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 that its
insurance carrier, Homeowners of America Insurance Company (“HOA”),
was placed under temporary supervision by the Texas Department of
Insurance (“TDI”).
Porch disclosed in its second quarter 2023
earnings release that HOA had a reinsurance contract with White
Rock Insurance SAC Ltd, an Aon subsidiary (“Aon White Rock”) for
which Vesttoo Ltd (“Vesttoo”) arranged capital. Vesttoo is facing
allegations of fraudulent activity in connection with collateral it
and Aon White Rock were required to provide to HOA and certain
other third parties. As a result of these allegations against
Vesttoo, the Company recognized a $48.2 million charge in provision
for doubtful accounts to reduce the net recorded balance receivable
from the associated reinsurance contract. While the allegations
first surfaced in July, the write-off was made in the June 30, 2023
financials. HOA is pursuing recovery for all losses and damages
incurred. HOA held $192 million of unrestricted cash and
investments as of June 30, 2023 and will continue to remain
responsible and committed with respect to all claims and claim
settlement expenses under its policies.
With this background, the Company announced
today that HOA has been placed under temporary regulatory
supervision by the TDI. The supervision order provides the TDI with
more visibility and control during uncertain periods and to ensure
there are sufficient plans to build capital surplus at the carrier.
HOA continues to maintain management of the day-to-day operations
of the company and its assets, including the writing of new
business and renewals and the payment of claims, subject to the
TDI’s supervision. The Company expects the supervision order to
last for a period of time, until the TDI is sufficiently
comfortable with HOA’s operations and financial position
post-Vesttoo.
Since terminating its reinsurance agreement with
Aon White Rock effective July 1, 2023, HOA has secured
approximately $147 million in supplemental reinsurance coverage
with third parties. This replaces approximately 84% of the
reinsurance coverage that was in place under the now terminated
agreement. Pending TDI approval, HOA plans to place additional
reinsurance with Porch Group’s captive reinsurer. In addition, HOA
will require additional capital to restore surplus, primarily
driven by the Vesttoo matter, and is discussing its plans with the
TDI. The Company held $358 million of unrestricted cash and
investments at June 30, 2023, including $192 million at HOA, and
$166 million in other Porch businesses and corporate.
“Vesttoo’s alleged fraudulent activity is an
unfortunate event for insurance carriers and the reinsurance
industry alike. That said, it is a one-time event that the Porch
team has quickly reacted to and has done an excellent job of
securing supplemental reinsurance coverage. HOA has historically
produced strong results, and we look forward to working with the
TDI and providing clarity on HOA’s plans for continued strength
moving forward. We view TDI’s supervision order as a sensible
action for a regulator to take given Vesttoo’s wide-spread impact
on the insurance industry. We do not believe HOA is alone here as
others have been impacted and are seeking recovery. We remain
confident in our strategy and our team to deliver against our
goals.” 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 Company’s ability to obtain supplemental
reinsurance coverage (whether from Porch Group, third parties, or a
combination thereof) in order to maintain adequate coverage against
excess losses and to satisfy regulatory or rating agency
requirements, following the termination of its reinsurance contract
with one of its external reinsurers due to allegations of
fraudulent activity committed by such reinsurer, and uncertainty of
the extent and significance of any effects on HOA and the Company
due to such termination; (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
Porch (NASDAQ:PRCH)
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