Q4 2024 Ryan Specialty Holdings Inc Earnings Call
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Speaker Change: Good afternoon, and thank you for joining us today for Ryan specialty Holdings' fourth quarter and full year 'twenty 'twenty four 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 Ryan specialty Dot com.
Speaker Change: On today's call management's prepared remarks and answers to your questions may contain forward looking statements investors should not place undue reliance on any forward looking statement.
Speaker Change: These statements are based on management's current expectations and beliefs are subject to risks and uncertainties that could cause actual results to differ materially from those discussed today.
Speaker Change: Listeners are encouraged to review the more detailed discussion of these risk factors contained in the company's filings with the S E T.
Speaker Change: The company assumes no duty to update such forward looking statements in the future except as required by law.
Speaker Change: 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.
Speaker Change: Reconciliations of these non-GAAP financial measures to the most closely comparable measures prepared in accordance with GAAP.
Speaker Change: Included in the earnings release, which was filed with the SEC and available on the company's website.
Speaker Change: With that I'd like to turn the call over to founder and executive Chairman and Brian Specialty Pat Ryan That's right. Please go ahead.
Speaker Change: Good afternoon.
Speaker Change: Thank you for joining us to discuss our fourth quarter results.
Speaker Change: With me on today's call is our CEO Tim Turner.
Jerome: Our president of Jerome I pick them.
Jonathan Hamilton: Our CFO Jonathan Hamilton.
Miles War: C E O of underwriting managers miles war.
Jonathan Hamilton: And our director of Investor Relations.
Jonathan Hamilton: <unk>.
Jonathan Hamilton: Before we discuss our results I wanted to take a moment to comment on the California wildfires.
Jonathan Hamilton: Our thoughts and prayers are with everyone affected.
Jonathan Hamilton: Excluding our teammates clients and.
Jonathan Hamilton: Trading partners.
Jonathan Hamilton: The loss of life and destruction is tragic.
Jonathan Hamilton: These events are yet another reminder of the difficult.
Jonathan Hamilton: All being loss environment in which we operate.
Jonathan Hamilton: We remain well positioned to assist our trading partners navigate an ever changing insurance landscape.
Now turning to our financial performance 2024 was another outstanding year for Ryan specialty.
Jonathan Hamilton: We delivered on all of our strategic priorities.
Jonathan Hamilton: Our strong results are a testament to our conviction to put our clients first or.
Jonathan Hamilton: Our focus on specialized expertise.
Jonathan Hamilton: Our commitment to rewarding top talent.
Jonathan Hamilton: And our dedication to excellence in everything we do for.
Jonathan Hamilton: For the quarter, we delivered organic revenue growth of 11%.
Jonathan Hamilton: On top of our toughest quarterly comparable of 16.5%.
Jonathan Hamilton: I'm very proud of our organic revenue growth considering the volatile property market conditions.
Jonathan Hamilton: Along with the exceptional performance of our casualty lines of business and all three specialties.
Tim Turner: All of US Tim will provide more color on shortly.
Tim Turner: This quarter is a telling example of our specialized diverse portfolio and balance out and even overcome.
Tim Turner: Market conditions to produce exceptional organic growth at scale.
Tim Turner: For the full year, we surpassed revenue was up two and a half billion up.
Tim Turner: 21% year over year.
Tim Turner: Driven by organic growth of 12, 8%.
Tim Turner: On top of the 15.4% in 'twenty to 'twenty three.
Tim Turner: And significant contributions from our M&A strategy.
Tim Turner: We marked our sixth consecutive you're growing the top line by 20% or more.
Tim Turner: And our 14th straight year.
Tim Turner: Double digit organic revenue growth.
Tim Turner: Full year adjusted EBITDAX grew.
Tim Turner: With 30%.
Tim Turner: 811 billion.
Tim Turner: Adjusted EBITDA margin.
Tim Turner: Spanned 210 basis points.
Tim Turner: The 32, 2%.
Tim Turner: Adjusted earnings per share grew 30%.
Tim Turner: So $1 79.
Tim Turner: We successfully executed the largest your M&A in our history.
Tim Turner: Completing southern acquisitions with trailing revenue of over $265 million.
Tim Turner: We carried that momentum into 'twenty to 'twenty five.
Tim Turner: We're off to a great start.
Tim Turner: Earlier this month.
Tim Turner: Close on the velocity underwriting managers transaction.
Tim Turner: And are very excited to welcome or those new teammates into the Ryan, especially family.
Tim Turner: We are pleased with the success, we had to bring in these great firms, which expands our total addressable market.
Tim Turner: We've added multiple supposedly leading M G using programs.
Tim Turner: With unique product sets technology advantages like.
Tim Turner: Like efficient online distribution of it.
Tim Turner: Expanded geographically.
Tim Turner: The evolution of our business mix is consistent with our core mission of offering differentiated specialty insurance services to brokers agents and carriers.
Tim Turner: Further.
Tim Turner: It offers clear diversification benefits to our financial performance.
Tim Turner: Clothing velocity.
Tim Turner: Delegated authority now makes up nearly 45% of our revenue.
Tim Turner: The build out of our delegated authority capabilities in specialty lines was part of the core thesis for Orion specialties founding.
Tim Turner: We are proud to have been an early mover.
Speaker Change: Best thing into the segment.
Speaker Change: We've let structural changes.
Speaker Change: Fuel growth and increased adoption of delegated underwriting authority across our industry.
Speaker Change: And my founding letter that our company at our IPO.
Speaker Change: We set out a strategy.
Speaker Change: To build a delegated underwriting authority business with a differentiated platform and top flight underwriting talent.
Speaker Change: This was in response to the growing unmet need among insurance carriers for trading partner that could assist them in meeting the challenges and opportunities of a rapidly evolving and increasingly complex specialty insurance market.
Speaker Change: As we move into 2020 five.
Speaker Change: See continued validation of our delegated authority strategy.
Speaker Change: Confirmation of acceleration and carriers use of delegated authority.
Speaker Change: Specifically.
Speaker Change: A M best recently published a market wide study.
Speaker Change: We decided scaled delegated authority partners.
Speaker Change: Is increasingly valuable for a number of factors.
Speaker Change: Notably.
Speaker Change: Niche specialization.
Speaker Change: Portfolio diversity.
Speaker Change: Improved cost and efficiency.
Speaker Change: Speed to market.
Speaker Change: And access to superior underwriting technology, or all sided I've been core to our offering since inception.
Speaker Change: Additionally of the carriers polled 70 per son, we're expected to grow their use of delegated authority in 2025.
Speaker Change: With no respondents planning to shrink.
Speaker Change: Overall, 52% of respondents commented that delegated authority would take a more significant role in the insurance value chain.
Speaker Change: Again with zero respond and seeing a possibility of decline and relevance.
Speaker Change: As we look back at the last 15 years of investments in our business. We are proud of what we've achieved.
Speaker Change: Ryan specialty is stronger than ever.
Speaker Change: We're excited to see the benefits from our recent acquisitions come through.
Speaker Change: As we have repeatedly noted.
Speaker Change: This year's M&A is next year's organic growth.
Speaker Change: As we look to 'twenty 'twenty five weeks.
Speaker Change: We expect to deliver another year of double digit organic growth.
Speaker Change: As well as margin expansion.
We believe that we will continue to deliver innovative solutions to our clients generate.
Speaker Change: Industry, leading organic growth.
Speaker Change: Execute on our M&A strategy.
Speaker Change: And increased profitability, while investing in our platform all of which drive significant additional value for our shareholders.
I'm proud of our entire team's dedication and relentless efforts to evolve our brand into the very best specialty insurance services firm in our industry.
Speaker Change: I'm very excited for our future.
Speaker Change: Now I'm pleased to turn the call over to our Chief Executive Officer, Tim Turner Tim.
Tim Turner: Thank you very much Pat it was another outstanding year for Ryan specialty as we delivered our 14th consecutive year of double digit organic growth.
With very strong new business generation.
Tim Turner: Our full year organic growth of 12, 8% was strong.
Tim Turner: Driven by consistent results in casualty.
Tim Turner: Property was also solid for much of the year and our team manage this challenging environment well.
Tim Turner: Spike rate deterioration.
Tim Turner: Which became more pronounced in the fourth quarter.
Tim Turner: We executed on one of our top strategic priorities completing a record year of M&A.
Tim Turner: But the largest transaction being our acquisition of U S assure.
Tim Turner: We added over 265 million of annual revenue to our platform.
Tim Turner: As well as the myriad of capabilities to our underwriting management specialty.
Tim Turner: For example.
Tim Turner: With both <unk> and Innovest, we significantly enhanced our U K and European footprint.
Tim Turner: Set the stage to accelerate our international expansion.
Tim Turner: With each we added key talent, new capabilities and incremental products, including a strong environmental M. G U.
Tim Turner: Which complements our brokerage expertise.
Tim Turner: With U S. Assure we've added to our sophisticated set of builders' risk product to serve the attractive SME segment.
Tim Turner: With expertise across all market segments, we're well placed to expand our product offering and cater to this expanding market.
Tim Turner: Next is ever sports.
Tim Turner: We were very pleased to be a solution provider for Everest, a great trading partner of ours in acquiring this business.
Tim Turner: <unk> specialty underwriting managers as an M. G. U is working closely with Everest on the re underwriting of this book with an emphasis on E&S solutions.
Tim Turner: Following integration into our existing M. G. U Y brisk. This acquisition is further enhanced by our exceptionally strong brokerage practice within our T specialty.
Tim Turner: And most recently is the acquisition of velocity risks underwriters.
Tim Turner: With $81 million of annual revenue velocity adds critical property capabilities and an.
Tim Turner: Is that middle market and small to medium commercial business.
Tim Turner: Velocity further rounds out our offering of ground up property shared and layered and tier one cat all to better serve our retail and wholesale clients.
Tim Turner: With velocity, we further position ourselves to capitalize on the long term growth opportunity, we see in property catastrophe risk.
Tim Turner: We were also very excited to partner with.
Tim Turner: And strengthen our strategic relationship with FM global and industry, leading property carrier.
Tim Turner: As part of the transaction at the EM Global is expected to acquire a majority of the balance sheet of velocity specialty insurance company or visa, Inc. One of the capital providers that supports the M. G U.
Tim Turner: A component of this pending transaction as Ryan specialty acquiring at nine 9%.
Tim Turner: Or approximately a $16 million stake in visa it subject to closing adjustments.
Tim Turner: We will not consolidate be sick, rather we expect to treat the stake as an equity method investment.
Similar to our existing investment in Geneva re.
Tim Turner: This is part of our strategic commitment to an alignment with our capital providers.
Tim Turner: Our successful M&A activity this year cement Ryan specialty underwriting managers as the preeminent delegated underwriting authority platform.
Tim Turner: As demonstrated each of these acquisitions support our strategic vision of a wining specialized underwriting products with our.
Tim Turner: <unk> expertise across industries, expanding our capabilities and offering clients diverse innovative solutions.
Tim Turner: On top of everything else. We believe we can further enhance these already great businesses through our track record of productivity improvements now.
Tim Turner: Now, let me dive into our specialties.
Tim Turner: Our wholesale brokerage specialty had a strong year and a solid fourth quarter.
Tim Turner: In property, we executed well.
Tim Turner: We saw property pricing declined modestly early in the quarter.
Tim Turner: And the decline accelerated significantly in December similar to what we witnessed at the end of Q3.
Tim Turner: As noted on our last call December is the largest property month in Q4. Nevertheless, we overcame these trends.
Tim Turner: As we took share of strong flow into the channel.
Tim Turner: One head to head against our competitors and had high renewal retention.
Tim Turner: The recent L. A wildfires devastating hurricanes, Milton and Helene and record severe convective storms second only to 2023 are tough examples driving heightened concern for large loss events.
Tim Turner: Add to this growing exposure in both high value concentration.
Tim Turner: And areas of high catastrophe risk.
Tim Turner: We believe there is further proof of long term durability of and the need for E&S property solutions.
Tim Turner: With our deep capabilities, we will continue to deliver value and offer solutions to the most complex issues, our clients face irrespective of the market cycle.
Tim Turner: Given the continued uncertainty in the rate environment, we expect more modest growth in property this year, but.
Tim Turner: We strongly believe property will remain an important contributor to our growth.
Tim Turner: Particularly over the long term.
Tim Turner: Our casualty practice had an outstanding year with strong new business and high renewal retention.
Tim Turner: A persistently challenging loss environment is driving higher or in some lines accelerating loss cost in numerous casualty classes.
Tim Turner: He admitted market continues to react to this trend by dumping and shedding risks.
Tim Turner: With those risks moving into the specialty and E&S market.
Tim Turner: We see the E&S market responding well with carriers tightening distribution lines re underwriting changing appetite raising prices and focusing on limit management.
Tim Turner: As a result, we believe the need for specialized industry and product level knowledge. Ryan specialty offers has never been greater and our value proposition has never been stronger.
Tim Turner: We remain confident that casualty will be a strong driver of our growth moving forward.
Tim Turner: And that we will continue to be a leader in casualty solutions for years to come.
Tim Turner: Now turning to our delegated authority specialties, which include both binding and underwriting management or.
Tim Turner: Our binding authority specialty had an excellent year and continues to perform very well driven by our top tier talent and our expanding product set for small tough to place commercial P&C risks.
Tim Turner: We continue to believe panel consolidation and binding authority remains a long term growth opportunity and we are well positioned to capitalize.
Tim Turner: Our underwriting management specialty which includes M. G U N G H.
Tim Turner: And programs had another strong quarter and an outstanding 2024.
Tim Turner: Results were driven by strong organic growth.
Tim Turner: Particularly in casualty and transactional liability.
Tim Turner: We also had meaningful contribution from recent acquisition.
Tim Turner: Including a full quarter from U S assure.
Tim Turner: And by contingent Commission.
Tim Turner: As we continue to deliver strong underwriting profit for our carrier trading partners.
Tim Turner: Our strategic positioning allows us to capitalize on organic and inorganic growth opportunities.
Tim Turner: We believe this combination paired with our skills to manage the business through the insurance cycle ensures our ability to deliver consistently profitable underwriting results growth and scale over the long term.
Tim Turner: Turning to price after years of significant price increases and capacity and appetite increasing in the second half of the year property pricing was down in Q4 at.
At the same time casualty pricing accelerated and broadened out across an increasing number of classes.
Tim Turner: Cross both major classes, there remains uncertainty in the loss environment.
Tim Turner: This continues to drive higher retentions of risk and pushes new risks into the specialty and E&S marketplace.
Tim Turner: We have consistently noted that in any cycle as certain lines are perceived to reach pricing adequacy admitted markets tend to step back in and certain placements.
Tim Turner: However, this is still not playing out in any measurable way and the standard market is not meaningfully impacted the rate or flow of our portfolio in the aggregate.
Tim Turner: As we've said since our IPO, we continue to expect the flow of business into the specialty and E&S market to be a significant driver of Brian specialties growth over the long term more so than rate.
Tim Turner: Most importantly.
Tim Turner: We remain well positioned to assist our trading partners navigate an ever changing insurance landscape.
Tim Turner: As we progress through 2025, there are several things you can continue to expect from Ryan specialty.
Tim Turner: First we expect to record our 15th consecutive year of double digit organic growth.
Tim Turner: Once again, driven by secular growth drivers such as retail brokers, becoming larger through solid organic growth and ongoing consolidation.
Tim Turner: Panel consolidation, which has created growing recognition among retail brokers of the need to optimize client outcomes minimized E N o's and invest in long term strategic relationships that help them win.
Tim Turner: The world getting riskier and more complex.
Tim Turner: AI cyber threats climate change social inflation political.
Tim Turner: Unrest.
Tim Turner: They're all driving more risks into the E&S marketplace.
Tim Turner: Which offer a solution that would otherwise not be available.
Tim Turner: We believe E&S will continue to outpace growth in the admitted market overshadowing any cyclical shifts.
Tim Turner: This is further supported by the significant commitment to the E&S market made by carriers that historically participated only in the admitted market and the addition of new capital.
Tim Turner: Adding to our secular growth drivers are Ryan specialties own attributes and strategies.
Tim Turner: Our ability to innovate.
Tim Turner: Evolve and when it's underpinned and perpetuated by specific pillars.
Tim Turner: Our entrepreneurial and empowering culture are.
Tim Turner: Our unique relationships and position of trust and our scale and scope of expertise.
Tim Turner: Second we will thoughtfully invest in our business to optimize our platform and support long term growth.
To that end, we completed our accelerate 2025 program at the end of the year.
Tim Turner: As Jeremiah will speak to shortly the results and opportunities from accelerate 2025 provide.
Tim Turner: Provide us more flexibility and we believe have placed us in a unique position to further invest in our growth.
Speaker Change: We've said it before but.
Speaker Change: But it bears repeating we will always prioritize investing in our business.
Speaker Change: Onboarding top talent.
Speaker Change: Adding capabilities and enhancing tools technology and governance will always be the hallmark of our commitment to our employees clients and trading partners.
Speaker Change: These investments across Ryan specialty along with our commitment to innovation should continue to enable us to consistently achieve industry, leading organic growth for years to come.
Speaker Change: Finally, we will continue to grow through M&A.
Speaker Change: While still early in the year, we were off to a great start and we see a broad set of strategic M&A opportunities in front of us.
Our focus is on strategic acquisition of specialized expertise, adding new products capabilities or geographies for our clients and trading partners, while being disciplined integrators.
Speaker Change: That said, we will only move forward when all of our criteria for M&A are met.
Speaker Change: A strong cultural fit strategic and accretive.
Speaker Change: To sum up it was an excellent year for Ryan specialty we are off to a great start in Q1 and are well positioned for 2025 and beyond.
Speaker Change: The companies that will win has to be the best of the best the a plus players.
Speaker Change: That means keeping the best talent and we were pleased to end 2024 with another year of best in class retention among our producers.
Speaker Change: We have built an incredible business over the last 15 years in terms of our scale scope and intellectual capital one.
Speaker Change: One that has earned the trust and respect of our clients.
Speaker Change: One that is recognized as the destination of choice for World class talent.
Speaker Change: And one that is exceedingly difficult to replicate.
Speaker Change: Providing us with clear competitive advantages for years and years to come.
Speaker Change: I am proud of our entire team for delivering another year of outstanding results and continuing to add value for our clients trading partners and ultimately our shareholders.
With that I will now turn the call over to Jeremiah. Thank you.
Jeremiah: Thank you Tim we are very pleased with our strong performance in 2024.
Jeremiah: Our success continues to be driven by our unparalleled expertise our unmatched work ethic and our culture of innovation that we built and reinforced over the last 15 years.
Jeremiah: We were also pleased to complete our accelerate 2025 program at the end of last year as planned.
Jeremiah: Accelerate has matured our operating model and made us a more efficient organization.
Jeremiah: Because of this program, we now have more flexibility and are in a unique position to be able to make even larger long term investments in our platform, while consistently delivering margin improvement.
Jeremiah: We are making targeted investments in talent operation and go to market strategies to support our growing business.
Jeremiah: This concludes additional underwriters actuaries risk modelers data scientists along with distribution support and is consistent with what has made our underwriting platform successful to date.
Jeremiah: We are also investing in new technology, including AI solution and digital insight to bring the best of Ryan specialty to our client.
Jeremiah: We maintain our focus on our winning culture remaining a destination of choice for top talent enhancing our growth opportunities and furthering our ability to enrich the experience of our teammates.
Jeremiah: Our dynamic and differentiated business model, which reinforces our unique ability to generate sustainable outsized organic growth makes us very excited for 2025 and beyond.
Jeremiah: With that I'll now turn the call over to our Chief Financial Officer, Janice Hamilton, who will give you more detail on our financial results.
Jeremiah: Dennis.
Speaker Change: Thanks, Dan now in Q4 total revenue grew 24, 5% period over period.
Speaker Change: Alright, Thanks, Neal by organic revenue growth of 11% strong contribution from M&A, which added nearly 11 percentage points to our top line.
Speaker Change: Good question.
Speaker Change: <unk> underwriting profit carrier right.
Speaker Change: Alright that was again driven by our ability to win substantial amount.
Speaker Change: High renewal retention and ongoing tailwind.
Speaker Change: Washington market.
Speaker Change: Adjusted EBIT grew 36% period over period.
Speaker Change: Excellent.
Speaker Change: Adjusted EBITDA margin expanded 280 basis points to 32, 6% driven by another quarter of strong revenue growth savings from accelerate 2025 underlying margin improvement.
Speaker Change: If an acquisition.
Speaker Change: Adjusted diluted EPS grew 29% to 45 cents per share.
Speaker Change: Our full year 2024, our results were excellent.
Speaker Change: Total revenue grew 21% over $2 5 billion driven by organic revenue growth of 12, 8% and strong contributions from M&A, which added nearly seven percentage points to our top line.
Speaker Change: Adjusted EBIT grew 30% 811 land I.
Speaker Change: Adjusted EBITDA margin expanded 210 basis points to 32, 2%.
Speaker Change: Adjusted EPS grew 30% to $1 79 per share.
Speaker Change: Our adjusted effective tax rate was 26% from fourth quarter and the full year.
Speaker Change: For 2025, we expect our adjusted effective tax rate may look like based on geographic mix and tax law changes.
Speaker Change: We completed our accelerated 2025 program at the end of the year and will generate approximately $60 million of saving gross every investment in 2020.
Speaker Change: Turning to capital allocation M&A remains our top priority now and for the foreseeable future.
Our M&A program.
Speaker Change: $600 million add on to our 2032 now in a private offering an exit rate of 585%.
Speaker Change: We ended the quarter at three one times total net leverage on a credit basis.
Speaker Change: At the low end of our leverage comfort corridor of three to four times.
Speaker Change: When adding in velocity, which closed earlier this month and have made progress.
Speaker Change: Through our Q1 seasonal working capital needs we have.
Speaker Change: Anticipate we will be near the high end of our corridor.
Speaker Change: Or what.
Speaker Change: We remain willing to temporarily go above our comfort corridor for M&A that meets our criteria.
Speaker Change: With that stated.
Speaker Change: Our strong free cash flow and the strength of our balance sheet provides flexibility to continue executing our strategic M&A opportunity.
Speaker Change: Further on capital allocation as noted in our earnings release, the board approved a 9% increase to our regular quarterly dividend to our class a stockholders of 12 that payable later next month.
Speaker Change: This increase reflects our strong earnings trend.
Speaker Change: Our outlook there.
Speaker Change: We are pleased to grow the dividend and return capital to shareholders.
Speaker Change: And modest level, all while executing on a record year of M&A in 2024.
Based on our current forecast, we expect to report GAAP interest expense net of interest income on our operating plan.
The reason is that rate of approximately $225 million in 2025.
Speaker Change: $57 million in the first quarter.
Speaker Change: Now turning to guidance.
Speaker Change: And Pat and Caroline Hudson, we continue to be excited about our long term growth opportunity and value proposition.
Speaker Change: As a result, we are guiding full year 2025 organic revenue growth to be between 11 and 13%.
Speaker Change: We believe we will continue to see the benefits of our diverse portfolio of particular strength and casualty across our specialty and in our underwriting national basketball, which would be the benefit of prior year M&A. We lap 12 months of ownership exactly a patent technology in many of our prior calls.
Speaker Change: We believe our growth will be driven by sustainable secular factory and our unique competitive position.
Speaker Change: We expect strong flow into the E&S channel that will more than offset rate and property.
Speaker Change: In addition, we are guiding adjusted EBITDA margin for the full year 2020 to be between 32, 5% and 33, 5%.
Speaker Change: 2025, we expect margin expansion will be driven by contributions from M&A and underlying margin expansion, which will be partially offset the headwind from fiduciary investment income due to lower rate.
Speaker Change: We will also be taking the opportunity to fund a larger than average investment year, the remaining savings from accelerated 2025.
Speaker Change: We have a balance delivering for today and investing for the future.
Speaker Change: Importantly, looking further out we believe we are on track to hit a 35% adjusted EBITDA margin by the end of 2027.
Speaker Change: With our differentiated business model, okay. Thank Ralph market ability to provide innovative solutions to clients and empowering and entrepreneurial culture unique relationship scale and scope. We are positioned for success over the long term.
Speaker Change: With that we thank you for your time I would like to open up the call for Q&A operator.
Speaker Change: Thank you, we'll now be conducting a question answer session, if you'd like to be placed in the question queue. Please press star one on your telephone keypad, a confirmation tone will indicate your line is in the question queue.
Speaker Change: Press Star two if he'd like to move your question from the queue for participants using speaker equipment. It maybe that's necessary to pick up your handset before pressing star one one moment. Please while we poll for questions.
Speaker Change: First question is coming from Elyse Greenspan from Wells Fargo. Your line is now live.
Elyse Greenspan: Hi, Thanks. Good evening. My first question is just on the organic guide and I guess the outlook for property for this year, how do you I said modest growth in property. So I'm, just trying to get a sense of within.
Elyse Greenspan: Within the 11% to 13% organic revenue guide what are you know what are you assuming for property relative to the overall guidance.
Elyse Greenspan: Hi, Lee. This is Janice are happy to take the question about the organic growth guide and then I might give it over to tend to give a little bit more specifics on the 5% and we.
Elyse Greenspan: We are really pleased with our trial for an 8% organic growth this year, which Pat noted and as our 14th consecutive year of double digit organic growth on top of our toughest quarterly comp and looking ahead to 2025 regarding organic revenue growth between 11 and 13% as you noted at a high level, we've got our usual drivers of organic growth that or expect.
Elyse Greenspan: To play out both in secular trends also specialty strategies that are unit train specialty.
Elyse Greenspan: Secondly, risks, increasing and becoming more complex retail brokers growing organically and Inorganically panel consolidation and of course, the E&S market outpacing in that end market.
Elyse Greenspan: That coupled with our ecosystem of excellence to support our ability to innovate evolve and win.
Elyse Greenspan: Our empowering entrepreneurial culture strategic relationships and position of trust and our scale and scope of expertise.
Elyse Greenspan: More specifically if the underlying assumptions in our guidance is strong new business opportunities and of course casualty as Tim mentioned in his comments casualty will continue to be a strong contributor to our credit across all of our specialties.
Elyse Greenspan: We continue to see growth from underwriting managers, which can be bolstered by our recent M&A in the last 12 months of ownership and we're growing more bullish on professional lines is our brokers have been resilient and resourceful and identifying new opportunities for growth, which is in their DNA expanding to new opportunities such as health care and you know classes like architects and engineers.
Elyse Greenspan: Do you expect modest growth in property, but we expect it to be strong over the long term and together our diverse portfolio, which is based on differentiated talent and niche specialization enables us to achieve double digit organic growth in any environment, and we will remain positioned to execute and provide value to our clients.
Elyse Greenspan: Anything you want to say further on there sure Hi, Elyse.
Speaker Change: Property pricing is still soft near term, however flow remains strong and our ability to win market share of both new and renewal business is more than offsetting the pricing.
Elyse Greenspan: We saw we continue to grow our property. Despite these headwinds.
Elyse Greenspan: Okay. Thank you and then.
Elyse Greenspan: My second question was on the margin I recognize there's a lot going on this year right with just core leverage right. Some some M&A coming in and then you know the.
Elyse Greenspan: The accelerate program, but then you guys had said you had said I think in the prepared remarks that it was going to be a higher than average investment year can you just expand or put some numbers around that and then I guess my second question related to margin is depending upon where you.
Elyse Greenspan: And you know 25 relative to the guidance you laid out you said that you'll be at 35 rate in 27. So should we expect I guess the incremental improvement to be split between 26 and 27 to get to the 35.
Elyse Greenspan: Okay at least Genesis again here. So just to reiterate you know for 2025 our guidance.
Elyse Greenspan: So we are really pleased with the over 200 basis point expansion that we had for 2025 2024, rather and our guide for 32% Alright.
Alright, a guide for 32 and a half to 33, 5% for 2025, we see those drivers of growth coming from M&A underlying scaling and they said headwinds.
Elyse Greenspan: You acknowledged the fact that you know accelerate 2025 is really affording us the financial flexibility to be able to invest in our platform bigger than we have in the past and Jeremiah I would be happy to give you some background on some of the additional investments there, but just stepping back you know in order for us to deliver industry, leading growth and expand our margins over the long.
Elyse Greenspan: A term we have to reinvest in our platform, we've always been focused on making longer term investments and sometimes we are opportunistic in doing so and using accelerate is the opportunity to do that and providing the flexibility that we will be balancing delivering today for investing in the future and we're really pleased to.
Elyse Greenspan: So another year as potentially more than 100 basis points at the top end of our range.
Elyse Greenspan: Sure My anything else you want a family that's it.
Elyse Greenspan: No I think at.
Elyse Greenspan: At least you have been following us enough to know that we are always making long term investments in our platform and sometimes we're even opportunistic like in 2022 we had a chance to make.
Elyse Greenspan: And an oversized investment in talent that was definitely the right long term business decision, but it impacted margins. The following year like we are so thrilled right now with what we've achieved and accelerate because we've got the flexibility to make and invest continued investments in talent and our platform. This year that is I won't give an actual number.
But it's a multiple of what an average year is even proportionately and still bring potentially over a 100 basis points to the bottom line. We think it's a great balance of near term and long term growth, but also showing that progressing to the 35%.
Elyse Greenspan: Yeah.
Speaker Change: And then just one last one just on I understand you correctly is 35 as the exit run rate for 2007 meeting you will see it in 28 or is it for full year 2007.
Elyse Greenspan: The expectation would be for full year 'twenty seven.
Speaker Change: Thank you.
Elyse Greenspan: Mhm.
Speaker Change: Thank you. Your next question today is coming from Brian Meredith from UBS. Your line is now live.
Brian Meredith: Hi, Yeah, a couple of questions here for you first one I'm just curious Tim can you maybe break out a little bit on the organic growth expectations for 2025 between wholesale binding and underwriting management kind of how should we kind of think about the growth rates there.
Brian Meredith: Yeah, I'll take that one so as you know we don't guide our organic growth by specialty, but all of our specialties have had the properties to be able to achieve double digit organic growth.
Brian Meredith: What do you expect one to grow faster than the others to grow photos wanted to grow faster than the other.
Brian Meredith: You've seen the contributions that we've had from M&A. This year, we've done a lot of acquisitions within the delegated authority platforms.
Brian Meredith: That's going to be an area of growth for us that I've mentioned previously, but we do have tailwind from casualty might ascribe some property across the board.
Speaker Change: Gotcha. That's helpful. And then I guess the second question you know given where you talked about leverage being at the end of the quarter do you think M&A is going to slow call. It not last nine months of the year.
Speaker Change: Yeah, I I hope that you noticed that we added an additional metric this quarter to be able to give everyone a better understanding of the borrowing capacity that we do have and we still have as Tim mentioned, a robust pipeline of M&A opportunities and we believe we have the capacity to address them.
Speaker Change: It slows it all it won't be because of leverage availability like that's why we added the additional disclosures to show that we've got we anticipate ample borrowing capacity through the year. We're in any given period were constrained by the availability of assets that meet our three criteria. So we've got a great pipeline.
Speaker Change: We're ambitious about it as you know we're not going to force any deals, but we think that we still we still have the the appetite and the financial flexibility to execute on a lot.
Speaker Change: Got it thank you.
Speaker Change: Thank you next question today is coming from Meyer Shields from K B W. Your line is that right.
Speaker Change: Great. Thanks, so much.
Meyer Shields: First I guess, probably the question for Janet what are the interest rates embedded in the fiduciary investment income forecast.
Meyer Shields: For 2025 in other words, they basically want to get that to what you were looking for and how that could change if interest rates move in a different direction.
Meyer Shields: Yeah, well, we're using the forward curve.
Meyer Shields: Okay simple enough.
Meyer Shields: And then I.
Meyer Shields: Yes, well I find in 2022 and there is significant investment going forward, there's a lot of turmoil in the marketplace because of a I.
Meyer Shields: I guess the sales large broker merger.
Meyer Shields: And then I was hoping you could still in the what.
Meyer Shields: What's presenting the opportunity for what sounds like maybe.
Meyer Shields: Above average annual investment.
Meyer Shields: Yeah.
Meyer Shields: Whats mirror, what's triggering the opportunity for above average investment.
Meyer Shields: Basically is it something external internal.
Meyer Shields: Yes, so the investment program that was accelerate twenty-five was.
Meyer Shields: Not the end of our investments in efficiencies and data and AI in fact that we think that to win in the future firms are going to have to make even bigger investments and where we're trying to be proactive.
Meyer Shields: So theres not a an external force necessarily but when we have the flexibility to make big investments that we know are going to be important to continue winning in bringing additional value to our clients and still drop about 100 basis points to the bottom line, we're going to do that and I don't think that this will be.
Meyer Shields: The last year that we have the capability to walk and chew gum at the same time like that that is the strategy going forward as we March to 35%.
Okay.
Speaker Change: Okay perfect. Thanks, so much.
Speaker Change: Thank you as a reminder, that star one to be placed into the question queue. Our next question is coming from Rob Cox from Goldman Sachs. Your line is now live.
Speaker Change: Okay.
Rob Cox: Hey, thanks.
Speaker Change: So yeah just on these investments I'm just thinking you know this is probably helps support the organic growth into the future. So I just wanted to gauge the conviction in sort of the multiyear organic growth above 10% do you still have that conviction post 2025.
Rob Cox: Definitely tougher.
Definitely.
Rob Cox: We were built for double digit.
Rob Cox: Growth from the beginning.
Rob Cox: Stronger is acquisitions.
Rob Cox: A lot of firepower to our delegated authority, which has us even though drawing rapidly as a whole.
Rob Cox: The phenomenon of delegated authority.
Oh, the best study really.
Rob Cox: Open the door for a lot of people understand the power of the trend change delegated authority.
Rob Cox: So we anticipated that.
Rob Cox: That's why those seven acquisitions, we're focused on.
Rob Cox: Expanding delegated authority.
Rob Cox: And as you know our founding thesis.
Rob Cox: Well, it's based on.
Providing innovative solutions.
Rob Cox: Sure.
Rob Cox: <unk> solutions.
Rob Cox: Brokers.
Rob Cox: Agents.
Rob Cox: Carriers and.
Rob Cox: And carriers is very much a part of.
Rob Cox: Delegated authority.
Rob Cox: And I am best confirmed.
Rob Cox: The industry is moving heavily towards delegated authority.
Rob Cox: In spite of what some people don't.
Rob Cox: Believe.
Rob Cox: But we're long term believers in that.
Rob Cox: History has proven to be right.
Rob Cox: Yeah.
Rob Cox: Okay.
Speaker Change: I appreciate that thank you as a follow up I wanted to ask about our personal lines I understand that Ryan as you know fairly small and in personal lines today, but I was hoping you guys could walk us through the opportunity you have there and frame the exposure.
Rob Cox: Sure, Rob, we do very well in personal lines.
Rob Cox: High net worth aside for a minute we have electronic trading platforms. There we have programs across the country. That's always been a very very strong niche for us, but this new high net worth opportunity has been incredible and we moved very quickly we built an M. G U a de Novo <unk>.
Rob Cox: Are you in London, that's been very successful and we have this.
Rob Cox: Joint venture with AIG in Tcs, that's just getting off the ground early stages, but a tremendous opportunity for us to grow the business profitably there.
Rob Cox: Our clients need us theres more and more opportunities lots of.
Rob Cox: Non renewal notices going out not just California, and Florida across the country and so tremendous demand for the solutions that we're perfectly aligned and have a lots of product and solutions for our clients. We're excited about that specialty.
Rob Cox: Yeah.
Speaker Change: Thanks, Tim.
Speaker Change: Thank you. Your next question is coming from micro Demski from BMO capital markets. Your line is now live.
Speaker Change: Yeah good evening.
Speaker Change: Back to our organic.
Speaker Change: Organic growth and the outlook just want to be.
Speaker Change: Be clear about.
Speaker Change: Seasonality.
Speaker Change: You know, we know that I believe.
Speaker Change: The highest quarter on property as to Q.
Speaker Change: <unk> followed by <unk>.
Speaker Change: Just curious given the dynamics you see in the marketplace.
Speaker Change: And your outlook should we expect.
Some seasonality to.
Speaker Change: The property for example, or anything you want to you want to remind us about.
Speaker Change: And I'm actually think through the 11% to 13 for next year.
Speaker Change: Yeah, Mike I would say you know seasonality is consistent with what you've seen before Q2 will be a tough comp for property.
Speaker Change: But otherwise I don't think there's anything new that we would want to point out seasonality is similar to what you've seen in the past.
Speaker Change: I think it's important to focus in a.
Speaker Change: A little retrospective.
Speaker Change: Look.
Speaker Change: In the fourth quarter of 'twenty three you'll recall.
Speaker Change: Pretty rights for rapidly accelerating.
Speaker Change: So it was a very very challenging comp because by the fourth quarter, particularly.
The second half of December.
Speaker Change: All of the suburb, especially the second half of December decelerating roads, probably driven.
Speaker Change: But what some people view it as.
Speaker Change: Relief.
Speaker Change: Benign.
Speaker Change: Hurricane season.
Speaker Change: Well we were lucky.
Speaker Change: Tampa.
Speaker Change: It went down to Sarasota.
Speaker Change: But if it does.
Speaker Change: Tampa.
Speaker Change: That's a different story, so rates reduced celebrating but the wildfires.
Speaker Change: Just a recognition we believe and I think others would support this.
Speaker Change: <unk>.
Speaker Change: Property is going to be growing.
Speaker Change: Line of business.
Speaker Change: 25.
Speaker Change: Hard to forecast.
Speaker Change: Basically what that is because of the actions taken by some carriers and the two solar running routes.
Speaker Change: But the risks are out there.
Speaker Change: And they're there.
Speaker Change: So you can see the wildfires.
And you know that can translate into further damage with spring rains. So property risks are still there.
Speaker Change: So long runs wrong term, we're very bullish.
Speaker Change: On our property girlfriend witness.
Speaker Change: Terrific investment in velocity.
Speaker Change: Add to that.
Speaker Change: We were able to.
Speaker Change: Bring.
Speaker Change: Global.
Speaker Change: And two of them.
Speaker Change: So that's our initial investment.
Speaker Change: In the U S market.
Speaker Change: Pretty only obviously.
Speaker Change: But that's attracting some very sophisticated capital.
Speaker Change: A lot of support for future work.
Speaker Change: We're very excited about the talent that we got up in the.
Speaker Change: Velocity.
Speaker Change: Hello.
Speaker Change: We seem to have lost the speaker Ryan are you there.
Ryan Specialty: Yeah, I'm here sorry, yeah.
Speaker Change: Please standby for me no unify the speakers can you hear me we cannot hear you.
Speaker Change: Just to be quite honest switchover to the backup line.
Speaker Change: Yeah.
Speaker Change: Well speakers if you can hear me I switched over to the speaker line to the backup line.
Speaker Change: We can hear you. Please go ahead.
Speaker Change: Okay.
Speaker Change: Yes.
Speaker Change: Okay.
Speaker Change: I'll ask a follow up question.
Speaker Change: Mike did you get that last response from from Pat on property and velocity in.
Speaker Change: I you know I I got to just you know I don't know.
Speaker Change: Maybe he was a pet was cut off towards the end.
Speaker Change: Global.
Speaker Change: And being excited about.
Speaker Change: It does.
Speaker Change: Capabilities.
Speaker Change: Your call if you want to.
Speaker Change: To elaborate more oregon's move on.
Speaker Change: Hello.
So connecting like it appears the speaker, so having some technical difficulties in the room there with their lives.
Speaker Change: And please standby it when we do apologize for the inconvenience.
Speaker Change: Just wanted to make you can't hear me correct Sir.
Speaker Change: Yep.
Speaker Change: So what's happening at the moment I do apologize.
Speaker Change: Everyone just Cambodia.
Speaker Change: One of the room and.
Speaker Change: We connect everyone. We do apologize for the inconvenience. Please do not disconnect everyone. We do still have some further our question and answer session too.
Speaker Change: Go through please standby.
Speaker Change: Once again, everyone. Please standby will be reconnecting shortly we do thank you for your patience.
Speaker Change: Yeah.
Speaker Change: Okay.
Speaker Change: And a place for music in the meantime, everyone as soon as the speakers rejoining I'll. Let you know please standby. It again, please do not just Quebec, we do thank you for your patience.
Speaker Change: [music].
Speaker Change: Hello.
Speaker Change: Yes, the speakers have rejoined one moment please.
Speaker Change: Okay, but when you are now live.
Speaker Change: Well, Rob I this is Pat.
Speaker Change: I was answering the <unk>.
Speaker Change: Property organic growth question.
Speaker Change: And I referred to.
Speaker Change: Portsmouth rapidly.
Speaker Change: Tullow raving property rates in the.
Speaker Change: Fourth quarter.
Speaker Change: Great.
Speaker Change: And then as we all know.
Speaker Change: Property rates starting to decelerate.
Speaker Change: 24, particularly in Q4, but most particularly.
Speaker Change: In December.
Speaker Change: And that was a very tough comp. So we were really pleased with C. L.
Speaker Change: 11% organic growth.
Speaker Change: What I mentioned is.
Speaker Change: We've made a major.
Speaker Change: Investment.
Speaker Change: And commitment.
Speaker Change: Delegated authority expansion with the seven deals we did particularly in velocity.
Speaker Change: And we brought in some outstanding underwriting talent.
Speaker Change: And we brought on new high quality very sophisticated capital Tabak velocities.
Property cat facility and.
Speaker Change: And we were very pleased to bring FM global EM.
Speaker Change: Getting them to initially invest.
Speaker Change: This property is I've never done that before so.
Speaker Change: The whole commitment to property underwriting and distribution.
Speaker Change: For the indication.
Speaker Change: Bullish we are for the future of property for our firm.
Speaker Change: Well I hope so.
Speaker Change: Disruption of communication.
Speaker Change: To disrupt your understanding of our.
Speaker Change: Our feelings on this subject.
Speaker Change: Yes.
Speaker Change: Loud and clear.
Speaker Change: Well can I ask a quick follow up.
Speaker Change: Moving to our back to the investments.
Speaker Change: Topic.
Speaker Change: Follow up to <unk> question too so.
Speaker Change: No.
Speaker Change: Most of.
Speaker Change: Your expenses are compensation, what should we think about as people. So I think back when you and the last kind of.
Higher investment period.
Speaker Change: More people you're invested in so.
Speaker Change: Yes.
Speaker Change: Well this cycle be people or is it more you kind of mentioned and tech investments and our AI I suppose a different flavor. This time or is it just kind of the same playbook as we've seen in the past.
Speaker Change: When we that's a great question when we talk about investments in the platform, it's always a mix, but when we think about the pass 235.
Speaker Change: What were youre going to see the majority of the saves is in comp and that's.
Speaker Change: Because the the tools that we're giving.
Speaker Change: Our people the efficiency of our processes and our systems is going to make them more efficient.
Speaker Change: So the majority of the path to 35 will actually go through comp just because of how much more efficient the workforce will become and will sort of been been the.
Speaker Change: Compensation cost curve, even further over time.
Speaker Change: Thank you.
Yeah.
Speaker Change: Thank you. Your next question is coming from West Carmichael from Autonomous Research. Your line is now live.
West Carmichael: Hey, Thank you good evening I just wanted to come back to the margin guidance for 2025, I think in the prepared remarks, you talked about kind of three moving pieces of the benefit from M&A. Some underlying expansion and then fiduciary income being a headwind just hoping you could quantify or help us understand how much underlying improvement you're expecting in 2025.
West Carmichael: With me, we aren't going to break out the individual components of the guidance, but I think it's important to remember that M&A will contribute well.
West Carmichael: Two our underlying margin expansion platform.
West Carmichael: All lines as well.
West Carmichael: So you know to think about them separately would be.
Speaker Change: Yeah potentially.
Speaker Change: And the underlying expansion that accompanies our double digit organic growth is going to contribute to the the remainder of the other way to get to 35 as well.
Okay understood.
Speaker Change: In terms of the organic growth piece could you just maybe provide a little bit more color on submissions for new business.
Speaker Change: Driving your confidence there.
Speaker Change: Our new business flow is very strong double digit flow.
Speaker Change: Stamping offices, all validate that for the quarter.
Speaker Change: As you know we had a very strong 'twenty 'twenty four led by casualty.
Speaker Change: Surprisingly, including professional liability rebounded very nicely and we're starting to see some real measurable growth there so that our debt.
Speaker Change: It helped us offset the headwinds on property. The overall casualty market continues to be very firm led by long tail high hazard classes of business like transportation habitation all construction.
Speaker Change: Certain product liability you know all loss leaders in the reinsurance world and were clearly, leaving that casualty segment again.
Speaker Change: Again professional liability, making a great comeback for us its clear proof of the incredible resiliency and the strength of our industry, leading national professional liability team. They continue to find new opportunities to grow and expand their market share it's kind of a common trade of our RT brokers.
Speaker Change: When there's adversity in the marketplace. They search for other areas of growth it's in their DNA.
Speaker Change: And last just a quick update on binding and programs.
Speaker Change: Just the incredible performance there they had a fabulous year continue to experience industry, leading growth, including the connector, our small commercial digital trading platform, having some explosive growth that we're very excited about.
Speaker Change: Thank you I appreciate it.
Speaker Change: Thank you we reached end of our question and answer session I'd like to turn the floor back over for any further closing comments.
Speaker Change: Well, we appreciate everybody's interest in patients with this technological disruption.
Speaker Change: Certainly appreciate your questions.
Speaker Change: I'm very happy to.
Speaker Change: Do it quarterly and we look forward to the next quarterly meeting.
Speaker Change: Thanks for your support and interest.
Speaker Change: Thank you that does conclude today's teleconference. You may disconnect. Your line at this time and have a wonderful day, we thank you for your participation today.
Speaker Change: Yeah.