Porch Group Inc

NASDAQ:PRCH

Q1-2025 Earnings Call

[Operator]

Good afternoon, everyone, and thank you for participating in Porch Group's First Quarter 2025 Conference Call. Today, we include our earnings release and filed our related Form 8-K with the SEC. The press release can be found on our Investor Relations website at ir.porchgroup.com. I would like to take a moment to review 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. Today's discussion, including responses to your questions, reflects management's views as of today, May 6, 2025. We do not undertake any obligation to update or revise this information.

Additionally, we will make forward-looking statements about our expected future financial or business performance or conditions, business strategy and plans. These statements are subject to risks and uncertainties, which could cause our actual results to differ materially from these forward-looking statements. Please refer to the information on this slide and in our SEC filings for important disclaimers. We will reference both GAAP and non-GAAP financial measures on today's call. Please refer to today's press release for reconciliations of non-GAAP measures to the most comparable GAAP measures discussed during this earnings call, which are available on our website.

As a reminder, this webcast will be available for replay along with the presentation shortly after this call on the company's website at ir.porchgroup.com. Joining me here today are Matthew Ehrlichman, porch Group's CEO, Chairman and Founder; Shawn Tabak, Porch Group's CFO; and Matthew Neagle, Porch Group COO. Thank you. I'll now turn the call over to Matt for key updates.

[Matt Ehrlichman, executive]

Good afternoon, everyone. Thanks for joining us. I've never been more excited to report on quarterly earnings as I am here for Q1 2025. After launching the member on Porch Reciprocal Exchange on January 1 and the corresponding sale of our homeowners of America insurance carrier into the reciprocal. This is the first quarter in which our business is in our view, optimally structured. We've fully transformed to a simpler, commission and fee-based, higher-margin model that is more predictable for shareholders. And I'm pleased to report that the results are strong. Because of the standout Q1 results and the trends we're seeing, we are again increasing 2025 guidance. As I look ahead to the next several years, my expectation is very clear that we will grow profitability and cash flow faster than previously anticipated. Shawn will take you through the results, the increase in our guidance and the increase in our long-term model and margins shortly.

So this quarter marks a special time for the company. It's the moment Porch shareholders are no longer in the catastrophic weather claims business, while still participating in the attractive growth of the homeowners insurance industry, and with durable competitive advantages. This quarter demonstrates how effectively our business is now structured to scale. Overall, we delivered results for Porch shareholders that are exciting.

Revenue of $85 million generated predominantly from $97 million of premium written at the recarrier, which will label reciprocal written premium. Both of these numbers exceeded expectations. Now as the manager of the reciprocal rather than the carrier itself, revenue isn't apples-to-apples when comparing year-over-year given our transformation. However, gross profit and adjusted EBITDA certainly are good to look at to assess year-over-year growth and performance.

And so we're having to report that in Q1, we realized 82% gross margins, which we expect will continue forward, demonstrating what we've been saying about the high-margin nature of our go-forward business. This produced Q1 gross profit of $69 million, which was a $32 million or 86% increase compared to gross profit in Q1 2024.

Our business is now highly profitable. Net income attributable to Porch was positive at $8 million. We produced our highest ever Q1 adjusted EBITDA of $17 million, which is a 20% margin and above expectations. This was a $34 million increase over the prior year. Resulting from this, I'm excited to share that we not only generated positive cash for Porch shareholders, but significantly so at $27 million of positive cash flow from operations for Porch shareholders in the quarter, which includes $7 million collected related to the past Vesttoo pursuits.

Operationally, we performed strongly. New business premium at our insurance business is performing well, our software and consumer service operations are progressing nicely, and we are investing more aggressively across these businesses to drive faster growth in 2026 and beyond. Finally, the reciprocal remains healthy. The Reciprocal's April 1 reinsurance renewals were strong, lowered its catastrophic weather risk and provides Porch shareholders certainty and clarity as we move forward. This reciprocal's cost of reinsurance decreased year-over-year given our strong underwriting results in 2024 and Porch's unique Home Factors property data.

Meanwhile, the reciprocal is healthy with $198 million of surplus combined with non-admitted assets at the end of Q1. Similar to a strong comparison we shared about 2023 performance, I'm pleased to share the A.M. Best report comparing results across carriers for 2024, the final year in which we owned homeowners of America.

As you can see on the slide, the carrier was #1 in direct combined ratio performance in Texas out of carriers with more than $50 million in homeowners insurance premiums in the state. Across a U.S.-wide comparison of carriers with more than $350 million of premium, our carrier was #3. This outperformance versus the market demonstrates the ability for the reciprocal to pay attractive management fees to Porch Group ongoing, while continuing to build surplus. And it reinforces our differentiated capabilities that will sustain advantages for the long term.

We believe Porch is an excellent company to own during a turbulent time in the markets. First, we do not believe tariffs will have a significant impact on our business. We expect a mid-single-digit adjusted EBITDA impact at most, which has been built in and assumed in the increased guidance Shawn will share shortly. Second, if there is a recession, we believe our business is well protected and may even benefit. The majority of our business and income is generated from homeowners insurance premiums at the reciprocal. As you can see in the chart on this slide, historically, Homeowners insurance premiums just continued to grow in all economic cycles. It's an attractive industry to be playing in, especially in a commission and fee model without absorbing the weather volatility.

If interest rates come down amidst the slowing economy, it could spark a housing market pickup, which will be attractive for our software, consumer service and insurance businesses. Third, if inflation picks up, we expect homeowners insurance price increases will accelerate, directly increasing our high-margin management fees. And finally, if weather worsens, it can now help our business. Porch doesn't absorb nor pay for the catastrophic weather claims under this reciprocal structure. More weather-related claims means premiums will increase over time, growing fees produced for Porch and for our shareholders.

Nice thing is generally, homeowners need homeowners insurance. So we don't see risk to this industry as a whole doing anything, but continuing to grow. And our competitive advantages help us to consistently stand out. I'll now turn it over to Shawn to cover our strong financial results and raise guidance.

[Shawn Tabak, executive]

Thank you, Matt, and good afternoon, everyone. As previously discussed, we changed our segments as of January 1, 2025, to align with the new business model following the launch of insurance services in the Porch Reciprocal Exchange. I'll focus my comments today on the port shareholders component of our Q1 '25 financials. As a reminder, and as we discussed last quarter and at our Investor Day, there are 3 segments that generate cash for Porch shareholders, insurance services, software and data and consumer services, offset by corporate. We call this Porch shareholder interest. And since generating cash for Porch shareholders is our ultimate goal and how we measure our success.

This is what we will focus our commentary on in this earnings call and ongoing. As a reminder, under GAAP, for the time being, we are consolidating the Porch reciprocal exchange given the surplus note relationship between the reciprocal and our business. We do provide a reconciliation in our 10-Q and press release between Porch shareholder interest and GAAP consolidated financials with the difference being the reciprocals segment.

Where relevant, we will present the prior year financials on a comparative basis, so folks can better understand the trends in our business. For software and data and consumer services, the comparison will be apples-to-apples. But because the reciprocal model didn't exist in 2024, the comparison for insurance services and therefore, Porch shareholder interest will not be apples-to-apples.

Okay. With that background, let's get into our strong Q1 results, which exceeded expectations. Q1 2025 Porch shareholder interest revenue was $84.5 million, with 59% of revenue from insurance services, 26% from software and data and the remainder from Consumer Services. Associated gross profit was $69.1 million with a gross margin of 82%. Insurance Services had an 85% gross margin. Software and data was at 75% and Consumer Services 83%. Overall gross profit grew 86% year-over-year. Q1 2025 Porch shareholder interest adjusted EBITDA was $16.9 million, a $33.6 million improvement over the prior year, driven by the shift to the insurance services business model.

As Matt mentioned, we see the year-over-year improvements in gross profit and adjusted EBITDA is the clearest way to understand the increase in our results. We're off to a strong start in delivering what we said we would as the operator of the reciprocal, higher margins and predictable results.

Now let's dig into the segment results. Starting with Insurance Services. There are a number of ways that Porch's Insurance Services business generates economics. Management fees paid by the reciprocal based on a percentage of its written premium, policy fees paid directly by the policyholders, non-catastrophic quota share reinsurance provided by Porch's captive reinsurer to improve capital efficiency for the reciprocal and as a reminder, this reinsurance only is on attritional losses and does not include catastrophic weather.

Also, fees paid by third-party agencies when we deliver home buyer leads and approximately 15% coupon on a $106 million surplus note Porch group holds with the reciprocal. From the $97 million of the reciprocals written premium, Porch Insurance Services generated revenue of approximately 50% or $49.8 million, which is high margin and predictable. Associated gross profit was $42.3 million with a gross margin of 85%. Adjusted EBITDA was $25.8 million with a margin of 52%.

Shifting now to software and data. Revenue was $22 million, a 4% increase over the prior year, driven by product launches and associated price increases at several of our software businesses and partially offset by a nonrecurring revenue transaction. We expect growth in this segment to accelerate in Q2 to high single digits as we normalize for the Q1 nonrecurring items. Gross profit was $16.5 million, with a 75% gross margin. Adjusted EBITDA was $4.6 million, a $2 million increase over the prior year. As a note, in Q1 2025, the housing market existing home sales were 2% lower than prior year, with continued slow turnover. As interest rates decline in the future, we expect to see tailwinds driven by the pent-up demand. But for now, we remain cautious and are assuming a flat housing market for the year.

Shifting now to Consumer Services. Revenue was $14.7 million, a 9% decrease over the prior year, driven by the closure of our lower-margin moving products such as corporate relocation in the third quarter of 2024. Gross profit was $12.2 million with an 83% gross margin. Adjusted EBITDA loss was $700,000, a $2.2 million decrease over the prior year, driven by investments to drive growth in 2026 and beyond. We've reduced corporate expenses significantly over the last couple of years as we move to lower-cost location and reduced G&A back-office type costs. You can see here the benefit of our cost control actions. Corporate expenses decreased $2.2 million to $12.8 million in Q1 2025 compared to $15 million in the prior year.

Moving on to the balance sheet. There are several benefits from the shift toward the commission and fee-based insurance services business model. It's simpler, higher margin and asset length. As a reminder, our focus is on generating cash for Porch shareholders, which aligns closely with adjusted EBITDA. In Q1, we have also provided additional information on cash flow from operations of the Porch shareholder interest. Porch cash plus investments was $114 million at March 31, 2025. Porch shareholder interest cash flow from operations was $27 million, driven by adjusted EBITDA in the quarter of $17 million and $7 million of cash from the Vesttoo bankruptcy process with potential for more over time. Additionally, our litigation against other parties remains ongoing, and we will keep you posted as things developed.

Now for our updated 2025 guidance for Porch shareholder interest. Now that we are through our first full quarter post the launch of the reciprocal and our transition to a high-margin operator, we've seen the results. Good news, the model is performing even better than we had previously expected. And despite the macroeconomic turmoil and tariffs, which have been factored in, we are increasing our 2025 guidance across the board.

We are increasing our 2025 revenue guidance by $10 million and now ranging from $400 million to $420 million. We are increasing our 2025 gross profit guidance by $10 million and now ranging from $320 million to $335 million, still with an associated gross margin of approximately 80%. We are increasing our adjusted EBITDA guidance by $5 million, now ranging from $60 million to $70 million. This increase in adjusted EBITDA guidance reflects 3 things: first, Q1 2025 adjusted EBITDA was ahead of our internal expectations by approximately $5 million. Second, we are pleased with our Insurance Services segment's performance post reciprocal transition. So we are raising guidance for the rest of the year by $5 million, which factors in the mid-single-digit millions of tariff-related impact Matt had mentioned. Finally, those increases are partially offset by an approximately $5 million of additional 2025 investments to accelerate growth in 2026 and beyond.

Starting April 1, when we renewed our reinsurance contracts, we improved the terms of the non-catastrophic quota share contract for the reciprocal to build even more surplus cushion there and scale insurance premiums. With this change, Q2 adjusted EBITDA for Porch is expected to be approximately $5 million to $7 million lower than Q1 and continue to grow nicely in Q3 and again in Q4. Given this is our first quarter with actual results and our go-forward structure, we wanted to provide what we shared at our Investor Day. We wanted to update what we shared at our Investor Day in December.

As a quick note, we won't be updating the long-term model quarterly. Since it was the first quarter of results, we thought it was relevant. As we saw in the Q1 results, we now expect the reciprocals written premium to convert to Porch Insurance services revenue at approximately 50% versus 40% previously. If we apply that higher conversion to our long-term $3 billion premium target and our long-term Porch shareholder -- our long-term target Porch shareholder revenue is $2.3 billion.

Aligned with our Q1 results, we still anticipate 80% gross margins and a 30% adjusted EBITDA margin. This means that at $3 billion of premium, we now expect adjusted EBITDA of $660 million. I'll now hand it over to Matthew to discuss a strategic update and review our KPIs.

[Matthew Neagle, executive]

Thank you, Shawn. I'd like to start by providing an update on our 4 strategic focus areas to drive revenue growth for the business. First is to scale insurance premiums. In Q1 2025, new business growth accelerated, driven by strong execution across geographies, pricing and distribution. Most ZIP codes across our largest states are reopened at this time. Texas, our largest state, implemented a 16% rate increase, reinforcing our commitment to pricing discipline. We remain careful in risk evaluation on both new and renewal policies to ensure profit targets are hit, therefore, keeping the reciprocal healthy and growing surplus.

During this time, most premium growth comes from price increases, generating more reciprocal written premium and thus management fees for Porch without increasing risk. Key hires have strengthened our insurance leadership team. And we successfully placed its new reinsurance program with over 40 investment-grade partners, reducing the reciprocals risk. Importantly, Porch shareholders are no longer in the catastrophic weather claims business.

The second area of revenue growth is software innovation, where we have made meaningful progress against our road map. In Q1, Rynoh implemented a 20% price increase, in line with our strategic pricing goals. Our inspection business launched an expanded partnership with one of the largest inspection franchises in the country. [indiscernible], our mortgage SaaS business launched a new product, Flowfi-QuickApply, which autofills up to 80% of a mortgage application, streamlining borrower onboarding and driving adoption. Next is the growth of our data business. We continue to expand Home Factors, our unique property insights product, adding further value for the reciprocal and third-party carriers.

Lastly, accessing more homebuyers. We made strategic progress in reaching and monetizing high-value homebuyers and launch new offerings such as packaging services to make their move easier. Before we dive into our key performance indicators for insurance services, I want to provide a few important reminders regarding our segment reporting and prior year comparisons.

Early in the first quarter of last year, we divested our EIG business. Additionally, our prior insurance segment included our warranty business, which has now been strategically aligned within our new Consumer Services segment. This realignment allows for greater focus on the distinct growth and profitability drivers of each business. These changes in our business structure make direct year-over-year comparisons to previously disclosed KPIs less relevant as they are based on a different basis. Furthermore, in support of our profitability objectives, we executed material nonrenewals that extended through the first half of last year.

This will naturally impact our year-over-year comparisons for the current period. With these factors in mind, let's now turn to our new key performance indicators. As Shawn noted, our insurance services generate economics primarily through reciprocal written premium, or RWP, which represents premium written by the reciprocal before any policyholder cancellations. We earn a management fee based on a percentage of this RWP. In the first quarter, reciprocal ring premium reached $97 million, reflecting an approximate 10% increase compared to the prior year.

Looking ahead, we anticipate continued growth in RWP throughout the remainder of the year. This expectation is driven by the historic seasonality of renewal policies where the first quarter typically sees lower volumes compared to the second, third and fourth quarters due to the typical patterns of homebuyer activity in new construction during the spring, summer and fall months. Moreover, our ongoing efforts to expand our distribution channels and implement strategic price increases are expected to further contribute to RWP growth. reciprocal policies written reflects the total number of new and renewal insurance policies written by the reciprocal during the period.

We generate policy fee revenue directly from these policyholders. Reciprocal RIN policies were 36,000 in Q1. Given Q1 has historically the fewest renewal policies written, looking ahead to the second quarter, we expect reciprocal policies written to be north of 50,000 policies in that quarter. This anticipated increase is driven by the historical seasonality and the improving momentum in our new business growth engine. RWP per policy written is calculated by dividing the reciprocal written premium by the total number of reciprocal policies written.

In the first quarter, RWP per policy written stood at $2,683. As mentioned before, we are encouraged by the momentum we are building in our new business initiatives. In the first quarter of 2025, we saw reciprocal new business premium double on an apples-to-apples comparison to the prior year, demonstrating the effectiveness of our efforts to expand our reach and attract new policyholders. While we continue to see some residual impact on our renewal rates from our prior profitability initiatives, growing renewal premium represents a significant opportunity for growth.

We are actively focused on enhancing our renewal strategies and expect to see improvement in these rates as we progress through the year. Finally, as Matt mentioned, the Porch reciprocal exchange maintains a strong financial position with a healthy surplus combined with non-minute assets totaling $198 million. For software and data, we have a number of companies in the annualized revenue per company or ARPU. In Q1, we served 24,000 companies with an annualized revenue per company of $3,644.

Reminder, this only includes companies related to our software and data segment and no longer includes moving companies or insurance agencies. On that basis, the number of companies have been relatively flat and we expect that to continue until the housing market picks up. As we discussed previously, strategic price increases are driving increases in revenue per company, and we expect that to continue.

For Consumer Services, we have the monetized services and annualized revenue per monetized service. In Q1, we had 71,000 monetized services with annualized revenue per monetized service of $207. Reminder, this only includes monetized services relating to our Consumer Services segment and does not include insurance policies nor transactions in the software segment. I'll pass it back to Matt now to wrap us up.

[Matt Ehrlichman, executive]

Thanks, Matthew. I'll quickly wrap just by reinforcing the most important messages from today, and then we'll dive into Q&A. First, delivering quarterly adjusted EBITDA of $17 million in Q1 2025. Again, a $34 million increase year-over-year. Number two, this translated to $27 million of positive Porch shareholder interest cash flow from operations. Again, we think that's a really important stat. Number three, we increased our 2025 adjusted EBITDA guidance by $5 million to $65 million at the midpoint. We demonstrated what we said. We are now a high-margin business and produced 82% gross margins.

Again, we're proud of our $69 million of Q1 gross profit being an 86% year-over-year increase. We completed the reinsurance renewals at the reciprocal as we said, reducing its exposure to catastrophic weather claims and lowering reinsurance costs. Porch shareholders not being in the catastrophic weather claims business is great, and I do want to express appreciation to the great partnerships with more than 40 A-rated high-quality reinsurers. Our premium growth plan is on track, and we are seeing strong signs related to new business growth.

Lastly, there are no significant impacts from tariffs. The majority of our business is homeowners insurance, which is stable in a recession. So folks, we're off to a strong start, and we look forward to a fun and exciting year and years ahead. Thank you to our shareholders for your continued support. With that, Lisa, please open the call for questions.

[Operator]

[Operator Instructions]

And we'll take the first question from Daniel Kurnos, Benchmark.

[Daniel Kurnos, analyst]

Yes. Great. Thanks. Matt, not a lot to say here. It's a fantastic quarter, especially from the insurance side. Can I just get some clarity because I think I may have missed this from Shawn, just why the take rate was so high in the quarter? And I know you have some built in with the TDI, but just is that a result of the surplus? Or what exactly drove that? And then just as we think about your willingness here, Matt, given the strong start of the year to kind of lean in, you guys gave an initial GWP guide. Q1 crushed it. You guys are clearly [indiscernible] into agents harder. And so -- and getting new policies written, I guess what's your willingness to accelerate from here? Because it sounds like your -- there's a little bit of reinvestment willingness -- incremental willingness at this point given how strongly you started?

[Matt Ehrlichman, executive]

Thanks, Dan. Shawn, why don't you take the first one? And Matthew, maybe you can take the second one, premium growth.

[Shawn Tabak, executive]

Yes. Yes, sure. Happy to -- yes, the reciprocal written premium converted to revenue at about 50%. We do expect that to be close to the ongoing rate there. A couple of things on that. First of all, Porch Insurance Services segment does receive policy fees directly from the policyholder. So that's included there as well. And then second, there are management fees that are paid by the reciprocal as well as the captive arrangement, the captive reinsurance arrangement that insurance services has with the reciprocal. The thing to remember about the captive is the ports also pays commission and sales and marketing and a portion of the attritional losses back to the reciprocal.

So you can see that all flowing through the ports insurance services P&L that we broke out. The main thing I think we think about with respect to the reciprocal is it's in a really healthy spot from a surplus perspective. We ended the quarter with almost $200 million of surplus combined with non-amended assets. That's the highest that metric has ever been for the reciprocal. We do expect it to move around from quarter-to-quarter, especially as there's weather claims at the reciprocal, but all in all, a very healthy spot for the reciprocal to be in there. We do expect that to be highest at Q4.

[Matthew Neagle, executive]

And then I can speak to the plans of how we're thinking about premium growth. Just kind of reiterating some of the prepared comments. We've seen RWP grow 10% on an apples-to-apples basis year-over-year. But the area we leaned into, particularly in Q4, which is around our agency distribution, appointing and reactivating new agents has led to Q1 being more than 100% in new business premium growth. There are a variety of levers that we still have to grow RWP over time. And as Shawn mentioned in his comments, we have started to make more investments. And so I'll share some of those opportunities we have. Some are shorter term and some are medium term. We will continue to invest in our growth team to be able to reach out and engage agents in making sure our commissions and incentives are competitive and attractive for our agents. We are now looking at new geographies and looking at additional states where we can offer our products. We are in the infancy of our port insurance product, which offers an entirely different type of value prop to the consumer, and to the agent, and we are going to lean into building that out.

There are choices we can make around our product that can make us even more attractive in the market. We'll do that a little bit in the near term, but we are making bigger investments into how we leverage our data and increase our sophistication of pricing, which will allow us to be more aggressive around growth and pricing in a way that gives us confidence that we will be profitable. I would also say as a sort of -- as a final point, there's still some opportunity for price increases. It's probably slower than what we've seen in the past. And this is a massive market. And so there is a lot of opportunity for us and we have started to take midterm investments in terms of bringing on additional talent -- senior talent to our team and starting to put in place some of the systems that will allow us to scale as we go after that $3 billion in premium in the next 7 to 10 years. So there's a lot ahead for us.

[Daniel Kurnos, analyst]

Matthew, can I just follow up on one thing super quickly? Like if replacement value were to go up as a result of tariffs or just in the general market and given that you guys have a lot more of a dynamic model with your data advantage would be confident in being able to pass through premium increases? And b, do you think it would make you more advantage relative to others given that you have a lot more visibility into the actual products themselves that have [indiscernible].

[Matthew Neagle, executive]

Those are. I look at those sort of 2 vectors. The first is we do look at replacement value on an ongoing basis, and we do update replacement value on an ongoing basis. And as we do that, it does bring up price through just the fact that you're getting more coverage. To your second point, it is certainly our thesis and belief that as we get more and more data into our pricing, which were every -- all the time, and there's opportunities for us to invest more into the sophistication of our pricing. We do believe that those 2 things, the privilege data that we have in combination with increasing sophistication will allow us to target segments that we know to be lower risk, but where we can command attractive pricing in the market. And that is certainly the strategy we're pursuing, and we will keep chipping away at that now and into the future.

[Operator]

John Campbell from Stephens Inc. has the next question.

[John Campbell, analyst]

I'll echo the sentiment. It's a great start to the year. It seems like you guys got the momentum building, and I think we're definitely seeing what you guys message as far as life -- life's going to look like under the new reciprocal, nice work all around. But I just wanted to get a few insights kind of relative to what you guys are experiencing in the trenches so far with Reciprocal. I don't know, maybe this explains some of the higher take rate, but within Texas, just from a new policy standpoint, just broadly what percent of consumers are selecting HOA versus Porch Insurance? And how has that kind of fared versus expectations?

[Matt Ehrlichman, executive]

Yes. I'd say -- we don't provide a specific metric on that, although Matthew did obviously provide just kind of overall new business growth metric, which we're clearly excited about. I will say, John, though, that we have positioned our products for certain segments where we really are focused, homebuyers, like Matthew mentioned, we want to be known as being the best homeowner insurance company for homebuyers. Those consumers, which represent almost 40 -- actually 40% of all the whole insurance purchases that happen each year are by homebuyers generally and so we actually can work really well for those customers. New construction is another segment we convert really well for.

Obviously, because of our data, homes that are better maintained or lower risk, we're naturally going to play better. So I will say the answer to your question would vary depending on the different kind of sub segments within Texas. But clearly, overall, we feel like we're in a good spot, given how new business premium is growing.

[John Campbell, analyst]

Okay. That's helpful. And then on the HOA surplus, you guys had mentioned the $198 million. And then I think you had targeted $100 million by end of year. I don't know if those are apples-to-apples. Maybe if you could just shed some light on that? And then just broadly, how much surplus kind of typically draws down throughout the year?

[Shawn Tabak, executive]

Yes, I can cover that. So as of the end of last year, December 31, surplus combined with non-amended assets, which is the key metric that we kind of look at was $157 million. It actually went up in Q1 to almost $200 million, $198 million to be exact. That's in a very healthy spot. I think as I mentioned, it's the highest that metric has ever been for the reciprocal. And so that's a key thing that we look to ensure the continued health of the reciprocal. And as I mentioned, it does kind of have a seasonality curve to it, especially typically the earnings pattern historically for the carrier has been in the first half of the year, you typically have losses driven by catastrophic weather. And then in the second half of the year, that typically flips around and you generate income.

Now if you look at the net income, even in the financials that we issue today, the reciprocal itself had a really strong Q1, actually net income -- or net loss, excuse me, for the reciprocal improved like $10 million year-over-year. And I think it just speaks to some of the underlying advantages that we've talked about, Home Factors and some of those other items. So as I mentioned, we do expect surplus combined with non-admitted assets to move around from quarter-to-quarter based on the carriers business. But overall, a very healthy position at the beginning of the year.

[John Campbell, analyst]

Okay. That's helpful. And then one more to add. Just relative to the Porch shares within HOA for the surplus. You guys have been pretty clear about the flywheel effect, which is super enticing. I'm just trying to get a sense for how that's calculated at the regulatory level, if you're able to capture all of that appreciation? Or is it capped to some extent?

[Shawn Tabak, executive]

Yes, there is some cap that's included in the surplus number that gets filed. One of the things that we look at is surplus combined with the full value of the port shares that's in there, effectively, I think if it is effectively the net assets of the business of the reciprocal. And so we think that's a good indication of the overall value there. The amount of technical surplus that gets filed is -- will be around $105 million or thereabouts. So also a very strong number, with obviously a lot more upside on top of that if you include the full net assets.

[Matt Ehrlichman, executive]

And just to layer on one thing. John, the reason we think that the surplus plus the non-admitted asset number of the [ 198 ] is the best number is obviously, if we wanted to, the reciprocal go sell some of those shares, right? And so no, that's not what we plan to do because we anticipate and we hope that the stock will fairly value the company as we continue to build the company. And so -- but we got -- and so we think it's the right number to focus on. And then quickly to your point on the flywheel, I mean, we are excited about how that flywheel is working. I mean the reality is now with this structure, I think you can probably see it as the Porch stock price is higher, that net asset number is higher, it can then support more premium growth, right? So we would anticipate growing premium faster. And you see today, I think investors can see today how that premium can translate into cash flow for Porch shareholders, which we would expect will help to just value the company appropriately as we look ahead. And so that -- it's an exciting time to be able to post a quarter and just demonstrate what we've said there is happening, and we expect will continue to happen.

[Operator]

The next question is from Jason Kreyer, Craig-Hallum.

[Jason Kreyer, analyst]

Great. Impressive work here. So I wanted to just ask about the reinsurance process. If you can give some more details there. If I'm understanding that right, you're now going to carry less risk, but also paying less for reinsurance. And I'm curious as you went through the process, just if you can share some dialogue about the reinsurer's appetite to work with Porch and how that's changed.

[Matt Ehrlichman, executive]

Sure. So first things first, which is we are proud and appreciative of the relationships we have with these great reinsurance companies. There's been long-standing relationships. We look forward to working with these partners for years and years and years to come. Yes, we are pleased with how the reinsurance renewal went because to your point, we've now set the retention limit for the reciprocal at $25 million, which we think is a really healthy spot for it to be. And so if there are large weather events, we have support from third-party partners who would then be able to step in and really mitigate the risk around catastrophic, whether for the reciprocal itself. We shared today the A.M. best results in terms of how well the carrier has performed versus others. And so clearly, we share that data with third-party reinsurers. And so when it came down to pricing, the reality is that our business does stand out versus other carriers. And so through that, we were able to get benefit in just pricing overall and just the participation in that book. So net, yes, we're pleased with how that process went overall.

[Jason Kreyer, analyst]

Appreciate that. Saying with the reciprocal written premium topic, I know we've talked about that a little bit. But can you give any transparency on what we should expect on how that breaks out between rate increases versus policy acquisition over the course of the year?

[Matthew Neagle, executive]

We don't break that out. We've shared that Texas has a 16% price increase I shared, we'll continue to look for opportunities for price increases. It's an ongoing thing we look at very closely, but we do expect them to slow down. And then I shared we're very focused on rebuilding our growth engine, and we're seeing great momentum with our new business premium. And we have opportunity over time to grow renewal premium. And then I also share just for clarity, we do expect reciprocal written premium to increase in Q2 over $50 million and that's due to the combination of historical seasonality of when we typically acquire policies and the momentum that we're seeing in our new business premium.

[Operator]

We'll take the next question from Ryan Tomasello, KBW.

[Ryan Tomasello, analyst]

In terms of the growth levers for the reciprocal, can you say what percent of your prior active footprint was essentially turned off when you guys pulled back? And how much of those ZIP codes you've reopened again? And then as a follow-up, on the agent channel, if you can just maybe contextualize how large that is today, maybe in terms of, I guess, the number of agents that you're working with and how that compares to where the prior peak was? Just help us understand how much low-hanging fruit there is here as you turn that back on.

[Matt Ehrlichman, executive]

Yes, maybe I'll take the first, and Matthew, why don't you take the second around agencies. We didn't disclose right specifically like how many geographies or ZIP codes we had closed previously. But we were very clear that we were constraining growth and managing premiums to flat as we were taking price increases. And so you'll recall, both the nonrenewals, but then closing ZIP codes. So there was certainly, wide sets of areas that we were not taking business in. I would say, for the most part at this point, those ZIP codes have been fully reopened.

So we've started to do that in November. Once we had approval around the reciprocal, and we've been executing against that. Only last comment on geographies, and I'll turn it over to Matthew is there is a lot of additional geographic expansion with new states. And so we do expect to continue to open up new geographies in new states and that will just be an ongoing process. So more to announce as we go there.

[Matthew Neagle, executive]

Yes. So we don't today disclose the number of active agents or the number of quoting agents. It is growing nicely due to the efforts that we really kicked off just in Q4. The additional commentary what you guys keep in mind is we just started in Q4. So as an example, the growth team, I think, just this week reached the initial size that we intended for this year. I would also share that the historical numbers are kind of interesting, but what's more interesting is just the sheer number of agents that are out there. And I would say we're still very early at engaging the full prospect list of potential agents.

And that prospect list will grow as we expand into new states, and there is energy and excitement around Porch Insurance. And so as we further grow and develop our Porch Insurance product set, we see opportunity to get more engagement from agencies. And then on top of that, once we get agents involved with Porch, there's a whole another lever, which is how do we become a top carrier within their book of business. And I would say that one, we are very early days. A lot of these agents that were reengaging or that were we've appointed, we are not yet a significant part of their business. And so we have this big clear path through the agency channel to go grow materially that is through time, effort, blocking and tackling and continuing to provide good good incentives, good products and a good claims experience and make it easy to do business with us, and that's what we're going to be focused on. But there's a lot of room still, I think, is the primary message.

[Ryan Tomasello, analyst]

And then just wanted to clarify the numbers on the surplus that you talked about earlier. Sean, so you mentioned, I think $105 million is the statutory amount and then the $198 million is docutory-plus non-admitted assets. Does the $105 million include a haircut amount of the share value? Because by my math, the share value at March 31 was like $133 million. So I'm just trying to get to that plug of like what's in the $105 million and then what's in $198 million, if that makes sense.

[Shawn Tabak, executive]

Yes. So 198 is -- to make sure it's clear for folks, 198 is surplus combined with non-admitted assets. Some of the port shares isn't included. Value isn't included in the filed surplus number. As Matt mentioned, we would have an ability to if we perhaps liquidated some of those in the future don't not expecting. And then within the surplus number that I mentioned of approximately 105, there is also some of the share value is in there. I suppose if you took the highest number of 198, and you backed off the value of 18.3 million shares at the $7.27 stock price at the end of the quarter, that would get you to the surplus without any of the shares. So those are kind of the different components within it. That helps hopefully.

[Operator]

We'll take the next question from Jason Helfstein, Oppenheimer.

[Jason Helfstein, analyst]

Sean, I want to start out in your prepared remarks, you did something amount for the time being, you're consolidating the reciprocal, so can you go through the steps of what would need to happen for you to have a kind of GAAP reported without typical included? And then secondly, when we look at software and data and consumer services, software data revenue is basically flat year-over-year. Consumer Services down, kind of somewhat how do you see kind of those businesses kind of potentially improving as housing market gets unlocked presumably at some point in the back half of this year. And I guess I'll say we've seen pretty good momentum in the more affluent homes and kind of underperformance in the less affluent homes within housing transactions. So I don't know how all that ties together.

[Matt Ehrlichman, executive]

Yes. I can -- we'll see the second one first and then Shawn go to the first one just briefly. I'll start and then Matthew layer on. Maybe you can talk about some of the investments and growth opportunities. But just quickly, it doesn't matter to us really that much, Jason, if there's sales or more affluent homes or less, it's not based on the total dollar amount, it's really around the number of total transactions that are running through the system. Our software products charge per transaction basis. Based on the number of existing home sales and also in some of our software businesses on the number of refinance transactions. And so obviously, that also is just very, very low right now. And so as the transaction volume picks up, then we benefit. And we will be able to build those tailwinds. Maybe, Matthew, just take one more minute on that question in terms of some of the investments, then Shawn, to you on the first one.

[Matthew Neagle, executive]

Yes. So as Matt mentioned, this transaction volume goes up, will benefit. In addition, for software and data, there are investments being made into home factors, both the product itself and the go-to-market and our core strategy with the software businesses, while the housing market has been flat, has been to invest in innovation to be able to drive price increases so that as transaction volume comes back, we are well positioned. We have been doing that, and we've pulled the trigger to invest more into that innovation to support price increases, which will benefit us as the market comes back.

On Consumer Services, we certainly have some impact related to housing volumes, our moving business in some of our core channels around warranty are tied to new homebuyers. And we have also decided there's opportunity to invest there, in particular, in trying to get access to more consumers through our app, through a website called Moving Place, which will be a destination site for all types of moving services we just launched [ back in ] there in Q1. And also looking at how can we better partner real estate agents in order to get us access to home buyers, which is a great segment for us because we can sell them a variety of services, especially insurance.

[Matt Ehrlichman, executive]

And then, Sean, to you on consolidation?

[Shawn Tabak, executive]

Yes. So the question around consolidation of the reciprocal and the surplus now surplus note is one of the -- is the key reason we are consolidating the reciprocal. I guess what I would say is that there is -- we're really pleased with the structure. I mean, the surplus note is really attractive paper at 15% coupon. And so we're not in a rush to change that. We could sell the surplus at some point off in the future. But for now, we're really pleased with what we're seeing in the business overall as well as the reciprocal transition and the surplus note paper that we currently hold.

[Operator]

We'll go next to Tim Greaves, Loop Capital.

[Timothy Greaves, analyst]

I guess my question is around Home Factors. I [indiscernible] the one know like the strength of the pipeline as far as like -- the strength of the pipeline and Home Factors and maybe more so of that impact on the revenue going forward and where you see that?

[Matthew Neagle, executive]

Sure. I can speak to those. We actually -- I think about pipeline in 2 ways. One is the conversations we're having with carriers and what makes us really excited is we are engaging with carriers who are actively digging in to go through their own testing process with their own claims data to prove out the Home Factors help them to better predict risk. That creates all sorts of opportunities for us.

The second pipeline I think about is we are still building out new Home Factors. And the more Home Factors we build out, there's more opportunities for us to help carriers engage -- improve their pricing and underwriting, which creates opportunity for us. In terms of revenue impact, what we've communicated in the past is not a lot for 2025, but starting to build in 2026.

[Operator]

And everyone, at this time, there are no further questions. I'd like to hand the conference back to Mr. Matthew Ehrlichman, for any additional or closing remarks.

[Matt Ehrlichman, executive]

I'll just say thank you to thank you, all, for joining us today. Thanks for those questions and to our shareholders. Thanks for the continued support. As you can tell, we are excited about how this year and [Audio Gap].