Hudson Structured leads $80m PIPE for SPAC acquisition of insurtech Kin

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Insurance-linked securities (ILS), reinsurance, insurtech and transportation focused investment manager Hudson Structured Capital Management Ltd. has again put its weight behind home insurtech company Kin Insurance, this time in supporting its acquisition by a SPAC company.

hudson-structured-capital-management-logoHudson Structured, doing its insurance investment business as HSCM Bermuda, originally invested in Kin Insurance back in 2019, when it participated in a $47 million funding round for the company.

Hudson Structured followed this up and demonstrated its confidence in Kin’s business model, by participating in a $35 million Series B funding round for Kin as well, in 2020.

That was followed by the investment manager co-leading a $64 million Series C investment round for Kin earlier this year.

Now, Hudson Structured, as ever investing as HSCM Bermuda, is set to lead an $80 million so-called PIPE investment to help accelerate growth for Kin Insurance, Inc. as part of its acquisition by Omnichannel Acquisition Corp., a publicly-traded special purpose acquisition company (SPAC) led by serial entrepreneur Matt Higgins.

A private investment in public equity, so-called PIPE, involves the selling of publicly traded common shares or some form of preferred stock or convertible security to private investors.

It’s often used as a way to enable investors to participate and maintain interests in a company that is going through a SPAC acquisition and public listing.

In this case, for Kin, thee $80 million PIPE is led by HSCM Bermuda and Senator Investment Group, while Gillson Capital, Park West Asset Management and other institutional investors also participated.

Kin is also set to benefit from more industry experience as Joe Plumeri, Former Chairman and CEO, Willis Group Holdings is becoming a strategic investor in the company.

After the acquisition by the SPAC, the combined company will be named Kin Insurance, Inc. and is expected to be listed on the NYSE under the new ticker symbol “KI”.

Kin also said today that it’s buying a dormant insurance carrier in a stock purchase agreement, which will give it licenses in more than 40 states.

Acquisition by SPAC and public listing, along with this licensed carrier acquisition, will give Kin significant firepower and more reach to expand its business and more quickly.

After closing, Kin is expected to have a pro forma enterprise value of $1.03 billion, assuming no redemptions by Omnichannel’s public stockholders.

In addition, the deal is expected to provide Kin with approximately $242 million of cash at closing, which is in addition to the $80 million raised in the recent Series C financing.

Kin’s existing stockholders, including HSCM Bermuda, will be rolling 100% of their equity into the combined company and are expected to own roughly 74% of the combined company immediately following the closing of the business combination.

PIPE investors are expected to own approximately 6% of the combined company, and Omnichannel stockholders are expected to own approximately 16%.

As a result, Hudson Structured, investing as HSCM Bermuda, has increased its stake in a fast-growing insurtech that is achieving a much higher valuation thanks to this arrangement and the public listing, as well as having elevated growth potential.

Which bodes well for the ultimate backers, Hudson Structured’s investor base, for who the initial backing of Kin looks could turn out to be particularly profitable.

“The home insurance industry has been coasting for years on legacy technology and an antiquated way of interacting with customers. It is more than ripe for an innovative alternative and that is exactly why we created Kin – to provide customers with a better home insurance offering, better pricing and an overall better experience,” Sean Harper, Co-founder and Chief Executive Officer of Kin commented on the news.

“Access to affordable home insurance is challenging in regions that are impacted by climate change and severe weather; at Kin, our proprietary technology and deep data advantage enables us to best evaluate risk and price home insurance fairly for consumers. Our customers receive a simple, direct and exceptional experience that provides them with real savings and leaves them delighted and loyal to Kin. As a result, we are growing fast, generating attractive unit economics, and we believe we are well-positioned to significantly expand our market share moving forward.”

“Today’s announcement is a major milestone and validation of what we have built, as well as an important next step in our development,” continued Mr. Harper. “We are excited to enter the public markets with Matt Higgins and the incredible team at Omnichannel, who have a proven track record of building enduring direct-to-consumer brands, making them the perfect complement for Kin. We expect to use our strengthened balance sheet to further scale our platform to new geographies, accelerating the growth of our premiums and profitability. Consumers deserve an easy, affordable and personalized insurance experience, and at Kin, we are building the home for better insurance.”

“The Kin team has leveraged their decades of insurance and fintech experience to build a capital efficient company that is experiencing outstanding growth across the board, along with compelling and superior unit economics,” added Matt Higgins, Chairman and CEO of Omnichannel, who also co-teaches a course on digitally native brands at Harvard Business School. “Kin’s direct-to-consumer approach to insurance is a true differentiator and provides it with a clear-cut advantage versus the competition. As a result, Kin has an opportunity to reinvent and lead the massive homeowners insurance marketplace. The Omni team is already hard at work helping elevate Kin’s brand presence, expanding Kin’s acquisition channels and layering in the most cutting-edge acquisition tactics. The pandemic compressed years of ecommerce adoption and upended industries overnight. Now the future belongs to frictionless commerce, and the homeowner’s insurance industry is lagging way behind. We believe Kin is well positioned to capitalize on that unmet demand for years to come.”

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