Hagerty Raises 2026 Profit Outlook as Q3 Adjusted EBITDA Rises 64%

Hagerty raised its full-year 2026 profit outlook on November 3, 2026, after third-quarter Adjusted EBITDA rose 64% to $97 million from $59 million, even as net income fell to $36 million from $46 million, the specialty vehicle insurer said in its third-quarter results. Adjusted EBITDA is Hagerty’s non-GAAP measure that adjusts net income for interest, taxes, depreciation, amortization and specified items.

Hagerty now expects full-year net income of $48 million to $60 million, up from $18 million to $30 million previously, and Adjusted EBITDA of $305 million to $315 million, up from $270 million to $280 million. The total revenue outlook increased to $1.34 billion to $1.354 billion from $1.325 billion to $1.34 billion. The written-premium range remained $1.385 billion to $1.397 billion, representing expected growth of 16% to 17%.

The contrast between rising adjusted earnings and lower reported profit reflects the Markel Fronting Arrangement. Third-quarter net income included $36 million of pre-tax transitional costs, which the Adjusted EBITDA reconciliation excludes along with other specified adjustments. Those costs are deferred ceding commissions paid to Markel for policies written before January 1, 2026, and are being amortized over the remaining policy terms through December 31, 2026.

The arrangement increased Hagerty Re’s U.S. quota share from 80% to 100%, including in-force policies written in 2025, so Hagerty now retains all of the associated premium and risk. Third-quarter written premium rose 16% to $386 million, while earned premium increased 42% to $265 million. The earned-premium growth reflected the larger quota share and growth in subject premiums written by Hagerty’s MGA subsidiaries.

Reported revenue tells a different story because of consolidation. MGA+ commission and fee revenue grew 16% to $160 million, reflecting organic growth in the Essentia and State Farm books, but $138 million was eliminated in consolidation now that Hagerty controls the Essentia book. Consolidated commission and fee revenue fell 84% to $22 million, contributing to a 9% decline in total revenue to $354 million.

Underwriting Results and Accounting Changes

Hagerty Re’s third-quarter loss ratio improved to 32.6% from 42.0%, while its combined ratio improved to 79.7% from 89.6%. Both ratios benefited from a $26 million reduction in estimated loss and loss-adjustment expenses for the current accident year, recorded in the quarter.

Expenses also reflected the new structure. Policy acquisition costs, net decreased 29% to $62 million following the change in expense composition under Markel, partly offset by earned-premium growth. Combined underwriting and other insurance expenses and selling, general and administrative expenses in the insurance segment fell 13% to $121 million, primarily because the MGA subsidiary’s costs for acquiring or renewing policies under the arrangement are now deferred and amortized rather than expensed as incurred. The transition and adoption of Article 7 insurance reporting reclassified costs among expense captions, reducing period-over-period comparability of individual lines without changing total expenses.

Operating cash flow for the first nine months increased 48% to $280 million. Policies in force rose 18% to 1.9 million as of September 30, 2026, while retention slipped to 88.2% from 88.6%. Hagerty Drivers Club paid membership increased 6% to more than 977,000. Marketplace revenue moved lower, down 6% to $32 million in the quarter; year-to-date auction sales grew 83%, but lower inventory sales offset that growth in marketplace revenue.

Hagerty expects Markel transitional-cost amortization to decline to approximately $10 million in the fourth quarter of 2026 as the remaining 2025 policy terms expire. Its full-year net income forecast includes approximately $199 million of those pre-tax costs.

The runoff will remove a charge that reduced reported net income but was excluded from Adjusted EBITDA. The central question for subsequent results is whether premium growth and underwriting improvement persist after the transitional costs run off, now that Hagerty retains all of the associated premium and risk.