Release Date: August 01, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- Total revenue grew 18.8% year over year to $695 million, driven by organic growth of 14.2%.
- Adjusted EBITDA grew 27.6% to $248 million, with a margin expansion of 240 basis points to 35.6%.
- The acquisition of U.S. Assure is expected to be immediately accretive to adjusted EPS.
- Ryan Specialty Holdings Inc (RYAN, Financial) announced a strategic relationship with MAG Mutual and an exclusive distribution partnership with Private Client Select (PCS).
- The company has a strong succession plan with internal promotions ensuring continuity and leadership stability.
Negative Points
- The property market is experiencing rate moderation and stabilization after years of large increases.
- Higher interest rates have put pressure on housing starts, which could impact the newly acquired U.S. Assure's business.
- The acquisition of U.S. Assure will increase the company's leverage, raising concerns about future M&A activities.
- The cyber insurance market remains under pressure, with potential impacts from recent high-profile cyber events.
- There is uncertainty in the casualty market, with increasing loss costs and reserve adequacy concerns for recent years.
Q & A Highlights
Q: My first question is on the margin guidance. Is the upside solely from the transaction, and would this be the new baseline for margin improvement for 2025?
A: We haven't given updated margin guidance with and without U.S. Assure. The new margin guidance includes U.S. Assure, and the significant uptick is almost entirely due to U.S. Assure. This will be the baseline for 2025.
Q: Can you provide more color on what led to the sequential acceleration in organic revenue growth in Q2?
A: Property was an extremely strong contributor in Q2 and H1 overall. Despite some rate moderation, our team presented unique solutions and products, resulting in solid double-digit growth from our property portfolio. We believe property will continue to be a strong contributor for the remainder of the year.
Q: How big of an opportunity is the agreement with AIG, and is there any revenue from this relationship embedded within your new organic revenue guidance?
A: There is no revenue from the AIG agreement either in Q2 or embedded in the guidance. It is a very exciting opportunity, especially as high net worth has increasingly become an E&S product line.
Q: Is there any notable seasonality in the revenue or margins of U.S. Assure that we should consider?
A: No, there is not noticeable seasonality. U.S. Assure has a substantial amount of in-force policies, approximately 150,000, which are small and take place over the course of the year.
Q: Given the noise in the casualty market, how are you thinking about the outlook for contingents in your business?
A: We expect continued attractive profit commissions from the business we've placed. The non-admitted market's freedom of rate and form allows for more accurate underwriting, which should mitigate reserving concerns.
Q: Can you confirm that the mid-60s margin for U.S. Assure is the adjusted EBITDA margin, and explain why it is so high?
A: Yes, it is the adjusted EBITDA margin. The high margin is due to their efficient distribution system, long-term sustainable high-profit results with Zurich, and a highly efficient tech-enabled platform where the majority of policies don't require human touch before being bound.
Q: What is the organic growth profile of U.S. Assure historically?
A: U.S. Assure has historically achieved double-digit organic growth. We believe there is upside to this growth profile on our platform, especially with our track record of improving productivity in acquisitions.
Q: How does U.S. Assure's portal interact with Ryan Specialty's automated portal?
A: Currently, they are independent, but our team will have expanded access to the U.S. Assure portal. We expect incremental submissions and form from our TI and Ryan online retailers.
Q: What is the economic sensitivity of U.S. Assure's business, and how does it respond to inflation?
A: U.S. Assure has been a double-digit grower throughout the cycle. Despite higher interest rates putting pressure on housing starts, they have continued to grow. The macro addressable opportunity remains strong due to the structural housing shortfall and aging housing stock in the U.S.
Q: What could the CrowdStrike event mean for the cyber market in terms of pricing and terms and conditions?
A: Initial estimates suggest the CrowdStrike event could firm current levels and inspire incremental buyers. It serves as a reminder of the increasing dependence on web-based delivery, highlighting the need for more comprehensive cyber insurance coverage.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
