Hagerty (HGTY) risk factors, 2025 10-K

Risks Related to Our Business

1. 01We have experienced significant Member growth over the past several years, and our continued business and revenue growth are dependent on our ability to continuously attract and retain Members and we cannot be sure we will be successful in these efforts, or that Member retention levels will not materially decline
2. 02A large percentage of our products and services are distributed through a few relationships and the loss of business provided by any one of them could have an adverse effect on us
3. 03We may not be able to prevent, monitor, or detect fraudulent activity, including transactions with insurance policies or payments of claims as well as transactions through our marketplace business
4. 04We rely on the expertise of our Chief Executive Officer and other key employees. If we are unable to attract, retain, or motivate key personnel, our business may be severely impacted
5. 05Our unique culture has contributed to our success, and if we are not able to maintain this culture in the future, our business could be harmed
6. 06Our future growth and profitability may be affected by new entrants into the market or current competitors developing preferred offerings
7. 07Future acquisitions or investments contain inherent strategic, execution, and compliance risks that could disrupt our business and harm our financial condition
8. 08Some of our membership and marketplace products and services are newer and have limited operating history, which makes it difficult to forecast operating results. We may not show profitability from these newer products as quickly as we anticipate or at all
9. 09We are subject to payment processing risks which could adversely affect our results of operations
10. 10Rising inflation and interest rates may affect demand for our products and services
11. 11Rising interest rates increase our cost of borrowing and could adversely affect our results of operations
12. 12Our technology platforms may not function properly, which might subject us to loss of business and revenue, breach of contractual obligations, and place us out of compliance with state and federal rules and regulations
13. 13Our future success depends on our ability to continue to develop and implement technology to transform or replace legacy technology, and to maintain the security and confidentiality of our legacy technology, each in compliance with evolving privacy and cybersecurity laws
14. 14We may not be able to prevent or address the misappropriation of Hagerty-owned data
15. 15Our results of operations depend, in part, on the performance of our investment portfolio. We seek to hold a portfolio of investments in accordance with our investment policy, which is routinely reviewed by our Investment Committee
16. 16Changes to the law and social attitudes towards petroleum-powered vehicles may make ownership of collector vehicles less desirable, leading to a decline in demand for our products and services
17. 17We may require additional capital in the future, which may not be available or may only be available on unfavorable terms, and we may encounter difficulty in obtaining funds to meet our commitments
18. 18Our estimates of market opportunity and forecasts of market growth may prove to be inaccurate, and even if the market in which we compete achieves the forecasted growth, our business could fail to grow at a similar rate, if at all

Risks Related to Our Insurance Products and Services

1. 19The insurance products that we develop and sell for our underwriting carriers are subject to regulatory approval, and we may incur significant expenses in connection with the development and filing of new products before revenue is generated from new products
2. 20We operate in a highly regulated environment for our insurance product distribution and face risks associated with compliance requirements, some of which cause us to make judgments that could have an adverse effect on us
3. 21Unexpected increases in the frequency or severity of claims may adversely affect our operations and financial condition
4. 22Severe weather events, catastrophes, and unnatural events are unpredictable, and we may experience losses or disruptions from these events
5. 23We may not be able to adapt effectively and timely to any changes in law
6. 24Our MGAs do business with a limited number of key underwriting carrier partners in our insurance markets, and we may not be able to find suitable replacements for our existing carriers
7. 25A regulatory environment that requires rate increases to be approved and that can dictate underwriting and pricing and mandate participation in loss sharing arrangements may adversely affect our financial condition and results of operations
8. 26The underwriting companies that we work with, and our insurance agencies, are periodically subject to examinations and audits by insurance regulators, which could result in adverse findings, enforcement actions, require payments of fines or penalties, and necessitate remedial actions
9. 27The insurance business, including the market for property and casualty insurance, is historically cyclical in nature, and there may be periods with excess underwriting capacity and unfavorable premium rates, which could adversely affect our business
10. 28The reinsurance that Hagerty Re purchases to protect against catastrophic and large losses may be unavailable at current coverage terms, limits, or pricing
11. 29If the risks within the insurance programs that we offer are not priced and underwritten accurately with competitive, yet profitable, rates, our business and financial condition could be adversely affected
12. 30Reinsurance subjects Hagerty Re to counterparty risk if reinsurers fail to pay or timely pay claims due to insolvency or otherwise fail to honor their obligations
13. 31Unexpected changes in the interpretation of coverage or provisions, including loss limitations and exclusions, in the insurance policies we sell and service could have a material adverse effect on our financial condition and operations
14. 32Hagerty Re's actual ultimate loss liability could potentially be greater than our loss and loss adjustment expense reserves, which could have a material adverse effect on our financial condition and results of operations
15. 33Our expansion into different insurance products and jurisdictions may subject us to additional costs and expenses, and our plans might not be as profitable as projected
16. 34Our reliance on technology and intellectual property from third parties for pricing and underwriting insurance policies, handling claims, and maximizing automation, could cause an adverse impact on our business and operations if these third parties become unavailable or provide us with inaccurate information
17. 35Our failure to accurately and timely pay claims on our insurance programs could have an adverse impact on our own business, financial condition and prospects
18. 36A downgrade in the financial strength rating of the carriers on our insurance programs may adversely affect our ability to conduct business as currently conducted
19. 37Hagerty Re is subject to regulatory requirements to maintain its license in Bermuda as a Class 3A insurer

Risks Related to Our Marketplace Business

1. 38Our growth strategy involves the development and expansion of our marketplace offerings, and if we are unable to realize the anticipated benefits from their growth and integration with our other businesses, our business, financial condition and results of operations could be materially and adversely affected
2. 39Competition in the global collector car sales market and the variability of the value, demand and availability of quality collector cars for sale may adversely impact the business, results of operations, and financial condition of our marketplace business
3. 40We could be exposed to losses in the event of title, authenticity or other claims related to damage or theft
4. 41The limited operating history of BAC may not represent BAC's future operating results, as minimal loan losses on the BAC loan portfolio to date may not be indicative of future loan loss experience and our ability to realize proceeds from the sale of collateral for BAC loans may be delayed or limited
5. 42Changes to tax laws may affect the volume of collector vehicle inventory available for our marketplace business, and increase our compliance risks

Legal, Regulatory and Political Risks

1. 43Complex legal, regulatory, and contractual requirements regarding data privacy and cybersecurity may impact how we interact with our insurance customers and how we market to future Members, and could have an adverse effect on our business, financial condition and operations
2. 44Our intellectual property rights are extremely valuable and if they are not properly protected, our products, services, and brand could be adversely impacted

Risks Related to Ownership of Our Securities

1. 45Our stock may be diluted by future issuances of additional Hagerty, Inc. Class A Common Stock ("Class A Common Stock") in connection with our incentive plans, acquisitions or otherwise; future sales of such shares in the public market or the expectations that such sales may occur could lower our stock price
2. 46Substantial blocks of our total outstanding shares may be sold into the market. If there are substantial sales of shares of our Class A Common Stock, the price of our Class A Common Stock could decline
3. 47We qualify as, and have elected to be treated as, a "controlled company" within the meaning of the NYSE listing standards and, as a result, our stockholders may not have certain corporate governance protections that are available to stockholders of companies that are not controlled companies
4. 48The dual class structure of our common stock may adversely affect the trading market for our Class A Common Stock
5. 49The dual class structure of our common stock will have the effect of concentrating voting power with two stockholders, which will limit your ability to influence the outcome of important transactions, including a change in control
6. 50Our three largest stockholders hold significant voting power, have the right to designate directors to our Board and are entitled to preemptive rights with respect to the issuance of new Class A Common Stock, which provides these stockholders with significant power to influence our business and affairs
7. 51Because we have no current plans to pay cash dividends on our Class A Common Stock for the foreseeable future, you may not receive any return on investment unless you sell your Class A Common Stock for a price greater than that which you paid for it
8. 52Anti-takeover provisions in our organizational documents and applicable insurance laws could delay or prevent a change of control
9. 53There is no public market for our Series A Convertible Preferred Stock
10. 54The price of our securities may be volatile or may decline regardless of our operating performance and you could lose all or part of your investment as a result
11. 55These broad market and industry fluctuations may adversely affect the market price of our Class A Common Stock regardless of our actual operating performance
12. 56If securities or industry analysts do not publish research or publish inaccurate or unfavorable research reports about our business, or if they downgrade our stock or our sector, our stock price and trading volume could decline

Risks Related to Tax

1. 57We are a holding company, and our only material asset is our interest in THG, and we will therefore be dependent upon distributions made by THG to pay taxes, make payments under the TRA and pay other expenses
2. 58Hagerty, Inc. is required to pay Legacy Unit Holders and any other party to the TRA for certain tax benefits we may receive and the amounts payable may be substantial
3. 59To the extent we receive tax distributions in excess of our actual tax liabilities and retain such excess cash, HHC and Markel may benefit from such accumulated cash balances if they exercise their exchange rights