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Hippo adj Ebitda loss widens to $48mn in Q3 as underlying loss ratio improves to 63%

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Hippo’s loss on an adjusted Ebitda basis grew in the third quarter to $48mn compared with $24mn a year ago, despite the InsurTech lowering its loss ratio on an underlying basis and taking a lower cat hit relative to premiums than a year ago.

The company reported a net loss of about $31mn, or $0.08 a share, a stark improvement from last year’s $.44 per share loss. The loss is a little more than the $.07 a share analysts had expected.

In total, the company’s gross loss ratio fell to 128%, from 155%, helped by cutting the contribution of cats to the loss ratio from 75% to 50%. Large losses increased, on a percentage basis, to 15% of net earned premiums from 12% last year.

However, the InsurTech’s net loss ratio jumped to 241% from 185%.

Among the highlights from the company’s disclosure, it said it generated 63% of new premium from outside of California and Texas, where it has been heavily concentrated and which contributed to a significant loss from Winter Storm Uri earlier this year.

“While our concentration in north Texas worked against us in the first half of 2021 due to historically bad weather, it benefited us in Q3,” the company said.

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Loss ratio: The loss ratio fell by 27 points to 128%, down from 155% in the prior year-period, benefiting from its geographic concentration in North Texas, while the industry at large was hit by the devastation of Hurricane Ida.

“As we highlighted last quarter, geographic concentration in homeowners insurance can result in higher loss ratio volatility. While our concentration in north Texas worked against us in the first half of 2021 due to historically bad weather, it benefited us in Q3,” the company said in a letter to its shareholders.

Premiums: The company posted gross premiums written of $162mn, 94% higher than the prior year. Hippo said it continues to geographically diversify, with 63% of new homeowners premium coming from states from outside of California, led by Colorado and New Jersey, and up 55% from last quarter.

“As our business grows nationally, we are continuing to develop a much more balanced portfolio of geographic exposure, which should help reduce the volatility of our loss ratio over time,” the company said in the letter.

The big increase reflected in part the company’s acquisition of fronting company Spinnaker, completed in September 2020.

Profits: Hippo posted a net loss of $30.9mn, 19.9% lower than last year, reflecting the improvement in the InsurTech’s loss ratio.

Commentary: Founder and CEO Assaf Wand said: “Q3 was an incredibly strong quarter for Hippo. Our results demonstrate exciting progress in the areas of our business that matter most. We delivered robust growth, improved our gross loss ratio, and made a number of investments which will strengthen our foundation for the future.”

“In an unpredictable environment impacted by pandemics, climate change, and inflation, we believe that our tech-driven operating agility allows us to act more quickly and decisively than our competitors, and puts us in a solid position to win long-term.”

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