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Income Taxes | 12 Months Ended
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Dec. 31, 2023
Income Tax Disclosure [Abstract] |
Income Taxes | 17. Income Taxes 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 (in millions):
| Year Ended December 31,
| 2023 |  | 2022
United States | $ | (274.0) |  |  | $ | (333.5) |
Foreign | 1.4 |  |  | 1.4 |
Loss before income taxes attributable to Hippo | $ | (272.6) |  |  | $ | (332.1) |
Income before tax attributable to noncontrolling interests | 10.1 |  |  | 6.9 |
Loss before income taxes | $ | (262.5) |  |  | $ | (325.2) |
The components of the total provision for income taxes are as follows (in millions):
| Year Ended December 31,
| 2023 |  | 2022
Loss before income taxes attributable to Hippo | $ | (272.6) |  |  | $ | (332.1) |
Income tax benefit from statutory rate | (57.2) |  |  | (69.8) |
Effect of: |  |  |
Meals, entertainment & parking | 0.2 |  |  | 0.2 |
Deferred compensation | 7.4 |  |  | 6.6 |
State taxes | (9.1) |  |  | (9.0) |
Goodwill impairment | — |  |  | 8.0 |
Increase in valuation allowance | 64.2 |  |  | 66.8 |
Foreign taxes | 0.1 |  |  | 1.2 |
Other | (5.1) |  |  | (2.7) |
Income taxes expense | $ | 0.5 |  |  | $ | 1.3 |
The components of the provision for income taxes are as follows (in millions):
| Year Ended December 31,
| 2023 |  | 2022
Income tax applicable to: |  |  |
Current |  |  |
Federal | $ | — |  |  | $ | — |
State | 0.4 |  |  | 0.1 |
Foreign | 0.8 |  |  | 1.2 |
Total current provision | $ | 1.2 |  |  | $ | 1.3 |
Deferred |  |  |
Federal | $ | — |  |  | $ | — |
State | — |  |  | — |
Foreign | (0.7) |  |  | — |
Total deferred provision | $ | (0.7) |  |  | $ | — |
Total provision for income taxes | $ | 0.5 |  |  | $ | 1.3 |
Deferred tax Significant components of the Company’s deferred tax assets and liabilities are as follows (in millions):
| As of December 31,
| 2023 |  | 2022
Deferred tax assets: |  |  |
Net operating loss carryforward | $ | 171.6 |  |  | $ | 127.7 |
Intangible assets | 10.2 |  |  | 8.5 |
Research and development credit | 10.5 |  |  | 6.7 |
Deferred compensation | 9.7 |  |  | 6.2 |
Unearned premium reserve | 4.1 |  |  | 1.6 |
Loss reserve discount | 1.1 |  |  | 0.8 |
Unrealized losses | 2.0 |  |  | 1.7 |
Lease liability | 3.5 |  |  | 5.6 |
Deferred revenue | 5.9 |  |  | 4.3 |
Capitalized software | 13.7 |  |  | 5.8 |
Other accruals | 3.2 |  |  | 0.7 |
Total deferred tax assets | $ | 235.5 |  |  | $ | 169.6 |
Valuation allowance | (226.0) |  |  | (161.5) |
Total deferred income tax assets | $ | 9.5 |  |  | $ | 8.1 |
Deferred tax liabilities |  |  |
Property and equipment | $ | 0.9 |  |  | $ | 0.5 |
Provision for commission slide and cancellation | — |  |  | 0.2 |
Deferred acquisition costs | 5.0 |  |  | 1.7 |
Right-of-use asset | 2.4 |  |  | 5.4 |
Other | 0.4 |  |  | 0.3 |
Total deferred tax liabilities | $ | 8.7 |  |  | $ | 8.1 |
Deferred income tax assets, net | $ | 0.8 |  |  | $ | — |
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, 2023 and 2022. 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 (in millions):
|  |  | Year Ended December 31,
|  |  |  |  | 2023 |  | 2022 |  |
Beginning unrecognized tax benefits |  |  |  |  | $ | 2.9 |  |  | $ | 1.1 |  |  |
Increases related to tax positions from prior years |  |  |  |  | 0.8 |  |  | 0.7 |  |  |
Increases related to tax positions taken in the current year |  |  |  |  | 1.4 |  | 1.1 |  |
Ending unrecognized tax benefits |  |  |  |  | $ | 5.1 |  |  | $ | 2.9 |  |  |
The balances at December 31, 2023 and 2022 were fully offset by a valuation allowance. No interest or penalties were incurred during the years ended December 31, 2023 and 2022. As of December 31, 2023, there were no material positions for which the Company believes it is reasonably possible that the total amounts of unrecognized tax benefits will significantly increase or decrease within the next twelve months. Net Operating Losses As of December 31, 2023, the Company has U.S. federal and state net operating loss (“NOL”) carryforwards of $719.8 million and $326.7 million, respectively. The Company has $166.2 million of Dual Consolidated Losses in RHS, a 953(d) company. The provisions of the Tax Cuts and Jobs Act of 2017 eliminated the 20-year carryforward period and made it indefinite for federal NOLs generated in tax years after December 31, 2017. For such amounts generated prior to 2018, the 20-year carryforward periods continue 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 (the “Code”), as amended, as well as similar state provisions. These ownership changes may limit the amount of NOL and research & development (“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 transaction or 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 (in millions):
|  |  | Indefinite |  |
| 20-year Carryforward |  | Carryforward |  |
| Expires in 2035 - 2043 |  | Period |  | Total
U.S. Federal | $ | 175.3 |  | 0 | $ | 544.5 |  |  | $ | 719.8 |
U.S. State | 326.7 |  | — |  |  | 326.7
Balance as of December 31, 2023 | $ | 502.0 |  |  | $ | 544.5 |  |  | $ | 1,046.5 |
Tax credit carryforwards As of December 31, 2023, the Company has U.S. federal R&D credit carryforwards of $10.0 million, which have a 20-year carryforward and expire 2038-2043, as well as state R&D credit carryforwards of $6.6 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, 2023. For U.S. federal purposes, the Company is open to examination for the 2020 – 2022 tax years and for state purposes, the Company is open for from 2019 – 2022 tax years. No interest or penalties were incurred during the years ended December 31, 2023 and 2022.

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- Definition The entire disclosure for income taxes. Disclosures may include net deferred tax liability or asset recognized in an enterprise's statement of financial position, net change during the year in the total valuation allowance, approximate tax effect of each type of temporary difference and carryforward that gives rise to a significant portion of deferred tax liabilities and deferred tax assets, utilization of a tax carryback, and tax uncertainties information. + References Reference 1: http://www.xbrl.org/2003/role/disclosureRef -Topic 946 -SubTopic 20 -Name Accounting Standards Codification -Section 50 -Paragraph 13 -Publisher FASB -URI https://asc.fasb.org//1943274/2147480990/946-20-50-13 Reference 2: http://www.xbrl.org/2003/role/disclosureRef -Topic 235 -SubTopic 10 -Name Accounting Standards Codification -Section S99 -Paragraph 1 -Subparagraph (SX 210.4-08(h)(2)) -Publisher FASB -URI https://asc.fasb.org//1943274/2147480678/235-10-S99-1 Reference 3: http://www.xbrl.org/2003/role/disclosureRef -Topic 740 -Name Accounting Standards Codification -Publisher FASB -URI https://asc.fasb.org//740/tableOfContent Reference 4: http://www.xbrl.org/2003/role/disclosureRef -Topic 740 -SubTopic 10 -Name Accounting Standards Codification -Section 50 -Paragraph 14 -Publisher FASB -URI https://asc.fasb.org//1943274/2147482685/740-10-50-14 Reference 5: http://www.xbrl.org/2003/role/disclosureRef -Topic 740 -SubTopic 10 -Name Accounting Standards Codification -Section 50 -Paragraph 21 -Publisher FASB -URI https://asc.fasb.org//1943274/2147482685/740-10-50-21 Reference 6: http://www.xbrl.org/2003/role/disclosureRef -Topic 740 -SubTopic 270 -Name Accounting Standards Codification -Section 50 -Paragraph 1 -Publisher FASB -URI https://asc.fasb.org//1943274/2147482526/740-270-50-1 Reference 7: http://www.xbrl.org/2003/role/disclosureRef -Topic 740 -SubTopic 10 -Name Accounting Standards Codification -Section 50 -Paragraph 17 -Subparagraph (b) -Publisher FASB -URI https://asc.fasb.org//1943274/2147482685/740-10-50-17 Reference 8: http://www.xbrl.org/2003/role/disclosureRef -Topic 740 -SubTopic 10 -Name Accounting Standards Codification -Section S99 -Paragraph 1 -Subparagraph (SAB TOPIC 6.I.5.Q1) -Publisher FASB -URI https://asc.fasb.org//1943274/2147479360/740-10-S99-1 Reference 9: http://www.xbrl.org/2003/role/disclosureRef -Topic 740 -SubTopic 10 -Name Accounting Standards Codification -Section S99 -Paragraph 2 -Subparagraph (SAB Topic 11.C) -Publisher FASB -URI https://asc.fasb.org//1943274/2147479360/740-10-S99-2 Reference 10: http://www.xbrl.org/2003/role/disclosureRef -Topic 740 -SubTopic 30 -Name Accounting Standards Codification -Section 50 -Paragraph 2 -Subparagraph (a) -Publisher FASB -URI https://asc.fasb.org//1943274/2147482603/740-30-50-2 + Details
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