Home insurance provider Hippo reported a significant jump in its total generated premium (TGP) and revenue in the final quarter and full year of 2023, in what its chief executive has dubbed a turning point for the insurtech.
For the full year, Hippo posted a TGP of $1.1 billion, a 40% increase from the prior year. The firm also grew revenue significantly faster than TGP, increasing 75% from $120 million to $210 million.
The company’s net loss for the year was $273.1 million, compared to a loss of $333.4 million in 2022.
“I think when people look back on it, they’re going to say Q4 2023 was the quarter that Hippo turned the corner,” President and CEO Rick McCathron (pictured) told Insurance Business.
“We now have strong confidence and guidance, and this creates opportunity with a lot of freedom and flexibility. Once we get adjusted EBITDA profitable, that absolutely changes the dynamics in a company.”
Hippo’s improvements were largely due to increases in the scale of the firm’s Services and Insurance-as-a-Service (IaaS) segments, combined with structural changes in the Hippo Home Insurance Program (HHIP).
Combined with strategic actions aimed at reducing risk exposure and enhancing profitability, Hippo anticipates achieving its profitability goals ahead of schedule.
“We not only improved the underwriting results of our HIPAA home insurance program, but we’ve also furthered the mix-shift into higher margin, non-volatile fee-based revenue,” said McCathron.
“Our insurance-as-a-service operation, which is our Spinnaker operation, posted great growth numbers, both with more volume from existing partners and new partners on the platform. The second piece of it is our services business, which is our insurance agency and our First Connect insurance platform.”
The CEO outlined aggressive actions taken for the home insurance program, including reducing volatility in weather-prone areas, adjusting rates for inflationary pressures, and updating terms and conditions to meet changing environmental factors.
“We hit [those actions] very hard in the second half of the year. Most of them took effect in the late fall to early winter timeframe, which is why we have great confidence that we posted a good quarter,” McCathron said.
“Most of those actions are not in the portfolio yet because they all take effect at renewal. That’s what gives us the real confidence that while we were facing massive headwinds over the last few years, those have now shifted to tailwinds.”
Hippo’s top priority is to get adjusted EBITDA profitable by year-end. Despite a net loss in the fourth quarter of 2023, the company’s adjusted EBITDA decreased significantly compared to last year, giving it a “clear line of sight” that its recent actions are “bearing fruit,” according to McCathron.
Hippo notably paused writing new homeowners’ insurance business nationwide, a “bold” move aimed at improving its portfolio. It also laid off 20% of its workforce, or approximately 120 employees, in November last year.
McCathron also acknowledged that a good weather quarter also benefited the industry and helped Hippo accelerate its expense reduction measures.
“It’s time to get back on offence,” he said. “As we get profitable, we are accelerating investment into the business.”
Looking forward, the chief executive said Hippo’s growth will be geared toward its home insurance program and its Spinnaker business. Hippo is also looking to integrate more technological advancements, including artificial intelligence, and engage in mergers and acquisitions “if it makes sense.”
“The ability to know you can self-fund growth and investments without burning cash on hand is rejuvenating for the company because we have a lot of things we want to do to change the landscape,” McCathron said. “So, let’s get profitable and do it.”
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