What changed in this filing

/stocks — the workspaceLOADING

Item 2. Management’s Discussion and Analysis

2025-05-07 compared with 2024-11-07 · 82 added, 164 removed, 235 unchanged (51% 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 “third quarter” as used below refers to the three and nine months ended September 30 for the time period then ended.

The term “first quarter” as used below refers to the three months ended March 31 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 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 results of operations for the three months ended March 31, 2025 are not necessarily indicative of the results that may be expected for the full year ended December 31, 2025, 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 2024 Form 10-K.

5 unchanged sentences

As such, we develop and deliver tailored insurance products and services to address each of the niche markets we serve.

Each of our eight distinct underwriting divisions has dedicated underwriting leadership supported by high-quality technical staff with deep experience in their respective niches.

We believe this structure and expertise allows us to serve the needs of our customers effectively and be a value-add partner to our distributors, while earning attractive risk-adjusted returns.

During the first quarter of 2025, the Company updated its underwriting divisions to align with how management currently oversees the business, allocates resources and evaluates operating performance.

The Company added a ninth division, Agriculture and Credit (Re)insurance, which includes the Global Agriculture unit, previously reported with Global Property, and the Mortgage and Credit units, and focuses on specialty classes for which reinsurance provides a more attractive market entry.

The Industry Solutions division is now the Construction & Energy Solutions division and the Inland Marine unit is now included in the Transactional E&S division.

Programs is now Specialty Programs.

Prior reporting periods have been conformed to reflect the new presentation.

All of our insurance company subsidiaries are group rated and have financial strength ratings of “A” (Excellent) with stable outlook from the A.M.

1 unchanged sentence

Results of Operations

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,

The following table summarizes our results for the three months ended March 31, 2025 and 2024:

Three months ended March 31,

($ in thousands) 2025 2024

9 unchanged sentences

Net investment income $ 19,331 $ 18,297

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

Net investment gains $ 6,841 $ 8,303

Income before income taxes $ 51,435 $ 46,977

5 unchanged sentences

Combined ratio 90.5 % 89.6 %

Adjusted loss and LAE ratio (1)

63.4 % 61.1 % 62.1 % 62.7 %

Expense ratio 28.9 % 29.2 % 28.9 % 28.3 %

Adjusted combined ratio (1)

92.3 % 90.3 % 91.0 % 91.0 %

Annualized return on equity 20.5 % 21.7 %

8 unchanged sentences

Adjusted Operating Income

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

($ in thousands) Pre-tax After-tax Pre-tax After-tax Pre-tax After-tax Pre-tax After-tax

The following table provides a reconciliation of adjusted operating income to net income for the three months ended March 31, 2025 and 2024:

Three months ended March 31,

($ in thousands) Pre-tax After-tax Pre-tax After-tax

Income as reported $ 51,435 $ 42,058 $ 46,977 $ 36,784

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

Net investment gains 6,841 5,594 8,303 6,501

Net impact of LPT — — 241 189

Other loss (195) (154) — — (202) (160) — —

Other income 13 11 — —

Other expenses (1,061) (868) (1,188) (930)

1 unchanged sentence

Underwriting Income

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,

The following table provides a reconciliation of underwriting income to income before federal income tax expense for the three months ended March 31, 2025 and 2024:

Three months ended March 31,

($ in thousands) 2025 2024

Income before federal income tax expense $ 46,853 $ 27,795 $ 134,185 $ 72,533

Income before income taxes $ 51,435 $ 46,977

Interest expense 1,834 2,727

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 —

Underwriting income $ 28,482 $ 24,680

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 nine months ended September 30, 2024 and 2023:

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

($ in thousands) 2024 2023 2024 2023

Net earned premiums $ 269,557 $ 227,033 $ 763,482 $ 604,211

Losses and LAE 170,521 138,536 473,489 377,841

Pre-tax net impact of loss portfolio transfer 318 266 800 970

Adjusted losses and LAE $ 170,839 $ 138,802 $ 474,289 $ 378,811

Loss ratio 63.3 % 61.0% 62.0 % 62.5 %

Net impact of LPT (0.1) % (0.1)% (0.1) % (0.2)%

Adjusted loss ratio 63.4 % 61.1 % 62.1 % 62.7 %

Combined ratio 92.2 % 90.2 % 90.9 % 90.8 %

Net impact of LPT (0.1) % (0.1)% (0.1) % (0.2)%

Adjusted combined ratio 92.3 % 90.3 % 91.0 % 91.0 %

Tangible Stockholders’ Equity

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

The following table provides a reconciliation of tangible stockholders’ equity to stockholders’ equity for the periods ended March 31, 2025 and 2024:

Three months ended March 31,

($ in thousands) 2025 2024

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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 nine months ended September 30, 2024 and 2023:

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

The following table provides a reconciliation of annualized adjusted return on equity to annualized return on equity for the three months ended March 31, 2025 and 2024:

Three months ended March 31,

($ in thousands) 2025 2024

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Annualized Return on Tangible Equity

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,

Annualized return on tangible equity for the three months ended March 31, 2025 and 2024 reconciles to annualized return on equity as follows:

Three months ended March 31,

($ in thousands) 2025 2024

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Annualized Adjusted Return on Tangible Equity

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,

Annualized adjusted return on tangible equity for the three months ended March 31, 2025 and 2024 reconciles to annualized return on equity as follows:

Three months ended March 31,

($ in thousands) 2025 2024

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Underwriting Results

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,

The following tables present 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 Change % Change

Global Property & Agriculture $ 54,360 $ 48,775 $ 5,585 11.5 %

Industry Solutions 74,089 79,798 (5,709) (7.2 %)

Captives 53,630 41,886 11,744 28.0 %

Programs 54,434 41,735 12,699 30.4 %

Transactional E&S 44,885 30,699 14,186 46.2 %

Accident & Health $ 63,169 $ 40,901 $ 22,268 54.4 %

Professional Lines 40,310 48,259 (7,949) (16.5 %)

Surety 34,816 24,977 9,839 39.4 %

Total gross written premiums (1)

$ 400,014 $ 355,683 $ 44,331 12.5 %

(1) Excludes exited business

Nine months ended September 30,

($ in thousands) 2024 2023 Change % Change

Global Property & Agriculture $ 279,721 $ 247,195 $ 32,526 13.2 %

Industry Solutions 236,460 226,680 9,780 4.3 %

Agriculture and Credit (Re)insurance 87,847 43,321 44,526 102.8 %

Captives 68,401 68,408 (7) — %

Programs 166,256 143,032 23,224 16.2 %

Transactional E&S 132,791 90,948 41,843 46.0 %

Accident & Health 128,479 112,819 15,660 13.9 %

Construction & Energy Solutions 75,571 74,222 1,349 1.8 %

Global Property 46,686 57,312 (10,626) (18.5 %)

Professional Lines 41,166 42,239 (1,073) (2.5 %)

Specialty Programs 62,675 52,178 10,497 20.1 %

Surety 37,798 33,842 3,956 11.7 %

Transactional E&S 52,006 46,232 5,774 12.5 %

Total gross written premiums (1)

1 unchanged sentence

(1) Excludes exited business

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.

The increase in gross written premiums for the first quarter of 2025, when compared to the same 2024 period, was driven by double-digit premium growth primarily from the agriculture and credit (re)insurance, accident & health and specialty programs divisions, partially offset by a decrease in gross written premiums in the global property division.

Net written premiums for the first quarter of 2025 were $343.3 million, an increase of $56.2 million or 19.6%, when compared to $287.1 million for the same 2024 period.

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

Net earned premiums for the first quarter of 2025 were $300.4 million, an increase of $64.1 million or 27.1% when compared to $236.3 million for the same 2024 period.

The increase in net earned premiums was 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 nine months ended September 30, 2024 and 2023:

Three months ended September 30,

($ in thousands) Losses

Losses and LAE:

Non-cat loss and LAE (1)

$ 163,385 60.6 % $ 137,802 60.7 %

Cat loss and LAE (1)

7,454 2.8 % 1,000 0.4 %

Prior accident year development - LPT

(318) (0.1) % (266) (0.1)%

Total losses and LAE $ 170,521 63.3 % $ 138,536 61.0 %

Adjusted losses and LAE (2) :

Non-cat loss and LAE (1)

$ 163,385 60.6 % $ 137,802 60.7 %

Cat loss and LAE (1)

7,454 2.8 % 1,000 0.4 %

Total adjusted losses and LAE (2)

$ 170,839 63.4 % $ 138,802 61.1 %

(1) Current accident year

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

Nine months ended September 30,

The following tables set forth the components of the loss and LAE ratios and adjusted loss and LAE ratios for the three months ended March 31, 2025 and 2024:

Three months ended March 31,

($ in thousands) Losses

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Total losses and LAE $ 187,309 62.4 % $ 143,914 60.9 %

Adjusted losses and LAE (2) :

Non-cat loss and LAE (1)

$ 462,835 60.6 % $ 367,767 60.9 %

Cat loss and LAE (1)

11,454 1.5 % 11,044 1.8 %

Total adjusted losses and LAE (2)

$ 474,289 62.1 % $ 378,811 62.7 %

(1) Current accident year

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

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.

The loss ratio for the first quarter of 2025 increased 1.5 points when compared to the same 2024 period, due to higher catastrophe losses, primarily from convective storms in the Midwest and the California wildfires.

The improvement in the non-catastrophe loss and LAE ratio for the first quarter of 2025 when compared to the same 2024 period, was driven by the business mix shift.

Expense Ratio

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

Net Earned Premiums Expenses % of

Net Earned Premiums

Net policy acquisition expenses $ 37,365 13.9 % $ 34,071 15.0 %

Other operating and general expenses 42,452 15.7 % 34,244 15.1 %

Underwriting, acquisition and insurance expenses 79,817 29.6 % 68,315 30.1 %

commission and fee income (1,818) (0.7 %) (2,085) (0.9 %)

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

Nine months ended September 30,

The following tables set forth the components of the expense ratios for the three months ended March 31, 2025 and 2024:

Three months ended March 31,

($ in thousands) Expenses % of

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Total net expenses $ 84,575 28.1 % $ 67,748 28.7 %

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.

The expense ratio for the first quarter improved 0.6 points when compared to the same 2024 period primarily due to earnings leverage partially offset by higher acquisition costs due to the business mix shift.

The expense ratios for the first quarters of 2025 and 2024 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

Beginning January 1, 2024, we simplified the investment portfolio classifications to align with our strategy and the underlying risk characteristics of the portfolio.

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 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 net investment income and net investment gains (losses) for the three months ended March 31, 2025 and 2024:

Three months ended March 31,

$ in thousands 2025 2024

4 unchanged sentences

Net investment income $ 19,331 $ 18,297

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.

Net unrealized gains on securities still held

$ 5,491 $ 8,991

Net realized gains (losses) 1,350 (688)

Net investment gains $ 6,841 $ 8,303

Net investment income for the first quarter of 2025 increased $1.0 million when compared to the same 2024 period.

The increase in income from our fixed income portfolio for the first quarter of 2025, when compared to the same 2024 period, 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 5.2% at March 31, 2025 compared to 4.7% at March 31, 2024.

The decrease in income from short-term investments for the first quarter of 2025 when compared to the same 2024 period, was due to a lower book yield.

The losses from alternative and strategic investments for the first quarter of 2025 was driven by the 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 September 30, 2024 and determined that no credit impairment existed in the gross unrealized holding losses.

We reviewed our available-for-sale fixed maturities at March 31, 2025 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 September 30, 2024 and December 31, 2023:

The following table sets forth the components of our investment portfolio at carrying value at March 31, 2025 and December 31, 2024:

($ in thousands) Carrying Value

7 unchanged sentences

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 September 30, 2024 and December 31, 2023:

The following table sets forth the components of our fixed income securities at March 31, 2025 and December 31, 2024:

($ in thousands) Carrying Value % of Total

9 unchanged sentences

Total fixed income portfolio $ 1,413,520 100.0 % $ 1,318,708 100.0 %

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 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:

The weighted average credit rating of our available-for-sale fixed income portfolio was “A+” by Standard & Poor’s Financial Services, LLC (“Standard & Poor’s”) at March 31, 2025 and “AA-” at December 31, 2024.

The following table sets forth the credit quality of our available-for-sale fixed income portfolio at March 31, 2025 and December 31, 2024, as rated by Standard & Poor’s or equivalent designation:

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

6 unchanged sentences

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 3.89 years and 4.24 years, respectively, as of September 30, 2024 and December 31, 2023.

The average duration of our fixed income portfolio was approximately 4.29 years and 4.34 years, respectively, as of March 31, 2025 and December 31, 2024.

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, 100.0% of which are publicly traded.

4 unchanged sentences

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

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.

Income tax expense for the three months ended March 31, 2025 was $9.4 million compared to $10.2 million for the same 2024 period.

Our effective tax rate for the three months ended March 31, 2025 was 18.2%, compared to 21.7% for the same 2024 period.

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%.

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

Liquidity and Capital Resources

9 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 nine months ended September 30, 2024 and 2023 were:

Our cash flows for the three months ended March 31, 2025 and 2024:

($ in thousands) 2025 2024

4 unchanged sentences

Change in cash and cash equivalents and restricted cash $ (4,019) $ 14,933

The increase in cash provided by operating activities in 2024 and 2023 was primarily due to positive cash flow from our insurance operations.

The increase in cash provided by operating activities in 2025 when compared to 2024 was primarily due to positive cash flow from our insurance operations.

Cash from operations can vary from period to period due to the timing of premium receipts, claim payments and reinsurance activity.

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 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 investing activities in 2025 and 2024 were 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.

5 unchanged sentences

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).

We used the proceeds to fund the redemption of 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 (see “Revolving Credit Facility” below for additional information regarding the redemption).

Revolving Credit Facility

3 unchanged sentences

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.

As of March 31, 2025, 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.

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

At March 31, 2025, the six-month SOFR on the Revolving Credit Facility was 4.22%, 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 September 30, 2024, we are in compliance with all covenants.

As of March 31, 2025, 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”).

6 unchanged sentences

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

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%.

At March 31, 2025 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 12.3% and at December 31, 2024, the ratio of total debt outstanding, including the Term Loan, the Revolver, the Trust Preferred and the Notes, to total capitalization was 13.1%.

Share Repurchase Program

3 unchanged sentences

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.

As of March 31, 2025, no shares had been repurchased under this plan.

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.

Our reinsurance contracts are predominantly one year in length and renew annually throughout the year.

Our reinsurance contracts are predominantly one year in length and renew annually throughout the year, primarily in January and April.

At each annual renewal, we consider several factors that influence any changes to our reinsurance purchases, including any plans to change the underlying insurance coverage we offer, updated loss activity, the level of our capital and surplus, changes in our risk appetite and the cost and availability of reinsurance treaties.

5 unchanged sentences

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 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:

For the three months ended March 31, 2025 our net retention on a written basis (calculated as net written premiums as a percentage of gross written premiums) was 64.1%, compared to 62.6% for the same 2024 period.

The following is a summary of our reinsurance programs as of March 31, 2025:

Line of Business Maximum Company Retention

6 unchanged sentences

$1.68 million per occurrence

Ocean Marine (2)

$2.50 million per occurrence

Professional Lines (2)

14 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 2. Management’s Discussion and Analysis