Hippo (HIPO) 17 Aug 212021 Q2 Earnings call transcript

Good evening. Thank you for attending the Hippo Holdings Q2 2021 Earnings Conference Call. All lines will be muted during the presentation portion of the call with an opportunity for questions and answers at the end. I would now like to pass the conference over to your host, Chris Maloney with Hippo Thank you, he may proceed.

Thank you, operator. everybody. afternoon, Good for call. you second XXXX quarter And joining conference earnings thank Hippo's Earlier announcing shareholder results, a today, issued Hippo letter, also which available@investors.hippo.com. it's is quarter second President Chief Leading Ellis. Stewart Officer, be discussion and Hippo's today's Assaf Financial will Wand; Rick Officer, McCathron; Chief Executive

remarks Following questions. management the to will we prepared up open call

expectations forward-looking date to is information other about this business that Before like that discussion and remind we begin, the will statements our on as management's presentation. current based you of I'd contain of predictions, expectations, our

Forward-looking statements not industry are and performance but or predictions limited, and expectations include, and to of outlook. competitive business Hippo's financial and conditions

Forward-looking statements including forth in to and results differ factors are materially filed Hippo's from Form those that set X-K and/or uncertainties today. forecasts, other could historical cause our actual to subject our results risks, from

refer during discussed factors statements For wherever the more in that call All forward-looking appear. information, we this we any are filings. Hippo's please and risks, to statements cautionary uncertainties other make they to SEC make applicable

public prior should and reviving for statement will predecessor of the Hippo's the disclaim seen statements, obligation consummation reporting of responsibility business as other in be a events, forward-looking Running prior expressly combination Hippo undue with the as were or as place altering other is after recent and Hippo's risks disclosed required financial that on No the as reliance registrant, and of uncertainties statements in combinations was events be periodic consider the Technology filings, associated combination not through business accordance purposes. technicalities for be for the in GAAP. new statements, future under by SEC any recorded Hippo to discussed transaction in financial any or Partner accounted no factors intangible Inc. to updating, Reinvent [ph] successor otherwise, capitalization assets will in reversal some a company listing whether the You or carefully the treated the will for periods as result forward-looking reports. the SEC with Z law. meaning Hippo's future was Hippo as information, goodwill business otherwise, except the of Holding acquired the

please details, the more see our For with SEC. filings

Additionally, this we to conference non-GAAP measures, EBITDA. refer premiums call, as financial and during tele-generated also will such adjusted

our our that, Our XXXX non-GAAP SEC quarter can been the to a of I'll financial with reconciliation with has on Wand, to which GAAP shareholder the full a of and And to found Assaf call turn measures, description furnished in website. the letter, be Hippo. over GAAP available and second CEO a

Chris. all us you, And thank today. joining for Thank you

reflective time We incredibly was QX are are. will what you only a to public we the that This of for was as quarter not on financial reflective told results we it do, proud we was report who first a company. of

shows Our premium million. achieved performance to Hippo's growth the growth $XXX during life. QX second reaching strategy total generated XXX% We quarter in year-on-year coming

couldn't be team Our the Hippo of effort these of strategy; power of I results. proud the Hippo the results and QX Hippo for power and the drives the determination and platform demonstrate that

but policy. Looking will market The At better Hippo embracing. the set rapidly guidance we Accordingly, different we generated that that are meet visibility more home customers expectations for streaming our transforming at a fundamentally exceed only from year the policy we and token from full have we not for growing $XXX previously we million with insurance year confidence are increasing experience to modern the Hippo $XXX million. homeowners a are them.

our unveiled this customer's strategy vast and continue be with past mind. being purchase the Hippo fine there easiest God allowed to to lastly, a on you them market. the XX% us premiums increase take can has business bad protect Hippo happened, designed to And the billion total in by share experience end with at proactive QX on [ph]. surpassed team The home. to smart efficiency the billion for when $XXX in you of partner market. policy And Hippo forbid future the family technology This something home with your be over policies generated Hippo pick and and in Before effectiveness force technology-enabled and of care, it's Hippo help the is customized consumer year. in the $X.X both,

primed we beginning Although this just we and journey, is the continue our the is not we vision, it's all we And QX. the sustain just our are incremental to growth are still for deliver framing not it strategy our believe and of at long-term. that on cylinders, in mission; growth firing is

We new scale increasingly the launched we also into solid foundation and future to expanded own We started in continue for products new build though. an we work markets, vertical continuing new our build partnerships, and to their on states platform. geographic in and end of our are plan, executed vertically the first our protection achieve by states, of our on products goal expansion XXXX. new XX integrated to industry's launching we three We on-track

the needed partnerships our loan our serve with growth. strengthen Smart additional with Inclined P&C provider. [ph] distribution Ally doubled distribution and strategy as future would capacity support omni-channel that launching to to underwriting by two new reducing of the thus two carrier; insurance XX signing otherwise the our we've Financial capital MGA leading the Top Further, XX partnerships homebuilder, by and be to continue Top originator carriers, Home X Top We

short-term policies and regulators first diversification stabilized at association U.S. the homeowners Finally, programs three products; ratio, missed lines, to in a product the XXX,XXX commercial home our homebuyers drivers time proceeds a portfolio inspection loss and of state more insurance new one weather is is biggest of one other offering a of the like result. Expansion unlike approve issues community against therefore, diversified enables insurance, all Hippo. protection across in we launched to In for ever session, their protect during second,

real volatility, more estate expand ratios a into and as paved our to geographically, way, a over and our way success Just of very growth you diversified profitability. our consistent like of more the improving bottom-line and to loss diversify become ratio build should long-term the when strategy time. we loss using portfolio stocks reduce dynamic In more

me Let proud is have and very saying pleased Hippo that trading conviction at team team now conclude the a ownership of and the our One; form be to changed, not. by company. the as determination of public has

insurance driven company business. transform determined are the We growth home is that to

policies drive We and Hippo we the States, metrics on United bottom-line will growth offer grow. focus as we across will

product to the leader that to million more and $XXX will now our enhance have in order a offering this growth industry. deploying our We we on in become than balance carefully sheet

As $XXX and I billion a noted mark. have Hippo, earlier, crossed the vast is industry, home now million at insurance $XXX we

While for company, to our know, CFO, this over the Stewart. Thank milestone great is beginning. And you. you it turn just let now a me

Assaf. Thanks,

coming mentioned, our strategy life, growth channels show Assaf results balanced So QX across geographies. across to and with

ratio recurring, over of loss and premium predictable, and Let year a a through we in profitability. programs required on and fun, me QX XXX% total seasonal of premium generated start year period million. XX% impact that year with including third-party in growth in is version weather, mentioned year are Spinnaker, is of affected Total indicator like the we million. our create premium to to value Hippo given across can September which fluctuations total of force severe behalf in carriers amount and over was generated force grew great carrier the the policies platforms, business that building represents across premium, in because total and in $XXX.X year. short-term generated of Hippo this generated all $XXX.X The at it metric last the support by Total channel. things new home that grew balanced other renewal insurance sell we I long-term agency which policies,

and business, other partners generated homeowners our homebuilders, came the players XX% new companies through from servicers, channel, XX% insurance came direct-to-consumer of in estate portion home premium, and mortgage of and new real XX% and For premium ecosystem. like protection represented other our generated agents the of our independent

our and in geographies, one business to to our grow continue reduce also area. We across any diversify concentration

premium from two last QX Hippo a we platform of For if Texas own launch distribution advantage. geographic and third-party dependent many partners, a new of Because XXXX. our opportunities. increasing more in presents quickly control policy Expanding purchase in can only one to can down of XX% on provides unique a example, leaving technology our our we new stack, and cases, QX custom and allows areas the generated of where coverage website are a our from that capability Hippo bind homeowners without than system. we in were would own in distribution relationships QX, represented XX% we an policy the technology year, ATI, channel also us XX% via customers management much from platform Because otherwise of with us, geographies ever in policy

the long customers this cohort by of cohort year by a ago. period of strong customers key retention renewed to customer dollars We One retention of premium in the drivers improve remained premium same quarter. from economics continue dollars term-unit current of of a and of that of our measure generated that divided

retention aged. improve and second homeowners years cohorts grew this they third to QX. one level year to during their as in XX% Our continue beyond And

our total burned are the the driven in quarter, risk income. the commission our sheet, balance premium in as we primary fee year million income as of premium, not continued revenue and service which investment The year on for primarily XX% revenue, mixture Our the where over by risk, growth grew bearer to retain $XX net a well for from was we growth premium. generated is of

to ratio of XXX%, by compared three QX driven loss quarter factors. this main gross in was Our XXXX, XXX%

where hailstorm we of concentration in experienced our parts we First, book. Texas in severe have

level. industry were ratio, QX out losses began load cap of normalized actuarially services were well hailstones reported in highest to by third We business. XX in a is predicted which line past residential loss built catastrophic in beyond property the breaking losses in the Texas weather According but the our claims years, normal into QX have data,

had net incremental Uri. the negative benefits ratio, on did XX reinsurance percentage QX, underscoring Winter it points basis, in negatively contributed a affect Second developments of strategy. the we Texas Storm gross this amount a loss an Well, to in of our small our our anomalous P&L not

to operating in as the year year industry-wide result tightening but pandemic. increase like QX a homeowners a of the chain, steep and temporary market loss we material building COVID-XX disruptions costs Finally, other supply increases labor severity sales expenses, of compared carriers, in XX%, from significant to excluding year experienced cash increased over million as expenses, prior $XX.X or Of loss prior well XX% loss other marketing, million expenses, an relates increase to and to interest as year. this, and adjustment and other million. $X.X $XX of non in

we continue employees as add The other major functions. core headcount, new all increase is Hippo to for reason the in growth across

was last As from up QX, XXX% our of XXX, headcount to XXX year.

Our driven adjusted million, QX team and was ratio, to million long-term year, QX to in platform increase of EBITDA an the by loss increase loss $XX.X and our strategy. investments for continued our support with $XX.X compared last

a Assaf of executing public, proceeds we soft million. above, net capitalized from in we and taking end plan mentioned our total had over Including at the investing opportunities. quarter well the cash investments and ended of and Finally, cash company the to on position QX as continue in future $XXX equivalents strong the

execution Looking we believe we exceed confident previously. shared our of and will the forward, strategy forecast we in the remain growth

to $XXX to Rick progress for $XXX between mentioned million it bit to target Assaf indicated the our from I'd loss about year down turn our made like with to full to $XXX our a loss bring long-term a million guidance QX's premium ratio in midpoint increasing earlier, we put of now ratio actuarially say million. are to and context, McCathron, President, over our total As $XXX and quarter more we to the million level. generated in

diversification for QX of to the ours drive overtime. profitability. is severe weather. from volatility a down of Thanks, due will most the of to high primary weather. long-term our the quarter-to-quarter In on metric and seasonal our one drivers given the Stuart. this metric typically current This geographic vary Loss focus of geographic important is ratio represents This impacts is why customers, year-to-year, seasonal of distribution particular,

positive our important It right expanding trying recognize ensure Beyond optimizing customer XX cohorts weather, by in unfortunate these we QX, over decades. am geographic underwriting average suggest pleased of made that despite our rates our future have we highlight for is are three out right portfolio, long-term price performance to in loss diversification, actions built have we having the area; and years encouraged legacy impact the to challenging concrete ratio. great significantly to model, incumbents we to I been tightening initiatives that loss to Hippo's age the are diversification leading build many indicators want risk. during on steps have compare with should our that geographical And already examples we a the numbers. between are difference on report I product those first, of their that to ours. taking to the Texas. it of progress this makes improve of The what are and players

As recently our Texas. XXXX, was approximately as two-thirds homeowners premium in new of written

and a events outside we deliberately the of volatility kinds reduce this have more the growth Texas loss achieve We QX geographically balanced Overtime, focused to should lower order portfolio. in our on dramatically weather of our in to experienced ratio. exposure that

incorporate data platform, our of we done have both flexibility we just sources, Second, that and have new quickly, underwriting because the ability in to the qX. of and pricing technology

time will Difficulty]. are it our ratio, positively early to some [Technical for these encouraging. overall impact actions take loss While indicators

based And in collected way expand that pay are that in it's time. helps particular us also for over we premium on things a to to channel geographies, the the and cash-efficient partner agent since new

very the expenses sector we question spending the or think mind. have for about in increases lead That in costs keep always to seen advertising costs important in think our direct-to-consumer So advertising not things I that channels. said, and in own as in acquisition money we is business our other funnel. We're about disciplined

in about scaling sales our marketing. strongly We're not distribution back very strategy. investment very, feel and we So our

In because the forward. We strong invest retention, to unit is like our economics high and now time want to to we customer get of fact, aggressive. feel continue going

and from nationally-recognized story the to brands start everyone improving start build you'll building think expanding hope I and to directly we the to so hear us that more see can spend us. that Hippo

on like we distribution we're feel strategy about feel our track. good So, and we

lot, Awesome. lot more great. in That's a future. Thanks -- sure a there will the I'm and be something

Chris. you, Thank Yes.

Okay.

Mr. question from Please, comes with you, Ramnani Thank Sandler. Piper Martin. Arvind The proceed. next

your Hi, question. get just I guys. Thanks thoughts taking for on really bundling. my to wanted

versus Metromile? announced the to order I your why You to more launching taking partnership own are wanted product Metromile. kind your really focused thinking get you of a with with But approach on bundling

a Thanks, take want one. component. Arvind. into I'll components. macro break two to actually micro it Assaf. This is down this I a and There's

platform believe just best the on is and the So, in focus be world. the our we focus micro-level, in to home protection

actually what correlation low some lines. realize between you the Now, that different there's of is

synergy. frequency For different misalignment organization, exactly severity, not same some and not instance, not auto need a the severity and is the also line claim high enough the It's underwriting frequency people it. to that high the There's low same It's just it's not and home experience. where and same is low there's product. do it's

for something our way, customers of a them case, get some Facebook giving we do that couldn't customer In of customers experience. in the [ph], we of with is we which However, products can need. that the we if in always they auto, better offer providers better create for want our to the market, how best or some our better, the customers using we a partner enough in is to [ph], for just data in Hence, offer approach Metromile inside, policies technology conviction do data don't just market not conviction. everything. Progressive what best have We utilizing this

not to by customers going are our going They're still [inaudible to XX:XX] abundant. get just to Hippo. produced So, get

micro-level. that's So, under

is trends actually especially another fintech, thinking of unbundling Now, seeing point in But What also else's auto by is I'm this the I being in the [ph], the see sold their it trend. world every Geico and the the about want you're which is And is home to because to for product someone bundle. SMCU raise point, back bundling world, component. in that macro-level. our insurance in you unbundling world of

your don't years Just five ago, I to before, think about life know XX Arvind.

to in account. bank your have the bank used go You to and used savings and your your to checking

card, in be be insurance forward we the you you're there, with that your lot with to your moving to and you biggest used now, we centric trend. further, provider, credit to student going you're you're You using, student card to engage actually believe have the is old benefactors for credit used from easier of world is one a another trading But what in years your mortgage another happen take used used Everything would take to of bank-centric. take with. trading take of company, to your is to right that airline five of from the moving breed you are of your best that's products belief provider, loans the are one bank. XX customers to loan the mortgage, and people an this customer and that area very And your

Thank XX:XX]. you. [inaudible perfect. That's

Avi Thanks, [ph].

The Matt securities. Thank proceed. Please, Ramnani. from Carletti you, Mr. next question comes with JMP

thanks. Hey, taking my afternoon. Good Thanks questions. for

little bit just Are to I comes you follow-on channel? kind and of to relatively kind customer can off, similar or sense about some a by in costs wide just there view LTV acquisition variances on Hippo? which talk want are of follow-up customer a [ph] the questioning you distribution to Chris' through of channel ask how CAC they on First a of and

from is and take some structural This one. that the I this different are There I'll channels Stewart, they these Matt. Hi, variances ways spring think work.

customer it to or people channel, to direct-to-consumer like will leads acquisition a into those where people the bring turn to will funnel, upfront customers. and to the of dollars the spend in bring some percentage website, traditional phone, we works So, advertising the

over insurance you lifetimes then earn and are customer. to so costs situation sign they consumer life lot that to front you other of insurance like acquisition a home products. you relative stay service lengthy have homeowners that, people It's a acquisition with the a customer and pretty that when back cost tend of up, when provider. the up And Typically, have their

high average premium have net And see third year And retention. very And cohorts premium entered industry the customer years. go look with at quarter we mentioned in a very our customer data, the satisfaction second see their first up we XX% eight high excess is lifetime was I our years, of high just so basis. there. numbers this and for from that and the scores in very we on promoter when retentiXon And

upfront acquisition differently. We by anything or have we customer channels, so, economics over external of acquire the collected from other a channel a And another that in benefit insurance two full partner. time. In the economics upfront pay that the to to through down able followed parties to from through customers direct company, don't being costs the independent an work road. premium slightly or We share customer agent, those is the

CAC. So, and this The And capital cost, in it's the have really than not CAC, we LTV CAC slightly internally, premium treat the partner you we direct there on LTV purest the would with higher risk. technology partner share to producer though channels, ratio, this to CAC starts because approximate the crafted way as even that traditional is when any see take math, it consumer. when in is not that do to at marketing LTV sense, a basis, customer the first you year what and think we no we to there's of acquisition that about that a

But more a think to economics that the high the because will less. way On slightly consumer higher be targets. two some than long other and keep blended customer the for The a a times slightly to for to on less, insurance. us at I retention are this, than that because And is a fact bit then other the our six going channels, is so stemmed channels and get lines of we be ratio value term the of basis. in is from little basis, we direct to value higher. very on we loss to the ratio ratio attractive think lower five customer basis pay unit relative we and this direct we have to lifetime it's tend that higher pay other more the And lifetime about a all

some from ask loss we Good. It's commented perspective, next the a of strategic should a that think real underwriting capital come little other you about. bit I ratio question a want beyond I Rick and bit hoping the impact I spoke or as you little your really And you. then helpful. just leverage, ALLY expect on partnerships. there? can to impacts any onion peel Thank Incline on thinking was those was to numbers actions the The any related back about

Hey, Matt, this is ahead and I'll Rick. go question. that answer

underwriting light you The towards loss use perspective? or were, think our segment that of makes of Stewart need from what mentioned, capital support our reduces underwriting both our across the partnership question you customers, the and But and structure, life ALLY underwriting new capital which Incline own essentially does capital work sort amount allows multiple our already we of existing of the it to ratio carriers, As does of do growth. I addressed In our is the that multiple doubles certainly the us underwriting our is customers companies. to further driving support structure what use a capital it and which well. capacity,

with right segmented you So, business the carrier, underwriting right result further, see right you are over placing guidelines, have because cetera. you generally et them time underwriting more risk, as the a positive the

So, we model. believe that having underwriting multi-carrier our improvements does in support

is then the last which how then help I points. hail best quarter, items, quarter like of how help there's shortages, on labor apart general impacting and severity that, to and impact with -- your of mentioned us if on want the for from obviously, ratio. think of this Okay, kind me supply put break XX just can, things kind I currently? severity quantify you much that some it a can that things one, the few kind thanks. in much quarter then number loss Can And assessment last adverse in and had chain hail a development from And a of the Texas, in you touch you Uri us

generally because We of series basis, out didn't the of events. Uri The gross not we Matt. to development understand did out this net any storm a events break We little specifics simply development really basis broken Thanks, people on quarter. or anomalous a us. there have individual that on Uri such help a was have wanted an But negative because storm. to bit storm

in so the for concentrated think more we in important in And business started us book impact, in it's understand our of Texas. because I areas because other historically, Texas, of is to in country California Texas, and than, than the

And to of our away been Texas something so, coming of from past from QX this new in quarter. over in XXXX, years XX% like XXXX, the in we've Texas. premium XX% was But XX% couple diversifying

was is growth severe What PPS exposure that breaking volatility experiencing think bit something year I a in that past. on a though, The products I bring forward of It since the been new I second an are that seasonal initiatives within started things be sources, and bring time. this down products the the on us are operationally a the we're mentioned as help peak to should have this of in can convective was risk, legacy overall before out to happened we going doing data other to storm will new record than this in higher some But risk, on quarter. third to us. Texas, our [ph] obviously historically unusual over in loss source the experienced to HOX QX the a the that the not ratio. of the bring home loss-side bit we've this worst going We HOA say, this kind homeowners QX. as subject portfolio outside for in and was smart add hailstorms the just to on like peak will is And truly areas loss of has

there of And what standpoint, a assume that's about can just is Okay. that try pricing higher? severity view I And would think lot your forward? way obviously, help it's of kind from to that driving then there then us broad a going you combat to any of

clear, predominantly I'll labor of go increasing one. in is supply impact think Matt, chain is had It's every the in because sector this Yes, shortages. Yes. a about issues, COVID Rick. on I take that insurance talking severity that. and company because ahead massive of

that We are seeing go down.

that was Stewart houses monitoring strategic that down No, sorts think construction, the in Lennar, things construction all and the expansion monitor blip. numbers. mentioned opening in on frequency water are devices, reduce doubling our just comments putting So, off how course new valves actions. We're I HOX shut with [ph], our partnership these we're our dramatically and new constantly of IoT that in a ratio severity of of temporary improved can loss for constantly those. as significantly. those we're we When But we beyond product at both mentioned that in we looking pricing

for luck. of very the the And color. you Thank helpful. best Very

Thanks, Matt.

Thanks, Matt.

comes KBW. Mr. The you, the question next Christopher Carletti. Martin of Please, proceed. with from Thank line

question Hey, call. is again, my guys, here taking My for thanks circling back.

at and on flattening with then diversification, growth you ratio, in in just obviously, where level there future? necessarily, a all on EBITDA balance it to guidance, [ph] the or and comment with the goes around breakeven all towards comment As of the not from looking of for sheet of to profitability? explicit discussion on at able break shown you that discussion the the approach. given, If a then you've numbers you've getting tightening your loss the Are that in down your the are model geographic path the but rate can things optimization,

a earlier this year. out Stewart. forecast did Yes. publicly We Chris, this put is

talk the for the defined of I where I right profitable to we is a to But historical book the at to the that direct well-diversified right that is the right So, We want way home know folks path moment to about to profitability. properly-priced, we insurance. business there opportunity that reference. price be for scale, in think about risk, a an risk,

that we to good an we've internally the nowhere What up market invest high, taking constraints. investment customer one investment the they're market. an and advantageous because share incredibly are that with against our ratio we're help in us and bumping having biggest first sales we with belief customers And at with the is the true of we that insurance, know Lennar that people avoid actively experience to from aren't aggressively on us. drivers, as it fact level. And technology is the our and partners and to of opportunity to use customers mentioned, very that homebuilders, customer-centric that high continue as to we loss close loss, and is mentioned home on to combine possible partnering also there that in losses you is should like shopping long we've marketing our in when customers as a we for believe through technology of Rick by customers customers are the other only avoid access but talked gives place. We and have happening about is ability pools not the that to remortgage servicers, our previously, preferred our using that that is return staying large Hippo this in acquisition share where return model, that to help And the bring our beginning

we And profitable have be scale. so makes basis, economics sense to we can invest a in that and have it we strong business unit when a long-term know on

will we opportunistic. continue so, to be And

of we're journey said, at here. I beginning As the the

a opportunity, on it there's we real to as will money spending confidence have growth. less as to in and investments. to we're the talked, is makes in sense have the invest. those growth very path loss continuing in way, we The will as we've long disciplined as that our greater make profitability. think about think continue we to become Obviously, So, more geographic volatile we ratio the diversification business, our But

a we'll for you we to to to So, virtuous years. that going see very here this cycle in anything want say question? be keep able Rick, addition many do

XX% are of looking taken thanks other earlier, what as term early And When seeing mentioned term And that Chris, you're couple one And, and thing the Stewart. XX% leading a young reduction respectively, show early cohorts for is clearly question. Thanks, you're losses. losses, losses. reduction actions to to in other the of the Yes. improvement. frequency term of early the our remember compared doing very we're that the we cohorts. an I things, really indicator A have at is

a time, we portion in cohorts a places those to of have larger other be. addition us and business, we where in over our As in growth absolutely need get that's to larger the business that and renewal book, geographical diversification age will the itself

lot, really Awesome, a and luck. and great good that's thanks

Thank you, Chris.

everyone This conference. concludes Martin. Mr. joining. you, Thank for Thanks, today's

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