RYAN SPECIALTY HOLDINGS, INC. (RYAN)

ITEM 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF

OPERATIONS

The following discussion and analysis summarizes the significant factors affecting the consolidated operating

results, financial condition, liquidity, and cash flows of the Company as of and for the periods presented below. The

following discussion and analysis should be read in conjunction with our Consolidated Financial Statements and the

related notes included elsewhere in this Annual Report on Form 10-K. The discussion contains forward-looking statements

that are based on the beliefs of management, as well as assumptions made by, and information currently available to, our

management. Actual results could differ materially from those discussed in or implied by forward-looking statements as a

result of various factors, including those discussed below and in the sections entitled “Risk Factors” and “Information

Concerning Forward-Looking Statements”.

The following discussion provides commentary on the financial results derived from our audited financial

statements for the years ended December 31, 2024, 2023, and 2022, prepared in accordance with U.S. GAAP. In addition,

we regularly review the following Non-GAAP measures when assessing performance: Organic revenue growth rate,

Adjusted compensation and benefits expense, Adjusted compensation and benefits expense ratio, Adjusted general and

administrative expense, Adjusted general and administrative expense ratio, Adjusted EBITDAC, Adjusted EBITDAC

margin, Adjusted net income, Adjusted net income margin, and Adjusted diluted earnings per share. See “Non-GAAP

Financial Measures and Key Performance Indicators” for further information.

Overview

Founded by Patrick G. Ryan in 2010, we are a service provider of specialty products and solutions for insurance

brokers, agents, and carriers. We provide distribution, underwriting, product development, administration, and risk

management services by acting as a wholesale broker and a managing underwriter or a program administrator with

delegated authority from insurance carriers. Our mission is to provide industry-leading innovative specialty insurance

solutions for insurance brokers, agents, and carriers.

For retail insurance agents and brokers, we assist in the placement of complex or otherwise hard-to-place risks.

For insurance carriers, we work with retail and wholesale insurance brokers to source, onboard, underwrite, and service

these same types of risks. A significant majority of the premiums we place are bound in the E&S market, which includes

Lloyd’s of London. There is often significantly more flexibility in terms, conditions, and rates in the E&S market relative

to the Admitted or “standard” insurance market. We believe that the additional freedom to craft bespoke terms and

conditions in the E&S market allows us to best meet the needs of our trading partners, provide unique solutions, and drive

innovation. We believe our success has been achieved by providing best-in-class intellectual capital, leveraging our trusted

and long-standing relationships and developing differentiated solutions at a scale unmatched by many of our competitors.

Significant Events and Transactions

Corporate Structure

We are a holding company and our sole material asset is a controlling equity interest in New LLC, which is also

a holding company and its sole material asset is a controlling equity interest in the LLC. The Company operates and

controls the business and affairs of, and consolidates the financial results of, the LLC through New LLC. We conduct our

business through the LLC. As the LLC is substantively the same as New LLC, for the purpose of this discussion, we will

refer to both New LLC and the LLC as the “LLC.”

The LLC is a limited liability company taxed as a partnership for income tax purposes, and its taxable income

or loss is passed through to its members, including the Company. The LLC is subject to income taxes on its taxable income

in certain foreign countries, in certain state and local jurisdictions that impose income taxes on partnerships, and on the

taxable income of its U.S. corporate subsidiaries. As a result of our ownership of LLC Common Units, we are subject to

U.S. federal, state, and local income taxes with respect to our allocable share of any taxable income of the LLC and are

taxed at the prevailing corporate tax rates. We intend to cause the LLC to make distributions in an amount sufficient to

allow us to pay our tax obligations and operating expenses, including distributions to fund any ordinary course payments

due under the Tax Receivable Agreement. See “Liquidity and Capital Resources - Tax Receivable Agreement” for

additional information about the TRA.

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ACCELERATE 2025 Program

During the first quarter of 2023, we initiated the ACCELERATE 2025 program to enable continued growth,

drive innovation, and deliver sustainable productivity improvements over the long term. The program concluded in the

fourth quarter of 2024 and resulted in $108.1 million of cumulative one-time charges through December 31, 2024, funded

through operating cash flow. Restructuring costs were primarily included in Compensation and benefits expense,

predominantly relating to third-party contractor and other workforce-related costs. The remaining costs were incurred

through General and administrative expense, relating to third-party professional services, lease and contract terminations

costs, and other expenses. As of December 31, 2024, we undertook actions that we expect to generate annual savings of

approximately $60 million in 2025. See “Note 5, Restructuring” in the footnotes to the consolidated financial statements in

this Annual Report for further discussion.

For the year ended December 31, 2024, we incurred restructuring costs of $59.7 million. Combined with

restructuring costs incurred during 2023, we have incurred restructuring costs of $108.1 million since the inception of this

restructuring plan in the first quarter of 2023. Of the cumulative $108.1 million in costs, $62.5 million was Compensation

and benefits expense with the remaining balance consisted of General and administrative expense. The final results of the

ACCELERATE 2025 program were in line with previously communicated expectations.

Acquisitions

On May 1, 2024, the Company completed the acquisition of the MGU platform Castel Underwriting Agencies

Limited (“Castel”). Castel is headquartered in London, England, with additional offices and operations in the Netherlands,

Belgium, and Singapore.

On August 30, 2024, the Company completed the acquisition of US Assure Insurance Services of Florida, Inc.

(“US Assure”), a program specializing in builder’s risk insurance headquartered in Jacksonville, Florida.

On September 1, 2024, the Company completed the acquisition of certain assets of Greenhill Underwriting

Insurance Services, LLC (“Greenhill”), an MGU focused on the allied health industry headquartered in Houston, Texas.

On September 13, 2024, the Company completed the acquisition of the Property and Casualty (“P&C”) MGUs

owned by Ethos Specialty Insurance, LLC (“Ethos P&C”). Ethos P&C is composed of eight programs which underwrite on

behalf of insurance carriers.

On October 1, 2024, the Company completed the acquisition of certain assets of EverSports & Entertainment

Insurance, Inc. (“EverSports”), an MGU focused on sports, leisure and entertainment risks based in Carmel, Indiana.

On October 2, 2024, the Company completed the acquisition of certain assets of Geo Underwriting Europe BV

(“Geo”), a financial lines MGA based in Rotterdam, Netherlands, with operations in Germany.

On November 4, 2024, the Company completed the acquisition of Innovisk Capital Partners (“Innovisk”), a

portfolio of seven specialty MGUs with a focus on environmental, transactional liability, US and international financial

lines, professional liability for lawyers, commercial auto liability, and UK professional indemnity and P&C. Innovisk is

headquartered in London, England, and also has offices in the United States and India.

On February 3, 2025, the Company completed the acquisition of Velocity Risk Underwriters, LLC

(“Velocity”), an MGU specializing in first-party insurance coverage for catastrophe exposed properties based in Nashville,

Tennessee.

We believe these acquisitions complement our product capabilities, enhance our human capital, expand our

total addressable market, and provide us access to new markets in new geographies. See “Note 4, Mergers and

Acquisitions” in the footnotes to the consolidated financial statements in this Annual Report for further discussion.

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Key Factors Affecting Our Performance

Our historical financial performance has been, and we expect our financial performance in the future to be,

driven by our ability to:

Pursue Strategic Acquisitions

We have successfully integrated businesses complementary to our own to increase both our distribution reach

and our product and service capabilities. We continuously evaluate acquisitions and intend to further pursue targeted

acquisitions that complement our product and service capabilities or provide us access to new markets. We have previously

made, and intend to continue to make, acquisitions with the objective of enhancing our human capital and product and

service capabilities, entering natural adjacencies, and expanding our geographic presence. Our ability to successfully

pursue strategic acquisitions is dependent upon a number of factors, including sustained execution of a disciplined and

selective acquisition strategy which requires acquisition targets to have a cultural and strategic fit, competition for these

assets, purchase price multiples that we deem appropriate and our ability to effectively integrate targeted companies or

assets and grow our business. We do not have agreements or commitments for any material acquisitions at this time.

Deepen and Broaden our Relationships with Retail Broker Trading Partners

We have deep engagement with our retail broker trading partners, and we believe we have the ability to transact

in even greater volume with nearly all of them. For example, in 2024, our revenue derived from the Top 100 firms (as

ranked by Business Insurance) expanded faster than our Organic revenue growth rate of 12.8%. Our ability to deepen and

broaden relationships with our retail broker trading partners and increase sales is dependent upon a number of factors,

including client satisfaction with our distribution reach and our product capabilities, retail brokers continuing to require or

desire our services, competition, pricing, economic conditions, and spending on our product offerings.

Build Our Delegated Authority Business

We believe there is substantial opportunity to continue to grow our Delegated Authority business, which

includes both our Binding Authority Specialty and Underwriting Management Specialty. We believe that both M&A

consolidation and panel consolidation are in nascent stages for Binding Authority. We believe that both M&A

consolidation and the use and reliance on scaled delegated Underwriting Management will continue to grow. Our ability to

grow this business is dependent upon a number of factors, including a continuing ability to secure sufficient capital support

from insurers, the quality of our services and product offerings, marketing and sales efforts to drive new business prospects

and execution, new product offerings, the pricing and quality of our competitors’ offerings, and the growth in demand for

the insurance products.

Invest in Operation and Growth

We have invested heavily in building a durable business that is able to adapt to the continuously evolving E&S

market and intend to continue to do so. We are focused on enhancing the breadth of our product and service offerings as

well as developing and launching new solutions to address the evolving needs of the specialty insurance industry and

markets. Our future success is dependent upon a number of factors, including our ability to successfully develop, market,

and sell existing and new products and services to both new and existing trading partners.

Generate Commission Regardless of the State of the E&S Market

We earn commissions, which are calculated as a percentage of the total insurance policy premium, and fees.

Changes in the insurance market or specialty lines that are our focus, characterized by a period of increasing (or declining)

premium rates, could positively (or negatively) impact our profitability.

Managing Changing Macroeconomic Conditions

Growth in certain lines of business, such as project-based construction and M&A transactional liability

insurance, is partially dependent on a variety of macroeconomic factors inasmuch as binding the underlying insurance

coverage is subject to the underlying activity occurring. In light of the recent geopolitical developments, we could

experience macroeconomic uncertainty and volatility that could lead to an unexpected impact to our business. In periods of

economic growth and liquid credit markets, this underlying activity can accelerate and provide tailwinds to our growth. In

periods of economic decline and tight credit markets, this underlying activity can slow or be delayed and provide

headwinds to our growth. We believe over the long term these lines of business will continue to grow.

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Leverage the Growth of the E&S Market

The growing relevance of the E&S market has been driven by the rapid emergence of large, complex, high-

hazard, and otherwise hard-to-place risks across many lines of insurance. This trend continued in 2024, with $110 billion of

insured catastrophe losses, driven by over $50 billion of insured losses related to severe convective storms (“SCS”) with 17

SCS events above $1 billion in losses, which together accounted for the second-highest annual total for insured losses on

record for SCS events. The year also included ice storms across the country and continued wildfire-related losses. In

addition to the SCS events, Hurricanes Helene and Milton caused over $35 billion in insured losses. Additionally, these

risks include the potential for more severe hurricanes that occur with greater frequency, more devastating wildfires, more

frequent flooding, escalating jury verdicts and social inflation, geographic shifts in population density, a proliferation of

cyber threats, novel health risks, risks associated with large sports and entertainment venues, building and labor cost

inflation relative to insured value, and the transformation of the economy to a “digital first” mode of doing business. We

believe that as the complexity of the E&S market continues to escalate, wholesale brokers and managing underwriters that

do not have sufficient scale, or the financial and intellectual capital to invest in the required specialty capabilities, will

struggle to compete effectively. This will further the trend of market share consolidation among the wholesale firms that do

have these capabilities. We will continue to invest in our intellectual capital to innovate and offer custom solutions and

products to better address these evolving market fundamentals.

Although we believe this growth will continue, we recognize that the growth of the E&S market might not be

linear as risks can and do shift between the E&S and non-E&S markets as market factors change and evolve. For example,

we benefited from a rapid increase in both the flow of property risks into the wholesale channel and the premium rate

charged for those risks in 2023 as the frequency and severity of catastrophe losses, attritional losses, and losses from

secondary perils such as severe convective storms, economic inflation, concentration of exposures, higher retentions of

risk, and higher reinsurance costs applied pressure to insurers and capacity tightened. In the second half of 2024, the E&S

market experienced a shift in these trends as insurance capacity for these property risks increased, particularly at the end of

the year, which resulted in a decline in property premium rates. We believe these factors have also created opportunities for

retailers to place some of that coverage directly.

Components of Results of Operations

Revenue

Net Commissions and Fees

Net commissions and fees are derived primarily from our three Specialties and are paid for our role as an

intermediary in facilitating the placement of coverage for our retail and wholesale broker clients in the insurance

distribution chain. Net commissions and policy fees are generally calculated as a percentage of the total insurance policy

premium placed, although fees can often be a fixed amount irrespective of the premium, and we also receive supplemental

commissions based on the volume placed or profitability of a book of business. We share a portion of these net

commissions and policy fees with the retail insurance broker and recognize revenue on a net basis. Additionally, carriers

may also pay us a contingent commission or volume-based commission, both of which represent forms of contingent or

supplemental consideration associated with the placement of coverage and are based primarily on underwriting results, but

may also contain considerations for only volume, growth, and/or retention. Although we have compensation arrangements

called contingent commissions in all three Specialties that are based in whole or in part on the underwriting performance,

we do not take any direct insurance risk other than through our equity method investment in Geneva Re through Ryan

Investment Holdings, LLC. We also receive loss mitigation and other fees, some of which are not dependent on the

placement of a risk.

In our Wholesale Brokerage and Binding Authority Specialties, we generally work with retail insurance brokers

to secure insurance coverage for their clients, who are the ultimate insured party. Our Wholesale Brokerage and Binding

Authority Specialties generate revenues through commissions and fees from clients, as well as through supplemental

commissions, which may be contingent commissions or volume-based commissions from carriers. Commission rates and

fees vary depending upon several factors, which may include the amount of premium, the type of insurance coverage

provided, the particular services provided to a client or carrier, and the capacity in which we act. Payment terms are

consistent with current industry practice.

In our Underwriting Management Specialty, we utilize delegated underwriting authority granted to us by

carriers and generally work with retail and wholesale insurance brokers, including our own Wholesale Brokerage, to secure

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insurance coverage for the ultimate insured party. Our Underwriting Management Specialty generates revenues through

commissions and fees from clients and through contingent commissions from carriers. Commission rates and fees vary

depending upon several factors including the premium, the type of coverage, and additional services provided to the client.

Payment terms are consistent with current industry practice.

Fiduciary Investment Income

Fiduciary investment income consists of interest earned on insurance premiums and surplus lines taxes that are

held in a fiduciary capacity, in cash and cash equivalents, until disbursed.

Expenses

Compensation and Benefits

Compensation and benefits is our largest expense. It consists of (i) salary, incentives and benefits to employees,

and commissions to our producers and (ii) equity-based compensation associated with the grants of awards to employees,

executive officers, and directors. We operate in competitive markets for human capital and we need to maintain

competitive compensation levels in order to maintain and grow our talent base.

General and Administrative

General and administrative expense includes travel and entertainment expenses, office expenses, accounting,

foreign exchange, legal, insurance and other professional fees, and other costs associated with our operations. Our

occupancy-related costs and professional services expenses, in particular, generally increase or decrease in relative

proportion to the number of our employees and the overall size and scale of our business operations.

Amortization

Amortization expense consists primarily of amortization related to intangible assets we acquired in connection

with our acquisitions. Intangible assets consist of customer relationships, trade names, and internally developed software.

Interest Expense, Net

Interest expense, net consists of interest payable on indebtedness, amortization of the Company’s interest rate

cap, imputed interest on contingent consideration, and amortization of deferred debt issuance costs, offset by interest

income on the Company’s Cash and cash equivalents balances and payments received in relation to the interest rate cap.

Other Non-Operating Loss

For the year ended December 31, 2024, Other non-operating loss included expense related to Term Loan

modifications and TRA contractual interest and related charges offset by income related to a decrease in our blended state

tax rates and foreign tax credit impact on the TRA remeasurement and sublease income. For the years ended December 31,

2023 and 2022, Other non-operating loss included charges related to the change in the TRA liability caused by a change in

our blended state tax rates.

Income Tax Expense

Income tax expense includes tax on the Company’s allocable share of any net taxable income from the LLC,

from certain state and local jurisdictions that impose taxes on partnerships, as well as earnings from our foreign

subsidiaries and C-Corporations subject to entity level taxation.

Non-Controlling Interest

Net income and Other comprehensive income (loss) are attributed to the non-controlling interests based on the

weighted-average LLC Common Units outstanding during the period and is presented on the Consolidated Statements of

Income. Refer to “Note 10, Stockholders’ Equity” of the audited consolidated financial statements in this Annual Report for

more information.

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Results of Operations

Below is a summary table of the financial results and Non-GAAP measures that we find relevant to our

business operations:

(1)Compensation and benefits expense ratio is defined as Compensation and benefits expense divided by Total revenue.

(2)General and administrative expense ratio is defined as General and administrative expense divided by Total revenue.

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(3)Net income margin is defined as Net income divided by Total revenue.

(4)See “Note 12, Earnings Per Share” in the footnotes to the consolidated financial statements in this Annual Report for

further discussion of how these metrics are calculated.

* These measures are Non-GAAP. Please refer to the section entitled “Non-GAAP Financial Measures and Key

Performance Indicators” below for definitions and reconciliations to the most directly comparable GAAP measure.

Comparison of the Years Ended December 31, 2024 and 2023

Revenue

Total Revenue

Total revenue increased by $438.2 million, or 21.1%, from $2,077.5 million to $2,515.7 million, for the year

ended December 31, 2024, as compared to the prior year. The following were the principal drivers of the increase:

•$252.2 million, or 12.1%, of the period-over-period change in Total revenue was due to

organic revenue growth in Net commissions and fees. Organic revenue growth represents

the change in Net commissions and fees revenue, as compared to the same period for the

year prior, adjusted for Net commissions and fees attributable to recent acquisitions during

the first twelve months of Ryan Specialty’s ownership, and other adjustments such as the

removal of the impact of contingent commissions and the impact of changes in foreign

exchange rates. In aggregate, our net commission rates were consistent period-over-period.

Also, we grew our client relationships, in aggregate, within each of our three Specialties.

The growth of these relationships is due to the combination of a growing E&S market and

winning new business from competitors. Growth for the year was balanced across our

property and casualty portfolios within our three Specialties, driven by an increase in the

flow of risks into the E&S market. This growth was partially offset by a number of factors,

none of which were individually significant such as (i) a continued decline throughout the

year in Net commissions and fees generated from the placement of public company D&O

insurance policies, related to a slow-down in IPO activity and an associated rapid premium

rate decrease and (ii) in the second half of 2024 a shift in property trends as capacity

become more readily available, which resulted in a decline in property premium rates. We

believe these factors have also created opportunities for retailers to place some of these

property risk coverages directly.

•$142.0 million, or 6.8%, of the period-over-period change in Total revenue was due to the

2023 and 2024 acquisitions related to our first twelve months of ownership;

•$34.9 million, or 1.7%, of the period-over-period change in Net commissions and fees was

due to changes in contingent commissions and the impact of foreign exchange rates on our

Net commissions and fees; and

•$9.1 million, or 0.5%, of the period-over-period change in Total revenue was due to an

increase in Fiduciary investment income, caused by a rise in fiduciary cash balances

compared to the prior year.

Wholesale Brokerage net commissions and fees increased by $170.0 million, or 12.9%, period-over-period,

primarily due to strong organic growth within the Specialty.

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Binding Authority net commissions and fees increased by $44.4 million, or 16.1%, period-over-period,

primarily due to strong organic growth within the Specialty.

Underwriting Management net commissions and fees increased by $214.6 million, or 49.7%, period-over-

period, primarily due to strong organic growth within the Specialty as well as contributions from the AccuRisk, Castel, US

Assure, Greenhill, Ethos P&C, EverSports, Geo, and Innovisk acquisitions.

The following table sets forth our revenue by type of commission and fees:

Net commissions and policy fees grew $374.5 million, or 19.3%, period-over-period, slightly lower than the

overall net commissions and fee revenue growth of 21.2% for the year ended December 31, 2024, compared to the prior

year. The main drivers of this growth continue to be the acquisition of new business and expansion of ongoing client

relationships in response to the increasing demand for new E&S products as well as the inflow of risks from the Admitted

market into the E&S market. In aggregate, we experienced stable commission rates period over period.

Supplemental and contingent commissions increased $32.5 million, or 57.6%, period-over-period driven by the

performance of risks placed on eligible business earning profit-based or volume-based commissions as well as profit

commissions recognized from acquisitions completed in 2024.

Loss mitigation and other fees grew $22.1 million, or 64.2%, period-over-period primarily due to increased

capital markets activity, additional captive management and other risk management services fees from the placement of

alternative risk insurance solutions as well as growth in certain fees related to the ACE, Point6, and AccuRisk acquisitions

completed in the second half of 2023.

Expenses

Compensation and Benefits

Compensation and benefits expense increased by $270.0 million, or 20.4%, from $1,321.0 million to

$1,591.1 million for the year ended December 31, 2024, compared to the prior year. The following were the principal

drivers of this increase:

•Commissions increased $91.1 million, or 14.7%, period-over-period, driven by the 21.2%

increase in total Net commissions and fees discussed above;

•An increase of $29.3 million was driven by Acquisition related long-term incentive

compensation expense associated with recent acquisitions;

•An increase of $17.3 million was driven by Restructuring and related expense associated

with the ACCELERATE 2025 program;

•An increase of $11.2 million was driven by Acquisition-related expense associated with

recent acquisitions;

•A net increase of $9.3 million was driven by equity-based compensation, caused by an

increase of $21.0 million in normal course equity-based compensation expense offset by a

decrease of $11.7 million of IPO related expenses; and

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•An increase of $111.8 million was driven by (i) the addition of 938 employees compared to

the prior year, inclusive of acquired employees, and (ii) growth in the business. Overall

headcount increased to 5,295 full-time employees as of December 31, 2024, from 4,357 as

of December 31, 2023.

The net impact of revenue growth and the factors above resulted in a Compensation and benefits expense ratio

decrease of 0.4% from 63.6% to 63.2% period-over-period.

In general, we expect to continue experiencing a rise in commissions, salaries, incentives, and benefits expense

commensurate with our expected growth in business volume, revenue, and headcount.

General and Administrative

General and administrative expense increased by $75.9 million, or 27.5%, from $276.2 million to

$352.1 million for the year ended December 31, 2024, as compared to 2023. The following were the principal drivers of

this increase:

•$47.4 million was driven by growth in the business. Expenses incurred to accommodate

both organic and inorganic revenue growth include IT, travel and entertainment, occupancy,

and insurance;

•$35.4 million of increased Acquisition-related expense associated with recent and

prospective acquisitions; and

•These increases were partially offset by a $6.9 million decrease compared to the prior year

in Restructuring and related expense associated with the ACCELERATE 2025 program.

The net impact of revenue growth and the factors listed above resulted in a General and administrative expense ratio

increase of 0.7% from 13.3% to 14.0% period-over-period.

Amortization

Amortization expense increased by $51.0 million, or 47.8%, from $106.8 million to $157.8 million for the year

ended December 31, 2024, compared to the prior year. The main driver of the increase was the amortization of intangible

assets from recent acquisitions. Our Customer relationships and Other intangible assets increased by $865.1 million when

comparing the balance as of December 31, 2024, to the balance as of December 31, 2023, the largest individual increase

generated by the US Assure acquisition.

Interest Expense, Net

Interest expense, net increased $38.9 million, or 32.6%, from $119.5 million to $158.4 million for the year

ended December 31, 2024, compared to the prior year. The main driver of the increase in Interest expense, net for the year

ended December 31, 2024, was an increase in debt from recent acquisition activity. For the years ended December 31, 2024

and 2023, the reduction to Interest expense, net related to our interest rate cap was $17.8 million and $15.9 million,

respectively. Interest earned on the Company’s Cash and cash equivalents balances offsets Interest expense, net. For the

years ended December 31, 2024 and 2023, the Company earned interest income of $21.5 million and $32.0 million,

respectively.

Other Non-Operating Loss

Other non-operating loss increased by $4.6 million from $10.4 million in the prior year to $15.0 million for the

year ended December 31, 2024. For the year ended December 31, 2024, Other non-operating loss consisted of

$18.1 million of expense related to Term Loan modifications and $1.3 million of TRA contractual interest and related

charges offset by $3.4 million of income related to a decrease in our blended state tax rates and foreign tax credit impact on

the TRA remeasurement and $0.5 million of sublease income. For the year ended December 31, 2023, Other non-operating

loss included a $10.4 million charge related to the change in the TRA liability caused by a change in our blended state tax

rates.

Income Before Income Taxes

Due to the factors above, Income before income taxes increased $34.6 million, or 14.6%, from $237.9 million

to $272.6 million for the year ended December 31, 2024, compared to the prior year.

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Income Tax Expense

Income tax expense decreased $0.8 million from $43.4 million to $42.6 million for the year ended

December 31, 2024, as compared to the prior year primarily due to a $13.9 million deferred tax benefit in 2024 from

equity-based compensation and a $8.8 million decrease in Deferred income tax expense recognized as a result of the

Common Control Reorganizations (“CCRs”) subsequent to the Socius and AccuRisk acquisitions in the second half of

2023 and Innovisk in the fourth quarter of 2024. These CCRs were discrete, non-cash expenses incurred at Ryan Specialty

Holdings, Inc., and the Company’s annual effective tax rate is unaffected. The decrease was partially offset by an increase

in pre-tax book income allocated to the Company for the year ended December 31, 2024, and a decrease in the Company’s

blended state tax rate during 2024 which resulted in increased tax expense recognized related to the change in our Deferred

tax assets.

Net Income

Net income increased $35.4 million, or 18.2%, from $194.5 million to $229.9 million for the year ended

December 31, 2024, compared to the prior year as a result of the factors described above.

Comparison of the Years Ended December 31, 2023 and 2022

Revenue

Total Revenue

Total revenue increased by 352.3 million, or 20.4%, from $1,725.2 million to $2,077.5 million, for the year

ended December 31, 2023 as compared to the prior year. The following were the principal drivers of the increase:

•$259.5 million, or 15.0%, of the period-over-period change in Total revenue was due to

organic revenue growth in Net commissions and fees. Organic revenue growth represents

the change in Net commissions and fees revenue, as compared to the same period for the

year prior, adjusted for Net commissions and fees attributable to recent acquisitions during

the first twelve months of Ryan Specialty’s ownership, and other adjustments such as the

removal of the impact of contingent commissions and the impact of changes in foreign

exchange rates. In aggregate, our net commission rates were consistent period-over-period.

Also, we grew our client relationships, in aggregate, within each of our three Specialties.

The growth of these relationships is due to the combination of a growing E&S market and

winning new business from competitors. The largest growth factor in the period was our

property portfolio across our three Specialties, driven by an increase in the pricing for

property insurance as well as an increase in the flow of property risks into the E&S market.

We also experienced growth across the majority of our casualty lines. This growth was

partially offset by a number of factors, none of which were individually significant such as

(i) a decline in Net commissions and fees generated from the placement of public company

D&O insurance policies, related to a slow-down in IPO activity and an associated rapid

premium rate decrease and (ii) a decrease in Net commissions and fees generated from large

commercial construction projects and M&A activity related to a slow-down in underlying

activity during the year;

•$48.2 million, or 2.8%, of the period-over-period change in Total revenue was due to the

acquisitions of Griffin, Centurion, Socius, Point6, and ACE related to their first twelve

months of ownership; and

•$37.6 million, or 2.2%, of the period-over-period change in Total revenue was due to an

increase in Fiduciary investment income, caused by a rise in interest rates compared to the

prior year.

•$7.0 million, or 0.4%, of the period-over-period change in Net commissions and fees was

due to changes in contingent commissions and the impact of foreign exchange rates on our

Net commissions and fees.

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Wholesale Brokerage net commissions and fees increased by $189.8 million, or 16.8%, period-over-period,

primarily due to strong organic growth within the Specialty as well as contributions from the Griffin, Centurion, and Socius

acquisitions. Centurion contributed to organic growth starting in November of 2023.

Binding Authority net commissions and fees increased by $44.9 million, or 19.4%, period-over-period,

primarily due to strong organic growth within the Specialty as well as contributions from the Griffin acquisition.

Underwriting Management net commissions and fees increased by $80.0 million, or 22.8%, period-over-period,

primarily due to strong organic growth within the Specialty as well as contributions from the ACE and Point6 acquisitions.

The following table sets forth our revenue by type of commission and fees:

Net commissions and policy fees grew $302.5 million, or 18.5%, period-over-period, slightly higher than the

overall net commissions and fee revenue growth of 18.4% for the year ended December 31, 2023 compared to the prior

year. The main drivers of this growth continue to be the acquisition of new business and expansion of ongoing client

relationships in response to the increasing demand for new, complex E&S products as well as the inflow of risks from the

Admitted market into the E&S market. In aggregate, we experienced stable commission rates period over period.

Supplemental and contingent commissions increased $6.4 million, or 12.7%, period-over-period driven by the

performance of risks placed on eligible business earning profit-based or volume-based commissions.

Loss mitigation and other fees grew $5.8 million, or 20.5%, period-over-period primarily due to captive

management and other risk management services fees from the placement of alternative risk insurance solutions, and

certain fees related to the acquisitions completed in the second half of 2023.

Expenses

Compensation and Benefits

Compensation and benefits expense increased by $192.0 million, or 17.0%, from $1,129.0 million to $1,321.0

million for the year ended December 31, 2023 compared to the prior year. The following were the principal drivers of this

increase:

•Commissions increased $90.5 million, or 17.1%, period-over-period, driven by the 18.4%

increase in total Net commissions and fees discussed above;

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•An increase of $21.9 million was driven by Restructuring and related expense associated

with the ACCELERATE 2025 program;

•An increase of $121.4 million was driven by (i) the addition of 507 employees compared to

the prior year, inclusive of acquired employees, and (ii) growth in the business. Overall

headcount increased to 4,357 full-time employees as of December 31, 2023 from 3,850 as

of December 31, 2022;

•These increases were partially offset by a $26.4 million decrease compared to the prior year

in Acquisition related long-term incentive compensation related to the payoff of the All

Risks LTIP plan in 2022 and a $15.4 million decrease compared to the prior year in IPO

related compensation expense, which reflects charges associated with both the revaluation

of existing equity grants at the time of our IPO as well as expense related to the new awards

issued in connection with the IPO. The expense associated with both the revaluation of

existing awards as well as the issuance of new equity awards both relate directly to the

Organizational Transactions and IPO, however, amounts related to each will continue to be

expensed over future periods as the underlying awards vest.

The net impact of revenue growth and the factors above resulted in a Compensation and benefits expense ratio

decrease of 1.8% from 65.4% to 63.6% period-over-period.

In general, we expect to continue experiencing a rise in commissions, salaries, incentives, and benefits expense

commensurate with our expected growth in business volume, revenue, and headcount.

General and Administrative

General and administrative expense increased by $79.2 million, or 40.2%, from $197.0 million to $276.2

million for the year ended December 31, 2023 as compared to 2022. The following were the principal drivers of this

increase:

•$21.6 million of increased Restructuring and related expense associated with the

ACCELERATE 2025 program;

•$17.1 million of increased travel and entertainment expense compared to the prior year

which was the result of business travel returning to a normalized level;

•$15.7 million of professional services mostly related to service arrangements in connection

with revenue generating activities within our Ryan Re and Keystone operations;

•$14.6 million of increased Acquisition-related expense associated with recent and

prospective acquisitions; and

•The remaining increase of $10.2 million was driven by growth in the business. Such

expenses incurred to accommodate both organic and inorganic revenue growth include IT,

occupancy, and insurance.

The net impact of revenue growth and the factors listed above resulted in a General and administrative expense ratio

increase of 1.9% from 11.4% to 13.3% period-over-period.

Amortization

Amortization expense increased by $3.2 million, or 3.1%, from $103.6 million to $106.8 million for the year

ended December 31, 2023 compared to the prior year. The main driver for the increase was the amortization of intangible

assets from recent acquisitions. Our Customer relationships and Other intangible assets increased by $124.2 million when

comparing the balance as of December 31, 2023 to the balance as of December 31, 2022.

Interest Expense, Net

Interest expense, net increased $14.7 million, or 14.0%, from $104.8 million to $119.5 million for the year

ended December 31, 2023 compared to the prior year. The main drivers of the change in Interest expense, net for the year

ended December 31, 2023 were an increase in the floating rate applied to our Term Loan on account of the rising interest

rate environment and the issuance of $400.0 million of Senior Secured Notes on February 3, 2022. Interest earned on the

Company’s Cash and cash equivalents balances offsets Interest expense, net. For the years ended December 31, 2023 and

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2022 the Company earned interest income of $32.0 million and $10.6 million, respectively. On April 7, 2022, the Company

entered into an interest rate cap agreement to manage its exposure to interest rate fluctuations related to the Company’s

Term Loan. The interest rate cap has a $1,000.0 million notional amount, 2.75% strike, and terminates on December 31,

2025. For the year ended December 31, 2023, the net reduction to Interest expense, net related to the cap was $15.9

million.

Other Non-Operating Loss

Other non-operating loss increased by $5.3 million from $5.1 million in the prior year to $10.4 million for the

year ended December 31, 2023. Other non-operating loss included a $10.4 million and $5.6 million charge for the years

ended December 31, 2023 and 2022, respectively, related to the change in the TRA liability caused by a change in our

blended state tax rates.

Income Before Income Taxes

Due to the factors above, Income before income taxes increased $58.7 million, or 32.8%, from $179.2 million

to $237.9 million for the year ended December 31, 2023 compared to the prior year.

Income Tax Expense

Income tax expense increased $27.5 million from $15.9 million to $43.4 million for the year ended December

31, 2023 as compared to the prior year primarily due to $18.4 million of Deferred income tax expense recognized as a

result of the Common Control Reorganizations (“CCRs”) subsequent to the Socius and AccuRisk acquisitions in the

second half of 2023. These CCRs were discrete, non-cash expenses incurred at Ryan Specialty Holdings, Inc. and the

Company’s annual effective tax rate is unaffected. The remaining increase is due to the increase in pre-tax book income

allocated to the Company for the year ended December 31, 2023. This increase was partially offset by an increase in the

Company’s state tax rate during 2023 which resulted in a tax benefit recognized related to the increase in our Deferred tax

assets.

Net Income

Net income increased $31.2 million, or 19.1%, from $163.3 million to $194.5 million for the year ended

December 31, 2023 compared to the prior year as a result of the factors described above.

Non-GAAP Financial Measures and Key Performance Indicators

In assessing the performance of our business, we use non-GAAP financial measures that are derived from our

consolidated financial information, but which are not presented in our consolidated financial statements prepared in

accordance with GAAP. We consider these non-GAAP financial measures to be useful metrics for management and

investors to facilitate operating performance comparisons from period to period by excluding potential differences caused

by variations in capital structures, tax positions, depreciation, amortization, and certain other items that we believe are not

representative of our core business. We use the following non-GAAP measures for business planning purposes, in

measuring our performance relative to that of our competitors, to help investors to understand the nature of our growth, and

to enable investors to evaluate the run-rate performance of the Company. Non-GAAP financial measures should be viewed

as supplementing, and not as an alternative or substitute for, the consolidated financial statements prepared and presented

in accordance with GAAP. The footnotes to the reconciliation tables below should be read in conjunction with the audited

consolidated financial statements in this Annual Report. Industry peers may provide similar supplemental information but

may not define similarly named metrics in the same way we do and may not make identical adjustments.

Organic Revenue Growth Rate

Organic Revenue Growth Rate is defined as the percentage change in Net commissions and fees, as compared

to the same period for the prior year, adjusted to eliminate revenue attributable to acquisitions for the first twelve months of

Ryan Specialty’s ownership, and other items such as contingent commissions and the impact of changes in foreign

exchange rates.

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For the avoidance of doubt, prior period references in the tables below represent the same period in the prior

year. A reconciliation of Organic revenue growth rate to Net commissions and fees growth rate, the most directly

comparable GAAP measure, for each of the periods indicated is as follows (in percentages):

(1)Calculated by subtracting Net commissions and fees revenue growth rate from net commissions and fees

revenue excluding contingent commissions growth rate.

(2)Calculated by dividing the change in Total net commissions & fees revenue excluding contingent commissions

by prior year net commissions and fees excluding contingent commissions.

(3)Calculated by taking the mergers and acquisitions net commissions and fees revenue excluding contingent

commissions, representing the first 12 months of net commissions and fees revenue generated from

acquisitions, divided by prior period net commissions and fees revenue excluding contingent commissions.

(4)Calculated by taking the change in foreign exchange rates divided by prior period net commissions and fees

revenue excluding contingent commissions.

Adjusted Compensation and Benefits Expense and Adjusted Compensation and Benefits Expense Ratio

We define Adjusted compensation and benefits expense as Compensation and benefits expense adjusted to

reflect items such as (i) equity-based compensation, (ii) acquisition and restructuring related compensation expense, and

(iii) other exceptional or non-recurring items, as applicable. The most comparable GAAP financial metric is Compensation

and benefits expense. Adjusted compensation and benefits expense ratio is defined as Adjusted compensation and benefits

expense as a percentage of Total revenue. The most comparable GAAP financial metric is Compensation and benefits

expense ratio.

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A reconciliation of Adjusted compensation and benefits expense and Adjusted compensation and benefits

expense ratio to Compensation and benefits expense and Compensation and benefits expense ratio, the most directly

comparable GAAP measures, for each of the periods indicated, is as follows:

(1)In 2023, Acquisition related long-term incentive compensation includes a $6.8 million expense reversal

related to the claw back of an All Risks LTIP payment from a terminated employee.

(2)Adjustments to Compensation and benefits expense are described in the definition of Adjusted EBITDAC to

Net income in “Adjusted EBITDAC and Adjusted EBITDAC Margin”.

Adjusted General and Administrative Expense and Adjusted General and Administrative Expense Ratio

We define Adjusted general and administrative expense as General and administrative expense adjusted to

reflect items such as (i) acquisition and restructuring general and administrative related expense and (ii) other exceptional

or non-recurring items, as applicable. The most comparable GAAP financial metric is General and administrative expense.

Adjusted general and administrative expense ratio is defined as Adjusted general and administrative expense as a

percentage of Total revenue. The most comparable GAAP financial metric is General and administrative expense ratio.

A reconciliation of Adjusted general and administrative expense and Adjusted general and administrative

expense ratio to General and administrative expense and General and administrative expense ratio, the most directly

comparable GAAP measures, for each of the periods indicated is as follows:

(1)Adjustments to General and administrative expense are described in the definition of Adjusted EBITDAC to

Net income in “Adjusted EBITDAC and Adjusted EBITDAC Margin”.

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Adjusted EBITDAC and Adjusted EBITDAC Margin

We define Adjusted EBITDAC as Net income before Interest expense, net, Income tax expense, Depreciation,

Amortization, and Change in contingent consideration, adjusted to reflect items such as (i) equity-based compensation, (ii)

acquisition and restructuring related expenses, and (iii) other exceptional or non-recurring items, as applicable.

Acquisition-related expense includes one-time diligence, transaction-related, and integration costs. For the year

ended December 31, 2024, Acquisition-related expense included a $4.5 million charge related to a deal-contingent foreign

exchange forward contract associated with the Castel acquisition. The remaining charges in the three years presented

represent typical one-time diligence, transaction-related, and integration costs. Acquisition-related long-term incentive

compensation arises from changes to long-term incentive plans associated with acquisitions. Restructuring and related

expense for the years ended December 31, 2024 and 2023, consisted of compensation and benefits, occupancy, contractors,

professional services, and license fees related to the ACCELERATE 2025 program. The compensation and benefits

expense included severance as well as employment costs related to services rendered between the notification and

termination dates and other termination payments. See “Note 5, Restructuring” of the annual audited consolidated financial

statements for further discussion of ACCELERATE 2025. The remaining costs that preceded the restructuring plan were

associated with professional services costs related to program design and licensing costs. For the year ended December 31,

2022, Restructuring and related expense represented costs associated with the 2020 restructuring plan. Amortization and

expense is composed of charges related to discontinued prepaid incentive programs. For the year ended December 31,

2024, Other non-operating loss consisted of $18.1 million of expense related to Term Loan modifications and $1.3 million

of TRA contractual interest and related charges offset by $3.4 million of income related to a decrease in our blended state

tax rates and foreign tax credit impact on the TRA remeasurement and $0.5 million of sublease income. Other non-

operating loss included a $10.4 million and $5.6 million charge for the years ended December 31, 2023 and 2022,

respectively, related to the change in the TRA liability caused by a change in our blended state tax rates. Equity-based

compensation reflects non-cash equity-based expense. For the year ended December 31, 2024, Equity-based compensation

included $4.6 million of expense associated with the removal of equity transfer restrictions for an executive officer of the

Company. IPO related expenses include compensation-related expense primarily related to the expense for new awards

issued at IPO as well as expense related to the revaluation of existing equity awards at IPO.

Total revenue less Adjusted compensation and benefits expense and Adjusted general and administrative

expense is equivalent to Adjusted EBITDAC. For a breakout of compensation and general and administrative costs for each

addback, refer to the Adjusted compensation and benefits expense and Adjusted general and administrative expense tables

above. The most directly comparable GAAP financial metric to Adjusted EBITDAC is Net income. Adjusted EBITDAC

margin is defined as Adjusted EBITDAC as a percentage of Total revenue. The most comparable GAAP financial metric is

Net income margin.

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A reconciliation of Adjusted EBITDAC and Adjusted EBITDAC margin to Net income and Net income

margin, the most directly comparable GAAP measures, for each of the periods indicated is as follows:

(1)For the year ended December 31, 2024, Change in contingent consideration included a $25.5 million decrease

in valuation of the US Assure contingent consideration as a result of increased loss ratios impacting projected

profit commissions.

(2)For the year ended December 31, 2023, Acquisition related long-term incentive compensation includes a $6.8

million expense reversal related to the claw back of an All Risks LTIP payment from a terminated employee.

Adjusted Net Income and Adjusted Net Income Margin

We define Adjusted net income as tax-effected earnings before amortization and certain items of income and

expense, gains and losses, equity-based compensation, acquisition related long-term incentive compensation, acquisition-

related expenses, costs associated with the IPO, and certain exceptional or non-recurring items. The most comparable

GAAP financial metric is Net income. Adjusted net income margin is calculated as Adjusted net income as a percentage of

Total revenue. The most comparable GAAP financial metric is Net income margin.

Following the IPO, the Company is subject to United States federal income taxes, in addition to state, local, and

foreign taxes, with respect to our allocable share of any net taxable income of the LLC. For comparability purposes, this

calculation incorporates the impact of federal and state statutory tax rates on 100% of our adjusted pre-tax income as if the

Company owned 100% of the LLC.

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A reconciliation of Adjusted net income and Adjusted net income margin to Net income and Net income

margin, the most directly comparable GAAP measures, for each of the periods indicated is as follows:

(1)Interest expense, net includes amortization of deferred debt issuance costs.

(2)Adjustments to Net income are described in the definition of Adjusted EBITDAC to Net income in “Adjusted

EBITDAC and Adjusted EBITDAC Margin.”

(3)The Company is subject to United States federal income taxes, in addition to state, local, and foreign taxes,

with respect to our allocable share of any net taxable income of the LLC. For the year ended December 31,

2024, this calculation of adjusted tax expense is based on a federal statutory rate of 21% and a combined state

income tax rate net of federal benefits of 5.00% on 100% of our adjusted income before income taxes as if the

Company owned 100% of the LLC. For the year ended December 31, 2023, this calculation of adjusted tax

expense is based on a federal statutory rate of 21% and a combined state income tax rate net of federal

benefits of 5.12% on 100% of our adjusted income before income taxes as if the Company owned 100% of

the LLC. For the year ended December 31, 2022, this calculation of adjusted tax expense is based on a federal

statutory rate of 21% and a combined state income tax rate net of federal benefits of 4.53% on 100% of our

adjusted income before income taxes as if the Company owned 100% of the LLC.

Adjusted Diluted Earnings Per Share

We define Adjusted diluted earnings per share as Adjusted net income divided by diluted shares outstanding

after adjusting for the effect if 100% of the outstanding LLC Common Units (together with the shares of Class B common

stock), vested Class C Incentive Units, and unvested equity awards were exchanged into shares of Class A common stock

as if 100% of unvested equity awards were vested. The most directly comparable GAAP financial metric is Diluted

earnings per share.

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A reconciliation of Adjusted diluted earnings per share to Diluted earnings per share, the most directly

comparable GAAP measure, for each of the periods indicated is as follows:

(1)Adjustment removes the impact of Net income attributed to dilutive awards and substantively vested RSUs to

arrive at Net income attributable to Ryan Specialty Holdings, Inc. For the years ended December 31, 2024,

2023, and 2022, this removes $0.3 million, $4.2 million, and $76.3 million of Net income, respectively, on

132.9 million, 125.7 million, and 265.8 million Weighted-average shares of Class A common stock

outstanding - diluted, respectively. See “Note 12, Earnings Per Share” in the footnotes to the consolidated

financial statements in this Annual Report.

(2)For comparability purposes, this calculation incorporates the Net income that would be outstanding if all LLC

Common Units (together with shares of Class B common stock) and vested Class C Incentive units were

exchanged for shares of Class A common stock. For the years ended December 31, 2024, 2023, and 2022,

this includes $135.2 million, $133.4 million, and $102.2 million of Net income (loss), respectively, on

271.9 million, 268.1 million, and 265.8 million Weighted-average shares of Class A common stock

outstanding - diluted, respectively. For the year ended December 31, 2022, 144.0 million weighted average

outstanding LLC Common Units were considered dilutive and included in the 265.8 million Weighted-

average shares of Class A common stock outstanding - diluted within Diluted EPS. See “Note 12, Earnings

Per Share” in the footnotes to the consolidated financial statements in this Annual Report.

(3)Adjustments to Adjusted net income are described in the footnotes of the reconciliation of Adjusted net

income to Net income in “Adjusted Net Income and Adjusted Net Income Margin” on 271.9 million,

268.1 million, and 265.8 million Weighted-average shares of Class A common stock outstanding - diluted

years ended December 31, 2024, 2023, and 2022, respectively.

(4)For comparability purposes and to be consistent with the treatment of the adjustments to arrive at Adjusted

net income, the dilutive effect of unvested equity awards is calculated using the treasury stock method as if

the weighted average unrecognized cost associated with the awards was $0 over the period, less any unvested

equity awards determined to be dilutive within the Diluted EPS calculation disclosed in “Note 12, Earnings

Per Share” of the audited consolidated financial statements. For the years ended December 31, 2024, 2023,

and 2022, 4.4 million, 4.1 million, and 4.7 million shares were added to the calculation, respectively.

Liquidity and Capital Resources

Liquidity describes the ability of a company to generate sufficient cash flows to meet the cash requirements of

its business operations. We believe that the balance sheet and strong cash flow profile of our business provides adequate

liquidity. The primary sources of liquidity are Cash and cash equivalents on the Consolidated Balance Sheets, cash flows

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provided by operations, and debt capacity available under our Revolving Credit Facility, Term Loan, and Senior Secured

Notes. The primary uses of liquidity are operating expenses, seasonal working capital needs, business combinations, capital

expenditures, obligations under the TRA, taxes, distributions to LLC Unitholders, and dividends to Class A common

stockholders. We believe that Cash and cash equivalents, cash flows from operations, and amounts available under our

Revolving Credit Facility will be sufficient to meet liquidity needs, including principal and interest payments on debt

obligations, capital expenditures, and anticipated working capital requirements, for the next 12 months and beyond. Our

future capital requirements will depend on many factors including continuance of historical working capital levels and

capital expenditure needs, investment in de novo offerings, and the flow of deals in our merger and acquisition program.

On February 20, 2025, our Board declared and increased the Company’s regular quarterly dividend by 9.1% to

$0.12 per share on the outstanding Class A common stock. $0.07 of the regular quarterly dividend is to be funded by

current and prior tax distributions from the LLC that are in excess of both the corporate income taxes payable by the

Company as well as the Company’s obligations pursuant to the Tax Receivable Agreement. The remaining $0.05 of the

regular quarterly dividend was funded by free cash flow from the LLC and paid to all holders of the Class A common stock

and LLC Common Units.

We may be required to seek additional equity or debt financing. In the event that additional financing is

required from outside sources, we may not be able to raise it on terms acceptable to us or at all. If we are unable to raise

additional capital or generate cash flows necessary to expand our operations, this could reduce our ability to compete

successfully and harm the results of our operations.

Cash and cash equivalents on the Consolidated Balance Sheets include funds available for general corporate

purposes. Fiduciary cash and receivables cannot be used for general corporate purposes. Insurance premiums, claims funds,

and surplus lines taxes are held in a fiduciary capacity and the obligation to remit these funds are recorded as Fiduciary

liabilities on the Consolidated Balance Sheets. We recognize fiduciary amounts due to others as Fiduciary liabilities and

fiduciary amounts collectible and held on behalf of others, including insurance carriers, other insurance intermediaries,

surplus lines taxing authorities, clients, and insurance policy holders, as Fiduciary cash and receivables on the Consolidated

Balance Sheets.

In our capacity as an insurance broker or agent, we collect premiums from insureds and, after deducting our

commission, remit the premiums to the respective insurance markets and carriers. We also collect claims prefunding or

refunds from carriers on behalf of insureds, which are then returned to the insureds, and surplus lines taxes, which are then

remitted to surplus lines taxing authorities. Insurance premiums, claim funds, and surplus lines taxes are held in a fiduciary

capacity. The levels of Fiduciary cash and receivables and Fiduciary liabilities can fluctuate significantly depending on

when we collect the premiums, claims prefunding, and refunds, make payments to markets, carriers, surplus lines taxing

authorities, and insureds, and collect funds from clients and make payments on their behalf, and upon the impact of foreign

currency movements. Fiduciary cash, because of its nature, is generally invested in very liquid securities with a focus on

preservation of principal. To minimize investment risk, we maintain cash holdings pursuant to an investment policy which

contemplates all relevant rules established by states with regard to fiduciary cash and is approved by our Board of

Directors. The policy requires broad diversification of holdings across a variety of counterparties utilizing limits set by our

Board of Directors, primarily based on credit rating and type of investment. Fiduciary cash and receivables included cash

of $1,140.6 million and $917.5 million as of December 31, 2024 and 2023, respectively, and fiduciary receivables of

$2,599.1 million and $2,214.1 million as of December 31, 2024 and 2023, respectively. While we may earn interest income

on fiduciary cash held in cash and investments, the fiduciary cash may not be used for general corporate purposes. Of the

$540.2 million of Cash and cash equivalents on the Consolidated Balance Sheet as of December 31, 2024, $100.8 million

was held in fiduciary accounts representing collected revenue and was available to be transferred to operating accounts and

used for general corporate purposes.

Credit Facilities

We expect to have sufficient financial resources to meet our business requirements for the next 12 months.

Although cash from operations is expected to be sufficient to service our activities, including servicing our debt and

contractual obligations, and financing capital expenditures, we have the ability to borrow under our Revolving Credit

Facility to accommodate any timing differences in cash flows. Additionally, under current market conditions, we believe

that we could access capital markets to obtain debt financing for longer-term funding, if needed.

On February 3, 2022, the LLC issued $400.0 million of 8-year Senior Secured Notes. The notes have a 4.375%

interest rate and will mature on February 1, 2030. These notes remained outstanding as of December 31, 2024.

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On January 19, 2024, we entered into the Fifth Amendment (the “Repricing Amendment”) to the Credit

Agreement. As a result of the Repricing Amendment, the applicable interest rate of the Term Loan was reduced from

Adjusted Term SOFR + 3.00% to Adjusted Term SOFR + 2.75% and is no longer subject to a credit spread adjustment. All

other material provisions remain unchanged.

On July 30, 2024, the Company entered into the Sixth Amendment to the Credit Agreement, which provided for

an increase in borrowing capacity under the Revolving Credit Facility from $600.0 million to $1,400.0 million. The

amendment also extended the maturity date of the Revolving Credit Facility to July 30, 2029, and reduced the applicable

interest rate from Adjusted Term SOFR plus a margin of 2.50% to 3.00% to Adjusted Term SOFR plus a margin of 2.00%

to 2.50%, based on the first lien net leverage ratio defined in the Credit Agreement.

On September 13, 2024, the Company entered into the Seventh Amendment to the Credit Agreement, which

refinanced the existing Term Loan in the aggregate principal amount of $1,588.1 million outstanding as of June 30, 2024,

and increased the size of the Term Loan by $111.9 million to $1,700.0 million as of September 30, 2024. In addition to

increasing the size of the Term Loan, the Seventh Amendment reduced the applicable interest rate of the Term Loan from

Adjusted Term SOFR plus a margin of 2.75% to Adjusted Term SOFR plus a margin of 2.25% and lowered the 75 basis

point floor on Adjusted Term SOFR to a 0 basis point floor. Upon achievement of a stable (or better) corporate family

rating from Moody’s of Ba3 or better, the applicable interest rate of the Term Loan will be reduced to Adjusted Term

SOFR plus a margin of 2.00%.

On September 19, 2024, the LLC issued $600.0 million of its 2032 Senior Secured Notes. On December 9,

2024, the LLC issued an additional $600.0 million of its 2032 Senior Secured Notes as “additional notes” under a

supplement to the indenture dated as of September 2024. All of the 2032 Senior Secured Notes carry a 5.875% interest rate

and will mature on August 1, 2032.

As of December 31, 2024, the interest rate on the Term Loan was 2.25% plus Adjusted Term SOFR.

As of December 31, 2024, we were in compliance with all of the covenants under our debt facilities and there

were no events of default for the year ended December 31, 2024.

Tax Receivable Agreement

The Company is party to a TRA with current and certain former LLC Unitholders. The TRA provides for the

payment by the Company, to current and certain former LLC Unitholders, of 85% of the net cash savings, if any, in U.S.

federal, state, and local income taxes that the Company realizes (or is deemed to realize in certain circumstances) as a result

of (i) certain increases in the tax basis of the assets of the LLC resulting from purchases or exchanges of LLC Common

Units (“Exchange Tax Attributes”), (ii) certain tax attributes of the LLC that existed prior to the IPO (“Pre-IPO M&A Tax

Attributes”), (iii) certain favorable “remedial” partnership tax allocations to which the Company becomes entitled to (if

any), and (iv) certain other tax benefits related to the Company entering into the TRA, including tax benefits attributable to

payments that the Company makes under the TRA (“TRA Payment Tax Attributes”). The Company recognizes a liability

on the Consolidated Balance Sheets based on the undiscounted estimated future payments under the TRA.

Due to the uncertainty of various factors, we cannot precisely quantify the likely tax benefits we will realize as

a result of the LLC Common Unit exchanges and the resulting amounts we are likely to pay out to current and certain

former LLC Unitholders pursuant to the TRA; however, we estimate that such tax benefits and the related TRA payments

may be substantial. As set forth in the table below, and assuming no changes in the relevant tax law and that we earn

sufficient taxable income to realize all cash tax savings that are subject to the TRA, we expect future payments under the

TRA to be $436.3 million in aggregate as of December 31, 2024. Future payments in respect to subsequent exchanges

would be in addition to these amounts and are expected to be substantial. The foregoing amounts are merely estimates and

the actual payments could differ materially. In the highly unlikely event of an early termination of the TRA (e.g., a default

by the Company or a Change of Control) the Company is required to pay to each holder of the TRA an early termination

payment equal to the discounted present value of all unpaid TRA payments. The Company has not made, and is not likely

to make, an election for an early termination. We expect to fund future TRA payments with tax distributions from the LLC

that come from cash on hand and cash generated from operations.

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Total expected estimated tax savings from each of the tax attributes associated with the TRA as of

December 31, 2024 were $513.3 million consisting of (i) Exchange Tax Attributes of $297.9 million, (ii) Pre-IPO M&A

Tax Attributes of $98.1 million, and (iii) TRA Payment Tax Attributes of $117.2 million. The Company will retain the

benefit of 15% of these cash savings.

Comparison of Cash Flows for the Year Ended December 31, 2024 and 2023

Cash and cash equivalents decreased $298.6 million from $838.8 million at December 31, 2023, to $540.2

million at December 31, 2024. A summary of our cash flows provided by and used for ongoing operations from operating,

investing, and financing activities is as follows:

Cash Flows From Operating Activities

Net cash provided by operating activities during the year ended December 31, 2024, increased $37.7 million

from the year ended December 31, 2023, to $514.9 million. Strong organic revenue growth along with the Castel, US

Assure, Greenhill, Ethos P&C, EverSports, and GEO acquisitions drove operating cash flow period-over-period. Net

income increased $35.4 million, an increase of $51.0 million in Amortization, an increase in the change in Net

commissions and fees receivable, net of $22.2 million, and an increase of $18.6 million in Prepaid and deferred

compensation drove the year-over-year increase, which was partially offset by the change in Other current and non-current

assets and liabilities of $108.9 million. The increase in both Amortization and Prepaid and deferred compensation is

primarily associated with the recently completed acquisitions. The change in Other current and non-current liabilities was

primarily driven by an increase in acquisition-related contingent payments.

Cash Flows From Investing Activities

Cash flows used in investing activities during the year ended December 31, 2024, were $1,755.7 million, an

increase of $1,279.5 million compared to the $476.2 million of cash flows used for investing activities during the year

ended December 31, 2023. The main drivers of the cash flows used for investing activities for the year ended December 31,

2024, were $1,708.7 million of acquisition payments made for the Castel, US Assure, Greenhill, Ethos P&C, EverSports,

and Geo acquisitions and $47.0 million of Capital expenditures. The main drivers of the cash flows used for investing

activities for the year ended December 31, 2023, were $446.7 million of acquisition payments related to the Griffin, ACE,

Point6, Socius, and AccuRisk acquisitions and $29.8 million of capital expenditures.

Cash Flows From Financing Activities

Cash flows provided by financing activities during the year ended December 31, 2024, were $1,166.9 million,

an increase of $1,179.5 million compared to cash flows used in financing activities of $12.6 million during the year ended

December 31, 2023. The main drivers of cash flows provided by financing activities during the year ended December 31,

2024, were $1,187.4 million of Proceeds from Senior Secured Notes, $114.0 million Net change in fiduciary liabilities, and

$107.6 million of Proceeds from term debt, offset by $82.7 million of Tax distributions to non-controlling LLC

Unitholders, $80.2 million of Dividends paid to Class A common shareholders, $25.5 million of Debt issuance costs paid,

$22.2 million of Distributions to non-controlling LLC Unitholders, and $21.6 million of Payment of Tax Receivable

Agreement liabilities during the year. The main drivers of cash flows used in financing activities during the year ended

December 31, 2023, were $71.7 million of Tax distributions to non-controlling LLC Unitholders, the Repayment of term

debt of $16.5 million, and the Payment of Tax Receivable Agreement liabilities of $16.2 million, offset by $97.2 million

Net change in fiduciary liabilities.

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Contractual Obligations and Commitments

Our principal commitments consist of contractual obligations in connection with investing and operating

activities. These obligations are described within “Note 8, Leases” and “Note 9, Debt” in the notes to our audited

consolidated financial statements in this Annual Report and provide further description on provisions that create, increase

or accelerate obligations, or other pertinent data to the extent necessary for an understanding of the timing and amount of

the specified contractual obligations.

The Company recognized a liability for employee deferrals, inclusive of changes in the value of deferred

amounts held, of $5.2 million and $36.5 million in Current accrued compensation and Non-current accrued compensation,

respectively, on the Consolidated Balance Sheets as of December 31, 2024, and $3.5 million and $22.4 million in Current

accrued compensation and Non-current accrued compensation, respectively, on the Consolidated Balance Sheets as of

December 31, 2023.

Within Current accrued compensation and Non-current accrued compensation we have various long-term

incentive compensation agreements accrued for. These agreements are typically associated with an acquisition. Below we

have outlined the liabilities accrued as of December 31, 2024, the projected future expense, and the projected timing of

future cash outflows associated with these arrangements.

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Within “Note 4, Mergers and Acquisitions” and “Note 15, Fair Value Measurements” in the notes to our audited

consolidated financial statements in this Annual Report we outline various contingent consideration arrangements and their

impact. Below we have outlined the liabilities accrued as of December 31, 2024, the projected future expense, and the

projected timing of future cash outflows associated with these contingent consideration agreements.

Critical Accounting Policies and Estimates

The methods, assumptions, and estimates that we use in applying the accounting policies may require us to

apply judgments regarding matters that are inherently uncertain. We consider an accounting policy to be a critical estimate

if (i) the Company must make assumptions that were uncertain when the judgment was made and (ii) changes in the

estimate assumptions or selection of a different estimate methodology could have a significant impact on our financial

position and the results that we report in the consolidated financial statements. While we believe that the estimates,

assumptions, and judgments are reasonable, they are based on information available when the estimate was made. Refer to

“Note 2, Summary of Significant Accounting Policies” in the consolidated financial statements in this Annual Report for

further information on the critical accounting estimates and policies.

Business Combinations

The Company accounts for transactions that represent business combinations under the acquisition method

of accounting, which requires us to allocate the total consideration transferred for each acquisition to the assets we acquire

and liabilities we assume based on their fair values as of the date of acquisition, including identifiable intangible assets.

The allocation of the consideration utilizes significant estimates in determining the fair values of identifiable assets

acquired, which mainly consist of customer relationship intangible assets. The significant assumptions used in determining

the fair value of customer relationships include estimated revenue growth, attrition rates, operating margins, and weighted

average cost of capital. These estimates directly impact the amount of identified intangible assets recognized and the

related amortization expense in future periods. As of December 31, 2024 and 2023, an aggregate of $1,392.0 million and

$572.4 million, respectively, of Customer relationships was recorded on the Consolidated Balance Sheets.

The excess of purchase price over the fair value of assets acquired and liabilities assumed is recorded as

goodwill. We may refine our estimates and make adjustments to the assets acquired and liabilities assumed over a

measurement period, not to exceed one year from the date of acquisition.

Acquired Customer Relationships

We review acquired intangible assets that are being amortized for impairment whenever events or changes

in circumstance indicate that their carrying amount may not be recoverable. We have not made any material changes in the

accounting methodology used to evaluate the impairment of goodwill or amortizable intangible assets during the last three

fiscal years. Qualitative factors considered include any adverse developments in regulation, unfavorable market conditions,

or the extent to which an asset will be utilized. As we continue to experience revenue growth driven by the increase in

complexity and inflow of risks into the E&S market, we do not believe there is a reasonable likelihood there will be a

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material change in the estimates or assumptions used to calculate impairments or useful lives of amortizable intangible

assets. However, if actual results are not consistent with our estimates and assumptions, we may be exposed to an

acceleration of amortization or impairment losses that could be material.

Contingent Consideration

The Company recognizes contingent consideration liabilities and contingently returnable consideration

resulting from certain business combinations. We estimate the fair value of these contingent consideration arrangements

using Level 3 inputs that require the use of numerous assumptions and Monte Carlo simulations, which may change based

on the occurrence of future events and lead to increased or decreased operating income in future periods. Estimating the

fair value at the acquisition date and in subsequent periods involves significant judgments, including projecting the future

financial performance of the acquired businesses. The Company updates its assumptions each reporting period based on

new developments and records such amounts at fair value based on the revised assumptions. For significant acquisitions we

may use independent third-party valuation specialists to assist us in determining the fair value of assets acquired and

liabilities assumed. Refer to “Note 15, Fair Value Measurements” in the consolidated financial statements in this Annual

Report for further information on the assumptions used in the fair value of contingent consideration.

As of December 31, 2024, the Company had eight contingent consideration liability arrangements

outstanding, with an aggregate fair value of $129.1 million. If remaining targets were to be met for these contingent

consideration arrangements, the maximum amount of the liability would be $563.1 million as of December 31, 2024, and

the additional expense would be recorded over the next 3.3 years in Change in contingent consideration within the

Consolidated Statements of Income. As of December 31, 2024, the Company had one contingently returnable consideration

arrangement outstanding for $5.5 million. The maximum amount of the asset would be $18.8 million as of December 31,

2024, if certain targets were not achieved, and the additional income would be recorded over the next 2.3 years in Change

in contingent consideration within the Consolidated Statements of Income. Refer to “Note 4, Mergers and Acquisitions” in

the consolidated financial statements in this Annual Report for further information on business combinations and

contingent consideration.

Income Taxes

As of December 31, 2024 and 2023, $448.3 million and $383.8 million, respectively, of Deferred tax assets

were recorded on the Consolidated Balance Sheets. Deferred income taxes are recognized for the expected future tax

consequences attributable to temporary differences between the carrying amount of the existing tax assets and liabilities

and their respective tax basis. The primary item giving rise to temporary differences is the Company’s investment in the

LLC. As of December 31, 2024 and 2023, the Company’s deferred tax asset in the Company’s investment in the LLC was

$429.9 million and $375.2 million, respectively.

In determining the provision for income taxes, we make estimates and judgments which affect our

evaluation of the carrying value of our deferred tax assets as well as our calculation of certain tax liabilities. We evaluate

these assets on a quarterly basis to conclude whether they are more likely than not to be realized. In completing this

evaluation related to the Company’s deferred tax asset in the investment in the LLC, we consider all available positive and

negative evidence, including future reversals of existing taxable temporary differences, projected future taxable income,

tax-planning strategies, carryback potential if permitted under the applicable tax law, and results of recent operations.

Projected future taxable income is based on Board-approved budgets and long-term assumptions, which include revenue

growth and operating margins, among other factors. Estimating future taxable income is inherently uncertain and requires

judgment. We exclude any projected M&A activity from this evaluation.

To the extent we do not generate sufficient federal taxable income to realize a deferred tax asset in any

given year, it would result in a federal net operating loss (“NOL”) that is available to us to utilize over an indefinite

carryforward period to fully realize the deferred tax assets. Given our historical ability to generate federal taxable income

and our projected future taxable income, and the indefinite carryforward period available for federal NOLs, we consider it

more likely than not that we will realize this deferred tax asset. If we determine in the future that we will not be able to

fully utilize all or part of this deferred tax asset, we would record a valuation allowance through earnings in the period the

determination was made, which would have an adverse effect on our results of operations and earnings in those future

periods.

Changes in tax laws and rates could also affect recorded deferred tax assets and liabilities in the future.

Other than those potential impacts, we do not believe there is a reasonable likelihood there will be a material change in our

tax related balances or valuation allowances. However, due to the complexity of some of these uncertainties, the ultimate

resolution may result in a payment that is materially different from the current estimate of the tax liabilities

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Tax Receivable Agreement Liabilities

In connection with the Organizational Transactions and IPO, the Company entered into a TRA with current

and certain former LLC Unitholders. Amounts payable under the TRA are contingent upon, among other things, (i) the

generation of future taxable income over the term of the TRA and (ii) future changes in tax laws, including tax rate

changes. If we do not generate sufficient taxable income in the aggregate over the term of the TRA to utilize the tax

benefits, then we would not be required to make the related TRA payments. Therefore, we only recognize a liability for

TRA payments if we determine it is probable that we will generate sufficient future taxable income over the term of the

TRA to utilize the related tax benefits. Projecting future taxable income is inherently uncertain and requires judgment. In

projecting future taxable income, we consider our historical results and incorporate assumptions from our Board-approved

budgets and longer-term assumptions, which include revenue growth and operating margins, among other factors. We

exclude any projected M&A activity from this evaluation.

As of December 31, 2024 and 2023, we recognized $436.3 million and $358.9 million, respectively, of

liabilities relating to our obligations under the TRA, after concluding that it was probable that we would have sufficient

future taxable income to utilize the related tax benefits. There were no transactions subject to the TRA for which we did not

recognize the related liability, as we concluded that we would have sufficient future taxable income to utilize all of the

related tax benefits that have been generated since the IPO. If a valuation allowance is recorded against the deferred tax

assets subject to the TRA in a future period, the corresponding TRA liability may not be considered probable, resulting in

the liability being removed from the Consolidated Balance Sheets and recorded in Other non-operating loss on the

Consolidated Statements of Income. Refer to “Note 18, Income Taxes” in the consolidated financial statements in this

Annual Report for further information on the estimates involved in income taxes and the TRA liability.

Recent Accounting Pronouncements

For a description of recently issued accounting pronouncements see “Note 2, Summary of Significant

Accounting Policies” in the footnotes to the consolidated financial statements in this Annual Report.

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Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations

The following discussion and analysis summarizes the significant factors affecting the consolidated operating results, financial condition, liquidity, and cash flows of the Company as of and for the periods presented below. The following discussion and analysis should be read in conjunction with our Consolidated Financial Statements and the related notes included elsewhere in this Annual Report on Form 10-K. The discussion contains forward-looking statements that are based on the beliefs of management, as well as assumptions made by, and information currently available to, our management. Actual results could differ materially from those discussed in or implied by forward-looking statements as a result of various factors, including those discussed below and in the sections entitled “Risk Factors” and “Information Concerning Forward-Looking Statements”.

The following discussion provides commentary on the financial results derived from our audited financial statements for the years ended December 31, 2023, 2022, and 2021 prepared in accordance with U.S. GAAP. In addition, we regularly review the following Non-GAAP measures when assessing performance: Organic revenue growth rate, Adjusted compensation and benefits expense, Adjusted compensation and benefits expense ratio, Adjusted general and administrative expense, Adjusted general and administrative expense ratio, Adjusted EBITDAC, Adjusted EBITDAC margin, Adjusted net income, Adjusted net income margin, and Adjusted diluted earnings per share. See “Non-GAAP Financial Measures and Key Performance Indicators” for further information.

Overview

Founded by Patrick G. Ryan in 2010, we are a service provider of specialty products and solutions for insurance brokers, agents, and carriers. We provide distribution, underwriting, product development, administration, and risk management services by acting as a wholesale broker and a managing underwriter or a program administrator with delegated authority from insurance carriers. Our mission is to provide industry-leading innovative specialty insurance solutions for insurance brokers, agents, and carriers.

For retail insurance agents and brokers, we assist in the placement of complex or otherwise hard-to-place risks. For insurance carriers, we work with retail and wholesale insurance brokers to source, onboard, underwrite, and service these same types of risks. A significant majority of the premiums we place are bound in the E&S market, which includes Lloyd’s of London. There is often significantly more flexibility in terms, conditions, and rates in the E&S market relative to the Admitted or “standard” insurance market. We believe that the additional freedom to craft bespoke terms and conditions in the E&S market allows us to best meet the needs of our trading partners, provide unique solutions, and drive innovation. We believe our success has been achieved by providing best-in-class intellectual capital, leveraging our trusted and long-standing relationships and developing differentiated solutions at a scale unmatched by many of our competitors.

Significant Events and Transactions

Corporate Structure

We are a holding company and our sole material asset is a controlling equity interest in New LLC, which is also a holding company and its sole material asset is a controlling equity interest in the LLC. The Company operates and controls the business and affairs of, and consolidates the financial results of, the LLC through New LLC. We conduct our business through the LLC. As the LLC is substantively the same as New LLC, for the purpose of this discussion, we will refer to both New LLC and the LLC as the “LLC.”

The LLC is a limited liability company taxed as a partnership for income tax purposes, and its taxable income or loss is passed through to its members, including the Company. The LLC is subject to income taxes on its taxable income in certain foreign countries, in certain state and local jurisdictions that impose income taxes on partnerships, and on the taxable income of its U.S. corporate subsidiaries. As a result of our ownership of LLC Common Units, we are subject to U.S. federal, state, and local income taxes with respect to our allocable share of any taxable income of the LLC and are taxed at the prevailing corporate tax rates. We intend to cause the LLC to make distributions in an amount sufficient to allow us to pay our tax obligations and operating expenses, including distributions to fund any ordinary course payments due under the Tax Receivable Agreement. See “Liquidity and Capital Resources - Tax Receivable Agreement” for additional information about the TRA.

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ACCELERATE 2025 Program

During the first quarter of 2023 we initiated the ACCELERATE 2025 program that will enable continued growth, drive innovation, and deliver sustainable productivity improvements over the long term. The program will result in approximately $90.0 million of cumulative one-time charges through 2024, funded through operating cash flow. Restructuring costs will primarily be included in General and administrative expense, relating to third-party professional services, lease and contract terminations costs, and other expenses. The remaining costs will be incurred through Compensation and benefits expense, predominately relating to third-party contractor and other workforce-related costs. We expect the program to generate annual savings of approximately $50.0 million in 2025. See “Note 5, Restructuring” in the footnotes to the consolidated financial statements in this Annual Report for further discussion.

For the year ended December 31, 2023, we incurred restructuring costs of $48.4 million, which represent cumulative costs since the inception of the plan. Of the cumulative $48.4 million in costs, $25.8 million was general and administrative with the remaining balance being workforce related. While the current results of the ACCELERATE 2025 program are in line with expectations, changes to the total savings estimate and timing of the ACCELERATE 2025 program may evolve as we continue to progress through the plan and evaluate other potential opportunities. The actual amounts and timing may vary significantly based on various factors.

Acquisitions

On January 3, 2023, we completed the acquisition of Griffin Underwriting Services, a binding authority specialist and wholesale insurance broker headquartered in Bellevue, WA.

On July 1, 2023, the Company completed the acquisitions of certain assets of ACE Benefit Partners, Inc. (“ACE”), a medical stop loss general agent headquartered in Eagle, Idaho, and Point6 Healthcare, LLC (“Point6”), a distributor of medical stop loss insurance on behalf of retail brokers and third-party administrators headquartered in Plano, Texas.

On July 3, 2023, the Company completed the acquisition of Socius Insurance Services (“Socius”), a national wholesale insurance broker headquartered in Northern California.

On December 1, 2023, we acquired AccuRisk Holdings, LLC, (“AccuRisk”). AccuRisk is a medical stop loss managing general underwriter headquartered in Chicago, IL.

In December 2023 we announced the signing of a definitive agreement to acquire Castel Underwriting Agencies Limited (“Castel”), a managing general underwriter platform, from Arch Financial Holdings (UK) Limited and minority shareholders. Castel is headquartered in London, England with additional offices in the Netherlands and Belgium and operations in Singapore. The transaction is expected to close during the first half of 2024, subject to regulatory approvals and customary closing conditions.

We believe these acquisitions complement our product capabilities, enhance our human capital, expand our total addressable market, and provide us access to new markets in new geographies. See “Note 4, Mergers and Acquisitions” in the footnotes to the consolidated financial statements in this Annual Report for further discussion.

Key Factors Affecting Our Performance

Our historical financial performance has been, and we expect our financial performance in the future to be, driven by our ability to:

Pursue Strategic Acquisitions

We have successfully integrated businesses complementary to our own to increase both our distribution reach and our product and service capabilities. We continuously evaluate acquisitions and intend to further pursue targeted acquisitions that complement our product and service capabilities or provide us access to new markets. We have previously made, and intend to continue to make, acquisitions with the objective of enhancing our human capital and product and service capabilities, entering natural adjacencies, and expanding our geographic presence. Our ability to successfully pursue strategic acquisitions is dependent upon a number of factors, including sustained execution of a

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disciplined and selective acquisition strategy which requires acquisition targets to have a cultural and strategic fit, competition for these assets, purchase price multiples that we deem appropriate and our ability to effectively integrate targeted companies or assets and grow our business. We do not have agreements or commitments for any material acquisitions at this time.

Deepen and Broaden our Relationships with Retail Broker Trading Partners

We have deep engagement with our retail broker trading partners, and we believe we have the ability to transact in even greater volume with nearly all of them. For example, in 2023, our revenue derived from the Top 100 firms (as ranked by Business Insurance) expanded faster than our Organic revenue growth rate of 15.0%. Our ability to deepen and broaden relationships with our retail broker trading partners and increase sales is dependent upon a number of factors, including client satisfaction with our distribution reach and our product capabilities, retail brokers continuing to require or desire our services, competition, pricing, economic conditions, and spending on our product offerings.

Build Our National Binding Authority Specialty

We believe there is substantial opportunity to continue to grow our Binding Authority Specialty, as we believe that both M&A consolidation and panel consolidation are in nascent stages in the binding authority market. Our ability to grow our Binding Authority Specialty is dependent upon a number of factors, including a continuing ability to secure sufficient capital support from insurers, the quality of our services and product offerings, marketing and sales efforts to drive new business prospects and execution, new product offerings, the pricing and quality of our competitors’ offerings, and the growth in demand for the insurance products.

Invest in Operation and Growth

We have invested heavily in building a durable business that is able to adapt to the continuously evolving E&S market and intend to continue to do so. We are focused on enhancing the breadth of our product and service offerings as well as developing and launching new solutions to address the evolving needs of the specialty insurance industry and markets. Our future success is dependent upon a number of factors, including our ability to successfully develop, market, and sell existing and new products and services to both new and existing trading partners.

Generate Commission Regardless of the State of the E&S Market

We earn commissions, which are calculated as a percentage of the total insurance policy premium, and fees. Changes in the insurance market or specialty lines that are our focus, characterized by a period of increasing (or declining) premium rates, could positively (or negatively) impact our profitability.

Managing Changing Macroeconomic Conditions

Growth in certain lines of business, such as project-based construction and M&A transactional liability insurance, is partially dependent on a variety of macroeconomic factors inasmuch as binding the underlying insurance coverage is subject to the underlying activity occurring. In periods of economic growth and liquid credit markets, this underlying activity can accelerate and provide tailwinds to our growth. In periods of economic decline and tight credit markets, this underlying activity can slow or be delayed and provide headwinds to our growth. As interest rates have rapidly risen, leading to friction in debt markets, we have observed some delays to both construction projects and M&A activity which, in turn, pauses the binding of construction and M&A transactional liability insurance policies. We believe over time these lines of business will continue to grow as the economy steadies and again grows.

Leverage the Growth of the E&S Market

The growing relevance of the E&S market has been driven by the rapid emergence of large, complex, high-hazard, and otherwise hard-to-place risks across many lines of insurance. This trend continued in 2023, with $80 billion of insured catastrophe losses, mostly driven by a record setting year, both in frequency and severity, for severe convective storms (“SCS”) with 21 SCS events above $1 billion in losses, which together accounted for $58 billion in losses. The year also included hurricane losses on both the East and West coasts of the US, and sizable

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wildfire losses. Additionally, these risks include more severe hurricanes that occur with greater frequency, more devastating wildfires, more frequent flooding, escalating jury verdicts and social inflation, geographic shifts in population density, a proliferation of cyber threats, novel health risks, risks associated with large sports and entertainment venues, building and labor cost inflation relative to insured value, and the transformation of the economy to a “digital first” mode of doing business. We believe that as the complexity of the E&S market continues to escalate, wholesale brokers and managing underwriters that do not have sufficient scale, or the financial and intellectual capital to invest in the required specialty capabilities, will struggle to compete effectively. This will further the trend of market share consolidation among the wholesale firms that do have these capabilities. We will continue to invest in our intellectual capital to innovate and offer custom solutions and products to better address these evolving market fundamentals.

Although we believe this growth will continue, we recognize that the growth of the E&S market might not be linear as risks can and do shift between the E&S and non-E&S markets as market factors change and evolve. For example, we benefited from a rapid increase in both the rate and flow of public company D&O policies into the wholesale channel in 2020 and 2021. Throughout 2022 and 2023 as the public company D&O insurance markets stabilized, IPO markets have slowed, and new insurance capital that previously entered the market has impacted the public company D&O space, public company D&O rate decreases have accelerated. We believe these factors have also created opportunities for retailers to place some of that coverage directly.

Components of Results of Operations

Revenue

Net Commissions and Fees

Net commissions and fees are derived primarily from our three Specialties and are paid for our role as an intermediary in facilitating the placement of coverage in the insurance distribution chain. Net commissions and policy fees are generally calculated as a percentage of the total insurance policy premium placed, although fees can often be a fixed amount irrespective of the premium, but we also receive supplemental commissions based on the volume placed or profitability of a book of business. We share a portion of these net commissions and policy fees with the retail insurance broker and recognize revenue on a net basis. Additionally, carriers may also pay us a contingent commission or volume-based commission, both of which represent forms of contingent or supplemental consideration associated with the placement of coverage and are based primarily on underwriting results, but may also contain considerations for only volume, growth and/or retention. Although we have compensation arrangements called contingent commissions in all three Specialties that are based in whole or in part on the underwriting performance, we do not take any direct insurance risk other than through our equity method investment in Geneva Re through Ryan Investment Holdings, LLC. We also receive loss mitigation and other fees, some of which are not dependent on the placement of a risk.

In our Wholesale Brokerage and Binding Authority Specialties, we generally work with retail insurance brokers to secure insurance coverage for their clients, who are the ultimate insured party. Our Wholesale Brokerage and Binding Authority Specialties generate revenues through commissions and fees from clients, as well as through supplemental commissions, which may be contingent commissions or volume-based commissions from carriers. Commission rates and fees vary depending upon several factors, which may include the amount of premium, the type of insurance coverage provided, the particular services provided to a client or carrier, and the capacity in which we act. Payment terms are consistent with current industry practice.

In our Underwriting Management Specialty, we generally work with retail insurance brokers and often other wholesale brokers to secure insurance coverage for the ultimate insured party. Our Underwriting Management Specialty generates revenues through commissions and fees from clients and through contingent commissions from carriers. Commission rates and fees vary depending upon several factors including the premium, the type of coverage, and additional services provided to the client. Payment terms are consistent with current industry practice.

Fiduciary Investment Income

Fiduciary investment income consists of interest earned on insurance premiums and surplus lines taxes that are held in a fiduciary capacity, in cash and cash equivalents, until disbursed.

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Expenses

Compensation and Benefits

Compensation and benefits is our largest expense. It consists of (i) salary, incentives and benefits to employees, and commissions to our producers and (ii) equity-based compensation associated with the grants of awards to employees, executive officers and directors. We operate in competitive markets for human capital and we need to maintain competitive compensation levels in order to maintain and grow our talent base.

General and Administrative

General and administrative expense includes travel and entertainment expenses, office expenses, accounting, legal, insurance and other professional fees, and other costs associated with our operations. Our occupancy-related costs and professional services expenses, in particular, generally increase or decrease in relative proportion to the number of our employees and the overall size and scale of our business operations.

Amortization

Amortization expense consists primarily of amortization related to intangible assets we acquired in connection with our acquisitions. Intangible assets consist of customer relationships, trade names, and internally developed software.

Interest Expense, Net

Interest expense, net consists of interest payable on indebtedness, amortization of the Company’s interest rate cap, imputed interest on contingent consideration, and amortization of deferred debt issuance costs, offset by interest income on the Company’s Cash and cash equivalents balances and payments received in relation to the interest rate cap.

Other Non-Operating Loss

For years ended December 31, 2023 and 2022, Other non-operating loss included charges related to the change in the TRA liability caused by a change in our blended state tax rates. In 2021, Other non-operating loss included the change in fair value of the embedded derivatives on the Redeemable Preferred Units. This change in fair value was due to the occurrence of a Realization Event in the third quarter of 2021, which was defined as a Qualified Public Offering or a Sale Transaction in the Onex Purchase Agreement. It also includes the expense associated with the extinguishment of a portion of our deferred debt issuance costs on the term debt in the first quarter of 2021.

Income Tax Expense

Income tax expense includes tax on the Company’s allocable share of any net taxable income from the LLC, from certain state and local jurisdictions that impose taxes on partnerships, as well as earnings from our foreign subsidiaries and C-Corporations subject to entity level taxation.

Non-Controlling Interest

For the periods presented prior to March 31, 2021, our financial statements include the non-controlling interest related to the net income attributable to Ryan Re. Post-IPO, we report a non-controlling interest based on the LLC Common Units not owned by the Company. Net income and Other comprehensive income (loss) are attributed to the non-controlling interests based on the weighted average LLC Common Units outstanding during the period and Net income attributed to the non-controlling interests is presented on the Consolidated Statements of Income. Refer to “Note 10, Stockholders’ Equity” of the audited consolidated financial statements in this Annual Report for more information.

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Results of Operations

Below is a summary table of the financial results and Non-GAAP measures that we find relevant to our business operations:

(1) Compensation and benefits expense ratio is defined as Compensation and benefits expense divided by Total revenue.

(2) General and administrative expense ratio is defined as General and administrative expense divided by Total revenue.

(3) Net income margin is defined as Net income divided by Total revenue.

(4) See “Note 12, Earnings (Loss) Per Share” in the footnotes to the consolidated financial statements in this Annual Report for further discussion of how these metrics are calculated.

* These measures are Non-GAAP. Please refer to the section entitled “Non-GAAP Financial Measures and Key Performance Indicators” below for definitions and reconciliations to the most directly comparable GAAP measure.

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Comparison of the Years Ended December 31, 2023 and 2022

Revenue

Total Revenue

Total revenue increased by 352.3 million, or 20.4%, from $1,725.2 million to $2,077.5 million, for the year ended December 31, 2023 as compared to the prior year. The following were the principal drivers of the increase:

•
$259.5 million, or 15.0%, of the period-over-period change in Total revenue was due to organic revenue growth in Net commissions and fees. Organic revenue growth represents growth in Net commissions and fees, adjusted to eliminate revenue attributable to acquisitions for the first twelve months of ownership, and other items such as the change in contingent commissions and the impact of changes in foreign exchange rates. In aggregate, our net commission rates were consistent period-over-period. Also, we grew our client relationships, in aggregate, within each of our three Specialties. The growth of these relationships is due to the combination of a growing E&S market and winning new business from competitors. The largest growth factor in the period was our property portfolio across our three Specialties, driven by an increase in the pricing for property insurance as well as an increase in the flow of property risks into the E&S market. We also experienced growth across the majority of our casualty lines. This growth was partially offset by a number of factors, none of which were individually significant such as (i) a decline in Net commissions and fees generated from the placement of public company D&O insurance policies, related to a slow-down in IPO activity and an associated rapid premium rate decrease and (ii) a decrease in Net commissions and fees generated from large commercial construction projects and M&A activity related to a slow-down in underlying activity during the year;

•
$48.2 million, or 2.8%, of the period-over-period change in Total revenue was due to the acquisitions of Griffin, Centurion, Socius, Point6, and ACE related to their first twelve months of ownership; and

•
$37.6 million, or 2.2%, of the period-over-period change in Total revenue was due to an increase in Fiduciary investment income, caused by a rise in interest rates compared to the prior year.

•
$7.0 million, or 0.4%, of the period-over-period change in Net commissions and fees was due to changes in contingent commissions and the impact of foreign exchange rates on our Net commissions and fees.

Wholesale Brokerage net commissions and fees increased by $189.8 million, or 16.8%, period-over-period, primarily due to strong organic growth within the Specialty as well as contributions from the Griffin, Centurion, and Socius acquisitions. Centurion contributed to organic growth starting in November of 2023.

Binding Authority net commissions and fees increased by $44.9 million, or 19.4%, period-over-period, primarily due to strong organic growth within the Specialty as well as contributions from the Griffin acquisition.

Underwriting Management net commissions and fees increased by $80.0 million, or 22.8%, period-over-period, primarily due to strong organic growth within the Specialty as well as contributions from the ACE and Point6 acquisitions.

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The following table sets forth our revenue by type of commission and fees:

Net commissions and policy fees grew $302.5 million, or 18.5%, period-over-period, slightly higher than the overall net commissions and fee revenue growth of 18.4% for the year ended December 31, 2023 compared to the prior year. The main drivers of this growth continue to be the acquisition of new business and expansion of ongoing client relationships in response to the increasing demand for new, complex E&S products as well as the inflow of risks from the Admitted market into the E&S market. In aggregate, we experienced stable commission rates period over period.

Supplemental and contingent commissions increased $6.4 million, or 12.7%, period-over-period driven by the performance of risks placed on eligible business earning profit-based or volume-based commissions.

Loss mitigation and other fees grew $5.8 million, or 20.5%, period-over-period primarily due to captive management and other risk management services fees from the placement of alternative risk insurance solutions as well as certain fees related to the ACE, Point6, and AccuRisk acquisitions completed in the second half of 2023.

Expenses

Compensation and Benefits

Compensation and benefits expense increased by $192.0 million, or 17.0%, from $1,129.0 million to $1,321.0 million for the year ended December 31, 2023 compared to the prior year. The following were the principal drivers of this increase:

•
Commissions increased $90.5 million, or 17.1%, period-over-period, driven by the 18.4% increase in total Net commissions and fees discussed above;

•
An increase of $21.9 million was driven by Restructuring and related expense associated with the ACCELERATE 2025 program;

•
An increase of $121.4 million was driven by (i) the addition of 507 employees compared to the prior year, inclusive of acquired employees, and (ii) growth in the business. Overall headcount increased to 4,357 full-time employees as of December 31, 2023 from 3,850 as of December 31, 2022;

•
These increases were partially offset by a $26.4 million decrease compared to the prior year in Acquisition related long-term incentive compensation related to the payoff of the All Risks LTIP plan in 2022 and a $15.4 million decrease compared to the prior year in IPO related compensation expense, which reflects charges associated with both the revaluation of existing equity grants at the time of our IPO as well as expense related to the new awards issued in connection with the IPO. The expense associated with both the revaluation of existing awards as well as the issuance of new equity awards both relate directly to the Organizational Transactions and IPO, however, amounts related to each will continue to be expensed over future periods as the underlying awards vest.

The net impact of revenue growth and the factors above resulted in a Compensation and benefits expense ratio decrease of 1.8% from 65.4% to 63.6% period-over-period.

In general, we expect to continue experiencing a rise in commissions, salaries, incentives, and benefits expense commensurate with our expected growth in business volume, revenue, and headcount.

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General and Administrative

General and administrative expense increased by $79.2 million, or 40.2%, from $197.0 million to $276.2 million for the year ended December 31, 2023 as compared to 2022. The following were the principal drivers of this increase:

•
$21.6 million of increased Restructuring and related expense associated with the ACCELERATE 2025 program;

•
$17.1 million of increased travel and entertainment expense compared to the prior year which was the result of business travel returning to a normalized level;

•
$15.7 million of professional services mostly related to service arrangements in connection with revenue generating activities within our Ryan Re and Keystone operations;

•
$14.6 million of increased Acquisition-related expense associated with recent and prospective acquisitions; and

•
The remaining increase of $10.2 million was driven by growth in the business. Such expenses incurred to accommodate both organic and inorganic revenue growth include IT, occupancy, and insurance.

The net impact of revenue growth and the factors listed above resulted in a General and administrative expense ratio increase of 1.9% from 11.4% to 13.3% period-over-period.

Amortization

Amortization expense increased by $3.2 million, or 3.1%, from $103.6 million to $106.8 million for the year ended December 31, 2023 compared to the prior year. The main driver for the increase was the amortization of intangible assets from recent acquisitions. Our Customer relationships and Other intangible assets increased by $124.2 million when comparing the balance as of December 31, 2023 to the balance as of December 31, 2022.

Interest Expense, Net

Interest expense, net increased $14.7 million, or 14.0%, from $104.8 million to $119.5 million for the year ended December 31, 2023 compared to the prior year. The main drivers of the change in Interest expense, net for the year ended December 31, 2023 were an increase in the floating rate applied to our Term Loan on account of the rising interest rate environment and the issuance of $400.0 million of Senior Secured Notes on February 3, 2022. Interest earned on the Company’s Cash and cash equivalents balances offsets Interest expense, net. For the years ended December 31, 2023 and 2022 the Company earned interest income of $32.0 million and $10.6 million, respectively. On April 7, 2022, the Company entered into an interest rate cap agreement to manage its exposure to interest rate fluctuations related to the Company’s Term Loan. The interest rate cap has a $1,000.0 million notional amount, 2.75% strike, and terminates on December 31, 2025. For the year ended December 31, 2023, the net reduction to Interest expense, net related to the cap was $15.9 million.

Other Non-Operating Loss

Other non-operating loss increased by $5.3 million from $5.1 million in the prior year to $10.4 million for the year ended December 31, 2023. Other non-operating loss included a $10.4 million and $5.6 million charge for the years ended December 31, 2023 and 2022, respectively, related to the change in the TRA liability caused by a change in our blended state tax rates.

Income Before Income Taxes

Due to the factors above, Income before income taxes increased $58.7 million, or 32.8%, from $179.2 million to $237.9 million for the year ended December 31, 2023 compared to the prior year.

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Income Tax Expense

Income tax expense increased $27.5 million from $15.9 million to $43.4 million for the year ended December 31, 2023 as compared to the prior year primarily due to $18.4 million of Deferred income tax expense recognized as a result of the Common Control Reorganizations (“CCRs”) subsequent to the Socius and AccuRisk acquisitions in the second half of 2023. These CCRs were discrete, non-cash expenses incurred at Ryan Specialty Holdings, Inc. and the Company’s annual effective tax rate is unaffected. The remaining increase is due to the increase in pre-tax book income allocated to the Company for the year ended December 31, 2023. This increase was partially offset by an increase in the Company’s state tax rate during 2023 which resulted in a tax benefit recognized related to the increase in our Deferred tax assets.

Net Income

Net income increased $31.2 million, or 19.1%, from $163.3 million to $194.5 million for the year ended December 31, 2023 compared to the prior year as a result of the factors described above.

Comparison of the Year Ended December 31, 2022 and 2021

Revenue

Total revenue

Total revenue increased by $292.4 million, or 20.4%, from $1,432.8 million to $1,725.2 million for the year ended December 31, 2021 as compared to the prior year. The following were the principal drivers of the increase:

•
$236.4 million, or 16.4%, of the period-over-period change in Total revenue was due to organic revenue growth in Net commissions and fees. Organic revenue growth represents growth in Net commissions and fees, adjusted to eliminate revenue attributable to acquisitions for the first twelve months of ownership, and other items such as the change in contingent commissions and the impact of changes in foreign exchange rates. In aggregate, our net commission rates were consistent period-over-period. Also, we grew our client relationships, in aggregate, within each of our three Specialties. The growth of these relationships is due to the combination of a growing E&S market and winning new business from competitors. We experienced growth across the majority of our property and casualty lines. This growth was partially offset by a number of factors beginning in the back half of 2022, none of which were individually significant such as (i) a decline in Net commissions and fees generated from the placement of public company D&O insurance policies, related to a slow-down in IPO activity and an associated rapid premium rate decrease and (ii) a decrease in Net commissions and fees generated from large commercial construction projects and M&A activity related to a slow-down in underlying activity during the year;

•
$40.0 million, or 2.8%, of the period-over-period change in Total revenue was due to the acquisitions of Keystone, Crouse, and Centurion related to their first twelve months of ownership;

•
$12.7 million, or 0.9%, of the period-over-period change in Total revenue was due to an increase in Fiduciary investment income, caused by a rise in interest rates compared to the prior period; and

•
$3.3 million, or 0.3%, of the period-over-period change in Total revenue was due to changes in contingent commissions and the impact of foreign exchange rates on our Net commissions and fees.

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Wholesale Brokerage net commissions and fees increased by $197.3 million, or 21.2%, period-over-period, primarily due to strong organic growth within the Specialty as well as contributions from the Crouse and Centurion acquisitions. Crouse contributed to organic growth starting in December of 2022.

Binding Authority net commissions and fees increased by $21.4 million, or 10.2%, period-over-period, primarily due to strong organic growth within the Specialty as well as contributions from the Crouse acquisition. Crouse contributed to organic growth starting in December of 2022.

Underwriting Management net commissions and fees increased by $61.0 million, or 21.0%, period-over-period, primarily due to strong organic growth within the Specialty as well as contributions from the Keystone acquisition.

The following table sets forth our revenue by type of commission and fees:

Net commissions and policy fees grew $262.4 million, or 19.1%, slightly lower than the overall net commissions and fee revenue growth of 19.5% for the year ended December 31, 2022 as compared to the prior year. The main drivers of this growth continue to be the acquisition of new business and expansion of ongoing client relationships in response to the increasing demand for new, complex E&S products as well as the inflow of risks from the Admitted market into the E&S market. In aggregate, we experienced stable commission rates period over period.

Supplemental and contingent commissions increased $13.3 million, or 36.1%, period-over-period driven by the performance of risks placed on eligible business earning profit-based or volume-based commissions.

Loss mitigation and other fees grew $4.1 million, or 16.6%, period-over-period primarily due to captive management and other risk management services fees from the placement of alternative risk insurance solutions in 2022.

Expenses

Compensation and Benefits

Compensation and benefits expense increased by $137.4 million, or 13.9%, from $991.6 million to $1,129.0 million for the year ended December 31, 2022 compared to the prior year. The following were the principal drivers of this increase:

•
Commissions increased $95.2 million, or 22.0%, period-over-period, driven by the 19.5% increase in total Net Commissions and Fees discussed above;

•
The remaining $42.2 million period-over-period increase was driven by a $80.3 million increase generated from (i) the addition of 304 employees compared to the prior year and (ii) growth in the business. This growth of $80.3 million was offset by a $21.8 million decrease to IPO-related expense and a $16.3 million decrease to Acquisition related long-term incentive compensation. Overall headcount increased to 3,850 full-time employees as of December 31, 2022 from 3,546 as of December 31, 2021.

The net impact of revenue growth and the factors above resulted in a Compensation and benefits expense ratio decrease of 3.8% from 69.2% to 65.4% period-over-period.

In general, we expect to continue experiencing a general rise in commissions, salaries, incentives, and benefits expense commensurate with our expected growth in business volume, revenue, and headcount.

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General and Administrative

General and administrative expense increased by $58.0 million, or 41.8%, from $139.0 million to $197.0 million for the year ended December 31, 2022 as compared to 2021. A main driver of this increase was $25.7 million of increased travel and entertainment expense as travel restrictions associated with the pandemic lessened compared to 2021. Insurance expense contributed $4.7 million to the period-over-period increase due to increased costs associated with being a public company. An increase in E&O claims and other commercial accommodations contributed $4.5 million to the period-over-period increase. The remaining increase of $23.1 million was driven by growth in the business. Such expenses incurred to accommodate both organic and inorganic revenue growth include IT, occupancy, and professional services. The net impact of revenue growth and the factors listed above resulted in a General and administrative expense ratio increase of 1.7% from 9.7% to 11.4% period-over-period.

Amortization

Amortization expense decreased by $4.3 million, or 4.0%, from $107.9 million to $103.6 million for the year ended December 31, 2022 compared to the prior year. The main driver for the decrease is certain previously acquired intangible assets became fully amortized. Our intangible assets decreased by $87.5 million when comparing the balance as of December 31, 2022 to the balance as of December 31, 2021.

Interest Expense, Net

Interest expense, net increased $25.4 million, or 32.0%, from $79.4 million to $104.8 million for the year ended December 31, 2022 compared to the prior year. The main drivers of the change in Interest expense, net for the year ended December 31, 2022 were the issuance of $400.0 million of Senior Secured Notes on February 3, 2022 and an increase in the floating rate applied to our Term Loan on account of the rising interest rate environment. On April 7, 2022, the Company entered into an interest rate cap agreement to manage its exposure to interest rate fluctuations related to the Company’s Term Loan.

Other Non-Operating Loss

Other non-operating loss decreased by $39.8 million from to a loss of $44.9 million for the year ended December 31, 2021 to a loss of $5.1 million in the current period. For the year ended December 31, 2022, Other non-operating loss included a $5.6 million change in the TRA liability caused by a change in our blended state tax rates. For the year ended December 31, 2021, Other non-operating loss included a $36.9 million change in the fair value of the embedded derivatives of our Redeemable Preferred Units as well as $8.6 million of debt issuance costs written off due to the extinguishment of a portion of the term debt in connection with a repricing.

Income Before Income Taxes

Due to the factors above, Income before income taxes increased $117.6 million from $61.6 million to $179.2 million for the year ended December 31, 2022 compared to the prior year.

Income Tax Expense

Income tax expense increased $11.0 million from $4.9 million to $15.9 million for the year ended December 31, 2022 as compared to the prior year due to the Company being allocated pre-tax book loss for the post-IPO period ended December 31, 2021 compared to pre-tax book income for the year ended December 31, 2022. The increase in tax expense was offset by an increase in the Company’s state tax rate during 2022 which resulted in a tax benefit recognized related to the increase in our Deferred tax assets and by a tax benefit recognized as a result of equity-based compensation vesting and resulting increase in the Company’s tax basis in excess of GAAP basis.

Net Income

Net income increased $106.6 million from $56.6 million to $163.3 million for the year ended December 31, 2022 compared to the prior year as a result of the factors described above.

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Non-GAAP Financial Measures and Key Performance Indicators

In assessing the performance of our business, we use non-GAAP financial measures that are derived from our consolidated financial information, but which are not presented in our consolidated financial statements prepared in accordance with GAAP. We consider these non-GAAP financial measures to be useful metrics for management and investors to facilitate operating performance comparisons from period to period by excluding potential differences caused by variations in capital structures, tax positions, depreciation, amortization, and certain other items that we believe are not representative of our core business. We use the following non-GAAP measures for business planning purposes, in measuring our performance relative to that of our competitors, to help investors to understand the nature of our growth, and to enable investors to evaluate the run-rate performance of the Company. Non-GAAP financial measures should be viewed as supplementing, and not as an alternative or substitute for, the consolidated financial statements prepared and presented in accordance with GAAP. The footnotes to the reconciliation tables below should be read in conjunction with the audited consolidated financial statements in this Annual Report. Industry peers may provide similar supplemental information but may not define similarly named metrics in the same way we do and may not make identical adjustments.

Organic Revenue Growth Rate

Organic revenue growth rate represents the percentage change in Total revenue, as compared to the prior year, adjusted for revenue attributable to recent acquisitions during the first 12 months of Ryan Specialty’s ownership, and other adjustments such as contingent commissions, fiduciary investment income, and the impact of changes in foreign exchange rates.

A reconciliation of Organic revenue growth rate to Total revenue growth rate, the most directly comparable GAAP measure, for each of the periods indicated is as follows (in percentages):

(1)
December 31, 2023 revenue of $2,077.5 million less December 31, 2022 revenue of $1,725.2 million is a $352.3 million year-over-year change. The change, $352.3 million, divided by the December 31, 2022 revenue of $1,725.2 million is a total revenue change of 20.4%. December 31, 2022 revenue of $1,725.2 million less December 31, 2021 revenue of $1,432.8 million is a $292.4 million year-over-year change. The change, $292.4 million, divided by the December 31, 2021 revenue of $1,432.8 million is a total revenue change of 20.4%. December 31, 2021 revenue of $1,432.8 million less December 31, 2020 revenue of $1,018.3 million is a $414.5 million year-over-year change. The change, $414.5 million, divided by the December 31, 2020 revenue of $1,018.3 million is a total revenue change of 40.7%. See “Comparison of the Year Ended December 31, 2023 and 2022” and “Comparison of the Year Ended December 31, 2022 and 2021” for further discussion.

(2)
The mergers and acquisitions adjustment excludes net commission and fees revenue generated during the first 12 months following an acquisition. The total adjustment for the years ended December 31, 2023, 2022, and 2021 was $48.2 million $40.0 million and $186.4 million, respectively.

(3)
The other adjustments exclude the year-over-year change in contingent commissions, fiduciary investment income, and foreign exchange rates. The total adjustment for the years ended December 31, 2023, 2022, and 2021 was $44.6 million $16.0 million and $0.6 million, respectively.

Adjusted Compensation and Benefits Expense and Adjusted Compensation and Benefits Expense Ratio

We define Adjusted compensation and benefits expense as Compensation and benefits expense adjusted to reflect items such as (i) equity-based compensation, (ii) acquisition and restructuring related compensation expense, and (iii) other exceptional or non-recurring items, as applicable. The most comparable GAAP financial metric is

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Compensation and benefits expense. Adjusted compensation and benefits expense ratio is defined as Adjusted compensation and benefits expense as a percentage of Total revenue. The most comparable GAAP financial metric is Compensation and benefits expense ratio.

A reconciliation of Adjusted compensation and benefits expense and Adjusted compensation and benefits expense ratio to Compensation and benefits expense and Compensation and benefits expense ratio, the most directly comparable GAAP measures, for each of the periods indicated, is as follows:

(1)
In 2023, Acquisition related long-term incentive compensation includes a $6.8 million expense reversal related to the claw back of an All Risks LTIP payment from a terminated employee.

(2)
Adjustments to Compensation and benefits expense are described in the definition of Adjusted EBITDAC to Net income in “Adjusted EBITDAC and Adjusted EBITDAC Margin”.

Adjusted General and Administrative Expense and Adjusted General and Administrative Expense Ratio

We define Adjusted general and administrative expense as General and administrative expense adjusted to reflect items such as (i) acquisition and restructuring general and administrative related expense, and (ii) other exceptional or non-recurring items, as applicable. The most comparable GAAP financial metric is General and administrative expense. Adjusted general and administrative expense ratio is defined as Adjusted general and administrative expense as a percentage of Total revenue. The most comparable GAAP financial metric is General and administrative expense ratio.

A reconciliation of Adjusted general and administrative expense and Adjusted general and administrative expense ratio to General and administrative expense and General and administrative expense ratio, the most directly comparable GAAP measures, for each of the periods indicated is as follows:

(1)
Adjustments to General and administrative expense are described in the definition of Adjusted EBITDAC to Net income in “Adjusted EBITDAC and Adjusted EBITDAC Margin”.

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Adjusted EBITDAC and Adjusted EBITDAC Margin

We define Adjusted EBITDAC as Net income before Interest expense, net, Income tax expense, Depreciation, Amortization, and Change in contingent consideration, adjusted to reflect items such as (i) equity-based compensation, (ii) acquisition and restructuring related expenses, and (iii) other exceptional or non-recurring items, as applicable.

Acquisition-related expense includes one-time diligence, transaction-related, and integration costs. Acquisition-related long-term incentive compensation arises from long-term incentive plans associated with acquisitions. In 2023, Restructuring and related expense consisted of compensation and benefits, occupancy, contractors, professional services, and license fees related to the ACCELERATE 2025 program. The compensation and benefits expense included severance as well as employment costs related to services rendered between the notification and termination dates. See “Note 5, Restructuring” in the footnotes to the consolidated financial statements in this Annual Report for further discussion of ACCELERATE 2025. The remaining costs that preceded the restructuring plan were associated with professional services costs related to program design and licensing costs. In 2021 and 2022, Restructuring and related expense represented costs associated with the 2020 restructuring plan. Amortization and expense consisted of charges related to discontinued prepaid incentive programs. For years ended December 31, 2023 and 2022, Other non-operating loss included a $10.4 million and $5.6 million charge, respectively, related to the change in the TRA liability caused by a change in our blended state tax rates. For the year ended December 31, 2021, Other non-operating loss included the change in fair value of the embedded derivatives on the Redeemable Preferred Units. This change in fair value of $36.9 million was due to the occurrence of a Realization Event in the third quarter of 2021, which is defined as a Qualified Public Offering or a Sale Transaction in the Onex Purchase Agreement. The loss in 2021 also included expense of $8.6 million associated with the extinguishment of a portion of our deferred debt issuance costs on the term debt. Equity-based compensation reflects non-cash equity-based expense. IPO related expenses include general and administrative expense associated with the preparations for Sarbanes-Oxley compliance, tax, and accounting advisory services and compensation-related expense primarily related to the revaluation of existing equity awards at IPO as well as expense for new awards issued at IPO.

These measures start with consolidated Net income and do not deduct earnings related to the non-controlling interest in Ryan Re for the period of time prior to March 31, 2021 when the Company did not own 100% of the business or the non-controlling interest attributed to the retained ownership of the LLC.

Total revenue less Adjusted compensation and benefits expense and Adjusted general and administrative expense is equivalent to Adjusted EBITDAC. For a breakout of compensation and general and administrative costs for each addback, refer to the Adjusted compensation and benefits expense and Adjusted general and administrative expense tables above. The most directly comparable GAAP financial metric to Adjusted EBITDAC is Net income. Adjusted EBITDAC margin is defined as Adjusted EBITDAC as a percentage of Total revenue. The most comparable GAAP financial metric is Net income margin. A reconciliation of Adjusted EBITDAC and Adjusted EBITDAC margin to Net income and Net income margin, the most directly comparable GAAP measures, for each of the periods indicated is as follows:

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