Executive Summary / Key Takeaways

• Niche Dominance and Expanding Reach: Hagerty, Inc. (NYSE:HGTY) is solidifying its leadership in the automotive enthusiast market, leveraging its strong brand and specialized expertise in collector car insurance, memberships, and marketplace services. Strategic partnerships with industry giants like State Farm and Liberty Mutual are significantly expanding its addressable market and policy count.
• Accelerating Profitability and Strategic Investments: The company delivered robust financial performance in the first nine months of 2025, with strong revenue growth translating into substantial increases in net income and Adjusted EBITDA. These gains are fueling critical technology investments in its "Apex" platform, which are designed to drive long-term efficiency and scalable growth.
• Technological Edge and Product Innovation: Hagerty's investment in its cloud-based "Apex" platform, including Duck Creek (DCT), is a foundational differentiator, enabling more flexible underwriting, enhanced member experiences, and lower operating costs. The new Enthusiast+ product, tailored for modern enthusiast vehicles, is a direct outcome of this technological advancement, targeting a vast, underserved segment.
• Favorable Competitive Dynamics: Hagerty's deep understanding of the collector car niche, evidenced by its high Net Promoter Score (NPS) of 82, provides a durable competitive moat against broader insurers. Its ability to offer specialized valuation tools and community-driven experiences fosters unparalleled loyalty and efficient customer acquisition.
• Strong Outlook with Clear Growth Levers: Management has raised its 2025 guidance, projecting significant increases in revenue, net income, and Adjusted EBITDA, underpinned by the ramp-up of State Farm policy conversions and the phased rollout of Enthusiast+. The long-term vision to double policies in force to 3 million by 2030 appears well-supported by these strategic initiatives.

The Heart of Car Culture – Hagerty's Enduring Legacy and Vision

Hagerty, Inc. stands as a market leader in the specialized world of collector cars and enthusiast vehicles, operating a unique ecosystem that spans insurance, memberships, and a vibrant marketplace. With a history stretching back approximately 40 years, Hagerty has cultivated an unparalleled brand built on deep passion and expertise for automotive culture. The company functions primarily as a Managing General Agent (MGA), underwriting, selling, and servicing specialized insurance policies, while its wholly-owned subsidiary, Hagerty Reinsurance Limited (Hagerty Re), reinsures a significant portion of these risks. This integrated model allows Hagerty to offer guaranteed value coverage and best-in-class service, resonating deeply with its enthusiast clientele.

The company's overarching strategy centers on expanding its specialty insurance offerings, simplifying and integrating the member experience, and growing its marketplace business internationally. This approach is designed to capture a larger share of the vast collectible vehicle market, which includes both traditional classics and modern enthusiast cars. Hagerty's foundational strengths lie in its authentic brand, which fosters exceptional customer loyalty, reflected in an industry-leading Net Promoter Score (NPS) of 82, significantly higher than the industry average. This strong brand and reputation enable efficient customer acquisition through word-of-mouth referrals and strategic partnerships.

Broad industry trends, such as the increasing adoption of AI in insurance, present both opportunities and challenges. While AI-driven tools could enhance Hagerty's digital offerings and valuation capabilities, they also necessitate significant investment. The collector car market itself, while subject to economic fluctuations, has demonstrated remarkable stability, with valuations generally holding steady even in uncertain times. Unlike daily driver vehicles, collector cars rarely experience panic selling, as owners maintain a strong emotional connection, leading to consistent insurance premium payments.

Technological Engine: Apex and Duck Creek – Fueling Efficiency and Expansion

At the core of Hagerty's future growth and operational efficiency is its significant investment in technological transformation, particularly through its "Apex" program. This multi-year initiative involves transitioning from an aging IT infrastructure, originally built in the 2000s, to a modern cloud-based architecture, with Duck Creek serving as a leading insurance platform. This strategic shift is critical for supporting Hagerty's rapid growth trajectory, as the legacy system was identified as a limiting factor for scalability and operational efficiency.

The Apex program is designed to deliver specific, tangible benefits. It aims to simplify and improve the member experience through enhanced security and workflow automation, ultimately lowering marginal operating costs. Key features include more self-service options and rule-based functionality, alongside a modern risk rating architecture that allows for greater segmentation of its diverse vehicle portfolio. This technological liberation enables Hagerty's teams to focus on core differentiators such as personalized greetings, proprietary valuation tools, parts finders, repair networks, CRM, and integration with member content. For investors, this translates into a stronger competitive moat, improved capital efficiency, and the foundation for sustained margin expansion as the company scales.

The Enthusiast+ product, launched in Colorado in the third quarter of 2025, is a direct outcome of these technological advancements. This new insurance offering is tailored for modern enthusiast vehicles, which are typically driven more frequently and stored more flexibly than traditional collector cars. The underlying technology allows Hagerty to widen its underwriting aperture, enabling it to "say yes more" to inbound business that its core Classic Collector Car Insurance Program previously could not accommodate due to pricing or risk dynamics. Enthusiast+ policies are expected to command higher premiums and, while anticipated to have higher loss ratios due to distinct risk characteristics, are projected to generate attractive returns and broaden Hagerty's funnel of insurable vehicles, significantly aiding its growth.

Competitive Positioning: Dominating the Niche, Outmaneuvering Giants

Hagerty occupies a highly specialized and defensible position within the broader insurance landscape, distinguishing itself from larger, more generalized insurers like Progressive , Allstate (ALL), and Travelers (TRV). While these industry giants offer extensive auto insurance products and possess greater operational scale and diversified revenue streams, Hagerty's strength lies in its deep expertise and authentic connection to the automotive enthusiast community. Its Net Promoter Score of 82 significantly surpasses industry averages, indicating a level of brand loyalty and engagement that is difficult for mass-market insurers to replicate.

Hagerty's competitive advantages are rooted in its niche differentiation. Its proprietary vehicle valuation tools (HVT) provide superior accuracy for collector vehicles, offering a critical service that general insurers cannot match. The company's omnichannel distribution, combining direct sales with strong agent and carrier partnerships, allows it to efficiently acquire new members. Furthermore, Hagerty's extensive calendar of automotive enthusiast events, its magazine, and emergency roadside assistance services create a community-driven ecosystem that fosters unparalleled customer retention. This integrated approach allows Hagerty to maintain low single-digit price increases in its core traditional book, a competitive advantage compared to the higher rate increases often seen in the daily driver market.

However, Hagerty's smaller scale compared to its direct competitors presents certain vulnerabilities. Larger insurers like Progressive (PGR) benefit from immense operational efficiencies, potentially leading to faster claims processing and higher cash flow generation. While Hagerty's technology investments in Apex and Duck Creek are designed to address scalability and efficiency, the initial elevated costs in 2025 represent a "pinch point" that larger competitors might absorb more easily. Despite this, Hagerty strategically leverages partnerships, such as the master alliance agreement with State Farm and the new collaboration with Liberty Mutual and Safeco, to expand its market reach without incurring the full burden of direct distribution costs. These partnerships allow Hagerty to tap into vast existing customer bases, effectively turning potential competitors into distribution channels for its specialized offerings.

Financial Performance: Accelerating Profitability on a Solid Foundation

Hagerty has demonstrated a compelling trajectory of accelerating financial performance, particularly in the first nine months of 2025. Total revenue for this period reached $1.07 billion, marking a 17.6% increase over the prior year. This growth was underpinned by a 13% rise in Written Premium, which translated into a 14% increase in Commission and fee revenue to $380.70 million and a 12.5% increase in Earned premium, net, to $534.18 million. The third quarter alone saw an 18% increase in total revenue to $380.0 million, driven by 16.1% Written Premium growth.

Profitability metrics have shown significant expansion. For the nine months ended September 30, 2025, net income surged by 72.7% to $120.7 million, and Adjusted EBITDA grew by 46.3% to $153.1 million. Operating income for the same period increased by 78.4% to $107.7 million. These improvements were largely attributable to the ramp-up of new business from the State Farm partnership and significantly higher inventory sales and private sale commissions within the marketplace segment. A favorable comparison to the prior year, which included $24.7 million in estimated pre-tax losses from Hurricane Helene, also contributed to the improved loss ratio of 42% for the first nine months of 2025, resulting in a healthy combined ratio of 89.3%.

Operating expenses reflect strategic investments and performance-driven accruals. Salaries and benefits increased by 18.8% to $191.30 million for the nine-month period, primarily due to higher accrued incentive compensation reflecting stronger company performance. General and administrative expenses rose by 11.5% to $69.20 million, driven by increased professional fees related to strategic transactions and software-related costs for the new insurance policy management system.

The company's liquidity remains robust, with $160.39 million in cash and cash equivalents and $172.26 million in restricted cash as of September 30, 2025. Total debt stood at $177.98 million, including $75 million in back leverage for collateralized loans. Hagerty's diversified investment portfolio, primarily in high-grade corporate and government bonds with a 2-3 year duration, provides stability and contributes to investment income.

Strategic Initiatives: Expanding the Ecosystem, Deepening the Moat

Hagerty's strategic initiatives are meticulously designed to expand its market footprint, enhance its service offerings, and solidify its competitive advantages. A pivotal development is the proposed fronting arrangement with Markel Group Inc. (MKL), expected to be finalized in the fourth quarter of 2025 and effective January 1, 2026. This evolution of their long-standing partnership will see Hagerty Re control 100% of the premium and assume 100% of the risk for policies written through Essentia, Markel's subsidiary, in exchange for a 2% fronting fee. This move is anticipated to significantly increase Hagerty's profitability through additional underwriting and investment income, while granting greater operational control over its core insurance business.

The launch of the Enthusiast+ product in Colorado in the third quarter of 2025 marks a strategic expansion into the modern enthusiast vehicle segment. This new offering, tailored for vehicles typically driven more frequently and stored more flexibly, broadens Hagerty's addressable market beyond traditional collector cars. A phased nationwide rollout is planned over the next four years, leveraging the company's new Apex technology platform to accommodate the distinct risk characteristics and higher average premiums associated with these vehicles. This initiative is crucial for capturing a segment where Hagerty's penetration is currently low, such as post-1980 vehicles, which represent a significant growth opportunity within the 35 million car target market.

The master alliance agreement with State Farm continues to be a powerful growth engine. The "State Farm flywheel" is gaining momentum, with Hagerty aiming to be active in 25-27 states for new business by the end of 2025. The process of converting State Farm's existing Classic policies to Hagerty's new Classic Plus program is ramping up, with a "massive intake" of 525,000 cars expected to transition over the next few years, particularly in 2026 and 2027. This partnership, structured as a pure agency relationship for Hagerty, generates attractive commissions without direct risk retention, further boosting revenue and policy count.

Hagerty is also aggressively expanding its marketplace business internationally. Recent European auctions in Belgium and Switzerland, alongside a successful event in Las Vegas, have contributed to global vehicle values sold through Broad Arrow Live Auctions reaching $240 million through November 1. These live auctions work synergistically with private sales and financing services, establishing Broad Arrow as a trusted brand for buying and selling special vehicles globally. The company's ongoing business review, which included the divestiture of Motorsport Reg (MSR) in June 2024, underscores its commitment to prioritizing investments in areas with the strongest growth and profit potential.

Outlook and Risks: Charting a Course for Sustained Value Creation

Hagerty's management has expressed strong confidence in its future trajectory, reflected in its increased 2025 guidance. The company now anticipates total revenue growth of 14-15%, net income growth of 58-65% (ranging from $124 million to $129 million), and Adjusted EBITDA growth of 37-41% (ranging from $170 million to $176 million) compared to 2024. This optimistic outlook is predicated on the continued ramp-up of the State Farm partnership, the phased rollout of the Enthusiast+ product, and the realization of efficiency benefits from its technology investments. The long-term vision to double policies in force to 3 million by 2030 is a testament to the compounding growth potential inherent in its differentiated business model.

Despite this positive outlook, several risks warrant investor attention. The proposed fronting arrangement with Markel, while highly beneficial, remains subject to the negotiation of definitive documentation and all required regulatory approvals, with no absolute assurance of completion on the terms described. Broader macroeconomic conditions, including inflation and interest rates, could impact consumer spending on discretionary items like collector cars, although Hagerty's niche market has historically shown resilience. Changes in tariffs on imported goods could also affect claims costs, though the company anticipates a muted impact due to the fragmented and often domestically sourced nature of parts for collector vehicles.

Furthermore, the significant investment in the Apex technology re-platforming, while crucial for long-term scalability, creates a near-term "pinch point" in profitability during 2025 due to elevated expenses from running redundant systems and staffing ahead of full revenue realization. The company also settled claims related to a 2021 data security incident in October 2025, incurring $3.15 million in payments. While management believes the outcome of legal proceedings will not materially affect its financial condition, such incidents highlight ongoing operational risks. Hagerty's ability to effectively manage these risks while executing its strategic growth initiatives will be key to realizing its long-term value creation potential.

Conclusion

Hagerty, Inc. is strategically positioned as the undisputed leader in the automotive enthusiast market, transforming its passion for cars into a robust and accelerating business. Its unique blend of specialized insurance, engaging memberships, and a growing marketplace creates a powerful ecosystem that fosters deep customer loyalty and predictable revenue streams. The company's foundational investments in its Apex technology platform and innovative products like Enthusiast+ are not merely operational upgrades; they are critical differentiators that will unlock scalable growth and drive sustained margin expansion.

With the State Farm partnership gaining significant traction and new alliances like Liberty Mutual expanding its reach, Hagerty is poised to double its policies in force by 2030. This growth, coupled with the enhanced profitability expected from the Markel fronting arrangement, underscores a compelling investment thesis. While the company faces inherent risks from economic fluctuations and the complexities of technological transformation, its proven resilience, strong brand, and strategic foresight position it for compounding profit growth and continued shareholder value creation in the years to come.