(Reuters) - Hippo Enterprises will go public through a $5 billion merger with a blank-check firm backed by Silicon Valley heavyweights Reid Hoffman and Mark Pincus, in a sign of rising interest in the fast-growing “insurtech” sector.
The deal, announced on Thursday, comes when the COVID-19 pandemic has forced the insurance sector to rely heavily on technology to reach customers, helping the “insurtech” sector, which uses artificial intelligence and big data.
Founded in 2015, Palo Alto-based Hippo sells homeowners insurance online and the merger with special purpose acquisition company (SPAC) Reinvent Technology Partners Z will include a private investment of about $450 million and give it $1.2 billion in cash.
“We were looking for the best partner to help us on the next stage of our journey, someone who had built businesses of massive scale, and you can’t find better partners for that than Mark and Reid,” Hippo Chief Executive Assaf Wand told Reuters.
While the pandemic has focused the insurance industry on the importance of technology, Wand noted the pace of consumers adopting digital channels to buy insurance has quickened in the last year.
The total value of premiums generated by insurtech platforms will exceed $556 billion in 2025, compared with $250 billion in 2020, according to a study by Juniper Research.
Hoffman told Reuters that when they first raised the SPAC, they hadn’t contemplated an insurtech investment but were impressed by Hippo and its holistic approach to home protection.
As well as home insurance, Hippo offers maintenance services and smart monitoring devices to customers.
Hippo’s SPAC merger follows the recent deals by CCC Information and Metromile Inc.
Many insurtechs have also gone public, with Oscar Health, backed by Google parent Alphabet Inc, raising $1.2 billion on Tuesday. Insurance startup Lemonade Inc also became a public firm last year.
SPACs are shell companies that raise funds through an IPO to take a private company public.
Morgan Stanley and Goldman Sachs provided financial advice to Hippo, with Barclays acting in the same capacity for Reinvent. The respective legal advisers were Latham & Watkins LLP and Sullivan & Cromwell LLP.
Reporting by Sohini Podder and Noor Zainab Hussain in Bengaluru and David French in New York; Editing by Sriraj Kalluvila and Steve Orlofsky
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