8-K: Skyward Specialty Reports Strong Fourth Quarter and Full Year 2024 Results, Driven by Premium Growth and Underwriting Discipline

Skyward Specialty Insurance Group announces a net income of $14.4 million for Q4 2024 and $118.8 million for the full year, alongside significant growth in gross written premiums and adjusted operating income.

Summary

• Skyward Specialty Insurance Group reported a net income of $14.4 million, or $0.35 per diluted share, for the fourth quarter of 2024, compared to $29.3 million, or $0.74 per diluted share, for the same period in 2023.
• The net income for the year ended 2024 was $118.8 million, or $2.87 per diluted share, compared to $86.0 million, or $2.24 per diluted share, for the same period in 2023.
• Adjusted operating income for the fourth quarter of 2024 was $33.2 million, or $0.80 per diluted share, compared to $24.3 million, or $0.61 per diluted share, for the same period in 2023.
• Adjusted operating income for the year ended 2024 was $126.7 million, or $3.06 per diluted share, compared to $80.8 million, or $2.11 per diluted share, for the same period in 2023.
• Gross written premiums increased by 20.8% to $388.4 million in Q4 2024 compared to 2023.
• The adjusted combined ratio was 91.6%, including catastrophe losses of 2.2 points.
• The return on equity for the year ended 2024 was 16.3%, compared to 15.9% for the same period in 2023.
• The adjusted return on equity for the year ended 2024 was 17.4%, compared to 14.9% for the same period in 2023.
• Book value per share increased by 18% to $19.79 as of December 31, 2024, compared to December 31, 2023.

Sentiment

Score: 8

Explanation: The report is generally positive, highlighting strong growth in premiums and adjusted operating income, although there is a decrease in net income for Q4; the management's comments are optimistic about the future.

Positives

• Gross written premiums saw substantial growth, increasing by 20.8% in Q4 and 19.4% for the full year.
• Adjusted operating income increased for both the quarter and the full year.
• Return on equity and adjusted return on equity improved compared to the previous year.
• Book value per share increased by 18% year-over-year.
• The company thoughtfully diversified its product portfolio, strategically launching new units including Media Liability, Life Sciences, Mortgage and Credit, and Renewable Energy.

Negatives

• Net income for Q4 2024 decreased compared to the same period in 2023, from $29.3 million to $14.4 million.
• The loss ratios for the fourth quarter and year ended 2024 increased 5.8 points and 1.3 points, respectively, when compared to the same 2023 periods, primarily due to the net impact of prior accident year development related to the LPT.
• The fourth quarter and year ended 2024 were also impacted by higher catastrophe losses, primarily from Hurricane Milton in the fourth quarter of 2024 and Hurricanes Helene and Beryl in the third quarter of 2024.

Risks

• Forward-looking statements are subject to risks and uncertainties that could cause actual results to differ materially.
• These risks include legislative changes, regulatory rule making, class action litigation, loss of key personnel, competition, inflation, weather-related events, and the ability to obtain reinsurance coverage.

Future Outlook

Management is confident that they have built the foundation that will propel the company in 2025 and beyond.

Management Comments

• Skyward Specialty Chairman and CEO Andrew Robinson commented, 'We wrapped up another remarkable year for Skyward Specialty, delivering both outstanding underwriting results while growing gross written premiums at over 20% for the quarter and 19% for the full year, with six out of eight divisions growing double-digits over the prior year.'
• Our 16.3% return on equity for the year was again an excellent outcome.
• Throughout 2024 we continued to thoughtfully diversify our product portfolio, strategically launching new units including Media Liability, Life Sciences, Mortgage and Credit, and Renewable Energy.
• Our focus and disciplined execution of our Rule Our Niche strategy, and the extraordinary efforts of my 600 plus colleagues made 2024 another impressive year for our Company, and we are confident that we have built the foundation that will propel us in 2025 and beyond.

Industry Context

Skyward Specialty operates in the specialty insurance market, which focuses on niche areas and often involves higher risks and potentially higher rewards compared to standard insurance products; the company's growth in gross written premiums and strategic diversification into new units like Media Liability and Renewable Energy reflect a proactive approach to capturing opportunities in this dynamic market.

Comparison to Industry Standards

• It's difficult to provide a precise comparison without knowing the specific peer group Skyward Specialty benchmarks against.
• However, a combined ratio of 91.6% is generally considered healthy in the insurance industry, indicating profitable underwriting.
• Companies like RLI Corp. and W.R. Berkley Corporation are often seen as benchmarks for well-managed specialty insurers, and their ROEs are closely watched.
• Skyward's ROE of 16.3% is competitive, but a more detailed analysis would require comparing it to the average ROE of its direct competitors.

Stakeholder Impact

• Shareholders will likely react positively to the growth in premiums and book value per share.
• Employees may be motivated by the company's strong performance and strategic growth initiatives.
• Customers should benefit from the company's diversified product offerings and stable financial position.

Next Steps

• Skyward Specialty management will hold a conference call on February 26, 2025, to discuss the quarterly results with insurance industry analysts.
• The company will continue to execute its 'Rule Our Niche' strategy and focus on disciplined underwriting and product diversification.

Key Dates