Skyward Specialty Insurance Group, Inc. 10-Q

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations The term “Skyward Specialty” as used below refers only to Skyward Specialty Insurance Group, Inc. 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. We discuss certain key metrics which provide useful information about our business and the operational factors underlying our financial performance. Many of these metrics are generally standard among insurance companies and help to provide comparability with our peers. Select insurance, accounting, operating and financial terms for Skyward Specialty are defined in the sections entitled “Select Insurance and Financial Terms” and “Key Operating and Financial Metrics” included in our 2024 Form 10-K for the year ended December 31, 2024 (the “2024 Form 10-K”). The discussion and analysis below include certain forward-looking statements that are subject to risks, uncertainties and other factors described in “Risk Factors” in our 2024 Form 10-K. 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, 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. The accompanying condensed consolidated financial statements and related notes have been prepared in accordance with United States (“U.S.”) generally accepted accounting principles (“GAAP”). Overview Founded in 2006, Skyward Specialty is a specialty insurance holding company incorporated in Delaware. We have one reportable segment through which we offer 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. We focus our business on markets that are underserved, dislocated and/or for which standard insurance coverages are insufficient or inadequate to meet the needs of businesses, including our customers and prospective customers operating in these markets. Our customers typically require highly specialized, customized underwriting solutions and claims capabilities. As such, we develop and deliver tailored insurance products and services to address each of the niche markets we serve. 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 $3.1 million in acquisition-related expenses associated with this pending transaction. During the first quarter of 2025, we updated our underwriting divisions to align with how management currently oversees the business, allocates resources and evaluates operating performance. We added a ninth division, Agriculture and Credit (Re)insurance, which includes the Global Agriculture unit, previously reported with Global Property, and the Mortgage and Credit units, and focuses on specialty classes for which reinsurance provides a more attractive market entry. The Industry Solutions division is now the Construction & Energy Solutions division and the Inland Marine unit is now 33 Table of Contents included in the Transactional E&S division. Programs is now Specialty Programs. Prior reporting periods have been conformed to reflect the new presentation. All of our insurance company subsidiaries are group rated and have financial strength ratings of “A” (Excellent) with stable outlook from the A.M. Best Company. Results of Operations The following table summarizes our results for the three and nine months ended September 30, 2025 and 2024: Three months ended September 30, Nine months ended September 30, ($ in thousands) 2025 2024 2025 2024 Gross written premiums $ 606,509 $ 400,014 $ 1,726,749 $ 1,354,877 Ceded written premiums (165,342) (131,692) (603,098) (502,326) Net written premiums $ 441,167 $ 268,322 $ 1,123,651 $ 852,551 Net earned premiums $ 351,797 $ 269,557 $ 947,705 $ 763,482 Commission and fee income 1,904 1,818 6,440 5,897 Losses and LAE 213,780 170,521 582,351 473,489 Underwriting, acquisition and insurance expenses 101,676 79,817 273,823 226,270 Underwriting income (1) $ 38,245 $ 21,037 $ 97,971 $ 69,620 Net investment income $ 22,180 $ 19,535 $ 60,107 $ 59,866 Net investment gains $ 6,881 $ 10,173 $ 16,920 $ 16,755 Income before income taxes $ 60,547 $ 46,853 $ 161,777 $ 134,185 Net income $ 45,901 $ 36,668 $ 126,798 $ 104,422 Adjusted operating income (1) $ 44,008 $ 29,416 $ 118,574 $ 93,361 Loss and LAE ratio 60.8 % 63.3 % 61.4 % 62.0 % Expense ratio 28.4 % 28.9 % 28.2 % 28.9 % Combined ratio 89.2 % 92.2 % 89.6 % 90.9 % Annualized return on equity 19.7 % 19.3 % 19.3 % 19.1 % Annualized return on tangible equity (1) 21.8 % 21.8 % 21.4 % 21.7 % Annualized adjusted return on equity (1) 18.9 % 15.5 % 18.0 % 17.1 % Annualized adjusted return on tangible equity (1) 20.9 % 17.5 % 20.0 % 19.4 % (1) See “Reconciliation of Non-GAAP Financial Measures” in this Item 2 Reconciliation of Non-GAAP Financial Measures 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, 2025 and 2024: Three months ended September 30, Nine months ended September 30, 2025 2024 2025 2024 ($ in thousands) Pre-tax After-tax Pre-tax After-tax Pre-tax After-tax Pre-tax After-tax Income as reported $ 60,547 $ 45,901 $ 46,853 $ 36,668 $ 161,777 $ 126,798 $ 134,185 $ 104,422 Less (add): Net investment gains 6,881 5,217 10,173 8,037 16,920 13,262 16,755 13,236 Net impact of LPT — — 318 251 — — 800 632 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) Adjusted operating income $ 58,051 $ 44,008 $ 37,674 $ 29,416 $ 151,285 $ 118,574 $ 120,182 $ 93,361 34 Table of Contents Underwriting Income 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 Income before income taxes $ 60,547 $ 46,853 $ 161,777 $ 134,185 Add: Interest expense 1,919 2,229 5,629 7,405 Amortization expense 455 351 1,164 1,099 Other expenses 4,149 1,117 6,212 3,350 Less: Net investment income 22,180 19,535 60,107 59,866 Net investment gains 6,881 10,173 16,920 16,755 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 September 30, 2025 and 2024: ($ in thousands) 2025 2024 Stockholders’ equity $ 961,423 $ 797,507 Less: Goodwill and intangible assets 88,417 87,607 Tangible stockholders’ equity $ 873,006 $ 709,900 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, 2025 and 2024: Three months ended September 30, Nine months ended September 30, ($ in thousands) 2025 2024 2025 2024 Numerator: annualized adjusted operating income $ 176,032 $ 117,664 $ 158,099 $ 124,481 Denominator: average stockholders’ equity $ 930,669 $ 760,564 $ 877,711 $ 729,269 Annualized adjusted return on equity 18.9 % 15.5 % 18.0 % 17.1 % Annualized Return on Tangible Equity 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 Numerator: annualized net income $ 183,604 $ 146,672 $ 169,064 $ 139,229 Denominator: average tangible stockholders’ equity $ 842,063 $ 672,826 $ 789,829 $ 641,248 Annualized return on tangible equity 21.8 % 21.8 % 21.4 % 21.7 % 35 Table of Contents Annualized Adjusted Return on Tangible Equity 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 Numerator: annualized adjusted operating income $ 176,032 $ 117,664 $ 158,099 $ 124,481 Denominator: average tangible stockholders’ equity $ 842,063 $ 672,826 $ 789,829 $ 641,248 Annualized adjusted return on tangible equity 20.9 % 17.5 % 20.0 % 19.4 % Underwriting Results Premiums 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 Accident & Health $ 63,147 $ 43,490 $ 19,657 45.2 % Agriculture and Credit (Re)insurance 168,105 17,044 151,061 886.3 % Captives 67,956 53,630 14,326 26.7 % Construction & Energy Solutions 66,576 70,309 (3,733) (5.3 %) Global Property 27,649 37,540 (9,891) (26.3 %) Professional Lines 35,598 40,310 (4,712) (11.7 %) Specialty Programs 82,771 54,434 28,337 52.1 % Surety 43,737 34,592 9,145 26.4 % Transactional E&S 50,950 48,665 2,285 4.7 % Total gross written premiums (1) $ 606,489 $ 400,014 $ 206,475 51.6 % (1) Excludes exited business Nine months ended September 30, ($ in thousands) 2025 2024 Change % Change Accident & Health $ 186,805 $ 128,479 $ 58,326 45.4 % Agriculture and Credit (Re)insurance 327,525 96,957 230,568 237.8 % Captives 213,318 184,137 29,181 15.8 % Construction & Energy Solutions 215,760 222,745 (6,985) (3.1 %) Global Property 158,327 183,083 (24,756) (13.5 %) Professional Lines 114,911 120,655 (5,744) (4.8 %) Specialty Programs 231,401 166,256 65,145 39.2 % Surety 122,272 106,076 16,196 15.3 % Transactional E&S 156,417 146,506 9,911 6.8 % Total gross written premiums (1) $ 1,726,736 $ 1,354,894 $ 371,842 27.4 % (1) Excludes exited business 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. 36 Table of Contents 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 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 $184.2 million or 24.1%. The increases in net earned premiums was primarily driven by the same reasons that drove the increases in gross written premiums discussed above. For additional information regarding our reinsurance programs, see the “Reinsurance” discussion included in this Item 2 . Losses and LAE The following tables set forth the components of the loss and LAE ratios and adjusted loss and LAE ratios for the three and nine months ended September 30, 2025 and 2024: Three months ended September 30, 2025 2024 ($ in thousands) Losses and LAE % of Net Earned Premiums Losses and LAE % of Net Earned Premiums Losses and LAE: Non-cat loss and LAE $ 211,760 60.2 % $ 163,385 60.6 % Cat loss and LAE (1) 2,020 0.6 % 7,454 2.8 % Prior accident year development - LPT — — % (318) (0.1)% Total losses and LAE $ 213,780 60.8 % $ 170,521 63.3 % (1) Current accident year Nine months ended September 30, 2025 2024 ($ in thousands) Losses and LAE % of Net Earned Premiums Losses and LAE % of Net Earned Premiums Losses and LAE: Non-cat loss and LAE $ 569,831 60.1 % $ 462,835 60.6 % Cat loss and LAE (1) 12,520 1.3 % 11,454 1.5 % Prior accident year development - LPT — — % (800) (0.1)% Total losses and LAE $ 582,351 61.4 % $ 473,489 62.0 % (1) Current accident year 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. 37 Table of Contents Expense Ratio 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, 2025 2024 ($ in thousands) Expenses % of Net Earned Premiums Expenses % of Net Earned Premiums Net policy acquisition expenses $ 49,243 14.0 % $ 37,365 13.9 % Other operating and general expenses 52,433 14.9 % 42,452 15.7 % Underwriting, acquisition and insurance expenses 101,676 28.9 % 79,817 29.6 % Less: commission and fee income (1,904) (0.5 %) (1,818) (0.7 %) Total net expenses $ 99,772 28.4 % $ 77,999 28.9 % Nine months ended September 30, 2025 2024 ($ in thousands) Expenses % of Net Earned Premiums Expenses % of Net Earned Premiums Net policy acquisition expenses $ 138,369 14.6 % $ 105,273 13.9 % Other operating and general expenses 135,454 14.3 % 120,997 15.8 % Underwriting, acquisition and insurance expenses 273,823 28.9 % 226,270 29.7 % Less: commission and fee income (6,440) (0.7 %) (5,897) (0.8 %) Total net expenses $ 267,383 28.2 % $ 220,373 28.9 % 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 nine months ended September 30, 2025 and 2024: Three months ended September 30, Nine months ended September 30, $ in thousands 2025 2024 2025 2024 Short-term investments & cash and cash equivalents $ 4,130 $ 4,537 $ 12,745 $ 13,645 Fixed income 20,806 15,458 55,358 41,722 Equities 133 596 1,321 1,974 Alternative and strategic investments (2,889) (1,056) (9,317) 2,525 Net investment income $ 22,180 $ 19,535 $ 60,107 $ 59,866 Net unrealized (losses) gains on securities still held $ (8,987) $ 8,378 $ (6,677) $ 15,609 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. 38 Table of Contents 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. Future increases in fair value, if related to credit factors, are recognized through earnings limited to the amount previously recognized as an allowance for credit losses. 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 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 $0.8 million for one available-for-sale “corporate securities and miscellaneous” security. Other than the securities discussed previously, we determined that no other credit impairment existed at September 30, 2025. See Note 2, “Investments” to our condensed consolidated financial statements included in Item 1 of this Form 10-Q for additional information. Investments Composition of Investment Portfolio The following table sets forth the components of our investment portfolio at carrying value at September 30, 2025 and December 31, 2024: 2025 2024 ($ in thousands) Carrying Value % of Total Carrying Value % of Total Cash and cash equivalents $ 160,068 6.7 % $ 121,603 6.1 % Short-term investments 247,376 10.3 % 274,929 13.8 % Fixed income 1,815,216 75.8 % 1,318,708 66.2 % Equities 1,182 0.1 % 106,254 5.3 % Alternative and strategic investments 170,014 7.1 % 170,929 8.6 % Total portfolio $ 2,393,856 100.0 % $ 1,992,423 100.0 % Fixed income 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, 2025 and December 31, 2024: 2025 2024 ($ in thousands) Carrying Value % of Total Carrying Value % of Total U.S. government securities $ 76,187 4.2 % $ 26,486 2.0 % Corporate securities and miscellaneous 597,802 32.9 % 425,628 32.3 % Municipal securities 100,003 5.5 % 84,716 6.4 % Residential mortgage-backed securities 495,176 27.3 % 393,833 29.9 % Commercial mortgage-backed securities 72,384 4.0 % 69,364 5.2 % Other asset-backed securities 463,666 25.5 % 292,191 22.2 % Total fixed income portfolio, available-for-sale 1,805,218 99.4 % 1,292,218 98.0 % Commercial mortgage loans $ 9,998 0.6 % $ 26,490 2.0 % Total fixed income portfolio $ 1,815,216 100.0 % $ 1,318,708 100.0 % 39 Table of Contents 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: 2025 2024 ($ in thousands) Fair Value % of Total Fair Value % of Total AAA $ 311,740 17.3 % $ 483,099 37.3 % AA 559,945 31.0 % 141,177 10.9 % A 556,134 30.8 % 429,703 33.3 % BBB 352,332 19.5 % 216,602 16.8 % BB and Lower 25,067 1.4 % 21,637 1.7 % Total fixed income portfolio, available-for-sale $ 1,805,218 100.0 % $ 1,292,218 100.0 % 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 4.07 years and 4.34 years, respectively, as of September 30, 2025 and December 31, 2024. Equities 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 Alternative investments consists of promissory notes, limited partnerships, joint ventures and equity interests. The underlying investments are primarily floating rate senior secured loans, comprised of short duration, collateralized, asset-oriented credit investments. The limited partnerships and joint ventures are subject to future increases or decreases in asset value as asset values are monetized and the income is distributed. Strategic investments consists of equity interests in private entities within the insurance industry. Other Items Income Taxes 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. Liquidity and Capital Resources Sources and Uses of Funds Our most significant source of cash is from premiums received from our insureds, which, for most policies, we receive at the beginning of the coverage period, net of the related commission amount for the policies. Our most significant cash outflow is for claims that arise when a policyholder incurs an insured loss. Because the payment of claims occurs after the receipt of the premium, often years later, we invest the cash in various investment securities that generally earn interest and dividends. We also use cash to pay for operating expenses such as salaries, rent and taxes and capital expenditures such as technology systems. We use reinsurance to manage the risk that we take on our policies. We cede, or pay out, part of the premiums we receive to our reinsurers and collect cash back when losses subject to our reinsurance coverage are paid. The timing of our cash flows from operating activities can vary among periods due to the timing by which payments are made or received. Some of our payments and receipts, including loss settlements and subsequent reinsurance receipts, can be significant, and as a result their timing can influence cash flows from operating activities in any given period. Management believes that cash receipts from premiums and proceeds from investment income are sufficient to cover cash outflows in the foreseeable future. 40 Table of Contents Our cash flows for the nine months ended September 30, 2025 and 2024: ($ in thousands) 2025 2024 Cash and cash equivalents provided by (used in): Operating activities $ 356,308 $ 283,216 Investing activities (315,568) (227,963) Financing activities — (4,233) Change in cash and cash equivalents and restricted cash $ 40,740 $ 51,020 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 2025 and 2024 was primarily driven by purchases of fixed maturity securities. Credit Agreements FHLB Loan On August 30, 2024, we entered into a loan (the “FHLB Loan”) with the Federal Home Loan Bank of Dallas (the “FHLB”) pursuant to its Advances and Security Agreement. The FHLB Loan is a 4.5-year term loan in the principal amount of $57.0 million. The FHLB Loan provides for interest-only payments during its term, with principal due in full at maturity. The interest rate is fixed over the term of the loan at 4.00%. The FHLB Loan is fully secured by a pledge of specific investment securities of HSIC. 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 On March 29, 2023, we entered into an unsecured revolving credit facility (the “Revolving Credit Facility”) with a syndicate of participating banks. The Revolving Credit Facility provides us with up to a $150.0 million revolving credit facility and a letter of credit sub-facility of up to $30.0 million. On March 14, 2024, we drew $50.0 million on the Revolving Credit Facility and used the proceeds and existing cash to fund the redemption of the Debentures (see “Debentures” below for additional information regarding the redemption). 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, 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, 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 September 30, 2025, we are in compliance with all covenants. Debentures In August 2006, we received $58.0 million of proceeds from a debenture offering through a statutory trust, Delos Capital Trust (the “Trust”). The sole asset of the Trust consists of Fixed/Floating Rate Junior Subordinated Deferrable Interest Debentures (the “Trust Preferred”) with a principal amount of $59.8 million issued by us and cash of $1.8 million from the issuance of Trust common shares purchased by us equal to 3% of the Trust capitalization. On March 15, 2024, the Company redeemed the Debentures and paid $1.4 million of accrued interest. Subordinated Debt In May 2019, we issued unsecured subordinated notes (the “Notes”) with an aggregate principal amount of $20.0 million. Interest on the subordinated notes is 7.25% fixed for the first eight years and 8.25% fixed thereafter. Early retirement of the debt ahead of the eight-year commitment requires all interest payments to be paid in full, as well as the return of all capital. Principal payment is due at maturity on May 24, 2039 and interest is payable quarterly. 41 Table of Contents 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 In October 2024, the Board of Directors approved a share repurchase program authorizing the repurchase of up to $50.0 million of our common stock. The shares may be repurchased from time to time in open market purchases, privately-negotiated transactions, block purchases, accelerated share repurchase agreements or a combination of methods, including through Rule 10b5-1 trading plans. The timing, manner, price and amount of any repurchases under the share repurchase program will be determined by us in our discretion. 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 September 30, 2025, no shares had been repurchased under this plan. Reinsurance 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, 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. We purchase quota share reinsurance, excess of loss reinsurance, and facultative reinsurance coverage to limit our exposure from losses on any one occurrence. The mix of reinsurance purchased considers efficiency, cost, our risk appetite and specific factors of the underlying risks we underwrite. • Quota share reinsurance refers to a reinsurance contract whereby the reinsurer agrees to assume a specified percentage of the ceding company’s losses arising out of a defined class of business in exchange for a corresponding percentage of premiums, net of a ceding commission. • Excess of loss reinsurance refers to a reinsurance contract whereby the reinsurer agrees to assume all or a portion of the ceding company’s losses for an individual claim or an event in excess of a specified amount in exchange for a premium payable amount negotiated between the parties, which includes our catastrophe reinsurance program. • Facultative coverage refers to a reinsurance contract on individual risks as opposed to a group or class of business. 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, 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 Accident & Health $0.90 million per occurrence Commercial Auto (1) $1.00 million per occurrence Excess Casualty (1)(2) $1.25 million per occurrence General Liability (1) $1.50 million per occurrence Ocean Marine (2) $3.00 million per occurrence Professional Lines (2) $5.21 million per occurrence Property (3) $3.50 million per occurrence Representation and Warranty $3.25 million per occurrence Surety (2) $5.00 million per occurrence Workers’ Compensation (2) $2.33 million per occurrence (1) Legal defense expenses can force exposure above the maximum company retention for Excess Casualty, Commercial Auto and General Liability. (2) Reinsurance is subject to a loss ratio cap or aggregate level of loss cover that exceeds a modeled 1:250-year PML event. (3) Catastrophe loss protection is purchased up to $36.0 million in excess of $12.0 million retention, which provides cover for a 1:250-year PML event. 42 Table of Contents Credit and Financial Strength Ratings On August 14, 2025, A.M. Best affirmed Skyward Specialty’s financial strength rating of A (Excellent) with a stable outlook. Item 3. Quantitative and Qualitative Disclosures About Market Risk There have been no material changes in market risk from the information provided in our Annual Report on Form 10-K for the year ended December 31, 2024.