This conference call transcript was computer generated and almost certianly contains errors. This transcript is provided for information purposes only.EarningsCall, LLC makes no representation about the accuracy of the aforementioned transcript, and you are cautioned not to place undue reliance on the information provided by the transcript.
spk06: Good afternoon and thank you for attending today's HIPPO second quarter 2022 earnings call. My name is Donyell and I will be your moderator for today's call. All lines will be muted during the presentation portion of the call with an opportunity for questions and answers at the end. If you would like to ask a question, please press star followed by one on your telephone keypad. I would now like to pass the conference over to our host, Cliff Gallant of HIPPO. Cliff, please proceed.
spk08: Thank you, operator. Good afternoon, everybody, and thank you for joining HIPPO's second quarter earnings conference call. Earlier, HIPPO issued a shareholder letter announcing its results, which is available at investors.hippo.com. Leading today's discussions will be HIPPO's chief executive officer and president, Rick McCatherin, executive chairman and founder, Asaf Wand, and chief financial officer, Stuart Ellis. Following management's prepared remarks, we will open up the call to questions. Before we begin, I'd like to remind you that our discussion will contain predictions, expectations, forward-looking statements, and other information about our business that is 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 risk, uncertainties, and other factors that will cause our actual results to differ materially from historical results and or from our forecast. including those set forth in HIPPO's Form 8K file today. For more information, please refer to the risks, uncertainties, and other factors discussed in HIPPO's SEC filings. All cautionary statements that we make during this call 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 total generated premium and adjusted EBITDA. Our GAAP results and description of our non-GAAP financial measures with a full reconciliation to GAAP can be found in the second quarter 2022 shareholder letter, which has been furnished to the SEC and available on our website. And with that, I'll turn the call over to Asaf Mons. founder and executive chairman of EPO.
spk07: Thanks, Cliff. Before we dig into the details of another solid quarter of delivering on what we said we do, I wanted to take this opportunity to thank EPO's customers, employees, supporters, and investors for my time as the CEO of the company. When I founded EPO in 2015, I had a vision of what we could do for our homeowners and how we could build a great company, and I think we're well on our way of achieving that vision. As executive chairman and EPO's largest individual investor, I continue to be involved on an ongoing basis and dedicated to the continued success of EPO. Rick and I have worked side by side for six years to build EPO into what it is today. As we look to the next phase of EPO's development, Rick's operational background makes him ideal to take the lead in the CEO role. As an entrepreneur at heart, I will be focused on finding more strategic opportunities for HIPO on our long-term growth and on advancing our mission of protecting the joy of homeownership. Nothing gives me more pride and confidence than Rick's promotion to the CEO role and knowing that HIPO is in amazing hands. Thank you. And now, Rick.
spk13: Thanks, Asaf, for your continued involvement and support. Now, on to the quarter. HIPPO is making steady progress towards our goals of profitability and delivering on our mission of protecting the joy of homeownership. In Q2, we delivered another quarter of strong TGP growth, revenue growth, and perhaps most importantly, significant loss ratio improvement. Our total generated premium was up 29% over the prior year quarter. We are growing throughout our geographies, as we establish our presence and grow share in the states launched over the last 18 months. During Q2, we announced the entry into the major states of New York, Massachusetts, and North Carolina. While these states will take some time to be meaningful contributors, our confidence is high in our ability to succeed in these new markets. Growth through our builder and partnership channels remain robust. We recently announced the creation of the Amerisave Insurance Agency, powered by HIPPO's proprietary technology. We offer our partners a quality insurance experience for their customers, creating a circular win-win-win cycle between our partners, their customers, and HIPPO. Our Q2 gross loss ratio of 78% marks yet another leap of improvement from the prior year quarter. Our technology platform, which leverages advanced analytics and data, played a central role in this improvement. In addition, our increased geographic diversification, the early earning out of re-underwritten and re-rated policies, favorable reserve development, and relatively good weather all contributed to this improvement. We expect additional improvements as we continue to refine our pricing and risk management claims handling, and cost efficiency. We are getting better at identifying our target customers and winning their business. As this attractive and appropriately priced business grows, and as the other loss ratio improvement efforts gain momentum, we expect our loss ratio to continue to converge with those of our large national peers. Given our strong performance in the first half of 2022, We are pleased to be able to offer improved full year 2022 guidance for gross loss ratio, bringing it down from our previous guidance of under 100% to under 90% representing a 48 percentage point improvement from 138 in 2021. As we discussed in our first quarter 2022 letter, we've taken substantial re-underwriting and repricing actions across our book of business as we sharpen and focus on achieving our loss ratio objectives. On average, these actions have resulted in double-digit rate increases, although some of our most attractive risks have seen rate reductions. We are also pleased to report that our premium retention remains high at 87%, even though we are non-renewing policies that are not aligned with our customer segment goals. As we all return to our busy lives in a post-pandemic world, helping our customers to manage and protect their biggest asset, their homes, is more important than ever. We recently launched our HIPPO Home Care mobile experience, which includes a home health assessment done either in person or conducted through our mobile app with a HIPPO Home Care expert who can provide home care tips and create a personalized preventative maintenance plan for each HIPPO customer. As we like to say, the best claims experience is to help our customers prevent losses from ever occurring. You may have begun seeing more of us online and on TV. We recently launched our targeted brand campaign, Feel the House Power, which focuses on our differentiated product and customer experience. A recent HIPPO survey found that 87% of homeowners surveyed experience anxiety and dread about home maintenance and worry about what could go wrong next. HIPPO empowers homeowners by giving them the confidence and control they need to stand up to whatever homeownership throws at them. We're betting on our customers, not against them. Finally, we're excited for our Investor Day on September 6th in New York City, led by myself, Asaf, and Stuart, Several of our key leadership will present on topics including underwriting, technology, and product development focusing on how HIPPO differentiates itself. We will also welcome extensive Q&A. If you would like to join us in person or if you would like to submit a question, please email us at investors at HIPPO.com. We are looking forward to sharing our plans for furthering our mission of protecting the joy of homeownership as well as our financial outlook. Thank you, and now I hand it off to Stuart.
spk05: Thanks, Rick. The first half of 2022 has gone well for HIPAA. Our growth-loss ratio improved substantially versus the prior year period, with indications of more to come. Our TGP growth rate remains strong despite significant underwriting action, and our confidence in our financial position is higher than ever. We ended the first half of the year with cash and investments of $732 million and believe we can achieve profitability without raising additional capital. PGP was $204 million in Q2, up 29% from $159 million in the prior year quarter, and our HIPPO homeowner's premium retention rate of 87% remains high. As we have worked to accelerate our timeline to profitability, we have become more selective in our underwriting. This has shifted the mix of customers toward our most attractive segments, but has slowed our TGP growth slightly. Moving forward, if potential policies are on the margin between a profitable and unprofitable expected loss ratio, we will continue to lean toward profitability when choosing whether to write the business on our HIPPO program. As a result, we are slightly reducing our TGP guidance from 800 to 820 million offered previously to 790 to 810 million. We plan to go into more detail about our future growth plan at our investor day in September. Geographic expansion has been a key driver of our growth as we develop a balanced portfolio of risk exposure. With the recent additions of New York, Massachusetts, and North Carolina, we are now live in 40 states. We estimate that our current geographic footprint covers approximately 94% of the U.S. population. but our share of the overall homeowners insurance market is still less than 1%, indicating ample room for share gains and long-term growth, even while optimizing for a profitable underwriting result. Revenue in Q2 was $28.7 million, up 37% over the prior year quarter. As a reminder, revenue includes net premiums earned growing and steady streams of seeding, MGA, and agency commissions paid to us by other carriers and reinsurers, as well as service and fee income. Also, we're expanding our third-party program administrator business at Spinnaker and taking advantage of higher, low-risk yields on our cash balance to grow our investment income. The volume impact of our increased focus on nearer-term profitability and the increased cost of certain kinds of reinsurance which directly reduce our earned premium have resulted in a short-term headwind on the earned premium portion of our revenue. As a result, we expect the risk-bearing premium we will earn to come in a little lower than our initial forecast in favor of lower dollar but non-risk-bearing and higher margin commission revenue. Therefore, we are lowering our guidance for 2022 revenue to $119 to $121 million. Our growth loss ratio in Q2 was 78%, an 83 percentage point improvement over Q2 last year. Q2 is typically when our customers face adverse weather events, particularly hail, but our increasingly balanced risk exposures have helped to blunt the overall impact of this kind of weather on our results. Given the progress we are making in this area, we are comfortable offering improved guidance for full year growth loss ratio. I now believe we will be under 90% for the year, down from our previous guidance of 100%. Breaking down the loss ratio a bit, losses from PCS catastrophic events represented 22 points of our Q2 loss ratio, net of 12 points of prior period favorable development on PCS events, driven largely by hail and storms in the central plain states and northern Texas. I'd like to highlight the benefits of our recent focus on geographic expansion here. A year ago, we were more overweight in this geography and would have likely been impacted to a greater degree by this same weather. Q2 also benefited from 10 percentage points of favorable loss reserve development on attritional losses from prior years. Another key driver of our loss ratio improvement is our continued improvements to our rate adequacy and accuracy. through the filing and implementation of segmented rate changes. An additional five states and 11 product rate changes went live in the quarter, bringing our year-to-date changes to 15 states and 34 products. On a premium basis, over 80% of the book has seen a rate change filed, approved, and pushed live in 2022. The speed and nimbleness with which we have been able to affect these changes and the substantial improvements to our loss ratio As a result, is one example of the power of our technology platform. We were often asked by investors about the challenge of inflation. We would highlight that the very core of one of our value propositions to our customers, the prevention of losses, helps avoid these inflation and supply chain problems. Second, our pricing matches price to real risk, which implicitly considers inflation factors. And finally, we rerun our underwriting and rebuilding cost models automatically at each renewal, incorporating all accumulated data since the last renewal, including the impact of inflation on estimated rebuilding costs, which allows our premiums to be resilient to these factors without additional rate filings. We look forward to sharing more about our underwriting and technological strengths at our Investor Day in September. Sales and marketing expenses for the quarter decreased to $19.4 million from $22.2 million in the prior year quarter. As we focused on the execution of rate adjustments in the first half of 2022, we were conservative with our marketing spend. In the second half of the year, and now that many of the planned rate actions are live, we expect to lean more into customer acquisition. We have recently launched a new brand campaign to better inform our target customers about our unique value proposition. Technology and development expenses for the quarter increased to 16.5 million from 7.5 million in the prior year quarter, in part reflecting recent investments in our claims processing to achieve efficiency and improve service capabilities, as well as additional stock-based compensation. General and administrative expenses increased to 18.2 million from 8.8 million in the prior year quarter, reflecting additional stock-based compensation and the higher cost of being a public company. Our cash and investments at the end of the quarter were $732 million. While our investment strategy remains very conservative with high liquidity, we now hold $454 million in investments, including UST bills and high-rated corporate bonds, to capture the benefit of increasing short-term yields. We expect investment income to contribute more towards our bottom line in future years. Net loss attributable to HIPPO. with 73.5 million or 13 cents per share in Q2 compared to a net loss of 84.5 million in the prior year quarter. An adjusted EBITDA with a loss of 55.8 million versus a loss of 42.3 million in the prior year quarter. To summarize our updated guidance for 2022, we expect a gross loss ratio of below 90%, improved from our previous guidance of 100%, We're lowering our estimate for full-year total generated premium to between 790 and 810 million, down slightly from between 800 and 820 million. We're reducing our revenue estimate to a range of between 119 and 121 million, down from 140 to 142 million. Thank you very much for listening. We would now be happy to take your questions. In addition to posing questions through the operator, you can also email questions to investors at hippo.com. Thank you.
spk06: If you would like to ask a question, please press star followed by one on your telephone keypad. If for any reason you would like to remove that question, please press star followed by two. Again, to ask a question, please press star one. As a reminder, if you're using a speakerphone, please remember to pick up your handset before asking your question. We will pause here briefly as questions are registered. The first question comes from Matt Carletti of JMP. Please proceed. Hey, thanks. Good afternoon.
spk05: My first question centers around the loss ratio. Hey, how are you? First question is around the loss ratio. Just, I mean, great to see the ongoing improvement. it seems clear from your guidance that it's exceeding your expectations, despite, you know, what is a pretty inflationary environment and we've seen pressures the opposite direction at other companies. Stuart, I think you hit on a couple of pieces there, but I was hoping you could maybe peel the onion back a little bit on kind of what's been allowing you to do that. And also maybe if you can get a little more granular, I'd be curious if Are you seeing a big difference in frequency, just avoiding losses because of some of the smart home stuff, or kind of break out frequency versus severity if you can? Yeah, thanks, Matt. Thanks for the question. I think you're reading it accurately. We are ahead of the expectations we had at the beginning of the year, and I think that comes from a variety of things that we've been doing. This is an area that's been as you know, and as we've said in prior quarters, a large focus of the company's efforts. And I think we would break down those efforts into a few big buckets. I think we've been leaning hard into trying to grow more, you know, smarter growth, basically more focused on better segments. I think we've put a lot of energy into figuring out how to find the kinds of customers who resonate with our value proposition. And we're beginning to see some success in targeted messaging and marketing to people who will resonate with our technology forward approach. And I think that that has resulted in a mid-shift to a better fit in terms of customers for HIPAA's program. Another way our technology platform has supported the efforts that we've been making in the first half of this year on loss ratio is the high throughput way that we can take pricing action and rating action and also underwriting actions. And we're doing that in a very granular and targeted way. We've also made improvements to claims efficiency and cost efficiency more generally by being proactive about working with our partners in those areas. And then I think finally, something we've tried to emphasize in prior calls, but we're really starting to see the benefits of that this year is, you know, the areas that we've been able to grow and to expand our geographic diversity have really benefited us from a volatility standpoint with respect to the loss ratio. We launched in New York, Massachusetts, North Carolina. These states, while still small today, represent big growth opportunities for us. But as we As we diversify out of North Texas, we are seeing benefits to the volatility that comes from weather events like hail. And I think, you know, despite the environment, as you mentioned, it's getting harder and others are seeing headwinds. We feel like we're, you know, everyone is swimming upstream against those trends, but we feel like we're We've been able to actually accelerate our progress despite that, and it just went faster in the right direction. And I also think there's more to come. You know, we mentioned earlier that the large number of rate actions and filings that we've taken, those have only partially earned their way into the financial results, and we expect to see benefits of those in future quarters as well. So we're optimistic about the future, and I feel like we're making progress. And Rick, do you have anything to add? Yeah.
spk13: Hey, Matt. Your question around smart home, I think there's two different components to consider. The types of customers that resonate with our value proposition, the ones that we are targeting and we make great progress in identifying those and convincing them that our value proposition is what they need, those are customers that are generally positively selected that really participate either in our smart homes programs, people that want a partner in that particular area. The second component of that is specific segments of our business, like our builder channel. These are positively selected new construction properties, and we have various distribution techniques that allow us to get more of those positively selected exposures. So in our effort to really make sure that we are avoiding claims for the benefit of our customers, that is very much where we are focusing our growth and growth targets. Very helpful.
spk05: Thank you. And one quick follow up, if I could. I'm looking at page 19 of the investor letter, the geographic diversification, and it looks like a slightly bigger piece of the pie this quarter came from California and Texas. And I know one quarter doesn't make a trend, but just be curious if you could help me through why that might be versus last year.
spk13: Yeah, I think one thing to keep in mind is Texas specifically. Texas is a massively large state that you could fit, you know, a half dozen other states within, and it has very different exposures to catastrophe. So in areas where we were overly saturated and where we felt like we had inferior pricing, we've, for all intents and purposes, shut down those particular markets. areas that we were not overly saturated and where we believe we have pricing adequacy. Those are areas that actually within a given geography provide better diversification across different weather perils. So we are very confident that we are growing in all of our geographies. And we are very focused on making sure we don't have over concentration, oversaturation, similar types of things in places like California. The exposures in Northern California are very different than the exposures in Southern California. So we look at geographical diversification not just at a state-by-state basis, but also in a more granular way, including different exposures that might exist in those specific granular territories. That makes perfect sense. Thank you for the color.
spk12: Thanks, Matt. Operator, are you there? Operator, we'll take the next question.
spk06: Next question comes from Michael Phillips of Morgan Stanley. Please proceed.
spk02: Hey, thanks. Good evening, everybody. Guys, I hope you could touch on comments about being more selective with underwriting. So obviously, that's the impact on your guidance down modestly for the full year versus an uptick in and marketing spend for the back half of the year and leaning more into customer acquisition. So which normally what I would think would have an uptick in your top line. So it sounds like the first one is winning over guidance versus what you might get from a lift from more marketing spend and customer acquisition. So if you could just kind of talk about those two nuances.
spk05: Yeah, thanks Mike. Happy to talk more about that question. So I think we mentioned this last quarter, but this is a kind of continuing trend You know, we mentioned we have a large number of rates and underwriting filings that we're rolling out over the course of the country, and some of those take time. And so we were cautious in the first half of the year while we were rolling out those things and while they were being filed and approved. And at this point, we do feel like we are better positioned to write profitable business in a broader area of the country. I think if you looked at the growth last quarter and the guidance for the year, it was always going to be the case that we would see accelerating growth in the second half of the year. That has not changed. We still are expecting growth to pick up in the second half of the year as we lean into the broader geographies in the US where we feel like we have rate adequacy. In terms of guidance, I would think of that more as a refinement of guidance. If you look from midpoint to midpoint, it's just a 1% reduction. And we felt like it made sense to refine that slightly simply because we are erring on the side and we want to send the message to the broader investment community that we're erring on the side of profitability. Even at the new guidance, we're still expecting 30% year-over-year growth. And so what's going to get us there? I think we're going to continue to build on the progress we've made in targeting those high-value segments with our new brand campaign, which we're planning to roll out in the second half of the year a bit more broadly. Branding and brand spend, as I'm sure you know, It does take a little bit longer to show a positive return on investment as compared to more quantitative marketing spend. We do have higher confidence in our pricing, so we're spending more on the quantitative side as well to bring customers to the website. And as Rick mentioned, we are seeing a lot of success in the builder and other positively selected channels from a risk standpoint, and those we expect to continue to be the fastest growing. And also now that we're live in New York and Massachusetts, North Carolina, we're starting to see positive traction there. It's at the early stage, but we feel optimistic. And so I think about the guidance as a signal. More on the lines of on the margin, we're going to focus on making sure we get to cash flow positivity. But we still feel like growth will be a positive feature for our story.
spk02: Okay, thank you, Stuart. I guess also in lines with your comments about kind of, you know, those policies that might be on the margin and kind of how you decide whether they get on your HIPAA paper or not from here, what does that imply for, I guess, near-term growth in commission income? Whether it's because of that or not, just general comments about how commission income might kind of change over the next 12 months.
spk05: Yeah, I think, you know, in areas where we don't feel like we're adequately priced or we're not the best fit or the best policy for a customer, we do have the ability through our agency to sell other people's products. And that is something that we've been doing more of. And I expect that that will be a feature of our business and our customer experience going forward. So we've mentioned over the past few quarters that we do see service fee and non-risk commission income to be parts of our future growth story, and we expect that we will see that become a larger part of our financials. I don't think there's anything that's changed. It is something that we're excited about.
spk07: Okay, great. Thank you, Stuart. Appreciate it.
spk06: Yeah, thanks, Mike. Thank you. The next question comes from the line of Alex Scott of Goldman Sachs. Please proceed.
spk01: Hi, good afternoon. The first question I had was just to see if you could elaborate a bit on the comment in the Charter letter around achieving profitability without raising additional capital. Can you just talk a little bit about what that looks like over what time frame we should think about that?
spk05: Yeah, I think Dylan is happy to take that and then if Rick wants to add anything, happy to have him do so. We've been talking a lot on this call about the fact that our loss ratio results in Q2 represent another quarter of consistent progress. And I think we're also sharpening our focus internally on cost containment and operating efficiencies. And we're doing that and trying to balance that with continuing to make strategic investments in important growth areas for our business, like the builder and the partner channel that have the potential to deliver positively selected risk. I think based on our expectations, we think Q3, the quarter we're in right now, will be our peak loss quarter from an adjusted EBITDA standpoint. And as I said earlier, we do expect to reach bottom line profitability without the need to raise additional capital. I think that's a topic that is probably best covered in a bit more detail than we can on a call like this. And so That's going to be the focus of my presentation at the investor day that we're planning on September 6th. So I'd invite everyone who's interested to join us there and we'll have an opportunity to talk more about our growth plans and also the mechanisms by which we see convergence to profitability.
spk13: Alex, I just want to make sure we're very clear on this point. Getting the cash flow positive with a cash on hand is our number one priority as a company. And we intend to do so with a cushion. So as Stuart said, we'll have a lot more detail in our investor day. But just to be clear, that is something that we will achieve.
spk01: Got it. That was helpful. Next one I had for you all is just on The net loss ratio and your reinsurance agreements, as you mentioned, we've seen a lot of gross loss ratio improvement over the first half of 2021. The net loss ratio, though, has continued to go up pretty substantially. At what point does the gross loss ratio begin translating more to the net? I mean, do you have to get to the end of the year and restructure reinsurance contracts? Are those things that can be restructured annually, or is there some sort of longer timeline because of when they come up? How do I think about all that?
spk05: Yeah, I'm happy to take the first part of that question, and then, Rick, please feel free to add. I think you've captured, I think, what's going on, which is that the terms of our annual reinsurance agreements, as we've said, are somewhat lagging related to the performance of the underlying book, which is best represented by the gross loss ratio. And our 2022 reinsurance treaty, as we've said in prior periods, has some loss participation features. that are the result of our loss ratio in 2021, which is abnormally high for reasons related to both winter storm Yuri, as well as one of the most severe hail seasons on record. Part of the driver of the improvement in loss ratio is the geographic diversity that we've been able to put into the book through the growth. yet we still have uh you know some loss participation features that are impacting our our net loss ratio because we're we're experiencing losses but we're not actually able to recognize the earned premium and so um in addition to those loss participation we also have seen like the rest of the industry higher xol costs which reduce that net earned premium and so the the percentage uh is quite volatile because we're looking at a very small denominator of earned premium uh that you can see in the financials um but it is it's one of those things that um the annual portion of our insurance treaty we are exploring uh ways with our reinsurance partners uh to develop structures that are more cost effective going into 2023 uh we're optimistic about our ability to to translate the much improved loss ratio we're delivering in 2022 into better reinsurance terms in the next year.
spk13: Just to add a few points to that, reinsurance is generally backwards looking on the performance of the book and how the book is exposed to weather. So historically we have not had a great loss ratio and that loss ratio or the business, the book was very much exposed to catastrophic weather. So as an example, our 2022 treaty will impact us for 2022 and part of 2023 because they're calendar year treaties. And we are working with our reinsurance partners to structure the 2023 treaty in one that recognizes both the improvement in our loss ratio and the reduction of exposure to catastrophic weather. So it's lagging, but we're excited that we have strong reinsurance partners. They have a very deep look into the trends and what we're doing. As a reminder, we were oversubscribed last year, even with a poor historical loss ratio. So I think you're going to see continued improvement in that as time goes on and as we continue to take the actions that produce a much more favorable gross loss ratio. Got it. Thanks.
spk10: Thank you. The next question comes from Yaron Kinnar of Jefferies.
spk06: Please proceed.
spk03: Hey, good afternoon. This is Andrew on for your own. You'd mentioned some of your most attractive risks are seeing rate reductions. Can you help us think about and maybe quantify what percentage of policies are seeing these rate reductions?
spk05: Yeah, I think on average, we're seeing rate increase across the book. And I don't know if we can get into quantifying the specific numbers of policies that are in the best risk segments. But our goal generally is to try to match price of the policy and the rates of the policy to the underlying risk. And so when you look at the portfolio as a whole, it's a mid-teens rate increase. But there are places where we're getting more precise. where we want to be able, if we're overpriced for our best segments, we're not getting those customers. And so by being able to lower the price selectively where we're overpriced in certain areas, that helps us with both growth and also loss ratio because these are the best customers that we can bring in. So that's an area where maybe being more refined and more precise with our pricing
spk13: can generate benefits on both sides of the equation yeah andrew i think it's really important to note that disproportionate losses are generally created by fewer customers and as we continue to refine our segmentation the customer we're going after the distribution channels like builders that are more positively selected i think what we're finding is there are customers that we have and additional customers out there that should not subsidize the sort of the greater world of customers. So as time goes on, we will write more and more. And we have, by the way, written more and more sort of A and A plus customers that they should deserve a lower price. And we are finding those in our existing book and charging them the appropriate price.
spk03: Thanks. And I guess lower top line guidance on the one hand and better loss ratio on the other. Do you see your earnings power or EPS going better than planned for this year?
spk05: I think we'll talk more about bottom line guidance probably at our investor day for 2022. I don't know that we can We can talk to that today, but it is part of our plan to discuss in September.
spk03: Thanks. And maybe one more if I could sneak it in. Certainly been very active filing rates. What has kind of been the reception from regulators both in California and more broadly?
spk13: Yeah, based on my, you know, 30-year history of this, I am finding regulators generally to be more receptive because of both sort of inflationary trends generally and also recognizing that weather has been more pronounced across the board. And I don't think I have found, I don't think I remember a time when regulators have been more active partners with insurance companies to maintain a healthy insurance environment. And frankly, we have seen the regulators being very receptive to rate changes and increases, even in places like California.
spk05: Yeah, and I'll just add, the rates that we're talking about, these rate changes are not only filed, but they have either approved by regulators and also live within our system. So these are more than just, you know, asks of regulators. These are the things that have already made it through the process. And so I just want to make sure that that's clear. Great.
spk03: Thanks for the answers.
spk12: Thank you, Andrew. Absolutely.
spk06: Thank you. The next question comes from the line of Tommy McJoynt of KBW. Please proceed.
spk04: Hey, guys. Good evening. Thanks for taking my questions. Could you remind us how big the builder channel is for you? And are there any metrics that you can share around attach rates or penetration and then the latest loss ratio performances there? And then on that same topic, has the slowdown in new home sales or the expected slowdown at least had any impact on the results in the quarter or your growth outlook?
spk12: Yeah.
spk09: So, hey, Tommy.
spk13: I do think it's relevant. There is a slowdown of builders – excuse me, a slowdown of housing starts, although keep in mind that – We are relatively new in this effort, and we are improving and gaining, and Stuart can talk to specifics around attach rates. We think that our penetration within the new construction channel is just sort of at the tip of the iceberg. We don't think that the slowdown will impact us, and in fact, we are actually seeing pretty significant increases in those specific channels. we don't see any negative impact at all with fewer housing starts.
spk05: Yeah, and Tommy, on some of the metrics, one of the things that we can do that other providers that are out there have a more difficult time doing is to integrate fairly deeply into the builder's own customer experience. Lennar is a good case study on this, and I think we've talked about it publicly before. When we took over the business at Lennar and partnered with them, the attach rates were far lower for their customers than they are now. And so we've been able to drive meaningful increases in attach rates at Lennar for their own homebuyers. because we have been able to improve that experience. And I think the attach rates now are north of 70%. And I think Dave even talked about that publicly. In terms of size, I would say right now the builder channel is around 10% of the HIPPO program, specifically the HIPPO homeowners program. And that percentage is growing. It's one of the fastest channels that we have in terms of growth. um and uh and we're um excited about the future there um we signed uh a new like we launched new builders we launched with matamy uh in the quarter we now have i think four of the top 20 builders um and we're excited about the prospects for that business thanks for those metrics there um
spk04: And then how many markets do you have the HIPPO home care available in? And in those markets, what are the actual take-up rates by your customers that actually result in some sort of preventative maintenance plan being given to them?
spk13: Yeah, good question, Tommy. I think there's a couple things to consider. I think our HIPPO home care, how we utilize IoT devices through our partnerships has a wide range of what I would consider So when you look at customers that participate in HIPPO home care generally and have HIPPO smart home program, that number attached rate is north of 70%. When we talk about total home care, that is sort of the next iteration of that capabilities. And it's in its infancy stage. So I don't think you're seeing meaningful amounts showing on our particular economics related to that. We've had very good progress, very good relationships. We've done a ton with tele maintenance with the particular customer. So I think you're seeing a ton of opportunity in that particular area. And we will talk more about that on our investor day.
spk12: Thank you. Thank you.
spk06: There are currently no additional questions registered at this time. As a reminder, it is star 1 on your telephone keypad to ask a question.
spk09: Okay. Well, if there are no further questions, we very much appreciate your time this quarter, and we look forward to speaking to you next quarter.
spk12: and in September at our investor day.
spk10: That concludes the conference call. Thank you for your participation. You may now disconnect your lines.
Disclaimer