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What changed in Hagerty, Inc.'s 10-K — 2024 vs 2025

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Paragraph-level year-over-year comparison of Hagerty, Inc.'s 2024 and 2025 10-K annual filings, covering the Business, Risk Factors, Legal Proceedings, Cybersecurity, MD&A and Market Risk sections. Every new, removed and edited paragraph is highlighted side-by-side so you can see exactly what management changed in the 2025 report.

+623 added−556 removedSource: 10-K (2026-02-26) vs 10-K (2025-03-04)

Top changes in Hagerty, Inc.'s 2025 10-K

623 paragraphs added · 556 removed · 403 edited across 7 sections

Item 1. Business

Business — how the company describes what it does

58 edited+55 added−30 removed18 unchanged
Biggest changeWe manage our investment portfolio in accordance with an investment policy that seeks to generate an attractive total return on an after-tax basis on its investment assets, over the long-term, subject to compliance with all of the following constraints and objectives: (i) comply with certain portfolio-level and asset-level class constraints; (ii) preserve capital by assuming only a modest amount of risk of principal loss; (iii) ensure sufficient liquidity to meet obligations; (iv) comply with all legal, regulatory, and contractual requirements; and (v) employ an efficient portfolio in terms of assumed risk and relative to expected return.
Biggest changeWe seek to generate an attractive total return on an after-tax basis, net of fees, over the long-term, subject to the following objectives and constraints: (i) compliance with all legal, regulatory, and contractual requirements; (ii) maintaining strong liquidity; (iii) assuming a level of risk that is carefully calibrated and responsive to enterprise-wide considerations; and (iv) returns should be achieved through executing an efficient, diversified portfolio.
Our track record of expertise and growth creates opportunities for cultivating strong, mutually beneficial partnerships that allow us to continue to meaningfully grow our share of the collector car and enthusiast vehicle market in the U.S. Most insurance companies offer and compete for multi-line insurance: auto, homeowners, umbrella, watercraft, aircraft, and other exclusive collectibles.
Our track record of expertise and growth creates opportunities for cultivating strong, mutually beneficial distribution partnerships that allow us to continue to meaningfully grow our share of the collector car and enthusiast vehicle market in the U.S. Most insurance companies offer and compete for multi-line insurance: auto, homeowners, umbrella, watercraft, aircraft, and other exclusive collectibles.
This depth and discipline of focus has enabled us to maintain a "neutral" and non-threatening partner of choice position with the highest quality automobile insurance companies in the market as we help them reduce the risk of losing a customer and the total value of the bundled insurance and membership offerings. Our approach to partnerships enables complementary growth.
This depth and discipline of focus has enabled us to maintain a "neutral" and non-threatening partner of choice position with the highest quality automobile insurance companies in the market as we help them reduce the risk of losing a customer and the total value of the bundled insurance and membership offerings. Our approach to distribution partnerships enables complementary growth.
Our media content features the work of talented automotive content creators, journalists, and storytellers who bring the automotive world to life in exciting and unexpected ways across a variety of digital, print, and video media formats.
In addition, our media content features the work of talented automotive content creators, journalists, and storytellers who bring the automotive world to life in exciting and unexpected ways across a variety of digital, print, and video media formats.
Accordingly, our MGA subsidiaries experience peak commission and fee revenue in the second and third quarters of the year. In addition, catastrophic loss events, such as hurricanes and wildfires, are typically more prevalent in the second half of the year, so our losses and loss adjustment expenses may reflect that seasonality.
Accordingly, we experience peak MGA commission and fee revenue in the second and third quarters of the year. In addition, catastrophic loss events, such as hurricanes and wildfires, are typically more prevalent in the second half of the year, so our losses and loss adjustment expenses may reflect that seasonality.
We intend to pursue additional intellectual property protection on such enhancements to the extent we believe it would be beneficial and cost-effective. As of December 31, 2024, we have two issued patents in the U.S. and one in Canada.
We intend to pursue additional intellectual property protection on such enhancements to the extent we believe it would be beneficial and cost-effective. As of December 31, 2025, we have two issued patents in the U.S. and one in Canada.
Our focus on collector car and enthusiast vehicle products and services reduces competitive threats for partners and raises their confidence in transacting with us. Furthermore, we focus our investments on developing capabilities that serve the interests of the automotive enthusiast market.
Our focus on collector car and enthusiast vehicle products reduces competitive threats for partners and raises their confidence in transacting with us. Furthermore, we focus on developing capabilities that serve the interests of the automotive enthusiast market.
With an insurance policy retention rate of nearly 90% and an average policy life of nine years, we have demonstrated a strong recurring revenue model that benefits from a combination of high insurance policy retention, new Member growth, and increases in premiums driven, in part, by the increasing values of insured vehicles.
With an insurance policy retention rate of nearly 90% and an average policy life of nine years, we have demonstrated a strong recurring revenue model that benefits from a combination of high insurance policy retention, new Member growth, and increases in premiums driven, in part, by the increasing values of insured vehicles over the long term.
Under these arrangements, we generally make our specialty insurance products and related services available to the carrier's agents, who then refer or present Hagerty to their customers.
Under these arrangements, we generally make our specialty insurance products and related services available to the insurers' agents, who then refer or present Hagerty to their customers.
We continually review our development efforts to assess the existence and the ability to protect new intellectual property. 10 TABLE OF CONTENTS We have trademark rights in our name, our logo, and other brand indicia, and have trademark registrations for select markets in the U.S., Canada, U.K., European Union, and Australia.
We continually review our development efforts to assess the existence and the ability to protect new intellectual property. We have trademark rights in our name, our logo, and other brand indicia, and have trademark registrations for select markets in the U.S., Canada, U.K., European Union, and Australia.
We have a self-insured medical plan in which our employees pay up to 25% of the monthly estimated premiums. In addition to core medical benefits, we offer maternity and paternity benefits, as well as employee assistance programs to support the mental health of our employees.
We have a self-insured medical plan in which our employees pay approximately 21% of the monthly estimated premiums. In addition to core medical benefits, we offer maternity and paternity benefits, as well as employee assistance programs to support the mental health of our employees.
We intend to continue to invest and further develop our leadership training and support to ensure that all leaders — those promoted, developing or hired — understand how to effectively lead a high-performance team.
We intend to continue to invest and further develop our leadership training and support to ensure that all leaders — those promoted, developing, or hired — understand how to effectively lead a high-performance team. 14 TABLE OF CONTENTS
State laws govern many of the activities under this relationship and our MGA subsidiaries must maintain the appropriate licensing as a producer and, where required, as an MGA, plus additional requirements in some states for claims adjusting.
State laws govern many of the activities under this relationship and our MGA subsidiary must maintain the appropriate licensing as a producer and, where required, as an MGA, plus additional requirements in some states for claims adjusting. In 2025 and 2024, our U.S.
We have built a strong reputation for providing excellent customer service through our passionate team of member service center professionals, resulting in a Net Promoter Score ("NPS") of at least 82 in recent years, an insurance policy retention rate approaching 90%, and a typical policy life of approximately nine years.
We have built a strong reputation for providing excellent customer service through our passionate team of member service center professionals, resulting in an NPS of approximately 81 in recent years, an insurance policy retention rate approaching 90%, and a typical policy life of approximately nine years.
Business Attributes Intellectual Property We believe our intellectual property rights are valuable and important to our business. We rely on trademarks, patents, copyrights, trade secrets, license agreements, intellectual property assignment agreements, confidentiality procedures, non-disclosure agreements, and electronic and physical security measures to establish and protect our proprietary rights.
We rely on trademarks, patents, copyrights, trade secrets, license agreements, intellectual property assignment agreements, confidentiality procedures, non-disclosure agreements, and electronic and physical security measures to establish and protect our proprietary rights.
In connection with the servicing of insurance policies, we also handle claims on behalf of our insurance carrier partners to ensure that our Members receive a high level of service focused on the unique requirements of repairing vintage and rare vehicles. Under our alliance agreement and associated agency agreement with Markel Group, Inc.
In connection with the servicing of insurance policies, we also handle claims on behalf of our insurance carrier partners to ensure that our Members receive a high level of service focused on the unique requirements of repairing vintage and rare vehicles.
The relationship with Aviva in Canada is exclusive with respect to specialty, enthusiast, classic, and collector vehicle insurance, with the exception of the Quebec province, where a third-party insurance agency carries the appropriate licenses and authority to submit business to Elite Insurance Company. Elite Insurance Company and Hagerty Re also have a reinsurance quota share agreement.
The relationship with Aviva in Canada is exclusive with respect to specialty, enthusiast, classic, and collector vehicle insurance, with the exception of the Quebec province, where a third-party insurance agency carries the appropriate licenses and authority to submit business to Aviva.
We believe that consumers who feel a part of an enthusiast community or club are more engaged and have higher renewal rates than those who simply purchase a good or service.
We have become known as an automotive enthusiast brand built by drivers, for drivers. We believe that consumers who feel a part of an enthusiast community or club are more engaged and have higher renewal rates than those who simply purchase a good or service.
The automotive enthusiast community created by our insurance, membership, and marketplace offerings is enhanced by our media and entertainment platforms, as well as our renowned car events, which generate positive ongoing engagement with current Members, as well as interest in our brand, products, and services from prospective members.
Our connection to the automotive enthusiast community is complemented by HDC, our renowned car events, and our media and entertainment platforms, which generate positive ongoing engagement with current Members, as well as interest in our brand, products, and services from prospective members.
We believe that our strong brand and value proposition focused on our "Guaranteed Value" insurance policies position us well to capture a larger share of this growing market over the coming decade, including through our recent acquisition of Drivers Edge Insurance Company ("Drivers Edge").
We believe that our strong brand and value proposition position us well to capture a larger share of this growing market over the coming decade, including through our recent acquisition of Drivers Edge Insurance Company ("Drivers Edge"). For more information regarding Drivers Edge, refer to " Insurance and Reinsurance — Drivers Edge Insurance Company " below.
State Farm Alliance We have a 10-year master alliance agreement and associated managing general underwriter agreement with State Farm Mutual Automobile Insurance Company ("State Farm") under which the State Farm Classic+ policy is offered to State Farm's customers through State Farm agents.
State Farm Alliance We have a 10-year master alliance agreement and associated managing general underwriter agreement with State Farm Mutual Automobile Insurance Company ("State Farm") (the "State Farm Master Alliance Agreement") under which State Farm Classic+ policies are offered to State Farm's customers through State Farm agents. This program began offering State Farm Classic+ policies in September 2023.
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.
HDC, Events and Media Our Insurance segment also offers HDC memberships, which are bundled with our insurance policies and provide Members with access to an array of products and services, including emergency roadside assistance, Hagerty Drivers Club Magazine, special access to automotive enthusiast events, our proprietary vehicle valuation tool, and special vehicle-related discounts.
MGA subsidiaries and only writes insurance policies we produce. Under this arrangement, we are licensed and appointed as Essentia's MGA and are authorized to develop insurance products, underwrite, bill, and perform claims services for policies written through Essentia.
Under this arrangement, our U.S. MGA subsidiary is licensed and authorized to develop insurance products, underwrite, bill, and perform claims services for policies written through Essentia. Essentia is exclusive to our U.S. MGA subsidiary and only writes insurance policies we produce.
On this basis, we estimate that the U.S. total addressable market is approximately $19 billion of annual written premium for insurable collector cars and enthusiast vehicles based on our average vehicle premium of $405 per year.
On this basis, we estimate that our U.S. target market of collector cars and enthusiast vehicles represents approximately $15 billion of annual written premium based on our average vehicle premium of $423 per year.
Agent Channel We market our insurance products through our insurance distribution partnerships, which include 9 of the top 10 largest auto insurers, as ranked by the National Association of Insurance Commissioners based upon 2023 direct premiums written.
For the year ended December 31, 2025, approximately 44% of our total auto written premium was generated through direct sales. Agent Channel We market our insurance products through our insurance distribution partnerships, which include 9 of the top 10 largest auto insurers, as ranked by the National Association of Insurance Commissioners based upon 2024 direct premiums written.
We work closely with our Members to determine the right amount of coverage for their vehicle, utilizing Hagerty Valuation Tools, which has been built over decades of collecting vehicle sales information, with historic pricing data on more than 48,000 collector car and enthusiast vehicle models.
We work closely with our Members to determine the right amount of coverage for their vehicle, utilizing Hagerty Valuation Tools, which has been built over decades of collecting vehicle sales information, to accurately assess the risk associated with insuring collector cars and enthusiast vehicles.
This program began issuing policies in four initial states in September 2023, with additional states planned for 2025 and 2026. Under the master alliance agreement, State Farm paid Hagerty an advanced commission of $20.0 million in 2020, which is being recognized as "Commission and fee revenue" over the remaining life of the arrangement.
Under the State Farm Master Alliance Agreement, State Farm paid Hagerty an advanced commission of $20.0 million in 2020, which is being recognized as "Commission and fee revenue" over the remaining life of the arrangement.
While there are other specialty insurance companies offering collector car insurance, the size of their operations is small compared to ours. We believe our enthusiast-centered ecosystem, with a focus on community and engagement, is a significant competitive advantage over competitors who, without strong affinity or engagement, are left to compete solely based on price.
We believe our enthusiast-centered ecosystem, with a focus on community and engagement, is a significant competitive advantage over competitors who, without strong affinity or engagement, are left to compete solely based on price.
" within Item IA of Part I — Risk Factors, in this Annual Report for additional information. Seasonality We operate in certain geographic regions where vehicles are purchased and driven more frequently during the spring and summer months, and a larger portion of our annual insurance policies renew during those months.
Refer to Note 24 — Related-Party Transactions in Item 8 of Part II of this Annual Report for additional information. 10 TABLE OF CONTENTS Seasonality Our Insurance segment operates in certain geographic regions where vehicles are purchased and driven more frequently during the spring and summer months, and a larger portion of our annual insurance policies renew during those months.
Loans underwritten by BAC are typically $250,000 or higher, with a focus on collector cars and enthusiast vehicles that are typically not financed by traditional banks and lenders. To date, Broad Arrow's live auctions and private sales have been conducted in the U.S.
The loans underwritten by BAC include term loans and short-term bridge loans. Loans underwritten by BAC are typically $250,000 or higher, with a focus on collector cars and enthusiast vehicles that are typically not financed by traditional banks and lenders.
As a result of these factors, we expect to experience seasonal fluctuations in our quarterly operating results, which may not fully reflect the underlying performance of our business. Competition We believe that our business model of integrated products and services is unique.
As a result of these factors, we have historically experienced seasonal fluctuations in our quarterly operating results, which may not fully reflect the underlying performance of our business.
Canadian provincial laws govern many of the activities under this relationship and Hagerty Canada must maintain the appropriate licensing. The terms of our agreements with Aviva expire in 2030 and include a 5-year extension if certain thresholds are met.
The terms of our agreements with Aviva expire in 2030 and include a 5-year extension if certain thresholds are met.
At the high-end of the collector car and enthusiast vehicle market, where values typically exceed $100,000, our wholly owned subsidiary, Broad Arrow Group, Inc. ("Broad Arrow"), helps collectors and enthusiasts buy and sell at live auctions and through brokered private sales. At lower price points, typically below $100,000, we also offer digital auctions through Hagerty Marketplace.
At the high-end of the collector car and enthusiast vehicle market, where values typically exceed $100,000, our live auctions and brokered private sales are conducted by our wholly owned subsidiary, Broad Arrow.
We are often told by agents and brokers that partnering with Hagerty brings value and joy to their automotive enthusiast customers that is unmatched in the industry. Our high-engagement and experiential approach to the market is often co-branded by independent agents and brokers to deliver automotive enthusiasts an experience the agent or broker could not deliver themselves.
We also have relationships with over 54,000 independent agents and brokers, representing all top 10 brokers in the U.S. by revenue. Our high-engagement and experiential approach to the market is often co-branded by independent agents and brokers to deliver automotive enthusiasts an experience the agent or broker could not deliver themselves.
We believe we can differentiate ourselves from other platforms and services by incorporating a higher level of trust into this marketplace by using our existing size, scale, improved processes, and trusted brand status. Our marketplace offerings leverage the power of our ecosystem by providing a trusted platform where enthusiasts can buy, sell, and finance collector cars and enthusiast vehicles.
We believe we can differentiate ourselves from other platforms and services by incorporating a higher level of trust into this marketplace by using our existing size, scale, reach, improved processes, and trusted brand status. During 2025, Broad Arrow expanded its live auction and private sale offerings in the EMEA region.
We estimate that there are approximately 48 million insurable collector cars and enthusiast vehicles in the U.S., valued at approximately $1.2 trillion. In 2024, we observed over 300,000 buy/sell collector car and enthusiast vehicle transactions representing approximately $15.7 billion in total value trading hands in our U.S. insurance book, or approximately 1% of the estimated U.S. market value.
We estimate that there are approximately 36 million insurable collector cars and enthusiast vehicles in the U.S. and in 2025, in our U.S. insurance book alone, we observed over 300,000 collector car and enthusiast vehicle transactions.
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.
Our vision is to be the world's most trusted and preferred brand for automotive enthusiasts to insure, buy, sell, and enjoy their special cars.
None of our employees are represented by a labor union or covered by a collective bargaining agreement. Compensation Our compensation programs are designed to attract, retain and motivate talented, deeply qualified, and committed individuals who believe in our mission, while rewarding employees for long-term value creation.
Compensation Our compensation programs are designed to attract, retain, and motivate talented, deeply qualified, and committed individuals who believe in our mission, while rewarding employees for long-term value creation. We have a pay-for-performance culture in which employee compensation is aligned to company performance, as well as individual contributions and impacts.
From time to time, Broad Arrow also opportunistically acquires collector cars and enthusiast vehicles for resale. Lastly, through Broad Arrow Capital LLC ("BAC"), we provide financing solutions to qualified collectors and businesses in the U.S., Canada, the U.K., and certain European countries by structuring loans secured by their collector cars.
Each of these auctions are held in partnership with various well-established concurs and/or automotive events with multi-year partnership agreements. We also provide financing solutions to qualified collectors and businesses in the U.S., Canada, the U.K., and certain European countries by structuring loans secured by their collector cars through our wholly owned subsidiary Broad Arrow Capital LLC ("BAC").
For more information regarding the acquisition of Drivers Edge, refer to Note 10 — Acquisitions in Item 8 of Part II of this Annual Report. 5 TABLE OF CONTENTS In order to fully capitalize on this opportunity, we perform a data-driven Member and vehicle analysis to understand vehicle ownership data, demographic data, vehicle usage, and values.
In order to fully capitalize on this opportunity, we perform a data-driven Member and vehicle analysis to understand vehicle ownership data, demographic data, vehicle usage, and values.
("Markel"), our MGA subsidiaries currently earn a base commission rate of approximately 37%, as well as an additional contingent underwriting commission ("CUC") that scales annually from -5% to a maximum of +5% of written premium, with 80% of the expected CUC paid monthly.
MGA subsidiary earned a base commission rate of approximately 37%, as well as an additional contingent underwriting commission ("CUC") that scaled annually from -5% to a maximum of +5% of written premium. On December 31, 2025, we entered into new contractual arrangements and amended the terms of our existing contractual arrangements with Markel and its affiliates.
In addition, we offer Member benefits tailored to the automotive enthusiast, all through our proprietary technology and by our sales and service teams. For partners, our focus on the collector car and enthusiast vehicle space allows them to focus on other parts of their business portfolios. We then align financial interests so both parties benefit from the relationship.
Our business model is attractive to our partners because we offer a full-service solution for their customers and their special cars. Our focus on the collector car and enthusiast vehicle space allows our distribution partners to focus on other parts of their business portfolios and because our financial interests are aligned, both parties benefit from the relationship.
Direct Sales Channel Our direct sales channel is serviced by our employee agents who sell policies in the U.S., Canada, and the United Kingdom ("U.K."). In 2024, approximately 45% of our total U.S. auto written premium is generated through direct sales.
For the years ended December 31, 2025, 2024, and 2023, commission and fee revenue earned by our MGA subsidiaries represented 33%, 34%, and 36%, respectively, of our total revenue. Direct Sales Channel Our direct sales channel is serviced by our employee agents who sell policies in the U.S., Canada, and the United Kingdom ("U.K.").
Refer to Note 24 — Related-Party Transactions in Item 8 of Part II of this Annual Report for additional information.
Refer to Note 24 — Related-Party Transactions in Item 8 of Part II of this Annual Report for additional information. Aviva Canada Alliance Aviva Canada Inc. ("Aviva") serves as the carrier for the specialty collector vehicle insurance policies sold by our Canadian MGA subsidiary ("Hagerty Canada").
These relationships with the largest auto insurance carriers enable us to provide a high-touchpoint experience for customers, resulting in more appropriate levels of coverage and higher overall customer service satisfaction. Government Regulation We operate across jurisdictions in North America and Europe and our businesses (in particular, insurance) are subject to comprehensive regulation and supervision.
These relationships with the largest auto insurance carriers enable us to provide a high-touchpoint experience for customers, resulting in more appropriate levels of coverage and higher overall customer service satisfaction. The collector car and enthusiast vehicle market is highly competitive for both Broad Arrow at the high-end of the market and Hagerty Marketplace at the lower price points.
Business Model and Competitive Strengths The Hagerty brand has been carefully curated over the last four decades by providing Members with excellent customer service through our passionate team of automotive experts. We have become known as an automotive enthusiast brand for car people, by car people.
Hagerty, Inc., a Delaware corporation, was formed in 2020 and became a public company traded on the New York Stock Exchange ("NYSE") in 2021 under the ticker symbol HGTY. Business Model and Competitive Strengths The Hagerty brand has been carefully curated over the last four decades by providing Members with excellent customer service through our passionate team of automotive experts.
Refer to Note 24 — Related-Party Transactions in Item 8 of Part II of this Annual Report for additional information. For the years ended December 31, 2024, 2023, and 2022, commission and fee revenue earned by our MGA subsidiaries represented 35%, 37%, and 39%, respectively, of our total revenue.
For information regarding the BAC loan portfolio, refer to Note 7 — Notes Receivable in Item 8 of Part II of this Annual Report. 11 TABLE OF CONTENTS For the years ended December 31, 2025, 2024, and 2023, Marketplace segment revenue represented 8%, 4%, and 3%, respectively, of our total revenue.
Our media team covers entertainment, news, market information, and vehicle valuation trends, all of which helps generate an engaged audience that drives retention and brings new Members into our ecosystem. Our enthusiast-centered ecosystem is built for car lovers, enabling them to protect, buy, sell, and enjoy their special cars, thereby increasing our share of their discretionary spending.
Our media team covers entertainment, news, market information, and vehicle valuation trends, all of which help generate an engaged audience that drives retention and attracts new Members.
Refer to the section titled " Risk Factors — Legal, Regulatory and Political Risks " within Item IA of Part I — Risk Factors in this Annual Report for additional information. Investments We hold an investment portfolio consisting predominantly of fixed maturity securities such as corporate bonds, U.S. treasury securities, and mortgage-backed securities.
Refer to the section titled " Risk Factors — Legal, Regulatory and Political Risks " within Item 1A of Part I — Risk Factors in this Annual Report for additional information. Intellectual Property We believe our intellectual property rights are valuable and important to our business.
Our strategy involves hiring great people, providing challenging and meaningful work, and investing in their professional and personal development, and we believe this creates a strategic advantage for us. Our objectives include effectively identifying, recruiting, retaining, and incentivizing our employees. As of December 31, 2024, we had 1,744 total employees including 1,733 full-time employees.
Human Capital Our performance-based culture is shaped by our people, and their engagement, accountability and alignment with our key objectives as an organization. Our strategy involves hiring great people, providing challenging and meaningful work, and investing in their professional and personal development, and we believe this creates a strategic advantage for us.
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").
Insurance Segment We operate as a Managing General Agent ("MGA") by underwriting, selling, and servicing collector car and enthusiast vehicle insurance policies on behalf of our insurance carrier partners. Due to our consistent track record of delivering strong underwriting results, we then reinsure a significant portion of the risks written by our MGA subsidiaries through Hagerty Re.
We do well when our partners win and grow, and we take great care to build partnerships with companies who share our focus on excellent customer service. We also have relationships with over 50,000 independent agents and brokers, representing all top 10 brokers in the U.S. by revenue.
We do well when our partners win and grow, and we take great care to build partnerships with companies who share our focus on excellent customer service. As a result of these partnerships, both brands benefit symbiotically through longer-lasting and more intimate customer relationships.
For the years ended December 31, 2024, 2023, and 2022, membership revenue represented 4.8%, 5.2%, and 5.7%, respectively, of our total revenue. Marketplace The market for buying and selling collector cars and enthusiast vehicles is substantial, encompassing live and digital auctions, as well as private sales.
We also earn private sales commissions through the direct brokering of purchases and sales of classic cars and enthusiast vehicles. The market for buying and selling collector cars and enthusiast vehicles is substantial, encompassing live auctions and digital sales, as well as private sales.
We believe that this enthusiast-centered business model, with a focus on community and engagement, is a significant advantage over competitors who, without strong affinity or engagement, are left to compete solely on price. 6 TABLE OF CONTENTS Insurance We provide insurance for approximately 2.6 million collector cars and enthusiast vehicles.
We believe our leading Net Promoter Score ("NPS") 1 and strong retention rates reflect the effectiveness of our enthusiast ecosystem and that our business model is a significant advantage over competitors who, without strong affinity or engagement, are left to compete solely on price. 1 NPS is a barometer of brand loyalty and engagement, supporting Member growth and policy retention.
Our investment portfolio also includes a relatively small balance of equity securities.
Our investment portfolio predominantly consists of fixed maturity securities such as corporate bonds, U.S. treasury securities, and agency mortgage-backed securities. Our investment portfolio also includes a relatively small balance of equity securities and other strategic direct investments.
The new platform will service distribution management, policy administration, billing, claims, and data reporting and insights. 7 TABLE OF CONTENTS Managing General Agent We earn commission revenue from the underwriting, sale, and servicing of collector car and enthusiast vehicle insurance policies on behalf of our insurance carrier partners.
When operating as an MGA, we earn commission and fee revenue primarily from the underwriting, sale, and servicing of collector car and enthusiast vehicle insurance policies written on behalf of insurance carriers.
ITEM 1. BUSINESS Company Overview We are a market leader in providing insurance for collector cars and enthusiast vehicles. Through our insurance business, we act as a Managing General Agent ("MGA") by underwriting, selling, and servicing collector car and enthusiast vehicle insurance policies.
ITEM 1. BUSINESS Company Overview We are a market leader in providing insurance for collector cars and enthusiast vehicles, helping the automotive enthusiast community protect and enjoy their special cars for more than 40 years. Our insurance products are complemented by our membership product, Hagerty Drivers Club ("HDC"), our renowned car events, and our media and entertainment platforms.
The backbone of our ecosystem is our fast-growing specialty insurance business. People take excellent care of the things they love, and we take great pride in protecting and preserving their treasured vehicles. For over 40 years, we have consistently grown our insurance business and currently insure 2.6 million collector cars and enthusiast vehicles.
For over 40 years, we have consistently grown our insurance business and, as of December 31, 2025, 2.8 million collector cars and enthusiast vehicles were covered by our insurance policies.
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HDC and our marketplace offerings, as well as our events and media and entertainment platforms, work synergistically with our insurance business to drive retention and loyalty and enable automotive enthusiasts to protect, buy, sell, and enjoy their special cars, whether it is on the road, on the track, in the garage, at an event or auction, or through our media content.
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We also operate a trusted marketplace where collectors and enthusiasts can buy and sell a wide range of vehicles, from entry level enthusiast vehicles to high value collector cars. Together, our integrated automotive ecosystem fosters a vibrant community where enthusiasts connect, share their passion, and access resources that enhance their ownership experience.
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We believe the combination of these complementary offerings creates an enthusiast-centered ecosystem of products and services, generating multiple points of engagement and monetization, resulting in an attractive recurring revenue business model with relatively low customer acquisition costs that is well-positioned to benefit from increasing scale.
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Beginning with this Annual Report, we present our Consolidated Financial Statements in accordance with Article 7 of Regulation S-X, reflecting the continued expansion of our insurance operations, including expanded risk assumption under the Markel Fronting Arrangement and the introduction of Enthusiast+, as discussed under " Markel Alliance" and " Drivers Edge Insurance Company " below.
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With a rich heritage spanning over 40 years, the first Hagerty company was founded in 1984. Hagerty, Inc., a Delaware corporation, was formed in 2020 and became a public company traded on the New York Stock Exchange ("NYSE") in 2021 under the ticker symbol HGTY.
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In addition, we now operate our business and report our financial performance using two segments: Insurance and Marketplace. Our segments provide management with a comprehensive financial view of our key businesses, as well as a framework for timely and rational allocation of resources.
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Industry and Market Opportunity We love cars and are not alone, as evidenced by the large and growing collector car and enthusiast vehicle market. We estimate that there are approximately 48 million insurable collector cars and enthusiast vehicles in the United States ("U.S."), of which approximately 11 million are pre-1981 and 37 million are post-1980 collectibles.
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Refer to " Transition to Article 7 Reporting Framework " in Item 7 of Part II of this Annual Report and Note 2 — Summary of Significant Accounting Policies in Item 8 of Part II of this Annual Report for additional information on the transition to Article 7 reporting.
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While we have become one of the leading providers of insurance for pre-1981 classics, with an estimated market share of 14% in that cohort, we estimate our market share for post-1980 collectibles is only 2%, resulting in an overall collector car and enthusiast vehicle market share of under 5%.
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Refer to Note 4 — Segment Reporting and Disaggregated Revenue in Item 8 of Part II of this Annual Report for additional information regarding segment reporting. The first Hagerty company was founded in 1984.
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Through our MGA subsidiaries, we are positioned to control the pricing and underwriting of our insurance policies, benefit from steady commission revenue, and engage directly with consumers. Then, due to our consistent track record of delivering strong underwriting results, we reinsure approximately 80% of the risks written by our MGA subsidiaries through Hagerty Re.
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The enthusiast community also benefits from the synergies of our trusted marketplace where we leverage our brand, relationships, and expertise to provide collectors and enthusiasts a seamless way to buy and sell a wide range of vehicles, from entry level enthusiast vehicles to high value collector cars.
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If a vehicle experiences a covered total loss, the carrier pays the full amount of the vehicle's insured value without any depreciation.
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Typical insurance businesses engage with their customers only a few times a year, but our diverse offerings result in numerous touchpoints with Members throughout the year.
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Our insurance business generates two types of revenue: (i) commissions and fees earned by our MGA subsidiaries from the underwriting, sale, and servicing of collector car and enthusiast vehicle insurance policies and (ii) insurance premiums earned for the risk assumed by Hagerty Re.
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NPS is measured twice annually through a web-based survey sent by email invitation to a random sample of existing Members, which currently excludes customers in our Marketplace segment, and is reported annually using an average of the two surveys. 6 TABLE OF CONTENTS Industry and Market Opportunity We have established ourselves as one of the leading providers of collector car and enthusiast vehicle insurance with an overall market share of approximately 7% within the United States ("U.S.") collector car and enthusiast vehicle market of 36 million vehicles.
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We utilize our data science capabilities to benefit both our MGA and risk-taking activities across the following key areas: • Underwriting and Risk Assessment: Decades of data allow us to accurately assess the risk associated with insuring collector cars and enthusiast vehicles through actuarial analysis, which leads to more efficient underwriting and appropriate pricing. • Market Analysis: Machine learning algorithms are designed to analyze data on collector car and enthusiast vehicle sales and values to identify trends and initiate automated marketing, sales, and servicing workflows. • Customer Service: AI-powered tools provide instant and accurate responses to Member inquiries, freeing up our member service agents to handle more complex issues and improve the Member experience. • Claims Processing: Streamlining the claims process by automating routine tasks and flagging potential fraud.
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This includes an estimated market share of approximately 15% for pre-1981 classic vehicles in the U.S. and an estimated U.S. market share for post-1980 collectible vehicles of 3%.
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To better serve our Members and enhance their experience as we continue to grow, we are investing substantial resources in the implementation of a new software-as-a-service ("SaaS") platform for our insurance products.
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Hagerty Re reinsures risks predominantly from policies issued by Essentia Insurance Company ("Essentia"), a wholly owned subsidiary of Markel.
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We offer our insurance products through an omnichannel distribution model, enabling us to sell our insurance wherever our policyholders need us.
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Hagerty Re's quota share percentage for the risks that is assumes from Essentia has ranged from 25% at the program's inception to 80% as of December 31, 2025, and increased to 100% in 2026 as discussed under " Markel Alliance " below.

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Item 1A. Risk Factors

Risk Factors — what could go wrong, per management

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Biggest changeAmong others, these risks relate to: • our ability to attract and retain Members and compete effectively within our industry; • our dependence on a limited number of insurance distribution and underwriting carrier partners; • our ability to prevent, monitor and detect fraudulent activity; • our reliance on a highly skilled management team, workforce, and unique culture ; 12 TABLE OF CONTENTS • our ability to successfully execute and integrate future acquisitions, partnerships and investments; • issues with our technology platforms and our ability to anticipate or prevent cyberattacks; • the limited operating history of some of our membership and marketplace products and services, as well as the success of any new insurance programs and products we offer; • our reliance on a limited number of payment processing services; • our susceptibility to inflation, interest rate, and foreign currency exchange rate fluctuations; • our ability to continue to develop, implement, and maintain the confidentiality of our proprietary technology and prevent the misappropriation of our data ; • unexpected increases in the frequency or severity of claims, including increases caused by catastrophic events; • compliance with the numerous laws and regulations applicable to our business, including state, federal and foreign laws relating to insurance and rate increases, privacy and cybersecurity, marketing and advertising, digital services, accounting matters, tax, anti-money laundering and economic sanctions; • the cyclical nature of the insurance business and our dependence on our ability to collect vehicle usage and driving data; • the ability or unwillingness of our reinsurers to pay claims on a timely basis, or at all, which may materially adversely affect our business, financial condition, and results of operations; • unexpected changes in the interpretation of our coverage or provisions, including loss limitations and exclusions, in the insurance policies we sell and service; • our ability to realize the anticipated benefits from the growth and integration of our marketplace offerings with our other businesses; • significant fluctuations in the collector car market and asset values, which may materially impact our ability to obtain and sell consigned property within our marketplace business; • the fact that Hagerty Holding Corp.
Biggest changeAmong others, these risks relate to: • our ability to attract and retain Members and compete effectively within our industry; • our dependence on a limited number of insurance distribution and underwriting carrier partners; • our ability to prevent, monitor, and detect fraudulent activity; • issues with our technology platforms and our ability to anticipate or prevent cyberattacks; • our ability to continue to develop, implement, and maintain the confidentiality of our proprietary technology and prevent the misappropriation of our data; • our reliance on a highly skilled management team, workforce, and unique culture; • our ability to successfully execute and integrate future acquisitions, partnerships and investments; • new products and services with limited operating history that may not achieve profitability as quickly as anticipated, or at all; • the performance of our investment portfolio, which is subject to a variety of investment risks; • our reliance on a limited number of payment processing services; • our susceptibility to inflation, interest rate, and foreign currency exchange rate fluctuations; • tariffs on imported goods, which may increase our costs and reduce consumer spending on collector cars and related services, which could adversely affect our business, financial condition, and results of operations; • unexpected increases in the frequency or severity of claims, including increases caused by catastrophic events; • compliance with the numerous laws and regulations applicable to our business, including state, federal and foreign laws relating to insurance and rate increases, privacy and cybersecurity, marketing and advertising, digital services, accounting matters, tax, anti-money laundering, and economic sanctions; • the cyclical nature of the insurance business and our dependence on our ability to collect vehicle usage and driving data; • the ability or unwillingness of our reinsurers to pay claims on a timely basis, or at all, which may materially adversely affect our business, financial condition, and results of operations; • unexpected changes in the interpretation of our coverage or provisions, including loss limitations and exclusions, in the insurance policies we sell and service; • our ability to realize the anticipated benefits from the growth and integration of our Marketplace segment offerings with our other businesses; • the potential for significant fluctuations in the collector car market and asset values, which may materially impact our ability to obtain and sell consigned vehicles and may have an adverse effect on the loan-to-value ("LTV") ratio of our loan portfolio within the Marketplace segment; • the accounting implications of the Markel Fronting Arrangement, which will impact the recognition of commission revenue and ceding commission expense, may not be readily understood by market participants; • the fact that we are a "controlled company" within the meaning of the NYSE listing requirements, and, as a result, we will qualify for, and intend to rely on, exemptions from certain corporate governance requirements; 15 TABLE OF CONTENTS • whether investors or stockholder advisory firms view our stock structure unfavorably, particularly our dual-class structure; • the fact that Hagerty Holding Corp.
In addition, there are limited barriers to entry in the automotive lifestyle business. Accordingly, more established brands with significantly more resources may compete against us in the automotive lifestyle business in the future.
In addition, there are limited barriers to entry in the automotive lifestyle business. Accordingly, more established brands with significantly more resources may compete against us in in the future.
We utilize numerous technology platforms throughout our business for various functions, including to gather Member data to price and administer our insurance products, including platforms for claims management, to issue and service our membership products, provide valuation services, and transact live and digital auctions. We use proprietary algorithms in certain circumstances within our underwriting processes for efficiency.
We utilize numerous technology platforms throughout our business for various functions, including platforms to gather Member data to price and administer our insurance products, for claims management, to issue and service our membership products, provide valuation services, and transact live and digital auctions. We use proprietary algorithms in certain circumstances within our underwriting processes for efficiency.
We are exposed to credit risk, or liquidity risk, through our banking partners. If we were to experience operating losses and are not able to generate additional liquidity through a capital raise or other cash infusion, we may need to secure additional sources of funds, which may or may not be available.
We are exposed to credit risk, and liquidity risk, through our banking partners. If we were to experience operating losses and are not able to generate additional liquidity through a capital raise or other cash infusion, we may need to secure additional sources of funds, which may or may not be available.
Our Amended and Restated Charter provides that, subject to limited exceptions, any (i) derivative action or proceeding brought on behalf of us under Delaware law, (ii) action asserting a claim of breach of a fiduciary duty owed by any current or former director, officer, or other employee to us or our stockholders, (ii) action asserting a claim against us, our directors, officers or other employees arising under the Delaware General Corporation Law ("DGCL"), our Amended and Restated Charter or our Amended and Restated Bylaws (in each case, as may be amended from time to time), (iv) action asserting a claim against us or any of our directors, officers or other employees governed by the internal affairs doctrine of the State of Delaware, or (v) other action asserting an "internal corporate claim," as defined in Section 115 of the DGCL, in all cases subject to the court having personal jurisdiction over all indispensable parties named as defendants shall, to the fullest extent permitted by law, be exclusively brought in the Court of Chancery of the State of Delaware or, if such court does not have subject matter jurisdiction thereof, another state or federal court located within the State of Delaware.
Our Amended and Restated Charter provides that, subject to limited exceptions, any (i) derivative action or proceeding brought on behalf of us under Delaware law; (ii) action asserting a claim of breach of a fiduciary duty owed by any current or former director, officer, or other employee to us or our stockholders; (iii) action asserting a claim against us, our directors, officers or other employees arising under the Delaware General Corporation Law ("DGCL"), our Amended and Restated Charter or our Amended and Restated Bylaws (in each case, as may be amended from time to time); (iv) action asserting a claim against us or any of our directors, officers or other employees governed by the internal affairs doctrine of the State of Delaware; or (v) other action asserting an "internal corporate claim," as defined in Section 115 of the DGCL, in all cases subject to the court having personal jurisdiction over all indispensable parties named as defendants shall, to the fullest extent permitted by law, be exclusively brought in the Court of Chancery of the State of Delaware or, if such court does not have subject matter jurisdiction thereof, another state or federal court located within the State of Delaware.
In addition, the broker/agent relationships with many of the partners we work with may change and their own internal strategy about how products are marketed may change, and, where we do not have exclusivity, we face competition by providers who seek to build or strengthen the relationships without distribution partners, which could cause a loss of focus on or exposure to our products and services, adversely impacting new sales.
In addition, the broker/agent relationships with many of the partners we work with may change and their own internal strategy about how products are marketed may change, and, where we do not have exclusivity, we face competition by providers who seek to build or strengthen relationships with our distribution partners, which could cause a loss of focus on or exposure to our products and services, adversely impacting new sales.
The TRA generally provides for the payment by Hagerty, Inc. to Legacy Unit Holders of 85% of the cash tax benefits, if any, realized as a result of (i) tax basis adjustments resulting from TRA exchanges in connection with or following the business combination that formed Hagerty, Inc. in 2021 , (ii) certain other tax benefits related to entering into the TRA , including tax benefits attributable to making payments under the TRA .
The TRA generally provides for the payment by Hagerty, Inc. to Legacy Unit Holders of 85% of the cash tax benefits, if any, realized as a result of (i) tax basis adjustments resulting from TRA exchanges in connection with or following the business combination that formed Hagerty, Inc. in 2021; and (ii) certain other tax benefits related to entering into the TRA, including tax benefits attributable to making payments under the TRA.
A large percentage of our products and services are distributed through a few relationships and the loss of business provided by any one of them could have an adverse effect on us. In addition to our direct sales efforts and independent channels, we market our insurance products through several insurance distribution partners.
A large percentage of our Insurance segment products and services are distributed through a few relationships and the loss of business provided by any one of them could have an adverse effect on us. In addition to our direct sales efforts and independent channels, we market our insurance products through several insurance distribution partners.
If our efforts to satisfy our existing Members are not successful, we may not be able to attract new Members , and as a result, our ability to grow our business will be adversely affected. Similarly, a large percentage of our revenues are derived from direct-to-consumer sales, including through digital channels.
Therefore, if our efforts to satisfy our existing Members are not successful, we may not be able to attract new Members, and as a result, our ability to grow our business will be adversely affected. Similarly, a large percentage of our revenues are derived from direct-to-consumer sales, including through digital channels.
The preparation of our financial statements requires us to make significant judgements, assumptions, and estimates that materially affect the amounts reported in our Consolidated Financial Statements. If these judgments, assumptions, or estimates prove to be incorrect, it could have a material adverse effect on our results of operations and/or financial condition.
The preparation of our financial statements requires us to make significant judgments, assumptions, and estimates that materially affect the amounts reported in our Consolidated Financial Statements. If these judgments, assumptions, or estimates prove to be incorrect, it could have a material adverse effect on our financial condition and/or results of operations.
Our three largest stockholders hold significant voting power, have the right to designate directors to our Board and are entitled to preemptive rights with respect to the issuance of new Class A Common Stock, which provides these stockholders with significant power to influence our business and affairs. Our three largest stockholders are HHC, Markel, and State Farm .
Our three largest stockholders hold significant voting power, have the right to designate directors to our Board and are entitled to preemptive rights with respect to the issuance of new shares of Class A Common Stock, which provides these stockholders with significant power to influence our business and affairs. Our three largest stockholders are HHC, Markel, and State Farm .
We have recently completed strategic acquisitions, including Broad Arrow in August 2022 and Drivers Edge in September 2024. In the future, we may pursue additional acquisitions or investments to grow our business in line with our strategic objectives. Our acquisitions or investments may not achieve their intended purpose or the desired return sought.
We have completed strategic acquisitions, including Drivers Edge in September 2024 and Broad Arrow in August 2022. In the future, we may pursue additional acquisitions or investments to grow our business in line with our strategic objectives. Our acquisitions or investments may not achieve their intended purpose or the desired return sought.
Accordingly, shares registered under such registration statements will be available for sale in the open market. Any stock that we issue or exchange would dilute the percentage ownership held by the investors who purchase Class A Common Stock .
Accordingly, shares registered under such registration statements will be available for sale in the open market. Any stock that we issue or exchange would dilute the percentage ownership held by the investors who purchase our Class A Common Stock .
However, should any regulatory agency take a contrary position and prevail, we will be required to change the manner in which we operate and we may be subject to penalties and other enforcement actions up to, and including, license suspension or revocation.
However, should any regulatory agency take a contrary position and prevail, we may be required to change the manner in which we operate and we may be subject to penalties and other enforcement actions up to, and including, license suspension or revocation.
Political events and positions can affect the insurance market on occasion, including efforts to reduce rates to a level that may prevent us from being profitable or may not allow us to reach our goals.
Political events and positions can affect the insurance market on occasion, including efforts to reduce rates to a level that may prevent our Insurance segment from being profitable or may not allow us to reach our goals.
An insurance regulator could also determine that there are other aspects of either the underwriting company or our operations that are less than satisfactory, or that either us or the underwriting company that we work with are in violation of applicable laws or regulations.
An insurance regulator could also determine that there are other aspects of either the underwriting company or our operations that are less than satisfactory, or that either we or the underwriting company that we work with are in violation of applicable laws or regulations.
If we are unable to comply with applicable rules or requirements for the payment methods that we accept, or if payment-related data is compromised due to a cybersecurity incident or a breach, we may be liable for significant costs incurred by payment card issuing banks and other third parties, subject to fines and higher transaction fees, subject to potential litigation or enforcement action, or our ability to accept or facilitate certain types of payments may be impaired.
If we are unable to comply with applicable rules or requirements for the payment methods that we accept, or if payment-related data is compromised due to a cybersecurity incident or a breach, we may be liable for significant costs incurred by payment regulatory bodies, payment card issuing banks and other third parties, subject to fines and higher transaction fees, subject to potential litigation or enforcement action, or our ability to accept or facilitate certain types of payments may be impaired.
Any actions or publications by stockholder advisory firms critical of our corporate governance practices or capital structure could also adversely affect the value of our Class A Common Stock . 32 TABLE OF CONTENTS The dual class structure of our common stock will have the effect of concentrating voting power with two stockholders, which will limit your ability to influence the outcome of important transactions, including a change in control.
Any actions or publications by stockholder advisory firms critical of our corporate governance practices or capital structure could also adversely affect the value of our Class A Common Stock . 35 TABLE OF CONTENTS The dual class structure of our common stock will have the effect of concentrating voting power with two stockholders, which will limit your ability to influence the outcome of important transactions, including a change in control.
Fluctuations in our operating results could be due to a number of other factors, many of which may be outside of our control, including competition, but also the frequency and severity of catastrophic events, levels of capacity, adverse litigation trends, regulatory constraints, general economic conditions, and agreement on underwriting appetite with our carrier partners, and other factors.
Fluctuations in the operating results of our Insurance segment could be due to a number of other factors, many of which may be outside of our control, including competition, but also the frequency and severity of catastrophic events, levels of capacity, adverse litigation trends, regulatory constraints, general economic conditions, and agreement on underwriting appetite with our carrier partners, and other factors.
As a result, you may not receive any return on an investment in our Class A Common Stock unless you sell our Class A Common Stock for a price greater than that which you paid for it. 33 TABLE OF CONTENTS Anti-takeover provisions in our organizational documents and applicable insurance laws could delay or prevent a change of control.
As a result, you may not receive any return on an investment in our Class A Common Stock unless you sell our Class A Common Stock for a price greater than that which you paid for it. 36 TABLE OF CONTENTS Anti-takeover provisions in our organizational documents and applicable insurance laws could delay or prevent a change of control.
As we continue to expand and grow, we will need to promote or hire additional staff, and it may be difficult to attract or retain such individuals in a timely manner and without incurring significant additional costs. If we are not able to integrate new team members or if they do not perform adequately, our business may be harmed.
As we continue to expand and grow, we will need to promote or hire additional staff, and it may be difficult to attract or retain such individuals in a timely manner and without incurring significant additional costs. If we are unable to integrate new team members or if they do not perform adequately, our business may be harmed.
If we are unable to remain competitive on Member experience, pricing, or insurance coverage options, our ability to grow and retain our business may also be adversely affected. In addition, we might not be able to accurately predict risk segmentation of new and renewal Members or potential Members , which could also reduce our profitability.
If we are unable to remain competitive with Member experience, pricing, or insurance coverage options, our ability to grow and retain our business may also be adversely affected. In addition, we might not be able to accurately predict risk segmentation of new and renewal Members or potential Members, which could also reduce our profitability.
If our claims adjusters are unable to effectively process our volume of claims in accordance with our service metrics and the manner that our Members expect, our ability to grow our business while maintaining high levels of Member satisfaction could be compromised, which in turn, could adversely affect our reputation, financial condition and results of operations.
If our claims adjusters are unable to effectively process our volume of claims in accordance with our service metrics and the manner that our Members expect, our ability to grow our business while maintaining high levels of Member satisfaction could be compromised, which in turn, could adversely affect the reputation, financial condition, and results of operations of our Insurance segment.
For example, the BMA requires Bermuda-licensed insurers to maintain a minimum level of capital and surplus, comply with restrictions on dividends, make financial statement filings, prepare a financial condition report, maintain a head office in Bermuda from which insurance business is directed and managed and allow for the performance of certain periodic examinations of financial condition.
For example, the BMA requires Bermuda-licensed insurers to maintain a minimum level of capital and surplus, comply with restrictions on dividends, make financial statement filings, prepare a financial condition report, maintain a principal office in Bermuda from which insurance business is directed and managed and allow for the performance of certain periodic examinations of financial condition.
Our day-to-day operations create transactions, events, and conditions that may give rise to the need for accounting estimates to be recognized or disclosed in our Consolidated Financial Statements . There is a risk that these estimates are incorrect, which could have a material adverse effect on our results of operations and/or financial condition for accounting purposes.
Our day-to-day operations create transactions, events, and conditions that give rise to the need for accounting estimates to be recognized or disclosed in our Consolidated Financial Statements. There is a risk that these estimates are incorrect, which could have a material adverse effect on our financial condition and/or results of operations.
Our MGA subsidiaries work with a limited number of carriers in the U.S., Canada, and the U.K. to offer our personal lines insurance products, and there is a risk that if one or more of the carriers becomes impaired or terminates its relationship with us that our profitability may be adversely affected.
Our MGA subsidiaries work with a limited number of carriers in the U.S., Canada, and the U.K. to offer our personal lines insurance products, and there is a risk that if one or more of the carriers becomes impaired or terminates its relationship with us such that the profitability of our Insurance segment may be adversely affected.
Our insurance coverage relating to any data security and privacy damages and claim expenses may not be sufficient to compensate for all liabilities we may incur. 30 TABLE OF CONTENTS Our intellectual property rights are extremely valuable and if they are not properly protected, our products, services, and brand could be adversely impacted.
Our insurance coverage relating to any data security and privacy damages and claim expenses may not be sufficient to compensate for all liabilities we may incur. 33 TABLE OF CONTENTS Our intellectual property rights are extremely valuable and if they are not properly protected, our products, services, and brand could be adversely impacted.
At such time, we may file additional registration statements on Form S-8 under the Securities Act to register shares of Common Stock or securities convertible into or exchangeable for shares of Common Stock issued pursuant to our equity incentive plans. Any such Form S-8 registration statements will automatically become effective upon filing.
At such time, we may file additional registration statements on Form S-8 under the Securities Act to register shares of our Class A Common Stock or securities convertible into or exchangeable for shares of Class A Common Stock issued pursuant to our equity incentive plans. Any such Form S-8 registration statements will automatically become effective upon filing.
Any regulatory or enforcement action or any regulatory order imposing remedial, injunctive, or other corrective action against us or any of the underwriting companies we work with resulting from these examinations or audits could have a material adverse effect on our business, reputation, financial condition and results of operations.
Any regulatory or enforcement action or any regulatory order imposing remedial, injunctive, or other corrective action against us or any of the underwriting companies we work with resulting from these examinations or audits could have a material adverse effect on the business, reputation, financial condition, and results of operations of our Insurance segment.
Insurance regulators periodically subject the underwriting companies that we work with to audits and examinations to assess compliance with applicable laws and regulations, financial condition, and the conduct of regulated activities. These examinations and audits may be conducted during a jurisdiction’s normal review cycle, or because of a targeted investigation.
Insurance regulators periodically subject the underwriting companies that we work with to audits and examinations to assess compliance with applicable laws and regulations, financial condition, and the conduct of regulated activities. These examinations and audits may be conducted during a jurisdiction’s typical review cycle, or because of a targeted investigation.
In the event of a loan default, our ability to realize proceeds from the sale of collateral may be impaired where the collateral is incorrectly valued, or there are competing claims on the collateral, or disputes involving a borrower and/or the collateral including, but not limited to, bankruptcy, litigation or insolvency laws.
In the event of a loan default, our ability to realize proceeds from the sale of collateral may be impaired where the collateral was incorrectly valued, or there are competing claims on the collateral, or disputes involving a borrower and/or the collateral including, but not limited to, bankruptcy, litigation or insolvency laws.
Additional operational requirements for Hagerty Re in Bermuda include: • maintaining a principal office in Bermuda and having a certain number of Bermuda-domiciled managers involved in overseeing operations; • obtaining prior approval for changes in ownership/transfers of shares; • having restrictions on dividends; • complying with Bermuda know-your-customer and anti-bribery type laws; • having audited financial statements and being subject to BMA examination; and • carrying out operations in accordance with its filed and approved business plan.
Additional operational requirements for Hagerty Re in Bermuda include: • maintaining a principal office in Bermuda and having a certain number of Bermuda-domiciled managers involved in overseeing operations; • obtaining prior approval for changes in ownership/transfers of shares; 30 TABLE OF CONTENTS • having restrictions on dividends; • complying with Bermuda know-your-customer and anti-bribery type laws; • having audited financial statements and being subject to BMA examination; and • carrying out operations in accordance with its filed and approved business plan.
Additional risks and uncertainties that we are unaware of, or that we currently believe are not material, may also become important factors that affect us. You should carefully read the following risks as well as the cautionary statements referred to in "Cautionary Statement Regarding Forward-Looking Statements" herein.
Additional risks and uncertainties that we are unaware of, or that we currently believe are not material, may also become important factors that affect us. You should carefully read these risks as well as the cautionary statements referred to in "Cautionary Statement Regarding Forward-Looking Statements" herein.
If we are unable to compete effectively, we may not be able to grow our business and our financial condition and results of operations may be adversely affected. 15 TABLE OF CONTENTS Future acquisitions or investments contain inherent strategic, execution, and compliance risks that could disrupt our business and harm our financial condition.
If we are unable to compete effectively, we may not be able to grow our business and our financial condition and results of operations may be adversely affected. 19 TABLE OF CONTENTS Future acquisitions or investments contain inherent strategic, execution, and compliance risks that could disrupt our business and harm our financial condition.
The supply and demand for collector cars, and therefore the values of collector cars, are influenced not only by overall economic conditions, but also by changing trends in the collector car market as to which vehicles and provenance are most sought after and by the collecting preferences of individual collectors.
The supply and demand for collector cars and enthusiast vehicles, and therefore the values of collector cars and enthusiast vehicles, are influenced not only by overall economic conditions, but also by changing trends in the collector car and enthusiast vehicle market as to which vehicles and provenance are most sought after and by the collecting preferences of individual collectors.
Pursuant to the Investor Rights Agreement, each of HHC, Markel, and State Farm has agreed to vote for the election of any director nominated by HHC, Markel, and State Farm in furtherance of the director designation rights described above. As a consequence, at present, the re-election in 2025 of the directors designated by HHC, Markel and State Farm is assured.
Pursuant to the Investor Rights Agreement, each of HHC, Markel, and State Farm has agreed to vote for the election of any director nominated by HHC, Markel, and State Farm in furtherance of the director designation rights described above. As a consequence, at present, the re-election in 2026 of the directors designated by HHC, Markel and State Farm is assured.
Without an active market, the liquidity of the Series A Convertible Preferred Stock will be limited. 34 TABLE OF CONTENTS The price of our securities may be volatile or may decline regardless of our operating performance and you could lose all or part of your investment as a result.
Without an active market, the liquidity of the Series A Convertible Preferred Stock will be limited. 37 TABLE OF CONTENTS The price of our securities may be volatile or may decline regardless of our operating performance and you could lose all or part of your investment as a result.
Worse, our acquisitions and investments may also result in unforeseen liabilities, expenses, or negative consequences, including contingent liabilities, high implementation costs, misalignment of culture, burdensome regulatory requirements, tax liabilities, and distraction of senior management from pursuing more profitable strategic objectives.
Additionally, our acquisitions and investments may also result in unforeseen liabilities, expenses, or negative consequences, including contingent liabilities, high implementation costs, misalignment of culture, burdensome regulatory requirements, tax liabilities, and distraction of senior management from pursuing more profitable strategic objectives.
Any regulatory enforcement actions, such as the inquiry related to unauthorized access into our online quote feature described in the section titled 2021 Data Security Incident within Note 25 — Commitments and Contingencies in Item 8 of Part II of this Annual Report , or future cyberattacks on our systems, could result in reputational damage and/or our current and prospective Members to stop using our services.
Any regulatory enforcement actions, such as the inquiry related to unauthorized access into our online quote feature described in the section " Data Security Incident " within Note 25 — Commitments and Contingencies in Item 8 of Part II of this Annual Report, or future cyberattacks on our systems, could result in reputational damage and/or cause current and prospective Members to stop using our services.
Severe weather conditions and catastrophes can cause greater losses, which can cause our liquidity and financial condition to deteriorate.
Severe weather conditions and catastrophes can cause greater losses, which could cause our liquidity and financial condition to deteriorate.
Any of these eventualities could result in a material adverse effect on our business, financial condition and results of operations. 17 TABLE OF CONTENTS Our future success depends on our ability to continue to develop and implement technology to transform or replace legacy technology, and to maintain the security and confidentiality of our legacy technology, each in compliance with evolving privacy and cybersecurity laws.
Any of these eventualities could result in a material adverse effect on our business, financial condition, and results of operations. Our future success depends on our ability to continue to develop and implement technology to transform or replace legacy technology, and to maintain the security and confidentiality of our legacy technology, each in compliance with evolving privacy and cybersecurity laws.
Any of these factors could have a material adverse effect on our financial condition and results of operations. Our estimates of market opportunity and forecasts of market growth may prove to be inaccurate, and even if the market in which we compete achieves the forecasted growth, our business could fail to grow at a similar rate, if at all.
Any of these factors could have a material adverse effect on our financial condition and results of operations. 22 TABLE OF CONTENTS Our estimates of market opportunity and forecasts of market growth may prove to be inaccurate, and even if the market in which we compete achieves the forecasted growth, our business could fail to grow at a similar rate, if at all.
These types of governmental actions could result in higher than anticipated losses and loss adjustment expenses, which could have a material adverse effect on our financial condition or results of operations. In addition, court decisions have eliminated long standing coverage limitations by a narrow reading of policy exclusions.
These types of governmental actions could result in higher than anticipated losses and loss adjustment expenses, which could have a material adverse effect on the financial condition or results of operations of our Insurance segment. In addition, court decisions have eliminated long standing coverage limitations by a narrow reading of policy exclusions.
Our inability to ensure that we have the depth and breadth of management and personnel with the necessary skills and experience could impede our ability to deliver growth objectives and execute our operational strategy.
Our inability to ensure that we have the depth and breadth of management and personnel with the necessary skills and experience could affect our ability to deliver growth objectives and execute our operational strategy.
Additionally, any failure to pay claims accurately or timely could also lead to regulatory and administrative actions or material litigation, loss or reduction in reinsurance recoverable, or result in damage to our reputation, any one of which could materially and adversely affect our business, financial condition, results of operations and prospects.
Additionally, any failure to pay claims accurately or timely could also lead to regulatory and administrative actions or material litigation, loss or reduction in reinsurance recoverable, or result in damage to our reputation, any one of which could materially and adversely affect the business, financial condition, results of operations and prospects of our Insurance segment.
This shift, along with a significant rise in the annual growth of car sharing members and autonomous and electric vehicles, and legislative efforts to reduce carbon emissions, in the markets we currently conduct business, could have a trickle-down effect to the collector car space and create a drop in demand for our products and services, which could have a material adverse effect on our business, financial condition and results of operations.
This shift, along with a significant rise in the annual growth of car sharing members and autonomous and electric vehicles, and legislative efforts to reduce carbon emissions, in the markets we currently conduct business, could have a trickle-down effect to the collector car space and result in reduced demand for our products and services, which could have a material adverse effect on our business, financial condition, and results of operations.
If any technology and intellectual property we license from others becomes unavailable, we may not be able to find replacement technologies at a reasonable cost or at all, which could materially harm our business and results of operations.
If any technology and intellectual property we license from others becomes unavailable, we may not be able to find replacement technologies or intellectual property at a reasonable cost or at all, which could materially harm the business and results of operations of our Insurance segment.
A significant increase in claim severity could have an adverse effect on our financial condition and results of operations. Severe weather events, catastrophes, and unnatural events are unpredictable, and we may experience losses or disruptions from these events.
A significant increase in claim severity could have an adverse effect on our financial condition and the results of operations of the Insurance segment. Severe weather events, catastrophes, and unnatural events are unpredictable, and we may experience losses or disruptions from these events.
Our business may be exposed to catastrophic events such as tornadoes, tsunamis, tropical storms (including hurricanes), earthquakes, windstorms, hailstorms, severe thunderstorms, wildfires and other fires, as well as non-natural events such as explosions, riots, pandemics, terrorism, or war, which could cause operating results to vary significantly from one period to the next.
Our Insurance segment may be exposed to catastrophic events such as tornadoes, tsunamis, tropical storms (including hurricanes), earthquakes, windstorms, hailstorms, severe thunderstorms, wildfires and other fires, as well as non-natural events such as explosions, riots, pandemics, terrorism, or war, which could cause the operating results of the Insurance segment to vary significantly from one period to the next.
Such an event may cause Hagerty Re to require capital investments that may not be available. 25 TABLE OF CONTENTS Unexpected changes in the interpretation of coverage or provisions, including loss limitations and exclusions, in the insurance policies we sell and service could have a material adverse effect on our financial condition and operations.
Such an event may cause Hagerty Re to require capital investments that may not be available. Unexpected changes in the interpretation of coverage or provisions, including loss limitations and exclusions, in the insurance policies we sell and service could have a material adverse effect on the financial condition and operations of our Insurance segment.
Despite our efforts to ensure the security, privacy, integrity, confidentiality, availability, and authenticity of information technology networks and systems, processing and information, we may not be able to anticipate, or to implement, preventive and remedial measures effective against all data security and privacy threats.
Despite our efforts to ensure the security, privacy, integrity, confidentiality, availability, and authenticity of information technology networks and systems, processing and information, we may not be able to fully anticipate, or to implement effective measures against all data security and privacy threats.
Treasury regulations provide for certain safe harbors from treatment as a publicly traded partnership and, although THG intends to operate to qualify under such safe harbors, there may be situations where it is unable to do so.
Applicable U.S. Treasury regulations provide for certain safe harbors from treatment as a publicly traded partnership and, although THG intends to operate to qualify under such safe harbors, there may be situations where it is unable to do so.
We intend to cause THG to make distributions to its members in amounts sufficient to cover all applicable taxes (calculated at certain assumed tax rates) and payments under the TRA ; however, THG's ability to make such distributions may be subject to various limitations and restrictions including, but not limited to, restrictions on distributions in violation of its financing covenants that would have the effect of rendering THG insolvent, or pursuant to other applicable law.
Hagerty, Inc. intends to cause THG to make distributions to its members in amounts sufficient to cover all applicable taxes (calculated at certain assumed tax rates) and payments under the TRA; however, THG's ability to make such distributions may be subject to various limitations and restrictions including, but not limited to, restrictions on distributions in violation of its financing covenants that would have the effect of rendering THG insolvent, or pursuant to other applicable law.
Refer to the section entitled " Critical Accounting Estimates" within Item 7 of Part II of this Annual Report for additional information. 19 TABLE OF CONTENTS We may require additional capital in the future, which may not be available or may only be available on unfavorable terms, and we may encounter difficulty in obtaining funds to meet our commitments.
Refer to the section " Critical Accounting Estimates " within Item 7 of Part II of this Annual Report for additional information. We may require additional capital in the future, which may not be available or may only be available on unfavorable terms, and we may encounter difficulty in obtaining funds to meet our commitments.
We may incur Member insurance claims from severe weather events, and catastrophe losses in our business in excess of: (i) those experienced in prior years; (ii) the average expected level used in pricing; (iii) current reinsurance coverage limits; or (iv) loss estimates from external models at various levels of probability.
Our Insurance segment may incur claims from severe weather events, and catastrophe losses in excess of: (i) those experienced in prior years; (ii) the average expected level used in pricing; (iii) current reinsurance coverage limits; or (iv) loss estimates from external models at various levels of probability.
The factors considered by management in estimating the provision for unpaid losses and loss adjustment expenses include the following: • the views of the Company's actuaries; • historical trends in claim frequency and severity, including the impacts of adverse weather-related events; • changes in claim cycle time and claim settlement practices; • observed industry trends; • the changing mix of business due to the large growth in modern collectible cars which carry a different risk profile than the risks associated with collector cars; • inflation or deflation; • retention limits under current catastrophe and treaty reinsurance programs; and • legislative and judicial changes in the jurisdictions in which the Company operates.
The factors considered by management in estimating the provision for unpaid losses and loss adjustment expenses include the following: • the views of our actuaries; • historical trends in claim frequency and severity, including the impacts of adverse weather-related events; • changes in claim cycle time and claim settlement practices; • observed industry trends; • the changing mix of business, predominantly due to the large growth in modern collectible cars which carry a different risk profile than the risks associated with collector cars; • inflation or deflation; • retention limits under current catastrophe and treaty reinsurance programs; and • legislative and judicial changes in the jurisdictions in which we operate.
A regulatory environment that requires rate increases to be approved and that can dictate underwriting and pricing and mandate participation in loss sharing arrangements may adversely affect our financial condition and results of operations.
A regulatory environment that requires rate increases to be approved and that can dictate underwriting and pricing and mandate participation in loss sharing arrangements may adversely affect our financial condition and the results of operations of our Insurance segment.
The Series A Convertible Preferred Stock is not currently listed on any securities exchange or nationally recognized trading system, including the New York Stock Exchange, and we may choose not to apply to list it in the future.
The Series A Convertible Preferred Stock is not currently listed on any securities exchange or nationally recognized trading system, including the NYSE, and we may choose not to apply to list it in the future.
Accordingly, if we experience a change of control, we could lose our agreements with one or both of these partners, which could have a material adverse effect on our business, operations and financial results.
Accordingly, if we experience a change of control, we could lose our agreements with one or both of these partners, which could have a material adverse effect on the business, operations and financial results of our Insurance segment.
Regulatory review or the issuance of interpretations of existing laws and regulations may result in the enactment of new or amended laws and regulations that could adversely affect our operations or our ability to conduct business profitably.
Regulatory review or the issuance of interpretations of existing laws and regulations may result in the enactment of new or amended laws and regulations that could adversely affect the operations of our Insurance segment or its ability to conduct business profitably.
It is impossible to have an insurance product that satisfies every potential customer, and our competitors may offer coverage terms or other features that we do not provide. In presenting our total addressable market, we are not making any claim that we can realistically serve that market.
It is impossible to have an insurance product that satisfies every potential customer, and our competitors may offer greater flexibility or other features that we do not provide. In presenting our total addressable market, we are not making any claim that we can realistically serve that market.
Marketplace businesses generate revenues through fees and commissions generally based on a percentage of the final sale price, which can fluctuate based on the market dynamics. Further, the fees and commissions we charge may be lowered based on both the level of compensation and the market dynamics between supply and demand for collector cars.
Marketplace businesses generate revenues through fees and commissions generally based on a percentage of the final sale price, which can fluctuate based on the market dynamics. Further, the fees and commissions we charge may be lowered based on both the level of competition and the market dynamics between supply and demand for collector cars and enthusiast vehicles.
If we are unable to maintain or obtain our dealer licenses, auctioneer licenses, and/or other applicable permits and licenses as required in certain jurisdictions in which we operate, or plan to operate, such licensing issues may adversely impact the business results of operation, and financial condition of our m arketplace business.
If we are unable to maintain or obtain our dealer licenses, auctioneer licenses, and/or other applicable permits and licenses as required in certain jurisdictions in which we operate, or plan to operate, such licensing issues may adversely impact the business, financial condition, and results of operation of our Marketplace segment.
Member demand could decrease after the development cycle has begun. A decrease in Member demand for a new or improved product could cause us to fall short of our sales targets, and we might not be able to avoid the substantial costs associated with the product's development or improvement.
A decrease in Member demand for a new or improved product could cause us to fall short of our sales targets, and we might not be able to avoid the substantial costs associated with the product's development or improvement.
Risks Related to Our Marketplace Business Our growth strategy involves the development and expansion of our marketplace offerings, and if we are unable to realize the anticipated benefits from their growth and integration with our other businesses, our business, financial condition and results of operations could be materially and adversely affected.
Risks Related to Our Marketplace Segment Our growth strategy involves the development and expansion of our Marketplace segment offerings, and if we are unable to realize the anticipated benefits from their growth and integration with our Insurance segment, the business, financial condition, and results of operations of our Marketplace segment could be materially and adversely affected.
As of December 31, 2024, no shares of Series A Convertible Preferred Stock have been converted to shares of Class A Common Stock under the Securities Purchase Agreement. Refer to Note 18 — Convertible Preferred Stock in Item 8 of Part II of this Annual Report for additional information.
As of December 31, 2025, no shares of Series A Convertible Preferred Stock have been converted to shares of Class A Common Stock under the Securities Purchase Agreement. Refer to Note 19 — Convertible Preferred Stock in Item 8 of Part II of this Annual Report for additional information.
In addition, we might not be able to accurately predict risk segmentation of new and renewal Members or potential Members , which could also reduce our profitability.
In addition, we might not be able to accurately predict risk segmentation of new and renewal Members or potential Members, which could also reduce the profitability of our Insurance segment.
The compensation committee of our Board may in the future increase the number of shares to be reserved for future issuance under our equity incentive plans at its discretion.
The Talent, Culture, and Compensation Committee (the "Compensation Committee") of our Board may in the future increase the number of shares to be reserved for future issuance under our equity incentive plans at its discretion.
We are subject to regulation and supervision both federally and in each applicable state or provincial jurisdiction. In general, these regulations are designed to protect Members , policyholders, and insureds, and to protect the integrity of the financial markets, rather than to protect stockholders or creditors.
We are subject to regulation and supervision both federally and in each applicable state or provincial jurisdiction. In general, these regulations are designed to protect policyholder and insured Members and to protect the integrity of the financial markets, rather than to protect stockholders or creditors.
Complex legal, regulatory, and contractual requirements regarding data privacy and cybersecurity may impact how we interact with our insurance customers and how we market to future Members, and could have an adverse effect on our business, financial condition and operations.
Complex legal, regulatory, and contractual requirements regarding data privacy and cybersecurity may impact how we market and interact with existing and future Members, and could have an adverse effect on our business, financial condition, and operations.
Additionally, the loss of key personnel within our senior management and Broad Arrow teams might significantly delay or prevent the achievement of our strategic business objectives and could harm our business. We rely on a small number of specialized experts, the loss of any one of whom could have a disproportionate impact on our business.
Additionally, the loss of key personnel within our senior management, Insurance segment, and Marketplace segment teams might significantly delay or prevent the achievement of our strategic business objectives and could harm our business. We rely on a small number of specialized experts, the loss of any one of whom could have a disproportionate impact on our business.
BAC, our wholly owned collector car financing business, has a limited operating history and has incurred minimal losses on its loan portfolio. Accordingly, despite our conservative loan underwriting standards, our current loan loss experience may not be indicative of the future performance of the loan portfolio.
BAC, our wholly owned collector car financing business, has a limited operating history and has incurred no material losses on its loan portfolio to date. Accordingly, despite our conservative loan underwriting standards, our current loan loss experience may not be indicative of the future performance of the loan portfolio.
Competition in the global collector car sales market and the variability of the value, demand and availability of quality collector cars for sale may adversely impact the business, results of operations, and financial condition of our marketplace business.
Competition in the global market for sales of collector cars and enthusiast vehicles and the variability of the value, demand and availability of quality collector cars for sale may adversely impact the business, financial condition, and results of operations of our Marketplace segment.
Our inability to maintain the required licenses or permits in any jurisdiction where we operate or plan to operate may adversely impact the business, results of operations, and financial condition of our marketplace business.
Our inability to maintain or obtain the required licenses or permits in any jurisdiction where we operate or plan to operate may adversely impact the business, financial condition, and results of operations of the businesses within our Marketplace segment.
If we fail to meet consumer expectations for the Member experience through digital or other sales channels, our growth may be impacted through the loss of existing Members or inability to attract new Members . 13 TABLE OF CONTENTS A significant loss of Members could lead to higher loss ratios or declining revenue; either of which would adversely impact our profitability.
If we fail to meet consumer expectations for the Member experience through digital or other sales channels, our growth may be impacted through the loss of existing Members or inability to attract new Members. A significant loss of Members could lead to declining revenue, which would adversely impact our profitability.
So long as more than 50% of the voting power for the election of directors is held by an individual, a group, or another company, we will qualify as a "controlled company" under the NYSE listing requirements. As of December 31, 2024, HHC controls approximately 67.5% of the voting power of our outstanding capital stock.
So long as more than 50% of the voting power for the election of directors is held by an individual, a group, or another company, we will qualify as a "controlled company" under the NYSE listing requirements. As of December 31, 2025, HHC controls approximately 66.0% of the voting power of our outstanding capital stock.
It is difficult to predict whether, and to what degree, changes resulting from new laws and regulations will affect the industry or our business. Our MGAs do business with a limited number of key underwriting carrier partners in our insurance markets, and we may not be able to find suitable replacements for our existing carriers.
It is difficult to predict whether, and to what degree, changes resulting from new laws and regulations will affect the insurance industry or the business of the Insurance segment. 24 TABLE OF CONTENTS Our MGA subsidiaries do business with a limited number of key underwriting carrier partners in our insurance markets, and we may not be able to find suitable replacements for our existing carriers.
Our ability to conduct business in these jurisdictions depends on our compliance with the rules and regulations promulgated by federal, state or provincial regulatory bodies and other regulatory authorities.
The ability of our Insurance segment to conduct business in these jurisdictions depends on its compliance with the rules and regulations promulgated by federal, state, or provincial regulatory bodies and other regulatory authorities.
In addition, although we seek to employ investment strategies that are not correlated with our insurance and reinsurance exposures, losses in our investment portfolio may occur at the same time as underwriting losses and, therefore, exacerbate the adverse effect of the losses on us.
In addition, although we seek to employ investment strategies that are not correlated with our insurance and reinsurance exposures, losses in our investment portfolio may occur concurrently with underwriting losses and, therefore, exacerbate the adverse effect of the losses on us.
The TRA also provides that, upon certain changes of control or other significant transactions, at the discretion of HHC and Markel , obligations under the TRA may be accelerated and become payable in a lump sum, calculated as described above.
The TRA also provides that, upon certain changes of control or other significant transactions, at the discretion of the Legacy Unit Holders, obligations under the TRA may be accelerated and become payable in a lump sum, calculated as described above.

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Item 1C. Cybersecurity

Cybersecurity — threats and controls disclosure

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Biggest changeAs part of our cybersecurity program, our information security team identifies and assesses material risks based on the NIST risk assessment model and then collaborates with internal business and technical partners to proactively create internal risk treatment plans that address identified risk exposures.
Biggest changeWe assess and seek to mitigate AI-enabled attack techniques, such as the use of AI to discover vulnerabilities or generate targeted social engineering, and we are incorporating AI-driven tools and analytics into our security monitoring, threat-hunting, and response processes to enhance our ability to identify, investigate, and remediate potential cybersecurity events. 40 TABLE OF CONTENTS As part of our cybersecurity program, our information security team identifies and assesses material risks based on the NIST and the International Organization for Standardization ("ISO") 27001 and ISO 27002 risk assessment models and then collaborates with internal business and technical partners to proactively create internal risk treatment plans that address identified risk exposures.
Our CIO has extensive experience in our industry with over 30 years of information technology experience, including extensive experience leading large global teams at several companies in his tenure. Our CISO has over 35 years of information technology experience, including 24 years of experience as a CISO leading large cybersecurity teams at four different insurance companies.
Our CIO has extensive experience in our industry with over 30 years of information technology experience, including extensive experience leading large global teams at several companies in his tenure. Our CISO has over 40 years of information technology experience, including 25 years of experience as a CISO leading large cybersecurity teams at four different insurance companies.
We periodically test and evaluate such plans on a routine basis. As of the date of this Annual Report, we do not believe that any risks from cybersecurity threats, including as a result of previous cybersecurity incidents, are reasonably likely to have a material adverse effect on us, our business strategy, results of operations, or financial condition.
As of the date of this Annual Report, we are not aware of any material risks from cyber security threats, including as a result of previous cybersecurity incidents, that are reasonably likely to have a material adverse effect on us, our business strategy, financial condition, or results of operations.
Our information security program utilizes a layered defense approach where components such as risk assessments, access controls, network security, encryption, employee training, and continuous monitoring and response processes provide layers of protection for our systems and assets.
Our information security program utilizes a layered defense approach where components such as risk assessments, access controls, network security, encryption, employee training, and continuous monitoring and response processes provide layers of protection for our systems and assets. Our cybersecurity program also considers the evolving use of AI, including generative AI, by both threat actors and defenders.
Our CISO also has several industry recognized designations. 37 TABLE OF CONTENTS As part of our cybersecurity risk management program, our information security department identifies, assesses, and manages cybersecurity risks, whether material or non-material.
Our CISO also has several industry-recognized designations. As part of our cybersecurity risk management program, our information security department identifies, assesses, and manages cybersecurity risks, whether material or non-material. Through our Information Security department, the CIO and CISO work to ensure that key stakeholders are informed about the prevention, detection, mitigation, and remediation of cybersecurity risks and incidents.
Through our Information Security department, the CIO and CISO work to ensure that key stakeholders are informed about the prevention, detection, mitigation, and remediation of cybersecurity risks and incidents. We have established and maintain incident response and recovery plans that address the detection, reporting, analysis, response, recovery, communication, documentation, and post-incident review of cybersecurity incidents.
We have established and maintain incident response and recovery plans that address the detection, reporting, analysis, response, recovery, communication, documentation, and post-incident review of cybersecurity incidents. We periodically test and evaluate such plans on a routine basis.
Added
For more information regarding the risks we face from cybersecurity threats, see " Risk Factors — Risks Related to Our Business — Like others in our industry, we face potential exposures to operational disruptions caused by cyber breaches or resiliency failures impacting us or third party technology providers upon whom we rely, which could impair website availability and crucial technology operations.

Item 3. Legal Proceedings

Legal Proceedings — active lawsuits and investigations

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Biggest changeAlthough the results of litigation and claims cannot be predicted with certainty, we do not believe that the ultimate resolution of these actions will have a material adverse effect on our financial position, results of operations, liquidity or capital resources.
Biggest changeAlthough the results of litigation and claims cannot be predicted with certainty, we do not believe that the ultimate resolution of these actions will have a material adverse effect on our financial position, results of operations, liquidity or capital resources. 41 TABLE OF CONTENTS Future litigation may be necessary to defend ourselves and our partners by determining the scope, enforceability and validity of third party proprietary rights or to establish our proprietary rights.
Removed
Future litigation may be necessary to defend ourselves and our partners by determining the scope, enforceability and validity of third party proprietary rights or to establish our proprietary rights.

Item 5. Market for Registrant's Common Equity

Market for Common Equity — stock, dividends, buybacks

6 edited+5 added−5 removed5 unchanged
Biggest changeDuring 2024, we made a change to our peer group to remove American Coastal Insurance Corporation as a result of its insolvency and replaced it with Skyward Specialty Insurance Group, Inc., which more closely aligns with our business and financial profile. Our 2023 customized peer group consisted of the following companies: Safety Insurance Group, Inc. Universal Insurance Holdings, Inc.
Biggest changeDuring 2025, we replaced our 2024 customized peer group with the S&P 500 P&C Index, which more closely aligns with our insurance-focused business model and financial profile following the expansion of our insurance operations. Prior to this change in our peer group, our 2024 customized peer group consisted of the following companies: Safety Insurance Group, Inc. Universal Insurance Holdings, Inc.
Our Board will take into account: • general economic and business conditions; • our results of operations and financial condition; • our available cash and current and anticipated cash needs; 38 TABLE OF CONTENTS • our capital requirements; • contractual, legal, tax and regulatory restrictions and implications on the payment of dividends by us to our stockholders or by our subsidiaries (including THG) to us; and • such other factors as our Board may deem relevant.
Our Board will take into account: • general economic and business conditions; • our financial condition and results of operations; • our available cash and current and anticipated cash needs; • our capital requirements; • contractual, legal, tax and regulatory restrictions and implications on the payment of dividends by us to our stockholders or by our subsidiaries (including THG) to us; and • such other factors as our Board may deem relevant.
Stockholders of Record As of February 20, 2025, there were 18 holders of record of our Class A Common Stock and two holders of record of our Class V Common Stock. The number of record holders does not include persons who held shares of our common stock in nominee or "street name" accounts through brokers.
Stockholders of Record As of February 20, 2026, there were 15 holders of record of our Class A Common Stock and two holders of record of our Class V Common Stock. The number of record holders does not include persons who held shares of our common stock in nominee or "street name" accounts through brokers.
Heritage Insurance Holdings, Inc. Erie Indemnity Company BRP Group, Inc. Palomar Holdings, Inc. Ryan Specialty Holdings, Inc. Kinsale Capital Group, Inc. Goosehead Insurance, Inc. Tiptree Inc. United Fire Group, Inc. American Coastal Insurance Corporation RLI Corp. Donegal Group Inc.
Heritage Insurance Holdings, Inc. Erie Indemnity Company BRP Group, Inc. Palomar Holdings, Inc. Ryan Specialty Holdings, Inc. Kinsale Capital Group, Inc. Goosehead Insurance, Inc. Tiptree Inc. United Fire Group, Inc. Skyward Specialty Insurance Group, Inc. RLI Corp. Donegal Group Inc.
However, because we must pay taxes, make payments under the TRA, and pay our expenses, amounts ultimately distributed as dividends to holders of our Class A Common Stock would be less than the amounts distributed by THG to its unit holders on a per share basis.
If THG makes such distributions, THG unit holders will be entitled to receive pro-rata distributions from THG. However, because we must pay taxes, make payments under the TRA, and pay our expenses, amounts ultimately distributed as dividends to holders of our Class A Common Stock would be less than the amounts distributed by THG to its unit holders.
During the year ended December 31, 2024, THG made tax distributions of $6.7 million to non-controlling interest unit holders and $1.1 million of tax distributions to Hagerty, Inc. There were no such tax distributions during the year ended December 31, 2023.
During the year ended December 31, 2025, THG made tax distributions of $30.3 million to non-controlling interest unit holders and $11.9 million of tax distributions to Hagerty, Inc.
Removed
If THG makes such distributions, THG unit holders will be entitled to receive pro-rata distributions from THG.
Added
During the year ended December 31, 2024, THG made tax distributions of $6.7 million to non-controlling interest unit holders and $1.1 million of tax distributions to Hagerty, Inc. 42 TABLE OF CONTENTS Stock Performance Graph The stock performance graph compares the cumulative total shareholder return of an investment in (i) our Class A Common Stock; (ii) the cumulative total returns of the Russell 2000; (iii) the cumulative total returns of the S&P 500 P&C Index; and (iv) our 2024 customized peer group.
Removed
Stock Performance Graph The following shall not be deemed to be "soliciting material" or to be "filed" with the SEC for purposes of Section 18 of the Exchange Act, or otherwise subject to the liabilities under that Section, and shall not be deemed to be incorporated by reference into any of our other filings under the Securities Act or the Exchange Act.
Added
The graph assumes an initial investment of $100 and the reinvestment of dividends, if any. Such returns are based on historical results and are not indicative of future performance.
Removed
Horace Mann Educators Corporation After the change in our peer groups, our 2024 customized peer group consisted of the following companies: Safety Insurance Group, Inc. Universal Insurance Holdings, Inc. Heritage Insurance Holdings, Inc. Erie Indemnity Company BRP Group, Inc. Palomar Holdings, Inc. Ryan Specialty Holdings, Inc. Kinsale Capital Group, Inc. Goosehead Insurance, Inc. Tiptree Inc. United Fire Group, Inc.
Added
Horace Mann Educators Corporation December 3, 2021 December 31, 2021 2022 2023 2024 2025 Hagerty, Inc. $ 100.00 $ 133.02 $ 78.89 $ 73.17 $ 90.53 $ 126.08 Russell 2000 $ 100.00 $ 101.88 $ 81.06 $ 94.78 $ 105.72 $ 119.26 S&P 500 P&C Index $ 100.00 $ 106.02 $ 126.03 $ 139.66 $ 189.20 $ 208.28 Customized Peer Group - 2024 $ 100.00 $ 103.50 $ 108.03 $ 132.01 $ 178.49 $ 150.18 43 TABLE OF CONTENTS Recent Sales of Unregistered Securities The following table presents information regarding our repurchases of common stock made during the three months ended December 31, 2025: Period Total number of shares purchased Weighted average price paid per share Total number of shares purchased as part of publicly announced programs Maximum number of shares that may yet be purchased under the programs October 1 - 31, 2025 26,686 $ 11.92 — — November 1 - 30, 2025 — — — — December 1 - 31, 2025 — — — — Total 26,686 $ 11.92 — — During the three months ended December 31, 2025, we did not repurchase any shares of our Class A Common Stock pursuant to a publicly announced share repurchase program.
Removed
Skyward Specialty Insurance Group, Inc. RLI Corp. Donegal Group Inc.
Added
The share amounts reflected in the table above represent shares of Class A Common Stock that were withheld by us to satisfy tax withholding obligations in connection with the vesting of restricted stock unit awards.
Removed
Horace Mann Educators Corporation The performance presentation shown below is being furnished as required by applicable rules of the SEC and was prepared using the following assumptions: • A $100 investment was made in our Class A Common Stock, the Russell 2000 and our peer group as of December 3, 2021, which is the date our Class A Common Stock began trading on the NYSE; • Investment in the Company's old and new peer groups were weighted based on the stock market capitalization of each individual company within the peer group at the beginning of each period for which a return is indicated; and • Dividends were reinvested on the relevant payment dates. 39 TABLE OF CONTENTS December 3, 2021 December 31, 2021 2022 2023 2024 Hagerty, Inc. $ 100.00 $ 133.02 $ 78.89 $ 73.17 $ 90.53 Russell 2000 $ 100.00 $ 101.88 $ 81.06 $ 94.78 $ 105.72 Customized Peer Group - 2024 $ 100.00 $ 103.50 $ 108.03 $ 132.01 $ 178.49 Customized Peer Group - 2023 $ 100.00 $ 103.47 $ 107.57 $ 131.15 $ 176.84 ITEM 6. [ Reserved ] Not applicable.
Added
Such share withholdings are permitted under the terms of the applicable equity compensation plans and award agreements, and the withheld shares are treated as repurchases for accounting purposes but were not acquired under any share repurchase authorization. We remitted the required tax withholdings in cash to the applicable taxing authorities. ITEM 6. [ Reserved ] Not applicable.

Item 7. Management's Discussion & Analysis

Management's Discussion & Analysis (MD&A) — revenue / margin commentary

125 edited+93 added−74 removed32 unchanged
Biggest changeThe following table reconciles Adjusted EPS to the most directly comparable GAAP measure, which is Basic EPS: Year ended December 31, 2024 2023 in thousands (except per share amounts) Numerator: Net income available to Class A Common Stockholders (1) $ 8,900 $ 15,881 Accretion of Series A Convertible Preferred Stock 7,427 3,677 Undistributed earnings allocated to Series A Convertible Preferred Stock 690 673 Net income attributable to non-controlling interest 61,286 7,948 Consolidated net income 78,303 28,179 (Gain) loss related to warrant liabilities, net 8,544 (11,543) Adjusted consolidated net income (2) $ 86,847 $ 16,636 Denominator: Weighted average shares of Class A Common Stock outstanding (1) 87,529 84,180 Total potentially dilutive securities outstanding: Non-controlling interest THG units 255,178 255,499 Series A Convertible Preferred Stock, on an as-converted basis 6,785 6,785 Total unissued share-based compensation awards 7,980 8,385 Total warrants outstanding — 19,484 Potentially dilutive shares outstanding 269,943 290,153 Fully dilutive shares outstanding (2) 357,472 374,333 Basic EPS (1) $ 0.10 $ 0.19 Adjusted EPS (2) $ 0.24 $ 0.04 (1) Numerator and Denominator, respectively, of the GAAP measure Basic EPS (2) Numerator and Denominator, respectively, of the non-GAAP measure Adjusted EPS 60 TABLE OF CONTENTS
Biggest changeA reconciliation of Adjusted Net Income to Net income attributable to Class A Common Stockholders, the most directly comparable GAAP measure, and the computation of Adjusted Diluted EPS are presented below. 57 TABLE OF CONTENTS Year ended December 31, 2025 2024 Numerator: in thousands (except per share amounts) Net income attributable to Class A Common Stockholders $ 41,463 $ 9,590 Adjustments: Accretion of Series A Convertible Preferred Stock 7,555 7,427 Net income attributable to non-controlling interest 100,207 61,286 Net investment gains (3,064) (2,223) Loss related to warrant liabilities, net — 8,544 Change in TRA Liability 32,235 1,602 Gain related to divestiture — (87) Other unusual items (1) 5,405 1,880 Tax impact of above adjustments (2) (51,224) (11,815) Adjusted Net Income $ 132,577 $ 76,204 Denominator: Weighted average shares of Class A Common Stock outstanding — Diluted 346,973 88,504 Adjustments: Assumed exchange of non-controlling interest THG units for shares of Class A Common Stock — 255,328 Assumed conversion of shares of Series A Convertible Preferred Stock into shares of Class A Common Stock 6,785 6,785 Assumed vesting of share-based compensation awards 7,062 7,162 Adjusted weighted average shares of Class A Common Stock outstanding — Diluted 360,820 357,779 Adjusted Diluted EPS $ 0.37 $ 0.21 Year ended December 31, 2025 2024 Diluted earnings per share $ 0.37 $ 0.10 Impact of assumed exchange, conversion, or vesting of remaining potentially dilutive securities (3) 0.05 0.12 Non-GAAP adjustments (4) (0.05) (0.01) Adjusted Diluted EPS $ 0.37 $ 0.21 (1) For the year ended December 31, 2025, other unusual items includes certain legal settlement expenses, professional fees associated with the THG Unit Exchange and related Secondary Offering, and certain material severance expenses.
These indicators could include a decline in our stock price and market capitalization, a significant change in the outlook for a reporting unit, lower than expected reporting unit operating results, increased competition, legal factors, or the sale or disposition of a significant portion of a reporting unit.
These indicators could include a significant decline in our stock price and market capitalization, a significant change in the outlook for a reporting unit, lower than expected reporting unit operating results, increased competition, legal factors, or the sale or disposition of a significant portion of a reporting unit.
Other Items Gain (loss) related to warrant liabilities, net In July 2024, we completed an exchange offer under which holders of our warrants were issued 3,876,201 shares of Class A Common Stock in exchange for 19,483,539 warrants, with a nominal cash settlement paid in lieu of fractional shares (the "Warrant Exchange").
Other Items Loss related to warrant liabilities, net In July 2024, we completed an exchange offer under which holders of our warrants were issued 3,876,201 shares of Class A Common Stock in exchange for 19,483,539 warrants, with a nominal cash settlement paid in lieu of fractional shares (the "Warrant Exchange").
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. (8) Vehicles in Force represents the number of current insured vehicles as of the end of the period.
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. Vehicles in Force represents the number of current insured vehicles as of the end of the period.
Vehicles in Force is an important metric to assess our financial performance because insured vehicle growth drives our revenue growth and increases market penetration. (9) HDC Paid Member Count represents the number of current Members who pay an annual membership subscription as of the end of the period.
Vehicles in Force is an important metric to assess our financial performance because insured vehicle growth drives revenue growth and increases market penetration. HDC Paid Member Count represents the number of current Members who pay an annual membership subscription as of the end of the period.
While historical performance and current expectations have generally resulted in the conclusion that our goodwill is not impaired, if our assumptions are not realized, it is possible that an impairment charge may need to be recorded in the future.
While historical performance and current expectations have resulted in the conclusion that our goodwill is not impaired, if our assumptions are not realized, it is possible that an impairment charge may need to be recorded in the future.
(7) PIF Retention represents the percentage of expiring insurance policies that are renewed on the renewal effective date, calculated on a rolling twelve months basis.
PIF Retention represents the percentage of expiring insurance policies that are renewed on the renewal effective date, calculated on a rolling twelve months basis.
The TRA provides for payment to the Legacy Unit Holders of 85% of the U.S. federal, state and local income tax savings realized by Hagerty, Inc. as a result of the increases in tax basis and certain other tax benefits as outlined in the Business Combination Agreement upon the exchange of THG units and shares of Hagerty, Inc.
The TRA provides for payment to the Legacy Unit Holders of 85% of the U.S. federal, state and local cash tax savings realized by Hagerty, Inc. as a result of the increases in tax basis and certain other tax benefits, as outlined in the Business Combination Agreement, upon the exchange of THG units and shares of Hagerty, Inc.
Total Written Premium reflects the direct economic benefit of our policy acquisition efforts and is closely correlated with the growth of insurance commission revenue generated by our MGA subsidiaries and earned premium generated by Hagerty Re. (2) Hagerty Re Loss Ratio is the ratio of (i) Hagerty Re's losses and loss adjustment expenses to (ii) its earned premium.
Total Written Premium reflects the direct economic benefit of our policy acquisition efforts and is closely correlated with the growth of insurance commission revenue generated by our MGA subsidiaries and earned premium generated by Hagerty Re. Hagerty Re Loss Ratio represents the ratio of (i) Hagerty Re's losses and loss adjustment expenses to (ii) its earned premium.
A discussion of the Company's results of operations comparing results for the years ended December 31, 2023 and 2022 is included under the section entitled "Results of Operations" in Item 7 of Part II of the Annual Report on Form 10-K for the year ended December 31, 2023, and is incorporated by reference into this Annual Report.
A discussion of the Company's results of operations comparing results for the years ended December 31, 2024 and 2023 is included under the section entitled " Results of Operations" in Item 7 of Part II of the Annual Report on Form 10-K for the year ended December 31, 2024, and is incorporated by reference into this Annual Report.
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.
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 trends with written premium growth.
Off-Balance Sheet Arrangements We do not have any material off-balance sheet arrangements as of December 31, 2024. 53 TABLE OF CONTENTS Critical Accounting Estimates The preparation of financial statements in accordance with GAAP requires management to make significant judgments, assumptions, and estimates that materially affect the amounts reported in the Company's Consolidated Financial Statements.
Off-Balance Sheet Arrangements We do not have any material off-balance sheet arrangements as of December 31, 2025. 61 TABLE OF CONTENTS Critical Accounting Estimates The preparation of the Consolidated Financial Statements in accordance with GAAP requires management to make significant judgments, assumptions, and estimates that materially affect the amounts reported in the Company's Consolidated Financial Statements.
Refer to Note 23 — Taxation in Item 8 of Part II of this Annual Report for additional information related to the TRA. Income tax expense THG is taxed as a pass-through ownership structure under provisions of the IRC and a similar section of state income tax law.
Refer to Note 23 — Taxation in Item 8 of Part II of this Annual Report for additional information related to the TRA. 47 TABLE OF CONTENTS Income tax benefit (expense) THG is taxed as a pass-through ownership structure under provisions of the IRC and a similar section of state income tax law.
Any adjustments to the provision for losses and loss adjustment expenses are recognized in our Consolidated Statements of Operations in the period in which management determines that an adjustment is required. 55 TABLE OF CONTENTS If the actual level of loss frequency and/or severity is higher or lower than our expectations, the ultimate cost of claims paid will differ from management's estimates.
Any adjustments to our reserves for unpaid losses and loss adjustment expenses are recognized in our Consolidated Statements of Operations in the period in which management determines that an adjustment is required. 63 TABLE OF CONTENTS If the actual level of loss frequency and/or severity is higher or lower than our expectations, the ultimate cost of claims paid will differ from management's estimates.
Refer to Note 13 — Provision for Unpaid Losses and Loss Adjustment Expenses in Item 8 of Part II of this Annual Report for additional information regarding the methodologies used to estimate loss and loss adjustment expense reserves.
Refer to Note 15 — Reserves for Unpaid Losses and Loss Adjustment Expenses in Item 8 of Part II of this Annual Report for additional information regarding the methodologies used to estimate loss and loss adjustment expense reserves.
Similarly, state statutes restrict the amount of dividends that Drivers Edge may pay without prior approval of state insurance regulators. As of December 31, 2024, there were no plans to issue dividends from Drivers Edge and a change in such plans may require regulatory approval.
As of December 31, 2025, there were no plans to issue dividends from Hagerty Re. Similarly, state statutes restrict the amount of dividends that Drivers Edge may pay without prior approval of state insurance regulators. As of December 31, 2025, there were no plans to issue dividends from Drivers Edge and a change in such plans may require regulatory approval.
These commissions represent Hagerty Re's pro-rata share of the carrier's costs including (i) policy acquisition costs, which consists of the commissions earned by our MGA subsidiaries, (ii) general and administrative costs, and (iii) other costs. Ceding commissions are recorded net of commissions received by Hagerty Re related to ceded reinsurance premiums.
These commissions represent Hagerty Re's pro-rata share of the carrier's costs including (i) policy acquisition costs, which principally consist of the commissions earned by our MGA subsidiaries; (ii) general and administrative costs; and (iii) other costs. Ceding commissions are recorded net of commissions received by Hagerty Re from reinsurers related to ceded reinsurance premiums.
The factors considered by management in estimating the provision for unpaid losses and loss adjustment expenses include the following: • the views of the Company's actuaries; • historical trends in claim frequency and severity, including the impacts of adverse weather-related events; • changes in claim cycle time and claim settlement practices; • observed industry trends; • the changing mix of business due to the large growth in modern collectible cars which carry a different risk profile than the risks associated with collector cars; • inflation or deflation; • retention limits under current catastrophe and treaty reinsurance programs; and • legislative and judicial changes in the jurisdictions in which the Company operates.
The factors considered by management in estimating its reserves for unpaid losses and loss adjustment expenses include the following: • the views of our actuaries; • historical trends in claim frequency and severity, including the impacts of adverse weather-related events; • changes in claim cycle time and claim settlement practices; • observed industry trends; • the changing mix of business, predominantly due to the large growth in modern collectible cars which carry a different risk profile than the risks associated with collector cars; • inflation or deflation; • retention limits under current catastrophe and treaty reinsurance programs; and • legislative and judicial changes in the jurisdictions in which we operate.
As of December 31, 2024, Drivers Edge maintained sufficient capital and surplus levels to comply with state insurance regulations. Dividend Restrictions 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.
As of December 31, 2025, Drivers Edge maintained sufficient capital and surplus levels to comply with National Association of Insurance Commissioners ("NAIC") and state insurance regulations. Dividend Restrictions 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.
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 JPM Credit Facility, the BAC Credit Facility, and the unsecured term loan credit facility with 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; and (vi) funding payments under the TRA.
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 (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.
Membership, marketplace and other revenue We earn subscription revenue through 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.
Membership and other revenue We earn subscription revenue from the sale of HDC memberships, which are bundled with our insurance policies and give members access to an array of products and services, including emergency roadside assistance, Hagerty Drivers Club Magazine, special access to automotive enthusiast events, our proprietary vehicle valuation tool, and special vehicle-related discounts.
Any such changes in these factors or changes in our determination of the need for a valuation allowance related to the tax benefits acquired under the TRA could adjust the TRA Liability recognized on the Consolidated Balance Sheets.
Any such changes in these factors or changes in our determination of the need for a valuation allowance related to the tax benefits acquired under the TRA could result in a significant change to the estimated value of the TRA Liability recognized on our Consolidated Balance Sheets.
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS The following discussion and analysis of our financial condition and results of operations should be read in conjunction with our Consolidated Financial Statements and related Notes included in Item 8 of Part II of this Annual Report.
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS The following discussion and analysis of our financial condition and results of operations should be read in conjunction with our Consolidated Financial Statements and related Notes included in Item 8 of Part II of this Annual Report, including Note 4 — Segment Reporting and Disaggregated Revenue.
Class V Common Stock for shares of Hagerty, Inc. Class A Common Stock or cash. The Business Combination Agreement is provided as Exhibit 2.1 to this Annual Report, which is incorporated by reference within Item 15. Exhibits, Financial Statement Schedules.
Class V Common Stock for shares of Hagerty, Inc. Class A Common Stock or cash. The remaining 15% cash tax savings resulting from the basis adjustments are retained by Hagerty, Inc. The Business Combination Agreement is provided as Exhibit 2.1 to this Annual Report, which is incorporated by reference within Item 15. Exhibits, Financial Statement Schedules.
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.
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 December 31, 2025, we were in compliance with the financial covenants under the BAC Credit Agreement.
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.
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.
Liabilities under Tax Receivable Agreement Description In connection with the consummation of the business combination that formed Hagerty, Inc. in 2021, Hagerty, Inc. entered into a TRA with HHC and Markel ("Legacy Unit Holders").
Tax Receivable Agreement In connection with the consummation of the business combination that formed Hagerty, Inc. in 2021, Hagerty, Inc. entered into a TRA with the Legacy Unit Holders.
No warrants remained outstanding following the completion of the Warrant Exchange. Prior to the Warrant Exchange, our warrants were accounted for as liabilities and were measured at fair value each reporting period, with changes in fair value recognized as non-operating income (expense) in our Consolidated Statements of Operations.
No warrants remained outstanding following the completion of the Warrant Exchange. Prior to the Warrant Exchange, our warrants were accounted for as liabilities and were measured at fair value each reporting period, with changes in fair value recognized within "Loss (gain) related to warrant liabilities, net" in our Consolidated Statements of Operations.
(3) Other unusual items includes professional fees associated with the Warrant Exchange, as well as certain material severance expenses for the year ended December 31, 2024 and certain legal settlement expenses (net) recognized for the year ended December 31, 2023.
For the year ended December 31, 2024, other unusual items includes professional fees associated with the Warrant Exchange, as well as certain material severance expenses.
The following tables present premiums assumed by Hagerty Re and the related quota share percentages for the years ended December 31, 2024 and 2023: Year ended December 31, 2024 U.S. Canada U.K.
The following tables present premiums assumed and earned, as well as the related quota share percentages for the years ended December 31, 2025 and 2024: Year ended December 31, 2025 U.S. Canada U.K.
When estimating reserves, our actuarial reserving group utilizes several actuarial reserving methods which consider historical claim reporting patterns, claim cycle time, claim frequency and severity, claims settlement practices, adequacy of case reserves over time, the seasonality of our business, and current economic conditions.
Reserves are reviewed by management quarterly and periodically throughout the year by combining historical results and current actual results. When estimating reserves, our actuarial reserving group utilizes several actuarial reserving methods which consider historical claim reporting patterns, claim cycle time, claim frequency and severity, claims settlement practices, adequacy of case reserves over time, seasonality, and current economic conditions.
We use Adjusted EBITDA as a measure of the operating performance of our business on a consistent basis, as it removes the impact of items not directly resulting from our core operations.
Management uses Adjusted EBITDA to evaluate our operating performance on a consistent basis, as it removes the impact of items not directly resulting from our core operations.
As of December 31, 2024, Hagerty Re maintained sufficient statutory capital and surplus to comply with the BSCR. 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.
Similarly, our U.S. insurance company subsidiary, Drivers Edge, which holds certificates of authority in 41 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.
Salaries and benefits are expensed as incurred except for costs that are required to be capitalized, which are then amortized over the useful life of the asset created, primarily internally developed software and software-as-a-service ("SaaS") implementation 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. General and administrative expenses General and administrative expenses primarily consists of expenses related to non-capitalized hardware and software, professional services, and occupancy costs.
Effect if Actual Results Differ From Estimates and Assumptions Changes in the liability resulting from historical exchanges under the TRA may occur based on changes in anticipated future taxable income, changes in applicable tax rates, and other changes in tax attributes that may occur and impact the expected future tax benefits to be received.
Effect if Actual Results Differ From Estimates and Assumptions The estimated value of the TRA Liability may change in future periods due to changes in anticipated future taxable income, changes in applicable tax rates, and other changes in tax attributes that may occur and impact the expected future tax benefits to be received.
This discussion contains forward-looking statements based upon current expectations that involve risks and uncertainties. Please refer to the section in this Annual Report entitled "Cautionary Statement Regarding Forward-Looking Statements". The following discussion contains references to the years ended December 31, 2024 and 2023.
Please refer to the section in this Annual Report entitled "Cautionary Statement Regarding Forward-Looking Statements". The following discussion contains references to the years ended December 31, 2025 and 2024.
A combined ratio under 100% indicates underwriting income while a combined ratio exceeding 100% indicates an underwriting loss. 42 TABLE OF CONTENTS (4) New Business Count represents the number of new insurance policies issued by our MGA subsidiaries during the period.
This metric provides a benchmark to evaluate underwriting profitability. A combined ratio under 100% indicates underwriting income while a combined ratio exceeding 100% indicates an underwriting loss. New Business Count represents the number of new insurance policies issued by our MGA subsidiaries during the period.
Our definition of Adjusted EBITDA may be different than similarly titled measures used by other companies in our industry, which could reduce the usefulness of this non-GAAP financial measure when comparing our performance to that of other companies.
Limitations of the Usefulness of This Measure Adjusted EBITDA may differ from similarly titled measures used by other companies due to different methods of calculation, which could reduce the usefulness of this non-GAAP financial measure when comparing our performance to that of other companies.
Sources and Uses of Liquidity Our sources of liquidity include our: (i) balances of cash and cash equivalents; (ii) net working capital; (iii) cash flows from operations; (iv) borrowings from the JPM Credit Facility (as defined below) to fund the general corporate needs of THG and its subsidiaries; and (v) borrowings from the BAC Credit Facility (as defined below) to fund a portion of the lending activities of BAC.
As a holding company without direct operations, we manage liquidity globally and across all operating subsidiaries. 58 TABLE OF CONTENTS Sources and Uses of Liquidity Our sources of liquidity include our: (i) balances of cash and cash equivalents; (ii) net working capital; (iii) cash flows from operations, including net investment income; (iv) borrowings from the 2025 JPM Credit Facility (as defined below) to fund the general corporate needs of THG and its subsidiaries; and (v) borrowings from the BAC Credit Facility (as defined below) to fund a portion of the lending activities of BAC.
Refer to Note 20 — Warrant Exchange in Item 8 of Part II of this Annual Report for additional information with respect to the Warrant Exchange.
Refer to Note 6 — Fair Value Measurements in Item 8 of Part II of this Annual Report for additional information regarding the Warrant Exchange.
Sales expense 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.
Ceding commissions, net is recognized ratably over the term of the related policies, which is generally 12 months. Sales expense 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.
Any taxable income or loss generated by THG is passed through and included in the taxable income or loss of its members, including Hagerty, Inc., on a pro rata basis.
As a partnership, THG is not subject to U.S. federal and certain state and local income taxes. Any taxable income or loss generated by THG is passed through and included in the taxable income or loss of its members, including Hagerty, Inc., on a pro rata basis.
Revenue from the sale of inventory is recognized at the point in time when title and control of the car is transferred to the buyer, which is generally upon collection of the full purchase price.
Revenue from the sale of acquired collector cars and enthusiast vehicles is recognized on a gross basis at the point in time when title and control of the vehicle is transferred to the buyer, which is generally upon collection of the full purchase price.
Total in thousands (except percentages) Subject premium $ 873,364 $ 59,664 $ (202) $ 932,826 Quota share percentage 81.0 % 35.0 % 80.0 % 77.9 % Assumed premium in Hagerty Re 706,250 20,883 (162) 726,971 Reinsurance premiums ceded (50,541) Net assumed premium 676,430 Change in unearned premiums (41,207) Change in deferred reinsurance premiums 8,101 Earned premium $ 643,324 Year ended December 31, 2023 U.S.
(1) Total in thousands (except percentages) Subject premium (2) $ 873,364 $ 59,664 $ (202) $ 932,826 Quota share percentage 81.0 % 35.0 % 80.0 % 77.9 % Assumed premium 706,250 20,883 (162) 726,971 Reinsurance premiums ceded (50,541) Net assumed premium 676,430 Change in unearned premiums (41,207) Change in deferred reinsurance premiums 8,101 Earned premium, net $ 643,324 (1) In 2025 and 2024, we did not reinsure classic auto risks produced by our U.K.
Refer to Note 20 — Warrant Exchange in Item 8 of Part II of this Annual Report for additional information with respect to our warrants.
Refer to Note 20 — Stockholders' Equity in Item 8 of Part II of this Annual Report for additional information with respect to the THG Unit Exchange and Note 6 — Fair Value Measurements in Item 8 of Part II of this Annual Report for additional information with respect to our warrants.
Premiums assumed and ceded are recognized on a pro-rata basis over the term of the reinsured policies, which is generally 12 months. The cost of catastrophe reinsurance coverage is recognized over the contract period in proportion to the related earned premium.
Premiums assumed and ceded are recognized on a pro-rata basis over the term of the reinsured policies, which is generally 12 months.
Income tax expense We are the sole managing member of THG, and as a result, consolidate its financial results. THG is treated as a partnership for U.S. federal and most applicable state and local income tax purposes. As a partnership, THG is not subject to U.S. federal and certain state and local income taxes.
Refer to Note 23 — Taxation in Item 8 of Part II of this Annual Report for additional information. Income tax benefit (expense) We are the sole managing member of THG, and as a result, consolidate its financial results. THG is treated as a partnership for U.S. federal and most applicable state and local income tax purposes.
Finance revenue is recognized over time as earned based on the amount of the outstanding loan, the applicable interest rate on the loan, and the length of time the loan was outstanding during the period. Operating Expenses Salaries and benefits Salaries and benefits consist primarily of costs related to employee compensation, payroll taxes, employee benefits, and employee development costs.
Finance revenue is recognized over time as earned based on the amount of the outstanding loan, the applicable interest rate on the loan, and the length of time the loan was outstanding during the period.
Hagerty, Inc., Hagerty Insurance Holdings, Inc., Broad Arrow, Hagerty Radwood, Inc., and various foreign subsidiaries are treated as taxable entities and income taxes are provided where applicable.
Hagerty, Inc., Hagerty Insurance Holdings, Inc., Broad Arrow, Hagerty Radwood, Inc., and various foreign subsidiaries are treated as taxable entities and income taxes are provided where applicable. Hagerty Insurance Holdings, Inc. files a consolidated tax return with its wholly owned corporate subsidiaries Hagerty Re and Drivers Edge.
The exact timing and amount of the valuation allowance reversal, and any corresponding increase to the TRA Liability, are subject to change on the basis of the level of profitability that is actually achieved. 56 TABLE OF CONTENTS Effect if Actual Results Differ From Estimates and Assumptions If management's projections of future taxable income and other positive evidence considered in evaluating the need for the valuation allowance prove, with the benefit of hindsight, to be inaccurate, it could prove more difficult to support the realization of the net deferred tax asset.
Effect if Actual Results Differ From Estimates and Assumptions If management's projections of future taxable income and other positive evidence considered in evaluating the need for the valuation allowance prove, with the benefit of hindsight, to be inaccurate, it could prove more difficult to support the realization of our net deferred tax assets.
Membership fee revenue was $57.5 million for the year ended December 31, 2024, an increase of $5.1 million, or 9.7%, compared to 2023.
Commission and fee revenue Commission and fee revenue was $486.4 million for the year ended December 31, 2025, an increase of $63.1 million, or 14.9%, compared to 2024.
The following table summarizes the components of Ceding commissions, net for the years ended December 31, 2024 and 2023: Year ended December 31, 2024 2023 in thousands (except percentages) Ceding commission: Ceding commission – reinsurance assumed $ 317,648 $ 256,000 Ceding commission – reinsurance ceded (15,929) (4,195) Ceding commissions, net $ 301,719 $ 251,805 Percentage of earned premium 46.9 % 47.3 % Losses and loss adjustment expenses Losses and loss adjustment expenses were $298.6 million for the year ended December 31, 2024, an increase of $77.9 million, or 35.3%, compared to 2023.
The following table summarizes the components of Ceding commissions, net for the years ended December 31, 2025 and 2024: Year ended December 31, 2025 2024 Ceding commission: in thousands (except percentages) Ceding commission – reinsurance assumed $ 357,686 $ 317,648 Ceding commission – reinsurance ceded (20,599) (15,929) Ceding commissions, net $ 337,087 $ 301,719 Percentage of earned premium 46.4 % 46.9 % Sales expense Sales expense was $165.9 million for the year ended December 31, 2025, an increase of $14.6 million, or 9.6%, compared to 2024.
Effect if Actual Results Differ from Estimates and Assumptions Fair value determinations require considerable judgment and are sensitive to changes in underlying assumptions and factors. As a result, there can be no assurance that the estimates and assumptions made for purposes of the annual goodwill impairment test will prove to be an accurate prediction of the future.
As a result, there can be no assurance that the estimates and assumptions made for purposes of the annual goodwill impairment test will prove to be an accurate prediction of the future.
As of December 31, 2024, we believe that our sources of liquidity will be sufficient to provide an adequate level of capital to support our anticipated short and long-term commitments, operating needs, and capital requirements. 50 TABLE OF CONTENTS Financing Arrangements JPM Credit Facility THG has a credit agreement with JPMorgan Chase Bank, N.A.
As of December 31, 2025, we believe that our sources of liquidity will be sufficient to provide an adequate level of capital to support our anticipated short and long-term commitments, operating needs, and capital requirements.
Comparative Cash Flows The following table summarizes our cash flow data for the years ended December 31, 2024 and 2023: Year ended December 31, 2024 2023 $ Change % Change in thousands (except percentages) Net Cash Provided by Operating Activities $ 177,024 $ 133,706 $ 43,318 32.4 % Net Cash Used in Investing Activities $ (618,564) $ (52,647) $ (565,917) N/M Net Cash Provided by (Used in) Financing Activities $ (46,922) $ 103,161 $ (150,083) (145.5) % N/M = Not meaningful Operating Activities Cash provided by operating activities primarily consists of Net income, adjusted for non-cash items, and changes in working capital balances.
Comparative Cash Flows The following table summarizes our cash flow data for the years ended December 31, 2025 and 2024: Year ended December 31, 2025 2024 $ Change % Change in thousands (except percentages) Net Cash Provided by Operating Activities $ 218,986 $ 177,024 $ 41,962 23.7 % Net Cash Used in Investing Activities $ (185,197) $ (618,564) $ 433,367 70.1 % Net Cash Provided by (Used in) Financing Activities $ 29,928 $ (46,922) $ 76,850 N/M N/M = Not meaningful 60 TABLE OF CONTENTS Operating Activities Cash provided by operating activities primarily consists of Net income, adjusted for non-cash items, and changes in working capital balances.
Risk Factors — Risks Related to Tax — " We are a holding company, and our only material asset is our interest in THG, and we will therefore be dependent upon distributions made by THG to pay taxes, make payments under the TRA and pay other expenses.
Risk Factors — Risks Related to Tax — " Hagerty, Inc. is a holding company, whose only material asset is its interest in THG. Hagerty, Inc. depends on THG distributions to pay taxes, make payments under the TRA, and pay other expenses. " in this Annual Report.
Changes in these estimates and assumptions could materially affect the determination of estimated fair value and potential impairment for each reporting unit.
Changes in these estimates and assumptions could materially affect the determination of estimated fair value and potential impairment for each reporting unit. The Company did not recognize any goodwill impairments during the years ended December 31, 2025, 2024, and 2023.
THG made an election under Section 754 of the IRC with the filing of its 2019 income tax return, which cannot be revoked without the permission of the IRS Commissioner and will be in place for any future exchange of THG units.
This election cannot be revoked without the permission of the IRS Commissioner and will be in place for any future exchange of THG units.
In connection with the BAC Credit Agreement, BAC and certain of its subsidiaries may transfer originated notes receivable to wholly owned, bankruptcy remote special purpose entities (each, an "SPE") to secure the borrowings. The assets transferred to SPEs are legally isolated from us and our other (non-SPE) subsidiaries.
BAC is not a borrower or guarantor of the BAC Credit Facility. 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.
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. In 2025, Hagerty Re can pay approximately $68 million in dividends without prior BMA approval. As of December 31, 2024, there were no plans to issue dividends from Hagerty Re.
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.
An illustration of the potential effect of higher or lower levels of loss frequency and severity on our ultimate cost of claims for the 2024 accident year is provided in the following table: Change in both loss frequency and severity Net Ultimate Cost of Claims Occurring in 2024 Change in thousands 3% Higher $ 317,955 $ 18,252 2% Higher $ 311,811 $ 12,108 1% Higher $ 305,727 $ 6,024 Base Scenario $ 299,703 $ — 1% Lower $ 293,739 $ (5,964) 2% Lower $ 287,834 $ (11,869) 3% Lower $ 281,990 $ (17,713) Deferred Income Taxes Description Where applicable, income taxes are accounted for under the asset and liability method.
An illustration of the potential effect of higher or lower levels of loss frequency and severity on our ultimate cost of claims for the 2025 accident year is provided in the following table: Change in both loss frequency and severity Net Ultimate Cost of Claims Occurring in 2025 Change in thousands 3% Higher $ 313,703 $ 18,008 2% Higher $ 307,642 $ 11,947 1% Higher $ 301,639 $ 5,944 Base Scenario $ 295,695 $ — 1% Lower $ 289,811 $ (5,884) 2% Lower $ 283,986 $ (11,709) 3% Lower $ 278,220 $ (17,475) Deferred Income Taxes Description Income taxes are accounted for under the asset and liability method.
This increase was primarily a driven by the diversification of our investment portfolio in the second quarter of 2024, which resulted in the purchase of investment-grade fixed maturity securities and, to a much lesser extent, equity securities.
This decrease was almost entirely due to the diversification of our investment portfolio during 2024, which resulted in the purchase of investment-grade fixed maturity securities and, to a much lesser extent, equity securities. This factor was partially offset by a $31.0 million increase in net fundings of BAC notes receivable in 2025.
BAC Credit Facility In December 2023, BAC and its wholly owned subsidiary BAC Funding 2023-1, LLC, as borrower, entered into a revolving credit agreement with a certain lender (the "BAC Credit Agreement").
As of December 31, 2025, we were in compliance with these financial covenants. BAC Credit Facility 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").
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 vehicles held in inventory and sold through our marketplace business, as well as interest expense and borrowing costs associated with the BAC credit facility ("BAC Credit Facility").
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.
(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.
This metric allows us to evaluate our historical loss patterns and make necessary and appropriate adjustments. Hagerty Re Combined Ratio represents 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.
Losses consist of claims paid, case reserves, and incurred but not reported costs, which are recorded net of estimated recoveries from reinsurance, salvage and subrogation. Loss adjustment expenses consist of the cost associated with processing and settling claims.
Operating Expenses Losses and loss adjustment expenses Losses and loss adjustment expenses represent our best estimate of the losses and associated settlement costs related to the risks we assume. Losses consist of claims paid, case reserves, and IBNR costs, which are recorded net of estimated recoveries from reinsurance, salvage, and subrogation.
Additionally, Interest and other income (expense), net includes interest expense related to outstanding borrowings, primarily related to the JPM Credit Facility (as defined in Note 17 — Long-Term Debt in Item 8 of Part II of this Annual Report) and changes in the value of the liability related to our TRA ("TRA Liability") with HHC and Markel.
Interest expense and other, net Interest expense and other, net primarily 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 18 — Debt in Item 8 of Part II of this Annual Report).
Liquidity and Capital Resources Maintaining a strong balance sheet and capital position is a top priority for us. As a holding company without direct operations, we manage liquidity globally and across all operating subsidiaries.
Liquidity and Capital Resources Maintaining a strong balance sheet and capital position is a top priority for us.
Tax Receivable Agreement We expect to have adequate capital resources to meet the requirements and obligations under the TRA entered into with the Legacy Unit Holders.
We expect to have adequate capital resources to meet the requirements and obligations under the TRA entered into with the Legacy Unit Holders. Refer to the section " Critical Accounting Estimates — Tax Receivable Agreement " and Note 23 — Taxation in Item 8 of Part II of this Annual Report for information related to the TRA.
For additional information regarding capital and dividend restrictions, refer to Note 15 — Statutory Capital and Surplus in Item 8 of Part II of this Annual Report.
Refer to Note 6 — Fair Value Measurements in Item 8 of Part II of this Annual Report for additional information regarding the Warrant Exchange.
For the years ended December 31, 2024 and 2023, Marketplace revenue was 40.7% and 27.8%, respectively, of total Membership, marketplace and other revenue. 47 TABLE OF CONTENTS Other revenue, which primarily includes sponsorship, admission, advertising, valuation, and sublease revenue, was $21.6 million for the year ended December 31, 2024, a decrease of $0.2 million, or 0.9%, compared to 2023.
Membership fee revenue was $63.0 million for the year ended December 31, 2025, an increase of $5.5 million, or 9.6%, compared to 2024, which was primarily due to a $5.1 million, or 9.6%, increase in revenue attributable to new insurance policies issued with a bundled HDC membership. 51 TABLE OF CONTENTS Other revenue, which primarily includes sponsorship, admission, advertising, valuation, and sublease revenue, was $19.4 million for the year ended December 31, 2025, a decrease of $2.1 million, or 9.7%, compared to 2024.
The following table presents Hagerty Re's provision for losses and loss adjustment expenses, both gross and net of reinsurance recoverables, as of December 31, 2024 and 2023: December 31, 2024 Gross % of Total Net % of Total in thousands (except percentages) Outstanding losses reported $ 99,250 58.9 % $ 94,489 58.1 % IBNR 69,242 41.1 % 68,234 41.9 % Total provision for unpaid losses and loss adjustment expenses $ 168,492 100.0 % $ 162,723 100.0 % December 31, 2023 Gross % of Total Net % of Total in thousands (except percentages) Outstanding losses reported $ 86,420 63.3 % $ 84,651 63.0 % IBNR 50,087 36.7 % 49,621 37.0 % Total provision for unpaid losses and loss adjustment expenses $ 136,507 100.0 % $ 134,272 100.0 % 54 TABLE OF CONTENTS The following table summarizes the (favorable) unfavorable development of management's estimate of gross and net ultimate losses and loss adjustment expenses for the 2020 to 2024 accident years: Gross Ultimate Loss & Loss Adjustment Expenses Net Ultimate Loss & Loss Adjustment Expenses Accident Year 2024 2023 Change 2024 2023 Change in thousands 2020 $ 85,163 $ 85,313 $ (150) $ 85,163 $ 85,313 $ (150) 2021 $ 126,191 $ 126,391 $ (200) $ 126,191 $ 126,391 $ (200) 2022 $ 184,425 $ 188,012 $ (3,587) $ 179,463 $ 183,188 $ (3,725) 2023 $ 234,231 $ 231,231 $ 3,000 $ 231,465 $ 228,465 $ 3,000 2024 $ 314,348 N/A N/A $ 299,703 N/A N/A Judgments and Uncertainties Estimating the ultimate cost of claims and claims expenses is an inherently complex and subjective process that involves many variables and a high degree of judgment.
The following table presents our reserves for losses and loss adjustment expenses, both gross and net of reinsurance recoverables, as of December 31, 2025 and 2024: December 31, 2025 Gross % of Total Net % of Total Loss and loss adjustment reserves: in thousands (except percentages) Case reserves $ 95,242 56.4 % $ 90,992 55.8 % IBNR reserves 73,609 43.6 % 72,215 44.2 % Total $ 168,851 100.0 % $ 163,207 100.0 % December 31, 2024 Gross % of Total Net % of Total Loss and loss adjustment reserves: in thousands (except percentages) Case reserves $ 99,250 58.9 % $ 94,489 58.1 % IBNR reserves 69,242 41.1 % 68,234 41.9 % Total $ 168,492 100.0 % $ 162,723 100.0 % 62 TABLE OF CONTENTS The following table summarizes the (favorable) unfavorable development of management's estimate of gross and net ultimate losses and loss adjustment expenses for the 2021 to 2025 accident years: Gross Ultimate Loss & Loss Adjustment Expenses Net Ultimate Loss & Loss Adjustment Expenses Accident Year 2025 2024 Change 2025 2024 Change in thousands 2021 $ 126,591 $ 126,191 $ 400 $ 126,591 $ 126,191 $ 400 2022 $ 185,556 $ 184,425 $ 1,131 $ 180,573 $ 179,463 $ 1,110 2023 $ 235,921 $ 234,231 $ 1,690 $ 233,155 $ 231,465 $ 1,690 2024 $ 300,812 $ 314,348 $ (13,536) $ 286,166 $ 299,703 $ (13,537) 2025 $ 318,187 N/A N/A $ 295,695 N/A N/A Judgments and Uncertainties Estimating the ultimate cost of claims and claims expenses is an inherently complex and subjective process that involves many variables and a high degree of judgment.
In connection with the filing of its 2019 income tax return THG made an election under Section 754 of the IRC for each taxable year in which TRA exchanges occur. This election cannot be revoked without the permission of the IRS Commissioner and will be in place for any future exchange of THG units.
In connection with the filing of its 2019 income tax return, THG made an election under Section 754 of the IRC for each taxable year in which TRA exchanges occur. This election allows THG to adjust the tax basis of its assets when certain ownership changes or distributions occur.
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 to by the administrative agent. BAC is not a borrower or guarantor of the BAC Credit Facility.
The revolving borrowing period of the BAC Credit Facility expires in November 2027, followed by an amortization period until it ultimately matures in November 2028. The borrowing period and the maturity date of the BAC Credit Facility may be extended by one year if requested by BAC and agreed by the administrative agent.
Lastly, credit card processing fees increased, primarily due to a shift in customer preference towards credit cards as a payment method within our MGA subsidiaries. 48 TABLE OF CONTENTS General and administrative expenses General and administrative expenses were $82.5 million for the year ended December 31, 2024, a decrease of $2.9 million, or 3.4%, compared to 2023.
To a lesser extent, payment processing fees and postage costs increased by $2.1 million and $1.5 million, respectively, driven by policy count growth, as well as a shift in customer preference towards credit cards as a payment method within our MGA subsidiaries. 52 TABLE OF CONTENTS Other expenses Salaries and benefits were $245.9 million for the year ended December 31, 2025, an increase of $37.0 million, or 17.7%, compared to 2024.
For the years ended December 31, 2024 and 2023, membership fees were 43.1% and 51.0%, respectively, of total Membership, marketplace and other revenue. Marketplace revenue was $54.3 million for the year ended December 31, 2024, an increase of $25.7 million, or 90.1%, compared to 2023.
Membership and other revenue Membership and other revenue was $82.4 million for the year ended December 31, 2025, an increase of $3.5 million, or 4.4%, compared to 2024.
Net cash provided by operating activities for the years ended December 31, 2024 and 2023 is presented below: Year ended December 31, 2024 2023 $ Change % Change in thousands (except percentages) Net income $ 78,303 $ 28,179 $ 50,124 177.9 % Non-cash adjustments to Net income 75,979 71,294 4,685 6.6 % Changes in operating assets and liabilities 22,742 34,233 (11,491) (33.6) % Net Cash Provided by Operating Activities $ 177,024 $ 133,706 $ 43,318 32.4 % Net cash provided by operating activities for the year ended December 31, 2024 was $177.0 million, an increase of $43.3 million, or 32.4%, compared to 2023.
Net cash provided by operating activities for the years ended December 31, 2025 and 2024 is presented below: Year ended December 31, 2025 2024 $ Change % Change in thousands (except percentages) Net income $ 149,225 $ 78,303 $ 70,922 90.6 % Non-cash adjustments to Net income 59,074 75,979 (16,905) (22.2) % Changes in operating assets and liabilities 10,687 22,742 (12,055) (53.0) % Net Cash Provided by Operating Activities $ 218,986 $ 177,024 $ 41,962 23.7 % Net cash provided by operating activities for the year ended December 31, 2025 was $219.0 million, an increase of $42.0 million, or 23.7%, compared to 2024.
Fee-based marketplace revenue is recognized when the underlying sale is completed, which is generally upon the matching of a seller and buyer in a legally binding auction or private sale transaction.
In addition, we earn finance revenue from loans made to qualified collectors and businesses secured by their collector cars. Commission and fee-based marketplace revenue is recognized on a net basis when the underlying sale is completed, which is generally upon the matching of a seller and buyer in a legally binding sale transaction.
" within Item IA of Part I — Risk Factors of this Annual Report. 51 TABLE OF CONTENTS Capital Restrictions Our reinsurance company, Hagerty Re, is subject to the Bermuda Solvency Capital Requirement ("BSCR"), which establishes a target capital level and enhanced capital requirements for each insurer.
Capital Restrictions Our reinsurance subsidiary, Hagerty Re, is subject to the Bermuda Solvency Capital Requirement ("BSCR"), which establishes a target capital level and enhanced capital requirements for each insurer. As of December 31, 2025, Hagerty Re maintained sufficient statutory capital and surplus to comply with the BSCR.
The increase in underlying policy premiums for both policy renewals and new policies was 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.
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. 50 TABLE OF CONTENTS The increase in revenue from new policies was primarily driven by a 33.3% increase in new policies written when compared to the prior year period, including business generated by the State Farm Master Alliance Agreement.

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Item 7A. Quantitative and Qualitative Disclosures About Market Risk

Market Risk — interest-rate, FX, commodity exposure

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Biggest changeIn the normal course of our operations, the primary components of market risk affecting us are interest rate risk and credit risk. Interest rate risk Interest rate risk is the risk that we will incur economic losses due to adverse changes in interest rates. Our available-for-sale securities, debt obligations, and loan portfolio secured by collector cars have interest rate risk.
Biggest changeWe are exposed to market risks primarily through the investment portfolio supporting our insurance operations, including interest rate risk in fixed maturity securities and credit risk. We do not enter into derivatives for trading purposes. Interest rate risk Interest rate risk is the risk that we will incur economic losses due to adverse changes in interest rates.
Based on variable-rate loans outstanding as of December 31, 2024, a 100-basis point (or 1.0%) change in our variable rates would result in our annual interest income changing by approximately $0.5 million. Credit risk Available-for-sale securities Credit risk is the potential loss resulting from adverse changes in an issuer's ability to repay its debt obligations.
Based on variable-rate loans outstanding as of December 31, 2025, a 100-basis point (or 1.0%) change in our variable rates would result in our annual interest income changing by approximately $0.9 million. Credit risk Available-for-sale securities Credit risk is the potential loss resulting from adverse changes in an issuer's ability to repay its debt obligations.
Based on variable-rate borrowings outstanding as of December 31, 2024, a 100-basis point (or 1.0%) change in our borrowing rates would result in our annual interest payments changing by approximately $0.8 million.
Based on variable-rate borrowings outstanding as of December 31, 2025, a 100-basis point (or 1.0%) change in our borrowing rates would result in our annual interest payments changing by approximately $1.5 million.
Loan portfolio We also have a portfolio of loans secured by collector cars of approximately $57.0 million as of December 31, 2024, upon which interest is earned predominately at variable rates including the Prime Rate and Term Secured Overnight Financing Rate.
Loan portfolio We also have a portfolio of loans secured by collector cars of approximately $113.9 million as of December 31, 2025, upon which interest is earned predominately at variable rates including the Prime Rate and Term Secured Overnight Financing Rate.
Conversely, as interest rates decrease, the fair value of our fixed maturity securities increases. We manage this interest rate risk by investing in securities with varied maturity dates and by managing the duration of our investment portfolio. The target duration of our investment portfolio is two to four years.
When market interest rates increase, the fair value of our fixed maturity securities decreases. Conversely, as interest rates decrease, the fair value of our fixed maturity securities increases. We manage this interest rate risk by investing in securities with varied maturity dates and by managing the duration of our investment portfolio.
Available-for-sale securities The primary market risk to our investment portfolio is interest rate risk associated with investments in fixed maturity securities. Fluctuations in interest rates have a direct effect on the market valuation of these securities. When market interest rates increase, the fair value of our fixed maturity securities decreases.
Our available-for-sale securities, debt obligations, and loan portfolio secured by collector cars have interest rate risk. Available-for-sale securities The primary market risk to our investment portfolio is interest rate risk associated with investments in fixed maturity securities. Fluctuations in interest rates have a direct effect on the market valuation of these securities.
We have exposure to credit risk as a holder of fixed maturity securities. Our risk management strategy and investment policy are designed to invest in investment grade debt and to limit the amount of credit exposure with respect to a single issuer to no greater than 5%, except for the U.S. Federal Government.
We have exposure to credit risk as a holder of fixed maturity securities. Our risk management strategy and investment policy are designed to invest primarily in investment grade debt and to limit the amount of credit exposure with respect to a single issuer. 67 TABLE OF CONTENTS
The table below illustrates the sensitivity of the value of our fixed maturity securities with hypothetical changes in interest rates as of December 31, 2024: December 31, 2024 Estimated Fair Value Estimated Change in Fair Value Estimated % Increase (Decrease) in Fair Value in thousands (except percentages) 200 basis points increase $ 543,669 $ (34,019) (5.9) % 100 basis points increase $ 560,885 $ (16,803) (2.9) % No change $ 577,688 $ — — % 100 basis points decrease $ 594,620 $ 16,932 2.9 % 200 basis points decrease $ 610,694 $ 33,006 5.7 % Debt obligations As of December 31, 2024, we had approximately $80.5 million of variable rate indebtedness, representing approximately 76% of our total debt outstanding, at an average interest rate during the year ended December 31, 2024 of approximately 6.75%.
The table below illustrates the sensitivity of the value of our fixed maturity securities with hypothetical changes in interest rates as of December 31, 2025: December 31, 2025 Estimated Fair Value Estimated Change in Fair Value Estimated % Increase (Decrease) in Fair Value in thousands (except percentages) 200 basis points increase $ 654,232 $ (42,039) (6.0) % 100 basis points increase $ 675,618 $ (20,653) (3.0) % No change $ 696,271 $ — — % 100 basis points decrease $ 716,177 $ 19,906 2.9 % 200 basis points decrease $ 735,574 $ 39,303 5.6 % Debt obligations As of December 31, 2025, we had approximately $153.4 million of variable rate indebtedness, representing approximately 86% of our total debt outstanding, at an average interest rate during the year ended December 31, 2025 of approximately 5.57%.
As of December 31, 2024, we held fixed maturity securities with a fair value of $577.7 million.
The target duration of our investment portfolio is two to four years. As of December 31, 2025, we held fixed maturity securities with a fair value of $696.3 million.
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As of December 31, 2024, all fixed income securities in our investment portfolio were rated investment grade by at least one nationally recognized rating organization. 61 TABLE OF CONTENTS

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