Hagerty Inc
For the period ended Dec 31, 2024. Filed Mar 4, 2025.
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A company's yearly report to the SEC, with audited financial statements. It is the fullest account a company gives of its business, its finances and the risks it sees.
FY2024 · Filed Mar 4, 2025
HGTY$17.97-2.1%Stored close · as of Nov 6, 2026
What changed in Management’s Discussion and Analysis?
Read the current filingPrevious report: 10-K
Period ended 2023-12-31; filed 2024-03-12.
0001840776-24-000022
ITEM 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONSCurrent report: 10-K
Period ended 2024-12-31; filed 2025-03-04.
0001840776-25-000033
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONSThe baseline is this issuer’s latest earlier reporting period of the same form that was filed before the current report. A previous 10-Q is a different quarter, not a year-over-year comparison. Amendments are excluded.
Compared 214 previous paragraphs and 197 current paragraphs.
67 unchanged; 76 reworded; 48 added; 64 removed; 7 previous and 6 current paragraphs rearranged.
Tables are not compared: 14 previous and 13 current tables excluded. Dates, whitespace, punctuation and numbering changes are ignored; changes to financial figures remain significant.
A changed paragraph is not evidence that risk increased or decreased. An unchanged paragraph does not establish that risk stayed the same.
Added paragraphs (48)
Current report
California Wildfires
Current report
In January 2025, Southern California experienced severe and destructive wildfires, notably the Palisades fire and the Eaton fire. We currently estimate that pre-tax losses resulting from these wildfires will be approximately $11.0 million, which is below our 2025 catastrophe reinsurance program per event retention of $28.0 million. There is inherent variability in estimates of early loss projections and claims severity, particularly in high-damage regions. Accordingly, our estimate may change as additional information emerges. Losses from the California wildfires will be reflected in our results for the three months ending March 31, 2025.
Current report
Financial Highlights
Current report
In 2024, we reported Net Income of $78.3 million, representing a $50.1 million, or 177.9%, increase compared to 2023 and Adjusted EBITDA (a non-GAAP financial measure) of $124.5 million, representing a $36.3 million, or 41.2%, increase compared to 2023. This improvement is primarily attributable to continued Written Premium growth (+$137.3 million), which drove a 15.8% increase in Commission and fee revenue earned by our MGA subsidiaries and a 21.0% increase in Earned premium at Hagerty Re. These revenue increases were partially offset by losses related to Hurricane Helene and Hurricane Milton, which totaled $26.7 million. Also significantly impacting our results for the period was a higher balance of investable assets, as well as the diversification of our investment portfolio to include higher yielding fixed maturity securities, which resulted in a $12.6 million, or 46.7%, increase in interest income.
Current report
(2) Hagerty Re Loss Ratio is the ratio of (i) Hagerty Re's losses and loss adjustment expenses to (ii) its earned premium. Hagerty Re Loss Ratio allows us to evaluate our historical loss patterns and make necessary and appropriate adjustments. Refer to "Losses and Loss Adjustment Expenses" below for additional information regarding the changes in Hagerty Re Loss Ratio between the current and prior year period.
Current report
(3) Hagerty Re Combined Ratio is the ratio of (i) Hagerty Re's losses, loss adjustment expenses, and underwriting expenses to (ii) its earned premium. Hagerty Re's underwriting expenses primarily include ceding commissions paid to insurance carrier partners and, to a lesser extent, certain administrative expenses. Hagerty Re Combined Ratio provides a benchmark to evaluate underwriting profitability, including expense trends. A combined ratio under 100% indicates underwriting income while a combined ratio exceeding 100% indicates an underwriting loss.
Current report
Under the terms of our contracts with certain insurance carrier partners, we have the opportunity to earn a contingent underwriting commission based on the results of the book of business, including the level of written or earned premium and loss ratio. Contingent underwriting commissions are recognized in the period that the policy is issued based on our estimate of the amount that we will become entitled to receive during the calendar year such that a significant reversal of revenue is not probable.
Current report
Our marketplace business earns fee-based revenue primarily from the sale of collector cars and enthusiast vehicles through live auctions, time-based digital auctions, and brokered private sales. From time-to-time, we also earn revenue from the sale of collector cars and enthusiast vehicles that have been acquired opportunistically and placed in inventory.
Current report
Fee-based marketplace revenue is recognized when the underlying sale is completed, which is generally upon the matching of a seller and buyer in a legally binding auction or private sale transaction. Revenue from the sale of inventory is recognized at the point in time when title and control of the car is transferred to the buyer, which is generally upon collection of the full purchase price. Finance revenue is recognized over time as 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 report
Ceding commissions, net
Current report
General and administrative expenses
Current report
Gain (loss) related to warrant liabilities, net
Current report
In July 2024, we completed an exchange offer under which holders of our warrants were issued 3,876,201 shares of Class A Common Stock in exchange for 19,483,539 warrants, with a nominal cash settlement paid in lieu of fractional shares (the "Warrant Exchange"). No warrants remained outstanding following the completion of the Warrant Exchange.
Current report
Interest and other income (expense), net
Current report
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, 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.
Current report
Earned premium at Hagerty Re was $643.3 million for the year ended December 31, 2024, an increase of $111.5 million, or 21.0%, 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 the risks underwritten by its U.K. MGA affiliate, and the book is in run-off.
Current report
Membership, marketplace and other revenue was $133.5 million for the year ended December 31, 2024, an increase of $30.6 million, or 29.8%, compared to 2023.
Current report
Marketplace revenue was $54.3 million for the year ended December 31, 2024, an increase of $25.7 million, or 90.1%, compared to 2023. This improvement was primarily due an $18.8 million increase in inventory sales, a $4.2 million increase in revenues associated with stronger Broad Arrow auction results, and a $3.1 million increase in finance revenue associated with the growth of the BAC loan portfolio. For the years ended December 31, 2024 and 2023, Marketplace revenue was 40.7% and 27.8%, respectively, of total Membership, marketplace and other revenue.
Current report
Salaries and benefits were $221.5 million for the year ended December 31, 2024, an increase of $4.6 million, or 2.1%, compared to 2023. This increase was primarily due to a higher level of 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 expense associated with employee benefits. These increases were offset by a decrease in accrued incentive compensation as a result of a higher level of catastrophe losses in the current period, as discussed below.
Current report
Ceding commissions, net
Current report
Ceding commissions, net was $301.7 million for the year ended December 31, 2024, an increase of $49.9 million, or 19.8%, compared to 2023. This increase is primarily attributable to the 21.0% increase in Earned premium discussed above.
Current report
Losses and loss adjustment expenses were $298.6 million for the year ended December 31, 2024, an increase of $77.9 million, or 35.3%, compared to 2023. This increase was primarily driven by $23.0 million of estimated losses related to Hurricane Helene and $3.7 million of estimated losses related to Hurricane Milton, as well as the higher volume of assumed premium at Hagerty Re.
Current report
For the year ended December 31, 2024, our loss ratio was 46.4%, including the impact of catastrophe losses, which added 5.6% to our loss ratio. For the year ended December 31, 2023, our loss ratio was 41.5%, including the impact of catastrophe losses, which added 1.2% to our loss ratio. Excluding the impact of catastrophe losses, our loss ratio was 40.8% and 40.3% for the years ended December 31, 2024 and 2023, respectively.
Current report
General and administrative expenses
Current report
General and administrative expenses were $82.5 million for the year ended December 31, 2024, a decrease of $2.9 million, or 3.4%, compared to 2023. This decrease was primarily driven by a $4.9 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 a $3.2 million increase in professional fees associated with various corporate initiatives, including $0.8 million of professional fees associated with the exchange offer related to our warrants. Refer to Note 20 — Warrant Exchange in Item 8 of Part II of this Annual Report for additional information with respect to the Warrant Exchange offer.
Current report
Depreciation and amortization expense was $38.9 million for the year ended December 31, 2024, a decrease of $6.9 million, or 15.1%, compared to 2023. This decrease was driven primarily by a $4.3 million impairment of digital media content assets recorded in the prior year period, which was the result of lower than anticipated advertising and sponsorship revenue associated with these assets. The remainder of the decrease was primarily driven by a smaller base of fixed assets and finite-lived intangible assets as of December 31, 2024, when compared to the same period in 2023.
Current report
Gains, losses, and impairments related to divestitures
Current report
Gain (loss) related to warrant liabilities, net
Current report
During the year ended December 31, 2024, Gain (loss) related to warrant liabilities, net was an $8.5 million loss, compared to an $11.5 million gain in 2023. The $8.5 million loss in the current year period consists of a $2.0 million loss related the Warrant Exchange that was completed in July 2024 and a $6.5 million loss resulting from the change in fair value of our warrant liabilities prior to the completion of the Warrant Exchange. The $11.5 million gain during the year ended December 31, 2023 was a result of the change in fair value of our warrant liabilities. Refer to Note 4 — Fair Value Measurements and Note 20 — Warrant Exchange in Item 8 of Part II of this Annual Report for additional information with respect to our warrants.
Current report
Interest and other income (expense), net
Current report
Interest and other income (expense), net increased $13.0 million, or 56.9%, during the year ended December 31, 2024, compared to 2023. This increase was primarily due to a higher balance of investable assets, as well as the diversification of our 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.
Current report
We are the sole managing member of THG, and as a result, consolidate its financial results. THG is treated as a partnership for U.S. federal and most applicable state and local income tax purposes. As a partnership, THG is not subject to U.S. federal and certain state and local income taxes. Any taxable income or loss generated by THG is passed through and included in the taxable income or loss of its members, including Hagerty, Inc., on a pro rata basis. Hagerty, Inc. is subject to U.S. federal, state and local income taxes with respect to its allocable share of any taxable income or loss of THG, as well as any of its stand-alone income or loss. In addition, Hagerty Insurance Holdings, Inc., Broad Arrow, Hagerty Radwood, Inc. and various foreign subsidiaries are treated as taxable entities. Hagerty Insurance Holdings, Inc. files a consolidated tax return with its wholly owned corporate subsidiaries Hagerty Re and Drivers Edge.
Current report
Our effective income tax rate for the year ended December 31, 2024 decreased to 17% from 37% in 2023. This decrease is primarily due to an increase in the earnings attributed to the non-controlling interest holders of THG, which are not included in the taxable income of Hagerty, Inc.
Current report
In connection with the BAC Credit Agreement, BAC and certain of its subsidiaries may transfer originated notes receivable to wholly owned, bankruptcy remote special purpose entities (each, an "SPE") to secure the borrowings. The assets transferred to SPEs are legally isolated from us and our other (non-SPE) subsidiaries. Accordingly, those assets are not available to satisfy our debts or other obligations and our recourse under the BAC Credit Agreement is limited.
Current report
Refer to Note 17 — Long-Term Debtin Item 8 of Part II of this Annual Reportfor additional information related to the JPM Credit Agreement and BAC Credit Agreement.
Current report
We are a holding company with no material assets other than our ownership interest in THG and its operating subsidiaries. Accordingly, our ability to meet our cash requirements depends on THG's financial performance and the distributions we receive from THG. Our subsidiaries' ability to make distributions, pay dividends and make other payments may be regulated by the states and territories where they are domiciled.
Current report
For a discussion of the risks associated with our holding company structure, refer to Item 1A. Risk Factors —Risks Related to Tax — "We are a holding company, and our only material asset is our interest in THG, and we will therefore be dependent upon distributions made by THG to pay taxes, make payments under the TRA and pay other expenses." within Item IA of Part I— Risk Factors of this Annual Report.
Current report
Similarly, our U.S. insurance company subsidiary, Drivers Edge, which holds certificates of authority in 38 states, is subject to state-specific minimum capital and surplus requirements, as well as risk-based capital ("RBC") requirements. RBC levels are reported on an annual basis. As of December 31, 2024, Drivers Edge maintained sufficient capital and surplus levels to comply with state insurance regulations.
Current report
Similarly, state statutes restrict the amount of dividends that Drivers Edge may pay without prior approval of state insurance regulators. As of December 31, 2024, there were no plans to issue dividends from Drivers Edge and a change in such plans may require regulatory approval.
Current report
For additional information regarding capital and dividend restrictions, refer to Note 15 — Statutory Capital and Surplus in Item 8 of Part II of this Annual Report.
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Removed paragraphs (64)
Previous report
Hagerty Garage + Social
Previous report
On September 29, 2023, Hagerty Ventures LLC ("HV"), a wholly owned subsidiary of The Hagerty Group, entered into an agreement with HGS Hub Holdings LLC ("H3") to terminate the joint venture agreement governing Member Hubs Holding, LLC ("MHH"), which operates as Hagerty Garage + Social. In connection with this agreement, H3's 20% equity interest in MHH was redeemed and MHH's equity interests in the Palm Beach, Florida and Redmond, Washington locations of Hagerty Garage + Social were distributed to H3. Following the termination of the joint venture agreement, HV now owns 100% of MHH and its remaining Hagerty Garage + Social locations in Delray Beach, Florida; Miami, Florida; Van Nuys, California; and Burlington, Ontario.
Previous report
As a result of the joint venture termination, we recognized a loss of $2.9 million in the third quarter of 2023, as well as a $0.6 million loss related to the termination of the real estate lease held by the Culver City, California location of Hagerty Garage + Social. Following this lease termination, MHH no longer operates a Hagerty Garage + Social location in Culver City, California. Refer to Note 10 — Losses and Impairments Related to Divestitures in Item 8 of Part II of this Annual Report for additional information.
Previous report
Hagerty DriveShare
Previous report
In the third quarter of 2023, The Hagerty Group entered into an agreement to sell Hagerty DriveShare, LLC ("DriveShare"), a peer-to-peer rental platform for collector vehicles, to a third party. The sale was completed on October 9, 2023. As a result of the sale, the Company recognized a $0.4 million loss in the third quarter of 2023. Refer to Note 10 — Losses and Impairments Related to Divestitures in Item 8 of Part II of this Annual Report for additional information.
Previous report
On January 12, 2024, our subsidiary, Hagerty Insurance Holdings, Inc., agreed to acquire all of the issued and outstanding capital stock of Consolidated National Insurance Company ("CNIC") for approximately $18.4 million, subject to upward or downward adjustment in accordance with the terms of the agreement. The closing price will be comprised of approximately $10 million for CNIC's approved state licenses and $8 million for the expected capital and surplus. We believe that the CNIC acquisition will allow us to continue driving high rates of written premium growth, better control our underwriting profits, and offer new products and coverages to fill an underserved segment of the enthusiast vehicle market. Subject to the satisfactory completion of various closing conditions, we expect to complete the CNIC acquisition during the second quarter of 2024.
Previous report
(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. In 2023, our Loss Ratio improved to 41.5% from 45.3% in the prior year due, in part, to better underwriting results. The comparison to the prior year is also favorably impacted by $10.0 million of catastrophe losses related to Hurricane Ian incurred in 2022 that were not repeated in the current year.
Previous report
Historically, our MGA subsidiaries have earned, on average, a base commission of approximately 32% of written premium, as well as a CUC of up to 10%. In December 2023, our alliance agreement and associated agency agreement with Markel, which generated approximately 95% of our total commission revenue in 2023, was amended to increase the base commission rate to 37% and to adjust the profit share commission factors to scale from -5% to a maximum of +5% of written premium, with 80% of the expected CUC being paid monthly, beginning in 2024.
Previous report
We earn reinsurance premium revenue for the risks assumed by Hagerty Re from the classic car and enthusiast vehicle insurance policies underwritten by our MGA subsidiaries. Hagerty Re is registered as a Class 3A reinsurer under the Bermuda Insurance Act of 1978.
Previous report
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.
Previous report
Ceding commission, net
Previous report
General and administrative services
Previous report
Change in fair value of warrant liabilities
Previous report
Interest and other income (expense)
Previous report
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 7.0% when compared to the prior year period as a result of writing policies with higher insured values at higher premium rates. Accordingly, premiums from new policies increased $23.7 million, or 16.1%, during the year ended December 31, 2023. In turn, base commission revenue from newly issued policies grew by $7.6 million, or 16.5%, over the same period.
Previous report
Earned premium at Hagerty Re was $531.9 million for the year ended December 31, 2023, an increase of $128.8 million, or 32.0%, compared to 2022. This increase correlates with the $162.1 million, or 34.2%, increase in assumed premium resulting from an increase in Hagerty Re's U.S. quota share from 70% in 2022 to approximately 80% in 2023.
Previous report
Also contributing to the increase in Hagerty Re earned premium is the consistent growth in the volume of subject premiums written through our MGA subsidiaries in the U.S.
Previous report
Membership, marketplace and other revenue was $102.8 million for the year ended December 31, 2023, an increase of $25.5 million, or 33.1%, compared to 2022.
Previous report
Marketplace revenue was $28.6 million for the year ended December 31, 2023, an increase of $14.9 million, or 109.1%, compared to 2022, which was primarily attributable to the auction, private sale, and lending activities of Broad Arrow, which was acquired and consolidated into our results beginning in August 2022. For the years ended December 31, 2023 and 2022, Marketplace revenue was 27.8% and 17.7%, respectively, of total Membership, marketplace and other revenue.
Previous report
Salaries and benefits were $216.9 million for the year ended December 31, 2023, an increase of $17.4 million, or 8.7%, compared to 2022. This increase was principally due to an increase in incentive compensation consistent with our improved year-over-year results, as well as an increase in stock-based compensation expense. The overall increase in Salaries and benefits was partially offset by headcount reductions associated with the voluntary retirement program (the "VRP") and reductions in force implemented in the fourth quarter of 2022 and first quarter of 2023. Refer to Note 15 — Restructuring, Impairment and Related Charges in Item 8 of Part II of this Annual Report for information related to our restructuring plans.
Previous report
Ceding commission, net
Previous report
Ceding commission, net at Hagerty Re was $251.8 million for the year ended December 31, 2023, an increase of $60.7 million, or 31.7%, compared to 2022. This increase is consistent with the 32.0% increase in Hagerty Re Earned premium, as discussed above.
Previous report
Losses and loss adjustment expenses at Hagerty Re were $220.7 million for the year ended December 31, 2023, an increase of $38.3 million, or 21.0%, compared to 2022. This increase reflects higher 2023 incurred losses related to the increase in Hagerty Re's U.S. quota share during the period from 70% in 2022 to approximately 80% in 2023, as well as underlying growth in our business. While incurred losses increased, Hagerty Re's loss ratio improved to 41.5% for the year ended December 31, 2023. This improvement was due, in part, to better underwriting results in the current year. In addition, prior year results include $10.0 million of catastrophe losses related to Hurricane Ian. For the year ended December 31, 2022, Hagerty Re's loss ratio was 45.3%, including the impact of Hurricane Ian, and 42.8%, excluding the impact of Hurricane Ian.
Previous report
General and administrative services
Previous report
General and administrative services expense was $85.4 million for the year ended December 31, 2023, a decrease of $3.6 million, or 4.1%, compared to 2022. This decrease was driven by a reduction in professional services of $7.0 million, primarily in digital technology consulting, as well as a continued focus by management on expense management. The overall decrease in General and administrative services expense was partially offset by a $4.8 million increase in software subscription licenses.
Previous report
Depreciation and amortization expense was $45.8 million for the year ended December 31, 2023, an increase of $11.9 million, or 35.2%, compared to 2022. This increase was due, in part, to a higher base of capital assets in 2023 as a result of digital platform investments made in recent years, which resulted in an increase in Depreciation and amortization of approximately $5.8 million. Additionally, we incurred a $4.3 million loss related to digital media content asset impairments in 2023 due to lower than anticipated advertising and sponsorship revenue associated with these assets.
Previous report
During the year ended December 31, 2022, management approved an initiative to increase operational efficiencies and flexibility by transitioning to a "remote-first" work model for employees. In addition, in the fourth quarter of 2022, the Board approved the VRP, as well as a reduction in force (the "2022 RIF"). As a result, in 2022, we recognized restructuring, impairment and related charges of $18.3 million, which primarily consisted of $12.2 million in employee severance-related expenses related to the VRP and 2022 RIF and $6.2 million related to operating lease ROU asset impairments and related leasehold disposals.
Previous report
Change in fair value of warrant liabilities
Previous report
During the years ended December 31, 2023 and 2022, the change in the fair value of our warrant liabilities resulted in a gain of $11.5 million and $41.9 million, respectively. Refer to Note 16 — Fair Value Measurements in Item 8 of Part II of this Annual Report for additional information with respect to our warrants.
Previous report
Revaluation gain on previously held equity method investment
Previous report
During the year ended December 31, 2022, the Company recognized a revaluation gain on a previously held equity method investment of $34.7 million, which represents the remeasurement of our 40% equity interest in Broad Arrow immediately prior to the Broad Arrow Acquisition in August 2022. Refer to Note 9 — Acquisitions and Investments in Item 8 of Part II of this Annual Report for additional information with respect to our acquisition of Broad Arrow.
Previous report
Interest and other income (expense)
Previous report
Key Developments — Financing Activities
Previous report
In 2023, we took a number of actions to enhance our capital structure, strengthen our liquidity position, and provide additional financial flexibility including the following:
Previous report
•On June 23, 2023, Hagerty, Inc. issued 8,483,561 shares of our newly-designated Series A Convertible Preferred Stock for an aggregate purchase price of $80.0 million. This capital raise bolsters our cash balances and liquidity and provides working capital to drive profitable growth. Refer to Note 18 — Convertible Preferred Stockin Item 8 of Part II of this Annual Reportfor additional information related to the Series A Convertible Preferred Stock.
Previous report
•On September 19, 2023, Hagerty Re entered into an unsecured term loan credit facility with State Farm Mutual Automobile Insurance Company ("State Farm") in the aggregate principal amount of $25.0 million (the "State Farm Term Loan"). As of December 31, 2023, Hagerty Re's statutory capital and surplus included $25.0 million related to the State Farm Term Loan, which is recorded for statutory purposes as "Other Fixed Capital" and is also eligible as "Tier 2 Ancillary Capital". This capital raise supports Hagerty Re's growth and we believe raising this additional capital was a positive factor that helped Hagerty Re be assigned a financial strength rating of A- (Excellent) from AM Best. Refer to Note 17 — Long-Term Debtin Item 8 of Part II of this Annual Reportfor additional information related to the State Farm Term Loan.
Previous report
•On November 28, 2023, The Hagerty Group entered into a Tenth Amendment to the JPM Credit Agreement (as defined below), which provides additional operational flexibility to The Hagerty Group and its subsidiaries, and includes, among other things (i) additional baskets for investments, incurrence of indebtedness and liens; (ii) changes to financial covenants; and (iii) the ability to issue additional indebtedness in the form of either incremental debt on a pari-passu basis or on an asset-backed securitization basis. Refer to Note 17 — Long-Term Debtin Item 8 of Part II of this Annual Reportfor additional information related to the JPM Credit Agreement.
Previous report
•On December 21, 2023, Broad Arrow Capital LLC, as initial servicer, and its wholly owned subsidiary BAC Funding 2023-1, LLC, as borrower, entered into a revolving credit agreement with a certain lender (the "BAC Credit Agreement"). The BAC Credit Agreement provides for a revolving credit facility (the "BAC Credit Facility") with an aggregate borrowing capacity of $75.0 million which will be used to fund the growth of BAC's asset-based lending activities. Refer to Note 17 — Long-Term Debtin Item 8 of Part II of this Annual Reportfor additional information related to the BAC Credit Facility.
Previous report
In conjunction with the BAC Credit Agreement, Broad Arrow Capital LLC and certain of its subsidiaries transfer certain notes receivable originated by Broad Arrow Capital LLC and certain of its subsidiaries to wholly owned, bankruptcy remote special purpose entities (each, an "SPE") to secure the borrowings under the BAC Credit Agreement. These SPEs have the limited purpose of acquiring notes receivable or a certificate representing beneficial ownership interest therein from Broad Arrow Capital LLC and certain of its subsidiaries, with BAC Funding 2023-1, LLC also being the borrower under the BAC Credit Agreement. Assets transferred to each SPE are legally isolated from the Company and its subsidiaries. Further, the assets of each SPE are owned by such SPE and are not available to satisfy the debts or other obligations of the Company or any of its other subsidiaries. Broad Arrow Capital LLC continues to service the notes receivable transferred to the SPEs.
Previous report
Through our reinsurance subsidiary, Hagerty Re, we reinsure the same personal lines risks that are underwritten by our MGA subsidiaries on behalf of our insurance carrier partners. Hagerty Re's reinsurance operations are funded primarily through existing capital and net cash flows from operations. In addition, as discussed above under "Key Developments — Financing Activities," on September 19, 2023, Hagerty Re bolstered its balance of cash and cash equivalents with the $25.0 million in gross proceeds from the State Farm Term Loan. As of December 31, 2023, Hagerty Re had approximately $558.2 million in "Cash and cash equivalents" and "Restricted cash and cash equivalents".
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Reworded paragraphs (76)
Previous wording
Management's Discussion and Analysis of Financial Condition and Results of Operations is intended to provide the reader of the financial statements with a narrative from the perspective of management on the financial condition, results of operations, liquidity and certain other factors that may affect our operating results. The following discussion and analysis of our financial condition and results of operations should be read in conjunction with the Consolidated Financial Statements and related Notes included in Item 8 of Part II of this Annual Report. In addition to historical financial information, the following discussion and analysis contains forward-looking statements that involve risks, uncertainties, and assumptions. Our actual results and timing of selected events may differ materially from those anticipated in these forward-looking statements as a result of many factors, including those discussed within "Risk Factors" in Item 1A of this report.
Current wording
The following discussion and analysis of our financial condition and results of operations should be read in conjunction with our Consolidated Financial Statements and related Notes included in Item 8 of Part II of this Annual Report. This discussion contains forward-looking statements based upon current expectations that involve risks and uncertainties. Please refer to the section in this Annual Report entitled "Cautionary Statement Regarding Forward-Looking Statements".
Previous wording
The following discussion contains references to the years ended December 31, 2023 and 2022. A discussion of the Company’s results of operations comparing results for the years ended December 31, 2022 and 2021 is included under the section entitled “Results of Operations” in Item 7 of Part II of the Annual Report on Form 10-K for the year ended December 31, 2022, and is incorporated by reference into this Annual Report for the year ended December 31, 2023.
Current wording
The following discussion contains references to the years ended December 31, 2024 and 2023. A discussion of the Company's results of operations comparing results for the years ended December 31, 2023 and 2022 is included under the section entitled "Results of Operations" in Item 7 of Part II of the Annual Report on Form 10-K for the year ended December 31, 2023, and is incorporated by reference into this Annual Report.
Previous wording
We are a market leader in providing insurance for classic cars and enthusiast vehicles. Through our insurance model, we act as an MGA by underwriting, selling and servicing classic car and enthusiast vehicle insurance policies. Then, due to our consistent track record of delivering strong underwriting results, we reinsure a large portion of the risks written by our MGA subsidiaries through our wholly owned subsidiary, Hagerty Re. In addition, we offer HDC memberships, which can be bundled with our insurance policies and give subscribers access to an array of products and services, including Hagerty Drivers Club Magazine, automotive enthusiast events, our proprietary vehicle valuation tool, emergency roadside assistance, and special vehicle-related discounts. Lastly, to complement our insurance and membership offerings, we also offer Marketplace, where car enthusiasts can buy, sell, and finance collector cars. Through these offerings, our goal is to be the world's most trusted and preferred brand for enthusiasts to protect, buy and sell, and enjoy the special cars that are their passion.
Current wording
We are a market leader in providing insurance for collector cars and enthusiast vehicles. Through our insurance model, we act as an MGA by underwriting, selling, and servicing collector car and enthusiast vehicle insurance policies. Due to our consistent track record of delivering strong underwriting results, we then reinsure approximately 80% of the risks written by our MGA subsidiaries through our wholly owned subsidiary, Hagerty Re. In addition, we offer HDC memberships, which are primarily bundled with our insurance policies and give subscribers access to an array of products and services, including emergency roadside assistance, Hagerty Drivers Club Magazine, automotive enthusiast events, our proprietary vehicle valuation tool, and special vehicle-related discounts. We also offer a marketplace to complement our insurance and membership offerings where automotive enthusiasts can buy, sell, and finance collector cars and enthusiast vehicles. Through these offerings, our vision is to be the world's most trusted and preferred brand for automotive enthusiasts to protect, buy, sell, and enjoy their special cars.
Previous wording
In 2023, we conducted a review of certain components of our operations which resulted in the sale or reorganization of certain businesses, including Hagerty Garage + Social and DriveShare, as discussed below. This initiative supported 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. 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.
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, in 2023, we recognized approximately $4.0 million of losses and impairments related to actions taken with respect to Hagerty Garage + Social and DriveShare. In addition, in 2024, we recognized a $0.1 million gain 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 11 — Divestitures in Item 8 of Part II of this Annual 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 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 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 Consolidated Financial Statements prepared in accordance with GAAP.
Previous wording
(1) Total Written Premium is the total amount of insurance premium written by our MGA subsidiaries on policies that were bound by our insurance carrier partners during the period. We view Total Written Premium as an important metric as it most closely correlates with our growth in insurance commission revenue and Hagerty Re earned premium. Total Written Premium reflects the actual business volume and direct economic benefit generated from our policy acquisition efforts.
Current wording
(1) Total Written Premium is the total amount of insurance premium written by our MGA subsidiaries on behalf of our insurance carrier partners during the period. Total Written Premium reflects the direct economic benefit of our policy acquisition efforts and is closely correlated with the growth of insurance commission revenue generated by our MGA subsidiaries and earned premium generated by Hagerty Re.
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
(4) New Business Count represents the number of new insurance policies issued by our MGA subsidiaries during the period. New Business Count is an important metric to assess our financial performance because policy growth is critical to our success. While we benefit from strong policy retention through renewals, new policies more than offset those cancelled or non-renewed at expiration. New policies also often mean new relationships and an opportunity to sell additional products and services.
Previous wording
(5) Policies in Force ("PIF") represents the number of current and active insurance policies as of the applicable period end date. We view PIF as an important metric to assess our financial performance because policy growth drives our revenue growth, increases brand awareness and market penetration, generates additional insight to improve the performance of our platform, and provides key data to assist us in strategic decision making.
Current wording
(6) Policies in Force ("PIF") represents the number of current and active insurance policies as of the end of the period. PIF is an important metric to assess our financial performance because policy growth drives revenue growth, increases brand awareness and market penetration, generates additional insight to improve the performance of our platform, and provides key data to assist us in strategic decision making.
Previous wording
(6) PIF Retention represents the percentage of expiring insurance policies that are renewed on the renewal effective date, calculated on a rolling twelve months basis. We view PIF Retention as an important measurement of the number of policies retained each year, which contributes to recurring revenue streams from MGA commissions, membership fees, and earned premiums. It also contributes to maintaining our NPS, as discussed below.
Current wording
(7) PIF Retention represents the percentage of expiring insurance policies that are renewed on the renewal effective date, calculated on a rolling twelve months basis. PIF Retention is an important measurement of the number of policies retained each year, which contributes to our recurring revenue streams including commissions earned by our MGA subsidiaries, HDC membership fees, and earned premium generated by Hagerty Re.
Previous wording
(7) Vehicles in Force represents the number of current insured vehicles as of the applicable period end date. We view Vehicles in Force as an important metric to assess our financial performance because insured vehicle growth drives our revenue growth and increases market penetration.
Current wording
(8) Vehicles in Force represents the number of current insured vehicles as of the end of the period. Vehicles in Force is an important metric to assess our financial performance because insured vehicle growth drives our revenue growth and increases market penetration.
Previous wording
(8) HDC Paid Member Count represents the number of current Members who pay an annual membership subscription as of the applicable period end date. We believe that HDC Paid Member Count is important because it helps us measure membership revenue growth and provides an opportunity to customize our value proposition and benefits to specific types of enthusiasts, both by demographic and vehicle interest.
Current wording
(9) HDC Paid Member Count represents the number of current Members who pay an annual membership subscription as of the end of the period. HDC Paid Member Count is an important metric because it helps us measure membership revenue growth and provides an opportunity to customize our value proposition and benefits to specific types of enthusiasts, both by demographic and vehicle interest.
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 (who are 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
(10) NPS is an important measure of the overall strength of our relationship with 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 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
We generate commission and fee revenue through our MGA subsidiaries primarily from the underwriting, sale, and servicing of classic car and enthusiast vehicle insurance policies on behalf of our insurance carrier partners. Commissions are earned for both new and renewed policies. In addition, under the terms of certain of our contracts with insurance carriers, we have the opportunity to earn a CUC based on written or earned premium and the loss ratio results of the insurance book of business.
Current wording
We generate commission and fee revenue through our MGA subsidiaries, primarily from the underwriting, sale, and servicing of collector car and enthusiast vehicle insurance policies on behalf of our insurance carrier partners. Commissions are earned for both new and renewed policies. Commission and fee revenue is earned when the policy becomes effective, net of allowances for policy changes and cancellations.
Previous wording
Earned premium represents the earned portion of written premiums that Hagerty Re has assumed under quota share reinsurance agreements with our insurance carrier partners, net of premiums ceded to various reinsurers and the cost of catastrophe reinsurance coverage. Premiums assumed and ceded are recognized on a pro-rata basis over the term of the related reinsured policies, which is generally 12 months. The cost of catastrophe reinsurance coverage is recognized over the contract period in proportion to the related earned premium.
Current wording
Earned premium represents the earned portion of written premiums that Hagerty Re has assumed under quota share reinsurance agreements with our insurance carrier partners, net of premiums ceded to various reinsurers and the cost of catastrophe reinsurance coverage. Premiums assumed and ceded are recognized on a pro-rata basis over the term of the reinsured policies, which is generally 12 months. The cost of catastrophe reinsurance coverage is recognized over the contract period in proportion to the related earned premium.
Previous wording
We earn subscription revenue through HDC memberships, which can be bundled with our insurance policies and give subscribers access to an array of products and services, including Hagerty Drivers Club Magazine, automotive enthusiast events, our proprietary vehicle valuation tool, emergency roadside assistance, and special vehicle-related discounts. We also earn fee-based revenue from Hagerty Garage + Social memberships, which include storage services in addition to the HDC Member benefits. Revenue from the sale of HDC and storage memberships is recognized ratably over the period of the membership. The membership is treated as a single performance obligation to provide access to stated member benefits over the life of the membership, which is currently one year.
Current wording
We earn subscription revenue through HDC memberships, which are primarily bundled with our insurance policies and give subscribers access to an array of products and services, including emergency roadside assistance, Hagerty Drivers Club Magazine, automotive enthusiast events, our proprietary vehicle valuation tool, and special vehicle-related discounts.
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 their 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
In addition, we also earn finance revenue from loans made to qualified collectors and businesses secured by their collector cars.
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. 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 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 forms of incentive compensation, including share-based compensation. Employee benefits primarily include the cost of our 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 costs that are required to be capitalized, which are then amortized over the useful life of the asset created, primarily internally developed software and software-as-a-service ("SaaS") implementation costs. 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
Ceding commission, net represents the commissions paid by Hagerty Re to insurance carrier partners for the risk assumed under the quota share agreements with those carriers. These commissions represent Hagerty Re's pro-rata share of the carrier's costs including (i) policy acquisition costs, which primarily consists of the commissions earned by our MGA subsidiaries, (ii) general and administrative costs, and (iii) other costs. Ceding commissions paid is recorded net of commissions received by Hagerty Re related to ceded reinsurance premiums. Ceding commission, net is recognized ratably over the term of the related reinsured policies, which is generally 12 months.
Current wording
Ceding commissions, net represents the commissions paid by Hagerty Re to insurance carrier partners for the risk assumed under the quota share agreements with those carriers. These commissions represent Hagerty Re's pro-rata share of the carrier's costs including (i) policy acquisition costs, which consists of the commissions earned by our MGA subsidiaries, (ii) general and administrative costs, and (iii) other costs. Ceding commissions are recorded net of commissions received by Hagerty Re related to ceded reinsurance premiums. Ceding commissions, net is recognized ratably over the term of the related reinsurance policies, which is generally 12 months.
Previous wording
Losses and loss adjustment expenses represents our best estimate of the losses related to the risk assumed by Hagerty Re. Losses consist of claims paid, case reserves, and incurred but not reported ("IBNR") costs, which are recorded net of estimated recoveries from reinsurance, salvage and subrogation. Loss adjustment expenses consist of the cost associated with the investigation and settlement of claims. The estimates utilized in determining the amount of losses and loss adjustment expenses recorded in a period are based on statistical analysis performed by our internal and external actuarial team. Reserves are reviewed regularly and adjusted, as necessary, to reflect our estimate of the ultimate cost of settlement. (Refer to "Critical Accounting Estimates" below.)
Current wording
Losses and loss adjustment expenses represent our best estimate of the losses and associated settlement costs related to the risk assumed by Hagerty Re. Losses consist of claims paid, case reserves, and incurred but not reported costs, which are recorded net of estimated recoveries from reinsurance, salvage and subrogation. Loss adjustment expenses consist of the cost associated with processing and settling claims. The estimates utilized in determining the amount of losses and loss adjustment expenses recorded in a period are based on statistical analysis performed by our internal and external actuarial team. Reserves are reviewed regularly and adjusted, as necessary, to reflect our estimate of the ultimate cost of settlement.
Previous wording
Sales expense includes costs related to the sale and servicing of insurance policies, as well as costs related to our Membership and Marketplace offerings, such as broker expense, cost of sales, promotion expense, and travel and entertainment expenses. Broker expense is the compensation paid to our agent partners and national broker partners when an insurance policy is written through a broker relationship. Broker expense generally tracks with written premium growth. Cost of sales includes payment processing fees, emergency roadside service costs, postage and other variable costs associated with the sale and servicing of a policy. Cost of sales also includes costs associated with vehicles held in our inventory and sold through Marketplace. Promotion expense includes various costs related to branding, events, advertising, marketing, and customer acquisition. Sales expenses, in general, are expensed as incurred and will trend with revenue growth.
Current wording
Sales expense includes costs related to the sale and servicing of insurance policies, as well as costs related to our membership and marketplace offerings, such as broker expense, cost of sales, promotion expense, and travel and entertainment expenses. Broker expense is the compensation paid to our agent partners and national broker partners when an insurance policy is written by our MGA subsidiaries through a broker relationship. Broker expense generally tracks with written premium growth. Cost of sales includes payment processing fees, emergency roadside service costs, postage and other variable costs associated with the sale and servicing of a policy. Cost of sales also includes the cost of vehicles held in inventory and sold through our marketplace business, as well as interest expense and borrowing costs associated with the BAC credit facility ("BAC Credit Facility"). Promotion expense includes various costs related to branding, events, advertising, marketing, and customer acquisition. Sales expenses, in general, are expensed as incurred and will trend with revenue growth.
Previous wording
General and administrative services 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 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 expenses primarily consists 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 modestly 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, 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, SaaS implementation, and finite-lived intangible assets 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 measured at fair value each reporting period, with changes in fair value recognized as non-operating income (expense) in our 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. (Refer to "Critical Accounting Estimates" below.)
Current wording
Prior to the Warrant Exchange, 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 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 20 — Warrant Exchange in Item 8 of Part II of this Annual Report for additional information regarding the Company's Warrant Exchange.
Previous wording
Interest and other income (expense) primarily includes interest income related to our cash balances and interest expense related to outstanding borrowings, as well as changes in the value of the liability related to our TRA with Hagerty Holding Corp. ("HHC") and Markel. Refer to "Critical Accounting Estimates" and Note 22 — Taxation in Item 8 of Part II of this Annual Report for additional information related to the TRA.
Current wording
Interest and other income (expense), net primarily includes interest income related to 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 (as defined in Note 17 — Long-Term Debt in Item 8 of Part II of this Annual Report) and changes in the value of the liability related to our TRA ("TRA Liability") with HHC and Markel. Refer to Note 23 — Taxation in Item 8 of Part II of this Annual Report for additional information related to the TRA.
Previous wording
The Hagerty Group is taxed as a pass-through ownership structure under provisions of the IRC and a similar section of state income tax law, except certain U.S. corporate subsidiaries and foreign subsidiaries. Any taxable income or loss generated by The Hagerty Group is passed through to and included in the taxable income or loss of all holders of The Hagerty Group 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 The Hagerty Group.
Current wording
THG is taxed as a pass-through ownership structure under provisions of the IRC and a similar section of state income tax law. As such, any taxable income or loss generated by THG is passed through to and included in the taxable income or loss of THG unit holders, including Hagerty, Inc.
Previous wording
Interest and other income (expense) was $22.8 million of income for the year ended December 31, 2023, compared to $2.0 million of income for the year ended December 31, 2022. This increase was primarily due to a $19.5 million increase in interest income on cash balances, resulting from higher variable interest rates and increased cash balances. In addition, the value of the TRA liability decreased by $2.6 million. These factors were partially offset by an increase in interest expense of $0.5 million related to outstanding JPM Credit Facility borrowings due to higher variable interest rates.
Current wording
Year Ended December 31, 2024 compared to the Year Ended December 31, 2023
Previous wording
Commission and fee revenue was $365.5 million for the year ended December 31, 2023, an increase of $58.3 million, or 19.0%, compared to 2022, consisting of increases of $47.7 million related to renewal policies and $10.6 million related to new policies.
Current wording
Commission and fee revenue was $423.2 million for the year ended December 31, 2024, an increase of $57.7 million, or 15.8%, compared to 2023, consisting of increases of $46.7 million related to renewal policies and $11.0 million related to new policies.
Previous wording
The increase in revenue from renewal policies was primarily related to an increase of 17.0% 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, as well as 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. The increase in revenue from new policies was primarily driven by a 13.4% increase in underlying policy premiums, as well as sustained year-over-year growth in New Business Count, which increased 9.5% in 2024.
Previous wording
Commission and fee revenue from agent sources increased $34.3 million, or 20.6%, and Commission and fee revenue from direct sources increased $24.0 million, or 17.0%, during the year ended December 31, 2023. 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 $32.5 million, or 16.2%, and Commission and fee revenue from direct sources increased $25.2 million, or 15.3%, during the year ended December 31, 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
The following table presents premiums assumed by Hagerty Re and the related quota share percentages for the years ended December 31, 2023 and 2022:
Current wording
The following tables present premiums assumed by Hagerty Re and the related quota share percentages for the years ended December 31, 2024 and 2023:
Previous wording
Membership fee revenue was $52.5 million for the year ended December 31, 2023, an increase of $7.2 million, or 16.0%, compared to 2022, which was primarily attributable to an increase in new policies issued with a bundled HDC membership, as well as an increase in storage revenue attributable to more Hagerty Garage + Social locations being in operation for most of the current year. For the years ended December 31, 2023 and December 31, 2022, membership fees were 51.0% and 58.5%, respectively, of total Membership, marketplace and other revenue. Refer to Note 10 — Losses and Impairments Related to Divestitures in Item 8 of Part II of this Annual Report for additional information related to Hagerty Garage + Social.
Current wording
Membership fee revenue was$57.5 million for the year ended December 31, 2024, an increase of $5.1 million, or 9.7%, compared to 2023. This increase was primarily due to a $7.4 million, or 16.1%, increase in revenue attributable to new insurance policies issued with a bundled HDC membership, partially offset by a $1.6 million decrease in storage revenue as a result of fewer Hagerty Garage + Social locations in operation. For the years ended December 31, 2024 and 2023, membership fees were 43.1% and 51.0%, respectively, of total Membership, marketplace and other revenue.
Previous wording
Other revenue, which primarily includes sponsorship, admission, advertising, valuation and registration income, was $21.8 million for the year ended December 31, 2023, an increase of $3.4 million, or 18.6%, compared to 2022, primarily due to increased event sponsorship and admission revenue. For the years ended December 31, 2023 and December 31, 2022, other revenue was 21.2% and 23.8%, respectively, of total Membership, marketplace and other revenue.
Current wording
Other revenue, which primarily includes sponsorship, admission, advertising, valuation, and sublease revenue, was $21.6 million for the year ended December 31, 2024, a decrease of $0.2 million, or 0.9%, compared to 2023. This decrease was primarily attributable to the loss of registration fee revenue attributable to MSR, which was sold in the second quarter of 2024, partially offset by an increase sublease and advertising revenue. For the years ended December 31, 2024 and 2023, other revenue was 16.2% and 21.2%, respectively, of total Membership, marketplace and other revenue. Refer to Note 11 — Divestitures in Item 8 of Part II of this Annual Report for additional information related to the sale of MSR.
Previous wording
The following table summarizes the components of Ceding commission, net for the years ended December 31, 2023 and 2022:
Current wording
The following table summarizes the components of Ceding commissions, net for the years ended December 31, 2024 and 2023:
Previous wording
Sales expense was $156.4 million for the year ended December 31, 2023, an increase of $15.6 million, or 11.1%, compared to 2022, which was primarily attributable to an increase in broker expense of $9.4 million, consistent with written premium growth at our MGA subsidiaries across the agent distribution channel. In addition, cost of sales increased $7.2 million, primarily driven by Broad Arrow vehicles sales and related commissions. Lastly, credit card processing fees increased $2.1 million, primarily due to a shift in consumer preference towards credit cards as a payment method within our MGA subsidiaries. The overall increase in Sales expense was partially offset by reductions in promotion and travel and entertainment costs of $2.2 million and $1.3 million, respectively.
Current wording
Sales expense was $190.5 million for the year ended December 31, 2024, an increase of $34.1 million, or 21.8%, compared to 2023. This increase was due, in part, to a $23.8 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 $9.3 million, which is consistent with the written premium growth within the agent channel, and sales commissions increased $1.6 million, which is consistent with revenue growth within the marketplace business. Lastly, credit card processing fees increased, primarily due to a shift in customer preference towards credit cards as a payment method within our MGA subsidiaries.
Previous wording
During the year ended December 31, 2023, the Board approved an additional reduction in force (the "2023 RIF") in the first quarter of 2023 and as a result, recognized $5.4 million in employee severance-related expenses and a $0.4 million impairment charge to write-down the value of certain digital media content assets. Additionally, in 2023, we recognized $3.1 million of charges associated with operating lease ROU asset impairments and related leasehold disposals in connection with the Company's ongoing transition to a "remote-first" work model.
Current wording
In 2023, the Board approved a reduction in force (the "2023 RIF") following a strategic review of business processes as we focus on driving efficiencies in order to achieve growth and profitability goals. As a result of these actions, we recognized $5.4 million in employee severance-related expenses and a $0.4 million impairment charge to write-down the value of certain digital media content assets. Additionally, in 2023, we recognized $3.1 million of charges associated with operating lease right-of-use ("ROU") asset impairments and related leasehold disposals in connection with the Company's ongoing transition to a "remote-first" work model.
Previous wording
During the year ended December 31, 2023, the Company recognized $4.0 million of losses and impairments related to Hagerty Garage + Social and DriveShare, as discussed above under "Business Review". Refer to Note 10 — Losses and Impairments Related to Divestitures in Item 8 of Part II of this Annual Report for additional information.
Current wording
During the year ended December 31, 2024, we recognized a $0.1 million gain related to the sale of MSR. During the year ended December 31, 2023, we recognized $4.0 million of losses and impairments related to Hagerty Garage + Social and DriveShare. Refer to Note 11 — Divestitures in Item 8 of Part II of this Annual Report for additional information.
Previous wording
Income tax expense was $16.6 million for the year ended December 31, 2023, an increase of $9.6 million compared to 2022. The increase in income tax expense for the year ended December 31, 2023 compared to 2022 was primarily due to an increase in income before income tax expense of $46.0 million within Hagerty Re, which is taxed as a corporation in the U.S. Refer to Note 22 — Taxation in Item 8 of Part II of this Annual Report for additional information with respect to items affecting our effective tax rate.
Current wording
For the year ended December 31, 2024, income tax expense was $15.4 million, representing a decrease of $1.2 million, or 7.3%, compared to 2023. This decrease is primarily due to a decrease in pre-tax income of $8.8 million within Hagerty Re. Refer to Note 23 — Taxation in Item 8 of Part II of this Annual Report for additional information with respect to items affecting our effective tax rate.
Previous wording
Maintaining a strong balance sheet and capital position is a top priority for us. We manage liquidity globally and across all operating subsidiaries.
Current wording
Maintaining a strong balance sheet and capital position is a top priority for us. As a holding company without direct operations, we manage liquidity globally and across all operating subsidiaries.
Previous wording
Our sources of liquidity include our: (i) balances of cash and cash equivalents; (ii) net working capital; (iii) cash flows from operations; (iv) borrowings from the JPM Credit Facility (as defined below) to fund the general corporate needs of The Hagerty Group and its subsidiaries; and (v) borrowings from the BAC Credit Facility to fund a substantial portion of the lending activities of BAC.
Current wording
Our sources of liquidity include our: (i) balances of cash and cash equivalents; (ii) net working capital; (iii) cash flows from operations; (iv) borrowings from the JPM Credit Facility (as defined below) to fund the general corporate needs of THG and its subsidiaries; and (v) borrowings from the BAC Credit Facility (as defined below) to fund a portion of the lending activities of BAC.
Previous wording
Our primary liquidity needs and capital requirements include cash required for: (i) the funding of business operations, including strategic investments; (ii) the servicing and repayment of borrowings under the JPM Credit Facility, the BAC Credit Facility, and the State Farm Term Loan; (iii) the payment of income taxes; and (iv) the funding of potential payments under the TRA.
Current wording
Our primary liquidity needs and capital requirements include cash required for: (i) funding the business operations of THG and its subsidiaries; (ii) funding strategic investments and acquisitions; (iii) servicing and repayment of borrowings under the JPM Credit Facility, the BAC Credit Facility, and the unsecured term loan credit facility with State Farm (the "State Farm Term Loan"); (iv) funding potential cash dividend payments on the Series A Convertible Preferred Stock; (v) payment of income taxes; and (vi) funding payments under the TRA.
Showing the first 40 of 76 pairs. Open the source sections for the rest.
Rearranged current paragraphs (6)
Current report — wording carried from elsewhere
Revenue from the sale of HDC memberships is recognized ratably over the period of the membership. The membership is treated as a single performance obligation to provide access to stated Member benefits over the life of the membership, which is currently one year.
Current report — wording carried from elsewhere
The increase in underlying policy premiums for both policy renewals and new policies was a result of 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. In addition, average premiums on newly issued policies increased as a result of writing policies with higher insured values at higher premium rates.
Current report — wording carried from elsewhere
The following table summarizes the components of Interest and other income (expense), net for the years ended December 31, 2024 and 2023:
Current report — wording carried from elsewhere
The JPM Credit Agreement provides for a revolving credit facility (the "JPM Credit Facility") with an aggregate borrowing capacity of $305.0 million. The JPM Credit Agreement matures in October 2026, but may be extended if agreed to by us and the lenders party thereto.
Current report — wording carried from elsewhere
As of December 31, 2024, total outstanding borrowings under the JPM Credit Facility were$50.3 million. JPM Credit Facility borrowings are collateralized by the assets of and equity interests in THG and its consolidated subsidiaries, except for (i) the assets held by the special purpose entities related to the BAC Credit Facility and (ii) all or a portion of certain foreign and certain excluded or immaterial subsidiaries.
Current report — wording carried from elsewhere
Under the JPM Credit Agreement, we are required, among other things, to meet certain financial covenants (as defined in the JPM Credit Agreement), including a fixed charge coverage ratio and a leverage ratio. We were in compliance with these financial covenants as of December 31, 2024.
Rearranged previous paragraphs (7)
Previous report — wording carried elsewhere
Commission and fee revenue is earned when the policy becomes effective, net of allowances for policy changes and cancellations, as our performance obligation is substantially complete when the policy is issued.
Previous report — wording carried elsewhere
Results of Operations for the Years Ended December 31, 2023 and 2022
Previous report — wording carried elsewhere
Losses and impairments related to divestitures
Previous report — wording carried elsewhere
Refer to Note 17 — Long-Term Debt in Item 8 of Part II of this Annual Report for additional information on the JPM Credit Facility.
Previous report — wording carried elsewhere
Refer to Note 17 — Long-Term Debtin Item 8 of Part II of this Annual Reportfor additional information related to the BAC Credit Agreement.
Previous report — wording carried elsewhere
•historical trends in claim frequency and severity;
Previous report — wording carried elsewhere
Effect if Actual Results Differ from Estimates and Assumptions