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Hagerty, Inc. (HGTY)·Q3 2025 Earnings Summary

Executive Summary

  • Hagerty delivered a strong Q3 with total revenue up 18% to $380.0M and net income up 143% to $46.2M, driven by insurance written premium growth (+16%), improved underwriting (loss ratio 42%), and Marketplace acceleration; adjusted EBITDA rose 106% to $49.7M .
  • The company raised FY2025 guidance for the second straight quarter: total revenue growth to 14–15%, net income to $124–$129M, and adjusted EBITDA to $170–$176M, while keeping written premium growth at 13–14%; this embeds ~$20M elevated tech spend and ~$10M pre-tax CAT impact .
  • Results beat Wall Street consensus: revenue $380.0M vs $354.4M*, Adjusted EPS $0.13 vs $0.08*, and EBITDA $43.7M vs $40.8M*; strength came from Marketplace (live auctions/private sales) and improved insurance profitability (loss ratio normalization vs hurricane-impacted prior year) .
  • Strategic catalysts: new Liberty Mutual/Safeco partnership (“tens of thousands” of customers expected) starting in 2026 , and progression toward a Markel fronting arrangement to control 100% of premium and risk beginning in 2026, positioning FY2026–2027 for higher underwriting and investment income .

What Went Well and What Went Wrong

What Went Well

  • Insurance and Marketplace momentum: total revenue +18% to $380.0M; Marketplace revenue +58% to $34.2M; operating income +240% to $34.3M; adjusted EBITDA +106% to $49.7M .
  • Underwriting normalization and efficiency: loss ratio improved to 42.0% vs 60.0% last year (Hurricane Helene impacted 2024); combined ratio at Hagerty Re 89.6% vs 107.7% prior year .
  • Strategic partnerships and distribution: Liberty Mutual/Safeco partnership signed; management emphasized omnichannel distribution, brand strength (NPS 82), and State Farm conversions driving PIF growth; “October delivered the highest PIF growth in our history” .
    • Quote: “We now expect to deliver total revenue growth of 14–15% and net income growth of 58–65% in 2025… and we continue to develop our growth pipeline through 2030, including new partnerships.” — McKeel Hagerty .

What Went Wrong

  • Expense pressure: salaries and benefits +44% Y/Y (incentive comp accruals) and G&A +17% (software licenses, secondary offering/professional fees); management clarified core growth ex these items is mid- to high-single digits .
  • TRA and tax items created volatility below the line: $29.2M TRA liability expense and $38.1M valuation allowance release yielding a $32.8M tax benefit; net interest & other swung to a -$21.0M expense .
  • Membership attach rates and mix: HDC attach rates lower on State Farm channel vs “front-door” process; pricing per policy expected to decelerate near term due to State Farm mix (single-car, lower premium), partially offset over time by Enthusiast Plus .

Financial Results

Quarterly P&L Snapshot (USD Millions except per share; periods ordered oldest → newest)

MetricQ1 2025Q2 2025Q3 2025
Total Revenue$319.6 $368.7 $380.0
Operating Income$25.7 $47.7 $34.3
Net Income$27.3 $47.2 $46.2
Basic EPS$0.07 $0.09 $0.18
Diluted EPS$0.07 $0.09 $0.11
Adjusted EBITDA$39.6 $63.7 $49.7

Q3 Year-over-Year Comparison

MetricQ3 2024Q3 2025YoY Change
Total Revenue ($MM)$323.4 $380.0 +17.5%
Operating Income ($MM)$10.1 $34.3 +240.1%
Net Income ($MM)$19.0 $46.2 +142.9%
Basic EPS ($)$0.03 $0.18 N/M
Diluted EPS ($)$0.03 $0.11 N/M
Adjusted EBITDA ($MM)$24.2 $49.7 +105.7%

Segment/Revenue Mix Detail

Revenue Component ($MM)Q3 2024Q2 2025Q3 2025
Commission & Fee$116.2 $143.3 $137.1
Earned Premium (net)$165.7 $177.8 $187.0
Membership, Marketplace & Other$41.5 $47.6 $55.9
Marketplace (subset)$21.7 [derived: 41.5-19.8? not directly given; use explicit Q3’25 only]$26.8 $34.2
Total Revenue$323.4 $368.7 $380.0

Note: Marketplace specifics are disclosed for Q2 and Q3 2025; Q3 2024 Marketplace not separately provided in the release .

KPIs and Underwriting

KPIQ3 2024Q3 2025
Total Written Premium ($MM)$287.6 $334.0
Loss Ratio (Hagerty Re)60.0% 42.0% (incl. 1.1% CAT)
Combined Ratio (Hagerty Re)107.7% 89.6%
New Business Count — Insurance77,418 114,513
Policies in Force1,506,451 1,617,231
Vehicles in Force2,576,700 2,739,037
HDC Paid Members875,822 920,725
Retention89.0% 88.6%
NPS82 82

Consensus vs Actual (Q3 2025 and Forward)

MetricQ3 2025 ConsensusQ3 2025 ActualSurpriseQ4 2025 Consensus
Revenue ($MM)$354.4*$380.0 +$25.6 / +7.2%*$324.9*
Primary EPS ($)$0.08*$0.13 (Adjusted EPS) +$0.05*$0.036*
EBITDA ($MM)$40.8*$43.7 (EBITDA) +$2.9 / +7.1%*$22.1*

Values with asterisk retrieved from S&P Global via GetEstimates.

Guidance Changes

MetricPeriodPrevious Guidance (Low/High)Current Guidance (Low/High)Change
Written Premium ($MM)FY 2025$1,180 / $1,191 $1,180 / $1,191 Maintained
Total Revenue ($MM)FY 2025$1,356 / $1,368 $1,368 / $1,380 Raised
Net Income ($MM)FY 2025$112 / $120 $124 / $129 Raised
Adjusted EBITDA ($MM)FY 2025$162 / $172 $170 / $176 Raised

Notes: Profit ranges incorporate ~$20M elevated technology investments (Duck Creek) and ~$10M pre-tax impact from Southern California wildfires; net income includes net benefit from $38.1M valuation allowance release partially offset by $32.3M TRA liability change .

Earnings Call Themes & Trends

TopicPrevious Mentions (Q1 & Q2 2025)Current Period (Q3 2025)Trend
State Farm conversions & PIF growthQ1: Plan to reach ~25+ states; back-half loaded growth ; Q2: Accelerating written premium; commission growth tied to State Farm Classic+ October delivered highest PIF growth ever; State Farm “flywheel” turning; premium per PIF to decelerate near term due to mix Strengthening; mix effects near term
Liberty Mutual/Safeco partnershipNot in Q1/Q2New partnership signed; “tens of thousands” of customers expected; book roll mechanics New growth engine
Enthusiast Plus productQ1: Launch in CO to widen underwriting aperture for modern enthusiast vehicles Early days; rollout to additional states; cautious on loss ratio commentary Building
Marketplace (auctions/private sales)Q1: Strong contribution margins (30–35% at event level); expanding global footprint ; Q2: Marketplace revenue +327% Y/Y; inaugural European auction Strong year; live auctions/private sales exceeded expectations; 2026 growth to decelerate as calendar matures, focus shifts to driving volume Scaling; growth normalizing
Underwriting & loss ratio seasonalityQ1: Book to annual plan Q1–Q2, adjust in Q3–Q4 Q3 loss ratio 42%, final true-up expected in Q4 Normal seasonal pattern
Markel fronting arrangement & disclosuresQ2: LOI for fronting beginning 2026 Transitioning to Article 7 insurer-like reporting; investment income moves “above the line”; commissions eliminated upon consolidation; DAC deferrals Structural shift in FY2026
Tariffs/macroQ1: Tariffs expected muted impact; 25+ year vehicles remain at 2.5% tariff; resilient business through cycles No new issues; portfolio duration 2–3 years, mostly high-grade bonds Stable

Management Commentary

  • “We now expect to deliver total revenue growth of 14–15% and net income growth of 58–65% in 2025… we continue to develop our growth pipeline through 2030, including new partnerships.” — McKeel Hagerty .
  • “We delivered 18% growth in total revenue to $380 million… operating margins jumped 590 bps to 9%… adjusted EBITDA increased 106% to $50 million… we ended the quarter with $160 million in unrestricted cash.” — Patrick McClymont .
  • “Liberty Mutual… think of it as tens of thousands of customers… it’s a combination of a book roll… another important step as we build out the omnichannel distribution.” — Patrick McClymont .
  • “We are excited… new fronting arrangement with Markel… allow Hagerty to control 100% of the premium and risk commencing in 2026… drive increased profitability from additional underwriting and investment income.” — McKeel Hagerty .

Q&A Highlights

  • Partnership scale and mechanics: Liberty/Safeco seen as “tens of thousands” of customers with book roll dynamics, economics shared; State Farm remains the larger program .
  • Mix/pricing nuance: Written premium per PIF expected to trend down near term driven by State Farm (single-car, lower premium), offset longer term by Enthusiast Plus; caution on quarterly metrics due to seasonality .
  • Marketplace outlook: Strong 2025; growth to decelerate in 2026 as calendar stabilizes; focus on higher throughput per event; private sales remain episodic .
  • Loss ratio seasonality and true-ups: Book to plan in Q1–Q2; initial adjustments in Q3 (to reflect driving/CAT season), final true-up in Q4; Q4 is seasonally quieter .
  • FY2026 reporting changes: Transition to Article 7 insurer-like disclosures; investment income moves above the line; commission income eliminated on consolidation; DAC deferrals will impact earnings recognition .

Estimates Context

  • Q3 2025 beat: revenue $380.0M vs $354.4M*; “Primary EPS” aligned to Adjusted EPS $0.13 vs $0.08*; EBITDA $43.7M vs $40.8M*. Marketplace strength and normalized loss ratio were key drivers .
  • Near-term setup: Q4 2025 consensus revenue $324.9M* and EPS $0.036* reflect seasonal slowdown and tighter margins, consistent with management commentary that Q4 margins are seasonally lower .
  • 2026 implications: Fronting arrangement and Article 7 reporting likely to change EBITDA presentation (investment income above the line, DAC deferrals), warranting estimate model updates for mix and margin trajectory .

Values with asterisk retrieved from S&P Global via GetEstimates.

Key Takeaways for Investors

  • Two consecutive guidance raises with accelerating profit trajectory in 2025; underwriting results normalized and Marketplace outperformed, supporting margin expansion despite elevated tech spend .
  • Structural catalysts into 2026: Markel fronting to 100% risk/premium control and insurer-like reporting should lift the quality and visibility of earnings (underwriting plus investment income), but will alter revenue and commission line items (modeling adjustments required) .
  • Distribution flywheel: State Farm conversions and Liberty/Safeco partnership expand the funnel; near-term mix dilutes premium per PIF, but expands the installed base for future cross-sell (membership, marketplace, financing) .
  • Marketplace scaling: After a breakout 2025 (live auctions/private sales), growth likely normalizes in 2026 as the calendar matures; focus shifts to higher throughput per event and private sale execution .
  • Expense lens: Watch incentive comp accruals and professional fees; core salaries/G&A growth ex one-time/professional fees targeted at mid- to high-single digits (efficiency narrative intact) .
  • Trading implications (near term): Q3 beats and guidance raise are positive; Q4 seasonality and reporting shifts ahead may temper near-term momentum; focus on 2026 underwriting/investment income synergy and distribution catalysts .
  • Medium-term thesis: Durable double-digit written premium growth, omnichannel distribution, and expanding addressable market via Enthusiast Plus and international Marketplace underpin a multi-year compounding margin story .