Hippo Holdings Inc Stock

Hello, everyone. Thank you for joining us, and welcome to the Hippo Holdings, Inc. Third Quarter 2026 Earnings Call. [Operator Instructions]

I will now hand the conference over to Charles Sebaski, Head of Investor Relations. Charles, please go ahead.

Thank you, operator. Good morning, and thank you for joining Hippo's Third Quarter 2026 Earnings Call. Earlier today, Hippo issued an earnings release announcing 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.

And 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 3, 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. And 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 we 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 losses with Clara. This technology provides our claims operations the bandwidth to keep growing profitably. Additionally, the launching of these new states has also been significant 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 premium up sharply to $188 million, now 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 3 of our 4 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. Renters grew 25% to $74 million and accounted for 15% of the total gross written premium, down from 19% in Q3 of last year.

Commercial multi-peril grew 63% to $108 million, accounted for 22% of total gross written premium, up from 21% last year. And casualty grew 146% to $188 million, representing 38% of total gross written premium, up from 25% last year. I would like to provide a little additional color on our casualty growth in the last few quarters. While the rate of growth has been elevated, where the growth is originating from is equally important. During the year, we added several large existing programs with in-force books, resulting in over 2/3 of the casualty GWP growth coming from renewal business rather than chasing business in a softening market.

Net written premiums in Q3 grew 26% year-over-year to $149 million, trading the extension of gross written premium as we are intentionally retaining less risk in the fastest-growing commercial lines. Consequently, our blended retention rate in the quarter was 30% compared to 38% last year. In general, we view retention levels on a full year basis as timing of program renewals can lead to quarterly variances in that metric. The change in mix was also reflected on a net basis. Homeowners generated $74 million of net written premium, representing 50% of the total net written premium, down from 64% last year.

Renters generated $29 million and accounted for 19% of total net written premium, down from 22% last year. Commercial multi-peril generated $20 million and accounted for 14% of total net written premium, up from 12% last year. Casualty also generated $20 million in the quarter compared to roughly $4 million in Q3 of last year. It is worth noting how this mix shift has already started impacting our underwriting results in Q3 and is expected to continue doing so in the future.

Casualty and C&P lines generally have a higher non-cat loss ratio than our property lines, but also lower cat loss ratio and expense ratio. So as we continue to diversify into C&P and casualty lines on a net basis, we expect to see the components of consolidated combined ratio moving in the direction I just mentioned, while we still aim to achieve normalized combined ratio in the mid-90s by 2028.

In Q3, our net combined ratio improved 1 percentage point to 98.4% compared to Q3 of last year. This was achieved by improvement in expense ratio, which more than offset a slightly more normalized loss ratio. Our Q3 net loss ratio increased 9 percentage points year-over-year to 56.7%. Accident year ex-cat loss ratio came in at 49.9% compared to 48.4% last year. The increase was driven both by a more normalized loss experience in a business owner property line as well as by the continued shift to a higher percentage of casualty and CMP exposure in the book.

However, we still view sub-50% underlying loss ratio as excellent results. Cat loss ratio came in at 6.5% and was higher by 7 percentage points over last year, a period which had no cat losses. Seasonally, Q3 contains our most elevated modeled cat exposure, and this quarter's results still came in below expectation. There was no material prior accident year reserve development for the quarter, similar to Q3 of last year. In Q3, expense ratio improved by 10 percentage points year-over-year to 41.7%. This improvement was driven mostly by operating leverage, which improved with scale and was also supported by the lower expense ratio of C&P and casualty line.

As Rick mentioned previously, we believe that our continued focus on operating leverage through AI enables us to grow our business while keeping fixed expense largely flat, which in turn has helped driving the expense ratio improvement. Revenue in the quarter was $156 million, up 29% over Q3 of last year. During the quarter, revenue included a $19.7 million of commission, service and fee income, which was up 45% over Q3 of last year. Q3 net income came in at $9 million or $0.33 per diluted share. Net income was down $89 million year-over-year as the prior year period included a $91 million net gain on sale of the homebuilder distribution network.

Excluding the onetime gain on sale last year, our net income has improved roughly 28% year-over-year. Q3 adjusted net income grew 9% year-over-year to $20 million or $0.74 per diluted share. The year-over-year improvement was primarily due to the continued improvement of underwriting results and strong premium growth. Total Hippo stockholder equity at the end of the quarter was up 8% to $469 million, up from $436 million at year-end 2025. Total book value per share at the end of the quarter was $17.62 per share, largely in line with the $17.65 per share at last quarter as unrealized investment losses offset the net income in the quarter.

Following this quarter's results, we are raising our full year guidance. We're increasing gross written premium from a range of $1.65 billion and $1.7 billion to a range of $1.7 billion and $1.75 billion. We're increasing revenue from a range of $580 million and $585 million to a range of $585 million and $590 million. We are lowering our combined ratio from a range of 99% and 101%, inclusive of a 10% cat loss ratio to a range of 97% and 98%, inclusive of an 8% cat loss ratio. And finally, we're increasing adjusted net income from a range of $62 million and $70 million to a range of $77 million and $80 million, while maintaining the expected impact from both stock-based compensation and depreciation and amortization to roughly $42 million.

And with that, operator, I would now like to open the floor to questions.

[Operator Instructions] Your first question comes from the line of Randy Binner with Texas Capital Bank.

I guess my question, and it's somewhat in the context of looking ahead to revenue growth in 2027, but the retentions were a little bit lower, as you mentioned this quarter. Is this the right level? Or do you think you kind of continue to retain less in light of soft market dynamics? And the question applies, I think, more to the commercial and casualty side, but also to the property side.

Randy, this is Guy. Thanks for the question. So generally speaking, because of the mix shift we're seeing between the lines of business, and as you mentioned, the fact that we are retaining less in C&P and casualty, we do expect the blended retention of net written over gross written in 2027 to continue to go down a bit, I would say, a few percentage points. So if the average in 2026 is about 33%, 34%. We do expect it to come down to probably to the low 30s area, low 30s to 30. So -- so that would be the retention, but we do expect, I would say, from a revenue growth perspective, probably a similar number to what we have been seeing and continue that trend into 2028.

Randy, this is Rick. I appreciate the question as well. I just want to add a couple of things more on a strategic view. We've mentioned on many occasions that we will not sacrifice underwriting quality for growth. And so when we're in a soft market, we are very comfortable retaining less business, yet we still believe we will hit the growth numbers that we have put forth. In fact, we've increased the guidance, as you know, on this call because we are operating with more partners and more channels. So the opportunity for us to be more selective while we're growing in other channels with other partners more than offsets the retention numbers from my perspective.

Okay. And just to double check, I heard that right, while the -- I'm sorry, the overall number goes down to 30%? Or is it -- you're more talking about in casualty and C&P?

The overall number.

Okay. And so that tracks closer to 30%. Yes, I guess just relatedly, just like a little -- the housing market is slower because of higher mortgage rates. Can you just touch a little bit on how like how submission and binding activity is with the Westwood partnership in light of the slower housing market?

Absolutely, Randy, again, this is Rick. Happy to talk about that. So one, we don't specifically share the numbers of what they look like. But I can tell you, one of the thesis we had by doing the Westwood partnership and the greater Baldwin partnership is that it gives us access to far more builders than we had access to previously. So even if individual builders are producing fewer homes, our access now is to a significantly larger number of builder partners. So we still believe that there's significant upside in the builder distribution channel even with the decreases that any individual builders might face due to the rising interest rate environment.

Your next question comes from the line of Tommy McJoynt with KBW.

One of the slides, I think it was Slide 4, you had a bullet there about beginning to offer a broader suite of services, and you mentioned claims, customer support and technology. Is this sort of a new endeavor or offering that you guys are rolling out and thinking about monetizing better? Or what's sort of the strategy around you guys are offerings in the go-to-market?

Yes. Thanks, Tommy. This is Rick, and I really appreciate this question. One of the things as we continue to take more and more risk with our various underlying program partners, I think it's incumbent upon us to make sure that the quality of the business from an underwriting perspective, a claims perspective, oftentimes driven by some of the technological improvements we have in our own MGA gives us better view, vision and insight on what those individual programs are doing. So as an example, if I'm taking 20%, 30%, 40% on a particular program, I would much prefer actually being the claims TPA with that partner program because we believe that our claims handling at Hippo would surpass the quality of any individual claims TPA that does not have the same interest aligned as we do, which is underwriting profitability.

So most of the services that we are providing, those are generally to enhance our participation and partnership with individual programs and giving them sort of services that are aligned with our expectation of being an underwriting partner with them and also helping those programs leverage the years of technology, data and AI build that we've done with Hippo. So we're not looking at it as a revenue center. We're looking at it as an opportunity for us to continue to have appropriate oversight on programs in which we retain risk. Does that help?

Yes, that does. That's a sort of useful explanation for us to think about it. Yes, I appreciate that. Yes. When we sort of -- any time we see a high-growth insurance company, that naturally raises questions around sort of the capital and capacity to fund that growth. So can you talk about as you think about growth into next year, certainly reaching into the double digits on a net written premium growth basis, how much capital is available at Spinnaker to support that growth? Or is there any need potentially for capital injection to support that?

Tony, this is Guy. Happy to take this question. So just to reiterate something that we've said in the past, we have enough capital to support all the organic growth that we put out or to achieve the targets we put out for 2027 and 2028. And just to reiterate, these are more than $2.5 billion of gross written premium and more than $140 million of adjusted net income. So we'll have plenty of capital to accomplish that. I think the easiest way to think about that and one ratio that we are looking at very closely, not just at the Spinnaker level, but at the consolidated entity level is the NWP leverage ratio over the surplus. So if you look at our GAAP surplus alongside with the surplus note that we raised, we have more than $500 million of capital. And if you stretch that 1.5x, that gives you $750 million to $800 million. And our net written premium this year is going to be under $600 million. And even if you assume the growth into next year, it's going to be probably in the -- again, in the $750 million area. So we are now into the position where we start accumulating net income and accumulate the capital such that this additional capital can also support the growth into 2028 and beyond.

Yes, Tommy, one thing that I would add is that I think we disclosed a few quarters ago that we have also put a whole account gross quota share in place. It's a very small percentage, like 5% of our total portfolio is very small. But that is a lever we can use if we have an opportunity to grow more than what Guy had just indicated. We always have that lever that we could feed off more in the whole account Hippo and Spinnaker quota share to allow us to take advantage of an opportunity where we think there would be a quality operator or new partnership we might have on the HHIP side. So we feel very good with the capital that we have to achieve the 2028 goals, and we have a lever if we think there's an opportunity for us to increase those further.

Your next question comes from the line of Andrew Anderson with Jefferies.

This is Sid on for Andrew. First, just hoping you can expand a bit more on the announced partnership with Greenlight Re. And I think the announcement mentioned emerging MGA business. So maybe you could clarify if that means it's programs with limited underwriting history and if we should think about Hippo keeping retentions lower on premiums from that business?

Yes, Sid, this is Rick. I'll go ahead and take the beginning of this question. So a couple of things. One, we're always looking for growth, not just in the near term, but also in the long term. And our experience has shown that if you pick partners early in the process and you're able to help and support them throughout their start-up phase into their high-growth phase. You have an opportunity really to be an integrated partner in what they're accomplishing over time. So as an example, if you go back several years ago, when Spinnaker first started as a fronting carrier, it essentially had 2 start-ups that were the vast majority of the business. It was Hippo and it was MSI. We fast forward today, those 2 programs on Spinnaker paper account for close to $1 billion of total premium, maybe a shade below that. But those were 2 start-ups. And so we believe that partnering with Greenlight and the capabilities that they've demonstrated on finding good partners and the services that we had sort of just talked about with Tommy, so adding more value to those partners because of our expertise in particular lines is seeding the future growth with these partners.

So it's starting small, of course. We will continue to grow and expand it as we have success in this. But frankly, it's really planting seeds for long-term growth within Hippo Holdings.

Okay. And then maybe just pivoting to the loss ratio. I think you called out some mix shift headwinds and maybe those continue. But curious if you kind of expect accelerating homeowners growth to provide any offset there or if we should consider the third quarter underlying loss ratio is a reasonable baseline moving forward?

Yes, Sid, thank you for the question. This is Guy. So just to give you an idea on the mix shift, when we look at it on a year-over-year basis, our ex-cat loss ratio ex reserve development was higher by about 160 basis points. But if you just look at the mix shift, so if you keep everything else constant just changing the mix in lines of business, it actually went up by about 3 points. So everything else being equal, we actually had a better quarter because we kept seeing homeowners performing better because we saw premium coming ahead of loss trend. In terms of what we expect into the future, just to do the full math, we still expect to have a combined ratio in the mid-90s in 2028. And Rick also said before that we expect on the same period to have an expense ratio in the mid-30s. So what you're going to see is just a mix shift between the components of combined ratio, whereas we do expect to see the ex-cat going up. But against that, the cat loss ratio to go down as well as the expense ratio, which is an operating leverage play as well as mix shift that will push the expense ratio down.

Yes. So this is Rick. Just to elaborate a little bit on what Guy said. This is part of the strategy. This is intentional. So when we put the strategy forth a little under 2 years ago, what we said was we wanted to produce a highly curated, positively selected portfolio of risk that comes from our own program and partner programs. In order -- and we would want that positively selected portfolio to be diversified across geographies, across product lines and offerings. And so by doing that, we intentionally are adding program lines that look different than HHIP from both a loss ratio component and an expense ratio component leading to the combined ratio component. So currently, we are performing better than our long-term projections on loss ratio. We're performing worse than our long-term -- excuse me, we're performing on line with our long-term projections of expense ratio. And the mix shift will ultimately equate to the loss ratio -- or excuse me, combined ratio targets that we put forth. And so we would expect there to see gradual increasing in loss ratio, gradual decreasing in expense ratio, providing a much more positive combined ratio component. So again, intentional actions on our part to create that diversified portfolio.

There are no further questions at this time. I will now turn the call back to the management for closing remarks.

Well, I appreciate you joining us. Thank you for that, and we look forward to speaking with you again next quarter. Have a great day, everyone.

And this concludes today's call. Thank you for attending. You may now disconnect. Goodbye.

Thank you. Hello everyone. Thank you for joining us and welcome to the Hippo Holdings Inc. Second Quarter 2026 Earnings Call. After today's prepared remarks, we will host a question and answer session. If you would like to ask a question, please press star 1 to raise your hand. To withdraw your question, press star 1 again. I will now hand the conference over to Charles Sebesky, Investor Relations. Charles, please go ahead.

Good morning, and thank you for joining HIPPO's second quarter 2026 earnings call. Earlier today, HIPPO issued an earnings release announcing its Q2 results and a financial results presentation, which will be webcast during today's call, both of which are available at investors.hippo.com. Weeding today's discussion will be HIPPO President and Chief Executive Officer Rick McCatherin and Chief Financial Officer Guy Zeltser. Following management's prepared remarks, we will open up the call to 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 are based on management's current expectations as of the date of this presentation. Forward-looking statements include, but are not limited to, HIPAA'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 historical results and our forecast, including those set forth in HIPAA's Form 10-Q and 10-K.

For more information, please refer to the risks and uncertainties and other factors discussed in HIPAA'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, uncertainties and other factors discussed and hit those violence. Do not place undue reliance on forward looking statements as HIPAA 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 second quarter 2026 earnings release which has been furnished to the SEC and is available on our website. And with that, I'll turn the call over to Rick McCatherin, our President and CEO.

Thank you, Chuck, and good morning, everyone. Thanks for joining us. HIPPO delivered another strong quarter, building on the momentum we started the year with. We grew top and bottom line together. our fifth straight quarter of profitability on both a stated and adjusted basis. For the quarter, we generated $10 million of net income, a nearly eight-fold increase over last year, and $21 million of adjusted net income, a 24% increase over second quarter last year. Gross written premium came in at $482 million, up 61% over last year, led by the continued expansion of existing program partners in our casualty and CMP lines of business. and a return to growth in our homeowners line. However, what stands out most isn't the growth itself. It's that we grew profitably. Our combined ratio improved four percentage points year over year to 95.8%.

And we're at 97.5% year to date, a 31 percentage point improvement over the first half 2025. That combination, growth and underwriting discipline moving in lockstep is the story of the quarter. Let's walk through it in more detail. In homeowners, we wrote $107 million of premium, up 7% over last year. Growth continues to come from our Progressive and Westwood partnerships, with admitted growth more than offsetting the pullback in E&S as the market becomes more competitive. Rate remains at with mid to high single digit renewal rates this quarter, though we expect rate trend to moderate from here, but to keep pace with loss trends. We want this business to grow, but only where we believe there's a high likelihood of profitability.

Commercial multi-parallel had another strong quarter, up 65% over last year to $138 million, now following casualty as our second largest line on a gross basis. second largest on a net written basis behind homeowners. Retention increased to 37% impacted by a reinsurance structure change. However, we expect retention to return to more historic levels in the low 20s for the year. Casualty was our fastest growing line again this quarter, with gross written premium up sharply to 180 million. Now our largest line on a gross basis. So third on a net basis. That growth continues to be led by one of our longest tenured partners, a program with a multi-decade track record, which is exactly the kind of program we want to drive growth.

One, we know well. As we said last quarter, we're starting to lean into higher retention and casualty, and this quarter's uptick reflects both a new excess program and a reinsurance change with an existing partner. we expect retention to settle back into the mid-teens from here. We achieved this growth in a competitive market because we believe we've built the program carrier of choice in the MGA space. We now have more than 50 programs, double what we had in the first quarter of last year. And most of that growth is coming from existing partners expanding with us, not just new logos. Our longest tenured partner has been with HIPPO for over a decade. We keep investing in the platform, capacity, and technology to support that partner program growth, such as fully automated monthly data ingestion process, shortening the border row integration from new programs by 90%, and reflecting back real-time insights to programs. We have continuously been focused on improving our underwriting and over the last several years that has included over 200 rate filings and over a 100% aggregate rate increase to HHIP.

To support our program underwriting, we now have two program managers overseeing every program and three on our fastest growing casualty programs. All of this work shows up in our underwriting results. Core accident year, ex-cat loss ratio came in at 45.8% and improvement over last year and among our strongest quarter results in recent years and nearly 17 points improvement from Q2, 2024. This quarter, we evolved our reinsurance structure in ways we think are significant both for our partners and for HIPAA's own risk appetite, something we've been signaling to investors for some time. We renewed our cap bond on attractive terms and added wildfire as a named peril. More importantly, we moved to buying catastrophic reinsurance at the corporate group level rather than program by program, which lowered our PMLs by more than 30% across the return periods that mattered most to earnings volatility. We also introduced our first whole account quoted share across the portfolio, giving us more optionality as we build a track record managing risks at the enterprise level.

Put simply, this reduces our volatility, improves our economics, and gives our partners more room to grow. And those goals reinforce each other. Scale and expense discipline are doing what we said it would. Our net expense ratio came in at 45.4%, down nearly 26 points from where we started in 2024. As operating leverage continues to build. During that same period, our fixed expense ratio dropped by 39 points to 29%. AI continues to move from experiment to infrastructure across our business.

Hannah, our AI service agent, and Clara, our AI first notice of loss agent, are both live this quarter. And together, they're a big part of why we can grow the top line without growing overhead at the same pace. We've also rolled out Devon, Cognition's AI software engineer across our tech organization, nearly a third of our roughly 500 employees. Tech is core to Hippo's value proposition, And this is about making our best people even better at building it. Our tech native roots also show up in how fast we move. Our full integration with Westwood and our accelerated launch with Progressive are both proof points and we believe both have plenty of runway left. We'll keep investing here because we believe a unique and targeted distribution model is an opportunity to further differentiate our business.

Given everything this quarter, I want to remind everybody what we told investors at last June's Investor Day. by 2028 we'd reach at least 2 billion of gross written premium a 22 percent CAGR through organic growth new programs scaling our builder channel and relaunching homeowners outside of builders so how are we doing against that Over the last year, we've simultaneously added 14 new programs, completed our Westwood integration, now quoting more than 50 builders, and launched our progressive partnership, accelerating homeowners growth outside the builder channel. Additionally, this quarter, we significantly advanced our business partnerships, which now brings our expected 2027 premium above $2 billion, hitting our prior 2028 goal a year early. real progress against all four drivers we laid out. Given that momentum, we're raising the bar. gross written premium to more than $2.5 billion, a 25% increase over our prior target, representing a 32% compounded annual growth rate, and adjusted net income of more than $140 million in 2028, doubling our current year 2026 guidance. I'm proud of this quarter and even more excited about where HIPPO is heading. We're executing with discipline against our long-term goals and the progress we're seeing gives me real confidence in what's ahead. 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.

Thanks, Rick, and good morning, everyone. In the second quarter, we once again delivered strong top line premium growth, improved underwriting, and increased profitability. Q2 gross return premium grew 61% year over year to $482 million, up from $299 million in Q2 of last year. Growth in the second quarter was achieved across all our lines of business, with especially strong performance in casualty and commercial multi-parallel lines. and more modest expansion in renders and homeowners. I will now highlight a few additional details of how diversified our gross return premium has become. Homeowners grew slightly to $107 million and accounted for 22% of the total gross return premium, down from 33% in Q2 of last year. Commercial multi-parallel generated $138 million, accounted for 29% of total gross return premium, up from 28% last year.

Casualty generated $180 million, representing 37 percent of total gross return premium, up from 22 percent last year. Net return premium in Q2 grew 71% year over year to $183 million, slightly ahead of the extension of gross return premium, driven by a program-specific reinsurance change accounted for $27 million of net return premium discourse. quarter. Consequently, our retention rate in the quarter was 38% compared to 36% last year and is slightly ahead of our full year guide. In general, we view retention levels on a full year basis as timing of program renewal can lead to quarterly variances in that metric. From a niche perspective, homeowners generated $76 million of net return premium in the quarter, representing 42% of total net return premium. down from 59% last year. Commercial multi-barrel generated $51 million and accounted for 28% of total net return premium, up from 24% last year. The aforementioned program reinsurance change this quarter drove $21 million of net return premium in this slide.

For the food year, we would expect retention levels to be in the low 20s. Casualty generated $35 million compared to roughly $2 million in Q2 of last year. As we previously indicated, the increase in casualty retention was intentional and driven mostly by the long tenure program Rick mentioned earlier. However, the 20% retention rate this quarter was also bolstered by the aforementioned program reinsurance change. So for the full year, we expect the casualty retention level to be in the mid-teens. Revenue in the second quarter was $145 million, up 23% over Q2 of last year. We expect revenue year-over-year growth to accelerate in the second half of the year as the net return premium growth in the quarter is going to earn it.

In Q2, our net combined ratio improved four percentage points to 95.8% compared to Q2 of last year. This was achieved by improvement in expense ratio and accident year loss ratio, slightly offset by a lower prior accident year reserve benefit in Q2 versus Q2 of last year. Our Q2 net loss ratio increased three percentage points year over year to 50.4%. Ex-in-year ex-cash loss ratio improved to 45.8%. on 46.4% last year, reflecting our continued focus on underwriting profitability. Generally, we view X-CAS loss ratios in the mid-40s as excellent results. Cap-loss ratio improved one percentage point to 6.7% as due to this year and last year, both experienced relatively light cap losses. Prior exit and D reserve development was 2% in the second quarter compared to roughly 7% in Q2 of last year.

In Q2, net expense ratio improved 8 percentage points year over year to 45.4%. As Rick mentioned previously, we believe that our continued focus on operating leverage through AI enables us to grow our business while keeping fixed expense large to size, which in turn has helped driving the expense ratio improvement. Q2 net income came in at $10 million or $0.38 per diluted share, a $9 million improvement year over year. The year-over-year improvement was primarily due to the continued improvement of underwriting results and strong premium growth. Q2 adjusted net income grew 24% year-over-year to $21 million, or 79 cents per diluted share. Total Impulse Stockholders' Equity at the end of the quarter was up 4% to $466 million from $449 million last quarter and up 40% from the $333 million at Q2 of last year. Total good value per share at the end of the quarter was up 2% to $17.65 per share from $17.23 per share at last quarter and up 36% from $13.02 per share at Q2 of last year.

Following this quarter's results, we are raising our full year guidance. We're increasing gross return premium from a range of $1.45 and $1.525 billion to a range of $1.65 and $1.7 billion. We are increasing net return premium from a range of $520 and $550 million to a range of $565 and 580 million dollars we're increasing revenue from a range of 560 and 570 million dollars to a range of 580 and 585 million dollars We are lowering our net combined rate from a range of 103 and 105%, inclusive of a 13% to a range of 99 and 101%, inclusive of a 10% cast loss ratio. And finally, we're increasing adjusted net income from a range of $48 million and $56 million to a range of $62 and $70 million while maintaining the expected impact from stockless compensation and depreciation and amortization to roughly $42 million. And with that operator, I would now like to open the floor to questions.

We will now begin the question and answer session. Please limit yourself to one question and one follow-up. If you would like to ask a question, please press star 1 to raise your hand. To withdraw your question, press star 1 again. ask that you pick up your handset when asking a question to allow for optimum sound quality. If you are muted locally, please remember to unmute your device. Please stand by while we compile the Q&A roster. Your first question comes from the line of Randy Binner with Texas Capital.

Randy, your line is open. Please go ahead. Thank you.

Hey, good morning. Hopefully you're hearing me okay. I had a tough connection there, but I have a question about just the business mix going forward. It was a good result this quarter, but the casualty lines in particular were a lot of the premiums. Is this a function, you went through retention and growth opportunities and program, but should we think of HIPPO as being more like a third or less homeowners longer term? Just, I think a lot of people have thought of it as more of a home insurer, obviously they've had a lot of success with the programs, but just trying to understand looking out in the future, you know, what the business mix is of this kind of multi-line carrier.

Good morning, Randy. This is Rick and we can hear you loud and clear. So appreciate the question. I think the way everybody should really consider and think about HIPPO is it's our objective to build a very diversified portfolio that allows us to optimize mix, based on a market cycle and market segment. So for us, as an example, we talked about the E&S market is softer right now, so we can toggle that back while we're growing the admitted market. Homeowner business is looking favorable. So we're growing that with our Westwood and Progressive Partnerships on the admitted basis line. But for us to get to a fully diversified portfolio where we have a blended and balanced book, we want to make sure that our commercial multi-parole, our casualty lines gets up to a point where it does create optimal balance for our homeowner's line. So we still emphasize the quality of HIPPO's home insurance program. We continue to grow that program.

We will continue to grow that program. but we wanna make sure the portfolio stays in balance over time. So the more we grow homeowners, the more we're going to want to grow casualty to create that balance that I mentioned before. So from an optimal mix perspective, it's very important for us to make sure that we are driving against favorable favorable trends and favorable product lines and favorable market cycles. And again, toggling back when the market cycle might be distressed.

Okay, understood. And then just a couple quick follow-ups. When you – the ENS reference, the market being software, that is in homeowners? you're seeing software units? Correct. Or, okay. And that makes sense. And then I guess just for the casualty lines growth, I think a common reaction is that that's kind of growing in a softer area of the market, but of course you have a lot of control to your program. So just maybe like just a little more granularity on you know, good opportunity in writing those programs and kind of seeing, you know, outsized casualty growth and what's, what's, what's broadly is, is, is seen as a softer casualty market.

Yes, Randy, happy to talk about that. I think one thing that is really important to recognize is most of our casualty growth is concentrated in existing known long tenured programs to us. This is not us going out and chasing new opportunities, chasing rate, chasing growth. you look at like CMP as an example, we tie that back to we are fast becoming the program carrier of choice. We have 50 programs in that space. We know these programs well. These programs are growing with us. We reviewed in the last 12 to 18 months approximately 200 programs and selected a relatively small percentage of those as somebody that we want to partner with on a go forward basis. So from our perspective, it comes through a combination of organic growth with existing long tenured partners and lack of a better term cherry picking new programs that we believe are very well operated and ones that again help us get to that diversified balance that I was talking about.

All right. Thanks for the responses. Appreciate it. Thanks, Randy.

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

Hey, good morning. Thanks for taking my questions. To start off, can you talk a little more about the partnership with Accelerant that you announced in June? I guess the important question that we want to ask is thinking about premiums that are coming through that channel with Accelerant and the economics or the bottom line impact of those premiums, how do they compare, uh, with non-accelerant revenues that are coming through. Just wanna understand the difference as we think about modeling those premiums. Thanks.

Yes, Tommy, this is Rick. Happy to start and then Guy can jump in with any other detailed questions. I think first and foremost, the way we view the Accelerant program is a way for us to grow the premium with a partner that has access to a large number of MGA programs. that we believe and expect us to be in excess of $500 million next year. But I also think there's more opportunity in that particular space. But we do generally look at each program in great detail before we agree to be the carrier to support accelerated with that particular program. So again, I'd really like to emphasize today, our growth comes with thoughtful quality, not just growth at all costs. Accelerant gives us an opportunity to look at those programs and then take those programs on and then continue to grow it. We of course have our own sourcing of business business in the program space outside of accelerant.

And in those we generally look for things, as I mentioned before, with Randy's question, operators that have a long track record, high quality, ones that have been in business for quite some time, or at least have the expertise in the particular product line space. And then we also go out and hire internally to HIPPO experts in both underwriting and claims handling in that particular segment so we are an additional backstop or an additional vet on the quality of business that comes in, both on a per on a claims handling basis and in the aggregate. So this is the way we look at accelerant for the most part. I think accelerant can be used continues to grow, therefore they need lots of capacity. We're proud to be one of their capacity providers. allows us to get views of programs that maybe we normally would not have been able to take a look at.

And Tommy, this is Guy. Just wanted to also comment on the economics. This is a fairly standard transaction. So when you model the business going forward and the commission income side specifically, very standard to other deals that we're doing. So it should be viewed as a scale up in line with seated earn premium.

Okay, got it. That all makes sense. And then switching over, a question on the property books across homeowners and the commercial side as well. We hear from a lot of competitors that competition in the space is intensifying. You are seeing some rate deceleration there. And some of that frankly reflects the lower cost of reinsurance and you guys reported that as well. So if you just talk about the competitive environment and where you see,.

sort of margins heading in the various property books of business that you have? Yes, I think this is one of the, Tommy, I think this is one of the real benefits of our platform because we do write across multiple product lines and multiple barrels, we're not in the business of chasing, uh, chasing risk and chasing growth in a softening market. I agree with your sentiment that the homeowner's market is absolutely softening right now, which is one of the reasons why you're seeing an uptick on the commercial and casualty sides of our business. But we do believe we have so many much room to grow in the property space both in our own homeowners program and some of the mgas that we support that we think that our growth won't slow into the soft market again because we are relatively small compared to the industry in that particular in particular space however What we will commit to is that if we find ourselves in a position where we do not believe that growth in any particular product line will be accretive to our bottom line and to our community, combined ratio, we won't grow in that space. And so that's, again, the force of what we've built here is those levers for us to pull across cycle, across product line, and across programs and both owned and non-owned business.

Tommy, this is Guy again. Just wanted to also add two points on top of what Rick just mentioned. So on the homeowner side, one of the reasons why we love the partnership with Progressive is that it gives us access to a lot of lead generation, a lot of flow. We're right now live with Progressive at eight states, but we do plan to triple the state footprint by the end of this year, and that is giving us even more volume. And the impacts of volume allows us to, It also should still be very, very disciplined and only buying businesses will feel very good from a profitability perspective. And the second thing you also asked about property within the CMP line. we also see the same trend. So even though the CMP is growing, we do see with commercial property specifically some softening, which is why we're pulling back. which is why the growth that you are seeing is actually coming from other lines. So it's the same thing that Rick has mentioned, where we are seeing softness.

We have no problem of pulling back.

And the most important thing again is to be disciplined across each and every line. Yes, Tommy, one thing I'll add to what Guy had just mentioned is, the growth that we are experiencing in Progressive, we only expose a rate to Progressive customers for particular business that we wanna write both from a geographical basis, but also from an inherent underlining per policy basis. So we do not expose a price or a HIPPO quote on any customer of Progressive's that doesn't fit into our desired footprint and our desired underwriting box.

Thank you. Thanks, Tommy. Your next question comes from the line of Andrew Anderson with Jefferies. Andrew, your line is open. Please go ahead.

Yes. Hey, good morning. This is Sid on for Andrew. I'm curious if you could expand on why right now was the right time to add the whole account quota share and what economics made the transaction attractive. And then I know you touched on casualty and CMP, but should we expect any further action from that?.

change in the retention and homeowners moving forward? Hi, this is Rick. Thanks for the question. I'll go ahead and start with this one. The whole account quota share is more of a capability. The amount of our risk seated in our whole account quota share is very, very small. But what it does is it creates a capability that as we continue to grow over time, again, another another lever for us to pull to put more risk to third party reinsurers if we feel like it's the best way to stick within our risk tolerance framework. And so for us, it's more of a capability. I don't think it meaningfully impacts the economics of the business, certainly not at the size of business that we're placing through it, but it's a capability that we thought it was important for us to have. as we experience continued growth throughout.

Sid, remind me, what was your second question?.

Yes, just curious if, I know you guys had touched on casualty and CMP retention, but if we should expect any changes in the homeowners retention moving forward?.

Yes, that's right. Thank you, Sid. First of all, for the HIPPO home insurance program, from an attritional loss perspective and even at the lower levels of CAT, we, for all intents and purposes, maintain near 100% of that risk. So there's really nowhere to go up with that because we're already taking most of it. For our program partners in the property space, we do participate in a sizable amount of risk. It ranges between 20% with some partner programs and up to 40% with others. We think our risk acceptance and our retention for property is right where we want it to be, so we would not expect it to increase in the foreseeable future.

Yes, this is Guy here. The only thing I would add is from, if you just look at the homeowner's line, you can tell that we have provided the mix between the admitted and non-admitted. as Rick mentioned, because we are retaining more on the admitted side, and that's the piece that is growing faster, you should expect a bit of an uptick in the overall retention of that line. but I would say not significantly above what you're seeing right now. But for every intents and purposes, I think you can triangulate the almost 100% retention. on the attrition outside on the on the administrative business. And then the rest will just be a plug number.

Okay, thanks for that. And then just as a follow-up, I'm curious to hear if you're seeing any competitive changes on fronting fees or economics as more capital enters the MGA and fronting markets, or maybe you're seeing the opposite occur?.

Yes, it's a really good question. I think for the most part we are not seeing changes in that because despite what I think a lot of people believe, the front-team business is not a commodity business. And I think you're seeing that by the amount of deals that we are winning. We are not winning based on business. decreasing fronting fees or economics back to the MGA. We are winning on more capabilities we can provide to the MGA, both in the form of services, in the form of data, data insights, the ability to share some of the technologies that we've been building from an AI perspective. So when programs are coming to a front-end carrier, they generally fall into one of two buckets. The bucket where the program will take any carrier at the lowest price or the lowest seed commission, we don't play in that game.

The other bucket is those that say we want a long-term partner that has enough capital to support our growth, can retain risk can provide other valuable services and capabilities far beyond just access to the balance sheet and to the rating. I'll also reinforce we had a size increase last quarter, so now we're able at our AMBEST A-9, we're able to really participate in even more opportunities than we were previously. Okay, thank you.

As a reminder, if you would like to ask a question, please press star 1 to raise your hand. Your next question comes from the line of Timothy D'Agostino with B. Riley Securities. Timothy, your line is open. Please go ahead.

Hi, good morning. Thanks for taking all the questions. Just one question on my end. On the 2028 growth targets on slide 14. you emphasize potential new lines. I was just kind of just wondering, For HIPPO entering new lines, is that really a 2028 idea or could we see that in 2027? And then could you just kind of remind us of the game plan when entering those new lines? Thank you.

Yes, Tim, this is Rick. I'm assuming your question is around HIPPO entering new lines on a manufactured basis, so products we manufacture, as opposed to products that we front-force. I'll answer both questions. First of all, for products that we manufacture, I would expect us to enter into either new lines or new flavors of lines. lines before the 2028 target. By flavors, I mean new things that we might be doing within the personal homeowners or property space and other things that might be tangential to that particular space. So we're not ready at this point to share what those are. But I think in future quarters prior to 2028, we'll be able to share a lot more in detail, but we do want to grow the owned pre, the own premium side and the owned product side. On the fronting business, We will enter new lines if we believe those lines are diversifying to the business that we already have. Just as a reminder. has lots of different carriers within its Spinnaker Insurance Group, both admitted and non-admitted.

We have lots of certificates of authority, not not just property and casualty, but also with accident and health. There are opportunities that come to us every day and we go through a fairly detailed analysis of every opportunity to determine, is this the creative to that diversification goal and will that individual program positively impact the bottom line of the business? I can't give you specifics of what those might be at this point. I can tell you that we are looking at other opportunities that meet those strategic goals of ours. Okay, great. Thank you so much. Thanks, Tim.

We have reached the end of the Q&A session. I will now turn the call back to management for closing remarks.

Well, I appreciate all of you joining us this morning. We're excited about the quarter that we've had and even more so about the future. So we look forward to speaking with you again next quarter. Thank you, everyone.

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

This live transcript is auto-generated without human intervention or review.

[Call has ended.]

Hello, everyone. Thank you for joining us, and welcome to Hippo First Quarter 2026 Financial Results. [Operator Instructions]

I will now hand the conference over to Charles Sebaski, Head of Investor Relations. Please go ahead.

Thank you, operator. Good morning, and 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 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 include, but are not limited to, Hippo'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 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, altering 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. And with that, I'll turn the call over to Rick McCathron, our President and CEO.

Thank you, Chuck, and 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 million of 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 billion in 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 2 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 homebuilders and new homebuyers 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 replatform 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, and 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, and 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 1 to 2 years, we expect Agentic AI to resolve 50-plus percent of customer producer support requests across e-mail, 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 multiyear 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 million of 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, but we expect that momentum to moderate in the quarters ahead. Turning to our Renters business, which produced $41 million 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 million of 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, and 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 million of gross written premium. Importantly, this growth came from a well-diversified group of programs, and 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.

And 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.

Now 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 profitability. Q1 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 diversified our gross written premium has become. Casualty generated $101 million, representing 30% of total gross written premium, up from 16% last year. Commercial Multi-Peril with $96 million of gross written premium accounted for 29% of total gross written premium, up from 24% last year.

And Homeowners, which grew slightly to $87 million, representing 26% of the total gross written premium, down from 41% of gross written premium in Q1 of last year as our portfolio continues to diversify. Net written premium in Q1 grew 1% year-over-year to $101 million, trailing behind the expansion of 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 Renters retention rate had a meaningful impact this quarter, which I will provide a bit more color on. In Renters, net written premium was $11 million compared to the $37 million in Q1 last year, and 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 Renters line is structured such that when the retention rate changes at time of the treaty renewal on January 1 each year, the new retention rate is applied to both new 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 '25 net written premium was boosted by this adjustment as retention increased versus prior year, and our Q1 '26 net 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 Renters line. Going forward, we would expect net written premium growth to be more directionally in line with 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 a $5.5 million of fee income from the homebuilder 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 homebuilder 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. CAT 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-CAT 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 '25.

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 this quarter results, we are updating a few of our guidance metrics for full year 2026. We're increasing gross written premium from a range of $1.4 billion to $1.5 billion to a range of $1.45 billion and $1.525 billion. We are increasing net written premium from a range of $500 million and $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% to 22% over full year 2025. We are maintaining our net combined ratio at a range of 103% and 105%, inclusive of a 13% CAT loss ratio, given the second and third quarters are typically elevated CAT quarters. And finally, we increased our expected adjusted net income from a range of $45 million to $55 million to a range of $48 million to $56 million.

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

[Operator Instructions]

Your first question comes from the line of Andrew Andersen from Jefferies.

This is Sid on for Andrew. First, on the updated guidance, you raised the growth outlook but left the combined ratio unchanged. So just curious what you're expecting for the balance of the year to prevent margin expansion despite the higher growth? And then I guess, similarly, how should we be thinking about the incremental loss ratios with elevated growth in Casualty and CMP?

Hi Sid, this is Guy. Happy to take this question. So first of all, to start off, we're very happy with how we started the year. This is why on both the GWP and 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. So we didn't want to -- so 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 cap load as we had. So we didn't want to get ahead of that. But 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.

So 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%. So we still feel really good about that, just generally the loss cost trends.

Sid, this is Rick. One thing that I'll 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. And 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. And so 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. And then maybe I'm just hoping you can remind us how you think about managing collateral adequacy and counterparty risk and fronting?

Yes, I'll go ahead and take that, Sid. I think that's a great question. And frankly, I think it's very important for everybody to understand there is a difference in quality of programs, of reinsurers, of partnerships. And I'll remind everybody that when there were challenges with Vesttoo 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. And so we very much monitor the collateral. We are very careful on who we select or who we accept as reinsurance risk-bearing partners. And 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. So 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.

[Operator Instructions]

Your next question comes from the line of Timothy D'Agostino from B. Riley Securities.

Congrats on the quarter. One question for me is just, I guess, a little more color on the Progressive partnership and how that's rolling out, understanding that it's still a month in since the announcement, but it would be great to just get more additional color on how the relationship is building. Yes, and if you could just add anything to that?

Yes, Tim. 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. So we now have 4 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. And I heard you say that enter new states in the coming quarters. I guess from their lens and from your lens, what's it going to take for that growth to accelerate and for maybe by year-end '26, we see you enter a couple more states?

Yes, it's a great question, Tim. Like any partnership, both sides have a desire to grow in particular geographic regions. So 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.

I think we launched with approximately 10 states initially with Progressive, we expect to grow that. I think, actually 8 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.

Your question next comes from the line of Tommy McJoynt from KBW.

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

Tommy, I'll go ahead and start, and then 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, and I will reiterate this quarter, we are ahead of pace on those targets. So we're very, 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 of 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, and we want to take advantage of that opportunity.

And then, of course, the overarching theme is we will not get out of whack in terms of broadly diversified portfolio against the major product lines. So we want to 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 win and which we may choose to grow a bit larger.

Guy, do you want to take the CAGR?

Yes. So Tommy, so as we said during our Investor Day, the implied CAGR to get to the $2 billion target was about 22%. So as you can see, this quarter, last quarter, we are ahead, as Rick 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 on a gross written premium basis. It was relatively even between the 3 largest 3 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. And 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.

If I look at Slide 7 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 and E&S in your home book? And then 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?

Yes, happy to, Tommy. I think my -- 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 to 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. But having these toggles and these levers are by design so we can take advantage of various market cycles.

Guy, do you want to talk about the mix?

Yes. So Tommy, about the mix, about 70% of the Homeowners line in Q1 was HHIP, our owned MGA and then the rest was the partner program, which is predominantly E&S. So 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 by about 20% to 25% -- we -- what we like about E&S, it has -- 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. And because of the competition, we do see a volume growth there. But again, we have no problem playing the right cycle and maintaining profitability over volume.

Yes, 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.

And so 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.

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

Well, I'd like to thank everybody for joining us 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. So 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.

Good morning or good afternoon, and welcome to the Hippo Fourth Quarter '25 Earnings Call. My name is Adam, and I'll be your operator today. [Operator Instructions] I will now hand the floor to Charles Sebaski to begin. So Charles, please go ahead when you are ready.

Thank you, operator. Good morning, and thank you for joining Hippo's Fourth Quarter 2025 Earnings Call. Earlier today, Hippo issued an earnings release announcing its fourth quarter and full year 2025 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 the call for questions. Before we begin, we would 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, Hippo'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 historical results and/or from our forecast, including those set forth in Hippo's Form 10-K. 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 our fourth quarter 2025 earnings release, which has been furnished to the SEC and is available on our website. And with that, I'll turn the call over to Rick McCathron, our President and CEO.

Thank you, Chuck, and good morning, everyone. Thank you for joining us. Once again, I am pleased to report that Hippo delivered a very strong performance in 2025, continuing to advance and strengthen our business, building on our technology-native insurance platform. For the year, we generated over $1.1 billion of gross written premium for the first time, an increase of 24%, and we are just getting started.

Net written premium for the year of $422 million was up 13%. This growth was achieved while improving our combined ratio by 25 percentage points, helping deliver net income of $58 million for the year. These results underscore the strength of our model and our ability to drive consistent improvements across the core drivers of our business.

Guy will discuss more details when he reviews the financials later. We enter 2026 with positive momentum and increased confidence in achieving and exceeding our 2028 targets of over $2 billion in gross written premium, $125 million of adjusted net income and an 18% adjusted return on equity by the end of 2028.

Our continued evolution aligns squarely with the 3 strategic pillars that guide our business and position Hippo for long-term profitable growth. Strategic diversification. We continue to broaden our premium base across both personal and commercial lines, building a more balanced and profitable portfolio.

Unlocking market growth. Our programs deliver a differentiated technology-driven customer experience that sets Hippo apart and expands our reach into attractive markets. Optimize for risk management. We are leveraging our diversified portfolio and deep risk management capabilities to continuously optimize performance across market cycles.

Now I'd like to provide updates on our main lines of business. First, in homeowners, our largest and original line of business. For 2025, we wrote $379 million of gross written premium, down approximately 10% from the prior year as we prioritize profitability over growth given the heightened competition in E&S.

However, we believe the line performed well, having achieved an average renewal premium increase of approximately 15% in our HHIP business, which we now view as rate adequate. Consequently, we've turned the corner in homeowners and expect this business to return to growth again in 2026, driven by 2 key developments: First, through our Baldwin partnership, we are now actively quoting business with more than 50 homebuilders nationwide, up from 6 prior to the sale of our homebuilder distribution network.

Second, following the completion of improvements to our homeowners product outside the builder channel, which included an advanced rate filing process, revised terms and conditions and improved claims handling, I am pleased to report that we have relaunched writing traditional new policies with selected partners.

Turning to our Renters business, which produced $175 million gross written premium for the year, a 19% increase year-over-year. As one of Hippo's most seasoned programs, it continues to grow while maintaining attractive profitability. We are pleased to support this program and its continued innovation in the renters market.

Now turning to our most diversified portfolio of risk, our Commercial Lines business. Commercial multi-peril delivered a very strong year of growth, increasing 75% over 2024 to $265 million of gross written premium, making it our second largest line of business after homeowners.

Fundamental to our program strategy is supporting programs we know well or have had a long track record of performance, and this is exactly where this year's growth originated, specifically programs with 5 years operating histories and consistently attractive underwriting results.

Our casualty business experienced even faster growth, increasing 92% to an end of year with $264 million of gross written premium, just slightly behind commercial multi-peril. Importantly, this growth came from a well-diversified group of programs with relatively modest limits profiles.

Consistent with our strategy of supporting long-tenured programs, our risk retention levels in casualty was only 3% for 2025. However, these programs were well supported by the reinsurance market. And as we continue to deepen those partnerships, we expect to increase our retention levels over time.

Given the growth in our partner program business, we wanted to provide additional insight into how we manage this platform, which is likely a bit more engaged than some may realize.

When launching new lines of business with program partners, we follow a rigorous diligence process. Together, we establish the underwriting guidelines the program will operate under an approach we believe is critical to our long-term success. For instance, over 70% of our liability policies have limits under $300,000, and our portfolio has an average liability duration of approximately 2 years, which is generally considered short-tail exposure.

We remain highly engaged with our program partners through the underwriting and claims once new programs are operational. For example, if a program wants to write a policy that falls outside of its established underwriting guidelines, it must request an exception. Today, we are well under 1% of quotes requiring such an exception. Claims management is also critical to underwriting outcomes, and we are actively involved in that process as well.

We set claims authority limits on third-party administrators and proactively review claims that approach those thresholds. Today, our claims team reviews more than 800 files per month. While we currently have 38 programs in operation, not all have performed as initially expected.

In those cases, we will place a program into runoff to protect the overall underwriting performance. I am very pleased with how our team has managed the program business, driving growth, maintaining oversight and exiting when necessary. This disciplined approach is clearly evidenced by our 54% gross loss ratio in 2025, which includes the impact of the severe California wildfires in early 2025.

Overall, I'm very pleased with Hippo's position today and confident in our prospects for 2026 and beyond. Now I'd like to turn the call over to our Chief Financial Officer, Guy Zeltser, to walk through the highlights of our fourth quarter and 2025 financial results and our expectations for 2026.

Thanks, Rick, and good morning, everyone. In the fourth quarter, we once again delivered strong top line premium growth, improved underwriting and increased profitability. Gross written premiums in Q4 grew 40% year-over-year to $288 million and for the full year grew 24% year-over-year to over $1.1 billion.

Growth in both the fourth quarter and for the full year was driven primarily by strong performance in casualty and commercial multi-peril lines and slightly offset a modest contraction in homeowners as we continue to prioritize underwriting discipline over premium growth in that line of business.

I'll now highlight a few additional details of this gross written premium growth. Casualty grew 169% compared to Q4 of last year, grew 92% over full year 2024 and accounted for 24% of 2025 gross written premium. Commercial multi-peril grew 58% compared to Q4 of last year, grew 75% over full year 2024 and also accounted for 24% of 2025 gross written premium.

And homeowners declined 5% compared to Q4 last year and declined 10% versus full year 2024. For 2025, homeowners accounted for 34% of gross written premium compared to 47% in 2024, demonstrating our ongoing portfolio diversification.

Net written premium in Q4 grew 23% year-over-year to $97 million and for the full year grew 13% to $422 million, while also getting more diversified. Renters grew 227% compared to Q4 of last year and grew 311% over full year 2024. Commercial multi-peril grew 36% compared to Q4 of last year and grew 127% over full year 2024.

And homeowners declined 3% in the quarter and was down 17% for the year. Homeowners accounted for 65% of net written premium in the quarter and 60% for the full year, goes down from approximately 82% in each of the prior year periods.

In Q4, net loss ratio improved 12 percentage points year-over-year to 46%, driven by favorable trends in both CAT and non-CAT loss experience. CAT loss ratio improved 7 percentage points to negative 1%, driven primarily by a very low level of CAT losses during the quarter and by a positive development from earlier quarters in accident year 2025.

Non-CAT loss ratio improved 5 percentage points year-over-year to 47%, reflecting continued rate actions, refined policy terms and conditions, enhanced underwriting processes and stronger claims operations. In Q4, net expense ratio increased 4 percentage points year-over-year to 53.5%. This was fully driven by the sale of our Homebuilders Distribution Network in Q3 of 2025 as our expense ratio in Q4 of last year benefited from 5 percentage points of profit from these agencies in that period.

Together, in Q4, net combined ratio improved 8 percentage points to 99.4% compared to Q4 of last year. For full year 2025, our net loss ratio improved 17 percentage points to 60%, driven by improvements in both CAT and non-CAT loss experience. Non-CAT loss ratio improved 11 percentage points year-over-year to 45%, reflecting the same previously mentioned actions.

CAT loss ratio improved 6 percentage points to 15% compared to 2024. Our net expense ratio for 2025 improved 8 percentage points year-over-year to 53%. This was driven by the scalability of our platform, which enabled us to grow top line significantly faster than our fixed expenses. Together, the improvements in our loss and expense ratios resulted in a combined ratio of 113%, a 25 percentage points improvement compared to 2024.

Q4 net income attributable to Hippo was $6 million or $0.23 per diluted share compared to $44 million or $1.71 per diluted share in the prior year quarter. The year-over-year decline was primarily due to the $46 million gain from the sale of a majority stake of First Connect in the prior year period, which more than offset the improvement in underwriting performance over the same period.

Q4 adjusted net income grew 20% year-over-year to $18 million or $0.67 per diluted share. For full year 2025, net income attributable to Hippo was $58 million or $2.22 per diluted share, representing a $98 million improvement year-over-year.

This improvement was driven by continued top line growth, materially stronger underwriting performance and an incremental $45 million in net gain from asset sales in 2025 versus 2024. Full year 2025 adjusted net income was $18 million or $0.68 per diluted share, a $38 million improvement year-over-year.

This was driven by the same underlying factors that drove the net income improvement with the exception of the net gain on the sale, which is excluded from adjusted net income. Total Hippo shareholders' equity at the end of the quarter was $436 million or $16.97 per share, up 17% from $362 million or $14.56 per share at year-end 2024.

The increase was driven primarily by the gain on the sale of the homebuilder distribution network and better underwriting performance, which more than offset first quarter operating losses from the California wildfires and share repurchase executed in the third quarter.

Looking ahead to 2026, we expect gross written premium to grow between 27% and 36% to a range of $1.4 billion to $1.5 billion. This reflects our expectation that growth in our newer lines of business will continue. And as Rick mentioned, our homeowners business will return to growth in 2026.

We expect net written premium to grow between 19% and 28% to a range of $500 million to $540 million. We expect net combined ratio to improve between 8 and 10 percentage points to a range of 103% to 105%, driven mostly by the operating leverage and scalability of our platform. This outlook assumes a 13% CAT loss ratio, a slight reduction versus 15% of actual CAT loss ratio in 2025, which includes the Los Angeles wildfires.

This reduction is supported by our continued diversification into less CAT-exposed lines of business. And finally, we expect adjusted net income of between $45 million and $55 million compared to the $18 million in 2025.

While we are no longer providing net income guidance, we are now guiding to stock-based compensation and depreciation and amortization expense and expect these line items to total approximately $41 million in 2026, down from $50 million in 2025.

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

[Operator Instructions] The first question today comes from Tommy McJoynt from KBW.

My first question is just about the relaunch of the homeowners book outside of builders. Can you talk a little bit about your go-to-market strategy and maybe comment on what the competitive environment looks like there as you're looking to increase the distribution?

Yes. Tommy, this is Rick. Happy to answer that question. As you and the listeners know, it's been quite a while since we wrote traditional Homeowners business. We've spent the last 2 years retooling that product line, a combination of reducing some of the volatility in a more geographically diversified area.

We've taken considerable rate on that product line over the last few years. We've improved our terms and conditions. We have changed some of the coverage languages as it relates to deductibles and roof schedules. And we've gotten the product that we believe is extremely rate adequate and one that we are very bullish on its profitability.

As we've opened that product line, we've done it in a thoughtful way. In a number of states with very few strategic partners in order to ensure both competitiveness and profitability. We are accelerating that throughout the year.

We will continue to open in other states as well as expand the partnership roster, inclusive of some direct-to-consumer play. But we're very excited about it, and we're excited to share the results as we start to develop them next quarter.

Got it. And then looking at another line of business here, the casualty side, you've seen some nice growth there, both on a gross basis and retaining a bit more through a net basis. Can you unpack a little bit as to what sort of business actually underlies that casualty business?

What's the tail risk there? And then can you talk about your -- maybe time line to continue to increase retention there? I understand gross is growing, but there's obviously room for the retention side to increase as well.

Yes, Tommy, I appreciate the question, given this is a newer endeavor for us. Predominantly, it's combined some cyber insurance, some commercial GL, predominantly for small business, construction projects, some commercial auto. It's a fairly diverse portfolio of commercial exposure.

We take a very small percentage in aggregate. I think for 2025, we took about 3% of the exposure on that portfolio. And our average exposure per account is $300,000, so nothing that's extremely large. We also think the time to settle claims is 2 years or less, which is still fairly short tail in nature.

As we've said previously, we typically only take risk participation with partners that develop -- that we develop a longer-term relationship and have great conviction that they understand what they're doing, that we have proper controls in place, both from a pricing perspective, a claims handling perspective.

We would expect that to increase over 2026 and beyond, but we're doing it in a very partner-by-partner selective way. If we find ourselves wanting to participate, but we're still concerned a bit about tail exposure or larger limits exposure, there are ways to protect that with third-party reinsurance over our share.

So we are taking risk. We are increasing the risk participation, but we're doing it in a very thoughtful, slow way.

The next question comes from Andrew Andersen from Jefferies.

This is Sid on for Andrew. Just curious if you could discuss what drove the reserve development in the quarter?

This is Guy. Happy to take this question. So to answer your question directly, it was mostly driven by one large loss actually in our homeowners business. It was a liability claim. Just to add a bit more color on how we think about that. First of all, if you just look at the prior accident year, we tend to look at it on a full year basis.

On a full year basis, we did release about $10 million. So the view for the full year has been positive for us. And then also specifically, when you look at only Q4, you are right that from the prior accident year, there was 1 point of adverse development, but we did see about 3 points of positive development from earlier quarters in accident year 2025.

So even if we just focus on Q4, it was a positive quarter, and this is why we're, generally speaking, feeling pretty good about where we stand from a reserve perspective entering 2026.

Okay. And then maybe you could just discuss how you're expecting the renewal premium increases in homeowners to trend moving forward relative to the 15% in 2025.

Yes, absolutely. So as you mentioned, we achieved about 15% in 2025. Obviously, that was way above the loss cost trends in 2025. Given that what Rick just said that we feel very good about the rate adequacy for the book, we don't expect another year of 15%, but it will still go up given that in addition to some rate, we have the annual -- essentially, we're automatically catching up with inflation.

So we do expect the premium change increase in 2026 to continue. And we also expect it to still come ahead of loss cost, which is another reason why we are very, very bullish about the new partnerships that we launched and growing outside the builder channel, given that, again, we're not only rate adequate but we do expect the average premium change next year to trend faster or slightly faster than loss cost.

Yes. So if I could -- this is Rick. I just want to add one very important component as we accelerate and grow in our own HHIP homeowners program. We are only writing business with where we expect the loss ratio to be profitable. So our partners will not even see quotes for business that we are not excited to write.

And the question that Tommy had asked earlier, I failed to answer. On the business that we want to write, we find ourselves to be competitive. On the business we don't want to write, we find ourselves to not be competitive. And frankly, we're not even displaying quotes in that particular business.

As such, we're very confident that we'll be able to keep up with the trends and keep that portfolio profitable. We do not want to get ourselves into a position that we were in previously where we found ourselves not to be rate adequate. So we are staying ahead of that curve in a meaningful way.

[Operator Instructions] We have no further questions, so I'll hand the call back to the management team for any closing comments.

Great. Well, thank you so much for joining us this morning. We are excited about the year-end quarter we just posted and very excited to be sharing additional progress in the coming quarters. Thank you very much. Have a great day.

This concludes today's call. Thank you very much for your attendance. You may now disconnect your lines.

Hello, everyone. Thank you for attending today's Hippo Third Quarter 2025 Earnings Call. My name is Ken, and I will be your moderator today. [Operator Instructions] I would now like to pass the conference over to our host, Charles Sebaski, Investor Relations of Hippo to begin. Please go ahead.

Thank you, operator. Good morning and thank you for joining Hippo's Third Quarter 2025 Earnings Call. Earlier today, Hippo issued an earnings release announcing its third quarter 2025 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 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, but are not limited to, Hippo'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 actual results to differ materially from historical results and/or our forecast, including 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, and we make whenever they may 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 and adjusted EBITDA. Our GAAP results and descriptions of our non-GAAP financial measures with full reconciliation to GAAP can be found in our third quarter 2025 earnings release, which has been furnished with the SEC and available on our website.

And with that, I'd like to turn the call over to Rick McCathron, our President and CEO.

Thank you, Chuck, and good morning, everyone. Thank you for joining us. This was a very strong quarter for Hippo. We maintained our momentum from last quarter and delivered another set of impressive results, achieving adjusted net income of $18 million while growing our gross written premium by 33% year-over-year. These results underscore the strength of our model and our continued ability to generate meaningful incremental improvements across the core drivers of our business.

As we shared at our June Investor Day, Hippo is doubling down on what we do best, building a technology-native insurance platform that drives profitable growth across both our owned and partner MGAs. This quarter, we are introducing a new way of looking at our business, one that aligns our reporting with a new unified way of managing our business. We now manage the business and allocate resources as a single carrier platform that underwrites a broad spectrum of insurance products across homeowners, renters, commercial multi-peril and casualty lines.

Our continued evolution aligns squarely with the 3 strategic pillars that guide our business with the goal of positioning Hippo for continued profitable growth over the long-term.

First, strategic diversification. We continue to broaden our premium base across both personal and commercial lines, building a more balanced and resilient portfolio.

Second, unlocking market growth. Our programs deliver a differentiated technology-driven customer experience that sets Hippo apart and expands our reach into attractive markets.

Third, optimize risk management. We are leveraging our diversified portfolio and deep risk management capabilities to continuously optimize performance across market cycles. And this quarter, we continued to execute on all 3. Investors can now better see not only where we are going, but just as importantly, the risks we are retaining within each line of business.

We continue to rebalance and diversify our portfolio, supported this quarter by 6 new programs who joined our platform, bringing our total up to 36. These programs further diversify our premium base across commercial and casualty lines, and our new reporting format should better showcase the progress we're making in this area.

During the quarter, we also focused on integrating our new homes product and infrastructure with Baldwin's industry-leading Westwood Insurance agency, which will triple our access to annual new home closings, fueling both premium growth and additional geographic diversification. I'm pleased to share that we bound our first new policies with Westwood last month, and it's worth noting that there is typically a 3- to 6-month lag between quote and bind in this channel as quotes are frequently made preconstruction, so we expect volume from this partnership to accelerate in the coming months.

While unlocking market growth opportunity remains central to our strategy, we do not pursue growth at the expense of underwriting discipline. This quarter, our underwriting results improved significantly, highlighting Hippo's potential as we continue to scale. For example, on a gross written premium basis, commercial multi-peril and casualty grew by $80 million, more than offsetting the slight decline in E&S homeowners. This reflects our underwriting discipline, maintaining pricing standards amid increased competition in homeowners, while optimizing our portfolio by increasing participation in lines that align more closely with our underwriting appetite.

As part of our updated disclosures, we are now reporting both our net loss ratio and our combined ratio, both of which improved meaningfully year-over-year. Our net loss ratio improved by 25 percentage points year-over-year to 48% and our net combined ratio improved 28 percentage points year-over-year to 100%. While we benefited from lower cat loss activity this quarter, we also saw continued improvement in both our expense ratio and the attritional loss ratio. This progress reflects our disciplined approach to risk, including underwriting and rate actions, diversification as well as the benefit of scale and expense efficiency, all of which continue to strengthen our foundation for sustainable profitability.

Collectively, these results and our focus on operational excellence continue to make Hippo an attractive home for world-class talent. I'm proud to highlight several important additions to our leadership team this quarter. Robin Gordon joined us as our Chief Data Officer, bringing deep expertise that will help us manage our portfolio holistically. Robin's appointment underscores Hippo's position as a technology-native platform, leveraging advanced data and analytics to sharpen risk management, expand and diversify our portfolio and deliver superior customer experience.

We also welcomed 2 new members of our Board of Directors, Laura Hay and Susan Holliday, both accomplished leaders with distinguished careers in insurance. Having the right insurance talent across the organization is critical to any organization's success over the long-term, and these additions will further strengthen Hippo's capabilities, culture and resiliency.

Q3 was yet another clear demonstration of the strength of our platform, the caliber of our team and the momentum we're carrying into the future. I'm immensely proud of all we've accomplished and look forward to building on this trajectory as we move towards 2026 and beyond.

Now I'd like to turn the call over to our Chief Financial Officer, Guy Zeltser, to walk through the highlights of our third quarter 2025 financial results and our expectations for the remainder of 2025.

Thanks, Rick, and good morning, everyone. As Rick mentioned, this quarter, we updated our reporting structure to align with how we're now managing the business. We have transitioned to reporting consolidated P&L in a way that emphasizes gross and net premium by line of business. And as part of this change, we have eliminated segment reporting. We have also begun reporting consolidated expense and combined ratios and as discussed previously, changed our core profitability metric from adjusted EBITDA to adjusted net income.

To help analysts and investors model our business, we have also prepared a supplemental financial package that provides the details of the past 6 quarters under the new reporting structure and made this available on our Investor Relations website.

In the third quarter, we once again delivered top line premium growth while maintaining underwriting profitability and gained meaningful operating leverage as premium growth continued to outpace fixed expense growth.

Q3 gross written premium grew 33% year-over-year to $311 million, up from $234 million in Q3 of last year. Growth in the third quarter was driven by strong performance across most of our lines of business, more than offsetting a small contraction in homeowners as we continue to prioritize underwriting discipline over premium growth in that line of business. This mix shift demonstrates early progress towards our strategic goal of diversifying the portfolio beyond historical concentration in homeowners.

I'll highlight a few more details of this diversification. Casualty increased to 25% of gross written premium, up from 14% last year. Commercial multi-peril increased to 21% of gross written premium, up from 13% last year. And homeowners, which was 47% of gross written premium in Q3 of last year, decreased to 32% this quarter.

On a net basis, renters increased to 22% of net written premium, up from 10% last year. Commercial multi-peril increased to 12% of net written premium, up from 3% last year, and homeowners, which was 86% of net written premium in Q3 of last year, decreased to 64% this quarter, fantastic progress and more to come.

Speaking of net written premium, this key metric was up 30% year-over-year to $118 million, up from $91 million in Q3 of last year. Net written premium was 38% of gross written premium, a slight reduction from 39% in Q3 of last year. Our net written premium growth was driven by continued strength in our renters line of business, which increased by $18 million or 203% year-over-year. This growth was primarily the result of a higher premium retention, which rose from 16% a year ago to 45% this quarter, supported by the renters program's long track record and a loss ratio in the low 30s.

In Q3, revenue grew 26% year-over-year to $121 million, up from $96 million in Q3 of last year. The increase was driven by net earned premium growth of 41% to $100 million, up from $71 million in Q3 of last year. The net earned premium growth more than offset the $5 million reduction in commissions following the sales of First Connect in the homebuilder distribution network over the last year. Q3 consolidated net loss ratio improved 25 percentage points year-over-year to 48%, driven by improvement in both cat and non-cat loss experience. The biggest driver of the year-over-year improvement was the very low level of cat losses during the quarter, which provided a 23 percentage point benefit compared to Q3 of last year.

As discussed in previous quarters, we have largely completed our efforts to reduce the wind and had exposure in the portfolio that drove some of the historical volatility, but this quarter's results were even more favorable than our target levels. We also improved our non-cat loss ratio by 2 percentage points year-over-year to 48%, driven by continued rate improvements, refined policy terms and conditions, enhanced underwriting processes and stronger claims operations. Our accident year non-cat loss ratio, which excludes the impact of prior year development, improved by 5 percentage points year-over-year to 48.5%.

Following the reporting change this quarter and our intention to manage exposure by line of business holistically, we do not intend to disclose program level performance going forward. However, during this transition period, we are providing an update on Hippo Home Insurance program, our owned MGA. The HHIP net loss ratio improved 29 percentage points year-over-year to 50% this quarter, driven by the same factors that supported improvement in the consolidated net loss ratio.

Our Q3 consolidated net expense ratio improved by 3 percentage points year-over-year to 52%. As we scale, we expect the expense ratio to continue to improve, though not necessarily linearly. Together, improvements in our loss and expense ratios resulted in a consolidated combined ratio of 100%, a 28 percentage point improvement versus Q3 of last year. Q3 net income came in at $98 million or $3.77 per diluted share, a $107 million improvement year-over-year. This improvement was driven by $91 million net gain from the sale of the homebuilder distribution network, materially better underwriting performance and continued top-line growth.

Q3 adjusted net income came in at $18 million or $0.70 per diluted share, a $19 million improvement year-over-year. The same factors that drove the net income improvement also contributed to the increase in adjusted net income with the exception of the net gain on the sale, which does not impact adjusted net income.

Total Hippo shareholders' equity at the end of the quarter was $422 million or $16.64 per share, up 14% from $362 million or $14.56 per share at year-end 2024. The increase was driven primarily by the gain on sale of the homebuilder distribution network, which more than offset first quarter operating losses from the California wildfires and the repurchase of 514,000 shares for approximately $15 million.

As we look ahead to the remainder of the year, we are raising our full year 2025 outlook based on this quarter's strong results. For gross written premium, we are raising the midpoint of our full year guidance by $15 million to a range of $1.09 billion to $1.11 billion. This reflects our expectation that growth in new lines of business will continue to more than offset the short-term intentional stabilization in homeowners, which we anticipate will begin to grow again in 2026.

For revenue, we are raising full year guidance from a range of $460 million to $465 million to a range of $465 million to $468 million, in line with our premium guidance raise.

For our consolidated net loss ratio, we are improving our full year guidance from a range of 67% to 69% to a range of 63% to 64%, driven by the positive loss trends reflected in our Q3 results.

For net income, we are raising our full year guidance from a range of $35 million to $39 million to between $53 million and $57 million, driven by the stronger top-line growth, improved net loss ratio trends and continued expense discipline.

And finally, for adjusted net income, we are raising guidance from our previous range of a loss of $0 million to $4 million to a new range of a profit of between $10 million and $14 million, also driven by stronger top-line growth, improved net loss ratio trends and continued expense discipline.

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

[Operator Instructions] We have our first question from Andrew Andersen from Jefferies.

Just looking at some of the new premium disclosures by line of business and recognizing it's off of a small base, but the casualty growth was pretty sizable. Can you just give us some color on kind of the growth there and what type of business you're writing within casualty?

Andrew, thanks for the question. I'll have Guy talk a little bit about the numbers. But one thing to keep in mind, and we've emphasized this before, but I think it's a very important piece of the equation. When we grow premium in any of our fronted lines, we have the option to take risk or to not take risk. Generally speaking, until we have strong comfort and a historical reference point on the profitability of any particular program, we generally opt not to take risk. So even though we've grown that number fairly significantly as a premium line, we take very little risk initially until we gain that trust and confidence in the individual program.

Guy, do you want to go over some of the make up?

Yes. So Andrew, this is Guy. In terms of what lines, then it's a combination of -- we have some cyber commercial general liability, which spends across small businesses, real estate investors, construction. As Rick mentioned, and what you can also see with the net written premium disclosure is that the net retention on that is relatively small. We like to start usually with the fully funded. And then as we get some traction, then we like to increase the risk retention over time, especially if we are happy with the underwriting performance.

And then on homeowners, I think you talked about some increased competition on E&S. Are you seeing the admitted market come back to take some share of homeowners or more competition within the E&S world? And can you maybe just remind us like what kind of rate need do you have left in that book? Or is it just kind of the competition is pricing too aggressively right now?

Yes. I think there's 2 different components in your question, Andrew. So if I don't answer it, please ask it again.

First, where we're seeing softening of the E&S market is predominantly price softening and customers that are going to the admitted market as the admitted market has started to rebound over the last few quarters, and we expect that rebound to continue.

From a price adequacy perspective, we actually feel very good that the rate we need, we have in the portfolio, and we do not anticipate other than taking some occasional inflationary trend increases, we do not anticipate any repricing of the book or the portfolio in the foreseeable future.

We have our next question from Thomas McJoynt from KBW.

This is Jean on for Tommy. My first question is on business mix. So as Hippo diversified away from homeowners, just curious on by 2028, what is the reasonable business mix that you expect?

Yes. Thank you for the question. I think it's probably worth sharing a little bit of history on our homeowners line and where we're looking at it on a go-forward basis. So when we went through the portfolio correction over the last couple of years, we intentionally exited portions of the homeowners market that was non-new build, non-new construction. And as we've mentioned in the -- in our presentation that we've actually tripled the size of the funnel for new homes through our Westwood partnership. So the shrinking that you have seen in the homeowners line was an intentional effort to diversify into less cap-prone states and to make sure that we had correct underwriting pricing going forward.

On the go-forward basis, we expect to increase the number of writings for new construction. We expect to continue to open our manufactured HHIP homeowners program. And we expect growth within our fronted partners that are also on our carrier platform because when you look at the homeowners numbers, it's a combination of what we do at HHIP and the partnerships that we have with our fronted programs.

So we anticipate growth in the homeowners market over the next 3 years. Likewise, we anticipate growth in the entire portfolio over the next 3 years. So I refer back to our Investor Day 3-year pro forma and we anticipate over $2 billion in premium, which is nearly doubling our current premium basis. And I do think that $2 billion will be further diversified, but homeowners will grow in the absolute.

And this is Guy. The one thing I would add on what Rick said is that you can see that we made great progress on both gross and net diversification. You're still seeing the -- there's still some lag. I would say that as we get into 2028, you'll also see more diversification in the net written premium. And if we look closer to how the written premium -- the gross written premium pie looks like [ indiscernible ].

Got it. Very helpful. My second question is on share repurchases. Just curious about kind of forward-looking buybacks intended to be like going forward as a use of capital.

Yes. I think the use of capital -- and I'll reiterate what we said during Investor Day. From our perspective, the use of capital will be a combination of continuing to grow our portfolio and the necessary surplus to facilitate that more than $2 billion of premium in 3 years. We've also indicated that we will be opportunistic if there are opportunities for us to acquire entities that will further diversify the portfolio and accelerate that diversification, that is a potential use of additional funds.

But we feel very good with our cash position. We feel very good with our with our ratios in terms of the car. And we think we're well positioned not only to grow to the $2-plus billion premium in 3 years, but also to take advantage of things that might help us accelerate that further.

We currently do not have any questions. [Operator Instructions] We do not have any questions at the end. We will hand over to Rick McCathron, the CEO, for any further remarks. Thank you.

Well, first of all, I'd like to thank all of you for joining us this morning. We're very excited about the quarter that we posted, and we believe that this is just the beginning. So thank you again. We look forward to speaking next quarter.

Thank you. That concludes today's call. Thank you for your participation. You may now disconnect your lines.