Ryan Specialty posts strong top line growth but bottom line slips

Insurance brokerage and services firm  Ryan Specialty Group suffered a nearly 20% decline in its annual net income in 2021 which fell to $56.6 million, despite handy gains in revenues and an increase in core earnings.

Operating profits of $186 million were up 17.7% year on year following a massive 41% increase in FY revenue to $1.43 billion. That revenue gain was boosted by the late-2020 acquisition of All Risks plus organic growth at over 20%.

“Our fourth quarter performance capped off a banner 2021,” founder and CEO Patrick Ryan (pictured) said. “Another quarter of strong double-digit organic growth enabled us to record a second consecutive full year of over 20% organic revenue growth, a remarkable feat."

But the accompanying rise in OPEX outpaced those top line gains, taking 2.6 percentage points from the operating margin to 13.0%.

Financial costs and non-operating charges wiped out the rise in EBIT to render the nearly 20% year on year decline at the bottom line. FY2021 costs included $79.5 million of one-off costs tied to the IPO, management noted.

Management preferred to point to an adjusted EBITDAC margin which it claimed had risen 3.3 percentage points year-over-year to 32.1%.

"We improved margins once again on a year-over-year basis, further validating the scalability of our platform," Ryan said.

The pace can't quite be held. Ryan went on to say that growth and margins could ease back slightly from 2021 levels in the current year. Expect organic revenue growth at between 13.0 and 15.0% and an adjusted EBITDAC margin down lightly to a range of 28 to 30%.

For the fourth quarter just closed, the group swung back to a net profit at $29.6 million versus a prior period pushed into the red by huge non-operating charges.

Operating profits were up a handy 13.9% year on year to $55.2 million following a 15.8% rise in revenue. The EBIT margin slipped 0.2 percentage points to 14.6%, with management saying notable portions of OPEX were tied directly to strong business growth.

Management claimed 15.4% organic growth, driven by "new client wins, expanded relationships with existing clients, an overall expansion of the E&S market, and premium rate increases."

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