Hagerty Q2 2026 Earnings: Premium Growth Was Masked by the Markel Transition

Hagerty (NYSE: HGTY) reported Q2 2026 revenue of $354.8 million, down 6.5% year over year, while diluted EPS was $(0.02), compared with $0.09 a year earlier. Underlying insurance activity moved in the opposite direction: written premium increased 19.2% to $424.5 million, earned premium rose 41.7% to $252.0 million, and adjusted EBITDA increased 2.6% to $74.5 million. The gap primarily reflected the accounting effects and transitional costs associated with the new Markel fronting arrangement.

Core Financial Results

The reported revenue decline did not reflect weakness across all business lines. Consolidated commission and fee revenue fell $119.6 million because Hagerty now eliminates revenue generated between its MGA and reinsurance operations, more than offsetting higher earned premium, marketplace revenue, and investment income.

Profitability was also affected by $64.1 million of pretax Markel transitional costs. Income before taxes declined to $2.2 million, while a $5.8 million income tax benefit lifted consolidated net income to $8.0 million.

Business and Segment Performance

Insurance activity continued to expand

Policies in force increased 19.0% to 1.86 million, while vehicles in force rose 13.8% to 3.03 million. New insurance business count climbed 90.0% to 166,951. Retention edged down to 88.2% from 88.7%, indicating that policy growth was driven more by new business than by an improvement in retention.

Hagerty Re’s Q2 loss ratio rose slightly to 42.7% from 42.3%, while its combined ratio remained unchanged at 89.6%. The increase in earned premium reflected both the shift to a 100% U.S. quota share under the Markel arrangement and growth in premiums generated by Hagerty’s MGA subsidiaries.

The MGA+ reporting unit recorded a 17% increase in commission and fee revenue to $167.2 million, supported by organic growth in the Essentia and State Farm books. However, $143.5 million was eliminated in consolidation, leaving reported consolidated commission and fee revenue at $23.7 million, down 83.5%.

Marketplace growth was concentrated in auctions and financing

Marketplace revenue rose 47.5% to $39.7 million, supported by live-auction sales and increased financing revenue. Aggregate auction sales more than doubled to $104.4 million, and net auction sales increased 110.5% to $94.4 million.

The performance was not uniform across marketplace activities. Private sales fell 61.5% to $44.1 million, while Broad Arrow Capital’s average loan portfolio expanded 80.2% to $146.4 million.

Membership and other revenue increased 3.0% to $21.4 million. Hagerty Drivers Club paid membership rose 5.9% to 961,929 members.

The Markel Transition Masked Premium Growth and Reduced GAAP Profit

Effective January 1, 2026, Hagerty moved to a 100% quota share arrangement with Markel, allowing Hagerty Re to retain 100% of the premium and insurance risk associated with the U.S. book. Because Hagerty now controls the Essentia business, commission revenue and related ceding commission expense between Hagerty’s MGA and reinsurance operations are eliminated in the consolidated financial statements.

This accounting change explains why consolidated revenue declined even as written and earned premiums increased. The $143.5 million Q2 commission revenue elimination was substantially larger than the $74.2 million increase in earned premium, producing a lower reported top line despite expanding insurance activity.

The arrangement also generated $64.1 million of Q2 transitional costs from the amortization of deferred ceding commissions on policies written before January 1. Adjusted EBITDA excludes these costs and increased modestly, while GAAP income before taxes fell sharply. First-half transitional costs totaled $153.1 million and are expected to decline to approximately $37 million in Q3 and $9 million in Q4 as the remaining 2025 policies expire.

Profitability, Cash Flow, and Balance Sheet

Although consolidated net income was $8.0 million, $7.8 million was attributable to noncontrolling interests and another $1.9 million reflected accretion on Series A convertible preferred stock. That left a $1.7 million loss attributable to Class A shareholders, explaining why diluted EPS was negative.

Expense comparisons were also affected by the adoption of insurance-company reporting standards and the reclassification of certain MGA operating costs. On a combined basis, underwriting and other insurance expenses plus selling, general, and administrative expenses within the insurance segment decreased 11% to $119 million. This decline partly reflected the deferral of eligible policy-acquisition costs that were expensed immediately in the prior year.

Cash flow data were provided for the first half rather than Q2 alone. Operating cash flow increased 91% to $186.2 million despite a $4.7 million first-half net loss. Cash generation benefited from balance-sheet movements including reductions in receivables and deferred acquisition costs and an increase in unearned premiums, partly offset by lower amounts due to insurers and lower ceding commissions payable.

At June 30, Hagerty held $298.3 million of unrestricted cash and $216.0 million of total debt. Approximately $88 million of that debt represented back leverage supporting Broad Arrow Capital’s collector-car loan portfolio.

2026 Guidance

Hagerty raised all four major components of its 2026 outlook relative to the guidance issued on May 6. The largest change was in GAAP net income, which moved from an expected loss to expected positive earnings, even though the forecast still includes approximately $199 million of pretax Markel transitional costs.

The revised written-premium range represents expected growth of 16% to 17%. Reported revenue is still expected to decline 8% to 9% because Markel-related commission revenue is eliminated in consolidation.

Management Commentary

CEO McKeel Hagerty attributed the increased outlook to first-half written-premium growth, adjusted EBITDA expansion, and the economics of retaining the full U.S. insurance book. Management also highlighted that the company surpassed three million insured vehicles.

Broad Arrow generated 17% first-half revenue growth and a 91% auction sell-through rate. Hagerty also expects to add Bennetts, the United Kingdom’s second-largest specialty motorcycle insurance broker, during Q3, which management said would triple the company’s scale in that market.

Recent Insider Transactions

The supplied insider data show both purchases and sales before the earnings release. These transactions are presented without drawing conclusions about insiders’ views of Hagerty’s prospects.

Risks Investors Should Monitor

• Greater underwriting exposure: The 100% quota share arrangement gives Hagerty more premium economics but also increases its exposure to claims volatility and catastrophe losses. The Q2 loss ratio increased 0.4 percentage points, although the combined ratio was unchanged.
• Transition-related earnings complexity: Markel costs and intercompany eliminations reduce comparability with prior periods. Investors will need to monitor whether premium growth translates into stronger GAAP earnings as the transitional costs run off.
• Slightly lower retention: Policies in force grew rapidly, but retention declined from 88.7% to 88.2%. Continued policy growth may therefore depend on maintaining the current pace of new customer additions.
• Marketplace and credit exposure: Auction activity expanded, but private sales contracted sharply. Broad Arrow Capital’s larger loan portfolio and related back-leverage debt also increase the importance of credit performance.
• Bennetts execution: The expected acquisition would materially expand Hagerty’s U.K. presence, but completion, integration, and anticipated benefits remain execution points to monitor.

Conclusion

Hagerty’s Q2 results showed expanding insurance volume and marketplace revenue beneath a lower reported top line. The Markel transition reduced commission revenue and burdened GAAP profit with temporary costs, while adjusted EBITDA recorded modest growth and first-half operating cash flow improved. The revised 2026 outlook signals greater management confidence, with the main follow-up questions centered on underwriting performance, the conversion of premium growth into GAAP earnings, and the completion of the Bennetts acquisition.