Hagerty Q4 Earnings Call Highlights

Key Points

• Hagerty beat 2025 expectations with revenue up 17% and net income up 91%, adding 371,000 new members, growing written premiums 14%, and lifting operating cash flow 24% to $219 million with 89% Q4 retention.
• The company signed a new fronting deal with Markel to retain 100% of premium, which should boost long‑term underwriting profitability but creates a ~$190 million non‑cash amortization in 2026 that drives guidance of negative GAAP net income ($41M–$51M) while adjusted EBITDA is forecast at $236M–$247M.
• Growth is being fueled by distribution partnerships (State Farm Classic Plus conversions and a Liberty Mutual/Safeco relationship) and a rapidly expanding Marketplace — Marketplace revenue more than doubled in 2025 and rose 119% to $119 million, though management warns Marketplace is more “lumpy” than insurance.

Hagerty NYSE: HGTY executives outlined strong full-year results for 2025 and a growth-focused—but accounting-noisy—setup for 2026 during the company’s fourth-quarter earnings call. Management emphasized continued premium expansion driven by new business counts, strategic partner programs, and the company’s evolving relationship with fronting partner Markel, while cautioning that reported GAAP net income in 2026 will be temporarily pressured by non-cash transitional items tied to that change.

Full-year 2025 results exceeded prior expectations

CEO McKeel Hagerty said the company “handily exceeded” its original expectations for 2025, citing revenue growth of 17% and a 91% increase in net income. He attributed the profit improvement to record new business volume, operating efficiencies, stable underwriting, and “better than anticipated loss trends,” which allowed the company to reduce reserves by $21 million.

Hagerty highlighted 2025 as the third straight year of executing on its strategy to grow the top line while translating incremental revenue into profits and cash flow more efficiently. McKeel Hagerty said that since becoming public four years ago, the company has compounded revenue at 23% per year and increased net income by more than $200 million. Operating cash flow increased 24% to $219 million, which management framed as funding for reinvestment into the member value proposition.

Among the year’s operational milestones, management noted record new member additions and growth across multiple parts of its ecosystem. The company welcomed 371,000 new members in 2025 and reported written premium gains of 14%, which management said accelerated through the year. The company also pointed to “excellent retention,” citing 89% retention in the fourth quarter results discussion.

Insurance partnerships and the Markel shift

Management repeatedly returned to the company’s distribution partnerships as a key growth driver, with particular attention on State Farm and a newly announced partnership with Liberty Mutual and Safeco.

• State Farm Classic Plus: Hagerty ended 2025 selling new State Farm Classic Plus business in 27 states and said it is converting State Farm’s U.S. book of 525,000 vehicles in seven states. Executives said 2026 is expected to be a major ramp year, with most states “up and running by the end of this year,” while full conversion momentum extends into 2027.
• Liberty Mutual and Safeco: Management described the Liberty Mutual/Safeco relationship as modest in its 2026 impact, with a ramp expected over time.

A central strategic change is Hagerty’s updated fronting arrangement with Markel. McKeel Hagerty said the company signed a new structure under which it retains 100% of the premium beginning January 1, calling it “an extremely rare occurrence” in insurance to move from earning a commission to capturing full economics. CFO Patrick McClymont said the new arrangement creates a “step function increase” in potential underwriting profitability and investment income, while also bringing a complex set of transitional accounting impacts.

Fourth-quarter performance: revenue up 19%, net income up sharply

McClymont reported fourth-quarter revenue increased 19% to $357 million. Written premiums grew 19% on robust new business, helped by ramping State Farm conversions and the company’s 89% retention. Commission and fee revenue rose 18% to $106 million, earned premium increased 14% to $193 million, Marketplace revenue rose 80% to $29 million, and membership and other revenue grew 8% to $19 million. Net investment income, including gains, was $11 million, compared to $10 million in the prior-year period.

On profitability, the company reported fourth-quarter income before taxes of $40 million, up 186% year over year. The quarterly loss ratio was 31%, which was favorably impacted by 11 percentage points due to the $21 million reserve reduction. McClymont said the reserve reduction primarily reflected favorable development for the 2024 accident year and improved current accident year experience, including decreased severity and improved loss trends in liability and physical damage claims.

Fourth-quarter adjusted EBITDA increased 97% to $57 million, and fourth-quarter net income rose 238% to $29 million. Net income attributable to Class A common stockholders was $7 million after attribution to non-controlling interest and preferred stock accretion. GAAP basic and diluted EPS was $0.06 for the quarter; adjusted EPS was $0.08, calculated using 361 million fully diluted shares.

Marketplace growth remained strong, but described as “lumpier” than insurance

Hagerty’s Marketplace and auction businesses were a major growth contributor in 2025. Management said Marketplace revenue more than doubled during the year as the company expanded into Europe with auctions in Italy, Belgium, and Switzerland. McKeel Hagerty said total transaction value of vehicles sold at auction and through private transactions was $566 million, which he said made Hagerty the number two global player after three years in the market.

McClymont added that Marketplace revenue jumped 119% to $119 million for the full year. He also said total vehicle transactions reached $624 million, including $85 million of financing activity and $40 million in online sales on Hagerty Marketplace. He noted Broad Arrow’s January auction at Rétromobile Paris opened 2026 with $21 million in sales and highlighted Broad Arrow’s new role as the official auction house of The Quail during Monterey Car Week.

Responding to an analyst question about Marketplace visibility, management said insurance is the primary focus of 2026 priorities, while Marketplace remains important but is “lumpier” and more variable—especially private sales—making forecasting less precise. Executives pointed to the Amelia Island event as a near-term focal point, describing it as the largest auction the company has announced, with “low estimates” of $105 million.

2026 outlook: premium growth accelerates, GAAP net income turns negative due to transition accounting

For 2026, Hagerty guided to written premium growth of 15% to 16%, accelerating from 14% in 2025, driven by new business counts and the evolved Markel arrangement. However, management cautioned that reported revenue and GAAP profitability will be distorted by accounting presentation changes related to the new fronting structure.

McClymont said eliminating commission revenue associated with the Markel alliance means 2026 revenue is expected to be between $1.28 billion and $1.3 billion—below 2025—despite the higher written premium growth. He also detailed a non-cash transitional expense tied to previously paid ceding commissions for 2025-issued policies: about $190 million will amortize through 2026, reducing reported profit before taxes by that amount. He said these costs are expected to “burn off” from roughly $90 million in the first quarter to $10 million in the fourth quarter and reach zero by year-end 2026.

As a result, Hagerty guided to GAAP net income of negative $41 million to negative $51 million for 2026, while adjusted EBITDA is expected to be $236 million to $247 million. Management urged investors to focus on adjusted EBITDA to understand underlying profit and cash flow growth during the transition year, with McClymont saying 2027 should be “clean” once the 2025 ceding commission amortization is complete.

On underwriting, management reiterated an expectation for loss ratios in the low 40% range, pointing to a planning framework around approximately 41% for 2026.

About Hagerty NYSE: HGTY

Hagerty is a specialized automotive lifestyle and insurance company that caters primarily to collectible car enthusiasts. Its core business centers on offering classic vehicle insurance policies designed to protect antique, vintage and specialty automobiles, motorcycles and boats. These policies typically feature agreed-value coverage, flexible usage options and access to restoration services, aligning with the unique needs of collectors and hobbyists.

Beyond insurance, Hagerty operates a comprehensive suite of community and content services under its automotive lifestyle brand.

This instant news alert was generated by narrative science technology and financial data from MarketBeat in order to provide readers with the fastest reporting and unbiased coverage. Please send any questions or comments about this story to contact@marketbeat.com.