What changed in this filing

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Item 9A. Controls and Procedures

2025-03-03 compared with 2024-04-01 · 101 added, 57 removed, 222 unchanged (42% of the section changed)

2 unchanged sentences

Our management, with the participation of our principal executive officer and our principal financial officer, evaluated, as of the end of the period covered by this Annual Report on Form 10-K, the effectiveness of our disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934, as amended, or the Exchange Act).

Based on that evaluation, our principal executive officer and principal financial officer have concluded that as of December 31, 2023, our disclosure controls and procedures were effective at the reasonable assurance level.

Management recognizes that any controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving their objectives and our management necessarily applies its judgment in evaluating the cost-benefit relationship of possible controls and procedures.

Based on that evaluation, our principal executive officer and principal financial officer have concluded that as of December 31, 2024, the disclosure controls and procedures were not effective due to a material weakness in internal control over financial reporting, described below.

Notwithstanding the identified material weakness described below, management does not believe that the material weakness had an adverse effect on our reported operating results or financial condition and management has determined that the financial statements and other information included in this report and other periodic filings present fairly in all material respects our financial condition, results of operations, and cash flows at and for the periods presented in accordance with U.S.

Management’s Report on Internal Control over Financial Reporting

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(iii) Provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use or disposition of our assets that could have a material effect on the financial statements.

Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements.

Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

Management assessed the effectiveness of our internal control over financial reporting as of December 31, 2023.

In making this assessment, management used the framework in Internal Control-Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission.

Management’s assessment included an evaluation of the design of our internal control over financial reporting and testing of the operational effectiveness of its internal control over financial reporting.

Management reviewed the results of its assessment with the audit committee of our board of directors.

Based on that assessment under the framework in Internal Control-Integrated Framework (2013), management concluded that the company’s internal control over financial reporting was effective as of December 31, 2023.

This annual report on Form 10-K does not include an attestation report of our company’s registered public accounting firm regarding internal control over financial reporting as we are an emerging growth company as of December 31, 2023, as defined in the JOBS Act.

Management has assessed the effectiveness of our internal control over financial reporting as of December 31, 2024, using the criteria set forth by the Committee of Sponsoring Organizations of the Treadway Commission (COSO) in Internal Control—Integrated Framework (2013).

As a result of this assessment, management concluded that, as of December 31, 2024, its internal control over financial reporting was not effective because management identified a material weakness in internal control over financial reporting.

A material weakness is a deficiency, or a combination of deficiencies, in internal control over financial reporting, such that there is a reasonable possibility that a material misstatement of our annual or interim financial statements will not be prevented or detected on a timely basis.

Our management concluded that a material weakness existed as of December 31, 2024 related to the ineffective implementation of information technology general controls (“ITGCs”) in the area of user access for systems that support the Company’s financial reporting processes.

Further, the Company’s related process-level IT dependent manual and automated controls that rely upon the affected ITGCs, or information coming from IT systems with affected ITGCs, were also deemed ineffective.

This material weakness did not result in any material misstatements to the financial statements in this Form 10-K, and we have not identified any changes required to our previously issued financial statements.

We have completed substantive procedures for the year ended December 31, 2024.

Based on these procedures, management believes that our consolidated financial statements included in this Form 10-K have been prepared in accordance with U.S.

Our CEO and CFO have certified that, based on their knowledge, the financial statements, and other financial information included in this Form 10-K, fairly present in all material respects our financial condition, results of operations and cash flows as of, and for, the periods presented in this Form 10-K.

Ernst & Young LLP has issued an unqualified opinion on our financial statements, which is included in Item 8 of this Form 10-K.

In addition, Ernst & Young LLP has issued a report on our internal control over financial reporting as of December 31, 2024, and its report appears in Item 8.

Planned Material Weakness Remediation Activities

Management is implementing measures designed to remediate the control deficiencies contributing to the material weakness described above.

The remediation actions for the material weakness related to the design of ITGCs in the area of user access over certain information technology include:

(1) enhancing our IT compliance oversight function and expanding our team members with experience designing and implementing ITGCs;

(2) developing and implementing a training program addressing ITGCs and policies, including educating control owners about the principles and requirements of each control;

(3) developing and maintaining documentation underlying ITGCs to promote knowledge transfer upon IT personnel and function changes;

(4) implementing an IT management review and testing plan to monitor ITGCs;

and (5) enhanced quarterly reporting on the remediation measures to the Audit Committee of our board of directors.

Changes in Internal Control over Financial Reporting

There was no change in our internal control over financial reporting identified in connection with the evaluation required by Rule 13a-15(d) and 15d-15(d) of the Exchange Act that occurred during the year ended December 31, 2023 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

Except for changes relating to the material weakness identified above, there has been no change in our internal control over financial reporting identified in connection with the evaluation required by Rule 13a-15(d) and 15d-15(d) of the Exchange Act that occurred during the year ended December 31, 2024 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

Limitations on Effectiveness of Controls and Procedures

In designing and evaluating the disclosure controls and procedures, management recognizes that any controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving the desired control objectives.

In addition, the design of disclosure controls and procedures must reflect the fact that there are resource constraints and that management is required to apply judgment in evaluating the benefits of possible controls and procedures relative to their costs.

Other Information

On November 30, 2023 , Andrew Robinson , Chief Executive Officer , adopted a Rule 10b5-1 trading plan.

Robinson’s plan provides for the sale of up to 126,748 shares of our common stock by December 31, 2024.

This plan was entered into during an open insider trading window and is intended to satisfy the affirmative defense of Rule 10b5-1(c) under the Exchange Act and our policies regarding transactions in our securities.

During the quarter ended December 31, 2024, none of our directors or officers (as defined in Rule 16a-1(f) of the Securities Exchange Act of 1934) adopted , terminated or modified a Rule 10b5-1 trading arrangement or non-Rule 10b5-1 trading arrangement (as such terms are defined in Item 408 of Regulation S-K).

Disclosure Regarding Foreign Jurisdictions that Prevent Inspections - Not applicable.

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The following consolidated financials statements of the Company are filed as part of this Form 10-K and are included in Item 8:

Report of Independent Registered Public Accounting Firm

Reports of Independent Registered Public Accounting Firm

Consolidated Balance Sheets as of December 31, 2024 and 2023

Consolidated Statements of Operations and Comprehensive Income (loss) for the two years in the period ended December 31, 2023 and 2022

Consolidated Statements of Stockholders’ Equity for the two years in the period ended December 31, 2023 and 2022

Consolidated Statements of Cash Flows for the two years in the period ended December 31, 2023 and 2022

Consolidated Statements of Operations and Comprehensive Income (loss) for the three years in the periods ended December 31, 2024, 2023 and 2022

Consolidated Statements of Stockholders’ Equity for the three years in the period ended December 31, 2024, 2023 and 2022

Consolidated Statements of Cash Flows for the three years in the period ended December 31, 2024, 2023 and 2022

Schedule Number Schedule Description Page

Summary of Investments — Other Than in Related Parties at December 31, 2024

Condensed Financial Information of Registrant (Parent Company) for the years ended December 31, 202 3 and 202 2

Financial Information of Registrant (Parent Company) for the years ended December 31, 2024, 2023 and 2022

Supplementary Reinsurance Information for the years ended December 31, 2024, 2023, and 2022

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2022 Employee Stock Purchase Plan (incorporated by reference to Exhibit 10.5 to the Company's Registration Statement on Form S-1, filed with the SEC on November 14, 2022).

Number Exhibit Description

10.6+ Form of Restricted Stock Units Agreement and form of notice under the Company's 2022 Long-Term Incentive Plan (incorporated by reference to Exhibit 99.6 to the Company's Registration Statement on Form S-8, filed with the SEC on January 12, 2023).

Number Exhibit Description

10.7+ Form of Restricted Stock Agreement under the Company’s 2022 Long-Term Incentive Plan (incorporated by reference to Exhibit 99.7 to the Company's Registration Statement on Form S-8, filed with the SEC on January 12, 2023).

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10.12+ Performance Unit Agreement under the Company’s 2022 Long-Term Incentive Plan (incorporated by reference to Exhibit 10.12 to the Company’s Annual Report on Form 10-K, filed with the SEC on March 28, 2023).

10.13+ Amended Form of Performance Share (GBVPS) Agreement under the Company’s 2022 Long-Term Incentive Plan.

10.14+ Amended Form of Performance Share (Executives) Agreement under the Company’s 2022 Long-Term Incentive Plan.

10.15+ Amended Form of Performance Share (Others) Agreement under the Company’s 2022 Long-Term Incentive Plan.

10.13+ Amended Form of Performance Share (GBVPS) Agreement under the Company’s 2022 Long-Term Incentive Plan (incorporated by reference to Exhibit 10.13 to the Company’s Annual Report on Form 10-K, filed with the SEC on April 1, 2024).

10.14+ Amended Form of Performance Share (Executives) Agreement under the Company’s 2022 Long-Term Incentive Plan (incorporated by reference to Exhibit 10.14 to the Company’s Annual Report on Form 10-K, filed with the SEC on April 1, 2024).

10.15+ Amended Form of Performance Share (Others) Agreement under the Company’s 2022 Long-Term Incentive Plan (incorporated by reference to Exhibit 10.15 to the Company’s Annual Report on Form 10-K, filed with the SEC on April 1, 2024).

10.16+ Amended Form of Performance Cash Units Agreement under the Company’s Long-Term Incentive Plan.

10.17+ Amended Form of the Restricted Stock Unit (Executives) Agreement under the Company’s 2022 Long-Term Incentive Plan.

10.18+ Amended Form of Restricted Stock Unit (Others) Agreement under the Company’s 2022 Long-Term Incentive Plan.

10.19+ Amended Form of Long-Term Performance Cash Plan and Award Letter under the Company’s 2022 Long-Term Incentive Plan.

(incorporated by reference to Exhibit 10.16 to the Company’s Annual Report on Form 10-K, filed with the SEC on April 1, 2024).

10.17+ Amended Form of the Restricted Stock Unit (Executives) Agreement under the Company’s 2022 Long-Term Incentive Plan (incorporated by reference to Exhibit 10.17 to the Company’s Annual Report on Form 10-K, filed with the SEC on April 1, 2024).

10.18+ Amended Form of Restricted Stock Unit (Others) Agreement under the Company’s 2022 Long-Term Incentive Plan (incorporated by reference to Exhibit 10.18 to the Company’s Annual Report on Form 10-K, filed with the SEC on April 1, 2024).

10.19+ Amended Form of Long-Term Performance Cash Plan and Award Letter under the Company’s 2022 Long-Term Incentive Plan (incorporated by reference to Exhibit 10.19 to the Company’s Annual Report on Form 10-K, filed with the SEC on April 1, 2024).

10.20+ Form of Indemnification Agreement (incorporated by reference to Exhibit 10.6 to the Company's Registration Statement on Form S-1, filed with the SEC on November 14, 2022).

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1 dated January 1, 2022 (incorporated by reference to Exhibit 10.7 to the Company's Registration Statement on Form S-1, filed with the SEC on November 14, 2022).

10.22+ Form of Promissory Note (incorporated by reference to Exhibit 10.8 to the Company's Registration Statement on Form S-1, filed with the SEC on November 14, 2022).

10.23 Credit Agreement by and between Prosperity Bank and Houston International Insurance Group, Ltd., dated December 11, 2019 (incorporated by reference to Exhibit 10.10 to the Company's Registration Statement on Form S-1, filed with the SEC on November 14, 2022).

10.24* Loss Portfolio Transfer and Adverse Development Retrocession Agreement by and among R&Q Bermuda (SAC) Limited acting in respect of the HIIG Segregated Account, HIIG Re, Houston Specialty Insurance Company, Imperium Insurance Company, and Great Midwest Insurance Company, dated April 1, 2020 (incorporated by reference to Exhibit 10.14 to the Company's Registration Statement on Form S-1, filed with the SEC on November 14, 2022).

Number Exhibit Description

10.22+* Form of Non-Employee Director Deferred Restricted Stock Unit Agreement and Form of Notice Under the Company’s 2022 Long-Term Incentive Plan.

10.23 Commutation and Release Agreement by and among R&Q Re (Bermuda) Ltd., Skyward Re, Houston Specialty Insurance Company, Imperium Insurance Company, and Great Midwest Insurance Company, dated January 31, 2025 (incorporated by reference to Exhibit 10.1 to the Company's Current Report on Form 8-K filed with the Commission on February 5, 2025).

10.24 Investment Management Agreement by and among Arena Investors, LP, Houston Specialty Insurance Company, Imperium Insurance Company, and Great Midwest Insurance Company, dated November 6, 2015, with a Supplemental Acknowledgement dated January 13, 2016, a Supplemental Acknowledgement dated May 17, 2021, Supplemental Acknowledgement B dated May 17, 2021, an Amendment Agreement effective March 15, 2022, and a Supplemental Acknowledgement dated March 23, 2022 (incorporated by reference to Exhibit 10.15 to the Company's Registration Statement on Form S-1, filed with the SEC on November 14, 2022).

10.26 Second Amendment Agreement effective as of December 8, 2023, to that certain Investment Management Agreement dated November 6, 2015, by and among Arena Investors, LP, Houston Specialty Insurance Company, Imperium Insurance Company, and Great Midwest Insurance Company.

Number Exhibit Description

10.25 Second Amendment Agreement effective as of December 8, 2023, to that certain Investment Management Agreement dated November 6, 2015, by and among Arena Investors, LP, Houston Specialty Insurance Company, Imperium Insurance Company, and Great Midwest Insurance Company (incorporated by reference to Exhibit 10.26 to the Company’s Annual Report on Form 10-K, filed with the SEC on April 1, 2024).

10.26 Credit Agreement, dated March 29, 2023, by and among Skyward Specialty Insurance Group, Inc., the lenders from time to time party thereto and Truist Bank, as administrative agent (incorporated by reference to Exhibit 10.1 to the Company's Current Report on Form 8-K filed with the Commission on April 3, 2023).

10.28 First Amendment dated as of February 26, 2024, to that certain Credit Agreement, dated March 29, 2023, by and among Skyward Specialty Inc., the lenders from time to time party thereto and Truist Bank, as administrative agent.

10.27 First Amendment dated as of February 26, 2024, to that certain Credit Agreement, dated March 29, 2023, by and among Skyward Specialty Inc., the lenders from time to time party thereto and Truist Bank, as administrative agent (incorporated by reference to Exhibit 10.28 to the Company’s Annual Report on Form 10-K, filed with the SEC on April 1, 2024).

10.28 Guaranty Agreement, dated March 29, 2023, by and among Skyward Service Company, Skyward Underwriters Agency, Inc., the loan parties identified on the signature pages thereto and Truist Bank.

(incorporated by reference to Exhibit 10.2 to the Company's Current Report on Form 8-K filed with the Commission on April 3, 2023).

21.1 List of Subsidiaries of the Company (incorporated by reference to Exhibit 21.1 to the Company's Registration Statement on Form S-1, filed with the SEC on November 14, 2022).

10.29 Advances and Security Agreement, dated August 1, 2024, by and between Houston Specialty Insurance Company, a wholly owned insurance company subsidiary of the Company and the Federal Home Loan Bank of Dallas (incorporated by reference to Exhibit 10.1 to the Company’s Current Report on Form 8-K filed with the Commission on September 6, 2024).

10.30+* Form of Severance Agreement between the Company and executive officers (other than the CEO)

10.31+* Amendment No.

2 to Employment Agreement between the Registrant and Andrew Robinson dated March 1, 2025 .

19* Skyward Specialty Insurance Securities Trading Policy

21.1* List of Subsidiaries of the Company

23.1 Consent of Ernst & Young LLP, Independent Registered Public Accounting Firm.

3 unchanged sentences

Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

97 Policy for Recovery of Erroneously Awarded Incentive Compensation (“Clawback Policy”) adopted November 9, 2023.

97 Policy for Recovery of Erroneously Awarded Incentive Compensation (“Clawback Policy”) (incorporated by reference to Exhibit 97 to the Company’s Annual Report on Form 10-K, filed with the SEC on April 1, 2024).

101.INS Inline XBRL Instance Document – the instance document does not appear in the Interactive Data File because XBRL tags are embedded within the Inline XBRL document.

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____________________

* To be filed by amendment.

* Filed herewith.

+ Management contract or compensatory plan or arrangement.

† Portions of this exhibit have been omitted for confidentiality purposes.

SKYWARD SPECIALTY INSURANCE GROUP, INC.

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AND SUBSIDIARIES

SCHEDULE II — CONDENSED FINANCIAL INFORMATION OF REGISTRANT

SCHEDULE II — FINANCIAL INFORMATION OF REGISTRANT

BALANCE SHEETS (PARENT COMPANY)

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Total liabilities and stockholders’ equity $ 916,645 $ 791,090

See accompanying notes to financial statements.

SKYWARD SPECIALTY INSURANCE GROUP, INC.

AND SUBSIDIARIES

SCHEDULE II — CONDENSED STATEMENTS OF OPERATIONS

SCHEDULE II — STATEMENTS OF OPERATIONS

(PARENT COMPANY)

2 unchanged sentences

Net investment income $ 3,212 $ 3,822 $ 2,567

Net investment losses ( 963 ) ( 6 )

Other losses ( 27 ) —

Net investment (losses) gains 963 ( 963 ) ( 6 )

Other loss ( 2 ) ( 27 ) —

Total revenues 4,173 2,832 2,561

Operating expenses 10,632 — —

Interest expense 8,140 9,815 6,407

3 unchanged sentences

Loss before income tax expense ( 25,165 ) ( 7,747 ) ( 3,927 )

Income tax expense (benefit) 6,808 ( 1,209 )

Net loss before equity in earnings of subsidiaries ( 14,555 ) ( 2,718 )

Income tax expense 33,578 6,808 ( 1,209 )

Loss before equity in earnings of subsidiaries ( 58,743 ) ( 14,555 ) ( 2,718 )

Equity in undistributed earnings of subsidiaries 177,571 100,539 42,114

Net income $ 118,828 $ 85,984 $ 39,396

See accompanying notes to financial statements.

SKYWARD SPECIALTY INSURANCE GROUP, INC.

AND SUBSIDIARIES

SCHEDULE II — CONDENSED STATEMENTS OF CASH FLOWS (PARENT COMPANY)

SCHEDULE II — STATEMENTS OF CASH FLOWS (PARENT COMPANY)

Years Ended December 31,

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Cash flows from financing activities:

Employee share purchases 1,350 2,180

Draw on revolving line of credit 50,000 —

Repayment of term loan ( 50,000 ) —

Repayment of stock notes receivable 5,561 1,350 2,180

Proceeds from long term borrowings 107,000 50,000 —

Payments on long term borrowings and trust preferred ( 115,000 ) ( 50,000 ) —

Proceeds from equity offerings — 128,887 —

1 unchanged sentence

Net cash provided by financing activities ( 2,439 ) 130,947 2,180

Net (decrease) increase in cash and cash equivalents and restricted cash ( 5,885 ) 2,904

Net increase (decrease) in cash and cash equivalents and restricted cash ( 81 ) ( 5,885 ) 2,904

Cash and cash equivalents and restricted cash at beginning of year 3,024 8,909 6,005

3 unchanged sentences

Cash paid for federal income taxes 36,980 15,800 —

See accompanying notes to financial statements.

SKYWARD SPECIALTY INSURANCE GROUP, INC.

AND SUBSIDIARIES

SCHEDULE II — FINANCIAL INFORMATION OF REGISTRANT

Notes to Financial Statements

On September 30, 2024, Skyward Specialty entered into an Intercompany Loan Promissory Note (“the Promissory Note”) with Houston Specialty Insurance Company (“HSIC”).

Under the terms of the Promissory Note, Skyward Specialty borrowed $ 57.0 million from HSIC.

Under the terms of the Promissory Note, interest is payable monthly at a fixed annual interest rate of 4.00 %, with the principal due at the maturity date.

There are no prepayment penalties and no collateral was given as security for the payment of the Promissory Note.

During the year ended December 31, 2024, Skyward Specialty provided funds for a new subsidiary, Skyward Specialty No.

1 Limited Company, a UK company authorized as a Lloyd’s corporate member to invest in Lloyd’s syndicates.

Financial Instruments Disclosed, But Not Carried, At Fair Value

Notes Payable

Included in notes payable is the Promissory Note described above between Skyward Specialty and HSIC.

Skyward Specialty determined its fair value using the income approach utilizing inputs that are observable.

The Promissory Note has been placed in Level 2 of the fair value hierarchy.

As of December 31, 2024, the carrying value and fair value of the Promissory Note were $ 57.0 million and $ 56.3 million, respectively.

SKYWARD SPECIALTY INSURANCE GROUP, INC.

AND SUBSIDIARIES

SCHEDULE IV — REINSURANCE

Years Ended December 31,

2024 2023 2022

($ in thousands) Accident &

2 unchanged sentences

Health Property &

Casualty Accident &

Health Property &

Gross amount $ 173,073 $ 1,285,564 $ 151,702 $ 1,089,478 $ 130,377 $ 881,862

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Balance at December 31, 2023 586 2,295 964

Charged to costs and expenses — 13,585 3,235

Amounts written off — ( 13,585 ) ( 1,895 )

Recoveries of amounts previously written off — — 128

Balance at December 31, 2024 $ 586 $ 2,295 $ 2,432

SKYWARD SPECIALTY INSURANCE GROUP, INC.

13 unchanged sentences

Losses and loss adjustment expenses (prior years) (1)(2)

25,728 — 14,385

Amortization of policy acquisition costs (1)

10 unchanged sentences

Skyward Specialty Insurance Group, Inc.

April 1, 2024

March 3, 2025

/s/ Andrew Robinson

3 unchanged sentences

Signature Title Date

/s/ Andrew Robinson Chairman and Chief Executive Officer April 1, 2024

/s/ Andrew Robinson Chairman and Chief Executive Officer March 3, 2025

Andrew Robinson (Principal Executive Officer)

/s/ Mark Haushill Chief Financial Officer April 1, 2024

/s/ Mark Haushill Chief Financial Officer March 3, 2025

Mark Haushill (Principal Financial and Accounting Officer)

/s/ Gena Ashe Director April 1, 2024

/s/ Robert Creager Director April 1, 2024

/s/ Gena Ashe Director March 3, 2025

/s/ Robert Creager Director March 3, 2025

Robert Creager

/s/ Marcia Dall Director April 1, 2024

/s/ James Hays Director April 1, 2024

/s/ Marcia Dall Director March 3, 2025

/s/ James Hays Director March 3, 2025

/s/ Anthony J.

Kuczinski Director April 1, 2024

/s/ Michael Morrissey Director April 1, 2024

Kuczinski Director March 3, 2025

/s/ Michael Morrissey Director March 3, 2025

Michael Morrissey

/s/ Katharine Terry Director April 1, 2024

/s/ Katharine Terry Director March 3, 2025

Katharine Terry

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-K

Item 9A. Controls and Procedures