Ryan Specialty Holdings, Inc. Class A

Good afternoon and thank you for joining us today for Ryan's Specialty Holdings second quarter 2025 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 ryansspecialty.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 and executive chairman of Ryan Specialty, Pat Ryan.

Good afternoon. Thank you for joining us to discuss our second quarter results. With me on today's call is our CEO, Tim Turner, our president, Jeremiah Bickham, our CFO, Jens Hamilton, our CEO of Underwriting Managers, Miles Wooler, and our head of investor relations, Nick Messick. Our second quarter was solid and demonstrates the resiliency of our platform, particularly when considering the property headwind. For the quarter, we grew total revenue 23%, driven by organic revenue growth of 7.1%, and M&A, which added 13 percentage points to the top line. Adjusted EBITDA grew 24.5% to $308 million. Adjusted EBITDA margin expanded 50 basis points to 36.1%. And adjusted earnings per share grew 13.8% to 66 cents. Although organic revenue growth fell short of our expectations, I'm pleased with our results, which reflect our continued ability to navigate through this rapidly evolving insurance market and complex macro environment. This is a testament to the depth and breadth of our team and the diversity of our products and lines of business. Across the firm, we generated solid new business and high renewal retention. We continue to deliver for our clients in a very firm casualty market and that strong casualty growth across all three of our specialties. We have long said that we capture broad tailwinds and especially in the E&S market, while also capitalizing on specific areas of accelerated growth as they arise. This is evident across many products and lines of business, notably high-hazard casualty, as well as transportation. We experienced headwinds from a significant decline in property pricing and the bleed-in of uncertainty from the trade war and other macro factors impacting construction. As discussed last quarter, the second quarter is our largest property quarter, and the second quarter of 2024 was the last very strong quarter for property before rates began to decline, which set us up for our most challenging year-over-year comparison. We had excellent contributions to our top line from recent acquisitions. In the quarter, we closed on both USQ risk and 360-degree underwriting. and earlier this month closed on JM Wilson, a binding authority firm noted for its expertise in transportation. We are very excited to welcome these new teammates into the Ryan Specialty family. Our robust M&A activity over the past two years, and since our founding, continues to advance our long-term strategy through significantly expanding our total addressable market. adding expertise, augmenting our capabilities to serve our clients across market segments, and broadening our international footprint. And by adding many new programs and unique MGUs, providing us with greater advantages to extend our lead and delegate an underwriting authority now and over the long term. We continue to make investments in key talent and new initiatives that will drive strong growth in the near, medium, and long term. These investments will significantly boost our unmatched capabilities to generate new business, organic growth, and margin benefits for Ryan's specialty in 2026 and beyond. We've also further expanded our strategic alliance with Nationwide Mutual, and I'm very excited about two specific areas. Yesterday, Nationwide announced a deal to acquire the reinsurance renewal rights from Markel. Ryan Rhee, our reinsurance underwriting MGU and nationwide's exclusive reinsurance underwriter, will have delegated authority to underwrite this book of business. Ryan Rhee will be getting a diversified portfolio with complimentary lines and new relationships. Second, through Ryan Alternative Risk, we are creating innovative solutions to help solve complex risks for our clients. These initiatives are a testament to our ability to cultivate deep strategic relationships with leading insurance institutions, which Jeremiah will speak to shortly. As we look forward, we are confident in our ability to innovate, invest, and continue to strengthen and diversify our offerings within the specialty insurance market. Our relentless efforts to navigate both near-term challenges and a very firm casualty market, all while investing in areas of accelerating growth and making thoughtful acquisitions give a strong conviction that we will continue delivering annual double-digit organic growth and leading in the specialty lines insurance sector. As the coach of this terrific team, I'm incredibly proud of our ability to mitigate the impact of the dramatic swing in property pricing in Q2 with significant new business production. We continue to be unwavering in our dedication to clients and trading partners. I'm pleased to turn the call over to our Chief Executive Officer, Tim Turner. Tim.

Thank you very much, Pat. Ryan's specialty had a solid second quarter. I was pleased with how our team executed, especially considering some headwinds. Despite these pressures, we remain hyper-focused on successfully executing what we can control. The combination of strong secular growth trends and Ryan's specialty's specific growth drivers will propel us forward. These include our specialized intellectual capital, unique trading relationships at scale, and an ability to innovate, evolve, and stay ahead of the market, including the two significant new business opportunities that Pat mentioned. This all drives our strong conviction that we have a tremendous runway for continued growth for years to come. We remain relentless in our goal to yet again deliver double digit organic growth for the full year and are well positioned for the long term. Now diving into our specialties, our wholesale brokerage specialty had a solid quarter. In property, we executed well in a very challenging environment and I am proud of our results. we saw a rapid decline in property pricing as the quarter progressed, especially in the month of June. We expect this significantly soft pricing environment to continue at least in the near term, which drives our expectation for property to decline modestly for the full year. Despite this rapid decline in property insurance pricing, flow into the channel remains strong. And we took share, one head to head against our competitors and had another quarter of high renewal retention. This is a testament to our tenacious and ultra competitive RT brokerage team. We know how to navigate adversity in the marketplace, find new opportunities to grow and expand our market share, and importantly, find ways to win. It's in our DNA. Long-term, our outlook is more optimistic. This year marks the sixth consecutive year with over 100 billion in insured losses from catastrophes, specifically from severe convective storms, floods, and wildfires. and there are still five months remaining. Assuming an average wind season, 2025 will end up being a significant loss year and has the potential to make the current property pricing declines short term in nature, which demonstrates just how sensitive the property market is to large loss events. We believe that elevated and higher frequency catastrophe losses, a rise in secondary perils, and increased populations in cat-affected areas supports the long-term durability of and the need for E&S property solutions. With our deep capabilities, we will continue to deliver value for our trading partners and offer solutions to the most complex issues our clients face, irrespective of the market cycle. We continue to expect property to be an important contributor to our growth over the long term. Our casualty practice had another great quarter with excellent new business and high renewal retention. We saw strength in a number of areas, most notably transportation, habitational risks, public entities, sports and entertainment, healthcare, social and human services, and consumer product liability. Our professional lines brokers have been resilient and resourceful in identifying new opportunities. And we're a contributor to growth this quarter, despite continued pricing pressure in many lines. More broadly in casualty, loss trends driven by both economic and severe social inflation are causing carriers to increase rates, pull back appetite, and in some cases, exit markets completely. Risks in each of these classes and many others are continuing to move into the specialty and ENS markets. We see the ENS market responding in a disciplined manner with carriers tightening distribution lines, re-underwriting, changing appetite, raising prices, and focusing on limit management. We believe the need for the specialized industry and product level expertise that Ryan Specialty offers has never been greater. And our value proposition has never been stronger. With difficult loss trends likely to continue, we see a long runway for sustained casualty pricing. We remain confident that casualty will be a strong driver of our growth moving forward and believe we will remain 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 continues to perform very well, driven by our top tier talent and expanding product set for small, tough to place commercial PNC risks. We continue to believe panel consolidation and binding authority remains a long-term growth opportunity, and we are well positioned to serve our clients as this trend persists. Our underwriting management specialty had a solid quarter with excellent results in casualty, which helped mitigate pressure across the property and construction segment. We also had meaningful contributions from recent acquisitions, which added over 55 percentage points of growth to the top line of this specialty. Over the last few years, we've added multiple specialty MGUs and programs that we feel privileged to have added to the Ryan Specialty family. They have brought to us unique product sets, technology advantages, like efficient online distribution, and expanded our geographic presence. These firms have also added critical capabilities, meaningfully increased our footprint across all market segments and bolstered the number of products we're able to distribute through our wholesale broker, RT Specialty. Our recent cohort of acquisitions continues to perform well, adding value to our efforts and materially contributing toward our long-term delegated authority strategy. Stepping back, our skill and discipline to manage these businesses through the insurance cycle bolsters our ability to deliver consistently profitable underwriting results, growth, and scale over the long term. We remain well positioned to capitalize on both organic and inorganic delegated authority growth opportunities. Turning to price and flow, we have repeatedly 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 meaningful way, and the standard market has not meaningfully impacted rate or flow 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's specialty's growth over the long term, more so than rate. This was demonstrated in Q2 as the flow of business into the ENS channel remained strong across all lines. And we benefited from that flow and posted meaningful growth despite significant property pricing declines. Turning to M&A, we were pleased to close three acquisitions over the past few months. We expect USQ Risk to be a significant contributor to our alternative risk offerings for property, casualty, and transportation. 360 degree underwriting and Irish MGU specializing in commercial construction further expands our international footprint. And on July 1st, we completed the acquisition of JM Wilson, which is an excellent addition to our binding authority and transportation offering. With 19 million of annual revenue, JM Wilson adds high quality talent in the Midwest with expertise across transportation and adds to our long-term goal to become the national leader in binding authority. Further on the M&A front, our pipeline continues to be robust, including both tuck-ins and large deals. 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 a solid quarter for Ryan's specialty, and I am proud of how our team executed and the results we delivered. I am confident we will navigate these headwinds. The team remains resolute in our long-term outlook and our overall value proposition. We are deepening and earning the trust and respect of our clients every day, making us a highly valued trading partner for their specialty insurance needs. Quite simply, our scale, scope, and intellectual capital has been thoughtfully crafted over 15 years and is the foundation of our ability to continue winning and expanding our market share over time. We also will continue to be a destination of choice for the best talent in the industry, driven by our winning and empowering culture and nonstop focus on innovation. All of this makes our platform exceedingly difficult to replicate. And as we head into the latter half of 2025, you should expect us to further invest in our platform to widen our long-term competitive advantages that continue to clearly set us apart from the specialty industry. With that, I will now turn the call over to Jeremiah. Thank you.