Hagerty (HGTY) Q2 FY26 earnings call: guidance and Q&A

Has the strategy for integrating 54,000 independent agents shifted to help sell Hagerty policies?

The independent agent channel is key, but challenging due to its size. The strategy involves focusing on high-producing agents, moving 'zero to one' agents, and educating them on the expanding definition of classic cars to include enthusiast vehicles, using data, communications, and education.

“We want to be that partner in an agent's office when somebody like this comes in, not just with a really vintage car, but with one of these enthusiast vehicles that they need to send it to us.”

asked by Thomas Mcjoynt-Griffith · answered by McKeel Hagerty

Can adjusted EBITDA growth in 2027 keep pace with written premium growth, considering the accounting noise this year?

While not providing 2027 guidance yet, the underlying business economics will continue to grow in the mid-teens. The company will communicate how much margin expansion flows to the bottom line versus being reinvested. Consensus estimates are a reasonable starting point.

“What I would say is once we get through the complexity of this year, the then the economics of the business are largely driven by insurance, and that, you know, will continue to grow in the mid-teens.”

asked by Thomas Mcjoynt-Griffith · answered by Patrick McClymont

What are the moving pieces from accounting noise for 2027, specifically regarding deferred acquisition costs (DAC) and transition costs?

The $199 million in transition costs will be fully amortized by end of 2026 and will not be present in 2027. The DAC dynamic, where capitalization currently benefits the P&L, will normalize in 2027, with a more consistent relationship between cash spending and P&L amortization.

“The two things that will be different will be, one, the transition cost, 199 million is gone, right? So that's fully amortized by the end of this year. And so that we have to worry about that next year.”

asked by Charles Lederer · answered by Patrick McClymont

Can you expand on relationships with Progressive and other national carriers, including any quantified impact?

The Progressive relationship has evolved to cover vehicles 25 years and older, expanding the cohort beyond pre-1981 cars. The Liberty Mutual partnership is starting to turn on, with more programs to be piloted. These partnerships contribute to growth beyond State Farm.

“We've evolved that relationship, so now it's 25 years old and older. So we picked up just through that alone, 17 years of additional cohorts that are out there, and now just kind of roll forward on a go-forward basis.”

asked by Elyse Greenspan · answered by Patrick McClymont

Is there any seasonality to consider for new business and policies in force (PIF) trends in the back half of the year?

The normal seasonality remains, with growth peaking from March/April and tapering off in October, reflecting car buying activity. While the new accounting for earned premium has a smoothing effect on revenue, the underlying business activity still follows this pattern.

“Well, the normal seasonality that we've talked about before, Elise, is still in play. So, you know, there's a kind of a big bell curve to our growth, you know, kind of starts in March and April and kind of starts tapering off in October.”

asked by Elyse Greenspan · answered by McKeel Hagerty

What was the driver of the meaningful bump in new business count this quarter from 100K to 160K?

The traditional business continues strong growth, but the significant bump is primarily due to State Farm conversions. The company is now in the conversion phase in 15 states, transitioning over 500,000 vehicles to Hagerty, which will continue through 2027 and into 2028.

“Yes, so the traditional business continues to grow at a strong rate. And then the incremental, the big bump is State Farm. So we are now into the conversion phase. I think it's 15 states that we're doing conversions in.”

asked by Kevin Regentra · answered by Patrick McClymont