Hagerty (HGTY) Q2 2026 earnings review
GAAP Revenue Reverses, But Underlying Growth Accelerates
Hagerty’s Q2 2026 results present a massive optical illusion. On paper, Total Revenue reversed to a 6% decline and Net Income crashed 83% to $8 million. In reality, the core business is accelerating wildly. The optical drag is entirely manufactured by Hagerty's new 100% risk retention agreement with Markel. Because Hagerty now controls the entire policy economics, $144 million in MGA commission revenue was eliminated in consolidation, and a $64 million one-time transitional charge was taken to amortize 2025 policies. Looking purely at the true operating metrics: Earned Premium surged 42%, Written Premium grew 19%, and Policies in Force (PIF) grew 19% to 1.9 million. Based on this structural profitability uplift, management increased full-year guidance for Adjusted EBITDA to $270-$280 million.
🐂 Bull Case
By shifting from an 80% quota share to retaining 100% of the risk under the new Markel Fronting Arrangement, Hagerty captures the entirety of underwriting and investment income. YTD Adjusted EBITDA is up 32% to $160 million.
The company added a record 279,000 new members in H1 2026. The conversion of State Farm's classic car policies provides a locked-in, multi-year runway for mid-teens PIF growth that is entirely non-seasonal.
🐻 Bear Case
While Policies in Force grew 19%, Membership and other revenue grew a highly anemic 3%. The new omnichannel customers (like State Farm conversions) appear highly resistant to the Hagerty Drivers Club up-sell.
With $153 million in pre-tax transition costs recognized YTD and heavily distorted revenue optics expected to last through Q4 2026, the equity story requires deep unpacking, which may stall institutional buying until 2027.
⚖️ Verdict: 🟢
Bullish. You have to look past the accounting noise. Hagerty traded top-line vanity for bottom-line sanity by taking 100% of its risk. The compounding effect of 88% retention mixed with the State Farm pipeline makes the raised EBITDA guidance highly credible.
Key Themes
Markel Fronting Arrangement Transforms Economics
The most important theme of 2026 is the acceleration in structural margins. On January 1, Hagerty shifted its Markel partnership to retain 100% of risk and premium, up from 80%. This caused an immediate 42% YoY surge in Q2 Earned Premium ($252 million). While it triggers a temporary GAAP net loss due to the amortization of deferred ceding commissions from 2025 policies ($64M in Q2 alone), the underlying reality is that Hagerty captures ~25% more underwriting profit per policy on a very stable ~89% combined ratio.
Broad Arrow Auctions Feed the Flywheel
Marketplace revenue is accelerating, up 48% YoY in Q2 to $39.6 million. Broad Arrow delivered €41 million at Villa d'Este and more than $111 million at Amelia Island (92% sell-through). Crucially, this isn't just an auction business; it's Hagerty's primary customer acquisition engine. Rising auction values directly drive members to increase their insured vehicle values, creating a self-sustaining premium tailwind.
The Membership Disconnect
A massive contradiction emerged in Q2: Insurance growth and membership growth are diverging. While Policies in Force (PIF) grew by 19% to 1.9 million, Hagerty Drivers Club paid members grew only 6%, and Membership/Other revenue grew a decelerating 3% YoY to $21.3 million. This suggests that the massive influx of State Farm conversions are largely treating Hagerty as a utility (insurance) rather than a lifestyle brand (membership).
Enthusiast+ and Duck Creek Implementation Drag
Hagerty is incurring heavy technology expenses to implement its Duck Creek platform, a prerequisite for scaling its 'Enthusiast+' product targeting post-1980 vehicles. With Q2 Selling, General & Administrative (SG&A) combined with Underwriting expenses decreasing artificially on a GAAP basis (due to deferrals), the true cash drag of this tech debt must be monitored, as management previously flagged these 'pinch point' expenses as long-term, structural costs.
Macro Expansion: Bennetts UK Acquisition
Hagerty announced the acquisition of Bennetts, the second-largest specialty motorcycle insurer in the UK, for £34 million. This is a vital strategic pivot. Following management's previous admissions that European insurance expansion post-Brexit is highly complex, buying an established, profitable player instantly triples Hagerty's scale in a lucrative overseas market and bypasses the slow organic buildout phase.
Other KPIs
Stable. The combined ratio remained perfectly flat YoY at 89.6%. This indicates that despite taking on significantly more top-line volume through the State Farm conversion, underwriting discipline has not deteriorated. The Hagerty Re Loss Ratio saw a slight uptick to 42.7% (vs 42.3% last year), but remains industry-leading.
Accelerating wildly. Operating Cash Flow surged 91% YoY compared to $97.7 million in H1 2025. This underscores the true cash-generation power of the Markel fronting arrangement shift, proving that despite GAAP net losses, the core business is highly cash generative.
Stable. Retention remains an industry gold standard at 88.2%, down microscopically from 88.7% a year ago. Maintaining this rate while absorbing hundreds of thousands of new State Farm policies proves the durability of the brand moat.
Guidance
Accelerating. Raised from previous range. The midpoint implies ~16.5% YoY growth, heavily driven by the non-seasonal compounding of the State Farm book conversion and rising values within the core independent agency channel.
Reversing. The implied growth is -8% to -9% YoY. Management is making it explicitly clear that this is a structural accounting artifact caused by eliminating commission revenue under the new 100% quota share Markel deal, not a fundamental deterioration in demand.
Accelerating. Raised from prior $236-$247M guidance. Midpoint implies 16% growth over 2025 actuals ($236.7M), highlighting the true underlying profitability uplift of retaining 100% of the underwriting margin.
Key Questions
Membership Attach Rate Erosion
With Policies in Force growing 19% but HDC membership revenue only growing 3%, it appears new omnichannel converts are resisting the membership upsell. Are you changing the sales funnel for State Farm conversions to mandate or heavily incentivize HDC attach rates?
Bennetts Integration
You acquired Bennetts for £34M to capture the UK motorcycle market. What is the timeline for integrating their policyholders into the broader Broad Arrow and Hagerty Marketplace flywheel, and what are the expected cross-sell synergies?
Enthusiast+ Rollout Pacing
Given the heavy Duck Creek technology investments previously cited, when will Enthusiast+ contribute meaningfully to top-line premium growth outside of the initial pilot states?