Hippo Insurance coverage Joins the SPAC Frenzy


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What’s Hippo Insurance coverage?

Hippo is a fintech firm with the mission of reworking the house insurance coverage trade.

Anticipated IPO Date:

Merger anticipated to shut mid-2021.

  • Hippo is merging with SPAC Reinvent Know-how Companions Z, you should purchase this SPAC beneath the ticker image RPTZ.
  • Reinvent is led Reid Hoffman, the founding father of LinkedIn.

Bull Case

  • Hippo is valued at 4.4X its 2023 estimated written premiums. Whereas under no circumstances low-cost, it is a decrease a number of than comparable corporations fintech insurers like Lemonade.
  • Hippo carries a Internet Promoter Rating of 75, considerably larger than the trade common of 35.

Bear Case

  • The expansion fee of Hippo Insurance coverage’s written premiums fell from 114% in 2019 to 33% in 2020.
  • Hippo Insurance coverage could also be entering into the “SPAC craze” at its tail-end. Latest SPACs have seen extra muted market response.

One other day, one other mega-SPAC deal…

At the moment fintech residence insurer Hippo Enterprises introduced it was doing a reverse merger SPAC cope with Reinvent Know-how Companions Z. The deal values Hippo at $5 billion (much less internet money) and the corporate will elevate roughly $1.2 billion from the deal.

Hippo Insurance coverage is Going Public: In regards to the SPAC Merger

Together with Reinvent Know-how Companions Z’s money, the deal additionally contains $780 million in proceeds from a PIPE. In complete, Hippo Insurance coverage expects to have $1.2 billion in money at completion within the merger.

Additionally taking part within the deal have been Silicon Valley heavyweights Dragoneer Funding Group and Ribbit Capital. Their involvement in Hippo Insurance coverage is a promoting level for the well being insurer as each have a popularity and document of success of investing in fintech corporations.

Dragoneer most famously teamed up with PayPal to purchase shares of Latin America ecommerce large MercadoLibre when its Mercado Pago fintech alternative wasn’t well-known Wall Road. MercadoLibre shares have exploded 238% since Dragoneer’s 2019 funding and Ribbit has invested in a who’s who of fintech corporations together with Affirm and Coinbase.

Total, the deal seems effectively funded with a Rolodex filled with buyers with deep experience within the area.

What’s Hippo Insurance coverage’s Inventory Image and Valuation?

The merger between Hippo Insurance coverage and Reinvent Know-how Companions Z is anticipated to shut mid-2021. Till then, buyers who’re enthusiastic about proudly owning Hippo Insurance coverage should buy shares of RPTZ, the SPAC that Hippo will merge into.

As soon as the merger completes it’s doubtless Hippo will change its ticker image to one thing nearer to the corporate’s precise identify.


Supply: Getty Pictures

Per the Wall Road Journal utilizing knowledge from S&P International, fintech is shortly transferring into the insurance coverage area, transferring past mere brokerage to turning into carriers which might be answerable for monetary protection and claims. 5 property-and-casualty expertise startups both fashioned a provider or introduced the acquisition of 1, up from three in 2019 and one in 2018.

On the similar time, you’ve seen an enormous enhance within the variety of fintech-related SPACs and IPOs.

That’s not coincidence. An open secret within the IPO and SPAC market is timing issues. Founders and the enterprise capitalists that put money into personal corporations pay shut consideration to latest public debuts with a cautious eye on what the general public is valuing shares of their trade earlier than they pull the set off.

Assuming Hippo Insurance coverage is not any completely different than each different firm, it’s doubtless they’re not liking what they’re seeing within the public markets, most notably from latest IPOs/SPACs within the fintech insurance coverage area:

  • Oscar’s delicate IPO: Shares of the tech-focused medical insurance expertise platform based the brother of the previous senior advisor to the president (and son-in-law) Jared Kushner fell 11% under its IPO worth on the primary day of buying and selling when the corporate debuted on the general public markets this week.
  • Clover Well being’s struggles: Shares of Chamath Palihapitiya’s SPAC Clover Well being are down roughly 40% within the final month alone as a mix of unfavorable headlines from a short-seller and weak point amongst richly-valued development shares have dragged the corporate down.
  • Lemonade’s sell-off: Even fintech insurers which might be exceeding expectations are getting punished. Shares of the AI-based residence and rental insurer Lemonade just lately plunged practically 20% after reporting sturdy earnings.

To be honest to Hippo Insurance coverage, it has been reported the corporate was in talks to do a SPAC deal as early as final November. Nevertheless, it’s doubtless the present backdrop sped up the corporate’s timeline.

Investor sentiment can shortly change and it’s doable the corporate is perhaps going through a a lot more durable atmosphere than even just a few weeks in the past. It’s doubtless many different fintech shares shall be watching Hippo’s SPAC with bated breath.

Ought to You Purchase Hippo Insurance coverage or Cross?

When analyzing Hippo Insurance coverage, your foremost consideration ought to hinge on how bullish you might be on their enterprise mannequin.

The corporate feels that insurance coverage is just too adversarial, pitting clients in opposition to insurers. Their method is to create what they describe as a “partnership” the place the corporate helps clients keep their houses.

This “partnership” consists of Hippo providing good residence instruments that may present premium reductions. As well as, in early 2020 the corporate acquired residence upkeep platform Sheltr, which offers checkup work designed to save lots of on expensive upkeep.

Homeownership is a big market, with $105 billion in annual premiums, so if Hippo’s insurance coverage technique is actually disruptive they may have a protracted runway for development.

Nevertheless, with the corporate reporting $405 million in written premiums in 2020, it would commerce at a steep valuation. Whereas buyers have been prepared to pay up for rising corporations on this market, latest sell-offs in Lemonade’s (Nasdaq: LMND) share worth present valuations could also be contracting.

As well as, whereas Hippo grew its premiums 114% in 2019, that development fee decelerated to 33% in 2019. The corporate expects written premiums to develop at an identical fee (34%) in 2021.

The subsequent blockbuster IPO?

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