• Skyward Specialty Insurance Group Reports First Quarter 2024 Results

    ソース: Nasdaq GlobeNewswire / 01 5 2024 16:00:00   America/New_York

    HOUSTON, May 01, 2024 (GLOBE NEWSWIRE) -- Skyward Specialty Insurance Group, Inc. (Nasdaq: SKWD) (“Skyward Specialty” or the “Company”) today reported first quarter 2024 net income of $36.8 million, or $0.90 per diluted share, compared to $15.6 million, or $0.42 per diluted share. for the same 2023 period.

    Adjusted operating income(1) for the first quarter of 2024 was $31.0 million, or $0.75 per diluted share, compared to $15.5 million, or $0.42 per diluted share, for the same 2023 period.

    Highlights for the quarter included:

    • Gross written premiums increased 27.2%.
    • Underwriting income(1) of $24.7 million compared to $17.8 million for the first quarter of 2023.
    • Combined ratio of 89.6% compared to 90.2% for the first quarter of 2023.
    • Current accident year non-cat loss and LAE ratio of 60.6% compared to 61.1% for the first quarter of 2023.
    • Cat loss and LAE ratio of 0.4% compared to 1.8% for the first quarter of 2023.
    • Annualized return on equity of 21.7% compared to 13.4% for the same 2023 period.
    • Annualized return on tangible equity(1) of 25.0% compared to 16.6% for the same 2023 period.
    (1) See "Reconciliation of Non-GAAP Financial Measures"

    Skyward Specialty Chairman and CEO Andrew Robinson commented, "We continued to build on our outstanding 2023 results in the first quarter of 2024, delivering an 89.6% combined ratio inclusive of cat losses, gross written premium growth of approximately 27%, and annualized return on equity of 21.7%. The excellent execution of our "Rule our Niche" strategy and the diversity of our business portfolio continues to distinguish us in the marketplace as 7 of our 8 underwriting divisions achieved double digit growth. While the market opportunities have become more nuanced, we are confident that 2024 will continue to provide plenty of opportunity to deliver attractive returns for our shareholders and to profitably grow our Company."

    Results of Operations

    Underwriting Results

    Premiums      
    ($ in thousands) Three months ended March 31,
    unaudited  2024   2023  %
    Change
    Gross written premiums $458,620  $360,498  27.2%
    Ceded written premiums $(171,520) $(158,357) 8.3%
    Net retention  62.6%  56.1% NM(1)
    Net written premiums $287,100  $202,141  42.0%
    Net earned premiums $236,342  $182,831  29.3%
    (1)Not meaningful      
           

    The increase in gross written premiums for the first quarter of 2024, when compared to the same 2023 period, was driven by double-digit premium growth primarily from our captives, transactional E&S, surety, global property & agriculture and professional lines underwriting divisions.

    Combined Ratio Three months ended March 31,
    (unaudited) 2024
    		 2023
    Non-cat loss and LAE(1) 60.6% 61.1%
    Cat loss and LAE(1) 0.4% 1.8%
    Prior accident year development - non-LPT 0.0% 0.0%
    Prior accident year development - LPT(2) (0.1)% (0.1)%
    Loss Ratio 60.9% 62.8%
    Net policy acquisition costs 13.6% 11.6%
    Other operating and general expenses 16.0% 16.6%
    Commission and fee income (0.9)% (0.8)%
    Expense ratio 28.7% 27.4%
    Combined ratio 89.6% 90.2%
    Adjusted Underwriting Ratios    
    Adjusted loss ratio(2) 61.0% 62.9%
    Expense ratio 28.7% 27.4%
    Adjusted combined ratio(2) 89.7% 90.3%
    (1)Current accident year
    (2)See "Reconciliation of Non-GAAP Financial Measures"
         

    The loss ratio for the first quarter of 2024 improved 1.9 points when compared to the same 2023 period. The first quarter of 2024 was minimally impacted by catastrophe losses, while the first quarter of 2023 was impacted by wind and hail events, including tornadoes, which added 1.8 points to the 2023 loss ratio. The non-cat loss and LAE ratio improved 0.5 points when compared to the same 2023 period, primarily driven by the shift in the mix of business.

    The expense ratio for the first quarter of 2024 increased 1.3 points when compared to the same 2023 period driven by the business mix shift.

    The expense ratios for the first quarter of 2024 and 2023, respectively, 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 March 31,
    (unaudited)  2024   2023 
    Short-term investments & cash and cash equivalents $5,088  $1,776 
    Fixed income  12,478   7,461 
    Equities  627   (2)
    Alternative & strategic investments  104   (4,589)
    Net investment income $18,297  $4,646 
    Net unrealized gains on securities still held $8,991  $3,767 
    Net realized losses  (688)  (2,806)
    Net investment gains $8,303  $961 
     

    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 first quarter of 2024 increased $13.7 million when compared to the same 2023 period. The increase in income from our fixed income portfolio for the first quarter of 2024, when compared to the same 2023 period, was due to (i) a larger asset base as we continued to increase our allocation to this part of our investment portfolio and (ii) a higher book yield of 4.7% at March 31, 2024 compared to 4.0% at March 31, 2023. The increase in income from short-term investments & cash and cash equivalents for the first quarter of 2024, when compared to the same 2023 period, was due to higher investment yields and a larger asset base. The fair value of our alternative and strategic investments portfolio for the first quarter of 2024 increased when compared to the same 2023 period, which was impacted by a decline in the fair value of limited partnership investments.

    Stockholders’ Equity

    Stockholders’ equity was $692.3 million at March 31, 2024 which represents an increase of 4.7% when compared to stockholders' equity of $661.0 million at December 31, 2023. The increase in stockholders’ equity was primarily due to net income.

    Conference Call

    At 9 a.m. central time tomorrow, May 2, 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 positive 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.

    Media contact:
    Haley Doughty
    hdoughty@skywardinsurance.com
    713-935-4944

    or

    Investor contact:
    Natalie Schoolcraft,
    nschoolcraft@skywardinsurance.com
    614-494-4988

    Consolidated Balance Sheets    
    ($ in thousands, except share and per share amounts)    
    (unaudited) March 31,
    2024    		 December 31,
    2023
    Assets    
    Investments:    
    Fixed maturity securities, available-for-sale, at fair value (amortized cost of $1,102,190 and $1,047,713, respectively) $1,065,175  $1,017,651 
    Fixed maturity securities, held-to-maturity, at amortized cost (net of allowance for credit losses of $329)  42,700   42,986 
    Equity securities, at fair value  117,083   118,249 
    Mortgage loans, at fair value  44,309   50,070 
    Equity method investments  103,962   110,653 
    Other long-term investments  2,045   3,852 
    Short-term investments, at fair value  297,932   270,226 
    Total investments  1,673,206   1,613,687 
    Cash and cash equivalents  85,059   65,891 
    Restricted cash  30,210   34,445 
    Premiums receivable, net  273,410   179,235 
    Reinsurance recoverables, net  612,043   596,334 
    Ceded unearned premium  204,625   186,121 
    Deferred policy acquisition costs  104,697   91,955 
    Deferred income taxes  23,607   21,991 
    Goodwill and intangible assets, net  88,137   88,435 
    Other assets  92,063   75,341 
    Total assets $3,187,057  $2,953,435 
    Liabilities and stockholders’ equity    
    Liabilities:    
    Reserves for losses and loss adjustment expenses $1,376,946  $1,314,501 
    Unearned premiums  621,794   552,532 
    Deferred ceding commission  41,062   37,057 
    Reinsurance and premium payables  193,760   150,156 
    Funds held for others  88,864   58,588 
    Accounts payable and accrued liabilities  53,443   50,880 
    Notes payable  100,000   50,000 
    Subordinated debt, net of debt issuance costs  18,916   78,690 
    Total liabilities  2,494,785   2,292,404 
    Stockholders’ equity    
    Common stock, $0.01 par value, 500,000,000 shares authorized, 39,995,027 and 39,863,756 shares issued and outstanding, respectively  400   399 
    Additional paid-in capital  711,309   710,855 
    Stock notes receivable  (5,234)  (5,562)
    Accumulated other comprehensive loss  (29,279)  (22,953)
    Retained earnings (accumulated deficit)  15,076   (21,708)
    Total stockholders’ equity  692,272   661,031 
       Total liabilities and stockholders’ equity $3,187,057  $2,953,435 
         


    Condensed Consolidated Statements of Operations and Comprehensive Income
    ($ in thousands) Three months ended March 31,
    (unaudited)  2024   2023 
         
    Revenues:    
    Net earned premiums $236,342  $182,831 
    Commission and fee income  2,026   1,492 
    Net investment income  18,297   4,646 
    Net investment gains  8,303   961 
    Total revenues  264,968   189,930 
    Expenses:    
    Losses and loss adjustment expenses  143,914   114,900 
    Underwriting, acquisition and insurance expenses  69,774   51,655 
    Interest expense  2,727   2,152 
    Amortization expense  388   387 
    Other expenses  1,188   1,114 
    Total expenses  217,991   170,208 
    Income before income taxes  46,977   19,722 
    Income tax expense  10,193   4,166 
    Net income  36,784   15,556 
    Net income attributable to participating securities  —   1,274 
    Net income attributable to common stockholders $36,784  $14,282 
    Comprehensive income:    
    Net income $36,784  $15,556 
    Other comprehensive (loss) income:    
    Unrealized gains and losses on investments:    
    Net change in unrealized (losses) gains on investments, net of tax  (5,418)  7,788 
    Reclassification adjustment for losses on securities no longer held, net of tax  (908)  (47)
    Total other comprehensive (loss) income  (6,326)  7,741 
    Comprehensive income $30,458  $23,297 
         


    Share and Per Share Data    
    ($ in thousands, except share and per share amounts) Three months ended March 31,
    (unaudited)  2024   2023 
         
    Weighted average basic shares  39,108,351   32,848,243 
    Weighted average diluted shares  41,085,136   36,952,073 
         
    Basic earnings per share $0.94  $0.43 
    Diluted earnings per share $0.90  $0.42 
    Basic adjusted operating earnings per share $0.79  $0.43 
    Diluted adjusted operating earnings per share $0.75  $0.42 
         
    Annualized ROE(1)  21.7%  13.4%
    Annualized adjusted ROE(2)  18.3%  13.3%
    Annualized ROTE(3)  25.0%  16.6%
    Annualized adjusted ROTE(4)  21.1%  16.5%
         
      March 31 December 31
       2024   2023 
         
    Shares outstanding  39,995,027   39,863,756 
    Fully diluted shares outstanding  41,964,170   41,771,854 
         
    Book value per share $17.44  $16.72 
    Fully diluted book value per share $16.62  $15.96 
    Fully diluted tangible book value per share $14.52  $13.84 
         
    (1)Annualized ROE is net income expressed on an annualized basis as a percentage of average beginning and ending stockholders' equity during the period
    (2)Annualized adjusted ROE is adjusted operating income expressed on an annualized basis as a percentage of average beginning and ending stockholders' equity during the period
    (3)Annualized ROTE is net income expressed on an annualized basis as a percentage of average beginning and ending tangible stockholders' equity during the period
    (4)Annualized adjusted ROTE is adjusted operating income expressed on an annualized basis as a percentage of average beginning and ending tangible stockholders' equity during the period

    Adjusted operating income – We define adjusted operating income as net income excluding the impact of certain items that may not be indicative of underlying business trends, operating results, or future outlook, net of tax impact. We use adjusted operating income as an internal performance measure in the management of our operations because we believe it gives our management and other users of our financial information useful insight into our results of operations and our underlying business performance. Adjusted operating income should not be viewed as a substitute for net income calculated in accordance with GAAP, and other companies may define adjusted operating income differently.        

    ($ in thousands) Three months ended March 31,
    (unaudited)  2024   2023 
      Pre-tax After-tax Pre-tax After-tax
    Income as reported $46,977  $36,784  $19,722  $15,556 
    Less (Add):        
    Net investment gains  8,303   6,559   961   759 
    Net impact of loss portfolio transfer  241   190   242   191 
    Other expenses  (1,188)  (939)  (1,114)  (880)
    Adjusted operating income $39,621  $30,974  $19,633  $15,486 
             

    Underwriting income – We define underwriting income as net income before income taxes excluding net investment income, net realized and unrealized gains and losses on investments, impairment charges, interest expense, amortization expense and other income and expenses. Underwriting income represents the pre-tax profitability of our underwriting operations and allows us to evaluate our underwriting performance without regard to investment income. We use this metric as we believe it gives our management and other users of our financial information useful insight into our underlying business performance. Underwriting income should not be viewed as a substitute for pre-tax income calculated in accordance with GAAP, and other companies may define underwriting income differently.

    ($ in thousands) Three months ended March 31,
    (unaudited) 2024 2023
    Income before federal income tax expense $46,977 $19,722
    Add:    
    Interest expense  2,727  2,152
    Amortization expense  388  387
    Other expenses  1,188  1,114
    Less:    
    Net investment income  18,297  4,646
    Net investment gains  8,303  961
    Underwriting income $24,680 $17,768
         

    Adjusted Loss Ratio / Adjusted Combined Ratio – We define adjusted loss ratio and adjusted combined ratio as the corresponding ratio (calculated in accordance with GAAP), excluding losses and LAE related to the LPT and all development on reserves fully or partially covered by the LPT and amortization of deferred gains associated with recoveries of prior LPT reserve strengthening. We use these adjusted ratios as internal performance measures in the management of our operations because we believe they give our management and other users of our financial information useful insight into our results of operations and our underlying business performance. Our adjusted loss ratio and adjusted combined ratio should not be viewed as substitutes for our loss ratio and combined ratio, respectively.

    ($ in thousands) Three months ended March 31,
    (unaudited)  2024   2023 
    Net earned premiums $236,342  $182,831 
         
    Losses and LAE  143,914   114,900 
    Add: Pre-tax net impact of LPT  (241)  (242)
    Adjusted losses and LAE $144,155  $115,142 
         
    Loss ratio  60.9%  62.8%
    Add: net impact of LPT (0.1)% (0.1)%
    Adjusted loss ratio  61.0%  62.9%
         
    Combined ratio  89.6%  90.2%
    Add: net impact of LPT (0.1)% (0.1)%
    Adjusted combined ratio  89.7%  90.3%
         

    Tangible Stockholders’ Equity – We define tangible stockholders’ equity as stockholders’ equity less goodwill and intangible assets. Our definition of tangible stockholders’ equity may not be comparable to that of other companies and should not be viewed as a substitute for stockholders’ equity calculated in accordance with GAAP. We use tangible stockholders’ equity internally to evaluate the strength of our balance sheet and to compare returns relative to this measure.

    ($ in thousands) March 31 December 31
    (unaudited) 2024 2023 2023
    Stockholders' equity $692,272 $507,146 $661,031
    Less: Goodwill and intangible assets  88,137  89,503  88,435
    Tangible stockholders' equity $604,135 $417,643 $572,596
           

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