Insurtech Hippo Holdings Inc. is laying off about 20% of its workforce, roughly 120 employees, at the start of an “organizational realignment,” according to a U.S. Securities and Exchange Commission filing.
The move will likely generate $2.2 million to $2.7 million of severance, benefit and other related costs that the company plans to record in the fourth quarter.
The charge could climb higher. Hippo said it continues to “review the potential impact of the reduction, including facility lease exits and additional employee related costs, and is unable to estimate any additional restructuring costs or charges at this time.”
Hippo declined additional comment, citing the nearness of its Nov. 2 third-quarter earnings call.
During the second quarter, President and Chief Executive Officer Rick McCathron said a top priority is improving the loss ratio for the company’s home insurance program, which started to benefit from rates earning in and improved segmentation, geographic diversity and the quality of new business. These widespread efforts started at the end of 2021 and should be fully in place by the end of this year, he said.
McCathron, who has spent decades in the industry, also said he is keenly aware that reinsurers keep a close eye on losses incurred by insurtechs: “We’re not the only people writing the checks while we’re reaching profitability.”
Last year, Hippo shareholders approved a reverse stock split on the heels of a 70-person layoff, about 10% of its workforce at the time. The company’s board had sought the reverse split to raise its share price above the $1 minimum set by the New York Stock Exchange. On Sept. 29, 2022, every 25 shares of common stock were converted to one share.
The 2022 layoffs were intended to accelerate Hippo’s path to profitability, a spokesman said at the time.
In August, the Florida Office of Insurance Regulation cleared the expansion of Hippo subsidiary Mainsail Insurance Co. to Florida to conduct property/casualty business. A new carrier, Mainsail reported $109,000 in net income in 2022 and $94,000 for the first three months of 2023, according to BestLink.
Underwriting entities of Hippo Holdings Inc. currently have a Best’s Financial Strength Rating of A- (Excellent).