Hagerty Reports Full Year 2025 Results; Provides 2026 Growth Outlook

Full year 2025 Highlights

TRAVERSE CITY, Mich., Feb. 26, 2026 /PRNewswire/ – Hagerty, Inc. (NYSE: HGTY), an automotive enthusiast brand and leading specialty vehicle insurance provider, announced today financial results for the three and twelve months ended December 31, 2025.

"2025 was a standout year for Hagerty, defined by accelerating momentum and record new business count. Top-line gains of 17% were fueled by written premium growth of 14%, and we efficiently converted this revenue into a 91% surge in net income. We also reinvested significantly in our business, including our technology transformation, the launch of Enthusiast+, the roll-out of State Farm to 27 states, as well as our Marketplace expansion into Europe," said McKeel Hagerty, Chief Executive Officer and Chairman of Hagerty.

"In 2026, we will continue to invest back into our member-centric model to drive durable, compounding growth, with written premiums expected to increase 15% to 16%. 2026 also marks a major milestone for Hagerty as we move to a 100% quota share with our long-term partner, Markel. We believe this evolution, combined with our technology-led efficiency initiatives, positions us to generate even higher rates of underlying profit growth and cash flow for our shareholders over the coming years," added Mr. Hagerty.

FOURTH QUARTER AND FULL YEAR 2025 FINANCIAL HIGHLIGHTS

The definitions and reconciliations of non-GAAP financial measures are provided under the heading Key Performance Indicators and Certain Non-GAAP Financial Measures at the end of this press release.

2026 OUTLOOK - SUSTAINED COMPOUNDING GROWTH

We believe 2026 is on track to be another great year for Hagerty as our team executes on our long-term plan to deliver compounding premium growth through investing in our long-term competitive advantages with a member-centric approach. In 2026, we will move to a 100% quota share arrangement with our long-term partner, Markel, where we retain 100% of the premium and risk from our high quality, low volatility underwriting. We also remain focused on delivering this growth more efficiently through the benefits of scale, continued cost discipline, and investments in our technology platform.

2026 Outlook ($)

2026 Outlook (%)

in thousands

2025 Results

Low End

High End

Low End

High End

Total Written Premium

$1,193,548

$1,373,000

$1,385,000

15 %

16 %

Total Revenue 1

$1,456,389

$1,280,000

$1,300,000

(12) %

(11) %

Net Income (Loss) 2, 3

$149,225

$(51,000)

$(41,000)

N/M

Adjusted EBITDA 4

$236,791

$236,000

$247,000

— %

4 %

Revenue guidance reflects the accounting impact of the Markel Fronting Arrangement. Beginning in 2026, we now control the Markel book of business with the benefit of our MGA services received by Hagerty Re and not Markel. As a result commission revenue and the associated ceding commission expense for policies issued through the Markel Fronting Arrangement will be eliminated in consolidation. Although we expect the arrangement to result in increased profitability (as reflected in Adjusted EBITDA), reported commission revenue and ceding commission expense will be significantly lower than prior periods, affecting period-to-period comparability. 2025 commission revenue associated with our alliance agreement with Markel was $437 million and ceding commission expense related to the Company's reinsurance quota share agreement with Markel was $344 million in 2025.

The projected Net Loss includes approximately $190 million of transitional, non-cash costs related to the Markel Fronting Arrangement representing deferred ceding commissions paid to Markel in 2025 for policies written prior to January 1, 2026, which will be fully amortized ratably over the remaining term of those policies throughout 2026. This amortization will decline from approximately $90 million in Q1 2026 to approximately $10 million in Q4 2026 as 2025 policies expire. Excluding these transitional costs, we expect 2026 to reflect underlying profitability improvement.

Full year 2025 Net Income includes (i) the benefit from the $42 million release of a portion of our valuation allowance, partially offset by a $32 million loss related to the change in value of the TRA liability; and (ii) a $21 million reduction in reserves in the fourth quarter, primarily related to favorable development for the 2024 accident year and improvement in current accident year experience.

See Non-GAAP Financial Measures below for additional information regarding this non-GAAP financial measure.

N/M = Not meaningful

Conference Call Details

Hagerty will hold a conference call to discuss the financial results on Thursday, February 26, 2026 10:00 am Eastern Time. A webcast of the conference call, including its Investor Presentation highlighting full year 2025 financial results, will be available on Hagerty's investor relations website at investor.hagerty.com. The dial-in for the conference call is (877) 423-9813 (toll-free) or (201) 689-8573 (international). Please dial the number 10 minutes prior to the scheduled start time.

A webcast replay of the call will be available at investor.hagerty.com following the call.

Forward-Looking Statements

This press release contains statements that constitute "forward-looking statements" within the meaning of the federal securities laws. All statements we provide, other than statements of historical fact, are forward-looking statements, including those regarding Hagerty's future operating results and financial position, Hagerty's business strategy and plans, products, services, and technology implementations, market conditions, growth and trends, expansion plans and opportunities, and Hagerty's objectives for future operations. The words "anticipate," "believe," "envision," "estimate," "expect," "intend," "may," "plan," "predict," "project," "target," "potential," "will," "would," "could," "should," "continue," "ongoing," "contemplate," and similar expressions, and the negatives of these expressions, are intended to identify forward-looking statements.

Hagerty has based these forward-looking statements largely on current expectations about future events, which may not materialize. Actual results could differ materially and adversely from those anticipated or implied in forward-looking statements. These factors include, among other things, Hagerty's ability to: (i) compete effectively within Hagerty's industry and attract and retain insurance policyholders and paid Hagerty Drivers Club ("HDC") subscribers; (ii) maintain key strategic relationships with Hagerty's insurance distribution and underwriting carrier partners; (iii) prevent, monitor, and detect fraudulent activity; (iv) manage risks associated with disruptions, interruptions, outages, or other issues with Hagerty's technology platforms or use of third-party services; (v) accelerate the adoption of Hagerty's membership and marketplace products and services, as well as any new insurance programs and products offered; (vi) successfully implement the fronting arrangement consummated with Markel and realize the anticipated benefits while also managing the increased exposure to underwriting volatility, catastrophes, reinsurance counterparty risk, and legal, compliance, and regulatory risks resulting from the shift to Hagerty Re assuming 100% of the risk for policies written through this arrangement; (vii) underwrite and price new products, including Enthusiast+, consistent with expected loss ratios and risk tolerances; (viii) execute Broad Arrow's private sale, auction, and financing strategies; (ix) manage the cyclical nature of the insurance business and broader macroeconomic conditions, including inflation, interest rates, and potential recessionary pressures; (x) achieve Hagerty's investment objectives and avoid losses in the investment portfolio; (xi) address unexpected increases in the frequency or severity of claims, including catastrophe losses; and (xii) comply with numerous laws and regulations applicable to Hagerty's business, including without limitation state, federal, and foreign laws relating to insurance and rate increases, privacy and cybersecurity, marketing and advertising, digital services, accounting matters, tax, anti-money laundering, and economic sanctions.

The forward-looking statements in this release represent Hagerty's views as of the date hereof. You should not rely on forward-looking statements as predictions of future events. We operate in a very competitive and rapidly changing environment and new risks emerge from time to time. This presentation should be read in conjunction with the information included in filings with the SEC and press releases. Understanding the information contained in these filings is important in order to fully understand Hagerty's reported financial results and business outlook for future periods. In addition, this presentation contains certain "non-GAAP financial measures". The non-GAAP measures are presented for supplemental informational purposes only. These financial measures are not recognized measures under GAAP and should not be considered in isolation or as a substitute for, or superior to, the financial information prepared and presented in accordance with GAAP. Reconciliations to the most directly comparable financial measure calculated and presented in accordance with GAAP are provided in the appendix to this presentation.

About Hagerty, Inc. (NYSE: HGTY)

Hagerty is a company built by drivers for drivers, protecting 2.8 million vehicles in the United States, Canada and the UK. We make it easier and more enjoyable for car enthusiasts to drive and celebrate the machines they love through innovative vehicle insurance products, live and digital auctions, engaging media and events, and the Hagerty Drivers Club, the world's largest membership community of car lovers.

For more information, please visit www.hagerty.com or www.newsroom.hagerty.com. Never Stop Driving®.

Category: Financial

Source: Hagerty

Hagerty, Inc.

Consolidated Statements of Operations

Three months ended December 31,

2025

2024

$ Change

% Change

REVENUES:

in thousands (except percentages and per share amounts)

Commission and fee revenue

$ 105,699

$ 89,423

$ 16,276

18.2 %

Earned premium, net

192,547

168,407

24,140

14.3 %

Marketplace revenue

28,871

16,048

12,823

79.9 %

Membership and other revenue

19,274

17,853

1,421

8.0 %

Net investment income

10,022

9,329

693

7.4 %

Net investment gains

913

412

501

121.6 %

Total revenue

357,326

301,472

55,854

18.5 %

EXPENSES:

Losses and loss adjustment expenses

60,425

72,078

(11,653)

(16.2) %

Ceding commissions, net

89,405

79,842

9,563

12.0 %

Sales expense

58,524

43,732

14,792

33.8 %

Salaries and benefits

72,312

60,462

11,850

19.6 %

General and administrative expenses

25,313

20,432

4,881

23.9 %

Depreciation and amortization

9,790

9,147

643

7.0 %

Interest expense and other, net

1,857

1,878

(21)

(1.1) %

Total expenses

317,626

287,571

30,055

10.5 %

INCOME BEFORE TAXES

39,700

13,901

25,799

185.6 %

Income tax expense

(11,141)

(5,461)

(5,680)

(104.0) %

NET INCOME

28,559

8,440

20,119

238.4 %

Net income attributable to non-controlling interest

(19,733)

(5,335)

14,398

269.9 %

Accretion of Series A Convertible Preferred Stock

(1,902)

(1,875)

1.4 %

NET INCOME ATTRIBUTABLE TO CLASS A

COMMON STOCKHOLDERS

$ 6,924

$ 1,230

$ 5,694

462.9 %

Earnings per share of Class A Common Stock:

Basic

$ 0.06

$ 0.01

Diluted

$ 0.06

$ 0.01

Weighted average shares of Class A Common Stock outstanding:

Basic

100,570

90,032

Diluted

102,321

90,032

Hagerty, Inc.

Consolidated Statements of Operations

Year ended December 31,

2025

2024

$ Change

% Change

REVENUES:

in thousands (except percentages and per share amounts)

Commission and fee revenue

$ 486,376

$ 423,240

$ 63,136

14.9 %

Earned premium, net

726,726

643,324

83,402

13.0 %

Marketplace revenue

119,199

54,549

64,650

118.5 %

Membership and other revenue

82,376

78,925

3,451

4.4 %

Net investment income

38,648

39,249

(601)

(1.5) %

Net investment gains

3,064

2,223

841

37.8 %

Total revenue

1,456,389

1,241,510

214,879

17.3 %

EXPENSES:

Losses and loss adjustment expenses 1

285,394

298,593

(13,199)

(4.4) %

Ceding commissions, net

337,087

301,719

35,368

11.7 %

Sales expense

258,202

190,523

67,679

35.5 %

Salaries and benefits

263,587

221,463

42,124

19.0 %

General and administrative expenses

94,517

82,504

12,013

14.6 %

Depreciation and amortization

37,524

38,905

(1,381)

(3.5) %

Gain related to divestiture

—

(87)

N/M

Loss related to warrant liabilities, net

—

8,544

(8,544)

N/M

Interest expense and other, net 2

40,896

5,664

35,232

N/M

Total expenses

1,317,207

1,147,828

169,379

14.8 %

INCOME BEFORE TAXES

139,182

93,682

45,500

48.6 %

Income tax benefit (expense) 3

10,043

(15,379)

25,422

165.3 %

NET INCOME

149,225

78,303

70,922

90.6 %

Net income attributable to non-controlling interest

(100,207)

(61,286)

38,921

63.5 %

Accretion of Series A Convertible Preferred Stock

(7,555)

(7,427)

128

1.7 %

NET INCOME ATTRIBUTABLE TO CLASS A

COMMON STOCKHOLDERS

$ 41,463

$ 9,590

$ 31,873

332.4 %

Earnings per share of Class A Common Stock:

Basic

$ 0.41

$ 0.10

Diluted

$ 0.37

$ 0.10

Weighted average shares of Class A Common Stock outstanding:

Basic

94,404

87,529

Diluted

346,973

88,504

N/M = Not meaningful

Includes a $21 million reduction in reserves, primarily related to favorable development for the 2024 accident year and improvement in current accident year experience.

Includes a $32 million loss related to changes in the value of the TRA liability.

Includes $42 million benefit related to the release of a portion of the valuation allowance.

Hagerty, Inc.

Consolidated Balance Sheets

December 31,

2025

2024

ASSETS

in thousands (except share amounts)

Fixed maturity securities available-for-sale, at fair value (amortized cost: $687,813 in 2025, $578,669 in 2024)

$ 696,271

$ 577,688

Equity securities, at fair value

34,871

11,839

Total investments

731,142

589,527

Cash and cash equivalents

160,177

104,784

Restricted cash and cash equivalents

138,823

128,061

Accounts receivable

96,205

84,763

Commissions receivable

28,904

20,430

Premiums receivable

180,529

153,748

Deferred acquisition costs, net

179,224

156,466

Reinsurance recoverables

15,296

11,927

Prepaid reinsurance premiums

21,950

18,521

Notes receivable

113,887

56,972

Intangible assets, net

88,915

90,107

Goodwill

114,164

114,123

Deferred tax assets

43,011

—

Other assets

181,749

179,909

TOTAL ASSETS

$ 2,093,976

$ 1,709,338

LIABILITIES, TEMPORARY EQUITY AND STOCKHOLDERS' EQUITY

Accounts payable and accrued expenses

$ 111,947

$ 58,892

Advance premiums and due to insurers

123,217

108,352

Losses payable

95,353

98,386

Reserves for unpaid losses and loss adjustment expenses

168,851

168,492

Unearned premiums

412,058

357,539

Ceding commissions payable

86,165

77,389

Debt, net

177,907

105,760

Contract liabilities

46,450

47,239

Deferred tax liability

23,489

18,065

Tax receivable agreement liability

39,829

2,180

Other liabilities

61,684

58,875

TOTAL LIABILITIES

1,346,950

1,101,169

Commitments and Contingencies

—

TEMPORARY EQUITY

Preferred stock, $0.0001 par value (20,000,000 shares authorized, 8,483,561 Series A Convertible

Preferred Stock issued and outstanding as of December 31, 2025 and December 31, 2024) 1

86,618

84,663

STOCKHOLDERS' EQUITY

Class A Common Stock, $0.0001 par value (500,000,000 shares authorized, 100,706,893 and

90,032,391 issued and outstanding as of December 31, 2025 and December 31, 2024, respectively)

Class V Common Stock, $0.0001 par value (300,000,000 authorized, 241,552,156 and 251,033,906

shares issued and outstanding as of December 31, 2025 and December 31, 2024, respectively)

Additional paid-in capital

623,013

603,780

Accumulated earnings (deficit)

(402,960)

(451,978)

Accumulated other comprehensive income (loss)

1,229

(1,514)

Total stockholders' equity

221,316

150,322

Non-controlling interest

439,092

373,184

Total equity

660,408

523,506

TOTAL LIABILITIES, TEMPORARY EQUITY AND STOCKHOLDERS' EQUITY

$ 2,093,976

$ 1,709,338

The Series A Convertible Preferred Stock is recorded within Temporary Equity because it has equity conversion and cash redemption features.

Hagerty, Inc.

Consolidated Statements of Cash Flows

Year ended December 31,

2025

2024

OPERATING ACTIVITIES:

in thousands

Net income

$ 149,225

$ 78,303

Adjustments to reconcile net income to net cash from operating activities:

Loss on disposals of equipment, software, and other assets

1,912

500

Loss related to warrant liabilities, net

—

8,544

Change in TRA Liability

32,235

1,602

Depreciation and amortization

37,524

38,905

Provision for deferred taxes

(34,503)

2,929

Share-based compensation expense

18,908

17,357

Non-cash lease expense

8,911

8,053

Net investment gains

(3,064)

(2,223)

(Accretion) amortization of discount and premium, net

(4,146)

(3,386)

Other

1,297

3,698

Changes in assets and liabilities:

Accounts, commissions, and premiums receivable

(62,595)

26,498

Deferred acquisition costs, net

(22,758)

(14,829)

Reinsurance recoverables

(3,369)

(9,144)

Prepaid reinsurance premiums

(3,429)

(8,047)

Advance premiums and due to insurers

14,175

8,418

Losses payable

(3,033)

36,385

Reserves for unpaid losses and loss adjustment expenses

359

31,985

Unearned premiums

54,519

40,264

Ceding commissions payable

8,776

(31,350)

Other assets and liabilities, net

28,042

(57,438)

Net Cash Provided by Operating Activities

218,986

177,024

INVESTING ACTIVITIES:

Capital expenditures

(24,535)

(21,344)

Acquisitions, net of cash acquired, and other investments

(1,619)

(25,120)

Issuance of notes receivable

(74,714)

(65,770)

Collection of notes receivable

37,733

59,788

Purchases of fixed maturity securities

(333,050)

(669,452)

Purchases of equity securities

(21,890)

(10,861)

Proceeds from maturities and sales of fixed maturity securities

229,899

113,216

Other investing activities

2,979

979

Net Cash Used in Investing Activities

(185,197)

(618,564)

FINANCING ACTIVITIES:

Repayments of debt

(187,881)

(90,775)

Proceeds from debt, net of issuance costs

257,191

61,972

Distributions paid to non-controlling interest unit holders

(30,257)

(6,683)

Payment of Series A Convertible Preferred Stock dividends

(5,600)

Funding of TRA Liability payments

(223)

—

Funding of employee tax obligations upon vesting of share-based payments

(3,854)

(5,836)

Other financing activities

552

—

Net Cash Provided by (Used in) Financing Activities

29,928

(46,922)

Effect of exchange rate changes on cash and cash equivalents and restricted cash and cash equivalents

2,438

(2,969)

Change in cash and cash equivalents and restricted cash and cash equivalents

66,155

(491,431)

Beginning cash and cash equivalents and restricted cash and cash equivalents

232,845

724,276

Ending cash and cash equivalents and restricted cash and cash equivalents

$ 299,000

$ 232,845

Key Performance Indicators and Certain Non-GAAP Financial Measures

Key Performance Indicators

The tables below present a summary of our Key Performance Indicators, which include important operational metrics, as well as certain financial measures prepared in accordance with accounting principles generally accepted in the United States of America ("GAAP") and non-GAAP financial measures. We use these Key Performance Indicators to evaluate our business, measure our performance, identify trends against planned initiatives, prepare financial projections, and make strategic decisions. We believe these Key Performance Indicators are useful in evaluating our performance when read together with our Consolidated Financial Statements prepared in accordance with GAAP.

Year ended December 31,

2025

2024

Change

GAAP Financial Measures

dollars in thousands (except per share amounts)

Total Revenue 1

$ 1,456,389

$ 1,241,510

$ 214,879

17.3 %

Income before taxes

$ 139,182

$ 93,682

$ 45,500

48.6 %

Net Income

$ 149,225

$ 78,303

$ 70,922

90.6 %

Basic Earnings Per Share

$ 0.41

$ 0.10

$ 0.31

N/M

Diluted Earnings Per Share

$ 0.37

$ 0.10

$ 0.27

N/M

Non-GAAP Financial Measures

Adjusted EBITDA

$ 236,791

$ 161,662

$ 75,129

46.5 %

Adjusted Net Income

$ 132,577

$ 76,204

$ 56,373

74.0 %

Adjusted Diluted EPS

$ 0.37

$ 0.21

$ 0.16

76.2 %

Insurance Operational Metrics

Total Written Premium

$ 1,193,548

$ 1,044,492

$ 149,056

14.3 %

Hagerty Re Loss Ratio

39.3 %

46.4 %

(7.1) %

N/M

Hagerty Re Combined Ratio

86.6 %

94.1 %

(7.5) %

N/M

New Business Count — Insurance

371,203

278,556

92,647

33.3 %

Marketplace Operational Metrics

Auction sales:

Aggregate Auction Sales

$ 278,694

$ 178,199

$ 100,495

56.4 %

Net Auction Sales

$ 252,363

$ 163,312

$ 89,051

54.5 %

Private Sales

$ 286,763

$ 77,281

$ 209,482

271.1 %

BAC Average Loan Portfolio

$ 85,468

$ 65,045

$ 20,423

31.4 %

N/M = Not meaningful

Total Revenue for 2024 has been recast to include Net investment income and Net investment gains as components of revenue in accordance with the Article 7 reporting standards adopted in 2025. Total revenue as previously presented in accordance with Article 5 was $1,200 million for the year ended December 31, 2024.

December 31,

2025

2024

Change

Insurance Operational Metrics

Policies in Force

1,684,935

1,506,451

178,484

11.8 %

Policies in Force Retention

88.7 %

89.0 %

(0.3) %

N/M

Vehicles in Force

2,819,179

2,576,700

242,479

9.4 %

HDC Paid Member Count

929,895

875,822

54,073

6.2 %

Marketplace Operational Metrics

BAC Loan Portfolio Balance

$ 103,338

$ 56,972

$ 46,366

81.4 %

N/M = Not meaningful

Non-GAAP Financial Measures

Adjusted EBITDA

We define EBITDA as consolidated Net income, excluding Interest expense and other, net, Income tax expense (benefit), and Depreciation and amortization. We define Adjusted EBITDA as EBITDA, further adjusted to (i) exclude net investment gains and losses; (ii) deduct interest expense related to the State Farm Term Loan; (iii) exclude net gains and losses related to our warrant liabilities prior to the Warrant Exchange; (iv) exclude share-based compensation expense; and when applicable, exclude (v) restructuring, impairment and related charges; (vi) gains, losses and impairments related to divestitures; and (vii) certain other unusual items.

How This Measures is Useful

When used in conjunction with GAAP financial measures, Adjusted EBITDA is a supplemental measure of operating performance that we believe is a useful measure to evaluate our performance period over period and relative to our competitors and peers. Management uses Adjusted EBITDA to evaluate our operating performance on a consistent basis, as it removes the impact of items not directly resulting from our core operations. We believe the presentation of Adjusted EBITDA provides securities analysts, investors, and other interested parties with a supplemental view of our operating performance that enhances their understanding of our business and our results operations, as well as assisting investors in evaluating how well we are executing our strategic initiatives.

Limitations of the Usefulness of This Measure

Adjusted EBITDA may differ from similarly titled measures used by other companies due to different methods of calculation, which could reduce the usefulness of this non-GAAP financial measure when comparing our performance to that of other companies. Presentation of Adjusted EBITDA is not intended to be considered in isolation or a substitute for, or superior to, the financial information prepared in accordance with GAAP. A reconciliation of Adjusted EBITDA to Net income, the most directly comparable GAAP measure, is presented below.

Three months ended

December 31,

Year ended

December 31,

2025

2024

2025

2024

in thousands

Net income

$ 28,559

$ 8,440

$ 149,225

$ 78,303

Interest expense and other, net 1, 2

1,857

1,878

40,896

5,664

Income tax expense (benefit) 3

11,141

5,461

(10,043)

15,379

Depreciation and amortization

9,790

9,147

37,524

38,905

EBITDA

51,347

24,926

217,602

138,251

Net investment gains

(913)

(412)

(3,064)

(2,223)

Interest expense related to State Farm Term Loan 4

(515)

(2,060)

Loss related to warrant liabilities, net

—

8,544

Share-based compensation expense

4,281

4,339

18,908

17,357

Gain related to divestiture

—

(87)

Other unusual items 5

2,444

344

5,405

1,880

Adjusted EBITDA

$ 56,644

$ 28,682

$ 236,791

$ 161,662

Excludes interest expense related to the BAC Credit Facility, which is recorded within "Sales expense" in the Consolidated Statements of Operations.

Principally includes interest expense and changes in the value of the TRA liability, which totaled $32 million during the year ended December 31, 2025, and $2 million during the year ended December 31, 2024.

Income tax expense (benefit) for the three and twelve months ended December 31, 2025 includes a $42 million benefit related to the release of a portion of the valuation allowance against our deferred tax assets.

Interest expense related to the State Farm Term Loan is charged against Adjusted EBITDA as it is directly attributable to the operations of Hagerty Re.

For the year ended December 31, 2025, other unusual items includes certain legal settlement expenses, professional fees associated with the THG Unit Exchange and related Secondary Offering, and certain material severance expenses. For the year ended December 31, 2024, other unusual items includes professional fees associated with the Warrant Exchange, as well as certain material severance expenses.

As a result of our transition to the Article 7 reporting standards, Net investment income is reported as a component of revenue and is no longer an adjustment in our reconciliation from Net income to Adjusted EBITDA. In addition, interest expense related to the State Farm Term Loan is now deducted from Adjusted EBITDA as it is directly attributable to Hagerty Re, which generates a significant portion of our net investment income. The following table presents a reconciliation of Adjusted EBITDA as presented in prior periods in accordance with Article 5, to the current presentation in accordance with Article 7:

Three months ended

December 31,

Year ended

December 31,

2024

in thousands

Prior presentation of Adjusted EBITDA

$ 19,868

$ 124,473

Net investment income

9,329

39,249

Interest expense related to State Farm Term Loan

(515)

(2,060)

Current presentation of Adjusted EBITDA

$ 28,682

$ 161,662

The following table reconciles Adjusted EBITDA for the year ended December 31, 2026 Outlook to the most directly comparable GAAP measure, which is Net income:

2026 Low

2026 High

in thousands

Net loss 1

$ (51,000)

$ (41,000)

Interest expense and other, net 2

5,000

Income tax expense

33,000

34,000

Depreciation and amortization

40,000

Share-based compensation expense

19,000

Markel Fronting Arrangement transition costs

190,000

Adjusted EBITDA

$ 236,000

$ 247,000

The projected Net Loss includes approximately $190 million of transitional, non-cash costs related to the Markel Fronting Arrangement representing deferred ceding commissions paid to Markel in 2025 for polcies written prior to January 1, 2026, which will be fully amortized ratably over the remaining term of those policies throughout 2026. This amortization will decline from approximately $90 million in the first quarter of 2026 to approximately $10 million in the fourth quarter of 2026 as 2025 policies expire. Excluding these transitional costs, we expect 2026 to reflect underlying profitability improvement

Excludes interest expense related to the BAC Credit Facility, which is recorded within "Sales expense" in the Consolidated Statements of Operations

Adjusted Net Income and Adjusted Diluted EPS

Beginning with this Annual Report, Adjusted Net Income is presented as a non-GAAP financial measure, as we consider it to be an important supplemental measure of our performance and believe it is frequently used by securities analysts, investors, and other interested parties in the evaluation of companies in our industry. In addition, we revised and renamed our non-GAAP measure previously titled "Adjusted EPS" to "Adjusted Diluted EPS". The revised measure uses Adjusted Net Income as the numerator in the calculation and updated the most comparable GAAP measure from Basic EPS to Diluted EPS. We believe that the revised calculation better reflects the potential dilution from these securities and enhances comparability with industry peers.

Adjusted Net Income represents Net income attributable to Class A Common Stockholders, assuming the full exchange of all outstanding THG units and Series A Convertible Preferred Stock for shares of Class A Common Stock, adjusted to exclude (i) net investment gains and losses; (ii) changes in the fair value of warrant liabilities prior to the Warrant Exchange; (iii) changes in the TRA Liability; (iv) gains and losses related to divestitures; and (v) certain other unusual items, each of which we do not believe are directly related to our core operations and may not be indicative of our ongoing performance. Adjusted Diluted EPS is calculated by dividing Adjusted Net Income by the weighted average shares of Class A Common Stock outstanding, assuming the full exchange of all outstanding THG units, Series A Convertible Preferred Stock, and unvested share-based compensation awards. Refer to Note 6 — Fair Value Measurements in Item 8 of Part II of this Annual Report for additional information regarding the Warrant Exchange.

How These Measures Are Useful

When used in conjunction with GAAP financial measures, Adjusted Net Income and Adjusted Diluted EPS are supplemental measures of operating performance that we believe are useful measures to evaluate our performance period over period and relative to our competitors and peers. Management uses Adjusted Net Income and Adjusted Diluted EPS to evaluate our operating performance on a consistent basis to make strategic and operational decisions. We believe these measures provide management and investors with useful information regarding trends in our business that may not otherwise be apparent when relying solely on GAAP measures. By assuming the full exchange of all outstanding THG units and Series A Convertible Preferred Stock, we believe these measures facilitate comparisons with other companies that have different organizational and tax structures, as well as comparisons period over period because it eliminates the effect of any changes in Net income attributable to Class A Common Stockholders driven by increases in Hagerty, Inc.'s ownership in THG, which is unrelated to our operating performance, and excludes items that are unusual or may not be indicative of our ongoing performance.

Limitations of the Usefulness of These Measures

Adjusted Net Income and Adjusted Diluted EPS may differ from similarly titled measures used by other companies due to different methods of calculation. Presentation of Adjusted Net Income and Adjusted Diluted EPS should not be considered alternatives to Net income attributable to Class A Common Stockholders and Diluted EPS, as determined under GAAP. While these measures are useful in evaluating our performance, they assume the full exchange of all outstanding THG units and Series A Convertible Preferred Stock for shares of Class A Common Stock, which has not occurred and may not occur. Further, the adjustments made to arrive at Adjusted Net Income exclude certain expenses and income that may recur in the future. Adjusted Net Income and Adjusted Diluted EPS should be evaluated in conjunction with our GAAP financial results. A reconciliation of Adjusted Net Income to Net income attributable to Class A Common Stockholders, the most directly comparable GAAP measure, and the computation of Adjusted Diluted EPS are presented below.

Three months ended

December 31,

Year ended December 31,

2025

2024

2025

2024

Numerator:

in thousands (except per share amounts)

Net income attributable to Class A Common Stockholders

$ 6,924

$ 1,230

$ 41,463

$ 9,590

Adjustments:

Accretion of Series A Convertible Preferred Stock

1,902

1,875

7,555

7,427

Net income attributable to non-controlling interest

19,733

5,335

100,207

61,286

Net investment gains

(913)

(412)

(3,064)

(2,223)

Loss related to warrant liabilities, net

—

8,544

Change in TRA Liability

(40)

280

32,235

1,602

Gain related to divestiture

—

(87)

Other unusual items 1

2,444

344

5,405

1,880

Tax impact of above adjustments 2

186

2,214

(51,224)

(11,815)

Adjusted Net Income

$ 30,236

$ 10,866

$ 132,577

$ 76,204

Denominator:

Weighted average shares of Class A Common Stock outstanding — Diluted

102,321

90,032

346,973

88,504

Adjustments:

Assumed exchange of non-controlling interest THG units for shares of Class A Common Stock

245,554

255,178

—

255,328

Assumed conversion of shares of Series A Convertible Preferred Stock into shares of Class A Common Stock

6,785

Assumed vesting of share-based compensation awards

6,445

8,101

7,062

7,162

Adjusted weighted average shares of Class A Common Stock outstanding — Diluted

361,105

360,096

360,820

357,779

Adjusted Diluted EPS

$ 0.08

$ 0.03

$ 0.37

$ 0.21

Three months ended

December 31,

Year ended December 31,

2025

2024

2025

2024

in thousands

Diluted earnings per share

$ 0.06

$ 0.01

$ 0.37

$ 0.10

Impact of assumed exchange, conversion, or vesting of

remaining potentially dilutive securities 3

0.02

0.01

0.05

0.12

Non-GAAP adjustments 4

—

0.01

(0.05)

(0.01)

Adjusted Diluted EPS

$ 0.08

$ 0.03

$ 0.37

$ 0.21

(1)

(2)

Represents the tax effect of the aforementioned adjustments to reflect corporate income taxes at an estimated effective tax rate of 23.7% and 26.3% for 2025 and 2024, respectively, which considers the U.S. federal statutory rate of 21%, a combined state income tax rate of approximately 5% (net of federal benefits), and certain material permanent items.

(3)

Assumes the exchange of all outstanding THG units, Series A Convertible Preferred Stock, and unvested share-based compensation awards for shares of Class A Common Stock, resulting in the elimination of the non-controlling interest and recognition of the Net income attributable to non-controlling interest, as well as elimination of the accretion of Series A Convertible Preferred Stock.

(4)

Represents the per share impact of non-GAAP adjustments for each period. Refer to the reconciliation above for additional information.

SOURCE Hagerty