Hagerty is a 'swift and strong' company benefiting from a statutory requirement for insurance on classic cars. The company has demonstrated exceptional operating leverage, with revenue growing at a CAGR of 23.1% from 2020 to 2025, while EBITDA grew eightfold from under $30M to $237M annually. Despite 2026 guidance suggesting muted operating leverage, we believe Hagerty will exceed expectations barring catastrophic events. The partnership with State Farm is expected to add significant policies, and momentum is accelerating with written premiums increasing dramatically. Additionally, a trial partnership with Geico could further enhance growth, which the market has largely overlooked.

Hagerty is firing on all cylinders, having appreciated 36% in 2025 and becoming our second largest holding. The onboarding of over 1 million State Farm policies will significantly boost revenue, while operating leverage is expected to drive EBIT margins from 12% in 2025 to over 20% in the coming years. With a customer retention rate of approximately 90% and a net promoter score of 82, Hagerty's marketplace business is also gaining traction, evidenced by substantial growth in auction and private sales transactions. Overall, we anticipate earnings growth of over 25% per year in 2026 and 2027.

Hagerty's earnings could grow 5x from 2024-2029, driven by three factors: the transition of the State Farm partnership from a multi-million-dollar expense to a profit contributor, the operating leverage from consolidating onto one IT platform (Duck Creek), and the normalization of loss ratios back to Hagerty's historical 42% target. Insiders own nearly 86% of the company, which has a large base of recurring revenue with over 90% of policies renewing, pricing tailwinds, and significant operating leverage. The earnings improvement would be a continuation of a trend that began in 2022.

Hagerty (HGTY) is positioned well despite current trade policies, as the impact of tariffs on the classic and collector car insurance market is hard to discern. This uncertainty has created a buying opportunity, prompting us to increase our stake in the company. We believe that Hagerty's unique market position and the resilience of the classic car sector will allow it to thrive, making it a valuable addition to our portfolio.

Hagerty (HGTY) is positioned well despite current trade policies, as the impact of tariffs on the classic and collector car insurance market is hard to discern. This uncertainty has created a buying opportunity, leading us to increase our stake in the company. We believe that Hagerty's unique market position and the resilience of the classic car sector will allow it to thrive, making it a valuable addition to our portfolio.

I believe that specialty insurer Hagerty (HGTY) will integrate AI-based tools over time to significantly reduce the cost of servicing claims. This integration of AI is expected to enhance operational efficiency and create value for the company, positioning it favorably in the market.