Q2 2023 Ryan Specialty Holdings Inc Earnings Call

Good afternoon, and thank you for joining us today for our specialty Holdings' second quarter 2022 earnings conference call.

In addition to the school the company filed a press release with the ACC earlier. This afternoon, which has also been posted to sweet spot at running specialty Dot com.

On today's call management's prepared remarks and answers to questions may contain forward looking statements.

And they say you should not place undue reliance on any forward looking statement.

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 filing with the ACC.

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.

Should not be considered and consider it in isolation or as a substitute for the financial information presented in accordance with cap.

Consolidations of non-GAAP financial measures to the most closely comparable measures prepared in accordance with GAAP are included in the earnings release, which was filed with SEC and available on the company's website.

With that I'd now like to turn the call over to the founder Chairman and Chief Executive Officer of <unk> specialty pet triad.

Good afternoon, and thank you for joining us to discuss our second quarter results.

With me on today's call is our President Tim Turner.

Our CFO Jerome I break them all.

Our CEO of underwriting managers miles Walter.

Nick message from Investor Relations.

Right, especially had a great quarter with strong momentum continuing across all of our strategic financial and operational objectives.

Total revenue of 19.1 Prasad.

And by organic growth of 16, 1%.

Building on the 22, 3% organic growth in the second quarter of 2022.

We also achieved double digit growth in adjusted EBITDAX.

Adjusted net income on a year over year basis.

We saw broad based strength across our specialties, particularly in property and the many individual lines of business.

The specific headwinds we noted on our prior calls or in line with our expectations and partially offset some of the very strong tailwind we experienced in property.

Overall, I'm very pleased with our performance in the quarter.

Throughout the first half of 'twenty to 'twenty three.

In addition to delivering great results.

We continue to execute on our M&A strategy.

In July we completed three attractive and strategic acquisitions.

Is that at the scale and scope to our wholesale specialty and lost their benefits practice.

The first is social insurance services.

Approximately 40 million of annual revenue.

So it's just.

High quality talent to our professional lines and cyber teams.

And deepens, our scale and scope.

Key hubs like San Francisco Tampa.

In Miami.

We are confident in the outlook for this business given our long standing familiarity with the team and our proven ability to help firms grow on our platform through our relationships with the top 100 retail brokers access to our proprietary products and expand carrier relationships.

We also completed two employee benefits acquisitions boy six health care.

This benefit partners.

I think just under $10 million of annual revenue.

These firms provide exceptional talent.

In foundational capabilities.

Ryan specialty benefits.

We have diligently assess opportunities in the benefits market targeting firms that have a track record of both growth and long term margin greater than the industry average.

Medical stop loss focused firms are perfectly aligned with those attributes.

Medical stop loss insurance plays a vital role by smoothing the volatility in health care spend from a reassuring of self funded benefits plan against high cost claims.

Medical stop loss insurance to continue to play a crucial role in financing and risk mitigation strategies.

Particularly as health care innovation accelerates and high cost drugs and gene therapies become more prevalent.

We are pleased to enter this niche that boasts over 25 billion and freedom in the U S.

The 12% compound annual growth rate.

2014.

We believe there's a long runway for both organic and inorganic growth.

Benefits and are excited to add these capabilities.

Please.

Further on the M&A front.

Our pipeline remains robust.

We remain disciplined in our pursuit of acquisitions.

Particularly in the current environment.

We will only move forward.

But all of our criteria are met.

Each acquisition must be a strong cultural fit.

Strategic and accretive.

We continue to make targeted investments during the quarter.

We brought on additional talent.

Further enhance our current capabilities and.

In developed areas, where we anticipate our clients.

Lead us in the future.

These investments, particularly in the recruitment of new colleagues offer the greatest returns for our shareholders.

And a part of a proven winning formula.

Maintaining our long term growth prospects.

That takes us to accelerate 2025.

Our two year restructuring program.

Earlier this year.

We are making investments that will enable continued growth drive innovation deliver sustainable productivity increases over the long term and accelerate margin improvement.

We made solid progress in the second quarter was Jeremiah.

Jeremiah I will discuss further.

We remain on track to generate a targeted annual savings of at least $35 million.

20th twenty-five with cumulative special charges expected to be at least 65 million through the end of 'twenty 'twenty four.

The second quarter.

In that marketplace remains robust.

It is continues to provide solutions.

Otherwise not available for hard to place risks.

As we've previously noted.

We've invested significantly in those lines.

Or we see clear opportunities to grow it.

In addition to bolstering the lines of business, where our clients need us the most.

We have also continued to expand our ability to serve brokers agents and carriers through innovation like trading alternatives to traditional insurance placements in areas like cat property.

My interpretation.

Looking ahead.

We expect favorable, especially insurance market dynamics to persist.

We remain confident.

2023 we will continue to be another strong year for our firm.

We're in a prime position.

To capture a broader E&S tailwind and also further capitalize on our specific lines accelerated growth.

Our differentiated business model allows us to remain ahead of the competition in our flex.

<unk> flexibility and enables us to quickly adapt and pivot when market conditions shift.

We continue to expand our total addressable market through innovation and strategic acquisitions and further deepen our moat.

Scale and scope of intellectual capital.

We're able to do all of this because of our exceptional team.

Who consistently deliver impressive results and value for our clients trading partners and ultimately to our shareholders.

I'm pleased to turn it over to Tim Tim.

Tim.

So very much Pat.

As Pat noted it was another strong quarter across our specialties as we continue to successfully execute on winning new business and producing innovative solutions for our clients.

The effects of industry trends, such as climate change and natural disasters, accelerating social inflation and broad based economic inflation happening concurrently with reduced insurance capital.

I'll pull back and underwriter appetite and market exits make for an incredibly challenging insurance market. Additionally.

Additionally, continuous change in the loss environment and growing uncertainty and reserve adequacy, it's driving more risks into the E&S marketplace, which offer significantly more freedom of rate and form.

Given our specialized and industry, leading teams ability to navigate the complexities of the market. We plan to continue delivering for our clients and expect to further expand our market share.

Diving into our specialties, our wholesale brokerage specialty generated another quarter of strong growth in property elevated levels of Attritional and secondary perils, including severe convective storms and persistent inflation from higher cost of materials and labor short.

Joe's are driving up loss costs.

Additionally, market conditions, including higher reinsurance costs reduction in available capacity and the ongoing requirements for proper valuations are driving higher retentions of risk and ultimately more volatility into the U S direct property market.

These factors are continuing to drive flow up new business into the E&S market.

The E&S market is responding.

Yet it is also experiencing more conservative appetites significant rate increases and tighter limits management, especially on coastal property severe convective storms wildfire flood and earthquake risk.

We are well positioned to assist our clients in navigating the complexities of this market are a plus team of experts are working tirelessly to bring important and creative solutions to our retail brokers and trading partners in this challenging market.

Our transportation practice continued to see substantial flow in the quarter fueled by social inflation carrier need for continued rate increases and a pullback in underwriter appetite and market exits.

We continue to win more than our fair share of new business and remain well positioned to capitalize on additional growth opportunities.

Our casualty practice also performed very well in the quarter, we continue to see higher loss trends inflation and reserving issues drive more flow into the E&S channel across both primary and excess casualty, particularly in lines like health care habitation.

Oh and real estate.

And as Pat noted, we completed the acquisition of social <unk> at the beginning of July and are excited about the addition of new teammates who have hit the ground running and are a clear cultural match with Ryan specialty.

Overall, our wholesale brokerage specialty continues to successfully execute its game plan and we see a long runway of consistent growth ahead.

In our binding authority specialty we saw another quarter of solid growth in traditional binding.

Which includes small commercial business and growth in personal lines. Despite continued capacity constraints.

We continue to see further potential for panel consolidation.

It's a long and steady growth opportunity and we are well positioned to execute.

Our underwriting management specialty also generated strong results led by continued steady and profitable growth and property and casualty and our reinsurance M. G. You Ryan Reed.

We also launched our benefits practice with the acquisitions of 0.6 health care and Ace benefit partners.

Our team was extremely thoughtful in determining where we can best add value in this large and important market.

And medical stop loss is where we see a clear opportunity for rapid expansion within this fast growing specialty niche.

John <unk> and his team are hard at work expanding our sales force in this practice.

We look forward to updating you on the progress of benefits in the quarters ahead.

As we had mentioned on our prior call and as Pat just noted the specific headwinds in certain lines in the second quarter, namely public company D&O.

Lower external M&A volumes, and transactional liability and delayed starts and construction.

He made in line with our expectations.

We expect any growth benefit.

And these three lines to be modest in the second half of the year.

Turning to price through Q2, we remained in the prolonged stages of a historically hard market.

Reising in the E&S market, largely held firm or accelerated in many lines of business with property continuing to see the strongest rate momentum.

Exceptions remain public company, D&O, and cyber where we saw further pressure.

As with all cycles as pricing continues to increase and certain lines are perceived to reach pricing adequacy.

We see admitted market step back in on certain placements, particularly within large towers.

But overall, we still have yet to see the standard market meaningfully impact rate or flow in the aggregate.

We continue to expect the flow of business into the non admitted market to be a significant driver of Ryan specialties growth more so than rate.

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 second quarter.

Thank you.

Thank you Tim in Q2, we grew total revenue, 19.1% period over period to 585 million fueled by another strong quarter of organic revenue growth at 16, 1% as we continue to benefit from the ongoing tailwind in much of the E&S market, particularly property.

Broad based strength in many of our individual lines and our ability to win substantial amounts of new business.

Net income for Q2, 'twenty, three was 84 million or 26 cents per diluted share.

Adjusted net income for the quarter was 124 million or 45 cents per diluted share.

Adjusted EBITDAX for the second quarter grew 16.9% period over period to 194 million, while adjusted EBITDAX margin declined 60 basis points to 33, 2%.

Our EBITDAX margin was impacted by continued investments in our business, including last year's hiring and T. N E. Continuing to return to normalized levels, both of which were partially offset by higher fiduciary investment income.

Turning to our accelerate 2025 program, we had approximately $17 million of charges in the quarter as the program was able to move into full swing slightly ahead of schedule.

We remain well on track to generate annual savings of at least $35 million in 2025 with cumulative special charges projected to be at least 65 million through the end of 'twenty 'twenty four as Pat noted. We also continued to make targeted investments in the quarter, adding underwriting and broking talent to our ranks.

We expect consistent recruitment efforts to continue in the back half of the year.

The cost of these investments along with the annulus nation of our 2022 head count growth, we will continue to impact margin, but will be partially offset by increases in fiduciary investment income.

These investments in talent, particularly recruiting new colleagues offer the highest returns for our shareholders and are part of a proven winning formula to maintain our long term growth prospects.

Based on our current forecast, we expect to record GAAP interest expense, which is net of interest income on our operating funds of approximately $31 million in Q3 and $29 million in Q4.

As a quick reminder, we paid for our three most recently announced acquisitions at the beginning of Q3, which reduce our operating funds relative to the 630 balance sheet.

We are now guiding organic revenue growth rate for the full year 2023 to be between 13.0 in 2000, 14.5%.

From our previous guide range of 10, 5% to 13.0% we are maintaining our full year adjusted EBIT margin guidance range of 29.0 to 30.0 per cent.

In summary, it was an excellent second quarter and first half performance by Ryan specialty we remain very excited for both our near and long term prospects with that we thank you for your time and we'd like to open up the call for Q&A operator.

Thank you we will now be conducting a question and answer session.

If you would like to ask a question. Please stay star and then one on your telephone keypad.

A confirmation tone will indicate your line is in the question queue.

In My Press Star and then two if you would like to move your question from the queue.

All participants using speaker equipment. It maybe makes it seems to pick up your handset before pressing the star keys.

One woman piece, while we poll for questions.

The first question, we have is from Elyse Greenspan with Wells Fargo. Please go ahead.

Hi, Thanks. Good evening My first question is on the.

David organic growth right 13 to 14 and a half you guys were 14 six for the first half the year and you know it sounds like there will still be will still be some impact of the headwinds in the second half. We are annualizing that so why wouldn't organic growth be stronger in the back half or is this just you know.

Some level of conservatism built into the guidance update.

Hi, Lee. Thanks. Thanks for the question. So first off just want to acknowledge we had a very good quarter that we're quite proud of and really the end to a very solid first half of the year.

As you noted in our prepared remarks, we got a big boost from property this quarter and because seasonally Q2 has the highest amount of property and property cat business in our portfolio.

That's why and thus we are expecting less of a lift from property in the second half of the year, but otherwise we're implying that H two will play out very similarly to H, one which means strong growth across the board, including double digit digit.

Growth contribution from our very balanced casualty portfolio as well. So overall, we feel great about where we're headed and age two and we're very confident we can land within our increased organic growth guide range, which we feel would represent another very solid year for Ryan specialty.

And then so Q2 Jeremiah staying there for a second Q2 right. I know you guys have said right is the highest property concentration quarter.

The other three quarters are they all pretty close from a property perspective or would one stand out as having a you know a higher concentration next to the second quarter.

So Q2 is far and away the largest and if youre just looking at percentage attribution of business. It doesn't even tell the whole story because not only does it have the highest overall property contribution, but it's the highest cat property.

Quarter of the year by far the next highest is Q4, but we did experience a benefit in the last couple of weeks of Q4 from property rates surging. So we're not counting on the exact same.

Growth in Q4, proportionately as we would a quarter like Q2, if that makes sense.

That does make sense and then.

And then in terms of the M&A pipeline you guys highlighted some of the activity during the quarter.

How does the rest of the pipeline look just in terms of other potential deals out there.

Oh, Thank you Louise.

It looks good.

It is a robust pipeline.

We are in discussions on additional benefits.

Opportunities that.

Well round out our offering to our clients add some significant.

New management talent and production talent.

There's no way of knowing.

When.

But.

It could be quite soon.

We're in serious discussions.

Okay. Thank you.

Thanks Elyse.

The next question is from Mr. <unk> of UBS. Please go ahead.

Hi, Thank you. Good evening. My first question is on the margin guidance I mean, you raised the full year organic the less the margin unchanged could you just talk to the types of investments you're making in the back half of the year and maybe what impact you're expecting within your margin guidance around normalization of tenure.

Or wage inflation or other investments.

Yes, Thank you Wes and so as we've said for multiple quarters now that the biggest impact to our margin at the moment is our outsized hiring activity from last year.

We know as is the right investment for our long term growth prospects and we're really confident will pay off in the long term and with regard to the guidance I mean, a quarter like Q2 33, 1% adjusted EBITDA margin.

More than anything it makes us confident in our guide range and increases the likelihood that we will end up at the high end of that range.

And again just to remind everyone. We had 25% margins in 2019, so our model definitely scales.

And next year, we won't have the same margin impact from our hiring this year. So we feel very good about margin improvement as time goes on but in the meantime, as you said.

<unk> is still ramping up its not ramping up as significantly as it was in 'twenty two relative to 'twenty, one, but still an impact there and then the biggest.

Impact again is just the annualized <unk> of last year's hiring and we're not making outsized hires at that same scale, but we are making are more normalized maintenance and growth level of hiring this year that we're really excited about.

Great that's helpful and and three M&A deals that you did in the quarter does that impact your margin profile, either favorably or adversely or maybe change the seasonality of it.

Your EBITDA or revenue.

They're they're too small to have an impact and then generally what we tell people is to think of acquisitions as coming on at the same margin in the same growth rate.

If there's an acquisition that is significantly different enough.

And significant in size enough to move the needle.

We will let investors know.

Great and then last question from me I know you have a partnership with nationwide and they they had pulled out of it is E&S commercial auto it was there any impact of that within your numbers or could you just comment on.

Or is that really where your relationship is with them.

Yes, we are.

We certainly noted nationwide withdrawal from commercial auto, but we have.

Wide product line and several other carriers that we can.

Employee and to absorb that business, we're expanding our transportation department as we've mentioned before and we were ready for that change.

The acquisition.

Of Krauss and associates really strengthened our bench and gave us a national breadth and depth and not just brokerage transportation, but underwriting. So we're we're.

We're looking ahead and we can absorb it make those changes without any any effect.

Great are you sizing that impact at all.

Or is that something you can close we're looking at double digit growth in transportation and underwriting and in broking, we're creating facilities Mg use <unk>.

Expanded binding authority product line.

And that that really doesn't put or have any negative impact on our ability to grow.

Great. Thank you.

The next question, we have is from <unk> <unk> of BMO capital markets. Please go ahead.

Okay.

Okay.

My question is a follow up to that question on margins.

Relative to the pace of hiring I guess.

Are there any.

Numbers you can help.

For context too.

The access.

Pace of hiring you made I guess, you know because we don't have as long of a history that kind of understand kind of you know we can see how many people you added in <unk> and.

And 'twenty two versus 21, but we can't see the long term average so I'm just trying to get a sense of.

Any context, you can put around like did you was the pace of hiring.

Points more than.

You you think is kind of quote unquote normal so we can kind of better understand you know.

Trying to size up the impact attached to your margins.

So I won't be able to put it in basis points for you, Mike, but it think of it as over one and a half times normal sized production class.

Relative to a normal year and Youre right looking at head count won't tell you the whole story because it's it's generally the production folks that are then needle mover. One thing we can tell you and we've said this a bunch is that.

Production classes as a cohort will cover their costs after two years and generally be margin accretive.

Sometime in the third year. So that's why we're confident that the 'twenty two class won't be.

Weighing down margin come 24.

And like I said were not Onboarding, an outsized class in 'twenty, three and if and if we only made normal size.

Hiring.

Hiring classes, there wouldn't be an impact in the following year, we can still scale somewhat if we're just hiring at an average level.

Okay.

It does help.

And just sticking to margins just just want to sure.

Are there are there any other.

Things changing.

The margin no pun intended to kind of back on commission rates or you know and you know I don't.

No just wage inflation.

Should be thinking about or is it you know that.

That would change versus three to six months ago that we should be contemplating as well.

Nothing on commission rates those are stable.

Question on wage inflation, we're not immune to it because there are plenty of folks who are running around on salaries, but the majority of our comp expense is commission based.

And so it doesn't.

It doesn't get impacted by wage inflation in the same way. So yes. It has an impact on us I'm sure you've heard everyone talking about it but it's not.

That alone wouldn't have the same margin impact that is worthy of as many references as we've made two.

What's happening in our comp margin right now it's it's the sheer number of hires that we made last year on the production side.

Okay, Great and then lastly, just.

You gave us some good commentary about flows into the E&S marketplace.

But he also talked about there being even some appetite constraints within the E&S marketplace, but just.

Just curious anything you've seen any stats you want to talk about what you're seeing in July .

Seeing any change.

Change in acceleration or deceleration in flows.

Over the past month.

No it's been quite steady.

Flow has been measurable and increased in many lines some.

Some deceleration as we talked about and in public D&O and widely noted in cyber, but so many other lines not just cat property, but many casualty lines continued to harden and so the flow into the channel and our ability to capture it continues to.

Get strength stronger.

And we feel we're converting a higher percentage of that business and we've been building our bench for years to to win as much of that business as we can it's working out very well.

And what what CASM clients are there or are they more kind of large accounts or small accounts and I promise my last follow up.

No problem, it's a combination of small commercial certainly in our binding authorities and our our Mg use but it's larger brokerage business as well large habitation all schedules and the casualty side continue.

To pour into our channel residential construction, New York construction to name a few transportation as we've mentioned healthcare nursing homes assisted living certain.

Social.

And different types of healthcare sports and entertainment.

<unk> to be a very difficult line, where they need our help consumer products and maybe lastly public entity.

Real demand for property and casualty solutions in the specialty side across the whole.

Public entity sector.

Yeah.

Thank you.

The next question we have is from Cook's of Goldman Sachs. Please go ahead.

Hey, Thanks for taking my question.

So I noticed the adjusted compensation margin was down a good bit year over year. Despite the talent investments, but the adjusted G&A ratio was higher than the first quarter. When it's seasonally lower so I would've thought that would be a little bit lower I think as the first quarter if I ever.

Call correctly was your toughest comp with respect to travel and entertainment. So is there any additional color you can provide there.

Yes, a little bit of that or I, shouldnt say, a little some of that is <unk> and then another bit of that in his professional services that increased significantly this quarter relative to prior quarters related to a new revenue stream that just requires additional professional services.

Over time that May.

Water bed into comp if we decide to in house some of those but for right now they're through professional services.

Got it thank you and maybe just another question.

You know on that the state of California, which I think is nearly 15% of the E&S market based on data that we look at.

I think it's been a net drag on overall E&S industry premiums since November of last year, but we've seen it tick up positively.

Positively in the double digits and in the last two months, which I suspect might be driven by personal lines and properties I'm wondering if you see growth in California in the back half of the year and how well positioned Ryan is to potentially take advantage of some of those tailwind if if they're there.

We're very well positioned in the state of California, we have multiple offices two of our last large brokerage acquisitions are in the state of California.

We've strengthened ourselves there deep benches, and property and casualty and binding.

We're building and finishing up a high net worth personal lines facility to complement what we've already been doing in personal lines. So we're there to capture that business and to deliver for our clients across California, and the West coast.

Okay.

That's great and maybe if I could sneak in.

One more on cyber Tim.

Tim I think I noted you had recently stated that the cyber market is getting skittish again, but I think theres still pricing declines in that market.

So I guess my question is are you growing in that market and do you expect growth to pick up or slow down in the back half of the year.

Well Theres no question Theres rate deceleration and the flow has slowed a bit but we're still capitalizing on its still.

A very.

Great opportunity for us, we're well positioned in binding authorities Mg use which miles will or can talk about a little further but our cyber team is number one in the country and they are performing at a very high level, our clients still need us miles.

I'll chime in.

So we have noted deceleration cyber previously and there has been modest negative change most observable in the excess layers.

Please keep in mind this was relative to the market, particularly thus achieving 85% rate increase in the first half of last year. So.

Investments by corporate risk managers of curb losses substantial price hikes that helps great adequacy.

It has brought some new capital this space, but however, despite the shifting pricing the overall opportunity remains immense the cyber threats persist and where the industry is still anticipating structural.

Structural growth is averaging 20% per annum for the foreseeable future. So we're well positioned with.

People and product to capitalize on that.

I appreciate the color. Thank you.

Ladies and gentlemen, just a reminder, if you would like to ask a question Youre welcome to Gray Star then one.

Christian we have is from Meyer shields of <unk>. Please go ahead.

Thanks, I want to follow up on fiber if I can is there any seasonality analogous to what we're seeing in property, where cyber is a bigger factor in a particular quarter.

There is not material seasonality cyber.

Okay perfect.

And second question I think its probably for Jeremy.

A very significant tick up into your Sherry assets going from the end of the first quarter to the end of the second quarter.

Is the seasonality that we've seen historically.

<unk> a good proxy for how fiduciary funds bill coming up.

Okay.

When you say recently are you talking about.

First half of this year or since you've been following us just want to make sure I understand the question.

I mean first half this year in other words.

We saw a pretty big increase going from the first quarter to second quarter last year and also this year and I'm, just wondering whether that be ebbs and flows should be roughly the same every year.

Yes.

I was actually talking to the treasurer about this earlier this week.

I would classify everything that you are seeing in our fiduciary balances as normal.

Factors and timing that can happen theres been no change to our DSO no material change to business mix, even though the different obviously wholesale and.

Delegated authority do have different payment terms and DSO when we.

Higher businesses will impact fiduciary balances, but.

There is nothing nothing.

To read into in terms of a material change its normal timing factors.

Okay Perfect and then final question, if I can for Tim.

It sounds based on everything that we're saying that maybe <unk> growth will slow down because we are lapping normal quarters.

Are you seeing competitors pull back on that is there a specific opportunity.

From that particular aspect of marketing.

No, we're not seeing any any real pull back on that.

But im not sure I understood. The question could you repeat that.

Yes, I'm, just wondering with travel and entertainment.

Observable he's much more expensive.

Wondering whether you are starting to see some competitors say, we're just going to do less of that and whether there's an opportunity for growth.

No I haven't seen that in fact, I think it is competitive in our space as it's ever been.

We're attending events and on the road seeing our clients and our underwriters continuously.

We're back to full speed ahead, and I don't see any pullback from our competitors actually.

Okay. That's very helpful. Thank you.

Okay.

The next question we have is from Michael Wood of Citi. Please go ahead.

Hi, Thanks, guys.

I was wondering and benefits what capabilities you might be looking to add or is it more medical stop loss or other areas.

Yes.

Medical stop loss.

As I'm sure you know.

Is rapidly growing.

Moving from fully fund this.

<unk> plans.

Self insured plans.

Sure.

It's just us.

Great Lee is the phenomenon.

The size of employer, who was moving into self insured.

And funding.

Through group captives.

It's pooling with other.

Employers employer groups.

Similar size characteristics and so our strategy is.

Integrated health solution.

Heavily driven.

Through self insured clients.

Ultimately.

We believe in.

Large numbers are going to want to be funding that by putting up some of their own capital.

And group captives.

So.

It's a process.

Providing services to retail brokers.

They may not have.

Resources to provide these services.

And frankly.

And the ability through our professional skills.

The talent of the team that we've assembled.

To bring.

Innovative.

Great in House solutions.

Coupled with.

We are self insured plans that I've talked about.

Then, bringing very innovative funding mechanism.

So we believe that.

Okay.

Benefits strategy that we have.

Excuse me is going to be.

A significant.

The accretive.

Two our total addressable market will.

It will be picking up a lot of clients.

We believe we'll be interested in what we're offering.

And then we think we have cross selling.

Selling opportunities on the P&C side.

So we're very excited about that.

Thanks, that's helpful.

And then maybe just on the 2025 savings plan. Thank.

Thank you mentioned this but could we should we potentially be expecting to see savings a little bit earlier than that.

Or timing is still the same.

No timing.

A little bit ahead of schedule on execution, but the material impact to the P&L is is on the same schedule. So no saves this year some in 'twenty, four which will be reflected in our guidance next year and then the the full annual 35 in 'twenty five.

Thanks, guys.

Thank you.

The next question, we have is from Jason <unk> of Barclays. Please go ahead.

Tracey do we have you.

Can you hear me.

We can now.

Okay.

Can you hear me.

Yes, okay.

Okay.

Sorry, it would be great to learn more about your property E&S wholesale brokering and underwriting management capabilities are you more known by the market on the transactional E&S side are you more known in the larger property direct and facultative market.

Okay.

Yeah Tracy.

So I'll start on the delegated authority side so.

Our property capabilities.

Span habitation, all property builder's risk renewables energy and most certainly cap property.

We're able to efficiently service, both the middle market as well as large accounts are.

Our cap practice.

It's predominantly shared and layered working some of the largest and most complex risks out there.

And so as far as positioning and expectation side, we've noted previously.

Previously with our results and expert teams, we increased cat capacity post Ian and I'm pleased to say, we continue to add cat commitments, even as recently as this week. So we've been prudent deploying our cat aggregate and have substantial dry powder, which which points.

Continued great contribution into the end of the year.

Okay, I would just add our our brokerage capabilities are industry, leading we've been capturing a high percentage of this new business pouring into the channel.

I believe our outstanding leadership team and in the brokerage cat property Arena.

Doing a fabulous job and we that was a big part of our success in the quarter, we look forward to capturing other difficult property risk because if we move on through the year.

There's much more to it than just cat wind.

Okay excellent.

A number of new E&S carriers, including some UK insurers, which may be moved to be more efficient on the Lloyds distribution efforts.

I'd like to know is does this move just cut one layer in that value chain like business, you would have seen anyway.

Or does bypassing Lloyds give you a new business opportunity.

No I would say that net positive on that as it enhances and strengthens our ability to market the business.

Boyds is obviously an industry leader in the E&S market, but there is multiple access points and they are a major player in our binding authorities, our Mg use open brokerage London access points.

So it's a it's a heavy duty player and then creating these two E&S facilities that we've been reading about I see that as a very positive.

Influence on our ability to solve these catastrophic challenges.

Okay just to be clear is that business you would have seen anyway or is that new business that you would now see.

It's a combination of new and renewal business. It just enhances our capabilities and strengthens.

Okay. Thank you.

Yes.

Operator, do we have another question.

Ladies and gentlemen, we apologize for the delay we will move onto our next question, which is coming from the line of Ryan Tunis with Autonomous Research. Please proceed with your question.

Hey, Thanks, Good evening guys.

Just another follow up on side, we're trying to understand.

So some of the businesses the businesses that are capable of moving the needle on your organic when you have sharp inflections, obviously, we know D&O can do it.

Property can do it but.

Cyber one of those businesses, where when you really do have big pricing swings, it's something that can notably move your headline organic growth rate.

So I would just say broadly this is jeremiah Ryan.

Cyber or think of that as a product category.

Which is we've said publicly is there is no product that's more than.

Single digits in terms of our overall portfolio and in the case of cyber. It's it's low single digits versus property, which is an entire category of products, making up a very significant part of the portfolio. So they are apples and oranges really cyber is worth talking about it because it's an important.

It's an important topic for insured it's an important.

Weapon in the Arsenal of our professional lines team and there's a lot going on.

And as miles said the opportunity set is big enough, where we do expect that it will be a feature we're talking about as time goes on but it's not the.

It's not as material for example, as like D&O as public D&O has been over the last several quarters.

And Ryan I'll jump in there, even though rate is under pressure, we continue to find ways to grow through new products, new clients and incremental capacity. So we are achieving growth.

I also think it's important to note that it has been last year was a relatively benign.

Last year, a lot of people were looking for how it comes out of the Ukraine, Russia conflict.

It didn't materialize, but.

There are increases in attacks year over year, there had been some malware and sedans and so that's a threat remains very active risk environment.

Got it and then.

On the property side, just trying to think about the longevity of this.

So.

Would you say that like.

Carriers generally coming to market and getting the rate that they think they need on property placements. This year or would you characterize it more as there being some type of understanding that.

In the marketplace getting to whatever your viewers of rate adequacy may take multiple renewals.

I would say more of the latter.

Turning to get increases the losses continue to come in.

As you know global warming is not going away, it's creating more and more.

Connective.

Storm activity.

Wildfire phenomenon Theres, just a lot of tentacles to this issue and we see prices going up we see capacity shrinking.

It took 10 or 20 carriers to build $100 million tower last year now it takes twice as many.

Most carriers are shortening their lines tightening their terms and conditions and continuing to raise their prices.

I don't think we're anywhere near close to where the market could go.

The convective storms.

Really doing damage.

To balance sheets. The modeling has been off in this area and so we're our services and our products are needed well beyond the cat wind aspect of property.

Got it and then just one last follow up for Jeremy I apologize if I missed this but could you give us some idea of what the acquired revenues are in the three deals you completed this quarter.

Okay.

It was about $40 million in aggregate.

Yes.

Thank you.

Yes.

That's correct.

Yeah.

Yes.

Thank you. It appears we have no additional questions at this time, so I'd like to pass the floor back to management for any closing remarks.

Okay.

Yes.

Well. Thank you all very much good questions and thanks for your support.

Interest in our company.

We look forward to speaking to you again.

At the end of the third quarter. Thank you.

Ladies and gentlemen, this does conclude today's teleconference and webcast. We thank you for your participation and you may disconnect. Your lines at this time.

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