HIPO Q3 2026 earnings call transcript, October 29, 2026

Hello, everyone. Thank you for joining us and welcome to the HIPPO Holdings Inc. third quarter 2026 earnings call. After today's prepared remarks, we will host a question and answer session. If you would like to ask a question, please press star one to raise your hand. To withdraw your question, press star one again. I will now hand the conference over to Charles Sebasky, Head of Investor Relations. Charles, please go ahead.

Thank you, operator. Good morning, and thank you for joining HIPPO's third quarter 2026 earnings call. Earlier today, HIPPO issued an earnings release announcing its Q3 results and a financial results presentation, which will be webcast during today's call, both of which are available at investors.hippo.com. Leading today's discussion will be HIPPO President and Chief Executive Officer, Rick McCatherin, and Chief Financial Officer, Guy Zeltzer. Following management's prepared remarks, we will open up the call for questions. Before we begin, we'd like to remind you that our discussion will contain predictions, expectations, forward-looking statements, and other information about our business that are based on management's current expectations as of the date of this presentation. Forward-looking statements are subject to risks, uncertainties, and other factors that could cause our actual results to differ materially from historical results and or from our forecast, including those set forth in HIPPO's Form 10Q. For more information, please refer to the risks, uncertainties, and other factors discussed in HIPPO's SEC filings, in particular, the section entitled Risk Factors in our Form 10Q and 10 . All cautionary statements are applicable to any forward-looking statements we make whenever they appear. We should carefully consider the risks and uncertainties and other factors discussed in HIPPO's SEC filings.

We now place undue reliance on forward-looking statements as HIPPO is under no obligation and expressly disclaims any responsibility for updating, offering, or otherwise revising any forward-looking statements, whether as a result of new information, future events, or otherwise, except as required by law. During this conference call, we will also refer to non-GAAP financial measures such as adjusted net income. Our GAAP results and description of our non-GAAP financial measures with full reconciliation to GAAP can be found in the third quarter 2026 earnings release, which has been furnished to the SEC, and is available on our website. And with that, I'll turn the call over to Rick McCatherin, our President and CEO. Thank you, Chuck, and good morning, everyone. Thanks for joining us. HIPPO continues to execute on our strategy of growth, diversification, and improving profitability at reduced volatility. This quarter, we delivered on all three, including marking our fifth straight quarter of underwriting profitability. For the quarter, we generally

generated 9 million of net income and 20 million of adjusted net income, which represents 17% annualized adjusted return on equity for the quarter. We had strong growth across the business with growth written premiums of nearly 500 million up 60% over last year, led by the continued expansion of existing program partners in our casualty and CMP lines of business and an acceleration of growth and our homeowners business. This growth did not come at the expense of underwriting discipline. Our combined ratio for the quarter improved one percentage point year over year to 98.4. However, on a year-to-date basis, our combined ratio improved 20 points to 97.9 compared to the same period last year. I would like to provide a few thoughts on what we are seeing in the overall competitive environment. In general, the property market remains... ...soft with increased competition as plentiful reinsurance capacity is allowing for reduced rates and softening terms and conditions. In casualty, while we have seen some increased competition, we are still seeing higher renewal pricing and the impact of lost cost trends really depends on the line of business and where you are attaching. Combined, we still see an overall operating environment in which we can grow our business profitably. Now let's discuss where this performance is coming from. The program and MGA market remains one of the fastest growing and most innovative sectors of insurance.

This market now generates gross premium of over $125 billion in the U.S., growing at 15% annually since 2019. And I am proud that HIPO is one of the leading program carriers supporting this growth and innovation. Last night, we announced our latest endeavor into the program. A partnership with Greenlight Re, whereby we will have the opportunity to be a preferred program carrier for emerging MGAs, as well as invest alongside Greenlight Re into these businesses. One of the ways we intend to support emerging programs and current program partners is by offering a broad suite of services beyond capacity, including claims administration, customer support, and technology, which we have built to operate our own MGA. HHIP. We see the cultivating of emerging programs as a pathway to build strategic partnerships with some of the leading programs of the future. Now turning to our current portfolio. In homeowners, we wrote $112 million of premium, up 11% over last year. Growth continues to come from our admitted book, more than offsetting the headwinds in the ENS channel. We view our homeowners book as rate adequate, achieving a mid-single. We saw a single-digit renewal rate this quarter, and we combined with nearly 10% of increased exposure, we had nearly 14% of renewal premium increase in the quarter. Overall, we are seeing favorable loss trends across the book with low single-digit loss costs, which we expect rate to keep pace with.

As we announced last quarter, we continued to ramp up our footprint with our national distribution partners, including an additional 14 states this year for supporting existing homes. We also are actively working to expand the options for how we reach potential customers. Supporting the expansion has been the rollout of our AI initiatives, one of which is now showing a success rate in 9 of 10 first notice of losses with Clara. This technology provides our claims operations the bandwidth to keep growing profitably. Additionally, the launching of these new states has also been significantly more efficient, requiring 70% less engineering effort per state than our initial 8 states. We continue to refine our underwriting and technology integrations and see a lot of runway ahead for our homeowner's business. Commercial Multi-Apparel had another strong quarter, up 63% over last year to $108 million of gross written premium, which, on a year-to-date basis, makes CMP our second largest line behind casualty. Our retention of 19% came back in line with our previously communicated expectation of a low 20s retention for the year. Casualty was our fastest growing line again this quarter, with gross written premiums up sharply to $188 million, now our largest line on a gross basis, though only third on a net basis year-to-date. As we said last quarter, this year, we have begun to retain more casualty risk primarily from a program with a 20%

year track record, and we are doing so as both a means of managing the insurance cycle and managing the overall exposure concentrations given the growth we expect in our property book. As indicated last quarter, we expect the retention level to normalize with mid-teens for the full year. Our net expense ratio came in at 41.7%, down over 10 points from last year and nearly 30 points from the beginning of 2024. This improvement was driven by both increased operating leverage, which improves with scale, and our changing of mix of business, including more casualty business. We believe our investments in technology have us in the position to keep driving expense ratio down in the near future. The result of these efforts is the steadily improved and stabilized underwriting performance, which has now produced a combined ratio underwriting profit for the last year. five quarters in a row, with a 98% for the quarter, despite experiencing a more normalized cat loss quarter. As we continue to see the market in various lines of business, especially cat exposed E&S property, the need to remain ever more disciplined is increasingly important. We believe this type of discipline is embedded at HIPPO. This quarter, we continue to make excellent progress towards our long term goals, which we have raised last quarter to over two. $2.5 billion of gross premium and over $140 million of adjusted net income.

Our business continues to evolve into a more diversified, stable, and profitable enterprise. We are making the investments in technology and talent today, which will drive HIPPO into 2028 and beyond. Now, I'll turn it over to our CFO, Guy Zeltser, to walk through the numbers in detail, and then we'll take your questions. Guy?

And we've been unfolding all this time. Guy?

? Guy? And good morning, everyone. In the third quarter, we continue to deliver strong top-line premium growth, improved underwriting, and increased profitability. Q3 gross written premium grew 60% year-over-year to $498 million, up from $311 million in Q3 of last year. Growth in the third quarter was achieved across all our lines of business, with especially strong performance. In casualty and commercial multi-parallel lines, and more modest extension in both renters and homeowners. The intentional diversification of our gross written premium continued in the third quarter, when three of our four major lines generated over $100 million of gross written premium. Homeowners grew 11% to $112 million, and accounted for 23% of the total gross written premium, down from 32% in Q3 of last year. Renters grew 25% to $74 million, and accounted for 15% of the total gross written premium, down from 19% in Q3 of last year. Commercial multi-apparel grew 63% to $108 million, accounted for 22% of total gross written premium, up from 21% last year. And casualty grew 146% to $188 million, representing 38% of total gross written premium, up from 25% last year. I would like to provide a little additional color on our casualty growth in the last few quarters. While the rate of growth has been elevated, where the growth is originating from is equally important. During the year, we added several large existing programs with enforced books, resulting in over two thirds of the casualty GWP growth coming from renewal business, rather than chasing business in a softening market. Net return premium in Q3 grew 26% year over year to $149 million, trading the extension of gross return premium, as we are intentionally retaining less risk in the fastest growing commercial lines. Consequently,

our blended retention rate in the quarter was 30% compared to 38% last year. In general, we view retention levels on a full year basis as timing of program renewals can lead to quarterly variances in that metric. The changing mix was also reflected on a net basis. Homeowners generated $74 million of net return premium, representing 50% of the total net return premium, down from 64% last year. Renters generated $29 million and accounted for 19% of total net return premium, down from 22% last year. Commercial multi payroll generated $20 million and accounted for 14% of total net return premium, up from 12% last year. Casualty also generated $20 million in the quarter, compared to roughly $4 million in Q3 of last year. It is worth noting how this mix shift has already started impacting our underwriting results in Q3, and is expected to continue doing so in the future. Casualty and CMP lines generally have a higher non-cat loss ratio than our property lines, but also lower cat loss ratio and expense ratio. So as we continue to diversify into CMP and casualty lines on a net basis, we expect to see the components of consolidated combined ratio, moving the direction I just mentioned. While we still aim to achieve normalized combined ratio in the mid-90s by 2028. In Q3, our net combined ratio improved one percentage point to 98.4% compared to Q3 of last year. This was achieved by improvement in expense ratio, which more than offset a slightly more normalized loss ratio. Our Q3 net loss ratio increased 9 percentage points year over year to 56.7%.

Excellent year, X-CAT loss ratio came in at 49.9% compared to 48.4% last year. The increase was driven both by a more normalized loss experience in a business owner property line, as well as by the continued shift to a higher percentage of casualty and CMP exposure in the book. However, we still reduced sub 50% underlying loss ratio as excellent results. GAP loss ratio came in at 6.5% and was higher by 7 percentage points over last year, a period which had no GAP losses. Seasonally, Q3 contains our most elevated model GAP exposure, and this quarter's results still came in below expectations. There was no material prior extended year reserve development for the quarter, similar to Q3 of last year. In Q3, expense ratio improved by 10. percentage points year over year to 41.7%. This improvement was driven mostly by operating leverage, which improves with scale, and was also supported by the lower expense ratio of CMP and casualty lines. As Rick mentioned previously, we believe that our continued focus on operating leverage through AI enables us to grow our business while keeping six expense largely flat, which in turn has helped driving the expense ratio improvement. Revenue in the quarter was $156 million, up 29% over Q3 of last year. During the quarter, revenue included a $19.7 million of commission, service, and fee income, which was up 45% over Q3 of last year. Q3 net income came in at $9 million, or 33 cents per diluted share.

Q3 net income was down. $189 million year-over-year, as the prior year period included a $91 million net gain on sale of the home builder distribution network. Excluding the one-time gain on sale last year, our net income has improved roughly 28% year-over-year. Q3 adjusted net income grew 9% year-over-year to $20 million, or 74 cents per diluted share. The year-over-year improvement. was primarily due to the continued improvement of underwriting results and strong premium growth. Total GIFO stockholder equity at the end of the quarter was up 8% to $469 million, up from $436 million at year-end 2025. Total book value per share at the end of the quarter was $17.62 per share. Largely in line with the $17.65. per share at last quarter, as unrealized investment losses offset the net income in the quarter. Following this quarter's results, we are raising our full year guidance. We're increasing gross return premium from a range of $1.65 and $1.7 billion to a range of $1.7 and $1.75 billion. We're increasing revenue from a range of $580 and $585 million. to a range of $585 and $590 million. We are lowering our combined ratio from a range of 99 and 101%, inclusive of a 10% cash loss ratio, to a range of 97 and 98%, inclusive of an 8% cash loss ratio. And finally, we're increasing adjusted net income from a range of $62.

and $70 million to a range of 77 and $80 million while maintaining the expected impact from both stockless compensation and depreciation and amortization to roughly $42 million. And with that operator, I would now like to open the floor to questions.

We will now begin the question and answer session. If you would like to ask a question, please press star one to raise your hand.

Okay. And just to double check, I heard that right. The overall number goes down to 30% or is it you're more talking about in casualty and C&P? The overall number. Okay. And so that tracks closer to 30. Um, yeah, I guess just, just relatedly and, um, just a little, like a little, you know, the housing market is, is slower because of, of higher mortgage rates. Um, can you just touch a little bit on how, like how submission and binding activity is with the Westwood partnership in light of the slower housing market?

Absolutely. Randy, again, this is Rick. I'm happy to, happy to talk about that. So one, you know, we don't specifically share the numbers of. What, what they look like, but I can tell you one of the, one of the, the, the thesis that we had by doing the Westwood partnership and the, the greater Baldwin partnership is that it gives us access to far more builders than we had access to previously. So even if individual builders are producing fewer homes, our access now is to a significantly larger number of builder partners. So we still believe that. there's significant upside in the builder distribution channel, even with decreases that any individual builders might face due to the rising interest rate environment.

Okay, great. I'll leave it there. Appreciate it. Thanks, Randy.

Your next question comes from the line of Tommy McJoint with KBW. Your line is open. Please go ahead.

Anytime we see a high-growth insurance company, that naturally raises questions around the capital and capacity to fund that growth. Can you talk about, as you think about growth into next year, certainly reaching into the double digits on a net written premium growth basis, how much capital is available at Spinnaker to support that growth, or is there any need potentially for a capital injection to support that? Thanks.

Hey, Tommy, this is Guy, happy to take this question. So just to reiterate something that we have said in the past, we have enough capital to support all the organic growth that we put out, or to achieve the targets we put out for 2027 and 2028. And just to reiterate, these are more than 2.5 billion of growth written premium, and more than 140 million of adjusted net income. So we'll have plenty, plenty of capital to accomplish that. I think the easiest way to think about that. And one ratio that we are looking at very closely, not just at the Spinnaker level, but at the consolidated entity level, is the NWP leverage ratio over the surplus. So if you look at our gap surplus, alongside with the surplus note that we raised, we have more than 500 million of capital. And if you stretch that one and a half times, that gives you 750 to 800 million. And our net written premium, this... This year is going to be under 600. And even if you assume the growth into next year, it's going to be probably in the 750 area. So we are now into the position where we start accumulating net income and accumulate the capital such that this additional capital can also support the growth into 2028 and beyond. Yeah, Tommy, one thing that I would add is that I think we disclosed a few quarters ago that we have also put a whole account gross quota share in place. It's a very small percentage, you know, like 5% of our total portfolio is very small. But that is a lever we can use if we have an opportunity to grow more than what Guy had just indicated. We always have that lever that we could seed off more in the whole account HIPPO and Spinnaker quota share to allow us to take advantage of an opportunity

where we think there would be a quality operator or new partnership we might have on the HIP side. So we feel very good with the capital that we have to achieve the 2020A goals. And we have a lever if we think there's an opportunity for us to increase those further.

Makes sense. Thank you. Thanks, Tommy. As a reminder, if you would like to ask a question or rejoin... the queue, press star one to raise your hand. Your next question comes from the line of Andrew Anderson with Jeffries. Your line is open. Please go ahead.

Yeah, so this is Rick. Just to elaborate a little bit on what Guy said, this is part of the strategy. This is intentional. So when we put the strategy forth a little under two years ago, what we said was we wanted to produce a highly curated, positively selected portfolio of risk that comes from our own program and partner programs. And we would want that positively selected portfolio to be diversified across geographies, across product lines and offerings. And so by doing that, we intentionally are adding program lines that look different than HHIP from both a loss ratio component and an expense ratio component leading to the community. So currently we are performing better than our long term projections on loss ratio. We're performing worse than our long term, excuse me, we're performing online with our long term projections of expense ratio and the mixed shift will ultimately equate to the loss ratio or excuse me, combined ratio targets that we put forth. And so, you know, we would expect there to see gradual in. Increasing in loss ratio, gradual decreasing in expense ratio, providing a much more positive combined ratio component. So, again, intentional actions on our part to create that diversified portfolio. Thanks for the answers. Thanks, Ed.

There are no further questions at this time. I will now turn the call back to management. for closing remarks. Well, I appreciate you joining us. Thank you for that. And we look forward to speaking with you again next quarter. Have a great day, everyone. And this concludes today's call. Thank you for attending. You may now disconnect.