Hippo Lost Less Money in Q3, Boosted Premiums and Continued Diversifying Distribution Options

Digital home insurer Hippo reduced net losses during the 2021 third quarter and boosted premiums substantially. The California-based InsurTech said it also made progress with its “omni-channel distribution strategy,” which includes partnerships, direct selling, independent agent, and builder channels.

Year-to-date losses are still sizable, however. Hippo booked a $310.7 million net loss over the first nine months of 2021, compared to an $87.4 million net loss last year. Startups typically boost losses as they scale up their businesses, but

“It will take time for the changes we are making to work their way into our reported results, but early signs are positive and we are more confident than ever that we will deliver,” Hippo Founder and CEO Assaf Wand said in the company’s Q3 2021 letter to shareholders on Nov. 10.

Hippo’s stock traded at $3.91 per share at the NYSE close on Nov. 15, less than half of what it was after going public through a SPAC merger deal in August 2021.

Hippo reported a nearly $31 million net loss during Q3, or negative $0.08 per share. That’s an improvement compared to the $38.6 million net loss, or negative $0.44 per share, reported over the same period last year.

Total generated premium for the quarter nearly reached $162 million, versus $83.2 million in Q3 2020. Net earned premiums were nearly $11 million, versus $4.7 million the year before. As well, total generated premium in force hit $553 million in the quarter, versus $375 million in the 2020 third quarter.

While Hippo said Hurricane Ida created heavy losses, it improved its gross loss ratio to 128 percent, versus 155 percent the year before. The company had previously been exposed to losses due to its big presence in high risk states such as Texas, but Hippo said it has made progress pursuing more geographical diversification. According to Hippo, 63 percent of new Hippo homeowners premium in Q3 came from states outside of Texas and California, led by Colorado and New Jersey. That’s up from 55 percent the previous quarter.

Here are other Q3 result highlights:

Premium retention grew to 89 percent in the quarter, which Hippo said will drive top line growth, in part because loss frequency dips as customers age.

Sales and marketing grew 27 percent from last year to $22.4 million.

Technology and development spending jump to $8.3 million, 46 percent higher than a year ago. Money spent went, in part, to integrating new data sources into its platform, and improving its underwriting model. It also helped support new partnerships. expansion into new states and new products.

General and administrative costs dipped to $13.4 million, 17 percent lower than a year ago. While costs as a public company grew higher, this was offset by reductions in year-over-year stock-based compensation.