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Porch Group, Inc. ("Porch" or "the Company") (NASDAQ:PRCH), a homeowners insurance and vertical software platform, today announced it has filed a new and updated application to form and license a Texas reciprocal insurance exchange ("Reciprocal") with the Texas Department of Insurance ("TDI"). If approved and fully implemented as proposed, Homeowners of America Insurance Company ("HOA"), Porch's homeowners insurance carrier, would be sold to the Reciprocal at inception resulting in all premiums, policies, and insurance underwriting being conducted through the Reciprocal1.
The formation of the Reciprocal is an important step in Porch's long-term strategy to reduce its exposure to earnings volatility from its Insurance segment by mitigating direct exposure to insurance claims and weather events.
A reciprocal insurer is an insurance association owned by its policyholder-members who spread risk by pooling their risks together. This reciprocal exchange structure has been utilized by other homeowner insurance businesses such as Farmers Insurance and Erie Insurance. The day-to-day operations of the Reciprocal would be managed by a subsidiary of Porch, which would receive ongoing fees for originating and managing all day-to-day aspects of the homeowners insurance business for the Reciprocal.
Porch would support growth at the Reciprocal by continuing to reach homebuyers early and throughout the homebuying journey and leveraging access to homebuyer information and property data. Homeowners who purchase policies in the Reciprocal could receive unique benefits and value-added services from Porch.
Along with the reciprocal exchange application, Porch contributed approximately 18.3 million Porch Group common stock shares2 into HOA to support this planned transition. This contribution helps to bolster HOA's balance sheet strength and rating after Q2 2024 weather impacted surplus. In addition, the contribution strengthens HOA's long-term surplus position, which better positions HOA for any future third-party surplus note capital-raising efforts, and, importantly, is expected to support premium growth in 2025 and beyond.
Posted In: PRCH
