Hagerty Q3 2026 Earnings: Adjusted EBITDA Rises Despite Lower Revenue

Hagerty (NYSE: HGTY) reported Q3 2026 total revenue of $354.2 million, down 9.5% year over year, and diluted EPS of $0.08, compared with $0.11 a year earlier, for the quarter ended September 30, 2026. Written premium increased 15.5% to $386.0 million and adjusted EBITDA rose 63.5% to $97.1 million, while the Markel Fronting Arrangement continued to reduce reported commission revenue and generate transitional costs.

Core Financial Results

The decline in consolidated revenue primarily reflected the accounting impact of the Markel Fronting Arrangement. Earned premium increased 41.7% as Hagerty Re’s U.S. quota share rose from 80% to 100% and the underlying insurance business expanded, but consolidated commission and fee revenue fell 84.3% because commissions between Hagerty’s reporting units are now eliminated.

Profit measures moved in different directions. Income before taxes increased to $41.4 million and adjusted EBITDA rose 63.5%, but GAAP net income declined because Q3 2025 included a $32.8 million tax benefit, compared with a $5.1 million tax expense this quarter. Q3 2026 results also included $35.8 million of pre-tax Markel transition costs, which are excluded from adjusted EBITDA.

Business and Segment Performance

Insurance Growth and Underwriting Results

Policies in force increased 18.1% to 1.91 million, supporting the 15.5% increase in written premium. Retention remained high at 88.2%, although it slipped from 88.6% a year earlier. Hagerty Drivers Club paid membership reached 977,456, up 6.2%.

Hagerty Re’s loss ratio improved to 32.6% from 42.0%, while its combined ratio declined to 79.7% from 89.6%. The quarter benefited from a $26 million reduction in estimated loss and loss-adjustment expenses for the current accident year, meaning part of the underwriting improvement came from a favorable revision to loss estimates rather than premium growth alone.

Marketplace and Membership

Marketplace revenue declined 6.4% to $32.2 million even though aggregate auction sales increased 65.3% to $111.6 million and private sales rose 88.1% to $99.9 million. For the first nine months of 2026, management said higher auction sales were offset at the revenue level by lower inventory sales.

Membership and other revenue increased 1.9% to $21.9 million. Net investment income rose 25.3% to $12.7 million.

Profitability, Cash Flow, and Balance Sheet

Total expenses declined 17.3% to $312.8 million. Within the insurance segment, underwriting and other insurance expenses plus selling, general and administrative expenses fell 13% to $121 million. Hagerty attributed the reduction mainly to the deferral of acquisition and renewal costs under the Markel arrangement; in 2025, comparable costs were expensed as incurred. Changes in expense classification also limit direct year-over-year comparisons between individual expense lines.

Net income attributable to Class A common stockholders fell 55.7% to $8.4 million after accounting for non-controlling interests and preferred stock accretion. On an adjusted basis, net income increased 6.2% to $35.6 million and adjusted diluted EPS rose to $0.10.

For the first nine months of 2026, operating cash flow increased 48% to $280.1 million. Hagerty ended September with $460.8 million of unrestricted cash and $246.4 million of total debt. Approximately $103 million of that debt represented back leverage for Broad Arrow Capital’s collector-car loan portfolio.

The Markel Arrangement Depressed Reported Revenue but Expanded Retained Economics

The Markel Fronting Arrangement is the central factor behind the divergence between Hagerty’s reported revenue and its underlying insurance metrics. Hagerty now retains 100% of the premium and risk for the relevant business, compared with an 80% quota share previously. That change helped earned premium rise 41.7% and increased the economics retained by Hagerty Re.

At the same time, the MGA+ reporting unit generated $159.5 million of commission and fee revenue, up 16% on a standalone basis, but $137.9 million was eliminated in consolidation. Consolidated commission and fee revenue therefore fell to $21.6 million from $137.1 million. The revenue decline does not by itself indicate a comparable decline in business activity.

The arrangement also produced $35.8 million of Q3 transitional costs related to deferred ceding commissions on policies written before January 1, 2026. These costs are expected to run off by year-end, with approximately $10 million expected in Q4, down from $89 million in Q1, $64 million in Q2, and $36 million in Q3.

2026 Guidance

Hagerty raised its full-year revenue, net income, and adjusted EBITDA ranges while maintaining its written premium outlook. The net income forecast still includes approximately $199 million of pre-tax Markel transitional costs.

The written premium range implies growth of 16% to 17%, while the revenue outlook still represents a 7% to 8% decline because of the elimination of Markel-related commission revenue.

Recent Insider Transactions

Recent transaction records include one reported director purchase, several sales, and stock awards. Stock awards are compensation grants rather than open-market purchases, and the transactions do not by themselves establish insiders’ views on Hagerty’s outlook.

Risks Investors Need to Watch

• Greater underwriting exposure: The move to a 100% quota share allows Hagerty to retain more premium economics, but it also increases exposure to claim severity, catastrophe losses, and underwriting volatility.
• Benefit from revised loss estimates: The $26 million reduction in current-year estimated losses materially helped Q3 loss and combined ratios. Future quarters may not receive a comparable benefit.
• Transition costs and limited comparability: The Markel arrangement changed revenue eliminations, expense classifications, and acquisition-cost timing, making individual line-item comparisons with 2025 less straightforward.
• Mixed non-insurance performance: Marketplace revenue declined despite substantially higher auction and private sales volumes, while policy retention edged lower by 0.4 percentage points.

Summary

Hagerty’s Q3 2026 results showed expanding insurance volume, lower underwriting ratios, and higher adjusted EBITDA despite a decline in reported revenue. The Markel arrangement explains much of that divergence by increasing retained insurance economics while eliminating commission revenue and creating temporary costs. The main issues to monitor are underwriting performance without favorable loss revisions, the completion of transition-cost amortization, and whether higher marketplace activity translates into revenue growth.