8-K: Hagerty Q2 2025 Profit Soars, Raises Full-Year Outlook

Hagerty, Inc. reported strong second-quarter 2025 financial results with significant revenue and profit growth, leading to an increased full-year outlook and a new fronting arrangement with Markel.

Summary

• Total Revenue for Q2 2025 increased 18% year-over-year to $368.7 million, and year-to-date 2025 Total Revenue increased 18% to $688.3 million.
• Net Income for Q2 2025 increased 11% year-over-year to $47.2 million, and year-to-date 2025 Net Income increased 46% to $74.5 million.
• Adjusted EBITDA for Q2 2025 increased 20% year-over-year to $63.7 million, and year-to-date 2025 Adjusted EBITDA increased 28% to $103.4 million.
• The full-year 2025 outlook was increased for Total Revenue growth to 13-14%, Net Income growth to 43-53%, and Adjusted EBITDA growth to 30-38%.
• Hagerty announced a non-binding Letter of Intent (LOI) for a new fronting arrangement with Markel, which would result in Hagerty controlling 100% of the premium as of January 1, 2026.
• Broad Arrow Auctions, a Hagerty subsidiary, has established itself as the No. 2 auction house in the global premium segment by total sales in the first half of 2025.
• The first European auction held in May 2025 in Italy achieved total sales of $31 million with 78% of all lots sold.
• Policies in Force Retention was 88.7% as of June 30, 2025, and total insured vehicles increased 6% year-over-year to 2.7 million.
• Hagerty Drivers Club (HDC) paid members increased 6% year-over-year to approximately 908,000.

Sentiment

Score: 8

Explanation: The filing reports strong financial performance, significant growth in key metrics, and a raised full-year outlook. Strategic initiatives like the Markel fronting arrangement and Broad Arrow's expansion are positive. While there are increased expenses for technology and a slightly higher loss ratio, the overall picture is one of robust growth and strategic execution.

Positives

• Strong revenue growth: Q2 Total Revenue up 18% to $368.7 million; YTD Total Revenue up 18% to $688.3 million.
• Significant profit growth: Q2 Net Income up 11% to $47.2 million; YTD Net Income up 46% to $74.5 million.
• Robust Adjusted EBITDA growth: Q2 Adjusted EBITDA up 20% to $63.7 million; YTD Adjusted EBITDA up 28% to $103.4 million.
• Increased full-year 2025 outlook for Total Revenue (13-14%), Net Income (43-53%), and Adjusted EBITDA (30-38%), indicating strong confidence in future performance.
• Broad Arrow Auctions' rapid ascent to the No. 2 position in the global premium auction segment by H1 2025 sales.
• Successful expansion into the European market with the inaugural auction in Italy generating $31 million in sales and a 78% sell-through rate.
• High customer retention (88.7% Policies in Force Retention) and a stellar Net Promoter Score (NPS) of 82, signaling strong customer satisfaction and business durability.
• Growth in total insured vehicles by 6% year-over-year to 2.7 million and Hagerty Drivers Club paid members by 6% year-over-year to approximately 908,000.
• The non-binding LOI with Markel for 100% premium control starting January 1, 2026, is expected to drive better profitability and operational control.
• Operating Income margin increased by 70 basis points in Q2 and 210 basis points year-to-date, demonstrating improved efficiency.

Negatives

• The Loss Ratio increased to 42.3% in Q2 2025 (from 41.1% in prior year) and 42.2% year-to-date (from 41.1% in prior year), including impact from catastrophe losses.
• New Business Count for Insurance decreased by 1.3% in Q2 2025 and 3.5% year-to-date 2025.
• Sales expense increased significantly by 40.4% in Q2 2025 and 39.2% year-to-date 2025.
• Interest and other income (expense), net decreased by 54.1% in Q2 2025 and 35.1% year-to-date 2025.
• Elevated technology investments of approximately $20 million in 2025, primarily for the new Duck Creek platform, are leading to higher than normal operating and software expenses in the near term.

Risks

• Ability to compete effectively within the industry and attract and retain insurance policyholders and paid Hagerty Drivers Club (HDC) subscribers.
• Maintaining key strategic relationships with insurance distribution and underwriting carrier partners.
• Preventing, monitoring, and detecting fraudulent activity.
• Managing risks associated with disruptions, interruptions, outages, or other issues with technology platforms or the use of third-party services.
• Accelerating the adoption of membership and marketplace products and services, as well as any new insurance programs and products offered.
• Successfully entering into and implementing the proposed fronting arrangement with Markel and achieving its intended benefits.
• Managing the cyclical nature of the insurance business, including through any periods of recession, economic downturn, or inflation.
• Addressing unexpected increases in the frequency or severity of claims.
• Complying with numerous laws and regulations applicable to the business, including state, federal, and foreign laws relating to insurance and rate increases, privacy, the internet, and accounting matters.

Future Outlook

Hagerty anticipates another year of strong profit growth in 2025, driven by continued investments in long-term competitive advantages, including a new technology platform (Duck Creek). The company expects to deliver sustained, compounding profit growth in the coming years by focusing on its Insurance, Membership, and Marketplace businesses, and aims to double its policies in force to 3.0 million by 2030. Technology spend is expected to moderate as a percentage of revenue in 2026.

Management Comments

• "We delivered solid results during the first half of 2025 with revenue growth of 18%, net income gains of 46%, and Adjusted EBITDA gains of 28%." McKeel Hagerty, CEO and Chairman.
• "We continued to expand our margins while making large investments in future growth, including rolling out State Farm Classic+, launching our Enthusiast+ product, building our European Marketplace team, and investing in the technology that will enable further margin expansion as we scale up over the coming years." McKeel Hagerty.
• "Given our first half results and strong business momentum, we have increased our 2025 revenue growth outlook to 13-14% as we help car enthusiasts protect, buy and sell, and enjoy their special vehicles." McKeel Hagerty.
• "Margins are expanding faster than expected in our original outlook, and we now expect to deliver net income growth of 43-53% in 2025." McKeel Hagerty.
• "We are well positioned for accelerating rates of top and bottom line growth as we move into 2026, including the recently announced evolution of our partnership with Markel that would result in Hagerty controlling 100% of the premium next year." McKeel Hagerty.
• "For investors, this means predictable, compounding profit growth. Today, for instance, we are celebrating our tenth straight quarter of profitable growth and cash flow generation." McKeel Hagerty.
• "The combination of high retention (89%) and a stellar NPS (82) signals that our business is not only loved by its customers but also built to last." McKeel Hagerty.
• "We currently protect only around 2.6 million out of the total addressable market. That means, while we are the market leader, we have a long and lucrative runway ahead." McKeel Hagerty.

Industry Context

Hagerty operates in the specialized and growing automotive enthusiast market, providing a unique ecosystem of specialty vehicle insurance, valuation data, auction services, and events. Its business model, centered on 'car love' and deep engagement with enthusiasts, differentiates it from traditional insurers. The successful expansion of Broad Arrow Auctions into Europe and its rapid rise to the No. 2 position in the premium segment highlights Hagerty's effective strategy to capture additional value beyond insurance in the collector car market. The proposed Markel fronting arrangement positions Hagerty for greater control and profitability, aligning with a broader trend towards vertical integration or deeper control over the value chain in niche markets. Hagerty's consistent historical growth rates (15% CAGR for U.S. Auto vs. 6% for Industry Top 100) and significantly lower loss ratio (39% average vs. 68% industry average) underscore its strong competitive position and effective risk management within its specialized segment.

Comparison to Industry Standards

• Hagerty's U.S. Auto Premium Growth (15% CAGR from 2010-2024) significantly outperforms the Industry Top 100 (6% CAGR), demonstrating superior market penetration and growth within its specialized niche.
• Hagerty's average Loss Ratio of 39% from 2010-2024 is substantially lower than the Industry Top 100 average of 68%, indicating better underwriting profitability and effective risk selection for its specialized vehicle portfolio.
• Broad Arrow Auctions, a Hagerty subsidiary, has rapidly become the No. 2 auction house globally in the premium segment (auction houses with average sale prices of greater than $200,000) by total sales in the first half of 2025, showcasing strong performance against established competitors.
• The inaugural European auction at Concorso d'Eleganza Villa d'Este in May 2025 achieved $31 million in total sales with 78% of all lots sold, indicating successful market entry and strong demand for high-value collector cars in new geographies.

Stakeholder Impact

• Shareholders are positively impacted by strong financial results, an increased profit outlook, expanding margins, and strategic initiatives expected to drive future growth and profitability.
• Customers (policyholders and HDC members) benefit from continued investment in technology for improved experience (e.g., self-serve functionality, modern rating), new product launches (Enthusiast+, State Farm Classic+), and expanded marketplace services (Broad Arrow Auctions) for buying and selling collector cars.
• Employees ('One Team Hagerty') are acknowledged for their 'incredible work' and talents, with increased headcount and merit increases noted in expenses, indicating positive internal recognition and investment.
• Partners, specifically Markel, are engaged in an evolving strategic relationship, indicating continued collaboration, albeit with a shift in premium control towards Hagerty.

Next Steps

• Hagerty will hold a conference call on August 4, 2025, to discuss the financial results.
• The Monterey Jet Center Auction is scheduled for August 13-14, 2025.
• A European auction will be held during the Zoute Grand Prix Car Week in Belgium on October 10, 2025.
• The Zurich auction in collaboration with Auto Zürich is scheduled for November 1, 2025.
• Negotiation of the definitive agreement for the Markel fronting arrangement is ongoing.
• Continued investment in the new Duck Creek technology platform is planned.
• Rollout of State Farm Classic+ and expansion of the Enthusiast+ product are underway.
• The European Marketplace team will continue to be built out.
• The company aims to double its policies in force to 3.0 million by 2030.

Key Dates

Recommendation

The company delivered exceptional Q2 2025 results, significantly exceeding prior expectations and leading to a raised full-year outlook across all key financial metrics (revenue, net income, Adjusted EBITDA). The strategic move to control 100% of premium with Markel from 2026 promises enhanced profitability and operational control. Broad Arrow Auctions' rapid growth and successful European expansion demonstrate effective diversification and market leadership. Despite increased technology investments and a slightly higher loss ratio, the underlying business fundamentals, high retention rates, and clear long-term growth strategy (doubling policies by 2030) position Hagerty for sustained compounding profit growth, making it a strong buy for investors.

Keywords

Hagerty, HGTY, specialty vehicle insurance, classic car insurance, automotive enthusiast, car culture, Broad Arrow Auctions, collector cars, SEC filing, financial results, Q2 2025, earnings, insurance, marketplace, membership, Markel, Duck Creek