Ryan Specialty Holdings, Inc. Class A

Good afternoon, and thank you for joining us today for Orion Specialty Holdings' second 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 orionspecialty.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. Listeners are encouraged to review the more detailed discussion of these risk factors contained in the company's filing with the SEC. The company assumes no duty to update such forward-looking statements in the future and 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 non-GAAP financial measures to the most closely comparable measures prepared in accordance with GAAP are included in the 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, and thank you for joining us to discuss our second quarter results. With me on today's call is our president, Tim Turner, our CFO, Jeremiah Bickham, our CEO of Underwriting Managers, Miles Wooler, and Nick Messick from Investor Relations. Brian specially had a great quarter with strong momentum continuing across all of our strategic financial and operational objectives. We grew total revenue 19.1%, led by organic growth of 16.1%, building on the 22.3% organic growth in the second quarter of 2022. We also achieved double digit growth and adjusted EBITDA and adjusted net income on the year over year basis. We saw broad-based strength across our specialties, particularly in property and in many individual lines of business. The specific headwinds we noted on our prior calls were in line with our expectations and partially offset some of the very strong tailwinds we experienced in property. Overall, I'm very pleased with our performance in the quarter and throughout the first half of 2023. In addition to delivering great results, we continued to execute on our M&A strategy. In July, we completed three attractive and strategic acquisitions, which added scale and scope to our wholesale specialty and launched our benefits practice. The first is Socialist Insurance Services. With approximately $40 million of annual revenue, Socialist adds high-quality talent to our professional lines and cyber teams and deepens our scale and scope and key hubs like San Francisco, Tampa, and Miami. We are confident in the outlook for this business given our longstanding familiarity with the team and our proven ability to help firms grow on our platform through our relationships with the top 100 retail brokers, access to our proprietary products, and expand carrier relationships. We also completed two employee benefits acquisitions, 0.6 Healthcare, and ACE benefit partners, adding just under $10 million of annual revenue. These firms provide exceptional talent and foundational capabilities around specialty benefits. We have diligently assessed opportunities in the benefits market, targeting firms that have a track record of both growth and long-term margin greater than the industry average. And these medical stop-loss focus firms are perfectly aligned with those attributes. Medical stop-loss insurance plays a vital role by smoothing the volatility in healthcare spend through reinsuring a self-funded benefits plan against high-cost claims. We expect medical stop-loss insurance to continue to play a crucial role in financing and risk mitigation strategies, particularly as healthcare innovation accelerates and high-cost drugs and gene therapies become more prevalent. We are pleased to enter this niche that boasts over $25 billion in premium in the US, with a 12% compound annual growth rate since 2014. We believe there's a long runway for both organic and inorganic growth in benefits and are excited to add these capabilities to our specialties. Further on the M&A front, our pipeline remains robust. We remain disciplined in our pursuit of acquisitions, particularly in the current environment, as we will only move forward when all of our criteria are met. Each acquisition must be a strong cultural fit, strategic, and accretive. We continue to make targeted investments during the quarter, as we brought on additional talent to further enhance our current capabilities. and developed areas where we anticipate our clients lead us in the future. These investments, particularly in the recruitment of new colleagues, offer the greatest returns for our shareholders and are part of a proven winning formula to maintain our long-term growth prospects. That takes us to Accelerate 2025, our two-year restructuring program announced earlier this year. We are making investments that will enable continued growth, drive innovation, deliver sustainable productivity increases over the long term, and accelerate margin improvement. We have made solid progress in the second quarter, which Jeremiah will discuss further. We remain on track to generate a targeted annual savings of at least $35 million in 2025, with cumulative special charges expected to be at least $65 million through the end of 2024. Throughout the second quarter, the E&S marketplace remained robust. E&S continues to provide solutions that are otherwise not available for hard-to-place risks. As we previously noted, we've invested significantly in those lines where we see clear opportunities to grow, in addition to bolstering the lines of business where our clients need us the most. We have also continued to expand our ability to serve brokers, agents, and carriers through innovation and creating alternatives to traditional insurance placements in areas like cat property and transportation. Looking ahead, we expect favorable specialty insurance market dynamics to persist, and we remain confident that 2023 will continue to be another strong year for our firm. We're in a prime position to capture broader ENS tailwinds and also further capitalize on our specific lines of accelerated growth. Our differentiated business model allows us to remain ahead of the competition, and our flexibility enables us to quickly adapt and pivot when market conditions shift. We continue to expand our total addressable market through innovation and strategic acquisitions, and further deepen our moat with scale, scope, and intellectual capital. We're able to do all of this because of our exceptional team, who consistently deliver impressive results and value for our clients, trading partners, and ultimately to our shareholders. Now I'm pleased to turn it over to Tim. Tim.

Thank you very much, Pat. As Pat noted, it was another strong quarter across our specialties. as we continue to successfully execute on winning new business and producing innovative solutions for our clients. The effects of industry trends such as climate change and natural disasters, accelerating social inflation, and broad-based economic inflation happening concurrently with reduced insurance capital, a pullback in underwriter appetite, and market exits make for an incredibly challenging insurance market. Additionally, continuous change in the loss environment and growing uncertainty in reserve adequacy is driving more risks into the E&S marketplace, which offers significantly more freedom of rate and form. Given our specialized and industry-leading team's ability to navigate the complexities of the market, we plan to continue delivering for our clients and expect to further expand our market share. Diving into our specialties, our wholesale brokerage specialty generated another quarter of strong growth. In property, elevated levels of attritional and secondary perils, including severe convective storms and persistent inflation from higher cost of materials and labor shortages are driving up lost costs. Additionally, Market conditions, including higher reinsurance costs, reduction in available capacity, and ongoing requirements for proper valuations are driving higher retentions of risk and ultimately more volatility into the U.S. direct property market. These factors are continuing to drive flow of new business into the E&S market. The E&S market is responding. yet it is also experiencing more conservative appetites, significant rate increases, and tighter limit management, especially on coastal property, severe convective storms, wildfire, flood, and earthquake risk. We are well positioned to assist our clients in navigating the complexities of this market. Our A-plus team of experts are working tirelessly to bring important and creative solutions to our retail brokers and trading partners in this challenging market. Our transportation practice continue to see substantial flow in the quarter, fueled by social inflation, carrier need for continued rate increases, and a pullback in underwriter appetite and market exits. We continue to win more than our fair share of new business and remain well positioned to capitalize on additional growth opportunities. Our casualty practice also performed very well in the quarter. We continue to see higher loss trends, inflation, and reserving issues drive more flow into the ENS channel across both primary and excess casualty, particularly in lines like health care, habitational, and real estate. And as Pat noted, we completed the acquisition of Socious, at the beginning of July and are excited about the addition of new teammates who have hit the ground running and are a clear cultural match with Ryan's specialty. Overall, our wholesale brokerage specialty continues to successfully execute its game plan, and we see a long runway of consistent growth ahead. In our binding authority specialty, we saw another quarter of solid growth in traditional binding. which includes small commercial business and growth in personal lines, despite continued capacity constraints. We continue to see further potential for panel consolidation as a long and steady growth opportunity, and we are well positioned to execute. Our underwriting management specialty also generated strong results, led by continued steady and profitable growth in property and casualty and our reinsurance MGU, Ryan Rhee. We also launched our benefits practice with the acquisitions of Point Six Healthcare and ACE Benefit Partners. Our team was extremely thoughtful in determining where we could best add value in this large and important market. And medical stop loss is where we see a clear opportunity for rapid expansion within this fast-growing specialty niche. John Zern and his team are hard at work expanding our sales force in this practice. We look forward to updating you on the progress of benefits in the quarters ahead. As we had mentioned on our prior call, and as Pat just noted, the specific headwinds in certain lines in the second quarter, namely public company D&O, lower external M&A volumes in transactional liability, and delayed starts in construction, remained in line with our expectations. We expect any growth benefit in these three lines to be modest in the second half of the year. Turning to price through Q2, we remained in the prolonged stages of a historically hard market. Pricing in the E&S market largely held firm or accelerated in many lines of business, with property continuing to see the strongest rate momentum. Exceptions remain public company D&O and cyber, where we saw further pressure. As with all cycles, as pricing continues to increase and certain lines are perceived to reach pricing adequacy, we see admitted markets step back in on certain placements, particularly within large towers. But overall, we still have yet to see the standard market meaningfully impact rate or flow in the aggregate. We continue to expect the flow of business into the non-admitted market to be a significant driver of Ryan Specialty's growth, more so than rate. With that, I will now turn the call over to our Chief Financial Officer, Jeremiah Bickham, who will give you more detail on the financial results of our second quarter. Thank you.