Porch Group’s homeowners insurance business is growing quickly through independent agents. But the third quarter showed a widening gap between Porch’s own profits and those of the policyholder-owned reciprocal exchange it manages.
Porch moved its insurance carrier into a reciprocal structure, the Porch Reciprocal Exchange, which is owned by its policyholder-members. Porch itself earns fees for managing the reciprocal and distributing its policies, reported through its Insurance Services segment.
Reciprocal policies written rose 42% year on year to 67,500, accelerating from 38% growth in the second quarter. But written premium rose only 17% to $161.0 million, because average premium per policy written fell 17%, from $2,884 to $2,384.
Porch didn’t explain the drop in average premium in its release. It is consistent with lower rates in a softening homeowners market, a shift towards lower-premium policies or regions, or both. Chief executive Matt Ehrlichman said the business was performing well “in a soft insurance market.”
Porch’s distribution growth was rapid. The number of agency branch locations producing business rose 114% year on year, and quote volumes rose 79%. Written premium from new customers was up 178%.
The insurance services business that Porch owns had a strong quarter. Revenue rose 39% to $102.8 million, and adjusted EBITDA nearly doubled to $50.1 million, an adjusted EBITDA margin of 49%. Porch raised its full-year guidance and reported net income of $12.2 million, compared with a loss a year earlier.
The reciprocal had a weaker quarter. It reported a pretax loss of $4.9 million, compared with pretax income of $13.0 million a year earlier, as its gross margin fell to 64% from 78% and its costs rose. Its statutory surplus stood at $174.4 million, up $22 million year on year.
The reciprocal pays fees and interest to Porch, including on $106 million of surplus notes held by Porch that carry interest at SOFR plus 9.75%. That arrangement means Porch’s earnings can grow even when the reciprocal itself is under pressure, which is common in reciprocal structures but worth understanding for anyone assessing the carrier’s strength.
Porch also plans to acquire Allied Trust in a two-part deal agreed on October 13. The reciprocal will buy the Allied Trust insurance company for an initial $55 million in cash, plus $50 million in deferred consideration over 12 months. The carrier is expected to bring about $60 million in statutory surplus, leaving an effective net cost to the reciprocal of about $45 million.
Separately, Porch will buy Allied Trust’s MGA and captive reinsurance business for $95 million, made up of $75 million in cash and an expected $20 million in Porch shares. The deal is expected to close in the first quarter of 2027.
For independent agents placing homeowners business, Porch is clearly expanding appetite and agency relationships, which could add capacity in markets where options are limited. The jump in producing branch locations suggests many agencies have started writing with Porch.
Agents should also understand the reciprocal structure. Policyholders are insured by the reciprocal, not by Porch Group, so the reciprocal’s surplus and underwriting results are what matter for claims-paying ability. A falling margin at the reciprocal, combined with lower average premiums, is worth watching, particularly as it takes on the Allied Trust carrier.
