TWFG Q2 2025 Earnings Call Transcript

Quartr
Provided by Quartr
August 13, 2025

Key Takeaways

  • Positive Sentiment: Revenue and EBITDA Growth: Q2 2025 total revenue rose 13.8% YoY to $60.3 M with organic growth of 10.6%, while adjusted EBITDA jumped 40.7% to $15.1 M and margins expanded to 25.1%.
  • Positive Sentiment: Premiums and Branch Expansion: Total written premiums increased 14.4% to $450.3 M; the company added nine new branches, entered Kentucky and completed four acquisitions, including a new Florida MGA program.
  • Negative Sentiment: Personal lines market is softening as carrier capacity expands, rate increases moderate and certain regions even see rate reductions, creating downward pressure on future premium growth.
  • Positive Sentiment: Strategic Technology Investments: Piloting AI-driven tools, enhancing tech infrastructure and deepening carrier relationships aim to boost agent productivity and support scalable growth.
  • Positive Sentiment: Tightened Full-Year Guidance: 2025 outlook maintained with organic revenue growth of 11–14%, adjusted EBITDA margin of 21–23% and total revenues of $240–$255 M, backed by $160 M cash and a fully available credit revolver.
AI Generated. May Contain Errors.
Earnings Conference Call
TWFG Q2 2025
00:00 / 00:00

There are 6 speakers on the call.

Operator

Good morning. My name is Didi, and I will be your conference operator today. At this time, I would like to welcome everyone to the TWFG Second Quarter twenty twenty five Conference Call. All lines have been placed on mute to prevent any background noise. After the speakers' remarks, there will be a question and answer session.

Operator

If you would like to ask a question during this time, simply press star then one one on your telephone keypad. If you would like to withdraw your question, please press star one one again. This call is being recorded and will be available for replay on the company's website. Before we begin, let me remind you that today's discussion may contain forward looking statements and actual results may differ materially from those discussed. For more information regarding forward looking statements, please refer to the company's press releases and SEC filings.

Operator

Also on today's call, our speakers will reference certain non GAAP financial measures, which we believe will provide useful information for investors. The company has posted reconciliation of the non GAAP financial measures discussed during this call in the tables accompanying the company's earnings press release located on the Investors section of the company's website at www.twfg.com. It is now my pleasure to introduce Mr. Gordy Bunch, Founder, Chairman and CEO of TWFG. Sir, the floor is yours.

Speaker 1

Good morning, and thank you for joining us today. Joining me is Janice Zwingy, our chief financial officer. After our remarks, we'll open up the call for your questions. I'd like to start off by expressing my appreciation for our agents, employees, carrier partners, clients and shareholders. The dedication of our team and trust are the foundation of our continued success.

Speaker 1

Our second quarter results reflect a strong execution and growing momentum. We delivered total revenue growth of 13.8% to $60,300,000 and organic revenue growth of 10.6%. Adjusted EBITDA rose 40.7% to 15,100,000.0 with margins expanding to 25.1%. Total written premiums increased 14.4% to 450,300,000.0. This performance highlights the scalability of our platform and our ability to drive profitable growth even as we invest in expansion.

Speaker 1

During the quarter, we added nine new branch locations, expanded into Kentucky, and completed four acquisitions, including a new MGA property program in Florida. As always, it's important to note that newly onboarded agents typically take two to three years to reach full productivity. We are confident that today's investments will continue to fuel our future growth trajectory. We continue to see softening in the personal lines market. Carrier capacity is expanding, rate increases are moderating, and certain regions have even seen rate reductions.

Speaker 1

As the market stabilizes, we're gaining more options for both new and renewal business. This contributed to a retention rate of 89% in Q2, consistent with our long term averages. Looking ahead to the 2025, we expect moderate rate increases and are monitoring how potential tariffs may impact lost costs. Our diversified network of agents is well positioned to capture share as conditions continue to improve. Our strategic focus, is focused on four pillars, expanding our national footprint, investing in agent productivity, enhancing our technology infrastructure, and deepening our carrier relationships.

Speaker 1

We've begun piloting AI driven tools within our services teams to reduce manual processes and improve responsiveness. We believe these tools will help us scale our platform efficiently while continuing to deliver exceptional service to clients and agents alike. I will now turn it over to our CFO, Janice Swingey.

Speaker 2

Thank you, Gordy, and good morning, everyone. Before diving into the quarter results, as a reminder, interest income was moved from the revenue line down to other income, so will be comparable to prior and future periods. Starting with our top KPI written premium increased by 56,700,000.0 or 14.4% over the prior year period to 450,300,000.0. Within our primary offerings, insurance services grew 55,000,000 or 16.5%, and TWFG MGA grew 1,600,000 or 2.7%. This increase was a result of growth in both renewals and new business.

Speaker 2

During the 2025, within both of our product offerings, we saw healthy renewal business growth of 45,400,000 or 14.9%, as well as new business growth of 11,300,000 or 12.6% over the prior year period. Within our insurance services offering, renewal business grew 41 excuse me, 41,800,000 or 16.1%, and new business grew 13,200,000.0 or 17.8% over the prior year period. This growth is reflective of our corporate store acquisitions and expansion into new geographical areas. Within our MGA offering, we saw a shift in renewal on new business growth as compared to the same period in the prior year. In the 2024, we saw both property programs open up capacity in an increased rate environment providing exceptional new business growth during that period.

Speaker 2

In the 2025, these programs faced a slowing rate and more competitive market where we saw a decline in new business growth, resulting from an exceptional through a more normalized growth period. Growth shifted towards renewal business, which grew 3,500,000 or 8.1% compared to minimal growth in the same period of the prior year. Our consolidated written premium retention was 89% as compared to 93% in the prior year period, with current retention being in line with our long term projected retention rate of 88%. The decrease quarter over quarter is correlated to the shift in new in renewal business growth as previously discussed and as a result of carriers moderating rate increases and opening up for new business after a period of restricted capacity and aggressive rate increases. Our total revenues increased 7,300,000.0 or 13.8 percent over the prior year period to 60,300,000.0.

Speaker 2

This increase, it was mainly due to commission income representing 11.1% of the total growth. The remaining 2.7% total growth included contingent income of 1.5% and fee and other income of 1.2%. Commission income increased 5,900,000.0 or 12.1% over the prior year period to 54,600,000.0, driven by new business growth and solid retention levels. Insurance services was the main contributor at 14.2% growth or 12.1% of the total growth, while the MGA remained relatively flat over the prior year period. Contingent income increased 800,000.0 or 61.6% over the prior year period to 2,000,000 tracking closely with our written premium growth.

Speaker 2

Fee income was up 600,000.0 or 23.8% to 3,300,000.0 driven by increases in branch fees, PPA fees, policy fees, and licensing fees. Organic revenues increased 5,700,000.0 reaching 54,100,000.0 compared to 48,400,000.0 in the same period prior year for an organic growth rate of 10.6% driven by new business production, normalized retention levels, and moderating rate increases. Turning to expenses. Commission expense increased 2,200,000.0 or 6.8% over the prior year period to 34,200,000.0, tracking with commission income, taking into account the impact of corporate store acquisitions and programs with no related commission expense. Our total salary and employee benefits increased by 2,700,000.0 or 39.3% over the prior year period to 9,500,000.0, reflecting our scale and the IPO transition driven by 1,500,000 increase from the RSUs issued in connection with the IPO, 700,000.0 due to corporate store acquisitions, and 500,000.0 due to growth of the business.

Speaker 2

Other admin expenses increased 1,700,000 or 44.2% over the prior year period to 5,400,000.0 with approximately 400,000.0 in IT cost, 300,000.0 related to professional and consulting fees, and the remaining 1,000,000 increase was tied to ongoing growth and acquisition integration. Depreciation and amortization increased 900,000.0 or 31.4% to 3,900,000.0 primarily from our recent asset acquisitions. Net income for the quarter was 9,000,000, up 30.1% over the prior year period. Adjusted net income increased 17.3% to 11,500,000.0, driven by earnings growth and partially offset by higher public company costs and a 3,400,000.0 increase in tax expense. EBITDA was 11,800,000.0 and adjusted EBITDA was 15,100,000.0, up 40.7% over the prior year period.

Speaker 2

Adjusted EBITDA margin expanded to 25.1% compared to 20.3% in q two twenty twenty four, reflecting both top line growth and scale. With that, I will turn it back to Gordie.

Speaker 1

Thank you, Janice. With half the year behind us, we are tightening our 2025 guidance as follows. Organic revenue growth between 11 to 14%, adjusted EBITDA margin between 2123%, and reaffirming total revenues between $240,000,000 and $255,000,000 We will remain well capitalized with $160,000,000 in cash and a fully available credit revolver. This gives us flexibility to continue investing in our strategic growth priorities and expanding our M and A initiatives. In closing, I want to thank the entire TWF team for their continued dedication and our shareholders for their support.

Speaker 1

We are energized by the opportunities ahead and confident in our ability to deliver long term value. With that, Janice and I would be happy to answer any questions. Operator, please open the lines.

Operator

Thank you. And our first question comes from Mike Zaremski of BMO. Your line is open.

Speaker 3

Hey, good morning. Thanks. My first question is about the profit margins this quarter. The commission expense ratio was much better than expected and appears to be driving much of the upside on earnings in guide. Maybe you can help unpack how to think about what's taking place there.

Speaker 3

I'm assuming the MGA is impacting that the most, but maybe there was I think you talked about incentives you're optimistic about last quarter, maybe those didn't come to fruition as much. That's my first question.

Speaker 1

At a high level, Mike, commission expense is lower due to commission revenues also being lower. There's a ratio implied in those projections that, you know, will pay out x percentage of commission income. So that that does drive part of it. I'll let Janice give you a little more

Speaker 2

detail on other components that help drive expansion of profitability. Sure. So a big portion of that was the corporate store acquisitions that we're adding that have 0% commission expense, so that makes the ratio look lower compared to the commission income growth. And that was really driven by the later acquisitions that we did in 'twenty three and also the acquisitions that we did in 'twenty five. So those really made a big difference in the drop to 6%, I think, of commission expense growth.

Speaker 1

Yeah. And then on top of that, the margin we're achieving on acquired corporate locations is exceeding the modeled margin, which is giving us some margin expansion off of the business units. So, yeah, the the commission expense stands out a little bit, but that's more a reflection of lower commission income, But the profitability is coming from operating margins are improving on the broker locations.

Speaker 3

Got it. So I guess from your answer, I'll tease out maybe offline. It sounds like a good amount of this is run ratable. Some of it's not. It's going be driven by growth, but maybe growth being below expectations.

Speaker 3

But it does sound like some of this could be a trend. Okay. Got it. Maybe, you know, pivoting back.

Speaker 1

We will frame it as this, you know, we're not guiding to the to the quarter's 25.1 margin. You know, we're still, you know, giving you guys an EBITDA margin on the full calendar year. You know, that's between, what, '21 and '23.

Speaker 2

Yeah.

Speaker 1

So we did have some was a gain on sale, gave us a little bit of a a lift in the quarter. That's not a repeatable portion of that EBITDA margin. So we don't want you just to gross up the margin to say rate it out for the Q2.

Speaker 3

Got it. That's helpful. Maybe pivoting, I'm sure there'll be more questions on organic growth, but maybe starting with maybe you can talk about what's changed in the last few months versus prior expectations, and that'll help us give us a flavor of how to you know, we can see your implied growth in the back half of the year, but maybe you could talk about what's changed and the dynamics there and help us kind of think through what's

Speaker 4

going on.

Speaker 1

Sure. So I think I think at the highest level, you look at the overall market conditions. So if you look at prior year 2024, market was very hard for personal lines. A lot of capacity was constrained. Rate was flowing through.

Speaker 1

Our agents and customers had fewer choices in the market. As we roll into '25, market starting to soften by the time we hit q two twenty five, you're starting to see additional capacity providers enter the marketplace at lower average premiums, not just for property, but also for private passenger auto. I think when you we look at some of the other companies that have already reported, you can you can see that there is more competition in the overall market. And so our customers, as they renew in '25, have more options. So even if there's still a little rate flowing through, we may have two or three options that might be at pricing that's equivalent to prior year expiration or even below prior year written.

Speaker 1

And that's where we saw a mix shift of the business from renewal retention going in in a higher lift in our overall new business as a percentage of the mix. So we kind of expected this all to start coming through. I think what's driving the overall lower on organic is probably gonna be just the extent of the rate differential between expiring terms and what's available at renewal and what's also available at new business. That's much harder to predict and gauge, in a in a forward looking estimate.

Speaker 3

Okay. Got it. And, as a follow-up to that, maybe you can kind of you know, we we know your g your geographic footprint. Can you maybe, at a high level, just paint a picture of, you know, is there are there certain footprints where rates went from, like, double digits immediately to low singles, or is it just happening in certain pockets of I just wanna understand if there's, a regional very regional bias to this that we should be thinking through that's potentially temporary if rates are, you know, now negative, but, you know, long term, they probably are gonna go back to positive? Or any other color would be helpful.

Speaker 3

Thank you.

Speaker 1

Yeah. Let me let me kinda bifurcate between auto and home. Auto on a national basis is relatively softening and stabilizing. We still expect, you know, mid single digit rate to flow through with the markets on private passenger auto being more open for new business growth. We are starting to see some of those incentives that we mentioned in Q1 starting to come into the distribution.

Speaker 1

You know, the offset to that, it's auto is a six month cycle. Policies are written on six month terms. So the you know q2 will have more of an impact on auto q3 will be kind of the balance and then once you get past that two quarter cycle, the impact of private passenger auto gets more stable. We are being able to add, know, exposure in private passenger auto in a way that we weren't last year. So we are seeing growth with new business.

Speaker 1

On the homeowner side, you're you are going to see differential by region. We don't have a large footprint in Florida, but there is some price deceleration in Florida given the results that that state's had. We are also seeing some price deceleration Louisiana, you know, stable in say Texas, our core state, but there are pockets, you know, that do have more rate downward trajectory in the current period that we don't anticipate being a long term trend. But, you know, structurally, the the entire country's not in a moderated mode on property. There's still some states that are taking rate.

Speaker 1

So it's really going to come down to a blend of, you know, where we're getting our growth, where we have our current footprint, but that does have impact on organic. If you have a policy that was $6,000 last year, and it can be written with two or three different markets at five this year, those do have impacts on it. But we don't see, like, it's not like commercial lines where you have a wildly dramatic drop in rate that then, you know, continues for a longer period of time. The cat costs are still kind of that that base underlying force that will keep rate at a more elevated over the long term historical. So we do we just got to get through these renewal cycles and it's more acute like I said Louisiana, Florida, but, you know, more stable in, say, our core state like Texas and other states are more normalized, you know, mid single digit to double digit rates are still flowing through those lagging states.

Speaker 3

Thank you.

Operator

Thank you. And our next question comes from Pablo Singzon of JPMorgan. Your line is open.

Speaker 4

Hi, good morning. Gordie, thanks for your detailed explanation on organic growth. I was just hoping to get sort of a longer term perspective here, right? So I think you look historically, Woodlands has served in a mid teens organic grower and maybe saw some benefit from the hard market cycle in 2020, 2023, but it was actually much less than the price that was flowing through the system, right? But now with prices moderating more broadly, how would you frame, I guess, quantitatively the benefits you're getting from pricing today?

Speaker 4

And where do you see that benefit moving in a more mutual environment? Just sort of trying to get a sense of what the growth curve might look like in this environment, right? Because going up, you didn't get much of a benefit. But, know, as things are moderating, curious to see how you, you know, your view on what the growth curve looks like.

Speaker 1

Right. So we still see double digit organic growth in the near term and in the projected period forward. A lot of that, as we've discussed in prior quarters, it's just a shift between renewal, retention, and new business growth. We are seeing that new business growth that kind of offsets the retention ratio that shrank from 93% to 89% in this quarter. I think if you go back and look at our notes from '24, we had kind of predicted this mix shift between renewal premium retention and new business growth normalizing to 88%.

Speaker 1

So we've seen that kind of manifesting the last two quarters. We have additional market capacity that wasn't present in the prior periods. So we'll have the ability to add more customers, retain more customers, albeit that maybe a lower average premium than in a rate increasing environment, but the offset is we'll have more total customers because of the ability to grow new business now that carriers are in growth mode. So we're still looking at double digit organic in the forward periods. We reaffirmed organic for full year 2025 between, I want to say 1113%.

Speaker 1

Is that right?

Speaker 4

Got it. Yep. Got

Speaker 1

Yeah. And, Corey, you're talking 11 to 14%. Sorry.

Speaker 4

Yep. Yep. 14. Yep. I I guess to summarize what you said.

Speaker 4

Right? It seems like I recognize the dynamics of what you said. That's all correct, but it seems like the magnitude of price moderation, price decreases, whatever you want to call it, is not enough to offset all of that, right? Because in another world, if prices were going down by 30 points, it sort of doesn't matter what happens to new business and renewal, right? Know, certain level, the price execution will just be too large.

Speaker 4

But from what you were saying, it seems like, yeah, prices are slowing down, but sort of the normal dynamics that you described should, you know, ultimately result in whatever growth you had you're guiding to. Right? Is that the message?

Speaker 1

That's right. And, you know, you know, we've lived through July, so we have a little bit of line of sight to, you know, seeing that where we're guiding to make sense. If we saw something different, we would have adjusted further. And again, '4 was an exceptional growth period. Q2 'twenty five, in our opinion, was still an excellent quarter.

Speaker 1

Top line revenue growth, all things being considered, you're comparing a exceptional organic growth quarter to still an excellent growth quarter when you're doing the prior period analysis. So having the ability to still have the growth in the face of moderating rate environment and increasing capacity, we're feeling good about the trajectory of where we're headed. Still more than 2x, I think, the industry average organic, and we still are guiding to that double digit forward looking projection.

Speaker 4

Okay. Understood. And then my second main question, I realize I sneaked one in there, but this one's more about the broad revenue outlook and maybe more about M and A, right? So I think you reaffirmed your revenue outlook for the year, and I think the base for 24,000,000 taking out interest income is $2.00 $4,000,000 right? So with $2.40 to $2.55 this year, there's something like 18 to 25% growth.

Speaker 4

And if you're saying that organic is 11 to 14, then that would imply the balance is m and a. Right? So let's call it seven to 11 points. So the question then is, in the first half, at least by the math I'm doing, it seems like the M and A contribution has been lower than seven to 11, right? So if you compare organic versus the low revenue growth, maybe you're getting two to three points from M and A or something like that, right?

Speaker 4

So can you sort of unpack what's assuming my math is correct, like what's behind the numbers there, right? If you're saying you do seven to 11 for the year, it seems like first half was a bit light. What are you expecting for the second half?

Speaker 1

When you're looking at the M and A contribution, it's always about timing of when you onboard that asset. So we closed a few transactions beginning of Q1. We closed a few beginning of Q2 and throughout Q2 and subsequent to Q2. We announced yesterday an acquisition in New York that occurred post Q2. So we have

Speaker 4

the

Speaker 1

revenue seasonality of those acquisitions in our forward forecasts. So it's about the timing of when we took those in. So something we acquired in May wasn't that accretive to the first half of the calendar year, but will be more accretive to the back half of the calendar. And so we had closings April 1, we had closings May 1, we had closings June 1, and the quarter from the announced M and A. And so those ones will compound into more meaningful contributions in the back half of the year for the M and A contributed revenue.

Speaker 1

And that's one of the reasons we reaffirmed our revenue guidance for the full year 'twenty five is we have line of sight to those impacts of those now acquired, onboarded and integrating, assets joining the TWFG family.

Speaker 4

Great. Thank you.

Operator

Thank you. And our next question comes from Tommy McJoynt of KBW. Your line is open.

Speaker 5

Hey, good morning, guys. First question here, Looking ahead, should we assume continued year over year EBITDA margin expansion just as the corporate branch growth, either organic or via acquisitions, outpaces agency in a box production? And maybe more simply, is it feasible that margins get to 25% for a full year in the next couple of years?

Speaker 1

It's feasible depending upon what additional acquisitions we have of scale that are operating at, you know, plus 30% margins. We're not currently projecting that in the forward, you know, 26 or 27. But it is plausible given that we are achieving greater than 30% margin on the corporate assets. But it's gonna it's gonna be a combination of what do we actually acquire, how do we realize that higher margin business into the overall total, how much growth do we have in the lower margin business that runs alongside that. And then there's a number of margin expansion initiatives via technology and, you know, our virtual assistance programs out in The Philippines.

Speaker 1

So we are working on AI initiatives that could lead to better efficiencies within all of our operations as well, which might lead to some cost savings improved scalability. And then our Philippines operation is expanding facilities right now. We anticipate those coming online towards the end of the calendar year. That should give us an opportunity to leverage that labor arbitrage further. So it's plausible we're not currently projecting it.

Speaker 1

I think as we get through the remainder of 'twenty five and we take a refreshed look at the 'twenty six, 'twenty seven projections, we'll provide you an updated margin guidance at that point.

Speaker 5

Thanks. That's helpful. And then actually just going back to your response to one of the earlier questions on here. I think you referenced a gain on sale that gave us a bit of a margin uplift. What was that referring to and any way to quantify how much margin accretion that drove?

Speaker 1

Yeah, I'll let Janice answer that one.

Speaker 2

So there were two things. Yeah, the gain on the book of business sale was roughly 600,000. In addition to that, we had an increase of over a million in, interest income on the IPO proceeds that we didn't have last year in q two.

Speaker 1

Is that what the gain on sale, though? Just the 600,000?

Speaker 2

Yeah. Just 600 is the gain on the sale. Right.

Speaker 5

Right. So just the 600 is is the one timer?

Speaker 3

Yep.

Speaker 1

That's correct.

Speaker 5

Okay. Thank you. Thank

Operator

you. And we have a follow-up from Pablo Sinzon of JPMorgan. Your line is open.

Speaker 4

Hey, thanks for squeezing me again. So, Corey, I was just another question on M and A. I was hoping you could provide a broad sense of, you know, and it can be a very loose range, right, of the properties you're considering in M and A. And would it be fair to assume that the deals you've closed thus far, what you paid for them are, you know, a decent size below where you're trading in the public market? Thank you.

Speaker 1

Yeah. So M and A, we're acquiring assets of various sizes. So the range in what we're paying depends on the growth of the asset, the profitability margin, and the overall size of the business. So it's not a static number, but we are, you know, on a blended basis through, you know, the quarters that we've had, still coming out pretty close to what we modeled. So not wanting to get too specific on exactly multiples that we paid.

Speaker 1

It's a very robust pipeline we have going forward. And so we're in active conversations with sellers trying to project what we've ultimately paid for previously closed deals, probably not in our best interest. But for your purposes, relatively aligned with the m and a model that we used last year. And as we're looking at our forecast for the remainder of '25, achieving that midyear convention of what we projected. And now things that we possibly acquire in Q3 and Q4 will be accretive against that model.

Speaker 4

Yep, thank you for that Gordie. Thank

Operator

you. And we have a follow-up from Mike Zaremski of BMO. Your line is open.

Speaker 3

Hey, good morning. Thanks for taking the follow-up. My question is on the MGA side of the business. One of your public peers discussed on their earnings call approximately a week ago about a meaningful increased competition into the E and S home insurance marketplace. Obviously, you talked about a lot of softening in home.

Speaker 3

But curious, competitor also talked about that causing underwriting standards that might not cause them to be comfortable about underwriting as much E and S home business. Just curious if you have any comments or is the softening you're seeing also taking place in the E and S marketplace? And how is it impacting your MGA's trajectory?

Speaker 1

Yeah. Good question, Mike. And I want to clarify the property programs we have. Our core program, FICO, is admitted. It's a Texas based program.

Speaker 1

It did take rate in this calendar year. That did impact retention slightly. The biggest differential trying to compare '24 versus '25 for that program is last calendar year, a lot of the market for property in Texas went relatively catatonic. Progressive had shut down new business 04/01/2024, which gave us an outsized growth in that program in '24. If we're looking at how that compared to q two twenty five, you know, we're retaining that portfolio, adding new PIF, but the growth differential between the two calendar years does have that relative mix to it of, you know, we had outsized growth last year when the market was closed.

Speaker 1

We also constrained our own growth going into the second quarter. The reinsurance for that program renews June 1, wanting to make sure you have longevity in that program and growth forward. You really have to see what your costs of that program are going to be, and reinsurance is a huge component. So at that renewal, we look to include growth in the cat program that was purchased and that growth was restrained. So really, we self inflicted our own growth trajectory by staying closed in geography that we could have added additional risks in to later into the hurricane season that gives us a better overall economic use of that cat program.

Speaker 1

And so that program should have growth potential for us in Q3 and Q4 as we've loosened up some of those guidelines to open up geography that we were actually closed in for Q2. So that's kind of the answer on that particular program. The Dover Bay program that is ENS, that is an exclusive program to its own distribution channel and it's still having growth. We have some opportunities for expansion into additional geography that we're working through. So we do think that that has legs.

Speaker 1

That program doesn't operate on a premium to commission ratio. If you recall last year, we transitioned that contract to a more level cost that adjusts on an annual basis. So that also does skew premium to commission ratios in total And but we're not we're not we're not having the same, you know, necessarily correlated ENS impact. Where where that's gonna flow through to us, Mike, is we do access other ENS markets. And so if they are lowering their rates, that might flow through into that renewal premium differential that I mentioned earlier.

Speaker 3

Got it. Got it. Okay. I'm gonna one more follow-up, that's helpful. You know, if we if we're transitioning, you know, I guess maybe knock on wood for consumers to an environment where pricing is stable, which is, say, mid single digits overall.

Speaker 3

How do you all think about or do you how do you all think about kind of new branch locations? Do you think about them in terms of, like, numbers and what a you know, what your you know is there like a cadence that you that you think is that we should be thinking about as normal or is it gonna is it always going to be inherently kind of a bit volatile?

Speaker 1

Yeah. I would say that, you know, recruiting is an ongoing effort. The pipeline is solid. The emphasis of, you know, how many in any given month or any given quarter is probably not that relative. It's always about the quality of the talent, aligning that talent to our platform, and depending on the type of prospect, the sales cycle to bring on a new location can be either relatively quick, meaning that the individual is not encumbered by existing agreements or portfolios, or it can be relatively long if they're having to dispose of a captive portfolio that they are not allowed to bring with them.

Speaker 1

And we are having success at smaller independent agencies that are looking to convert to our model, you know, via a eightytwenty relationship where they can scale up and pick up our infrastructure. So I think we're hyper focused on qualitative onboardings and looking now for those that can bring some portfolio with us. So they have more of an immediate benefit to the organization than say just all the ones we've done from scratch. But they all have different timelines on how they onboard. I think that we will spend more effort into increasing the pipeline.

Speaker 1

So we have a better culling of opportunities. Geographically, the carriers opening up for more capacity does provide a better outcome as we're looking to recruit people in. You know, one of their biggest questions are, can I actually write business? One of the attractions to our model is, you know, many of them are living in, you know, captive singular carrier environments. So having access to a broader market makes it more attractive.

Speaker 1

So carriers now willing to appoint willing to grow does give us a good trajectory there.

Speaker 3

Thank you.

Speaker 1

Yep. And I and I should say that not all geography is is softening. California, you know, is still a state that has persistent rate and has has, you know, good opportunities for us, but it is still a hard market in California for personal lines.

Operator

Thank you. I'm showing no further questions at this time. I'd like to turn it back to Gordie Bunch for closing remarks.

Speaker 1

Thank you, Didi, and thank you all for attending today's call. I just want to reiterate that TWFG remains a highly capitalized, nearly debt free organization with good tailwinds at our back. Our organic and inorganic strategies are playing out. We will continue to update guidance as we see changes within our performance. We appreciate everybody who's attended this call and look forward to Q3 call here in the near future.

Speaker 1

So thank you for attending and until next time.

Operator

And this concludes today's conference call. Thank you for participating and you may now disconnect.

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