Hagerty, Inc. 2025 Annual Report (10-K) Summary
Business Context and Reporting Period
This filing is the Annual Report on Form 10-K for Hagerty, Inc. (HGTY) for the fiscal year ended December 31, 2025. Hagerty is a market leader in insurance for collector cars and enthusiast vehicles, operating an integrated ecosystem that includes insurance, the Hagerty Drivers Club (HDC), media, and a marketplace for buying and selling vehicles (Broad Arrow). Beginning in 2025, the Company transitioned its financial reporting to Article 7 of Regulation S-X (insurance standards) and reorganized its reporting into two segments: Insurance and Marketplace.
Key Financial Metrics
| Metric | 2025 | 2024 | Change |
|---|---|---|---|
| Total Revenue | $1,456.4 million | $1,241.5 million | +17.3% |
| Net Income | $149.2 million | $78.3 million | +90.6% |
| Adjusted EBITDA | $236.8 million | $161.7 million | +46.5% |
| Operating Cash Flow | $219.0 million | $177.0 million | +23.7% |
| Total Assets | $2,094.0 million | $1,709.3 million | N/A |
| Total Debt (Net) | $177.9 million | $105.8 million | +68.1% |
| Investment Portfolio | $1,038.2 million | $830.2 million | +25.1% |
Segment Performance:
- Insurance Segment: Revenue of $1,336.3 million (92% of total). Written premium grew 14.3%. The Hagerty Re Loss Ratio improved to 39.3% (from 46.4% in 2024), and the Combined Ratio was 86.6%.
- Marketplace Segment: Revenue of $120.1 million (8% of total), up 116.6% year-over-year, driven by higher private sale commissions and inaugural European auctions. The segment reported a pre-tax loss of $11.1 million.
Material Changes vs. Prior Period
- Accounting Transition: The Company adopted Article 7 reporting, reclassifying net investment income and gains as components of revenue rather than below the operating line. Prior periods were recast for comparability.
- Profitability Drivers: Net income nearly doubled, driven by a significant reduction in catastrophe losses (2024 included $26.7 million in hurricane losses) and a $20.5 million favorable reserve development. Additionally, the Company released a $41.8 million valuation allowance on deferred tax assets, resulting in a $10.0 million income tax benefit.
- Marketplace Expansion: Broad Arrow launched three inaugural European auctions (Italy, Belgium, Switzerland) and expanded private sales, contributing to the segment's revenue surge.
- Debt Structure: Total debt increased due to the utilization of a new $375 million JPM Credit Facility (replacing the prior facility) and an expansion of the Broad Arrow Capital (BAC) credit facility from $75 million to $150 million.
Guidance, Outlook, and Risks
Strategic Developments:
- Markel Fronting Arrangement: Effective January 1, 2026, Hagerty Re will assume 100% of the risk for policies written through Essentia (previously 80%). This increases underwriting control and profitability but also increases exposure to volatility and catastrophe risk. Accounting for this book will change, reducing reported commission revenue and ceding commission expense.
- Enthusiast+ Product: Launched in Colorado in Q3 2025 via the acquired Drivers Edge Insurance Company. This product targets modern enthusiast vehicles with higher frequency of use, expected to have higher loss ratios but broader market appeal.
Risks and Contingencies:
- Cybersecurity: The Company settled a 2021 data security incident with the NY DFS and NY AG in Q4 2025, paying $3.15 million in penalties.
- Tax Receivable Agreement (TRA): The estimated TRA liability increased to $39.8 million (from $2.2 million in 2024) based on forecasts of future taxable income. This liability requires payments to Legacy Unit Holders for tax benefits realized.
- Investment Risk: The portfolio is exposed to interest rate risk and credit risk, though unrealized losses are attributed to rate changes rather than credit deterioration.
Key Facts for Investor Verification
- Accounting Impact of Markel Deal: Verify how the 2026 shift to 100% risk assumption will alter revenue recognition (reducing commission revenue) and expense structures, potentially reducing period-to-period comparability.
- Loss Reserve Adequacy: Monitor the development of the 2025 accident year reserves, particularly given the introduction of the higher-risk "Enthusiast+" product line.
- TRA Liability Volatility: Track the TRA liability balance, as it is sensitive to future taxable income projections and stock price fluctuations related to unit exchanges.
- Marketplace Profitability: Assess the timeline for the Marketplace segment to reach profitability, given its rapid revenue growth but continued pre-tax losses.
- Capital Constraints: Review dividend restrictions on Hagerty Re (Bermuda) and Drivers Edge (Colorado), which limit the ability to upstream capital to the parent company.