Porch Says Softer Insurance Pricing Barely Dents New-Customer Premiums, Down Just 2%
Management said it can manage growth and margins through a softening market, with premium per new customer down 2% and policies up 42%.
Porch Group, which runs a homeowners insurance reciprocal and sells software and services to home buyers, said on its third-quarter earnings call on Wednesday that a softening insurance market is pushing down prices, but that premium per new customer fell only 2% from a year earlier. Analysts pressed on the gap between policy growth of 42% and premium growth of 17%.
Policies surge, premium per policy slips
Reciprocal written premium was $161 million, up 17% from a year earlier, while policies written rose 42% to 68,000, accelerating from 38% growth in the second quarter. Chief Operating Officer Matthew Neagle said premium per policy was $2,384 and remains lower than a year ago, mainly because of customer mix: new customers are a much larger share and start at lower premiums than renewing ones.
Neagle said the discounts on newer customers unwind as they renew, so the mix comparison should become more balanced over time.
Porch's chief financial officer, Shawn Tabak, said the long-term target of 20-plus percent organic premium growth is unchanged, answering an analyst from Keefe, Bruyette & Woods. Chairman and CEO Matt Ehrlichman said October brought a clear acceleration in premium and policy growth, and he expects the same in the fourth quarter.
Reinsurance, competition and the margin cushion
Asked by an analyst from Stephens what is behind the soft market, Ehrlichman said it is tied to both reinsurance and competition: cheaper reinsurance lowers carriers' costs, so they can cut prices for new customers. Porch's own reinsurance savings, he said, were larger than the market's because it could include its data.
He argued that Porch does not carry weather volatility on its income statement, so "our results would be exactly the same regardless of what happened in terms of weather or reinsurance pricing." The reciprocal's gross loss ratio was 24% in the quarter, and attritional losses, which exclude catastrophic weather, were 18%.
On take rate, the share of premium that becomes insurance services profit, Tabak declined to guide at the segment level. He said it has ranged from 60% to the mid-60s over four quarters and was 64% this quarter, and that 2027 guidance will come in February.
Guidance raised, Allied Trust pending
Tabak raised full-year guidance: adjusted EBITDA excluding the reciprocal of $135 million to $140 million, with a $138 million midpoint, up from $102 million at the start of the year. Revenue guidance is $518 million to $523 million for Porch-owned segments. Third-quarter revenue was $144 million, and net income attributable to Porch was $12 million.
Porch also agreed to buy Allied Trust, a regional insurer with operations in Texas and Louisiana. Ehrlichman said the combined 2027 target includes more than $900 million of written premium, more than 360,000 policies and more than $180 million of adjusted EBITDA excluding the reciprocal. Porch plans to spend $95 million, $75 million in cash and $20 million in stock, on Allied's agency and captive reinsurance units.
Porch will give 2027 guidance when it reports fourth-quarter results in February.
Sources
- Porch Group Q3 2026 Earnings Call Transcript — benzinga.com
- Porch Group GAAP EPS of $0.10 beats by $0.08, revenue of $143.9M beats by $10.46M (NASDAQ:PRCH) | Seeking Alpha — seekingalpha.com
