Hippo, an insurance startup, to go public in a $ 5 billion merger with SPAC

Home Insurance Tech Upstart Hippo Enterprises Inc. is Partnering with a Special Purpose Acquisition Company to Go Public, The Latest Insurance Technology Business to Take Advantage of Equity Markets and Challenge Traditional Insurers Head on .

Six-year-old Hippo, based in Palo Alto, California, to go public through a merger with Reinvent Technology Partners Z RTPZ -6.57%

in a deal that values ​​the firm at $ 5 billion, the companies said. Reinvent Technology Partners Z had an initial public offering of shares in November.

Reinvent’s co-directors are LinkedIn co-founder Reid Hoffman and Mark Pincus, founder of mobile game maker Zynga. Inc.

Hippo’s move will provide financing as it continues to transition from being a partner to insurance companies providing them with a digital sales channel to being both a partner and a direct competitor. Last year, the company bought Spinnaker Insurance Co., a 50-state licensed property casualty insurer, and its goal is to increase the number of policies it issues.

To assess risk in homes, Hippo’s online underwriting technology uses aerial imagery to assess roof conditions and uses building permits to provide details of home characteristics, for example.

The firm seeks to distinguish itself by emphasizing proactive insurance services that can help homeowners avoid claims, such as free water sensing devices to detect leaks and discounted burglar alarm systems.

“Our guiding principle is that the best affirmation is the one that never happens,” said Assaf Wand, CEO and co-founder of Hippo. He said becoming a carrier is the best way for the company to control its own path, including offering policies with broad coverage for electronic equipment and home offices.

Hippo expects to have up to $ 1.2 billion in cash as a result of the transaction to fund growth and operations, the companies said. The transaction includes approximately $ 550 million in fundraising from investors, including Dragoneer Investment Group, Lennar. Corp.

and Ribbit Capital, the companies said. Mutual funds are also investing.

Private companies are flooding into Special Purpose Acquisition Companies, or SPACs, to bypass the traditional IPO process and get a public listing. WSJ explains why some critics say that investing in these so-called blank check companies is not worth the risk. Illustration: Zoë Soriano / WSJ

In 2020, five P&C technology startups formed a carrier or announced the acquisition of one, up from three in 2019 and one in 2018, according to S&P Global Market Intelligence.

Becoming a carrier gives an insurance technology company more revenue potential, said Thomas Mason, senior research analyst at S&P Global Market Intelligence, “as the company will receive the premium payments from the insured rather than just a commission percentage for each sale “.

On the other hand, “it is more capital intensive, inherently riskier and requires additional expertise in areas such as reserves and investments,” he said.

Transformations from digital agency to full insurer are possible in part because there is ample venture capital available to help with costs, analysts and consultants said. The trend is likely “to continue into 2021, which in turn will stimulate more private equity increases, M&A activity and new operator lineups,” Mason said.

Write to Leslie Scism at [email protected]

Copyright © 2020 Dow Jones & Company, Inc. All rights reserved. 87990cbe856818d5eddac44c7b1cdeb8


Source link