8-K: Hagerty Q3 2025 Earnings Soar, Raises Full-Year Outlook

Hagerty, Inc. reported strong third-quarter 2025 financial results with significant revenue and profit growth, leading to an increased full-year outlook.

Summary

• Total Revenue for Q3 2025 increased 18% year-over-year to $380.0 million, and year-to-date increased 18% to $1,068.3 million.
• Net Income for Q3 2025 increased 143% year-over-year to $46.2 million, and year-to-date increased 73% to $120.7 million.
• Adjusted EBITDA for Q3 2025 increased 106% year-over-year to $49.7 million, and year-to-date increased 46% to $153.1 million.
• The company raised its full-year 2025 outlook for Total Revenue growth to 14-15%, Net Income growth to 58-65%, and Adjusted EBITDA growth to 37-41%.
• Policies in Force Retention was 88.6% as of September 30, 2025, and total insured vehicles increased 7% year-over-year to 2.7 million.
• Hagerty Drivers Club (HDC) paid members increased 6% year-over-year to approximately 921,000.
• A proposed arrangement with Markel, commencing January 1, 2026, would result in Hagerty assuming 100% of underwriting and investment economics, increasing underwriting profits by 25%.
• A new partnership agreement was signed with Safeco, a Liberty Mutual company, to take on their classic business.

Sentiment

Score: 9

Explanation: The company reported exceptionally strong financial results across all key metrics, significantly raised its full-year outlook, and announced strategic partnerships and a beneficial fronting arrangement. While there are increased G&A and salary expenses, and a TRA liability expense, these are overshadowed by robust growth and improved profitability, indicating strong operational execution and positive future prospects.

Positives

• Total Revenue increased 18% year-over-year in Q3 2025 to $380.0 million and 18% year-to-date to $1,068.3 million.
• Net Income surged 143% year-over-year in Q3 2025 to $46.2 million and 73% year-to-date to $120.7 million.
• Adjusted EBITDA grew 106% year-over-year in Q3 2025 to $49.7 million and 46% year-to-date to $153.1 million.
• Operating Income increased 240% year-over-year in Q3 2025 to $34.3 million and 78% year-to-date to $107.7 million, with operating margin improving by approximately 590 bps in Q3 and 350 bps year-to-date.
• Marketplace revenue saw significant growth, up 58% in Q3 2025 to $34.2 million and 135% year-to-date to $89.9 million, driven by higher inventory sales and European auctions.
• The company increased its full-year 2025 outlook for Total Revenue growth (14-15%), Net Income growth (58-65%), and Adjusted EBITDA growth (37-41%).
• The Q3 2025 Loss Ratio improved significantly to 42.0% compared to 60.0% in the prior year period, which was negatively impacted by Hurricane Helene. Year-to-date Loss Ratio also improved to 42.1% from 47.7%.
• Policies in Force Retention remains strong at 88.6%, and total insured vehicles increased 7% year-over-year to 2.7 million.
• Hagerty Drivers Club (HDC) paid members increased 6% year-over-year to approximately 921,000.
• The launch of Guardian Safe Storage Concierge, a test program offering complimentary vehicle shelter during bad weather, received overwhelmingly positive member feedback.
• A new partnership with Safeco, a Liberty Mutual company, is expected to add hundreds of thousands of additional vehicles.
• The proposed Markel Fronting Arrangement is expected to increase underwriting profits by 25% and provide Hagerty with 100% control of premiums and operational management.
• A $38.1 million gain related to the release of a portion of the valuation allowance against deferred tax assets contributed to the Q3 income tax benefit.

Negatives

• Policies in Force Retention slightly decreased to 88.6% as of September 30, 2025, compared to 88.8% in the prior year period.
• General and administrative expenses increased 11.5% year-to-date due to professional fees related to the secondary offering and the Markel Fronting Arrangement, as well as software-related costs.
• Salary and benefits increased 18.8% year-to-date, partly due to higher accrued incentive compensation reflecting strong performance, but also indicating increased personnel costs.
• Interest and other income (expense) for Q3 2025 was a $21.0 million expense, primarily due to a $29.2 million expense related to a change in the tax receivable agreement (TRA) liability. Year-to-date, this was an $8.3 million expense, including a $32.3 million TRA liability change.
• Near-term redundant systems from the technology platform transition (Duck Creek) are resulting in higher than normal operating and software expenses.

Risks

• Ability to compete effectively and to attract, retain, and engage insurance policyholders and paid Hagerty Drivers Club (HDC) members.
• Reliance on key strategic relationships, including distribution partners and underwriting carrier partners, and the ability to enter into, implement, and realize the anticipated benefits of the proposed Fronting Arrangement with Markel.
• Performance and availability of reinsurance and fronting capacity, and the timing and terms of renewals.
• Execution risks associated with technology initiatives, including implementation and migration to the Duck Creek policy administration platform, and risks of disruptions, interruptions, outages, cybersecurity events, or other issues with technology systems or third-party service providers.
• Macroeconomic and industry conditions, including inflation, interest rate movements, capital market volatility, consumer sentiment, and the cyclicality of collector and enthusiast vehicle prices and transaction volumes.
• Risks associated with Marketplace and Broad Arrow Capital businesses, including inventory and credit risk, financing availability and cost, and the potential for writedowns.
• Catastrophe, weather, and other losses, including increases in the frequency or severity of claims.
• Ability to obtain and implement rate changes and other regulatory approvals on a timely basis.
• Impact of evolving laws and regulations applicable to the business in the United States and internationally.
• The proposed Markel Fronting Arrangement is currently under a non-binding Letter of Intent and is subject to negotiation of a final binding agreement.

Future Outlook

Hagerty anticipates continued strong profit growth in 2025, with revised full-year outlooks for Written Premium growth of 13-14%, Total Revenue growth of 14-15%, Net Income growth of 58-65% (to $124 million $129 million), and Adjusted EBITDA growth of 37-41% (to $170 million $176 million). The company expects 2026 to be another year of sustained growth and margin expansion, with plans to double policies in force to 3 million by 2030 through new partnerships and continued investment in technology and services.

Management Comments

• "We delivered high rates of growth through the third quarter of 2025 with year-to-date revenue gains of 18%. Margins continued to expand as we scale up our business while maintaining tight cost discipline, resulting in year-to-date net income growth of 73%, and Adjusted EBITDA gains of 46%." McKeel Hagerty, CEO and Chairman.
• "Our strong business momentum allowed us to increase our 2025 outlook for the second straight quarter as we help car enthusiasts protect, buy and sell, and enjoy their special vehicles. We now expect to deliver total revenue growth of 14-15% and net income growth of 58-65% in 2025. We believe 2026 is shaping up to be another great year of sustained growth and margin expansion, and we continue to develop our growth pipeline through 2030, including new partnerships." McKeel Hagerty, CEO and Chairman.
• "Its innovation like this that characterizes an industry leader." Will (member comment on Guardian Safe Storage Concierge).
• "We are well positioned to build our business momentum in the years ahead, creating value for shareholders. Hagerty has only begun to tap the markets potential, insuring 2.7 million vehicles out of a total target market of 35 million collectible vehicles in the U.S." McKeel Hagerty, CEO and Chairman.

Industry Context

Hagerty operates in the niche market of specialty vehicle insurance and automotive enthusiast services. Its strong growth in revenue and profitability, coupled with an improved loss ratio, indicates effective risk management and market penetration within this specialized segment. The expansion of partnerships with major P&C insurers like State Farm and Liberty Mutual (Safeco) reflects a strategy to leverage established distribution channels to reach a broader base of classic and enthusiast vehicle owners, solidifying its leadership position. The investment in a new technology platform (Duck Creek) aligns with broader industry trends towards digital transformation and operational efficiency in insurance.

Comparison to Industry Standards

• Hagerty's U.S. Auto Premium Growth has a Compound Annual Growth Rate (CAGR) of 15%, significantly outperforming the Industry Top 100's CAGR of 6%.
• Hagerty's average Loss Ratio is 39%, which is substantially better than the Industry Loss Ratio average of 68%.
• The company's Policies in Force Retention of 88.6% is described as "industry leading," indicating strong customer loyalty compared to general insurance industry averages.
• Hagerty's Net Promoter Score (NPS) of 82 is exceptionally high, suggesting superior customer satisfaction compared to typical insurance or service industries.

Stakeholder Impact

• Shareholders: Positive impact due to strong financial performance, increased outlook, potential for higher underwriting profits from Markel arrangement, and strategic growth initiatives aimed at long-term value creation.
• Policyholders/Members: Enhanced services like Guardian Safe Storage Concierge, continued high retention rates, and improved technology platform (Duck Creek) are expected to lead to better experiences. No disruption expected from Markel arrangement.
• Employees ("One Team Hagerty"): Acknowledged for outstanding dedication, with higher accrued incentive compensation reflecting strong performance.
• Partners (State Farm, Safeco/Liberty Mutual, Markel): Deepening and expanding strategic relationships, indicating mutual benefits and growth opportunities.

Next Steps

• Continue nationwide rollout of the State Farm Classic+ program, with the balance of states coming in 2026 and 2027.
• Implement the proposed Markel Fronting Arrangement, commencing January 1, 2026.
• Double Policies in Force (PIF) to 3 million by 2030.
• Continue investing in the new technology platform, Duck Creek, to improve efficiency and scalability.
• Further develop the growth pipeline through 2030, including new partnerships.
• Monitor the investor relations website for material non-public information, upcoming investor conferences, and disclosure obligations under Regulation FD.

Key Dates

Recommendation

The company delivered exceptional Q3 2025 results, significantly exceeding prior-year performance across all key financial metrics including revenue, net income, and Adjusted EBITDA. The upward revision of the full-year 2025 outlook for the second consecutive quarter signals strong confidence in continued momentum. Strategic initiatives like the State Farm and Liberty Mutual partnerships, coupled with the highly favorable proposed Markel Fronting Arrangement, position Hagerty for substantial long-term growth and improved profitability. The company's industry-leading loss ratio and high customer retention further underscore its robust business model and competitive advantage. Despite increased technology investments and a TRA liability expense, the overall trajectory is overwhelmingly positive, making it a compelling investment opportunity.

Keywords

Hagerty, HGTY, Q3 2025 Earnings, Financial Results, Specialty Vehicle Insurance, Collector Cars, Automotive Enthusiast, Insurance Partnerships, Markel Fronting Arrangement, Duck Creek, Marketplace, Hagerty Drivers Club, Revenue Growth, Net Income Growth, Adjusted EBITDA, Outlook Increase, State Farm, Safeco, Liberty Mutual, Risk Management