Hippo : Fourth Quarter 2023 Shareholder Letter

Q4 2023

LETTER TO

SHAREHOLDERS

KEY HIGHLIGHTS FROM Q4

Favorable Mix-Shift Driving Top-line Growth

• Insurance-as-a-Service(IaaS) and Services driving TGP growth, up 39% and 20% YoY, respectively in Q4
• Consolidated TGP up 15% YoY, with IaaS and Services now representing 77% of Total TGP
• Revenue up 80% YoY to $64 million

Continued HHIP Loss Ratio Improvement

Total Generated Premium in-Force

+40%

YoY

		$1,140M
	$813M
$602M
Q4 '21	Q4 '22	Q4'23

• Hippo Homeowners Insurance Program (HHIP) Q4 Accident Period loss ratio improved 24 percentage points from a year ago to 64%
• Hippo Homeowners Insurance Program (HHIP) Q4 Accident Period Non-PCS loss ratio improved 11 percentage points from a year ago to 59%

Generating Substantial Operating

Leverage

• GAAP Operating expenses, excluding loss and loss adjustment and insurance related expense, declined from 158% of revenue a year ago to 75% in Q4

Net Loss and Adjusted EBITDA continuing to improve

• Q4 GAAP net loss attributable to Hippo of $42 million down 33% from Q4 2022
• Q4 Adjusted EBITDA loss of $22 million down 53% from Q4 2022

Financial Strength

• Year-endCash and investments of $491 million
• Year-endSpinnaker surplus of $191 million, up from $165m a year ago

Letter to Shareholders | Q4 2023

Revenue			$64M
+80%	$32M	$36M
YoY
	Q4 '21	Q4 '22	Q4'23

HHIP Accident
Period Loss		88%
Ratio1	78%
-24pp			64%
YoY
	Q4 '21	Q4 '22	Q4'23

Adjusted	Q4 '21	Q4 '22	Q4'23
EBITDA
(Loss)
-53%			-$22M
YoY
	-$46M	-$47M

1. Defined as a percentage, which is the ratio of loss and loss adjustment expenses incurred and attributed to an accident period to the gross earned premium.

2

Q4'23:

TURNING THE CORNER

Dear Shareholders,

The beginning of a new year presents an opportunity to reflect on the past and internalize its lessons before moving forward with renewed enthusiasm and focus.

In two short years, we have nearly doubled our total generated premium from $606 million to $1.1 billion and more than doubled our revenue from $91 million to $210 million, all while lowering fixed expenses from $140 million to $138 million and improving the gross loss ratio on our Hippo Home Insurance Program by approximately 40 percentage points.

We learned that our customers want the ability to buy not just Hippo home insurance policies from us, but other kinds of policies from third-party carriers as well. We have taken this to heart and re-focused our consumer agency on finding the best policy for each customer, regardless of the carrier. We believe that for our target Generation Better customers, especially those who are buying a newly built home, a Hippo homeowners' policy will be the best option. But if a customer is a better fit with another carrier, we will work to find the best option from across our 50+ carrier partners.

Generation Better

Our "Generation Better" target customers have a desire to proactively maintain their homes and a willingness to use technology to do so.

We learned that there is a real need in the market for carrier services focused on serving MGAs, where much of the innovation in the insurance market is happening. Our Spinnaker Insurance-as-a-Service ("IaaS") business has an industry-leading platform and robust underwriting processes that have allowed us to grow at an accelerating rate in 2023 while avoiding many of the pitfalls experienced by our competitors last year. We are especially excited to have achieved this growth while expanding our operating margin in this already- profitable portion of our business; truly a win-win for both Spinnaker and its customers.

Letter to Shareholders | Q4 2023

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And finally, we also learned that there are some risks, and some geographies, to which we would prefer less exposure as we seek to improve the predictability and profitability of our Hippo Home Insurance Program. In the second half of 2023, we launched an aggressive program to raise deductibles for wind and hail in certain geographies and began non-renewing policies in higher-cat areas where we had excess concentration.

These actions are intended to reduce exposure to the kinds of losses we experienced in the second quarter of 2023. A quick thought-experiment illustrates how those decisions are paying off: if we experience the exact same hailstorms this coming year, with the same level of severity, the program of deductible changes and selective non-renewals in CAT concentrated areas that is currently in progress would reduce Hippo's direct losses by approximately 55%. Moreover, because the changes that began last October take a full year to work their way through policy renewal dates, the benefits in 2025 would be even greater: an almost 80% reduction in direct losses if the hailstorms from second quarter of 2023 were to reoccur.

These initiatives, when combined with the actions we took in the second half of 2023 to streamline our operations and reduce our fixed expenses, give us greater confidence that we are on track to achieve our profitability goals ahead of schedule, with a mix that is shifting toward businesses with lower volatility and higher predictability.

As we enter 2024, we believe we are incredibly well-positioned to compete for business in our core markets and in our core customer segments. It is time for Hippo to go back on offense.

Sincerely,

Richard McCathron President &

CEO

Letter to Shareholders | Q4 2023

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Q4'23

AND FY23 RESULTS

Q4'23 and FY23 Highlights

Q4'23 AND FY23 FINACIALS:

KPIS, SEGMENT INFORMATION, AND NON-GAAP FINANCIALS

2023 was a remarkable year of change for Hippo. We doubled down on meeting the needs of our customers, streamlined our operations, focused on segments of the market where we have a significant competitive advantage, and simplified our reinsurance structure.

We exit the year as a business transformed by these efforts: increasingly predictable, and with far clearer visibility into both how and when we will achieve profitability.

1. Defined as a percentage, which is the ratio of non-PCS loss and loss adjustment expenses incurred and attributed to an accident period to the gross earned premium.

Letter to Shareholders | Q4 2023

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Total Generated Premium ("TGP")

During 2023, we grew TGP from $811 million to more than $1.1 billion, an increase of 40%. More important than the growth itself, was how we achieved it: the parts of our business that are less exposed to underlying weather and underwriting volatility grew at an accelerating rate, while we significantly reduced our exposure to weather in our primary homeowners' insurance program. During Q4, the most profitable and predictable components of our business (IaaS and Services) collectively represented 77% of our TGP, up from 59% in the fourth quarter of 2021. In these businesses, we act as agency for third-party carriers and front for MGAs and take significantly less risk than in our Hippo Home Insurance Program segment.

We expect these trends to continue in the coming year, with TGP growing during 2024 to more than $1.3 billion, with the Services and IaaS segments collectively representing ~85% of total TGP by the final quarter of the year.

		HHIP			Services		Insurance-as-a-Service
2021-2024 Total Generated		Q4'21-Q4'24F Total Generated
Premium1 by segment, $m		Premium by segment, % of Total
1,300 - 1,370

	1,134		250-
				260
	811	361
			530-
606	550
366

460

330

358

	15%
	23%
41%	35%
+22%
	43%
	39%
	36%
41%

288

630-

41%

514 670

279

157

2021 2022 2023 2024F

	29%	38%
18%
Q4'21	Q4'22	Q4'23	Q4'24F

1. Total TGP is lower than sum of all segments, due to intercompany eliminations

Letter to Shareholders | Q4 2023

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Revenue

During the year, we grew Revenue significantly faster than TGP, from $120 million to $210 million, an increase of 75%. This growth was a result of increases in the scale of our Services and Insurance-as-a-Service segments, combined with structural changes to our program-specific reinsurance structure at HHIP.

In 2022, we retained only 12% of the premium associated with our homeowners' policies, but 30% of the risk. In 2023, we were able to retain 39% of the premium, but only 46% of the risk, significantly narrowing the gap between risk retention and premium retention, thereby getting paid more fully for the risk we retained. By moving away from our past reinsurance structure and bringing premium more in-line with the risk we are retaining, we were able to monetize the insurance risk more effectively, which is a key driver of both revenue growth and profitability.

2022-2023 Revenue1 by
segment, $m
	+75%
		210
		44
	120
		71
Services	37
Insurance-as-a-	37
Service
		102
HHIP	64
	2022	2023

HHIP Proportional Premium and Risk

retention, % of Gross Written Premium

Risk Retention

Premium Retention

	46%
	39%
30%
12%
2022	2023

1. Total TGP is lower than sum of all segments, due to intercompany eliminations

Letter to Shareholders | Q4 2023

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We expect 2024 revenue to continue to grow at an accelerated rate relative to TGP, rising more than 60%, from $210 million in 2023 to more than $340 million in 2024. Importantly, we expect to be able to achieve this while lowering our underlying volatility and exposure to the weather that has contributed to our historical losses, as measured by an almost 60% reduction we expect to achieve in our underlying severe weather exposure.

2023-2024 Revenue by	HHIP - 1:250 Gross Occurrence and
segment, $m	Aggregate Exceedance Probability

		340-360
		50-
		55
		95-
	210	105
Services	44
Insurance-as-a-	71
Service		215-
		225
HHIP	102
	2023	2024F

1. Based on in-force as of 6/30/23
2. Based on pro-forma as of 9/30/24

Occurrence Exceedance
Probability
Aggregate Exceedance
Probability
-57%
-54%
2023¹	2024F²

Because of our consistent, historical track record of attritional loss ratio improvement, combined with the expected reduction in underlying volatility and exposure to the weather, we felt comfortable transitioning to a more traditional excess of loss (XoL) reinsurance structure, retaining nearly all the attritional risk and related premium, and purchasing XoL reinsurance to protect against major catastrophic weather events.

This transition to XoL reinsurance will better align our net earned premium with risk retention and will also allow us to further narrow the gap between gross and net loss ratio.

Letter to Shareholders | Q4 2023

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Loss and Loss Adjustment Expense

Loss and Loss Adjustment expenses during 2023 were significantly higher than our expectations because of outsized weather losses in the second quarter. The wind and hail losses during that time masked the significant and continued improvement in our non-PCS loss ratio over the course of the year, with 2023 non-PCS loss ratio improving 13 percentage points to 63% in 2023 vs. 76% in 2022.

Q1'22-04'23 HHIP Accident Period Loss Ratio by peril, % of Total

	40%	50%	97%	88%			95%
PCS		20%
			39%
					28%	64%
								5%
Non-PCS	77%		77%	70%	64%	60%	67%	59%
	Q1'22	Q2'22	Q3'22	Q4'22	Q1'23	Q2'23	Q3'23	Q4'23

As we've discussed in previous shareholder letters, we responded to the excess weather losses during the year with aggressive actions to raise deductibles in wind and hail exposed geographies and selective policy non-renewals in cat-exposed geographies more generally.

The combined effects of rate and underwriting actions taken in 2022 and 2023, which resulted in 28% written rate increase in the fourth quarter of 2023, and the actions taken to structurally reduce our exposure to cat-related volatility mean that the expected loss ratio of the business we wrote in Q4 was far better than at the end of 2022.

Letter to Shareholders | Q4 2023

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In 2024, we expect to realize additional benefit to our gross loss ratio as previous rate and underwriting actions earn into our financials, as well as significantly lower losses from Cat events due to reduced exposure and higher deductibles. In 2024, we are targeting HHIP gross non-PCS loss ratio to be between 52% and 58%, with an expected PCS Cat load of 20%.

In 2024, we expect HHIP net loss ratio to be 85-90%, down more than 160 percentage points from 2023 due to the improvements in gross loss ratio and more effective use of reinsurance. Similarly to the trend we experienced in 2023, we expect the net loss ratio improvement to happen gradually over the year, with Q4'24 expected net loss ratio under 75%. We expect additional improvements in 2025, when we expect net loss ratio to be less than 75% for the full year.

HHIP Accident Period

HHIP Net Loss Ratio, %

Loss Ratio by peril, %

	-27PP
	107%
	103%
`	31%
PCS
	72-78%
	20%

		76%
Non-PCS		63%		52-
					58%

2022 2023 2024F

428%
	-169PP
	256%
		85-90%
2022	2023	2024F

1. 2023 Expected CAT Load, per our previous guidance, was 28%

Letter to Shareholders | Q4 2023

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