Hagerty Inc

Company Overview

We are a market leader in providing insurance for collector cars and enthusiast vehicles. Through our insurance business, we act as a Managing General Agent ("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 Reinsurance Limited ("Hagerty Re"). In addition, we offer Hagerty Drivers Club ("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.

The backbone of our ecosystem is our fast-growing specialty insurance business. People take excellent care of the things they love, and we take great pride in protecting and preserving their treasured vehicles. For over 40 years, we have consistently grown our insurance business and currently insure 2.6 million collector cars and enthusiast vehicles. We have built a strong reputation for providing excellent customer service through our passionate team of member service center professionals, resulting in a Net Promoter Score ("NPS") of at least 82 in recent years, an insurance policy retention rate approaching 90%, and a typical policy life of approximately nine years.

HDC and our marketplace offerings, as well as our events and media and entertainment platforms, work synergistically with our insurance business to drive retention and loyalty and enable automotive enthusiasts to protect, buy, sell, and enjoy their special cars, whether it is on the road, on the track, in the garage, at an event or auction, or through our media content. We believe the combination of these complementary offerings creates an enthusiast-centered ecosystem of products and services, generating multiple points of engagement and monetization, resulting in an attractive recurring revenue business model with relatively low customer acquisition costs that is well-positioned to benefit from increasing scale.

With a rich heritage spanning over 40 years, the first Hagerty company was founded in 1984. Hagerty, Inc., a Delaware corporation, was formed in 2020 and became a public company traded on the New York Stock Exchange ("NYSE") in 2021 under the ticker symbol HGTY.

Industry and Market Opportunity

We love cars and are not alone, as evidenced by the large and growing collector car and enthusiast vehicle market. We estimate that there are approximately 48 million insurable collector cars and enthusiast vehicles in the United States ("U.S."), of which approximately 11 million are pre-1981 and 37 million are post-1980 collectibles. On this basis, we estimate that the U.S. total addressable market is approximately $19 billion of annual written premium for insurable collector cars and enthusiast vehicles based on our average vehicle premium of $405 per year. Over the last decade, we have increased our written premium by a compound annual growth rate of 14%, powered primarily by strong growth in the number of our insurance policies in force. While we have become one of the leading providers of insurance for pre-1981 classics, with an estimated market share of 14% in that cohort, we estimate our market share for post-1980 collectibles is only 2%, resulting in an overall collector car and enthusiast vehicle market share of under 5%. We believe that our strong brand and value proposition focused on our "Guaranteed Value" insurance policies position us well to capture a larger share of this growing market over the coming decade, including through our recent acquisition of Drivers Edge Insurance Company ("Drivers Edge"). For more information regarding the acquisition of Drivers Edge, refer to Note 10 — Acquisitions in Item 8 of Part II of this Annual Report.

In order to fully capitalize on this opportunity, we perform a data-driven Member and vehicle analysis to understand vehicle ownership data, demographic data, vehicle usage, and values. Based upon this analysis, we are able to identify key vehicle markets, explore additional opportunities within these markets, and overlay demographic and usage data to enrich our approach and leverage the information to better serve the automotive enthusiast community.

Business Model and Competitive Strengths

The Hagerty brand has been carefully curated over the last four decades by providing Members with excellent customer service through our passionate team of automotive experts. We have become known as an automotive enthusiast brand for car people, by car people. We believe that consumers who feel a part of an enthusiast community or club are more engaged and have higher renewal rates than those who simply purchase a good or service. With an insurance policy retention rate of nearly 90% and an average policy life of nine years, we have demonstrated a strong recurring revenue model that benefits from a combination of high insurance policy retention, new Member growth, and increases in premiums driven, in part, by the increasing values of insured vehicles.

The automotive enthusiast community created by our insurance, membership, and marketplace offerings is enhanced by our media and entertainment platforms, as well as our renowned car events, which generate positive ongoing engagement with current Members, as well as interest in our brand, products, and services from prospective members. Our media content features the work of talented automotive content creators, journalists, and storytellers who bring the automotive world to life in exciting and unexpected ways across a variety of digital, print, and video media formats. Our media team covers entertainment, news, market information, and vehicle valuation trends, all of which helps generate an engaged audience that drives retention and brings new Members into our ecosystem.

Our enthusiast-centered ecosystem is built for car lovers, enabling them to protect, buy, sell, and enjoy their special cars, thereby increasing our share of their discretionary spending. We believe that this enthusiast-centered business model, with a focus on community and engagement, is a significant advantage over competitors who, without strong affinity or engagement, are left to compete solely on price.

Insurance

We provide insurance for approximately 2.6 million collector cars and enthusiast vehicles. Through our MGA subsidiaries, we are positioned to control the pricing and underwriting of our insurance policies, benefit from steady commission revenue, and engage directly with consumers. Then, due to our consistent track record of delivering strong underwriting results, we reinsure approximately 80% of the risks written by our MGA subsidiaries through Hagerty Re.

Our insurance offerings are centered around our "Guaranteed Value" insurance policy, which differentiates our coverage from the standard auto insurance market by insuring covered vehicles at their agreed upon value, rather than their depreciated value. We work closely with our Members to determine the right amount of coverage for their vehicle, utilizing Hagerty Valuation Tools, which has been built over decades of collecting vehicle sales information, with historic pricing data on more than 48,000 collector car and enthusiast vehicle models. If a vehicle experiences a covered total loss, the carrier pays the full amount of the vehicle's insured value without any depreciation.

Our insurance business generates two types of revenue: (i) commissions and fees earned by our MGA subsidiaries from the underwriting, sale, and servicing of collector car and enthusiast vehicle insurance policies and (ii) insurance premiums earned for the risk assumed by Hagerty Re.

We utilize our data science capabilities to benefit both our MGA and risk-taking activities across the following key areas:

•Underwriting and Risk Assessment: Decades of data allow us to accurately assess the risk associated with insuring collector cars and enthusiast vehicles through actuarial analysis, which leads to more efficient underwriting and appropriate pricing.

•Market Analysis: Machine learning algorithms are designed to analyze data on collector car and enthusiast vehicle sales and values to identify trends and initiate automated marketing, sales, and servicing workflows.

•Customer Service: AI-powered tools provide instant and accurate responses to Member inquiries, freeing up our member service agents to handle more complex issues and improve the Member experience.

•Claims Processing: Streamlining the claims process by automating routine tasks and flagging potential fraud.

To better serve our Members and enhance their experience as we continue to grow, we are investing substantial resources in the implementation of a new software-as-a-service ("SaaS") platform for our insurance products. The new platform will service distribution management, policy administration, billing, claims, and data reporting and insights.

Managing General Agent

We earn commission revenue from the underwriting, sale, and servicing of collector car and enthusiast vehicle insurance policies on behalf of our insurance carrier partners. We offer our insurance products through an omnichannel distribution model, enabling us to sell our insurance wherever our policyholders need us. This omnichannel approach allows us to offer our insurance products across two channels: (i) directly to consumers and (ii) through our agent channel, which includes a vast network of independent agents and brokers, as well as strategic distribution partnerships with large traditional auto insurers. We believe that this distribution model creates a win-win situation that allows us to capture more of the collector car and enthusiast vehicle insurance market. In connection with the servicing of insurance policies, we also handle claims on behalf of our insurance carrier partners to ensure that our Members receive a high level of service focused on the unique requirements of repairing vintage and rare vehicles.

Under our alliance agreement and associated agency agreement with Markel Group, Inc. ("Markel"), our MGA subsidiaries currently earn a base commission rate of approximately 37%, as well as an additional contingent underwriting commission ("CUC") that scales annually from -5% to a maximum of +5% of written premium, with 80% of the expected CUC paid monthly. Prior to 2024, the base commission rate was approximately 32% of written premium, with a CUC of up to 10%. As a result of the strong underwriting performance of the policies underwritten by our MGA subsidiaries, we have earned approximately 90% of the maximum potential CUC over the last three years. In 2024, Markel generated approximately 93% of our total commission revenue as substantially all of our personal lines business in the U.S. is written through Markel's wholly owned subsidiary, Essentia Insurance Company ("Essentia"). Markel is a related party to the Company. Refer to Note 24 — Related-Party Transactionsin Item 8 of Part II of this Annual Reportfor additional information.

For the years ended December 31, 2024, 2023, and 2022, commission and fee revenue earned by our MGA subsidiaries represented 35%, 37%, and 39%, respectively, of our total revenue.

Direct Sales Channel

Our direct sales channel is serviced by our employee agents who sell policies in the U.S., Canada, and the United Kingdom ("U.K."). In 2024, approximately 45% of our total U.S. auto written premium is generated through direct sales.

Agent Channel

We market our insurance products through our insurance distribution partnerships, which include 9 of the top 10 largest auto insurers, as ranked by the National Association of Insurance Commissioners based upon 2023 direct premiums written. Under these arrangements, we generally make our specialty insurance products and related services available to the carrier's agents, who then refer or present Hagerty to their customers. Our track record of expertise and growth creates opportunities for cultivating strong, mutually beneficial partnerships that allow us to continue to meaningfully grow our share of the collector car and enthusiast vehicle market in the U.S.

Most insurance companies offer and compete for multi-line insurance: auto, homeowners, umbrella, watercraft, aircraft, and other exclusive collectibles. Our focus on collector car and enthusiast vehicle products and services reduces competitive threats for partners and raises their confidence in transacting with us. Furthermore, we focus our investments on developing capabilities that serve the interests of the automotive enthusiast market. This depth and discipline of focus has enabled us to maintain a "neutral" and non-threatening partner of choice position with the highest quality automobile insurance companies in the market as we help them reduce the risk of losing a customer and the total value of the bundled insurance and membership offerings.

Our approach to partnerships enables complementary growth. Our business model is attractive to our partners because we offer a full-service solution for their customers and their special cars. We handle product development and pricing, underwriting, sales and service, and claims services on behalf of our insurance carrier partners. In addition, we offer Member benefits tailored to the automotive enthusiast, all through our proprietary technology and by our sales and service teams. For partners, our focus on the collector car and enthusiast vehicle space allows them to focus on other parts of their business portfolios. We then align financial interests so both parties benefit from the relationship. We do well when our partners win and grow, and we take great care to build partnerships with companies who share our focus on excellent customer service.

We also have relationships with over 50,000 independent agents and brokers, representing all top 10 brokers in the U.S. by revenue. We are often told by agents and brokers that partnering with Hagerty brings value and joy to their automotive enthusiast customers that is unmatched in the industry. Our high-engagement and experiential approach to the market is often co-branded by independent agents and brokers to deliver automotive enthusiasts an experience the agent or broker could not deliver themselves. As a result, both brands benefit symbiotically through longer-lasting and more intimate customer relationships.

In 2024, approximately 55% of our total U.S. auto written premium is generated through our agent channel.

Strategic Agreements

Markel Alliance

Markel is the ultimate parent company of Essentia, which serves as the dedicated carrier for the specialty collector vehicle insurance policies sold by our U.S. MGA subsidiaries. Essentia is exclusive to our U.S. MGA subsidiaries and only writes insurance policies we produce. Under this arrangement, we are licensed and appointed as Essentia's MGA and are authorized to develop insurance products, underwrite, bill, and perform claims services for policies written through Essentia. State laws govern many of the activities under this relationship and our MGA subsidiaries must maintain the appropriate licensing as a producer and, where required, as an MGA, plus additional requirements in some states for claims adjusting.

Essentia cedes risk through quota share reinsurance agreements to three of our key insurance distribution partners with the remaining retained premium being ceded to its affiliate, Evanston Insurance Company ("Evanston"). Evanston, in turn, cedes a portion of the business it reinsures from Essentia to Hagerty Re. The current agreements governing our relationship with Markel expire at the end of 2030, unless we and Markel mutually agree to an extension.

Markel is a related party to the Company. Refer to Note 24 — Related-Party Transactionsin Item 8 of Part II of this Annual Reportfor additional information.

Aviva Canada Alliance

Aviva Canada Inc. ("Aviva") is the parent company of Elite Insurance Company, which serves as the carrier for the specialty collector vehicle insurance policies sold by our Canadian MGA subsidiary ("Hagerty Canada"). The relationship with Aviva in Canada is exclusive with respect to specialty, enthusiast, classic, and collector vehicle insurance, with the exception of the Quebec province, where a third-party insurance agency carries the appropriate licenses and authority to submit business to Elite Insurance Company. Elite Insurance Company and Hagerty Re also have a reinsurance quota share agreement. Canadian provincial laws govern many of the activities under this relationship and Hagerty Canada must maintain the appropriate licensing. The terms of our agreements with Aviva expire in 2030 and include a 5-year extension if certain thresholds are met.

State Farm Alliance

We have a 10-year master alliance agreement and associated managing general underwriter agreement with State Farm Mutual Automobile Insurance Company ("State Farm") under which the State Farm Classic+ policy is offered to State Farm's customers through State Farm agents. This program began issuing policies in four initial states in September 2023, with additional states planned for 2025 and 2026. Under the master alliance agreement, State Farm paid Hagerty an advanced commission of $20.0 million in 2020, which is being recognized as "Commission and fee revenue" over the remaining life of the arrangement. In addition, we are paid a commission for underwriting, binding coverage, and issuing State Farm Classic+ policies and can offer HDC memberships to State Farm Classic+ customers, providing us an additional revenue opportunity.

State Farm is a related party to the Company. Refer to Note 24 — Related-Party Transactionsin Item 8 of Part II of this Annual Reportfor additional information.

Hagerty Re

Because we have confidence in the risks underwritten by our MGA subsidiaries, we reinsure a large portion of that risk and share in the underwriting profit through Hagerty Re, which is registered as a Class 3A reinsurer under the Bermuda Insurance Act of 1978 and has an AM Best financial strength rating of A- (Excellent). For the years ended December 31, 2024, 2023, and 2022, Hagerty Re's U.S. quota share, or assumed risk, was approximately 80%, 80%, and 70%, respectively. We expect that Hagerty Re's U.S. quota share will remain at approximately 80% in 2025.

Hagerty Re allows us to efficiently deploy capital and create steady, consistent underwriting results due to our deliberate approach to managing risk and employing actuarial discipline to the underwriting process, which has resulted in an attractive average loss ratio of 44% over the last three years. This compares favorably to the overall auto insurance industry average of approximately 75%, excluding loss adjustment expenses.

For the years ended December 31, 2024, 2023, and 2022, Hagerty Re earned premium represented 54%, 53%, and 51%, respectively, of our total revenue.

Membership

We offer HDC memberships as a way to strengthen our relationships with insurance policyholders. In 2024, approximately three-quarters of our new policyholders also purchased an HDC membership. Our focus on HDC memberships is intended to build a community of car lovers and enhance brand loyalty through multiple points of engagement.

Typical insurance businesses engage with their customers only a few times a year. Through our diverse membership offerings, we deploy an ecosystem of engagement, including both physical (through events and social functions) and digital platforms (through media content, social media engagement, market news and valuation data) that can result in numerous touchpoints with Members each year. We believe our leading NPS and strong retention rates reflect the effectiveness of our enthusiast ecosystem.

For the years ended December 31, 2024, 2023, and 2022, membership revenue represented 4.8%, 5.2%, and 5.7%, respectively, of our total revenue.

Marketplace

The market for buying and selling collector cars and enthusiast vehicles is substantial, encompassing live and digital auctions, as well as private sales. We estimate that there are approximately 48 million insurable collector cars and enthusiast vehicles in the U.S., valued at approximately $1.2 trillion. In 2024, we observed over 300,000 buy/sell collector car and enthusiast vehicle transactions representing approximately $15.7 billion in total value trading hands in our U.S. insurance book, or approximately 1% of the estimated U.S. market value. We believe we can differentiate ourselves from other platforms and services by incorporating a higher level of trust into this marketplace by using our existing size, scale, improved processes, and trusted brand status.

Our marketplace offerings leverage the power of our ecosystem by providing a trusted platform where enthusiasts can buy, sell, and finance collector cars and enthusiast vehicles. At the high-end of the collector car and enthusiast vehicle market, where values typically exceed $100,000, our wholly owned subsidiary, Broad Arrow Group, Inc. ("Broad Arrow"), helps collectors and enthusiasts buy and sell at live auctions and through brokered private sales. At lower price points, typically below $100,000, we also offer digital auctions through Hagerty Marketplace. From time to time, Broad Arrow also opportunistically acquires collector cars and enthusiast vehicles for resale. Lastly, through Broad Arrow Capital LLC ("BAC"), we provide financing solutions to qualified collectors and businesses in the U.S., Canada, the U.K., and certain European countries by structuring loans secured by their collector cars. Loans underwritten by BAC are typically $250,000 or higher, with a focus on collector cars and enthusiast vehicles that are typically not financed by traditional banks and lenders.

To date, Broad Arrow's live auctions and private sales have been conducted in the U.S. However, in January 2025, Broad Arrow expanded its reach by adding car specialists in certain European countries to allow for the growth of its live auction and private sale offerings. Starting in May 2025, Broad Arrow will partner with BMW AG to become the official auction partner of the Concorso d'Eleganza Villa d'Este on the shores of Lake Como in Italy.

For the years ended December 31, 2024, 2023, and 2022, marketplace revenue represented 4.5%, 2.9%, and 1.7%, respectively, of our total revenue.

Business Attributes

Intellectual Property

We believe our intellectual property rights are valuable and important to our business. We rely on trademarks, patents, copyrights, trade secrets, license agreements, intellectual property assignment agreements, confidentiality procedures, non-disclosure agreements, and electronic and physical security measures to establish and protect our proprietary rights. Though we rely in part upon these legal, contractual, and other protections, we believe that factors such as the skill and ingenuity of our employees and the functionality and frequent enhancements to our platform are large contributors to our success. We intend to pursue additional intellectual property protection on such enhancements to the extent we believe it would be beneficial and cost-effective.

As of December 31, 2024, we have two issued patents in the U.S. and one in Canada. The issued patents generally relate to (i) our vehicle information number decoder, which allows us to determine vehicle configuration details and associated vehicle values and (ii) our method and system for storage and selective sharing of vehicle data. The issued patents are expected to expire in August 2030, May 2031, and May 2033, respectively. We continually review our development efforts to assess the existence and the ability to protect new intellectual property.

We have trademark rights in our name, our logo, and other brand indicia, and have trademark registrations for select markets in the U.S., Canada, U.K., European Union, and Australia. We have copyrights for our media and entertainment content and registered copyrights for our vehicle information tools in the U.S. We also have registered various domain names related to our brand for websites that we use in our business, including Hagerty.com.

Although we believe our intellectual property rights are valuable and strong, intellectual property rights are sometimes subject to invalidation or circumvention. Refer to the section titled "Risk Factors —Legal, Regulatory and Political Risks —Our intellectual property rights are extremely valuable and if they are not properly protected, our products, services, and brand could be adversely impacted." within Item IA of Part I— Risk Factors, in this Annual Report for additional information.

Seasonality

We operate in certain geographic regions where vehicles are purchased and driven more frequently during the spring and summer months, and a larger portion of our annual insurance policies renew during those months. Accordingly, our MGA subsidiaries experience peak commission and fee revenue in the second and third quarters of the year. In addition, catastrophic loss events, such as hurricanes and wildfires, are typically more prevalent in the second half of the year, so our losses and loss adjustment expenses may reflect that seasonality. As a result of these factors, we expect to experience seasonal fluctuations in our quarterly operating results, which may not fully reflect the underlying performance of our business.

Competition

We believe that our business model of integrated products and services is unique. While there are other specialty insurance companies offering collector car insurance, the size of their operations is small compared to ours. We believe our enthusiast-centered ecosystem, with a focus on community and engagement, is a significant competitive advantage over competitors who, without strong affinity or engagement, are left to compete solely based on price. We experience some competition in the larger standard auto insurance market as the majority of collector cars and enthusiast vehicles are currently insured through traditional auto insurance carriers. However, in lieu of competing directly with standard auto insurance carriers, we have formed relationships with many of them to offer their customers our specialty insurance products and HDC memberships. These relationships with the largest auto insurance carriers enable us to provide a high-touchpoint experience for customers, resulting in more appropriate levels of coverage and higher overall customer service satisfaction.

Government Regulation

We operate across jurisdictions in North America and Europe and our businesses (in particular, insurance) are subject to comprehensive regulation and supervision. Each jurisdiction in which we operate has established supervisory agencies with broad administrative and oversight powers for various business practices (for example, financial services consumer protection and data protection). While we are not aware of any proposed or recently enacted domestic or international regulation that would have a material impact on our operations, earnings, or competitive position, we cannot predict the effect that future regulatory changes might have on us. Refer to the section titled "Risk Factors —Legal, Regulatory and Political Risks" within Item IA of Part I— Risk Factors in this Annual Report for additional information.

Investments

We hold an investment portfolio consisting predominantly of fixed maturity securities such as corporate bonds, U.S. treasury securities, and mortgage-backed securities. Our investment portfolio also includes a relatively small balance of equity securities.

We manage our investment portfolio in accordance with an investment policy that seeks to generate an attractive total return on an after-tax basis on its investment assets, over the long-term, subject to compliance with all of the following constraints and objectives: (i) comply with certain portfolio-level and asset-level class constraints; (ii) preserve capital by assuming only a modest amount of risk of principal loss; (iii) ensure sufficient liquidity to meet obligations; (iv) comply with all legal, regulatory, and contractual requirements; and (v) employ an efficient portfolio in terms of assumed risk and relative to expected return.

Refer to the section titled "Risk Factors —Risks Related to Our Business —Performance of our investment portfolio is subject to a variety of investment risks that may adversely affect our financial results." within Item IA of Part I— Risk Factors and Note 3 — Investments in Item 8 of Part II of this Annual Report for additional information.

Human Capital

Our performance-based culture is shaped by our people, and their engagement, accountability and alignment with our key objectives as an organization. Our strategy involves hiring great people, providing challenging and meaningful work, and investing in their professional and personal development, and we believe this creates a strategic advantage for us. Our objectives include effectively identifying, recruiting, retaining, and incentivizing our employees. As of December 31, 2024, we had 1,744 total employees including 1,733 full-time employees. None of our employees are represented by a labor union or covered by a collective bargaining agreement.

Compensation

Our compensation programs are designed to attract, retain and motivate talented, deeply qualified, and committed individuals who believe in our mission, while rewarding employees for long-term value creation. We have a pay-for-performance culture in which employee compensation is aligned to company performance, as well as individual contributions and impacts. The potential for stock-based compensation awards through our equity incentive plan, as well as the opportunity to participate in an employee stock purchase plan are designed to align employee compensation to the long-term interests of our stockholders, while encouraging them to think and act like owners. We strive for a fair, competitive, transparent, and equitable approach in recognizing and rewarding our employees.

Health and Wellness

The health and wellness of our employees and their families is integral to our success. We have a comprehensive benefits program to support the physical, mental, and financial well-being of our employees. We have a self-insured medical plan in which our employees pay up to 25% of the monthly estimated premiums. In addition to core medical benefits, we offer maternity and paternity benefits, as well as employee assistance programs to support the mental health of our employees. Additionally, aside from our competitive paid time off program, we offer caregiver time off, which provides employees 40 hours each year of paid time off for caregiver responsibilities.

Performance Culture

Our performance culture objective is to be a company where each employee genuinely belongs, is respected and valued, and is driven to do their best work. We take this to heart not just within our Company, but also within the broader automotive enthusiast community.

To help achieve our goals, we ensure fair and transparent processes in talent assessment, hiring, performance management, career progression, and retention. We are creating an environment focused on the respectful treatment of others, including employees, Members, and partners. Engagement and belonging are fueled by having a meaningful connection to others and opportunities to grow and develop careers. Across these dimensions, we are building programs, systems and tools that foster greater belonging.

We intend to continue to invest and further develop our leadership training and support to ensure that all leaders — those promoted, developing or hired — understand how to effectively lead a high-performance team.