Hagerty, Inc.

Previous wording

The following discussion and analysis of our financial condition and results of operations should be read in conjunction with our Annual Report on Form 10-K ("Annual Report") and our Condensed Consolidated Financial Statements and related Notes included in Item 1 of Part I of this Quarterly Report on Form 10-Q ("Quarterly Report"). This discussion contains forward-looking statements based upon current expectations that involve risks and uncertainties. Please refer to the section in this Quarterly Report entitled "Cautionary Statement Regarding Forward-Looking Statements".

Current wording

The following discussion and analysis of our financial condition and results of operations should be read in conjunction with our Annual Report on Form 10-K for the year ended December 31, 2025 ("Annual Report") and our Condensed Consolidated Financial Statements and related Notes included in Item 1 of Part I of this Quarterly Report on Form 10-Q ("Quarterly Report"). This Management's Discussion and Analysis of Financial Condition and Results of Operations ("MD&A") contains forward-looking statements based upon current expectations that involve risks and uncertainties. Please refer to the section in this Quarterly Report entitled "Cautionary Statement Regarding Forward-Looking Statements".

Previous wording

On December 31, 2025, we entered into new contractual arrangements and amended the terms of our existing contractual arrangements with Markel and its affiliates. These coordinated transactions with Markel formed an arrangement that became effective January 1, 2026 (the "Markel Fronting Arrangement"). Under the Markel Fronting Arrangement: (i) we continue to issue policies through Essentia, with our underwriting authority (including pricing decisions, rate filing, insurance rating, and risk selections) and claims authority expanded to the maximum levels permitted by applicable law; (ii) we have assumed increased administrative responsibilities for the policies issued through Essentia; (iii) Hagerty Re controls 100% of the premium and assumes 100% of the risk for policies written through Essentia; and (iv) Hagerty Re pays an initial fronting fee, representing 2% of written premium, to Markel for administrative support, which incrementally decreases based on the level of written premium in each calendar year. We expect these changes to result in increased profitability and additional control, allowing for enhanced operational efficiencies.

Current wording

On December 31, 2025, we entered into new contractual arrangements and amended the terms of our existing contractual arrangements with Markel and its subsidiaries. These coordinated transactions with Markel formed an arrangement that became effective January 1, 2026 (the "Markel Fronting Arrangement"). Under the Markel Fronting Arrangement: (i) we continue to issue policies through Essentia, with our underwriting authority (including pricing decisions, rate filing, insurance rating, and risk selections) and claims authority expanded to the maximum levels permitted by applicable law; (ii) we have assumed increased administrative responsibilities for the policies issued through Essentia; (iii) Hagerty Re controls 100% of the premium and assumes 100% of the risk for policies written through Essentia; and (iv) Hagerty Re pays an initial fronting fee, representing 2% of written premium, to Markel for administrative support, which incrementally decreases based on the level of written premium in each calendar year. We expect these changes to result in increased profitability and additional control, allowing for enhanced operational efficiencies.

Previous wording

Due to the expanded underwriting and claims authority granted to us under the Markel Fronting Arrangement, we now control the Essentia book of business. While our United States ("U.S.") MGA subsidiary and Hagerty Re continue to operate in the same manner they have historically, beginning on January 1, 2026, the benefit of our MGA services with respect to the Essentia book of business is being received by Hagerty Re and not Essentia. As a result, effective in the first quarter of 2026, we are no longer recognizing commission revenue or the associated ceding commission expense for Essentia-originated policies in our Condensed Consolidated Financial Statements. However, ceding commission expense associated with Essentia policies issued in 2025 will continue to be recognized ratably over the remaining term of those policies throughout 2026. In addition, policy acquisition costs incurred by our U.S. MGA subsidiary for Essentia policies issued in 2026 are being deferred and amortized over the policy term. Although we expect the Markel Fronting Arrangement to result in increased profitability, our reported commission revenue and ceding commission expense will be lower than in prior periods, reflecting the new contractual terms governing our relationship with Markel.

Current wording

Due to the expanded underwriting and claims authority granted to us under the Markel Fronting Arrangement, we now control the Essentia book of business. While our United States ("U.S.") MGA subsidiary and Hagerty Re continue to operate in the same manner they have historically, beginning on January 1, 2026, the benefit of our MGA services with respect to the Essentia book of business is being received by Hagerty Re and not Essentia. As a result, effective in the first quarter of 2026, we are no longer recognizing commission revenue or the associated ceding commission expense for Essentia-originated policies in our Condensed Consolidated Financial Statements. However, ceding commission expense associated with Essentia policies issued in 2025 is continuing to be recognized ratably over the remaining term of those policies throughout 2026. In addition, policy acquisition costs incurred by our U.S. MGA subsidiary for Essentia policies issued in 2026 are being deferred and amortized over the policy term. Although we expect the Markel Fronting Arrangement to result in increased future profitability, throughout 2026, our reported commission revenue and ceding commission expense will be lower than in prior periods, reflecting the new contractual terms governing our relationship with Markel.

Previous wording

Other revenue primarily includes sponsorship, admission, and advertising revenue. Other revenue is recognized when the performance obligation for the related product or service is satisfied.

Current wording

Other revenue primarily includes admission, sponsorship, and advertising revenue. Other revenue is recognized when the performance obligation for the related product or service is satisfied.

Previous wording

Net investment gains (losses) represents the cumulative difference between the cost basis (or carrying value) and the net proceeds received from the sale of investments during the period, as well as the change in fair value of our equity securities between periods.

Current wording

Net investment gains represents the cumulative difference between the cost basis (or carrying value) and the net proceeds received from the sale of investments during the period, as well as the change in fair value of our equity securities between periods.

Previous wording

Effective January 1, 2026, the definition of Policy acquisition costs includes costs incurred by our U.S. MGA subsidiary for the successful acquisition or renewal of insurance policies issued under the Markel Fronting Arrangement. The policy acquisition costs associated with the Markel Fronting Arrangement primarily include (i) third-party broker expense; (ii) certain salaries, benefits, and other costs associated with underwriting, selling, issuing, and processing policies; (iii) fees paid to the fronting carrier; and (iv) premium taxes. Policy acquisition costs also includes ceding commissions paid by Hagerty Re to other insurance carriers for the risks assumed under quota share agreements.

Current wording

Effective January 1, 2026, the definition of Policy acquisition costs includes costs incurred by our U.S. MGA subsidiary for the successful acquisition or renewal of insurance policies issued under the Markel Fronting Arrangement. The policy acquisition costs associated with the Markel Fronting Arrangement primarily include (i) third-party broker expense; (ii) certain salaries, benefits, and other costs associated with underwriting, selling, issuing, and processing policies; (iii) fees paid to the fronting carrier; and (iv) premium taxes. Policy acquisition costs also include ceding commissions paid by Hagerty Re to other insurance carriers for the risks assumed under quota share agreements. Policy acquisition costs are recognized ratably over the term of the related policies, which is generally 12 months.

Previous wording

Effective January 1, 2026, ceding commission expense for Essentia-originated policies is no longer recognized in our Condensed Consolidated Statements of Operations, reflecting the new contractual terms governing our relationship with Markel, as discussed in more detail above under "Markel Fronting Arrangement".

Current wording

Effective January 1, 2026, ceding commission expense for Essentia-originated policies is no longer recognized in our Condensed Consolidated Statements of Operations, reflecting the new contractual terms governing our relationship with Markel, as discussed in more detail above under "Markel Fronting Arrangement". However, ceding commission expense associated with Essentia policies issued in 2025 is continuing to be recognized ratably over the remaining term of those policies throughout 2026.

Previous wording

Underwriting and other insurance expenses consists of the operating costs incurred in connection with our risk taking activities. Effective January 1, 2026, as a result of the Markel Fronting Arrangement through which we assumed control of the Essentia book of business, Underwriting and other insurance expenses include costs incurred by our U.S. MGA subsidiary that are associated with our underwriting operations such as certain salaries and benefit costs, technology and systems costs that support the underwriting process, and expenses related to risk evaluation and pricing. Also included are general and administrative expenses attributable to the operations of our risk taking activities, including facilities costs, professional services fees, regulatory and compliance costs, and other overhead expenses. Prior to January 1, 2026, such costs were reported within Selling, general, and administrative expenses.

Current wording

Underwriting and other insurance expenses consists of the operating costs incurred in connection with our risk taking activities that do not qualify as policy acquisition costs. Effective January 1, 2026, as a result of the Markel Fronting Arrangement through which we assumed control of the Essentia book of business, Underwriting and other insurance expenses include costs incurred by our U.S. MGA subsidiary that are associated with our underwriting operations such as certain salaries and benefit costs, technology and systems costs that support the underwriting process, and expenses related to risk evaluation and pricing. Also included are general and administrative expenses attributable to the operations of our risk taking activities, including facilities costs, professional services fees, regulatory and compliance costs, and other overhead expenses. Prior to January 1, 2026, such costs were reported within Selling, general, and administrative expenses.

Previous wording

Hagerty Re Loss Ratio represents the ratio, expressed as a percentage, of (i) Hagerty Re's losses and loss adjustment expenses to (ii) its earned premium. Hagerty Re Loss Ratio is calculated using Hagerty Re's standalone financial statements. For the three and six months ended June 30, 2026, this excludes $3.2 million and $9.1 million, respectively, of claims handling expenses incurred by our MGA subsidiaries on behalf of Hagerty Re. Hagerty Re's standalone financial statements are prepared in accordance with accounting principles generally accepted in the United States of America ("GAAP"). This metric allows us to evaluate Hagerty Re's loss patterns on the basis of its standalone GAAP financial statements and track loss experience and identify trends that inform our pricing, reserving, and reinsurance decisions.

Current wording

Hagerty Re Loss Ratio represents the ratio, expressed as a percentage, of (i) Hagerty Re's losses and loss adjustment expenses to (ii) its earned premium. Hagerty Re Loss Ratio is calculated using Hagerty Re's standalone financial statements. For the three and nine months ended September 30, 2026, this excludes $3.8 million and $12.9 million, respectively, of claims handling expenses incurred by our MGA subsidiaries on behalf of Hagerty Re. Hagerty Re's standalone financial statements are prepared in accordance with accounting principles generally accepted in the United States of America ("GAAP"). This metric allows us to evaluate Hagerty Re's loss patterns on the basis of its standalone GAAP financial statements and track loss experience and identify trends that inform our pricing, reserving, and reinsurance decisions.

Previous wording

Hagerty Re Combined Ratio represents the ratio, expressed as a percentage, of (i) Hagerty Re's losses, loss adjustment expenses, policy acquisition costs, and underwriting and other insurance expenses to (ii) its earned premium. Hagerty Re Combined Ratio is calculated using Hagerty Re's standalone GAAP financial statements. For the three and six months ended June 30, 2026, this includes $43.7 million and $55.2 million, respectively, of commissions paid to our MGA subsidiaries that are eliminated in consolidation. This metric provides a benchmark to evaluate Hagerty Re's underwriting profitability on the basis of its standalone GAAP financial statements. A combined ratio under 100% indicates underwriting income while a combined ratio exceeding 100% indicates an underwriting loss.

Current wording

Hagerty Re Combined Ratio represents the ratio, expressed as a percentage, of (i) Hagerty Re's losses, loss adjustment expenses, policy acquisition costs, and underwriting and other insurance expenses to (ii) its earned premium. Hagerty Re Combined Ratio is calculated using Hagerty Re's standalone GAAP financial statements. For the three and nine months ended September 30, 2026, this includes $81.2 million and $136.3 million, respectively, of commissions paid to our MGA subsidiaries that are eliminated in consolidation. This metric provides a benchmark to evaluate Hagerty Re's underwriting profitability on the basis of its standalone GAAP financial statements. A combined ratio under 100% indicates underwriting income while a combined ratio exceeding 100% indicates an underwriting loss.

Previous wording

PIF Retention represents the percentage of expiring insurance policies written by our MGA subsidiaries that are renewed on the renewal effective date, calculated on a 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.

Current wording

PIF Retention represents the percentage of expiring insurance policies written by our MGA subsidiaries that are renewed on the renewal effective date, calculated on a twelve month 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

(2)Adjusted EBITDA, Adjusted Net Income (Loss), and Adjusted Diluted EPS are non-GAAP financial measures. Please see the section titled "Non-GAAP Financial Measures" below for a description of these non-GAAP financial measures and a reconciliation to the most comparable GAAP measure, as well as a reconciliation of prior year Adjusted EBITDA to the current year presentation.

Current wording

(2)Adjusted EBITDA, Adjusted Net Income, and Adjusted Diluted EPS are non-GAAP financial measures. Please see the section titled "Non-GAAP Financial Measures" below for a description of these non-GAAP financial measures and a reconciliation to the most comparable GAAP measure, as well as a reconciliation of prior year Adjusted EBITDA to the current year presentation.

Previous wording

For the three months ended June 30, 2026, we reported Net income of $8.0 million, representing a $39.2 million, or 83.0%, decrease compared to the prior year, and Adjusted EBITDA of $74.5 million, representing a $1.9 million, or 2.6%, increase compared to the prior year.

Current wording

For the three months ended September 30, 2026, we reported Net income of $36.3 million, representing a $9.9 million, or 21.4%, decrease compared to the prior year, and Adjusted EBITDA of $97.1 million, representing a $37.7 million, or 63.5%, increase compared to the prior year.

Previous wording

In our Insurance segment, Income before taxes for the three months ended June 30, 2026 was $2.8 million, representing a $58.0 million decrease from the prior year. This decrease is due to the transition of our business under the Markel Fronting Arrangement, which resulted in lower Commission and fee revenue and the recognition of non-cash costs to amortize the remaining deferred ceding commissions for Essentia policies written in 2025. These factors are partially offset by a $74.2 million, or 41.7%, increase in Earned premium, net, reflecting the increase to our quota share percentage from 80% to 100% under the Markel Fronting Arrangement, as well as the continued growth of that book of business.

Current wording

In our Insurance segment, Income before taxes for the three months ended September 30, 2026 was $48.9 million, representing a $1.9 million decrease from the prior year. This decrease is due to the transition of our business under the Markel Fronting Arrangement, which resulted in lower Commission and fee revenue and the recognition of non-cash costs to amortize the remaining deferred ceding commissions for Essentia policies written in 2025. These factors are partially offset by a $78.1 million, or 41.7%, increase in Earned premium, net, reflecting the increase to our quota share percentage from 80% to 100% under the Markel Fronting Arrangement, as well as the continued growth of that book of business. In addition, the comparison to the prior year is favorably impacted bya $26.0 million reduction to our estimate of losses and loss adjustment expenses for the current accident year recorded in the third quarter of 2026 to reflect continued favorable trends in auto physical damage losses and better-than expected experience in auto liability losses.

Previous wording

As discussed in greater detail above under "Markel Fronting Arrangement", due to the expanded underwriting and claims authority granted to us under the Markel Fronting Arrangement, we now control the Essentia book of business. While our U.S. MGA subsidiary and Hagerty Re continue to operate in the same manner they have historically, beginning on January 1, 2026, the benefit of our MGA services is being received by Hagerty Re and not Essentia. As a result, effective in the first quarter of 2026, we are no longer recognizing commission revenue or the associated ceding commission expense for Essentia-originated policies in our Condensed Consolidated Financial Statements. However, ceding commission expense associated with Essentia policies issued in 2025 will continue to be recognized ratably over the remaining term of those policies throughout 2026. In addition, policy acquisition costs incurred by our U.S. MGA subsidiary for Essentia policies issued in 2026 are being deferred and amortized over the policy term. Accordingly, our entry into the Markel Fronting Arrangement has reduced the period‑to‑period comparability of our Condensed Consolidated Financial Statements.

Current wording

As discussed in greater detail above under "Markel Fronting Arrangement", due to the expanded underwriting and claims authority granted to us under the Markel Fronting Arrangement, we now control the Essentia book of business. While our U.S. MGA subsidiary and Hagerty Re continue to operate in the same manner they have historically, beginning on January 1, 2026, the benefit of our MGA services is being received by Hagerty Re and not Essentia. As a result, effective in the first quarter of 2026, we are no longer recognizing commission revenue or the associated ceding commission expense for Essentia-originated policies in our Condensed Consolidated Financial Statements. However, ceding commission expense associated with Essentia policies issued in 2025 is continuing to be recognized ratably over the remaining term of those policies throughout 2026. In addition, policy acquisition costs incurred by our U.S. MGA subsidiary for Essentia policies issued in 2026 are being deferred and amortized over the policy term. Accordingly, our entry into the Markel Fronting Arrangement has reduced the period‑to‑period comparability of our Condensed Consolidated Financial Statements.

Previous wording

(f)These consolidation entries are made to defer $32.1 million in policy acquisition costs incurred by the MGA+ reporting unit in their standalone results of operations, which are then amortized over the underlying policy term in our Condensed Consolidated Statements of Operations. For the three months ended June 30, 2026, the amortization of such deferred policy acquisition costs totaled $12.2 million.

Current wording

(f)These consolidation entries are made to defer $30.8 million in policy acquisition costs incurred by the MGA+ reporting unit in their standalone results of operations, which are then amortized over the underlying policy term in our Condensed Consolidated Statements of Operations. For the three months ended September 30, 2026, the amortization of such deferred policy acquisition costs totaled $20.1 million.

Previous wording

Earned premium, net was $252.0 million for the three months ended June 30, 2026, an increase of $74.2 million, or 41.7%, compared to 2025. This increase is primarily driven by our entry into the Markel Fronting Arrangement, which became effective January 1, 2026 and increased Hagerty Re's U.S. quota share from approximately 80% to 100%, including for in-force policies written in 2025. To a lesser extent, the increase is driven by growth in subject premiums written through our MGA subsidiaries.

Current wording

Earned premium, net was $265.1 million for the three months ended September 30, 2026, an increase of $78.1 million, or 41.7%, compared to 2025. This increase is primarily driven by our entry into the Markel Fronting Arrangement, which became effective January 1, 2026 and increased Hagerty Re's U.S. quota share from approximately 80% to 100%, including for in-force policies written in 2025. To a lesser extent, the increase is driven by growth in subject premiums written through our MGA subsidiaries.

Previous wording

Losses and loss adjustment expenses, net were $110.7 million for the three months ended June 30, 2026, an increase of $35.5 million, or 47.2%, compared to 2025. This increase is primarily the result of the Markel Fronting Arrangement, which increased Hagerty Re's U.S. quota share from approximately 80% to 100% as of January 1, 2026 for all in-force policies. To a lesser extent, the increase is driven by continued growth of subject premiums written through our MGA subsidiaries.

Current wording

Losses and loss adjustment expenses, net were $90.3 million for the three months ended September 30, 2026, an increase of $11.6 million, or 14.8%, compared to 2025. This increase is primarily the result of the Markel Fronting Arrangement, which increased Hagerty Re's U.S. quota share from approximately 80% to 100% as of January 1, 2026 for all in-force policies. To a lesser extent, the increase is driven by continued growth of subject premiums written through our MGA subsidiaries. These increases are largely offset by a $26.0 million reduction to our estimate of losses and loss adjustment expenses for the current accident year to reflect continued favorable trends in auto physical damage losses and better-than expected experience in auto liability losses.

Previous wording

For the six months ended June 30, 2026, the Hagerty Re Loss Ratio was 40.6%, a decrease of 1.6% from 2025, when the Hagerty Re Loss Ratio was 42.2%.

Current wording

For the three months ended September 30, 2026, the Hagerty Re Loss Ratio was 32.6%, a decrease of 9.4 percentage points from 2025, when the Hagerty Re Loss Ratio was 42.0%.

Previous wording

Policy acquisition costs, net were $83.6 million for the three months ended June 30, 2026, an increase of $0.7 million, or 0.8%, compared to 2025. Policy acquisition costs, net remained relatively flat despite growth in earned premium, reflecting a change in the composition of expenses following the transition of our business under the Markel Fronting Arrangement. Refer to the discussion of Policy acquisition costs, net within the section "Components of Our Results of Operations" above for additional details.

Current wording

Policy acquisition costs, net were $62.2 million for the three months ended September 30, 2026, a decrease of $25.2 million, or 28.8%, compared to 2025. This decrease is a result of a change in the composition of expenses following the transition of our business under the Markel Fronting Arrangement, partially offset by growth in earned premium. Refer to the discussion of Policy acquisition costs, net within the section "Components of Our Results of Operations" above for additional details.

Previous wording

Underwriting and other insurance expenses were $62.9 million for the three months ended June 30, 2026, an increase of $61.7 million compared to 2025. This increase is primarily due to the transition of our business under the Markel Fronting Arrangement, which required a different classification of certain costs in our Condensed Consolidated Statements of Operations. Beginning in 2026, because we now control the Essentia book of business, certain operating costs incurred by our U.S. MGA subsidiary in support of our risk taking activities are classified within "Underwriting and other insurance expenses". In 2025, prior to assuming control of the Essentia book of business, these costs were categorized within "Selling, general, and administrative expenses".

Current wording

Underwriting and other insurance expenses were $66.7 million for the three months ended September 30, 2026, an increase of $65.2 million compared to 2025. This increase is primarily due to the transition of our business under the Markel Fronting Arrangement, which required a different classification of certain costs in our Condensed Consolidated Statements of Operations. Beginning in 2026, because we now control the Essentia book of business, certain operating costs incurred by our U.S. MGA subsidiary in support of our risk taking activities are classified within "Underwriting and other insurance expenses". In 2025, prior to assuming control of the Essentia book of business, these costs were categorized within "Selling, general, and administrative expenses".

Previous wording

The increase in Net investment income is due to an increase in the size of our fixed maturity securities portfolio when compared to the prior year. The increase in Net investment gains is primarily driven by unrealized gains on equity securities in the period.

Current wording

The increase in Net investment income is primarily due to a higher average balance of fixed maturity securities when compared to the prior year period. The decrease in Net investment gains is primarily driven by a lower level of unrealized gains on equity securities in the current period.

Previous wording

Commission and fee revenue was $23.7 million for the three months ended June 30, 2026, a decrease of $119.6 million, or 83.5%, compared to 2025. This decrease is primarily due to the transition of our business under the Markel Fronting Arrangement. Due to the expanded underwriting and claims authority granted to us under the Markel Fronting Arrangement, we now control the Essentia book of business and, as a result, beginning on January 1, 2026, the benefit of our MGA services is being received by Hagerty Re and not Essentia. As a result, effective in the first quarter of 2026, we no longer recognize commission revenue for Essentia-originated policies in our Condensed Consolidated Financial Statements. This decrease is partially offset by an increase of $5.0 million related to policies written under the State Farm Master Alliance Agreement.

Current wording

Commission and fee revenue was $21.6 million for the three months ended September 30, 2026, a decrease of $115.5 million, or 84.3%, compared to 2025. This decrease is primarily due to the transition of our business under the Markel Fronting Arrangement. Due to the expanded underwriting and claims authority granted to us under the Markel Fronting Arrangement, we now control the Essentia book of business and, as a result, beginning on January 1, 2026, the benefit of our MGA services is being received by Hagerty Re and not Essentia. As a result, effective in the first quarter of 2026, we no longer recognize commission revenue for Essentia-originated policies in our Condensed Consolidated Financial Statements. This decrease is partially offset by an increase of $4.0 million related to policies written under the State Farm Master Alliance Agreement.

Previous wording

Membership and other revenue was $21.4 million for the three months ended June 30, 2026, an increase of $0.6 million, or 3.0%, compared to 2025. This increase is primarily due to a $1.5 million, or 10.1%, increase in revenue attributable to new insurance policies issued with a bundled HDC membership, partially offset by a decrease of $0.7 million in advertising revenue.

Current wording

Membership and other revenue was $21.9 million for the three months ended September 30, 2026, an increase of $0.4 million, or 1.9%, compared to 2025. This increase is primarily due to a $1.5 million, or 10.1%, increase in revenue attributable to new insurance policies issued with a bundled HDC membership, partially offset by a decrease of $0.5 million in advertising revenue.

Previous wording

Selling, general, and administrative expenses were $55.9 million for the three months ended June 30, 2026, a decrease of $75.7 million, or 57.5%, compared to 2025. This decrease is primarily due to the transition of our business under the Markel Fronting Arrangement, which required a different classification of certain costs in our Condensed Consolidated Statements of Operations. Beginning in 2026, because we now control the Essentia book of business, certain costs incurred by our U.S. MGA subsidiary in support of our risk taking activities, are classified within "Losses and loss adjustment expenses, net", "Policy acquisition costs, net", and "Underwriting and other insurance expenses". In 2025, prior to assuming control of the Essentia book of business, these costs were categorized within "Selling, general, and administrative expenses".

Current wording

Selling, general, and administrative expenses were $54.6 million for the three months ended September 30, 2026, a decrease of $82.8 million, or 60.3%, compared to 2025. This decrease is primarily due to the transition of our business under the Markel Fronting Arrangement, which required a different classification of certain costs in our Condensed Consolidated Statements of Operations. Beginning in 2026, because we now control the Essentia book of business, certain costs incurred by our U.S. MGA subsidiary in support of our risk taking activities are classified within "Losses and loss adjustment expenses, net", "Policy acquisition costs, net", and "Underwriting and other insurance expenses". In 2025, prior to assuming control of the Essentia book of business, these costs were categorized within "Selling, general, and administrative expenses".

Previous wording

(2)Private Sales is a gross transaction-volume metric that includes both brokered private sales, for which we recognize revenue on a net commission basis, and sales of our inventory, for which we recognize revenue on a gross basis. The decrease in Private Sales is primarily attributable to lower brokered private sale volume compared to the prior year, which included the private sale of a sizable single-owner collection. Because brokered private sales are recognized net, this decline did not have a proportionate impact on Marketplace revenue or income before taxes.

Current wording

(2)Private Sales is a gross transaction-volume metric that includes both brokered private sales, for which we recognize revenue on a net commission basis, and sales of our inventory, for which we recognize revenue on a gross basis.

Previous wording

Income before taxes for the Marketplace segment was $1.1 million for the three months ended June 30, 2026, an increase of $3.1 million compared to 2025. The improved Marketplace segment results are principally due to increased auction revenue, which was driven by an 80.3% increase in Net Auction Sales attributable to the 2026 Concorso d’Eleganza Villa d’Este Auction. To a much lesser extent, the increase in Marketplace segment results is driven by an increase in finance revenue due to an 80.2% increase in the BAC Average Loan Portfolio Balance during the period, which was enabled by the upsizing of the BAC Credit Facility in the fourth quarter of 2025.

Current wording

Loss before taxes for the Marketplace segment was $2.6 million for the three months ended September 30, 2026, an improvement of $3.0 million compared to 2025. The improved Marketplace segment results are principally due to $87.6 million of Net Auction Sales attributable to The Quail Auction, representing a $40.0 million, or 84.1%, increase when compared to the comparable Monterey Car Week auction in the prior year. In addition, Marketplace segment results benefitted from a significant increase in commissions earned from brokered private sales, as well as an increase in finance revenue due to a 59.2% increase in the BAC Average Loan Portfolio Balance, which was enabled by the upsizing of the BAC Credit Facility in the fourth quarter of 2025.

Previous wording

Amortization of the deferred gain associated with the LPT Agreement was $1.6 million for the three months ended June 30, 2026, with no comparable amount in the prior year period. The LPT Agreement became effective on January 1, 2026 in connection with the Markel Fronting Arrangement, and the associated deferred gain is being recognized within "Interest expense and other, net" over the expected period of future claim payments. Refer to Note 3 — Markel Fronting Arrangement in Item 1 of Part I of this Quarterly Report for additional information.

Current wording

For the three months ended September 30, 2026, amortization of the deferred gain associated with the LPT Agreement was $1.5 million, with no comparable amount in the prior year period. The LPT Agreement became effective on January 1, 2026 in connection with the Markel Fronting Arrangement, and the associated deferred gain is being recognized within "Interest expense and other, net" over the expected period of future claim payments. Refer to Note 3 — Markel Fronting Arrangement in Item 1 of Part I of this Quarterly Report for additional information.

Previous wording

During the three months ended June 30, 2026, Interest expense decreased $0.2 million compared to 2025. This decrease is the result of a lower interest rate incurred on borrowings under the JPM Credit Facility for the three months ended June 30, 2026, when compared to the prior year.

Current wording

During the three months ended September 30, 2026, interest expense decreased $0.1 million compared to 2025. This decrease is the result of a lower interest rate incurred on JPM Credit Facility borrowings, partially offset by a higher average balance of JPM Credit Facility borrowings in the current period.

Previous wording

For the three months ended June 30, 2026, we recorded an income tax benefit of $5.8 million, resulting in an effective tax rate of (260.3)%, compared to income tax expense of $6.2 million for the three months ended June 30, 2025, resulting in an effective tax rate of 11.5%. The change in income tax benefit (expense) period over period is driven by non-reversing temporary differences between taxable income and pre-tax book income related to the Markel Fronting Arrangement, partially offset by higher earnings in Hagerty Re and an increase in Hagerty, Inc.'s allocable share of income from THG.

Current wording

For the three months ended September 30, 2026, we recorded income tax expense of $5.1 million, resulting in an effective tax rate of 12.4%, compared to income tax benefit of $32.8 million for the prior year period, resulting in an effective tax rate of (246.2)%. The comparison to the prior year period is significantly influenced by the $37.3 million income tax benefit recorded in the third quarter of 2025 to release a portion of the valuation allowance recorded against our deferred tax assets, as discussed above. The remainder of the change in income tax expense is driven by higher earnings in Hagerty Re and an increase in Hagerty, Inc.'s allocable share of income from THG, partially offset by non-reversing temporary differences between taxable income and pre-tax book income related to the Markel Fronting Arrangement.

Previous wording

(2)Adjusted EBITDA, Adjusted Net Income (Loss), and Adjusted Diluted EPS are non-GAAP financial measures. Please see the section titled "Non-GAAP Financial Measures" below for a description of these non-GAAP financial measures and a reconciliation to the most comparable GAAP measure, as well as a reconciliation of prior year Adjusted EBITDA to the current year presentation.

Current wording

(2)Adjusted EBITDA, Adjusted Net Income, and Adjusted Diluted EPS are non-GAAP financial measures. Please see the section titled "Non-GAAP Financial Measures" below for a description of these non-GAAP financial measures and a reconciliation to the most comparable GAAP measure, as well as a reconciliation of prior year Adjusted EBITDA to the current year presentation.

Previous wording

For the six months ended June 30, 2026, we reported a Net loss of $4.7 million, representing a $79.2 million decrease compared to the prior year, and Adjusted EBITDA of $159.7 million, representing a $38.9 million, or 32.2%, increase compared to the prior year.

Current wording

For the nine months ended September 30, 2026, we reported Net income of $31.6 million, representing an $89.1 million decrease compared to the prior year, and Adjusted EBITDA of $256.7 million, representing a $76.6 million, or 42.5%, increase compared to the prior year.

Previous wording

In our Insurance segment, Loss before taxes for the six months ended June 30, 2026 was $17.6 million, representing a $111.2 million decrease from the prior year. The loss for the current period is due to the transition of our business under the Markel Fronting Arrangement, which resulted in a decrease in Commission and fee revenue and the recognition of non-cash costs to amortize the remaining deferred ceding commissions for Essentia policies written in 2025. These factors are partially offset by a $144.5 million, or 41.6%, increase in Earned premium, net, reflecting the increase to our quota share percentage from 80% to 100% under the Markel Fronting Arrangement, as well as the continued growth of that book of business.

Current wording

In our Insurance segment, Income before taxes for the nine months ended September 30, 2026 was $31.3 million, representing a $113.2 million decrease from the prior year. This decrease is due to the transition of our business under the Markel Fronting Arrangement, which resulted in lower Commission and fee revenue and the recognition of non-cash costs to amortize the remaining deferred ceding commissions for Essentia policies written in 2025. These factors are partially offset by a $222.5 million, or 41.7%, increase in Earned premium, net, reflecting the increase to our quota share percentage from 80% to 100% under the Markel Fronting Arrangement, as well as the continued growth of that book of business. In addition, the comparison to the prior year is favorably impacted by (i) a $5.7 million reduction in our estimate of ultimate losses for the 2025 accident year, reflecting the continued emergence of lower physical damage losses; and (ii) a $26.0 million reduction to our estimate of losses and loss adjustment expenses for the current accident year to reflect continued favorable trends in auto physical damage losses and better-than expected experience in auto liability losses.

Previous wording

The following table summarizes Insurance segment results of operations for the six months ended June 30, 2026 and 2025, and the dollar and percentage changes between the two periods:

Current wording

The following table summarizes Insurance segment results of operations for the nine months ended September 30, 2026 and 2025, and the dollar and percentage changes between the two periods:

Previous wording

As discussed in greater detail above under "Markel Fronting Arrangement", due to the expanded underwriting and claims authority granted to us under the Markel Fronting Arrangement, we now control the Essentia book of business. While our U.S. MGA subsidiary and Hagerty Re continue to operate in the same manner they have historically, beginning on January 1, 2026, the benefit of our MGA services is being received by Hagerty Re and not Essentia. As a result, effective in the first quarter of 2026, we are no longer recognizing commission revenue or the associated ceding commission expense for Essentia-originated policies in our Condensed Consolidated Financial Statements. However, ceding commission expense associated with Essentia policies issued in 2025 will continue to be recognized ratably over the remaining term of those policies throughout 2026. In addition, policy acquisition costs incurred by our U.S. MGA subsidiary for Essentia policies issued in 2026 are being deferred and amortized over the policy term. Accordingly, our entry into the Markel Fronting Arrangement has reduced the period‑to‑period comparability of our Condensed Consolidated Financial Statements.

Current wording

As discussed in greater detail above under "Markel Fronting Arrangement", due to the expanded underwriting and claims authority granted to us under the Markel Fronting Arrangement, we now control the Essentia book of business. While our U.S. MGA subsidiary and Hagerty Re continue to operate in the same manner they have historically, beginning on January 1, 2026, the benefit of our MGA services is being received by Hagerty Re and not Essentia. As a result, effective in the first quarter of 2026, we are no longer recognizing commission revenue or the associated ceding commission expense for Essentia-originated policies in our Condensed Consolidated Financial Statements. However, ceding commission expense associated with Essentia policies issued in 2025 is continuing to be recognized ratably over the remaining term of those policies throughout 2026. In addition, policy acquisition costs incurred by our U.S. MGA subsidiary for Essentia policies issued in 2026 are being deferred and amortized over the policy term. Accordingly, our entry into the Markel Fronting Arrangement has reduced the period‑to‑period comparability of our Condensed Consolidated Financial Statements.

Previous wording

The following table provides a reconciliation of the standalone results of operations for our Hagerty Re and MGA+ reporting units for the six months ended June 30, 2026, which reflect the continuing operations of those businesses, to our Condensed Consolidated Statements of Operations. This table is presented solely to improve the year-over-year comparability of our financial statements and should not be viewed on a standalone basis. It should be read together with our Condensed Consolidated Statements of Operations and the accompanying notes.

Current wording

The following table provides a reconciliation of the standalone results of operations for our Hagerty Re and MGA+ reporting units for the nine months ended September 30, 2026, which reflect the continuing operations of those businesses, to our Condensed Consolidated Statements of Operations. This table is presented solely to improve the year-over-year comparability of our financial statements and should not be viewed on a standalone basis. It should be read together with our Condensed Consolidated Statements of Operations and the accompanying notes.

Previous wording

(f)These consolidation entries are made to defer $57.2 million in policy acquisition costs incurred by the MGA+ reporting unit in their standalone results of operations, which are then amortized over the underlying policy term in our Condensed Consolidated Statements of Operations. For the six months ended June 30, 2026, the amortization of such deferred policy acquisition costs totaled $16.3 million.

Current wording

(f)These consolidation entries are made to defer $88.1 million in policy acquisition costs incurred by the MGA+ reporting unit in their standalone results of operations, which are then amortized over the underlying policy term in our Condensed Consolidated Statements of Operations. For the nine months ended September 30, 2026, the amortization of such deferred policy acquisition costs totaled $36.4 million.

Previous wording

(g)Refer to Note 5 — Segment Reporting and Disaggregated Revenue in Item 1 of Part I of this Quarterly Report for a reconciliation of Insurance segment Income (loss) before taxes to consolidated Income (loss) before taxes.

Current wording

(g)Refer to Note 5 — Segment Reporting and Disaggregated Revenue in Item 1 of Part I of this Quarterly Report for a reconciliation of Insurance segment Income before taxes to consolidated Income before taxes.

Previous wording

Earned premium, net was $491.6 million for the six months ended June 30, 2026, an increase of $144.5 million, or 41.6%, compared to 2025. This increase is primarily driven by our entry into the Markel Fronting Arrangement, which became effective January 1, 2026 and increased Hagerty Re's U.S. quota share from approximately 80% to 100%, including for in-force policies written in 2025. To a lesser extent, the increase is driven by growth in subject premiums written through our MGA subsidiaries.

Current wording

Earned premium, net was $756.7 million for the nine months ended September 30, 2026, an increase of $222.5 million, or 41.7%, compared to 2025. This increase is primarily driven by our entry into the Markel Fronting Arrangement, which became effective January 1, 2026 and increased Hagerty Re's U.S. quota share from approximately 80% to 100%, including for in-force policies written in 2025. To a lesser extent, the increase is driven by growth in subject premiums written through our MGA subsidiaries.

Previous wording

The following tables present premiums assumed and earned, as well as the related quota share percentages for the six months ended June 30, 2026 and 2025:

Current wording

The following tables present premiums assumed and earned, as well as the related quota share percentages for the nine months ended September 30, 2026 and 2025: