Notable Takeaways from Ryan Specialty Group Q1 2022 Earnings
- Net income for the first quarter of 2022 was $18M or $0.06 per diluted share. Organic revenue growth was 20.1% for the quarter, up from 18.4% for the same quarter last year. Results were driven by strong growth in all three business units: wholesale brokerage, binding authorities, and underwriting management.
- Adjusted EBITDAC for the first quarter grew 14% period-over-period to $107M, while adjusted EBITDAC margin declined 260 basis points from the prior year period to 27.7%.* Margin was impacted by continued investments in the business, public company costs (Ryan launched its IPO in July 2021), and travel & entertainment expenses returning to normalized levels. While the latter two items are expected to impact the Q2 2022 margin as well, the company’s overall outlook remains positive due to forecasted growth and tailwinds from the current Excess & Surplus (E&S) market environment.
- Ryan raised its full-year 2022 outlook guidance for both organic growth and adjusted EBITDAC margin by half a point each, with the organic growth rate for the full year 2022 now expected between 13.5% and 15.5%, and adjusted EBITDAC margin expected between 28.5% and 30.0%.
- During the quarter, management noted that rates remained resilient and while rate increases have moderated, they have been “more than offset” by the continued expansion of the E&S market. In particular, CAT property continues to see record submission flow as admitted markets face pressure from reinsurers de-risking their portfolios, which pushes more business into the E&S market.
- Construction is another vertical where Ryan sees significant increases in flow, with double-digit increases in submissions for both infrastructure projects and habitational construction. Professional liability, health care, cyber lines, and transportation are also seeing an increased flow of business into the E&S channel.
- Overall, the E&S market environment remains “very positive,” and pricing continues to be firm in nearly all lines of business. Ryan expects that the continued flow of business into the non-admitted market to be a more significant driver of growth compared to the rate.
- Ryan plans to ramp up hiring for the rest of 2022. While seeing “some increases” in offer letters, the Company noted that it hasn’t seen a material negative impact from wage inflation yet, citing the fact that the majority of its compensation expense is related to producers and thus tied to revenue.
- Ryan noted its merger and acquisition pipeline remains robust, including potential small and large opportunities across a number of specialties.
*EBITDAC: Net income before interest expense, income tax expense, depreciation and amortization, and change in contingent consideration adjusted to reflect items such as (i) equity-based compensation, (ii) acquisition-related expenses, and (iii) other exceptional or non-recurring items, as applicable.”
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