Hippo Holdings' Q4 2024: Unpacking Contradictions in Subrogation Strategies, Reinsurance, and Financial Guidance

These are the key contradictions discussed in Hippo Holdings Inc.'s latest 2024Q4 earnings call, specifically including: Strategy Behind Selling Subrogation Rights, Impact of Early Cat Loss Event on Reinsurance Protection, Financial Guidance, and Sales and Marketing Strategy:



Successful Financial Year and Quarter:
- Hippo Holdings Inc. achieved its most successful year and quarter in the company's history, doubling its annual revenue and generating positive adjusted EBITDA.
- This growth was driven by improvements in HHIP gross loss ratio, streamlining of operations, and positive adjustments to reinsurance structures.

Insurance Portfolio Transformation:
- Hippo's HHIP homeowners insurance program completed a transformation to reduce cat-related volatility, achieving a gross loss ratio of 73% and a non-cat PCS loss ratio under 45% for 2024.
- The transformation involved rate increases, structural changes to coverage, and reductions in wind and hail exposure, contributing to a significant improvement in loss ratios.

Impact of California Wildfires:
- The company reported preliminary pretax estimates of cat losses from the Los Angeles wildfires in January 2025, totaling $42 million.
- The losses were primarily related to legacy HHIP policies, and none were from homes covered through the new homes channel, reflecting a strategic reduction in exposure to high cat geographies.

Insurance as a Service Growth:
- The Insurance as a Service segment experienced more than 40% revenue growth in 2024, maintaining a net loss ratio of 39%.
- Growth was driven by consistent long-term growth, disciplined program selection, and higher risk retention with existing programs, indicating strong underwriting profitability.

Operational Efficiency and Cost Management:
- Hippo reduced its GAAP sales, marketing, technology, and development and general and administrative expenses by $8 million, or 19%, year-over-year.
- This reduction, combined with revenue growth, led to a significant decrease in operating expenses as a percentage of revenue, contributing to positive adjusted EBITDA in Q4.