8-K: Hagerty Inc. Reports Strong 2023 Results, Projects Continued Growth and Profitability in 2024

Hagerty, Inc. announced a 27% increase in total revenue for 2023, reaching $1 billion, alongside significant improvements in profitability and a positive outlook for 2024.

Summary

• Hagerty, Inc. reported its financial results for the fourth quarter and full year of 2023, showcasing substantial growth and improved profitability.
• The company's total revenue for 2023 reached $1 billion, a 27% increase compared to the previous year.
• Written premiums also saw a significant rise, increasing by 17% to $907.2 million for the full year.
• Hagerty achieved a full-year net income of $28.2 million, a substantial increase of $25.8 million from the prior year.
• Adjusted EBITDA for the full year was $88.2 million, a significant improvement of $90.1 million compared to the previous year.
• The company's operating margin expanded by 960 basis points in 2023, driven by operational efficiencies and cost discipline.
• Hagerty's policies in force retention rate increased to 88.7% as of December 31, 2023, up from 88.0% the previous year.
• The company also reported a strong insurance Net Promoter Score of 82.
• Hagerty Reinsurance Limited received a financial strength rating of A(Excellent) from AM Best.
• For 2024, Hagerty projects total revenue growth of 15-17%, net income growth of 116-148%, and Adjusted EBITDA growth of 41-53%.

Sentiment

Score: 9

Explanation: The document conveys a very positive sentiment due to the strong financial results, significant improvements in profitability, and optimistic future outlook. The company's performance exceeded expectations, and management's comments are confident and forward-looking.

Positives

• Hagerty achieved a significant milestone by surpassing $1 billion in total revenue for the first time.
• The company demonstrated strong growth in both revenue and written premiums.
• There was a substantial improvement in profitability, with significant increases in net income and Adjusted EBITDA.
• Operating margins expanded considerably, indicating improved operational efficiency.
• The company's customer retention rate remains high, reflecting customer satisfaction.
• Hagerty received a strong credit rating for its reinsurance business, demonstrating financial strength.
• The company has a positive outlook for 2024, projecting continued growth and profitability.
• Hagerty's membership program, Hagerty Drivers Club, saw an 8% increase in paid members to approximately 815,000.

Negatives

• Fourth quarter 2023 Marketplace revenue decreased 34% to $3.7 million compared to the prior year period due to the absence of a live auction.
• Full year 2023 results include losses and impairments of $4.0 million related to the termination of the Hagerty Garage + Social joint venture and the sale of DriveShare.
• Full year 2023 depreciation and amortization was $45.8 million compared to $33.9 million in the prior year period, driven by a higher base of capital assets related to the digital platform and the impairment of media content assets.

Risks

• The company acknowledges the uncertain macro environment and challenging dynamics for the insurance industry, including heightened inflationary pressures.
• Hagerty's future performance is subject to its ability to compete effectively, maintain key strategic relationships, and manage risks associated with technology disruptions and fraudulent activity.
• The company must also manage the cyclical nature of the insurance business and address unexpected increases in claims.
• Compliance with numerous laws and regulations, as well as potential litigation, government inquiries, and investigations, pose ongoing risks.
• The company's forward-looking statements are subject to various factors that could cause actual results to differ materially.

Future Outlook

Hagerty anticipates continued strong growth in 2024, projecting a 15-17% increase in total revenue, a 116-148% increase in net income, and a 41-53% increase in Adjusted EBITDA.

Management Comments

• McKeel Hagerty, CEO of Hagerty, stated that 2023 was an excellent year as the company successfully executed on its priorities and delivered results that consistently exceeded expectations.
• Mr. Hagerty also mentioned that the company is maintaining its investment posture in technology and expanded offerings to drive growth and improve customer value.
• Mr. Hagerty believes that Hagerty is just beginning what will be a multi-year period of sustained revenue growth and strong flow-through to the bottom line.

Industry Context

Hagerty's strong performance comes amid a challenging environment for the insurance industry, marked by heightened inflationary pressures, demonstrating the company's resilience and effective business model within the specialty vehicle insurance market.

Comparison to Industry Standards

• Hagerty's 27% revenue growth significantly outpaces the average growth rate of the top 100 U.S. auto insurers, as indicated by S&P Global Market Intelligence data.
• The company's loss ratio of 41.5% for 2023 is also favorable compared to the industry average, which is often higher due to various factors including catastrophe losses.
• Hagerty's focus on a niche market of car enthusiasts and its integrated business model, including insurance, marketplace, and membership, differentiates it from traditional insurance companies.
• The A(Excellent) rating from AM Best for Hagerty Reinsurance Limited places it among the financially strong insurers in the industry.

Stakeholder Impact

• Shareholders are likely to be positively impacted by the strong financial results and positive future outlook.
• Employees may benefit from the company's growth and success.
• Customers are expected to benefit from improved services and offerings.
• Suppliers and partners may see increased business opportunities due to Hagerty's expansion.

Next Steps

• Hagerty will continue to focus on growing its Insurance, Membership, and Marketplace businesses.
• The company plans to further improve customer loyalty and enhance member experience.
• Hagerty aims to build its Marketplace into the most trusted platform for buying, selling, and financing collector cars.
• The company will expand its insurance offerings, particularly in the post-1980s collectible space.

Key Dates

Keywords

Hagerty, insurance, automotive, revenue, profitability, written premium, EBITDA, marketplace, membership, financial results