Hippo achieves first quarter of positive Ebitda and discloses sale of LA wildfire subrogation rights

By David Bull

March 6 - (The Insurer) - Shares in Hippo were trading up by close to 18% on Thursday after it reported $8.5 million in positive adjusted Ebitda in Q4 2024, which president and CEO Rick McCathron said surpassed all expectations as the homeowners insurtech delivered a near 30-point improvement in its gross loss ratio for the full year.

• Q4 positive Ebitda of $8.5 million compared to a loss of $22.3 million in PYP

• Net income of $44.2 million driven by sale of First Connect business

• Q4 revenue up 58% to $102 million

• Disclosed $42 million LA wildfire loss across HHIP and Spinnaker

• Sold subrogation rights for HHIP, saving $15 million on gross basis and $11 million on net basis

• CEO McCathron highlights “most successful year to date” including a nearly 30-point reduction in gross loss ratio

Hippo's share price was up 17.5% to $34.64 at 11:45 a.m. ET in New York.

The firm also disclosed that it has sold its subrogation rights in relation to the Hippo portion of losses from the Eaton Fire.

Hippo released an overall LA wildfires estimate of $42 million that includes assessments from the California Fair Plan and is net of subrogation.

Of the total, $30 million is attributed to the Hippo Home Insurance Program (HHIP) and $12 million to non-Hippo programs supported by fronting carrier Spinnaker.

It said that sale of the subrogation rights is expected to save around $15 million on a gross basis and $11 million on a net basis, which is reflected in its estimates.

The company added that none of the losses are associated with its fastest-growing channel, the Hippo New Home Program, which represents a “substantial majority” of the new business Hippo has written in California over the past few years.

“As a native of Southern California, these events are deeply personal to me," said McCathron. "I am proud of Hippo's quick and compassionate response: arranging temporary housing, offering accelerated payouts and collaborating with our builder partners to find ways to shorten the rebuilding process.”

Commenting on its overall performance, he added that in 2024 the Palo Alto, California-based company further streamlined its operations in its “most successful year to date”.

“We accomplished all of this while nearly doubling our revenue, and our focus is now on turning net income profitable by Q4 2024,” he continued.

Hippo’s fourth-quarter results included revenue of $102 million that grew 58%, taking the full-year total to $372 million.

The firm generated net income of $44 million compared to a net loss of $42 million in Q4 2023.

The Q4 2024 net income was driven by a gain on the sale of its First Connect business, which contributed $46 million.

Adjusted Ebitda for the period was a positive $8.5 million, compared to an adjusted Ebitda loss of $22 million in Q4 2023. For the full year, adjusted Ebitda was a loss of $43.5 million, down from $200.6 million in 2023.

The gross loss ratio in the firm’s core HHIP business improved by 3 points to 50%, with a non-PCS loss ratio of 43% and a PCS loss ratio of 7%.

For the full year, the HHIP gross loss ratio improved by 28 points to 73%, while the net loss ratio improved by 46 points to 60%.

The overall gross loss ratio for the quarter was 45%, matching the prior-year period, with the net loss ratio improving from 80% to 58%. For the full year, the gross loss ratio narrowed from 71% to 53%, with the net loss ratio more than halving from 169% to 77%.

The firm highlighted investments in operational efficiencies which helped lower fixed expenses by $8 million while revenue increased by $38 million year over year.

Sales and marketing; technology and development; and general and administrative expenses collectively declined by 34 points of revenue, from 69% to 35% between the fourth quarters of 2023 and 2024.

In commentary, McCathron said: “Over the course of the year, we improved our HHIP gross loss ratio by nearly 30 percentage points, streamlined our operations to reduce fixed costs, and in Q4, achieved our long-stated goal of generating positive adjusted EBITDA, both on time and to a greater extent than expected.

“We did all of this while nearly doubling our annual revenue and laying the foundation across each of our business units to deliver margin-enhancing growth for years to come.”