Porch Group announces cash investment in HOA
Porch Group is investing $57 million in its insurance carrier subsidiary, Homeowners of America Insurance Company, in exchange for both a $49 million surplus note from HOA and the acquisition of HOA’s rights to potential claims stemming from the fraud connected to Vesttoo and others.
In addition, Porch was appointed to the statutory committee of unsecured creditors in the Chapter 11 bankruptcy of Vesttoo and intends to pursue recovery of funds.
Porch announced on September 5, 2023 that HOA is under supervision by the Texas Department of Insurance following the release of HOA’s statutory accounts for the quarter ending June 30, 2023. Subsequently, HOA’s rating agency Demotech, Inc. withdrew its financial stability rating. Porch has worked closely with the TDI to restore surplus to an appropriate level. Porch made a $57 million cash investment in HOA to increase surplus, in exchange for i) a $49 million surplus note, with interest and principal payments, and early redemption subject to sufficient capitalization levels at HOA and TDI approval and ii) the purchase of all rights from HOA for potential claims related to the fraud connected to Vesttoo and others. Additionally, HOA will continue to use Porch Group’s captive reinsurer to further support financial strength.
At June 30, 2023, the Porch held $358 million of unrestricted cash and investments, including $192 million at HOA, and $166 million in other Porch businesses and corporate. In addition, the company held $39 million of restricted cash.
HOA remains focused on managing gross written premiums and underwriting actions, such as price increases and non-renewal of higher risk policies.
“This transaction is a credit to the team who worked tirelessly with TDI and others to find a structure which supports HOA and is a good outcome for Porch and our stakeholders now and into the future. We continue to focus on strong and consistent execution of things we can control and are pleased with the progress being made across Porch and what is ahead.” – Matt Ehrlichman, CEO of Porch Group.