Q1 2022 Ryan Specialty Group Holdings Inc Earnings Call
Greetings and welcome to the Ryan Specialty group first quarter 2022 earnings call. At this time, all participants are in a listen only mode.
A question and answer session will follow the formal presentation.
Anyone should require operator assistance during the conference. Please press star zero on your telephone keypad.
This conference is being recorded.
I'll now turn the conference over to your host no antibody you may begin.
Thank you operator, good afternoon, and welcome to Ryan Specialty Group Holdings first quarter 2022 earnings call.
This afternoon. The company released its financial results for the quarter ended March 31 2022.
The earnings release is available on the investors section of the company's website at <unk> Dot com.
I would like to remind everyone that certain statements made during this call are not based on historical information and May constitute forward looking statements any statements that refer to projections forecast guidance outlook or other characterizations of future plans, including integration expectations restructuring initiatives events or circumstances, including any underlying.
Assumptions our forward looking statements. These statements are based on management's current expectations and beliefs and are subject to a number of trends and uncertainties that could cause actual results to differ materially from those described in the forward looking statements.
I refer you to the company's filings made with the SEC for a more detailed discussion of the risk factors that could cause actual results timing levels of activity performance or achievements to differ materially from those expressed or implied in any forward looking statements made today investors should not place undue reliance on any forward looking statements. The company undertakes no duty.
To update any forward looking statements that may be made during the course of this call except as required by law.
Additionally, certain non-GAAP financial measures will be discussed on this call, including organic revenue growth rate adjusted net income adjusted EBITDAX and adjusted diluted EPS. Our presentation of this information is not intended to be considered in isolation or as a substitute for the financial information presented in accordance with GAAP reconciliations of these non-GAAP financial measure.
As to the most closely comparable measures prepared in accordance with GAAP are included in our earnings release, which is available in the investors section of the company's website at <unk> Dot com.
With that I'd now like to turn the call over to the founder Chairman and Chief Executive Officer of Ryan Specialty Pat Ryan.
Good afternoon, everyone. Thank you for joining us on our first quarter 2022 earnings conference call.
On today's call I'll provide a brief overview of the quarter in our history.
<unk> moving forward.
Our president Tim Turner, well that will give you an update on each of our three specialties and recent events.
Lastly, our CFO Jeremy <unk>.
Walk you through our financials and we'll then open it up for Q&A.
Our first quarter of 2022 picked up seamlessly from our outstanding 2021 performance.
We grew total revenue 24%.
Of our organic revenue growth of 20%.
We also achieved double digit growth in adjusted EBITDA.
And adjusted net income on a year over year basis.
Our excellent results.
Driven by strong growth across all three of our specialties.
Our strong performance this quarter and the prior quarters continues to demonstrate a differentiated platform provides considerable value.
Clients.
Ambles us to outperform in various environments and against any competition.
We're pleased to see in the marketplace remains robust.
Market changes we've received on the periphery.
Which we flagged on our prior earnings call.
Yet developed.
Always speaking Reits remained resilient the majority of our lines of business.
Our rate increases are moderating.
It's been more than offset by.
The continued expansion of smart.
We continue to add to our best in class team.
We hit the ground running.
The Onboarding new teammates are Q1, particularly in our underwriting management, especially proving that we are a destination of choice.
Top talent in the industry.
We believe we offer leading underwriters and brokers a unique value proposition.
The ability to build a business.
Leveraging our industry leading capabilities.
It provides them with strong financial backing.
And infrastructure support.
Allowing them to focus on providing innovative solutions.
For our clients.
One of the very result.
Our industry, leading retention for underwriters and producers.
<unk> volumes through our winning culture.
Moving forward, we expect to stay the course on our growth initiatives.
We are on pace to onboard our largest broker class ever.
In 2022.
We remain confident that these investments in the next generation of teammates.
Will be accretive for Ryan specialty going forward.
We are pushing ahead in our formation of de Novo's.
You'll hear more from timber.
Moreover, as we have previously conveyed.
We will complete our 25 billion.
<unk> 20 of restructuring program.
June 30 of this year.
Looking ahead, we remain very confident in our ability to maintain.
Eddie and profitable growth.
CNS market continues to expand.
The complexity risks increases.
As we have for the last 11 years.
To take market share of our competitors.
Along with our strong organic growth.
Continue to maintain a highly active M&A pipeline.
As we look for additional opportunities to enhance our platform.
And capabilities.
We have a strong balance sheet.
Novel capacity.
Enables us to act when we find the right opportunities.
As we've noted before.
We will remain disciplined.
Move forward ultimately.
When we identify an opportunity.
We believe this strategic.
A strong cultural fit.
And accretive to our shareholder returns.
Simply.
This was another outstanding quarter for Ryan specialty.
Due to our incredible team.
Unwavering dedication to our clients and trading partners.
Our time tested business model.
And are willing to culture.
We are well positioned to sustainably and profitably grow our business.
To continue delivering long term value for our shareholders.
I will now turn the call over to our President Tim Turner Tim.
Thank you very much Pat.
As Pat highlighted we picked up in 2022, right, where we left off at the end of 2021 with a strong quarter across our specialties.
These results are a testament to the teamwork across the firm.
Our producers, our underwriters and their teams who roll up their sleeves and work day in and day out on behalf of our clients in.
In addition, we made significant strides in the quarter, expanding our talent base broadening our product offerings and continuing to strengthen our value proposition to our broker clients and capital providers.
Our wholesale brokerage specialty continued to experience excellent growth across all property and casualty lines of business.
In particular <unk>.
<unk> continues to see record submission flow as admitted markets faced pressure from reinsurers derisking their portfolios, which pushes more business into the E&S market.
Construction is another vertical where we see significant increases in flow with our industry, leading team seeing solid double digit increases in submissions for both infrastructure projects and habitation all construction.
Also our professional liability healthcare and cyber lines see an increasing flow of business into the E&S channel, which is driving outsized growth.
We're also seeing strong growth in our transportation practice as the addition of Krauss and associates has proved to be essential in winning accounts across our firm.
Within our binding authority specialty we continue to see strong growth in our small commercial lines and are experiencing widespread success and our binding carrier contract renewals.
We're keeping a close eye on additional opportunities in the delegated authority market to consolidate into Ryan specialty.
And continue on the path toward creating the first truly 50 state binding authority operation.
Our underwriting management specialty also delivered a strong first quarter growing revenue by double digits on a year over year basis, while continuing to deliver solid profits to our carrier trading partners.
As we've noted before we appreciate the trust. These carriers have shown in us and we are careful to manage our growth with the need to deliver underwriting profit for our trading partners.
As a follow on to our remarks in the last call I am very excited about our strategic arrangement with nationwide, which provides us with limited exclusive access to its harleysville of New York, a plus 15, a M best rated paper to.
To support our underwriting manager specialty and alternative risk strategy.
Through this arrangement with nationwide and as we mentioned last quarter. We're excited to update you on the progress of two of our de Novo Mg use the.
The first is Axel and excess commercial auto insurance alternative risk group captive program created and managed by a recently acquired Keystone team the.
The actual captive reinsurer nationwide's fronting capacity with nationwide retaining a percentage of the risk directly and through our Geneva re joint venture.
The second is Emerald underwriting managers are primary and excess general liability <unk>.
We expect that Admiral will very soon be writing on harleysville paper on an exclusive basis.
The environment remains full of opportunities within this business line.
We are very optimistic about the opportunities created by this new strategic alignment and these two de novo programs.
These provide additional tools for Ryan specialty to service, our clients and trading partners.
Additionally, our M&A pipeline remains robust as Pat noted, including potential small and large opportunities and across a number of specialties.
In terms of the E&S market the environment remains very positive while competition is still entering the market on the fringes, we have yet to see competition accelerate in any meaningful way.
Pricing remains firm in nearly all lines of business and flow was very steady through the first quarter of the year and through April , particularly with additional stress that we have seen in the admitted market.
As we said before we expect the increasing flow of business.
Into the non admitted market to continue to be a significant driver of Ryan specialties growth.
So then right.
And with that I will now turn the call over to our Chief Financial Officer, Jeremy <unk>, who will give you more detail on the financial results of our first quarter.
Thank you.
Thank you Tim.
In Q1, we grew total revenue, 24% period over period to 387 million, which was fueled by strong organic revenue growth of 21%.
Fitting from the continued tailwind in the E&S market and the market share gains that Pat and Tim noted earlier.
We were once again very pleased with our performance and especially with the very strong finish to the quarter.
Net income for the first quarter of 2022 was $18 million or <unk> <unk> per diluted share.
Adjusted net income for the quarter, which excludes IPO related and other unusual items increased 13% period over period to $65 million or 24 cents per diluted share.
Adjusted EBITDAX for the first quarter grew 14% period over period to 107 million, while adjusted EBITDA margin declined 260 basis points to 27, 7%.
Primary drivers of our adjusted EBITDA increase where our revenue growth.
<unk> realization of savings from our 2020 restructuring plan and lighter professional services spend which we expect will pick back up in Q2.
However, our margin was impacted by continued investments in the business public company costs as we were private in Q1 of 'twenty, one and <unk> returning to normalized levels, which we flagged in our remarks last quarter.
As a reminder, the latter two items will impact the second quarter margin as well.
And it's important to note that relative to Q1 of 2020, our margin is up 560 basis points.
As we previously noted the current environment offers us a unique and very exciting opportunity to hire a plus level underwriters and brokers and we expect to capitalize on this opportunity in future quarters by pursuing an onboarding top talent to our platform over.
Over the long term, we expect that our growth will yield additional and sustainable operating leverage in the form of adjusted EBITDA margin.
Furthermore, our balance sheet remains quite healthy during the quarter, we completed an opportunistic $400 million high yield offering at a rate of four 375%.
In April we converted our credit facilities to a term so for benchmark and purchased an interest rate cap on $1 billion of sofa with a strike of 275% capping our rates on that $1 billion through 2025.
We would expect to straight line the cost of the cap over the life of the instrument.
And further on interest rate exposure, we have a natural hedge with our operating and fiduciary cash balances and similar to our peers. It earns a modest yield tied to the risk free rate in short we believe that we are very well insulated from steep increases in the fed funds rate.
Given our strong execution and a resilient E&S environment, we have raised our full year 2022 outlook for organic revenue growth and adjusted EBITDA margin as follows.
We are now guiding organic revenue growth rate for the full year 2022 to be between $13 five and 15, 5%.
We continue to believe that our guidance is prudent given the prolonged stages of a very hard market and increased flow into the E&S market.
We are also taking up the low end of our adjusted EBITDA margin range for the full year 2022 and are now guiding to end the year between 28, 5% and 30.0%.
As we previously noted we are investing heavily in talent and growth in 2022 in order to continue serving our clients over the long term and many of those investments will be made in the second quarter and subsequent quarters.
In summary, we are very pleased with our performance during the first quarter of 'twenty, two and remain very excited about the path ahead for Ryan specialty with that we thank you for your time and we'd like to open up the call for Q&A operator.
Yeah.
And at this time, we will be conducting a question and answer session.
If you'd like to ask a question. Please press star one on your telephone keypad.
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One moment, please while we poll for questions.
And our first question comes from the line of.
Elyse Greenspan Wells Fargo. Please proceed with your question.
Thanks. Good evening. My first question. So you guys took up your organic guidance I'm, just trying to get a sense. It sounds like youre not really seeing kind of the competition that you said you might've seen on the fringes right from last quarter. When you put together. This new guide are you assuming that.
You start to see that to a greater degree over the balance of the year or how should we think about that impact on organic as we move through 2002.
Well I'll start with that.
Jeremy I'll pick it up.
This is very hard to predict and we're not seeing much of it now.
That's really the story on that.
Just think it's prudent to keep.
Keep those historical facts in mind.
Sure Islands.
Yes.
It's the most important piece out of prudence and in an effort to be transparent and helpful. We flagged.
Competition, we were seeing and noted that in our forecast. There is the there is a presumption that the market's cool off later in the year.
The other thing and Thats still a factor in our forecast just to be clear, even though as Pat said, we havent seen that accelerate.
We still think that that's prudent to keep to.
The forecast.
We also mentioned on the last quarter and I'll just reiterate.
To give some other some additional context on why the guide moved the way it did.
You probably realize that our quarterly estimates are not linear.
No.
The organic that we produce Q1.
And how it relates to the full year guidance was not a total surprise to us.
And in addition to what we what we've observed in the past from the way extended hard market.
Eventually change we also want to acknowledge the macro uncertainty out there that Pat noted last last call as well rising interest rates inflation general economic uncertainty and war and remember that we're only four months into the year and we'd love nothing more than to come to give you a positive update in a couple of months Q2 is actually our biggest quarter of the year.
<unk>.
So hopefully that's the case, but in the meantime, we feel that need to be prudent.
And then my second question you guys mentioned that you are going to be.
Investing right by May investing in talent and kind of bringing on.
More.
Underwriters and brokers in.
In the second I think starting in the second quarter.
My sense is.
When companies have flagged hiring right that there is typically a lag right. So there might be an impact on expenses to start and then it takes time for these individuals to ramp up and really help from a revenue perspective. So can you help us think about the timing here is this something that you think could be a tailwind to organic growth in 'twenty three.
Ramp up on the hiring front this year.
I would say that it's.
Sure.
First year of that.
We have on board.
So I'm very exceptional talent already.
And then.
We expect that they'll start to produce.
And the second third and fourth quarter.
Additionally.
We've hired people.
And our garden leaves.
And so that could be anywhere.
90 days to six months.
But they are committed.
Our highly talented.
And they're real professionals.
In fact.
Those expenses will come on.
In the third and fourth quarter.
Those that are deferred.
So with regard to <unk>.
And so it's hard to say.
Dr <unk> in the third and fourth quarter, but.
As a seasoned professionals.
Great.
Reputation in this.
Niche practice groups at the revolver.
So we're very optimistic about.
Our ability to contribute.
The relative near term.
Okay. Thanks for the color.
Thank you Elise.
Our next question comes from the line of Weston Bloomer with UBS. Please proceed with your question.
Hi, Thanks for taking my questions. My first one is a follow up on the organic growth guide.
To what extent does your guidance forecast a recessionary environment in the back half of the year and do you think you can kind of maintain that overall organic growth and a potential recession, just kind of curious how I know you weren't necessarily public during the 2020.
Timeframe, how did you book all the over then how are you positioned now thank you.
Okay.
Western this is Jeremy let me start on that and I think some context around how we build our budgets in our forecast.
It's actually not a top down process. We go out to every producer every underwriter in the field and they have to do a bottoms up by account bill that we aggregate and interrogate and Thats, how we get to our projections a consistent theme as we were building. The budget. This year was this assumption in <unk>.
Timing for different lines is that there would be.
A market slowdown and.
These people are.
Highly seasoned professionals they know their books, they know the market, but they're not making assumptions and we're not layering in broader assumptions about the macroeconomic environment earlier this year.
Things have already changed a lot just since January or February so, we're not making <unk>.
Predictions about.
In a recession or the timing or anything like that and it's really hard to say.
How would you how would your forecast do against.
A recession or something like that in every.
Recession is different as you know western but what I can do things that you asked specifically is there was a significant economic downturn in 2022.
We put up record organic growth during that period.
And I'm sorry in 2021, and 2008 2020 in 2021, we were dealing with the effects of the pandemic.
And you you Wouldnt know there was a pandemic or downturn going on just based on our financials.
If you look back to the prior to recession.
We certainly werent public at those times, but the other brokers were.
We're a resilient so.
I don't have a great answer for you on how our our specific forecast would change if we entered a recession, but.
As Tim mentioned and Pat mentioned in his remarks.
The overall insurance market conditions that affect us. The most are still healthy. So that's a positive sign and then theres. Some other mitigating factors for us.
That are helpful. If we get into a period of economic uncertainty for example, our.
Most of our the majority of our expenses are comp and the majority of our comp is performance based and therefore variable. So we're not concerned but we don't have a lot of precision around how our forecast changes.
And a recession is another point that I would add to that.
This is a high percentage of our <unk>.
Brokerage and managing underwriting business.
Provides a compulsory insurance products.
We're not heavily into discretionary.
And the compulsory.
They have to buy insurance, because it's the law of copper auto.
Or they're borrowing money in the banks required in London's require.
It's a matter of what's happening to exposures.
What's happening with payroll such as you run into.
Tougher insurance market, but also a slowdown in the economy.
And the ability to predict that balance.
But clearly.
The world is getting riskier.
This inflation, so thus raising exposure.
That does raise premiums.
But there's just no way to calibrate that.
And appropriate for us to try to give.
Give you a number on that nobody can do that.
Yes.
Yes.
Got it that's all very helpful. My second question is it's more on the margin outlook, specifically around the condensation and I know you said you saw a pretty steep pickup in hiring.
I think total compensation was up close to 26% of <unk> versus <unk> 12 last quarter, how much of that increase was from hiring versus general wage inflation trends and can you help me think about those two metrics as I move through the year like is <unk> the high watermark for the accelerated increase in hiring or should it accelerate further from.
From here and what are your expectation for wage inflation throughout the year. Thank you.
I wanted to answer the words unpleasant volatility.
Yes, so so Pat will talk more about this but the.
Timing I'll, just give you a teaser the hiring environment the hiring opportunity, we still consider very rich.
Depending on how you want to look at it whether you are talking about the broker class or others were on pace to ahead of schedule there, but the timing of that is a little bit difficult to predict wage inflation. We've seen it we've seen the impact as we look at.
Offer letters for example for salaried employees that go out relative to what we had planned.
There are some <unk>.
Some surprises some increases in there, but again the majority of our compensation is related to producers and they are paid on a formula that's tied to revenue. So when their comp is going up it's because revenues going up proportionately.
And the rest of the the salary or the non variable comp piece.
<unk> had a.
A material negative impact on us yet.
And we remain.
A destination of choice.
Our talent and brokerage.
Binding.
Managing under delegated authority.
So that.
We're casting a wide net for exceptional talent.
We're not looking to.
So let's bring people on that are.
Doing fine.
And for people, who historically have done really really well.
But that can prosper in our culture.
And on our platform and our environment.
And you can see the benefit of that.
As all risks brokers.
Manage.
<unk>.
Underwriting binding underwriting.
Sure.
The.
Underwriting brokers.
Really increased our productivity, we can already see that in crops.
So the idea is to keep bringing in seasoned professionals.
While as Tim referenced.
Bringing in.
Young people right out of college and University or out of the military.
We'll have a lot of talent and experience.
Putting them through our training program and our development program all of those are accelerating.
Got it that's all Super helpful. Thank you.
Our next question comes from the line of Jimmy.
<unk> with J P. Morgan. Please proceed with your question.
Hi, I had a couple of questions first just on <unk>.
Organic growth if you look at your results in the Q you mentioned in the release several drivers of that.
Including I think new clients.
<unk> relationships with existing clients pricing.
You give some dimension on what the contribution of each order of which one was the bigger driver than the other to the extent you are able to quantify.
The various drivers or deal with any growth in wound care.
We don't break that out Jimmy.
What I will reiterate though is that the.
If youre thinking about rate versus.
Exposure.
Rate versus flow.
The latter is much more significant in terms of driving growth opportunities for us.
And the flow and Tim can expand on this but what we're what we're seeing what we saw in Q1 and what we've seen reflected in the organic growth numbers was a healthy amount of new business, a healthy amount of flow into the E&S market that we were able to take more than our fair share of.
As our existing clients needs and the risks that we're already in E&S grew we believe.
That we took more than our fair share of that as well. So it's a very it's a very balanced attribution, but Tim is there anymore color you want to add.
I would just add that the increase in.
Non admitted property and casualty business into the into our channel increased through the stamping offices and our association that records at WSI, a so we know the flow continues to grow.
Jeremy said, we're capturing more of that.
Okay.
Then can you talk about fiduciary income and what do you expect for that like how sensitive is it to the move in rates and to the extent you are able to quantify what your expectations are.
Okay.
Say that again Jimmy.
And fiduciary income.
What do you how should that benefit will be affected by the rise in rates and.
How much of leverage how much leverage does it have to the increase in rates.
So I'm glad you brought that up because I know in inflation and rising rates are on everyone's mind.
And we've got fixed rate debt, we've got interest rate caps, but are our biggest hedge.
Hedge is a natural hedge and its the hundreds of millions of dollars that we have on our balance sheet.
That premium in transit that we can invest now remember, though that that money. It doesn't belong to us. So preservation of capital is priority one two and three and all of the states have different rules about.
What you can do with it and some of them are limiting as you got to keep it in a savings account at a bank and so it doesn't track.
Our yield opportunity doesn't track perfectly with the fed funds rate or sofa, but conservatively and it's going to depend on a number of different things Jimmy but.
Something conservative to model for this year as everything is is.
Moving around and obviously the yield opportunity theres, a lag to when interest rates rise I would say.
One month term so for minus 50 basis points, we could comfortably.
<unk> this year.
And over the medium term in a more stable environment, we may be able to get tighter, but thats a safe assumption on our fed balances.
This year.
Okay.
And then just lastly, if I could ask on your comments around talent and hiring I think you mentioned, it's a good environment for hiring.
I would have thought it would be a bad environment for hiring given just wage inflation competition for talent low unemployment, but can you just expand on that a little bit.
Oh, you're talking about people from other brokers are you talking about people from outside the industry.
Both.
Other brokers are the other matters of underwriters.
We're not having a real problem with that.
Because we have a very performance based comp plan.
And so we can pay.
Nice rewards.
Good.
On a performance.
So as people look to join us.
Looking at what is the salary as much as Theyre looking at what is the growth opportunity.
In my short term.
Incentive plan.
And this platform of him joining.
And then you all frankly.
We do have our equity program well disciplined.
That's attractive to people as well.
So as we've said in the past one of the benefits.
Our going public.
In spite of what's happening in the market.
For a period of time for everybody almost everybody.
The liquid stock.
Okay.
New York Stock exchange listing.
Security is very attractive to people.
So the combination of all of that.
It's giving us the opportunity to be quite competitive.
In terms of hiring without.
Reaching in terms of fixed costs.
Thank you.
And our next question comes from the line of Alex Scott with Goldman Sachs. Please proceed with your question.
Hi, yes, thanks for taking it.
First one I had is just on the M&A pipeline.
Any comments you have on what that looks like and how the.
The current environment and potential changes in cost of capital and so forth would impact your M&A plans.
Oh, that's a question that.
Really welcome.
Because.
We've been working the pipeline.
And as we said the pipeline is robust.
I think you know by now that we are quite deliberate.
So we have.
Always we always start with the cultural fit.
And then the strategic fit.
We don't do opportunistic deals with strategic.
So we have.
Discussions going.
With people that are.
Proven their cultural foot.
Meet our strategic.
Demands.
And now.
We are in discussions.
We could work out terms.
Including price.
Sure.
To be accretive to our shareholders.
No.
Sometimes it takes a little longer.
For them to be able to approve the accretion.
So you can have discussions that could be prolonged for.
A few months.
Like here's what we expect we can do.
On our own on our own.
And here is what.
But we think we can do to help them once they are robust.
And it's not always a natural meeting of the minds.
But because we are a destination of choice.
We have had the ability.
To continue those discussions.
Until we are satisfied.
Yes. This is a deliverable.
Can make it accretive.
Move forward.
That's helpful. Thank you.
Second one I had.
As around inflationary impacts on the top line I guess some of the primaries talked about how exposure.
Also be impacted by the changing value of the underlying <unk>.
Products property et cetera, that's being insured.
Yes, I'd be interested.
What's sort of embedded in your plans around that.
Since maybe you laid out here.
Your full year.
Inflation has picked up and.
That something that would help a bit just on the exposure unit side in terms of revenue growth.
It definitely could and we're hearing the same thing from carriers.
As loss costs go up.
They need to keep up.
Periods of high inflation.
Typically follows as a hard market as well so theres a couple of different factors that could provide potential tailwind to us.
But we're not we haven't gotten too cute on the back half of the year in terms of the current inflationary environment and that providing a big boost there is certainly the potential for it though the other part of that.
Answer.
This is where brokers really earn there.
Our distinction.
Because with inflation.
And of course with interest rates moving up.
Coverages that were written a year ago 18 months ago two years ago.
Paying the higher claims.
Because of in place.
Including social inflation.
I think a lot of people are saying.
Inflation is not transitory now it's not.
A matter of all foreign how fast it goes.
So the good brokers and Thats generally.
<unk> is our team.
And our underwriters.
Our very careful because they have a responsibility.
To make sure that theyre guiding the client.
To protecting this exposure increase.
Less experienced and less qualified brokers to take the easy way out.
Yes.
Assume lower.
Exposure increases.
But.
I think our people are really professionally oriented.
With that so that does drive exposure increase probably hard to quantify.
Bill.
Thank you.
Our next question comes from the line of Tracy.
Julie.
I'm, sorry, I'm being usually you sorry for mispronouncing from Barclays. Please proceed with your question.
Yes.
Thank you.
On the seasonality perspective, you previously mentioned that the first and third quarter, you see lower organic revenue growth and then the second and fourth quarter the opposite.
I'm wondering if there any pull forward in the first quarter that could affect second quarter organic revenue prospects or do you expect the same quarterly cadence.
Organic growth.
So Tracy I'm glad you asked that because Q1 and Q3 don't necessarily have to be the lowest organic growth there just the smallest.
And Q2, and Q4 are the biggest and sometimes that aligns with organic growth, but sometimes not to look at last year Q3 was I believe our highest organic growth percentage.
That quarter, so we expect the.
The seasonality in terms of quarter size to.
To follow its usual pattern, so one and three the smallest two and for the biggest but we're not seeing we're not attributing.
What we achieved in Q1 to be.
Any material that would be related to any material timing issues like.
Like Q1 versus Q2 or Q1 and Q4.
Got it helpful.
And then just a follow up on your comment that Youre actually seeing very steady flow of the E&S market through April .
I'm just wondering.
When risks are really hard to place it goes from there.
<unk> to eventually Bermuda and you mentioned in your Geneva Joint venture earlier can you remind us your per meeting capability and over time, you could see meaningful growth in that market.
Well.
Geneva re.
That's partnered with nationwide.
Yeah.
Specialty.
And then Ryan related investors.
Are very conscious of.
We underwrite and discretion.
Yes.
Required.
Two in effect.
Yes.
And so those are conservative.
Attitude.
With really high quality underwriters and.
Would add.
We're dealing with.
High quality retail brokers.
And so we're partnering together with.
With those retail brokers to make sure the business that they're bringing it comes in us market.
It was properly.
Place.
Placed with high quality carriers.
And so.
The partnership with nationwide with a plus 15.
Does attract quality business.
So that's all working out quite well.
Can you also just remind me you account for that David Geneva, We under the equity method. So.
Could we see that category growing.
Over time.
And maybe another source of income.
No.
No it's a capital of both strategy.
The benefits of it Tracy though.
Our capital investment, which you are correct to remember it's on the balance sheet as an equity method investment but related to Geneva re is our reinsurance MDU, Ryan right, which we wholly own.
As of.
Believe it was the end of Q1 'twenty 2021.
And you will see the impact of that relationship and the growth in that MDU flow through our P&L like the rest of RMG use that's a really good point.
I probably misunderstood.
The question.
But we were able to attract.
Unusually capable.
Reinsurance underwriting talent.
And then partnering with.
Nationwide.
They are a plus 15 balance sheets.
Third carving out a very nice market position.
High quality ceding companies.
And as a result of.
We've expanded our total addressable market.
Significantly because we're we're.
Working with insurance carriers.
Hello.
Providing them.
Services.
Our mission statement.
So as of now.
Another dimension.
So if a joint venture relationship that we've described.
When you have exceptional talent.
And you have a plus 15 quality balance sheets.
Very high quality business.
Okay.
Got it thank you.
And as a reminder, if anyone has any questions you May press star one on your telephone keypad doing so will ensure you're spot on the question and answer queue.
Our next question comes from the line of Mayor Shields with <unk>. Please proceed with your question.
Thanks, and good afternoon all.
One of the issues that you talked about on I guess early on was that when retail brokers. Consolidate then the fact that those retail brokers have consolidate their wholesale panels.
And to your benefit and I was hoping you could talk about what exposure maybe the growth trajectory has a higher interest rate.
Slowdown in the retail brokerage acquisitions.
Okay.
That's a that's a very good question.
<unk>.
That effect is certainly not measurable yet, but if interest rates. We already we are hearing whispers from out in the M&A landscape that certain pay investors for example are thinking of.
Pause or a delay maybe a wait and see.
On the M&A approach related to interest rates, so to the extent that strategics.
Big retail.
Big retail brokers that are our trading partners that consolidate essentially customers for us to the extent that that changes their M&A outlook. It could have an impact, but I would expect them.
The strategics to have a more durable.
Thesis on.
On roll ups and consolidation then the strategics just because they are strategic.
But the most important thing is mirror, we haven't seen that impact yet.
Okay. That's helpful. Do you have an idea.
The timing of it in other words.
I'm assuming.
Catastrophic scenarios, but if M&A goes away in the retail market.
Immediately in terms of slower growth or is there any sort of lag.
That's probably a question for Tim sure I'd be happy to Premier.
No.
We can't see any.
Slowdown in growth related to M&A.
Most of these clients that are involved in it our clients the acquiring agency and the ones being rolled up in the in the private equity.
Roll ups and even the publicly traded broker clients.
We just don't see that really affecting the business thats coming our way right now.
The other part of M&A.
As you know we've established a third vertical.
And the benefits was going to be mostly managing underwriting.
With some.
Consulting attached to it.
And then the fourth vertical being alternative risk.
So there are opportunities in each one of those.
Sectors.
Our.
So quite quite interesting.
With.
Some.
Fairly abundant opportunities.
Really up to us too.
Select the right ones for us.
But both of those strategies.
Of those verticals.
Alright.
Sectors.
But.
M&A activity is picking up.
Okay Thats all I had thank you.
Yes.
And we have reached the end of the question and answer session and I will now turn the call back over to Pat Ryan for closing remarks.
Thank you operator, and thank you ladies and gentlemen.
For your continued interest and support of Ryan specially.
We always enjoy these discussions are good.
<unk> been taken the dialogue.
We look forward to speaking with you again.
When we discuss our second quarter two.
Results.
Thanks for your interest in our company and have a good evening.
And this concludes today's conference and you may disconnect. Your lines at this time. Thank you for your participation.
Okay.
Okay.
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