Ryan Specialty Group Holdings Inc

NYSE:RYAN

Earnings Call Analysis

Strong Revenue and Growth Outlook

The company reported a total revenue increase of 22.5% to $533 million, with an organic growth rate of 16.0%. Adjusted EBITDAC grew by 24.6% to $159 million, improving margin by 50 basis points to 29.8%, and adjusted EPS rose by 29.6% to $0.35 per share. Looking ahead, for full year 2024, they expect organic revenue growth between 12.0% and 13.5%, with reasons for optimism including less variability in contributing factors compared to the previous year. Moreover, the adjusted EBITDAC margin is anticipated to range from 31.0% to 31.5%, with about half of the $50 million in annual run rate savings from ACCELERATE 2025 expected to be realized this year.

Ryan Specialty Touts Robust 2023 Performance with Strong Revenue Growth and Margin Expansion

Under the leadership of Founder, Chairman, and CEO Pat Ryan, Ryan Specialty Holdings has reported a remarkable year in 2023. The company's unwavering commitment to client service has led to a significant 20.4% revenue increase to over $2 billion, driven largely by a robust organic growth rate of 15%. Notably, the adjusted EBITDAC saw an uptick of 20.7% reaching $625 million, while margins improved modestly by 10 basis points to 30.1%.

Strategic Movements to Widen Market Reach and Global Footprint

The company's success is also a product of its astute strategic orientation, which emphasizes organic growth opportunities interspersed with thoughtfully curated M&A activities aimed at enlarging the total addressable market. The year 2023 saw the second-highest M&A activity since the notable All Risks acquisition in 2020. Key acquisitions with a collective historical revenue exceeding $140 million across three specialty areas bolstered geographic expansion and deepened the talent pool in professional lines, cyber liability, and property segments. The pending Castel Underwriting Agencies acquisition is anticipated to further enhance their market presence, contributing an expected $44 million in annual revenue and expanding operations within the U.K. and Europe.

Fostering Innovation and Expanding Product Portfolio

Ryan Specialty is resolute in developing innovative proprietary products, particularly in the realm of underwriting management for transportation and high net worth segments with challenging risk exposures like coastal wind and wildfire. The company's extensive global presence is evident with expansion moves in key international markets like the U.K., Canada, and Singapore, thereby broadening its addressable market and fortifying its competitive stance.

Commitment to Talent Development and Retention

The company's investment in and retention of top-tier talent is central to its modus operandi. The strategic onboarding and empowerment of industry-leading professionals have been pivotal in maintaining Ryan Specialty's edge in the market. With a culture that fosters innovation and a client-centric approach, they aim to sustain their industry-leading organic growth through continuous talent development and robust producer retention strategies.

Robust Capital Allocation Strategy and Shareholder Value Focus

Ryan Specialty's capital allocation strategy for 2024 remains committed to M&A as its primary agenda to augment the organic growth engine, alongside initiating a quarterly dividend program in recognition of their financial flexibility and strong cash flow generation. By adhering to a calculated approach where each acquisition aligns culturally, strategically, and accretively, they anticipate fostering value creation for their shareholders in the long term.

Outlook for 2024: Sustaining Double-Digit Organic Growth and Market Leadership

The company is poised to leverage secular growth trends and strategic initiatives to achieve another year of double-digit organic growth. These trends encompass the consolidation and growth of retail brokers, the complexities of emerging risks, and the expansion of the E&S market, all of which Ryan Specialty is uniquely positioned to capitalize on. Their confidence in the sustainability of these trends is clear as they look forward to maintaining their leadership position in the specialty insurance sector.

Earnings Call Transcript 2023-Q4

[Operator]

Good afternoon, and thank you for joining us today for Ryan Specialty Holdings Fourth Quarter and Full Year 2023 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 on 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 statement. 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 of 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 Founder, Chairman and Chief Executive Officer of Ryan Specialty, Pat Ryan. Mr. Ryan, please go ahead, sir.

[Patrick Ryan, executive]

Good afternoon, and thank you for joining us to discuss our fourth quarter results. With me on today's call is our President, Tim Turner; our CFO, Jeremiah Bickham; and our CEO of Underwriting Managers, Miles Wuller. Also with us is our Director of Investor Relations, Nick Mezick.

2023 was another outstanding year for Ryan Specialty. Our team continues to excel with their steadfast efforts to deliver top quality service to our clients. Through a combination of industry-leading talent and dedication to our clients, we generated another year of strong results while making long-term sustainable investments in our business to fortify our competitive position. For the full year, we surpassed revenues of $2 billion, up 20.4% year-over-year, driven by organic growth of 15%, on top of the 16.4% in 2022.

We also had a meaningful contribution from recent M&A. We grew full year adjusted EBITDAC 20.7% to $625 million and expanded adjusted EBITDAC margins by 10 basis points to 30.1%. Adjusted earnings per share grew 20% to $1.38.

We also successfully executed on our strategy to add to our total addressable market. Our overall strategy is aligned around serving the evolving and growing needs of our clients in order to provide a dynamic value proposition. For a double-digit organic growth engine and our M&A strategy, we are steadily expanding our total addressable market within specialty insurance, particularly with targeted investments and dedicated authority, benefits, alternative risks as well as deepening our considerable moat by enhancing our scale, scope and intellectual capital. 2023 marked the second best year for M&A, only topped in 2020 when we acquired All Risks.

We successfully completed and announced several acquisitions, with annual historic revenue totaling in excess of $140 million, adding and integrating new capabilities to each of our 3 specialties. Griffin Underwriting Services broadened our geographic scope and capabilities and our Binding Authority in brokered specialties. Our associates insurance services deepened our scale in our key urban centers and added high-quality talent to our professional lines, cyber liability and property teams. ACE, Point6 and AccuRisk provided foundational capabilities for our employee benefits distribution and underwriting platform and are rapidly developing new products and service offerings to help our clients with integrated health solutions.

In late December, we signed a definitive agreement to acquire Castel Underwriting Agencies, which is anticipated to close in the first half of this year. We expect the Castel team to add approximately $44 million of annual revenue. Castel adds top talent and differentiated intellectual capital through 13 unique MGUs and has an excellent track record of delivering strong underwriting profits to its capital providers. Our geographic focus in the U.K. and Europe will significantly expand our international footprint, and we expect our management team and operations to be a catalyst for new delegated underwriting authority start-ups and accelerated international expansion.

Further, we've developed new proprietary products and capabilities in underwriting management with multiple transportation facilities, and [indiscernible], our high net worth MGU, offering coastal wind and wildfire covers to a highly dislocated homeowners insurance market. In addition, several of our MGUs have expanded geographically in the U.K., Canada and Singapore, growing our global footprint and expanding our total addressable market. In particular, we're excited about PERse International, our wind and solar property MGU, with a recent launch in the U.K. Stepping back, our delegated authority specialties are well positioned to execute on both organic and inorganic opportunities. Our offering to carriers is stronger than ever, built through investment in top talent and a heavily resourced platform, which includes actuarial and IT support as well as broad-based distribution.

Our market position is further strengthened by our ability to retain our talent through our culture of empowerment, innovation and client centricity. We share a like-minded view of risk and partnership with our carriers as demonstrated by our excellent track record of underwriting results. We are confident that our investment in people and the platform will help ensure our ability to sustainably grow our value proposition over the longer term and perform well through economic cycles.

Turning to talent. We made strategic investments in talent in 2023 to further strengthen our capabilities in both current and developing lines of business on the back of onboarding our largest production class in history in 2022. Collectively, these investments in talent are well on track to meaningfully contribute to our future performance. As we've noted previously, they are a key part of our proven winning formula to maintain and strengthen our long-term growth prospects. We were pleased to finish the year once again with industry-leading producer retention. While we have been successful at onboarding key talent, it's equally important to maintain a winning empowering culture that ensures our top producers remain at our firm. We continue to succeed on that front.

It is both the exceptional quality and quantity of talent that distinguishes Ryan Specialty from the rest of the industry. We remain dedicated to recruiting, training and developing large teams of talent, from college hires to experienced brokers and underwriters. As a result of our efforts, we accelerate the learning curve of these individuals, which helps them compete at the highest level. Our clients consistently emphasize that it's our differentiated talent that ensures they can trust us to solve their most challenging problems. Our commitment to onboarding and retaining the best and most innovative talent and our emphasis on delivering value for our clients has been vital to our mission since our founding. This is why we continue to generate industry-leading organic growth and why we believe we can successfully sustain these levels of growth over the long term.

Turning to capital allocation, M&A remains our top priority, and we entered the year with significant momentum. We are cultivating a wealth of opportunities. And as market conditions are improving, we have an ambitious M&A outlook for 2024. We continue to see substantial M&A opportunities that we expect will bolster our organic growth engine.

Our M&A pipeline remains robust and includes both tuck-ins and potential large deals. As we've consistently noted, we will only move forward when all of our criteria for M&A are met. Each acquisition must be a strong cultural fit, strategic and accretive. Additionally, given our broad financial flexibility, we are pleased to initiate a quarterly dividend program to return capital and create additional value for our shareholders. And assisted by our Board to initiate the cash dividend program reflects confidence in our ability to continue to drive sustainable, profitable growth, generate strong cash flow over the long term and execute on a robust M&A program.

It is also a testament of our ability to be excellent stewards of capital for our investors as we believe we can both seamlessly execute on our robust M&A pipeline for years to come and distribute dividends to our shareholders. We remain firmly committed to our successful long-term strategy. One, organically investing in our business to support sustainable and profitable growth; two, executing on our disciplined M&A strategy with high-quality acquisitions; and three, maintaining our strong balance sheet while returning excess cash, all of which create value for our shareholders. As we progress through 2024, there are 4 things you can continue to expect from Ryan Specialty.

First, we expect to generate another year of double-digit organic growth, driven by secular growth factors and the strategies we are pursuing. Secular growth drivers like retail brokers becoming larger through solid organic growth and ongoing industry consolidation; retail brokers pursuing panel consolidation for both open market wholesale and delegated authority in order to have fewer more sophisticated counterparties who have the necessary scale to meet their needs. We believe that we are one of very few specialty insurance firms that meet those criteria. The world continuing to increase in risk and complexity, this is driving more risks and new exposures into the E&S marketplace, which offers significantly more freedom of rate and form and, therefore, able to provide solutions that otherwise are not available. We believe the E&S market will keep growing and consistently outpace growth in the admitted market, overshadowing any cyclical shifts in certain lines with respect to submission flow and pricing. This is further aided by changes in distribution trends, with a growing number of wholesale-only E&S carriers in the marketplace. Adding to these secular growth drivers is our unique competitive position in high-growth businesses, the expansion of our total addressable market and our ability to innovate with new product development, all of which serve to bolster our organic growth engine. We remain confident that these ongoing trends are sustainable and will continue to support our growth for the foreseeable future.

Second, we will continue to grow through M&A. As mentioned earlier, we are steadily expanding our total addressable market within specialty insurance, including in delegated authority, alternative risks, benefits and deepening our considerable moat by enhancing our scale, scope and intellectual capital. We will complete the integration of our 2023 acquisitions and onboard the great team from Castel. Further, we will help these firms grow on our platform through our broad distribution network, access to our proprietary products and our deep carrier relationships.

Third, we will continue to thoughtfully invest in our business. We expect another year of strategic hiring of top industry talent across our specialties. And we'll make additional investments in our systems and operations to ensure we remain at the forefront of the industry.

Lastly, we will continue to execute on our efficiency initiatives. Notably, we will execute on our ACCELERATE 2025 program, driving continued growth and innovation, delivering sustainable productivity improvements over the long term and accelerating our margin improvement. As a reminder, we expect to generate annual savings of approximately $50 million in 2025, with some of the savings to be realized in 2024.

With our flexible and differentiated business model, unparalleled expertise, innovation and work ethics that our clients and trading partners value, we are well positioned for another strong year in 2024. In summary, I remain incredibly proud of our entire team who are delivering another year of outstanding results and adding value for our clients, trading partners and, ultimately, our shareholders.

Now I'm pleased to turn it over to Tim. Tim?

[Timothy Turner, executive]

Thank you very much, Pat.

The fourth quarter capped off an excellent 2023 for Ryan Specialty as we generated another quarter of double-digit growth across all our specialties. Turning to the market. Ongoing industry trends persist or are accelerating, notably an increasingly complex climate and legal environment marked by nuclear verdicts, accelerating social inflation, rising uncertainty regarding reserve adequacy and a pullback in risk appetite from the admitted market. These trends are driving more risks into the E&S marketplace, which is better able to handle a more uncertain environment as it offers significantly more freedom of rate in form and the ability for insurers and underwriters to adjust more quickly. As a result, the E&S market is seeing a consistent flow of risks as it is able to provide critical solutions that would otherwise not be available. This continues to create fantastic opportunities for our specialized and industry-leading teams to provide solutions on behalf of our clients.

Diving into our specialties. Our wholesale brokerage specialty generated another quarter of strong growth. In property, elevated loss activity, including $50 billion of insured losses from severe convective storms, higher reinsurance costs and retentions of risk, persistent inflation and ongoing focus on insurance to value make for a challenging market. These factors are continuing to drive flow of new business into the E&S market. We continue to see the E&S market respond well, yet with continued discipline and tighter limit management, especially around coastal property, wildfire and flood, along with increased concern of earthquake risk.

Given the heightened frequency and severity of property losses, particularly in coastal areas, and more recently in the Midwest, we believe risks will remain in the E&S market. This will drive recurring opportunities for talented experts to deliver critical solutions to our trading partners and placing these complex risks. We believe property should continue to be a strong driver of growth for Ryan Specialty in 2024, driven by sustained flow into the channel and continued yet more stabilizing rate increases.

Our casualty practice had another strong quarter, driven by flow into the E&S market in both primary and excess casualty, particularly for habitational risks, health care, transportation, sports and entertainment and consumer products. Our transportation practice saw another quarter of strong flow. Difficult loss trends driven by both economic and severe social inflation are driving carrier need for continued rate increases, a pullback in underwriter appetite and market exits. These casualty classes are experiencing higher loss trends driven by economic and social inflation, reserving issues due to the long tail nature, and latency and claims, plus higher reinsurance costs.

With our world-class technical expertise and deep bench, we are perfectly positioned to execute and deliver value for our clients, particularly in a more unpredictable market. We are optimistic that casualty will be a strong contributor to our 2024 performance. Overall, it was a great year for our wholesale brokerage specialty. The team remains committed to delivering innovative strategies and products to meet the ever-changing needs of the marketplace for our clients, and we are well positioned to generate consistent, profitable growth.

Now turning to our delegated authority specialties, which include both binding and underwriting management. Our Binding Authority specialty had another excellent quarter, driven by key contributions from our high-caliber talent and new proprietary products, which make for a seamless experience for our clients on small but tough to place commercial P&C risks. We continue to see the consolidation of panels and Binding Authority as a long-term growth opportunity, and we remain well positioned to capitalize on that opportunity.

Our underwriting management specialty performed very well in the quarter, led by property and casualty and our reinsurance MGU, Ryan Re. We are proud to deliver another year of increasing underwriting profitability for our carrier trading partners despite multiple adverse market events. We also look forward to the addition of Castel, pending regulatory approval in the U.K., which will add top decile talent, expand our international footprint, make us stronger in markets such as the U.K. and Europe and position us well to accelerate our international expansion. As Pat mentioned, we made significant progress with respect to our acquisition strategy in 2023. Focused execution on the right transactions will enable us to further grow alongside our clients' evolving needs and ensure our ability to sustainably grow our platform over the long term and perform over economic cycles.

Turning to price. The hard market conditions, including firm or accelerating pricing, have continued into early 2024 in the majority of our business lines. Exceptions remain in public company D&O and cyber. As we've noted before, in any cycle, as certain lines are perceived to reach pricing adequacy, admitted markets tend to step back in on certain placements. That said, we still have yet to see this play out, and the standard market has not meaningfully impacted rate or flow in the aggregate. We continue to expect the flow of business into the non-admitted market to be a significant driver of Ryan Specialty's growth, more so than rate.

With that, I will now turn the call over to our Chief Financial Officer, Jeremiah Bickham, who will give you more detail on the financial results of our fourth quarter. Thank you.

[Jeremiah Bickham, executive]

Thank you, Tim. In Q4, we grew total revenue 22.5% period-over-period to $533 million, fueled by another strong quarter of organic growth at 16.0% and contributions from M&A, which added over 4 percentage points to our top line. Growth was driven by the ongoing tailwinds in much of the E&S market, strong renewal retention and our ability to win substantial amounts of new business. Adjusted EBITDAC for the fourth quarter grew 24.6% period-over-period to $159 million and adjusted EBITDAC margin improved 50 basis points to 29.8%, driven by another quarter of strong revenue growth and higher fiduciary investment income, which was partially offset by continued investments in our business. Adjusted EPS grew 29.6% to $0.35 per share.

Our full year 2023 results were excellent. For the year, we grew total revenue 20.4% to $2.1 billion, driven by organic growth of 15% and contributions from M&A, which added 3 percentage points to our top line. We grew full year adjusted EBITDAC 20.7% to $625 million and expanded adjusted EBITDAC margins by 10 basis points to 30.1%. Adjusted EPS grew 20% to $1.38 per share.

Turning to our ACCELERATE 2025 program. We had approximately $12 million in charges for the quarter and $48 million in charges for the year. We continue to expect cumulative special charges of approximately $90 million under this program and expect annual savings of approximately $50 million in 2025. We expect approximately half of these savings will be realized in 2024. As Pat noted in his remarks, M&A remains the top priority in terms of allocating capital. That said, as a result of the financial flexibility that our business model provides, the Board declared a onetime special cash dividend of $0.23 per share and initiated a regular quarterly dividend of $0.11 per share on our outstanding Class A common stock.

Both the special and regular quarterly dividend will be payable on March 27, 2024, to stockholders of record as of the close of business on March 13, 2024. More information on the attribution of the dividend can be found in our earnings release and will also be presented in our Q1 10-Q. As we initiate our dividend and add this new facet of capital management to our arsenal, it is important to note that we will continue to execute on our robust M&A pipeline, maintain our strong balance sheet and stay within our stated leverage corridors. We remain committed to being good stewards of capital, both through our M&A strategy and our dividend policy in order to deliver long-term sustainable shareholder value.

As Pat mentioned, we remain firmly committed to our successful long-term strategy: one, organically investing in our business to support sustainable and profitable growth; two, executing on our disciplined M&A strategy with high-quality acquisitions; and three, maintaining our strong balance sheet while returning excess cash, all of which create value for shareholders.

Looking forward, we will continue making strategic investments in talent and recruitment. These investments in talent, particularly recruiting new colleagues, historically have offered the highest returns for our shareholders and are part of our proven approach to maintaining our long-term growth prospects.

Based on our current forecast, we expect to record GAAP interest expense, which is net of interest income on our operating funds and includes the recent repricing of our term loan of approximately $120 million in 2024. As Pat and Tim mentioned, we continue to be excited about our long-term growth opportunities and value proposition. As a result, we are guiding full year 2024 organic revenue growth to be between 12.0% and 13.5%. We believe our broad-based growth will be driven by our exceptional talent, including our outsized investments in 2022 and the benefits of prior year M&A as we lap 12 months of ownership, exactly as Pat has signaled in many of our prior calls.

In addition, we are guiding adjusted EBITDAC margin for the full year 2024 to be between 31.0% and 31.5%. We expect to recognize approximately half of the $50 million in annual run rate savings from ACCELERATE 2025 this year, with the majority of those savings falling to our bottom line. Those savings will be paired with a return to underlying annual margin expansion in our business.

In summary, we are very pleased with our 2023 performance and remain excited for both our near- and long-term prospects. Our dynamic and differentiated business model continues to position us well to best serve our clients and to deliver the innovative solutions that our clients have come to expect as a hallmark of Ryan Specialty.

With that, we thank you for your time, and we'd like to open up the call for Q&A. Operator?

[Operator]

[Operator Instructions] Our first question today is coming from Elyse Greenspan from Wells Fargo.

[Elyse Greenspan, analyst]

My first question is on the organic growth outlook, right? So you're setting 2024 initially at 12% to 13.5%. If I go back 12 months ago, you had set this 2023 at 10% to 13%. So I know that's driven by several factors you outlined on the call. But it feels like you feel better about '24 than you did at the start of 2023. Would you agree with that statement?

[Jeremiah Bickham, executive]

Elyse, we feel very good not only about where we finished 2023, but also 2024, and we view 12% to 13% as a very healthy amount of growth. Now when you're comparing it to '23 and trying to understand if there's a trend, the biggest individual variable that explains the difference is really property. So we expect a really strong contribution from our property portfolio this year as well as our casualty portfolio. However, we're not counting on the same compounding premium rate increases that we saw last year in property this year. But as I said, 12% to 13%, still very healthy. And then when you pair that with up to 150 basis points of margin improvement and the contributions from last year's M&A and potential new M&A this year, it's -- I think it's easy to see why we're very excited about our overall growth prospects in 2024.

[Elyse Greenspan, analyst]

And then you guys were talking about the Castel deal, and you said that it helps with international expansion. Can you just give a sense -- I mean that brings on $44 million, but how do we think about just the international opportunity that you guys see? And over what time period could that play out?

[Patrick Ryan, executive]

Well, we look at the international market as very much being ripe for delegated authority expansion. A lot of that comes from the consolidation of carriers over the last number of years, but also a need for innovation in the European market. We bring innovation. So we believe that planting the flag in Europe as we add to our already existing good business, the Castel talent, that look at quick materialization of productivity improvements and bringing innovative products to various European countries.

[Elyse Greenspan, analyst]

And then how big is Ryan Re today?

[Patrick Ryan, executive]

How big are they? Well, they're big, but we don't break it out.

[Jeremiah Bickham, executive]

Yes. We don't disclose revenue or profitability at the individual MGU level. But it's a great example of innovation, a TAM expanding de novo, a great partnership that we have with Nationwide and a really rapidly growing part of our MGU portfolio.

[Operator]

Next question is coming from Mike Zaremski from BMO Capital Markets.

[Michael Zaremski, analyst]

Great. First question, on contingents and subs for the year, I don't think I have the 4Q number, but it looks like for the year, it's running a much higher percentage of revenues than last year. Any thoughts, any guidance you want to offer us or just how to think about contingents and subs, whether this is kind of a -- '23 was a normal year, better than a normal year? Or maybe the lines you're growing in have a larger contribution from contingent and subs?

[Patrick Ryan, executive]

Look, we appreciate the question. So I think we perhaps highlighted in our last quarter that we've seen an emergence of profit commissions from even back years in the soft market, parts of the cycle, which are a great complement to the results we've driven. So we've seen results from past years. We believe we've delivered a lot of profit to carriers over the last several years. which will continue to emerge as profit commissions over the coming years. So that is part of our go-forward planning process. Of course, those are not organic growth numbers. We don't put contingent positions. Right.

[Michael Zaremski, analyst]

Okay. Maybe pivoting back to the organic growth guidance, and you've given a lot of good breadcrumbs and just insights on the call so far. But if I just look at -- just curious, if I look at the guidance range, it's tighter than you've given in previous years, which seems to kind of point to you have increased conviction over or just more predictability over your growth rate this year versus in previous years. Anything more you'd want to add about why you have more conviction other than you made a number of comments and you talked about property being a variable to that you're counting on less this year?

[Jeremiah Bickham, executive]

I think the simplest way to think about it, Mike, is just there's less variability, less material variability within the individual variables. So last year, for example, you had property, which it was hard to tell at the beginning of the year, where it was going to end up, how long it was going to last, how much rate there was going to be. You had various headwinds across our professional lines and transaction liability. There's still a lot of moving pieces and a lot of things in play, but there's -- it's more of an aggregation of a bunch of, call it, normal variables that make us feel comfortable guiding towards a tighter range. That doesn't mean that that's what we'll go out with every year. But this year, it felt in all the scenarios that we ran in our bottom-up budgeting process, we got comfortable with the 150 basis point range.

[Michael Zaremski, analyst]

Okay. And just lastly, it sounds like still optimistic on M&A. Could the pace of M&A in '24 be similar to that of the pace in '23?

[Patrick Ryan, executive]

Well, as you know, it takes a long time to cultivate a lot of these great companies that we're able to buy. I would comment that in terms of people that are ready or getting ready to sell, there's been an uptick. So it's a matter of determining when they are available and can we get together on reasonable terms. As we said, we have a very robust pipeline. We had quite a good year in M&A last year. We can't predict how one may fall. It's got so many variables. But just rest assured that there's more opportunity in '24 than there was -- entering '24 than there was entering '23.

[Operator]

Your next question is coming from Meyer Shields from KBW.

[Meyer Shields, analyst]

I have one question sort of stemming from the Castel deal. And I don't want to extrapolate too much from one point. But should we think of there being behind the scenes mounting interest in underwriters divesting MGUs?

[Jeremiah Bickham, executive]

Just to make sure I heard the question. You said, are there -- should we assume that there's mounting interest in carriers divesting MGUs?

[Meyer Shields, analyst]

Yes. Or I don't know whether this is just a one-off deal. Obviously, it takes time for deals to close, but I don't know if there's a broader theme that we should be thinking about in the context of potential M&A.

[Patrick Ryan, executive]

Well, this is just our opinion. Carriers as well as banks see that they need tangible net worth in their businesses. And they've had -- banks have that strategy to own brokers with lots of intangible value. They have certainly been carriers in that situation. There is -- I don't know if you can call it a trend, but let's say that, in fact, 4 carriers are realizing that getting the tangible book is superior to managing the delegated authority opportunity. I don't want to call it a trend, but it certainly is happening now.

[Meyer Shields, analyst]

No, that's very helpful. The second question, just broadly speaking, with regard to recruiting, I was hoping for an update on what we could think of as sort of the war for talent or just battle for talent, whether pricing for good brokerage talent is intensifying or abating compared to 6 to 12 months ago?

[Timothy Turner, executive]

Meyer, I would certainly say this, from day 1 and through our history, we've been very, very focused on attracting the highest caliber decile talent in broking and underwriting. And we've never let up. It's been a big part of our success. It's a limited supply of high-caliber underwriters and brokers. We know who they are, and we've been very successful at bringing them in and attracting them to Ryan Specialty. We'll continue to do that. It's been a big part of our success across the country, and the environment for recruiting has never been better.

[Meyer Shields, analyst]

Okay. Perfect. And if I can throw in one last one. I know that public company D&O remains something of a headwind. Is that changing at all? Are the headwinds fading?

[Timothy Turner, executive]

The headwinds continue, but I think we're through the pain phase. The books have rolled over and converted and we're back to being in a pretty strong position across all ProExec lines, including D&O and E&O. Public D&O, it remains a challenge. It's a softer part of ProExec today. But I think the actual movement of the business and the transition of that business, we've been through most of it. And I expect that line to really stabilize and continue to grow. There's firming niches in ProExec, like health care, social and human services; we're getting a real big tailwind in those classes.

[Operator]

Next question is coming from Rob Cox from Goldman Sachs.

[Robert Cox, analyst]

So one of the areas that's been particularly strong relative to some of the public peers we look at is Binding Authority. And I know you guys don't exactly give the organic there, and the business mix is a bit different from those peers. But maybe you could elaborate on what's been the driver of what's been exceptional growth there.

[Timothy Turner, executive]

Sure, Rob. Small commercial, not to be misconstrued as easy; those are tough. Property and casualty accounts are just small. We've been keen on building this binding authority up underneath the RT chassis, if you will. So in all the different offices, our hub-and-spoke approach to the business, the brokerage platforms of RT have these burgeoning Binding Authority platforms, and they're gaining momentum. The customer base who trusts us with their brokerage property and casualty business is moving more Binding Authority business to us. RFPs for the consolidation of Binding Authority business continue to be a strong tailwind for us. And our electronic trading platform, our technology approach to the business is working extremely well, and we're getting a lot more momentum in the speed and the efficiency at which we can grow small commercial. So we're very, very bullish on the long runway ahead in growing our Binding Authority business.

[Robert Cox, analyst]

And as a follow-up on the margin guide, so the $25 million in 2024 seems like it will add 100 basis points of the 100 to 150 basis point expansion or so that you guys have identified. Could you help us think about the puts and takes of the margin excluding the restructuring impact?

[Jeremiah Bickham, executive]

Yes. So Rob, you're absolutely right. The, call it, 25-round savings from ACCELERATE that's flowing through this year does do most of the heavy lifting to get us into the beginning of our range, the 31%. But remember, that's being paired with resuming a return to underlying annual scaling. And where we ultimately shake out will depend on how organic growth materializes for the year, what other growth investments arise, and then also what that does. So right now, our plan contemplates overcoming a headwind in fiduciary investment income.

But if the Fed cuts deeper and faster, that will obviously have an impact. And then alternatively, if rates hold throughout the year, that could be a tailwind for margin. But big picture though, I mean, the progress of ACCELERATE 2025 and the impact that it's having on our margin this year, the impact that it will have on our margin in future years and the fact that we're resuming annual underlying scaling is incredibly exciting for us and then pairing that big jump in earnings power with our exceptional top line growth is even more exciting, and we're far from done on both of those fronts.

[Operator]

Next question is coming from Bill Carcache from Wolfe Research.

[Bill Carcache, analyst]

Following up on your delegated underwriting authority comments. Can you take us inside some of the discussions that you're having with clients regarding your capabilities. In an environment where there is significant performance disparity across MGAs and MGUs, how is your performance track record contributing to the discussions? And maybe what's your success rate in competing for the business with top decile talents, seems like it should be quite strong. But any color around sort of the discussions would be extremely helpful.

[Patrick Ryan, executive]

Yes. Look, I appreciate the question. We're definitely proud of our '23 performance and the momentum going into '24. So strong growth, product expansion, and most importantly, as you highlighted another year of increasing profitability to carriers. So kind of like your industry, our track record in individual product classes is important to attracting new capital. And it's equally important in showing that past performance when it comes to launching new products. So we've had a lot of success increasing underwriting capital under management last year.

Last year, we grew premium in products with a greater majority of our top 25 partners. A strategy that I feel we've led the way on that had success continuing into last year was we were able to achieve several portfolio-wide arrangements where key capital partners are supporting a broad-based selection of our products. We believe the same is possible as we go into '24. Big picture, we -- the penetration of delegated authority is increasing across the marketplace, but it's still early doors, and we remain a relatively small percentage of total premium wallet a lot of these major global carriers and we aspire to perpetuate this performance into '24.

[Bill Carcache, analyst]

That's helpful. Separately, the risk of E&S business migrating back to the admitted markets is very much in focus, and I appreciate your comments in the prepared remarks. But are there any tangible examples you could point to or that you would point to as posing outsized risk?

[Timothy Turner, executive]

Well, the migration of business back into the standard market is very, very modest. In most high hazard classes of business in property casualty, it's double-digit growth. The dumping and the shedding continues, especially in classes of business like transportation and health care, loss leaders in the reinsurance world, that business continues to grow double digit in our space. So we don't really see a lot of migration back into the standard market at all, that's measurable. A little bit of business kind of heading back into the London market, but hardly measurable. The London market has been a little bit more aggressive, but we use that market as well. But again, nothing measurable that we can see.

[Bill Carcache, analyst]

Understood. And if I may squeeze in one last one. How are expectations of Fed rate cuts influencing your discussions with potential targets? Do you sense a greater inclination to wait in anticipation of selling it to a more attractive environment? I'm just curious whether the discussions are sort of being influenced by the -- how they're being influenced by the current rate environment?

[Patrick Ryan, executive]

Well, I think it's -- it depends on the quality of the business that you're targeting. We target very high-quality businesses. And people know that they're high quality and they're not anxious to take a haircut on that because of the market conditions. You saw just recently the announcement on Truist Insurance Holdings, that's been announced at a pretty high multiple because it's the high-quality business.

There are businesses that deservedly have earned a lower multiple and not necessarily because they're bad businesses at all, but there could be some disruptions that temporarily lowered their performance. And so there are good companies out there that we could, we believe, bring in at lower multiples than the past, but they need a little bit of productivity improvement, we call it, but we're quite good at that. So as we look at the opportunities out there, likely, there are some quite good companies that need a little, let's say, a new home and some productivity help and some distribution help. And we think we can get some quite good attractive companies at reasonable multiples.

[Operator]

[Operator Instructions] Our next question is coming from Mike Ward from Citi.

[Michael Ward, analyst]

Maybe just following up on Rob's question on NII. How much of a headwind are you embedding? Are you assuming rate cuts?

[Jeremiah Bickham, executive]

We are. We look at the forward curve to set our budgets, and it's changed the assumption of I think it was 5 cuts a month ago. It's 3 cuts that are embedded in the forward curve now. So we're taking into account a range of outcomes. And all of the scenarios in our models are a headwind. And like I said, we're very happy that our plan has us overcoming them.

[Michael Ward, analyst]

Okay. And then just kind of curious what you're expecting in terms of property rate increases with respect to organic growth guidance. And I guess a similar question for casualty.

[Timothy Turner, executive]

Well, we'll start with property. First of all, the flow into the channel continues to be double digit. So we continue to see a lot of business being moved into the non-admitted market. And we're seeing double-digit rate increases on cat property. So whether it's coastal wind, wildfire, flood, convective storm business, predominantly what we see there's double-digit rate increase continuing. Very little rate deceleration, very modest.

In casualty, again, double-digit growth flow into the channel, stamping offices, the larger states have validated that once again. That kind of ebbs and flows depending on the narrow niches of high hazard business that we play in, but your usual strong classes of business like transportation, habitational, large venue risks, higher education, and sports and entertainment, health care, social and human service business continues to flow into our channel. So we're very well set up, as you know, with heavy brokerage, talent, deep bench and our underwriting platforms that are woven into these practice group verticals. We expect '24 to be very strong.

[Operator]

Next question is coming from Ryan Tunis from Autonomous Research.

[Ryan Tunis, analyst]

I guess just following up on that last question. You said that you are seeing solid rate in property, not much deceleration. But if you can recall all of those cat-exposed property lines for new midyear. So how much -- do you guys really have that much visibility on what's going to happen from a pricing standpoint in property in 2024 at this juncture?

[Timothy Turner, executive]

We don't. But what we can see so far is that the rates continue to increase. There's been, again, a very slight, hardly even measurable deceleration on certain classes of business. But again, we're talking specifically about E&S high hazard cat property and that -- certainly not middle market or mainstream property business that does, in fact, have rate deceleration. So again, the overall high hazard part of our property continues to be very, very strong.

[Ryan Tunis, analyst]

And then I mean you're still bullish, I guess, on property submissions. Can you just help me understand where incremental submissions come from? So 2022 happened, we had a huge hurricane. I think we just had about everything, coastal wind and non-admitted market. I'm not disagreeing that it's going to stay there. But where is the incremental submission flow come from?

[Timothy Turner, executive]

Well, first of all, treaty reinsurance plays a big role here and limited capacity being produced by large risk-bearing companies, whether it's here or Europe or Lloyd's, London, shrinking lines, much, much smaller net line capacity available for the cat business. So it requires a higher number of participants to deliver on the limits that are required. So our non-admitted capacity even in smaller tranches is needed in a much -- there's a much higher demand for that in accomplishing these limits that are needed. We don't see a let-up in that. There's no one putting up big lines in cat property. It's much more the other way. So the new opportunities are really restructuring these towers and requiring, again, that expertise and more carriers to participate to accomplish the goals.

[Ryan Tunis, analyst]

Got it. And I guess just one last one with the contingents and the profit commissions. I'm not sure how that's accounted for. But is there a noise that you see there from, I don't know, maybe you got paid for something in casualty, [ 15 to 19 ], and now it's developing more adversely. Like that -- is there a clawback mechanism for that? Or is that not really a dynamic?

[Miles Wuller, executive]

So Ryan, on this technical accounting side, there is no clawback on anything we book. We only book it when it's fully earned and collected we don't want any downside to what you're seeing. I think broadly speaking, there -- on average, it takes 3 or 4 years on average for a profit commission to be earned, recognized, measured and paid. So as I think I said in the opening, we're pleased to see PCs materialize from some of the soft market years of 4 or 5 years ago, and we're optimistic of our underwriting performance that will materialize in PCs in the coming several years. But again, at the heart of your question, there are no clawbacks in what you're seeing on our books.

[Operator]

We reached the end of our question-and-answer session. I'd like to turn the floor back over to management for any further closing comments.

[Patrick Ryan, executive]

Okay. Well, thank you. We appreciate you taking the time to join us today and certainly for your continued support of our firm. And we look forward to updating you on our progress next quarter, and probably we'll be talking to several of you between now and then. Thanks for your interest and support.

[Operator]

Thank you. That does conclude today's teleconference and webcast. You may disconnect your line at this time, and have a wonderful day. We thank you for your participation today.