RYAN - Ryan Specialty Holdings, Inc.

Operator: Good afternoon, and thank you for joining us today for Ryan Specialty Holdings Second Quarter 26 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 ryanspecialty.com. 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 statements. 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 filings with the SEC. 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 and should not be considered in isolation or as a substitute for the financial information presented in accordance with GAAP. Reconciliations of these non GAAP financial measures to the most closely comparable measures prepared in accordance with GAAP are included in the earnings release, which is filed with the SEC and available on the company's website. With that, I would now like to turn the call over to the Founder and Executive Chairman of Ryan Specialty, Patrick G. Ryan.
Patrick G. Ryan: Good afternoon, and thank you for joining us. With me on today's call is our CEO, Timothy William Turner. Our CFO, Janice Hamilton, our CEO of underwriting managers, Miles Wuller, and our head of investor relations, Nicholas J. Mezick. For the quarter, total revenue grew 7.2% to $917 million. Primarily driven by organic revenue growth of 6.7%. As well as modest contributions from M&A. Adjusted EBITDAC grew 6% to $327 million. Adjusted EBITDAC margin declined 40 basis points to 35.7%. Adjusted earnings per share grew 12.1% to $0.74. For the first half of 26, we have grown organic revenue by 8.9%. Adjusted EBITDAC by 9.8%. And adjusted earnings per share by 16.2%. In the quarter, we repurchased 8.1 million shares for $260 million. And increased the authorization of the program by an additional $300 million to deploy opportunistically without a capital allocation framework. We are pleased with these results. Especially considering the headwinds industry continues to face. Our top and bottom line results speak to the resiliency of the platform we built What this quarter demonstrated is that even in a very challenging market, our people delivered. Utilizing their differentiated capabilities to execute on behalf of our clients and carrier trading partners. We earn our clients' business, our respect and trust every day. Through continuously delivering innovative solutions. Expanding into new products deepening and broadening relationships, with our retail broker clients, and carrier trading partners while executing at consistently high levels. I want to make a few comments about our team. We work tirelessly in our efforts to control what we can control. Our brokers are exceptional pipeline builders. We win new business, and produce unique solutions that others simply cannot replicate. Some of that production is large and project based. And sits in our pipeline until the right micro or macro conditions push it through. We focus on building the pipeline. We cannot control when projects close. Additionally, our underwriters are disciplined product builders. They assess every risk with carrier profitability front of mind. Our industry leading underwriting results discipline, and strong governance structure attract the most sophisticated capital providers to our platform. Whether through an adjacent product or de novo MGU, Our speed to market lets us meet evolving client demand driving strong new business growth, and the ability to expand our share of recurring and non recurring business. Together these capabilities of pipeline and product building are important characteristics that set us apart. We continue to evolve as the leading specialty insurance services firm. Always looking for ways to be broader, more diversified, or strategic while still staying true to our mission statement. Our differentiation is significant and meaningful. A leading platform with scale but much more than that. it is the power of our combined platform and ecosystem where each piece makes the whole more powerful than the sum of its parts. Powered by secular tailwinds and industry best talent. An innovation machine built to expand and win in new markets, complemented by what we believe is the best-in-class M&A engine. The result is industry-leading growth and strong margins. All aligned by a disciplined capital allocation framework and an aligned leadership team. Timothy will expand on these things shortly. But first, I wanna unpack the innovation of our delegated underwriting authority strategy. Where I believe we were the true first mover. 16 years ago, we anticipated the demand for specialty solutions from our retail broker clients and trading partners. And we led the structural changes that follow. Through continuous innovation, investment, and a well-executed M&A strategy. We built a comprehensive diversified platform. Offering over 300 specialty insurance products. We continue to extend our lead growing beyond traditional delegated authority channels. By expanding into new specialties like reinsurance underwriting, alternative capital solutions, and broad based benefit solutions, We continue to skate to where the puck is going. Not where it is. Our differentiating capabilities speed to market in emerging classes, portfolio breadth, and our track record of delivering underwriting profits for our carrier trading partners all supported by aligned incentives continue to attract the highest quality capital for our platform. Relationships that are deep and enduring with now more than 25 carriers, that each back, 10 or more of our 40 MGUs. A balanced capital base with the majority of our premium syndicated across multiple carriers. Giving us the capacity to underwrite more products, expanding our reach. Lastly, a platform that is equipped to manage through the ever evolving specialty insurance market. We built a delegated authority platform that we believe is unique to the industry. Creating a significant moat. The combination of wholesale brokerage delegated underwriting authority creates a distribution engine of unmatched scale and sophistication. Which we believe is capable of delivering durable, differentiated growth for years to come. As we look forward, we remain confident in our ability to innovate, invest, and continue to strengthen and diversify our offerings as a leader in the specialty lines insurance services sector. For years to come. With that, I am pleased to turn the call over to our chief executive officer, Timothy William Turner. Timothy.
Timothy William Turner: Thank you very much, Patrick. Ryan Specialty had a great second quarter. As we delivered for our clients in a face of a very challenging property pricing environment. Before diving into the quarter, and building on Patrick's remarks, let me outline the 8 factors that differentiate Ryan Specialty, both now and over the long term. 1, we are an industry leader. Delivering innovative solutions at scale. We are uniquely positioned at the top of both specialty distribution and underwriting. This dual vantage point provides the widest view of specialty risk. Offering us unique insights that provide us with a competitive advantage. We see the need sooner, innovate faster, hire the talent, build the product, and source the capital through deep carrier relationships. Our ability to anticipate and meet client demand deepens our relationships with our clients. This flywheel compounds over time. 2, we operate in a market with secular tailwinds. And have shown a unique ability to win share over time. The world continues to become riskier, and more complex, driving flow into the specialty and E&S channels. Our clients, both retail brokers and carrier trading partners, are growing while consolidating panels. Delegated underwriting authority continues to take share of the commercial market. From 9% in 2012 to 20% in 2025. And healthy E&S share gains supported by strong flow as well as carriers having made a significant commitment to the E&S market. Together, these trends compound in our favor. But tailwinds only reward those equipped to capture them. Which brings me to number 3. Our talent. We attract, retain, and develop the best talent in the industry. We continue to believe we are the destination of choice for the industry's A players. Last year, we attracted the second largest hiring class in our history, As they ramp up, they become increasingly accretive to our growth. We have 1 of the industry's highest producer and underwriter retention rates. Our culture, our platform, and our broad employee ownership keep our best people here. 4, our commitment to innovation and expanding our addressable market. Our innovation engine aided by insights across $32 billion of premium, constantly identifies niches that require unique solutions creating new sources of growth for our clients and trading partners. We have deepened our capabilities in niches like hospital and health care liability. Public entity, sports and entertainment, and many more. We have launched over a dozen de novo specialty businesses with impressive speed to market As Pat described, we have expanded delegated underwriting authority outside the traditional MGA MGU practice vertical. Through unique strategic relationships, we have built Ryan Re, our reinsurance managing underwriter. And are on track to place $2 billion in reinsurance premium this year. We have established in house alternative capital management solutions. We have built a benefits division with distinguished capabilities and products, which are largely uncorrelated to the P&C cycle. And we have invested significant resources into all aspects of alternative risk. Including captive management and structured solutions. The market is ripe with these opportunities. We have the scale, talent, and speed to market to be early movers and scale rapidly. 5, we have what we believe is a best in class M&A engine that has consistently enhanced our growth profile and remains capable of doing so. We have added new talent and capabilities. New lines of business, and entered new geographies via acquisitions since our founding. We remain disciplined in our approach to M&A. Only moving forward when all of our criteria are met. A strong cultural fit, strategic and accretive. 6, our platform is durable. And we believe built to deliver industry leading growth and strong margins. Years of deliberate reinvestment back into the business has built this platform. With our Empower program, we are creating more operational flexibility to keep investing in the future investment that has the potential to widen our competitive moat, and supports our goal of modest margin expansion in most years. 7, all of these differentiating factors are supported by our disciplined capital allocation framework. We will prioritize investing in talent, which is the most accretive investment we can make We will be disciplined acquirers We will return a modest, and sustainable dividend. And we will deploy capital towards share repurchases when we believe it to be the best use of our capital. Lastly, 8. Behind executing, delivering, maintaining these differentiating factors sits our seasoned, and aligned leadership team. The best team in the business, the team that wakes up early every day, to out hustle and outwork our competition, and support our producers and underwriters to deliver the best possible solutions to our clients. Turning to our results by specialty, our wholesale brokerage specialty continues to deliver in the face of significant cyclical industry challenges. In property, the market was every bit as challenging as we indicated last quarter. Pricing in many cat exposed and large accounts declined materially. As capacity continued to build. And competition remained tough. Including from the admitted market. Yet our brokers fought vigorously, won head to head, had strong renewal retention, and captured new business from the steady flow into the E&S channel. The net of this is a property book that declined only modestly better than our expectations. As our performance improved throughout the quarter. Notably in June. In casualty, we had a very strong quarter across the book, Strong construction activity in Q1 continued into Q2 as the pipeline we have been building for some time began binding. We saw a better June than we expected. Driven by a handful of large project based wins, including construction and data center activity. As we have said before, this business is inherently lumpy and the timing of large project bindings is difficult to predict. Remain optimistic about our pipeline heading into the balance of the year, and are well positioned as the leading wholesale broker in the construction space. Broadly, most casualty lines continue to be impacted by social inflation and challenging litigation trends. Which continue to support the need for adequate pricing. At the same time, we are seeing more capital looking to grow in casualty. Which introduces additional competition beyond what we have been seeing in small, commercial and middle market. This is leading to some moderation of pricing in certain pockets. Our professional lines team once again significantly outperformed the market. Despite continued pricing pressure aiding our growth for the quarter. Now, turning to our delegated authority specialties, which include both binding authority and underwriting management. Our binding authority specialty saw heightened competition in the quarter yet still grew revenue year over year. 1 competitive dynamic to highlight is the increase new facilities competing aggressively for small commercial business. Particularly at the smaller end of the market. We expect these trends to intensify in the back half of the year. As a reminder, our clients use us when they need us. And we are constantly looking to increase the ways in which we are needed We have been expanding our services to improve outcomes for our clients trading partners. Which is enhanced by our independence. We are navigating the competitive pressures the way we always do, relying on our talent, our product breadth and expertise, and our industry leading service, Our underwriting management specialty had an excellent quarter with yet another impressive performance across transactional liability, transportation, international specialty, casualty, and reinsurance while exercising appropriate discipline relative to current market conditions. Transactional liability delivered exceptional results topping our expectations. Growth continues to be supported by a more constructive global M&A environment. And the investments we have made over several years. Within reinsurance, Ryan Re also delivered another excellent quarter, with strong renewal retention especially considering the tough pricing environment and another strong yet smaller quarter with respect to the Mark portion of the book. With that said, not everything was in our favor this quarter. Within our builders' risk businesses, results continue to be under pressure, consistent with macro pressures we described over the last few quarters. We are not standing still. We are bringing more product to the market, competing for every account. And we are winning more than our share. RSUM also launched its own Lloyd's consortium stamp earlier this month. This consortium was about crafting underwriting capital outcomes at scale. Delivering efficiency to clients, and further monetizing the platform and exceptional underwriting results. Beginning August 1, it will take a 15% line on RSUM's syndicated business further accelerating our innovation and speed to market Now turning to a quick update on our team. We also announced a planned leadership succession at RT Specialty. Brendan Martin Mulshine will assume the role of CEO of RT Specialty. Ed McCormick, will transition into the role of Vice Chairman of RT. I cannot say enough about how important Ed has been to the founding and building of not just RT, but Ryan's specialty itself. We are grateful he will continue as Vice Chairman while Brendan is the perfect choice to lead RT specialty into its next phase of growth. Lastly, I would like to update you on our digital transformation and AI strategy. Our strategy remains anchored in the 3 principles we shared last quarter. Our clients, our people, and our process. In practice, we invest in redesigning workflows, that improve client outcomes, make our people more productive, and make our processes faster and more reliable. Last quarter, we also told you we were building a platform to deploy AI thoughtfully and responsibly at scale. As an example, for our clients, our reinsurance FAC Workbench now turns a submission into a priced decision ready file in minutes. Not days. And we are extending that capability into treaty underwriting. Where the platform ingests years of prior submissions and claims at a scale and speed that no person could achieve in a reasonable amount of time. For our people, putting more tools in their hands. Thanks to a thoughtful rollout strategy AI adoption, and usage are accelerating across the firm. The capacity we are unlocking is being directed back into what matters most, winning new business. And helping our newest talent ramp up faster than ever. For our process, we have started rolling out a proprietary engine for deploying AI around the firm. Built inside our own guardrails and trained on our own data. We started deploying Agen-tec AI towards our property inspection process sharpening underwriting accuracy, and reducing cycle times by removing the need for thousands of manual touch points each month. As AI becomes a commodity, that anyone can rent, our advantage is the proprietary data and hard won expertise built into our platform that cannot be easily replicated. We are a clear net beneficiary of this transformation, and it shows in how our people work every single day. In closing, we are very proud of our second quarter performance. Particularly in the face of a complex and rapidly evolving insurance macro and geopolitical environment. Our performance is a testament to the resilience and durability of our people and platform. In the face of this intense competition, our teams continue to innovate differentiate our services, and improve our value proposition to our clients. We retained high levels of existing business won significant new business, expanded our market share and continued to build our pipeline across the organization each supported by the many factors that differentiate us. We are doing what we do best, controlling what we can control. Adapting executing, and overcoming challenging dynamics. With that, I will now turn the call over to our CFO, Janice Hamilton.
Janice Hamilton: Thank you. Thanks, Timothy. In the second quarter, total revenue grew 7.2% to $917 million. Driven by organic revenue growth of 6.7% as well as modest contributions from M&A. As Timothy described, it was a great finish to the second quarter with growth supported by better than expected results in property, casualty construction, and transactional liability. Adjusted EBITDAC grew 6% to $327 million Adjusted EBITDAC margin was 35.7% compared to 36.1% in the prior year period. Margins were supported by stronger than expected organic growth disciplined cost management, as well as early progress in the operational efficiencies underway through Empower. Adjusted earnings per share grew 12.1% to $0.74. Our adjusted effective tax rate was approximately 26% and we expect a similar rate for the remainder of 2026. On capital allocation, we repurchased approximately 8.1 million shares or $260 million of our stock. And increased our program's authorization by an additional $300 million. We have also repurchased $42 million of shares thus far in July. We remain committed to strategically investing for the long term. Beyond our modest and sustainable dividend, we view both M&A and our share repurchase program, as key priorities. We will continue to do what we believe is right for our shareholders. Based on the opportunities that we are seeing in the market, we believe it is unlikely that we will close a meaningful acquisition in 2026. Rather, we are looking towards 2027. With that said, if and when high quality specialty assets come to market that meet our criteria, we will be the first in line and will have the capital to execute. We ended the quarter at 3.3x total net leverage on a credit basis. Well within our 3 to 4x comfort corridor. Based on the current interest rate environment, we expect GAAP interest expense, net of interest income on our operating funds, of approximately $226 million in 2026 with $58 million to be expensed in the third quarter. Turning to guidance, We continue to guide to organic revenue growth in the mid single digits for 2026. And now expect to be towards the higher end of the range. As Tim said, we are conscious of the complex and rapidly evolving insurance, macro, and geopolitical environment as we close out 2026 and look to next year. Our guidance embeds continued property pricing declines and heightened competition. Resulting in a moderate decline in our property book for the full year. Casualty competition picking up in certain pockets beyond what we have been seeing in the small commercial and middle market. A more normalized level of growth in construction projects in the second half though the timing remains lumpy and hard to predict. Continued headwinds and builders risk consistent with macro pressures and softer binding authority growth with some business moving into the admitted market and pressure from facilities. As a reminder, while it is our smallest revenue quarter, the third quarter represents our most difficult organic growth comparison of the year. On margins, we are now guiding to a full year adjusted EBITDAC margin that will be down approximately 50 basis to 100 basis points year over year. This reflects current and evolving market conditions the continued absorption of our talent investments, lower fiduciary investment income higher health care and benefits costs, offset by disciplined cost management and recent progress from the Empower program. Looking ahead, we continue to expect modest margin expansion in most years. We have and will continue to innovate and create differentiated opportunities for growth. That are entirely unique to the scale and expertise we have built. In closing, we are in a great position through the first 6 months and I am very proud of our results. I am pleased with our team's execution continuing to deliver for our clients, advancing our technology and AI investments, and driving the Empower program forward with great collaboration. With that, we thank you for your time and would like to open up the call for Q&A. Operator?
Operator: At this time, if you would like to ask a question, please click on the Raise Hand button, which can be found on the black bar at the bottom of your screen. May remove yourself from the queue at any time by lowering your hand. When it is your time, you will hear your name called and receive a message on your screen asking you to unmute. Please then unmute and ask your question. We will wait 1 moment to allow the queue to form. Our first question will come from Elyse Greenspan with Wells Fargo. Please unmute your line and ask your question.
Elyse Greenspan: Hi. Thanks. Good evening. My first question is on margin. You guys had guided to a margin in the low 30s for the quarter. You came in better than that. So I am just trying to get a sense, is that just is that a function of the stronger organic revenue growth than you guys had expected? Is there also a change in level of investments, talent investments you have pointed to maybe it is a combination of both. Hoping to get a sense there. And then what is the driver, I guess, of the margin--the change in the full year margin guide relative to prior expectations?
Janice Hamilton: Yep. Elyse, I can take that. This is Janice. Thanks for the question. Maybe I will just start with the performance for the quarter. So as you noted, the stronger than expected organic growth is a significant driver of the margin beat for the quarter. On top of that, last quarter, I mentioned that we were going to be focused on expense discipline and cost management, and that is another driver of the beat this quarter and part of what we are anticipating for the full year, which I will come back to. And then also, you know, really starting to work through some of our Empower actions. I mentioned last quarter that we intended on getting ahead on accelerating some of those activities, and so early days there still, but some of that also plays in. Maybe just to touch on, you know, a reminder for next quarter, it is going to be our toughest comp, but it also is the quarter, the last quarter really where we are lapping the significant talent investment. Those all came in towards the end of the third quarter beginning in the fourth. So it is our last full quarter that perspective. The full year guide, we have raised that 50 basis points on both ends. You know, that really reflects, again, the organic growth, but also the anticipation of those cost savings measures and Empower. Thanks.
Elyse Greenspan: So then my second question is on organic growth. I recognize you guys said, right, the high end of mid single digits now for the year. You guys had a strong second quarter right? So being at just under 9% for the first half of the year, does imply a slowdown in the second half. I am just trying to get a sense of greater sense of just how you guys are thinking about the second half? And then is it fair to assume that maybe the biggest wildcard is just, what happens on the construction side? Is I think, Janice, right, you said that is, you know, lumpy and you guys are expecting that to slow in the second half of the year.
Janice Hamilton: Yeah, Elyse, you know, I think Timothy said it best. In his opening here that, you know, we are still monitoring a number of different uncertainties when we think about the broader macroeconomic uncertainties when we think about, you know, geopolitical, but also the broader insurance market. And specifically within our guide, you know, you touched on the expectation and what I noted that from a construction standpoint, we had a very strong quarter. All of the activity really ticked up in the month of June. We are expecting that to be more normalized for the remainder of the year, so that is gonna be a component of it. Also, the property front, you know, still expecting to see a lot of the pricing headwinds and the competition. You know, we talked about that last quarter, continue to see it a bit from the admitted market as well. And then in casualty overall, last quarter, I commented on construction sorry, I commented on the competition impact in the small and middle market side. What we are anticipating that to go a bit beyond, and that was what Timothy said in his remarks just now. And then we still continue to face pressures within the builder's risk line of business. We have talked about that in past quarters, but the broader macroeconomic uncertainty certainly continues to create a headwind for us there. And then Timothy also mentioned the additional competition that we are facing in the small commercial. Area led by the influx of facilities. So, you know, when we think about the second half of the year, there is a number of uncertainties that we are facing that is built within the guide. I just commented on the fact that third quarter for us is going to be a difficult comp over last year. As a reference, point, we grew property last quarter sorry, last year in the third quarter. Currently, that is not the expectation for this quarter. this Q3. And then we also had great growth on the underwriting manager side in, you know, transactional liability, structured solutions, reinsurance, and you know those really create a tough comp for us. Overall, you know, as we did this quarter, we are going to continue to make sure that we are that we are outworking and outcompete our competition, focusing on what we can control. And that really drives our sentiment in the higher end of range.
Elyse Greenspan: Thank you.
Operator: Our next question will come from Andrew Kligerman from TD Cowen. Please unmute your line and ask your question.
Andrew Kligerman: Great. I am coming through. Yes. You are. Excellent. I just wanna follow-up on the prior question because the math having grown about 9% last in the first half of the year, you could achieve your mid your higher end mid single digit, meaning 6% growth, with less than 3% in the second half. And Janice, you outlined a quite a few headwinds. And, I think, with Timothy's commentary around the moderating of pricing, I am wondering, you frame where you see pricing going very broadly in E&S casualty? And with that, you thinking that, you know, 3% is where you are gonna kind of land in the second half of the year to get high single digit organic growth.
Timothy William Turner: Well, thank you, Andrew. I will Timothy William Turner here. I will take a shot at the first part of that. The casualty market remains generally speaking, firm. Although it is bifurcated, there is competition in certain segments that is expanding. Others continue to firm, frankly, Transportation habitational, sports and entertainment, certain parts of health care, and, of course, public entity and human services continue to firm for us. But there is others that we see some softening. Small and medium hazard risks, as an example, Professional lines, another real positive for us. We outperform the market and had a stellar quarter. So it is really by specific product line where we have to break it down. But generally speaking, it remains firm. But we expect more competition Construction's another headliner for us. But we do see competition around the edges.
Andrew Kligerman: And so around that 3%, is that you are framing it? The organic?
Janice Hamilton: Yeah. Andrew, I think you have you have done the math to back into what that looks like for the second half of the year. We are trying to provide some of the uncertainties in the context for what contributes to that guide. You know, from a different perspective, when we think about, you know, from a from a downside perspective relative to the range, that is where we are talking about some of the property pricing pressures going beyond our expectations. And then also, if competition in casualty rapidly intensifies. Timothy talked about a lot of the drivers of, you know, what might--what might drive prices further from a hardening perspective, but we are seeing competition intensify across casualty, and that could lead to further downside risk. So we have factor that into our guide. Alternatively, you know, from a property perspective, perspective, if pricing moderates, that will be a benefit, and we do continue to have strong pipeline both on the construction, data center, and transactional liability front. So all of those pieces have to come together when we are thinking about how we put the guide together for the remainder of the year.
Andrew Kligerman: Got it. And then just in my follow-up is around Timothy, your commentary around captive management employee benefits, and other areas that might not be cyclical? What proportion of your delegated and wholesaling businesses are kind of tied to those areas where you might be outside of the kind of cyclical pressures that we are seeing across PNC.
Patrick G. Ryan: This is Patrick. We have reinsurance underwriting. Which we have now had a building for the last 5 plus years. Working closely with Nationwide Mutual. That capability of our talented underwriter. Blended with the nationwide brand, has just continued growing market acceptance. So that is a line of business that we have been building as a true differentiator we consider a true moat because it is very difficult for anybody to get a relationship with a carrier like Nationwide. With that balance sheet and credit rating and then get the talent. To be able to be a leader in that space. So that is 1. Alternative risk which is feeding and fueling the interest of clients who wanna put up some of their own capital. In order to get more capacity than the market will provide. Or in some cases, they just do not like the pricing. And so that again is reinsurance behind their capital. So these are we think, a very differentiated lines of service for our clients that we have I would add the next 1 is benefits. And benefits is countercyclical in the pricing. Cycle to PNC. So it gives good balance. Now I wanna be clear. That these are all new businesses. Essentially, the Novo, a little bit of investment and benefits, in terms of m and a, but modest. But they were all designed to balance our firm against inevitable softening of the E&S and P&C market. And although they are much smaller than wholesale distribution, and smaller certainly than our underwriting management businesses. Under what we call RSUM, discrete MGUs and programs they are now becoming quite material in terms of contribution of incremental growth incremental margin, incremental earnings per share, EBITDAC per share. Thanks for that, Patrick.
Operator: Our next question will come from Alex Scott with Barclays. Please unmute your line and ask your question.
Alex Scott: This should be working. So first question, I wanted to see if you could talk a bit about the, you know, the RAC Re and just its contribution to growth this quarter, how we should think about how much it contributed in the first half relative to what you would expect in the back half and so forth?
Benjamin Miles Wuller: Yeah. No. Thank you for that. This is Miles Wuller. So we do not disclose the exact levels. But what we want to note is we feel structures like RAC Re alternative capital practice that has been in operation for about 18 months. And investments in our traditional capital management practice which is we had a headline a few weeks ago launching our own Lloyd's consortium stamp in that marketplace. All of those are deliberate efforts to monetize this great investment in our platform Our results and our central underwriting structure around that. So they also--I want to add, there is direct economic result and new revenue it is converting at a high margin But perhaps equally or more important it is accelerating our speed to market as we can become as we have more aligned capital to our outcomes, as familiar with our overall syndicated portfolio, We are able to innovate faster, build faster and respond to market dislocation faster. So I apologize. We cannot share an exact number, but it is exciting and growing part of our business.
Alex Scott: Got it. Okay. Follow-up question. I wanted to ask about just general concentration in your business around construction. How do we think about that? I guess, in the construction line, do you see any impact from potentially higher inflation from things going on in The Middle East? And are you seeing any kind of changes in the recent trends in that? Business as we think about 3Q?
Timothy William Turner: No. Actually, Alex, it continues to be a steady, heavy flow of business, in the in the renewable construction book. The general contractors, the subcontractors, the artisan contractors, the renewable annual renewable book is a large part of our construction success. The projects themselves are lumpy. We have mentioned that the data centers, the large infrastructure projects, Our pipeline is very full. Very strong. The submit to quote to buying process is moving along very smoothly. They just sit a little bit longer as we await binding instructions. And so we had some very, meaningful success in the second quarter in binding some large projects. And we see that you know, continuing. But we have said before, it is lumpy. it is hard to predict when they will actually bind. But again, we believe we are industry-leading in that specialty practice group. So we are winning a lot of head-to-head battle We are getting market share. And I think the outlook is very positive for us in construction.
Patrick G. Ryan: This is Patrick. I will add 1 thought to that. We consider these construction projects recurring income They happen to be different risks. They recur from the same source. So it is great differentiator for us. We really believe we have the best talent the expertise, to work with the retail brokers who specialize in construction, and they are the larger brokers. And so we have very strong trading relationships. So it is recurring. it is just projects.
Alex Scott: Got it. Thank you.
Operator: Our next question will come from Brian Meredith with UBS. Please unmute your line and ask your question.
Brian Meredith: Yeah. Thank you. So question, I wanna talk a little bit about the durability of the growth you are seeing in the underwriting management business. And also narrow in a little bit on, are you seeing with respect to carrier appetite or demand to commit capital as well as alternative capital in that business. And then the other side, as we are getting this more competitive market and you are looking at the business, what is your appetite to receive more capital in that business?
Benjamin Miles Wuller: Thank you for that. This is Miles. So I will talk about growth and then an appetite So we are successfully finding growth through all the key levers I have mentioned in the past, and that would be on new product launch, product and geographic expansion, certainly more capital under management, Our results and alignment and the scope and scale of our platform has drawn significant interest in partners both traditional and alternative. We have seen a steady increase over the last 12 to 18 months, we have talked about it in the past. Carriers are seeing record levels of returns. it is driving flush balance sheets. That are looking to be deployed in the E&S channel. I mean, I think we have done a great job helping validate the E&S marketplace as the environment for carriers to get the risk returns that they deserve on the highest hazard monoline risks. We are still finding growth on top of that new product just by core efficiency. My colleagues mentioned that in the opening, but I want to tack on that certainly our investments in AI and machine learning, which have been speaking about for 3 or 4 quarters, are starting to deliver measurable efficiency outcomes in certain lines, perhaps most notably property. So there is without a doubt rate headwinds but there is countervailing efficiency headwinds on top of new products and more capital. So the average RSUM property employee and this is property employees not just the underwriters, achieved 11% more quotes per head in the last 12 months than the prior year. So that certainly includes hustle, but it also represents our investments in automated data extraction, data structuring enrichment, and rating prepopulation coming to life. So we are excited about optimizing our core platform as well as new products and certainly new verticals as just touched on.
Brian Meredith: that is helpful. Thank you. And then my second question, I am just curious. Thinking about 2026, you have had a couple of nice tailwinds, be it the Mark business coming in, at RAC Re, that is really helped your organic growth. How do you think about 2027? Or what are you thinking about your ability to overcome some of those call it, tailwinds you have had this year to continue to drive you, call it, mid to high single digit organic growth in 2027. Is it achievable?
Janice Hamilton: Brian, I will start that 1, and then, Patrick, if you wanna add to it, feel free. But, effectively, you know, when we think about 2027, obviously, we are not gonna be guiding where we are from that perspective. But, you know, I think Patrick and Timothy really outlined where we see the growth drivers of our business. And when we think about the secular trends that we have talked about on our prior calls, you know, that is effectively the starting point for how we think about our growth Layering on top of that, you know, the scale that we have being number 2 and number 1 in wholesale and delegated respectively, You know, the vantage point that gives us to be able to see you know, new and unique risks coming into the channel and develop products through the innovative solutions and expertise that we have within the organization. You know, all of these factors really lend themselves towards you know, making sure that we can control our destiny and that we can ensure that you know, we are really focused on overcoming some of the headwinds, some of the cyclical headwinds that we have been talking about thus far. So the combination of cyclical the secular trends, you know, our talent, the innovation that we have, you know, all of those really lead us towards industry leading growth, as we have said before, in addition to having strong margins. And we are really proud about, you know, how we think about that formula and how we you know, how we look towards 2027 in even in light of some of the transitioning and changing market trends that are out there.
Brian Meredith: And, Brian, you mentioned Mark Re? Mhmm. Yeah. Okay. Brian, any other follow-ups? Oh, yeah. I thought Patrick was talking about the Mark exactly entailed. And I was all just wondering about I thought you did.
Patrick G. Ryan: We are looking for as I mentioned, we believe we have really differentiated value prop to bring to our clients. In terms of outsourced reinsurance. Managing underwriting. A combination I articulated. We are looking for more opportunities like that We provided a great service to Mark it is wonderful opportunity for Nationwide mutual and a great opportunity for us. And we are out scotting other opportunities like that. Or us, that is a de novo opportunity. it is we take on HR obligations. But that is it. Then it becomes a matter of the talent that we bring to help reinsurer, the sub-reinsurer, to solve that problem. And there are people out there that are candidates for the change, so we are on the prowl.
Brian Meredith: Gotcha. I guess what I was trying to get at for 2020 is all this talent that you have been investing in. Would we see that kind of as a tailwind in 2027?
Janice Hamilton: The talent that we acquired last year know, that for us, from a margin perspective, has been a headwind, it is been accretive to our organic growth from day 1. And you are absolutely right. You know, that is a component of the growth that we anticipate in 2027. I did not explicitly call it out, but talent is certainly an element of, you know, how we think about the building blocks for 2027 and beyond organic growth.
Patrick G. Ryan: Another part to that is we were able to bring in 42 really solid professional reinsurance underwriters. With the Mark deal. We took the HR risk. But it is been very, very successful. We are very pleased to have that incremental increase in our talent in reinsurance underwriting. So it was a win.
Brian Meredith: Right. Thank you.
Operator: Our next question will come from Robert Cox with Goldman Sachs. Please unmute your line and ask your question.
Robert Cox: Hey. Thanks for taking my question. Yeah. I just wanna ask the underwriting management segment. You could talk a little bit about how, you know, the firm is exercising discipline just given you know, some of the property pricing in the market. are you growing exposure in property there outside of some of these larger, you know, Rackery, Ryanery deals? And if so, where are you finding opportunity?
Benjamin Miles Wuller: Yeah. Robert, it is Miles. Thank you for that. So I will start with discipline and talk a little bit about the environment. So I want to emphasize discipline lives with us daily. So really Ryan's $12 billion delegated platform wins through standard of care, alignments, and the material investment in our platform and people. And that is spans the frontline in our mid office governance apparatus and throughout the executive team I have touched on these in the past, but we have multiple prongs of alignment to our partners. So our underwriters and executives have a substantial portion of their bonus related to profit commissions which is aligned to carrier profitability. We have a real time underwriting governance mechanism monitoring rate. Frequency, severity, and returns. And that is allowed us and we have proven the output is we are shaping the profile of our overall portfolio. And proudly, with both investment and augmentation of AI, We are auditing 5x as many files as we did last year. And we are increasing the probability of getting to the right files within that subset. So I think that is ingrained in our culture. Further, our staff have an owner mentality and are aligned to protect our investment in Geneva Re. Which although modest, perfectly aligned to the results of our other syndicated capital partners. On capital deployment, so yes, the reality is we are attracting incremental capital. And but what we are doing, Bob, is we are in a constant dialogue to fit to the carriers appetite and return profile. So the opportunity set is different. But I think I talked about our execution but within that are our portfolio analytics. So our cat portfolio tools we believe are industry leading. We have gotten that feedback from some of the blue chip capital that supports us. But we have the ability to perform real time marginal impact analysis across our portfolio We understand the exposures exceptionally well. We can make informed decisions and deploy capital at scale. So we are looking to arbitrage concentrations in geography and scale Not all risks are created equal. We think we can sift through the right ones and use them to optimize the balance of our portfolio. So we are still finding select growth in property. But we are very measured and we are very aligned to the risk return expectations of our capital providers.
Robert Cox: Got it. Thank you, Miles. And I just wanted to ask on yeah, submission growth Submissions still seem you know, pretty strong in the E&S market. I was just wondering if you could talk about what you are seeing from a submission perspective and really how that is changed since you know, the hard market.
Timothy William Turner: Well, it continues to grow, Bob. The stamping offices are 1 metric that we get to see the larger states. There is a little bit of a slowdown on the new flow but it is still positive, still growing. We are capturing more of it. As we have alluded to. We look at the non admitted market to be 24-25% of the overall commercial market. So it remains very strong, and 1 point I would like to make is we do not expect the market to recede and to soften like it has in cycles gone by. Because of the structural change and that most large admitted carriers now own a nonadmitted surplus lines company. And that business is where it belongs. it is in a place they have freedom of rate and form. And we do not see a lot of it migrating back into the admitted market. there is constant niche firming phenomenons going on that continue to create dumping and shedding of new business opportunities. And with our $32 billion lens, we see that change in the market before our competitors do. We can move in quickly. With our de novo facility machine and we can create proprietary product that helps us get an edge on capturing that new business. So we see those phenomenons continuing, and while the flow has slowed a bit, it is still growing.
Janice Hamilton: Yeah. And just to put a finer point on that, the flow is slowing largely because of the pricing headwinds. But from an item count perspective, those continue to grow, and that is really where the opportunity is for us Yep. Right. To continue to work for those new accounts and buying that new business. And so that is really the distinction between the premium metrics that we are seeing in the real underlying.
Timothy William Turner: Yeah. Great point, Janice. The item counts significantly up Bob.
Robert Cox: Thanks. that is helpful.
Operator: Our next question will come from Tracy Benguigui from Wolfe Research. Please unmute your line and ask your question.
Tracy Benguigui: Thank you. On a seasonality perspective, the second quarter is your largest property quarter. So I thought it is worth unpacking more Timothy's comments that property book declined only modestly better than your expectations throughout the quarter, notably in June. Can you elaborate what is driving that? Is it that we are hearing about a lot of capacity in the property market. Are you seeing less of that? Or greater insurance demand? Is it just simply a change in your business mix?
Timothy William Turner: And if you could touch on if you are seeing similar trends in July, I think what we experienced was our quality and the performance of our property brokers was much stronger than we expected. They were winning head to head more frequently. Retaining business, Our retention levels were high. And so while the prices on the cat book were down as much as 25% or 35%, we were hanging on to the business. And, again, winning new business. So we were surprised that the book declined modestly so much better than expectations. And, we applaud the performance of our property brokers and we remain optimistic that we could be a storm away from a refirming. The wildfire season is coming. There are lots of other perils that can drive a change in the marketplace. So we are we are on the edge of our seat. We are poised and ready to pounce on new opportunities, and we are confident that our team will get market share when that happens.
Tracy Benguigui: Great. And on the structural changes discussion, that is very fair that admitted writers have E&S paper as well, so that could limit reverse flow. What about the fact that there is just so many more ENS players right now? It looks like these startups' growth has outpaced the incumbents. How does that change your outlook?
Timothy William Turner: The number of new ENS players is noted and there is more capacity pouring into the non admitted channel. that is a good point. And so there is competition, and we see it alive and well on property. it is not the business is not leaving the non admitted channel. it is ferocious competition from additional surplus and additional capacity. We do not see that in other lines necessarily. there is always competition. there is always new facilities. However, most of them remain wholesale dedicated. So we have a lot of control over the marketing exercises. We get a lot more opportunities with the new capital. And we use it to win. So we do not we do not see it as detrimental although it has aided in the softness in property. Again, it is not going to the admitted market. it is inter-E&S competition that is driving the price.
Benjamin Miles Wuller: Tracy, I would like to add. it is Miles. That We see those new E&S carriers as client opportunities for both underwriting and RT. So RT is obviously delegated distribution for those E&S carriers But many of those new E&S balance sheets are looking to delegate to shops like Ryan's Special Underwriting Manager for access to specialty underwriting. So the capital is real, the rate pressure is real, but it is a net positive opportunity set for us across Ryan.
Patrick G. Ryan: This is Patrick. You have been very generous with your time. Excellent questions. Thanks for your support and interest. We are all working hard. We are proud of what we achieved in the quarter. Proud of the team. Timothy just summed up that they outperformed our expectations. And we have high expectations for them. So thank you, and we will be seeing you many of you, over the next 90 days, but see, all of you in 90 days. Thank you.
Operator: Thank you for calling. You may now disconnect.