Hagerty Q4 Earnings Call Highlights

Core Insights - The company achieved record new member additions with 371,000 new members in 2025 and reported a 14% increase in written premiums, indicating strong growth across its ecosystem [1][6] - Management emphasized a focus on top-line growth while efficiently translating revenue into profits and cash flow, with a compounded annual revenue growth rate of 23% since going public [2][6] - The company exceeded its 2025 expectations with a 17% revenue growth and a 91% increase in net income, attributed to record new business volume and operational efficiencies [3][6] Financial Performance - For the fourth quarter, revenue increased by 19% to $357 million, with net income rising sharply by 238% to $29 million [10][12] - Operating cash flow for the year increased by 24% to $219 million, with a retention rate of 89% in Q4 [2][6] - The company reported a quarterly loss ratio of 31%, positively impacted by a $21 million reserve reduction [11][19] Marketplace Growth - Marketplace revenue more than doubled in 2025, increasing by 119% to $119 million, driven by expansion into Europe and strong auction performance [5][14] - Total vehicle transactions reached $624 million, with significant contributions from financing activity and online sales [14] - Management noted that while Marketplace growth is strong, it is more variable compared to insurance, making forecasting less precise [15] Strategic Changes - The company signed a new fronting deal with Markel, allowing it to retain 100% of premium, which is expected to enhance long-term underwriting profitability but will result in a non-cash amortization of approximately $190 million in 2026 [6][8] - The new arrangement is anticipated to create a "step function increase" in potential underwriting profitability and investment income [8] - Management cautioned that GAAP net income for 2026 will be negatively impacted by transitional accounting items related to the new fronting structure [4][16] 2026 Outlook - For 2026, the company projects written premium growth of 15% to 16%, driven by new business counts and the evolved Markel arrangement [16][18] - Despite the expected growth in written premiums, revenue is forecasted to be between $1.28 billion and $1.3 billion, lower than 2025 due to the elimination of commission revenue [17] - GAAP net income is guided to be negative, ranging from $41 million to $51 million, while adjusted EBITDA is expected to be between $236 million and $247 million [18]