Hippo Holdings Inc. (NYSE:HIPO ) Q1 2022 Results Conference Call May 13, 2022 8:30 AM ET

Cliff Gallant - Vice President of Investor Relations

Assaf Wand - Chief Executive Officer

Stewart Ellis - Chief Financial Officer

Matthew Carletti - JMP Securities

Michael Phillips - Morgan Stanley

Alex Scott - Goldman Sachs

Hello and welcome to today’s Hippo’s First Quarter 2022 Earnings Call. My name is Bailey and I will 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. [Operator Instructions]

I would now like to pass the conference over to Cliff Gallant, Investor Relations. Cliff, please go ahead.

Thank you, operator. Good morning everybody and thank you for joining Hippo’s first quarter earnings conference call. Earlier this morning, Hippo issued a shareholder letter announcing its first quarter results, which is also available at investors.hippo.com.

Leading today’s discussion will be Hippo’s Chief Executive Officer, Assaf Wand; President, Rick McCathron; and Chief Financial Officer, Stewart Ellis. Following management’s prepared remarks, we will open up the call to question.

Before we begin, I would like to remind you that our discussion will contain predictions, expectations, Forward-Looking Statements, and other information about our business that is 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 will 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 uncertainty in our factors discussed in Hippo’s SEC failing.

All cautionary statements that we make during this call are applicable to any forward-looking we make wherever they appear. You should carefully consider the risks and uncertainties and other factors discussed and disclosed in the SEC filing. Do not place undue reliance on forward-looking statements as Hippo is under no obligation and expressedly disclaim any responsibility for updating, altering or otherwise revise any forward-looking statements, whether as a result of new information, future events or otherwise, except as required by law.

During the 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 first quarter 2022 shareholder letter, which has been furnished to the SEC and available on our website.

And with that, I will turn the call over to Assaf Wand, Co-founder and CEO of Hippo.

Thank you, Cliff. We are pleased to report that Hippo had a successful start for 2022. Continuous improvement is a hallmark of the Hippo culture and over the past year, the focus of our efforts has been on the gross loss ratio. And for the first quarter, we are reporting our best loss ratio as a public company while growth remains robust and on track with our full-year targets.

We also believe the quality of our products and services continues to get better. The outlook is right. Total generated premium grew 25% over the prior year quarter, our fixed expansion efforts are gaining momentum as recently licensed states begin to produce volume.

We launched in New York in late April, and we are expecting other states in coming months. We believe our customer satisfaction and word-of-mouth reputation remains strong, we need to own a premium retention at 87%.

We continue to expect full-year PGP in the 800 million to 820 million range. Our homebuilder business is our fastest growing and most profitable channel. When we partner with a homebuilder, like we did with [indiscernible] in 2019, we have proven our ability to materially increase insurance attachment rate, driving volume and better customer outcome for our partners.

We did this by deeply integrating into the home buying process and offering an insurance policy tailored for the needs of new home buyers. We believe that as the market recognized that Hippo delivers a better experience for both builders and their customers, our builder network will further expand.

Our gross loss ratio of 76% is our best since we became a public company, while Q1 is traditionally a milder weather quarter we are very pleased with the progress, particularly compared to last year where we encountered a winter storm Irwin. We remain confident in our previous guidance of significant improvement over a full-year 2021 results.

We achieved a loss ratio despite the inclusion of 19 points of catastrophe loss event stemming from winter storms across the U.S. As we add greater geographic balance and scale to our book of business, the impact of individual events should lessen. The additions of New York and other states will add significantly to this balance.

We continue to refine our pricing and underwriting models to appropriately match price to risk and improve our ability to identify and track the type of homeowners while particularly well suited to our products. Our best customers are homeowners who embrace proactive home protection and are willing to use technology to make the home safer and easier to manage.

Looking ahead, we expect that the actions we have already taken, including more advanced pricing and segmentation and better geographic balance would have favorable impact on the loss ratio.

In addition, we are beginning to identify and execute upon other areas for further improvement. For example, our new claims leadership is leveraging technology to improve customer experience while reducing loss expenses and improving operational efficiency.

We are excited to be returning to the office, we have opened an expanded our office location to include Oakland in the largest state in Austin, despite a challenging hiring environment of staff count rose to 645.

We will continue to progress with reporting to-date, but even more excited by the progress to come. We are planning an Investor Day on September 6th in New York City. And we would love to have you come back to meet our leadership team in person and learn more about our plans to deliver glowing values to our customers and shareholders.

I would like now to pass it to Rick on President.

Thanks Assaf. 2022 started off well for our business as we begin to show the underlying strengths of our insurance operations. Growth continues to be balanced across geographies and distribution channels.

We grew our homeowners business across our 37 states, with two-thirds of growth outside of Texas and California. In late April, we launched the state of New York, and we expect additional states and upcoming quarters. These new states will take time to add meaningful volume. But our results show the states we launched in 2021 are adding meaningfully today.

Our builder channel has been particularly strong, and we expect to add additional builder partners this year. We also expect to soon announce new alliances in our mortgage lender channels.

As Assaf said, we create real value for our partners by improving the tax rates and delivering a better insurance experience for the customer. Our partners see better economics and a stronger relationship with the homeowner.

We are also excited to Spinnaker launched important new programs and quarter. We now offer excess and surplus lines products like earthquake and flood. These products will be reinsured, but will offer our customers the opportunity to buy additional protections when their homes carry such exposures.

We continue to focus on developing products and services to fit the needs of our Hippo customers. Our loss ratio has improved, but we still have much more to go. We are pleased by the positive impact from the latest iteration of our underwriting engine introduced in late 2021, which we discussed during our Q4 2021 call.

For new business, our flexible technology platform enabled us to implement 22 rate changes across 10 states in quarter one. These changes went live in the quarter, and we are highly segmented, providing a wide mix of decreases and increases as we have improved our ability to identify and accurately price our target market of homeowners, who are willing to use our technology to protect our homes.

For renewals, these rate changes took effect in California during the quarter, and the response has been encouraging with premium retention rates remaining high. For the other states, the changes will take effect over the course of 2022 as policies these states come up for renewal.

We expect these changes will positively impact our loss ratio as the year progresses. These following strategies have been extremely deliberate and successful, reflecting Hippo’s expertise and experience applied to our unique tech stack.

One advantage Hippo has in the current market relative to carriers who use simple inflation accelerators is that we rerun our underwriting and we building cost models automatically at each renewal, incorporating all the accumulated data since last renewal.

This ensures our customers are properly protected while providing protection to Hippo from current inflationary trends and materials and labor. We are encouraged by the first quarter results. Our strategy and ability to execute is proving out, but we have much larger goals. We are investing our business to create a nationwide consistently profitable homeowners protection company. That is the clear leader in customer service.

I would like now to pass it over to Stewart, our CFO.

Thanks Rick. Hippo had a strong first quarter of 2022. We delivered a substantial improvement in our gross loss ratio versus last year, while continuing to grow our book of business. Let me take you through some of the financial highlights.

Total generated premium was 154 million in Q1 up 25% from 123 million in the first quarter of last year. We continue to execute against our plan for thoughtful growth with loss ratio goals in mine.

For the full-year, we continue to expect 800 million to 820 million TGP, implying an accelerating growth rate as the year progresses, reflecting geographic expansion as we roll out new states growing partnerships and a step up in marketing.

Revenues in Q1 were 24 million, up 44% over the prior year quarter. Revenues include net premiums earned, growing and steady streams of seeding commission paid to us by reinsurers, MGA and agency commissions paid to us by other carriers and service and fee income from our customers.

Also through Spinnaker, we are expanding our third-party program administrator business. We continue to expect 2022 revenue in the range of 140 million to 142 million. Our gross loss ratio in Q1 was 76.1%, marking another quarter substantial improvement.

Given the seasonality of whether exposure continued sequential improvement isn’t fully within our control. But we believe we are on track to achieve our full-year guidance of the gross loss ratio below 100%, which would be a major improvement versus 2021 to 138%.

During the quarter PCS catastrophic losses added 19 percentage points to the loss ratio, driven largely by winter weather across the U.S. The quarter’s results also include a benefit of 19% of favorable loss reserved development from prior periods with approximately two-thirds of that number from attritional loss activity and one-third from prior period catastrophic events.

Sales and marketing expenses increased slightly to 24.9 million from 24.7 million in the prior year quarter. We believe we have a unique and compelling value proposition. Our proactive approach to home protection is a persuasive message to homeowners and it is particularly aligned with those customers who we view as attracted risks.

In the coming months we plan to invest in marketing programs to further grow awareness of the Hippo brand. Technology and development expenses increased to 14.7 million from 6.9 million in the prior year quarter, primarily driven by an increase in stock based compensation of 4.8 million.

Further our spend now includes our acquisition of the SwingDev team in Poland, engineers, designers and product managers, who are boosting the development of our mobile apps, our home builders suite of products and our consumer facing web portals. We are glad to have a geographically and culturally diverse set of teams, allowing us to tap into innovation and talent pools around the world.

General and administrative expenses increased to 16.5 million from 8.3 million in the prior year quarter, reflecting our growth, including an increase in stock based compensation of 2.9 million. The cost of being a public company and new office locations.

Our cash and investments at the end of the quarter were 772 million. The reduction in cash quarter-over-quarter was amplified by 12.2 million due to a temporary increase in recoverable from reinsurers.

During the quarter we shifted 349 million from cash to U.S. treasury bills in order to capture the benefit of short-term yields, which is why on the balance sheet you see the shift from cash to investments. We remain well positioned for an extended period of growth and investment.

Net loss attributable to Hippo was 67.6 million or $0.12 per share in Q1 compared to a net loss of 195.2 million in the prior year quarter. Adjusted EBITDA was a loss of 48.5 million versus a loss of 35.6 million in the prior year quarter.

Our guidance for 2022 remains unchanged from when we reported last quarter’s results. To summarize, for the full-year 2022, we continue to expect TGP in the range of 800 million to 820 million, revenue in the range of 140 million to 142 million, and gross loss ratio below 100% and on track for further materials improvement in future years.

Thank you. And I will now turn it back over to Assaf for his closing remarks.

Thank you, Stewart. In a world of volatility it feels to have become normal. We at Hippo feel grateful that we are able to focus on a simple challenge to improve the homeownership experience of our customers. This quarter, we made significant progress in our loss ratio and continue to grow. We remain confident that we are on the road and delivering on our mission.

Thank you everybody. Operator, could we please take questions?

Thank you. [Operator Instructions] Our first question today comes from Matt Carletti from JMP Securities. Matt please go ahead. Your line is now open.

Okay, thanks. Good morning. First question was I hoping that - ask a little bit at some of the commentary in the shareholder letter about building earthquake and flood products. Spinnaker paper, obviously heavily reinsured. I just wanted to get your perspective on as you look at that kind of the build versus you could have partnered kind of on the other way with that. Just kind of that thought process and why you elected to build a Hippo product versus partner with somebody else?

Yes Matt, how are you doing. This is Rick. So a couple of things to consider one. Remember, our vision is to protect the joy of homeownership. And to do that, you need to make sure you are providing proper coverages for customers that need that specific type of coverage.

Yet there are some areas where we don’t have as much expertise, so we choose to partner instead of build. Now keep in mind also, when we acquired Spinnaker, Spinnaker was a fronting carrier that had other programs in it.

We continue to add other programs as a fronting carrier, taking minimal exposure, if any, but to provide that platform for other MGAs that have products that we think are additive to the total gross loss ratio. So we also utilize our distribution channels to sell some of those products, creating sort of a win-win for a customer, for the product, manager and for us.

Alright, great. very helpful. And then just a number of questions and it get some restored. Really good growth in the quarter, net earned premiums were flat sequentially and year-over-year. Can you help us a little bit with kind of the cadence there and what is going on?

Hi Matt this is Stewart. I’m happy to take that. I think first, I would say some of this is a bit of a court of how the accounting for capital allowances that we get from our reinsurers as part of our reinsurance treaty and the accounting for our actual purchases and then amortization of the Cat actually well, that would reduce our earned premium.

In 2022 reinsurance treaty, some pieces of it moved from a gross quota share to a net quota share, which means that the reinsurers themselves are giving us an allowance to purchase reinsurance rather than having it baked in to the treaty. And those allowances are going to be tied to the policies that are written during the treaty.

And so it is more of a kind of a treaty dynamic, which means it can spread out over a couple of years. Whereas the cat XOL purchases are amortized over the calendar year that we are buying in that.

And so there is a bit of a timing difference that is reducing our net earned premium, because of that effect more than it did last year, which didn’t have this effect. But just in general, more than I think that sort of substantive economics would indicate.

That also filters down into other parts of our P&L. So if you are looking at EBITDA, or you are looking at the net loss ratio, which is going to be based on net earned premium, that impact will tend to lower our earnings, a bit on an accounting basis, and it will tend to raise our net loss ratio as well.

Okay great. Very helpful. Thank you for the answers.

Thank you. The next question today comes from Yaron Kinar from Jefferies. Please go ahead. Your line is now open.

Thank you and good morning. So you have had nice momentum on the growth loss ratio. Maybe you can help us think about the expected underlying growth loss ratio for 2022. Do you see improvement there year-over-year or is it more on just an overall loss ratio that you are thinking of the below 100%?

Yes. Hey Yaron it is Rick. We are seeing meaningful improvements in the underlying loss ratio results. Keep in mind when you are making pretty material changes in geographical diversification, and underwriting model and rate changes rate filings, it takes time one to determine what you want to do, then you have to file the change.

And then you have to wait for regulatory approval. And then the change for your existing book starts at the renewal of those existing policies. So that entire process ranges between 12-months and 24-months.

So in the first quarter, we actually had 10 rate filings go live for 22 different products. But we are just beginning to see the improvement of those particular rate filings going live. So the improvement that you are seeing for this particular quarter are efforts that we took six to nine months ago.

And I would say you should continue to see meaningful improvements subjected to, quarter volatility due to weather, as you know, second quarter of our footprint is a typically a pretty high weather quarter.

But you should see that continued improvement. We have strong conviction and clear line of sight that our loss ratio continues to turn down by the actions we have taken that haven’t worked themselves into the book of business.

Just to be clear here, you expect continued improvement on the underlying loss ratio as well as the total loss ratio. Right?

Okay. Perfect and then you gave - you spelled out the impact of catastrophes and prior development on the gross loss ratio. Do you have those numbers on net basis here?

Yes. Yaron it is Stewart. On a net basis I think that the net reserve release was 2.8 million in 2022 and we didn’t have our reserve release in 2021.

Okay. And on a [Cat] (Ph), for the Cat code on a net basis?

It is on a PTF basis, it was 2.8 million, 600,000, roughly. And ex-PTF is 2.1 so.

Got it. And then, Stuart, I think in the previous question, you had addressed the net loss ratio, which actually came in a bit higher year-over-year. In sounds like a lot of it has to do with just the shift in treaties, and the impact on net premiums earned. Are there any other drivers there that would have led to deterioration year-over-year despite a very significant improvement in growth?

Yes. It is a great question Yaron. Before I dive into the details here, I think it makes sense for us to just remind everybody that we do think gross loss ratios is the measure of our underwriting, actuarial performance, our operational performance, it is the measure of the actual performance of the risks that is being assumed, regardless of who is it assuming the risk.

As we reduce our risk retention, so if we were maintaining all the risks, our net and our gross loss ratio would be the same. As we reduce the risk reduction, and we look only half the pieces of the risks that we retain, we are going to get, the number is it is representing a smaller and smaller piece of our overall economics.

To the point where once the risk retention gets below a certain amount, then the number starts to become increasingly irrelevant to the overall economics of the business. Because we are a program business and in MGA, we are performing services on behalf of the people who are bearing the risks of the bulk of the policies that we write.

So for example, unallocated loss and loss adjustment expense, which we are incurring on behalf of the entire portfolio is hitting - all of that cost is hitting our net loss ratio. Even though only, we are only retaining a small percentage of the premium.

And so just the UA, I just to give you an example of how big some of these numbers can get, when you get a smaller and premium number. Just UA represents 51 percentage points of our net loss ratio.

And I think the problem with the net loss ratio for a business like Hippo is that it is essentially the economics on a small piece of our business and exclude all of the commissions that we get from the reinsurance.

And so the change in character well - like the character or purchase by itself was 113 percentage points of net loss ratio in this quarter, it was 71 percentage points in the prior year quarter. Those sorts of things had a big impact on net loss ratio, and so movements in them can move that number around independent of the performance of the overall underlying portfolio. Does that make sense?

Yes. Yes very much so and I appreciate that color.

Thank you. Next question today comes from Michael Phillips from Morgan Stanley. Michael please go ahead. Your line is now open.

Okay, thanks. Good morning everybody. You have talked in the past - last quarter and quarters before that about come certain areas of taking rate decreases and more refined pricing is alleged to do that. When you couple that was another quarter of POID favorable on not the [indiscernible] only attritional piece it kind of you know those two things combined kind of imply that some of your prior pricing may have been too high. I guess hoping you can just add some color on, any more color on that what is driving the ability to take rate cuts? Again, I think I have heard you say before that you just got more refined pricing that allows you to do that. But couple that with a POID and it looks like prior stuff was kind of high and bringing it back down. So just in more color you can find there will be appreciated.

Yes, Michael, hey it is Rick. Really good question. I think a better way of explaining this is that historically, the prices we were charging weren’t segmented enough to match rate with exposure. So we have gone through an entire re-underwriting process at the company, and making sure that we have appropriate segmentation.

This is one of the reasons why we partnered with Incline and Ally to bring multiple underwriting companies to bear. So we can have greater segmentation and granularity in the pricing. What we found is we were not charging enough premium for what we would consider average clients and we were charging too much premium for what we consider our best clients. So we were getting disproportionately poor clients versus the better clients that we want.

So our new leadership team on the insurance organization, we have spent the last nine-months continuing to focus in re underwriting the policy, make sure pricing matches each individual exposure, specifically towards those customers we want. We call them our generation better customers, customers that resonate strongly with our total home protection mindset and that is why you are seeing some go down and others go up.

The portfolio as a whole is experiencing pretty significant rate increases, just as the industry as a whole is seeing insignificant rate increases, but it is really that segmentation that we are refining. Much of the work is done. It just needs to work its way into the book over future quarters.

Okay, thank you. That is helpful. And a second question on the POID piece as well. It was given to her there was a traditional. Can you talk a little bit more about what do you mean by that and specifically areas where that was coming from an interesting side?

Yes. Michael, we had a - the phone dropped a little bit. Can you repeat that please?

Sorry. Yes, two-thirds of your POID 90 points are attritional. Is still you can add a little more color. What you mean by that? Where you are seeing that on the attritional side? Another quarter of favorable there.

Yes, this is also - we got it, we understand your question now. This is also complex when you have a shifting portfolio geographically, because in states where we have been heavily exposed to catastrophe like Texas and California. Those states have particularly high whether or PCS type loss ratio.

As we start diversified into states that have almost all their loss ratio is attritional, we will use Arizona as an example. Then you actually see while you are balancing the portfolio, attritional losses going up as you write more business in those areas that sometimes masks the effects of attritional going down overall in your portfolio because of mix shift.

So those are things that are I think, relevant, it is difficult to judge it when you are in a period of correction as we have been. So sometimes the numbers look a little wonky. Stuart, do you want to add anything? Alright, there you go, Michael.

Okay. No thank you. Just one more for me. Just your thoughts on the inflation we are seeing on the property side for homeowners. I assume you are feeling that we are going to everybody else’s. And you are seeing that reaction tool if your rate increases or your finger taking. But the question is, do you feel like because your portion of on that big or small portion of your businesses from the homebuilder, therefore pretty new homes. Does that insulate you more than a competitor or inflation pressures, or does that actually make it worse?

Yes. Also a great question Michael. I’m going to tackle this two different ways. So let’s just talk about inflation generally. So I mean, one word is volatile. The inflation increases and rebuilding costs, labor materials are going up dramatically.

We actually have, I think, a competitive advantage over some of the incumbents, because what many incumbents do they put an inflation guard that arbitrarily increases coverage AMLs at each renewal. We don’t have that. We underwrite every policy using all the data sources we have on that policy at each and every renewal.

So we are picking up significant increases, inflationary pressure each renewal, so it is severity, because of inflation goes up 20%. When we underwrite that policy, it renewals the coverage A is going up 20%. So we are able to stay ahead of it, I think better than most. So that is the first aspect of it.

The builder aspect of it is obviously the builder business performs very, very well. They are new construction homes. There is, you have fewer attritional losses in new construction homes. And therefore since you have fewer attritional losses.

Those homes are not subject as much as homes that have higher attritional losses, you just - the frequency in new construction is less than existing home. So I think it helps not necessarily to a meaningful amount as it relates to inflation and severity. I think the first aspect I mentioned has a far greater impact.

Okay. Thanks for that, it makes sense. Congrats on the quarter.

Thank you. The next question today comes from Alex Scott from Goldman Sachs. Alex, please go ahead. Your line is now open.

Hey good morning. First one I had is on the MGA, but I just was in - just said, it is provide an update and how those are going in terms of coming online? And can you also talk about, what that may allow you to do as we think through the back half of the year. Does it - is it just more capacity or does it actually allow you to underwrite risks that you weren’t underwriting before? Does it allow you different geographies et cetera?

Yes Alex good question. By MGA, I assume you are talking about the partnerships we have with Incline and Ally?

Okay. Perfect. There is really two benefits that we have with those partnerships. The first benefit is it helps us with our capital life structure. We utilize their balance sheet to grow the business instead of infusing additional capital into our own balance sheet, which has Spinnaker, so that is one aspect. That is important, but not the most important aspect.

The most important aspect is what I mentioned earlier, our ability to have multiple programs, multiple rate filings and further granular segmentation in each and every state really allows us to better match price and risk.

Now, historically, we have essentially had one underwriting company that was Spinnaker. Yes, it is a fairly sophisticated rating algorithm is by parallel, we have lots of granularity, but you can never get the level of granularity, that you would get if you have multiple carriers and underwriting companies.

Finally, as we watch new companies in the states, the time for those products to go live is usually compressed, because the regulator is not as concerned about dislocation of current customers, because those new underwriting companies have no current customers. So all of that accelerates the timeline in which we can take on rate, it gives us granular segmentation. And it does support our capitalized structure.

Got it. Thank you. And second one, I had here I guess, just in light of the droughts going on in California, and some concerns, the wildfire season is going to be pretty bad this year. Could you talk about sort of where you are geographically in California and any nuances to maybe your exposures relative to the areas that get hit by wildfires?

Yes, also a great question. We are not overly exposed to wildfire concentrations. So we historically have used fire line as our risk meter for that. Fire line goes from zero, which is the least exposed all the way up to 30, which is the most exposed.

In places like California, we only do fire line, zero and one. So not overly exposed. We have actually switched, are in the process of switching to a better metric. But our appetite for brushfire wildfire exposure has not changed. We are very conservative related to that.

Got it. Maybe if I can sneak one last one in? I mean, just looking at where your stock is trading Obviously there has been a lot going on with what is happened with growth stocks, and so forth. But, with words trading, I mean, do you think about anything differently? Is there anything strategic that you can do something about where your stock has traded down to even maybe even just looking at it relative to book value per share at this point?

Hi Alex it is Assaf. In short, we basically believe that we are building a valuable company, we keep on managing the company, we keep on improving on an ongoing grade. Basically we live our life in a very simple way, which we see what we do. And we do what we say this is what we are doing.

And all of these phone calls, we said we are going to keep on reducing the loss ratio, and this is what we are focused on. We basically reiterate the goals and what we are going to end. And this is what we will do and the market, we can control the market.

We don’t like - well it is we think it is, the stock is not what it should be that we focused on growth, and we are actually very optimistic and have more conviction than ever in the company and on the future. So this is what we are focused on. And I think this quarter is a good testament for that.

Thank you. [Operator Instructions] The next question today is a follow-up from Yaron Kinar from Jefferies. Please go ahead. Your line is now open.

Hey, thank you. I’m curious, given the REIT underwriting and the amount of actions you have taken year-over-year. Have you tried to kind of model where 1Q 2021 would have come in based on the current portfolio from a loss ratio?

We have I don’t know if we could share that. I’m going to punt over to Stuart, but of course we have but I’m not sure that is something that we would share.

Yes. I think what we can say, which is probably obvious is that given the increased diversity in our book today versus last year, the impact of the Winter Storm Uri and other PCS cat events that we had last year. They would be smaller, obviously, than they were in 2021.

And as part of - from a - I don’t think, we have quantified that publicly, but it is part of the overall growth strategy and the diversification strategy that we have. So those pieces of Texas represent a smaller piece of our overall book today than they did a year-ago. And mathematically, the book is just more diverse, and each of those would have a smaller impact.

Hey Yaron. I’m sufficed to say, if we hadn’t been taking the actions that we have been working hard to take the loss ratio would look very, very differently.

No doubt. Okay. And then second, follow-up if I could. So you talked about the homebuilder customers being of the highest quality, I guess, are the best performers in the book. Can you maybe give us a sense of what portion of those customers remain with the company after your one, after year two or maybe how that compares with the rest of the year?

Hi Yaron this is Stewart. I don’t think, we have broken out the retention by channel. But in general, in the homeowner space and then I think in particular with Hippo, given the high levels of customer satisfaction, like we do feel like the book that we are building has enduring value.

This is not and you can - I think you can see in the numbers. Our marketing expense was pretty similar to last year, but our book is still continuing to grow. Like it is not that we are having to replace a large number of people to churn out every year. We feel really good about the premium retention across all of our channels. And so we are excited about our ability to continue to invest in that piece of the business.

Yes. Yaron the one thing, I would add to - because a question people would probably start thinking about is as those homes age, what happens to the loss ratio of this particular business? And suffice it to say we have a strategy, both on retention and pricing that as the home ages, to create more of a standard type rating methodology that we would have at a similar home at similar age.

So I think that is something that others that have been in this space have not done a great job with. And we have a very strong strategy to support those homes as they age, develop both retention and underwriting.

Thanks and thanks for preempting next question. Thanks very much as well.

Thank you. There were no additional questions waiting at this time. So I would like to pass the conference over to Assaf Wand for closing remarks.

Thank you. I just want to reiterate that this was a very strong quarter for Hippo and we continue making progress on all fronts. We are actually very optimistic for the future and wanted to thank everybody for joining our call. Thank you.

That concludes the Hippo first quarter 2022 earnings call. Thank you for your participation. You may now disconnect your line.