Ryan Specialty reports higher organic growth, foresees moderation

Ryan Specialty reported strong organic growth in the most recent quarter but warned of a sharp slowdown for the year due to continuing declining property pricing and increasing competition.

The Chicago-based specialty intermediary posted an 11.8% organic revenue growth rate, down slightly from 12.9% in the prior-year period. But it projected that organic growth for the full year would be in the “mid-single digits.”

CEO Timothy W. Turner said property rates continue to decline, with large and catastrophe-exposed accounts down 25%-35%. “Competition intensified broadly, including in the admitted market,” he said.

In casualty, “in high-hazard, large-account classes … loss trends driven by social inflation continue to drive meaningful rate increases, in some cases exceeding 10%. At the same time, there is growing competition for small and medium hazard risk.”

Company founder Patrick G. Ryan expressed surprise at how quickly rates had declined. “It’s a risky world out there. The risks have not diminished, they’ve just taken a hiatus … We’re one big storm away from some adjustments.”

Mr. Turner expressed continued confidence in the growth of the E&S market. “We continue to see 8%-plus growth of new E&S business, so the flow remains very strong and very healthy, and we’re capturing more of that. We’re outpacing that. It’s just that prices are coming down…But in terms of our market share, we’re gaining market share all the time.”

Total revenue was $795.2 million, up 15% from the prior year, driven by organic growth and mergers and acquisitions. Net income was $40.6 million, compared with a $4.4 million loss in the first quarter of last year.

Adjusted earnings before interest, depreciation, amortization and coronavirus increased 15.7%, and margin increased 29.2%, compared with the prior-year period.

Last year, the company announced a three-year, $160 million restructuring initiative to increase automation and improve efficiency. The program is expected to generate at least $80 million in annual savings starting in 2029.

“AI-enabled and automated submission processing has reduced turnaround times from approximately 24 hours to under two hours, and looks promising to scale,” Mr. Turner said. In its reinsurance business, underwriters can evaluate about 10 times as many submissions as before.

Earlier this year, insurance brokers’ share prices were hit amid concerns about disintermediation by AI-based companies and services. Mr. Turner said AI would help the company focus on its value proposition of providing expertise in specialty lines. “Disintermediation risk rises as complexity falls. Ryan Specialty’s portfolio sits on the other end of that spectrum.”