Hippo Q2 2025 Earnings Report

Hippo EPS Results

• Actual EPS: $0.65
• Consensus EPS: -$0.65
• Beat/Miss: Beat by +$1.30
• One Year Ago EPS: N/A

Hippo Revenue Results

• Actual Revenue: $117.30 million
• Expected Revenue: $116.00 million
• Beat/Miss: Beat by +$1.30 million
• YoY Revenue Growth: N/A

Hippo Announcement Details

• Quarter: Q2 2025
• Date: 8/6/2025
• Time: Before Market Opens
• Conference Call Date: Wednesday, August 6, 2025
• Conference Call Time: 8:00AM ET

Hippo (NYSE:HIPO) is an American insurtech company that provides homeowners insurance through a digital-first platform. The company offers a range of coverage options designed to protect homes, personal belongings and liability risks, with a focus on streamlined online policy purchasing and claims handling. By leveraging modern technology, Hippo seeks to simplify the insurance experience and offer faster service compared with traditional carriers.

Central to Hippo’s offerings is its proprietary risk assessment engine, which analyzes property data and historical claims information to tailor policies to individual homeowners. The company also partners with smart-home device manufacturers to provide homeowners with complimentary sensors—such as water-leak and freeze detectors—that can help prevent losses before they occur. Policyholders benefit from real-time alerts and automated maintenance reminders, positioning Hippo’s model as preventive rather than strictly reactive.

Founded in 2015 and headquartered in San Jose, California, Hippo has rapidly expanded its footprint across the United States, underwriting policies in multiple states through a combination of its own licenses and partnerships with established insurance carriers. The company’s digital platform enables easy online quoting and binding of policies, while its mobile and web apps facilitate rapid filing and tracking of claims. Hippo’s approach aims to reduce paperwork and improve customer engagement through a suite of digital tools.

Hippo went public via a merger with a special purpose acquisition company (SPAC) in 2021. Co-founder Assaf Wand serves as President and Chief Executive Officer, guiding the firm’s strategy and product development. Under his leadership, Hippo continues to invest in data science, customer service and home-protection technology, positioning itself as an innovator in the competitive homeowners insurance market.

Hippo Q2 2025 Earnings Call Transcript

Key Takeaways

• Positive Sentiment: In Q2 Hippo delivered a 31% year-over-year revenue increase and 16% growth in gross written premium, achieved a 47% consolidated net loss ratio, posted positive net income from operating activities for the first time, and reported $17 million of adjusted net income.
• Positive Sentiment: Hippo announced a transformative partnership with the Baldwin Group to expand its hybrid fronting capacity, triple access to new home closings via Westwood Insurance Agency, and accelerate premium growth and geographic diversification.
• Positive Sentiment: The company closed the sale of its homebuilder distribution assets for $100 million—yielding an expected one-time gain of approximately $90 million—and bolstered its financial position to support long-term strategic initiatives.
• Positive Sentiment: Hippo raised its full-year 2025 guidance across key metrics, increasing its lower bound for gross written premium, improving its consolidated net loss ratio outlook to 67–69%, and shifting to a projected positive net income of $35–39 million.
• Neutral Sentiment: The company is executing a long-term strategic plan anchored in strategic diversification, optimized risk management, and market growth via its tech-driven MGA platform and hybrid carrier model.

Presentation

[Operator]

Hello, everyone, and a warm welcome to the Hippo Q2 twenty twenty five Earnings Call. My name is Emily, and I'll be coordinating your call today. I would now like to turn the call over to Mark Olson, Director of Corporate Communications to begin. Please go ahead.

[Mark Olson, Director - Corporate Communications at Hippo]

Thank you, operator. Good morning and thank you for joining Hippo's twenty twenty five second quarter earnings call. Earlier today, Hippo issued a shareholder letter announcing its Q2 twenty twenty five results, which is available at investors.hippo.com. Leading today's discussion will be Hippo President and Chief Executive Officer, Rick McAthron and Chief Financial Officer, Guy Zeltzer. Following management's prepared remarks, we will open up the call to questions.

[Mark Olson, Director - Corporate Communications at Hippo]

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 include, but are not limited to, Itco's expectations or predictions of financial and business performance and conditions and competitive and industry outlook. Forward looking statements are subject to risks, uncertainties and other factors that could cause our actual results to differ materially from our historical results and or from our forecast, including those set forth in Hippo's Form 10 Q filed today. For more information, please refer to the risks, uncertainties and other factors discussed in Hippo's SEC filings, in particular, in the section entitled Risk Factors in our Form 10 Q. All cautionary statements are applicable to any forward looking statements we make whenever they appear.

[Mark Olson, Director - Corporate Communications at Hippo]

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 and adjusted EBITDA. Our GAAP results and description of our non GAAP financial measures with a full reconciliation to GAAP can be found in the second quarter twenty twenty five shareholder letter, which has been furnished to the SEC and is available on our website. And with that, I will turn the call over to Rick McAatherine, our President and CEO.

[Richard McCathron, Director, President & CEO at Hippo]

Thank you, Mark. Good morning, everyone. Thank you for joining us. The second quarter marked a pivotal milestone for Hippo, a proud moment that reflects the dedication, hard work and steady progress we've made over the past several quarters. We unveiled our exciting long term strategic plan at our Investor Day in New York City and announced a new transformative partnership that will accelerate our strategy.

[Richard McCathron, Director, President & CEO at Hippo]

This quarter underscores our ability to deliver significant incremental improvements across the core drivers of value in our business. The strategic plan we presented to investors and analysts is designed to deliver superior returns on capital and is anchored in three powerful pillars: strategic diversification. We are actively diversifying our premium base across both personal and commercial lines while also broadening our reach across the insurance value chain by leveraging Hippo's hybrid hunting carrier unlocking market growth. We are poised to capitalize on the robust long term growth trajectory within the home insurance market through our own managing general agency, Hippo Home Insurance. This program offers a differentiated technology driven customer experience that sets us apart.

[Richard McCathron, Director, President & CEO at Hippo]

Optimize risk management. We're leveraging our diverse portfolio and risk management capabilities to intelligently optimize our business across market cycle. This involves iteratively adjusting pricing coverages and the degree and nature of risk participation across different lines of business to maximize returns. The strategic partnership announced at our Investor Day with the Baldwin Group is set to supercharge the momentum across all three of our strategic pillars. Program premium growth and diversification.

[Richard McCathron, Director, President & CEO at Hippo]

Hippo's hybrid frontier will build upon its decade long support of Baldwin's MSI renters and MSI homeowners program, extending capacity to a broader spectrum of Baldwin's NGA programs. This move is set to accelerate premium growth and enable faster diversification across lines of business. Tripling MarketAxess. We'll now distribute our newly built homeowners product through Baldwin's industry leading Westwood Insurance Agency, which partners with 20 of the top 25 homebuilders in The U. S.

[Richard McCathron, Director, President & CEO at Hippo]

This collaboration significantly expands our reach, tripling access to new home closings and fueling both premium growth and geographic diversification. Strengthening financial position. We closed the deal to transfer our homebuilder assets to the Baldwin Group for $100,000,000 in Q3. The additional capital will directly fuel our long term strategy of building a well balanced portfolio of insurance risks that delivers a superior return on capital. Beyond these significant corporate developments, our internal teams remain laser focused on operational efficiency, execution and excellence throughout the quarter.

[Richard McCathron, Director, President & CEO at Hippo]

We welcome two key MGA partners to our platform, further diversifying our premium within commercial and casualty lines, while also expanding additional lines of business with current partners. As we mentioned during Investor Day, our risk participation when launching new programs is low. As we gain more experience with each program, we'll consider increasing our risk participation if doing so enhances our return on equity. Crucially, while expanding our top line remains core to our strategy, we did not compromise on underwriting profitability. Thanks to earlier underwriting and rate actions along with improved claims operations, we achieved a consolidated net loss ratio of 47% in Q2 supported by favorable reserve developments across multiple lines of business.

[Richard McCathron, Director, President & CEO at Hippo]

This quarter also powerfully demonstrated the scalability of our platform. While we grew revenue by more than 30% year over year, fixed expenses decreased by 16% over that same period. Our improved operating leverage is a key driver of value, enabling us to deliver robust revenue growth while maintaining underwriting discipline and controlling expenses. Our diligent execution of our strategic go forward plan in the second quarter led to a substantial improvement in profitability year over year, culminating in a critical milestone. Hippo posted positive net income from operating activities for the very first time.

[Richard McCathron, Director, President & CEO at Hippo]

This truly outstanding quarter for Hippo would not have been possible without the extraordinary hard work, focus and collaborative spirit of the entire team and the unwavering support of our valued partners. I'm immensely proud of all we achieved in Q2 and eagerly look forward to building on this powerful momentum throughout the rest of 2025 and well into the future. Now I'd like to turn the call over to our Chief Financial Officer, Guy Zeltzer, to walk through the highlights of our second quarter financial results as well as our expectations for the remainder of 2025.

[Guy Zeltser, CFO at Hippo]

Thanks, Greg, and good morning, everyone. In Q2, we continue to implement our long term strategy, demonstrating strong performance across key financial and operational metrics. Our underwriting discipline remained consistent, supporting solid top line premium growth and healthy loss ratios. We also made further progress in expense management, positioning us well to capitalize on the operating leverage inherent in our model as we scale. At our Investor Day in New York City, we outlined our twenty twenty eight financial targets, reinforcing our confidence in the long term trajectory of the business.

[Guy Zeltser, CFO at Hippo]

These targets include gross written premium over $2,000,000,000 adjusted net income over $125,000,000 adjusted return on equity over 18%. These targets reflect the continued maturation of our business model and our ability to drive profitable growth over time. The primary drivers of future adjusted net income growth are already visible in our Q2 results. We are growing top line premium while maintaining underwriting profitability at expected levels and we're gaining meaningful operating leverage as premium growth continues to outpace the growth of fixed expense. As we outlined during our Investor Day, there are four key drivers of future gross written premium growth.

[Guy Zeltser, CFO at Hippo]

Organic growth from existing hybrid fronting programs, addition of new hybrid fronting programs, scaling our new homes channel within HHIP, and expanding HHIP beyond the new homes channel. In Q2, we made strong progress on most of these growth drivers. Gross written premium grew 16% year over year to $299,000,000 up from $258,000,000 in Q2 of last year. This growth was driven by our hybrid fronting programs with existing programs contributing $24,000,000 in organic growth and new programs adding $23,000,000 In HJP, we observed a mixed trend where the growth in our new homes channel was more than offset by the reduction in CapEx exposure from existing homes, resulting in a 9% year over year reduction in gross written premium from HJP. Looking ahead, there are two trends that we expect to bring HHIP back to gross written premium growth.

[Guy Zeltser, CFO at Hippo]

The Baldwin partnership provides us access to approximately three times more new homes closings, supporting our continued expansion within the new homes channel. And second, we prefer to expand growth beyond new homes, setting policies to customers with existing homes through select partners and in the states providing geographical diversification. In Q2, revenue grew 31% to $117,000,000 up from $90,000,000 in Q2 of last year. The increase was driven by gross earned premium growth of 12% to $238,000,000 up from $212,000,000 in Q2 of last year, as well as an increase in premium retention, which grew nine percentage points to 39%, up from 30% in Q2 of last year. The increase in premium retention was driven by two main sectors.

[Guy Zeltser, CFO at Hippo]

One, higher risk retention at hybrid fronting programs where the risk profile and underwriting profit were attractive and two, a shift away from quota share reinsurance at SGIP. Our premium retention in Q2 is approaching the long term target range of between 4045% that we recently shared during our Investor Day. As a core part of our strategy, we plan to be opportunistic and respond quickly to market conditions by dialing up or down premium retention guided by return on equity. In Q2, our consolidated net loss ratio improved 46 percentage points year over year to 47%. This improvement was driven by previous underwriting and rate actions earning through our financials, enhanced claim operations and favorable reserve development across multiple lines of business.

[Guy Zeltser, CFO at Hippo]

Even when we exclude the benefit of the reserve release from prior accident year, our net loss ratio would have been 55%, well below the long term targets of between 6065% we shared at our Investor Day. The net loss ratio for our hybrid fronting programs increased four percentage points to 37%. As we nearly doubled net earned premium from our hybrid fronting programs compared with Q2 of last year, we continue to demonstrate our ability to not compromise on underwriting discipline while driving significant growth. The HHRP net loss ratio improved 58 percentage points year over year to 55% driven by improvements in gross loss ratio and by prior quarter share reinsurance treaties running off, resulting in better match between net premiums and losses. Gross loss ratio of HGIP improved 41 percentage points year over year to 44%.

[Guy Zeltser, CFO at Hippo]

Non PCS loss ratio improved 26 percentage points to 34%, while PCS loss ratio improved 14 percentage points to 11%. Even when excluding the benefit from reserve release from prior accident year, HHIP gross loss ratio improved 44 percentage points to 56%. The improvement in gross loss ratio was driven by improved rate, changes in terms and conditions, better underwriting processes and enhanced claims operations. In Q2, we continue to deliver top line growth while simultaneously reducing our operating expenses both as a percentage of revenue and on an absolute dollar basis. In Q2, our combined sales and marketing, technology and development and general and administrative expenses declined by $6,000,000 compared with the same period last year, representing a 16% decrease.

[Guy Zeltser, CFO at Hippo]

When combined with the increase in our revenue over the same period, these costs fell from 46% of revenue in Q2 of last year and 30% of revenue this quarter. This reduction reflects ongoing efficiency gains across our operations and signals our ability to scale the business more effectively in future quarters. Q2 net income came in at $1,000,000 a $41,000,000 improvement compared to Q2 of last year. The drivers of this improvement included top line growth while diversifying the premium base, improving consolidated net loss ratio, better operating leverage and lower stock based compensation expense. Q2 adjusted net income came in at $17,000,000 a $37,000,000 improvement compared to Q2 of last year.

[Guy Zeltser, CFO at Hippo]

The same factors that drove the net income improvement also contributed to the increase in adjusted net income with the exception of stock based compensation expense, which does not impact adjusted net income. Q2 ending cash and investments increased quarter over quarter by $76,000,000 to $6.00 $4,000,000 This increase was primarily driven by the $50,000,000 surplus note issuance and seasonal working capital changes, including payments received from reinsurers. On 07/01/2025, we closed on the sale of our homebuilder distribution network to Westwood Insurance Agency LLC. The sale consisted of $75,000,000 in upfront cash and $25,000,000 in cash to be paid in the 2026. During the 2025, we expect to record a gain of approximately $90,000,000 in our consolidated financial statements.

[Guy Zeltser, CFO at Hippo]

On 07/01/2025, we repurchased approximately 514,000 shares of our common stock beneficially owned by Lennar in a private transaction at a price per share of $28.17 for an aggregate purchase price of $14,500,000 The repurchase of the shares was made under our existing share repurchase program. As of 07/01/2025, after giving effect to the repurchase of the shares, approximately $18,000,000 will remain authorized and available under our share repurchase program. As we look ahead to the rest of the year, we are raising full year guidance for all the key metrics we highlighted during our Investor Day. While additional details including quarterly guidance could be found in our Q2 shareholders letter, The summary of the guidance and expected drivers are the follows. We are raising the lower end of our guidance for gross written premium for full year 2025 from between 1,050,000,000 and $1,100,000,000 to between 1,070,000,000.00 and $1,100,000,000 driven by stronger performance of newly launched programs.

[Guy Zeltser, CFO at Hippo]

Similar to the trend experienced in 2024, we expect Q3 and Q4 to record lower gross written premium versus Q2 on an absolute basis, but to represent an acceleration in year over year growth versus Q2. We expect revenue for full year 2025 come in between $460,000,000 and $465,000,000 We expect the selling of the homebuilder distribution assets to lower revenue in Q3 and Q4 by approximately 5,500,000.0 and $6,500,000 respectively compared with the guidance provided prior to announcing this transaction. We are updating guidance for consolidated net loss ratio for full year 2025 improving from between seventy two percent and seventy four percent to between 6769% driven by positive loss trends reflected in our Q2 results. When neutralizing the impact of prior and current accident year reserve changes in Q2, we expect consolidated net loss ratio to increase slightly in Q3 due to seasonally higher non PCS losses, followed by an improvement in Q4. We are raising guidance for net income for full year 2025 from between $65,000,000 and $69,000,000 loss to net income positive of between 35,000,000 and $39,000,000 driven by the improved net loss ratio trends discussed already, as well as the one time gain on sale from selling the Home Builder distribution assets.

[Guy Zeltser, CFO at Hippo]

We're also raising guidance for adjusted net income for full year 2025 from between $10,000,000 and $14,000,000 loss to between $4,000,000 loss and breakeven driven by improved debt loss ratio trends discussed on this call. And with that operator, I would now like to open the floor to questions.

[Operator]

Thank you. We will now begin the question and answer session. Our first question today comes from Andrew Anderson with Jefferies. Andrew, please go ahead.

[Andrew Andersen, VP - Equity Research at Jefferies Financial Group]

Thanks. Good morning. If we look at the guide for '25 and you touched on it a bit, but could we talk about some of the upside optionality or limitations here? Are you waiting on any more rate approvals for the HHIP product before starting to write more on either the new home programs or the existing? And should we think of the second quarter as perhaps the final quarter of retrenchment in HHIP?

[Richard McCathron, Director, President & CEO at Hippo]

I'll go ahead and take that one, Andrew. Good morning. A couple of different things. Taking a half a step back, I don't think any effectively managed insurance organization in this environment is ever done. Taking rate actions, costs continue to go up.

[Richard McCathron, Director, President & CEO at Hippo]

And I think if you stay ahead of the curve, you're consistently taking much smaller rate increases than we've done in the past, but going forward. I think the substantial rate increases to really remediate our portfolio are done. Not all of those premiums have worked themselves into the P and L yet. So I would say the majority of the work is done. Still, there's some tailwind upside benefit, but we will continue to take rate as our, expected loss ratios start to deteriorate.

[Richard McCathron, Director, President & CEO at Hippo]

So our goal, of course, is to stay in a sweet spot range of profitability. So those will continue, but not nearly to the degree that they've done that we've done so in the past.

[Andrew Andersen, VP - Equity Research at Jefferies Financial Group]

Thanks. And then, just on the net loss ratio guide for the second half was kind of unchanged. But could you remind us, or just help us think about the cat loss ratio component in the second half of the year and remind us of the Southeast wind exposures you all have on the fronting side as well as the HHIP side?

[Richard McCathron, Director, President & CEO at Hippo]

Guy, why don't you take the first part and I'll take the second part.

[Guy Zeltser, CFO at Hippo]

Sure. So Andrew, the as you mentioned, the guide for the second half remain unchanged. So from an HHIP perspective, it is similar to what we shared before. So it is roughly 15 points of, caps in q three and then another 11 or so in q four. And then we have some, there's also some cat load on the fronting programs, so the agreement season is approaching. So so, yeah, we remain unchanged from that perspective.

[Richard McCathron, Director, President & CEO at Hippo]

Yeah. Related Andrew, related to the the question about our exposure to Southeast hurricane. Just as a reminder, on the HHIP program, the only thing we write in Florida, as an example, are newly constructed homes. That portfolio has gone through three hurricanes and has has performed very well. On the fronting side of the business, we do take some exposure with MSI and a few other small commercial providers, but we think that we have amply baked our participation in that in our cat load predictability.

[Richard McCathron, Director, President & CEO at Hippo]

And so we feel good about our exposure in that particular area even going into hurricane season.

[Andrew Andersen, VP - Equity Research at Jefferies Financial Group]

Thank you.

[Operator]

Thank you. Our next question comes from Randy Binner with B. Riley. Randy, please go ahead.

[Randy Binner, Managing Director at B.Riley Securities]

Yes. Thank you. Just continuing with that line of questioning, Do you disclose the your per event limit on if you had a large cat in the third quarter of any nature across your book? Is there do you have a per event limit that you disclose? And just could you just walk us through, like, how your reinsurance is is structured for that?

[Richard McCathron, Director, President & CEO at Hippo]

Yeah. We we don't disclose that specifically, Randy, but let me just give you a little bit of a little bit of information the way that we think about reinsurance. So, for all intensive purposes on the HHIP program, for any regular or attritional losses, we have very little quota share. We take almost all of that net. We do then buy layers of XOL above that to protect from sort of earnings type events.

[Richard McCathron, Director, President & CEO at Hippo]

And then we also, buy corporate cat, not only over the HHIP portfolio, but also all of the portfolios in which we take property exposure within Spinnaker. So we believe we have ample reinsurance protection to to see us through any of these individual events. Also, as a reminder, each of the programs we support, they have their own reinsurance treaties and towers, typically quota share with some XOL if it's property exposed. And then, of course, that that overarching corporate cap that we have. And we only take a fraction of the underlining exposure on on most programs. So we don't have a lot of exposure related to that, and we think we've got good solid reinsurance support in the event of any large loss.

[Randy Binner, Managing Director at B.Riley Securities]

Okay. Understood. And you said you're baking in 15% of cat for 3Q and 11% for 4Q. Did I hear that correctly?

[Guy Zeltser, CFO at Hippo]

On HHIV, yes, 15% in 3Q and about 11% in 4Q. Correct.

[Randy Binner, Managing Director at B.Riley Securities]

Okay. Great. And then just a higher level question. Obviously, gross written was pretty good in the quarter. Is there can you just give us kind of an update on how homeowners insurance is increasingly expensive in The U.

[Randy Binner, Managing Director at B.Riley Securities]

S. You're more focused on homebuilders. There's a lot of in effect in the homeowners market. Can you just give us like a quick overview of kind of where your buyers are, how you're resonating with distribution and just kinda how you're fitting into the kinda the overall kinda fragmented and and higher priced homeowners market.

[Richard McCathron, Director, President & CEO at Hippo]

Yeah. It's it's it's a challenging market for consumers, for sure. I think insurance organizations are finally reaching layers of levels of rate adequacy. Frankly, I think that over time, the industry, consumers, and providers of home repairs are gonna have to come up with a better solution. I don't anticipate weather related events to decrease.

[Richard McCathron, Director, President & CEO at Hippo]

If anything, they're likely to increase. And simply raising deductibles or putting reschedules on homes are are are not, in the best interest of customers. So it's my belief that over time, we're gonna find these types of weather related exposures to be, for the risk for those to be taken out side of a traditional homeowners policy similar to what happened with earthquake. I also think we're starting to see more parametric, providers pop up to do things like deductible buy down or deductible buyback as it relates to some of these types of things. I think that's gonna take time.

[Richard McCathron, Director, President & CEO at Hippo]

What we've really focused on at Hippo is two things. One, where we were exposed in HHIP to weather related events, we have significantly decreased our exposure in those particular areas. And then, we've also, as we've said in our our our strategic three year forecast, our objective is to build a well balanced portfolio in which homeowners is only a portion, which creates a couple things. It creates more, revenue predictability and reduced volatility. So that's the way we look at it.

[Richard McCathron, Director, President & CEO at Hippo]

From a consumer perspective, Brandy answering that question, we generally resonate with customers of either a, new homes or b, people that want to keep their homes acting, looking, feeling, sounding like a new home. So proactive preventative services provided to our customers to help them protect that joy of home ownership. And that's the types of customers we've gone for traditionally and certainly do certainly do now. And I think the entry into new homeowners with new homes transitions nicely as those homes age, as the home builder warranty starts to expire for them to partner with a provider like Hippo that tries to create ongoing value by protecting their home and mitigating exposures through the use of IoT devices, through the use of proactive preventative maintenance, and other aspects that we that we assist customers on.

[Randy Binner, Managing Director at B.Riley Securities]

Okay. Thanks for the comments. Appreciate it.

[Guy Zeltser, CFO at Hippo]

You're welcome, Amy.

[Operator]

Thank you. Thank you. Our next question comes from Tommy McJoint with KBW. Please go ahead, Tommy.

[Analyst]

Hi. It's Jean on for Tommy. Thank you for taking my question. My first question is on operating leverage. You mentioned that fixed income fixed expenses declined 16% this quarter.

[Analyst]

Just curious as you scale towards the $2,000,000,000 gross written premium, at what revenue level do you anticipate needing significant fixed cost investments? And how will you maintain this operating leverage momentum going forward?

[Richard McCathron, Director, President & CEO at Hippo]

I'm sorry. You cut out a little bit there. Could you could you repeat the question?

[Analyst]

My question is on operating leverage. So you mentioned, like, your fixed expenses declined 16%. So just wonder, like, as you scale towards the 2,000,000,000 gross written premium, at what level what revenue level do you anticipate needing more fixed cost investments? And how will you maintain this operating leverage going forward?

[Guy Zeltser, CFO at Hippo]

Yeah. Happy to take this question. This is Guy. So as we we refer to in our Investor Day, our three year plan that will take us to more than 2,000,000,000 of premium and more than 125,000,000 of adjusted net income. What we guided there is that in order for that to happen, we need to grow the written premium over the horizon by a bit more than 20%.

[Guy Zeltser, CFO at Hippo]

And what we also said is that the we expect the operating leverage to grow slower than that at around 8%. So as you mentioned, we don't expect the the fixed expense to continue to go down. It will start to go up, but the the entirety of the operating operating leverage is the is what's going to allow us to grow them significantly slower and to boost more profit into the bottom line.

[Richard McCathron, Director, President & CEO at Hippo]

Yeah. Just to just to add to what Guy said, over the last two and a half years, we've made tremendous progress on operational efficiency within the organization across all aspects of our business. Although we've made tremendous progress, I don't think we've made all the progress. I think we have an inherently scalable platform that will allow us to continue to add premium disproportionately to the amount of expense that go along with it. You know, we don't talk a lot about what we're doing in the AI front, but there are operational efficiency measures that we have deployed that we believe will continue to help that trend of increasing premiums and revenues without commensurate increases in fixed expenses.

[Richard McCathron, Director, President & CEO at Hippo]

So we think we've made good good progress, but we don't think we've made all of the progress, as a percentage of of premiums and revenues.

[Guy Zeltser, CFO at Hippo]

The the last thing I would add is when we think about the broader portfolio that we have and the scalability of the front interior that we have, this is what is allowing us to continue adding programs. And we just mentioned this quarter that 23,000,000 of gross written premium came from new launch programs. And usually, we launch these programs, we don't need to add significant fixed expense. And this and we expect that to continue. It's part of what makes the platform very, very scalable.

[Analyst]

Got it. Thank you. My second question is on the MGA partnership. In your letter, you mentioned you guys added two MGA partners with commercial and casualty lines. Just curious on what specific criteria drive your MGA partner selection, and how do you evaluate the risk return profile of new program versus existing? Thank you.

[Richard McCathron, Director, President & CEO at Hippo]

Yes. I thank you for the question. I appreciate the question. I think it's important as we talk about what differentiates our Spinnaker platform from other avenues in which an entity might be able to take inherent underwriting risk. So, typically, when we engage with a new MGA, it's a fully fronted deal.

[Richard McCathron, Director, President & CEO at Hippo]

We typically do not take much, if any, underwriting risk. And as that program matures and as we have the data to support our conviction that this is a well managed, well run program, We then start participating in risk as that program starts to mature. So we never really feel compelled to participate in risk unless we have strong conviction in a particular program's operating and underwriting capabilities. We also want to make sure that we have a portfolio in which the various product lines work together to reduce volatility in any particular product line or particular event. So adding more casualty to our portfolio creates ballast against the high property that we currently have in the portfolio.

[Richard McCathron, Director, President & CEO at Hippo]

And that's the efforts of our front team team to make sure that we are going out and we are plugging holes in that desired portfolio with operators and MGAs that we believe will produce positive underwriting results, then they prove that over time and then we start participating in risk. So we're well positioned to pick and choose our level of risk participation based on our view of quality. The last thing I'll say in this area is we have also sent programs into runoff. Ones that do not meet our threshold, whether we take risk or don't take risk, we send ones into runoff that we believe will not produce a favorable gross loss ratio, not just a net loss ratio for our participation. So we're highly disciplined in this area.

[Richard McCathron, Director, President & CEO at Hippo]

We have more than ten years of history doing this as Spinnaker, and we're gonna continue to leverage that on a go forward basis.

[Analyst]

Got it. Thank you so much for the color.

[Richard McCathron, Director, President & CEO at Hippo]

You're very welcome.

[Operator]

Thank you. At this time, we have no further questions registered. And so I'll hand back to President and CEO, Rick McAthron, for closing remarks.

[Richard McCathron, Director, President & CEO at Hippo]

Well, first of all, I'd like to thank all of you for joining us this morning. We are immensely pleased with the performance of this quarter. I think this is showing the hard work that the team has done over the last several quarters, really getting our business well positioned for the future. We think we now have that well positioned stance, and it is our objective to consistently demonstrate positive returns, both on equity and underwriting performance. So we look forward to sharing our continued progress next quarter.

[Richard McCathron, Director, President & CEO at Hippo]

And we, again, thank you for joining us this morning. Have a wonderful day.

[Operator]

Thank you all for joining us today. This concludes our call, and you may now disconnect your lines.

Participants

Executives

• Mark Olson, Director - Corporate Communications
• Richard McCathron, Director, President & CEO
• Guy Zeltser, CFO

Analysts

• Andrew Andersen, VP - Equity Research at Jefferies Financial Group
• Randy Binner, Managing Director at B.Riley Securities
• Analyst