Earnings call transcript Q4 2022

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Lois Perkins

Good afternoon, everyone, and thank you for participating in Porch Group’s Full Year 2022 Conference Call. Today, we issued our fourth quarter earnings release and related Form 8-K to the SEC. The press release can be found on our Investor Relations website at ir.porchgroup.com.

Joining me here today are Matt Ehrlichman, Porch Group’s CEO, Chairman and Founder; Shawn Tabak, Porch Group’s CFO; Matthew Neagle, Porch Group’s COO; and Adam Kornick, President of Porch Group’s Insurance Division.

Before we go further, I’d like to take a moment to read the company’s Safe Harbor statement within the meaning of the Private Securities Litigation Reform Act of 1995, which provides important cautions regarding forward-looking statements.

to XX, reflects XXXX. responses of views including March today, discussion, your management’s questions, as Today’s We update information. or not revise do undertake this any obligations to

Additionally, on plans and expected impacts from about performance forward-looking completed conditions, and anticipated we acquisitions assumptions. or or based or and financial expectations business our strategy business pending will make current future statements

the uncertainties, from These statements you risk differ our materially these actual SEC well statements. cause described filings to are these subject factor as factors consider for which to our in a results could additional information. risks information encourage forward-looking and slides We as to in risk

the non-GAAP refer during discussed comparable earnings will both release GAAP call. of press this We on to today’s reconciliations financial to GAAP most today’s call. Please and measures for reference measures measures non-GAAP

a after at As presentation the available this company’s be website the will reminder, along ir.porchgroup.com. for with replay webcast this on call shortly

that, Chairman I’ll the with to of over to Matt. call Over Founder Group. and And you, Ehrlichman, CEO, turn Matt Porch

Matt Ehrlichman

Thank advantages to aboard. areas most we mission the a the focus everybody. ago afternoon, insurance ownership decade allow Welcome would services building valuable Good I key the for with at Porch center. simplify on sustainable over with focused for founded the homeowners now have home and win years in now that us to the Lois. of you, home,

markets, XXXX volatility to dealt have and that housing Porch board how weather the off, first as in on I Shawn, work of I our challenging So of you proud that inflation, with the contributions the the want Fantastic to I’ll we entire substantially. capital impacts CFO. by am unusual just new team market, and and slowed from start saying welcome

market of profitability. stayed all not insurance our to face near-term but home We we strategy products and our we forward headwinds, and verticals. control and same in we our on if position software what toward can service took extended key XXXX businesses focused move advantage Many these in and

in insurance matured systems policies. our by grew increase we integrated underwriting and successfully and adding our strong financial We We we diversified Board past business acquisitions, with members. new improved our

at So of financials, been loss. occurred and week million would’ve hadn’t XXXX in in been revenue which million million $XX QX year. results with $XX better EBITDA in if QX last adjusted adjusted looking Elliott, quickly ended for the EBITDA we the of the $X Storm it

XX%. the For was year revenue XXXX full year-over-year growth

on going a a company, the more share two revenue details we’ve been to grown now Over years the we’ve XX%. of results public financial here since Shawn’s at CAGR shortly.

XXXX did on reflect some key to like I’d successes as forward. us really there were move that

warranty the residential expanded Pro, warranties. last Inspector leadership and our home strengthened an inspection position our has services, home acquired and deepened our that SaaS year, which its division capabilities with offerings industry, inspection software Home company the software inspectors in During home

extends to to into we as software more XXXX, selling well have provide and which properties. underlying the Porch received service as of XX,XXX than gain well home we unique into experience now In our consumers home buyers approximately the we traction. for launched By insights XX% App, continues all companies, visibility

and made the or priced We us a general America a managing opportunity a in gives insurance to carrier demand more with provided insurance homeowners in regional expansion XXXX, or advantage, acquired MGA. competitive effectively us HOA, that a our both and consumer company which delightful insurance. we accelerate Homeowners To of progress data, homeowners agency and a great core accessing experience build the unique eventually most

XX% XXXX, XXXX in HOA other growing was year. regions this better accomplished severe quarter expanded proud having year. the ratios of carriers, homeowners business that both through We’ve with I’m carrier U.S. largest fastest the geographies our of insurance new during despite weather the while to share and third that We distribution in than the and the unexpected gross in loss

chose the reasons acquire by carrier of and efficiency volatility leadership both data team, less HOA that companies, much business, is as position. liked, to seeding we MGA XX underwriting claims healthy company a the greater the characteristics results, uniquely to years great in capital and One a premiums reinsurance historic that than strong and historic financial had we most of the of

limited margin the have and from large swings a with and for an our to of higher ambition shareholders operate create become would we model we which commission all insurance results value company long-term. weather, with So seasonality and fee-based believe effectively to and

to companies, the on invest strategy, been working Exchange. of continue Reciprocal programming a and reinsurance for we partnerships in pricing we formation, structuring time have with strategic While some and

and file our shareholders. Insurance imminently Reciprocal Group this not an by Department as formed holder of reciprocal. Porch, terms on with Insurance policy members will in the approved in If Texas Porch owned by create Porch to Exchange its association be Texas by application the proposed We would an the

entity dive. HOA required is provide new Group benefits expected and the to and hold our This operate carrier the reciprocal the the in Initially, would course ongoing ordinary discuss insurance shortly to going and related Porch costs. premiums purchase would capital would to claims key our strategy Adam deep considerations and

our which is our as better looking allows this We company structure today forward to and to profitability and have been an key attractive we believe a over advantages time. leverage us improve for sharing time more

results this off our now We’ll this President who of takes dive it provide kick Shawn Division, Kornick, into guidance. over further with deep to context will before and hand to Insurance Adam launch to cover and over

over Adam, to So you.

Adam Kornick

pricing. industry way the insurance position how in and plus along experience. increasing costs of Hurricane share years difficult to plans By Winter volatile. We saw inflation in going with two updates one storms of mitigate claims today most was in XXXX in the decades been and my and Matt. the for background, Thanks, reinsurance I’ve our growth and QX on We’ll Ian Storm Elliott increases we’re for in profitability QX to

ways, compares to provide different in a home and five today a better industry operate the reciprocal. that First, how understand operate step one you we me let insurance how and so could can take clarity on back

leads. regulated, but selling the consumer simpler great revenue a So streams lacks it It one experience. deliver retail annuity of as Two, ability insurance is business, agency. to and a a less

there’s have also insurers and insurance a limited claims cycles. a commissions they to rely the carriers underwriting or volatility. for care are models Insurance to today to agencies and But companies Four, require Commissions carriers capacity for refer write of and and grow agency the So increase, MGA, row, they fourth on or for use upside reinsurance carrier. all general risk. managing hold underwriting premiums and risk Three price what we reinsurers. reinsurers, depending more and is capital but if but exposure to carriers two, own of four. their on some and under three, the products carry operate seed products

Exchange. a Finally, Reciprocal

for Exchange successful believe attractive an business structure that Insurance. model utilized explain as we has is been strategy mentioned, As will insurance next businesses this such by A the Farmers our over and slides. Reciprocal few

substantial As example, that an Zurich behind consistent creates operator day-to-day relationship. farmers and owns from value the and

Exchange claims hold its sheet. a we by the requirements members owned Insurance structure, as the and A and the application Department how pay is its and known Insurance association capital will reciprocal? approves as we Texas from will policyholder Reciprocal an what TDI by the premiums will Group. not assuming also the Porch be The So Here’s file. balance policies, of reciprocal issue Porch

will on access. consumer continue manage claims reciprocal, Group the to and our Porch pricing leveraging of behalf data and

variety we’ve the be we expect as as fees to these Distribution fees channels, of Porch’s companies. reinsurance well from to through both agencies. paid For a BXBXC received third available comparable party including the past services, in relationships, is

of all to as one liabilities expect the our That entity on current to carrier’s this assets formed carrier Texas transaction, states reciprocal note. exchange our all We would transfer coupon carrier including we HOA be means launch in of will moved newly premiums day the in of from entity. HOA part its that into bearing and for this, and

of the responsible from success for and reciprocal reciprocal Porch be be and capitalization the the of as separate, entity. of will financially we’ll the be income fee important significant success Although we to earning will that also course initially

through TDI from in would exchange states work application premium for carrier all reciprocal transfer the a coupon HOA soon the and process. To then with recap, the file We into we’ll the and approval bearing.

in receive expect first launch new brand services Texas. Porch We lastly, will fee. a to Porch will provide operating And it Insurance to a for which reciprocal

reciprocal together, benefits structure for So will the to next this of bring all slide stakeholders. the is highlight this I long-term

distributions. structure them as from are expected to warranty provide can in new policyholder product benefit also more owners such of a policyholders XX-day dividends members the benefit Porch any future are or the to value allowing propositions and First, home this reciprocal, from

higher seasonality mentioned, to our ambition this have will shareholders. reduce towards more third-party to and large and we future, results In and we financing will swings as exposure direct Porch, At long-term value structure profitability. and be will for with move predictable believe margin, us capital to replaced help create have Porch our this the deliver

this profits go echo the should is positioned Porch growing what said. and long-term. for in more, to I’ll So This Matt have Group in well if one Shawn, for we way more over turning before predictable a had an call time exciting

We year. expect XXXX a transition to be

the In we As of we business HOA current TDI, expect on manage reciprocal the with interim, eye QX is the which before by we to assuming it approved profitability. business, this model, expect shift towards year. now an this the

Let a to in transition me smooth in will share launch key this do reciprocal, facilitate initiatives of environment. the this key things year two we the

XX% reinsurance less given half purchasing support risks, in exposure a broadly some amount the particular the operate efficiently. seed and reciprocal to approximately first in the in pronounced to market versus we means the and expect to in transition have which of First, of historical expect [indiscernible] really decrease additional cost periods, are we’ll typically its more levels, XXXX weather-related This in substantial seeding year. the the which reinsurance in to increase of of reinsurance the more

Additionally, our in increased capitalized near-term XX,XXX is to help on expected given of terms of but at obviously when launch the appropriately approximately insurer is risk our reciprocal insurance approved in of business the we the This expect increase will temper we reinsurance, propose. TDI XXXX, policies. cost higher by profitability to non-renewal cost if growth

to drive year an inflation lever and we in it’s long therefore time [ph] more actively growth direct consistent unique with and reinsurance. are exciting positioned summarize, towards to a share exposure working profitable filing quota To less approval coming, and

Shawn, over to you.

Shawn Tabak

afternoon good everyone. and Adam Thanks

excited into the just how wanted here the results, with working fourth and Matt, be I to dive of team. Adam, rest I Before the wonderful express I am Matthew, to quarter Porch, at

weather-related in employees Taking center. macro reinsurance a shareholders, the as insurance a step as create our a by capital for in have with at XXXX and Porch sales with simplifying environment to home increases a decline tightening and markets. our our home for value increases back, tremendous and events challenging We customers, ownership with presented well inflation, rising opportunity price challenging

results businesses. driven by Insurance of many is grew these service like home year-over-year that takeaway revenue key Each this, XXXX The for quarter other and of short-term XX% of insurance the business all fourth we despite our segment. impacted

EBITDA million Elliot country impacted much was storm event in the Adjusted higher by our large particular. fourth loss weather CAT which year, at claims. in EBITDA the drove quarter. approximately weather of ice a adjusted $X the by Texas impacted Storm than of and average In also the total impacted end Winter

segment. of excluding our insurance higher Pro with [ph] margin Software of growth, XX% would’ve by revenue less than Insurance Fourth segment partially offset Residential CAT less rather Services a cost CAT revenue prior revenue cost was lower XX%. driven quarter revenue Fourth Starting related was metrics. of with weather the claims. the grown $XX.X $XX.X XX%. Home XX% of now quarter in resulting filed by Warranty less revenue revenue Normalizing Inspector the and for acquisitions by million recent Revenue, was growth XXXX cost key Vertical than weather million, year, financial revenue

Insurance accounting warranty strong segment was driven through. loss was our over business to higher continued increase control. year, EBITDA CAT prior $XX.X $XXX strong growth loss for premium and premium performance flow XX% million, by with million Gross and the a and driven written approximately $X that weather for Adjusted our in per policy expense policies by in otherwise million of starting

XX% driven on prior over of policy segment. in strong to in Insurance home quarter by policies, from increase warranty. growth year, of per the segment in quarter and fourth revenue segment revenue of growth million, Insurance XX% XXXX in $XX.X our Revenue fourth XXXX. revenue Moving XX% of revenue the premium in a the by to was total increased

headwinds. to a prior declined sales by face XX% market continued X% million, that year our Software quarter moving our was home year-over-year which due was decrease soft impacted Revenue in was to over directly segment services the which Fourth $XX a housing group, industry-wide.

services subscription and software groups relatively year-over-year. flat Our were

EBITDA, adjusted from insurance driven the weather $XXX,XXX, decrease CAT Insurance segment for was As a related adjusted year EBITDA our claims. prior by

a adjusted their strong mentioned. as segment was million, and which market was XX% invested prior revenue housing platform from a were Software EBITDA year We $XX.X app, the offset in decrease reducing to $X.X XX% million, Corporate by driven data XXXX. by total in our control. expenses expense from

now to to rates policy Shifting XX% approximately consumers. prior acquisitions strong segment for in XXX% premium Revenue Revenue execution revenue warranty in improved full growth and year. value growth XX%. policies, year proposition per growth the due increased was Insurance retention prior excluding including grew by XXXX million, from year over XXXX, per our results. our business, the in driven an year full improvement the $XXX was in

our Revenue million, Software XX% was XX% similarly finally, gross less of weather-related growing by adjusted XXXX in market. segment revenue $XX.X primarily of these million prior was premiums in of insurance year, from CAT million, And EBITDA as less year-over-year. claims segment housing Vertical cost CAT impacted margin revenue written despite driven in mentioned. weather-related down our insurance XX% the a was claims. by cost grew the Revenue The loss $XXX Insurance $XXX revenue

XXXX; hold million of third balance the convertible We Shifting cash of of We sheet. now of versus at million $XXX year to our with of sheet debt the investments unrestricted plus shares in the quarter. end end the $XXX as due $XXX repurchase quarter million X.X XXXX million in per $X.XX price of and the September, fourth average we balance approximately on an of share.

to we that do wanted hold I Additionally, any SVB not currently [ph]. with provide deposits

other amount must on capital certain through partners, transferring Historically, offset reminder, based we quota effectively amount or premium, factors. basis. can a HOA this vary insurance excess carrier and of premiums and of reinsurance a hold losses to the our As requirement some a of have capital that growth, on either loss of share

its of HOA $XX has and balance that the $XX To maintain capitalized, Porch of in transferred its to A the is unrestricted to cash rated ensure HOA’s the investment and end been $XX rating appropriately and quarter, continues fourth be year rating by entity balance exceptional of million the Group agency. to million bringing million. HOA at

exchange bearing and investment HOA for coupon cash note. transfer transfer would Therefore, to to expect We the these the Reciprocal with balances in a Reciprocal.

for to And shifting now our outlook XXXX.

into We expect market. many and such volatility potential of the the housing in headwinds faced in XXXX as declines could XXXX, continue weather inflation,

Given additional exposure are range weather no providing Reciprocal prepare catastrophic we which we for performance event. assumes weather a as the launch, for

in year-over-year strong million, segment. XXXX segment $XXX that, expected our software with vertical year-on-year. of million relatively for revenue growth increasing revenue guidance least in at to our is And This assumes $XXX our XX% flat insurance with revenues

better year, sales million Revenue in this a less In cost million. Until industry-wide compared home into revenue the to but create and a hope XX% turn, the upside $XXX this an would the is any highest is we in given our the see increase to ratio Certainly, to at costs costs this higher versus assumption for assumption effect, XX% range, slowing we XX% the XXXX to the we policy our pricing inflationary $XXX of which increases highest historically of than that volumes. we’ve for this per equate housing gone claims believe of is the time. XXXX. for Therefore, appropriate to seen half weather could is first weather excluding states the our cat market gross exposure year, historical a ratio largest decline loss have claims starting average. And assumed weather in XXXX. of the when loss this have given approximately

We million loss outside of Adjusted cat until for create EBITDA have the downside which $XX million. assumed not this weather would losses formed. major of $XX events, is Reciprocal to range

We beyond. adjusted and half the for remain of positive track and are EBITDA managing second for on carefully costs XXXX we

continue U.S. review finally, to which be application the a directly events we be present time, under the more catastrophic know GAAP, the of Until of new guidance we and Group of exposed attractive. approximately And the Reciprocal approved, million. the weather time. to XXXX. business, of our we of If Porch to will $XXX we Reciprocal believe with to the to latter this will gross in that premium consolidate potential period then expect TDI revise our for anticipate We written part structure financial results

even in As expected increase expect beyond, the I continued downturn reinsurance for mentioned, the to profitability of continue in and second housing and with half adjusted substantial EBITDA pricing. XXXX we XXXX market

Here’s to to adjusted the by we XXXX adjusted demonstrate the $XX EBITDA achieve second XXXX EBITDA expectation positive in second factors. loss a how would in of a the of of the half driven bridge of number Comparing million this. half is

$XX a costs. and modeling are between million in policy out increases per rolling approved are distribution that We insurance lower already premium improvement

previously and insurance renewal. South at impact year substantial. stated of customer is the being Carolina the each price And in by out half second Our of increases policies Texas ruled are the

place severe savings claims taking million variety given expect and we by decrease compared the already of $XX costs And underwriting [ph]. expenses second more in than XXXX, XXXX. we of a a weather improvement given Second, the finally, saw between of we half are $X G&A XXXX million the actions to from initiatives in in

few it cover. housekeeping before items I finally, Matthew, a I wanted And to over hand to

look as CFO, I metrics additional share. calendar plan alternative to as or our in First, full I enter to KPIs first my Porch at year

as such the have You’ll presentation for notice insurance loss added our that gross business. disclosures this ratio certain in we

transition applicable. it this to disclosure the to becomes to until Reciprocal provide expect and we potentially continue We less

retention comparable policy to we meaningful transition and believe which reporting more plan premium rate, directly peers. retention as considers also a to Secondly, price increases to is it from more is we

from press today our related restating XXXX restatement are subsidiary. September finally, a The material net on contracts. had we that XX, the reinsurance the want release Additionally, team there, significant million. you’ll and new XXXX, weakness material the million we $X.X weaknesses unaudited efforts identified months made we their primarily additional Separate we have from thank progress of to XXXX three to loss due a the EBITDA of to as impact acquired work have financial that SOX front. in the We’ll QX we’ve subject for that this for of statements our remediated the HOA accounting note And towards XXXX HOA we our we reminder, of for the adjusted remediating time is issue in was and for QX XXXX. to XXXX. And ended in in to nine revenue additional first $X.X and for weakness

With for turn to that, to Operating it discuss fourth Neagle, our indicators key the I’ll our over Matthew quarter. performance Officer Chief Matthew?

Matthew Neagle

to XXXX, make well. Great be an want that the strong everyone. performing fundamentals the the unusual to understood throughout sure despite I Hello is of you it’s team impact pressures weather business seen with and today. are macro

priorities clear Looking and our unchanged. to remain largely XXXX, strategic

our experiences, and First, as we we’ll sell can Vertical online we customers Two, the will home upsell. partner with and and Software such to extend more app our percentage BXBXC consumer transactions. deeply their embedded, our aim of digital companies we their be increase to tools become our the for increasing access where

insurance data Group’s platform products. improve via and step weather Porch insights unique policy reducing And as we reinsurance. for launch events to build to claims, and a further our per Porch’s exposure will towards Porch out our insurance and direct warranty will key reciprocal leverage We premium

with revenue number KPIs, In average month. and I’ll per the companies per quarterly company terms average of start of

penetration, difficult when are and XX,XXX taken with are number As the left, provide in revenue together approximately a up the average total for teams environment. to quarter. the these a even software of companies selling Beginning companies in from year. appendix. our on prior reminder, QX metrics in companies on was Definitions XX% additional increasing the that, Showcasing of information more our the our KPIs our these

slow, will in market have we companies until As and number of the mentioned, is, especially housing growth the rebounds.

per companies of QX or volumes. companies retire or in certain and in in $XXX was inspection start purchase mortgage compressed go prior QX, to have per the We home seen a recognize out of month roughly decrease KPI revenue home business and year. impacted XX% company spend. either close This from by moving We lower

companies, in and to We but services gaining growth the expect helping medium more there to more insurance we and more opportunity like with expanding this term warranty. is in in metric by for modules software short-term, continue believe to this consumers access the offered

monetized Shifting includes home TV average monetize home warranty, security, Monetize monetize include movers, this fewer XX% and services. buyers. and subscription services was service. per fourth revenue services and services to than differently, our services This other saw automation revenue the year. driven insurance of the in and other decrease XXXX, Said policies, BXB now internet software home and home prior primarily We revenue. quarter from a XXX,XXX by all shift of

the worse in XX% had prior downturn than was market, the decline quarters. Given housing which a substantially

to XX% $XXX. by services is warranty, increased per per produce service going are service such monetized per and monetized revenue The growth we and revenue $XXX insurance as service even may on, key which focused up higher driven forward. Revenue the from

fourth premiums of while approximately Slide retention XX per of an basis XX, continues $XXX average generating into on million America insurance month XX, written On to of of XX% business. our quarter the had segment grow and Homeowners $XXX a gross at of XXXX per rate we an at XXX,XXX rolling policy with December policies revenue Looking year. the with as

has higher As will as to policies. risk and certain growth slow mentioned, in non-renew continue we XXXX policy

little a into the Finally, Insurance gross diving ratio loss segment. for deeper

XXXX was atypical of from point an which can XX you fourth in the XX%, loss impact gross events. weather approximately ratio the Here percentage see included quarter

see broadly QX Elliott The line years which the major we when the was three loss in in prior XX%, As average Winter period ratio Storm XX% was over a less XXXX. gross QX events. mentioned, typically with in hit weather in was

we the means loss expense CAT approximately million gross of higher to due than this additional expected If quarter of XXXX events, ratio. had fourth in this you exclude these $X

Matt up. Thanks everyone. wrap I’ll things pass back to us to

Matt Ehrlichman

Thanks, Matthew. Thanks guys.

to this couldn’t I XXXX, look turn year. excited we what’s coming given As up be more

our strategic continuing to nicely. First, progress are initiatives

We’re approved pricing. data where can property states nine we now with our in use insurance

companies renewal before, broadly increases price to mentioned to policy holders are buyers, getting using out our our price new warranty our increases now our and integrated vertical experiences ISN we’re software of as is products excellent as it’s modules. rolling I is inspection good a channels Home across half expected, tied variety software. with distributed insurance expected, app, seeing and home Our software out into growth of consumer through in but some of our at approximately rolling

insurance Second, because an company. revenue of to XX% expect profitability grow despite still important despite become market strong and to we for the which be second this and milestone our execution the is mentioned, half year growth internal our track, beyond, north on of the cautious XXXX. prioritizing by this housing for team, over in of expectations And business, profitable of as continue in lastly, to Shawn adjusted EBITDA the we

very produce. several launch about the For and are the potential the excited we the what reciprocal the business, across next momentum years of will

So Q&A. thanks the interest. with we call time that, open And up for will the much for and

Lois Perkins

Oppenheimer. Matt. [Operator question Instructions] you Jason. from to at one Over thank Great, you Jason comes So

Jason Helfstein

Hey guys, a questions. few

so just we’ll a reciprocal you exchange and one gross been just at how take in people how profit order, have that XXXX, had a ask understand if would So in EBITDA? them impacted time. just I’ll

had think already about would been business a how reciprocal the should you exchange? like it impacted how just So we

Matt Ehrlichman

Yes, Jason, the thanks for question.

take now and would be do Shawn, just high you reciprocal. what the other so. any forward to the not looking want Let Jason to the numbers then me if with are please We details, guiding level obviously right provide

approved. to it going We’re to wait get

that go We with time, that guidance analysts can we’d so in TDI through process with the and be to updated. as well appropriately point deep both to that the as go update at have models to first, our expect

costs last are in Like EBITDA because the materially we reciprocal, does at the material the margins, by and that then Obviously would’ve to, call, that margin impact that both in entity. the weather occurred, and because the born typically to of have looking impact gross incurred noted weather are line claims margins overall margins been amount a positive particular it unusual XXXX – year.

So or else, I’ll without too that way. add? certainly guys Adam detail, that much like Shawn to comment would into going Anything you

Shawn Tabak

the the had can I on a in give were weather year. we that of by how third of atypical mentioned perspective In we the saw Ian just some Hurricane we impacted as a in quarter little QX. in fourth And Elliott had primarily we a million catastrophic Storm Winter now approximately Ell $XX $X million the mentioned Storm impact. all Winter quarter from from – weather, the bit

that impacted just those two a we’ve items, Just which down to that’s, there. also. those et just give are that two But disclosed, up math XX doing the loss taking that year, our big little other ones XX may to things adds EBITDA events. $XX perspective million, would’ve us There in taken the inflation, like other cetera,

Adam Kornick

it’s that’s your rates, how to the mean way. kind opinion, and kind more is like, of reinsurance deal of the ask just catalyst become unattractive the the take talking? kind specifically in the with of recent in we’re to I bad direction just mean, – catalyst, industry’s that under the and one kept going going impacted that the going given I’ll the for just like up higher idea current this you for like I’ll along reinsurance, third I all have mean weather ultimately keep weather to economics of just, being, of one, I the And like ends second with quarters and effective multiple offline. had model

Matt Ehrlichman

quite Yes, that’s great. that something Jason, about actually a It’s talking for while. we have been

to scale that long we grow, forward an would we a company over structured looked scale insurance it’s how would a the into we we structure, almost had after immediately be to believe I, business and Adam fact, of acquiring We can conversation do we think about In of best how talk just strategically, level HOAs. best period time this into.

its Well, Again, of scale the with one more more difficult. get light, your to premiums XX% and the that to the attractive expensive. it is volatility seed of about it would is of was, that capital And that the and acquisition you time that HOA at reinsurance party or was levels reinsurers. lower third as things more difficult point that certainly changes to also, becomes in larger seeding, larger landscape approximately

structure structure. fortunate get forward, it’s I those of because, kind belief, long work our make ago filings the ready to in point, out to, able insurance optimal that this we day, bearer want But respect, homeowner’s us very with being getting able to goes do, had can for the and essentially moving of in do to very volatility. so work that essentially we premiums do of scale that, of positions a material feel direct leading large us weather what cost this having these XXX% into the end ahead, that we where it’s and that start the to aren’t Jason, seed the conversations of to and started, be at this a way is to some which company amount so without the claims, to to

can and for big impactful very a both overtime. valuation change margins us that that’s be believe we so it And to

Jason Helfstein

Thanks.

Lois Perkins

Dan you. to Dan. Thank And Great. from Over next we’ll to Benchmark. go you,

Dan Kurnos

through go-to-market do that go let’s XXX% have we advantage and this. call of exchange? future to maintain to think ability go or go me Do that asset have this you is A, this, you When a path to highlight, ignorance my because effectively approved like kind a it different data to you’re of have you it, believe But call totally the a obviously help the limit little Great. you this Thanks. of getting strategy transfer light sort on process, how it you bit Matt, of of almost there’s you forgive sounds going the kind getting bit this. it to them your for you as charge you or through process your claims downside. through if through

You’re somewhat reliant on them.

be driver still they own your can a own lead obviously You but exchange. the through platform,

me couple help through those things. just think a of So

Matt Ehrlichman

first if take And anything the Yes, Adam, have happy in and crack add. to. you I’ll to layer then

by this you’re confident TDI. insurer exactly announce that news it today weren’t we if not Dan, being would approved right, in the we So

We get that through process believe yes, already. that approved. it discussions had to we’ll that we’ve able – So TDI be the to with work

out there’s many of I’ll also industry. in that other examples the again note reciprocals

model with others. members/owners not know, farmers gave the one a folks [ph] they well. who were used ERE for attractive if of we of variety insurance operator that behind Zurich, but in that’s USAA but others USAA a pure So is very they are as or for might Zurich or as

it’s so that’s structure a before. used And been

grow right? of So the consumers be go premiums faster be quickly, to can lower able a fees In to by price our being effectively. benefit terms we able yes, in we can for percentage to better being help more well, We more One, premiums. essentially our underwriting being credit data able two more able able ways. and data grow and win we to of grow results get right, pricing use the faster, the to we our to consumers, higher get the to right because provide to fees create premiums advantage, how are, premiums as

help And so premiums grow quickly. to incentive we very are

advantage. us Our data gives an

be You’ll so. do to able

Secondly, pay a fees on based sustainable we exchange. having reciprocal healthy appropriately can

to right you entity fees priced growing over this time. being affords else to that customers and those anything have And the correctly, pay so Adam, fees to would be potentially add? have by able able

Adam Kornick

it think you wouldn’t I did great. just complicated. more I make

Dan Kurnos

both of move guide. – and exchange this is plan obviously reflective Does guess in levels year of to your GWP I sort to you’re reducing the also this reciprocal seeding the

obviously a TAM through help after, be you who have can right? So at us smaller does all think can But but just your of go you little it bit? you minds? this a in kind margin, go higher after that change And the can substantially TAM

Matt Ehrlichman

noted think seed in and I of like get our get One, companies ways. So TAM is two we the we largely to reinsurance are the the then they one team no, last the but when premiums interesting this we involved, us. types I’ll in to would would and fees similar take fees would call, pay

no take, not different, So is our opportunity our – no. materially

auto insurance terms have time in of time. are of insurance insurance dynamic our out right? just category and interesting companies In actually like, because TAM profit. insurance, very becomes to to cars safer. smaller general of risk just is think that like being the in in homeowners over we the good do the categories long-term questions there general, a I is get that that a become Homeowners as market unlike thing this One to increase that generate weather, view, industry of going play should attractive to weather be because is the okay, it price That’s able a over

the will weather, homeowners believe going That’s which substantially. means is just the insurance going TAM to up more to is TAM and grow we it. grow there go that reality Prices is the as of

I at is five the forward – Not look next as if the is over it you it’s TAM large would If now? be if as surprised twice a years, all.

prices just not the only our the executing growing beneficiary to our from business, to to so we going we expect this plan, through but up and And would continue fee-based and that we be to of go the TAM benefit be model. would are able direct

Dan Kurnos

helpful. it’s my be along. move Matt, so but if the focus to I’d you I’ll question, going app standard a That’s me it. Got and something ask not tells call long tonight,

Matt Ehrlichman

see Dan. Thanks, Good to you.

Lois Perkins

Thanks, Dan.

Next is Cory. you, Over up from to Cory JPMorgan.

Cory Carpenter

Hey, the questions. thanks for

pull the Just there on of the happen that more, that a Like cash I’ll just one impact to does sticking P&L? sure like your are to Home basically right think can in this but all? no on do around Plan you what it? opportunity, just about from format. financial that Porch Is a essentially then I perspective? just terms at there. the bundling new the Does weather does way understand And with stop this then HOA have limitations from like – we couple reserves impact impact under when has it reciprocal make

Adam Kornick

Sure.

for lever for a an report from would on entity the standpoint, EBITDA Shawn so standpoint, So adjusted own. as shareholder mentioned that we

not with so that And would moved lever. be

by So the statement exchanges owned. loss would shown Porch the claims and the on the the NPL exchange be paid on not balance sheet apart

But the own intent to that’s and pay entity actually create can source it So but we they capital, we there, of volatility tell reliable be more claims, is efficient. that’s a their can want our consumers make right? the lever experiencing the

and was Home your us second then Porch more this lets question think about in ways So do Plan I there. many the

make to us. for people Insurance So Reciprocal offers ways exchange, to but these the such that get the we Exchange, proposition with Porch value kinds reciprocal find want of

app want to through moving or we So a phone concierge. for get make them to through the it the easy

offer We’re value around propositions can looking through the at warranty recall we Reciprocal Exchange a or check.

to it think branding ability it easier from we makes we do. a actually what offer products So and

want to it So Matthew sure add you make or that’s it, as want we we anything to happens. something that. launch actually Matt to

Cory Carpenter

try I’ll too. muted. one Sorry, more

back you the during terms for given, at effective Just year, you’re exposure. window. and half where not my policies Sorry, and pull of will terms XX% in I your insurance? insurance think of little Will all time that first and think you it’s the I XX%, or the the you correctly, if at in period somebody in of essentially is part of growth like, less this a yet weather back your pull variable said like have heard all reinsuring only is year be most you’ll more aggressive I

of kind thinking you are about how Just that?

Adam Kornick

Yes.

So answer that. I can

or that quota share. And a the like a is if refers share, hurricane reinsurance premium So I single loss we primarily see excessive kinds like loss One a talked about percent is CAT of event percent losses. [indiscernible] excessive pays that we a So an quota there first two where of catastrophe, of XX% to other a and are for reinsurance, remember essentially all, of use. event, only the

that Reciprocal And filing of are way way a about to so really get to Exchange do. our position to an the to for appropriate sold a we that be manage market. us current under us the HOA for application things It’s reinsurance XX%. economics is part of a around structure the there subsidiary also It’s as couple as

better TDI CAT for at more it in pay large amount if it efficient, So XoL, which our event, if deductible. retention in is be use to structure of puts some there is that, footing change approves that the the excess doesn’t of it a would the

factors quota two the changed intentionally So those share are why this we’ve year.

that’s then transition through looked worked we’ve approval. a filing ready upon we’ve on the time, the As long something and for getting markets, in

we a do done. question we policies. are policy Yes, XX,XXX it, things application, The it’s second year. are macro The how around science see already underwrite understand level, team an range of we was we a I how has non-renew half policies it, at of But there we there. around we to a profitable. think About price that’s this great plan how are that so there those if when

appropriate. charge they in fundamentally regulated. but a us Reinsurers is because policies past, price And are were lag. Those current can good the They that’s the the in market. there’s feel not

We regulated. are

And hold to policies it so those doesn’t that are now. for us right just make sense

that those. a we’re renew the of not one And that of – will reinsurance both. leverage taking an cost we and we in example So tactic part that it’s because see

Matt Ehrlichman

in customers with, forward at continue from second for understanding A that really customers those related question being year. also renewal. those increase on get the to profitable policies the then point not the renewal you in there’s of we of year comes we and at price the customers continue your majority half of down just profitable half for note the for vast and the forward non-renew a It the with and first the the

the over process that some of the happens during of but of half course in And is, policies, those of first unprofitable the of year. so of carry do the are half the non-renewing you have lack profit we first the what year, to

the of course half or the of – place a get the to renewal, last substantial the go at the effect the of have and of ongoing. also over we or in You the from and second into quarter point the over two the all two. year make this us quarter P&L profitability in the does of that and will to That second that really those into – next course benefit quarter the drive year in impact go going the over now helps and price the half been increases

Cory Carpenter

Thank you.

Lois Perkins

from to you. Thank Josh Over Cantor.

Josh Siegler

can book? if just touched more rate these you talk Hi, do Thanks but Matt, into Yes. of it, increases deeper dive specific fully bit you When on actual question. on little on taking expect about earning afternoon. or we everyone. you my for to could I’d Good a providing the love color markets. the start rollouts some if these actually

Matt Ehrlichman

you color provided? what addition, little a a Adam, and more – detail in what want do little to provide I just from

Adam Kornick

way about the of as is it XX they simplest take Yes, so think months. they,

So once new – approved in that and any at next price the in at pay that that them market and comes we their have see will will customer price renewable. any renewal consumer programmed and renewal

And so that’s by state.

had price changes. we in three states So like some Texas,

South one. example, had Carolina, for we

we from there’s So the but XX when essentially over months it’s outs, the file some and ins increases.

So, really XX to takes full benefit we’re see it a seeing of a months some XXX%. already, but them

Josh Siegler

more little on on then elaborate XXXX in on strategy to you capture your go-to-market you a more can software plan the some And expanding software customers? side, how Understood.

Matt Ehrlichman

Sure.

We business. Vertical are still very focused on Software growing our

per us in One opportunities out to of success the back title and new would us modules, inspection had things that also some go is, customer. the some to particular customers. space those give the I rolling drive space. And more new highlight in gives value in opportunities It we’ve to

housing a something the focused. bit our by continue to And would And slowdown to stay a so modules that is the continue and headwind day on. But of every is focus rolling core them we’re focused on. the with I we of lot continuing impacted out in little market. There’s main new businesses verticals after are work we because go the say that just

Josh Siegler

Thank you very much. Understood.

Lois Perkins

Great, thank you.

have John we from Next Stephens.

John Campbell

on probably you, know to Congrats to that’s have That’s, done. get for the lean the know you’re update willing but factored the guidance, I renewal easier the your is But you’re incremental That’s of going willing And quarters. business of all depth take the but range reinsurance thanks. notice you on that. when premiums. into guidance still don’t to that go kind on degree an just how arrangements. of if have level right getting a least to a does for exciting next pricing you I uncertainty a course are of guys are I know guys that’s guidance usual now? change. as the And and I of life the a much there’s development. to business and wills it’s heart get – couple you goes season. guys, like And kind at this guys, on if – Hey in on the make you said what operate wanted that it against side Shawn, in of emotional going sound just like to And lot the there,

Matt Ehrlichman

Yes, renewals April X. are

out obviously in just just will from we increases what starting market, quotes the in in to are. We’ve good the really get lot more data there’s know a pricing providers. terms those So, the seen though market of the in

of and out what’s guidance shortly, that but have view more happening get built some expectations we’ve and guidance set up into fully we we’ve appropriately we’ll been the conservative, given given just – there. so And unknown we in there. information feel about here Obviously our good how

John Campbell

HOA be tricky but that read. of for premiums so and elsewhere. seeing And a you’re Matt. I’m pretty for filings are the can to then maybe to that was year, the Texas big help getting business, driver I’m a XX%, thinking, close thanks XX% little lot these up insurance obviously Okay, a

legacy unpack larger you side. states the stage, you’ve if you’re and just stage maybe of Carolina So seeing how incumbent or Texas, South larger to your impact maybe talk opened newer out growth broadly that of the maybe could much versus

Shawn Tabak

into Looking that.

high a at say are very I we level, So focused profitability. on

we’re we growth and tends we’ve a states that profitable. like lot our have a where we that know enter existing we new partners, we are, companies So we to and when that believe what Texas, like Carolina. been South state, agency, in price years, with a existing Carolina, own competitive our of is in some being and to mean we use like tend the that several North from way comes have state agents are for of really And history a profitable, in

at most continue so that’s is, in. when are really increases. point you’re states And filings, be to what looking reading you the states the we successful you’re to Those I the would

impactful most the are there changes so to our business. And

Matt Ehrlichman

a John, of not many their have would I and have that customers price at filings you’re when yet kind thing those seeing been renewal. for hit not increases you’re yet that the And only looking through pushed is that add, remember price increase,

would getting price get benefit through we the the so actually of the be customers And that price, as all increases renewal and that increase. going more of

substantial second we’ve the given the So of, is noted, approvals I like gotten. a to impact year, it that half

John Campbell

thanks Okay, Appreciate guys. it.

Matt Ehrlichman

Thanks.

Lois Perkins

have Ryan KBW. Next we from

Ryan Tomasello

questions. Hi everyone. taking Thanks for

your Just to on of further your near new conversions Second, bit conversion into in business dependent tend drill to into post that transition touched the continue BXBXC conversion, there markets Porch of across status Matt, newer just cross licenses. And sell the this that brand grow reciprocal ability launching are grow then you term? based this any ability do attrition amount more earlier, the material think existing based be kind or quo you the broader you churn limitations can but I a to on finally, will structure drive to to on new these or services here? post on a the puts policyholder and

Matt Ehrlichman

was see can I if them. several I think I’ll that questions, but get

the So we’re the of is Texas. making in application State

application just state So the your insurance HOA. the apply for insurance, Reciprocal in state, coupon carrier points, to would two a return note Reciprocal like by Exchange in first is the Exchange to entity. To the bearing sell licensed we

of even value other, a stays subsidiary in what would exchange. So existing switch the that consumers have that to want would propositions consumer strong company entity is a one we HOA but means in the from the that that we be to

chooses also that part state manage that that filings, a of we’ll we for will reason the risk licensing be some we’ve use that exchange entity. that not the means It is umbrella, inside HOA our and So churn. how of of to underneath that’s of Reciprocal move for be licenses but to state that managed that key one fact is way if both able subsidiary we by apply a which risk a still consumer they’ll

we’re Matt, to and you thinking So focus if consumers more on that I talk broadly how categories those it you’re about maybe know helping about then with. I don’t want across

Matthew Neagle

brand, Yes, this launch will and we’re so talked at first insurance in about the about more this BXBXC us our or transition help the introducing off, so selling kind strategy, the hinted be past. mean, of in terms excited we’ve broad of with can Porch how services, Ryan I just

As in soon an be to that Porch we set stand that it’s insurance able will customers approved, as out noted be well existing these bringing to transitioning we’d market. as Porch help insurance remarks as that into product prepared be to to the selling able proposition We brand. start the in new customers really expanded for value in customers

So one to XX-day customers. of warranty able existing we’ll But be that our do. a product examples of those provide is to things Porch those variety can there’s

insurance, just not be help them their manage monitor what means is to around different these than holistically, help what can lot more capabilities differentiate home product a think than the consumers any to does app in lot over appliances built and give again to able able to with for that opportunities to built to that moving It’s recalls be potential help home variety insurance has value. that really That’s to bundle us unique that check and Porch can others, services their more. we of that’s insurance people recall a of their, with we a create other just for time but very of their help free to concierge, them are into it

Ryan Tomasello

book for recapitalize can repaid carried? get value? that by kind secondly, third-party bridge that long Thanks that. is how the And note value to if will on that’s then with of us you how so, Is And take you’re understand of providing currently the HOA’s you tell the think Reciprocal you it fair do And where that as capital? transfer you determined? dictated can us help

Matt Ehrlichman

book to first, I’m yes, happy it’s take market value, the value.

this, for price value and then set have purchase. the book we like that when the appropriate look a So you transaction yes, at comps use market

the second that’s right. then So exactly question… And

Ryan Tomasello

with take you’re How what you recapitalize the and long do the think contributing? new take entity to it third-party will capital out

Matt Ehrlichman

of It’s choice in than terms our ability and capital a get capital actually go just capital. us, – entity. priced needs for Ryan, when we be more to of that question It’s the of when the also will a the right,

surplus into surplus. the consumers in of a addition to additional their building Reciprocal so of that So one pay the premiums slight amount goes is elements contribution,

in a way over bring to So it’s efficient the and able go be was third-party to surplus we out in. so, look or of build more time. year course of over first right would capital expect to cost the assuming the to capital But

Lois Perkins

we everyone. you, afraid have all Great. Thank time [ph] for I’m that’s today.

you soon. very forward speaking So we look to thank to and much for joining you

Matt Ehrlichman

day. for do We’ll all the Have you it. interest. Thank the soon. We great a and see appreciate time you

Porch (PRCH) 14 Mar 232022 Q4 Earnings call transcript