RYAN.NYSERyan Specialty Holdings, INC
DEF 14A: Ryan Specialty Holdings Reports Strong 2023 Performance and Outlines Strategic Priorities for 2024
Sentiment:
Proxy Statement
Ryan Specialty Holdings' 2024 Proxy Statement highlights a successful 2023 with double-digit growth across all specialties and strategic M&A activity, setting an ambitious outlook for 2024.
Better than expectedThe company's total revenue grew by over 20%, with organic revenue growth at 15%.Net income increased by 19% to $194.5 million, and adjusted EBITDAC grew by 21% to $624.7 million.
Summary
- Ryan Specialty Holdings had an outstanding year in 2023, delivering strong financial performance and achieving double-digit top-line growth in Wholesale Brokerage, Binding Authority, and Underwriting Management.
- The company's total revenue grew by over 20%, with organic revenue growth at 15%.
- Net income increased by 19% to $194.5 million, and adjusted EBITDAC grew by 21% to $624.7 million.
- The Wholesale Brokerage Specialty saw 17% growth, driven by property insurance placements and strength in casualty insurance.
- Binding Authority and Underwriting Management also delivered excellent results, fueled by new capabilities and geographic expansion.
- Ryan Specialty completed five acquisitions, enhancing its wholesale brokerage, binding authority, and managed underwriting platforms, and expanding into benefits and alternative risks verticals.
- The company announced an agreement to acquire Castel Underwriting Agencies, expected to close in the first half of 2024, which will expand its international footprint.
- The ACCELERATE 2025 restructuring program is on track to be completed by the end of 2024, focusing on technology investments and operational efficiencies.
- In February 2024, Ryan Specialty initiated a quarterly cash dividend program to return capital to stockholders.
- The company remains optimistic for 2024 and believes it is well-positioned for another strong year, expecting the E&S market to continue to grow in size and importance.
Sentiment
Score: 9
Explanation: The document expresses a highly positive sentiment due to the strong financial results, strategic acquisitions, and optimistic outlook for the future. The initiation of a dividend program further contributes to the positive sentiment.
Positives
- Double-digit top-line growth in each of the three Specialties: Wholesale Brokerage, Binding Authority, and Underwriting Management.
- Second-largest year for M&A transactions based on acquired revenue.
- Initiation of a quarterly cash dividend program to return capital to stockholders.
- Strong balance sheet and ability to execute on M&A program.
- Continued increase in risk and complexity throughout the globe drives exposures into the E&S market.
Risks
- Pending regulatory approval for the acquisition of Castel Underwriting Agencies.
- The company's future success depends on its ability to continue to drive sustainable, profitable growth, generate strong cash flow over the long term and at the same time seamlessly execute on its M&A program.
- The company's directors may be removed only for cause upon the affirmative vote of at least 66 2/3% of the voting power of our outstanding shares of common stock entitled to vote thereon if the Ryan Parties aggregate beneficial ownership falls below 40% of the total number of shares of our common stock outstanding.
Future Outlook
Ryan Specialty is optimistic for 2024 and believes it is well-positioned for another strong year, expecting the E&S market to continue to grow in size and importance. Pursuing opportunities through our robust M&A pipeline remains a top priority, and we have an ambitious outlook for 2024.
Management Comments
- '2023 was another outstanding year for Ryan Specialty,' said Patrick G. Ryan, Founder, Chairman & CEO.
- 'We again delivered an enviable financial performance, achieved double-digit top line growth in each of our three Specialties (Wholesale Brokerage, Binding Authority, and Underwriting Management), and added to our outstanding team of brokers and underwriters through excellent recruiting and M&A.'
Industry Context
The company believes the Excess & Surplus (E&S) component of the insurance market will become more significant as the world continues to increase in complexity and risk. Retail brokers are becoming larger through organic growth and industry consolidation, pursuing panel consolidation for both transactional wholesale and delegated authority distribution.
Comparison to Industry Standards
- The document does not provide specific comparisons to industry standards in terms of financial metrics.
- However, it highlights that Ryan Specialty's performance is 'enviable' and that the company is 'industry-leading' in wholesale brokerage, binding authority, and managed underwriting platforms.
- The document mentions Aon Corporation, where Patrick G. Ryan previously served as Chairman and/or CEO, as a point of reference for his leadership experience.
Management Changes
| Role | Previous Person | New Person | Effective Date | Reason |
|---|---|---|---|---|
| Class II Director | Andrew J. McKenna | Francesca Cornelli | July 2023 | To fill the seat vacated by Andrew J. McKenna shortly after his passing |
| Class II Director | Vacant | Anthony J. Kuczinski | October 2023 | To fill the vacant seat created when the Board increased the authorized number of directors to thirteen |
| Class I Director | William J. Devers | Patrick G. Ryan, Jr. | January 2024 | To fill the seat vacated by William J. Devers upon his retirement from the Board |
Corporate Governance
| Change Type | Description | Effective Date | Impact Assessment |
|---|---|---|---|
| Amendment to Non-Employee Director Compensation Policy | Increased (i) the annual cash retainer from $85,000 to $100,000, and (ii) the annual grant of equity from a grant date fair value of $120,000 to $125,000. The committee chairperson and Lead Director fees remain unchanged. | January 1, 2024 | Increased compensation for non-employee directors to align with market practices. |
Related Party Transactions
- The Company charters executive jets for business purposes from a third-party service provider, Executive Jet Management (EJM). Mr. Ryan indirectly owns aircraft that he leases for remuneration to EJM and which EJM then charters to third parties. The Company recognized an expense related to business usage of the aircraft of $1.0 million for the year ended December 31, 2023 (of which Mr. Ryan indirectly received $0.7 million in remuneration).
- Mr. Ryan and his wife hold preferred equity in Ryan Re Underwriting Managers, LLC (Ryan Re), a wholly owned subsidiary of the Company, with unreturned capital of $3.3 million as of December 31, 2023, which accrues a preferred return at the rate of 10% annually. In January of 2024 the Company paid the previously approved amount of $1.9 million in accrued interest on the preferred equity held by Mr. Ryan and his wife.
Stakeholder Impact
- Shareholders will benefit from the initiation of a quarterly cash dividend program.
- Employees will benefit from the company's continued growth and success.
- Clients will benefit from the company's enhanced capabilities and expanded service offerings.
- Trading partners will benefit from the company's increased scale and scope.
Next Steps
- Complete the acquisition of Castel Underwriting Agencies, expected to close in the first half of 2024.
- Continue pursuing opportunities through the robust M&A pipeline.
- Complete the ACCELERATE 2025 restructuring program by the end of 2024.
- Hold the 2024 Annual Meeting of Stockholders on April 30, 2024.
Key Dates
| Date | Description |
|---|---|
| March 11, 2024 | Record Date for Annual Meeting |
| March 19, 2024 | Date of Proxy Statement |
| March 19, 2024 | Notice of how to access the Proxy Statement and 2023 Annual Report to stockholders and a form of proxy are first being sent to stockholders |
| April 30, 2024 | Annual Meeting of Stockholders |
| November 19, 2024 | Deadline for stockholder proposals pursuant to SEC Rule 14a-8 for inclusion in our Proxy Statement and form of proxy for our 2025 annual meeting of stockholders |
| December 31, 2024 | Latest date for stockholders wishing to make a director nomination or bring a proposal before the annual meeting to be held in 2025 (but not include it in our proxy materials) to provide written notice of such proposal to the Corporate Secretary at our principal executive offices |
| January 30, 2025 | Earliest date for stockholders wishing to make a director nomination or bring a proposal before the annual meeting to be held in 2025 (but not include it in our proxy materials) to provide written notice of such proposal to the Corporate Secretary at our principal executive offices |
| March 1, 2025 | Deadline for stockholders who intend to solicit proxies in support of director nominees, other than the Companys nominees, must also provide notice that sets forth the information required by Rule 14a-19 under the Securities Exchange Act of 1934, as amended (the Exchange Act) |
Keywords
Ryan Specialty, revenue growth, EBITDAC, acquisitions, insurance, wholesale brokerage, underwriting management, binding authority, M&A, dividend, restructuring, E&S market
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