Impact of Platform Transition on Insurance Revenue
NerdWallet experienced a temporary disruption in its insurance shopping funnel due to transitioning to a new platform partner, which caused a 26% quarter-over-quarter decline in insurance revenue.
The platform transition was completed in mid-July, after which insurance revenue rebounded to levels similar to the previous year, indicating a short-term impact.
Management highlighted that the transition was necessary to improve economics and features, aiming for better long-term growth and efficiency in insurance referrals.
The company clarified that the current reinsurance program, effective from June 1, 2025, is not significantly different in cost as a percentage of direct earned premium compared to the previous period.
This stability is notable given the recent landfalling storms last year, which typically would lead to increased reinsurance costs.
The change in reinsurance programs from last year, including the winding down of the RAP program at no cost, impacts quarterly comparisons and reflects strategic reinsurance structuring.
Significant Reduction in Reinsurance Quota Share from 55% to 20%
The company reduced its quota share reinsurance from 55% to 20%, a move driven by improved loss ratios and capital efficiency.
This change was a strategic decision to shift risk management focus from risk concentration to capital management.
The transition is expected to unfold over several quarters, with ceding roughly 45% of premium in H2 2025 and reaching 20% by Q3 2026.
The impact on revenue is expected to outpace gross profit growth, with a shift towards higher revenue growth rates as the reinsurance scope narrows.
This structural change aims to improve capital utilization and reduce dependency on reinsurance, leveraging the company's improved loss ratios and captive reinsurance structures.
Dafinchi