Hagerty, Inc.

Previous wording

We are a market leader in providing insurance for collector cars and enthusiast vehicles. Through our insurance model, 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.

Current wording

We are a market leader in providing insurance for collector cars and enthusiast vehicles. Through our insurance model, 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 currently reinsure approximately 80% of the risks written by our MGA subsidiaries through our wholly owned subsidiary, Hagerty Reinsurance Limited ("Hagerty Re"). Refer to "Recent Developments" below for information on emerging developments related to a proposed fronting arrangement (the "Proposed Fronting Arrangement") with Markel Group Inc. (together with its subsidiaries, "Markel").

Previous wording

For the three months ended March 31, 2025, we reported Net income of $27.3 million, representing a $19.1 million, or 232.9%, increase compared to the prior year, and Adjusted EBITDA (a non-GAAP financial measure) of $39.6 million, representing a $12.3 million, or 44.9%, increase compared to the prior year. These improvements are primarily attributable to 11.9% growth in Written Premium, which drove a 12.9% increase in Commission and fee revenue and an 11.7% increase in Earned premium. The comparison to the prior year is also favorably impacted by a higher level of Broad Arrow inventory sales, including cars acquired from The Academy of Art University Collection, which were sold at auction in February 2025.

Current wording

For the three months ended June 30, 2025, we reported Net income of $47.2 million, representing a $4.5 million, or 10.7%, increase compared to the prior year, and Adjusted EBITDA of $63.7 million, representing a $10.6 million, or 20.0%, increase compared to the prior year. These improvements are primarily attributable to 10.8% growth in Written Premium, which drove an 11.2% increase in Commission and fee revenue and a 12.8% increase in Earned premium. The comparison to the prior year is also favorably impacted by significantly higher levels of Broad Arrow inventory sales and private sale commissions, as well as the results from Broad Arrow's inaugural auction at Concorso d’Eleganza Villa d’Este.

Previous wording

(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 wording

(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 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.

Previous wording

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 opportunistically acquired for resale. In addition, we also earn finance revenue from loans made to qualified collectors and businesses secured by their collector cars.

Current wording

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. Through our marketplace business, we also earn revenue from the sale of collector cars and enthusiast vehicles that we have opportunistically acquired for resale. 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, 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 amortized over the useful life of the asset created, such as 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.

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 recorded in employee development costs. Salaries and benefits are expensed as incurred except for costs that are required to be capitalized, which are amortized over the useful life of the asset created, such as 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

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 acquired vehicles sold through our marketplace business, sales commissions related to our marketplace business, as well as interest expense and borrowing costs associated with the Broad Arrow Capital LLC ("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.

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 acquired vehicles sold through our marketplace business, and sales commissions related to our marketplace business, as well as interest expense and borrowing costs associated with the Broad Arrow Capital LLC ("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

Interest and other income (expense), net primarily includes interest income related to cash balances and fixed maturity 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 our current and prior revolving credit facilities with JPMorgan Chase Bank, N.A. ("JPM"), as well as the State Farm Term Loan (as defined in Note 12 — Long-Term Debt in Item 1 of Part I of this Quarterly Report), and changes in the value of the liability related to our Tax Receivable Agreement ("TRA") (the "TRA Liability") with Hagerty Holding Corp. ("HHC") and Markel Group Inc. ("Markel") (together the "Legacy Unit Holders"). Refer to Note 17 — Taxation in Item 1 of Part I of this Quarterly Report for additional information related to the TRA.

Current wording

Interest and other income (expense), net primarily includes interest income related to cash balances and fixed maturity 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 our current and prior revolving credit facilities with JPMorgan Chase Bank, N.A. ("JPM"), as well as the State Farm Term Loan (as defined in Note 15 — Debt in Item 1 of Part I of this Quarterly Report) and changes in the value of the liability related to our Tax Receivable Agreement ("TRA") (the "TRA Liability") with Hagerty Holding Corp. ("HHC") and Markel (together the "Legacy Unit Holders"). Refer to Note 20 — Taxation in Item 1 of Part I of this Quarterly Report for additional information related to the TRA.

Previous wording

The following table summarizes our results of operations for the three months ended March 31, 2025 and 2024, and the dollar and percentage change between the two periods:

Current wording

The following table summarizes our results of operations for the three months ended June 30, 2025 and 2024, and the dollar and percentage changes between the two periods:

Previous wording

Commission and fee revenue from agent sources increased $5.8 million, or 11.8%, and Commission and fee revenue from direct sources increased $5.6 million, or 14.2%, during the three months ended March 31, 2025. 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 $8.1 million, or 11.6%, and Commission and fee revenue from direct sources increased $6.4 million, or 10.8%, during the three months ended June 30, 2025. Commission rates vary based on geography, but do not differ by distribution channel (i.e., whether they are direct-sourced or agent-sourced).

Previous wording

Earned premium at Hagerty Re was $169.4 million for the three months ended March 31, 2025, an increase of $17.7 million, or 11.7%, compared to 2024. This increase was primarily due to continued growth of subject premiums written through our MGA subsidiaries, which increased $21.4 million, or 10.8%, compared to the three months ended March 31, 2024.

Current wording

Earned premium at Hagerty Re was $177.8 million for the three months ended June 30, 2025, an increase of $20.2 million, or 12.8%, compared to 2024. This increase was almost entirely due to continued growth of subject premiums written through our MGA subsidiaries, which increased $33.7 million, or 11.9%, compared to the three months ended June 30, 2024.

Previous wording

(1)Represents the portion of total written premium written by our MGA subsidiaries that is subject to reinsurance agreements between our insurance carrier partners and Hagerty Re.

Current wording

(2)Represents the portion of total written premium written by our MGA subsidiaries that is subject to reinsurance agreements between our insurance carrier partners and Hagerty Re.

Previous wording

Membership fee revenue was$15.3 million for the three months ended March 31, 2025, an increase of $1.9 million, or 14.1%, compared to 2024. This increase was primarily due to a $1.8 million, or 14.2%, increase in revenue attributable to new insurance policies issued with a bundled HDC membership. For the three months ended March 31, 2025 and 2024, membership fees were 30.7% and 43.0%, respectively, of total Membership, marketplace and other revenue.

Current wording

Membership fee revenue was $15.7 million for the three months ended June 30, 2025, an increase of $1.5 million, or 10.9%, compared to 2024. This increase was primarily attributable to a $1.4 million, or 10.7%, increase in revenue attributable to new policies issued with a bundled HDC membership. For the three months ended June 30, 2025 and 2024, membership fees were 32.9% and 52.7%, respectively, of the Membership, marketplace and other revenue total.

Previous wording

Salaries and benefits were $59.1 million for the three months ended March 31, 2025, an increase of $3.0 million, or 5.3%, compared to 2024. This increase was primarily due to annual merit increases, which occur in the second quarter of each year, as well as increased headcount year over year.

Current wording

Salaries and benefits were $64.1 million for the three months ended June 30, 2025, an increase of $6.4 million, or 11.0%, compared to 2024. This increase was primarily due to annual merit increases, which occur in the second quarter of each year, as well as increased headcount year over year.

Previous wording

Ceding commissions, net was $77.3 million for the three months ended March 31, 2025, an increase of $6.4 million, or 9.0%, compared to 2024. This increase is primarily attributable to the 11.7% increase in Earned premium discussed above.

Current wording

Ceding commissions, net was $82.9 million for the three months ended June 30, 2025, an increase of $9.5 million, or 12.9%, compared to 2024. This increase is primarily attributable to the 12.8% increase in Earned premium discussed above.

Previous wording

Losses and loss adjustment expenses were $71.1 million for the three months ended March 31, 2025, an increase of $8.8 million, or 14.1%, compared to 2024. This increase was primarily driven by the 11.7% increase in Hagerty Re Earned premium discussed above.

Current wording

Losses and loss adjustment expenses were $75.2 million for the three months ended June 30, 2025, an increase of $10.5 million, or 16.2%, compared to 2024. This increase was primarily driven by the 12.8% increase in Hagerty Re Earned premium discussed above.

Previous wording

Sales expense was $54.6 million for the three months ended March 31, 2025, an increase of $15.0 million, or 37.7%, compared to 2024. This increase was due, in part, to a $12.3 million increase in cost of sales, predominantly as a result of a higher level of marketplace inventory sales, as well as a $0.6 million increase in sales commissions, consistent with revenue growth within the marketplace business. In addition, broker expense increased $1.7 million, consistent with the written premium growth within the agent insurance distribution channel.

Current wording

Sales expense was $67.4 million for the three months ended June 30, 2025, an increase of $19.4 million, or 40.4%, compared to 2024. This increase was due, in part, to a $15.3 million increase in cost of sales, predominantly as a result of a higher level of marketplace inventory sales, as well as a $3.6 million increase in sales commissions, consistent with revenue growth within the marketplace business. In addition, broker expense increased $2.2 million, consistent with the written premium growth within the agent insurance distribution channel.

Previous wording

During the three months ended March 31, 2024, Loss related to warrant liabilities, net was a $6.1 million loss as a result of the change in fair value of our then outstanding warrant liabilities. There were no warrants outstanding during the three months ended March 31, 2025 as a result of the Warrant Exchange transaction that was completed in July 2024. Refer to Note 4 — Fair Value Measurements in Item 1 of Part I of this Quarterly Report for additional information with respect to our warrants.

Current wording

During the three months ended June 30, 2024, Loss related to warrant liabilities, net was $1.9 million as a result of the change in fair value of our then outstanding warrant liabilities. There were no warrants outstanding during the three months ended June 30, 2025 due to the Warrant Exchange transaction that was completed in July 2024. Refer to Note 6 — Fair Value Measurements in Item 1 of Part I of this Quarterly Report for additional information with respect to our warrants.

Previous wording

The following table summarizes the components of Interest and other income (expense), net for the three months ended March 31, 2025 and 2024:

Current wording

The following table presents the components of Interest and other income (expense), net for the three months ended June 30, 2025 and 2024:

Previous wording

For the three months ended March 31, 2025, income tax expense was $5.5 million, representing an increase of $0.4 million, or 7.0%, compared to the three months ended March 31, 2024. This increase was primarily due to an increase in pre-tax income of $1.8 million, or 7.3%, within Hagerty Re. Refer to Note 17 — Taxation in Item 1 of Part I of this Quarterly Report for additional information with respect to items affecting our effective tax rate.

Current wording

For the three months ended June 30, 2025, income tax expense was $6.2 million, representing an increase of $0.4 million, or 6.0%, compared to 2024. This increase was primarily due to an increase in THG earnings attributable to Hagerty, Inc. Refer to Note 20 — Taxation in Item 1 of Part I of this Quarterly Report for additional information with respect to items affecting our effective tax rate.

Previous wording

Commission and fee revenue was $100.3 million for the three months ended March 31, 2025, an increase of $11.4 million, or 12.9%, compared to 2024. This increase was driven by policy renewals, which contributed $11.9 million to the year-over-year improvement, partially offset by a $0.5 million decrease in revenue related to new policies.

Current wording

Commission and fee revenue was $243.6 million for the six months ended June 30, 2025, an increase of $25.9 million, or 11.9%, compared to 2024. This increase was driven by policy renewals, which contributed $26.4 million to the year-over-year improvement, partially offset by a $0.5 million decrease in revenue related to new policies.

Previous wording

The increase in revenue from policy renewals was primarily driven by a 16.6% increase in underlying policy premiums, as well as continued strong policy retention. The increase in renewal policy premiums is 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.

Current wording

The increase in revenue from policy renewals was primarily driven by a 15.3% increase in underlying policy premiums, as well as continued strong policy retention. The increase in renewal policy premiums is the 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.

Previous wording

The decrease in revenue from new policies was primarily driven by a 6.7% decrease in new business count, the effect of which was partially offset by rate increases in several states due to inflation and higher vehicle repair costs.

Current wording

The decrease in revenue from new policies was primarily driven by a 3.5% decrease in new business count, the effect of which was partially offset by rate increases in several states due to inflation and higher vehicle repair costs.

Previous wording

The following tables present premiums assumed by Hagerty Re and the related quota share percentages for the three months ended March 31, 2025 and 2024:

Current wording

The following tables present premiums assumed and earned by Hagerty Re, as well as the related quota share percentages for the six months ended June 30, 2025 and 2024:

Previous wording

Marketplace revenue was $29.0 million for the three months ended March 31, 2025, an increase of $18.5 million, or 175.8%, compared to 2024. This improvement was principally due to a higher level of inventory sales, including cars acquired from The Academy of Art University Collection, which were sold at auction in February 2025. For the three months ended March 31, 2025 and 2024, Marketplace revenue was 58.0% and 33.6%, respectively, of total Membership, marketplace and other revenue.

Current wording

Marketplace revenue was $55.8 million for the six months ended June 30, 2025, an increase of $39.0 million compared to 2024. This improvement was principally due to significantly higher levels of inventory sales, including cars acquired from The Academy of Art University Collection and sold at auction in February 2025, as well as increased private sale commissions. To a lesser extent, the increase in Marketplace revenue was attributable to revenues earned from Broad Arrow's inaugural auction at Concorso d’Eleganza Villa d’Este, which was held in May 2025. For the six months ended June 30, 2025 and 2024, Marketplace revenue was 57.1% and 28.9%, respectively, of total Membership, marketplace and other revenue.

Previous wording

Other revenue, which primarily includes sponsorship, admission, advertising, valuation, and sublease revenue, was $5.6 million for the three months ended March 31, 2025, a decrease of $1.7 million, or 22.8%, compared to 2024. This decrease was primarily attributable to the loss of registration fee revenue attributable to MSR, which was sold in the second quarter of 2024, as well as a lower level of sponsorship revenue and a decrease in admission revenue due to poor weather at this year's Amelia Concours d'Elegance. For the three months ended March 31, 2025 and 2024, other revenue was 11.3% and 23.3%, respectively, of total Membership, marketplace and other revenue.

Current wording

Other revenue, which primarily includes sponsorship, admission, advertising, valuation, and sublease revenue, was $10.8 million for the six months ended June 30, 2025, a decrease of $2.9 million, or 21.0%, compared to 2024. This decrease was primarily attributable to the loss of registration fee revenue attributable to MSR, which was sold in June 2024, as well as a lower level of sponsorship revenue and a decrease in admission revenue due to poor weather at this year's Amelia Concours d'Elegance. For the six months ended June 30, 2025 and 2024, other revenue was 11.1% and 23.6%, respectively, of total Membership, marketplace and other revenue. Refer to Note 11 — Divestiture in Item 1 of Part I of this Quarterly Report for additional information related to the sale of MSR.

Previous wording

For the three months ended March 31, 2025, our loss ratio was 42.0%, including the impact of $10.4 million of pre-tax catastrophe losses resulting from the Southern California wildfires in January 2025. For the three months ended March 31, 2024, our loss ratio was 41.1%, including the impact of catastrophe losses.

Current wording

For the six months ended June 30, 2025, our loss ratio was 42.2%, including the impact of $10.3 million of pre-tax catastrophe losses resulting from the Southern California wildfires in January 2025. For the six months ended June 30, 2024, our loss ratio was 41.1%, including the impact of catastrophe losses.

Previous wording

General and administrative expenses were $22.2 million for the three months ended March 31, 2025, an increase of $2.3 million, or 11.7%, compared to 2024, primarily due to an increase in software-related costs.

Current wording

General and administrative expenses were $44.8 million for the six months ended June 30, 2025, an increase of $3.5 million, or 8.5%, compared to 2024. This increase was primarily due to an increase in software-related costs, partially offset by a $0.9 million decrease in professional services.

Previous wording

Depreciation and amortization expense was $9.5 million for the three months ended March 31, 2025, a decrease of $1.1 million, or 10.2%, compared to 2024. The decrease was primarily driven by a smaller base of in-service fixed assets and finite-lived intangible assets as of March 31, 2025, when compared to the same period in 2024.

Current wording

Depreciation and amortization expense was $18.3 million for the six months ended June 30, 2025, a decrease of $2.3 million, or 11.0%, compared to 2024. The decrease was primarily driven by a smaller base of in-service fixed assets and finite-lived intangible assets as of June 30, 2025, when compared to the same period in 2024.

Previous 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 2025 JPM Credit Facility, the BAC Credit Facility, and the unsecured term loan credit facility with State Farm Mutual Automobile Insurance Company ("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; (vi) funding required distributions paid to the non-controlling interest unit holders of THG; and (vii) funding required payments to Legacy Unit Holders 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 2025 JPM Credit Facility, the BAC Credit Facility, and the unsecured term loan credit facility with State Farm Mutual Automobile Insurance Company ("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; (vi) funding required distributions to the non-controlling interest unit holders of THG; and (vii) funding required payments to Legacy Unit Holders under the TRA.

Previous wording

The 2025 JPM Credit Agreement provides for a senior unsecured revolving credit facility (the "2025 JPM Credit Facility") with an aggregate borrowing capacity of $375.0 million. The 2025 JPM Credit Agreement matures in March 2030, but may be extended if agreed to by THG and the lenders party thereto. Any unpaid balance on the 2025 JPM Credit Facility is due at maturity. As of March 31, 2025, total outstanding borrowings under the 2025 JPM Credit Facility were $88.8 million.

Current wording

The 2025 JPM Credit Agreement provides for a senior unsecured revolving credit facility (the "2025 JPM Credit Facility") with an aggregate borrowing capacity of $375.0 million. The 2025 JPM Credit Agreement matures in March 2030, but may be extended if agreed to by THG and the lenders party thereto. Any unpaid balance on the 2025 JPM Credit Facility is due at maturity. As of June 30, 2025, total outstanding borrowings under the 2025 JPM Credit Facility were $111.6 million.

Previous wording

BAC and its wholly owned subsidiary BAC Funding 2023-1, LLC, as borrower, have 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"), which has an aggregate borrowing capacity of $75.0 million and is subject to a borrowing base that is determined based on the carrying value of certain BAC notes receivable. As of March 31, 2025, the applicable borrowing base and outstanding borrowings for the BAC Credit Agreement were $32.1 million.

Current wording

BAC and its wholly owned subsidiary BAC Funding 2023-1, LLC, as borrower, have a revolving credit agreement (the "BAC Credit Agreement") that provides for a revolving credit facility (the "BAC Credit Facility") with an aggregate borrowing capacity of $75.0 million. The BAC Credit Facility's borrowing base is determined by the carrying value of certain BAC notes receivable. As of June 30, 2025, the applicable borrowing base and outstanding borrowings for the BAC Credit Agreement were $38.9 million.

Previous wording

The revolving borrowing period provided by the BAC Credit Agreement expires in December 2025, after which an amortization period will begin when principal payments will be required to be made until the BAC Credit Facility ultimately matures in December 2026. The revolving borrowing period and the maturity date of the BAC Credit Agreement may be extended by one year if requested by BAC and agreed by the administrative agent. BAC is not a borrower or guarantor of the BAC Credit Facility.

Current wording

The revolving borrowing period expires in December 2025, followed by an amortization period until the BAC Credit Facility ultimately matures in December 2026. The borrowing period and the maturity date may be extended by one year if requested by BAC and agreed by the administrative agent. BAC is not a borrower or guarantor of the BAC Credit Facility.

Previous wording

Recourse to the Company and its subsidiaries that originated and transferred notes receivable that represent collateral under the BAC Credit Facility is limited to (i) an obligation of the applicable seller to repurchase a note receivable if it is determined that there was a breach of any representation or warranty relating to such note receivable as of the relevant date specified in the related transfer agreement and (ii) a limited guarantee covering certain liabilities that may result under certain foreign exchange hedging activity of one of the SPEs.

Current wording

BAC and certain of its subsidiaries may transfer notes receivable to wholly owned, bankruptcy remote special purpose entities (each, an "SPE") to secure borrowings, isolating these assets from our other obligations. Recourse is limited to (i) an obligation of the applicable seller to repurchase a note receivable if it is determined that there was a breach of any representation or warranty relating to such note receivable as of the relevant date specified in the related transfer agreement and (ii) a limited guarantee for certain liabilities that may result under certain foreign exchange hedging activity of one of the SPEs.

Previous wording

BAC and BAC Funding 2023-1, LLC are required, among other things, to meet certain financial covenants under the BAC Credit Agreement, including that BAC, as the servicer, maintain a minimum tangible net worth, minimum liquidity balances, and an indebtedness to tangible net worth ratio. As of March 31, 2025, we were in compliance with the financial covenants under the BAC Credit Agreement.

Current wording

BAC and BAC Funding 2023-1, LLC are required, among other things, to meet certain financial covenants including that BAC, as the servicer, maintain a minimum tangible net worth, minimum liquidity balances, and an indebtedness to tangible net worth ratio. As of June 30, 2025, we were in compliance with the financial covenants under the BAC Credit Agreement.

Previous wording

Refer to Note 12 — Long-Term Debt in Item 1 of Part I of this Quarterly Report for additional information related to the 2025 JPM Credit Agreement and BAC Credit Agreement.

Current wording

Refer to Note 15 — Debt in Item 1 of Part I of this Quarterly Report for additional information related to the 2025 JPM Credit Agreement and BAC Credit Agreement.

Previous wording

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 March 31, 2025, Drivers Edge maintained sufficient capital and surplus levels to comply with state insurance regulations.

Current wording

Similarly, our U.S. insurance company subsidiary, Drivers Edge, which holds certificates of authority in 39 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 June 30, 2025, Drivers Edge maintained sufficient capital and surplus levels to comply with state insurance regulations.

Previous wording

Under Bermuda law, Hagerty Re is prohibited from declaring or issuing a dividend if it fails to meet its minimum solvency margin or minimum liquidity ratio. Prior approval from the BMA is also required if Hagerty Re's proposed dividend payments would exceed 25% of its prior year-end total statutory capital and surplus. Based on these restrictions, during 2025, Hagerty Re can pay $67.9 million in dividends without prior BMA approval; however, the amount that Hagerty Re can pay in dividends is further limited by the amount of unrestricted cash held in its operating account, which totaled $38.1 million as of March 31, 2025. As of March 31, 2025, there were no plans to issue dividends from Hagerty Re.

Current wording

Under Bermuda law, Hagerty Re is prohibited from declaring or issuing a dividend if it fails to meet its minimum solvency margin or minimum liquidity ratio. Prior approval from the BMA is also required if Hagerty Re's proposed dividend payments would exceed 25% of its prior year-end total statutory capital and surplus. Based on these restrictions, during 2025, Hagerty Re can pay $67.9 million in dividends without prior BMA approval; however, the amount that Hagerty Re can pay in dividends is further limited by the amount of unrestricted cash and liquid investments held outside of restricted accounts, which totaled $47.1 million as of June 30, 2025. As of June 30, 2025, there were no plans to issue dividends from Hagerty Re.

Previous wording

The following table summarizes our cash flow data for the three months ended March 31, 2025 and 2024:

Current wording

The following table summarizes our cash flow data for the six months ended June 30, 2025 and 2024:

Previous wording

Cash provided by operating activities primarily consists of Net income, adjusted for non-cash items, and changes in working capital balances. Net cash provided by operating activities for the three months ended March 31, 2025 and 2024 is presented below:

Current wording

Cash provided by operating activities primarily consists of Net income, adjusted for non-cash items, and changes in working capital balances. Net cash provided by operating activities for the six months ended June 30, 2025 and 2024 is presented below:

Previous wording

Net cash provided by operating activities for the three months ended March 31, 2025 was $43.8 million, a decrease of $14.4 million, or 24.7%, compared to 2024. This decrease was due to a $26.7 million decrease in cash from operating assets and liabilities, partially offset by a $12.3 million increase in Net income, net of non-cash adjustments. The $6.8 million decrease in non-cash adjustments to Net income was primarily the result of a $6.1 million fair value loss related to our warrant liabilities in the prior year. There was no such charge in the current year as our warrants were settled in connection with the consummation of the Warrant Exchange in the third quarter of 2024.

Current wording

Net cash provided by operating activities for the six months ended June 30, 2025 was $97.7 million, a decrease of $24.5 million, or 20.1%, compared to 2024. This decrease was due to a $40.2 million decrease in cash from operating assets and liabilities, partially offset by a $15.6 million increase in Net income, net of non-cash adjustments. The $8.0 million decrease in non-cash adjustments to Net income was primarily the result of an $8.1 million fair value loss related to our warrant liabilities in the prior year. There was no such charge in the current year as our warrants were settled in connection with the consummation of the Warrant Exchange in the third quarter of 2024.