Skyward Specialty Insurance Group, Inc.

Company Overview

Business Model: Skyward Specialty Insurance Group, Inc. is a specialty insurance company that delivers commercial insurance products and solutions primarily in the United States, operating on both a non-admitted (E&S) and admitted basis. The Company focuses on underserved, dislocated, or complex markets where standard insurance coverages are insufficient. It develops tailored insurance products and services across a diversified portfolio, including general liability, excess liability, professional liability (including cyber and media), commercial auto, group accident and health, property, agriculture, credit, surety, and workers’ compensation. Skyward Specialty also engages in specialty reinsurance, principally for property, agriculture, and credit. Its core strategy, "Rule Our Niche," aims to establish sustainable competitive positions, generate best-in-class underwriting profitability, and drive book value per share growth across P&C market cycles.

Market Position: Skyward Specialty is a growing specialty insurer with a highly diversified portfolio of insured risks, balancing primary insurance between E&S (59% of gross written premiums in 2025) and admitted markets (41% in 2025). All of its insurance company subsidiaries hold a financial strength rating of “A” (Excellent) with a stable outlook from A.M. Best Company, reflecting a strong competitive position in its chosen market niches.

Recent Strategic Developments:

• Apollo Acquisition: On January 1, 2026, Skyward Specialty completed the acquisition of Apollo Group Holdings Limited, a U.S. centric specialty underwriting platform operating at Lloyd’s of London, for approximately $555.0 million (comprising $371.0 million in cash and 3,679,332 shares of common stock). This acquisition is expected to bring new specialty niches, a distinctive new economy offering, accelerate innovation, and add advanced technology capabilities. David Ibeson will continue as CEO of Apollo Group Holdings Limited.
• Underwriting Division Realignment: During the first quarter of 2025, the Company updated its underwriting divisions to better align with management oversight and resource allocation. This included adding the Agriculture and Credit (Re)insurance division, incorporating Global Agriculture, Mortgage, and Credit units.
• Reinsurance Commutation: Effective January 31, 2025, the Loss Portfolio Transfer (LPT) with R&Q Re (Bermuda) Ltd. for accident years 2018 and prior was commuted, with the Company receiving the full reinsurance recoverable balance.
• Insurance Subsidiary Restacking: Effective December 31, 2024, the Company reorganized its insurance subsidiaries, with Great Midwest Insurance Company becoming the lead insurer, to provide necessary capital for its growing surety business.

Geographic Footprint: Skyward Specialty operates predominantly in the United States, with a diversified geographic distribution of gross written premiums for the year ended December 31, 2025: Texas (10.7%), Pennsylvania (7.6%), Florida (7.2%), California (7.1%), New York (6.3%), Louisiana (6.1%), Illinois (4.1%), New Jersey (4.1%), Georgia (3.8%), Delaware (3.1%), and all other states and countries (39.9%). Its Houston Specialty Insurance Company subsidiary underwrites in 50 states, the District of Columbia, and select foreign countries, and its Global Property and Agriculture and Credit (Re)insurance divisions have global exposure.

Financial Performance

Revenue Analysis

Profitability Metrics:

• Gross Margin (Underwriting Income as % of Total Underwriting Revenues): 10.60% (2025) vs. 7.70% (2024)
• Operating Margin (Income before income taxes as % of Total Revenues): 15.28% (2025) vs. 13.28% (2024)
• Net Margin (Net Income as % of Total Revenues): 12.00% (2025) vs. 10.33% (2024)

Investment in Growth:

• R&D Expenditure: Not explicitly quantified as a separate line item. The Company emphasizes continuous innovation and investment in advanced technology, data analytics, and generative artificial intelligence to augment underwriting and claims processes.
• Capital Expenditures: $5,454 thousand (2025) vs. $4,224 thousand (2024) for property and equipment.
• Strategic Investments: The acquisition of Apollo Group Holdings Limited for approximately $555.0 million (closed January 1, 2026) represents a significant strategic investment. Additionally, the Company holds an investment in a limited partnership with RedBird Capital Partners, which invests in Bishop Street Underwriters, LLC, with a fair value of $55.6 million in 2025 and an unfunded commitment of $18.3 million.

Business Segment Analysis

Skyward Specialty operates in one reportable segment but manages its business through nine distinct underwriting divisions. The following provides gross written premiums and year-over-year growth for each division for the year ended December 31, 2025.

Accident & Health

Financial Performance:

• Revenue (Gross Written Premiums): $228,142 thousand (+193.2% YoY)
• Key Growth Drivers: Primarily driven by the acquisition of more high deductible accident and health captives.

Product Portfolio:

• Provides medical stop loss to employers who self-insure employee benefits, as well as covering group and single-employer captives.
• Offers tailored medical stop-loss and reinsurance solutions for captive arrangements.

Market Dynamics:

• Targets small and medium-sized enterprises seeking to control healthcare costs by self-insuring.
• Distributes primarily through retail and wholesale broker partners on an admitted basis.

Agriculture and Credit (Re)insurance

Financial Performance:

• Revenue (Gross Written Premiums): $346,212 thousand (+193.2% YoY)
• Key Growth Drivers: Primarily due to new opportunities in dairy and livestock and crop, and growth in the credit portfolio initiated in the fourth quarter of 2024.

Product Portfolio:

• Delivers specialty risk-transfer solutions across a diversified global portfolio, including agriculture, dairy and livestock revenue protection, mortgage, and credit product lines.
• Utilizes derivative instruments (put options and futures) to mitigate commodity price risk in its dairy and livestock business.

Market Dynamics:

• Supports insurers, MGAs, and other risk originators with tailored treaty protection (proportional and excess of loss structures).
• Focuses on attractive specialty classes where reinsurance provides an efficient market entry.

Captives

Financial Performance:

• Revenue (Gross Written Premiums): $275,694 thousand (+14.0% YoY)
• Key Growth Drivers: Primarily due to rate increases and new business.

Product Portfolio:

• Provides group captive solutions for companies seeking to self-insure.
• Writes property, general liability, commercial auto, excess liability, and workers’ compensation lines of business.

Market Dynamics:

• Leverages the Company's underwriting, claims, technology, and analytical expertise.
• Often administers business through partnerships with third-party captive managers on an E&S and admitted basis.

Construction & Energy Solutions

Financial Performance:

• Revenue (Gross Written Premiums): $274,318 thousand (-7.5% YoY)
• Key Growth Drivers: Decrease due to the exit of unprofitable lines during 2025.

Product Portfolio:

• Focuses on high-severity exposures with tailored, often multi-line solutions, including general liability, excess liability, commercial auto, and workers’ compensation.

Market Dynamics:

• Distributes products through retail agents, brokers, and a select network of wholesalers.

Global Property

Financial Performance:

• Revenue (Gross Written Premiums): $178,128 thousand (-11.7% YoY)
• Key Growth Drivers: Decrease due to continued downward pricing pressure in the global property market, despite steady retention.

Product Portfolio:

• Provides comprehensive property insurance and reinsurance solutions for commercial clients worldwide.
• Protects against physical loss or damage to assets due to natural catastrophes and other insured perils.

Market Dynamics:

• Supports clients across diverse industries in managing exposures and maintaining operational resilience.

Professional Lines

Financial Performance:

• Revenue (Gross Written Premiums): $149,231 thousand (-6.6% YoY)
• Key Growth Drivers: Decrease due to the exit of unprofitable lines during 2025.

Product Portfolio:

• Includes management liability, professional liability (which encompasses cyber), and allied health (including life sciences).
• Provides primary and excess claims-made liability products.

Market Dynamics:

• Distributed through both wholesale and retail brokers on an E&S and admitted basis.

Specialty Programs

Financial Performance:

• Revenue (Gross Written Premiums): $322,705 thousand (+47.8% YoY)
• Key Growth Drivers: Primarily due to the addition of two new programs in 2025.

Product Portfolio:

• Partners with program administrators focused on specific markets aligned with the Company's expertise and strategy.
• Writes property, general liability, commercial auto liability, excess liability, and workers’ compensation lines of business.

Market Dynamics:

• Leverages program administrators' competitive advantages (scale, proprietary technology) to optimize risk selection and pricing.
• Products written on an E&S and admitted basis.

Surety

Financial Performance:

• Revenue (Gross Written Premiums): $168,148 thousand (+16.8% YoY)
• Key Growth Drivers: Primarily due to market expansion in both commercial and contract bonds.

Product Portfolio:

• Provides contract, commercial, and transactional surety solutions.
• Focuses on small to medium-sized enterprises with aggregate bond programs up to approximately $100.0 million for contract and $125.0 million for commercial and transactional.

Market Dynamics:

• Distributes through retail agents and brokers on an admitted basis.

Transactional E&S

Financial Performance:

• Revenue (Gross Written Premiums): $197,779 thousand (+4.3% YoY)
• Key Growth Drivers: Not explicitly detailed beyond general growth.

Product Portfolio:

• Provides primary and excess non-catastrophe prone property and general liability solutions.
• Emphasizes hard-to-place risks due to complexity, loss history, and/or limited operating history.

Market Dynamics:

• Accesses the market exclusively through wholesale brokers.
• Success is driven by technical underwriting, thoughtful coverage provisions, pricing, and high-quality broker service.

Capital Allocation Strategy

Shareholder Returns:

• Share Repurchases: As of December 31, 2025, no shares have been repurchased under the $50.0 million share repurchase program authorized by the Board of Directors in October 2024.
• Dividend Payments: Skyward Specialty Insurance Group, Inc. does not intend to declare and pay cash dividends on its common stock in the foreseeable future. Its insurance subsidiaries did not pay dividends to the holding company for the years ended December 31, 2025 and 2024.
• Future Capital Return Commitments: A $50.0 million share repurchase program is authorized.

Balance Sheet Position:

• Cash and Equivalents: $168,544 thousand (2025) vs. $121,603 thousand (2024).
• Total Debt: $491,069 thousand (2025) vs. $119,536 thousand (2024).
• Net Cash Position: -$322,525 thousand (2025) vs. $2,067 thousand (2024).
• Credit Rating: The insurance group holds an “A” (Excellent) rating with a stable outlook from A.M. Best Company.
• Debt Maturity Profile:
  • FHLB Loan: A $57.0 million 4.5-year term loan, fixed at 4.00% interest, with principal due at maturity (August 2029). Secured by specific investment securities of Houston Specialty Insurance Company.
  • Term Loan Facility: An unsecured senior delayed draw term loan facility totaling $300.0 million, drawn on December 30, 2025, to fund a portion of the Apollo acquisition. Tranche A DDTL matures January 1, 2028, and Tranche B DDTL matures July 2, 2029. Interest rates are variable (term SOFR plus a margin or base rate plus a margin).
  • Revolving Credit Facility: An unsecured facility with an initial maximum principal of $150.0 million, increased to $250.0 million on the Apollo acquisition closing date. $114.5 million was drawn on December 30, 2025, for the acquisition. The availability period terminates November 12, 2030. Interest rates are variable (term SOFR plus a margin or base rate plus a margin).
  • Subordinated Debt: Unsecured subordinated notes with an aggregate principal of $20.0 million, due May 24, 2039. Interest is fixed at 7.25% for the first 8 years and 8.25% thereafter.

Cash Flow Generation:

• Operating Cash Flow: $408,076 thousand (2025) vs. $305,115 thousand (2024), primarily due to increased cash inflows from insurance operations.
• Free Cash Flow: Not explicitly provided.
• Cash Conversion Metrics: Not explicitly provided.

Operational Excellence

Production & Service Model: Skyward Specialty's operational philosophy is deeply embedded in its "Rule Our Niche" strategy, focusing on profitable niches that require technical underwriting and claims management. The Company provides differentiated, tailored products and solutions, empowering its underwriting and claims teams with significant authority, augmented by advanced technology and analytics. This structure fosters a nimble and responsive culture to market opportunities. Claims management is characterized by prompt and comprehensive investigations, quality service, early and accurate reserve establishment, effective subrogation, fraud detection, and disciplined litigation management. The Company handles the majority of its claims in-house, utilizing Third Party Administrators (TPAs) for specific programs and runoff claims under active oversight. Key technological tools include a "Claims Development Severity Predictor" for large loss identification and a "quick strike" program for commercial auto accidents to enable rapid response and investigation.

Supply Chain Architecture: Key Suppliers & Partners:

• Reinsurers: Skyward Specialty strategically purchases reinsurance from third parties, with 98% of its reinsurance recoverables as of December 31, 2025, derived from reinsurers rated “A-” (Excellent) or better by A.M. Best Company or collateralized. The top 10 reinsurers account for $661,130 thousand of recoverables. Notable reinsurers include eMaxx Captives ($123,925 thousand, not rated) and Everest Reinsurance Co. ($70,355 thousand, A+).
• Program Administrators: Partners with program administrators for its Specialty Programs division.
• Captive Managers: Collaborates with third-party captive managers for its Captives division.
• Third Party Administrators (TPAs): Utilizes TPAs for claims handling in specific areas like programs, captives, occupational accident, workers compensation, and runoff claims, with internal oversight.
• Technology Vendors: Generally uses third-party vendor-developed core operating applications, customized for the Company's needs.
• Investment Management Firms: Manages its diversified investment portfolio with professional investment advisory management firms.

Facility Network:

• Executive Offices & Operations: The Company leases its primary executive offices and insurance operations in Houston, Texas, occupying approximately 20,400 square feet under a lease expiring in 2029.
• Additional Office Space: Leases additional office space as needed.
• Technology Infrastructure: Designed for resilience, with real-time data replication to a third-party cloud disaster recovery site and daily data backups to prevent disruptions.

Operational Metrics:

• Combined Ratio: 89.3% (2025) vs. 92.3% (2024), indicating an underwriting profit.
• Loss and LAE Ratio: 60.9% (2025) vs. 63.4% (2024), an improvement of 2.5 points.
• Expense Ratio: 28.4% (2025) vs. 28.9% (2024), an improvement of 0.5 points.
• Net Retention: Approximately 64.9% of gross written premiums in 2025.
• Catastrophe Loss Protection: Catastrophe reinsurance is purchased up to $36.0 million, designed to cover events beyond a 1 in 250-year Probable Maximum Loss (PML). The Company aims to expose no more than 3.0% of stockholders’ equity to a catastrophic loss less than a 1 in 250-year event.
• Loss Reserves: Total reserves for losses and LAE were $2,318,894 thousand (2025) vs. $1,782,383 thousand (2024). Net reserves for losses and LAE were $1,397,729 thousand (2025) vs. $1,111,537 thousand (2024). The Company recognized $7.5 million in favorable prior accident year development in 2025.
• Claims Duration (Historical Average Annual Payout, Net of Reinsurance):
  • Short-Tail/Monoline Specialty Lines: Year 1: 21.1%, Year 2: 38.1%, Year 3: 10.8%, Year 4: 9.7%, Year 5: 15.2%.
  • Multi-line Solutions: Year 1: 23.9%, Year 2: 21.6%, Year 3: 15.6%, Year 4: 13.6%, Year 5: 10.5%, Year 6: 4.8%, Year 7: 4.8%, Year 8: 2.4%.
  • Exited Lines: Year 1: 27.5%, Year 2: 12.2%, Year 3: 4.9%, Year 4: 9.9%, Year 5: 8.9%, Year 6: 6.8%, Year 7: 6.8%, Year 8: 2.9%.

Market Access & Customer Relationships

Go-to-Market Strategy: Skyward Specialty's marketing and distribution strategy is tailored to the individual needs of insureds and specific market niches. The Company maintains strong, established relationships with its distribution partners, which include retail agents, wholesale brokers, select program administrators, and captive managers. This diversified approach allows efficient and effective access to target business. The Company differentiates itself through deep expertise in niche markets, high-caliber underwriters, a culture of innovation, thoughtful product design, and rapid, high-quality responsiveness.

Customer Portfolio:

• Enterprise Customers: Insures customers across a wide variety of industries, focusing on those with specialized needs.
• Strategic Partnerships: Engages in strategic partnerships with program administrators and captive managers to extend market reach and leverage specialized expertise.
• Customer Concentration: The customer base is generally diversified across many different lines of business and geographic regions, mitigating concentration risk.
• Key Customer Types: Includes employers who self-insure employee benefits, companies seeking self-insurance solutions, commercial clients globally, small to medium-sized enterprises requiring bonding, and businesses with hard-to-place or complex risks.

Geographic Revenue Distribution:

• United States: The primary operational region, accounting for 60.1% of total gross written premiums in 2025, with significant concentrations in Texas (10.7%), Pennsylvania (7.6%), Florida (7.2%), California (7.1%), and New York (6.3%).
• International Exposure: Select foreign countries are served by Houston Specialty Insurance Company, and the Global Property and Agriculture and Credit (Re)insurance divisions provide solutions for commercial clients worldwide and across a diversified global portfolio, respectively.

Competitive Intelligence

Market Structure & Dynamics

Industry Characteristics: The specialty lines property & casualty insurance market is characterized by numerous distinct markets and sub-markets, each with unique customer needs and economic features. The industry is historically cyclical, experiencing significant fluctuations due to intense competition, catastrophic events, capacity levels, litigation trends, and economic conditions. There is a rising demand for specialized insurance solutions driven by increasing risk complexity from factors like climate change, supply chain uncertainty, financial inflation, cyber risk, novel health risks, and increased litigation. The market also exhibits "micro cycles" where specific segments harden or soften independently.

Competitive Positioning Matrix:

Direct Competitors

Primary Competitors: Skyward Specialty faces competition from other specialty and standard insurers, as well as program administrators. 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 Financial Corporation, Kinsale Capital Group, Inc., Arch Capital Group, and AXIS Capital Holdings, Ltd.

Emerging Competitive Threats: The Company acknowledges potential threats from new market entrants, disruptive technologies, and alternative solutions. Specifically, it recognizes the risk if competitors are able to leverage artificial intelligence solutions more quickly or effectively.

Competitive Response Strategy: Skyward Specialty's competitive response is anchored in its "Rule Our Niche" strategy. This involves attracting and retaining top underwriting and claims talent, continuously leveraging its technology DNA to enhance competitive advantage, profitably growing existing lines of business while expanding into new underwriting divisions, and maintaining daily operational excellence. Cross-functional collaboration among underwriting, claims, actuarial, and product management teams ensures timely analysis of trends and rapid implementation of portfolio, pricing, and coverage adjustments.

Risk Assessment Framework

Strategic & Market Risks

Market Dynamics:

• Underwriting Risk: The Company's financial condition is materially affected by its ability to accurately assess underwriting risk and establish appropriate premium rates.
• Competition: Intense competition in the insurance industry, including from consolidating firms, can impact pricing, business retention, and new business acquisition.
• Reinsurance Availability: Inability to secure desired reinsurance on commercially acceptable terms could increase loss exposure and necessitate reduced underwriting.
• Cyclicality: The insurance business is inherently cyclical, with fluctuations in operating results influenced by competition, catastrophic events, capacity, litigation, and economic conditions.
• Economic Factors: Adverse economic conditions (recession, inflation, high unemployment) can reduce demand for insurance, increase claim frequency/severity, and lead to premium defaults.
• Catastrophes & Climate Change: Exposure to severe weather, earthquakes, and man-made events, with climate change potentially increasing the frequency and severity of natural disasters, impacting risk prediction and management.
• Distribution Channel Reliance: Dependence on independent retail agents, brokers, wholesalers, and program administrators creates risks related to relationship stability, credit risk for unremitted premiums, and potential for distributors to exceed authority.
• Renewal & New Business: Failure to meet expectations for renewals and repeat business could adversely affect future written premiums.
• ESG Matters: Increased public scrutiny of environmental, social, and governance issues may lead to negative public perception, reputational harm, and additional costs.

Operational & Execution Risks

Supply Chain Vulnerabilities:

• Reinsurer Solvency: Reinsurers may default on their obligations due to insolvency or other factors, leaving Skyward Specialty primarily liable to policyholders.
• Key Vendor Relationships: Loss or failure of critical third-party vendors (e.g., IT, claims adjustment, investment management) could disrupt operations and lead to financial losses.
• Cybersecurity: High dependence on IT systems makes the Company vulnerable to security breaches, cyberattacks, and data loss, which could disrupt operations, damage reputation, and incur significant costs.
• Artificial Intelligence: The rapid evolution and adoption of AI present risks if competitors leverage it more effectively, or if AI applications produce deficient, inaccurate, or biased results.
• Growth Management: Challenges in managing future growth, including capital needs, systems development, and personnel, could adversely affect business.
• Acquisition Integration: The recent acquisition of Apollo Group Holdings Limited carries integration risks, including operational disruptions, failure to realize anticipated benefits, retention of key personnel, cultural differences, and financial/regulatory complexities.

Financial & Regulatory Risks

Market & Financial Risks:

• Investment Portfolio Performance: Results are partly dependent on investment portfolio performance, subject to interest rate, equity price, and credit risks.
• Liquidity Requirements: Potential need to sell investments at unfavorable prices to meet liquidity requirements if cash flows are insufficient.
• Financial Covenants: Breach of covenants in credit agreements could trigger immediate debt repayment.
• Loss & LAE Reserves: Reserves are estimates and may prove inadequate, requiring increases that reduce net income and stockholders’ equity.
• Coverage Interpretation: Unexpected changes in policy coverage interpretation or enforceability of limitations/exclusions could broaden coverage and increase losses.

Regulatory & Compliance Risks:

• Extensive Regulation: Subject to broad state insurance regulation, which primarily protects policyholders and can impose significant compliance costs and operational limitations.
• Holding Company Regulation: As an insurance holding company, it is subject to specific state laws requiring regulatory approval for certain transactions.
• Risk-Based Capital Requirements: Failure to maintain required risk-based capital levels could impact regulatory authority and A.M. Best rating.
• Tax Law Changes: Changes in U.S. tax laws could negatively affect the Company, its investments, or stockholders.
• NOL Limitations: Utilization of net operating loss carryforwards may be limited by Internal Revenue Code Section 382 due to past ownership changes.
• Change of Control: Applicable insurance laws may deter or delay changes of control.
• Financial Reporting & Internal Controls: Operating as a public company incurs significant compliance costs and management time; risk of ineffective internal controls impacting financial reporting.
• Litigation: Exposure to various types of litigation, including insurance claims, bad faith, and general commercial disputes, with potential for substantial or unpredictable outcomes.

Innovation & Technology Leadership

Research & Development Focus: Skyward Specialty places technology at the heart of its operations, deploying it to gain competitive advantages in three primary functional areas.

• Core Technology Areas:
  • SkyBI (Business Intelligence Platform): A single, comprehensive enterprise-wide data repository that provides senior leadership and technical teams with real-time intelligence. It serves as the foundation for reporting, business intelligence, analytics, and advanced data capabilities, offering easy-to-consume visualized performance metrics across various categories (distributor, customer segment, line of business, underwriter, risk feature) to drive superior decision-making.
  • Predictive Analytics Technology: The Company augments employee capabilities daily using new forms of risk data and predictive analytics, including artificial intelligence, for enhanced risk selection, pricing, and claims handling. This innovation is tailored to each underwriting division and market served.
  • Core Transactional Platforms: Utilizes third-party vendor-developed core operating applications (policy administration, underwriting workbench, billing, and claims systems) that are customized to enable nimble scaling and efficient expansion into new markets.
• Innovation Pipeline: The Company aims to innovate constantly, with specific actions tailored to each division and market. It leverages generative artificial intelligence in underwriting and claims handling to improve effectiveness and efficiency.

Intellectual Property Portfolio:

• Trademark Strategy: Skyward Specialty has applied for various trademark registrations in the United States at both federal and state levels and actively monitors and protects its trademarks and service marks from unauthorized use.

Technology Partnerships:

• Strategic Alliances: The Company generally uses third-party vendor-developed core operating applications, which are customized for its specific needs.

Leadership & Governance

Executive Leadership Team

Leadership Continuity: The Company is led by an experienced and entrepreneurial executive leadership team whose compensation is carefully structured to align with shareholder interests, with a material portion tied to long-term and short-term incentives focused on underwriting returns and book value per share growth. The Company fosters a flat communication and decision-making structure, empowering its staff.

Board Composition: The Board of Directors includes an Investment Committee that reviews and approves investment policy and strategy quarterly, and a Risk Committee that oversees cybersecurity strategy, reviews IT risks, controls, and procedures, and receives periodic management updates. The Board is classified into three classes with staggered, three-year terms, and directors can only be removed for cause. The Company's charter documents include provisions that may discourage or delay changes of control, such as super-majority voting requirements for certain amendments, the ability to issue blank-check preferred stock, and restrictions on stockholders' ability to call special meetings or act by written consent.

Human Capital Strategy

Workforce Composition: As of December 31, 2025, Skyward Specialty had approximately 611 employees. The Company focuses on hiring and retaining highly skilled underwriting and technical staff, as well as claims professionals with specialized expertise in its niche markets.

Talent Management:

• Acquisition & Retention: Skyward Specialty strives to be an employer of choice, committed to fostering a diverse workforce with varied thoughts, backgrounds, and perspectives. It aims to attract, develop, and retain top talent by offering a competitive benefits package, including medical, dental, vision, a 401(k) plan, paid time off, family leave, employee assistance programs, and an employee stock purchase plan. The Company also emphasizes continuous training and professional development opportunities.
• Employee Value Proposition: Compensation for senior leadership is aligned with shareholder interests, with a significant portion tied to long-term and short-term incentives based on underwriting returns and book value per share growth.
• Culture & Engagement: The Company cultivates a distinctive, winning, and entrepreneurial culture, as evidenced by internal surveys and external recognition (e.g., "Best Places to Work in Insurance"). It promotes a flat communication structure, empowers staff, and offers a hybrid work schedule for flexibility.

Diversity & Development:

• Diversity Metrics: The Company is committed to fostering a rich diversity of thought, background, and perspective within its workforce.
• Development Programs: Continuous training is provided to claims staff on claim evaluation, strategy, litigation management, and best practices. Opportunities for further education and professional development are offered to all employees.

Environmental & Social Impact

Environmental Commitments: The 10-K filing does not explicitly detail specific environmental commitments, emissions targets, carbon neutrality goals, or renewable energy strategies. However, it acknowledges changing weather patterns and climatic conditions, such as global warming, as factors contributing to the unpredictability and frequency of natural disasters, which can impact its business.

Supply Chain Sustainability: The filing does not explicitly detail specific supply chain sustainability initiatives, supplier engagement programs, or responsible sourcing practices.

Social Impact Initiatives: The filing does not explicitly detail specific community investment programs or product impact initiatives related to social benefits. However, it highlights its commitment to fostering a diverse workforce and being an employer of choice.

Business Cyclicality & Seasonality

Demand Patterns: The insurance business is historically cyclical, with significant fluctuations in operating results driven by factors such as competition, catastrophic events, capacity levels, litigation trends, and general economic conditions. Demand for insurance is influenced by the frequency and severity of catastrophic events, market capacity, new capital providers, and economic conditions. The Company notes the emergence of "micro cycles" where specific segments of the P&C market experience hardening or softening independently, with the E&S market often exhibiting more pronounced cyclicality.

Planning & Forecasting: Skyward Specialty's financial forecasting incorporates assumptions about renewal rates of existing contracts and new business from repeat insureds. The Company's strategy involves adapting to market conditions, growing certain lines of business when favorable, and limiting exposure when conditions are less favorable.

Regulatory Environment & Compliance

Regulatory Framework: Skyward Specialty and its primary insurance subsidiaries (Great Midwest Insurance Company, Houston Specialty Insurance Company, Imperium Insurance Company, Oklahoma Specialty Insurance Company) are subject to extensive insurance regulation in the states where they operate, primarily Texas and Oklahoma. These regulations are designed to protect policyholders and cover aspects such as capital and surplus requirements, licensing, product forms and rates, reserve adequacy, affiliate transactions, and solvency. As an insurance holding company, Skyward Specialty is also subject to specific holding company laws. Its insurance subsidiaries are subject to Risk-Based Capital (RBC) requirements set by the National Association of Insurance Commissioners (NAIC), which Great Midwest Insurance Company substantially exceeded as of December 31, 2025 and 2024. The recent acquisition of Apollo Group Holdings Limited will expand its operations into the Lloyd’s market, increasing exposure to international regulatory environments.

Trade & Export Controls: The filing does not explicitly detail specific trade or export control compliance requirements or limitations.

Legal Proceedings: The Company is a party to various legal actions arising from insurance claims and other general commercial and corporate litigation, including bad faith claims and alleged errors and omissions. Accruals are made for probable and reasonably estimable losses. Based on current information, 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.

Tax Strategy & Considerations

Tax Profile: Skyward Specialty's effective tax rate was 21.4% for the year ended December 31, 2025, compared to 22.2% for 2024. The Company files a consolidated U.S. federal income tax return and certain state tax returns. Its admitted insurance subsidiaries pay premium taxes in lieu of most state income or franchise taxes.

Tax Reform Impact: The One Big Beautiful Bill Act (OBBBA), signed on July 4, 2025, modifies key business tax provisions. Based on current analysis, the Company does not believe these provisions will have a material impact on its annual effective tax rate in 2025 or 2026.

Tax Attributes: As of December 31, 2025, the Company had approximately $40.3 million in gross federal net operating loss (NOL) carryforwards, set to expire beginning in 2032. The utilization of these NOLs is limited by Internal Revenue Code Section 382 due to an ownership change in 2014, which is expected to result in the expiration of $2.8 million ($0.6 million tax effected) of NOLs, against which a valuation allowance has been established. Additionally, $0.3 million ($0.1 million tax effected) of federal NOLs are related to dual consolidated loss and are not expected to be utilized. The Company also holds $0.9 million in state and local NOLs, which it expects to fully utilize.

Insurance & Risk Transfer

Risk Management Framework: Skyward Specialty's Enterprise Risk Management (ERM) is integral to its daily operations, aiming to achieve acceptable risk-adjusted returns while maintaining trust and reliability. The Company utilizes an Economic Capital Model (ECM) to quantify potential earnings and capital loss across various scenarios, measured against annually updated risk tolerances set by the ERM Committee and reviewed by the Board's Risk Committee. A comprehensive risk register is maintained, with top risks identified, quantified, and reviewed quarterly. Operational processes and controls, including the Underwriting Committee, Claims department, and Actuarial function, are designed to identify, assess, and manage key risks, supported by the real-time analytics of the SkyBI platform.

Insurance Coverage:

• Reinsurance Programs: The Company strategically purchases reinsurance from third parties to protect capital from severity events (large single losses or catastrophes) and reduce earnings volatility. Reinsurance contracts are predominantly one-year terms, renewing annually.
  • Quota Share Reinsurance: Transfers a specified percentage of losses in exchange for a corresponding premium share.
  • Excess of Loss Reinsurance: Assumes losses above a specified amount for individual claims or events, including catastrophe reinsurance.
  • Facultative Coverage: Covers individual risks or policies, supplementing treaty coverage or addressing excluded perils.
• Maximum Company Retention (as of December 31, 2025):
  • Accident & Health: $0.90 million per occurrence
  • Commercial Auto: $1.00 million per occurrence
  • Excess Casualty: $2.25 million per occurrence
  • General Liability: $1.50 million per occurrence
  • Ocean Marine: $3.00 million per occurrence
  • Professional Lines: $5.25 million per occurrence
  • Property: $3.50 million per occurrence
  • Representation and Warranty: $3.25 million per occurrence
  • Surety: $5.00 million per occurrence
  • Workers’ Compensation: $2.33 million per occurrence
• Catastrophe Reinsurance: Catastrophe reinsurance is purchased up to $36.0 million, informed by third-party stochastic and internal deterministic models, designed to cover events beyond a 1 in 250-year Probable Maximum Loss (PML). The Company aims to limit catastrophic loss exposure to no more than 3.0% of stockholders’ equity for events less than a 1 in 250-year return period.
• Reinsurer Credit Quality: Skyward Specialty seeks reinsurance from reinsurers rated at least “A-” (Excellent) or better by A.M. Best Company. As of December 31, 2025, 98% of its reinsurance recoverables were from such highly-rated reinsurers or were collateralized.
• Allowance for Uncollectible Reinsurance: An allowance of $2.3 million was maintained for uncollectible reinsurance at December 31, 2025 and 2024.
• Trust Accounts: Reinsurers have established funded trust accounts, with a market value of approximately $233.5 million as of December 31, 2025, providing additional security for claim recoverables.