Skyward/2024/FY/Annual report: Difference between revisions

''This article presents Skyward's FY 2024 annual report — the narrative Items (each summarized into a factsheet), primary financial statements, and note schedules from its SEC Form 10-K.''

 

 

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== Business ==

 

 

* Skyward Specialty was formed as a Delaware corporation on January 3, 2006, as an insurance holding company ^{p. 1}.

* All insurance company subsidiaries are group rated and hold financial strength ratings of "A" (Excellent) from A.M. Best Company, with a stable outlook ^{p. 1}.

 

 

* The company operates with one reportable segment offering a broad array of insurance coverages across various market niches ^{p. 2}.

* The company strives for excellence in risk selection, pricing, and claims outcomes, amplified by advanced technology and analytics ^{p. 2}.

 

 

* ''Competitive strengths'' include a focus on profitable niches, highly skilled underwriters, superior claims staff and operations, a superior business intelligence platform, advanced technology and new risk data for underwriting and claims, a diversified business, an attractive and winning culture, and a high-quality, experienced leadership team ^{p. 3}.

* ''Executive incentives'': Executive leadership has additional long-term incentive targets directly tied to growth in book value per share ^{p. 3}.

 

 

* The "Rule Our Niche" strategy guides all activities from recruiting to claims resolution ^{p. 4}.

* Loss reserves represent the company's best estimate of ultimate losses ^{p. 4}.

 

 

* ''Marketing and distribution'' approach mirrors underwriting and is a key facet of the "Rule Our Niche" strategy ^{p. 5}.

* ''Distribution approach'' allows effective and efficient access to targeted business based on market niche needs and dynamics ^{p. 5}.

 

 

* The underwriting approach is central to the "Rule Our Niche" strategy and market success ^{p. 6}.

* Underwriting controls and procedures are regularly reviewed to ensure profitable underwriting in each market served ^{p. 6}.

 

 

* Skyward's claims department operates on principles including prompt and comprehensive investigations using advanced analytics and technology, quality customer service, timely reserve establishment, effective pursuit of contribution and subrogation, fraud detection and prevention, and disciplined litigation management ^{p. 7}.

* Claims managers and adjusters collaborate with underwriting partners to inform them of legal trends and emerging claims issues, educating underwriters on loss experience for risk selection ^{p. 7}.

 

 

* Technology is central to Skyward Specialty Insurance Group's operations and decision-making, aiming for long-term competitive advantage ^{p. 8}.

* The Company continuously reviews its security breach posture and implements updated processes, best practices, and tools ^{p. 8}.

 

 

* Reinsurance is strategically purchased from third parties to protect capital from severity events (large single event losses or catastrophes) and reduce earnings volatility ^{p. 9}.

* The ''allowance for uncollectible reinsurance'' was ''$2.3 million'' at December 31, 2024, and December 31, 2023 ^{p. 9}.

 

 

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(3) Catastrophe loss protection is purchased up to $36.0 million in excess of $12.0 million retention, which provides cover for a 1:250-year PML event.

 

 

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(2) This reinsurer facilitated our LPT reinsurance agreement which was commuted effective January 31, 2025. At December 31, 2024, we held collateral in a statutory trust of $22.7 million on our net reinsurance recoverables.

 

 

* Our enterprise risk management (ERM) is integrated into nearly every aspect of the company and guides daily activities ^{p. 10}.

* ERM is a core component of the strategy to achieve market-leading risk-adjusted returns for shareholders ^{p. 10}.

 

 

* The company maintains reserves for specific claims incurred and reported, IBNR reserves, and reserves for uncollectible reinsurance when appropriate ^{p. 11}.

* For additional information on loss reserves, refer to Item 7 of Form 10-K, "Management’s Discussion and Analysis of Financial Condition and Results of Operations - “Results of Operations - Losses and LAE” and “Critical Accounting Policies” ^{p. 11}.

 

 

* The company aims to maintain a balanced investment portfolio primarily consisting of investments that yield predictable and stable returns ^{p. 12}.

* For further discussion on investments and related market risks, refer to Item 7 of this Form 10-K, "Management’s Discussion and Analysis of Financial Condition and Results of Operations—Investments" ^{p. 12}.

 

 

* The specialty lines property & casualty insurance market includes many markets and sub-markets, each with distinct customer needs, products, services, and specific economic and structural features ^{p. 13}.

* Notable competitors include Markel Corporation, W.R. Berkley Corporation, American Financial Group Inc., Tokio Marine Holdings, Inc., CNA Financial Corporation, Hiscox, Ltd., RLI Corp., Intact Finance Corporation, and Kinsale Capital Group, Inc. ^{p. 13}.

 

 

* Operations are conducted principally through four insurance companies: Great Midwest Insurance Company (GMIC), Houston Specialty Company (HSIC), Imperium Insurance Company (IIC), and Oklahoma Specialty Insurance Company (OSIC) ^{p. 14}.

* Each entity in the organizational structure is wholly-owned by its immediate parent ^{p. 14}.

 

 

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[[File:Skyward-2024-FY-Annual report-skwd-20241231_g1.jpg|thumb|Our Structure]]

 

 

* ''Skyward Specialty Insurance Group, Inc.'' has an "A" (Excellent) rating with a stable outlook from A.M. Best ^{p. 15}.

* ''A.M. Best ratings'' are based on factors relevant to policyholders, agents, insurance brokers, and intermediaries, and are not specifically related to securities issued by the company ^{p. 15}.

 

 

* We are regulated by insurance regulatory authorities in the states where we conduct business ^{p. 16}.

* Notice to or prior approval from the applicable state insurance regulator is generally required for any material or extraordinary transaction ^{p. 16}.

 

 

* The company has applied for various ''trademark registrations'' in the United States at both federal and state levels ^{p. 17}.

* The company monitors its ''trademarks and service marks'' and protects them from unauthorized use as necessary ^{p. 17}.

 

 

* ''Employees'': approximately 580 as of December 31, 2024 ^{p. 18}.

* Such events could lead to a decline in the price of the common stock, potentially resulting in a loss of part or all of an investment ^{p. 19}.

 

 

* ''Underwriting risk'': financial condition and results of operations could be materially adversely affected if underwriting risk is not accurately assessed ^{p. 20}.

* ''Public company costs'': costs will increase significantly as a public company, and management will need to devote substantial time to complying with public company regulations ^{p. 20}.

 

 

* ''Underwriting success'' depends on accurately assessing risks and establishing appropriate premium rates ^{p. 21}.

* ''Pending proposals'' before NAIC committees could negatively affect insurance industry participants if enacted ^{p. 21}.

 

 

* Adverse economic factors like recession, inflation, high unemployment, or lower economic activity can lead to fewer policy sales, increased claim frequency, premium defaults, or claim falsification, impacting growth and profitability ^{p. 22}.

* Investments may not be sold at favorable prices or at all, potentially resulting in significant realized losses depending on general market conditions, interest rates, and credit issues with individual securities ^{p. 22}.

 

 

* Extensive regulation may adversely affect the company's ability to achieve business objectives ^{p. 23}.

* These requirements may discourage acquisition proposals and delay, deter, or prevent a change of control, even if stockholders consider it desirable ^{p. 23}.

 

 

* Future capital requirements depend on factors such as the ability to write new business successfully and establish premium rates and reserves sufficient to cover losses ^{p. 24}.

* Inability to obtain adequate capital on favorable terms could materially adversely affect operating plans, business, financial condition, or results of operations ^{p. 24}.

 

 

* The company could be adversely affected by the loss of key personnel or an inability to attract and retain qualified personnel ^{p. 25}.

* Even if successful in a dispute, litigation could be costly, time-consuming, and divert management attention ^{p. 25}.

 

 

* Operating as a public company incurs increased costs and requires substantial management time for compliance initiatives ^{p. 26}.

* The number of record holders does not represent the total number of stockholders because many shares are held by brokers and other institutions on behalf of stockholders ^{p. 30}.

 

 

* Information regarding equity compensation plans will be included in the definitive proxy statement to be filed with the SEC for the 2025 Annual Meeting of Stockholders ("2025 Proxy Statement") and is incorporated by reference into this document ^{p. 31}.

 

 

* Information regarding securities issued or granted by the company during the period covered by the Annual Report on Form 10-K that were not registered under the Securities Act is provided ^{p. 32}.

* No underwriters were involved in this share issuance ^{p. 32}.

 

 

* ''IPO closing date'': January 18, 2023 ^{p. 33}

* ''Proceeds distribution'': All proceeds from the IPO have been distributed to the Company’s insurance company subsidiaries ^{p. 33}

 

 

* The company did not purchase any of its equity securities during the period covered by this Annual Report on Form 10-K ^{p. 34}.

 

 

* The company does not currently intend to pay any ''cash dividends'' on its common stock in the foreseeable future ^{p. 35}.

* Investors seeking ''immediate cash dividends'' should not purchase the company's common stock ^{p. 35}.

 

 

* The performance graph compares the cumulative total shareholder return of an investment in ''Skyward Specialty Insurance Group's common stock'', the ''Nasdaq Composite Index'', and the ''Nasdaq Insurance Index'' ^{p. 36}.

** December 31, 2024: Approximately ''$128.00'' ^{p. 36}

 

 

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== Management’s Discussion and Analysis of Financial Condition and Results of Operations ==

 

 

* The company is a growing specialty insurance company providing commercial P&C products and solutions on both non-admitted (E&S) and admitted bases, primarily in the United States ^{p. 37}.

* The company consistently strives for excellence in risk selection, pricing, and claims outcomes, amplified by advanced technology and analytics ^{p. 37}.

 

 

* ''Net premiums earned'' were USD 1,004.0m in 2024, up from USD 800.0m in 2023 ^{p. 38}.

* ''Weighted-average common shares outstanding—diluted'' were 40.9m in 2024, up from 40.8m in 2023 ^{p. 38}.

 

 

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(1) See “Reconciliation of Non-GAAP Financial Measures” in this Item 2.

 

 

* ''Adjusted Operating Income'' reconciliation to net income provided for years ended December 31, 2024 and 2023 ^{p. 39}.

* ''Adjusted Return on Tangible Equity'' reconciliation to return on equity provided for years ended December 31, 2024 and 2023 ^{p. 39}.

 

 

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* ''Net written premiums'' were USD 1,123.6m compared to USD 910.7m in 2023, an increase of USD 212.9m or 23.4% ^{p. 40}.

* The fair value of the alternative and strategic investments portfolio for 2024 increased compared to 2023 due to an increase in the fair value of limited partnership investments ^{p. 40}.

 

 

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(1) Excludes exited business.

 

 

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(2) See "Reconciliation of Non-GAAP Financial Measures" included in this Item 2.

 

 

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* ''Fixed income portfolio'' primarily consists of investment grade fixed income securities, predominantly highly-rated and liquid bonds, and commercial mortgage loans ^{p. 41}.

* The ''tail-risk management strategy'' is designed to provide protection for the equity portfolio if there is a significant decline in the S&P 500 within a 30-day period ^{p. 41}.

 

 

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* ''Income tax expense'' for the year ended December 31, 2024, was USD 33.9m ^{p. 42}.

* For a reconciliation between actual federal income tax expense and the amount computed at the indicated statutory rate for the years ended December 31, 2024 and 2023, refer to Note 13, “Income Taxes,” in the consolidated financial statements included in Item 8 of this Form 10-K ^{p. 42}.

 

 

* The company is organized as a holding company, with operations primarily conducted by wholly-owned insurance subsidiaries: GMIC, HSIC, and IIC (domiciled in Texas), and OSIC (domiciled in Oklahoma) ^{p. 43}.

* Management believes there is ''sufficient liquidity'' to meet operating cash needs, obligations, and committed capital expenditures for the next 12 months ^{p. 43}.

 

 

* ''Premiums received'' from insureds are the most significant source of cash, typically received at the beginning of the coverage period, net of commissions ^{p. 44}.

* ''Net cash used in financing activities'' in 2024 was driven by net payments on debt ^{p. 44}.

 

 

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* On August 30, 2024, the company entered into a ''FHLB Loan'' with the Federal Home Loan Bank of Dallas ^{p. 45}.

* As of December 31, 2024, ''no shares'' had been repurchased under this plan ^{p. 45}.

 

 

* ''Reserves for losses and LAE'' represent the best estimate of the ultimate cost of settling reported and unreported claims and related expenses ^{p. 46}.

* ''Reinsurance balances recoverable'' on reserves for paid and unpaid losses and LAE totaled ''$596.3m'' at December 31, 2023 ^{p. 46}.

 

 

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* Critical accounting estimates are those important to financial condition and results of operations, requiring significant judgment ^{p. 47}.

* A ''5% change in net IBNR'' would result in a ''$30.4 million change'' in net income and stockholders’ equity ^{p. 47}.

 

 

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* ''ASU 2023-07 (Improvements to Reportable Segment Disclosures)'' was issued by FASB in November 2023 ^{p. 48}.

== Financial Statements ==

 

 

* We have audited the accompanying consolidated financial statements of Skyward Specialty Insurance Group, Inc. and its subsidiaries, which include the consolidated balance sheets as of December 31, 2023 and 2022, and the related consolidated statements of operations, comprehensive income (loss), changes in stockholders’ equity, and cash flows for each of the three years in the period ended December 31, 2023, and the related notes (collectively referred to as the “consolidated financial statements”) ^{p. 50}.

* We have also audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), Skyward Specialty Insurance Group, Inc.’s internal control over financial reporting as of December 31, 2023, based on criteria established in Internal Control—Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO), and our report dated March 1, 2024, expressed an unqualified opinion thereon ^{p. 50}.

 

 

* ''Internal control over financial reporting'' was audited as of December 31, 2024, based on criteria established in the Internal Control—Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (2013 framework) (the COSO criteria) ^{p. 51}.

* ''Report on consolidated financial statements'' dated March 3, 2025, expressed an unqualified opinion and is not affected by this material weakness ^{p. 51}.

 

 

* ''Management'' is responsible for maintaining effective internal control over financial reporting and for its assessment included in the accompanying Management’s Report on Internal Control over Financial Reporting ^{p. 52}.

* ''We believe'' our audit provides a reasonable basis for our opinion ^{p. 52}.

 

 

* ''Internal control over financial reporting'' is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles ^{p. 53}.

| March 3, 2025 |

 

 

* We have audited the accompanying consolidated financial statements of Skyward Specialty Insurance Group, Inc. and its subsidiaries, which include the consolidated balance sheets as of December 31, 2023 and 2022, and the related consolidated statements of operations, comprehensive income (loss), changes in stockholders’ equity, and cash flows for each of the three years in the period ended December 31, 2023, and the related notes (collectively referred to as the “consolidated financial statements”) ^{p. 54}.

* Ernst & Young LLP, Houston, Texas, February 29, 2024 ^{p. 54}.

 

 

* The accompanying consolidated balance sheets of Skyward Specialty Insurance Group, Inc. and subsidiaries (the Company) as of December 31, 2024 and 2023 have been audited ^{p. 55}.

* The financial statements are in conformity with U.S. generally accepted accounting principles ^{p. 55}.

 

 

* The Company's management is responsible for the financial statements ^{p. 56}.

* The auditors believe their audits provide a reasonable basis for their opinion ^{p. 56}.

 

 

* The critical audit matter communicated arises from the current period audit of the financial statements ^{p. 57}.

* Communicating the critical audit matter does not provide a separate opinion on the critical audit matter or on the account or disclosure to which it relates ^{p. 57}.

 

 

* ''Company’s reserves for unpaid losses and LAE'' were USD 1.8bn at December 31, 2024 ^{p. 58}.

| March 3, 2025 |

 

 

* The accompanying notes are an integral part of the consolidated financial statements ^{p. 59}.

 

 

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* The accompanying notes are an integral part of the consolidated financial statements ^{p. 60}.

 

 

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* The accompanying notes are an integral part of the consolidated financial statements ^{p. 61}.

 

 

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* The accompanying notes are an integral part of the consolidated financial statements ^{p. 62}.

 

 

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(1) The sum of cash and cash equivalents and restricted cash from the consolidated balance sheets.

 

 

* The Company is an insurance holding company, a Delaware corporation organized in 2006 ^{p. 63}.

** ''Skyward Specialty No. 1 Limited'' is a Lloyd’s corporate member authorized to invest in Lloyd’s syndicates ^{p. 63}.

 

 

* The Company's consolidated financial statements are prepared according to Generally Accepted Accounting Principles in the United States of America (GAAP) ^{p. 64}.

* The Company's actual results may differ from these estimates ^{p. 64}.

 

 

* ''Cash and cash equivalents'' include cash on hand and fixed maturity securities with original maturities of three months or less ^{p. 65}.

* The ''carrying value'' of the Company’s cash and cash equivalents approximates fair value ^{p. 65}.

 

 

* ''Restricted cash'' is defined as cash with a legal restriction on withdrawal or use by the consolidated group ^{p. 66}.

* Cash held in a depository account for others or restricted by a state is recorded as restricted cash ^{p. 66}.

 

 

* ''Available for Sale fixed maturities'' are carried at fair value ^{p. 67}.

* ''Net realized gains and losses on investments'' are recognized in net income based upon the specific identification method ^{p. 67}.

 

 

* The Company purchases prospective reinsurance for certain lines of business on a proportional, excess of loss, and facultative basis ^{p. 68}.

* ''eMaxx Captives'' was not rated by A.M. Best at December 31, 2024 and 2023 ^{p. 68}.

 

 

* Financial instruments that could lead to concentrations of credit risk include cash and cash equivalents, restricted cash, investments, and premiums receivable, excluding reinsurance recoverables ^{p. 69}.

* Failure by distribution sources to remit premiums could lead to premium write-offs and a corresponding loss of income ^{p. 69}.

 

 

* ''Policy acquisition costs'' include commissions and premium taxes directly related to new or renewal business production ^{p. 70}.

* Management's analysis determined no premium deficiency existed as of December 31, 2024, and 2023 ^{p. 70}.

 

 

* ''Goodwill and intangible assets'' are recorded following a business combination ^{p. 71}.

* No ''goodwill impairment'' was recorded for the years ended December 31, 2024, and 2023, based on the Company's review ^{p. 71}.

 

 

* ''Property and equipment'' is recorded at cost less accumulated depreciation and is included in other assets on the consolidated balance sheets ^{p. 72}.

* ''Depreciation periods'' range from three to seven years ^{p. 72}.

 

 

* ''Right-of-use (ROU) assets'' are included in other assets on the consolidated balance sheets ^{p. 73}.

* ''Sublease income'' is recognized on a straight-line basis over the sublease term ^{p. 73}.

 

 

* ''Reserves for unpaid losses and loss adjustment expenses (LAE)'' represent the estimated ultimate cost of all unreported and reported but unpaid insured claims and the cost to adjust incurred losses as of the balance sheet date ^{p. 74}.

* If recorded reserves are determined to be more than adequate, it would lead to a reduction in reserves ^{p. 74}.

 

 

* The Company recognizes property and casualty and surety premiums on a pro-rata basis over the policy terms ^{p. 75}.

* These ''unearned premiums'' are calculated on a pro-rata basis over the terms of the policies for both direct and ceded amounts ^{p. 75}.

 

 

* ''SUA commission revenue'' is generated from placing insurance policies on reinsurance programs via a reinsurance broker ^{p. 76}.

* Changes in the ''estimate of variable consideration'' for SUA fee income are recognized in the month they occur ^{p. 76}.

 

 

* ''Income tax expense'' is accrued for tax effects of transactions reported on consolidated financial statements ^{p. 77}.

* ''Premium tax expense'' is recognized within underwriting, acquisition, and insurance expense on the Consolidated Statements of Operations ^{p. 77}.

 

 

* ''Fair value'' is estimated for each class of financial instrument using the framework from fair value accounting guidance ^{p. 78}.

* Further details on fair value disclosures are in Note 4 ^{p. 78}.

 

 

* The estimated fair value of employee stock options and similar awards is expensed ^{p. 79}.

* Compensation cost for the ESPP is recognized on a straight-line basis over the offering period ^{p. 79}.

 

 

* ''Basic earnings per share'' is calculated using the two-class method ^{p. 80}.

* When ''common share adjustments'' increase earnings per share or reduce loss per share, the effect is anti-dilutive, and diluted net earnings or net loss per share is computed excluding these common share equivalents ^{p. 80}.

 

 

* In November 2023, the FASB issued ASU 2023-07, Improvements to Reportable Segment Disclosures (Topic 280) ^{p. 81}.

* The Company is evaluating the effect of the amendments of ASU 2024-03 on its consolidated financial statements ^{p. 81}.

 

 

* The Company's ''indefinite-lived intangible assets'' include insurance licenses and trademarks ^{p. 82}.

* ''Amortization expense'' was USD 1.5m for the years ended December 31, 2023 and 2022 ^{p. 82}.

 

 

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* ''Expected maturities'' may differ from contractual maturities due to borrowers' rights to call or prepay obligations, and portfolio sales may occur prior to maturity due to changing interest rates, tax considerations, or other factors ^{p. 83}.

* At December 31, 2024 and 2023, ''cash and investment securities on deposit'' with states had carrying values of approximately USD 66.8 million and USD 65.3 million, respectively ^{p. 83}.

 

 

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* The Company's financial instruments include assets and liabilities carried at fair value, and those carried at cost or amortized cost but disclosed at fair value in consolidated financial statements ^{p. 84}.

* Other financial instruments qualify as insurance-related products and are specifically exempted from fair value disclosure requirements ^{p. 84}.

 

 

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* The Company has invested in ''Separately Managed Accounts'' ("SMA1" and "SMA2") ^{p. 85}.

* As of December 31, 2023, ''$6.8 million of mortgage loans were not producing income'' for the previous 12 months ^{p. 85}.

 

 

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* The difference between the cost of an investment and its proportionate share of underlying equity in net assets is allocated to the various assets and liabilities of the equity method investment ^{p. 86}.

* As of December 31, 2024 and 2023, the Company held indirect investments in collateralized loans and loan collateral through SMA1 and SMA2 ^{p. 86}.

 

 

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* The Company analyzes the credit risk of its ''reinsurance recoverables'' by monitoring the financial strength rating of its reinsurers from A.M. Best ^{p. 87}.

* This ''$13.6 million'' increase was subsequently written-off during the year ended December 31, 2024 ^{p. 87}.

 

 

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* ''Depreciation expense'' was USD 2.9m for the year ended December 31, 2024 ^{p. 88}.

* ''Depreciation expense'' was USD 3.6m for the year ended December 31, 2022 ^{p. 88}.

 

 

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* The Company determines if a contract contains a lease at inception ^{p. 89}.

* ''Lease expense'' for the year ended December 31, 2022, was $2.6 million ^{p. 89}.

 

 

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* The ''FHLB Loan'' was entered into on August 30, 2024, under the Advances and Security Agreement ^{p. 90}.

* On March 15, 2024, the Company redeemed the ''Debentures'' and paid USD 1.4m of accrued interest ^{p. 90}.

 

 

* ''Reverse stock split'': The Board of Directors approved a 4-for-1 reverse stock split of the Company’s common stock on September 23, 2022 ^{p. 91}.

* ''Follow-on net proceeds'': Approximately $62.5 million, after deducting underwriting discounts and specific incremental expenses ^{p. 91}.

 

 

* The Company operates with one reportable segment, offering commercial property and casualty products and solutions primarily in the United States on both non-admitted (E&S) and admitted bases ^{p. 92}.

* The competitive analysis and monitoring of budgeted versus actual results are factors in assessing segment performance and determining management's compensation ^{p. 92}.

 

 

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* The Company's provision for income taxes generally does not deviate substantially from the statutory tax rate ^{p. 93}.

* The Company's ''deferred tax valuation allowance'' at December 31, 2024 and 2023 was USD 0.6 million ^{p. 93}.

 

 

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* The Company evaluates net ultimate loss and LAE under three sub-categories: multi-line solutions, short-tail/monoline specialty lines, and exited lines ^{p. 94}.

* Adverse development of $13.0 million in multi-line solutions was driven by an increase in the frequency and severity of claims in commercial auto and general liability from accident years 2018 through 2021 ^{p. 94}.

 

 

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* ''Losses and LAE reserves'' represent the Company's best estimate of the ultimate net cost of all reported and unreported losses that are unpaid as of the balance sheet dates ^{p. 95}.

* ''Claim counts'' include all reported claims, even if no liability is established for them (i.e., no reserve for loss and loss adjustment expenses) ^{p. 95}.

 

 

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* The table presents the reconciliation of net incurred and paid loss development tables to balance sheet reserves for losses and loss adjustment expenses at December 31, 2024 and 2023 ^{p. 96}.

* The payout information is based on disaggregated data from paid loss development tables, net of reinsurance ^{p. 96}.

 

 

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* ''Skyward Underwriters Agency, Inc. (SUA)'' is a subsidiary of the Company ^{p. 97}.

* These policies are placed with either a third-party insurance or reinsurance company ^{p. 97}.

 

 

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* ''Underwriting, acquisition and insurance expenses'' components are presented for the years ended December 31, 2024, 2023, and 2022 ^{p. 98}.

 

 

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* ''Reinsurance agreements'' provide the Company with increased capacity to write larger risks and maintain loss exposure within capital resources ^{p. 99}.

* This deposit asset is included in other assets on the consolidated balance sheets ^{p. 99}.

 

 

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* The ''2022 Long-Term Incentive Plan'' (the "2022 Plan") was approved by the Compensation Committee on September 23, 2022, and became effective on January 12, 2023 ^{p. 100}.

* As of ''December 31, 2024'', the fair value of unrecognized ESPP expense was USD 0.3 million ^{p. 100}.

 

 

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(2) Decreases below the 100% target level are reflected as forfeited.

 

 

* The Company's preferred shares are considered participating securities as they participate in dividends and distributions with common stock on an as-converted basis ^{p. 101}.

* Instruments granted to employees that allow the purchase of common stock at a fixed price were included as potential common shares in diluted EPS calculations, weighted for the period granted, if dilutive ^{p. 101}.

 

 

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* The Company sponsors the 401(k) Plan (the "Plan") ^{p. 102}.

* ''Matching contributions'' to the Plan were USD 2.4m for the year ended December 31, 2022 ^{p. 102}.

 

 

* RISCOM provides the Company with wholesale brokerage services ^{p. 103}.

* ''Premiums receivable'' as of December 31, 2023, were $10.6 million ^{p. 103}.

 

 

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* ''Advisory and professional services fees and expense reimbursements'' paid to affiliated stockholders and directors were USD 0.6m in 2024, USD 3.6m in 2023, and USD 3.4m in 2022 ^{p. 104}.

* Related party transactions concerning the Company’s common and preferred shares are detailed in Note 11 ^{p. 104}.

 

 

* The Company is a defendant in various legal actions related to claims under insurance policies and contracts ^{p. 105}.

* Based on current information, available insurance coverage, and advice from outside legal counsel, the Company believes the resolution of these matters will not have a material adverse effect on its consolidated financial position, results of operations, or cash flows, individually or in the aggregate ^{p. 105}.

 

 

* The Company has provided ''indemnifications'' to certain buyers in conjunction with the sale of business assets and subsidiaries ^{p. 106}.

* The Company currently has ''no reason to believe'' any significant claims exist related to these indemnifications ^{p. 106}.

 

 

* The Company’s ''statutory net income'' was USD 108.2m for 2024, USD 73.1m for 2023, and USD 50.5m for 2022 ^{p. 107}.

* As of December 31, 2023, ''HSIC’s statutory capital and surplus'' substantially exceeded regulatory requirements ^{p. 107}.

 

 

* On ''January 31, 2025'', Skyward Re commuted its existing Loss Portfolio Transfer and Adverse Development and Retrocession Agreement, dated April 1, 2020, with R&Q ^{p. 108}.

== Controls and Procedures ==

 

 

* ''Management evaluation'' of disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934) was conducted as of the end of the period covered by this Annual Report on Form 10-K ^{p. 109}.

* ''Management'' determined that the financial statements and other information in this report and other periodic filings fairly present the company's financial condition, results of operations, and cash flows for the periods presented in accordance with U.S. GAAP ^{p. 109}.

 

 

* ''Management'' is responsible for establishing and maintaining adequate internal control over financial reporting as defined in Rules 13a-15(f) and 15d-15(f) under the Securities Exchange Act of 1934 ^{p. 110}.

* ''Ernst & Young LLP'' also issued a report on internal control over financial reporting as of December 31, 2024, which appears in Item 8 ^{p. 110}.

 

 

* Management is implementing measures to remediate control deficiencies contributing to the material weakness ^{p. 111}.

** Enhanced ''quarterly reporting'' on remediation measures to the Audit Committee of the board of directors ^{p. 111}.

 

 

* No change in ''internal control over financial reporting'' occurred during the year ended December 31, 2024, except for changes related to the material weakness identified ^{p. 112}.

* The evaluation was required by ''Rule 13a-15(d)'' and ''15d-15(d)'' of the Exchange Act ^{p. 112}.

 

 

* Management acknowledges that disclosure controls and procedures, even when well-designed and operated, offer only reasonable assurance of achieving control objectives ^{p. 113}.

* Items marked with a plus (+) indicate a management contract or compensatory plan or arrangement ^{p. 120}.

 

 

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* ''Cash and cash equivalents'' were USD 10.0m as of December 31, 2023 ^{p. 121}.

* ''Total liabilities and stockholders’ equity'' were USD 9,010.0m as of December 31, 2022 ^{p. 121}.

 

 

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* See accompanying notes to financial statements ^{p. 122}.

 

 

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* See accompanying notes to financial statements ^{p. 123}.

 

 

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* On ''September 30, 2024'', Skyward Specialty entered into an Intercompany Loan Promissory Note with Houston Specialty Insurance Company (HSIC) ^{p. 124}.

* ''Skyward Specialty No. 1 Limited Company'' is a UK company authorized as a Lloyd’s corporate member to invest in Lloyd’s syndicates ^{p. 124}.

 

 

* The ''Promissory Note'' between Skyward Specialty and HSIC is included in notes payable ^{p. 125}.

* As of December 31, 2024, the ''fair value'' of the Promissory Note was USD 56.3 million ^{p. 125}.

 

 

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(2) Amount does not include gain on retroactive reinsurance which is included in losses and loss adjustment expenses presented on the Consolidated Statements of Operations.

 

 

* The report was signed on behalf of the registrant as required by Section 13 or 15(d) of the Securities Exchange Act of 1934 ^{p. 126}.

* The report was signed by the indicated persons on behalf of the Registrant, in their respective capacities, and on the specified dates, as per the requirements of the Securities Exchange Act of 1934 ^{p. 126}.

 

 

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