Hagerty(US:HGTY)2023-03-14 15:29Financial Data and Key Metrics Changes - Total revenue for 2022 grew by 27% to $788 million, driven by written premium growth of 15% to $777 million [23][17] - In Q4 2022, total revenue increased by 28% to $197 million, with written premium growth of 15% to $162 million [9][10] - The company reported a fourth quarter operating loss of $36 million, compared to a loss of $21 million in the prior year [10][46] - Adjusted EBITDA for the full year was a loss of $2 million, impacted by Hurricane Ian and increased reserves [47][26] Business Line Data and Key Metrics Changes - Membership and marketplace revenue surged by 50%, primarily due to $14 million in incremental marketplace revenue [5][11] - Earned premium grew by 36% to $112 million in Q4 2022 [45] - Commission and fee revenue for 2022 increased by 13%, slightly below the growth of written premiums [23] Market Data and Key Metrics Changes - The company issued 235,000 new insurance policies during the year, reflecting strong brand strength [5] - The loss ratio increased by 4 percentage points in 2022 compared to 2021, while industry-wide loss ratios rose by over 12 percentage points [11][30] Company Strategy and Development Direction - The company aims to improve profitability significantly in 2023, targeting adjusted EBITDA of $40 million to $60 million [8][26] - Key initiatives for 2023 include transitioning to a more integrated insurance business and enhancing operational efficiencies [19][20] - The company plans to leverage its brand equity to drive referrals and efficient growth [25][42] Management's Comments on Operating Environment and Future Outlook - Management expressed optimism about growth opportunities, emphasizing the importance of efficiency in executing their strategy [63] - The company anticipates strong top-line momentum in 2023, with revenue growth projected at 22% to 26% [8][24] - Management noted that the love for automobiles persists regardless of economic conditions, supporting their business model [17] Other Important Information - The company is focusing on integrating its operations with State Farm, expecting to drive meaningful scale and growth [41] - The company has implemented cost containment measures and operational efficiencies to return to profitability [19][62] Q&A Session Summary Question: What is driving the slight decrease in new business count year-over-year? - Management noted that while new business count ticked down, strong penetration in traditional Hagerty vehicles continues, and they are ramping up in newer vehicles [52] Question: Can you discuss the underlying claim frequency and severity trends? - Management indicated that frequency remains stable, but severity has increased due to higher repair costs and compounding liability losses [54] Question: How will the reinsurance pricing changes affect the business? - Management acknowledged that while reinsurance costs are increasing, their unique risk profile mitigates some of the impacts seen in the broader industry [35][36]