Hagerty, Inc.

Current report

Rising interest rates and the imposition of tariffs on imported goods could increase costs, reduce consumer spending on collector cars and related services, and negatively impact our business, results of operations and financial condition.

Current report

Our business depends on consumer demand for collectible cars and related services, which may decline in response to unfavorable economic conditions, such as high inflation or interest rates, or changes in trade and regulatory policies. Consumer spending on discretionary items, such as collector cars and related services, may be influenced by various factors beyond our control, such as unemployment, income levels, consumer confidence, and financial market volatility. When economic conditions deteriorate, consumers may reduce or postpone their spending on collector cars and related services, which could lower the demand for our products and services. Moreover, changes in tariffs, trade policy, or laws and policies affecting foreign trade, manufacturing, development and investment could increase our costs. For example, the recent imposition of tariffs on certain imported goods could affect the availability and cost of parts to repair our insureds' vehicles, which could impact our cost of claims, insurance premiums and customer satisfaction. While we have not yet identified direct effects from the recent changes in tariffs and other trade measures in our business, the long-term consequences of these actions remain uncertain and could negatively affect both the overall economy and our business. Any prolonged downturns in the economy or decreases in consumer demand for collector cars and related services could materially adversely affect our business, results of operations, and financial condition.

Previous report

Our results of operations depend, in part, on the performance of our investment portfolio. We seek to hold a portfolio of investments in accordance with our investment policy, which is routinely reviewed by our Investment Committee.

Previous report

Historically, our investment portfolio was primarily invested in cash and cash equivalents and fixed maturity securities. However, during the second quarter of 2024, we diversified our investment portfolio by opening positions in higher-yield fixed maturity securities and, to a lesser extent, equity securities. Our investments in marketable equity securities are carried on our balance sheet at fair market value and are subject to potential losses and declines in market value.

Previous report

The Federal Reserve began lowering interest rates in September 2024. If interest rates continue to decline, this would place pressure on our net investment income, particularly as it relates to our short-term investments, which, in turn, may adversely affect our operating results. Conversely, if interest rates were to increase, it could cause the values of our fixed income securities portfolios to decline, with the magnitude of the decline depending on the duration of securities included in our portfolio and the amount by which interest rates increase.

Previous report

The value of our investment portfolio is subject to the risk that certain investments may default or become impaired due to deterioration in the financial condition of one or more issuers of the securities we hold, or due to deterioration in the financial condition of an insurer that guarantees an issuer's payments on such investments. Downgrades in the credit ratings of fixed maturity securities also have a significant negative effect on the market value of such securities.

Previous report

Each of the foregoing factors could reduce our net investment income and result in realized investment losses. Risks for all types of securities are managed through the application of our investment policy, which establishes investment parameters that include, but are not limited to, maximum percentages of investment in certain types of securities and minimum levels of credit quality. We cannot be certain that our investment objectives will be achieved, and results may vary substantially over time. In addition, although we seek to employ investment strategies that are not correlated with our insurance and reinsurance exposures, losses in our investment portfolio may occur at the same time as underwriting losses and, therefore, exacerbate the adverse effect of the losses on us.