On Wednesday, Hagerty (NYSE:HGTY) discussed second-quarter financial results during its earnings call. The full transcript is provided below.
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Summary
Full Transcript
OPERATOR
Hello and welcome to Hagerty’s second quarter 2026 earnings call and webcast. At this time, all participants are in a listen-only mode. After the speaker’s presentation, there will be a question-and-answer session. To ask a question during the session, you will need to press star 11 on your telephone. You will then hear an automatic message advising your hand is raised. To withdraw your question, please press star 11 again. I would now like to hand the conference over to Jay Coval, Head of Investor Relations.
Sir, you may begin.
Jay Coval, Head of Investor Relations
Thank you, operator, and good morning, everyone, and thank you for joining us to discuss Hagerty’s results for the second quarter of 2026. I’m joined this morning by McKeel Hagerty, Chief Executive Officer and Chairman, and Patrick McClymont, Chief Financial Officer. During this morning’s conference call, we will refer to an accompanying presentation that is available on Hagerty’s Investor Relations section of the company’s corporate website at investor.hagerty.com.
Our earnings release, slides, and letter to stockholders covering this period are also posted on the IR website, as well as our 8-K filing. Today’s discussion contains forward-looking statements and non-GAAP financial metrics, as described further on slide 2 of the earnings presentation. Forward-looking statements include statements about our expected future business and financial performance and are not promises or guarantees of future performance.
They are subject to a variety of risks and uncertainties that could cause the actual results to differ materially from our expectations. For a discussion of material risks and important factors that could affect our actual results, please refer to those contained in our filings with the SEC, which are also available on our Investor Relations website. And the appendix of the presentation also contains reconciliations of our non-GAAP metrics to the most directly comparable GAAP measures that are further supplemented by this morning’s 8-K filing.
And with that, I’ll turn the call over to McKeel.
McKeel Hagerty, CEO
Thank you, Jay, and good morning, everyone. Summertime in the Midwest is something special. The days are long, the roads are open, and the fun cars are out. Our 1.9 million members have been making the most of this year’s driving season, from the Sunday morning canyon runs and Cars and Caffeine gatherings to track days and vintage car events. And Team Hagerty has been right there with them, delivering the service, coverage, and community that define what we uniquely do.
We report our second quarter results this morning, and let me give you the headline. The first half of 2026 was the best in Hagerty’s history as measured by gains in policies in force, written premium, earned premium, and Adjusted EBITDA. These are the metrics that best reflect the true vibrancy of our business. We blew through the 3 million vehicles insured milestone in the second quarter as we added a record 279,000 new members. Importantly, we are delivering high rates of growth while simultaneously investing in our teams, technology, and member experience that will sustain growth as our compounding machine shifts into overdrive.
Written premium growth of 19% came in well ahead of our prior full-year expectations for 15% to 16% growth. Our written premium growth is powered by new business count rather than rate, unlike the broader industry that fluctuates with the pricing cycle. Earned premium jumped 42% due to the strong written premium gains combined with the increase in economics under the new Markel fronting arrangement, and Adjusted EBITDA grew 32% to 160 million due to the benefits of increasing scale combined with cost discipline.
Reported GAAP revenue in the first half was down 6% and our GAAP net loss was 5 million, reflecting the accounting mechanics from the new Markel fronting arrangement that we have discussed on previous calls. While the GAAP presentation of revenue and net income in 2026 continues to look different from prior years due to this new Markel fronting structure, the underlying business performance is stronger than ever. The key metrics above — policy count, written and earned premium, and Adjusted EBITDA — are all running well ahead of expectations, causing us to increase our outlook for the year.
More on that in a moment. Let me run through some of the first half highlights in more detail shown on slide three, and Patrick will focus on the second quarter. The 279,000 new members added in the first half was a record for any comparable six-month period, boosted by State Farm conversions. The breadth of vehicles joining the Hagerty family continues to expand. Our classic cohort — Mustangs, Camaros, C10 pickups, and Porsche 911s, to name a few — is growing quickly, but the fastest-growing segment is the modern enthusiast vehicles: 1980s to 2000s sports cars from Japan, Germany, and the U.S., as well as off-road vehicles.
The incremental demand is coming from the rising generation of younger collectors that grew up coveting these fun vehicles and now have the disposable income to acquire them. This is the Enthusiast Plus target demographic, and it is arriving as the demand from Gen X, Millennials, and Gen Z quickly ramps up. Year-to-date quote volume from these younger generations now exceeds 60% of total demand. Our Enthusiast Plus program in Colorado is performing in line with revised pricing assumptions, and we are applying those learnings as we expand it into three additional states in July.
Our high rates of PIF growth and industry-leading retention of 88% power consistent compounding growth and provide us with excellent visibility into future revenue streams, particularly as we unlock our partnership opportunities by deepening existing relationships and adding new ones. The rollout of the highly integrated State Farm Classic Plus program is accelerating. As of the end of the second quarter, State Farm agents are selling new Hagerty policies in 37 states.
New tranches of states are coming online as planned and on budget. The conversion of State Farm’s existing 525,000 collector car policies to the Hagerty platform is also progressing well, with 14 states in motion, and we remain on pace to complete the transition by 2028. We are also excited about our new partnership with Liberty Mutual as well as the progress made on securing larger cohorts of vehicles with Progressive, and trial programs with other national carriers that are performing very well.
In our independent agency channel, we believe we have an opportunity to better inform and activate these 54,000 agents. We are investing in straight-through processing and automated identification tools that enable agents to spot enthusiast vehicles already sitting in their daily driver books. We are also improving the educational resources that help agents understand what Hagerty can do for their customers, including enhancing customer retention.
The addressable market of 36 million vehicles expands every year, and most of these cars are currently insured at generic daily driver rates by carriers that neither understand nor value them the way that Hagerty can. Omnichannel distribution is a key competitive advantage to drive outsized growth, and we deliver these high rates of growth with exceptional underwriting discipline. Hagerty Re’s combined ratio for the first half came in at 88%, with a loss ratio at 41%.
Forty years of proprietary data on 48,000 makes and models combined with members that treat their cars with exceptional care is a combination that others cannot replicate. Let me turn now to our buy-and-sell business, Hagerty Marketplace, where total sales grew 17% to $65 million. Broad Arrow, our high-end live auction business, was the key driver of growth with a first half sales increase of 74% and an exceptional 91% sell-through rate. Private sales were down against the prior-year period, which benefited from the sale of a large single-owner collection.
The depth of demand we are seeing from buyers across multiple continents tells us something important about the health of our market. Great cars continue to appreciate in value, and buyers who care about provenance, condition, and expertise are choosing Broad Arrow because they trust our process and our team. I want to remind investors of something fundamental about our Marketplace business: it is not just a revenue line, it is a customer acquisition machine.
Every car that trades hands is a potential Hagerty insurance policy, and every auction catalog that circulates through our global community of members reinforces the Hagerty brand as the most trusted name in collector cars. The flywheel is self-reinforcing, and it grows more powerful with every member-centric interaction. Slide 4 is a useful reminder that the results we’re reporting today aren’t accidental. They are the output of a deliberate multi-year investment in distribution, technology, and the member experience.
And the progress across each of these is exactly why we’re raising our 2026 outlook. Let me close by stepping back to the bigger picture. We are now halfway through 2026, our structural transition year with the new Markel fronting arrangement, and the business is performing well above the high end of the ranges we shared last quarter. Given the strength of our first half and robust business momentum, we are raising our expectations for full-year written premium growth to 16% to 17% with better-than-expected flow-through.
We now expect GAAP net income of 18 to 30 million in 2026 and Adjusted EBITDA of 270 to 280 million. Let me now turn it over to Patrick to run through the second quarter in more detail.
OPERATOR
Thank you, ladies and gentlemen. As a reminder, to ask a question, please press star 11 on your telephone, then wait for your name to be announced. To withdraw your question, please press star 11 again. Please stand by while we compile the Q&A roster. Our first question comes from the line of Tommy McJoint with KBW. Your line is open.
Tommy McJoint, Analyst at KBW
Hey, good morning. Thanks for taking our questions.
The first one here is, I heard your comments around pitching to independent agents. Has your strategy around that shifted at all as you think about getting more of the 54,000 agents integrated into helping sell Hagerty policies?
McKeel Hagerty, CEO
Hey Tommy, good morning. Thank you for the question. We think the independent agent channel is a really key piece of our growth strategy. The challenge is 54,000 that we’ve accumulated over a long period of time is a very large group, so we’ve really put an incredible team together. Jeff Briglia brought in Adam Van Loon to lead this whole effort and really is expert at thinking about how we’re going to focus on the ones that will help us produce the most.
How do we think about the ones that we can sort of move the 0 to 1 strategy on the front end and then how are we going to just take advantage of the fact that we have this larger ecosystem where we need to be communicating to agents that the idea of a classic car, sometimes the perspective that these are just very, very old cars, has really shifted. That’s a big part of our strategy. So, you know, it’s data, it’s communications, it’s education, it’s all of the above.
And we want to be that partner in an agent’s office when somebody like this comes in, not just with a really vintage car, but with one of these enthusiast vehicles, that they need to send it to us.
Tommy McJoint, Analyst at KBW
Got it. Thanks for that. And then a question around thinking about the transition kind of into next year once we have cleaner accounting. Obviously there’s a lot of accounting noise this year around the Markel transition and especially around the $199 million of transitional costs add-back and the accounting for policy acquisition costs right now. Just to help us with modeling, is it your expectation that adjusted EBITDA growth in 2027 can sort of keep pace with the written premium growth that you guys are contemplating?
Just kind of helping us think about, you know, the impacts of this accounting noise this year. Thanks.
OPERATOR
Thank you. Please stand by for our next question. Our next question comes from the line of Charlie Lederer with BMO. Your line is open.
Charlie Lederer, Analyst at BMO
Hey, thanks. Maybe just following up on that last question. If you think about the moving pieces just from the accounting noise, I guess, would the only kind of dynamic next year from a comparison standpoint be that you have the increase in deferred acquisition costs amortizing in the P&L, particularly, I guess, in the first half? Thanks. Thanks. Yeah, yeah, sorry. I guess I was thinking from an adjusted EBITDA standpoint. So the DAC is in the adjusted EBITDA, but the transition costs are not.
UNKNOWN Analyst
Okay, thank you. And then I guess just as for my follow-up, McKeel, you cited the Enthusiast Plus quote volume driving demand. So I guess, is that what’s driving the upside to guidance and the results in the quarter? I guess. Can you give us some color around the contribution between Enthusiast Plus, kind of legacy Hagerty, and then State Farm in the quarter? Thanks.
McKeel Hagerty, CEO
No, thanks. Thanks. It’s a good question. I mean, this is just overall demand. We came into this year with a lot of momentum. We know that when you get a lot of momentum building in the back half of the year, it tends to carry through. We saw that. We’ve seen this certainly through the first half, and it’s across the board. Of course, we’re absorbing this massive amount of State Farm business right now, which I mentioned is on pace in terms of both the new states that we’re turning on for new business, as well as the conversion states.
And those will kind of continue through a cadence and then on through the next year. And what we hope is that we’re fully, fully live with State Farm by 2028. But it’s really across the board. Almost every channel is firing on all cylinders and E is a piece of it. But it’s still very, very new to us. We were in Colorado for one time. We’ve turned on a few more states. We’ll be turning on a few more this year, and that’s still very much, while the program itself is functioning, almost in a, you know, startup mode.
It’s based on the fact that we get a lot of this demand for this business in the core program already. So it’s not like a brand new thing for us. It’s just an extension of what we already know. So all cylinders are firing here, and that’s attributing to—that’s the bulk of what’s attributing to the growth and the raised guidance.
OPERATOR
Thank you. Our next question comes from the line of Elise Greenspan with Wells Fargo. Your line is open.
Elise Greenspan, Analyst at Wells Fargo
Hi. Thanks. Good morning, you guys. You highlighted progress, I think you said, you made on securing larger cohorts of vehicles with Progressive and then trial programs with other national carriers that I think you said were performing well. Can you just expand on those relationships and just, you know, and just kind of put some numbers on that, if possible?
McKeel Hagerty, CEO
Well, so, you know, we’ve had a number of these relationships up and running for a long time. Progressive is one that we’re very proud of. You know, if you go to Progressive today and try to get a quote on their website for some sort of vintage car, that works through a workstream that we built together with Progressive. Progressive is obviously growing very, very fast. They’re a huge insurance company, and they’ve turned on even more—a wider spigot, I guess you could put it—to us.
So we’re seeing really, really successful growth. And then in terms of some of the other partnerships we mentioned earlier, you know, we have the Liberty Mutual partnership that we launched before, and we’re starting to turn that on, and we’ll be piloting more programs in the months to come that we’ll be talking more specifically about. But, you know, I guess what we’re trying to say is our whole world is not just State Farm and turning on these great State Farm states.
We have a lot of new partnerships that we’re working on and that will be part of our growth picture in the years ahead when we talk more specifically about it. And Elise, just to give you on Progressive, one of the big changes recently is historically we were only seeing volume for those pre-1981 cars because of the VIN issue that we’ve talked about, so it was a static group of cars that we could see quotes on. We’ve evolved that relationship. So now it’s 25 years old and older. So we picked up, just through that alone, 17 years of additional cohorts that are out there and now just kind of roll forward on a go-forward basis.
Elise Greenspan, Analyst at Wells Fargo
Thanks. And then as we think about just new business and just overall policy in-force trends in the back half of the year, is there any seasonality that we should be considering?
McKeel Hagerty, CEO
Well, the normal seasonality that we’ve talked about before, Elise, is still in play. So, you know, there’s a kind of a big bell curve to our growth—you know, kind of starts in March and April and kind of starts tapering off in October. That pattern remains the same. You know, even though there are sunny-weather states that that shouldn’t be the case, it just seems it has been the historic pattern of this business going back for decades. So it remains.
And it, you know, kind of reflects—the pattern is reflected in all of our past-year numbers that you have available to you. And we’ll continue to see that happen the same. And even as we’ve turned on some of these new partnerships, when large groups of policies become available for us, that same seasonality exists. So kind of it’s a springtime to fall-time activity, and that’s when people buy cars and that’s when they need their policies incepted.
Elise Greenspan, Analyst at Wells Fargo
Thanks. And then just quickly. Oh, go ahead.
Kevin Delaney, SVP, Corporate Controller and Chief Accounting Officer
I was going to say, under the new accounting, it’s evolved a bit, right. Because it used to be that the commissions were showing up on the face of the P&L and those were seasonal, right? Our big seasons were second and third quarter. Now that we’re eliminating those commissions and what’s really dominating the revenue is the earned premium that turns out over the life of the policy. So it has a smoothing effect relative to history.
Elise Greenspan, Analyst at Wells Fargo
Thanks. And then just on capital, right, you guys mentioned the recent Bennett’s deal and it sounds like deals, I think you said, tend to be modest and infrequent. Are there other, like, I guess, how would you characterize, I guess, the pipeline of potential transactions today as you think about just the M&A component of your capital strategy? Thank you.
McKeel Hagerty, CEO
Well, thank you. And I think that language is about as specific as we can be at this point. Bennett’s was actually not something that had been long on our radar, and we’ve long wanted to find the right kind of acquisition that could help boost the scale of our UK business, which we’ve had for a long time, but it’s never been huge for us. And so Bennett’s kind of came onto our radar and we moved quickly at it and we were able to make it happen. And while we have a team that’s very capable of analyzing and looking at these deals and making them happen, we just have—I was taking the approach of being very cautious for all the integration issues that companies see with absorbing employee groups and books of business and all that sort of thing, and we’ll look very carefully out into the future. So we’re not scrubbing the world looking for acquisitions, but when they come up we want to be able to act on them. And our performance in the last year and what we think will be in the next couple years will make it easy for us to take things on like this. I think when you look at the big broad landscape of, at least in the insurance side of our business, there aren’t great big ones out there to look at and to acquire.
So, you know, when we see things like this, they’ll be, I think, relatively modest, and we will be cautious.
OPERATOR
Thank you. Thank you. Our next question comes from the line of Mitchell Rubin with Raymond James. Your line is open.
Mitchell Rubin, Analyst at Raymond James
Hey, good morning. This is Mitch on for Greg. Retention was down 50 basis points year over year and 30 basis points sequentially. Could you talk about the trends you’re seeing there and how much of that is on the core book versus mix from the State Farm book coming on?
Kevin Delaney, SVP, Corporate Controller and Chief Accounting Officer
So from a mix standpoint, the State Farm book is so young. It’s converting at a very high rate because we’re deep into conversions now in a bunch of states. And the new business that we did place over the last year plus is also—retention on that is quite high. And so it’s a little bit of a downtrend in the core book as we look at it. There’s nothing—it’s within the range of where we’ve been historically. So there’s nothing about it that gives us particular pause.
Mitchell Rubin, Analyst at Raymond James
I appreciate the color. And on the non-reversing tax difference you called out on the ceding commission deduction, does that benefit carry into ’27 or should that run off?
Kevin Delaney, SVP, Corporate Controller and Chief Accounting Officer
We’re always going to have this dynamic—just the nature of how the consolidation accounting works. It will be less impactful over time. You know, it will start to normalize as we get towards the end of this year, and then next year it’ll still flow through but it’s not going to be as evident here. And then the other thing that’s going on is when you’re in the neighborhood of kind of break-even from an effective tax rate perspective, it looks quite large.
As that net income grows—right, next year we’re going to get out of the Markel transition cost. That 199 goes away, we’ll start producing more net income, and so the impact of this will be kind of less visible in the tax line.
Mitchell Rubin, Analyst at Raymond James
Got it. Appreciate it. Thank you guys.
OPERATOR
Thank you. Please stand by for our next question. Our next question comes from the line of Kevin Wijentra with JP Morgan. Your line is open.
Kevin Wijentra, Analyst at JPMorgan
Hi, this is Kevin on for Pablo. Thanks for taking my question. So the first is in relation to the guidance you issued. It looks like the increase in revenues versus EBITDA implies very high incremental EBITDA margin. What’s the driver of this? Great, thanks. And then for my follow-up, there was a meaningful bump in new business count this quarter from 100k to 160. Thank you.
OPERATOR
Thank you. Our last question comes from the line of Mark Hughes with Truist. Your line is open.
Mark Hughes, Analyst at Truist
Yeah, thank you. Good morning. The modern enthusiast business. Could you refresh me on any differences there? Premium per policy or the loss ratio?
McKeel Hagerty, CEO
What do you mean by modern enthusiasts, Mark?
Mark Hughes, Analyst at Truist
Well, just the more recent vehicles drive, you’ve had good success in the marketplace there. That’s a separate topic. But the younger cars, newer cars, but still falling in the vintage category—just a modern enthusiast business as opposed to your more traditional older vehicles. Is there any difference in premium per policy? I think you made the point—you know, some insurance companies just look at them as old cars, but you look at them differently.
And that being said, is there any difference in premium per policy versus your legacy business, let’s call it, or in the loss experience? Yeah, very good. On your existing relationships with carriers, is the productivity there—the kind of flow-through rate you experience—has that improved? Obviously you’ve got benefits in terms of new business with State Farm, but how is your experience with your other relationships, other referral relationships?
McKeel Hagerty, CEO
Hey Mark, you know, as I might have mentioned earlier on a previous answer, I mean we’re really firing on all cylinders. All of our partnerships are being really well managed and those carriers are seeing the same opportunities that we are. So not only did new cohorts of cars kind of come into view each year, but in many cases we’re just getting penetration into their distribution networks year over year. And a lot of that is just—call it the kind of ground war or time on task or just reps of us getting out there, meeting with their field teams, meeting with their territory managers, you know, activating at agent events, all of that sort of thing. So, you know, both the independent agency side of the house and the kind of carrier partnership side of the house, I mean they’re all contributing to our great growth trajectory right now. And, you know, really grateful for these partnerships and they’re very sticky. Our oldest partnerships are over 20 years old and yet we’re still turning new ones on. And you know, that’s a pattern that we’re going to work really hard to keep going.
Mark Hughes, Analyst at Truist
Okay, appreciate that. Thank you.
McKeel Hagerty, CEO
Thanks, Mark.
OPERATOR
Thank you. Ladies and gentlemen, I would now like to turn the call back over to McKeel Hagerty for closing remarks.
McKeel Hagerty, CEO
Thank you, operator, and thanks to everyone on the call for your continued support. I want to close by repeating where we started this morning. Hagerty has never been better positioned to serve the community of auto enthusiasts who trust us to protect their special toys. We have the fastest growing specialty insurance franchise in the collector market with a powerful recurring revenue model, low volatility, combined ratios of 90% and consumer-friendly rates.
Our business is rapidly scaling as we work toward 3 million policies by 2030. The path is clear, the team is exceptional, the market is ours to win as we are creating something genuinely unique in the insurance world. Thank you. One Team Hagerty, these results are the product of your passion, your excellence and your hard work. I cannot wait to see what this team is capable of delivering over the next decade. We look forward to seeing some of you in California next week where we will host our inaugural auction at The Quail Motorsports Gathering and also at the Pebble Beach Concours and our Motorlux gathering and the Laguna Seca historic races.
We’ll be all over the Monterey Peninsula and we hope that you might be there to join us during Monterey Car Week. Until then, never stop driving.
OPERATOR
Ladies and gentlemen, that concludes today’s conference call. Thank you for your participation. You may now disconnect.
Disclaimer: This transcript is provided for informational purposes only. While we strive for accuracy, there may be errors or omissions in this automated transcription. For official company statements and financial information, please refer to the company’s SEC filings and official press releases. Corporate participants’ and analysts’ statements reflect their views as of the date of this call and are subject to change without notice.
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