Hippo Holdings Inc. · NYSE:HIPO
Hippo — SPAC Merger (March 2021)
50 slides from Hippo's SPAC merger presentation, March 2021
Slide 1: Proprietary and |
Proprietary and Confidential | 1
Slide 2: Disclaimer (1/2)
Disclaimer (1/2) About this Presentation This presentation (“Presentation”) is for informational purposes only. This Presentation shall not constitute an offer to sell, or the solicitation of an offer to buy, any securities, nor shall there be any sale of securities in any states or jurisdictions in
Slide 3: Disclaimer (2/2)
Disclaimer (2/2) Use of Data … The data contained herein is derived from various internal and external sources. No representation is made as to the reasonableness of the assumptions made within or the accuracy or completeness of any projections or modeling or any other information contained herein.
Slide 4: Today's Presenters
Today’s Presenters Reid Hoffman Michael Thompson Assaf Wand Richard McCathron Stewart Ellis Co-Lead Director of RTPZ President and CEO of RTPZ Chief Executive Officer President Chief Financial Officer
Slide 5: Transaction Summary
Transaction Hippo and Reinvent are partnering to transform the home Structure insurance industry Founder shares are structured to create long-term Transaction alignment Summary Valuation Transaction implies a fully diluted pro forma enterprise value of $5.0B 4.4x 2023E Total Written Premium 25.1x 20
Slide 6: Proud to Partner with Hippo
Proud to Partner with Hippo What Attracted Us to Hippo? Adaptive Strong Unit Asymmetric Risk Management Team Economics Reward Relative and Housing Tech + Insurance Fundamental Fundamentals Expertise Valuation Homeowners Disciplined Insurance Mkt Customer Value Underwriters Structure Proposition
Slide 7: De-SPAC Structure Aligns Interests for the Long-Term
De-SPAC Structure Aligns Interests for the Long-Term One Board Seat Lock-up Arrangements Designated by Reinvent Up to two-years Senior Hippo management and on founder shares material existing investors subject to lock-up arrangements Strong Alignment for substantially similar to the founder shares H
Slide 8: Hippo exists to protect the joy of homeownership
VISION Hippo exists to protect the joy of homeownership MISSION Delivering intuitive and proactive protection for homeowners, combining the power of technology with a human touch Proprietary and Confidential | 8
Slide 9: Legacy insurers spent 100 years building a flawed experience
THOUGH HOME INSURANCE IS A $100B+ MARKET Legacy insurers spent 100 years building a flawed experience Top 4 Home Difficult purchase process 35/100 Insurers Mkt. Share1 Founded State Farm 17.9% 1922 Outdated coverage Allstate Corp 8.4% 1931 Typical Carrier NPS2 Poor claims experience -49 for Claims3
Slide 10: We believe there is a better way
The entire system creates a transactional, adversarial relationship between insurers and customers r When one wins, the other loses We believe there is a better way Proprietary and Confidential | 10
Slide 11: Hippo makes insurance simple, modern, and proactive
Hippo makes insurance simple, modern, and proactive Easy to buy 1 minute to quote, 5 minutes to purchase Coverage designed for modern lives Expanded home office, electronics coverage, etc. 75/100 Overall NPS1 Proactive, human approach to claims 60 for Claims1 Event monitoring, claims concierge Tech-
Slide 12: Hippo takes a proactive approach to drive better outcomes for homeowners
Hippo takes a proactive approach to drive better outcomes for homeowners 1 Ongoing Underwriting 2 Smart Home Devices 3 Maintenance Support
Slide 13: Ongoing underwriting
1 Ongoing underwriting Property/permit data Fraud identification Risk score modeling Risk modeling (Cat, non-Cat) Customer history Permit analysis Behavioral analytics Physical property inspections Day 0 Onboarding Run risk models with initial data Proprietary and Confidential | 13
Slide 14: Ongoing underwriting
1 Ongoing underwriting Property/permit data Fraud identification Risk score modeling Risk modeling (Cat, non-Cat) Customer history Permit analysis Behavioral analytics Physical property inspections Year 1 New pool identified! Outreach with recommendation to increase liability coverage Proprietary an
Slide 15: Ongoing underwriting
1 Ongoing underwriting Property/permit data Fraud identification Risk score modeling Risk modeling (Cat, non-Cat) Customer history Permit analysis Behavioral analytics Physical property inspections Year 4 New roof identified! Update premium with new roof discount Proprietary and Confidential | 15
Slide 16: Our Smart Home program is the most widely adopted in the US Home Insurance space
2 Our Smart Home program is the most widely Kits include devices intended to mitigate damage from water, fire adopted in the US Home and theft 75% Insurance space1 Opt-in rate2 Included in standard policies, with premium discounts Complimentary self or 74% professionally-monitored kits Activation ra
Slide 17: We help customers maintain their homes
3 We help customers maintain their homes Thousands Of home checkups delivered 11K+ Preventive actions performed1 4.5 out of 5 Average customer satisfaction score1
Slide 18: Hippo's proactive approach
Hippo’s proactive approach turns an adversarial customer relationship into a partnership And average risk into better risk
Slide 19: Insurance is a hard industry to enter
Insurance is a hard industry to enter Data Fragmented High Initial Capital Distribution Availability Regulation Requirements Access Access and integrity at the state Especially for a Requires significant tech challenges level startup and ops investments
Slide 20: The opportunity in homeowners insurance is potentially massive
The opportunity in homeowners insurance is potentially massive Massive Fragmented Attractive Dynamics $ 105B 10% +8 YRS In Annual Premiums1 Only one player Customer Lifetime2 1. Source: Morgan Stanley research 2. Source: William Blair research Proprietary and Confidential | 20
Slide 21: Hippo has a technological advantage over existing players
Hippo has a technological advantage over existing players Legacy tech vs Owning a proprietary, stacks modern tech stack prevent meeting customer expectations enables better adaptation to customer expectations and to partner platforms Customer- vs Third-party, verifiable supplied data data sources im
Slide 22: Macro trends favor tech-forward challengers
Macro trends favor tech-forward challengers Aging Agent Agent-channel Population conflict average age of 611 Incumbents hindered (and increasing) by legacy agent network vs vs Birth of the Omni-channel digital consumer distribution New generation of customers expect API integration into multiple cha
Slide 23: Our distribution allows customers to purchase however they want
Our distribution allows customers to purchase however they want and provides Hippo differentiated access to the best risk Direct to Customer Agents Partners Fast and accurate Agents can focus on the Tech embedded into partner online purchase customers’ insurance needs sales flows enables access to a
Slide 24: Vertical, integrated approach to building an all-inclusive home protection platform
Vertical, integrated Home Warranty approach to building an all-inclusive home Flood Insurance protection platform HoA Insurance Renters Auto Condo Travel Pet Life Umbrella Homeowners Smart Home Tech Home Maintenance Professional Monitoring
Slide 25: Financial Overview
Financial Overview
Slide 26: Hippo's economic models
1 2 MGA Agency Commission, Policy, and Agency Commission Service Fees Hippo’s economic 3 4 models Carrier Risk Retention Insurance as a Service Earned Premium
Slide 27: Asset-light capital strategy
~90% ~75% Reinsurance1 Asset-light capital strategy ~25% Net Risk Retained ~10% 2021E Long Term
Slide 28: Key metrics & performance indicators
Highly recurring and predictable Total Written Unaffected by short-term fluctuations Premium1 in loss ratio Premium Important driver of future Total Written Premium and customer lifetime value Renewal Rate Key metrics & performance Driver of long-term profitability indicators Loss Ratio Improves wit
Slide 29: Proven track record of growth and execution
Proven track record of $2,279 growth and execution Historical Total Written Premium, $m1 2020 Milestones Rapid Geographic Diversification 12 new state launches $1,628 69% 43% ‘18 – ’20 Growth ’21 – ’25 CAGR Vertical Integration $1,145 Acquisition of Spinnaker to become full-stack carrier $796 Mitsui
Slide 30: Solid foundation for continued topline growth
Solid foundation for $2,279 continued topline growth Historical & Projected Total Written Premium, $m1 $1,628 69% 43% ‘18 – ’20 Growth ’21 – ’25 CAGR $1,145 $796 $544 $405 $304 $142 2018 2019 2020 2021F 2022F 2023F 2024F 2025F
Slide 31: Our business strengthens as we scale
Increased Scale Improved Unit Economics, More Data, More Profits Deeper Insights Reinvested in Growth Our business strengthens Increasingly as we scale Predictable & Profitable Higher Customer More Accurate Pricing, Satisfaction & Retention Better Underwriting Results
Slide 32: Our growth strategy provides a cash-efficient path to scale
Upfront Marketing Dollars in $0 our agent and partner channels1 Our growth strategy provides of customers pay a cash-efficient 60% annually in advance2 path to scale Payback period of the 1.5 acquisition costs3 YEARS
Slide 33: We have attractive customer dynamics and compelling unit economics
We have attractive …and compelling unit customer dynamics… economics ~$1,900 ~$1,200 Avg. Premium 5.4x 5.4x 8+ Years ~$350 Avg. Customer Life1 Customer Lifetime Acquisition Cost Value2 (CAC) (LTV)
Slide 34: Unit economics improving over time
Unit economics improving over time Improving Retention Declining Loss Frequency Annual Premium Retention by Cohort 12-month average Non-CAT Frequency by Cohort1 Yr 1 Yr 2 Yr 3 New Renewal 98% 5.2 87% 86% 87% 82% 4.0 3.9 78% 3.5 3.2 3.3 2.8 2017 2018 2019 2017 2018 2019 2020
Slide 35: Path to steady state Loss Ratio
Path to steady state Loss Ratio Bridge from 2020 to Steady State Indicated Loss Ratio of Hippo Programs1 -5% -6% -9% -6% -4% -4% 2020 Normalization Maturity Differentiation 2020E Excess COVID Unearned 2020 Operational Growth Proactive / Underwriting Steady State Loss Ratio CAT Rate Changes Normalize
Slide 36: Enabling rapid margin expansion as we scale
Enabling rapid margin expansion as we scale Projected Total Written Premium, $m Projected Adjusted Gross Profit, $m 43% $2,279 92% $546 ‘21 – ’25 CAGR ‘21 – ’25 CAGR $1,628 % of TEP1 $340 $1,145 28% $796 $202 25% $544 $106 21% $402 16% 9% 2021F 2022F 2023F 2024F 2025F 2021F 2022F 2023F 2024F 2025F 1
Slide 37: Our target operating model
Our target operating model Normalized2 Projected All shown as a % of Total Earned Premium1 Long-Term 2020 2025 Gross Loss Ratio3 83% 62% 60% Adjusted Gross Profit 10% 28% 38% Operating Income4 (22%) 3% 15%
Slide 38: Financial Highlights
Proven track record Z00 >$400M 69% of cash-efficient growth PIF1 in <4 Years 2-Year TWP2 CAGR In a large and attractive Z00 market $105B 8+ Years US Home Insurance Customer Lifetime Financial Superior consumer experience Z00 driven by differentiated technology and approach 75 NPS vs. 35 Industry 60
Slide 39: Hippo exists to protect the joy of homeownership
Hippo exists to protect the joy of homeownership 1 Radically improved customer experience Policies built for modern lives, powered by data 2 and technology Proactive services that reinforce our core product 3 and strengthen our relationship with customers
Slide 40: Appendix
Appendix
Slide 41: Transaction Summary
Transaction Summary Key Highlights Sources Uses Approximately $5B enterprise value Cash proceeds to Hippo $638 Seller rollover equity $5,422 Equity consideration to 4.4x 2023E Total Written Premium or 25.1x 2023E Adjusted Gross Profit $5,422 existing Hippo Shareholders PIPE investment $550 Hip
Slide 42: Hippo: Best in class Insurtech
Hippo: Best in class Insurtech 2023 Scale Gross Written Premium ($MM) 1,1451 778 5242 2,150 Growth Adj. Gross Profit3 (’21E – ’23E 124% 65% 113% 179% Growth Rate (%) CAGR) Retention One-Year Retention (%) 87%4 62%5 63%6 33%7 Customer Avg. Premium Per Policy ($) ~$1,200 $2138 $1,0769 $9299 Profile Un
Slide 43: Valuation Benchmarking
Valuation Benchmarking AV / Gross Written Premium (2023E) 7.8x 4.4x 2.5x 1.0x 1 2 3 AV / Adj. Gross Profit (2023E) 41.8x 25.1x 9.1x 8.0x 1
Slide 44: Summary Consolidated Non-GAAP P&L
Summary Consolidated Non-GAAP P&L
Slide 45: Reconciliation of FY2020 Actuals to Pro forma
Reconciliation of FY2020 Actuals to Pro forma
Slide 46: Adjusted Gross Profit – Non-GAAP Reconciliation
Adjusted Gross Profit – Non-GAAP Reconciliation FY2020A1 $ in Millions (Unaudited) Revenue 51.5 Loss and Loss Adjustment Expense (25.3) Insurance Related Expense (19.3) GAAP Gross Profit 7.0 Adjustments: Less: Net Investment Income (1.1) Add: Channel Distribution Costs 4.6 Add: Employee Related cost
Slide 47: Adjusted EBITDA – Non-GAAP Reconciliation
Adjusted EBITDA – Non-GAAP Reconciliation FY2020A1 $ in Millions (Unaudited) Net Income (Loss) (141.5) Adjustments: Less: Benefit from Income Taxes (1.8) Less: Capitalization of Software Development costs (9.4) Add: Depreciation and Amortization 6.7 Add: Stock Based Compensation 17.7 Add: Fair Value
Slide 48: Summary of Risks (1/3)
Summary of Risks (1/3) Investing in our common stock involves a high degree of risk. You should carefully consider the following risks, together with all of the other information contained in this prospectus, before deciding to invest in our common stock. Our business, financial condition, results o
Slide 49: Summary of Risks (2/3)
Summary of Risks (2/3) Risks Relating to Our Business providers could impair the operability of our website and may cause our business to suffer. 1. We have a history of net losses and we may not achieve or maintain profitability in the future. 20. Security incidents or real or perceived errors, fai
Slide 50: Summary of Risks (3/3)
Summary of Risks (3/3) 38. Claims by others that we infringed their proprietary technology or other intellectual property rights could harm our business. 59. Our insurance company subsidiaries are subject to assessments and other surcharges from state guaranty funds, and 39. If we are unable to make