Porch announces reciprocal exchange regulatory approval
Porch Group, a homeowners insurance and vertical software platform, announced that the Texas Department of Insurance has approved its application to form and license Porch Insurance Reciprocal Exchange (PIRE), a new homeowners insurance reciprocal exchange.
Forming PIRE is a key step in Porch’s strategy to increase profitability and stabilize earnings in its go-forward Insurance reporting segment by reducing direct exposure to claims and weather risks. Porch will be the operator managing PIRE’s operations.
After the TDI completes customary administrative closing procedures, Porch will contribute $10 million cash in exchange for a surplus note to capitalize PIRE. On or around January 1, 2025, Porch will sell Homeowners of America Insurance Company to PIRE, including all its policies, premium, assets, and liabilities. In exchange, Porch will receive an incremental surplus note equal to HOAIC’s end-of-year surplus less Porch’s existing $49 million surplus note which will be assigned to PIRE and continue forward. Ongoing, as the operator, Porch will earn commissions and fees that blend to a take rate of approximately 20% of Gross Written Premium and PIRE will manage to an appropriate risk based capital and surplus. HOAIC is expected to maintain its “A” financial stability rating from Demotech.
Porch does not expect PIRE’s approval to impact its 2024 financials. Further details will be shared at the Q3 2024 earnings announcement on November 7, 2024 and at an investor day in early December 2024.
“I would like to thank the TDI for their partnership throughout this process and to the Porch team for consistently living our values as we worked toward this moment. It has taken great effort, and we are pleased to have achieved this key milestone on our journey to become ‘A New Kind of Homeowners Insurance Company.’ This is an important step for us to protect the homes of more homeowners in Texas and around the country where we plan to continue to be a great partner for both policyholders and insurance agents alike. With this change, Porch will be a simpler and more predictable business over time that has higher margins and growth potential. We believe this transaction and go-forward operation will create significant value for shareholders. We are looking forward to sharing more about our 2024 results, forward-looking financials, and details into our plans soon.” – Matt Ehrlichman, Chief Executive Officer.
