Skyward Specialty Insurance Group Reports Third Quarter 2024 Results
HOUSTON, Oct. 29, 2024 (GLOBE NEWSWIRE) -- Skyward Specialty Insurance Group, Inc. (NASDAQ:SKWD) ("Skyward Specialty" or the "Company") today reported third quarter 2024 net income of $36.7 million, or $0.89 per diluted share, compared to $21.7 million, or $0.57 per diluted share, for the same 2023 period. Net income for the first nine months of 2024 was $104.4 million, or $2.53 per diluted share, compared to $56.7 million, or $1.50 per diluted share, for the same 2023 period.
Adjusted operating income(1) for the third quarter of 2024 was $29.4 million, or $0.71 per diluted share, compared to $25.0 million, or $0.65 per diluted share, for the same 2023 period. Adjusted operating income(1) for the first nine months of 2024 was $93.4 million, or $2.26 per diluted share, compared to $56.5 million, or $1.49 per diluted share, for the same 2023 period.
Highlights for the third quarter included:
Gross written premiums of $400.0 million an increase of 12.4% compared to the third quarter of 2023.
Combined ratio of 92.2% and ex-Cat combined ratio of 89.4% compared to 90.2% and 89.8%, respectively, for the third quarter of 2023.
Annualized return on equity of 19.1% through the first nine months of 2024 compared to 15.8% for the same 2023 period.
Book value per share of $19.89, an increase of 19% compared to December 31, 2023.
(1) See "Reconciliation of Non-GAAP Financial Measures"
Skyward Specialty Chairman and CEO Andrew Robinson commented, "These past weeks have proven to be a very difficult time and our thoughts continue to be with those impacted by Hurricanes Helene and Milton; I am proud of the extraordinary efforts of our claims team and partners who continue to deliver exceptional service to our customers affected by these catastrophes."
"As for our third quarter, our results reflect our continued excellent execution of our "Rule our Niche" strategy, and our disciplined underwriting and our strategic risk management. Our adjusted operating income was up nearly 18% over the prior year quarter, continuing the trend of strong earnings growth we have delivered every quarter as a public company, and our 19.1% annualized return on equity year to date is outstanding. We delivered gross written premiums growth of 12.4% over the prior year quarter while continuing to increase our mix of business to areas that are less exposed to the P&C cycles. Given investments into our business, the momentum building in certain divisions, and with full consideration for the market backdrop, I am confident that we are well positioned to deliver strong growth as we look forward to the coming quarters."
Results of Operations
Underwriting Results
Premiums
($ in thousands)
Three months ended September 30,
Nine months ended September 30,
unaudited
2024
2023
% Change
2024
2023
% Change
Gross written premiums
$
400,014
$
355,732
12.4
%
$
1,354,877
$
1,138,224
19.0
%
Ceded written premiums
$
(131,692
)
$
(75,036
)
75.5
%
$
(502,326
)
$
(441,650
)
13.7
%
Net retention
67.1
%
78.9
%
NM (1)
62.9
%
61.2
%
NM (1)
Net written premiums
$
268,322
$
280,696
(4.4
)%
$
852,551
$
696,574
22.4
%
Net earned premiums
$
269,557
$
227,033
18.7
%
$
763,482
$
604,211
26.4
%
(1) Not meaningful
The increase in gross written premiums for the third quarter and first nine months of 2024, when compared to the same 2023 periods, was driven by double-digit premium growth primarily from our transactional E&S, programs, captives, surety and global property & agriculture underwriting divisions.
During the third quarter and first nine months of 2023, the Company cancelled a quota share reinsurance contract. Excluding the impact of the cancellation, net written premiums for the third quarter and first nine months of 2024 increased 16.5%(2) and 32.0%(2), respectively, when compared to the same 2023 periods.
Combined Ratio
Three months ended September 30,
Nine months ended September 30,
(unaudited)
2024
2023
2024
2023
Non-cat loss and LAE(1)
60.6
%
60.7
%
60.6
%
60.9
%
Cat loss and LAE(1)
2.8
%
0.4
%
1.5
%
1.8
%
Prior accident year development - LPT(2)
(0.1
)%
(0.1
)%
(0.1
)%
(0.2
)%
Loss Ratio
63.3
%
61.0
%
62.0
%
62.5
%
Net policy acquisition costs
13.9
%
15.0
%
13.9
%
13.0
%
Other operating and general expenses
15.7
%
15.1
%
15.8
%
16.3
%
Commission and fee income
(0.7
)%
(0.9
)%
(0.8
)%
(1.0
)%
Expense ratio
28.9
%
29.2
%
28.9
%
28.3
%
Combined ratio
92.2
%
90.2
%
90.9
%
90.8
%
Ex-Cat Combined Ratio(3)
89.4
%
89.8
%
89.4
%
89.0
%
Adjusted Underwriting Ratios
Adjusted loss ratio(2)
63.4
%
61.1
%
62.1
%
62.7
%
Expense ratio
28.9
%
29.2
%
28.9
%
28.3
%
Adjusted combined ratio(2)
92.3
%
90.3
%
91.0
%
91.0
%
(1) Current accident year
(2) See "Reconciliation of Non-GAAP Financial Measures"
(3) Defined as the combined ratio excluding cat loss and LAE(1)
The loss ratios for the third quarter and first nine months of 2024 increased 2.3 points and improved 0.5 points, respectively, when compared to the same 2023 periods. The third quarter of 2024 was impacted by higher catastrophe losses, primarily from Hurricanes Helene and Beryl.
The expense ratios for the third quarter and first nine months of 2024 were comparable to the same 2023 periods.
The expense ratios for all periods presented exclude the impact of IPO related stock compensation and secondary offering expenses, which are reported in other expenses in our condensed consolidated statements of operations and comprehensive income.
Investment Results
Net Investment Income
$ in thousands
Three months ended September 30,
Nine months ended September 30,
(unaudited)
2024
2023
2024
2023
Short-term investments & cash and cash equivalents
$
4,537
$
3,022
$
13,645
$
8,007
Fixed income
15,458
9,488
41,722
24,867
Equities
596
650
1,974
1,332
Alternative & strategic investments
(1,070
)
(71
)
2,615
(7,888
)
Net investment income
$
19,521
$
13,089
$
59,956
$
26,318
Net unrealized gains (losses) on securities still held
$
8,378
$
(6,391
)
$
15,609
$
2,394
Net realized gains
1,809
3,407
1,056
934
Net investment gains (losses)
$
10,187
$
(2,984
)
$
16,665
$
3,328
Beginning January 1, 2024 we simplified the investment portfolio classifications to align with our strategy and the underlying risk characteristics of the portfolio. The prior period has been reclassified to conform to the current period presentation.
Net investment income for the third quarter and first nine months of 2024 increased $6.4 million and $33.6 million, respectively when compared to the same 2023 periods, primarily driven by increased income from our fixed income portfolio and short-term investments due to higher yields and larger asset bases.
Stockholders' Equity
Stockholders' equity was $797.5 million at September 30, 2024 which represents an increase of 10.2% when compared to stockholders' equity of $723.6 million at June 30, 2024. The increase in stockholders' equity was primarily due to net income and an increase in the market value of our investment portfolio.
Share Repurchase Authorization
In October 2024, the Company's Board of Directors authorized a share repurchase program authorizing the repurchase of up to $50.0 million of the Company's common stock.
Skyward Specialty Chairman and CEO Andrew Robinson commented, "The share repurchase program allows Skyward to opportunistically deploy our capital in an accretive fashion and ultimately drive long-term value creation for our shareholders. Given our strong cash position and financing flexibility, the repurchase program will not limit our ability to support our near-term growth or our flexibility to support ongoing investment in the key growth areas of our business, or to capture additional value creating opportunities."
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 and pursuant to safe harbors provided by Rule 10b-18 and Rule 10b5-1 under the Securities Exchange Act of 1934. The timing, manner, price and amount of any repurchases under the share repurchase program will be determined by the Company in its discretion. The stock repurchase program does not require the Company to repurchase any specific number of shares, and may be modified, suspended or terminated at any time.
Conference Call
At 9:30 a.m. eastern time tomorrow, October 30, 2024, Skyward Specialty management will hold a conference call to discuss quarterly results with insurance industry analysts. Interested parties may listen to the discussion at investors.skywardinsurance.com under Events & Presentations. Additionally, investors can access the earnings call via conference call by registering via the conference link. Users will receive dial-in information and a unique PIN to join the call upon registering.
Non-GAAP Financial Measures
This release contains certain financial measures and ratios that are not required by, or presented in accordance with, generally accepted accounting principles in the United States ("GAAP"). We refer to these measures as "non-GAAP financial measures." We use these non-GAAP financial measures when planning, monitoring, and evaluating our performance.
We have chosen to exclude the net impact of the Loss Portfolio Transfer ("LPT"), all development on reserves fully or partially covered by the LPT and amortization of deferred gains associated with recoveries of prior LPT reserve strengthening in certain non-GAAP metrics, where noted, as the business subject to the LPT is not representative of our continuing business strategy. The business subject to the LPT is primarily related to policy years 2017 and prior, was generated and managed under prior leadership, and has either been exited or substantially repositioned during the reevaluation of our portfolio. We consider these non-GAAP financial measures to be useful metrics for our management and investors to facilitate operating performance comparisons from period to period. While we believe that these non-GAAP financial measures are useful in evaluating our business, this information should be considered supplemental in nature and is not meant to be a substitute for revenue or net income, in each case as recognized in accordance with GAAP. In addition, other companies, including companies in our industry, may calculate such measures differently, which reduces their usefulness as comparative measures. For more information regarding these non-GAAP financial measures and a reconciliation of such measures to comparable GAAP financial measures, see the section entitled "Reconciliation of Non-GAAP Financial Measures."
About Skyward Specialty Insurance Group, Inc.
Skyward Specialty is a rapidly growing and innovative specialty insurance company, delivering commercial property and casualty products and solutions on a non-admitted and admitted basis. The Company operates through eight underwriting divisions - Accident & Health, Captives, Global Property & Agriculture, Industry Solutions, Professional Lines, Programs, Surety and Transactional E&S. SKWD stock is traded on the Nasdaq Global Select Market, which represents the top fourth of all Nasdaq listed companies.
Skyward Specialty's subsidiary insurance companies consist of Houston Specialty Insurance Company, Imperium Insurance Company, Great Midwest Insurance Company, and Oklahoma Specialty Insurance Company. These insurance companies are rated A (Excellent) with stable outlook by A.M. Best Company. Additional information about Skyward Specialty can be found on our website at www.skywardinsurance.com.
Forward-Looking Statements
Except for historical information, all other information in this news release consists of forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. The forward-looking statements are typically, but not always, identified through use of the words "believe," "expect," "enable," "may," "will," "could," "intends," "estimate," "anticipate," "plan," "predict," "probable," "potential," "possible," "should," "continue," and other words of similar meaning. These forward-looking statements are subject to risks and uncertainties that could cause actual results to differ materially from those projected, anticipated or implied. The most significant of these uncertainties are described in Skyward Specialty's Form 10-K, and include (but are not limited to) legislative changes at both the state and federal level, state and federal regulatory rule making promulgations and adjudications, class action litigation involving the insurance industry and judicial decisions affecting claims, policy coverages and the general costs of doing business, the potential loss of key members of our management team or key employees and our ability to attract and retain personnel, the impact of competition on products and pricing, inflation in the costs of the products and services insurance pays for, product development, geographic spread of risk, weather and weather-related events, other types of catastrophic events, our ability to obtain reinsurance coverage at prices and on terms that allow us to transfer risk and adequately protect our company against financial loss, and losses resulting from reinsurance counterparties failing to pay us on reinsurance claims. These forward-looking statements speak only as of the date of this release and the Company does not undertake any obligation to update or revise any forward-looking information to reflect changes in assumptions, the occurrence of unanticipated events, or otherwise.
Skyward Specialty Insurance Group, Inc.
Investor contact:Natalie Schoolcraft,
or
Media contact:Haley
Skyward Specialty Insurance Group, Inc.
Consolidated Balance Sheets
($ in thousands, except share and per share amounts)
(unaudited)
September 30, 2024
December 31, 2023
Assets
Investments:
Fixed maturity securities, available-for-sale, at fair value (amortized cost of $1,359,700 and $1,047,713, respectively)
$
1,357,500
$
1,017,651
Fixed maturity securities, held-to-maturity, at amortized cost (net of allowance for credit losses of $239 and $329, respectively)
39,321
42,986
Equity securities, at fair value
124,719
118,249
Mortgage loans, at fair value
36,267
50,070
Equity method investments
102,111
110,653
Other long-term investments
23,802
3,852
Short-term investments, at fair value
206,358
270,226
Total investments
1,890,078
1,613,687
Cash and cash equivalents
105,573
65,891
Restricted cash
45,783
34,445
Premiums receivable, net
327,176
179,235
Reinsurance recoverables, net
686,725
596,334
Ceded unearned premium
236,962
186,121
Deferred policy acquisition costs
119,910
91,955
Deferred income taxes
18,502
21,991
Goodwill and intangible assets, net
87,607
88,435
Other assets
80,547
75,341
Total assets
$
3,598,863
$
2,953,435
Liabilities and stockholders' equity
Liabilities:
Reserves for losses and loss adjustment expenses
$
1,568,777
$
1,314,501
Unearned premiums
692,452
552,532
Deferred ceding commission
44,984
37,057
Reinsurance and premium payables
200,967
150,156
