UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

(Mark One)

☒ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended March 31, 2025

OR

☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from ________ to _______

Commission file number: 001-40244

HAGERTY, INC.

(Exact name of registrant as specified in its charter)

Delaware		86-1213144
(State of incorporation)		(I.R.S. Employer Identification No.)
121 Drivers Edge, Traverse City, Michigan		49684
(Address of principal executive offices)		(Zip code)
	(800) 922-4050
	Registrant's telephone number, including area code

Securities registered pursuant to Section 12(b) of the Act:

Title of each class	Trading Symbols	Name of each exchange on which registered
Class A common stock, par value $0.0001 per share	HGTY	The New York Stock Exchange

Indicate by check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports); and (2) has been subject to such filing requirements for the past 90 days. Yes  ☒ No  ☐ 

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes  ☒   No  ☐ 

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Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, smaller reporting company, or an emerging growth company. See the definitions of "large accelerated filer," "accelerated filer," "smaller reporting company," and "emerging growth company" in Rule 12b-2 of the Exchange Act.

Large accelerated filer	☐	Accelerated filer	☒
Non-accelerated filer	☐	Smaller reporting company	☐
		Emerging growth company	☒

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act).     Yes ☐   No  ☒

The registrant had 90,715,648 shares of Class A Common Stock outstanding and 251,033,906 shares of Class V Common Stock outstanding as of April 25, 2025.

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Table of Contents

Title	Page
Forward Looking Statements	4
Part I – Financial Information	5
Item 1. Financial Statements (Unaudited)	5
Condensed Consolidated Statements of Operations	5
Condensed Consolidated Statements of Comprehensive Income (Loss)	6
Condensed Consolidated Balance Sheets	7
Condensed Consolidated Statements of Changes in Temporary Equity and Stockholders' Equity	8
Condensed Consolidated Statements of Cash Flows	10
Notes Accompanying the Condensed Consolidated Financial Statements	11
Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations	43
Item 3. Quantitative and Qualitative Disclosures About Market Risk	57
Item 4. Controls and Procedures	57
Part II – Other Information	58
Item 1. Legal Proceedings	58
Item 1A. Risk Factors	58
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds	58
Item 3. Defaults Upon Senior Securities	58
Item 4. Mine Safety Disclosures	58
Item 5. Other Information	58
Item 6. Exhibits	59
Signatures	60

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Cautionary Statement Regarding Forward-Looking Statements

This Quarterly Report on Form 10-Q (this "Quarterly Report"), as well as other oral or written information we provide, contain 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 our future operating results and financial position, our business strategy and plans, products, services, and technology implementations, market conditions, growth and trends, expansion plans and opportunities, and our 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 negative of these expressions, are intended to identify forward-looking statements.

We have based these forward-looking statements largely on our current expectations about future events, which may not materialize. Actual results could differ materially and adversely from those anticipated or implied in our forward-looking statements. Some of the factors that could cause actual results to differ from our expectations include the risks and uncertainties described in Item 1A of Part II — Risk Factors of this Quarterly Report and Item 1A of Part I — Risk Factors of our Annual Report on Form 10-K for the year ended December 31, 2024, which highlight, among other risks, our ability to:

•compete effectively within our industry and attract and retain our insurance policyholders and paid Hagerty Drivers Club ("HDC") subscribers (collectively, "Members");

•maintain key strategic relationships with our insurance distribution and underwriting carrier partners;

•prevent, monitor, and detect fraudulent activity;

•manage risks associated with disruptions, interruptions, outages or other issues with our technology platforms or our use of third-party services;

•accelerate the adoption of our membership and marketplace products and services, as well as any new insurance programs and products we offer;

•manage the cyclical nature of the insurance business, including through any periods of recession, economic downturn or inflation;

•address unexpected increases in the frequency or severity of claims; and

•comply with the numerous laws and regulations applicable to our business, including state, federal and foreign laws relating to insurance and rate increases, privacy, the internet, and accounting matters.

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. The forward-looking statements in this Quarterly Report represent our views as of the date hereof. We undertake no obligation to update any of these forward-looking statements for any reason after the date of this Quarterly Report.

Where You Can Find More Information

Our Annual Reports on Form 10-K, Quarterly Reports on Form 10-Q, Current Reports on Form 8-K, as well as any amendments to those reports, are available free of charge through our website at investor.hagerty.com after we file them with, or furnish them to, the Securities and Exchange Commission ("SEC"). We use our investor relations website, investor.hagerty.com, as a means of disclosing information which may be of interest or material to our investors and for complying with disclosure obligations under Regulation FD. Accordingly, investors should monitor our investor relations website, in addition to following our press releases, SEC filings, public conference calls, webcasts, and social media channels. Information contained on or accessible through our website or social media channels is not a part of, and is not incorporated by reference into, this Quarterly Report or any other report or document we file with the SEC. Any reference to our website in this Quarterly Report is intended to be an inactive textual reference only.

Unless the context indicates otherwise, the terms "we," "our," "us," "Hagerty," and the "Company" refer to Hagerty, Inc. and its consolidated subsidiaries, including The Hagerty Group, LLC ("THG").

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PART I - FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS

Hagerty, Inc.

Condensed Consolidated Statements of Operations (Unaudited)

	Three months ended March 31,
	2025		2024
REVENUE:	in thousands (except per share amounts)
Commission and fee revenue	$	100,287	$	88,840
Earned premium	169,355		151,619
Membership, marketplace and other revenue	49,951		31,249
Total revenue	319,593		271,708
OPERATING EXPENSES:
Salaries and benefits	59,103		56,116
Ceding commissions, net	77,333		70,930
Losses and loss adjustment expenses	71,130		62,356
Sales expense	54,626		39,660
General and administrative expenses	22,185		19,862
Depreciation and amortization	9,488		10,560
Total operating expenses	293,865		259,484
OPERATING INCOME	25,728		12,224
Loss related to warrant liabilities, net	—		(6,140)
Interest and other income (expense), net	7,054		7,244
INCOME BEFORE INCOME TAX EXPENSE	32,782		13,328
Income tax expense	(5,489)		(5,129)
NET INCOME	27,293		8,199
Net income attributable to non-controlling interest	(18,922)		(9,550)
Accretion of Series A Convertible Preferred Stock	(1,875)		(1,838)
NET INCOME (LOSS) ATTRIBUTABLE TO CLASS A COMMON STOCKHOLDERS	$	6,496	$	(3,189)
Earnings (loss) per share of Class A Common Stock:
Basic	$	0.07	$	(0.04)
Diluted	$	0.07	$	(0.04)
Weighted average shares of Class A Common Stock outstanding:
Basic	90,047		84,656
Diluted	346,311		84,656

The accompanying Notes are an integral part of these Condensed Consolidated Financial Statements.

See Note 18 for information regarding Related-Party Transactions.

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Hagerty, Inc.

Condensed Consolidated Statements of Comprehensive Income (Loss) (Unaudited)

	Three months ended March 31,
	2025		2024
	in thousands
Net income	$	27,293	$	8,199
Other comprehensive income (loss), net of tax:
Change in net unrealized gain (loss) on available-for-sale investments	4,037		—
Foreign currency translation adjustments	24		(631)
Change in unrealized gain (loss) on interest rate swap	—		37
Other comprehensive income (loss)	4,061		(594)
Comprehensive income	31,354		7,605
Comprehensive income attributable to non-controlling interest	(21,924)		(9,104)
Accretion of Series A Convertible Preferred Stock	(1,875)		(1,838)
Comprehensive income (loss) attributable to Class A Common Stockholders	$	7,555	$	(3,337)

The accompanying Notes are an integral part of these Condensed Consolidated Financial Statements.

See Note 18 for information regarding Related-Party Transactions.

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Hagerty, Inc.

Condensed Consolidated Balance Sheets (Unaudited)

	March 31,		December 31,
	2025		2024
ASSETS	in thousands (except share amounts)
Current Assets:
Cash and cash equivalents	$	127,704	$	104,784
Restricted cash and cash equivalents	158,604		128,061
Investments	104,991		73,957
Accounts receivable	97,610		84,763
Premiums receivable	175,522		153,748
Commissions receivable	17,135		20,430
Notes receivable	62,053		45,417
Deferred acquisition costs, net	152,270		156,466
Other current assets	102,044		90,779
Total current assets	997,933		858,405
Investments	481,115		515,570
Notes receivable	11,139		11,555
Property and equipment, net	17,919		18,205
Lease right-of-use assets	43,433		44,485
Intangible assets, net	87,122		90,107
Goodwill	114,127		114,123
Other long-term assets	63,403		56,888
TOTAL ASSETS	$	1,816,191	$	1,709,338
LIABILITIES, TEMPORARY EQUITY AND STOCKHOLDERS' EQUITY
Current Liabilities:
Accounts payable, accrued expenses and other current liabilities	$	116,875	$	73,383
Losses payable and provision for unpaid losses and loss adjustment expenses	251,920		266,878
Commissions payable	79,315		77,389
Advance premiums and due to insurers	154,009		108,352
Unearned premiums	352,162		357,539
Contract liabilities	32,778		31,905
Total current liabilities	987,059		915,446
Long-term lease liabilities	41,956		43,178
Long-term debt, net	132,596		104,968
Deferred tax liability	18,421		18,065
Contract liabilities	14,834		15,334
Other long-term liabilities	2,130		4,178
TOTAL LIABILITIES	1,196,996		1,101,169
Commitments and Contingencies (Note 19)	—		—
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 March 31, 2025 and December 31, 2024)	86,538		84,663
STOCKHOLDERS' EQUITY
Class A Common Stock, $0.0001 par value (500,000,000 shares authorized, 90,064,663 and 90,032,391 issued and outstanding as of March 31, 2025 and December 31, 2024, respectively)	9		9
Class V Common Stock, $0.0001 par value (300,000,000 authorized, 251,033,906 shares issued and outstanding as of March 31, 2025 and December 31, 2024)	25		25
Additional paid-in capital	606,972		603,780
Accumulated earnings (deficit)	(443,607)		(451,978)
Accumulated other comprehensive income (loss)	(455)		(1,514)
Total stockholders' equity	162,944		150,322
Non-controlling interest	369,713		373,184
Total equity (Note 14)	532,657		523,506
TOTAL LIABILITIES, TEMPORARY EQUITY AND STOCKHOLDERS' EQUITY	$	1,816,191	$	1,709,338

The accompanying Notes are an integral part of these Condensed Consolidated Financial Statements.

See Note 18 for information regarding Related-Party Transactions.

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Hagerty, Inc.

Condensed Consolidated Statements of Changes in Temporary Equity and Stockholders' Equity (Unaudited)

					Three months ended March 31, 2025
	Temporary Equity			Stockholders' Equity
	Series A Convertible Preferred Stock			Class A Common Stock			Class V Common Stock			Additional Paid in Capital		Accumulated Earnings (Deficit)		Accumulated Other Comprehensive Income (Loss)		Total Stockholders' Equity		Non-controlling Interest		Total Equity
in thousands	Shares	Amount		Shares	Amount		Shares	Amount
Balance at January 1, 2025	8,484	$	84,663	90,032	$	9	251,034	$	25	$	603,780	$	(451,978)	$	(1,514)	$	150,322	$	373,184	$	523,506
Net income	—	—		—	—		—	—		—		8,371		—		8,371		18,922		27,293
Accretion of Series A Convertible Preferred Stock	—	1,875		—	—		—	—		(1,875)		—		—		(1,875)		—		(1,875)
Other comprehensive income	—	—		—	—		—	—		—		—		1,059		1,059		3,002		4,061
Issuance of shares under employee plans, net of shares withheld for employee taxes	—	—		9	—		—	—		(44)		—		—		(44)		—		(44)
Share-based compensation	—	—		—	—		—	—		4,392		—		—		4,392		—		4,392
Exchange of THG units for Class A Common Stock	—	—		24	—		—	—		234		—		—		234		(234)		—
Distributions paid to non-controlling interest holders	—	—		—	—		—	—		—		—		—		—		(24,676)		(24,676)
Reallocation between controlling and non-controlling interest	—	—		—	—		—	—		485		—		—		485		(485)		—
Balance at March 31, 2025	8,484	$	86,538	90,065	$	9	251,034	$	25	$	606,972	$	(443,607)	$	(455)	$	162,944	$	369,713	$	532,657

The accompanying Notes are an integral part of these Condensed Consolidated Financial Statements.

See Note 18 for information regarding Related-Party Transactions.

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Hagerty, Inc.

Condensed Consolidated Statements of Changes in Temporary Equity and Stockholders' Equity (Unaudited)

					Three months ended March 31, 2024
	Temporary Equity			Stockholders' Equity
	Series A Convertible Preferred Stock			Class A Common Stock			Class V Common Stock			Additional Paid in Capital		Accumulated Earnings (Deficit)		Accumulated Other Comprehensive Income (Loss)		Total Stockholders' Equity		Non-controlling Interest		Total Equity
in thousands	Shares	Amount		Shares	Amount		Shares	Amount
Balance at January 1, 2024	8,484	$	82,836	84,589	$	8	251,034	$	25	$	561,754	$	(468,995)	$	(88)	$	92,704	$	317,805	$	410,509
Net income (loss)	—	—		—	—		—	—		—		(1,351)		—		(1,351)		9,550		8,199
Accretion of Series A Preferred Stock	—	1,838		—	—		—	—		(1,838)		—		—		(1,838)		—		(1,838)
Other comprehensive loss	—	—		—	—		—	—		—		—		(148)		(148)		(446)		(594)
Issuance of shares under employee plans, net of shares withheld for employee taxes	—	—		67	—		—	—		—		—		—		—		—		—
Share-based compensation	—	—		—	—		—	—		4,543		—				4,543				4,543
Reallocation between controlling and non-controlling interest	—	—		—	—		—	—		(377)		—		—		(377)		377		—
Balance at March 31, 2024	8,484	$	84,674	84,656	$	8	251,034	$	25	$	564,082	$	(470,346)	$	(236)	$	93,533	$	327,286	$	420,819

The accompanying Notes are an integral part of these Condensed Consolidated Financial Statements.

See Note 18 for information regarding Related-Party Transactions.

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Hagerty, Inc.

Condensed Consolidated Statements of Cash Flows (Unaudited)

	Three months ended March 31,
	2025		2024
OPERATING ACTIVITIES:	in thousands
Net income	$	27,293	$	8,199
Adjustments to reconcile net income to net cash from operating activities:
Loss on disposals of equipment, software and other assets	1,136		—
Loss related to warrant liabilities, net	—		6,140
Depreciation and amortization	9,488		10,560
Provision for deferred taxes	(939)		(571)
Share-based compensation expense	4,392		4,543
Non-cash lease expense	2,109		2,197
Realized (gain) loss on investments, net	315		—
(Accretion) amortization of discount and premium, net	(1,184)		—
Other	1,852		1,140
Changes in operating assets and liabilities:
Accounts, premiums and commissions receivable	(39,394)		42,736
Deferred acquisition costs, net	4,196		4,712
Losses payable and provision for unpaid losses and loss adjustment expenses	(14,958)		5,567
Commissions payable	1,926		(37,669)
Advance premiums and due to insurers	45,257		34,941
Unearned premiums	(5,377)		(4,573)
Operating lease assets and liabilities	(2,252)		(2,282)
Other assets and liabilities, net	9,970		(17,402)
Net Cash Provided by Operating Activities	43,830		58,238
INVESTING ACTIVITIES:
Capital expenditures	(5,389)		(4,538)
Acquisitions, net of cash acquired, and other investments	—		(3,843)
Issuance of notes receivable	(9,886)		(17,828)
Collection of notes receivable	1,650		11,041
Purchases of fixed maturity securities	(39,150)		(2,956)
Proceeds from sales of fixed maturity securities	14,804		—
Proceeds from maturities of fixed maturity securities	33,722		1,075
Purchases of equity securities	(246)		—
Sales of equity securities	247		—
Other investing activities	(233)		(1,238)
Net Cash Used in Investing Activities	(4,481)		(18,287)
FINANCING ACTIVITIES:
Payments on long-term debt	(120,880)		(45,331)
Proceeds from long-term debt, net of issuance costs	160,067		8,098
Distributions paid to non-controlling interest unit holders	(24,676)		—
Funding of TRA liability payments	(223)		—
Funding of employee tax obligations upon vesting of share-based payments	(44)		—
Net Cash Provided by (Used in) Financing Activities	14,244		(37,233)
Effect of exchange rate changes on cash and cash equivalents and restricted cash and cash equivalents	(130)		(186)
Change in cash and cash equivalents and restricted cash and cash equivalents	53,463		2,532
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	$	286,308	$	726,808

The accompanying Notes are an integral part of these Condensed Consolidated Financial Statements.

See Note 18 for information regarding Related-Party Transactions.

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Hagerty, Inc.

Notes To Condensed Consolidated Financial Statements (Unaudited)

1 — Basis of Presentation and Accounting Policies

In these Notes to the Condensed Consolidated Financial Statements, the terms "Hagerty," and the "Company" refer to Hagerty, Inc. and its consolidated subsidiaries, including The Hagerty Group, LLC ("THG"), unless the context requires otherwise. In addition, the Company's insurance policyholders and paid Hagerty Drivers Club ("HDC") subscribers are collectively referred to as "Members".

Description of Business — Hagerty is a market leader in providing insurance for collector cars and enthusiast vehicles. Through Hagerty's insurance model, the Company acts as a Managing General Agent ("MGA") by underwriting, selling, and servicing collector car and enthusiast vehicle insurance policies. The Company then reinsures approximately 80% of the risks written by its MGA subsidiaries through its wholly owned subsidiary, Hagerty Reinsurance Limited ("Hagerty Re"). In addition, Hagerty offers HDC memberships, which are primarily bundled with its insurance policies and give subscribers access to an array of products and services, including emergency roadside assistance, Hagerty Drivers Club Magazine, automotive enthusiast events, Hagerty's proprietary vehicle valuation tool, and special vehicle-related discounts. The Company also offers a marketplace to complement its insurance membership offerings where automotive enthusiasts can buy, sell, and finance collector cars and enthusiast vehicles.

These financial statements should be read in conjunction with the Consolidated Financial Statements and Notes thereto included in the Company's Annual Report on Form 10-K for the year ended December 31, 2024. The results of operations for the three months ended March 31, 2025 are not necessarily indicative of the results that may be expected for the year ending December 31, 2025.

Basis of Presentation — The Condensed Consolidated Financial Statements are prepared in accordance with accounting principles generally accepted in the United States of America ("GAAP") and pursuant to the regulations of the Securities and Exchange Commission and include the accounts of Hagerty, Inc., which is comprised of THG and its consolidated subsidiaries. Certain information and footnote disclosures normally included in financial statements prepared in accordance with GAAP have been condensed or omitted from this report, as permitted by such rules and regulations.

The Condensed Consolidated Financial Statements reflect all normal recurring adjustments and accruals that are, in the opinion of management, necessary for a fair statement of the Company's financial position and results of operations for the interim periods presented.

Principles of Consolidation — The Condensed Consolidated Financial Statements contain the accounts of Hagerty, Inc. and its majority-owned or controlled subsidiaries.

As of March 31, 2025 and December 31, 2024, Hagerty, Inc. had economic ownership of 26.1% of THG and is its sole managing member. Hagerty, Inc. reports a non-controlling interest representing the economic interest in THG held by other parties.

The financial statements of THG are consolidated by the Company under the voting interest method in accordance with Accounting Standards Codification ("ASC") Topic 810, Consolidations ("ASC 810"). Non-controlling interest is presented separately on the Condensed Consolidated Statements of Operations, the Condensed Consolidated Statements of Comprehensive Income, the Condensed Consolidated Balance Sheets, and the Condensed Consolidated Statements of Changes in Temporary Equity and Stockholders' Equity.

All intercompany accounts and transactions have been eliminated in consolidation.

Variable Interest Entities — Broad Arrow Capital LLC ("BAC") and certain of its subsidiaries transfer notes receivable to wholly owned, bankruptcy-remote, special purpose entities (each, an "SPE") to secure borrowings under the BAC Credit Agreement (as defined in Note 12 — Long-Term Debt).

These SPEs are considered to be variable interest entities (each, a "VIE") under GAAP and their financial statements are consolidated by BAC, which is the primary beneficiary of the SPEs and also a consolidated subsidiary of the Company. BAC is considered to be the primary beneficiary of the SPEs because it has (i) power over the significant activities of the SPEs through its role as servicer of the notes receivable used to secure borrowings under the BAC Credit Agreement and (ii) the obligation to absorb losses or the right to receive returns that could be significant through its interest in the residual cash flows of the SPEs.

Refer to Note 5 — Notes Receivable and Note 12 — Long-Term Debt for additional information.

11

The following table presents the assets and liabilities of the Company's consolidated variable interest entities as of March 31, 2025 and December 31, 2024:

	March 31,		December 31,
	2025		2024
ASSETS	in thousands
Cash and cash equivalents	$	630	$	1,746
Restricted cash and cash equivalents	3,655		1,221
Notes receivable	60,007		49,337
Other assets	1,703		1,961
TOTAL ASSETS	$	65,995	$	54,265
LIABILITIES
Accounts payable, accrued expenses and other current liabilities (1)	$	15,179	$	999
Long-term debt, net	19,340		30,193
TOTAL LIABILITIES	$	34,519	$	31,192

(1)    Accounts payable, accrued expenses and other current liabilities includes the current portion of outstanding borrowings under the BAC Credit Facility (as defined in Note 12 — Long-Term Debt) totaling $12.8 million.

Emerging Growth Company — The Company currently qualifies as an "emerging growth company" under the Jumpstart Our Business Startups Act of 2012 and can delay the adoption of new or revised accounting standards until those standards would apply to private companies.

The Company intends to avail itself of this extended transition period and, therefore, the Company may not be subject to the same new or revised accounting standards as other public companies that are not emerging growth companies or have opted out of using such extended transition period. As of March 31, 2025, the Company has not delayed the adoption of any new or revised accounting standards despite qualifying as an emerging growth company.

Use of Estimates — The preparation of the Condensed Consolidated Financial Statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, and the disclosure of contingent assets and liabilities as of the date of the Condensed Consolidated Financial Statements, as well as the reported amounts of revenue and expenses during the reporting period. Although the estimates are considered reasonable, actual results could materially differ from those estimates.

Significant estimates made by management include, but are not limited to: (i) the provision for unpaid losses and loss adjustment expenses, including incurred but not reported ("IBNR") claims (see Note 10); (ii) the valuation of the Company's deferred income tax assets (see Note 17); (iii) the amount of the liability associated with the Tax Receivable Agreement ("TRA") (the "TRA Liability") (see Note 17); (iv) the fair values of the reporting units used in assessing the recoverability of goodwill; and (v) the valuation and useful lives of intangible assets (see Note 9). Although some variability is inherent in these estimates, management believes that the current estimates are reasonable in all material respects. These estimates are reviewed regularly and adjusted as necessary. Adjustments related to changes in estimates are reflected in the Company's results of operations in the period during which those estimates changed.

Segment Information — The Company has one operating segment and one reportable segment with the Chief Executive Officer ("CEO") acting as the Chief Operating Decision Maker ("CODM"). The Company's segment presentation reflects its business activities which place the automotive enthusiast at the center of operating and resource allocation decisions. Accordingly, the CODM evaluates performance and makes resource allocation decisions using a number of consolidated measures, including consolidated net income. The CODM is also regularly provided with information regarding the Company's significant expenses consistent with the level of information provided in the Condensed Consolidated Statements of Operations, as well as information regarding assets consistent with the level of detail provided on the Condensed Consolidated Balance Sheets. The CODM utilizes such consolidated financial information in connection with the Company's budgeting and forecasting process to monitor budget-to-actual variances when evaluating performance, allocating resources, and establishing management compensation.

12

Cash and Cash Equivalents and Restricted Cash and Cash Equivalents — The following table provides a reconciliation of cash and cash equivalents and restricted cash and cash equivalents as of March 31, 2025 and 2024:

	March 31,
	2025		2024
	in thousands
Cash and cash equivalents	$	127,704	$	131,207
Restricted cash and cash equivalents	158,604		595,601
Total cash and cash equivalents and restricted cash and cash equivalents	$	286,308	$	726,808

Supplemental Balance Sheet Information

Restricted Assets — The Company's MGA subsidiaries collect premiums from insureds on behalf of insurance carriers. Prior to remittance to the insurance carrier, these funds are required to be held in trust for the benefit of the insurance carriers and segregated from the Company's operating cash.

Hagerty Re maintains trust accounts for the benefit of various ceding insurers as security for its obligations for losses, loss expenses, unearned premium, and profit-sharing commissions.

On September 1, 2024, the Company acquired Consolidated National Insurance Company, which was subsequently renamed Drivers Edge Insurance Company ("Drivers Edge"). Drivers Edge maintains assets on deposit with a number of regulatory authorities to support its insurance operations. Refer to Note 8 — Acquisition for additional information related to the Company's acquisition of Drivers Edge.

BAC and its consolidated subsidiaries maintain bank accounts that are required for the operation of the BAC Credit Facility (as defined in Note 12 — Long-Term Debt). The funds in these bank accounts represent security under the BAC Credit Facility and their use is restricted to the servicing of the debt outstanding under that facility.

The following table presents the components of the Company's restricted assets as of March 31, 2025 and December 31, 2024:

	Balance Sheet Classification	March 31,		December 31,
		2025		2024
		in thousands
Cash and cash equivalents	Restricted cash and cash equivalents	$	158,604	$	128,061
Fixed maturity securities	Investments	574,797		577,688
Equity securities	Investments	11,309		11,839
Total restricted assets		$	744,710	$	717,588

13

Supplemental Cash Flow Information

The table below presents information regarding the Company's non-cash investing and financing activities, as well as the cash paid for interest and taxes for the three months ended March 31, 2025 and 2024:

	Three months ended March 31,
	2025		2024
Non-cash investing activities:	in thousands
Issuance of notes receivable (1)	$	9,553	$	2,177
Collection of notes receivable (1)	$	1,884	$	814
Capital expenditures	$	908	$	687
Non-cash financing activities:
Exchange of THG units for Class A Common Stock (Refer to Note 14)	$	234	$	—
Cash paid for:
Interest	$	1,807	$	1,240
Income taxes	$	101	$	—

(1)    In certain situations, BAC makes loans to refinance accounts receivable balances generated by Broad Arrow Group, Inc. ("Broad Arrow") auction or private sale purchases. These loans are accounted for on the Condensed Consolidated Balance Sheets as non-cash reclassifications between "Accounts receivable" and "Notes receivable" and are not presented within Investing Activities in the Company's Condensed Consolidated Statements of Cash Flows. Upon repayment, the cash received in settlement of such loans is classified within Operating Activities in the Company's Condensed Consolidated Statements of Cash Flows.

The issuance of Class A Common Stock resulting from the vesting of restricted stock units ("RSUs") is a non-cash financing activity. Refer to Note 15 — Share-Based Compensation for information related to share-based compensation.

Accounting Standards Not Yet Adopted

Income Taxes — In December 2023, the Financial Accounting Standards Board ("FASB") issued Accounting Standards Update ("ASU") No. 2023-09 - Income Taxes (ASC 740), Improvements to Income Tax Disclosures, which enhances the transparency and decision usefulness of income tax disclosures through changes to the rate reconciliation and income taxes paid information. ASU No. 2023-09 modifies the rules on income tax disclosures to require entities to disclose (i) specific categories in the rate reconciliation, (ii) the income or loss from continuing operations before income tax expense or benefit (separated between domestic and foreign), and (iii) income tax expense or benefit from continuing operations (separated by federal, state and foreign). ASU No. 2023-09 also requires entities to disclose their income tax payments to international, federal, state and local jurisdictions, among other changes. ASU No. 2023-09 is effective for annual periods beginning after December 15, 2024. The Company will adopt ASU No. 2023-09 starting with the Annual Report on Form 10-K for the year ended December 31, 2025. Upon adoption, the Company will include the required additional disclosures in its Consolidated Financial Statements.

Income Statement Expenses — In November 2024, the FASB issued ASU No. 2024-03, Disaggregation of Income Statement Expenses (ASC 220-40), which enables investors to better understand an entity's performance, assessing an entity's prospects for future cash flows, and comparing an entity's performance over time and with that of other entities. ASU No. 2024-03 primarily requires entities to disaggregate, in the notes to financial statements, any relevant expense caption presented in the statement of operations within continuing operations into the following required natural expense categories: purchases of inventory, employee compensation, depreciation, and intangible asset amortization. The new standard does not change the presentation of expense information in the statement of operations. ASU 2024-03 is effective for annual periods beginning after December 15, 2026. The Company is still assessing the impact of ASU No. 2024-03 and, upon adoption, the Company may be required to include certain additional disclosures in its Consolidated Financial Statements.

2 — Revenue

Disaggregation of Revenue — The tables below present the Company's revenue by distribution channel, as well as a reconciliation to total revenue for the three months ended March 31, 2025 and 2024. Commission and fee revenue and contingent commission revenue earned from the agent distribution channel includes revenue generated through the Company's insurance distribution partnerships, as well as its relationships with independent agents and brokers. Commission and fee revenue and contingent commission revenue earned from the direct distribution channel includes revenue generated by Hagerty's employee agents.

14

	Three months ended March 31, 2025
	Agent		Direct		Total
	in thousands
Commission and fee revenue	$	49,092	$	40,078	$	89,170
Contingent commission revenue	5,784		5,333		11,117
Membership revenue	—		15,346		15,346
Marketplace revenue	—		27,136		27,136
Other revenue	—		5,623		5,623
Total revenue from customer contracts	54,876		93,516		148,392
Earned premium (recognized under ASC 944)					169,355
Finance revenue (recognized under ASC 310)					1,846
Total revenue					$	319,593

	Three months ended March 31, 2024
	Agent		Direct		Total
	in thousands
Commission and fee revenue	$	44,047	$	35,719	$	79,766
Contingent commission revenue	5,016		4,058		9,074
Membership revenue	—		13,452		13,452
Marketplace revenue	—		8,925		8,925
Other revenue	—		7,286		7,286
Total revenue from customer contracts	49,063		69,440		118,503
Earned premium (recognized under ASC 944)					151,619
Finance revenue (recognized under ASC 310)					1,586
Total revenue					$	271,708

The following tables present Hagerty's revenue disaggregated by geographic area, as well as a reconciliation to total revenue for the three months ended March 31, 2025 and 2024:

	Three months ended March 31, 2025
	U.S.		Canada		Europe		Total
	in thousands
Commission and fee revenue	$	84,966	$	2,884	$	1,320	$	89,170
Contingent commission revenue	10,854		—		263		11,117
Membership revenue	14,388		954		4		15,346
Marketplace revenue	24,512		13		2,611		27,136
Other revenue	5,170		166		287		5,623
Total revenue from customer contracts	139,890		4,017		4,485		148,392
Earned premium (recognized under ASC 944)							169,355
Finance revenue (recognized under ASC 310)							1,846
Total revenue							$	319,593

15

	Three months ended March 31, 2024
	U.S.		Canada		Europe		Total
	in thousands
Commission and fee revenue	$	76,016	$	2,617	$	1,133	$	79,766
Contingent commission revenue	9,028		—		46		9,074
Membership revenue	12,544		908		—		13,452
Marketplace revenue	8,404		472		49		8,925
Other revenue	6,817		167		302		7,286
Total revenue from customer contracts	112,809		4,164		1,530		118,503
Earned premium (recognized under ASC 944)							151,619
Finance revenue (recognized under ASC 310)							1,586
Total revenue							$	271,708

Refer to Note 11 — Reinsurance for information regarding "Earned premium" recognized under ASC Topic 944, Financial Services - Insurance ("ASC 944").

Contract Assets and Liabilities — The following table is a summary of the Company's contract assets and liabilities as of March 31, 2025 and December 31, 2024:

	March 31,		December 31,
	2025		2024
	in thousands
Contract assets	$	10,851	$	15,860
Contract liabilities	$	47,612	$	47,239

Contract assets, which are reported within "Commissions receivable" on the Condensed Consolidated Balance Sheets, primarily consist of contingent underwriting commission ("CUC") receivables, which are earned throughout the year with 80% of the CUC receivables from Markel Group Inc. ("Markel") settled monthly and the remaining 20% settled annually.

Contract liabilities consist of cash collected in advance of revenue recognition and primarily includes the unrecognized portion of HDC membership fees, the unrecognized portion of the advanced commission payment received from State Farm Mutual Automobile Insurance Company ("State Farm"), and, to a much lesser extent, cash collected in advance of the completion of marketplace private sales. Refer to Note 18 — Related-Party Transactions for additional information regarding the Company's master alliance agreement with State Farm.

3 — Investments

The Company holds a diversified investment portfolio, consisting of fixed maturity securities and, to a much lesser extent, equity securities, with the fixed maturity securities classified as available-for-sale. As of March 31, 2025, all fixed maturity securities had an investment grade rating from at least one nationally recognized rating organization.

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Available-for-sale investments

The following tables summarize the Company's available-for-sale investments as of March 31, 2025 and December 31, 2024:

	March 31, 2025
	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses		Estimated Fair Value
Fixed maturity securities:	in thousands
Corporate	$	225,378	$	2,584	$	(503)	$	227,459
U.S. Treasury	149,666		531		(369)		149,828
States and municipalities	29,762		653		—		30,415
Foreign	18,615		115		(6)		18,724
Asset-backed securities	26,454		369		(59)		26,764
Mortgage-backed securities	120,802		1,514		(709)		121,607
Total fixed maturity securities	$	570,677	$	5,766	$	(1,646)	$	574,797

	December 31, 2024
	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses		Estimated Fair Value
Fixed maturity securities:	in thousands
Corporate	$	230,917	$	1,226	$	(954)	$	231,189
U.S. Treasury	146,211		424		(760)		145,875
States and municipalities	31,543		134		(92)		31,585
Foreign	21,022		59		(24)		21,057
Asset-backed securities	23,625		175		(120)		23,680
Mortgage-backed securities	125,351		396		(1,445)		124,302
Total fixed maturity securities	$	578,669	$	2,414	$	(3,395)	$	577,688

On a quarterly basis, fixed maturity securities with unrealized losses are reviewed to determine whether the decline in fair value is attributable to a material credit loss. As of March 31, 2025, no credit loss allowance was recorded and all unrealized losses on available-for-sale fixed maturity securities were in such position for less than one year. It is management's intent to hold these investments to recovery, or maturity, if necessary, to recover the decline in valuation as prices accrete to par.

The following table summarizes the contractual maturities of the Company's available-for-sale investments as of March 31, 2025:

	Amortized Cost		Estimated Fair Value
	in thousands
Due in one year or less	$	93,420	$	93,683
Due after one year through five years	261,468		263,877
Due after five years through ten years	68,533		68,866
Mortgage-backed and asset-backed securities	147,256		148,371
Total fixed maturity securities	$	570,677	$	574,797

Expected maturities may differ from contractual maturities because borrowers may have the right to call or prepay obligations with or without call or prepayment penalties.

17

Net investment income

The following table presents the components of net investment income for the three months ended March 31, 2025 and 2024:

	Three months ended March 31,
	2025		2024
Interest income:	in thousands
Cash and cash equivalents and restricted cash and cash equivalents	$	2,160	$	9,068
Fixed maturity securities	6,985		157
Total interest income	9,145		9,225
Dividends on equity securities	40		—
Gross investment income	9,185		9,225
Investment expenses	(127)		—
Net investment income	$	9,058	$	9,225

Net realized and unrealized gains (losses) on investments

The table below presents the components of pre-tax net investment gains (losses) included in Net income in the Condensed Consolidated Statements of Operations and the pre-tax change in net unrealized gains (losses) included in the Condensed Consolidated Statements of Comprehensive Income for the three months ended March 31, 2025. The gross amounts of realized investment gains and losses on fixed maturity securities were not material to the Condensed Consolidated Financial Statements and are presented on a net basis in the table below.

	Three months ended March 31, 2025
Fixed maturity securities:	in thousands
Net realized investment gains (losses)	$	215
Equity securities:
Total change in fair value of equity securities	(530)
Net investment gains (losses)	$	(315)
Change in net unrealized gains (losses) on available-for-sale investments included in Other comprehensive income (loss):
Fixed maturity securities	$	5,098

4 — Fair Value Measurements

Fair value measurements are classified within one of three levels in the fair value hierarchy. The level assigned to a fair value measurement is based on the lowest level input that management judges to be significant to the fair value measurement in its entirety.

The three levels of the fair value hierarchy are as follows:

•Level 1 — Quoted prices are available in active markets for identical assets or liabilities as of the reporting date. Active markets are those in which transactions for the asset or liability occur with sufficient frequency and volume to provide pricing information on an ongoing basis.

•Level 2 — Pricing inputs are other than quoted prices in active markets, which are either directly or indirectly observable as of the reporting date for substantially the full term of the asset or liability.

•Level 3 — Pricing inputs are unobservable, but management believes that such inputs are predicated on the assumptions market participants would use to measure the asset or liability at fair value.

The Company's policy is to recognize significant transfers between levels, if any, at the end of the reporting period. There were no transfers between levels during the current and prior reporting periods.

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Investments

Fixed maturity securities are classified as Level 2 within the fair value hierarchy and equity securities are classified as Level 1. The fair value of these investments is determined after considering various sources of information, including information provided by a third-party pricing service, which provides prices for substantially all of the Company's fixed maturity securities and equity securities. In determining fair value, the Company generally does not adjust the prices obtained from the pricing service. The Company obtains an understanding of the pricing service's valuation methodologies and related inputs, which include, but are not limited to, reported trades, benchmark yields, issuer spreads, bids, offers, duration, credit ratings, estimated cash flows, and prepayment speeds.

Refer to Note 3 — Investments for additional information related to the Company's investment portfolio.

Interest rate swap

In December 2020, the Company entered into an interest rate swap with an original notional amount of $35.0 million, a fixed swap rate of 0.81%, and a maturity date in December 2025. The interest rate swap was designated as a cash flow hedge and the Company formally documented the relationship between the interest rate swap and its variable rate borrowings, as well as its risk management objective and strategy for undertaking the hedge transaction. The Company also assessed whether the interest rate swap was highly effective in offsetting variability in the cash flows of its variable rate borrowings. The hedge was deemed highly effective at inception and on an ongoing basis; therefore, any changes in fair value were recorded within "Change in unrealized gain (loss) on interest rate swap" in the Condensed Consolidated Statements of Comprehensive Income. The differential paid or received on the interest rate swap agreement was recognized as an adjustment to interest expense within "Interest and other income (expense), net" in the Condensed Consolidated Statements of Operations.

The interest rate swap was classified as Level 2 within the fair value hierarchy. The significant inputs used to determine the fair value of the interest rate swap, such as the Secured Overnight Financing Rate ("SOFR") forward curve, are considered observable market inputs.

In the second quarter of 2024, the Company reduced its borrowings under the Prior JPM Credit Facility (as defined in Note 12 — Long-Term Debt) below the $35.0 million notional amount of the interest rate swap and, as a result, the interest rate swap was settled prior to its maturity date.

Warrant liabilities

The Company's Public Warrants were classified as Level 1 within the fair value hierarchy as they were measured utilizing quoted market prices. The Company's Private Warrants, Underwriter Warrants, OTM Warrants, and PIPE Warrants were classified as Level 3 within the fair value hierarchy. The Company utilized a Monte Carlo simulation model to measure the fair value of the Level 3 warrants. The Company's Monte Carlo simulation model included assumptions related to the expected stock price volatility, expected term, dividend yield, and risk-free interest rate.

The following table presents a reconciliation of the Company's warrant liabilities that were classified as Level 3 within the fair value hierarchy for the three months ended March 31, 2024:

	Private Warrants		Underwriter Warrants		OTM Warrants		PIPE Warrants		Total
	in thousands
Balance at December 31, 2023	$	476	$	53	$	3,981	$	20,020	$	24,530
Change in fair value of warrant liabilities	67		8		654		3,687		4,416
Balance at March 31, 2024	$	543	$	61	$	4,635	$	23,707	$	28,946

In July 2024, the Company completed an exchange offer under which holders of the Company's warrants were issued 3,876,201 shares of Class A Common Stock in exchange for 19,483,539 warrants, with a nominal cash settlement paid in lieu of fractional shares (the "Warrant Exchange"). No warrants remained outstanding following the completion of the Warrant Exchange.

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Summary of assets and liabilities measured at fair value

The fair values of the Company's financial assets and liabilities as of March 31, 2025 and December 31, 2024 are shown in the following tables:

	Estimated Fair Value as of March 31, 2025
	Total		Level 1		Level 2		Level 3
Financial Assets	in thousands
Investments:
Corporate	$	227,459	$	—	$	227,459	$	—
U.S. Treasury	149,828		—		149,828		—
States and municipalities	30,415		—		30,415		—
Foreign	18,724		—		18,724		—
Asset-backed securities	26,764		—		26,764		—
Mortgage-backed securities	121,607		—		121,607		—
Common stocks	11,309		11,309		—		—
Total	$	586,106	$	11,309	$	574,797	$	—
	Estimated Fair Value as of December 31, 2024
	Total		Level 1		Level 2		Level 3
Financial Assets	in thousands
Investments:
Corporate	$	231,189	$	—	$	231,189	$	—
U.S. Treasury	145,875		—		145,875		—
States and municipalities	31,585		—		31,585		—
Foreign	21,057		—		21,057		—
Asset-backed securities	23,680		—		23,680		—
Mortgage-backed securities	124,302		—		124,302		—
Common stocks	11,839		11,839		—		—
Total	$	589,527	$	11,839	$	577,688	$	—

5 — Notes Receivable

BAC provides financing solutions to qualified collectors and businesses by structuring loans secured by collector cars. The loans underwritten by BAC include term loans and short-term bridge financings. The loans underwritten by BAC are recorded on the Condensed Consolidated Balance Sheets within "Notes receivable".

Loans carry either a fixed or variable rate of interest and typically require periodic interest payments over the life of the loan with the principal amount due at maturity. Loans have an initial maturity of up to two years, often with an option for the borrower to renew for one year increments, provided the borrower remains in good standing, including maintaining a specified targeted loan-to-value ("LTV") ratio for the loan. As of March 31, 2025, the loans underwritten by BAC were classified as Level 3 within the fair value hierarchy, with the carrying values of the loans approximating their fair values due to the relatively short-term maturities and the variable interest rates associated with most loans. The lending activities of BAC are funded, in part, with borrowings drawn from the BAC Credit Facility, with the remainder funded by the Company's available liquidity. Refer to Note 12 — Long-Term Debt for additional information regarding the BAC Credit Facility.

BAC aims to mitigate the risk associated with a potential devaluation in collateral by targeting an LTV ratio of 65% or less (i.e., the principal loan amount divided by the estimated value of the collateral at the time of underwriting). The LTV ratio is reassessed on a quarterly basis or if the loan is renewed. The LTV ratio is reassessed more frequently if there is a material change in the circumstances related to the loan, including if there is a material change in the value of the collateral, a material change in the borrower's disposal plans for the collateral, or if an event of default occurs. If, as a result of this reassessment, the LTV ratio increases above the target level, the borrower may be asked to make principal payments and/or post sufficient additional collateral to reduce the LTV ratio as a condition of future financing, renewal, or to avoid a default. In the event of a default by a borrower, BAC is entitled to sell the collateral to recover the outstanding principal, accrued interest balance, and any expenses incurred with respect to the recovery process.

20

Management considers the valuation of the underlying collateral and the LTV ratio to be the two most critical credit quality indicators for the loans made by BAC. In estimating the value of the underlying collateral for BAC's loans, management utilizes its expertise in the collector car market and considers an array of factors impacting the current and expected sale value of each car including the year, make, model, mileage, history, and in the case of classic cars, the provenance, quality of restoration (if applicable), the originality of the body, chassis, and mechanical components, and comparable market transaction values.

The repayment of BAC's loans can be adversely impacted by a borrower's deteriorating financial circumstances, a decline in the collector car market in general or in the value of the collateral, which may be concentrated within certain marques, vintages, or types of cars. In addition, in situations when BAC's claim on the collateral is subject to a legal dispute, the ability to realize proceeds from the collateral may be limited or delayed.

As of March 31, 2025, BAC's net notes receivable balance was $73.2 million, of which $62.1 million was classified within current assets and $11.1 million was classified within long-term assets on the Condensed Consolidated Balance Sheets. As of December 31, 2024, BAC's net notes receivable balance was $57.0 million, of which $45.4 million was classified within current assets and $11.6 million was classified within long-term assets on the Condensed Consolidated Balance Sheets. The classification of a loan as current or long-term is based on the contractual maturity date of the loan as of the balance sheet date.

The table below provides the aggregate LTV ratio for BAC's loan portfolio as of March 31, 2025 and December 31, 2024:

	March 31,			December 31,
	2025			2024
	in thousands
Secured loans	$	73,192		$	56,972
Estimate of collateral value	$	123,486		$	95,778
Aggregate LTV ratio	59.3		%	59.5		%

As of March 31, 2025, four borrowers each had loan balances that exceeded 10% of the total loan portfolio. These loans total $36.9 million, representing 50% of the total loan portfolio. The collateral related to these loans was $61.7 million, resulting in an aggregate LTV ratio of 60%.

Management considers a loan to be past due when an interest payment is not paid within 10 business days of the monthly due date, or if the principal amount is not repaid by the contractual maturity date. Typically, a loan becomes past due only for a short period of time during which the loan is renewed or collateral is sold to satisfy the borrower's obligations. As of March 31, 2025 and December 31, 2024, the amount of past due principal and interest payments was not material.

A non-accrual loan is a loan for which future finance revenue is not recorded due to management's determination that it is probable that future interest on the loan will not be collectible. When a loan is placed on non-accrual status, any accrued interest receivable deemed not collectible is reversed against finance revenue. Any cash receipts subsequently received on non-accrual loans are first applied to reduce the recorded principal balance of the loan, with any proceeds in excess of the principal balance then applied to interest and expenses owed by the borrower. As of March 31, 2025 and December 31, 2024, there were no non-accrual loans.

As of March 31, 2025 and December 31, 2024, the allowance for expected credit losses related to the BAC loan portfolio was not material based on management's quarterly risk assessment, which takes into consideration a number of factors including the level of historical losses for similar loans, the quality of the collateral, the low LTV ratio of the loans, management's overall assessment of the current circumstances and risks related to each loan, and, to a lesser extent, the circumstances related to each borrower.

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6 — Other Assets

As of March 31, 2025 and December 31, 2024, other assets, current and long-term, consisted of:

	March 31,		December 31,
	2025		2024
	in thousands
Prepaid software-as-a-service ("SaaS") implementation costs	$	46,380	$	41,110
Prepaid sales, general and administrative expenses	22,227		20,134
Deferred reinsurance premiums ceded	26,806		18,521
Inventory (1)	14,418		18,484
Reinsurance recoverable	19,488		11,927
Other investments	10,571		10,312
Contract costs	9,498		9,399
Accrued investment income	4,031		4,827
Deferred financing costs related to revolving credit facilities	4,011		3,489
Other	8,017		9,464
Other assets	$	165,447	$	147,667

(1)    Inventory primarily includes vehicles owned by Broad Arrow that have been purchased for resale purposes.

As of March 31, 2025, Other primarily included $2.5 million of collector vehicle investments, $2.0 million related to capitalized digital media content, and a $1.5 million receivable related to a prior year divestiture. As of December 31, 2024, Other primarily included $2.5 million of collector vehicle investments, $2.2 million related to capitalized digital media content, and a $2.0 million tax receivable.

7 — Leases

The following table summarizes the components of the Company's operating lease expense for the three months ended March 31, 2025 and 2024:

	Three months ended March 31,
	2025		2024
	in thousands
Operating lease expense (1)	$	2,110	$	2,197
Short-term lease expense (1)	21		49
Variable lease expense (1) (2)	873		617
Sublease revenue (3)	(301)		(303)
Lease cost, net	$	2,703	$	2,560

(1)    Classified within "General and administrative expenses" in the Condensed Consolidated Statements of Operations.

(2)    Amounts include payments for maintenance, taxes, insurance, and payments affected by the Consumer Price Index.

(3)    Classified within "Membership, marketplace and other revenue" in the Condensed Consolidated Statements of Operations.

22

The following tables summarize supplemental balance sheet information related to operating leases as of March 31, 2025 and December 31, 2024:

	March 31,			December 31,
	2025			2024
	in thousands
Operating lease ROU assets	$	43,433		$	44,485
Current lease liabilities (1)	6,746			6,715
Long-term lease liabilities	41,956			43,178
Total operating lease liabilities	$	48,702		$	49,893
	March 31,			December 31,
	2025			2024
	in thousands
ROU assets obtained in exchange for new operating lease liabilities	$	417		$	1,317
Weighted average lease term	8.08			8.23
Weighted average discount rate	5.0		%	5.0		%

(1)    Current lease liabilities are recorded within "Accounts payable, accrued expenses and other current liabilities" on the Condensed Consolidated Balance Sheets.

The following table summarizes information about the amount and timing of the Company's future operating lease commitments as of March 31, 2025:

	in thousands
2025	$	6,826
2026	8,400
2027	8,013
2028	7,972
2029	6,163
Thereafter	22,432
Total lease payments	59,806
Less: imputed interest	(11,104)
Total lease liabilities	$	48,702

8 — Acquisition

On September 1, 2024, the Company's subsidiary, Hagerty Insurance Holdings, Inc., acquired all of the issued and outstanding capital stock of Consolidated National Insurance Company, which was subsequently renamed Drivers Edge, for a purchase price of $19.3 million, including $0.9 million in direct and incremental transaction costs. The acquisition of Drivers Edge was accounted for as an asset acquisition with the $19.3 million purchase price allocated to approved state licenses ($11.3 million), cash and cash equivalents ($3.9 million), restricted fixed maturity securities ($3.7 million), and restricted cash and cash equivalents ($0.4 million).

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9 — Intangible Assets

The cost and accumulated amortization of intangible assets as of March 31, 2025 and December 31, 2024 are as follows:

	March 31, 2025
	Weighted average useful life	Gross carrying amount		Accumulated amortization		Net carrying amount
		in thousands
Internally developed software	3.3	$	139,650	$	(88,388)	$	51,262
Renewal rights	9.9	19,228		(8,960)		10,268
Trade names and trademarks	14.1	12,061		(3,694)		8,367
State licenses (1)	Indefinite	11,263		—		11,263
Relationships and customer lists	15.4	7,977		(2,029)		5,948
Other	4.2	1,066		(1,052)		14
Total intangible assets		$	191,245	$	(104,123)	$	87,122

(1)    Represents approved state licenses related to the acquisition of Drivers Edge. Refer to Note 8 — Acquisition for additional details.

	December 31, 2024
	Weighted average useful life	Gross carrying amount		Accumulated amortization		Net carrying amount
		in thousands
Internally developed software	3.3	$	136,235	$	(82,903)	$	53,332
Renewal rights	9.9	19,187		(8,458)		10,729
Trade names and trademarks	14.1	12,061		(3,393)		8,668
State licenses (1)	Indefinite	11,263		—		11,263
Relationships and customer lists	15.4	7,975		(1,896)		6,079
Other	4.2	1,065		(1,029)		36
Total intangible assets		$	187,786	$	(97,679)	$	90,107

(1)    Represents approved state licenses related to the acquisition of Drivers Edge. Refer to Note 8 — Acquisition for additional details.

Intangible asset amortization expense was $6.4 million and $7.4 million for the three months ended March 31, 2025 and 2024, respectively.

Estimated future aggregate amortization expense related to intangible assets as of March 31, 2025 is as follows:

	in thousands
2025	$	17,252
2026	19,097
2027	15,626
2028	9,772
2029	4,729
Thereafter	9,383
Total	$	75,859

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10 — Provision for Unpaid Losses and Loss Adjustment Expenses

The following table presents a reconciliation of the beginning and ending provision for unpaid losses and loss adjustment expenses related to Hagerty Re, net of amounts recoverable from various reinsurers:

	Three months ended March 31,
	2025		2024
	in thousands
Gross reserves for unpaid losses and loss adjustment expenses, beginning	$	168,492	$	136,507
Less: Reinsurance recoverable on unpaid losses and loss adjustment expenses	5,769		2,235
Net reserves for unpaid losses and loss adjustment expenses, beginning	162,723		134,272
Incurred losses and loss adjustment expenses:
Current accident year	71,130		62,356
Total incurred losses and loss adjustment expenses	71,130		62,356
Payments:
Prior accident years	63		—
Total payments	63		—
Effect of foreign currency rate changes	102		(174)
Net reserves for unpaid losses and loss adjustment expenses, ending	233,892		196,454
Reinsurance recoverable on unpaid losses and loss adjustment expenses	17,948		7,621
Gross reserves for unpaid losses and loss adjustment expenses, ending	$	251,840	$	204,075

Losses and loss adjustment expenses for the three months ended March 31, 2025 includes approximately $10.4 million of pre-tax losses related to the Southern California Wildfires.

Reserving Methodology

The Company records an estimate of quarterly losses and loss adjustment expenses in the Condensed Consolidated Statements of Operations using an annual loss ratio, which is based on statistical analysis performed by our internal and external actuarial team that considers several factors, including projected levels of catastrophe events. Management believes this approach provides a more consistent view of loss experience over the year given the seasonality of Hagerty Re's business. The annual loss ratio is reviewed throughout the year and adjusted, as necessary.

The provision for unpaid losses and loss adjustment expenses recorded on the Condensed Consolidated Balance Sheets represents the difference between management's estimate of the ultimate cost of losses and loss adjustment expenses incurred by Hagerty Re and the amount of paid losses as of the reporting date. These reserves reflect management's best estimate of unpaid losses related to both reported claims and IBNR claims. These reserves also include management's best estimate of all expenses associated with processing and settling reported and unreported claims.

Reserves are reviewed by management quarterly and periodically throughout the year by combining historical results and current actual results to calculate new development factors. Claims are analyzed and reported based on the year in which the loss occurred (i.e., on an accident year basis). Accident year data is classified and utilized within actuarial models to prepare estimates of required reserves for payments to be made in the future.

When estimating reserves, the Company utilizes several actuarial reserving methods which consider historical claim reporting patterns, claim cycle time, claim frequency and severity, claims settlement practices, adequacy of case reserves over time, seasonality, and current economic conditions. Reserve estimates produced by various actuarial reserving methods are further analyzed to determine the actuarial central estimate which represents the expected value over the range of reasonably possible outcomes.

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11 — Reinsurance

The following table presents Hagerty Re's total premiums assumed and ceded on a written and earned basis for the three months ended March 31, 2025 and 2024:

	Three months ended March 31,
	2025		2024
	in thousands
Premiums written:
Assumed	$	175,511	$	157,114
Ceded	(19,860)		(22,826)
Net	$	155,651	$	134,288
Premiums earned:
Assumed	$	180,933	$	161,687
Ceded	(11,578)		(10,068)
Net	$	169,355	$	151,619

The following table presents gross, ceded, and net losses and loss adjustment expenses incurred for the three months ended March 31, 2025 and 2024:

	Three months ended March 31,
	2025		2024
	in thousands
Gross losses and loss adjustment expenses	$	83,326	$	67,742
Ceded losses and loss adjustment expenses	(12,196)		(5,386)
Net losses and loss adjustment expenses	$	71,130	$	62,356

Ceded Reinsurance

Hagerty Re purchases catastrophe reinsurance to protect its capital from large catastrophic events and to provide earnings protection and stability. Hagerty Re renegotiated its catastrophe reinsurance coverage effective January 1, 2025, with terms and limits similar to 2024. The 2025 catastrophe reinsurance program for accounts with total insured values ("TIV") of up to $5.0 million affords coverage in excess of a per event retention of $28.0 million in two layers; $27.0 million excess of $28.0 million, and $50.0 million excess of $55.0 million. Additionally, Hagerty Re purchases facultative reinsurance to cede a portion of the physical damage exposure related to certain high value vehicles.

Hagerty Re cedes 100% of its physical damage exposure on U.S. accounts written or renewed with TIV equal to or greater than $5.0 million ("High-Net-Worth Accounts") via quota share agreements with various reinsurers. These High-Net-Worth Accounts are assumed 100% from a wholly owned subsidiary of Markel. Certain reinsurers involved in these quota share agreements are related parties. Refer to Note 18 — Related-Party Transactions for additional information.

Hagerty Re receives ceding commissions related to premiums ceded under reinsurance contracts related to High-Net-Worth Accounts. Ceding commissions are recognized ratably over the terms of the related policies, which are generally 12 months, and are recorded within "Ceding commissions, net" in the Company's Condensed Consolidated Statements of Operations. Deferred portions of ceding commissions received are included in "Deferred acquisition costs, net" on the Company's Condensed Consolidated Balance Sheets.

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12 — Long-Term Debt

As of March 31, 2025 and December 31, 2024, "Long-term debt, net" consisted of the following:

		March 31,		December 31,
	Maturity	2025		2024
		in thousands
2025 JPM Credit Facility	March 2030	$	88,762	$	—
Prior JPM Credit Facility	October 2026	—		50,296
BAC Credit Facility	December 2026	32,115		30,193
State Farm Term Loan	September 2033	25,000		25,000
Notes payable	2025	815		792
Total debt		146,692		106,281
Less: BAC Credit Facility, current portion		(12,775)		—
Less: Notes payable, current portion		(815)		(792)
Less: Unamortized debt issuance costs related to the State Farm Term Loan		(506)		(521)
Total long-term debt, net		$	132,596	$	104,968

2025 JPM Credit Facility

In March 2025, THG entered into a credit agreement with JPMorgan Chase Bank, N.A. ("JPM"), as administrative agent, issuing bank and swingline lender, the foreign subsidiary borrowers thereto, and the other financial institutions party thereto as lenders (the "2025 JPM Credit Agreement").

The 2025 JPM Credit Agreement provides for a senior unsecured revolving credit facility (the "2025 JPM Credit Facility") with an aggregate borrowing capacity of $375.0 million. Additionally, the 2025 JPM Credit Agreement provides for (i) the issuance of letters of credit with a $175.0 million sublimit, (ii) borrowings in foreign currencies of up to a $100.0 million sublimit, and (iii) an uncommitted accordion feature of $75.0 million, plus an unlimited amount so long as THG's net leverage ratio is less than 3.25. The 2025 JPM Credit Agreement matures in March 2030, but may be extended if agreed to by THG and the lenders party thereto. Any unpaid balance on the 2025 JPM Credit Facility is due at maturity.

In connection with its entry into the 2025 JPM Credit Agreement, THG used proceeds from the 2025 JPM Credit Facility to repay in full all indebtedness, liabilities and other obligations outstanding under, and terminated, its prior credit agreement with JPMorgan Chase Bank, N.A., as administrative agent, issuing bank and swingline lender, the foreign subsidiary borrowers party thereto, and the other financial institutions party thereto as lenders (the "Prior JPM Credit Agreement"). THG incurred approximately $1.0 million of fees associated with its entry into the 2025 JPM Credit Agreement, which, along with the remaining unamortized fees associated with the Prior JPM Credit Agreement, will be amortized over the agreement's five-year term.

The 2025 JPM Credit Facility accrues interest at the applicable reference rate, primarily Term SOFR, depending on the currency of the borrowing plus an applicable margin determined by the Company's net leverage ratio for the preceding period (as defined in the 2025 JPM Credit Facility). The effective interest rate related to the 2025 JPM Credit Agreement and the Prior JPM Credit Agreement was 5.91% and 6.81% for the three months ended March 31, 2025 and 2024, respectively.

The 2025 JPM Credit Agreement requires THG to, among other things, meet certain financial covenants, including a minimum fixed charge coverage ratio test and a maximum leverage ratio test. As of March 31, 2025, THG was in compliance with these financial covenants.

As of March 31, 2025, the carrying value of the outstanding borrowings under the 2025 JPM Credit Facility approximated its fair value due to the variable interest rates associated with the outstanding borrowings.

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BAC Credit Facility

BAC and its wholly owned subsidiary BAC Funding 2023-1, LLC, as borrower, have a revolving credit agreement with a certain lender (the "BAC Credit Agreement"). The BAC Credit Agreement provides for a revolving credit facility (the "BAC Credit Facility"), which has an aggregate borrowing capacity of $75.0 million and is subject to a borrowing base that is determined based on the carrying value of certain BAC notes receivable. As of March 31, 2025, the applicable borrowing base for the BAC Credit Agreement was $32.1 million.

The revolving borrowing period provided by the BAC Credit Agreement expires in December 2025, after which an amortization period will begin when principal payments will be required to be made until the BAC Credit Facility ultimately matures in December 2026. The revolving borrowing period and the maturity date of the BAC Credit Agreement may be extended by one year if requested by BAC and agreed by the administrative agent. BAC is not a borrower or guarantor of the BAC Credit Facility.

In connection with the BAC Credit Agreement, BAC and certain of its subsidiaries may transfer originated notes receivable to wholly owned, bankruptcy remote SPEs to secure the borrowings. The assets transferred to SPEs are legally isolated from the Company and its other (non-SPE) subsidiaries. Accordingly, those assets are not available to satisfy the debts or other obligations of the Company and its other (non-SPE) subsidiaries and the Company's recourse under the BAC Credit Agreement is limited.

Recourse to the Company and its subsidiaries that originated and transferred notes receivable that represent collateral under the BAC Credit Facility is limited to (i) an obligation of the applicable seller to repurchase a note receivable if it is determined that there was a breach of any representation or warranty relating to such note receivable as of the relevant date specified in the related transfer agreement and (ii) a limited guarantee covering certain liabilities that may result under certain foreign exchange hedging activity of one of the SPEs.

BAC and BAC Funding 2023-1, LLC are required, among other things, to meet certain financial covenants under the BAC Credit Agreement, including that BAC, as the servicer, maintain a minimum tangible net worth, minimum liquidity balances, and an indebtedness to tangible net worth ratio. As of March 31, 2025, the Company was in compliance with the financial covenants under the BAC Credit Agreement.

As of March 31, 2025, the carrying value of the $32.1 million in outstanding borrowings under the BAC Credit Facility approximated its fair value due to the variable interest rates associated with the outstanding borrowings. The current portion of the outstanding BAC Credit Agreement borrowings is recorded within "Accounts payable, accrued expenses and other current liabilities" on the Condensed Consolidated Balance Sheets.

State Farm Term Loan

In September 2023, Hagerty Re entered into an unsecured term loan credit facility with State Farm in the aggregate principal amount of $25.0 million (the "State Farm Term Loan"). The State Farm Term Loan bears interest at a rate of 8.0% per annum and will mature in September 2033. State Farm is a related party to the Company. Refer to Note 18 — Related-Party Transactions for additional information.

Notes Payable

As of March 31, 2025 and December 31, 2024, the Company had outstanding notes payable, which are used to fund certain loans made by BAC in the United Kingdom ("U.K."), totaling $0.8 million. The effective interest rates for these notes payable is 9.8% with repayment due between August and October 2025. Refer to Note 5 — Notes Receivable for additional information on the lending activities of BAC.

Letters of Credit

As of March 31, 2025, the Company has authorized three letters of credit for a total of $10.8 million for operational purposes, primarily related to Hagerty Re's Section 953(d) tax structuring election, and to a much lesser extent, a requirement under a quota share agreement, and lease down payment support.

13 — Convertible Preferred Stock

In June 2023, the Company entered into a Securities Purchase Agreement (the "Purchase Agreement") with certain accredited investors (the "Investors"), pursuant to which it closed, issued and sold (the "Closing") to the Investors an aggregate of 8,483,561 shares of the Company's newly-designated Series A Convertible Preferred Stock, par value $0.0001 per share, for an aggregate purchase price of $80.0 million, at a per-share purchase price of $9.43 (the "Series A Purchase Price" and the transaction, the "Private Placement").

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The Investors include State Farm, Markel, and persons related to Hagerty Holding Corp. ("HHC"). State Farm and Markel are both significant stockholders of the Company, each holding in excess of 5% of the outstanding common stock. McKeel Hagerty is the Company's CEO and the Chairman of its Board of Directors (the "Board"). Mr. Hagerty and Tammy Hagerty may be deemed to control HHC, which is the controlling stockholder of the Company. Prior to and continuing after the Private Placement, each of State Farm and Markel have the right to nominate one director to the Company's Board and HHC has the right to nominate two directors to the Company's Board. Refer to Note 14 — Stockholders' Equity and Note 18 — Related-Party Transactions for additional information.

The net proceeds from the Private Placement after deducting issuance costs of approximately $0.8 million were $79.2 million, which was recorded within Temporary Equity on the Company's Condensed Consolidated Balance Sheets. The Company used the net proceeds from the Private Placement for general corporate purposes.

As of March 31, 2025, the estimated redemption value of the Series A Convertible Preferred Stock was $115.4 million, which represents the maximum cash payment, including cumulative dividends, that would be required to be paid if the Optional Term Redemption provision in the Certificate of Designations, as summarized below, is exercised as of the earliest possible redemption date of June 23, 2028. The decision to redeem the Series A Convertible Preferred Stock for cash is made at the discretion of the Company; however, the Company is controlled by HHC through its voting control of the Company. Accordingly, the redemption of the Series A Convertible Preferred Stock is considered outside the control of the Company and, as a result, the Series A Convertible Preferred Stock is recorded within Temporary Equity on the Company's Condensed Consolidated Balance Sheets.

The Company has elected to apply the accretion method to adjust the carrying value of the Series A Convertible Preferred Stock to its estimated redemption value. Amounts recognized to accrete the Series A Convertible Preferred Stock to its estimated redemption value are treated as a deemed dividend and are recorded as a reduction to "Additional paid-in capital". The estimated redemption value may vary in subsequent periods and the Company has elected to recognize such changes prospectively.

The captioned sections below provide a summary of the material terms of the Series A Convertible Preferred Stock, as set forth in the Certificate of Designations, Preferences and Rights of the Series A Convertible Preferred Stock (the "Certificate of Designations").

Ranking — The Series A Convertible Preferred Stock ranks senior to the Class A Common Stock, the Class V Common Stock, and each other class or series of shares of the Company that the Company may issue in the future the terms of which do not expressly provide that such class or series ranks equally with, or senior to, the Series A Convertible Preferred Stock, with respect to dividend rights and/or rights upon liquidation, winding up or dissolution.

Dividends — Dividends on the Series A Convertible Preferred Stock are cumulative and accrue from the date of issuance at the rate per annum of 7% of the Series A Purchase Price of each share, plus the amount of previously accrued dividends, compounded annually (the "Accruing Dividends"). The Company may elect to pay the Accruing Dividends either in cash or in additional shares of Series A Convertible Preferred Stock. Prior to the third anniversary of the Closing, the Series A Convertible Preferred Stock will participate on an as-converted basis in dividends declared and paid on the Class A Common Stock. In June 2024, the Company paid $5.6 million of cash dividends on the Series A Convertible Preferred Stock to the Investors.

Conversion — Any shares of Series A Convertible Preferred Stock may, at the option of the holder, be converted at any time into shares of Class A Common Stock. The conversion price for the Series A Convertible Preferred Stock is initially $11.79 and is subject to adjustment upon certain events, including a stock split, a reverse stock split, or a dividend of the Class A Common Stock or Class V Common Stock to the Company's common stockholders (as adjusted, the "Conversion Price"). The Company may require such conversion (i) if the closing price per share of Class A Common Stock, for at least twenty (20) of any thirty (30) consecutive trading days, exceeds: (a) on or after the third and prior to the seventh anniversary of the Closing, 150% of the Conversion Price; or (b) on or after the seventh and prior to the tenth anniversary of the Closing, 100% of the Conversion Price; and (ii) on or after the tenth anniversary of the Closing. The conversion rate in effect at any applicable time (the "Conversion Rate") is the quotient obtained by dividing the Series A Purchase Price by the Conversion Price.

As of March 31, 2025, no shares of Series A Convertible Preferred Stock had been converted and the outstanding shares of Series A Convertible Preferred Stock were convertible into 6,785,410 shares of Class A Common Stock.

Voting — The Series A Convertible Preferred Stock votes together with the Class A Common Stock on an as-converted basis, and not as a separate class. The Investors have veto rights over (i) changes to the terms of the Certificate of Designations or the Company's certificate of incorporation or bylaws that adversely impact the Series A Convertible Preferred Stock and (ii) the issuance of equity securities senior to the Series A Convertible Preferred Stock or other securities convertible thereto.

29

Liquidation Preference — In the event of any liquidation, dissolution or winding up of the Company, each share of Series A Convertible Preferred Stock will be paid the greater of (i) the Series A Purchase Price plus any Accruing Dividends accrued but unpaid thereon, and (ii) the amount that such share of Series A Convertible Preferred Stock would have received had it converted into the Class A Common Stock immediately prior to such liquidation, dissolution or winding up of the Company (the "Liquidation Preference"). After payment of the Liquidation Preference, the Series A Convertible Preferred Stock will no longer be convertible and will not participate in any distribution made to the holders of the Class A Common Stock or Class V Common Stock.

Change of Control — Upon a merger, consolidation, sale or other change of control transaction as described in the Certificate of Designations (a "Change of Control"), either (i) the Company may elect to redeem the Series A Convertible Preferred Stock or (ii) each holder of Series A Convertible Preferred Stock, individually, may require the Company to redeem all or any portion of the Series A Convertible Preferred Stock. The redemption price per share to be paid by the Company would be the greater of: (a) the Series A Purchase Price plus any accrued but unpaid Accruing Dividends multiplied by (i) if prior to or on the third anniversary of the Closing, 120%; (ii) if after the third but prior to or on the fifth anniversary of the Closing, 110%; (iii) if after the fifth anniversary of the Closing, 100%; and (b) the amount such share of Series A Convertible Preferred Stock would have received had it converted into the Class A Common Stock prior to the Change of Control. Any shares of Series A Convertible Preferred Stock that are not so redeemed will automatically convert into shares of Class A Common Stock and be paid in connection with the Change of Control.

Fundamental Transaction — In the event of any acquisition by the Company with a transaction value of at least $500.0 million or any equity or debt financing by the Company that raises at least $500.0 million, either (i) the Company may elect to redeem the Series A Convertible Preferred Stock, or (ii) each holder of Series A Convertible Preferred Stock, individually, may require the Company to redeem all or any portion of its Series A Convertible Preferred Stock. The redemption price per share to be paid by the Company would be the Series A Convertible Preferred Stock plus any accrued but unpaid Accruing Dividends multiplied by: (a) if prior to or on the third anniversary of the Closing, 120%; (b) if after the third but prior to or on the fifth anniversary of the Closing, 110%; (c) if after the fifth but prior to or on the sixth anniversary of the Closing, 108%; (d) if after the sixth but prior to or on the seventh anniversary of the Closing, 106%; (e) if after the seventh but prior to or on the eighth anniversary of the Closing, 104%; (f) if after the eighth but prior to or on the ninth anniversary of the Closing, 102%; or (g) if after the ninth anniversary of the Closing, 100%.

Optional Term Redemption — Any time after the fifth anniversary of the Closing, the Company may redeem all or any portion of the then-outstanding shares of the Series A Convertible Preferred Stock for cash (a "Term Redemption"). The redemption price per share to be paid by the Company would be equal to the greater of: (i) the Series A Purchase Price plus any accrued but unpaid Accruing Dividends multiplied by: (a) if after the fifth but prior to the sixth anniversary of the Closing, 110%; (b) if on or after the sixth but prior to the seventh anniversary of the Closing, 108%; (c) if on or after the seventh but prior to the eighth anniversary of the Closing, 106%; (d) if on or after the eighth but prior to the ninth anniversary of the Closing, 104%; (e) if on or after the ninth but prior to tenth anniversary of the Closing, 102%; or (f) if on or after the tenth anniversary of the Closing, 100%; and (ii) the amount such share of Series A Convertible Preferred Stock would have received had it converted into Class A Common Stock prior to the Term Redemption.

Registration Rights Agreement — In connection with the Private Placement, the Company entered into a registration rights agreement with the Investors (the "Registration Rights Agreement") pursuant to which, the Investors will be entitled to certain demand, shelf and piggyback registration rights with respect to the Series A Convertible Preferred Stock and shares of the Class A Common Stock issuable upon conversion thereof.

14 — Stockholders' Equity

Class A Common Stock

Hagerty, Inc. is authorized to issue 500,000,000 shares of Class A Common Stock with a par value of $0.0001 per share. Holders of Class A Common Stock are entitled to one vote for each share. As of March 31, 2025 and December 31, 2024, there were 90,064,663 and 90,032,391 shares of Class A Common Stock issued and outstanding, respectively.

Class V Common Stock

Hagerty, Inc. is authorized to issue 300,000,000 shares of Class V Common Stock with a par value of $0.0001 per share. Class V Common Stock represents voting, non-economic interests in Hagerty, Inc. Holders of Class V Common Stock are entitled to 10 votes for each share. In connection with the business combination that formed Hagerty, Inc. in 2021, shares of Class V Common Stock were issued to HHC and Markel (together, the "Legacy Unit Holders") along with an equivalent number of THG units, as discussed below under "Exchange of THG Units". Each share of Class V Common Stock, together with the corresponding unit of THG, is exchangeable for one share of Class A Common Stock. As of March 31, 2025 and December 31, 2024, there were 251,033,906 shares of Class V Common Stock issued and outstanding.

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Preferred Stock

Hagerty, Inc. is authorized to issue 20,000,000 shares of Preferred Stock with a par value of $0.0001 per share. The Board has the authority to issue shares of Preferred Stock with such designations, voting and other rights and preferences as may be determined from time to time. As of March 31, 2025 and December 31, 2024, there were 8,483,561 shares of Preferred Stock issued and outstanding. Refer to Note 13 — Convertible Preferred Stock for additional information.

Non-controlling Interests

Hagerty, Inc. is the sole managing member of THG and, as a result, consolidates the financial statements of THG into its Condensed Consolidated Financial Statements. The Company reports a non-controlling interest representing the economic interest in THG held by other unit holders of THG. Hagerty, Inc. owns one THG unit for each share of Class A Common Stock outstanding.

The following table summarizes the changes in ownership of THG units for the periods presented:

	Three months ended March 31,
	2025		2024
THG units held by Hagerty, Inc.
Beginning of period	90,032,391		84,588,536
Issuance of shares under employee plans	8,272		67,003
Exchange of THG units for Class A Common Stock	24,000		—
End of period	90,064,663		84,655,539
Ownership percentage
Beginning of period	26.1	%	24.9	%
End of period	26.1	%	24.9	%
THG units held by other unit holders
Beginning of period	255,178,346		255,499,164
Exchange of THG units for Class A Common Stock	(24,000)		—
End of period	255,154,346		255,499,164
Ownership percentage
Beginning of period	73.9	%	75.1	%
End of period	73.9	%	75.1	%
Total THG units outstanding	345,219,009		340,154,703

At the end of each reporting period, THG equity attributable to Hagerty, Inc. and the non-controlling interest unit holders, respectively, is reallocated to reflect their current ownership in THG.

Share-Based Compensation

Employees of THG subsidiaries are awarded share-based compensation in the form of RSUs and performance restricted stock units ("PRSUs") under the Company's 2021 Stock Incentive Plan. Upon the vesting of these awards, the employees receive shares of Class A Common Stock and the Company is issued an equivalent number of THG units. Employees of THG subsidiaries may also participate in the Company's 2021 Employee Stock Purchase Plan under which these employees may purchase shares of Class A Common Stock at a discounted price and the Company is issued an equivalent number of THG units.

During the three months ended March 31, 2025 and 2024, the Company received 8,272 and 67,003, respectively, of THG units in connection with shares of Class A Common Stock that were issued as a result of share-based compensation awards vesting under the Company's 2021 Stock Incentive Plan. No shares of Class A Common Stock were issued related to the Company's 2021 Employee Stock Purchase Plan during the three months ended March 31, 2025 and 2024.

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Exchange of THG Units

Each THG unit and, if applicable, the associated share of Class V Common Stock, is exchangeable for one share of Class A Common Stock. Accordingly, in connection with any such exchange, Hagerty, Inc. receives a corresponding number of THG units, thereby increasing its ownership interest in THG. Changes in Hagerty, Inc.'s ownership interest in THG while retaining its controlling interest are accounted for as equity transactions. Accordingly, exchanges of THG units by unit holders other than Hagerty, Inc. increase Hagerty, Inc.'s ownership in THG, thereby reducing the amount recorded as "Non-controlling interest" and increasing "Additional paid-in capital".

During the three months ended March 31, 2025, 24,000 THG units were exchanged for an equal number of shares of Class A Common Stock. These exchanges resulted in reductions to "Non-controlling interest" and corresponding increases to "Additional paid-in capital" of $0.2 million representing the fair value of Class A Common Stock on the date of each exchange. No THG units were exchanged during the three months ended March 31, 2024.

THG Preferred Units

In connection with the Private Placement, the Fourth Amended and Restated Limited Liability Company Agreement of THG was amended and restated in the form of a Fifth Amended and Restated Limited Liability Company Agreement (as subsequently amended and restated, the "THG LLC Agreement"), to, among other things, create a new series of preferred units within THG (the "THG Preferred Units"). The terms of the THG Preferred Units parallel the terms of the Series A Convertible Preferred Stock and are held entirely by Hagerty, Inc.

The THG Preferred Units are recorded on the financial statements of THG based on their estimated redemption value, which represents the maximum cash payment, including cumulative dividends, that would be required to be paid to Hagerty, Inc. if the Optional Term Redemption of the Series A Convertible Preferred Stock is exercised. Amounts recognized to accrete the THG Preferred Units to their estimated redemption value are treated as a deemed dividend due to Hagerty, Inc. The amount of this deemed dividend is attributed entirely to Hagerty, Inc. prior to allocating the remainder of THG's net income between controlling and non-controlling interests. In June 2024, THG paid $5.6 million of cash dividends to Hagerty, Inc. on the THG Preferred Units. Refer to Note 13 — Convertible Preferred Stock for additional information on the Private Placement and the Series A Convertible Preferred Stock.

Distributions to Unit Holders of THG

Under the terms of the THG LLC Agreement, THG is obligated to make tax distributions to its unit holders. During the three months ended March 31, 2025, THG made tax distributions of $24.7 million to non-controlling interest unit holders and $9.7 million of tax distributions to Hagerty, Inc. There were no such tax distributions during the three months ended March 31, 2024.

15 — Share-Based Compensation

The Company's 2021 Stock Incentive Plan provides for the issuance of up to approximately 38.3 million shares of Class A Common Stock to employees and non-employee directors. The 2021 Stock Incentive Plan allows for the issuance of incentive stock options, non-qualified stock options, restricted stock awards, stock appreciation rights, RSUs, and PRSUs. As of March 31, 2025, there were approximately 27.6 million shares available for future grants under the 2021 Stock Incentive Plan.

Share-based compensation expense related to employees is recognized within "Salaries and benefits" in the Condensed Consolidated Statements of Operations. Share-based compensation expense related to non-employee directors is recognized within "General and administrative expenses" in the Condensed Consolidated Statements of Operations. The Company recognizes forfeitures of share-based compensation awards in the period in which they occur.

The following table summarizes share-based compensation expense recognized during the three months ended March 31, 2025 and 2024:

	Three months ended March 31,
	2025		2024
	in thousands
Restricted stock units	$	3,202	$	3,828
Performance restricted stock units	1,190		715
Total share-based compensation expense	$	4,392	$	4,543

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Restricted Stock Units

RSUs typically vest over a two to five-year period based on the requisite service period. The grant date fair value is determined based on the closing market price of the Class A Common Stock on the business day prior to the grant date and the related share-based compensation expense is recognized over the requisite service period on a straight-line basis.

The following table provides a summary of RSU activity during the three months ended March 31, 2025.

	Restricted Stock Units	Weighted Average Grant Date Fair Value
Unvested balance as of December 31, 2024	3,682,679	$	9.65
Vested (1)	(12,819)	7.80
Forfeited	(32,345)	9.32
Unvested balance as of March 31, 2025	3,637,515	$	9.66

(1)    For the three months ended March 31, 2025, 8,272 shares of Class A Common Stock were issued related to the vesting of RSUs in the period, net of shares withheld for the funding of employee tax obligations.

The following table provides additional data related to RSU award activity during the three months ended March 31, 2025 and 2024:

	Three months ended March 31,
	2025		2024
	in thousands (except years)
Total fair value of shares vested (1)	$	100	$	711
Unrecognized compensation expense	$	25,512	$	27,355
Weighted-average period awards are expected to be recognized (in years)	2.72		3.38

(1)    The tax impact related to vested RSUs for the three months ended March 31, 2025 and 2024 was not material to the Company's Condensed Consolidated Financial Statements due to the full valuation allowance on the deferred tax asset for the investment in the assets of THG.

Performance Restricted Stock Units

Market Condition PRSUs

In April 2022, the Company's CEO was granted 3,707,136 market condition PRSUs, which provide him the opportunity to receive up to 3,707,136 shares of Class A Common Stock. The award had a grant date fair value of approximately $19.2 million, which was estimated using a Monte Carlo simulation model. These PRSUs have both market-based and service-based vesting conditions. Shares of Class A Common Stock issuable under this award can be earned based on the achievement of the following stock price targets: (i) 25% of the shares can be earned when the stock price of the Class A Common Stock exceeds $20.00 per share for 60 consecutive days, (ii) 25% of the shares can be earned when the stock price of the Class A Common Stock exceeds $25.00 per share for 60 consecutive days, and (iii) 50% of the shares can be earned when the stock price of the Class A Common Stock exceeds $30.00 per share for 60 consecutive days. These market-based conditions must be met in order for the PRSUs to vest; therefore, it is possible that no shares will ultimately vest. If any of the market-based conditions are met, the PRSUs will vest contingent upon continued service through the earlier of three years after achievement of the stock price target or the end of the seven-year performance period. As of March 31, 2025, no market condition PRSUs had vested.

The Company will recognize the entire $19.2 million of compensation expense for this award over the requisite service period, regardless of whether such market-based conditions are met. As of March 31, 2025, unrecognized compensation expense related to this award was $10.6 million, which the Company expects to recognize over a period of 4.00 years.

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The following table summarizes the assumptions and related information used to determine the grant-date fair value of the market condition PRSUs awarded in April 2022:

Inputs	Performance Restricted Stock Units
Weighted average grant-date fair value per share	$5.19
Expected stock volatility	35%
Expected term (in years)	7.0
Risk-free interest rate	2.5%
Dividend yield	—%

Performance Condition PRSUs

In March 2024, the Talent, Culture, and Compensation Committee (the "Compensation Committee") of the Board adopted a new form of PRSU award agreement (the "2024 PRSU Agreement") to be used for awards of PRSUs to certain employees under the Company's 2021 Stock Incentive Plan.

PRSUs granted under the 2024 PRSU Agreement will be eligible to vest subject to the satisfaction of both performance-based and service-based conditions. The performance-based vesting condition will be satisfied contingent upon the Company's level of performance over the designated performance period (the "Performance Period") as measured against a financial performance target (the "Performance Target"), each as determined by the Compensation Committee. Following the end of the Performance Period, the Compensation Committee will determine the applicable attained performance level with payout percentages ranging from 35% to 200% (each, a "Payout Percentage") of the target number of PRSUs awarded. In the event of a Change in Control (as defined in the 2024 PRSU Agreement) before the end of a scheduled Performance Period, the Compensation Committee retains discretion to end the Performance Period early and measure performance levels as of a revised measurement date.

If both the service-based and performance-based vesting conditions are satisfied, the PRSU holder will be entitled to receive the number of shares of Class A Common Stock, if any, determined by multiplying the aggregate number of PRSUs subject to the applicable PRSU Agreement by the applicable Payout Percentage that corresponds to the level of achievement of the Performance Target pursuant to the payout formula approved by the Compensation Committee.

The amount of compensation expense ultimately recognized for PRSUs issued under the 2024 PRSU Agreement will be based on the Company's ultimate performance relative to the Performance Target. The amount of compensation expense recognized prior to the end of the Performance Period is dependent upon management's assessment of the likelihood of achieving the applicable payout levels. If, as a result of management's assessment, it is projected that a greater number of PRSUs will vest than previously anticipated, a life-to-date adjustment to increase compensation expense is recorded in the period when such determination is made. Conversely, if, as a result of management's assessment, it is projected that a lower number of PRSUs will vest than previously anticipated, a life-to-date adjustment to decrease compensation expense is recorded in the period when such determination is made.

The following table provides a summary of the activity related to PRSUs granted under the 2024 PRSU Agreement during the three months ended March 31, 2025. No shares were granted or forfeited during the three months ended March 31, 2025.

	Performance Restricted Stock Units	Weighted Average Grant Date Fair Value
Unvested balance as of December 31, 2024	295,166	$	9.33
Granted	—	—
Forfeited	—	—
Unvested balance as of March 31, 2025	295,166	$	9.33

As of March 31, 2025, the maximum number of shares of Class A Common Stock that may be issued with respect to PRSUs granted under the 2024 PRSU Agreement is 590,332, assuming full achievement of the Performance Target.

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The following table provides additional data related to performance condition PRSU award activity during the three months ended March 31, 2025:

	Three months ended March 31,
	2025
	in thousands (except years)
Total fair value of shares vested	$	—
Unrecognized compensation expense	$	3,691
Weighted-average period awards are expected to be recognized (in years)	2.00

Employee Stock Purchase Plan

The 2021 Employee Stock Purchase Plan (the "ESPP") allows substantially all of the Company's employees to purchase shares of Class A Common Stock at a discount. As of March 31, 2025, 228,316 shares had been purchased under the ESPP and there were approximately 11.3 million shares available for future purchases.

16 — Earnings Per Share

Basic earnings (loss) per share is calculated under the Two-Class Method using basic Net income (loss) available to Class A Common Stockholders, divided by the weighted average number of shares of Class A Common Stock outstanding during the period.

Diluted earnings (loss) per share is calculated using diluted Net income (loss) available to Class A Common Stockholders divided by the weighted average number of shares of Class A Common Stock outstanding during the period, adjusted to give effect to potentially dilutive securities.

The Company's potentially dilutive securities consist of (i) unvested share-based compensation awards, shares issuable under the employee stock purchase plan, and unexercised warrants (prior to completion of the Warrant Exchange) with the dilutive effect calculated using the Treasury Stock Method, and (ii) non-controlling interest THG units and Series A Convertible Preferred Stock, with the dilutive effect calculated using the more dilutive of the If-Converted Method and the Two-Class Method.

In periods in which the Company reports a net loss attributable to Class A Common Stockholders, diluted net loss per share attributable to Class A Common Stockholders would be equal to basic net loss per share because potentially dilutive shares of Class A Common Stock are not assumed to be issued if their effect is anti-dilutive.

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The following table summarizes the basic and diluted earnings (loss) per share calculations for the three months ended March 31, 2025 and 2024:

	Three months ended March 31,
	2025		2024
	in thousands (except per share amounts)
Earnings (Loss) Per Share of Class A Common Stock, Basic
Net income (loss) available to Class A Common Stockholders	$	6,041	$	(3,189)
Weighted-average shares of Class A Common Stock outstanding	90,047		84,656
Earnings (loss) per share of Class A Common Stockholders, Basic	$	0.07	$	(0.04)
Earnings (Loss) Per Share of Class A Common Stock, Diluted
Net income (loss) available to Class A Common Stockholders	$	22,786	$	(3,189)
Weighted-average shares of Class A Common Stock outstanding	346,311		84,656
Earnings (loss) per share of Class A Common Stockholders, Diluted	$	0.07	$	(0.04)
Net income (loss) available to Class A Common Stockholders
Net income	$	27,293	$	8,199
Net income attributable to non-controlling interest	(18,922)		(9,550)
Accretion of Series A Convertible Preferred Stock	(1,875)		(1,838)
Undistributed earnings allocated to Series A Convertible Preferred Stock	(455)		—
Net income (loss) available to Class A Common Stockholders, Basic	6,041		(3,189)
Undistributed earnings allocated to Series A Convertible Preferred Stock	—		—
Adjustment for potentially dilutive THG units	16,685		—
Adjustment for potentially dilutive Series A Convertible Preferred Stock	—		—
Adjustment for potentially dilutive share-based compensation awards	60		—
Adjustment for potentially dilutive warrants	—		—
Net income (loss) available to Class A Common Stockholders, Diluted	$	22,786	$	(3,189)
Weighted Average Shares of Class A Common Stock Outstanding
Weighted average shares of Class A Common Stock outstanding, Basic	90,047		84,656
Adjustment for potentially dilutive THG units	255,172		—
Adjustment for potentially dilutive Series A Convertible Preferred Stock	—		—
Adjustment for potentially dilutive share-based compensation awards	1,092		—
Adjustment for potentially dilutive warrants	—		—
Weighted average shares of Class A Common Stock outstanding, Diluted	346,311		84,656

The following table summarizes the weighted average potential shares of Class A Common Stock excluded from diluted earnings (loss) per share of Class A Common Stock as their effect would be anti-dilutive:

	Three months ended March 31,
	2025	2024
	in thousands
THG units	—	255,499
Series A Convertible Preferred Stock	6,785	6,785
Unvested shares associated with share-based compensation awards	4,297	8,283
Warrants	—	19,484
Total	11,082	290,051

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17 — Taxation

United States — With the exception of certain U.S. corporate and foreign subsidiaries, THG is taxed as a pass-through ownership structure under provisions of the Internal Revenue Code ("IRC") and a similar section of state income tax law. As such, any taxable income or loss generated by THG is passed through to and included in the taxable income or loss of THG unit holders, including Hagerty, Inc.

Hagerty, Inc. is taxed as a corporation under the IRC and pays corporate, federal, state, and local taxes with respect to income allocated from THG. Hagerty, Inc., Hagerty Insurance Holdings, Inc., Broad Arrow, Hagerty Radwood, Inc., and various foreign subsidiaries are treated as taxable entities and income taxes are provided where applicable. Hagerty Insurance Holdings, Inc. files a consolidated tax return with its wholly owned corporate subsidiaries Hagerty Re and Drivers Edge.

Canada — Hagerty's Canadian entities are taxed as non-resident corporations and subject to income tax in Canada under provisions of the Canadian Revenue Agency.

United Kingdom — Hagerty's U.K. entities are taxed as corporations and subject to income tax in the U.K. under provisions of HM Revenue & Customs.

Bermuda — Hagerty Re made an irrevocable election under Section 953(d) of the IRC, as amended, to be taxed as a U.S. domestic corporation. As a result, Hagerty Re is subject to U.S. taxation on its world-wide income as if it were a U.S. corporation. In accordance with an agreement between Hagerty Re and the IRS, Hagerty Re established an irrevocable letter of credit with the Internal Revenue Service ("IRS") in 2021.

Tax Legislation — The Organisation for Economic Co-operation and Development has a framework to implement a global minimum corporate tax rate of 15% for companies with global revenues and profits above certain thresholds (referred to as "Pillar 2"). Certain aspects of Pillar 2 became effective on January 1, 2024 and other aspects became effective on January 1, 2025. While its uncertain whether the U.S. will enact legislation to adopt Pillar 2, certain countries in which the Company operates have adopted legislation, and other countries are in the process of introducing legislation to implement Pillar 2. While the Company's effective income tax rate and cash income tax payments could increase in future years as a result of the global minimum tax, management does not expect there will be a material impact to the Company's effective tax rate or its results of operations. The Company's assessment could be affected by legislative guidance and future enactment of additional provisions within the Pillar 2 framework.

Income Tax Expense — For the three months ended March 31, 2025 and 2024, income tax expense reflected in the Condensed Consolidated Statements of Operations differs from the tax computed by applying the statutory U.S. federal rate of 21% to "Income before income tax expense" as follows:

	Three months ended March 31,
	2025				2024
	in thousands (except percentages)
Income tax expense at statutory rate	$	6,884	21	%	$	2,799	21	%
State taxes	572		2	%	23		—	%
(Income) loss not subject to entity-level taxes	(915)		(3)	%	35		—	%
Foreign rate differential	505		2	%	(223)		(2)	%
Change in valuation allowance	(25)		—	%	1,002		8	%
(Gain) loss related to warrant liabilities, net	—		—	%	1,290		10	%
Permanent items	18		—	%	208		2	%
Effect of changes in tax rates	(1,312)		(4)	%	—		—	%
Other, net	(238)		(1)	%	(5)		—	%
Income tax expense	$	5,489	17	%	$	5,129	39	%

Deferred Tax Assets — As of March 31, 2025 and December 31, 2024, the Company had deferred tax assets of $146.2 million and $148.1 million, respectively, related to the difference between the outside tax basis and book basis of its investment in the assets of THG. The Company's deferred tax assets are reduced by a valuation allowance when management believes it is more likely than not that some, or all, of the deferred tax assets will not be realized.

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The Company evaluates the realizability of its deferred tax assets on a quarterly basis using all available evidence, both positive and negative. The realization of deferred tax assets is dependent on the Company's ability to generate sufficient future taxable income during periods prior to the expiration of tax attributes to fully utilize these assets. After considering all positive and negative evidence of taxable income in the carryback and carryforward periods, as permitted by law, as of March 31, 2025 and December 31, 2024, management concluded that it is more likely than not that certain deferred tax assets, including the deferred tax asset for the investment in the assets of THG, will not be realized. As a result, the Company recorded a valuation allowance of $174.6 million and $176.2 million against its deferred tax assets as of March 31, 2025 and December 31, 2024, respectively.

Given the Company's recent history of earnings and anticipated future earnings, management believes there is a reasonable possibility that, within the next twelve months, sufficient positive evidence may become available to allow management to reach a conclusion that a significant portion of the valuation allowance recorded against the U.S. deferred tax assets will be reversed. Reversal of the valuation allowance would result in the recognition of certain deferred tax assets and a decrease to income tax expense in the period the reversal is recorded. In addition, a corresponding increase to the estimated value of the liability related to the TRA Liability, may be required to be recognized with the resulting expense recorded within "Interest and other income (expense), net" in the Condensed Consolidated Statements of Operations. The exact timing and amount of the valuation allowance reversal, and any corresponding increase to the TRA Liability, are subject to change on the basis of the level of profitability that is actually achieved.

Tax Examinations — The Company is subject to taxation and files income tax returns in the U.S. federal jurisdiction, as well as many state and foreign jurisdictions. As of March 31, 2025, tax years 2020 to 2023 are subject to examination by various tax authorities. With few exceptions, as of March 31, 2025, the Company is no longer subject to U.S. federal, state, local or foreign examinations for years before 2020. THG is currently under audit by the IRS for the 2021 tax year.

The Canadian Revenue Agency closed its examinations of the Company for the 2018 tax year in March 2024 and for the 2020-2022 tax years in February 2025, with no changes to previously filed tax returns.

Uncertain Tax Positions — The calculation of the Company's tax liabilities involves uncertainties in the application of complex tax laws and regulations in a multitude of jurisdictions across its global operations. ASC Topic 740, Income Taxes ("ASC 740") states that a tax benefit from an uncertain tax position may be recognized when it is more likely than not that the position will be sustained upon examination, including resolutions of any related appeals or litigation processes, on the basis of the technical merits.

The Company records uncertain tax benefits ("UTB") as liabilities in accordance with ASC 740 and adjusts these liabilities when management's conclusion changes as a result of the evaluation of new information not previously available. Because of the complexity of some of these uncertainties, the ultimate resolution may result in a payment that is materially different from the current estimate of the UTB liabilities. These differences will be reflected as increases or decreases to income tax expense in the period in which new information is available.

As of March 31, 2025 and 2024, the Company did not have any unrecognized tax benefits and had no material accrued interest or penalties related to uncertain tax positions. If recorded, interest and penalties would be recorded within "Income tax expense" in the Condensed Consolidated Statements of Operations.

Tax Receivable Agreement Liability — In connection with the consummation of the business combination that formed Hagerty, Inc. in 2021, Hagerty, Inc. entered into a TRA with the Legacy Unit Holders. The TRA provides for payment to the Legacy Unit Holders of 85% of the U.S. federal, state and local income tax savings realized by Hagerty, Inc. as a result of the increases in tax basis and certain other tax benefits as outlined in the Business Combination Agreement upon the exchange of THG units and shares of Hagerty, Inc. Class V Common Stock for shares of Hagerty, Inc. Class A Common Stock or cash. The Business Combination Agreement is provided as Exhibit 2.1, incorporated by reference within Item 6. Exhibits, in this Quarterly Report. In connection with the filing of its 2019 income tax return THG made an election under Section 754 of the IRC for each taxable year in which TRA exchanges occur. This election cannot be revoked without the permission of the IRS Commissioner and will be in place for any future exchange of THG units. The remaining 15% cash tax savings resulting from the basis adjustments will be retained by Hagerty, Inc.

The amount and timing of any payments under the TRA will vary depending on a number of factors, including, but not limited to, the increase in tax basis of THG's assets, the timing of any future redemptions, exchanges or purchases of THG units held by Legacy Unit Holders, the price of Hagerty, Inc. Class A Common Stock at the time of the redemption, exchange or purchase, the extent to which redemptions or exchanges are taxable, the amount and timing of the taxable income that Hagerty, Inc. generates in the future, the tax rates then applicable, and the portion of the payments under the TRA constituting imputed interest.

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In general, under the TRA, cash tax savings result in a year when the tax liability of Hagerty, Inc. for the year, computed without regard to the deductions attributable to the amortization of the basis increase and other deductions that arise in connection with the payment of the cash consideration under the TRA or the exchange of THG units and shares of Hagerty, Inc. Class V Common Stock for shares of Hagerty, Inc. Class A Common Stock, would be more than the tax liability for the year taking into account such deductions. Payments under the TRA will not be due until the Company produces taxable income and the resulting cash tax liability is reduced by deducting the amortization of the basis increase on a filed tax return. The payments under the TRA are expected to be substantial.

As of March 31, 2025 and December 31, 2024, the estimated value of the TRA Liability was $2.0 million and $2.2 million, respectively, principally recorded within "Other long-term liabilities" on the Condensed Consolidated Balance Sheets. During the three months ended March 31, 2025, Hagerty, Inc. made TRA payments of $0.2 million to the Legacy Unit Holders. There were no such TRA payments during the three months ended March 31, 2024.

18 — Related-Party Transactions

As of March 31, 2025, Markel and State Farm had the following equity interests in Hagerty and, as a result, are considered related parties:

	Markel			State Farm
Equity Interest	Shares/Units	Percentage of total outstanding (1)		Shares/Units	Percentage of total outstanding (1)
Hagerty, Inc. Class A Common Stock	3,108,000	3.5	%	51,800,000	57.5	%
Hagerty, Inc. Class V Common Stock	75,000,000	29.9	%	—	—	%
Hagerty, Inc. Series A Convertible Preferred Stock	1,590,668	18.8	%	5,302,226	62.5	%
THG units	75,000,000	21.7	%	—	—	%
Controlling Interest	3,108,000	3.5	%	51,800,000	57.5	%
Non-controlling Interest	75,000,000	29.4	%	—	—	%

(1)    The percentages reflected represent only the ownership of the specific security identified in each row, and are not reflective of the total economic ownership in Hagerty.

Refer to Note 14 — Stockholders' Equity and Note 13 — Convertible Preferred Stock for a description of each equity interest in the table above.

Markel

Alliance Agreement

The Company and Markel have an alliance agreement (the "Markel Alliance Agreement") and associated agency agreement pursuant to which policies sold by Hagerty's U.S. MGAs are underwritten by Essentia Insurance Company and reinsured with Evanston Insurance Company ("Evanston"), both of which are wholly owned subsidiaries of Markel.

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The following tables provide information related to Markel-affiliated "Due to insurer" liabilities and "Commission revenue" associated with the Markel Alliance Agreement:

	March 31,			December 31,
	2025			2024
	in thousands (except percentages)
Due to insurer	$	103,458		$	78,792
Percent of total	94		%	94		%

	Three months ended March 31,
	2025			2024
	in thousands (except percentages)
Commission revenue	$	93,973		$	83,669
Percent of total	95		%	95		%

Refer to Note 2 — Revenue for information on related party balances within "Commissions receivable," which primarily consist of CUC receivables due from Markel.

Reinsurance Agreement

Hagerty Re has a quota share agreement with Evanston to assume approximately 80% of the risks written through the Company's U.S. MGAs, with the exception of High-Net-Worth Accounts in which Hagerty Re assumes 100% of the risk. Refer to Note 11 — Reinsurance for additional information on the Company's reinsurance programs.

The following tables summarize all balances related to the Company's reinsurance business with Markel subsidiaries:

	March 31,		December 31,
	2025		2024
Assets:	in thousands
Premiums receivable	$	171,650	$	150,436
Commissions receivable	1,125		489
Deferred acquisition costs, net	157,314		160,360
Other current assets	4,431		2,926
Total assets	$	334,520	$	314,211
Liabilities:
Accounts payable, accrued expenses and other current liabilities	$	1,995	$	806
Losses payable and provision for unpaid losses and loss adjustment expenses	239,662		254,422
Commissions payable	77,692		76,001
Unearned premiums	343,183		347,501
Total liabilities	$	662,532	$	678,730

	Three months ended March 31,
	2025		2024
Revenue:	in thousands
Earned premium	$	175,061	$	156,120
Expenses:
Ceding commission, net	$	79,467	$	72,363
Losses and loss adjustment expenses	79,911		65,155
Total expenses	$	159,378	$	137,518

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Pursuant to the terms of the quota share agreement with Evanston, Hagerty Re maintains assets in trust for the benefit of Evanston. These assets are included within "Restricted cash and cash equivalents" and "Investments" on the Company's Condensed Consolidated Balance Sheets. The assets held in trust for the benefit of Evanston totaled $576.6 million and $589.2 million as of March 31, 2025 and December 31, 2024, respectively.

State Farm

Alliance Agreement

Hagerty has a 10-year master alliance agreement and associated managing general underwriter agreement with State Farm, under which State Farm Classic+ policies are offered to State Farm's customers through State Farm agents. This program began issuing policies in four initial states in September 2023, with additional states planned for 2025 and 2026. Under the master alliance agreement, State Farm paid Hagerty an advanced commission of $20.0 million, which is being recognized as "Commission and fee revenue" over the remaining life of the arrangement. In addition, the Company is paid a commission for underwriting, binding coverage, and issuing State Farm Classic+ policies and can offer HDC memberships to State Farm Classic+ customers, providing Hagerty with an additional revenue opportunity. Commission revenue associated with State Farm Classic+ policies was not material to the Company's Condensed Consolidated Financial Statements for the three months ended March 31, 2025 and 2024.

Reinsurance Agreement

Hagerty Re has a quota share agreement to cede 50% of the risk assumed from a subsidiary of Markel in relation to High-Net-Worth Accounts to Oglesby Reinsurance Company, a wholly owned subsidiary of State Farm. Refer to Note 11 — Reinsurance for additional information on the Company's reinsurance programs.

The following tables summarize all balances related to the risk ceded by Hagerty Re to State Farm subsidiaries:

	March 31,		December 31,
	2025		2024
Assets:	in thousands
Commissions receivable	$	2,724	$	2,095
Deferred acquisition costs, net (1)	(4,854)		(4,448)
Other current assets (2)	18,532		14,758
Total assets	$	16,402	$	12,405
Liabilities:
Accounts payable, accrued expenses and other current liabilities	$	5,238	$	4,028
Total liabilities	$	5,238	$	4,028

(1)    Represents unearned ceding commission received from State Farm subsidiaries.

(2)    Represents unearned deferred ceded premium and reinsurance recoverables from State Farm subsidiaries.

	Three months ended March 31,
	2025		2024
Revenue:	in thousands
Earned premium (1)	$	(4,456)	$	(3,953)
Expenses:
Ceding commission, net (2)	$	(2,317)	$	(2,055)
Losses and loss adjustment expenses (3)	(6,087)		(2,791)
Total expenses	$	(8,404)	$	(4,846)

(1)    Represents premiums ceded to State Farm subsidiaries, which are accounted for as a reduction to "Earned premium".

(2)    Represents commissions from State Farm subsidiaries related to ceded reinsurance, which are accounted for as a reduction to "Ceding commissions, net".

(3)    Represents loss recoveries associated with reinsurance ceded to State Farm subsidiaries, which are accounted for as a reduction to "Losses and loss adjustment expenses".

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State Farm Term Loan

In September 2023, Hagerty Re entered into an unsecured term loan facility with State Farm in an aggregate principal amount of $25.0 million and an interest rate of 8.0% per annum. The State Farm Term Loan will mature in September 2033. Refer to Note 12 — Long-Term Debt for additional information.

Other Related Party Transactions

From time-to-time, in the ordinary course of business, related parties, such as members of the Board and management, purchase insurance policies from the Company, receive payments on claims required by the Company's insurance policies, and buy and sell collector cars and enthusiast vehicles through marketplace auctions or in private transactions.

19 — Commitments and Contingencies

Employee Compensation Agreements — In the ordinary course of conducting its business, the Company enters into certain employee compensation agreements from time to time which commit it to severance obligations in the event an employee terminates employment with the Company. If applicable, these obligations are included in the accrued expenses lines of the Condensed Consolidated Balance Sheets.

Litigation — From time to time, the Company is involved in various claims and legal actions that arise in the ordinary course of business. Management is required to assess the likelihood of any adverse judgments or outcomes related to these legal contingencies, as well as potential ranges of probable or reasonably possible losses. The determination of the amount of any losses to be recorded or disclosed as a result of these contingencies is based on a careful analysis of each individual exposure with, in some cases, the assistance of outside legal counsel. The amount of losses recorded or disclosed for such contingencies may change in the future due to new developments in each matter or a change in legal or settlement strategy. While the impact of any one or more legal claims or proceedings could be material to the Company's operating results in any period, management does not believe that the outcome of any of these pending claims or proceedings (including the data security incident discussed below), individually or in the aggregate, will have a material adverse effect on the Company's consolidated financial condition or liquidity.

Data Security Incident — In 2021, the Company experienced an unauthorized access into its online insurance quote feature whereby attackers used personal information already in their possession to obtain additional consumer data, including driver's license numbers. The unauthorized access issue has been remediated. This incident is the subject of coordinated industry-wide regulatory investigations in New York state. The Company could be subject to litigation, fines, penalties, and/or settlements related to this incident. In 2023, the Company accrued an estimated liability related to this incident based on the facts known by management and developed through its assessment of the current status of ongoing dialog with the regulatory investigators. The amount of the estimated liability is not material to the Company's Condensed Consolidated Financial Statements. The amount of any fines, penalties, and/or settlements related to this incident could differ from the amount currently accrued and such difference is not currently estimable.

20 — Subsequent Events

Management has evaluated subsequent events through May 7, 2025, which is the date these Condensed Consolidated Financial Statements were issued, and no material subsequent events were identified that are required to be reported.

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ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

The following discussion and analysis of our financial condition and results of operations should be read in conjunction with our Annual Report on Form 10-K ("Annual Report") and our Condensed Consolidated Financial Statements and related Notes included in Item 1 of Part I of this Quarterly Report. This discussion contains forward-looking statements based upon current expectations that involve risks and uncertainties. Please refer to the section in this Quarterly Report entitled "Cautionary Statement Regarding Forward-Looking Statements".

Overview

We are a market leader in providing insurance for collector cars and enthusiast vehicles. Through our insurance model, we act as a Managing General Agent ("MGA") by underwriting, selling, and servicing collector car and enthusiast vehicle insurance policies. Due to our consistent track record of delivering strong underwriting results, we then reinsure approximately 80% of the risks written by our MGA subsidiaries through our wholly owned subsidiary, Hagerty Reinsurance Limited ("Hagerty Re"). In addition, we offer Hagerty Drivers Club ("HDC") memberships, which are primarily bundled with our insurance policies and give subscribers access to an array of products and services, including emergency roadside assistance, Hagerty Drivers Club Magazine, automotive enthusiast events, our proprietary vehicle valuation tool, and special vehicle-related discounts. We also offer a marketplace to complement our insurance and membership offerings where automotive enthusiasts can buy, sell, and finance collector cars and enthusiast vehicles. Through these offerings, our vision is to be the world's most trusted and preferred brand for automotive enthusiasts to protect, buy, sell, and enjoy their special cars.

Business Review

We are reviewing certain components of our operations, which in 2023 and 2024 resulted in the sale or reorganization of certain businesses, including Hagerty Garage + Social, DriveShare, and Motorsport Reg ("MSR"). This initiative supports our strategy to prioritize investments and resources in the areas of our business that offer the strongest growth and profit potential. As a result of this review, in 2023, we recognized approximately $4.0 million of losses and impairments related to actions taken with respect to Hagerty Garage + Social and DriveShare. We may incur additional losses and/or impairment charges in future periods as a result of actions which we may take related to this review.

Financial Highlights

For the three months ended March 31, 2025, we reported Net income of $27.3 million, representing a $19.1 million, or 232.9%, increase compared to the prior year, and Adjusted EBITDA (a non-GAAP financial measure) of $39.6 million, representing a $12.3 million, or 44.9%, increase compared to the prior year. These improvements are primarily attributable to 11.9% growth in Written Premium, which drove a 12.9% increase in Commission and fee revenue and an 11.7% increase in Earned premium. The comparison to the prior year is also favorably impacted by a higher level of Broad Arrow inventory sales, including cars acquired from The Academy of Art University Collection, which were sold at auction in February 2025.

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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 Condensed Consolidated Financial Statements prepared in accordance with GAAP.

	Three months ended March 31,
	2025			2024			Change
Operational Metrics	dollars in thousands (except per share amounts)
Total Written Premium (1)	$	244,327		$	218,286		$	26,041		11.9	%
Hagerty Re Loss Ratio (2)	42.0		%	41.1		%	0.9		%	N/M
Hagerty Re Combined Ratio (3)	88.5		%	88.5		%	—		%	N/M
New Business Count — Insurance (4)	55,309			59,286			(3,977)			(6.7)	%
GAAP Financial Measures
Total Revenue	$	319,593		$	271,708		$	47,885		17.6	%
Operating Income	$	25,728		$	12,224		$	13,504		110.5	%
Net Income	$	27,293		$	8,199		$	19,094		232.9	%
Basic Earnings (Loss) Per Share	$	0.07		$	(0.04)		$	0.11		N/M
Diluted Earnings (Loss) Per Share	$	0.07		$	(0.04)		$	0.11		N/M
Non-GAAP Financial Measures
Adjusted EBITDA (5)	$	39,608		$	27,327		$	12,281		44.9	%
Adjusted Earnings Per Share (5)	$	0.08		$	0.04		$	0.04		100.0	%

N/M = Not meaningful

	March 31,		December 31,
	2025		2024		Change
Operational Metrics
Policies in Force (6)	1,524,927		1,506,451		18,476		1.2	%
Policies in Force Retention (7)	89.0	%	89.0	%	—	%	—	%
Vehicles in Force (8)	2,609,209		2,576,700		32,509		1.3	%
HDC Paid Member Count (9)	889,390		875,822		13,568		1.5	%
Net Promoter Score (10)	82		82		—		—	%

(1)    Total Written Premium is the total amount of insurance premium written by our MGA subsidiaries on behalf of our insurance carrier partners during the period. Total Written Premium reflects the direct economic benefit of our policy acquisition efforts and is closely correlated with the growth of insurance commission revenue generated by our MGA subsidiaries and earned premium generated by Hagerty Re.

(2)    Hagerty Re Loss Ratio is the ratio of (i) Hagerty Re's losses and loss adjustment expenses to (ii) its earned premium. Hagerty Re Loss Ratio allows us to evaluate our historical loss patterns and make necessary and appropriate adjustments. Refer to "Losses and Loss Adjustment Expenses" below within "Components of Our Results of Operations" for additional information regarding our quarterly estimate of losses and loss adjustment expenses.

(3)    Hagerty Re Combined Ratio is the ratio of (i) Hagerty Re's losses, loss adjustment expenses, and underwriting expenses to (ii) its earned premium. Hagerty Re's underwriting expenses primarily include ceding commissions paid to insurance carrier partners and, to a lesser extent, certain administrative expenses. Hagerty Re Combined Ratio provides a benchmark to evaluate underwriting profitability, including expense trends. A combined ratio under 100% indicates underwriting income while a combined ratio exceeding 100% indicates an underwriting loss.

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(4)    New Business Count represents the number of new insurance policies issued by our MGA subsidiaries during the period. New Business Count is an important metric to assess our financial performance because policy growth is critical to our success. While we benefit from strong policy retention through renewals, new policies more than offset those cancelled or non-renewed at expiration. New policies also often mean new relationships and an opportunity to sell additional products and services.

(5)    Refer to "Non-GAAP Financial Measures" below for a description of this non-GAAP financial measure and a reconciliation to the most comparable GAAP measure.

(6)    Policies in Force ("PIF") represents the number of current and active insurance policies as of the end of the period. PIF is an important metric to assess our financial performance because policy growth drives revenue growth, increases brand awareness and market penetration, generates additional insight to improve the performance of our platform, and provides key data to assist us in strategic decision making.

(7)    PIF Retention represents the percentage of expiring insurance policies that are renewed on the renewal effective date, calculated on a rolling twelve months basis. PIF Retention is an important measurement of the number of policies retained each year, which contributes to our recurring revenue streams including commissions earned by our MGA subsidiaries, HDC membership fees, and earned premium generated by Hagerty Re.

(8)    Vehicles in Force represents the number of current insured vehicles as of the end of the period. Vehicles in Force is an important metric to assess our financial performance because insured vehicle growth drives revenue growth and increases market penetration.

(9)    HDC Paid Member Count represents the number of current Members who pay an annual membership subscription as of the end of the period. HDC Paid Member Count is an important metric because it helps us measure membership revenue growth and provides an opportunity to customize our value proposition and benefits to specific types of enthusiasts, both by demographic and vehicle interest.

(10)    Net Promoter Score ("NPS") is an important measure of the overall strength of our relationship with insurance policyholders and paid HDC subscribers (collectively referred to as "Members"). NPS is measured twice annually through a web-based survey sent by email invitation to a random sample of existing Members, which currently excludes customers in our marketplace business, and is reported annually using an average of the two surveys. Often referred to as a barometer of brand loyalty and engagement, NPS is well-known in our industry as a strong indicator of growth and retention.

Components of Our Results of Operations

Revenue

Commission and fee revenue

We generate commission and fee revenue through our MGA subsidiaries, primarily from the underwriting, sale, and servicing of collector car and enthusiast vehicle insurance policies on behalf of our insurance carrier partners. Commissions are earned for both new and renewed policies. Commission and fee revenue is earned when the policy becomes effective, net of allowances for policy changes and cancellations.

Under the terms of our contracts with certain insurance carrier partners, we have the opportunity to earn a contingent underwriting commission based on the results of the book of business, including the level of written or earned premium and loss ratio. Contingent underwriting commissions ("CUC") are recognized in the period that the policy is issued based on our estimate of the amount that we will become entitled to receive during the calendar year such that a significant reversal of revenue is not probable.

Earned premium

Earned premium represents the earned portion of written premiums that Hagerty Re has assumed under quota share reinsurance agreements with our insurance carrier partners, net of premiums ceded to various reinsurers and the cost of catastrophe reinsurance coverage. Premiums assumed and ceded are recognized on a pro-rata basis over the term of the reinsured policies, which is generally 12 months. The cost of catastrophe reinsurance coverage is recognized over the contract period in proportion to the related earned premium.

Membership, marketplace and other revenue 

We earn subscription revenue through HDC memberships, which are primarily bundled with our insurance policies and give subscribers access to an array of products and services, including emergency roadside assistance, Hagerty Drivers Club Magazine, automotive enthusiast events, our proprietary vehicle valuation tool, and special vehicle-related discounts.

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Revenue from the sale of HDC memberships is recognized ratably over the period of the membership. The membership is treated as a single performance obligation to provide access to stated Member benefits over the life of the membership, which is currently one year.

Our marketplace business earns fee-based revenue primarily from the sale of collector cars and enthusiast vehicles through live auctions, time-based digital auctions, and brokered private sales. From time-to-time, we also earn revenue from the sale of collector cars and enthusiast vehicles that have been opportunistically acquired for resale. In addition, we also earn finance revenue from loans made to qualified collectors and businesses secured by their collector cars.

Fee-based marketplace revenue is recognized when the underlying sale is completed, which is generally upon the matching of a seller and buyer in a legally binding auction or private sale transaction. Revenue from the sale of acquired collector cars and enthusiast vehicles is recognized at the point in time when title and control of the vehicle is transferred to the buyer, which is generally upon collection of the full purchase price. Finance revenue is recognized over time as earned based on the amount of the outstanding loan, the applicable interest rate on the loan, and the length of time the loan was outstanding during the period.

Operating Expenses

Salaries and benefits

Salaries and benefits consist primarily of costs related to employee compensation, payroll taxes, employee benefits, and employee development costs. Employee compensation includes wages, as well as various forms of incentive compensation, including share-based compensation. Employee benefits primarily include the cost of our retirement, medical, dental, wellness, and severance plans. Costs related to employee education, training, and recruiting are included in employee development costs. Salaries and benefits are expensed as incurred except for costs that are required to be capitalized, which are amortized over the useful life of the asset created, such as internally developed software and software-as-a-service ("SaaS") implementation costs. Salaries and benefits are expected to increase in dollar amount over time as the business continues to grow but will likely decrease as a percent of revenue.

Ceding commissions, net

Ceding commissions, net represents the commissions paid by Hagerty Re to insurance carrier partners for the risk assumed under the quota share agreements with those carriers. These commissions represent Hagerty Re's pro-rata share of the carrier's costs including (i) policy acquisition costs, which consists of the commissions earned by our MGA subsidiaries, (ii) general and administrative costs, and (iii) other costs. Ceding commissions are recorded net of commissions received by Hagerty Re related to ceded reinsurance premiums. Ceding commissions, net is recognized ratably over the term of the related reinsurance policies, which is generally 12 months.

Losses and loss adjustment expenses

Losses and loss adjustment expenses represent our best estimate of the losses and associated settlement costs related to the risks assumed by Hagerty Re. Losses consist of claims paid, case reserves, and incurred but not reported costs, which are recorded net of estimated recoveries from reinsurance, salvage and subrogation. Loss adjustment expenses consist of the cost associated with processing and settling claims.

We record an estimate of quarterly losses and loss adjustment expenses in the Condensed Consolidated Statements of Operations using an annual loss ratio, which is based on statistical analysis performed by our internal and external actuarial team and considers several factors, including projected levels of catastrophe events. Management believes this approach provides a more consistent view of loss experience over the year given the seasonality of Hagerty Re's business. The annual loss ratio is reviewed throughout the year and adjusted, as necessary.

Sales expense

Sales expense includes costs related to the sale and servicing of insurance policies, as well as costs related to our membership and marketplace offerings, such as broker expense, cost of sales, promotion expense, and travel and entertainment expenses. Broker expense is the compensation paid to our agent partners and national broker partners when an insurance policy is written by our MGA subsidiaries through a broker relationship. Broker expense generally tracks with written premium growth. Cost of sales includes payment processing fees, emergency roadside service costs, postage and other variable costs associated with the sale and servicing of a policy. Cost of sales also includes the cost of acquired vehicles sold through our marketplace business, sales commissions related to our marketplace business, as well as interest expense and borrowing costs associated with the Broad Arrow Capital LLC ("BAC") credit facility ("BAC Credit Facility"). Promotion expense includes various costs related to branding, events, advertising, marketing, and customer acquisition. Sales expenses, in general, are expensed as incurred and will trend with revenue growth.

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General and administrative expenses

General and administrative expenses primarily consists of expenses related to non-capitalized hardware and software, professional services, and occupancy costs. These costs are expensed as incurred. We expect this expense category to modestly increase in dollar amount over time as the business continues to grow but will likely decrease as a percentage of revenue over the next few years after we reach scale to handle incoming business from new partnerships.

Depreciation and amortization

Depreciation and amortization reflects the recognition of the cost of our investments in various assets over their useful lives. Depreciation expense relates to computer hardware, furniture and equipment, and leasehold improvements. Amortization relates to internally developed software, SaaS implementation costs, and finite-lived intangible assets associated with acquisitions. Depreciation and amortization are expected to increase in dollar amount over time but will likely decrease as a percent of revenue as investments in platform technology reach scale.

Other Items

Loss related to warrant liabilities, net

In July 2024, we completed an exchange offer under which holders of our warrants were issued 3,876,201 shares of Class A Common Stock in exchange for 19,483,539 warrants, with a nominal cash settlement paid in lieu of fractional shares (the "Warrant Exchange"). No warrants remained outstanding following the completion of the Warrant Exchange.

Prior to the Warrant Exchange, our warrants were accounted for as liabilities and were measured at fair value each reporting period, with changes in fair value recognized as non-operating income (expense) in our Condensed Consolidated Statements of Operations. In general, under the fair value accounting model, in periods when our stock price increased, the warrant liability increased, and we recognized additional expense. In periods when our stock price decreased, the warrant liability decreased, and we recognized additional income.

Interest and other income (expense), net

Interest and other income (expense), net primarily includes interest income related to cash balances and fixed maturity securities, realized gains or losses from the sale of fixed maturity securities, and realized and unrealized gains and losses related to equity securities. Additionally, Interest and other income (expense), net includes interest expense related to outstanding borrowings, primarily related to our current and prior revolving credit facilities with JPMorgan Chase Bank, N.A. ("JPM"), as well as the State Farm Term Loan (as defined in Note 12 — Long-Term Debt in Item 1 of Part I of this Quarterly Report), and changes in the value of the liability related to our Tax Receivable Agreement ("TRA") (the "TRA Liability") with Hagerty Holding Corp. ("HHC") and Markel Group Inc. ("Markel") (together the "Legacy Unit Holders"). Refer to Note 17 — Taxation in Item 1 of Part I of this Quarterly Report for additional information related to the TRA.

Income tax expense

The Hagerty Group, LLC ("THG") is taxed as a pass-through ownership structure under provisions of the Internal Revenue Code ("IRC") and a similar section of state income tax law. As such, any taxable income or loss generated by THG is passed through to and included in the taxable income or loss of THG unit holders, including Hagerty, Inc.

Hagerty, Inc. is taxed as a corporation and pays corporate federal, state, and local taxes with respect to income allocated from THG. Hagerty, Inc., Hagerty Insurance Holdings, Inc., Broad Arrow Group, Inc. ("Broad Arrow"), Hagerty Radwood, Inc., and various foreign subsidiaries are treated as taxable entities and income taxes are provided where applicable. Hagerty Insurance Holdings, Inc. files a consolidated tax return with its wholly owned corporate subsidiaries Hagerty Re and Drivers Edge Insurance Company ("Drivers Edge").

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Three Months Ended March 31, 2025 compared to the Three Months Ended March 31, 2024

The following table summarizes our results of operations for the three months ended March 31, 2025 and 2024, and the dollar and percentage change between the two periods:

	Three months ended March 31,
	2025		2024		$ Change		% Change
REVENUE:	in thousands (except percentages)
Commission and fee revenue	$	100,287	$	88,840	$	11,447	12.9	%
Earned premium	169,355		151,619		17,736		11.7	%
Membership, marketplace and other revenue	49,951		31,249		18,702		59.8	%
Total revenue	319,593		271,708		47,885		17.6	%
OPERATING EXPENSES:
Salaries and benefits	59,103		56,116		2,987		5.3	%
Ceding commissions, net	77,333		70,930		6,403		9.0	%
Losses and loss adjustment expenses	71,130		62,356		8,774		14.1	%
Sales expense	54,626		39,660		14,966		37.7	%
General and administrative expenses	22,185		19,862		2,323		11.7	%
Depreciation and amortization	9,488		10,560		(1,072)		(10.2)	%
Total operating expenses	293,865		259,484		34,381		13.2	%
OPERATING INCOME	25,728		12,224		13,504		110.5	%
Loss related to warrant liabilities, net	—		(6,140)		6,140		100.0	%
Interest and other income (expense), net	7,054		7,244		(190)		(2.6)	%
INCOME BEFORE INCOME TAX EXPENSE	32,782		13,328		19,454		146.0	%
Income tax expense	(5,489)		(5,129)		(360)		7.0	%
NET INCOME	$	27,293	$	8,199	$	19,094	232.9	%

Revenue

Commission and fee revenue

Commission and fee revenue was $100.3 million for the three months ended March 31, 2025, an increase of $11.4 million, or 12.9%, compared to 2024. This increase was driven by policy renewals, which contributed $11.9 million to the year-over-year improvement, partially offset by a $0.5 million decrease in revenue related to new policies.

The increase in revenue from policy renewals was primarily driven by a 16.6% increase in underlying policy premiums, as well as continued strong policy retention. The increase in renewal policy premiums is a result of rate increases in several states due to inflation and higher vehicle repair costs, both of which contribute to higher premiums and, in turn, higher commission revenue.

The decrease in revenue from new policies was primarily driven by a 6.7% decrease in new business count, the effect of which was partially offset by rate increases in several states due to inflation and higher vehicle repair costs.

Commission and fee revenue from agent sources increased $5.8 million, or 11.8%, and Commission and fee revenue from direct sources increased $5.6 million, or 14.2%, during the three months ended March 31, 2025. Commission rates vary based on geography, but do not differ by distribution channel (i.e., whether they are direct-sourced or agent-sourced).

Earned premium

Earned premium at Hagerty Re was $169.4 million for the three months ended March 31, 2025, an increase of $17.7 million, or 11.7%, compared to 2024. This increase was primarily due to continued growth of subject premiums written through our MGA subsidiaries, which increased $21.4 million, or 10.8%, compared to the three months ended March 31, 2024.

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The following tables present premiums assumed by Hagerty Re and the related quota share percentages for the three months ended March 31, 2025 and 2024:

	Three months ended March 31, 2025
	U.S.			Canada			U.K.			Total
	in thousands (except percentages)
Subject premium (1)	$	211,868		$	7,512		$	6		$	219,386
Quota share percentage	81.0		%	50.0		%	80.0		%	80.0		%
Assumed premium in Hagerty Re	171,750			3,756			5			175,511
Reinsurance premiums ceded										(19,860)
Net assumed premium										155,651
Change in unearned premiums										5,422
Change in deferred reinsurance premiums										8,282
Earned premium										$	169,355
	Three months ended March 31, 2024
	U.S.			Canada			U.K.			Total
	in thousands (except percentages)
Subject premium (1)	$	191,066		$	6,955		$	—		$	198,021
Quota share percentage	81.0		%	35.0		%	80.0		%	79.3		%
Assumed premium in Hagerty Re	154,680			2,434			—			157,114
Reinsurance premiums ceded										(22,826)
Net assumed premium										134,288
Change in unearned premiums										4,573
Change in deferred reinsurance premiums										12,758
Earned premium										$	151,619

(1)    Represents the portion of total written premium written by our MGA subsidiaries that is subject to reinsurance agreements between our insurance carrier partners and Hagerty Re.

Membership, marketplace and other revenue

Membership, marketplace and other revenue was $50.0 million for the three months ended March 31, 2025, an increase of $18.7 million, or 59.8%, compared to 2024.

Membership fee revenue was $15.3 million for the three months ended March 31, 2025, an increase of $1.9 million, or 14.1%, compared to 2024. This increase was primarily due to a $1.8 million, or 14.2%, increase in revenue attributable to new insurance policies issued with a bundled HDC membership. For the three months ended March 31, 2025 and 2024, membership fees were 30.7% and 43.0%, respectively, of total Membership, marketplace and other revenue.

Marketplace revenue was $29.0 million for the three months ended March 31, 2025, an increase of $18.5 million, or 175.8%, compared to 2024. This improvement was principally due to a higher level of inventory sales, including cars acquired from The Academy of Art University Collection, which were sold at auction in February 2025. For the three months ended March 31, 2025 and 2024, Marketplace revenue was 58.0% and 33.6%, respectively, of total Membership, marketplace and other revenue.

Other revenue, which primarily includes sponsorship, admission, advertising, valuation, and sublease revenue, was $5.6 million for the three months ended March 31, 2025, a decrease of $1.7 million, or 22.8%, compared to 2024. This decrease was primarily attributable to the loss of registration fee revenue attributable to MSR, which was sold in the second quarter of 2024, as well as a lower level of sponsorship revenue and a decrease in admission revenue due to poor weather at this year's Amelia Concours d'Elegance. For the three months ended March 31, 2025 and 2024, other revenue was 11.3% and 23.3%, respectively, of total Membership, marketplace and other revenue.

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Costs and Expenses

Salaries and benefits

Salaries and benefits were $59.1 million for the three months ended March 31, 2025, an increase of $3.0 million, or 5.3%, compared to 2024. This increase was primarily due to annual merit increases, which occur in the second quarter of each year, as well as increased headcount year over year.

Ceding commissions, net

Ceding commissions, net was $77.3 million for the three months ended March 31, 2025, an increase of $6.4 million, or 9.0%, compared to 2024. This increase is primarily attributable to the 11.7% increase in Earned premium discussed above.

The following table summarizes the components of Ceding commissions, net for the three months ended March 31, 2025 and 2024:

	Three months ended March 31,
	2025			2024
	in thousands (except percentages)
Ceding commission:
Ceding commission – reinsurance assumed	$	82,038		$	74,752
Ceding commission – reinsurance ceded	(4,705)			(3,822)
Ceding commissions, net	$	77,333		$	70,930
Percentage of earned premium	45.7		%	46.8		%

Losses and loss adjustment expenses

Losses and loss adjustment expenses were $71.1 million for the three months ended March 31, 2025, an increase of $8.8 million, or 14.1%, compared to 2024. This increase was primarily driven by the 11.7% increase in Hagerty Re Earned premium discussed above.

For the three months ended March 31, 2025, our loss ratio was 42.0%, including the impact of $10.4 million of pre-tax catastrophe losses resulting from the Southern California wildfires in January 2025. For the three months ended March 31, 2024, our loss ratio was 41.1%, including the impact of catastrophe losses.

Sales expense

Sales expense was $54.6 million for the three months ended March 31, 2025, an increase of $15.0 million, or 37.7%, compared to 2024. This increase was due, in part, to a $12.3 million increase in cost of sales, predominantly as a result of a higher level of marketplace inventory sales, as well as a $0.6 million increase in sales commissions, consistent with revenue growth within the marketplace business. In addition, broker expense increased $1.7 million, consistent with the written premium growth within the agent insurance distribution channel.

General and administrative expenses

General and administrative expenses were $22.2 million for the three months ended March 31, 2025, an increase of $2.3 million, or 11.7%, compared to 2024, primarily due to an increase in software-related costs.

Depreciation and amortization

Depreciation and amortization expense was $9.5 million for the three months ended March 31, 2025, a decrease of $1.1 million, or 10.2%, compared to 2024. The decrease was primarily driven by a smaller base of in-service fixed assets and finite-lived intangible assets as of March 31, 2025, when compared to the same period in 2024.

Loss related to warrant liabilities, net

During the three months ended March 31, 2024, Loss related to warrant liabilities, net was a $6.1 million loss as a result of the change in fair value of our then outstanding warrant liabilities. There were no warrants outstanding during the three months ended March 31, 2025 as a result of the Warrant Exchange transaction that was completed in July 2024. Refer to Note 4 — Fair Value Measurements in Item 1 of Part I of this Quarterly Report for additional information with respect to our warrants.

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Interest and other income (expense), net

The following table summarizes the components of Interest and other income (expense), net for the three months ended March 31, 2025 and 2024:

	Three months ended March 31,
	2025		2024		$ Change		% Change
	in thousands (except percentages)
Interest income	$	9,145	$	9,225	$	(80)	(0.9)%
Interest expense	(1,908)		(1,371)		537		39.2%
Net investment gains (losses)	(315)		—		(315)		N/M
Other income (expense), net	132		(610)		742		121.6%
Interest and other income (expense), net	$	7,054	$	7,244	$	(190)	(2.6)%

N/M = Not meaningful

Income tax expense

We are the sole managing member of THG, and as a result, consolidate its financial results. THG is treated as a partnership for U.S. federal and most applicable state and local income tax purposes. As a partnership, THG is not subject to U.S. federal and certain state and local income taxes. Any taxable income or loss generated by THG is passed through and included in the taxable income or loss of its members, including Hagerty, Inc., on a pro rata basis. Hagerty, Inc. is subject to U.S. federal, state and local income taxes with respect to its allocable share of any taxable income or loss of THG, as well as any of its stand-alone income or loss. In addition, Hagerty Insurance Holdings, Inc., Broad Arrow, Hagerty Radwood, Inc. and various foreign subsidiaries are treated as taxable entities. Hagerty Insurance Holdings, Inc. files a consolidated tax return with its wholly owned corporate subsidiaries Hagerty Re and Drivers Edge.

Our effective income tax rate for the three months ended March 31, 2025 was 17%, a decrease of 22% from 39% for the three months ended March 31, 2024. The decrease in our effective income tax rate was primarily due to a higher level of earnings attributed to the non-controlling interest holders of THG, which are not included in the taxable income of Hagerty, Inc, as well as the year-over-year impact of the valuation allowance recorded against our deferred tax assets and non-deductible losses related to our warrant liabilities in the prior year.

For the three months ended March 31, 2025, income tax expense was $5.5 million, representing an increase of $0.4 million, or 7.0%, compared to the three months ended March 31, 2024. This increase was primarily due to an increase in pre-tax income of $1.8 million, or 7.3%, within Hagerty Re. Refer to Note 17 — Taxation in Item 1 of Part I of this Quarterly Report for additional information with respect to items affecting our effective tax rate.

Liquidity and Capital Resources

Maintaining a strong balance sheet and capital position is a top priority for us. As a holding company without direct operations, we manage liquidity globally and across all operating subsidiaries.

Sources and Uses of Liquidity

Our sources of liquidity include our: (i) balances of cash and cash equivalents; (ii) net working capital; (iii) cash flows from operations; (iv) borrowings from the 2025 JPM Credit Facility (as defined below) to fund the general corporate needs of THG and its subsidiaries; and (v) borrowings from the BAC Credit Facility (as defined below) to fund a portion of the lending activities of BAC.

Our primary liquidity needs and capital requirements include cash required for: (i) funding the business operations of THG and its subsidiaries; (ii) funding strategic investments and acquisitions; (iii) servicing and repayment of borrowings under the 2025 JPM Credit Facility, the BAC Credit Facility, and the unsecured term loan credit facility with State Farm Mutual Automobile Insurance Company ("State Farm") (the "State Farm Term Loan"); (iv) funding potential cash dividend payments on the Series A Convertible Preferred Stock; (v) payment of income taxes; (vi) funding required distributions paid to the non-controlling interest unit holders of THG; and (vii) funding required payments to Legacy Unit Holders under the TRA.

As of March 31, 2025, we believe that our sources of liquidity will be sufficient to provide an adequate level of capital to support our anticipated short and long-term commitments, operating needs, and capital requirements.

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Financing Arrangements

2025 JPM Credit Facility

In March 2025, THG entered into a credit agreement with JPM as administrative agent, issuing bank and swingline lender, the foreign subsidiary borrowers thereto, and the other financial institutions party thereto as lenders (the "2025 JPM Credit Agreement").

The 2025 JPM Credit Agreement provides for a senior unsecured revolving credit facility (the "2025 JPM Credit Facility") with an aggregate borrowing capacity of $375.0 million. The 2025 JPM Credit Agreement matures in March 2030, but may be extended if agreed to by THG and the lenders party thereto. Any unpaid balance on the 2025 JPM Credit Facility is due at maturity. As of March 31, 2025, total outstanding borrowings under the 2025 JPM Credit Facility were $88.8 million.

The 2025 JPM Credit Agreement requires us to, among other things, meet certain financial covenants, including a minimum fixed charge coverage ratio test and a maximum leverage ratio test. As of March 31, 2025, we were in compliance with these financial covenants.

BAC Credit Facility

BAC and its wholly owned subsidiary BAC Funding 2023-1, LLC, as borrower, have a revolving credit agreement with a certain lender (the "BAC Credit Agreement"). The BAC Credit Agreement provides for a revolving credit facility (the "BAC Credit Facility"), which has an aggregate borrowing capacity of $75.0 million and is subject to a borrowing base that is determined based on the carrying value of certain BAC notes receivable. As of March 31, 2025, the applicable borrowing base and outstanding borrowings for the BAC Credit Agreement were $32.1 million.

The revolving borrowing period provided by the BAC Credit Agreement expires in December 2025, after which an amortization period will begin when principal payments will be required to be made until the BAC Credit Facility ultimately matures in December 2026. The revolving borrowing period and the maturity date of the BAC Credit Agreement may be extended by one year if requested by BAC and agreed by the administrative agent. BAC is not a borrower or guarantor of the BAC Credit Facility.

In connection with the BAC Credit Agreement, BAC and certain of its subsidiaries may transfer originated notes receivable to wholly owned, bankruptcy remote special purpose entities (each, an "SPE") to secure the borrowings. The assets transferred to SPEs are legally isolated from us and our other (non-SPE) subsidiaries. Accordingly, those assets are not available to satisfy our debts or other obligations our recourse under the BAC Credit Agreement is limited.

Recourse to the Company and its subsidiaries that originated and transferred notes receivable that represent collateral under the BAC Credit Facility is limited to (i) an obligation of the applicable seller to repurchase a note receivable if it is determined that there was a breach of any representation or warranty relating to such note receivable as of the relevant date specified in the related transfer agreement and (ii) a limited guarantee covering certain liabilities that may result under certain foreign exchange hedging activity of one of the SPEs.

BAC and BAC Funding 2023-1, LLC are required, among other things, to meet certain financial covenants under the BAC Credit Agreement, including that BAC, as the servicer, maintain a minimum tangible net worth, minimum liquidity balances, and an indebtedness to tangible net worth ratio. As of March 31, 2025, we were in compliance with the financial covenants under the BAC Credit Agreement.

Refer to Note 12 — Long-Term Debt in Item 1 of Part I of this Quarterly Report for additional information related to the 2025 JPM Credit Agreement and BAC Credit Agreement.

Capital and Dividend Restrictions

We are a holding company with no material assets other than our ownership interest in THG and its operating subsidiaries. Accordingly, our ability to meet our cash requirements depends on THG's financial performance and the distributions we receive from THG. Our subsidiaries' ability to make distributions, pay dividends and make other payments may be regulated by the states and territories where they are domiciled.

For a discussion of the risks associated with our holding company structure, refer to Item 1A. Risk Factors — Risks Related to Tax — "We are a holding company, and our only material asset is our interest in THG, and we will therefore be dependent upon distributions made by THG to pay taxes, make payments under the TRA and pay other expenses." in our Annual Report.

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Capital Restrictions

Our reinsurance company, Hagerty Re, is subject to the Bermuda Solvency Capital Requirement ("BSCR"), which establishes a target capital level and enhanced capital requirements for each insurer. As of March 31, 2025, Hagerty Re maintained sufficient statutory capital and surplus to comply with the BSCR.

Similarly, our U.S. insurance company subsidiary, Drivers Edge, which holds certificates of authority in 38 states, is subject to state-specific minimum capital and surplus requirements, as well as risk-based capital ("RBC") requirements. RBC levels are reported on an annual basis. As of March 31, 2025, Drivers Edge maintained sufficient capital and surplus levels to comply with state insurance regulations.

Dividend Restrictions

Under Bermuda law, Hagerty Re is prohibited from declaring or issuing a dividend if it fails to meet its minimum solvency margin or minimum liquidity ratio. Prior approval from the BMA is also required if Hagerty Re's proposed dividend payments would exceed 25% of its prior year-end total statutory capital and surplus. Based on these restrictions, during 2025, Hagerty Re can pay $67.9 million in dividends without prior BMA approval; however, the amount that Hagerty Re can pay in dividends is further limited by the amount of unrestricted cash held in its operating account, which totaled $38.1 million as of March 31, 2025. As of March 31, 2025, there were no plans to issue dividends from Hagerty Re.

Similarly, state statutes restrict the amount of dividends that Drivers Edge may pay without prior approval of state insurance regulators. As of March 31, 2025, there were no plans to issue dividends from Drivers Edge and a change in such plans may require regulatory approval.

Comparative Cash Flows

The following table summarizes our cash flow data for the three months ended March 31, 2025 and 2024:

	Three months ended March 31,
	2025		2024		$ Change		% Change
	in thousands (except percentages)
Net Cash Provided by Operating Activities	$	43,830	$	58,238	$	(14,408)	(24.7)	%
Net Cash Used in Investing Activities	$	(4,481)	$	(18,287)	$	13,806	75.5	%
Net Cash Provided by (Used in) Financing Activities	$	14,244	$	(37,233)	$	51,477	138.3	%

Operating Activities

Cash provided by operating activities primarily consists of Net income, adjusted for non-cash items, and changes in working capital balances. Net cash provided by operating activities for the three months ended March 31, 2025 and 2024 is presented below:

	Three months ended March 31,
	2025		2024		$ Change		% Change
	in thousands (except percentages)
Net income	$	27,293	$	8,199	$	19,094	232.9	%
Non-cash adjustments to Net income	17,169		24,009		(6,840)		(28.5)	%
Changes in operating assets and liabilities	(632)		26,030		(26,662)		(102.4)	%
Net Cash Provided by Operating Activities	$	43,830	$	58,238	$	(14,408)	(24.7)	%

Net cash provided by operating activities for the three months ended March 31, 2025 was $43.8 million, a decrease of $14.4 million, or 24.7%, compared to 2024. This decrease was due to a $26.7 million decrease in cash from operating assets and liabilities, partially offset by a $12.3 million increase in Net income, net of non-cash adjustments. The $6.8 million decrease in non-cash adjustments to Net income was primarily the result of a $6.1 million fair value loss related to our warrant liabilities in the prior year. There was no such charge in the current year as our warrants were settled in connection with the consummation of the Warrant Exchange in the third quarter of 2024.

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The $26.7 million decrease in net cash from operating assets and liabilities was primarily driven by the timing of the settlement of CUC receivables and payables, which resulted in a $31.9 million net decrease in operating cash flows, as well as claim payments made by Hagerty Re in the first quarter of 2025 related to Hurricane Helene and Hurricane Milton. This decrease in net cash from operating assets and liabilities was partially offset by a $10.3 million increase in advance premiums and due to insurers as a result of the growth in Written Premium.

Investing Activities

Cash used in investing activities for the three months ended March 31, 2025 decreased by $13.8 million when compared to 2024, reflecting net cash proceeds received from the sale and maturity of debt securities.

Financing Activities

Cash from financing activities for the three months ended March 31, 2025 increased $51.5 million when compared to 2024 primarily due to net proceeds received from credit facility borrowings, partially offset by $24.7 million in required distributions to THG non-controlling interest unit holders.

Tax Receivable Agreement

We expect to have adequate capital resources to meet the requirements and obligations under the TRA entered into with the Legacy Unit Holders. The TRA requires us to pay Legacy Unit Holders 85% of the amount of cash savings, if any, under U.S. federal, state and local income tax or franchise tax realized as a result of (i) any increase in tax basis of Hagerty, Inc.'s assets resulting from (a) the purchase of THG units from any of the Legacy Unit Holders using the net proceeds from any future offering, (b) redemptions or exchanges by the Legacy Unit Holders of Class V Common Stock and THG units for shares of Class A Common Stock, or (c) payments under the TRA, and (ii) tax benefits related to imputed interest deemed arising as a result of payments made under the TRA.

Legacy Unit Holders may, subject to certain conditions and transfer restrictions as described in the Legacy Unit Holders Exchange Agreement executed in connection with the business combination that formed Hagerty, Inc. in 2021, redeem or exchange their Class V Common Stock and THG units for shares of Class A Common Stock of Hagerty, Inc. on a one-for-one basis. THG made an election under Section 754 of the IRC with the filing of its 2019 income tax return, which cannot be revoked without the permission of the IRS Commissioner and will be in place for any future exchange of THG units. The redemptions and exchanges are expected to result in increases in the tax basis of the tangible and intangible assets of THG. These increases in tax basis may reduce the amount of tax that we would otherwise be required to pay in the future. This payment obligation as a part of the TRA is an obligation of Hagerty, Inc. and not of THG. For purposes of the TRA, the cash tax savings in income tax will be computed by comparing the actual income tax liability of Hagerty, Inc. (calculated with certain assumptions) to the amount of such taxes that Hagerty, Inc. would have been required to pay had there been no increase to the tax basis of the assets of THG as a result of the redemptions or exchanges and had Hagerty, Inc. not entered into the TRA. Estimating the amount of payments that may be made under the TRA is by nature imprecise, insofar as the calculation of amounts payable depends on a variety of factors.

During the three months ended March 31, 2025, the Company made TRA payments of $0.2 million. No such payments were made during the three months ended March 31, 2024.

Off-Balance Sheet Arrangements

We do not have any material off-balance sheet arrangements as of March 31, 2025.

Critical Accounting Policies and Estimates

The preparation of the unaudited Condensed Consolidated Financial Statements in accordance with GAAP requires management to make significant judgments, assumptions, and estimates that materially affect the amounts reported in the Company's Condensed Consolidated Financial Statements. Management's judgments, assumptions, and estimates are based on historical experience, future expectations, and other factors that are believed to be reasonable as of the date of the Condensed Consolidated Financial Statements. Actual results may ultimately differ from management's original estimates, as future events and circumstances sometimes do not develop as expected.

Our accounting policies are set forth in Note 1 — Basis of Presentation and Accounting Policies to Consolidated Financial Statements contained in our Annual Report. We include herein certain updates to those policies.

New Accounting Standards

New accounting standards are described in Note 1 — Basis of Presentation and Accounting Policies in Item 1 of Part I of this Quarterly Report, which are incorporated herein by reference.

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Non-GAAP Financial Measures

Adjusted EBITDA

We define Adjusted EBITDA as consolidated Net income, excluding net interest and other income (expense), income tax expense, and depreciation and amortization, further adjusted to exclude (i) net gains and losses related to our warrant liabilities prior to the Warrant Exchange; (ii) share-based compensation expense; and when applicable, (iii) restructuring, impairment and related charges; (iv) gains, losses and impairments related to divestitures; and (v) certain other unusual items. Refer to Note 4 — Fair Value Measurements in Item 1 of Part I of this Quarterly Report for additional information regarding the Warrant Exchange.

We present Adjusted EBITDA because 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. We use Adjusted EBITDA as a measure of the operating performance of our business on a consistent basis, as it removes the impact of items not directly resulting from our core operations.

By providing this non-GAAP financial measure, together with a reconciliation to Net income, which is the most comparable GAAP measure, we believe we are enhancing investors' understanding of our business and our results of operations, as well as assisting investors in evaluating how well we are executing our strategic initiatives. However, Adjusted EBITDA has limitations as an analytical tool, and should not be considered in isolation, or as an alternative to, or a substitute for Net income or other financial statement data presented in our Condensed Consolidated Financial Statements as indicators of financial performance. Our definition of Adjusted EBITDA may be different than similarly titled measures used by other companies in our industry, which could reduce the usefulness of this non-GAAP financial measure when comparing our performance to that of other companies.

The following table reconciles Adjusted EBITDA to the most directly comparable GAAP measure, which is Net income:

	Three months ended March 31,
	2025		2024
	in thousands
Net income	$	27,293	$	8,199
Interest and other (income) expense, net (1) (2)	(7,054)		(7,244)
Income tax expense	5,489		5,129
Depreciation and amortization	9,488		10,560
EBITDA	35,216		16,644
Loss related to warrant liabilities, net	—		6,140
Share-based compensation expense	4,392		4,543
Adjusted EBITDA	$	39,608	$	27,327

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

(2)    Includes interest income and net investment income related to our investment portfolio.

Adjusted EPS

We define Adjusted Earnings Per Share ("Adjusted EPS") as consolidated Net income, excluding net gains and losses related to our warrant liabilities prior to the Warrant Exchange, divided by our outstanding and total potentially dilutive securities, which includes (i) the weighted average issued and outstanding shares of Class A Common Stock; (ii) all issued and outstanding non-controlling interest units of THG; (iii) all issued and outstanding shares of our Series A Convertible Preferred Stock on an as-converted basis; (iv) all unissued share-based compensation awards; and (v) all unexercised warrants outstanding prior to the Warrant Exchange. Refer to Note 4 — Fair Value Measurements in Item 1 of Part I of this Quarterly Report for additional information regarding the Warrant Exchange.

The most directly comparable GAAP measure to Adjusted EPS is basic earnings per share ("Basic EPS"), which is calculated as Net income (loss) available to Class A Common Stockholders divided by the weighted average number of Class A Common Stock shares outstanding during the period.

We present Adjusted EPS because we consider it to be an important supplemental measure of our operating performance and believe it is used by securities analysts, investors and other interested parties in evaluating the consolidated performance of other companies in our industry. We also believe that Adjusted EPS, which compares our consolidated Net income with our outstanding and potentially dilutive shares, provides useful information to investors regarding our performance on a fully consolidated and fully diluted basis.

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Management uses Adjusted EPS:

•as a measurement of operating performance of our business on a fully consolidated and fully diluted basis;

•to evaluate the performance and effectiveness of our operational strategies; and

•as a preferred predictor of core operating performance, comparisons to prior periods and competitive positioning.

We caution investors that Adjusted EPS is not a recognized measure 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, including Basic EPS, and that Adjusted EPS, as we define it, may be defined or calculated differently by other companies. In addition, Adjusted EPS has limitations as an analytical tool and should not be considered as a measure of profit or loss per share.

The following table reconciles Adjusted EPS to the most directly comparable GAAP measure, which is Basic EPS:

	Three months ended March 31,
	2025		2024
	in thousands (except per share amounts)
Numerator:
Net income (loss) available to Class A Common Stockholders (1)	$	6,041	$	(3,189)
Accretion of Series A Convertible Preferred Stock	1,875		1,838
Undistributed earnings allocated to Series A Convertible Preferred Stock	455		—
Net income attributable to non-controlling interest	18,922		9,550
Consolidated net income	27,293		8,199
Loss related to warrant liabilities, net	—		6,140
Adjusted consolidated net income (2)	$	27,293	$	14,339
Denominator:
Weighted average shares of Class A Common Stock outstanding (1)	90,047		84,656
Total potentially dilutive securities outstanding:
Non-controlling interest THG units	255,154		255,499
Series A Convertible Preferred Stock, on an as-converted basis	6,785		6,785
Total unissued share-based compensation awards	7,935		8,256
Total warrants outstanding	—		19,484
Potentially dilutive shares outstanding	269,874		290,024
Fully dilutive shares outstanding (2)	359,921		374,680
Basic EPS (1)	$	0.07	$	(0.04)
Adjusted EPS (2)	$	0.08	$	0.04

(1)    Numerator and Denominator, respectively, of the GAAP measure Basic EPS

(2)    Numerator and Denominator, respectively, of the non-GAAP measure Adjusted EPS

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ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

There have been no material changes to our market risk during the three months ended March 31, 2025. For a discussion of our exposure to market risk, refer to the market risk disclosures set forth in Item 7A of Part II, "Quantitative and Qualitative Disclosures About Market Risk" in our Annual Report.

ITEM 4. CONTROLS AND PROCEDURES

Disclosure Controls and Procedures

Our management, with the participation of our Chief Executive Officer and Chief Financial Officer, evaluated the effectiveness of our disclosure controls and procedures (as such term is defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934, as amended (the "Exchange Act")) as of the end of the period covered by this Quarterly Report.

Based on that evaluation, our Chief Executive Officer and Chief Financial Officer concluded that our disclosure controls and procedures were effective as of March 31, 2025.

Changes in Internal Controls Over Financial Reporting

There were no changes to our internal control over financial reporting that occurred during the three months ended March 31, 2025, which were identified in connection with management's evaluation required by paragraph (d) of Rules 13a-15 and 15d-15 under the Exchange Act, that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

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PART II – OTHER INFORMATION

ITEM 1. LEGAL PROCEEDINGS

From time to time, we are involved in various claims and legal actions that arise in the ordinary course of business. Although the results of litigation and claims cannot be predicted with certainty, we do not believe that the ultimate resolution of these actions will have a material adverse effect on our financial position, results of operations, liquidity or capital resources.

Future litigation may be necessary to defend ourselves and our partners by determining the scope, enforceability and validity of third party proprietary rights or to establish our proprietary rights. The results of any current or future litigation cannot be predicted with certainty, and regardless of the outcome, litigation can have an adverse impact on us because of defense and settlement costs, diversion of management resources and other factors.

Refer to Note 19 — Commitments and Contingencies in Item 1 of Part I of this Quarterly Report for additional information related to legal proceedings.

ITEM 1A. RISK FACTORS

Other than the risk factor below, as of the date of this Quarterly Report, there have been no material changes to our risk factors as previously disclosed in our Annual Report. We may disclose changes to such factors or disclose additional factors from time to time in our future filings with the SEC. Additional risks that we currently do not know about or currently view as immaterial may also materially adversely affect our business, financial condition, or operating results.

Rising interest rates and the imposition of tariffs on imported goods could increase costs, reduce consumer spending on collector cars and related services, and negatively impact our business, results of operations and financial condition.

Our business depends on consumer demand for collectible cars and related services, which may decline in response to unfavorable economic conditions, such as high inflation or interest rates, or changes in trade and regulatory policies. Consumer spending on discretionary items, such as collector cars and related services, may be influenced by various factors beyond our control, such as unemployment, income levels, consumer confidence, and financial market volatility. When economic conditions deteriorate, consumers may reduce or postpone their spending on collector cars and related services, which could lower the demand for our products and services. Moreover, changes in tariffs, trade policy, or laws and policies affecting foreign trade, manufacturing, development and investment could increase our costs. For example, the recent imposition of tariffs on certain imported goods could affect the availability and cost of parts to repair our insureds' vehicles, which could impact our cost of claims, insurance premiums and customer satisfaction. While we have not yet identified direct effects from the recent changes in tariffs and other trade measures in our business, the long-term consequences of these actions remain uncertain and could negatively affect both the overall economy and our business. Any prolonged downturns in the economy or decreases in consumer demand for collector cars and related services could materially adversely affect our business, results of operations, and financial condition.

ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS

None.

ITEM 3. DEFAULTS UPON SENIOR SECURITIES

None.

ITEM 4. MINE SAFETY DISCLOSURES

Not applicable.

ITEM 5. OTHER INFORMATION

Trading Arrangements of Directors and Executive Officers

During the three months ended March 31, 2025, no director or executive officer of the Company has adopted or terminated a "Rule 10b5-1 trading arrangement" or "non-Rule 10b5-1 trading arrangement," as each term is defined in Item 408(a) of Regulation S-K.

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ITEM 6 OF PART II EXHIBITS, FINANCIAL STATEMENT SCHEDULES

(a) Financial statements and financial statement schedules filed as part of this report are listed in the index included in Item 1 of Part I of this Quarterly Report.

(b) Exhibits. As required by Item 601 of Regulation S-K, the following are exhibits to this report.

Exhibit No.	Description
2.1*	Business Combination Agreement, dated as of August 17, 2021, by and among Aldel Financial Inc. Aldel Merger Sub LLC and The Hagerty Group, LLC (incorporated by reference to Exhibit 2.1 of the Company’s Form 8-K (File No. 001-40244), filed with the SEC on August 18, 2021).
3.1	Third Amended and Restated Certificate of Incorporation of the Company, dated December 2, 2021 (incorporated by reference to Exhibit 3.1 of the Company’s Amendment No.3 to Form S-1 (File No. 333-261810), filed with the SEC on January 20, 2023).
3.2	Amended and Restated By-Laws of the Company, dated December 2, 2021 (incorporated by reference to Exhibit 3.2 of the Company’s Form 8-K (File No. 001-40244), filed with the SEC on December 8, 2021).
3.3	Certificate of Designations, Preferences and Rights of Series A Convertible Preferred Stock of the Company dated June 23, 2023 (incorporated by reference to Exhibit 3.1 of the Company’s Form 8-K (File No. 001-40244), filed with the SEC on June 23, 2023).
10.1*	Credit Agreement, dated as of March 7, 2025, among The Hagerty Group, LLC, the Foreign Subsidiary Borrowers party hereto, the Lenders party hereto, and JPMorgan Chase Bank, N.A., as Administrative Agent, (incorporated by reference to Exhibit 10.1 of the Company's Form 8-K (File No. 001-40244), filed with the SEC on March 10, 2025).
31.1	Certification of the Chief Executive Officer Pursuant to Rule 13a-14(a).
31.2	Certification of the Chief Financial Officer Pursuant to Rule 13a-14(a).
32.1#	Certification of the Chief Executive Officer Pursuant to 18 U.S.C. Section 1350.
32.2#	Certification of the Chief Financial Officer Pursuant to 18 U.S.C. Section 1350.
101.INS	XBRL Instance Document.
101.SCH	XBRL Taxonomy Extension Schema Document.
101.CAL	XBRL Taxonomy Extension Calculation Linkbase Document.
101.LAB	XBRL Taxonomy Extension Label Linkbase Document.
101.PRE	XBRL Taxonomy Extension Presentation Linkbase Document
101.DEF	XBRL Taxonomy Extension Definition Linkbase Document.
104	Cover Page Interactive Data File (formatted as Inline XBRL).

*

The schedules and exhibits to this agreement have been omitted pursuant to Item 601(a)(5) of Regulation S-K. A copy of any omitted schedule and/or exhibit will be furnished to the SEC upon request. In addition, portions of this exhibit have been redacted pursuant to Item 601(b)(10)(iv) of Regulation S-K because the registrant customarily and actually treats that information as private or confidential and the omitted information is not material.

#

This certification is not deemed filed for the purpose of Section 18 of the Exchange Act or otherwise subject to the liability of that section, nor shall it be deemed incorporated by reference into any filing under the Securities Act or the Exchange Act.

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Signatures

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized, on May 7, 2025.

HAGERTY, INC.
By:	/s/ McKeel O Hagerty
	McKeel O Hagerty
	Chief Executive Officer

HAGERTY, INC.
By:	/s/ Patrick McClymont
	Patrick McClymont
	Chief Financial Officer

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