Hippo Holdings Inc.

Hello, everyone. Thank you for joining us and welcome to HIPPO first quarter 2026 financial results. After today's prepared remarks, we will host a question and answer session. If you'd like to ask a question, please press star one to raise your hand. To withdraw your question, press star one again. I will now hand the conference over to Charles Sabaski, 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 McCatherin and Chief Financial Officer Guy Seltzer. 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, 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 or from our forecast, including those set forth in HIPAA's Form 10-Q. For more information, please refer to the risks, 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 and uncertainties and other factors discussed in HIPAA's SEC filings. 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 graph 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 McCatherin, 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 and 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 platforms. 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 two partnerships complementary to each other, and most importantly, supportive of profitable growth. Progressive provides a scaled high volume platform that allows us to efficiently identify and target our ideal customer segments, while Westwood offers direct access to home builders and new home buyers at the point of purchase. Second, improving operating leverage at scale requires a technology driven approach, and our platform was purpose built for this moment, reinforcing the value of continued investment in our technology, which has long been a source of strength for HIPPO. As such, we are able to quickly apply new AI capabilities without the need to 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 one to two years, we expect Agentic AI to resolve 50 plus percent of customer producer support requests across email, chat, and voice. Early indications following our Q1 launch is that we are already seeing a 10% improvement in average handle time, accelerating customer outcomes while significantly reducing outsourced call center expenses. Third, underwriting. We've begun deploying AI in our homeowner's business to assist our underwriters and accelerate their ability to review new business, supporting rapid growth from our Progressive and Westwood partnerships without adding headcount. This AI-driven underwriting platform will enable continuous risk evaluation from submission through renewal, empowering underwriters to manage every policy and program, all enabled by our roots as a technology native carrier. Our continued multi-year investment in technology is expected to improve the customer experience, increase profitability, enable us to scale efficiently as we grow towards $2 billion in premium and beyond. We'll share additional updates throughout the year as we achieve key milestones. I'll now provide some updates on core lines of business. First, in homeowners. For the quarter, we wrote $87 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 average roughly 10% this quarter, though 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-parallel 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 It's 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 Seltzer, 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 growth return 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-parallel lines, continued steady expansion in renters, and as Rick mentioned, a modest return to extension in homeowners. I'll highlight now a few additional details of how diversified our gross return premium has become. Casualty generated $101 million, representing 30% of total gross return premium, up from 16% last year. Commercial multi-parallel with $96 million of gross return premium accounted for 29% of total gross return premium, up from 24% last year. and homeowners, which grew slightly to $87 million, representing 26% of the total gross return premium, down from 41% of gross return premium in Q1 of last year, as our portfolio continues to diversify. Net return premium in Q1 grew 1% year over year to $101 million, trailing behind the expansion of gross return 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 mixed shift as we retained less in our fastest growing line, casualty. In addition, a change in our renter's retention rate had a meaningful impact this quarter, which I will provide a bit more color on. In renters, net return 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 renter's line is structured such that when the retention rate changes at time of the treaty renewal on January 1st each year, The new retention rate is applied to both new gross return premium and to all unearned premium outstanding from the prior period. This unearned premium adjustment has an impact of $26 million year over year, as our Q125 net return premium was boosted by this adjustment as retention increased versus prior year, and our Q126 net return premium was slightly lower due to this adjustment as retention slightly decreased versus prior year. For the remainder of the year, we exert retention rates to normalize and get closer to 40% on the renter's line. Going forward, we would expect net return premium growth to be more directionally in line with gross return 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 home builder distribution network sold last year, we expect revenue growth to accelerate. In Q1, our net combined ratio improved 60 percentage points to 99.5% compared to Q1 of last year. This was achieved by improvement to both net loss and expense ratio. Our Q1 net loss ratio improved 58 percentage points year over year to 48%, driven by favorable trends in both CAAT and non-CAAT loss experience. CAAT loss ratio improved 57 percentage points to 4%, driven primarily by a low level of CAAT losses during the quarter and the impact of California wildfires in 2025. Non-CAAT loss ratio improved 1 percentage points 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 two 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 27 cents per diluted share, a $55 million improvement year-over-year. The year-over-year improvement was primarily due to the lower CAF 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 EPO shareholder equity at the end of the quarter was $449 million, or $17.23 per share, up 2% from $436 million, or $16.97 per share, at last quarter end. Following these quarter results, we are updating a few of our guidance metrics for full year 2026. We're increasing gross return premium from a range of $1.4 to $1.5 billion to a range of $1.45 and $1. $525 billion. We are increasing net return premium from a range of $500 and $540 million to a range of $520 and $550 million. We are introducing a new revenue guide of between $560 and $570 million, which represents a growth of 19 to 22% over full year 2025. We are maintaining our net combined ratio at the range of 103 and 105%, inclusive of a 13% cap-loss ratio, given the second and third quarters are typically elevated cap quarters. And finally, we increased our expected adjusted net income from a range of $45 to $55 million to a range of $48 to $56 million. And without the operator, I'd now like to open the floor to questions.

We will now begin the question and answer session. If you would like to ask a question, please press star one to raise your hand. To withdraw your question, press star one again. We 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. Your first question comes from the line of Andrew Anderson from Jefferies. Andrew, your line is open. Please go ahead.

Hey, yeah, thanks. Good morning. This is Sidon 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 and casualty and CMP?

I said, this is Guy. Happy to take this question. So first of all, to start off, we were very happy with how we started the year. This is why on both the GWP and WP 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 capsules 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-cap of about 45% for the year and the cap load of about 13. So we still feel very 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 improving 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. Thanks. And then maybe I'm just hoping you can remind us how you think about managing collateral adequacy and counterparty risk and fronting.

Yeah, 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 Vestu 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 the on who we assign up as a program partner um versus those that uh that 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.

Great. Appreciate the answers.

Thanks, Ed. A reminder, if you would like to ask a question, please press star 1 on your telephone keypad. Your next question comes from the line of Timothy D'Agostino from B. Riley Securities. Please go ahead.

yeah hi good morning thanks for taking the question congrats in the quarter um 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 you know a month in since the uh since the announcement but it'd be great to just get more additional color how the relationship's building um yeah and if you just add anything to that thank you yeah Tim no happy to answer that um 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 four months of history with them. It's exceeding our expectations, and I'd like to think it's exceeding their expectations as well as we're talking about how do we add additional states to the partnership. I will emphasize that both companies wanted to take a fairly conservative approach on growth, making sure that both are aligned with the quality of customers that are being placed on the HIPPO program. I've been impressed, frankly, with Progressive and their collaborative partnership on this, and we're really excited to continue to grow it and continue to ramp and add additional states in the coming quarters. which will certainly continue to accelerate our renewed growth in our homeowners line.

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

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

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

Really appreciate it. Thanks, Tim.

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

Hey, good morning. As you're starting to re-engage in growth in the homeowner's 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 kegger for growth you're expecting in your homeowner's book.

Hey 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 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 when and which we may choose to grow a bit larger. Guy, do you want to take the kicker?

Yes. So, Tommy, 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 we mentioned. This is why we feel comfortable to say that we are ahead of that target so far. We like the mix as it is right now on a gross return premium basis. It was relatively even between the three largest three lines, casualty, CMP, and homeowners. What I will say is that on a net basis, you should expect the PI 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.

Thanks for the color there. if i look at slide seven of your investor presentation um you have the down arrow next to ens home under increased competition first off can you remind us what is the mix between admitted in ens in your home book and then is that comment there saying ens at this point in home is unattractive or it's just more selective in certain markets could you elaborate on that that comment yeah happy to tommy um 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 ENS business or toggle them down when we feel like the market conditions aren't right. Predominantly, the reason that we're toggling down the ENS 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 own MGA, and then the rest was the partner program, which is predominantly ENS. 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 about 20% to 25%. What we like about ENS, 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 grow there. But again, we have no problem playing the right cycle and maintaining profitability over volume.

Yeah, 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.

Thank you. Thanks, Tommy.

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

Well, I'd like to thank everybody for joining today. We're very pleased with the quarter, but I think we're more excited about what the future will hold and what the future will bring. 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.