The missive urges immediate actions to salvage the company’s value, which has recently taken a hit due to financial difficulties. Hippo’s share price has been stagnant in the $9 to $10 range since the company reported a substantial net loss of $108 million on August 8.
The share price drop has been compounded with the news last month that the company would halt all new business for 30 days, last month.
News of the open letter also follows Rick McCathron’s recent disclosure at the Keefe, Bruyette & Woods Insurance Conference last week, that the nationwide business pause, which was put in place in August, will start being lifted this week.
During the session, McCathron described the decision to cease business as a way to prevent further, unnecessary losses. He said: “I don’t know about you but when I have a leaky hose, I generally turn the hose off at the house before I try to plug the leaks. And that’s exactly what we did.”
He said that the decision was also evidence of Hippo’s swift response to market changes. “We talked about it as a management team. We said look, let’s go ahead and shut everything down. Let’s find out where all the holes are in the leaky hose. Let’s plug those holes, and then let’s turn it back on gradually where it makes sense.”
Shareholder concern at Hippo performance
According to a report by Insurance Journal the shareholder group stated its concerns regarding Hippo’s financial performance has been abysmal and its operations unsustainable since its public debut in 2021. In their letter, they stressed the imperative need for the board to initiate a strategic review process aimed at preserving and maximising the value of the company’s capital, Spinnaker Insurance Company (a Hippo subsidiary), and net operating losses (NOLs).
Bradley L. Radoff and Etude Capital LLC’s Steven Stein, the signatories of the letter, also demanded greater financial transparency to hold the board and management accountable. They called for an end to what they labeled as “meaningless non-GAAP guidance,” specifically pointing out the adjusted EBITDA metric, which Hippo often emphasises in its earnings reports.
According to a media statement, the members of this shareholder group collectively hold approximately 2.5% of the outstanding common shares of Hippo Holdings Inc., making them among the company’s top 10 shareholders.
The shareholder group said that instead of non-GAAP measures, the focus should shift to metrics crucial for the insurer’s success, such as book value and net income.
The letter from the shareholder group also outlined their belief that taking the right and necessary steps could potentially restore the company’s per-share value to a range of $15 to $20.