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Shares of homeowners insurance and software platform Porch Group surged more than 50 percent on Friday after the company reported record profit and revealed plans to restructure its insurance business to better protect it from extreme weather events.
While third-quarter revenue fell 14 percent from a year ago, to $111.2 million, Porch turned a profit of $14.4 million — after losing $78.6 million in the first quarter of 2024 and $133.9 million last year.
Porch said improved loss ratios in its insurance business, increased pricing for its software services, and “tighter cost controls” helped drive the turnaround.
Last month, regulators signed off on the company’s plans to restructure its insurance business into a policyholder-owned company owned by Porch.
The approval “has been a long time coming, is a milestone for Porch, and the culmination of extensive work by the Porch team in partnership with the Texas Department of Insurance,” Porch CEO, founder and Chairman Matt Ehrlichman said in a statement.
Matt Ehrlichman
“We believe this will be the right structure for our insurance business, which we expect will lead to higher revenues and a more predictable financial profile and equip our insurance operations for future profitability,” Ehrlichman said.
Shares in Porch, which last year traded at 86 cents and peaked at $4.78, gained 55 percent on Friday to close at $3.62.
Porch’s home owners insurance business was plunged into collapse due to the bankruptcy of the insurance company, Vesttoo Ltd. Fraud allegations against Vesttoo swept through the insurance industry last year, and Porch’s insurance subsidiary, Homeowners of America Insurance Company, was placed under temporary supervision by the . Texas Department of Insurance.
Porch is looking to put that chapter of the company’s history behind it. After announcing a strategic business partnership with reinsurance broker Aon Re Inc. In January, Porch filed with the Texas Department of Insurance in August to reorganize its insurance business.
Texas regulators approved the plan last month, and Porch said it plans to sell Homeowners of America Insurance Company to a new homeowners insurance exchange owned by policyholders and operated by Porch on Jan. 1 or about them.
Creating the Porch Insurance Reciprocal Exchange, or PIRE, is “an important step in Porch’s strategy to increase profitability and stabilize earnings … by reducing direct exposure to claims and weather risks,” the company said when it announced it had received the green light from Texas regulators in October. .
While the future looks bright, Seattle-based Porch has racked up $785 million in losses since going public through a 2020 merger with a special purpose acquisition company (SPAC).
Location details provide the underwriting limit
While Porch’s insurance and warranty business accounted for 72 percent of Q3 revenue, its software and services business also generated $31.3 million in revenue.
Porch’s software and services business operates as a number of businesses including appraisal software and services, title insurance software, mortgage software, moving services, moving and homeowner marketing, and roofing software.
Through its software and services business, Porch says it has built deep relationships with 28,000 companies, giving you “unique insights into the vast majority of US real estate. This data helps feed our underwriting models, better understand risk, and create competitive differentiation in underwriting,” the company said in its latest quarterly report to investors.
Affiliates of Porch’s Inspection Support Network and other types of inspections do about 40 percent of all home inspections, Porch said when it announced the price increase for those services in April.
Porch is allowed in 16 states to use its data to improve risk accuracy in pricing policies — meaning it can charge lower premiums for low-risk policies, and higher premiums for policies with higher risk factors.
In the third quarter, the board said it introduced three new “household items” for price risk, including that the electrical panel needs to be repaired. Porch estimates that the panel requiring repairs will result in a 41 percent higher rate of claims.
Homeowners whose panels don’t need repairs can get an 18 percent discount, while those who need repairs can pay 13 percent more, Porch said in an investor briefing.
Porch’s earnings report also detailed the impact of the Texas hurricanes on its bottom line, and how recent premium increases have mitigated those impacts.
Hail in the first quarter led to a major loss of $16.5 million, while Hurricane Beryl led to an estimated loss of $44.9 million.
American home owners Texas premiums are rising
Source: Porch Group investor presentation.
Beginning in 2021, Porch’s insurance carrier, Homeowners Insurance Company of America, has raised annual premiums in Texas from $1,245 to $2,508 per policy — a compound annual growth rate (CAGR) of 42 percent.
During the third quarter, Porch said its insurance business had moved out of Georgia and away from coastal zip codes.
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