How LinkedIn's co-founder Reid Hoffman plans to save homeowners from this headache | FI SENSE

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Reid Hoffman LinkedIn co-founder sees a big opportunity to make homeownership just a little bit easier, at least when it comes to the often head-shaking ordeal of dealing with home insurance.

And he is putting his money where his mouth is.

Hippo an online home insurance platform recently inked a deal to merge with Hoffman’s new SPAC Reinvent Technology Partners Z (which is also backed by Zynga founder Mark Pincus).  The deal values Hippo at $5 billion, up from the last reported valuation of $1.5 billion in July 2020 amid a $150 million capital raise (the last disclosed valuation). The deal is expected to close in mid-2021.

“Hippo is essentially the leading company in this category using technology networks to reinvent the experience, moving from essentially adversarial — because like hey we don’t want to pay out the claims — to partnering which is how do we make your home safe by using the internet of things and technology.” According to Yahoo Finance Live, Hoffman who is also a general partner at venture firm Greylock Partners, said “This is exactly the kind of transformative technology company that we have set out to find that is good for the individuals and customers, good for society and good for shareholders.”

 

Hippo was co-founded in 2015 by Assaf Wand, and prides itself in taking a more proactive approach to avoiding housing disasters (water damage, fires, break-ins, etc.). Using its data analysis capabilities, the company will reach out to homeowners in advance of potential disasters as to avoid losses.

According to an investor presentation, the company competes with 2020 IPO darling Lemonade and more traditional names in the space such as State Farm and Liberty Mutual. By the end of 2021 Hippo expects to have its products available to 95% of the U.S. population versus 70% currently. This year Hippo targeting $544 million in total written premiums, up 34.3% from a year ago.  Adjusted gross profits are seen at $40 million in 2021.

By 2025 both of those numbers are seen reaching $2.3 billion and $546 million, respectively.

According to Wand, “we have a component called proactive insurance, where we give advice to help people prevent losses from escalating.”

For someone who was a founding member of PayPal, co-founder of LinkedIn and early investor in Facebook and Airbnb, Hoffman’s housing play appears well-timed.

As people continue to migrate from often cramped cities to spacious rural locations, the COVID-19 pandemic has triggered another housing boom in America.  Existing home sales hit their highest level since 2006. Home construction was also at its highest level since 2006 last year.

According to IBIS World, the size of the home insurance industry is expected to rise 2.3% year-over-year to $108.1 billion in 2021. That’s opens the door wide for companies like Hippo and Lemonade to capitalize on their home insurance products.

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