Hippo Holdings Inc. · NYSE:HIPO
Hippo — Q4 2022 Earnings Presentation
26 slides from Hippo's earnings presentation, Mar 2, 2023
Slide 1: Analyst Supplement: Guidance 2023
Analyst Supplement: Guidance 2023 March 2, 2023
Slide 2: Executive summary
Executive summary • In 2023, we will begin segment reporting which will align with how we have begun to operate Hippo this year. We believe the additional level of detail will also help investors better understand Hippo’s business • Hippo’s Services businesses are fee-driven, not exposed to loss rat
Slide 3: Hippo is a proactive partner for homeowners
Hippo is a proactive partner for homeowners who seek to better maintain and protect their homes
Slide 4: 2023 Guidance Principles and Business Unit Reporting
2023 Guidance Principles and Business Unit Reporting • Align external reporting with how we are managing the business starting in Q1’23 • Improve public understanding of the components of Hippo’s business • Allow the investment community to more easily model the relationship between the drivers of o
Slide 5: Components of Hippo's Business
Components of Hippo’s Business Hippo Home Insurance as a Service Consumer Agency Insurance Program Modern Platform to Sell both Hippo and 3rd Home Insurance support other MGAs party carrier policies, directly and through partners (like builders) First Connect Home Care Platform to support small Proa
Slide 6: Hippo Home Insurance Program
Hippo Home Insurance Program Business model Hippo differentiators Key investment themes • Recurring net earned • Embedded partnerships • $100B+ Total Addressable premium on retained • Platform allows more Market, growing at $5+ business frequent rate calibration and Billion annually1 • Recurring ced
Slide 7: Insurance as a Service for other MGAs
Insurance as a Service for other MGAs Business model Hippo differentiators Key investment themes • Monetize underutilized capital • Flexible capital base allows us • Stable, predominantly fee and insurance licenses by to be responsive to MGA based, economics renting our insurance capacity capacity n
Slide 8: Consumer Agency
Consumer Agency Business model Hippo differentiators Key investment themes • Earn recurring agency • Differentiated consumer • Predictable, fee-based commission on active experience built around revenue, not dependent policies proactive home care on loss ratio or • Cross-sell to increase services re
Slide 9: First Connect – An Insurtech Platform for Independent Agents
First Connect – An Insurtech Platform for Independent Agents Business model Hippo differentiators Key investment themes • Allow small and medium-sized • Combination of market • Stable, fee-based revenue independent agencies to access and technology stream with no exposure to access carriers and mark
Slide 10: Home Care Services
Home Care Services Business model Hippo differentiators Key investment themes • Support Agency • Sole destination with an • US Home Services TAM of differentiation and customer integrated experience for +$650B1 experience using tech- homeowners (hardware, • Makes Agency and Carrier value enabled too
Slide 11: Business Models and Reporting
Business Models and Reporting Primarily fee-based revenue Recurring, fee-based revenue Primarily based on Underlying Economics with limited underwriting with no underwriting exposure underwriting results exposure First Home Hippo Home Insurance Businesses within Hippo Agency Insurance as a Service C
Slide 12: Services Top Line Guidance
Services Top Line Guidance1 Accelerating Growth in 2023 Total Generated Premium Revenue2 • Streamlining customer flow, 459 44 optimizing right product and service for each customer 36 351 • Adding new builder partners First 31 288 Connect • Increasing focus on cross-selling 3rd party policies First
Slide 13: Insurance as a Service Top Line Guidance
Insurance as a Service Top Line Guidance1 Expected Growth in 2023 Total Generated Premium Revenue2 • Increased focus on geographic and 364 50 product diversification versus single- state and regional property cat 279 exposed programs 37 • Expand volume with existing programs • Increased net investme
Slide 14: Hippo Home Insurance Program Top Line Guidance
Hippo Home Insurance Program Top Line Guidance1 Expected Growth in 2023 Total Generated Premium Revenue2 • Focus on Generation Better customers 367 380 100 (~75% of new business in Q422) 331 • Expand Builder Channel • Continue geographic diversification 65 57 • Continue rate action offsetting proact
Slide 15: Consolidated Gross Loss Ratio Improved 20pp YoY
Consolidated Gross Loss Ratio Improved 20pp YoY after excluding impact of reserves released in 2022 $91m of 2021 reserves released in 2022 Reported Consolidated Gross Loss Ratio (CY)1 Consolidated Gross Loss Ratio (CY) 138% -20PP 113% 93% 76% 2021 2022 2021 2022 1. Includes Allocated and Unallocated
Slide 16: HHIP Gross Loss Ratio improved 38pp YoY
HHIP Gross Loss Ratio improved 38pp YoY after excluding reserves released in 2022, with more improvement to come in 2023 -38PP Consolidated 145% Hippo Home Insurance Program Insurance as a Service (Non-Hippo) Programs 113% -(12-19)PP 107% 93% 88-95% Drivers of 2023 L/R Improvement for Hippo Home Ins
Slide 17: Putting Net Loss Ratio into context – 2022 Treaty Year
Putting Net Loss Ratio into context – 2022 Treaty Year Retained vs. Ceded Written Premium Economics of Ceded Premium 367 Economics of Retained Premium Commission Income, Net Earned Premium Net - Loss and LAE ÷ - Loss & LAE Net Earned Premium = Net Loss Ratio 89% Loss Loss Participation Ceded Partici
Slide 18: 2023 Hippo Homeowners Insurance Program Reinsurance Placement
2023 Hippo Homeowners Insurance Program Reinsurance Placement Quota Share Retention % Retained Premium 2023 Renewal highlights % Retained Loss + Loss participation 42% • Structural shift to retain more of the day-to-day risks our 39% customers face (and where we believe our loss prevention strategie
Slide 19: 2023 Guidance
2023 Guidance 1 2 Elimination Mechanics: 1. Remove duplicate Total Generated Premium: Agency and First Connect (in Services) sell Hippo Home Insurance Program Policies directly and through Partners, so a portion of HHIP TGP appears in both 2. Revenue: Services revenue includes commissions paid from
Slide 20: Path to Profitability Business-level Detail
Path to Profitability Business-level Detail 20
Slide 21: Path to Profitability – Services
Path to Profitability – Services Profitability Considerations • Healthy LTV to CAC ratio (~3x) suggests aggressive investment in growth is optimal • Current investments in sales and marketing to fuel growth more than offset variable contribution • High retention rates and margins on renewal business
Slide 22: Path to Profitability – Insurance As a Service
Path to Profitability – Insurance As a Service Profitability Considerations • Expected to report positive Adjusted EBITDA in 2023. Primary focus going forward is to optimize return on capital and profitability • Focusing on adding non-correlated risk to reduce the cost of Corporate XoL, which will a
Slide 23: Path to Profitability – Hippo Home Insurance Program
Path to Profitability – Hippo Home Insurance Program Profitability Considerations • Biggest driver of convergence to profitability is continued improvement in loss ratio • Limited need to increase fixed costs as the book of business grows 1 • As premium grows, we should see improvement in both varia
Slide 24: Hippo Home Insurance Program – We target a loss ratio of 65%
Hippo Home Insurance Program – We target a loss ratio of 65% Loss Ratio Walk (Calendar Year) Summary of Initiatives 2022 Initiatives 2023 Initiatives • 2023A 107% − 73 rate filings across 31 states planned -12% − ~85% of rate plan ($) already -(0-7)% 88-95% filed − Continue non-renewal action -(23-3
Slide 25: Key Takeaways
Key Takeaways • In 2023, we will begin segment reporting which will align with how we have begun to operate Hippo this year. We believe the additional level of detail will also help investors better understand Hippo’s business • Hippo’s Services businesses are fee-driven, not exposed to loss ratio v
Slide 26: Disclaimer
Disclaimer Forward Looking Statements Certain statements included in this Presentation that are not historical facts are forward-looking statements for purposes of the safe harbor provisions under the United States Private Securities Litigation Reform Act of 1995. Forward-looking statements generall