Hippo’s acquisition of Spinnaker Insurance drew favorable attention from A.M. Best.

The ratings agency removed Spinnaker from under review with developing implications and affirmed both it’s A- (Excellent) financial strength rating and its “a-” long-term issuer credit rating for Spinnaker. A.M. Best also gave Spinnaker a stable outlook.

A.M. Best’s update appears triggered by Hippo’s acquisition of Spinnaker, which closed on Aug. 31 2020. Hippo is an InsurTech and managing general agent focused on home insurance, and Spinnaker is a New Jersey-based national property/casualty insurer licensed to do business in all 50 states. Before the acquisition, the companies had forged a partnership dating back to 2017.

A.M. Best said its evaluation reflects Spinnaker’s “very strong” balance sheet, plus its “adequate operating performance, limited business profile and appropriate enterprise risk management.” It also wrote favorably of Hippo’s Spinnaker acquisition, noting, in part, “the financial and operational benefits that Spinnaker may receive as part of a larger organization, including anticipated access to capital support and technology resources from Hippo.”

A.M. Best’s evaluation also takes into account the acquisition method Hippo used for Spinnaker.

“The ratings recognize the equity-like characteristics of Hippo’s capitalization with primarily convertible preferred stock, the parent’s adequate liquidity position pro forma for the Spinnaker acquisition and its ongoing capital support from investors,” A.M. Best noted.

At the same time, Hippo is far from being a panacea for Spinnaker’s bottom line and future. A.M. Best warned that it would contemplate a negative rating action “if there is a material deterioration in Hippo’s balance sheet strength, operating performance or liquidity profile, including its ability to raise additional capital.”

Hippo is planning an IPO in 2021 after raising $150 million in new financing in July.

Source: A.M. Best

Topics Mergers & Acquisitions AM Best