Porch Group announces an update in HOA, its insurance carrier

SEATTLE, Sept. 05, 2023 (GLOBE NEWSWIRE) -- 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.