8-K: Hagerty Reports Strong Q1 2025 Results, Reaffirming Full-Year Outlook

Hagerty, Inc. announced a robust first quarter in 2025, marked by significant revenue and profit growth, and reaffirmed its financial outlook for the year.

Summary

• Hagerty, Inc. reported an 18% increase in total revenue for Q1 2025, reaching $319.6 million.
• Written premium increased by 12% year-over-year to $244.3 million.
• Marketplace revenue saw a substantial increase of 176% year-over-year, totaling $29.0 million, driven by higher inventory sales, including the Academy of Art University Collection.
• Operating income increased by 110% to $25.7 million, with the operating income margin improving by 360 bps.
• Net income increased by 233% to $27.3 million.
• Adjusted EBITDA increased by 45% to $39.6 million.
• The company reaffirmed its 2025 outlook, projecting total revenue growth of 12-13%, net income growth of 30-40%, and Adjusted EBITDA growth of 21-29%.
• Hagerty is investing approximately $20 million in technology upgrades, primarily in the Duck Creek platform, to improve efficiency and scalability.
• The company aims to double its policies in force to 3 million by 2030.
• Policies in Force Retention was 89.0% as of March 31, 2025 compared to 88.7% in the prior year period, and total insured vehicles increased 8% year-over-year to 2.6 million.
• First quarter 2025 Loss Ratio was 42.0% including 6.7% of impact from catastrophe losses (including approximately $10.4 million in pre-tax losses from the Southern California wildfires), compared to 41.1% in the prior year period.

Sentiment

Score: 9

Explanation: The document presents a highly positive outlook with strong financial results and reaffirmed guidance, indicating a confident and optimistic sentiment.

Positives

• Significant revenue growth of 18% in Q1 2025.
• Substantial increase in net income by 233%.
• Strong growth in Adjusted EBITDA by 45%.
• Successful marketplace revenue growth of 176%.
• Reaffirmation of positive 2025 financial outlook.
• Strategic technology investments to improve efficiency and scalability.
• High Policies in Force Retention of 89.0%.

Negatives

• The loss ratio increased slightly from 41.1% to 42.0% due to catastrophe losses, including the Southern California wildfires, which had a $10.4 million pre-tax impact.
• Elevated technology investments of ~$20 million in 2025 may impact near-term profitability.

Risks

• The company's ability to compete effectively and retain policyholders and Hagerty Drivers Club subscribers.
• Maintaining strategic relationships with insurance distribution and underwriting carrier partners.
• Managing risks associated with technology disruptions and third-party services.
• Unexpected increases in the frequency or severity of claims.
• Compliance with laws and regulations related to insurance, privacy, and accounting matters.
• The cyclical nature of the insurance business, including potential impacts from recession, economic downturn, or inflation.

Future Outlook

Hagerty anticipates written premium growth of 13-14%, total revenue growth of 12-13%, net income growth of 30-40%, and Adjusted EBITDA growth of 21-29% for the full year 2025.

Management Comments

• McKeel Hagerty, CEO, stated that Hagerty is off to a solid start in 2025, with strong growth in revenue, net income, and Adjusted EBITDA.
• Mr. Hagerty noted that the company is making substantial technology investments to become more efficient.
• Mr. Hagerty believes Hagerty is well-positioned for accelerating growth as they move into 2026.
• Mr. Hagerty added that operating margin expansion should drive even faster rates of bottom-line growth.

Industry Context

Hagerty operates in an industry that has historically performed well regardless of the economic cycle, with industry-leading retention rates and consistent new member growth.

Comparison to Industry Standards

• Hagerty's U.S. auto premium growth has a CAGR of 15%, compared to the industry top 100's CAGR of 6%.
• Hagerty's average loss ratio is 39%, while the industry average is 68%.

Stakeholder Impact

• Shareholders can expect continued growth and profitability.
• Employees will benefit from investments in technology and cultural excellence.
• Customers will experience improved service and offerings.
• The company's purpose to save driving and fuel car culture will be further supported.

Next Steps

• Continue the rollout of the State Farm Classic Plus program.
• Integrate membership with authentic delivery of products and services.
• Expand the marketplace globally in live and digital auctions.
• Transition to a cloud-native, scalable architecture with the Duck Creek platform.

Key Dates

Keywords

Hagerty, financial results, insurance, classic cars, revenue growth, EBITDA, net income, written premium, marketplace, automotive enthusiast