Porch Group, Inc. (“Porch” or “the Company”) (NASDAQ: PRCH), a platform for homeowners insurance and vertical software solutions, announced that the Texas Department of Insurance (TDI) has approved its application to establish and license the Porch Insurance Reciprocal Exchange (PIRE), a new homeowners insurance reciprocal exchange.
The formation of PIRE is a key component of Porch’s strategy to improve profitability and stabilize earnings within its Insurance segment by lowering direct exposure to claims and weather-related risks. A reciprocal insurer operates as a policyholder-owned entity, similar to models used by companies like Farmers Insurance and Erie Insurance, with Porch acting as the operator, or attorney-in-fact, managing PIRE’s operations.
Under the TDI-approved transaction structure, Porch will contribute $10 million to PIRE as capital in exchange for a surplus note, following the completion of TDI’s administrative procedures. Around January 1, 2025, Porch will transfer Homeowners of America Insurance Company (HOAIC), including its policies, assets, and liabilities, to PIRE. In return, Porch will receive an additional surplus note equivalent to HOAIC’s end-of-year surplus, minus Porch’s existing $49 million surplus note, which will be reassigned to PIRE. As PIRE’s operator, Porch will earn commissions and fees totaling around 20% of Gross Written Premium, while PIRE will maintain appropriate risk-based capital levels. HOAIC is expected to retain its “A” financial stability rating from Demotech.
Porch anticipates that PIRE’s approval will not affect its 2024 financial results. More information will be provided at Porch’s Q3 2024 earnings announcement on November 7, 2024, and an investor day in early December.
“We appreciate the TDI’s support and the hard work of our team in reaching this milestone on our path to becoming ‘A New Kind of Homeowners Insurance Company,’” said Matt Ehrlichman, CEO of Porch. “This achievement allows us to protect more homes in Texas and beyond, creating a simpler, more predictable business model with higher margins and growth potential. We’re excited to share additional updates on our 2024 performance and future plans soon.”
