10-Q: Hagerty Inc. Reports Strong Q1 2025 Results Driven by Premium Growth and Marketplace Performance

Hagerty Inc. announced a significant increase in net income and Adjusted EBITDA for the first quarter of 2025, driven by growth in written premiums and marketplace revenue.

Summary

• Hagerty Inc. reported a net income of $27.3 million for Q1 2025, a 232.9% increase compared to $8.2 million in Q1 2024.
• Adjusted EBITDA increased by 44.9% to $39.6 million from $27.3 million in the prior year.
• Total revenue grew by 17.6% to $319.6 million, driven by increases in commission and fee revenue, earned premium, and membership and marketplace revenue.
• Written premium increased by 11.9% to $244.3 million.
• The Hagerty Re loss ratio was 42.0%, including the impact of $10.4 million in pre-tax catastrophe losses from the Southern California wildfires.
• Marketplace revenue saw a substantial increase of 175.8%, primarily due to higher inventory sales, including cars from The Academy of Art University Collection.
• Membership fee revenue increased by 14.1%, driven by new insurance policies with bundled HDC memberships.
• The company reaffirmed its commitment to maintaining a strong balance sheet and capital position.

Sentiment

Score: 8

Explanation: The document presents a positive outlook with strong financial results, particularly in net income and Adjusted EBITDA. While there are some challenges noted, the overall tone is optimistic and indicates a healthy business performance.

Positives

• Significant growth in net income and Adjusted EBITDA indicates improved profitability.
• Strong revenue growth across multiple segments, including commission and fee revenue, earned premium, and marketplace revenue.
• Increase in written premium reflects successful policy acquisition and renewal efforts.
• Substantial growth in marketplace revenue demonstrates the strength of Hagerty's marketplace offerings.
• Growth in membership fee revenue indicates increasing customer engagement and loyalty.
• The company maintains a strong balance sheet and capital position.

Negatives

• The Hagerty Re loss ratio was impacted by $10.4 million in pre-tax catastrophe losses.
• New business count in insurance decreased by 6.7%.
• Other revenue decreased by 22.8%, primarily due to the sale of Motorsport Reg (MSR) and lower sponsorship and admission revenue.

Risks

• The company's loss ratio is susceptible to catastrophe events, as demonstrated by the impact of the Southern California wildfires.
• A decrease in new business count could impact future revenue growth.
• Dependence on THG for distributions to meet cash requirements poses a risk if THG's financial performance declines.
• Rising interest rates and tariffs could negatively impact consumer spending on collector cars and related services.
• The company is subject to various legal proceedings and regulatory investigations, including one related to a 2021 data security incident.

Future Outlook

The company expects to continue prioritizing investments and resources in areas of the business that offer the strongest growth and profit potential. The company believes that its sources of liquidity will be sufficient to provide an adequate level of capital to support its anticipated short and long-term commitments, operating needs, and capital requirements.

Management Comments

• Maintaining a strong balance sheet and capital position is a top priority for us.

Industry Context

Hagerty operates in the collector car insurance market, which is influenced by factors such as consumer demand for collectible cars, economic conditions, and regulatory policies. The company's performance is also affected by broader trends in the insurance industry, including the frequency and severity of claims, as well as reinsurance costs.

Comparison to Industry Standards

• It is difficult to compare Hagerty's results directly to industry standards due to its unique focus on collector car insurance and its integrated business model.
• However, the company's loss ratio and combined ratio can be compared to those of other property and casualty insurers to assess its underwriting profitability.
• The company's growth in written premium and membership can be compared to that of other specialty insurers and membership-based organizations.
• The company's marketplace revenue growth can be compared to that of other online auction platforms and classic car dealerships.

Legal Proceedings

• The company is subject to coordinated industry-wide regulatory investigations in New York state related to a 2021 data security incident.
• The company could be subject to litigation, fines, penalties, and/or settlements related to this incident.

Related Party Transactions

• The company has significant related-party transactions with Markel and State Farm, including reinsurance agreements, alliance agreements, and a term loan facility.
• These transactions are conducted in the ordinary course of business and are disclosed in detail in the report.

Stakeholder Impact

• Shareholders will benefit from the company's improved financial performance and growth prospects.
• Employees may benefit from increased job security and potential for career advancement.
• Customers will benefit from the company's continued investment in its products and services.
• Suppliers and partners will benefit from the company's growth and expansion.

Next Steps

• The company plans to continue expanding its State Farm Classic+ policies to additional states in 2025 and 2026.
• The company will continue to evaluate and adjust its annual loss ratio throughout the year.
• The company will monitor the impact of rising interest rates and tariffs on consumer spending and adjust its strategies accordingly.

Key Dates

Keywords

Hagerty, financial results, Q1 2025, insurance, collector cars, Adjusted EBITDA, written premium, marketplace, membership, reinsurance