Ryan Specialty Holdings, Inc. Class A

Good afternoon, and thank you for joining us today for Ryan Specialty Holdings' fourth quarter and full year 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 that 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 like to turn the call over to founder and executive chairman of Ryan's specialty, Pat Ryan. Ms. Ryan, please go ahead.

Good afternoon, and thank you for joining us to discuss our fourth quarter results. With me on today's call is our CEO, Tim Turner, our president, Jeremiah Bickham, our CFO, Janice Hamilton, our CEO of Underwriting Managers, Miles Wooler, and our Director of Investor Relations, Nick Messick. Before we discuss our results, I want to take a moment to comment on the California wildfires. Our thoughts and prayers are with everyone affected, including our teammates, clients, and trading partners. The loss of life and destruction is tragic. These events are yet another reminder of the difficulty and evolving loss environment in which we operate. We remain well positioned to assist our trading partners navigate an ever-changing insurance landscape. Now turning to our financial performance, 2024 was another outstanding year for Ryan Specialty as we delivered on all of our strategic priorities. Our strong results are a testament to our conviction to put our clients first our focus on specialized expertise, our commitment to rewarding top talent, and our dedication to excellence in everything we do. For the quarter, we delivered organic revenue growth of 11%, on top of our toughest quarterly comparable of 16.5%. I'm very proud of our organic revenue growth, considering the volatile property market conditions, along with the exceptional performance of our casualty lines of business and all three specialties, all of which Tim will provide more color on shortly. This quarter is a telling example of how our specialized, diverse portfolio can balance out and even overcome difficult market conditions to produce exceptional organic growth at scale. For the full year, we surpassed revenues of $2.5 billion up 21% year over year, driven by organic growth of 12.8%, on top of a 15.4% in 2023, and significant contributions from our M&A strategy. We marked our sixth consecutive year growing the top line by 20% or more, and our 14th straight year of double-digit organic revenue growth. Pool year adjusted EBITDA grew 30% to $811 million. Adjusted EBITDA margin expanded 210 basis points to 32.2%. Adjusted earnings per share grew 30% to $1.79. We successfully executed the largest year of M&A in our history. completing seven acquisitions with trailing revenue of over $265 million. We carried that momentum into 2025 and are off to a great start. Earlier this month, we closed on the Velocity Underwriting Managers transaction and are very excited to welcome those new teammates into the Ryan Specialty family. We are pleased with the success we had to bring in these great firms. which expands our total addressable market. We've added multiple specialty-leading MGUs and programs with unique product sets, technology advantages, like efficient online distribution, and have expanded geographically. The evolution of our business mix is consistent with our core mission of offering differentiated specialty insurance services to brokers, agents, and carriers. Further, it offers clear diversification benefits to our financial performance, including velocity. Delegated authority now makes up nearly 45% of our revenue. The build-out of our delegated authority capabilities and specialty lines was part of the core thesis for Ryan Specialty's founding, and we are proud to have been an early mover investing in this segment. we've led structural changes that have fueled growth and increased adoption of delegated underwriting authority across our industry. In my founding letter that accompanied our IPO, we set out a strategy to build a delegated underwriting authority business with a differentiated platform and top-flight underwriting talent. This was in response to the growing unmet need among insurance carriers for a trading partner that could assist them in meeting the challenges and opportunities of a rapidly evolving and increasingly complex specialty insurance market. As we move into 2025, we see continued validation of our delegated authority strategy and confirmation of acceleration in carriers' use of delegated authority. Specifically, I am best recently published a market-wide study which cited scale delegated authority partners as increasingly valuable for a number of factors. Notably, niche specialization, portfolio diversity, improved costs and efficiency, speed to market, and access to superior underwriting technology were all cited and have been core to our offering since inception. Additionally, of the carriers polled, 70% were expected to grow their use of delegated authority in 2025, with no respondents planning to shrink. Overall, 52% of respondents commented that delegated authority would take a more significant role in the insurance value chain, again, with zero respondents seeing a possibility of decline in relevance. As we look back at the last 15 years of investments in our business, we are proud of what we've achieved. Ryan's specialty is stronger than ever. We're excited to see the benefits from our recent acquisitions come through. As we've repeatedly noted, this year's M&A is next year's organic growth. As we look to 2025, we expect to deliver another year of double-digit organic growth, as well as margin expansions. We believe that we will continue to deliver innovative solutions to our clients, generate industry-leading organic growth, execute on our M&A strategy, and increase profitability while investing in our platform, all of which drive significant additional value for our shareholders. I'm proud of our entire team's dedication and relentless efforts to evolve our brand into the very best specialty insurance services firm in our industry. And I'm very excited for our future. Now I'm pleased to turn the call over to our Chief Executive Officer, Tim Turner. Tim?

Thank you very much, Pat. It was another outstanding year for Ryan Specialty as we delivered our 14th consecutive year of double-digit organic growth with very strong new business generation. our full-year organic growth of 12.8% was strong, driven by consistent results in casualty. Property was also solid for much of the year, and our team managed this challenging environment well, despite rate deterioration, which became more pronounced in the fourth quarter. We executed on one of our top strategic priorities, completing a record year of M&A, with the largest transaction being our acquisition of U.S. Assured. We added over 265 million of annual revenue to our platform, as well as a myriad of capabilities to our underwriting management specialty. For example, with both Castel and Innovisk, we significantly enhanced our UK and European footprint and set the stage to accelerate our international expansion. With each, we added key talent, new capabilities, and incremental products, including a strong environmental MGU, which complements our brokerage expertise. With U.S. Assure, we've added to our sophisticated set of builder's risk products to serve the attractive SME segment. With expertise across all market segments, we're well-placed to expand our product offering and cater to this expanding market. Next is Eversports. We were very pleased to be a solution provider for Everest, a great trading partner of ours in acquiring this business. Ryan's specialty underwriting managers as an MGU is working closely with Everest on the re-underwriting of this book with an emphasis on ENS solutions. Following integration into our existing MGU, AliveRisk, this acquisition is further enhanced by our exceptionally strong brokerage practice within our T specialty. And most recently is the acquisition of Velocity Risk Underwriters. With 81 million of annual revenue, Velocity adds critical property capabilities and an emphasis on middle market and small to medium commercial business. Velocity further rounds out our offering of ground-up property, shared and layered, and Tier 1 CAT, all to better serve our retail and wholesale clients. With Velocity, we further position ourselves to capitalize on the long-term growth opportunity we see in property catastrophe risk. We are also very excited to partner with and strengthen our strategic relationship with FM Globals. an industry-leading property carrier. As part of the transaction, FM Global is expected to acquire a majority of the balance sheet of Velocity Specialty Insurance Company, or VSIC, one of the capital providers that supports the MGU. A component of this pending transaction has Ryan Specialty acquiring a 9.9% or approximately a $16 million stake in VSIC. subject to closing adjustments. We will not consolidate B-6. Rather, we expect to treat this stake as an equity method investment, similar to our existing investment in Geneva Re. This is part of our strategic commitment to and alignment with our capital providers. Our successful M&A activity this year cements Ryan Specialty Underwriting Managers as the preeminent delegated underwriting authority platform. As demonstrated, each of these acquisitions support our strategic vision of aligning specialized underwriting products with our distribution expertise across industries, expanding our capabilities, and offering clients diverse, innovative solutions. On top of everything else, we believe we can further enhance these already great businesses through our track record of productivity improvements. Now let me dive into our specialties. Our wholesale brokerage specialty had a strong year and a solid fourth quarter. In property, we executed well. We saw property pricing decline modestly early in the quarter. Then the decline accelerated significantly in December, similar to what we witnessed at the end of Q3. As noted on our last call, December is the largest property month in Q4. Nevertheless, we overcame these trends as we took share of strong flow into the channel, won head-to-head against our competitors, and had high renewal retention. The recent LA wildfires, devastating hurricanes Milton and Helene, and record severe convective storms, second only to 2023, are tough examples driving heightened concern for large loss events. Add to this growing exposure in both high-value concentrations and areas of high catastrophe risk, we believe there is further proof of long-term durability of and the need for E&S property solutions. With our deep capabilities, we will continue to deliver value and offer solutions to the most complex issues our clients face, irrespective of the market cycles. Given the continued uncertainty in the rate environment, we expect more modest growth in property this year. But we strongly believe property will remain an important contributor to our growth, particularly over the long term. Our casualty practice had an outstanding year with strong new business and high renewal retention. A persistently challenging loss environment is driving higher or in some lines accelerating lost costs, and numerous casualty classes. The admitted market continues to react to this trend by dumping and shedding risks, with those risks moving into the specialty and ENS markets. We see the ENS market responding well, with carriers tightening distribution lines, re-underwriting, changing appetite, raising prices, and focusing on limit management. As a result, we believe the need for specialized industry and product-level knowledge Ryan Specialty offers has never been greater, and our value proposition has never been stronger. We remain confident that casualty will be a strong driver of our growth moving forward, and that we will continue to be a leader in casualty solutions for years to come. Now turning to our delegated authority specialties, which include both binding and underwriting management. Our binding authority specialty had an excellent year and continues to perform very well, driven by our top-tier talent and our expanding product set for small, tough-to-place commercial P&C risks. We continue to believe panel consolidation and binding authority remains a long-term growth opportunity, and we are well-positioned to capitalize. Our underwriting management specialty, which includes MGUs, MGAs, and programs, had another strong quarter and an outstanding 2024. Results were driven by strong organic growth, particularly in casualty and transactional liability. We also had meaningful contributions from recent acquisitions, including a full quarter from U.S. Assure, and by contingent commissions as we continue to deliver strong underwriting profits for our carrier trading partners. Our strategic positioning allows us to capitalize on organic and inorganic growth opportunities. We believe this combination, paired with our skill to manage the business through the insurance cycle, ensures our ability to deliver consistently profitable underwriting results, growth, and scale over the long term. Turning to price. After years of significant price increases and capacity and appetite increasing in the second half of the year, property pricing was down in Q4. At the same time, casualty pricing accelerated and broadened out across an increasing number of classes. Across both major classes, there remains uncertainty in the loss environment. This continues to drive higher retentions of risk and pushes new risks into the specialty and ENS marketplace. We have consistently noted that in any cycle, as certain lines are perceived to reach pricing adequacy, admitted markets tend to step back in on certain placements. However, this is still not playing out in any measurable way, and the standard market has not meaningfully impacted the rate or flow of our portfolio in the aggregate. As we've said, since our IPO, we continue to expect the flow of business into the specialty and ENS market to be a significant driver of Ryan Specialty's growth over the long term, more so than rate. Most importantly, we remain well-positioned to assist our trading partners navigate an ever-changing insurance landscape. As we progress through 2025, there are several things you can continue to expect from Ryan's specialty. First, we expect to record our 15th consecutive year of double-digit organic growth, once again driven by secular growth drivers, such as retail brokers becoming larger through solid organic growth and ongoing consolidation, panel consolidation, which has created growing recognition among retail brokers of the need to optimize client outcomes, minimize E&Os, and invest in long-term strategic relationships that help them win. The world getting riskier and more complex, AI, cyber threats, climate change, social inflation, political unrest, these are all driving more risks into the E&S marketplace, which offer solutions that would otherwise not be available. We believe ENS will continue to outpace growth in the admitted market, overshadowing any cyclical shifts. This is further supported by the significant commitment to the ENS market made by carriers that historically participated only in the admitted market and the addition of new capital. Adding to our secular growth drivers are Ryan Specialty's own attributes and strategies. Our ability to innovate, evolve and win is underpinned and perpetuated by specific pillars, our entrepreneurial and empowering culture, our unique relationships and position of trust, and our scale and scope of expertise. Second, we will thoughtfully invest in our business to optimize our platform and support long-term growth. To that end, we completed our Accelerate 2025 program at the end of the year. As Jeremiah will speak to shortly, the results and opportunities from Accelerate 2025 provide us more flexibility and we believe have placed us in a unique position to further invest in our growth. We've said it before, but it bears repeating. We will always prioritize investing in our business. Onboarding top talent, Adding capabilities and enhancing tools, technology, and governance will always be the hallmark of our commitment to our employees, clients, and trading partners. These investments across Ryan's specialty, along with our commitment to innovation, should continue to enable us to consistently achieve industry-leading organic growth for years to come. Finally, we will continue to grow through M&A, While still early in the year, we are off to a great start, and we see a broad set of strategic M&A opportunities in front of us. Our focus is on strategic acquisition of specialized expertise, adding new products, capabilities, or geographies for our clients and trading partners, while being disciplined integrators. That said, we will only move forward when all of our criteria for M&A are met. a strong cultural fit, strategic, and accretive. To sum up, it was an excellent year for Ryan's specialty. We were off to a great start in Q1 and are well positioned for 2025 and beyond. The companies that will win have to be the best of the best, the A-plus players. That means keeping the best talent, and we are pleased to end 2024 with another year of best-in-class retention among our producers. We have built an incredible business over the last 15 years in terms of our scale, scope, and intellectual capital, one that has earned the trust and respect of our clients, one that is recognized as the destination of choice for world-class talent, and one that is exceedingly difficult to replicate, providing us with clear competitive advantages for years and years to come. I am proud of our entire team for delivering another year of outstanding results and continuing to add value for our clients, trading partners, and ultimately our shareholders. With that, I will now turn the call over to Jeremiah. Thank you.