Ryan Specialty Holdings, Inc. Class A

Good afternoon and thank you for joining us today for Ryan Specialty Holdings' second quarter 2024 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 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 the financial information presented in accordance with GAAP. Reconciliation 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 at Ryan.

Good afternoon, and thank you for joining us to discuss our second quarter results as well as today's announcement of our agreement to acquire U.S. Assure. We have included our supplemental presentation on our investor relations website regarding the acquisition, which we will refer to during today's call. With me on today's call is our president, Tim Turner, our CFO, Jeremiah Bickham, and our CEO of Underwriting Managers, Miles Waller. Also with us is our chief accounting officer and incoming CFO, Janice Hamilton, and our Director of Investor Relations, Nick Messick. Our second quarter continued our strong momentum, excellent top and bottom line results, reflecting our formidable value proposition, differentiated talent, and niche specialization. Total revenue grew 18.8% year over year to 695 million, driven by organic growth of 14.2% on top of the strong growth we posted in the second quarter of 2023. Adjusted EBITDA grew 27.6% to 248 million. Adjusted EBITDA margin expanded 240 basis points to 35.6%, driven by another quarter of strong revenue growth, savings from Accelerate 2025, and underlying margin improvement in our business. Adjusted diluted EPS grew 28.9% to 58 cents per share. Now turning to slide three of our supplemental presentation. Today, we announced an agreement to acquire U.S. Assure, a leading program focused exclusively on builder's risk insurance. We're excited about this transaction for several reasons. We're significantly expanding Ryan Specialty's broker relationships and total addressable market. U.S. Assure meaningfully increases our footprint in the program segment of delegated underwriting authority. We're pleased to be executing our M&A focused in this area as we see it as ripe for consolidation. We're deepening our capabilities in attractive markets. We will enhance our capability in the attractive SME segment of the builders risk and construction market, which more broadly is a major and fast growing component of US GDP. We're adding a strong and valuable solution set. Having placed business online for over 25 years, U.S. Assurance Distribution Portal is a unique asset, offering an efficient and cost-effective tool that provides a one-stop solution accessed by over 20,000 retailers. This innovative offering provides fully automated, rapid, and seamless quote, bind, and issue capabilities, which has yielded high retention with brokers and agents. We see further optionality to distribute more product and drive deeper engagement through these portals. We expect to make a great business even better. US Assure has a long and enviable track record of strong growth and robust margins, driven by high client retention, efficient distribution via its tech-enabled online portal, as well as consistently profitable underwriting results for their capacity provider. We believe we can further enhance this business through our track record of productivity improvements, including expanded solutions, the addition of new brokers, as well as product innovation. For many quarters, we've discussed M&A as our top capital allocation priority. We've consistently noted that we only move forward with an acquisition when all our criteria for M&A are met. A deal must be a strong cultural fit, strategic and accretive. U.S. Assure fits these criteria perfectly and aligns with our mission of providing innovative, industry-leading solutions for insurance brokers, agents, and carriers. We will be acquiring U.S. Assure for $1.075 billion, which represents approximately 12.8 times trailing 12-month EBITDA. There's also contingent consideration of up to $400 million. This transaction will be immediately accretive to adjusted EPS which Jeremiah will further address shortly. With that, I'm going to turn it over to Miles to discuss the business in more detail. Miles.

Thank you very much, Pat. I want to echo Pat's comments on how excited we are to execute on our M&A strategy. Turning to slide four, delegated authority continues to be an enormous long-term opportunity and one of the core reasons for Ryan Specialty's founding. We have focused intently on building Ryan's specialty as a home where the best underwriters are empowered to innovate. We approach delegated authority through multiple avenues, each a touch point for Ryan's specialty to deliver value to carriers along the entire continuum of binding, programs, and MGUs. Our program's business targets niche industry verticals with a defined product set with typically smaller average premiums than our MGUs. This is the most significant enhancement to our program business since adding all risk national programs unit in 2020 and adds what we believe is one of the largest independent programs. We believe there's a long runway for consolidation and innovation in the program segment. With U.S. Assure, our underwriting management specialty will now make up 28% of Ryan Specialty's total revenue and coupled with finding authority takes delegated authority to 41%. highlighting the diversification of our platform. We will be larger, more diversified, and better equipped to provide innovative, industry-leading solutions to our insurance brokers, agents, and carriers. Turning to slide five, U.S. Assure has been in business since 1977 and has a remarkable track record of success, which is a testament to the strong leadership of CEO Ty Pettway, President Alan Ferguson, and CFO, Selena Breedlove. Culturally, we've been extremely impressed with everyone at U.S. Assure, and we're thrilled to welcome them all to the Ryan Specialty family. U.S. Assure targets builders risk and construction projects in the SME market, specifically sub 50 million in hard costs and writes on admitted paper provided by Zurich with whom they've had a 44 year relationship. The business has an extremely valuable brand and is considered a first call for builders' risk in the SME segment, as it is favored for its efficiency, responsiveness, and targeted industry solutions. U.S. Assure has a long track record of servicing over 20,000 existing brokerage relationships, many of whom will be new relationships to Ryan's specialty. We expect these additional relationships will drive significant new submission flow into our ecosystem. U.S. Assure digitally services the majority of their policies through their highly efficient portal, a hallmark of their business for over 25 years. U.S. Assure has delivered strong growth, consistent with Ryan Specialty's target of double-digit organic growth. Underpinning its strong standalone revenue growth is their diversified product mix across residential and commercial construction, as well as remodeling, with a 50-state reach. Turning to slide six. As Pat outlined, this acquisition is a strategic fit for many reasons. First, U.S. Assure adds connectivity with a broader set of SME-focused retail brokers, where Ryan's specialty can drive deeper, multifaceted relationships. They expand our total addressable market into the SME-admitted segment and perfectly complement Ryan's specialty's existing builder's risk and construction capabilities, which tend to focus on larger projects on a non-admitted basis. The acquisition also expands our relationship with Zurich, a leading global insurer. Second, the acquisition deepens our capabilities in attractive markets. The construction industry has strong macro tailwinds given domestic housing dynamics and secular growth factors, such as the undersupply of homes, the age of national housing stock, and new home inventories remaining modest by historical standards. Third is their unique distribution portal. Over the last 25 years, the team has developed an online portal with unmatched ease and efficiency. A fully automated quote, find, and issuance system drives high client retention. Additionally, US Assure delivers to us valuable new product capabilities and further enhances our value proposition to clients and trading partners. US Assure has significant knowledge of builders risk insurance in the SME segment, which is highly valued by brokers, and speaks that we are continuing to enhance our intellectual capital. And fourth, with a history of strong double-digit growth, a diversified product mix with a 50-state reach, secular growth factors, and our track record of productivity improvements, we are confident in the long-term growth of this business. This transaction will be immediately accretive to adjusted EPS. For the full year 2024, we expect U.S. Assure to generate $123 million of revenue with a long-term sustainable margin in the mid 60s. Turning to slide seven, U.S. Assure is poised to thrive within our ecosystem. We see numerous levers to sustain and improve U.S. Assure's growth. We believe we can further enhance this business through our track record of productivity improvements, including expanded solutions, the addition of new brokers, as well as product innovation. We believe there are substantial opportunities to find E&S solutions for existing submissions that were declined by the admitted market and believe our capabilities in placing difficult risks will bear fruit. We can leverage each firm's vast and complimentary network by going deeper with key brokers and agents while working to develop the new retail broker relationships. We will drive more submission flow into U.S. Assure as RT will find the best solutions for their retail clients. We also expect to develop new products and innovate on behalf of these SME builders risk insureds. We see opportunities that partner with RSCUM's existing construction MGU, technical risk underwriters, in order to assist U.S. Assure in implementing these incremental solutions for the SME segment. We have a longstanding track record of innovation and believe the construction industry has all the hallmarks we look for to develop successful delegated authority solutions. Given these levers, we expect double-digit growth moving forward, and we are confident in the long-term growth of this business. With that, I'll turn it back to Pat.