Despite watching claims for damage to classic cars it insures climb after Hurricane Ian swept through Florida, Hagerty Inc. saw its total revenue increase 27% in 2022 and predicts strong growth in 2023.
The company reported revenue of $787.6 million and net income of $2.4 million. However, the Traverse City, Michigan-based classic car insurer and auction house reported an adjusted EBITDA loss of $1.9 million.
The lost on adjusted EBITDA was due to the impact of Hurricane Ian, the decision to increase the company’s 2022 loss reserves, as well as $29.8 million of pre-revenue costs related to scaling the company’s infrastructure, new digital platforms and legacy systems, human resources and occupancy to accommodate our alliance with State Farm and other potential distribution partnerships as well as to further develop our Marketplace transactional platform, the company said.
“Hagerty has excellent business momentum entering 2023 and we are focused on positioning the company for sustained profitable growth over the coming years,” McKeel Hagerty, the company’s top executive, predicted as it released its financial report for 2022.
“We are confident that the opportunities we have identified to monetize our significant addressable revenue from its insurance and the company’s new classic-car oriented market will expand our share,” Hagerty said.
The company expects total lifestyle business to grow by 22%-26% powered by written premium growth of 11%-13%.
During the fourth quarter of 2022, Hagerty’s total revenue increased 28% year-over-year to $197 million, in addition to the full-year results.
“We delivered industry-leading revenue growth of 27% during fiscal 2022, fueled by auto enthusiasts love of their cars despite a weakening macroeconomic environment,” Hagerty said. “These impressive results were powered by consistent 15% written premium growth throughout the year, higher quota share in Hagerty Re, as well as $14 million in revenue from Marketplace.
“We have spent the last several decades building Hagerty into one of the most beloved consumer brands in the auto enthusiast space and believe our affinity model positions us to provide our members with the necessary resources to enjoy their passion.”
Hurricane piled up losses
Hagerty took its lumps as the full-year loss ratio was 45.3% in 2022 compared to 41.3% in the prior year. The full year loss ratio includes the $10 million in claims linked to Hurricane Ian, which came ashore in late September amid the wealthy enclaves on southwest Florida’s Gulf Coast.
Hagerty’s fourth quarter adjusted EBITDA was a $2 million loss compared to a $2.6 million loss for the year-ago period. The adjusted EBITDA was a loss of $1.9 million compared to a profit $25.4 million for the previous year.
The fourth quarter operating loss was $35.7 million compared to a loss of $21 million in the prior year period, while the full year operating loss was $67.6 million compared to a loss of $10.1 million for 2021.
The insurance policies offered by Hagerty offer coverage for collectible vehicles that are not driven daily, and offer lower prices than standard insurers. It says it has insured more than 2 million vehicles globally.
The company was launched in 1984 by Frank and Louise Hagerty after they could not find good insurance coverage for their wooden boats. The company initially focused on providing coverage for antique boats, and later expanded into cars and other vehicles. It went public in 2021 through a SPAC.