Hagerty, Inc. Q2 2026 Filing Summary
Business Context and Reporting Period
This Form 10-Q covers the quarterly period ended June 30, 2026. Hagerty, Inc. operates as a market leader in collector car insurance and an automotive marketplace. The reporting period is significantly impacted by the implementation of the Markel Fronting Arrangement, effective January 1, 2026. Under this arrangement, Hagerty Reinsurance Limited ("Hagerty Re") assumed 100% of the risk and premium for policies issued through Essentia Insurance Company, increasing its U.S. quota share from 80% to 100%. Consequently, the Company no longer recognizes commission revenue for Essentia-originated policies, fundamentally altering revenue composition and expense classification compared to prior periods.
Key Financial Metrics
| Metric (in thousands) | Q2 2026 | Q2 2025 | YTD 2026 | YTD 2025 |
|---|---|---|---|---|
| Total Revenue | $354,822 | $379,309 | $666,652 | $707,645 |
| Net Income (Loss) | $8,041 | $47,202 | $(4,704) | $74,495 |
| Net Income Attributable to Class A | $(1,668) | $9,098 | $(8,189) | $15,594 |
| Adjusted EBITDA | $74,505 | $72,645 | $159,690 | $120,796 |
| Cash and Cash Equivalents | $298,302 | $140,300 | $298,302 | $140,300 |
| Total Debt, Net | $215,951 | $177,907 | $215,951 | $177,907 |
Note: GAAP Net Income for Q2 2026 was positive ($8.0M), but Net Income attributable to Class A Common Stockholders was negative ($1.7M) due to accretion of Series A Convertible Preferred Stock and non-controlling interest allocations.
Material Changes vs. Prior Period
- Revenue Composition Shift: Commission and fee revenue plummeted 83.5% to $23.7M in Q2 2026 from $143.3M in Q2 2025. This is a direct result of the Markel Fronting Arrangement, where Hagerty Re now retains the premium rather than earning a commission. Conversely, Earned Premium, net increased 41.7% to $252.0M.
- Expense Reclassification: "Underwriting and other insurance expenses" surged to $62.9M in Q2 2026 from $1.2M in Q2 2025. Costs previously classified as SG&A are now categorized here due to the expanded risk-taking authority. SG&A expenses decreased 57.5% to $55.9M.
- Loss Experience: Losses and loss adjustment expenses increased 47.2% to $110.7M, primarily driven by the 100% quota share assumption. However, the Hagerty Re Loss Ratio improved slightly to 40.6% YTD 2026 from 42.2% YTD 2025, aided by a $6.1M favorable reserve development.
- Marketplace Growth: The Marketplace segment turned profitable, reporting $1.1M income before taxes in Q2 2026 compared to a $2.0M loss in Q2 2025. Net Auction Sales increased 110.5% year-over-year.
Guidance, Outlook, and Risks
- Transitional Costs: Management expects significant non-cash transitional costs related to the amortization of deferred ceding commissions from 2025 policies to continue through 2026. These costs are excluded from Adjusted EBITDA and are expected to decline in Q3 and Q4 2026.
- Acquisition: On June 30, 2026, Hagerty agreed to acquire Bennetts Motorcycling Services Limited for approximately $43.0 million. Closing is expected in Q3 2026, subject to regulatory approval.
- Key Risks:
- Underwriting Volatility: Increased exposure to underwriting volatility and catastrophes as Hagerty Re assumes 100% of the risk.
- Regulatory Compliance: Compliance with Bermuda Solvency Capital Requirements (BSCR) and U.S. state regulations for Drivers Edge.
- Market Conditions: Sensitivity to the collector car market value, which impacts collateral for loans and insurance premiums.
Investor Verification Checklist
- Markel Arrangement Impact: Verify the run-off schedule of the deferred ceding commission amortization to understand the timeline for GAAP profitability normalization.
- Loss Ratio Sustainability: Monitor the Hagerty Re Loss Ratio and Combined Ratio to ensure the 100% risk assumption does not lead to underwriting losses as the book matures.
- Debt Covenants: Confirm continued compliance with the 2025 JPM Credit Facility and BAC Credit Facility covenants, particularly the leverage and fixed charge coverage ratios.
- TRA Liability: Review the Tax Receivable Agreement (TRA) liability balance ($38.3M) and the assumptions regarding future taxable income required to trigger payments.
- Non-GAAP Reconciliations: Scrutinize the reconciliation of Adjusted EBITDA, specifically the $64.1M adjustment for Markel Fronting Arrangement transitional costs in Q2 2026.