Ryan Specialty Holdings, Inc. Q2 FY2025 earnings call

• Second quarter was solid with 23% revenue growth, 24.5% adjusted EBITDAC growth. • Closed acquisitions like USQRisk, 360° Underwriting, and JM Wilson; pipeline remains robust. • Expanded strategic alliance with Nationwide, with Ryan Re to underwrite reinsurance renewal rights from Markel; Ryan Alternative Risk creating innovative solutions. • Property facing pricing decline but long-term E&S solutions needed; casualty seeing strength in various areas with sustained pricing; delegated authority specialties performing well with talent and product expansion.

Total revenue for the second quarter grew 23%, driven by 7.1% organic revenue growth and M&A contributing 13 percentage points. Adjusted EBITDAC increased 24.5% to $308 million, with a margin expansion to 36.1%. Adjusted EPS grew 13.8% to $0.66. In segments: Wholesale Brokerage saw property facing rapid pricing decline but strong flow and retention, while casualty had solid new business and retention with loss trends driving rates up. Delegated Authority specialties: Binding Authority performed well with top talent, and Underwriting Management had solid results with recent acquisitions. Organic revenue growth for the full year 2025 is guided to 9%-11%, and adjusted EBITDAC margin to 32.5%-33%.

• Full-year 2025 organic revenue growth guided 9%-11%. • Adjusted EBITDAC margin guided 32.5%-33%. • Property book expected to decline modestly due to continued pricing declines. • Q3 organic revenue growth expected higher than Q2 and Q4 as they are property-heavy. • Aim to hit 35% margin target in 2027.

• Property pricing decline continuing longer than expected. • Macro uncertainty, elevated borrowing costs, trade war impacts on construction. • Potential unexpected softening in casualty lines, though management sees less risk there.

Q: My first question, I just wanted to focus on the discussion on just the property and what you guys saw in June. Because when you guys provided an update right, early in the month, you did say Q2 was tracking below the full year guide, but you still thought you could hit like the full year number. So can you just give us a sense of the pricing declines you saw in June? And then embedded within the guide, are you assuming similar price declines for the remainder of the year? Or are you assuming that the market gets worse relative to what you saw in June?

A: Elyse, this is Janice. I'll start and then maybe Tim can provide a little bit more color on property. So you're absolutely right. When we met in June, we were talking about the expectation that organic for the second quarter would fall below our guide range. We saw a rapid decline in property pricing throughout the month of June, which really culminated into the organic number of 7.1%, which, as Pat said, did fall short of our expectations. I'll let Tim touch on the kind of context for the property pricing and what we saw in June. But specific to your other question about what was embedded in the guidance, we are continuing to see the property pricing declines from June carry forward for the remainder of the year. So we are no longer expecting any sort of stabilization or modest improvement in the back half of the year. This now reflects the same trends that we saw through the end of June, continuing for the remainder of the year and resulting in a modest decline in property now for the full year of 2025 in our guidance.

Q: My second question, can you just provide -- I know it sounds like the margin -- like tightening of the margin right towards the lower end, I guess, is less of a function of a weaker -- like the weaker organic but more of a function of the investments. I just want to make sure I'm understanding that correct. And can you put a dollar value, I guess, on the investments that you're now expecting with the Ryan Re initiative that you were outlining in the second half of the year?

A: Yes, Elyse, this is Janice again. So you've hit the two items. That's what I mentioned in our prepared remarks. So the main item for moving the midpoint of the range down 25 basis points is looking at the property pricing declines that we've seen through June and then obviously carrying that forward for the rest of the year, as we've talked about. There is also some additional uncertainty from a macroeconomic standpoint that has affected our construction book. That was probably the other item I spoke about that you didn't highlight that I have there. And then additionally, the investments that we're making in Ryan Re and also Alternative Risk. At this point, we're not going to put a number on it. But given the property pricing headwinds that we saw and that we expect to continue for the rest of the year, we're still very pleased with being able to deliver margin expansion in 2025 relative to 2024 and even just the 50 basis points that we put up in the quarter.