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    HGTY
    Earnings call· Mar 2026(Q1 FY26)

    Hagerty Q1 FY26 earnings call HGTY

    May 6, 2026 Source

    Executive summary

    Hagerty Q1 FY26 — Strong Underwriting and Record Member Growth Drive Performance

    Hagerty delivered an excellent first quarter, with written premiums and adjusted EBITDA significantly exceeding expectations, driven by record new policy additions and strong underwriting. The company is successfully navigating a structural change in its Markel arrangement, which temporarily impacts GAAP revenue and net income but is expected to normalize by year-end. Strategic investments in B2B distribution, technology, and the auction business are fueling continued growth and member engagement.

    Highlights

    5

    • Written premiums increased 18% in Q1 FY26, ahead of full-year expectations of 15%-16%.

    • Adjusted EBITDA jumped 77% to $85 million in Q1 FY26.

    • Hagerty Re's combined ratio was 87% in Q1 FY26, reflecting strong underwriting discipline.

    • Record 112,000 policies added in Q1 FY26, with PIF growth of 15%.

    • Broad Arrow Auctions achieved historic sales of $111 million at Amelia Car Week, 50% higher than any prior Amelia auction.

    Concerns

    4

    • GAAP revenue declined 5% in Q1 FY26 due to the new Markel Fronting Arrangement.

    • GAAP net loss of $13 million in Q1 FY26, impacted by $89 million in amortization of deferred ceding commissions.

    • Marketplace revenue was down 12% in Q1 FY26 due to lower inventory sales compared to a one-time sale in the prior year.

    • Operating cash flow was $16 million, lower than prior year's $44 million, due to a one-time doubling up of claims payments related to the new Markel arrangement.

    Guidance & targets

    7
    CategoryTargetConfidence
    Full-year 2026 Written Premium Growth
    15% to 16%
    high materiality
    High
    Full-year 2026 Adjusted EBITDA
    $236 million to $247 million
    high materiality
    High
    Full-year 2026 GAAP Net Loss
    $41 million to $51 million
    medium materiality
    High
    Full-year 2027 Written Premium Growth
    mid-teens growth
    high materiality
    Medium
    State Farm Classic+ agent selling states
    40 states
    medium materiality
    High
    State Farm Classic+ policy conversion
    most of 525,000 policies
    high materiality
    High
    PIF count
    3 million
    high materiality
    High

    Segment performance

    4
    SegmentRevenueYoYQoQMargin
    Insurance
    Strong performance driven by record new policy additions and the new Markel Fronting Arrangement. Underwriting discipline remains excellent, with favorable prior year development.
    Written premium: $289 millionWritten premium growth: 18% YoYEarned premium: $240 millionEarned premium growth: 42% YoYPolicies In Force (PIF) growth: 15% YoYRetention rate: 89%Hagerty Re combined ratio: 87%Hagerty Re loss ratio: 38%
    		————
    Marketplace
    Revenue declined due to lower inventory sales compared to a one-time sale in the prior year, despite record auction results at Amelia Car Week. The segment is investing to become a global leader in live and online sales.
    Amelia Car Week sales: $111 millionAmelia Car Week sell-through rate: 92%
    		$26 million-12%——
    Membership and Other
    Reflects steady growth in Hagerty Drivers Club paid memberships and ancillary revenue streams.
    		$22 million———
    Commission and Fee Revenue
    This line is no longer comparable to prior periods due to the elimination of Markel-related commissions. Expected to inflect upwards as State Farm conversions continue, with MGA fees carrying no offsetting ceding commission expense.
    		$16 million———

    Operational metrics

    12
    Adjusted EBITDA
    $85 million77% jump YoY
    Q1 FY26

    Reflects the true operating momentum of the business, including a $6 million reserve reduction.

    Amortization of deferred ceding commissions
    $89 million
    Q1 FY26

    Costs from pre-2026 policies due to the new Markel Fronting Arrangement, negatively impacting GAAP profits.

    Net Investment Income
    $10 million
    Q1 FY26

    Benefiting from a larger investment portfolio at Hagerty Re focused on high-quality fixed income.

    Loss before taxes
    $21 million
    Q1 FY26

    Includes $89 million of deferred acquisition costs.

    Adjusted Diluted Loss Per Share
    $0.04
    Q1 FY26

    Defined as adjusted net loss divided by fully diluted shares.

    Unrestricted Cash
    $212 million
    Q1 FY26

    Balance at quarter end.

    Total Investments
    $1.1 billion
    Q1 FY26

    Balance at quarter end.

    Total Debt
    $229 million
    Q1 FY26

    Balance at quarter end.

    New Policy Additions
    112,000record
    Q1 FY26

    Record number of new members added during a seasonally light quarter.

    Marketplace customer acquisition
    cheaper with every car sold
    Q1 FY26

    The marketplace is a customer acquisition machine that becomes more efficient as sales increase.

    Regulatory rate increases (Hagerty Re)
    1.5%averaged per year
    since 2010

    Low average rate increases bolster the consumer-friendly value proposition.

    Proceeds from Loss Portfolio Transfer
    $50 million
    Q1 FY26

    Part of the transition evolution with Markel, representing a financing transaction where Hagerty assumed liabilities for prior periods.

    Industry KPIs

    5
    MetricValueDetails
    Combined ratio87%%
    Net investment income$10 millionUSD
    Retention persistency89%%
    Net premiums written earned$289 millionUSD
    Prior year reserve development$6 millionUSD

    Deals & partnerships

    3
    MarkelNew Fronting Arrangement for U.S. book of business

    Effective January 1, 2026, Hagerty Re assumed 100% of the underwriting risk on its U.S. book. This eliminates MGA commission revenue and ceding commission expense in consolidation. The $89 million in deferred ceding commissions for pre-2026 policies will burn off by year-end 2026.

    State FarmClassic+ program expansion and policy conversion

    The partnership expects 19,000 State Farm agents to be selling new business in 40 states by year-end 2026. Conversion of State Farm's existing 525,000 collector car policies to the Hagerty platform is progressing well, with most expected to be converted by the end of 2027.

    BMW GroupOfficial auction partner for Concorso d'Eleganza Villa d'Este

    Broad Arrow will serve as the official auction partner for the second year at the Concorso d'Eleganza Villa d'Este on Lake Como, Italy, building on last year's inaugural event.

    Risks & headwinds

    3
    Temporary GAAP revenue decline and net lossQ1 FY26, amortization winds down by year-end 2026

    GAAP revenue down 5%, GAAP net loss of $13 million, due to $89 million amortization of deferred ceding commissions.

    Mitigation: The underlying business performance is strong, and the GAAP impact is temporary, related to settling the tab on the old Markel structure. Adjusted EBITDA shows significant profitability.

    Marketplace revenue declineQ1 FY26

    Marketplace revenue down 12% ($26 million)

    Mitigation: Attributed to lower inventory sales compared to a one-time sale in the prior year. Record auction results at Amelia Car Week indicate underlying strength, and investments are being made to position Hagerty as a global leader in sales.

    Operating cash flow reductionQ1 FY26

    Operating cash flow $16 million, lower than prior year's $44 million.

    Mitigation: Caused by a one-time doubling up of claims payments ($65 million) due to the new Markel Fronting Arrangement. This is expected to normalize during the balance of 2026.

    What to watch in Q2 FY26

    4

    Full-year 2026 guidance update

    Q2 FY26 call
    CurrentReaffirmed, trending towards high end
    TargetRevised guidance for FY26

    Why it matters

    Management indicated they would revisit the full-year outlook on the Q2 call, and are currently trending towards the high end of ranges, suggesting a potential raise.

    As has been our practice in prior years, we will revisit our full year outlook on the second quarter call, but we are increasingly confident in our ability to deliver great 2026 results for shareholders.

    Q&A highlights

    7

    Given Q1 EBITDA is strong, should we annualize it, or are there seasonal factors and expense ramps that will affect the full-year trend?

    Business seasonality has not changed, and expenses are expected to ramp up over the year as headcount slots are filled. Therefore, Q1 results should not be simply annualized for full-year projections.

    “I wouldn't just annualize the first quarter. Hopefully, that's helpful that gives you a direction.”

    asked by Pablo Singzon · answered by Patrick McClymont

    2 min read6 chapters

    Detailed Narrative

    01

    Impact of New Markel Fronting Arrangement

    Starting January 1, 2026, Hagerty Re assumed 100% of the underwriting risk on its U.S. book of business, a structural change that significantly improves reinsurance economics. This change led to a 42% jump in earned premium and a 77% increase in adjusted EBITDA. However, it also resulted in a 5% decline in reported GAAP revenue and a $13 million GAAP net loss in Q1 FY26, primarily due to $89 million in amortization of deferred ceding commissions for pre-2026 policies, which will wind down to zero by year-end 2026.

    02

    Strong Policy Growth and Retention

    Hagerty added a record 112,000 policies in Q1 FY26, a historically seasonally light quarter, contributing to a 15% year-over-year growth in Policies In Force (PIF). The company maintained an industry-leading retention rate of 89%. This growth is driven by new business count and is augmented by the ongoing conversion of State Farm's existing 525,000 collector car policies to the Hagerty platform, expected to be mostly complete by the end of 2027.

    03

    Underwriting Discipline and Claims Management

    Hagerty Re achieved a combined ratio of 87% in Q1 FY26, demonstrating excellent underwriting discipline. The company also reduced reserves by $6 million due to favorable prior-year development, predominantly from the 2025 accident year. Investments in strengthening the in-house claims team have led to increased efficiency, better customer service, and improved economic outcomes, leveraging 40 years of proprietary data on unique vehicle types.

    04

    Broad Arrow Auctions' Historic Performance

    Broad Arrow Auctions delivered historic results at Amelia Car Week in March, with $111 million in total sales, a 50% increase over any prior Amelia auction, and a 92% sell-through rate. The event set 12 pricing records, including a 2003 Ferrari Enzo selling for over $15 million. This success highlights the strong market for modern enthusiast vehicles and positions Broad Arrow as a leading global auction house, also serving as a customer acquisition channel for Hagerty's insurance business.

    05

    Strategic Partnerships and Market Expansion

    The partnership with State Farm Classic+ is accelerating, with expectations for 19,000 agents to be selling new business in 40 states by year-end. The independent agency channel, with 50,000 agents, represents significant potential, and Hagerty is investing in tools for straight-through processing and identifying enthusiast vehicles. The company is also exploring international expansion for its insurance business, leveraging the success of its European auctions to understand markets before expanding insurance offerings.

    06

    Asset Appreciation and Insurance Economics

    Approximately 20% of Hagerty's per-policy premium growth over the last 15 years has come from members voluntarily insuring their appreciating vehicles for higher guaranteed values. This alignment between asset appreciation and insurance economics provides a structural advantage, as regulatory rate increases for Hagerty Re have averaged only 1.5% per year over the same period, bolstering its consumer-friendly value proposition.

    AI-generated summary of the company’s earnings call. Not investment advice.