RYAN - NYSE

Good afternoon, and thank you for joining us today for Ryan Specialty Holdings Third Quarter 2024 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 -- 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 financials measures to the most closely comparable measures prepared in accordance GAAP are included in the earnings release, which is filed with the SEC and available on the company's website. With that, I'd now like to turn the call over to Founder and Executive Chairman of Product Specialty. Pat Ryan.

Good afternoon, and thank you for joining us to discuss our third quarter results. With me on today's call is our CEO, Tim Turner; our President, Jeremiah Bickham; our CFO, Janice Hamilton; our CEO of Underwriting Managers, Miles Wuller; and our Director of Investor Relations, Nick Mezick. We delivered an excellent third quarter by all measures. We grew total revenue 20.5%, which includes strong organic revenue growth of 11.8% and meaningful contributions from M&A. I'd like to pause for a moment to express how proud I am of these accomplishments this quarter, most specifically our organic growth. Our organic growth in Q3 of last year was 15% and was buttressed by a surge of growth in property. So that's quite a comp in which to compound. In contrast, this past quarter, we faced what we believe to be short-term headwinds as property rate deterioration accelerated in September prior to hurricanes Helene and Milton. We're taking market share of both new risks and renewals in the E&S market, we overcame these headwinds and posted very healthy growth in property and in our overall portfolio. All in all, 20.5% total growth and 11.8% organic growth for the quarter under these circumstances is further proof of Ryan Specialty's resilience and growth engine. We grew adjusted EBITDAC 29.4% to $190 million. Adjusted EBITDAC margin expanded 220 basis points to 31.5% and adjusted diluted EPS grew 28% to $0.41 per share. We also had a very active quarter for acquisitions, which aligns with our disciplined long-term M&A strategy. We target high-quality businesses with differentiated talent, which provides us with more capabilities to meet our clients' evolving and growing needs. We're very excited about the talent and tools we added to Ryan Specialty in Q3, which Tim will discuss shortly. Further, our leadership succession plan was executed seamlessly on October 1. I'm very proud to have Tim sitting next to me today as Ryan Specialty's new CEO. I'm confident that we have the right team in place to continue executing our winning strategy today and over the long term. Ryan Specialty is stronger than ever, and our teammates are excited for the future. We believe that we will continue to deliver innovative solutions to our clients, generate industry-leading organic growth, execute our M&A strategy, continue to increase profitability and create additional value for our shareholders. Now I'm pleased to turn the call over to Tim. Tim?

Thank you very much, Pat. I'm honored to take the baton from Pat and speak with everyone today as Ryan Specialty's CEO. For nearly 15 years, I've dedicated myself to the success of this firm and our teammates, and I couldn't be prouder of what this team has achieved thus far. In many ways, we have already accomplished more than we imagined in 2010 when Pat and I were just getting started. What has me so energized and so motivated right now, though, is my belief that we have the opportunity to dwarf our accomplishments to date. As Pat said a moment ago, we are stronger than ever and have growth opportunities now that did not exist for us previously. Our conviction to put our clients first, our focus on specialized expertise, our commitment to rewarding top talent and our dedication to excellence in everything we do is being validated by the market every day. Our exceptional growth, our success at recruiting and our unique M&A opportunities are all a reflection of that. Rather than being satisfied with our accomplishments thus far, we are doubling down on our strategy and putting everything we have into capitalizing on the opportunities in front of us. Our goal is not just to continue our momentum but to accelerate it. As we pull ahead of the competition, we're charging harder than ever. We have more firepower, more passion and a better story to tell than we've ever had before. I couldn't be more excited. With that as a backdrop, I'd like to set the stage with three important points. After that, I will walk through our performance by specialty, observations on industry trends, progress on our M&A strategy and investments that we're making in the business. The first point I would like to make is on independence. We are very serious about putting our clients first and a key element of independence is that we don't compete with the retail brokers and agents we aim to serve. With each passing day, the value of independence is becoming more and more of an obvious truth. However, this has been a cornerstone of our strategy and the North Star of our client-first philosophy since our founding. We believe this commitment to our clients has been a crucial part of our success and will be going forward. The second point I would like to make is on the durable value proposition of delegated underwriting authority. This is a principle that our firm was founded on and it's one that's gained significant traction in recent years. It is our closely held belief that delegated authority is not only here to stay but will continue gaining momentum as the value proposition is self-evident. However, the long-term success of the model is dependent on intermediaries like Ryan Specialty, who manage delegated authority with the highest professional standards. We honor our fiduciary responsibility to our capital providers and have demonstrated to them that we're not interested in growth at any cost. Their profitability has to come first. Doing this the right way requires not only that commitment, but the ongoing investment in talent, technology and governance to make sure that commitment is honored. This is an area that sets us apart and one we will continue to leverage to deepen our penetration in the delegated authority space. The third and final point I'll make before getting to the results is on panel consolidation. There is a growing recognition among retail brokers of the need to optimize client outcomes, minimize E&Os and invest in long-term strategic relationships that help them win. As the world continues to get riskier and more complex, we believe that deep industry specialization and a focus on fast, consistent execution is the only way to earn and keep business in our industry, and we stand ready to deliver that to our clients every single day. Now on to the results. As Pat noted, it was another exceptional quarter for Ryan Specialty. We executed well across our strategic, financial and operational objectives. We had broad-based growth across our specialties, meaningful contributions from our recent acquisitions and delivered strong underwriting profit for our carrier trading partners. Diving into our specialties, our wholesale brokerage specialty generated another quarter of strong growth. Our property practice had another impressive quarter of growth. We overcame what we believe to be short-term headwinds as property pricing deteriorated throughout the quarter and prior to Hurricanes Helene and Milton. We also overcame a tough comparable in a market that was seeing strong pricing increases in the prior year. We overcame these trends as we generated excellent new business, took share of strong flow into the channel and won head-to-head against our competitors and had high retention. Prior to this year's hurricane season, we continue to see expanded catastrophe appetite as additional capacity entered the market. Recently, the market has been working through the impact of two devastating hurricanes and a record year of severe convective storms. It is still too early to know for sure how the insurance and reinsurance markets will react, but many industry sources are pointing to renewals being flat to up by 1/1. We can deliver significant value to our clients in any market cycle through our deep specialty and industry capabilities and ability to navigate this dynamic environment. Property will be an important contributor to our growth moving forward and a very strong part of our portfolio over the long term. Our casualty practice had another excellent quarter. A challenging loss environment is driving higher loss costs in numerous casualty classes. This is partly driven by social inflation, marked by increased frequency and more prolonged cases, higher settlements, judgments and nuclear verdicts and amplified by litigation finance and partly by reserve charges related to the 2015 through 2019 accident years and the recognition of reserve inadequacy for more recent years. The market is reacting to these trends by raising prices, focusing on limit management and moving risks into the specialty and E&S market. As a result, the need for our specialized industry and product level knowledge has never been greater and our value proposition to our clients has never been stronger. We remain confident that casualty will be a strong driver of our growth moving forward and that we will continue to be a leader in casualty solutions for years to come. Now turning to our delegated authority specialties, which include both binding and underwriting management. Our binding authority specialty continues to perform very well, driven by our top-tier talent and expanding product set for small, tough-to-place commercial P&C risks. We continue to believe panel consolidation in binding authority and programs remains a long-term growth opportunity and we are well positioned to capitalize. Our underwriting management specialty had another outstanding quarter, particularly in M&A transactional liability, health care and property and casualty. Growth was aided by meaningful contributions from recent acquisitions and contingent commissions as we delivered strong underwriting profit for our carrier trading partners. Stepping back, our delegated authority specialties remains very well positioned to execute on both organic and inorganic growth opportunities. We are confident in our talent, our platform and our ability to remain a destination of choice for high-quality MGUs and their specialized talent. We believe this combination, paired with our skill to manage the business through the insurance cycle ensures our ability to deliver consistently profitable underwriting results, growth and scale over the long term. Our success and track record of excellent underwriting results have accelerated our speed to market, developed broader and deeper relationships across our carrier trading partners and onboarded additional capacity. Turning to price. After years of significant pricing increases, including in the prior year's quarter, property pricing was down in Q3 with a deterioration that accelerated in September, which we believe may change course. Meanwhile, casualty pricing accelerated and broadened out across an increasing number of classes. Across both major industry classes, there remains heightened uncertainty in the loss environment. This is driving new risks into the E&S marketplace and causing existing risks to remain there. We have consistently noted that in any cycle, as certain lines are perceived to reach price adequacy, admitted markets tend to step back in on certain placements. However, this is still not playing out, and the standard market has not meaningfully impacted the rate or flow of our portfolio in the aggregate. We continue to expect the flow of business into the E&S and specialty market to be a significant driver of Ryan Specialty's growth, more so than rate. Now turning to M&A. We continue to execute on our acquisition strategy. First, we completed the acquisition of US Assure. They are performing very well and integration is underway. We completed two more delegated authority transactions in the quarter and two earlier this month. Greenhill, an MGU focused on SME allied health care, will expand our health care MGU, Sapphire Blue. The P&C underwriting business acquired from Ethos with approximately $11 million of revenue will add 8 niche specialty solutions across property and casualty classes. EverSports will add approximately $10 million of revenue and enhance our sports, leisure and entertainment MGU, Alive Risk. Geo Underwriting Europe with a focus on financial lines will further expand our underwriting footprint in the Netherlands and Germany. And as we just recently announced, we are in the process of acquiring Innovisk and expect to close in November. With approximately $58 million of annual revenue, Innovisk brings intellectual capital across seven unique MGUs and an excellent track record of delivering strong underwriting profits to its capital providers. Innovisk adds product offerings to Ryan Specialty, including environmental liability, attorney E&O and tax credit protection coverage. They also provide us with access to incremental segments such as international SME for professional lines and we'll continue expanding our international footprint. We expect each of these acquisitions to contribute to our long-term growth for years to come. We believe we can further enhance these already great businesses through our track record of productivity improvements, including the trusting and reliable trading relationships we have built with our distributors and our capital providers. Further, on the M&A front, our outlook remains ambitious. Our pipeline continues to be robust, including both tuck-ins and large deals. As we previously noted, our overall strategy aims to anticipate and meet the evolving and growing needs of our clients and trading partners so that our value proposition to them remains dynamic and robust. We only move forward when all of our criteria for M&A are met. Each acquisition must be a strong cultural fit, strategic and accretive. Turning to talent. We continued to invest strategically in our business in the quarter, adding new talent to our world-class team. These investments across Ryan Specialty and our commitment to independence, innovation and excellence continue to enable industry-leading organic growth and strengthen our competitive position for years to come. I couldn't be prouder of what this team has achieved over the last nearly 15 years but we are just getting started. We are doubling down on our strategy and we will capitalize on the opportunities in front of us. With that, I will now turn the call over to Jeremiah to dive deeper into what distinguishes Ryan Specialty from the competition.

Thank you, Tim. I'm incredibly excited to step into my new role and continue supporting Pat, Tim and our business leaders on what matters most, delivering value for our clients and trading partners in a few broad but critical areas sustaining our growth engine, both organically and through M&A, investing in a platform that attracts, develops and retains the most talented people in our industry, maintaining our culture, our unique growth and development opportunities and enhancing our teammate experience. Finally, ensuring operational excellence across all of Ryan Specialty. On the topic of operational excellence, I'd like to take a moment to discuss ACCELERATE 2025. As we've said from the beginning, this program has been an investment in our long-term growth. By maturing our operating model, building processes, tools and capabilities, we can help our teammates deliver insights and solutions to our clients with greater speed and efficiency. While a byproduct of this work has been sustained margin improvement, the goal is to drive growth over the long term. Our focus on operational excellence and our goal of leveraging our platform to make expense management a strategic lever goes well beyond the life of ACCELERATE 2025. And on the topic of growth, a focus of mine and everyone else on the call today is to enhance our unique ability to generate outsized organic growth over the long term. In addition to the secular drivers we've previously discussed, our growth is underpinned by several characteristics that distinguish Ryan Specialty from our competition. First is our focus on growth markets. In Wholesale Broking, we focus on capturing broad tailwinds in the specialty market while also capitalizing on specific areas of accelerated growth as they arise. In delegated authority, which is growing faster than the overall E&S market, our underwriters' focus is on delivering consistently profitable underwriting results, growth and scale over the longer term. We believe our proven track record of success in these areas will help us continue expanding our reach in delegated authority and create significant growth opportunities over the long run. Second is our ability to innovate. Whether it's establishing a new class of business, expanding the TAM of delegated authority or crafting customized solutions beyond traditional insurance products, we have a unique blend of creativity, expertise and commitment to client solutions that we believe sets us apart from our competition. This has led to brand distinction and recognition of our ability to solve the most difficult problems for our clients. Third is our ecosystem of excellence. We have a unique culture that is empowering and entrepreneurial. Our platform offers growth and professional development for brokers and underwriters that we believe does not exist anywhere else. We've become a destination of choice for like-minded individuals and professionals who are technical, growth-minded, competitive and passionate about client service. This ecosystem not only fosters industry-leading retention, but it fuels our ability to innovate, evolve and win. Fourth is our unique relationship and position of trust with our trading partners. We represent significant scale, growth and profitability to many of the best institutions in the insurance industry. We believe that we are viewed as more than just a counterparty, but as a force multiplier for their success. We believe this unique status opens doors for us and provides us with more opportunities to innovate, grow and win. Finally, our scale and scope. We believe that the breadth and depth of our capabilities and expertise is unmatched, and it would be incredibly difficult to replicate either organically or inorganically. We believe this provides us with a moat and puts us in the driver's seat as we look ahead. Success begets success and excellence attracts excellence, which is why our pitch to individuals, to teams and to acquisitions has never been stronger. We will leverage this advantage to continue taking an even greater share of our ever-expanding total addressable market. Having been with the firm since nearly its founding, I'm incredibly proud to say that our current growth prospects are more exciting than any period in our history, and our employees are more energized than ever before. Reflecting on the nearly 15 years of the firm's past performance, what has driven our success and market opportunities, I am even more excited for our next 15-year story. With our dynamic and differentiated business model, our expertise, innovative culture and work ethic, we believe we remain well positioned to succeed in 2025 and beyond. We're proud of our team and their dedication to adding value to our clients, trading partners and ultimately, our shareholders. With that, I'll now turn the call over to our Chief Financial Officer, Janice Hamilton, who will provide more details on our third quarter financial results. Janice?

Thank you, Jeremiah. I'm very excited to be speaking with everyone today. In Q3, we grew total revenue 20.5% period-over-period to $605 million. Growth was fueled by another strong quarter of organic revenue growth at 11.8%, contributions from M&A, which added nearly 7 percentage points to our top line and contingent commissions as we delivered strong underwriting profit for our carrier trading partners. Growth was again driven by our ability to win substantial amounts of new business, high renewal retention and ongoing tailwinds in much of the specialty market. Adjusted EBITDAC for the quarter grew 29.4% period-over-period to $190 million. Adjusted EBITDAC margin improved 220 basis points to 31.5% driven by another quarter of strong revenue growth, savings from Accelerate 2025 and underlying margin improvement in our business. Adjusted diluted EPS grew 28% to $0.41 per share. Our adjusted effective tax rate was 26.1% for the quarter. Based on the current environment, we expect a similar tax rate for the fourth quarter of 2024. Turning to Accelerate 2025. We are in the process of concluding this program by the end of the year. We remain on track to achieve annual savings of approximately $60 million in 2025. We continue to expect that approximately half of these savings will be realized in 2024, with the majority of those savings falling to our bottom line. Earlier today, our board declared a regular quarterly dividend of $0.11 payable later next month. Turning to capital allocation. M&A remains our top priority now and for the foreseeable future. The substantial free cash flow we expect to generate will provide us with increasing flexibility for capital allocation opportunities in the future. During the quarter, we refinanced our credit facility with an upsized revolver and an amended and upsized $1.7 billion term loan, improving our borrowing margin from the prior credit agreement. In addition, we priced $600 million of senior secured notes in a private offering at a fixed rate of 5.875%. As of September 30, our leverage remains modest and we have ample capacity to execute on the exciting M&A opportunities ahead of us. We were very pleased with the outcomes for both our credit facility and the senior secured notes. This is a testament to our ongoing operational success, a reflection of our growth strategy and our prudent view of financial risk management. For the fourth quarter, we expect to record GAAP interest expense of $50 million and amortization of deferred issuance costs of $2 million. Now turning to guidance. We are maintaining our organic revenue growth rate guide range for the full year 2024 of 13.0% and 14.0% as well as our full year adjusted EBITDAC margin guide range of 32% to 32.5%. Looking ahead, we will continue to organically invest in our business to support sustainable and profitable growth. We will continue to execute our disciplined M&A strategy with high-quality acquisitions, and we will maintain our strong balance sheet while returning excess cash, all of which should create long-term sustainable value for our shareholders. With our differentiated business model focused on growth markets, ability to provide innovative solutions to clients and empowering and entrepreneurial culture, unique relationships, scale and scope, we are positioned for success over the long term. With that, we thank you for your time and would like to open up the call for Q&A. Operator?

Thank you. We’ll now be conducting question-and-answer session. [Operator Instructions] And our first question comes from Elyse Greenspan from Wells Fargo.

Hi, thanks. Good evening. My first question is on just organic growth, right? I think it's 13.3% right, year-to-date. You left the full year guide, which would imply an uptick, right, from the 11.8% in the Q3 and the fourth quarter. So could you just give us a sense on how Q4 is trending? Because -- and I also thought Q4 is one of your higher property concentration quarters. So are you seeing any impact -- if you -- if the property market does harden post these storms, would you expect there to be an impact in the fourth quarter? Or is that more a 2025 event?

Hi, Elyse, there's a lot in that question. So let me lead off by answering it directly related to the Q4 aspect, and then I'll hand it over to Miles and Tim because there's a lot of additional context and color on property, which is a big part of your question. So just the full picture for Q3 and Q4, last year, property in our channel was surging in Q3. And this year, as has been widely discussed now through earnings season, property rates in Q3 were really challenging and in many cases, down 20% to 30%. But why -- one of the reasons I think Pat said at the beginning, he's so proud of what we achieved in this quarter is because, as Tim said, flow matters more than rate. And because so many new risks were entering the channel and because we were able to take market share, we still posted very healthy growth in property and our overall portfolio. And what's really encouraging, too, is that those flow dynamics and our ability to take share are obviously still intact. And there's a chance that rate decline slows down or even levels off later this quarter or by 1/1. There's a good amount of industry speculation on this already. And so far, what we're seeing in Q4 are better results than we had in September and Q3 overall. Now as you know, you pointed out, the quarter is really determined by December because seasonally, that's the biggest, but we're off to a really promising start. And so for the rest of that here, Miles, you should take it away.

Yeah. Thank you, Elyse. Thank you, Jeremiah. I appreciate the question. So look, to add as backdrop, wind-exposed E&S property rates are up approximately 50% on a cumulative basis since Hurricane Ian hit in 2022. We began flagging last quarter, new capital is deployed insurance, reinsurance and ILS capacity over the last six months, pressuring rate. That pressure has certainly been abated by Helene and Milton, but not fully eliminated. That said, there are multiple factors on way we remain bullish on property. First, the macro structural changes that drove this business into E&S still persist. Population density continues to increase in Southeast coastal geographies. Real inflation in property values and building inputs remains high, materially increasing total insured values and climate change remains prevalent as evidenced by the over $100 billion in natural CAT losses this year. Second, our new business submissions remain robust in property as risk transition to the E&S market for the first time, we're drawn to new specialty property facilities we continue to build and buy. And lastly, we remain a destination choice for capacity providers. We continue to deliver underwriting performance and less volatility throughout the cycle. Through this cycle, we've been steadily attracting incremental capacity to better serve our clients. I think Tim is going to add as well.

Sure. Thanks, Miles. We see the CAT property market in a short-term transition. Rate deceleration in CAT property accelerated in September with two CAT 3s in 10 days plus record convective storms, we fully expect the CAT property market to stabilize. Our property flow in October looks very strong. Obviously, climate change, global warming is not going away. But it's too early to forecast the fourth quarter as 1/1 treaties will validate the market condition for 2025. But overall, the E&S market remains very, very firm and our double-digit growth and expanding looks very optimistic.

That's helpful. And then on the flip side with storms, right, sometimes there's an impact on contingent commissions. Did you see any impact in Q3 when you expect any impact in the fourth quarter?

Well, Elyse, they have been steadily increasing. So I would say the increasing profit commissions for both the quarter and the year have exceeded expectations and they're the direct result of our investment in top decile staff, our delegated authority platform and our high standard of care in underwriting and risk selection. So we -- if you would recall, these are typically earned over -- excuse me, recognized over three to five years after they've been delivered. But no, all signs to date are we have exceeded all modeled expectations for the storms this year, and we expect this flow to continue.

And then my last question, right, there were -- there was a press release and you guys mentioned it about the Innovisk Capital Partners transaction. I know there was disclosure, right, in terms of revenue. Anything you could just say in terms of potential purchase price or the margin of that property, just to help us think about just modeling when this transaction does close?

Sure, Elyse. I'll take that. So Innovisk, you've caught the revenue impact of that being $58 million. This deal is well within our delegated authority specialty, which tends to have a slightly higher margin. Don't think about the U.S. Assure style margin, but we wouldn't expect there to be a material impact as a result of Innovisk to our margin profile.

And then anything on the purchase price?

Not at this time.

Okay. Thank you.

Thank you. Our next question comes from Alex Scott, Barclays.

Hi, I had a similar line of questioning as Elyse's questions on property, but on the casualty side, I was just interested in what are some of the things you're seeing in the E&S market in terms of volume flow and so forth on casualty with what's going on with loss cost trend and some repricing efforts seemingly underway?

Alex, we see the casualty market continuing to firm, especially in the high-hazard practice group verticals where we spend most of our time, loss leaders in the reinsurance world, high hazard casualty business, in particular, led by transportation, consumer product liability, social and human services, to name a few, continue to deteriorate. Losses, loss cost adjustment factors, continue to drive the business into the channel. So we see double-digit growth in casualty. It helped us overcome the property wins in the quarter, and we see nothing but a long runway in high hazard casualty.

And any way you could help us think through just sort of allocation towards property versus casualty? And I'm just trying to understand the two different impacts and how powerful casualty could be if property does indeed moderate in terms of the price declines?

Well, casualty in the broader sense includes professional liability. And professional liabilities, we know, had some public D&O and some cyber headwinds. But even those are abating, and we're seeing real measurable growth now across all our professional liability pro-exec classes of business, led by health care and miscellaneous E&O classes like architect and engineers. So we're very, very bullish on professional liability as it's woven into casualty, roughly two thirds of our book, we see it gaining momentum in the fourth quarter, almost a second firming emerging in the marketplace, again, due to deterioration in losses, loss cost adjustment factors accelerating and more dumping and shedding by the standard markets into our channel. So very optimistic outlook.

Thank you.

Thank you. Our next question comes from Grace Carter, Bank of America.

Hi, everyone. I was wondering when you started to see the decline in property pricing start to kind of accelerate late in the quarter. Was there any sort of influence on customer purchase activity, for example, maybe seeing people buy more coverage than they might have recently had to forego due to pricing or people just kind of opting to take the net savings?

I'll take the first part of that and let Miles complement that. We saw very high retention rates on our renewal book. So we're not losing any business to the admitted market. And the -- while the prices went down, we were able to hang on to our layers and continue to write new business. Our new business flow has been very impressive, even though we had this outlying deceleration accelerate in September. We really believe it's an outlier. We think the market will bounce back quickly after two CAT 3s and the total impact of the convective storm season, and we're starting to see that already. October property flow looks very strong.

And structurally, we have seen your observation play out. The end buyers enhanced purchasing power, they have tended to use that to buy lower deductibles or most of this property obviously has mortgage or loans against it. But in some cases, property, the insurance is only up to the loan value, not the total TIV. So we have seen people redeploy that spend back into the -- towards the full total insured value of their assets.

Thank you. And would you be able to give us an update on the amount of competition coming out of the London market?

London is a great partner to us. They're a large E&S market in the U.S. and multiple access points, and they're competitive. But I wouldn't say anything beyond that. They're definitely a leader in the E&S market and property is part of that appetite, but not much beyond that.

Thank you.

Thank you. Up next is Meyer Shields of KBW.

Hi, good afternoon, all. A couple of hopefully quick questions. First, overall, is there a challenge in finding even E&S market capacity for transportation risk?

I didn't hear the first part of the question, I'm sorry.

Not at all. I'm wondering, I know that a number of insurance companies are cautious on commercial auto, and you mentioned it as a line of business driving the refirming of casualty. And I just want to see whether there's any actual shortage of capacity. Like do you ever encounter difficulties in placing these programs even if they move to E&S markets?

Transportation is without a doubt one of the hardest parts of the casualty market and that's widespread. It's primary trucking, it's livery. It's shared economy, it's primary and it's excess, it's binding authorities. It's MGUs, it's direct placements. So there's a lot going on in that space mayor. Part of it is the migration of the business from delegated underwriting authority into the brokerage market. So we're very well prepared to broker more transportation than we would underwrite in the past and very well prepared for this firming so lots of dumping and shedding in every class in 50 states in transportation. So a very exciting opportunity for us to solve these problems and challenges for our clients.

Okay. That's helpful. And a couple of numbers questions. I guess in the second quarter, we saw more improvement in the adjusted G&A ratio. Then in compensation, and that reversed, there was more improvement in compensation in the third quarter. And I don't know whether that related to faster growth in delegated authority or is something else impacting the trend of those individual expense ratios?

Meyer, I'm happy to take that. What you saw this quarter was the actioning of our savings from the Accelerate 2025 program, primarily just playing out the difference between when those were effective for both comp and G&A.

Okay. So it's not related to mix at all?

No.

Okay. And then related, when we think about fiduciary investment income, I guess the assets associated with that, does mix play a role there?

Sorry, Meyer, does mix play a role in what?

In the fiduciary investment income or the assets there, when you -- if you see faster growth in delegated authority, do that automatically imply either upward or downward trends in fiduciary investment income?

No, no.

Perfect. I’ll leave it there.

Thank you. Our next question comes from Mike

Good evening. First question on panel consolidation. I think intuitively to us, it makes sense that it's -- this is a tail growth. I haven't been able to crack the code on trying to figure out how it's benefiting your growth. Do you -- would you guys be willing to share what your data is telling you of the 13 to 14 points of growth you're going to throw off this year, how many points of that or basis points of that you think has come from panel consolidation even if it's just a rough estimate?

That would be a tough measure to share. But broadly speaking, panel consolidation, we consider part of when we say new client wins and winning new business, taking new share, that's all part of that. And it's -- there's a lot of overlap between that and just day-to-day winning in the trenches, like our success in doing book rolls and becoming preferred partners is all because we prove day-to-day that we can meet the needs and that our specialty verticals are a comprehensive solution to these firms. So it's very much a part of the portfolio today. And the reason we gave it a little bit of elevated airtime today on the call is because there's a lot -- like our -- the scale and sophistication of our industry has increased dramatically even in the last five years. And there is a recognition even more so today than certainly 15 years ago, but even 5 years ago of the power that strategic relationships like wholesalers like us at scale can provide to clients who are looking to minimize E&O or just like win more business. And we're benefiting from that, and we see the billions of unconsolidated premium out there among existing retail partners as being up for grabs over the next couple of years. And the statement today is that we're ready and we're already actively engaged trying to help our clients optimize their portfolios that way.

Okay. That's helpful. And I think we appreciate it's tough to get the exact data from your clients to probably able to really pinpoint a number on it. Okay. I guess going back to the property conversation, just when I heard your prepared remarks about the property pricing deterioration accelerating, but you think it can change course. Like are you seeing in real time in recent weeks it changing course? Because it feels like the insurers on Milton, for example, we just saw PCS came out with it only being a $5 billion loss so far. Obviously, devastating, but $5 billion is a pretty low number but maybe it's just early days. So it feels like there's conflicting data points out there on whether the market -- the property market really indeed will flatten out? Thanks.

Jeremiah, mentioned we were seeing some accelerated rate deceleration as we move through September, 10%, 20% at times, aggressive pricing competitive. And then post both CAT 3s and the convective storm totals really had an impact here over the last 30 days. So to your question, we have seen evidence and validation of the market stabilizing in CAT property. And we believe that we're now in a minus 5%, flat to plus 5% range roughly in that range. But we -- it's too early to really forecast that, but we are seeing evidence of it clearly.

Okay. And I guess just lastly on overall organic growth on the guidance, we can all just do the math on what the guide implies for 4Q and at the midpoint, it would imply the guide for the full year would imply a sequential bump up in organic in 4Q. Just given the portfolio is shaped differently this year than in the past years, is there any more just nuanced seasonality we should be thinking about that's different in 4Q versus historical 4Q? Or just anything we should keep in mind seasonality-wise?

No, no material change to the seasonality that we've discussed before. Q4 is still the biggest quarter overall for total revenue. It's the second biggest quarter for property. And our optimism, our confidence on achieving our guide range is informed by information through today. And as we said in the prepared remarks, the quarter is off to a good start.

Thank you.

Thank you. [Operator Instructions]. Our next question is coming from Rob Cox, Goldman Sachs.

Great. Thanks. Some of the data we've seen is that the mission growth has picked up meaningfully in the last few quarters for some of the larger stamping office states as pricing has fallen. I'm wondering if seeing elevated submission growth as pricing falls is consistent with typical E&S cyclicality? And if there's any color you could provide to help us better understand that dynamic?

We're certainly seeing the flow in those larger states from the stamping offices, double-digit growth actually. While we don't use a month or even a quarter to measure it nationally, we wait for the annual results to come out. We are seeing real strong evidence that the flow into the channel, i.e., the non-renewal notices, the dumping and the shedding of unprofitable business is definitely growing rapidly, and we're capturing our fair share of it. And it's in these loss-leading channels, as we've mentioned. And so we're perfectly set up to broker it and to underwrite it.

Okay. Thanks. And maybe shifting to the -- back to the property. I think you guys had previously disclosed that your property mix was kind of in line with the industry at 30% or so, if I'm not mistaken. I think that since then, maybe the industry has grown to about 40% property in E&S. So I was wondering if that 40% would be closer to the right figure today?

We -- our mix has ticked up a little bit, but what Tim said earlier, two thirds, one thirds is still the right way to think about it, two thirds casualty, one thirds property.

Okay. And maybe last question, just on the transaction liability and the exposure to capital markets. It seems like a positive in the quarter. I think some of the large retail brokers said it was a double-digit growth engine for them. Is there any way to size the impact to organic growth in the quarter?

Well, Rob, we wouldn't share it on a broken out basis, but we can confirm. It's been a great contributor. We're really pleased with the investments we've made globally, particularly in tax as well over the last two years and it is a contributor to our overall organic growth for the full year and quarter.

Thank you.

Thank you. It looks like there are no further questions at this time. I would now like to turn the call back to Pat Ryan for closing comments.

We certainly appreciate you taking the time to join us today, and we appreciate your continued support. We look forward to updating you on our progress next quarter. Have a good evening. Thank you.