10-K: Hagerty Inc. Reports Strong 2024 Results Driven by Premium Growth and Strategic Initiatives

Hagerty Inc. announces a significant increase in net income and Adjusted EBITDA for 2024, fueled by written premium growth and strategic business realignments.

Summary

• Hagerty Inc. reported a net income of $78.3 million for 2024, a 177.9% increase compared to 2023.
• Adjusted EBITDA for 2024 reached $124.5 million, a 41.2% increase year-over-year.
• The company's performance was driven by a $137.3 million increase in written premium.
• Commission and fee revenue earned by MGA subsidiaries increased by 15.8%.
• Earned premium at Hagerty Re increased by 21.0%.
• These revenue increases were partially offset by losses related to Hurricane Helene and Hurricane Milton, which totaled $26.7 million.
• Interest income increased by 46.7% due to a higher balance of investable assets and diversification into higher-yield fixed maturity securities.
• The company's total written premium reached $1,044.5 million in 2024.
• Hagerty Re's loss ratio was 46.4%, and its combined ratio was 94.1%.
• The number of insurance policies in force increased by 7.5% to 1,506,451.
• HDC paid member count increased by 7.5% to 875,822.
• The company estimates pre-tax losses of approximately $11.0 million from recent California wildfires, which is below their 2025 catastrophe reinsurance program per event retention of $28.0 million.

Sentiment

Score: 8

Explanation: The document presents a positive outlook with strong financial results and strategic initiatives driving growth. While acknowledging risks, the overall tone is optimistic and confident in the company's future prospects.

Positives

• Significant growth in written premium, driving increased commission and fee revenue.
• Strong underwriting performance at Hagerty Re, reflected in the combined ratio.
• Increase in membership revenue, indicating growing brand loyalty.
• Expansion of the marketplace business, contributing to revenue diversification.
• Diversification of the investment portfolio, leading to higher interest income.
• Effective cost management in general and administrative expenses.
• The company estimates pre-tax losses of approximately $11.0 million from recent California wildfires, which is below their 2025 catastrophe reinsurance program per event retention of $28.0 million.

Negatives

• Catastrophic losses from Hurricane Helene and Hurricane Milton impacted profitability.
• Increased claim frequency and severity could adversely affect operations and financial condition.
• The company estimates pre-tax losses of approximately $11.0 million from recent California wildfires, which is below their 2025 catastrophe reinsurance program per event retention of $28.0 million.

Risks

• Inability to attract and retain members and compete effectively.
• Dependence on a limited number of insurance distribution and underwriting carrier partners.
• Potential for fraudulent activity.
• Reliance on a highly skilled management team and workforce.
• Cybersecurity threats and potential data breaches.
• Unexpected increases in the frequency or severity of claims.
• Changes in laws and regulations impacting the insurance business.
• Cyclical nature of the insurance business.
• Reinsurance counterparty risk.
• Fluctuations in the collector car market and asset values.
• The company estimates pre-tax losses of approximately $11.0 million from recent California wildfires, which is below their 2025 catastrophe reinsurance program per event retention of $28.0 million.

Future Outlook

The company expects Hagerty Re's U.S. quota share to remain at approximately 80% in 2025 and plans to expand the State Farm Classic+ policy to additional states in 2025 and 2026.

Management Comments

• The Hagerty brand has been carefully curated over the last four decades by providing Members with excellent customer service through our passionate team of automotive experts.
• We have become known as an automotive enthusiast brand for car people, by car people.
• We believe that consumers who feel a part of an enthusiast community or club are more engaged and have higher renewal rates than those who simply purchase a good or service.

Industry Context

Hagerty operates in the collector car and enthusiast vehicle insurance market, which is estimated to be a $19 billion total addressable market in the U.S. The company is positioning itself to capture a larger share of this market through its strong brand, value proposition, and recent acquisitions.

Comparison to Industry Standards

• Hagerty Re's average loss ratio of 44% over the last three years compares favorably to the overall auto insurance industry average of approximately 75%, excluding loss adjustment expenses.
• The company competes with other specialty insurance companies, large national and international companies, technology companies, automotive media companies, and automotive auction and marketplace providers.
• Hagerty's business model of integrated products and services is unique, providing a competitive advantage over competitors who compete solely on price.

Legal Proceedings

• The company could be subject to litigation, fines, penalties, and/or settlements related to a 2021 data security incident.

Related Party Transactions

• Markel is the ultimate parent company of Essentia, which serves as the dedicated carrier for the specialty collector vehicle insurance policies sold by our U.S. MGA subsidiaries.
• We have a 10-year master alliance agreement and associated managing general underwriter agreement with State Farm Mutual Automobile Insurance Company under which the State Farm Classic+ policy is offered to State Farm's customers through State Farm agents.

Stakeholder Impact

• Shareholders: Positive financial results and growth prospects are likely to benefit shareholders.
• Employees: The company's performance-based culture and comprehensive benefits program support employee well-being.
• Customers: The company's focus on customer service and enthusiast engagement aims to enhance customer satisfaction and loyalty.
• Suppliers: The company's growth and expansion may create opportunities for suppliers.
• Creditors: The company's strong financial position and cash flow provide confidence in its ability to meet its debt obligations.

Next Steps

• Continue to expand into new geographic markets and introduce new products.
• Further develop and implement technology to transform or replace legacy technology.
• Maintain the security and confidentiality of proprietary technology.
• Monitor and adapt to changes in laws and social attitudes towards petroleum-powered vehicles.
• Continue to evaluate and adjust pricing and underwriting strategies.
• The company plans to expand the State Farm Classic+ policy to additional states in 2025 and 2026.

Key Dates