What changed in this filing

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Item 1. Financial Statements

2025-05-07 compared with 2024-11-07 · 239 added, 274 removed, 525 unchanged (49% of the section changed)

2 unchanged sentences

AND SUBSIDIARIES

CONDENSED CONSOLIDATED BALANCE SHEETS

September 30, 2024 December 31, 2023

CONDENSED CONSOLIDATED BALANCE SHEETS (UNAUDITED)

March 31, 2025 December 31, 2024

($ in thousands, except share and per share amounts) (Unaudited)

32 unchanged sentences

Additional paid-in capital 721,186 718,598

Stock notes receivable — ( 5,562 )

Accumulated other comprehensive loss ( 10,047 ) ( 22,120 )

Retained earnings (accumulated deficit) 82,714 ( 21,708 )

Retained earnings 139,178 97,120

Total stockholders’ equity 850,721 793,999

5 unchanged sentences

AND COMPREHENSIVE INCOME (UNAUDITED)

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

Three months ended March 31,

($ in thousands, except share and per share amounts) 2025 2024

2 unchanged sentences

Net investment income 19,331 18,297

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

Other loss ( 195 ) — ( 202 ) —

Net investment gains 6,841 8,303

Other income 13 —

Total revenues 328,527 264,968

8 unchanged sentences

Net income $ 42,058 $ 36,784

Net income attributable to participating securities — — — 1,492

Net income attributable to common stockholders $ 36,668 $ 21,711 $ 104,422 $ 55,227

Comprehensive income

Net income $ 42,058 $ 36,784

Other comprehensive income:

Other comprehensive income (loss):

Unrealized gains and losses on investments:

13 unchanged sentences

CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY (UNAUDITED)

Three months ended September 30,

($ in thousands, except share amounts) 2024 2023

Common shares:

Balance at beginning of period 40,096,132 37,674,063

Issuance of shares 3,799 3,458

Balance at September 30 40,099,931 37,677,521

Common stock:

Balance at beginning of period $ 401 $ 377

Balance at September 30 $ 401 $ 377

Additional paid-in capital:

Balance at beginning of period $ 713,542 $ 642,988

Issuance of common stock 2,553 2,304

Balance at September 30 $ 716,095 $ 645,292

Stock notes receivable:

Balance at beginning of period $ ( 5,233 ) $ ( 6,718 )

Employee equity transactions 5,233 1,093

Balance at September 30 $ — $ ( 5,625 )

Accumulated other comprehensive loss:

Balance at beginning of period $ ( 31,136 ) $ ( 41,284 )

Other comprehensive gain (loss), net of tax 29,433 ( 12,389 )

Balance at September 30 $ ( 1,703 ) $ ( 53,673 )

Retained earnings (accumulated deficit):

Balance at beginning of period $ 46,046 $ ( 72,685 )

Net income 36,668 21,711

Balance at September 30 $ 82,714 $ ( 50,974 )

Total stockholders’ equity $ 797,507 $ 535,397

The accompanying notes are an integral part of the consolidated financial statements.

SKYWARD SPECIALTY INSURANCE GROUP, INC.

AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY (UNAUDITED)

Nine months ended September 30,

Three months ended March 31,

($ in thousands, except share amounts) 2025 2024

Preferred shares:

Balance at beginning of year — 1,969,660

Preferred stock conversion to common shares — ( 1,969,660 )

Balance at September 30 — —

Common shares:

1 unchanged sentence

Issuance of shares 274,971 131,271

Preferred stock conversion to common shares — 16,305,113

Balance at September 30 40,099,931 37,677,521

Preferred stock:

Balance at beginning of year $ — $ 20

Preferred stock conversion to common shares — ( 20 )

Balance at September 30 $ — $ —

Balance at March 31 40,402,879 39,995,027

Common stock:

1 unchanged sentence

Issuance of common stock 3 1

Preferred stock conversion to common shares — 161

Proceeds from equity offerings, net — 48

Balance at September 30 $ 401 $ 377

Treasury stock:

Balance at beginning of year $ — $ ( 2 )

Preferred stock conversion to common shares — 2

Balance at September 30 $ — $ —

Balance at March 31 $ 404 $ 400

Additional paid-in capital:

1 unchanged sentence

Issuance of common stock 2,588 454

Preferred stock conversion to common shares — ( 143 )

Proceeds from equity offerings, net — 61,967

Balance at September 30 $ 716,095 $ 645,292

Balance at March 31 $ 721,186 $ 711,309

Stock notes receivable:

1 unchanged sentence

Employee equity transactions — 328

Balance at September 30 $ — $ ( 5,625 )

Balance at March 31 $ — $ ( 5,234 )

Accumulated other comprehensive loss:

1 unchanged sentence

Other comprehensive income (loss), net of tax 12,073 ( 6,326 )

Balance at September 30 $ ( 1,703 ) $ ( 53,673 )

Balance at March 31 $ ( 10,047 ) $ ( 29,279 )

Retained earnings (accumulated deficit):

Balance at beginning of year $ 97,120 $ ( 21,708 )

Cumulative effect on adoption of ASU No.

2016-13 — ( 2,276 )

Net income 42,058 36,784

Balance at September 30 $ 82,714 $ ( 50,974 )

Balance at March 31 $ 139,178 $ 15,076

Total stockholders’ equity $ 850,721 $ 692,272

3 unchanged sentences

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)

Nine months ended September 30,

Three months ended March 31,

($ in thousands) 2025 2024

5 unchanged sentences

Purchase of fixed maturity securities, available-for-sale ( 126,827 ) ( 97,426 )

Purchase of illiquid investments — ( 1,156 )

Purchase of equity securities ( 8,422 ) ( 2,035 )

2 unchanged sentences

Purchase of property and equipment ( 202 ) ( 260 )

Sales and maturities of investment securities 142,184 110,695

Distributions from equity method investments — 1,704

Proceeds from equity method and other long-term investments 10,054 —

Proceeds from the sales of fixed maturity securities, available-for-sale 8,195 12,093

Maturities, calls, transfers and paydowns of fixed maturity securities, available-for-sale 29,537 30,138

Maturities, calls and paydowns of fixed maturity securities held-to-maturity 2,129 784

Proceeds from the sales of equity securities 8,748 10,458

Sales of and distributions from equity method and other long-term investments 4,396 4,871

Change in short-term investments ( 33,162 ) ( 27,706 )

1 unchanged sentence

Cash provided by deposit accounting 1,200 2,417

Other, net — ( 1,421 )

Net cash used in investment activities ( 100,779 ) ( 69,866 )

Cash flows from financing activities:

Employee share purchases — 1,287

Repayment of stock notes receivable — 328

1 unchanged sentence

Payments on long term borrowings and trust preferred — ( 59,794 )

Proceeds from initial public offering — 66,262

Net cash (used in) provided by financing activities — ( 9,466 )

6 unchanged sentences

Cash paid for interest $ 1,805 $ 2,656

Cash paid for federal income taxes $ 22,480 $ 10,000

(1) The sum of cash and cash equivalents and restricted cash from the consolidated balance sheets

16 unchanged sentences

Actual results could differ materially from these estimates.

The following tables set forth the amortized cost and the fair value by investment category at September 30, 2024 and December 31, 2023:

($ in thousands) Gross

The following tables set forth the amortized cost and the fair value by investment category at March 31, 2025 and December 31, 2024:

($ in thousands) Amortized

Losses Allowance for Credit Losses Fair Value

September 30, 2024

March 31, 2025

Fixed maturity securities, available-for-sale:

13 unchanged sentences

Investments (continued)

($ in thousands) Gross

($ in thousands) Amortized

Loss Allowance for Credit Losses Fair Value

11 unchanged sentences

Total fixed maturity securities, held-to-maturity $ 39,396 $ — $ ( 436 ) $ ( 243 ) $ 38,717

The following table sets forth the amortized cost and fair value of available-for-sale fixed maturity securities by contractual maturity at September 30, 2024:

The following table sets forth the amortized cost and fair value of available-for-sale fixed maturity securities by contractual maturity at March 31, 2025:

($ in thousands) Amortized

9 unchanged sentences

Also, changing interest rates, tax considerations or other factors may result in portfolio sales prior to maturity.

The Company’s fixed maturity securities, held-to-maturity, at September 30, 2024 consisted entirely of asset backed securities that were not due at a single maturity date.

At September 30, 2024, the Company had U.S.

The Company’s fixed maturity securities, held-to-maturity, at March 31, 2025 consisted entirely of asset backed securities that were not due at a single maturity date.

At March 31, 2025, the Company had U.S.

government agencies mortgage-backed fixed maturity securities, with a carrying value of approximately $ 68.1 million pledged as collateral for a loan (the “FHLB Loan”) from the Federal Home Loan Bank of Dallas (“FHLB”) pursuant to an Advances and Security Agreement between the Company and FHLB (the “Advances and Security Agreement”).

In accordance with the terms of the FHLB Loans, the Company retains all rights regarding these pledged securities.

At September 30, 2024, the Company had assets with fair values of approximately $ 27.7 million pledged as collateral for the performance obligations under reinsurance agreements.

In accordance with the terms of the trust agreements, the Company retains all rights regarding these securities, of which $ 24.9 million are residential mortgage-backed securities, $ 2.2 million of short-term investments and $ 0.6 million of cash and cash equivalents and other assets.

In accordance with the terms of the FHLB Loan, the Company retains all rights regarding these pledged securities.

At March 31, 2025, the Company had assets with fair values of approximately $ 32.7 million pledged as collateral for the performance obligations under reinsurance agreements.

In accordance with the terms of the trust agreements, the Company retains all rights regarding these securities, of which $ 28.2 million are residential mortgage-backed securities, $ 2.3 million of cash and cash equivalents and other assets and $ 2.2 million of short-term investments.

SKYWARD SPECIALTY INSURANCE GROUP, INC.

2 unchanged sentences

Investments (continued)

The following tables set forth the gross unrealized losses and the corresponding fair values of investments, aggregated by length of time that individual securities had been in a continuous unrealized loss position as of September 30, 2024 and December 31, 2023:

Less than 12 Months 12 Months or More Total

($ in thousands) Fair Value Gross Unrealized Losses Fair Value Gross Unrealized Losses Fair Value Gross Unrealized Losses

September 30, 2024

March 31, 2025

Fixed maturity securities, available-for-sale:

34 unchanged sentences

Among the factors that management considers for fixed maturity securities are the financial condition of the issuer including receipt of scheduled principal and interest cash flows, and intent to sell, including if it is more likely than not that the Company will be required to sell the investments before recovery.

As of September 30, 2024, the Company had 505 lots of fixed maturity securities in an unrealized loss position.

As of March 31, 2025, the Company had 631 lots of fixed maturity securities in an unrealized loss position.

The Company does not have an intent to sell these securities and it is not more likely than not that the Company will be required to sell these securities before maturity or recovery of its cost basis.

The Company determined that no credit impairment existed in the gross unrealized holding losses because the credit ratings of these securities were consistent with the credit ratings when purchased and/or at origination, there were no adverse changes in financial condition of the issuer and no adverse credit quality events in underlying assets.

The Company attributed the unrealized losses to the changes in interest rates.

The Company reviewed its investments at March 31, 2025 and determined that no credit impairment existed in the gross unrealized holding losses, due to the reasons discussed below:

government securities and municipal securities :

These securities were issued by the U.S.

Treasury Department, Federal government-sponsored entities or by state and local governments.

The decline in fair values was attributable to changes in interest rates and not credit quality.

The Company does not intend to sell these securities and it is likely that it will not do so before their anticipated recovery.

Therefore, the Company does not consider these impaired securities.

• Corporate securities and miscellaneous :

Corporations in various industries issued these securities.

The decline in fair values was attributable to changes in interest rates and not credit quality.

The Company reviewed the issuers of these securities to identify any significant adverse change in financial condition, a change in the quality of credit enhancement (if any), a ratings decrease, or negative outlook assignment from a major credit rating agency, and any failure to make interest or principal payments.

After these reviews, the Company determined that the decline in fair values was attributable to changes in interest rates and not credit quality.

The Company does not intend to sell these securities and it is likely that it will not do so before their anticipated recovery.

Therefore, the Company does not consider these impaired securities.

SKYWARD SPECIALTY INSURANCE GROUP, INC.

2 unchanged sentences

Investments (continued)

The following table sets forth the components of 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,

• Residential mortgage-backed securities, commercial mortgage-backed securities, and other asset-backed securities :

The decline in fair values was attributable to changes in interest rates and not credit quality.

The Company does not intend to sell these securities and it is likely that it will not do so before their anticipated recovery.

Therefore, the Company does not consider these impaired securities.

The following table sets forth the components of net investment gains for the three months ended March 31, 2025 and 2024:

Three months ended March 31,

($ in thousands) 2025 2024

2 unchanged sentences

Equity securities 1,745 1,081

Other 62 — 80 1

Total 2,202 1,598

7 unchanged sentences

Mortgage loans ( 66 ) 971

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

The following table sets forth the proceeds from sales of available-for-sale fixed maturity securities and equity securities for the nine months ended September 30, 2024 and 2023:

Nine months ended September 30,

Other 4,477 —

Net investment gains

$ 6,841 $ 8,303

The following table sets forth the proceeds from sales of available-for-sale fixed maturity securities and equity securities for the three months ended March 31, 2025 and 2024:

Three months ended March 31,

($ in thousands) 2025 2024

1 unchanged sentence

Equity securities 8,748 10,458

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

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

SKYWARD SPECIALTY INSURANCE GROUP, INC.

AND SUBSIDIARIES

NOTES TO (UNAUDITED) CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

Investments (continued)

The following table sets forth the components of net investment income for the three months ended March 31, 2025 and 2024:

Three months ended March 31,

($ in thousands) 2025 2024

10 unchanged sentences

Net investment income $ 19,331 $ 18,297

SKYWARD SPECIALTY INSURANCE GROUP, INC.

AND SUBSIDIARIES

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

Investments (continued)

The following table sets forth the change in net unrealized gains (losses) on the Company’s investment portfolio, net of deferred income taxes, included in other comprehensive loss for the three and nine months ended September 30, 2024 and 2023:

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

Three months ended March 31,

($ in thousands) 2025 2024

2 unchanged sentences

Total $ 12,073 $ ( 6,326 )

SKYWARD SPECIALTY INSURANCE GROUP, INC.

AND SUBSIDIARIES

NOTES TO (UNAUDITED) CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

Fair Value Measurements

21 unchanged sentences

These represent Level 2 fair value inputs.

Fixed maturity securities, available for sale and equity securities classified as Level 3

The Company has corporate securities and miscellaneous, other asset-backed securities that are managed by an independent asset manager and priced by an independent pricing provider.

The provider estimates the value of the securities using the discount net present value of cash flows method using an unobservable discount rate.

The discount rate spread represents the risk associated with future cash flows, including inflation, opportunity cost and the time value of money.

This rate represents Level 3 fair value inputs.

SKYWARD SPECIALTY INSURANCE GROUP, INC.

2 unchanged sentences

Fair Value Measurements (continued)

Fixed maturity securities, available for sale and equity securities classified as Level 3

The Company has corporate securities and miscellaneous, other asset-backed securities and preferred stock that are managed by an independent asset manager that uses an independent pricing model to estimate the value of the securities it manages.

These represent Level 3 fair value inputs.

The following table sets forth the range of the discount rate as of March 31, 2025 and December 31, 2024:

March 31, 2025 December 31, 2024

High 7.98 % 8.00 %

Low 5.43 % 5.70 %

Weighted average 6.19 % 6.60 %

Mortgage loans

3 unchanged sentences

The spread represents the incremental cost of capital based on the borrower’s ability to make future payments and the value of the collateral relative to the loan balance and is subject to judgement and uncertainty.

The following table sets forth the range and weighted average, weighted by relative fair value, of the spread as of September 30, 2024 and December 31, 2023.

September 30, 2024 December 31, 2023

The following table sets forth the range and weighted average, weighted by relative fair value, of the spread as of March 31, 2025 and December 31, 2024:

March 31, 2025 December 31, 2024

High 7.93 % 10.00 %

1 unchanged sentence

Weighted average 7.69 % 7.93 %

The following tables set forth the Company’s investments within the fair value hierarchy at September 30, 2024 and December 31, 2023:

September 30, 2024

Investment in RedBird Capital Partners

Included in other long-term investments is an investment in a limited partnership with RedBird Capital Partners, which invests in Bishop Street Underwriters, LLC (“Bishop Street”), a managing general agent (MGA).

The investment had a fair value of $ 32.6 million at March 31, 2025, which was determined using the net asset value.

The Company employs procedures to assess the reasonableness of the fair value of the investment including obtaining and reviewing the audited financial statements.

The unfunded commitment related to the investment was $ 24.4 million at March 31, 2025.

The Company may sell its interest in the investment with the appropriate prior written notice and approval by the general partner.

In accordance with Accounting Standard Codification 820-10, this investment is measured at fair value using the net asset value per share practical expedient and has not been classified in the fair value hierarchy.

SKYWARD SPECIALTY INSURANCE GROUP, INC.

AND SUBSIDIARIES

NOTES TO (UNAUDITED) CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

Fair Value Measurements (continued)

The following tables set forth the Company’s investments within the fair value hierarchy at March 31, 2025 and December 31, 2024:

March 31, 2025

($ in thousands) Level 1 Level 2 Level 3 Total

44 unchanged sentences

Total $ 406,505 $ 1,188,976 $ 143,127 $ 1,738,608

The following tables set forth the changes in the fair value of instruments carried at fair value with a Level 3 measurement during the nine months ended September 30, 2024 and 2023:

SKYWARD SPECIALTY INSURANCE GROUP, INC.

AND SUBSIDIARIES

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

Fair Value Measurements (continued)

($ in thousands) Fixed Maturity Securities, Available-For-Sale Equity Securities Mortgage Loans

The following tables set forth the changes in the fair value of instruments carried at fair value with a Level 3 measurement during the three months ended March 31, 2025 and 2024:

($ in thousands) Fixed Maturity Securities, Available-For-Sale Mortgage Loans

Balance at December 31, 2024 $ 77,920 $ 26,490

Total gains for the period recognized in net investment gains (losses) — — 971

Issuances — — 187

Settlements — — ( 6,919 )

Balance at March 31, 2024 $ — $ — $ 44,309

Total gains for the period recognized in net investment gains (losses) attributable to the change in unrealized gains or losses relating to assets held as of period end $ — $ — $ 952

Total losses for the period recognized in net investment gains (losses) — — ( 1,030 )

Total losses for the period recognized in net investment gains ( 110 ) ( 66 )

Issuances — 5

Settlements — ( 10,417 )

Balance at June 30, 2024 $ — $ — $ 43,670

Total losses for the period recognized in net investment gains (losses) attributable to the change in unrealized gains or losses relating to assets held as of period end $ — $ — $ ( 1,031 )

Total (losses) gains for the period recognized in net investment gains (losses) ( 118 ) 246 866

Total unrealized gains for the period recognized in accumulated comprehensive income (loss) 1,592 — —

Transfers into Level 3 23,533 — —

Purchases 5,164 —

Sales/Disposals ( 199 ) —

Total unrealized gains for the period recognized in accumulated comprehensive income (loss) 682 —

Balance at March 31, 2025 $ 83,457 $ 16,012

Total losses for the period recognized in net investment gains attributable to the change in unrealized gains or losses relating to assets held as of period end $ — $ ( 84 )

($ in thousands) Mortgage Loans

Balance at December 31, 2023 $ 50,070

Total gains for the period recognized in net investment gains 971

Issuances 187

Settlements ( 6,919 )

Balance at September 30, 2024 $ 48,674 $ 5,817 $ 36,267

Total gains for the period recognized in net investment gains (losses) attributable to the change in unrealized gains or losses relating to assets held as of period end $ — $ 246 $ 829

Balance at March 31, 2024 $ 44,309

Total gains for the period recognized in net investment gains attributable to the change in unrealized gains or losses relating to assets held as of period end $ 952

SKYWARD SPECIALTY INSURANCE GROUP, INC.

2 unchanged sentences

Fair Value Measurements (continued)

($ in thousands) Mortgage Loans

Balance at December 31, 2022 $ 52,842

Total gains for the period recognized in net investment gains (losses) 22

Issuances 892

Settlements ( 11,421 )

Balance at March 31, 2023 $ 42,335

Total losses for the period recognized in net investment gains (losses) attributable to the change in unrealized gains or losses relating to assets held as of period end $ ( 14 )

Total losses for the period recognized in net investment gains (losses) ( 21 )

Settlements ( 9,582 )

Balance at June 30, 2023 $ 32,762

Total gains for the period recognized in net investment gains (losses) attributable to the change in unrealized gains or losses relating to assets held as of period end $ 3

Total gains for the period recognized in net investment gains (losses) 26

Issuances 26,530

Settlements —

Balance at September 30, 2023 $ 59,318

Total losses for the period recognized in net investment gains (losses) attributable to the change in unrealized gains or losses relating to assets held as of period end $ 26

The transfers into Level 3 during the three and nine months ended September 30, 2024 were the result of securities that began receiving valuations from asset managers that utilized unobservable inputs at the end of the period.

The Company measures certain assets, including investments in indirect loans and loan collateral, equity method investments and other invested assets, at fair value on a nonrecurring basis only when they are deemed to be impaired.

7 unchanged sentences

Fixed maturity securities, held-to-maturity consists of senior and junior notes with target rates of return.

As of September 30, 2024, the Company determined the fair value of these instruments using the income approach utilizing inputs that are unobservable (Level 3).

As of March 31, 2025, the Company determined the fair value of these instruments using the income approach utilizing inputs that are unobservable (Level 3).

Notes payable:

1 unchanged sentence

The Company determines fair value using the income approach utilizing inputs that are observable (Level 2).

The Company estimates the fair value of the FHLB Loan by discounting cash flows using a borrowing rate currently available to the Company for loans with similar terms (Level 3).

Subordinated debt:

Subordinated debt consists of two debt instruments, the Junior Subordinated Interest Debentures, due September 15, 2036, and Unsecured Subordinated Notes, due May 24, 2039.

The carrying value of the Junior Subordinated Interest Debentures approximates the estimated fair value as the instrument accrues interest at current market rates plus a spread.

Unsecured Subordinated Notes have a fixed interest rate.

Subordinated debt consists of the Unsecured Subordinated Notes, due May 24, 2039 and have a fixed interest rate.

The Company determines the fair value of these instruments using the income approach utilizing inputs that are observable (Level 2).

SKYWARD SPECIALTY INSURANCE GROUP, INC.

AND SUBSIDIARIES

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

Fair Value Measurements (continued)

The following table sets forth the Company’s carrying and fair values of notes payable and subordinated debt as of September 30, 2024 and December 31, 2023:

September 30, 2024 December 31, 2023

The following table sets forth the Company’s carrying and fair values of notes payable and subordinated debt as of March 31, 2025 and December 31, 2024:

March 31, 2025 December 31, 2024

($ in thousands) Carrying

5 unchanged sentences

Subordinated debt

Junior subordinated interest debentures $ — $ — $ 59,186 $ 59,794

Unsecured subordinated notes $ 19,545 $ 20,370 $ 19,536 $ 20,541

3 unchanged sentences

The Company has invested in Separately Managed Accounts (“SMA1” and “SMA2”).

As of September 30, 2024 and December 31, 2023, the Company held direct investments in mortgage loans from various creditors through SMA1 and SMA2.

As of March 31, 2025 and December 31, 2024, the Company held direct investments in mortgage loans from various creditors through SMA1 and SMA2.

The Company’s mortgage loan portfolios are primarily senior loans on real estate across the U.S.

The loans earn interest at a fixed spread above a prime rate, mature in approximately 2 to 3 years from loan origination and the principal amounts of the loans range between 64 % to 80 % of the property’s appraised value at the time the loans were made.

The carrying value of the Company’s mortgage loans as of September 30, 2024 and December 31, 2023 were as follows:

($ in thousands) September 30, 2024 December 31, 2023

The loans earn interest at a fixed spread above a prime rate, mature in approximately 2 years to 4 years from loan origination and the principal amounts of the loans range between 64 % to 65 % of the property’s appraised value at the time the loans were made.

SKYWARD SPECIALTY INSURANCE GROUP, INC.

AND SUBSIDIARIES

NOTES TO (UNAUDITED) CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

Mortgage Loans (continued)

The following table sets forth the carrying value of the Company’s mortgage loans as of March 31, 2025 and December 31, 2024:

($ in thousands) March 31, 2025 December 31, 2024

Commercial $ 8,016 $ 8,474

1 unchanged sentence

Hospitality 7,996 7,984

Industrial — 6,785

$ 16,012 $ 26,490

The following table sets forth the Company’s gross investment income for mortgage loans for the three and nine months ended September 30, 2024 and 2023:

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

The following table sets forth the Company’s gross investment income for mortgage loans for the three months ended March 31, 2025 and 2024:

Three months ended March 31,

($ in thousands) 2025 2024

2 unchanged sentences

Hospitality 249 471

Office — — — 203

Multi-family — 93 — 285

$ 661 $ 1,419

SKYWARD SPECIALTY INSURANCE GROUP, INC.

AND SUBSIDIARIES

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

Mortgage Loans (continued)

The uncollectible amounts on loans, on an individual loan basis, are determined based upon consultations and advice from the Company’s specialized investment manager and consideration of any adverse situations that could affect the borrower’s ability to repay, the estimated value of underlying collateral, and other relevant factors.

The Company writes off the uncollectible amount in the period it was determined to be uncollectible.

There was no write-off for uncollectible amounts during the three and nine months ended September 30, 2024 and 2023, respectively.

As of September 30, 2024 no mortgage loans were in the process of foreclosure and there were no mortgage loans that were not producing income for the previous 12 months.

As of December 31, 2023, approximately $ 7.1 million of mortgage loans were in the process of foreclosure.

There was no write-off for uncollectible amounts during the three months ended March 31, 2025 and 2024, respectively.

As of March 31, 2025 $ 4.5 million of mortgage loans were in the process of foreclosure and there were no mortgage loans that were not producing income for the previous 12 months.

As of December 31, 2024, no mortgage loans were in the process of foreclosure and there were no mortgage loans that were not producing income for the previous 12 months.

Equity Method Investments and Other

The following table sets forth the carrying value and ownership percentage of the Company’s equity method investments as of September 30, 2024 and December 31, 2023:

($ in thousands) September 30, 2024 December 31, 2023

The following table sets forth the carrying value and ownership percentage of the Company’s equity method investments as of March 31, 2025 and December 31, 2024:

($ in thousands) March 31, 2025 December 31, 2024

Carrying Value Ownership % Carrying Value Ownership %

1 unchanged sentence

JVM Funds LLC units 16,692 10.1 % 17,229 10.1 %

Arena SOP LP units 2,530 12.6 % 2,463 12.3 %

RISCOM 4,689 20.0 % 4,121 20.0 %

Hudson Ventures Fund 2 LP units 4,897 2.5 % 4,967 2.5 %

Dowling Capital Partners LP units 652 5.0 % 1,708 6.2 %

RISCOM 2,886 20.0 % 5,013 20.0 %

Brewer Lane Ventures Fund II LP units 1,410 2.4 % 1,040 2.4 %

Dowling Capital Partners LP units 678 5.0 % 666 5.0 %

Arena SOP LP units 218 11.1 % 1,474 10.9 %

$ 59,145 $ 65,325

The following table sets forth the components of net investment income (loss) from equity method investments for the three and nine months ended September 30, 2024 and 2023:

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

SKYWARD SPECIALTY INSURANCE GROUP, INC.

AND SUBSIDIARIES

NOTES TO (UNAUDITED) CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

Equity Method Investments and Other (continued)

The following table sets forth the components of net investment (loss) income from equity method investments for the three months ended March 31, 2025 and 2024:

Three months ended March 31,

($ in thousands) 2025 2024

Dowling Capital Partners LP units $ 67 $ 172 $ 1,449 $ 777

RISCOM 493 468 1,168 773

Brewer Lane Ventures Fund II LP $ 170 $ ( 32 )

Dowling Capital Partners LP units 13 1,342

Hudson Ventures Fund II LP units ( 25 ) ( 52 )

RISCOM ( 128 ) 286

JVM Funds LLC ( 211 ) ( 484 )

Universa Black Swan LP units — ( 84 ) — ( 988 )

Arena SOP LP units ( 612 ) ( 1,160 ) 67 ( 3,938 )

Arena Special Opportunities Fund, LP units ( 551 ) ( 251 )

Arena SOP LP units ( 1,256 ) 289

$ ( 1,988 ) $ 1,098

The following table sets forth the unfunded commitment of equity method investments as of September 30, 2024 and December 31, 2023:

($ in thousands) September 30, 2024 December 31, 2023

The following table sets forth the unfunded commitment of equity method investments as of March 31, 2025 and December 31, 2024:

($ in thousands) March 31, 2025 December 31, 2024

Brewer Lane Ventures Fund II LP units $ 3,770 $ 4,077

Hudson Ventures Fund 2 LP units 447 848

Dowling Capital Partners LP units 386 386

Hudson Ventures Fund 2 LP units 266 397

$ 4,422 $ 4,860

SKYWARD SPECIALTY INSURANCE GROUP, INC.

AND SUBSIDIARIES

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

Equity Method Investments and Other (continued)

The difference between the cost of an investment and its proportionate share of the underlying equity in net assets is allocated to the various assets and liabilities of the equity method investment.

2 unchanged sentences

The Company amortizes this difference over a 15 -year useful life.

The following table sets forth the Company’s recorded investment in RISCOM compared to its share of underlying equity as of September 30, 2024 and December 31, 2023:

($ in thousands) September 30, 2024 December 31, 2023

The following table sets forth the Company’s recorded investment in RISCOM compared to its share of underlying equity as of March 31, 2025 and December 31, 2024:

($ in thousands) March 31, 2025 December 31, 2024

Investment in RISCOM:

2 unchanged sentences

Recorded investment balance $ 2,886 $ 5,013

The following table sets forth the Company’s recorded investment in JVM Funds LLC compared to its share of underlying equity as of September 30, 2024 and December 31, 2023:

($ in thousands) September 30, 2024 December 31, 2023

The following table sets forth the Company’s recorded investment in JVM Funds LLC compared to its share of underlying equity as of March 31, 2025 and December 31, 2024:

($ in thousands) March 31, 2025 December 31, 2024

Investment in JVM Funds LLC:

2 unchanged sentences

Recorded investment balance $ 16,692 $ 17,229

SKYWARD SPECIALTY INSURANCE GROUP, INC.

AND SUBSIDIARIES

NOTES TO (UNAUDITED) CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

Equity Method Investments and Other (continued)

Investment in Indirect Loans and Loan Collateral

As of September 30, 2024 and December 31, 2023, the Company held indirect investments in collateralized loans and loan collateral through SMA1 and SMA2.

The carrying value of the SMA1 and SMA2 as of September 30, 2024 and December 31, 2023 were as follows:

($ in thousands) September 30, 2024 December 31, 2023

As of March 31, 2025 and December 31, 2024, the Company held indirect investments in collateralized loans and loan collateral through SMA1 and SMA2.

The carrying value of the SMA1 and SMA2 as of March 31, 2025 and December 31, 2024 were as follows:

($ in thousands) March 31, 2025 December 31, 2024

SMA1 $ 19,093 $ 20,296

1 unchanged sentence

Investment in indirect loans and loan collateral $ 29,443 $ 33,269

Notes Payable & Subordinated Debt

On August 30, 2024, the Company entered into the FHLB Loan pursuant to the 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.

The Company used the proceeds to fund redemptions of the draws on the Revolving Credit Facility (see “Revolving Credit Facility” below for additional information regarding the redemption).

Revolving Credit Facility

The Company entered into an agreement to obtain a new unsecured revolving credit facility (the “Revolving Credit Facility”) with a syndicate of participating banks during the first quarter of 2023.

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

As of December 31, 2023, the Company drew $ 50.0 million on the Revolving Credit Facility.

During the nine months ended September 30, 2024, the Company drew an additional $ 50.0 million on the Revolving Credit Facility and used the

The Company has one reportable segment through which it offers a broad array of commercial property and casualty products and solutions on a non-admitted (or E&S) and admitted basis, predominantly in the United States.

The segment is made up of nine distinct underwriting divisions, or “continuing business,” and has dedicated underwriting leadership supported by high-quality technical staff with deep experience in their respective niches.

The Company defines its segment on the basis of the way in which internally reported financial information is regularly reviewed by the Chief Operating Decision Maker (“CODM”) to analyze financial performance, make decisions and allocate resources.

The Company’s CODM is the chief executive officer.

The accounting policies of the segment are the same as those described in Note 1 “Summary of Significant Accounting Policies” of the Company’s Annual Report on Form 10-K for the year ended December 31, 2024.

The CODM assesses performance for the segment and decides how to allocate resources based on gross written premiums by net underwriting division, underwriting income, and income before income taxes that also is reported on the condensed consolidated statements of operations as consolidated income before income taxes.

The measure of segment assets is reported on the balance sheet as total consolidated assets.

Gross written premiums by underwriting division, net underwriting income, and consolidated net income are used to monitor budget versus actual results.

The chief operating decision maker also uses net underwriting income, annualized return on equity and growth in book value per share in competitive analysis by benchmarking to the Company’s competitors.

The competitive analysis along with the monitoring of budgeted versus actual results are used in assessing performance of the segment and in establishing management’s compensation.

SKYWARD SPECIALTY INSURANCE GROUP, INC.

1 unchanged sentence

NOTES TO (UNAUDITED) CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

Notes Payable & Subordinated Debt (continued)

proceeds to pay off the principal on its existing Debentures (defined below).

On September 6, 2024, the Company redeemed $ 57.0 million of the draws on the Revolving Credit Facility.

Interest on the Revolving Credit Facility is payable quarterly.

The interest rate on the Revolving Credit Facility is the Secured Overnight Financing Rate (“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.

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

The Company was 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 September 30, 2024, the Company was in compliance with all covenants.

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

The sole asset of the Trust consists of Fixed/Floating Rate Junior Subordinated Deferrable Interest Debentures (the “Debentures”) with a principal amount of $ 59.8 million issued by the Company and cash of $ 1.8 million from the issuance of Trust common shares purchased by the Company equal to 3 % of the Trust capitalization.

On March 15, 2024, the Company redeemed the Debentures and paid $ 1.4 million of accrued interest.

The following table sets forth the Company’s income tax expense and effective tax rates for the three and nine months ended September 30, 2024 and 2023:

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

Segment (continued)

The following table presents gross written premiums by underwriting division for the three months ended March 31, 2025 and 2024:

Three months ended March 31,

($ in thousands) 2025 2024

Accident & Health $ 63,169 $ 40,901

Agriculture and Credit (Re)insurance 87,847 43,321

Captives 68,401 68,408

Construction & Energy Solutions 75,571 74,222

Global Property 46,686 57,312

Professional Lines 41,166 42,239

Programs 62,675 52,178

Surety 37,798 33,842

Transactional E&S 52,006 46,232

Total continuing business 535,319 458,655

Exited business 7 ( 35 )

Total gross written premiums $ 535,326 $ 458,620

SKYWARD SPECIALTY INSURANCE GROUP, INC.

AND SUBSIDIARIES

NOTES TO (UNAUDITED) CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

Segment (continued)

The following table presents information about reported segment net underwriting income, significant segment expenses and a reconciliation of net underwriting income to net income for the three months ended March 31, 2025 and 2024:

Three months ended March 31,

($ in thousands) 2025 2024

Underwriting income

Net earned premiums $ 300,366 $ 236,342

Commission and fee income 1,976 2,026

Total underwriting revenues 302,342 238,368

Losses and LAE 187,309 143,914

Amortization of policy acquisition costs 44,490 31,977

Other operating and general expenses 42,061 37,797

Total underwriting expenses 273,860 213,688

Net underwriting income $ 28,482 $ 24,680

Reconciliation of net underwriting income to net income:

Net underwriting income $ 28,482 $ 24,680

Net investment income 19,331 18,297

Net investment gains 6,841 8,303

Other income 13 —

Interest expense 1,834 2,727

Amortization expense 337 388

Other expenses 1,061 1,188

Income before income taxes 51,435 46,977

Income tax expense 9,377 10,193

Effective tax rate 21.7 % 21.9 % 22.2 % 21.8 %

The effective tax rate will differ from the statutory rate of 21 percent due to permanent differences for disallowed expenses for tax and beneficial adjustments for tax-exempt income, dividends-received deduction and non-deductible expenses.

The Company paid federal income taxes of $ 8.5 million and $ 22.5 million during the three and nine months ended September 30, 2024, respectively, and $ 10.0 million during the nine months ended September 30, 2023.

Net income $ 42,058 $ 36,784

The following table presents annualized return on equity for the three months ended March 31, 2025 and 2024 and book value per share as of March 31, 2025 and December 31, 2024:

Three months ended March 31,

Annualized return on equity 20.5 % 21.7 %

March 31, 2025 December 31, 2024

Book value per share $ 21.06 $ 19.79

SKYWARD SPECIALTY INSURANCE GROUP, INC.

1 unchanged sentence

NOTES TO (UNAUDITED) CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

The following table sets forth the Company’s income tax expense and effective tax rates for the three months ended March 31, 2025 and 2024:

Three months ended March 31,

($ in thousands) 2025 2024

Income tax expense $ 9,377 $ 10,193

Effective tax rate 18.2 % 21.7 %

The effective tax rate for the three months ended March 31, 2025 was impacted by certain discrete tax items, primarily tax benefits from stock-based compensation, which reduced the effective tax rate by 3.9 %.

Losses and Loss Adjustment Expenses

The following table sets forth the reconciliation of unpaid losses and loss adjustment expenses (“LAE”) as reported in the condensed consolidated balance sheets as of and for the nine months ended September 30, 2024 and 2023:

Nine months ended September 30,

Three months ended March 31,

($ in thousands) 2025 2024

13 unchanged sentences

Reserves for losses and LAE, end of period $ 1,871,491 $ 1,376,946

SKYWARD SPECIALTY INSURANCE GROUP, INC.

AND SUBSIDIARIES

NOTES TO (UNAUDITED) CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

Commission and Fee Income

2 unchanged sentences

Commission and fee income is primarily generated from SUA for the placement of insurance policies on either a third-party insurance or reinsurance company.

The following table sets forth the Company’s disaggregated revenues from contracts with customers for the three and nine months ended September 30, 2024 and 2023:

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

The following table sets forth the Company’s disaggregated revenues from contracts with customers for the three months ended March 31, 2025 and 2024:

Three months ended March 31,

($ in thousands) 2025 2024

3 unchanged sentences

Total commission and fee income $ 1,976 $ 2,026

The Company’s contract assets from commission and fee income as of September 30, 2024 and December 31, 2023 were $ 2.4 million and $ 1.0 million, respectively.

SKYWARD SPECIALTY INSURANCE GROUP, INC.

AND SUBSIDIARIES

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

The Company’s contract assets from commission and fee income as of March 31, 2025 and December 31, 2024 were $ 1.9 million and $ 1.4 million, respectively.

Underwriting, Acquisition and Insurance Expenses

The following table sets forth the components of underwriting, acquisition and insurance expenses for the three and nine months ended September 30, 2024 and 2023:

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

The following table sets forth the components of underwriting, acquisition and insurance expenses for the three months ended March 31, 2025 and 2024:

Three months ended March 31,

($ in thousands) 2025 2024

5 unchanged sentences

The Company remains obligated for amounts ceded in the event that the reinsurers do not meet their obligations.

The following tables set forth the effects of reinsurance on written and earned premiums and losses and loss adjustment expenses for the three and nine months ended September 30, 2024 and 2023:

Three months ended September 30,

($ in thousands) Written Earned Written Earned

Direct premiums $ 347,444 $ 349,980 $ 308,215 $ 299,294

Assumed premiums 52,570 69,436 47,517 51,665

Ceded premiums ( 131,692 ) ( 149,859 ) ( 75,036 ) ( 123,926 )

Net premiums $ 268,322 $ 269,557 $ 280,696 $ 227,033

Ceded losses and LAE incurred $ 108,152 $ 103,753

Nine months ended September 30,

The following tables set forth the effects of reinsurance on written and earned premiums and losses and loss adjustment expenses for the three months ended March 31, 2025 and 2024:

($ in thousands) Written Earned Written Earned

8 unchanged sentences

Reinsurance (continued)

The following table sets forth the components of reinsurance recoverables and ceded unearned premium as of September 30, 2024 and December 31, 2023:

($ in thousands) September 30, 2024 December 31, 2023

The following table sets forth the components of reinsurance recoverables and ceded unearned premium as of March 31, 2025 and December 31, 2024:

($ in thousands) March 31, 2025 December 31, 2024

Ceded unpaid losses and LAE $ 706,801 $ 670,846

6 unchanged sentences

These trust accounts provide the Company additional security to collect claim recoverables under reinsurance contracts and the Company does not carry these on the balance sheet because the Company will only have custody over these accounts upon the failure of the reinsurer to pay amounts due.

At September 30, 2024, the market value of these accounts was approximately $ 196.4 million.

At March 31, 2025, the market value of these accounts was approximately $ 212.8 million.

The trust amount will be adjusted periodically, by mutual agreement, based on claim payments and loss reserve recoverables.

Certain ceded reinsurance contracts that transfer only significant timing risk and do not transfer sufficient underwriting risk are accounted for using the deposit method of accounting.

The Company’s deposit asset at September 30, 2024 and December 31, 2023 was $ 27.1 million and $ 29.9 million, respectively, and was included in other assets on the condensed consolidated balance sheets.

SKYWARD SPECIALTY INSURANCE GROUP, INC.

AND SUBSIDIARIES

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

The Company’s deposit asset at March 31, 2025 and December 31, 2024 was $ 24.7 million and $ 25.9 million, respectively, and was included in other assets on the condensed consolidated balance sheets.

Earnings Per Share

The following table sets forth the compilation of basic and diluted net earnings per share for the three and nine months ended September 30, 2024 and 2023:

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

The following table sets forth the compilation of basic and diluted net earnings per share for the three months ended March 31, 2025 and 2024:

Three months ended March 31,

($ in thousands, except for share and per share amounts) 2025 2024

Net income $ 42,058 $ 36,784

Undistributed income allocated to participating securities — — — ( 1,492 )

Net income attributable to common stockholders (numerator for basic earnings per share) 36,668 21,711 104,422 55,227

Undistributed income allocated to participating securities — — — 1,492

Net income (numerator for diluted earnings per share under the two-class method) $ 36,668 $ 21,711 $ 104,422 $ 56,719

Basic weighted-average common shares 40,196,416 39,108,351

Dilutive effect of preferred shares — — — 959,124

Dilutive effect of stock notes — 711,752

4 unchanged sentences

Diluted earnings per share $ 1.01 $ 0.90

The Company’s preferred shares participate in dividends and distributions with common stock on an as-converted basis and represent a participating security.

Instruments awarded to employees that provide the holder the right to purchase common stock at a fixed price were included as potential common shares, weighted for the portion of the period they were granted, if dilutive.

The following table presents anti-dilutive instruments that were excluded from the calculation of diluted weighted-average common share equivalents during 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

The following table presents anti-dilutive instruments that were excluded from the calculation of diluted weighted-average common share equivalents during the three months ended March 31, 2025 and 2024:

Three months ended March 31,

Stock units 56,155 70,671

4 unchanged sentences

Earnings Per Share (continued)

The following table presents common share equivalents of contingently issuable instruments that were excluded from basic earnings per share in 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

The following table presents common share equivalents of contingently issuable instruments that were excluded from basic earnings per share in the three months ended March 31, 2025 and 2024:

Three months ended March 31,

Common shares — 866,428

Total — 866,428

Related Party Transactions

2 unchanged sentences

The Company holds a 20 % ownership interest in RISCOM.

Net earned premium and gross commission expense related to these agreements for the three and nine months ended September 30, 2024 and 2023 were as follows:

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

Net earned premium and gross commission expense related to these agreements for the three months ended March 31, 2025 and 2024 were as follows:

Three months ended March 31,

($ in thousands) 2025 2024

1 unchanged sentence

Commissions 7,632 6,887

Premiums receivable as of September 30, 2024 and December 31, 2023 were $ 16.2 million and $ 10.6 million, respectively.

Advisory and professional services fees and expense reimbursements paid to various affiliated stockholders and directors for the three and nine months ended September 30, 2024 were $ 0.2 million and $ 0.4 million, compared to $ 0.5 million and $ 3.1 million, respectively, for the three and nine months ended September 30, 2023.

Premiums receivable as of March 31, 2025 and December 31, 2024 were $ 18.6 million and $ 12.6 million, respectively.

Advisory and professional services fees and expense reimbursements paid to various affiliated stockholders and directors for the three months ended March 31, 2025 were $ 0.2 million, compared to $ 2.0 million for the three months ended March 31, 2024.

See Note 4 and 5 for investments involving affiliated companies and additional related party transactions.

12 unchanged sentences

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 1. Financial Statements