Ryan Specialty snaps up Lodestar Marine
Just shy of eight years old, RSG Underwriting Managers now has 80 lines of business and more than 250 specialty underwriters. Intelligent Insurer speaks to chairman and CEO Mike Rice and COO Miles Wuller about the principles behind RSGUM’s rapid rise and what the future holds.
Our job is to give the underwriting talent the freedom to do its best work—that means assisting managing general underwriters (MGUs) with arranging capital and designing new products or granting them access to distribution channels on a larger scale or operations infrastructure.”
That is how RSG Underwriting Managers (RSGUM, the specialty underwriting business of Ryan Specialty Group) chairman and chief executive officer Mike Rice describes the secret to the company’s rapid growth. With roughly 400 employees across six countries, this specialty underwriting business comprises 22 specialty property and casualty MGUs— and has ambitious growth plans for the portfolio.
The company’s vision is that each MGU provides specialty expertise in distinct market niches in the E&S sector. These sectors encompass industries such as energy, marine, healthcare, enterprise risk, construction and more, all of which are areas where specialisation offers advantages for clients.
“We look for unique MGUs in specialty lines that have a proven track record of profi tability and a platform from which they can grow and evolve. This growth potential is sourced not only through the unparalleled expertise of our underwriters, but through the capital and distribution channels that RSGUM brings to the table,” says Rice.
A brand built on exacting standards
Miles Wuller, chief operating officer of RSGUM, stresses just how careful the company is in terms of the acquisitions it makes. He says the company often reviews between 60 and 70 opportunities to acquire entire companies or teams every year. Opportunities are a combination of internally sourced and market processes.
“Helping these businesses achieve their next level of performance takes a bespoke approach. That remains a key component to our success.” — Miles WullerRSGUM considers each opportunity but is very selective in terms of what it is looking for, completing only a handful of acquisitions or startups each year.
“Over the last several years, based on the interest in our segment, more properties are shifting to a competitive auction process. Every process starts with us emphasising our traits and operating model that have made us an employer and acquirer of choice over the last eight years,” Wuller says.
“Helping these businesses achieve their next level of performance takes a bespoke approach. That remains a key component to our success.”
Rice pointed to this rigour as contributing to the reputation of the parent RSGUM brand, a reputation for quality that extends to each of its MGUs.
“You will always know it is an RSGUM product; clients know what they are getting when they work with one of our MGUs. We have developed a distinct set of products and an experienced leadership team,” he says.
“We have a very flat management structure and seek to position ourselves as partners to each MGU.”
Success is a long game
When evaluating a prospective partner, RSGUM views shared values as paramount.
“The most important thing for us is to ensure the individuals we are working with are a good fit for our culture, and we in turn, are a good fit for the individuals concerned,” says Wuller. Some of the qualities sought are highly ethical behaviour, a culture of cooperation, passion, an entrepreneurial spirit, and a desire to see their business achieve new levels.
Given the often unique specialty nature of these businesses, RSGUM is also looking for ongoing commitment from MGU leaders.
“We want to own businesses into perpetuity. Each acquisition is approached with the understanding that it will become a permanent part of the group. We seek good underwriting talent and help them enhance the solutions their business can offer,” he adds.
While Wuller acknowledges the apparent irony of an eight-year old firm putting such an emphasis on longevity, he points out that, collectively, the 22 MGUs RSGUM encompasses have 300+ years of brand experience.
“We have brands that are more than 50 years old. That is very unusual and says a lot about with whom we want to partner. Few MGUs last more than 10 years, as they either lack the products or staff to perpetuate themselves. We seek businesses with specialty products that can withstand the test of time,” Wuller comments.
“We don’t look at sectors that are short-term plays,” Rice says. “We work with underwriting talent to create a niche that can last and build upon its success. It is certainly about a lot more than pricing at any given moment.”
Wuller adds: “It is heavily driven by historical underwriting performance. It is great to accumulate niche businesses but each has its own unique loss history, and we need to believe we can deliver an underwriting profit year after year going forward.”
Make no small plans
Setting such a high bar on deals means that RSGUM might go for long periods of time closing no deals, but then do several in quick succession. RSGUM is not focused solely on acquisitions. In the company’s short history, it has formed 11 MGUs from the ground up, often building the business around proven leaders and underwriting talent.
“It is not a question of whether the market is soft or hard; to us, the market is just the market.” — Mike Rice“We do not acquire for the sake of it; we do so to drive profitable organic growth post-acquisition via our distribution network and additional products,” says Rice.
This approach has led the company to set some very ambitious growth targets over the next few years. In 2018, Rice expects the business to underwrite $1.1 billion in premium. In the next three to five years, they predict this will double thanks to a combination of more acquisitions and organic growth.
“That is an ambitious target but not one that is unrealistic or irresponsible,” he says. “We work in conjunction with the business leaders to develop business plans that are unique to each company. Because of the additional product and distribution we offer, those targets are very realistic,” he says.
He adds that such a target is also informed by the company’s growth outside the US in the past three years. It has two facilities focused on Latin American business and now owns five businesses in Europe — three in London (EmergIn Risk, Hunter George & Partners, and Startpoint Executive Risks) and two in Scandinavia (RSG Sweden and RSG Denmark) — and is open to spreading its reach further afield.
“We will go where we feel we can make a difference,” Rice says.
Explaining the growth target further, Wuller adds: “Bear in mind that we have made a number of acquisitions recently. Some 25 percent have been in the past three years. As they settle into our company, they gather momentum quite quickly and contribute to next year’s organic growth.”
Case study: Lodestar Marine
A London-based MGU that operates in the P&I fixed premium marine market, Lodestar Marine is the company’s most recent acquisition.
The addition of Lodestar Marine complements the RSGUM team, which has been steadily building a marine business for several years. Lodestar is the third marine-focused MGU for RSGUM, following SafeWaters Underwriting Managers and Trident Marine Managers. Further supplementing RSGUM’s marine offering is Smooth Waters, a claims and adjustment services provider.
As one of the few providers to offer limits of liability up to $1 billion, Lodestar Marine fi ts the specialty niche so important to RSGUM. Led by RSA Insurance Group in the primary side (up to $500 million in limits), it offers owners’, charterers’ and operators’ P&I and additional covers for vessels up to 40,000 gross tonnage worldwide.
In terms of long-term prospects, Lodestar Marine’s directors, Charles Dymoke and John Hearn, are both P&I industry experts and now join RSG as directors of Lodestar continuing to lead the business going forward. The founders said at the time of the deal that they expect growth under the new ownership as it offers them a platform to expand geographic presence and product offering.
“Lodestar is a good fit for us; the two directors are career marine leaders with long and distinguished careers in the industry,” says Wuller.
“They started the business with private equity partners. We believe partnership with other insurance practitioners will enable their business to achieve its next evolution of growth and product.
“Our network of experts and infrastructure offers that and Lodestar is excited about the future. We are also confident that this will be a good cultural fit. We know Lodestar well; we have broken bread with them many times.”
Looking forward to the future
In the aftermath of heavy catastrophe losses in 2017, parts of the market have experienced an element of hardening in 2018—although to a lesser extent than many expected.
Asked whether this could help generate growth or, indeed, if the company has any view on pricing, Rice explains his somewhat pragmatic view.
“We don’t really have a view on rates or pricing,” he says. “There is always a point, naturally, where pricing becomes irresponsible, but we do not compete on price — we compete on offering the best solution.
“The reality is that across 22 businesses in as many niches, some prices will be up and some down. But overall, we have seen growth.
“It is not a question of whether the market is soft or hard; to us, the market is just the market. Those are the market conditions, and we have to do business on that basis. We are diligent; we use data and analysis to make good decisions. Across the portfolio, we expect solid growth and a very bright future.”
Mike Rice is chairman & CEO of RSG Underwriting Managers (RSGUM) and a managing director of Ryan Specialty Group (RSG).
Miles Wuller is chief operating off icer for RSGUM and a managing director of RSG.
RSG Underwriting Managers, Ryan Specialty Group, Miles Wuller, Mike Rice, MGA, MGU, M&A, Growth, Strategy, Global, Insurance