Ryan Specialty Holdings, Inc. Class A

Greetings and welcome to Ryan Specialty Group fourth quarter 2022 earnings call. At this time, all participants are in a listen only mode. A question and answer session will follow the formal presentation. If anyone should require operator assistance during the conference, please press star zero on your telephone keypad. As a reminder, this conference is being recorded. I would now like to turn the conference over to your host, Noah Angeletti, Head of Investor Relations and Treasurer. Please go ahead.

Good afternoon, and thank you for joining us today for Ryan Specialty Holdings' fourth quarter and full year 2022 earnings conference call. In addition to this call, we filed a press release with the SEC earlier this afternoon, which has also been posted to our 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 statements. 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. We encourage listeners to review the more detailed discussion of these risk factors contained in the company's filings with the SEC. We assume no duty to update such forward-looking statements in the future, except as required by law. Additionally, certain non-GAAP financial measures will be discussed on this call and should not be considered in isolation or as a substitute for the financial information presented in accordance with GAAP. Reconciliations of these non-GAAP financial measures to the most closely comparable measures prepared in accordance with GAAP are included in our earnings release, which is filed with the SEC and available on the company's website. With that, I'd now like to turn the call over to the founder, chairman, and chief executive officer of Ryan Specialty, Pat Ryan.

Good afternoon. Thank you for joining us to discuss our fourth quarter results. Joining us on today's call is our president, Tim Turner, our CFO, Jeremiah Bickham, and our CEO of Underwriting Managers, Miles Lohr. Before we discuss Ryan Specialty's 2022 performance, I'd like to take a moment to reflect on the passing of Andrew J. McKenna. Andy was an invaluable member of our board since its inception in 2012, serving on the Compensation and Governance Committee and is our lead director. And he was a national voice on the topic of corporate governance. Chicago institution, business icon, humanitarian philanthropist, husband, father, brother, and a dear friend. He will be missed by all who knew him. 2022 was an outstanding year for Ryan Specialty. The tireless efforts and dedication of our brokers underwriters and the entire Rhine specialty team is evident in our results. For the full year, we generated record revenue of over $1.7 billion, driven by organic growth of 16.4% on top of 22.4% in 2021, and produced a strong adjusted EBITDA margin of 30%. I want to take a few minutes to highlight some noteworthy achievements in 2022 which were significant for our firm. We invested in exceptional talent while onboarding the largest production class in our history. We enhanced our capabilities through new product offerings and integrated our 2021 acquisitions of Keystone and Kraus, both of which exceeded their growth goals for the first year as a part of the Ryan Specialty team. We were pleased to announce a highly strategic acquisition Griffin Underwriting Services, which closed on January 3rd of this year. With approximately $23 million in revenue, Griffin deepens our offerings in the Pacific Northwest, broadening our geographic scope and our capabilities in binding authority and brokerage specialties. Importantly, Griffin's consistent underwriting results, deep bench of talent, and focus on training and development is a clear cultural match with Ryan Specialty, further enhancing Ryan Specialty's essential role as a trading partner to our retailers. Continuing our winning culture, I'm pleased to report another year of 97% retention of our producers, consistent with 2021. For the fourth quarter, total revenue grew 14.9%, led by 10.3% organic growth. We also grew our adjusted EBITDA and generated another quarter of solid adjusted net income. In the fourth quarter, the specific headwinds we noted on our prior call were in line with our expectations. We anticipate that these headwinds will persist into at least the first half of 2023. That said, we were very pleased to see the strength in property manifest itself late in Q4. which drove the modest outperformance versus our expectations for the quarter. As we progress through 2023, there are three things we believe you can expect from Ryan Specialty. First, we see continued solid growth in the business. Although there is heightened macro uncertainty, the complexity of risks continues to increase, and as a result, we believe the E&S market will continue to be a standout within the insurance industry. We expect our growth will be balanced across our diverse portfolio of products and solutions, enabling us to capture the broader ENS tailwinds while capitalizing on specific areas of accelerated growth. We expect to grow our business through M&A. Our pipeline remains robust, both in tuck-ins and some larger platform opportunities. We continue to focus on M&A opportunities with the highest quality specialty distributors, including wholesale, delegated authority, and benefits. We will also look to grow our business through our alternative risk strategy, arranging alternative capital to support our clients, expanding our addressable market, and building on our culture of innovation. Second, we will continue to invest in our business. We expect another year of targeted hiring, adding industry top talent in both underwriting and broking where they're needed most, as well as continuing to build our internship program and Ryan Specialty University. We will also make additional investment in our delegated authority specialties, including the systems and technology to further enhance our actuarial risk management and loss control teams. And third, we will execute on strategic initiatives to increase the scalability of our operating platform. Today, we are announcing the launch of Accelerate 2025, a two-year restructuring program effective in Q1. Through this program, we're making changes and investments that will enable continued growth, drive innovation, and deliver sustainable productivity improvements over the long term. Accelerate 2025 is a natural progression of our strategy that brings together our people and assets in a way that allows us to continue to rapidly innovate and more efficiently provide new and improved solutions to the most complex challenges that our clients face. Jeremiah will provide more details in his remarks, but we anticipate a cumulative special charge of approximately $65 million through 2024. We expect the program will deliver approximately $35 million of annual savings in 2025 and further enhance our ability to scale our platform in the years beyond. Accelerate 2025 is designed in concert with our growth strategy, and we will continue to make investment decisions, including hiring an M&A based on a disciplined return on capital basis both now and in the future. Looking forward, I'm confident that 2023 will be another strong year for our firm. We expect sustained growth and have a flexible business model that allows us to quickly adapt and pivot to changing market conditions. As we've noted previously, risks across industries are only becoming more complex, and the E&S market has continued to outpace the overall P&C insurance market. Our products are larger compulsory, and our clients and trading partners value the unparalleled expertise we bring as we anticipate their needs and work tirelessly to provide the right solutions for our insurance. This, along with our other secular growth drivers, should allow us to continue generating double-digit organic growth over the long term. In summary, I'm very proud of our entire team. for delivering outstanding results for our clients, trading partners, and shareholders in a challenging insurance market and macro environment. Through innovation and exceptional customer service, we have once again validated our differentiated business model and continue to be a trusted partner to substantially all of the top 100 retailers. I'll turn it over to Tim. Tim.