Hagerty’s Q1 Surge: High-Octane Growth Meets Speed Bumps Ahead

Hagerty, Inc. (HGR) delivered a roaring start to 2025, with Q1 results showcasing explosive revenue growth and margin expansion. But beneath the headline numbers lie both opportunities and obstacles that investors must weigh. Let’s dive into the details of this specialty insurer’s performance—and why its future hinges on balancing high-margin ventures with near-term headwinds.

The Engine Behind the Numbers: Revenue and Margins on Fire

Hagerty’s Q1 revenue soared 18% year-over-year to $320 million, driven by a 12% rise in written premiums. Operating margins surged by a staggering 360 basis points, propelling net income to a 233% increase compared to Q1 2024. This margin leap isn’t just about pricing power—it’s a reflection of the company’s strategic bets paying off.

The real star, however, is the marketplace segment, which includes live auctions and enthusiast-focused sales platforms. Revenue here jumped 60% year-over-year, with contribution margins of 30–35%—a stark contrast to the 10% margins in its core insurance business.

. This segment’s growth isn’t just a side hustle; it’s a high-margin engine for future profits.

The Pit Stop Problems: Wildfires, Tech Costs, and Slower Onboarding

No race is without its hurdles. Hagerty reported a $10 million hit from Southern California wildfires, which pushed its loss ratio higher than expected. While the first-quarter loss ratio dipped into the “30s” (seasonally low), the company is already pricing in catastrophe impacts for the full year.

More concerning is the 30% lag in new customer acquisition growth compared to historical trends. Weather disruptions and internal process changes—aimed at reducing “quote-flow friction”—are partly to blame. Meanwhile, upfront costs for a new technology platform are compressing margins in 2025, a short-term trade-off for long-term efficiency.

Q&A Insights: Clues to the Finish Line

The earnings call revealed critical details about Hagerty’s strategy:
1. State Farm’s Expansion: A partnership with the insurance giant could turbocharge new customer growth, offsetting current slowdowns.
2. Enthusiast Plus Program: This initiative targets younger buyers of newer cars, expanding Hagerty’s underwriting funnel. Previously, such vehicles were too risky or expensive to insure.
3. Tariffs and Supply Chains: While risks exist, older cars (which dominate Hagerty’s portfolio) face lower tariffs, and domestic parts production mitigates costs.

The Data in the Dials

Let’s quantify the stakes:
- Marketplace Revenue Growth: A 60% jump suggests this segment could contribute $100 million+ annually within two years, given its current run rate.
- Margin Pressures: The new tech platform’s costs could shave 1-2% off margins in 2025, but automation could boost efficiency long-term.
- Enthusiast Plus Potential: If this program captures 10% of the $5 billion U.S. collector car insurance market, it adds $500 million in revenue potential.

Conclusion: Full-Throttle Growth, But Keep an Eye on the Gauge

Hagerty’s Q1 results are a masterclass in leveraging niche markets. The company’s 2.4 million insured vehicles and 30+ events annually create a flywheel of brand loyalty and data-driven underwriting. The 60% marketplace growth and 233% net income surge highlight its ability to monetize enthusiast communities.

Yet investors must acknowledge the speed bumps. The $10M wildfire loss is a reminder that catastrophe risk isn’t fully predictable, and margin compression from tech investments could persist. However, the 30-35% contribution margins in auctions and the Enthusiast Plus expansion offer a clear path to outsize returns.

The verdict? Hagerty’s long-term narrative is intact—if it can navigate the near-term costs and keep its marketplace momentum. With a $320 million revenue base growing at 18%, and high-margin segments accelerating, this insurer’s race toward dominance in the enthusiast market looks far from over.