Porch Group, Inc. (“Porch”, “Porch Group” or “the Company”)
(NASDAQ: PRCH), a leading vertical software company reinventing the
home services and insurance industries, today announced a cash
investment of $57 million to its insurance carrier subsidiary,
Homeowners of America Insurance Company (“HOA”), 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 Ltd. (“Vesttoo”) and others. In addition, the Company
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 (“TDI”)
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 Company 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, Chief Executive Officer.
About Porch Group
Seattle-based Porch Group, Inc., the vertical
software and insurance platform for the home, provides software and
services to approximately 30,700 home services companies such as
home inspectors, mortgage companies and loan officers, title
companies, moving companies, real estate agencies, utility
companies, and warranty companies. Through these relationships and
its multiple brands, Porch Group provides a moving concierge
service to homebuyers, helping them save time and make better
decisions on critical services, including insurance, warranty,
moving, security, TV/internet, home repair and improvement, and
more. To learn more about Porch Group, visit porchgroup.com or
porch.com.
Forward-Looking Statements
Certain statements in this release may be
considered “forward-looking statements” within the meaning of the
“safe harbor” provisions of the United States Private Securities
Litigation Reform Act of 1995. Although the Company believes that
its plans, intentions, and expectations reflected in or suggested
by these forward-looking statements are reasonable, the Company
cannot assure you that it will achieve or realize these plans,
intentions, or expectations. Forward-looking statements are
inherently subject to risks, uncertainties, assumptions, and other
factors which could cause actual results to differ materially from
those expressed or implied by such forward-looking statements.
Generally, statements that are not historical facts, including
statements concerning the Company’s possible or assumed future
actions, business strategies, events, or results of operations, are
forward-looking statements. These statements may be preceded by,
followed by, or include the words “believes,” “estimates,”
“expects,” “projects,” “forecasts,” “may,” “will,” “should,”
“seeks,” “plans,” “scheduled,” “anticipates,” “intends,” or similar
expressions.
These forward-looking statements are based upon
estimates and assumptions that, while considered reasonable by the
Company and its management at the time they are made, are
inherently uncertain. Factors that may cause actual results to
differ materially from current expectations include, but are not
limited to: (1) expansion plans and opportunities, and managing
growth, to build a consumer brand; (2) the incidence, frequency,
and severity of weather events, extensive wildfires, and other
catastrophes; (3) economic conditions, especially those affecting
the housing, insurance, and financial markets; (4) expectations
regarding revenue, cost of revenue, operating expenses, and the
ability to achieve and maintain future profitability; (5) existing
and developing federal and state laws and regulations, including
with respect to insurance, warranty, privacy, information security,
data protection, and taxation, and management’s interpretation of
and compliance with such laws and regulations; (6) the Company’s
reinsurance program, which includes the use of a captive reinsurer,
the success of which is dependent on a number of factors outside
management’s control, along with reliance on reinsurance to protect
against loss; (7) the uncertainty and significance of the known and
unknown effects on HOA and the Company due to the termination of
the reinsurance contract with Aon White Rock following the
allegations of fraud against Vesttoo, including, but not limited
to, the implications from, and the length of time HOA will be
subject to, the TDI's temporary supervision of HOA and Demotech's
subsequent withdrawal of HOA's financial stability rating; the
outcome of Vesttoo's Chapter 11 bankruptcy proceedings; the
Company's ability to successfully pursue claims arising out of the
alleged fraud, the costs associated with pursuing the claims, and
the timeframe associated with any recoveries; HOA's ability to
obtain and maintain adequate reinsurance coverage against excess
losses; and HOA's ability to maintain a healthy surplus; (8)
uncertainties related to regulatory approval of insurance rates,
policy forms, insurance products, license applications,
acquisitions of businesses, or strategic initiatives, including the
reciprocal restructuring, and other matters within the purview of
insurance regulators; (9) reliance on strategic, proprietary
relationships to provide the Company with access to personal data
and product information, and the ability to use such data and
information to increase transaction volume and attract and retain
customers; (10) the ability to develop new, or enhance existing,
products, services, and features and bring them to market in a
timely manner; (11) changes in capital requirements, and the
ability to access capital when needed to provide statutory surplus;
(12) the increased costs and initiatives required to address new
legal and regulatory requirements arising from developments related
to cybersecurity, privacy, and data governance and the increased
costs and initiatives to protect against data breaches,
cyber-attacks, virus or malware attacks, or other infiltrations or
incidents affecting system integrity, availability, and
performance; (13) retaining and attracting skilled and experienced
employees; (14) costs related to being a public company; and (15)
other risks and uncertainties discussed in Part I, Item 1A, “Risk
Factors,” in the Company’s Annual Report on Form 10-K (“Annual
Report”) for the year ended December 31, 2022, and in Part II, Item
1A, “Risk Factors,” in our Quarterly Reports on Form 10-Q for the
quarters ended March 31, 2023 and June 30, 2023, as well as those
discussed in subsequent reports filed with the Securities and
Exchange Commission (“SEC”), all of which are available on the
SEC’s website at www.sec.gov.
Nothing in this release should be regarded as a
representation by any person that the forward-looking statements
set forth herein will be achieved or that any of the contemplated
results of such forward-looking statements will be achieved. You
should not place undue reliance on forward-looking statements,
which speak only as of the date of this release. Unless
specifically indicated otherwise, the forward-looking statements in
this release do not reflect the potential impact of any
divestitures, mergers, acquisitions, or other business combinations
that have not been completed as of the date of this release. Porch
does not undertake any duty to update these forward-looking
statements, whether as a result of changed circumstances, new
information, future events or otherwise, except as may be required
by law.
Investor Relations Contact:
Lois Perkins, Head of Investor Relations
Porch Group, Inc.
Loisperkins@porch.com
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