Hippo Holdings Inc. shares came under pressure this week as the company announced that it is laying off 70 employees, or about 10% of its workforce, as part of an organizational realignment.
The insurtech said in a regulatory filing that the job cuts would "drive efficiency" and bolster the company's focus on its strategic priorities." The layoffs, which took effect Sept. 1, are expected to result in charges of approximately $1.8 million to $2.0 million for severance, benefits and related costs.
Hippo's stock finished down 12.01% for the week ending Sept. 2.
Hippo is not the only insurance technology company that has laid off a significant portion of its workforce in 2022. GoHealth Inc. announced last month that it had laid off 20% of its staff, while Root Inc. laid off 20% of its staff earlier this year, citing underwriting woes. Last month, Hippo and GoHealth were considering reverse stock splits to prevent their stocks from being delisted.
GoHealth closed the week down 13.89%, while Root lost 16.45%.
Life and health insurers outperform
Life and health companies outperformed many other sectors this week as some of the pressures generated by the COVID-19 pandemic continue to wear off.
U.S. equities overall lost ground for the week ending Sept. 2 as the S&P 500 dropped 3.38% to 3,920.42. Insurance companies fared a bit better as the S&P 500 Insurance index declined 2.38% to 540.92.
Higher interest rates are a positive for the portfolio yields of life and health companies, and the health backdrop in the U.S. is "dramatically improving," according to Piper Sandler analyst John Barnidge.
"Both of those create natural tailwinds to the earnings for the companies in that universe," Barnidge said.
Among the life companies that mostly held their ground or finished in the green even as most other stocks fell were American Equity Investment Life Holding Co., which finished up 1.06%, and MetLife Inc., which edged down 0.94%
Although too many factors are at play to ascribe the life insurance price impact this week solely to improving COVID-19 mortality rates, Barnidge said they are without a doubt helping the arc of improvement seen throughout 2022.
"If you look at the results of Reinsurance Group of America, which is a mortality reinsurer, and Globe Life, which has a large life insurance business, they actually have released reserves for mortality-based businesses in the U.S.," Barnidge said. "It's suggesting that COVID claims really are falling off, falling to the wayside, and we may be entering that pulling forward period."
According to an analysis by S&P Global Market Intelligence, a decline in COVID-19 mortality during the second quarter contributed to lower death benefits for the U.S. life and health insurance industry in a development that may become a trend through the balance of the year.
