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    HGTY
    Earnings call· Dec 2025(Q4 FY25)

    Hagerty Q4 FY25 earnings call HGTY

    Feb 26, 2026 Source

    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

    5

    • 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

    3

    • 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

    5
    CategoryTargetConfidence
    Written premium growth
    15% to 16%
    high materiality
    High
    Total Revenue
    $1.28 billion to $1.3 billion
    high materiality
    High
    Net Income
    minus $41 million to minus $51 million
    high materiality
    High
    Adjusted EBITDA
    $236 million and $247 million
    high materiality
    High
    Policies in Force
    Doubling to $3 million
    high materiality
    High

    Segment performance

    2
    SegmentRevenueYoYQoQMargin
    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 million80%——

    Operational metrics

    22
    Total Revenue growth
    19%
    Q4 FY25

    Total revenue increased to $357 million.

    Adjusted EBITDA
    $57 millionup 97% year-over-year
    Q4 FY25

    Reflects strong outperformance and additional headcount to support growth.

    Net Income growth
    238%
    Q4 FY25

    Net income was $29 million.

    Net Income attributable to Class A common shareholders
    $7 million
    Q4 FY25

    After attribution of earnings to the noncontrolling interest and accretion on the preferred stock.

    GAAP Basic and Diluted EPS
    $0.06
    Q4 FY25

    Based on weighted average shares of Class A common stock outstanding.

    Adjusted EPS
    $0.08
    Q4 FY25

    Defined as adjusted net income divided by fully diluted shares.

    Membership and other revenue
    $82 milliongrew 4%
    FY25

    null

    Adjusted EBITDA
    $237 milliongrew 46% from $162 million
    FY25

    Includes investment income in both periods.

    Unrestricted cash balance
    $160 million
    December 31, 2025

    null

    Long-term debt
    $178 million
    December 31, 2025

    Debt excluding back leverage for Broad Arrow Capital's portfolio of loans collateralized by Collector Cars.

    Lending facility for Broad Arrow Capital
    $150 milliondoubled
    FY25

    To meet the borrowing needs of global customers.

    Investment securities
    Over $1 billionsurpassed
    FY25

    null

    Commission revenue from Markel alliance arrangement
    $437 million
    FY25

    This revenue will be eliminated from reported financials in 2026 due to the new fronting arrangement.

    Ceding commission expense related to Markel reinsurance
    $344 million
    FY25

    This expense will be eliminated from reported financials in 2026 due to the new fronting arrangement.

    Amortization of 2025 ceding commission
    $190 million
    FY26

    This amount is still on the balance sheet as of early 2026 and will be amortized through the P&L in 2026, reducing reported profits.

    Income before taxes
    $48 millionup 186% year-over-year
    Q4 FY25

    After incorporating investment income into both periods.

    Income before taxes
    $139 millionjumped 49%
    FY25

    Expanded full year margins by 200 basis points.

    Net income
    $149 millionnearly double the prior year's $78 million
    FY25

    Includes the $21 million reserve reduction.

    Earnings per diluted share
    $0.37
    FY25

    GAAP diluted EPS.

    Adjusted earnings per share
    $0.37
    FY25

    null

    Current accident year loss ratio (implied)
    42%vs 40.4% prior year
    Q4 FY25

    Analyst's calculation of current accident year loss ratio after adjusting for reserve release. Management plans for low 40s in 2026.

    Average annual rate increase
    2%1/3 the increase of daily driver peers
    Last 5 years

    Reflects Hagerty's disciplined approach to rate increases compared to the broader industry (6% for daily driver peers).

    Industry KPIs

    7
    MetricValueDetails
    Combined ratio87%%
    ROE operating ROE34%%
    Net investment income$11 millionUSD
    Retention persistency89%%
    Net premiums written earned—
    Statutory regulatory capitalA-
    Prior year reserve development$21 millionUSD

    Product announcements

    1
    ProductTypeDetails
    Enthusiast Pluslaunch

    Deals & partnerships

    4
    State FarmClassic+ 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 SafecoNew partnership for classic car insurance

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

    MarkelNew 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 ArrowAuction house operations

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

    Risks & headwinds

    4
    Accounting noise and GAAP net loss in 2026FY26

    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 arrangementFY26

    $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 lumpinessFY26

    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 ratioFY26

    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

    4

    State Farm conversion progress

    Next quarter / By end of 2026
    CurrentConversions underway in 7 states, new business in 27 states.
    TargetMore 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.

    Q&A highlights

    5

    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 read5 chapters

    Detailed Narrative

    01

    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.

    02

    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.

    03

    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.

    04

    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.

    05

    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.

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