Mitsui Sumitomo Insurance, a subsidiary of MS&AD Insurance Group Holdings (ticker: MSADY), has invested $350 million in the firm in the form of a convertible note. The note will convert to equity when Hippo does another financing round, or is sold through an acquisition or a public offering, said Rick McCathron, Hippo’s president. Financial terms weren’t announced but Mistui, a Japanese insurer, will have a minority, McCathron said.

The investment comes just months after Hippo’s last funding round. The startup raised $150 million in a series E round in July, which valued Hippo at $1.5 billion. In all, Hippo has raised $709 million, McCathron said. Investors include FinTLV, Ribbit Capital, Dragoneer and Innovius Capital.

MS&AD Ventures, the corporate venture arm of MS&AD, took part in the E round and that led to the current investment, McCathron said. The investment will support Hippo’s product roll out in additional states with plans to reach 95% of the U.S. homeowners population in the next year, a statement said. Mitsui Sumitomo will take on a portion of Hippo’s reinsurance risk, he said. “Both companies thought [the current investment] would deepen the relationship in a sizable way. We value the partnership we’re forging with them,” McCathron told Barron’s.

“We value the innovation that Hippo brought to the home insurance space through its advanced classification of risk,” said Shinichiro Funabiki, director, vice president executive officer at Mitsui Sumitomo Insurance, in the statement.

Launched in 2015, Hippo offers homeowners insurance to consumers; total written premiums reached $270 million in July. The Palo Alto, California company employs 375 people. In June, Hippo agreed to buy Spinnaker Insurance Co, a national property and casualty insurer licensed in 50 states. Hippo also bought Sheltr, a preventive home maintenance platform, in November 2019.

Hippo has already discussed plans to be publicly traded. Assaf Wand, Hippo’s CEO, said in July that the company would be ready to go public in 2021. But the insurtech hasn’t decided whether it will actually opt for that route, McCathron said Wednesday. Hippo will talk to its advisors and board to determine what the next phase will look like, he said. This could include an IPO, a merger with a special purpose acquisition vehicle or accepting additional private investment. “We will make a determination at the right time…I’m sure this isn’t the last capital we will take,” McCathron said.

Several insurtechs have gone public in 2020, with most performing well. Lemonade’s (LMND) shares are up 135% from its $29 IPO price, while Duck Creek Technologies (DCT) remains 47% above its $27 offer price and MediaAlpha (MAX) shares are up 101% from its $19 IPO price. Root Insurance (ROOT), however, closed flat last month and its stock has dropped 37% from its $27 IPO price.

McCathron said there are certain insurtechs—including Lemonade, Root and SelectQuote (SLQT)—that have reached “escape velocity.” The market is picking the winners and losers, and determining what the next iteration will be for these companies, which is likely a public offering, McCathron said. “We’re proud to be considered among those leading insurtechs. The genie is out of the bottle and we’re excited to do our part as it relates to home insurance and home protection,” he said.

Source: Barrons