So I think we have slightly improved reinsurance economics and structure compared to where we were a quarter or two ago. And then finally, we talked a lot about the cost saving initiatives, both people and vendor related in Q3. I think we were able to achieve slightly more benefit from the cost reduction initiatives, in the fourth quarter than we had previously expected. And so you’ll see those work their way into our 2024 P&L progressively over the course of the year. So I think really all the drivers are moving in the right direction and we’re feeling increasingly confident as we move into ‘24.
Matt Carletti: Okay. Great. And then one follow-up if I could. Rick, you talked about the competitive environment a little bit and leaning in where you have an advantage, right, whether it’s geography, technology, demographic, whatever it might be. I think as we think about the market broadly, we still think of a lot of your competitors as kind of being on their heels, pushing a lot of rate, not looking to grow new business. In those areas that you’re looking to grow, is that a similar picture or are these pockets of the market that maybe others view as less cat exposed and other things as well and there is more competition in those markets? Just trying to get a feel for the competitive environment kind of in the spots where Hippo is going to look to grow.
Rick McCathron: Yeah. No. It’s a really good question. And so a couple of things. One, we were actually, I think, ahead of the curve from most of our competitors on changing given the hardening of the market. The main reason we were ahead of the curve is our technology actually allows us to put changes in quicker and get them to market quicker. So I would say, we had a six month to 12 month advantage in terms of timing to our competitors. That’s one aspect of it. The second aspect of it, which we’ve talked about before, and this is one example, we do have comparative and competitive advantages in certain channels. So we’ve talked about our builder channel, as an example. We have a tech advantage because quoting a property that doesn’t even have a street number or a street name requires significant ingestion of data from builder partners.
We have a distribution advantage because we are getting those leads directly from the builder partners, and we have a product advantage. We have constructed a specific homeowners policy for new home builds. All of those are areas in although, what some may think is a niche, there’s between $1 million and $1.5 million new homes being built every year. So if that’s a niche, it’s a massive one where we have four years of moat building and competitive advantage that we’re doubling down on.
Matt Carletti: Great. Thanks. That’s helpful. Appreciate it.
Rick McCathron: You’re welcome.
Operator: Thank you. We have a follow-up question from Yaron Kinar of Jefferies. Yaron, your line is open. Please go ahead.
Yaron Kinar: Thanks. Actually, two follow-up questions, if I could. One, when you say that the actions you’ve taken would reduce direct losses from hail events like 55% and if the same hail events occurred in ‘24 as they did in 2023, is that on a dollar basis?
Stewart Ellis: Yeah, Yaron. That’s on a dollar basis. So basically, if you just apply the exact same storms, the exact same severity, and the exact same geographies, and you roll our — changes in wind and hail deductibles and selective non-renewals through the portfolio progressively over the course of the year with their renewal dates, we’ll achieve a 55% reduction relative to 2023 and 2024, and then it rises to nearly 80% if you allow those changes to work their way all the way through the book. The reason for the difference is because these storms happen. We didn’t really start the process of rolling these changes out until the fall of 2024. So not all of our portfolio policies will have had a chance to come up for renewal, by the time we get to hail season this year. So we’ll still have some of that exposure, but it will be dramatically reduced in ‘24 and then even further reduced in ‘25.
Rick McCathron: Yeah, Yaron. This is Rick. Just to add to that and really with one of the previous questions, if you really think about when we started the work on reducing volatility in the portfolio, we actually started that work in 2022, and so we significantly reduced the volatility in 2020 — from 2022 to 2023. Just 2023 was a horrible first half and a horrible hail season. So we hadn’t made all — we hadn’t benefited from all of the actions that we had already been taken. So now as we look forward to 2024, we have all of the 2022 actions already in the portfolio. We have a portion of the 2023 actions that Stewart mentioned that we started in October, as a result of our Q2, partially in and then they’ll be fully in to the portfolio by the end of 2024. So we’ve got a stacking effect of two different years’ worth of efforts to get us highly confident in, in our projections.
Yaron Kinar: And the loss ratio impact should be even more pronounced, right, because of the premiums earned components continue to grow?
Stewart Ellis: I think, yes, that’s right, because we’ll be retaining more of the attritional or that’s the premium associated with the attritional losses.
Yaron Kinar: Okay. And then, I guess going back to revenues for a second. So in the Services segment, the guide there is for a bit of a reduction in growth relative to where you were in 2023. And I understand it’s a very, very young business that you’re still ramping up. So I guess on the one hand, I could say maybe you have a larger base and growing off of that base is more challenging. On the other hand, it’s so young and so, in ramp up mode. So why shouldn’t we see the same level of growth as we saw in ‘23, if not better, when we look at ‘24?
