Operator:

Greetings, and welcome to the Hagerty Fourth Quarter 2025 Earnings Call. [Operator Instructions] Please note, this call is being recorded. I would now like to turn the conference over to your host today, Jay Koval, Senior Vice President of Investor Relations. Thank you, sir. You may begin. Jason Koval: Thank you, operator, and good morning, everyone. And thank you for joining us to discuss Hagerty's results for the fourth quarter of 2025. I'm joined this morning by McKeel Hagerty, Chief Executive Officer and Chairman, and Patrick McClymont, Chief Financial Officer. During this morning's conference call, we will refer to an accompanying presentation that is available on Hagerty's Investor Relations section of the company's corporate website at investor.hagerty.com. Our earnings release, slides, and letter to stockholders covering this period are also posted on the IR website, as well as our 8-K filing. Today's discussion contains forward-looking statements and non-GAAP financial metrics as described further on Slide 2 of the earnings presentation. Forward-looking statements include statements about our expected future business and financial performance and are not promises or guarantees of future performance. They are subject to a variety of risks and uncertainties that could cause the actual results to differ materially from our expectations. For a discussion of material risks and important factors that could affect our actual results, please refer to those contained in our filings with the SEC, which are also available on our Investor Relations website and at sec.gov. The appendix of the presentation also contains reconciliations of our non-GAAP metrics to the most directly comparable GAAP measures that are further supplemented by this morning's 8-K filing. And with that, I'll turn the call over to McKeel. McKeel Hagerty: Thanks, Jay, and good morning, everyone. We appreciate you taking the time to join Hagerty's Fourth Quarter 2025 Earnings Call. As we approach the spring driving season, our team is hard at work preparing for the onslaught of new members we expect to add to the Hagerty ecosystem in 2026. Our members' cars are very special to them, and they are equally special to One Team Hagerty. This inherent love for their toys results in fundamentally better risk profiles due to the way our members care for their prized possessions, and Hagerty has the automotive expertise and guaranteed value proposition they are looking for to protect their cars. This includes innovating with new products and services that align with Hagerty's members' needs. Our member-centric approach, built around the automotive passion, combined with our reinvestment posture, positions us to spin the flywheel faster, resulting in high rates of sustained written premium growth and even faster growth in profits, which should lead to strong returns for shareholders. Let me dig into our excellent results for the full year 2025. Slide 3 shows how we handily exceeded our original expectations from a year ago, with revenue up 17% and net income surging 91%. Our profit growth benefited from record new business count and efficiency gains, as well as stable underwriting and better-than-anticipated loss trends, which permitted us to reduce reserves by $21 million. 2025 marked the third straight year of executing on our strategy to deliver high rates of top-line growth while more efficiently translating incremental revenue into profits and cash flow. Since going public 4 years ago, we have compounded revenue by 23% per year and increased net income by over $200 million, reflecting the strength and differentiation of the Hagerty business model, as our profit growth is driven by adding new members and not the rate cycle. Operating cash flow is growing quickly, up 24% to $219 million. This cash flow positions us to lengthen our leadership position by reinvesting back into our value proposition for members. With excellent retention and strong Net Promoter Scores, we are operating from a position of strength as we look to grow our share of the 36 million vehicle target market from just 7% today. Slide 4 shares some additional 2025 highlights. First, we welcomed a record 371,000 new members to Hagerty's ecosystem of products and services. Written premium gains of 14% accelerated throughout the year and were better than anticipated, thanks to share gains from our recurring revenue model. Importantly, our underwriting is not just high quality, but also low volatility. We ended the year selling new State Farm Classic Plus business in 27 states, and we are converting their U.S. book of 525,000 vehicles in 7 of those states. We also announced a new partnership with Liberty Mutual and Safeco. Marketplace and our auction businesses had an incredible year with revenue more than doubling as we expanded into Europe with auctions in Italy, Belgium, and Switzerland. Total transaction value of vehicles sold at auction and through private transactions came in at $566 million, making Hagerty the #2 global player after just 3 short years in the market. Net income jumped 91% to $149 million as compounding premium growth, cost discipline, resource prioritization, and terrific execution by One Team Hagerty are fueling steady margin expansion. We also evolved our relationship with Markel by signing a new fronting arrangement where we retain 100% of the premium beginning January 1 of this year. For some perspective, it's an extremely rare occurrence in the insurance world to transition from earning a commission to capturing full economics, and we have been working toward this moment for over a decade, taking on more and more of the risk and premium, culminating with the recent move from 80% to 100%. We are excited to continue partnering with Markel as we deliver seamless experiences for Hagerty members with greater operational control. Our technology and digital teams are steadily moving us toward a modern cloud-based architecture that should result in future efficiency gains and scalable growth, including the launch of Enthusiast Plus on Duck Creek to capitalize on the burgeoning demand from younger generations of car lovers. We have continued to deepen our bench strength through several strategic hires across insurance, claims, technology, and marketplace. And finally, the estate of my late sister, Kim Hagerty, executed a secondary share offering that increased our float and trading volumes as we work toward being a more fully distributed public company. This is a long list of milestones, but at its core, 2025 was a year of investing for the future while delivering in the present. Let me move on to Slide 5 and walk you through Hagerty's 2026 priorities, which are focused on further enhancing the member experience while becoming more efficient at delivering great products and services. First is implementing our new fronting arrangement with Markel, which creates a step function increase in potential underwriting profitability and investment income. To transition to this new 2% fronting arrangement, we are building out our internal team so we can control all aspects of our insurance risk, including administrative functions and regulatory filings. With this arrangement comes a complex set of noncash transitional costs that Patrick will discuss in more detail. But the key takeaway is that our underlying profit and cash flow increase under the new arrangement. Our second priority is State Farm Classic+ expansion and conversion of additional states. We will also prudently expand our Enthusiast Plus product after launching in Colorado last summer. Third is to refine our distribution strategy with partners and accelerate our B2B efforts, including agent distribution enhancements that should drive additional share gains for Hagerty. Fourth is to maintain the quality of our growth through further investments in our claims expertise. This includes building out the material damage and special investigative teams to ensure that claims are handled very quickly and accurately. Fifth is to enhance our member-centric approach and refine the HDC or Hagerty Drivers Club value proposition. And finally, we will continue our multiyear tech transformation and Duck Creek implementation. Executing on these priorities in 2026 should result in another year of strong underlying growth in premiums and cash flow. Let me now turn the call over to Patrick to share more details on our results and initial 2026 outlook. Patrick McClymont: Thank you, and good morning. Before I dig into the results, I wanted to mention that beginning this quarter, the company is presenting its consolidated financial statements in accordance with Article 7 for insurance companies, reflecting the ongoing transformation of the company's business operations. As a result, net investment income is now reported as a component of revenue with prior periods recast for comparability. Also, beginning this quarter, we present 2 segments: Insurance and Marketplace, which is a result of the continued revenue growth and geographic expansion of the Marketplace business. With that, let me walk through our fourth quarter results shown on Slide 6 and 7. In the fourth quarter, total revenue increased 19% to $357 million. Written premiums grew 19% due to robust new business count helped by ramping State Farm conversions and our 89% retention. Commission and fee revenue jumped 18% to $106 million. Earned premium grew 14% to $193 million. Marketplace revenue increased 80% to $29 million. Membership and other revenue grew 8% to $19 million. Net investment income, including gains, was $11 million for the quarter compared to $10 million in the prior year period. Turning to profitability, shown on Slides 8 and 9. We reported fourth quarter income before taxes of $48 million, up 186% year-over-year after incorporating investment income into both periods. Our loss ratio in the quarter came in at 31%, positively impacted by 11 percentage points due to the $21 million reserve reduction. This reduction was primarily due to the favorable development for the 2024 accident year as well as improvement in current accident year experience related to decreased severity and loss ratio trends in liability and physical damage claims. Fourth quarter G&A increased 24% and full year growth was up 15%, inflated by 8 percentage points due to software-related costs for our new insurance policy management system and professional fees associated with the new Markel fronting arrangement. Salaries and benefits were up 20% in the fourth quarter and 19% for the full year due to incentive compensation accruals given our strong outperformance and additional head count to support growth. Adjusted EBITDA came in at $57 million, up 97% year-over-year. Fourth quarter net income was $29 million, an increase of 238% from the fourth quarter of 2024. Net income attributable to Class A common shareholders was $7 million after attribution of earnings to the noncontrolling interest and accretion on the preferred stock. And GAAP basic and diluted earnings per share came in at $0.06 for the quarter based on 100 million basic and 102 million weighted average diluted shares of Class A common stock outstanding. Adjusted earnings per share, defined as adjusted net income divided by 361 million fully diluted shares came in at $0.08 for the fourth quarter. Let me reiterate a few of the key full year 2025 highlights that McKeel mentioned. Commission and fee revenue grew 15%. Earned premium for our risk-taking entity, Hagerty Reinsurance, increased 13% Marketplace revenue jumped 119% to $119 million. 2025 was our third full year of owning Broad Arrow and the team expanded into Europe with 3 successful auctions in 2025, plus January's auction at Retromobile Paris that launched 2026 with $21 million in sales. As McKeel mentioned, we delivered $624 million of total vehicle transactions, including $85 million of financing activity and another $40 million in online sales on Hagerty Marketplace. With last week's announcement that Broad Arrow is now the official auction house of The Quail, a motorsport gathering during Monterrey Car Week, it is clear that our team is firing on all cylinders and is on track to becoming the market leader to help members buy and sell their special vehicles. Membership and other revenue grew 4% to $82 million. Full year loss ratio for 2025 was 39%. With ceding commission for Hagerty Re at 47% of earned premium, our combined ratio was 87%, which includes 3 points of benefit from the $21 million reduction in reserves. Hagerty Re's return on equity for the year was 34% despite building the surplus necessary for the incremental earned premium in 2026 from the new Markel arrangement. Our high-quality underwriting was recently recognized by A.M. Best when they reaffirmed our A- rating and upgraded their outlook to positive. And we successfully renegotiated reinsurance terms for 2026 with a double-digit risk-adjusted decrease in costs. Income before taxes jumped 49% to $139 million as we expanded full year margins another 200 basis points. and we delivered net income of $149 million, nearly double the prior year's $78 million. Full year net income includes the $21 million reserve reduction. This resulted in $0.37 of earnings per diluted share and $0.37 of adjusted earnings per share. Adjusted EBITDA grew 46% to $237 million from the prior year's $162 million, which includes investment income of $39 million in both periods. And we delivered full year operating cash flow of $219 million as we capture more value across our ecosystem. We ended December with an unrestricted cash balance of $160 million and long-term debt of $178 million. Debt, excluding back leverage for Broad Arrow Capital's portfolio of loans collateralized by Collector Cars was only $110 million. We also doubled our lending facility for Broad Arrow Capital to $150 million to meet the borrowing needs of our global customers. And we surpassed $1 billion of investment securities in 2025, primarily high-grade corporate and government bonds. Let me wrap up with our 2026 outlook shown on Slide 10. We anticipate that 2026 will be another year of record growth driven by new business count and the evolved fronting arrangement with Markel. We expect written premium growth of 15% to 16%, an acceleration from this past year's 14%. I want to highlight changes to our accounting related to the new Markel fronting arrangement that will start in the first quarter. Due to the expanded underwriting and claims authority granted to us under the new arrangement, we now control the Essential book of business. Recall that Ascensia is the Markel Insurance company that issues our policies in the U.S. While our U.S. MGA and Hagerty Re will continue to operate in the same manner they have historically. Hagerty Re is now directly the customer of our MGA services, not Ascensia. Therefore, Hagerty Re will now pay the commission directly to our MGA. As a result, the consolidated financials we disclose will no longer show commission revenue or the associated ceding commission expense previously paid by Hagerty Re to Markel. Commission revenue associated with the Markel alliance arrangement was $437 million in 2025 and ceding commission expense related to the company's reinsurance business with Markel was $344 million. In the consolidated income statement, these changes reduced reported commission revenue and ceding commission compared to prior periods. In a steady-state year like 2027, these will largely offset each other in our financials. 2026, however, is a transitional year, and we will have some noise we need to lay out in more detail to help you with comparability. I want to be clear, the driver of this noise is the strategically and economically attractive decision to assume the final 20% earned premium in our U.S. book of business with the new arrangement. This evolution gives us more control and flexibility, allows us to capture more of our high-profit, high-return underwriting business and increases our investment portfolio. First, eliminating the commission revenue means 2026 revenue will come in below 2025 at between $1.28 billion and $1.3 billion. This is a bit counterintuitive considering our written premium, which is the key driver of insurance performance, is growing 15% to 16%. Second, for policies issued in 2025, Hagerty Re paid a ceding commission to Markel. We pay that upfront on the ceded premium with the expense being recognized over the 1-year policy life. As of the beginning of 2026, about half of it is still on our balance sheet at approximately $190 million. We will continue to amortize that amount in 2026 with these burn-off costs inflating disclosed expenses, which will reduce reported profits before taxes by that $190 million. This is a noncash transitional expense that only impacts us in 2026 as we begin operating under the new structure. These costs will decline to 0 by year-end 2026 if they flow through the P&L from roughly $90 million in the first quarter to $10 million in the fourth quarter. A related change to note is in 2026 and beyond, qualifying policy acquisition costs incurred by our MGA subsidiaries for policies issued under the fronting arrangement will be deferred and amortized over the policy term. This includes items such as broker fees, credit card fees and some people costs that are directly tied to generating new policies. Given the complexities around how these costs will impact GAAP net income, we will use adjusted EBITDA to help you better understand our underlying profit and cash flow growth. Slide 11 reconciles the walk to adjusted EBITDA. We recognize there is a fair bit of potentially confusing changes in the presentation of the consolidated financial statements. Jay and I are happy to do follow-ups with anyone who would like to dive in. Wrapping up the guidance for 2026 and reflecting the transitional year, net income is anticipated to come in at minus $41 million to minus $51 million. We expect adjusted EBITDA to come in between $236 million and $247 million. In summary, 2026 is on track to be another great year of growth at Hagerty, but accounting changes will create temporary noise in our 2026 GAAP reported results. 2027 should be a clean year as we have fully amortized the 2025 ceding commission, and our reported results will more closely align with our underlying profit and cash flow. Longer-term, we believe we are positioned to compound profit growth as we target doubling our policies in force to $3 million in 2030. Our differentiated model, brand strength and high-quality underwriting enable us to grow profits predictably year after year through sustained market share gains and with low volatility. New business count-driven premium growth makes us unique in insurance, where most companies' profits are subject to the whims of the pricing cycle. And with an average annual rate increase of just 2% over the last 5 years, 1/3 the increase of daily driver peers, Hagerty is well positioned as a consumer-friendly brand with a compelling value proposition that should enable us to create shareholder value for many years to come. With that, let's now open the call for your questions. Operator: [Operator Instructions] The first question comes from Michael Phillips with Oppenheimer. Michael Phillips: First question on -- Patrick, on the guidance, and I know there's a lot of moving parts. But if we take the net loss number, maybe just take the midpoint of that and add $190 million or maybe the tax effect of the $190 million, are we still below the 2025 $149 million net income? And I know that's way too simplistic given all the moving parts, but is that a basic way to start thinking about things? Patrick McClymont: I think with all the complexity, what we're asking people to really focus on is this adjusted EBITDA guidance that we've provided. And so, if you look at it that way, which is in the press release, what we've done there is it's the same definition we've always had for adjusted EBITDA. The only change that we've included is this last row Markel fronting arrangement transition costs, we're adding back the $190 million. And if you look at it that way, 2025 was a really good year. And it included at the end of the year, when we took a look at the reserves, we had a release of just north of $20 million. If you kind of strip that out and then look at EBITDA in 2025 and then the guidance for 2026, I think we're showing something up like kind of 10 -- a little north of 10%. So that -- I think that's the cleanest way to think about it. Michael Phillips: And maybe one quick one on. Patrick McClymont: The other one, just to clarify is in 2025, we also had the VA release below the line for valuation allowance for tax purposes and the TRA benefit as well. And so those are noise in the net income number in 2025 that we're not assuming there will be anything like that in 2026. And so those were benefits to net income. in '25 that don't recur in 2026. Michael Phillips: And maybe one quick one on the ceding commissions to Markel 190. Is there any potential for that to move up from a profit-related commissions that might come in later? Or is that kind of a solid number? Patrick McClymont: That's a solid number. Michael Phillips: On the loss ratio this quarter, you mentioned the reserve release, obviously. And then I don't think there was any last year. Last year fourth quarter did have some cats a little bit. I guess if you back all that out, your current quarter loss ratio probably moves to around 42%, I have last year, 40%. So, you mentioned an improvement in the current accident year. I'm confused on that. And can you help me with that one? And it looks like to me, the current accident year, again goes from about 40.4% to 42% this year once we back out the cat and the PYD. Patrick McClymont: Once you back out the cat and what else? Michael Phillips: The 10.6 points of PYD this quarter. Patrick McClymont: Okay. Michael Phillips: There's no cat, right? So 31.4% goes to 42%, I think, right? Patrick McClymont: Yes. I think the way that we're thinking about it, we did have reserve release, we did have a very good year in 2025 from a loss perspective. As we look to 2026, we're assuming that our losses are in line with what we've guided to previously, right in the low 40s. We are doing a lot of things in terms of how we manage claims or we've built up our what we call material damage unit. And so things are trending in a positive direction. But from a guidance standpoint, think of it as being right around that consistent number of 41% that we've talked about, and that's the right way to model it. Hopefully, that's helpful. Operator: The next question comes from Charlie Lederer with BMO Capital. Charles Lederer: So maybe just on the written premium guidance, obviously, 15% to 16% really strong. Can you walk us through the assumptions, I guess, of how much of the acceleration is from State Farm, Liberty Mutual and the legacy Hagerty operations? And then just one follow-up on that. I think Mckeel said that there are 7 State Farm conversions ongoing. How many have been completed so far? And how many remain? McKeel Hagerty: Yes. On the written premium, we're not going to break it down by the different categories. The way to think about it is the traditional business, sort of the core traditional business continues to grow at similar rates to what we've experienced. State Farm is definitely accelerating that in 2026 and 2027, we will pretty much wrap it up a big year. '25, we're in 27 states by the end of the year, 7 of which are doing the conversions that you talked about. We're rolling out more conversions this year, so it really ramps up. So that is also a contributor. The Liberty Mutual, we announced that. We're getting underway. That has a relatively modest impact in 2026 and then kind of ramp up from there. Charles Lederer: And just looking at Slide 19, so if I compare the post-1980 TAM to what you showed last quarter, it did go up a little bit. I guess, can you walk us through the assumption changes? Is that a change in data? Or does it reflect an increased, I guess, the appetite for Hagerty? Patrick McClymont: Yes. So as you'd expect, this is a living, breathing analysis. And so we're regularly looking at what we think the TAM is. And this is just the passage of time, right? Over time, the older cars don't go away typically, right? Once they become part of our universe, they're treasured assets and people keep them. And so you see very few of those coming out of the TAM. But what happens is additional vehicles join the TAM, right? There are manufacturers still making cool cars that people view as enthusiast vehicles, and those are exactly the kind of cars that we want to underwrite. So it tends to grow over time. So we just did an update. Charles Lederer: And maybe just one last one. So you gave the numbers on the commission revenue from Markel in '25 and the ceding commission expense. So, as we think about the commission and fee revenue in '26, you guys still expect to get some, right, from your ex-U.S. operations and then the State Farm business, right, that should all still flow through commission and fee revenue. Is that the right way to think about that? Patrick McClymont: Exactly, exactly. The commissions that our risk-taking entity pays to our MGA, that still happens underneath. But upon consolidation, the commission revenue goes away, and the ceding commission goes away. So that's what we're communicating. The other parts of our business where we continue to provide those MGA services, as you described, internationally. So the U.K. business and State Farm, those will still show up as revenue on the P&L. Operator: The next question comes from Gregory Peters with Raymond James. Charles Peters: So I think for the first question, I wanted to -- I was looking at your presentation and on Slide 5, you talked about the 2026 priorities. And I was intrigued that one of the items that wasn't really highlighted, which was a success in '25, was the marketplace revenue. And so, I was just -- when I triangulate the results you did in '25 with marketplace revenue and the guidance you've laid out for '26, just curious about your thinking about that area because that seems to be a strong area of growth for your company. McKeel Hagerty: Yes. Well, thank you, and we were really proud of the delivery of both growth and profitability in 2025 from all of the marketplace activities, live auctions, and really starting to see a little bit of effort from the digital marketplace sales plus capital plus everything else. When we're talking about our priorities, definitely a very insurance-focused year. It kind of goes with our technology spend and how we're focusing on the core business growth, absorbing the State Farm business, et cetera, turning on new partnerships like Liberty Mutual, Safeco that we'll see the benefit of in the years to come. But the marketplace business is continuing to be an important part of our picture. And our first really large sale actually happens next week, Amelia Island, which the press release went out with a very large catalog of cars, which could be really meaningful for us in the first part of the year. So, it's a big part of the business. By nature, in comparison to the insurance side of the house, it's a lumpier business. You just see a lot more variability. Teams are working really very hard but it's still a very important part of it. It's just not listed here. Patrick McClymont: Yes. I think as we think about the revenue from that, McKeel just mentioned Amelia Island, low estimates are $105 million, and that's the largest auction we've ever announced in our history doing this. So we're very excited about that. The way we think about it is the live auction business and the digital auction business will continue to grow. Some of that's geographic expansion. We did our first sale in Paris this year; so that happened in January. And each of the other sales that we've got, we're up to schedule now where we've got 8 scheduled auctions. Our goal is to grow each of those. The private sale business, which had a phenomenal 2025, that's the more chunky sort of episodic business that McKeel was talking about. It was a truly phenomenal year, and we are expecting that business to do well again. But it's difficult from a confidence standpoint to put a high degree of confidence around the prediction there because it is just chunky and episodic. And so as you're triangulating, that may be one of the things that you need to think through phenomenal year in 2025. We'll have a good year this year, but it's hard to say that it's going to be at the same level of where we ended up in '25. Charles Peters: Well, your answer there got to the destination of what I was thinking about, which is trying to work through the mechanics of the flow-through to the income statement for Hagerty from both the digital and live marketplace. So that's clearly top of mind. Perhaps you can do that off further comments offline. McKeel Hagerty: Yes, I'd love to do that. And that's why we went to segment disclosure, right? The business has grown to a point where it makes sense to split it out. We're sharing that information, obviously, in the documents that we've posted, and we're happy to have an offline conversation. It's an important business and continues to grow. Charles Peters: Great. I appreciate that. The other thing that is topical this year, in particular, is technology, artificial intelligence, and ChatGPT. I'm not sure there's a strong correlation between that and classic cars. But I'm sure there's opportunities across your organization to deploy technology to make you more efficient and more successful. Maybe you could spend a second and talk to us about what you're doing and where you're spending your money on that front to improve your company. McKeel Hagerty: Thank you. It's not just a table topic or a topic du jour. It's important work for any kind of company, I think, and for us, too. I think when we think about doubling the policies in force by 2030, we have to find not just kind of core underlying efficiencies and how to run the business, but AI will be an important part of, in particular, how we personalize the experience for a much larger policyholder group and member group over time. This is where AI, we think can really shine for us. But we have a number of initiatives underneath our overall technology investments that are both either piloting AI programs or actively using them in other ways. So, these range from fraud detection on the claims side, how we're analyzing valuations for both marketplace and the insurance valuation services that we offer. We have a number of areas in just the administrative side of this business. We have a lot of people who work in administrative functions. And I don't know about you, but I myself am using AI every single day to do my job in a clearer, more effective way, and we have a number of initiatives to make that happen. But ultimately, it is that personalization of service that we think will be the key benefit for us with AI. So, we have experiments, investments in every single part of that. And nothing to report yet in terms of concrete savings as most companies are also realizing, but we're there and we're very excited about what it can do for us. Charles Peters: And just one little detailed follow-up. You mentioned claim fraud. And I guess it's counterintuitive sitting back here that you would expect there to be claim fraud in classic cars. Do you think the incidence level for claim fraud in your area of the market, it's got to be lower than the broader market, generally speaking, but maybe you have some perspective on that? McKeel Hagerty: Yes. It's just like claims frequency itself, it's lower than standard auto, but you're not immune to it. Our claims business is -- we're downstream from societal factors and all sorts of things. So, you insure more and more cars, you're going to have more and more claims and you'll have more and more instances of potential fraud. For us, it's just that we've always had an SIU or special investigative unit in this business as long as we've handled claims. We just have more sophisticated tools to make sure that we're watching the all the Ps and Qs, if you will, when claims are coming in to make sure that we actually owe the claim. And we're really -- between that and as Patrick mentioned in an earlier answer, we stood up these new material damage units or what we used to call physical damage units that are just being very diligent, bringing in industry best practices in how you manage physical damage claims to make sure we pay what we owe, make sure the customer is happy, make sure we're working with our shops effectively, but you're not overpaying. And that's where -- we're not immune from big industry trends. But definitely, as you mentioned, it's lower in our particular part of the automotive world. Operator: The next question comes from Elyse Greenspan with Wells Fargo. Elyse Greenspan: I guess my first question, going back to some parts of the prior conversation, I was just hoping you guys have spoken to long-term targets right around PIF growth. Just trying to get a sense of just the outlook specifically for 2026. And then within '26, just how much of a ramp are you expecting from the 525,000 State Farm policies? Patrick McClymont: Sure. So, as we mentioned, on State Farm, we're now rolled out in 27 states as of the end of the year. So, 7 of those were doing the conversions of the 525,000, a subset of that within those states. The other 20, we're selling new business. And so when a State Farm agent has a new car with a customer or a new customer, that's what we do initially, and that's our rollout cadence. We always start with the new, and that's to make sure that everything is working and the product -- the agents understand the product, our systems, all that stuff. And then what we've done is we've shortened the time that we're just doing the new. So, we're accelerating when we switch over to new conversion. And that really takes hold as we get into this year, 2026. So, the way to think about it is by the time we get to the end of this year, we'll move from those 27 states to close to full penetration. There'll be a few that stretch over into 2027. But most of the states will be up and running by the end of this year. And we'll be making further progress in terms of the conversions as well. It won't be until 2027 that will be pretty close to full. All states are in conversion mode. We're picking up those policies. So, there's still a couple more year ramp on it. But this is the big year. This is the year that you're going to see real acceleration in getting to that $525 million. And it will happen kind of ratably over the course of the year. Elyse Greenspan: And then there's a lot, I guess, within the guidance. But in terms of like just the loss ratio and how we think about that trending during 2026. Any kind of color that you can provide there relative to '25, I guess, if we exclude the PYD, how are you thinking about the overall loss ratio trending between the 2 years? Patrick McClymont: I think I addressed that in the previous question. The way we think about it is right at that low 40% number, call it, 41%, something like that. That's what we think about from a planning standpoint. As I think you know, in the first and second quarter, we're probably going to book to that just because there's not that much information yet on the prompt year. And as we get into the third and fourth quarter, we'll have more information and there potentially could be some caps, and that's when we think about some adjustments. But that's our framework for it. Operator: The next question comes from Matt Carletti with Citizens. David Scharf: This is David on for Matt. In terms of partnerships, I know there are ongoing that continue to evolve, but is there any sort of pipeline for new potential partners? McKeel Hagerty: Thank you very much. So, these partnerships have been a big part of our growth story for almost 20 years. And just like all the conversation we have about State Farm, it's not just getting the conversation going and it's the contracting phase and the technology implementation phase, but then you get up and running, and it can take a couple of years to get them going. So, we're super excited about the partnerships we have. As we mentioned, we announced the new partnership with Liberty Mutual and Safeco, which was, for us, a really cool, I guess, kind of double win because it's not only a new partner, but it's also a partner that was actively competing with us in the collector vehicle insurance space, and they decided to partner with us instead of continuing to compete independently. So, we're excited about that one. That will take a couple of years to start realizing what it can be. We have active discussions with others, both kind of bigger chunky partners that we don't currently work with as well as smaller and kind of mid-tier insurance partners. We're also looking at a couple of partnerships that are very different than our typical insurance partnership, but that we think can be, as I said, kind of chunky new additional opportunities to fill the pipeline. So more to come, and we'll announce them when we can. Operator: The next question comes from Maxwell Fritscher with Truist Securities. Maxwell Fritscher: I'm calling in for Mark Hughes. How are you thinking about free cash generation in 2026? I guess, asked another way, how do you expect the year-end cash balance to compare to the $160 million you reported? Patrick McClymont: Yes. For 2026, you should think about the cash conversion similar to what you saw in 2025. We are -- our CapEx is it's kind of consistent with the numbers that we've shown over the last couple of years. Most of our CapEx is related to IT. There's not much else that we do that requires CapEx. And so, we're investing in our new platform, but we've been doing that for the last couple of years. So that will be consistent and the normal investments we make in our -- in the overall IT world. So, from a cash flow standpoint, that ends up being pretty close to D&A as well. And then the rest of it really is what we've communicated in terms of the growth in the earnings power of the business, you can start with our guidance around adjusted EBITDA. But assume similar cash flow conversion in '26 versus what we had this year. Maxwell Fritscher: And then following up on the AI question, and you might have answered this, so I'm sorry if I missed it, but are you seeing any opportunity on the distribution front from AI? McKeel Hagerty: Thanks for the question. Clearly, in the marketing function of the business, AI will, and we're actually already piloting some ways that we're thinking about how you can distribute better or better work through lead generation and kind of demand gen. But that's the main focus right now. I know that there are some sort of early announcements out in the industry about almost more completely AI-driven different channels of distribution. Those are not right at the moment on our radar screen, but the group is very actively looking in these areas. And we think because our -- the underlying premise of our business is to find people who love cars. It's an emotional connection between human beings and these cool vehicles. AI is undoubtedly going to provide opportunities for us to sift through that in more granular ways, especially as we were talking about in the earlier TAM answer as new and newer vehicles come online and become sort of in our target zone, we still have to find not just the vehicle, but we have to find the right people, and AI will be very helpful in that. Operator: And our last question comes from Tommy McJoynt with KBW. Thomas Mcjoynt-Griffith: I had a question about what is your outlook for written premium per policy. I understand there's a lot of moving pieces with State Farm coming on board, the Enthusiast Plus program rolling out, perhaps what you guys are filing with rates. So, what do you see as the outlook for written premium per policy in '26? Patrick McClymont: Yes. I think what's going to happen in '26 and the things that would pull it up are -- there are some rate things that are flowing through. There's some mix things that flow through and valuation. And then some is just mix, where we're getting the business from. But the State Farm business, which is really ramping up, does have lower premiums, just the nature of those vehicles, the age of those vehicles and the insured value. And so that will be pulling down on that number. The way we think about it is the core business continues to grow at the rates that we had talked about. We've been very disciplined in terms of rate increases. We talked about on the call, 2% over the last handful of years versus 6% for the broader industry. And so, we'll continue to have our kind of rate increases where appropriate. So that will be a tailwind for us. The State Farm, just -- it's big, it's meaningful. And so that will have a sort of a counterbalance to that as we get into 2026. Thomas Mcjoynt-Griffith: And then second, you mentioned the acquisition costs that are incurred by the MGA starting to get deferred and amortized over the policy term. In '26, will there be some cadence to the quarterly impact of that? I'm thinking perhaps in the first quarter with everything being deferred and not much getting amortized yet, you might get a stronger earnings profile in the first quarter, but then more of a normal impact in the back half of the year. Am I thinking about that right? Patrick McClymont: Yes. The way to think about it is it kind of starts from zero, right, because under the new regime, as we sell policies in 2026, whatever we're putting on the balance sheet is in terms of DAC, that gets booked and it gets amortized over the one-year life of that policy. So you end up from a P&L standpoint, pushing those expenses forward. And so in 2026, you're going to have that ramp up, right? It's not until we get to the end of 2026 that we've renewed all those policies. We've taken on the new ones. So you've got sort of that full balance on the balance sheet, and it gets normalized in 2027. But yes, what you're describing is what's going to happen in '26. Operator: At this time, I would like to turn the call back to McKeel Hagerty for closing comments. McKeel Hagerty: Thank you, operator, and thank you, everyone, who called in and asked thoughtful questions. And thank you to One Team Hagerty for delivering fantastic near-term results while positioning Hagerty for durable compounding growth and margin expansion. Car culture is alive and well with new generations of car lovers driving strong demand for fun cars, especially more modern enthusiast vehicles. In other words, the best is yet to come as we make it easier and more enjoyable to be a driving enthusiast by becoming part of the Hagerty community. We recently launched an ad campaign with our new marketing partner, Barrett Jackson, that I wanted to share with you as it encapsulates the essence of Hagerty. It goes something like this. At Hagerty, we don't see cars as thing, they are unique, alive and loved. We buy them, we wrench on them and sometimes we curse them. But most of all, we drive them. Muscle cars, supercars, rad cars, one-f-one spec cars, coops, convertibles, compacts, liftbacks, fastbacks and hatchbacks. We love them all because cars are for driving and Hagerty is for drivers. We hope to see you next week at Amelia Island, Florida outside of Jacksonville for our Concours d'Elegance on Saturday, March 7, as well as 2 days of Broad Arrow Auctions on Friday and Saturday and Cars and Community on the main show field on Sunday. Our team is hard at work to make it the best Amelia Concour yet. And with that, never stop driving. Operator: Thank you. This does conclude today's teleconference. You may disconnect your lines at this time. Thank you for your participation, and have a great day.