What changed in this filing

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Item 2. Management’s Discussion and Analysis

2024-11-07 compared with 2024-08-08 · 97 added, 75 removed, 302 unchanged (36% of the section changed)

2 unchanged sentences

and the terms “our Company,” “we,” “us,” and “our” as used below refer to Skyward Specialty Insurance Group and its consolidated subsidiaries.

The term “second quarter” as used below refers to the three and six months ended June 30 for the time period then ended.

The term “third quarter” as used below refers to the three and nine months ended September 30 for the time period then ended.

We discuss certain key metrics which provide useful information about our business and the operational factors underlying our financial performance.

3 unchanged sentences

Our actual results could differ materially from those anticipated in these forward-looking statements as a result of many factors.

The results of operations for the three and six months ended June 30, 2024 are not necessarily indicative of the results that may be expected for the full year ended December 31, 2024, or for any other future period.

The results of operations for the three and nine months ended September 30, 2024 are not necessarily indicative of the results that may be expected for the full year ended December 31, 2024, or for any other future period.

The following discussion should be read in conjunction with the unaudited condensed consolidated financial statements and the notes thereto included in Part I, Item 1 of this Quarterly Report, and in conjunction with our audited consolidated financial statements and the notes thereto included in our 2023 Form 10-K.

10 unchanged sentences

Results of Operations

The following table summarizes our results for the three and six months ended June 30, 2024 and 2023:

Three months ended June 30, Six months ended June 30,

The following table summarizes our results for the three and nine months ended September 30, 2024 and 2023:

Three months ended September 30, Nine months ended September 30,

($ in thousands) 2024 2023 2024 2023

9 unchanged sentences

Net investment income $ 19,521 $ 13,089 $ 59,956 $ 26,318

Net investment (losses) gains $ (1,825) $ 5,351 $ 6,478 $ 6,312

Net investment gains (losses) $ 10,187 $ (2,984) $ 16,665 $ 3,328

Income before income taxes $ 46,853 $ 27,795 $ 134,185 $ 72,533

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Adjusted Operating Income

The following table provides a reconciliation of adjusted operating income to net income for the three and six months ended June 30, 2024 and 2023:

Three months ended June 30, Six months ended June 30,

The following table provides a reconciliation of adjusted operating income to net income for the three and nine months ended September 30, 2024 and 2023:

Three months ended September 30, Nine months ended September 30,

2024 2023 2024 2023

1 unchanged sentence

Income as reported $ 46,853 $ 36,668 $ 27,795 $ 21,711 $ 134,185 $ 104,422 $ 72,533 $ 56,719

Net investment (losses) gains (1,825) (1,442) 5,351 4,227 6,478 5,118 6,312 4,986

Net investment gains (losses) 10,187 8,048 (2,984) (2,357) 16,665 13,165 3,328 2,629

Net impact of LPT 318 251 266 210 800 632 970 766

3 unchanged sentences

Underwriting Income

The following table provides a reconciliation of underwriting income to income before federal income tax for the three and six months ended June 30, 2024 and 2023:

Three months ended June 30, Six months ended June 30,

The following table provides a reconciliation of underwriting income to income before federal income tax for the three and nine months ended September 30, 2024 and 2023:

Three months ended September 30, Nine months ended September 30,

($ in thousands) 2024 2023 2024 2023

4 unchanged sentences

Net investment income 19,521 13,089 59,956 26,318

Net investment (losses) gains (1,825) 5,351 6,478 6,312

Net investment gains (losses) 10,187 (2,984) 16,665 3,328

Other loss (195) — (202) —

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Adjusted Loss Ratio / Adjusted Combined Ratio

The following table provides a reconciliation of the adjusted loss and LAE ratio and adjusted combined ratio to the loss and LAE ratio and combined ratio for the three and six months ended June 30, 2024 and 2023:

Three months ended June 30, Six months ended June 30,

The following table provides a reconciliation of the adjusted loss and LAE ratio and adjusted combined ratio to the loss and LAE ratio and combined ratio for the three and nine months ended September 30, 2024 and 2023:

Three months ended September 30, Nine months ended September 30,

($ in thousands) 2024 2023 2024 2023

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Tangible Stockholders’ Equity

The following table provides a reconciliation of tangible stockholders’ equity to stockholders’ equity for the periods ended June 30, 2024 and 2023:

The following table provides a reconciliation of tangible stockholders’ equity to stockholders’ equity for the periods ended September 30, 2024 and 2023:

($ in thousands) 2024 2023

3 unchanged sentences

Annualized Adjusted Return on Equity

The following table provides a reconciliation of annualized adjusted return on equity to annualized return on equity for the three and six months ended June 30, 2024 and 2023:

Three months ended June 30, Six months ended June 30,

The following table provides a reconciliation of annualized adjusted return on equity to annualized return on equity for the three and nine months ended September 30, 2024 and 2023:

Three months ended September 30, Nine months ended September 30,

($ in thousands) 2024 2023 2024 2023

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Annualized Return on Tangible Equity

Annualized return on tangible equity for the three and six months ended June 30, 2024 and 2023 reconciles to annualized return on equity as follows:

Three months ended June 30, Six months ended June 30,

Annualized return on tangible equity for the three and nine months ended September 30, 2024 and 2023 reconciles to annualized return on equity as follows:

Three months ended September 30, Nine months ended September 30,

($ in thousands) 2024 2023 2024 2023

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Annualized Adjusted Return on Tangible Equity

Annualized adjusted return on tangible equity for the three and six months ended June 30, 2024 and 2023 reconciles to annualized return on equity as follows:

Three months ended June 30, Six months ended June 30,

Annualized adjusted return on tangible equity for the three and nine months ended September 30, 2024 and 2023 reconciles to annualized return on equity as follows:

Three months ended September 30, Nine months ended September 30,

($ in thousands) 2024 2023 2024 2023

4 unchanged sentences

Underwriting Results

The following tables present gross written premiums by underwriting division for the three and six months ended June 30, 2024 and 2023:

Three months ended June 30,

The following tables present gross written premiums by underwriting division for the three and nine months ended September 30, 2024 and 2023:

Three months ended September 30,

($ in thousands) 2024 2023 Change % Change

10 unchanged sentences

(1) Excludes exited business

Six months ended June 30,

Nine months ended September 30,

($ in thousands) 2024 2023 Change % Change

10 unchanged sentences

(1) Excludes exited business

The increase in gross written premiums for the second quarter and first half of 2024, when compared to the same 2023 periods, was driven by double-digit premium growth primarily from our captives, transactional E&S and surety underwriting divisions.

The double-digit premium growth was due to new business and increased rates.

Our global property & agriculture division contributed double digit premium growth in the first half of 2024, when compared to the same 2023 period, primarily driven by new business in agriculture.

Net written premiums for the second quarter of 2024 were $297.1 million compared to $213.7 million for the same 2023 period, an increase of $83.4 million or 39.0%.

Net written premiums for the first half of 2024 were $584.2 million compared to $415.9 million for the same 2023 period, an increase of $168.3 million or 40.5%.

The increases in net written premiums were primarily driven by the same reasons that drove the increases in gross written premiums discussed above.

Net earned premiums for the second quarter of 2024 were $257.6 million compared to $194.3 million for the same 2023 period, an increase of $63.3 million, or 32.5%.

Net earned premiums for the first half of 2024 were $493.9 million compared to $377.2 million for the same 2023 period, an increase of $116.7 million or 31.0%.

The increases in net earned premiums were primarily driven by the same reasons that drove the increases in gross written premiums discussed above.

The increase in gross written premiums for the third quarter and first nine months of 2024, when compared to the same 2023 periods, was driven by double-digit premium growth primarily from our transactional E&S, programs, captives, surety and global property & agriculture underwriting divisions.

During the third quarter and first nine months of 2023, the Company cancelled a quota share reinsurance contract.

The following table provides a reconciliation of the impact of the cancellation of the quota share reinsurance contract on ceded written premiums, net retention, net written premiums and net earned premiums for the three and nine months ended September 30, 2023:

Three months ended September 30,

(unaudited) As Reported As Reported Adjustment Adjusted Change

Ceded written premiums $ (131,692) $ (75,036) $ (50,462) $ (125,498) 4.9%

Net retention 67.1% 78.9% 64.7% NM (1)

Net written premiums $ 268,322 $ 280,696 $ (50,462) $ 230,234 16.5%

Net earned premiums $ 269,557 $ 227,033 $ (13,145) $ 213,888 26.0%

Nine months ended September 30,

As Reported As Reported Adjustment Adjusted Change

Ceded written premiums $ (502,326) $ (441,650) $ (50,462) $ (492,112) 2.1%

Net retention 62.9% 61.2% 56.8% NM (1)

Net written premiums $ 852,551 $ 696,574 $ (50,462) $ 646,112 32.0%

Net earned premiums $ 763,482 $ 604,211 $ (13,145) $ 591,066 29.2%

(1) Not meaningful

Net written premiums for the third quarter of 2024 were $268.3 million compared to $280.7 million for the same 2023 period.

Net written premiums for the first nine months of 2024 were $852.6 million compared to $696.6 million for the same 2023 period.

Excluding the impact of the quota share reinsurance contract cancellation, net written premiums for the third quarter and first nine months of 2024 increased 16.5% and 32.0%, respectively, when compared to the same 2023 periods, primarily driven by the same reasons that drove the increases in gross written premiums discussed above.

Net earned premiums for the third quarter of 2024 were $269.6 million compared to $227.0 million for the same 2023 period.

Net earned premiums for the first nine months of 2024 were $763.5 million compared to $604.2 million for the same 2023 period.

Excluding the impact of the quota share reinsurance contract cancellation, net earned premiums for the third quarter and first nine months of 2024 increased 26.0% and 29.2%, respectively, when compared to the same 2023 periods, primarily driven by the same reasons that drove the increases in gross written premiums discussed above.

For additional information regarding our reinsurance programs, see the “Reinsurance” discussion included in this Item 2 .

Losses and LAE

The following tables set forth the components of the loss and LAE ratios and adjusted loss and LAE ratios for the three and six months ended June 30, 2024 and 2023:

Three months ended June 30,

The following tables set forth the components of the loss and LAE ratios and adjusted loss and LAE ratios for the three and nine months ended September 30, 2024 and 2023:

Three months ended September 30,

($ in thousands) Losses

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(2) See "Reconciliation of Non-GAAP Financial Measures" included in this Item 2

Six months ended June 30,

Nine months ended September 30,

($ in thousands) Losses

16 unchanged sentences

(2) See "Reconciliation of Non-GAAP Financial Measures" included in this Item 2

The loss ratios for the second quarter and first half of 2024 improved 2.3 points and 2.1 points, respectively, when compared to the same 2023 periods, driven by less severity of convective storms.

The non-cat loss and LAE ratio for the second quarter of 2024 was comparable to the same 2023 period.

The non-cat loss and LAE ratio for the first half of 2024 improved 0.3 points when compared to the same 2023 period, primarily driven by the shift in the mix of business.

The loss ratios for the third quarter and first nine months of 2024 increased 2.3 points and improved 0.5 points, respectively, when compared to the same 2023 periods.

The third quarter of 2024 was impacted by higher catastrophe losses, primarily from Hurricanes Helene and Beryl.

The non-cat loss and LAE ratio for the third quarter of 2024 was comparable to the same 2023 period.

The non-cat loss and LAE ratio for the first nine months of 2024 improved 0.3 points when compared to the same 2023 period, primarily driven by the shift in the mix of business.

Expense Ratio

The following tables set forth the components of the expense ratios for the three and six months ended June 30, 2024 and 2023:

Three months ended June 30,

The following tables set forth the components of the expense ratios for the three and nine months ended September 30, 2024 and 2023:

Three months ended September 30,

($ in thousands) Expenses % of

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Total net expenses $ 77,999 28.9 % $ 66,230 29.2 %

Six months ended June 30,

Nine months ended September 30,

($ in thousands) Expenses % of

6 unchanged sentences

Total net expenses $ 220,373 28.9 % $ 170,836 28.3 %

The expense ratio for the second quarter and first half of 2024 increased 1.0 point and 1.1 points, respectively, when compared to the same 2023 periods, primarily driven by the business mix shift partially offset by earnings leverage.

The expense ratios for the periods presented exclude the impact of IPO related stock compensation and secondary offering expenses, which are reported in other expenses in our condensed consolidated statements of operations and comprehensive income.

The expense ratios for the third quarter and first nine months of 2024 were comparable to the same 2023 periods.

The expense ratios for all periods presented exclude the impact of IPO related stock compensation and secondary offering expenses, which are reported in other expenses in our condensed consolidated statements of operations and comprehensive income.

Investment Results

1 unchanged sentence

The prior period has been reclassified to conform to the current period presentation.

The following table sets forth the components of net investment income and net investment gains (losses) for the three and six months ended June 30, 2024 and 2023:

Three months ended June 30, Six months ended June 30,

The following table sets forth the components of net investment income and net investment gains (losses) for the three and nine months ended September 30, 2024 and 2023:

Three months ended September 30, Nine months ended September 30,

$ in thousands 2024 2023 2024 2023

4 unchanged sentences

Net investment income $ 19,521 $ 13,089 $ 59,956 $ 26,318

Net unrealized (losses) gains on securities still held $ (1,760) $ 5,017 $ 7,231 $ 8,784

Net realized (losses) gains (65) 334 (753) (2,472)

Net investment (losses) gains $ (1,825) $ 5,351 $ 6,478 $ 6,312

Net investment income for the second quarter and first half of 2024 increased $13.6 million and $27.2 million, respectively when compared to the same 2023 periods.

The increase in income from our fixed income portfolio for the second quarter and first half of 2024, when compared to the same 2023 periods, was due to (i) a larger asset base as we continued to increase our allocation to this part of our investment portfolio and (ii) a higher book yield of 4.4% at June 30, 2024 compared to 3.9% at June 30, 2023.

The increases in income from short-term investments & cash and cash equivalents for the second quarter and first half of 2024 when compared to the same 2023 periods, were due to higher investment yields and a larger asset base.

The fair value of our alternative and strategic investments portfolio for the second quarter and first half of 2024 increased when compared to the same 2023 period, due to an increase in the fair value of limited partnership investments.

Net unrealized gains (losses) on securities still held $ 8,378 $ (6,391) $ 15,609 $ 2,394

Net realized gains 1,809 3,407 1,056 934

Net investment gains (losses) $ 10,187 $ (2,984) $ 16,665 $ 3,328

Net investment income for the third quarter and first nine months of 2024 increased $6.4 million and $33.6 million, respectively when compared to the same 2023 periods.

The increase in income from our fixed income portfolio for the third quarter and first nine months of 2024, when compared to the same 2023 periods, was due to (i) a larger asset base as we continued to increase our allocation to this part of our investment portfolio and (ii) a higher book yield of 5.0% at September 30, 2024 compared to 4.2% at September 30, 2023.

The increase in income from short-term investments for the third quarter and first nine months of 2024 when compared to the same 2023 periods, was due to higher investment yields and a larger asset base.

The increase in income from alternative and strategic investments for the first nine months of 2024 was driven by the increase in the fair value of limited partnership investments when compared to the same 2023 period.

Net investment income for the third quarter of 2024 and 2023 was impacted by a decline in the fair value of limited partnership investments.

When a fixed maturity has been determined to have an impairment, the impairment charge is separated into an amount representing the credit loss, which is recognized in earnings as a realized loss and on the balance sheet as an allowance for credit losses netted with the amortized cost of fixed maturities.

1 unchanged sentence

The amount related to non-credit factors is recognized in accumulated other comprehensive income and future increases or decreases in fair value, if not credit losses, are included in accumulated other comprehensive (loss) income.

We reviewed our available-for-sale fixed maturities at June 30, 2024 and determined that no credit impairment existed in the gross unrealized holding losses.

We reviewed our available-for-sale fixed maturities at September 30, 2024 and determined that no credit impairment existed in the gross unrealized holding losses.

See Note 2, “Investments” to our condensed consolidated financial statements included in Item 1 of this Form 10-Q for additional information.

Composition of Investment Portfolio

The following table sets forth the components of our investment portfolio at carrying value at June 30, 2024 and December 31, 2023:

The following table sets forth the components of our investment portfolio at carrying value at September 30, 2024 and December 31, 2023:

($ in thousands) Carrying Value

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Our fixed income portfolio primarily consists of investment grade fixed income securities, which are predominantly highly-rated and liquid bonds, and commercial mortgage loans.

The following table sets forth the components of our fixed income securities at June 30, 2024 and December 31, 2023:

The following table sets forth the components of our fixed income securities at September 30, 2024 and December 31, 2023:

($ in thousands) Carrying Value % of Total

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Total fixed income portfolio $ 1,393,767 100.0 % $ 1,067,721 100.0 %

The weighted average credit rating of our available-for-sale fixed income portfolio was “AA-” by Standard & Poor’s Financial Services, LLC (“Standard & Poor’s”) at June 30, 2024 and December 31, 2023.

The following table sets forth the credit quality of our available-for-sale fixed income portfolio at June 30, 2024 and December 31, 2023, as rated by Standard & Poor’s or equivalent designation:

The weighted average credit rating of our available-for-sale fixed income portfolio was “AA-” by Standard & Poor’s Financial Services, LLC (“Standard & Poor’s”) at September 30, 2024 and December 31, 2023.

The following table sets forth the credit quality of our available-for-sale fixed income portfolio at September 30, 2024 and December 31, 2023, as rated by Standard & Poor’s or equivalent designation:

($ in thousands) Fair Value % of Total Fair Value % of Total

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Our commercial mortgage loans are primarily senior loans on real estate across the U.S.

The average duration of our fixed income portfolio was approximately 4.19 years and 4.24 years, respectively, as of June 30, 2024 and December 31, 2023.

The average duration of our fixed income portfolio was approximately 3.89 years and 4.24 years, respectively, as of September 30, 2024 and December 31, 2023.

The equities portfolio primarily consists of domestic preferred stocks, common equities, exchange traded funds, limited partnerships, limited liability corporations and other types of equity interests, 95.3% of which are publicly traded.

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Strategic investments consists of equity interests in private entities within the insurance industry.

Income tax expense for the three and six months ended June 30, 2024 was $9.4 million and $19.6 million, respectively, compared to $5.6 million and $9.7 million, respectively, for the same 2023 periods.

Our effective tax rates for the three and six months ended June 30, 2024 were 23.3% and 22.4%, respectively, compared to 22.2% and 21.7%, respectively, for the same 2023 periods.

Income tax expense for the three and nine months ended September 30, 2024 was $10.2 million and $29.8 million, respectively, compared to $6.1 million and $15.8 million, respectively, for the same 2023 periods.

Our effective tax rates for the three and nine months ended September 30, 2024 were 21.7% and 22.2%, respectively, compared to 21.9% and 21.8%, respectively, for the same 2023 periods.

For additional information, see Note 7 of our condensed consolidated financial statements included in Item 1 of this Form 10-Q.

10 unchanged sentences

Management believes that cash receipts from premiums and proceeds from investment income are sufficient to cover cash outflows in the foreseeable future.

Our cash flows for the six months ended June 30, 2024 and 2023 were:

Our cash flows for the nine months ended September 30, 2024 and 2023 were:

($ in thousands) 2024 2023

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Cash flows from operations in each of the past two years were used primarily to fund investing activities.

Net cash used in investing activities in 2024 and 2023 was primarily driven by purchases of fixed maturity securities and short-term investments.

Net cash used in investing activities in 2024 was primarily driven by purchases of fixed maturity securities, partially offset by sales and maturities of investment securities and sales of short-term investments.

Net cash used in investing activities in 2023 was primarily driven by purchases of fixed maturity securities and short-term investments.

Net cash used in financing activities in 2024 was driven by net payments on debt.

Credit Agreements

On August 30, 2024, we entered into a loan (“the FHLB Loan”) with the Federal Home Loan Bank of Dallas (the “FHLB”) pursuant to its Advances and Security Agreement.

The FHLB Loan is a 4.5-year term loan in the principal amount of $57.0 million.

The FHLB Loan provides for interest-only payments during its term, with principal due in full at maturity.

The interest rate is fixed over the term of the loan at 4.00%.

The FHLB Loan is fully secured by a pledge of specific investment securities of HSIC.

We used the proceeds to fund the redemption of the March 15, 2024 draw on the Revolving Credit Facility and redeem $7.0 million of the March 29, 2023 draw on the Revolving Credit Facility (see “Revolving Credit Facility” below for additional information regarding the redemption).

Revolving Credit Facility

On March 29, 2023, we entered into an unsecured revolving credit facility (the “Revolving Credit Facility”) with a syndicate of participating banks.

The Revolving Credit Facility provides us with up to a $150.0 million revolving credit facility, with an accordion that can increase the capacity by $50.0 million, and a letter of credit sub-facility of up to $30.0 million.

The Revolving Credit Facility provides us with up to a $150.0 million revolving credit facility and a letter of credit sub-facility of up to $30.0 million.

On March 14, 2024, we drew $50.0 million on the Revolving Credit Facility and used the proceeds and existing cash to fund the redemption of the Debentures (see “Debentures” below for additional information regarding the redemption).

As of March 31, 2024, we had $100.0 million outstanding under the Revolving Credit Facility with another $50.0 million of undrawn capacity.

On August 30, 2024, we fully redeemed the March 15, 2024 draw on the Revolving Credit Facility and redeemed $7.0 million of the March 29, 2023 draw on the Revolving Credit Facility.

As of September 30, 2024, we had $43.0 million outstanding under the Revolving Credit Facility with another $107.0 million of undrawn capacity.

Interest on the Revolving Credit Facility is payable quarterly.

The interest rate on the Revolving Credit Facility is the SOFR plus a margin of between 150 and 190 basis points based on the ratio of debt to total capital and a credit spread adjustment of 10 basis points.

The following table sets forth the outstanding draws on the Revolving Credit Facility as of June 30, 2024:

($ in thousands) June 30, 2024

Amount Margin Six-month SOFR Net interest rate

March 15, 2024 $ 50,000 1.60 % 5.25 % 6.85 %

March 29, 2023 $ 50,000 1.60 % 5.23 % 6.83 %

At September 30, 2024, the six-month SOFR on the Revolving Credit Facility was 4.25%, plus a margin of 1.60%.

We are subject to covenants on the Revolving Credit Facility based on minimum net worth, maximum debt to capital ratio, minimum A.M.

Best Rating and minimum liquidity.

As of June 30, 2024, we are in compliance with all covenants.

As of September 30, 2024, we are in compliance with all covenants.

In August 2006, we received $58.0 million of proceeds from a debenture offering through a statutory trust, Delos Capital Trust (the “Trust”).

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Principal payment is due at maturity on May 24, 2039 and interest is payable quarterly.

At June 30, 2024 the ratio of total debt outstanding, including the Revolving Credit Facility, the Trust Preferred and the Notes, to total capitalization (defined as total debt plus stockholders’ equity) was 14.1% and at December 31, 2023, the ratio of total debt outstanding, including the Term Loan, the Revolver, the Trust Preferred and the Notes, to total capitalization was 16.3%.

At September 30, 2024 the ratio of total debt outstanding, including the FHLB Loan, the Revolving Credit Facility and the Notes, to total capitalization (defined as total debt plus stockholders’ equity) was 13.0% and at December 31, 2023, the ratio of total debt outstanding, including the Term Loan, the Revolver, the Trust Preferred and the Notes, to total capitalization was 16.3%.

Share Repurchase Program

In October 2024, the Board of Directors approved a share repurchase program authorizing the repurchase of up to $50.0 million of our common stock.

The shares may be repurchased from time to time in open market purchases, privately-negotiated transactions, block purchases, accelerated share repurchase agreements or a combination of methods, including through Rule 10b5-1 trading plans.

The timing, manner, price and amount of any repurchases under the share repurchase program will be determined by us in our discretion.

The share repurchase program does not require us to repurchase any specific number of shares, and may be modified, suspended or terminated at any time.

We strategically purchase reinsurance from third parties which enhances our business by protecting capital from severity events (either large single event losses or catastrophes) and reducing volatility in our earnings.

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It is used for a variety of reasons, including supplementing the limits provided by the treaty coverage or covering risks or perils excluded from treaty reinsurance.

For the three and six months ended June 30, 2024 our net retention on a written basis (calculated as net written premiums as a percentage of gross written premiums) was 59.9% and 61.2%, respectively, compared to 50.6% and 53.1%, respectively, for the same 2023 periods.

The following is a summary of our reinsurance programs as of June 30, 2024:

For the three and nine months ended September 30, 2024 our net retention on a written basis (calculated as net written premiums as a percentage of gross written premiums) was 67.1% and 62.9%, respectively, compared to 78.9% and 61.2%, respectively, for the same 2023 periods.

The following is a summary of our reinsurance programs as of September 30, 2024:

Line of Business Maximum Company Retention

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(3) Catastrophe loss protection is purchased up to $36.0 million in excess of $15.0 million retention, which provides cover for a 1:250-year PML event.

On June 21, 2024, R&Q Insurance Holdings Ltd, (“R&Q”) the parent company of Randall & Quilter (R&Q Bermuda (SAC) Ltd or “R&Q SAC Ltd”) the third-party reinsurer domiciled in Bermuda that is the counterparty for our loss portfolio transfer (“LPT”), filed for provisional liquidation with the Bermuda authorities.

Due to the complexity of the legal structure of R&Q SAC Ltd and uncertainty relative to the situation, management continues to evaluate the potential financial impact, if any.

Credit and Financial Strength Ratings

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Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-Q

Item 2. Management’s Discussion and Analysis