Michael Phillips: Great, okay cool, thanks Rick.
Operator: Thank you. Our next question comes from the line of Alex Scott with Goldman Sachs. Your line is now open.
Alex Scott: Hi, thanks for taking the question. First one I had it’s just on reinsurance costs. I know you guys have a bit longer term relationships. So I just wanted to understand how higher reinsurance costs could potentially make its way in. I mean, how important of an input is that to your path to profitability?
Richard McCathron: Yes Alex, it’s a really good question. And I think everybody should be aware that the reinsurance market is hardening in a pretty significant way, both on a quota share perspective, and an XOL perspective. I’m pleased to your point I’m pleased that we have multiyear capacity with several of our partners. So at any given renewal, and reinsurance renewal cycle, we are not looking for replacing the entire reinsurance portfolio. We also have the benefit of dramatically improving loss ratios. And when reinsurers are generally looking at where they want to deploy their capacity, they are looking for people that have the ability to react quickly. And that’s something that our tech stack allows us to do. I think inflation is a great example of that.
So I think what we’re finding is, there’s likely going to be a pretty significant shift industry-wide as it relates to demand and capacity within the reinsurance space. When we generally create our performance looking forward, such as the one that we that we displayed during our Investor Day, we take an approach that we think is a likely outcome, not an aggressive one. So from our perspective, I think we’re well positioned given the improvement in loss ratio given the fact that we have multiyear capacity. And we do have segments of our business that are performing exceptionally well like the builders business, which is something that reinsurers are very interested in participating on. So I think it’s still a little early to tell, given the hardening of the retro market as well.
But this is not something that is that is concerning us at this point.
Alex Scott: Got it, thanks for all that. The only other question I had was just, when you think about, whether it’s MGA commissions or – the way your reinsurance arrangements work, is there any kind of tail that we need to consider from Hurricane Ian I’m just thinking through, Hurricane Yuri, there’s a little bit of tail, as it related to the net loss ratio? I mean, do we need to consider things like that related to Ian?
Richard McCathron: Yes, I think if you’re talking about from us specifically, I think the answer is no, Ian was not a significant event on the Hippo program. I do want to point out we said this, in our prepared remarks. The vast majority of the gross loss was not a Hippo loss on Spinnaker paper it was the legacy fronting business that did have some exposure in Florida. So from us specifically, Ian was not a significant event by any stretch of the imagination. If you’re thinking industry wide, I actually think our performance in Ian in cap prone areas with new construction does motivate reinsurers to ask the question, where do we want to put our capacity and is that – does Hippo have a unique proposition. In cap exposed areas where new builders are building homes are those homes better.
And I think you can see example after example, of neighborhoods that have a new construction that had very little damaged versus next door, the neighborhood that might be 10 or 15 or 20 years old, that had massive damage. So I think industry wide there may be a bit of a headwind there, but from us, I’m actually looking at it as a tailwind.
