Skyward Specialty Insurance Group, Inc. Q3 FY2024 earnings call

Andrew Robinson noted a solid quarter with adjusted operating income of $0.71 per diluted share, through nine months adjusted operating income $2.26 per diluted share up over 50% y-o-y. Fully diluted book value per share up 19% to $18.99, annualized return on equity through nine months 19.1%. Mark Haushill discussed net income of $36.7 million or $0.89 per diluted share, adjusted operating income $29.4 million or $0.71 per diluted share. Investment income increased, strategy to de-risk portfolio paying off. Finalized credit facility with Federal Home Loan Bank and authorized share repurchase program of up to $50 million. Andrew Robinson highlighted portfolio management with certain segments like A&H, Surety, Captives, etc. contributing 37% to gross revenue premiums, double-digit growth in six of eight divisions, and operational metrics on pricing, retention, and submission activity.

For the quarter, gross written premiums grew by 12.4%, in line with expectations. Transactional E&S, Surety, Captives, programs and agriculture each contributed to growth. Year-to-date, gross written premiums grew by 19%. Q3 2024 net written premiums were $268 million. Excluding the quota share reinsurance contract cancellation impact, net written premiums grew by 16.5% in the quarter. Underwriting results: Q3 combined ratio was 92.2%, ex-cat combined ratio 89.4% with 0.4 point improvement y-o-y. Catastrophe losses in Q3 accounted for 2.8 points on the combined ratio, year-to-date cat loss ratio 1.5 points. Investment results: Net investment income was $19.5 million in Q3, up $6.4 million y-o-y. Embedded yield was 5% at September 30th.

Maintain full-year cat loss expectations to 2 to 2.5 points barring further major events. Authorized share repurchase program of up to $50 million. Remain bullish on growth outlook despite some market challenges, and will communicate next year's growth plans when ready.

Catastrophe risks, market competition in areas like D&O and miscellaneous E&O, loss cost inflation in certain segments impacting growth decisions.

Q: Matt Carletti asked about new initiatives and puzzle pieces to drive growth, especially media liability.

A: Andrew Robinson said they are strategically oriented, focusing on filling out existing investments and adjacencies, with media liability having a strong team.

Q: Gregory Peters asked about budget outlook for growth and submission activity.

A: Andrew Robinson said growth plans will be communicated when ready, submission activity increasing due to same-store sales, new underwriters, and increased flow in surplus lines.

Q: Paul Newsome asked about investment income portfolio changes.

A: Mark Haushill said little left to do in portfolio, embedded yield 5%, and impact of alternative portfolio liquidation is in current run rate.

Q: Yaron Kinar asked about professional lines and industry solutions gross premiums decline.

A: Andrew Robinson said D&O portfolio under pressure, miscellaneous E&O market changed, and industry solutions growth suppressed due to loss cost inflation.

Q: Meyer Shields asked about Surety business competition and health book risks.

A: Andrew Robinson said no change in Surety competition, but built world-class business; health book has medical inflation and other factors to monitor.

Q: Mark Hughes asked about property market and growth.

A: Andrew Robinson said global property market has varying competition, with some irresponsible pricing, and growth plan adjusted accordingly.

Q: Michael Zaremski asked about agriculture exposure and reserves.

A: Andrew Robinson said ag exposure increased, but quarter was quiet for reserves with conservative reserving.

Q: Michael Phillips asked about commercial auto segment and reserves.

A: Andrew Robinson said some adjustments in commercial auto with rate hiding exposure reduction, and reserves conservatively booked.

Q: Gregory Peters asked about delegated underwriting market.

A: Andrew Robinson said approach is selective, partnering in strategic niches.

Q: Alex Scott asked about transactional E&S growth and gross to net premiums.

A: Andrew Robinson said transactional E&S strong with great team, and gross to net premiums expected in low 60s full year.