Hagerty, Inc. 2024 Annual Report (10-K) Summary
Business Context and Reporting Period
This summary covers the fiscal year ended December 31, 2024, for Hagerty, Inc. (NYSE: HGTY). Hagerty is a market leader in providing insurance for collector cars and enthusiast vehicles, operating as a Managing General Agent (MGA) and reinsuring approximately 80% of its risks through its subsidiary, Hagerty Re. The company also offers the Hagerty Drivers Club (HDC) membership and a marketplace for buying, selling, and financing collector vehicles. As of December 31, 2024, the company insured approximately 2.6 million vehicles.
Key Financial Metrics
| Metric | 2024 | 2023 | Change |
|---|---|---|---|
| Total Revenue | $1,200.0 million | $1,000.2 million | +20.0% |
| Net Income | $78.3 million | $28.2 million | +177.9% |
| Operating Income | $66.4 million | $10.4 million | +538.1% |
| Adjusted EBITDA | $124.5 million | $88.2 million | +41.2% |
| Basic EPS | $0.10 | $0.19 | -47.4% |
| Diluted EPS | $0.10 | $0.09 | +11.1% |
| Operating Cash Flow | $177.0 million | $133.7 million | +32.4% |
| Total Written Premium | $1,044.5 million | $907.2 million | +15.1% |
| Hagerty Re Loss Ratio | 46.4% | 41.5% | +4.9 pts |
| Hagerty Re Combined Ratio | 94.1% | 89.2% | +4.9 pts |
Note: Basic EPS decreased due to the accretion of Series A Convertible Preferred Stock and non-controlling interest allocations, despite significant growth in consolidated net income.
Material Changes vs. Prior Period
- Revenue Growth: Total revenue increased by $199.8 million, driven by a 15.8% increase in commission and fee revenue and a 21.0% increase in earned premium. Marketplace revenue surged 90.1% to $54.3 million.
- Catastrophe Losses: The 2024 loss ratio increased primarily due to $26.7 million in pre-tax losses from Hurricane Helene and Hurricane Milton. Excluding catastrophes, the loss ratio was 40.8% (vs. 40.3% in 2023).
- Investment Income: Interest income increased 46.7% to $39.5 million following the diversification of the investment portfolio into higher-yielding fixed maturity securities in Q2 2024.
- Warrant Liability: The company recorded an $8.5 million loss related to warrant liabilities in 2024 (vs. an $11.5 million gain in 2023) following the completion of a warrant exchange in July 2024.
- Acquisitions: Hagerty acquired Drivers Edge Insurance Company in September 2024 for $19.3 million to expand its underwriting capabilities.
Guidance, Outlook, and Risks
Recent Developments: In January 2025, severe wildfires in Southern California (Palisades and Eaton fires) are estimated to result in approximately $11.0 million in pre-tax losses. These losses are below the company's 2025 catastrophe reinsurance retention of $28.0 million and will be reflected in Q1 2025 results.
Outlook: Management expects continued growth in written premium and policies in force. The company is investing in a new SaaS platform for insurance products and expanding its marketplace offerings, including a partnership with BMW AG for the Concorso d'Eleganza Villa d'Este auction in Italy starting May 2025.
Key Risks:
- Catastrophic Events: Unpredictable frequency and severity of weather events (hurricanes, wildfires) impacting loss ratios.
- Regulatory Environment: Extensive regulation of insurance products, rates, and data privacy across multiple jurisdictions.
- Market Concentration: Dependence on key carrier partners (Markel, State Farm, Aviva) for distribution and underwriting.
- Cybersecurity: Risks related to data breaches and unauthorized access to consumer information.
- Investment Portfolio: Exposure to interest rate risk and credit risk within the fixed maturity securities portfolio.
Investor Verification Checklist
- Catastrophe Exposure: Verify the final loss estimates for the January 2025 California wildfires and their impact on Q1 2025 earnings.
- Loss Ratio Trends: Monitor the development of the 2024 accident year loss reserves, particularly regarding the impact of inflation on repair costs and the mix of modern collectibles.
- Marketplace Profitability: Assess the margin profile of the rapidly growing marketplace segment (Broad Arrow) and the sustainability of its 90% revenue growth.
- Capital Structure: Review the terms and potential dilution impact of the Series A Convertible Preferred Stock and the Tax Receivable Agreement (TRA) obligations.
- Reinsurance Capacity: Confirm the terms and pricing of the 2025 catastrophe reinsurance program and the company's ability to maintain its 80% quota share arrangement with Hagerty Re.