HGTY

Hagerty is the dominant insurer of collector cars and enthusiast vehicles, a sticky 40-year niche now wrapped in a marketplace (Broad Arrow auctions, BAC financing) and media ecosystem. The fundamentals are genuinely good: revenue has compounded every year from $323M (FY2021) to $678M (FY2025), +23.5% in the latest year, while net income inflected from a $61.4M loss in FY2021 to $149M in FY2025 (+90.6%). Cash generation backs the GAAP profit — operating cash flow was $219M against just $24.5M of capex, leaving roughly $195M of free cash flow. This is a high-quality, scaling franchise, not a story stock.

The forward catalyst is the Markel Fronting Arrangement, effective January 1, 2026, under which Hagerty Re 'controls 100% of the premium and assumes 100% of the risk' on policies written through Essentia, with underwriting and claims authority expanded 'to the maximum levels permitted by applicable law.' Management 'expect[s] these changes to result in increased profitability and additional control.' That is the bull case: more of the economics of its own book stays in-house. But it cuts both ways — the same filing warns that 'beginning on January 1, 2026, the benefit of our MGA services will be received by Hagerty Re and not Markel,' so 'we will not recognize commission revenue or the associated ceding commission expense' on that book. Combined with the simultaneous shift to Article 7 reporting (net investment income/gains now sit inside revenue), FY2026 headline comparability will be messy, and the company is taking on materially more catastrophe risk just after Helene, Milton, and the Southern California wildfires drove claims in H2-2024/Q1-2025.