Ryan Specialty Holdings, Inc. Class A

Good afternoon, and thank you for joining us today for Ryan Specialty Holdings' third 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 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. Listeners are encouraged to review the more detailed discussion of these risk factors contained in the company's filings with the SEC. The company assumes 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 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. Thank you for joining us to discuss our third quarter results. With me on today's call is our president, Tim Turner, our CFO, Jeremiah Bickham, our CEO of Underwriting Managers, Miles Wooler. Also with us is our head of investor relations, Nick Messick. Mine especially had another strong quarter as we continued to successfully execute on our strategic, financial, and operational objectives. We grew total revenue 21.8%, led by organic growth of 14.7%. We saw broad-based strength across our specialties and in various lines of business, as well as strong contributions from our recent acquisitions, most notably Socia's. This quarter is a great example of how strategic M&A contributes to total revenue growth and will contribute to organic growth in future years. We also generated double-digit growth in both adjusted EBITDA and adjusted net income on a year-over-year basis. I'm very pleased with our results, as the entire Ryan Specialty team continues to perform at a high level and further validate our differentiated business model. Along with our excellent results, I'm excited to note that we continue to execute on our M&A strategy. Before diving into the details, I want to reiterate how we think about M&A. Our M&A strategy is aligned around the evolving and growing needs of our clients in order to create a dynamic value proposition. Our focus is on M&A opportunities with the highest quality specialty distributors, including wholesale, delegated authority, and employee benefits. We are building out our alternative risk strategy by structuring solutions beyond traditional insurance placements to support our clients and the needs of the insured, be it for P&C or employee benefit strategies. Through the 7A strategy, we are steadily expanding our total addressable market within specialty insurance and deepening our considerable moat by enhancing our scale, scope, and intellectual capital. This, we believe, will help ensure our ability to sustainably grow our platform over the longer term and perform well over our economic cycles. Earlier this week, we announced an attractive and strategic acquisition, which will deliver immediate value to our clients. We continued to build out Ryan Specialty benefits with the signing of a definitive agreement to acquire AccuRisk, which is targeted to close later this quarter and will add $25 million of annual revenue. AccuRisk is in part a medical stop-loss MGU and also provides capabilities in group captives, supplemental health care management, and occupational accidents. We are excited to bring the highly regarded AccuRisk team on board. Our three recent acquisitions in the employee benefits space are now the cornerstone of our medical stop-loss and employee benefits distribution and underwriting platform, as we are rapidly developing our product and services offering to help our clients with integrated health solutions. We generally target firms that have a track record of both higher growth and greater long-term margin potential than the industry average. These employee benefits firms are perfectly aligned with those attributes. Further, we continue to believe there remains a long runway for both organic and inorganic growth in medical stop-loss and, more broadly, employee benefits. Building on a strong year in executing at M&A, our pipeline remains robust. It speaks well to our ability to source a myriad of potential transactions, both tuck-ins and larger acquisitions. 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 in talent during the quarter to further enhance our capabilities in both current and developing lines of business. These investments in talent offer the greatest returns for our shareholders, and are part of a proven winning formula to maintain our long-term growth prospects. Now turning to Accelerate 2025. As we continue to execute on our restructuring actions, we've identified additional opportunities to drive continued growth and innovation, deliver sustainable productivity over the longer term, and accelerate margin improvements. We now expect to generate annual savings of approximately $50 million in 2025, with cumulative special charges of approximately $90 million through the end of 2024. Turning to the market, the E&S marketplace remains robust, providing solutions that are otherwise simply not available for hard-to-place risks. We expect this trend to support our growth and continue for the foreseeable future. As we have previously noted, we've invested significantly in those lines, and we see clear opportunities to grow, in addition to bolstering the lines of business where our clients need us the most. Looking forward, we recognize the more uncertain macroeconomic and geopolitical environment, yet expect favorable specialty insurance market dynamics to persist, which we believe will provide us with robust opportunities for continued growth. We are well-positioned to further capture the broader E&S tailwinds through our flexible and differentiated business model and capitalize on our specific lines of accelerated growth. Our exceptional team continues to consistently deliver, adding value for our clients, trading partners, and ultimately our shareholders. Now I'm pleased to turn it over to Tim. Tim.

Thank you very much, Pat. The third quarter saw our momentum from the first half of the year seamlessly carry forward as we generated double-digit growth across all our specialties. Turning to the market, ongoing industry trends persist, notably an increasingly complex weather and legal environment, a sizable pullback in risk appetite from the admitted market, and uncertainty regarding reserve adequacy. These trends are driving more risks into the E&S marketplace, which offers significantly more freedom of rate and form, and is thus able to provide critical solutions for these risks. Given our specialized and industry-leading team's ability to navigate the complexities of the market, we plan to continue delivering and exceeding expectations for our clients. Diving into our specialties. our wholesale brokerage specialty generated another quarter of strong growth. In property, elevated loss activity driven by severe convective storms, higher reinsurance costs, persistent inflation, an ongoing focus on insurance to value, and a reduction in available capacity make for an incredibly challenging market. These factors are continuing to drive flow of new business into the ENS market. The ENS market continues to respond well, providing solutions for insureds while surplus lines insurers are exhibiting more conservative appetites and tighter limit management, especially around coastal property, severe convective storms, wildfire, flood, and earthquake risk. Our teams of experts are assisting our clients in navigating the significant complexities of this market and devising tailored solutions that best fit the insured's needs. Our casualty practice also had another strong quarter, driven by higher flow into the ENS market in both primary and excess casualty, particularly for large venue risks, healthcare, habitational, and real estate, which are all experiencing higher loss trends driven by economic and social inflation and reserving issues. Our transportation practice continues to see significant flow in the quarter, driven by social inflation, carrier need for continued rate increases, a pullback in underwriter appetite, and market exits. We also received strong contributions in the quarter from our new team members that joined us through our acquisition of Socius, which officially came on board at the beginning of July. Overall, our wholesale brokerage specialty remains dedicated to executing on its game plan, which includes continued evolution of strategies and products to meet changing needs. And we expect to generate consistent and profitable growth for the foreseeable future. Our binding authority specialty had an excellent quarter with the trends we saw in the first half of the year continuing in the third quarter, despite ongoing capacity constraints and personal lines. There remains plenty of potential for panel consolidation as a steady long-term growth opportunity, and we are well positioned to execute. Our underwriting management specialty also performed very well. Growth was driven by sustained broad-based rate increases, particularly in property, contributions from new growth initiatives such as excess casualty and alternative risk solutions, incremental capacity fueling growth in cat property, transportation, and at our reinsurance MGU, Ryan Rhee, and profit commissions, including many of the strong historical performance in the preceding soft market cycle. We also announced the acquisition of Accurisk, which adds breadth and depth to our growing benefits practice. As Pat mentioned in his remarks, our acquisition strategy continues to provide us with new avenues, such as alternative risks and benefits, to substantially expand our total addressable market. This will enable us to further grow alongside our clients' evolving needs, ensure our ability to sustainably grow our platform over the longer term, and perform over economic cycles. Turning to price, through Q3, we remained in a prolonged stage of historically hard market conditions. Pricing in the ENS market largely held firm or accelerated in many lines of business, with property continuing to see the strongest rate momentum, though in a seasonally smaller quarter. Exceptions remain in public company DNO and cyber. As with all cycles, as certain lines are perceived to reach pricing adequacy, admitted markets tend to step back in on certain placements. That said, we still have yet to see this play out, and the standard market has not meaningfully impacted 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 third quarter. Thank you.