RYAN - NYSE

Good afternoon, and thank you for joining us today for Ryan Specialty Holdings Fourth 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 like to turn the call over to the Founder and Executive Chairman of Ryan Specialty, Pat Ryan.

Good afternoon, and thank you for joining us to discuss our fourth quarter results. With me on today's call is our CEO, Tim Turner; our CFO, Janice Hamilton; our CEO of Underwriting Managers, Miles Wuller; and our Head of Investor Relations, Nick Mezick. In many ways, 2025 was a strong year for Ryan Specialty, particularly considering the significant headwinds the industry faced. Our results are a testament to our team's ability to outperform in a challenging environment. Our conviction in putting our clients first, our unwavering focus on specialized expertise, commitment to attracting and retaining top talent, and dedication and excellence in everything we do. For the quarter, we delivered organic growth of 6.6%. I'm pleased with our performance especially taking into account the volatile property market conditions, increased competition and select casualty lines and continued delays in certain project-based business, all of which Tim will provide more color on shortly. For the full year, we surpassed revenues of $3 billion, up 21% year-over-year, driven by organic growth of 10.1%, on top of 12.8% in 2024, and significant contributions from our M&A strategy. We marked the seventh consecutive year of growing the top line by 20% or more and our 15th consecutive year of double-digit organic revenue growth. Adjusted EBITDAC grew 19.2% to $967 million. Adjusted EBITDAC margin was 31.7% compared to 32.2% in the prior year. Adjusted earnings per share grew 9.5% to $1.96. We completed 5 acquisitions with trailing revenue of over $125 million. I'd like to make a few comments on the overall market. Having lived through multiple of insurance pricing cycles, I've seen hard markets come and go. What distinguishes this cycle is simple. It was harder for longer on the way up and much faster on the way down, particularly as it relates to the property. Throughout my career, I've never witnessed market sentiment shifted this rapidly. We are currently operating one of the most volatile and reactive insurance markets, I've seen across my more than 60 years in the industry. Throughout this time, I've learned that volatility and market cycles is inevitable. And what sets us apart that's rooted in the very vision this company was founded on, brick by brick. We carefully constructed an intentionally diversified platform to deliver innovative solutions to brokers, agents and insurance carriers. To deliver for our clients and shareholders, when the times get tough, regardless of the market cycle. We didn't build Ryan Specialty for the easy years. People do for years like this, the power through transitioning markets. Diversified specialties, diversified products and diversified earnings, all backed by world-class talent, all by design. That's what makes us different. While we could not predict the precise timing or magnitude of this turn in the pricing cycle, we have long understood that the pricing cycle would eventually move from a tailwind to a headwind. From the very beginning, we made a deliberate decision to build more than a wholesale broker. We invested heavily in delegated authority, including both binding authority, and underwriting management. The benefits of this strategy are clear, deepened specialty presence and enhance the ability to bring products to market quickly, improve geographic balance through our international expansion and a significantly expanded total addressable market. Importantly, these strategies have underscored by alignment with our carrier trading partners and enhance the strength of our relationships with the capital providers who support us. Our delegated authority business generates meaningful revenue through contingent commissions, which are directly tied to the underwriting performance we deliver on our carriers' behalf. In softer markets, these contingent commissions act as a natural hedge, thus providing further diversification and balance to our total company earnings. Our numbers tell the story. Over the last 2 years, we've doubled our delegated authority revenue to $1.4 billion, now reflecting 47% of our total. A remarkable rise from $700 million and 35% of our total just 2 years ago. We've invested nearly $2.7 billion towards 12 acquisitions. We have grown a number of products on our platform by 50% to over 300. We've expanded our international presence now with 24 offices, up from just 6 in 2023. And still believe we're in the early innings. We've increased the size and capabilities of our central underwriting team to help support our efforts to deliver underwriting profits, growth and scale. We have dramatically increased the breadth and depth of Ryan Re, our reinsurance MGU. We have established in-house alternative for capital management solutions. We built a benefits division with distinguished capabilities and products, which are largely uncorrelated to the P&C cycle. And we've invested significant resources into all aspects of alternative risk including captive management and structured solutions. The diversification that we've achieved is significant, born out of the needs of the thousands of retail brokers with whom we trade, our enhanced offering has opened the door to additional opportunities across all our specialties and positions us well for a wide range of market outcomes. This evolution is exciting but it also introduces greater complexity to our business. As a result, we are launching Empower, a 3-year restructuring program designed to improve efficiency across the firm, particularly within delegated authority and create headroom for additional investment, despite the success we've achieved in many ways because of it, we are not yet as efficient as we need to be. And Empower is about more than just efficiency. It's about enabling our people to do what they do best, more tools, faster innovation and an even greater ability to deliver for our clients. AI will be a key enabler, allowing all our people to focus less on process and more on deepening client relationships. We're confident that Empower will deliver meaningful benefits for our colleagues, trading partners and shareholders. Tim and Janice will provide more details in their remarks, but we anticipate a cumulative special charge of approximately $160 million through 2028. We expect the program will deliver approximately $80 million of annual savings in 2029. The efficiencies we gained through Empower will enable us to continue making strategic investments in growth, top-tier talent, the novel formations and address the rapidly evolving needs of our clients, allowing us to maintain industry-leading growth in the years to come. We expect these savings will help contribute to our goal of modest margin expansion in most years, while maintaining the flexibility to continue investing in our business. As a result, we believe our industry-leading organic growth and accelerated efficiencies across all of our specialties will lead to enhanced earnings growth. I also want to provide an update on capital allocation. We are pleased to announce that our Board of Directors has authorized a $300 million share repurchase program. The scale of our platform, combined with our robust free cash flow generation gives us increased flexibility to expand how we deploy capital. This decision reflects our view that there's a meaningful dislocation between our current valuation and our confidence in the near and long-term outlook of our business. We remain committed to strategically investing for the long term, organically and inorganically while also opportunistically purchasing our shares when we believe it to be the best use of our capital. The added option of share repurchases is aligned with our goal of enhanced shareholder returns over the near and long term. As a coach of this terrific team, I'm incredibly proud of our ability to deliver exceptional results in a challenging environment. Our performance is a testament to the depth, expertise and determination of our people to provide value for our broker, agent and insurance carrier partners in the face of numerous challenges. All of these efforts will drive significant additional value for our shareholders and ensure we remain the leading specialty insurance services firm in our industry. I'm pleased to turn the call over to our Chief Executive Officer, Tim Turner. Tim?

Thank you very much, Pat. Ryan Specialty delivered our 15th consecutive year of double-digit organic growth, once again, setting the standard for the specialty insurance industry. In a year where there have been significant pressures across the insurance broker landscape, our performance speaks to the resilience and differentiation of our platform. I am incredibly proud of how our team navigated what was, without question, the most challenging property environment, the insurance industry has faced in decades. We capitalized on specific areas of accelerated growth as evidenced across many products and lines of business, most notably in high-hazard casualty and transportation. We launched innovative solutions like Ryan Re's expanded relationship with Nationwide. RAP Re, our first-of-its-kind collateralized sidecar and numerous real-time de novo formations to meet the emerging needs of the market. As you've seen us do repeatedly, when we see an opportunity, we organize and we move at the speed in which our clients and trading partners demand. Turning to our results by specialty. Our wholesale brokerage specialty demonstrated remarkable resilience in 2025, led by our exceptional talent and the continuation of secular trends like panel consolidation. In property, our team executed on behalf of our clients in the face of an exceptionally difficult pricing environment. For the full year, our Property business declined only modestly. The fourth quarter was particularly challenging. We saw a further decline in property pricing as the quarter progressed. It was most notable in the month of December, particularly on certain large accounts where pricing was down 25% to 35%. Additionally, an albeit in pockets, we saw instances of admitted carriers stepping back into certain segments particularly on smaller accounts. Based on this continued softening in pricing, combined with January 1 reinsurance renewals and the widely held view of rate adequacy and property, we expect there could be similar pricing declines in 2026. We are not standing still. Our team of experts are focused on delivering the best solutions to our clients, winning head-to-head against our wholesale broker competitors. And our goal remains clear: return to growth in property as soon as the market allows. That said, we remain optimistic about property beyond the near term. The frequency and severity of cat events, increasing populations in cat-affected areas and continued demand for E&S solutions all support our belief that property will remain an important contributor to our growth over the long term. Meanwhile, our casualty practice had a very strong year. Underlying trends are moving in different directions across lines, but the net result remains favorable for Ryan Specialty. In high hazard lines like transportation, health care, social and human services and habitational, we continue to see significant price increases in many cases, exceeding 10%. Across these difficult lines, we are seeing carriers tightened distribution re-underwrite, change appetites, raise prices and focus on limit management, our professional lines team significantly outperformed the market despite continued pricing pressure aiding our growth for the year as well as social inflation and litigation trends, which continue to support the need for adequate pricing. At the same time, we are seeing a more constructive tone from carriers looking to grow in Casualty, which introduces additional competition beyond what we've been seeing in small commercial and middle market. This is leading to a slight moderation of pricing in certain pockets. Lastly, parts of the large construction industry remain a headwind as project-based business faces continued delays. But we're seeing early signs that activity may pick back up. And given recent interest rate cuts, we're optimistic heading into 2026. Taking these trends together, we're anticipating strong yet moderating casualty growth in 2026. On data centers, we're growing increasingly optimistic as the leading wholesale broker in construction, we are in a great position to assist our clients as they navigate this rapidly evolving risk landscape. But it's not just construction as we bring deep expertise across builders risk, environmental, architect and engineers, and other complementary lines as well as within the energy field, making us a natural partner for these complex placements. With many projects in the planning phases, and demand for insurance capacity only building, we believe we are well positioned to assist our retail broker clients. While these projects can be lumpy, our enthusiasm as well as our pipeline continue to grow. As we've said repeatedly, retail brokers use us when they need us. And here, we're honored to play an important role.

Thanks, Tim. In Q4, total revenue grew 13% period-over-period to $751 million. Growth was comprised of organic revenue growth of 6.6%, contributions from M&A, which added over 5 percentage points to our top line and contingent commissions as we continue to deliver strong underwriting profits for our carrier trading partners. As Tim discussed, the fourth quarter reflected an intensification of the trends we've been navigating throughout the year. Adjusted EBITDAC grew 2.9% to $222 million. Adjusted EBITDAC margin was 29.6% compared to 32.6% in the prior year period. Adjusted diluted earnings per share of $0.45 was comparable period-over-period. Our full year 2025 results reflect the resilience and diversification of our platform. Total revenue grew 21% to over $3 billion, driven by organic revenue growth of 10.1% and strong contributions from M&A, which added 10 percentage points to our top line. Adjusted EBITDAC grew 19.2% to $967 million. Adjusted EBITDAC margin was 31.7% compared to 32.2% in the prior year. As we've discussed throughout the year, our margin was impacted by significant investments, principally in talent, operations and technology. Our talent investment was broad-based. We added key data and AI-focused resources within our central underwriting teams to support our expanded underwriting businesses, integrated strong talent to support Ryan Re and hired top-tier talent within alternative risk. We recruited at scale in wholesale brokerage, which heavily impacted our fourth quarter results. Adjusted EPS grew 9.5% to $1.96 per share. Our adjusted effective tax rate was 26% for both the quarter and the full year. We expect a similar tax rate in 2026. Based on the current interest rate environment and at current debt levels, we expect to record GAAP interest expense net of interest income on our operating funds of approximately $210 million in 2026 with $55 million in the first quarter. We ended the quarter at 3.2x total net leverage on a credit basis. We remain well positioned within our strategic framework and willing to temporarily go above our comfort corridor of 3x to 4x for compelling M&A opportunities that meet our criteria. More broadly on capital allocation, the Board of Directors approved an 8% increase to our regular quarterly dividend for our Class A stockholders now at $0.13 per share. We are pleased to grow our dividend at a modest and sustainable level. Additionally, our Board has authorized Ryan Specialty's first share repurchase program of $300 million. We have consistently demonstrated our ability to manage this business with an unwavering focus on strong free cash flow generation. It's 1 of the many great attributes of our firm and the broader insurance brokerage sector as a whole. Our free cash flow affords us the ability to deploy capital strategically, whether in organic investments, acquisitions, dividends and now opportunistic share repurchases. This repurchase program is a reflection of our confidence in our near- and long-term outlook and an opportunity to create additional value for shareholders. Turning to Project Empower. As Pat and Tim both mentioned, over the last 2 years we've invested nearly $2.7 billion towards 12 acquisitions, significantly diversifying our platform. As you would expect, an expansion of this magnitude has increased the complexity of our business. As a result, we are launching the Empower program, designed to: number one, streamline our broking and underwriting operations by standardizing processes, integrating operating platforms, increasing automation and driving efficiency and product innovation. Two, optimize our scale by eliminating redundancies to fully leverage and further monetize the investments we've made over the last several years. Three, accelerate our data and technology strategies by building a single unified ecosystem that harnesses advanced analytics and AI to improve client outcomes and drive operational excellence. Four, enhance efficiencies across all our specialties, leading to more consistent interactions across our 30,000-plus retail and wholesale broker relationships and deepen interactions with our 180-plus delegated authority carrier relationships. And finally, create headroom for additional investment. We anticipate a cumulative special charge of approximately $160 million through 2028. We expect the program will deliver approximately $80 million of annual savings in 2029. We expect the savings to ramp up over time. We expect these savings will help contribute to our goal of modest margin expansion in most years while maintaining the flexibility to continue investing in our business. Looking forward, we believe our industry-leading organic growth and accelerated efficiencies across all of our specialties will lead to enhanced earnings growth. Turning to guidance. We are guiding to organic revenue growth in the high single digits for 2026. This reflects our current view of market conditions, including continued property pricing pressures, a more moderate pace of casualty growth and broader macroeconomic uncertainty. From a seasonality perspective, we expect Q1 to be our strongest quarter for organic growth, aided by Ryan Re, as Tim mentioned. As a result of business mix changes and external trends, we expect organic growth to fluctuate quarter-to-quarter, but we remain confident in our full year outlook. We believe we will consistently deliver industry-leading organic growth on an annual basis moving forward. For the full year 2026, we are guiding to an adjusted EBITDAC margin of flat to moderately down as compared to the prior year. Embedded in this guide are a few headwinds. Notably, the impact of lower interest rates on fiduciary investment income, stable contingent commissions following an exceptional 2025, and higher health care and benefit costs. More importantly, we are continuing to absorb the significant talent and technology investments we made in the fourth quarter. As we close out 2025, I'm incredibly proud of the results we've delivered, another year of industry-leading growth particularly in the face of a very challenging environment is a testament to the depth, breadth, expertise and determination of our team. Looking ahead to 2026, we are well positioned to further differentiate Ryan Specialty as the destination of choice for the industry's top talent, powered by our commitment to innovation, our empowering culture, and the scale and scope we've built over the last 15 years. 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 with Wells Fargo.

I guess my first question, I just want to spend more time on the organic guide, right? So it sounds like for '26, you guys are expecting that the property price declines will be at the same level as in '25, yet the organic guidance is now high single digits versus right this year where the guide or -- sorry, in '25 where the guide had been double digits. So what's the driver of that just in relation to property as well as just the overall change in the guide for 2026?

Elyse, I'll start this, and then Tim might want to add a little bit more on the property color. As you probably picked up on from our remarks, the fourth quarter really marked an intensification of some of these property pricing trends. We saw particularly in the large accounts, rate decreases to 25% to 35%, which was higher than what we were seeing earlier in the year. We're currently expecting that to continue. We did see some small -- smaller commercial business starting to head back towards the admitted market, but not necessarily in a meaningful way. So I wouldn't necessarily call that out as a significant headwind in any way for 2026, but it's really the continuation of the property pricing declines that we saw intensify within the fourth quarter. On top of that, Tim mentioned the fact that in casualty, there are a number of different pricing conditions that are going in a lot of different directions. All of that, we expect to be favorable to us. But that strong growth that we experienced in 2025, we expect to moderate within 2026. So those are the 2 things that I would call out. We had -- for the fourth quarter of 2025, we also had timing related to some of the construction business. That for us was stronger within the third quarter. We also had a stronger third quarter as it related to transactional liability, all headwinds or potential headwinds that we had called out in the third quarter as we headed into the fourth. But really, the 2 trends that we're looking at for '26 that are continuing is around property and moderating casualty growth. Tim, anything you'd want to add on either of those?

Sure. Elyse. I would just add that, obviously, property is the big headwind here, but we have several niche firming phenomenons going on in casualty and professional liability. So the flow itself up 8% in the stamping offices remains very opportunistic for us. We're capturing a significant amount of new business coming into the channel, and we're winning in head-to-head competition with other wholesale brokers. So we believe there's plenty of new business for us to capture this year, and we continue to look for new innovative ways to broker that business and underwrite it. We can name a few niche firming phenomenon as you can take with you, but sports and entertainment would clearly be one of them, lots of consumer product liability, loss leaders in the reinsurance world, tough casualty risk with latency issues, public entity and municipality business really firming up for us, and social and human services and transportation. So lots of opportunities with increased flow and demand for our services, and we feel really good about '26.

And then my follow-up question. We've seen the broker sector really underperformed this week just on some overall concerns about AI really hitting the group. I would just love to get your views just relative to AI impacts on Ryan and just the brokerage sector at large.

This is Pat. We look at AI as an ally, not as an adversary. Lots of opportunities for us to embrace AI and improve as we mentioned, the tools for our people to serve our clients even more effectively. We also believe that there's going to be some significant efficiencies through AI. We can't quantify them at this time. We're very excited about them. I've had experience over the years or people have always said brokers are going to be disintermediated. What I want to emphasize is that the brokers and we are leading this in the organic growth phenomenon that we have, a timeless value of advice and advocacy, and we're going to get efficiencies but specialty skills that our underwriters and our brokers have in these practice group verticals. They have the trust and relationship with the markets and with the clients in terms of the dynamic changes that are occurring, both in carrier appetite and frankly, in new risks and new ways to design, but also a clear understanding of which are the markets to take those 2. And that appetite changes fairly quickly. So we've got tremendous tailwinds in improving our productivity, improving our speed to market. Speed to market in our space is critical. And we know that when we get a great design product with competitive rates and terms and conditions. And we do that promptly. That accelerates our growth because the brokers are smart, they see the opportunity and they want to serve their clients. So we advocate every day, all day long on behalf of our clients. And so AI is going to help us serve our clients more effectively and faster. So that's how we feel about disintermediation. I've been resisting that term for over 30 years.

Our next question will come from Alex Scott with Barclays.

I had for you is on the app for construction. I know you mentioned there's still a lot of projects that haven't started up yet. But can we think about some of the comparisons when we consider the '25, I think, already began to have maybe a little softness in the growth in construction. As you lap some of that, does it become a little bit easier and less drag as we get into '26? I'm just trying to understand that part of your business and also just thinking through the acquisition you did.

Yes. The construction segment and practice group for us remains very, very strong. Keep in mind that a large percentage of our construction business is renewable. So we write artisan subs, GCs, all the New York construction lines, they're renewable. What you see and what the headwind is all about are these large infrastructure projects, including residential construction projects, there's been a slowdown, not in flow. Our flow is very strong. We believe we're industry-leading. And we're getting them quoted, we're getting them teed up. But the macroeconomic pressure and the interest rates have slowed down the timeline between submit to quote to bind. So these projects are quoted, they're teed up, and the financing is just taking a little bit longer. So you saw a lumpy '25 as a result. We had some unbelievable victories in large construction projects, data centers. And then there was a slowdown. So we're still very bullish on it. We believe it will grow exponentially, and we believe we're the leading intermediary and underwriter in the construction industry in the U.S.

I would just add from an outlook perspective for 2026, just given the continued uncertainty from a macroeconomic perspective, it is still early -- too early to tell effectively how that will play out in '26. So we have a very strong pipeline, but those macroeconomic headwinds and visibility there do give us pause in terms of the timing of when some of these might hit.

Absolutely.

That's helpful. And the share repurchase authorization, can you talk a bit about that and just how you're viewing the M&A environment currently, particularly in light of, I guess, sort of the currency and your own stock valuation and what you're seeing for private equity valuations and how that all plays into capital management.

Well, I want to start off by saying the share repurchase is not in any sense diminish our commitment and enthusiasm for M&A. We're committed to -- that's the #1 priority for our capital allocation. But quite frankly, with the compression of our stock, and we look at the true value as we look at what we're going to -- how we're going to grow in the near term and the long term -- intermediate term and long term, we consider it to be a great investment for our shareholders and that improve shareholder returns. And so we're easing the opportunity, simple as that.

And then from an M&A perspective as well, you mentioned that it is our top capital allocation priority. Right now with the transitioning market that we face, we need to continue to be very disciplined in evaluating potential M&A criteria, all of our criteria to ensure those are met before we move forward with any acquisitions. So it's really about ensuring that we balance and utilize this program opportunistically because we do believe, as Pat said, given the dislocation in our valuation compared to our confidence in our outlook that this is the best use of our capital at this time.

Your next question will come from Brian Meredith with UBS.

Two questions here. The first one, more short term. The second 1 is more longer term. In the underlying growth guidance, I'm just curious if you can kind of give us a little sense of what client demand you're expecting? I mean are you seeing clients buying additional coverage with some of these price decreases? Or is the fact that you're seeing some economics uncertainty, you're not quite sure that's going to happen. I thought that would have been a nice offset.

Brian, I would say this, that most commercial buyers of property and casualty insurance are connected to lender agreements and loan covenants. And so those limit requirements are prequalified early on in our approach to marketing these accounts. So we don't really see a change so much in the limits that they're buying, but the structure demands are a little bit different. So higher retention levels in certain accounts, alternative risk, as Pat mentioned many times, comes into play on the most difficult risks in the United States. So having the ability to be flexible for us to be able to structure these accounts in such a way that meets the unique needs of these buyers is important. And so we feel very confident that we can answer the bell on even the most difficult risks that we see in America. So I would say this that we don't see any measurable trends of buying less. It happens, but there's not really a trend that we can put our finger on.

That's helpful. And then from a longer-term perspective, is the, call it, high single-digit organic growth that you're looking for in 2026, call it maybe a more normalized environment. And how are you thinking about these talent investments that you talked about last quarter factoring into organic growth, obviously look into the latter part of this year and into 2027?

Brian, I thank you for the question because I should have highlighted. From our perspective, high single digits. We are pleased with that expectation for '26. We believe that, that will be industry-leading growth. And our expectation, as we outlined last quarter, is the continuation of producing industry-leading growth going forward. When we think about talent, I commented last time that we expect that these will -- these new talent hires will contribute to margin pressures in the short and medium term. 2026 will represent effectively the first full year of that investment. We anticipate that they will begin to contribute to our organic growth from effectively day 1. But obviously, we need them to continue to abide by the restrictive covenants. So we anticipate that our ability to see the accretion from these investments that we've historically seen that are the most accretive investments we can make do take from 2 to 3 years. Tim, anything you'd want to add?

I'd like to add that we are guiding for 1 year forward. And we want to make sure that we're clear that this diversification of our offering to our clients has improved our ability to serve our clients greatly. But it's also -- is adding a lot of balance to our portfolio. So for example, we are strongly committed, and we're growing quickly as you're aware, in reinsurance, reinsurance underwriting. And that's a de novo. That's all just huge capital returns on capital, I should say. And more and more of our business is involving reinsurance, underwriting, managing underwriting. We're not a broker on that, managing underwriting. But alternative risk is something that we've been talking about. Those projects got pushed forward and not enacted as anticipated in Q4. But we're positive that there's going to be good growth on alternative risk. And those are reinsurance relationships. Additionally, our benefits start-up has gotten really good leverage. So as we go into '26 and on through '26, the diversification beyond and to help balance the E&S volatility, we're very excited about that. And so we're guiding high single digit because all brokers are under pressure right now. But as I said, that's for 1 year. We're not giving up. We're built for double digit. And that diversification is going to be a factor and down the road and getting to that, back to that.

Your next question will come from Meyer Shields with KBW.

So up until recently, I guess, there's a 35% margin guide for 2027, and you've been very clear about what's postponing that. But I'm wondering how we should think about the longer-term potential as good as the $80 million of savings is by 2027, that's probably, I don't know, less than 200 basis points of margin expansion. I was hoping you could just tie those ideas together?

Meyer, thank you for the question. This is Janice. So you're absolutely right. Last quarter, we deferred the goal of the 35% margin target beyond 2027. What we've talked about before is the expectation of modest margin expansion in future years -- in most years, right, allowing us to continue to invest in the growth of the business. Project Empower is intended to support the efficiencies that we've talked about to contribute to that modest margin expansion in most years. But at this point, we're not putting a time line around it. We continue to focus on ensuring that we're investing in talent, de novo formations, new product opportunities, and ensuring that we're delivering the right solutions to our clients. So we believe that 35% is still a realistic target for us, but we're not putting a date around when that may come to fruition.

Okay. That's fair. I understand that. And I guess the question for Tim, I'm not sure how to answer this. But we've obviously heard a lot about significant rate decreases in -- during 1/1. And I'm wondering whether the perception of margins that will exist in primary property taking into account cheaper reinsurance, do they really support another full year of 25% to 35% rate decreases, especially in the back half of the year?

Meyer, I would say this that it's hard to even conceive that the market could continue to cut rate at that level. But we're forecasting that. We're looking at it conservatively. There seems to be no let up. It's been a weak storm season, 2 years in a row, and we're not counting at it. But what we are counting on is fighting head-to-head to win new business and capture any new business that comes into the property channel. As you know, we've made some key acquisitions like Velocity. It strengthened our practice group vertical. So whatever is available, whatever we can capture in property, we'll do that. But like professional, you witnessed it a couple of years ago when cyber and public D&O took a dive our professional liability brokers were resilient, and they found other business, health care business, social and human service business, and now they're in a great double-digit growth trajectory. So we expect that from our property brokers. We expect them to find convective storm, sensitive business and flood sensitive business and to scrap and claw and find a way to grow. So we're very, very proud of the performance in the space of the headwind that they had, and we expect a similar performance in '26.

Your next question will come from Andrew Kligerman with TD Cowen.

I'd like to follow up a little more on the AI question. I've gotten quite a number of investors asking me, why wouldn't it be easy for a smaller wholesaler to create an app with AI, that's very speedy, and it would enable that smaller broker much smaller than Ryan to reach out to multiple specialty carriers as many as Ryan and they could go toe to toe. And I have my own thoughts on it, but I'd love to hear why and how there would be barriers that would keep Ryan front and center versus the startups and the smaller players that now have these AI apps to help them along?

Well, the AI app is one thing. It's the intellectual capital and it's the relationship with the market and the broker, the trust of that relationship, you can't just walk in and say, "Hi, I've got an AI app and I can now compete with the big guys. The AI app is an enabler. It's not anything more of an enabler. Can replace the trust, the adaptability, the flexibility, the understanding of what is the best market to place that risk in. We're not worried about the smaller guys coming in and leveling the playing field. It's all about our delivery, our delivering with our AI, and we're confident that we're going to be very effective with it.

My follow-up is around the contingent and supplemental commissions. They were up quite materially year-over-year. They represent about 6% of revenue. How do you -- how are you thinking about -- in this pricing environment, contingent and supplemental commissions. Is it likely to be a headwind as you head into '26? I thought I heard Janice say it was actually a natural hedge in softer markets. But what are your thoughts there?

Yes. I'll let Janice add to this. But I think broadly speaking, these PCs represent years of measurement of profitable underwriting. And you're certainly seeing it emerge in the publicly reported carriers. We feel we're driving those great results for our partners. You've seen them profit commissions grow steadily with us. I believe our entire public life cycle. And based on our underwriting performance of the last several years, we do expect continued strong results.

And I think I also noted in my remarks -- sorry. Happy to just fill this one out, a touch more. So for 2026, we're expecting profit commissions and supplemental effectively to be relatively stable. The benign storm season that we saw within 2025, obviously produced some opportunities for additional profit commissions. As Miles said, these span a number of different years. So it is a number of playing at different times. But we're obviously going to start the year with an expectation that we would have a normal cat season effectively and there would be some anticipation of not having that same level of exceptional profit commissioning from '26. So the difference between being a natural hedge and what we're expecting for '26, I think that they will align over time.

Our next question will come from Rob Cox with Goldman Sachs.

I just wanted to follow up on the organic growth guidance, high single digits for 2026. I'm curious what you think the E&S market as a whole will grow embedded in that organic guidance? And if you expect as we -- if we get into the outer years, would Ryan Specialty still be growing in excess of the E&S market as you look to deliver on the industry-leading organic growth?

Well, we just received the stamping results and they're 8%. And so we try to outpace the growth and the flow of that business, the new business coming in, by capturing existing E&S business. So it's always a combination of that. And -- but we don't see the flow of E&S business subsiding much more. We believe there will always be loss leaders in the reinsurance world and dumping and shutting in these high-hazard specialty areas and property and casualty, Rob. So a big advantage we have is this lens and this optic that we have. When something creates problems for the standard markets, we see it very quickly, early on, and we can formulate these underwriting solutions, and broking expertise is very quickly in the verticals and capture the businesses that's being dumped. So we're certain that '26, '27 will bring more of those kind of incidents in situations where there's more dumping and shedding. We see it right now in public entity and municipalities, higher education, just tremendous losses in the reinsurance world that cause the dumping and the shedding. So we're counting on that. It's never let us down and we're faster, nimbler and quicker to create these solutions than we've ever been. So we welcome it.

And Tim, I might just add. The E&S market may not grow in the teens or 20s every year, but we believe it will continue to outpace the growth of the admitted market over the long term. And [ again we cannot count on our ] ability to take market share from our wholesale competitors.

Yes, indeed. That's helpful. And I just wanted to follow up on some of the casualty business. It seems like in spots is getting incrementally a bit more competitive. I was just curious on what you would chalk that up to? Is it just carriers incrementally less optimistic on property giving rate decreases? Is it trend has been behaving better in recent years. Just curious your thoughts.

Well, Rob, I would kind of carve it up like this. You've got low to medium hazard casualty business and then medium to high casualty business. The softer part of the casualty market is medium hazard. So some of that is getting rate cuts, some of that's going back into the admitted market. Not a lot, not hardly measurable, much more in small commercial. We're seeing some movement there. But the main practice group verticals that we're known for and where we're needed the most, that would be construction, that would be transportation, sports and entertainment. I've mentioned a number of them. Those high-hazard niches that, again, are loss leaders in the reinsurance world and have a latency to the IBNR part of the risk. They're continuing to stay solidly placed in the E&S market. And so we're very bullish that we'll capture more and more of that business in '26.

I would add one other point. The profitability that carriers have realized in property because of the benign storm seasons have driven them to get more competitive on casualty risk. So some of that capital is being shifted in the casualty market and making that more competitive. But we have time for one more question. We've gone over a little bit.

Your final question will come from Matthew Heimermann with Citi.

A couple of questions. One was, it was noticeable to me that the wholesale growth you accelerated a lot. And I think accelerated more than some of the aggregate statistics would suggest for what's happening in the E&S market. So I wasn't sure if that was disproportionately the property we're talking about or flow or just unexpected volatility within just how the number is sorted out.

I would attribute most of that Matthew to the property market, that's really slowed those numbers down. But again, we believe there's professional liability. There's a casualty business that I've mentioned that continues to firm and hence the 8% increase in stamping fees in the fourth quarter. So we're watching those niches carefully. And we -- as we said, we can move faster than our competitors to capture that business when these situations occur.

I was curious with respect to the change in the outlook and the uncertainty and given that it looked like it was traditional wholesale brokers that was kind of a softer piece of the quarter and I think the focal point of most of your discussion on the call, is there any change to how you're thinking about the delegated underwriting side of the house or the binding authority side of the house? Or is it disproportionately the wholesale brokerage business and where that macro uncertainty piece and the property is not vested.

Matt, it's Miles. Thank you for the question. I'll open the response. So we were proud of the results of the quarter and the year. I think Pat and Tim and Janice have been clear that over the last 18 months, we see an ongoing opportunity set and delegated both in utilization, but also a bit of a penetration into balance sheets that have not previously delegated. And I want to emphasize some comments Pat made earlier about the diversity of our underwriting portfolio. So when you see that specialty in our financials, that really represents 2,000 colleagues dedicated to P&C insurance, treaty and facultative reinsurance, health and benefits, alternative risk and alternative capital. And we have been recognized by the industry press as one of the largest -- or the largest provider, and we think the feedback is sustained from our partners that we are a leader in capability and sophistication and results. And the reality is we have really parlayed those advantages, the investment in the platform and the results to continue to develop new products, meet the needs of the wholesale community wherever possible, and manage incremental carrier capital. So we continue to have an exciting outlook for our delegated practice.