☒ | QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 | ||||
☐ | TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 | ||||
Delaware | 86-1213144 | |||||||
(State of incorporation) | (I.R.S. Employer Identification No.) | |||||||
121 Drivers Edge, Traverse City, Michigan | 49684 | |||||||
| (Address of principal executive offices) | (Zip code) | |||||||
(800) 922-4050 | ||||||||
Registrant's telephone number, including area code | ||||||||
| Title of each class | Trading Symbols | Name of each exchange on which registered | ||||||||||||
| Class A common stock, par value $0.0001 per share | HGTY | The New York Stock Exchange | ||||||||||||
| Warrants, each whole warrant exercisable for one share of Class A common stock, each at an exercise price of $11.50 per share | HGTY.WS | The New York Stock Exchange | ||||||||||||
| Large accelerated filer | ☐ | Accelerated filer | ☒ | ||||||||
Non-accelerated filer | ☐ | Smaller reporting company | ☐ | ||||||||
Emerging growth company | ☒ | ||||||||||
| Title | Page | |||||||
Three months ended June 30, | Six months ended June 30, | ||||||||||||||||||||||
| 2023 | 2022 | 2023 | 2022 | ||||||||||||||||||||
| REVENUE: | in thousands (except per share amounts) | ||||||||||||||||||||||
| Commission and fee revenue | $ | 110,187 | $ | 95,506 | $ | 184,799 | $ | 157,967 | |||||||||||||||
| Earned premium | 127,482 | 94,100 | 244,713 | 183,232 | |||||||||||||||||||
| Membership, marketplace and other revenue | 23,575 | 16,411 | 50,084 | 32,629 | |||||||||||||||||||
| Total revenue | 261,244 | 206,017 | 479,596 | 373,828 | |||||||||||||||||||
| OPERATING EXPENSES: | |||||||||||||||||||||||
| Salaries and benefits | 53,572 | 53,271 | 108,804 | 99,747 | |||||||||||||||||||
| Ceding commission | 60,350 | 45,255 | 115,775 | 87,633 | |||||||||||||||||||
| Losses and loss adjustment expenses | 53,564 | 38,620 | 101,976 | 75,539 | |||||||||||||||||||
| Sales expense | 41,941 | 37,455 | 77,054 | 65,892 | |||||||||||||||||||
| General and administrative services | 21,318 | 20,729 | 42,699 | 40,187 | |||||||||||||||||||
| Depreciation and amortization | 10,397 | 8,300 | 24,140 | 15,447 | |||||||||||||||||||
| Restructuring, impairment and related charges, net | 2,849 | — | 8,384 | — | |||||||||||||||||||
| Total operating expenses | 243,991 | 203,630 | 478,832 | 384,445 | |||||||||||||||||||
| OPERATING INCOME (LOSS) | 17,253 | 2,387 | 764 | (10,617) | |||||||||||||||||||
| Change in fair value of warrant liabilities | (1,754) | (5,400) | (2,269) | 26,286 | |||||||||||||||||||
| Interest and other income (expense) | 3,770 | (353) | 9,417 | (1,037) | |||||||||||||||||||
| INCOME (LOSS) BEFORE INCOME TAX EXPENSE | 19,269 | (3,366) | 7,912 | 14,632 | |||||||||||||||||||
| Income tax benefit (expense) | (3,730) | (2,138) | (7,398) | (4,168) | |||||||||||||||||||
| Income (loss) from equity method investment, net of tax | — | (39) | — | (141) | |||||||||||||||||||
| NET INCOME (LOSS) | 15,539 | (5,543) | 514 | 10,323 | |||||||||||||||||||
| Net loss (income) attributable to non-controlling interest | (13,134) | 7 | (208) | 11,648 | |||||||||||||||||||
| NET INCOME (LOSS) ATTRIBUTABLE TO CLASS A COMMON STOCKHOLDERS | $ | 2,405 | $ | (5,536) | $ | 306 | $ | 21,971 | |||||||||||||||
Earnings (loss) per share of Class A Common Stock: | |||||||||||||||||||||||
| Basic | $ | 0.03 | $ | (0.07) | $ | — | $ | 0.27 | |||||||||||||||
| Diluted | $ | 0.03 | $ | (0.07) | $ | — | $ | (0.02) | |||||||||||||||
Weighted-average shares of Class A Common Stock outstanding: | |||||||||||||||||||||||
| Basic | 84,371 | 82,452 | 83,820 | 82,443 | |||||||||||||||||||
| Diluted | 85,563 | 82,452 | 84,424 | 334,702 | |||||||||||||||||||
Three months ended June 30, | Six months ended June 30, | ||||||||||||||||||||||
| 2023 | 2022 | 2023 | 2022 | ||||||||||||||||||||
| in thousands | |||||||||||||||||||||||
| Net income (loss) | $ | 15,539 | $ | (5,543) | $ | 514 | $ | 10,323 | |||||||||||||||
| Other comprehensive income (loss), net of tax: | |||||||||||||||||||||||
| Foreign currency translation adjustments | 1,110 | (1,022) | 1,347 | (748) | |||||||||||||||||||
| Derivative instruments | 330 | 388 | (148) | 1,933 | |||||||||||||||||||
| Other comprehensive income (loss) | 1,440 | (634) | 1,199 | 1,185 | |||||||||||||||||||
| Comprehensive income (loss) | 16,979 | (6,177) | 1,713 | 11,508 | |||||||||||||||||||
| Comprehensive loss (income) attributable to non-controlling interest | (14,220) | 7 | (1,112) | 11,648 | |||||||||||||||||||
| Comprehensive income (loss) attributable to Class A Common Stockholders | $ | 2,759 | $ | (6,170) | $ | 601 | $ | 23,156 | |||||||||||||||
June 30, 2023 | December 31, 2022 | ||||||||||
| ASSETS | in thousands (except share amounts) | ||||||||||
| Current Assets: | |||||||||||
| Cash and cash equivalents | $ | 114,252 | $ | 95,172 | |||||||
| Restricted cash and cash equivalents | 518,109 | 444,019 | |||||||||
| Accounts receivable | 76,794 | 58,255 | |||||||||
| Premiums receivable | 193,268 | 100,700 | |||||||||
| Commissions receivable | 42,317 | 60,151 | |||||||||
| Notes receivable | 30,991 | 25,493 | |||||||||
| Deferred acquisition costs, net | 140,098 | 107,342 | |||||||||
| Other current assets | 63,929 | 45,651 | |||||||||
| Total current assets | 1,179,758 | 936,783 | |||||||||
| Notes receivable | 11,885 | 11,934 | |||||||||
| Property and equipment, net | 23,399 | 25,256 | |||||||||
| Lease right-of-use assets | 77,640 | 82,398 | |||||||||
| Intangible assets, net | 103,826 | 104,024 | |||||||||
| Goodwill | 115,060 | 115,041 | |||||||||
| Other long-term assets | 40,962 | 37,082 | |||||||||
| TOTAL ASSETS | $ | 1,552,530 | $ | 1,312,518 | |||||||
| LIABILITIES, TEMPORARY EQUITY AND STOCKHOLDERS' EQUITY | |||||||||||
| Current Liabilities: | |||||||||||
| Accounts payable, accrued expenses and other current liabilities | $ | 78,686 | $ | 77,049 | |||||||
| Losses payable and provision for unpaid losses and loss adjustment expenses | 172,133 | 167,257 | |||||||||
| Commissions payable | 101,739 | 77,075 | |||||||||
| Due to insurers | 128,622 | 68,171 | |||||||||
| Advanced premiums | 34,173 | 17,084 | |||||||||
| Unearned premiums | 303,585 | 235,462 | |||||||||
| Contract liabilities | 29,661 | 25,257 | |||||||||
| Total current liabilities | 848,599 | 667,355 | |||||||||
| Long-term lease liabilities | 77,084 | 80,772 | |||||||||
| Long-term debt | 80,841 | 108,280 | |||||||||
| Warrant liabilities | 47,830 | 45,561 | |||||||||
| Deferred tax liability | 16,501 | 12,850 | |||||||||
| Contract liabilities | 18,336 | 19,169 | |||||||||
| Other long-term liabilities | 5,370 | 11,162 | |||||||||
| TOTAL LIABILITIES | 1,094,561 | 945,149 | |||||||||
Commitments and Contingencies (Note 21) | — | — | |||||||||
| TEMPORARY EQUITY | |||||||||||
Preferred stock, $0.0001 par value (20,000,000 shares authorized, 8,483,561 Series A Convertible Preferred Stock issued and outstanding as of June 30, 2023 and no shares issued and outstanding as of December 31, 2022) | 79,159 | — | |||||||||
| STOCKHOLDERS' EQUITY | |||||||||||
Class A Common Stock, $0.0001 par value (500,000,000 shares authorized, 84,405,625 and 83,202,969 issued and outstanding as of June 30, 2023 and December 31, 2022, respectively) | 8 | 8 | |||||||||
Class V Common Stock, $0.0001 par value (300,000,000 authorized, 251,033,906 shares issued and outstanding as of June 30, 2023 and December 31, 2022) | 25 | 25 | |||||||||
| Additional paid-in capital | 556,595 | 549,034 | |||||||||
| Accumulated earnings (deficit) | (489,296) | (489,602) | |||||||||
| Accumulated other comprehensive income (loss) | 83 | (213) | |||||||||
| Total stockholders' equity | 67,415 | 59,252 | |||||||||
| Non-controlling interest | 311,395 | 308,117 | |||||||||
Total equity (Note 15) | 378,810 | 367,369 | |||||||||
| TOTAL LIABILITIES, TEMPORARY EQUITY AND STOCKHOLDERS' EQUITY | $ | 1,552,530 | $ | 1,312,518 | |||||||
| Temporary Equity | Stockholders' Equity | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Series A Convertible Preferred Stock | Class A Common Stock | Class V Common Stock | Additional Paid in Capital | Accumulated Earnings (Deficit) | Accumulated Other Comprehensive Income/(Loss) | Total Stockholders' Equity | Non-controlling Interest | Total Equity | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| in thousands | Shares | Amount | Shares | Amount | Shares | Amount | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Balance at December 31, 2022 | — | $ | — | 83,203 | $ | 8 | 251,034 | $ | 25 | $ | 549,034 | $ | (489,602) | $ | (213) | $ | 59,252 | $ | 308,117 | $ | 367,369 | ||||||||||||||||||||||||||||||||||||||||||||||||||
Net income (loss) | — | — | — | — | — | — | — | (2,099) | — | (2,099) | (12,926) | (15,025) | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Other comprehensive income (loss) | — | — | — | — | — | — | — | — | (59) | (59) | (182) | (241) | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Issuance of shares under employee plans | — | — | 17 | — | — | — | — | — | — | — | — | — | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Share-based compensation | — | — | — | — | — | — | 4,113 | — | — | 4,113 | — | 4,113 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Conversion of Hagerty Group Units to Class A Common Stock | — | — | 119 | — | — | — | 1,045 | — | — | 1,045 | (1,045) | — | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Non-controlling interest issued capital | — | — | — | — | — | — | — | — | — | — | 500 | 500 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Reallocation between controlling and non-controlling interest | — | — | — | — | — | — | (143) | — | — | (143) | 143 | — | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Balance at March 31, 2023 | — | — | 83,339 | 8 | 251,034 | 25 | 554,049 | (491,701) | (272) | 62,109 | 294,607 | 356,716 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Net income (loss) | — | — | — | — | — | — | — | 2,405 | — | 2,405 | 13,134 | 15,539 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Other comprehensive income (loss) | — | — | — | — | — | — | — | — | 355 | 355 | 1,085 | 1,440 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Issuance of shares under employee plans | — | — | 926 | — | — | — | 906 | — | — | 906 | — | 906 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Share-based compensation | — | — | — | — | — | — | 4,109 | — | — | 4,109 | — | 4,109 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Conversion of Hagerty Group Units to Class A Common Stock | — | — | 141 | — | — | — | 1,266 | — | — | 1,266 | (1,266) | — | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Issuance of Series A Preferred Convertible Stock, net of issuance costs | 8,484 | 79,159 | — | — | — | — | — | — | — | — | — | — | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Non-controlling interest issued capital | — | — | — | — | — | — | — | — | — | — | 100 | 100 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Reallocation between controlling and non-controlling interest | — | — | — | — | — | — | (3,735) | — | — | (3,735) | 3,735 | — | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Balance at June 30, 2023 | 8,484 | $ | 79,159 | 84,406 | $ | 8 | 251,034 | $ | 25 | $ | 556,595 | $ | (489,296) | $ | 83 | $ | 67,415 | $ | 311,395 | $ | 378,810 | ||||||||||||||||||||||||||||||||||||||||||||||||||
| Temporary Equity | Stockholders' Equity | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Redeemable Non-controlling Interest | Class A Common Stock | Class V Common Stock | Additional Paid in Capital | Accumulated Earnings (Deficit) | Accumulated Other Comprehensive Income/(Loss) | Total Stockholders' Equity | Non-controlling Interest | Total Equity | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| in thousands | Shares | Amount | Shares | Amount | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Balance at December 31, 2021 | $ | 593,277 | 82,327 | $ | 8 | 251,034 | $ | 25 | $ | 160,189 | $ | (482,276) | $ | (1,727) | $ | (323,781) | $ | 1,305 | $ | (322,476) | |||||||||||||||||||||||||||||||||||||||||||||
| Net income (loss) before exchange agreement amendment | (11,205) | — | — | — | — | — | (3,679) | — | (3,679) | (172) | (3,851) | ||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Other comprehensive income (loss) before exchange agreement amendment | — | — | — | — | — | — | — | 1,657 | 1,657 | — | 1,657 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Exercise of warrants | — | 125 | — | — | — | 1,906 | — | — | 1,906 | — | 1,906 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Redemption value adjustment for redeemable non-controlling interest | 1,560,418 | — | — | — | — | (162,095) | (1,398,325) | — | (1,560,420) | — | (1,560,420) | ||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Removal of the redeemable feature of the non-controlling interest | (2,142,490) | — | — | — | — | 528,615 | 1,398,325 | — | 1,926,940 | 215,550 | 2,142,490 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Net income (loss) subsequent to exchange agreement amendment | — | — | — | — | — | — | 31,187 | — | 31,187 | (264) | 30,923 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Other comprehensive income (loss) subsequent to exchange agreement amendment | — | — | — | — | — | — | — | 162 | 162 | — | 162 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||
Balance at March 31, 2022 | — | 82,452 | 8 | 251,034 | 25 | 528,615 | (454,768) | 92 | 73,972 | 216,419 | 290,391 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Net income (loss) | — | — | — | — | — | — | (5,536) | — | (5,536) | (7) | (5,543) | ||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Other comprehensive income (loss) | — | — | — | — | — | — | — | (634) | (634) | — | (634) | ||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Share-based compensation | — | — | — | — | — | 4,307 | — | — | 4,307 | — | 4,307 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Non-controlling interest issued capital | — | — | — | — | — | — | — | — | — | 1,000 | 1,000 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||
Balance at June 30, 2022 | $ | — | 82,452 | $ | 8 | 251,034 | $ | 25 | $ | 532,922 | $ | (460,304) | $ | (542) | $ | 72,109 | $ | 217,412 | $ | 289,521 | |||||||||||||||||||||||||||||||||||||||||||||
Six months ended June 30, | |||||||||||
| 2023 | 2022 | ||||||||||
| OPERATING ACTIVITIES: | in thousands | ||||||||||
| Net income (loss) | $ | 514 | $ | 10,323 | |||||||
Adjustments to reconcile net income (loss) to net cash from operating activities: | |||||||||||
| Change in fair value of warrant liabilities | 2,269 | (26,286) | |||||||||
| Depreciation and amortization expense | 24,140 | 15,447 | |||||||||
| Provision for deferred taxes | 3,480 | 2,553 | |||||||||
| Impairment of operating lease right-of-use assets | 1,147 | — | |||||||||
Loss on disposals of equipment, software and other assets | 1,668 | 361 | |||||||||
| Share-based compensation expense | 8,222 | 4,307 | |||||||||
| Other | 958 | 229 | |||||||||
| Changes in operating assets and liabilities: | |||||||||||
| Accounts, premiums and commission receivable | (93,549) | (54,294) | |||||||||
| Deferred acquisition costs | (32,756) | (23,307) | |||||||||
Losses payable and provision for unpaid losses and loss adjustment expenses | 4,876 | 14,570 | |||||||||
| Commissions payable | 24,664 | 14,795 | |||||||||
| Due to insurers | 60,174 | 52,486 | |||||||||
| Advanced premiums | 17,043 | 15,032 | |||||||||
| Unearned premiums | 68,123 | 49,395 | |||||||||
| Other assets and liabilities, net | (20,416) | (15,686) | |||||||||
| Net Cash Provided by Operating Activities | 70,557 | 59,925 | |||||||||
| INVESTING ACTIVITIES: | |||||||||||
| Capital expenditures | (16,251) | (21,520) | |||||||||
Acquisitions, net of cash acquired | (7,084) | (13,520) | |||||||||
| Purchase of previously held equity method investment | — | (15,250) | |||||||||
| Issuance of notes receivable | (11,015) | — | |||||||||
| Collection of notes receivable | 6,235 | — | |||||||||
| Purchase of fixed income securities | (6,172) | (2,448) | |||||||||
| Maturities of fixed income securities | 2,964 | 1,216 | |||||||||
| Other investing activities | 22 | (1,639) | |||||||||
| Net Cash Used in Investing Activities | (31,301) | (53,161) | |||||||||
| FINANCING ACTIVITIES: | |||||||||||
| Payments on long-term debt | (99,250) | (91,500) | |||||||||
| Proceeds from long-term debt | 71,590 | 42,000 | |||||||||
| Proceeds from issuance of preferred stock, net of issuance costs | 79,159 | — | |||||||||
| Contribution from non-controlling interest | 600 | 1,000 | |||||||||
| Proceeds from issuance of common stock under employee stock purchase plan | 906 | — | |||||||||
| Net Cash Provided by (Used in) Financing Activities | 53,005 | (48,500) | |||||||||
Effect of exchange rate changes on cash and cash equivalents and restricted cash and cash equivalents | 909 | (787) | |||||||||
Change in cash and cash equivalents and restricted cash and cash equivalents | 93,170 | (42,523) | |||||||||
Beginning cash and cash equivalents and restricted cash and cash equivalents | 539,191 | 603,972 | |||||||||
Ending cash and cash equivalents and restricted cash and cash equivalents | $ | 632,361 | $ | 561,449 | |||||||
June 30, 2023 | June 30, 2022 | ||||||||||
| in thousands | |||||||||||
| Cash and cash equivalents | $ | 114,252 | $ | 180,165 | |||||||
| Restricted cash and cash equivalents | 518,109 | 381,284 | |||||||||
Total cash and cash equivalents and restricted cash and cash equivalents | $ | 632,361 | $ | 561,449 | |||||||
| Six months ended June 30, | |||||||||||
| 2023 | 2022 | ||||||||||
| NON-CASH INVESTING ACTIVITIES: | in thousands | ||||||||||
| Capital expenditures | $ | 212 | $ | 4,389 | |||||||
| Acquisitions | $ | 1,742 | $ | 7,500 | |||||||
| CASH PAID FOR: | |||||||||||
| Interest | $ | 3,312 | $ | 2,037 | |||||||
| Income taxes | $ | 6,500 | $ | 5,250 | |||||||
| Agent | Direct | Total | |||||||||||||||
| in thousands | |||||||||||||||||
Three months ended June 30, 2023 | |||||||||||||||||
| Commission and fee revenue | $ | 46,972 | $ | 40,702 | $ | 87,674 | |||||||||||
| Contingent commission revenue | 12,242 | 10,271 | 22,513 | ||||||||||||||
| Membership revenue | — | 13,146 | 13,146 | ||||||||||||||
| Marketplace and other revenue | — | 10,429 | 10,429 | ||||||||||||||
| Total revenue from customer contracts | 59,214 | 74,548 | 133,762 | ||||||||||||||
| Earned premium recognized under ASC 944 | 127,482 | ||||||||||||||||
| Total revenue | $ | 261,244 | |||||||||||||||
Three months ended June 30, 2022 | |||||||||||||||||
| Commission and fee revenue | $ | 40,193 | $ | 35,479 | $ | 75,672 | |||||||||||
| Contingent commission revenue | 10,857 | 8,977 | 19,834 | ||||||||||||||
| Membership revenue | — | 11,131 | 11,131 | ||||||||||||||
| Marketplace and other revenue | — | 5,280 | 5,280 | ||||||||||||||
| Total revenue from customer contracts | 51,050 | 60,867 | 111,917 | ||||||||||||||
| Earned premium recognized under ASC 944 | 94,100 | ||||||||||||||||
| Total revenue | $ | 206,017 | |||||||||||||||
| Agent | Direct | Total | |||||||||||||||
| in thousands | |||||||||||||||||
Six months ended June 30, 2023 | |||||||||||||||||
| Commission and fee revenue | $ | 78,659 | $ | 66,841 | $ | 145,500 | |||||||||||
| Contingent commission revenue | 21,681 | 17,618 | 39,299 | ||||||||||||||
| Membership revenue | — | 25,693 | 25,693 | ||||||||||||||
| Marketplace and other revenue | — | 24,391 | 24,391 | ||||||||||||||
| Total revenue from customer contracts | 100,340 | 134,543 | 234,883 | ||||||||||||||
| Earned premium recognized under ASC 944 | 244,713 | ||||||||||||||||
| Total revenue | $ | 479,596 | |||||||||||||||
Six months ended June 30, 2022 | |||||||||||||||||
| Commission and fee revenue | $ | 66,392 | $ | 58,152 | $ | 124,544 | |||||||||||
| Contingent commission revenue | 18,232 | 15,191 | 33,423 | ||||||||||||||
| Membership revenue | — | 21,449 | 21,449 | ||||||||||||||
| Marketplace and other revenue | — | 11,180 | 11,180 | ||||||||||||||
| Total revenue from customer contracts | 84,624 | 105,972 | 190,596 | ||||||||||||||
| Earned premium recognized under ASC 944 | 183,232 | ||||||||||||||||
| Total revenue | $ | 373,828 | |||||||||||||||
| U.S. | Canada | Europe | Total | ||||||||||||||||||||
| in thousands | |||||||||||||||||||||||
Three months ended June 30, 2023 | |||||||||||||||||||||||
| Commission and fee revenue | $ | 77,611 | $ | 8,587 | $ | 1,476 | $ | 87,674 | |||||||||||||||
| Contingent commission revenue | 22,478 | — | 35 | 22,513 | |||||||||||||||||||
| Membership revenue | 12,254 | 892 | — | 13,146 | |||||||||||||||||||
| Marketplace and other revenue | 9,061 | 348 | 1,020 | 10,429 | |||||||||||||||||||
| Total revenue from customer contracts | 121,404 | 9,827 | 2,531 | 133,762 | |||||||||||||||||||
| Earned premium recognized under ASC 944 | 127,482 | ||||||||||||||||||||||
| Total revenue | $ | 261,244 | |||||||||||||||||||||
Three months ended June 30, 2022 | |||||||||||||||||||||||
| Commission and fee revenue | $ | 66,400 | $ | 7,956 | $ | 1,316 | $ | 75,672 | |||||||||||||||
| Contingent commission revenue | 19,798 | — | 36 | 19,834 | |||||||||||||||||||
| Membership revenue | 10,288 | 843 | — | 11,131 | |||||||||||||||||||
| Marketplace and other revenue | 4,754 | 152 | 374 | 5,280 | |||||||||||||||||||
| Total revenue from customer contracts | 101,240 | 8,951 | 1,726 | 111,917 | |||||||||||||||||||
| Earned premium recognized under ASC 944 | 94,100 | ||||||||||||||||||||||
| Total revenue | $ | 206,017 | |||||||||||||||||||||
| U.S. | Canada | Europe | Total | ||||||||||||||||||||
| in thousands | |||||||||||||||||||||||
Six months ended June 30, 2023 | |||||||||||||||||||||||
| Commission and fee revenue | $ | 132,208 | $ | 10,957 | $ | 2,335 | $ | 145,500 | |||||||||||||||
| Contingent commission revenue | 39,230 | — | 69 | 39,299 | |||||||||||||||||||
| Membership revenue | 23,923 | 1,770 | — | 25,693 | |||||||||||||||||||
| Marketplace and other revenue | 22,587 | 512 | 1,292 | 24,391 | |||||||||||||||||||
| Total revenue from customer contracts | 217,948 | 13,239 | 3,696 | 234,883 | |||||||||||||||||||
| Earned premium recognized under ASC 944 | 244,713 | ||||||||||||||||||||||
| Total revenue | $ | 479,596 | |||||||||||||||||||||
Six months ended June 30, 2022 | |||||||||||||||||||||||
| Commission and fee revenue | $ | 112,070 | $ | 10,274 | $ | 2,200 | $ | 124,544 | |||||||||||||||
| Contingent commission revenue | 33,266 | — | 157 | 33,423 | |||||||||||||||||||
| Membership revenue | 19,779 | 1,670 | — | 21,449 | |||||||||||||||||||
| Marketplace and other revenue | 10,066 | 470 | 644 | 11,180 | |||||||||||||||||||
| Total revenue from customer contracts | 175,181 | 12,414 | 3,001 | 190,596 | |||||||||||||||||||
| Earned premium recognized under ASC 944 | 183,232 | ||||||||||||||||||||||
| Total revenue | $ | 373,828 | |||||||||||||||||||||
June 30, 2023 | December 31, 2022 | ||||||||||
| in thousands | |||||||||||
| Contract assets | $ | 38,240 | $ | 60,151 | |||||||
| Contract liabilities | $ | 47,997 | $ | 44,426 | |||||||
June 30, 2023 | December 31, 2022 | ||||||||||
| in thousands | |||||||||||
| Secured loans | $ | 42,876 | $ | 37,427 | |||||||
| Estimate of collateral value | $ | 100,053 | $ | 75,802 | |||||||
| Aggregate LTV ratio | 42.9 | % | 49.4 | % | |||||||
June 30, 2023 | December 31, 2022 | |||||||||||||
| in thousands | ||||||||||||||
| Prepaid sales, general and administrative expenses | $ | 21,810 | $ | 24,234 | ||||||||||
| Prepaid software as a service ("SaaS") implementation costs | 19,046 | 18,501 | ||||||||||||
| Fixed income investments | 16,489 | 12,986 | ||||||||||||
| Contract costs | 7,482 | 6,576 | ||||||||||||
Consignor advances (1) | 6,100 | — | ||||||||||||
Inventory (2) | 4,973 | 2,074 | ||||||||||||
Digital media content (3) | 2,652 | 5,580 | ||||||||||||
| Deferred reinsurance premiums ceded | 14,552 | 91 | ||||||||||||
Other (4) | 11,787 | 12,691 | ||||||||||||
| Other assets | $ | 104,891 | $ | 82,733 | ||||||||||
Three months ended June 30, | Six months ended June 30, | ||||||||||||||||||||||
| 2023 | 2022 | 2023 | 2022 | ||||||||||||||||||||
| in thousands | |||||||||||||||||||||||
Operating lease expense (1) | $ | 3,153 | $ | 2,233 | $ | 6,300 | $ | 4,283 | |||||||||||||||
Short-term lease expense (1) | 147 | 66 | 216 | 77 | |||||||||||||||||||
Variable lease expense (1) (3) | 842 | 669 | 1,649 | 1,245 | |||||||||||||||||||
Sublease revenue (2) | (134) | (33) | (197) | (45) | |||||||||||||||||||
| Lease cost, net | $ | 4,008 | $ | 2,935 | $ | 7,968 | $ | 5,560 | |||||||||||||||
| in thousands | |||||
| 2023 | $ | 6,177 | |||
| 2024 | 12,299 | ||||
| 2025 | 11,876 | ||||
| 2026 | 11,244 | ||||
| 2027 | 11,052 | ||||
| Thereafter | 58,646 | ||||
| Total lease payments | 111,294 | ||||
| Less: imputed interest | (26,222) | ||||
| Total lease liabilities | $ | 85,072 | |||
| Total equity consideration | $ | 73,253 | ||||||
Fair value of previously held equity interest in Broad Arrow (1) | 48,309 | |||||||
| Total consideration and value to be allocated to net assets | $ | 121,562 | ||||||
Notes receivable (1) | $ | 21,594 | ||||||
Intangible assets, net (2) | 3,100 | |||||||
Other assets (3) | 11,756 | |||||||
Other liabilities (4) | (13,449) | |||||||
| Total identifiable net assets acquired | 23,001 | |||||||
| Goodwill | 98,561 | |||||||
| Total purchase consideration allocated to net assets acquired | $ | 121,562 | ||||||
| 2023 | 2022 | |||||||||||||
| in thousands | ||||||||||||||
| Goodwill as of January 1, | $ | 115,041 | $ | 11,488 | ||||||||||
| Goodwill resulting from acquisition | — | 5,044 | ||||||||||||
| Effect of foreign currency translation | 19 | (7) | ||||||||||||
Goodwill as of June 30, | $ | 115,060 | $ | 16,525 | ||||||||||
| Weighted Average Useful Life | June 30, 2023 | December 31, 2022 | |||||||||||||||
| in thousands | |||||||||||||||||
| Renewal rights | 10.0 | $ | 20,221 | $ | 17,282 | ||||||||||||
| Internally developed software | 3.1 | 119,885 | 109,764 | ||||||||||||||
| Trade names and trademarks | 14.0 | 12,541 | 12,541 | ||||||||||||||
| Relationships and customer lists | 15.4 | 13,898 | 13,890 | ||||||||||||||
| Other | 4.4 | 1,445 | 1,434 | ||||||||||||||
| Intangible assets | 167,990 | 154,911 | |||||||||||||||
| Less: accumulated amortization | (64,164) | (50,887) | |||||||||||||||
| Intangible assets, net | $ | 103,826 | $ | 104,024 | |||||||||||||
| 2023 | $ | 16,808 | |||
| 2024 | 26,110 | ||||
| 2025 | 18,760 | ||||
| 2026 | 11,176 | ||||
| 2027 | 8,376 | ||||
| Thereafter | 22,596 | ||||
| Total | $ | 103,826 | |||
Six months ended June 30, | ||||||||||||||
2023 | 2022 | |||||||||||||
| in thousands | ||||||||||||||
| Gross reserves for unpaid losses and loss adjustment expenses, beginning of year | $ | 111,741 | $ | 74,869 | ||||||||||
| Less: Reinsurance recoverable on unpaid losses and loss adjustment expenses | 843 | — | ||||||||||||
Net reserves for unpaid losses and loss adjustment expenses, beginning of year | 110,898 | 74,869 | ||||||||||||
| Incurred losses and loss adjustment expenses: | ||||||||||||||
| Current accident year | 101,976 | 75,539 | ||||||||||||
| Prior accident year | — | — | ||||||||||||
| Total incurred losses and loss adjustment expenses | 101,976 | 75,539 | ||||||||||||
| Payments: | ||||||||||||||
| Current accident year | 8,639 | 6,698 | ||||||||||||
| Prior accident year | 32,744 | 19,706 | ||||||||||||
| Total payments | 41,383 | 26,404 | ||||||||||||
| Effect of foreign currency rate changes | 104 | (83) | ||||||||||||
Net reserves for unpaid losses and loss adjustment expenses, end of period | 171,595 | 123,921 | ||||||||||||
| Reinsurance recoverable on unpaid losses and loss adjustment expenses | 538 | — | ||||||||||||
Gross reserves for unpaid losses and loss adjustment expenses, end of period | $ | 172,133 | $ | 123,921 | ||||||||||
Three months ended June 30, | Six months ended June 30, | ||||||||||||||||||||||
| 2023 | 2022 | 2023 | 2022 | ||||||||||||||||||||
| in thousands | |||||||||||||||||||||||
| Premiums: | |||||||||||||||||||||||
| Assumed | $ | 188,456 | $ | 139,627 | $ | 320,643 | $ | 237,255 | |||||||||||||||
| Ceded | (8,541) | — | (22,269) | (9,690) | |||||||||||||||||||
| Net | $ | 179,915 | $ | 139,627 | $ | 298,374 | $ | 227,565 | |||||||||||||||
| Premiums earned: | |||||||||||||||||||||||
| Assumed | $ | 132,123 | $ | 96,504 | $ | 252,520 | $ | 187,860 | |||||||||||||||
| Ceded | (4,641) | (2,404) | (7,807) | (4,628) | |||||||||||||||||||
| Net | $ | 127,482 | $ | 94,100 | $ | 244,713 | $ | 183,232 | |||||||||||||||
| in thousands | ||||||||
Balance at December 31, 2022 | $ | 9,470 | ||||||
| Costs incurred and charged to expense | 8,384 | |||||||
Costs paid or otherwise settled (1) | (16,995) | |||||||
Balance at June 30, 2023 | $ | 859 | ||||||
| Inputs | Private Placement Warrants | Underwriter Warrants | OTM Warrants | PIPE Warrants | ||||||||||||||||||||||
| Exercise price | $11.50 | $11.50 | $15.00 | $11.50 | ||||||||||||||||||||||
| Common stock price | $9.36 | $9.36 | $9.36 | $9.36 | ||||||||||||||||||||||
| Volatility | 42.5% | 42.5% | 41.0% | 42.5% | ||||||||||||||||||||||
| Expected term of the warrants | 3.43 | 3.43 | 8.43 | 3.43 | ||||||||||||||||||||||
| Risk-free rate | 4.40% | 4.40% | 3.90% | 4.40% | ||||||||||||||||||||||
| Dividend yield | —% | —% | —% | —% | ||||||||||||||||||||||
| Fair Value Measurements | |||||||||||||||||||||||
| Total | Level 1 | Level 2 | Level 3 | ||||||||||||||||||||
| in thousands | |||||||||||||||||||||||
June 30, 2023 | |||||||||||||||||||||||
| Financial Assets | |||||||||||||||||||||||
| Interest rate swaps | $ | 3,146 | $ | — | $ | 3,146 | $ | — | |||||||||||||||
| Total | $ | 3,146 | $ | — | $ | 3,146 | $ | — | |||||||||||||||
| Financial Liabilities | |||||||||||||||||||||||
| Public warrants | $ | 13,512 | $ | 13,512 | $ | — | $ | — | |||||||||||||||
| Private placement warrants | 689 | — | — | 689 | |||||||||||||||||||
| Underwriter warrants | 77 | — | — | 77 | |||||||||||||||||||
| OTM warrants | 4,937 | — | — | 4,937 | |||||||||||||||||||
| PIPE warrants | 28,615 | — | — | 28,615 | |||||||||||||||||||
| Total | $ | 47,830 | $ | 13,512 | $ | — | $ | 34,318 | |||||||||||||||
December 31, 2022 | |||||||||||||||||||||||
| Financial Assets | |||||||||||||||||||||||
| Interest rate swaps | $ | 3,294 | $ | — | $ | 3,294 | $ | — | |||||||||||||||
| Total | $ | 3,294 | $ | — | $ | 3,294 | $ | — | |||||||||||||||
| Financial Liabilities | |||||||||||||||||||||||
| Public warrants | $ | 12,880 | $ | 12,880 | $ | — | $ | — | |||||||||||||||
| Private placement warrants | 673 | — | — | 673 | |||||||||||||||||||
| Underwriter warrants | 75 | — | — | 75 | |||||||||||||||||||
| OTM warrants | 4,706 | — | — | 4,706 | |||||||||||||||||||
| PIPE warrants | 27,227 | — | — | 27,227 | |||||||||||||||||||
| Total | $ | 45,561 | $ | 12,880 | $ | — | $ | 32,681 | |||||||||||||||
| Private Placement Warrants | Underwriter Warrants | OTM Warrants | PIPE Warrants | Total | |||||||||||||||||||||||||
| in thousands | |||||||||||||||||||||||||||||
Balance at December 31, 2021 | $ | 1,248 | $ | 139 | $ | 6,849 | $ | 55,887 | $ | 64,123 | |||||||||||||||||||
| Change in fair value of warrant liabilities | (402) | (44) | (1,301) | (16,834) | (18,581) | ||||||||||||||||||||||||
| Exercise of warrants | — | — | — | (1,906) | (1,906) | ||||||||||||||||||||||||
Balance at June 30, 2022 | $ | 846 | $ | 95 | $ | 5,548 | $ | 37,147 | $ | 43,636 | |||||||||||||||||||
Balance at December 31, 2022 | $ | 673 | $ | 75 | $ | 4,706 | $ | 27,227 | $ | 32,681 | |||||||||||||||||||
| Change in fair value of warrant liabilities | 16 | 2 | 231 | 1,388 | 1,637 | ||||||||||||||||||||||||
Balance at June 30, 2023 | $ | 689 | $ | 77 | $ | 4,937 | $ | 28,615 | $ | 34,318 | |||||||||||||||||||
| Carrying Amount | Estimated Fair Value | ||||||||||
| in thousands | |||||||||||
| June 30, 2023 | |||||||||||
| Short-term | $ | 7,930 | $ | 7,817 | |||||||
| Long-term | 8,559 | 8,243 | |||||||||
| Total | $ | 16,489 | $ | 16,060 | |||||||
| December 31, 2022 | |||||||||||
| Short-term | $ | 6,296 | $ | 6,205 | |||||||
| Long-term | 6,690 | 6,316 | |||||||||
| Total | $ | 12,986 | $ | 12,521 | |||||||
June 30, 2023 | December 31, 2022 | ||||||||||
| in thousands | |||||||||||
Credit Facility | $ | 75,008 | $ | 105,000 | |||||||
Notes payable | 5,833 | 3,280 | |||||||||
| Total debt outstanding | 80,841 | 108,280 | |||||||||
| Less: current portion | — | — | |||||||||
| Total long-term debt outstanding | $ | 80,841 | $ | 108,280 | |||||||
| June 30, 2023 | December 31, 2022 | ||||||||||||||||||||||
| Units Owned | Ownership Percentage | Units Owned | Ownership Percentage | ||||||||||||||||||||
Hagerty Group Units held by Hagerty, Inc. | 84,405,625 | 24.8 | % | 83,202,969 | 24.5 | % | |||||||||||||||||
Hagerty Group Units held by other unit holders | 255,499,164 | 75.2 | % | 255,758,466 | 75.5 | % | |||||||||||||||||
| Total | 339,904,789 | 100.0 | % | 338,961,435 | 100.0 | % | |||||||||||||||||
Three months ended June 30, | Six months ended June 30, | ||||||||||||||||||||||
2023 | 2022 | 2023 | 2022 | ||||||||||||||||||||
| in thousands, except per share amounts | |||||||||||||||||||||||
| Earnings (Loss) Per Share of Class A Common Stock, Basic | |||||||||||||||||||||||
| Net income (loss) available to Class A Common Stockholders | $ | 2,388 | $ | (5,536) | $ | 305 | $ | 21,971 | |||||||||||||||
| Weighted-average shares of Class A Common Stock outstanding | 84,371 | 82,452 | 83,820 | 82,443 | |||||||||||||||||||
| Net income (loss) per share of Class A Common Stock, Basic | $ | 0.03 | $ | (0.07) | $ | — | $ | 0.27 | |||||||||||||||
| Earnings (Loss) Per Share of Class A Common Stock, Diluted | |||||||||||||||||||||||
| Net income (loss) available to Class A Common Stockholders | $ | 2,405 | $ | (5,536) | $ | 307 | $ | (6,546) | |||||||||||||||
| Weighted-average shares of Class A Common Stock outstanding | 85,563 | 82,452 | 84,424 | 334,702 | |||||||||||||||||||
| Net income (loss) per share of Class A Common Stock, Diluted | $ | 0.03 | $ | (0.07) | $ | — | $ | (0.02) | |||||||||||||||
| Net Income (Loss) Available to Class A Common Stockholders | |||||||||||||||||||||||
| Net income (loss) | $ | 15,539 | $ | (5,543) | $ | 514 | $ | 10,323 | |||||||||||||||
| Net loss (income) attributable to non-controlling interest | (13,134) | 7 | (208) | 11,648 | |||||||||||||||||||
| Undistributed earnings allocated to Series A Convertible Preferred Stock | (17) | — | (1) | — | |||||||||||||||||||
| Net income (loss) available to Class A Common Stockholders, Basic | 2,388 | (5,536) | 305 | 21,971 | |||||||||||||||||||
| Undistributed earnings allocated to to Series A Convertible Preferred Stock | 17 | — | 1 | — | |||||||||||||||||||
| Adjustment for potentially dilutive Hagerty Group Units | — | — | — | (11,237) | |||||||||||||||||||
| Adjustment for potentially dilutive Series A Convertible Preferred Stock | — | — | 1 | — | |||||||||||||||||||
| Adjustment for potentially dilutive warrant liabilities | — | — | — | (17,280) | |||||||||||||||||||
| Net income (loss) available to Class A Common Stockholders, Diluted | $ | 2,405 | $ | (5,536) | $ | 307 | $ | (6,546) | |||||||||||||||
| Weighted-Average Shares of Class A Common Stock Outstanding | |||||||||||||||||||||||
| Weighted-average shares of Class A Common Stock outstanding, Basic | 84,371 | 82,452 | 83,820 | 82,443 | |||||||||||||||||||
| Adjustment for potentially dilutive Hagerty Group Units | — | — | — | 251,034 | |||||||||||||||||||
| Adjustment for potentially dilutive Series A Convertible Preferred Stock | 597 | — | 300 | — | |||||||||||||||||||
| Adjustment for potentially dilutive share-based compensation awards | 595 | — | 304 | — | |||||||||||||||||||
| Adjustment for potentially dilutive warrant liabilities | — | — | — | 1,225 | |||||||||||||||||||
| Weighted-average shares of Class A Common Stock outstanding, Diluted | 85,563 | 82,452 | 84,424 | 334,702 | |||||||||||||||||||
| Three months ended June 30, | Six months ended June 30, | |||||||||||||||||||||||||
| 2023 | 2022 | 2023 | 2022 | |||||||||||||||||||||||
| in thousands | ||||||||||||||||||||||||||
| Hagerty Group Units | 255,532 | 251,034 | 255,620 | — | ||||||||||||||||||||||
| Series A Convertible Preferred Stock | — | — | — | — | ||||||||||||||||||||||
| Warrants | 19,484 | 19,484 | 19,484 | 7,050 | ||||||||||||||||||||||
| Unvested shares associated with RSUs, performance-based RSUs and the ESPP | 5,931 | 6,872 | 6,328 | 3,455 | ||||||||||||||||||||||
| Total | 280,947 | 277,390 | 281,432 | 10,505 | ||||||||||||||||||||||
Three months ended June 30, | Six months ended June 30, | ||||||||||||||||||||||
2023 | 2022 | 2023 | 2022 | ||||||||||||||||||||
| in thousands | |||||||||||||||||||||||
| Restricted stock units | $ | 3,393 | $ | 3,592 | $ | 6,626 | $ | 3,592 | |||||||||||||||
| Performance restricted stock units | 716 | 715 | 1,431 | 715 | |||||||||||||||||||
| Employee stock purchase plan | — | — | 165 | — | |||||||||||||||||||
| Total share-based compensation expense | $ | 4,109 | $ | 4,307 | $ | 8,222 | $ | 4,307 | |||||||||||||||
| Restricted Stock Units | Weighted Average Grant Date Fair Value | ||||||||||
Unvested balance as of December 31, 2022 | 3,195,038 | $ | 10.76 | ||||||||
| Granted | 1,009,853 | 8.74 | |||||||||
| Vested | (824,790) | 10.79 | |||||||||
| Forfeited | (65,491) | 10.79 | |||||||||
Unvested balance as of June 30, 2023 | 3,314,610 | $ | 10.14 | ||||||||
| Inputs | Performance Restricted Stock Units | |||||||
| Weighted average grant-date fair value per share | $5.19 | |||||||
| Expected stock volatility | 35% | |||||||
| Expected term (in years) | 7.0 | |||||||
| Risk-free interest rate | 2.5% | |||||||
| Dividend yield | —% | |||||||
| Performance Restricted Stock Units | Weighted Average Fair Value | ||||||||||
Outstanding as of December 31, 2022 | 3,707,136 | $ | 5.19 | ||||||||
| Granted | — | — | |||||||||
Outstanding as of June 30, 2023 | 3,707,136 | $ | 5.19 | ||||||||
Six months ended June 30, | |||||||||||||||||||||||
| 2023 | 2022 | ||||||||||||||||||||||
| in thousands (except percentages) | |||||||||||||||||||||||
| Income tax (benefit) expense at statutory rate | $ | 1,661 | 21 | % | $ | 3,073 | 21 | % | |||||||||||||||
| State taxes | 103 | 1 | % | (142) | (1) | % | |||||||||||||||||
| Loss not subject to entity-level taxes | 4,311 | 55 | % | 4,692 | 32 | % | |||||||||||||||||
| Foreign rate differential | (185) | (2) | % | (175) | (1) | % | |||||||||||||||||
| Change in valuation allowance | 252 | 3 | % | 2,002 | 14 | % | |||||||||||||||||
| Change in fair value of warrant liability | 477 | 6 | % | (5,520) | (38) | % | |||||||||||||||||
| Permanent items | 510 | 7 | % | 238 | 2 | % | |||||||||||||||||
| Other, net | 269 | 3 | % | — | — | % | |||||||||||||||||
| Income tax expense | $ | 7,398 | 94 | % | $ | 4,168 | 29 | % | |||||||||||||||
Markel | State Farm | |||||||||||||||||||||||||
| Equity Interest | Shares/Units | Percentage of total outstanding (1) | Shares/Units | Percentage of total outstanding (1) | ||||||||||||||||||||||
| Hagerty, Inc. Class A Common Stock | 3,000,000 | 3.6 | % | 50,000,000 | 59.2 | % | ||||||||||||||||||||
| Hagerty, Inc. Class V Common Stock | 75,000,000 | 29.9 | % | — | — | % | ||||||||||||||||||||
| Hagerty, Inc. Series A Convertible Preferred Stock | 1,590,668 | 18.8 | % | 5,302,226 | 62.5 | % | ||||||||||||||||||||
| Hagerty Group Units | 75,000,000 | 22.1 | % | — | — | % | ||||||||||||||||||||
| Controlling Interest | 3,000,000 | 3.6 | % | 50,000,000 | 59.2 | % | ||||||||||||||||||||
| Non-controlling Interest | 75,000,000 | 29.4 | % | — | — | |||||||||||||||||||||
June 30, 2023 | December 31, 2022 | ||||||||||
| Assets: | in thousands | ||||||||||
| Commissions receivable | $ | 2,909 | $ | — | |||||||
| Other current assets | 4,483 | — | |||||||||
| Total assets | $ | 7,392 | $ | — | |||||||
| Liabilities: | |||||||||||
| Accounts payable, accrued expenses and other current liabilities | $ | 7,782 | $ | — | |||||||
| Total liabilities | $ | 7,782 | $ | — | |||||||
Three months ended June 30, | Six months ended June 30, | ||||||||||||||||||||||
| 2023 | 2022 | 2023 | 2022 | ||||||||||||||||||||
| Revenue: | in thousands | ||||||||||||||||||||||
| Earned premium | $ | (1,390) | $ | — | $ | (1,390) | $ | — | |||||||||||||||
| Expenses: | |||||||||||||||||||||||
| Ceding commission | $ | (723) | $ | — | $ | (723) | $ | — | |||||||||||||||
| Losses and loss adjustment expenses | (278) | — | (278) | — | |||||||||||||||||||
| Total expenses | $ | (1,001) | $ | — | $ | (1,001) | $ | — | |||||||||||||||
June 30, 2023 | December 31, 2022 | ||||||||||
| in thousands (except percentages) | |||||||||||
| Due to insurer | $ | 116,411 | $ | 64,873 | |||||||
| Percent of total | 91 | % | 95 | % | |||||||
Three months ended June 30, | Six months ended June 30, | ||||||||||||||||||||||
| 2023 | 2022 | 2023 | 2022 | ||||||||||||||||||||
| in thousands (except percentages) | |||||||||||||||||||||||
| Commission revenue | $ | 100,737 | $ | 86,716 | $ | 172,376 | $ | 146,252 | |||||||||||||||
| Percent of total | 93 | % | 93 | % | 95 | % | 94 | % | |||||||||||||||
June 30, 2023 | December 31, 2022 | ||||||||||
| Assets: | in thousands | ||||||||||
| Premiums receivable | $ | 185,458 | $ | 97,897 | |||||||
| Commissions receivable | 584 | — | |||||||||
| Deferred acquisition costs, net | 135,769 | 103,869 | |||||||||
| Other current assets | 1,217 | — | |||||||||
| Total assets | $ | 323,028 | $ | 201,766 | |||||||
| Liabilities: | |||||||||||
| Accounts payable, accrued expenses and other current liabilities | $ | 1,956 | $ | — | |||||||
| Losses payable and provision for unpaid losses and loss adjustment expenses | 163,833 | 160,236 | |||||||||
| Commissions payable | 98,331 | 75,898 | |||||||||
| Unearned premiums | 293,507 | 227,192 | |||||||||
| Total liabilities | $ | 557,627 | $ | 463,326 | |||||||
Three months ended June 30, | Six months ended June 30, | ||||||||||||||||||||||
| 2023 | 2022 | 2023 | 2022 | ||||||||||||||||||||
| Revenue: | in thousands | ||||||||||||||||||||||
| Earned premium | $ | 130,610 | $ | 89,738 | $ | 243,972 | $ | 175,428 | |||||||||||||||
| Expenses: | |||||||||||||||||||||||
| Ceding commission, net | $ | 59,419 | $ | 43,415 | $ | 113,177 | $ | 84,303 | |||||||||||||||
| Losses and loss adjustment expenses | 51,194 | 36,808 | 97,849 | 71,379 | |||||||||||||||||||
| Total expenses | $ | 110,613 | $ | 80,223 | $ | 211,026 | $ | 155,682 | |||||||||||||||
Three months ended June 30, | Six months ended June 30, | ||||||||||||||||||||||
| 2023 | 2022 | 2023 | 2022 | ||||||||||||||||||||
| Operational Metrics | |||||||||||||||||||||||
Total Written Premium (in thousands) (1) | $ | 275,895 | $ | 237,697 | $ | 458,745 | $ | 392,487 | |||||||||||||||
Loss Ratio (2) | 42.0 | % | 41.0 | % | 41.7 | % | 41.2 | % | |||||||||||||||
New Business Count — Insurance (3) | 80,140 | 74,922 | 131,902 | 122,436 | |||||||||||||||||||
| GAAP Measures | |||||||||||||||||||||||
Total Revenue (in thousands) | $ | 261,244 | $ | 206,017 | $ | 479,596 | $ | 373,828 | |||||||||||||||
Operating Income (Loss) (in thousands) | $ | 17,253 | $ | 2,387 | $ | 764 | $ | (10,617) | |||||||||||||||
Net Income (Loss) (in thousands) | $ | 15,539 | $ | (5,543) | $ | 514 | $ | 10,323 | |||||||||||||||
| Basic Earnings (Loss) Per Share | $ | 0.03 | $ | (0.07) | $ | — | $ | 0.27 | |||||||||||||||
| Non-GAAP Financial Measures | |||||||||||||||||||||||
Adjusted EBITDA (in thousands) (4) | $ | 34,367 | $ | 16,065 | $ | 41,072 | $10,106 | ||||||||||||||||
Adjusted Earnings (Loss) Per Share (4) | $ | 0.05 | $ | — | $ | 0.01 | $ | (0.04) | |||||||||||||||
June 30, 2023 | December 31, 2022 | ||||||||||
| Operational Metrics | |||||||||||
Policies in Force (5) | 1,365,718 | 1,315,977 | |||||||||
Policies in Force Retention (6) | 88.0 | % | 88.0 | % | |||||||
Vehicles in Force (7) | 2,319,953 | 2,234,461 | |||||||||
HDC Paid Member Count (8) | 791,895 | 752,754 | |||||||||
Net Promoter Score (NPS) (9) | 83 | 83 | |||||||||
Three months ended June 30, | |||||||||||||||||||||||
| 2023 | 2022 | $ Change | % Change | ||||||||||||||||||||
| REVENUE: | in thousands (except percentages) | ||||||||||||||||||||||
| Commission and fee revenue | $ | 110,187 | $ | 95,506 | $ | 14,681 | 15.4 | % | |||||||||||||||
| Earned premium | 127,482 | 94,100 | 33,382 | 35.5 | % | ||||||||||||||||||
| Membership, marketplace and other revenue | 23,575 | 16,411 | 7,164 | 43.7 | % | ||||||||||||||||||
| Total revenue | 261,244 | 206,017 | 55,227 | 26.8 | % | ||||||||||||||||||
| OPERATING EXPENSES: | |||||||||||||||||||||||
| Salaries and benefits | 53,572 | 53,271 | 301 | 0.6 | % | ||||||||||||||||||
| Ceding commission | 60,350 | 45,255 | 15,095 | 33.4 | % | ||||||||||||||||||
| Losses and loss adjustment expenses | 53,564 | 38,620 | 14,944 | 38.7 | % | ||||||||||||||||||
| Sales expense | 41,941 | 37,455 | 4,486 | 12.0 | % | ||||||||||||||||||
| General and administrative services | 21,318 | 20,729 | 589 | 2.8 | % | ||||||||||||||||||
| Depreciation and amortization | 10,397 | 8,300 | 2,097 | 25.3 | % | ||||||||||||||||||
| Restructuring, impairment and related charges, net | 2,849 | — | 2,849 | 100.0 | % | ||||||||||||||||||
| Total operating expenses | 243,991 | 203,630 | 40,361 | 19.8 | % | ||||||||||||||||||
| OPERATING INCOME (LOSS) | 17,253 | 2,387 | 14,866 | 622.8 | % | ||||||||||||||||||
| Change in fair value of warrant liabilities | (1,754) | (5,400) | 3,646 | 67.5 | % | ||||||||||||||||||
| Interest and other income (expense) | 3,770 | (353) | 4,123 | 1,168.0 | % | ||||||||||||||||||
| INCOME (LOSS) BEFORE INCOME TAX EXPENSE | 19,269 | (3,366) | 22,635 | 672.5 | % | ||||||||||||||||||
| Income tax benefit (expense) | (3,730) | (2,138) | (1,592) | 74.5 | % | ||||||||||||||||||
| Income (loss) from equity method investment, net of tax | — | (39) | 39 | 100.0 | % | ||||||||||||||||||
| NET INCOME (LOSS) | $ | 15,539 | $ | (5,543) | $ | 21,082 | 380.3 | % | |||||||||||||||
| U.S. | Canada | U.K. | Total | ||||||||||||||||||||
| in thousands (except percentages) | |||||||||||||||||||||||
Three months ended June 30, 2023 | |||||||||||||||||||||||
| Subject premium | $ | 220,859 | $ | 22,419 | $ | 3,101 | $ | 246,379 | |||||||||||||||
| Quota share percentage | 81.0 | % | 35.0 | % | 80.0 | % | 76.5 | % | |||||||||||||||
| Assumed premium in Hagerty Re | 178,129 | 7,847 | 2,480 | 188,456 | |||||||||||||||||||
| Change in unearned premiums | (56,333) | ||||||||||||||||||||||
| Reinsurance premiums ceded | (8,541) | ||||||||||||||||||||||
| Change in deferred reinsurance premiums | 3,900 | ||||||||||||||||||||||
| Earned premiums | $ | 127,482 | |||||||||||||||||||||
Three months ended June 30, 2022 | |||||||||||||||||||||||
| Subject premium | $ | 185,636 | $ | 21,523 | $ | 3,070 | $ | 210,229 | |||||||||||||||
| Quota share percentage | 70.0 | % | 35.0 | % | 70.0 | % | 66.4 | % | |||||||||||||||
| Assumed premium in Hagerty Re | 129,945 | 7,533 | 2,149 | 139,627 | |||||||||||||||||||
| Change in unearned premiums | (43,123) | ||||||||||||||||||||||
| Reinsurance premiums ceded | — | ||||||||||||||||||||||
| Change in deferred reinsurance premiums | (2,404) | ||||||||||||||||||||||
| Earned premiums | $ | 94,100 | |||||||||||||||||||||
| Three Months Ended June 30, | ||||||||||||||
| 2023 | 2022 | |||||||||||||
| (in thousands, except percentages) | ||||||||||||||
| Ceding commission | ||||||||||||||
| Ceding commission expense | $ | 61,361 | $ | 45,255 | ||||||||||
| Ceding commission income | (1,011) | — | ||||||||||||
| Net ceding commission | $ | 60,350 | $ | 45,255 | ||||||||||
| Percentage of earned premium | 47.3 | % | 48.1 | % | ||||||||||
Six months ended June 30, | |||||||||||||||||||||||
| 2023 | 2022 | $ Change | % Change | ||||||||||||||||||||
| REVENUE: | in thousands (except percentages) | ||||||||||||||||||||||
| Commission and fee revenue | $ | 184,799 | $ | 157,967 | $ | 26,832 | 17.0 | % | |||||||||||||||
| Earned premium | 244,713 | 183,232 | 61,481 | 33.6 | % | ||||||||||||||||||
| Membership, marketplace and other revenue | 50,084 | 32,629 | 17,455 | 53.5 | % | ||||||||||||||||||
| Total revenue | 479,596 | 373,828 | 105,768 | 28.3 | % | ||||||||||||||||||
| OPERATING EXPENSES: | |||||||||||||||||||||||
| Salaries and benefits | 108,804 | 99,747 | 9,057 | 9.1 | % | ||||||||||||||||||
| Ceding commission | 115,775 | 87,633 | 28,142 | 32.1 | % | ||||||||||||||||||
| Losses and loss adjustment expenses | 101,976 | 75,539 | 26,437 | 35.0 | % | ||||||||||||||||||
| Sales expense | 77,054 | 65,892 | 11,162 | 16.9 | % | ||||||||||||||||||
| General and administrative services | 42,699 | 40,187 | 2,512 | 6.3 | % | ||||||||||||||||||
| Depreciation and amortization | 24,140 | 15,447 | 8,693 | 56.3 | % | ||||||||||||||||||
| Restructuring, impairment and related charges, net | 8,384 | — | 8,384 | 100.0 | % | ||||||||||||||||||
| Total operating expenses | 478,832 | 384,445 | 94,387 | 24.6 | % | ||||||||||||||||||
| OPERATING INCOME (LOSS) | 764 | (10,617) | 11,381 | 107.2 | % | ||||||||||||||||||
| Change in fair value of warrant liabilities | (2,269) | 26,286 | (28,555) | (108.6) | % | ||||||||||||||||||
| Interest and other income (expense) | 9,417 | (1,037) | 10,454 | 1,008.1 | % | ||||||||||||||||||
| INCOME (LOSS) BEFORE INCOME TAX EXPENSE | 7,912 | 14,632 | (6,720) | (45.9) | % | ||||||||||||||||||
| Income tax benefit (expense) | (7,398) | (4,168) | (3,230) | 77.5 | % | ||||||||||||||||||
| Income (loss) from equity method investment, net of tax | — | (141) | 141 | 100.0 | % | ||||||||||||||||||
| NET INCOME (LOSS) | $ | 514 | $ | 10,323 | $ | (9,809) | (95.0) | % | |||||||||||||||
| U.S. | Canada | U.K. | Total | ||||||||||||||||||||
| in thousands (except percentages) | |||||||||||||||||||||||
| Six months ended June 30, 2023 | |||||||||||||||||||||||
| Subject premium | $ | 379,451 | $ | 28,520 | $ | 5,062 | $ | 413,033 | |||||||||||||||
| Quota share percentage | 81.0 | % | 35.0 | % | 80.0 | % | 77.6 | % | |||||||||||||||
| Assumed premium in Hagerty Re | 306,612 | 9,982 | 4,049 | 320,643 | |||||||||||||||||||
| Change in unearned premiums | (68,123) | ||||||||||||||||||||||
| Reinsurance premiums ceded | (22,269) | ||||||||||||||||||||||
| Change in deferred reinsurance premiums | 14,462 | ||||||||||||||||||||||
| Earned premiums | $ | 244,713 | |||||||||||||||||||||
| Six months ended June 30, 2022 | |||||||||||||||||||||||
| Subject premium | $ | 320,382 | $ | 27,279 | $ | 4,914 | $ | 352,575 | |||||||||||||||
| Quota share percentage | 70.0 | % | 35.0 | % | 70.0 | % | 67.3 | % | |||||||||||||||
| Assumed premium in Hagerty Re | 224,267 | 9,548 | 3,440 | 237,255 | |||||||||||||||||||
| Change in unearned premiums | (49,395) | ||||||||||||||||||||||
| Reinsurance premiums ceded | (9,690) | ||||||||||||||||||||||
| Change in deferred reinsurance premiums | 5,062 | ||||||||||||||||||||||
| Earned premiums | $ | 183,232 | |||||||||||||||||||||
| Six Months Ended June 30, | ||||||||||||||
| 2023 | 2022 | |||||||||||||
| (in thousands, except percentages) | ||||||||||||||
| Ceding commission: | ||||||||||||||
| Ceding commission expense | $ | 116,786 | $ | 87,633 | ||||||||||
| Ceding commission income | (1,011) | — | ||||||||||||
| Net ceding commission | $ | 115,775 | $ | 87,633 | ||||||||||
| Percentage of earned premium | 47.3 | % | 47.8 | % | ||||||||||
| Six months ended June 30, | |||||||||||||||||||||||
| 2023 | 2022 | $ Change | % Change | ||||||||||||||||||||
| in thousands (except percentages) | |||||||||||||||||||||||
| Net Cash Provided by Operating Activities | $ | 70,557 | $ | 59,925 | $ | 10,632 | 17.7 | % | |||||||||||||||
| Net Cash Used in Investing Activities | $ | (31,301) | $ | (53,161) | $ | 21,860 | 41.1 | % | |||||||||||||||
| Net Cash Provided by (Used in) Financing Activities | $ | 53,005 | $ | (48,500) | $ | 101,505 | 209.3 | % | |||||||||||||||
Six months ended June 30, | |||||||||||||||||||||||
| 2023 | 2022 | $ Change | % Change | ||||||||||||||||||||
| in thousands (except percentages) | |||||||||||||||||||||||
Net income (loss) | $ | 514 | $ | 10,323 | $ | (9,809) | (95.0) | % | |||||||||||||||
| Non-cash adjustments to net income (loss) | 41,884 | (3,389) | 45,273 | 1,335.9 | % | ||||||||||||||||||
| Changes in operating assets and liabilities | 28,159 | 52,991 | (24,832) | (46.9) | % | ||||||||||||||||||
| Net Cash Provided by Operating Activities | $ | 70,557 | $ | 59,925 | $ | 10,632 | 17.7 | % | |||||||||||||||
| Total | 2023 | 2024 | 2025 | 2026 | 2027 | Thereafter | |||||||||||||||||||||||||||||||||||
| in thousands | |||||||||||||||||||||||||||||||||||||||||
| Debt | $ | 80,841 | $ | — | $ | 3,434 | $ | 2,399 | $ | 75,008 | $ | — | $ | — | |||||||||||||||||||||||||||
Interest payments (1) | 1,429 | 375 | 716 | 338 | — | — | — | ||||||||||||||||||||||||||||||||||
| Operating leases | 111,294 | $ | 6,177 | 12,299 | 11,876 | 11,244 | 11,052 | 58,646 | |||||||||||||||||||||||||||||||||
| Purchase commitments | 11,106 | 5,573 | 5,265 | 268 | — | — | — | ||||||||||||||||||||||||||||||||||
| Total | $ | 204,670 | $ | 12,125 | $ | 21,714 | $ | 14,881 | $ | 86,252 | $ | 11,052 | $ | 58,646 | |||||||||||||||||||||||||||
Three months ended June 30, | Six months ended June 30, | |||||||||||||||||||||||||
| 2023 | 2022 | 2023 | 2022 | |||||||||||||||||||||||
| in thousands | ||||||||||||||||||||||||||
| Net income (loss) | $ | 15,539 | $ | (5,543) | $ | 514 | $ | 10,323 | ||||||||||||||||||
| Interest and other (income) expense | (3,770) | 353 | (9,417) | 1,037 | ||||||||||||||||||||||
| Income tax (benefit) expense | 3,730 | 2,138 | 7,398 | 4,168 | ||||||||||||||||||||||
| Depreciation and amortization | 10,397 | 8,300 | 24,140 | 15,447 | ||||||||||||||||||||||
| Restructuring, impairment and related charges, net | 2,849 | — | 8,384 | — | ||||||||||||||||||||||
| Change in fair value of warrant liabilities | 1,754 | 5,400 | 2,269 | (26,286) | ||||||||||||||||||||||
| Share-based compensation expense | 4,018 | 4,307 | 7,934 | 4,307 | ||||||||||||||||||||||
Other unusual items(1) | (150) | 1,110 | (150) | 1,110 | ||||||||||||||||||||||
| Adjusted EBITDA | $ | 34,367 | $ | 16,065 | $ | 41,072 | $ | 10,106 | ||||||||||||||||||
| Three months ended June 30, | Six months ended June 30, | |||||||||||||||||||||||||
| 2023 | 2022 | 2023 | 2022 | |||||||||||||||||||||||
| in thousands (except per share amounts) | ||||||||||||||||||||||||||
| Numerator: | ||||||||||||||||||||||||||
Net income (loss) attributable to Class A Common Stockholders(1) | $ | 2,405 | $ | (5,536) | $ | 306 | $ | 21,971 | ||||||||||||||||||
| Net income (loss) attributable to non-controlling interest | 13,134 | (7) | 208 | (11,648) | ||||||||||||||||||||||
| Consolidated net income (loss) | 15,539 | (5,543) | 514 | 10,323 | ||||||||||||||||||||||
| Change in fair value of warrant liabilities | 1,754 | 5,400 | 2,269 | (26,286) | ||||||||||||||||||||||
Adjusted consolidated net income (loss)(2) | $ | 17,293 | $ | (143) | $ | 2,783 | $ | (15,963) | ||||||||||||||||||
| Denominator: | ||||||||||||||||||||||||||
Weighted average shares of Class A Common Stock outstanding — basic(1) | 84,371 | 82,452 | 83,820 | 82,443 | ||||||||||||||||||||||
| Total potentially dilutive securities outstanding: | ||||||||||||||||||||||||||
Conversion of non-controlling interest Hagerty Group Units to Class A Common Stock | 255,499 | 251,034 | 255,499 | 251,034 | ||||||||||||||||||||||
Conversion of Series A Convertible Preferred Stock to Class A Common Stock | 6,785 | — | 6,785 | — | ||||||||||||||||||||||
| Total warrants outstanding | 19,484 | 19,484 | 19,484 | 19,484 | ||||||||||||||||||||||
| Total unissued share-based compensation awards | 7,022 | 6,851 | 7,022 | 6,851 | ||||||||||||||||||||||
| Potentially dilutive shares outstanding | 288,790 | 277,369 | 288,790 | 277,369 | ||||||||||||||||||||||
Fully dilutive shares outstanding(2) | 373,161 | 359,821 | 372,610 | 359,812 | ||||||||||||||||||||||
Basic EPS = (Net income (loss) available to Class A Common Stockholders / Weighted-average shares of Class A Common Stock outstanding)(1) | $ | 0.03 | $ | (0.07) | $ | — | $ | 0.27 | ||||||||||||||||||
Adjusted EPS = (Adjusted consolidated net income (loss) / Fully dilutive shares outstanding)(2) | $ | 0.05 | $ | — | $ | 0.01 | $ | (0.04) | ||||||||||||||||||
| Exhibit No. | Description | |||||||
| 2.1* | ||||||||
| 3.1 | ||||||||
| 3.2 | ||||||||
| 3.3 | ||||||||
| 4.1 | ||||||||
| 4.2 | ||||||||
| 4.3 | ||||||||
| 4.4 | ||||||||
| 4.5 | ||||||||
| 10.1* | ||||||||
| 10.2* | ||||||||
| 10.3 | ||||||||
| 10.4 | ||||||||
| 10.5 | ||||||||
| 31.1 | ||||||||
| 31.2 | ||||||||
| 32.1# | ||||||||
| 32.2# | ||||||||
| 101.INS | XBRL Instance Document. | |||||||
| 101.SCH | XBRL Taxonomy Extension Schema Document. | |||||||
| 101.CAL | XBRL Taxonomy Extension Calculation Linkbase Document. | |||||||
| 101.LAB | XBRL Taxonomy Extension Label Linkbase Document. | |||||||
| 101.PRE | XBRL Taxonomy Extension Presentation Linkbase Document | |||||||
| 101.DEF | XBRL Taxonomy Extension Definition Linkbase Document. | |||||||
| 104 | Cover Page Interactive Data File (formatted as Inline XBRL). | |||||||
| * | The schedules and exhibits to this agreement have been omitted pursuant to Item 601(a)(5) of Regulation S-K. A copy of any omitted schedule and/or exhibit will be furnished to the SEC upon request. | |||||||
| † | Indicates management contract or compensatory plan or arrangement. | |||||||
| # | This certification is deemed not filed for purpose of Section 18 of the Exchange Act or otherwise subject to the liability of that section, nor shall it be deemed incorporated by reference into any filing under the Securities Act or the Exchange Act. | |||||||
HAGERTY, INC. | ||||||||||||||
| By: | /s/ McKeel O Hagerty | |||||||||||||
| McKeel O Hagerty | ||||||||||||||
| Chief Executive Officer | ||||||||||||||
HAGERTY, INC. | ||||||||||||||
| By: | /s/ Patrick McClymont | |||||||||||||
| Patrick McClymont | ||||||||||||||
| Chief Financial Officer | ||||||||||||||
| Interest Payments: | The Company shall make quarterly payments of accrued interest on the outstanding and unpaid principal amount of the Term Loan commencing on [June 30], 2023, and on each [March 31, June 30, September 30 and December 31] thereafter prior to the Term Loan Maturity Date. An interest payment shall be deferred indefinitely for so long as the Company is (or would be, as a result of such payment) in breach of its enhanced capital and surplus requirement (“ECR”), as set out in the Bermuda Insurance Act 1978 and its related regulations (the “Insurance Act”). | ||||
| Optional Prepayments: | The Credit Facility will include a one-year soft call period. At any time following the first anniversary of the Closing Date, the Company shall be permitted to prepay the Term Loan in whole or in part (subject to the Repayment Conditions); provided that partial prepayments shall be in a minimum principal amount to be agreed. On the date of each prepayment, the Company shall pay the accrued and unpaid interest on the principal amount prepaid, together with a prepayment premium of 2% for year 2 and 1% for year 3 of the Credit Facility and 0% thereafter. The Company shall give the Lender at least ten (10) days’ prior written notice of each voluntary prepayment, which notice shall specify the principal amount of the Term Loan that will be prepaid and the date on which such prepayment will be made. When such written notice is given to the Lender the principal amount of the prepayment specified in such written notice shall become due and payable on the date specified for such prepayment in such notice. | ||||
| Repayment Conditions: | Repayments of the principal amount of the Term Loan are subject to the following conditions: (i) prior to the fifth anniversary of the Closing Date, the Term Loan may only be repaid with the approval of the Bermuda Monetary Authority (the “BMA”) (to the extent then required by the BMA or the BMA’s rules for eligible capital); (ii) the Term Loan may not be repaid at any time, including on the Term Loan Maturity Date, if the ECR would be breached immediately before or after giving effect to such repayment; and (iii) the Term Loan may not be repaid at any time, including on the Term Loan Maturity Date, if any other condition to such repayment under the BMA’s rules for eligible capital (on the basis that the Term Loan is intended to qualify as Tier 2 Ancillary Capital under the Insurance Act) or as may have otherwise been imposed by the BMA have not been complied with, unless, in the case of each of clause (i), (ii) and (iii), (a) the Company replaces the capital represented by the Term Loan to be repaid with capital having equal or better capital treatment as the Term Loan under the BMA’s rules for eligible capital (or the satisfaction of such condition is otherwise not required to permit the Term Loan to qualify as Tier 2 Ancillary Capital under the Insurance Act) or (b) the repayment is otherwise permitted by the BMA (collectively, the “Repayment Conditions”). | ||||
| Conditions Precedent: | The closing of, and the funding under, the Credit Facility will be subject to satisfaction or waiver of the following conditions precedent, in each case, in form and substance reasonably satisfactory to the Lender: •The negotiation, execution and delivery of definitive documentation with respect to the Credit Facility (collectively, the “Loan Documents”). •The Lender shall have received constitutional documents of the Company certified by a responsible officer and Bermuda certificates of compliance from the Bermuda Registrar of Companies and the BMA. •The Lender shall have received customary opinions of counsel to the Company with respect to authority, legality, validity, binding effect and enforceability of the documents for the Credit Facility. •The Lender shall have received a solvency certificate, signed by a responsible officer of the Company, certifying as to the financial condition, solvency and related matters of the Company immediately after giving effect to the incurrence of indebtedness by the Company on the Closing Date. •There shall not have occurred, since December 31, 2022, any event or condition that has had, or would be reasonably expected, either individually or in the aggregate, to have, a material adverse effect on the Company. •The absence of any action, suit, investigation or proceeding pending, or, to the knowledge of the Company, threatened, in any court or before any arbitrator or governmental authority that would reasonably be expected to have a material adverse effect on the Company. •The Lender shall have received evidence that all boards of directors, shareholder and governmental consents necessary in connection with the Credit Facility have been obtained. •The Lender shall have received payment of all fees and expenses owing pursuant to the Loan Documents and invoiced to the Company at least 3 business days prior to the Closing Date. | ||||
| Representations and Warranties: | Customary for subordinated commercial loans for entities subject to Solvency II (or equivalent) seeking Tier 2 Ancillary Capital treatment under the Insurance Act, subject to materiality qualifiers and thresholds to be agreed and limited to: formation and organization; power and authority; enforceability; governmental approvals; absence of conflicts; accuracy of financial statements; absence of material adverse change; subsidiaries; absence of material litigation or administrative proceedings; compliance with laws and agreements; ownership of assets and rights; perfection and first priority of security interests; accuracy of disclosure; solvency; use of proceeds; Federal Reserve margin regulations; inapplicability of the Investment Company Act of 1940; taxes; and environmental matters. | ||||
| Affirmative Covenants: | Customary for subordinated commercial loans for entities subject to Solvency II (or equivalent) seeking Tier 2 Ancillary Capital treatment under the Insurance Act, subject to materiality qualifiers and thresholds to be agreed and limited to: information reporting; notification of defaults; maintenance of existence; compliance with laws; maintenance of properties; maintenance of insurance; payment of taxes; maintenance of records; and environmental matters. | ||||
| Negative Covenants: | Customary for subordinated commercial loans for entities subject to Solvency II (or equivalent) seeking Tier 2 Ancillary Capital treatment under the Insurance Act, subject to materiality qualifiers and thresholds to be agreed and limited to limitations on: changes in identity or organizational matters; indebtedness; hedge agreements; acquisitions; dispositions; investments; material contracts; affiliate transactions; liens; restricted payments; negative pledges; changes in nature of business; accounting changes and changes to fiscal year; and fundamental changes.1,2 | ||||
| Events of Default: | Customary for subordinated commercial loans for entities subject to Solvency II (or equivalent) seeking Tier 2 Ancillary Capital treatment under the Insurance Act, subject to cure periods, materiality qualifiers and thresholds to be agreed and limited to: nonpayment of principal, interest and other required amounts; breach of representation or warranty; breach of covenants; judgments; bankruptcy or insolvency events; and change of control. | ||||
| Bermuda Monetary Authority Provisions: | In order to qualify the Term Loan as Tier 2 Ancillary Capital under the Insurance Act, the definitive agreements will contain provisions where the parties will acknowledge that it is: ● free of incentives to redeem; ● unencumbered; ● does not contain terms or conditions designed to accelerate or induce the Company’s insolvency; and ● does not give rise to a right of set-off against the Company’s claims and obligations to an investor or creditor. | ||||
| MISCELLANEOUS | |||||
| Fees and Expenses: | The Company shall pay the reasonable and documented out-of-pocket fees and expenses of the Lender associated with the Credit Facility. | ||||
| Confidentiality: | Without the prior written consent of the Company, the Lender agrees not to disclose, and to cause its directors, agents, advisors, officers, employees, attorneys, accountants, stockholders, authorized representatives and affiliates not to disclose, the existence or status of negotiations with respect hereto or any other information concerning the Company or its affiliates received in connection therewith, provided that the Lender shall be entitled to disclose any information about this Term Sheet and the investment contemplated herein as required by law, in which case, the Company shall have the opportunity to review the disclosure in advance and provide comments thereto. In addition, neither party shall use the other party’s name in any manner, context or format (including reference on or links to websites, press releases, etc.) without the prior written consent of the other party. | ||||
| Governing Law: | THIS TERM SHEET AND THE LOAN DOCUMENTS SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH INTERNAL LAWS OF THE STATE OF NEW YORK (EXCEPT FOR THE SUBORDINATION PROVISIONS OF THE LOAN DOCUMENTS, WHICH SHALL BE GOVERNED BY BERMUDA LAW), WITHOUT GIVING EFFECT TO ANY CHOICE OR CONFLICT OF LAW PROVISION OR RULE (WHETHER OF THE STATE OF DELAWARE OR ANY OTHER JURISDICTION) THAT WOULD CAUSE THE APPLICATION OF LAWS OF ANY JURISDICTION OTHER THAN THOSE OF THE STATE OF NEW YORK. | ||||
| Third Party Beneficiaries: | Except as specifically set forth or referred to herein, nothing herein is intended or shall be construed to confer upon any person or entity other than the Company and Lender and their successors or assigns, any rights or remedies under or by reason of this Term Sheet. | ||||
| Miscellaneous: | This Term Sheet may be executed in counterparts, each of which shall be deemed to be an original, but all of which together shall constitute one document. Counterparts may be delivered by email (including a “.pdf” format data file), fax, DocuSign or similar encrypted electronic document system, and any counterpart so delivered shall have the same force and effect as if such counterpart were an original thereof. The headings of the various sections of this Term Sheet have been inserted for reference only and shall not be deemed to be a part of this Term Sheet. The Loan Documents will include mutual waivers of jury trial. | ||||
Date: August 8, 2023 | |||||||||||
| By: | /s/ McKeel O Hagerty | ||||||||||
| McKeel O Hagerty | |||||||||||
| Chief Executive Officer | |||||||||||
| (Principle Executive Officer) | |||||||||||
Date: August 8, 2023 | |||||||||||
| By: | /s/ Patrick McClymont | ||||||||||
| Patrick McClymont | |||||||||||
| Chief Financial Officer | |||||||||||
| (Principal Financial Officer) | |||||||||||
Date: August 8, 2023 | |||||||||||
| By: | /s/ McKeel O Hagerty | ||||||||||
| McKeel O Hagerty | |||||||||||
| Chief Executive Officer | |||||||||||
| (Principle Executive Officer) | |||||||||||
Date: August 8, 2023 | |||||||||||
| By: | /s/ Patrick McClymont | ||||||||||
| Patrick McClymont | |||||||||||
| Chief Financial Officer | |||||||||||
| (Principal Financial Officer) | |||||||||||