Hippo Holdings Inc. 2026 Q3 Earnings Call

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 McCathron, and Chief Financial Officer, Guy Zeltser. 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 10-Q.

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 10-Q and 10-K. All cautionary statements are applicable to any forward-looking statements we make whenever they appear. You should carefully consider the risks and uncertainties and other factors discussed in Hippo's SEC filings. Do not 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. With that, I'll turn the call over to Rick McCathron, 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 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 gross 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 in our homeowners business. This growth did not come at the expense of underwriting discipline. Our combined ratio for the quarter improved 1 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 loss 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. I am proud that Hippo is one of the leading program carriers supporting this growth and innovation. Last night, we announced our latest endeavor into the program market, 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 E&S channel. We view our homeowners book as rate adequate, achieving a mid-single-digit renewal rate this quarter, and when 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 cost, which we expect rate to keep pace with. As we announced last quarter, we continue to ramp up our footprint with our national distribution partners, including an additional 14 states this year for quoting 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 loss with Clara. This technology provides our claims operation 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 homeowners business. Commercial multi-peril 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. 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 5 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 $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? Thanks, Rick, and good morning, everyone.

In the third quarter, we continued 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-peril lines and more modest expansion 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.