Thank you, everyone. Welcome to the Leveraged Finance Conference . We are here today for a presentation by TriNet. TriNet is a PEO for small, medium-sized businesses. Joining us today for the company is Kelly Tuminelli, who is the EVP and CFO of the business. With that, I will turn it over to Kelly.
Great. Thank you, Stuart. Good afternoon, everyone. I'm Kelly Tuminelli, TriNet CFO. I'm thrilled to be here talking to you about a great company that powers the success of small and medium-sized businesses. Before I begin, I want to point out the cautionary note regarding forward-looking statements and the other financial information. This presentation is being webcast and will be available for replay. Now, turning to our investment highlights. TriNet's an innovative leader in the PEO space and for this large addressable market. We serve the SMB market with two products, our PEO and our HRIS platforms, and we employ an intentional and targeted vertical strategy. We are focused on using scale in service of our customers, and we believe over time, we will continue to deliver operating leverage. Ultimately, we have historically driven profitable growth, supported by strong cash generation.
In the SMB space, there are over 60 million people who work for companies with 500 or fewer employees. Not all work for companies who would use a PEO. Currently, only about 7% of this population are employed by PEOs. Most of this market is available for HRIS solutions, providing opportunities for us to grow with customers, offering them valuable solutions that fit multiple points of their business life cycle. When you think about growing a business, these SMBs are faced with three core challenges: compliance, complexity, and cost. These challenges have changed over time. For example, remote work is a huge new challenge, and compliance across various states has become a bigger challenge as regulations multiply, as states go their separate regulatory ways. The co-employment construct under a PEO can simplify the back office for the SMBs.
Now let's move on to Slide 9 and discuss our technology. TriNet goes to market as the industry-leading technology provider, and importantly, for both our traditional PEO offering or our contemporary HRIS platform, we own our technology. Our technology platform enables our SMB customers to access a robust service set, often not available to SMBs. Expense management using our cloud-based app, benefits enrollment and management, payroll, workforce analytics, just to name a few. All of these are delivered through the web or through our industry-leading mobile app. In February 2022, we acquired Zenefits, giving us a cloud-based HRIS solution with 219,000 average users. New products such as benefit administration and are combining of our integrated open market solutions, or IOM, which is a brokered benefit PEO offering, and we manage a highly scalable technology platform we're leveraging for our digital transformation.
The integration of Zenefits is on track, and the business, while still a small part of our revenue, is progressing well. Now, let's talk about some common PEO products and services for those of you that aren't familiar with the model. Here you can see a broad list of services we offer and frankly, provide as a part of our PEO product. As you can see, it's quite comprehensive. I think at the highest level, we offer payroll services, which underpin so many of our services. Through the co-employment construct, we offer HR expertise and federal, state, and local compliance, a comprehensive list of health benefits, workers' compensation, and many other services. When you think about services, with well over 20,000 customers across our PEO and HRIS platforms, scaling our services is critical to efficiently and effectively servicing our customers.
We offer a mix of named service reps, access to experts, and solution centers. We enable customers the ability to access service through the medium they prefer, whether that's email, phone calls, or through chat. On our most recent earnings call, we talked about improved retention. We attribute a large portion of that improvement to our service model and how we've improved our execution of the model over the last few years. This is evidenced in our strong NPS scores from our customers. Now, you've heard me mention verticals, and this is really a key differentiator for how TriNet goes to market. We go to market with our vertical strategy, where we target six core verticals: financial services, life sciences, Main Street , nonprofit, professional services, and technology, which is our largest vertical. The core of the vertical strategy is really two parts.
We want to make sure that our customers understand that we are their industry experts, and our products and services are great fits for them, and we designed our product to cater to the most valuable part of the SMB market. This customer base values our high-touch, differentiated service offerings and the breadth of plan options available to them. For example, in our targeted verticals and sub-verticals, given the product fit, our customers have a lifetime value over 10 times that of broad SMBs. A key part of the PEO offering and really another differentiator for TriNet is our insurance offering. We offer the most comprehensive access to benefits available to SMBs through our over 200 plans. While we offer SMBs access to health plans, not all of their employees enroll in our plans.
Regarding our plans, we take a deductible layer for a little over 80% of our health insurance participants. This enables us to offer unique plans and price and reprice our customers based upon their risk. In addition, we provide access to our workers' compensation plan. Similar to other PEOs, our plans have a $1 million per incident deductible. Importantly, we manage our risk across these plans by leveraging our proprietary data, internal actuaries, as well as external actuaries. As some investors are new to the TriNet story, I'd like to dig a little deeper into how we manage our health insurance risk. TriNet offers our customers access to several carriers, including national carriers such as Aetna and UnitedHealthcare, as well as regional carriers such as Blue Shield of California, Florida Blue, Blue Shield, Blue Cross Blue Shield of North Carolina, and Kaiser Permanente, to name a few.
Approximately two-thirds of our WSEs elect to access healthcare through TriNet's master plans. Just over 80% of our health participations, we take risk. We do this through our minimum premium plan offerings. First and foremost, we manage that risk by pricing new and existing business to our customers' risk. We have 72 bands which we can price them against and use industry-leading risk assessment tools. For each of our health plan members on a reinsurance plan, the member takes the first loss position through their deductible and shares any risk with co-payments up to an out-of-pocket maximum. TriNet takes up to $500,000 of claims risk per enrollee per year. For any claims greater than $500,000, the carrier assumes the risk. Finally, we have aggregate stop-loss insurance in place with each of our carriers. They bear the ultimate risk.
Now, let's quickly review our leadership team. TriNet is led by Burton Goldfield. Burton has been the CEO for 15 years, taking the company public in 2014. Importantly, the last year has seen a significant transformation of the leadership team with the creation of a Chief Revenue Officer in charge of both new sales and recurring revenue, a new Chief Technology Officer, and a Chief Digital and Innovation Officer. What this represents is an overt commitment to transforming our business and unifying our go-to-market approach, impacting prospects through and including retaining our customers. Now let's talk about our financial model. Our model is predicated on driving revenue growth through volume growth across our products, mix as the growth in our core verticals, plus the adoption and use of our broader products and services drives revenue, and predictable price capture for increased value.
We are focused on driving strong EBITDA growth over time by delivering scale in service of our customer. Our earnings are supported by strong operating cash flow. We have a capital-efficient business model and very efficient working capital. As such, we deliver strong corporate cash generation, which supports our business and enables the execution of our capital allocation strategy. Now let's walk through our financial policy. It's important to note that while we've managed our business consistent with our financial policy for a number of years, we did decide to make our financial policy public this last quarter, providing additional transparency to our investors. First and foremost, we will always reinvest in our business for growth. Next, we will prudently manage our cash, always ensuring a cash buffer sufficient for managing our business through any eventuality. This proved particularly important during the regional bank crisis earlier this year.
We manage our business to a targeted leverage ratio of 1.5-2 times adjusted EBITDA. Should we make a transaction that pushes us through the top end of that range, we will quickly work to bring our leverage back into the range. Finally, we intend to deploy approximately 75% of our corporate cash flow over time as a return to shareholders or towards accretive M&A. While we've deployed a higher amount of that over the last two years, that was in line with the intent to reshape our capital structure in line with our financial policy. So let me pause and just take any questions, if there are any from the field. If not, we'll walk through the second quarter financial results, since it's been a few, a little while since we've done that. Any questions from the room? Nope. Great!
Well, let me take a few minutes to walk through our recent financial performance and highlights from our second quarter earnings call. During the second quarter, we generated $1.2 billion in revenue, representing 1% year-over-year growth. Our business during the first half of 2023 experienced a slowdown in our largest vertical technology. Since the Q3 of 2022, our tech vertical has been impacted by the economic slowdown, driven by higher interest rates and funding costs. Irrespective of that, we were able to grow revenue in the quarter, a testament to the strength and durability of our business. We continue to manage our insurance business effectively, delivering an 84% Insurance Cost Ratio in the quarter, inclusive of health and workers' comp fees and claims.
Note that our Insurance Cost Ratio does include a significant amount of, or does not include, rather, a significant amount of our internal costs that are incurred to manage and price our insurance benefits. This ratio does have seasonality based upon the timing of benefit renewals and deductible resets, as well as the timing of our renewal on our carrier pooling contracts. Ultimately, through the effective cost management, this revenue growth translated into strong earnings performance. Now, let me walk through the consistent pattern that we've had over the years. As you look at our historical financial performance, what you observe is strong, predictable financial model, which is CapEx light and generates strong EBITDA and corporate operating cash flow. We've grown total revenues over the last five years at a 9% compound annual growth rate, and in the same period, professional service revenues grew at a 12% CAGR.
We've seen an extended period of declining Insurance Cost Ratios as we've continued to price our customers to their risk, while utilization remained lower through the pandemic and post-pandemic period. As health utilization normalizes, we are factoring in higher health cost inflation across both provider and pharma prices, and we expect insurance costs to continue trending back up, but monitor closely, managing our risk accordingly. We have publicly guided to an 85.5% Insurance Cost Ratio for fiscal 2023. Drivers of our historical EBITDA margin expansion include pricing discipline, growth, and operational scale, as well as operating leverage. During 2020 to 2022, we also realized lower than priced for our claims experience in both healthcare and workers' compensation, which we expect to normalize moving forward.
Because of our CapEx light model, our revenue growth has translated to strong EBITDA and free cash flow performance. So to wrap, I've hit some of the highlights of TriNet, our business model, and corresponding financial performance. I hope you share some of the enthusiasm for our business and recognize the strength of our business. It's great to be here with all of you, and let me know if you have any questions. Any questions from the room? With no questions, we are adjourned. Thank you all.