Hipo ticker
On the recent earnings call, Ellis said that’s not happening yet. The industry is struggling to get its arms around these big weather-related claims.”Īnother key question for Hippo is whether its costs of acquiring customers will start to rise as the business continues to grow quickly and mature. “Companies trying to get into the business are coming in at a bit of a tough time. “Insurance is a much harder business than it seems from the outside,” says Paul Newsome, a senior research analyst at Piper Sandler who has been covering insurance for over 25 years. Allstate, the second-largest home insurer in America, which has had decades to refine its underwriting, had a loss ratio of 71% in the second quarter. He adds that severe weather in Texas, including Winter Storm Uri and hailstorms, drove big chunks of the losses, because Hippo has a high concentration of its customers in the state. Menu icon A vertical stack of three evenly spaced horizontal lines. “We have high confidence that we’ll be able to bring the loss ratio into line with the industry,” Ellis says. HIPO: Get the latest Hippo Holdings stock price and detailed information including HIPO news, historical charts and realtime prices. In the six weeks after the mid-August earnings call, Hippo’s stock fell from $5.49 to $3.99.
A loss ratio needs to be well below 100% for a company to reach profitability. In August, it announced in its second-quarter earnings call that its loss ratio-the insurance metric that divides a company’s costs for paying and managing insurance claims by the total revenue it collects from customers through premiums-was 161%. One big question plaguing Hippo today, and one that’s likely keeping its stock so low, is whether it can turn a profit. Hippo now has roughly $900 million in cash on its balance sheet, Ellis adds. Those investors are still holding the stock, Ellis says. “I think IPO investors, people who invested in SPACs before they had found a merger partner, got a lot more risk-averse.”Īlongside the small SPAC fundraise of $37 million, Hippo also raised a $550 million private investment in public equity (or PIPE) from backers including Ribbit Capital and Dragoneer. “The entire SPAC category experienced a significant increase in redemptions over the past few months,” he says. Hippo CFO Stewart Ellis argues the redemptions were largely due to the market dynamics. Now Hippo trades around $4.50 a share, or an implied market value of $2.5 billion-half of what it was valued at in the SPAC deal. The redemptions caused the available shares of Hippo to shrink dramatically, which also made its stock more volatile, such that any selling pressure would send it down faster and further. Given the high number of redemptions, the people holding the stock were likely short-term traders, not the type of long-term investors that CEO Assaf Wand had hoped to draw into his company. Essentially, they’d decided that Hippo wasn’t worth $5 billion, so they got out of their stock for $10 a share. But a whopping 84% of the stockholders redeemed their shares before the merger, meaning it only raised $37 million.
All rights reserved.Hippo aimed to raise $230 million in cash from investors through its SPAC.
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