While Wall Street buzzes about Ryan Specialty's (NYSE: RYAN) impressive double-digit organic growth and ambitious M&A strategy, a subtle shift in their approach reveals a stealthy plan for international expansion. Hidden in plain sight within their Q1 2024 earnings call lies a strategy they haven't explicitly named but are executing with precision: the "Whisper Strategy." This strategy, focused on delegated authority, is poised to reshape their global presence and potentially catapult them to a level of dominance that eclipses their current market perception.

Ryan Specialty has always been a major player in the specialty insurance market, but their primary focus has been the United States. However, recent acquisitions and strategic pronouncements hint at a change in their approach, a move away from the boisterous fanfare of wholesale brokerage towards a quieter, more calculated penetration of international markets through delegated authority.

The "Whisper Strategy" hinges on several key observations. Firstly, Ryan Specialty recognizes the saturation of the wholesale brokerage market in Europe and the UK. Tim Turner, the company's president, acknowledges this, stating that these regions are "not fertile ground for wholesale broking." Instead, they see an opportunity in the burgeoning delegated authority sector, fueled by carrier consolidation and a thirst for innovative insurance products.

Secondly, they understand that conquering international markets requires more than just capital; it demands localized expertise and talent. This insight is apparent in their acquisition of Castel Underwriting Agencies, a move lauded for bolstering their delegated authority offerings. However, the true brilliance of this acquisition lies in its strategic implications. Castel brings not just its 13 unique MGUs and a track record of underwriting profits but also, crucially, a 135-strong team embedded in the UK and Benelux region.

This acquisition, therefore, serves as the linchpin of the "Whisper Strategy." With Castel's established local presence, Ryan Specialty gains a critical foothold in European markets. This allows them to forge direct relationships with distributors who, as Miles Wuller, CEO of RSG Underwriting Managers, points out, prefer interacting with local entities.

But the "Whisper Strategy" goes beyond a single acquisition. It's about cultivating an environment where international expansion can flourish organically. Pat Ryan, the company's founder and CEO, notes that the acquisition provides them with "local leadership in those jurisdictions," individuals who will act as "great resources in identifying talent." This implies a long-term vision: building a self-sustaining ecosystem of expertise and talent within these regions.

"Pat Ryan states, "We see international, particularly Europe and the U.K. as not fertile ground for a wholesale broking, but very fertile ground for delegated authority. There's been a lot of consolidation of carriers in those countries... but they're far fewer and it allows an opportunity for delegated authority for us to bring in new capital providers or work with some of the existing over there with innovative ideas on product, innovative ideas on servicing different parts of the insurance industry.""

Furthermore, Ryan Specialty recognizes the current trend of carriers divesting their MGUs. They attribute this to carriers seeking to strengthen their tangible book value. This trend creates a fertile ground for Ryan Specialty to acquire established, high-performing MGUs at potentially attractive valuations, further amplifying their international reach.

The financial implications of the "Whisper Strategy" are significant. Castel, alone, adds an estimated $44 million in annual revenue. However, this is merely the tip of the iceberg. As Ryan Specialty leverages Castel's local expertise to attract new talent, develop innovative products, and secure more delegated authority arrangements, their revenue from international operations could skyrocket.

While they haven't broken out revenue figures for their individual MGUs, including their reinsurance MGU, Ryan Re, both Pat Ryan and Jeremiah Bickham, the company's CFO, refer to it as a "rapidly growing" segment. This suggests that their delegated authority business, with Castel acting as a catalyst, is poised to become a major growth engine for the company.

Projected Revenue Growth: US vs. International

The following chart illustrates a hypothetical projection of Ryan Specialty's revenue growth, showcasing the potential impact of the "Whisper Strategy" on international expansion.

Hypothesis: Ryan Specialty's international revenue will grow at a rate significantly higher than their US revenue growth rate over the next 3-5 years.

Potential Numbers: Assuming a conservative 15% annual growth rate for their US operations and a more aggressive 25% annual growth rate for their international operations (fueled by the "Whisper Strategy"), we could see a significant shift in their revenue mix. If current US revenue represents roughly 90% of their total revenue, within five years, international operations could account for over 30% of their revenue, demonstrating a substantial shift in their global footprint. This rapid international growth could lead to a significant re-rating of their stock, potentially exceeding analysts' current price targets.

Ryan Specialty's "Whisper Strategy" is not a fleeting trend; it's a deliberate and meticulously crafted plan for global expansion. While the market is distracted by the noise of organic growth and acquisitions, Ryan Specialty is quietly laying the foundation for a future where they are not just a major player, but a dominant force in the global specialty insurance market.

"Fun Fact: Ryan Specialty's M&A strategy isn't just about acquiring businesses; it's about attracting top talent. Over half of their nearly 60 acquisitions have been driven by the sellers' preference for Ryan Specialty as their destination of choice. This speaks volumes about the company's reputation and its ability to create a thriving environment for insurance professionals."