Earnings Call Transcript - HGTY Q2 2025

Operator, Operator

Greetings, and welcome to the Hagerty Second Quarter 2025 Earnings Conference Call. As a reminder, this conference is being recorded. It is now my pleasure to introduce your host, Jay Koval, Senior Vice President of Investor Relations. Thank you. You may begin.

Jason Koval, Senior Vice President of Investor Relations

Thank you, operator, and good morning, everyone. Thanks for joining us to discuss Hagerty's results for the second quarter of 2025. 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. Our earnings release, slides, and letter to stockholders covering this period are also posted on the IR website. Today's discussion contains forward-looking statements and non-GAAP financial metrics as described further in 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. 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 8-K filing. And with that, I will turn the call over to McKeel.

McKeel O. Hagerty, Chief Executive Officer and Chairman

Thanks, Jay, and good morning, everyone. We appreciate you taking the time to join Hagerty's Second Quarter 2025 Earnings Call. This summer has been another great driving season as we remain on track to welcome a record number of new members to Hagerty in 2025, helping them protect, buy, sell, and enjoy their special cars. After four decades in the car world, I have learned that everyone has their own car story, ranging from someone who loves brass horseless carriages to modern-day high-performance vehicles, off-road vehicles to vintage woody wagons, and American-made muscle cars to Japanese Kei cars. Regardless of the type of vehicle, we know it's special to that member, leading to an emotional connection that inspires safer driving habits, which in turn leads to lower claims frequency and consistently strong underwriting results. And our team of auto enthusiasts is here to provide the excellent service, guaranteed value coverage, and a suite of Hagerty products and services to help celebrate their vehicle. This passion and love of cars shared by One Team Hagerty and our members results in sustained high rates of growth. Let me dig into some highlights from the first half of 2025. Total revenue increased 18%. New business count fueled an 11% increase in Written Premium and a 12% growth in our Commission revenue. Earned Premium for our risk-taking entity, Hagerty Reinsurance, increased 12% and Membership, marketplace, and other revenue jumped 68% due to higher inventory sales and the launch of our European auction business. Moving to profitability, during the first six months of the year, our operating margins jumped another 210 basis points, resulting in net income gains of 46% and adjusted EBITDA growth of 28%. Over the last three years, we have expanded first half operating margins by nearly 14 percentage points, and we expect continued gains as we double our Policies in Force to three million by 2030. Let's move on to our 2025 strategic priorities built around three themes: simpler, faster, and better integrated. First is to expand our specialty insurance offerings to protect more of the collectible market, including modern enthusiast vehicles with the launch of our Enthusiast+ program in Colorado two weeks ago. Second is to simplify and better integrate the Membership experience across our products and services, creating revenue synergies and driving cost efficiencies. This is how we engage with our members in a unique and authentic way. Third is to expand our marketplace business internationally, leveraging the trust that we have built in the United States. We announced two additional European auctions on the heels of the excellent results from our inaugural Villa d'Este auction in May, where we achieved a 78% sell-through rate. These include auctions built around partnerships with the Zoute Concours in Belgium and Auto Zurich in Switzerland. We are methodically building Hagerty and Broad Arrow into the most trusted brands to help people around the world buy and sell special vehicles. And finally, we are investing in the technology replatforming that will enable efficiency gains. I would note that we recently launched Enthusiast+ on Duck Creek, a leading cloud-based insurance platform. Our technology spend should trend down as a percentage of revenue as we accelerate the top line in 2026 and 2027 and begin to realize the efficiency benefits from these investments. Before I turn the call over to Patrick to share more details on our results and increased 2025 outlook, I wanted to walk you through the recently announced fronting arrangement with our long-standing partner, Markel. As you know, we have had a highly successful partnership with Markel that began in 2013 when they acquired Essentia to underwrite Hagerty's U.S. business. In 2017, we began to assume 25% of the premium and risk associated with our high-quality book of business and steadily increased it to the current quota share of 80% with Markel retaining 20%. On July 24, we announced that we had signed an LOI to move to a new fronting arrangement with Markel, where Hagerty would control 100% of the premium and risk commencing in 2026 while paying a 2% fronting fee to Markel to issue policies and provide administrative support. The evolution of this partnership will result in increased profitability for Hagerty in the form of additional underwriting and investment income, along with greater operational control. We are excited to continue partnering with Markel and believe the new arrangement will position us to unlock even more value for Hagerty shareholders over the coming years.

Patrick Scott McClymont, Chief Financial Officer

Thank you, and good morning, everyone. Let me dig into the second quarter results in more detail. In the quarter, we delivered 18% growth in total revenue to $369 million. New Business Count gains, combined with industry-leading retention of 89%, drove an 11% increase in Written Premium. This 11% is below the 13% to 14% growth we expect for the full year given our expectations for faster growth in the second half as State Farm ramps. Our two-year rates of Written Premium growth during the first half were over 30% and should remain steady at those levels in the second half as growth accelerated back into the mid-teens during July. Commission and fee revenue grew 11% to $143 million. Earned Premium increased 13% to $178 million. Our loss ratio remained steady at 42%, and Membership, marketplace, and other revenue jumped 78% to $48 million. In just three years, we have quickly established ourselves as a leading auction house with unparalleled automotive expertise across Hagerty's products, focused on cultivating trusted long-term relationships with our customers. Turning now to profitability, we reported an operating profit of $48 million in the second quarter with operating margins up 70 basis points to 13%. We are maintaining tight discipline on our costs to translate double-digit Commission gains into faster rates of profit growth. G&A increased 6% due primarily to higher software licensing costs from our technology transformation, and salaries and benefits grew 11% due to merit increases and additional headcount to support our growth. Adjusted EBITDA increased 20% to $64 million as we improved the efficiency of our business model. Our growing capital base at Hagerty Re and balanced investment strategy resulted in $11 million in second quarter investment income. Interest and other income of $6 million included $2 million of interest expense and a $3 million noncash increase in the tax liability related to our partnership structure. In total, we delivered second quarter net income of $47 million compared to $43 million a year earlier, an increase of 11%. Net income attributable to Class A common shareholders was $9 million after attribution of earnings to the noncontrolling interest and accretion on the preferred stock. GAAP basic and diluted earnings per share was $0.09 based on 91 million shares of Class A common stock outstanding. We ended the quarter with $140 million in unrestricted cash and $176 million of total debt, which includes $39 million in back leverage for our portfolio of collateralized loans. Let me wrap up with our updated outlook for 2025, where we increased full year expectations for revenue and profits. Given our first half results and solid business momentum, we are increasing our 2025 revenue expectations to 13% to 14% growth, powered by similar rates of Written Premium growth and strong gains from our marketplace business. We are also increasing our assumptions for margin expansion and now expect net income of $112 million to $120 million, up 43% to 53%, and adjusted EBITDA of $162 million to $172 million, up 30% to 38% compared to 2024. In addition to executing on our 2025 strategic priorities, we are well positioned to deliver accelerated growth as we move into 2026, fueled by State Farm's ramp and market share gains. We are excited to welcome their 525,000 current program members and to help them grow their classic business. Our partnership pipeline is strong and growing as top 50 carriers realize that they could benefit from a partnership with Hagerty to help them fuel their own growth and improve retention with our differentiated approach to caring for their members and special cars. Enthusiast+ should become a material growth driver over the medium term as we target more of the modern enthusiast vehicles with the right product and pricing to service these vehicles. As we continue to get smarter at utilizing our data to target members with superior driving characteristics with their special vehicles, we have more precisely defined our target market for 25- to 40-year-old cars that are more likely to be collectible versus just an older vehicle that might still be used as a daily driver. This includes filtering by vehicle and body type equipment and powertrain packages and original MSRP. The 1999 Toyota Camry would be a good example of this. We believe we have a long runway in front of us given our penetration of this 35 million car target market is only 6.7%. When you combine our top line momentum and growth levers with our ongoing efficiency initiatives and the proposed Markel fronting arrangement, we believe we are pulling together all the ingredients necessary for creating strong shareholder value over the coming years. With that, let us now open the call to your questions.

Operator, Operator

Our first question comes from Mark Hughes with Truist Securities.

Mark Douglas Hughes, Analyst

The Marketplace revenue was quite strong this quarter. Do you have any thoughts on kind of pacing on Q3, Q4 when you look at the events that you've got in front of you? What's the trajectory of that going to be? And then when we look at your full-year total revenue guide, how much of that is Marketplace? I don't know if you can share that detail.

Patrick Scott McClymont, Chief Financial Officer

Sure. In the second quarter, we experienced robust private sales, including some inventory sales. We've mentioned previously that we occasionally purchase cars to resell them privately or at auction. According to our accounting practices, the total sale price of the car counts as revenue, which we aim to do to achieve a margin. There was significant activity in this area during the second quarter. Additionally, pure agency transactions have also performed well in the first half of the year, contributing to year-to-date revenue. Looking ahead to the second half of the year, we expect growth to increase. We're excited about the upcoming Monterrey auction, which is shaping up nicely, and we’ll see how the bidding goes. As mentioned by McKeel, we are also introducing several new auctions this year in Belgium, Switzerland, and Las Vegas, which will add to our growth. None of these events occurred last year, and that’s reflected in our guidance for the second half of the year.

Mark Douglas Hughes, Analyst

Very good. The $20 million in incremental technology spending, what's the outlook when we think about 2026? Is that all going to go away? Or is that going to drop by half? Or any thoughts on that?

Patrick Scott McClymont, Chief Financial Officer

Yes. I think we've talked about this on previous calls, and we try to be very careful with our language. We're intentionally not describing it as a one-time that would go away. The concept is that we had to increase spending. So it's $20 million, $15 million of which is related to technology. The other $5 million is really related to Marketplace. And so putting together with the team and for the auctions that I just talked about, we've meaningfully grown our footprint in Europe to support the business. But the $15 million, the way to think about it is it's the fact that as we've invested heavily in our new technology platform, which is now actually in use. We've launched Enthusiast+ and we're selling policies. Think of that as pre-revenue spending, right? So we spent on both technology and people to get ready to launch the platform. Now we're starting to actually sell on the platform, but we're only in one state. It will ramp up over time. So what we're trying to explain is there's a pinch point in profitability because we're spending those dollars in advance of when the revenue shows up. So the concept is not that it goes away. It's that we'll actually be delivering real revenues, both from the insurance side and the marketplace side on a go-forward basis. So we gave clarity on that really to just explain that pinch point. Does that help, Mark?

Mark Douglas Hughes, Analyst

It does. So that's cost that you'll be leveraging. I think I understand what you're saying. About the...

Patrick Scott McClymont, Chief Financial Officer

Yes. So the licenses for our new platform, which is the Duck Creek platform, we started spending money on those in 2025. And for the first half of the year, there was no revenue associated with. Second half of '25, there's a little bit as we launched Enthusiast+, but it ramps up from there. And similar on the Marketplace, right? We hired those people. And now in the second half of the year, we'll start producing revenue against it.

Mark Douglas Hughes, Analyst

Yes. The earnings impact from the Markel shift, other things equal, is that we need to consider how that contributes to the bottom line.

Patrick Scott McClymont, Chief Financial Officer

Sure. And we put out a set of slides when we announced that ten days ago, whenever it was. And the concept is by picking up the incremental 20 percentage points of quota share, going from 80% quota share up to 100%, the benefits to us are, one, we get the incremental underwriting profit on that. And as you know, within Hagerty Re, the way that business works is it runs at about an 89% combined ratio. So on the incremental 20 points, we'd expect to earn, call it, 11 points of operating profit. And so that's a meaningful benefit at the Hagerty Re level. And if you can take the current book of business that we're running and gross it up by the incremental 20 percentage points of quota share, and that's the way to think how it flows through. Additionally, we're now getting that earned premium within Hagerty Re and so we'll be able to make the investment income on that as well. And we're earning something like, I think, 4.4% right now on investment earnings. So those are the two big economic drivers. We do have to staff up a little bit. We're taking on new scope of work. And so that's a little bit of an offset to the two positives. But I think if you just focus on the incremental investment earnings, the incremental underwriting profit, you'll get most of the answer.

Mark Douglas Hughes, Analyst

Understood. If I could just squeeze in one more. When you think about the shopping behavior of the customers, I think you've mentioned on earlier calls that some of the higher pricing across the industry has perhaps been beneficial as consumers have shopped around and you've had an attractive offering. How would you characterize the market right now in terms of just the potential flow related to the dynamics across the broader space?

Patrick Scott McClymont, Chief Financial Officer

Yes, I'm happy to take a crack at it and McKeel can add. We're in business with all the top insurance companies. And so we talk about what they're seeing in their core business and share with them what we're seeing. And the general theme now with the exception of Progressive is people are seeing this being a year where unit growth is a bit below what they had expected. Progressive obviously in a different situation where they're spending heavily and they're growing quite aggressively. And so I would say it's somewhat of a balanced market right now. We're not in one of those phases where there is intense spending on new customer generation in the broad industry that's leading to those high levels of shopping maybe that we saw in years past. It seems more muted, again, with the exception of Progressive. Having said that, our quote bond continues to be very strong and up year-over-year. And so we're confident from a new business perspective, but maybe not kind of the frothy environment that you can see in other times.

Operator, Operator

Our next question comes from Greg Peters with Raymond James.

Charles Gregory Peters, Analyst

I wanted to revisit your expansion in Europe. Could you remind me about your perspective on the addressable market for your business as we consider the next couple of years?

McKeel O. Hagerty, Chief Executive Officer and Chairman

Yes. Greg, it's McKeel. Thanks for that. We're pretty excited about our expansion into Europe and really with auctions being the lead step here. Our auction at Villa d'Este, which is a very, very high-end auction and Concours environment, was a real testament that we had the team to go out there and build this business for us in Europe. And we can't emphasize enough that live auctions and private sales are very client-oriented. So in order to have the business, you can't just hang the shingle out and hope for the best. It's very much like if you have the team, you have the specialists, they go out and generate the business, find the potential buyers in the auction room, especially if you do it in a fun place like Lake Como and Villa d'Este. So off to a good start. And then the idea being that with the two additional auctions at the Zoute Concours in Belgium, which is a very well-attended high-end Concours environment, lots of different motoring activities take place there, long history of auctions being successful there. That was the next one we announced and then on to Auto Zurich, which is a very strong both enthusiast and kind of more towards this modern enthusiast car. They call them young timers, actually over in Europe, kind of the German-speaking term for that kind of newer vehicle category, which is where all the expansion is and where a lot of our greatest demand is in our auction business. So what we think we've done here is built the right team for Europe. We're focused on the right most growing Marketplace rather than trying to just compete in a tougher market of older cars. And what we found already is, again, a great team, plenty of demand, and a lot of early indications that we've made the right moves at the right time. So, so far, so good in Europe. We'd look to see in the next couple of years an even bigger auction calendar for us in Europe and also build out that private sales capability. So looking forward to that as well as a full auction schedule for us in the U.S.

Charles Gregory Peters, Analyst

Can we discuss State Farm? It seems like this is starting to significantly affect your financials. Could you provide an update on the progress of the State Farm integration and the rollout of your business to all their agents?

McKeel O. Hagerty, Chief Executive Officer and Chairman

This partnership with State Farm is significant for us and we see it as a long-term commitment. State Farm engaged us to support their customers who are passionate about cars, as this is not their area of expertise. Currently, we are operational in 17 states and may have added a couple more recently. We're focused on new business, especially as we open new agents in those areas. Allstate and State Farm have over 19,000 agents in total, so each state has a substantial number of them. We have already begun developing new business in four states and are now in the process of transitioning existing accounts from those states to us. The next few years are expected to be high volume, both in terms of new business and the transition of existing accounts. The technology integration has been complex, but our teams have worked diligently to ensure everything runs smoothly on our end while aligning with State Farm's extensive systems. We are pleased to report that operations are up and running successfully. The positive aspect we’re seeing is that the new business figures show that agents are enthusiastic about this product, making them a highly motivated sales force. We anticipate this partnership will increasingly play a vital role in our new business strategy.

Charles Gregory Peters, Analyst

That's interesting. Do you have a goal to be in 30 states by the end of the year? Ultimately, your aim seems to be entering all those states, but there might be specific challenges at State Farm that complicate a straightforward rollout. Perhaps you can provide us with some insights.

McKeel O. Hagerty, Chief Executive Officer and Chairman

Yes. They have a clear cadence that they want to be careful that they can pre-communicate, train their agents, and create all their territory and regional people to be ready for this. I think the goal is something in the 20s, right?

Patrick Scott McClymont, Chief Financial Officer

Twenty-five states by the end of the year.

McKeel O. Hagerty, Chief Executive Officer and Chairman

Yes, twenty-five states. It fluctuated by one or two states. The plan is to be present in all accessible states over the next few years. Some states, like California, tend to be challenging and may lag behind, and that will apply here as well. It's also important to note that State Farm doesn’t operate in every state; for example, they notably do not conduct business in Massachusetts for this specific area. So, the aim is to cover all states. Additionally, this isn't like previous partnerships where we simply place a product on the shelf and wait for sales. This situation involves a significant amount of business that will transition to us as states begin the conversion process. It's a different scenario compared to the exciting launch of a new partner with hopes of high sales. Both aspects—sales and conversion—are expected to be strong, which is why State Farm is very important to us.

Charles Gregory Peters, Analyst

Makes sense. I guess the last question, you touched upon it in your comments and in your answer before. But just curious about the background in the change of the fronting arrangement with Markel. And what got you to the point where you wanted to go to 100% retention? Just curious how you're thinking about that going into those conversations.

McKeel O. Hagerty, Chief Executive Officer and Chairman

I’ll begin and Patrick can add any details I might have missed. From the very start in 2013, our core intention was to eventually assume full risk. We chose to operate as an MGA and managed that risk through a quota share agreement, which became the most practical approach over time, increasing the quota share to the current 80% starting in 2017. This has always been a friendly and intentional evolution of our business model. The timing and terms for transitioning from 80% to 100% have consistently been a topic of discussion with Markel throughout the years. Through our regular partner conversations, we mutually agreed that it was time to shift from 80% to 100% and to modify the structure from a quota share to a standard fronting fee. Markel has a significant fronting business called State National, which they didn’t have at the beginning of our partnership, and they have expressed a preference for this fronting relationship. This change reflects a natural evolution from both sides, and it’s advantageous for Hagerty, as Patrick mentioned earlier, providing substantial economic benefits for us in the coming years. We have solid experience with the 80% quota share and feel prepared to take on the final 20%.

Operator, Operator

Our next question comes from Pablo Singzon with JPMorgan.

Kevin Wijendra, Analyst

This is Kevin on for Pablo. So Premium growth in the first half of '25 is running a little below your full-year outlook. Why is that? And what factors do you think will help the recovery in the second half?

Patrick Scott McClymont, Chief Financial Officer

Sure, it's Patrick. So it's a little late to what we had planned for and expected. There's a few factors going on there. One is on the new business front, it's coming in a little bit below what we had expected. And most of that is intentional. We have deemphasized growth in certain markets where we just didn't see adequate profitability. And so you can think about markets like California and New York. And we're working on changes in those markets to get back to a position where we can grow again, but we did pause that a bit in the first half of the year. And then we've actually transitioned our direct approach in terms of how we spend. We refined our model, and we're much more focused on a return on advertising sales approach versus previously, we were more focused on minimizing our cost to acquire a customer. And you can imagine the logical outcome, right? We're getting what we believe are better customers as measured by our expected lifetime value. But in some cases, we're getting less customers. We're just optimizing for a different metric now. So those are the factors that went into it. We actually feel very good about both of those decisions, and we think that things will change in the markets where we had to slow down a bit, and we're really excited about our new approach to maximizing returns on new customers. And then in the second half of the year, what we're going to see is we just talked at length about State Farm. That will start to really ramp up. McKeel talked about the fact we're in 16 states. The original four have started conversions. We've got another seven or so states that will start conversions in the fall time table. And so that really does ramp up in the latter part of the year.

McKeel O. Hagerty, Chief Executive Officer and Chairman

Is that helpful?

Kevin Wijendra, Analyst

Yes. Yes. And then a follow-up to that. The tax rate in the first half has been running a little low. Do you have an expected tax rate for the second half of the year?

Patrick Scott McClymont, Chief Financial Officer

Not at this time. Our tax situation is quite interesting, the nature of the partnership structure that we have. And then with the new Big Beautiful Bill Act, we're still doing our analysis of what the implications of that are. And so we don't have an update on that right now. It's implied in what we put in terms of the net income guidance, but there's some moving pieces right now.

Operator, Operator

Our next question comes from Mark Hughes with Truist Securities.

Mark Douglas Hughes, Analyst

Patrick, on the State Farm arrangement, the marginal economics on that business, given the kind of the risk structure, I think State Farm retaining risk. How does that work just in terms of the latest thoughts on how it flows through the P&L with that Written Premium being quite strong, but then kind of flowing through the rest of the income statement a little differently?

Patrick Scott McClymont, Chief Financial Officer

Sure. When considering State Farm, there is no risk involved since it is under State Farm's policies, and there is no quota share arrangement with Hagerty. This establishes a straightforward agency relationship where State Farm handles all distributions. Their agents manage existing customers, seek out new clients, and oversee all related activities, similar to a broker relationship. In our typical operations, we pay brokers commissions that range from 10% to 13%. However, since State Farm has its own sales force and uses its own policies, this changes the economic dynamics. In our core program under the MGA, commissions typically range from 41% to 42%, depending on the circumstances. When you exclude the distribution expenses, the commission we receive from the State Farm partnership is about 11 to 12 points lower than the 42%. That said, these remain attractive and healthy commissions considering the value we bring. Currently, State Farm's portfolio consists of 525,000 vehicles, and their pricing is somewhat lower than ours regarding average premiums, which will adjust over time. Our goal is to convert this business while supporting their growth, allowing us to earn commissions in the low 30% range on this portfolio. We'll utilize our existing expertise and processes through the core MGA, and we expect this to be a very profitable venture. Additionally, any HTC sales to new State Farm clients will provide incremental financial benefits for us.

McKeel O. Hagerty, Chief Executive Officer and Chairman

Is that helpful, Mark?

Operator, Operator

Our next question comes from Mike Zaremski with BMO Capital Markets.

Michael David Zaremski, Analyst

I think just one question on pricing or premium per vehicle trends. It looks like it's trending down a bit. The overall market, we kind of can see loss costs are from 9% and competition is building. Any comments there? And I believe just to intertwine in, you just said that State Farm average premiums per vehicle are also a bit lower than the portfolio.

McKeel O. Hagerty, Chief Executive Officer and Chairman

Just looking a little bit on the outside-in approach, and thanks for the question. It's a good one. As you may know, we publish something that we call our Hagerty Value Index through our valuation tools. We have an amazing team of people that track the market out there. It is true based on the index you look at that pricing or valuation specifically of cars is, call it, soft, flat, whatever it is, especially at the high end. But it's remaining quite steady. What you don't see in uncertain economic times in this market is a lot of, say, panic selling or gosh, my car isn't increasing in value this year, so I'm going to go sell it. People just hang on to it and continue to pay their insurance premiums. So valuation is, from a again, that index and marketplace standpoint, kind of soft to flat, but holding steady by almost every measure. I'm not sure if that addresses the second part of your question, though Patrick. Was there anything you'd like to add?

Patrick Scott McClymont, Chief Financial Officer

Yes. The average premium can fluctuate. Currently, what we're observing compared to last year and our expectations is consistent. As McKeel mentioned, the factors that influence our rates primarily involve rate adjustments. We experienced a period of rate increases a couple of years ago across most states, and that has impacted our portfolio. Typically, we see long-term values increase, but right now, the market is relatively stable, so there is less rate adjustment resulting from rising underlying values. However, we are not seeing anything that raises concerns. You brought up increased competition; could you elaborate on that question and share what you are noticing or seeking in that regard?

Michael David Zaremski, Analyst

Your answer is helpful. We've noticed increased competition and are evaluating pricing KPIs from other industry competitors, as well as analyzing CPI data. Please continue.

Patrick Scott McClymont, Chief Financial Officer

When it comes to competition within our niche, right, things operate very differently in the collector car niche. And so when we look at the specialists who compete, it feels pretty normal, right? You can see pockets where people are competitive and other pockets where it's less so. And so we're not seeing something fundamentally different on that front either.

Michael David Zaremski, Analyst

Okay. Got it. If we create a KPI called vehicles per policy, it doesn't seem to fluctuate much. I think it's increased slightly over the past couple of years. Should we consider any initiatives to boost vehicles per policy?

McKeel O. Hagerty, Chief Executive Officer and Chairman

Thank you for the great question. It's a positive development for us. Currently, we have about 1.7 vehicles per policy when considering both our core business and our Flex business. One of the main reasons we launched the Enthusiast+ program is to accept more of the inbound business we receive. This often involves individuals adding more vehicles to their policies that we might not have been able to underwrite before due to pricing or risk concerns in our core program. Additionally, it allows us to welcome more new customers that we don't currently serve. While this doesn't directly increase the 1.7 vehicles per policy figure, it enables us to say yes more often. We expect that the Enthusiast+ business will also yield higher average premiums. Therefore, the key initiative for us, which has been complicated and ongoing for several years, has been the rollout of Enthusiast+. This initiative includes acquiring the driver's Insurance Company, which is currently operational in one state and will expand over the coming months. We are also establishing our Apex platform to manage this new business with flexible pricing and eventually oversee our core business as well. I must say, between the technology and the launch of Enthusiast+, we have celebrated a significant month following years of hard work. This should help address your concerns.

Operator, Operator

We've reached the end of our Q&A session. And I would now like to pass the floor back over to McKeel for closing comments.

McKeel O. Hagerty, Chief Executive Officer and Chairman

Thank you, operator, and thanks to all of you for your continued support. Hagerty is firing on all cylinders, and we have solid business momentum and a long straightaway in front of us. Sustaining this trajectory year after year requires great talent. And over the last month, we have been able to fill three key positions with top-tier talent that we believe will be critical to our long-term success. This includes hiring Adam Van Loon, our new Head of Omnichannel Insurance Distribution, after a career of working at Bain, Chubb, and Plymouth Rock. We also hired Jesse McKendry to lead our insurance products after great success at GEICO, Progressive, and Lemonade. Our third addition to Hagerty is Marc Burns, who has brought on board to tightly integrate Hagerty's brand and marketing efforts across our suite of products and services for car lovers. One Team Hagerty has never been stronger. And with that, we look forward to seeing some of you over the next two weeks as we head to Monterrey Car Week, including our two-day Broad Arrow auctions, where we will present some of the best cars yet. Until then, never stop driving.