Our continued involvement in event acquisitions and partnerships, and execution of events, may give rise to increased brand and reputational risk. If we are unable to successfully onboard associated employees, contractors, and volunteers and incorporate them into our culture, we may fail to maintain continuity of experience across our event offerings. We may experience an increase in financial liability and potential litigation due to a heightened exposure inherent in the operation of public events.

We may be subject to cyberattacks, and our reliance on third party providers for technology and service mean our operations could be disrupted due to the lack of resiliency in the operations of other companies, or a breach in their obligations to us, and could impair the operability of our website and other technology-based operations.

Cyberattacks, denial-of-service attacks, ransomware attacks, business email compromises, computer malware, viruses, social engineering (including phishing) and other malicious internet-based activity are prevalent in our industry and such attacks continue to increase. We also utilize third-party providers to host, transmit, or otherwise process electronic data in connection with our business activities. We or our vendors and business partners may experience attacks, unavailable systems, unauthorized access, or disclosure due to employee or other theft or misuse, denial-of-service attacks, sophisticated attacks by nation-state and nation-state supported actors, and advanced persistent threat intrusions. Despite our efforts to ensure the security, privacy, integrity, confidentiality, availability, and authenticity of information technology networks and systems, processing and information, we may not be able to anticipate, or to implement, preventive and remedial measures effective against all data security and privacy threats. The recovery systems, security protocols, network protection mechanisms, and other security measures that we have integrated into our systems, networks, and physical facilities, may not be adequate to prevent or detect service interruption, system failure, data loss or theft, or other material adverse consequences. No security solution, strategy, or measures can address all possible security threats or block all methods of penetrating a network or otherwise perpetrating a security incident. The risk of unauthorized circumvention of our security measures, or those of our third-party providers, clients, and partners has been heightened by advances in computer and software capabilities and the increasing sophistication of hackers who employ complex techniques, including without limitation, the theft or misuse of personal and financial information, counterfeiting, "phishing" or social engineering incidents, ransomware, extortion, publicly announcing security breaches, account takeover attacks, denial or degradation of service attacks, malware, fraudulent payment, and identity theft.

In 2021, we experienced an unauthorized access into our online insurance quote ~~system~~feature whereby attackers used personal information already in their possession to obtain additional consumer data, including driver’s license ~~numbers, through Hagerty's Instant Quote feature. The issue has been remediated.~~numbers. While none of our systems or databases were compromised or significantly disrupted as part of this incident and the costs associated with the incident and our remediation efforts were not material, we could be subject to ~~litigation. Regulators may also explore~~litigation or regulatory enforcement ~~actions, including fines or other penalties,~~actions. In 2023, the Company accrued an estimated liability related to this ~~event.~~incident based on the facts known by management and developed through its assessment of the current status of ongoing dialog with the regulatory investigators. The amount of the estimated liability is not material to our Consolidated Financial Statements, though any actual fines, penalties, or settlements may differ from our estimates and the amounts accrued.

Any regulatory enforcement actions, or future cyberattacks on our systems, could cause irreparable harm to our reputation and lead our current and prospective Members away from using our services. Further, we may be required to expend significant financial and operational resources in response to a security breach, including repairing system damage, increasing security protection costs by deploying additional personnel and protection technologies, and defending against and resolving legal and regulatory claims, all of which could be costly and divert resources and the attention of our management and key personnel away from our business operations.

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Some of our membership products 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.

The success of new product and service introductions depends on a number of factors, including timely and successful development, market acceptance, our ability to manage the risks associated with new product production ramp-up issues, the availability of application software for new products, the effective management of purchase commitments and vendor relationships in line with anticipated product demand, the availability of products in appropriate quantities and at expected costs to meet anticipated demand, and the risk that new products and services may have quality or other defects or deficiencies. Accordingly, we cannot determine in advance the ultimate effect of new product and service introductions and transitions. If our new products or services are not well received, or if we are unable to introduce them in a cost-effective manner, we may not be able to realize a profit on those products and services and may, in fact, recognize losses for some time. This could have an adverse effect on our financial condition and results of operations.

We are subject to payment processing risks which could adversely affect our results of operations.

We currently rely on a limited number of payment processing services, including the processing of payments from credit cards and debit cards, and our business would be disrupted if any of the vendors become unwilling or unable to provide these services to us, and we are unable to find a suitable replacement on a timely basis. If we or our processing vendors fail to maintain adequate systems for the authorization and processing of credit card transactions, it could cause one or more of the major credit card companies to disallow our continued use of their payment products. In addition, if these systems fail to work properly and, as a result, we do not charge our customers’ credit cards on a timely basis, or at all, our business, financial condition and results of operations could be harmed.

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The payment methods that we offer also subject us to potential fraud and theft by criminals, who are becoming increasingly more sophisticated, seeking to obtain unauthorized access to, or exploit weaknesses that may exist in the payment systems. There are potential legal, contractual, and regulatory risks if we are not able to properly process payments. If we are unable to comply with applicable rules or requirements for the payment methods that we accept, or if payment-related data is compromised due to an incident or a breach, we may be liable for significant costs incurred by payment card issuing banks and other third parties, subject to fines and higher transaction fees, subject to potential litigation or enforcement action, or our ability to accept or facilitate certain types of payments may be impaired.

In addition, our customers could lose confidence in certain payment types, which may result in a shift to other payment types or potential changes to our payment systems that may result in higher costs. If we fail to adequately control fraudulent credit card transactions, we could face civil liability, diminished public perception of our security measures, and significantly higher credit card-related costs, each of which could harm our business, financial condition and results of operations.

Rising inflation and interest rates may affect demand for our products and services.

Global economic conditions, including increases in inflation and interest rates, have resulted in uncertainty in consumer discretionary spending, employment ~~decreases~~rate fluctuations and overall volatility in the financial markets. These unfavorable economic conditions have ~~lead,~~led, and in the future may lead, consumers to reduce their spending on collectible cars and related services, which in turn could lead to a decrease in the demand for our products and services. Our sensitivity to economic cycles and any related fluctuation in consumer demand may have a material adverse effect on our business, results of operations, and financial condition.

Rising interest rates increase our cost of borrowing and could adversely affect our results of operations.

The Federal Reserve Board significantly increased the federal funds rate in ~~2022~~2023 and while it has indicated that ~~further~~rates are expected to decrease in 2024, there is no certainty how significant, if any, such rate ~~increases may be announced in the short-term to combat rising inflation in the United States. Such~~cuts will be. A sustained elevated interest rate ~~increase~~environment will have a corresponding impact to our costs of borrowing and may have an adverse impact on our ability to raise funds through the offering of our securities or through the issuance of debt due to higher debt capital costs, diminished credit availability, and less favorable equity markets. Any significant additional federal fund rate increases may have a material adverse effect on our business, financial condition, and results of ~~operations, and financial condition.~~operations.

As we continue to grow operations in different geographic locations, additional risk related to foreign currencies may have an impact on revenue and our results of operations.

We have foreign operations, and in some instances, collect from customers in foreign currencies. The exchange rates we use to consolidate our foreign entities may be less favorable to us than the actual exchange rates used to convert the funds into U.S. dollars. These foreign exchange risks could have a material negative impact on our financial condition and results of operations.

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Our 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.

We utilize numerous technology platforms throughout our business for various functions, including to gather Member data in order to determine whether or not to write and how to price our insurance products, to process many of our claims, to issue and service our membership products, and to provide valuation services. We use proprietary artificial intelligence algorithms in ~~minimal~~certain circumstances within our underwriting processes for efficiency. Our technology platforms are expensive and complex. The continuous development, maintenance, and operation of our technology platforms may entail unforeseen difficulties, including material performance problems or undetected defects or errors. We may encounter technical obstacles, and it is possible that we may discover additional problems that prevent our technology from operating properly. If our platforms do not function reliably, we may incorrectly select our Members, bill our Members, price insurance products, or incorrectly pay or deny insurance claims made by our Members. These errors could result in inadequate insurance premiums paid relative to claims made, resulting in increased financial losses. These errors could also cause Member dissatisfaction with us, which could cause Members to cancel or fail to renew their insurance policies with us or make it less likely that prospective Members obtain new insurance policies from us. Additionally, technology platform errors may lead to unintentional bias and discrimination in the underwriting process, which could subject us to legal or regulatory liability and harm our brand and reputation. Any of these eventualities could result in a material adverse effect on our business, financial condition and results of operations.

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Our future success depends on the ability to continue to develop and implement technology to transform or replace legacy technology, and to maintain the security and confidentiality of this ~~technology.~~technology in compliance with evolving privacy laws.

Our future success depends on our ability to continue to develop, implement, and maintain the security and confidentiality of our proprietary ~~technology.~~technology in compliance with evolving privacy laws. Changes to existing laws, their interpretation or implementation, or the introduction of new laws could impede our use of this technology or require that we disclose our proprietary technology to our competitors, which could negatively impact our competitive position and result in a material adverse effect on our business, financial condition and results of operations.

We rely on internet and mobile technologies and applications to market our products and services.Any future legal or regulatory requirements impacting these applications or that restricts our ability to collect or use personal data may impact how we interact with our Members and prospective Members, and could potentially have an adverse effect on our business, financial condition and operations.

We rely in part on internet and mobile applications to execute our business strategy. We are subject to domestic and international laws and regulations governing our activity and transactions both offline and online through the internet and mobile applications, including (i) how personal data can be collected, used, shared, transferred, stored, or otherwise processed ("Privacy Laws"), (ii) cybersecurity and data security obligations, and (iii) protections relating to our marketing and advertising activities (together with Privacy Laws, "Internet Laws"). Existing and future Internet Laws may impede our use of the internet to interact with current and future Members and to effectively market our products and services. In ~~most jurisdictions,~~particular, an increasing number of Privacy Laws regulate our ability to use personal data for targeted or cross-context behavioral advertising, as well as give individuals the ability to opt out of such advertising.

It is possible that (i) the Internet Laws or general business laws and regulations may be interpreted and applied in a manner that is inconsistent from one jurisdiction to another and may conflict with other rules or our practices; (ii) as new Internet Laws and consumer expectations are adopted, our compliance obligations may increase; (iii) government regulatory authorities ~~have the power to~~may interpret and amend ~~laws~~their Internet Laws and ~~regulations applicable to the processing of data. Such authorities~~ may require us to incur substantial costs ~~in order~~ to comply, ~~with such laws~~ and regulations. Regulatory statutes are broad in scope and subject to differing interpretation. In some areas of our business, we act on the basis of our own or the industry’s interpretations of applicable laws or regulations, which may conflict from jurisdiction to jurisdiction. In the event those interpretations eventually prove different from the interpretations of regulatory authorities, we may be penalized or precluded from carrying on our ~~previous activities. Our errors~~current activities; (iv) we may be subject to individual or class action claims by plaintiffs using both new and ~~omissions~~pre-existing Internet Laws based on new technologies, some of which are part of our marketing efforts, and; (v) our practices have not historically complied, do not currently comply, or will not fully comply in the future with all Internet Laws.

Any failure, or perceived failure, by us to comply with any Internet Laws could result in: (i) damage to our reputation, including consumer trust, (ii) a loss in business potentially leading to lower revenue and Member growth; (iii) proceedings or actions against us by governmental entities or private litigants including, for example, the Data Security Incident referenced in Note 24 — Commitments and Contingencies in Item 8 of Part II of this Annual Report; (iv) significant additional expense and time in defending regulatory proceedings or legal actions; (v) imposition of monetary liability; (vi) disgorgement of personal data and any algorithms trained on, or products or services derived from, such personal data; (vii) regulatory proceedings or legal actions distracting management; (viii) increased cost of doing business; (ix) decreased use of our mobile applications or websites by current and future Members; (x) contractual liability to indemnify and hold harmless third parties from the costs or consequences of non-compliance with the Internet Laws. In addition, our insurance coverage ~~covering certain security and privacy~~relating to any damages ~~and claim~~or expenses may not be sufficient to compensate for ~~all~~the liabilities we may incur. Any legal or regulatory requirements that restrict how we interact with our Members and future Members, or our actual or perceived failure to comply with Internet Laws, could have a material adverse effect on our business, financial condition and results of operations.

We may not be able to prevent or address the misappropriation of Hagerty-owned data.

From time to time, third parties may misappropriate our data through website scraping, bots, or other means and aggregate this data on their websites with data from other companies. In addition, copycat websites or mobile apps may misappropriate data and attempt to imitate our brand or the functionality of our website or our mobile app. If we become aware of such websites or mobile apps, we intend to employ technological or legal measures in an attempt to halt their operations. However, we may be unable to detect all such websites or mobile apps in a timely manner and, even if we could, technological and legal measures may be insufficient to halt their operations.

In some cases, particularly in the case of websites operating outside of the U.S., our available remedies may not be adequate to protect us against the effect of the operation of such websites or mobile apps. Regardless of whether we can successfully enforce our rights against the operators of these websites or mobile apps, any measures that we may take could require us to expend significant financial or other resources, which could harm our business, financial condition or results of operations. In addition, to the extent that such activity creates confusion among consumers or advertisers, our brand and business could be harmed.

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Changes in social attitudes may make ownership of collector vehicles less desirable, leading to a ~~drop~~decline in demand for our products and services.

Changing consumer preferences and social attitude toward options such as electric vehicles and/or autonomous driving could have a material impact on our business. The traditional business model of car sales is starting to be complemented by a range of diverse, on-demand mobility solutions, especially in dense urban environments that proactively discourage private-car use. This shift, along with a significant rise in the annual growth of car sharing members and autonomous and electric vehicles in the markets we currently conduct business, could have a trickle-down effect to the collector car space and create a drop in demand for our products and services, which could have a material adverse effect on our business, financial condition and results of operations.

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An inadequate strategy to address and respond to issues of diversity, equity, and inclusion could leave us insufficiently prepared for significant cultural shifts affecting our marketplace and may create a negative brand image, leading to the alienation of our employees and clients.

Companies must achieve diversity if they want to acquire and retain talent, build employee engagement, and improve business performance. Diversity, equity, and inclusion have been shown to drive higher innovation, enhanced job performance, less employee turnover, and greater profits. If there is not a focus on developing a cohesive strategy to create a sense of belonging with clear and impactful diversity, equity, and inclusion initiatives, we could potentially put ourselves in a position where our brand and/or sales are impacted as a result of a failure to create a successful strategy.

Performance of our investment portfolio is subject to a variety of investments risks that may adversely affect our financial results.

Our 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 and routinely reviewed by our Investment Committee.

The significant majority of our investment portfolio is invested in cash and cash equivalents and fixed maturity securities. This portfolio mix may change over time if we elect to diversify our holdings into other asset classes. In recent years, interest rates have been at or near historic lows, however, throughout ~~2022,~~2023, interest rates have steadily risen. Should the recent rate increases cease or decline, including as a result of steps taken by the federal government to slow inflation, such as the passage of the Inflation Reduction Act of 2022, a low interest rate environment would continue to place pressure on our net investment income, particularly as it relates to these securities and short-term investments, which, in turn, may adversely affect our operating results. Recent and future increases in interest rates could cause the values of our fixed income securities portfolios to decline, with the magnitude of the decline depending on the duration of securities included in our portfolio and the amount by which interest rates increase. Some fixed income securities have call or prepayment options, which create possible reinvestment risk in declining rate environments. Other fixed income securities, such as mortgage-backed and asset-backed securities, carry prepayment risk or, in a rising interest rate environment, may not prepay as quickly as expected.

Risks for all types of securities are managed through the application of our investment policy, which establishes investment parameters that include, but are not limited to, maximum percentages of investment in certain types of securities and minimum levels of credit quality. We cannot be certain that our investment objectives will be achieved, and results may vary substantially over time. In addition, although we seek to employ investment strategies that are not correlated with our insurance and reinsurance exposures, losses in our investment portfolio may occur at the same time as underwriting losses and, therefore, exacerbate the adverse effect of the losses on us.

We may require additional capital in the future, which may not be available or may only be available on unfavorable terms. We may also encounter difficulty in obtaining funds to meet our commitments.

We are exposed to ~~the~~ credit risk, or liquidity risk, through our banking partners. If we were to experience operating losses and are not able to generate additional liquidity through a capital raise or other cash infusion, we may need to secure additional sources of funds, which may or may not be available. Additionally, a failure to generate additional liquidity could negatively impact our ability to operate our business.

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To the extent that cash flows generated by our operations are insufficient to fund future operating requirements, or that our capital position is adversely impacted by a decline in the fair value of our investment portfolio, losses from catastrophic events or otherwise, we may need to raise additional funds. We also may be required to liquidate fixed maturity securities, which may result in realized investment losses. Any further sources of capital, including capacity needed for letters of credit, if available at all, may be on terms that are unfavorable to us. Our access to additional sources of capital will depend on a variety of factors, such as market conditions, the general availability of credit, the availability of credit to the industries in which we operate, our financial condition, results of operations, credit ratings and credit capacity, as well as pending litigation or regulatory investigations. Our ability to borrow under our revolving credit ~~facility~~facilities and letter of credit facilities is contingent on our compliance with the covenants and other requirements under those facilities. Similarly, our access to capital may be impaired if regulatory authorities or rating agencies take negative actions against us. Additionally, to reduce the risk of a bank failure, we engage only with high-quality counterparties with high credit ratings. Our inability to obtain adequate capital when needed could have a negative impact on our ability to invest in, or take advantage of opportunities to expand our businesses, such as possible acquisitions or the creation of new ventures, and inhibit our ability to refinance our existing indebtedness on terms acceptable to us. Any of these effects could have a material adverse effect on our financial condition and results of operations.

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Our day-to-day operations create transactions, events, and conditions that may give rise to the need for accounting estimates to be recognized or disclosed in the financial statements. There is a risk that these estimates are incorrect, which could ~~create~~have a material ~~misstatement~~adverse effect on our results of operations and/or financial condition for accounting purposes.

The preparation of our financial statements requires us to make estimates and assumptions affecting the reported amounts of our assets, liabilities, revenues and expenses. If these estimates or assumptions are incorrect, it could have a material adverse effect on our results of operations and/or financial condition. We have identified several accounting estimates as being "critical" to the fair presentation of our financial condition and results of operations because they involve major aspects of our business and require us to make judgments about matters that are inherently uncertain. Refer to "Critical Accounting Estimates" within Item 7 of Part II of this Annual Report ~~on Form 10-K~~ for additional information.

The COVID-19 pandemic has caused, and may continue to cause, a disruption to our operations and may impact our business, key metrics, and results of operations in numerous ways that remain unpredictable.

COVID-19 has had, and may continue to have, material effects on our operations. Factors that give rise, or may give rise, to those effects include, or may include, the following, as well as others that we cannot predict.

•~~Executive, legislative or regulatory mandates or judicial decisions which are unknown to us that may require increased levels of insurance or may extend the scope of insurance coverages.~~

•~~Regulatory actions such as:~~

•prohibiting or postponing the cancellation or non-renewal of insurance policies in accordance with policy terms or requiring renewals on current terms, conditions, previous rates, or at a rate decrease;

•~~requiring the coverage of losses irrespective of policy terms or exclusions;~~

•~~requiring or encouraging premium refunds;~~

•~~granting extended grace periods for premium payments; and~~

•~~extending due dates to pay past due premiums.~~

•Disruptions, delays, and increased costs and risks related to working remotely, having limited or no access to our facilities, workplace re-entry, employee safety concerns, and reductions or interruptions of critical or essential services. Those effects may include, among others:

•exposure to additional and increased risks related to internal controls, data security, and information privacy, for both us and for our suppliers, vendors, and other third-parties with whom we do business;

•illnesses suffered by key employees, or a significant percentage of our workforce or the workforce of our agents, brokers, suppliers, or outsourcing providers, which could prevent or delay the performance of critical business functions;

•~~illnesses suffered by employees who have continued to work, or who have or will return to work, in our facilities may expose us to increased risk of employment related claims and litigation;~~

•reduced demand for our insurance and non-insurance products, events, and services due to reduced global economic activity, which could adversely impact our revenues and cash flows; adverse impacts on our revenues and cash flows due to premium refunds or delayed receipt of premium payments or delayed payment of reinsurance recoverables; and

•~~expedited claims payments in response to regulatory requirements.~~

•~~Increases in the number of potential fraudulent claims made under insurance policies due to the economic hardships experienced by companies and individuals as a result of COVID-19.~~

•~~Increases in local, state, and federal taxes to pay for costs incurred by governmental expenditures associated with COVID-19.~~

One or more of these factors resulting from the COVID-19 pandemic, and others we cannot anticipate, could have material adverse effects on our financial condition and results of operations; and the extent of these effects will depend, at least in part, on the scope, severity, duration, and subsequent recurrences of the pandemic. In addition, we may take steps to mitigate potential risks or liabilities that may arise from COVID-19 and related developments, and some of those steps may have a material adverse effect on our financial condition and results of operations. Even if an unfavorable outcome does not materialize, these factors and actions we may take in response may have a material adverse impact on our reputation and result in substantial expense and disruption.

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~~In addition, it is important to note and emphasize, COVID-19 also may have the effect of triggering or intensifying many of the risks described elsewhere in the Risk Factors.~~

Risks Related to Our Insurance Products and Services

The 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.

The insurance products that we develop and sell require regulatory approvals in each respective jurisdiction. This product development and filing cycle can take time. The product development and filing process can be challenging and expensive. The process can also be delayed, given the unknown timelines in which insurance departments might take to review and approve filings. Questions and objections from insurance departments can also delay the product launch date. Moreover, there could be an inability to obtain regulatory approval on a product filing.

The nature of the product development and filing cycles may cause us to experience delays between the time we incur expenses associated with research and development and the time we generate revenues, if any, from the new products. If we spend a significant amount of resources on research and development, and our efforts do not lead to the successful introduction or improvement of products that are competitive in the marketplace, this could materially and adversely affect our business and results of operations.

Additionally, there could be a change in the anticipated Member demand for a product we are developing before the product is released. Member demand could decrease after the development cycle has begun. A decrease in Member demand for a new or improved product could cause us to fall short of our sales targets, and we might not be able to avoid the substantial costs associated with the product’s development or improvement. If we are unable to complete product development and filing cycles successfully, in a timely manner, that meets Member demand for new or improved products, and generate revenues from these future products, the growth of our business could be harmed.

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As ~~a managing general agency/underwriter,~~an MGA, we 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 judgment calls that could have an adverse effect on us.

The insurance industry in which we operate is subject to extensive regulation. We are subject to regulation and supervision both federally and in each applicable local state or provincial jurisdiction. In general, these regulations are designed to protect Members, policyholders, and insureds and to protect the integrity of the financial markets, rather than to protect stockholders or creditors. Our ability to conduct business in these jurisdictions depends on our compliance with the rules and regulations promulgated by federal and state or provincial regulatory bodies and other regulatory authorities. Maintaining compliance with rules and regulations is often complex and challenging, and it sometimes requires us to make determinations that require judgments regarding uncertain issues that ultimately may be resolved differently than we have determined, which could have an adverse effect on us.

We may not be able to adapt effectively and timely to any changes in law.

A failure to comply with regulatory requirements, or changes in regulatory requirements or interpretations, can result in actions by regulators, potentially leading to penalties and enforcement actions, and in extreme cases, revocation of an authority to do business in one or more jurisdictions. This could result in adverse publicity and potential damage to our brand and reputation in the marketplace. In addition, we could face lawsuits by Members and other parties for alleged violations of these laws and regulations.

State insurance laws grant supervisory agencies, including state insurance departments, broad administrative authority. Canadian, Bermuda, and U.K. insurance regulators and, in the U.S., state insurance regulators and the National Association of Insurance Commissioners continually review existing laws and regulations, some of which affect our business. These supervisory agencies regulate many aspects of the insurance business, including the licensing of insurance brokers and agents and other insurance intermediaries; the handling of third-party funds held in a fiduciary capacity; and trade practices, such as marketing, advertising, and compensation arrangements entered into by insurance brokers and agents. Individuals who engage in the solicitation, negotiation, or sale of insurance, or provide certain other insurance services, generally are required to be licensed individually. Insurance laws and regulations govern whether licensees may share commissions with unlicensed entities and individuals. We believe that generally any payments we make to third parties are in compliance with applicable laws. However, should any regulatory agency take a contrary position and prevail, we will be required to change the manner in which we pay fees to individuals and entities for placing insurance policies through us.

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Regulatory review or the issuance of interpretations of existing laws and regulations may result in the enactment of new laws and regulations that could adversely affect our operations or our ability to conduct business profitably. It is difficult to predict whether, and to what degree, changes resulting from new laws and regulations will affect the industry or our business.

We 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.

We work with a limited number of carriers in the U.S., Canada, and the U.K. for our personal lines insurance products, and there is a risk that if one or more of the carriers becomes impaired or terminates its relationship with us that our profitability may be adversely affected. If a carrier partner relationship terminates or there is loss of strategic support or alignment, we may be unable to transition to a new relationship without disruption, increased cost, lost profits, or lost market share, or a combination of the foregoing.

We derive a large portion of our revenue from commissions and quota share reinsurance on the sale of personal lines insurance products in the U.S. primarily through our exclusive relationship with Essentia, in Canada through our exclusive relationship with Aviva's Canadian subsidiary, Elite Insurance Company, and in the U.K., ~~primarily~~ through our relationship with ~~Markel~~Aviva. If these carriers were to experience liquidity problems or other financial (such as rating agency downgrades) or operational difficulties, we could encounter business disruptions as a result, and our results of operations may suffer.

Our ~~contract~~contracts with each of Markel, and ~~our contract with~~ State Farm, regarding the ~~upcoming~~ State Farm Classic+ program, contain provisions that allow those partners to terminate our agreements with them at any time upon the occurrence of a change of control. One of the events triggering a change of control would occur if the Hagerty family ceases to own shares representing a majority of our voting power. Accordingly, if we experience a change of control, including as a result of the Hagerty ~~family’s~~family's sale of a sufficient number of shares to result in their controlling less than a majority of their voting power, we could lose our agreements with one or both of these partners, which could have a material adverse effect on our business, operations and financial results.

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A 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.

Political events and positions can affect the insurance market on occasion, including efforts to reduce rates to a level that may prevent us from being profitable or may not allow us to reach our goals. If the loss ratio for the insurance programs that we administer is favorable to that of the industry, regulatory authorities could impose rate restrictions, require payment of premium refunds to policyholders, or could challenge or delay efforts to raise rates. Rate changes may be required for us to achieve our goals related to profitability and return on equity. If we were to experience challenges in obtaining approvals for rate changes, that could limit us in reaching our targeted goals and profitability. For example, with COVID-19, state regulators and legislators were under increased political pressure to provide financial relief to policyholders, and several states did require premium relief/refunds, depending on loss severity and frequency, while other states highly recommended that premium relief/refunds be given to policyholders. Additionally, certain states have enacted laws that require an insurer conducting business in that state to participate in assigned risk plans, reinsurance facilities, and joint underwriting associations. Certain states also require insurers to offer coverage to all consumers, often restricting an insurer’s ability to charge the price it might otherwise charge. Laws and regulations of many states also limit an insurer’s ability to withdraw from one or more lines of insurance there, except pursuant to a plan that is approved by the state insurance department. This limitation can prolong and provide additional challenges for strategic business plans related to conversions, transfers, and book rolls. Although we are not an insurer, our business, financial condition or results of operations could be adversely affected by any of these factors, as they are applicable to the insurance programs we administer.

The 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.

In the U.S., our insurance agencies operate as an MGA for Essentia and ~~will perform~~also operate in ~~a Managing General Underwriter~~this capacity for State Farm Classic Insurance Company in order to service the ~~upcoming~~ State Farm Classic+ program. Essentia is currently domiciled in Missouri and has a classic auto insurance program ~~and a classic boat insurance program~~ in all 50 United States, plus the District of Columbia. We operate as the MGA for the ~~programs~~Essentia program in all 51 jurisdictions. We also operate a similar auto insurance program in Canada (underwritten by Elite Insurance Company) and in the U.K. ~~(primarily underwritten~~(underwritten by ~~Markel International Insurance Company Limited, a wholly owned subsidiary of~~ ~~Markel~~Aviva).

Additionally, under its license as a Class 3A insurer, Hagerty Re must meet and maintain the relevant solvency margin, and liquidity and other ratios applicable under Bermuda law. Hagerty Re's license limits it to accepting only business produced through our ~~managing general agency/underwriters~~MGA that is underwritten by carriers rated A- or better by A.M. Best or similar rating agency.

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Insurance regulators periodically subject the underwriting companies that we work with to doconduct audits and examinations to assess compliance with applicable laws and regulations, financial condition, and the conduct of regulated activities. These examinations and audits may be conducted during a jurisdiction’s normal review cycle, or because of a targeted investigation. Our insurance agencies can also be subject to regulatory audits and exams. A formal examination or audit provides insurance regulators with a significant opportunity to review and scrutinize the underwriting companies we work with, the insurance programs we administer, and our operations.

As a result of an examination or an audit, an insurance regulator could determine that an underwriting company’s financial condition or capital resources are less than satisfactory. An insurance regulator could also determine that there are other aspects of either the underwriting company or our operations that are less than satisfactory, or that either us or the underwriting company that we work with are in violation of applicable laws or regulations. These types of examination or audit findings could lead an insurance regulator to require either us or the underwriting company that we work with to take one or more remedial actions or otherwise subject us to regulatory scrutiny, impose fines and penalties, or take further actions.

We cannot predict with precision the likelihood, nature, or extent, including the associated costs, of any necessary remedial actions, or any financial impact that could result from an examination or audit. Any regulatory or enforcement action or any regulatory order imposing remedial, injunctive, or other corrective action against us or any of the underwriting companies we work with resulting from these examinations or audits could have a material adverse effect on our business, reputation, financial condition and results of operations.

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We rely on external data and our digital platform to collect and evaluate information that we utilize in producing, pricing, and underwriting insurance policies (in accordance with the rates, rules, and forms filed with regulators, where required), managing claims and customer support, and improving business processes. Any future legal or regulatory requirements that might restrict our ability to collect or utilize this data could potentially have an adverse effect on our business, financial condition, and prospects.

We use our digital platform to collect data points that we evaluate in pricing and underwriting insurance policies, managing claims and customer support, and improving business processes. Our business model is dependent on our ability to collect vehicle ~~usage~~ and ~~driving~~personal data. If federal, state, or international regulators were to determine that the type of data we collect, the process we use for collecting this data, or how we use it, unfairly discriminates against a protected class of people or otherwise violates applicable data Privacy Laws and regulations, regulators could ~~move to~~ prohibit or restrict our collection or use of this data. In addition, if legislation were to restrict our ability to collect ~~driving~~personal data, it could impair our capacity to underwrite insurance cost effectively, negatively impacting our revenue and earnings.

The 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.

We operate primarily in North America and the seasonality of driving in that region has caused a large portion of our revenue to be generated in the spring and summer months of each year. This in turn impacts operational cash flows and could produce volatility in our earnings. Fluctuations in our operating results could be due to a number of other factors, many of which may be outside of our control, including competition, frequency and severity of catastrophic events, levels of capacity, adverse litigation trends, regulatory constraints, general economic conditions, and agreement on underwriting appetite with our carrier partners, and other factors. The supply of insurance is related to prevailing prices, the level of insured losses, and the level of capital available to the industry that, in turn, may fluctuate in response to changes in rates of return on investments being earned in the insurance industry. As a result, the auto insurance business historically has been a cyclical industry characterized by periods of intense price competition due to excessive underwriting capacity, as well as periods when shortages of capacity increased premium levels. We operate in a specialty sector of the auto insurance market and need to be mindful of these and other factors which could impact our operations. Demand for insurance depends on numerous factors, including the frequency and severity of catastrophic events, levels of capacity, the introduction of new capital providers, and general economic conditions. All of these factors fluctuate and may contribute to price declines generally in the insurance industry. We cannot predict with certainty whether market conditions affecting the auto insurance market and the insurance market in general will improve, remain constant, or deteriorate. Negative market conditions may impair our ability to underwrite insurance at rates we consider appropriate and commensurate relative to the risk assumed. Additionally, negative market conditions could result in a decline in policies sold, an increase in the frequency or severity of claims and premium defaults, and an uptick in the frequency of fraud, including the falsification of claims. If we cannot underwrite insurance at appropriate rates, our ability to transact business will be materially and adversely affected. Any of these factors could lead to an adverse effect on our business, financial condition and results of operations.

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The reinsurance that Hagerty Re purchases to protect against catastrophic and large losses may be unavailable at current coverage terms, limits, or pricing.

The business that Hagerty Re reinsures is exposed to catastrophic events that are inherently unpredictable and may cause capacity in the reinsurance market to become scarcer leading to rate increases or changes in coverage terms, or a combination of both. This in turn may cause Hagerty Re to retain more risk, be unable to accept risk and grow, or require greater capital investment that may not be available, in each case resulting in lower profits, as well as a material effect on our financial condition and results of operations.

Unexpected increases in the frequency or severity of claims may adversely affect our operations and financial condition.

We may experience increases in claim frequency on occasion. Short-term trends with an increase in claim frequency may not continue over the longer term. Any changes in claim frequency might be derived from changes in miles driven, driving behaviors, macroeconomics, weather-related events, or other factors. A significant increase in claim frequency could have an adverse effect on our financial condition and results of operations.

We could also experience increases in the severity of claims. Changes in bodily injury claim severity can be impacted by inflation in medical costs, litigation trends and precedents, regulation, and the overall safety of automobile travel. Changes in auto property damage claim severity can be driven by inflation in the cost to repair vehicles, including parts and labor rates, the mix of vehicles that are declared total losses, the availability of parts to repair vehicles, and an increase in value for collector vehicles. Unanticipated increases in claim severity can arise from events that are inherently difficult to predict. Although we pursue various loss management initiatives to mitigate future increases in claim severity, these initiatives may not successfully identify or reduce the effect of future increases in claim severity. A significant increase in claim severity could have an adverse effect on our financial condition and results of operations.

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Severe weather events, catastrophes, and unnatural events are unpredictable, and we may experience losses or disruptions from these events.

Our business may be exposed to catastrophic events such as tornadoes, tsunamis, tropical storms (including hurricanes), earthquakes, windstorms, hailstorms, severe thunderstorms, wildfires and other fires, as well as non-natural events such as explosions, riots, pandemics, terrorism, or war, which could cause operating results to vary significantly from one period to the next. We may incur catastrophe losses in our business in excess of: ~~(1)~~(i) those experienced in prior years, ~~(2)~~(ii) the average expected level used in pricing, ~~(3)~~(iii) current reinsurance coverage limits, or ~~(4)~~(iv) loss estimates from external tornado, hail, hurricane, and earthquake models at various levels of probability. In addition, we are subject to Member insurance claims arising from weather events such as winter storms, rain, hail, and high winds.

~~The incidence and severity of weather conditions are largely unpredictable.~~ There is generally an increase in the frequency and severity of Member insurance claims when severe weather conditions occur. The incidence and severity of severe weather conditions and catastrophes are inherently unpredictable and the occurrence of one catastrophe does not render the possibility of another catastrophe greater or lower. The extent of losses from a catastrophe is a function of both the total amount of insured exposure in the area affected by the event and the severity of the event. In particular, severe weather and other catastrophes could significantly increase our costs due to a surge in claims following such events and/or legal and regulatory changes in response to catastrophes that may impair our ability to limit our liability under our policies. Severe weather conditions and catastrophes can cause greater losses, which can cause our liquidity and financial condition to deteriorate. ~~In addition, reinsurance placed in the market also carries some counterparty credit risk.~~

Climate change may affect the occurrence of certain natural events, such as an increase in the frequency or severity of wind and thunderstorm events, eruptions of volcanoes, and tornado or hailstorm events due to increased convection in the atmosphere; more frequent wildfires and subsequent landslides in certain geographies; higher incidence of deluge flooding and the potential for an increase in severity of the hurricane events due to higher sea surface temperatures. Additionally, climate change may cause an impact on the demand, price and availability of insurance, as well as the value of our investment portfolio. Due to significant variability associated with future changing climate conditions, we are unable to predict the impact climate change will have on our business.

If the risks within the insurance programs that we offer on behalf of our underwriting carriers are not priced and underwritten accurately with competitive, yet profitable, rates, our business and financial condition could be adversely affected.

As an MGA, ~~for~~ ~~Essentia~~, we operate under delegated underwriting authority in the U.S. In general, the premiums for the insurance policies in our program are established at the time a policy is issued and, therefore, before all of the underlying costs are known. The accuracy of the pricing is subject to our ability to adequately assess risks, estimate losses, and comply with insurance laws and regulations. Like others in the industry, we rely on estimates and assumptions in setting the premium rates. We also utilize the data that we gather through our interactions with Members.

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Establishing adequate premium rates is necessary, together with investment income, if any, to generate sufficient revenue to offset losses, loss adjustment expenses, and other costs. If we do not accurately assess the risks that are underwritten, adequate premiums may not be charged to cover losses and expenses, which would adversely affect our results of operations and our profitability. Moreover, if we determine that the prices are too low, insurance regulations may prevent non-renewing insurance contracts, non-renewing Members, or raising prices. Alternatively, we could set the premiums too high, which could reduce our competitiveness and lead to lower revenues, which could have a material adverse effect on our business, financial condition and results of operations.

Pricing involves the acquisition and analysis of historical loss data and the projection of future trends, loss costs, expenses, and inflation trends, among other factors, for each of the products in multiple risk levels and many different markets. In order to accurately price the policies, we must, among other factors:

•collect and properly and accurately analyze a substantial volume of data from our Members;

•develop, test, and apply appropriate actuarial projections and rating formulas;

•review and evaluate competitive product offerings and pricing dynamics;

•closely monitor and timely recognize changes in trends;

•project both frequency and severity of our Members’ losses with reasonable accuracy; and

•in many jurisdictions, obtain regulatory approval for the resulting rates.

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We may not have success in implementing a pricing methodology accurately in accordance with our assumptions. Our ability to accurately price policies is subject to a number of risks and uncertainties, including, but not limited to:

•insufficient, inaccurate, or unreliable data;

•incorrect or incomplete analysis of available data;

•uncertainties generally inherent in estimates and assumptions;

•our inability to implement appropriate actuarial projections and rating formulas or other pricing methodologies;

•incorrect or incomplete analysis of the competitive environment;

•regulatory constraints on rate increases or coverage limitations;

•our inability to accurately estimate investment yields and the duration of our liability for loss and loss adjustment expenses; and

•unanticipated litigation, court decisions, and legislative or regulatory actions or changes to the existing regulatory landscape.

To address the potential errors or desired or required changes in our current business model, we may be compelled to increase the amount allocated to cover policy claims, or to address other economic factors resulting in an increase in future premium rates, or to additionally or alternatively adopt different underwriting standards. Any of these changes may result in a decline in new business and renewals and, as a result, have a material adverse effect on our business, financial condition, and results of ~~operations and financial condition.~~operations.

Reinsurance subjects Hagerty Re to counterparty risk where reinsurers fail to pay or timely pay claims due to insolvency or otherwise fail to honor their obligations.

Hagerty Re is legally obligated to pay claims under the reinsurance agreements where Hagerty Re has assumed risk, regardless of whether Hagerty Re is able to secure its own reinsurance for ceded reinsurance coverages. If one or more of Hagerty Re's reinsurance providers gobecome insolvent or default in payment when reimbursement is sought by Hagerty Re, this may have a material effect on Hagerty Re's financial condition and results of operations ~~and financial condition~~ as well as its ability to accept risk. Such an event may cause Hagerty Re to require capital investments that may not be available.

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Unexpected 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.

We have specifically negotiated loss limitations and exclusions in the policies we sell and service, and these limitations and exclusions may not be enforceable in the manner we intend. As industry practices and legal, judicial, social, and other conditions change, unexpected and unintended issues related to claims and coverage may emerge. While these limitations and exclusions help us assess and mitigate our loss exposure, it is possible that a court or regulatory authority could nullify or void a limitation or exclusion, or legislation could be enacted modifying or barring the use of such limitations or exclusions. These types of governmental actions could result in higher than anticipated losses and loss adjustment expenses, which could have a material adverse effect on our financial condition or results of operations. In addition, court decisions have eliminated long standing coverage limitations by a narrow reading of policy exclusions. Under the insurance laws, the insurer typically has the burden of proving an exclusion applies and any ambiguities in the terms of a loss limitation or exclusion provision are typically construed against the insurer. These types of cases and the issues they raise may adversely affect our business by either broadening coverage beyond our underwriting intent or by increasing the frequency or severity of claims. In some instances, these changes may not become apparent until sometime after we have issued insurance contracts that are affected by the changes. As a result, the full extent of liability under the insurance contract may not be known for many years after a contract is issued. There could also be additional exposure with claims for other household vehicles that are not covered under an insurance policy issued by us, such as for someone’s regular use vehicle. It is possible that our underwriting companies that we write business through may share in liability with these types of claims onin certain instances.

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Hagerty 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.

Significant periods of time often elapse between the occurrence of an insured or reinsured loss, the reporting of the loss to us, and our payment of that loss. To recognize liabilities for unpaid losses, we establish reserves as balance sheet liabilities representing estimates of amounts needed to pay reported and unreported losses and the related loss adjustment expenses. The process of estimating loss reserves is a difficult and complex exercise involving many variables and subjective judgments. As part of the reserving process, we review historical data and consider the impact of such factors as:

•trends in claim frequency and severity;

•changes in operations;

•emerging economic and social trends;

•trends in insurance rates;

•changing mix of insured risks;

•inflation or deflation; and

•changes in the regulatory and litigation environments.

This process assumes that past experience, adjusted for the effects of current developments and anticipated trends, is an appropriate basis for predicting future events. There is no precise method, however, for evaluating the impact of any specific factor on the adequacy of reserves, and actual results will differ from original estimates. As part of the reserving process, we regularly review our loss reserves and make adjustments as necessary. Future increases in loss reserves for our underwriting operations will, and for our program’s services operations may, result in additional charges to earnings, which may be material. Our estimates could prove to be inadequate, and this underestimation could have a material adverse effect on our financial condition.

Hagerty Re is required to maintain its reserves and financial condition in accordance with Bermuda law and the Bermuda Solvency Capital Requirement ("BSCR") administered by the Bermuda Monetary Authority ("BMA"). Inadequate current reserves may adversely affect earnings in future periods, as well as the ability to continue to accept risk, and Hagerty Re's ability to maintain its financial condition and meet solvency requirements ~~with possible loss of~~necessary to maintain its license in Bermuda. Under Bermuda law, Hagerty Re is prohibited from declaring or making payment of a dividend if it fails to meet its minimum solvency margin or minimum liquidity ratio. Prior approval from the BMA is also required if Hagerty Re's proposed dividend payments would exceed 25% of its prior year-end total statutory capital and surplus.

Our 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.

We believe that the growth of our business and revenue depends in part upon our ability to: (i) retain our existing Members and add new Members in our current, as well as new, geographic markets; (ii) add new insurance programs and products; and (iii) add to and continue to grow our offering of non-insurance automotive enthusiast-related products.

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Expanding into new geographic markets and introducing new products takes time, requires us to navigate and comply with extensive regulations, and may happen more slowly than we expect or than it has occurred in the past. If we were to lose Members, our value might diminish. A future loss of Members could lead to higher loss ratios, loss ratios that cease to decline, or declining revenue — any of which would adversely impact our profitability. If we are unable to remain competitive on Member experience, pricing, or insurance coverage options, our ability to grow and retain our business may also be adversely affected. In addition, we might not be able to accurately predict risk segmentation of new and renewal Members or potential Members, which could also reduce our profitability.

While a key part of our business strategy is to retain and add Members in our existing markets, we may also seek to expand our operations into new markets and new products. In doing so, we may incur losses or otherwise not be successful in entering new markets or introducing new products. Our expansion into new markets and new products may place us in unfamiliar competitive environments and involve various risks, including competition, government regulation, the need to invest significant resources, and the possibility that returns on such investments might not be achieved for several years, or at all.

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We may not be successful in these efforts, and even if we are successful, these efforts may increase or create the following risks, among others:

•we might not be able to effectively use search engines, social media platforms, content-based online advertising, and other online sources for generating traffic to our website;

•potential Members in a particular marketplace could generally not meet the underwriting guidelines;

•demand for new products or expansion into new markets may not meet our expectations;

•new products and expansion into new markets may increase or change our risk exposures, and the data and models we use to manage those exposures may not be as effective as those we use in existing markets or with existing products;

•models underlying automated underwriting and pricing decisions may not be effective;

•efforts to develop new products or expand into new markets or to change commission terms may create or increase distribution channel conflicts;

•in connection with the conversion of existing policyholders to a new product, some policyholders’ pricing may increase while the pricing for other policyholders may decrease, the net impact of which could negatively impact retention and profit margins;

•changes to our business processes or workflow, including the use of new technologies, may give rise to execution risk;

•our products might not be competitive in terms of Member experience, pricing, or insurance coverage options;

•there could be barriers in obtaining the governmental and regulatory approvals, licenses, or other authorizations necessary for expansion into new markets or in relation to our products (such as line, form, underwriting, and rating approvals), or such approvals could contain conditions that impose restrictions on our operations (such as limitations on growth);

•our digital platform might experience disruptions;

•we could suffer reputational harm to our brand resulting from negative publicity, whether accurate or inaccurate;

•we may not be able to offer new and competitive products, to provide effective updates to our existing products, or to keep pace with technological improvements in our industry;

•we might not be able to maintain traditional retail agent relationships;

•Members may have difficulty installing, updating, or otherwise accessing our website on mobile devices or web browsers as a result of actions by us or third parties;

•Members may be unable or unwilling to adopt or embrace new technology;

•technical or other problems may frustrate the Member experience, particularly if those problems prevent us from generating quotes or paying claims in a fast and reliable manner;

•we might not be able to address Member concerns regarding the content, data privacy, and security generally or for our digital platform specifically;

•we may not identify or enter joint ventures with strategic partners or we may enter into joint ventures that do not produce the desired results; or

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•there may be challenges in, and with the cost of, complying with various laws and regulatory standards, including with respect to the insurance business and insurance distribution, capital and outsourcing requirements, data privacy, tax, and regulatory restrictions.

These efforts may require additional investments by us, some of which could be significant. These costs may also include hiring additional personnel, as well as engaging third-party service providers, and other research and development costs. If we grow our geographic footprint or product offering at a slower rate than expected, or if we are unable to overcome the challenges listed above, our business, financial condition and results of operations could be materially and adversely affected.

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Our 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.

We use data, technology, and intellectual property licensed from unaffiliated third parties in certain components of our products, including insurance industry proprietary information that we license, and we may license additional third-party technology and intellectual property in the future. Any errors or defects in this third-party technology and intellectual property could result in errors that could harm our brand and business. In addition, licensed technology and intellectual property may not continue to be available on commercially reasonable terms, or at all. Also, should a company refuse to license its proprietary information to us on the same terms that it offers to our competitors, we could be placed at a significant competitive disadvantage. If any technology and intellectual property we license from others becomes unavailable, we may not be able to find replacement technologies at a reasonable cost or at all, which could materially harm our business and results of operations.

Denial of claims or the failure to accurately and timely pay claims on behalf of our underwriting carriers could have an adverse impact on our own business, financial condition and prospects.

We must accurately and timely evaluate and pay claims that are made under the insurance policies in our program. There are many factors that could affect our ability to pay claims accurately and timely, including the efficiency of our claims processing, the training and experience of our claim’s adjusters, and our ability to develop or select and implement appropriate procedures and systems to support our claims functions.

The risks included in our insurance programs are typically those of an antique, classic, or ~~collectable~~collectible vehicle nature. Adjusting claims on these types of risks often requires specialized knowledge of collector vehicles, so our claims staff is trained to have ~~collectable~~collectible vehicle expertise to provide an efficient, yet comprehensive, claims experience. The manner in how we handle claims is a differentiating factor for our business, and an inability to be able to continue to offer a timely and comprehensive claims experience could undermine our brand and position in the insurance marketplace. Additionally, any failure to pay claims accurately or timely could also lead to regulatory and administrative actions or material litigation, loss or reduction in reinsurance recoverable, or result in damage to our reputation, any one of which could materially and adversely affect our business, financial condition, results of operations and prospects.

If our claims adjusters are unable to effectively process our volume of claims in the manner that our Members expect, our ability to grow our business while maintaining high levels of Member satisfaction could be compromised, which in turn, could adversely affect our reputation, financial condition and results of operations.

A downward change in ~~Essentia~~’sEssentia’s financial strength rating may adversely affect our ability to conduct business as currently conducted.

Essentia’s ability to underwrite business is dependent upon its financial strength rating as evaluated by independent rating agencies. In the event that Essentia is downgraded (or if Evanston is downgraded), we believe our ability to write business through Essentia would be adversely affected. In the normal course of business, we evaluate Essentia’s capital needs to support the amount of business it writes in order to maintain its financial strength ratings.

Hagerty Re is subject to regulatory requirements to maintain its license in Bermuda as a Class 3A insurer.

Hagerty Re is registered as a Class 3A insurer under the Bermuda Insurance Act. The BMA issues regulations and other guidance prescribing requirements that ~~Bermuda- licensed~~Bermuda-licensed insurance companies, like Hagerty Re, are required to comply with. For example, the BMA requires Bermuda-licensed insurers to maintain a minimum level of capital and surplus, comply with restrictions on dividends, make financial statement filings, prepare a financial condition report, maintain a head office in Bermuda from which insurance business is directed and managed and allow for the performance of certain periodic examinations of financial condition. These statutes and regulations may restrict Hagerty Re's ability to write reinsurance ~~policies,~~contracts, distribute funds and pursue its investment strategy.

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Under its license as a Class 3A insurer, Hagerty Re must meet and maintain the relevant solvency margin, and liquidity and other ratios applicable under Bermuda law. For example, Hagerty Re's license limits it to reinsuring business that is underwritten by carriers rated A- or better by A.M. Best or similar rating agencies. Additional operational requirements for Hagerty Re in Bermuda include:

•~~complying with economic substance requirements which include~~ maintaining a principal office in Bermuda and having a certain number of Bermuda-domiciled managers involved in overseeing operations;

•obtaining prior approval for changes in ~~ownership /~~ ownership/transfers of shares;

•having restrictions on dividends;

•complying with Bermuda know-your-customer and anti-bribery type laws;

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•having audited financial statements and being subject to BMA examination; and

•carrying out operations in accordance with its filed and approved business plan.

Failure to operate properly in accordance with Bermuda law could cause Hagerty Re's license to be restricted or revoked, ~~along with~~result in possible supervisory control of Hagerty Re and its assets and termination of reinsurance agreements with its ceding ~~carriers.~~insurers. Additionally, Bermuda insurance statutes, regulations and the policies of the BMA are less restrictive than U.S. insurance statutes and regulations. Insurance supervisors in the U.S. may review Hagerty Re's activities and determine that Hagerty Re is subject to a U.S. jurisdiction’s licensing requirements or determine that our U.S.-domiciled underwriting partners cannot transact business with us. Any such determination would have an adverse impact on Hagerty Re's operations and financial condition.

Risks Related to Hagerty Marketplace

If we are unable to ~~successfully integrate the operations of~~ ~~Broad Arrow~~ ~~into Hagerty, or~~ realize the anticipated synergies and cost savings from the Broad Arrow acquisition and integration, or if we are unable to retain the key employees, the business, financial condition and results of operations of ~~the~~our Marketplace business ~~vertical~~ could be materially and adversely affected.

In ~~January~~ 2022, Hagerty purchased ~~approximately~~ ~~40%~~ ~~of the outstanding capital stock of~~ ~~Broad Arrow~~ ~~for a purchase price of~~ ~~$15.3 million~~.~~In August 2022, Hagerty acquired the remaining~~ ~~60%~~ ~~outstanding equity interest of~~ Broad Arrow and its consolidated subsidiaries ~~(the "Acquired Business") for~~ ~~$73.3 million~~ in an all-stock transaction. Broad Arrow offers services for buying, selling and financing collector cars, primarily through auctions and facilitating private sales, and enables the Company to further leverage respective product offerings under Marketplace.

~~The~~ ~~Broad Arrow~~It is possible that the synergies and cost savings anticipated by the acquisition ~~involves the integration of two businesses that previously operated independently,~~ and ~~the unique business cultures of the two businesses may prove to be incompatible. The anticipated~~ integration of Broad Arrow into Hagerty ~~into the operations of Hagerty will be a significant undertaking and will require significant attention from our management team. It is possible that the integration process~~ could take longer than anticipated and could result in the loss of valuable employees, Member and supplier relationships, the disruption of each party’s ongoing businesses, processes, and systems, or inconsistencies in standards, controls, procedures, practices, policies, and compensation arrangements, any of which could adversely affect our ability to achieve the anticipated benefits of the Broad Arrow acquisition. Our results of operations could also be adversely affected by any issues attributable to the Acquired Business’s operations that arise or are based on events or actions that occurred prior to the closing of the Broad Arrow acquisition.

Broad Arrow is largely a service business in which the ability of its employees to develop and maintain relationships with potential sellers and buyers of collector cars is essential to its success. ~~Moreover, its~~Broad Arrow's business, ~~is unique, making it important to retain key specialists~~financial condition, and results of operations are highly dependent on a small number of team members who generate substantially all of Broad Arrow's ~~management. Accordingly,~~revenues. Therefore, our ability to ~~integrate Broad Arrow's business~~attract, motivate, and/or retain those key employees is ~~highly dependent upon~~critical, and the loss of any key revenue generator could have a disproportionate impact on our ~~success~~Marketplace business. Our compensation arrangements, such as our sales incentive plan and equity award programs, may not always be successful in attracting new employees and motivating and retaining ~~such qualified personnel.~~key employees.

~~The large volume of competition~~Competition in the global collector car sales market and the variability of the ~~amount,~~value, demand and availability of quality of collector cars ~~consigned~~ for sale may adversely impact the business, results of operations, and financial condition of our Marketplace ~~business vertical.~~business.

We compete with other collector car auction houses, dealers, brokers and classifieds platforms to obtain valuable consignments to offer for sale either at auction or through private sale. The level of competition is intense and can adversely impact our ability to obtain valuable consignments for sale, as well as the commission margins achieved on such consignments.

The ~~amount~~values and availability of quality of collector cars ~~consigned~~ for sale is influenced by a number of factors not within our control. The supply and demand for collector cars, isand therefore the values of collector cars, are influenced not only by overall economic conditions, but also by changing trends in the collector car market as to which vehicles and provenance are most sought after and by the collecting preferences of individual collectors. Marketplace businesses generate revenues through fees and commissions generally based on a percentage of the final sale price, which can fluctuate based on the market dynamics. Further, the fees and commissions we charge may be lowered based on both the level of compensation and the market dynamics between supply and demand for collector cars. These conditions and trends are difficult to predict and may adversely impact our ability to obtain and sell consigned property ~~potentially causing~~and our ability to maintain our fee structure, which may cause significant variability in our results of operations from period to period.

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Many major consignments, and specifically large single-owner collection sale consignments, ~~become available only as a result of the~~are often driven by personal circumstances of the owner, including but not limited to death, divorce, and/or other financial circumstances, all of which are unpredictable and may cause significant variability in our results of operations from period to period.

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We could be exposed to losses in the event of title, ~~warranty~~authenticity or other claims related to damage or theft.

The assessment of collector cars offered for auction or private sale can involve potential claims regarding title, authenticity of chassis and vehicle identification numbers, provenance, and condition. The vehicles we sell may be subject to statutory warranties as to title or other limited warranties that cannot be disclaimed under ~~the~~our General Conditions of Sale that are published online or in our auction sale catalogs and the terms stated in, and the laws applicable to, agreements governing private sale transactions. Our assessment of the vehicles we offer is based on scholarship and research, but necessarily requires a degree of judgment from our ~~collector~~ car ~~specialists.~~specialists and researchers. In the event of a title, authenticity or other ~~warranty~~ claim against us, we may have recourse against the consignor or seller of the property and may have the benefit of insurance, but a claim could nevertheless expose us to losses and to reputational risk.

Valuable collector cars are exhibited and stored at events and facilities around the world. Although we maintain security measures at our premises and insurance, valuable property may be subject to damage or theft. The damage or theft of valuable property despite these security measures and insurance could have a material adverse impact on our business and reputation.

If we are unable to maintain or obtain our dealer licenses, auctioneer licenses, and/or other applicable permits and licenses as required in certain jurisdictions in which we operate, or plan to operate, such licensing issues may adversely impact the business results of operation, and financial condition of our Marketplace business.

Several businesses underneath our Marketplace business operate under a dealer license, auctioneer license, and/or other permits and licenses in certain jurisdictions in which we operate as a dealer, auction house, lender, or intermediary to facilitate the auction, sale, purchase, or financing of collector cars. Our inability to maintain the necessary licenses or permits as required in those jurisdictions may adversely impact the business, results of operations, and financial condition of our Marketplace business. Also, our inability to obtain the necessary licenses or permits as required in new jurisdictions in which we plan to operate may adversely impact the growth of the business, results of operations, and financial condition.

The limited operating history of ~~Broad Arrow~~ ~~Capital ("~~BAC") may not represent ~~BAC~~’sBAC’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 ~~Broad Arrow Capital~~BAC loans may be delayed or limited.

~~The~~ BAC, our wholly owned collector car financing business, has a limited operating history and has incurred minimal losses on its loan portfolio. Accordingly, despite our ~~stringent~~conservative loan underwriting standards, our current loan loss experience may not be indicative of the future performance of the loan portfolio. In situations when there are competing claims on the collateral or mispricing of the collateral value for BAC loans and/or when a borrower and/or the collateral becomes subject to a dispute, including but not limited to bankruptcy, litigation or insolvency laws, our ability to realize proceeds from the sale of ~~its~~ collateral may be limited and/or delayed.

Changes to tax laws may affect the volume of collector vehicle inventory available for our Marketplace business, and increase our compliance risks.

Our collectors reside in various tax jurisdictions. Changes to tax laws or tax reporting obligations in any of these jurisdictions could adversely impact the ability and/or willingness of our collectors to sell or purchase collector cars. Additionally, we are subject to laws and regulations involving sales, use, and other indirect taxes which are assessed by various governmental authorities and imposed on certain transactions between us and our collectors. ~~In addition, changes~~Changes to the laws and regulations involving such sales, use, and other indirect taxes could increase the complexity of our compliance obligations. Generally, we are not responsible for these indirect tax liabilities unless we fail to collect the appropriate amount of sales, use, or other indirect ~~taxes.~~taxes or applicable tax exemption documentation. Failure to collect the correct amount of indirect tax or applicable tax exemption documentation on a transaction may expose us to claims from tax authorities.

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Legal, Regulatory and Political Risks

The legal and regulatory requirements applicable to our business are extensive. If we are not able to comply, it could have an adverse effect on us. Extensive regulation and potential further restrictive regulation could increase our operating costs and limit our growth.

We are subject to extensive laws, regulations, and supervision in the jurisdictions in which we transact business. These laws are complex and subject to change. Changes can sometimes lead to additional expenses, increased legal exposure, increased required capital and surplus, delays in implementing desired rate increases or business operations, and additional limits on our ability to grow or achieve targeted goals and profitability. Our business is highly dependent on the ability to engage on a daily basis in financial and operational activities, many of which are highly complex, including, but not limited to, insurance underwriting, claim processing, and providing products and services to businesses and consumers in a hospitable and efficient manner. These activities are subject to internal guidelines and policies, as well as legal and regulatory requirements, including, but not limited to, those related to:

•data privacy ~~regulation~~ and ~~data~~ security;

•anti-corruption and anti-bribery;

•domestic and international economic sanctions;

•restrictions on advertising and marketing;

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•restrictions on rebating and inducements related to insurance transactions;

•restrictions on sharing insurance commissions and payments of referral fees;

•restrictions related to underwriting and pricing of insurance;

•approval of policy forms and premiums;

•restrictions on the adjustment and settlement of insurance claims;

•restrictions on the sale, solicitation, and negotiation of insurance;

•rules regarding licensing, affiliations, and appointments;

•state-mandated premium rebates, refunds, or reductions as a result of potentially lower risk exposure due to ~~COVID-19 and related~~ emergency orders;

•regulation of registered securities, corporate governance and risk management; and

•periodic examinations of operations, finances, market conduct and claims practices.

While we believe that we have adopted adequate and effective risk management and compliance programs, compliance risks remain, especially as we become subject to additional rules and regulations. The requirement to oversee and monitor the increasing speed and volume of regulatory changes could hinder our ability to appropriately review, analyze, and implement processes to ensure compliance in a timely manner. Failure to comply with, or to obtain, appropriate authorizations or exemptions under any applicable laws and regulations could result in restrictions on our ability to do business or undertake activities that are regulated in one or more of the jurisdictions in which we conduct business. Any such failure could also subject us to fines, penalties, equitable relief, and changes to our business practices.

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Future regulatory changes could limit or impact our business model.

Compliance with applicable laws and regulations is time consuming and ~~personnel-and~~personnel- and systems-intensive. The current political environment, and the current high level of government intervention and regulatory reform may lead to substantial new regulations and compliance obligations. Any changes in, or the enactment of new, applicable laws and regulations may increase the complexity of the regulatory environment in which we operate, which could materially increase our direct and indirect compliance costs and other expenses of doing business and have a material adverse effect on financial condition and results of operations. Although state insurance regulators have primary responsibility for administering and enforcing insurance regulations in the U.S., such laws and regulations are further administered and enforced by a number of additional governmental authorities, each of which exercises a degree of interpretive latitude, including state securities administrators; state attorneys general, as well as federal agencies including the SEC, the Financial Industry Regulatory Authority, the Federal Reserve Board, the Federal Insurance Office, the U.S. Department of Labor, the U.S. Department of Justice, and the National Labor Relations Board. Similarly, there are governmental authorities in U.K., such as the Financial Conduct Authority; the BMA in Bermuda; and numerous federal and provincial governmental and oversight organizations in Canada. Consequently, compliance with any particular regulator’s or enforcement authority’s interpretation of a legal issue may not result in compliance with another’s interpretation of the same issue, particularly when compliance is judged in hindsight. Such regulations or enforcement actions are often responsive to current consumer and political sensitivities, which may arise after a major event. Such rules and regulations may result in rate suppression, limit our ability to manage our exposure to unprofitable or volatile risks, or lead to fines, premium refunds, or other adverse consequences.

The federal government may also regulate aspects of our business, such as the protection of consumer confidential information or the use of consumer insurance (credit) scores to underwrite and assess the risk of customers under the Fair Credit Reporting Act ("FCRA") in the U.S. Among other things, for insurance purposes, the FCRA requires that (i) there is a permissible purpose before obtaining and using a consumer report for underwriting purposes, and (ii) there is compliance with related notice and recordkeeping requirements. Failure to comply with federal requirements under the FCRA or any other applicable federal laws could subject us to regulatory fines and other sanctions. In addition, there is risk that a particular regulator’s or enforcement authority’s interpretation of a legal issue or the scope of a regulator’s authority may change over time to our detriment. There is also a risk that changes in the overall legal environment may cause us to change our views regarding the actions we need to take from a legal risk management perspective. This would necessitate changes to our practices that may adversely impact our business.

~~In some cases, these laws and regulations are designed to protect~~Legal or benefit the interests of a specific constituency rather than a range of constituencies. State insurance laws and regulations are generally intended to protect the interests of purchasers or users of insurance products, rather than our stockholders. Failure to comply with state insurance laws and regulations in the future could also have a material adverse effect on our business, financial condition and results of operations.

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~~Additionally, changes in the~~ regulatory landscape, whether it be on a state, federal, or global level, related to autonomous vehicles and regulations around petroleum-based vehicles could significantly alter our core insurance model, and we may have to make changes to our insurance program to comply with regulatory changes in this space. This would require changes to our operations, which could adversely impact our business.

Furthermore, the federal government could pass a law expanding its authority to regulate the insurance industry, expanding federal regulation over our business to our detriment. These laws and regulations may limit our ability to grow, to raise additional capital, or to improve the profitability of our business.

~~New legislation or legal~~ requirements impacting the ~~internet and the applicable~~ use of ~~mobile applications~~personal data may ~~affect~~impact how we ~~communicate~~interact with our insurance customers and how we market to future Members, and could have an adverse effect on our business, ~~model,~~ financial condition and operations.

We are subject to insurance regulatory requirements in the handling of personal data of our insurance customers and applicants in the jurisdictions in which we operate. Existing and future Privacy Laws applicable to our regulated insurance activities may impact our ability to: (i) interact with existing insureds; (ii) effectively market to future insurance customers; and, (iii) cross-sell additional products and services.

We rely on the internet and our mobile application to execute our business strategy. We are subject to general business regulations and laws, as well as federal and state regulations and laws specifically governing the internet and the use of mobile applications in particular. Existing and future lawsLaws and regulations may impede the growth of the internet or other online services and increase the cost of providing online services. These regulations and laws may involve taxes, tariffs, privacy and data security, anti-spam, content protection, electronic contracts and communications, electronic signatures and consents, consumer protection, and social media marketing. It is at times not cleargovern how existing laws governing issues such as property ownership, sales, and other taxes and consumer privacy apply to the internet and the use of mobile applications in particular, as the vast majority of these laws were adopted prior to the advent of the internet and the use of mobile applications and do not contemplate or address the unique issues raised by the internet. It is possible that general business regulations and laws, or those specifically governing the internet and the use of mobile applications in particular, may be interpreted and applied in a manner that is inconsistent from one jurisdiction to another and may conflict with other rules or our practices. For example, privacy laws govern howinsurance related personal data can be collected, used, shared, transferred, ~~across borders from the E.U./U.K. to the U.S.,~~ and ~~stored/deleted.~~stored. As new ~~privacy and cybersecurity laws,~~Privacy Laws, regulations and expectations ~~come online,~~are adopted, our compliance obligations ~~mount~~may increase, and our ability to market to and reach Members ~~can~~ may be ~~affected,~~impacted, potentially leading to lower revenue and Member growth.At We are subject to government regulatory authorities’ power to impose fines and penalties in their interpretation and enforcement of insurance regulations regarding our processing and use of personal data. Such authorities may require us to incur substantial costs in order to comply with such laws and regulations. Laws and regulations are broad in scope and subject to differing interpretations. In some areas of our business, we act on the ~~same time,~~basis of our own or the industry’s interpretations of applicable laws or regulations, which may conflict from jurisdiction to jurisdiction. In the event those interpretations prove different from the interpretations of regulatory authorities, we may be penalized or precluded from carrying on our previous activities. Additionally, we may be exposed to plaintiffs ~~are increasingly using pre-existing laws to bring~~bringing class action ~~claims based on new technologies, some of which are part of our marketing efforts.~~claims. We cannot be sure that our practices have complied, currently comply, or will comply fully with all such laws and regulations. Any failure, or perceived failure, by us to comply with any of these laws or regulations could result in damage to our reputation, a loss in business, and proceedings or actions against us by governmental entities or private litigants. Any such ~~proceeding~~proceedings or ~~action could hurt our reputation, force~~actions require us to spend significant amounts in defense of these proceedings or actions, distract our management, increase our costs of doing business, ~~and~~ decrease the use of our mobile application or website by consumers and suppliers, and may result in the imposition of monetary liability. We may also be contractually liable to indemnify and hold harmless third parties from the costs or consequences of non-compliance with any such laws or regulations. Our insurance coverage relating to any data security and privacy damages and claim expenses may not be sufficient to compensate for all liabilities we may incur.

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Our intellectual property rights are extremely valuable and if they are not properly protected, our products, services, and brand could be adversely impacted.

As we continue expanding our development of intellectual property across all channels, we may be unable to adequately protect and/or obtain appropriate rights, leading to increased risk. Competitors may target certain products or services and seek to assert competing rights. If appropriate contractual measures are not maintained, employees, contractors, and vendors may divulge trade secrets or claim ownership over our intellectual property.

New legislation or legal requirements impacting the use of petroleum-based vehicles and/or supporting autonomous vehicles could significantly challenge and impact our core insurance model and company purpose.

A significant majority of our Members currently drive gas-powered vehicles and engage in automotive enthusiast activities where they are able to drive and enjoy their vehicles. Changes in the law that create higher barriers to the use and enjoyment of their vehicles may in turn reduce the need or desire for many of our products and services, leading to lost revenue and lower profits and the inability to deliver on our purpose in an impactful manner.

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Risks ~~Relating~~Related to Ownership of Our Securities

Our stock may be diluted by future issuances of additional 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.

We may issue additional shares of Class A Common Stock in several ways:

By the Board of Directors (the "Board"). Our Amended and Restated Charter authorizes us to issue shares of our Class A Common Stock and options, rights, warrants and appreciation rights relating to our Class A Common Stock and on the terms and conditions established by our Board in its sole discretion, whether in connection with acquisitions or otherwise.

Under the 2021 Equity Incentive Plan. We have reserved 38,317,399 shares of Class A Common Stock for issuance under our 2021 Equity Incentive Plan (as defined in Note 21 — ~~Stock-Based~~Share-Based Compensation in Item 8 of Part II of this Annual ~~Report on Form 10-K)~~Report). As of December 31, ~~2022,~~2023, we have issued ~~37,071~~965,517 shares under this Plan.

Under the 2021 Employee Stock Purchase Plan. We have reserved 11,495,220 shares of Class A Common Stock for issuance under our 2021 Employee Stock Purchase Plan (as defined in Note 21 — ~~Stock-Based~~Share-Based Compensation in Item 8 of Part II of this Annual ~~Report on Form 10-K)~~Report). As of December 31, ~~2022,~~2023, we have ~~not yet~~ issued ~~any~~197,819 shares under this Plan.

Under the Contribution and Exchange Agreement. We reserved 4,724,560 shares of Class A Common Stock for exchange under our Contribution and Exchange Agreement (as defined within the Sixth Amended and Restated Limited Liability Company Agreement of The Hagerty Group, incorporated by reference within Item 6. Exhibits, in this Annual Report). As of December 31, 2023, we have exchanged 259,302 shares under the Contribution and Exchange Agreement.

The compensation committee of our Board may determine the exact number of shares to be reserved for future issuance under its equity incentive plans at its discretion. We will file one or more registration statements on Form S-8 under the Securities Act to register shares of Common Stock or securities convertible into or exchangeable for shares of Common Stock issued pursuant to our equity incentive plans. Any such Form S-8 registration statements will automatically become effective upon filing. Accordingly, shares registered under such registration statements will be available for sale in the open market.

Any stock that we issue or exchange would dilute the percentage ownership held by the investors who purchase Class A Common Stock. The market price of shares of our Class A Common Stock could decline as a result of newly issued or exchanged stock, or the perception that we might issue or exchange stock. A decline in the price of our Class A Common Stock might impede our ability to raise capital through the issuance of additional shares of Class A Common Stock or other equity securities.

Substantial 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.

The price of our Class A Common Stock could decline if there are substantial sales of our Class A Common Stock, particularly sales by our directors, executive officers, and significant stockholders, or if there is a large number of shares of our Class A Common Stock available for sale. As of March 1, ~~2023,~~2024, we have ~~83,211,595~~84,655,539 shares of our Class A Common Stock outstanding. All of the shares of Class A Common Stock sold at the completion of our Business Combination are available for sale in the public ~~market, other than shares held by purchasers who, after the Closing, hold in excess of 10% of our issued and outstanding~~ ~~Class A Common Stock~~.market. Shares held by directors, executive officers and other affiliates are subject to volume limitations under Rule 144 under the Securities Act of 1933, as amended, or the Securities Act, and various vesting agreements.

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The market price of the shares of our Class A Common Stock could decline as a result of the sale of a substantial number of our shares of Class A Common Stock in the public market or the perception in the market that the holders of a large number of such shares intend to sell their shares.

Certain warrants to purchase our Class A Common Stock are now exercisable and could become exercisable in ~~2023,~~2024, which could increase the number of shares eligible for future resale in the public market and result in dilution to our stockholders.

PIPE Warrants to purchase an aggregate of ~~12,669,300~~12,147,300 shares of Class A Common Stock became exercisable on the 30th day following the closing of the Business Combination in accordance with the terms of the warrant agreement governing those securities. In addition, Public Warrants to purchase an aggregate of 5,750,000 shares of Class A Common Stock and Underwriter Warrants to purchase an aggregate of 28,750 shares of Class A Common Stock became exercisable on April 12, 2022 in accordance with the warrant agreement covering those securities. Each such PIPE Warrant, Underwriter Warrant and Public Warrant entitles its holder to purchase one share of Class A Common Stock at an exercise price of $11.50 per share and will expire at 5:00 p.m., New York time, five years after the closing of the Business Combination or earlier upon redemption or our liquidation. In addition, the Private Placement Warrants and OTM Warrants became exercisable on December 2, 2022, subject to the achievement of ~~certian~~certain trading thresholds pursuant to the terms of the Sponsor Warrant Lock-up Agreement. ~~Refer to Note 20 — Warrant Liabilities~~ ~~in Item 8 of Part II of this Annual Report on Form 10-K for additional information.~~ To the extent warrants are exercised, additional shares of Class A Common Stock will be issued, which will result in dilution to our then existing stockholders and increase the number of shares eligible for resale in the public market. Sales of substantial numbers of such shares in the public market could depress the market price of our common stock.

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We qualify as an "emerging growth company" within the meaning of the Securities Act, and if we take advantage of certain exemptions from disclosure requirements available to emerging growth companies, it could make our securities less attractive to investors and may make it more difficult to compare our performance to the performance of other public companies.

We qualify as an "emerging growth company" as defined in Section 2(a)(19) of the Securities Act, as modified by the JOBS Act. As such, we are eligible for and intend to take advantage of certain exemptions from various reporting requirements applicable to other public companies that are not emerging growth companies for as long as we continue to be an emerging growth company, including ~~(a)~~(i) the exemption from the auditor attestation requirements with respect to internal control over financial reporting under Section 404(b) of the Sarbanes-Oxley Act of 2002, as amended ("Sarbanes-Oxley") and~~, (b)~~ (ii) the exemptions from say-on-pay, say-on-frequency and say-on-golden parachute voting requirements and ~~(c)~~(iii) reduced disclosure obligations regarding executive compensation in its periodic reports and proxy statements. We will remain an emerging growth company until the earliest of (i) the last day of the fiscal year in which the market value of Class A Common Stock that is held by non-affiliates exceeds $700 million as of June 30 of that fiscal year, (ii) the last day of the fiscal year in which we have total annual gross revenue of $1.235 billion or more during such fiscal year (as indexed for inflation), (iii) the date on which we have issued more than $1 billion in non-convertible debt in the prior three-year period or (iv) December 31, 2026. In addition, Section 107 of the JOBS Act also provides that an emerging growth company can take advantage of the exemption from complying with new or revised accounting standards provided in Section 7(a)(2)(B) of the Securities Act as long as we are an emerging growth company. An emerging growth company can therefore delay the adoption of certain accounting standards until those standards would otherwise apply to private companies. We intend to avail ourselves of such extended transition period and, therefore, we may not be subject to the same new or revised accounting standards as other public companies that are not emerging growth companies or that have opted out of using such extended transition period. Investors may find the Class A Common Stock less attractive because we will rely on these exemptions, which may result in a less active trading market for the Class A Common Stock and its price may be more volatile.

We 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.

So long as more than 50% of the voting power for the election of directors is held by an individual, a group, or another company, we will qualify as a "controlled company" under the NYSE listing requirements. As of December 31, ~~2022,~~2023, HHC controls approximately ~~67.9%~~67.7% of the voting power of our outstanding capital stock. As a result, we qualify as, and elect to be treated as, a "controlled company" under the NYSE listing standards and will not be subject to the requirements that would otherwise require us to have: (i) a majority of "independent directors," as defined under the listing standards of the NYSE; (ii) a nominating committee comprised solely of independent directors; (iii) compensation of our executive officers determined by a majority of the independent directors or a compensation committee comprised solely of independent directors; and (iv) director nominees selected, or recommended for the board of directors’ selection, either by a majority of the independent directors or a nominating committee comprised solely of independent directors.

HHC may have its interest diluted due to future equity issuances or its own actions in selling shares of common stock, in each case, which could result in a loss of the "controlled company" exemption under the NYSE listing rules. We would then be required to comply with those provisions of the NYSE listing requirements.

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The dual class structure of our common stock may adversely affect the trading market for our Class A Common ~~Stock~~.Stock.

S&P Dow Jones and FTSE Russell limit their eligibility criteria for inclusion of shares of public companies on certain indices, including the S&P 500, namely, to exclude companies with multiple classes of shares of common stock from being added to such indices. In addition, several stockholder advisory firms have announced their opposition to the use of multiple class structures. As a result, the dual class structure of our common stock may prevent the inclusion of our Class A Common Stock in such indices and may cause stockholder advisory firms to publish negative commentary about our corporate governance practices or otherwise seek to cause us to change our capital structure. Any such exclusion from indices could result in a less active trading market for our Class A Common Stock. Any actions or publications by stockholder advisory firms critical of our corporate governance practices or capital structure could also adversely affect the value of our Class A Common Stock.

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The 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.

Our Class V Common Stock has 10 votes per share and our Class A Common Stock has one vote per share. Markel and HHC, who currently hold all of the Class V Common Stock, together will hold a substantial majority of the voting power of our outstanding capital stock. Because of the 10-to-1 voting ratio between our Class V and Class A Common Stock, the holders of our Class V Common Stock will collectively control a majority of the combined voting power of common stock and, therefore, will be able to control all matters submitted to our stockholders until the earlier of ~~(1)~~(i) 15 years from the date of the consummation of the Business Combination and ~~(2)~~(ii) the date on which such share of Class V Common Stock is transferred other than pursuant to a Qualified Transfer (as defined in our Amended and Restated Charter). This concentrated control will limit or preclude your ability to influence the outcome of important corporate matters, including a change in control, for the foreseeable future.

Transfers by holders of Class V Common Stock will generally result in those shares losing their super voting rights, subject to limited exceptions, such as certain transfers effected for estate planning or charitable purposes.

Our 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.

Our three largest stockholders are HHC, Markel and State Farm. HHC controls approximately ~~67.9%~~67.7% of the voting power, Markel controls approximately 29.0% of the voting power, and State Farm controls approximately ~~1.9%~~2.1% of the voting power. Pursuant to the terms of the Investor Rights Agreement among HHC, Markel and State Farm, HHC ~~designated~~has the right to designate two directors to our Board, and Markel and State Farm have each designated one director to our Board. Pursuant to the Investor Rights Agreement, each of HHC, Markel and State Farm has agreed to vote for the election of any director nominated by HHC, Markel and State Farm in furtherance of the director designation rights described above. As a consequence, at present, the re-election in ~~2023~~2024 of the ~~four~~ directors designated by HHC, Markel and State Farm is assured.

Moreover, under the terms of the Investor Rights Agreement, each of HHC, Markel and State Farm has a contractual preemptive right. Specifically, under the terms of the Investor Rights Agreement, for so long as HHC, Markel and State Farm, as applicable, are entitled to nominate a director, each of HHC, Markel and State Farm, as applicable, subject to certain conditions, has a preemptive right to purchase up to the amount of any new securities we propose to issue or sell as is necessary to maintain the relative pro rata ownership position (determined on a fully diluted basis at the time of determination) of HHC, Markel and State Farm, as applicable. Therefore, while other holders of our stock would risk suffering a reduction in percentage ownership in connection with a new issuance of securities by us, HHC, Markel and State Farm would, through this preemptive right, have the opportunity to avoid a reduction in percentage ownership. As long as HHC, Markel and State Farm continue to hold a significant portion of our outstanding common stock, each will have the ability to influence the vote in any election of directors and over decisions that require stockholder approval.

By virtue of their voting power and Board designation rights, preemptive right to purchase additional equity securities in future stock offerings and approval rights, HHC, Markel and State Farm, collectively and separately, have the power to significantly influence our business and affairs and the outcome of matters required to be submitted to stockholders for approval, including the election of our directors, amendments to our charter, mergers, or sales of assets. Their influence over our business and affairs may not be consistent with the interests of some or all of our other stockholders and might negatively affect the market price of our common stock.

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We may redeem unexpired warrants prior to their exercise at a time that is disadvantageous to the holders of such warrants, thereby making such warrants worthless.

We have the ability to redeem outstanding warrants at any time after they become exercisable and prior to their expiration, at a price of $0.01 per warrant, provided that the last reported sales price of Class A Common Stock equals or exceeds $18.00 per share (as adjusted for stock splits, stock dividends, reorganizations, recapitalizations and the like) for any 20 trading days within a 30 trading-day period commencing once the warrants become exercisable and ending on the third trading day prior to the date on which we give proper notice of such redemption and provided certain other conditions are met. If and when the warrants become redeemable by us, we may not exercise our redemption right if the issuance of shares of Class A Common Stock upon exercise of the warrants is not exempt from registration or qualification under applicable state blue sky laws or we are unable to effect such registration or qualification. We will use our best efforts to register or qualify such shares of Class A Common Stock under the blue sky laws of the state of residence in those states in which the warrants were offered. Redemption of the outstanding warrants could force you (i) to exercise your Public Warrants and pay the exercise price therefor at a time when it may be disadvantageous for you to do so, (ii) to sell your warrants at the then-current market price when you might otherwise wish to hold your warrants or (iii) to accept the nominal redemption price which, at the time the outstanding warrants are called for redemption, is likely to be substantially less than the market value of your warrants. None of the Private Placement Warrants or Underwriter Warrants are redeemable by us so long as they are held by the Sponsor, FG SPAC Partners LP, the underwriter in ~~Aldel’s~~Aldel's initial public offering, or their permitted transferees.

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Because ~~there are~~we have no current plans to pay cash dividends on ~~the~~ 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.

We intend to retain future earnings, if any, for future operations, expansion and debt repayment and there are no current plans to pay any cash dividends on our Class A Common Stock for the foreseeable future. The declaration, amount and payment of any future dividends on shares of our Class A Common Stock will be at the sole discretion of our Board. Our Board may take into account general and economic conditions, our financial condition and results of operations, our available cash and current and anticipated cash needs, capital requirements, contractual, legal, tax, and regulatory restrictions, implications on the payment of dividends by us to our stockholders or by our subsidiaries to us and such other factors as our Board may deem relevant. In addition, our ability to pay dividends is limited by covenants of our existing and outstanding indebtedness and may be limited by covenants of any future indebtedness we incur. As a result, you may not receive any return on an investment in our Class A Common Stock unless you sell our Class A Common Stock for a price greater than that which you paid for it.

Anti-takeover provisions in our organizational documents and applicable insurance laws could delay or prevent a change of control.

Certain provisions of our Amended and Restated Charter and Amended and Restated Bylaws may have an anti-takeover effect and may delay, defer or prevent a merger, acquisition, tender offer, takeover attempt or other change of control transaction that a stockholder might consider in its best interest, including those attempts that might result in a premium over the market price for the shares held by our stockholders.

These provisions provide for, among other things:

•the ability of our Board to issue one or more series of preferred stock;

•advance notice for nominations of directors by stockholders and for stockholders to include matters to be considered at our annual meetings;

•certain limitations on convening special stockholder meetings; and

•limiting the ability of stockholders to act by written consent;

These anti-takeover provisions could make it more difficult for a third party to acquire us, even if the third party’s offer may be considered beneficial by many of our stockholders. As a result, our stockholders may be limited in their ability to obtain a premium for their shares. These provisions could also discourage proxy contests and make it more difficult for you and other stockholders to elect directors of your choosing and to cause us to take other corporate actions you desire.

Further, the insurance laws applicable to our regulated insurance subsidiaries prohibit any person from acquiring direct or indirect control of us or our regulated insurance subsidiaries, generally defined as owning or having the power to vote 10% or more of our outstanding voting stock, without the prior written approval of state regulators.

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Our Amended and Restated Charter designates the Court of Chancery of the State of Delaware as the sole and exclusive forum for certain types of actions and proceedings that may be initiated by our stockholders, which could limit our stockholders’ ability to obtain a favorable judicial forum for disputes with us or our directors, officers, employees or stockholders.

Our Amended and Restated Charter provides that, subject to limited exceptions, any (1) derivative action or proceeding brought on behalf of us under Delaware law, (2) action asserting a claim of breach of a fiduciary duty owed by any current or former director, officer, or other employee to us or our stockholders, (3) action asserting a claim against us, our directors, officers or other employees arising under the Delaware General Corporation Law ("DGCL"), our Amended and Restated Charter or our Amended and Restated Bylaws (in each case, as may be amended from time to time), (4) action asserting a claim against us or any of our directors, officers or other employees governed by the internal affairs doctrine of the State of Delaware or (5) other action asserting an "internal corporate claim," as defined in Section 115 of the DGCL, in all cases subject to the court having personal jurisdiction over all indispensable parties named as defendants shall, to the fullest extent permitted by law, be exclusively brought in the Court of Chancery of the State of Delaware or, if such court does not have subject matter jurisdiction thereof, another state or federal court located within the State of Delaware. Any person or entity purchasing or otherwise acquiring any interest in shares of our capital stock shall be deemed to have notice of and to have consented to the provisions of our Amended and Restated Charter described above. This choice of forum provision may limit a stockholder’s ability to bring a claim in a judicial forum that it finds favorable for disputes with us or our directors, officers or other employees, which may discourage such lawsuits against us and our directors, officers and employees. Alternatively, if a court were to find these provisions of our Amended and Restated Charter inapplicable to, or unenforceable in respect of, one or more of the specified types of actions or proceedings, we may incur additional costs associated with resolving such matters in other jurisdictions, which could adversely affect our business and financial condition.

There is no public market for the Series A Convertible Preferred Stock.

33There is no established public trading market for the Series A Convertible Preferred Stock, and we do not expect a market to develop. The Series A Convertible Preferred Stock is not currently listed on any securities exchange or nationally recognized trading system, including the New York Stock Exchange, and we may choose not to apply to list it in the future. Without an active market, the liquidity of the Series A Convertible Preferred Stock will be limited.

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	December 31,
	2023		2022
Operational Metrics
Policies in Force (5)	1,401,037		1,315,977
Policies in Force Retention (6)	88.7	%	88.0	%
Vehicles in Force (7)	2,378,883		2,234,461
HDC Paid Member Count (8)	815,007		752,754
Net Promoter Score (9)	82		83

(1) Total Written Premium is the total amount of insurance premium written by our MGA subsidiaries on policies that were bound by our insurance carrier partners during the period. We view Total Written Premium as an important metric as it most closely correlates with our growth in insurance commission revenue and Hagerty Re earned premium. Total Written Premium reflects the actual business volume and direct economic benefit generated from our policy acquisition efforts.

(2) Loss Ratio, expressed as a percentage, is the ratio of ~~(1)~~(i) losses and loss adjustment expenses incurred to ~~(2)~~(ii) earned premium in Hagerty Re. We view Loss Ratio as an important metric because it is a powerful benchmark for profitability. ~~The~~This benchmark allows us to evaluate our historical loss patterns including incurred losses and make necessary and appropriate adjustments. ~~Hurricane Ian, which made landfall~~In 2023, our Loss Ratio improved to 41.5% from 45.3% in the ~~third quarter of 2022, generated~~prior year due, in part, to better underwriting results. The comparison to the prior year is also favorably impacted by $10.0 million of ~~net~~catastrophe losses ~~and added 2.5%~~related to ~~the loss ratio for the year ended December 31, 2022. Additionally, we strengthened reserves for U.S. auto liability by $6.5 million for the~~Hurricane Ian incurred in 2022 ~~accident year, which added 1.6% to the loss ratio for the year ended December 31, 2022. These two items account for the significant increase~~that were not repeated in the ~~2022 loss ratio compared to 2021.~~

current year.

(3) New Business Count represents the number of new insurance policies issued by our MGA subsidiaries during the applicable period. We view New Business Count as an important metric to assess our financial performance because it is critical to achieving our growth objectives. While Hagerty benefits from strong renewal retention, new business policies more than offset those cancelled or non-renewed at expiration. Often new policies mean new relationships and an opportunity to sell additional products and services.

(4) Refer to "Non-GAAP Financial Measures" below for a description of this non-GAAP financial measure and a reconciliation to the most comparable GAAP amount.

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~~(4)~~(5) Policies in Force ("PIF") ~~are~~represents the number of current and active insurance policies as of the applicable period end date. We view PIF as an important metric to assess our financial performance because policy growth drives our revenue growth, increases brand awareness and market penetration, generates additional insight to improve the performance of our platform, and provides key data to assist us in strategic decision ~~making for the Company.~~making.

~~(5)~~(6) PIF Retention isrepresents the percentage of expiring insurance policies that are renewed on the renewal effective date, calculated on a rolling twelve months basis. We view PIF Retention as an important measurement of the number of policies retained each year, which contributes to recurring revenue streams from MGA commissions, membership fees, and earned premiums. It also contributes to maintaining our NPS, as discussed below.

~~(6)~~(7) Vehicles in Force ~~are~~represents the number of current insured vehicles as of the applicable period end date. We view Vehicles in Force as an important metric to assess our financial performance because insured vehicle growth drives our revenue growth and increases market penetration. ~~Vehicles in Force generates additional insight to support Marketplace and Hagerty Media, and provides key data to assist strategic decision making for the Company.~~

~~(7)~~(8) HDC Paid Member Count isrepresents the number of current Members who pay an annual membership subscription as of anthe applicable period end date. We ~~view~~believe that HDC Paid Member Count asis important because it helps us measure membership revenue growth and provides an opportunity to customize our value proposition and benefits to specific types of enthusiasts, both by demographic and vehicle interest.

~~(8)~~(9) Hagerty uses Net Promoter Score ("NPS") as an important measure of the overall strength of our relationship with ~~Members.~~insurance policyholders and paid HDC subscribers (who are collectively referred to herein as Members). NPS is measured twice annually through a web-based survey sent by email invitation to a random sample of existing Members, which currently excludes customers in our new Marketplace business, and is reported annually using an average of the two surveys. Often referred to as a barometer of brand loyalty and ~~Member~~ engagement, NPS is well-known in our industry as a strong indicator of growth and retention.

~~(9) Refer to "Non-GAAP Financial Measures" below for a description of this non-GAAP financial measure and a reconciliation to the most comparable GAAP amount.~~

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Components of Our Results of Operations

Revenue

Commission and fee revenue

We generate commission and ~~fee-based~~fee revenue through our MGA subsidiaries primarily from the underwriting, sale, and servicing of ~~automotive~~classic car and enthusiast vehicle insurance policies on behalf of our insurance carrier partners and reinsurance premiums from participating in the underwriting of these policies. To a lesser extent, we also generate fee-based revenue from HDC membership subscriptions, media and entertainment and Marketplace services. Our revenue model incorporates multiple touchpoints in the insurance and lifestyle value chains, built on data collection and Member experience.

~~Commission and fee revenue~~

Certain of our insurance affiliated subsidiaries act as MGAs who, among other things, write collector vehicle and marine policies on behalf of our insurance carrier partners, in exchange for commissions.partners. Commissions are earned for both new and renewed policies. ~~Additionally, policyholders pay fees directly~~In addition, under the terms of certain of our contracts with insurance carriers, we have the opportunity to ~~us related~~earn a CUC based on written or earned premium and the loss ratio results of the insurance book of business.

Historically, our MGA subsidiaries have earned, on average, a base commission of approximately 32% of written premium, as well as a CUC of up to ~~their insurance coverage.~~ 10%. In December 2023, our alliance agreement and associated agency agreement with Markel, which generated approximately 95% of our total commission revenue in 2023, was amended to increase the base commission rate to 37% and to adjust the profit share commission factors to scale from -5% to a maximum of +5% of written premium, with 80% of the expected CUC being paid monthly, beginning in 2024.

Commission and fee revenue is earned when the policy becomes effective, net of allowances for policy changes and cancellations, as our performance obligation is substantially complete when the policy is issued.

Under the terms of many of our contracts with insurance carriers, we have the opportunity to earn an annual contingent underwriting commission ("CUC"), or profit-share, based on the calendar-year performance of the insurance book of business. Our CUC agreements are based on written or earned premium and loss ratio results. Each insurance carrier partner contract and related CUC is calculated independently. Revenue from CUC is accrued throughout the year and settled annually.

Earned premium

~~Reinsurance premiums are earned~~We earn reinsurance premium revenue for the risks assumed by Hagerty Re ~~which reinsures~~from the ~~collector~~classic car and enthusiast vehicle ~~and marine risks written through~~insurance policies underwritten by our ~~affiliated MGAs in the U.S., Canada and the U.K.~~MGA subsidiaries. Hagerty Re is registered as a ~~Bermuda-domiciled,~~ Class 3A ~~reinsurer.~~reinsurer under the Bermuda Insurance Act of 1978.

Earned premium represents the earned portion of written premiums that Hagerty Re has assumed under quota share reinsurance agreements with our insurance carrier ~~partners. Earned premium is~~partners, net of premiums ceded to various reinsurers and the cost of catastrophe reinsurance coverage. Premiums assumed and ceded are recognized on a pro-rata basis over the term of the ~~policy,~~related reinsured policies, which is generally 12 months. The cost of catastrophe reinsurance coverage is recognized over the contract period in proportion to the related earned premium.

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Membership, marketplace and other revenue

We earn subscription revenue through HDC memberships, which can be bundled ~~HDC membership offerings, which include~~with our insurance policies and give subscribers access to an array of products and services, ~~such as,~~including Hagerty Drivers Club Magazine, automotive enthusiast events, our proprietary vehicle valuation tool, emergency roadside assistance, and special vehicle-related discounts. We also earn fee-based revenue from Hagerty Garage + Social memberships, which include storage services in addition to the HDC Member benefits. Revenue from the sale of HDC and storage memberships is recognized ratably over the period of the membership. The membership is treated as a single performance obligation to provide access to stated ~~Member~~member benefits over the life of the membership, which is currently one year.

Marketplace earns fee-based revenue primarily from the sale of collector cars through ~~classified listings,~~ live ~~and~~auctions, time-based online auctions, and brokered private ~~sales, as well as finance~~sales. In addition, Marketplace earns revenue from ~~term loans~~financing provided to ~~high-net-worth individuals~~qualified collectors and businesses secured by their collector cars. Fee-based revenue earned by Marketplace is recognized when the underlying sale is completed. Finance revenue is recognized when earned based on the amount of the outstanding loan, the applicable interest rate on the loan, and the length of time the loan was outstanding during the period.

~~Other~~Lastly, other revenue includes sponsorship, admission, advertising, valuation and registration income. Other revenue is recognized when the performance obligation for the related product or service is satisfied.

Operating Expenses

Our operating expenses typically consist of salaries and benefits, ceding commission, losses and loss adjustment expenses, sales expenses, general and administrative services and depreciation and amortization.

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Salaries and benefits

Salaries and benefits consist primarily of costs related to employee compensation, payroll taxes, employee benefits, and employee development costs. Employee compensation includes wages paid to employees, as well as various incentive compensation plans. Employee benefits include the costs of various employee ~~benefits~~benefit plans, including retirement, medical, dental, ~~insurance~~ and wellness plans. Costs related to employee education, training, and recruiting are included in employee development costs. Salaries and benefits ~~costs~~ are expensed as incurred except for those costs which are required to be capitalized, which are then amortized over the useful life of the asset created, ~~(generally software or media content).~~primarily software. Salaries and benefits are expected to increase over time as the business continues to grow but will likely decrease as a percent of revenue.

Ceding commission, net

Ceding commission, ~~consists of~~net represents the ~~commission~~commissions paid by Hagerty Re to insurance ~~carriers~~carrier partners for ~~our~~the risk assumed under the quota share agreements with those carriers. These commissions represent Hagerty Re's pro-rata share of the carrier's costs including (i) policy acquisition costs, ~~(primarily~~which primarily consists of the ~~commission~~commissions earned by our MGA ~~affiliates),~~subsidiaries, (ii) general and administrative ~~services~~costs, and (iii) other costs. Ceding commissions paid is recorded net of commissions received by Hagerty Re ~~pays a fixed rate ceding commission which varies by insurance carrier partner, averaging approximately 47% and 48% of net earned premium for the years ended December 31, 2022 and 2021, respectively.~~related to ceded reinsurance premiums. Ceding commission, net is recognized ~~into expense~~ratably over the ~~annual policy term. In future periods, ceding commission will change in proportion to earned premium assumed through our various quota share reinsurance agreements.~~term of the related reinsured policies, which is generally 12 months.

Losses and loss adjustment expenses

Losses and loss adjustment expenses ~~represent management's~~represents our best estimate of the ~~share of~~ losses related to the risk assumed by Hagerty ~~Re, including its share of the net cost to settle claims submitted by insureds.~~Re. Losses consist of claims paid, case reserves, and ~~IBNR,~~incurred but not reported ("IBNR") costs, which are recorded net of estimated recoveries ~~for~~from reinsurance, salvage and subrogation. Loss adjustment expenses consist of the cost associated with the investigation and ~~settling~~settlement of claims. The estimates utilized in determining the amount of losses and loss adjustment expenses recorded in a period are based on statistical analysis performed by our internal and external actuarial team. Reserves are reviewed regularly and adjusted, as necessary, to reflect ~~management’s~~our estimate of the ultimate cost of settlement. (Refer to "Critical Accounting Estimates" below.)

Sales expense

Sales expense includes costs related to the ~~sales~~sale and servicing of insurance policies, as well as costs related to our Membership and Marketplace offerings, such as broker expense, cost of sales, promotion expense, and travel and entertainment expenses. Broker expense is the compensation paid to our agent partners and national broker partners when an insurance policy is written through a broker relationship. Broker expense generally tracks with written premium growth. Cost of sales includes ~~postage, document costs,~~ payment processing fees, emergency roadside service costs, postage and other variable costs associated with the sale and servicing of a policy. Cost of sales also includes costs associated with ~~the vehicle sales~~vehicles held in our inventory and sold through Marketplace. Promotion expense includes various ~~expenses~~costs related to branding, events, advertising, marketing, and customer acquisition. ~~Promotion expense and travel and entertainment expense will likely decrease as a percent of revenue over the long-term.~~ Sales expenses, in general, are expensed as incurred and will trend with revenue growth.

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General and administrative services

General and administrative services primarily consist of expenses related to professional services, occupancy costs, and non-capitalized hardware and software. These costs are expensed as incurred. We expect this expense category to increase ~~commensurate with our expected business volume and growth expectations and be managed lower~~in dollar amount over time but will likely decrease as a ~~percent~~percentage of revenue over the next few years after we reach scale to handle incoming business from new partnerships.

Depreciation and amortization

Depreciation and amortization reflects the recognition of the cost of our investments in various assets over their useful lives. Depreciation expense relates to leasehold improvements, furniture and equipment, vehicles, hardware, and purchased software. Amortization relates to investments ~~related to recent~~associated with acquisitions, SaaS implementation, and internal software development, ~~and~~as well as investments made in and impairments of digital media ~~and~~ content assets. Depreciation and amortization are expected to increase in dollar amount over time but will likely decrease as a percent of revenue as investments in platform technology reach scale.

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Other Items

Change in fair value of warrant liabilities

Our warrants are accounted for as liabilities ~~in accordance with ASC Topic 815,~~ ~~Derivatives~~ and ~~Hedging~~ ~~("ASC 815"), and are~~ measured at fair value each reporting period, with changes in fair value recognized as non-operating income (expense). in our Consolidated Statements of Operations. In general, under the fair value accounting model, in periods when our stock price increases, the warrant liability increases, and we recognize additional ~~expense in our Consolidated Statements of Operations.~~expense. In periods when our stock price decreases, the warrant liability decreases, and we recognize additional income. (Refer to "Critical Accounting Estimates" below.)

Interest and other income (expense)

Interest and other income (expense) primarily includes interest income related to our cash balances and interest expense related to outstanding borrowings, as well as changes in the value of the liability related to our ~~Consolidated Statements~~TRA with Hagerty Holding Corp. ("HHC") and Markel. Refer to "Critical Accounting Estimates" and Note 22 — Taxation in Item 8 of ~~Operations.~~Part II of this Annual Report for additional information related to the TRA.

Income tax expense

The Hagerty Group is taxed as a pass-through ownership structure under provisions of the IRC and a similar section of state income tax law, except certain U.S. corporate subsidiaries and foreign subsidiaries. Any taxable income or loss generated by The Hagerty Group is passed through to and included in the taxable income or loss of all holders of The Hagerty Group ~~Units~~,units, including Hagerty, Inc. Hagerty, Inc. is taxed as a corporation and pays corporate federal, state, and local taxes with respect to income allocated from The Hagerty Group.

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Results of Operations

~~Year~~ for the Years Ended December 31, 2023 and 2022 ~~compared to the Year Ended December 31, 2021~~

The following table summarizes our results of operations for the years ended December 31, ~~2022~~2023 and ~~2021,~~2022, and the dollar and percentage change between the two ~~years:~~periods:


			Year Ended December 31,																								Year Ended December 31,
			2023													2023					2022						$ Change				% Change
		Year Ended December 31,
		2022		2021		$ Change		% Change

REVENUE:
REVENUE:
REVENUE:	REVENUE:	in thousands (except percentages)										in thousands (except percentages)
Commission and fee revenue	Commission and fee revenue	$	307,238	$	271,571	$	35,667	13.1	%	Commission and fee revenue	$	365,512		$	$	307,238		$		$	58,274			19.0			19.0		%
Earned premium	Earned premium	403,061		295,824		107,237		36.3	%	Earned premium	531,866			403,061		403,061			128,805			128,805			32.0				32.0	%
Membership, marketplace and other revenue	Membership, marketplace and other revenue	77,289		51,684		25,605		49.5	%	Membership, marketplace and other revenue	102,835			77,289		77,289			25,546			25,546			33.1				33.1	%
Total revenue	Total revenue	787,588		619,079		168,509		27.2	%	Total revenue	1,000,213			787,588		787,588			212,625			212,625			27.0				27.0	%
OPERATING EXPENSES:	OPERATING EXPENSES:
Salaries and benefits	Salaries and benefits	199,542		171,901		27,641		16.1	%
Ceding commission		191,150		140,983		50,167		35.6	%
Salaries and benefits
Salaries and benefits											216,896				199,542					17,354						8.7		%
Ceding commission, net										Ceding commission, net	251,805				191,150					60,655						31.7		%
Losses and loss adjustment expenses	Losses and loss adjustment expenses	182,402		122,080		60,322		49.4	%	Losses and loss adjustment expenses	220,658			182,402		182,402			38,256			38,256			21.0				21.0	%
Sales expense	Sales expense	140,781		107,483		33,298		31.0	%	Sales expense	156,378			140,781		140,781			15,597			15,597			11.1				11.1	%
General and administrative services	General and administrative services	89,068		64,558		24,510		38.0	%	General and administrative services	85,434			89,068		89,068			(3,634)			(3,634)			(4.1)				(4.1)	%
Depreciation and amortization	Depreciation and amortization	33,887		22,144		11,743		53.0	%	Depreciation and amortization	45,809			33,887		33,887			11,922			11,922			35.2				35.2	%
Restructuring, impairment and related charges, net	Restructuring, impairment and related charges, net	18,324		—		18,324		100.0	%	Restructuring, impairment and related charges, net	8,812			18,324		18,324			(9,512)			(9,512)			(51.9)				(51.9)	%
Losses and impairments related to divestitures										Losses and impairments related to divestitures	4,013				—					4,013						100.0		%
Total operating expenses	Total operating expenses	855,154		629,149		226,005		35.9	%	Total operating expenses	989,805			855,154		855,154			134,651			134,651			15.7				15.7	%
OPERATING INCOME (LOSS)	OPERATING INCOME (LOSS)	(67,566)		(10,070)		(57,496)		571.0	%	OPERATING INCOME (LOSS)	10,408			(67,566)		(67,566)			77,974			77,974			115.4				115.4	%
Change in fair value of warrant liabilities	Change in fair value of warrant liabilities	41,899		(42,540)		84,439		198.5	%	Change in fair value of warrant liabilities	11,543			41,899		41,899			(30,356)			(30,356)			(72.5)				(72.5)	%
Revaluation gain on previously held equity method investment	Revaluation gain on previously held equity method investment	34,735		—		34,735		100.0	%	Revaluation gain on previously held equity method investment	—			34,735		34,735			(34,735)			(34,735)			(100.0)				(100.0)	%
Interest and other income (expense)		2,028		(1,993)		4,021		201.8	%
INCOME (LOSS) BEFORE INCOME TAX EXPENSE		11,096		(54,603)		65,699		120.3	%
Income tax benefit (expense)		(7,017)		(6,751)		(266)		(3.9)	%
Income (loss) from equity method investment, net of tax		(1,676)		—		(1,676)		(100.0)	%
NET INCOME (LOSS)		$	2,403	$	(61,354)	$	63,757	103.9	%
Interest and other income										Interest and other income	22,821				2,028					20,793						N/M
INCOME BEFORE INCOME TAX EXPENSE										INCOME BEFORE INCOME TAX EXPENSE	44,772				11,096					33,676						N/M
Income tax expense										Income tax expense	(16,593)				(7,017)					(9,576)						(136.5)		%
Loss from equity method investment, net of tax										Loss from equity method investment, net of tax	—				(1,676)					1,676						100.0		%
NET INCOME										NET INCOME			$	28,179			$	2,403					$	25,776					N/M

We recognize the fair value of contingent consideration at the date of acquisition as part of the consideration transferred to acquire a business. The liability associated with contingent consideration is remeasured to fair value at each reporting period subsequent to the date of acquisition taking into consideration changes in financial projections and long-term growth rates, among other factors, that may impact the timing and amount of contingent consideration payments until the term of the agreement has expired or the contingency is resolved. Increases in the fair value of contingent consideration are recorded as losses in our Consolidated Statements of Operations, while decreases in fair value are recorded as gains.

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Goodwill and Intangible Assets

Description

Goodwill represents the excess of the purchase price paid over the fair value of net assets acquired in a business combination. Goodwill is not amortized, but is tested annually for impairment at ~~least annually~~the reporting unit level as of October 1 orand between annual ~~events~~tests if ~~an event occurs~~indicators of potential impairment exist. These indicators could include a decline in the Company’s stock price and market capitalization, a significant change in the outlook for the reporting unit's business, lower than expected operating results, increased competition, legal factors, or ~~circumstances change that would more likely than not reduce~~ the ~~estimated fair value~~sale or disposition of a significant portion of a reporting ~~unit below its carrying value. As of October 1, 2022, we performed a qualitative analysis in which we determined that it was not more likely than not that the fair values of our~~unit. For reporting units with goodwill, ~~were less than their~~an impairment loss is recognized for the amount by which the reporting unit's carrying ~~values.~~ value, including goodwill, exceeds its fair value.

Our intangible assets are evaluated for impairment only when there is evidence that events or changes in circumstances indicate that the carrying amount of these assets may not be recoverable.

Judgments and Uncertainties

Application of the goodwill impairment test requires judgment, including the identification of reporting units and the determination of the estimated fair value of reporting units. For reporting units with goodwill, we perform a qualitative analysis to determine whether it is more likely than not the fair value of the reporting unit is less than its carrying amount. When assessing goodwill for impairment, our decision to perform a qualitative assessment for an individual reporting unit is based on a number of factors, including the carrying value of the reporting unit's goodwill, the amount of time in

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between quantitative fair value assessments, macro-economic conditions, industry and market conditions and the operating performance of the reporting unit. If it is determined, based on qualitative factors, that it is more likely than not that the fair value of the reporting unit is less than its carrying amount, a quantitative impairment test is performed, in which we determine the estimated fair value of the reporting unit using a discounted cash flow analysis. This analysis requires significant ~~judgments,~~judgment, including the estimation of future cash flows, which is dependent on internal forecasts, available industry/market data, ~~(to~~ the ~~extent available),~~ estimation of the long-term rate of growth for the reporting unit including expectations and assumptions regarding the impact of general economic conditions on the reporting unit, the estimation of the useful life over which cash flows will occur (including terminal multiples), the determination of the respective weighted average cost of capital and market participant assumptions. Changes in these estimates and assumptions could materially affect the determination of estimated fair value and potential impairment for each reporting unit.

As of December 31, 2023, the Company has recorded goodwill of $114.2 million, including $103.6 million attributable to the Marketplace reporting unit, and intangible assets of $91.9 million, consisting principally of internally developed software, renewal rights, and trade names and trademarks.

Effect if Actual Results Differ from Estimates and Assumptions

Fair value determinations require considerable judgment and are sensitive to changes in underlying assumptions and factors. As a result, there can be no assurance that the estimates and assumptions made for purposes of the annual goodwill impairment test will prove to be an accurate prediction of the future. Examples of events or circumstances that could reasonably be expected to negatively affect the underlying key assumptions and ultimately impact the estimated fair value of our reporting units may include such items as: ~~(1)~~(i) failure to meet business plans; ~~(2)~~(ii) deterioration of the U.S. economy; ~~(3)~~(iii) an increase in interest rates; or ~~(4)~~(iv) other unanticipated events and circumstances that may decrease the projected cash flows or increase the ~~discounts~~discount rates and could potentially result in an impairment charge.

While historical performance and current expectations have generally resulted in the conclusion that our goodwill is not impaired, if our assumptions are not realized, it is possible that an impairment charge may need to be recorded in the future. There can be no assurance that the estimates and assumptions made for purposes of the annual goodwill impairment tests will prove to be an accurate prediction of the future.

Warrant Liabilities

Description

As of December 31, 2023, the Company had 5,750,000 Public Warrants outstanding, 257,500 Private Placement Warrants outstanding, 28,750 Underwriter Warrants, 1,300,000 OTM Warrants outstanding, and 12,147,300 PIPE Warrants outstanding.

The Company accounts for these warrants as liabilities as they do not meet the criteria for equity treatment. Accordingly, the warrants are measured at fair value each reporting period with the change in fair value between reporting periods recorded within "Change in fair value of warrant liabilities" in the Consolidated Statements of Operations.

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Judgments and Uncertainties

The Company's Private Placement Warrants, Underwriter Warrants, OTM Warrants, and PIPE Warrants are Level 3 within the fair value hierarchy. The Company utilizes a Monte Carlo simulation model to measure the fair value of these warrants. The Company’s Monte Carlo simulation model includes assumptions related to the expected stock price volatility, expected term, dividend yield, and risk-free interest rate.

The following table summarizes the significant inputs used in the valuation model for the private warrants as of December 31, 2023:


Inputs	Private Placement Warrants	Underwriter Warrants	OTM Warrants	PIPE Warrants
Exercise price	$11.50	$11.50	$15.00	$11.50
Common stock price	$7.80	$7.80	$7.80	$7.80
Volatility	48.6%	48.6%	46.0%	48.6%
Expected term of the warrants	2.92	2.92	7.93	2.92
Risk-free rate	4.00%	4.00%	3.90%	4.00%
Dividend yield	—%	—%	—%	—%

Effect if Actual Results Differ from Estimates and Assumptions

We believe that the significant inputs and assumptions used in the Monte Carlo simulation model are reasonable and appropriately value our Level 3 warrants. However, to the extent that the significant inputs and assumptions used in the valuation model change between reporting periods, the recorded amount of our warrant liabilities would be impacted, resulting in an increase or decrease to the liability and our earnings.

Refer to Note 16 — Fair Value Measurements, in Item 8 of Part II of this Annual Report, for additional information related to the significant inputs to the Monte Carlo simulation model.

New Accounting Standards

New accounting standards are described in Note 1 — Summary of Significant Accounting Policies and New Accounting Standards, in Item 8 of Part II of this Annual Report, ~~on Form 10-K.~~which are incorporated herein by reference.

Non-GAAP Financial Measures

Adjusted EBITDA

We define Adjusted EBITDA as consolidated ~~net~~Net income ~~(loss) (the most directly comparable GAAP measure) before~~excluding interest and other income (expense), income tax ~~(expense) benefit,~~expense, and depreciation and amortization, adjusted to exclude (i) ~~restructuring, impairment and related charges, net, (ii)~~ changes in the fair value of our warrant ~~liabilities,~~liabilities; (ii) share-based compensation expense; and when applicable, (iii) ~~stock-based compensation expense,~~restructuring, impairment and related charges, net; (iv) the net gain or loss from asset disposals; (v) losses and impairments related to divestitures; (vi) the revaluation gain on a previously held equity method ~~investment, (v) expense associated with the accelerated vesting of incentive plans, (vi) net gains and losses from asset disposals~~investment; and (vii) certain other unusual items.

We present Adjusted EBITDA because we consider it to be an important supplemental measure of ~~our~~the Company's performance and believe it is frequently used by securities analysts, investors, and other interested parties in the evaluation of companies in our industry.

~~Our management~~ Management uses Adjusted ~~EBITDA:~~

•EBITDA as a ~~measurement~~measure of the operating performance of our business on a consistent basis, as it removes the impact of items not directly resulting from our core ~~operations;~~

•~~for planning purposes, including the preparation of our internal annual operating budget and financial projections;~~

•~~to evaluate the performance and effectiveness of our operational strategies;~~

•~~to evaluate our capacity to expand our business;~~

•~~as a performance factor in measuring performance under our executive compensation plan; and~~

•~~as a predictor of core operating performance, comparisons to prior periods and competitive positioning.~~operations.

By providing this non-GAAP financial measure, together with a reconciliation to net income (loss), which is the most ~~directly~~ comparable GAAP measure, we believe we are enhancing investors’ understanding of our business and our results of operations, as well as assisting investors in evaluating how well we are executing our strategic initiatives. However, Adjusted EBITDA has limitations as an analytical tool, and should not be considered in isolation, or as an alternative to, or a substitute for net income (loss) or other financial statement data presented in our Consolidated Financial Statements as indicators of financial performance. Hagerty's definition of Adjusted EBITDA may be ~~determined or calculated differently~~different than similarly titled measures ofused by other companies in our industry, which could reduce the usefulness of this non-GAAP financial measure when comparing our performance to that of other companies.

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The following table reconciles Adjusted EBITDA to the most directly comparable GAAP measure, which is Net ~~income (loss):~~income:

Year Ended December 31,
2022 2021
in thousands
Net income (loss) $ 2,403 $ (61,354)
Interest and other (income) expense (2,028) 1,993
Income tax (benefit) expense 7,017 6,751
Depreciation and amortization 33,887 22,144
Restructuring, impairment and related charges, net 18,324 —
Change in fair value of warrant liabilities (41,899) 42,540
Stock-based compensation expense 12,129 —
Revaluation gain on previously held equity method investment (34,735) —
Accelerated vesting of incentive plans — 9,321
Net (gain) loss from asset disposals 1,970 1,764
Other unusual items (1)
992 2,191
Adjusted EBITDA $ (1,940) $ 25,350


	Year Ended December 31,
		2023		2022

		in thousands
Net income		$	28,179	$	2,403
Interest and other income		(22,821)		(2,028)
Income tax expense		16,593		7,017
Depreciation and amortization		45,809		33,887
EBITDA		67,760		41,279
Restructuring, impairment and related charges, net		8,812		18,324
Change in fair value of warrant liabilities		(11,543)		(41,899)
Share-based compensation expense		17,729		12,129
Losses and impairments related to divestitures		4,013		—
Revaluation gain previously held equity method investment		—		(34,735)
Net loss from asset disposals		—		1,970
Other unusual items (1)		1,391		992
Adjusted EBITDA		$	88,162	$	(1,940)

(1) Other unusual items ~~in 2021 relates to expenses incurred related to the Business Combination. Other unusual items in 2022 relates to~~primarily includes certain ~~severance and~~ legal settlement ~~expenses.~~

~~Net income (loss)~~expenses (net) recognized in the years ended December 31, 2023 and ~~Adjusted EBITDA for~~2022, and certain non-restructuring severance expenses recognized in the year ended December 31, 2022 include $10.0 million of estimated net losses related to Hurricane Ian. Additionally, we strengthened reserves for U.S. auto liability by $6.5 million for the 2022 accident year. Both of these events adversely impacted the 2022 results compared to the year ended December 31, 2021.

2022.

We incurred $29.8 million and $31.0 million during the years ended December 31, 2022 and 2021, respectively, for certain pre-revenue costs related to scaling our infrastructure, newly-developed digital platforms and legacy systems, human resources and occupancy to accommodate our alliance with State Farm and other potential distribution partnerships as well as to further develop our Marketplace initiatives. These costs were not included in the Adjusted EBITDA reconciliation above.

Pursuant to a defined set of activities and objectives, these expenses are adding entirely new capabilities for us, integrating our new and legacy policyholder, membership and Marketplace systems with State Farm’s legacy policy and agent management systems and other third-party platforms.

Adjusted EPS

We define Adjusted Earnings (Loss) Per Share ("Adjusted EPS") as consolidated Net income (loss) ~~attributable to both our controlling and non-controlling interest,~~, less changes in the ~~change in~~ fair value of our ~~warrants~~warrant liabilities and, when applicable, the revaluation gain on a previously held equity method investment, divided by our outstanding and total potentially dilutive ~~securities. The total potentially dilutive~~ securities, which includes ~~(1)~~(i) the weighted-average issued and outstanding shares of Class A Common ~~Stock, (2)~~Stock; (ii) all issued and outstanding non-controlling interest units of The Hagerty ~~Group Units~~Group;, ~~(3)~~(iii) all unexercised ~~warrants and (4)~~warrants; (iv) all unissued ~~stock-based~~share-based compensation ~~awards.~~

~~In the third quarter of 2022, we began removing (1) the change in fair value~~awards; and (v) all issued and outstanding shares of our ~~warrants and (2) the revaluation gain~~Series A Convertible Preferred Stock on previously held equity method investment from consolidated Net income (loss) attributable to both our controlling and non-controlling interest for purposes of calculating Adjusted EPS. For comparability, references to prior period non-GAAP measures have been updated to show the effect of removing the change in the fair value of our warrants from Adjusted EPS. We believe this updated presentation of Adjusted EPS enhances investors' understanding of our financial performance from activities occurring in the ordinary course of our business.an as-converted basis.

The most directly comparable GAAP measure to Adjusted EPS is basic earnings per share ("Basic EPS"), which is calculated as Net income (loss) ~~attributable~~available to ~~controlling interest~~Class A Common Stockholders divided by the weighted average number of Class A Common Stock shares outstanding during the period.

We present Adjusted EPS because we consider it to be an important supplemental measure of our operating performance and believe it is used by securities analysts, investors and ~~securities analysts~~other interested parties in evaluating the consolidated performance of other companies in our industry. We also believe that Adjusted EPS, which compares our consolidated Net income (loss) ~~(which includes our controlling and non-controlling interest)~~ with our outstanding and potentially dilutive shares, provides useful information to investors regarding our performance on a fully consolidated basis.

TA ~~BLE OF~~ ~~CONTENTS~~

~~Our management~~Management uses Adjusted EPS:

•as a measurement of operating performance of our business on a fully consolidated basis;

•to evaluate the performance and effectiveness of our operational strategies;

•~~to evaluate our capacity to expand our business;~~ and

•as a preferred predictor of core operating performance, comparisons to prior periods and competitive positioning.

We caution investors that Adjusted EPS is not a recognized measure under GAAP and should not be considered in isolation or as a substitute for, or superior to, the financial information prepared and presented in accordance with GAAP, including Basic EPS, and that Adjusted EPS, as we define it, may be defined or calculated differently by other companies. In addition, Adjusted EPS has limitations as an analytical tool and should not be considered as a measure of profit or loss per share.

TABLE OF CONTENTS

The following table reconciles Adjusted EPS to the most directly comparable GAAP measure, which is Basic EPS:

Year Ended December 31,
2022 2021
in thousands (except per share amounts)
Numerator:
Net income (loss) attributable to controlling interest(1)
$ 32,078 $ (46,358)
Net income (loss) attributable to non-controlling interest (29,675) (398)
Net income (loss) attributable to redeemable non-controlling interest — (14,598)
Consolidated net income (loss) $ 2,403 $ (61,354)
Change in fair value of warrant liabilities (41,899) 42,540
Revaluation gain on previously held equity method investment (34,735) —
Adjusted consolidated net income (loss)(2)
$ (74,231) $ (18,814)
Denominator:
Weighted-average shares of Class A Common Stock outstanding — Basic(1)
82,728 82,327
Total potentially dilutive securities outstanding:
Conversion of non-controlling interest Hagerty Group Units to Class A Common Stock 255,758 251,034
Total warrants outstanding 19,484 20,006
Total unissued stock-based compensation 6,902 —
Potentially dilutive shares outstanding 282,144 271,040
Fully dilutive shares outstanding(2)
364,872 353,367
Basic EPS = (Net income (loss) attributable to controlling interest / Weighted-average shares of Class A Common Stock outstanding)(1)
$ 0.39 $ (0.56)
Adjusted EPS = (Adjusted consolidated net income (loss) / Fully dilutive shares outstanding)(2)
$ (0.20) $ (0.05)


	Year Ended December 31,
		2023		2022

		in thousands (except per share amounts)
Numerator:
Net income available to Class A Common Stockholders (1)		$	15,881	$	32,078
Undistributed earnings allocated to Series A Convertible Preferred Stock		673		—
Accretion of Series A Convertible Preferred Stock		3,677		—
Net income (loss) attributable to non-controlling interest		7,948		(29,675)
Consolidated net income		28,179		2,403
Change in fair value of warrant liabilities		(11,543)		(41,899)
Revaluation gain on previously held equity method investment		—		(34,735)
Adjusted consolidated net income (loss) (2)		$	16,636	$	(74,231)

Denominator:
Weighted average shares of Class A Common Stock outstanding — basic (1)		84,180		82,728
Total potentially dilutive securities outstanding:
Conversion of non-controlling interest units of The Hagerty Group to Class A Common Stock		255,499		255,758
Conversion of Series A Convertible Preferred Stock to Class A Common Stock		6,785		—
Total unissued share-based compensation awards		8,385		6,902
Total warrants outstanding		19,484		19,484
Potentially dilutive shares outstanding		290,153		282,144
Fully dilutive shares outstanding (2)		374,333		364,872

Basic EPS (1)		$	0.19	$	0.39

Adjusted EPS (2)		$	0.04	$	(0.20)

(1) Numerator and Denominator, respectively, of the GAAP measure Basic EPS

(2) Numerator and Denominator, respectively, of the non-GAAP measure Adjusted EPS

TABLE OF CONTENTS

ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

We are exposed to interest rate risk as part of our ongoing business operations. Interest rate risk is the risk that the fair value of future cash flows of a financial instrument will fluctuate due to changes in prevailing market interest rates.

As of December 31, 2023, we had approximately $68.0 million of variable rate indebtedness (after taking into consideration $35.0 million in interest rate swaps which effectively convert variable-rate debt to fixed-rate debt), representing approximately 50% of our total debt outstanding, at an average interest rate during the year ended December 31, 2023 of approximately 7.30%. Based on variable-rate borrowings outstanding as of December 31, 2023, a 100-basis point (or 1.0%) change in our borrowing rates would result in our annual interest payments changing by approximately $0.7 million.

We ~~are~~also have a ~~smaller reporting company~~portfolio of loans secured by collector cars of approximately $52.9 million as ~~defined by Rule 12b-2~~ of ~~the Exchange Act,~~December 31, 2023, upon which interest is earned predominately at variable rates including Prime Rate and ~~are not required to provide the information otherwise required under this item.~~Term Secured Overnight Financing Rate ("SOFR").

5767

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ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

All other schedules are omitted because they are not applicable or the required information is shown in the Consolidated Financial Statements or Notes thereto.

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REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

To the stockholders and the Board of Directors of Hagerty, Inc.

Opinion on the Financial Statements

We have audited the accompanying consolidated balance sheets of Hagerty, Inc. and subsidiaries (the "Company") as of December 31, ~~2022~~2023 and ~~2021,~~2022, the related consolidated statements of operations, comprehensive income (loss), changes in ~~members’~~temporary and ~~stockholders’~~stockholders' equity, and cash flows, for each of the ~~two~~three years in the period ended December 31, ~~2022,~~2023, and the related notes and the schedules listed in the index at Item 8 (collectively referred to as the "financial statements"). In our opinion, the financial statements present fairly, in all material respects, the financial position of the Company as of December 31, ~~2022~~2023, and ~~2021,~~2022, and the results of its operations and its cash flows for each of the ~~two~~three years in the period ended December 31, ~~2022,~~2023, in conformity with accounting principles generally accepted in the United States of America.

Basis for Opinion

These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on the Company's financial statements based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (PCAOB) and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. As part of our audits, we are required to obtain an understanding of internal control over financial reporting but not for the purpose of expressing an opinion on the effectiveness of the ~~Company’s~~Company's internal control over financial reporting. Accordingly, we express no such opinion.

Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that our audits provide a reasonable basis for our opinion.

/s/ DELOITTE & TOUCHE LLP

Detroit, Michigan

March ~~14, 2023~~12, 2024

We have served as the Company’s auditor since 2019.

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Hagerty, Inc.

Consolidated Statements of Operations


				Year Ended December 31,
				Year Ended December 31,
				Year Ended December 31,
						2023		2023	2022	2021
		Year Ended December 31,
		2022		2021

REVENUE:
REVENUE:
REVENUE:	REVENUE:	in thousands (except per share amounts)					in thousands (except per share amounts)
Commission and fee revenue	Commission and fee revenue	$	307,238	$	271,571
Earned premium	Earned premium	403,061		295,824
Membership, marketplace and other revenue	Membership, marketplace and other revenue	77,289		51,684
Total revenue	Total revenue	787,588		619,079
OPERATING EXPENSES:	OPERATING EXPENSES:
Salaries and benefits	Salaries and benefits	199,542		171,901
Ceding commission		191,150		140,983
Salaries and benefits
Salaries and benefits
Ceding commission, net
Losses and loss adjustment expenses	Losses and loss adjustment expenses	182,402		122,080
Sales expense	Sales expense	140,781		107,483
General and administrative services	General and administrative services	89,068		64,558
Depreciation and amortization	Depreciation and amortization	33,887		22,144
Restructuring, impairment and related charges, net	Restructuring, impairment and related charges, net	18,324		—
Losses and impairments related to divestitures
Total operating expenses	Total operating expenses	855,154		629,149
OPERATING INCOME (LOSS)	OPERATING INCOME (LOSS)	(67,566)		(10,070)
Change in fair value of warrant liabilities	Change in fair value of warrant liabilities	41,899		(42,540)
Revaluation gain on previously held equity method investment	Revaluation gain on previously held equity method investment	34,735		—
Interest and other income (expense)	Interest and other income (expense)	2,028		(1,993)
INCOME (LOSS) BEFORE INCOME TAX EXPENSE	INCOME (LOSS) BEFORE INCOME TAX EXPENSE	11,096		(54,603)
Income tax benefit (expense)		(7,017)		(6,751)
Income (loss) from equity method investment, net of tax		(1,676)		—
Income tax expense
Loss from equity method investment, net of tax
NET INCOME (LOSS)	NET INCOME (LOSS)	2,403		(61,354)
Net loss (income) attributable to non-controlling interest		29,675		398
Net loss (income) attributable to redeemable non-controlling interest		—		14,598
NET INCOME (LOSS) ATTRIBUTABLE TO CONTROLLING INTEREST		$	32,078	$	(46,358)
Net (income) loss attributable to non-controlling interest
Net loss attributable to redeemable non-controlling interest
Accretion of Series A Convertible Preferred Stock
NET INCOME (LOSS) ATTRIBUTABLE TO CLASS A COMMON STOCKHOLDERS

Earnings (loss) per share of Class A Common Stock:	Earnings (loss) per share of Class A Common Stock:
Earnings (loss) per share of Class A Common Stock:
Earnings (loss) per share of Class A Common Stock:
Basic
Basic
Basic	Basic	$	0.39	$	(0.56)
Diluted	Diluted	$	(0.07)	$	(0.56)

Weighted-average shares of Class A Common Stock outstanding:	Weighted-average shares of Class A Common Stock outstanding:
Weighted-average shares of Class A Common Stock outstanding:
Weighted-average shares of Class A Common Stock outstanding:
Basic
Basic
Basic	Basic	82,728		82,327
Diluted	Diluted	336,147		82,327


Delaware		86-1213144
~~(State or other jurisdiction~~ (State of ~~incorporation or organization)~~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


Large accelerated filer	☐	Accelerated filer	☒
Non-accelerated filer	☐	Smaller reporting company	☒☐
		Emerging growth company	☒


Title		Page
Where You Can Find More Information		ii4
~~Forward Looking~~Cautionary Statement Regarding Forward-Looking Statements		ii5
~~Glossary of Terms~~		iv

~~Part~~PART I		1
~~Item 1. Business~~		16
~~Item 1A. Risk Factors~~ITEM 1: BUSINESS		106
~~Item 1B. Unresolved Staff Comments~~ITEM 1A. RISK FACTORS		3813
~~Item 2. Properties~~ITEM 1B. UNRESOLVED STAFF COMMENTS		3842
~~Item 3. Legal Proceedings~~ITEM 1C. CYBERSECURITY		3842
~~Item 4. Mine Safety Disclosures~~ITEM 2. PROPERTIES		38

~~Part II~~		3943
~~Item 5. Market for Registrant's Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities~~ITEM 3. LEGAL PROCEEDINGS		3943
~~Item~~ITEM 4. MINE SAFETY DISCLOSURES	43
PART II	43
ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES	43
ITEM 6. [ Reserved ]		4045
~~Item~~ITEM 7. ~~Management's Discussion and Analysis of Financial Condition and Results of Operations~~MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS		4045
~~Item~~ITEM 7A. ~~Quantitative and Qualitative Disclosures About Market Risk~~QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK		5767
~~Item~~ITEM 8. ~~Financial Statements and Supplementary Data~~FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA		5868
~~Item~~ITEM 9. ~~Changes in and Disagreements With Accountants on Accounting and Financial Disclosure~~CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURES		~~107~~128
~~Item~~ITEM 9A. ~~Controls and Procedures~~CONTROLS AND PROCEDURES		~~107~~128
~~Item~~ITEM 9B. ~~Other Information~~OTHER INFORMATION		~~108~~129
~~Item~~ITEM 9C. ~~Disclosure Regarding Foreign Jurisdictions that Prevent Inspections~~DISCLOSURE REGARDING FOREIGN JURISDICTION THAT PREVENT INSPECTIONS		~~108~~

~~Part III~~		~~109~~129
~~Item 10. Directors, Executive Officers and Corporate Governance~~PART III		~~109~~129
~~Item 11. Executive Compensation~~ITEM 10. DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE		~~109~~129
~~Item 12. Security Ownership of Certain Beneficial Owner and Management and Related Stockholder Matters~~ITEM 11. EXECUTIVE COMPENSATION		~~109~~129
~~Item 13. Certain Relationships and Related Transactions, and Director Independence~~ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNER AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS		~~109~~129
~~Item 14. Principal Accountant Fees and Services~~ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCE		~~109~~

~~Part IV~~		~~110~~130
~~Item 15. Exhibits and Financial Statement Schedules~~ITEM 14. PRINCIPAL ACCOUNTING FEES AND SERVICES		~~110~~130
~~Item 16. Form 10-K Summary~~PART IV	131
ITEM 15. EXHIBITS, FINANCIAL STATEMENT SCHEDULES	~~112~~131
ITEM 16. FORM 10-K SUMMARY	134
Signatures		~~113~~135


	December 3, 2021		December 31,
			2021		2022		2023
Hagerty, Inc.	$	100.00	$	133.02	$	78.89	$	73.17
Russell 2000	$	100.00	$	101.88	$	81.06	$	94.78
Customized Peer Group	$	100.00	$	103.47	$	107.57	$	131.15


	Year Ended December 31,
	2022	2021
Operational Metrics (period of time)
Total Written Premium (in thousands) (1)	$776,664	$674,305
Loss Ratio (2)	45.3%	41.3%
New Business Count (Insurance) (3)	234,520	244,478

Operational Metrics (point in time)
Policies in Force (4)	1,315,977	1,247,056
Policies in Force Retention (5)	88.0%	89.1%
Vehicles in Force (6)	2,234,461	2,103,185
HDC Paid Member Count (7)	752,754	718,583
Net Promoter Score (8)	83.0	82.0

GAAP Measures
Total Revenue (in thousands)	$787,588	$619,079
Operating Income (Loss) (in thousands)	$(67,566)	$(10,070)
Net Income (Loss) (in thousands)	$2,403	$(61,354)
Basic Earnings (Loss) Per Share	$0.39	$(0.56)

Non-GAAP Measures
Adjusted EBITDA (in thousands) (9)	$(1,940)	$25,350
Adjusted Earnings (Loss) Per Share (9)	$(0.20)	$(0.05)


☒			ANNUAL 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


	Year Ended December 31, 2023
	U.S.			Canada			U.K.			Total

	in thousands (except percentages)
Subject premium	$	754,746		$	54,536		$	9,129		$	818,411
Quota share percentage	81.0		%	35.0		%	80.0		%	77.8		%
Assumed premium in Hagerty Re	609,975			19,088			7,303			636,366
Reinsurance premiums ceded										(33,070)
Net assumed premium										603,296
Change in unearned premiums										(81,813)
Change in deferred reinsurance premiums										10,383
Earned premium										$	531,866

	Year Ended December 31, 2022
	U.S.			Canada			U.K.			Total

	in thousands (except percentages)
Subject premium	$	643,777		$	50,434		$	8,569		$	702,780
Quota share percentage	70.0		%	35.0		%	70.0		%	67.5		%
Assumed premium in Hagerty Re	450,644			17,652			5,998			474,294
Reinsurance premiums ceded										(10,749)
Net assumed premium										463,545
Change in unearned premiums										(60,264)
Change in deferred reinsurance premiums										(220)
Earned premium										$	403,061


			Payments Due by Period																	Payments Due by Period
			Total														Total	Less than 1 year	1-3 years		3-5 years	More than 5 years
		Total			2023		2024		2025		2026		2027		Thereafter

		in thousands
Debt		$	108,280		$	—	$	3,280	$	—	$	105,000	$	—	$	—
Interest payments		1,304			529		490		285		—		—		—
				in thousands
				in thousands
				in thousands
Debt (1)
Interest payments (2)
Operating leases	Operating leases	116,790			12,129		12,206		11,765		11,176		10,984		58,530
Purchase commitments	Purchase commitments	14,477			10,772		3,705		—		—		—		—
Total	Total	$	240,851		$	23,430	$	19,681	$	12,050	$	116,176	$	10,984	$	58,530


	December 31, 2023
	Gross		% of Total		Net		% of Total

	in thousands (except percentages)
Outstanding losses reported	$	86,420	63.3	%	$	84,651	63.0	%
IBNR	50,087		36.7	%	49,621		37.0	%
Total provision for unpaid losses and loss adjustment expenses	$	136,507	100.0	%	$	134,272	100.0	%

	December 31, 2022
	Gross		% of Total		Net		% of Total

	in thousands (except percentages)
Outstanding losses reported	$	66,824	59.8	%	$	65,981	59.5	%
IBNR	44,917		40.2	%	44,917		40.5	%
Total provision for unpaid losses and loss adjustment expenses	$	111,741	100.0	%	$	110,898	100.0	%


	Gross Ultimate Loss & Loss Adjustment Expenses						Net Ultimate Loss & Loss Adjustment Expenses
Accident Year	2023		2022		Change		2023		2022		Change

	in thousands
2019	$	60,495	$	60,495	$	—	$	60,495	$	60,495	$	—
2020	$	85,313	$	86,113	$	(800)	$	85,313	$	86,113	$	(800)
2021	$	126,391	$	130,016	$	(3,625)	$	126,391	$	130,016	$	(3,625)
2022	$	188,012	$	191,815	$	(3,803)	$	183,188	$	186,463	$	(3,275)
2023	$	231,231	N/A		N/A		$	228,465	N/A		N/A


Change in both loss frequency and severity	Ultimate Cost of Claims Occurring in 2023		Change
	in thousands
3% Higher	$	242,379	$	13,914
2% Higher	$	237,695	$	9,230
1% Higher	$	233,057	$	4,592
Base Scenario	$	228,465	$	—
1% Lower	$	223,919	$	(4,546)
2% Lower	$	219,418	$	(9,047)
3% Lower	$	214,963	$	(13,502)


Financial Statements						Page No.
Report of Independent Registered Public Accounting Firm (PCAOB ID No. 34)						5969
Consolidated Statements of Operations for the ~~two~~t hree years ended December 31, 202 23						6070
Consolidated Statements of Comprehensive Income (Loss) for the ~~two~~three years ended December 31, ~~202~~22023						6171
Consolidated Balance Sheets as of December 31, 202 23 and 202 12						6272
Consolidated Statements of Equity for the ~~two~~t hree years ended December 31, 202 23						6473
Consolidated Statements of Cash Flows for the ~~two~~t hree years ended December 31, 202 23						6575
Notes Accompanying the Consolidated Financial Statements						6776

Financial Statement Schedule:
Schedule I : Condensed Financial Inf ormation of Registrant Parent Company						124
Schedule II: Valuation and Qualifying Accounts						128


	December 31, 2022		December 31, 2021

	in thousands (except share amounts)
Commitments and Contingencies (Note 24)
Redeemable non-controlling interest (Note 18)	$	—	$	593,277
STOCKHOLDERS' EQUITY
Preferred stock, $0.0001 par value (20,000,000 shares authorized, no shares issued and outstanding as of December 31, 2022 and 2021, respectively)	—		—
Class A common stock, $0.0001 par value (500,000,000 shares authorized, 83,202,969 and 82,327,466 shares issued and outstanding as of December 31, 2022 and 2021, respectively)	8		8
Class V common stock, $0.0001 par value (300,000,000 shares authorized, 251,033,906 shares issued and outstanding as of December 31, 2022 and 2021)	25		25
Additional paid-in capital	549,034		160,189
Accumulated earnings (deficit)	(489,602)		(482,276)
Accumulated other comprehensive income (loss)	(213)		(1,727)
Total stockholders' equity:	59,252		(323,781)
Non-controlling interest	308,117		1,305
Total equity (Note 18)	367,369		(322,476)
TOTAL LIABILITIES AND EQUITY	$	1,312,518	$	1,041,871
			(concluded)


	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	—	—			—		—			—		—		—		20,231		—		20,231		7,948		28,179
Accretion of Series A Convertible Preferred Stock	—	3,677			—		—			—		—		(3,677)		—		—		(3,677)		—		(3,677)
Other comprehensive income	—	—			—		—			—		—		—		—		125		125		379		504
Issuance of shares under employee plans	—	—			1,126		—			—		—		1,526		—		—		1,526		—		1,526
Stock-based compensation	—	—			—		—			—		—		18,017		—		—		18,017		—		18,017
Conversion of The Hagerty Group units to Class A Common Stock	—	—			260		—			—		—		2,311		—		—		2,311		(2,311)		—
Issuance of Series A Convertible Preferred Stock, net of issuance costs	8,484	79,159			—		—			—		—		—		—		—		—		—		—
Non-controlling interest issued capital	—	—			—		—			—		—		—		—		—		—		779		779
Termination of MHH Joint Venture (see Note 10)	—	—			—		—			—		—		(1,038)		376		—		(662)		(1,526)		(2,188)
Reallocation between controlling and non-controlling interest	—	—			—		—			—		—		(4,419)		—		—		(4,419)		4,419		—
Balance at December 31, 2023	8,484	$	82,836		84,589		$	8		251,034		$	25	$	561,754	$	(468,995)	$	(88)	$	92,704	$	317,805	$	410,509


	Year Ended December 31,
	2023		2022		$ Change		% Change

	in thousands (except percentages)
Net Cash Provided by Operating Activities	$	133,706	$	55,328	$	78,378	141.7	%
Net Cash Used in Investing Activities	$	(52,647)	$	(91,521)	$	38,874	42.5	%
Net Cash Provided by (Used in) Financing Activities	$	103,161	$	(28,084)	$	131,245	N/M


		Members' Equity			Class A Common Stock					Class V Common Stock					Additional Paid in Capital		Accumulated Earnings (Deficit)			Accumulated Other Comprehensive Income/(Loss)			Total Stockholders' / Members' Equity				Non-controlling Interest				Total Equity				Redeemable Non-controlling Interest
	Temporary Equity																													Temporary Equity							Stockholders' Equity
	Redeemable Non-controlling Interest																																				Redeemable Non-controlling Interest		Members' Equity		Class A Common Stock	Class V Common Stock	Additional Paid in Capital	Accumulated Earnings (Deficit)	Accumulated Other Comprehensive Income/(Loss)	Total Stockholders' / Members' Equity	Non-controlling Interest	Total Equity
in thousands			in thousands	Members' Equity		Shares			Amount		Shares			Amount					Additional Paid in Capital						Accumulated Earnings (Deficit)				Accumulated Other Comprehensive Income/(Loss)				Total Stockholders' / Members' Equity					Non-controlling Interest		Total Equity	Redeemable Non-controlling Interest
Balance at December 31, 2020	Balance at December 31, 2020				—		$	—		—		$	—
Net income (loss) before transaction		—			—		—			—		—			—		(3,089)					—				(3,089)				(312)				(3,401)			—
Other comprehensive income (loss) before transaction		—			—		—			—		—			—		—			248			248				—				248				—
Distributions before transaction		(4,056)			—		—			—		—			—		—			—			(4,056)				—				(4,056)				—
Non-controlling interest issued capital before transaction		—			—		—			—		—			—		—			—			—				1,580				1,580				—
Balance at December 31, 2020
Balance at December 31, 2020
Net income (loss) before Business Combination
Other comprehensive income before Business Combination
Distributions before Business Combination
Non-controlling interest issued capital before Business Combination
Business Combination	Business Combination	(58,264)			82,327		8			251,034		25			526,711		(489,661)			—			(21,181)				—				(21,181)				238,265
Net income (loss) after transaction		—			—		—			—		—			—		(46,358)			—			(46,358)				(86)				(46,444)				(11,510)
Other comprehensive income (loss) after transaction		—			—		—			—		—			—		—			(21)			(21)				—				(21)				—
Net income (loss) after Business Combination
Other comprehensive income (loss) after Business Combination
Fair value adjustment for redeemable non-controlling interest	Fair value adjustment for redeemable non-controlling interest	—			—		—			—		—			(366,522)		—			—			(366,522)				—				(366,522)				366,522
Balance at December 31, 2021	Balance at December 31, 2021	$	—		82,327		$	8		251,034		$	25		$	160,189	$	(482,276)		$	(1,727)		$	(323,781)			$	1,305			$	(322,476)			$	593,277
Net income (loss) before exchange agreement amendment	Net income (loss) before exchange agreement amendment	—			—		—			—		—			—		(3,679)			—			(3,679)				(172)				(3,851)				(11,205)
Other comprehensive income (loss) before exchange agreement amendment		—			—		—			—		—			—		—			1,657			1,657				—				1,657				—
Other comprehensive income before exchange agreement amendment
Redemption value adjustment for redeemable non-controlling interest	Redemption value adjustment for redeemable non-controlling interest	—			—		—			—		—			(162,095)		(1,398,325)			—			(1,560,420)				—				(1,560,420)				1,560,418
Removal of the redeemable feature of the non-controlling interest	Removal of the redeemable feature of the non-controlling interest	—			—		—			—		—			528,615		1,398,325			—			1,926,940				215,550				2,142,490				(2,142,490)
Net income (loss) after exchange agreement amendment	Net income (loss) after exchange agreement amendment	—			—		—			—		—			—		35,757			—			35,757				(18,298)				17,459				—
Other comprehensive income (loss) after exchange agreement amendment	Other comprehensive income (loss) after exchange agreement amendment	—			—		—			—		—			—		—			(792)			(792)				—				(792)				—
Exercise of warrants	Exercise of warrants	—			125		—			—		—			1,906		—			—			1,906				—				1,906				—
Restricted stock issued		—			37		—			—		—			—		—			—			—				—				—				—
Issuance of shares under employee plans
Stock-based compensation	Stock-based compensation	—			—		—			—		—			12,129		—			—			12,129				—				12,129				—
Non-controlling interest issued capital	Non-controlling interest issued capital	—			—		—			—		—			—		—			—			—				1,700				1,700				—
Broad Arrow acquisition	Broad Arrow acquisition	—			714		—			—		—			9,613		—			—			9,613				63,640				73,253				—
Cumulative effect of adoption of ASC 842	Cumulative effect of adoption of ASC 842	—			—		—			—		—			—		1,066			—			1,066				3,248				4,314				—
Reallocation between controlling and non-controlling interest	Reallocation between controlling and non-controlling interest	—			—		—			—		—			(1,323)		(40,470)			649			(41,144)				41,144				—				—
Balance at December 31, 2022	Balance at December 31, 2022	$	—		83,203		$	8		251,034		$	25		$	549,034	$	(489,602)		$	(213)		$	59,252			$	308,117			$	367,369			$	—


	Agent		Direct		Total

	in thousands
	Year Ended December 31, 2022
Commission and fee revenue	$	133,584	$	113,864	$	247,448
Contingent commission	32,899		26,891		59,790
Membership revenue	—		45,234		45,234
Marketplace and other revenue	—		32,055		32,055
Total revenue from customer contracts	$	166,483	$	218,044	$	384,527
Earned premium recognized under ASC 944					403,061
Total revenue					$	787,588

	Year Ended December 31, 2021
Commission and fee revenue	$	115,310	$	98,926	$	214,236
Contingent commission	29,552		27,783		57,335
Membership revenue	—		40,605		40,605
Marketplace and other revenue	—		11,079		11,079
Total revenue from customer contracts	$	144,862	$	178,393	$	323,255
Earned premium recognized under ASC 944					295,824
Total revenue					$	619,079


	~~December 31,~~ ~~2022~~

	~~in thousands~~
~~Secured loans~~	$	~~37,427~~
~~Estimate of collateral value~~	$	~~75,802~~
~~Aggregate LTV ratio~~	~~49.4~~		%


	~~Year Ended December 31,~~
	~~2022~~
	~~in thousands~~
~~Operating lease expense~~ ~~(1)~~	$	~~10,737~~
~~Short-term lease expense~~ ~~(1)~~	~~187~~
~~Variable lease expense~~ ~~(1) (3)~~	~~3,943~~
~~Sublease revenue~~ ~~(2)~~	~~(156)~~
~~Lease cost, net~~	$	~~14,711~~


	~~December 31,~~
	~~2022~~
	~~in thousands~~
~~Operating lease ROU assets~~	$	~~82,398~~

~~Other current liabilities~~	~~7,556~~
~~Operating lease liabilities~~	~~80,772~~
~~Total operating lease liabilities~~	$	~~88,328~~


~~Other Supplemental Information~~
~~ROU assets obtained in exchange for new operating lease liabilities~~ ~~(in thousands)~~ ~~(1)~~	$	~~82,398~~
~~Gains (losses) on sales and leaseback transactions, net~~ ~~(in thousands)~~	$	~~4,314~~
~~Weighted-average lease term~~	~~10.23~~
~~Weighted-average discount rate~~	~~5.5~~		%


	in thousands
2022	$	9,068
2023	8,783
2024	8,587
2025	8,451
2026	7,936
Thereafter	53,940
Total	$	96,765


	in thousands
2024	$	9,067
2025	8,737
2026	8,156
2027	7,921
2028	7,946
Thereafter	29,286
Total lease payments	71,113
Less: imputed interest	(14,154)
Total lease liabilities	$	56,959


	Business Combination
	in thousands
Cash in trust, net of redemptions	$	85,811
Cash, PIPE	703,850
Less: transaction costs and advisory fees	(41,859)
Less: cash consideration to HHC at Closing	(489,661)
Net cash received from Business Combination	$	258,141


	in thousands
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


	in thousands
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 ~~and value to be~~ allocated to net assets acquired	$	121,562


			Weighted Average Useful Life										Weighted Average Useful Life	December 31,
						2023									2023	2022
		Weighted Average Useful Life			December 31,
				2022			2021

					in thousands
Insurance policy renewal rights				9.9			$	17,282			$	17,557
							in thousands
							in thousands
							in thousands
Renewal rights
Internally developed software	Internally developed software	3.1			109,764				76,865
Trade names and trademarks	Trade names and trademarks	14.0			12,541				5,004
Relationships and customer lists	Relationships and customer lists	15.4			13,890				5,652
Other	Other	4.4			1,434				1,464
Intangible assets	Intangible assets				154,911				106,542
Less: accumulated amortization	Less: accumulated amortization				(50,887)				(30,371)
Intangible assets, net	Intangible assets, net				$	104,024			$	76,171


2023		$	29,663
	in thousands			in thousands
2024	2024	26,714
2025	2025	17,746
2026	2026	8,671
2027	2027	3,742
2028
Thereafter	Thereafter	17,488
Total	Total	$	104,024


Auto Insurance
(dollars in thousands)											Reserves for Losses and Loss Adjustment Expenses Incurred But Not Reported		Cumulative Number of Reported Claims
	Reporting Years Ended December 31,
Accident Year	2019*		2020*		2021*		2022*		2023		As of December 31, 2023
2019	$	63,642	$	63,642	$	59,660	$	59,660	$	59,660	$	445	23,800
2020			90,110		86,608		85,111		84,311		1,600		27,204
2021					131,643		129,259		125,634		1,851		35,430
2022							186,073		182,783		10,032		39,199
2023									228,071		35,318		39,738
Total									680,459		49,246		165,371
Cumulative paid losses and loss adjustment expenses from the table below									(547,214)		—
Reserves for losses and loss adjustment expenses before 2019, net of reinsurance									707		303
Effect of foreign currency rate changes									107		—
Reserves for losses and loss adjustment expenses, undiscounted and net of reinsurance									$	134,059	$	49,549



	As of December 31,
Accident Year	2017*		2018*		2019*		2020*		2021*		2022
2017	$	11,410	$	16,655	$	17,442	$	17,530	$	17,897	$	18,122
2018			23,915		34,992		35,899		36,414		36,807
2019					37,910		51,491		55,617		57,393
2020							53,167		73,402		78,079
2021									75,933		105,475
2022											109,255
Total											$	405,131



Auto Insurance
(in thousands)	As of December 31,
Accident Year	2019*		2020*		2021*		2022*		2023
2019	$	37,910	$	51,491	$	55,617	$	57,393	$	58,415
2020			53,167		73,402		78,079		80,656
2021					75,933		105,475		114,884
2022							109,255		155,157
2023									138,102
Total									$	547,214


(dollars in thousands)													Reserves for Losses and Loss Adjustment Expenses Incurred But Not Reported		Cumulative Number of Reported Claims
	Reporting Years Ended December 31,
Accident Year	2017*		2018*		2019*		2020*		2021*		2022		As of December 31, 2022
2017	$	198	$	198	$	198	$	198	$	183	$	183	$	—	124
2018			437		437		437		489		514		—		189
2019					893		893		835		835		—		192
2020							915		975		1,002		16		205
2021									854		757		44		210
2022											405		90		114
Total											$	3,696	$	150	1,034
Cumulative paid losses and loss adjustment expenses from the table below											(3,530)		—
Reserves for losses and loss adjustment expenses before the 2017 accident year											—		—
Reserves for losses and loss adjustment expenses, undiscounted and net of reinsurance											$	166	$	150


	Average Annual Percentage of Payout of Incurred Claims by Age (in Years), Net of Reinsurance
unaudited	Year 1		Year 2		Year 3		Year 4		Year 5		Year 6
Auto	62.4	%	21.0	%	8.8	%	3.6	%	1.6	%	1.4	%
Marine	77.9	%	21.4	%	0.9	%	(0.3)	%	—	%	—	%


	Average Annual Percentage of Payout of Incurred Claims by Age (in Years), Net of Reinsurance (Unaudited)
Years	Year 1		Year 2		Year 3		Year 4		Year 5
Auto Insurance	61.1	%	24.4	%	5.8	%	3.9	%	2.5	%


	in thousands
Balance at December 31, ~~2021~~2022	$	—9,470
Costs incurred and charged to expense	~~18,324~~8,812
Costs paid or otherwise settled(1)	(18,282)		~~(8,854)~~
Balance at December 31, ~~2022~~2023	$	~~9,470~~—


	Fair Value Measurements
	Total		Level 1		Level 2		Level 3

	in thousands
	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

	December 31, 2021
Financial Assets
Interest rate swaps	$	531	$	—	$	531	$	—
Total	$	531	$	—	$	531	$	—

Financial Liabilities
Public warrants	$	25,243	$	25,243	$	—	$	—
Private placement warrants	1,248		—		—		1,248
Underwriter warrants	139		—		—		139
OTM warrants	6,849		—		—		6,849
PIPE warrants	55,887		—		—		55,887
Total	$	89,366	$	25,243	$	—	$	64,123