Skyward Specialty Insurance Group - Q4 2025
February 24, 2026
Transcript
Operator (participant)
Please be advised that today's conference is being recorded. I would now like to turn the conference over to your speaker for today, Kevin Reed, Vice President, Investor Relations. Please go ahead.
Kevin Reed (VP of Investor Relations)
Thank you, Lisa. Good morning, everyone, and welcome to our Fourth Quarter 2025 Earnings Conference Call. Today, I am joined by our Chairman and Chief Executive Officer, Andrew Robinson, and Chief Financial Officer, Mark Haushill. We will begin the call today with our prepared remarks, and then we will open the lines for questions. Our comments today may include forward-looking statements, which by their nature, involve a number of risk factors and uncertainties, which may affect future financial performance. Such risk factors may cause actual results to differ materially from those contained in our projections and forward-looking statements. These types of factors are discussed in our press release, as well as in our 10-K that was previously filed with the Securities and Exchange Commission.
Financial schedules containing reconciliations of certain non-GAAP measures, along with other supplemental financial schedules, are included as part of our press release and available on our website under the Investors section. With that, I will turn the call over to Andrew.
Andrew Robinson (Chairman and CEO)
Thank you, Kevin. Good morning, and thank you for joining us. Our strong fourth quarter caps off another incredible year. Mark will cover the quarter in detail in a moment, but I'll start our call today with a few quarter and full year highlights. Fourth quarter adjusted operating income increased 47% to $49 million, and underwriting income reached $41 million, both all-time highs in the fourth consecutive quarter of record results for those two metrics. Our growth in gross written premiums in the quarter of 13% caps off an outstanding year of 24% growth. We continue to exceed our objectives of delivering mid-teens return on equity, reporting 18.9% for the year, and a return on tangible equity of 20.9% was simply outstanding.
Our fully diluted book value per share grew to $23.87, which is up 5% over the third quarter and an impressive 26% for the year. The market is becoming more competitive and difficult for many to navigate, and yet we simply go from strength to strength in our financial results, our competitive position, our portfolio construction, and our execution. Whether it be the impressive year-to-date growth in our Ag business, the leadership position we established in the small employer market in A&H, our market-leading innovations such as EndWell, that are powering the growth in Surety and similarly creative products that are driving profitable growth elsewhere, or now the accretive impact the Apollo combination will bring to growth areas like our Life Sciences unit. We are demonstrating every day that we're unique amongst the P&C universe in how we are competing, executing, and winning.
While others are struggling to find their footing in a decidedly more challenging property market and endeavoring to stay in front of the escalating loss costs in areas of the casualty market, we have successfully navigated in a manner others have not. We've evolved nearly 50% of our business portfolio to less cyclical lines while executing on our strategy to rule our niche by attracting the very best talent, staying in the lead in the technology and AI arms race, and building defensible positions in a competitive moat around our business, all while delivering outstanding financial returns. It is unlikely that every quarter going forward can be an all-time best for our underwriting and operating income as it was in 2025. Relative to the market and the opportunities ahead, we believe Skyward has never been better positioned to deliver sustained top-quartile shareholder value.
With that, I'll turn it over to Mark to provide the financial details for the quarter and the year. Mark?
Mark Haushill (CFO)
Thank you, Andrew. We had another great quarter, reporting adjusted operating income of $49 million, or $1.17 per diluted share, and net income of $43 million or $1.03 per diluted share. As Andrew mentioned, gross written premiums grew by more than 13% in the quarter, driven by our A&H, Surety and Specialty Programs divisions. Net written premiums grew 25% for the year, and our retention of 64.9% remained stable year-over-year and consistent with our guidance. Turning to our underwriting performance, the fourth quarter combined ratio improved 7.3 points compared to the prior year quarter to 88.5%, reflecting net favorable development and a modest catastrophe quarter. Our loss ratio of 59.6% includes net favorable prior year development.
This was across multiple lines, primarily Surety and Property of $7.5 million or 2.1 points on the loss ratio. Our favorable development more than offset modest adverse development in more recent accident years, which was principally driven by commercial auto and excess auto in areas that have been exited over the past three years. Our 10-K and statutory filings provide additional details. We ended the year with a very strong reserve profile, with 74% of reserves in IBNR, our highest level of IBNR in the history of the company. Our paid-to-incurred is a low 65% for 2025, consistent with 2024. These metrics demonstrate our disciplined and conservative approach to reserving, even as our liability durations continue to shorten.
The expense ratio for the quarter was 28.9%, consistent with the prior year quarter and in line with our expectation of sub-30s. Efficiency gains in controllable expenses were offset by higher acquisition costs, which were driven by business mix shifts and by regular fourth quarter profit share true-ups. Turning to our investment portfolio. Net investment income for the fourth quarter 2025 increased $3 million compared to the fourth quarter 2024, driven by a larger asset base and higher yields in our fixed income portfolio. In the fourth quarter, we put $52 million to work at 5.6%. Our embedded yield was 5.3% on December 31st, up from 5.1% a year ago. Underlying marks of $2 million on the private credit holdings in our alternative asset portfolio continued to impact net investment income in the quarter.
While the 2025 results in our alternative asset portfolio are disappointing, this portfolio only represents 3.8% of our investment portfolio at December 31st, compared to 6% a year ago. For the year, $44 million of the alt capital was returned and reinvested into our fixed income portfolio. Our organic growth in capital, arising from our strong 2025 results, supports our 2026 business plan. That capital strength positions us well as we consider our balance sheet and our leverage profile going forward. Our financial leverage was modest as we finished the quarter at under 11% debt-to-capital ratio. However, rolling into the first quarter of 2026, our leverage will be impacted by debt related to the Apollo transaction, and we expect it to be in the range of 28%-29%.
Recall, as part of the consideration paid for Apollo, the company issued approximately 3.7 million shares at an accreted $50 per share. At the closing of the Apollo transaction on January 1st, fully diluted book value per share is expected to fall within the range of $26-$26.10, as compared to our $23.87 at December 31st. You'll recall that on December 3rd, we provided guidance for 2026, and that guidance is unchanged. As discussed in prior quarters, the material weakness in IT controls has been remediated, and that will be visible in our 10-K. There are no material weaknesses. We remain focused on our balance sheet strengths and prudent capital management as we move into 2026.
We will look to opportunistically deploy excess capital to take advantage of our extremely attractive share price via our share repurchase program. I'll turn the call back over to Andrew.
Andrew Robinson (Chairman and CEO)
Thank you, Mark. As Mark just shared, our financial results for the quarter were excellent again. We grew over 20% in Surety, A&H, and Specialty Programs. We expect strong continued growth in A&H and Surety, given our winning positions. As noted in the prior calls, we expect flatter growth in Specialty Programs as the effects from the two programs added in early 2025 are fully reflected in written premium. We also grew in captives and modestly in Global Property, the latter of which simply reflects a small premium quarter, high retention on our in-force, and a couple of account wins. We continue to see considerable competition in property. We had strong growth in the quarter within the Credit unit part of our Ag and Credit Reporting division. We remain bullish about our profitable growth opportunity in both units.
We shrunk in Construction & Energy Solutions, driven by our ongoing intentional actions in commercial auto and construction. We have now reduced our commercial auto exposure by more than 62% over the last 12 quarters, as we signaled to you three years ago that the loss cost inflation backdrop is too unpredictable and too unsustainable, something only in the past few quarters others have started to discuss regularly. Regarding energy, given the strength of our market position, limited competition in the specific markets we serve, and our broadened offerings in renewables and power, we are bullish in our outlook for this unit. In Q4, as often happens, the market becomes more competitive as many try to make full year plans. This is most visible in our E&S and Professional Lines divisions. We defended our books effectively, but wrote less new business given the price and terms on offer.
While this continued into the 1/1 renewals, we remain positive about our ability to grow profitably in specific areas in these divisions, including healthcare professional, the specific target classes that make up our management liability book, and general and excess liability. It's important to note our outstanding portfolio construction diversification. Over 58% of our business is in short tail lines, now 48% of our business in lines less exposed to the P&C cycles, our largest division makes up only 16% of our premium. These all continue trends that are visible over the past three years. We arrived at this point with clear strategic intentions, which we have spoken about quarter on quarter since being a public company. Turning to our operational metrics. With a quarter similar to last, on pricing, we achieved mid-single digit pure rate Ex-Global Property.
Retention was in the mid-70s, driven by our intentional actions in commercial auto. We continue to see strong submission growth, which was solidly in the teens again this quarter. I'd now like to take a moment to reflect on our progress as a public company over the last three years. On January 13th, 2023, we listed as a public company. In February of 2023, we reported our 2022 fourth quarter and full year results, with operating income of $11.6 million and $0.36 per fully diluted share, and $12.87 book value per fully diluted share.
In just three years, our adjusted operating income of $49 million is more than 4x greater, our diluted EPS of $1.17 is more than 3x greater, and our fully diluted book value per share is over 2x greater at the close of the Apollo transaction on 1/1. Underlying this is a far stronger balance sheet, both on the asset and liability side of the ledger, a far more durable business portfolio, as I just discussed, market-leading underwriting and claims talent, a leadership position in the use of advanced technology and AI, and every single division executing exceptionally on its rule or niche strategy.
None of this begins to contemplate the impact of the Apollo transaction, which further strengthens our talent, our innovation and earnings, and it provides attractive fee income, strengthens and expands our business portfolio into new specialty areas, and importantly, it builds on Apollo's distinct and obvious leadership position in providing solutions to the digital economy. To this end, you likely saw Uber's announcement yesterday regarding its launch of the first-ever manufacturer-agnostic autonomous rideshare platform. One critical component Uber highlighted is the Autonomous Vehicle Insurance Policy, also known as AVIP. We are proud that Apollo is the sole carrier partner to Uber for this market-leading initiative. AVIP is a comprehensive liability product that combines general and product liability, along with several other coverages for manufacturers, ADS providers, owners, fleet managers, and other supporting participants into one simple policy that is embedded directly within the Uber AV platform.
Uber selected Apollo because of our expertise, intellectual property, proprietary data, track record, and leading position in providing insurance to the AV market. I noted autonomy as a large growth area for Apollo when we announced the transaction to acquire Apollo. This is a powerful demonstration that we are the leader in understanding AV risk and providing powerful risk transfer solutions to this market. Our collaboration with Uber has been central to the unique design of this product, including our proprietary context-specific and usage-based pricing approach. The embedded coverages mean this product is not sold, but rather consumed by AVs offering their services through the Uber platform.
We'll share more specifics in the coming days and weeks, but when we speak about the impact of Apollo and the strength of the combined company that is now Skyward Group, this partnership with Uber is precisely what we envisaged. It reflects the differentiated capabilities we have brought together and our ability to deliver solutions at the forefront of innovation, technology, and serving markets being disrupted by AI. To wrap up, as I look back on 2025 and our last three years as a public company, I'm immensely proud of the integrity of our company and how we operate, the accomplishments of our Skyward team, and the results we've delivered to you, our shareholders. I'm even more excited about the next three years now with the capabilities and talents of our colleagues at Apollo.
Despite a more challenging and uncertain market backdrop, at no point during my six years at the company have I viewed us better positioned for success than today. With that, I'd now like to turn the call back over to the operator to open it up for Q&A. Operator?
Operator (participant)
Thank you. As a reminder, if you would like to ask a question, please press star one one on your telephone. You'll hear an automated message advising your hand is raised. We also ask that you please wait for your name and company to be announced before proceeding with your question. One moment while we compile the Q&A roster. Our first question for the day will be coming from the line of Meyer Shields of Keefe, Bruyette & Woods. Your line is open.
Meyer Shields (Managing Director)
Great. Thank you so much, and good morning. I was hoping you'd go a little bit deeper into the Surety growth, where it was very strong in the fourth quarter. You're pretty optimistic, if about 2026, because we've heard a lot of, I guess, concern from other carriers, about delayed construction projects.
Andrew Robinson (Chairman and CEO)
Yeah, look, I mean, I think that. Thanks, Meyer, by the way, for the question. There was nothing unusual about, you know, this quarter. You could see the growth building. The fourth quarter, particularly, was a release of a lot of federal funds. Things that were backed up over the course of the year, you know, the monies sort of became available. Our view is really simple, which is, you know, we've built a really well-diversified portfolio within Surety, right? So it's not just, you know, contract and commercial. It is the fact that we're well across all the trades, that we're not exposed to, you know, home builders. On the Surety side, you know, we have, you know, great areas like the SBA.
We have, you know, our judiciary and fiduciary, you know, bond capabilities. You know, we've done a great job with EndWell, which we, you know, obviously talked about over the last three quarters. You know, more recently, there's been a failure of a large solar company with over $1 billion of bonds out in the market, and, you know, probably every top 20 surety, you know, had some piece of that except us. So we're certainly going to avoid a loss there, but that will, that will sort of harden the backdrop around solar, just the way that, you know, we saw the hardening on oil and gas.
You know, I think when I look at it all in, it's just the execution of our business along the lines of the way that we constructed that business. Well diversified, different areas that we can press down, ease up, wait for some market opportunities like we saw in oil and gas, now we'll probably see in solar. I would expect that we're just going to continue to outperform both on the growth and on the loss side as compared to the market.
Meyer Shields (Managing Director)
Okay, fantastic. That's helpful. If I could stay on premium growth prospects just for a second. Wholesale brokers like Ryan are creating these sort of diversified facilities, and we've seen some other specialty carriers participate in that. I was wondering about Skyward's appetite for that sort of business that is externally underwritten.
Andrew Robinson (Chairman and CEO)
Yeah, thanks for the question. We will never do that while I'm the CEO of the company. How about that? I think that it may be appropriate for others, but our strategy is about grow your niche. It is about distinct focus. It is about expertise and capabilities that we can look at and say, "Here's the source of your competitive advantage, your ability to, you know, to have a competitive moat." Whether people are doing it under we're managing other people's money, which some are doing, or just taking a straight quota share, you know, on other people's underwriting, that's just something we will never do as a company while I'm the CEO.
Meyer Shields (Managing Director)
Okay, that is very clear. Thanks so much.
Operator (participant)
Thank you. One moment for the next question. The next question is coming from the line of Paul Newsome of Piper Sandler. Your line is open. Hello, Paul, your line is open. One moment for the next question. The next question will be coming from the line of Gregory Peters of Raymond James. Your line is open.
Gregory Peters (Managing Director)
Hey, good morning, everyone.
Andrew Robinson (Chairman and CEO)
Hey, Greg.
Mark Haushill (CFO)
Good morning, Greg.
Gregory Peters (Managing Director)
I think, you know, you spoke about Apollo, you spoke about, you mentioned this autonomous vehicle partnership with Uber. You know, as we're working through our financial forecasts, maybe you could give us some perspective on how Apollo performed in 2025 and what you think they might be able to do in 2026, you know, as we sort of blend it all together.
Andrew Robinson (Chairman and CEO)
Well, I think that we will have, we're going to have some information out on Apollo here over the coming couple of weeks, as part of sort of the ordinary reporting at the Lloyd. There are some things that will be available. Let me just say that, just in sort of at the macro level, Apollo's financial results are uncannily similar to ours. They grew at about 20%. Their combined ratio was around 89 for the year. The probably the only difference that I would highlight is that their expense ratio is, you know, four or five points higher than ours for this past year, and the loss ratio, accordingly, four or five points lower.
I also will tell you that Mark and I could not be any more pleased with the great work that David Ibeson and James Slaughter and Taryn McHarg had undertaken to ensure that the balance sheet was every bit as conservative as ours. I feel great about sort of our entry into 2026. I think beyond that, you know, Mark just said it best in the script, right? We gave guidance. Our guidance is unchanged. I believe that, you know, you can judge for yourself how it is that we perform against our guidance over the prior three years.
We're going to work hard, obviously, to do the best that we can, but in the end, you know, we can only sort of, take what the market will allow us to take and still deliver the kind of returns that we're delivering to our investors. I'll highlight that this is really important, that while others have put out, you know, some companies have put out monster growth numbers on casualty and so forth, you know, great for them, not great for us.
We're very thoughtful about the loss cost inflation backdrop. The fact that we are exiting this year in the Skyward Specialty part of the portfolio with 50% of our business in areas that are not exposed to the P&C cycles, where we don't have, you know, the kind of concerns around, you know, property and casualty in that half of the portfolio, is unique to us. That gives us a real advantage as we're coming into 2026.
Gregory Peters (Managing Director)
Just sticking on Apollo for a second, and then I do have a follow-up question on a different topic. When, you know, we hear the rhetoric in the marketplace about pricing competition, you know, obviously, we've come to learn, you know, how your book of business has performed. Can you give us some perspective of how you think Apollo is going to perform under the Skyward banner, given the fact that there's a lot more price competition in the marketplace now than there was maybe two or three years ago?
Andrew Robinson (Chairman and CEO)
Well, I mean, I, what I'd say to you is that, is that, what we think about when we, when we were evaluating the potential combination, I think it's reinforced today. There's much about the Apollo portfolio that is, first off, it's very complementary, right? We, we certainly really appreciate what they're doing in their specialty businesses, areas like, you know, Product Recall, PRI and PV, Political Risk, Political Violence, Contingency. I think that this point we just spoke about coming out of ibott Syndicate 1971, the syndicate that's focused on the digital economy, is an example where I have said that they are one of one in that market, and I believe that this partnership with Uber...
I mean, we're talking about embedded product, where all of our expertise is really the foundation for the pricing. Our partnership with them and the insights that we bring is the foundation for the product. That's a unique place to be. You're not out, you know, sitting at the box competing with, you know, 50 other, you know, syndicates for a piece of business. I certainly feel really good about their portfolio construction. I would describe it as very analogous to us. I see that, you know, pricing pressure is not something that you can ignore, but the portfolio is well-diversified enough, like we have at Skyward Specialty, that I'm very confident that we can profitably grow and navigate the market while still delivering, you know, really exceptional returns for our shareholders.
Gregory Peters (Managing Director)
All right. I mean, the other question I had was just about the reserve development. Certainly appreciated your comment about, you know, how you've managed your commercial auto exposures over the last couple of years. Was hoping that you could give us some commentary about the moving pieces inside the reserve development for the fourth quarter.
Mark Haushill (CFO)
Hey, Greg, it's Mark. Thanks. I mean, look, in quick summary, commercial auto moved a little bit on us in accident years 22 and 24. Maybe circa $25 million-ish, it was offset by, as I mentioned in my comments, by some of the shorter tail lines. I'm glad you asked the question because I think it's important for me to be very clear. Look, we review our reserves each and every quarter. In the event that we see something that we need to react to, we will, of course, do that. I think maybe the way I've communicated in the past may have led to a little bit of confusion. I gave you some metrics earlier in terms of just high-level metrics on reserves.
Look, I think it's worth noting, to you and to anybody on the call, I feel as good about our reserves as I ever have since we have been public. Look, there are things that we need to, the areas that we're looking at, for sure. Coming into 2026, I frankly feel better about our reserve than I ever have.
Andrew Robinson (Chairman and CEO)
You know, Greg, I don't think that you can look past the realities that we have dramatically shortened our liability durations, you know, over the course of the last, you know, well, six years since I've been at the company. You know, we're at an incredibly high level of conservatism if you measure it through IBNR. Our paid-to-incurred are as good as they're, you know, as they possibly could be, I would say, at this point. We do look at that, you know, as compared to others in the market.
I think the last thing that I would just highlight is that the auto and the excess over auto, the parts where, you know, we recognize some adverse development, are all parts of our business that we've exited as part of, you know, sort of slimming down the exposure that we have to commercial auto.
Gregory Peters (Managing Director)
Got it. Thanks for the details.
Kevin Reed (VP of Investor Relations)
Thanks, Greg.
Andrew Robinson (Chairman and CEO)
Thank you.
Operator (participant)
Thank you. One moment for the next question. Our next question is coming from the line of Alex Scott of Barclays. Your line is open.
Alex Scott (Equity Research Analyst)
Hey, good morning.
Andrew Robinson (Chairman and CEO)
Good morning, Alex.
Alex Scott (Equity Research Analyst)
Good morning. The first one I had is on Accident & Health. Some of that I know is stop-loss, and I think you guys have had pretty good performance where the rest of it, the industry has struggled a bit. It might be one of the hardest markets we've seen in a while. Pretty unique relative to some of the other things you guys do in P&C. Is that a place where you'd lean into growth? Could you tell us at all about what you did at 1/1 renewals?
Andrew Robinson (Chairman and CEO)
Yeah, our 1/1 were off the chart. We massively, we're ahead of where we thought we would be. That's just a quick answer to your first question. Here's what I think we're seeing. You know, I'll just sort of go back here on the history. You know, we're a stop-loss writer, you know, six years ago, when I joined the company, we focused very heavily on the smaller employer market, so think about 500 employees and less. We got the portfolio working well. About three years ago, we added captives capabilities.
I do think that the couple of players who are really great P&C names, companies that we respect very well, are really kind of the only other folks that we see with really compelling captive offerings. I think that we are seeing a lot of growth in that market, but we're also taking share in addition to the growth that we're seeing. That powered a lot of our growth over the course of the last 24 months. Probably about, starting about 12 months ago, we saw a return to growth in sort of the non-captive part. As we came through 1/1, you're right in what you're saying, Alex.
It is, it is a, I don't know if you wanna call it a hard market, but certainly, it's a market where we're seeing a lot of opportunity at really attractive, you know, price. We're staying true to our focus. Our captive capabilities are top-notch. Our focus on medical cost management is, I would say, distinct and unique and second to nobody in the market. I think we're recognized as such, and whether it be somebody who wants to come into a group captive, or somebody who is self-insuring on their own, and buying the stop-loss, we bring a lot of value to those companies. I see our strength in one-one continuing out through the course of this year.
I feel really good about it. I'll highlight something that just reinforces what you said. You know, if you take a look at the 2024 STAT data that's out there, our loss ratio is 15 points better than the market and a full 30 points better than, you know, the big names that sort of, performed really poorly over the course of the last couple of years, purely on the loss ratio side. You know, that you can't hide from. These are short tail line of business, right? The numbers don't lie, and I couldn't feel any better about what our team has done and what the year looks like for us, and I feel great. You're right to highlight it, so thank you for that.
Alex Scott (Equity Research Analyst)
That was helpful. Follow-up question I had is on the Uber partnership. Obviously, longer term, potential bigger opportunity. As we think about the next year or two, is that gonna cover some of the testing that they're doing initially? Like, will there be premium dollars that come online more immediately? You know, any color you can help us with there?
Andrew Robinson (Chairman and CEO)
Well, let me say three things. First is, you know, as we said in the prepared remarks, we're gonna come back with more data. You know, I've been cautioned by our colleagues at Apollo not to get out of our ski tips here. You know, Uber has put some information out. They're launching this in 15, you know, cities. You know, we'll see how the, how the premium builds. It is in our guidance that we gave you, right? This is not something that we didn't contemplate. It's in the guidance. What I would say is that, look, we are one of one. We are embedded in, you know, the dominant player in this market, who has basically created a manufacturer-agnostic platform. You know, like, you just think about the potential, right?
It's just it's extraordinary. I'll, and I'll highlight something really important to you, which is that no company in the world is better positioned than Uber to demonstrate the safety and the difference between autonomy and human drivers, right? They have the data, and they're gonna have more data as every day passes, right? When you think about a legal and tort backdrop, I don't know who who you'd like to be if you had to choose, but I couldn't imagine being better positioned as being a partner to them on the AV side, you know, as compared to being, you know, writing commercial auto, you know, for them in a very difficult tort backdrop, that they've done a great job of navigating.
There's no question that, you know, the safety care comparison between, you know, autonomous vehicles and human drivers is a marked difference. No company is better positioned to demonstrate that than Uber. You know, we're in the middle of that.
Alex Scott (Equity Research Analyst)
Got it. Thank you.
Operator (participant)
Thank you. One moment for the next question. Our next question is coming from the line of Michael Zaremski of BMO. Your line is open.
Michael Zaremski (Managing Director and Senior Equity Research Analyst)
Hey, Greg. Good morning. Maybe a question on the loss ratio. You know, great all-in loss ratio. If we just kind of look at the underlying loss ratio, ticked up a bit, sequentially. It had been, you know, previously ticking down a bit. Is this you know, you mentioned a commercial auto review. What should we kind of expect this new, slightly higher level to be the kind of the trend line?
Andrew Robinson (Chairman and CEO)
Go ahead. Yeah. Mike, thanks for the question, and good morning. Mark will provide more details. No change in our picks. It's a mixed change. We have two very considerable growth areas in A&H and Ag, which are higher loss ratio businesses, which are, you know, earning in faster than the low loss ratio businesses like Credit and Surety, and effectively on balance, that's what you're seeing. I will tell you that our internal plans are, you know, we gave you the guidance, but I think that it does reflect, you know, a bit of mixed change running through, but I wouldn't overread it, right?
I Those are also lower expense ratio businesses and, you know, so I think on balance, what you're gonna see is, you know, the sort of the performance of our business on a combined ratio, consistent with the guidance that we gave you. The geography will be changing a little bit, but nothing in terms of our underlying picks.
Mark Haushill (CFO)
I think that's right.
Michael Zaremski (Managing Director and Senior Equity Research Analyst)
Got it. That's helpful. Then lastly, moving to the comments about the material weaknesses being resolved, congrats. Just curious on were there any kind of material learnings or system changes or anything you'd like to kind of highlight that?
changed the way you guys do business as a result, or is it really just kind of small things behind the scenes?
Mark Haushill (CFO)
Hey, Mike, it's Mark. This is a sore subject. Look, this whole controls thing is the bane of my existence. No, we're not making any material changes to our systems as a result of it.
Andrew Robinson (Chairman and CEO)
We, Mike, it was IT controls. I think we spoke at length. You know, this is a non-financial matter. We remediated earlier in the year. It didn't get recognized until you know, until you issue your 10-K. Hey, listen, we're a public company, right? This is not unusual, but it's not something that is financial in nature, and, you know, these things happen, right?
It's a company that, you know, we, you know, we took over a company that was in tough conditions six years ago, and we took it public three years ago, and we became, you know, an accelerated filer last year, and the stakes went up. I wouldn't overread any of it. We're just, we're just executing on all dimensions, including in finance.
Michael Zaremski (Managing Director and Senior Equity Research Analyst)
Got it. Yep. I meant to ask it in a, in a positive way. If it was taken a different way.
Andrew Robinson (Chairman and CEO)
No, Mike, don't worry about it.
Mark Haushill (CFO)
No, that's me, Mike.
Andrew Robinson (Chairman and CEO)
Yeah, we, you know, listen.
Michael Zaremski (Managing Director and Senior Equity Research Analyst)
Got it.
Andrew Robinson (Chairman and CEO)
Being a public company is an absolute pleasure, as you can imagine, when it comes to things like this.
Michael Zaremski (Managing Director and Senior Equity Research Analyst)
Maybe I'll seek, I'll seek one last sense since you guys have, you know, you mentioned, reduced commercial auto by over almost two-thirds now over the last few years. Are we kind of towards the end of that, and retention levels might start increasing or impacting growth, differently? Or is that still kind of a consistent work in process, given commercial auto loss inflation remains higher than other lines?
Andrew Robinson (Chairman and CEO)
Yeah. That's a great question. I do want to be clear that we have parts of our portfolio that are commercial auto heavy, that with one piece, it's a significant part that has, you know, been consistently delivering unbelievable returns for us over the course of, you know, 12 years. Predated me, it's not the entire portfolio. To answer your question directly, Mike, in the third quarter of this year, we narrowed our focus in construction, a particular area that had. Well, I'll just describe it as, you know, Ford F-150 trucks that had unusually high severity, to be honest. Frequency was improving. I think that, you know, we had a, maybe a false confidence on the frequency.
The severity, you know, really has been a byproduct of a really just an awful tort backdrop. So we took action on that, there will still be some development of, you know, not development, reduction of our written premium over the course of the next couple of quarters that works its way through. But there's no additional actions, and we feel very good about our portfolio. I don't think there's anything more that we would change at this point. Yeah, there will be some impacts, but it's not anything new. It's just the non-renewal of business that we took decisions on previously.
Michael Zaremski (Managing Director and Senior Equity Research Analyst)
Thank you.
Andrew Robinson (Chairman and CEO)
Thank you.
Operator (participant)
Thank you. One moment for the next question. Our next question will be coming from the line of Andrew Andersen of Jefferies. Your line is open.
Andrew Andersen (Equity Research Senior VP)
Hey, hey, good morning.
Andrew Robinson (Chairman and CEO)
Good morning.
Andrew Andersen (Equity Research Senior VP)
As property just becomes more competitive and you kind of manage the writings there, what have you been seeing on kind of bind or hit ratios for either liability or just the broader book as probably the rest of the market becomes more competitive?
Andrew Robinson (Chairman and CEO)
Thanks, Andrew. That's a good question. I think just straight up on the bind ratio. You know, submission activity continues to be pretty good. Bind ratios, you know, I think maybe you might be asking the question specifically through maybe our transactional E&S lens, has been pretty consistent. You know, there's a particular profile of business that we write, terms and conditions, you know, still pretty good. We haven't really seen a backup on the bind ratio. You know, we quote a lot, you know, to get the business we want. Away from E&S, when you look at something like energy, it's quite different, right? Our competition is quite narrow. Our distribution's tight.
You know, we see the business that we want to see, you know, that just continues to perform well for us. You know, with the introduction of things that we've done over the course of the last couple or three years, on renewables, now more recently on sort of the unique way that we went into power, much of that's targeted towards the same distributors, and that has helped us in terms of kind of the strength of our position on their shelf. Yeah, I mean, I feel like, you know, we're doing what we should do, and there's no real change just yet on, you know, on the liability side. I'm sure that it's going to become more competitive.
The capital's connected, and, you know, as we're about to lap ourselves on the property side, you know, it was in the second quarter of last year that property rates really started to move down, and so we're lapping ourselves, and I'm sure companies are going to redeploy capital elsewhere in the market. Some of that's going to find its way into the liability side, and it's going to become more competitive, but I feel like we're really well positioned.
Andrew Andersen (Equity Research Senior VP)
Thanks. Maybe one more on the Uber piece. I think you mentioned that was going to be in the 1971 syndicate. I think that business does cede maybe 50% or so of net premiums, you know, there's kind of a few layers to the Apollo business with managed and then gross and net. Are you kind of thinking the Uber relationship is maybe more of a fee income vehicle, kind of the near to medium term, rather than a retained premium?
Andrew Robinson (Chairman and CEO)
... so, first off, 1971 for 2026 with our capital participates on a 25% basis. Seventy-five percent of the capital is provided by, you know, third parties, all very, you know, notable name reinsurers. As we've talked about in the past, that itself has a fee-based component. We do have a quota share support behind 1971 as well. That quota share support, like anything that we might do on quota share, effectively seeks to take a portion of the underwriting profits and lock that in, you know, via a cede. That isn't unique to the Uber relationship. That's, you know, structurally in place across 1971.
I think as we get into, we get into the specifics of Apollo in future quarters, I think, you know, probably we can do a little bit more, Andrew, to, you know, give you sort of a better sense for that. At this time, I think, you know, you kind of had the headlines right, and that's just the geography of what I described as sort of the macro geography behind that.
Andrew Andersen (Equity Research Senior VP)
Thank you.
Andrew Robinson (Chairman and CEO)
You're welcome. Thank you.
Operator (participant)
Thank you. One moment for the next question. Our next question is coming from the line of Michael Phillips of Oppenheimer. Your line is open.
Michael Phillips (Investment Banking Analyst)
Thank you. Good morning. I want to touch, Andrew, on the captive division, and a topic we sort of touched on a little bit last quarter, with the maybe demand of captives and the pricing cycle. The slowdown there, any anomalies in the quarter, or is that maybe just a, you know, a start of a continued slowdown, given the overall P&C market is seeing softening pricing?
Andrew Robinson (Chairman and CEO)
Well, I think that Michael, thanks for the question. you know, I think that we have talked about in the past that captives have been sort of a structural, you know, share gainer in the P&C market. Even during the soft market years, captives were able to, as a share of the market, you know, have more, and we're talking specifically group captives, have more flow into the group captives market. there is no question that, you know, the backdrop influences kind of the, maybe the value of somebody moving out of the guaranteed cost market into a captive market at this particular point in time. By and large, folks that do that, do it for strategic reasons, right?
They want to, you know, control their cost of risk. They're making that decision on a long-term basis, but oftentimes the pricing backdrop, you know, acts as an impetus. I think that, you know, probably that's what you're seeing here.
Michael Phillips (Investment Banking Analyst)
Okay. Yeah, that's helpful. Thank you, Andrew. Maybe just a quick second question on a topic we haven't talked about in a while is California and the wildfires. Given the suits on PG&E, any possible updates on any recoveries from that stuff?
Andrew Robinson (Chairman and CEO)
Yeah, I mean, I mean, just to remind you, we had very little loss associated with it.
Michael Phillips (Investment Banking Analyst)
Mm.
Andrew Robinson (Chairman and CEO)
We're talking about, you know, a handful. last I checked, it looks like our recoveries were very good. I think that we, yeah, I think we did the right things around that to ensure that we could just put some confidence behind what we could recover there. It, you know, for us, it's not even material enough to see through our P&L because our losses just weren't that great.
Michael Phillips (Investment Banking Analyst)
Okay. Yep, thank you very much.
Andrew Robinson (Chairman and CEO)
Thank you, Michael. Appreciate it.
Operator (participant)
Thank you. One moment for the next question. Our next question is coming from the line of Tracy Benguigui of Wolfe Research. Your line is open.
Tracy Benguigui (Director and Senior Research Analyst)
Thank you. Good morning. We heard some folks on earnings calls talking about reverse flow within small property counts. What are you seeing in terms of any reverse flow at this point in the cycle? If that's happening, like, what is the typical cadence? Is it small account than large, or do you think high hazard risk will always stay in the E&S market?
Andrew Robinson (Chairman and CEO)
Tracy, good morning. Thanks for the question. You know, I, I just will remind you, and I think we're talking specifically about flow from, you know, from E&S back into the admitted markets. You know, our average premium per policy in our E&S business is about $40 K, we're not a small account writer. That said, on the property side, I think I've talked about these statistics in the past. About a little more than 50% of our business, we're writing, you know, the full limits, the full DIVs, and, you know, less than 50%, you know, we're writing, you know, the primer, and somebody else is writing the excess. We did launch an excess property offering as well. You know, I think that we're really not in the small market.
We're certainly not in the binding authority market. We're not in the market that is kind of the submit business that comes out of the binding authority market. But if I were to highlight one area where I'm seeing seeing it is that, you know, the march on property went from, you know, very large accounts, visible in our Global Property, to, you know, now we're seeing pressure on premiums that are less than $50 K, right? It's come to sort of all levels. In general, we write very tough risks. You know, think things like Well, things that really can burn, like, you know, involved in the wood industry, as an example, or things that explode. Those are not the things that tend to flow back into the admitted market.
That's intentional on our part. It's the same thing on the liability side. We write really, really tough classes: hazard, high severity, low frequency, and, you know, and we charge a lot, and we get our terms and conditions. It probably we're probably not well positioned to address that question as compared to others because of the makeup, and I think that we're a little bit above where that flow back might occur.
Tracy Benguigui (Director and Senior Research Analyst)
Okay, appreciate that. I had a follow-up on, I know you guys already discussed commercial auto and Uber. You obviously have a conservative stance on this line of business, given all your reductions. As it relates to this Uber AV insurance policy, to be sure, does coverage include any bodily injury? If it does, I heard what you had to say about autonomous vehicles being more safe, but I'm wondering if you worry about the mix of driver-enabled and driverless cars at the road at the same time, presenting an untested type of risk.
Andrew Robinson (Chairman and CEO)
Yeah. Thanks for the question, Tracy. The first thing I'd say is, for the avoidance of doubt, this is not a commercial auto policy. Any AV on the road has to carry commercial auto to meet their legal requirements. This is not that. This is a coverage for anybody who participates on the platform, embedded into the Uber platform, for which that coverage applies when an AV is actually doing something in response to, you know, taking instructions on the platform, whether that be, you know, if you read what Uber is doing, it's more than just, you know, rideshare transporting people. It's. It will contemplate other things. Of course, the question of kind of the mixed environment is a critically important question.
I will highlight to you what I said during the prepared remarks. We are not coming into this without really deep knowledge. We have been very active in the AV space. I can't say any more than that. Leading up to this, our dataset on the insurer side, to our knowledge, is the largest dataset available, and so we understand the risk that you're describing incredibly well. The other thing I would say to you is that every AV is equipped with far more information, because of the nature of AV, than vehicles that are being driven by people, except in the cases of those vehicles that could operate as AVs, but are being driven by people.
The information advantage that inures to the AVs is quite considerable if you're talking about a vehicle-to-vehicle collision. Again, I think that all goes into our calculus. As I said, you think about Uber's position. You can take nearly any instruction, any ride in any city in the world, and the amount of information they have about that ride, the frequency of loss, you know, et cetera, et cetera, the driver errors associated with that, as compared to the emerging information on AVs, they are uniquely positioned to demonstrate the safety differences that, AVs have over human drivers. There's no company better positioned. In a difficult tort backdrop, that's an immensely valuable thing.
Tracy Benguigui (Director and Senior Research Analyst)
Really appreciate. Thank you.
Andrew Robinson (Chairman and CEO)
Thank you.
Operator (participant)
Thank you. One moment for the next question. Our next question is coming from the line of Andrew Kligerman of TD Cowen. Your line is open.
Andrew Kligerman (Managing Director)
Thank you. Good morning. Question around retention. It looks like your net written premium as a percent of gross went to 64% from 70%. Could you touch on the dynamics around that shift and what we should expect going into 2026 and 2027 around retention?
Andrew Robinson (Chairman and CEO)
Andrew, this is Andrew. Mark will jump in here as well. I'm looking for the numbers. I think that a couple different points I'd make. One is that I think our full year numbers were around 65%, which is, I believe, up a couple ticks over last year. If I remember last year, we were maybe 62%-63% gross to net, we were up a couple of ticks. The quarter was, you know, it was a, on a relative basis, a quarter where we ceded more, there was nothing in that. It's just the ebbs and flows of any given quarter and mix of business.
I believe that, you know, we've been on a sort of consistent upward trajectory of, you know, of eating more of our own cooking, if you will. By the way, just in this quarter, as one example that, Andrew, we, on our excess, we went to market with a clear intention to increase our cede, and we were able to do that in not an immaterial fashion, but we also made the trade-off that we were going to get the cede that we were aiming at, even if it meant that we kept, more of our excess writings for ourselves. I think that, you know, we kept about 10% more, but we increased our cede quite considerably, and both those trades are very smart trades for us.
Obviously, in one case, we're getting, you know, we're getting more fee income, you know, offsetting our expenses. In the other case, we feel really good about, you know, our loss picks on the excess side, so we're happy to keep our own cooking.
Andrew Kligerman (Managing Director)
Got it. Maybe expect, you know, the annual number to kind of move up a little bit?
Andrew Robinson (Chairman and CEO)
Yeah, I think in our guidance, we basically said, you know, consistent with this year, some of it's going to be mix related. I do think it's fair to say that if you looked at, you know, 2023, 2024, 2025, we are on a consistent trajectory of increasing, you know, our net as a percentage of our gross. I think, you know, it's gone from kind of 60% to this year, about 65%, over that horizon.
Andrew Kligerman (Managing Director)
Got it.
Andrew Robinson (Chairman and CEO)
We'll get you the exact data. We'll follow up and make sure that we're closing the loop.
Andrew Kligerman (Managing Director)
No, that makes a lot of sense. My follow-up is around the pipeline for potentially other acquisitions, or maybe you could do team lift outs. Are you seeing much of a pipeline there to kind of move into new areas of insurance?
Andrew Robinson (Chairman and CEO)
Yeah, I think that we are. Well, we certainly see opportunities. I think as a company, I've said this before, and I would absolutely say this is true of Apollo as well. We're strategically led, right? There are places that we want to go, but we're not necessarily saying, well, you know, that has to happen this quarter. We're targeting people and teams that we know, that we have confidence in, and sometimes it takes quite some time to get those folks across. Ag was a great example of that.
you know, what I can say is that there are things in the works, but whether those things crystallize in 2026, hard to know, because, you know, we're more patient and strategically minded in targeting, you know, people and teams that we know are great performers in the categories we want to enter. on the M&A side, you know, I'll say what I've said in the past. We have a financial responsibility as a company to make sure that we are being incredibly mindful of the way that we use, you know, the capital that our shareholders give us. We were never a company that said we are going to acquire to scale.
The Apollo transaction was a unique transaction that matched what we thought would be appropriate for the next turn of our company. We were in London looking at ways to organically grow and develop our presence there. I wouldn't describe a sort of our position as being, you know, an active acquirer. We've made two small other acquisitions. We made an acquisition, insurance acquisition in aviation, over the sort of five and a half year tenure that I've been at the company. I think it's not something that, you know, will be a, you know, too much of a focus, but we are very active in making sure we stay abreast of what's out there, should there be a unique opportunity that's a great match for us.
Andrew Kligerman (Managing Director)
Great stuff. Thanks for the insights.
Andrew Robinson (Chairman and CEO)
Thank you.
Operator (participant)
Thank you. One moment for the next question. Our next question is coming from the line of Mark Hughes of Truist. Please go ahead.
Mark Hughes (Managing Director and Senior Equity Research Analyst)
Yeah, thank you. Good morning.
Andrew Robinson (Chairman and CEO)
Good morning.
Mark Hughes (Managing Director and Senior Equity Research Analyst)
Andrew, you talked about how the pricing pressure has extended from very large accounts down to all levels and property. That pressure on the very large accounts, is it has it gotten worse, or did it step down and then has been reasonably stable, let's say, the last quarter or two?
Andrew Robinson (Chairman and CEO)
The former, not the latter. I think that as I think I mentioned, you know, earlier, Mark, that we're about to lap ourselves, right? It was the second quarter of 2025 that you really started to see the pressure come in. This is the point where, you know, if I'm, if I'm me and I'm you, I would be watching that space to see whether at this point, the market kind of settles at the point it's at, or, you know, whether, you know, some of the bad behavior out there continues. It's really hard to know, you know, because we're not quite at the point where we're lapping ourselves. We're just a few months away from it.
Yeah, I would not say that there's any signs of it improving. I do think that, you know, at least for our Global Property business, in particular, the most impacted area, we have done a downright extraordinary job, given our ability to use larger line sizes, to avail ourselves to attractive fac pricing, to effectively limit the net margin impact for every dollar of premium that we've written, recognizing that, you know, we've written less, right? The contribution, we feel, continues to be not far off where it was over the course of the year prior.
Mark Hughes (Managing Director and Senior Equity Research Analyst)
Yeah, appreciate that. The final question on the liability side. You said you're concerned about the redeployment of capital. When you think about the competition there, is it from kind of the existing public players, we might know their names, or is it outside MGAs new capital that's putting the marginal pressure on the liability side?
Andrew Robinson (Chairman and CEO)
I would say by and large, the companies that we hold out as being responsible competitors. I think that they're being responsible. I think they're great companies. We follow and try to mimic, organizationally, the good things they do. I think that responsible competitors are responsible, and you see it in their results through the cycle. You know, you should always take pause at companies that don't have a track record in casualty that grow a lot, whether they're public or private. The casualty market is a, you know, it's an interesting and challenging market in really simple terms, right?
It, you know, all you have to do is, you know, your own, your own analysis, which looks at the, you know, what's been happening in the general liability market, and occurrence liability broadly, should be a concern. The loss cost backdrop is a challenging backdrop. I'm sure some of the guys that are growing in big numbers are doing it well. By and large, the people who are chomping up big chunks of this market and growing at, you know, quite considerable levels, are not doing it and beating the better, the best players out there because they're better underwriters. They're doing it to get share, and they're doing it oftentimes with price and terms. That's just. That's the logics of our business, right?
You know, our strategy has been, you can see it in our results. Nobody should take pause by the fact that some of our divisions are flat or even shrinking, because we're being the responsible purveyors of our shareholders' investment in us by redeploying our capital away from places that are overly competitive or where the loss cost inflation is not something that you can have, you know, a high level of confidence in. I just think it's like, use your common sense, that common sense in three, four, and five years will prove to be right.
Mark Hughes (Managing Director and Senior Equity Research Analyst)
Yeah, very good. Thank you. Appreciate that.
Andrew Robinson (Chairman and CEO)
Thank you.
Operator (participant)
Thank you. One moment for the next question. Our next question is coming from the line of Matthew Carletti of Citizens. Your line is open.
Matthew Carletti (Managing Director and Senior Equity Analyst)
Hey, thanks. Good morning. Andrew, I heard your comments on Uber. That is not a commercial auto policy. Can you help me understand, like, what a potential loss would stem from or what it might look like in that, what, the coverage you're writing?
Andrew Robinson (Chairman and CEO)
Yeah. Matt, thanks. I, we're pleased that you can join. You just surprised us. We didn't think you were going to join. Look, first off, commercial auto, you're required to carry coverage, to, you know, to have a vehicle on the road. This is not that, right? This is an embedded coverage. Functionally, if you think about this, right, and we'll just say an autonomous vehicle, you know, causes an accident, strikes something, you know, it's hard to say whether that's in sort of commercial auto in a traditional sense, product liability, general liability, et cetera, et cetera. It's a redefinition.
The policy, which is not going to be visible to anybody, it's designed, and it is proprietary and embedded into the Uber platform, so it's available to the participants to fully understand how it works. You know, it's unique to the specifics of the fact that you're dealing with, effectively, you know, a robot, an autonomous vehicle, you know, moving around in an environment where you have, you know, you have people, other vehicles, physical, you know, physical structures and everything else.
The fundamental exposure is the same, but the definition and the way things respond, and certainly the information that we have available, and of course, what we believe to be true is both, you know, safety and so frequency and severity are certainly meaningfully impacted as a result. I think that, you know, you can think about exposure has comparability. The product itself is a rather different product, unique to the specifics of an autonomous vehicle.
Matthew Carletti (Managing Director and Senior Equity Analyst)
Okay, that's helpful. You've referenced a couple of times, obviously, the kind of lower frequency severity of AVs versus human drivers. You know, Waymo has published some statistics on this, kind of suggesting, depending how you slice it, like 80%-90% lower accident frequency and across various categories, kind of in the same cities where they're rolled out. Is kind of your understanding of kind of the policy teams working with Uber that something of that magnitude should be expected in kind of the exposures you have, too? Or is there something unique to Waymo versus what Uber is doing that would make that different?
Andrew Robinson (Chairman and CEO)
Well, one thing I'd say, Matt, is, you know, you should go on to the Uber announcement, because you can see all the terrific, you know, autonomous, the, you know, the manufacturers of the product that are on the platform. You know, the performance of any individual, you know, provider is going to be different based on their technology. I don't want to comment on any specific company, but here's what I'd say to you. What I'd say to you is that it is a dramatic difference on both frequency, I also would say a dramatic difference in severity.
We can say through our own analysis, unequivocally, that we can see that, for example, the way an AV responds in a particular situation, that results in, you know, an accident of some sort, that the severity of the accident, and I'm talking specifically about bodily injury, because, you know, the physical damage, which we would not be involved in covering of the AVs, can be very expensive, right? Because these are very expensive, this is very expensive equipment. The way the AV in the situations that form a good part of our view, the way that they behave is effectively in a way that would reduce severity, you know, of a loss event.
You know, that's a big part of the calculus as well. Ultimately, you know, when you, when you're sitting, you know, trying to basically, you know, resolve a claim, and God forbid, something ends up being litigated, the wealth of information that will be available to prove that out, will be considerable, and that's going to be a huge advantage. I like the side that we are on in this instance, and I think over time, that's going to be, you know, become very well understood, across the industry, including in the personal auto market.
Matthew Carletti (Managing Director and Senior Equity Analyst)
Wonderful. Thanks for the follow-up. I appreciate it.
Andrew Robinson (Chairman and CEO)
Thank you.
Operator (participant)
Thank you. That does conclude today's Q&A session. I would like to turn the call over to Kevin for closing remarks. Please go ahead.
Kevin Reed (VP of Investor Relations)
Thank you, everyone, for your questions, for participating in our conference call, and for your continued interest in and support of Skyward Group. I'm available after the call to answer any additional questions you may have. We look forward to speaking with you again on our first quarter of 2026 earnings call. Thank you. Have a wonderful day.
Operator (participant)
Thank you. Thank you all for joining today's conference call. You may now disconnect.