Hagerty (HGTY) Q2 2026: Written Premium Surges 19% as State Farm Conversions Accelerate Growth
Hagerty’s structural transition year delivered record policy growth and premium acceleration, powered by State Farm conversions and strong demand from younger collectors. Despite accounting noise from the Markel fronting shift, core business momentum is outpacing expectations, prompting a guidance raise and positioning the company for normalized, higher-margin growth into 2027. Investors should focus on the compounding effect of omnichannel distribution, robust underwriting discipline, and expanding partnerships as Hagerty deepens its specialty insurance leadership.
Summary
- State Farm Conversions Fuel Membership Surge: New business momentum is broad-based and not limited to legacy channels.
- Omnichannel Partnerships Expand Reach: Progressive, Liberty Mutual, and independent agents are increasingly contributing to growth.
- 2027 Normalization Sets Stage for Margin Expansion: Accounting transition headwinds abate, revealing core profitability and scale.
Business Overview
Hagerty is a specialty insurance and automotive lifestyle company focused on the collector and enthusiast vehicle market. The company generates revenue primarily through insurance premiums, membership fees, and marketplace transactions, with major segments including insurance (policies in force and premium), Hagerty Drivers Club memberships, and Hagerty Marketplace (auctions and private sales). Its omnichannel distribution strategy leverages direct, agent, and carrier partnerships to maximize reach within a growing addressable market of over 36 million vehicles.
Performance Analysis
Hagerty’s Q2 results showcased a compounding specialty insurance model firing on all cylinders. Written premium rose 19% year-over-year, outpacing the company’s prior guidance, driven by record new member additions and the ongoing State Farm policy conversion. Earned premium growth of 42% reflected both higher policy volume and the full transition to 100% quota share economics under the Markel fronting arrangement, which allows Hagerty to retain all underwriting profit and investment income on its U.S. book. Adjusted EBITDA increased 32% in the first half, highlighting the benefits of scale and cost discipline even as the company invests in technology and member experience.
Marketplace revenue climbed 48% to $40 million in Q2, with Broad Arrow auctions and private sales both contributing to growth. Membership revenue also grew 10% as Hagerty Drivers Club continues to expand. Cash flow nearly doubled from the prior year, underscoring the improved economics of the new risk structure. Despite a reported GAAP net loss for the first half due to transitional accounting items, underlying profitability and cash generation remain robust, with management emphasizing that these effects will normalize in 2027.
- Policy Growth Outpaces Industry: Policies in force and new member additions reached record highs, surpassing 3 million vehicles insured.
- Omnichannel Distribution Drives Scale: State Farm, Progressive, Liberty Mutual, and independent agents all contributed to volume gains.
- Cost Efficiency and Margin Expansion: Operating leverage and disciplined acquisition spending supported EBITDA growth ahead of revenue gains.
Overall, Hagerty’s diversified growth engines and disciplined underwriting are compounding value even amid temporary GAAP volatility.
Executive Commentary
"We blew through the 3 million vehicle insured milestone in the second quarter as we added a record 279,000 new members. Importantly, we are delivering high rates of growth while simultaneously investing in our teams, technology and member experience that will sustain growth as our compounding machine shifts into overdrive."
McKeel Hagerty, Chief Executive Officer and Chairman
"This is what a healthy, compounding specialty insurer looks like when firing on all cylinders. The investments we are making in distribution, technology, and product, State Farm conversions accelerating, Enthusiast Plus scaling to additional states, and Doug Creek Delivering Cost Efficiencies are designed to sustain premium growth and steadily expand margins in the years to come."
Patrick McClymont, Chief Financial Officer
Strategic Positioning
1. State Farm Channel Transformation
State Farm Classic Plus, a co-branded program, is now live in 37 states, with conversions of existing State Farm collector policies progressing on schedule. This rollout not only accelerates near-term growth but also locks in long-term recurring revenue as 525,000 policies transition to Hagerty’s platform by 2028.
2. Multi-Carrier and Agency Channel Expansion
Partnerships with Progressive and Liberty Mutual are scaling, with Progressive now funneling vehicles 25 years and older (up from pre-1981) into Hagerty’s pipeline. The company is also investing in activating its 54,000 independent agents through data-driven tools and education, aiming to unlock more enthusiast vehicles from existing daily driver books.
3. Younger Demographic and Enthusiast Plus
Demand from Gen X, Millennials, and Gen Z now exceeds 60% of quote volume, reflecting a generational shift as younger collectors enter the market. The Enthusiast Plus program, targeting modern sports and off-road vehicles, is expanding to new states and capturing incremental premium at higher rates due to different usage and storage profiles.
4. Marketplace Flywheel Integration
The Hagerty Marketplace, including Broad Arrow auctions, is not only a revenue stream but a strategic customer acquisition funnel. Every transaction reinforces the brand and provides opportunities to cross-sell insurance, deepening the company’s flywheel effect.
5. International Scale via Bennett’s Acquisition
The acquisition of Bennett’s, the UK’s second-largest specialty motorcycle insurer, immediately triples Hagerty’s UK scale and extends its member-focused model to a new enthusiast segment, with integration expected to further strengthen the European growth platform.
Key Considerations
Hagerty’s Q2 results reflect a business in transition, with growth levers firing across distribution channels and a clear path to normalized, higher-margin economics in 2027. Investors should look beyond headline GAAP results to the underlying compounding engine, which is accelerating due to omnichannel reach, sticky partnerships, and deepening penetration of the enthusiast market.
Key Considerations:
- Accounting Transition Masks Underlying Strength: Temporary GAAP revenue and net income volatility from the Markel fronting shift will normalize next year, revealing true scale and profitability.
- State Farm Conversion Drives Near- and Long-Term Growth: The multi-year transition is a unique, low-cost customer acquisition engine that will continue to compound policy count and premium.
- Channel Diversification Reduces Risk: Expanding carrier and agent partnerships lower reliance on any single source and broaden the funnel for new business.
- Gen Z and Millennial Penetration Creates Multi-Decade Tailwind: Younger collector demand is now the majority of new quotes, positioning Hagerty for durable growth as the demographic mix shifts.
Risks
Short-term financial reporting complexity from the Markel fronting transition could obscure true business momentum, potentially leading to investor misunderstanding until 2027 normalization. Competitive encroachment from larger carriers or digital-first entrants, execution risk in scaling new partnerships and acquisitions, and potential macroeconomic slowdowns in discretionary spending on collector vehicles remain key watchpoints. Management’s disciplined underwriting and omnichannel strategy partially mitigate these risks, but integration and seasonality should be monitored.
Forward Outlook
For Q3 2026, Hagerty guided to:
- Continued double-digit written premium growth, supported by ongoing State Farm conversions and expansion of Enthusiast Plus.
- Stable combined ratios, with cost efficiency initiatives offsetting inflationary pressures.
For full-year 2026, management raised guidance:
- Written premium growth of 16 to 17%.
- GAAP net income of $18 to $30 million.
- Adjusted EBITDA of $270 to $280 million.
Management emphasized that 2027 will mark a return to clean financial reporting, with mid-teens premium growth and margin expansion flowing to the bottom line as transition costs roll off and acquisition expense normalization occurs.
- State Farm conversions and partnership expansions remain central to growth.
- Omnichannel investments and technology upgrades are expected to sustain margin gains.
Takeaways
Hagerty’s Q2 demonstrates the power of a compounding specialty insurance platform, with omnichannel distribution, disciplined underwriting, and a generational shift in collector demand driving outperformance.
- Premium Growth Surges: New business from State Farm, Progressive, and independent agents is accelerating policy count and premium, outpacing legacy industry growth rates.
- Strategic Partnerships Deepen Moat: Multi-carrier and agency relationships are expanding Hagerty’s addressable market and reducing customer acquisition costs.
- 2027 Normalization Will Reveal True Profit Power: As accounting transition effects abate, Hagerty’s structural margin and cash generation will become more apparent to investors.
Conclusion
Hagerty’s transition year is delivering on its promise, with record growth in core metrics and a clear path to higher-margin, compounding profitability as accounting headwinds fade. The company’s unique position at the intersection of specialty insurance and automotive enthusiasm, combined with disciplined execution, positions it for sustained outperformance in a growing market.
Industry Read-Through
Hagerty’s Q2 underscores the value of niche underwriting expertise and omnichannel distribution in specialty insurance. The success of the State Farm conversion and the ability to partner with major carriers like Progressive and Liberty Mutual highlight the potential for ecosystem-driven growth in fragmented markets. For peers in specialty or enthusiast insurance, the lesson is clear: data-driven segmentation, deep partnerships, and a strong brand community can create a defensible moat. The integration of marketplace and insurance flywheels also suggests that platforms serving passion-driven verticals can unlock cross-sell and lifetime value opportunities that transcend traditional insurance models. Investors in the broader insurance and fintech space should monitor how demographic shifts and digital distribution reshape customer acquisition and retention economics across verticals.