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Hippo Enterprises offers homeowners insurance.
Courtesy of Hippo
Hippo Enterprises is the latest insurtech to combine with a special purpose acquisition company.
On Thursday, Hippo said it was merging with Reinvent Technology Partners Z (ticker: RTPZ) in a deal that values the insurance technology company at $5 billion. Launched in 2015, Hippo offers homeowners insurance to consumers, and says customers can get an insurance quote within a minute and buy a policy within 5 minutes. It will have $1.2 billion in cash once the transaction closes, which is expected midyear. The boards of both Hippo and Reinvent have approved the deal.
Hippo is one of several insurtechs looking to reinvent the insurance industry, which has lagged in embracing technology. Total annual written premiums are projected to hit $544 million this year, according to an investor deck announcing the deal. The start-up employs more than 400 people; it has raised $709 million in funding.
“We’ve built products and services with a human touch to broaden home protection to include proactive, smart insurance coverage,” said Assaf Wand, Hippo’s CEO and co-founder, in a statement.
Several insurtechs went public last year using a traditional initial public offering. Most performed well in the aftermarket.
Lemonade’s
(LMND) shares are up 230% from the company’s $29 IPO price, while Duck Creek Technologies (DCT) remains nearly 65% above its $27 offer price, and MediaAlpha (MAX) shares are up 170% from a $19 IPO price. Root Insurance (ROOT), however, has never traded above its $27 offer price.
Oscar Health
(OSCR) also broke in its first day of trading Wednesday.
Hippo did actively consider going public via a traditional IPO, Wand said. It opted for a SPAC because of the level of partnership the transaction would give them, he said. “We wanted to find a partner and [Reinvent] was a better fit for us. That’s what very much appealed to our board,” Wand told Barron’s.
Reinvent Technology Partners Z
is the second SPAC from
Reid Hoffman,
co-founder of LinkedIn, and
Mark Pincus,
founder of
Zynga
(ticker: ZNGA).
Hippo began discussions with Reinvent in late December/early January, Wand said. Hoffman said Reinvent was seeking a technology company that was aiming to transform experiences for individuals and that made society better, he said. Hippo is looking to change the normally adversarial relationship between insurers and customers, and instead make the company more of an ally to its customers, Hoffman said. “Hippo has the exact, right strategy in how to build out in the connected world,” he said.
Unlike typical SPAC mergers, Reinvent and Hippo have agreed to a two-year lockup on founder shares, the statement said. Senior Hippo management and material existing investors are also subject to a lockup, according to the investor deck.
The transaction includes a $550 million private investment in public equity or PIPE, that was increased from $500 million. Current Hippo investors—including Dragoneer Investment Group, Lennar and Ribbit Capital—led the PIPE which also drew mutual funds and Reinvent Capital. Hippo shareholders will retain about 87% of the company once it closes the merger with Reinvent.
In the future, Hippo will be looking to add products such as warranty insurance, as it aims to take home protection to more consumers, Rick McCathron, Hippo’s president, told Barron’s. Hippo has been acquisitive: Last year, it bought Spinnaker Insurance, a national property and casualty insurer licensed in 50 states, and purchased Sheltr, a preventive home maintenance platform, in November 2019. “We think there are few companies out there that match what we’re doing,” McCathron said. “If there are others out there, we would consider them. We don’t have anything imminent.”
Hippo’s combination with Reinvent comes roughly one month after
Metromile
(MILE), a pay-per-mile auto insurer, closed its merger with
Insu Acquisition Corp
II, a blank check company from financial services company
Cohen & Co.
(COHN). MetroMile began publicly trading in February.
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