Hagerty, Inc. (HGTY)

Hagerty is a global market leader in insurance for classic cars and enthusiast vehicles, and it has built an automotive lifestyle brand around that insurance business. The first Hagerty company was founded in 1984, and Hagerty, Inc. is a Delaware corporation formed in 2020. The company insures more than 2.2 million classic cars and enthusiast vehicles worldwide. It reports a net promoter score of about 83 over the last decade and a policy retention rate close to 90%. Its stated goal is to save driving and car culture for future generations.

The business has four integrated product areas. Insurance is the backbone. Hagerty acts as a managing general agent that underwrites, sells and services policies for carriers and earns commissions averaging 32% of written premium, plus up to 10% in contingent commissions. It also reinsures part of the premium through Hagerty Re, formed in Bermuda in 2017, and recognizes earned premium. Policies center on "Guaranteed Value" coverage. Membership includes the Hagerty Drivers Club, with about 753,000 members, and Hagerty Garage + Social, a network of clubhouses and car storage facilities in the U.S. and Canada. Marketplace covers buying and selling collector cars through Broad Arrow auctions, Hagerty Classifieds, Collectors Garage and Broad Arrow Capital financing. It also includes the Hagerty Valuation Tools. Media & Entertainment covers Hagerty Drivers Club Magazine, video, social and web content, and more than 1,800 sponsored or owned events, including the Greenwich Concours, the Detroit Concours, The Amelia, the California Mille, RADwood, Concours d'Lemons and Motorlux.

Customers are car enthusiasts and collectors in the U.S., Canada and the U.K. The company estimates about 45 million insurable collector cars in the U.S., a $12 to $15 billion annual premium opportunity, and puts its own market share at about 4%. Insurance is sold through three channels. Direct sales account for about 45% of U.S. auto written premium. Over 45,000 independent agents and brokers account for about 33%. Distribution partnerships with 9 of the top 10 U.S. auto insurers account for about 22%. A master alliance agreement with State Farm is expected to start in the second half of 2023, adding about 19,200 agents. The company also earns revenue from event tickets, sponsorships and advertising.

On the operating side, Markel's Essentia Insurance Company is the dedicated U.S. and U.K. carrier, with Evanston Insurance Company reinsuring and ceding part of the business to Hagerty Re. Aviva Canada's Elite Insurance Company is the exclusive carrier in Canada. Those agreements run to 2030 and 2030 respectively, with extension options. The company's MGA affiliates handle claims, and the retained quota share is rising to at least 80% in 2023. Hagerty invests in research and development and uses data science for underwriting, market analysis, customer service and claims. It holds two U.S. patents and one Canadian patent, along with trademarks and copyrights. It does not view other specialty collector insurers as significant competitors and instead partners with standard auto carriers, though it faces some competition in the broader auto insurance market. Revenue is seasonal, peaking in the second quarter. Investable assets are held mainly in cash, short-term investments and Canadian sovereign and provincial fixed income securities.