Greetings. And welcome to the Hagerty’s First Quarter 2022 Earnings Call. At this time, all participants are in a listen-only mode. A brief question-and-answer session will follow the formal presentation. [Operator Instructions] As a reminder, this conference is being recorded. It is now my pleasure to introduce your host Garrett Edson from ICR. Please go ahead.

Thank you, Operator. Good afternoon, ladies and gentlemen. Thank you for joining us on Hagerty’s first quarter 2022 earnings conference call. Please note that this call will be simultaneously webcast on the Investor Relations section of the company’s corporate website at investor.hagerty.com. Our Stockholder Letter covering this period is also posted on the IR website. Joining the call today are McKeel Hagerty, Chief Executive Officer; and Fred Turcotte, Chief Financial Officer. Before we start, I would like to remind you that the discussion today may contain statements related to our business that may be considered forward-looking, including statements concerning our expected future business and financial performance, our ability to maintain existing and acquired members, our plans to expand market share including planned investments and partnerships, expectations regarding key operational metrics and other statements regarding our plans, and prospects. Forward-looking statements are often identified with words such as we expect, we anticipate, we believe, or similar expressions. These statements reflect our view only as of today, May 9, 2022, and should not be considered our views as of any subsequent date. We do not undertake any obligation to update or revise any forward-looking statements. Forward-looking statements are not promises or guarantees of future performance and are subject to a variety of risks and uncertainties that could cause the actual results to differ materially from our expectations. For discussion of material risks and other important factors that could affect our actual results, please refer to those contained in our filings with the SEC, which are available on the Investor Relations section of our website and on the SEC’s website at sec.gov. Finally, during today’s call, we will refer to certain non-GAAP financial measures. A discussion of these non-GAAP financial measures along with reconciliations to the most directly comparable GAAP measure is included in our Stockholder Letter, Investor deck and Form 10-Q, copies of which can be found on the Investor Relations section of our website and on the SEC’s website at sec.gov. Unless otherwise noted in today’s call, all comparisons are on a year-over-year basis. And with that, I’d like to turn the call over to McKeel Hagerty, CEO of Hagerty.

Good afternoon. I am happy to report that we have had a strong first quarter of 2022 and are tracking favorably to meet our financial goals for the year. We are also excited and ready to launch our long-term and contractual partnership with State Farm in the fourth quarter. Fred Turcotte, our CFO will provide the financial details in just a moment. But the headlines are total revenue grew 30% year-over-year to $168 million. Written premium grew 16% year-over-year to $155 million. Total active members grew 11% year-over-year to 2.5 million. Before we dive in I will say a few words about car people and how they enjoy their cars each year. Spring is strong throughout North America, which means it is once again driving season for tens of millions of people who describe themselves as automotive enthusiast. Our company was built to serve this massive community and we are honored to do so. So while auto enthusiast spend their long winters driving a little less, but still working on cars researching the next car they intend to buy or planning their next driving and venture, we at Hagerty have been hard at work steadily adding to our automotive lifestyle ecosystem to make their favorite pastime easier and more fun. All of our offerings help car people enjoy the car world whether they are racers, Sunday drivers, serious collectors or shade tree mechanics. But they also allow Hagerty to gain a larger share of consumer discretionary spend and to create a sense of community and belonging among car lovers, which is important, because the larger this community grows, the more discretionary income car people spend within our ecosystem. During the first quarter, the Hagerty team achieved several strategic milestones. First and foremost, we announced the expansion of Hagerty Marketplace, which…

Thanks, McKeel. Let’s get right into the financial results for the first quarter. We continue to experience strong growth across our membership, insurance and enthusiast offerings. Overall, 2.5 million active members have joined Hagerty through March 31, 2022, up 11% year-over-year with 1.3 million paid members looking to us to protect their vehicles, provide enthusiast services, products and experiences, and consume automotive media and content. As McKeel mentioned, we had numerous wins this quarter, including negotiating the acquisition of Speed Digital, a cloud-based technology solution for automotive dealers, auction companies and collectors, which provide vehicle inventory for our Marketplace platform. The transaction closed in April, so we will see the impact on topline and bottomline beginning with our Q2 results. Shifting to the numbers. We are pleased with our Q1 2022 financial results, and as McKeel noted, are tracking favorably to meet our 2022 financial goals. On a year-over-year basis, total revenue grew 30% to $168 million. Commission and fee revenue grew 15% to $63 million, driven by roughly 48,000 new business policies, along with solid policy in force retention of 89%. Membership and other revenue increased 40% to $16 million, benefiting from an increase in total paid members, including HDC paid membership and an increase of 100 basis points in the new membership adoption rate on new insurance policies to 76%. Earned premium grew 41% to $89 million, driven by new written premium growth, policy retention and a 10-point increase in our U.S. contractual reinsurance quota share to 70%. Revenue per paid member increased 21% year-over-year to $134, compared to $111 in the prior year period. Total written premium grew $655 million, compared to $134 million in the prior year period. Loss ratio remained stable year-over-year at 41%. We continue to benefit from higher contractual insurance revenue from our…

Thanks, Fred. In closing, I am tremendously proud of what we have accomplished at Hagerty. We believe our value proposition is clearly resonating in the market bolstered by our team’s talent and our unyielding drive to offer best in class value-added services to our members. I am very excited for our future and confident in our ability to continue to expand our ecosystem for car enthusiasts, while delivering long-term value for our shareholders. Thank you again for joining us today onward and upward.

Thank you. [Operator Instructions] Gentlemen, there are no questions coming from my end.

Okay. Thank you. If there are no further questions, we have had a few questions that have come to us at that a couple of general themes. So I am going to sort of ask them and then we will answer them. The first one that seem to come in is, can you provide us with an update on the State Farm partnership is still on track for the Q4 2022 launch and any updates on the economics. And I will take that one. First of all, we are really excited about the State Farm partnership. It’s huge for us, it’s a long-term relationship, a long-term commitment 10 years. They were big investment -- investor in the pipe and their CEO is sitting in our Board. We are still on track to get the relationship up and running later this year with the bulk of the first phase of that big block of business that will be coming to us starting to roll in 2023. It’s a very large growth opportunity for us with an estimated at the end of 2021, 460,000 policies are significant for us and there are no changes in the economics. So the exciting thing is that it’s coming, the number of policies is larger than we thought and we will be excited to accelerate the conversion in the time period ahead. Second question that came in is with Q1 2022 in April now behind us. How comfortable are you with your overall 2022 guidance. Fred, do you want to.

Yeah. Happy to take that McKeel. Thank you. Yeah. Q1 results put us on track to meet our 2022 full year guidance. So we feel pretty good about that. We remain focused, however, on executing our plans to meet that guidance as we move forward through 2022. We are happy with the results thus far.

And I think kind of finally for us here today is, this one was excluding State Farm, how do you feel about general business trends, particularly given more economic uncertainty, including higher inflation and higher interest rates? While we recognize here that of course no business is immune to larger micro economic trends, but I have been sitting in my seat since the early 2000s, we have been through a lot of different kinds of cycles, a lot of different downturns economically. The first one was the dotcom crash in the early 2000s followed by the economic crisis. We have had a lot of catastrophic weather events and then COVID, and what I can say, in general, is this, our business model is incredibly resilient in economic downturns, both from a growth and a profitability standpoint. What specifically as it comes through inflation though there are probably some, there are both headwinds and tailwinds. The headwinds I would describe as, as I described in my earlier comments, we see some rising loss costs when it comes to repairing vehicles, labor rates, wage pressures from all supporting businesses around the auto world [ph] are definitely there, transportation costs, that sort of thing. But you deal with that through normal pricing adjustments, which were in the process of putting in place this year with all the insurance industry, this is happening throughout property and casualty insurance and we are in front of that. But there are also tailwinds when it comes to inflation and this one is actually good for us and that is the value of vehicles is up significantly. In 2021, we saw almost 70% of the 40,000 makes a models of vehicles that we track in our vehicle information database. Our valuation tools went up in value on nearly 10%. So that’s a very significant jump in increase in value. So for us what that means is you -- you are able to capture more premium with new business and then very often we capture additional premium at the time of renewal by offering a higher value for people to ensure their vehicles. So headwinds and tailwinds balances out both ways. But, overall, our business model is incredibly resilient in difficult times. So it looks like there may have been a question that came into the queue. Operator? Did you -- do you want to chime in.

Yes. Yeah. Yeah. Sure. We have a question from Kelly Shilink [ph], Private Investor. Please go ahead.

Thank you. I have two questions actually. One, could you comment on what be combined ratio is year-to-date and what it was for the finishing last year combined ratio. And number two, what do you attribute the erosion in the price per share that’s occurred throughout the course of this year?

I will go ahead and take the first one, and McKeel, on the price erosion we can talk through it together. On the first one, the combined ratio on the business debt is written through Hagerty REIT with our partners Markel in the U.S. and the U.K. and Aviva in Canada was 89.5. So 89.5 is the combined for the first quarter and for last year, it was just slightly higher about 89.8, 90. And then on the next question McKeel you want to take that now.

Yeah. In terms of the erosion since the original listing, I think, we were -- what we are seeing is an awful lot of excitement about our company going public especially amongst people who understood that there is a very persistent business model that underlies our business and there’s not a lot of float in our, in our stock as it stands today. Then the erosion, I think, a very, very late is probably macroeconomic factors people looking at us that way.

There are no further questions on the line. Okay.

I would like to just follow up on that…

Yeah. Kelly, go ahead.

… if I might. To what would you attribute the, how would you go about improving the price per share I have been be both a shareholder and insurative of the organization, I am concerned about the viability of the model if it’s not reflected in the price per share.

No. Well, thank you, Kelly. And first of all thank you for insuring your vehicles with us and thank you for being an investor. Our number one focus here is to execute on the model, which is to grow the business organically and persistently over time and to continue building our profit in our business model along the way. We believe that what we need to be focusing on is making sure that we have built consistent solid growth through this quarter and we hope that the market reflects favorably on that for us. But, again, thank you for your business.

There are no more further questions. This concludes today’s teleconference.

Okay.

You may disconnect your lines at this time and thank you for your participation.