Hagerty Q2 Revenue Jumps 18%

Key Points

• Hagerty reported GAAP revenue of $369 million for Q2 2025, exceeding analyst estimates.

• Net income grew 11% to $47 million, driven by strength in both core insurance and the Broad Arrow auction segment.

• Management raised its full-year 2025 outlook, citing robust customer retention and expanding partnerships, signaling confidence in continued growth.

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Hagerty (NYSE:HGTY), known for providing insurance and automotive-focused membership services to car enthusiasts, reported earnings for Q2 2025 on August 4, 2025. The most notable news was a sharp revenue beat: GAAP revenue reached $369 million for the second quarter of 2025, topping analyst estimates of $293.94 million. Net income also jumped 11% compared to the prior year, powered by ongoing strength in its insurance business and rapid growth in the Broad Arrow auction division. Adjusted EBITDA increased to $63.7 million, up 20% year over year. Management raised its full-year outlook, supported by strong customer loyalty and expanded partnerships. The quarter highlighted the company’s ability to capture both recurring and event-driven revenue, while investments in technology and international expansion are expected to affect margins short-term but position the business for growth in coming years.

Source: Analyst estimates provided by FactSet. Management expectations based on management's guidance, as provided in Q1 2025 earnings report.

Company Overview and Recent Focus Areas

Hagerty specializes in insurance products for collector and enthusiast vehicles, offering policies tailored to classic cars, newer collectibles, and specialty vehicles. It also provides club memberships, operates automotive marketplaces, and runs live auctions. Its core business is built on “Guaranteed Value” insurance, which pays out agreed values for insured vehicles, targeting high retention customers with a typical policy life of about nine years.

Recent business efforts have centered on capturing more of the $19 billion collectible auto insurance market, where its market share stands below 5%, as estimated in the company's latest annual report. Expansions in auctions through Broad Arrow and new MGA (Managing General Agent) programs with large partners like State Farm are key to boosting growth. The company’s main success drivers include strong relationships with insurance carriers, high brand loyalty, robust underwriting risk management, and a scalable platform strategy.

Quarter Highlights: Revenue, Profitability, and Segment Activity

Insurance operations strongly contributed to profitability, with risk managed through Hagerty Re reinsurance vehicles. Loss ratios stood at 44% on average over the last three years, well below industry averages. This reinsurance approach means Hagerty transfers around 80% of its insurance risk as of FY2024 and expects to maintain this level in FY2025, leaving Hagerty less exposed to catastrophic events such as wildfires. Sales in core insurance, MGA programs, and fee commissions rose thanks in part to the ongoing State Farm Classic Plus rollout, extending into 25 states by year-end.

The European market debut at Villa d’Este in May 2025 delivered €31 million in auction sales, and US auctions remained solid, with last year’s Monterey event totaling $72 million in sales. These auctions demonstrated high profit contribution margins of 30% to 35% in Q1 2025.

Investments remained a clear theme. The company expects to spend $20 million in 2025 on technology modernization (notably implementing the Duck Creek insurance platform and developing the 'Apex' system) and hiring staff for international expansion. Although these investments result in near-term margin compression, management expects them to create lasting operating efficiencies starting in 2026. These up-front costs, which will become part of the expense baseline, are being incurred throughout the year, with revenue benefits to follow as new digital infrastructure and partnerships mature.

Business Model, Products, and Strategic Partnerships

Products in the insurance portfolio focus on collectible and enthusiast vehicle coverage -- offering agreed-value protection for classic and specialty cars. The Enthusiast Plus program, soon launching in Colorado, will target modern collectibles and broaden the range of vehicles that can be insured, appealing to younger and more diverse car enthusiasts.

Marketplace services span brokerage and live auctions, with Broad Arrow now ranked as the No. 2 auction house for premium collectible cars based on total sales in the first half of 2025. The Hagerty Drivers Club and membership suite enhance engagement and reinforce loyalty, boasting a high Net Promoter Score (NPS) of 82 in recent years and a policy retention rate of 89%. Partnerships with major carriers like Markel, Aviva, and especially State Farm expand distribution through both agent networks and direct channels, providing pathways for new business and commission growth.

Underwriting and reinsurance are core to the company's risk discipline. Hagerty Re reinsures about 80% of its risk as of FY2024 and maintains loss ratios consistently below industry averages, with an average of 44% over the last three years compared to the industry average of approximately 75%. This supports stable underwriting profits. The recent acquisition of Drivers Edge Insurance Company is designed to further expand market presence and position the company in the post-1980 vehicle market.

Management Outlook and Investor Considerations

Management increased its full-year 2025 guidance based on the strength of the first half and momentum heading into the remainder of the year. The company now expects to see total revenue between $1.356 billion and $1.368 billion, and net income between $112 million and $120 million. This compares to prior guidance of $1.344 billion to $1.356 billion for revenue and $102 million to $110 million for net income. Hagerty also expects its adjsuted EBITDA to come in between $162 million and $172 million, versus prior guidance of $150 million to $160 million. This outlook reflects expected acceleration from new State Farm program revenues, growing marketplace contributions, and the ramp-up of recent technology upgrades.

The leadership team indicated that 2025 will see higher spending -- especially on technology and talent -- resulting in slower margin expansion this year. They anticipate these investments will support future revenue and margin growth, particularly as new MGA programs and international auctions mature. For the near term, investors should watch for the scalability of the auction segment, success metrics for new product launches like Enthusiast Plus, customer acquisition trends, and the impact of strategic hiring on operational performance.

Revenue and net income presented using U.S. generally accepted accounting principles (GAAP) unless otherwise noted.

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