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Skyward Specialty Insurance Group, Inc. (SKWD)·Q1 2025 Earnings Summary

Executive Summary

  • Q1 2025 delivered record adjusted operating income of $37.3M ($0.90 diluted), net income of $42.1M ($1.01 diluted), and underwriting income of $28.5M; combined ratio was 90.5% with 2.2 pts of cat losses .
  • Revenue and EPS beat Wall Street consensus: revenue $328.5M vs $310.9M*, EPS $0.90 vs $0.77*; strength came from underwriting and fixed income NII despite losses in alternatives .
  • Growth broad-based: GWP +16.7% YoY to $535.3M, led by Agriculture & Credit (Re)insurance (+103%), A&H (+54%), Specialty Programs (+20%); Global Property declined (-18.5%) amid rapid market softening but >95% account retention .
  • Guidance/tone: management reiterated mid-teens full-year growth, expects expense ratio to stay sub-30% but tick up modestly, ETR 21–22% for FY25; reinsurance renewals were orderly with property CAT treaty at $15M first-event retention/$36M cover .

What Went Well and What Went Wrong

What Went Well

  • Record profitability: “We had a great start to the year… adjusted operating income of $37.3 million… each metric… best in company history” .
  • Diversification wins: A&H and Global Agriculture “were standouts, delivering extraordinary growth” with broad contribution from transactional E&S, surety, and specialty programs .
  • Underwriting discipline: Non-cat loss ratio improved to 60.2% (best in company history); expense ratio improved 0.6 pts to 28.1% on scale .

What Went Wrong

  • Cat headwinds: Loss ratio up 1.5 pts YoY due to convective storms and California wildfires (2.2 pts cat vs 0.4 pts prior year) .
  • Global Property pressure: GWP down 18.5% YoY as pricing softened; mitigating actions included writing over longer primary stretches and high retention (>95%) .
  • Alternatives volatility: $2.1M loss in alternative/strategic investments; management noted this is the driver of NII lumpiness .

Financial Results

P&L and Margins vs Prior Periods and Estimates

MetricQ1 2024Q3 2024Q4 2024Q1 2025
Total Revenues ($USD Millions)$264.968 $300.888 $304.402 $328.527
Net Earned Premiums ($USD Millions)$236.342 $269.557 $293.240 $300.366
Net Income ($USD Millions)$36.784 $36.668 $14.406 $42.058
Diluted EPS ($)$0.90 $0.89 $0.35 $1.01
Adjusted Op. Income ($USD Millions)$31.024 $29.405 $33.218 $37.321
Combined Ratio (%)89.6 92.2 95.8 90.5
Ex-Cat Combined Ratio (%)89.2 89.4 93.6 88.3

Q1 2025 vs Consensus

MetricConsensusActualSurprise
Revenue ($USD Millions)$310.941*$328.527 +$17.586*
EPS (Diluted, $)$0.7706*$0.90 +$0.1294*
# of EPS Estimates11*——
# of Revenue Estimates8*——

Values with asterisk (*) retrieved from S&P Global.

Segment Breakdown (Gross Written Premiums)

Underwriting DivisionQ1 2024 ($USD Thousands)Q1 2025 ($USD Thousands)YoY Change
Accident & Health$40,901 $63,169 +54.4%
Agriculture & Credit (Re)insurance$43,321 $87,847 +102.8%
Captives$68,408 $68,401 ~0%
Construction & Energy Solutions$74,222 $75,571 +1.8%
Global Property$57,312 $46,686 -18.5%
Professional Lines$42,239 $41,166 -2.5%
Specialty Programs$52,178 $62,675 +20.1%
Surety$33,842 $37,798 +11.7%
Transactional E&S$46,232 $52,006 +12.5%
Total GWP$458,655 $535,319 +16.7%

Key Performance Indicators

KPIQ1 2024Q1 2025
Gross Written Premiums ($USD Thousands)$458,620 $535,326
Net Written Premiums ($USD Thousands)$287,100 $343,271
Net Earned Premiums ($USD Thousands)$236,342 $300,366
Net Retention (%)62.6% 64.1%
Non-cat Loss & LAE (%)60.6% 60.2%
Cat Loss & LAE (%)0.4% 2.2%
Expense Ratio (%)28.7% 28.1%
Net Investment Income ($USD Thousands)$18,297 $19,331
Net Investment Gains ($USD Thousands)$8,303 $6,841
Annualized ROE (%)21.7% 20.5%
Book Value per Share ($)$19.79 (12/31/24) $21.06 (3/31/25)
IBNR as % of Net Reserves—>70%
Embedded Fixed Income Yield (%)—5.2% (vs 4.7% a year ago; 5.1% at 12/31)

Guidance Changes

MetricPeriodPrevious GuidanceCurrent GuidanceChange
Top-line growth (GWP)FY 2025Mid-teens growth (reiterated) Mid-teens growth (reiterated) Maintained
Expense RatioFY 2025Sub-30% target (prior commentary) Sub-30% target; expected to tick up somewhat in 2025 Maintained (with color)
Effective Tax RateFY 2025—21%–22% for full-year 2025 New detail
Agriculture & Credit (Re)insurance mixFY 2025—10%–12% of premiums for full year (Q1 was 16%) New detail
Property CAT TreatyApr 1, 2025 renewal$15M first-event net retention; $36M cover Renewed on expiring structure Maintained
IT Controls Material Weakness2025Material weakness reported at YE 2024 Expect remediation in 2025 Improving

No explicit revenue/EPS quarterly guidance provided in documents.

Earnings Call Themes & Trends

TopicPrevious Mentions (Q3 2024, Q4 2024)Current Period (Q1 2025)Trend
Portfolio diversification / “Rule Our Niche”Emphasis on disciplined underwriting and “Rule our Niche” strategy ; Strategic launches in 2024 (Media Liability, Life Sciences, Mortgage & Credit, Renewable Energy) Diversity allowed capital reallocation to higher-return units (A&H, Global Agriculture) Strengthening
Reinsurance/LPTNo LPT change disclosed in Q3; share repurchase was highlighted LPT commuted effective Jan 31, 2025 ; Property placements provide greater protection at lower cost; cat treaty renewed Balance sheet cleanup; improved protection
Rate/macro in Global PropertyNot detailed in press releaseRates down high-single digits; rapid softening; >95% retention; increased QS capacity Softer pricing; maintaining position
A&H stop-loss dynamicsNot detailed in press releaseGrowth aided by failures of certain MGAs; focus on small groups; USP in cost management and claims; tech/AI use Improving conditions; share gains
Reserve qualityNot highlightedFavorable emergence AY20+ in property, surety, professional; margin increased vs indicated; IBNR >70% Stronger reserves
Technology/AI—“Leadership in technology, including our use of AI and predictive analytics in risk selection and pricing” More explicit emphasis

Management Commentary

  • “We had a great start to the year… adjusted operating income of $37.3 million… Each metric… best in company history.” — Andrew Robinson .
  • “Our investment in our Agriculture unit has been timely… we are very bullish that we can continue to grow earnings… with very attractive returns on capital.” — Andrew Robinson .
  • “Our embedded yield was 5.2% at March 31st versus 4.7% a year ago and 5.1% at December 31st.” — Mark Haushill .
  • “Our property cat treaty renewed at the expiring structure… a $15 million first event net retention and $36 million cover.” — Mark Haushill .
  • “We have a leadership position in technology, including our use of AI and predictive analytics in risk selection and pricing.” — Andrew Robinson .

Q&A Highlights

  • Agriculture & Credit mix/strategy: Global Ag now ~40% US with broad country/crop exposure; ~90% QS structures; pipeline includes substantial Q3 treaties; conservative reserving in Ag .
  • Macro/tariffs and loss cost trend: Company-wide loss cost trend ~5–6%; exposure managed by shorter limits, writing excess over own primary; property reconstruction cost inflation offset by E&S cash value and surety benefits .
  • Seasonality and growth cadence: Q2 expected lower growth; Q3 higher; FY25 mid-teens growth reiterated; Global Property likely to shrink in Q2 amid softer market .
  • Expense ratio/Acquisition costs: Q1 acquisition ratio a reasonable proxy but likely to tick up; controllable OUE to improve; sub-30% overall still targeted .
  • Reserves: Favorable emergence AY20+ across property, surety, PL; margin increased vs indicated; no PYA recognized in quarter .

Estimates Context

  • Q1 2025 EPS beat by ~$0.13 vs consensus ($0.90 actual vs $0.7706*) and revenue beat by ~$$17.6M vs consensus ($328.5M actual vs $310.9M*) . Strength stemmed from underwriting income ($28.5M) and higher fixed income NII ($16.7M), partly offset by alternative investment losses (-$2.1M) .
  • Consensus coverage: 11 EPS estimates, 8 revenue estimates for the quarter*. Values retrieved from S&P Global.

Key Takeaways for Investors

  • The quarter was a clean beat on revenue and EPS versus consensus, driven by underwriting excellence and fixed income yield momentum, with record adjusted operating income and improved ex-cat loss ratio .
  • Diversification is working: outsized growth in A&H and Agriculture & Credit (Re)insurance is offsetting softness in Global Property; management is deliberately tilting toward less P&C-cycle-exposed niches .
  • Property market softening is real, but SKWD’s primary-layer leadership, >95% retention, and expanded QS capacity should sustain margins even at lower rates .
  • Reserve quality and stability are positives: favorable emergence AY20+, high IBNR share (>70%), and no PYA releases suggest prudence and support for sustained ROE .
  • Expense ratio likely to edge up with mix and investment, but sub-30% target intact; ETR guided to 21–22%, aiding EPS translation .
  • Reinsurance renewals were orderly with CAT treaty maintained; risk transfer remains robust, a buffer against elevated convective-storm/wildfire activity .
  • Near-term trading: narrative of “record profitability + diversified growth + clean balance sheet post-LPT commutation” should be supportive; watch Q2 cadence (seasonally lower growth) and alternative asset volatility .

Values with asterisk (*) retrieved from S&P Global.