Good morning, everybody. Welcome to Hippo's 2025 Investor Day. We're so happy to have all of you in the room, as well as those watching on the webcast. I'm Andrea Collins, Chief Marketing Officer here at Hippo, and this is the only time you'll see anybody reading from an iPad today, but we have to keep the lawyers happy. I'm excited to hear from our outstanding leadership today and share with you all our plans for long-term profitability and sustained growth. During our remarks today, we'll make forward-looking statements that reflect the company's expectations about future plans and performance. These statements rely on assumptions and estimates, and actual results may differ materially due to risks and uncertainties. Additionally, please note that the company uses non-GAAP results for the purpose of evaluating performance internally. Further details on these items can be found within today's presentation.
Before I pass it over to Rick McCathron, our President and Chief Executive Officer, I want to provide a brief overview of our agenda for today. Stewart Ellis, our Chief Strategy Officer, will review our journey to date and how we've put in place solid building blocks from which to grow. Rick will then come back to share details about our go-forward strategy and long-term vision. Rick will be joined by Jim Roche, President of the Baldwin Group and CEO of Underwriting Capacity and Technology in Operations, in a fireside chat to discuss our exciting announcement from this morning. Following a quick break, Torben Ostergaard, President and CEO of Spinnaker Platform, will outline how we've built a leading hybrid fronting platform of choice for MGAs.
We'll then hear from Mike Stienstra, our Chief Insurance Officer, and myself about our Hippo Home Insurance program and how we're well-positioned to capture growth with this market. Jesse Willmott, CFO and COO of Spinnaker, will provide details about how we're managing risk and volatility within our portfolio. Finally, our Chief Financial Officer, Guy Zeltser, will share more about our financial strategy and compelling 2028 targets. We'll round out the day with a Q&A session followed by lunch, during which our leadership team will be available to answer any of your questions. With that, let's get started with a short video.
Good morning, everyone. First of all, my name is Rick McCathron. I'm the Chief Executive Officer here at Hippo Holdings Group, and I want to thank each of you for coming to today's Investor Day. Special thanks to those watching on our live streaming broadcast, and also for those of you that this is their second Hippo Investor Day, having had one about three years ago, in which we put forth our three-year plan, and we'll talk a lot about how we've achieved those various objectives. Today, we're going to talk about our next three-year plan, and we're going to focus on seven different categories. First, our business transformation, how we have shifted our business from the original hypothesis of Hippo into where we are today, and that's going to be led by Stewart Ellis, our Chief Strategy Officer.
I'm going to share our go-forward company vision, including some of the information that you all have seen in various press releases by us and the Baldwin Group today. I do want to emphasize, and I'll spend a little bit of time talking about our team that has made Hippo what it is today and will be necessary to continue to grow and build profitability and return on equity to our investors. We'll also talk about our differentiated services and products, inclusive of the Spinnaker platform, what makes it a leading hybrid fronting player in the space, and Torben Ostergaard will talk quite a bit about that. Part of that and what makes that work is our flexible risk management strategy. Jesse Willmott, our CFO and COO of Spinnaker, will give you a deep dive on the way that we look at risk and risk management.
Guy Zeltser, our CFO, will be joining us, talking about our proven track record and where we expect to be three years from now, which ultimately will drive shareholder value, which I think is compelling for all. With that, I would love to hand the baton over to Stewart Ellis, our Chief Strategy Officer, to set the stage. Thank you.
Good morning. Thank you, Rick. For those of you who do not know me, my name is Stewart Ellis. For the past six years, I served as Hippo's Chief Financial Officer until March, when I transitioned into my current role of Chief Strategy Officer. In 2022, we hosted our first Investor Day, and when we approached that event, we wanted to set some targets that would help investors understand the business, but also to help everyone understand kind of where we were going at that time. A lot of people thought those targets were aggressive. At the time, in Q3 of 2022, we had lost around $55 million, and we were a subscale business. We said, "Look, by the end of 2024, we want to generate cash.
We want to be a cash flow positive company, and we want to do it with a strong balance sheet. We said we were going to achieve cash flow positivity with over $400 million of cash in the bank. We did not want to just get there by cutting things. You can only cut so far. You can only get so efficient. We also needed to grow. We set some aggressive growth targets, increasing our top line revenue by more than three and a half times. I think there maybe were a small number of people who thought this was possible, but I'm proud to report that as of the end of last year, not only have we achieved these financial targets, but we've surpassed them.
We did so while building a very solid foundation for growth, which allowed us to have the confidence earlier this year to raise our revenue guidance that we set back in 2022 for the current fiscal year from between $420 million-$450 million up to between $465 million-$475 million. I want to talk about kind of what we did over the past few years to achieve this in the business and why it positions us well for the future and why we're quite excited about what's coming next. On this slide, I think the piece of the 2022 targets that a lot of people felt like was maybe the most aggressive was the improvement in underlying profitability, the adjusted EBITDA.
How did we get from negative $55 million in Q3 to positive $9, which was not just positive, but starting to demonstrate the ability that we have to generate consistent cash over time? I think you can break that transition down into four primary components. The first is improvements to our variable margin, and the single biggest improver or driver of that improvement to our variable profitability has been improvements to our underwriting profit at our Hippo Home Insurance program. We'll talk about a little bit more in a minute, exactly how we achieved that, but that was $32 million of the increase, again, on a quarterly basis. The second component was operating leverage.
We wanted to make sure we were as efficient as we could be while we were increasing the scale, and not only were we able to lower our fixed cost as a percentage of revenue, we were able to lower our fixed cost on a dollar basis over the past three years. We have talked a lot about that on the earnings calls, but I think it fundamentally comes down to the scalable technology platform that we built and making very smart choices about prioritization that enable us to build for the future without wasting things along the way. The final two components relate to increasing the size of businesses that, in the case of our Spinnaker platform, which we have been referring to as Spinnaker or, excuse me, as Insurance as a Service historically, but we are going to continue to change.
We're going to increasingly talk about that as our hybrid fronting platform. That business grew in scale and in size, and so something that's already profitable grows, you're going to generate more cash flow. Finally, the agency business also generated a bit more. Between these four, I think the operating leverage and the scale of the businesses on the right there is probably the most straightforward. Everybody understands that. I think it bears digging a bit deeper into the improvements to the Hippo underwriting profit because I think we delivered quite a lot of improvement over a very short period of time. I think that speaks to both the quality of the platform that we have as well as the quality of the team that we've been able to attract to Hippo. We'll go into a bit more detail there.
In 2022, we had a relatively new insurance leadership team who came to Hippo because they felt like they could do their job better here and would have more fun doing it than they had at their other previous lives. I think that the work that they've done has been exceptional. It's been enabled by the platform, but we have a great team. During the past three years, we've filed 173 new rate filings, achieving 82% cumulative rate increase across the period. We've improved our policy terms and conditions, especially in areas that have higher wind and hail risk, which have dramatically lowered the volatility of our book. We've also changed how we think about going to market. In 2022, we were a multi-channel business. We talked a lot about our multi-channel distribution strategy. We went direct to consumer. We went through independent agents.
We worked through partners, everyone up and down the real estate value chain. In 2024, we have a different picture. You can see that almost all of the new business mix, and again, this is not a surprise. We've talked about this a lot, but almost all of our new business mix has come from the new homes channel. We are going to talk more about what that means as we go into the future, but that's a very, very significant change in the kind of business that we're adding to the portfolio. While we were adding business to the portfolio, we were also re-underwriting the entire existing portfolio with a special focus on reducing exposure in high-cap areas, in particular areas that are difficult to seed off volatility and risk in the reinsurance market, like areas that are exposed to wind and hail risk.
The high frequency of wind and hail in some areas of the country makes it difficult to efficiently manage that risk in the reinsurance market. What happened? What was the effect of all of this work? I think the effect was pretty dramatic. When you look at the 2022 loss ratio, you see non-weather loss ratio that is higher than where we wanted, and also CAT load that was higher than where we wanted. That's why we had such a low adjusted EBITDA in Q3 of 2022. In 2024, this is annual, the picture is very, very different. Not only did we lower the CAT loss ratio from 34% to 19% by taking a lot of that CAT risk out of our homeowners portfolio, we also lowered the non-cat loss ratio from 73% to 56%.
I want to take a moment just to dwell on how unusual that is, because when you take catastrophic risk out of a portfolio, because the insurance premium that you would pay for insuring a home is divided between weather and non-weather risks, generally, the high weather risks have a much lower expected attritional loss ratio, non-weather loss ratio, because most of that premium is going to pay for that weather risk. When you take CAT load out of a portfolio, you would naturally expect at a portfolio level the non-weather loss ratio to rise because more of your premium is going to non-weather risk. That's not what happened at Hippo. Because of all the work that the team did, we were able to dramatically lower the attritional loss ratio while removing CAT risk from the portfolio.
That meant higher variable profitability in the Hippo Home Insurance program, but also an ability to change the way we think about reinsurance, to participate more in that profits ourselves. In 2022, we were heavy buyers of quota share reinsurance. We ceded off almost all of the gross written premium that was related to the Hippo Homeowners program to quota share reinsurers. As the loss ratio came down, as we became more confident in our attritional loss ratio and non-weather underwriting, we were able to retain that premium for ourselves and the margin for ourselves. We shifted to a more traditional excess of loss reinsurance structure, which is a much more cost-effective way of managing the tail than focusing on gross quota share. As you can see, the effects have been tremendous.
From annual 2022, losing a little over $80 million on an underwriting basis within HHIP to, in 2024, being very, very close to break-even on an underwriting basis. That trend, as we think about 2022 to 2024, we expect that to continue. Guy is going to talk about that as he talks about our future. Over the past three years, we have not just been focusing on Hippo Homeowners. As Torben is going to talk about and as Jesse is going to talk about a little bit later, we have also been building quite a differentiated franchise in hybrid fronting. I want to talk about that for a moment. If you level up at a portfolio level and look at our gross written premium in 2022 and compare that to where we are today, you see a very, very different picture.
In 2022, the majority of the premium that we were writing was related to our Hippo Homeowners program. We had some third-party homeowners. We had some renters, and we had a little bit of casualty, but it was mostly homeowners, and of that homeowners, it was mostly Hippo. The picture in 2024 is very, very different. You can see the Hippo Home Insurance program represented only 30% of the premium in 2024, and the composition of that 30% is very, very different today than it was three years ago. It's far more new construction business today than it was previously. As we've talked about, those homes generally have a better expected loss ratio. We've also added diversifying premium from casualty lines, again, relatively short tail business.
As we think about the portfolio, our goal has been, from a risk management standpoint, to move ourselves closer to the efficient frontier. How do we reduce volatility while either maintaining the expected profitability or increase the expected profitability for a given level of volatility? I would argue that we've done both, and that is the primary driver of the financial transformation that we've had over the past few years. The result is a consolidated portfolio that's far more efficient and far more profitable. When you combine the expected loss ratio benefits that you get as a specialty underwriter with the portfolio level benefits that you get from being a more broad spectrum, kind of diversified bearer of risk, I think you build something special. That's what we're going to talk about today.
I'll summarize kind of the transformation here before I turn it back over to Rick. In 2022, we were a monoline homeowners company that had some fronting revenue. Today, we're very different. We are an integrated platform that has achieved critical mass, that has a dramatically improved owned MGA in the Hippo Home Insurance program with access to positively selected risk. We've added diversifying lines of business from a risk standpoint that give us a much, much better kind of expected loss ratio, but at a lower volatility. That is what you need if you're going to deliver a consistent and compelling return on capital, which is our goal. With that, I'd like to turn it back over to our CEO, Rick McCathron, to talk about the future and how we're going to use this going forward. Thank you.
Okay, let's talk about the future.
First of all, if that sizzle video did not give you goosebumps, I know all the Hippo people here probably did get goosebumps. Listening to Stewart talk about the work that the team did over the last three years, getting us into this position in which we can talk about the future definitely gave me goosebumps. Let's talk a little bit about what Stewart was setting us up for. Now, I am going to talk at a high level of what our go-forward strategy is, and then the other speakers today are going to dig down deeper in why that strategy works, and then what the outcome will be from a financial perspective of that strategy. We talked about building a differentiated platform in Spinnaker as the preeminent hybrid fronting carrier.
It's important to recognize the necessity to have a well-distributed, geographically diverse, product line diverse portfolio within Spinnaker to continue to have the favorable loss ratios that Spinnaker has had historically on a go-forward basis. Also, with proper line of business diversification, you reduce the volatility of those earnings over time. If you look at the Spinnaker platform today, we have several different product lines built into it. We have renters, we have commercial property, we have casualty, we have homeowners from other players like MSI and some other products. We also have an anchor program that is Hippo Home Insurance program. It's critical to have anchor programs within this portfolio where you can control growth a little bit more, diversification, longer-term duration relationships, etc.
When we think about the three types of programs that we're looking at either having or bringing into Spinnaker, it really comes into, again, three categories. Number one, programs that we manufacture: Hippo Home Insurance, a program that we manufacture, and a program that we control. Second, best-in-class MGAs that create real value add to their customers, unique distribution, unique product offering, and a committed relationship to Spinnaker. Two new anchor tenants that have, frankly, been anchor tenants, but now formalize more in a longer-term way is our new partnership with Baldwin, and we'll talk more about that. The last one here is the one at the bottom: potential acquisition. There will be opportunities for us to identify exceptional operators that either lack the skill, wherewithal, capabilities to really grow their business, which has the potential to create acquisition targets for us.
I'm a firm believer that if you try to do all things for all people, you will fail. You cannot be great at everything. There are great operators out there that have specific product lines that they are exceptional in that we would love to bring into this well-diversified portfolio to help us grow and add stability as the years go on. There are a couple of components that are really important to unlock this success: the disciplined approach to portfolio and risk management. Spinnaker, which is now a decade old, has a strong track record of a very disciplined approach. We've talked about this on earnings calls when there was the challenge within the fronting carrier space with the Vesttoo situation. Spinnaker was one of the few fronters, if not only fronter, that had no exposure, zero exposure to that. That was not an accident.
That was built by very disciplined underwriting of programs and risk management. As Hippo, as a core anchor tenant within the Spinnaker universe, we've also had significant discipline. Over the last two years, we have made one statement very clear: we will not write a piece of business that we do not believe will have a positive expected loss ratio. We have shown that discipline over the last two years, demonstrating the success that Stewart had mentioned. I do want to share, and I've got a slide here that identifies who in the leadership team is involved with these different components. I think you can only achieve this transformation and this exciting forward-looking vision without a very strong team to execute on the plan.
At the end, it is so critical to realize that as a tech-enabled insurance platform, that technology gives us significant advantage over other players. Just in the HHIP program alone, Stewart had mentioned something like 170 rate filings. Doing that requires a tech stack that allows you to implement those changes very, very quickly and identify what changes need to be made sooner than what others are able to do. What this ultimately leads to is a far superior return on capital and a well-balanced risk portfolio. I think you'll find what our three-year forecast is to be somewhat compelling. The team. If you look at the individuals here that lead the various components of our organization, and again, I'll emphasize, this is the leadership group at Hippo. There's some 300 years' combined experience, relevant experience in the space.
These are people that have come from well-established, well-recognized insurance organizations that wanted to come to Hippo to make a difference. We all have only so much time in the day to achieve something different. People tend to want to go where they have the latitude and capabilities to actually do something different in an industry that they've grown up in and that they love and believe can be modernized. Oh, sorry. Can you go back, please? It's usually a bad idea to give the big slide before this one. I do want to emphasize that the rest of the speakers today are going to talk about portfolio management and how important that is to have that disciplined portfolio management. Operational efficiencies. We have an entire group dedicated to look at every employee's job in the company.
What is their job, their workflow, their process, and how do we actually use technology to streamline their job on an every job basis? It's critical for us to continue to have that operational efficiency that Stewart mentioned. Guy will talk about on a go-forward basis because that's what allows this to be scalable and allows us to deliver more favorable results. You must have a differentiated platform in the fronting space. I think Torben will talk about why Spinnaker has become the differentiated platform in the hybrid fronting space. Now let's talk a little bit about the numbers. Guy will get into a much deeper component of these. Waiting for the slide to change. There we go. As Stewart mentioned, three years ago, we put out broad financial targets. We're doing that today.
This is what we expect to achieve three years from now: $2 billion in gross written premium, more than $125 million in adjusted net income, and more than 18% return on equity. When we achieve this, this should demonstrate the power of the platform that we've been building over the past few years. I do want to give the highlights of the transaction that we just recently announced, as announced this morning with Baldwin, of what this means from Hippo's perspective. First of all, this accelerates our plan to create additional volume within Spinnaker. Baldwin, through its MSI programs, have been a very solid partner, and in some cases, a decade-long partner in some of these spaces.
Baldwin now is committed to write more business across different product lines within the Spinnaker platform, giving us growth of what we believe is the best operated programs in the industry, as well as stability and diversification over time. What does this mean for HHIP? As you know, we have very much focused on builder-sourced business over the last several years. Stewart had mentioned that 99% of all of our new business growth over the last few years in HHIP was builder-sourced business. The partnership with Baldwin triples our access to builders throughout the United States through their Westwood platform. That tripling is a more diversified offering across multiple states with multiple builders, giving us now access to 20 of the top 25 home builders in the United States.
The distribution aspects of this, we believe, and we'll talk a little bit about in the fireside, that Baldwin, through its Westwood affiliate, does an exceptional job and has for, I think, close to three decades of partnering with builders. We believe they do an exceptional job at that. We think we have an exceptional product for new homes and the ability to identify those risks, price those risks, and underwrite those risks. That's what we do really well, as proven by the loss performance of this portfolio. We are going to have Baldwin do what they do, we do what we do, an expanded relationship. With that, we're going to have a little bit of a stage change. Jim Roche is going to join me, and we're going to have a fireside on what this partnership means to both Baldwin and to Hippo.
Bear with us for a few minutes while we add a few chairs up here, and we'll be right back with Jim.
I want to start with an open question for both of you. Can you share a little more color on today's announcement? What does it mean for Hippo? What does it mean for Baldwin?
All right. I'll go ahead and start. First of all, the level of excitement within Hippo is incredibly realized by this partnership. We've had a long-standing relationship at Spinnaker with Baldwin, and now we get to expand that relationship in a way that allows us to accelerate our strategy both on the Spinnaker side and on the Hippo Home Insurance program side. We couldn't imagine doing it with a better partner as Baldwin and as Jim.
Yeah, we are equally excited.
I think the chance to welcome the new builders into the Westwood family, as Rick described, and just the opportunity to work with Spinnaker and Hippo in a much broader capacity is a huge opportunity for us. It just creates a very, very aligned value chain. It's been a lot in 10 years from that first renters policy back in 2015. We've gone from that to more than 500,000 policies on Hippo and Spinnaker paper, and very, very excited to expand our relationship going forward.
Fantastic. Rick, you touched a little bit on our long-standing relationship with MSI and Spinnaker. Can you share a little bit more about our current relationship and how we'll be evolving this for that long-term strategic partnership?
Yeah, happy to.
First of all, when I look for partnerships, I look at people that are incredibly strong operators, people with a proven track record, and frankly, people that I trust and want to do business with. This is the relationship that Spinnaker has had with MSI, particularly, but of course, the greater Baldwin Group for nearly a decade. I remember meeting Jim 15 years ago when he had, as the founder and owner of MSI, talking about the Renters Program. I was impressed back then. We parted ways. What I did not realize at the time is that they were partnering with Spinnaker, which we did not own at the time, as one of their paper providers for the program.
Once we ultimately acquired Spinnaker, the fact that they already had such a great relationship with somebody and whose company that I have high respect for just became such a great opportunity for us to deepen the partnership. The part that I'm most excited about comes in two categories. First of all, having more diversified programs under Baldwin on Spinnaker paper fulfills that goal of having the optimal portfolio as it relates to diversification. That's the first thing. The second thing is now being able to partner with a once competitor of Westwood that does an exceptional job in working with builder partners in a way that they do what they do really well, and we can do what we do really well. Those are the two areas where I think it accelerates our strategy.
That's fantastic and very helpful context.
Jim, you also mentioned a little bit about the partnership between MSI and Spinnaker, but I'd love to hear your thoughts on why it's such a success and why deepening that relationship now makes sense for Baldwin.
Yeah, it's been a long, it's been a long 10+ years since we started. I still remember we were Spinnaker's first program. If you go back, we were waiting on pins and needles for the AM Best rating to come back so we could write the first policy, and I think it was October of 2015. It's come a long way from that standpoint. That trusted relationship has been there from the beginning. Baldwin and MSI are constantly searching for strategic additional capacity.
This is an amazing opportunity when you think about us building an additional new construction project or program together, and then our ability to now place additional business across a variety of property, but more casualty-based and what that means to both companies. That is extremely exciting. It is extremely accretive to what we are trying to do across Baldwin as a whole.
Fantastic. Let's get into the numbers a little bit. Rick, how will the strategic partner help accelerate the business strategy that we are outlining today?
Yeah, as we mentioned in the press release and talked a little bit about today, there are two components of this. There is a financial component, and then there is also a strategic partnership component. Baldwin acquired the builder distribution assets from Hippo for $100 million.
We then, in turn, are committing both capacity and growth to help Baldwin achieve a greater growth and trajectory than what they're currently doing. There, of course, are economics related to that transaction. So we at Spinnaker will participate with Baldwin in two ways. One, fronting fee revenue for the additional programs, and two, risk participation in the underwriting side of the house. The Baldwin Group companies have phenomenally good underwriting results historically, and we are more than happy to put some of our risk capital to work in supporting their programs.
Fantastic. Similar question over to you, Jim. How will the strategic partnership with Hippo help further Baldwin's strategy?
On top of what Rick just shared, I think the biggest thing is bringing more capacity to our Westwood builder partners.
The addition of the Hippo builder product, in particular, the augmented one that we're putting together, is just a massive differentiator for the builders. As Rick mentioned, combined, we'll have 20 of the 25 top builders in the country going through the Westwood platform. Adding this additional capacity in the form of that program is just a massive opportunity for us to capture more of the economics, and I guess, more importantly, help that home closing process. That's the intent at the end of the day, to help facilitate that closing process, and this facilitates that goal.
Love that you brought it back to not only the business process, but as well as the customer. Rick, can you expand on why the new homes channel is so important for Hippo?
It is.
I think at the end of the day, you're always looking for the most positively selected underwriting risks if you're an underwriter. When we look in the homeowners insurance space, it is clear, I think, to anyone that's either a property underwriter or been involved in the space, that new construction fares better than older construction as it relates to risk, not just from the attritional loss ratio perspective. Let's remember, these are new homes that have new building codes, new pipes, include a home warranty from the builder for a period of time. The trees in the neighborhood are six feet tall, not 60 feet tall. There are also more resilient building materials that are generally used in these constructions.
Our experience has shown that new construction fares better, not just from an attritional loss ratio perspective, but also a weather loss ratio perspective, as demonstrated by three different hurricanes that hit Florida over the past few years of what a traditional portfolio would have had in losses versus the Hippo new home portfolio. It is critical for us as an underwriter to make sure we have access to the best risks. Getting that access through the Westwood panel, or through the Westwood partnerships, rather, and being part of the Westwood panel very much gives us a great view of the quality of that business. Also remember that the typical buyer of new homes is the type of person that very much wants those new homes to stay looking, feeling, acting like a new home.
Those are exactly the kinds of customers that we have historically targeted at Hippo that really want a partner within the insurance and home protection space to help them keep that new home new. This is why this business has been successful for us, and we're excited to expand it with Jim.
Fantastic. Jim, can you expand a little bit more on how the partnership benefits builders?
Within the space, the builders are trying to find an opportunity to sell a product that matches up the client base and the risk profile to the situation at hand. The Hippo team today, and even more in the future, has a product that fits very, very nicely into that niche. Whereas lots of insurance carriers have programs, they're typically aimed at more of a mass market type consumer.
To have a program that is specifically aimed at this niche is a great opportunity to help sort of both capture more of the opportunity, but more importantly, to create a more frictionless opportunity and experience for that ultimate consumer. That just creates the better outcome for the customer. The customer wins, the agency wins, the agency wins, the MGA and the carrier win, and the entire value chain works. It ends up delivering a better loss ratio as tied to what Rick explained with the business profile of those customers. Getting that situation set up and facilitated, it's just a very, very exciting opportunity for us to get the value chain set up in this fashion.
Fantastic. That gives us a lot of color to the relationship and really exciting times. Thank you very much for that.
We're going to move on to a quick 10-minute break so everybody can stretch their legs a bit before we come back and hear from the rest of the Hippo team.
Good morning, everyone. Okay, I'm excited to kick off the second half of our investor day. My name is Torben Ostergaard, and I am the CEO of Spinnaker Insurance Company, Hippo's MGA platform, or hybrid fronting company, as we also call it. I'm super excited to be here today and tell you a couple of things. First of all, we will go through the results that we've achieved over the last three years. I want to talk about the investments we have made in the platform and why we think it's really standing out. Last but not least, I'm going to talk about what differentiates us in the marketplace.
Before I do that, I thought I would start by just defining the marketplace. Hybrid fronting has been around for many years, as many of you will probably know, and the market has really grown substantially over the last 10 years. The latest estimate is that the MGA market was about $100 billion at the end of 2024, and about 20%-25% of that was written through hybrid fronting companies. A very large-scale market that continues to grow, and we believe Hippo is well-positioned to take advantage of this growth and the opportunities ahead. Let me first start with what I call a Spinnaker snapshot here. This is really Spinnaker on a page here. Starting in the top left corner there, we have three carriers in the group, insurance carriers. First, we have Spinnaker Insurance Company. That is our main admitted carrier.
We have Spinnaker Specialty, which is our excess and surplus lines carrier. Both of them are licensed in all 50 states and fully operational. We have a second admitted carrier coming online called Wingsail Insurance Company. Wingsail is now licensed in 24 states, and we are now in the process of getting the other 26 approved as well. Really important, we have multiple carriers at our disposal so that as we have programs, we have the right licenses, and we can capitalize on the growth ahead. Eighteen program partners, very important. You heard from one of them today, Jim, was the founding program, as we call it, the Renters Program from MSI. We now have 18 partners, and it has been a great joy just to see how we've been able to build this over the years.
The team have done a phenomenal job, really going out and soliciting and finding some of the best underwriters in the industry. We now have 18 strong partners with us. We have 30 active programs. That is a very important stat, as Rick showed in his presentation and Stewart as well. We started out with a very concentrated balance sheet. As we have grown the company, we continue to diversify and bring on new lines of business. We are now up to 30. What is also important about that number is that multiple of our partners are writing more than one program. That is very intentional. We want to find deep relationships with the best underwriters in the industry. As we find them, we keep investing in them, giving them more capacity, helping them launch new programs.
That is exactly what we are going to do with the Baldwin partnership that we just talked about this morning. Going to the bottom part of this page here, we have an A-rating. We have a great relationship with AM Best. As you all know, an insurance carrier really needs to have a strong rating. We have had this rating since 2015, and we continue to really protect that. Our CFO, Jesse, that you are going to hear from in a little bit, does a great job managing that relationship for us. That is a very key milestone for us every year as we renew our rating. Now, let's talk about the financial numbers: $618 million in gross written premium. As you can see, we have underlined that there with these are the non-owned Hippo programs. These are third-party programs.
These are the 30 that write on our paper across the three carriers we have. Those 30 programs produce a 39% net loss ratio. That is exceptional results. We are very pleased with that. These are the 2024 numbers. In return, that produced a 25% return on capital to Hippo. We were really pleased with the performance here. Now what I want to do is show you the trajectory that has happened over the last three years in the business. Here are the numbers broken down, a few of them. We started there on the left. You will see our gross written premium. Again, this is the non-owned Hippo programs. You will see there we have more than doubled the premium there that we have written over the last three years. Very strong top-line growth by finding and partnering with some of the best underwriters in the industry.
The 30 programs produced a 39% loss ratio last year, as I talked, but you can also see they're stabilizing around 40%. Very strong performance. We're very pleased with how these programs are performing. As you always have in a portfolio, some are performing extremely well, some slightly different. It varies with where you are in the cycle and what line of business it is. When you net it all out and you have a diversified balance sheet like this, it produces exceptional results. We're very pleased with how the programs are performing. Last but not least, bottom-line profitability. What you see there on the right side is a representation of bottom-line profits. We wanted to bring in the numbers that you could, or the labels, I should say, that you can tie back to our 10Ks and 10Qs.
Guy later on in the presentation is going to introduce adjusted net income. Think of this as adjusted net income numbers for the 30 programs that we partner with on the Spinnaker platform. Very strong performance, continued underwriting profit growth, and really just very strong performance overall for the platform. We believe that we now have the foundation, a very well-diversified balance sheet that's really setting us up for success. What I want to do next is go in and talk about how have we built this, what are some of the key elements in place, what is it that controls this company, and why do we have confidence that we can continue to add on to these great numbers here. There are really four things that matter a lot to me as I get to run the company every day.
First of all, it starts with a strong team. We have a phenomenal team. You've got to have the right deep bench and expertise that can manage insurance risk. You've got to be exceptional at managing risk. We have a risk management culture at the company. It starts with risk. It ends with managing the risk. I want to tell you a little bit more about how we do that day in and day out. Finally, through Hippo, we have made some significant investments in our technology platform. From everywhere, from how we onboard a program to how we manage them within the bowels of the organization to how we feed data into our data warehouse and how we do risk analytics, we have made tremendous strides there and some enormous investments in our technology platform.
Feel great about where we are there as well. It is all underpinned by trust. Insurance is all about being there when your policyholders need you at the end of the day. We really strive to earn our partners' trust every day. I think the team is doing a phenomenal job of that. These are the four pillars that underpin this company. I am now going to go a step deeper and tell you a little bit about how we have built this out. As I said, it starts with a strong team. I am very fortunate to work alongside these great leaders every day. I am not going to go through each resume, but I do want to say that all of them come from the industry. They have tremendous backgrounds.
As Rick said earlier in his presentation and Stewart as well, a lot of people have come here because we want to do something different. I'm one of them. This team is exceptional. It's not just who we have on this page. It's also everyone that's not here. It's the team that gets to run the company every day. We have equal amounts of talent sitting on the bench helping us run Spinnaker every day. Great team. I just want to end by saying I have a ton of confidence in them. You're going to get a chance to hear from Jesse a little bit. Charles is here in the room as well, so you can ask him questions as we go through the rest of the session today. Let's talk about risk management.
That's the second pillar of how we have built the company. A risk management business needs to be driven by data and analytics and models. That's what we do. It starts with us taking data in, analyzing the data, and all the major decisions we make at Spinnaker, we use data and analytics to make them. We are very conservative in nature. We do not take risks we do not understand. If we do not understand it, we will walk away from it. That is just the right thing to do. It is embedded in our culture. It is our DNA. Very important to us as well. Operations, we have got to have operational excellence. We are not perfect. We try to be excellent, but not perfectionists. I think we do a pretty good job managing all the programs with discipline, with strong processes in place.
Overall, we believe this is the key ingredients to creating a stable and predictable underwriting profit and maintain our underwriting, or sorry, our A-rating so that we have our trust and confidence with our partners and policyholders long term. There's much more to risk management than what I have on this page. I'll dive one step further. Charles, as our Chief Underwriting Officer, gets to run our underwriting process every day. It starts with how we source a program all the way to how we potentially terminate it. We are very intentional. We're very methodical in how we manage this process. We do it in partnership with all the 30 programs. They know exactly where we are in the process, what we expect from them, what we will do for them and with them, and what our oversight responsibilities are.
When you put this process to work, you again create discipline. Hopefully, if you do your job well, you will create great results, which is what we have had the success of doing the last three years. Let's shift and talk about technology. Some key investments we have made there. I've alluded to a few of them already. Let's start with onboarding. As the company was formed and as we got along the way, we have really transitioned our onboarding process to be as automated as we can. Today, we have gone from a lot of manual processes to much more structured processes. Where we can, we're really automating the data intakes all the way from when we engage with a program of a potential partnership. Really purposeful using technology in our onboarding process. Back office.
An insurance company is driven by a lot of processes that have to be done right. You can only be operationally excellent if you have very strong technology and processes in your back office. An example I'll give there is how we manage and deal with our reinsurance partners. Spinnaker has a panel of 150 reinsurers. You'll know many of them if you see the list. Every day, we pretty much communicate with them, transfer money between us and them, or do some type of an interaction. We have put in place, Jesse's team has done a great job with the overall finance organization, putting in a process and a tool that really has automated a lot of this. The transfer of money, the communication, the transfer of data has now been organized really well in this new system.
That is just one example of the many investments we have made in our back office. Finally, to the heart of the organization, which is our data warehouse. This has been an ongoing journey for two years. Many of you get to do various things in business. You'll know you're never done investing in your data infrastructure. We've made a ton of progress here. A risk business is all about taking in data, analyzing the data, creating models, and making decisions on, is this a risk I can take? Is it priced appropriately? Should I have more of it? Should I have less of it? Where are you in the market cycle? Our data warehouse really is the heart of the company. I think we have done a great job building that to the next level. We keep investing in it.
Also, very importantly, I'll say when you operate three insurance carriers across 50 states, you have a lot of constituents that you've got to deal with, not just your partners, but also your regulators. This data warehouse also helps us automate some of that reporting that goes out to our regulatory friends as well. Let's put some context and some conclusions on this. On the left side, I wanted to show you just a little bit about what has been the output of us building, in this case here, our risk management processes, built them to a level where we have full confidence in them, where we feel we can now take on more risk. What you see there is the gray bars is our increase in premium. The line you have there is the amount of risk retention we have.
As you can see, we have continued to, or we have increased our risk participation. We expect that to continue in the years to come. We are doing that because we have a lot of confidence in the way we manage risk. Even though it's a small percentage increase, keep in mind the pie is a lot bigger than what it was a few years ago. We are taking on more risk. We're doing it with discipline. We feel we understand it. It's well modeled and well controlled. That's a good example of how we're putting our risk management practices to work. On the right side, I wanted to end on trust. You will see some of the long-tenured partnerships we have there. I'm very proud of all the 30 partnerships we have. We talk to them on a very frequent basis.
Some stand out, obviously, as some of our most tenured. You'll see Coterie. Some of you might know Coterie. It's a great commercial DL program. Some of you will know Simply Business. Same thing, slightly different focus and scale, sorry, focuses and different target customers. They've been with us four and six years. Very pleased with those partnerships. They've become some of our biggest partners on the platform. MSI, representing here, was Jim earlier. As Jim said, he was the first policy that was written on Spinnaker. Very, very pleased with that partnership. Many years to come still to go on that. I think in conclusion, a lot of great investments we have made. The infrastructure is there. The pillars of a strong, profitable company are in place.
We feel really, really have a lot of confidence in where the platform will go next. To end us, I wanted to talk a little bit about how we put this all to work and show you how we manage the programs on a regular basis. I put these into three categories: programs that are slow and steady, where we continue to give them capacity in various market cycles as we think makes sense; those that are able to really scale up fast, and we see an opportunity to go a little bit faster than we normally would and give more capacity quicker; and then finally, the programs where we unfortunately might have to exit. The vast majority of our programs fall in the first category.
They do a great job underwriting the risk, selling the business, servicing the business, and then being there for the policyholders when a claim needs to be dealt with. The second category does not happen very often, but we do have some. I am going to give some examples of that in a second. That is really the case where not only are underwriting results and servicing done extremely well, but the financials are in a situation, it could be a niche situation where there is a market opportunity, and we lean into it a little bit harder than we normally would. Finally, there are only a few cases, but it does happen where a program is not quite performing. There might not be the reinsurance support for it, and therefore, we have to exit the program. It does happen.
When that does happen, we try to act swiftly, be great partners, do the right thing, and help the program land where they best can. Let me show you some numbers behind this so you get a sense. This first category is the slow and steady growth. This is an example of a program. You see the gray bar is the premium that they are writing, and the black there is the gross loss ratio. This is an exceptional program. You can see very well managed, very well performing year over year. We have multiple programs that fit this bill. Not everyone does exactly that pattern right there, but you get the sense. In this case, we give more capacity year over year. We continue to work with the program.
When it makes sense, we might dial up our risk participation in the right market conditions. We might dial it down in different market conditions. The vast majority of our programs, again, fall in this category. The second thing we'll do is, as I said, somewhat infrequently, but it does happen. Here's an example of a program that came to us in 2021. It really was able to ramp up fairly quickly. We got very confident with the modeling of the risk, how they were handling it, how they were servicing the book. They had a unique market opportunity to service a segment that was probably underserved. We were able to lean into this and really help them scale faster. The results kept going as well. This does not happen very often.
When it does, we try to be opportunistic and take advantage of these situations and help the partner, all for the greater good of serving the policyholder. Last but not least, excuse me. This is where we have a program that might, excuse me, might have some problems with performance. There are many reasons for these things happening. Typically, what happens is that the reinsurance market will also back off, and we will not be able to get the reinsurance support we want. In these situations, as I said, we try to be great partners, do the right thing, help the program land on their feet, and figure out what is best for the whole ecosystem that is surrounding this partner.
I hope these case studies gave you a little bit of sense for how we run the company and what it feels like being walking in the shoes of Jesse or Charles or myself every day or the teammates that we have on the team as well. In summary, we've talked about Hippo's MGA platform here called Spinnaker. I think the results have been exceptional. As you can see there, the program's business is strong. There's a big marketplace that's growing. The results have really continued to improve. We have strong underwriting results. We have strong bottom line profits at the platform. We believe very strongly that the platform provides a stable, predictable, and profitable pathway to continue to grow Hippo in the years to come. On that note, that concludes the Spinnaker section.
I'll be available for questions here with Rick and a few others in the next half an hour. At this point, I think I'm handing it over to our Ch ief Insurance Officer, Mike Stienstra, who's going to talk about the Hippo homeowners program. Mike.
All right. Thank you, Torben. My name is Mike Stienstra, and I lead the Hippo home insurance program here. I came to Hippo in 2021 as the Chief Actuary, and I stepped into my current role at the beginning of last year. Over the next 15 minutes or so, I'm excited to talk to you about Hippo's journey over the past couple of years, where we sit today, and the opportunities ahead. Our opportunities are really broken down into three groups. First, we're in a large and growing marketplace. Second, we've built our portfolio into a profitable, stable one that is resilient against large-scale weather events.
Third, we have the team, tools, and discipline to capitalize on the opportunities ahead of us. I also want to take a step back, pull back the curtain, and show you a little bit more about what operational excellence means to us. To do that, we're going to go through the ethos and actions that have powered these actions and have put us in the place where we are today. Starting with the US home insurance market, I might be biased, but I think this is the most compelling market to be in, not just today, but as I look out over the next 10 to 20 years. In 2024 alone, it grew by $20 billion and sits at $215 billion total. Over the past five years, it's grown 60%, or $80 billion worth of growth.
What's exciting is that this growth was not driven by a housing boom or something really up and down, but instead, deep structural changes have been occurring over a large number of years. These changes are combining in a way that produces long-term sustained growth into the future. This represents a huge opportunity for companies that can combine underwriting discipline with operational rigor with a modern technology stack that enables them to respond rapidly to changing marketplaces. That is Hippo. We are a team of insurance professionals committed to underwriting excellence who are paired with exceptional engineers who have the ability to build capabilities and bring that vision to life. As we talked about with the new homes market, we are committed to continuing making it easy for great homeowners to easily obtain affordable home insurance coverage.
Through proactive and disciplined underwriting paired with modern technology, we will continue to deliver on that mission. These are the good-looking leaders who have helped bring that vision to life and can continue to deliver on the opportunities ahead of us. We come from companies that have been exceptional and have shown you can pair a customer and partner-centric culture with underwriting discipline and excellence. Over the past three years, this team has transformed the portfolio into one that is generating significant income at much lower volatility. It is priced not just adequately, but accurately. There is less concentration, and it is on much more favorable and equitable economic terms. It has been made up of and changed into much younger and lower-risk homes as well. It is a healthy portfolio. Over the ensuing slides, we will show you the high-level performance as well as the drivers that underlie that.
Much of the current leadership team came on in 2021, and we initiated a series of improvement actions that started to take hold over the ensuing years. This drove down the loss ratio and also reduced the volatility. What we're showing here is the underwriting year ultimate loss and ALAE performance evaluated as of Q1 2025. What this does is it ties the premium and losses to the year in which the policy was written. This cohort view makes it a little bit easier to see how the actions are impacting the policies and how that cohort is changing over time. You can see underwriting year 2024, but we're not the but-for insurance company. At a 70% loss ratio, including the California wildfires, but for the California wildfires, the loss ratio would be below 55%. Now, we're not done here.
There's another more than 15% rate action that is live and earning through the book. This positions underwriting year 2025 to outperform even these strong results. Now, we achieved these results despite extreme inflationary headwinds. The industry saw ex-CAT loss costs increase somewhere in the 30% range between 2021 and 2024. Conversely, we were able to decrease our ex-cat loss costs by double digits, and we made even more strides reducing our CAT exposure. This was accomplished not with broad brush actions being sweeping across the portfolio, but targeted house-by-house decisions. We applied surgical precision in both our pricing and underwriting to strengthen the portfolio and put us in shape to grow profitably into the future. The first order of action was making sure each policy was priced accurately and fairly. Beginning in 2022, we launched a major overhaul of our rating plan, introducing increasing segmentation and granularity.
Since then, we've introduced 18 new variables, and we've reevaluated our entire set of pricing factors. What this has created is a much more robust pricing matrix and much more precise risk-based pricing. It has also created a more dynamic and responsive pricing framework. A number of the variables we introduced react automatically to changing underlying exposure sets. For example, the aerial imagery variable roof condition, it's updated multiple times a year to see how it's performing. At renewal, if the customer has improved their roof by repairing it or replacing it, the variable will automatically adjust, read that in, and give the customer discounts. Conversely, if the roof is deteriorating, it'll pick up that and apply surcharges to the policy.
This not only keeps our rate aligned with the risk, it provides a financial incentive for the customer to improve their house and does so without them ever needing to talk to the insurance company. What we're showing here is one of those rate changes we deployed. You can see the segmentation and disruption accompanied by it. Our highest risk policies received extremely high rate increases, some as high as triple digits. Conversely, the lowest risk policies received meaningful rate reductions. This wasn't just about correcting mispricing, but it was a strategic realignment of the risk tolerance pushed through our portfolio. It's enabled us to retain more of the lower risk policies while reducing our exposure to higher risk policies and right pricing the ones that remained. Additionally, this was not a one-year effort.
This occurred back to back to back years, continually improving and changing the portfolio to that lower risk, more profitable set. Go next. Hopefully. Additionally, we adjusted our coverage. We changed our terms and conditions to increase the cost-sharing mechanism with our customers. Similar to pricing, this was not a broad brush action, but we tailored our adjustment to every single house based on the house's specific characteristics, its geographic location, and our concentration in the area. This is best observed through the results shown. Our Q2 2024 CAT season produced results that if they'd happened a year prior on the prior exposure set, they were 50% lower. If those same events were to happen this year, we'd expect 60% lower losses than what we saw in 2024. We can see what drove it. Part is a reduction in those higher risk policies.
There are targeted non-renewals in addition to that changing pricing set that drove some of them away. Then, the changing terms and conditions that realigned the economic incentives between us and our customers enabled us to write this policy profitably and give them a bigger financial stake in the outcome. Lastly, we drove profitable growth in the portfolio by strategically expanding our presence in the new homes market, specifically through the builder channel. This shift replaced older, higher-risk homes with newly constructed properties and well-planned communities. This was a deliberate move that strengthened the overall health of the portfolio. We can see the performance here. These cohorts of new homes through the builder channel continually produce loss ratios somewhere between 19%-43%, while their presence in our portfolio grew from 2% in 2020 to almost a quarter in 2024.
This growth and performance was enabled by pairing disciplined underwriting with modern technology. It shows that we can make it easy for great customers to obtain affordable coverage easily while continuing to drive profit and strength through the portfolio. Improving the portfolio in light of generationally high inflation required more than just strong underwriting and pricing. It required operational rigor, disciplined execution, and a long-term commitment to build sustainable value through our operations. I was asked, "Mike, how do you show that you not just did the right things, but you're going to continue to do the right things?" I said, "Planning." They said, "How do you do that in an exciting way?" I said, "Planning." It really is that same rigor that we need to run this company.
It was applied through a deliberate cycle of our planning, monitoring, and executing that drives consistent performance and continuous improvement. It is said that if you take care of the minutes, the hours will take care of themselves. That is true in insurance. How do you make sure you're making the right decision every single day? The planning process here also exhibits our commitment to underwriting and pricing each customer individually. A commitment like that demands a planning process that is built from the bottoms up and is rooted in precision and scalability. The first step, we forecast each house multiple years to see how the home, the homeowner, and policy are going to change over time. We calculate the premium and losses. This may sound simple. Let's just take premium.
At any point in time during the year, we have between 120 and 200 rating engines live with both the in-force and renew and book of business. Forecast that multiple years forward, and you see you need hundreds of rating engines. Each rating engine has upwards of 200 variables. Each variable has its own separate table with factors across 10 payrolls. In order to calculate and understand the exact impact each customer is going to go through, you need all of that. That takes some serious technology. Now, as Stewart said, between 2022 and 2024, we launched over 170 rate increases. Those rate changes were not just your vanilla base rate. They were extremely complex, introducing new variables, changing tables, changing interactions.
The same technology that allowed us to do that rapidly at scale, taking our actuaries and underwriters' mindset and putting it into the marketplace, has been scaled across our organization into our planning to be able to do this and improve our operations with minimal additional costs. Lastly, the loss models. We have 17 different ones. This forms the backbone of our company. As pricing and underwriting focus, your loss models tell you where you need to go. We need to understand our exposure to fire, non-weather water, wind, hail, all of it, understand how it changes for each policy and how it aggregates up to the portfolio. This drives the future of the organization and is vital to get right. Lastly, our retention engine adds a critical forward-looking lens.
We predict not only the likelihood of each policy staying or leaving in light of the actual premium and coverage changes that will apply to it, but for those policies we expect to lose, we're actually forecasting the exact day that they're going to churn. All told, this provides a multi-year policy-level view of the profitability that can easily be aggregated up to the portfolio to assess the portfolio health, stress test assumptions around trend or other things, and iterate through to optimize the portfolio. As we begin executing our plan, we continuously track the policies to ensure our actions are having the intended impact. We're looking to see that the home, the homeowner, and the policy are evolving as expected. The question is, how do you do that?
How do you quantify if the coverage A goes up 5%, but they buy down coverage C, and the roof ages a little bit more than what you thought, but then maybe they increase their deductible? It gets really complicated really fast. To do it at scale, we independently re-rate all 210 variables and measure that difference to expectation. That allows us to aggregate it and see quickly where there are differences to plan, what's driving it, and if there's something we want to do about it. The daily retention measurements allow us to quickly detect changes in customer behavior. Again, it all comes through the loss models. Is our losses being matched by exposure and our premium, and where do we have to go?
This ultimately gives us a real-time view of how our exposure and profitability is changing and to ensure that we're on track to hit our targets. It's really nice to have this visibility, but visibility alone is not enough. It's the ability to act that sets us apart and really drives the value behind this process. A flexible tech stack enables us to rapidly deploy targeted changes. This end-to-end capability to plan, monitor, and execute leads to quicker and more targeted actions, allowing us to act more confidently, changing customers and policies that need to be changed while protecting the profitable ones, increasing the retention among the ones we want to keep, and enabling long-term profitable growth. For example, here's a small one. As we came on, we saw a signal that some discounts may be getting overused and misapplied.
Step one is we quickly change the consumer flow to adjust the process and reduce potential misuse. Then our engineering and insurance product teams work together to create a tool to make it easy to verify discount eligibility both for the customer or the agent. We launched that tool for targeted customers whose discounts were in question. As we found that to be more successful, generating premium at a higher retention rate than expected, we scaled that across other states and discounts. The more accurate application of our policy pricing not only ensures that the risk-based pricing is there, but it protects our other customers from unnecessary price increases. At Hippo, we're a group repairing insurance expertise with an engineering mindset. This creates a powerful feedback loop. The technology makes it easy to underwrite accurately, adapt quickly, and grow responsibly.
We built a platform that lets us both identify opportunities and act on them. What this enables is the engineering capabilities that allow rapid and targeted responses. We paired that with a culture of disciplined underwriting and rigorous execution. Together, that has created a more profitable and resilient portfolio that positions us well in a large and growing US homeowners market. Lastly, all of this says about the future. We're not only driving profit on a day-to-day basis, but we're able to deliver on our mission of making it easy for great homeowners to find and obtain affordable coverage, both generating profit through the organization. Now, I'd like to bring back Andrea Collins to talk through how we bring this to life through our go-to-market and customer experience strategies.
Thanks so much, Mike. Nice to see you all again. As I mentioned, I'm Andrea Collins, Hippo's Chief Marketing Officer.
I bring more than 20 years of experience in marketing and communications to my role. Most of that is in the insurance industry. At Hippo, I focus on distribution, acquisition, and delivering on exceptional customer experience. Let's get into it. It's clear that in today's connected world, delivering exceptional customer experience isn't optional. It's essential. That's why our goal is to provide customers with a seamless experience and the best coverage options for their unique needs, all while driving higher premium retention and recurring revenue, of course. We start by understanding the potential customer sets that best suit our needs before we even think about acquisition or targeting. We go out and heavily research potential homeowners' unique needs and risk profiles, and then we target a specific segment of customers that meet our risk profile and would be the best potential customers.
We use highly effective and efficient marketing channels and partner marketing opportunities to target these customers. Once we bring them into our funnel, as my colleague Mike alluded to, we still provide a very seamless experience and never lose focus on how to provide that exceptional customer experience. We make sure that there are no repetitive steps in an application, for example, by prefilling with first and third-party data sets. We move quickly to identify whether the customers are a best fit for a Hippo product or an agency product. Our agency is backed by more than 70 carrier partners, so some really great optionality. We also work on the back end to understand when bundling options are the best fit for these customer sets based on providing more value at the point of sale, as well as more revenue for the company.
It is not just our D2C channel and engine that we see great growth opportunity. We have invested in our B2B channels to be able to focus heavily on customer experience and provide great value there too. Hippo created a new construction home product that is best suited to the new construction homes by considering how to weave in things like a blueprint or a plan, as well as safety features in a community. It takes into account how much defensible space is around a California community that is trying to mitigate wildfire risk, for example. Each new construction home buyer moves into a home with a policy that is heavily tailored to that home and perfect for their unique needs. That also gives Hippo access to low-loss ratio new construction homes.
Through our partnership with Baldwin, announced today, we'll give a lot more new construction home buyers access to this great and tailored product. No matter how we acquire our customers, whether it's through D2C channels or B2B partnerships, exceptional customer experience remains our focus. Overall, our refined approach to both targeting and acquisition, as well as our intuitive online funnel that delivers personalized options to unique customer sets, continues to give us a strong advantage across all of our channels. That advantage doesn't stop once we actually write a policy. We leverage tech to drive value at every touchpoint for the customer experience. We provide tailored offerings and stay connected with customers throughout the life of their policy.
For example, when a customer's unique needs change, like maybe there's a new driver in a home or the family is growing, we offer auto quotes or umbrella insurance opportunities. We use proactive communications to drive personalized tips and advice for proactive home care. Every year, we develop seasonal weather communications, like the one we just sent out at the top of this month, providing personalized plans around how to avoid risks and mitigate losses during hurricane season. It is not just catastrophic and seasonal preparedness that we focus on. We want to truly empower our customers to take on home care.
We developed a Hippo Home app that provides personalized plans with essentials like when to change the batteries in your smoke and carbon monoxide detectors, or more advanced and personalized options like where to put a water leak detector underneath your sink or next to your bathtub, which could help you avoid one of the most common and costly claims in home insurance. This is all just the beginning. We're leveraging technology to be able to refine and drive proactive communications around every area of the homeownership journey in the future. In summary, we have built a unique offering and positioning in the home insurance market, underpinned by both the growth and net earned premiums and reduction in loss ratio, as well as our distribution and customer experience strategy. We are well positioned for growth. Now I'll hand it over to Spinnaker's CFO and COO, Jesse Willmott.
Thanks, Andrea. Good morning, everyone. My name is Jesse Willmott, and I'm the CFO and Chief Operating Officer of Spinnaker Insurance Company. It's great to be here with you today. What I'd like to do is share a little bit about how we overall manage risk and volatility for the broader company across the portfolio programs. Our risk management and portfolio approach is really grounded by two fundamental key components. The first you heard a lot about today already. That's essentially how we source programs, whether that's sourcing our own affiliated Hippo Home Insurance program that Mike spoke a lot about today, or the diversified portfolio of third-party program partners that Torben talked a lot about. The key component to that is, again, finding high-quality, diversified business that we bring into the company, in which case we can then structure solutions around that.
The second key component is reinsurance, and particularly how we structure that reinsurance across those programs, whether that one is at an individual program level or two on a multi-portfolio basis cross program. There is a lot of stuff that we do there, which is actually pretty interesting and we feel like really drives a lot of the value in the business and how it all comes together. A key dimension to risk management from our standpoint is our ability to be flexible. What flexibility does is it allows us to manage across market cycles. What that does is it allows us to achieve the right balance and optimization of how we deploy capital.
It allows us to pivot fast, whether that means we're looking to enter a new opportunistic line of business, whether that means that we're looking to exit a specific program because we may have some otherwise challenges or challenges on the horizon. Pivoting allows us to also take advantage of various market cycles. In the example here above, what you're going to see on the left is a general softer market cycle where there may be demand for essentially broader demand for whether it's offerings that we have, again, is grounded in this diverse book of business, in which that case there may be broader reinsurance capacity in the market that's looking for that. We actually may lean more on fee-based economics, generally like what you're seeing a lot of the other hybrid fronting companies do.
Another key component to that flexibility, though, is when rates are higher and we have generally harder market conditions, there's less supply of reinsurance capital and reinsurance capacity in the market. In that case, we don't want to have a single rigid fixed strategy where we have to depend on reinsurance. In that case, we really want to lean in on our portfolio and lean in on the underwriting results that that's otherwise creating. What that allows us to do is, again, pivot based on conditions and really do optimize capital for the right condition within the market. A key component to managing these cycles is certainly how we think about and how we deploy reinsurance capacity across our programs. In this example, which is affectionately referred to, I've heard so far this week as the puzzle slide.
When you look at this, there are three key components of reinsurance that are on here. The first is programmatic reinsurance. As the name implies, that reinsurance is set and established on an individual program basis. We would otherwise look at that program to see what type of risk tolerance and what type of financial objectives we are looking to achieve, again, within the construct of the current market cycle. If you look at Program A, for example, this may be a program that is growing quickly. As part of growing, we are looking for other reinsurance partners to otherwise help support that growth. It gives us the ability to utilize and deploy capital more efficiently. In this case, we would have in the light gray a gross quota share structure that goes up to a certain return period.
Whatever the inverse of that gross quota share that we're otherwise solving for is going to be what we would call our net retain piece. That could flex and that could vary based on the facts and circumstances with that underlying program. If that program has some volatility components in there over our net retain structure, what we may otherwise do is buy some excess reinsurance, CADXOL, per risk, whether reinstatable or single shot, again, really based on the facts and circumstances of that program. Program B is an example where we're employing a similar structure. However, you can see the quota share doesn't go as high up in the programmatic structure. This would be generally a net quota share type structure.
You're typically going to see something like this as market conditions harden a little bit and reinsurers are looking to participate and kind of limit the volatility on their end. Allowing to deploy this, again, just provides flexibility. It gives us broader, more access to markets. In exchange for a lower occurrence cap, we would generally get increased commission economics that would allow us to protect against volatility above where that participation otherwise ends. Same thing, we would otherwise think how to solve for what's the right net retain structure for us. Program C is an example that you heard a lot about, Stewart talking about earlier before, really the evolution of Hippo and the Hippo Home Insurance program.
I think when I think about Hippo, it's really in a way of moving from Program A, kind of early days to moving to Program C, similar to where we are now. What that does is, as you certainly get a lot more conviction in the underlying attritional loss ratio and underlying attritional economics, or it's a program that really just has peak peril exposure, that might be something where it doesn't make sense to utilize a quota share reinsurance structure and instead structure more with CATXOL and then capture a lot more of the economics down on the premium side. The second piece of our kind of structuring with reinsurance, and this is how we keep all of our reinsurance broker partners so busy, you can see, is our corporate layers and corporate structures. What that would otherwise do is provide support across multiple programs.
Generally, what we're looking to do is we're solving for internal company risk tolerances. We might be solving for particular capital protection. It also allows us to introduce structures at higher return periods that might otherwise make it more efficient across multiple programs rather than if we were to buy up those limits on an individual program. It gives us a lot of flexibility, especially as the portfolio becomes more and more diverse. The third piece I'll talk about is how we think about alternative reinsurance structures. This is something we particularly started to lean into the last couple of years. We announced a couple of years ago the issuance of Spinnaker's first cap bond. What that does is that provides multi-year capacity for peak peril, and it's a specific solve.
It also generally gives us access to reinsurance markets and reinsurance capital that is different than traditional reinsurance capital. Another example would just be like a state-type fund, a Florida Hurricane CAT Fund, which I'm sure a lot of you are familiar with, is more of a Florida-specific, gives us access to, as a writer in Florida, gives us access to protection at, I'd say, a better cost than what otherwise would be available broader in the markets. It gives you a little bit of an overlay, a little bit of an idea, really the day-to-day, how we think about these programs, and again, just underpinned in flexibility. If we had a rigid structure right here, this would be a lot more challenging for us.
Having flexibility and really having a great panel of reinsurance partners that are willing to work with us, and we're not just looking at that as a transactional relationship, it's looking as a really long-term relationship that helps supplement our capital. To turn really into the last slide, how reinsurance is dictated, a lot of it's just driven and underpinned in our overall risk tolerances that we set at the company. I would say that's kind of three main buckets. The first two I'd call table stakes. That's regulatory standards, and that's AM Best requirements to maintain our license within markets and our rating, which we view as something that we need to go to market. Internal risk tolerance otherwise then is just a next building block on top of that. And that's generally more stringent.
What that would be solving for very specific pieces, whether that's going to be evaluating multiple PMLs across the curve and establishing capital thresholds across that. It changes with our portfolio dynamic as our portfolio evolves. It is less rigid, it is more flexible, and it is really meant to help us think about how do we drive the most value out of the portfolio that we create. Hopefully this was somewhat insightful, and we could not be doing it without such a great team that we have. I feel left out because I do not have that team slide in mind, but big thank you to all that helped bring this together. With that, I am going to introduce Guy Zeltser, our CFO, and take us home.
Thanks, Jesse. Hello, everyone. Great to see so many familiar faces. For the ones who do not know me, my name is Guy Zeltser. I'm Hippo's Chief Financial Officer. I've been with Hippo for the past five years, and I'm very proud and excited about the progress that we have made over the last five years. I'm even more excited about the direction that we're showing to you today and our plan going forward. Before talking about the plan going forward, I do want to go back for a few moments to what we said three years ago. Stewart already went through this slide, so I do not need to repeat each and every number. Stewart put a lot of focus on the direction and how we have gone from what we said three years ago to what we actually did.
What I do want to put a lot of focus on is what we said that we would do and what we actually did. As you can see, against each of the key metrics that we talked about, we actually did better than we said that we would. This is not by coincidence. This is in our DNA. This is who we are. We are not shy away of putting pretty bold goals out there and then do whatever it takes to execute. As you all know, when you put a plan together, nothing is always happening exactly as you plan, but it does not matter. We are committed to what we are saying that we're going to do, and we're doing it.
This is why what we're now going to aim to do in the next three years is that in the next Investor Day, three years from now, we will be able to show you a similar view of how we exceeded each and every target that we're showing you today. That's what we're trying to do. All right. One more thing I want to talk about before talking about the future is the new financial metrics that we're going to be focusing on. As we think about this new strategy and as we are going to execute against this strategy, this is what we are going to look at internally to measure the progress, and this is what we encourage all of you to do. I don't think that I need to explain this to any of you. This is pretty standard.
What I do want to say is it should be able to allow you, first of all, to much more easily compare us against our peers. Hopefully, attaching a value to Hippo should be much easier going forward than what it used to be in the past. Also, we internally are going to be focusing going forward much more on a consolidated basis results rather than individual segments. As you heard from Rick, Stewart, Jesse, Mike, and Torben, this is all going to be about how we manage the portfolio and how we make sure that we continue to diversify and add more scale to the platform. The power is in how things are working together, which is why we are going to look at the results on a consolidated basis at the portfolio level.
Last but not least, I do want to touch on one metric, which is the adjusted net income. That is going to be the main metric that we're going to be using going forward to measure the profitability. This metric does include the investment income that we generate from our investment portfolio, as it should, because we're an insurance company, and that's a core part of the business model of every insurance company. Now, let's understand, first of all, let's level set and understand how the results that we have today already look like through this new language. I just want to start by highlighting a very important aspect. We're not changing the guidance that we just shared with all of you two months ago or two months ago when we announced Q1 results. This is the same guidance. We're only translating it to this new language.
You can see on the left-hand side the results for the full year. Again, same guidance. What I do want to, what I do encourage all of you to focus on is on the right-hand side, which is the results of Q2 and Q4 taking the same guidance and just annualizing it by adding another quarter. The way that that looks like is we're guiding to $1.15 billion-$1.2 billion of gross written premium, 62%-64% consolidated net loss ratio, adjusted net income of $28 million-$32 million, and adjusted return on equity of 8%-9%. Now, probably more importantly than the level set and the baseline is how this thing is going to look like over the next few years. All right. Let's start by the top line, the gross written premium.
What we're guiding here is to nearly double gross written premium to more than $2 billion by 2028, and I'm going to talk in a second about how we're going to do it. Adjusted net income, as I mentioned, going to be going forward the main profitability metric. We're going to quadruple it to more than $125 million in 2028, and that will allow us to generate more than 18% of adjusted return on equity also in 2028. Let's double-click on each one and help all of you understand what are the main drivers to accomplish these results over the next few years. All right. Top line. As I just mentioned, we're going to nearly double the gross written premium to more than $2 billion by 2028, and there are four main drivers that are going to allow us to do that.
First of all, organic growth through the existing non-Hippo programs on the Spinnaker platform. You heard Torben earlier talking a lot about all the programs that we have been adding to the platform over the last few years. We're simply going to continue to grow organically with these programs by between 10%-15% a year, which is pretty much what we expect them to grow organically, and this is how we pretty much expect the market to continue to grow, and we're just going to grow with that, nothing unusual. Second, continue to adding new programs. If you think about the numbers that Torben mentioned, we have grown the Spinnaker platform or the non-Hippo premium on the Spinnaker platform from about $150 million in 2021 to, as Torben showed, more than $600 million in 2024. That is not the end.
It continues to grow in 2025. Obviously, we did not just 4x by organic growth. We have been adding a lot of partners. As we think about the future, we're talking about adding additional partners and additional premium of between $100 million and $150 million every year, which is pretty much in line, as I just described, with what we have done historically. In addition to the absolute dollars, we're also going to focus a lot on diversifying into additional lines of business. That is going to be bolstered by the very exciting partnership that we announced this morning with Baldwin. They already have different programs that are going to diversify our portfolio. We are very, very excited that we have a clear line of sight to accomplish that. Three, new homes within HHIP.
You all heard us talking about new homes in the last few years, I want to say. As Mike showed you, it has been generating for us phenomenal underwriting results, gross loss ratio of less than 40% inception to date. As we think about the future, and again, bolstered by the partnership that we announced this morning with Baldwin, we are now going to get access to 3x the number of new homes versus what we have today. That should allow us to continue to grow this business very profitably. Last but not least, number four, the growth in HHIP outside new homes. As Mike mentioned, we have worked a lot on the transformation of this book, and we are now ready to come back to growing it. We are going to do it in a selective way.
We are going to work through select channels or select partners to which we have access to positively selected risk. We also want to focus on geographies in which new homes are not predominantly being built, so we can also get geographical diversification. All right. Now let's understand how gross written premium growth is going to actually result in real dollars into the P&L. When you think about how much of the gross written premium we're actually writing on our own balance sheet and what is the net loss ratio of this premium that we write on our balance sheet, we actually don't think that it's going to change as much between 2025 and 2028. We are already retaining today on a consolidated basis, about 40%, 42%. As you can see, there is a range of 40%-45%.
We talked about the fact that a core pillar of the strategy is the ability to dial up and down risk retention and to respond to market conditions. This is why there is a range. Again, we're going to react to market conditions, but this is where we think it's going to land. Net loss ratio, as you can see, not changing as much. There are a few tailwinds that we already know that are coming. Mike mentioned some of them. As we grow, we might face some headwinds. Net net, we think that it's going to stay relatively the same to where it is today. If you believe that these two metrics are going to stay the same, and if gross written premium is going to double, then the other underwriting profit before overhead is also going to double to more than $220 million in 2028.
All right. Another key component of the strategy and the growth of adjusted net income is the operating leverage. Hopefully, after you heard us talking about it for a few years now, and after Stewart talked about it also in length in his own section, this should not come as a surprise or as any new news. Stewart mentioned it earlier. We have been actually managed to, while we grew the business in the last few years, to take costs down on an absolute basis. We are going to continue to invest in automation in our infrastructure technology, and that will allow us to continuously have gross written premium and top line growing significantly faster than the fixed expense growth. The last component of the adjusted net income growth is the investment portfolio.
I'm not going to read each and every piece of the pie here, but I think, as you can see here as well, we're being pretty conservative. We're not trying to generate excess returns. We want to generate a relatively similar yield as we're generating today. On an absolute basis, we do expect the revenue from the investment portfolio to nearly double over the next few years as our business is going to nearly double over the same time horizon. Just to land the plane, I just want to reiterate the guidance. We're going to more than quadruple the adjusted net income over the next few years, and it's going to be driven by three main things, mostly gross written premium growth while maintaining similar underwriting profitability to what we have today.
We're going to get additional investment income from the investment portfolio, and we're going to continue gaining operating leverage. All right. Capital structure. There are a few things that we think that make us unique on that front. First of all, when you think about the different, literally the capital structure that we have in the org, we have an MGA, we have a carrier, and we have a captive reinsurer. What that is allowing us is to relatively easily shift capital around the org and to always think about how we can deploy the capital against the pockets that generate the highest return on equity, which is what we're going to put a lot of emphasis going forward.
The fact that we have a captive reinsurer is also what's allowing us to relatively easily dial up and down risk retention and respond to market conditions, which we're going to continue doing. Second, the predictability of our results. I just talked about how the results are going to improve on an absolute basis, but another important aspect here is by diversifying the portfolio into additional geographies and lines of business, the results are also going to be much more predictable. Last but not least, NOLs. That's an asset that we have at our disposal. Especially as we become more and more profitable, that will allow us to essentially move more dollars into the bottom line, net income bottom line. All right. As I wrap up today, there are three takeaways that I want you to take from the presentation.
First of all, strong track record of execution. Over the last few years, we grew revenue, as Stewart mentioned in the beginning, right? 3.5x. Over the same horizon, we moved from a pretty significant adjusted EBITDA loss to adjusted EBITDA positive, exactly as we promised in the end of last year. Probably most importantly, we did it better than what we said that we would. That is, again, not by coincidence. That is the DNA of the company. That is what we do, and that is what we are going to continue to do into the future. Takeaway number two, 2028 targets. Hopefully, if we have all done a great job today, then you should all see that the targets that we put out there, on the one hand, are pretty achievable, but on the other hand, they are also pretty compelling.
Just to reiterate the guidance, more than $2 billion of gross written premium by 2028, more than $125 million of adjusted net income in 2028, and in the same year, generating more than 18% of adjusted return on equity. Takeaway number three, very important, equally. It's not just about the absolute results. It's about the predictability of the earnings and the lower volatility of the results. That's going to be enabled by the platform that we have built, by the ability to continue to add new programs very efficiently that will help us to diversify both geographically and from a lines of business perspective. Q&A time. That's the end of my presentation. We're going to take a five-minute break just to set the stage for the Q&A. We'll see you in five minutes. Thank you.
All right.
We are going to begin our Q&A session. Before we dive in, just a few ground rules. First, we have a relatively full house today, so initially, we'd ask you to limit yourself to one question. If we have time at the end, you're free to ask another question. Once I call on you, one of my team members will come up and hand you a microphone so everyone on the webcast will be able to hear you. For those of you who are on the webcast, there should be a chat function where you're able to submit a question, and we will try our best to get to those as well. Finally, for those of you in the room, when I do call on you, please just state your name and your organization when we start.
With that, I think we could probably take our first question. Let's go in the white shirt over there.
Thank you. Good morning, Andrew Andersen from Jefferies. Just want to kind of bridge the gap between now and 2028. How should we think about the timeline to net income profitability? And just with that, with the goals for growth, I just want to confirm there's no expectation of additional capital raise.
Yeah, great. Andrew, we'll go ahead and let Guy take the path from here to 2028 question.
All right. First of all, as we guided previously, we're not changing the guidance. We still expect to be net income positive for the first time at the end of 2025. We're going to be full year net income positive in 2026, and then very net income positive in 2028.
It is not going to be as high as the adjusted net income, but again, 2026, first year of full net income positive, all the way to 2028. To the question about the capital raise, especially with this transaction, it is not something that we expect that we will need to have another capital raise to support the plan that we put together today.
Yeah. Just to, Andrew, just to reiterate, that does not mean that if there is some opportunity that we want to take advantage of, we would not consider one. In order to achieve this plan, we are in good shape from a capital position. There in the white shirt.
Thanks. Matt Carlotti with Citizens. You have talked a bit about kind of diversifying Spinnaker and kind of new programs.
A few of the ones you highlighted up there were actually kind of casualty, commercial general liability programs. Is there any desire to or a benefit from trying to get an A instead of an A- at Spinnaker? Is A- the right fit from capital and everything else, and you're good?
Yeah, we, sorry, go ahead.
Yeah, no, appreciate that. I think there's a couple of things, and then we'll kick it over to Torben. But a couple of things to consider. The reason we emphasized casualty was because we're currently overly indexed to property. In order to create that balanced portfolio that we were talking about, you need to apply more casualty. From a rating perspective, we're very comfortable with our A-. I do think we need to have a sizing increase to take advantage of some opportunities.
Torben can elaborate to that.
Yeah, listen, you can never, it's the higher the rating, the better at the end of the day. I think the sweet spot, the Goldilocks for fronting companies, is that A-. I think that gives you the most efficient capital structure. You can earn an appropriate return on your equity. I think it fits really, really well for how we are running the company.
Thank you. Andrew Andersen from Jefferies. I think I heard some comments today about viewing results more at a consolidated level. There have been three segments more recently. We did not hear a lot about the services segment today. Where does that kind of fit into the go-forward picture?
Yeah, I appreciate the question.
The reason that we believe the consolidated view is the right view, as Guy mentioned in his presentation, the interchange between these different components from a risk-bearing perspective, whether it is the HHIP portion or the diversified Spinnaker portion, we think it is better to look at that as a consolidated diverse portfolio. From a services perspective, as you know, that has traditionally been made up of three different components. Component number one, our agency. The agency was divided into two groups: the agency group that supported the builders and then our direct-to-consumer agency. It was historically part of First Connect, which, as everybody knows, we sold the majority interest of First Connect last year. Then it is the proactive preventative services. From the agency perspective, of course, now Westwood is taking over the builder agency portion of what we do.
The direct-to-consumer agency, we still have an active direct-to-consumer agency that's going after those positively selected homeowners that want to partner in the growth in our HHIP program. Predominantly in that would be non-builders. There are, of course, many aspects of a positively selected individual on a new home that Andrea talked about. When we talk about our proactive and preventative home services, this is still something in our DNA. It's something that we plan to do. We felt like today, talking about what we have and what we have clear line of sight to deliver is prudent, not something that we believe that we can achieve. I didn't want to bake belief into a business model or a business plan, although we still ultimately, my view is that in order to protect somebody's home, insurance is a portion of that.
You also have to have warranty and proactive preventative services to ultimately get that holistic total home protection. None of that is baked into any of the economics that you saw, Andrew.
The one thing that I do want to add, Andrew, is we are viewing the agency, which is what's left in what used to be services, but going forward is consolidated. We are going to leverage the agency to cross-sell to our customers. Every revenue that we get there is going to be value accretive from a return on equity perspective because it gives you dollars to the P&L, and you don't need to really put capital against it because it's not your paper. We look at things from a consolidated perspective with the agency being value additive.
Yeah, one last addition to that, as I see my friend Jim sitting up here. When Guy talks about cross-sell, he's talking about the Hippo direct-to-consumer cross-sell. The customers that were in the Hippo agency that were builder-source customers, those customers are now Westwood's customers and the builder partners managed by Westwood. I just want to be clear on that point. You take here and then we'll go over there. Start right here.
Hi, I'm Max Chee, Aquiline Capital Partners. I was wondering, you mentioned 15% growth in pricing. What are your assumptions for future growth just from rate increases based on macro environment and based on your own kind of internal assumptions to get to the numbers you're talking about through 2028?
And Max, just for a point of clarity, you mean on the HHIP program from rate increase?
Yes.
Great.
I'm going to turn that question over to Mike Stienstra, our Chief Insurance Officer, to go ahead and answer that question. So Mike, all you.
Sure. So the 15% is the rate that's already live and earning through the book. So that's really about driving down the loss ratio. As we talk about Guy's model, rate increases combined with exposure adjustments, but really that's doing because the book is where we want it to be, is just keeping up with trends. It all kind of rolls through into our retention assumptions. I can tell you when we bring on a customer that is priced and underwritten properly, we retain 90% of them each year. That is even in the face of moderate 5%-8% premium increases.
You add that up and you kind of say that's where we think our premium increase will stay from an overall financial retention perspective. The rest of it is moderate growth on top of it to produce the overall portfolio growing. Guy can give the specifics what's behind that.
Yeah, just Max, my guess is embedded in part of your question too is the go-forward rate need that might exist. I think generally speaking, the catch-up rate that we needed to turn the portfolio around, that's for all intents and purposes complete. I think Mike is exactly right that there will be ongoing inflationary adjusted rate increases that we'll participate in. We're going to try to stay ahead of the curve on those with our analytics tools to make sure that we don't get behind rate again.
I think you're going to see beyond the hard work that we've done to correct the portfolio, the rates that Mike mentioned that we've already done that are live, just not through the books. Beyond that, I do think you're going to see just regular rate increases in that 5%-10% range. We have a question over here.
Yeah, thanks. Tommy McJoynt with KBW. Historically, with the segment disclosures that you did have, we used to be able to see the performance of the Hippo Home Insurance Program relative to the insurance as a service segment. And if I think back a couple of years, a lot of the drivers for the improvement to get to break even and ultimately profitability has been improvement in the Hippo side.
Going forward, do you plan to continue to allow us to see the progress on the HHIP side separate from the more Spinnaker fronting side? On a related note, can you remind me, is the HHIP program the risk? Does that all flow to Spinnaker, or is there a third-party capacity also there?
Great. Guy, why don't you take the beginning of that question?
Perfect. First of all, the answer is yes. We're going to provide additional disclosure. As we mentioned, the focus of the actual P&L is still going to be consolidated, but we do want to allow investors to better understand what is driving the consolidated results, especially from a loss ratio perspective. The answer is yes. We do plan to provide probably lines of business disclosure. Specifically, HHIP probably will carve that out because you're right. It is an owned MGA.
It did drive a significant improvement, and we want to continue to allow investors to see that.
Yeah, one other, Tommy, one other thing to add is that one of the reasons we felt like it was important to break out the segments, which we'll do, continue to do, by the way, the HHIP portion, is that I think there was a misconception that the majority of the business was HHIP and not Spinnaker. As Spinnaker continued to grow, we wanted clear indication that what is driving results both positively and negatively. Now that HHIP is in much more of an industry standard, we think it makes more sense to focus on a consolidated view, but still show you the HHIP view. I think that's important. One thing we really want to do is we want to be very transparent with investors to clearly understand what we are doing.
I think in most of our experience, when we failed to disclose enough information, people make their own assumptions that are generally wrong. We want to make sure people have all the information necessary to make their models and assumptions and everything based on good factual information. That is sort of a DNA that we're continuing to develop, just as Guy mentioned, the DNA of if we say we're going to do something, we're going to do it. That is also a commitment that we have to all of the analysts and all the other investors that we want to give you a lot of information so you know that. To answer the second part of your question on other reinsurance partners, for all intents and purposes on HHIP, there is one small exception to that, which is that Hippo takes the underlying and attritional loss ratio.
We have very little use of quota share that will likely go to no use of quota share on the HHIP program. We do participate with third-party reinsurers on any catastrophe exposure in two different ways. We have, as Jesse was sharing, the programmatic reinsurance. We have an XOL, actually three layers of XOL on HHIP by itself. On top of that, we have a Spinnaker corporate CAT that is over HIPPO, above the programmatic, over HIPPO, over MSI, over several of the programs, generally speaking. That is sort of the way that we think about third-party reinsurers.
Tommy, was your question about the primary carrier for the HHIP program?
Yeah, go ahead, sir.
Today, I think substantially all of the HIPPO program is written on Spinnaker paper.
We may have a small amount of legacy business that is on another carrier, but the vast majority is on Spinnaker. As we think about it going forward, I think we're thinking about it on Spinnaker or Spinnaker Group Company's paper as well.
We have a question here from online from an investor. Congratulations on continued success. It's been impressive to watch the story unfold. As a portfolio of newer home builder-originated properties matures, reaching ages of say five years, 10 years, how do you plan to manage the anticipated rise in attritional risk due to aging structures and other related factors, as well as the ongoing challenges posed by climate change? Yeah, just to paraphrase the question before I give the answer, new homes age and they become non-new homes. What is your plan as those homes become non-new homes?
There are multiple aspects of this. I'll share it at a high level. First, you need to have a program and a rating methodology and underwriting criteria that adjust as those homes age. Simply put, at new business for a new home, Hippo does not run credit score and does not, even in states where credit scores are allowed, insurance score and does not run prior losses. Why? Because somebody just bought a new home, likely their insurance score is somewhat favorable. Also, we care less about prior losses in an old home. When they just bought a brand new home, the prior losses are less relevant. However, as those homes age, there is a component where you want to start bringing in the individual underwriting capabilities as well. You want to start adjusting the price based on age of home.
That's one aspect of it. I think that's probably the same way most carriers think about an aging portfolio. The part that I think we think about it differently is that, and this goes back to what Andrea was sharing on our relationship with the customer. Our view is, as that home ages, how do we help that customer protect their home through preventative actions and home protection actions to help their new home continue to look, feel, and act like a new home? That is back to our IoT device component, our proactive preventative services component, all of those issues and benefit that we think we will add to customers as that portfolio ages. The listener's question is right. Right now, our new homes are relatively young. We've been doing this for about six years.
Some of those are starting to age, and we already have very good relationships with those customers, offering suggestions through our Hippo Home Care app, which is available to any homeowner in the United States, whether you're a customer or not, on things you can do to help protect your home, translation to insurance, fewer claims, better loss ratio. Right here in the front.
Hi, thanks for everyone's time. Chang Lee, Fine point Capital. Would you elaborate a bit more on what are the primary limiters on growth at Spinnaker today? Is it simply the balance sheet capacity? Is it the ability to scale up profitable lines of business while maintaining current loss ratios or the underlying reinsurance panel and the availability thereof, for example, or something else?
Great. Torben, do you want to take this one?
Yeah, sure. Yeah.
First, let's just talk about the market a little bit. As I said, we're now about $100 billion. About 25% of that is written by fronting companies. The headwinds I'm seeing for the market, let me talk about the headwinds first. There's clearly more competition. There's now about 30 fronting companies. Tailwinds, the market continues to grow. I don't know if it will grow quite as fast as it has in prior years, but there's still momentum there. I think we don't have any limitations right now. We have plenty of capital to continue to grow. We will get plenty of new non-correlated programs to the new MSI and Baldwin relationship. I really think we are really well positioned. This becomes a game of don't become the commoditized player out there. I think we are differentiated. I think we do a great job partnering.
I think we do a great job once the partner is part of the platform. I think that will continue to drive the momentum. I do not see any limitations right now, but there are clearly some market headwinds that we have to continue to navigate. I think we are really well positioned.
Yeah, just one thing I would like to add to that is we are not a growth at all costs organization. We are an organization that wants to grow profitably with compelling growth numbers. Ultimately, the number that is most important to me from a financial perspective is return on equity. In order to achieve that, you need to be disciplined in your approach.
If we have proven anything over the last three years, we have proven that we are an incredibly disciplined organization that does what it takes to transition from loss to profit and then exceeding profit. We are very confident in the growth numbers for the next three years. We are very confident that we can grow to that number with very few limitations at the profit levels that Guy shared. I will add one small piece to what Torben said about the 30 fronting carriers in the market. The dynamics of fronting are unique. They are unique in certain states in which you have what's called super group or super group states. California is one of them. A carrier can only have one program, one rate filing per program.
Even if they have multiple carriers like we do at Spinnaker, they can still only have one for all the carriers, or they have to offer the lowest price to that customer for that one. Most of the new fronting carriers have one carrier, which means they each can write one MGA, have one rate filing for that partnership. Even when they want to expand, some states did not help. There is a need as the MGA market that Torben mentioned, the MGA market is about $100 billion, 25 currently. It is growing. I think most analysts believe it is going to continue to grow. With that, because of the statutory structure, you have to have more fronting carriers to support those MGAs. We think more fronting carriers are necessary just to fulfill the needs.
Frankly, we think we have a better fronting model and good partners and a good reputation to where we are one of the few that brokers and MGAs call when they're looking for increased capacity or a new product. We've got another one online here from an investor. Guy, this one's probably for you. How large is the NOL and when can we expect to see it on the balance sheet as an asset?
We have between, I mean, the NOLs we have are close to $1 billion. This is why, again, as we are becoming more profitable in the last few years, it should give us a lot of runway to have more profits flowing through all the way to the bottom line at the net income level, which, as I mentioned, is one of the advantages that we have.
The other thing that I will mention is, as we think about valuation and multiples, it's also an advantage that we have, right? We can attach a multiple looking at some of our peers, and we should probably be trading at a premium to that because of this asset that we have on our balance sheet.
Tommy McJoynt with KBW. It was good to see the ROE element included in the financial targets. I think I commend that as a very mature thing to do. I guess when you think about, though, a business that's growing, your financial targets imply somewhere around like a 30% growth CAGR. Getting an optimized ROE when you're growing that quickly can be difficult because of how much growth you're generating relative to the capital that supports that.
Is the ROE target that you have for 2028, is that a fully optimized number in your opinion, or does that have some excess capital baked into it to support growth beyond 2028?
Yeah, great question. Guy, do you want to take that?
Sure. A couple of things. First of all, one thing that I would highlight is, again, and Torben mentioned that in his presentation. Today, if you think just about the Spinnaker platform, the programs that we have outside of HHIP, the return on equity is already north of 20%. It was 25%, I believe, in 2024. We already have a very strong baseline. As you grow that, that is already giving you a pretty strong tailwind. To answer your question directly on are we going to have excess capital, I think it's hard to answer that with a lot of precision, right?
Because some of the question about excess capital and return on equity depends on the reinsurance strategy. If we see a softer market, we can buy more because it makes more sense, which frees up more capital. It's hard to know with precision. As we mentioned, we feel very good about the capital position that we have, especially supported by the transaction that we announced this morning. We feel very good about the capital position that we have all the way through 2028. Hopefully that answers your question.
Yeah, just Tommy, to add a couple pieces to that. First of all, I think it's important to understand because I think there are some people that ask about HHIP versus Spinnaker. If Spinnaker is so compelling, why do you still focus on HHIP? I think the two of them actually play together.
I think it's critical if you're going to be best-in-class fronter, you need a couple things. One, you need some programs that you control, programs that you can toggle up and back, programs that you can choose to do what you want with. Second, you need programs that you have long-term relationships with. One of the reasons I'm so excited about our MSI and Baldwin partnership is these are relationships at duration. Making sure you have these things, although the pure results on homeowners may be slightly worse than the pure results on fronting, without having some control, you may never achieve the result on the fronting side of the business. They play with each other very well.
Your capital question, which I think it was Jesse that talked about it, the flexibility of having an MGA, a carrier, a captive reinsurer, these different components allow you to pivot and shift and move capital to best utilize that capital without it necessarily being trapped if you only had a pure carrier because it's difficult to get capital out of a pure carrier. Therefore, you want to make sure you have plenty, so people tend to overcapitalize it. You do not have to do that if you have different ways in which you're participating in risk, such as a captive reinsurer.
Tommy, just want to add one last thing to your question.
I understand. I agree with the premise that as you're growing and as you're trying to, and as we aim to double the premium over the next few years, then there is a question of can we do it at the same profitability? I do want to mention a few key tailwinds that we're already seeing that should allow us to grow while improving the return on equity. Number one, as Mike mentioned, we still have some unearned rate that is going to keep support HHIP's profitability and improve it, including the return on equity. Number two, I want to remind all of you that in the builder channel, there's probably the opposite of the growth penalty, right? New homes are actually performing amazingly well in the first year.
What we're seeing is about 20% gross loss ratio in the first year, and then it slowly started to go up. Growing there is actually helping us rather than being a headwind. The last thing I mentioned, which is very important, if I go back to one of the most important slides in Torben's section, when we grew the premium from $280 million in 2022 to $620 million or so in 2024, the net loss ratio improved from about 60% in 2022 to 39% in 2024. We have already demonstrated the ability by being very disciplined to add programs and to grow while not compromising on profitability, which is, I think, one of the things that make Spinnaker so special.
Maybe one more thing, just since we're on this topic, about the capital efficiency aspect of your question, Tommy.
I think Rick talked about it, but I'll try to make it even more explicit, which is by having the Hippo Home Insurance Program as an owned program. As we think increasingly about the business more at a portfolio level, being able to make sure that we're optimizing the capital that we have at any given time by writing a bit more or retaining a bit more on the homeowner side is an important lever for us as we think about managing the capital efficiency of the business and the return on equity.
It's also why when we think about, even though, as we said, we're going to continue to disclose some of the loss ratios and other things related to the HHIP program, we're going to move away from the segment reporting because we don't really want people focused on the individual growth of a particular segment of our business because it might make sense for us in a certain year to dial it up a little faster than we might otherwise have done or to dial it back a little bit to grow a bit slower than we might otherwise have done as we think about both the capital efficiency aspects of the business, but also importantly, the diversification of the premium across business lines. We want that flexibility, and we want people to think about it as an integrated portfolio.
We do have non-insurance businesses, to be sure, that support the risk businesses that we're in. I think making it easier for investors to understand what's going on at a high level as opposed to having to do all of the work because we are not managing the business the same way in 2025 that we were in 2023 or in 2024. We are thinking differently about the priorities, and we're thinking about it much more through a portfolio and diversification and return on capital lens. That has to cut across programs. I have one from online here from an investor. Under this new strategy, how are you thinking about your total adjustable market, and how should we view you kind of largely within this industry?
Yeah, maybe I'll start with that with the answer.
When we think about total addressable market, I would look at there's two components again. There's the Spinnaker fronting component. I think we've talked about that. I think the MGA market is growing. There's more opportunity. We think that that's massive in comparison to the opportunity is massive in comparison to our piece today. I think when we talk about total addressable market in HHIP, there are two things that are compelling there. One, of course, the partnership we now have with the Westwood panel under Baldwin, the ability to have triple the funnel of new homes leads. Secondarily, what Mike talked about, which is the growth of home insurance premiums in the United States, we are just a small, small piece of both currently of both new construction homes and total homeowners insurance business. The headroom is massive.
However, I will also remind people that insurance is one of those products that if you're writing a lot very quickly, you need to pause and ask yourself why. What did you miss in rating? What are gaps in your either your distribution partners have found or consumers have found? What is causing you to grow so quickly? From a property perspective, you don't want to grow that quickly in a concentrated area because then when you have weather-related exposures, you have the potential to really get hit hard, which is something we had to overcome starting back in 2022, our overexposure to geographies that had severe convective storm. All of these pieces tell us that the future is bright, the top-line potential is massive, but we need to stay disciplined to make sure that growth is profitable growth.
Any more questions here in the room?
That's all I have online. Rick, maybe I'll turn it back to you just for some closing comments.
Perfect. First of all, I would like to thank everybody again for coming. Those of you that are here in person, if you have time, we do have lunch prepared, and management members will be here that you can ask further questions to. I hope you are as excited as I am on the prospects of Hippo going forward. I think we talk about internally, this is the decade of the Hippo, and we're only halfway through the decade, and the second half of this decade is an exciting one. Thank you so much for coming. Thank you for your continued support of our company, and look for big things from this big animal that is a Hippo. Thank you very much, everyone.