Skyward Specialty Insurance Group, Inc. Q2 FY2025 earnings call

• Adjusted operating income of $37.1 million and $0.89 per diluted share driven by strong underwriting income. - Gross written premiums grew 18% with an 89.4% combined ratio, a company best. - Diversified portfolio and Rule Our Niche strategy driving profitable growth in less cyclical areas. - Growth in ag, credit, A&H with specialized knowledge. - AI investment via SkyVantage platform to augment underwriters and claims professionals. - Disciplined underwriting and focus on complex underserved markets.

Skyward Specialty reported an outstanding second quarter with adjusted operating income of $37.1 million or $0.89 per diluted share. Gross written premiums grew 18% for the quarter. The combined ratio was 89.4%, a company best. Agriculture, credit, accident and health, captives, and specialty programs contributed to the growth. Net written premiums grew by 14%, and net retention through 6 months was 60.9%. The non-cat loss ratio was 59.9%, the best in company history. Investment income was impacted by alternative assets, but excluding alternatives, net investment income increased 23.5% due to higher fixed income portfolio yield and asset base.

• Management sticks to annual guidance, currently overdelivering against it. - Retention ratio guidance around 60%, with mix dynamics affecting quarter-over-quarter movement. - Annual guidance provided and will be maintained, with overdelivery expected if performing well.

• Volatility in alternative investments due to market marking-to-market. - Loss inflation posing a headwind for exposure growth in certain lines. - Softening conditions in global and E&S property impacting growth. - Market dynamics affecting surety and other lines with potential loss activity shifts.

Q: Greg Peters asked about reserving in ag business and investment side performance.

A: Andrew Robinson discussed conservative reserving in volatile lines like ag and the runoff of alternative investments, confident in managing the portfolio.

Q: Michael Zaremski inquired about pricing excluding property and headcount.

A: Andrew Scott Robinson confirmed pricing exclusion for global property and talked about OUE expenses down 2 points, leveraging AI to amplify underwriter productivity.

Q: Alex Scott asked about captive growth and A&H exposure to medical cost inflation.

A: Andrew Robinson explained captive growth from innovative property-focused captive and A&H growth via group captives and medical cost management strategies.

Q: Meyer Shields asked about surety growth and loss activity.

A: Andrew Scott Robinson stated surety growth is strong with innovative products and no current loss activity issues.

Q: Andrew Andersen asked about amended filing and material weakness.

A: Mark Haushill explained the administrative nature of the amended filing and ongoing remediation of material weakness.

Q: Matt Carletti asked about aviation unit focus.

A: Andrew Scott Robinson described the aviation unit focusing on noncommercial aviation risks.

Q: Andrew Kligerman asked about captive impact on retention and attractive casualty areas.

A: Andrew Scott Robinson discussed captive impact on retention due to business mix and market dynamics, and attractive casualty areas like E&S GL and energy solutions.

Q: Mark Hughes asked about cat loss assumption, accident year loss picks, and seasonality.

A: Mark Haushill and Andrew Scott Robinson stated no change to cat loss guidance, no movement in accident year loss picks, and discussed seasonality and program lumpiness.