The deal with the blank cheque company will enable the US home insurance provider to go public
US insurtech company Hippo Enterprises has agreed to merge with Reinvent Technology Partners Z in a deal that values the former at $5bn.
Reinvent is a special purpose acquisition company (SPAC).
The deal with the SPAC will enable Hippo to become a publicly-traded company.
Established in 2015, Hippo provides home insurance by leveraging real-time data, smart home technology, and a suite of home services. Currently, the company serves 32 states in the US.
Hippo Insurance Services, the company’s property-casualty agent, digitises the entire home insurance process.
The insurtech company had developed an underwriting engine that utilises augmented intelligence and machine learning for prefilling of customer applications.
Besides, the underwriting engine is said to accurately evaluate and price risk at the point of purchase. This facilitates in generating accurate quotes in less than a minute and purchase in five minutes on average, claimed Hippo.
Through the omnichannel distribution of Hippo, customers can purchase policies online, via an agent, or with one of the company’s partners.
The insurtech company also offers a smart home programme for helping customers prevent water damage, break-ins, fires, and other adverse events.
Hippo also employs live data to predict and track major weather events. This enables its claims team to reach out in advance to homeowners to protect them against the events.
Reinvent co-lead director Mark Pincus 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.”
The combined company is likely to have nearly $1.2bn in cash at closing. This includes up to about $230m of cash held in the trust account of Reinvent.
The merger is further backed by a private investment in public equity (PIPE) of $550m, at $10 per share.
The PIPE was led by Hippo’s current investors Dragoneer, Lennar, and Ribbit, top-tier mutual funds, and Reinvent Capital.
Post-merger, Hippo’s existing shareholders are expected to own a stake of about 87% in the combined company.
Hippo CEO and co-founder Assaf Wand said: “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.”
The deal is expected to be completed in mid-2021. It will be subject to customary closing conditions such as approval of shareholders of the merging firms.