• Skyward Specialty Insurance Group Reports Second Quarter 2024 Results

    ソース: Nasdaq GlobeNewswire / 05 8 2024 16:00:01   America/New_York

    HOUSTON, Aug. 05, 2024 (GLOBE NEWSWIRE) -- Skyward Specialty Insurance Group, Inc. (Nasdaq: SKWD) (“Skyward Specialty” or the “Company”) today reported second quarter 2024 net income of $31.0 million, or $0.75 per diluted share, compared to $19.5 million, or $0.51 per diluted share, for the same 2023 period. Net income for the first half of 2024 was $67.8 million, or $1.65 per diluted share, compared to $35.0 million, or $0.93 per diluted share, for the same 2023 period.

    Adjusted operating income(1) for the second quarter of 2024 was $33.1 million, or $0.80 per diluted share, compared to $16.0 million, or $0.42 per diluted share, for the same 2023 period. Adjusted operating income(1) for the first half of 2024 was $64.0 million, or $1.56 per diluted share, compared to $31.5 million, or $0.84 per diluted share, for the same 2023 period.

    Highlights for the second quarter included:

    • Gross written premiums increased 17.6%.
    • Underwriting income(1) of $23.9 million compared to $15.5 million for the second quarter of 2023.
    • Adjusted operating income(1) of $33.1 million compared to $16.0 million for the second quarter of 2023.
    • Combined ratio of 90.7% compared to 92.0% for the second quarter of 2023.
    • Cat loss and LAE ratio of 1.2% compared to 3.5% for the second quarter of 2023.
    • Annualized return on equity of 19.6% through the first half of 2024 compared to 14.8% for the same 2023 period.
    • Annualized return on tangible equity(1) of 22.4% through the first half of 2024 compared to 18.3% for the same 2023 period.

    (1) See "Reconciliation of Non-GAAP Financial Measures"

    Skyward Specialty Chairman and CEO Andrew Robinson commented, "Our second quarter results continue the consistently excellent performance we have produced in each of the seven quarters reporting as a public company and our adjusted operating income of $33.1 million was the best in Company history. Our 90.7% combined ratio, inclusive of 1.2% of catastrophe losses, was again excellent. Our 18% gross written premiums growth reflects the power and sustainability of our "Rule our Niche" strategy. We are pleased with the sources of our growth which are increasingly coming from parts of our business that are less exposed to the P&C cycles, including our surety, accident & health and captives divisions and our agriculture business unit within our global property & agriculture division. We continue to be confident that we are well positioned to deliver attractive returns for our shareholders and to profitably grow our Company."

    "Last week's AM Best upgrade to A (Excellent) with stable outlook is a testament to the strength of our business model and the dedication of our team. This upgrade reflects our ongoing commitment to delivering exceptional value to our policyholders and shareholders."

    Results of Operations

    Underwriting Results

    Premiums            
    ($ in thousands) Three months ended June 30, Six months ended June 30,
    unaudited  2024   2023  % Change  2024   2023  % Change
    Gross written premiums $     496,243  $421,994   17.6% $     954,863  $782,492   22.0%
    Ceded written premiums $  (199,114) $(208,257)  (4.4)% $  (370,634) $(366,614)  1.1%
    Net retention   59.9 %  50.6%  NM (1)    61.2 %  53.1%  NM (1) 
    Net written premiums $     297,129  $213,737   39.0% $     584,229  $415,878   40.5%
    Net earned premiums $     257,583  $194,347   32.5% $     493,925  $377,178   31.0%
    (1) Not meaningful            
                 

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

    Combined Ratio Three months ended June 30, Six months ended June 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)   1.2 %  3.5%   0.8 %  2.7%
    Prior accident year development - LPT(2)   (0.1)%  (0.2)%   (0.1)%  (0.2)%
    Loss Ratio   61.7 %  64.0%   61.3 %  63.4%
    Net policy acquisition costs   14.0 %  11.9%   13.7 %  11.7%
    Other operating and general expenses   15.8 %  17.3%   15.9 %  17.0%
    Commission and fee income   (0.8)%  (1.2)%   (0.8)%  (1.0)%
    Expense ratio   29.0 %  28.0%   28.8 %  27.7%
    Combined ratio   90.7 %  92.0%   90.1 %  91.1%
    Adjusted Underwriting Ratios        
    Adjusted loss ratio(2)   61.8 %  64.2%   61.4 %  63.6%
    Expense ratio   29.0 %  28.0%   28.8 %  27.7%
    Adjusted combined ratio(2)   90.8 %  92.2%   90.2 %  91.3%
    (1) Current accident year
    (2) See "Reconciliation of Non-GAAP Financial Measures"
             
             

    The loss ratios for the second quarter and first half of 2024 improved 2.3 points and 2.1 points, respectively, when compared to the same 2023 periods, driven by less severity of convective storms.

    The expense ratios for the second quarter and first half of 2024 increased 1.0 point and 1.1 points, respectively, when compared to the same 2023 periods driven by the business mix shift partially offset by earnings leverage.

    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 June 30, Six months ended June 30,
    (unaudited)  2024   2023   2024   2023 
    Short-term investments & cash and cash equivalents $              4,021   $3,206  $           9,108   $4,985 
    Fixed income                13,786    7,919               26,264   15,380 
    Equities                     751    684                 1,378   682 
    Alternative & strategic investments                  3,580    (3,226)                3,685   (7,818)
    Net investment income $           22,138   $8,583  $         40,435   $13,229 
    Net unrealized (losses) gains on securities still held $          (1,760) $5,017  $            7,231  $8,784 
    Net realized (losses) gains                    (65)  334                 (753)  (2,472)
    Net investment (losses) gains $          (1,825) $5,351  $            6,478  $6,312 
     
     

    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 second quarter and first half of 2024 increased $13.6 million and $27.2 million, respectively when compared to the same 2023 periods, driven by (i) increased income from our fixed income portfolio and short-term investments & cash and cash equivalents due to higher yields and larger asset bases and (ii) an increase in the fair value of limited partnership investments in our alternative and strategic investments portfolio.

    Stockholders’ Equity

    Stockholders’ equity was $723.6 million at June 30, 2024 which represents an increase of 4.5% when compared to stockholders' equity of $692.3 million at March 31, 2024. The increase in stockholders’ equity was primarily due to net income.

    Conference Call

    At 9 a.m. central time tomorrow, August 6, 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.

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

    or

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

    Skyward Specialty Insurance Group, Inc.
    Consolidated Balance Sheets   
    ($ in thousands, except share and per share amounts)   
    (unaudited)June 30,
    2024    		 December 31,
    2023
    Assets   
    Investments:   
    Fixed maturity securities, available-for-sale, at fair value (amortized cost of $1,239,724 and $1,047,713, respectively)$        1,200,273   $1,017,651 
    Fixed maturity securities, held-to-maturity, at amortized cost (net of allowance for credit losses of $225 and $329, respectively)                39,962    42,986 
    Equity securities, at fair value              112,823    118,249 
    Mortgage loans, at fair value                43,670    50,070 
    Equity method investments              101,903    110,653 
    Other long-term investments                   2,665    3,852 
    Short-term investments, at fair value              215,041    270,226 
    Total investments           1,716,337    1,613,687 
    Cash and cash equivalents                72,989    65,891 
    Restricted cash                35,278    34,445 
    Premiums receivable, net              377,333    179,235 
    Reinsurance recoverables, net              667,837    596,334 
    Ceded unearned premium              255,138    186,121 
    Deferred policy acquisition costs              116,499    91,955 
    Deferred income taxes                25,107    21,991 
    Goodwill and intangible assets, net                87,868    88,435 
    Other assets                81,108    75,341 
    Total assets$        3,435,494   $2,953,435 
    Liabilities and stockholders’ equity   
    Liabilities:   
    Reserves for losses and loss adjustment expenses$        1,470,106   $1,314,501 
    Unearned premiums              711,854    552,532 
    Deferred ceding commission                47,948    37,057 
    Reinsurance and premium payables              207,638    150,156 
    Funds held for others                95,596    58,588 
    Accounts payable and accrued liabilities                59,796    50,880 
    Notes payable              100,000    50,000 
    Subordinated debt, net of debt issuance costs                18,936    78,690 
    Total liabilities           2,711,874    2,292,404 
    Stockholders’ equity   
    Common stock, $0.01 par value, 500,000,000 shares authorized, 40,096,132 and 39,863,756 shares issued and outstanding, respectively                      401    399 
    Additional paid-in capital              713,542    710,855 
    Stock notes receivable                 (5,233)  (5,562)
    Accumulated other comprehensive loss               (31,136)  (22,953)
    Retained earnings (accumulated deficit)
    		                46,046    (21,708)
    Total stockholders’ equity
    		              723,620    661,031 
    Total liabilities and stockholders’ equity$        3,435,494   $2,953,435 
        
        


    Skyward Specialty Insurance Group, Inc.

    Condensed Consolidated Statements of Operations and Comprehensive Income
    ($ in thousands) Three months ended June 30, Six months ended June 30,
    (unaudited)  2024   2023   2024   2023 
             
    Revenues:        
    Net earned premiums $         257,583   $194,347  $         493,925   $377,178 
    Commission and fee income                  2,053    2,240                   4,079    3,732 
    Net investment income                22,138    8,583                 40,435    13,229 
    Net investment (losses) gains                (1,825)  5,351                   6,478    6,312 
    Other loss                        (7)  —                         (7)  — 
    Total revenues              279,942    210,521               544,910    400,451 
    Expenses:        
    Losses and loss adjustment expenses              159,054    124,405               302,968    239,305 
    Underwriting, acquisition and insurance expenses                76,679    56,683               146,453    108,338 
    Interest expense                  2,449    2,466                   5,176    4,618 
    Amortization expense                     360    486                      748    873 
    Other expenses                  1,045    1,465                   2,233    2,579 
    Total expenses              239,587    185,505               457,578    355,713 
    Income before income taxes                40,355    25,016                 87,332    44,738 
    Income tax expense                  9,385    5,564                 19,578    9,730 
    Net income                30,970    19,452                 67,754    35,008 
    Net income attributable to participating securities                        —    —                         —    1,402 
    Net income attributable to common stockholders $           30,970   $19,452  $           67,754   $33,606 
    Comprehensive income:        
    Net income $           30,970   $19,452  $           67,754   $35,008 
    Other comprehensive income:        
    Unrealized gains and losses on investments:        
    Net change in unrealized (losses) gains on investments, net of tax                (1,451)  (4,375)                (6,869)  3,413 
    Reclassification adjustment for losses on securities no longer held, net of tax                   (406)  (1,165)                (1,314)  (1,212)
    Total other comprehensive (loss) income                (1,857)  (5,540)                (8,183)  2,201 
    Comprehensive income $           29,113   $13,912  $           59,571   $37,209 
             
             


    Skyward Specialty Insurance Group, Inc.
             
    Share and Per Share Data         
    ($ in thousands, except share and per share amounts) Three months ended June 30, Six months ended June 30,
    (unaudited)  2024   2023   2024   2023 
             
    Weighted average basic shares  39,177,457   36,603,779   39,142,825   34,746,874 
    Weighted average diluted shares  41,168,082   38,143,585   41,110,384   37,503,914 
             
    Basic earnings per share $0.79  $0.53  $1.73  $0.97 
    Diluted earnings per share $0.75  $0.51  $1.65  $0.93 
    Basic adjusted operating earnings per share $0.84  $0.44  $1.64  $0.87 
    Diluted adjusted operating earnings per share $0.80  $0.42  $1.56  $0.84 
             
    Annualized ROE (1)   17.5 %  15.1%   19.6 %  14.8%
    Annualized adjusted ROE (2)   18.7 %  12.4%   18.5 %  13.3%
    Annualized ROTE (3)   20.0 %  18.3%   22.4 %  18.3%
    Annualized adjusted ROTE (4)   21.3 %  15.1%   21.2 %  16.5%
             
          June 30 December 31
           2024   2023 
             
    Shares outstanding      40,096,132   39,863,756 
    Fully diluted shares outstanding      41,945,532   41,771,854 
             
    Book value per share     $              18.18  $16.72 
    Fully diluted book value per share     $              17.38  $15.96 
    Fully diluted tangible book value per share     $              15.28  $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
     


    Skyward Specialty Insurance Group, Inc.
    Reconciliation of Non-GAAP Financial Measures
     

    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 June 30, Six months ended June 30,
    (unaudited) 2024   2023   2024   2023 
     Pre-tax After-tax Pre-tax After-tax Pre-tax After-tax Pre-tax After-tax
    Income as reported$  40,355   $  30,970   $25,016  $19,452  $  87,332   $  67,754   $44,738  $35,008 
    Less (add):               
    Net investment (losses) gains      (1,825)       (1,442)  5,351   4,227          6,478           5,118    6,312   4,986 
    Net impact of loss portfolio transfer           241              190    462   365             482              381    704   556 
    Other loss              (7)               (6)  —   —                (7)               (6)  —   — 
    Other expenses      (1,045)          (826)  (1,465)  (1,157)       (2,233)       (1,764)  (2,579)  (2,037)
    Adjusted operating income$  42,991   $  33,054   $20,668  $16,017  $  82,612   $  64,025   $40,301  $31,503 
                    
                    

    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 June 30, Six months ended June 30,
    (unaudited)  2024   2023   2024   2023 
    Income before federal income tax expense $           40,355   $25,016  $            87,332  $44,738 
    Add:        
    Interest expense                  2,449    2,466                   5,176   4,618 
    Amortization expense                     360    486                       748   873 
    Other expenses                  1,045    1,465                   2,233   2,579 
    Less:        
    Net investment income                22,138    8,583                 40,435   13,229 
    Net investment (losses) gains                (1,825)  5,351                   6,478   6,312 
    Other loss                        (7)  —                        (7)  — 
    Underwriting income $           23,903   $15,499  $            48,583  $33,267 
             
             

    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 June 30, Six months ended June 30,
    (unaudited)  2024   2023   2024   2023 
    Net earned premiums $         257,583  $194,347  $         493,925  $377,178 
             
    Losses and LAE              159,054   124,405               302,968   239,305 
    Add: Pre-tax net impact of LPT                  (241)  (462)                  (482)  (704)
    Adjusted losses and LAE $         159,295  $124,867  $         303,450  $240,009 
             
    Loss ratio   61.7 %  64.0%   61.3 %  63.4%
    Add: net impact of LPT   (0.1)%  (0.2)%   (0.1)%  (0.2)%
    Adjusted loss ratio   61.8 %  64.2%   61.4 %  63.6%
                     
    Combined ratio   90.7 %  92.0%   90.1 %  91.1%
    Add: net impact of LPT   (0.1)%  (0.2)%   (0.1)%  (0.2)%
    Adjusted combined ratio   90.8 %  92.2%   90.2 %  91.3%
             
             

    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) June 30, December 31,
    (unaudited)  2024   2023   2023 
    Stockholders' equity $         723,620  $522,678  $661,031 
    Less: Goodwill and intangible assets                87,868   89,181   88,435 
    Tangible stockholders' equity $         635,752  $433,497  $572,596 
           
           


    Skyward Specialty Insurance Group, Inc.
    Gross Written Premiums by Underwriting Division (Unaudited)
     
      Three months ended June 30, Six months ended June 30,
    ($ in thousands)  2024   2023  % Change  2024   2023  % Change
    Global Property & Agriculture $     124,728  $124,080   0.5% $    225,361  $198,420   13.6%
    Industry Solutions            84,112   79,249   6.1%        162,371   146,882   10.5%
    Captives            62,099   39,283   58.1%        130,507   85,363   52.9%
    Programs            59,644   52,598   13.4%        111,822   101,297   10.4%
    Transactional E&S            45,711   30,632   49.2%           87,906   60,249   45.9%
    Accident & Health            44,088   37,252   18.4%           84,989   73,265   16.0%
    Professional Lines            38,106   32,989   15.5%           80,345   66,161   21.4%
    Surety            37,737   26,221   43.9%           71,579   50,922   40.6%
    Total gross written premiums(1) $     496,225  $422,304   17.5% $    954,880  $782,559   22.0%
    (1) Excludes exited business            
                 

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