Part I - Financial Information Financial Statements The unaudited condensed consolidated financial statements for Q1 2025 show total assets of $4.03 billion and net income of $42.1 million Condensed Consolidated Balance Sheets As of March 31, 2025, total assets increased to $4.03 billion, total liabilities rose to $3.18 billion, and stockholders' equity grew to $850.7 million Condensed Consolidated Balance Sheet Highlights (Unaudited) | ($ in thousands) | March 31, 2025 | December 31, 2024 | | :--- | :--- | :--- | | Total Assets | $4,030,633 | $3,729,478 | | Total Investments | $1,993,390 | $1,870,820 | | Premiums receivable, net | $417,542 | $321,641 | | Total Liabilities | $3,179,912 | $2,935,479 | | Reserves for losses and LAE | $1,871,491 | $1,782,383 | | Unearned premiums | $708,347 | $637,185 | | Total Stockholders' Equity | $850,721 | $793,999 | Condensed Consolidated Statements of Operations and Comprehensive Income Net income for Q1 2025 increased to $42.1 million, driven by a 27.1% rise in net earned premiums, with diluted EPS at $1.01 and comprehensive income at $54.1 million Q1 2025 vs Q1 2024 Performance (Unaudited) | ($ in thousands, except per share data) | Q1 2025 | Q1 2024 | | :--- | :--- | :--- | | Net earned premiums | $300,366 | $236,342 | | Total revenues | $328,527 | $264,968 | | Income before income taxes | $51,435 | $46,977 | | Net income | $42,058 | $36,784 | | Diluted earnings per share | $1.01 | $0.90 | | Comprehensive income | $54,131 | $30,458 | Condensed Consolidated Statements of Cash Flows Net cash provided by operating activities was $96.8 million in Q1 2025, while investing activities used $100.8 million, resulting in a net decrease in cash of $4.0 million Cash Flow Summary (Unaudited) | ($ in thousands) | Three months ended March 31, 2025 | Three months ended March 31, 2024 | | :--- | :--- | :--- | | Net cash provided by operating activities | $96,760 | $94,265 | | Net cash used in investment activities | ($100,779) | ($69,866) | | Net cash (used in) provided by financing activities | $0 | ($9,466) | | Net (decrease) increase in cash | ($4,019) | $14,933 | Notes to Condensed Consolidated Financial Statements The notes detail accounting policies, the $2.0 billion investment portfolio, single segment operations, $535.3 million in gross written premiums, and an 18.2% effective tax rate - The company's investment portfolio is primarily composed of fixed maturity securities, with available-for-sale securities valued at $1.40 billion and held-to-maturity at $37.5 million as of March 31, 20251910 - The company operates as a single reportable segment, offering a broad array of commercial property and casualty products, with the Chief Executive Officer identified as the Chief Operating Decision Maker (CODM)55 Gross Written Premiums by Underwriting Division (Q1 2025 vs Q1 2024) | ($ in thousands) | Q1 2025 | Q1 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 | | Total continuing business | $535,319 | $458,655 | - The effective tax rate for Q1 2025 was 18.2%, down from 21.7% in Q1 2024, primarily due to a 3.9% reduction from tax benefits related to stock-based compensation61 Management's Discussion and Analysis of Financial Condition and Results of Operations (MD&A) Management discusses Q1 2025 financial results, noting 16.7% gross written premium growth to $535.3 million, a 90.5% combined ratio, $19.3 million net investment income, and a 12.3% debt-to-capitalization ratio Results of Operations Q1 2025 net income reached $42.1 million with gross written premiums growing 16.7% to $535.3 million, resulting in a combined ratio of 90.5% and annualized return on equity of 20.5% Key Performance Metrics (Q1 2025 vs Q1 2024) | Metric | Q1 2025 | Q1 2024 | | :--- | :--- | :--- | | Gross written premiums ($M) | $535.3 | $458.6 | | Net income ($M) | $42.1 | $36.8 | | Loss and LAE ratio | 62.4% | 60.9% | | Expense ratio | 28.1% | 28.7% | | Combined ratio | 90.5% | 89.6% | | Annualized return on equity | 20.5% | 21.7% | Underwriting Results Gross written premiums grew 16.7% driven by key divisions, while the loss ratio increased to 62.4% due to higher catastrophe losses, and the expense ratio improved to 28.1% - The increase in gross written premiums was driven by double-digit growth in the agriculture and credit (re)insurance, accident & health, and specialty programs divisions91 - The loss ratio increased by 1.5 points to 62.4% due to higher catastrophe losses ($6.5 million in Q1 2025 vs $1.0 million in Q1 2024), while the non-catastrophe loss ratio improved due to a business mix shift94 - The expense ratio improved by 0.6 points to 28.1% due to earnings leverage, which was partially offset by higher acquisition costs from the shift in business mix95 Investment Results and Portfolio Net investment income increased to $19.3 million in Q1 2025, with the total investment portfolio growing to $2.11 billion, primarily in fixed income with an 'A+' rating Net Investment Income Components (Q1 2025 vs Q1 2024) | ($ in thousands) | Q1 2025 | Q1 2024 | | :--- | :--- | :--- | | Fixed income | $16,730 | $12,478 | | Short-term investments & cash | $4,041 | $5,088 | | Equities | $657 | $627 | | Alternative and strategic investments | ($2,097) | $104 | | Net investment income | $19,331 | $18,297 | - The fixed income portfolio's weighted average credit rating was 'A+' as of March 31, 2025, with an average duration of 4.29 years101102 Liquidity and Capital Resources Operating activities provided $96.8 million in cash, with a total debt-to-capitalization ratio of 12.3% and a $50 million share repurchase program approved but not yet utilized - The ratio of total debt outstanding to total capitalization was 12.3% at March 31, 2025, down from 13.1% at December 31, 2024119 - In October 2024, the Board approved a $50.0 million share repurchase program, but as of March 31, 2025, no shares had been repurchased under this plan120 - The company's net retention on a written premium basis was 64.1% for Q1 2025, compared to 62.6% for the same period in 2024123 Quantitative and Qualitative Disclosures About Market Risk There have been no material changes in market risk from the information provided in the 2024 Form 10-K - There have been no material changes in market risk from the disclosures in the 2024 Form 10-K127 Controls and Procedures Disclosure controls were ineffective due to a material weakness in ITGCs for user access, though remediation is underway and financial statements are fairly presented - A material weakness in internal control over financial reporting related to IT general controls (ITGCs) for user access still exists as of March 31, 2025129 - Remediation activities are in process, including reviewing and enhancing access controls, strengthening procedures, and providing employee training130 - Despite the material weakness, the CEO and CFO concluded that the financial statements included in the Form 10-Q fairly present the company's financial condition, results of operations, and cash flows129 Part II - Other Information Legal Proceedings The company is involved in ordinary course legal proceedings not expected to materially affect its financial position - The company is involved in ordinary course legal proceedings but does not expect them to have a material adverse effect on its financial position135 Risk Factors The company updated its cybersecurity risk factor due to a recent data incident, which is under investigation but currently deemed immaterial - The company updated its cybersecurity risk factor to disclose a recent data incident where attackers acquired certain company data138 - The company is still investigating the incident but currently believes the breach is immaterial in nature138 Other Information During the quarter, CEO Andrew Robinson modified his Rule 10b5-1 trading plan, and CFO Mark Haushill entered into a new Rule 10b5-1 trading plan for the sale of company common stock - CEO Andrew Robinson modified his Rule 10b5-1 trading plan on March 6, 2025, changing the start date of a sales tranche144 - CFO Mark Haushill entered into a new Rule 10b5-1 trading plan on March 12, 2025, for the potential sale of up to 75,000 shares between June 2025 and March 2026145146
Skyward Specialty Insurance (SKWD) - 2025 Q1 - Quarterly Report