Skyward Specialty Insurance (SKWD) - 2025 Q2 - Quarterly Results

Financial Performance Summary Skyward Specialty reports strong Q2 and H1 2025 results, driven by significant income growth and improved key performance indicators Second Quarter 2025 Highlights Skyward Specialty reported strong financial results for Q2 and H1 2025, with significant growth in net income and adjusted operating income | Metric | Q2 2025 | Q2 2024 | H1 2025 | H1 2024 | | :--- | :--- | :--- | :--- | :--- | | Net Income | $38.8M | $31.0M | $80.9M | $67.8M | | Diluted EPS | $0.93 | $0.75 | $1.94 | $1.65 | | Adjusted Operating Income | $37.1M | $33.0M | $74.5M | $63.9M | | Adjusted Diluted EPS | $0.89 | $0.80 | $1.78 | $1.56 | - Gross written premiums increased by 17.9% to $584.9 million in Q2 2025[3] - The combined ratio for Q2 2025 was 89.4%, with an ex-catastrophe combined ratio of 88.0%[3] - Annualized return on equity for the first six months of 2025 was 19.1%[3] - Book value per share grew by 12% to $22.23 since December 31, 2024[3] CEO Commentary CEO Andrew Robinson attributes strong results to specialized underwriting, claims capabilities, and the "Rule Our Niche" strategy for profitable growth - The company's success is driven by its specialized underwriting, claims capabilities, and the execution of its 'Rule Our Niche' strategy, which focuses on portfolio diversity to grow underwriting profitability while managing volatility[2] Results of Operations The company demonstrates strong operational performance with increased premiums, improved underwriting profitability, and mixed investment results Underwriting Results Strong underwriting performance is evident from increased gross written premiums and an improved combined ratio, driven by divisional growth and earnings leverage Premiums Analysis | Premium Type | Q2 2025 | Q2 2024 | % Change | | :--- | :--- | :--- | :--- | | Gross Written Premiums | $584.9M | $496.2M | 17.9% | | Net Written Premiums | $339.2M | $297.1M | 14.2% | | Net Earned Premiums | $295.5M | $257.6M | 14.7% | - Premium growth was primarily driven by double-digit increases in the agriculture and credit (re)insurance, specialty programs, accident & health, and captives divisions, partially offset by decreases in the global property and construction & energy solutions divisions[4] Combined Ratio Analysis | Ratio Component | Q2 2025 | Q2 2024 | Change (points) | | :--- | :--- | :--- | :--- | | Loss Ratio | 61.3% | 61.7% | -0.4 | | Expense Ratio | 28.1% | 29.0% | -0.9 | | Combined Ratio | 89.4% | 90.7% | -1.3 | | Ex-Cat Combined Ratio | 88.0% | 89.5% | -1.5 | - The improvement in the expense ratio was due to earnings leverage, which was partially offset by higher acquisition costs resulting from a shift in business mix[6] - Catastrophe losses, driven by convective storms, increased slightly in Q2 2025 compared to Q2 2024, contributing 1.4% to the combined ratio[5] Investment Results Net investment income decreased due to losses in alternative investments, partially offset by higher fixed income earnings | ($ in thousands) | Q2 2025 | Q2 2024 | H1 2025 | H1 2024 | | :--- | :--- | :--- | :--- | :--- | | Net Investment Income | $18,589 | $22,034 | $37,927 | $40,331 | | Net Investment Gains (Losses) | $3,205 | $(1,721) | $10,039 | $6,582 | - The decrease in net investment income was driven by losses in alternative & strategic investments, specifically from a decline in the fair value of limited partnership investments[8] Stockholders' Equity Stockholders' equity increased significantly in Q2 2025, primarily due to higher investment portfolio market value and net income - Stockholders' equity rose to $899.9 million at June 30, 2025, up from $850.7 million at March 31, 2025, mainly due to higher investment portfolio market value and net income[9] Consolidated Financial Statements The consolidated financial statements reflect robust growth in assets, equity, revenues, and net income for Q2 and H1 2025 Consolidated Balance Sheets The balance sheet shows significant growth in total assets and stockholders' equity as of June 30, 2025, compared to year-end 2024 | ($ in thousands) | June 30, 2025 | December 31, 2024 | | :--- | :--- | :--- | | Total Investments | $2,080,507 | $1,870,820 | | Total Assets | $4,336,392 | $3,729,478 | | Total Liabilities | $3,436,477 | $2,935,479 | | Total Stockholders' Equity | $899,915 | $793,999 | Consolidated Statements of Operations The statements of operations show strong year-over-year growth in net earned premiums, total revenues, and net income for Q2 and H1 2025 | ($ in thousands) | Q2 2025 | Q2 2024 | H1 2025 | H1 2024 | | :--- | :--- | :--- | :--- | :--- | | Net Earned Premiums | $295,542 | $257,583 | $595,908 | $493,925 | | Total Revenues | $319,903 | $279,942 | $648,430 | $544,910 | | Income Before Income Taxes | $49,795 | $40,355 | $101,230 | $87,332 | | Net Income | $38,839 | $30,970 | $80,897 | $67,754 | Share and Per Share Data The company reported increased earnings per share and book value per share, maintaining strong annualized returns on equity and tangible equity | Per Share Data | Q2 2025 | Q2 2024 | H1 2025 | H1 2024 | | :--- | :--- | :--- | :--- | :--- | | Diluted EPS | $0.93 | $0.75 | $1.94 | $1.65 | | Diluted Adjusted Operating EPS | $0.89 | $0.80 | $1.78 | $1.56 | | Metric | June 30, 2025 | December 31, 2024 | | :--- | :--- | :--- | | Book Value Per Share | $22.23 | $19.79 | | Annualized ROE (H1) | 19.1% | 19.6% (for H1 2024) | | Annualized ROTE (H1) | 21.3% | 22.4% (for H1 2024) | Supplemental Information This section provides detailed breakdowns of gross written premiums by division and reconciliations of non-GAAP financial measures Gross Written Premiums by Underwriting Division Gross written premiums growth varied significantly across divisions, with strong increases in agriculture and specialty programs, and declines in others | Underwriting Division | GWP Q2 2025 ($M) | % Change YoY | | :--- | :--- | :--- | | Agriculture and Credit (Re)insurance | $71.6 | 95.6% | | Specialty Programs | $86.0 | 44.1% | | Accident & Health | $60.5 | 37.2% | | Captives | $77.0 | 23.9% | | Surety | $40.7 | 8.2% | | Transactional E&S | $53.5 | 3.6% | | Professional Lines | $38.1 | 0.1% | | Global Property | $84.0 | (4.8)% | | Construction & Energy Solutions | $73.6 | (5.9)% | Reconciliation of Non-GAAP Financial Measures This section reconciles GAAP measures to non-GAAP measures like Adjusted Operating Income and Underwriting Income, used for performance evaluation - Adjusted operating income, a non-GAAP measure, is defined as net income excluding items not indicative of underlying business trends, such as net investment gains/losses and other non-recurring expenses[23] | ($ in thousands) | Q2 2025 | Q2 2024 | | :--- | :--- | :--- | | Net Income (GAAP) | $38,839 | $30,970 | | Adjustments (net of tax) | $(1,723) | $2,002 | | Adjusted Operating Income | $37,116 | $32,972 | | ($ in thousands) | Q2 2025 | Q2 2024 | | :--- | :--- | :--- | | Income Before Income Taxes (GAAP) | $49,795 | $40,355 | | Adjustments | $(18,551) | $(16,452) | | Underwriting Income | $31,244 | $23,903 | Company Overview and Forward-Looking Statements Skyward Specialty is a commercial P&C insurer with an A (Excellent) rating, operating through nine divisions, with standard forward-looking statement disclaimers - The company operates through nine underwriting divisions: Accident & Health, Agriculture and Credit (Re)insurance, Captives, Construction & Energy Solutions, Global Property, Professional Lines, Specialty Programs, Surety, and Transactional E&S[14] - The company's subsidiary insurance companies are rated A (Excellent) with a stable outlook by A.M. Best Company[15] - The report includes forward-looking statements that are subject to various risks and uncertainties, as detailed in the company's Form 10-K[16]