Menu
close
Leading insurtech disruptor Hippo to Go Public in a $5bn deal
Hippo Enterprises Inc. (“Hippo”), the home insurance group that created a new standard of care and protection for homeowners, has entered into a definitive business agreement with Reinvent Technology Partners Z (“Reinvent”) (NYSE:RTPZ), a special purpose acquisition company (“SPAC”) that takes a “venture capital at scale” approach. Upon the closing of the transaction, the combined company will be publicly traded.
Hippo: A Protective, Modern Approach to Home Insurance
Founded in 2015, Hippo’s goal is to make homes safer and better protected by taking a proactive approach designed to prevent losses. Harnessing real-time data, smart home technology, and a growing suite of home services, the company is creating the first vertically integrated, end-to-end home protection and insurance platform.
Hippo’s licensed property casualty agent, Hippo Insurance Services, is a leader in the transformation of the $105 billion United States home insurance industry, digitizing the entire home insurance process in order to create lasting advantages and efficiencies across the customer lifecycle. The company built an insurance experience that is simple, modern, and proactive. Its proprietary underwriting engine leverages augmented intelligence and machine learning to prefill customer applications and accurately assess and price risk at the point of purchase, enabling accurate quotes in under a minute and purchase in just five minutes on average.
Hippo’s omni-channel distribution allows customers to buy policies however and wherever they want: online, through an agent, or with one of the company’s growing number of partners. Hippo’s coverage is designed for today’s homeowners, replacing coverage for items such as fur coats and china sets with more protection of crucial items such as home office equipment and water back-up. This modern coverage lowers the chance of its customers encountering unexpected gaps in coverage in the event of a loss.
In addition, Hippo’s industry-leading Smart Home Program is designed to help prevent events such as water damage, fires, and break-ins. The company also uses live data to anticipate and track major weather events, enabling its claims team to reach out in advance to help protect homeowners. For example, ahead of recent storms in Texas that impacted millions, Hippo reached out to customers to help them prepare for frozen pipes or water damage, offering Hippo Home Care support for live video calls to prevent and resolve any immediate DIY issues. Hippo’s intuitive and proactive protection platform is designed to reduce the likelihood of loss, while deepening its customer relationships and improving loyalty and retention.
Home insurance products offered through Hippo Insurance Services are currently available in 32 states, covering more than 70% of the U.S. population, and the company expects its products to be available to 95% of the U.S. population by the end of 2021.
Management Comments
Assaf Wand, Chief Executive Officer and Co-Founder of Hippo, said:
“We set out with a bold vision: to shift the focus of the home insurance industry back to the end customer - the homeowner. In an industry that has traditionally referred to its customers as ‘policyholders,’ Hippo has carved out its own path. We’ve built products and services with a human touch to broaden home protection to include proactive, smart insurance coverage. Our guiding principle is that the best claim is one that never happens, and if it does happen, then we should make our customers' experience as smooth as possible. The evolution of our industry must be grounded in meeting today’s customer needs. Through this strategic partnership with Reinvent and an incredible team of world-class entrepreneurs, investors, and employees, we can’t wait to transform the homeowner experience and accelerate our growth.”
Reid Hoffman, LinkedIn Co-Founder and Co-Lead Director of Reinvent, said:
“Guided by Assaf’s visionary leadership, Hippo is deploying impressive speed and skill to transform the home insurance industry. Hippo has created its own industry category by rewriting the homeowner experience through insurance. Reinvent’s goal has been to help build industry-leading technology companies at scale for the long-term, and we see ample opportunity to ignite growth and scale Hippo’s business; we believe that Hippo is defining a model that will set the path for years to come in home insurance. With its differentiated technology, insurance expertise, and vertical integration of homeowner services, Hippo fits squarely into our ‘venture capital at scale’ approach. Together, we will strive to create truly revolutionary outcomes for homeowners and this industry.”
Mark Pincus, Co-Lead Director of Reinvent, said:
“Hippo is reimagining home insurance to serve the needs of the modern homeowner. Through deep investments in technology, data, and homeowner services, Hippo has built the country’s most radically user-friendly home insurance company that provides it with a competitive advantage over industry incumbents. Hippo is positively disrupting the insurance industry by offering consumers the first online buying experience that is fast, friendly, and affordable.”
Hippo is Poised to Scale
The U.S. home insurance industry is expected to reach nearly $140 billion by 2025,1 and Hippo has a significant opportunity for further transformation with its proven track record of growth and execution. Hippo has grown historical total written premiums by 69% over the last 3 calendar years, and it launched in 12 new states in 2020 alone. The company has attractive customer dynamics, with an average annual premium of $1,200, an average 1-year retention rate of 87%, and an overall net promoter score of 75 out of 100, 2x the industry average in 2020.
Having completed two acquisitions in 2020, including the acquisition of Spinnaker Insurance Company, a national insurance carrier licensed in all 50 states with a Financial Strength Rating of A- (Excellent) by AM Best, Hippo continues to build an all-inclusive home protection platform encompassing home warranty, smart home tech, home maintenance and professional monitoring services. The company is positioned to gain significant market share through growth plans that are aggressive but also disciplined, achievable, and validated by compelling unit economics. The lifetime customer value is 5.4X the average customer acquisition cost and the company has developed meaningful partnership distribution channels, including home builders and mortgage servicers giving Hippo a strong competitive advantage.
Transaction Overview
The transaction has been unanimously approved by the Boards of Directors of both Hippo and Reinvent. It is expected to close in mid-2021, subject to the satisfaction of customary closing conditions, including the approval of shareholders of Reinvent and the stockholders of Hippo.
The combined company is expected to have approximately $1.2 billion in cash at closing, including up to approximately $230 million of cash held in Reinvent’s trust account from its initial public offering on November 23, 2020. The transaction is further supported by a $550 million PIPE at $10 per share that was led by current investors (including Dragoneer, Lennar and Ribbit), top tier mutual funds and Reinvent Capital. After the closing of the merger, Hippo’s existing stockholders are expected to own approximately ~87 percent of the pro forma combined company.
Reinvent believes in structuring its transactions to ensure maximum long-term alignment with the company in which it invests. Consistent with this approach, Reinvent and Hippo have agreed to a long-term lock-up on founder shares for up to two years, and a robust earnout structure with full vesting not realized until the share price reaches $20 per share. Major stockholders and key executives of Hippo have agreed to enter into separate lockup agreements as well.
Pursuant to the business combination agreement, a Reinvent appointed director will join Hippo’s Board of Directors at the transaction closing.
Additional information about the proposed transaction, including a copy of the merger agreement and investor presentation, has been provided in a Current Report on Form 8-K filed by Reinvent today with the Securities and Exchange Commission (“SEC”) and available at www.sec.gov.
Advisors
Morgan Stanley & Co. LLC and Goldman Sachs & Co. LLC are acting as co-financial advisors to Hippo and Latham & Watkins LLP is acting as its legal counsel. Morgan Stanley & Co. LLC and Goldman Sachs & Co. LLC also acted as joint placement agents on the PIPE transaction. Barclays is acting as financial advisor to Reinvent and Sullivan & Cromwell LLP is serving as its legal counsel.
About Hippo
Hippo offers a different kind of home insurance, built from the ground up to provide a new standard of care and protection for homeowners. Our goal is to make homes safer and better protected so customers spend less time worrying about the burdens of homeownership and more time enjoying their homes and the life within. Harnessing real-time data, smart home technology, and a growing suite of home services, we are creating the first integrated home protection platform. Hippo is headquartered in Palo Alto, California with offices in Austin and Dallas, Texas and insurance products available to more than 70 percent of U.S. homeowners in 32 states. Hippo Insurance Services is a licensed property casualty insurance agent with products underwritten by various insurance companies. For more information, including licensing information, visit www.hippo.com.
About Reinvent
Reinvent is a special purpose acquisition company led by Reid Hoffman, Mark Pincus and Michael Thompson, that takes a “venture capital at scale” approach. Reinvent was formed to support a technology business to innovate and achieve entrepreneurship at scale by leveraging its team’s operating expertise as founders of iconic technology companies, their experience building companies as advisors and board members, and the capital raised in its initial public offering.
