Any comment on their Class A/Class V share structure? I can't wrap my head around the portion of income that is attributable to NCI. I thought the ratio between income for ClassA/income attributable to NCI should stay statble, but this does not seem to be the case. Do you think Class A holders are getting short changed here?
Short answer is no - Class A holders are not getting shortchanged. The ratio is not stable because you have a few moving pieces that impact net income attribution:
1) Exchanges of The Hagerty Group (THG) Units for Hagerty Inc. Class A Stock. Broad Arrow Group (BAG) owners received THG units as part of the BAG acquisition in 2022 and technically would have net income attributed to their share of ownership in THG, alongside Class A and Class V shareholders.
2) Accretion of value in the Convertible Preferred to adjust the carrying value of converts to the estimated redemption value.
3) Deemed dividends on the THG convertible preferred. This amount can fluctuate based on the prevailing prices, I believe.
To seed, build, and nurture timeless, intangible human capitals — such as resilience, trust, truth, evolution, fulfilment, quality, peace, patience, discipline, relationships and conviction — in order to elevate human judgment, deepen relationships, and restore sacred trusteeship and stewardship of long-term firm value across generations.
A refreshing take on our business world and capitalism.
A reflection on why today’s capital architectures—PE, VC, Hedge funds, SPAC, Alt funds, Rollups—mostly fail to build and nuture what time can trust.
“Built to Be Left.”
A quiet anatomy of extraction, abandonment, and the collapse of stewardship.
"Principal-Agent Risk is not a flaw in the system.
Impressive research! Well done! While insurance is indeed government-mandated for car ownership, Hagerty doesn’t necessarily enjoy a guaranteed or exclusive foothold. Do you think that other large insurers, like GEICO or State Farm, could decide to allocate resources toward this niche classic car segment, eroding Hagerty’s customer base?
Thanks for reading! There's certainly always a possibility but I think the evidence would indicate otherwise. 9 of the top 10 insurers have decided to exclusively partner with Hagerty instead of compete against them because they realized that Hagerty is just that much better at underwriting and servicing the claims. Importantly, this niche segment typically only makes up ~10% of the total household premium so these large insurers would much rather "outsource" that emotionally important piece of the business and keep the remaining 90% rather than risk dropping the ball and losing the whole business.
Great read Tuan, very comprehensive write up of a quality business!
Thanks Zach! :)
excellent writeup Tuan.
Any comment on their Class A/Class V share structure? I can't wrap my head around the portion of income that is attributable to NCI. I thought the ratio between income for ClassA/income attributable to NCI should stay statble, but this does not seem to be the case. Do you think Class A holders are getting short changed here?
Thanks Liam, glad you enjoyed.
Short answer is no - Class A holders are not getting shortchanged. The ratio is not stable because you have a few moving pieces that impact net income attribution:
1) Exchanges of The Hagerty Group (THG) Units for Hagerty Inc. Class A Stock. Broad Arrow Group (BAG) owners received THG units as part of the BAG acquisition in 2022 and technically would have net income attributed to their share of ownership in THG, alongside Class A and Class V shareholders.
2) Accretion of value in the Convertible Preferred to adjust the carrying value of converts to the estimated redemption value.
3) Deemed dividends on the THG convertible preferred. This amount can fluctuate based on the prevailing prices, I believe.
Hello there,
Huge Respect for your work!
New here. No huge reader base Yet.
But the work has waited long to be spoken.
Its truths have roots older than this platform.
My Sub-stack Purpose
To seed, build, and nurture timeless, intangible human capitals — such as resilience, trust, truth, evolution, fulfilment, quality, peace, patience, discipline, relationships and conviction — in order to elevate human judgment, deepen relationships, and restore sacred trusteeship and stewardship of long-term firm value across generations.
A refreshing take on our business world and capitalism.
A reflection on why today’s capital architectures—PE, VC, Hedge funds, SPAC, Alt funds, Rollups—mostly fail to build and nuture what time can trust.
“Built to Be Left.”
A quiet anatomy of extraction, abandonment, and the collapse of stewardship.
"Principal-Agent Risk is not a flaw in the system.
It is the system’s operating principle”
Experience first. Return if it speaks to you.
- The Silent Treasury
https://tinyurl.com/48m97w5e
A non tech business!! hallelujah... amazing write up. So fascinating
What a great read!
Thank you for this insightful pitch
Best pitch I’ve read since January. Props. I’ll be digging in to this idea next! Subbed.
Impressive research! Well done! While insurance is indeed government-mandated for car ownership, Hagerty doesn’t necessarily enjoy a guaranteed or exclusive foothold. Do you think that other large insurers, like GEICO or State Farm, could decide to allocate resources toward this niche classic car segment, eroding Hagerty’s customer base?
Thanks for reading! There's certainly always a possibility but I think the evidence would indicate otherwise. 9 of the top 10 insurers have decided to exclusively partner with Hagerty instead of compete against them because they realized that Hagerty is just that much better at underwriting and servicing the claims. Importantly, this niche segment typically only makes up ~10% of the total household premium so these large insurers would much rather "outsource" that emotionally important piece of the business and keep the remaining 90% rather than risk dropping the ball and losing the whole business.
Hagerty is a great business.
Have you read Greenlight Capitals writeups? They are excellent.
Thanks for reading Matt. Do you mind sharing the link to the writeups?
My bad Tom, it's Greenhaven Capital not Greenlight (although they have some great writeups too).
Initial writeup is from their Q2 2022 letter: https://static1.squarespace.com/static/5498841ce4b0311b8ddc012b/t/63828b47a89b9902cff228f3/1669499719982/Greenhaven+Road+-+2022+Q3+final.pdf
They have periodic updates in their quarterly letters, and here is a more recent presentation from them: https://docsend.com/view/czdsxjfp6dssv8zt