TWFG Q1 2026 Earnings Call Transcript

Quartr
Provided by Quartr
May 7, 2026

Key Takeaways

  • Positive Sentiment: TWFG reported 35.3% revenue growth (to $72.8M), $458.2M written premiums (up 23.5%), and adjusted EBITDA up 73.9% to $21.2M with a 650 bps margin expansion to 29.1%.
  • Positive Sentiment: Management reaffirmed full‑year guidance — total revenue growth 15%–20% ($285M–$300M), organic revenue 10%–15%, and adjusted EBITDA margin 22%–25% — after 10.1% organic growth in Q1.
  • Negative Sentiment: A material portion of near‑term margin improvement came from the TWFG MGA Florida takeout program that generated commission income without commission expense; that advantage will fade as those policies renew and normal commissions resume.
  • Positive Sentiment: Company completed strategic acquisitions (Lofton Wells, APIA, Fortress), repurchased ~$40M of a $50M buyback, and maintains a strong liquidity position ($124.8M cash, $50M undrawn revolver), supporting accretive M&A and capital flexibility.
  • Positive Sentiment: TWFG is scaling proprietary technology and AI capabilities (new CTO, ~44 tech staff, embedded underwriting data), which management says creates a competitive moat and the potential for long‑term productivity and margin gains.
AI Generated. May Contain Errors.
Earnings Conference Call
TWFG Q1 2026
00:00 / 00:00

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Operator

Good morning. My name is Desiree, and I will be your conference operator today. At this time, I would like to welcome everyone to the TWFG first quarter 2026 conference call. All lines have been placed on mute to prevent any background noise. After the speaker's remarks, there will be a question and answer session. If you would like to ask a question during this time, simply press star then one on your telephone keypad. If you would like to withdraw your question, please press star then 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, 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

On calls today, our speakers will reference certain non-GAAP financial measures, which we believe will provide useful information for investors. The company has posted the reconciliations of the non-GAAP financial measures discussed during this call in the tables accompanying the company's earnings press release located on the investor 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.

Gordy Bunch
Gordy Bunch
Founder, Chairman, and CEO at TWFG

Thank you and good afternoon, everyone. Thank you for joining us today to discuss TWFG's first quarter 2026 results. Joining me on today's call is Janice Zwinggi, our Chief Financial Officer. After my remarks, Janice will walk through our financial performances in more detail, and then we'll open the call for questions. I am pleased to report that TWFG delivered a strong first quarter that demonstrates the underlying strength and scalability of our platform. Our results reflect a softening market environment, continued disciplined execution across our businesses, and the benefits of our strategic investments in technology, our new MGA programs, and our talent acquisition. For the first quarter of 2026, we delivered a solid 35.3% revenue growth, driven by a combination of double-digit organic growth and contributions from our prior and current year acquisitions.

Gordy Bunch
Gordy Bunch
Founder, Chairman, and CEO at TWFG

This growth reflects momentum across both our insurance services and MGA platforms. Written premiums grew 23.5%, with strong performances in renewal retention and new business growth. From a profitability perspective, we delivered 650 basis points margin expansion. This expansion reflects our operating leverage, higher margin profile of our MGA platform, and disciplined execution on integration of our recent acquisitions. There are near-term margin benefits with TWFG MGA Florida takeout program during the runoff period, where policies assumed have a commission without a corresponding commission expense. This margin benefit will decline as more takeout policies renew with new full-term premiums and a normal commission expense. The market has improved meaningfully compared to a year ago. Carriers have reentered key personal and commercial lines markets where capacity had been constrained. Pricing trends are moderating and underwriting discipline remains strong across the industry.

Gordy Bunch
Gordy Bunch
Founder, Chairman, and CEO at TWFG

This creates an ideal environment for a diversified platform like ours to expand. Our business model, spanning retail agencies, corporate branches, and proprietary MGA programs, is uniquely positioned to capitalize on these dynamics. Whether in a hard or soft market cycle, our independent agent network provides stable, recurring revenue and deep carrier and client relationships, creating a competitive advantage difficult to replicate. Our strategy remains consistent and disciplined. We're executing across four core priorities to deliver double-digit organic growth, execute accretive M&A, investing in technology and platform improvements for our agents' productivity, deploying capital with discipline across all these investments. On the acquisition front, we completed two strategically important transactions in the first quarter. In March, we acquired Lofton Wells Insurance, which became a corporate location in Memphis, Tennessee. This addition provides scale to our Tennessee operations and positions us in a region with significant long-term growth opportunities.

Gordy Bunch
Gordy Bunch
Founder, Chairman, and CEO at TWFG

We also completed the acquisition of Asset Protection Insurance Associates, a Texas-based MGA specializing in insurance solutions for property owners and real estate investors across the United States. APIA brings deep underwriting expertise, an expanded distribution network, and access to additional program opportunities. This enhances our MGA's capabilities and supports continued margin expansion. Last week, we closed on the acquisition of Fortress Insurance Services out of Iowa, establishing another foothold agency in the Midwest. From a technology standpoint, we continue to prioritize investments that make our platforms more efficient and our clients better served. Our proprietary technology remains a competitive advantage, allowing us to rapidly develop and implement new capabilities, whether built internally or integrated with best-in-class third-party solutions. Our capital position remains solid, providing significant flexibility to invest in growth and pursue strategic opportunities.

Gordy Bunch
Gordy Bunch
Founder, Chairman, and CEO at TWFG

Before turning to Janice, I want to address the topic of AI becoming a central conversation in our industry's future. AI, if you look at the SEC filings across insurance brokers over the past five years, is an increasing reference in everybody's earning releases and conversations. Machine learning mentions have increased tenfold in that time span. Not by accident, the industry is embracing the change and many people have questions on how AI matters. It does matter, and it will have an impact on the industry. It's whether your company is positioned to harness it strategically and implement it in a way that is beneficial across your distribution and your platforms. Last quarter, we shared our perspective that AI will improve the independent distribution channel for those that can embrace and implement the technology.

Gordy Bunch
Gordy Bunch
Founder, Chairman, and CEO at TWFG

Today, I want to update you on our progress on why we believe TWFG is best positioned as a net beneficiary of this evolution. We've made significant investments in AI leadership and capabilities. Over the past year, we appointed a chief technology officer focused specifically on AI strategy, cloud architecture, and platform modernization. We've grown our technology team to 44 dedicated professionals, software engineers, infrastructure specialists, and product developers, representing a third of our non-sales corporate employee base. Critically, we are investing in proprietary AI solutions that embedded with our 25 years of underwriting knowledge and data assets. We are deploying AI tools like Claude to make each engineer more productive, and we are being intentional about how we deploy engineering talent towards revenue generation and competitive advantage, creating efficiencies, not just a cost reduction. We do have competitive advantages in AI space. First, proprietary data.

Gordy Bunch
Gordy Bunch
Founder, Chairman, and CEO at TWFG

Our MGA and agency platforms have accumulated millions of underwriting data points and decisions over the past 25 years. In an AI-driven environment, that data becomes more valuable, not less. It creates a structural competitive moat difficult for competitors to repeat. Second, we own our technology. We build and control our core platforms. This means we're not dependent on third-party vendors or constrained by standardized solutions. When new AI capabilities emerge, we can integrate them quickly or build them ourselves. That flexibility is a genuine competitive advantage. Third, balanced deployment. Unlike others pursuing pure automation, we are deploying AI to amplify what our people do best. For our agents, AI accelerates quote turnaround time, automates routine account management, and identifies coverage gaps, bringing them to build relationships and provide trusted advice. For our underwriting teams, AI improves risk assessment, velocity of decision-making, and precision.

Gordy Bunch
Gordy Bunch
Founder, Chairman, and CEO at TWFG

For our operations, it drives efficiencies that we expect will translate directly into margin expansion over time. The enduring competitive advantage remains human expertise, community presence, and professional judgment. Our agents are embedded in their communities. They show up when clients face their most vulnerable moments, whether it's a catastrophic loss, a complex coverage question, or a claim dispute. We are at an inflection point. The companies that will dominate insurance distribution aren't those choosing between AI or human advisory. They're the ones integrating both strategically. TWFG owns our technology. We have deep insurance expertise, we have the financial resources to invest, and we have a cultural commitment to innovation that's been part of our DNA for 25 years.

Gordy Bunch
Gordy Bunch
Founder, Chairman, and CEO at TWFG

We are positioned to be a net beneficiary of AI's continued evolution, and we're excited to demonstrate that to you at an upcoming Investor Day that we will host early in the fourth quarter. With that, I will now turn the call over to Janice Zwinggi to walk through the financial details.

Janice Zwinggi
Janice Zwinggi
CFO at TWFG

Thank you, Gordy, and good afternoon, everyone. I am pleased to report the following first quarter results, beginning with our top KPI, written premium. Total written premium grew $87 million or 23.5% to $458.2 million, with strong performances in renewal retention and new business growth. We saw growth in renewals of $59 million or 21% and new business of $28 million or 31% growth with a consolidated retention of 92%. This growth was driven by our acquisition strategy, notably the acquisition of TWFG MGA Florida, and several corporate store locations, combined with strong underlying organic growth.

Janice Zwinggi
Janice Zwinggi
CFO at TWFG

Looking at our primary offering components, insurance services grew $46 million or 14.5%, and the MGA had exceptional growth of $41 million or 77.3% over the prior year period, primarily driven by the TWFG MGA Florida acquisition in the second quarter of last year. Retention remains solid at 92%, a testament to the strength of our client relationships. Excluding the impact of recent acquisitions and certain books of business sales, our underlying retention would have been approximately 88%, which is in line with our historical retention rate. Total revenues increased $19 million or 35.3% to $72.8 million, driven by a combination of organic revenue growth and strong contributions from our acquisitions.

Janice Zwinggi
Janice Zwinggi
CFO at TWFG

Commission income, which is our largest revenue component, grew $18.3 million or 37.4% to $67.1 million, reflecting expansion across both our insurance services and MGA platforms, supported by strong renewal and new business activity. Organic revenues reached $54.3 million, up $5 million from the prior year, representing an organic growth rate of 10.1%. This organic growth reflects solid momentum across both of our platforms, underpinned by accelerating new business production, improved carrier capacity, and a moderating rate environment. This growth demonstrates the underlying momentum of our core platforms independent of acquisition contributions. Moving to operating expenses. Commission expense grew $5.2 million or 16.4% to $37 million, reflecting strong production growth while maintaining consistent commission ratios.

Janice Zwinggi
Janice Zwinggi
CFO at TWFG

Commission expense grew at a lesser degree as compared to commission income growth, due mainly to programs and corporate branches with zero or minimal commission expense. Salaries and employee benefits increased $1.7 million or 20.8% to $9.9 million, driven by headcount increases from acquisitions and corporate office investments to support long-term growth. Other administrative expenses increased $2.7 million or 56.4% to $7.4 million, primarily driven by our completed acquisitions and ongoing investments in our technology initiatives. Depreciation and amortization expense increased to $6.2 million, reflecting purchase accounting from our acquisitions. From a profitability and cash flow perspective, net income was up $6.2 million or 90.8% to $13.1 million, reflecting profitability on our core business growth and contributions from our acquisitions.

Janice Zwinggi
Janice Zwinggi
CFO at TWFG

Our net income margin improved to 18%, up from 12.7% in the first quarter of 2025. Adjusted net income increased 75.2% to $16.2 million, with an adjusted net income margin of 22.2%, up from 17.1% in the first quarter of 2025. Adjusted EBITDA grew 73.9% to $21.2 million, reflecting strong operating leverage across our platforms and the higher margin profile of our MGA operations. The Adjusted EBITDA margin expanded significantly by 650 basis points to 29.1% compared to 22.6% in the prior year quarter. This quarter-over-quarter improvement was driven by the favorable revenue mix shift towards higher margin MGA business, continued cost discipline as we scale, and the accretive impact of our acquisitions.

Janice Zwinggi
Janice Zwinggi
CFO at TWFG

From a cash perspective, cash flow from operating activities was $22.7 million compared to $15.6 million in the prior year quarter. Adjusted free cash flow was $15.2 million, up from $13.6 million in the first quarter of 2025, driven by increased net income and strong working capital management. From a liquidity and capital resource perspective, our balance sheet remains strong. As of March 31st, we had $124.8 million in unrestricted cash and cash equivalents. We have full unused capacity on our $50 million revolving credit facility and only $3.5 million of term debt outstanding. On capital allocation, we remained disciplined. Our $50 million share repurchase program announced in February has progressed significantly.

Janice Zwinggi
Janice Zwinggi
CFO at TWFG

We repurchased $16.7 million through March 31st and have continued to be active in the market, bringing total repurchases to approximately $40 million as of today. We have $10 million remaining capacity under the program. With that, I will now turn it back to Gordy for closing remarks.

Gordy Bunch
Gordy Bunch
Founder, Chairman, and CEO at TWFG

Thank you, Janice. As we look back at the first quarter 2026, I am very pleased with our execution. Our team has delivered strong organic growth, meaningful margin expansion, and disciplined capital deployment, all hallmarks of our business model. What's particularly encouraging is that our success is not dependent on any single factor, rather it reflects the strength and resilience of our diversified platform. Our independent agent network continues to win market share. Our MGA platform is scaling efficiently while expanding margins. Our corporate branch model continues to demonstrate operational leverage, and our technology investments are making our agents more productive and our clients better served. We believe TWFG is uniquely positioned for sustained growth in the current environment. The insurance industry is more complex and fragmented than ever.

Gordy Bunch
Gordy Bunch
Founder, Chairman, and CEO at TWFG

Our agents provide trusted advice, deep carrier relationships, and local market expertise, attributes that become even more valuable as complexity increases. Our proprietary technology and data assets built over 25 years creates a competitive advantage that are difficult to replicate. Our cultural advantage, what we call the TWFG family, continues to drive employee engagement, agent loyalty, and client retention. Looking ahead, we are reaffirming our full year 2026 guidance. We expect total revenues to grow 15%-20%, reaching $285 million-$300 million. We anticipate organic revenue in the range of 10%-15%. We expect Adjusted EBITDA margins to be in the range of 22%-25%. Our first quarter results were consistent with these expectations.

Gordy Bunch
Gordy Bunch
Founder, Chairman, and CEO at TWFG

We believe the strength of our organic growth engine, continued momentum across both our agency and MGA platforms, and a favorable carrier environment support these targets. In closing, I want to thank our employees, agents, carrier partners, and shareholders for their continued trust and commitment to TWFG. The years ahead will bring tremendous opportunities for all. With that, operator, please open the line for questions.

Operator

Thank you. We will now begin the question and answer session. If you have dialed in and would like to ask a question, please press star one on your telephone keypad to raise your hand and join the queue. If you would like to withdraw your question, simply press star one again. If you are called upon to ask your question and are listening via speakerphone in your device, please pick up your handset to ensure that your phone is not on mute when asking your question. Again, press star one to join the queue. Our first question comes from the line of Paul Newsome with Piper Sandler. Your line is open.

Paul Newsome
Paul Newsome
Analyst at Piper Sandler

Good morning. I was wondering if you had any thoughts or about what could happen with your organic growth sort of over the course of the year. It came in at the low end of your guidance this for this quarter. Doesn't mean it's gonna do that for the rest of the year. Is there anything that would suggest that this is not the right run rate for the rest of the year?

Gordy Bunch
Gordy Bunch
Founder, Chairman, and CEO at TWFG

Yeah. Good question, Paul. We know we have some structural tailwinds coming into the second quarter, that is informing our guidance on organic growth being that 10%-15%. We should have outsized, or double digit, high double digit organic in the second quarter, given what we know, that structural advantage has coming into the second quarter. The 10.1 is a good result for the first quarter, given the softening market and pricing and expanding beyond auto and its property. We feel very confident in the full guidance that we've provided, which is why we're reaffirming that 10%-15%, knowing we've got good structural tailwinds for organic in the second quarter and looking towards the back half, looking for that to continue.

Paul Newsome
Paul Newsome
Analyst at Piper Sandler

This is a little bit more of a modeling question, but it's related to the organic growth. The biggest piece that reconciles your revenue growth with the organic growth, is this acquisition adjustment number, and it's been last couple of quarters, you know, 10, 14-ish. At least my math suggests that that needs to drop off to reconcile what you for the rest of the year to rec it to have sort of organic in your range but also revenue in the range. Maybe I'm getting my math wrong, should that piece be dropping off given the acquisitions you've announced?

Gordy Bunch
Gordy Bunch
Founder, Chairman, and CEO at TWFG

Acquisitions drop off after they've been in our operations for 12 months. There is that or you tested for organic adjustment where we're moving, removing things that were not part of the prior 12-month organic calc and then adding back in plus their base from the prior year to reset how we do the organic calc. For those who are unfamiliar, anything we acquire the first 12 months of operations of the acquired portfolio remains in an inorganic calculation. It's excluded from our 10.1% organic for the first quarter. Then we buy things throughout the calendar year, so there's going to be differences in adjustments quarter to quarter depending on the date we closed the acquisition.

Gordy Bunch
Gordy Bunch
Founder, Chairman, and CEO at TWFG

You know, on organic, you know, it's a component of our retention of prior year business plus new business, which we had strong retention and good new business growth that supported the 10% as a whole for the first quarter.

Paul Newsome
Paul Newsome
Analyst at Piper Sandler

Great. Appreciate the help. Thank you.

Operator

Our next question comes from the line of Tommy McJoynt with KBW. Your line is open.

Tommy McJoynt
Tommy McJoynt
Analyst at KBW

Hi. Good afternoon. A question on the margin, and we can look at it on either Adjusted EBITDA or a net income margin basis. We've seen a nice uplift the past two quarters and especially into the first quarter here. Could you spend some time helping us think about how much that tailwind from the MGA in the Florida side has been? As we think about modeling margin the rest of the year, when does that start to fall off? Is it kind of a gradual decrease through the rest of the year to get to the target range, or is it a sharper step off? Thanks.

Gordy Bunch
Gordy Bunch
Founder, Chairman, and CEO at TWFG

We know that we have the favorable economics of the takeout impacts, which gives us the commission income without the commission expense. We had takeouts from June of last year, October of last year, November of last year, small one in December and then an even smaller one in February. The larger of the takeouts were June and October, so they will fade as we get through the calendar year 2026. We'll have small remnants of benefit in the back half of the year from the latter smaller takeouts. And then we do have, you know, other factors that come into play. You know, at this point through the first quarter, we're looking at, you know, reaffirming the guidance of that 22%-25%.

Gordy Bunch
Gordy Bunch
Founder, Chairman, and CEO at TWFG

We know that we have investments in technology. We have growth in other business units coming in. Then as those policies start to renew, we will have full-term commission expenses against those policies that we didn't have in the prior period. We're being very disciplined in how we are viewing the long term. We think that, you know, we're being exactly where we wanna be at this point. If we see another quarter like the first quarter, then we would potentially look at making guidance coming into our next release.

Tommy McJoynt
Tommy McJoynt
Analyst at KBW

Got it. Thanks for the explanation there. Then switching over, when we think about your acquisition appetite, you know, you held true to your expectations for starting M&A a bit on the earlier end this year as compared to last year. Is there anything preventing you from getting even more aggressive? Surely there's no shortage of targets out there in terms of, you know, potential agencies and acquisition targets that could be accretive, and you guys are sitting on plenty of capital. Anything stopping you guys from getting even more aggressive than the start of the ramp that we saw in the first part of this year?

Gordy Bunch
Gordy Bunch
Founder, Chairman, and CEO at TWFG

I would say that, you know, we have a very healthy pipeline, having made the acquisitions we've had year to date, which we announced in the earnings release. We're going to be very selective in acquisitions for the balance of the calendar year. The Fortress acquisition that we just announced today is a very sizable operation in Iowa. We wanna make sure we get integration and orientation into the TWFG family before we turn our eyes to the next deal. There's nothing preventing us other than our own desire to make sure we do well with integration and making sure that we have solid post-acquisition traction, and we don't end up doing too many deals that end up turning that into a less than beneficial outcome. Really wanna focus on the assets we've acquired.

Gordy Bunch
Gordy Bunch
Founder, Chairman, and CEO at TWFG

APIA, the commercial MGA, getting it through its integration and orientation, and also looking at additional products that we can introduce into that business unit. You're right, we have the capital, we have the credit revolver, we have the pipeline. Structurally, there's nothing preventing us from doing more the back half of the year. It's really just us being opportunistic and selective, knowing that we've achieved our objective for M&A for the calendar year 2026 guidance. Anything we do beyond here would move the guidance up. There could be potential upside from M&A activity, but we'd rather get through the things that we've already acquired before telling you we're gonna do more and changing our guidance for the full year.

Tommy McJoynt
Tommy McJoynt
Analyst at KBW

Makes sense. Thank you.

Operator

Next question comes from the line of Rowland Mayor with RBC Capital Markets. Your line is open.

Rowland Mayor
Rowland Mayor
Analyst at RBC Capital Markets

Hi, good evening. I wanted to just ask on the other side of Tommy's question, are there any volume limitations or structural limitations on your ability to buy back stock? If I'm doing the math right, I think you've bought back almost 15% of the Class A shares since the authorization was announced.

Gordy Bunch
Gordy Bunch
Founder, Chairman, and CEO at TWFG

There are Rule 10b-18 volume restrictions that the SEC has, and we have to adhere to those. We authorized a $50 million repurchase plan, at our last release. Structurally, you have those boundaries of the amount authorized by the board for repurchase, plus the SEC Rule 10b-18 limits.

Rowland Mayor
Rowland Mayor
Analyst at RBC Capital Markets

Okay. That's perfect. Thank you. I did wanna ask just on the M&A, was the Fortress deal included in the revenue guide? I don't know what timeline was for closing or getting through that process, but I just was curious if the $285 million-$300 million included an assumption for Fortress.

Gordy Bunch
Gordy Bunch
Founder, Chairman, and CEO at TWFG

Yes. When we gave you our guidance at the beginning of the year, we assumed that we would deploy a certain amount of capital, acquiring a certain amount of revenue with a certain amount of EBITDA, and that's what goes into our total guidance for the calendar year. Fortress has gotten us to that full amount that we had in our full calendar year guidance.

Rowland Mayor
Rowland Mayor
Analyst at RBC Capital Markets

That's very helpful. Thank you so much.

Operator

Next question comes from the line of Mike Zaremski with BMO. Your line is open.

Mike Zaremski
Mike Zaremski
Analyst at BMO Capital Markets

Hey, good afternoon. Thanks. First question to follow up on the excellent profit margin question and answer. We, we could take it offline too, if you'd like. It sounded like there was more profits that, you know, coming from the Florida takeouts that are gonna, I guess, but you're not raising the profit margin guidance 'cause you're gonna kinda spend that expected extra profits on increased expenses in the back part or, you know, later in the year. Is that the right way to think about it?

Gordy Bunch
Gordy Bunch
Founder, Chairman, and CEO at TWFG

I would look at it this way, Mike. When we gave you our guidance at the beginning of the year, we had an assumed retention rate of the portfolio. As you are aware, Florida is a softening marketplace. We overachieved our retention of the renewal takeouts in the first quarter. We know pricing is going to be pressured in the states, so we're remaining disciplined in how we're looking at the balance of the calendar year. As I mentioned a little bit ago, if we get through the second quarter with similar success, that's going to require us to then update the guidance up as we would have overachieved down 2 quarters. We're being disciplined in how we're looking at that portfolio, given its outsized economic benefit.

Gordy Bunch
Gordy Bunch
Founder, Chairman, and CEO at TWFG

You know, we know the Florida market is dealing with its own property pricing downward. We're doing well, better than expected. You know, we're being disciplined and not looking to update at this release. If we get through the second quarter with similar outcome, then yes, there's upside to the margin on guidance.

Mike Zaremski
Mike Zaremski
Analyst at BMO Capital Markets

Okay. That's understood. Moving to organic growth. Gordy, you've talked about the impact from improving availability, you know, and how it's having an impact on organic. You talked about the soft market. Maybe you can kind of help tease out if that impact is becoming less, you know, having a less of an impact on organic or the same or more. So we can kind of figure out directionally whether we should continue to kind of build in a bit of a very near-term headwind.

Gordy Bunch
Gordy Bunch
Founder, Chairman, and CEO at TWFG

We have a lot of geography that TWFG operates in. Not every geography has the same rate change cadence or significance. If we look at, you know, the balance of the calendar year, we're looking at, you know, rate, property rates. You know, we all know the cat market is softening and that eventually goes through property repricing. Our soft market cycle really started last year, second quarter on the private passenger auto side. I would say that the property portion started softening more towards the end of the fourth quarter, early part of the first quarter.

Gordy Bunch
Gordy Bunch
Founder, Chairman, and CEO at TWFG

They're kind of disconnected in the timing, but we've assumed the softening market at our full year guidance and are not expecting anything dramatic from a pricing standpoint to change that 10%-15% guidance. You know, as we talked maybe two years ago when we were first coming out public, and the market was hard, what happens is, because carriers now offer us capacity and they all have new business as incentives, the mix shift of the total portfolio growth becomes less dependent on retention and more driven by exposure growth. New business overtakes policy premium retention. We're kind of seeing that shift occurring in real time, where we might be renewing at a lower average premium, but we're also writing new business and adding PIF growth that's offsetting that pricing headwind.

Gordy Bunch
Gordy Bunch
Founder, Chairman, and CEO at TWFG

For us, we're looking at that, you know, guidance as being very solid through the first quarter and what we can see through today, which is why we're maintaining that range.

Mike Zaremski
Mike Zaremski
Analyst at BMO Capital Markets

That's helpful. Maybe just a last on the competitive environment. Just curious, I know you're probably more of a bundled writer, but is the GEICO initiative having an impact on the organic or it's just, it's too small to really move the needle?

Gordy Bunch
Gordy Bunch
Founder, Chairman, and CEO at TWFG

GEICO has become more relevant in our portfolio, not less. Again, it is price advantage. Last year, even though it was allowing us to write more business, it was, you know, also moving policies from a higher average premium to a lower average premium. We still have significant growth with GEICO. You know, we look at their technology platforms and the product lines that they're still not fully released in every state, as gonna be a net beneficiary to us as they continue to expand into new geography and open up more lines of business. You know, GEICO's been a positive other than, you know, like I said, the rate differential from incumbents, allows us to retain the customer, allows us to write new business, but it is a lower average premium than the incumbent carriers.

Mike Zaremski
Mike Zaremski
Analyst at BMO Capital Markets

Understood. Thank you.

Operator

Next question comes from the line of Brian Meredith with UBS. Your line is open.

Brian Meredith
Brian Meredith
Analyst at UBS

Yeah, thanks. Gordy, a couple questions here. First, I'm just curious, what is the organic growth of your MGA business this quarter? Are you seeing a slowdown in business moving into the non-admitted market?

Gordy Bunch
Gordy Bunch
Founder, Chairman, and CEO at TWFG

As a first recap, the vast majority of our MGA is admitted.

Brian Meredith
Brian Meredith
Analyst at UBS

Okay.

Gordy Bunch
Gordy Bunch
Founder, Chairman, and CEO at TWFG

We're more of an admitted operation than an E&S one. Our admitted portfolios are growing. As we've been able to introduce new products in new states, as we've expanded our own product in our core state, we are able to grow PIF and premium in both the admitted programs. On the E&S side, I would say for states like California, we're seeing less dependency on the E&S homeowners market as more of the traditional carriers are starting to open up capacity in California. That could change with some of the more recent actions from the DOI, but we've had a number of new admitted markets open up for new business in that state, which it was not present last quarter.

Gordy Bunch
Gordy Bunch
Founder, Chairman, and CEO at TWFG

We don't really break out the organic by business unit. You know, Florida's got a combination of new business, new program, voluntary writings that aren't part of the calculations for inorganic versus organic. Our full year guidance includes basically a blend of all the different businesses coming together on a consolidated basis, so we don't really have a breakout on that in between. We do know that coming into the second quarter, we're going to have a, you know, good benefit of policies renewing in the quarter that were not present in the prior period. That acquisition is now past the 12th month, so it's going to give us an upsized organic quarter for the second quarter.

Brian Meredith
Brian Meredith
Analyst at UBS

Yeah. Terrific. Second question. Contingents. Any views on what contingents could look like for the year?

Gordy Bunch
Gordy Bunch
Founder, Chairman, and CEO at TWFG

Great question. We're probably an outlier here. We're being very disciplined in how we're viewing contingents. We entered the year, knowing that the market was softening and expecting combined ratios and loss ratios to eventually be impacted by the lower rate environment. If you track our contingent line, we're currently projecting a little bit lower on a premium to contingency basis, anticipating this, there should be some loss ratio elevation by the lower rate environment. So far, that hasn't manifested, but we're not looking to adjust our current contingent in our forecast. We get more substantial confidence on that line after the third quarter. We get lock-in provisions, and carriers then give us more substantial updates on where we're at in those profit-sharing agreements.

Gordy Bunch
Gordy Bunch
Founder, Chairman, and CEO at TWFG

There could be upside in the fourth quarter as we live further into the calendar year, and then those loss ratio sensitive contingencies become a lot clearer. We're taking a very disciplined approach in how we're approaching contingency in our guidance and in our forecasts. Yes, there's some upside there should the combined ratios and loss ratios stay historically good.

Brian Meredith
Brian Meredith
Analyst at UBS

Gotcha. Then one last one, Gordy. I just want to go back to the good discussion you had on AI and completely agree with you. One of the debates that I'm having with some people is, you know, with AI and what's going on, not only the benefits you're seeing from an AI productivity perspective, will that over time force, call it, commission rates to decline, do you think? Just given the efficiencies that, you know, y'all and agencies are generating and maybe competition from, you know, AI-generated aggregators and stuff.

Gordy Bunch
Gordy Bunch
Founder, Chairman, and CEO at TWFG

I think it's too early to predict that that's an outcome. You know, I did read the Chubb article that you're probably referencing. You know, nobody yet knows the long-term cost of the AI tools. I think it's presumptuous to believe that all the AI tools are going to inherently create a cost savings. The amount of energy it takes to operate these server farms, and in many cases, the number of different microservice AI bots or AI agents you may have, and the token cost if you're using third-party AI, I don't know that anybody could accurately predict where the cost savings is gonna be this early in the AI deployment.

Gordy Bunch
Gordy Bunch
Founder, Chairman, and CEO at TWFG

I think certainly over time, we believe there will be efficiencies, and there will be some margin expansion opportunities, but way too early to predict that. How does the agency economics shift the carrier commission schedules? I think that, you know, we've proven that independent agency distribution provides underwriters with a superior portfolio, better retention, better loss ratios, and I don't see them, you know, immediately directing commission expenses downward in a very competitive marketplace. The industry is so fragmented. I don't know that that would be a wise move for a carrier to be looking at agency comp as an outcome of AI, because AI is improving their infrastructure and their costs too.

Gordy Bunch
Gordy Bunch
Founder, Chairman, and CEO at TWFG

They certainly might get some relief on how they can lower rate based on their expense ratios coming down, but I don't think that needs to come at the expense of distribution.

Brian Meredith
Brian Meredith
Analyst at UBS

Thanks. Thank you.

Operator

Our last question comes from the line of Pablo Singzon with JPMorgan, your line is open.

Pablo Singzon
Pablo Singzon
Analyst at JPMorgan

Hi. Thank you. First question, I just want to confirm, the reason that organic will be strong in Q2, I think are the Florida takeout books renewing into organic, right? That's sort of the first part. Then I guess you also took out some books in the latter half of 2025. Do they renew in the latter half of 2026, or does everything renew at the same time, which is why Q2 is so strong?

Gordy Bunch
Gordy Bunch
Founder, Chairman, and CEO at TWFG

There's a couple points there, and I'll let Janice clean up what I don't cover. Yes, we have policies renewing in the second quarter that are gonna help drive organic up to high double digits. We also have a voluntary program, which is an entirely new form and distribution that was stood up from scratch. Everything that it generates is also organic, separate from the takeout. There's takeout going into renewal, and then there's voluntary writings, which is new business production from scratch, not a renewing of a takeout policy. The takeouts are also accelerating their new business traction coming into this quarter. That's part of my structural tailwind I'm talking about, which gives us significant confidence in the guidance we've given for the full year organic.

Gordy Bunch
Gordy Bunch
Founder, Chairman, and CEO at TWFG

There are policies from all the various takeouts that go into various extended periods of the calendar. Janice is much closer to how that plays out.

Janice Zwinggi
Janice Zwinggi
CFO at TWFG

I mean, another thing too is we're being disciplined on the retention rate that we're using. On renewals and the new direct business, like Gordy mentioned, we're being disciplined on how much we're gonna see 'cause we haven't really seen the cancellations coming through as of yet. I feel like in, with what we've got with the, with the takeouts dropping off starting in July, on the June takeout, and then October, November. June and October were the largest ones. Then you'll start seeing the replacements on the renewals after that point in time. Again, we have a pretty nice, I mean, we're using a good, we feel like a comfortable retention rate on those.

Gordy Bunch
Gordy Bunch
Founder, Chairman, and CEO at TWFG

The number of policies going into the third and fourth quarter are relatively de minimis.

Janice Zwinggi
Janice Zwinggi
CFO at TWFG

Yes.

Operator

Ladies and gentlemen, that concludes the question and answer session. I would now like to turn the call back over to Gordy Bunch for closing remarks.

Gordy Bunch
Gordy Bunch
Founder, Chairman, and CEO at TWFG

Thank you for attending this afternoon's call. We appreciate all your thoughtful questions. Really five things we want you guys to walk away with. Our business is firing on all cylinders. Total revenue up 35.3%. Just to give it up, this isn't just a quarter of luck, it's the compounding of strategic investments in technology, M&A, and the people that have helped made this company great for the last 25 years. Our organic growth is strong, really 2x the industry, and we feel very compelled by the strategic tailwinds we have coming into the second quarter and throughout the remaining part of the year. Our MGA platform is scaling. We're getting new programs and new distribution points and all the different business units.

Gordy Bunch
Gordy Bunch
Founder, Chairman, and CEO at TWFG

Reaffirming our full guidance for revenue growth, organic growth, and Adjusted EBITDA. Our capital allocation strategy is working. $40 million of the $50 million buyback executed, three acquisitions completed. We have, you know, cash on hand, an undrawn credit facility, a fortress balance sheet to continue to carry our trajectory forward. We appreciate everybody for attending today and look forward to our next call. Thank you.

Operator

Ladies and gentlemen, that concludes today's call. Thank you all for joining. You may now disconnect.

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