Skyward Specialty reports Q3 2024 results

Skyward Specialty  held its earnings call on October 30, 2024. Highlights include:

• 560 employees.
• The company is nearing the end of its second year as a public company and remains focused on its “Rule Our Niche” strategy to deliver top-quartile returns across market cycles.
• Gross written premiums rose 12.4%, driven by transactional E&S, surety, captives, programs, and agriculture.
• A&H, surety, captives, mortgage, credit, and agriculture segments contributed 37% of the $400 million in gross written premiums this quarter.
• In Professional Lines, healthcare professional liability products showed strong market performance, while the new Media Liability unit is expected to drive future growth. Despite challenges in D&O and increased competition in miscellaneous E&O, adjustments are in place to support growth and maintain margins in upcoming quarters.
• Matthew John Carletti from JMP Securities asked about Skyward Specialty’s growth initiatives, specifically Media Liability, and inquired if there are additional “puzzle pieces” the company plans to add in the future. CFO Mark Haushill explained that Skyward Specialty follows a strategic, long-term approach to growth, often engaging with talent for extended periods before launching new initiatives like Media Liability. The focus is currently on expanding and optimizing existing investments rather than adding new areas.
• Charles Peters from Raymond James asked about the impact of pricing trends and growth areas on Skyward Specialty’s top-line growth outlook, while questioning whether the share repurchase program indicates limited internal investment opportunities. CEO Andrew Robinson clarified that the share repurchase program reflects the company’s maturation as a public entity and serves as a tool to address undervaluation during market fluctuations. He emphasized that the program is not large, signaling it is supplemental rather than a primary focus. Robinson also highlighted Skyward’s strong financial position with low debt and reiterated confidence in its growth strategy, while explaining that the buyback provides flexibility to capitalize on opportunities where the company’s stock price does not reflect its intrinsic value.
• Skyward discussed the competitive landscape in the property market, highlighting varied dynamics across different sectors. While some areas, like marine and small property accounts, remain competitive but manageable, the Global Property market has seen reckless pricing practices. “The crazies have taken over, to be honest. We have examples of companies doing things that are every bit as irresponsible as maybe what you’ve heard in the D&O market. I’m thinking of some recent accounts,” said Haushill. He shared an example of a competitor significantly increasing coverage exposure for minimal additional premium, calling it irresponsible. Despite these challenges, Skyward remains committed to disciplined pricing and strategy, refusing to follow others into unsustainable practices. Robinson believes competitors will eventually face the consequences of their risky decisions. “I will give you one example where we were a lead line on a large account, so writing a significant portion of the primary $100 million. We wrote that for a 20% rate. So just think of you wrote that entire line, that’s a $20 million premium. And this year, that primary layer, which we came off of was renewed with the leaders taking a $300 million stretch, not $100 million stretch for $21 million. So they added $200 million of vertical exposure for an additional $1 million.”