10-K: Skyward Specialty Reports Strong 2025 Growth, Apollo Acquisition

Skyward Specialty Insurance Group, Inc. reported significant growth in 2025, driven by strong underwriting results and strategic expansion, including the acquisition of Apollo Group Holdings Limited.

Summary

• Gross written premiums increased 24.3% to $2,166.2 million in 2025, compared to $1,743.2 million in 2024.
• Net income rose to $170.0 million in 2025 from $118.8 million in 2024.
• The combined ratio improved to 89.3% in 2025 from 92.3% in 2024, indicating an underwriting profit.
• The company acquired Apollo Group Holdings Limited for $555.0 million, comprising $371.0 million in cash and 3,679,332 shares of common stock, with the acquisition closing on January 1, 2026.
• A material weakness in internal control over financial reporting (ITGCs) identified as of December 31, 2024, was remediated as of December 31, 2025.
• A new underwriting division, Agriculture and Credit (Re)insurance, was introduced and saw 193.2% growth in gross written premiums.
• Return on equity increased to 18.9% in 2025 from 16.3% in 2024, and return on tangible equity increased to 20.9% from 18.6%.

Sentiment

Score: 8

Explanation: StockSavvy.ai views this as a strong performance, marked by significant premium growth, improved profitability metrics, and a strategic acquisition that enhances market position and technological capabilities. The remediation of internal control weaknesses further strengthens the operational foundation.

Positives

• Strong growth in gross written premiums, increasing 24.3% year-over-year to $2,166.2 million.
• Improved combined ratio of 89.3% in 2025 (down from 92.3% in 2024), indicating enhanced underwriting profitability.
• Significant increase in net income to $170.0 million in 2025 from $118.8 million in 2024.
• Successful remediation of a previously identified material weakness in internal control over financial reporting (ITGCs).
• Strategic acquisition of Apollo Group Holdings Limited, expected to bring new specialty niches, a distinctive new economy offering, and advanced technology capabilities.
• High growth in the Agriculture and Credit (Re)insurance division, with gross written premiums increasing by 193.2%.
• Return on equity increased to 18.9% and return on tangible equity to 20.9%, demonstrating efficient capital utilization.
• Maintained an A (Excellent) financial strength rating with a stable outlook from A.M. Best.
• Statutory capital and surplus substantially exceeded regulatory requirements, indicating a strong balance sheet.

Negatives

• Decreases in gross written premiums for Global Property (-11.7%), Construction & Energy Solutions (-7.5%), and Professional Lines (-6.6%) due to continued downward pricing pressure and the exit of unprofitable lines.
• Adverse development of $22.4 million in exited lines' prior year loss and loss expense reserves.
• Income from alternative and strategic investments decreased in 2025 due to a decline in the fair value of limited partnership investments.
• The company sold almost all of its equities portfolio during the third quarter of 2025.
• Incurred $14.0 million in transaction expenses associated with the Apollo acquisition.
• The holding company had relatively low cash and investments of $3.5 million at December 31, 2025, relying on subsidiaries for liquidity.

Risks

• Financial condition and results of operations could be materially adversely affected if underwriting risk is not accurately assessed.
• Intense competition for business in the insurance industry.
• Reliance on insurance retail agents, brokers, wholesalers, and program administrators exposes the company to risks if relationships deteriorate or they fail to remit premiums.
• Inability to purchase third-party reinsurance in desired amounts on commercially acceptable terms or terms that adequately protect the company.
• Losses and loss expense reserves may be inadequate to cover actual losses.
• A decline in the financial strength rating may adversely affect the amount of business written.
• Unexpected changes in the interpretation of coverage or provisions, including loss limitations and exclusions, in policies.
• Reinsurers may not reimburse claims on a timely basis, or at all.
• Failure to accurately and timely pay claims could materially and adversely affect business, financial condition, results of operations, and prospects.
• Adverse economic factors, including recession, inflation, periods of high unemployment or lower economic activity, could result in fewer policy sales or an increase in claims frequency and premium defaults.
• The insurance business is historically cyclical in nature, which may affect financial performance.
• Extensive regulation, with failure to comply potentially leading to penalties.
• Loss of one or more key personnel or an inability to attract and retain qualified personnel.
• Increased costs and management time required for operating as a public company.
• Use of derivatives to mitigate exposure to market price volatility may subject the company to risks such as hedge ineffectiveness, basis risk, collateral and margin call liquidity pressures, and valuation uncertainty.
• The integration of Apollo may present unforeseen challenges, including potential difficulties in integrating technology systems, business processes, and risk management frameworks, which could result in operational disruptions, increased costs, or delays in realizing anticipated strategic benefits.
• Increased public attention to environmental, social, and governance (ESG) matters may expose the company to negative public perception, reputational harm, or additional costs.
• Changes in accounting practices and future pronouncements may materially affect reported financial results.
• Performance of the investment portfolio is subject to a variety of investment risks, including credit risk and interest rate risk.
• The company could be forced to sell investments to meet liquidity requirements.
• Subject to risk-based capital requirements and other minimum capital and surplus restrictions.
• May become subject to additional government or market regulation.
• Changes to U.S. tax laws and implementation of new tax policies could have a significant negative impact.
• Ability to utilize net operating loss carryforwards and certain other tax attributes may be limited.
• As a holding company, liquidity depends on cash dividends or other permitted payments from insurance subsidiaries, which are restricted by state laws.
• Applicable insurance laws may make it difficult to effect a change of control.
• May require additional capital in the future, which may not be available or may only be available on unfavorable terms.
• The availability of credit under the Revolving Credit Facility is subject to conditions that may limit access.
• Failure to meet certain financial covenants required by credit agreements.
• Security breaches, loss of data, cyberattacks, and other information technology failures could disrupt operations, damage reputation, and adversely affect business.
• Artificial intelligence is an evolving and rapidly growing technology which may impact business and operations, with risks if competitors leverage it more quickly or effectively, or if applications are deficient.
• May not be able to manage growth effectively, particularly inorganic growth through acquisitions.
• Operating results and stock price may be volatile, or may decline regardless of operating performance.
• May change underwriting guidelines or strategy without stockholder approval.
• Anti-takeover provisions in organizational documents could prevent or delay a change of control.
• Exclusive forum provision in charter documents could limit stockholders' ability to obtain a favorable judicial forum for disputes.

Future Outlook

The company aims to continue profitable growth by leading in niche markets, attracting and retaining exceptional talent, leveraging advanced technology and analytics, and fostering a nimble and responsive culture. It expects to capitalize on increasing demand for specialized insurance solutions due to rising and complex risks (including climate change, supply chain uncertainty, financial inflation, cyber risk, novel health risks, and increased litigation) and the emergence of micro-cycles and micro-dislocations within the P&C insurance market.

Management Comments

• "We are a growing specialty insurance company delivering commercial insurance products and solutions on a non-admitted (or E&S) and admitted basis, predominantly in the United States."
• "We believe this diversification, which includes businesses not typically aligned with traditional P&C pricing cycles, combined with our underwriting and claims expertise, will more consistently produce strong growth and profitability across all insurance pricing cycles."
• "We aim to deliver long-term value for our shareholders by generating best-in-class underwriting profitability and book value per share growth across P&C market cycles."
• "We believe the acquisition [Apollo] is exceptionally well aligned to Skyward Specialty’s strategy, bringing new specialty niches, a distinctive new economy offering, accelerating innovation, and adding Apollo’s advanced technology capabilities."
• "We fundamentally believe that every underwriting and claims decision can be augmented with the use of new types of risk data and advanced technology."
• "We know that we cannot win at our business unless we first win with our people."
• "Management believes that cash receipts from premiums and proceeds from investment income are sufficient to cover cash outflows in the foreseeable future."

Industry Context

StockSavvy.ai notes that Skyward Specialty's strategic focus on underserved and dislocated niche markets, coupled with its diversified portfolio and advanced technology adoption (SkyBI, AI), positions it to navigate the cyclical nature of the P&C insurance market more effectively than many traditional carriers. The acquisition of Apollo, a leading U.S.-centric specialty underwriting platform operating at Lloyds of London, further enhances its specialty offerings and digital economy presence, aligning with broader industry trends towards specialization, technological innovation, and global market access.

Comparison to Industry Standards

• The combined ratio of 89.3% in 2025 is indicative of strong underwriting profitability, outperforming many industry peers who often struggle to maintain sub-90% ratios in competitive markets. For example, while some large diversified insurers might see combined ratios in the low to mid-90s, specialty players like Kinsale Capital Group, Inc. (a mentioned competitor) often target and achieve combined ratios in the low 80s, suggesting Skyward is performing well but has room for further optimization compared to top-tier specialty players.
• The 18.9% Return on Equity (ROE) in 2025 is robust and generally exceeds the average for the broader P&C insurance industry, which often ranges from 8-12%. This performance is more in line with high-growth specialty insurers.
• The 24.3% growth in gross written premiums significantly outpaces the overall P&C market growth, which typically ranges in the mid-single digits, demonstrating successful market penetration and strategic expansion, particularly in its Agriculture and Credit (Re)insurance division.

Management Changes

Corporate Governance

Legal Proceedings

• Party to various legal actions arising from claims made under insurance policies and contracts in the ordinary course of business, with management believing outcomes will not have a material adverse effect on consolidated financial position.
• Acknowledges industry-wide risks of class action lawsuits and other types of litigation, some involving substantial or indeterminate amounts, and the unpredictability of outcomes.
• Notes issues of social inflation, particularly in third-party claims, which can lead to oversized judgments and inflated litigation costs and settlement amounts.

Related Party Transactions

• RISCOM: The company holds a 20% ownership interest in RISCOM, which provides wholesale brokerage services and has a managing general agency agreement. Net earned premiums related to these agreements were $120.1 million in 2025, and commissions were $28.7 million.
• Advisory and professional services fees and expense reimbursements paid to various affiliated stockholders and directors amounted to $0.6 million in 2025.
• Intercompany Loan Promissory Note: Skyward Specialty borrowed $57.0 million from Houston Specialty Insurance Company (HSIC) on September 30, 2024, with a fixed annual interest rate of 4.00%.

Stakeholder Impact

• Shareholders: Positive impact from increased net income, improved return on equity, and strategic acquisition. Potential dilution from common stock issuance for the Apollo acquisition. Share repurchase program approved but no shares repurchased yet.
• Policyholders: Benefit from the company's strong financial strength rating (A Excellent from A.M. Best) and diversified product offerings, indicating stability and ability to meet obligations.
• Employees: The company aims to be an employer of choice, fostering diversity, providing competitive compensation and benefits, and emphasizing training and professional development. A hybrid work schedule offers flexibility.
• Distribution Partners: Benefit from the company's deep expertise in niche markets, high-caliber underwriters, culture of innovation, thoughtful product line-up, and responsive service.
• Reinsurers: The company seeks to purchase reinsurance from highly-rated reinsurers (Aor better by A.M. Best), indicating a focus on reliable partnerships.
• Regulators: The company is subject to extensive state and federal regulation, with compliance efforts noted, including the successful remediation of ITGCs.

Next Steps

• Integration of Apollo Group Holdings Limited into the business.
• Continued focus on leading in chosen market niches and establishing sustainable competitive positions.
• Attracting and retaining exceptional underwriting and claims talent.
• Amplifying expertise with advanced technology and analytics.
• Empowering underwriting and claims teams with considerable authority to make decisions.
• Fostering a culture that promotes nimbleness and responsiveness to market opportunities and dislocation.
• Evaluating the effect of ASU 2024-03 (Improvements to Income Tax Disclosures) on consolidated financial statements, effective for fiscal years beginning after December 15, 2026.
• Monitoring and responding to trends in loss emergence and market conditions through cross-functional collaboration.

Key Dates

Recommendation

The filing demonstrates robust financial performance with significant premium growth, improved underwriting profitability (lower combined ratio), and strong returns on equity. The strategic acquisition of Apollo expands market reach and technological capabilities, positioning the company for continued leadership in specialty niches. The successful remediation of internal control weaknesses further enhances operational integrity. While integration risks exist, the overall trajectory and strategic moves suggest strong future potential for investors.

Keywords

Specialty Insurance, Commercial P&C, Underwriting, Reinsurance, Apollo Acquisition, Financial Performance, Risk Management, SEC Filing, 10-K, SKWD, Insurance Industry, Cybersecurity, ESG, Capital Markets, Investment Portfolio