Earnings Call Transcript - HIPO Q4 2022

Operator, Operator

Good afternoon. Thank you for attending today's Hippo Fourth Quarter ‘22 Earnings Call. My name is Hanna and I'll 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. I would now like to pass the conference over to our host, Cliff Gallant, Investor Relations. Please go ahead.

Cliff Gallant, Investor Relations

Thank you, operator. Good afternoon, everybody. And thank you for joining Hippo's fourth 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 McCathron; and Chief Financial Officer, Stewart 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 are based on management's current expectations as of the date of this presentation. Forward-looking statements include, but are not limited to, Hippo's expectations or predictions of financial and business performance and conditions in 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 forecasts, including those set forth in Hippo's Form 8-K filed today. For more information, please refer to the risks, uncertainties and other factors discussed in Hippo's SEC filings. All cautionary statements are applicable to any forward-looking statements we make whenever they appear. You should carefully consider the risks and uncertainties and other factors discussed in Hippo's SEC filings. And 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 third quarter 2022 shareholder letter, which has been furnished to the SEC and is available on our website. And with that, I'll turn the call over to Rick McCathron, our President and CEO.

Rick McCathron, CEO

Good afternoon, everyone. Hippo was founded in 2015 with a bold vision to fundamentally improve the homeowners insurance experience by partnering with customers, helping them better maintain and protect their homes. It takes a long time to build a profitable insurance company. Building a recognized consumer brand, developing best-in-class underwriting and bringing enough customers together while managing the volatility of the policy portfolio, none of this happens overnight. The 10 largest homeowners insurance carriers in the US on average are over 100 years old, and they firmly have the advantages of time on their side. We believe the incumbent players have become complacent. Rapid technological change and the explosion of data and analytics capabilities over the past decade has not only made it possible for a company like Hippo to exist, but also to build a superior customer experience and a national footprint far faster than any legacy carrier could have imagined. Consumers have come to expect high standards of service and Hippo is well positioned to deliver. With Hippo's foundation firmly in place, 2022 was a year of rapid progress, advancing other aspects of our company. Success in this endeavor comes down to two simple facts. First, make the experience of being a Hippo customer the best around, so our customers will partner with us over the long term. When unfortunate things happen, we think modern protection is the best protection; innovations in loss prevention and claims handling can put Hippo at the forefront of customer care. Second, make the rest of our company as strong as our foundation. By using our technology to rapidly improve our ability to deliver on the fundamentals of insurance, we are now marching towards profitability ahead of schedule and creating a financial future that is built to last. Here are some of the highlights of what we've developed for our customers and partners as we look back on the last 12 months. We launched our Book a Pro pilot in Texas, which enables Hippo customers to use the Hippo app and order home repair services through a curated network of providers. We're ramping up cross-selling of non-Hippo products, both home and auto, as a third-party agency, allowing our customers to satisfy all of their insurance needs with Hippo. We've added new builders to our builder network and we recently launched Hippo Builder Insurance Agency for small regional builders, making Hippo's new builder policy and experience available to a much larger group of prospective homeowners. We've also met and exceeded our KPI targets for the year, including 62 percentage points of gross loss ratio improvement in 2022 versus the full year of 2021; improved our targeted marketing, where over 75% of new customers fall within our Generation Better target market; added geographic diversification, we’re now in 40 states covering over 90% of the population; we’ve improved our claims experience through the use of aerial imagery to rapidly assess damage after catastrophes. We had TGP growth of 33% in 2021 to over 2022. We successfully placed our 2023 reinsurance program with improved terms and conditions. And finally, we’re getting ahead of costs, as Q4 saw a flattening of fixed operating expenses. We have a lot going on at Hippo, but as we look out for 2023, there are a few key areas of focus for our company. First, we want to make sure that all of our customers have a superior Hippo experience, whether they buy a Hippo home insurance policy or one of our third-party offerings through our agency. Second, our Hippo home insurance net loss ratio, which has already shown much progress, will show much more as the actions that we've already taken work their way into the results. Third, we are investing in Hippo homecare business, which we believe will become a key differentiator of our customer experience in the years to come. As I begin my first full calendar year as Hippo’s CEO, I could not be more excited about our vision and the execution we achieved in 2022 turning that vision into reality. The most exciting part is that for both our customers and our shareholders the best is yet to come. Thank you for your support and for joining us on this journey. I will now turn it over to Stewart to share a few more details on our financial performance.

Stewart Ellis, CFO

Thank you, Rick. In the fourth quarter, Hippo took another step forward along our path to profitability with an adjusted EBITDA loss of $47.3 million, improving upon our Q3 2022 results. Our growth rates remain strong and we're beginning to achieve the positive operating leverage that will drive our long-term profitable growth. TGP growth accelerated in Q4, rising to an increase of 44% over the prior year quarter to $234 million, bringing our full year 2022 TGP to $811 million in line with our original 2022 guidance. Demand for our products and services remained strong and customer retention has continued to improve with blended premium retention across both Hippo policies and agency customers coming in at 92% in the quarter, up from 90% in Q3 and 89% in Q2. We saw growth throughout our 40 states as we began to build a presence in the northeast and mid-Atlantic. We've recently been more cautious about growth in our historically largest markets, but in the quarter, we saw higher growth in Texas as our footprint in the state becomes more balanced. In our services business lines, where economics are predominantly fees and commission income, TGP was driven by strong fiscal year-end home sales in our thriving builders business, which is seasonally typical for Q4. We’ve recently announced the launch of Hippo Builder Insurance Agency designed for smaller regional home builders. We're taking the embedded product of our fastest growing most profitable distribution channel and expanding it to include small builders nationwide. Our technology allows us to begin quoting a new partner's lead in as little as two weeks without the builder needing to invest significant resources. With builders outside of the top 10, responsible for over half of homes built in the US, we see this as a material long-term opportunity. Another part of our services business to keep an eye on is First Connect insurance services, our rapidly growing digital platform designed to support independent agents by providing access to the nation's top carriers across numerous lines of business. This agent-centric platform provides access to over 60 carriers and a variety of products that include home, auto, cyber, small business, life, specialty lines and more. The recently launched carrier store helps agents discover additional carriers and products that can be bundled to increase sales. In Q4, Berkshire Hathaway's biBERK was added to the carrier store's roster of insurance providers. Spinnaker’s program business added $84 million of non-Hippo TGP in the fourth quarter, up from $38 million in the prior year quarter. At Spinnaker, we provide other managing general agents access to our balance sheets and insurance licenses in exchange for fronting fees and often a small percentage of the underwriting results on the premium that they produce. In 2022, we brought several new programs online, offsetting lower volume from programs that we put into run-off earlier in the year, which boosted our TGP. In the Hippo home insurance program where our economics are driven by underwriting performance, TGP growth was in the mid-teens. Over the course of 2022, we've executed significant re-underwriting actions, including new pricing matrices and claims handling improvements. In what continues to be a challenging economic environment with higher and more volatile inflation rates, we continued to be proactive about repricing and re-underwriting actions, which are expected to drive significant growth and net loss ratio improvement over the course of 2023. Our revenue in the quarter was $35.8 million, up 11% over the prior year quarter bringing full year results to $119.7 million in line with our guidance. Looking ahead, we expect very strong 2023 revenue growth, above 40% as our new reinsurance treaty will lead to retention of higher net premiums earned. Our Q4 gross loss ratio of 42% was the best in our company's history since going public. Favorable reserve releases from prior accident years benefited the gross loss ratio by 10 points. We're also reporting 2 points of benefits from PCS defined CAT losses in the quarter because Q4’s CAT losses at 13 points, which were largely due to winter storm Elliott, were more than offset by current year favorable development from our initial loss pick from Q3’s Hurricane Ian, which happened in the final days of Q3. For the full year, our gross loss ratio improved 62 percentage points year-over-year to 76% from 138% in 2021, and we expect ongoing underlying improvement in 2023. We've taken many actions to drive better loss ratio results, including repricing, re-underwriting, more focused marketing on our targeted Generation Better customers, growth of our builder channel, increased geographic balance and improving our claims processes. As we continue to grow our TGP and revenue, we're also beginning to achieve positive operating leverage as our expense line items flatten or decline year-over-year. We're expecting this improvement to accelerate over the next 18 to 24 months. Our sales and marketing costs were $28.1 million in the quarter up from $25.5 million in the prior year. But outside of increased stock-based compensation, our marketing spend has declined. Looking ahead, our marketing will be more focused on our targeted demographic and desired geographies, while also reaping the benefits of our embedded partnership and the word of mouth rewards from strong customer service. Our technology and development costs were $11.5 million, down from $14.8 million, reflecting the rightsizing decisions we made in Q3. We're committed to focus investments in our technology platforms, which we view as a key differentiator, and we continue to invest aggressively in our development team in Warsaw, Poland. Our G&A expenses were $17.8 million, down from $19 million in the prior year quarter and we are beginning to see the bottom line impact of our increased emphasis on cost control. Unrestricted cash and investments at December 31, 2022 were $640 million. While we remain highly conservative in our asset allocation, we're beginning to see the benefits of our shift into short-duration highly rated securities. Investment income contributed $5 million in the quarter, up from less than $1 million in the prior year quarter and $2.5 million in Q3 of 2022. At year end, Spinnaker’s policyholder surplus was $165 million, up from $132 million at the end of Q3, driven largely by a $30 million contribution from Hippo Holdings to support future growth. Net loss attributable to Hippo during the quarter was $63.1 million or $2.74 per share compared to a loss of $60.7 million or $2.72 per share in the prior year quarter. On an adjusted EBITDA basis, our net loss was $47.3 million versus $46 million in the prior year quarter. As we turn our attention to the future, I would like to summarize our high-level guidance for full year 2023. We expect consolidated TGP to grow to nearly $1 billion, we expect our revenue will grow by over 40% and we expect our adjusted EBITDA loss will be $147 million. We also reiterate our expectations that we will be adjusted EBITDA positive by year-end 2024. I'll close by pointing out that we've posted a supplemental analyst package on our website, which has more detailed information and our outlook for the individual business lines that we’ll be reporting under in 2023. I think you'll find that additional detail helpful in understanding Hippo's business trajectory. With that, I'd like to thank you for your time today and to open the line for questions.

Operator, Operator

The first question is from Matt Carletti with JMP.

Matt Carletti, Analyst

I was hoping you could comment on the new reinsurance program that you put announcement out you put in place to start the year. Just one is, is it done or do you look to put some more pieces to it in place across the year? I know it's a dynamic reinsurance environment. And then two just being go through what we should expect in terms of the financial impacts. If I'm understanding it correct, it feels like the net loss ratio should start to come down to approach the gross loss ratio as it earns its way in. Maybe I'm misunderstanding that. But is that accurate?

Rick McCathron, CEO

I'll go ahead and start with the beginning part and then Stewart can jump in with some more specifics. First of all, though, I do want to introduce to the group, Chris Donohue. Chris is our Chief Underwriting Officer. He's been with us now for nearly two years. And Chris and his team have been instrumental in the significant loss ratio improvement and the geographical diversification that we've achieved in such a short time period. Because of these improvements, we did see very strong support from the reinsurance markets. In fact, we had nine participants on the program this treaty. And keep in mind, when reinsurers are evaluating the participation, they do a tremendous amount of forward-looking calculations, taking all the actions that we've already put into place and bringing everything to current rate level. And I think that's where you saw the bullish nature that they had on our program. I am pleased that we actually achieved improved terms and conditions during a very difficult reinsurance market. And because of all of these things, because of the improvement, we're structurally shifting to an environment where we are going to retain more risk in areas that we can control, sort of the day-to-day attritional losses. Yet, we're still very much protecting the balance sheet for items that are outside of our control, such as the weather. So that's kind of the structural components. Stewart, do you want to jump in?

Stewart Ellis, CFO

Matt, I’d like to provide some insights regarding the financial impact of the treaty in 2023. As Rick mentioned, we are making a structural shift, and the treaty in 2023 will align the premium we retain more closely with the losses we retain. Our 2022 treaty included loss participation features that allowed us to retain about 30% of the non-severe weather exposure while only retaining approximately 12% of the associated premium. In 2023, these figures will be much more aligned, with our underlying exposure in the non-severe weather category rising to around 42%, and the premium we retain increasing to up to 39%. This represents a significant increase in the retained premium compared to the underlying exposure. As we transition our policy portfolio from the 2022 treaty to the 2023 treaty, we will start to see these economics reflected in our financials with each policy renewal. In the first quarter, most of the economic effects will still stem from the 2022 treaty, leading to a higher underlying net loss ratio due to the mismatch between loss and premium retention. However, by the fourth quarter of 2023, we anticipate these figures will be much closer together. I expect the ratio to be over 200% in the first quarter, but by the end of 2023, it should drop below 100%, aligning more closely with the gross loss ratio.

Operator, Operator

The next question is from the line of Tommy McJoynt with KBW.

Tommy McJoynt, Analyst

So I do appreciate some of the increased disclosure at the segment level. If you could sum it up, just what is the mix, I guess, of business either on revenue or earnings that is not subject to this loss ratio volatility? And if you could sort of describe that in terms of either 2022 or 2023, and then just thinking about longer term, how you see that mix shifting?

Stewart Ellis, CFO

I will begin by providing some context regarding our business perspective. We see the Hippo customer experience as distinct in the market and believe it extends beyond just those covered by Hippo policy. It also includes individuals who purchase a policy from a third-party carrier through Hippo as an agent. I appreciate the mention of the supplemental package where we discuss our guidance for 2023, all of which is detailed in that package, so I encourage everyone to review it. Our business can be classified into three main categories based on the business model. The first category is recurring fee-based revenue with no underwriting exposure, which we refer to as services, accounting for about 40% of our expected total generated premium for 2023. The second category consists of business that primarily generates fee-based revenue with limited underwriting exposure, which pertains to our Spinnaker program where we assist other MGAs by renting our balance sheet for fees, making up about 30% of our expected total generated premium for 2023. Lastly, we have the Hippo home insurance program, where the economic outcomes, as we've observed, are mainly driven by underwriting results, projected to constitute around 30% of our total generated premium for 2023.

Rick McCathron, CEO

Tommy, if I could add one more thing. I actually think this helps the procurement of Generation Better customers. When we actually have options that don't necessarily fit our underwriting appetite or the way we think of customers who truly want a partner to help them protect all aspects of their home, we still have the ability to meet their needs and place them with one of our partner carriers that might very well have a different underwriting appetite and a different business model. Now those customers over time we still can provide Hippo home services to, and Hippo home care. So it really does create an environment where the Hippo experience is a combination of Hippo home place policies, third-party policies including cross-sell and the ability to generate more customers that would participate in Hippo home care.

Tommy McJoynt, Analyst

And Stewart, if you could just clarify. So those figures on a TGP basis, as you think about just kind of the earnings, I guess, contribution mix of those, do those ratios or percentages hold generally true?

Stewart Ellis, CFO

As we look at 2023, I believe the answer to that question differs this year compared to the long-term perspective. Currently, Hippo is not profitable, primarily due to our ongoing efforts to improve the loss ratio, as we have mentioned in previous calls. We are making significant progress on the initiatives necessary to enhance the loss rate, particularly regarding the rate plans, and we are confident that we are moving in the right direction. In 2023, we anticipate that the services business will incur losses, which is acceptable from an economic perspective, as the core business is profitable. Most of the losses will stem from expenses associated with growth. We also expect the insurance as a service program to be profitable in 2023, while the majority of losses for the overall Hippo consolidated business will be attributed to the Hippo insurance program. However, we are confident that these losses will decrease over time as the loss ratio improves. There is additional detail in the supplemental package we released today regarding the guidance. Today, however, is not reflective of what I expect the long-term contributions to be, as I believe that in the long run, each of these businesses will be profitable.

Operator, Operator

The next question is from the line of Yaron Kinar with Jefferies.

Unidentified Analyst, Analyst

This is Andrew on for Yaron. Can you help us think about how the company views its rate adequacy and pricing needs for '23?

Rick McCathron, CEO

Andrew, I think this is a great question for Chris to take. So Chris, do you want to answer that for Andrew?

Chris Donahue, Chief Underwriting Officer

The rate plan that we've set forth in 2022 and 2023 is our organization's top priority. We're continuing to improve the overall rate level but also improve our ability to align our rate to risk so we can price risks appropriately in the marketplace. The majority of the efforts that we need to achieve our goal of the 65 loss ratio ultimately have been put in place and are underway. In 2022, we already achieved about a 20% written rate increase. We made 64 filings in 28 states. The benefit of those rate increases started to earn in and will continue to impact 2022, 2023 and 2024 going forward. In 2023, we’ll take increases in the high teens. So we'll do pretty much the same thing that we accomplished in 2022 and we'll make 73 filings in 31 states. We've already taken significant ground in executing that strategy with 85% of the filings necessary to achieve that having already been submitted to departments of insurance. And these filings will also significantly impact 2023 but we'll continue to see the compounded effect of the last two years of rate earning through 2024 and see that impact significantly on the loss ratio and the loss results that we see going forward.

Rick McCathron, CEO

I think this explanation is very much aligned with my opening comments related to reinsurance and the bullish nature that the reinsurers have, because the reinsurers forecast all of these actions already taken, take everything up to current rate level, take both exposure and rate changes into account and identify what both our medium and long-term loss ratio is going to be. So we're really pleased at the activity that the underwriting and actuarial team have already done for 2023.

Unidentified Analyst, Analyst

And as we think about ongoing underlying improvement here. Is the correct comp the 66% in '22, relative to the 67% in '21? So just given the rate actions over the last year and perhaps into '23 as well, should we think about the pace of that improvement accelerating?

Rick McCathron, CEO

Yes, as these rate actions continue to integrate into the portfolio, the measures we've implemented generally have a significant positive impact on the underlying loss ratio. This gives us strong confidence in achieving our goal of cash flow positivity by the end of 2024. We are on track and feel very optimistic about what we shared during our Investor Day regarding reaching that goal.

Stewart Ellis, CFO

I would like to provide some additional insight into your question. What you're noticing in the results, despite all the rate actions, is that the non-PCS core loss ratio has only slightly decreased. It may not be immediately apparent to those not immersed in the business daily, but we have been reducing our overall exposure to catastrophic risk through geographic diversification. Homes in states with low CAT risk primarily see premiums associated with attritional loss. In contrast, homes located in high CAT risk areas have a significant portion of their premiums allocated for CAT risk. Therefore, as we decrease the overall CAT exposure in our portfolio, one might expect the non-PCS core loss ratio to rise due to a larger portion of premiums going towards attritional losses. The fact that it is declining is due to our rate plan and the improvements in underwriting we have implemented over the past year.

Rick McCathron, CEO

And the last thing that I would say on this topic is really understanding the way we categorize the category of losses. So we have two categories. We have PCS claims and all others. The all others are a combination of attritional and non-PCS weather, so there's still whether in that 62% or 67%, whichever particular number you want to refer to, but it's non-PCS weather, if that's helpful.

Stewart Ellis, CFO

You can also look at the core loss ratio; just look at Q4, the core non-PCS loss ratio was 54%. So the 66% is an average over the course of the year, but we are seeing a positive trend progressively throughout the year.

Operator, Operator

The next question comes from the line of Alex Scott with Goldman Sachs.

Alex Scott, Analyst

First thing I have for you guys is just on the updated reinsurance program. Could you help us think through the loss participation that’s still remaining? I saw in the slides that looks like it's only modestly higher than the premium you're retaining in a base case, so that's good. What kind of variability could we have around that, like how much loss participation do you still have, how does it compare to what you did have? Any way to help frame all that for us.

Stewart Ellis, CFO

I'll start and then if Rick wants to add, I'm happy to ask him to supplement this. The loss participation features in the 2023 treaty, they're still there but we're being paid for taking some of that risk ourselves. So that's what we said earlier about the higher retained premium. In general, the corridors we have are narrower than in the 2022 trading. So there's less variability from the corridors, and they attach at rates that are more favorable to Hippo than they did in 2022. So at our expected loss ratio, I'm expecting them to be a much smaller percentage of our overall economics in 2023 than they were in 2022.

Alex Scott, Analyst

Could you elaborate on the comment regarding there being no changes to required capital? I'm looking at the situation and noticing that you're retaining significantly more, nearly four times the amount you did previously. I understand you've implemented more tail risk, but could you clarify this further for us? It seems almost too good to believe that you're receiving such a higher premium without needing more capital.

Stewart Ellis, CFO

So I think there's two things going on there. The actual underlying risk retained is not four times what it was because of the loss participation features in the 2022 treaty, so the risk retention is modestly higher but not four times higher even though the retained premium is closer to four times higher. So this is an economic shift in the way we're thinking about the treaty, but also I think that reflects candidly the substantial improvement in expected loss ratio in 2023 relative to 2022. The other…

Rick McCathron, CEO

There's one other thing too, Alex, to keep in mind: as we continue to geographically diversify, the exposure from catastrophes has actually come down. And when you calculate all of the PMLs versus the exposure, we actually look like we have less exposure to weather in particular states or other large events like fire. So the diversification on the geographical exposure has also helped the total exposure to the company.

Stewart Ellis, CFO

And then the one final point I wanted to make was, in 2022, we were such heavy buyers of reinsurance. And as we looked at the AM Best BCAR score and we're navigating the maintenance of our AM Best A minus rating, the calculation was actually penalizing us with a credit risk penalty on the reinsurance that we were buying. And so as we actually increased our participation and bought less quota share reinsurance, we actually get capital relief from AM Best in the BCAR model. And so we were paying a heavy penalty in that framework, because we were such a heavy utilizer of reinsurance. Now we've sort of found the sweet spot where we're matching up the benefit we get from quota share reinsurance and the exposure that we're taking. So we can go into more detail on that if you have further questions. But it's a function of both exposure and the way we're hitting off the risk.

Alex Scott, Analyst

And then maybe one more quick one from me a little bit out of left field. How would you think about earthquake exposure, just giving you a little more concentrated in California, seems like earthquake activity is often bad just in general globally. So I'm just trying to think through, I get that your policies cover it, but they may cover like the secondary fires that it causes. Any way for us to think through like how your reinsurance program would help out with that kind of a risk?

Rick McCathron, CEO

I think, I mean, clearly, you're 100% right. Quake is not covered but fire following is. And fire following would be subject to any type of other exposure we have in the portfolio. So we don't think it's a significant exposure for us. Chris, anything you want to add?

Chris Donahue, Chief Underwriting Officer

No, it is covered within the reinsurance programs but it's definitely not a peak driver peril of risk for us, and we feel it's managed within our portfolio.

Operator, Operator

Our last question is from the line of Pablo Singzon with JP Morgan.

Pablo Singzon, Analyst

The first one I had was just on the opportunity in the home builders market. Can you give a sense of the market concentration there below the top 10? I think you referenced that's half of the market, but is the top 11 to 20 a good chunk of the 50%, or is it more or less evenly distributed? And then as a follow-on to that, could you sort of describe your sales organization, how are you thinking about offering your services to 50% of the market there?

Rick McCathron, CEO

It’s important to consider that there has been discussion about the impact of declining housing starts on our growth in that sector. Regardless of whether we're discussing the top 10 builders or those ranked 11 to 20, or what we refer to as long tail builders, Hippo remains a small player compared to the overall market. We still see ourselves in the early stages of optimizing our sales approach with these builders. Even during tough years, there are over a million housing starts, and we capture only a small fraction of that. Most homes are constructed by long tail builders, not the top 10, which presents us a significant growth opportunity in this segment over time. Our sales strategy towards home builders is primarily not a business-to-consumer approach; instead, it focuses on building partnerships with builders. They find that our technology allows for rapid, real-time quotes for homes even before they are built, which is a considerable advantage in the builder channel. Traditional agencies struggle with insuring homes that are not yet constructed because of the difficulty in providing an address, such as identifying lot numbers. We have access to data files for each model from the builders we collaborate with, allowing transactions to close more swiftly. Ultimately, our goal is to enable the consumer to move into their new home, while helping the builder to finalize the deal, which we facilitate effectively.

Pablo Singzon, Analyst

My second question is about the First Connect business. Can you provide some context regarding when it was established? How do you feel it compares to the independent HD platform and other alternatives like clusters and aggregators? Additionally, could you explain the revenue model and how you charge for the services provided? Overall, how do you view this as an alternative compared to what is available for independent agents?

Rick McCathron, CEO

So first of all, First Connect was an acquisition that we made a few years ago. So it wasn't something that we started from scratch. Now what we have done since our acquisition of First Connect is we've invested Hippo technology into the infrastructure that First Connect had. So Hippo has built tools for independent agents and our internal salespeople to really accelerate the quote to bind process. And we felt it was appropriate to offer these same types of tools, not just for Hippo policies but for non-Hippo policies to the network of independent insurance agents that utilize the First Connect platform. So it's not just a traditional aggregator; it's an aggregator with significant technology that helps agents streamline the quote to bind flow, and we monetize that through a commission split and other fees that we generate from other services that we're providing. So we think it's an important platform and it utilizes the technology that we already have.

Operator, Operator

There are no additional questions waiting at this time, so I will turn the call over to Rick McCathron, CEO, for closing remarks.

Rick McCathron, CEO

Thank you. I'm very excited and grateful for all of you of joining today. This was a fabulous quarter for Hippo and a fabulous year. We've made tremendous progress in a very short time frame. And we have strong conviction, more conviction than we've ever had, that the metrics of the company are driving us towards cash flow positivity while continuing to grow the business. So we're excited to be presenting at the next quarter and look forward to sharing the news. Thank you, everybody.

Operator, Operator

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