HIPO

Hello, everyone. Thank you for joining us, and welcome to Hippo First Quarter 2026 Financial Results. After today's prepared remarks, we will host a question and answer session. I will now hand the conference over to Charles Sebaski, Head of Investor Relations. Please go ahead.

Thank you, operator. Good morning, thank you for joining Hippo's First Quarter 2026 Earnings Call. Earlier today, Hippo issued an earnings release announcing its Q1 results and 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'll 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 include, are not limited to, Hippo's expectations or predictions of financial and business performance and conditions in 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 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 in 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 first 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, Good morning, everyone. Thank you for joining us. Hippo kicked off 2026 with strong momentum, accelerating the top line growth of our business in the first quarter while announcing initiatives to support our technology-driven insurance platform and delivering a fourth consecutive quarter of profitability on both a stated and adjusted basis, with $7 million of net income and $17 million of Adjusted Net Income in the quarter. In the quarter, we generated over $332 Gross Written Premium, up 58% over last year, driven by our commercial lines business capitalizing on recent market opportunities and a return to growth in homeowners. This growth was coupled with a continued focus on underwriting discipline and sustainable profitability. For the quarter, we generated an underwriting profit with a 99.5 Combined Ratio, an improvement of 60 percentage points year-over-year.

These results and our continued momentum highlight the strength of our model and the progress we've made as an organization over the past several years. We expect to build on this progress as we continue advancing the core drivers of our technology-native insurance platform. We continue to make progress towards our 2028 targets of over $2 Gross Written Premium, $125 million of Adjusted Net Income, and an 18% adjusted return on equity driven by our focus to drive long-term profitable growth. This quarter, we made several advancements across our key value drivers. First, we supported our long-term growth and diversification goals by announcing our strategic distribution partnership with Progressive. We have now created a truly differentiated distribution platform for our homeowners product by combining Progressive with our existing Westwood partnership.

With the two partnerships complementary to each other, and most importantly, supportive of profitable growth. Progressive provides a scaled high volume platform that allows us to efficiently identify and target our ideal customer segments, while Westwood offers direct access to home builders and new home buyers at the point of purchase. Second, improving operating leverage at scale requires a technology-driven approach, and our platform was purpose-built for this moment, reinforcing the value of continued investment in our technology, which has long been a source of strength for Hippo. As such, we are able to quickly apply new AI capabilities without the need to re-platform fragmented legacy systems. I now want to talk about three areas where we have been investing and implementing AI to support growth and drive operational efficiencies. First, we are fundamentally changing how claims are handled at Hippo.

By embedding agentic AI directly into our claims workflow, our adjusters are operating at roughly 30% higher efficiency, we believe that improvement is sustainable, not as a one-time gain. Claims expense is one of our largest controllable costs. Historically, efficiency gains require either more people or outsourcing. Instead, we are scaling intelligence. Over time, we expect more than 70% of our first notice of loss to be filed digitally, improving the customer experience and quality of data captured for claims processing. This technology also enables a rapid increase in claims handling capacity following catastrophic events, enhancing the customer experience at a time of great need. Claims is just the beginning. Second, services.

Later this year, we will announce a transformation of the customer experience through agentic AI, designed to redefine service with a fully AI-powered first-line support that reduces costs, improves the net expense ratio, and resolves a significant share of inquiries without human intervention. This is enabled by our modern AI-ready tech stack. Our AI service voice agent is already live for 100% of inbound calls and after-hour support. It handles authentication, triages, attempts to resolve, then seamlessly escalates calls to the relevant agent or creates follow-up tickets as needed. Over the next one-two years, we expect agentic AI to resolve 50+% of customer producer support requests across email, chat, and voice. Early indications following our Q1 launch is that we are already seeing a 10% improvement in average handle time, accelerating customer outcomes while significantly reducing outsourced call center expenses. Third, underwriting.

We've begun deploying AI in our homeowners business to assist our underwriters and accelerate their ability to review new business, supporting rapid growth from our Progressive and Westwood partnerships without adding headcount. This AI-driven underwriting platform will enable continuous risk evaluation from submission through renewal, empowering underwriters to manage every policy and program, all enabled by our roots as a technology-native carrier. Our continued multi-year investment in technology is expected to improve the customer experience, increase profitability, enable us to scale efficiently as we grow towards $2 billion in premium and beyond. We'll share additional updates throughout the year as we achieve key milestones. I'll now provide some updates on core lines of business. First, in homeowners. For the quarter, we wrote $87 Gross Written Premium, up slightly as we turned the corner on growth, as we had previously indicated.

Recent initiatives and partnerships more than offset continued pressure in the E&S market. Our homeowners book remains rate adequate. Rate increases averaged roughly 10% this quarter, though we expect that momentum to moderate in the quarters ahead. Turning to our renters business, which produced Gross Written Premium for the quarter, a 17% increase over the prior year quarter. This remains a book we view very favorably and are pleased to support despite the lower retention this year, which Guy will discuss in more detail shortly. Now, turning to our diversified commercial lines business. Commercial multi-peril delivered a strong quarter of growth, increasing 89% over last year to $96 Gross Written Premium, now similarly sized to both the casualty and homeowners books.

Fundamental to our program strategy is supporting programs we know well and/or have long track records of performance. Our growth originated largely from existing program partners focused on commercial property and business owners' policies. Our casualty business experienced even faster growth, increasing 193% to end the quarter with $101 Gross Written Premium. importantly, this growth came from a well-diversified group of programs. The book overall maintains relatively modest limit profiles. As we outlined last quarter, our intention was to start increasing our retention rates in the casualty business. This quarter, we launched a new program with a long-term operator who we are very familiar with and have taken the opportunity to retain increased portion of the risk.

This was a strong start to 2026, both in our quarterly results and, more importantly, in the progress we have made towards achieving our longer-term aspirations. I'll turn the call over to our Chief Financial Officer, Guy Zeltser, to walk through the highlights of our first quarter, and then we'll open it up for questions. Guy?

Thanks, Rick, and good morning, everyone. In the first quarter, we once again delivered strong top-line premium growth, improved underwriting, and increased Gross Written Premium grew 58% year-over-year to $332 million, up from $211 million in Q1 of last year. Growth in the first quarter was driven primarily by strong performance in casualty and commercial multi-peril lines, continued steady expansion in renters, and as Rick mentioned, a modest return to expansion in homeowners. I'll highlight now a few additional details of how Gross Written Premium has become. Casualty generated $101 million, representing 30% Gross Written Premium, up from 16% last year. Commercial multi-peril with $96 Gross Written Premium accounted for 29% Gross Written Premium, up from 24% last year.

Homeowners, which grew slightly to $87 million, representing 26% of Gross Written Premium, down from Gross Written Premium in q1 of last year as our portfolio continues to diversify. Gross Written Premium in Q1 grew 1% year-over-year to $101 million, trailing behind the Gross Written Premium. this equates to a 31% retention rate in the quarter compared to 48% last year. As reflected in our 2026 guide, this change was largely expected given the overall mix shift as we retained less in our fastest-growing line, casualty. In addition, a change in our renter's retention rates had a meaningful impact this quarter, which I will provide a bit more color on.

In renters, Gross Written Premium was $11 million compared to the $37 million in Q1 last year. This change was almost entirely driven by a $26 million unearned premium adjustment related to a change in retention in both Q1 of this year and last year. The renter's line is structured such that when the retention rate changes at time of the treaty renewal on January 1st each year, the new retention rate is applied to Gross Written Premium and to all unearned premium outstanding from the prior period. This unearned premium adjustment had an impact of $26 million year-over-year as our Q1 2025 Gross Written Premium was boosted by this adjustment as retention increased versus prior year. Our Q1 2026 Gross Written Premium was slightly lower due to this adjustment as retention slightly decreased versus prior year.

For the remainder of the year, we expect retention rates to normalize and get closer to 40% on the renter's line. Going forward, we would expect Gross Written Premium growth to be more directionally in Gross Written Premium growth. total revenue in the first quarter was $122 million, up 10% over Q1 of last year, a period which also included $5.5 million of fee income from the home builder distribution network, which was sold last year. As we continue to grow the business, and as prior periods will stop having the benefit of fee income from the home builder distribution network sold last year, we expect revenue growth to accelerate. In Q1, our net combined ratio improved 60 percentage points to 99.5% compared to Q1 of last year.

This was achieved by improvement to both net loss and expense ratio. Our Q1 Net Loss Ratio improved 58 percentage points year-over-year to 48%, driven by favorable trends in both cat and non-cat loss experience. Catastrophe loss ratio improved 57 percentage points to 4%, driven primarily by a low level of CAT losses during the quarter and the impact of California wildfires in 2025. Non-catastrophe loss ratio improved 1 percentage point year-over-year to 44%, reflecting that we have largely gotten the underlying pricing where it needs to be from a rate adequacy perspective. In Q1, Net Expense Ratio improved 2 percentage points year-over-year to 51.5%. As Rick mentioned previously, our continued focus on operating leverage through AI and impact of scale continues to drive the expense ratio down.

It is also worth highlighting that we achieved this year-over-year improvement despite the benefit in prior year quarter of roughly 4.5 percentage points from profits generated by the homebuilder distribution network we sold in Q3 of 2025. Q1 net income came in at $7 million or $0.27 per diluted share, a $55 million improvement year-over-year. The year-over-year improvement was primarily due to the lower cat activity year-over-year, followed by the continued improvement of core underlying underwriting results. Q1 Adjusted Net Income grew by $52 million year-over-year to $17 million or $0.65 per diluted share.

Total Hippo shareholder equity at the end of the quarter was $449 million or $17.23 per share, up 2% from $436 million or $16.97 per share at last quarter end. Following these quarter results, we are updating a few of our guidance metrics for full year 2026. Gross Written Premium from a range of $1.4 billion-$1.5 billion to a range of $1.45 billion and $1.525 billion. We are increasing Gross Written Premium from a range of $500 million-$540 million to a range of $520 million and $550 million.

We are introducing a new revenue guide of between $560 million and $570 million, which represents a growth of 19%-22% over FY 2025. We are maintaining our net combined ratio at a range of 103% and 105%, inclusive of a 13% catastrophe loss ratio, given the second and third quarters are typically elevated cat quarters. Finally, we increased our expected Adjusted Net Income from a range of $45 million-$55 million to a range of $48 million-$56 million.

With that, operator, I'd now like to open the floor to questions.

Andrew, your line is open. Please go ahead.

Hey. Yeah, thanks. Good morning. This is Sid on for Andrew. First on the updated guidance, you raised the growth outlook but left the Combined Ratio unchanged. Just curious what you're expecting for the balance of the year to prevent margin expansion despite the higher growth. I guess similarly, how should we be thinking about the incremental loss ratios with elevated growth and casualty and CMP?

Hi, Sid. This is Guy. Happy to take this question. To start off, we were very happy with how we started the year. This is why on both the GWP, NWP, and the bottom line profitability, we felt comfortable to raise it a bit. The combined ratio, we kept it the same. Every point is $5 million. You know, by and large, we feel that's still the appropriate number. The other thing I will remind is that Q2 and Q3 are the quarters with the highest catastrophe loss that we had. We didn't want to get ahead of that. Directionally, all the metrics are moving in the right direction. Your other question about the casualty. Yes, we grew casualty significantly on the GWP.

It's still the line that we're retaining, the least. What we are retaining is one program that we. It's with an operator that we know well, and we feel very good about the pricing. We still expect the same loss ratio, if I would say, non-CAT of about 45% for the year and the CAT load of about 13%. We still feel very good about that, just generally the loss cost trends.

Sid, this is Rick. One thing that I'll ask answer about your combined ratio comment is when we think about combined ratio, we recognize that our loss ratio portion is doing quite well, and we expect that, barring any unforeseen circumstances, to continue. The expense ratio is the area in which we're putting significant focus on as a company. Much like when we had to improve the loss ratio a few years ago, that same level of energy and emphasis is being driven towards improved expense ratio, thus a pretty significant reduction in combined ratio over time.

The difference, I think, with expense ratio is that some of these initiatives build upon themselves. As we continue to get into future quarters and future years, you'll see continued improvement in that particular area, really driving for an expense ratio ultimate target or ultimate goal in the mid-30s as opposed to close to 50% where it is today.

Okay, great. Thanks. Then maybe I'm just hoping you can remind us how you think about managing collateral adequacy and counterparty risk in fronting?

Yeah, I'll go ahead and take that, Sid. I think that's a great question, frankly, I think it's very important for everybody to understand there is a difference in quality of programs, of reinsurers, of partnerships. I'll remind everybody that when there were challenges with Vesttoo, you know, a few years ago, Spinnaker had zero exposure to that loss. There's been some recent news on challenges with a few others. I'll just tell the audience that Spinnaker had zero exposure to those, which just emphasizes that we put quality above quantity and above growth every time. We very much monitor the collateral. We're very careful on who we select or who we accept as reinsurance risk-bearing partners.

More importantly, we're very cautious on who we sign up as a program partner versus those that approach us who want to be signed up. I think the message here is we have not sacrificed one bit of quality. We continue to have a high bar, and you should expect that from us going forward.

Okay, great. Appreciate the answers.

Thanks, Sid.

A reminder, if you would like to ask a question, please press star one on your telephone keypad. Your next question comes from the line of Timothy D'Agostino from B. Riley Securities. Please go ahead.

Hi, good morning. Thanks for taking the question. Congrats on the quarter. The one question from me is just, I guess a little more color on the Progressive partnership and how that's rolling out. Understanding that it's still, you know, a month in since the announcement, but it'd be great to just get more additional color how the relationship's building. If you could just add anything to that. Thank you.

Yeah, Tim, no, happy to answer that. We could not be more pleased with how the partnership is developing. Although we announced it a month or so ago, we actually went live at the beginning of the year. We now have four months of history with them. It's exceeding our expectations, and I'd like to think it's exceeding their expectations as well as we're talking about how do we add additional states to the partnership. I will emphasize that both companies wanted to take a fairly conservative approach on growth, making sure that both are aligned with the quality of customers that are being placed on the Hippo program.

I've been impressed, frankly, with Progressive and their collaborative partnership on this, and we're really excited to continue to grow it and continue to ramp and add additional states in the coming quarters, which will certainly continue to accelerate our renewed growth in our homeowners line.

Okay, great. I heard you say that, you know, enter new states in the coming quarters. I guess from their lens and from your lens, what's it gonna take for that growth to accelerate and for, you know, maybe by year-end 2026 we see you enter, you know, a couple more states?

Yeah, it's a great question, Tim. Like any partnership, both sides have a desire to grow in particular geographic regions. We work closely with them to identify where they may need additional carrier support in their agency and then obviously where we feel like we can grow where we're both, A, price adequate and, B, not overly concentrated. You know, I think we launched with approximately 10 states initially with Progressive. We expect to grow that. I think actually eight states. We expect to grow that in the coming quarters. I would imagine by this time next year that will be doubled in areas that both support their desires and where we believe will be accretive to the bottom line.

Okay, great. Thank you so much for taking the questions today, and congrats again on the quarter.

Really appreciate it. Thanks, Tim.

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

Hey, good morning. As you're starting to reengage in growth in the homeowners book, can you remind us, does your 2028 targets for or guidance there contemplate any certain mix of homeowners then and so we can back into what, a CAGR for growth you're expecting in your homeowners book?

Hey, Tommy. I'll go ahead and start. Guy can elaborate. When we put the 2028 targets out, we considered essentially, if we keep doing what we're doing, what will happen to the ultimate performance of the company. I said last quarter, I will reiterate this quarter, we are ahead of pace on those targets. We're very pleased with that. I think relating to the question on mix, we don't have a specific mix right now because the mix is dependent on a couple different things. What's going on with the various market cycles, both on property and casualty? What opportunities present themselves where we believe we can grow meaningfully in a particular or group of product lines, we wanna take advantage of that opportunity.

Of course, the overarching theme is we will not get out of whack in terms of broadly diversified portfolio against the major product lines. We wanna make sure that the portfolio is diversified throughout 2028, leveraging for opportunity and market conditions to give us a little bit of freedom and flexibility on which we may choose to grow when and which we may choose to grow a bit larger. Guy, do you want to take the CAGR?

Yes. Tommy, as we said, during our investor day, the implied CAGR to get to the $2 billion target was about 22%. As you can see, this quarter, last quarter, we are ahead, as we mentioned, this is why we feel comfortable to say that we are ahead of that target so far. We like the mix as it is right now Gross Written Premium basis. it was relatively even between the larger three lines, casualty, CMP, and homeowners. What I will say is that on a net basis, you should expect the pie to also continue to diversify and will be more diversified than it is right now because it's still more concentrated with the property programs.

We do expect slowly, as we learn more about the newly launched programs, to slowly dial up the risk retention on the other lines as well.

Thanks for the color there. If I look at slide seven of your investor presentation, you have the down arrow next to E&S home under increased competition. First off, can you remind us what is the mix between admitted E&S in your home book? Is that comment there saying E&S at this point in home is unattractive or it's just more selective in certain markets? Could you elaborate on that comment?

Yeah, happy to, Tommy. I think one of my roles as the CEO of Hippo is to give the company maximum optionality and create as many levers as possible to take advantage of particular market cycles and particular themes and particular opportunities. We've spent a lot of time over the last 12-24 months making sure we have the capabilities to toggle up admitted business, toggle up E&S business, or toggle them down when we feel like the market conditions aren't right. Predominantly, the reason that we're toggling down the E&S marketplace is we think that it is less competitive given the fact that more competition exists within the admitted and standard market. Having these toggles and these levers are by design, so we can take advantage of various market cycles. Guy, do you wanna talk about the mix?

Yes. Tommy, about the mix, about 70% of the homeowners line in Q1 was HHIP, our own MGA, and then the rest was the partner program, which is predominantly E&S. Within that line, HHIP actually grew about 15%, and that's also driven by the Progressive and Westwood partnerships. The other side of the book shrank about 20%-25%. What we like about E&S, it's very value accretive from a profitability perspective, and we absolutely prefer with our partner to prioritize underwriting discipline and not compromise on the profitability. Because of the competition, we do see a volume growth there. Again, we have no problem playing the right cycle and maintaining profitability over volume.

Tommy, the ability to lever against various cycles and various opportunities, I think is a differentiating factor for us versus some of the others that might be really emphasizing or focusing on a single product line. As you know, in our history, we focused on a single product line, and we got bit a few different times. It was really within our objectives to make sure that we have these toggles and these levers where we can continue to grow the business where attractive and slow the business where less attractive.

Thank you.

Thanks, Tommy.

At this time, there are no further questions. I will now turn the call over to Rick McCathron for closing remarks.

Well, I'd like to thank everybody for joining today. We're very pleased with the quarter, but I think we're more excited about what the future will hold and what the future will bring. We look forward to speaking with you again next quarter. Have a great morning.

This concludes today's call. Thank you all for attending. You may now disconnect.