Earnings call transcript: Baldwin Insurance Q1 2025 sees slight EPS beat, stock dips

Baldwin Insurance Group Inc. reported its first-quarter 2025 earnings, revealing a slight beat on earnings per share (EPS) but a miss on revenue forecasts. The company posted an EPS of $0.65, slightly above the forecasted $0.64. Despite this, Baldwin’s revenue of $413.4 million fell short of the anticipated $418.35 million. The market reacted negatively, with shares dropping 3.73% in after-hours trading to $39.19. According to InvestingPro data, the company’s revenue growth remains strong at 12.1% over the last twelve months, though three analysts have recently revised their earnings expectations downward for the upcoming period.

Key Takeaways

• Baldwin Insurance Group’s EPS surpassed expectations by $0.01.
• Revenue fell short of forecasts by $4.95 million.
• Stock declined by 3.73% in after-hours trading.
• The company launched new products and acquired a platform to enhance its offerings.
• Guidance for the year remains unchanged, with double-digit organic growth expected.

Company Performance

Baldwin Insurance Group demonstrated robust performance in Q1 2025, achieving a 10% organic revenue growth. The company reported a total revenue of $413.4 million and a GAAP net income of $24.9 million, equating to $0.20 per share. Adjusted net income was $76.6 million, or $0.65 per diluted share, reflecting strong operational efficiency. The adjusted EBITDA rose by 12% to $113.8 million, with a margin expansion of 80 basis points to 27.5%.

Financial Highlights

• Revenue: $413.4 million (missed forecast by $4.95 million)
• Earnings per share: $0.65 (beat forecast by $0.01)
• Adjusted EBITDA: $113.8 million (12% increase YoY)
• Adjusted EBITDA Margin: 27.5% (expanded by 80 basis points)
• Adjusted Free Cash Flow: $25.8 million (6% increase YoY)

Earnings vs. Forecast

Baldwin Insurance’s Q1 EPS of $0.65 exceeded the forecast of $0.64, marking a positive surprise of approximately 1.56%. However, the revenue of $413.4 million was below the forecasted $418.35 million, a shortfall of about 1.18%. This mixed performance highlights the company’s ability to manage costs effectively, despite revenue challenges.

Market Reaction

Following the earnings release, Baldwin Insurance’s stock declined by 3.73% in after-hours trading, closing at $39.19. This movement reflects investor concerns over the revenue miss and potential future growth challenges. The stock’s current price is closer to its 52-week low of $29.40, indicating a bearish sentiment compared to the broader market trends. InvestingPro analysis suggests the stock is currently undervalued, with a beta of 1.77 indicating higher volatility than the market. Despite recent pressure, the stock has delivered a strong 31% return over the past year. Subscribers to InvestingPro can access detailed Fair Value analysis and 7 additional ProTips for deeper insights.

Outlook & Guidance

Baldwin Insurance maintained its full-year consolidated guidance, projecting mid-to-high single-digit organic growth for its Insurance Advisory Solutions segment and double-digit overall growth. For Q2, the company expects revenue between $370 million and $380 million, with adjusted EPS in the range of $0.41 to $0.44. The firm is targeting $150 million to $175 million in free cash flow for the year. InvestingPro data shows the company maintains a healthy current ratio of 1.13 and has achieved a robust 59% revenue CAGR over the past five years. For comprehensive analysis including detailed financial health scores and expert insights, access the full Pro Research Report available exclusively to InvestingPro subscribers.

Executive Commentary

CEO Trevor Baldwin expressed satisfaction with the first-quarter results, stating, "We were extremely pleased with the first quarter overall." CFO Brad Hale added confidence in the company’s strategic goals, saying, "We remain confident in our ability to execute on our goals." Additionally, Baldwin highlighted the improving conditions in the Florida insurance market, noting it as "the healthiest place it’s been in over a decade."

Risks and Challenges

• Revenue Shortfall: The Q1 revenue miss raises concerns about future growth potential.
• Market Conditions: Declining property insurance renewal rates and cautious employee benefits markets could impact future performance.
• Economic Uncertainty: Broader macroeconomic pressures may affect client demand and operational costs.
• Competitive Landscape: Maintaining market share gains amidst strong competition remains a challenge.
• Leverage: Reducing net leverage below 4x by Q3 will require disciplined financial management.

Q&A

During the earnings call, analysts inquired about the timing of project-based work and its impact on revenue recognition. Discussions also centered on the dynamics of the Florida insurance market and expectations for reinsurance renewals. Concerns about the employee benefits market’s uncertainty were also addressed, reflecting broader industry challenges.

Full transcript - Baldwin Insurance Group Inc (BWIN) Q1 2025:

Earnings Call Introducer, Baldwin Group: Thank you. Welcome to the Baldwin Group’s First Quarter twenty twenty five Earnings Call. Today’s call is being recorded. First quarter financial results, supplemental information and Form 10 Q were issued earlier this afternoon and are available on the company’s website at ir.baldwin.com. Please note that remarks made today may include forward looking statements subject to various assumptions, risks and uncertainties.

The company’s actual results may differ materially from those contemplated by such statements. For a more detailed discussion, please refer to the note regarding forward looking statements in the company’s earnings release and our most recent Form 10 Q, both of which are available on the Volvo website. During the call today, the company may also discuss certain non GAAP financial measures. For a more detailed discussion of these non GAAP financial measures and historical reconciliation to the most closely comparable GAAP measures, please refer to the company’s earnings release and supplemental information, both of which have been posted on the company’s website at ir.baldwin.com. I will now turn the call over to Trevor Baldwin, Chief Executive Officer of The Baldwin Group.

Trevor Baldwin, Chief Executive Officer, Baldwin Group: Good afternoon and thank you for joining us to discuss our first quarter results reported earlier today. I’m joined by Brad Hale, Chief Financial Officer and Bonnie Bishop, Executive Director of Investor Relations. We were extremely pleased with the first quarter overall as we continued our track record of industry leading organic growth, ongoing margin expansion and double digit growth in earnings. In the first quarter, we generated organic revenue growth and adjusted EBITDA growth of 1012% respectively, while delivering 80 basis points of adjusted EBITDA margin improvement and 16% growth in adjusted diluted earnings per share. Normalizing to the sale of our wholesale business, Connected Risk Solutions, adjusted EBITDA grew 14% resulting in an adjusted EBITDA margin of 28%.

Adjusted free cash flow was $26,000,000 up 6% from the prior year period. We paid $123,000,000 of earn outs in cash in the first quarter and an additional $37,000,000 in April. We expect to pay another $22,000,000 in the second quarter, which will extinguish the vast majority of our remaining earn out obligations and result in the steady improvement in net leverage and adjusted free cash flow that we’ve expected. Turning to our segment results, in Insurance Advisory Solutions, overall organic revenue growth for the quarter was 3%. As we mentioned on our fourth quarter earnings call, we anticipated single digit organic revenue growth in IES in the first quarter due to the timing of net new business.

Sales velocity remained strong at 14% compared to 17% in the prior year period and client retention improved year over year to approximately 92%. The impact of rate and exposure or premium change on renewals for the quarter was negative 3.5% largely driven by a more competitive insurance rate environment for our clients across many lines particularly in large coastal property as well as muted project based revenue. When compared to the 4.5% benefit provided by rate and exposure in the first quarter of twenty twenty four, the aggregate headwind to this quarter was approximately 800 basis points. Our underwriting capacity and technology solutions segment had an outstanding quarter with organic revenue growth accelerating to 32% versus 21% in the first quarter of twenty twenty four driven by continued outperformance across our multifamily and home portfolios, which saw 1729% organic commissions and fees growth respectively. Continued momentum at Juniper Re and the introduction of our multifamily captive also supported the strong organic growth print in UCTS for the quarter.

In April, we announced the finalization of our third party led capitalization of our inaugural reciprocal insurance exchange named Builder Reciprocal Insurance Exchange or BREE for short to support continued growth in our builder channel. As of today, we have closed on the $110,000,000 capitalization of the reciprocal and will imminently begin migrating the builder book. This marks a meaningful milestone in our continued journey to vertically integrate across the value chain and bring innovative third party risk capital solutions to market in support of more efficient risk transfer outcomes for our clients. As a reminder, we do not intend to consolidate Breeze financial results and will account for the attorney in fact as an equity method investment. As such, the surplus notes used to capitalize the reciprocal do not represent additional debt of Baldwin or its affiliates.

Our Main Street Insurance Solutions segment delivered total organic revenue growth of 10% driven by strong new business generation across our builder and national mortgage and real estate franchises along with our Medicare division which outperformed during the annual enrollment period. New business momentum helped offset a deceleration in rate and exposure as well as capacity challenges in certain markets such as California. In summary, we’re pleased with our first quarter results despite the macro uncertainty of play and remain confident in the resilience and durability of our business model as well as the overall position and trajectory of our business. Our strengthening financial profile, immense operating leverage, diverse and durable drivers of outsized new business and leading talent franchise position our business well to execute at a high level and thrive through the current and any insurance market and economic environment. Thank you to our clients for their continued trust in our ability to provide guidance, advice and creative solutions to mitigate increasingly complex risks and to our colleagues for their dedication and commitment to deliver meaningful outcomes for both our clients and insurance company partners.

With that, I will turn it over to Brad who will detail our financial results.

Brad Hale, Chief Financial Officer, Baldwin Group: Thanks, Trevor, and good afternoon, everyone. For the first quarter, we generated organic revenue growth of 10% and total revenue of $413,400,000 Looking at the segment level, we generated organic revenue growth of 3% at IAS, thirty two percent at UCTS and 10% at MIS. We recorded GAAP net income for the first quarter of $24,900,000 or GAAP diluted earnings per share of $0.20 Adjusted net income for the first quarter, which excludes share based compensation, amortization and other one time expenses was $76,600,000 or $0.65 per fully diluted share. A table reconciling GAAP net income to adjusted net income can be found in our earnings release and our 10 Q filed with the SEC. Adjusted EBITDA for the first quarter rose 12% to $113,800,000 compared to $101,700,000 in the prior year period.

Adjusted EBITDA margin expanded approximately 80 basis points year over year to 27.5% for the quarter compared to 26.7% in the prior year period. As we mentioned on the last earnings call, we transitioned to a fiduciary reporting model for cash, accounts receivable and payables held or owed in a fiduciary capacity. This change is to reflect the nature of the accounts more appropriately on our balance sheet and reduce volatility in the cash flow from operations. On the balance sheet, we now label them fiduciary cash, fiduciary receivables and fiduciary liabilities. In the cash flow statement, changes in fiduciary cash are presented within financing activities.

We now present the prior periods on the same basis and included a recasting of 2024 quarterly and full year adjusted free cash flow on pages twenty and twenty one of our earnings supplement. As discussed on our year end call, this change introduced significant seasonality to our presentation of adjusted free cash flow from operations. Adjusted free cash flow for the first quarter was $25,800,000 up six percent year over year as a result of the increase in adjusted EBITDA offset primarily by timing of contingent receipts, which we expect will normalize in subsequent quarters. In the first quarter, we paid $123,000,000 of earn outs in cash, inclusive of amounts reclassified to colleague earn out incentives. Thus far in the second quarter, we’ve paid $37,000,000 leaving our remaining estimated undiscounted earn out obligations at approximately $30,000,000 20 2 million dollars of which we expect to pay in the next couple of months.

As expected, net leverage increased slightly to 4.2 times in the quarter given the significant earn out payments incurred. That said, we remain on track to bring net leverage below four times by the third quarter within our stated long term range of three to four times. Of note, we were recently upgraded by S and P to be stable and our rating of B2 was affirmed by Moody’s with a change in outlook from negative to stable. This outcome is a direct result of the significant improvement in our financial profile over the last couple of years and may provide us with additional opportunities to optimize our debt stack in the future. Looking ahead, our full year consolidated guidance remains unchanged.

In the face of continued economic uncertainty, we could see organic revenue growth in our IAS business in the mid to high single digit range for the year, with organic growth building through the year as a result of timing and expected net new business. That said, we continue to expect a double digit organic growth outcome for the overall business for the year. For the second quarter of twenty twenty five, we expect revenue of $370,000,000 to $380,000,000 and organic revenue growth towards the low end of our 10% to 15% long term range. We anticipate adjusted EBITDA between $83,000,000 and $88,000,000 and adjusted diluted EPS of $0.41 to $0.44 per share. In summary, we remain confident in our ability executing on our goals of reducing net leverage, expanding margins and free cash flow and maintaining double digit organic revenue growth for the year.

With almost all of our earn out obligations now satisfied, we are excited about our forthcoming improved flexibility to allocate capital to opportunities that will continue to generate durable outsized results for shareholders. We will now take questions. Operator?

Operator: Thank you. We will now be conducting a question and answer session. Our first question comes from the line of Greg Peters with Raymond James. Please proceed with your question.

Greg Peters, Analyst, Raymond James: Hey, good afternoon, everyone. Let’s jump right into, the comments provided organic revenue outlook for the second quarter in the low end of the range. And part of that, the IAS business seems to be running a little bit below where I thought it would be running. I think you called out some project based headwinds. Maybe give us some more detail on what’s going on inside there and when it might recover to something more to a higher level, which I would have normally expected?

Trevor Baldwin, Chief Executive Officer, Baldwin Group: Yes. Hey, Greg. This is Trevor. Good evening. So while the headline organic print for the quarter was below our historic results, this was not unexpected as we called out the expectation for single digit organic growth this quarter on our year end call.

And let’s be clear, I’d say I remain incredibly confident in the underlying fundamentals and relative positioning of our IS business. With respect to the result, while we saw some timing related impacts to net new business as we have previewed on our last call, we experienced a roughly 800 basis point headwind in the quarter from impact of rate and exposure or renewal premium change for which we call out I’d say two items specifically. First, if you look at our property book renewals in the quarter, renewal premium change was negative 5% which compares to positive 21% in the prior year period. While certainly this impacts our revenue, it also means we’re delivering outcomes for our clients, which contributes to the improved client retention that I cited in the prepared remarks earlier. Second, I’d say there’s obviously been a lot of headlines related to macro uncertainty.

And while our business has been and will continue to be incredibly resilient in times like this, we can typically see signs of economic uncertainty in our employee benefits business which we saw in the first quarter which is also our seasonally largest quarter for the benefits business. Specifically, renewal premium change was roughly flat for the quarter compared to historical trend in the 3% to 7% range, which we’d attribute to relatively more muted hiring trends and a somewhat more cautious business outlook from our clients related to the current macroeconomic uncertainty. All that being said, underlying trends in the business continue to be very strong. Our sales velocity of 14% in the quarter remains top quartile for the industry. Our new business pipelines are quite robust and we see growing momentum and project based work across our construction practice and are seeing continued improvement in client retention.

Analyst/Speaker: I continue to expect industry leading sales velocity, strong client retention and stabilizing impacts from rate and exposure as the year goes on

Trevor Baldwin, Chief Executive Officer, Baldwin Group: which should lead to growing momentum in our IS organic growth throughout the year. This continues to be a franchise that will deliver industry leading new business results, strong client retention and over time that will continue to generate industry leading organic growth overall.

Greg Peters, Analyst, Raymond James: Okay. Thanks for tying in the sales velocity because that was you called that out in your comments. So took note of that. Brad, can we go to the new cash flow presentation? And

Analyst/Speaker: can

Greg Peters, Analyst, Raymond James: you talk about, you know, the what you’re targeting, what you how you think about free cash flow conversion rate on adjusted basis because, these payments, that you’re going to be paying out, the balance of the second quarter or maybe a little bit in the third quarter. Just trying to figure out what the underlying on the new basis, sort of the target is for the free cash flow conversion rate?

Brad Hale, Chief Financial Officer, Baldwin Group: Yes. So I’d say, Greg, our target remains what we called out on the year end call. I believe we gave a guide of between $150,000,000 and $175,000,000 of free cash flow for the year, which would be, call it, roughly a 50% conversion rate against adjusted EBITDA. We continue to believe that as interest expense as a percentage of overall EBITDA goes down, one time items continue to go down that we can progress towards closer to a 65% to 70% conversion rate of adjusted EBITDA over time. And just to call out a little more specifics on the free cash flow from operations for for the quarter.

Obviously, 26,000,000, up 6% year over year under the revised presentation. It’s slightly lower than the adjusted EBITDA growth and that’s really a result of working capital timing. It was about a $10,000,000 headwind, dollars 15,000,000 drag from AR offset largely by about a $9,000,000 benefit in the change in accrued expenses. If I look at those two line items, the largest driver of the AR drag was timing of contingent receipts, which we of course expect to reverse in the subsequent quarters. In addition, we have a concentration of both Medicare and benefits revenue in Q1, which is collected over the subsequent twelve months.

On the accrual side, the benefit we saw there was the shifting in timing of cash interest as we launched our inaugural senior secured notes last May and we only pay interest on those twice a year both in May and October. So we had a slight benefit from that in Q1 which offset that headwind we saw in AR.

Greg Peters, Analyst, Raymond James: Thanks for that detail. Can you just one of the things you called out in the comments was the debt leverage of 4.2 times, I believe. Is it still your expectation that when we get to by year end, you’re going to be back down into the three range based on what you’re seeing going on inside the business?

Brad Hale, Chief Financial Officer, Baldwin Group: Yes, it is, Greg.

Trevor Baldwin, Chief Executive Officer, Baldwin Group: Perfect.

Greg Peters, Analyst, Raymond James: Thanks for the answers.

Trevor Baldwin, Chief Executive Officer, Baldwin Group: Thanks, Greg.

Operator: Thank you. Our next question comes from the line of Tommy McJoint with KBW. Please proceed with your question.

Tommy McJoint, Analyst, KBW: Hey, good evening, guys. It sounds like the project based headwinds were pretty pronounced in the first quarter. And when I think of the timing of some of the tariff announcements that may have induced some of that uncertainty, a lot of that came through into the second quarter. So can you talk about what you’ve seen so far, particularly around the project based work as we started the second quarter?

Trevor Baldwin, Chief Executive Officer, Baldwin Group: Yes. Hey, Tommy. I’d say, certainly, uncertainty causes a lot of business leaders to kind of slow down or pause decision making, particularly around kind of capital intensive project based work. Historically, what we’ve seen is that doesn’t go away. It just kind of builds up in spring loads, not a perfect proxy.

But as an example, at the onset of COVID, we saw organic kind of drop to low to mid single digits for a couple of quarters before rebounding up to mid to high teens as kind of that spring loaded pipeline began to hit. Specifically, what we’re seeing right now in the second quarter, I’d tell you, May 1 in particular, we had a number of new project starts. And as we look out the balance of this month in June, we have a strong pipeline of projects that we anticipate will go live, but you can’t count that until the shovels actually hit the dirt overall. But broadly, would tell you, we’re feeling incrementally more positive on the near term as the days go by and incremental certainty around the environment will only accelerate that.

Tommy McJoint, Analyst, KBW: Got it. And then switching over to the UCTS segment, generated really strong organic revenue growth in the first quarter. Can you unpack that a little bit in terms of what drove that meaningful acceleration from twenty one percent in the

Trevor Baldwin, Chief Executive Officer, Baldwin Group: first quarter of last year up

Charlie Letterra, Analyst, BMO Capital Markets: to 32% this year?

Trevor Baldwin, Chief Executive Officer, Baldwin Group: Yes. So, Tommy, the two primary drivers, one, continued really strong growth and kind of our homeowners programs broadly at high 20s commissions and fees growth, similar really strong growth in our multifamily renters product portfolio. We also introduced multifamily captive, which you should think of as kind of incremental contingent revenue opportunity on a very profitable book of business, which contributed about 500 basis points to the segment’s overall organic growth.

Brad Hale, Chief Financial Officer, Baldwin Group: Got it. Thank you. Thanks, Tommy.

Operator: Thank you. Our next question comes from the line of Josh Shanker with Bank of America. Please proceed with your question.

Josh Shanker, Analyst, Bank of America: Yes. Thank you. Can we put a number just, Trevor, on the onetime headwinds from the renewal timing that was the headwind for the 1Q organic. Anyway, it snaps back in 2Q, we don’t have that anymore. There a number you want to put on that?

Trevor Baldwin, Chief Executive Officer, Baldwin Group: It’s probably about a couple of hundred basis points, Josh, if you just isolate to kind of timing of project based work And then kind of you add to that this quarter kind of likely being the most pronounced change in property insurance pricing. We’ll see some of that in Q2, but where we had kind of a 21% increase in property rate in Q1 of twenty twenty four, that was down to like high single digits in Q2. And so less of a, I would say a headwind as we go through the year and by the time we get Q3 kind of that reverses out. And then the benefits business about 60%, sixty five % of our benefits revenue hits in the first quarter. You heard I called out kind of rate and exposure premium change on renewal there was roughly flat.

A result we believe largely of kind of just a more cautious business outlook and posture amongst our clients, but we would not expect the same degree of headwinds in our benefits business through the balance of the year as you see seasonally more new business begin rolling in Q2 through Q4 and don’t have the same kind of magnitude of renewal book that you are lapping.

Josh Shanker, Analyst, Bank of America: So it’s not wrong to say that we should expect perceptible acceleration in organic as the year rolls through? Correct. Yes. Okay. And then one more question, I asked this on another call, but I am interested in the Florida market.

It does seem like the House Bill eight thirty seven and some other changes have been really beneficial to the insurance industry, particularly the underwriters. My feeling is the cost of risk has gone down in the state of Florida. Does that and pricing should follow maybe. Do you have any thoughts on market conditions in a less risky Florida? Or maybe I’m just wrong about that?

Trevor Baldwin, Chief Executive Officer, Baldwin Group: Yes, Josh. So I would use slightly different language, but maybe to start at a macro level, the Florida insurance marketplace is in the healthiest place it’s been in over a decade, largely as a result of the tort reforms that you mentioned. What I would say is, I don’t think the price of risk or the cost of risk has changed in Florida. If anything, the cost of risk from a pure Nat Cat perspective is going up. We’ve got more aggregation of values, building costs have gone up.

And in general, the frequency and severity of climate events is going up, not down. What has changed in a very favorable manner is the cost of legal system abuse in Florida. And that has come down dramatically and was candidly a huge tax on Florida citizens that was showing up in the form of increases and insurance costs. As that’s been muted, I would say that the insurance environment here has stabilized. However, over time, as we continue to see building values, construction costs go up, climate event volatility, the overall cost of risk, I would expect to continue to grow over time, but just in a more manageable place.

Josh Shanker, Analyst, Bank of America: Okay. Thank you for the answers.

Trevor Baldwin, Chief Executive Officer, Baldwin Group: Thanks, Josh.

Operator: Thank you. Our next question comes from the line of Elyse Greenspan with Wells Fargo. Please proceed with your question.

Elyse Greenspan, Analyst, Wells Fargo: Hi, thanks. I guess I want to come back to the IAS discussion as well. I thought last quarter, you guys were talking about double digit commission and fee growth in IAS for the year, which I know, right, is close to organic. So it sounds like that’s going to be a little bit weaker. You guys are talking with like, I think you said, high single digit, mid to high single digits.

And so what is, I guess, what are you seeing as the offsets to that? Because I know you guys did reaffirm the organic guidance for the full year?

Trevor Baldwin, Chief Executive Officer, Baldwin Group: Hey, Elyse. So a few things there. One, on IES, I’d say what you’re hearing from us in that kind of revised perspective around full year organic results is largely just a result of a wider kind of range of outcomes as a result of greater macro economic uncertainty and what that may mean relative to client business activity. There is no change in outlook and underlying kind of sales velocity momentum and improving client retention. And as I shared earlier, we feel really, really good about the positioning of that business and how we’ll continue to take share and outgrow the industry broadly.

As I think about kind of what are the counterbalancing factors, while we had a very strong start to the year in our underwriting and capacity segment and while we expect to see some deceleration there as a result of the some of the headwinds we’d already pointed out relative to the transition of the QBE builder book to our newly formed reciprocal and some of the one time impacts related to that. We do expect continued strong momentum in that business broadly. We also continue to see very strong results across our Main Street segment. Growth in both our builder and mortgage channels has been holding up nicely through the macro uncertainty, which also gives us continued confidence around the overall results we’ll expect there.

Elyse Greenspan, Analyst, Wells Fargo: And then, you were talking about timing earlier, right, like a negative timing on the Q1. Does the guide imply that this timing becomes like benefits like the Q2 or other quarters of the year?

Trevor Baldwin, Chief Executive Officer, Baldwin Group: Yes, we would expect OG organic in the IS business to build through the year as a result of some of that timing in particular around project based revenues.

Elyse Greenspan, Analyst, Wells Fargo: And then I know last quarter when you gave the full year guide, you guys were talking about there was some uncertainty built into the EBITDA guidance around the June 1 reinsurance renewals on your MTA due to the California fires. Now that we’re closer to the renewal, is there any like have things are things transpiring the way you guys had expected when you set the ’25 guidance?

Trevor Baldwin, Chief Executive Officer, Baldwin Group: Yes. So a few data points there, Elyse. One, loss costs have come in slightly better than our original loss picks for the California wildfires, which is a positive fact pattern. We have initial conversations underway around those June 1 renewals, I would characterize as constructive. And I’m sure you’re reading all the headlines around somewhat favorable cat XOL reinsurance environment.

And so those have us feeling incrementally more constructive and positive. With that being said, the largest driver of potential economic headwinds on the sixone renewals for us are around the quota share reinsurance capacity, which is still somewhat supply constrained in the market. And so, I’d say we feel incrementally better, but not yet ready to say exactly what that means, if anything relative to differences from the original conservatism that was built into the expectation.

Elyse Greenspan, Analyst, Wells Fargo: And then one last quick one. Have you guys disclosed how large Juniper Re is, where it stands today, maybe trailing twelve months or contribution to the quarter revenue?

Trevor Baldwin, Chief Executive Officer, Baldwin Group: Yes. Juniper continues to perform quite well. We’re pleased with the results. I’d say on an LTM basis, you’re talking high single digit millions from a revenue perspective. But I would also add the relative impact and contribution they are having across the business is more significant than that as a result of their ability to help us more strategically access capacity to support the continued high growth momentum we have across our MGA businesses.

Elyse Greenspan, Analyst, Wells Fargo: Thank you.

Operator: Thanks Elyse. Thank you. Our next question comes from the line of Pablo Singzon with JPMorgan. Please proceed with your question.

Analyst/Speaker: Hi, good afternoon. Just a couple of questions on IAS, maybe for Trevor. Just want to get a better handle on the headwinds you called out. So first, I get your point about the pricing, double and property being the widest if you compare 1Q year over year. But isn’t it true and I’m not sure if it’s the same for your book, right?

But for most insurers, I think 2Q tends to be a heavier property quarter anyway, you look at mix. Is it the same for you? Or is there something different about your book?

Trevor Baldwin, Chief Executive Officer, Baldwin Group: Yes. I’d say, Pablo, Q2 would be our heaviest volume quarter for cat property renewals, which is partly what’s informing our view that organic will build kind of through the year. And so we would expect kind of incremental improvement in Q2 over Q1, but then sequentially more improvement in Q3 and Q4.

Analyst/Speaker: Got you. That’s clear. And then just on employee benefits, I was wondering if you could provide more commentary on your clients there, whether in terms of end markets or geographies. And the context is that it doesn’t seem like a lot of other insurers or brokers have called out any weakness in employee benefits so far. So I was just wondering if what you’re seeing could be more unique to you than your book?

Thank you.

Trevor Baldwin, Chief Executive Officer, Baldwin Group: Yes. I don’t I would not I would be surprised if there’s material differences in the relative industry and geographic mix of our employee benefits books of business. We’re pretty intentional around kind of how we estimate the renewals and the revenues of those renewals. And I’d say have developed a pretty good process for how we triangulate that at the renewal time, obviously oneone being the heaviest date. And so what you see right now is kind of our teams and client experience teams best estimates of the relative impact of renewals, but the nature of the benefits business is they are estimates and as the year goes on, we will have better and more clear visibility and information to that.

Analyst/Speaker: Okay. And then maybe jumping to another topic, I’ll squeeze in this last question. So clearly strong growth in UTS and MIS. I’m just going to focus on the home orders portfolio there. Could you talk about the benefit, if any, you’re getting from pricingexposure, right?

So it’s clearly been a tailwind. I’m not sure if it’s sort of stable for you or petering out or accelerating.

Tommy McJoint, Analyst, KBW: A moment of what’s going on there.

Trevor Baldwin, Chief Executive Officer, Baldwin Group: to, Pablo. So we certainly had a decelerating kind of tailwind from rate and exposure in the Main Street business. It was roughly a 2% tailwind for the quarter, which is down fairly substantially on a year over year basis, which is expected just based on kind of how that market has continued to stabilize. And I’d say showcases the kind of strength and durability of our embedded business model and how that drives consistent flows of new business to drive healthy double digit growth through the cycle. I would also point out as we mentioned on our year end call, as a result of the transition of the builder book from QBE to our newly formed reciprocal exchange, we do expect a one time impact to revenue in Main Street, which is why we guided to single digit growth for the Main Street segment overall this year.

But that is entirely driven by the one time step down in economics from that transition that will then normalize thereafter.

Analyst/Speaker: All right. Thank you.

Trevor Baldwin, Chief Executive Officer, Baldwin Group: Thanks, Pablo.

Operator: Thank you. Our next question comes from the line of Charlie Letterra with BMO Capital Markets. Please proceed with your question.

Charlie Letterra, Analyst, BMO Capital Markets: Hey, thanks. Good evening. On the captive in UCTS, I guess, you talk about your decision to participate in the underwriting? How should we think about your loss exposure? Is that business cat exposed?

And would you consider participating programs in that segment?

Trevor Baldwin, Chief Executive Officer, Baldwin Group: Yes. Hey, Charlie. You should think about the captive as kind of a proactive move from a position of strength on our perspective. And you should really think about kind of the revenue and resulting earnings as supplemental contingent income. This is our longest dated, stable and most consistent performing book of business.

It is not cat exposed and we view there to be a incredibly remote chance of any actual underwriting loss. I’d also point out just as a result of kind of timing and how premiums and expected losses are booked, the captive did not contribute to margin at all in the quarter. However, we would expect it to contribute to margin over the course of the year. So this is a low volatility, high certainty incremental earnings opportunity as a result of our ability to curate and manage a very high performing book of business with no cat exposure and very low volatility. This is not a strategy to support capacity.

It’s not a strategy to kind of bolster a program. It’s simply an opportunity to bolster the overall economics.

Charlie Letterra, Analyst, BMO Capital Markets: Thanks. That’s helpful. And just looking at the 10 Q, can you talk about the ILS platform you guys acquired here last month and how that is? Yes.

Analyst/Speaker: So

Trevor Baldwin, Chief Executive Officer, Baldwin Group: we’re incredibly excited to welcome Bob and the whole MultiStat team to Baldwin. What I would say is this was a very small transaction, one that I would kind of really more characterize as an Aqua higher. It’s leverage neutral and is kind of contemplated in the original guide for our overall results. And to be clear, there is no actual balance sheet risk in this business. You should think about this as a platform to raise direct capital from investors to be deployed into underwritten reinsurance contract.

So effectively a reinsurance MGA, which is a key part of our broader strategy to continue vertically integrating ourselves into the broader insurance value chain and best position ourselves to access capacity on behalf of ourselves and our clients, bringing them ultimately closer to the end risk capital providers to deliver better, more thoughtful and innovative risk transfer solutions. So while small and immaterial kind of transaction, one that we believe will hold immense strategic value for our business over time and has the potential to contribute meaningfully to our financial results over time.

Charlie Letterra, Analyst, BMO Capital Markets: Thanks. And then just my last one, I guess, I don’t know if you guys called this out in your scripts, was there a meaningful negative contingent commission impact from the wildfires?

Trevor Baldwin, Chief Executive Officer, Baldwin Group: There was not. Our contingent income contract on those MGA programs is tied to non cat losses.

Brad Hale, Chief Financial Officer, Baldwin Group: Thank you.

Trevor Baldwin, Chief Executive Officer, Baldwin Group: Thanks, Charlie.

Operator: Thank you. We have reached the end of the question and answer session. I would like to turn the floor back to Chief Executive Officer, Trevor Baldwin for closing remarks.

Trevor Baldwin, Chief Executive Officer, Baldwin Group: Thank you all for joining us on the call this evening. We are incredibly excited for the underlying momentum we have in our business as evidenced by continued outsized growth and new client wins, margin accretion and the onset of a significant inflection in our financial profile with the vast majority of our earn out payments now behind us. In closing, I want to thank our colleagues for their hard work and dedication to delivering innovative solutions and exceptional results for our clients. I also want to thank our clients for their continued trust and confidence in our teams. Thank you all very much and we look forward to speaking to you again next quarter.

Operator: Thank you. And ladies and gentlemen, this concludes today’s conference and you may disconnect your lines at this time. Thank you for your participation.

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