Executive Summary / Key Takeaways

• Ryan Specialty (RYAN) delivered a robust third quarter in 2025, with total revenue growing 24.8% and organic revenue growth at an impressive 15.0%, driven by strong casualty performance and strategic acquisitions.
• The company is prioritizing long-term growth and market leadership through significant investments in top-tier talent, de novo formations, innovative products (including the RAC Re sidecar), and advanced technology like AI and machine learning.
• This strategic investment approach has led to a revision of the 2025 Adjusted EBITDAC margin guidance to flat to modestly down and a deferral of the 2027 35% margin target, signaling a commitment to long-term value creation over short-term benchmarks.
• RYAN's competitive moat is built on specialized intellectual capital, a unique centralized back-office system for MGUs, data scientists, actuaries, and a culture that attracts top talent, positioning it as a leader in the complex and growing Excess & Surplus (E&S) market.
• While property pricing faces significant headwinds (20-30% rate reductions), RYAN's diversified portfolio and strong casualty performance are expected to drive continued double-digit organic growth in 2025 and into 2026, with modest margin expansion anticipated in most years thereafter.

A Specialty Powerhouse Forging its Future

Ryan Specialty Holdings, Inc. (NYSE: RYAN) has carved out a formidable position as a leading international specialty insurance firm since its founding in 2010 by Patrick G. Ryan. The company's core mission is to deliver innovative specialty insurance solutions to brokers, agents, and carriers, primarily operating as a wholesale broker and a managing underwriter. This dual-pronged approach, aligning RT Specialty's distribution with Ryan Specialty Underwriting Managers' deep product expertise, has been foundational to its strategy. RYAN's journey has been marked by consistent expansion, achieving its 14th consecutive year of double-digit organic revenue growth by the end of 2024, a testament to its cycle-tested business model and specialized expertise.

The company's strategic blueprint revolves around several key pillars: aggressive pursuit of strategic acquisitions, deepening relationships with retail broker trading partners, robust expansion of its Delegated Authority business, continuous investment in operations and growth, and adeptly leveraging the secular tailwinds of the specialty and E&S markets. This proactive stance has allowed RYAN to consistently anticipate market shifts and capitalize on emerging opportunities.

Technological Edge and Operational Excellence

RYAN's competitive advantage is significantly bolstered by its differentiated technology and commitment to operational excellence. The company has made substantial strides in putting its Managing General Underwriters (MGUs) onto a centralized back-office system, encompassing policy issuance and sub-ledger functions. This centralization streamlines operations, reduces cycle times, and enhances efficiency across various business units. The firm also employs data scientists and actuaries, leveraging data as a critical asset for raising new capital and driving improved results for carriers.

The company is actively investing in new technologies, including AI and machine learning solutions, to digitize workflows, speed up client insights, and automate non-strategic activities. These initiatives aim to reduce processing time, accelerate answers for clients, and elevate the role of the underwriter, ultimately equipping producers to be more effective. While specific quantitative metrics on the direct impact of these technologies are not always disclosed, the strategic intent is clear: to enhance competitive differentiation, improve cost efficiency, and support sustained growth by making the workforce more efficient and enabling faster product development. The ongoing investments in AI and machine learning are seen as critical for staying ahead in an evolving industry, further solidifying RYAN's competitive moat.

Competitive Landscape: A Differentiated Approach

In the competitive insurance services sector, RYAN operates alongside global giants like Arthur J. Gallagher & Co. (AJG), Marsh & McLennan Companies, Inc. (MMC), Aon plc (AON), and Willis Towers Watson Public Limited Company (WTW). While these larger players offer broader, more diversified services and often possess greater global reach and economies of scale, RYAN distinguishes itself through a focused expertise in specialty insurance and a unique value proposition.

RYAN's strategy emphasizes tailored product development for brokers and carriers, allowing for deeper penetration and greater efficiency in niche markets. This contrasts with AJG's broader global network or MMC's integrated risk and consulting solutions. RYAN's operational agility and innovation speed in customized risk solutions can give it an edge in segments requiring bespoke risk management, potentially leading to stronger customer loyalty and recurring revenue. For instance, RYAN's underwriting results have been highlighted as highly differentiated from the broader marketplace, including other MGUs and insurance carriers, attracting capital providers seeking access to niche solutions and improved cost efficiency.

However, RYAN's smaller scale compared to its largest competitors could present vulnerabilities, potentially leading to higher costs in certain areas or less overall market share capture. The company actively manages these dynamics by focusing on areas of niche firming, where its specialized talent and platforms can accelerate growth. RYAN's strong relationships with capital providers, such as its expanded strategic alliance with Nationwide Mutual, further underscore its differentiated positioning, attracting business that might otherwise go to larger, more traditional players. The company's leadership believes its platform is "exceedingly difficult to replicate," providing long-term competitive advantages.

Financial Performance and Operational Momentum

Ryan Specialty's financial performance in the third quarter of 2025 demonstrated significant momentum. Total revenue surged by 24.8% year-over-year to $754.6 million, contributing to a 24.2% increase to $2.30 billion for the nine months ended September 30, 2025. This growth was underpinned by a robust 15.0% organic revenue growth rate for the quarter, and 10.8% for the nine-month period, showcasing the effectiveness of its growth strategies. Acquisitions played a substantial role, adding approximately 9.1% to total revenue growth in Q3 2025 and 11.4% for the nine-month period. Profitability metrics also reflected strong performance, with Adjusted EBITDAC growing 23.8% to $236 million in Q3 2025. The Adjusted EBITDAC margin stood at 31.2% for the quarter, a slight decrease from 31.5% in the prior year, primarily due to significant strategic investments in talent and technology. Adjusted earnings per share climbed 14.6% to $0.47 for the third quarter.

Revenue composition highlights the company's diversified strengths. Net commissions and policy fees grew 21.2% in Q3 2025, driven by new business and expanded client relationships. Supplemental and contingent commissions saw a notable increase of 45.6% in Q3, reflecting strong underwriting performance. Loss mitigation and other fees nearly tripled, increasing 197.2% in Q3, fueled by capital markets activity and alternative risk solutions.

Operating expenses saw increases commensurate with growth and strategic investments. Compensation and benefits expense rose 12% in Q3 2025, largely due to the addition of 1,065 employees (including acquired talent) and overall business expansion. This was partially offset by a $12.3 million decrease in equity-based compensation due to the reversal of certain executive performance-based awards and the natural runoff of IPO-related awards. General and administrative expenses increased 32.6% in Q3, driven by higher professional services and IT charges related to technology initiatives. Amortization expense jumped 79.1% in Q3, a direct consequence of intangible assets acquired through recent M&A, which increased by $267.2 million period-over-period. Interest expense, net, also increased 14.1% in Q3 due to higher debt levels from acquisition activity.

The company's effective tax rate for Q3 2025 was 4.7%, influenced by RSU vesting, stock option exercises, and non-controlling interests. For the nine months, the effective tax rate was 26.4%, impacted by a $48 million non-cash deferred income tax expense from the Common Control Reorganization related to the Velocity acquisition. Net income for Q3 2025 increased by $34 million, but for the nine months, it saw a slight decrease of $4.4 million, primarily due to the aforementioned non-cash deferred tax expense.

Liquidity and Capital Allocation

Ryan Specialty maintains a strong liquidity position, supported by its cash and cash equivalents, robust cash flows from operations, and available debt capacity. As of September 30, 2025, the company had $153.485 million in cash and cash equivalents, with $83.8 million available for general corporate purposes (excluding fiduciary cash). The Revolving Credit Facility had $1,274.6 million available for borrowing out of a total capacity of $1,400 million, and the company was in compliance with all debt covenants.

Cash flows provided by operating activities increased by $125.2 million to $380.4 million for the nine months ended September 30, 2025. Cash flows used for investing activities decreased by $579.3 million to $707.2 million, primarily due to lower business combination costs compared to the prior year. Cash flows from financing activities decreased by $620 million to $5.3 million.

The company's net leverage on a credit basis stood at 3.4x, well within its comfort corridor of 3x to 4x, with management indicating a willingness to temporarily exceed this for compelling M&A opportunities.

Capital allocation prioritizes M&A, which remains a top focus. The company expects to fund future Tax Receivable Agreement (TRA) payments, estimated at $473.2 million in aggregate as of September 30, 2025, with tax distributions from the LLC. The recent Moody's credit rating upgrade from B1 to Ba3 in August 2025 is expected to reduce Term Loan interest rates, further supporting financial flexibility.

Outlook and Strategic Investments

Ryan Specialty is confident in delivering another year of double-digit organic growth for the full year 2025 and is well-positioned to sustain similar levels into 2026 and beyond. This outlook is driven by continued growth in its casualty business, which benefits from solid flow into the E&S channel and expertise in high-hazard classes. The company also expects to offset soft property pricing, which is anticipated to see continued deterioration (20-30% rate reductions) in Q4 2025 due to increased capacity and a benign hurricane season. However, the long-term outlook for property remains optimistic, given the frequency and severity of catastrophe events and increasing population in affected areas.

The company is making significant strategic investments in talent, de novo formations, innovative products, and technology. This includes ramping up recruitment efforts, particularly for Ryan Re (its reinsurance underwriting MGU, which gained delegated authority for Markel (MKL)'s reinsurance renewal rights book from Nationwide) and its Alternative Risk business. The launch of RAC Re, a collateralized sidecar, further adds diversified capacity to the underwriting platform. These investments are expected to create near- to medium-term margin pressure, leading to a revised 2025 Adjusted EBITDAC margin guidance of flat to modestly down compared to the prior year. Consequently, the 2027 target of 35% Adjusted EBITDAC margin has been deferred, reflecting a strategic choice to prioritize long-term value creation and market leadership over short-term benchmarks. Modest margin expansion is anticipated in most years going forward, while maintaining flexibility for strategic investments. GAAP interest expense for 2025 is projected at approximately $223 million, with $54 million in Q4, and is expected to be roughly flat in 2026.

Risks and Competitive Positioning

Despite a strong outlook, Ryan Specialty faces several risks. The property market's volatility, characterized by declining rates and increased competition, remains a near-term headwind. Macroeconomic uncertainties, including elevated borrowing costs, tariffs, and potential government shutdowns, could impact construction and transactional liability businesses. The ability to successfully recruit and retain top talent is crucial, as new hires typically take 2-3 years to become fully accretive, impacting short-term margins. The integration of numerous acquisitions also carries inherent risks.

However, RYAN's competitive positioning is strengthened by its ability to attract top talent, its differentiated platform, and its focus on the E&S market, which continues to outpace the admitted market. The company's deep expertise in high-hazard casualty lines, its expanding delegated authority business, and its strategic alliances (e.g., with Nationwide Mutual) create a "competitive moat" that is difficult to replicate. RYAN's proactive approach to technology, including AI, further enhances its operational efficiency and ability to deliver innovative solutions, setting it apart from competitors who may struggle with scale or specialized capabilities.

Conclusion

Ryan Specialty's third-quarter 2025 results underscore a compelling investment thesis rooted in its robust growth, strategic vision, and differentiated capabilities within the expanding specialty and E&S insurance markets. While the company is making a deliberate trade-off of near-term margin expansion for significant long-term investments in talent and technology, this strategy is designed to solidify its position as a global leader. The impressive organic revenue growth, coupled with strategic acquisitions and a resilient casualty business, demonstrates RYAN's ability to thrive even amidst property market headwinds. Investors should recognize RYAN's commitment to building a durable, high-growth platform, where technological leadership and a unique talent-centric culture are expected to drive sustained industry-leading performance and long-term shareholder value, despite the temporary margin pressures from these critical investments.