Hagerty: Leader in Collector Car Insurance, With Reinvestment Runway

Kyle Campbell of Greenhaven Road Capital presented his investment thesis on Hagerty (US: HGTY) at Wide-Moat Investing Summit 2024.

Thesis summary:

Hagerty is the leading specialty insurance provider for classic and collector cars, partnering with nine of the top ten auto insurers in the U.S. While insurance has been the core driver of the business since its inception in 1984, the leadership team is leveraging its current dominant position in a niche industry to build a much larger company that will ultimately control the car enthusiast ecosystem.

Hagerty’s reinsurance business earns 25-35% after-tax returns on incremental invested capital. The company controls its own pricing and has consistently achieved sub-40% loss ratios, compared to an industry average of 68%. After a multi-year investment period in advance of new partnerships and products, Hagerty’s Managing General Agent segment is returning to profitability and should achieve mid-teens margins over the next couple of years.

Hagerty recently launched an online marketplace business for classic/collector cars. With a laser focus on trust and value-added services, this offering is well-positioned for years of rapid, high-margin growth.

An owner-operator with large insider ownership, heavy-weight partners (Markel and State Farm), historical financials that do not reflect underlying business reality, and a stable business with low churn that can grow for decades with no additional capital makes Hagerty an attractive investment opportunity for those willing to do the work.

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About the instructor:

Kyle Campbell is a Senior Analyst at Greenhaven Road Capital with a strong background in finance, accounting, and data analysis. Prior to joining Greenhaven Road in 2021, he was the CFO of a single-family office, where he led a comprehensive overhaul of financial reporting systems and made capital allocation decisions across both public and private investments. Before entering the finance world, Kyle spent 14 years in the US Air Force, serving in various intelligence roles that supported special operations around the globe. He holds an MBA from Columbia Business School and is a graduate of their prestigious Value Investing Program.

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