Hagerty (HGTY) Q3 2026 earnings review
Hagerty raises its profit outlook, but new policy additions slow
Hagerty, the collector-car insurer and auction house, raised its profit outlook on lower claim estimates while new policy additions slowed. Total written premium grew 16%, and underlying revenue rose 26% by our math once commission changes with partner Markel are added back. Chief executive McKeel Hagerty lifted the full-year profit target by $35 million after cutting current-year claim loss estimates by $26 million, which pushed third-quarter profit above what the prior second-half plan implied.
| Total written premium | $386.0M +15.5% from a year ago |
|---|---|
| Reported revenue | $354.2M −9.5% from a year ago (+25.7% adding back eliminated commission) |
| Profit before interest, taxes, D&A, and one-offs | $97.1M +63.5% from a year ago |
| Full-year profit outlook (Adjusted EBITDA) | Raised $35M middle of the range: 30.9% growth |
⚖️ Verdict: ⚪ Neutral
The story is unchanged because a one-time claim reserve adjustment drove the profit raise while customer additions cooled. New insurance policy additions grew 8% from a year ago after nearly doubling in the second quarter, and by our math the unchanged written premium plan points to 13% growth in the fourth quarter.
The question now is whether the third-quarter slowdown in new policies is a brief pause between state rollouts or an early peak in the State Farm partnership. Either core demand and new state launches keep written premium growing in the high teens next year, or growth steps down once the initial wave of State Farm transfers passes. Management's first 2027 written premium outlook next quarter will settle it.
🐂 Bull Case
Lower Claim Estimates Drove the Profit Beat
"Given the strength of our results and current trajectory, we are again increasing our expectations for full year 2026," chief executive McKeel Hagerty said. Profit before interest, taxes, depreciation, and one-offs (Adjusted EBITDA) rose 63.5% from a year ago to $97.1 million, and the company raised its full-year target by $35 million at the middle of the range.
Hagerty cut its estimate of current-year insurance claim losses by $26 million in the third quarter "due in part to favorable loss trends in physical damage and liability", Hagerty wrote. It also deferred $10.7 million of net policy sales costs under its new Markel contract.
- Reported loss ratio (claims as a share of earned premium): 32.6%, down 9.4 percentage points from a year ago
- Loss ratio excluding the $26 million estimate reduction: 42.4% by our math, up 0.4 percentage points
- Policy acquisition costs: 17.6% of revenue, down 4.8 percentage points on newly deferred agent costs
- Profit before interest, taxes, depreciation, and one-offs without the reserve cut and cost deferral: up 1.7% by our math
This matters because the profit beat came from an accounting catch-up on claims from the first half of the year rather than a lower ongoing claim rate. By our math, the raised full-year outlook leaves fourth-quarter profit before interest, taxes, depreciation, and one-offs down 6.0% from a year ago at the middle of the range.
What to watch: the fourth-quarter loss ratio when full-year results arrive. Last year's fourth quarter included a $21 million reserve reduction that lowered the loss ratio to 31.4%, so matching that profit requires another reserve release.
Keeping All Underwriting Risk Lifted Cash Flow 48%
Starting January 1, Hagerty Re, the company's reinsurance arm, began keeping 100% of the premium and claim risk on policies issued through its partner Markel, up from 80% last year. The shift aims to capture all underwriting profit while putting 100% of any catastrophe bill onto the company's own balance sheet.
Earned premium — the portion of insurance policies recognized as revenue as coverage time passes — rose 41.7% from a year ago to $265.1 million. Because the company no longer counts commissions from Markel as separate agency revenue, reported total revenue fell 9.5% to $354.2 million, but adding back the $137.9 million of eliminated commission puts underlying revenue up 25.7% by our math.
Nine-month operating cash flow rose 47.5% to $280.1 million, lifting unrestricted cash to $460.8 million because the company now collects all customer premiums upfront. A quiet hurricane season kept claim costs low, so the extra 20% risk share paid off this quarter. One quiet summer does not remove the weather risk for future years.
What to watch: catastrophe claim losses in the fourth quarter and next year's storm season. A major hurricane or wildfire now hits Hagerty's profit in full up to its reinsurance limit.
🐻 Bear Case
New Policy Additions Slowed After the Spring Surge
Hagerty is moving State Farm's existing collector-car policyholders onto its own platform to reach 3 million policies in force by 2030. Management also signed a partnership with auction house Barrett-Jackson this summer, but it still does not disclose how much growth comes from State Farm transfers versus its own core customers.
The company added 123,321 new insurance policies in the third quarter, up 7.7% from a year ago after growing 90.0% in the second quarter. Net new policies in force totaled 53,605 by our math, down from 57,433 in last year's third quarter, and written premium growth slowed from 19.2% to 15.5%.
Management left its full-year written premium outlook unchanged at $1.385–1.397 billion. By our math, that target leaves fourth-quarter written premium growth at 12.5% at the middle of the range, down from 18.8% in the first half. Because the company hides the split between State Farm conversions and regular sign-ups, investors cannot tell whether core demand is slowing.
What to watch: fourth-quarter new business count and the first 2027 written premium outlook early next year. Another single-digit rise in new policies would show the State Farm conversion wave is already flattening.
Marketplace Revenue Fell Despite Higher Auction Sales
Hagerty runs live and online collector-car auctions, brokers private car sales, and lends money against collector cars through its Marketplace division. Hagerty said the division is delivering "with record sales at Monterey car week and an 83% increase in auction sales so far this year."
Despite a 65.3% jump in third-quarter auction sales to $111.6 million and an 88.1% rise in private sales to $99.9 million, third-quarter Marketplace revenue fell 6.4% from a year ago to $32.2 million. The company said the auction gains were "offset by lower inventory sales" — cars Hagerty buys and resells itself, where the entire sale price counts as revenue.
This cuts against management's framing because booming auction volumes did not translate into top-line growth for the division. When Hagerty sells fewer cars from its own inventory, commission fees on customer cars and interest on a 62.2% larger loan book are not enough to keep segment revenue growing.
What to watch: Marketplace segment profit in the full quarterly filing. It will show whether selling fewer company-owned cars improved the division's profit margin even as revenue shrank.
Risks this quarter didn't answer
Four standing concerns received no new data in the third-quarter release or stockholder letter.
- Policy retention drift: retention held at 88.2%, flat from the second quarter but down from 88.6% a year ago and 89.0% early last year; a break below 88% would weaken the compounding model.
- Enthusiast+ loss ratio: the modern-car insurance product got no mention or claims data; state-level filings or the annual report are needed to test its underwriting.
- Bennetts UK motorcycle acquisition: expected to close in the third quarter for £34 million, but the release only listed $6.4 million of nine-month deal and unit-exchange fees with no closing confirmation; the quarterly filing's subsequent-events note will settle it.
- Partner concentration and preferred stock: reliance on Markel and State Farm and the $86.8 million Series A preferred stock overhang ahead of June 2028 remain unchanged.
👓 Other Themes
Chief Executive Warns Top-End Car Prices May Cool
Industry-wide auction sales at Monterey Car Week hit a record $756 million in August, with modern supercars making up nearly half the total. After sharp price gains at the top of the collector market this year, Hagerty wrote that "I would not be surprised to see them take a breather at some point." Slower car-value appreciation would trim both auction commissions and the insured value of policies.
💲 Other KPIs
Unearned premiums — cash collected for insurance coverage that will be recognized over the rest of the policy year — rose 46.3% from a year ago and $44.6 million from last quarter. The balance jumped this year because Hagerty Re raised its share of US policies from 80% to 100%, locking in higher earned premium for coming quarters.
The collector-car loan book grew 62.2% from a year ago, up from $146.6 million at the end of June and $103.3 million at year-end. Hagerty funds this lending with $103 million of debt secured by the cars, which makes up more than two-fifths of the company's $246.4 million total debt.
Total diluted shares assuming all partnership units and preferred stock convert into common stock stayed almost unchanged, rising 0.04% from a year ago. Public Class A shares rose from 100.7 million at year-end to 120.6 million as private unit holders exchanged their holdings for tradable shares.
🔮 Guidance
Unchanged. The plan calls for 16% to 17% full-year growth in total written premium. By our math, that leaves fourth-quarter growth at 12.5% at the middle of the range, down from 15.5% in the third quarter and 18.8% in the first half as seasonal driving slows for winter.
Raised. Management lifted the middle of the range by $14.5 million, pointing to a 7.5% full-year decline caused by eliminating Markel commission revenue in consolidation. By our math, the outlook implies fourth-quarter revenue will fall 8.7% from a year ago, compared with a 9.5% drop in the third quarter. It is the second straight raise: +$42.5M in Q2, +$14.5M in Q3.
Raised. The middle of the range rose by $30 million, even after absorbing $199 million of one-year accounting charges from the Markel transition. By our math, the target implies $22.4 million of fourth-quarter net income at the middle of the range, down 21.4% from a year ago as the final $10 million transition charge runs off. Second raise: +$70M in Q2, +$30M in Q3.
Raised. The insurer lifted the middle of its range for profit before interest, taxes, depreciation, and one-offs by $35 million, to 30.9% full-year growth. By our math, that leaves $53.3 million for the fourth quarter at the middle of the range, down 6.0% from a year ago because last year's fourth quarter benefited from a $21 million claim reserve release. Second raise: +$33.5M in Q2, +$35.0M in Q3.
❓ Key Questions
Why did new policy additions slow to 8% growth?
New insurance business count grew 7.7% from a year ago in the third quarter after jumping 90.0% in the second quarter. Management still does not split new policies between State Farm transfers and core sign-ups, leaving the cause of the slowdown unclear.
What is the claim rate without reserve releases?
Excluding the $26 million cut to current-year loss estimates, the third-quarter loss ratio was 42.4% by our math, slightly above last year's 42.0%. Investors need to know what initial loss rate Hagerty booked in the first half that proved $26 million too high.
Did the Bennetts UK motorcycle acquisition close on schedule?
Management previously expected the £34 million purchase of UK motorcycle broker Bennetts to close in the third quarter. The release mentions professional fees for the deal but does not state whether regulatory approval arrived or when its policies join the count.
How is the Enthusiast+ modern-car product performing?
Hagerty aims to insure millions of post-1980 vehicles through its Enthusiast+ product, which expanded to four states in July. Management gave no policy count, average premium, or loss ratio for the product this quarter.