Skyward Specialty Insurance Group, Inc. 10-Q

Item 1. Financial Statements SKYWARD SPECIALTY INSURANCE GROUP, INC. AND SUBSIDIARIES CONDENSED CONSOLIDATED BALANCE SHEETS (UNAUDITED) March 31, 2025 December 31, 2024 ($ in thousands, except share and per share amounts) (Unaudited) Assets Investments: Fixed maturity securities, available-for-sale, at fair value (amortized cost of $ 1,410,269 and $ 1,320,266 , respectively) $ 1,397,508 $ 1,292,218 Fixed maturity securities, held-to-maturity, at amortized cost (net of allowance for credit losses of $ 250 and $ 243 , respectively) 37,519 39,153 Equity securities, at fair value 108,075 106,254 Mortgage loans, at fair value 16,012 26,490 Equity method investments 88,588 98,594 Other long-term investments 37,646 33,182 Short-term investments, at fair value 308,042 274,929 Total investments 1,993,390 1,870,820 Cash and cash equivalents 112,916 121,603 Restricted cash 40,590 35,922 Premiums receivable, net 417,542 321,641 Reinsurance recoverables, net 902,970 857,876 Ceded unearned premium 232,147 203,901 Deferred policy acquisition costs 126,439 113,183 Deferred income taxes 26,984 30,486 Goodwill and intangible assets, net 87,089 87,348 Other assets 90,566 86,698 Total assets $ 4,030,633 $ 3,729,478 Liabilities and stockholders’ equity Liabilities: Reserves for losses and loss adjustment expenses $ 1,871,491 $ 1,782,383 Unearned premiums 708,347 637,185 Deferred ceding commission 45,544 40,434 Reinsurance and premium payables 243,083 177,070 Funds held for others 113,748 102,665 Accounts payable and accrued liabilities 78,154 76,206 Notes payable 100,000 100,000 Subordinated debt, net of debt issuance costs 19,545 19,536 Total liabilities 3,179,912 2,935,479 Stockholders’ equity Common stock, $ 0.01 par value, 500,000,000 shares authorized, 40,402,879 and 40,127,908 shares issued and outstanding, respectively 404 401 Additional paid-in capital 721,186 718,598 Accumulated other comprehensive loss ( 10,047 ) ( 22,120 ) Retained earnings 139,178 97,120 Total stockholders’ equity 850,721 793,999 Total liabilities and stockholders’ equity $ 4,030,633 $ 3,729,478 The accompanying notes are an integral part of the consolidated financial statements. 3 Table of Contents SKYWARD SPECIALTY INSURANCE GROUP, INC. AND SUBSIDIARIES CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME (UNAUDITED) Three months ended March 31, ($ in thousands, except share and per share amounts) 2025 2024 Revenues: Net earned premiums $ 300,366 $ 236,342 Commission and fee income 1,976 2,026 Net investment income 19,331 18,297 Net investment gains 6,841 8,303 Other income 13 — Total revenues 328,527 264,968 Expenses: Losses and loss adjustment expenses 187,309 143,914 Underwriting, acquisition and insurance expenses 86,551 69,774 Interest expense 1,834 2,727 Amortization expense 337 388 Other expenses 1,061 1,188 Total expenses 277,092 217,991 Income before income taxes 51,435 46,977 Income tax expense 9,377 10,193 Net income $ 42,058 $ 36,784 Comprehensive income Net income $ 42,058 $ 36,784 Other comprehensive income (loss): Unrealized gains and losses on investments: Net change in unrealized gains (losses) on investments, net of tax 12,255 ( 5,418 ) Reclassification adjustment for losses on securities no longer held, net of tax ( 182 ) ( 908 ) Total other comprehensive income (loss) 12,073 ( 6,326 ) Comprehensive income $ 54,131 $ 30,458 Per share data: Basic earnings per share $ 1.05 $ 0.94 Diluted earnings per share $ 1.01 $ 0.90 Weighted-average common shares outstanding Basic 40,196,416 39,108,351 Diluted 41,680,595 41,085,136 The accompanying notes are an integral part of the consolidated financial statements. 4 Table of Contents SKYWARD SPECIALTY INSURANCE GROUP, INC. AND SUBSIDIARIES CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY (UNAUDITED) Three months ended March 31, ($ in thousands, except share amounts) 2025 2024 Common shares: Balance at beginning of year 40,127,908 39,863,756 Issuance of shares 274,971 131,271 Balance at March 31 40,402,879 39,995,027 Common stock: Balance at beginning of year $ 401 $ 399 Issuance of common stock 3 1 Balance at March 31 $ 404 $ 400 Additional paid-in capital: Balance at beginning of year $ 718,598 $ 710,855 Issuance of common stock 2,588 454 Balance at March 31 $ 721,186 $ 711,309 Stock notes receivable: Balance at beginning of year $ — $ ( 5,562 ) Employee equity transactions — 328 Balance at March 31 $ — $ ( 5,234 ) Accumulated other comprehensive loss: Balance at beginning of year $ ( 22,120 ) $ ( 22,953 ) Other comprehensive income (loss), net of tax 12,073 ( 6,326 ) Balance at March 31 $ ( 10,047 ) $ ( 29,279 ) Retained earnings (accumulated deficit): Balance at beginning of year $ 97,120 $ ( 21,708 ) Net income 42,058 36,784 Balance at March 31 $ 139,178 $ 15,076 Total stockholders’ equity $ 850,721 $ 692,272 The accompanying notes are an integral part of the consolidated financial statements. 5 Table of Contents SKYWARD SPECIALTY INSURANCE GROUP, INC. AND SUBSIDIARIES CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED) Three months ended March 31, ($ in thousands) 2025 2024 Cash flows from operating activities Net income $ 42,058 $ 36,784 Adjustments to reconcile net income to net cash provided by operating activities 54,702 57,481 Net cash provided by operating activities 96,760 94,265 Cash flows from investing activities: Purchase of fixed maturity securities, available-for-sale ( 126,827 ) ( 97,426 ) Purchase of equity securities ( 8,422 ) ( 2,035 ) Purchase of equity method investments ( 200 ) ( 261 ) Investment in direct and indirect loans 13,829 10,816 Purchase of property and equipment ( 202 ) ( 260 ) 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 ) Change in receivable/payable for securities — ( 13,755 ) Cash provided by deposit accounting 1,200 2,417 Net cash used in investment activities ( 100,779 ) ( 69,866 ) Cash flows from financing activities: Repayment of stock notes receivable — 328 Proceeds from long term borrowings — 50,000 Payments on long term borrowings and trust preferred — ( 59,794 ) Net cash (used in) provided by financing activities — ( 9,466 ) Net increase (decrease) in cash and cash equivalents and restricted cash ( 4,019 ) 14,933 Cash and cash equivalents and restricted cash at beginning of period (1) 157,525 100,336 Cash and cash equivalents and restricted cash at end of period (1) $ 153,506 $ 115,269 Supplemental disclosure of cash flow information: Cash paid for interest $ 1,805 $ 2,656 (1) The sum of cash and cash equivalents and restricted cash from the consolidated balance sheets The accompanying notes are an integral part of the consolidated financial statements. 6 Table of Contents SKYWARD SPECIALTY INSURANCE GROUP, INC. AND SUBSIDIARIES NOTES TO (UNAUDITED) CONDENSED CONSOLIDATED FINANCIAL STATEMENTS 1. Summary of Significant Accounting Policies Basis of Presentation The unaudited condensed consolidated financial statements of Skyward Specialty Insurance Group, Inc. (the “Company”) have been prepared in accordance with generally accepted accounting principles (“GAAP”) in the United States of America for interim financial reporting and with the instructions to Form 10-Q and Regulation S-X. Accordingly, they do not include all the disclosures required by GAAP for complete consolidated financial statements. Readers are urged to review the Company’s Annual Report on Form 10-K for the year ended December 31, 2024 for a more complete description of the Company’s business and accounting policies. In the opinion of management, all adjustments necessary for a fair statement of the condensed consolidated financial statements have been included. Such adjustments consist only of normal recurring items. Interim results are not necessarily indicative of results of operations for the full year. The consolidated balance sheet as of December 31, 2024 was derived from the Company’s audited annual consolidated financial statements. Use of Estimates The preparation of consolidated financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosures of contingent assets and liabilities at the date of the consolidated financial statements and the reported amounts of revenue and expenses during the reporting period. Actual results could differ materially from these estimates. 2. Investments 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 Cost Gross Unrealized Gains Gross Unrealized Losses Allowance for Credit Losses Fair Value March 31, 2025 Fixed maturity securities, available-for-sale: U.S. government securities $ 26,540 $ 212 $ ( 70 ) $ — $ 26,682 Corporate securities and miscellaneous 494,356 7,340 ( 10,846 ) — 490,850 Municipal securities 89,373 592 ( 4,134 ) — 85,831 Residential mortgage-backed securities 410,080 4,658 ( 12,341 ) — 402,397 Commercial mortgage-backed securities 76,802 652 ( 1,263 ) — 76,191 Other asset-backed securities 313,118 3,863 ( 1,424 ) — 315,557 Total fixed maturity securities, available-for-sale $ 1,410,269 $ 17,317 $ ( 30,078 ) $ — $ 1,397,508 Fixed maturity securities, held-to-maturity: Other asset-backed securities $ 37,769 $ 97 $ ( 6 ) $ ( 250 ) $ 37,610 Total fixed maturity securities, held-to-maturity $ 37,769 $ 97 $ ( 6 ) $ ( 250 ) $ 37,610 7 Table of Contents SKYWARD SPECIALTY INSURANCE GROUP, INC. AND SUBSIDIARIES NOTES TO (UNAUDITED) CONDENSED CONSOLIDATED FINANCIAL STATEMENTS 2. Investments (continued) ($ in thousands) Amortized Cost Gross Unrealized Gains Gross Unrealized Loss Allowance for Credit Losses Fair Value December 31, 2024 Fixed maturity securities, available-for-sale: U.S. government securities $ 26,577 $ 35 $ ( 126 ) $ — $ 26,486 Corporate securities and miscellaneous 433,298 5,618 ( 13,288 ) — 425,628 Municipal securities 89,966 116 ( 5,366 ) — 84,716 Residential mortgage-backed securities 408,585 1,875 ( 16,627 ) — 393,833 Commercial mortgage-backed securities 70,262 545 ( 1,443 ) — 69,364 Other asset-backed securities 291,578 2,447 ( 1,834 ) — 292,191 Total fixed maturity securities, available-for-sale $ 1,320,266 $ 10,636 $ ( 38,684 ) $ — $ 1,292,218 Fixed maturity securities, held-to-maturity: Other asset-backed securities $ 39,396 $ — $ ( 436 ) $ ( 243 ) $ 38,717 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 March 31, 2025: ($ in thousands) Amortized Cost Fair Value Due in less than one year $ 26,394 $ 26,361 Due after one year through five years 316,122 312,529 Due after five years through ten years 222,978 221,809 Due after ten years 44,775 42,664 Mortgage-backed securities 486,882 478,588 Other asset-backed securities 313,118 315,557 Total $ 1,410,269 $ 1,397,508 Expected maturities may differ from contractual maturities because borrowers have the right to call or prepay obligations with or without call or prepayment penalties. 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 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 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. 8 Table of Contents SKYWARD SPECIALTY INSURANCE GROUP, INC. AND SUBSIDIARIES NOTES TO (UNAUDITED) CONDENSED CONSOLIDATED FINANCIAL STATEMENTS 2. 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 March 31, 2025 and 2024: 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 March 31, 2025 Fixed maturity securities, available-for-sale: U.S. government securities $ 5,350 $ ( 2 ) $ 2,318 $ ( 68 ) $ 7,668 $ ( 70 ) Corporate securities and miscellaneous 89,029 ( 1,179 ) 80,321 ( 9,667 ) 169,350 ( 10,846 ) Municipal securities 25,337 ( 473 ) 28,863 ( 3,661 ) 54,200 ( 4,134 ) Residential mortgage-backed securities 96,088 ( 984 ) 83,406 ( 11,357 ) 179,494 ( 12,341 ) Commercial mortgage-backed securities 8,833 ( 216 ) 12,372 ( 1,047 ) 21,205 ( 1,263 ) Other asset-backed securities 75,860 ( 507 ) 25,644 ( 917 ) 101,504 ( 1,424 ) Total fixed maturity securities, available-for-sale 300,497 ( 3,361 ) 232,924 ( 26,717 ) 533,421 ( 30,078 ) Fixed maturity securities, held-to-maturity: Other asset-backed securities 37,610 ( 6 ) — — 37,610 ( 6 ) Total fixed maturity securities, held-to-maturity: 37,610 ( 6 ) — — 37,610 ( 6 ) Total $ 338,107 $ ( 3,367 ) $ 232,924 $ ( 26,717 ) $ 571,031 $ ( 30,084 ) 9 Table of Contents SKYWARD SPECIALTY INSURANCE GROUP, INC. AND SUBSIDIARIES NOTES TO (UNAUDITED) CONDENSED CONSOLIDATED FINANCIAL STATEMENTS 2. Investments (continued) 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 December 31, 2024 Fixed maturity securities, available-for-sale: U.S. government securities $ 15,938 $ ( 34 ) $ 2,297 $ ( 92 ) $ 18,235 $ ( 126 ) Corporate securities and miscellaneous 136,888 ( 2,060 ) 81,232 ( 11,228 ) 218,120 ( 13,288 ) Municipal securities 41,930 ( 1,046 ) 27,687 ( 4,320 ) 69,617 ( 5,366 ) Residential mortgage-backed securities 201,407 ( 3,366 ) 82,496 ( 13,261 ) 283,903 ( 16,627 ) Commercial mortgage-backed securities 9,411 ( 126 ) 13,178 ( 1,317 ) 22,589 ( 1,443 ) Other asset-backed securities 75,119 ( 721 ) 29,851 ( 1,113 ) 104,970 ( 1,834 ) Total fixed maturity securities, available-for-sale 480,693 ( 7,353 ) 236,741 ( 31,331 ) 717,434 ( 38,684 ) Fixed maturity securities, held-to-maturity: Other asset-backed securities 2,144 ( 2 ) 36,573 ( 434 ) 38,717 ( 436 ) Total fixed maturity securities, held-to-maturity: 2,144 ( 2 ) 36,573 ( 434 ) 38,717 ( 436 ) Total $ 482,837 $ ( 7,355 ) $ 273,314 $ ( 31,765 ) $ 756,151 $ ( 39,120 ) The Company regularly monitors its available-for-sale fixed maturity securities that have fair values less than cost or amortized cost for signs of impairment, an assessment that requires significant management judgment regarding the evidence known. Such judgments could change in the future as more information becomes known, which could negatively impact the amounts reported. 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 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 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: • U.S. 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. 10 Table of Contents SKYWARD SPECIALTY INSURANCE GROUP, INC. AND SUBSIDIARIES NOTES TO (UNAUDITED) CONDENSED CONSOLIDATED FINANCIAL STATEMENTS 2. Investments (continued) • 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 Gross realized gains Fixed maturity securities, available-for sale $ 453 $ 499 Equity securities 1,745 1,081 Other 4 18 Total 2,202 1,598 Gross realized losses Fixed maturity securities, available-for sale ( 120 ) ( 394 ) Equity securities ( 678 ) ( 1,874 ) Other ( 54 ) ( 18 ) Total ( 852 ) ( 2,286 ) Net unrealized gains (losses) on investments Equity securities 1,080 8,020 Mortgage loans ( 66 ) 971 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 Fixed maturity securities, available-for sale $ 8,195 $ 12,093 Equity securities 8,748 10,458 11 Table of Contents SKYWARD SPECIALTY INSURANCE GROUP, INC. AND SUBSIDIARIES NOTES TO (UNAUDITED) CONDENSED CONSOLIDATED FINANCIAL STATEMENTS 2. 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 Income: Fixed maturity securities, available-for sale $ 17,288 $ 12,231 Fixed maturity securities, held-to-maturity 815 1,126 Equity securities 617 627 Equity method investments ( 1,988 ) 1,098 Mortgage loans 661 1,419 Indirect loans ( 741 ) ( 1,694 ) Short-term investments and cash 3,192 4,240 Other 977 869 Total investment income 20,821 19,916 Investment expenses ( 1,490 ) ( 1,619 ) Net investment income $ 19,331 $ 18,297 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 months ended March 31, 2025 and 2024: Three months ended March 31, ($ in thousands) 2025 2024 Fixed maturity securities $ 15,284 $ ( 7,989 ) Deferred income taxes ( 3,211 ) 1,663 Total $ 12,073 $ ( 6,326 ) 12 Table of Contents SKYWARD SPECIALTY INSURANCE GROUP, INC. AND SUBSIDIARIES NOTES TO (UNAUDITED) CONDENSED CONSOLIDATED FINANCIAL STATEMENTS 3. Fair Value Measurements The Company’s financial instruments include assets and liabilities carried at fair value, as well as assets and liabilities carried at cost or amortized cost but disclosed at fair value in its consolidated financial statements. In determining fair value, the market approach is generally applied, which uses prices and other relevant data based on market transactions involving identical or comparable assets and liabilities. The Company uses data primarily provided by third-party investment managers or pricing vendors to determine the fair value of its investments. Periodic analyses are performed on prices received from third parties to determine whether the prices are reasonable estimates of fair value. The analyses include a review of month-to-month price fluctuations and, as needed, a comparison of pricing services’ valuations to other pricing services’ valuations for the identical security. The Company classifies its financial instruments into the following three-level hierarchy: Level 1 - Inputs are unadjusted, quoted prices for identical assets or liabilities in active markets at the measurement date. Level 2 - Inputs are other than quoted prices included in Level 1 that are observable for the asset or liability through corroboration with market data at the measurement date. Level 3 - Unobservable inputs that reflect management’s best estimate of what market participants would use in pricing the asset or liability at the measurement date. The following methods and assumptions were used in estimating the fair value disclosures for financial instruments in the accompanying consolidated financial statements and in these notes: U.S. government securities, mutual funds and common stock The Company uses unadjusted quoted prices for identical instruments in an active exchange to measure fair value which represent Level 1 inputs. Preferred stocks, municipal securities, corporate securities and miscellaneous The Company uses a pricing model that utilizes market-based inputs such as trades in an illiquid market for a particular security or trades in active markets for securities with similar characteristics. The model considers other inputs such as benchmark yields, issuer spreads, security terms and conditions, and other market data. These represent Level 2 fair value inputs. Commercial mortgage-backed securities, residential mortgage-backed securities and other asset-backed securities The Company uses a pricing model that utilizes market-based inputs that may include dealer quotes, market spreads, and yield curves. It may evaluate individual tranches in a security by determining cash flows using the security’s terms and conditions, collateral performance, credit information benchmark yields and estimated prepayments. 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. 13 Table of Contents SKYWARD SPECIALTY INSURANCE GROUP, INC. AND SUBSIDIARIES NOTES TO (UNAUDITED) CONDENSED CONSOLIDATED FINANCIAL STATEMENTS 3. Fair Value Measurements (continued) 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 Mortgage loans have variable interest rates and are collateralized by real property. The Company determines fair value of mortgage loans using the income approach utilizing inputs that are observable and unobservable (Level 3). The unobservable input consists of the spread applied to a prime rate used to discount cash flows. 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 March 31, 2025 and December 31, 2024: March 31, 2025 December 31, 2024 High 7.93 % 10.00 % Low 7.59 % 7.00 % Weighted average 7.69 % 7.93 % 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. 14 Table of Contents SKYWARD SPECIALTY INSURANCE GROUP, INC. AND SUBSIDIARIES NOTES TO (UNAUDITED) CONDENSED CONSOLIDATED FINANCIAL STATEMENTS 3. 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 Fixed maturity securities, available-for-sale: U.S. government securities $ 26,682 $ — $ — $ 26,682 Corporate securities and miscellaneous — 415,528 75,322 490,850 Municipal securities — 85,831 — 85,831 Residential mortgage-backed securities — 402,397 — 402,397 Commercial mortgage-backed securities — 76,191 — 76,191 Other asset-backed securities — 307,422 8,135 315,557 Total fixed maturity securities, available-for-sale 26,682 1,287,369 83,457 1,397,508 Fixed maturity securities, held-to-maturity: Other asset-backed securities — — 37,610 37,610 Total fixed maturity securities, held-to-maturity — — 37,610 37,610 Equity securities: Common stocks 64,215 — — 64,215 Preferred stocks — 1,160 — 1,160 Mutual funds 42,700 — — 42,700 Total equity securities 106,915 1,160 — 108,075 Mortgage loans — — 16,012 16,012 Short-term investments 308,042 — — 308,042 Total $ 441,639 $ 1,288,529 $ 137,079 $ 1,867,247 15 Table of Contents SKYWARD SPECIALTY INSURANCE GROUP, INC. AND SUBSIDIARIES NOTES TO (UNAUDITED) CONDENSED CONSOLIDATED FINANCIAL STATEMENTS 3. Fair Value Measurements (continued) December 31, 2024 ($ in thousands) Level 1 Level 2 Level 3 Total Fixed maturity securities, available-for-sale: U.S. government securities $ 26,486 $ — $ — $ 26,486 Corporate securities and miscellaneous — 354,815 70,813 425,628 Municipal securities — 84,716 — 84,716 Residential mortgage-backed securities — 393,833 — 393,833 Commercial mortgage-backed securities — 69,364 — 69,364 Other asset-backed securities — 285,084 7,107 292,191 Total fixed maturity securities, available-for-sale 26,486 1,187,812 77,920 1,292,218 Fixed maturity securities, held-to-maturity: Other asset-backed securities — — 38,717 38,717 Total fixed maturity securities, held-to-maturity: — — 38,717 38,717 Equity securities: Common stocks 64,251 — — 64,251 Preferred stocks — 1,164 — 1,164 Mutual funds 40,839 — — 40,839 Total equity securities 105,090 1,164 — 106,254 Mortgage loans — — 26,490 26,490 Short-term investments 274,929 — — 274,929 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 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 losses for the period recognized in net investment gains ( 110 ) ( 66 ) Issuances — 5 Settlements — ( 10,417 ) 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 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 16 Table of Contents SKYWARD SPECIALTY INSURANCE GROUP, INC. AND SUBSIDIARIES NOTES TO (UNAUDITED) CONDENSED CONSOLIDATED FINANCIAL STATEMENTS 3. Fair Value Measurements (continued) 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. In addition to the preceding disclosures on assets and liabilities recorded at fair value in the consolidated balance sheets, the Company is also required to disclose the fair values of certain other financial instruments for which it is practicable to estimate fair value. Estimated fair value amounts, defined as the quoted market price of a financial instrument, have been determined using available market information and other appropriate valuation methodologies. However, considerable judgements are required in developing the estimates of fair value where quoted market prices are not available. Accordingly, these estimates are not necessarily indicative of the amounts that could be realized in a current market exchange. The use of different market assumptions or estimating methodologies may have an effect on the estimated fair value amounts. The following methods and assumptions were used in estimating the fair value disclosures of other financial instruments: Fixed maturity securities, held-to-maturity: Fixed maturity securities, held-to-maturity consists of senior and junior notes with target rates of return. 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: The carrying value approximates the estimated fair value for notes payable as the notes payable accrue interest at current market rates plus a spread. The Company determines fair value using the income approach utilizing inputs that are observable (Level 2). Subordinated debt: 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). 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 Value Fair Value Carrying Value Fair Value Notes payable FHLB Loan $ 57,000 $ 57,089 $ 57,000 $ 56,200 Revolving credit facility 43,000 43,000 43,000 43,000 Notes payable $ 100,000 $ 100,089 $ 100,000 $ 99,200 Subordinated debt Unsecured subordinated notes $ 19,545 $ 20,370 $ 19,536 $ 20,541 Subordinated debt, net of debt issuance costs $ 19,545 $ 20,370 $ 19,536 $ 20,541 Other financial instruments qualify as insurance-related products and are specifically exempted from fair value disclosure requirements. 4. Mortgage Loans The Company has invested in Separately Managed Accounts (“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 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. 17 Table of Contents SKYWARD SPECIALTY INSURANCE GROUP, INC. AND SUBSIDIARIES NOTES TO (UNAUDITED) CONDENSED CONSOLIDATED FINANCIAL STATEMENTS 4. 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 Retail — 10,032 Hospitality 7,996 7,984 $ 16,012 $ 26,490 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 Commercial $ 108 $ 458 Retail 304 490 Hospitality 249 471 $ 661 $ 1,419 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 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. 5. 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 March 31, 2025 and December 31, 2024: ($ in thousands) March 31, 2025 December 31, 2024 Carrying Value Ownership % Carrying Value Ownership % Arena Special Opportunities Fund, LP units $ 32,364 14.9 % $ 34,936 15.3 % JVM Funds LLC units 16,692 10.1 % 17,229 10.1 % Hudson Ventures Fund 2 LP units 4,897 2.5 % 4,967 2.5 % 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 18 Table of Contents SKYWARD SPECIALTY INSURANCE GROUP, INC. AND SUBSIDIARIES NOTES TO (UNAUDITED) CONDENSED CONSOLIDATED FINANCIAL STATEMENTS 5. 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 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 ) 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 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 Dowling Capital Partners LP units 386 386 Hudson Ventures Fund 2 LP units 266 397 $ 4,422 $ 4,860 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. The Company amortizes the difference in net assets over the same useful life of a similar asset as the underlying equity method investment. For investment in RISCOM, a similar asset would be agent relationships. 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 March 31, 2025 and December 31, 2024: ($ in thousands) March 31, 2025 December 31, 2024 Investment in RISCOM: Underlying equity $ 1,689 $ 3,756 Difference 1,197 1,258 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 March 31, 2025 and December 31, 2024: ($ in thousands) March 31, 2025 December 31, 2024 Investment in JVM Funds LLC: Underlying equity $ 16,125 $ 16,624 Difference 567 605 Recorded investment balance $ 16,692 $ 17,229 19 Table of Contents SKYWARD SPECIALTY INSURANCE GROUP, INC. AND SUBSIDIARIES NOTES TO (UNAUDITED) CONDENSED CONSOLIDATED FINANCIAL STATEMENTS 5. Equity Method Investments and Other (continued) Investment in Indirect Loans and Loan Collateral 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 SMA2 10,350 12,973 Investment in indirect loans and loan collateral $ 29,443 $ 33,269 6. Segment 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. 20 Table of Contents SKYWARD SPECIALTY INSURANCE GROUP, INC. AND SUBSIDIARIES NOTES TO (UNAUDITED) CONDENSED CONSOLIDATED FINANCIAL STATEMENTS 6. 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 21 Table of Contents SKYWARD SPECIALTY INSURANCE GROUP, INC. AND SUBSIDIARIES NOTES TO (UNAUDITED) CONDENSED CONSOLIDATED FINANCIAL STATEMENTS 6. 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 Revenues: Net earned premiums $ 300,366 $ 236,342 Commission and fee income 1,976 2,026 Total underwriting revenues 302,342 238,368 Expenses: 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 Add: Net investment income 19,331 18,297 Net investment gains 6,841 8,303 Other income 13 — Less: 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 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, 2025 2024 Annualized return on equity 20.5 % 21.7 % March 31, 2025 December 31, 2024 Book value per share $ 21.06 $ 19.79 22 Table of Contents SKYWARD SPECIALTY INSURANCE GROUP, INC. AND SUBSIDIARIES NOTES TO (UNAUDITED) CONDENSED CONSOLIDATED FINANCIAL STATEMENTS 7. Income Taxes 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 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, non-deductible expenses and discrete items. 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 %. 8. 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 three months ended March 31, 2025 and 2024: Three months ended March 31, ($ in thousands) 2025 2024 Reserves for losses and LAE, beginning of period $ 1,782,383 $ 1,314,501 Less: reinsurance recoverable on unpaid claims, beginning of period ( 670,846 ) ( 455,484 ) Reserves for losses and LAE, beginning of period, net of reinsurance 1,111,537 859,017 Incurred, net of reinsurance, related to: Current period 187,309 144,155 Prior years — — Total incurred, net of reinsurance 187,309 144,155 Paid, net of reinsurance, related to: Current period 15,256 11,805 Prior years 118,900 80,516 Total paid 134,156 92,321 Net reserves for losses and LAE, end of period 1,164,690 910,851 Plus: reinsurance recoverable on unpaid claims, end of period 706,801 466,095 Reserves for losses and LAE, end of period $ 1,871,491 $ 1,376,946 23 Table of Contents SKYWARD SPECIALTY INSURANCE GROUP, INC. AND SUBSIDIARIES NOTES TO (UNAUDITED) CONDENSED CONSOLIDATED FINANCIAL STATEMENTS 9. Commission and Fee Income Skyward Underwriters Agency, Inc. (“SUA”), a subsidiary of the Company, is a managing general insurance agent and reinsurance broker for property and casualty and accident and health risks in specialty niche markets. 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 months ended March 31, 2025 and 2024: Three months ended March 31, ($ in thousands) 2025 2024 SUA commission revenue $ 865 $ 990 SUA fee income 1,629 846 Other ( 518 ) 190 Total commission and fee income $ 1,976 $ 2,026 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. 10. Underwriting, Acquisition and Insurance Expenses 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 Amortization of policy acquisition costs $ 44,490 $ 31,977 Other operating and general expenses 42,061 37,797 Total underwriting, acquisition and insurance expenses $ 86,551 $ 69,774 11. Reinsurance Certain premiums and benefits are assumed from and ceded to other insurance companies under various reinsurance agreements. The reinsurance agreements provide the Company with increased capacity to write larger risks and maintain its exposure to loss within its capital resources. 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 months ended March 31, 2025 and 2024: 2025 2024 ($ in thousands) Written Earned Written Earned Direct premiums $ 408,310 $ 385,438 $ 366,796 $ 327,172 Assumed premiums 127,016 78,727 91,824 62,186 Ceded premiums ( 192,055 ) ( 163,799 ) ( 171,520 ) ( 153,016 ) Net premiums $ 343,271 $ 300,366 $ 287,100 $ 236,342 Ceded losses and LAE incurred $ 135,467 $ 85,619 24 Table of Contents SKYWARD SPECIALTY INSURANCE GROUP, INC. AND SUBSIDIARIES NOTES TO (UNAUDITED) CONDENSED CONSOLIDATED FINANCIAL STATEMENTS 11. Reinsurance (continued) 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 Ceded paid losses and LAE 198,464 166,663 Loss portfolio transfer — 22,662 Allowance for credit losses ( 2,295 ) ( 2,295 ) Reinsurance recoverables $ 902,970 $ 857,876 Ceded unearned premium $ 232,147 $ 203,901 The Company entered into agreements with several of its reinsurers, whereby the reinsurer established funded trust accounts with the Company as the sole beneficiary. 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 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 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. 12. Earnings Per Share 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 Numerator Net income $ 42,058 $ 36,784 Denominator Basic weighted-average common shares 40,196,416 39,108,351 Dilutive effect of stock notes — 711,752 Dilutive effect of stock units 1,004,585 935,890 Dilutive effect of options 479,594 329,143 Diluted weighted-average common share equivalents 41,680,595 41,085,136 Basic earnings per share $ 1.05 $ 0.94 Diluted earnings per share $ 1.01 $ 0.90 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, 2025 2024 Stock units 56,155 70,671 Options 2,512 48 25 Table of Contents SKYWARD SPECIALTY INSURANCE GROUP, INC. AND SUBSIDIARIES NOTES TO (UNAUDITED) CONDENSED CONSOLIDATED FINANCIAL STATEMENTS 12. 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 months ended March 31, 2025 and 2024: Three months ended March 31, 2025 2024 Common shares — 866,428 Total — 866,428 13. Related Party Transactions RISCOM RISCOM provides the Company with wholesale brokerage services. RISCOM and the Company also have a managing general agency agreement. The Company holds a 20 % ownership interest in RISCOM. 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 Net earned premium $ 28,960 $ 25,894 Commissions 7,632 6,887 Premiums receivable as of March 31, 2025 and December 31, 2024 were $ 18.6 million and $ 12.6 million, respectively. Other 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. 14. Commitments and Contingencies Litigation The Company is named as a defendant in various legal actions arising from claims made under insurance policies and contracts. Those actions are considered by the Company in estimating the losses and loss adjustment expense reserves. Also, from time to time, the Company is a defendant in various legal actions that relate to bad faith claims, disputes with third parties or that involve alleged errors and omissions. The Company records accruals for these items to the extent the losses are probable and reasonably estimable. Although the ultimate outcome of these matters cannot be determined at this time, based on present information, the availability of insurance coverage and advice received from outside legal counsel, the Company believes the resolution of any such matters will not, individually or in the aggregate, have a material adverse effect on the Company’s consolidated financial position, results of operations or cash flows. Indemnification In conjunction with the sale of business assets and subsidiaries, the Company has provided indemnifications to certain buyers. Certain indemnifications cover typical representations and warranties related to the responsibilities to perform under the sales contracts. The amount of potential exposure covered by the indemnifications is difficult to determine because the indemnifications cover a variety of matters, operations and scenarios. Certain of these indemnifications have no time limit. At this time, the Company does not have reason to believe any such significant claims exist. 26 Table of Contents