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DATE

Wednesday, May 6, 2026 at 10 a.m. ET

CALL PARTICIPANTS

  • Chief Executive Officer and Chairman — McKeel O. Hagerty
  • Chief Financial Officer — Patrick Scott McClymont
  • Head of Investor Relations — Jay Koval

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TAKEAWAYS

  • Written Premium -- $289 million, up 18%, surpassing full-year guidance of 15%-16%; driven by record new members, PIF growth, and omnichannel expansion.
  • Earned Premium -- $240 million, increasing 42% due to 100% quota-share retention in the U.S. and written premium growth.
  • Adjusted EBITDA -- $85 million, rising 77%; this includes a $6 million reserve reduction from favorable prior-year development.
  • GAAP Revenue -- Down 5%, reflecting the netting effect under the new Markel fronting structure, despite underlying business growth.
  • GAAP Net Loss -- $13 million, including $89 million in deferred ceding commission amortization related to pre-2026 policies.
  • Policies in Force (PIF) -- Up 15%, supported by an industry-leading 89% retention rate and State Farm conversions.
  • Hagerty Re Combined Ratio -- 87%, benefitting from declines in loss frequency and reserve reductions.
  • Loss Ratio -- 38% at Hagerty Re, supported by proprietary data and improved claims management.
  • Operating Cash Flow -- $16 million, affected by claim payment timing, including a one-time overlap from legacy Markel claims reimbursement for Q4 2025; normalizes over the balance of the year.
  • Marketplace Revenue -- $26 million, down 12% due to lower inventory sales; offset by record auction performance at Amelia Car Week.
  • Commission and Fee Revenue -- $16 million; not directly comparable to prior periods due to structural changes.
  • Membership and Other Revenue -- $22 million, reflecting continued paid membership and ancillary revenue growth.
  • Net Investment Income -- $10 million, attributed to a larger, high-quality fixed income investment portfolio.
  • Policy Additions -- 112,000 new policies added in the quarter, with accelerating contribution from modern enthusiast vehicles.
  • State Farm Partnership -- Over 100,000 policies converted or newly sold; target to have 19,000 agents actively selling in 40 states by year-end, progressing toward converting 525,000 State Farm collector car policies by 2027.
  • Deferred Acquisition Costs -- $89 million in Q1; expected to wind down entirely by year-end 2026.
  • Cash and Investments -- $212 million in unrestricted cash and over $1.1 billion in total investments at quarter end.
  • Total Debt -- $229 million, inclusive of $110 million back leverage associated with Broad Arrow’s loan portfolio.
  • Record Auction Sales -- Broad Arrow Auctions delivered $111 million in sales at Amelia Car Week, setting 12 pricing records and achieving a 92% sell-through rate; highest in event history by 50%.
  • Porsche Air|Water Auction -- April sales rose 30% with an 84% sell-through rate.
  • Loss Portfolio Transfer -- $50 million cash received from Markel in connection with prior period liabilities assumed by Hagerty Re.
  • Full-Year Guidance Reaffirmed -- Expected written premium growth of 15%-16%, adjusted EBITDA of $236 million-$247 million, and GAAP net loss of $41 million-$51 million.
  • International Expansion -- Insurance operations remain focused on the U.K.; active European auction expansion continues, but insurance offerings on the continent are being evaluated post-Brexit.
  • In-House Claims Team -- Internal claims handling has increased, yielding improved service and better economic outcomes; initiative is positioned as a key differentiator.
  • Rate Increases -- Long-term regulatory rate changes for Hagerty Re averaged 1.5% annually, presenting a consumer-friendly value proposition.
  • Enthusiast Plus -- Contribution remains small, with rollout limited to Colorado and a measured expansion approach.
  • Guidance Update Timing -- Management will review and consider updating full-year outlook after Q2.

SUMMARY

Management highlighted the structural milestone of 100% economics retention on the U.S. book, resulting in substantial earned premium and adjusted EBITDA growth. Strategic initiatives, particularly the State Farm Classic Plus conversion and modern enthusiast vehicle focus, are accelerating policy growth and deepening B2B channel engagement. Historic performance at Broad Arrow Auctions amplified cross-platform customer acquisition while strengthening international brand credibility. Investments in technology, agent tools, and in-house claims capabilities are positioned as long-term drivers of efficiency, underwriting quality, and policyholder value. Hagerty (HGTY 2.14%) reaffirmed its outlook and signaled potential for upside performance, with year-end normalization of financial complexity under the Markel (NYSE: MKL) transition.

  • "GAAP profits in 2026 are negatively impacted by the amortization of deferred ceding commissions paid to Markel in 2025 for policies written before January 1. Think of it as settling the tab on the old structure," CEO Hagerty said, emphasizing the temporary nature of the accounting headwind.
  • Broad Arrow's integration with Hagerty's brand, member base, and proprietary valuation data has enabled auction results described as "historic" and continues to fuel both transaction revenue and embedded insurance growth opportunities.
  • Hagerty's addressable market expands with agent enablement; its 50,000 independent agents now have enhanced tools to source enthusiast vehicles within existing books of business, directly targeting the 36 million vehicle market segment.
  • Operating under new financial reporting norms brings Hagerty more in line with typical insurance company disclosures, facilitating comparability for investors.
  • High retention and voluntary increases in insured vehicle values provide structural advantages over the standard auto insurance market, compounding written premium gains.

INDUSTRY GLOSSARY

  • Combined Ratio: Insurance measure representing the sum of incurred losses and expenses as a percentage of earned premium; below 100% indicates underwriting profitability.
  • Quota-Share Retention: A reinsurance structure where the insurer retains a set percentage of the risk and premium on its own books.
  • Deferred Ceding Commission: Amounts paid for prior reinsurance cessions, amortized over time as policies run off.
  • Loss Portfolio Transfer: Transaction in which a reinsurer assumes liability for historical claims in exchange for consideration, impacting both balance sheet and future profit recognition.
  • MGA (Managing General Agent): An insurance intermediary with underwriting authority, providing services like policy administration, claims, and distribution for a carrier partner.
  • PIF (Policies in Force): The number of insurance policies actively in effect at a given time.
  • Sell-Through Rate: Percentage of auction lots sold relative to those offered, indicative of market demand and auction success.

Full Conference Call Transcript

Jay Koval: Thank you, operator, and good morning, everyone. Thank you for joining us to discuss Hagerty, Inc.'s results for 2026. I am joined this morning by McKeel O. Hagerty, Chief Executive Officer and Chairman, and Patrick Scott McClymont, Chief Financial Officer. During this morning's conference call, we will refer to an accompanying presentation that is available on Hagerty, Inc.'s Investor Relations section of the company's corporate website at investors.hagerty.com. Our earnings release, slides, and letter to stockholders covering this period are also posted on the IR website as well as our 8-K filing. Today's discussion contains forward-looking statements and non-GAAP financial metrics, as described further on Slide 2 of the earnings presentation.

Forward-looking statements include statements about our expected future business and financial performance and are not promises or guarantees of future performance. They are subject to a variety of risks and uncertainties that could cause the actual results to differ materially from our expectations. For a discussion of material risks and important factors that could affect our actual results, please refer to those contained in our filings with the SEC, which are also available on the Investor Relations website and at sec.gov. The appendix of the presentation also contains reconciliations of our non-GAAP metrics to the most directly comparable GAAP measures that are further supplemented by this morning's 8-K filing. With that, I will turn the call over to McKeel.

McKeel O. Hagerty: Thank you, Jay, and good morning, everyone. Spring has finally arrived in Northern Michigan, and with it comes the sound of engines turning over after a long winter's rest. Our members have been pulling their cars out of storage, checking all the fluids and tire pressures, and getting back out onto the open road. I, for one, drove a 1963 Corvette split-window into the Hagerty, Inc. headquarters this morning, and I am smiling ear to ear. Team Hagerty, Inc. has been right there with them and with me, ready to welcome a record number of new members in 2026 as the driving season gets underway. Let me jump to the headline. We are off to an excellent start to 2026.

Written premiums increased 18% in the first quarter, ahead of our full-year expectations. This marks 13 consecutive quarters of executing on strategy to deliver compounding top-line growth while making investments in our team, technology, and members that should sustain high rates of growth in the years to come. As we discussed last quarter, 2026 marks the first year in our history that we control 100% of the economics on our own U.S. book of business. This structural milestone shows up clearly in our results: 42% growth in earned premium, and a 77% jump in adjusted EBITDA. The GAAP presentation of revenue, down 5%, and our net loss of $13 million are temporarily different due to the new Markel fronting arrangement.

But the underlying business performance has never been stronger. GAAP profits in 2026 are negatively impacted by the amortization of deferred ceding commissions paid to Markel in 2025 for policies written before January 1. Think of it as settling the tab on the old structure. These deferred acquisition costs were $89 million in Q1, and wind down to zero by year-end 2026. With that, let me walk through our first quarter results shown on Slide 3. We added a record 112 thousand policies during what has historically been a seasonally light quarter for us. Top cars added are not surprising, as they are the bread and butter for Hagerty, Inc.: Mustangs and Miatas, C10 pickup trucks, and Camaros.

We are also seeing a rapidly growing contribution from more modern enthusiast vehicles, including German and Japanese imports, sought after by the rising generations of drivers. Our written premium growth has been and will continue to be powered by new business count, unlike the broader industry that fluxes with the cycle. PIF growth jumped 15% as our retention rate remained steady and an industry-leading 89%. Retention at that level is not an accident. It is the product of decades of delivering on our brand promise to members who genuinely love their cars and trust Hagerty, Inc. to protect them. We are delivering this growth with a careful focus on maintaining high-quality underwriting.

Hagerty Re's combined ratio was 87%, and we took down our reserves by $6 million in the first quarter. Our underwriting team is one of the best in the industry, and we have been strengthening the capabilities of our in-house claims team. Our sustained market share gains are impressive, indicative of the enormous B2B opportunity for us. We are diligently working on additional partnerships as well as deepening existing relationships by earning the right to ask for more business. Hagerty, Inc. is uniquely positioned to help protect carriers' classic car books of business with automotive expertise and excellent service. We are making the necessary investments to lengthen our lead.

State Farm Classic Plus is a great example of a tightly integrated partnership where both parties win. We now have an accelerating growth engine with expectations for their 19 thousand agents to be selling new business in 40 states by year-end. The conversion of State Farm's existing 525 thousand collector car policies to the Hagerty, Inc. platform is also progressing well, and we remain on pace to convert most of these members to the new Classic Plus program by 2027. In addition to the white space with national carriers, our independent agency channel with 50 thousand agents is ripe with potential.

We are investing to make it easier for these agents to do business with us, straight-through processing and the automated tools that help them identify enthusiast vehicles already sitting in their existing books of business, likely insured as daily drivers. Our addressable market of 36 million vehicles expands every year, and we want to empower these agents to think of Hagerty, Inc. as the best solution for their customers. Let me move on to something that genuinely stopped all of us in our tracks during the first quarter.

In March, Broad Arrow Auctions hosted a two-day sale at Amelia Car Week in Jacksonville, Florida, and the results were historic: $111 million in total sales, 50% higher than any prior Amelia auction, with a 92% sell-through rate. The top lot was a 2003 Ferrari Enzo that sold for $15 million, and we set 12 pricing records. The market for modern enthusiast vehicles has never been stronger. Every car that trades hands at a Broad Arrow auction is a potential Hagerty, Inc. insurance policy. That is the flywheel in action. Our marketplace is not only a rapidly scaling profit center, but it is also a customer acquisition machine that gets cheaper with every car sold.

I want to put that into context. In just four years and through the hard work of an exceptional global team, we have become one of the world's leading collector car auction houses. When you combine Broad Arrow's deep expertise with the Hagerty, Inc. brand, our global community of members, and our unmatched proprietary valuation data, you get results that surprise even us. Those results tell us something important about the health of our market. International demand for the finest cars is strong. Values on great cars continue to appreciate. Buyers from 23 countries do not show up to an auction in Northern Florida unless they trust Hagerty, Inc. and Broad Arrow.

That is all good news for Broad Arrow's transaction revenue. It is also good news for Hagerty Re; as insured values rise, so do written premiums. Approximately 20% of our per-policy premium growth over the last fifteen years has come from our members voluntarily choosing to insure their appreciating vehicles for higher guaranteed values. Our customers want their coverage to grow because their cars are worth more. That alignment between asset appreciation and insurance economics is absent from the standard auto market where vehicles tend to depreciate. It is a structural advantage that compounds every year for Hagerty, Inc., augmenting our PIF-driven written premium gains.

Over the same fifteen-year period since 2010, our regulatory rate increases for Hagerty Re have averaged only 1.5% per year, bolstering our consumer-friendly value proposition. We saw robust auction demand continue at the Porsche Air|Water auction in April, with sales up 30% year-over-year and a sell-through rate of 84%. In May, Broad Arrow will once again serve as the official auction partner of the Concorso d’Eleganza Villa d’Este with the BMW Group on Lake Como, Italy.

This will be our second year at Villa d’Este, widely considered to be one of the most prestigious concours events in the world, and we expect to build on last year's inaugural event as Broad Arrow is increasingly recognized as the trusted brand in auctions across major European markets. In summary, our first quarter results were not only ahead of expectations, but they were far and away the best first quarter we have ever delivered. While it is only May, we are highly encouraged by how we are tracking towards our full-year outlook. With that, let me turn it over to Patrick to walk through the financial details.

Patrick Scott McClymont: Thank you, McKeel, and good morning, everyone. Before I dig in, let me reiterate the headline: the underlying business is performing very well. Written premiums increased 18% ahead of full-year expectations, with record new member additions. Adjusted EBITDA jumped 77%, to $85 million, including a $6 million reserve reduction due to favorable prior-year development. Hagerty Re's combined ratio was 87%. This is what a healthy, compounding specialty insurer looks like, firing on all cylinders. As McKeel mentioned, the GAAP presentation this year requires a brief reminder of what we shared on our fourth quarter call. Starting January 1, Hagerty Re assumed 100% of the underwriting risk on our U.S. book.

It is a great economic outcome for us given the bump in underwriting profits and investment income. Under the new structure, the MGA commission revenue and the associated ceding commission expense that previously appeared gross on our P&L now eliminate against each other in consolidation, i.e., they net to zero. This is why reported revenue declined 5% even though written premiums grew 18%. Additionally, there are $89 million of costs in the first quarter from the amortization of deferred ceding commissions for pre-2026 policies that result in a GAAP net loss of $13 million. This charge burns off entirely by year-end. With that, let me walk through the financials shown on Slides 6 and 7.

Written premium in the first quarter was $289 million, up 18% versus the prior-year period. This is ahead of our full-year guidance of 15% to 16%, an acceleration from last year's 14% growth, driven by our omnichannel approach combined with 89% retention. Earned premium jumped 42% to $240 million, reflecting the 100% quota-share retention in our U.S. book of business plus written premium growth. This is the structural improvement in our reinsurance economics that we have been working towards for a decade as we evolve our partnership with Markel. Commission and fee revenue in the quarter was $16 million. As I noted, this line is no longer comparable to prior periods given the elimination of Markel-related commissions.

As State Farm conversions continue during the next two years, commission revenue inflects upwards, and unlike the prior Markel commission structure, State Farm MGA fees carry no offsetting ceding commission expense, falling through more cleanly. Marketplace revenue was $26 million, down 12%. We delivered record auction results at Amelia this year, but had lower inventory sales as we compared against last year's one-time sale at the Academy of Art University. Amelia cemented our position as a leader in the high-end auction market. We are investing significantly to position Hagerty, Inc. as the undisputed global leader in both live and online sales.

Membership and other revenue was $22 million, reflecting steady growth in Hagerty Drivers Club paid memberships and ancillary revenue streams. Net investment income came in at $10 million, benefiting from our now larger investment portfolio at Hagerty Re that enjoys steady returns with low volatility thanks to our focus on high-quality fixed income investments. Moving on to expenses, let us start with losses. In 2025 and into 2026, we are seeing declines in frequency, and favorable development from prior years allowed us to reduce reserves by $6 million in the first quarter. Hagerty Re's loss ratio was 38%, resulting in a combined ratio of approximately 87%.

We deliver high rates of written premium growth with excellent underwriting discipline thanks to more than forty years of proprietary data on 40,000 distinct makes and models, increased efficiency at acquiring and serving members, and selecting members who take exceptional care of their toys. With the new Markel fronting arrangement, we have also adjusted our presentation of our expenses to allow investors to track and model our core insurance operations the way other insurance companies disclose their results. We will report the balance of the year consistently with our first quarter disclosures.

After adjusting for the amortization of the ceding commission per policy issued in 2025, the underlying business showed significantly improved profitability, which can be seen in our adjusted EBITDA of $85 million. We believe that adjusted EBITDA is the best metric to focus on as it reflects the true operating momentum of our differentiated business strategy. We are growing quickly and efficiently converting premium growth into cash flow. I would point out that operating cash flow of $16 million was lower than the prior year's $44 million. With the new Markel fronting arrangement, we are paying claims directly, while under the prior structure, Markel paid the claims and we reimbursed Markel with a lag.

So in 2026, we made both the direct payments and the reimbursement for Q4 2025 claims of approximately $65 million. This normalizes during the balance of 2026. Adjusted for this doubling up of payments, operating cash flow increased roughly in line with adjusted EBITDA growth in the quarter. First quarter loss before taxes was $21 million and includes $89 million of deferred acquisition costs. First quarter net loss was $13 million and net loss attributable to Class A common shareholders was $7 million. GAAP basic and diluted loss per share was $0.6 for the quarter, based on 101 million weighted average shares of Class A common stock outstanding.

Adjusted diluted loss per share, defined as adjusted net loss divided by 361 million fully diluted shares, was $0.4 for the quarter. We ended the quarter with $212 million in unrestricted cash, total investments of more than $1.1 billion, and total debt of $229 million, which includes $110 million of back leverage for Broad Arrow's portfolio of loans. Given the strength in our first quarter results and momentum as we head into the summer driving season, we are reaffirming our full-year 2026 guidance and are trending toward the high end of these ranges.

This includes anticipated written premium growth of 15% to 16%, adjusted EBITDA of $236 million to $247 million, and a GAAP net loss of $41 million to $51 million. As has been our practice in prior years, we will revisit our full-year outlook on the second quarter call. We are increasingly confident in our ability to deliver great 2026 results for shareholders. Looking forward to 2027, it should be a more normalized year for Hagerty, Inc.'s P&L post-2026 complexity, where revenue growth more closely tracks written premium growth. We anticipate another year of mid-teens growth in written premium.

While we continue to make multiyear investments in member growth and other initiatives, these include increased capabilities around the Markel fronting arrangement, technology investments in our B2B distribution, buildout of our product and Broad Arrow teams, enhancements to our digital marketplace, as well as expansion of our Special Investigation and Material Damage units. Early indications point to these being high-return investments that will fuel member LTV in the years to come. That wraps up our prepared remarks. Operator, we can open the line for questions.

Operator: We will now open the call for questions.

Operator: Thank you. Ladies and gentlemen, we will now begin the question and answer session. If you would like to ask a question, please press star and 1. You may press star and 2 if you would like to remove your question from the queue. For participants using speaker equipment, it may be necessary to pick up your handset before pressing the star key. Ladies and gentlemen, we will wait for a moment while we take the first question from the line of Pablo Singzon from JPMorgan. Please go ahead.

Pablo Singzon: Hi. Thank you. Is there any seasonality considered for EBITDA through the balance of the year? It seems to me, as you had pointed out, Patrick, it seems to me that at least through Q1, you are running above the full-year guide. I would expect revenues to increase through the balance of the year, so I am just not sure if there are any offsets. Maybe you are considering gaps in the third quarter or some pickup in expenses that might derail the simplistic math of just annualizing the Q1 number.

Patrick Scott McClymont: Yes. The business is seasonal, and so the seasonal pattern does not change. You should always consider that in your modeling. We are investing in the business, and we have talked about that on the last earnings call, and some of that ramps up over the course of the year. We have the normal dynamic of, inevitably in the first quarter, we do not end up filling all the headcount slots that are open. It just takes a little longer than expected. So we would expect to see some ramp up of expenses embedded in the full-year guidance. I would not just annualize the first quarter. Hopefully that is helpful.

Pablo Singzon: Thanks for that. And then the second question I had is a broader topic. Competition in personal auto is increasing. I am wondering how that is affecting dynamics in your core classic car insurance business. And then maybe to tack on something to that, how is the current environment affecting your thinking about the rollout of Classic Plus? Thanks.

McKeel O. Hagerty: Thanks, Pablo. As you may recall, we have discussed this in some of our previous calls. When rates have gone up, for example in standard auto, it tends to create shopping behavior that we benefit from. As you know, we are in a different kind of cycle now with standard auto where states and standard auto carriers are holding pretty steady right now, if not down. But we are seeing very strong year-over-year PIF growth in the core business because of the additional new partnership accounts that are coming in from State Farm and others.

In this case, the flywheel effect of the business is holding our momentum strongly into this year, and we are not negatively affected by the fact that standard auto carriers are in a lateral moving year from a rate standpoint.

Operator: We take the next question from the line of Michael Phillips from Oppenheimer.

Michael Phillips: Yes, thank you. Good morning. You have talked a bit in recent calls about your European expansion for the auction business, and given the flywheel that exists in your overall business, can you talk about your appetite—just remind us—your appetite for expansion internationally for the insurance business?

McKeel O. Hagerty: Thanks, Michael. It is a topic we have discussed for years. We have had an international business for over twenty years, with our first entry outside of the country in the U.K. We still have that business; it is growing and doing well. The order of things that we have really discovered by unlocking these very successful sales in Europe with Broad Arrow is helping us to understand the market differently than just starting with insurance and then deciding whether membership is added and then thinking about marketplace later.

The order of things for us is first to understand the market with these European auctions, getting that kind of sales team and force in place, and the event environment, and then deciding whether insurance is something that needs to be added on the back. When we started our U.K. business back in the day, the U.K. was a golden place to be able to operate throughout Europe selling insurance. Under our MGA structure over there, we were able to consider writing directly into the European continent without having to create an additional entity. After Brexit, that became much more difficult. So right now, we are still just operating in the U.K.

We write a little bit of some larger collection business in Europe, but we are looking at opportunities. For now, we are focusing on rounding out that auction schedule on the continent.

Michael Phillips: Okay. Thank you. I was hoping you could expand a bit more on the strengthening of your in-house claims team—what is happening there and why. How much of that is related to the change in the structure that started this quarter? How much is related to your desire to expand more into the enthusiast market? You talked about that in-house claims team—what is happening there and why, and how it is related to the changes in your overall business?

McKeel O. Hagerty: I will take the high end of it, and if Patrick wants to follow, I will let him. We have always done claims in-house. It was a real differentiating thing for us when we were just operating as an MGA. Now, having 100% of your risk, you want to be paying attention to every dollar you spend when it comes to claims while maintaining a very high level of NPS and customer satisfaction and overall claim service rates. Even though this is a low-frequency claim business, the bigger you get, the more claims you will have. We decided we really needed to make the investment to upgrade that team.

We have some incredible leadership on the claims side who bring the best of big auto industry claims expertise, but the unique nature of repairing the types of vehicles we insure in our core book is very different than repairing a standard auto where you can just bolt on a brand-new part. In many cases, repairing a vintage car takes time. You have to find the right kind of shop. You sometimes have to fabricate parts, or parts have to be sourced from a variety of different places. We have teams of people who help find those parts—very different than a standard repair shop.

Structurally, we are bringing best practices from standard auto claims—turnaround times and all the things that you can do to contain the leakage that can happen around claims practices—while maintaining the high quality of work that our customers expect. You want to pay fast, but you do not want to rush so that they are concerned about the quality of the repair.

Patrick Scott McClymont: It is meaningful. The claims organization has changed the mix. They have meaningfully increased the number of claims that are dealt with in-house versus using independent adjusters. Every time they have increased that baseline, they have proven that the return on that is compelling, and so we sit down and decide to increase the baseline again—that is what happened over the last couple of years. That return comes from velocity when you are processing things in-house. The customer service is better, the ultimate economic outcomes are better as well. Overall frequency and severity trends for the industry have been positive. We think we have more tailwinds behind that because of this strategic decision to really invest in that capability.

We view it as a differentiator because these cars are different; they need a different level of expertise. It is driving real value.

Operator: We take the next question from the line of Elyse Greenspan from Wells Fargo. Please go ahead.

Elyse Greenspan: Hi, thanks. My first question is just on PIF. How should we think about seasonality during the year? Some years, Q1 tends to be the lowest growth quarter of the year. Would you expect to see similar trends this year as we think about PIF growing during the year?

Patrick Scott McClymont: Yes. Last year, this year, and next year, we do have the impact of State Farm conversions, and that is driving a meaningful increase in PIF. That is not seasonal; it is based upon the rollout schedule with partners at State Farm, and it is meaningful and attractive. Putting that aside from a seasonality perspective, we are seeing the same trends that we typically would see. The first quarter typically is a lower quarter for us in terms of PIF growth. We ramp up starting in April and now into May and through the summer months, and you see it ramp down again in the fourth quarter. We are seeing that same underlying dynamic.

Right now, we are also seeing very healthy growth in the traditional core business.

Elyse Greenspan: Thanks. And then my second question: you typically wait until Q2 to update full-year guidance, but you said you are trending towards the high end of the ranges. Based on Q1, you are trending favorable to most items. Is there anything that we should think about reversing? I am more interested in adjusted EBITDA and written premium growth, but really any components of guidance—is it just being somewhat conservative and waiting to provide an update with Q2?

Patrick Scott McClymont: It is just waiting to provide the update. That is our approach on this. We have been consistent. We have concluded that not enough chapters of the book have been written at the end of three months, and so we will do our first update after the second quarter.

Elyse Greenspan: Okay. And then I think you said with State Farm that you would be active in 40 states by the end of the year. Would you expect to add the additional states in 2027 to be at full capacity? Is that how to think about that?

Patrick Scott McClymont: Pretty much. There could be states that stretch a little bit beyond that just because they are more challenging from a regulatory standpoint. But by the end of 2027, we should be selling in almost all the states. We will still have a little bit of a tail in terms of the conversions. There is always that lag where we sell new business first, make sure that everything is working, and then start the conversion process.

Operator: We take the next question from the line of Charles Gregory Peters from Raymond James. Please go ahead.

Charles Gregory Peters: Good morning, everyone. McKeel, in your opening comments, I am quite envious of your description of driving the Corvette into the office this morning. I am going to go down a path that is probably unexpected, but I recently leased out a Tesla Model Y. I know this is not your classic car addressable market, but I find the experience with it shockingly positive. I am just curious, because you are a car enthusiast, what you think of these new electric cars with the self-driving feature.

McKeel O. Hagerty: Thank you. It was a super fun drive in the Corvette. I am reminded why they made some significant changes in 1964 after 1963 when you drive it—you cannot see out of the rearview mirror. I am a huge fan of electric cars. Some car people view it as some sort of dogmatic war; I do not view it that way. We are going to have more and more electric cars. I own an electric car—a Porsche Taycan—and I am, like you said, shockingly impressed. They are great. They are simple, they are fast, they are quiet, they do a lot of great things.

I think you will see more of them, and I think we will be insuring more of them in years to come. For us, there is always this sifting process. Even with the cars that we insure today that were daily drivers some number of decades ago, there is a sifting process where people decide what they like. The ones that survive are the ones that we end up insuring. There is no doubt, as we do now—insuring Tesla Roadsters—that we will be insuring certain Teslas out there in the future. On the self-driving thing, I took my first Waymo ride a couple of weeks ago, and I thought it was really cool.

I played my own music in it and all that stuff. We are going to have more self-driving cars as well. I think there will be a world where there are human-driven cars and self-driving cars. As that technology becomes safer and safer—outside of cities right now, I think it is better off in cities—it will be part of our world. We are going to be the ones out there advocating. We are the company that was built by drivers like me for drivers, and we will be advocating for those people. But we recognize that we will be surrounded by self-driving cars.

Charles Gregory Peters: Not really off topic; it is a great product. It is not in your classic car sweet spot yet, but I am sure it will be at some point. I know you spent some time in your prepared remarks and in the follow-up Q&A talking about the prior-year development. Can you revisit that and walk us through the source? Is it lower severity? Any read-through as we look forward on how the reserves are seasoning?

Patrick Scott McClymont: Sure. The prior year is about a $6.5 million reduction that we had in the first quarter. You will recall in the fourth quarter, we had about a $20.5 million reduction in reserves. This is a continuation. The $6.5 million was predominantly the 2025 accident year. We were starting to see that development in the fourth quarter, which influenced what we did then, and it continues to mature in a very attractive way for us. We are seeing a combination of favorable trends: from a severity standpoint, we continue to be in a good spot; we have talked about frequency before; we have talked about what we are doing in terms of claims outcomes.

Looking at the historical book of losses as those are maturing, and layering in what we have done to deliver from a claims standpoint, it is adding up to a better position. That is our mark-to-market as of right now for prior years. We will see how the balance of this year unfolds, but we think we are in a solid position right now.

Operator: We take the next question from the line of Mark Hughes from Truist Securities. Please go ahead.

Mark Hughes: Yes, thanks. Good morning. Patrick, you mentioned that you would probably see another year of mid-teens growth in written premium next year. Any early thoughts on EBITDA growth when we think about expenses that may be either ramping up or being leveraged? How should we think about EBITDA in 2027?

Patrick Scott McClymont: No early thoughts on that. We are going to stick to the focus on the prompt here in terms of guidance. Hopefully what came through in those comments is this is a business that continues to grow at a credible mid-teens type rate. We feel good about that. It is also a business where we have demonstrated we have been able to expand margins over time, and it is a business that we are choosing to invest in to make sure that we deliver that growth not just for the next year or two but for the long haul. That is the balance we are constantly striking.

Mark Hughes: And then, McKeel, you talked about the higher guaranteed value that is a benefit over time. Is there a specific number that you would throw at that? Is that a low single-digit tailwind, or how should we think about how much that helps year to year?

McKeel O. Hagerty: Thank you. When I think of the few times in my career where the market has taken some sort of dip—back to the dot-com crisis and the Great Financial Crisis—we saw sports cars, sports racing cars, Ferraris, Porsches of earlier generations show the greatest amount of increases year over year while the rest of the book held steady, which is still differentiated from a standard brand-new daily driver book that would be depreciating over time. What we are seeing right now is the more modern supercar and hypercar segment that we are seeing in the Broad Arrow business—those are the cars that are most sought after, and they are lifting everything around them.

When I think modern supercars, I think cars from the ‘90s and even the 2000s. These Ferraris and similar cars are being purchased at higher price points by new entrants into the market but also by older, well-heeled collectors. It is a double effect where you get new money deciding to pay 15% to 30% more than the car was worth—or in a few cases, multiples of that—but also the well-heeled collector stepping up so as not to be left without the new hot thing.

In general, it is single-digit steady growth on those types of cars, but you get wild examples like the 2003 Enzo that we sold for $15 million—a $3 million to $5 million car a couple of years ago. It is astonishing.

Patrick Scott McClymont: Yes, Mark. We have looked at all this data over the last fifteen years. On average, it ends up being low single digits. In those fifteen years, there are only two years where it ticked down a little bit, and that can happen. Some years, it is mid single digits or even high single digits, but in the long run, it ends up being that low single-digit type number.

Operator: We take the next question from the line of Michael David Zaremski from BMO Capital Markets. Please go ahead.

Michael David Zaremski: Hey, thanks. Good morning. Back to excellent PIF growth and revenue growth. It sounds like underlying seasonality did take place and the overlay was the State Farm conversions. I am trying to dimension the impact State Farm is having. Is that a fair way to think about it?

Patrick Scott McClymont: Yes, that is accurate.

Michael David Zaremski: I can see there is $50 million in proceeds from a loss portfolio transfer in the quarter. Any color on what happened there? Any implications for capital return, etc.?

Patrick Scott McClymont: That is part of the overall transition and evolution of our relationship with Markel. For the prior periods, we did a loss portfolio transfer. They transferred to us $50 million; we have assumed all those liabilities. Keep in mind, this is the roughly 20% or so from some of the prior years where we were taking a little less of the risk. It really just represents topping up that risk that we already had for those prior periods. We received the cash and put the liability on our balance sheet.

As you go through the Q, you will see we are assuming there is a gain associated with that, and then that gain amortizes into the income statement over the expected settlement of those claims, which in the aggregate will take about four years or so, but it is pretty front-end loaded. This is not a risk transfer transaction; it is a financing, and so it hits down on the Other Income and Expense line item.

Operator: We take the last question from the line of Thomas Mcjoynt-Griffith from KBW. Please go ahead.

Thomas Mcjoynt-Griffith: Hey, good morning. When we look at the mid-teens premium growth in the guide this year, is it a roughly even split between the core legacy Hagerty, Inc. business, State Farm, and Enthusiast Plus? Or is one of those contributing more than the others?

Patrick Scott McClymont: We are not going to break it down by the different lines you just described. What I will say is 2026 and 2027 are going to be big years for State Farm conversion. Between new and converted, we are already in excess of 100,000 policies, but in total, it is 500,000-plus policies. We are in the thick of it right now, so that is a meaningful driver this quarter and will be this year and next year. The core business continues to grow at the kind of rates that it has been for the last handful of years—very consistent. Enthusiast Plus is still very small, so that is not much of a driver at all right now.

Thomas Mcjoynt-Griffith: Got it. Switching gears, as we track the large national carriers starting to file for rate decreases in some instances, we understand that probably does not impact the core Hagerty, Inc. business, but does that at all impact your outlook for Enthusiast Plus where there is a bit more overlap with the daily drivers?

Patrick Scott McClymont: You are right. For the core business, when we look at our rate increases over the long haul, it is low single digits, and that has continued over the last couple of years. We have done some things on the liability front and addressed that, but our rate increases are pretty modest. As we think about the Enthusiast Plus business, it is hard to say because that is the current environment right now. For Enthusiast Plus, we are in one state—Colorado—and we are rolling this out over time.

We are learning in Colorado and will learn in other states in terms of what the right approach is on pricing and what that means in terms of the profitability of the product. It is hard to say that the current market is heavily influencing our plans there, just because of where we are in the rollout plan.

Operator: Ladies and gentlemen, with that, we conclude the question and answer session. I will now hand the conference over to McKeel O. Hagerty for closing comments.

McKeel O. Hagerty: Thank you, operator, and thanks to everyone on the call for your continued support. I want to close today by coming back to where we started this morning. Hagerty, Inc. has never been better positioned to serve the community of auto enthusiasts who trust us to protect what they love. We have a fast-growing recurring revenue model built around specialty insurance that delivers combined ratios of 90% year after year. Our high-quality underwriting and rapidly scaling business allow us to price at a meaningful discount to traditional carriers.

What we are building at Hagerty, Inc. is incredibly unique in the insurance world, making us the partner of choice because there is no one else who can do what we do for their customers—helping their retention and protecting their bundled business. We also have a fast-growing auction marketplace business that did not exist four years ago and is setting world records all over the world. We have a membership community approaching 1 million paid members that love our member-centric products and services. Thank you, Team Hagerty, Inc.

The results we deliver are the product of your passion, excellence, and hard work, and I cannot wait to see what this amazing team can accomplish over the coming years as we continue to double PIF count to three million by 2030. We look forward to seeing some of you at Villa d’Este in May, and we hope many of you will join us at our annual investor event in Connecticut on May 29, where we will share an update on our progress towards delivering compounding profit growth for our shareholders. Invites will follow, but please reach out to us for more details or to our SVP. Until then, never stop driving.

Operator: Ladies and gentlemen, the conference of Hagerty, Inc. has now concluded. Thank you for your participation. You may now disconnect your lines.