Hagerty Inc. Leans Into Growth Amid GAAP Headwinds

Hagerty Inc Class A ((HGTY)) has held its Q1 earnings call. Read on for the main highlights of the call.

Hagerty Inc. Class A’s latest earnings call struck an upbeat tone despite messy GAAP optics. Management emphasized strong premium growth, record policy additions, robust underwriting results, and scaling auction operations, arguing these fundamentals outweigh temporary accounting and cash‑flow headwinds tied to the Markel transition.

Premium Engine Accelerates with Record Policy Growth

Written premiums climbed 18% year over year to $289 million, outpacing the company’s full‑year growth target of 15%–16%. Earned premium surged 42% to $240 million as Hagerty Re began capturing the full economics of U.S. underwriting, supported by a record 112,000 new policies and 15% growth in policies in force at 89% retention.

EBITDA Jumps and Underwriting Discipline Shines

Adjusted EBITDA jumped 77% to $85 million, underscoring improving profitability as scale builds. Hagerty Re posted an impressive ~87% combined ratio with a ~38% loss ratio and booked a $6 million reserve release, signaling conservative prior reserving and strong underlying risk selection.

Auctions Drive Brand and Profits Despite Revenue Dip

Broad Arrow delivered record auction results at Amelia, generating $111 million in sales, 50% above any prior Amelia event, with a 92% sell‑through rate and a top lot exceeding $15 million. Porsche Air/Water auction sales rose 30% year over year with an 84% sell‑through, reinforcing management’s view of the marketplace as a growing profit center and powerful customer acquisition funnel.

Strategic Win: Full Economics on the U.S. Book

A key milestone is Hagerty’s move to capture 100% of underwriting economics on its U.S. business starting in 2026, which is already boosting earned premium. The State Farm alliance is another pillar, with the company targeting about 19,000 agents in roughly 40 states and planning to migrate around 525,000 collector policies to its platform by the end of 2027.

Balance Sheet Strength and Guidance Reaffirmation

The company reported $212 million in unrestricted cash and more than $1.1 billion in investments against $229 million of total debt, including $110 million tied to Broad Arrow back leverage. With this financial cushion, Hagerty reaffirmed its 2026 outlook and suggested performance is trending toward the upper end of its targets.

Asset Appreciation Provides Structural Pricing Tailwinds

Management highlighted that rising values of classic and enthusiast vehicles have structurally supported premium growth. Over the past 15 years, roughly 20% of per‑policy premium gains have come from customers electing higher guaranteed values, enabling growth without heavy rate hikes, as regulatory increases have averaged about 1.5% annually since 2010.

Deferred Ceding Commissions Weigh on GAAP Revenue

Accounting noise from the Markel fronting transition distorted reported results in the quarter. An $89 million amortization of deferred ceding commissions on pre‑2026 policies drove GAAP revenue down 5% and pressured reported profitability, though management expects this drag to fully burn off by year‑end 2026.

GAAP Net Loss Masks Economic Progress

Hagerty reported a GAAP net loss of $13 million for the quarter, with a $7 million loss attributable to Class A shareholders and a GAAP loss per share of $0.06, or $0.04 on an adjusted diluted basis. Management stressed that the loss is largely a reflection of the one‑time accounting impacts rather than underlying business weakness.

Cash Flow Hit by Transition‑Related Timing Issues

Operating cash flow fell to $16 million from $44 million a year earlier as Hagerty paid claims directly in Q1 2026 while also reimbursing Markel for fourth‑quarter 2025 claims, creating roughly $65 million of overlapping outflows. Leadership framed this as a temporary timing issue closely tied to the transition, with expectations for normalization over the rest of 2026.

Marketplace Revenue Remains Lumpy and Inventory‑Driven

Marketplace revenue declined 12% year over year to $26 million, reflecting lower inventory and a tough comparison to a one‑time institutional sale in the prior period. While headline revenue was softer, management pointed to strong high‑end auction performance and reiterated that this segment will remain inherently volatile and deal‑dependent.

Investment Ramp and Seasonality Temper Margin Outlook

Hagerty signaled it will keep investing heavily in claims capabilities, technology, B2B distribution, and Broad Arrow talent. Executives cautioned that Q1’s strong margins should not be extrapolated, as rising headcount, operating expenses, and normal seasonality are expected to moderate near‑term margin expansion.

Execution and Regulatory Risks Around Growth Initiatives

The planned State Farm policy conversions and broadened state footprint introduce regulatory and operational complexity that could affect timing and execution. International expansion, particularly in Europe, is also constrained by local insurance structures, and the early‑stage Enthusiast Plus offering remains small with outcomes still unclear.

Leverage Profile and Complex Financing Structures

Total debt of $229 million includes $110 million in back leverage tied to Broad Arrow loans, adding some financial complexity but manageable against asset levels. A $50 million loss portfolio transfer linked to the Markel transition will recognize gains gradually over the claims settlement period, further complicating reported capital flows without altering underlying economics.

Guidance and Outlook: Confidence at the High End

Management reaffirmed 2026 guidance for 15%–16% written premium growth, adjusted EBITDA of $236 million to $247 million, and a GAAP net loss between $41 million and $51 million, stating that performance is trending toward the high end of these ranges. They also projected mid‑teens written premium growth in 2027 as State Farm conversions ramp, backed by a solid balance sheet and improving underwriting scale.

Hagerty’s earnings call painted a picture of a specialty insurer in transition but gaining momentum, with core fundamentals outrunning near‑term accounting and cash‑flow noise. For investors, the key debate is whether the company can execute on its State Farm rollout and marketplace ambitions while preserving its underwriting discipline and delivering on high‑end guidance targets.