Hippo Holdings Inc. [HIPO] Filings

10-Q 1 hippo-20230630.htm 10-Q hippo-20230630

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

(Mark One)


☒			QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended June 30, 2023


o			TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from ______ to ______.

Commission file number 001-39711

HIPPO HOLDINGS INC.

(Exact name of registrant as specified in its charter)

Delaware

32-0662604

(State of incorporation)

(I.R.S. Employer Identification No.)

150 Forest Avenue

Palo Alto, California

94301

(Address of Principal Executive Offices)

(Zip Code)

(650) 294-8463

(Registrant's telephone number, including area code)

Not Applicable

(Former name, former address and former fiscal year, if changed since last report)

Securities registered pursuant to Section 12(b) of the Act:


Title of each class	Trading Symbol(s)	Name of each exchange on which registered
Common stock, $0.0001 par value per share	HIPO	New York Stock Exchange
Warrants to purchase common stock	HIPO.WS	New York Stock Exchange

Indicate by check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports); and (2) has been subject to such filing requirements for the past 90 days. Yes x No o

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes x No o

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act. (Check one):


Large accelerated filer	☐	Accelerated filer	☐
Non-accelerated filer	☒	Smaller reporting company	☒
		Emerging growth company	☒

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. o

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act). Yes ☐ No ☒

The registrant had outstanding 23,665,363 shares of common stock as of August 1, 2023.

Table of Contents


		Page
	Cautionary Note regarding Forward-Looking Statements
	Part I. Financial Information
Item 1	Consolidated Financial Statements
	Consolidated Balance Sheets	1
	Consolidated Statements of Operations and Comprehensive Loss	2
	Consolidated Statements of Stockholders’ Equity	3
	Consolidated Statements of Cash Flows	4
	Notes to Consolidated Financial Statements	5
Item 2	Management's Discussion and Analysis of Financial Condition and Results of Operations	30
Item 3	Quantitative and Qualitative Disclosures About Market Risk	52
Item 4	Controls and Procedures	52
	Part II. Other Information
Item 1	Legal Proceedings	54
Item 1A	Risk Factors	54
Item 2	Unregistered Sales of Equity Securities and Use of Proceeds	54
Item 3	Defaults Upon Senior Securities	54
Item 4	Mine Safety Disclosures	54
Item 5	Other Information	54
Item 6	Exhibits	56
	Signatures

CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS

This Quarterly Report on Form 10-Q of Hippo Holdings Inc. (“Hippo,” the “Company,” “we,” “us” and “our”) contains statements that are forward-looking and as such are not historical facts. This includes, without limitation, statements regarding the financial position, business strategy and the plans and objectives of management for our future operations. These statements constitute projections, forecasts and forward-looking statements, and are not guarantees of performance. Such statements can be identified by the fact that they do not relate strictly to historical or current facts. When used in this Quarterly Report on Form 10-Q, words such as “anticipate,” “believe,” “continue,” “could,” “estimate,” “expect,” “intend,” “may,” “might,” “plan,” “possible,” “potential,” “predict,” “project,” “should,” “strive,” “would” and similar expressions may identify forward-looking statements, but the absence of these words does not mean that a statement is not forward-looking. Forward-looking statements in this Quarterly Report on Form 10-Q may include, for example, statements about:

•our future results of operations and financial condition and our ability to attain profitability;

•our ability to grow our business and, if such growth occurs, to effectively manage such growth;

•customer satisfaction and our ability to attract, retain, and expand our customer base;

•our ability to maintain and enhance our brand and reputation;

•our business strategy, including our diversified distribution strategy and our plans to expand into new markets and new products;

•the effects of seasonal trends on our results of operations;

•our expectations about our book of business, including our ability to cross-sell and to attain greater value from each customer;

•our ability to compete effectively in our industry;

•our ability to maintain reinsurance contracts and our near- and long-term strategies and expectations with respect to cession of insurance risk;

•our ability to utilize our proprietary technology;

•our ability to underwrite risks accurately and charge profitable rates;

•our ability to leverage our data, technology and geographic diversity to help manage risk;

•our ability to protect our intellectual property;

•our ability to expand our product offerings or improve existing ones;

•our ability to attract and retain personnel, including our officers and key employees;

•potential harm caused by misappropriation of our data and compromises in cybersecurity;

•potential harm caused by changes in internet search engines’ methodologies;

•our expected use of cash on our balance sheet, our future capital needs and our ability to raise additional capital;

•fluctuations in our results of operations and operating metrics;

•our ability to receive, process, store, use and share data, and compliance with laws and regulations related to data privacy and data security;

•our ability to stay in compliance with laws and regulation that currently apply, or become applicable, to our business both in the United States and internationally;

•our inability to predict the lasting impacts of COVID-19 to our business in particular, and the global economy generally;

•our public securities’ liquidity and trading; and

•other factors detailed in the section titled “Risk Factors” in Part II, Item 1A, in this Quarterly Report on Form 10-Q.

These forward-looking statements are based on information available as of the date of this Quarterly Report on Form 10-Q, and current expectations, forecasts and assumptions, and involve a number of judgments, risks and uncertainties. Accordingly, forward-looking statements should not be relied upon as representing our views as of any subsequent date, and we do not undertake any obligation to update forward-looking statements to reflect events or circumstances after the date they were made, whether as a result of new information, future events or otherwise, except as may be required under applicable securities laws. As a result of a number of known and unknown risks and uncertainties, our actual results or performance may be materially different from those expressed or implied by these forward-looking statements. You should not place undue reliance on these forward-looking statements.

PART I - Financial Information

Item 1: Financial Statements

HIPPO HOLDINGS INC.

Consolidated Balance Sheets

(In millions, except share and per share data)

(Unaudited)


	June 30, 2023		December 31, 2022
	(Unaudited)
Assets
Investments:
Fixed maturities available-for-sale, at fair value (amortized cost: $141.8 million and $127.3 million, respectively)	$	135.6	$	121.1
Short-term investments, at fair value (amortized cost: $229.1 million and $325.6 million, respectively)	228.8		324.8
Total investments	364.4		445.9
Cash and cash equivalents	200.2		194.5
Restricted cash	38.2		50.0
Accounts receivable, net of allowance of $0.4 million and $0.3 million, respectively	148.2		107.2
Reinsurance recoverable on paid and unpaid losses and LAE	332.7		286.3

Prepaid reinsurance premiums	375.2		309.9
Ceding commissions receivable	70.1		45.8

Capitalized internal use software	44.0		38.8

Intangible assets	24.7		26.9
Other assets	83.1		63.6
Total assets	$	1,680.8	$	1,568.9
Liabilities and stockholders’ equity
Liabilities:
Loss and loss adjustment expense reserve	$	367.6	$	293.8
Unearned premiums	423.1		341.3
Reinsurance premiums payable	302.7		207.1
Provision for commission	12.7		5.0





Accrued expenses and other liabilities	127.7		128.2
Total liabilities	1,233.8		975.4
Commitments and contingencies (Note 12)


Stockholders’ equity:
Common stock, $0.0001 par value per share; 80,000,000 and 80,000,000 shares authorized as of June 30, 2023 and December 31, 2022, respectively; 23,611,308 and 23,201,434 shares issued and outstanding as of June 30, 2023 and December 31, 2022, respectively	—		—
Additional paid-in capital	1,590.9		1,558.0
Accumulated other comprehensive loss	(6.4)		(7.0)
Accumulated deficit	(1,138.9)		(961.1)
Total Hippo stockholders’ equity	445.6		589.9
Noncontrolling interest	1.4		3.6
Total stockholders’ equity	447.0		593.5
Total liabilities and stockholders’ equity	$	1,680.8	$	1,568.9

See Notes to the Consolidated Financial Statements

HIPPO HOLDINGS INC.

Consolidated Statements of Operations and Comprehensive Loss

(In millions, except share and per share data)

(Unaudited)


	Three Months Ended June 30,				Six Months Ended June 30,
	2023		2022		2023		2022

Revenue:
Net earned premium	$	22.3	$	11.2	$	36.1	$	20.2
Commission income, net	16.2		12.9		33.6		24.4
Service and fee income	3.8		3.5		7.0		7.1
Net investment income	5.4		1.1		10.8		1.5
Total revenue	47.7		28.7		87.5		53.2
Expenses:
Losses and loss adjustment expenses	76.7		29.2		114.4		51.7
Insurance related expenses	18.8		17.4		34.5		30.6
Technology and development	13.1		16.5		24.7		31.2
Sales and marketing	22.6		19.4		45.0		44.3
General and administrative	21.5		18.2		41.3		34.7

Interest and other (income) expense	—		(0.3)		0.5		(1.3)


Total expenses	152.7		100.4		260.4		191.2
Loss before income taxes	(105.0)		(71.7)		(172.9)		(138.0)
Income tax expense	0.2		0.3		0.5		0.5
Net loss	(105.2)		(72.0)		(173.4)		(138.5)
Net income attributable to noncontrolling interests, net of tax	2.6		1.5		4.3		2.6
Net loss attributable to Hippo	$	(107.8)	$	(73.5)	$	(177.7)	$	(141.1)
Other comprehensive income (loss):
Change in net unrealized gain or loss on investments, net of tax	(1.1)		(1.6)		0.6		(4.2)
Comprehensive loss attributable to Hippo	$	(108.9)	$	(75.1)	$	(177.1)	$	(145.3)

Per share data:
Net loss attributable to Hippo - basic and diluted	$	(107.8)	$	(73.5)	$	(177.7)	(141.1)
Weighted-average shares used in computing net loss per share attributable to Hippo - basic and diluted	23,387,767		22,644,306		23,293,652		22,555,050
Net loss per share attributable to Hippo - basic and diluted	$	(4.61)	$	(3.25)	$	(7.63)	(6.26)

See Notes to the Consolidated Financial Statements

HIPPO HOLDINGS INC.

Consolidated Statements of Stockholders’ Equity

(In millions, except share data)

(Unaudited)


	Common Stock			Additional Paid-in Capital		Accumulated Other Comprehensive Income (Loss)		Accumulated Deficit		Total Hippo Stockholders' Equity		Non controlling Interests		Total Stockholders’ Equity
	Shares	Amount

Balance at January 1, 2023	23,201,434	$	—	$	1,558.0	$	(7.0)	$	(961.1)	$	589.9	$	3.6	$	593.5
Net loss	—	—		—		—		(69.8)		(69.8)		1.7		(68.1)
Other comprehensive income	—	—		—		1.7		—		1.7		—		1.7
Issuance of common stock from stock plans and contingently issuable shares	134,824	—		0.4		—		—		0.4		—		0.4
Repurchase of common stock	(15,472)	—		(0.2)		—		—		(0.2)		—		(0.2)
Shares withheld related to net share settlement	—	—		(0.9)		—		—		(0.9)		—		(0.9)
Stock-based compensation expense	—	—		17.4		—		—		17.4		—		17.4
Other	—	—		—		—		(0.2)		(0.2)		(0.6)		(0.8)
Balance at March 31, 2023	23,320,786	$	—	$	1,574.7	$	(5.3)	$	(1,031.1)	$	538.3	$	4.7	$	543.0
Net loss	—	$	—	$	—	$	—	$	(107.8)	$	(107.8)	$	2.6	$	(105.2)
Other comprehensive loss	—	—		—		(1.1)		—		(1.1)		—		(1.1)
Issuance of common stock from stock plans and contingently issuable shares	375,844	—		1.8		—		—		1.8		—		1.8
Repurchase of common stock	(85,322)	—		(1.6)		—		—		(1.6)		—		(1.6)
Shares withheld related to net share settlement	—	—		(2.0)		—		—		(2.0)		—		(2.0)
Stock-based compensation expense	—	—		18.0		—		—		18.0		—		18.0
Other	—	—		—		—		—		—		(5.9)		(5.9)
Balance at June 30, 2023	23,611,308	$	—	$	1,590.9	$	(6.4)	$	(1,138.9)	$	445.6	$	1.4	$	447.0


	Common Stock			Additional Paid-in Capital		Accumulated Other Comprehensive Income (Loss)		Accumulated Deficit		Total Hippo Stockholders' Equity		Non controlling Interests		Total Stockholders’ Equity
	Shares	Amount

Balance at January 1, 2022	22,601,245	$	—	$	1,488.3	$	(0.7)	$	(628.0)	$	859.6	$	2.1	$	861.7
Net loss	—	—		—		—		(67.6)		(67.6)		1.1		(66.5)
Other comprehensive loss	—	—		—		(2.6)		—		(2.6)		—		(2.6)
Issuance of common stock from stock plans and contingently issuable shares	108,916	—		1.4		—		—		1.4		—		1.4
Shares withheld related to net share settlement	—	—		(1.0)		—		—		(1.0)		—		(1.0)
Stock-based compensation expense	—	—		15.7		—		—		15.7		—		15.7
Balance at March 31, 2022	22,710,161	$	—	$	1,504.4	$	(3.3)	$	(695.6)	$	805.5	$	3.2	$	808.7
Net loss	—	$	—	$	—	$	—	$	(73.5)	$	(73.5)	$	1.5	$	(72.0)
Other comprehensive loss	—	—		—		(1.6)		—		(1.6)		—		(1.6)
Issuance of common stock from stock plans and contingently issuable shares	187,934	—		2.3		—		—		2.3		—		2.3
Repurchase of common stock	(3,599)	—		—		—		—		—		—		—
Shares withheld related to net share settlement	—	—		(1.7)		—		—		(1.7)		—		(1.7)
Stock-based compensation expense	—	—		17.8		—		—		17.8		—		17.8
Other	—	—		—		—		0.3		0.3		(2.4)		(2.1)
Balance at June 30, 2022	22,894,496	$	—	$	1,522.8	$	(4.9)	$	(768.8)	$	749.1	$	2.3	$	751.4

See Notes to the Consolidated Financial Statements

HIPPO HOLDINGS INC.

Consolidated Statements of Cash Flows

(In millions)

(Unaudited)


	Six Months Ended June 30,
	2023		2022
Cash flows from operating activities:
Net loss	$	(173.4)	$	(138.5)
Adjustments to reconcile net loss to net cash used in operating activities:
Depreciation and amortization	9.5		7.4
Stock–based compensation expense	32.8		29.3

Change in fair value of warrant liability	—		(2.6)
Change in fair value of contingent consideration liability	3.7		2.4






Other non-cash items	(4.8)		0.2
Changes in assets and liabilities:
Accounts receivable, net	(41.0)		(10.1)
Reinsurance recoverable on paid and unpaid losses and LAE	(46.7)		(24.5)
Ceding commissions receivable	(24.3)		(8.4)
Prepaid reinsurance premiums	(65.4)		(31.8)
Other assets	(2.7)		9.1
Provision for commission	7.7		1.0
Accrued expenses and other liabilities	8.3		7.3
Loss and loss adjustment expense reserves	73.8		8.0
Unearned premiums	81.8		29.8
Reinsurance premiums payable	95.7		33.0
Net cash used in operating activities	(45.0)		(88.4)
Cash flows from investing activities:
Capitalized internal use software costs	(8.5)		(7.7)

Purchases of property and equipment	(29.0)		(3.0)
Purchases of investments	(207.2)		(408.0)
Maturities of investments	264.3		13.3
Sales of investments	30.1		4.2

Other	(0.9)		(2.0)
Net cash provided by (used in) investing activities	48.8		(403.2)
Cash flows from financing activities:




Taxes paid related to net share settlement of equity awards	(2.9)		(2.7)
Proceeds from issuances of common stock	1.9		3.3

Share repurchases under program	(1.8)		—
Payments of contingent consideration	(0.7)		—
Distributions to noncontrolling interests	(6.5)		(2.2)
Other	0.1		(1.0)
Net cash used in financing activities	(9.9)		(2.6)

Net decrease in cash, cash equivalents, and restricted cash	(6.1)		(494.2)
Cash, cash equivalents, and restricted cash at the beginning of the period	244.5		818.7
Cash, cash equivalents, and restricted cash at the end of the period	$	238.4	$	324.5

See Notes to the Consolidated Financial Statements

HIPPO HOLDINGS INC.

Notes to Consolidated Financial Statements

(Unaudited)

1. Description of Business and Summary of Significant Accounting Policies

Description of Business

Hippo Holdings Inc., referred to in these Notes to the Consolidated Financial Statements as “Hippo” or the “Company,” specializes in the underwriting, administration, and marketing of personal property and commercial insurance policies. The Company’s subsidiary, Hippo Analytics Inc., is a licensed insurance agency that provides various insurance services, including some or all of the following services for affiliated and non-affiliated insurance carriers: soliciting, marketing, servicing, underwriting, or providing claims processing services for a variety of commercial and personal insurance products. Hippo Analytics Inc. offers its insurance products through licensed insurance agents and direct-to-consumer channels. The Company’s insurance company subsidiaries, Spinnaker Insurance Company (“Spinnaker”), an Illinois domiciled insurance company, Spinnaker Specialty Insurance Company (“SSIC”), a Texas domiciled authorized surplus lines insurance company, and Mainsail Insurance Company (“MIC”), a Texas domiciled insurance company, underwrite personal and commercial insurance products on a direct basis through licensed insurance agents and surplus lines brokers. The Company has a wholly-owned Cayman domiciled captive insurance company, RH Solutions Insurance (Cayman) Ltd. (“RHS”), which assumes insurance risk of policies from affiliated and non-affiliated insurance carriers.

The Company was incorporated in October 2020 under the name Reinvent Technology Partners Z (“RTPZ”) as a Cayman Islands exempted company for the purpose of effecting a business combination. On August 2, 2021, RTPZ domesticated as a Delaware corporation, changed its name to “Hippo Holdings Inc.” and consummated a series of mergers to acquire Hippo Enterprises Inc., a Delaware corporation (“Old Hippo”), with the Company ultimately surviving (such mergers, the “Business Combination”). The Business Combination was completed pursuant to the Agreement and Plan of Merger, dated as of March 3, 2021, by and among RTPZ, RTPZ Merger Sub Inc. and Old Hippo.

Basis of Presentation and Consolidation

The interim consolidated financial statements and accompanying notes of the Company have been prepared in accordance with generally accepted accounting principles in the United States of America (“GAAP”) and include the Company’s consolidated subsidiaries. All intercompany transactions and balances have been eliminated in consolidation. Certain information and disclosures normally included in consolidated financial statements prepared in accordance with GAAP have been omitted accordingly.

The interim financial information is unaudited, but reflects all normal recurring adjustments that are, in the opinion of management, necessary to fairly present the information set forth herein. The interim consolidated financial statements should be read in conjunction with the audited consolidated financial statements and related notes included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2022. Interim results are not necessarily indicative of the results for a full year.

In accordance with Accounting Standards Codification 280 “Segment Reporting”, the Company reports three operating segments due to changes in how the Company’s chief operating decision maker assesses the Company’s performance and allocates resources. See Note 16 “Segment Reporting”. The Company has three reportable segments: Services, Insurance-as-a-Service, and Hippo Home Insurance Program.

Reverse Stock Split

On September 29, 2022, the Company filed a Certificate of Amendment to its Certificate of Incorporation to effect a one-for-25 reverse stock split of the Company’s common stock and a corresponding adjustment to its authorized capital stock (the “Reverse Stock Split”), effective as of 11:59 p.m. Eastern Daylight Time on September

HIPPO HOLDINGS INC.

Notes to Consolidated Financial Statements

(Unaudited)

29, 2022 (the “Effective Time”). All share and per share information has been retroactively adjusted to give effect to the Reverse Stock Split for all periods presented, unless otherwise indicated.

As a result of the Reverse Stock Split, every 25 shares of the Company’s issued and outstanding common stock were automatically converted into one share of issued and outstanding common stock. No fractional shares were issued as a result of the Reverse Stock Split. Stockholders who otherwise would have been entitled to receive fractional shares of common stock were entitled to receive cash in an amount equal to the product obtained by multiplying (a) the closing price per share of the common stock as reported on the New York Stock Exchange as of the first trading day following the Effective Time, by (b) the fraction of one share owned by the stockholder.

Proportionate adjustments were made to the number of shares issuable upon the exercise or vesting of all stock options, restricted stock, restricted stock units or other stock-based awards or rights (the “Stock-Based Awards”) and warrants outstanding at the Effective Time, as well as certain performance goals applicable to certain Stock-Based Awards, which resulted in a proportional decrease in the number of shares of the Company’s common stock reserved for issuance upon exercise or vesting of such Stock-Based Awards and warrants, and, in the case of stock options, purchase rights outstanding under the Company’s 2021 Employee Stock Purchase Plan and warrants, a proportional increase in the exercise price of such stock options, purchase rights and warrants. In addition, the number of shares reserved for issuance under the Company’s 2021 Incentive Award Plan and 2021 Employee Stock Purchase Plan were proportionately reduced.

Use of Estimates

The preparation of the Company’s consolidated financial statements in conformity with GAAP requires management to make estimates that affect the reported amounts of assets and liabilities, disclosure of contingent assets and liabilities at the date of the consolidated financial statements, and the reported amounts of revenues and expenses during the reporting periods. Significant items subject to such estimates and assumptions include, but are not limited to, loss and loss adjustment expense (“LAE”) reserves, provision for commission slide and cancellations, reinsurance recoverable on paid and unpaid losses and LAE, the fair values of investments, stock-based awards, warrant liabilities, contingent consideration liabilities, acquired intangible assets, deferred tax assets and uncertain tax positions, and revenue recognition. The Company evaluates these estimates on an ongoing basis. These estimates are informed by experience and other assumptions that the Company believes are reasonable under the circumstances. Actual results may differ significantly from these estimates.

Recent Accounting Pronouncements

The Company has evaluated recent accounting pronouncements through the date the financial statements were issued and filed with the SEC and believes that there are none that will have a material impact on the Company’s consolidated financial statements.

HIPPO HOLDINGS INC.

Notes to Consolidated Financial Statements

(Unaudited)

2. Investments

The amortized cost and fair value of fixed maturities securities and short-term investments are as follows (in millions):


	June 30, 2023
	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses		Fair Value
Fixed maturities available-for-sale:
U.S. government and agencies	$	20.4	$	—	$	(0.5)	$	19.9
States and other territories	10.3		—		(0.6)		9.7
Corporate securities	66.4		0.1		(2.4)		64.1
Foreign securities	0.9		—		(0.1)		0.8
Residential mortgage-backed securities	21.7		—		(1.6)		20.1
Commercial mortgage-backed securities	7.8		—		(0.7)		7.1
Asset backed securities	14.3		—		(0.4)		13.9
Total fixed maturities available-for-sale	141.8		0.1		(6.3)		135.6
Short-term investments:
U.S. government and agencies	109.5		—		(0.1)		109.4
Commercial paper	94.7		—		(0.1)		94.6
Corporate securities	24.9		—		(0.1)		24.8
Total short-term investments	229.1		—		(0.3)		228.8
Total	$	370.9	$	0.1	$	(6.6)	$	364.4


	December 31, 2022
	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses		Fair Value
Fixed maturities available-for-sale:
U.S. government and agencies	21.6		$	—	$	(0.5)	$	21.1
States and other territories	8.9		—		(0.6)		8.3

Corporate securities	54.8		0.1		(2.4)		52.5
Foreign securities	0.9		—		(0.1)		0.8
Residential mortgage-backed securities	20.4		0.1		(1.6)		18.9
Commercial mortgage-backed securities	6.5		—		(0.7)		5.8
Asset backed securities	14.2		—		(0.5)		13.7

Total fixed maturities available-for-sale	127.3		0.2		(6.4)		121.1
Short-term investments:
U.S. government and agencies	129.1		—		(0.2)		128.9
Commercial paper	147.1		—		(0.6)		146.5
Corporate securities	49.4		—		—		49.4
Total short-term investments	325.6		—		(0.8)		324.8
Total	$	452.9	$	0.2	$	(7.2)	$	445.9

HIPPO HOLDINGS INC.

Notes to Consolidated Financial Statements

(Unaudited)

The following tables present the gross unrealized losses and related fair values for the Company’s investments in available-for-sale debt securities and short-term investments, grouped by duration of time in a continuous unrealized loss position as of June 30, 2023, and December 31, 2022 (in millions):


	June 30, 2023
	Less than 12 months				12 months or more				Total
	Fair Value		Gross Unrealized Losses		Fair Value		Gross Unrealized Losses		Fair Value		Gross Unrealized Losses
Fixed maturities available-for-sale:
U.S. government and agencies	$	12.1	$	(0.2)	$	7.6	$	(0.2)	$	19.7	$	(0.5)
States and other territories	1.5		—		8.3		(0.6)		9.8		(0.6)

Corporate securities	5.5		(0.1)		58.5		(2.3)		64.0		(2.4)
Foreign securities	—		—		0.8		(0.1)		0.8		(0.1)
Residential mortgage-backed securities	—		—		20.1		(1.6)		20.1		(1.6)
Commercial mortgage-backed securities	—		—		7.0		(0.7)		7.0		(0.7)
Asset backed securities	—		—		13.9		(0.4)		13.9		(0.4)
Short-term investments:
U.S. government and agencies	27.0		(0.1)		—		—		27.0		(0.1)
Commercial paper	94.7		(0.1)		—		—		94.7		(0.1)
Corporate securities	24.9		(0.1)		—		—		24.9		(0.1)
Total	$	165.7	$	(0.6)	$	116.2	$	(5.9)	$	281.9	$	(6.6)


	December 31, 2022
	Less than 12 months				12 months or more				Total
	Fair Value		Gross Unrealized Losses		Fair Value		Gross Unrealized Losses		Fair Value		Gross Unrealized Losses
Fixed maturities available-for-sale:
U.S. government and agencies	$	17.9	$	(0.4)	$	1.1	$	(0.1)	$	19.0	$	(0.5)
States and other territories	3.6		(0.1)		4.6		(0.5)		8.2		(0.6)

Corporate securities	30.5		(1.5)		11.1		(0.9)		41.6		(2.4)
Foreign securities	—		—		0.8		(0.1)		0.8		(0.1)
Residential mortgage-backed securities	6.3		(0.3)		7.6		(1.3)		13.9		(1.6)
Commercial mortgage-backed securities	1.9		—		3.9		(0.7)		5.8		(0.7)
Asset backed securities	5.5		(0.2)		3.7		(0.3)		9.2		(0.5)
Short-term investments:
U.S. government and agencies	129.1		(0.2)		—		—		129.1		(0.2)
Commercial paper	147.1		(0.6)		—		—		147.1		(0.6)
Total	$	341.9	$	(3.3)	$	32.8	$	(3.9)	$	374.7	$	(7.2)

HIPPO HOLDINGS INC.

Notes to Consolidated Financial Statements

(Unaudited)

The Company has determined that unrealized losses as of June 30, 2023 and December 31, 2022 resulted from the interest rate environment, rather than a deterioration of the creditworthiness of the issuers. Therefore, an allowance for credit losses was not necessary as it is more likely than not that the Company will not be required to sell the investments before the recovery of the amortized cost basis or until maturity. As of June 30, 2023, none of our fixed maturity portfolio was unrated or rated below investment grade.

The amortized cost and fair value of fixed maturities securities by contractual maturity are as follows (in millions):


	June 30, 2023
	Amortized Cost		Fair Value
Due to mature:
One year or less	$	19.5	$	19.1
After one year through five years	73.9		70.9
After five years	4.6		4.4

Residential mortgage-backed securities	21.7		20.2
Commercial mortgage-backed securities	7.8		7.1
Asset backed securities	14.3		13.9

Total fixed maturities available-for-sale	$	141.8	$	135.6

Expected maturities may differ from contractual maturities because issuers may have the right to call or prepay obligations with or without call or prepayment penalties.

Net realized gains and losses on fixed maturity securities were insignificant for the three and six months ended June 30, 2023 and 2022, respectively.

The Company’s net investment income is comprised of the following (in millions):


	Three Months Ended June 30,				Six Months Ended June 30,
	2023		2022		2023		2022
Interest on cash and cash equivalents	$	1.3	$	0.2	$	2.5	$	0.2
Fixed maturities income	1.2		0.2		2.6		0.5
Short-term investment income	3.0		0.7		6.0		0.9
Total gross investment income	5.5		1.1		11.1		1.6
Investment expenses	(0.1)		—		(0.3)		(0.1)
Net investment income	$	5.4	$	1.1	$	10.8	$	1.5

Pursuant to certain regulatory requirements, the Company is required to hold assets on deposit with various state insurance departments for the benefit of policyholders. These special deposits are included in cash and cash equivalents, fixed maturities, or short-term investments on the consolidated balance sheets. The carrying value of securities on deposit with state regulatory authorities total $13.0 million and $12.6 million as of June 30, 2023 and December 31, 2022, respectively.

HIPPO HOLDINGS INC.

Notes to Consolidated Financial Statements

(Unaudited)

3. Cash, Cash Equivalents, and Restricted Cash

The following table sets forth the cash, cash equivalents, and restricted cash (in millions):


	June 30, 2023		December 31, 2022
Cash and cash equivalents:
Cash	$	79.5	$	65.7
Money market funds	91.4		87.1
Commercial paper	8.0		26.8
U.S. government and agencies	21.3		14.9
Total cash and cash equivalents	$	200.2	$	194.5

Restricted cash:
Fiduciary assets	35.2		30.6
Letters of credit and cash on deposit	3.0		19.4
Total restricted cash	38.2		50.0
Total cash, cash equivalents, and restricted cash	$	238.4	$	244.5

4. Fair Value Measurement

When determining the fair value measurements for assets and liabilities, which are required to be recorded at fair value, the Company considers the principal or most advantageous market in which the Company would transact and the market-based risk measurements or assumptions that market participants would use in pricing the asset or liability, such as risks inherent in valuation techniques, transfer restrictions, and credit risk. Fair value is estimated by applying the following hierarchy, which prioritizes the inputs used to measure fair value into three levels and bases the categorization within the hierarchy upon the lowest level of input that is available and significant to the fair value measurement:

•Level 1 — Quoted prices in active markets for identical assets or liabilities that are publicly accessible at the measurement date.

•Level 2 — Observable inputs other than quoted prices in active markets for identical assets and liabilities, quoted prices for identical or similar assets or liabilities in inactive markets, or other inputs that are observable or can be corroborated by observable market data for substantially the full term of the assets or liabilities.

•Level 3 — Inputs that are generally unobservable and typically reflect management’s estimate of assumptions that market participants would use in pricing the asset or liability.

HIPPO HOLDINGS INC.

Notes to Consolidated Financial Statements

(Unaudited)

The following table summarizes the Company’s fair value hierarchy for its financial assets and liabilities measured at fair value on a recurring basis (in millions):


	June 30, 2023
	Level 1		Level 2		Level 3		Total
Financial assets:
Cash, cash equivalents, and restricted cash	$	238.4	$	—	$	—	$	238.4
Fixed maturities available-for-sale:
U.S. government and agencies	19.9		—		—		19.9
States and other territories	—		9.7		—		9.7
Corporate securities	—		64.1		—		64.1
Foreign securities	—		0.8		—		0.8
Residential mortgage-backed securities	—		20.1		—		20.1
Commercial mortgage-backed securities	—		7.1		—		7.1
Asset backed securities	—		13.9		—		13.9
Total fixed maturities available-for-sale	19.9		115.7		—		135.6
Short-term investments
U.S. government and agencies	105.2		4.2		—		109.4
Commercial paper	—		94.6		—		94.6
Corporate securities	—		24.8		—		24.8
Total short-term investments	105.2		123.6		—		228.8
Total financial assets	$	125.1	$	239.3	$	—	$	364.4

Financial liabilities:
Contingent consideration liability	$	—	$	—	$	13.8	$	13.8
Public warrants	0.2		—		—		0.2
Private placement warrants	—		0.2		—		0.2
Total financial liabilities	$	0.2	$	0.2	$	13.8	$	14.2

HIPPO HOLDINGS INC.

Notes to Consolidated Financial Statements

(Unaudited)


	December 31, 2022
	Level 1		Level 2		Level 3		Total
Financial assets:
Cash, cash equivalents, and restricted cash	$	244.5	$	—	$	—	$	244.5
Fixed maturities available-for-sale:
U.S. government and agencies	21.1		—		—		21.1
States and other territories	—		8.3		—		8.3
Corporate securities	—		52.5		—		52.5
Foreign securities	—		0.8		—		0.8
Residential mortgage-backed securities	—		18.9		—		18.9
Commercial mortgage-backed securities	—		5.8		—		5.8
Asset backed securities	—		13.7		—		13.7
Total fixed maturities available-for-sale	21.1		100.0		—		121.1
Short-term investments
U.S. government and agencies	128.9		—		—		128.9
Commercial paper	—		146.5		—		146.5
Corporate securities	—		49.4		—		49.4
Total short-term investments	128.9		195.9		—		324.8
Total financial assets	$	394.5	$	295.9	$	—	$	690.4

Financial liabilities:

Contingent consideration liability	$	—	$	—	$	11.9	$	11.9

Public warrants	0.2		—		—		0.2
Private placement warrants	—		0.1		—		0.1
Total financial liabilities	$	0.2	$	0.1	$	11.9	$	12.2

The Company’s policy is to recognize transfers into and transfers out of fair value hierarchy levels at the end of each reporting period. There were no transfers between levels in the fair value hierarchy during the six months ended June 30, 2023.

Contingent Consideration

The contingent consideration, relating to the Company’s 2019 acquisition of North American Advantage Insurance Services, LLC, is re-valued to fair value at the end of each reporting period using the present value of future payments based on an estimate of revenue and customer renewals. North American Advantage Insurance Services, LLC’s ultimate parent company was Lennar Corporation, a related party of the Company. There is no limit to the maximum potential contingent consideration as the consideration is based on acquired customer retention. The table below presents the changes in the contingent consideration liability valued using Level 3 inputs (in millions):


	2023		2022
Balance as of January 1,	$	11.9	$	11.6
Payments of contingent consideration	(1.8)		(1.6)
Changes in fair value	3.7		2.4
Balance as of June 30,	$	13.8	$	12.4

HIPPO HOLDINGS INC.

Notes to Consolidated Financial Statements

(Unaudited)

5. Intangible Assets


		June 30, 2023						December 31, 2022
	Weighted- Average Useful Life Remaining (in years)	Gross Carrying Amount		Accumulated Amortization		Net Carrying Amount		Gross Carrying Amount		Accumulated Amortization		Net Carrying Amount
		(in millions)						(in millions)
Agency and carrier relationships	5.4	$	13.5	$	(4.3)	$	9.2	$	13.5	$	(3.4)	$	10.1
State licenses and domain name	Indefinite	10.5		—		10.5		10.5		—		10.5
Customer relationships	1.8	13.7		(9.7)		4.0		13.7		(8.5)		5.2


Other	5.9	1.7		(0.7)		1.0		1.7		(0.6)		1.1
Total intangible assets, net		$	39.4	$	(14.7)	$	24.7	$	39.4	$	(12.5)	$	26.9

Amortization expense related to intangible assets for the three months ended June 30, 2023 and 2022 was $1.1 million and $1.1 million, respectively, and for the six months ended June 30, 2023 and 2022 was $2.2 million and $3.0 million, respectively. The amortization expense is included in sales and marketing expenses for customer relationships, agency and carrier relationships, and other on the consolidated statements of operations and comprehensive loss.

6. Capitalized Internal Use Software


	June 30, 2023		December 31, 2022
	(in millions)
Capitalized internal use software	$	67.6	$	56.4
Less: accumulated amortization	(23.6)		(17.6)
Total capitalized internal use software	$	44.0	$	38.8

Amortization expense related to capitalized internal use software for the three months ended June 30, 2023 and 2022 was $3.1 million and $2.1 million, respectively, and for the six months ended June 30, 2023 and 2022 was $6.0 million and $3.9 million, respectively. The amortization expense is included in insurance related expenses on the consolidated statements of operations and comprehensive loss.

HIPPO HOLDINGS INC.

Notes to Consolidated Financial Statements

(Unaudited)

7. Other Assets


	June 30, 2023		December 31, 2022
	(in millions)

Prepaid expenses	$	15.3	$	17.4
Claims receivable	10.6		9.0
Lease right-of-use assets	15.9		27.6
Property and equipment	35.2		5.4
Other	6.1		4.2
Total other assets	$	83.1	$	63.6

On April 18, 2023, the Company closed on the purchase of an office building, which included certain real property, improvements, and personal property, located at 701 E. 5th Street, Austin, Texas 78701. The Company capitalized $30.5 million to building and land related to the purchase. The building is used as office space for employees of the Company and affiliated companies. Prior to the purchase the Company was leasing a portion of the building and had recorded a lease right-of use asset and lease liability. After the purchase the lease right-of use asset and lease liability were eliminated. The Company will depreciate the building over its estimated useful life of 39 years, except that land is not depreciated.

8. Accrued Expenses and Other Liabilities


	June 30, 2023		December 31, 2022
	(in millions)

Claim payments outstanding	$	34.9	$	27.7
Lease liability	17.2		28.9
Advances from customers	15.9		10.2
Deferred revenue	5.7		11.0
Employee related accruals	6.5		6.2
Premium refund liability	10.5		8.2
Fiduciary liability	5.2		6.6
Contingent consideration liability	13.8		11.9

Other	18.0		17.5
Total accrued expenses and other liabilities	$	127.7	$	128.2

HIPPO HOLDINGS INC.

Notes to Consolidated Financial Statements

(Unaudited)

9. Loss and Loss Adjustment Expense Reserves

The reconciliation of the beginning and ending reserve balances for losses and loss adjustment expenses (“LAE”), net of reinsurance is summarized as follows for the six months ended June 30, (in millions):


	2023		2022
Reserve for losses and LAE gross of reinsurance recoverables on unpaid losses and LAE as of beginning of the period	$	293.8	$	260.8
Less: Reinsurance recoverables on unpaid losses and LAE	(228.8)		(217.0)

Hippo Holdings Inc. [HIPO] Filings
Hippo Holdings Inc. [HIPO-WT] Filings
10-Q	[2023-08-08]
10-Q	[2023-05-09]
10-K	[2023-03-02]
10-Q	[2022-11-10]
10-Q	[2022-08-11]
10-Q	[2022-05-16]
10-K	[2022-03-14]
10-Q	[2021-11-10]
S-1	[2021-08-24]
10-Q	[2021-08-16]
10-Q	[2021-05-17]
10-K	[2021-03-08]
S-1	[2020-11-02]

Hippo Holdings Inc. [HIPO] Filings

Hippo Holdings Inc. [HIPO-WT] Filings