Hippo Holdings Inc.HIPO
Hippo Holdings Inc. Income Taxes Disclosure
16. Income Taxes
One Big Beautiful Bill Act
On July 4, 2025, the One Big Beautiful Bill Act (the "Act"), which contains significant tax-related provisions, was signed into law. These include the restoration of 100% bonus depreciation, the reinstatement of expensing for domestic research and experimentation expenditures, and changes to international tax provisions. The provisions of the Act did not have a material impact on the Company.
Income tax expense
The Company and its U.S. subsidiaries file a consolidated federal income tax return. Tax liabilities and benefits realized by the consolidated group are allocated on a separate return basis. The Company’s international subsidiaries file various income tax returns in their respective jurisdictions.
Income (loss) before tax consists of the following:
| Years Ended December 31, | |||||||||||||||||
| 2025 | 2024 | 2023 | |||||||||||||||
| (in millions) | |||||||||||||||||
| United States | $ | 57.2 | $ | (40.1) | $ | (274.0) | |||||||||||
| Foreign | 1.2 | 0.8 | 1.4 | ||||||||||||||
Income (loss) before income taxes attributable to Hippo | $ | 58.4 | $ | (39.3) | $ | (272.6) | |||||||||||
| Income before tax attributable to noncontrolling interests | 4.9 | 11.9 | 10.1 | ||||||||||||||
Income (loss) before income taxes | $ | 63.3 | $ | (27.4) | $ | (262.5) | |||||||||||
The components of the total provision for income taxes are as follows:
| Year Ended December 31, | |||||||||||
| 2025 | |||||||||||
| (in millions) | |||||||||||
| Income tax expense at statutory rate | $ | 12.3 | 21.0 | % | |||||||
| Effect of: | |||||||||||
State and local income tax, net of Federal income tax effects (1) | (0.3) | (0.5) | % | ||||||||
| Foreign tax effects | 0.7 | 1.1 | % | ||||||||
| Effects of cross border tax laws | (0.2) | (0.3) | % | ||||||||
| Tax credits | (0.9) | (1.5) | % | ||||||||
| Changes in valuation allowances | (16.6) | (28.4) | % | ||||||||
| Nontaxable or nondeductible items | |||||||||||
| Deferred compensation | 3.3 | 5.7 | % | ||||||||
| Gain on sale | 1.8 | 3.1 | % | ||||||||
| Other | 0.2 | 0.3 | % | ||||||||
| Changes in unrecognized tax benefits | 0.7 | 1.2 | % | ||||||||
| Other adjustments | (0.3) | (0.5) | % | ||||||||
| Income tax expense | $ | 0.7 | 1.2 | % | |||||||
(1) State taxes in California contributed to the majority of the tax effect in this category
| Years Ended December 31, | |||||||||||
| 2024 | 2023 | ||||||||||
| (in millions) | |||||||||||
| Loss before income taxes attributable to Hippo | $ | (39.3) | $ | (272.6) | |||||||
| Income tax benefit from statutory rate | (8.3) | (57.2) | |||||||||
| Effect of: | |||||||||||
| Meals, entertainment & parking | 0.1 | 0.2 | |||||||||
| Deferred compensation | 6.7 | 7.4 | |||||||||
| State taxes | (7.6) | (9.1) | |||||||||
| Goodwill impairment | — | — | |||||||||
| Increase in valuation allowance | 6.5 | 64.2 | |||||||||
| Foreign taxes | 0.5 | 0.1 | |||||||||
| Other | 3.3 | (5.1) | |||||||||
Income tax expense | $ | 1.2 | $ | 0.5 | |||||||
The components of the provision for income taxes are as follows:
| Years Ended December 31, | |||||||||||||||||
| 2025 | 2024 | 2023 | |||||||||||||||
| (in millions) | |||||||||||||||||
| Income tax applicable to: | |||||||||||||||||
| Current | |||||||||||||||||
| State | $ | — | $ | 0.7 | $ | 0.4 | |||||||||||
| Foreign | — | 0.4 | 0.8 | ||||||||||||||
| Total current provision | $ | — | $ | 1.1 | $ | 1.2 | |||||||||||
| Deferred | |||||||||||||||||
| Foreign | 0.7 | 0.1 | (0.7) | ||||||||||||||
| Total deferred provision | $ | 0.7 | $ | 0.1 | $ | (0.7) | |||||||||||
| Total provision for income taxes | $ | 0.7 | $ | 1.2 | $ | 0.5 | |||||||||||
The components of income taxes paid (net of refunds received) are as follows:
| Year Ended December 31, | |||||
| 2025 | |||||
| (in millions) | |||||
| Federal | $ | — | |||
| State | — | ||||
| Foreign | 0.3 | ||||
| Total | $ | 0.3 | |||
Deferred tax
Significant components of the Company’s deferred tax assets and liabilities are as follows:
| December 31, | |||||||||||
| 2025 | 2024 | ||||||||||
| (in millions) | |||||||||||
| Deferred tax assets: | |||||||||||
| Net operating loss carryforward | $ | 181.6 | $ | 175.5 | |||||||
| Intangible assets | 1.6 | 8.4 | |||||||||
| Research and development credit | 11.9 | 10.4 | |||||||||
| Deferred compensation | 3.8 | 6.5 | |||||||||
| Unearned premium reserve | 11.5 | 9.6 | |||||||||
| Loss reserve discount | 1.1 | 1.1 | |||||||||
| Unrealized losses | — | 2.1 | |||||||||
| Lease liability | 1.2 | 2.7 | |||||||||
| Deferred revenue | 3.7 | 2.4 | |||||||||
| Capitalized software | 10.9 | 17.4 | |||||||||
| Other accruals | 1.5 | 5.8 | |||||||||
| Total deferred tax assets | $ | 228.8 | $ | 241.9 | |||||||
| Valuation allowance | (215.5) | (232.6) | |||||||||
| Total deferred income tax assets | $ | 13.3 | $ | 9.3 | |||||||
| Deferred tax liabilities | |||||||||||
| Property and equipment | $ | 0.6 | $ | 0.7 | |||||||
| Deferred acquisition costs | 10.8 | 5.3 | |||||||||
| Right-of-use asset | 0.4 | 1.2 | |||||||||
| Other | 1.5 | 1.4 | |||||||||
| Total deferred tax liabilities | $ | 13.3 | $ | 8.6 | |||||||
| Deferred income tax assets, net | $ | — | $ | 0.7 | |||||||
Valuation allowance
Recognition of deferred tax assets is appropriate when realization of these assets is more likely than not. Based upon the weight of all available evidence, with primary focus on the Company's history of recent losses, the Company has concluded that it is not more likely than not that the recorded Federal and State deferred tax assets will be realized. As a result, the Company has recorded a full valuation allowance against its Federal and State deferred tax assets recorded as of December 31, 2025 and 2024.
Unrecognized tax benefits
The Company recognizes the tax benefit of tax positions taken in the consolidated financial statements only when it is more likely than not that the position will be sustained on examination by the relevant taxing authority based on the tax technical merits of the position. The tax benefit of a position that meets this standard is measured at the largest amount of benefit that is expected to be more likely than not to be realized on settlement. A liability is established for the difference between the tax benefit of positions taken in a tax return and the tax benefit of tax positions recognized in the consolidated financial statements.
Below is a reconciliation of unrecognized tax benefits:
| Years Ended December 31, | |||||||||||
| 2025 | 2024 | ||||||||||
| (in millions) | |||||||||||
| Beginning unrecognized tax benefits | $ | 5.0 | $ | 5.1 | |||||||
Increases related to tax positions from prior years | (0.3) | (0.4) | |||||||||
| Increases related to tax positions taken in the current year | 0.5 | 0.3 | |||||||||
| Ending unrecognized tax benefits | $ | 5.2 | $ | 5.0 | |||||||
The balances at December 31, 2025 and 2024 were fully offset by a valuation allowance. No interest or penalties were incurred during the years ended December 31, 2025 and 2024.
Net operating losses
As of December 31, 2025, the Company has recorded U.S. federal and state net operating loss (“NOL”) carryforwards of $718.9 million and $488.8 million, respectively. The Company has $166.0 million of Dual Consolidated Losses in a 953(d) company, RH Solutions Insurance (Cayman) Ltd. The provisions of the Tax Cuts and Jobs Act of 2017 eliminated the 20-year carryforward period and made it indefinite for federal net operating losses generated in tax years after December 31, 2017. For such amounts generated prior to 2018, the 20-year carryforward period continues to apply.
In general, a corporation’s ability to utilize its NOL carryforwards may be subject to a substantial limitation due to ownership changes that may have occurred or that could occur in the future, as required by section 382 of the Internal Revenue Code of 1986, as amended, as well as similar state provisions. These ownership changes may limit the amount of NOL and R&D credit carryforwards that can be utilized annually to offset future taxable income and tax, respectively. In general, an “ownership change,” as defined by Section 382 of the Code, results from a transaction or a series of transactions over a three-year period resulting in an ownership change of more than 50 percent of the capital (as defined) of a company by certain stockholders or public groups. The Company has performed a Section 382 analysis and experienced two historical ownership changes in 2016 and 2018, and the Company’s tax attributes subject to such limitations under section 382 have been considered. Components of the NOL carryforwards are as follows:
| Indefinite | |||||||||||||||||
| 20-year Carryforward | Carryforward | ||||||||||||||||
| Expires in 2035 - 2045 | Period | Total | |||||||||||||||
| (in millions) | |||||||||||||||||
| U.S. Federal | $ | 175.1 | $ | 543.8 | $ | 718.9 | |||||||||||
| U.S. State | 488.8 | — | 488.8 | ||||||||||||||
| Balance as of December 31, 2025 | $ | 663.9 | $ | 543.8 | $ | 1,207.7 | |||||||||||
Tax credit carryforwards
As of December 31, 2025, the Company has U.S. federal R&D credit carryforwards of $10.7 million, which have a 20-year carryforward and expire 2038-2045, as well as state R&D credit carryforwards of $8.2 million, which have an indefinite carryforward period.
Taxing authority audits
The Company’s income tax returns are subject to federal and state tax examinations. There are no pending tax examinations as of December 31, 2025. For U.S. federal purposes, the Company is open to examination for the 2022 – 2025 tax years, and for state purposes, the Company is open from 2021 – 2025 tax years. No interest or penalties were incurred during the years ended December 31, 2025, 2024, and 2023.Historical Timeline
| Fiscal Year | Filed | |
|---|---|---|
| 2025 | Mar 5, 2026 | Showing above |
| 2024 | Mar 6, 2025 | |
| 2023 | Mar 6, 2024 | |
| 2022 | Mar 2, 2023 | |
| 2021 | Mar 14, 2022 | |
About Income Taxes Disclosures
The income tax disclosure reveals how much a company actually pays in taxes versus what the statutory rate would predict. Analysts focus on the effective tax rate (ETR) reconciliation, which breaks down every item driving the gap between the 21% federal rate and the company's reported ETR — including R&D credits, foreign rate differentials, and state taxes. Deferred tax assets (DTAs) and their valuation allowances signal management's confidence in future profitability: a rising allowance suggests the company doubts it can use accumulated tax benefits. Uncertain tax benefit (UTB) reserves quantify exposure to IRS challenges on aggressive positions.
Key signals to watch: sudden ETR drops without clear operational reasons, large increases in valuation allowances, growing UTB balances, and significant unremitted foreign earnings. Post-TCJA, pay attention to GILTI and BEAT provisions that affect multinational tax structures. Compare the cash taxes paid (from the cash flow statement) against the income tax provision to gauge earnings quality.