Hagerty outlines 14–15% revenue growth and 3 million PIF target by 2030 as State Farm and Liberty Mutual partnerships ramp

Earnings Call Insights: Hagerty, Inc. (HGTY) Q3 2025

MANAGEMENT VIEW

* CEO McKeel Hagerty highlighted "2025 was a relatively benign year for catastrophes after a challenging start with the California wildfires" and credited member engagement for strong underwriting outcomes.
* CEO Hagerty announced the launch of Safe Storage Concierge, a new product offering guaranteed shelters for cars in hurricane-prone areas such as Tampa and Miami, which is expected to support lower claim frequency and stable underwriting.
* CEO Hagerty noted, “Total revenue increased 18%. New business count fueled by a 13% increase in written premium and 14% growth in commission revenue, an acceleration from the first half results as State Farm policy conversions ramp up month-over-month. October came in even stronger than September, delivering the highest Policy in Force or PIF growth in our history.”
* The company reported the launch of a European auction business and significant growth in its membership, marketplace and other revenue segments.
* CEO Hagerty revealed a new partnership with Liberty Mutual and Safeco, stating, “Hagerty will help Liberty Mutual engage and retain their customers through a combination of our excellent customer service and expertise at valuing, underwriting and handling claims on collectible vehicles.”
* A new fronting arrangement with Markel will allow Hagerty to control 100% of premium and risk starting in 2026, up from the current 80% quota share, which CEO Hagerty described as “a 25% increase compared to the current 80% quota share.”
* CFO Patrick McClymont stated, “We delivered 18% growth in total revenue to $380 million. New business count gains, combined with industry-leading retention of 89% drove a 16% increase in written premium. As expected, written premium growth accelerated in the third quarter, resulting in 2-year rate growth exceeding 30% as we ramp conversion of State Farm's 525,000 Classic policies to their new Classic Plus program, powered by Hagerty.”

OUTLOOK

* CFO McClymont provided updated 2025 guidance: "We now expect 14% to 15% revenue growth and are increasing our assumptions for margin expansion. This should result in net income of $124 million to $129 million, equating to growth of 58% to 65% and adjusted EBITDA of $170 million to $176 million, an increase of 37% to 41% compared to 2024."
* Management reiterated the strategic goal to double policies in force to 3 million by 2030.
* The company mentioned ongoing investments in technology re-platforming expected to drive efficiency gains.

FINANCIAL RESULTS

* Hagerty reported total revenue of $380 million for the third quarter, with written premium growth of 16% and earned premium up 13% to $187 million.
* Operating profit reached $34 million with operating margins increasing 590 basis points to 9%.
* Net income for the quarter was $46 million, up from $19 million a year earlier. GAAP basic earnings per share was $0.18 and diluted earnings per share was $0.11.
* Adjusted EBITDA rose 106% to $50 million in the quarter.
* Membership, Marketplace and Other Revenue increased 34% to $56 million, driven by European auctions and inventory growth.
* G&A expenses increased 17%, attributed to technology investments and professional fees related to a secondary offering and the Markel fronting arrangement. Salaries and benefits grew 44% due to higher incentive compensation accruals.
* $38 million of the valuation allowance was released and recorded as an income tax benefit, while a $29 million expense was recorded for the tax receivable agreement liability.

Q&A

* Hristian Getsov, Wells Fargo, asked about the Liberty Mutual and Safeco partnership's impact on PIF and premium growth. CFO McClymont replied, “Think of it as tens of thousands of customers. And so it's a good-sized opportunity. It's not sort of one of the State Farm type sized opportunity, obviously.”
* Getsov asked about Enthusiast Plus rollout and loss ratios. CEO Hagerty explained, “It's early days... we are live in one state. We will start rolling out new states. And as far as loss results, it's too early to be speaking specifically about it.”
* Charlie Lederer, BMO Capital Markets, questioned the acceleration in pricing growth. CFO McClymont clarified, “Our business is very seasonal... If you do, you'll see it's much smoother than what sort of the quarterly analysis would say.” He also noted that growth rate in live auctions will decelerate next year as the calendar nears capacity.
* Michael Phillips, Oppenheimer, asked about expense growth. CFO McClymont stated, “That's what it should be this year, for 2025 versus 2024.” Phillips also asked about Drivers Club membership growth; CEO Hagerty said, “The attach rates have been a little bit lower than our sort of standard through the front door process, but we're endeavoring to get that up to where it matches.”
* Mitchell Rubin, Raymond James, inquired about investment income sensitivity to rate cuts. CFO McClymont responded, “We have allocated most of the investments into high-grade corporate and government bonds, duration of 2 to 3 years. So it's not sitting in money market accounts.”
* Mark Hughes, Truist Securities, asked about PIF growth in October. CEO Hagerty said, “It's the State Farm flywheel beginning to really turn... we're really humming along.”
* Pablo Singzon, JPMorgan, inquired about fourth quarter EBITDA. CFO McClymont answered, “Typically, the fourth quarter is seasonally a lighter quarter for us and has tighter margins. And so it could swing around a little bit.”

SENTIMENT ANALYSIS

* Analysts probed for quantitative details about new partnerships, growth drivers, and margin impacts, with a neutral to slightly positive tone, though some expressed skepticism about guidance specifics and partnership contributions.
* Management maintained a confident tone in prepared remarks, frequently referencing "exciting" developments and sustained growth; during Q&A, responses were detailed but occasionally hesitated on specifics, with phrases like "it's too soon to say" and "we'll just have to see how it unfolds."
* Compared to the previous quarter, analysts maintained a consistent level of inquiry, with focus shifting more heavily toward new partnerships and the impact of State Farm.

QUARTER-OVER-QUARTER COMPARISON

* Guidance for revenue and net income was raised again, with 2025 revenue growth now expected at 14% to 15% (previous quarter: 13% to 14%) and net income target increased to $124 million to $129 million (previous: $112 million to $120 million).
* Management continued to emphasize operational efficiency and margin expansion, reporting improved operating profit and margin gains compared to Q2.
* Strategic focus advanced from the launch phase of Enthusiast Plus to initial rollout and partnership execution, with Liberty Mutual/Safeco added as a new distribution channel.
* Analyst questions this quarter focused more on partnership scale, auction seasonality, and impacts of fronting arrangement with Markel, whereas last quarter included more on State Farm integration pace and European expansion.
* Management's confidence appeared steady, with more emphasis on execution and integration of recent strategic initiatives.

RISKS AND CONCERNS

* Management acknowledged technology costs and the need to support future growth with selective headcount additions.
* Professional fees related to the Markel arrangement and a large secondary offering were highlighted as impacting G&A.
* Seasonality, particularly in the fourth quarter, was noted as a factor in margin and EBITDA variability.
* The impact of State Farm business on average written premium per policy and attach rates for Drivers Club is still evolving, with management monitoring these metrics.
* There is uncertainty around the profitability ramp of new products like Enthusiast Plus and international marketplace expansion.

FINAL TAKEAWAY

Hagerty’s management underscored strong revenue and profit momentum for 2025, backed by ongoing State Farm conversions, new strategic partnerships like Liberty Mutual/Safeco, and expanded marketplace operations. The company raised full-year guidance and continues to target operational efficiency, margin expansion, and robust cash generation, while investing in technology and product innovation to support long-term growth and the goal of 3 million policies in force by 2030.

Read the full Earnings Call Transcript [https://seekingalpha.com/symbol/hgty/earnings/transcripts]

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