Hagerty, Inc. Q3 FY2026 earnings call

• Strong Financial Execution: The company reported its 15th consecutive quarter of meeting or beating expectations. Year-to-date written premium grew 18%, adding 402,000 new members. Adjusted EBITDA surged 43% to $257 million, and net income was $32 million, aided by $32 million in lower estimated losses.
• Improved Underwriting Economics: The combined ratio for the first nine months was 85.2%, supported by a $26 million reduction in current accident year losses due to lower physical damage costs and favorable liability trends. Investments in claims teams, now 40% larger than two years ago, have significantly reduced loss ratios.
• Strategic Acquisitions and Expansion: Hagerty acquired Bennett’s, the UK’s second-largest specialty motorcycle insurance broker, to strengthen its European presence. The State Farm Classic Plus rollout is progressing well, with policies being sold in 41 states and conversions of 525,000 existing policies underway in 26 states.
• Broad Arrow Auction Growth: Auction sales are up 83% year-to-date, driven by record prices at events like Monterey and Las Vegas. Modern supercars and hypercars accounted for half of total sales volume, reflecting strong demand from younger collectors (Gen X, Millennials, Gen Z).
• Technology and Operational Efficiency: Significant investments in AI and automation have improved productivity, requiring only one full-time employee per 2,800 policies in force (a 20% YoY improvement). The Member Service Center leverages AI-assisted workflows to enhance member experience while controlling costs.
• Long-Term Growth Strategy: Management reaffirms the goal of reaching 3 million policies in force by 2030. Growth is supported by B2B distribution channels, cross-selling opportunities between insurance and the Hagerty Drivers Club, and capturing market share from traditional insurers who underwrite depreciating assets rather than appreciating collector cars.

The transcript does not provide a granular breakdown of financial performance by specific product segment (e.g., Insurance vs. Auctions) with distinct absolute revenue and percentage contribution figures for each in the provided text. However, it provides consolidated and component-level data: Total Written Premium grew 16% in Q3 and 18% year-to-date. Earned Premium was $265 million (up 42%). Commission and fee revenue was $22 million. Marketplace revenue declined 6% to $32 million, driven by lower inventory sales despite auction growth of 65%. Membership and other revenue was $22 million (up 6%). Net investment income was $13 million.

• Written Premium: Full-year 2026 written premium growth is expected at the high end of the previously guided range of 16% to 17%.
• GAAP Net Income: The outlook has been raised to a range of $48 million to $60 million for the full year 2026.
• Adjusted EBITDA: The outlook has been raised to a range of $305 million to $315 million for the full year 2026.
• Note on 2027 Guidance: Management did not provide specific guidance for 2027 during this call, stating that planning is ongoing and details will be shared on the fourth-quarter call. They noted that the $52 million benefit from capitalizing MGA acquisition costs seen in 2026 is a one-time timing effect that will not repeat in 2027.

• Market Volatility in Auctions: Management acknowledged that collector car prices, particularly for modern supercars and hypercars, have risen sharply. They cautioned that prices may 'take a breather' or cool down after the rapid appreciation seen in 2026, though long-term trends remain positive.
• Catastrophe Risk: While the hurricane season was uneventful for the last two years, management noted that hurricanes can still impact profitability. However, as the business scales, the relative impact of similarly sized events diminishes.
• Regulatory and Legal Environment: Liability claims are influenced by external factors such as tort-type situations and legal environments, which are largely out of the company's control. Management highlighted the importance of targeted rate increases in liability lines to mitigate these risks.
• AI Disruption: While no negative impacts from AI on shopping trends have been observed yet, management anticipates changes in customer behavior and agent interactions, necessitating continuous adaptation of quoting and servicing engines.

Q: Analyst Charlie Lederer asked why net policy count growth appears slightly lower YoY despite State Farm conversions, questioning if retention is driving growth. / A: CFO Patrick McClymont clarified that retention remains consistent with historical levels and plans. He attributed the slight variance in PIF growth to seasonality and the variable timing of State Farm’s state-by-state rollout schedules, noting nothing gives them pause on these fronts.

Q: Charlie Lederer followed up asking if softening rates in traditional home/auto markets (like CA/FL) would positively impact Hagerty’s PIF and premium given their partnerships with major carriers. / A: CEO McKeel Hagerty explained that while they are downstream from large carriers experiencing softness, Hagerty holds strong due to high retention and significant organic referrals from high-NPS customers. This buffers them against broader market softness, allowing them to maintain robust growth.

Q: Charlie Lederer asked about run-rate expectations for marketplace revenues given McKeel’s comment that top-end auction prices might cool down. / A: McClymont confirmed that while the market remains robust, it is reasonable to expect valuations to flatten or cool after such sharp rises. For 2027 planning, they are adopting a prudent approach rather than assuming continuous upward price slopes, with final guidance to be provided in Q4.

Q: Analyst Michael Phillips asked about the price sensitivity of the new Enthusiast Plus program compared to the core book, especially given the soft traditional insurance market. / A: McClymont stated it is too early to draw conclusions as the program is in early stages with limited direct-to-consumer rollout in just one market for about a year and a half. They are still learning price elasticity and have not launched through agents/brokers yet.

Q: Kevin Weljedra asked about the impact of AI on shopping trends and how Hagerty is positioned given its heavy reliance on the agent channel. / A: CEO McKeel Hagerty described a three-layered AI strategy: internal efficiency, middleware administration, and transforming insurance services. So far, no significant shifts in customer behavior due to AI shopping have been observed. However, they are proactively designing future quoting and servicing engines to assist both consumers and agents effectively.