Ryan Specialty (RYAN) 4 May 232023 Q1 Earnings call transcript

Good afternoon, and thank you for joining us today for Ryan Specialty Holdings' First Quarter 2023 Earnings Conference Call.

In addition to this call, the company filed a press release with the SEC earlier this afternoon, which has also been posted to its website at ryanspecialty.com.

On today's call, management's prepared remarks and answers to your questions may contain forward-looking statements. Investors should not place undue reliance on any forward-looking statement. These statements are based on management's current expectations and beliefs and are subject to risks and uncertainties that could cause actual results to differ materially from those discussed today. review in detailed the the to risk of SEC. encouraged contained factors company's are the discussion more these Listeners filings with in The such required duty no law. the statements by company as future, to except assumes forward-looking update

GAAP measures the with non-GAAP discussed the now release, most in With Additionally, accordance Executive call and this in in Reconciliations are SEC of accordance prepared Chief earnings and isolation as the with should I'd Officer which Ryan. will included the the closely over for Ryan with these in call and a considered GAAP. that, Chairman Pat on substitute to certain like financial be turn financial measures is the company's filed non-GAAP or financial to available Founder, on comparable website. Specialty, measures be to not information of presented

you afternoon, Bickham; Nick Miles quarter on with and With Mezick me first and us Turner; Noah Relations. Wuller; Good from CFO, our is Tim thank to Underwriting discuss Angeletti Managers, results. CEO President, of our call for today's along joining Investor our our Jeremiah

First growth organic represents XX.X%, by total led revenue on a organic XXXX. We to first great XX.X% year. quarter the XX.X% quarter the growth grew in building of of start

We least property quarter. expectations headwinds We in on a strength these also in growth noted lines adjusted year-over-year the achieved offset anticipate we headwinds calls at many quarter, our continued and in double-digit saw on persist with specific prior tailwinds. into growth property. second broad-based will and The were a line in some of our our business, that basis. income first net adjusted EBITDAC we In the of including

inflation in of economic perform performance, will heightened through environment. Overall, and continue firm cycle. especially volatile our persistent to macroeconomic the in when with macroeconomic I'm banking we uncertainty, our the sector, very believe context viewed Despite headlines well the pleased this

uniquely manage insurance are risks our with become positioned innovation seamlessly And the clients we ever and Our experience, more their complex, largely as needs. compulsory. to expertise to products are provide require they

to insurance overall or not P&C in E&S and otherwise continues providing marketplace Growth that the is outpace would be attainable hard-to-place solutions the risks. market

macroeconomic today's resilient, and market Specialty a nimble for Ryan offers the challenges, opportunity is broader E&S tremendous Given insurance and growth.

Specialty, hundreds and each broker tailored complexities to of needs. insurance, Ryan specialized to within industry-leading including cycles navigated are that of the providing comprise the that Specific the clients' our teams lines market, micro of solutions the commercial our uniquely

delivered of and specialties authority partners challenging our a trading management for by partners, experts our continue market. and line find strong in growth. underwriting together capacity The marketing relationships our widespread our profit crafting to large delegated strong carrier and with on Our binding top our clients and behalf clients. by generate and and underwriting towers risks insurers This hard-to-place is trading of valued particularly coverage weaving for insurance exercises

also ability like to transportation. agents have is in This alternatives our to of insurance through meaningful CAT especially placements. expanded innovation and and We creation carriers areas and the property traditional serve brokers,

distinction thanks with teammates the leaders. we assembled pride and our and the serve We since to developing founding, partners of continue great generation team clients our in to next exceptional trading and we've take

long-term of particularly to greatest maintain for onboarded when our offer the proven in our the picked future. shareholders deepen To These clients will history. make seamlessly adding returns and the formula our we of in anticipate the recruitment end, where colleagues, investments develop that in targeted underwriters brokers prospects. capabilities up growth we further new our and are in to continue XXXX class during production and left We we off our we largest from part investments, winning quarter, to current areas need our the

and capabilities robust, remains pipeline bring foundational employee wholesale On our the M&A front, opportunities benefits. including would that

authority forward met. a particularly strategic in we of Every we of to are closed specialties. to remain all our and our acquisition highly fit, our strong of by our require is current period. environment, consistently not it performance. is reminder, binding beginning accretive at a will in contributing brokerage given the growth the only as as both pursuit year, in Griffin must and move do strong criteria We evident As acquisitions, when our Services, Underwriting and acquisition, cultural be the achieve strategic targets acquisitions the any We disciplined

remain XXXX Looking will our be I firm. strong confident for that year another ahead,

accelerated We of on our positioned broader capitalizing growth. are well to capture E&S tailwinds specific while areas the

us pivot results I'm conditions. outstanding for focused Our continues partners trading enable to flexible shareholders. business clients, adapt and market entire of staying our team delivering our and proud and to quickly model to ever-changing for

Our differentiated competition apart stand and up to us to for business to come. significant model from delivering years sets continue continues value the

turn to pleased it over I'm Now Tim? to Tim.

inflation specialties, significantly rate tort and more that We our maintain remain form. Ongoing to you had social and the remains XXXX team the freedom with to E&S climate Pat. Thank start risks very such positioned well more into are momentum much, executing and entire our change continue a playbook. marketplace, We year. industry across trends, determined as of economic mass combined older strong throughout our to inflation, claims, driving successfully which offers

specialties. into Diving our

lines with increases. diminished materials labor, has and to significant recent which seeing This achieved secondary quarter are costs market, specialty we driving across higher balanced of loss pricing at attritional inflation In and forces and elevated growth, both year's reinsurance for most multiple a rate business. activity into property, historically hard play, of higher led another capital levels. Brokerage of Wholesale strong Our including perils, continued April

insurance market approach property April their at X derisking X and These solutions. of XXXX. as at in to strong to are of renewals hard We innovative of and new with the experts as believe of the market, portfolios continue reinsurers the non-admitted a and January X/X driver allow industry-leading and property that felt driving expect the fill a will our to continue renewal effects growth into challenging We need are continued flow reinsurance us factors business be X/X. team insurers

by continues need and for had see social Our another increases. fueled carrier flow to substantial quarter rate continued and transportation strong inflation practice

win to seeing to remain loss casualty into flow share and E&S entertainment, real particularly and on growth of estate. are issues capitalize In like channel, continue education, well lines practice, additional care, we driving our business inflation our higher health and positioned habitational more We trends, opportunities. higher are fair sports and that reserving the in

the sector. the date, a only have modest the sector, D&O on events Regarding recent in on banking we banking to focused seen impact

we D&O insurers or material market, systemic signs a for do hardening. end may losses the the to risk see up While being not is any materially this market at time,

However, But closely Wholesale banking there uncertainty, failures, and in as well market remains is We risks consistently add years. evolve. our coming some positioned we months producers are clients. in our value uncertainty of to deliver believe times to the the especially the grow the Brokerage and solutions about further best monitoring and

we In of our which limited Binding binding, businesses saw specialty, traditional growth includes in somewhat commercial another in quarter by smaller solid personal constraints Authority lines. capacity

and to well as see and a long to we steady positioned further opportunity, We growth potential execute. panel are for consolidation continue

reinsurance profitable specialty to post by growth Management MGU, our strong continued Ryan casualty and and Underwriting in steady Re. led property and Our results

certain expectations. noted, Pat first headwinds our lines were in with specific in the the line As quarter in

declines. liability external in and M&A rate held delayed a saw and IPO in we further accelerating are in rapid many lines transactional saw project-based lower public see D&O now company company construction. continuing is E&S market rate of rate rate firm momentum. to public where cyber, D&O, property is we and and and largely Exceptions with decline or business which the modest the most volumes Specifically, starts seeing pressure Pricing

to cycles, rate see admitted yet on pricing adequacy, are market competition certain markets to flow continues all large standard particularly But and aggregate. pricing with certain overall, step back as we to carrier impact in meaningfully lines has placements, the As or within increase the towers. reach perceived in

As we the more be to non-admitted significant to we driver of of than noted, into continue the rate. Specialty's expect market Ryan so a growth, frequently flow business

Financial Thank Jeremiah now over who the results that, I give first call our you. on more Bickham, will you Chief financial Officer, our of the will quarter. detail With to turn

income fueled many of income period-over-period broad-based win as Net strength million continue quarter our benefit ability to was Tim. for our QX growth per for million XX.X% net we including of revenue or E&S you, revenue grew strong property at share. lines $XX Thank of ongoing new market, of $XXX diluted and in diluted we quarter $XX the or organic see $X.XX the XX.X% Adjusted substantial In share. business. the total to was $X.XX per 'XX QX, another by million of tailwinds to amounts much in

XX basis to quarter $XXX first Adjusted million, adjusted to while EBITDAC declined XX.X% grew EBITDAC period-over-period margin the XX.X%. for points

return investments which EBITDAC fiduciary to impacted T&E both normalized to investment our higher were of by levels, was business and Our margin in partially income. continued by offset continuing

adjusted typically our from of margin, Regarding of and the the while margin, the our quarters in second and basis, and a in and smaller EBITDAC terms first quarters seasonal are revenue strongest a historically terms quarters largest fourth therefore third on are margin lower perspective.

quarter, XXXX and ramp program. Turning expect in half charges charge up and of to had XXXX we a throughout ACCELERATE the our to the small in We second XXXX.

XXXX significant we offset of $XX track with income progress of P&L very savings increase year. and the our additional to that progresses, million and increases year. As onboarding broking expect gradually will materialize will throughout a little as by be XXXX headcount result, recruitment in XXXX. continue the in Savings annual efforts on partially first talent, along these as We in will remain fiduciary in will XXXX. of made the underwriting growth, investment this and savings our we quarter generate progress during annualization investments, we Cost

particularly our are of winning growth the return prospects. talent, formula in to of the investments long-term shareholders for part colleagues, recruitment maintain these offer our highest and said, Pat As a in new proven

increase to guiding of guide rate to XX.X%, We the the our XX.X%. full and of be previous compared year between XXXX which for revenue an XX.X% basis are floor to now to reflects range points XX.X% organic XX growth

XX.X% margin our We adjusted are maintaining EBITDAC and of guidance between XX.X%.

affecting prior expect through headwinds the our will least this at on noted we year. second As growth the we persist of revenue organic quarter calls,

like for pleased performance, With that, near-term summary, we remain you call prospects. your we'd Q&A. open excited our and and time, up were we quarter the with In long-term our about and very first for to thank we

line [Operator the Instructions] come Fargo. from Our questions of with Elyse Greenspan first Wells

is headwinds given that quarter, question be the business, still business the property said first concentration we in go persisting, quarter mix wouldn't first conceptually year the more to i.e., than the the the more but and away? quarter could of lowest start property get organic have if get offset like of the that, know some guys you you headwinds greater I there's these of and will just a once fact to second you that My that

from Elyse, a from side, on more a yes, property an also seasonality perspective. quarter will property There's perspective, be in QX, QX lot and business a telling. the just information especially more it's bigger

am then year? getting I could in less And it of wrong? and Does apply the a but lower, and QX probably same than QX like it keeps bit -- the you right, then meaning QX the headwinds the other the quarters the feel the little felt the to impact of

relief of in the the D&O, not teams the play, But do get are call. new pretty public part headwinds see headwinds innovative in related are as have resilient easier. by number and bit hopefully, company But from opportunities. have, book, for ways win to more and But the some to in and Elyse, a strong The them in a really we who's of should into market. you hardest headwinds, suspect our There's our QX, may QX, that it I relief macroeconomic to say. detail relates expect We're book in and lapped we still as later we'll it create here little related can there. to get given calling found our that results a overall the

feel So our seasonality of year. from smallest good feel is the the a QX the about we're quarter -- about QX good perspective. rest But we results. We

from glean it. too there's that much not information can So you

one. Okay. And one then helpful. That's last

looking to seem hoping environment. is more just positively guys to a on just these get the you're seeing bit You out days. Ryan color and Pat, what there speak things about M&A at little that

Thanks, Elyse. Sure.

an calling integrate comments I We're we roll-up. said. repeated, like very I'd in is companies. pipeline, actually said not and We we're companies we investor robust just As everyone that a not remind really we my strong. to Jeremiah pipeline M&A and companies good great. as in the a We're companies good -- make it better and buy,

do looking we're not that Scope we lines business. keep acquisitions for not expand of do And opportunistic. to important strategic. We're could mind. acquisitions, We're so I scale. When scale. get doing scope, geographies. be we expand we the for Everything really be doing to think Scope But in is it's could when just additional scope. we

we are assimilated for the our in Pacific Northwest authority example, year, already in how our and earlier in and brokerage So binding strategy. they very strategy pleased we're Griffin closed the on advancing

it positive hopeful prior acquisitions. exist. very quite serious the and those do criteria. very and we're M&A communicate optimistic The we've cultural these strategic performance. our said the acquisitions in want transaction stay those these going strategic the acquisitions, already at excited as getting next would disciplined. bring repeat and from So we the and us. today's seeing we're And high. We're we stage that, discussions We're could them productivity really bring be we The results look only said all emerge fit some We're currently and and to about improvements we're in holding about growth, We've we're deals fit, criteria: that discussions. are an And improvement where months of weeks to we organic in all ahead. when that past, X that holding months it. discussions tomorrow's been are in we weeks, And able in We've the objectives accretive. and we'll meets to

being we're quite disciplined, think optimistic. I and So we're but consistent

UBS. come the Weston Our of next from Bloomer questions line with

than the the imply XQ slowdown are And say it I slowdown? on see to my client referencing. submissions missing wins in were seems -- is what does So been the a have more else feels just year ahead are we of property if versus you that abating, first and just your we guidance a could property headwinds other expectations? or results. stronger results? you the Or seem the accelerating like It where else other organic question, headwinds initial Like offset guys guess, full just

Jeremiah. it's Weston,

got the degree floor the we year ticked XX% the would because the and But we've macroeconomic there's thought we acknowledge points of of we And thought range solid and kicked annual for implied XXX a in conditions. But it reason revenue the guidance we prudent to outlook off prudent quarter of a guidance one XX you So that lot it those to was a variability the for well, gotten they've reiterate uncertainty up with. in -- last organic since 'XX was reason reminder, with part worse. basis all the -- we books. XX% to -- just the growth as of factors mostly we a tell improved, people obviously healthy spoke, really haven't started

year, said very, renewals, there's it's new though, and information was of we do. I to while smallest Elyse business, submissions, is our since the it's which, good still as quarter. Our moment indicators, And spoke. look much in very still when QX business, quite at new shape a course, in solid, you we early last all healthy. Those ago, But very not

we're all on really just all So with. still to in macro of the raised in the QX, that we've that that companies facing, off ability floor the confident and reiterated we to range. this basically a start. as are started to XX% that our the we economy uncertainty good XX% exists And range in in all spite deliver factored guide have

the from could range, perspective? backdrop a implied or like the And either that's expand on you macro GDP within inflationary guidance

interest everyone to who are space. is impact globally or conditions, The lack examples. of IPO in has public volume, that M&A Global couple Pricing, on headwind an economic rates, on depending the is which including affecting a down a for XX% thereof, D&O. XX% just rising market, you're a Well, reading.

practice. Great. grow the that? Can of an remarks the are to and give referenced benefits update just prepared And of taking where on build-out in initiatives the you you you're you the employee there some

the talked having optimistic announce We've that quite We're be talked activity a soon Yes. I amount mean, lot able activity. discussions. of that. that playing of serious say should in Sure. good optimistic about have going But very want all about I a of should We've playing, role to that That's potential quite good be completion and about, about defining has that spent be and we to -- time area that exact relatively we're they're organic significant we're to margins. we where growth at point. this that we'll

line from the Our Barclays. next Benguigui with come questions Tracy of

follow-up. a Just

headwinds related already flow already when public revenue organic market company to D&O you ] end guide? contemplated that your developed should second you the the improve mentioned Is You you've so reverse that by [ to the seen because that mid quarter.

We predicting in could the most in we'll that a book We overall to business Correct. placed directly, change just a that of be the that lap, were market. our was after think through not that. there D&O extent full be

Great. reiterated are factors. is that And drivers updated your behind there some key get your achieve you you're I what to in that. this the tracking contemplating you're But EBITDA seasonality guide? guide, margins,

guide a a bit seasonally, QX. it's that inverse us the ramping we was reminder, much said today. to months our year-end a expectations very prudent But still lower sort not appreciate that often only T&E and again, really did it and revenue below growth actually and range, And time. relationship for that more expect line QX most uncertainty a be X difficult annual guide deviate was confident to to -- lower these would, much we in for Particularly, the margin a And quarter and as was from years, we margin on hiring this and expect just range. is from that we in call, the the QX QX our perspective Well, felt margin rate quarterly as since but of up. the reiterating the our last ago variability and prudent of of Tracy, make reflect year, and we're in in to smallest smaller on the and that revenue QX guide size not then range the organic this and at we growth perspective it's of that terms actually, And from basis. with model in quite

come questions next Goldman Rob Sachs. line Our of from with the Cox

large I state kind of drag, it's growth negative, Maybe to southeastern the a been it's been think a specific and especially premium The relative question to of California. there been -- of states. the has some

and Just around. curious turn that driving what's think when potentially could you that

Well, a our creating exposures and construction, habitational, us a position the a California, southwest in been wildfire net lot for It's particular, us to in driven position for of opportunities has transportation. in California. high degree, and big high worth by

market So leader in in California, the I us for believe, surplus tax we're share an California. industry lines on

of volume So being very channel. on the we're business into dumped E&S bullish the

Got to most it. with for That's respect the year. I to the with just think great. margins, T&E difficult this And maybe the comp is regards

was how if on just maybe headwind the expect you quarter to So remainder comment quantify in guys of sort and year. wondering the you the could over of progress T&E I margins to the

Yes.

hiring the There's get by in that absolutely too. end going does affect in be to a worst was are will what for year a ramp-up the through -- more still goes because just the to issue year, did, have expect just the on with T&E rate of on hiring you margins QX, It of annual So comp that's as year. QX. There's will that some closer QX. And better is to be the this in quarters. right. going the the ramp-up to most we lot for same comparable an represented definitely the we the the going flow T&E T&E it's

it margins very And we're like I in that the So confident said, improve. in that the range reiterating with came today. does quarter, this we're

come with questions from Our of Research. Ryan next Tunis Autonomous the line

quarter. the it we quarter? expectations like it the full organic guide or first XQ that seemed What sounded like running in you lower guys the second this I XX% know. thought the It year guess, better in maybe than than First your that might question, spoke, -- when to don't I be got nearly last the

has. Well, nicely and I property think what we was was and that to the growing really quarter in the market guided it continue that we expected fourth that to

driver, then side of to a headwinds it. take these is things, it side it things Got the of of of guess macro percentage guess to And those I not what and kind is macro and like related really D&O seem the be specifically. percentage biggest what quantifying if related? had we're between of of kind But D&O you the

has macro, of D&O which believe amount overlap least D&O is on affects there's we overall IPOs, the impact Ryan, between and that Well, the the an macroeconomic at which environment pricing. because affecting market,

overlap So there's there.

macroeconomic affect headwinds try You break that could it to it But are our maybe that to haven't here. break and everyone specific business book won't or more down then that to we reconcile our things mix. or and out

of of I think is all parts all our M&A net that our our by the QX, teams us fight us of end of through very And in ways D&O -- though, it other if is book, win and the all take and worst up the can to our the our public but HX very alive this volume, strong set for headwinds hope, does what year. headwinds construction of bigger of of well, it. the finding are much one that past company you that, D&O, away, prediction, a

headwinds. then market when that to tougher carriers the I there the of responds mentioned Tim adequate. the rate lastly, a back become some it normal I Like also just, things bit, these more way of like becoming guess, sounds me, And business little it. a bit at market, business little of end hard type Got a are a guess, admitted on cyber just pulling too.

half that is they're why get year headwinds you when going headwinds continue the of back the as mitigate these in would you think think become to guess bigger to So I actually we the wouldn't year? that question goes makes on? my What

the standard Cyber even slowdown headwinds lines business very see slight of of They're of business. think really frame you is narrow. And And mentioned Construction bit narrow the and to the business business on are into that flow Well, strong. E&S D&O, that public was first construction. the could the we very It's the declines little is double that overall going of outliers. a digits. market. back more movement impact those is rates. is into a our residential interest related there's up channel The we construction, market rate just in quarter

to continues all It continues a very beyond and it market expand. So to grow, even and we through firm way that. 'XX see the

So there's no letup whatsoever.

of from Citi. with questions next come Our the Ward line Mike

just I items cash could was any wondering in if go if are wondering and you there the over quarter. onetime flows

items. onetime No. No No.

did in working year, a out up Some lumpy to of bonuses operating twice think in we then them of seasonal to were acquisition QX our and a a basically of through then biggest paid We flows an sort acquisition that run comp for draw QX. X-figure through like outlay And versus flow cash the true-up as capital accrue producers bigger, true would. were an flows and and put cash people earnouts what operating is in we QX. cash for flowing investing the have unusual huge that items and we through have because

that expense at XX/XX lot QX. the balance of So you'll sheet on year in every comp we see accrued a relieve

it's flow So of operating a negative that. net cash because

I transportation broadly, you talked just maybe practice. about think in And strength Great. then

terms bit rate on hoping and in flow. we're performing color of for how that's little So more a

leader market very world. Transportation remains It's loss very, in the firm. reinsurance a

to shared aspect and Our whether very it in on pay dividends. Associates the investment West trucking, of economy. transportation, Coast be some in long-haul has nice Crouse every delivery, started We're

our and get offices difficult world. country, to continue continues quarters a We look have damage firmer a as in to lot several that the transportation and reinsurance the more the we whole in transportation ahead. of do to units of in across And for

next Han the Our [Operator come questions line KBW. from of Instructions] with Derek

other about what care in as estate just prepared flows on which what's worsens? about Can your transportation, estate, I and you think, is is Tim, submission So macro the you real I in health the going well and remarks, outlook markets think healthy if as in your new. talk real talked

Sure. and side the again, the Habitational in up the go of hardest markets, the casualty a done as sector renew rates It's, a in continue on balance of damage reinsurance market. loss even is leader of lot to sheets casualty one the the parts of to the these world. of E&S It's the standard we house accounts.

economic loss having Social large wide impact very are of huge spans inflation, of getting through deterioration the But the factors any business. habitational Apartments, the rate of rate that a into on losses class accounts. -- market type impact, these on a of it cost group risks increases. significant come

as the difficult. hardest today I it be of property that's the can parts casualty on say of one letup would equally So the probably again, market with no in side, And sight.

we on cylinders. business come in both class of see that So

then see a numbers is Got constraints. really question it. didn't that their wholesale And slower that competitor your segment second just That's We helpful. to due called in capacity on in organic at all. my

you was of kind different seeing capacity maybe what strong. very Are any peers? from other makes organic Your And constraints? you

is a net constraint. high a worth. again, business. personal capacity capacity there It's in narrow very But wind a Well, And it's, shortage. class it's and lines. of There's flood

And But out as well leader aggregate it's up loss there. can. aggregate tough bringing it's more wind doing standard It's the our as rolling that and We're we're and much but wind and a attracting of tough. in in we sleeves so very capacity, despite more that. we're markets,

questions any closing There now are to further hand Ryan the would no remarks. I this over time. like Pat for at call to back

tell. optimistic, quite very for is questions. you We're support good are thank interest very and Things and much strong. your Well, company well. feel your you We our for as can going

quarterly some you. you So the but meetings, forward Thank next we report. be of listen, we'll look at meeting to

appreciate you. Thank participation. today's This your teleconference. conclude We does

You your may Enjoy lines disconnect rest time. of the this at your day.