As part of an “organizational realignment,” Hippo Holdings Inc. said that it is eliminating roughly 70 jobs from the company, amounting to about 10 percent reduction of the InsurTech’s overall workforce.
Hippo, a home insurance company, revealed the news in one of two 8-K filings with the Securities and Exchange Commission in the past few days. The second filing, dated Sept. 1, announced that stockholders approved an amendment of the company’s Certificate of Incorporation to effect its previously announced intention to do a reverse stock split at a ratio in the range of 1-for-20 to 1-for-30.
In yesterday’s filing about the reduction in force, Hippo also reported that Ran Harpaz, chief operating officer and chief technology officer, will be leaving the company on Nov. 15. Harpaz will be eligible for $250,000 in separation benefits, equivalent to six months of his base salary.
The other staff cuts are effective on Sept. 1, with the affected employees getting just one day of notice on Aug. 31.
Hippo said the company expects to record charges in the range of $1.8-$2.0 million in the third quarter for severance, benefits and related costs as a result of these actions. Beyond that, the filing said that the company is reviewing the potential impact of the reduction on facility lease exits and additional employee-related costs but is currently unable to provide any estimate of additional restructuring costs.
The company first announced its plans for the reverse stock split in July, stating that the action was intended to resolve an issue raised in a non-compliance notice Hippo received from the New York Stock Exchange on July 19, 2022.
News of the intended reverse split came just about a month after Hippo announced that it had appointed President Richard McCathron as chief executive officer, replacing founder and prior CEO Assaf Wand (who remains as executive chair). In an interview just a few days prior to his CEO appointment, McCathron told Carrier Management about Hippo’s commitment to underwriting profitability. He described the improvement in Hippo’s first-quarter 2022 gross loss ratio to 76 (down from 198 in first-quarter 2021) as dramatic. For the full year in 2021, Hippo’s gross loss ratio was 138, according to information in the latest 10K filing.
“Underwriting profitability is really what will be the sustainable future” for Hippo, he told CM in June, explaining that insurance leaders hired over the last year set their sights on improving the loss ratio and expanding nationally to improve geographic diversification. While Hippo has been talking about such expansion since 2018, when it first partnered with Spinnaker Insurance, ultimately acquiring the carrier in August 2020, the 76 loss ratio in first-quarter 2022 was the best quarterly loss ratio Hippo has recorded since becoming a public company last year.
In the second quarter, the loss ratio stayed on track, coming in at 78.
“As a new player, it takes time to get the underwriting results where you want them,” McCathron told CM in June. “You have new customers, not seasoned customers. You’ve only gone through a few underwriting cycles as opposed to multiple underwriting cycles. And we recognize that now, as a public company, it is very, very important for us to have credibility in the market.”
In addition to expanding geographically to counterbalance a concentration in Texas and Florida, with its most recent move going into New York, Hippo has also tightened underwriting and hiked rates in problem areas, he said. (Read the full interview in the related article, “Hippo Sets Sights on Improved Gross Loss Ratio, Geographic Expansion for 2022,” June 3, 2022)
The company is planning to hold an in-person Investor Day event in New York City next week on Sept. 6, 2022 (with a live webcast and replays available), during which McCathron and Chief Financial Officer Stewart Ellis will host a series of presentations, along with Q&A, highlighting Hippo’s financial outlook, operating strategy and “plans for delivering upon the company’s mission of protecting the joy of home ownership.” A LinkedIn post announcing the event describes the additional mission of “aggressively pursuing the path to profitability” and links to a schedule that originally had Harpaz listed as a presenter, along with other C-suite executives.
Hippo’s reduction in force comes in a year that has seen several other InsurTechs announce layoffs, including two other public companies in the property/casualty InsurTech space: Root and Lemonade.
Root was the first to announce an “organizational realignment” in January, with 330 team members cut from the company.
Lemonade’s layoff of 20 percent of the Metromile workforce—roughly 60 employees—came in July, just after Lemonade announced that it had closed its deal to acquire Metromile
More recently, Next Insurance and Thimble confirmed layoffs at their companies just after the July 4 holiday, with Next cutting 17 percent of its staff and Thimble cutting 33 percent.