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CHICAGO - Ryan Specialty Group (NYSE: RYAN), a global specialty insurance organization with a market capitalization of $7.7 billion and a strong financial health rating according to InvestingPro, has entered into a definitive agreement to acquire Velocity Risk Underwriters, LLC from Oaktree Capital Management, L.P. The acquisition, which includes Velocity's managing general underwriter operations and its wholly-owned E&S carrier, is expected to close early 2025, subject to regulatory approval.
Velocity, established in 2015 and headquartered in Nashville, Tennessee, specializes in first-party insurance for catastrophe-exposed properties, particularly in Florida, Texas, and the Southeast. The company also brings a robust technology platform to Ryan Specialty's portfolio, enhancing its property catastrophe offerings.
Miles Wuller, President and CEO of Ryan Specialty Underwriting Managers, emphasized that the addition of Velocity will significantly improve their services to wholesale clients and reinforce their position in the market. Meanwhile, FM, a leading commercial property mutual insurance company, is set to acquire Velocity's E&S carrier, Velocity Specialty Insurance Company (VSIC), as part of the transaction.
The acquisition is valued at an upfront cash consideration of $525 million, excluding VSIC and any earnout consideration. For the 12-month period ending December 31, 2024, Velocity reported operating revenue of approximately $81 million. Ryan Specialty Group, which generated revenue of $2.32 billion in the last twelve months and achieved a remarkable 47.7% stock return over the past year, appears to be trading above its Fair Value based on InvestingPro analysis. Discover more insights about RYAN and 1,400+ other stocks with comprehensive Pro Research Reports, available exclusively on InvestingPro.
The transaction is supported by both companies' leadership, with Velocity's Executive Vice Chairman and CEO expressing enthusiasm for the growth and market access opportunities it presents. Ryan Specialty's advisors for the deal were J.P. Morgan Securities LLC and Sidley Austin LLP, while Velocity and Oaktree were advised by Insurance Advisory Partners LLC, Howden Capital Markets & Advisory, and Debevoise & Plimpton LLP.
This strategic move is anticipated to enhance Ryan Specialty's capabilities in serving its clients and bolster its property catastrophe portfolio. With a robust gross profit margin of 37.6% and analysts forecasting continued net income growth, the company appears well-positioned for future expansion. The information for this article is based on a press release statement and InvestingPro data, where investors can access 8 additional ProTips and detailed financial metrics for smarter investment decisions.
In other recent news, Ryan Specialty Holdings has issued an additional $600 million in 5.875% Senior Secured Notes due 2032. This move, completed by the company's indirect subsidiary, is intended to fund potential future acquisitions and investments, aligning with its strategic growth plans. A portion of the proceeds is also expected to repay up to $400 million of the outstanding borrowings under the Revolving Credit Facility.
In terms of financial performance, Ryan Specialty has reported a significant increase in third-quarter revenue and earnings. The company's total revenue rose by 20.5% to $605 million, with organic growth contributing 11.8%. Adjusted earnings increased by 29.4% to $190 million, while adjusted diluted earnings per share grew by 28% to $0.41.
In a recent analyst note, Morgan Stanley (NYSE:MS) initiated coverage on Ryan Specialty with an Overweight rating. The firm's positive stance is based on the ongoing shift towards the Excess & Surplus markets, where Ryan Specialty operates. This trend is expected to continue, positioning Ryan Specialty to capitalize on these developments.
Finally, the company aims to maintain organic revenue growth guidance of 13.0% to 14.0% for 2024, indicating a focus on sustained growth. These developments underscore Ryan Specialty's strategic initiatives and commitment to growth in the specialty insurance sector.
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