Hagerty's Engine Turnover: Record Quarter Masks a Structural Shift
Written premiums surge 18% on the new Markel fronting arrangement, but GAAP revenue dips from one-time amortization—investors are looking through the noise.
HGTY · Earnings Call · 2026-05-06
A Structural Shift in the Economics
Hagerty reported a first-quarter that on the surface looks contradictory: GAAP revenue down 5% and a net loss of $13 million, yet the underlying business is firing on all cylinders. The key is the Markel Fronting Arrangement, which took effect January 1, 2026. Hagerty Re now assumes 100% of the underwriting risk on its U.S. book, a decade-long goal. As CFO Patrick McClymont explained, the reported revenue decline is purely a consolidation artifact—the MGA commission revenue and associated ceding commission expense now net to zero. Instead, earned premium jumped 42% and adjusted EBITDA rose 77% to $85 million. The one-time hit from amortizing deferred ceding commissions ($89 million in Q1) is the tab for the old structure, and it burns off by year-end.
This is what a healthy compounding specialty insurer looks like when firing on all cylinders.
Investors are clearly seeing through the GAAP noise. The stock has rallied 17.6% over the past 90 days and sits just 4% below its August high. The market is rewarding the economics. Total Revenue fell to $312 million from $328 million a year ago, but that masks the acceleration in written premiums to $289 million, up 18% and ahead of the full-year 15–16% guidance.
The Flywheel Accelerates
The growth engine isn't just the fronting change—it's the compounding from every part of the ecosystem. Broad Arrow, the company's auction arm, delivered a historic Amelia event: $111 million in sales, 50% higher than any prior Amelia auction, with a 92% sell-through rate. As CEO McKeel Hagerty put it, “every car that trades hands at a Broad Arrow Auctions is a potential Hagerty insurance policy—that is the flywheel in action.” — McKeel Hagerty, Chief Executive Officer and Chairman · 2026-05-06 This isn't just a profit center; it's a customer acquisition machine that gets cheaper with every car sold. The auction results also feed the insurance side—appreciating values on modern supercars like the $15 million Ferrari Enzo directly lift insured values and written premiums.
The State Farm partnership is the other major driver. Already adding record new members—112,000 policies in a seasonally light quarter—the conversion of the carrier's 525,000 collector car policies is progressing. Management expects agents to be selling in 40 states by year-end. “As State Farm conversions continue during the next 2 years, commission revenue inflects upwards,” — Patrick McClymont, Chief Financial Officer · 2026-05-06 and this business carries no offsetting ceding commission expense. The prior quarter echoed a similar sentiment, with Patrick noting, “2026 and 2027 are going to be big years for State Farm conversion.” — Patrick McClymont, Chief Financial Officer · 2026-02-26
New Themes on the Horizon
Beyond the core, Hagerty is positioning for the future. Two fresh keywords this quarter—electric car and self-driving cars—signal that the company is thinking beyond vintage metal. McKeel personally owns a Porsche Taycan and took his first Waymo ride, acknowledging that “we're going to have more and more electric cars” — McKeel Hagerty, Chief Executive Officer and Chairman · 2026-05-06 and that daily drivers of today could become the enthusiast vehicles of tomorrow. This is a long-horizon view, but it's consistent with the company's history of evolving its definition of "collectible." The standard auto market's rate dynamics—currently lateral—don't hurt Hagerty, as the core classic car book continues to grow PIF in the high single digits, independent of industry pricing cycles.
The guidance reaffirmation—written premium growth of 15–16% and adjusted EBITDA of $236–247 million—with management "trending toward the high end" underscores confidence. As Patrick said, “It's just waiting to provide the update. That's our approach.” — Patrick McClymont, Chief Financial Officer · 2026-05-06 The second-quarter call will be the moment to see if the momentum holds.
Hagerty's formula is simple: a sticky, high-retention insurance book (89%), a booming marketplace that feeds it, and now full control of underwriting economics. The Q1 GAAP loss is a bookkeeping artifact; the real story is a company compounding at 15%+ written premium growth with expanding margins, trading at a price that the market is finally rewarding.