SEC Form 10-Q filed by Skyward Specialty Insurance Group Inc.

5/7/25 3:40:46 PM ET

Property-Casualty Insurers

Finance

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skwd-20250331

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

__________________________________________

FORM 10-Q

__________________________________________

(Mark One)


☒			QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended March 31, 2025


☐			TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
			For the transition period from ____________ to ____________

Commission file number 001-41591

SKYWARD SPECIALTY INSURANCE GROUP, INC.

(Exact name of registrant as specified in its charter)


Delaware			14-1957288
(State or other jurisdiction of incorporation or organization)			(I.R.S. Employer Identification No.)

800 Gessner Road, Suite 600 Houston, Texas			77024-4284
(Address of Principal Executive Offices)			(Zip Code)

(713) 935-4800

Registrant’s telephone number, including area code

Securities registered pursuant to Section 12(b) of the Act:


Title of each class	Trading Symbol(s)	Name of each exchange on which registered
Common stock, par value $0.01	SKWD	The Nasdaq Stock Market LLC

Indicate by check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports); and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ No ☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes ☒ No ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company” and “emerging growth company” in Rule 12b-2 of the Exchange Act.


Large accelerated filer	☒	Accelerated filer	☐
Non-accelerated filer	☐	Smaller reporting company	☐
		Emerging growth company	☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act). Yes ☐ No ☒

As of May 2, 2025, the registrant had 40,402,879 shares of common stock outstanding.


Form 10-Q	Item and Description	Page
Part I
Item 1.	Financial Statements	3
	Condensed Consolidated Balance Sheets as of March 31, 2025 and December 31, 2024 (unaudited)	3
	Condensed Consolidated Statements of Operations and Comprehensive Income for the Three-Month Periods Ended March 31, 2025 and 2024 (unaudited)	4
	Condensed Consolidated Statements of Changes in Stockholders’ Equity for the Three -Month Periods Ended March 31, 2025 and 2024 (unaudited)	5
	Condensed Consolidated Statements of Cash Flows for the Three -Month Periods Ended March 31, 2025 and 2024 (unaudited)	6
	Notes to Condensed Consolidated Financial Statements (unaudited)	7
Item 2.	Management's Discussion and Analysis of Financial Condition and Results of Operations	27
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	36
Item 4.	Controls and Procedures	36
Part II
Item 1.	Legal Proceedings	38
Item 1A.	Risk Factors	38
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	38
Item 3.	Defaults Upon Senior Securities	39
Item 4.	Mine Safety Disclosures	39
Item 5.	Other Information	40
Item 6.	Exhibits	40
Signatures		41


	March 31, 2025		December 31, 2024


($ in thousands, except share and per share amounts)	(Unaudited)
Assets
Investments:
Fixed maturity securities, available-for-sale, at fair value (amortized cost of $1,410,269 and $1,320,266, respectively)	$	1,397,508	$	1,292,218
Fixed maturity securities, held-to-maturity, at amortized cost (net of allowance for credit losses of $250 and $243, respectively)	37,519		39,153
Equity securities, at fair value	108,075		106,254
Mortgage loans, at fair value	16,012		26,490
Equity method investments	88,588		98,594
Other long-term investments	37,646		33,182
Short-term investments, at fair value	308,042		274,929
Total investments	1,993,390		1,870,820
Cash and cash equivalents	112,916		121,603
Restricted cash	40,590		35,922
Premiums receivable, net	417,542		321,641
Reinsurance recoverables, net	902,970		857,876
Ceded unearned premium	232,147		203,901
Deferred policy acquisition costs	126,439		113,183
Deferred income taxes	26,984		30,486
Goodwill and intangible assets, net	87,089		87,348
Other assets	90,566		86,698
Total assets	$	4,030,633	$	3,729,478
Liabilities and stockholders’ equity
Liabilities:
Reserves for losses and loss adjustment expenses	$	1,871,491	$	1,782,383
Unearned premiums	708,347		637,185
Deferred ceding commission	45,544		40,434
Reinsurance and premium payables	243,083		177,070
Funds held for others	113,748		102,665
Accounts payable and accrued liabilities	78,154		76,206
Notes payable	100,000		100,000
Subordinated debt, net of debt issuance costs	19,545		19,536
Total liabilities	3,179,912		2,935,479
Stockholders’ equity

Common stock, $0.01 par value, 500,000,000 shares authorized, 40,402,879 and 40,127,908 shares issued and outstanding, respectively	404		401

Additional paid-in capital	721,186		718,598

Accumulated other comprehensive loss	(10,047)		(22,120)
Retained earnings	139,178		97,120
Total stockholders’ equity	850,721		793,999
Total liabilities and stockholders’ equity	$	4,030,633	$	3,729,478


	Three months ended March 31,
($ in thousands, except share and per share amounts)		2025		2024
Revenues:
Net earned premiums		$	300,366	$	236,342
Commission and fee income		1,976		2,026
Net investment income		19,331		18,297
Net investment gains		6,841		8,303

Other income		13		—
Total revenues		328,527		264,968
Expenses:
Losses and loss adjustment expenses		187,309		143,914
Underwriting, acquisition and insurance expenses		86,551		69,774

Interest expense		1,834		2,727
Amortization expense		337		388
Other expenses		1,061		1,188
Total expenses		277,092		217,991
Income before income taxes		51,435		46,977
Income tax expense		9,377		10,193
Net income		$	42,058	$	36,784
Comprehensive income
Net income		$	42,058	$	36,784
Other comprehensive income (loss):
Unrealized gains and losses on investments:
Net change in unrealized gains (losses) on investments, net of tax		12,255		(5,418)
Reclassification adjustment for losses on securities no longer held, net of tax		(182)		(908)
Total other comprehensive income (loss)		12,073		(6,326)
Comprehensive income		$	54,131	$	30,458
Per share data:
Basic earnings per share		$	1.05	$	0.94
Diluted earnings per share		$	1.01	$	0.90
Weighted-average common shares outstanding
Basic		40,196,416		39,108,351
Diluted		41,680,595		41,085,136


	Three months ended March 31,
($ in thousands, except share amounts)	2025		2024




Common shares:
Balance at beginning of year	40,127,908		39,863,756
Issuance of shares	274,971		131,271

Balance at March 31	40,402,879		39,995,027




Common stock:
Balance at beginning of year	$	401	$	399
Issuance of common stock	3		1


Balance at March 31	$	404	$	400




Additional paid-in capital:
Balance at beginning of year	$	718,598	$	710,855
Issuance of common stock	2,588		454


Balance at March 31	$	721,186	$	711,309
Stock notes receivable:
Balance at beginning of year	$	—	$	(5,562)
Employee equity transactions	—		328
Balance at March 31	$	—	$	(5,234)
Accumulated other comprehensive loss:
Balance at beginning of year	$	(22,120)	$	(22,953)
Other comprehensive income (loss), net of tax	12,073		(6,326)
Balance at March 31	$	(10,047)	$	(29,279)
Retained earnings (accumulated deficit):
Balance at beginning of year	$	97,120	$	(21,708)

Net income	42,058		36,784
Balance at March 31	$	139,178	$	15,076
Total stockholders’ equity	$	850,721	$	692,272


	Three months ended March 31,
($ in thousands)	2025		2024
Cash flows from operating activities
Net income	$	42,058	$	36,784



















Adjustments to reconcile net income to net cash provided by operating activities	54,702		57,481
Net cash provided by operating activities	96,760		94,265
Cash flows from investing activities:
Purchase of fixed maturity securities, available-for-sale	(126,827)		(97,426)

Purchase of equity securities	(8,422)		(2,035)
Purchase of equity method investments	(200)		(261)

Investment in direct and indirect loans	13,829		10,816
Purchase of property and equipment	(202)		(260)
Proceeds from the sales of fixed maturity securities, available-for-sale	8,195		12,093
Maturities, calls, transfers and paydowns of fixed maturity securities, available-for-sale	29,537		30,138

Maturities, calls and paydowns of fixed maturity securities held-to-maturity	2,129		784
Proceeds from the sales of equity securities	8,748		10,458
Sales of and distributions from equity method and other long-term investments	4,396		4,871
Change in short-term investments	(33,162)		(27,706)
Change in receivable/payable for securities	—		(13,755)
Cash provided by deposit accounting	1,200		2,417

Net cash used in investment activities	(100,779)		(69,866)
Cash flows from financing activities:

Repayment of stock notes receivable	—		328
Proceeds from long term borrowings	—		50,000
Payments on long term borrowings and trust preferred	—		(59,794)

Net cash (used in) provided by financing activities	—		(9,466)
Net increase (decrease) in cash and cash equivalents and restricted cash	(4,019)		14,933
Cash and cash equivalents and restricted cash at beginning of period(1)	157,525		100,336
Cash and cash equivalents and restricted cash at end of period(1)	$	153,506	$	115,269
Supplemental disclosure of cash flow information:
Cash paid for interest	$	1,805	$	2,656

(1)The sum of cash and cash equivalents and restricted cash from the consolidated balance sheets


($ in thousands)	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses		Allowance for Credit Losses		Fair Value
March 31, 2025
Fixed maturity securities, available-for-sale:
U.S. government securities	$	26,540	$	212	$	(70)	$	—	$	26,682
Corporate securities and miscellaneous	494,356		7,340		(10,846)		—		490,850
Municipal securities	89,373		592		(4,134)		—		85,831
Residential mortgage-backed securities	410,080		4,658		(12,341)		—		402,397
Commercial mortgage-backed securities	76,802		652		(1,263)		—		76,191
Other asset-backed securities	313,118		3,863		(1,424)		—		315,557
Total fixed maturity securities, available-for-sale	$	1,410,269	$	17,317	$	(30,078)	$	—	$	1,397,508
Fixed maturity securities, held-to-maturity:
Other asset-backed securities	$	37,769	$	97	$	(6)	$	(250)	$	37,610
Total fixed maturity securities, held-to-maturity	$	37,769	$	97	$	(6)	$	(250)	$	37,610


	Less than 12 Months				12 Months or More				Total
($ in thousands)	Fair Value		Gross Unrealized Losses		Fair Value		Gross Unrealized Losses		Fair Value		Gross Unrealized Losses
March 31, 2025
Fixed maturity securities, available-for-sale:
U.S. government securities	$	5,350	$	(2)	$	2,318	$	(68)	$	7,668	$	(70)
Corporate securities and miscellaneous	89,029		(1,179)		80,321		(9,667)		169,350		(10,846)
Municipal securities	25,337		(473)		28,863		(3,661)		54,200		(4,134)
Residential mortgage-backed securities	96,088		(984)		83,406		(11,357)		179,494		(12,341)
Commercial mortgage-backed securities	8,833		(216)		12,372		(1,047)		21,205		(1,263)
Other asset-backed securities	75,860		(507)		25,644		(917)		101,504		(1,424)
Total fixed maturity securities, available-for-sale	300,497		(3,361)		232,924		(26,717)		533,421		(30,078)
Fixed maturity securities, held-to-maturity:
Other asset-backed securities	37,610		(6)		—		—		37,610		(6)
Total fixed maturity securities, held-to-maturity:	37,610		(6)		—		—		37,610		(6)
Total	$	338,107	$	(3,367)	$	232,924	$	(26,717)	$	571,031	$	(30,084)



	March 31, 2025		December 31, 2024
High	7.98	%	8.00	%
Low	5.43	%	5.70	%
Weighted average	6.19	%	6.60	%


March 31, 2025
($ in thousands)	Level 1		Level 2		Level 3		Total
Fixed maturity securities, available-for-sale:
U.S. government securities	$	26,682	$	—	$	—	$	26,682
Corporate securities and miscellaneous	—		415,528		75,322		490,850
Municipal securities	—		85,831		—		85,831
Residential mortgage-backed securities	—		402,397		—		402,397
Commercial mortgage-backed securities	—		76,191		—		76,191
Other asset-backed securities	—		307,422		8,135		315,557
Total fixed maturity securities, available-for-sale	26,682		1,287,369		83,457		1,397,508
Fixed maturity securities, held-to-maturity:
Other asset-backed securities	—		—		37,610		37,610
Total fixed maturity securities, held-to-maturity	—		—		37,610		37,610
Equity securities:









Common stocks	64,215		—		—		64,215





Preferred stocks	—		1,160		—		1,160




Mutual funds	42,700		—		—		42,700
Total equity securities	106,915		1,160		—		108,075
Mortgage loans	—		—		16,012		16,012
Short-term investments	308,042		—		—		308,042
Total	$	441,639	$	1,288,529	$	137,079	$	1,867,247


($ in thousands)	Mortgage Loans
Balance at December 31, 2023	$	50,070
Total gains for the period recognized in net investment gains	971
Issuances	187
Settlements	(6,919)



Balance at March 31, 2024	$	44,309
Total gains for the period recognized in net investment gains attributable to the change in unrealized gains or losses relating to assets held as of period end	$	952



($ in thousands)	Amortized Cost		Fair Value
Due in less than one year	$	26,394	$	26,361
Due after one year through five years	316,122		312,529
Due after five years through ten years	222,978		221,809
Due after ten years	44,775		42,664
Mortgage-backed securities	486,882		478,588
Other asset-backed securities	313,118		315,557
Total	$	1,410,269	$	1,397,508


	Three months ended March 31,
($ in thousands)		2025		2024
Commercial		$	108	$	458
Retail		304		490
Hospitality		249		471




		$	661	$	1,419


($ in thousands)	March 31, 2025				December 31, 2024
	Carrying Value		Ownership %		Carrying Value		Ownership %
Arena Special Opportunities Fund, LP units	$	32,364	14.9	%	$	34,936	15.3	%
JVM Funds LLC units	16,692		10.1	%	17,229		10.1	%
Hudson Ventures Fund 2 LP units	4,897		2.5	%	4,967		2.5	%
RISCOM	2,886		20.0	%	5,013		20.0	%
Brewer Lane Ventures Fund II LP units	1,410		2.4	%	1,040		2.4	%
Dowling Capital Partners LP units	678		5.0	%	666		5.0	%

Arena SOP LP units	218		11.1	%	1,474		10.9	%
	$	59,145			$	65,325


	Three months ended March 31,
($ in thousands)		2025		2024
Brewer Lane Ventures Fund II LP		$	170	$	(32)
Dowling Capital Partners LP units		13		1,342
Hudson Ventures Fund II LP units		(25)		(52)

RISCOM		(128)		286
JVM Funds LLC		(211)		(484)
Arena Special Opportunities Fund, LP units		(551)		(251)
Arena SOP LP units		(1,256)		289
		$	(1,988)	$	1,098


	Three months ended March 31,
($ in thousands, except for share and per share amounts)		2025		2024
Numerator
Net income		$	42,058	$	36,784




Denominator
Basic weighted-average common shares		40,196,416		39,108,351


Dilutive effect of stock notes		—		711,752
Dilutive effect of stock units		1,004,585		935,890
Dilutive effect of options		479,594		329,143
Diluted weighted-average common share equivalents		41,680,595		41,085,136
Basic earnings per share		$	1.05	$	0.94
Diluted earnings per share		$	1.01	$	0.90


	Three months ended March 31,
$ in thousands		2025		2024
Short-term investments & cash and cash equivalents		$	4,041	$	5,088
Fixed income		16,730		12,478
Equities		657		627
Alternative and strategic investments		(2,097)		104
Net investment income		$	19,331	$	18,297

Net unrealized gains on securities still held		$	5,491	$	8,991
Net realized gains (losses)		1,350		(688)
Net investment gains		$	6,841	$	8,303


Line of Business						Maximum Company Retention
Accident & Health						$0.90 million per occurrence

Commercial Auto(1)						$1.00 million per occurrence
Excess Casualty(1)(2)						$1.69 million per occurrence
General Liability(1)						$1.68 million per occurrence
Ocean Marine(2)						$2.50 million per occurrence
Professional Lines(2)						$5.19 million per occurrence
Property(3)						$4.00 million per occurrence
Representation and Warranty						$5.00 million per occurrence
Surety(2)						$4.00 million per occurrence
Workers’ Compensation(2)						$2.33 million per occurrence

(1) Legal defense expenses can force exposure above the maximum company retention for Excess Casualty, Commercial Auto and General Liability.
(2) Reinsurance is subject to a loss ratio cap or aggregate level of loss cover that exceeds a modeled 1:250-year PML event.
(3) Catastrophe loss protection is purchased up to $36.0 million in excess of $12.0 million retention, which provides cover for a 1:250-year PML event.


Exhibit Number						Exhibit Description
3.1						Amended and Restated Certificate of Incorporation (incorporated by reference to Exhibit 3.1 to the Company’s Current Report on Form 8-K filed with the Commission on January 18, 2023).
3.2						Amended and Restated Bylaws (incorporated by reference to Exhibit 3.2 to the Company’s Current Report on Form 8-K filed with the Commission on January 18, 2023).
4.1						Amended and Restated Stockholders’ Agreement, by and among the Company and the stockholders listed therein (incorporated by reference to Exhibit 4.1 to the Company’s Registration Statement on Form S-1, filed with the SEC on November 14, 2022).
31.1						Certification of Principal Executive Officer pursuant to Rule 13a-14(a) or Rule 15d-14(a) of the Securities Exchange Act of 1934, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
31.2						Certification of Principal Financial and Accounting Officer pursuant to Rule 13a-14(a) or Rule 15d-14(a) of the Securities Exchange Act of 1934, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
32.1						Certification of Principal Executive Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
101.INS						Inline XBRL Instance Document - the instance document does not appear in the Interactive Data File because XBRL tags are embedded within the Inline XBRL document.
101.SCH						Inline XBRL Taxonomy Extension Schema with Embedded Linkbase Documents
104						Cover Page Interactive Data File (embedded within the Inline XBRL document)

Date	Price Target	Rating	Analyst
4/11/2025	$59.00	Buy → Hold	Jefferies
3/14/2025	$53.00 → $63.00	Equal Weight → Overweight	Barclays
2/28/2025		Outperform → Peer Perform	Wolfe Research
1/13/2025	$43.00	Hold	TD Cowen
9/5/2024	$44.00	Equal Weight	Barclays
8/19/2024		Outperform	William Blair
7/12/2024		Outperform	Oppenheimer
1/11/2024	$39.00	Outperform	Wolfe Research

SEC Form 10-Q filed by Skyward Specialty Insurance Group Inc.

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