Hagerty, Inc.

Hello and welcome to Hagerty's second quarter 2026 earnings call and webcast. At this time, all participants are in a listen-only mode. After the speaker's presentation, there will be a question and answer session. To ask the question during the session, you will need to press star 11 on your telephone. You will then hear an automatic message advising your hand is raised. To withdraw your question, please press star 11 again. I would now like to hand the conference over to Jay Koval, head of investor relations. Sir, you may begin.

Thank you, operator, and good morning, everyone. And thank you for joining us to discuss Hagerty's results for the second quarter of 2026. I'm joined this morning by McKeel Hagerty, chief executive officer and chairman, and Patrick McClymont, chief financial officer. During this morning's conference call, we will refer to an accompanying presentation that is available on Hagerty's investor relations section of the company's corporate website at investor.hagerty.com. Our earnings release slides and letter to stockholder covering this period are also posted on the IR website as well as our 8-K filing. Today's discussion contains forward-looking statements and non-GAAP financial metrics as described further on slide two of the earnings presentation. Forward-looking statements include statements about our expected future business and financial performance and are not promises or guarantees of future performance. They are subject to a variety of risks and uncertainties that could cause the actual results to differ materially from our expectations. For a discussion of material risks and important factors that could affect our actual results, please refer to those contained in our filings with the SEC, which are also available on our investor relations website and sec.gov. The appendix of the presentation also contains reconciliations of our non-GAAP metrics to the most directly comparable GAAP measures that are further supplemented by this morning's AK filing. And with that, I'll turn the call over to McKeel.

Thank you, Jay, and good morning, everyone. Summertime in the Midwest is something special. The days are long, the roads are open, and the fun cars are out. Our 1.9 million members have been making the most of this year's driving season from Sunday morning canyon runs and cars and caffeine gatherings to track days and vintage car events. And one team, Hagerty, has been right there with them delivering the service, coverage, and community that define what we uniquely do. We report our second quarter results this morning, and let me give you the headline. The first half of 2026 was the best in Hagerty's history as measured by gains in policies in force, written premium, earned premium, and adjusted EBITDA. These are the metrics that best reflect the true vibrancy of our business. We blew through the 3 million vehicle insured milestone in the second quarter as we added a record 279,000 new members. Importantly, we are delivering high rates of growth while simultaneously investing in our teams, technology and member experience that will sustain growth as our compounding machine shifts into overdrive. Written premium growth of 19% came in well ahead of our prior full-year expectations for 15% to 16% growth. Our written premium growth is powered by new business count rather than rate, unlike the broader industry that fluctuates with the pricing cycle. Earned premium jumped 42% due to the strong written premium gains combined with the increase in economics under the new Markel fronting arrangement to 100%. And adjusted EBITDA grew 32% to $160 million due to the benefits of increasing scale combined with cost discipline. Reported gap revenue in the first half was down 6%, and our gap net loss was $5 million, reflecting the accounting mechanics from the new Markel fronting arrangement that we have discussed on previous calls. While the gap presentation of revenue and net income in 2026 continues to look different from prior years due to this new Markel fronting structure, The underlying business performance is stronger than ever. The key metrics above, policy count, written and earned premium, and adjusted EBITDA, are all running well ahead of expectations, causing us to increase our outlook for the year. More on that in a moment. Let me run through some of the first half highlights in more detail, shown on slide three, and Patrick will focus on the second quarter. The 279,000 new members added in the first half was a record for any comparable six-month period, boosted by State Farm conversions. The breadth of vehicles joining the Hagerty family continues to expand. Our classic cohort, Mustangs, Camaros, C10 pickups, and Porsche 911s, to name a few, is growing quickly. But the fastest-growing segment is the modern enthusiast vehicles, 1980s to 2000 sports cars from Japan, Germany, and the U.S., as well as off-road vehicles. The incremental demand is coming from the rising generation of younger collectors that grew up coveting these fun vehicles and now they have the disposable income to acquire them. This is the Enthusiast Plus target demographic and it is arriving as the demand from Gen X and Millennials and Gen Z quickly ramps up. Year-to-date quote volume from these younger generations now exceeds 60% of total demand. Our Enthusiast Plus program in Colorado is performing in line with revised pricing assumptions, and we are applying those learnings as we expand it into three additional states in July. Our high rates of PIF growth and industry-leading retention of 88% powers consistent compounding growth and provides us with excellent visibility into future revenue streams, particularly as we unlock our partnership opportunities by deepening existing relationships and adding new ones. The rollout of the highly integrated State Farm Classic Plus program is exhilarating. As of the end of the second quarter, State Farm agents are selling new Hagerty policies in 37 states. New tranches of states are coming online as planned and on budget. The conversion of State Farm's existing 525,000 collector car policies to the Hagerty platform is also progressing well, with 14 states in motion, and we remain on pace to complete the transition by 2028. We are also excited about our new partnership with Liberty Mutual, as well as the progress made on securing larger cohorts of vehicles with Progressive and trial programs with other national carriers that are performing very well. In our independent agency channel, we believe we have an opportunity to better inform and activate these 54,000 agents. We are investing in straight-through processing, and automated identification tools that enable agents to spot enthusiast vehicles already sitting in their daily driver books. We are also improving the educational resources that help agents understand what Hagerty can do for their customers, including enhancing customer retention. The addressable market of 36 million vehicles expands every year, and most of these cars are currently insured at generic daily driver rates by carriers that neither understand nor value them the way that Hagerty can. Omnichannel distribution is a key competitive advantage to drive outsized growth, and we deliver these high rates of growth with exceptional underwriting discipline. Hagerty-Rees combined ratio for the first half came in at 88%, with a loss ratio at 41%. Forty years of proprietary data on 48,000 makes and models combined with members that treat their cars with exceptional care is a combination that others cannot replicate. Let me turn now to our buy and sell business, Hagerty Marketplace, where total sales grew 17% to $65 million. Broad Arrow, our high-end live auction business, was the key driver of growth, with a first-half sales increase of 74% and an exceptional 91% sell-through rate. Private sales were down against the prior year period, which benefited from the sale of a large single-owner collection. The depth of demand we are seeing from buyers across multiple continents tells us something important about the health of our market. Great cars continue to appreciate in value, and buyers who care about provenance, condition, and expertise are choosing Broad Arrow because they trust our process and our team. I want to remind investors of something fundamental about our marketplace business. It is not just a revenue line. It is a customer acquisition machine. Every car that trades hands is a potential Hagerty insurance policy, and every auction catalog that circulates through our global community of members reinforces the Hagerty brand as the most trusted name in collector cars. The flywheel is self-reinforcing, and it grows more powerful with every member-centric interaction. Slide 4 is a useful reminder that the results we're reporting today aren't accidental. They are the output of a deliberate multi-year investment in distribution, technology, and the member experience. And the progress across each of these is exactly why we're raising our 2026 outlook. Let me close by stepping back to the bigger picture. We are now halfway through 2026, our structural transition year with the new Markel fronting arrangement, and the business is performing well above the high end of the ranges we shared last quarter. Given the strength of our first half and robust business momentum, we are raising our expectations for full year written premium growth to 16 to 17%. With better than expected flow through, we now expect GAAP net income of 18 to 30 million in 2026 and adjusted EBITDA of 270 to 280 million. Let me now turn it over to Patrick to run through the second quarter in more detail.