Hagerty(HGTY) - 2024 Q4 - Annual Report

Financial Performance - In 2024, the company reported Net Income of $78.3 million, a 177.9% increase compared to 2023, and Adjusted EBITDA of$ 124.5 million, a 41.2% increase compared to 2023[252]. - The company experienced a 20.0% increase in Total Revenue, reaching $1,200.0 million in 2024 compared to$ 1,000.2 million in 2023[255]. - Adjusted Earnings Per Share increased to $0.24 in 2024, a 500.0% increase from$ 0.04 in 2023[255]. - Operating income for 2024 was $66.4 million, a significant increase of$ 56.0 million, or 538.1%, compared to 2023[277]. - Net income for the year was $78.3 million, reflecting a substantial increase of$ 50.1 million, or 177.9%, from the previous year[277]. - Total revenue for the year ended December 31, 2024, was $1,200.0 million, an increase of$ 199.8 million, or 20.0%, compared to 2023[277]. - Consolidated net income for 2024 is $78.3 million, up from$ 28.2 million in 2023, indicating strong growth in profitability[368]. Revenue Sources - Total Written Premium reached $1,044.5 million in 2024, reflecting a 15.1% increase from$ 907.2 million in 2023[255]. - Commission and fee revenue increased to $423.2 million, up$ 57.7 million, or 15.8%, driven by a 16.2% increase in renewal policy premiums and a 13.4% increase in new policy premiums[278][279]. - Membership, marketplace, and other revenue reached $133.5 million, an increase of$ 30.6 million, or 29.8%, compared to 2023[284]. - Marketplace revenue surged to $54.3 million, a 90.1% increase, attributed to higher inventory sales and improved auction results[286]. Expenses and Loss Ratios - Total operating expenses were$ 1,133.6 million, an increase of $143.8 million, or 14.5%, with losses and loss adjustment expenses rising by 35.3% to$ 298.6 million[277]. - The Hagerty Re Loss Ratio increased to 46.4% in 2024 from 41.5% in 2023, while the Combined Ratio rose to 94.1% from 89.2%[255]. - Losses and loss adjustment expenses rose to $298.6 million, an increase of$ 77.9 million or 35.3% compared to 2023, driven by estimated losses from Hurricanes Helene and Milton[290]. - The loss ratio for 2024 was 46.4%, up from 41.5% in 2023, with catastrophe losses contributing 5.6% in 2024 compared to 1.2% in 2023[291]. Cash Flow and Investments - Net cash provided by operating activities for the year ended December 31, 2024 was $177.0 million, an increase of$ 43.3 million, or 32.4%, compared to 2023[326]. - Cash used in investing activities increased by $565.9 million in 2024, primarily due to diversification of the investment portfolio and the acquisition of Drivers Edge for$ 11.3 million[328]. - Cash used in financing activities included a reduction of outstanding borrowings by $28.8 million and a cash dividend payment of$ 5.6 million on Series A Convertible Preferred Stock[329]. - The company reported a net cash used in investing activities of $618,564,000 in 2024, a substantial increase from$ 52,647,000 in 2023[400]. Assets and Liabilities - Total assets increased to $1,709,338, up from$ 1,588,212 in 2023, indicating growth in the company's asset base[392]. - Total liabilities slightly increased to $1,101,169 from$ 1,094,867 in 2023, showing stable financial management[392]. - The total provision for unpaid losses and loss adjustment expenses as of December 31, 2024 was $168.5 million, compared to$ 136.5 million in 2023, reflecting an increase of $32.0 million[337]. - Outstanding losses reported as of December 31, 2024 were$ 99.3 million, which is 58.9% of the total provision, compared to $86.4 million or 63.3% in 2023[337]. Tax and Deferred Assets - The effective income tax rate decreased to 17% in 2024 from 37% in 2023, with income tax expense at$ 15.4 million, down $1.2 million or 7.3%[302][303]. - As of December 31, 2024, the company recorded deferred tax assets of$ 193.6 million, with $148.1 million related to the difference between the outside tax basis and book basis of its investment in THG[345]. - A valuation allowance of$ 176.2 million was recorded against deferred tax assets as of December 31, 2024, indicating management's belief that certain deferred tax assets may not be realized[345]. - The company anticipates a reasonable possibility of reversing a significant portion of the valuation allowance against U.S. deferred tax assets within the next twelve months[346]. Shareholder Equity - Total stockholders' equity increased to $523.506 million as of December 31, 2024, up from$ 410.509 million in 2023, representing a growth of approximately 27.5%[393]. - The additional paid-in capital rose to $603.780 million in 2024, up from$ 561.754 million in 2023, marking an increase of about 7.5%[393]. - The company reported an accretion of Series A Convertible Preferred Stock amounting to $7.427 million for the year 2024[393]. - The total accumulated earnings (deficit) improved to$ (451.978) million in 2024 from $(468.995) million in 2023, indicating a reduction in the deficit by approximately 3.6%[393]. Goodwill and Intangible Assets - The company recorded goodwill of$ 114.1 million and intangible assets of $90.1 million as of December 31, 2024[356]. - Goodwill represents the excess cost of a business combination over the fair value of net assets acquired and is tested annually for impairment[446]. - Intangible assets are recorded at cost and amortized over 3 to 25 years, depending on the type of asset[445]. - Non-compete agreements and customer relationships are part of the intangible assets amortized over their estimated life[445].