Q3 2024 Hagerty Inc Earnings Call

Operator: Greetings and welcome to the Hagerty's third quarter 2024 earnings call. At this time, all participants are in a listen only mode.

Greetings and welcome to the Hackett East third quarter 'twenty 'twenty four earnings call. At this time, all participants are in a listen only mode.

Operator: A question and answer session will follow the formal presentation.

Speaker Change: <unk> and answer session will follow the formal presentation. If anyone should require operator assistance. Please press star zero on your telephone keypad. As a reminder, this conference is being recorded it is now my pleasure to introduce Jacob bout senior Vice President of Investor Relations. Thank you you may begin.

Operator: If anyone should require operator assistance, please press star zero on your telephone keypad. As a reminder, this conference is being recorded.

Jay Koval: It is now my pleasure to introduce Jay Koval, Senior Vice President of Investor Relations. Thank you, you may begin.

Jay Koval: Thank you, operator.

Jay Koval: Good morning, everyone. And thank you for joining us to discuss Hagerty's results for the third quarter of 2024. 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 at investor.hagerty.com. Our earnings release, slides, and letter to stockholders covering this period are also posted on the IR website, as well as our 8K filings.

Jacob Bout: Thank you operator, and good morning, everyone and thank you for joining us to discuss hagrid east results for the third quarter of 2024.

I'm joined this morning by Mckeel, Haggerty, Chief Executive Officer, and Chairman and Patrick Mcclimans, Chief Financial Officer.

During this mornings conference call, we will refer to an accompanying presentation that is available on <unk> Investor Relations section of the company's corporate website at Investor <unk> Haggerty Dot com.

Our earnings release slides and letter to stockholders covering this period are also posted on the IR website as well as our 8-K filing.

Jay Koval: Today's discussion contains forward-looking statements and non-GAAP financial metrics, as described further on slide 2 of 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 for the SEC, which are also available on our Investor Relations website and at sec.gov.

Speaker Change: Today's discussion contains forward looking statements and non-GAAP financial metrics as described further on slide two of the earnings presentation.

Speaker Change: Forward looking statements include statements about our expected future business and financial performance and are not promises or guarantees of future performance.

Speaker Change: They are subject to a variety of risks and uncertainties that could cause actual results to differ materially from our expectations.

Speaker Change: 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 and at SEC Gov.

Jay Koval: The appendix to the presentation also contains reconciliations of our non-GAP metrics to the most directly comparable GAP measures that are further supplemented by this morning's 8K filing.

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.

McKeel Hagerty: And with that, I'll turn the call over to McKeel. Thanks, Jay. And good morning, everyone. We appreciate you taking the time to join Hagerty's third quarter 2024 earnings call. The last of the most stubborn leaves have finally fallen to the ground, signaling the end to yet another great driving season in North America. With year to date written premium growth of 16 percent, Hagerty customers were out enjoying their special cars in larger numbers than ever. In fact, we are on track to add a record 275,000 new members in 2024, as our impressive portfolio of value-added offerings from events and live auctions to Hagerty Drivers Club and media continues to fuel mid-teens compounding revenue growth in year in and year out, with a visible path to expanding margins, including large gains in 2024.

Speaker Change: And with that I'll turn the call over to Mikael.

Mikael: Thanks, Jay and good morning, everyone. We appreciate you taking the time to join <unk> third quarter 2024 earnings call.

Mikael: The last of the most stubborn leaves have finally fallen to the ground signaling the end to yet another great driving season in North America.

Mikael: With year to date written premium growth of 16% already customers were out enjoying their special cars in larger numbers than ever and.

Mikael: In fact, we are on track to add a record 275000, new members in 'twenty 'twenty four is our impressive portfolio of value added offerings from events and live auctions. The hiring drivers club in media continues to fuel mid teens compounding revenue growth and year end and year out with a visible path to expanding margins include.

Mikael: <unk> large gains in 2024.

McKeel Hagerty: Now, as you have all seen on the news over the last month. Hurricane Helene and Milton were large destructive catastrophes. Fortunately, we have a disciplined approach to underwriting, and our team of 1,700 Hagerty employees was well prepared to help members with their losses. Events like these are typically a perilous time for insurance carriers, as a botched customer service experience can lead to attrition and low Net Promoter Scores. One of our Florida members was on hold with his home insurance carrier the entire time it took for us to process his loss in person at our on-site pop-up center at the Porsche dealership in Clearwater, Florida, and deposited money into his account.

Mikael: Now as you've all seen on the news over the last months.

Mikael: Hurricanes, Helene and Milton where large destructive catastrophes.

Mikael: Fortunately, we have a disciplined approach to underwriting and our team of 1700 Haggerty employees was well prepared to help members with their losses.

Mikael: Like these are typically a perilous time for insurance carriers as a botched customer service experience can lead to attrition and low net promoter scores.

Mikael: One of our Florida members was on hold with his home insurance carrier the entire time it took for us to process his loss in person at our onsite pop ups center at the Porsche dealership in Clearwater, Florida and deposited money into his account.

McKeel Hagerty: We take pride in working closely with our members to get them back out on the road with minimal friction, leading to even higher Net Promoter Scores after a claim than before. Thank you to One Team Hagerty for helping us generate our NPS of 82, more than double the industry average. It's a key differentiator that not only fuels our direct business, but also helps us to create long lasting partnerships with national carriers who look to Hagerty for the expertise and white glove service that car enthusiasts deserve for their prized possession. Our top line momentum persisted into the third quarter with total revenue growth of 20% over the first nine months of 2024.

Mikael: We take pride in working closely with our members to get them back out on the road with minimal friction leading to even higher net promoter scores after a claim than before.

Mikael: Thank you to one team haggerty for helping us generate our M. P. S of 82 more than double the industry average it is a key differentiator that not only fuels our direct business, but also helps us to create long lasting partnerships with national carriers, who look to haggerty for the expertise and white glove service that car enthusiasts deserve for there.

Mikael: Prized possessions.

Mikael: Our topline momentum persisted into the third quarter with total revenue growth of 20% over the first nine months of 2024. It also marks the seventh straight quarter of translating this incremental revenue into greater profitability.

McKeel Hagerty: It also marks the seventh straight quarter of translating this incremental revenue into greater profitability. Year-to-date operating income, excluding Helene's $25 million impact, came in approximately five times higher than the prior year period. Importantly, our revenue growth and margin expansion generated $190 million of operating cash flow during the first nine months of the year, up 43%. Let me share a few other key highlights shown on slide three. Revenue gains were driven by commission and fee growth of 16% in line with written premium gains as we added 220,000 new members during the first nine months. earned premium for a risk-taking entity, Hagerty Reinsurance, jumped 24% due to written premium growth and historical increases in quota share.

Mikael: Year to date operating income, excluding hellenes $25 million impact came in approximately five times higher than the prior year period.

Mikael: Importantly, our revenue growth and margin expansion generated $190 million of operating cash flow during the first nine months of the year up 43%.

Mikael: Let me share a few other key highlights shown on slide three.

Mikael: Revenue gains were driven by commission and fee growth of 16% in line with written premium gains as we added 220000, new members during the first nine months.

Mikael: Earned premium for our risk taking entity haggerty reinsurance jumped 24% due to written premium growth and historical increases in quota share.

McKeel Hagerty: Membership, Marketplace, and other revenue grew 20%, with Marketplace up 54% due to strong results from our Monterey Live auction, higher inventory sales, and an increase in financing revenue. Year-to-date profitability improved significantly over the prior year period with operating margin expansion of 440 basis points, despite Helene's negative 280 basis point drag on margin. Our cost discipline drove a year-to-date decline in G&A of 4% and allowed us to hold growth in salaries and benefits to just 1%. Year-to-date loss ratio was 47%, six points higher than the prior year due to unusual cat losses during the first three quarters, including, of course, Helene.

Mikael: Membership marketplace and other revenue grew 20% with marketplace up 54% due to strong results from our Monterey live auction higher inventory sales and an increase in financing revenue.

Mikael: Year to date profitability improved significantly over the prior year period with operating margin expansion of 440 basis points. Despite hellenes negative 280 basis point drag on margins.

Mikael: Our cost discipline drove a year to date decline in G&A of 4% and allowed us to hold growth in salaries and benefits to just 1%.

Mikael: Year to date loss ratio was 47% six points higher than the prior year due to unusual cat losses during the first three quarters, including of course Helene.

McKeel Hagerty: This resulted in operating income of $60 million and adjusted EBITDA of $105 million.

Mikael: This resulted in operating income of $60 million and adjusted EBITDA of $105 million.

McKeel Hagerty: Slides four and five are reminders of the 2024 priorities that are driving our operational efficiencies, including first, improving loyalty to drive retention and referrals. Second, enhancing the member experience in a cost effective and efficient way. Third, building Hagerty Marketplace into the most trusted place to buy, sell and finance collectible vehicles. And fourth, increasing our flexibility and control over our underwriting profits as we look to launch our Enthusiast Plus business in early 2025 through our newly acquired insurance company, which closed during the third quarter.

Mikael: Slides four and five are reminders of the 'twenty 'twenty four priorities that are driving our operational efficiencies, including first improving loyalty to drive retention and referrals second enhancing the member experience in a cost effective and efficient way.

Mikael: Third building haggerty marketplace into the most trusted place to buy sell and finance collectible vehicles, and fourth increasing our flexibility and control over our underwriting profit as we look to launch our enthusiast plus business in early 2025 through our newly acquired insurance company, which closed during the third quarter.

McKeel Hagerty: Let me now turn to our updated 2024 outlook. Given our underlying results during the first nine months and strong business momentum into the fourth quarter, we are increasing our full year revenue outlook. We now expect total revenue of approximately $1.18 billion on written premium growth of 15%. Our underlying profit outlook is in line with prior expectations, and our new outlook, including estimated losses from Helene and Milton of $30 million, is for net income of $65 to $74 million, and adjusted EBITDA of $110 to $120 million. Our focus and execution on top line growth and margin initiatives should result in the profitability that allows us to lengthen our leadership position.

Mikael: Let me now turn to our updated 2020 for outlook.

Mikael: Given our underlying results during the first nine months and strong business momentum into the fourth quarter, we are increasing our full year revenue outlook.

Mikael: We now expect total revenue of approximately 1.18 billion on written premium growth of 15%.

Mikael: Our underlying profit outlook is in line with prior expectations, and our new outlook, including estimated losses from Helene and Milton a $30 million is for net income of 65 to 74 million and adjusted EBITDA of $110 million to $120 million.

Mikael: Our focus and execution on top line growth and margin initiatives should result in the profitability that allows us to lengthen our leadership position.

McKeel Hagerty: Patrick will cover the outlook in more detail. But I believe the headline numbers don't adequately reflect the underlying profitability of our business, particularly as we invest in key growth initiatives such as the State Farm Rollout, the launch of Enthusiast Plus, and the buildout of Hagerty Marketplace into 2025, all of which should pave the way for sustained profit growth and value creation for shareholders over the coming years.

Speaker Change: Patrick will cover the outlook in more detail, but I believe the headline numbers don't adequately reflect the underlying profitability of our business, particularly as we invest in key growth initiatives such as the state farm rollout the launch of enthusiast plus and the build out of haggerty marketplace into 2020, five all of which should pave the way.

Speaker Change: For sustained profit growth and value creation for shareholders over the coming years, Let me now turn the call over to Patrick.

Patrick McClymont: Let me now turn the call over to Patrick. Thank you and good morning everyone. Let me walk you through our results for the three months ended September 30th shown on slide six and seven. In the third quarter, we delivered 17% growth in total revenue to $323 million. Written premiums grew 13% due primarily to robust new business counts and retention that improved to 89%. This performance is in line with expectations as we are maintaining a selective approach to growth. Commission and fee revenue jumped 13% to $116 million in line with written premium gain. Membership, marketplace, and other revenue increased 27% to $42 million.

Patrick Mcclimans: Thank you and good morning, everyone. Let me walk you through our results for the three months ended September 30th shown on slides six and seven.

Patrick Mcclimans: In the third quarter, we delivered 17% growth in total revenue to $323 million.

Patrick Mcclimans: Written premiums grew 13% due primarily to robust new business counts in retention that improved to 89%.

Patrick Mcclimans: This performance is in line with expectations as we are maintaining a selective approach to growth.

Patrick Mcclimans: Commission and fee revenue jumped 13% to $116 million in line with written premium games.

Patrick Mcclimans: Membership marketplace and other revenue increased 27% to $42 million, our membership business delivered high single digit growth new members as we launched new partnerships and began to introduce HTC local chapters.

Patrick McClymont: Our membership business delivered high single-digit growth in new members as we launched new partnerships and began to introduce HTC Local Chapter. We also continue to invest in our Broad Arrow team of automotive specialists, resulting in 26% growth at our Monterey sale, taking share against a muted industry backdrop. Earned premium grew at 19% to $166 million. Our underlying loss ratio came in at 44 percent and fully loaded loss ratio was 60 percent, which included $25 million in catastrophe claims from Hurricane Helene. Year-to-date loss ratio of 47% included seven points of cat impact. With seating commissioned for Hagerty-Ree, our risk-taking entity, at 47% of earned premium, our combined ratio of 94% is slightly above our long-term target of 90% due to the cap loss.

Patrick Mcclimans: We also continued to invest in our broad arrow team automotive specialists, resulting in 26% growth at our Monterrey sale, taking share against a muted industry backdrop.

Speaker Change: Earned premium grew at 19% to $166 million.

Speaker Change: Our underlying loss ratio came in at 44% and fully loaded loss ratio was 60%, which included $25 million in catastrophe claims from Hurricane Helene.

Speaker Change: Year to date loss ratio of 47% included seven points of Cat impact.

Patrick Mcclimans: With ceding commission for aggregate re a risk taking entity at 47% of earned premium or.

Patrick Mcclimans: Our combined ratio of 94% is slightly above our long term target of 90% due to the cat losses.

Patrick McClymont: Despite the elevated combined ratio, Hagerty-Reed delivered a very healthy 26% return on it.

Patrick Mcclimans: Despite the elevated combined ratio Haggerty re delivered a very healthy 26% return on equity.

Patrick McClymont: Turning now to profitability, shown on slides eight and nine, we reported a third quarter operating profit of $10 million. Operating profit, excluding Haleen, would have been roughly double the prior year as underlying margins continue to climb higher on tight cost discipline and operational efficiency. We'd better leverage existing GNA, down 6% in a quarter, and salaries and benefits declined by 8%, helped in part by lower incentive compensation. Adjusted EBITDA declines $13 million year-over-year to $24 million as improved margins were offset by the lean $25 million loss. On the bottom line, we delivered a third quarter net income of $19 million, in line with the prior year's results.

Patrick Mcclimans: Turning now to profitability shown on slides eight and nine we reported a third quarter operating profit was $10 million Apo.

Patrick Mcclimans: Operating profit, excluding Helene would've been roughly double the prior year as underlying margins continued to climb higher on tight cost discipline and operational efficiencies.

Patrick Mcclimans: We better leverage existing G&A down, 6% in the quarter and salaries and benefits declined by 8% helped in part by lower incentive compensation.

Patrick Mcclimans: Adjusted EBITDA declined $13 million year over year to $24 million as improved margins were offset by <unk> $25 million of losses.

Patrick Mcclimans: On the bottom line, we delivered third quarter net income of $19 million in line with the prior year's results.

Patrick McClymont: Net income was helped by the continued growth in our capital base and better diversified investments offset by post-tax cap losses of $20 million. The loss related to the change in fair value and settlement of our private and public warrants in the quarter was negative $1 million. As a reminder, we completed our warrant exchange during the third quarter, whereby we issued 3.9 million shares of Class A common stock in exchange for all 19.5 million warrants. Net income attributable to Class A common shareholders was $3 million after attribution of earnings to the non-controlling interest and accretion on the preferred stock.

Patrick Mcclimans: Net income was helped by the continued growth in our capital base and better diversified investments offset by post tax cat losses of $20 million.

Patrick Mcclimans: The loss related to the change in fair value in settlement of our private and public warrants in the quarter was negative $1 million.

Patrick Mcclimans: As a reminder, we completed our warrant exchange during the third quarter, whereby we issued $3 9 million shares of class a common stock in exchange for all $19 5 million warrants.

Patrick Mcclimans: Net income attributable to class a common shareholders was $3 million after attribution of earnings to the Noncontrolling interest and accretion on the preferred stock.

Patrick McClymont: Gap basic and diluted earnings per share was three cents for the quarter based on 90 million weighted average shares of Class A common stock outstanding. Adjusted Earnings Per Share, defined as consolidated net income before the gains and losses related to our warrants. Divided by fully diluted shares of $360 million, came in at $0.05 for the third quarter and $0.22 for the first nine months of 2020. Thanks to the $190 million of operating cash flow that McKeel mentioned, we ended September with an unrestricted cash balance of $147 million versus long-term debt of $123 million. Long-term debt, excluding back leverage for Broad Arrow Capital's portfolio of loans collateralized by Collector Cars, was only $77 million.

Patrick Mcclimans: GAAP basic and diluted earnings per share was <unk> <unk> for the quarter based on 90 million weighted average shares of class a common stock outstanding.

Patrick Mcclimans: Adjusted earnings per share defined as consolidated net income before the gains and losses related to our warrants divided by fully diluted shares of $360 million came in at five for the third quarter and 22 for the first nine months of 2024.

Speaker Change: Thanks to the $190 million of operating cash flow that Mckeel mentioned, we ended September with an unrestricted cash balance of $147 million versus long term debt of $123 million.

Patrick Mcclimans: Long term debt, excluding back leverage for broad arrow capital's portfolio of loans collateralized by collector cars was only $77 million.

Patrick McClymont: Let me wrap up with our updated 2024 outlook shown on slide 10. As McKeel mentioned, we increased our outlook for total revenue growth to a range of 18 to 19 percent, powered by 15 percent written premium gain. High rates of top-line growth combined with operational efficiencies and the benefits of scale are driving strong operating leverage and even faster rates of bottom-line growth. Our revised outlook now incorporates $30 million of pre-tax impact from Saline and Milton, or $24 million post-tax. This results in a new net income range of $65 to $74 million and adjusted EBITDA of $110 to $120 million.

Patrick Mcclimans: Let me wrap up with our updated 2024 outlook shown on slide 10.

Speaker Change: As <unk> mentioned, we increased our outlook for total revenue growth to a range of 18% to 19% powered by 15% written premium games.

Patrick Mcclimans: High rates of topline growth combined with operational efficiencies and the benefits of scale are driving strong operating leverage and even faster rates of bottomline growth.

Patrick Mcclimans: Our revised outlook now incorporates a $30 million pretax impact from Celine and Milton were $24 million post tax.

Patrick Mcclimans: This results in a new net income range of $65 million to $74 million and adjusted EBITDA of $110 million to $120 million.

Patrick McClymont: In summary, we are executing well on our plan to deliver compounding revenue growth, margin expansion, and cash flow production, and are investing in the initiatives that should sustain our high rates of profit growth over the coming years.

Patrick Mcclimans: In summary, we are executing well on our plans to deliver compounding revenue growth margin expansion and cash flow production and are investing in the initiatives that should sustain our high rates with profit growth over the coming years.

Operator: With that, let us now open the call to your questions. Thank you. We will now be conducting a question and answer session. If you would like to ask a question, please press star one on your telephone keypad. A confirmation tone will indicate your line is in the question queue. You may press star two if you would like to remove your question from the queue. For participants using speaker equipment, it may be necessary to pick up your handset before pressing start. One moment, please, while we pull for questions.

Speaker Change: With that let US now open the call to your questions.

Speaker Change: Thank you we will now be conducting a question and answer session.

Patrick Mcclimans: If you would like to ask a question. Please press.

Patrick Mcclimans: Star one on your telephone keypad.

Patrick Mcclimans: A confirmation tone will indicate your line is another question queue.

Patrick Mcclimans: You May press star two if he would like to remove your question from the queue.

Patrick Mcclimans: For participants using speaker equipment, it may be necessary to pick up your handset before typhoon Archie.

Patrick Mcclimans: One moment, please while we poll for questions.

Patrick Mcclimans: Yeah.

Patrick Mcclimans: Yeah.

Operator: Next question comes from Pablo Singzon with J.P. Morgan. Please go ahead.

Speaker Change: Question comes from Pablo <unk> with Jpmorgan. Please go ahead.

Pablo Singzon: Hi, good morning. My first question is on expenses, as you had both pointed out.

Speaker Change: Hi, Good morning, My first question is on expenses.

Speaker Change: Both put it at all it's a good expense control with G&A down in salaries up low single digits year to date.

Patrick McClymont: I guess if you take a step back and think about where Hey, Pablo, good morning. Thank you for the question. Yeah, we do believe that the business is built to deliver kind of that mid-teens written premium growth and obviously a bit faster growth in the marketplace business. So that side of the equation, you know, I think is pretty straightforward. On the cost side, what you've seen for the last couple of years, we put a lot of effort into right-sizing the cost structure and maintaining discipline on that. That will continue. And so we do expect to see margin expansion over time.

Speaker Change: I guess, if you take a step back and think about where you could go in the next few years right. So it's a business where you can grow revenues mid teens, but keep expense growth at recent levels or will there be some catch up on expenses at some point.

Speaker Change: Hey, Pablo good morning, Thank you for the question.

Speaker Change: Yes, we do believe that the business is built to deliver kind of that mid teens written premium growth and obviously.

Speaker Change: A bit faster growth in the marketplace business. So that side of the equation I think is pretty straightforward on the cost side, what <unk> seen for the last couple of years.

Speaker Change: We put a lot of effort into right sizing the cost structure and maintaining discipline on that that will continue.

Speaker Change: And so we do expect to see margin expansion over time.

Patrick McClymont: You know, we'll give guidance for 2025 on our fourth quarter call. As McKeel mentioned, it is a period where we are making investments in some pretty important initiatives. Obviously, the State Farm, which will really ramp up next year. And then also we're going through our technology transformation, implementing what we call APEX, the Duck Creek implementation and all the related systems. And so we are in a phase of investment. We'd expect that we'll continue to see some margin expansion. And then as we get through those investments, then we expect to see it leg up again. So it's the trajectory that we've been talking about.

Speaker Change: Yes, we will give guidance for 2025 on our fourth quarter call as Mikael mentioned it is a period, where we are making investments in some pretty important initiatives.

Speaker Change: The state farm, which will really ramp up next year and then also we're going through our technology transformation implementing.

Speaker Change: Called apex with Duck Creek implementation and all the related systems and so we are in a phase of investment.

Speaker Change: We would expect that we'll continue to see some margin expansion and then as we get through those investments and we expect to see leg up again.

Speaker Change: So it's the trajectory that we've been talking about where we're going to stay disciplined on the cost side and we do believe that our revenues will grow faster than our cost and we'll be able to deliver some leverage.

Patrick McClymont: We're going to stay disciplined on the cost side. And we do believe that our revenues will grow faster than our costs and we'll be able to deliver some leverage.

Pablo Singzon: Okay, and then just on the attrition loss ratio ex-saline, right, I think that... So that's a bit higher than where you guys have traditionally ranked.

Speaker Change: Gotcha.

Speaker Change: Then just on the Attritional loss ratio ex saline right I think Patrick you had mentioned 44% right.

Speaker Change: So that's a bit higher than where you guys have traditionally run.

Patrick McClymont: anything unusual that came up this quarter that you know brought No. As we've always talked about, over the years, the range of loss ratio, it's kind of been mid-30s, sometimes up to the mid-40s, and so it can move around, and it can certainly move around in a given quarter. There's nothing structural that we're seeing that is concerning to us. The big loss issue for the quarter was certainly the CAT event, but the underlying loss ratio, we still feel confident about. Okay.

Speaker Change: Anything unusual that came up this quarter that brought you to the 44 instead of 41 or 40.

Speaker Change: No as we've always talked about that over the years the range of loss ratio, it's kind of been.

Speaker Change: Mid thirties, sometimes up to the mid Forty's and so it can move around and can certainly move around in a given quarter. There's nothing structural that we're seeing that as.

Speaker Change: It is concerning to us.

Speaker Change: The big box issue for the quarter was certainly to the cat event, but the underlying loss ratio, we still feel confident about.

Speaker Change: Okay, and then last for me so the losses from Helene and Milton.

Pablo Singzon: And then... and many others. Thank you.

Patrick McClymont: Are those losses some You Pricing or, you know, is this sort of water under the bridge and going forward, it'll just be a matter of. So basically, I guess, you know, simplistically, will these losses have any implications for how you're? Well, we always include in our pricing a cat load, right? And so the question is, what actually happens? So 2022, we had a cat event. In 2023, we had nothing. This year, obviously, we've got the two cats, and those are reflected in the updated guidance. So I guess the answer is yes, right? We're always looking at what our pricing is and what we need to load in relative to cats.

Speaker Change: Are those losses, something you hope to recoup through pricing or is.

Speaker Change: Is this sort of water under the bridge and going forward. It will just be a matter of risk selection terms or.

Speaker Change: So basically I guess simplistically will lease losses have any implications for how you're pricing business on a go forward basis.

Speaker Change: Well, we always included in our pricing our cat load right and so the question is what actually happens.

Speaker Change: So 2022, we had a cat event and in 2023, we had nothing this.

Speaker Change: This year, obviously, we've got to catch some of those are reflected in the update.

Speaker Change: Updated guidance.

Speaker Change: Yeah.

Speaker Change: I guess the answer is yes right.

Speaker Change: Always looking at what our pricing is and what we need to load and relative to cats and as our modeling suggests that we need to make changes there those will flow through you have seen us pretty consistently increasing our rates a lot of that lately has been more on the liability side.

Patrick McClymont: And as our modeling suggests that we need to make changes there, those will flow through. You have seen us pretty consistently increasing our rates. A lot of that lately has been more on the liability side. But if we conclude that we need to do something on the cat side, then yes, we'll set that in over time.

Speaker Change: But if we conclude that we need to do something on the cat side, then, yes, we will feather in over time.

Speaker Change: Okay. Thank you.

Operator: Once again, if you would like to ask a question, please press star one on your telephone keypad.

Speaker Change: Once again, if you would like to ask a question. Please press star one on your telephone keypad.

Operator: Next question comes from Mark Hughes with Truist Securities.

Speaker Change: Next question comes from Mark Hughes with <unk> Securities. Please go ahead.

Mark Hughes: Please go ahead. Yeah, thank you.

Mark Hughes: Thank you and good morning.

Mark Hughes: Good morning. I wonder if you've seen any kind of change in shopping behavior, I think with the auto rates going up pretty substantially across the industry. I think that's helped you because you've got a good price point and people have been more likely to be looking around.

Speaker Change: If you've seen any.

Speaker Change: Any kind of change in shopping behavior I think with the.

Speaker Change: Auto rates going up pretty substantially across the industry as I understand it I think that helped you.

Speaker Change: <unk> got a good price point and people have been more likely to be looking around do you notice any change in trend.

Mark Hughes: Do you notice any change in trend in that behavior? Number one, is that a fair assessment? And then two, how do you see that lately in terms of new business?

Speaker Change: And that behavior number one is that a fair assessment and then two how do you see that.

Speaker Change: Lately in terms of new business.

McKeel Hagerty: Hey, thanks, Mark.

McKeel Hagerty: It's McKeel. It's a great question. And I think we've talked about this before that, indeed, the hardening of the auto insurance rate market pricing has definitely pushed more people to shop, especially in some states where there's just a lot of rates being taken or coverages being limited by, you know, whether it's a result of the regulatory market or just actions by individual carriers. So that benefits us. It just pushes more of this business, people off the market, and we definitely benefit from it. I think heading into the summer, you know, you're starting to see the predictions of the increases slowing down out of the regular auto markets.

Speaker Change: Thanks, Mark it's mckeel.

Speaker Change: It's a great question and I think we've talked about this before that indeed, the hardening of the auto insurance rate market pricing has definitely push more people to shop, especially in some states where there are just a lot of rates being taken or coverage as being.

Speaker Change: By weather.

Speaker Change: Whether it's a result of the regulatory market or just actions by individual carriers, so that benefits us it just pushes more.

Speaker Change: This business.

Speaker Change: People off the market and we definitely benefit from it I think heading into the summer.

Speaker Change: You were starting to see the predictions of the increases slowing down out of the regular auto markets. We certainly.

McKeel Hagerty: We certainly have, you know, we heard that signaling from some of our best partners who are out there, the names that you know. And so, you know, I think what we saw is that maybe the increase in people shopping sort of leveling off, but it's going to be interesting to see what happens after this hurricane season to see whether, again, some of those states who are sort of hoping for some moderating in the rate increases, that they might need to take more rate. We're not looking at that ourselves right now. We think our underlying price and underwriting discipline works well in the states where we're flood exposed.

Speaker Change: We heard that signaling from some of our best partners, who are out there than the names that you know and so.

Speaker Change: I think what we saw is that maybe the increase in people shopping sort of leveling off but it's going to be interesting to see what happens. After this this hurricane season to see whether again some of those states.

Speaker Change: We're sort of hoping for some moderating and the rate increases that they might they might need to take more rate.

Speaker Change: Not.

Speaker Change: Looking at that ourselves right now, we think our underlying price and underwriting discipline works well.

Speaker Change: In the states, where we're flood exposed.

Patrick McClymont: I mean, it's important to remember that really Helene was a flooding event, whereas, except where it went up further into the Carolinas, and Milton was more of a wind event, not so much a flooding event. So it has very different dynamics to it. So yeah, we're benefiting from things going on in the market, and it'll be interesting to see how the overall thing settles out. Mark, when we look back at 23, the industry rates were up 14% and our rates were up 3 to 4%. We think in 24, the industry probably ends up being something like up 10% and will be a similar up 3 to 4%.

Speaker Change: It's important to remember that really Helane was a flooding event.

Speaker Change: Erez.

Speaker Change: <unk> went up further in the Carolinas and Milton was more of a wind event not so much a flooding event. So it has very different dynamics to it. So we're benefiting from things going on in the market and it'll be interesting to see how the overall thing settles out.

Mark: Mark when we look back at 23 the.

Speaker Change: The industry rates were up 14% and our rates were up 3% to 4%. We think in 2000 and for the industry, probably ends up being something like up 10% and we will be a similar up 3% to 4%.

Patrick McClymont: And so those rate increases drive shopping, as McKeel suggested. And then when people do shop, our rates are going up. Our rate gap with the industry is as wide as it's ever been because different product, we're pricing appropriately. But we just think about the risk differently. And so that matters.

Speaker Change: So those rate increases drive shopping as mckeel suggested.

Speaker Change: And then when people do shop, our rates are going up our rate gap with the industry is as wide as it's ever been.

Speaker Change: Because different product we're pricing appropriately.

Speaker Change: We just think about the risk differently.

Speaker Change: So that matters in this year.

Mark Hughes: And this year, we're on track to bring in something like 275,000 new customers versus 250 or so last year. So, yeah, we do think that our value prop is pretty compelling right now, and that's helping with our growth. I appreciate that.

Speaker Change: We're on track to bring in something like 275000, new customers.

Speaker Change: Versus $2 50, or so last year. So yes, we do think that our value prop is pretty compelling right now and thats, helping with their growth.

Speaker Change: Yes.

Speaker Change: I appreciate that thank you.

Mark Hughes: Thank you.

McKeel Hagerty: I would like to turn the floor over to McHugh for closing remarks. Thank you, operator. And thanks to all of you for joining us today. During this busy election week, we've carefully curated the Hagerty brand over the last four decades around a shared passion for the automobile. And that campaign continues today to bring together car lovers. We've built a unique and highly differentiated business model that allows us to help members protect, buy, sell and enjoy their special cars. We believe we have the recipe for success that should position us to further penetrate the 46 million collectible car opportunity in the United States, delivering durable, profitable growth year after year.

Speaker Change: I would like to <unk> closing.

Speaker Change: Closing remark.

Speaker Change: Thank you operator, and thanks to all of you for joining us today. During this busy election week, we've carefully curated the haggerty brand over the last four decades around a shared passion for the automobile and that campaign continues today to bring together car lovers.

Speaker Change: We have built a unique and highly differentiated business model that allows us to help members protect buy sell and enjoy their special cars. We believe we have the recipe for success that should position us to further penetrate the $46 million collectible car opportunity in the United States delivering durable profitable growth year after year with <unk>.

McKeel Hagerty: With only 5% market share today, we believe we have a long runway ahead. We will share outlook for 2025 on our fourth quarter earnings call, as we have done in the past, but we are highly encouraged by our business momentum, as well as the quality of our team's execution that should allow us to sustain high rates of profit growth and create value for all stakeholders.

Speaker Change: Only 5% market share today, we believe we have a long runway ahead.

Speaker Change: We will share our outlook for 2025 on our fourth quarter earnings call as we have done in the past, but we are highly encouraged by our business momentum as well as the quality of our teams execution that should allow us to sustain high rates of profit growth and create value for all stakeholders until then never stopped driving.

McKeel Hagerty: Until then, never stop driving.

Operator: This concludes today's teleconference. You may disconnect your lines at this time and thank you for your participation.

Speaker Change: This concludes today's teleconference. You may disconnect your lines.

Speaker Change: Thank you for your participation.

Speaker Change:

Operator: Go to Beadaholique.com for all of your beading supply needs!

Speaker Change: Yes.