Hagerty Inc

Previous wording

In 2023, we began a review of certain components of our operations which resulted in the sale or reorganization of certain businesses, including Hagerty Garage + Social and DriveShare. This initiative supports our strategy to prioritize investments and resources in the areas of our business that offer the strongest growth and profit potential. As a result of this review, we recognized approximately $4.0 million of losses and impairments in the third quarter of 2023 related to actions taken with respect to Hagerty Garage + Social and DriveShare.

Current wording

In 2023, we began a review of certain components of our operations which resulted in the sale or reorganization of certain businesses, including Hagerty Garage + Social, DriveShare, and Motorsport Reg ("MSR"). This initiative supports our strategy to prioritize investments and resources in the areas of our business that offer the strongest growth and profit potential. As a result of this review, we recognized approximately $4.1 million of losses and impairments in the third quarter of 2023 related to actions taken with respect to Hagerty Garage + Social and DriveShare, and a $0.1 million gain in the second quarter of 2024 related to the sale of MSR. We may incur additional losses and/or impairment charges in future periods as a result of actions which we may take related to this review. Refer to Note 9 — Divestitures in Item 1 of Part I of this Quarterly Report for additional information.

Previous wording

The tables below present a summary of our Key Performance Indicators, which include important operational metrics, as well as certain accounting principles generally accepted in the United States of America ("GAAP") and non-GAAP financial measures as of and for the periods presented. We use these Key Performance Indicators to evaluate our business, measure our performance, identify trends against planned initiatives, prepare financial projections, and make strategic decisions. We believe these Key Performance Indicators are useful in evaluating our performance when read together with our Condensed Consolidated Financial Statements prepared in accordance with GAAP.

Current wording

The tables below present a summary of our Key Performance Indicators, which include important operational metrics, as well as certain financial measures prepared in accordance with accounting principles generally accepted in the United States of America ("GAAP") and non-GAAP financial measures. We use these Key Performance Indicators to evaluate our business, measure our performance, identify trends against planned initiatives, prepare financial projections, and make strategic decisions. We believe these Key Performance Indicators are useful in evaluating our performance when read together with our Condensed Consolidated Financial Statements prepared in accordance with GAAP.

Previous wording

(2) Loss Ratio, expressed as a percentage, is the ratio of (i) losses and loss adjustment expenses incurred to (ii) earned premium in Hagerty Re. We view Loss Ratio as an important metric because it is a powerful benchmark for profitability. This benchmark allows us to evaluate our historical loss patterns, including incurred losses, and make necessary and appropriate adjustments.

Current wording

(2) Loss Ratio, expressed as a percentage, is the ratio of (i) losses and loss adjustment expenses incurred to (ii) earned premium in Hagerty Re. We view Loss Ratio as an important metric because it is a benchmark for profitability. This benchmark allows us to evaluate our historical loss patterns, including incurred losses, and make necessary and appropriate adjustments. Refer to "Losses and Loss Adjustment Expenses" below for additional information regarding the changes in our loss ratio period over period.

Previous wording

(3) New Business Count represents the number of new insurance policies issued by our MGA subsidiaries during the applicable period. We view New Business Count as an important metric to assess our financial performance because it is critical to achieving our growth objectives. While Hagerty benefits from strong renewal retention, new business policies more than offset those cancelled or non-renewed at expiration. Often new policies mean new relationships and an opportunity to sell additional products and services.

Current wording

(3) New Business Count represents the number of new insurance policies issued by our MGA subsidiaries during the applicable period. We view New Business Count as an important metric to assess our financial performance because it is critical to achieving our growth objectives. While we benefit from strong renewal retention, new business policies more than offset those cancelled or non-renewed at expiration. New policies often mean new relationships and an opportunity to sell additional products and services.

Previous wording

(9) Hagerty uses Net Promoter Score ("NPS") as an important measure of the overall strength of our relationship with insurance policyholders and paid HDC subscribers (collectively referred to herein as "Members"). NPS is measured twice annually through a web-based survey sent by email invitation to a random sample of existing Members, which currently excludes customers in our new Marketplace business, and is reported annually using an average of the two surveys. Often referred to as a barometer of brand loyalty and engagement, NPS is well-known in our industry as a strong indicator of growth and retention.

Current wording

(9) We use Net Promoter Score ("NPS") as an important measure of the overall strength of our relationship with insurance policyholders and paid HDC subscribers (collectively referred to as "Members"). NPS is measured twice annually through a web-based survey sent by email invitation to a random sample of existing Members, which currently excludes customers in our new Marketplace business, and is reported annually using an average of the two surveys. Often referred to as a barometer of brand loyalty and engagement, NPS is well-known in our industry as a strong indicator of growth and retention.

Previous wording

Marketplace earns fee-based revenue primarily from the sale of collector cars through live auctions, time-based online auctions, and brokered private sales. In addition, Marketplace earns revenue from financing provided to qualified collectors and businesses secured by collector cars. Fee-based revenue earned by Marketplace is recognized when the underlying sale is completed. Finance revenue is recognized when earned based on the amount of the outstanding loan, the applicable interest rate on the loan, and the length of time the loan was outstanding during the period.

Current wording

Marketplace earns fee-based revenue primarily from the sale of collector cars through live auctions, time-based online auctions, and brokered private sales. In addition, Marketplace earns revenue from the sale of collector cars in inventory that have been acquired opportunistically for resale and from financing provided to qualified collectors and businesses secured by collector cars. Fee-based revenue earned by Marketplace is recognized when the underlying sale is completed. Revenue from the sale of collector cars from inventory is recognized at the point in time when title and control of the car is transferred to the buyer, which is generally upon payment of the full purchase price. Finance revenue is recognized when earned based on the amount of the outstanding loan, the applicable interest rate on the loan, and the length of time the loan was outstanding during the period.

Previous wording

Lastly, other revenue includes sponsorship, admission, advertising, valuation and registration income. Other revenue is recognized when the performance obligation for the related product or service is satisfied.

Current wording

Lastly, other revenue includes sponsorship, admission, advertising, valuation, registration, and sublease income. Other revenue is recognized when the performance obligation for the related product or service is satisfied.

Previous wording

Salaries and benefits consist primarily of costs related to employee compensation, payroll taxes, employee benefits, and employee development costs. Employee compensation includes wages paid to employees, as well as various incentive compensation plans, including share-based compensation. Employee benefits include the costs of various employee benefit plans, including retirement, medical, dental, and wellness plans. Costs related to employee education, training, and recruiting are included in employee development costs. Salaries and benefits are expensed as incurred except for those costs which are required to be capitalized, which are then amortized over the useful life of the asset created, primarily software. Salaries and benefits are expected to increase in dollar amount over time as the business continues to grow but will likely decrease as a percent of revenue.

Current wording

Salaries and benefits consist primarily of costs related to employee compensation, payroll taxes, employee benefits, and employee development costs. Employee compensation includes wages, as well as various incentive compensation plans, including share-based compensation. Employee benefits include the costs of various employee benefit plans, including retirement, medical, dental, wellness, and severance plans. Costs related to employee education, training, and recruiting are included in employee development costs. Salaries and benefits are expensed as incurred except for those costs which are required to be capitalized, which are then amortized over the useful life of the asset created, primarily software. Salaries and benefits are expected to increase in dollar amount over time as the business continues to grow but will likely decrease as a percent of revenue.

Previous wording

General and administrative primarily consist of expenses related to professional services, occupancy costs, and non-capitalized hardware and software. These costs are expensed as incurred. We expect this expense category to increase in dollar amount over time as the business continues to grow but will likely decrease as a percentage of revenue over the next few years after we reach scale to handle incoming business from new partnerships.

Current wording

General and administrative primarily consist of expenses related to non-capitalized hardware and software, professional services, and occupancy costs. These costs are expensed as incurred. We expect this expense category to increase in dollar amount over time as the business continues to grow but will likely decrease as a percentage of revenue over the next few years after we reach scale to handle incoming business from new partnerships.

Previous wording

Depreciation and amortization reflects the recognition of the cost of our investments in various assets over their useful lives. Depreciation expense relates to leasehold improvements, furniture and equipment, vehicles, hardware, and purchased software. Amortization relates to investments associated with acquisitions, software as a service ("SaaS") implementation, and internal software development, as well as investments made in and impairments of digital media content assets. Depreciation and amortization are expected to increase in dollar amount over time but will likely decrease as a percent of revenue as investments in platform technology reach scale.

Current wording

Depreciation and amortization reflects the recognition of the cost of our investments in various assets over their useful lives. Depreciation expense relates to hardware, furniture and equipment, and leasehold improvements. Amortization relates to internally developed software, software as a service ("SaaS") implementation, and investments associated with acquisitions. Depreciation and amortization are expected to increase in dollar amount over time but will likely decrease as a percent of revenue as investments in platform technology reach scale.

Previous wording

Our warrants are accounted for as liabilities and are measured at fair value each reporting period, with changes in fair value recognized as non-operating income (expense) in our Condensed Consolidated Statements of Operations. In general, under the fair value accounting model, in periods when our stock price increases, the warrant liability increases, and we recognize additional expense. In periods when our stock price decreases, the warrant liability decreases, and we recognize additional income.

Current wording

Prior to the Warrant Exchange, which was completed in the third quarter of 2024, our warrants were accounted for as liabilities and were measured at fair value each reporting period, with changes in fair value recognized as non-operating income (expense) in our Condensed Consolidated Statements of Operations. In general, under the fair value accounting model, in periods when our stock price increased, the warrant liability increased, and we recognized additional expense. In periods when our stock price decreased, the warrant liability decreased, and we recognized additional income. In addition, "Gain (loss) related to warrant liabilities, net" includes the loss on the Warrant Exchange recorded in the third quarter of 2024. Refer to Note 17 — Warrant Exchange in Item 1 of Part I of this Quarterly Report for additional information about the Company's Warrant Exchange.

Previous wording

Interest and other income (expense) primarily includes interest income related to our cash balances and fixed maturity securities, dividend income on equity securities, realized gains or losses from the sale of fixed maturity securities, and realized and unrealized gains and losses related to equity securities. Additionally, Interest and other income (expense) includes interest expense related to outstanding borrowings, primarily related to the JPM Credit Facility, and changes in the value of the liability related to our Tax Receivable Agreement ("TRA") with Hagerty Holding Corp. ("HHC") and Markel. Refer to Note 20 — Taxation in Item 1 of Part I of this Quarterly Report for additional information related to the TRA.

Current wording

Interest and other income (expense), net primarily includes interest income related to our cash balances and fixed maturity securities, dividend income on equity securities, realized gains or losses from the sale of fixed maturity securities, and realized and unrealized gains and losses related to equity securities. Additionally, Interest and other income (expense), net includes interest expense related to outstanding borrowings, primarily related to the JPM Credit Facility, and changes in the value of the liability related to our Tax Receivable Agreement ("TRA") with Hagerty Holding Corp. ("HHC") and Markel. Refer to Note 20 — Taxation in Item 1 of Part I of this Quarterly Report for additional information related to the TRA.

Previous wording

The Hagerty Group, LLC ("THG") is taxed as a pass-through ownership structure under provisions of the Internal Revenue Code ("IRC") and a similar section of state income tax law, except certain United States ("U.S.") corporate subsidiaries and foreign subsidiaries. Any taxable income or loss generated by THG is passed through to and included in the taxable income or loss of all holders of THG units, including Hagerty, Inc. Hagerty, Inc. is taxed as a corporation and pays corporate federal, state, and local taxes with respect to income allocated from THG. Hagerty, Inc., Hagerty Re, Broad Arrow Group, Inc. ("Broad Arrow"), Hagerty Radwood, Inc., and various foreign subsidiaries are treated as taxable entities and income taxes are provided where applicable.

Current wording

The Hagerty Group, LLC ("THG") is taxed as a pass-through ownership structure under provisions of the Internal Revenue Code ("IRC") and a similar section of state income tax law, except certain United States ("U.S.") corporate subsidiaries and foreign subsidiaries. Any taxable income or loss generated by THG is passed through to and included in the taxable income or loss of all holders of THG units, including Hagerty, Inc. Hagerty, Inc. is taxed as a corporation and pays corporate federal, state, and local taxes with respect to income allocated from THG. Hagerty, Inc., Hagerty Insurance Holdings, Inc., Broad Arrow Group, Inc. ("Broad Arrow"), Hagerty Radwood, Inc., and various foreign subsidiaries are treated as taxable entities and income taxes are provided where applicable. Hagerty Insurance Holdings, Inc. files a consolidated tax return with its wholly owned corporate subsidiaries Hagerty Re and Drivers Edge.

Previous wording

Commission and fee revenue was $128.8 million for the three months ended June 30, 2024, an increase of $18.6 million, or 16.9%, compared to 2023, consisting of increases of $15.2 million related to policy renewals and $3.4 million related to new policies.

Current wording

Commission and fee revenue was $116.2 million for the three months ended September 30, 2024, an increase of $13.0 million, or 12.6%, compared to 2023, consisting of increases of $11.3 million related to policy renewals and $1.7 million related to new policies.

Previous wording

The increase in revenue from policy renewals was primarily related to an increase of 16.9% in the underlying policy premiums, as well as continued strong policy retention. The increase in renewal policy premiums reflects sustained year-over-year growth in PIF and changes in our mix of business by vehicle type and value. In addition, there were rate increases in several states due to inflation and higher vehicle repair costs, both of which contribute to higher premiums and, in turn, higher commission revenue.

Current wording

The increase in revenue from policy renewals was primarily driven by a 13.4% increase in underlying policy premiums, as well as continued strong policy retention.

Previous wording

The increase in revenue from new policies was driven by sustained year-over-year growth in New Business Count, as well as rate increases in several states. The average premium on a newly issued policy increased 6.1% when compared to the prior year period as a result of writing policies with higher insured values at higher premium rates.

Current wording

The increase in revenue from new policies was primarily driven by a 11.7% increase in underlying policy premiums, as well as sustained year-over-year growth in New Business Count, which increased 11.1% during the current year period.

Previous wording

Commission and fee revenue from agent sources increased $10.5 million, or 17.7%, and Commission and fee revenue from direct sources increased $8.2 million, or 16.0%, during the three months ended June 30, 2024. Commission rates vary based on geography, but do not differ by distribution channel (i.e., whether they are direct-sourced or agent-sourced).

Current wording

Commission and fee revenue from agent sources increased $7.6 million, or 13.6%, and Commission and fee revenue from direct sources increased $5.3 million, or 11.4%, during the three months ended September 30, 2024. Commission rates vary based on geography, but do not differ by distribution channel (i.e., whether they are direct-sourced or agent-sourced).

Previous wording

Earned premium at Hagerty Re was $157.6 million for the three months ended June 30, 2024, an increase of $30.1 million, or 23.6%, compared to 2023. This increase was primarily due to continued growth of subject premiums written through our MGA subsidiaries, partially offset by an increase in ceded reinsurance premiums related to high-net-worth accounts in the U.S., which commenced in 2023. In addition, effective January 1, 2024, Hagerty Re is no longer reinsuring classic auto risks produced by its United Kingdom ("U.K.") MGA affiliate, and the book is in run-off.

Current wording

Earned premium at Hagerty Re was $165.7 million for the three months ended September 30, 2024, an increase of $25.9 million, or 18.5%, compared to 2023. This increase was primarily due to continued growth of subject premiums written through our MGA subsidiaries, partially offset by an increase in ceded reinsurance premiums related to high-net-worth accounts in the U.S. In addition, effective January 1, 2024, Hagerty Re is no longer reinsuring classic auto risks produced by its United Kingdom ("U.K.") MGA affiliate, and the book is in run-off.

Previous wording

Membership fee revenue was $14.1 million for the three months ended June 30, 2024, an increase of $1.0 million, or 7.5%, compared to 2023. This increase was primarily attributable to a $1.8 million, or 15.5%, increase in revenue attributable to new policies issued with a bundled HDC membership, partially offset by a $0.6 million, or 43.5%, decrease in storage revenue as a result of fewer Hagerty Garage + Social locations in operation. For the three months ended June 30, 2024 and 2023, membership fees were 52.7% and 55.8%, respectively, of the Membership, marketplace and other revenue total.

Current wording

Membership fee revenue was $14.8 million for the three months ended September 30, 2024, an increase of $1.0 million, or 7.0%, compared to 2023. This increase was primarily attributable to a $2.1 million, or 17.8%, increase in revenue attributable to new policies issued with a bundled HDC membership, partially offset by a $0.9 million, or 50.7%, decrease in storage revenue as a result of fewer Hagerty Garage + Social locations in operation. For the three months ended September 30, 2024 and 2023, membership fees were 35.6% and 42.4%, respectively, of the Membership, marketplace and other revenue total.

Previous wording

Marketplace revenue was $6.3 million for the three months ended June 30, 2024, an increase of $1.0 million, or 20.0%, compared to 2023, which was primarily attributable to an increase in finance revenue associated with the growth of the BAC loan portfolio. For the three months ended June 30, 2024 and 2023, Marketplace revenue was 23.4% and 22.2%, respectively, of the Membership, marketplace and other revenue total.

Current wording

Marketplace revenue was $21.6 million for the three months ended September 30, 2024, an increase of $8.6 million, or 66.2%, compared to 2023, which was primarily due to stronger results from Broad Arrow's Monterey Jet Center auction in August, an increase of $7.8 million in Marketplace inventory sales, and an increase in finance revenue associated with the growth of the BAC loan portfolio. For the three months ended September 30, 2024 and 2023, Marketplace revenue was 51.9% and 39.8%, respectively, of the Membership, marketplace and other revenue total.

Previous wording

Other revenue, which includes sponsorship, admission, advertising, valuation and registration income, totaled $6.4 million for the three months ended June 30, 2024, an increase of $1.2 million or 22.9%, compared to 2023, which was primarily attributable to an increase in advertising and sponsorship revenue. For the three months ended June 30, 2024 and 2023, other revenue was 23.9% and 22.1%, respectively, of the Membership, marketplace and other revenue total.

Current wording

Other revenue, which includes sponsorship, admission, advertising, valuation, and sublease revenue, totaled $5.2 million for the three months ended September 30, 2024, a decrease of $0.6 million, or 11.1%, compared to 2023. This decrease was primarily attributable to the loss of registration fee revenue associated with MSR, which was sold in the second quarter of 2024, partially offset by an increase in sublease and advertising revenue. For the three months ended September 30, 2024 and 2023, other revenue was 12.4% and 17.8%, respectively, of the Membership, marketplace and other revenue total. Refer to Note 9 — Divestitures in Item 1 of Part I of this Quarterly Report for additional information related to the sale of MSR.

Previous wording

Ceding commissions, net was $73.4 million for the three months ended June 30, 2024, an increase of $13.1 million, or 21.7%, compared to 2023. This increase is primarily attributable to the 23.6% increase in Earned premium discussed above.

Current wording

Ceding commissions, net was $77.5 million for the three months ended September 30, 2024, an increase of $12.1 million, or 18.5%, compared to 2023. This increase is primarily attributable to the 18.5% increase in Earned premium discussed above.

Previous wording

Losses and loss adjustment expenses were $64.7 million for the three months ended June 30, 2024, an increase of $11.2 million, or 20.8%, compared to 2023. This increase is consistent with the higher volume of assumed premium at Hagerty Re. Hagerty Re's loss ratio was 41.1% for the three months ended June 30, 2024 and 42.0% for the three months ended June 30, 2023.

Current wording

Losses and loss adjustment expenses were $99.4 million for the three months ended September 30, 2024, an increase of $41.9 million, or 73.0%, compared to 2023. This increase was primarily driven by $24.7 million of estimated losses related to Hurricane Helene, as well as the higher volume of assumed premium at Hagerty Re.

Previous wording

Sales expense was $48.0 million for the three months ended June 30, 2024, an increase of $6.0 million, or 14.4%, compared to 2023. This increase was due, in part, to a $2.8 million increase in broker expense which is consistent with written premium growth within the agent channel. In addition, cost of sales increased as a result of borrowing costs associated with the BAC Credit Facility, which was entered into in December 2023, as well as an increase in credit card processing fees, primarily due to a shift in customer preference towards credit cards as a payment method within our MGA subsidiaries.

Current wording

Sales expense was $59.1 million for the three months ended September 30, 2024, an increase of $11.4 million, or 23.9%, compared to 2023. This increase was due, in part, to a $9.3 million increase in cost of sales, primarily as a result of a higher level of Marketplace inventory sales, as well as borrowing costs associated with the BAC Credit Facility which was entered into in December 2023. In addition, broker expense increased $2.2 million, which is consistent with written premium growth within the agent channel.

Previous wording

General and administrative expense was $21.4 million for the three months ended June 30, 2024, an increase of $0.1 million, or 0.3%, compared to 2023. This increase was primarily driven by a $2.2 million increase in professional fees primarily associated with various corporate initiatives, including $0.7 million of professional fees associated with the exchange offer related to our warrants. This overall increase was partially offset by a decrease in occupancy costs as a result of fewer Hagerty Garage + Social locations in operation, as well as decreases in software subscription and insurance costs. Refer to Note 17 — Warrants in Item 1 of Part I of this Quarterly Report for additional information with respect to the warrant exchange offer.

Current wording

General and administrative expense was $20.8 million for the three months ended September 30, 2024, a decrease of $1.3 million, or 6.0%, compared to 2023. This decrease was primarily driven by a $1.7 million reduction in occupancy costs as a result of fewer Hagerty Garage + Social locations in operation, as well as lower insurance costs. The overall decrease was partially offset by an increase in professional fees primarily associated with various corporate initiatives.

Previous wording

Depreciation and amortization expense was $10.0 million for the three months ended June 30, 2024, a decrease of $0.4 million, or 3.7%, compared to 2023. This decrease was primarily attributable to a smaller base of fixed and intangible assets as of June 30, 2024 when compared to the same period in 2023.

Current wording

Depreciation and amortization expense was $9.2 million for the three months ended September 30, 2024, a decrease of $1.6 million, or 14.6%, compared to 2023. This decrease was primarily attributable to a smaller base of fixed assets and finite-lived intangible assets as of September 30, 2024 when compared to the same period in 2023.

Previous wording

Interest and other income (expense) was $19.6 million of income for the six months ended June 30, 2024, an increase of $10.2 million compared to 2023. This increase was primarily due to the diversification of Hagerty Re's investment portfolio in the second quarter of 2024, which resulted in the opening of positions in higher yielding fixed maturity securities. Also contributing to the year-over-year increase was a $2.3 million gain on the early settlement of an interest rate swap and a decrease in interest expense as a result of a lower level of borrowings under the JPM Credit Facility.

Current wording

Interest and other income (expense), net increased $2.1 million during the three months ended September 30, 2024, compared to 2023. This increase was primarily due to the diversification of Hagerty Re's investment portfolio in the second quarter of 2024, which resulted in the opening of positions in higher yielding fixed maturity securities and, to a much lesser extent, equity securities. These increases were partially offset by an increase in interest expense as a result of a higher level of borrowings under the JPM Credit Facility.

Previous wording

Income tax expense was $10.9 million for the six months ended June 30, 2024, an increase of $3.5 million compared to 2023. This increase in income tax expense for the three months ended June 30, 2024 compared to 2023 was primarily due to an increase in income before income tax expense of $17.1 million within Hagerty Re, which is taxed as a corporation in the U.S. Refer to Note 20 — Taxation in Item 1 of Part I of this Quarterly Report for additional information with respect to items affecting our effective tax rate.

Current wording

Income tax benefit was $1.0 million for the three months ended September 30, 2024, which compares to income tax expense of $4.6 million in 2023. The income tax benefit recorded in the current period is primarily due to a $4.8 million pre-tax loss within Hagerty Re as a result of losses associated with Hurricane Helene, which is taxed as a corporation in the U.S. Refer to Note 20 — Taxation in Item 1 of Part I of this Quarterly Report for additional information with respect to items affecting our effective tax rate.

Previous wording

The following table summarizes our results of operations for the six months ended June 30, 2024 and 2023, and the dollar and percentage change between the two periods:

Current wording

The following table summarizes our results of operations for the nine months ended September 30, 2024 and 2023, and the dollar and percentage change between the two periods:

Previous wording

Commission and fee revenue was $217.7 million for the six months ended June 30, 2024, an increase of $32.9 million, or 17.8%, compared to 2023, consisting of increases of $26.1 million related to renewal policies and $6.8 million related to new policies.

Current wording

Commission and fee revenue was $333.8 million for the nine months ended September 30, 2024, an increase of $45.8 million, or 15.9%, compared to 2023, consisting of increases of $36.9 million related to renewal policies and $9.0 million related to new policies.

Previous wording

The increase in revenue from renewal policies was primarily related to an increase of 17.8% in underlying policy premiums, as well as continued strong policy retention. The increase in renewal policy premiums reflects sustained year-over-year growth in PIF and changes in our mix of business by vehicle type and value. In addition, there were rate increases in several states due to inflation and higher vehicle repair costs, both of which contribute to higher premiums and, in turn, higher commission revenue.

Current wording

The increase in revenue from renewal policies was primarily driven by a 16.2% increase in underlying policy premiums, as well as continued strong policy retention.

Previous wording

Commission and fee revenue from agent sources increased $18.4 million, or 18.3%, and Commission and fee revenue from direct sources increased $14.4 million, or 17.1%, during the six months ended June 30, 2024. Commission rates vary based on geography, but do not differ by distribution channel (i.e., whether they are direct-sourced or agent-sourced).

Current wording

Commission and fee revenue from agent sources increased $26.1 million, or 16.6%, and Commission and fee revenue from direct sources increased $19.8 million, or 15.1%, during the nine months ended September 30, 2024. Commission rates vary based on geography, but do not differ by distribution channel (i.e., whether they are direct-sourced or agent-sourced).

Previous wording

Earned premium at Hagerty Re was $309.2 million for the six months ended June 30, 2024, an increase of $64.5 million, or 26.4%, compared to 2023. This increase was primarily due to continued growth of subject premiums written through our MGA subsidiaries, partially offset by an increase in ceded reinsurance premiums related to high-net-worth accounts in the U.S., which commenced in 2023. In addition, effective January 1, 2024, Hagerty Re is no longer reinsuring classic auto risks produced by its U.K. MGA affiliates, and the book is in run-off.

Current wording

Earned premium at Hagerty Re was $474.9 million for the nine months ended September 30, 2024, an increase of $90.4 million, or 23.5%, compared to 2023. This increase was primarily due to continued growth of subject premiums written through our MGA subsidiaries, partially offset by an increase in ceded reinsurance premiums related to high-net-worth accounts in the U.S. In addition, effective January 1, 2024, Hagerty Re is no longer reinsuring classic auto risks produced by its U.K. MGA affiliates, and the book is in run-off.

Previous wording

The following tables present premiums assumed by Hagerty Re and the related quota share percentages for the six months ended June 30, 2024 and 2023:

Current wording

The following tables present premiums assumed by Hagerty Re and the related quota share percentages for the nine months ended September 30, 2024 and 2023:

Previous wording

Membership fee revenue was$27.6 million for the six months ended June 30, 2024, an increase of $1.9 million, or 7.4%, compared to 2023. This increase was primarily due to a $3.3 million, or 14.8%, increase in revenue attributable to new insurance policies issued with a bundled HDC membership, partially offset by a $0.9 million decrease in storage revenue as a result of fewer Hagerty Garage + Social locations in operation. For the six months ended June 30, 2024 and 2023, membership fees were 47.5% and 51.3%, respectively, of total Membership, marketplace and other revenue.

Current wording

Membership fee revenue was$42.4 million for the nine months ended September 30, 2024, an increase of $2.9 million, or 7.2%, compared to 2023. This increase was primarily due to a $5.4 million, or 15.8%, increase in revenue attributable to new insurance policies issued with a bundled HDC membership, partially offset by a $1.8 million decrease in storage revenue as a result of fewer Hagerty Garage + Social locations in operation. For the nine months ended September 30, 2024 and 2023, membership fees were 42.6% and 47.8%, respectively, of total Membership, marketplace and other revenue.

Previous wording

Marketplace revenue was $16.8 million for the six months ended June 30, 2024, an increase of $4.9 million, or 41.2%, compared to 2023. This improvement was primarily due to the successful Broad Arrow auction at The Amelia, as well as an increase in finance revenue associated with the growth of the BAC loan portfolio. For the six months ended June 30, 2024 and 2023, Marketplace revenue was 28.9% and 23.7%, respectively, of total Membership, marketplace and other revenue.

Current wording

Marketplace revenue was $38.3 million for the nine months ended September 30, 2024, an increase of $13.5 million, or 54.2%, compared to 2023. This improvement was primarily due to stronger Broad Arrow auction results, an increase of $8.7 million in Marketplace inventory sales, and an increase in finance revenue associated with the growth of the BAC loan portfolio. For the nine months ended September 30, 2024 and 2023, Marketplace revenue was 38.5% and 30.1%, respectively, of total Membership, marketplace and other revenue.

Previous wording

Other revenue, which primarily includes sponsorship, admission, advertising, valuation, and registration income, was $13.7 million for the six months ended June 30, 2024, an increase of $1.2 million or 9.4%, compared to 2023, which was primarily attributable to an increase in advertising and admission revenue. For the six months ended June 30, 2024 and June 30, 2023, other revenue was 23.6% and 25.0%, respectively, of total Membership, marketplace and other revenue.

Current wording

Other revenue, which primarily includes sponsorship, admission, advertising, valuation, and sublease revenue, was $18.8 million for the nine months ended September 30, 2024, an increase of $0.5 million, or 2.9%, compared to 2023. This increase was primarily attributable to an increase in advertising and sublease revenue, partially offset by the loss of registration fee revenue attributable to MSR, which was sold in the second quarter of 2024. For the nine months ended September 30, 2024 and September 30, 2023, other revenue was 18.9% and 22.1%, respectively, of total Membership, marketplace and other revenue. Refer to Note 9 — Divestitures in Item 1 of Part I of this Quarterly Report for additional information related to the sale of MSR.

Previous wording

Salaries and benefits were $57.7 million for the three months ended June 30, 2024, an increase of $4.1 million, or 7.7%, compared to 2023. This increase was primarily due to an increase in accrued incentive compensation consistent with our improved year-over-year results, as well as a higher level of share-based compensation expense and increased base salaries as a result of annual merit increases, which occur in the second quarter of each year.

Current wording

Salaries and benefits were $161.0 million for the nine months ended September 30, 2024, an increase of $0.9 million, or 0.5%, compared to 2023. This increase was primarily due to an increase in base salaries as a result of annual merit increases, which occur in the second quarter of each year, as well as a higher level of share-based compensation expense and employee benefits. These increases were almost entirely offset by a decrease in accrued incentive compensation which reflects the losses associated with Hurricane Helene in the period.

Previous wording

Ceding commissions, net was $144.4 million for the six months ended June 30, 2024, an increase of $28.6 million, or 24.7%, compared to 2023. This increase is primarily attributable to the 26.4% increase in Earned premium discussed above.

Current wording

Ceding commissions, net was $221.9 million for the nine months ended September 30, 2024, an increase of $40.7 million, or 22.5%, compared to 2023. This increase is primarily attributable to the 23.5% increase in Earned premium discussed above.

Previous wording

The following table summarizes the components of Ceding commissions, net for the six months ended June 30, 2024 and 2023:

Current wording

The following table summarizes the components of Ceding commissions, net for the nine months ended September 30, 2024 and 2023: