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Hippo Holdings Inc. (HIPO)·Q4 2024 Earnings Summary

Executive Summary

  • Q4 2024 revenue grew 58% YoY to $102.0M, adjusted EBITDA turned positive at $8.5M, and net income was $44.2M, supported by a $46.1M gain on the sale of First Connect; underlying operating improvements drove the remainder of the profit swing .
  • Management raised FY 2025 revenue guidance to $465M and guided to positive net income by Q4 2025, citing continued loss ratio improvements and operating leverage; HHIP Q4 2025 gross loss ratio expected to be <60% (PCS load ~15%), net loss ratio <67% .
  • Operational execution improved materially: consolidated gross loss ratio fell to 45% and net loss ratio to 58% in Q4, while sales & marketing, tech & development, and G&A declined to 35% of revenue from 69% a year ago .
  • Wildfires in Los Angeles (~$42M pre-tax) will impact Q1 2025; reinsurance tower remained largely intact (losses “barely made it into the first layer”); none of the losses were tied to the New Homes channel, which continues to be a growth driver .
  • Stock reaction catalysts: beat vs Q3 guidance on Q4 revenue and adjusted EBITDA, raised FY’25 revenue outlook, and credible path to net income by Q4’25; near-term caution around Q1 wildfire losses but manageable reinsurance exposure .

What Went Well and What Went Wrong

What Went Well

  • Positive adjusted EBITDA and net income in Q4 driven by revenue growth, improved loss ratios, reinsurance structure, and operating leverage; “delivered $8.5M positive adjusted EBITDA…focus is now on turning net income profitable by Q4 2025” .
  • Material loss ratio progress: consolidated gross loss ratio at 45% and net loss ratio at 58% in Q4; HHIP non-PCS accident period loss ratio reached 43%, reflecting rate, coverage, and underwriting actions; CEO: “reduced exposure to wind and hail by ~80% vs mid-2023” .
  • Operating efficiency: fixed expenses fell $8M YoY with revenue up $38M; S&M, T&D, and G&A declined to 35% of revenue from 69% YoY; CFO: “ending cash and investments increased $25M QoQ to $571M” .

What Went Wrong

  • Q1 2025 wildfire losses in Los Angeles (~$42M pre-tax) will hit reported results; ~$30M Hippo Home Insurance Program, ~$12M Spinnaker-supported non-Hippo programs; subrogation rights sold to mitigate impact .
  • PCS CAT component for HHIP in Q4 rose YoY due to prior-year reserve releases (PCS 7% vs negative 10% last year), partially offsetting non-PCS improvements .
  • Services segment adjusted operating loss persisted (-$3.6M in Q4), reflecting mix and ongoing cost discipline; IaaS and HHIP carried positive adjusted operating income in Q4 .

Financial Results

Quarterly Progression (Q2 2024 → Q4 2024)

MetricQ2 2024Q3 2024Q4 2024
Revenue ($USD Millions)$89.6 $95.5 $102.0
Net Income (Loss) ($USD Millions)-$40.5 -$8.5 $44.2
Adjusted EBITDA ($USD Millions)-$24.9-$7.5 $8.5
Gross Loss Ratio (%)58%50%45%
Net Loss Ratio (%)94%73%58%
Total Generated Premium (TGP) ($USD Millions)$380.1 $368.0 $294.5
Net Earned Premium ($USD Millions)$64.4 $70.6 $77.0
Cash & Investments excl. restricted ($USD Millions)$491 $545 $571

Q4 YoY Comparison

MetricQ4 2023Q4 2024
Revenue ($USD Millions)$64.5 $102.0
Net Income (Loss) ($USD Millions)-$42.3 $44.2
Adjusted EBITDA ($USD Millions)-$22.3$8.5
Gross Loss Ratio (%)45%45%
Net Loss Ratio (%)80%58%
Total Generated Premium (TGP) ($USD Millions)$268.0 $294.5

Segment Revenue Trend

Segment Revenue ($USD Millions)Q2 2024Q3 2024Q4 2024
Services$12.1$13.2$11.6
Insurance-as-a-Service (IaaS)$24.4$25.4$29.3
Hippo Home Insurance Program (HHIP)$56.2$61.1$64.1
Eliminations-$3.1-$4.2-$3.0
Total Revenue$89.6$95.5$102.0

KPIs and Other Metrics

KPIQ2 2024Q3 2024Q4 2024
HHIP Non-PCS Loss Ratio (%)60% ex-reserves 52% 43%
HHIP PCS Loss Ratio (%)39% 18% 7%
Fixed Expenses (S&M, T&D, G&A) as % of Revenue46% 36% 35%
Cash & Investments excl. restricted ($USD Millions)$491 $545 $571

Guidance Changes

MetricPeriodPrevious GuidanceCurrent GuidanceChange
Revenue ($USD Millions)FY 2025$420–$450 (Investor Day 2022) $465 Raised
Net IncomeQ4 2025Not provided previouslyPositive net income by Q4’25 New
HHIP Gross Loss Ratio (%)Q4 2025Not provided previously<60% (PCS ~15%) New
HHIP Net Loss Ratio (%)Q4 2025Not provided previously<67% New
Fixed ExpensesFY 2025Hold roughly constantHold roughly constant despite higher revenue Maintained
Q4 Revenue ($USD Millions)Q4 2024$95–$99 Actual $102.0 Beat
Q4 Adjusted EBITDA ($USD Millions)Q4 2024+$5–$6 Actual $8.5Beat

Earnings Call Themes & Trends

TopicPrevious Mentions (Q2 2024 and Q3 2024)Current Period (Q4 2024)Trend
Loss ratio managementQ2: HHIP gross loss ratio improved 94pp YoY; PCS CAT down 83pp YoY; non-PCS improved ex-reserves . Q3: further non-PCS improvements, accident period LR down 22pp .Consolidated net LR at 58%; HHIP non-PCS 43%, PCS 7%; CEO emphasized 80% reduction in wind/hail exposure vs mid-2023 .Improving; nearing long-term targets.
Reinsurance structureTransition from quota-share to XOL discussed (retaining more premium) .Wildfire losses “barely made it into the first layer” of XOL; three layers intact .Adequate protection; minimal impact from early-year event.
New Homes ProgramExpansion in CA/FL/TX; builder additions; embedded experience benefits .No wildfire losses tied to New Homes; continued partner expansion and technology enhancements .Strategic focus; resilience validated.
IaaS/fronting pipelineGrowth driven by existing programs; premium retention modestly higher .Full pipeline with high-quality MGAs; differentiated fronting offering; risk participation disciplined .Solid growth with quality filter.
Operating leverageQ2: S&M/T&D/G&A down to 46% of revenue . Q3: down to 36% .Down to 35%; fixed expenses -$8M YoY while revenue +$38M .Efficiency compounding.
Wildfires/subrogationN/A.~$42M pre-tax impact; subrogation rights sale to capture economic value now .Near-term headwind mitigated.
LeadershipN/A.CFO transition to Guy Zeltser; Stewart Ellis remains Chief Strategy Officer .Continuity with strategic focus.

Management Commentary

  • “Hippo delivered $8.5 million in positive adjusted EBITDA in Q4 2024…our focus is now on turning net income profitable by Q4 2025.” — CEO Rick McCathron .
  • “Reduced exposure to wind and hail by approximately 80% compared to mid-2023 levels…we achieved a gross loss ratio of 73% for calendar year 2024 and a non-cat PCS loss ratio of under 45% in the fourth quarter.” — CEO .
  • “Revenue growth in Q4 once again outpaced TGP growth…net earned premium as a % of gross earned premium rose to 83% in Q4 from 29% a year ago.” — CFO Stewart Ellis .
  • “We are now in a position to raise revenue guidance to $465 million for calendar 2025 and to guide to positive net income by Q4 of 2025.” — CFO .
  • “The size of the [wildfire] losses…barely made it into our reinsurance tower…into the first layer by a small amount.” — CFO .

Q&A Highlights

  • Subrogation sale strategy: chosen for economic value and time value over legal process; not liquidity driven .
  • Reinsurance: January 1 renewals intact; wildfire losses only slightly touched the first layer; three XOL layers provide protection .
  • FY 2025 bottom-line guideposts: more detail to come at Investor Day; inference possible from revenue, loss ratio, and fixed expense commentary .
  • California exposure: wildfire losses tied to legacy HHIP policies; remediation largely done; continuing work with regulators; New Homes channel unaffected .
  • IaaS competitive dynamics: strong pipeline with high-quality partners; differentiated fronting capabilities support growth and selective risk retention .
  • Sales & marketing spend: efficiency improvements enable disciplined growth; willing to invest where returns are high while driving toward net income positivity in 2025 .

Estimates Context

  • S&P Global consensus estimates could not be retrieved at the time of analysis due to provider rate limits; comparisons to Wall Street consensus are therefore unavailable and will be updated when access is restored [GetEstimates error]. Values retrieved from S&P Global.*

Key Takeaways for Investors

  • Strong execution: Q4 revenue and adjusted EBITDA exceeded prior guidance, with net income turning positive on improved loss ratios and operating leverage .
  • Credible path to profitability: raised FY 2025 revenue guidance to $465M and guided to positive net income by Q4’25, underpinned by HHIP loss ratio targets and flat fixed costs .
  • Risk management works: 80% reduction in wind/hail exposure, non-PCS loss ratio progress, and reinsurance tower integrity minimize volatility and support sustainable margins .
  • Segment mix constructive: IaaS/fronting growth and HHIP retention lift revenue while Services remains a smaller, improving contributor; watch continued HHIP margin trajectory .
  • Near-term caution: Q1 2025 wildfire losses (~$42M pre-tax) will dent results, but loss mitigation via subrogation and limited reinsurance impact reduce downside risk .
  • Cash position strengthened: cash & investments excl. restricted rose to $571M, providing flexibility for growth and resilience amid CAT events .
  • Trading lens: focus on Q1 wildfire impact sizing and confirmation of loss ratio trends; medium-term thesis hinges on achieving Q4’25 net income, maintaining operating leverage, and delivering against raised revenue guidance .