Skyward Specialty Insurance Group, Inc. Q4 FY2025 Earnings Call

Good day, and thank you for standing by. Welcome to the Fourth Quarter 2025 Skyward Group Earnings Conference Call. Please be advised that today's conference is being recorded. I would now like to turn the conference over to your speaker for today, Kevin Reed, Vice President, Investor Relations. Please go ahead.

Thank you, Lisa. Good morning, everyone, and welcome to our fourth quarter 2025 earnings conference call. Today, I am joined by our Chairman and Chief Executive Officer, Andrew Robinson; and Chief Financial Officer, Mark Haushill. We will begin the call today with our prepared remarks, then we will open the lines for questions. Our comments today may include forward-looking statements, which, by their nature, involve a number of risk factors and uncertainties, which may affect future financial performance. Such risk factors may cause actual results to differ materially from those contained in our projections and forward-looking statements. These types of factors are discussed in our press release as well as in our 10-K that was previously filed with the Securities and Exchange Commission. Financial schedules containing reconciliations of certain non-GAAP measures, along with other supplemental financial schedules are included as part of our press release and available on our website under the Investors section. With that, I will turn the call over to Andrew.

Thank you, Kevin. Good morning, and thank you for joining us. Our strong fourth quarter caps off another incredible year. Mark will cover the quarter in detail in a moment, but I'll start our call today with a few quarter and full year highlights. Fourth quarter adjusted operating income increased 47% to $49 million and underwriting income reached $41 million, both all-time highs and the fourth consecutive quarter of record results for those two metrics. Our growth in gross written premiums in the quarter of 13% caps off an outstanding year of 24% growth. We continue to exceed our objectives of delivering mid-teens return on equity, reporting 18.9% for the year and a return on tangible equity of 20.9% was simply outstanding. Our fully diluted book value per share grew to $23.87, which is up 5% over the third quarter and an impressive 26% for the year. The market is becoming more competitive and difficult for many to navigate. And yet, we simply go from strength to strength in our financial results, our competitive position, our portfolio construction and our execution. Whether it be the impressive year-to-date growth in our ag business, the leadership position we established in the small employer market in A&H, our market-leading innovations such as EndWell that are powering the growth in surety and similarly creative products that are driving profitable growth elsewhere or now the accretive impact the Apollo combination will bring to growth areas like our Life Sciences unit. We are demonstrating every day that we're unique amongst the P&C universe in how we are competing, executing and winning. While others are struggling to find their footing in a decidedly more challenging property market and endeavoring to stay in front of the escalating loss costs in areas of the casualty market, we have successfully navigated in a manner others have not. We have evolved nearly 50% of our business portfolio to less cyclical lines while executing on our strategy to rule our niche by attracting the very best talent, staying in the lead in the technology and AI arms race and building defensible positions in a competitive moat around our business, all while delivering outstanding financial returns. It is unlikely that every quarter going forward can be an all-time best for our underwriting and operating income as it was in 2025. Yet relative to the market and the opportunities ahead, we believe Skyward has never been better positioned to deliver sustained top quartile shareholder value. With that, I'll turn it over to Mark to provide the financial details for the quarter and the year. Mark?

Thank you, Andrew. We had another great quarter, reporting adjusted operating income of $49 million or $1.17 per diluted share and net income of $43 million or $1.03 per diluted share. As Andrew mentioned, gross written premiums grew by more than 13% in the quarter, driven by our A&H, Surety and Specialty programs divisions. Net written premiums grew 25% for the year and our retention of 64.9% remained stable year-over-year and consistent with our guidance. Turning to our underwriting performance. The fourth quarter combined ratio improved 7.3 points compared to the prior year quarter to 88.5%, reflecting net favorable development and a modest catastrophe quarter. Our loss ratio of 59.6% includes net favorable prior year development. This was across multiple lines, primarily surety and property of $7.5 million or 2.1 points on the loss ratio. Our favorable development more than offset modest adverse development in more recent accident years, which was principally driven by commercial auto and excess auto in areas that have been exited over the past three years. Our 10-K and statutory filings provide additional details. We ended the year with a very strong reserve profile with 74% of reserves in IBNR, our highest level of IBNR in the history of the company. Our pay to incurred is a low 65% for 2025, consistent with 2024. These metrics demonstrate our disciplined and conservative approach to reserving, even as our liability durations continue to shorten. The expense ratio for the quarter was 28.9%, consistent with the prior year quarter and in line with our expectation of sub-30s. Efficiency gains and controllable expenses were offset by higher acquisition costs, which were driven by business mix shifts and by regular fourth quarter profit share true-ups. Turning to our investment portfolio, net investment income for the fourth quarter 2025 increased $3 million compared to the fourth quarter 2024, driven by a larger asset base and higher yields in our fixed income portfolio. In the fourth quarter, we put $52 million to work at 5.6%. Our embedded yield was 5.3% on December 31, up from 5.1% a year ago. Underlying marks of $2 million on the private credit holdings in our alternative asset portfolio continued to impact net investment income in the quarter. While the 2025 results in our alternative asset portfolio are disappointing, this portfolio only represents 3.8% of our investment portfolio at December 31 compared to 6% a year ago. For the year, $44 million of the alt capital was returned and reinvested into our fixed income portfolio. Our organic growth and capital arising from our strong 2025 results supports our 2026 business plan. That capital strength positions us well as we consider our balance sheet and our leverage profile going forward. Our financial leverage was modest as we finished the quarter at under 11% debt-to-capital ratio. However, rolling into the first quarter of 2026, our leverage will be impacted by debt related to the Apollo transaction, and we expect it to be in the range of 28% to 29%. Recall, as part of the consideration paid for Apollo, the company issued approximately 3.7 million shares at an accretive $50 per share. At the closing of the Apollo transaction on January 1, fully diluted book value per share is expected to fall within the range of $26 to $26.10 as compared to our $23.87 at December 31. You'll recall that on December 3, we provided guidance for 2026, and that guidance is unchanged. As discussed in prior quarters, the material weakness in IT controls has been remediated, and that will be visible in our 10-K. There are no material weaknesses. We remain focused on our balance sheet strength and prudent capital management as we move into 2026. We will look to opportunistically deploy excess capital to take advantage of our extremely attractive share price via our share repurchase program. Now I'll turn the call back over to Andrew.

Thank you, Mark. As Mark just shared, our financial results for the quarter were excellent again. We grew over 20% in Surety, A&H and Specialty Programs. We expect strong continued growth in A&H and Surety given our winning positions. As noted in the prior calls, we expect flatter growth in Specialty Programs as the effects from the two programs added in early 2025 are fully reflected in written premium. We also grew in captives and modestly in Global Property, the latter of which simply reflects a small premium quarter, high retention on our in-force and a couple of account wins. We continue to see considerable competition in property. We had strong growth in the quarter within the credit unit part of our Ag and credit reporting division. We remain bullish about our profitable growth opportunity in both units. We shrank in Energy and Construction Solutions, driven by our ongoing intentional actions in commercial auto and construction. We have now reduced our commercial auto exposure by more than 62% over the last 12 quarters as we signaled to you three years ago that the loss cost inflation backdrop is too unpredictable and too unsustainable, something only in the past few quarters others have started to discuss regularly. Regarding energy, given the strength of our market position, limited competition in the specific markets we serve and our broadened offerings in renewables and power, we are bullish in our outlook for this unit. In Q4, as often happens, the market becomes more competitive as many try to make full year plans. This was most visible in our E&S and Professional Lines divisions. We defended our books effectively but wrote less new business given the price and terms on offer. While this continued into the 1/1 renewals, we remain positive about our ability to grow profitably in specific areas in these divisions, including health care professional, the specific target classes that make up our management liability book and general and excess liability. It's important to note our outstanding portfolio construction and diversification. Over 58% of our business is in short-tail lines and now 48% of our business in lines less exposed to the P&C cycles. And our largest division makes up only 16% of our premium. These all continue trends that are visible over the past three years. We arrived at this point with clear strategic intentions, which we have spoken about quarter-on-quarter since being a public company. Turning to our operational metrics. We had a quarter similar to last. On pricing, we achieved mid-single-digit pure rate ex global property. Retention was in the mid-70s, driven by our intentional actions in commercial auto. We continue to see strong submission growth, which was solidly in the teens again this quarter. I'd now like to take a moment to reflect on our progress as a public company over the last three years. On January 13, 2023, we listed as a public company. In February of 2023, we reported our 2022 fourth quarter and full year results with operating income of $11.6 million and $0.36 per fully diluted share and $12.87 book value per fully diluted share. In just three years, our adjusted operating income of $49 million is more than 4x greater. Our diluted EPS of $1.17 is more than 3x greater and our fully diluted book value per share is over 2x greater at the close of the Apollo transaction on 1/1. Underlying this is a far stronger balance sheet, both on the asset and liability side of the ledger, a far more durable business portfolio, as I just discussed, market-leading underwriting and claims talent, a leadership position in the use of advanced technology and AI and every single division executing exceptionally on its Rule Our Niche strategy. None of this begins to contemplate the impact of the Apollo transaction, which further strengthens our talent, our innovation and earnings, and it provides attractive fee income, strengthens and expands our business portfolio into new specialty areas, and importantly, it builds on Apollo's distinct and obvious leadership position in providing solutions to the digital economy. To this end, you likely saw Uber's announcement yesterday regarding its launch of the first-ever manufacturer-agnostic autonomous rideshare platform. One critical component Uber highlighted is the autonomous vehicle insurance policy, also known as AVIP. We are proud that Apollo is the sole carrier partner to Uber for this market-leading initiative. AVIP is a comprehensive liability product that combines general and product liability along with several other coverages for manufacturers, ADS providers, owners, fleet managers and other supporting participants into one simple policy that is embedded directly within the Uber AV platform. Uber selected Apollo because of our expertise, intellectual property, proprietary data, track record and leading position in providing insurance to the AV market. I noted autonomy as a large growth area for Apollo when we announced the transaction to acquire Apollo. This is a powerful demonstration that we are the leader in understanding AV risk and providing powerful risk transfer solutions to this market. Our collaboration with Uber has been central to the unique design of this product, including our proprietary context-specific and usage-based pricing approach. The embedded coverages mean this product is not sold, but rather consumed by AVs offering their services through the Uber platform. We'll share more specifics in the coming days and weeks. But when we speak about the impact of Apollo and the strength of the combined company that is now Skyward Group, this partnership with Uber is precisely what we envisaged. It reflects the differentiated capabilities we have brought together and our ability to deliver solutions at the forefront of innovation, technology and serving markets being disrupted by AI. To wrap up, as I look back on 2025 and our last three years as a public company, I'm immensely proud of the integrity of our company and how we operate, the accomplishments of our Skyward team and the results we've delivered to you, our shareholders. I'm even more excited about the next three years now with the capabilities and talents of our colleagues at Apollo. And despite a more challenging and uncertain market backdrop, at no point during my six years at the company have I viewed us better positioned for success than today. With that, I'd now like to turn the call back over to the operator to open it up for Q&A.

Operator? Please wait for a moment.

Andrew, I was hoping you could go a little bit deeper into the Surety growth where it was very strong in the fourth quarter. You're pretty optimistic about 2026 because we've heard a lot of, I guess, concerns from other carriers about delayed construction projects.

Thank you for the question. There was nothing unusual about this quarter, and we could see growth building. The fourth quarter particularly saw a release of federal funds, which made previously held-up money available. Our perspective is straightforward: we have built a well-diversified portfolio within Surety, not just in contracts and commercial but across all trades, which protects us from exposure to homebuilders. On the Surety side, we have strong areas like the SBA, along with our judiciary and fiduciary bond capabilities. We have also had success with EndWell, as we've discussed in the last three quarters. Recently, a large solar company failed, affecting over $1 billion in bonds in the market, with most of the top 20 Surety providers having some involvement, except for us, which helps us avoid a loss there. This event will likely lead to a hardening of the solar market, similar to what we experienced with oil and gas. Overall, our execution of business remains strong due to our diversified strategy, allowing us to adapt and seize market opportunities like we did with oil and gas, and now likely in solar. I expect us to continue outperforming both in growth and loss mitigation compared to the market.

Okay. Fantastic. That's helpful. If I could stay on premium growth prospects just for a second. So wholesale brokers like Ryan are creating these sort of diversified facilities, and we've seen some other specialty carriers participate in that. I was wondering about Skyward's appetite for that sort of business that is externally underwritten.

Yes, thank you for the question. We will not pursue that approach while I am the CEO of the company. It may suit others, but our strategy focuses on dominating our niche. We emphasize distinct focus, expertise, and capabilities that provide a competitive advantage and a solid defensive position. Whether it's managing other people's funds or merely taking a straightforward quota share on other underwriting, that is something we will not engage in as a company while I am in this role.

Our next question is from Paul Newsome of Piper Sandler. The following question will be from Gregory Peters of Raymond James.

I think you mentioned Apollo and the partnership with Uber regarding autonomous vehicles. As we develop our financial forecast, could you provide some insights on how Apollo performed in 2025 and your expectations for its performance in 2026 as we integrate this information?

Well, I think we will have some information on Apollo in the coming weeks as part of our regular reporting. There are certain details that will be available. At a macro level, Apollo's financial results are strikingly similar to ours, with a growth rate of about 20%. Their combined ratio was around 89% for the year. The main difference is that their expense ratio is 4 or 5 points higher than ours, leading to a loss ratio that is also 4 or 5 points lower. Mark and I are very pleased with the excellent work that David Ibeson and his team have done to ensure our balance sheet remains as conservative as theirs. I feel optimistic about our entry into 2026. As Mark stated in the script, our guidance remains unchanged. You can evaluate our performance against this guidance over the past three years. We will work hard to achieve our targets, but we can only take what the market allows while still delivering solid returns to our investors. It is important to note that, while some companies have reported significant growth in casualty insurance, that approach does not fit us. We are very cautious about the backdrop of loss cost inflation. The fact that we are ending this year with 50% of our Skyward Specialty business in areas not exposed to property and casualty cycles sets us apart and provides a real advantage as we head into 2026.

Just sticking on Apollo for a second. And then I do have a follow-up question on a different topic. But when we hear the rhetoric in the marketplace about pricing competition, obviously we've come to learn how your book of business has performed. Can you give us some perspective of how you think Apollo is going to perform under the Skyward banner given the fact that there's a lot more price competition in the marketplace now than there was maybe two or three years ago?

What I want to convey is that during our evaluation of the potential combination, and as today has shown, we find the Apollo portfolio to be highly complementary. We truly value their efforts in specialty areas such as product recall, political risk, and contingency. The recent example discussed regarding the digital economy highlights how unique they are in that market. Our partnership with Uber, which involves integrating our expertise into the pricing, is a distinctive advantage. We aren't competing with numerous other syndicates for business, and I have a strong confidence in their portfolio construction, which is quite similar to ours. While pricing pressure is a factor to consider, their portfolio is diverse enough—like Skyward Specialty’s—that I am very optimistic about our ability to grow profitably and manage the market, all while delivering excellent returns for our shareholders.

All right. I mean, the other question I had was just about the reserve development. And certainly appreciated your comment about how you've managed your commercial auto exposures over the last couple of years. But I was hoping that you could give us some commentary about the moving pieces inside the reserve development for the fourth quarter.

Greg, it's Mark. Thanks. In summary, we saw some movement in commercial auto in accident years '22 and '24, estimated at around $25 million, but it was offset by some shorter tail lines. I'm glad you asked because I want to emphasize that we review our reserves every quarter. If there's a need for adjustment, we will certainly do that. I realize my previous communication may have caused some confusion. I provided you with some high-level metrics on reserves earlier, and I believe it's important to convey that I feel as confident about our reserves as I ever have since going public. There are areas we're evaluating, but as we approach '26, I honestly feel better about our reserves than I ever have.

Greg, I don't think that you can look past the realities that we have dramatically shortened our liability durations over the course of the last, well, six years since I've been at the company. We're at an incredibly high level of conservatism if you measure it through IBNR. Our paid to incurred rates are as good as they possibly could be, I would say, at this point. And we do look at that as compared to others in the market. And I think the last thing that I would just highlight is that the auto and the excess over auto, the parts where we recognize some adverse development are all parts of our business that we've exited as part of sort of slimming down the exposure that we have to commercial auto.

Our next question is coming from the line of Alex Scott of Barclays.

First one I had is on Accident & Health. Some of that, I know is stop loss, and I think you guys have had pretty good performance where the rest of the industry has struggled a bit. So it might be one of the hardest markets we've seen in a while, pretty unique relative to some of the other things you guys do in P&C. Is that a place where you'd lean into growth? And could you tell us at all about what you did at 1/1 renewals?

Our results at 1/1 exceeded our expectations significantly. To address your question, I’ll provide some context. When I joined the company six years ago, we were primarily focused on the smaller employer market, specifically those with 500 employees or fewer, and we successfully built that portfolio. About three years ago, we introduced captive capabilities. There are a few notable companies in the P&C space that have strong captive offerings, and we are observing substantial growth in that market while also capturing additional market share. This has greatly contributed to our growth in the last 24 months. Approximately a year ago, we began to see growth in the non-captive segment as well. As we approached 1/1, you are correct in your observation; while I’m not sure I’d classify it as a hard market, there are certainly numerous opportunities available at attractive prices, and we remain committed to our strategy. Our captive capabilities are exceptional, and our approach to medical cost management is unparalleled in the market. We are recognized for this. Whether a company wants to join a group captive or is self-insuring and purchasing stop-loss, we add significant value. I expect our strength seen at 1/1 to persist throughout this year, and I feel very positive about our prospects. To emphasize your point, if you analyze the 2024 statistics, our loss ratio stands 15 points better than the market average and a remarkable 30 points better than some larger companies that have struggled over the past couple of years in terms of loss ratios. There’s no denying these numbers, especially since this is a short-tail line of business. I’m truly proud of our team's performance and optimistic about the year ahead. Thank you for bringing this up.

That was helpful. Follow-up question I had is on the Uber partnership. Obviously, longer-term potential bigger opportunity. As we think about the next year or two, is that going to cover some of the testing that they're doing initially? Like will there be premium dollars that come online more immediately? And any color you can help us with there?

Let me highlight three points. First, as mentioned in our prepared remarks, we will return with additional data. I’ve been advised by our colleagues at Apollo to be cautious. Uber has released some information stating they are launching in 15 cities, and we will observe how the premium develops. This is included in the guidance we provided, so it was anticipated. What stands out is that we are unique in this market, closely aligned with the leading player who has created a manufacturer-neutral platform. The potential here is remarkable. I want to emphasize that no other company is as well positioned as Uber to showcase the safety differences between autonomous and human drivers. They possess extensive data, and they will continue to gather more daily. Considering the current legal and operational landscape, I wouldn't want to be in any other position than partnering with them on autonomous vehicles, especially when compared to providing commercial auto coverage for them in these challenging times, where they have successfully navigated. The safety distinction between autonomous vehicles and human drivers is significant, and Uber is uniquely equipped to illustrate this, and we are centrally involved in that process.

Our next question is coming from the line of Michael Zaremski of BMO.

Maybe a question about the loss ratio, which looks good overall. If we examine the underlying loss ratio, it has increased slightly sequentially after previously decreasing. Is this new, slightly higher level something we should expect to be the trend going forward?

Go ahead.

Yes, Mike, thank you for your question. Mark will share more details. There’s no change in our selections; rather, it’s a shift in the mix. We have two significant growth areas in Accident & Health and Agriculture, which have higher loss ratios and are earning more quickly than the lower loss ratio segments like Credit and Surety. Overall, that's what you're observing. I can tell you that our internal plans reflect this mix change, but I wouldn’t make too much of it. Those lower loss ratio sectors also have lower expense ratios. What you'll see is the performance of our business on a combined ratio that aligns with the guidance we've provided. The geography may shift slightly, but there’s nothing fundamentally different about our underlying selections.

Got it. That's helpful. Lastly, regarding the resolution of the material weaknesses, congratulations. I'm curious if there are any significant learnings or system changes you'd like to highlight that have impacted how you conduct business, or if it's mostly minor adjustments behind the scenes.

Mike, it's Mark. This is a sore subject. Look, this whole controls thing is the bane of my existence. But no, we're not making any material changes to our systems as a result of it.

We remediated earlier in the year, but it didn't get recognized until you issued your 10-K. As a public company, this is not unusual, and it's not something financial in nature; these things happen. We took over a company that was in tough conditions six years ago, went public three years ago, and became an accelerated filer last year, which raised the stakes. So, I wouldn't read too much into it. We're just executing on all fronts, including in finance.

Got it. Yes. I meant to ask it in a positive way if it was taken.

Could you provide insight on whether the significant reduction in commercial auto, nearly two-thirds over the past few years, indicates we are approaching the end of that trend? Will retention levels begin to rise, potentially affecting growth differently, or is this still an ongoing challenge considering that commercial auto loss inflation continues to be higher than other lines?

That's a great question. I want to clarify that we have certain parts of our portfolio that are heavily weighted in commercial auto, and one significant segment has consistently delivered impressive returns for us over the past 12 years, even before my time. It’s not the entire portfolio, but to directly address your question, in the third quarter of this year, we focused on a specific area in construction that involved Ford F-150 trucks, which have shown unusually high severity. While frequency was improving, we may have been overly confident in that regard. The severity has largely been influenced by a challenging legal environment. We took action in response to that, and there will still be a decrease in our written premium over the next couple of quarters as things settle. However, we don’t plan to take any additional actions, and we feel very confident about our portfolio. At this point, we don’t see any further changes needed. Yes, there will be some impacts, but these are related to business non-renewals we decided on previously.

And our next question will be coming from the line of Andrew Andersen of Jefferies.

As property just becomes more competitive and you kind of manage the writings there, what have you been seeing on kind of bind or hit ratios for either liability or just the broader book as probably the rest of the market becomes more competitive?

Thanks, Andrew. That's a good question. I think just straight up on the bind ratio. Submission activity continues to be pretty good. Bind ratios, I think maybe you might be asking the question specifically through maybe our transactional E&S lens has been pretty consistent. There's a particular profile of business that we write, terms and conditions still pretty good. And so we haven't really seen a backup on the buying ratio. We quote a lot to get the business we want to see. Away from E&S, so when you look at something like energy, it's quite different, right? Because our competition is quite narrow. Our distribution is tight. We see the business that we want to see. And so that just continues to perform well for us. And with the introduction of things that we've done over the course of the last couple or three years on renewables, now more recently on sort of the unique way that we went into power, much of that's targeted towards the same distributors, and that has helped us in terms of kind of the strength of our position on their shelf. And so yes, I mean, I feel like we're doing what we should do, and there's no real change just yet on the liability side. I'm sure that it's going to become more competitive. The capital is connected. And as we're about to lap ourselves on the property side, it was in the second quarter of last year that property rates really started to move down. And so we're lapping ourselves. And I'm sure companies are going to redeploy capital elsewhere in the market. Some of that's going to find its way into the liability side, and it's going to become more competitive, but I feel like we're really well positioned.

And then maybe on one more on the Uber piece. I think you mentioned that was going to be in the 1971 syndicate. I think that business does see maybe 50% or so of net premiums, but there's kind of a few layers to the Apollo business with managed and then gross and net. Are you kind of thinking the Uber relationship is maybe more of a fee income vehicle kind of the near to medium term rather than a retained premium?

In 2026, 1971 will participate with 25% of our capital, while 75% will come from prominent third-party reinsurers. As we've mentioned before, this arrangement includes a fee-based component. We also have quota share support for 1971, which aims to secure some of the underwriting profits through a seed. This structure is not exclusive to the Uber relationship; it is a standard practice for 1971. When we discuss the specifics of Apollo in upcoming quarters, we will provide more clarity. For now, I believe you have captured the main points, reflecting the broader context I described.

Our next question is coming from the line of Michael Phillips with Oppenheimer.

I want to touch, Andrew, on the captive division and a topic we sort of touched on a little bit last quarter with the demand of captives and the pricing cycle. The slowdown there, any anomalies in the quarter? Or is that maybe just a start of a continued slowdown given the overall P&C market is seeing softening pricing?

Thank you for the question, Michael. We have previously discussed how captives have gained market share in the property and casualty sector. Even during periods of soft market conditions, group captives have seen an increase in market share. However, the current market environment does affect the appeal of transitioning from a guaranteed cost model to a captive model. Generally, companies make this move for strategic reasons, aiming to manage their risk costs effectively over the long term. Nonetheless, pricing conditions can often motivate this shift, which may be what you are observing at this time. Yes, we had very little loss associated with that, just a handful. Last I checked, our recoveries were very good. I believe we took the right steps to instill confidence in our ability to recover. However, it's not material enough to reflect in our P&L because our losses were minimal.

And our next question is coming from the line of Tracy Benguigui of Wolfe Research.

We heard some folks on earnings calls talking about reverse flow within small property accounts. What are you seeing in terms of any reverse flow at this point in the cycle? And if that's happening, like what is the typical cadence? Is it small account than large? Or do you think high hazard risk will always stay in the E&S market?

Thank you for your question, Tracy. I want to clarify that we're discussing the flow from the E&S sector back into the admitted markets. Our average premium per policy in our E&S business is around $40,000, indicating we're not focused on small accounts. On the property side, a little over 50% of our business involves writing full limits, while less than 50% is writing primary coverage with another party handling the excess. We've also introduced an excess property offering. To be clear, we are not participating in the small market or the binding authority market, nor are we involved in the submit business that emerges from it. One trend I've noticed is that the pressure on premiums is now extending to accounts under $50,000, affecting all levels. Generally, we take on very challenging risks, such as those in the wood industry or other highly hazardous areas, which do not typically transition back to the admitted market intentionally. This is also true for our liability side, where we engage with very difficult classes that have high severity and low frequency. We charge significantly for these risks and secure our terms and conditions. Therefore, we may not be in a good position to respond to that question compared to others due to our specific focus and operations being somewhat above where that reverse flow might happen.

Okay. Appreciate that. And I had a follow-up. I know you guys already discussed commercial auto and Uber. You obviously have a conservative stance on this line of business given all your reductions. But as it relates to this Uber AV insurance policy, to be sure, does coverage include any bodily injury? And if it does, I heard what you had to say about autonomous vehicles being more safe. But I'm wondering if you worry about the mix of driver-enabled and driverless cars at the road at the same time, presenting an untested type of risk.

Thank you for the question, Tracy. To clarify, this is not a commercial auto policy. Every autonomous vehicle on the road must carry commercial auto insurance to meet legal requirements. Instead, this coverage applies to anyone using the Uber platform when an autonomous vehicle is responding to instructions from that platform. Uber's activities extend beyond just ridesharing and consider various scenarios. The mixed environment of driver-operated and autonomous vehicles presents an important concern. I want to emphasize that we are entering this space with extensive knowledge, having been actively involved in autonomous vehicles. Our dataset on the insurer side is, to our knowledge, the largest available, which helps us understand the risks you've pointed out very well. Additionally, every autonomous vehicle has access to significantly more information compared to human-driven vehicles, particularly relevant in vehicle-to-vehicle collisions. This information advantage is considerable. Considering Uber's position, they can take nearly any instruction and have a wealth of information on those rides, loss frequency, and associated driver errors compared to the emerging data on autonomous vehicles. They are in a unique position to showcase the safety differences between autonomous vehicles and human drivers. No other company is better positioned in this regard, and in a challenging market, this advantage is extremely valuable.

And our next question is coming from the line of Andrew Kligerman of TD Cowen.

Question around retention. It looks like your net written premium as a percent of gross went to 64% from 70%. Could you touch on the dynamics around that shift and what we should expect going into '26 and '27 around retention?

Mark will jump in here as well. We're looking for the numbers. I think our full year figures were around 65%, which is an increase from last year when we were around 62% or 63% gross to net. While this quarter saw us cede more, it was just the normal fluctuations of any given quarter and the business mix. Overall, we've been consistently improving our retention. For instance, during this quarter, we aimed to increase our seed in the market and successfully accomplished that, even if it meant retaining more of our excess writings. We kept about 10% more while significantly increasing our seed, which was a smart move for us. This allows us to generate more fee income to offset our expenses, and we're confident in our loss estimates on the excess side, so we feel good about our performance.

It. So maybe expect the annual number to kind of move up a little bit.

Yes. I think in our guidance, we basically said consistent with this year. Some of it is going to be mix related, but I do think it's fair to say that if you looked at '23, '24, '25, we are on a consistent trajectory of increasing our net as a percentage of our gross. I think it's gone from kind of 60% to this year, about 65% over that horizon. And we'll give you the exact data. We'll follow up and make sure that we're closing the loop. Yes, I think we definitely see opportunities. As a company, I've previously mentioned that we are strategically led. There are certain directions we want to take, but we’re not insisting that everything has to happen this quarter. We are focusing on people and teams that we have confidence in, and sometimes it can take a while to bring those individuals on board. Ag was a good example of this. I can say that there are initiatives in progress, but whether they come to fruition in 2026 is uncertain because we are prioritizing patience and strategy in identifying high-performing individuals and teams in the categories we aim to enter. Regarding M&A, I’ve consistently expressed that we have a financial responsibility to be mindful of how we utilize our shareholders' capital. We have never positioned ourselves as a company that pursues acquisition for the sake of growth. The Apollo transaction was a unique opportunity that aligned with our vision for the next phase of our company. During our time in London, we focused on ways to grow organically and enhance our presence there. Therefore, I wouldn't characterize our stance as being actively in the market for acquisitions. While we have made two smaller acquisitions—one in surety and another in aviation over my 5.5 years with the company—it’s not our primary focus. However, we remain vigilant and ready to explore unique opportunities that may be a good fit for us.

And our next question is coming from the line of Mark Hughes of Truist.

Andrew, you talked about how the pricing pressure has extended from very large accounts down to all levels in property. That pressure on the very large accounts, has it gotten worse? Or did it step down and then has been reasonably stable, let's say, the last quarter or two?

The former, not the latter. I think that as I think I mentioned, earlier, Mark, that we're about to lap ourselves, right? It was the second quarter of 2025 that you really started to see the pressure come in. And so this is the point where if I'm me and I'm you, I would be watching that space to see whether at this point, the market kind of settles at the point it's at or whether some of the bad behavior out there continues. And it's really hard to know because we're not quite at the point where we're lapping ourselves. We're just a few months away from it. But yes, I would not say that there's any signs of it improving. And I do think that at least for our global property business, in particular, the most impacted area, we have done a downright extraordinary job given our ability to use larger line sizes to avail ourselves to attractive fact pricing to effectively limit the net margin impact for every dollar of premium that we've written, recognizing that we've written less, right? But the contribution, we feel continues to be not far off where it was over the course of the year prior.

Yes. I appreciate that. And then the final question on the liability side. You said you're concerned about the redeployment of capital. When you think about the competition there, is it from kind of the existing public players, we might know their names? Or is it outside MGAs new capital that's putting the marginal pressure on the liability side?

I believe that, generally speaking, the companies we regard as responsible competitors are indeed acting responsibly and are excellent firms. We strive to learn from their positive practices. It's important to be cautious with companies, whether public or private, that lack a history in casualty but are experiencing rapid growth. The casualty market poses its own set of challenges. A careful analysis of the trends in the general liability and occurrence liability markets should raise concerns. The current loss cost environment is difficult. While some growing companies may be performing well, many that are capturing significant market shares are not excelling because of superior underwriting skills. Instead, they are gaining market share often through aggressive pricing and terms. This is simply the nature of our industry. Our approach has been reflected in our performance; there's no reason to be unsettled by the flat or declining performance in some of our divisions. We are responsibly managing our shareholders' investments by reallocating our capital away from excessively competitive environments or areas with uncertain loss cost inflation. I encourage using common sense, as this judgment will likely prove correct in the coming years.

And our next question is coming from the line of Matt Carletti of Citizens.

Andrew, I heard your comments about Uber not being a commercial auto policy. Can you help me understand what a potential loss might stem from or what it could look like regarding the coverage you're providing?

Yes, Matt, thank you for joining us. You caught us by surprise as we didn't expect you to be here. Firstly, regarding commercial auto, it's mandatory to have coverage to operate a vehicle, but this isn't exactly that. There's an embedded coverage aspect. If we consider an autonomous vehicle causing an accident, it can be challenging to categorize that as traditional commercial auto, product liability, or general liability. It's a redefinition of these terms. The policy itself is proprietary and integrated into the Uber platform, so participants can fully grasp how it functions. It is tailored to the unique circumstances of dealing with an autonomous vehicle navigating an environment filled with people, other vehicles, and structures. While the fundamental exposure remains the same, the definitions and responses along with the available information differ significantly. We believe that safety, frequency, and severity are all significantly affected by this, which is an important factor in our calculations. When it comes time to resolve a claim, especially if it leads to litigation, the extensive information available will be a considerable asset, giving us a competitive edge. I feel confident about our position in this situation, and I believe that in time, this understanding will become widespread across the industry, including in the personal auto sector.

And that does conclude today's Q&A session. I would like to turn the call over to Kevin for closing remarks. Please go ahead.

Thank you all for your questions, for joining our conference call, and for your ongoing interest in Skyward Group. I will be available after the call to address any further questions you might have, and we look forward to connecting with you again during our first quarter 2026 earnings call. Thank you, and have a great day.

Thank you. Thank you all for joining today's conference call. You may now disconnect.