RYAN - NYSE

Good afternoon, and thank you for joining us today for Ryan Specialty Holdings Second Quarter 2025 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'd now like to turn the call over to the Founder and Executive Chairman of Ryan Specialty, Pat Ryan.

Good afternoon. Thank you for joining us to discuss our second 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 Head of Investor Relations, Nick Mezick. Our second quarter was solid and demonstrates the resiliency of our platform, particularly when considering the property headwind. For the quarter, we grew total revenue of 23%, driven by organic revenue growth of 7.1% and M&A, which added 13 percentage points to the top line. Adjusted EBITDAC grew 24.5% to $308 million. Adjusted EBITDAC margin expanded 50 basis points to 36.1%, and adjusted earnings per share grew 13.8% to $0.66. Although organic revenue growth fall short of our expectations, I'm pleased with our results, which reflect our continued ability to navigate through this rapidly evolving insurance market and complex macro environment. This is a testament to the depth and breadth of our team and the diversity of our products and lines of business. Across the firm, we generated solid new business and high renewal retention. We continue to deliver for our clients in a very firm casualty market and had strong casualty growth across all three of our specialties. We have long said that we capture broad tailwinds and especially in E&S market, while also capitalizing on specific areas of accelerated growth as they arise. This is evident across many products and lines of business, notably high-hazard casualty as well as transportation. We experienced headwinds from a significant decline in property pricing and the bleed-in of uncertainty from the trade war and other macro factors impacting construction. As discussed last quarter, the second quarter is our largest property quarter, and the second quarter of 2024 was the last very strong quarter for property before rates began to decline, which set us up for our most challenging year-over-year comparison. We had excellent contributions to our top line from recent acquisitions. In the quarter, we closed on both USQRisk and 360° Underwriting. And earlier this month, closed on JM Wilson, a Binding Authority firm noted for its expertise in transportation. We are very excited to welcome these new teammates into the Ryan Specialty family. Our robust M&A activity over the past 2 years and since our founding continues to advance our long-term strategy through significantly expanding our total addressable market, adding expertise, augmenting our capabilities to serve our clients across market segments and broadening our international footprint. And by adding many new programs and unique MGUs, providing us with greater advantages to extend our lead in delegated underwriting authority now and over the long term. We continue to make investments in key talent and new initiatives that will drive strong growth in the near, medium and long term. These investments will significantly boost our unmatched capabilities to generate new business, organic growth and margin benefits for Ryan Specialty in 2026 and beyond. We've also further expanded our strategic alliance with Nationwide Mutual, and I'm very excited about two specific areas. Yesterday, Nationwide announced a deal to acquire the reinsurance renewal rights from Markel. Ryan Re, our reinsurance underwriting MGU and Nationwide's exclusive reinsurance underwriter will have delegated authority to underwrite this book of business. Ryan Re will be getting a diversified portfolio with complementary lines and new relationships. Second, through our Ryan Alternative Risk, we are creating innovative solutions to help solve complex risks for our clients. These initiatives are a testament to our ability to cultivate deep strategic relationships with leading insurance institutions that Jeremiah will speak to shortly. As we look forward, we are confident in our ability to innovate, invest and continue to strengthen and diversify our offerings within the specialty insurance market. Our relentless efforts to navigate both near-term challenges and a very firm casualty market, all while investing in areas of accelerating growth and making thoughtful acquisitions, we have a strong conviction that we will continue delivering annual double-digit organic growth and leading in the specialty lines insurance sector. As the coach of this terrific team, I'm incredibly proud of our ability to mitigate the impact of the dramatic swing in property pricing in Q2 with significant new business production. We continue to be unwavering in our dedication to clients and trading partners. I'm pleased to turn the call over to our Chief Executive Officer, Tim Turner. Tim?

Thank you very much, Pat. Ryan Specialty had a solid second quarter. I was pleased with how our team executed, especially considering some headwinds. Despite these pressures, we remain hyper-focused on successfully executing what we can control. The combination of strong secular growth trends and Ryan Specialty specific growth drivers will propel us forward. These include our specialized intellectual capital, unique trading relationships at scale, and an ability to innovate, evolve and stay ahead of the market, including the two significant new business opportunities that Pat mentioned. This all drives our strong conviction that we have a tremendous runway for continued growth for years to come. We remain relentless in our goal to yet again deliver double-digit organic growth for the full year and are well positioned for the long term. Now diving into our specialties. Our Wholesale Brokerage specialty had a solid quarter. In property, we executed well in a very challenging environment, and I am proud of our results. We saw a rapid decline in property pricing as the quarter progressed, especially in the month of June. We expect this significantly soft pricing environment to continue at least in the near term, which drives our expectation for property to decline modestly for the full year. Despite this rapid decline in property insurance pricing, flow into the channel remains strong. And we took share, won head-to-head against our competitors and had another quarter of high renewal retention. This is a testament to our tenacious and ultra-competitive RT brokerage team. We know how to navigate adversity in the marketplace, find new opportunities to grow and expand our market share, and importantly, find ways to win. It's in our DNA. Long term, our outlook is more optimistic. This year marks the sixth consecutive year with over $100 billion in insured losses from catastrophes, specifically from severe convective storms, floods and wildfires. And there are still 5 months remaining. Assuming an average wind season, 2025 will end up being a significant loss year and has the potential to make the current property pricing declines short term in nature, which demonstrates just how sensitive the property market is to large loss events. We believe that elevated and higher frequency catastrophe losses, a rise in secondary perils and increased populations in cat-affected areas supports the long-term durability of and the need for E&S property solutions. With our deep capabilities, we will continue to deliver value for our trading partners and offer solutions to the most complex issues our clients face, irrespective of the market cycle. We continue to expect property to be an important contributor to our growth over the long term. Our casualty practice had another great quarter with excellent new business and high renewal retention. We saw strength in a number of areas, most notably transportation, habitational risks, public entities, sports and entertainment, health care, social and human services, and consumer product liability. Our professional lines brokers have been resilient and resourceful in identifying new opportunities, and were a contributor to growth this quarter despite continued pricing pressure in many lines. More broadly in casualty, loss trends driven by both economic and severe social inflation are causing carriers to increase rates, pull back appetite and in some cases, exit markets completely. Risks in each of these classes and many others are continuing to move into the specialty and E&S markets. We see the E&S market responding in a disciplined manner with carriers tightening distribution lines, re-underwriting, changing appetite, raising prices and focusing on limit management. We believe the need for the specialized industry and product level expertise that Ryan Specialty offers has never been greater, and our value proposition has never been stronger. With difficult loss trends likely to continue, we see a long runway for sustained casualty pricing. We remain confident that casualty will be a strong driver of our growth moving forward and believe we will remain 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 and Binding Authority remains a long-term growth opportunity, and we are well positioned to serve our clients as this trend persists. Our Underwriting Management specialty had a solid quarter with excellent results in casualty, which helped mitigate pressure across the property and construction segment. We also had meaningful contributions from recent acquisitions, which added over 55 percentage points of growth to the top line of this specialty. Over the last few years, we've added multiple specialty MGUs and programs that we feel privileged to have added to the Ryan Specialty family. They have brought to us unique product sets, technology advantages like efficient online distribution and expanded our geographic presence. These firms have also added critical capabilities, meaningfully increased our footprint across all market segments and bolstered the number of products we're able to distribute through our wholesale broker, RT Specialty. Our recent cohort of acquisitions continues to perform well, adding value to our efforts and materially contributing toward our long-term delegated authority strategy. Stepping back, our skill and discipline to manage these businesses through the insurance cycle bolsters our ability to deliver consistently profitable underwriting results, growth and scale over the long term. We remain well positioned to capitalize on both organic and inorganic delegated authority growth opportunities. Turning to price and flow. We have repeatedly noted that in any cycle, as certain lines are perceived to reach pricing adequacy, admitted markets tend to step back in on certain placements. However, this is still not playing out in any meaningful way, and the standard market has not meaningfully impacted rate or flow in the aggregate. As we've said since our IPO, we continue to expect the flow of business into the specialty and E&S market to be a significant driver of Ryan Specialty's growth over the long term, more so than rate. This was demonstrated in Q2 as the flow of business into the E&S channel remains strong across all lines, and we benefited from that flow and posted meaningful growth despite significant property pricing declines. Turning to M&A. We are pleased to close three acquisitions over the past few months. We expect USQRisk to be a significant contributor to our Alternative Risk offerings for property, casualty and transportation. 360° Underwriting, an Irish MGU, specializing in commercial construction further expands our international footprint. And on July 1, we completed the acquisition of JM Wilson, which is an excellent addition to our Binding Authority and transportation offering. With $19 million of annual revenue, JM Wilson adds high-quality talent in the Midwest, with expertise across transportation and adds to our long-term goal to become the national leader in Binding Authority. Further on the M&A front, our pipeline continues to be robust, including both tuck-ins and large deals. That said, we will only move forward when all of our criteria for M&A are met: a strong cultural fit, strategic and accretive. To sum up, it was a solid quarter for Ryan Specialty, and I am proud of how our team executed and the results we delivered. I am confident we will navigate these headwinds. The team remains resolute in our long-term outlook and our overall value proposition. We are deepening and earning the trust and respect of our clients every day, making us a highly valued trading partner for their specialty insurance needs. Quite simply, our scale, scope and intellectual capital has been thoughtfully crafted over 15 years, and is the foundation of our ability to continue winning and expanding our market share over time. We also will continue to be a destination of choice for the best talent in the industry, driven by our winning and empowering culture and nonstop focus on innovation. All of this makes our platform exceedingly difficult to replicate. And as we head into the latter half of 2025, you should expect us to further invest in our platform to widen our long-term competitive advantages that continue to clearly set us apart from the specialty industry. With that, I will now turn the call over to Jeremiah. Thank you.

Thank you, Tim. We remain on our front foot in terms of being a growth-minded business, thoughtfully balancing investments for growth and margin expansion. As a demonstration of our ability to be a new business machine, I'm excited to discuss two new initiatives that will help us sustain exceptional organic growth and will be margin accretive starting in 2026. First, we are in the process of renewing our strategic alliance with Nationwide for a fresh 10-year commitment and a significant expansion of our already robust relationship. As Pat mentioned, Ryan Re will be Nationwide's exclusive reinsurance MGU in their reinsurance renewal rights deal with Markel. We are significantly ramping up talent investments to take advantage of this unique opportunity. While this investment in talent will temporarily impact margins in the second half of 2025, we expect a benefit to margins during Q1 and Q2 of 2026, align with the revenue seasonality of this business. It is also worth noting that our deep relationships with Nationwide and Markel were instrumental in facilitating this unique transaction. And as a result, we are expanding our highly strategic trading relationship with Markel as well. Second, we are making significant progress in our Ryan Alternative Risk business, building on our prior acquisition of Keystone and the recent acquisition of USQRisk. We have been making a major investment in top-tier talent and intellectual capital across different verticals to help develop and distribute these innovative products. Based on our strategic alliance with Nationwide, we expect to create a suite of innovative solutions and generate considerable new business over the medium term. These two distinct initiatives serve as clear examples of how our strong relationships with top-tier trading partners create unique opportunities for Ryan Specialty. We are confident that similar opportunities will continue to arise in the future. These initiatives are also great examples of how investing in the near term positions us to generate significant new business, organic growth and margin benefits as we progress through 2026 and beyond. The ongoing secular growth drivers in the industry and our specific strategies that Tim mentioned, illustrated in part by these two initiatives, give us high conviction in delivering meaningful growth in 2026 and for the foreseeable future. With that, I'll now turn the call over to our Chief Financial Officer, Janice Hamilton, who will give you more details on our financial results. Janice?

Thanks, Jeremiah. In Q2, total revenue grew 23% period-over-period to $855 million. Growth was fueled by organic revenue growth of 7.1%, substantial contributions from M&A, which added 13 percentage points to our top line and contingent commissions across all three specialties as we continue to deliver strong underwriting profits for our carrier trading partners. Adjusted EBITDAC grew 24.5% to $308 million. Adjusted EBITDAC margin expanded 50 basis points to 36.1%, driven by another quarter of strong revenue growth, including recent acquisitions. Adjusted earnings per share grew 13.8% to $0.66. Our adjusted effective tax rate was 26% for the quarter. Based on the current environment, we expect a similar tax rate for the remainder of 2025. Turning to capital allocation. M&A remains our top priority now and for the foreseeable future. We ended the quarter at 3.5x total net leverage on a credit basis, and we remain willing to temporarily go above our comfort corridor for M&A that meets our criteria. Our strong free cash flow and the strength of our balance sheet provide flexibility to continue executing on strategic M&A opportunities. Based on the current interest rate environment, we expect to record GAAP interest expense, which is net of interest income on our operating funds of approximately $223 million in 2025, with $57 million to be expensed in the third quarter. Turning to guidance. For the full year 2025, we are now guiding to organic revenue growth of 9% to 11%. Given the recent significant decline in property pricing, we see this trend continuing at least in the near term. This drives our expectation that our property book will decline modestly for the full year. As Tim discussed, there is the potential for these property pricing declines to be short term in nature, but this is not reflected in our guidance. Our revised guidance also assumes overall macro uncertainty, continued effects of elevated borrowing costs, and ongoing trade war and tariffs continuing to have a near-term impact on construction. Looking at the second half, we expect Q3 organic revenue growth to be higher than Q2 and Q4 as these quarters are heavily weighted towards property. While our revised guidance reflects our current assessment of market conditions, as Tim mentioned, we remain relentless in our goal to yet again hit double-digit organic growth for the full year. We are also now guiding to adjusted EBITDAC margins of 32.5% to 33%. In addition to our lower expectations for property, which are partially offset by our variable compensation base, our revised guidance includes the impact of investments, particularly in heavy staffing of exceptional talent to ramp up the Ryan Re and alternative risk initiatives. As Jeremiah noted, we expect these investments will generate significant new business, organic growth and margin benefits in the near, medium and long term. Looking beyond 2025, we remain on track to hit our 35% margin target in 2027. With our differentiated business model focused on growth markets, our ability to provide innovative solutions to clients and empowering and entrepreneurial culture, unique relationships, scale and scope, we remain 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?

[Operator Instructions] Our first question will come from Elyse Greenspan from Wells Fargo.

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

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

And Elyse, I would just add that our property submission flow remains very strong. Our retention levels are high. But the month of June, the rate deceleration accelerated. Last quarter, we saw a 10% to 20% reductions on average. This quarter, 20% to 30%. So June really accelerated. We're continuing to win head-to-head in the field. We're producing lots of new opportunities. We believe that these rate depressions are temporary. When things will turn around? We don't know, but we know from history that there is a cycle to this. So we're optimistic. As you know, we've offset these headwinds with very strong casualty performance and numbers and professional liability has come back very strong, double-digit growth in all of the professional liability lines. So all in all, we're very proud of the results. We overcame this drastic reduction in pricing in property, and we're optimistic for the second half.

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

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

And then one last one. Is it fair to assume where you end the year that the improvement from '25 to '27 would be evenly split between '26 and '27? Or is there anything we need to be aware of between the 2 years?

Yes. I think Elyse, at this point, it would be too early to comment on whether or not that would be even linear, et cetera. We'll obviously be coming back to you in probably relatively short order at the end of the year on 2026 guidance. So you'll have a better idea at that point, but we certainly always work through the balance of investing in talent and technology for future growth. So keep that in mind. But at this point, not willing to comment on whether that will be evenly spread. But we are still committed to the 35% margin target in 2027.

Our next question comes from Andrew Kligerman from TD Cowen. Okay. In the meantime, we'll move forward to Alex Scott from Barclays.

I first wanted to start on the construction and the lower projects that you've seen. And I was interested if you've seen any changes in those trends recently. I mean, I guess, particularly in July as the economy has felt like it's on a little more firm footing. Have you seen any relief in that? Are you seeing that starting to pick up at all?

It's remained fairly constant in terms of it's been a slowdown. So we're quoting a lot. We're getting a lot of opportunities in projects, infrastructure projects, residential construction projects. And just Main Street construction business has been very steady and strong. However, the binding periods have been prolonged and the period of time from quote to bind has been extended. So interest rates affecting that, obviously. But again, our flow is as strong as it's ever been, and we expect there to be some change here in the second half, and we think the binding will pick up. But I'd like to remind everyone that a big part of our construction practice group are renewable policies. These are general contractors, subcontractors, annual renewable policies, and that part of construction remains very strong.

That's helpful. My second question, I wanted to see if you could provide any more color around potential revenue benefits from the Nationwide mandate that you got. You provided some commentary on the expense piece of it, but -- and we can do our own math using their premiums and so forth. But I just was interested if you could help us out with that at all.

Are you referring to the Markel?

Yes, exactly.

Yes. Well, we were very pleased to be appointed by Nationwide Mutual as they are completing this transaction with Markel. We have built a very, very effective delegated authority MGU for reinsurance underwriting with our talented team at Ryan Re. And they've done a fantastic job putting Nationwide Mutual into a major position of underwriting property and casualty reinsurance, significant growth, good margins on both sides for Nationwide and for Ryan Re. And so when Markel decided to focus more narrowly on direct underwriting of insurance and sell their reinsurance book, we were pleased that we were able to get together with them because we have a very strong relationship with Markel as well. And so the combination of the appeal of Nationwide and our team to Markel who essentially were not -- didn't have the scale that they really felt they needed to have to continue in the business. And so it's a great opportunity for Nationwide and a very strong opportunity for ourselves.

And in terms of sizing the revenue component to that, we're not going to be able to comment on that specifically at this time. But the thing to keep in mind, as Pat said, this is a renewal rights deal. So there is always an attrition component to that to be considered. Obviously, you'll have to make your own assumptions about the commission rate, but just consider that Ryan Re and Nationwide have market rates from that perspective. And then for seasonality, Jeremiah mentioned just that the cost would be heavier in the back half of this year. The margin impact would be heavier in the back half of this year, assuming that the seasonality is more heavily weighted towards the first half of every calendar year. And I think that there's probably publicly available financial information out there that can help try to validate that. But obviously, that's dependent on the book of business that is renewed.

We'll now go back to the line of Andrew Kligerman from TD Cowen.

Just a quick follow-up. Actually, a couple of follow-ups. The Nationwide transaction, I had listened to the Markel call this morning. And in reinsurance, they were doing about $1.2 billion in premium. And I guess I know you don't want to answer how much volume you could do, but do you feel confident that you could renew a lot of that?

Yes. We have a tremendous underwriting team that Nationwide is really pleased with, as you can tell. And we have produced very strong underwriting results for Nationwide. And as you know, from that call, Markel, they were subscale in their minds and felt that it was appropriate to focus more narrowly. But a great talented team that's coming over with this, and that's very important to us that we have this talented team joining our very talented team. And so our talented team is really very confident as is Nationwide, that they will grow this book that renews and that they will improve the underwriting results from the book. So this is a win-win for all parties, including the ceding companies, the Markel.

Sounds very exciting. And then you also mentioned that you're going to expand the relationship with Markel, which is a massive E&S writer. Any color that you can share on that?

Well, we've had a very strong relationship with Markel over the 15 years that we've been doing business. And as they indicated in that call, they're going to be focusing on specialty lines, principally in the E&S market, and we have this very strong binding relationship with them. Tim, why don't you pick up on that?

Sure. Markel has been a tremendous trading partner of ours for a very long time, just very, very focused on E&S in North America. Great success, as Pat said, in binding. But in just Main Street property and casualty business, year in, year out, very, very consistent partner and great relationships from top to bottom in the organization. So this was a home run with a super partner.

Yes, definitely sounds like it. And maybe just shifting to your comments earlier. I think when Tim, you said in June, it shifted down a lot, and then you followed up by saying rates are going down by 20% to 30%. So your model in the guidance assumes that for the balance of the year, property rates are down 20% to 30% year-over-year. Is that -- did I understand that right?

Yes. Andrew, you got that right. So we're assuming the same conditions that we saw at the end of June continue to play out through the end of the year. Tim also mentioned that just given what we've seen over $100 billion in insured losses this year and in the situation where there's an average wind season and rates start to turn around, that's obviously going to be upside for us. But at this point, we have no visibility into that turning around. And therefore, we are continuing to include that within our expectation for the guide range and is the single most significant reason for bringing the guide range down this quarter.

Got it. And then just last one quick one. General and admin expense ratio at 10.9% versus 9.2% year-over-year. I know you were -- you talked a bit about expense ratio picking up, especially with this Nationwide transaction. But any color on why the big jump up in the year-over-year?

Yes, Andrew, I've talked about this a little bit last quarter, and I think perhaps there's just some further clarification needed around the adjusted comp and benefits ratio and adjusted G&A ratios. We're expecting the annualization benefits from U.S. Assure to come through along with accelerated 2025 savings to really be benefiting our adjusted comp and benefits ratio. The offset to that from an adjusted G&A perspective is a lot of the investments that we're making in talent and AI are items that we would expect to see more in the G&A ratio. So I think it's more just a balance of where those savings are starting to flow through that you're seeing the difference year-over-year as opposed to anything other than the investment in the platform in G&A.

Our next question will come from Meyer Shields from KBW.

Great. I hope I'm coming through. Tim, I was hoping you could talk more broadly about whether there's a risk that the same way property softened a lot faster than a lot of experts expected. Is there a similar risk of unexpected softening maybe on casualty lines that are hardening now?

Meyer, I don't believe so. There are so many different attributes to the long-tail high hazard casualty book that we look at and see every day loss cost adjustment factors accelerating, combined ratios continue to be challenging. And again, this is in a very narrow segment of the commercial market, high hazard long-tail casualty business. We see more firming in niches like transportation, certain consumer product liability, habitational doing a lot of damage to the balance sheets of many insurance companies. And other niche firming phenomenons continue to drive the business into the channel with no sign of any of that business going back into the admitted market. So we're very, very bullish on casualty business, including certain lines of professional liability.

Okay. That's very helpful. And I don't know if this is a silver lining, but when we talk about the revenue pressure associated with the property rate decreases, does that provide more property-focused MGA acquisition opportunities?

Meyer, we have the benefit of Velocity dramatically rounding out our portfolio last year. So that's been part of our success in light of the rate pressure is our ability to provide a full portfolio of solutions across the value chain to E&S wholesalers has increased the number of at bats. So with Velocity under our ownership, we've actually been able to increase their capital under management. We've been able to increase their distribution through access to incremental RT wholesalers. And so the reality is we are always on the lookout. We maintain an active M&A dialogue, but the product set is complete at this stage, and it's more likely that as you've seen in past cycles, we've seen a flight to quality of carriers looking to contribute their capital to our management. So staffing and capital is just as likely as M&A and property.

Our next question will come from Mike

Great. Going back to the property discussion. So this rapid rate of decline, which you're seeing, and I'm assuming it's not obviously the entire portfolio, but in a big chunk of the portfolio causing organic for property, the outlook to be negative for the year. I think we understand that. I guess just if we -- Tim, to your point about the property market is just inherently volatile. If this is not "normal" wind season that rates could change materially. But I guess I just want to think through in our world, we have to think "normal." So given the pace of decline, if we think out past '25 into '26, '27, should we now be assuming that the base is lower, right? So for example, you might have a view that property over long periods of time increases goes back to plus -- I'm making it up plus 10%, but should we only grade up property slowly? Just is that the right thought when we're thinking about kind of outer year baselines for property organic growth for Ryan?

Well, I'll start, Mike, and let my colleagues jump in. What we're really looking at is a multi-peril approach to cat property. So it's not just about wind, it's obviously lots of flood losses, convective storm losses, wildfire losses in the state of Oregon, lots of new loss activity out there. We're just starting the wind season. We just don't believe this is going to be a long-term challenge here. We had a tough comp quarter to overcome. We had headwinds. But the silver lining here is that we won a lot frequently head-to-head competition. Our submission flow continues to be strong. So the business isn't moving back into the standard market. It's our renewal rates and even new business that we're writing are getting these 20%, 30% rate reductions. Do we think that will continue? We don't. You hear experts all the time in these earnings calls the last week or 2, CEOs of big insurance companies saying, they think they've hit rock bottom on the rates. So I do believe it will subside, and I do believe it will go the other direction here in the foreseeable future.

But to be clear, that's not reflected in our guidance.

Yes. That's the outlook.

Understood. Switching to the inorganic component. Revenues, it looked like they were better than expected -- total revenue, sorry. We'll definitely put pen to paper on the exciting Nationwide deal. From a utilization of future free cash flow perspective, is the pipeline continue to be strong and you would potentially be able to use all free cash flow and new debt on top of new EBITDA? Or just kind of want to get your views on the M&A environment maybe -- and I think we probably have to take into account the Nationwide deal, too, for cash usage potentially.

Yes. Thanks. I'm just going to give a quick update, and then I think Pat wants to comment on the pipeline a little bit. And I just want to go back on Nationwide for a second because I know Andrew asked the question about how much we think that we can renew. And I think there is certainly the conviction that we will be reviewing the portfolio. We'll be working with the new talent to assess the elements of the portfolio that need to be renewed, working with Nationwide on that risk appetite. So I think it's too early to put a number on it, but certainly something that we'll be working towards over the coming months. And as Jeremiah said, it's going to be accretive to us starting in the beginning of 2026. Just taking a step back in terms of the pipeline from an M&A perspective. I think just based on where our leverage is at 3.5x, I've said before, we would have expected to basically delever about a full turn from where we were at our high watermark previously. That's probably down to about 0.8 of a turn just based on the recent acquisitions that we've done, but we still feel like we have ample capacity to do the M&A that we have in our pipeline, and I know Pat would like to talk more about that.

Yes. So the M&A pipeline is robust. There's a lot of activity. We've looked at a lot of opportunities. We have a good, as I said, strong pipeline, which includes both tuck-ins and large deals. That's focusing in on bringing in top talent and acquisitions that we've been making, we've got some fantastic new talent. And as we say, M&A is next year's organic growth in the following years. And so with this robust pipeline and the recent deals that we've completed are performing at very high levels. Meyer has referenced Velocity. But we've had great success of blending, attracting this talent, integrating them into our system and into our teams and increasing their productivity. So we are going to continue to be prudent in our leveraging, but we are a destination of choice in the majority of cases that we've done, and we expect that to continue. I think we're a destination of choice, we believe, in terms of the combination of Nationwide and Ryan especially for Markel. So we keep that in mind as we're looking at M&A opportunities. There are people who want to join us. There are people who want to bring their businesses to ours. And so we're very optimistic about the future on M&A. And as we've talked about, a lot of these levers we've been pulling to build organic growth that are in the short term here hitting some decline because of missed expectations because of rate decline. But the growth in the business itself, we believe, is really quite strong. And that's because we've done some very good M&A activity and attracted a lot of really good talent. And so we've been bringing talent in for our Alternative Risk. We're bringing talent in for reinsurance. We're very pleased with this team we're getting from Markel. So we got a big chunk of pretty top professionals from Markel Re. So we just keep building on the quality of our talent and building on the opportunity to serve our clients ever more appropriately and effectively.

Our next question will come from Robert Cox from Goldman Sachs.

I just wanted to go back to casualty. Curious how the growth in casualty in the second quarter compared to the growth in casualty in the first quarter? And are you embedding a change in expectations there in the guidance? Or is it all property?

Yes. So casualty was a strong contributor to our growth in both the first and second quarters, and we are continuing to expect that into the second half of the year.

Yes, there's no letup at all in the major casualty lines. And in fact, we see more niche firming phenomenons. I mentioned a few earlier, Rob, but I didn't mention energy, public entity and municipalities. Certain consumer product liability continues to create a lot of loss dynamics and heavier flow there. So we're very, very bullish that we can continue to grow our casualty book, especially in these high hazard areas. So we're excited about it.

That's helpful. And then I just had a follow-up on some of the recent acquisitions you've done. I think some of these bigger MGA acquisitions are rolling into organic growth over the next 3 quarters or so like U.S. Assure. Could you give us a sense generally on your organic growth outlook on those acquisitions relative to the overall firm?

Yes. Rob, I appreciate the question. So U.S. Assure, you are correct. It does roll into the end of Q3. Janice did highlight it. There are some realities to tackle. So the higher building costs, less available labor, sustained higher borrowing costs have all created headwinds in construction starts. Every time there's macroeconomic uncertainty or trade war, the builders are ultimately repricing these projects, in many cases, revisiting financing. And the outcome, as Tim touched on, is increased time between quoting and inception of coverage. But I want to emphasize that the U.S. Assure as well as our other builders' risk practice have tremendous open quoted pipelines. Some of the largest we've seen, and we do expect to see it bind as the year goes on. Close rates would certainly accelerate in a lower interest rate environment. But most importantly, Rob, I want to emphasize that our core investment thesis for expanding these assets remains intact. There's been a recent study that there's as much as 8 million to 9 million shortfall of available housing units within the U.S. that needs to be addressed in the coming years. So we believe in the asset when we bought it, and we believe in its outlook to contribute to the coming quarter.

[Operator Instructions] We'll now go to Josh Shanker from Bank of America.

I really appreciate you indulging everybody. I have another Ryan Re question. More or less, I just want to give you an opportunity to tell the story a little bit. What capabilities does Ryan Re have? This is always an industry that seems to be dominated by three participants and everyone else is treated an also-ran. Are there capabilities that they have that you don't have? Is Ryan Re a real competitor? I mean this is obviously a large, large deal. So the answer is yes. Can you talk a little bit about what you can do at Ryan Re compared to the big 3?

Could you repeat the company that you're comparing it to?

Aon Re, Guy Carpenter and...

Okay. Well, they're -- we do business with them. Ryan Re does business with them.

I don't want you to disparage your competitors. I want you to talk about the capability. Are there things that...

Excuse me, they're not competitors, they bring us business. They are not competitors. We do not -- we're not a reinsurance broker, we're reinsurance...

Okay. There's no broking capabilities you have within the Ryan Re?

No. We're an underwriter.

Purely underwriter?

They love -- they bring us business.

So Nationwide is the capacity for Ryan Re, and Ryan Re is reinsurance. And the added -- I mean, I think maybe the heart of your question, though, the added capabilities through the acquired book of business and the talent coming along with it does increase the specialty footprint of the portfolio.

It increases the scale, increases the geography, increases the talent, it increases the scope, it increases everything, and we expect that's going to be a very important contribution to our future. But I want to be clear, I don't think we were. We are not a reinsurance broker, we hire them. They bring us business. They're our production force. Gallagher is a very good producer for us. Aon Re is a good producer for us. Guy Carpenter is a big producer for us. They love us.

And our next question will come from Katie Sakys from Autonomous.

I just wanted to circle back to the discussion of the organic guidance this year. And I apologize if I'm sort of beating a dead horse here, but you guys do discuss remaining relentless in your goal to deliver a double-digit organic growth result this year. It seems like there's a scenario where you're more in the high single-digit range. And assuming that your current view on property pricing continuing to decrease into the end of the year brings organic to the midpoint of the 9% to 11% range. How do you kind of view the pushes and pulls from the 9% to the 11%? Or what might ultimately take you down to the lower end of that range this year?

Thanks, Katie. Well, I think we've talked about, obviously, what the property expectations are and bringing us down. Tim has commented on the strength in casualty, and we're really focused on capitalizing the specific areas of growth that continue to accelerate, high hazard casualty and transportation specifically. And I think that there are a number of ways that we have proven that we are continuing to navigate these headwinds. We're at 9.6% organic growth for the year-to-date. And in this context, 9% to 11% would be a fantastic year when our business could be down -- 1/3 of our business could be down modestly. But we have a number of different initiatives. We have strong business growth across a number of different business lines. And on balance, we feel good about our goal in continuing to hit that double-digit organic growth.

One of the other points that we should add is that we are balancing our business by bringing in more capital for our clients with Alternative Risk building that nicely, and that's adding incrementally to growth. The scale is escalating nicely. And we keep pulling levers to enhance our organic growth. We're very proud of the fact that we've been double-digit organic growth for all of our public life and most of our life before going public. We take this very seriously. And we are constantly looking for ways to increase our productivity and fight the headwinds that we get from price declines. And so what we've been talking about, and we've lowered the guidance just because the market is -- as Janice has very well said, the market has been rapidly deescalating prices on 1/3 of our business. And so we feel really good that we're hovering at double digit in spite of all of that pressure. And so believe that we are working every possible lever pulling it and stimulating our productivity and our underwriters and our brokers to end this year at double-digit organic growth.

I do appreciate the color there. Perhaps as a follow-up and a completely different line of questioning, we've heard rather emphatic and pointed discussions from some carriers over the last couple of weeks describing in their words, a misalignment of incentives in the MGA model.

Katie, you're cutting out a little bit. I don't know if you can try to start over again or see if you can get a better signal.

My apologies. Are you able to hear me?

Yes. We didn't quite understand the question, Katie. Could you repeat it?

Yes. We've heard some pretty emphatic discussions from carriers over the last couple of weeks regarding what they describe as a misalignment of incentives in the MGA model. What do you make of that? And how might you respond to those characterizations?

Well, that's probably true in some of them and certainly not true at all with us. We are aligned with our capital providers. We have very strong relationships with our capital providers and our alignment, we value very highly. And I think even the people who complain about MGAs say that's not across the board, and they're referring to us because they know that we're aligned. That's why capital providers are standing at the door, trying to get more of our business. And that's evolved over 15 years to a point now where we have the top capital providers all around the world, different regions of the world, and people who would not give us their pen in the past are now doing that. So we're very proud of our alignment. What others do is not our business.

We'd emphasize that we've made the investment in the platform over the last 10 to 15 years, the top decile talent in the front office, the robust infrastructure around it of actuarial. And the outcome has been a control and governance platform that can help curtail growth when needed. At our scale, we have the comfort to shut off lines when needed, slow growth in lines. Because as Pat referenced, at any given point, we have enough new opportunities in the pipeline that we are -- to continue this kind of double-digit structural growth going forward. But we've made the investment. Carriers are coming to us for access to niche solutions, diversification of their core business, improved cost efficiency, increased speed to market. And on top of that, our underwriting results to date are highly differentiated from the rest of the marketplace, both MGUs and insurance carriers alike. So we think it's a durable advantage to our carrier clients that's going to persist.

Thank you, Katie. And if that concludes the questions, then that's all we have for today. So I'll hand back to management for closing remarks. Thank you.