Skyward Specialty Insurance Group, Inc. ((SKWD)) has held its Q4 earnings call. Read on for the main highlights of the call.
Skyward Specialty Insurance Group’s recent earnings call reflected a generally positive sentiment, highlighting the company’s strong financial performance and strategic portfolio management. The company showcased significant growth in premiums and operating income, with a robust return on equity. However, the call also acknowledged some challenges, such as increased reserves and difficulties in certain underwriting areas, which slightly tempered these achievements.
Strong Financial Performance
Skyward Specialty Insurance Group reported a remarkable 57% growth in adjusted operating income, reaching $126.7 million for the year. The book value per share saw an 18% increase, climbing to $19.79, while the full-year return on equity was a robust 16.3%. These figures underscore the company’s solid financial footing and effective management strategies.
Impressive Premium Growth
The company experienced a 21% growth in gross written premiums for the quarter and a 19% increase for the year. Key contributors to this growth included areas such as surety, programs, captives, transactional E&S, and agriculture, demonstrating the company’s ability to capitalize on diverse market opportunities.
Successful Portfolio Management
Skyward successfully shifted its portfolio focus to areas less exposed to the P&C cycle, achieving a 19% top-line growth for the year. High-return sectors like A&H, surety, captives, mortgage, credit, and agriculture accounted for 42% of the quarterly gross written premiums, reflecting strategic portfolio adjustments.
Positive Investment Income
The company’s net investment income for the year was $80.7 million, marking an increase of over $40 million compared to the previous year. This significant rise in investment income highlights the company’s effective investment strategies and its contribution to overall financial performance.
Increased Reserves
In the fourth quarter, Skyward increased its reserves by $25.3 million due to losses from accident years 2018 and prior. This adjustment impacted the combined ratio by 4.2 points for the quarter, indicating a cautious approach to managing potential future claims.
Underwriting Challenges
The adjusted combined ratio for the year was slightly elevated at 91.2%, primarily due to an increase in the catastrophe loss ratio. This reflects some challenges in underwriting, which the company is actively addressing to maintain its financial health.
Softening in Professional Lines
Growth in professional lines was slightly down due to softening market conditions. However, Skyward is optimistic about future prospects, with investments in healthcare and media expected to offset this decline by 2025.
Forward-Looking Guidance
Looking ahead, Skyward forecasts net income between $138 million and $150 million for 2025, with a combined ratio between 91% and 92%. The company also anticipates gross written premium growth in the low to mid-teens. These projections reflect Skyward’s confidence in its strategic direction and market positioning.
In summary, Skyward Specialty Insurance Group’s earnings call conveyed a positive outlook, with strong financial performance and strategic growth initiatives. While challenges such as increased reserves and underwriting difficulties were noted, the company’s forward-looking guidance suggests continued optimism and potential for future success.