Hagerty (HGTY) Q4 2025: Written Premiums Accelerate 19% as Markel Fronting Adds Profit Leverage

2026-02-26 | By EarningsIQ Research

Hagerty’s Q4 saw double-digit premium growth and a strategic pivot to full-risk retention with Markel, setting the stage for margin expansion and operational control in 2026. Marketplace revenues more than doubled, but the year ahead will be defined by accounting transition noise and a step-change in underwriting economics. Investors should focus on underlying cash flow and adjusted EBITDA as the company navigates a complex but value-creating shift in its insurance model.

Summary

  • Full-Risk Retention Unlocks Margin: Hagerty’s move to 100% premium retention with Markel transforms its profit and investment profile.
  • Marketplace Momentum: Auctions and private sales revenue more than doubled, reinforcing diversification beyond core insurance.
  • Transitional Accounting Creates Noise: 2026 GAAP results will be distorted by non-cash legacy costs, but adjusted EBITDA remains a cleaner gauge of business health.

Performance Analysis

Hagerty delivered robust Q4 results, with total revenue up 19% and written premiums growing 19% year over year, driven by record new member additions and strong retention. The insurance segment, which now includes a restructured relationship with Markel, continues to anchor the business, with earned premium up 14% and commission and fee revenue up 18%. Loss ratio improvement was significant, aided by a $21 million reserve release, reflecting better-than-expected claims trends and disciplined underwriting.

Marketplace revenue surged 80% in Q4, and more than doubled for the year as Hagerty expanded live and digital auctions into Europe, making it the number two global player after just three years. Membership and other revenue grew 8%, while net investment income contributed $11 million for the quarter. Adjusted EBITDA nearly doubled, up 97% year over year, and net income rose 238% to $29 million, reflecting both operational leverage and favorable reserve development.

  • Written Premium Acceleration: State Farm conversions and new partnerships powered above-market premium growth, with retention holding at 89%.
  • Expense Headwinds: G&A grew 24% in Q4, inflated by technology investments and transitional costs tied to the Markel fronting shift.
  • Profit Flow-Through: Margin expansion was supported by lower loss ratios and cost discipline, but headline net income benefited from one-time reserve releases.

While core insurance remains the engine, Marketplace’s rapid expansion and the transition to full-risk retention with Markel are redefining Hagerty’s financial profile, though 2026 will see reported revenue fall due to accounting changes rather than operational weakness.

Executive Commentary

"2025 marked the third straight year of executing on our strategy to deliver high rates of top line growth while more efficiently translating incremental revenue into profits and cash flow. Since going public four years ago, we have compounded revenue by 23% per year and increased net income by over $200 million, reflecting the strength and differentiation of the Hagerty business model as our profit growth is driven by adding new members and not the rate cycle."

McKeel Hagerty, Chief Executive Officer and Chairman

"The driver of this noise is the strategically and economically attractive decision to assume the final 20% earned premium in our U.S. book of business with the new arrangement. This evolution gives us more control and flexibility, allows us to capture more of our high profit, high return underwriting business, and increases our investment portfolio."

Patrick McClima, Chief Financial Officer

Strategic Positioning

1. Full-Risk Retention with Markel

Hagerty’s transition to a 100% fronting arrangement with Markel, meaning it now retains all underwriting risk and premium economics, is a rare move in insurance and positions the company for greater profit capture and investment income. This shift required significant internal buildout for regulatory and operational control, but long-term, it materially improves the company’s margin structure and flexibility.

2. Marketplace Diversification

The Marketplace segment, including live and digital auctions and private sales, saw revenue more than double and expanded into Europe. Hagerty is now the second-largest global player in enthusiast vehicle auctions, with over $566 million in transaction value in 2025. This diversification reduces reliance on insurance cycles and enhances the brand’s ecosystem effect.

3. Distribution and Partnership Expansion

Strategic partnerships, notably with State Farm and the new Liberty Mutual/Safeco alliance, are accelerating premium growth and expanding Hagerty’s addressable market. State Farm conversions are ramping up across 27 states, with full penetration expected by 2027, while Liberty Mutual is a multi-year growth lever.

4. Technology and AI Investments

Hagerty is investing heavily in technology, including a new cloud-based policy management system and the rollout of Enthusiast Plus on Duck Creek. AI is being piloted for claims fraud detection, valuation analytics, and marketing personalization, aiming for both efficiency and deeper customer engagement as the business scales toward its 2030 policy targets.

5. Claims and Underwriting Discipline

Loss ratio improvement reflects both favorable trends and operational enhancements, including a growing material damage and special investigative unit. Hagerty’s underwriting remains low volatility and high quality, supporting margin expansion and earning AMBEST’s A minus rating with a positive outlook.

Key Considerations

Hagerty’s Q4 and full-year performance demonstrates the company’s ability to compound growth through disciplined execution, but the year ahead will test investor patience as headline metrics become distorted by accounting transition effects. The underlying business remains strong, and investors should focus on cash flow, adjusted EBITDA, and operational milestones.

Key Considerations:

  • Accounting Noise Masks Underlying Growth: 2026 GAAP revenue and net income will decline due to removal of commission revenue and amortization of legacy seeding commissions, not because of operational weakness.
  • Marketplace Growth Is Lumpy: Auction and private sale revenue is episodic and can drive volatility, but the segment’s expansion is strategically significant for Hagerty’s ecosystem.
  • State Farm and Liberty Mutual Ramps: These partnerships will drive premium growth, but State Farm’s lower average premium per policy will dilute this metric even as total premiums rise.
  • Cost Structure in Transition: Technology investments and one-time fronting arrangement costs are inflating G&A, but normalized margins are expected to expand post-2026.

Risks

Hagerty faces risk from transitional accounting complexity, which could obscure real economic performance and confuse investors in 2026. Marketplace revenue is inherently volatile and susceptible to macro cycles in discretionary vehicle demand. As Hagerty assumes full underwriting risk, any adverse claims trends or regulatory shifts could have a greater direct impact on profitability. Technology execution and successful integration of new distribution partners remain critical watchpoints for sustained growth.

Forward Outlook

For Q1 2026, Hagerty guided to:

  • Written premium growth of 15% to 16%, outpacing the 14% achieved in 2025.
  • Adjusted EBITDA of $236 million to $247 million, reflecting underlying profit growth despite GAAP distortions.

For full-year 2026, management provided:

  • Revenue guidance of $1.28 billion to $1.3 billion, down from 2025 solely due to accounting changes.
  • GAAP net income guidance of negative $41 million to negative $51 million, driven by non-cash amortization of $190 million in legacy seeding commissions.

Management emphasized that 2026 is a “transitional year” and that 2027 will provide a clean baseline for reported results. Key drivers include:

  • Acceleration of State Farm conversions and Liberty Mutual ramp.
  • Continued technology investment and claims process enhancements.

Takeaways

Hagerty’s insurance flywheel is accelerating, with premium growth driven by new business and partnerships, not rate hikes. The shift to full-risk retention with Markel is a structural profit lever, but 2026 will be noisy as legacy costs burn off. Marketplace expansion offers diversification, though with inherent lumpiness. Investors should track adjusted EBITDA and operational execution as the clearest signals of underlying performance through the transition.

  • Structural Profit Shift: The Markel arrangement positions Hagerty for higher long-term margins and investment income, even if 2026 GAAP results are temporarily depressed.
  • Marketplace as Growth Hedge: Auctions and private sales are scaling, but the segment’s episodic revenue means insurance remains the core engine.
  • 2027 as a Clean Year: Investors should look beyond 2026 accounting noise and focus on policy growth, margin normalization, and the scaling of new partnerships.

Conclusion

Hagerty’s Q4 capped a year of strong execution and strategic repositioning, with premium growth, expanding margins, and a critical shift to full-risk retention. The year ahead will be marked by accounting transition, but underlying cash flow and profit levers are strengthening. Investors should track operational milestones and adjusted EBITDA as the company builds toward a cleaner, higher-margin profile in 2027 and beyond.

Industry Read-Through

Hagerty’s move to capture 100% underwriting economics is a rare industry precedent, signaling a trend toward greater risk retention and vertical integration among specialty insurers. The rapid growth and internationalization of Marketplace highlights rising global demand for enthusiast vehicles, with digital and live auctions gaining share. The focus on member-centricity, technology transformation, and AI-driven claims management reflects broader insurance industry priorities, while partnership models with major carriers like State Farm and Liberty Mutual illustrate the value of ecosystem leverage in niche markets. Insurers with strong brands and data-driven underwriting are best positioned to weather cyclical volatility and regulatory change.

HGTY Financials Insurance Marketplace Underwriting Technology Partnerships