Ryan Specialty (RYAN) - 2024 Q2 - Earnings Call Transcript

Financial Data and Key Metrics Changes - Total revenue increased by 18.8% year-over-year to $695 million, driven by organic growth of 14.2% and contributions from M&A adding nearly 5 percentage points to the top line [5][33] - Adjusted EBITDAC grew by 27.6% to$ 248 million, with an adjusted EBITDAC margin expanding by 240 basis points to 35.6% [5][33] - Adjusted diluted EPS rose by 28.9% to $0.58 per share [5][33] Business Line Data and Key Metrics Changes - The acquisition of US Assure is expected to enhance the Programs segment of Delegated Underwriting Authority, which will now account for 28% of total revenue [9][10] - The company anticipates that the US Assure acquisition will drive double-digit organic growth moving forward [60] Market Data and Key Metrics Changes - The property market remains firm despite some rate moderation, with the company capturing new business and retaining its book at a high level [42][26] - The casualty market is experiencing increasing loss costs, driving rate increases across various industry classes [27][28] Company Strategy and Development Direction - The company is focused on expanding its capabilities in attractive markets, particularly in the SME segment of the builders risk and construction market [12][13] - The strategic acquisition of US Assure aligns with the company's mission to provide innovative solutions for insurance brokers, agents, and carriers [8][12] - The company is also forming strategic relationships with MagMutual and Private Client Select to enhance its offerings in healthcare and high net worth homeowners insurance [16][17] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in the long-term growth of the business, citing strong macro tailwinds in the construction industry and a structural housing shortfall in the U.S. [12][77] - The company expects to maintain a strong balance sheet while returning excess cash to shareholders, creating long-term sustainable value [38] Other Important Information - The company announced a quarterly dividend of$ 0.11 payable later this month [33] - The ACCELERATE 2025 program is on track to achieve annual savings of approximately $60 million by 2025 [34] Q&A Session Summary Question: Is the margin guidance upside solely from the transaction? - Management clarified that the new margin guidance includes US Assure and the significant uptick is almost entirely due to this acquisition [39] Question: What led to the sequential acceleration in organic revenue growth? - Management noted that property was a strong contributor, and despite rate moderation, the flow of business into E&S remains healthy [41][42] Question: How significant is the opportunity with AIG? - Management indicated that there is no revenue embedded in the guidance from this relationship, but it represents a significant upside opportunity [43] Question: Is there notable seasonality in US Assure's revenue or margins? - Management confirmed that there is no noticeable seasonality, as US Assure has a substantial amount of enforced policies throughout the year [46][47] Question: What is the economic sensitivity of the business? - Management highlighted that US Assure has shown exceptional double-digit growth throughout the cycle, despite pressures from higher interest rates [76][77]