Greetings. Welcome to the Ryan Specialty Group First Quarter 2022 earnings call. At this time, all participants are in a listen only mode. A question and answer session will follow the formal presentation. If anyone should require operator assistance during the conference, please press star zero on your telephone keypad. Please note this conference is being recorded. I'll now turn the conference over to your host, Noah Angeletti. You may begin.
Thank you, operator. Good afternoon and welcome to Ryan Specialty Group Holdings first quarter 2022 earnings call. This afternoon, the company released its financial results for the quarter ended March 31, 2022. The earnings release is available in the Investors section of the company's website at ryansg.com. I would like to remind everyone that certain statements made during this call are not based on historical information and may constitute forward-looking statements. Any statements that refer to projections, forecasts, guidance, outlook, or other characterizations of future plans, including integration expectations, restructuring initiatives, events or circumstances, including any underlying assumptions, are forward-looking statements. These statements are based on management's current expectations and beliefs and are subject to a number of trends and uncertainties that could cause actual results to differ materially from those described in the forward-looking statements.
I refer you to the Company's filings made with the SEC for more detailed discussion of the risk factors that could cause actual results, timing, levels of activity, performance or achievements to differ materially from those expressed or implied in any forward-looking statements made today. Investors should not place undue reliance on any forward-looking statement. The Company undertakes no duty to update any forward-looking statements that may be made during the course of this call, except as required by law. Additionally, certain non-GAAP financial measures will be discussed on this call, including organic revenue growth rate, Adjusted Net Income, Adjusted EBITDAC and Adjusted Diluted EPS. Our presentation of this information is not intended to be considered in isolation or as a substitute for the financial information presented in accordance with GAAP.
Reconciliations of these non-GAAP financial measures to the most closely comparable measures prepared in accordance with GAAP are included in our earnings release, which is available in the Investors section of the company's website at ryansg.com. With that, I'd now like to turn the call over to the Founder, Chairman, and Chief Executive Officer of Ryan Specialty, Pat Ryan.
Good afternoon, everyone. Thank you for joining us on our first quarter 2022 earnings conference call. On today's call, I will provide a brief overview of the quarter and our strategy moving forward. Our President, Tim Turner, will then give an update on each of our three specialties and recent events. Lastly, our CFO, Jeremiah Bickham, will walk you through our financials. We'll then open it up for Q&A. Our first quarter of 2022 picked up seamlessly from our outstanding 2021 performance as we grew total revenue of 24%, led by organic revenue growth of 20%. We also achieved double-digit growth in adjusted EBITDA and adjusted net income on a year-over-year basis. Our excellent results were driven by strong growth across all three of our specialties.
Our strong performance this quarter and in prior quarters continues to demonstrate that our differentiated platform provides considerable value to our clients and enables us to outperform in various environments and against any competition. We are pleased to see that the E&S marketplace remains robust. Market changes we've received on the periphery, which we flagged on our prior earnings call, have not yet developed. Broadly speaking, rates remain resilient in the majority of our lines of business. Our rate increases have moderated. They've been more than offset by the continued expansion of the E&S market. We continue to add to our best in class team. We hit the ground running with onboarding new teammates in Q1, particularly in our underwriting management specialty, proving that we are a destination of choice for the top talent in the industry.
We believe we offer leading underwriters and brokers a unique value proposition, the ability to build a business by leveraging our industry leading capabilities, which provides them with strong financial backing and infrastructure support, allowing them to focus on providing innovative solutions for our clients. Further bearing this out is our industry leading retention for underwriters and producers, which speaks volumes to our winning culture. Moving forward, we expect to stay the course on our growth initiatives. We are on pace to onboard our largest broker class ever in 2022. We remain confident that these investments in the next generation of teammates will be accretive for Ryan Specialty going forward. We are pushing ahead in our formation of de novos, which you'll hear more from Tim on. Moreover, as we have previously conveyed, we will complete our $25 million 2020 restructuring program by June 30th of this year.
Looking ahead, we remain very confident in our ability to maintain steady and profitable growth. The E&S market continues to expand as the complexity of risks increases. As we have for the last 11 years, we continue to take market share from our competitors. Along with our strong organic growth, we continue to maintain a highly active M&A pipeline as we look for additional opportunities to enhance our platform and capabilities. We have a strong balance sheet and ample capacity that enables us to act when we find the right opportunities. As we've noted before, we will remain disciplined and move forward only when we identify an opportunity that we believe is strategic, a strong cultural fit, and accretive to our shareholder returns.
Simply, this was another outstanding quarter for Ryan Specialty due to our incredible team that is unwavering in their dedication to our clients and trading partners, our time-tested business model, and our winning culture. We are well-positioned to sustainably and profitably grow our business and to continue delivering long-term value to our shareholders. With that, I'll now turn the call over to our President, Tim Turner. Tim?
Thank you very much, Pat. As Pat highlighted, we picked up in 2022 right where we left off at the end of 2021 with a strong quarter across our specialties. These results are a testament to the teamwork across the firm, to our producers, our underwriters, and their teams who roll up their sleeves and work day in and day out on behalf of our clients. In addition, we made significant strides in the quarter, expanding our talent base, broadening our product offerings, and continuing to strengthen our value proposition to our broker clients and capital providers. Our wholesale brokerage specialty continued to experience excellent growth across all property and casualty lines of business. In particular, CAT property continues to see record submission flow as admitted markets face pressure from reinsurers de-risking their portfolios, which pushes more business into the E&S market.
Construction is another vertical where we see significant increases in flow, with our industry-leading team seeing solid double-digit increases in submissions for both infrastructure projects and habitational construction. Also, our professional liability, healthcare, and cyber lines see an increasing flow of business into the E&S channel, which is driving outsized growth. We're also seeing strong growth in our transportation practice as the addition of Crouse and Associates has proved to be essential in winning accounts across our firm. Within our binding authority specialty, we continue to see strong growth in our small commercial lines and are experiencing widespread success in our binding carrier contract renewals. We're keeping a close eye on additional opportunities in the delegated authority market to consolidate into Ryan Specialty and continue on the path toward creating the first truly 50-state binding authority operation.
Our underwriting management specialty also delivered a strong first quarter, growing revenue by double digits on a year-over-year basis while continuing to deliver solid profits to our carrier trading partners. As we've noted before, we appreciate the trust these carriers have shown in us, and we are careful to manage our growth with the need to deliver underwriting profit for our trading partners. As a follow-on to our remarks in the last call, I'm very excited about our strategic arrangement with Nationwide, which provides us with limited exclusive access to its Harleysville of New York A+ 15 AM Best-rated paper to support our underwriting manager specialty and alternative risk strategy. Through this arrangement with Nationwide, and as we mentioned last quarter, we're excited to update you on the progress of two of our de novo MGUs.
The first is AXSAL Re, an excess commercial auto insurance alternative risk group captive program created and managed by our recently acquired Keystone team. The AXSAL Re captive will reinsure Nationwide's fronting capacity, with Nationwide retaining a percentage of the risk directly and through our Geneva Re joint venture. The second is Emerald Underwriting Managers, a primary and excess general liability MGU. We expect that Emerald will very soon be writing on Harleysville paper on an exclusive basis. The environment remains full of opportunities within this business line. We are very optimistic about the opportunities created by this new strategic alignment and these two de novo programs. These provide additional tools for Ryan Specialty to service our clients and trading partners. Additionally, our M&A pipeline remains robust, as Pat noted, including potential small and large opportunities and across a number of specialties.
In terms of the E&S market, the environment remains very positive. While competition is still entering the market on the fringes, we have yet to see competition accelerate in any meaningful way. Pricing remains firm in nearly all lines of business, and flow was very steady through the first quarter of the year and through April, particularly with additional stress that we have seen in the admitted market. We expect the increasing flow of business i nto the non-admitted market to continue 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 first quarter. Thank you.
Thank you, Tim. In Q1, we grew total revenue 24% period over period to $387 million, which was fueled by strong organic revenue growth of 20.1%, benefiting from the continued tailwinds in the E&S market and the market share gains that Pat and Tim noted earlier. We were once again very pleased with our performance, and especially with the very strong finish to the quarter. Net income for the first quarter of 2022 was $18 million or $0.06 per diluted share. Adjusted Net Income for the quarter, which excludes IPO related and other unusual items, increased 13% period over period to $65 million or $0.24 per diluted share.
Adjusted EBITDAC for the first quarter grew 14% period over period to $107 million, while Adjusted EBITDAC margin declined 260 basis points to 27.7%. Primary drivers of our adjusted EBITDAC increase were our revenue growth, the continued realization of savings from our 2020 restructuring plan, and lighter professional services spend, which we expect will pick back up in Q2. However, our margin was impacted by continued investments in the business, public company costs as we were private in Q1 of 2021, and T&E returning to normalized levels, which we flagged in our remarks last quarter. As a reminder, the latter two items will impact the second quarter margin as well. It's important to note that relative to Q1 of 2020, our margin is up 560 basis points.
As we previously noted, the current environment offers us a unique and very exciting opportunity to hire A-plus level underwriters and brokers, and we expect to capitalize on this opportunity in future quarters by pursuing and onboarding top talent to our platform. Over the long term, we expect that our growth will yield additional and sustainable operating leverage in the form of Adjusted EBITDAC margin. Furthermore, our balance sheet remains quite healthy. During the quarter, we completed an opportunistic $400 million high yield offering at a rate of 4.375%. In April, we converted our credit facilities to a term SOFR benchmark and purchased an interest rate cap on $1 billion of SOFR with a strike of 2.75%, capping our rates on that $1 billion through 2025.
We would expect to straight line the cost of the cap over the life of the instrument. Further on interest rate exposure, we have a natural hedge with our operating and fiduciary cash balances, and similar to our peers, it earns a modest yield tied to the risk-free rate. In short, we believe that we are very well insulated from steep increases in the federal funds rate. Given our strong execution and a resilient E&S environment, we have raised our full-year 2022 outlook for organic revenue growth and Adjusted EBITDAC margin as follows. We are now guiding organic revenue growth rate for the full-year 2022 to be between 13.5% and 15.5%. We continue to believe that our guidance is prudent given the prolonged stages of a very hard market and increased flow into the E&S market.
We are also taking up the low end of our Adjusted EBITDAC margin range for the full year 2022, and are now guiding to end the year between 28.5% and 30.0%. As we previously noted, we are investing heavily in talent and growth in 2022 in order to continue serving our clients over the long term, and many of those investments will be made in the second quarter and subsequent quarters. In summary, we are very pleased with our performance during the first quarter of 2022 and remain very excited about the path ahead for Ryan Specialty. With that, we thank you for your time and would like to open up the call for Q&A. Operator?
At this time, we will be conducting a question and answer session. If you would like to ask a question, please press star one on your telephone keypad. A confirmation tone will indicate your line is in the question queue. You may press star 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. Our first question comes from the line of Elyse Greenspan with Wells Fargo. Please proceed with your question.
Thanks, good evening. My first question, so you guys took up your organic guidance. Just trying to get a sense, it sounds like you're not really seeing, you know, kind of the competition that you said you might have seen on the fringes, right from last quarter. When you put together this new guide, are you assuming that you start to see that to a greater degree over the balance of the year? Or, you know, how should we think about just that impact on organic as we move through 2022?
Well, I'll start with that. It's Pat, and Jeremiah will pick it up. It's just very hard to predict. We're not seeing much of it now. That's really the story on that. We just think it's prudent to keep those historical facts in mind. Jeremiah, why don't you pick it up?
Yep. That's the most important piece out of prudence and in an effort to be transparent and helpful, we flagged competition we were seeing and noted that in our forecast, there's the presumption that the markets cool off later in the year. The other thing. That's still a factor in our forecast, just to be clear. Even though, as Pat said, we haven't seen that accelerate, we still think that that's prudent to keep in the forecast. We also mentioned in the last quarter, and I'll just reiterate, to give some additional context on why the guide moved the way it did. You probably realize that our quarterly estimates are not linear, so the organic that we produced Q1 and how it relates to the full year guidance was not a total surprise to us.
You know, in addition to what we've observed in the past from the way extended hard markets eventually change, we also wanna acknowledge the macro uncertainty out there that Pat noted last call as well. Rising interest rates, inflation, general economic uncertainty and war. Remember that we're only four months into the year, and we'd love nothing more than to come give you a positive update in a couple of months. Q2 is actually our biggest quarter of the year. Hopefully that's the case, but in the meantime, we feel the need to be prudent.
My second question, you guys mentioned that you're gonna be investing, right, investing in talent and, you know, kind of bringing on more underwriters and brokers, you know, starting in the second quarter. My sense is, you know, when companies have flagged hiring, right, that there's typically a lag, right? There might be an impact on expenses, right, to start and then, you know, it takes time for these individuals to ramp up and really help from a revenue perspective. Can you help us think about the timing here? Is this something that you think could be a tailwind to organic growth in 2023, you know, as you kind of ramp up on the hiring front this year?
I would say that it's a mixture of that. We have onboarded some very exceptional talent already. We expect that they'll start to produce in the second, third and fourth quarter. Additionally, we've hired people that have garden leave, and so that can be anywhere from 90 days to six months. They're committed, they're highly talented, and they're real professionals. In fact, those expenses will come on in the third and fourth quarter, those that are deferred through the garden leave. It's hard to say how productive they'll be in the third and fourth quarter, but these are seasoned professionals who have a great reputation in these niche practice groups that they're involved in.
We're very optimistic about their ability to contribute to the relatively near term.
Okay. Thanks for the color.
Thank you, Elyse.
Our next question comes from the line of Weston Bloomer with UBS. Please proceed with your question.
Hi. Thanks for taking my questions. My first one's a follow-up on the organic growth guidance. To what extent does your guidance forecast a recessionary environment as in the back half of the year? Do you think you can kind of maintain that overall organic growth in a potential recession? Just kind of curious how I know you weren't necessarily public during the 2020 timeframe, but how did your book hold up over then? How are you positioned now? Thank you.
Weston, this is Jeremiah. Let me start on that. I think some context around how we build our budgets and our forecasts. It's actually not a top-down process. We go out to every producer, every underwriter in the field, and they have to do a bottoms-up by-account build that we aggregate and interrogate, and that's how we get to our projections. A consistent theme as we were building the budget this year was this assumption, and different timing for different lines, is that there would be a market slowdown. You know, these people are highly seasoned professionals. They know their books, they know the market, but they're not making assumptions, and we're not layering in broader assumptions about the macroeconomic environment.
Earlier this year, I mean, the things have already changed a lot just since January or February, so we're not making predictions about a recession or the timing or anything like that. It's really hard to say, you know, how would your forecast do against a recession or something like that. Every recession is different, as you know, Weston. What I can do, since you asked specifically, is there was a significant economic downturn in 2022. We put up record organic growth during that period.
In what?
I'm sorry, in 2021. In 2020 and 2021, we were dealing with the effects of the pandemic. You wouldn't know there was a pandemic or a downturn going on just based on our financials. If you look back to the prior two recessions, we certainly weren't public at those times, but the other brokers were resilient. I don't have a great answer for you on how our specific forecast would change if we entered a recession. As Tim mentioned and Pat mentioned in his remarks, the overall insurance market conditions that affect us the most are still healthy. That's a positive sign. Then there's some other mitigating factors for us that are helpful if we get into a period of economic uncertainty.
For example, the majority of our expenses are comp, and the majority of our comp is performance-based and therefore variable. We're not concerned, but we don't have a lot of precision around how our forecast changes in a recession.
There's another point that I would add to that, which is a high percentage of our brokerage and managing underwriting business provides compulsory insurance products. We're not heavily into discretionary. The compulsory is they have to buy insurance because it's the law in comp or auto, or they're borrowing money and the banks require it, the lenders require it. It's a matter of what's happening to exposures, what's happening to payroll, et cetera, as you run into a tougher insurance market, but also a slowdown in the economy. There's not an ability to predict that balance, but clearly the world is getting riskier and then there's inflation, so that's raising exposures and that does raise premiums. But there's just no way to calibrate that. It would be inappropriate for us to try to give you a number on that.
Nobody can do that.
Got it. That's all very helpful. My second question is more on the margin outlook, specifically around the compensation. I know you said you saw a pretty steep pickup in hiring. I think total compensation was up close to 26% in 1Q versus 12% last quarter. Just how much of that increase was from hiring versus general wage inflation trends? Can you help me think about those two metrics as I move through the year? Like, is 1Q the high watermark for the accelerated increase in hiring or should it accelerate further from here? What are your expectations for wage inflation throughout the year? Thank you.
Why don't you answer the wage inflation? I'll talk about the hiring.
Yeah. Pat will talk more about this, but the timing, I'll just give you a teaser. The hiring environment, the hiring opportunity we still consider very rich, depending on how you want to look at it, whether you're talking about the broker class or others, we're on pace to be ahead of schedule there. The timing of that is a little bit difficult to predict. Wage inflation, we've seen it. We've seen the impacts as we look at, you know, offer letters, for example, for salary employees that go out relative to what we had planned. There are some surprises, some increases in there. Again, the majority of our compensation is related to producers, and they're paid on a formula that's tied to revenue. When their comp is going up, it's because revenue is going up proportionally.
The rest of the salaried or the non-variable comp piece hasn't had a material negative impact on us yet.
We remain a destination of choice for talent in brokerage, binding, and managing under a delegated authority. So that we're casting a wide net for exceptional talent. We're not looking to just bring people in that are doing fine. We're looking for people who historically have done really, really well, that they can prosper in our culture and on our platform and our environment. You can see the benefit of that as All Risks brokers and underwriting, binding underwriting brokers have really increased their productivity. We can already see that in Crouse.
The idea is to keep bringing in seasoned professionals while, as Tim had referenced, bringing in young people right out of college and university or out of the military, who have a lot of talent and no experience, and putting them through our training program and our development program. All of those are accelerating.
Got it. That's all super helpful. Thank you.
Our next question comes from the line of Jimmy Bhullar with J.P. Morgan. Please proceed with your question.
Hi. I had a couple of questions. First, just on organic growth. If you look at your results in 1Q, you mentioned in the release several drivers of that, including, I think, new clients, expanded relationships with existing clients, pricing. Can you give some dimension on what the contribution of each was or which one was a bigger driver than the other to the extent you're able to quantify, the various drivers of the organic growth in 1Q?
We don't break that out, Jimmy. What I will reiterate, though, is that. You know, if you're thinking about rate versus exposure rate versus flow. The latter is much more significant in terms of driving growth opportunities for us. The flow, and Tim can expand on this, but what we're seeing, what we saw in Q1 and what we've seen reflected in the organic growth numbers was a healthy amount of new business, a healthy amount of flow into the E&S market that we were able to take more than our fair share of. As our existing clients' needs and the risks that were already in E&S grew, we believe that we took more than our fair share of that as well. It's a very balanced attribution.
Tim, is there any more color you wanna add?
No. I would just add that the increase in non-admitted property and casualty business into our channel increased through the stamping offices and our association that records it, WSIA. We know the flow continues to grow, and as Jeremiah said, we're capturing more of that.
Okay. Can you talk about fiduciary income and what do you expect for that? Like, how sensitive is it to the moving rates and to the extent you're able to quantify what your expectations are?
Say that again, Jimmy.
Fiduciary income.
On fiduciary income, how should that benefit or be affected by the rise in rates? How much leverage does it have to the increase in rates?
I'm glad you brought that up because I know inflation and rising rates are on everyone's mind. We've got fixed rate debt, we've got interest rate caps, but our biggest hedge is a natural hedge, and it's the $hundreds of millions that we have on our balance sheet, that's that premium in transit that we can invest. Now, remember though, that money doesn't belong to us, so preservation of capital is priority one, two, and three. All the states have different rules about what you can do with it, and some of them are as limiting as you gotta keep it in a savings account at a bank. Our yield opportunity doesn't track perfectly with the federal funds rate or SOFR, but conservatively.
It's gonna depend on a number of different things, Jimmy. Something conservative to model for this year as everything is moving around, and obviously the yield opportunity, there's a lag to when interest rates rise. I would say one-month term SOFR minus 50 basis points we could comfortably achieve this year. In a, you know, over the medium term, in a more stable environment, we may be able to get tighter, but that's a safe assumption on our bid balances this year.
Okay. Just lastly, if I could ask on your comments around talent and hiring. I think you mentioned it's a good environment for hiring. I would've thought it would be a bad environment for hiring given just wage inflation, competition for talent, low unemployment. Can you just expand on that a little bit? Are you talking about people from other brokers? Are you talking about people from outside the industry?
Both other brokers and other managing underwriters. We're not having a real problem with that because we have a very performance-based comp plan. We can pay nice rewards for good and exceptional performance. As people look to join us, they're not looking at what is their salary as much as they're looking at what is the growth opportunity in my short-term incentive plan and this platform that I'm joining. You know, frankly, we do have our equity program that's well-disciplined, but that's attractive to people as well.
As we said in the past, one of the benefits of our going public, in spite of what's happened in the market in the last short period of time for everybody, almost everybody, you know, the liquid stock, the New York Stock Exchange listing security is very attractive to people. And so the combination of all of that is giving us an opportunity to be quite competitive in terms of hiring without reaching in terms of fixed costs.
Cool. Thank you.
Our next question comes from the main line of Alex Scott with Goldman Sachs. Please proceed with your question.
Hi. Yeah, thanks for taking it. First one I had is just on the M&A pipeline. You know, any comments you have on what that looks like and how the current environment and, you know, potential changes in costs of capital and so forth would impact your M&A plans?
Well, that's a question that we really welcome because we've been working pipeline, and as we said, the pipeline is robust. I think you know by now that we're quite deliberate. We always start with the cultural fit and then the strategic fit. We don't do opportunistic deals, we do strategic. We have discussions going with people that have proven their cultural fit, meet our strategic demands, and now we're in discussions to see that we can work out terms, including price, et cetera, et cetera, to be accretive to our shareholders. Sometimes it takes a little longer for them to be able to prove the accretion. You can have discussions that could be prolonged for a few months.
Like, here's what we expect we can do on our own, and here's what we think we can do to help them once they're with us. It's not always a natural meeting of the minds, but because we are a destination of choice, we have had the ability to continue those discussions until we're satisfied that, yes, this is a deliverable, we can make it accretive, and we move forward.
Oh, that's helpful. Thank you. Second one I had is around inflationary impacts on the top line. I guess, you know, some of the primaries talked about how exposure can also be impacted by, you know, the changing value of the underlying, you know, products, property, et cetera, that's being insured. You know, I'd be interested, you know, what sort of embedded in your plans around that? I would think since maybe you laid out your full year, you know, inflation's ticked up and, you know, is that something that would help a bit just on the exposure unit side in terms of revenue growth?
It definitely could, and we're hearing the same thing from carriers that as loss costs go up, they need to keep up. Periods of high inflation, what typically follows is a hard market as well. There's a couple different factors that could provide potential tailwinds to us. We're not, we haven't gotten too cute on the back half of the year in terms of the current inflationary environment and that providing a big boost. There's certainly the potential for it, though.
Well, the other part of that answer is that this is where brokers really earn their distinction. Because with inflation, and of course, with interest rates moving up, coverages that were written one year ago, 18 months ago, two years ago, are gonna be paying out in higher claims because of inflation, including social inflation. I think a lot of people are saying that inflation is not transitory now, it's a matter of how far and how fast it goes. The good brokers, and that's generally defines our team and our underwriters, are very careful because they have a responsibility to make sure that they're guiding the client to protecting this exposure increase. You know, less experienced and less qualified brokers can take the easy way out and, you know, assume lower exposure increases.
I think our people are really professionally oriented to deal with that. That does drive exposure increase. Very hard to quantify, but it's real.
Thank you.
Our next question comes from the line of Tracy Benguigui. I'm sorry for mispronouncing. From Barclays. Please proceed with your question.
Thank you. On a seasonality perspective, you previously mentioned that the first and third quarters you see lower organic revenue growth, and in the second and fourth quarter, the opposite. I'm wondering if there are any pull forwards in the first quarter that could affect second quarter organic revenue prospects, or do you expect the same quarterly cadence of organic growth?
Tracy, I'm glad you asked that because Q1 and Q3 don't necessarily have to be the lowest organic growth. They're just the smallest. Q2 and Q4 are the biggest. Sometimes that aligns with organic growth, but sometimes not. Look at last year, Q3 was, I believe, our highest organic growth percentage that quarter. We expect the seasonality in terms of quarter size to follow its usual pattern. One in three, the smallest, two and four, the biggest. We're not attributing what we achieved in Q1 to be related to any material timing issues like Q1 versus Q2 or Q1 and Q4.
Got it. That's helpful. Just a follow-up on your comment that you're actually seeing very steady flow of the E&S market through April. I'm just wondering what about the next wave when risks are really hard to place? It goes from admitted to non-admitted to eventually Bermuda. You mentioned your Geneva Re joint venture earlier. Can you remind us your Bermudian capabilities and over time, if you could see meaningful growth in that market?
Well, Geneva Re has partnered with Nationwide, and Ryan Specialty and then Ryan-related investors are very conscious of the underwriting discretion required to in effect do this appropriately. There's a conservative attitude on that. We have really high quality underwriters. I would add that, you know, we're dealing with really high quality retail brokers. We're partnering together with those retail brokers to make sure that as the business that they're bringing comes to the E&S market, you know, it's properly placed and it's placed with high quality carriers. You know, the partnership with Nationwide with A+ 15 does attract quality business. That's all working out quite well.
Can you also just remind me, you account for that stake at Geneva Re under the equity method, so, you know, could we see that category growing over time as maybe another source of income?
No. No, it's a capital growth strategy.
You'll the benefits of it, Tracy, though. There's our capital investment, which you're correct to remember it's on the balance sheet as an equity method investment. Related to Geneva Re is our reinsurance MGU Ryan Re, which we wholly own as of, I believe, the end of Q1 2021. You will see the impact of that relationship and the growth in that MGU flow through our P&L like the rest of our MGUs.
That's a really good point. I probably misunderstood the bulk of that question. We were able to attract unusually capable, reinsurance underwriting talent. Partnering with Nationwide and their A+ 15 balance sheets, they're carving out a very nice market position with high quality ceding companies. As a result of that, we've expanded our total addressable market significantly because we're now working with insurance carriers on providing them services that, you know, really are in our mission statement. That is an added dimension to the joint venture relationship that we've described. When you have exceptional talent as we have, and you have A+ 15 quality balance sheets, you attract very high quality business, and that's what's happening.
Got it. Thank you.
As a reminder, if anyone has any questions, you may press star one on your telephone keypad. Doing so will ensure your spot on the question and answer queue. Our next question comes from the line of Meyer Shields with KBW. Please proceed with your question.
Thanks, and good afternoon all. One of the issues that you talked about on, I guess early on, was that when retail brokers consolidate, then the fact that those retail brokers have consolidated their wholesale panels also to your benefit. I was hoping you could talk about what exposure maybe the growth trajectory has if higher interest rates slow down the retail brokers acquisitions.
That's a very good question. It's that effect is certainly not measurable yet, but if interest rates, we already are hearing whispers from out in the M&A landscape that certain PE investors, for example, are thinking of a pause or a delay, maybe a wait and see on their M&A approach related to interest rates. To the extent that strategics, the big retail brokers that are our trading partners that consolidate essentially customers for us, to the extent that that changes their M&A outlook, it could have an impact, but I would expect the strategics to have a more durable thesis on roll-ups and consolidation than the strategics just because they're strategic. The most important thing is, Meyer, we haven't seen that impact yet.
Okay. That's helpful. Do you have any idea of the timing of it? In other words, if I'm assuming catastrophic scenarios, but if M&A goes away in the retail market, does it show up immediately in terms of slower growth, or is there any sort of lag?
That's probably a question for Tim.
Sure. I'd be happy to. Hi, Meyer. No, we can't see any slowdown in growth related to M&A. I mean, most of these clients that are involved in it are our clients.
The acquiring agency and the ones being rolled up in the private equity roll-ups, and even the, you know, the publicly traded broker clients. We just don't see that really affecting the business that's coming our way right now.
The other part of the M&A is that, as you know, we've established a third vertical in benefits, which is gonna be mostly managing underwriting with some, you know, consulting attached to it. Then the fourth vertical being alternative risk. There are opportunities in each one of those sectors that are quite interesting with some fairly abundant opportunities. It's really up to us to select the right ones for us. Both of those strategies and those verticals are in sectors that M&A activity is picking up in.
Okay, fantastic. That's all I had. Thank you.
We have reached the end of the question-and-answer session, and I'll now turn the call back over to Pat Ryan for closing remarks.
Thank you, operator, and thank you, ladies and gentlemen, for your continued interest and support of Ryan Specialty. We always enjoy these discussions and the good give and take in the dialogue. We look forward to speaking with you again when we discuss our second quarter 2022 results. Thanks for your interest in our company. Have a good evening.
This concludes today's conference, and you may disconnect your line at this time. Thank you for your participation.