Hippo Holdings Inc. reported financial progress in its third-quarter results for 2024, including a sale involving its subsidiary, First Connect Insurance Services. The sale comes as Hippo consolidates focus on core operations, while First Connect embarks on a growth path under new partial ownership.
Hippo sold a majority stake in First Connect to Centana Growth Partners for approximately $48 million, with an additional $12 million contingent on First Connect’s performance over the coming years. The sale, finalized in late October, allows First Connect to secure new capital to bolster its standing as a key independent agent platform in the insurance sector, according to a news release. Hippo will retain a 19.2% stake and continue as a partner and minority shareholder.
Hippo president and CEO Rick McCathron described the move as timely, explaining that with Hippo’s refocus on its primary business lines, First Connect is positioned to operate with increased autonomy and investment capabilities. McCathron expressed optimism about First Connect’s future in supporting independent agents and their connection to third-party insurance carriers.
“Since we acquired First Connect in 2020, it has become the premier platform for connecting independent agents with third-party carriers. As Hippo focuses more and more on its core business, we felt this was the ideal time for First Connect to chart its own path. We are excited to remain a customer, partner, and minority shareholder as First Connect continues leveling the playing field for independent agents,” McCathron said.
For the third quarter of 2024, Hippo reported that total revenue surged by 65% year-over-year (YoY) to $95 million, with major contributions from its services and insurance-as-a-service (IaaS) segments. Consolidated total generated premiums (TGP) grew by 21% YoY to $368 million, largely fueled by a favorable shift towards services and technology-driven insurance offerings, which now make up 81% of TGP.
Hippo also reported improvements in its HHIP loss ratios, reflecting gains in efficiency and operational streamlining. The gross loss ratio decreased by 3 percentage points YoY to 72%, while the net loss ratio improved by 67 percentage points to 84%. These enhancements, along with targeted reductions in operating expenses, have contributed to an 84% reduction in net loss YoY, now standing at $8.5 million for Q3.
Efforts to optimize operations included a $17 million decrease in fixed expenses. Overall, operating costs in areas such as sales, marketing, technology, and general administration fell from 89% of total revenue to 36%.
Hippo’s ongoing focus on profitability has seen significant strides, with adjusted EBITDA loss reduced by 81% to $7.5 million in Q3 2024. Cash reserves, excluding restricted cash, have grown to $545 million, providing a strong financial foundation for future endeavors.
McCathron underscored the importance of recent investments in enhancing both product quality and market reach, particularly through Hippo’s New Homes Program, which supports newly built homebuyers by integrating insurance into the purchasing process.
With progress made this quarter, Hippo anticipates a positive trajectory as it closes out 2024 and enters 2025.
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