Questioned the stated improvement in current accident year experience, noting that after backing out the $21 million reserve release (10.6 points) from the 31.4% reported loss ratio, the current accident year loss ratio appeared to be around 42%, higher than the prior year's 40.4%.

Patrick McClymont reiterated that the company plans for a loss ratio in the low 40s (around 41%) for 2026, despite positive trends from claims management improvements. He acknowledged the Q4 2025 had a very good loss year. “I think the way that we're thinking about it, we did have reserve release, we did have a very good year in 2025 from a loss perspective. As we look to 2026, we're assuming that our losses are in line with what we've guided to previously, right in the low 40s.”

Asked for a breakdown of written premium guidance by source (State Farm, Liberty Mutual, legacy) and how many of the 7 State Farm conversions have been completed.

McKeel Hagerty stated they would not break down written premium by category but confirmed State Farm is accelerating growth in 2026/2027. He clarified that they are rolling out more conversions in 2026, with most states expected to be up and running by year-end, and full penetration expected by 2027. “The way to think about it is by the time we get to the end of this year, we'll move from those 27 states to close to full penetration... And we'll be making further progress in terms of the conversions as well.”

Noted that Marketplace revenue was a strong success in 2025 but not highlighted in 2026 priorities, asking about the outlook for this segment.

McKeel Hagerty explained that 2026 priorities are insurance-focused due to technology spend and core business growth, but Marketplace remains important. Patrick McClymont added that live and digital auctions will continue to grow, with geographic expansion (e.g., Paris sale), but the private sale business, while expected to do well, is lumpier and harder to predict at the same phenomenal 2025 level. “The private sale business, which had a phenomenal 2025, that's the more chunky sort of episodic business that McKeel was talking about... it's hard to say that it's going to be at the same level of where we ended up in '25.”

HGTY

Hagerty (HGTY) Q4 FY25 earnings call: guidance and Q&A

Earnings call· Dec 2025 (Q4 FY25)· Financials· Feb 26, 2026

Source: earnings call transcript

Executive summary

Hagerty Q4 FY25 — Strong Growth and Strategic Markel Fronting Arrangement

Hagerty delivered strong Q4 and full-year FY25 results, marked by significant revenue and profit growth, driven by new member acquisition and marketplace expansion. The company is undergoing a strategic transition with a new Markel fronting arrangement in 2026, which will lead to temporary accounting noise and a reported GAAP net loss, despite underlying profit and cash flow growth. Management emphasizes focusing on adjusted EBITDA for 2026 to reflect the true operational performance.

Highlights

Revenue up 17% for FY25, with Q4 total revenue increasing 19% to $357 million.
Net income surged 91% for FY25 to $149 million, and Q4 net income increased 238% to $29 million.
Adjusted EBITDA grew 46% for FY25 to $237 million, and Q4 adjusted EBITDA increased 97% to $57 million.
Record 371,000 new members welcomed in 2025, driving 14% written premium growth.
Marketplace revenue more than doubled in 2025 to $119 million, with total transaction value of $566 million.

Concerns

2026 GAAP revenue expected to be below 2025, between $1.28 billion and $1.3 billion, due to accounting changes from the new Markel fronting arrangement.
2026 net income anticipated to be a loss of minus $41 million to minus $51 million, impacted by $190 million in non-cash transitional expenses from amortizing prior ceding commissions.
Current accident year loss ratio in Q4 2025 was discussed as potentially higher at 42% compared to 40.4% in the prior year, after backing out reserve releases.

Guidance & targets

Category	Target	Timeline	Confidence
Written premium growth	15% to 16% high materiality	FY26	High
Total Revenue	$1.28 billion to $1.3 billion high materiality	FY26	High
Net Income	minus $41 million to minus $51 million high materiality	FY26	High
Adjusted EBITDA	$236 million and $247 million high materiality	FY26	High
Policies in Force	Doubling to $3 million high materiality	By 2030 · FY30	High

Segment performance

Segment	Revenue	YoY	QoQ	Margin
Insurance Robust new business count and ramping State Farm conversions contributed to written premium growth. Written premiums growth: 19% (Q4 FY25)Commission and fee revenue: $106 million (Q4 FY25)Commission and fee revenue growth: 18% (Q4 FY25)Earned premium: $193 million (Q4 FY25)Earned premium growth: 14% (Q4 FY25)Retention: 89% (Q4 FY25)	$328 million	—	—	—
Marketplace Strong growth driven by expansion into Europe and successful auctions. Broad Arrow is now the official auction house of The Quail. Total transaction value: $566 million (FY25)Financing activity: $85 million (FY25)Online sales on Hagerty Marketplace: $40 million (FY25)Auctions in Europe: Italy, Belgium, Switzerland (2025)January 2026 Retromobile Paris sales: $21 million	$29 million	80%	—	—

HGTY operating KPIs by quarter

HGTY operating KPIs stated on its earnings calls, by fiscal quarter
KPI	This call Dec 2025 Q4 FY25	Mar 2026 Q1 FY26	Jun 2026 Q2 FY26	Change vs prior quarter
Policy retention rate	89% Written premiums grew 19% due to robust new business count helped by ramping State Farm conversions and our 89% retention. Source: earnings call transcript	89% PIF growth jumped 15% as our retention rate remained steady at an industry-leading 89%. Source: earnings call transcript	88% Our high rates of PIF growth and industry-leading retention of 88% powers consistent compounding growth and provides us with excellent visibility into future revenue streams, particularly as we unlock our partnership opportunities by deepening existing relationships and adding new ones. Source: earnings call transcript	-1 pt
Combined ratio Hagerty Re	—	87% Hagerty Re's combined ratio was 87%, and we took down our reserves by $6 million in the first quarter. Source: earnings call transcript	90% Turning to profitability, shown on slides 7 and 8, Hagerty-Ree's combined ratio came in at 90% in the second quarter, despite inflationary pressures. Source: earnings call transcript	+3 pt

Operating figures the company stated on at least two of the calls shown, checked against each call's transcript. Click a figure to read the sentence. A dash means it was not stated that quarter.

Product announcements

Product	Type	Timeline	Details
Enthusiast Plus	launch	launched in Colorado last summer

Deals & partnerships

State Farm Classic+ business expansion and conversion

Selling new State Farm Classic Plus business in 27 states, converting their U.S. book of 525,000 vehicles in 7 of those states. More conversions rolling out in 2026.

Liberty Mutual and Safeco New partnership for classic car insurance

A new partnership where Liberty Mutual and Safeco decided to partner with Hagerty instead of competing independently.

Markel New fronting arrangement where Hagerty retains 100% of the premium

Hagerty will control all aspects of its insurance risk, including administrative functions and regulatory filings, for the Essential book of business. This involves noncash transitional costs in 2026.

Broad Arrow Auction house operations

Expanded into Europe with 3 successful auctions in 2025. Now the official auction house of The Quail.

Risks & headwinds

Accounting noise and GAAP net loss in 2026 FY26

Net income anticipated at minus $41 million to minus $51 million for FY26.

Mitigation:Management advises focusing on Adjusted EBITDA ($236M-$247M) for underlying profit and cash flow growth, as the GAAP loss is due to non-cash transitional expenses.

Non-cash transitional expenses from Markel fronting arrangement FY26

$190 million amortization of 2025 ceding commission.

Mitigation:These costs will decline to $0 by year-end 2026, flowing through the P&L from roughly $90 million in Q1 to $10 million in Q4. It's a non-cash expense.

Marketplace private sale business lumpiness FY26

difficult from a confidence standpoint to put a high degree of confidence around the prediction there because it is just chunky and episodic.

Mitigation:While 2025 was phenomenal, the company expects a good year in 2026 but acknowledges it might not be at the same level. Live and digital auctions are expected to continue growing.

Potential for higher current accident year loss ratio FY26

Analyst implied current accident year loss ratio of 42% for Q4 FY25, compared to 40.4% prior year, after adjusting for reserve releases.

Mitigation:Management plans for a loss ratio in the low 40s (around 41%) for 2026, citing improvements in claims management (material damage unit, special investigative teams).

What to watch in Q1 FY26

State Farm conversion progress

Next quarter / By end of 2026

Current Conversions underway in 7 states, new business in 27 states.

Target More states in conversion mode, progress towards full penetration.

Why it matters

State Farm partnership is a key driver of written premium growth and policy count expansion.

The way to think about it is by the time we get to the end of this year, we'll move from those 27 states to close to full penetration. There'll be a few that stretch over into 2027. But most of the states will be up and running by the end of this year. And we'll be making further progress in terms of the conversions as well.

Find out whether HGTY delivers this. Inve re-checks your case every morning.

Q&A highlights

Asked if the 2026 net loss guidance, adjusted for the $190 million non-cash expense, would still be below 2025's $149 million net income, given other complexities.

Patrick McClymont advised focusing on adjusted EBITDA guidance for comparability, noting that 2025 net income included a $20 million reserve release and a tax valuation allowance benefit that won't recur in 2026, making direct net income comparison difficult.

“I think with all the complexity, what we're asking people to really focus on is this adjusted EBITDA guidance that we've provided.”

asked by Michael Phillips · answered by Patrick McClymont

2 min read 5 chapters

Detailed narrative

Strategic Markel Fronting Arrangement

Hagerty has evolved its relationship with Markel, transitioning to a new 2% fronting arrangement where Hagerty retains 100% of the premium starting January 1, 2026. This move, culminating a decade-long effort, significantly increases potential underwriting profitability and investment income by giving Hagerty full control over insurance risk.

The transition involves building internal teams for administrative and regulatory functions, and while it creates non-cash transitional costs in 2026, it is expected to boost underlying profit and cash flow.

Marketplace Business Expansion

The Marketplace segment, including Broad Arrow auctions, had an exceptional 2025, with revenue more than doubling to $119 million. Total transaction value of vehicles sold reached $566 million, positioning Hagerty as the #2 global player in just three years. The company expanded into Europe with auctions in Italy, Belgium, and Switzerland, and launched 2026 with a $21 million sale at Retromobile Paris.

Future growth is expected from geographic expansion and increasing the number of scheduled auctions, with Amelia Island's upcoming auction having low estimates of $105 million.

Technology Transformation and AI Adoption

Hagerty is undergoing a multi-year technology transformation, including a Duck Creek implementation, to move towards a modern cloud-based architecture. This is expected to drive future efficiency gains and scalable growth, such as the launch of Enthusiast Plus on Duck Creek.

The company is also actively exploring and piloting AI programs for fraud detection in claims, valuation analysis for marketplace and insurance, and administrative functions, aiming to personalize the member experience and improve efficiency as it targets doubling policies in force by 2030.

State Farm and Liberty Mutual Partnerships

The State Farm Classic+ partnership is accelerating, with new business being sold in 27 states and conversions of 525,000 vehicles underway in 7 of those states. More conversions are rolling out in 2026, with most states expected to be up and running by year-end.

A new partnership with Liberty Mutual and Safeco was also announced, which is expected to have a modest impact in 2026 but ramp up in subsequent years, further enhancing distribution strategy.

Underwriting Quality and Capital Management

Hagerty's underwriting quality was recognized by A.M. Best with an A- rating and an upgraded outlook to positive. The company successfully renegotiated reinsurance terms for 2026, achieving a double-digit risk-adjusted decrease in costs. Hagerty Re's return on equity for 2025 was 34%, despite building surplus for the incremental earned premium from the new Markel arrangement.

The company ended 2025 with $160 million in unrestricted cash and surpassed $1 billion in investment securities, primarily high-grade bonds.

Summary of the company's earnings call; see how call summaries are prepared. Not investment advice.