10-K: Hagerty Reports Strong 2025 Growth, Strategic Insurance Shift

Hagerty, Inc. announced significant revenue and profit growth in 2025, driven by strong insurance performance and a rapidly expanding marketplace, alongside a major shift in its Markel Fronting Arrangement for 2026.

Summary

• Total revenue increased by 17.3% to $1.46 billion in 2025, up from $1.24 billion in 2024.
• Net income surged by 90.6% to $149.2 million in 2025, compared to $78.3 million in 2024.
• Adjusted EBITDA grew by 46.5% to $236.8 million in 2025, from $161.7 million in 2024.
• Insurance segment revenue increased by 12.7% to $1.34 billion, with Total Written Premium up 14.3% to $1.19 billion.
• Hagerty Re's loss ratio improved significantly to 39.3% in 2025 from 46.4% in 2024, and the combined ratio improved to 86.6% from 94.1%.
• Marketplace segment revenue more than doubled, increasing by 116.6% to $120.1 million in 2025, driven by a 271.1% increase in Private Sales to $286.8 million.
• The company released a $41.8 million valuation allowance against deferred tax assets in 2025 due to achieving cumulative three-year profitability and positive future forecasts.
• Effective January 1, 2026, the Markel Fronting Arrangement will see Hagerty Re assume 100% of the risk for policies issued through Essentia, up from 80%.
• Drivers Edge Insurance Company launched "Enthusiast+" in Colorado in Q3 2025, a new insurance product for modern enthusiast vehicles, with a phased nationwide rollout planned over four years.

Sentiment

Score: 8

Explanation: StockSavvy.ai views this filing as highly positive, reflecting strong financial performance, significant operational improvements in the insurance segment, and robust growth in the strategic marketplace segment, alongside clear plans for future expansion and profitability.

Positives

• Total revenue increased by 17.3% to $1.46 billion in 2025.
• Net income increased by 90.6% to $149.2 million in 2025.
• Adjusted EBITDA increased by 46.5% to $236.8 million in 2025.
• Insurance segment Total Written Premium grew by 14.3% to $1.19 billion.
• Hagerty Re's loss ratio improved by 7.1 percentage points to 39.3% in 2025, significantly better than the industry average.
• Hagerty Re's combined ratio improved by 7.5 percentage points to 86.6% in 2025, indicating strong underwriting profitability.
• New Business Count for insurance increased by 33.3% to 371,203 policies.
• Policies in Force grew by 11.8% to 1.68 million, and Vehicles in Force increased by 9.4% to 2.82 million.
• Marketplace segment revenue surged by 116.6% to $120.1 million, with Private Sales increasing by 271.1% to $286.8 million.
• The Marketplace segment's loss before taxes was reduced by 22.8% to $(11.1) million.
• BAC Average Loan Portfolio increased by 31.4% to $85.5 million, and the balance increased by 81.4% to $103.3 million.
• A $41.8 million valuation allowance on deferred tax assets was released in 2025, reflecting improved profitability and future taxable income forecasts.
• The Markel Fronting Arrangement, effective January 1, 2026, is expected to increase profitability and operational control for Hagerty Re by assuming 100% of risk.
• Launch of "Enthusiast+" product in Colorado is expected to generate attractive returns and broaden the addressable market.
• Broad Arrow Group expanded its live auction and private sale offerings into the EMEA region and added new auction partnerships for 2026.
• BAC Credit Facility borrowing capacity increased from $75 million to $150 million in November 2025.
• The company achieved cumulative three-year profitability in Q3 2025.

Negatives

• Policies in Force Retention slightly decreased by 0.3 percentage points to 88.7% in 2025.
• Interest expense increased by $4.0 million to $5.4 million in 2025, driven by higher net borrowings.
• The expense related to the change in the Tax Receivable Agreement (TRA) Liability increased significantly by $30.6 million to $32.2 million in 2025.
• The Markel Fronting Arrangement will result in lower reported commission revenue and policy acquisition costs from Q1 2026, impacting period-to-period comparability of financial statements.
• The Marketplace segment continues to report a loss before taxes of $(11.1) million, despite significant revenue growth.
• Other revenue (excluding membership fees) decreased by $2.1 million, or 9.7%, primarily due to the sale of Motorsport Reg.

Risks

• Ability to attract and retain Members and compete effectively within the industry.
• Dependence on a limited number of insurance distribution and underwriting carrier partners, with potential adverse effects if relationships are lost or terms change.
• Inability to prevent, monitor, or detect fraudulent activity, including insurance policy, claims, and Marketplace fraud.
• Potential exposures to operational disruptions caused by cyber breaches or resiliency failures impacting the company or third-party technology providers.
• Technology platforms may not function properly, leading to business loss, revenue reduction, or non-compliance.
• Future success depends on the ability to develop and implement technology to transform or replace legacy technology, and maintain security and confidentiality.
• Future legal or regulatory requirements impacting internet and mobile technologies, marketing, advertising, transactions, or personal data collection and use.
• Misappropriation of Hagerty-owned data or websites by third parties.
• Rapid evolution and adoption of artificial intelligence could adversely affect competitive position, operations, and brand.
• Reliance on the Chief Executive Officer and other key employees; inability to attract, retain, or motivate key personnel.
• Inability to maintain the company's unique culture as it grows.
• Future growth and profitability may be affected by new entrants or current competitors developing preferred offerings.
• Future acquisitions or investments contain inherent strategic, execution, and compliance risks that could disrupt the business.
• New products and services with limited operating history, such as Enthusiast+, may not achieve profitability as quickly as anticipated, or at all.
• Payment processing risks, including reliance on a limited number of services, potential fraud, and compliance issues.
• Current economic conditions, including inflation and interest rate uncertainty, may affect demand for products and services.
• Imposition of tariffs on imported goods could increase costs and reduce consumer spending on collector cars.
• Performance of the investment portfolio is subject to interest rate risk, credit risk, and equity risk.
• Changes to the law and social attitudes towards petroleum-powered vehicles may make ownership of collector vehicles less desirable.
• Accounting estimates for financial statements, such as reserves for unpaid losses and loss adjustment expenses, deferred income taxes, and the Tax Receivable Agreement liability, may prove incorrect.
• The company may require additional capital in the future, which may not be available or may only be available on unfavorable terms.
• Estimates of market opportunity and forecasts of market growth may prove inaccurate.
• Insurance products are subject to regulatory approval, and the development and filing process can be lengthy and costly.
• Unexpected increases in the frequency or severity of claims, including those caused by catastrophic events.
• Failure to comply with regulatory requirements or changes in regulatory requirements or interpretations.
• MGA subsidiaries do business with a limited number of key underwriting carrier partners, and the loss of business from any one of them could have an adverse effect.
• Rapid growth may strain infrastructure, resources, and relationships, impairing service quality and operational execution.
• A regulatory environment that requires rate increases to be approved and can dictate underwriting and pricing may adversely affect financial condition.
• Examinations and audits by insurance regulators could result in adverse findings, enforcement actions, or penalties.
• Reliance on external data and digital platforms for pricing and underwriting insurance policies; future restrictions on data collection or utilization.
• The insurance business is historically cyclical, with periods of excess underwriting capacity and unfavorable premium rates.
• The shift to Hagerty Re assuming 100% of the risk for policies written through the Markel Fronting Arrangement increases exposure to underwriting volatility, catastrophes, reinsurance counterparty risk, and legal, compliance, and regulatory risks.
• Reinsurance purchased to protect against catastrophic and large losses may become unavailable on current coverage terms, limits, or pricing.
• Inaccurate pricing and underwriting of risks at competitive, profitable rates.
• Reinsurers may fail to pay or timely pay claims due to insolvency or other reasons.
• Unexpected changes in the interpretation of coverage or provisions, including loss limitations and exclusions, in insurance policies.
• Hagerty Re's ultimate loss liability could exceed loss and loss adjustment expense reserves.
• Expansion into different insurance products and jurisdictions may not be as profitable as projected.
• Reliance on technology and intellectual property from third parties for pricing, underwriting, and claims handling.
• Failure to accurately and timely pay claims on insurance programs.
• A downgrade in the financial strength rating of the carriers on insurance programs.
• Hagerty Re is subject to Bermuda regulatory requirements, including capital and dividend restrictions.
• Inability to realize anticipated benefits from the growth and integration of the Marketplace segment with the Insurance segment.
• Marketplace segment expansion into new markets exposes it to complex, inconsistent global regulations and higher compliance costs.
• Competition in the global market for sales of collector cars and enthusiast vehicles and variability of value, demand, and availability of quality cars.
• Marketplace segment could be exposed to losses in the event of title, authenticity, damage, or theft claims.
• Inability to maintain or obtain dealer licenses, auctioneer licenses, and/or other applicable permits and licenses.
• Limited operating history of Broad Arrow Capital (BAC) and its loan portfolio; past loan loss experience may not be indicative of future.
• Changes to tax laws may affect the volume of collector car and enthusiast vehicle inventory and increase compliance risks.
• Extensive legal, regulatory, and supervision requirements; failure to comply could have an adverse effect.
• Complex legal, regulatory, and contractual requirements regarding data privacy and cybersecurity.
• Intellectual property rights may not be properly protected.
• The Markel Fronting Arrangement will reduce reported commission revenue and ceding commission expense beginning in 2026, impacting period-to-period comparability.
• The Markel Fronting Arrangement may not result in the commercial benefits expected.
• Stock may be diluted by future issuances of additional Class A Common Stock.
• Substantial blocks of total outstanding shares may be sold into the market, potentially lowering stock price.
• "Controlled company" status limits corporate governance protections for stockholders.
• Dual class structure of common stock may adversely affect the trading market for Class A Common Stock.
• Dual class structure concentrates voting power with two stockholders (HHC and Markel).
• Three largest stockholders (HHC, Markel, State Farm) hold significant voting power, director designation rights, and preemptive rights.
• No current plans to pay cash dividends on Class A Common Stock for the foreseeable future.
• Anti-takeover provisions in organizational documents and applicable insurance laws could delay or prevent a change of control.
• Designation of the Court of Chancery of the State of Delaware as the sole and exclusive forum for certain actions could limit stockholders' ability to obtain a favorable judicial forum.
• No public market for Series A Convertible Preferred Stock.
• The price of securities may be volatile or decline regardless of operating performance.
• If securities or industry analysts do not publish research or publish inaccurate or unfavorable reports, stock price and trading volume could decline.
• Hagerty, Inc. is a holding company and depends on THG distributions to pay taxes, make payments under the TRA, and pay other expenses.
• Required to pay Legacy Unit Holders for certain tax benefits under the TRA, and amounts payable may be substantial.
• Tax distributions in excess of actual tax liabilities retained by Hagerty, Inc. could benefit Legacy Unit Holders if they exercise exchange rights.
• Risk of THG becoming a publicly traded partnership taxable as a corporation for U.S. federal income tax purposes.
• Subject to VAT and other indirect tax laws in multiple jurisdictions, with complexity and interpretation risks.

Future Outlook

Hagerty anticipates increased profitability and operational efficiencies from the Markel Fronting Arrangement, effective January 1, 2026, where Hagerty Re will assume 100% of the risk for policies issued through Essentia. The company plans a phased, nationwide rollout of its new 'Enthusiast+' insurance product over the next four years, expecting attractive returns and market diversification. Broad Arrow Group is set to further expand its auction calendar in 2026 with new online and official partnership auctions in Europe and the U.S. The company also expects to continue investing in technology development and managing risks associated with AI evolution.

Management Comments

• "Our vision is to be the world's most trusted and preferred brand for automotive enthusiasts to insure, buy, sell, and enjoy their special cars."
• "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."
• "Our leading Net Promoter Score ('NPS') and strong retention rates reflect the effectiveness of our enthusiast ecosystem and that our business model is a significant advantage over competitors who, without strong affinity or engagement, are left to compete solely on price."
• "We believe that Enthusiast+ will generate attractive returns for us, widen our funnel of insurable vehicles, and contribute to the long-term growth and diversification of our insurance portfolio."
• "We expect these changes [Markel Fronting Arrangement] to result in increased profitability and additional control, allowing for enhanced operational efficiencies."
• "We believe we can differentiate ourselves from other platforms and services by incorporating a higher level of trust into this marketplace by using our existing size, scale, reach, improved processes, and trusted brand status."
• "Our performance-based culture is shaped by our people, and their engagement, accountability and alignment with our key objectives as an organization. Our strategy involves hiring great people, providing challenging and meaningful work, and investing in their professional and personal development, and we believe this creates a strategic advantage for us."

Industry Context

StockSavvy.ai notes that Hagerty's strong financial performance, particularly its significantly better loss ratio of 39.3% compared to the overall auto insurance industry average of 74%, positions it as a leader in the specialty automotive insurance market. The expansion of its Marketplace segment and the introduction of 'Enthusiast+' align with broader industry trends towards niche market specialization and diversified revenue streams. The company's strategic partnerships with major auto insurers demonstrate a collaborative approach to market penetration, contrasting with direct competition. The filing acknowledges the rapid evolution of AI and its potential impact on competitive dynamics, indicating a proactive stance in a technologically advancing insurance landscape.

Comparison to Industry Standards

• Hagerty Re's average loss ratio of 42% over the last three years is significantly better than the overall auto insurance industry average of approximately 74%, excluding loss adjustment expenses. This indicates superior underwriting performance compared to general auto insurers.
• The company's Net Promoter Score (NPS) of approximately 81 and insurance policy retention rate approaching 90% are strong indicators of customer loyalty and engagement, often exceeding benchmarks in the broader insurance sector where customer churn can be higher.
• Hagerty's market share of approximately 15% for pre-1981 classic vehicles in the U.S. demonstrates a dominant position within its core niche, while its 3% share for post-1980 collectible vehicles indicates significant growth potential in a segment that traditional insurers may not adequately serve.
• In the high-end collector car auction market, Broad Arrow competes with established global auction houses such as RM Sothebys, Gooding Christies, Bonhams, and Artcurial, indicating its aspiration to be a top-tier player.
• For lower-priced collector vehicles, Hagerty Marketplace competes with traditional auction houses like Barrett-Jackson and Mecum, and digital platforms such as Bring a Trailer Auctions, Cars & Bids, PCARMARKET, and Collecting Cars, highlighting a competitive landscape across various price points.

Corporate Governance

Legal Proceedings

• The company settled claims related to a 2021 data security incident with the New York Department of Financial Services for $1.85 million and the New York Attorney General for $1.3 million in October 2025.
• The company is involved in various claims and legal actions that arise in the ordinary course of business, but management does not believe their ultimate resolution will have a material adverse effect on financial position, results of operations, liquidity, or capital resources.
• THG is currently under audit by the IRS for the 2021 tax year.

Related Party Transactions

• Markel Group Inc. (Markel) holds approximately 29.9% of the voting power and 18.8% of Series A Convertible Preferred Stock, and has the right to designate one director to the Board.
• State Farm Mutual Automobile Insurance Company (State Farm) holds approximately 2.2% of the voting power and 62.5% of Series A Convertible Preferred Stock, and has the right to designate one director to the Board.
• Hagerty Holding Corp. (HHC) controls approximately 66.0% of the voting power and has the right to designate two directors to the Board. McKeel Hagerty (CEO) and Tammy Hagerty may be deemed to control HHC.
• The Markel Alliance Agreement governs the relationship where Hagerty's U.S. MGAs sell policies underwritten by Essentia (a Markel subsidiary), with Hagerty Re reinsuring a significant portion of the risks. Commission revenue from Markel was $436.8 million in 2025, representing 91.1% of total commission revenue.
• Effective January 1, 2026, under the Markel Fronting Arrangement, Hagerty Re will assume 100% of the risk for policies issued through Essentia and pay a fronting fee to Markel.
• Hagerty Re maintains $680.4 million in assets in trust for the benefit of Evanston (a Markel subsidiary) as of December 31, 2025.
• The State Farm Master Alliance Agreement involves State Farm Classic+ policies offered to State Farm customers, with Hagerty receiving an advanced commission of $20.0 million in 2020.
• Hagerty Re cedes 50% of the risk for High-Net-Worth Accounts to Oglesby Reinsurance Company, a State Farm subsidiary.
• Hagerty Re entered into an unsecured term loan credit facility of $25.0 million with State Farm in September 2023.
• Related parties, including Board members and management, engage in ordinary course business transactions with the company, such as purchasing insurance policies, receiving claim payments, and buying/selling collector cars through the marketplace.

Stakeholder Impact

• Shareholders: Potential for increased value due to strong financial performance and strategic growth initiatives. However, the dual-class structure and "controlled company" status limit influence, and there are no plans for cash dividends on Class A Common Stock. Future equity issuances could dilute ownership.
• Employees: Benefit from compensation programs, health and wellness benefits, and a performance-based culture. the company's growth and expansion create opportunities for professional development.
• Customers/Members: Benefit from enhanced insurance products like "Enthusiast+", expanded marketplace offerings, and continued focus on customer service (high NPS and retention). The data security incident settlement addresses past issues.
• Insurance Carrier Partners: The Markel Fronting Arrangement significantly alters the risk and profitability sharing with Markel, potentially increasing Hagerty's control and profitability while maintaining the partnership.
• Creditors: The company's compliance with financial covenants under its credit facilities (JPM, BAC) and its strong capital position provide assurance. The increase in BAC's borrowing capacity supports its lending activities.
• Regulatory Authorities: The company is subject to extensive regulation and supervision, with recent settlements for a data security incident and ongoing compliance requirements.

Next Steps

• Hagerty Re will assume 100% of the risk for policies issued through Essentia under the Markel Fronting Arrangement, effective January 1, 2026.
• The company will implement a phased, nationwide rollout of its "Enthusiast+" insurance product over the next four years.
• Broad Arrow Group expects to expand its auction calendar in 2026, including new online auctions in Paris and official partnerships with The Quail and Audrain Newport Concours.
• State Farm Classic+ policies are planned to be offered in additional states in 2026 and 2027.
• The company will continue to develop and implement technology to transform or replace legacy technology.
• The company will continue to assess and mitigate AI-enabled attack techniques and incorporate AI-driven tools into security monitoring.
• The company will continue to invest and further develop leadership training and support.
• The company will continue to evaluate the impact of ASU No. 2024-03 (Disaggregation of Income Statement Expenses) and ASU No. 2025-06 (Targeted Improvements to the Accounting for Internal-Use Software) for future adoption.

Key Dates

Recommendation

The filing demonstrates robust financial performance with significant increases in total revenue, net income, and Adjusted EBITDA. The Insurance segment shows strong underwriting profitability with an improved loss ratio well below industry averages, while the Marketplace segment exhibits impressive growth and strategic expansion. Key initiatives like the Markel Fronting Arrangement and the Enthusiast+ product are poised to drive future profitability and market diversification. The release of a substantial deferred tax asset valuation allowance further strengthens the financial outlook. While governance structure and potential dilution are noted, the overall operational and financial trajectory presented in the filing suggests a compelling investment opportunity for long-term growth.

Keywords

Hagerty, HGTY, Insurance, Collector Cars, Enthusiast Vehicles, Marketplace, Auctions, Reinsurance, Markel Fronting Arrangement, Enthusiast+, Drivers Edge, Financial Results, SEC Filing, 10-K, Automotive, Risk Management, Corporate Governance, Dividends, Tax Receivable Agreement, Cybersecurity, Capital Structure