What changed in this filing

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Item 2. Management’s Discussion and Analysis

2025-11-06 compared with 2025-08-07 · 82 added, 74 removed, 284 unchanged (35% of the section changed)

2 unchanged sentences

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

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

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

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

3 unchanged sentences

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

The results of operations for the three and six months ended June 30, 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 results of operations for the three and nine months ended September 30, 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.

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.

On September 2, 2025, we entered into two share purchase agreements (the "Apollo Majority SPAs") with institutional and management shareholders, respectively, of Apollo Group Holdings Limited ("Apollo") (the "Majority Sellers").

Pursuant to the Apollo Majority SPAs, in accordance with the terms and subject to the conditions therein, we have agreed to acquire all of the issued shares of Apollo held by the Majority Sellers, representing approximately 87% of the issued share capital of Apollo.

In addition, the closing of the transaction ("completion") is conditioned upon the Company acquiring 100% of the issued share capital of Apollo at completion pursuant to additional short-form share purchase agreements (the "Apollo Minority SPAs" and together with the Apollo Majority SPAs, the "Apollo SPAs") to be entered into either prior to or at completion with the remaining minority shareholders of Apollo (the "Minority Sellers" and together with the Majority Sellers, the "Sellers").

The consideration for the entire issued share capital of Apollo under the Apollo SPAs is $555.0 million, approximately 33% of which will be satisfied by the issue of common stock of the Company to certain Sellers and the remainder in cash.

The acquisition is expected to close in the first quarter of 2026, subject to the satisfaction of closing conditions, including regulatory approvals.

In connection with the Apollo SPAs, on September 2, 2025, we entered into debt commitment letters (the "Apollo Commitment Letters") pursuant to which Barclays Bank PLC (the "Lender") has committed to provide us with debt financing in the form of (i) up to two senior unsecured delayed draw term loan credit facilities of up to $300.0 million in total, and (ii) in case the borrower is not able to obtain consent from lenders under its existing revolving credit agreement to the transactions under the Apollo SPAs, a senior unsecured bridge facility of up to $150.0 million, in each case, on the terms and subject to the conditions set forth in the Apollo Commitment Letters.

As of September 30, 2025, we have recognized $3.1 million in acquisition-related expenses associated with this pending transaction.

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

We 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.

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Results of Operations

The following table summarizes our results for the three and six months ended June 30, 2025 and 2024:

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

The following table summarizes our results for the three and nine months ended September 30, 2025 and 2024:

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

($ in thousands) 2025 2024 2025 2024

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Net investment income $ 22,180 $ 19,535 $ 60,107 $ 59,866

Net investment gains (losses) $ 3,205 $ (1,721) $ 10,039 $ 6,582

Net investment gains $ 6,881 $ 10,173 $ 16,920 $ 16,755

Income before income taxes $ 60,547 $ 46,853 $ 161,777 $ 134,185

15 unchanged sentences

Adjusted Operating Income

The following table provides a reconciliation of adjusted operating income to net income for the three and six months ended June 30, 2025 and 2024:

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

The following table provides a reconciliation of adjusted operating income to net income for the three and nine months ended September 30, 2025 and 2024:

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

2025 2024 2025 2024

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Net impact of LPT — — 318 251 — — 800 632

Other income 7 5 (7) (6) 20 16 (7) (6)

Other loss (236) (179) (195) (154) (216) (169) (202) (160)

Other expenses (4,149) (3,145) (1,117) (882) (6,212) (4,869) (3,350) (2,647)

1 unchanged sentence

Underwriting Income

The following table provides a reconciliation of underwriting income to income before federal income tax expense for the three and six months ended June 30, 2025 and 2024:

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

The following table provides a reconciliation of underwriting income to income before federal income tax expense for the three and nine months ended September 30, 2025 and 2024:

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

($ in thousands) 2025 2024 2025 2024

5 unchanged sentences

Net investment gains 6,881 10,173 16,920 16,755

Other income 7 (7) 20 (7)

Other loss (236) (195) (216) (202)

Underwriting income $ 38,245 $ 21,037 $ 97,971 $ 69,620

Tangible Stockholders’ Equity

The following table provides a reconciliation of tangible stockholders’ equity to stockholders’ equity for the periods ended June 30, 2025 and 2024:

The following table provides a reconciliation of tangible stockholders’ equity to stockholders’ equity for the periods ended September 30, 2025 and 2024:

($ 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 six months ended June 30, 2025 and 2024:

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

The following table provides a reconciliation of annualized adjusted return on equity to annualized return on equity for the three and nine months ended September 30, 2025 and 2024:

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

($ in thousands) 2025 2024 2025 2024

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Annualized Return on Tangible Equity

Annualized return on tangible equity for the three and six months ended June 30, 2025 and 2024 reconciles to annualized return on equity as follows:

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

Annualized return on tangible equity for the three and nine months ended September 30, 2025 and 2024 reconciles to annualized return on equity as follows:

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

($ in thousands) 2025 2024 2025 2024

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Annualized Adjusted Return on Tangible Equity

Annualized adjusted return on tangible equity for the three and six months ended June 30, 2025 and 2024 reconciles to annualized return on equity as follows:

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

Annualized adjusted return on tangible equity for the three and nine months ended September 30, 2025 and 2024 reconciles to annualized return on equity as follows:

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

($ in thousands) 2025 2024 2025 2024

4 unchanged sentences

Underwriting Results

The following tables present gross written premiums by underwriting division for the three and six months ended June 30, 2025 and 2024:

Three months ended June 30,

The following tables present gross written premiums by underwriting division for the three and nine months ended September 30, 2025 and 2024:

Three months ended September 30,

($ in thousands) 2025 2024 Change % Change

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(1) Excludes exited business

Six months ended June 30,

Nine months ended September 30,

($ in thousands) 2025 2024 Change % Change

11 unchanged sentences

(1) Excludes exited business

The increases in gross written premiums for the second quarter and first half of 2025, when compared to the same 2024 periods, were driven by double-digit premium growth primarily from the agriculture and credit (re)insurance, accident & health, specialty programs and captives divisions, partially offset by decreases in gross written premiums in the global property and construction & energy solutions divisions.

Net written premiums for the second quarter of 2025 were $339.2 million compared to $297.1 million for the same 2024 period, an increase of $42.1 million or 14.2%.

Net written premiums for the first half of 2025 were $682.5 million

compared to $584.2 million for the same 2024 period, an increase of $98.3 million or 16.8%.

The increases in gross written premiums for the third quarter and first nine months of 2025, when compared to the same 2024 periods, were primarily driven by growth from the agriculture and credit (re)insurance division.

Specialty programs, accident & health, captives and surety also contributed meaningfully to the growth, partially offset by decreases in gross written premiums in the global property, professional lines and construction and energy solutions divisions.

Net written premiums for the third quarter of 2025 were $441.2 million compared to $268.3 million for the same 2024 period, an increase of $172.8 million or 64.4%.

Net written premiums for the first nine months of 2025 were $1,123.7 million compared to $852.6 million for the same 2024 period, an increase of $271.1 million or 31.8%.

The increases 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 second quarter of 2025 were $295.5 million compared to $257.6 million for the same 2024 period, an increase of $37.9 million or 14.7%.

Net earned premiums for the first half of 2025 were $595.9 million compared to $493.9 million for the same 2024 period, an increase of $102.0 million or 20.6%.

Net earned premiums for the third quarter of 2025 were $351.8 million compared to $269.6 million for the same 2024 period, an increase of $82.2 million or 30.5%.

Net earned premiums for the first nine months of 2025 were $947.7 million compared to $763.5 million for the same 2024 period, an increase of $184.2 million or 24.1%.

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

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Losses and LAE

The following tables set forth the components of the loss and LAE ratios and adjusted loss and LAE ratios for the three and six months ended June 30, 2025 and 2024:

Three months ended June 30,

The following tables set forth the components of the loss and LAE ratios and adjusted loss and LAE ratios for the three and nine months ended September 30, 2025 and 2024:

Three months ended September 30,

($ in thousands) Losses

8 unchanged sentences

(1) Current accident year

Six months ended June 30,

Nine months ended September 30,

($ in thousands) Losses

8 unchanged sentences

(1) Current accident year

The loss ratio for the second quarter improved 0.4 points and it increased 0.6 points for the first half of 2025, when compared to the same 2024 periods, respectively.

Catastrophe losses in the second quarter increased marginally when compared to the same 2024 period, driven by convective storms in the South and Midwest.

The first half of 2025 was also impacted by convective storms in the Midwest and the California wildfires.

The non-cat loss and LAE ratios for the second quarter and first half of 2025 improved 0.7 points and 0.5 points, respectively, when compared to the same 2024 periods, primarily driven by the business mix shift.

The loss ratios for the third quarter and first nine months of 2025 improved 2.5 points and 0.6 points when compared to the same 2024 periods, respectively, primarily driven by the business mix shift.

Catastrophe losses in the third quarter of 2025 decreased when compared to the same 2024 period, which was impacted by higher catastrophe losses, primarily from Hurricanes Helene and Beryl.

The first nine months of 2025 were impacted by convective storms in the Midwest and the California wildfires.

The non-cat loss and LAE ratios for the third quarter and first nine months of 2025 improved 0.4 points and 0.5 points, respectively, when compared to the same 2024 periods, primarily driven by the business mix shift.

Expense Ratio

The following tables set forth the components of the expense ratios for the three and six months ended June 30, 2025 and 2024:

Three months ended June 30,

The following tables set forth the components of the expense ratios for the three and nine months ended September 30, 2025 and 2024:

Three months ended September 30,

($ in thousands) Expenses % of

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Total net expenses $ 99,772 28.4 % $ 77,999 28.9 %

Six months ended June 30,

Nine months ended September 30,

($ in thousands) Expenses % of

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Total net expenses $ 267,383 28.2 % $ 220,373 28.9 %

The expense ratios for the second quarter and first half of 2025 improved 0.9 points and 0.7 points, respectively, when compared to the same 2024 periods due to earnings leverage partially offset by higher acquisition costs due to the business mix shift.

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 ratios for the third quarter and first nine months of 2025 improved 0.5 points and 0.7 points, respectively, when compared to the same 2024 periods due to earnings leverage partially offset by higher acquisition costs due to the business mix shift.

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

Investment Results

The following table sets forth the components of net investment income and net investment gains (losses) for the three and six months ended June 30, 2025 and 2024:

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

The following table sets forth the components of net investment income and net investment gains (losses) for the three and nine months ended September 30, 2025 and 2024:

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

$ in thousands 2025 2024 2025 2024

4 unchanged sentences

Net investment income $ 22,180 $ 19,535 $ 60,107 $ 59,866

Net unrealized gains (losses) on securities still held

Net unrealized (losses) gains on securities still held

$ (8,987) $ 8,378 $ (6,677) $ 15,609

Net realized gains (losses) 6,386 (39) 7,729 (649)

Net investment gains (losses) $ 3,205 $ (1,721) $ 10,039 $ 6,582

Net investment income for the second quarter and first half of 2025 decreased $3.4 million and $2.4 million, respectively when compared to the same 2024 periods.

The decreases in net investment income were primarily driven by losses from our alternative & strategic investments portfolio due to the decline in the fair value of limited partnership investments.

Partially offsetting the decreases in net investment income were increases in income from our fixed income

portfolio for the second quarter and first half of 2025, when compared to the same 2024 periods, due to (i) a larger asset base, and (ii) a higher book yield of 5.3% at June 30, 2025 compared to 4.4% at June 30, 2024.

Net realized gains 15,868 1,795 23,597 1,146

Net investment gains $ 6,881 $ 10,173 $ 16,920 $ 16,755

Net investment income for the third quarter and first nine months of 2025 increased $2.6 million and $0.2 million, respectively when compared to the same 2024 periods, driven by increased income from our fixed income portfolio due to a higher book yield of 5.3% at September 30, 2025 compared to 5.0% at September 30, 2024 and larger asset base.

The alternative and strategic investments portfolio continued to be impacted by the decline in the fair value of limited partnership investments.

The decreases in income from the short-term investments and cash and cash equivalents was due to an overall decrease in yields when compared to the same 2024 periods.

The decrease in income from equities was due to the sale of almost all of the equity portfolio in the third quarter of 2025.

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

1 unchanged sentence

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

We reviewed our available-for-sale fixed maturities at June 30, 2025 and determined that for two available-for-sale securities in the “corporate securities and miscellaneous” category, and recognized a provision for credit losses of $6.2 million.

This determination was made based on new recovery analysis that showed deteriorating conditions raising credit concerns.

Other than the securities discussed previously, we determined that no other credit impairment existed.

We reviewed our available-for-sale fixed maturities at June 30, 2025 and recognized a provision for credit losses of $6.2 million for two available-for-sale “corporate securities and miscellaneous” securities.

At September 30, 2025, we recognized an additional provision for credit losses of $0.8 million for one available-for-sale “corporate securities and miscellaneous” security.

Other than the securities discussed previously, we determined that no other credit impairment existed at September 30, 2025.

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

Composition of Investment Portfolio

The following table sets forth the components of our investment portfolio at carrying value at June 30, 2025 and December 31, 2024:

The following table sets forth the components of our investment portfolio at carrying value at September 30, 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 June 30, 2025 and December 31, 2024:

The following table sets forth the components of our fixed income securities at September 30, 2025 and December 31, 2024:

($ in thousands) Carrying Value % of Total

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Total fixed income portfolio $ 1,815,216 100.0 % $ 1,318,708 100.0 %

The weighted average credit rating of our available-for-sale fixed income portfolio was “A+” at June 30, 2025 and “AA-” at December 31, 2024.

The following table sets forth the credit quality of our available-for-sale fixed income portfolio at June 30, 2025 and December 31, 2024:

The weighted average credit rating of our available-for-sale fixed income portfolio was “A+” at September 30, 2025 and “AA-” at December 31, 2024.

The following table sets forth the credit quality of our available-for-sale fixed income portfolio at September 30, 2025 and December 31, 2024:

($ 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 4.35 years and 4.34 years, respectively, as of June 30, 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.

The average duration of our fixed income portfolio was approximately 4.07 years and 4.34 years, respectively, as of September 30, 2025 and December 31, 2024.

The equities portfolio primarily consisted of domestic preferred stocks, common equities, exchange traded funds, limited partnerships, limited liability corporations and other types of equity interests, 100.0% of which were publicly traded.

During the third quarter of 2025, we sold almost all of our equities portfolio, retaining only our preferred stocks.

Alternative and strategic investments

3 unchanged sentences

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

Income tax expense for the three and six months ended June 30, 2025 was $11.0 million and $20.3 million, respectively, compared to $9.4 million and $19.6 million, respectively, for the same 2024 periods.

Our effective tax rates for the three and six months ended June 30, 2025 were 22.0% and 20.1%, respectively, compared to 23.3% and 22.4% for the same 2024 periods, respectively.

The effective tax rate for the six months ended June 30, 2025 was impacted by certain discrete tax items, primarily tax benefits from stock-based compensation, which reduced the effective tax rate by 1.7%.

Income tax expense for the three and nine months ended September 30, 2025 was $14.6 million and $35.0 million, respectively, compared to $10.2 million and $29.8 million, respectively, for the same 2024 periods.

Our effective tax rates for the three and nine months ended September 30, 2025 were 24.2% and 21.6%, respectively, compared to 21.7% and 22.2% for the same 2024 periods, respectively.

The effective tax rate for the three months ended September 30, 2025 was primarily impacted by a permanent tax item related to non-deductible acquisition expenses, which increased the effective tax rate by 1.1%.

For additional information, see Note 9 of our condensed consolidated financial statements included in Item 1 of this Form 10-Q.

10 unchanged sentences

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

Our cash flows for the six months ended June 30, 2025 and 2024:

Our cash flows for the nine months ended September 30, 2025 and 2024:

($ in thousands) 2025 2024

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

Net cash used in investing activities in 2025 and 2024 were primarily driven by purchases of fixed maturity securities.

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

Net cash used in investing activities in 2025 and 2024 was primarily driven by purchases of fixed maturity securities.

Credit Agreements

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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 June 30, 2025, we had $43.0 million outstanding under the Revolving Credit Facility with another $107.0 million of undrawn capacity.

As of September 30, 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 June 30, 2025, the six-month SOFR on the Revolving Credit Facility was 4.22%, plus a margin of 1.60%.

At September 30, 2025, the six-month SOFR on the Revolving Credit Facility was 3.87%, plus a margin of 1.60%.

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

Best Rating and minimum liquidity.

As of June 30, 2025, we are in compliance with all covenants.

As of September 30, 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 June 30, 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 11.7% 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%.

At September 30, 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 11.1% 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 June 30, 2025, no shares had been repurchased under this plan.

As of September 30, 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.

7 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 six months ended June 30, 2025 our net retention on a written basis (calculated as net written premiums as a percentage of gross written premiums) was 58.0% and 60.9%, respectively, compared to 59.9% and 61.2%, respectively, for the same 2024 period.

The following is a summary of our reinsurance programs as of June 30, 2025:

For the three and nine months ended September 30, 2025 our net retention on a written basis (calculated as net written premiums as a percentage of gross written premiums) was 72.7% and 65.1%, respectively, compared to 67.1% and 62.9% for the same 2024 periods, respectively.

The following is a summary of our reinsurance programs as of September 30, 2025:

Line of Business Maximum Company Retention

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On August 14, 2025, A.M.

Best upgraded Skyward Specialty’s financial strength rating to A (Excellent) from A- (Excellent) and revised the outlook to stable from positive.

Best affirmed Skyward Specialty’s financial strength rating of A (Excellent) with a stable outlook.

Quantitative and Qualitative Disclosures About Market Risk

1 unchanged sentence

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