Skyward Specialty outlines Apollo acquisition timeline and signals uneven premium growth amid 52% surge in Q3

Earnings Call Insights: Skyward Specialty Insurance Group, Inc. (SKWD) Q3 2025

MANAGEMENT VIEW

* CEO Andrew Robinson described the third quarter as "exceptional, extending our outstanding and consistent track record of profitable growth and double-digit returns." He highlighted company records including $44 million in operating income, $38 million in underwriting income, an 89.2% combined ratio, and 52% growth in gross written premiums. Robinson emphasized, "5 of 9 divisions grew by over 25%, with our Agriculture unit as the largest contributor."
* CEO Robinson stated, "Market conditions across much of the P&C market are now showing signs of increased competition. As always, our teams are responding with discipline, leaning in where market dynamics support our return thresholds, and stepping back where they do not."
* Robinson welcomed Kevin Reed as the new Vice President of Investor Relations.
* CFO Mark Haushill reported, "We had an exceptional quarter, reporting adjusted operating income of $44 million or $1.05 per diluted share and net income of $45.9 million or $1.10 per diluted share. Gross written premiums grew by 52% in the quarter versus the prior year."
* Haushill detailed that the Agriculture unit, especially the U.S. dairy and livestock industry, was a significant growth driver. He noted, "Setting aside Agriculture, gross written premiums grew at a strong mid-teens rate in aggregate compared to the prior year, driven by A&H, Captives, Surety, and Specialty programs."
* Haushill announced, "We continue to prepare for the Apollo acquisition, which we expect to close in the early first quarter of 2026, subject to regulatory approvals. Deal financing is progressing well and remains on track."

OUTLOOK

* Management expects quarterly growth to be "somewhat uneven," with divisions such as Ag, Captives, Specialty programs, and A&H having concentrated renewal cycles that may cause fluctuations. Haushill stated, "There will be quarters where growth is lower than what we have reported in each of the first 3 quarters this year."
* Haushill indicated the company plans to provide guidance on Apollo's 2026 financial metrics once regulatory progress is further along, likely in early December, and will offer additional guidance on Skyward's business during the fourth quarter call in February.
* Robinson addressed capital needs, saying, "We don't necessarily see any capital constraints. But that doesn't sort of set aside this potential point that we will be evaluating whether some portion of our underwriting income should be recaptured through fees over time."

FINANCIAL RESULTS

* Haushill reported net written premiums grew by 64% with net retention for nine months at 65.1%, up from 62.9% in the prior year.
* The combined ratio was 89.2%, with a non-cat loss ratio of 60.2%, an improvement of 0.4 points compared to 2024. The expense ratio of 28.4% improved 0.5 points over the prior year quarter.
* Net investment income increased by $2.7 million over the prior quarter, with a $5.3 million increase from the fixed income portfolio, partially offset by losses in alternatives. The company realized $16.3 million in gains from the monetization of its equity portfolio.
* Financial leverage ended the quarter under an 11% debt-to-capital ratio, with expectations to rise to approximately 28% post-Apollo acquisition.
* Operational metrics included renewal pricing bouncing up to mid-single digits plus peer rate, mid-digit exposure growth (excluding Global Property), and submission growth consistent in the mid-teens.

Q&A

* Charles Peters, Raymond James: Asked about success outside Agriculture and more detail on segment performance. Haushill responded, "We're being appropriately cautious... It's becoming more competitive and certainly more nuanced. That said... Surety has bounced back 26% growth this past quarter."
* Peters asked about Apollo's Q3 results and cycle management. Robinson replied, "We really, really like everything that the Apollo team has done... They're weighted pretty heavily towards specialty classes, and... aren't heavily weighted towards property cat."
* Tracy Benguigui, Wolfe Research: Inquired about capital sources for continued growth. Robinson stated, "We are an incredibly capital-efficient organization... We don't necessarily see any capital constraints."
* Benguigui asked about 52% growth in specialty programs. Robinson explained, "We added two programs... Warranty Indemnity program and... Brownwater and Greenwater Marine."
* Matthew Carletti, Citizens JMP: Asked about growth volatility. Haushill responded, "Ag, that's heavily a Q3 quarter... A&H is weighted more towards the first quarter, Property towards the first half of the year."
* Meyer Shields, KBW: Queried about Ag premium earnings recognition and G&A expenses. Haushill confirmed, "We'll earn it ratably over the next 12 months... There's no nonrecurring items here at all."
* Michael Zaremski, BMO: Asked about retention levels and reserves. Robinson noted, "Three big drivers of our gross to net... Global Property business, Captives, and A&H."
* Andrew Andersen, Jefferies: Asked about construction inflation. Robinson described, "We're seeing severity inflation... just that we keep seeing the loss inflationary dimensions emerge in areas that we're surprised by."

SENTIMENT ANALYSIS

* Analysts were broadly positive, emphasizing strong growth but raising questions about capital sufficiency, competitive market conditions, and future guidance. Benguigui described the company's growth as "eye-popping" and probed on capital strategy.
* Management maintained a confident tone in both prepared remarks and Q&A, repeatedly affirming capital efficiency and strategic discipline. Robinson stated, "We are very capital efficient."
* Compared to the previous quarter, both analysts and management remained constructive, but analyst questions were more focused on sustainability of growth and competitive threats, while management was more explicit about the potential for uneven future growth.

QUARTER-OVER-QUARTER COMPARISON

* Guidance language shifted to emphasize expected unevenness in quarterly growth, compared to prior quarter's focus on steady expansion.
* Strategic focus remains on niche growth and disciplined cycle management, but there is increased attention to competitive pressures and the timing of the Apollo acquisition.
* Key metrics such as gross written premiums and operating income set new records, with growth rates significantly outpacing the prior quarter.
* Analysts' tone evolved to probe more on sustainability and capital needs, while management's confidence was consistent but more cautious about future volatility.

RISKS AND CONCERNS

* Management highlighted intensifying competition in the P&C market, particularly in Global Property and transactional E&S business.
* Robinson noted selective participation in occurrence liability lines due to ongoing loss inflation and flagged severity inflation in the construction unit.
* Analysts expressed concern about capital sufficiency to support elevated growth, especially ahead of the Apollo acquisition. Management reiterated their capital efficiency and readiness to tap fee-based models if needed.
* Exposure to volatility from alternative investments was cited, though steps have been taken to reduce this risk.

FINAL TAKEAWAY

Skyward Specialty delivered record-setting growth and profitability in the third quarter, driven by standout results in Agriculture, A&H, Captives, Surety, and Specialty programs, while maintaining a robust underwriting performance. Management anticipates uneven growth in future quarters due to business mix and renewal cycles and is preparing for the Apollo acquisition with expectations to provide further guidance following regulatory milestones. The company's disciplined approach to underwriting and capital efficiency remains central as it navigates a more competitive market landscape and continues to leverage technology and innovation across its portfolio.

Read the full Earnings Call Transcript [https://seekingalpha.com/symbol/skwd/earnings/transcripts]

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