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    SKWD
    Earnings call· Jun 2026(Q2 FY26)

    Skyward Specialty Insurance Group Q2 FY26 earnings call SKWD

    Aug 5, 2026 Source

    Executive summary

    Skyward Specialty Q2 FY26 — Outstanding Underwriting Profitability and Strategic Growth

    Skyward Specialty delivered an outstanding second quarter, driven by its diversified "Rule Our Niche Strategy" and strong execution, resulting in significant premium growth and excellent underwriting profitability. The company continues to strategically allocate capital, including increased share repurchases, while navigating challenging market segments with disciplined underwriting and leveraging technology for efficiency gains. Management emphasized a proactive stance on loss cost trends and a focus on portfolio construction.

    Highlights

    5

    • Diluted operating earnings per share increased 46% to $1.30.

    • Annualized operating return on equity was an excellent 19%.

    • Gross written premiums increased 13% over the prior year quarter to $741 million.

    • Managed premiums were up 18% to $1.1 billion.

    • Combined ratio of 89.5%, inclusive of 1.9 points of catastrophe losses, with an ex-cat combined ratio of 87.6%.

    Concerns

    3

    • Alternative and strategic investments remained pressured by lower valuations in certain limited partnership investments, representing $68 million of total invested assets.

    • Market conditions remain more challenging in global property and E&S, and E&S liability is clearly transitioning to a more price competitive market.

    • Apollo's risk-adjusted rate change moderated to a low single-digit decline.

    Guidance & targets

    4
    CategoryTargetConfidence
    Apollo Underwriting Fee Income
    $30 million to $35 million
    medium materiality
    High
    Aggregate Accident Year Loss Ratio
    up like 1 plus maybe a bit percent over the prior year in aggregate
    medium materiality
    Medium
    Largest Division as % of Overall Portfolio
    no division larger than maybe 17-ish percent
    medium materiality
    High
    Surety Business Run Rate Premium
    cross $200 million
    medium materiality
    High

    Segment performance

    2
    SegmentRevenueYoYQoQMargin
    Skyward Specialty
    Led by continued momentum in accident and health, agriculture, credit and surety and specialty programs. The increase in non-cat loss ratio was driven by business mix, specifically A&H and agriculture, which are higher loss ratio divisions. Expense ratio improvement driven by expense discipline and leverage from technology, including AI.
    Gross written premiums: $668 millionEx-cat combined ratio: 85.6%Loss ratio: 62.6% (inclusive of 1.3 points of catastrophe losses)Non-cat loss ratio: 61.3% (up 1.4 points YoY)Expense ratio: 24.3% (improved 2.7 points YoY)Pure rate (ex global property): high single digitsPure rate (incl. global property): low single digitsRetention: 70sSubmission growth: teens
    		—14%—86.9% combined ratio
    Apollo
    Growth driven by specialty lines in Syndicate 1969. Fee generation continued to be a meaningful growth driver. Q2 results are not necessarily indicative of longer-term growth trends due to seasonal production patterns. Combined ratio includes 5.4 points of catastrophe losses related primarily to the conflict in the Middle East. YTD expense ratio provides a more representative view.
    Gross written premiums: $73 millionFee-generating gross written premiums: $318 million (up 29%)Partner syndicates GWP growth: 8%Aligned syndicates GWP growth: 13%Underwriting fee income: $13 millionCombined ratio (YTD): 91.3%Non-cat loss ratio: 54.7%Expense ratio: 37.5% (Q2), 34.9% (YTD)Risk-adjusted rate change: low single-digit decline
    		—6%—97.6% combined ratio

    Operational metrics

    26
    Diluted operating earnings per share
    $1.30up 46% YoY
    Q2 FY26

    Reported for the quarter.

    Annualized operating return on equity
    19%
    Q2 FY26

    Excellent performance for the quarter.

    Net income
    $49 million
    Q2 FY26

    Reported for the quarter.

    Operating income
    $59 million
    Q2 FY26

    Reported for the quarter.

    Operating income
    $116 million
    First 6 months 2026

    Increased for the first 6 months of 2026.

    Annualized operating return on equity
    20.4%
    First 6 months 2026

    Driving an annualized operating return on equity for the first 6 months.

    Total managed premiums
    $1.1 billionup 18% YoY
    Q2 FY26

    Strong premium growth.

    Net investment income
    $31 millionup >60% YoY
    Q2 FY26

    Benefited from a larger asset base, inclusive of Apollo.

    Fixed income portfolio income
    $29 million
    Q2 FY26

    Primary contributor to net investment income.

    Fixed income portfolio yield (new money)
    5.6%
    Q2 FY26

    Yield at which new money was put to work.

    Group portfolio embedded yield
    5.3%
    Q2 FY26

    Embedded yield for the overall group portfolio.

    Stockholders' equity
    ~$1.3 billion
    June 30, 2026

    Balance sheet remains exceptionally strong.

    Financial leverage
    26%decreased 2 points QoQ
    Q2 FY26

    Moving towards target debt-to-cap ratio.

    Term loan repayment
    $50 million
    Q2 FY26

    Repayment of a portion of the $150 million term loan maturing end of 2027.

    Target debt-to-cap ratio
    low 20s
    Future

    Rapidly moving towards this target.

    Shares repurchased
    223,000 shares
    Q2 FY26

    Executed during the quarter.

    Share repurchase authorization
    $100 millionincreased from $50 million
    July 2026

    Increased reflecting confidence in business quality and earnings outlook.

    Amortization expense
    $8.5 million
    Quarterly run rate

    Expected normalized run rate for amortization. Analyst initially cited $14 million, which was corrected by management.

    Liability durations
    >60%
    First 6 months 2026

    Reflects the portfolio construction strategy to shorten tails.

    Surety business run rate premium
    $200 million
    Future

    Expected to cross this run rate premium, having grown from $7 million when Andrew Robinson joined.

    A&H loss ratio
    71
    2024

    Historical performance of the A&H business.

    U.S. dairy livestock program market size
    $2 billion-ish
    Current

    Total market size for the program, which is growing.

    Apollo cost base
    $4 million to $5 million
    Per quarter

    Underlying cost base for Apollo, which is not linearly related to fee growth, indicating leverage.

    Global property business size
    $235 million
    2024

    Size of the business in 2024, expected to be far smaller this year due to market conditions.

    Alternative investments portfolio size
    $65 million
    Q2 FY26

    Portion of total invested assets that remained pressured by lower valuations.

    Fixed income and short-term investments
    2.5 billion
    Q2 FY26

    Represents the majority of the invested assets. Transcription note: The transcript stated 'about 2.5% of the 2.8% sitting in fixed income and short-term investments', which is an ASR error. Based on context and the $2.8 billion total, it is corrected to $2.5 billion.

    Industry KPIs

    10
    MetricValueDetails
    Combined ratio89.5%%
    Capital returns$10 millionUSD
    ROE operating ROE19%%
    Catastrophe losses1.9 pointspoints
    Book value per share$28.55USD
    Net investment income$31 millionUSD
    Retention persistency70s%
    Net premiums written earned$741 millionUSD
    Renewal rate change pricinghigh single digits (ex global property); low single digits (incl. global property)%
    Prior year reserve developmentno development

    Risks & headwinds

    6
    Challenging Market Conditions in Property and E&S LiabilityCurrent

    Prices cut by 20-30% for second or third year in a row in global property; E&S liability transitioning to a more price competitive market.

    Mitigation: Prioritizing underwriting profitability over volume, being selective, using facultative reinsurance to buttress net pricing effects, and reducing exposure in global property.

    Loss Cost Inflation in Occurrence LiabilityOngoing

    In certain areas, loss cost inflation is well over 10%, compared to historical 5%.

    Mitigation: Intentionally steering portfolio away from personal injury intensively exposed occurrence liability lines, keeping limits short, and focusing on diversified niche strategies.

    Underperformance of Alternative InvestmentsCurrent

    Lower valuations in certain limited partnership investments, impacting $68 million of total invested assets.

    Mitigation: Being intentional in understanding underlying movements, but acknowledging limited direct action; portfolio is small relative to total invested assets.

    Excess Capital in the Insurance IndustryOngoing

    Not quantified, but described as 'too much capital knocking around' leading to irrational pricing behavior.

    Mitigation: Maintaining disciplined underwriting, focusing on profitable growth, and allowing others to 'wash out' during market cycles.

    Misbehavior of MGAs and Fronted Premium RiskOngoing, with potential future impact

    Two reinsurers left the A&H market due to being burned by MGAs; one company hit a trip wire on bad collateral recently.

    Mitigation: Acknowledging the risk and the eventual 'train crash' for misbehaving MGAs and fronted premium, while focusing on internal underwriting discipline.

    Catastrophe Losses from Middle East ConflictQ2 FY26

    5.4 points on Apollo's combined ratio.

    Mitigation: Approaching the dynamic situation with caution, seeking opportunities where meaningful price movements are seen for second or third-order exposures, and hoping for a broad-based hard market in political violence.

    What to watch in Q3 FY26

    5

    Global Property Market Pricing

    Next quarter
    CurrentPrices cut by 20-30% for second or third year in a row
    TargetStabilization or improvement in pricing

    Why it matters

    Continued price declines could impact profitability and necessitate further portfolio adjustments, affecting the company's ability to deploy capital sensibly.

    Hey, listen, you can't cut prices by 20%, 30% on -- for the second or third year in a row and justify to yourself that, that's okay, right?

    Q&A highlights

    5

    How should investors interpret the increased share repurchase authorization, given the company's historically efficient capital structure and prior equity raises for growth? Does it signal less underwriting capacity or a willingness to tap debt markets for buybacks?

    Management views buybacks as an attractive use of capital due to strong earnings growth and an attractive valuation (12x 2026 earnings guidance). They proactively reduced leverage to create headroom for buybacks and will remain opportunistic, emphasizing the company's strong fundamentals.

    “We think buybacks are viable. We sort of took the preemptive move to reduce our leverage really to create the headroom, right? Because you can't sort of execute buybacks if we're starting at a leverage level that really we want to reduce, and I think we're doing a good job of that.”

    asked by Tracy Benguigui · answered by Andrew Robinson

    2 min read6 chapters

    Detailed Narrative

    01

    Strategic Portfolio Diversification

    Skyward Specialty continues to execute its "Rule Our Niche Strategy," intentionally leaning into markets with attractive pricing and underwriting conditions, such as Accident & Health, Agriculture, and Credit & Surety. This diversification allows the company to protect margins and play defense in softer markets like global property and E&S liability, where competitive pressures or loss cost inflation are less attractive. The goal is to maintain balance, with no single division exceeding 20% of the overall portfolio by year-end.

    02

    Technology and Efficiency Driving Expense Improvement

    The company's significant improvement in its expense ratio, particularly in Skyward Specialty (down 2.7 points YoY to 24.3%), is attributed to expense discipline and leverage from technology, including AI. Initiatives like "Bionic underwriting" and "SkyScore" in surety automate submission ingestion, improve speed to quote by 35%, and enable 40% faster submissions to underwriters. Half of the underwriting process now benefits from machine learning and predictive analytics, enhancing efficiency and profitability.

    03

    Apollo Integration and Performance

    Apollo's fee-generating gross written premiums increased 29% to $318 million, driven by partner and aligned syndicates, contributing $13 million in underwriting fee income. While Apollo's Q2 GWP growth of 6% was seasonally impacted by property market conditions, the focus remains on long-term growth, managing premiums, and expanding both underwriting and fee-based earnings. The capital-light business model of Apollo is seen as a significant advantage, delivering high returns on capital and offering earnings leverage.

    04

    Capital Management and Share Repurchases

    Skyward Specialty repurchased approximately $10 million of shares during the quarter and increased its share repurchase authorization to $100 million. This reflects confidence in the business quality, earnings outlook, and capital position. The company also repaid $50 million of its term loan, reducing financial leverage to 26% and moving towards a target debt-to-cap ratio in the low 20s, demonstrating disciplined capital allocation and a commitment to shareholder returns.

    05

    Proactive Stance on Loss Cost Trends

    Management highlighted its early and action-oriented approach to concerns around loss cost trends, particularly in occurrence liability and bodily injury exposure. The company has intentionally steered its portfolio away from these areas, prioritizing underwriting profitability over volume. The reported increase in the underlying loss ratio for Skyward Specialty was attributed entirely to a business mix shift towards higher loss ratio divisions like A&H and Agriculture, rather than deteriorating loss trends.

    06

    Global Property Market Dynamics

    The global property market is described as challenging and

    AI-generated summary of the company’s earnings call. Not investment advice.