Ryan Specialty Holdings, Inc. Class A

Good afternoon, and thank you for joining us today for Ryan Specialty Holdings' fourth 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 ryanspecialty.com. On today's call, management's prepared remarks and answers to your questions may contain forward-looking statements. 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 the founder and executive chairman of Ryan Specialty, Pat Ryan.

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 CFO, Janice Hamilton, our CEO of Underwriting Managers, Miles Wooler, and our Head of Investor Relations, Nick Messick. In many ways, 2025 was a strong year for Ryan Specialty. particularly considering the significant headwinds the industry faced. Our results are a testament to our team's ability to outperform in a challenging environment. Our conviction in putting our clients first, our unwavering focus on specialized expertise, commitment to attracting and retaining top talent, and dedication to excellence in everything we do. For the quarter, we delivered organic growth of 6.6%. I'm pleased with our performance, especially taking into account the volatile property market conditions, increased competition, and select casualty lines, and continued delays in certain project-based business, all of which Tim will provide more color on shortly. For the full year, we surpassed revenues of $3 billion, up 21% year over year, driven by organic growth of 10.1%, on top of 12.8% in 2024, and significant contributions from our M&A strategy. We marked our seventh consecutive year of growing the top line by 20% or more, and our 15th consecutive year of double-digit organic revenue growth. Adjusted EBITDA grew 19.2% to $967 million. Adjusted EBITDA margin was 31.7% compared to 32.2% in the prior year. Adjusted earnings per share grew 9.5% to $1.96. We completed five acquisitions with trailing revenue of over $125 million. I would like to make a few comments on the overall market. Having lived through multiple insurance pricing cycles, I've seen hard markets come and go. What distinguishes this cycle is simple. It was harder for longer on the way up and much faster on the way down, particularly as it relates to property. Throughout my career, I've never witnessed market sentiment shift this rapidly. We are currently operating in one of the most volatile and reactive insurance markets I've seen across my more than 60 years in the industry. Throughout this time, I've learned that volatility in market cycles is inevitable. And what sets us apart is rooted in the very vision this company was founded on. Brick by brick. We carefully constructed an intentionally diversified platform to deliver innovative solutions to brokers, agents, and insurance carriers, to deliver for our clients and shareholders when the times get tough, regardless of the market cycle. We didn't build Ryan's Specialty for the easy years. We built it for years like this, to power through transitioning markets. diversified specialties, diversified products, and diversified earnings, all backed by world-class talent, all by design. That's what makes us different. While we could not predict the precise timing or magnitude of this turn in the pricing cycle, we have long understood that the pricing cycle would eventually move from a tailwind to a headwind. From the very beginning, We made a deliberate decision to build more than a wholesale broker. We invested heavily in delegated authority, including both binding authority and underwriting management. The benefits of this strategy are clear. Deepened specialty presence and enhanced ability to bring products to market quickly. Improved geographic balance through our international expansion and a significantly expanded total addressable market. Importantly, these strategies are underscored by alignment with our carrier trading partners and enhance the strength of our relationships with the capital providers who support us. Our delegated authority business generates meaningful revenue through contingent commissions, which are directly tied to the underwriting performance we deliver on our carrier's behalf. In softer markets, these contingent commissions act as a natural hedge, thus providing further diversification and balance to our total company earnings. Our numbers tell the story. Over the last two years, we've doubled our delegated authority revenue to $1.4 billion, now reflecting 47% of our total. A remarkable rise from $700 billion and 35% of our total just two years ago. We've invested nearly 2.7 billion towards 12 acquisitions. We have grown the number of products on our platform by 50% to over 300. We've expanded our international presence, now with 24 offices, up from just six in 2023, and still believe we're in the early innings. We've increased the size and capabilities of our central underwriting team to help support our efforts to deliver underwriting profits, growth, and scale. We have dramatically increased the breadth and depth of Ryan Re, our reinsurance MGU. We have established in-house alternative capital management solutions. We've built a benefits division with distinguished capabilities and products, which are largely uncorrelated to the P&C cycle. And we've invested significant resources into all aspects of alternative risk, including captive management and structured solutions. The diversification we've achieved is significant. Born out of the needs of the thousands of retail brokers with whom we trade, our enhanced offering has opened the door to additional opportunities across all our specialties. and positions as well for a wide range of market outcomes. This evolution is exciting, but it also introduces greater complexity to our business. As a result, we are launching Empower, a three-year restructuring program designed to improve efficiency across the firm, particularly within delegated authority, and create headroom for additional investment. despite the success we've achieved. In many ways, because of it, we are not yet as efficient as we need to be. And Empower is about more than just efficiency. It's about enabling our people to do what they do best. More tools, faster innovation, and an even greater ability to deliver for our clients. AI will be a key enabler. allowing all our people to focus less on process and more on deepening client relationships. We're confident that Empower will deliver meaningful benefits for our colleagues, trading partners, and shareholders. Tim and Janice will provide more details in their remarks, but we anticipate a cumulative special charge of approximately $160 million through 2028. We expect the program will deliver approximately $80 million of annual savings in 2029. The efficiencies we gain through Empower will enable us to continue making strategic investments in growth, top-tier talent, to noble formations, and address the rapidly evolving needs of our clients, allowing us to maintain industry-leading growth in the years to come. We expect these savings will help contribute to our goal of modest margin expansion in most years, while maintaining the flexibility to continue investing in our business. As a result, we believe our industry-leading organic growth and accelerated efficiencies across all of our specialties will lead to enhanced earnings growth. I also want to provide an update on capital allocation. We are pleased to announce that our board of directors has authorized a $300 million share repurchase program. The scale of our platform combined with our robust free cash flow generation gives us increased flexibility to expand how we deploy capital. This decision reflects our view that there's a meaningful dislocation between our current valuation and our confidence in the near and long-term outlook of our business. we remain committed to strategically investing for the long term, organically and inorganically, while also opportunistically purchasing our shares when we believe it to be the best use of our capital. The added option of share repurchases is aligned with our goal of enhanced shareholder returns over the near and long term. As the coach of this terrific team, I'm incredibly proud of our ability to deliver exceptional results in a challenging environment. Our performance is a testament to the depth, expertise, and determination of our people who provide value for our broker, agent, and insurance carrier partners in the face of numerous challenges. All of these efforts will drive significant additional value for our shareholders. and ensure we remain the leading specialty insurance services firm in our industry. I'm pleased to turn the call over to our Chief Executive Officer, Tim Turner. Tim.

Thank you very much, Pat. Ryan Specialty delivered our 15th consecutive year of double-digit organic growth, once again setting the standard for the specialty insurance industry. In a year where there have been significant pressures across the insurance broker landscape, our performance speaks to the resilience and differentiation of our platform. I am incredibly proud of how our team navigated what was, without question, the most challenging property environment the insurance industry has faced in decades. We capitalized on specific areas of accelerated growth as evidenced across many products and lines of business, most notably in high hazard casualty and transportation. We launched innovative solutions like Ryan Rhee's expanded relationship with Nationwide, Rack Rhee, our first of its kind collateralized sidecar, and numerous real-time de novo formations to meet the emerging needs of the market. As you've seen us do repeatedly, when we see an opportunity, we organize and we move at the speed in which our clients and trading partners demand. Turning to our results by specialty, our wholesale brokerage specialty demonstrated remarkable resilience in 2025, led by our exceptional talent and the continuation of secular trends like panel consolidation. In property, our team executed on behalf of our clients in the face of an exceptionally difficult pricing environment. For the full year, our property business declined only modestly. the fourth quarter was particularly challenging. We saw a further decline in property pricing as the quarter progressed. It was most notable in the month of December, particularly on certain large accounts where pricing was down 25 to 35%. Additionally, and albeit in pockets, we saw instances of admitted carriers stepping back into certain segments, particularly on smaller accounts. Based on this continued softening in pricing, combined with January 1 reinsurance renewals and the widely held view of rate adequacy in property, we expect there could be similar pricing declines in 2026. We are not standing still. Our team of experts are focused on delivering the best solutions to our clients, winning head-to-head against our wholesale broker competitors. And our goal remains clear. return to growth in property as soon as the market allows. That said, we remain optimistic about property beyond the near term. The frequency and severity of cat events, increasing populations in cat-affected areas, and continued demand for ENS solutions all support our belief that property will remain an important contributor to our growth over the long term. Meanwhile, our casualty practice had a very strong year. Underlying trends are moving in different directions across lines, but the net result remains favorable for Ryan's specialty. In high-hazard lines like transportation, healthcare, social and human services, and habitational, we continue to see significant price increases, in many cases exceeding 10%. Across these difficult lines, we are seeing carriers tighten distribution, re-underwrite, change appetites, raise prices, and focus on limit management. Our professional lines team significantly outperformed the market despite continued pricing pressure, aiding our growth for the year, as well as social inflation and litigation trends, which continue to support the need for adequate pricing. At the same time, we are seeing a more constructive tone from carriers looking to grow in casualty, which introduces additional competition. beyond what we've been seeing in small commercial and middle market. This is leading to a slight moderation of pricing in certain pockets. Lastly, parts of the large construction industry remain a headwind as project-based business faces continued delays, but we're seeing early signs that activity may pick back up. And given recent interest rate cuts, we're optimistic heading into 2026. Taking these trends together, we're anticipating strong yet moderating casualty growth in 2026. On data centers, we're growing increasingly optimistic. As the leading wholesale broker in construction, we are in a great position to assist our clients as they navigate this rapidly evolving risk landscape. But it's not just construction, as we bring deep expertise across builder's risk, environmental, architect and engineers, and other complementary lines, as well as within the energy field, making us a natural partner for these complex placements. With many projects in the planning phases and demand for insurance capacity only building, we believe we are well positioned to assist our retail broker clients. While these projects can be lumpy, our enthusiasm, as well as our pipeline, continue to grow. As we've said repeatedly, retail brokers use us when they need us. And here, we're honored to play an important role. Zooming out on wholesale brokerage, we believe the secular trends that have fueled our growth over the years remain intact. One worth highlighting is panel consolidation. The largest retail brokers continue to narrow the number of wholesale broker intermediaries they work with. We see this playing out in real time in 2026 and 2027 and for years to come. Our scale, track record, and relationships with the top 100 retail brokers positions us well as this trend continues. Now turning to our delegated authority specialties. which include both binding authority and underwriting management. Our binding authority specialty continues to perform well, driven by our top-tier talent and 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 Ryan's specialty underwriting managers delivered excellent results for the year, with strong performance across transactional liability, casualty, and transportation. Our transactional liability practice performed exceptionally well, supported by the investments we've made over the past few years and a more constructive global M&A outlook. Velocity, our Tier 1 property CAT MGU, continued to expand its distribution through RT and ended the year with impressive year-over-year growth numbers. Conversely, while our Builders Risk MGU, U.S. Assure, faces near-term pressure from project delays due to the heightened interest rate environment, we remain confident in the long-term opportunity as the housing market normalizes and construction activity picks up. Let me spend a moment on Ryan Rhee. Over the last six years, we've created a remarkable business, strategically positioning us to capitalize on an expanded opportunity set. We are very proud of our ability to execute on our strategic partnership with Nationwide on the Markel Reinsurance book. We are driving increased brand awareness. deeper relationships with clients, and diversification into niche specialty markets, enabling us to deliver on a very strong January 1 renewal season. Stepping back, our delegated authority strategy is a key differentiator for us. Our exceptional M&A activity over the last two plus years cements Ryan's specialty underwriting managers as the preeminent delegated underwriting authority platform in the industry. As we've 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. Today, our delegated authority business manages north of $10 billion in premium across more than 300 products, and has been recognized by business insurance as the largest delegated authority platform. What sets us apart is our consultative approach. We create bespoke solutions because our broker, agent, and insurance carrier clients entrust us to solve problems alongside them. Our scale allows us to build markets and launch de novo programs with speed and efficiency in response to our clients' individual needs. We are here to add value and complement our trading partners, filling niches where needed and strengthening their distribution model, not to compete with them. 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. Now, turning to price and flow, we have repeatedly noted that in any cycle, as certain lines are perceived to reach pricing adequacy, admitted markets historically reenter select placements. While we saw small pockets of this dynamic playing out in property during the fourth quarter, particularly on smaller accounts, the standard market has not meaningfully impacted rate or flow in the aggregate across our portfolio. As we've consistently said, we continue to expect the flow of business into the specialty and E&S market, more so than rate, to be a significant driver of Ryan Specialty's growth over the long term. Turning to M&A and capital allocation, we completed another exceptional year of acquisitions, closing five transactions with trailing revenue of over $125 million, including Velocity, USQ, 360 Underwriting, JM Wilson, and SSRU, to name a few. M&A has been and continues to be a top capital allocation priority for us. We remain disciplined in our approach to M&A, only moving forward when all of our criteria are met. A strong cultural fit, strategic and accretive. More broadly, on capital allocation, we are excited to announce our first share repurchase program, adding another tool to our tool belt. Given the current dislocation that Pat mentioned, combined with our confidence in our near and long-term outlook, we believe now is the right time to act. The addition of this lever gives us more flexibility in how we return value to our shareholders. To sum up 2025, our colleagues performed exceptionally well, particularly in the face of a complex and rapidly evolving insurance and macro environment. which is a testament to the resilience and durability of our people and this platform. With that being said, we have built an intentionally diversified platform at Ryan Specialty, one that is able to not only withstand the ever changing landscape, but power through it. A platform that provides us with many avenues for expansion, designed to deliver industry leading organic growth. As Pat mentioned, Over the last two years, we've invested nearly $2.7 billion towards 12 acquisitions, significantly diversifying our platform with new products, geographies, capabilities, and businesses. This transformation has been exciting, but with scale comes complexity. As a result, we are focused on further positioning the business to adapt and are excited to discuss Project Empower, our three-year restructuring program. Empower is designed to streamline our broking and underwriting operations, optimize our scale, accelerate our data and technology strategies, and enhance efficiencies across all our specialties. Empower isn't just about efficiency. It's about enabling our people to do what they do best, more tools, faster innovation, and an even greater ability to deliver for our broker, agent, and insurance carrier partners. The efficiencies we gain through the Empower program will enable us to continue making strategic investments and growth, top-tier talent, de novo formations, and address the rapidly evolving needs of our clients, allowing us to maintain industry-leading growth in the years to come. We will continue to invest in our business, in talent, innovation, technology, and AI. Investments that will lead to margin expansion over time while maintaining flexibility to capitalize on strategic opportunities like our talent initiative late last year. Our scale, scope, and intellectual capital thoughtfully crafted over our 15-year history is unmatched. It is the foundation of our ability to continue winning and expanding our market share over time. This platform is exceedingly difficult to replicate, and the diversification we have achieved is significant. We continue to improve upon our competitive moat, and we will continue investing to widen the gap between Ryan Specialty and the rest of the specialty industry. With that, I will now turn the call over to our CFO, Janice. Thank you.