Hagerty (HGTY) Q2 2025: Marketplace Revenue Jumps 78% as European Auctions Accelerate
Marketplace and membership expansion delivered a standout quarter, with international auctions and new programs fueling top-line gains. Hagerty’s strategic shift to full risk retention and ongoing tech reinvestment signal a business model pivot toward higher-margin, scalable growth. Investors should watch for execution on State Farm integration, Enthusiast Plus ramp, and the operational leverage promised as technology investments mature.
Summary
- Marketplace Expansion Drives Growth: European auctions and private sales are reshaping revenue mix.
- Operational Leverage in Focus: Tech replatforming and integration efforts set up future margin gains.
- Strategic Shift to Full Risk Retention: Markel fronting deal positions Hagerty for higher profitability from 2026 onward.
Performance Analysis
Hagerty delivered robust double-digit revenue growth in Q2, propelled by strong marketplace performance and resilient membership gains. The company’s total revenue rose 18% year-over-year, with written premium up 11% and earned premium for Hagerty Reinsurance climbing 12%. Notably, membership, marketplace, and other revenue surged 78%, driven by higher inventory sales and the successful launch of the European auction business, including a 78% sell-through rate at the inaugural Villa d’Este event.
Operating profitability continued its upward trajectory, as operating margins expanded 70 basis points to 13% and adjusted EBITDA increased 20%. Cost discipline was evident despite higher technology and personnel spend, with G&A rising 6% and salaries up 11% to support growth initiatives. The company’s investment income contributed meaningfully, and net income attributable to Class A shareholders improved, reflecting both operating leverage and capital allocation discipline.
- Marketplace Outperformance: Private sales and new European auctions materially lifted non-insurance revenue, diversifying the business model.
- Membership Momentum: Record new member additions and high retention (89%) support recurring revenue streams.
- Margin Expansion: Technology investments and cost controls are driving sustained margin improvement, with further gains forecast as tech spend normalizes.
Hagerty’s financials reflect a business in transition, with investment in technology and international expansion creating short-term cost pressure but setting up for higher future returns. The company’s ability to leverage these investments will be crucial for sustaining its multi-year growth trajectory.
Executive Commentary
"This summer has been another great driving season as we remain on track to welcome a record number of new members to Hagerty in 2025, helping them protect, buy, sell, and enjoy their special cars... Over the last three years, we have expanded first half operating margins by nearly 14 percentage points, and we expect continued gains as we double our policies in force to 3 million by 2030."
McKeel Hagerty, Co-founder and Chief Executive Officer
"We are maintaining tight discipline on our costs to translate double-digit commission gains into faster rates of profit growth... Our growing capital base at Hagerty Re and balanced investment strategy resulted in $11 million in second quarter investment income."
Patrick, Chief Financial Officer
Strategic Positioning
1. Marketplace and International Expansion
Marketplace revenue is becoming a core growth engine, with European auctions and private sales outpacing expectations. The company’s approach—building local teams and leveraging high-profile events like Villa d’Este—has established Hagerty as a credible player in the European collector car market. This expansion not only diversifies revenue but also strengthens the brand’s global presence, positioning Hagerty to capture a greater share of the estimated 35 million collectible car market, of which it currently holds just 6.7% penetration.
2. Technology Replatforming for Scale
Hagerty’s transition to the Duck Creek platform, a cloud-based insurance system, underpins its “simpler, faster, better integrated” strategy. The launch of Enthusiast Plus, targeting modern enthusiast vehicles, is the first major product on this new stack. While short-term tech spend is elevated, management expects technology as a percentage of revenue to decline as the platform scales, unlocking operational efficiencies and supporting future margin expansion.
3. Full Risk Retention via Markel Fronting
The move from an 80% quota share to a 100% risk retention model with Markel marks a pivotal shift. From 2026, Hagerty will control all premium and risk, paying only a 2% fronting fee. This change will materially increase underwriting and investment income, while giving Hagerty greater operational control over its book. The company’s experience at the 80% level and its growing capital base position it to manage the additional risk prudently.
4. State Farm Partnership Integration
The State Farm agency relationship, which carries no risk retention for Hagerty and operates as a pure commission model, is ramping up across 17 states (targeting 25 by year-end). With 525,000 vehicles in the pipeline and agent enthusiasm high, this channel is set to become a significant new business driver. Conversion of existing books and new sales are expected to accelerate in the coming quarters, providing a steady stream of high-margin commission income.
5. Data-Driven Member Targeting
Hagerty is refining its customer acquisition strategy, shifting from cost-per-acquisition to lifetime value optimization. By leveraging proprietary data to target owners of 25- to 40-year-old vehicles with collectible attributes, the company is improving risk selection and focusing marketing spend on higher-value segments. This approach aims to enhance retention, reduce loss ratios, and drive profitable growth over the long term.
Key Considerations
Hagerty’s Q2 results reflect both the momentum and complexity of a business scaling multiple new initiatives. The interplay of marketplace diversification, tech investment, and risk model evolution creates both opportunity and execution risk for investors to weigh.
Key Considerations:
- Marketplace Revenue Mix Shift: Rapid growth in auctions and private sales is altering revenue composition, but also introduces event-driven variability and inventory risk.
- Tech Investment Payback: Elevated technology spend is pressuring current margins, but management expects operational leverage as new products and states come online.
- Risk Retention Upside and Complexity: The Markel fronting arrangement will boost profits but increases Hagerty’s exposure to underwriting and investment volatility.
- Channel Partner Ramp: State Farm integration is a multiyear effort, with economics driven by agent adoption, conversion pace, and commission structure.
- Competitive and Macro Environment: Flat to soft car valuations and muted industry-wide unit growth require disciplined underwriting and differentiated member engagement to maintain momentum.
Risks
Execution risk around State Farm integration, successful ramp of Enthusiast Plus, and delivery of promised tech efficiencies could materially impact growth and margins. The shift to full risk retention increases exposure to insurance cycle swings and investment returns. Marketplace expansion adds event and inventory risk, while elevated tech spend may not yield expected operational leverage if adoption lags. Macro softness in car valuations and insurance competition could pressure premium growth and retention rates.
Forward Outlook
For Q3 and Q4, Hagerty expects:
- Accelerated written premium growth as State Farm conversions ramp and more states go live
- Incremental marketplace revenue from new European and Las Vegas auctions
For full-year 2025, management raised guidance:
- Revenue growth of 13% to 14%
- Net income of $112 to $120 million (up 43% to 53%)
- Adjusted EBITDA of $162 to $172 million (up 30% to 38%)
Management highlighted several factors that will drive results:
- State Farm agent rollout and conversion pace
- Marketplace event execution and European expansion
- Efficiency gains as technology investments scale
Takeaways
Hagerty’s business model is evolving rapidly, with marketplace, technology, and risk retention shifts setting up for higher-margin, recurring growth if execution holds. The company’s ability to deliver on State Farm integration, scale Enthusiast Plus, and realize tech leverage will determine whether mid-teens top-line growth translates to durable shareholder value.
- Marketplace and Membership Engines: Expansion into Europe and continued strong member retention are building a more diversified, resilient revenue base.
- Margin Leverage Hinges on Tech and Risk: Tech platform investments and risk retention transition are pivotal levers for future profitability.
- Key Watchpoint: Investors should monitor pace of State Farm rollout, Enthusiast Plus adoption, and evidence of technology-driven margin gains in 2026 and beyond.
Conclusion
Hagerty’s Q2 2025 results reinforce its position as a specialty insurance and marketplace leader, with strategic bets on international expansion, technology, and risk retention setting the stage for higher growth and profitability. Execution on these initiatives will be the defining factor for long-term value creation.
Industry Read-Through
Hagerty’s success in expanding its marketplace and integrating technology reflects a broader trend in specialty insurance and enthusiast markets: vertical integration, platform leverage, and internationalization are becoming key differentiators. The move to full risk retention mirrors similar shifts among MGAs (managing general agents) seeking greater control and margin. For peers, the importance of data-driven member targeting and tech-enabled operational scale is underscored, while the challenges of maintaining growth amid flat asset values and competitive commission structures remain front and center.