Hippo Holdings: an insurance business with potential for an earnings outlook upgrade

Hippo Holdings (HIPO) is a U.S. insurance holding company that, through its subsidiaries, insures property and liability for individuals and businesses. The company also services partner insurance agencies. Freedom Broker analysts recommend buying Hippo shares: business growth, more efficient reinsurance, and conservative estimates of catastrophe losses could support financial results.

Investment thesis drivers:

• Revenue and profit are rising. In Q2 2026, Hippo’s revenue increased 23% year over year to $145 million, and gross written premiums rose 61% to $482 million due to the expansion of partner programs. Adjusted net income grew 24% to $21.0 million, or $0.79 per share. The combined ratio decreased from 100.1% to 95.8%. This metric compares insurance losses and expenses with earned premiums: a value below 100% indicates underwriting profitability.
• Management raised the full-year outlook. In July, the company increased its 2026 adjusted profit guidance from $48–56 million to $62–70 million. The combined ratio guidance improved from 103–105% to 99–101%, and expected catastrophe losses declined from 13% to 10% of premiums.
• Embedded Q4 loss assumptions may prove overstated. Consensus expects catastrophe losses at 12% of premiums versus 6.2% in Q4 2024 and 1.0% a year later. Freedom analysts view this estimate as conservative: by that time, the hail and squall season typically fades, and hurricane season will be nearly over. This could allow management, when reporting Q3 results, to raise adjusted profit guidance above $70 million.
• A calm hurricane season helps, but other weather risks remain. At the time of preparing the thesis, not a single hurricane had formed in the Atlantic, and only three weak tropical storms had made landfall on the U.S. coast. However, Hippo’s main weather risk is hail and squalls in Texas and the Midwest. Therefore, analysts do not expect a large positive surprise in catastrophe losses in Q3; they link the main potential for guidance improvement to Q4.
• A new reinsurance program reduces costs. Effective June 1, Hippo replaced separate protection for each portfolio with a single company-wide program. This reduced the cost of protection by 15–20%, and the company’s net loss from a major catastrophe by about one third. Reinsurance allows a portion of risks to be ceded to other insurers. At the same time, the share of risk that Hippo retains in partner liability insurance programs is expected to increase from less than 10% to 15%. This increases retained risk, but also enables growth in earned premiums and underwriting profit.

Target price: $35