Ryan Specialty Group - Q2 2023
August 3, 2023
Transcript
Operator (participant)
Good afternoon, and thank you for joining us today for Ryan Specialty Holdings second quarter 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 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 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 filing 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 should not be considered in isolation or as a substitute for the financial information presented in accordance with GAAP. Reconciliations of non-GAAP financial measures to the most closely comparable measures prepared in accordance with GAAP are included in the earnings release, which is filed with the SEC and available on the company's website. With that, I'd now like to turn the call over to the Founder, Chairman, and Chief Executive Officer of Ryan Specialty, Pat Ryan.
Pat Ryan (Founder, Chairman, and CEO)
Good afternoon. Thank you for joining us to discuss our second quarter results. With me on today's call is our President, Tim Turner, our CFO, Jeremiah Bickham, our CEO of Underwriting Managers, Miles Wuller, and Director, Investor Relations, Nick Mezick. Ryan Specialty had a great quarter, with strong momentum continuing across all of our strategic, financial, and operational objectives. We grew total revenue 19.1%, led by organic growth of 16.1%, building on the 22.3% organic growth in the second quarter of 2022. We also achieved double-digit growth in adjusted EBITDAC and adjusted net income on a year-over-year basis. We saw broad-based strength across our specialties, particularly in property and in many individual lines of business.
The specific headwinds we noted on our prior calls were in line with our expectations and partially offset some of the very strong tailwinds we experienced in property. Overall, I'm very pleased with our performance in the quarter and throughout the first half of 2023. In addition to delivering great results, we continued to execute on our M&A strategy. In July, we completed three attractive and strategic acquisitions, which added scale and scope to our wholesale specialty and launched our benefits practice. The first is Socius Insurance Services. With approximately $40 million of annual revenue, Socius adds high-quality talent to our professional lines and cyber teams and deepens our scale and scope in key hubs like San Francisco, Tampa, and Miami.
We are confident in the outlook for this business, given our long-standing familiarity with the team and our proven ability to help firms grow on our platform through our relationships with the top 100 retail brokers, access to our proprietary products, and expand carrier relationships. We also completed two employee benefits acquisitions, Point6 Healthcare and ACE Benefit Partners, adding just under $10 million of annual revenue. These firms provide exceptional talent and foundational capabilities for Ryan Specialty Benefits. We have diligently assessed opportunities in the benefits market, targeting firms that have a track record of both growth and long-term margin greater than the industry average, and these medical stop-loss focus firms are perfectly aligned with those attributes. Medical stop-loss insurance plays a vital role by smoothing the volatility in healthcare spend through reinsuring a self-funded benefits plan against high-cost claims.
We expect medical stop-loss insurance to continue to play a crucial role in financing and risk mitigation strategies, particularly as healthcare innovation accelerates and high-cost drugs and gene therapies become more prevalent. We are pleased to enter this niche that boasts over $25 billion in premium in the US, with a 12% compound annual growth rate since 2014. We believe there is a long runway for both organic and inorganic growth in benefits and are excited to add these capabilities to our specialties. Further on the M&A front, our pipeline remains robust. We remain disciplined in our pursuit of acquisitions, particularly in the current environment, as we will only move forward when all of our criteria are met. Each acquisition must be a strong cultural fit, strategic, and accretive.
We continued to make targeted investments during the quarter as we brought on additional talent to further enhance our current capabilities and developed areas where we anticipate our clients need us in the future. These investments, particularly in the recruitment of new colleagues, offer the greatest returns for our shareholders and are part of a proven winning formula to maintain our long-term growth prospects. That takes us to ACCELERATE 2025, our two-year restructuring program announced earlier this year. We are making investments that will enable continued growth, drive innovation, deliver sustainable productivity increases over the long term, and accelerate margin improvement. We have made solid progress in the second quarter, which Jeremiah will discuss further.
We remain on track to generate a targeted annual savings of at least $35 million in 2025, with cumulative special charges expected to be at least $65 million through the end of 2024. Throughout the second quarter, the E&S marketplace remained robust. E&S continues to provide solutions that are otherwise not available for hard-to-place risks. As we previously noted, we've invested significantly in those lines where we see clear opportunities to grow. In addition to bolstering the lines of business where our clients need us the most, we have also continued to expand our ability to serve brokers, agents, and carriers through innovation and creating alternatives to traditional insurance placements in areas like cat property and transportation. Looking ahead, we expect favorable specialty insurance market dynamics to persist, and we remain confident that 2023 will continue to be another strong year for our firm.
We're in a prime position to capture broader E&S tailwinds and also further capitalize on our specific lines of accelerated growth. Our differentiated business model allows us to remain ahead of the competition, and our flexibility enables us to quickly adapt and pivot when market conditions shift. We continue to expand our total addressable market through innovation and strategic acquisitions, and further deepen our moat with scale, scope, and intellectual capital. We're able to do all of this because of our exceptional team, who consistently deliver impressive results and value for our clients, trading partners, and ultimately, to our shareholders. Now, I'm pleased to turn it over to Tim. Tim?
Tim Turner (President)
Thank you very much, Pat. As Pat noted, it was another strong quarter across our specialties as we continue to successfully execute on winning new business and producing innovative solutions for our clients. The effects of industry trends, such as climate change and natural disasters, accelerating social inflation and broad-based economic inflation, happening concurrently with reduced insurance capital, a pullback in underwriter appetite, and market exits, make for an incredibly challenging insurance market. Additionally, continuous change in the loss environment and growing uncertainty in reserve adequacy is driving more risks into the E&S marketplace, which offers significantly more freedom of rate and form. Given our specialized and industry-leading team's ability to navigate the complexities of the market, we plan to continue delivering for our clients and expect to further expand our market share. Diving into our specialties, our wholesale brokerage specialty generated another quarter of strong growth.
In property, elevated levels of attritional and secondary perils, including severe convective storms and persistent inflation from higher cost of materials and labor shortages, are driving up loss costs. Additionally, market conditions, including higher reinsurance costs, reduction in available capacity, and ongoing requirements for proper valuations, are driving higher retentions of risk and ultimately more volatility into the U.S. direct property market. These factors are continuing to drive flow of new business into the E&S market. The E&S market is responding, yet it is also experiencing more conservative appetites, significant rate increases, and tighter limit management, especially on coastal property, severe convective storms, wildfire, flood, and earthquake risk. We are well-positioned to assist our clients in navigating the complexities of this market. Our A-plus team of experts are working tirelessly to bring important and creative solutions to our retail brokers and trading partners in this challenging market.
Our transportation practice continued to see substantial flow in the quarter, fueled by social inflation, carrier need for continued rate increases, and a pullback in underwriter appetite and market exits. We continue to win more than our fair share of new business and remain well-positioned to capitalize on additional growth opportunities. Our casualty practice also performed very well in the quarter. We continue to see higher loss trends, inflation, and reserving issues drive more flow into the E&S channel across both primary and excess casualty, particularly in lines like healthcare, habitational, and real estate. As Pat noted, we completed the acquisition of Socius at the beginning of July, and are excited about the addition of new teammates who have hit the ground running and are a clear cultural match with Ryan Specialty.
Overall, our wholesale brokerage specialty continues to successfully execute its game plan, and we see a long runway of consistent growth ahead. In our binding authority specialty, we saw another quarter of solid growth in traditional binding, which includes small commercial business and growth in personal lines, despite continued capacity constraints. We continue to see further potential for panel consolidation as a long and steady growth opportunity, and we are well positioned to execute. Our underwriting management specialty also generated strong results, led by continued steady and profitable growth in property and casualty and our reinsurance MGU, Ryan Re. We also launched our benefits practice with the acquisitions of Point6 Healthcare and ACE Benefit Partners.
Our team was extremely thoughtful in determining where we could best add value in this large and important market, and medical stop-loss is where we see a clear opportunity for rapid expansion within this fast-growing specialty niche. John Zern and his team are hard at work expanding our sales force in this practice. We look forward to updating you on the progress of benefits in the quarters ahead. As we had mentioned on our prior call, and as Pat just noted, the specific headwinds in certain lines in the second quarter, namely public company D&O, lower external M&A volumes in transactional liability, and delayed starts in construction, remained in line with our expectations. We expect any growth benefit in these three lines to be modest in the second half of the year. Turning to price, through Q2, we remained in the prolonged stages of a historically hard market.
Pricing in the E&S market largely held firm or accelerated in many lines of business, with property continuing to see the strongest rate momentum. Exceptions remain public company D&O and cyber, where we saw further pressure. As with all cycles, as pricing continues to increase and certain lines are perceived to reach pricing adequacy, we see admitted markets step back in on certain placements, particularly within large towers. Overall, we still have yet to see the standard market meaningfully impact 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 second quarter. Thank you.
Jeremiah Bickham (CFO)
Thank you, Tim. In Q2, we grew total revenue 19.1% period-over-period to $585 million, fueled by another strong quarter of organic revenue growth at 16.1%, as we continue to benefit from the ongoing tailwinds in much of the E&S market, particularly property, broad-based strength in many of our individual lines, and our ability to win substantial amounts of new business. Net income for Q2 2023 was $84 million, or $0.26 per diluted share. Adjusted net income for the quarter was $124 million, or $0.45 per diluted share. Adjusted EBITDAC for the second quarter grew 16.9% period-over-period to $194 million, while adjusted EBITDAC margin declined 60 basis points to 33.2%.
Our EBITDAC margin was impacted by continued investments in our business, including last year's hiring, and T&E continuing to return to normalized levels, both of which were partially offset by higher fiduciary investment income. Turning to our ACCELERATE 2025 program, we had approximately $17 million of charges in the quarter as the program was able to move into full swing, slightly ahead of schedule. We remain well on track to generate annual savings of at least $35 million in 2025, with cumulative special charges projected to be at least $65 million through the end of 2024. As Pat noted, we also continued to make targeted investments in the quarter, adding underwriting and broking talent to our ranks, and expect consistent recruitment efforts to continue in the back half of the year.
The cost of these investments, along with the annualization of our 2022 headcount growth, will continue to impact margin, but will be partially offset by increases in fiduciary investment income. These investments in talent, particularly recruiting new colleagues, offer the highest returns for our shareholders and are part of a proven winning formula to maintain 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, of approximately $31 million in Q3 and $29 million in Q4. As a quick reminder, we paid for our three most recently announced acquisitions at the beginning of Q3, which reduced our operating funds relative to the 6/30 balance sheet.
We are now guiding organic revenue growth rate for the full year 2023 to be between 13.0% and 14.5%, up from our previous guide range of 10.5%-13.0%. We are maintaining our full year adjusted EBITDAC margin guidance range of 29.0%-30.0%. In summary, it was an excellent second quarter and first half performance by Ryan Specialty. We remain very excited for both our near and long-term prospects. With that, we thank you for your time and would like to open up the call for Q&A. Operator?
Operator (participant)
Thank you. We will now be conducting a question and answer session. If you would like to ask a question, please press star and then one on your telephone keypad. A confirmation tone will indicate your line is in the question queue. You may press star and then two if you would like to remove your question from the queue. For participants using speaker equipment, it may be necessary to pick up your handset before pressing the star keys. One moment please while we poll for questions. The first question we have is from Elyse Greenspan of Wells Fargo. Please go ahead.
Elyse Greenspan (Senior Equity Research Analyst)
Hi, thanks. Good evening. My first question is on the, you know, updated organic growth, right? 13%-14.5%. You guys were 14.6% for the first half of the year. You know, it sounds like there'll still be some impact of the headwinds in the second half, but we are annualizing them. Why wouldn't organic growth be stronger in the back half? Is there just, you know, some level of conservatism built into the guidance update?
Jeremiah Bickham (CFO)
Hi, Elyse, thanks, thanks for the question. First off, just want to acknowledge we had a very good quarter that we're quite proud of and really the end to a very solid first half of the year. As you noted in our prepared remarks, we got a big boost from property this quarter. Because seasonally, Q2 has the highest amount of property and property cat business in our portfolio, that's why. Thus, we are expecting less of a lift from property in the second half of the year. Otherwise, we're implying that H2 will play out very similarly to H1, which means strong growth across the board, including double-digit growth contribution from our very balanced casualty portfolio as well.
Overall, we feel great about where we're headed in H2, and we're very confident we can land within our increased organic growth guide range, which we feel would represent another very solid year for Ryan Specialty.
Elyse Greenspan (Senior Equity Research Analyst)
Q2, Jeremiah, staying there for a second. Q2, right, I know you guys have said, right, is the highest, property concentration quarter. Of the other three quarters, are they all pretty close from a property perspective, or would one stand out as having a, you know, a higher concentration next to the second quarter?
Jeremiah Bickham (CFO)
Q2 is far and away the largest, and if you're just looking at percentage attribution of business, it doesn't even tell the whole story, because not only does it have the highest overall property contribution, but it's the highest cat property quarter of the year by far. The next highest is Q4, we did experience a benefit in the last couple weeks of Q4 from property rates surging, we're not counting on the exact same growth in Q4 proportionally as we would a quarter like Q2, if that makes sense.
Elyse Greenspan (Senior Equity Research Analyst)
That does make sense. Then in terms of the M&A pipeline, you guys highlighted, you know, some of the activity during the quarter. How does the rest of the pipeline look just in terms of other potential deals out there?
Pat Ryan (Founder, Chairman, and CEO)
Thank you, Elyse. The. It looks good. As I said, it's a robust pipeline. We are in discussions on additional benefits opportunities that will help round out our offering to our clients, add some significant new management talent and production talent. There's no way of knowing when, but could be quite soon. We're in serious discussions.
Elyse Greenspan (Senior Equity Research Analyst)
Okay, thank you.
Jeremiah Bickham (CFO)
Thanks, Elyse.
Operator (participant)
The next question is from Weston Bloomer of UBS. Please go ahead.
Weston Bloomer (Director of Equity Research)
Hi, thank you. Good evening. My first question is on the margin guidance. I, I mean, you raised the full year organic, but left the margin unchanged. Could you just talk to the, the types of investments you're, you're making in the back half of the year and maybe what impact you're expecting, within your margin guidance around normalization of T&E or, or wage inflation or, or other investments?
Jeremiah Bickham (CFO)
Yep. Thank you, Weston. As we've said for multiple quarters now, the biggest impact to our margin at the moment is our outsized hiring activity from last year, which we know as is the right investment for our long-term growth prospects, and we're really confident will pay off in the long term. With regard to the guidance, I mean, a quarter like Q2, 33.1% adjusted EBITDAC margin, more than anything, it makes us confident in our guide range and increases the likelihood that we'll end up at the high end of that range. Again, just to remind everyone, we had 25% margins in 2019, our model definitely scales. Next year, we won't have the same margin impact from our hiring this year. We feel very good about margin improvement as time goes on.
In the meantime, as you said, T&E is still ramping up. It's not ramping up as significantly as it was in 2022 relative to 2021, but still an impact there. Then the, the biggest impact, again, is just the annualization of, of last year's hiring. We're not making outsized hires at that same scale, but we are making a more normalized maintenance and growth level of hiring this year, that we're really excited about.
Weston Bloomer (Director of Equity Research)
Great, that's helpful. The three M&A deals that you did in the quarter, does that impact your margin profile either favorably or adversely, or maybe change the seasonality of your EBITDAC or revenue?
Jeremiah Bickham (CFO)
They're, they're too small to have an impact. Then generally, what we tell people is to think of acquisitions as coming on at the same margin and the same growth rate. If there's an acquisition that is significantly different enough, and significant in size enough to move the needle, we will let investors know.
Weston Bloomer (Director of Equity Research)
Great. Last question from me. I know you have a partnership with Nationwide, and they had pulled out of it's E&S Commercial Auto. Was there any impact of that within your numbers? If you just comment on where that where your relationship is with them?
Jeremiah Bickham (CFO)
Yes, we, we certainly noted Nationwide's withdrawal from commercial auto, but we have a wide product line and several other carriers that we can employ and to absorb that business. We're expanding our transportation department, as we've mentioned before, and we were ready for that change. The acquisition of Crouse and Associates really strengthened our bench and gave us a national, you know, breadth and depth, and not just brokerage transportation, but underwriting. We're, we're looking ahead, and we can absorb and make those changes without any, any effect.
Weston Bloomer (Director of Equity Research)
Great. Are you sizing that impact at all? That's something you can close.
Jeremiah Bickham (CFO)
We're, we're looking at double-digit growth in transportation, in underwriting, and in broking. We're creating facilities, MGUs, expanded binding authority product line, and that, that really doesn't put, or have any negative impact on our ability to grow.
Weston Bloomer (Director of Equity Research)
Great. Thank you.
Operator (participant)
The next question we have is from Mike Zaremski of BMO Capital Markets. Please go ahead.
Mike Zaremski (Senior Equity Research Analyst and Managing Director)
Hey, good evening. My question is, you know, a follow-up to the question on margins, relative to the pace of hiring. You know, I guess, and are there any numbers you could help put context to, you know, the excess pace of hiring you made? I, I guess, you know, we-- 'cause we don't have as, as long of a history to kind of understand kind of, you know, you know, we can see how many people you added in, in 2022 versus 2021, but we, you know, we can't see the long-term average.
I, I'm just trying to get a sense of any context you could put around, like, you know, did you-- was the pace of hiring, you know, 5 points more than, you know, you, you, you think is kind of quote-unquote, "normal," so we can kind of get better understand, you know, try to size up the, the impact it's had to your margins?
Jeremiah Bickham (CFO)
I, I won't be able to put it in basis points for you, Mike, but it think of it as over a 1.5 times normal size production class, relative to a normal year. You're right, looking at headcount won't tell you the whole story 'cause it's, it's generally the production folks that are the needle mover. One thing we can tell you, and we've said this a bunch, is that production classes as a cohort, will cover their costs after two years and generally be margin accretive, sometime in the third year.
That's why we're confident that the 2022 class won't be weighing down margin come 2024. Like I said, we're not onboarding an outsized class in 2023. If, and if we only made normal size, hiring size, hiring classes, there wouldn't be an impact in the following year. We can still scale somewhat if we're just hiring at an average level.
Mike Zaremski (Senior Equity Research Analyst and Managing Director)
Okay. That, that, that, that does help. Just sticking to margins, just, just curious, are there, are there any other, you know, things changing on, on the margin, no pun intended, kind of like on commission rates or, you know, and, and you know, I don't know, just wage inflation, you know, we should be thinking about, or is, is, you know, that, that, that would, you know, has changed versus three to six months ago, that we should be contemplating as well?
Jeremiah Bickham (CFO)
nothing on commission rates. Those are stable. great question. On wage inflation, we're not immune to it, 'cause there are plenty of folks here running around on salaries, but the majority of our comp expense is commission-based, and so doesn't, doesn't get impacted by wage inflation the same way. Yes, it, it has an impact on us. I, I'm sure you've heard everyone talking about it, but it's not, you know, that alone wouldn't have the same margin impact that is worthy of as many references as we've made to what's happening in our comp margin right now. It's the sheer number of hires that we made last year on the production side.
Mike Zaremski (Senior Equity Research Analyst and Managing Director)
Okay, great. Lastly, just, you know, you gave us some good commentary about flows into the E&S marketplace and, you know, you also talked about there being even some appetite constraints within the E&S marketplace. You know, just curious, anything you've seen, any stats you, you want to talk about that you've seen in July, if, if you're seeing any change in acceleration or deceleration in, in flows, over the past month? Thanks.
Tim Turner (President)
No, it's been quite steady. The flow has been measurable and increased in many lines. Some deceleration, as we've talked about in public D&O and widely noted in cyber. So many other lines, not just cat property, but many casualty lines continue to harden. So the flow into the channel and our ability to capture it continues to get stronger. We feel we're converting a higher percentage of that business, and we've been building our bench for years to win as much of that business as we can. It's working out very well.
Mike Zaremski (Senior Equity Research Analyst and Managing Director)
Tim, what what casualty lines are there? Are they more kind of large account or small account? I promise it's my last follow-up.
Tim Turner (President)
Oh, no, no problem. It's a combination of small commercial, certainly in our binding authorities and our MGUs, but it's larger brokerage business as well. Large habitational schedules in the casualty side continue to pour into our channel. Residential construction, New York construction, to name a few, transportation, as we've mentioned, healthcare, nursing homes, assisted living, certain social and different types of healthcare. Sports and entertainment continue to be a very difficult line where they need our help. Consumer products, maybe lastly, public entity, real demand for property and casualty solutions in the specialty side across the whole public entity sector.
Mike Zaremski (Senior Equity Research Analyst and Managing Director)
Thank you.
Operator (participant)
The next question we have is from Rob Cox of Goldman Sachs. Please go ahead.
Rob Cox (VP of Equity Research)
Hey, thanks for taking my question. I noticed the adjusted compensation margin was down a good bit year-over-year, despite the talent investments, but the adjusted G&A ratio was higher than the first quarter when it's seasonally lower. I would have thought that would be a little bit lower, I think as the first quarter, if I recall correctly, was your toughest comp with respect to travel and entertainment. Is there any, you know, additional color you can provide there?
Tim Turner (President)
Yep. A little bit of that, or I shouldn't say a little. Some of that is T&E, and then another bit of that is professional services that increased significantly this quarter relative to prior quarters, related to a new revenue stream that just requires additional professional services. Over time, that may water bed into comp if we decide to in-house some of those, but for right now, they're through professional services.
Rob Cox (VP of Equity Research)
Got it. Thank you. Maybe just another question, you know, on the, the state of California, which I think is nearly 15% of the E&S market based on data that we look at. I think it's been a net drag on overall E&S industry premium since November of last year, we've seen it tick up, and positively in the double-digits in, in the last two months, which I suspect might be driven by personal lines and property. I'm, I'm wondering if you see growth in California in the back half of the year, and, and how well positioned Ryan is to potentially take advantage of some of those tailwinds, if, if they're there?
Tim Turner (President)
We're, we're very well positioned in the state of California. We have multiple offices. Two of our last large brokerage acquisitions are in the state of California. We've strengthened ourselves there, deep benches in property and casualty and binding. We're building and finishing up a high net worth personal lines facility to complement what we've already been doing in personal lines. We're, we're there to capture that business and to deliver for our clients across California and the West Coast.
Rob Cox (VP of Equity Research)
That's great. Maybe if I could sneak in one more, on cyber. Tim, I think I noted you had recently stated that the cyber market is getting skittish again. I think there's still pricing declines in that market. I guess my question is, are you growing in that market? Do you expect growth to, to pick up or slow down in the back half of the year?
Tim Turner (President)
There's no question there's rate deceleration, and the flow has slowed a bit, but we're still capitalizing on it. It's still a very great opportunity for us. We're well positioned in binding authorities, MGUs, which Miles Wuller can talk about a little further. Our, our cyber team is number 1 in the country, and they're performing at a very high level. Our clients still need us. Miles?
Miles Wuller (CEO of Ryan Specialty Underwriting Managers)
Yeah, I'll, I'll chime in. We, we have noted deceleration in cyber previously, and there has been modest negative change, most observable in the excess layers. You know, but please keep in mind, this was relative to the market, particularly that's achieving 85% rate increase in the first half of last year.
Investments by corporate risk managers have curbed losses, substantial price hikes have helped trade adequacy. It has brought some new capital to space. However, despite the shifting pricing, the overall opportunity remains immense. The cyber threats persist, and we're the industry is still anticipating structural structural growth is averaging 20% per annum for the foreseeable future. We're, we're well positioned with people and product to capitalize on that.
Rob Cox (VP of Equity Research)
Appreciate the color. Thank you.
Operator (participant)
Ladies and gentlemen, just a reminder, if you would like to ask a question, you are welcome to press star and then one. The next question we have is from Meyer Shields of KBW. Please go ahead.
Meyer Shields (Managing Director)
Thanks. I want to follow up on cyber, if I can. Is there any seasonality analogous to what we're seeing in property, where cyber is a bigger factor in a particular quarter?
Tim Turner (President)
There, there is not material seasonality to cyber.
Meyer Shields (Managing Director)
Okay, perfect. And second question, I think this is probably for Jeremiah. A very significant pickup in fiduciary assets going from the end of the first quarter to the end of the second quarter. Is the seasonality that we've seen historically still a good proxy for how fiduciary funds will come and go?
Jeremiah Bickham (CFO)
When you say recently, are you talking about first half of this year or since you've been following us? Just want to make sure I understand the question.
Meyer Shields (Managing Director)
I mean, first half this year. In other words, you know, we saw a pretty big increase going from the first quarter to second quarter last year, and also this year. I'm just wondering whether that the ebbs and flows should be roughly the same every year?
Jeremiah Bickham (CFO)
You know, I, I was actually talking to the treasurer about this earlier this week. I would classify everything that you're seeing in our fiduciary balances as normal factors in timing that can happen. There's been no change to our DSO, no material change to business mix, even though, you know, the different, obviously, wholesale and delegated authority do have different payment terms and DSO. When, when we acquire businesses will impact fiduciary balances, there's nothing, nothing to read into in terms of a material change. It's, it's normal timing factors.
Meyer Shields (Managing Director)
Okay, perfect. Then final question, if I can, for Tim. It sounds based on everything that we're saying, that maybe TNO growth will slow down because we're lapping normal quarters. Are you seeing competitors pull back on that? Is there a specific opportunity from that particular aspect of marketing?
Tim Turner (President)
No, we're not seeing any, any real pullback on that. I'm not sure I understood the, the, the question. Could you repeat that?
Meyer Shields (Managing Director)
Yeah. I'm just wondering, with travel and entertainment, observably much more expensive, I'm wondering whether you're starting to see some competitors say, we're just going to do less of that, and whether there's an opportunity for growth when that happens?
Tim Turner (President)
No, I haven't seen that. In fact, I, I think it's as competitive in our space as it's ever been. We're attending events and on the road, seeing our clients and our underwriters continuously. We're, we're back to full speed ahead, and I, I don't see any pullback from our, our competitors, actually.
Meyer Shields (Managing Director)
Okay. That's very helpful. Thank you.
Operator (participant)
The next question we have is from Michael Ward of Citi. Please go ahead.
Michael Ward (Financial Analyst)
Hi. Thanks, guys. I was wondering, in benefits, what capabilities you might be looking to add. Is it more medical stop-loss or other areas?
Pat Ryan (Founder, Chairman, and CEO)
Yes, it's medical stop-loss, as I'm sure you know, is rapidly growing, moving from fully funded benefit plans to self-insured plans. What interests us greatly is the phenomenon of the size of employer who is moving into self-insured and funding through group captives. In other words, pooling with other employers, employer groups of similar size characteristics. Our strategy is an integrated health solution, heavily driven through self-insured clients, who ultimately, we believe in large numbers, are going to want to be funding that by putting up some of their own capital in group captives.
It's a process of providing services to retail brokers who may not have the resources to provide these services, and frankly, an ability through our professional skills of the talented team that we've assembled, to bring innovative, integrated health solutions, coupled with the self-insured plans that I talked about, and then bringing a very innovative funding mechanism.
We believe that the benefit strategy that we have, excuse me, is going to be a significant, accretive to our total addressable market. We'll be picking up a lot of clients that we believe will be interested in what we're offering. Then we think we have cross-selling opportunities into the P&C side. We're very excited about that.
Michael Ward (Financial Analyst)
Thanks. That's helpful. And then maybe just on the 2025 savings plan. I think you mentioned this, but should we potentially be expecting to see savings a little bit earlier than that, or timing is still the same?
Tim Turner (President)
No, timing is, we're a little bit ahead of schedule on execution, but the material impact to the P&L is, is on the same schedule. No saves this year. Some in 2024, which will be reflected in our guidance next year, and then the, the full annual 35 in 2025.
Michael Ward (Financial Analyst)
Thanks, guys.
Tim Turner (President)
Thank you.
Operator (participant)
The next question we have is from Tracy Benguigui of Barclays. Please go ahead.
Tim Turner (President)
Tracy, do we have you?
Tracy Benguigui (Head of Insurance Equity Research)
Can you hear me?
Tim Turner (President)
We can now.
Tracy Benguigui (Head of Insurance Equity Research)
Can you hear me?
Tim Turner (President)
Yes.
Tracy Benguigui (Head of Insurance Equity Research)
Okay. Sorry. It would be great to learn more about your property E&S wholesale brokering and underwriting management capabilities. Are you more known by the market on the transactional E&S side, or you're more known in the larger property, direct and facultative market?
Miles Wuller (CEO of Ryan Specialty Underwriting Managers)
Yeah, Tracy, it's, Miles Wuller. I'll, I'll start on the delegated authority side. Our, our property capabilities span habitational property, builders risk, renewables, energy, and, and most certainly, cat property. We're able to efficiently service both the, the middle market as well as large accounts. Our, our cat practice is predominantly shared and layered, working some of the largest and most complex risks out there. As, as far as positioning and expectations, I'd, you know, we've noted previously that with our results and expert teams, we increased cat capacity post Ian, and I'm pleased to say we continue to add cat commitments even as recently as this week. We, we've been prudent deploying our cat aggregate and have substantial dry powder, which, which points to a continued great contribution into the end of the year.
Tracy Benguigui (Head of Insurance Equity Research)
Okay.
Tim Turner (President)
I would just add, our, our brokerage capabilities are industry leading. We've been capturing a high percentage of this new business pouring into the channel. I believe our outstanding leadership team in, in the brokerage cat property arena is, is doing a fabulous job, and we... That was a big part of our success in the quarter. We look forward to capturing other, difficult property risks as we move on through the year. There's, there's much more to it than just cat wind.
Tracy Benguigui (Head of Insurance Equity Research)
Okay, excellent. You know, there's a number of new E&S carriers, including some U.K. insurers, which may be a move to be more efficient on the Lloyd's distribution efforts. What I'd like to know is, does this move just cut one layer in that value chain, like business you would have seen anyway, or does bypassing Lloyd's give you a new business opportunity?
Tim Turner (President)
No, I, I would say the net positive on that is it enhances and strengthens our ability to market the business. Lloyd's is obviously an industry leader in the E&S market, but there's multiple access points, and they're a major player in our binding authorities, our MGUs, open brokerage, London access points. It's a, it's a heavy-duty player, and them creating these two E&S facilities that we've been reading about, I see that as a very positive influence on our ability to solve these catastrophic challenges.
Tracy Benguigui (Head of Insurance Equity Research)
Okay. Just to be clear, is that business you would have seen anyway, or is that new business that you would now see?
Tim Turner (President)
It's a combination of new and renewal business. It just enhances our capabilities and strengthens them.
Tracy Benguigui (Head of Insurance Equity Research)
Okay, thank you.
Tim Turner (President)
Operator, do we have another question?
Operator (participant)
Ladies and gentlemen, we apologize for the delay. We'll move on to our next question, which is coming from the line of Ryan Tunis with Autonomous Research. Please proceed with your question.
Ryan Tunis (Senior Analyst)
Hey, thanks. good evening, guys. Just another follow-up on cyber, trying to understand, you know, some of the business, the businesses that are capable of moving the needle on your organic when you have sharp inflections. Obviously, we know D&O can do it, we know property can do it. Is, is cyber one of those businesses where when you really do have big pricing swings, it's something that, that can notably move your headline organic growth rate?
Jeremiah Bickham (CFO)
I, I would just say broadly, this is Jeremiah, Ryan. Cyber, think of that as a product category, which is we've said publicly, is there's no product that's more than single digits in terms of our overall portfolio. In the case of cyber, it's, it's low single digits versus property, which is an entire category of products, making up a very significant part of the portfolio. They're apples and oranges, really.
Cyber is worth talking about it because it's an important, it's an important topic for insureds. It's an important weapon in the arsenal of our professional lines team, and there's a lot going on. As Miles said, the opportunity set's big enough where we do expect that it will be a feature worth talking about as time goes on. It's not the, it's not as material, for example, as like D&O, as public D&O has been over the last several quarters.
Ryan Tunis (Senior Analyst)
Got it.
Miles Wuller (CEO of Ryan Specialty Underwriting Managers)
Ryan, I'll jump in, that even though rate is under pressure, we continue to find ways to grow through new products, new clients, and incremental capacity. We are achieving growth. I also think it's important to note that it has been, last year was a relatively benign loss year. A lot of people were looking for outcomes out of the Ukraine-Russia conflict that didn't materialize. There are increases in attacks year-over-year. There have been some malware incidents, so the threat remains a very active risk environment.
Ryan Tunis (Senior Analyst)
Got it. Then, on the property side, just trying to think about the longevity of this. Would you say that, like, are, are, are carriers generally coming to market and, and getting the rate that they think they need on property placements this year? Or would you characterize it more as there being some type of understanding that, you know, in the marketplace, that getting to whatever their view is of rate adequacy may take multiple renewals?
Jeremiah Bickham (CFO)
I would say more of the latter. They're, they're continuing to get increases. The losses continue to come in. As, as you know, global warming is not going away. It's creating more and more, you know, convective storm activity, the wildfire phenomenon. There's just a lot of tentacles to this issue, and we, we see prices going up.
We see capacity shrinking. What, what took 10 or 20 carriers to build a $100 million tower last year now takes twice as many. Most carriers are shortening their lines, tightening their terms and conditions, and continuing to raise their prices. I don't think we're anywhere near close to where the market can go. The convective storms are, are really doing damage to balance sheets. You know, the modeling has been off in this area, and so our services and our products are needed well beyond the cat wind aspect of property.
Ryan Tunis (Senior Analyst)
Got it. Then just one last follow-up for Jeremiah. I apologize if I missed this, but could you give us some idea what the acquired revenues are on the three deals you completed this quarter?
Jeremiah Bickham (CFO)
It was about $40 million in aggregate.
Ryan Tunis (Senior Analyst)
Thank you.
Operator (participant)
Thank you. It appears we have no additional questions at this time, so I'd like to pass the floor back to management for any closing remarks.
Pat Ryan (Founder, Chairman, and CEO)
Well, thank you all very much. Good questions, thanks for your support and interest in our company. We look forward to speaking to you again at the end of the third quarter. Thank you.
Operator (participant)
Ladies and gentlemen, this does conclude today's teleconference and webcast. We thank you for your participation, and you may disconnect your lines at this time.