Skyward Specialty Insurance Group Inc (SKWD) 2025 Q4 法說會逐字稿

Good day, and thank you for standing by. Welcome to the fourth-quarter 2025 Skyward Group earnings conference call. (Operator Instructions) 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-Ks that were 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 will 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, in 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 N-Well 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 are 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 and 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 will 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 paid-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 in controllable expenses were offset by higher acquisition costs 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 in 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 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 $26.00 to $26.10 as compared to our $23.87 at December 31. You will 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 will 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 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 shrunk 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 is 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 healthcare professional, the specific target classes that make up our management liability book, and general and excess liability.

It is important to note our outstanding portfolio construction 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 are all continued 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. With 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 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 January 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 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 is 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 will 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 am immensely proud of the integrity of our company and how we operate, the accomplishments of our Skyward team, and the results we have delivered to you, our shareholders. I am 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 would now like to turn the call back over to the operator to open it up for Q&A.

(Operator Instructions)

Meyer Shields, Keefe, Bruyette & Woods.

Great. Thank you so much, and good morning. Andrew, was hoping you would go a little bit deeper into the surety growth where it looks very strong in the fourth quarter. You are pretty optimistic about 2026 because we have heard a lot of, I guess, concern from other carriers about delayed construction projects.

Yeah. Look. I mean, I think that we -- And there is nothing unusual about this quarter. You could see the growth building. The fourth quarter particularly was a release of a lot of federal funds. So things that were backed up over the course of the year, the money sort of became available. Our view is really simple, which is we built a really well-diverse portfolio within surety. Right? So it is not just contract and commercial. It is the fact that we are well across all the trades, that we are not exposed to homebuilders.

On the surety side, we have great areas like the SBA. We have our judiciary and fiduciary bond capabilities. We've done a great job with N-Well, which we obviously talked about over the last three quarters. More recently, there has been a failure of a large solar company with over $1 billion of bonds out in the market, and probably every top 20 surety had some piece of that except us. And so we are certainly going to avoid a loss there.

But that will sort of harden the backdrop around solar just the way that we saw the hardening on oil and gas. And so I think when I look at it all in, it is just the execution of our business along the lines of the way that we constructed that business: well-diversified, different areas that we can press down, ease up, wait for some market opportunities like we saw in oil and gas, now we will probably see in solar. And so I would expect that we are just going to continue to outperform both on the growth and on the loss side as compared to the market.

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 have seen some other specialty carriers participate in that. I was wondering about Skyward Specialty Insurance Group, Inc.'s appetite for that sort of business that is externally underwritten.

Yeah. We will never do that while I am the CEO of the company. How about that? I think that it may be appropriate for others, but our strategy is about rule your niche. It is about distinct focus. It is about expertise and capabilities that we can look at and say, here is the source of your competitive advantage, your ability to have a competitive moat.

And whether people are doing it under -- while managing other people's money, which some are doing, or just taking a straight quota share on other people's underwriting, that's just something we will never do as a company while I'm the CEO.

Gregory Peters, Raymond James.

So I think you spoke about Apollo. You spoke about -- you mentioned this autonomous vehicle partnership with Uber. As we're working through our financial forecast, maybe you could give us some perspective on how Apollo performed in '25 and what you think they might be able to do in '26 as we sort of blend it all together?

Well, I think that we will have -- we have some information out on Apollo here over the coming couple of weeks as part of sort of the ordinary reporting at Lloyd's. So there are some things that will be available. But let me just say that just at the macro level, Apollo's financial results are uncannily similar to ours. They grew at about 20%. Their combined ratio was around 89 for the year. And probably the only difference that I would highlight is that their expense ratio is 4 or 5 points higher than ours for this past year, and the loss ratio accordingly 4 or 5 points lower.

I also will tell you that Mark and I could not be any more pleased with the great work that David Iveson and James Slaughter and Karen Carr had undertaken to ensure that the balance sheet was every bit as conservative as ours. And so I feel great about our entry into 2026. I think beyond that Mark just said it best in the script. Right? We gave guidance. Our guidance is unchanged. I believe that you can judge for yourself how it is that we perform against our guidance over over the prior three years. We are going to work hard, obviously, to do the best that we can.

But in the end we can only sort of take what the market will allow us to take and still deliver the kind of returns that we are delivering to our investors. I will highlight that this is really important, that while others have put out some companies have put out monster growth numbers on casualty and so forth, great for them, not right for us. We are very, very thoughtful about the loss cost inflation backdrop.

And so the fact that we are exiting this year in the Skyward Specialty part of the portfolio with 50% of our business in areas that are not exposed to the P&C cycles, where we don't have the kind of concerns around property and casualty in that half of the portfolio, is unique to us. And that gives us a real advantage as we are coming 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 have 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 Specialty Insurance Group, Inc. banner given the fact that there is a lot more price competition in the marketplace now than there was maybe two or three years ago?

Well, I mean, what I would say to you is that what we think about when we were evaluating the potential combination -- and I think it is reinforced today -- there is much about the Apollo portfolio that is -- first off, it is very complementary. Right? We certainly really appreciate what they are doing in their specialty businesses, areas like product recall, PR and PV, political risk, political violence, contingency. And I think that this point we just spoke about coming out of iBot 1971, the syndicate that is focused on the digital economy, is an example where I have said that they are one of one in that market.

And I believe that this partnership with Uber -- I mean, we are talking about embedded product where all of our expertise is really the foundation for the pricing. Our partner with them and the insights that we bring is the foundation for the product. That is a unique place to be. You're not out sitting at the box competing with 50 other syndicates for a piece of business. And I certainly feel really good about their portfolio construction. I would describe it as very analogous to us.

And I see that pricing pressure is not something that you can ignore, but the portfolio is well-diversified enough like we have at Skyward Specialty that I am very confident that we can profitably grow and navigate the market while still delivering really exceptional returns for our shareholders.

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

Hey, Greg, it is Mark. Thanks. I mean, look, in quick summary, commercial auto moved a little bit on us in accident years '22 and '24, maybe circa $25 million-ish, and it was offset by, as I mentioned in my comments, some of the shorter-tail lines. But I am glad you asked the question because I think it is important for me to be very clear. Look. We review our reserves each and every quarter. In the event that we see something that we need to react to, we will, of course, do that. I think maybe the way I have communicated in the past may have led to a little bit of confusion.

I gave you some metrics earlier in terms of just high-level metrics on reserves. And, look, I think it is worth noting to you and to anybody on the call. I feel as good about our reserves as I ever have since we have been public. Look. There are things that we need to -- that areas that we are looking at for sure. But coming into 2026, I frankly feel better about our reserve than I ever have.

You know, Greg, I do not 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 have been at the company. You know, we are at an incredibly high level of conservatism if you measure it through IBNR. Our paid-to-incurred 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 recognized some adverse development, are all parts of our business that we have exited as part of the slimming down the exposure that we have to commercial auto.

Alex Scott, Barclays.

First one I had is on accident and health. Some of that I know is stop loss, and I think you guys have had pretty good performance. For the rest of it, the industry has struggled a bit. So it might be one of the hardest markets we have 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 would lean into growth? And could you tell us at all about what you did at 1/1 renewals?

Yeah. Our January 1s were off the chart. We massively were ahead of where we thought we would be. So that is just a quick answer to your first question. Here is what I think we are seeing. I will just sort of go back here on the history.

We are a stop loss writer. And six years ago, when I joined the company, we focused very heavily on the smaller employer market. So think about 500 employees and less. We got the portfolio working well. About three years ago, we added captives capabilities.

I do think that the couple of players who are really great P&C names, companies that we respect very well, are really kind of the only other folks that we see with really compelling captive offerings. And I think that we are seeing a lot of growth in that market, but we are also taking share in addition to the growth that we are seeing. That powered a lot of our growth over the course of the last 24 months. Probably about -- starting about twelve months ago, we saw a return to growth in sort of the non-captive part.

And as we came through 1/1, you are right in what you are saying, Alex. It is a -- I don't know if you want to call it a hard market, but certainly, it's a market where we're seeing a lot of opportunity at really attractive price. And we are staying true to our focus. Our captive capabilities are top notch. Our focus on medical cost management is, I would say, distinct and unique and second to nobody in the market. I think we are recognized as such. Whether it be somebody who wants to come into a group captive, or somebody who is self-insuring on their own and buying the stop loss, we bring a lot of value to those companies.

And I see our strength in 1/1 continuing out through the course of this year. I feel really good about it. And I will highlight something that just reinforces what you said. If you take a look at the 2024 stat data that is out there, our loss ratio is 15 points better than the market, and a full 30 points better than the big names that sort of have performed really poorly over the course of the last couple of years purely on the loss ratio side. That -- you can't hide from. These are short-tail lines of business. Right?

So the numbers don't lie, and I couldn't feel any better about what our team has done and what the year looks like for us. And I feel great. So you're right to highlight it.

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 are doing? Like, will there be premium dollars that come online more immediately? And any color you can help us with there?

Well, let me say three things. First is as we said in the prepared remarks, we are going to come back with more data. I've been cautioned by our colleagues at Apollo not to get out over our ski tips here. Uber has put some information out. They're launching this in 15 cities. And we'll see how the premium builds. It is in our guidance that we gave you. Right? So this is not something that we didn't contemplate. It's in the guidance.

What I would say is that, look, we are one of one. We are embedded in the dominant player in this market who has basically created a manufacturer-agnostic platform. And you just think about the potential. Right? It is just extraordinary. And I will highlight something really important to you, which is that no company in the world is better positioned than Uber to demonstrate the safety and the difference between autonomy and human drivers, right? They have the data, and they are going to have more data as every day passes, right?

So when you think about a legal and tort backdrop, I don't know who you would like to be if you had to choose, but I could not imagine being better positioned as being a partner to them on the AV side as compared to being writing commercial auto for them in a very difficult tort backdrop that they have done a great job of navigating. But there is no question that the safety comparison between autonomous vehicles and human drivers is a marked difference, and no company is better positioned to demonstrate that than Uber. And we are in the middle of that.

Michael Zaremski, BMO.

Maybe a question on the loss ratio. Great all-in loss ratio. If we just look at the underlying loss ratio, it ticked up a bit sequentially. It had been previously ticking down a bit. Is this -- you mentioned a commercial auto review. Should we kind of expect this new slightly higher level to be the kind of the trend line?

Mark will provide more details. No change in our picks. This is a mix change. We have two very considerable growth areas in A&H and Ag, which are higher loss ratio businesses, which are earning in faster than the low loss ratio businesses like credit and surety, and effectively on balance, that is what you are seeing. I will tell you that our internal plans are -- you know, we gave you the guidance, but I think that it does reflect a bit of mix change running through, but I would not overread it. Right?

I see those are also lower expense ratio businesses and so I think on balance what you are going to see is the performance of our business on a combined ratio consistent with the guidance that we gave you. The geography will be changing a little bit. But nothing in terms of our underlying picks.

Got it. That is helpful. And then lastly, moving to the comments about the material weaknesses being resolved. Congrats. Just curious on any -- are there any kind of material learnings or system changes or anything you would like to kind of highlight that has changed the way you guys do business as a result? Or is it really just kind of small things behind the scenes?

Hey, Mike. It is Mark. This is a sore subject. Look. This whole controls thing is the bane of my existence, but no. We are not making any material changes to our systems as a result of it.

Mike, it was IT controls. I think we spoke at length. This is a non-financial matter. We remediated earlier in the year. It did not get recognized until we -- until you issue your 10-K. Hey, listen, we're a public company, right? This is not unusual. But it's not something that is financial in nature and these things happen, right?

It's a company that we -- we took over a company that was in tough condition six years ago, and we took it public three years ago. And we became an accelerated filer last year. And the stakes went up. And so I would not overread any of it. We are just executing on all dimensions, including in finance.

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

No, Mike, don't worry about it.

No. That is me, Mike. Yeah. We -- listen. Being a public company is an absolute pleasure as you can imagine when it comes to things.

Maybe I will sneak one last in since you guys have -- you mentioned commercial auto by almost 2/3 now over the last few years. Are we towards the end of that and retention levels might start increasing or impacting growth differently, or is that still kind of a consistent work in process given commercial auto loss inflation remains higher than other lines?

It's a great question. So I do want to be clear that we have parts of our portfolio that are commercial auto-heavy that we have one piece. It is a significant part that has been consistently delivering unbelievable returns for us over the course of 12, predated me. And so it is not the entire portfolio.

But to answer your question directly, Mike, in the third quarter of this year, we narrowed our focus in construction, a particular area that had -- well, I will just describe it as Ford F-150 trucks that had unusually high severity, to be honest. Frequency was improving.

I think that we had maybe a false confidence on the frequency. The severity really, it has been a byproduct of a really just an awful tort backdrop. And so we took action on that, and there will still be some development of sort of -- not development -- reduction of our written premium over the course of the next couple quarters that works its way through. But there is no additional actions. And we feel very good about our portfolio. I do not think there is anything more that we would change at this point. And so, yeah, there will be some impacts, but it is not anything new.

It is just the nonrenewal business that we took decisions on previously.

Andrew Andersen, Jefferies.

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

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 is a particular profile of business that we write. Terms and conditions still pretty good. And so we have not really seen a backup on the bind ratio. We quote a lot to get the business we want. Away from E&S, so when you look at something like energy, it is 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 have 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 is 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, yeah, I mean, I feel like we're doing what we should do, and there's no real change just yet on on the liability side.

I'm sure that it is going to become more competitive. The capital is connected. And as we are 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 are lapping ourselves. And I am sure companies are going to redeploy capital elsewhere in the market. Some of that is going to find its way into the liability side, and it's going to become more competitive. But I feel like we are really well positioned.

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

So first off, 1971 for 2026, with our capital, participates on a 25% basis. So 75% of the capital is provided by third parties, all very notable-name reinsurers. And so, as we have talked about in the past, that itself has a fee-based component. We do have quota share support behind 1971 as well. That quota share support, like anything that we might do on quota share, effectively seeks to take a portion of the underwriting profits and lock that in via a cede. And so -- but that is not unique to the Uber relationship. That is structurally in place across 1971.

And I think as we get into the specifics of Apollo in future quarters, I think probably we can do a little bit more, Andrew, to give you sort of a better sense for that. But at this time, I think you kind of have the headlines right, and that is just geography of what I described as sort of the macro geography behind that.

Michael Phillips, Oppenheimer.

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

I think that we have talked about in the past that captives have been sort of a structural share gainer in the P&C market. Even during the soft market years, captives were able to, as a share of the market have more -- and we are talking specifically group captives -- have more flow into the group captives market. But there is no question that the backdrop influences kind of the -- maybe the value of somebody moving out of the guaranteed market into a captive market at this particular point in time. By and large, folks that do that do it for strategic reasons. Right?

They want to control their cost of risk. They are making that decision on a long-term basis. But oftentimes, the pricing backdrop acts as an impetus. And I think that probably that is what you are seeing here.

Okay. Yeah. That is helpful. Thank you, Andrew. And maybe just a quick second question on a topic we have not talked about in a while is California and the wildfires. Yeah. Given the suits on PG&E, any possible updates on any recoveries from that stuff?

I mean, I just will remind you, we had very little loss associated with that. And we are talking about a handful. And last I checked, it looks like our recoveries were very good. I think that we -- yeah. I think we did the right things around that to ensure that we could just put some confidence behind what we could recover there. But for us, it just is not -- it is not even material enough to see through our P&L because our losses just were not that great.

Tracy Benguigui, Wolfe Research.

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

So I just will remind you -- and I think we are talking specifically about flow from E&S back into the admitted markets -- our average premium per policy in our E&S business is about $40,000, so we are not a small account writer. That said, on the property side, I think I have talked about these statistics in the past about a little more than 50% of our business we are writing the full limits, the full TIVs, and less than 50% we are writing the primary and somebody else is writing the excess. We did launch an excess property offering as well.

And so I think that we are really not in the small market. We are certainly not in the binding authority market. We are not in the market that is of the submit business that comes out of the binding authority market. But if I were to highlight one area where I am seeing it is that the march on property went from very large accounts visible in our global property to now we are seeing pressure on premiums that are less than $50,000. Right? It has come to sort of all levels. In general, we write very tough risks.

So think things like -- well, things that really can burn, like involved in the wood industry as an example. Or things that explode. And those are not the things that tend to flow back into the admitted market. That is intentional on our part. It is the same thing on the liability side. We write really, really tough classes -- high severity, low frequency -- and we charge a lot. And we get our terms and conditions. So we are probably not well positioned to address that question as compared to others because of the makeup, and I think that we are a little bit above where that flowback might occur.

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 am wondering if you worry about the mix of driver-enabled and driverless cars on the road at the same time, presenting an untested type of risk.

The first thing I would say is for the avoidance of doubt, this is not a commercial auto policy. Any AV on the road has to carry commercial auto to meet their legal requirements. This is not that. This is a coverage for anybody who participates on the platform embedded into the Uber platform for which that coverage applies when an AV is actually doing something in response to taking instructions on the platform, whether that be -- you know, if you read what Uber is doing, it is more than just rideshare transporting people. It is -- it will contemplate other things.

And of course, the question of kind of the mixed environment is a critically important question. I will highlight to you what I said during the prepared remarks. We are not coming into this without really deep knowledge. We have been very active in the AV space. I can't say any more than that. Leading up to this, our dataset on the insurer side, to our knowledge, is the largest dataset available. And so we understand the risk that you are describing incredibly well.

The other thing I would say to you is that every AV is equipped with far more information because of the nature of AV than vehicles that are being driven by people, except in the cases of those vehicles that could operate as AVs but are being driven by people. So the information advantage that enures to the AVs is quite considerable if you are talking about a vehicle-to-vehicle collision. And so, again, I think that all goes into our calculus.

And as I said, you think about Uber's position -- you can take nearly any instruction, any ride, in any city in the world, and the amount of information they have about that ride, the frequency of loss, etcetera, etcetera, the drivers associated with that, as compared to the emerging information on AVs -- they are uniquely positioned to demonstrate the safety differences that AVs have over human drivers. So there is no company better positioned in a difficult tort backdrop. That is an immensely valuable thing.

Andrew Scott Kligerman, TD Cowen.

Thank you. Good morning. 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?

Andrew, this is Andrew. Mark will jump in here as well. I am -- we are looking for the numbers. I think that a couple different points I would make. One is that I think our full-year numbers were around 65%, which is, I believe, up a couple ticks over last year. If I remember last year, we were maybe 62%, 63% gross to net. And so we were up a couple of ticks. The quarter was it was, on a relative basis, a quarter where we ceded more, but there was nothing in that. It is just the ebbs and flows of any given quarter and mix of business.

But I believe that we have been on this sort of consistent upward trajectory of eating more of our own cooking, if you will. And by the way, just in this quarter, as one example, Andrew, we, on our excess, went to market with a clear intention to increase our cede, and we were able to do that in -- not in a material fashion, but we also made the trade-off that we were going to get the cede that we were aiming at even if it meant that we kept more of our excess writings for ourselves. And so I think that we kept about 10% more, but we increased our cede quite considerably.

And both those trades are very smart trades for us, obviously. In one case, we are getting more fee income offsetting our expenses. In the other case, we feel really good about our loss picks on the excess side, so we are happy to keep our own cooking.

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

Yeah. I think in our guidance, we basically said consistent with this year. It is going to be mix-related, but I do think it is 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 has gone from kind of 60% to, this year, about 65% over that horizon. And we can give you -- we will give you the exact data. We will follow up and make sure that we are closing the loop.

No. That makes a lot of sense. And then my follow-up is around the pipeline for potentially other acquisitions, or maybe you could do team lift-outs. Are you seeing much of a pipeline there to kind of move into new areas of insurance?

Yeah. I think that I think that we will certainly see opportunities and I think as a company -- I have said this before, and I would absolutely say this is true of Apollo as well -- we are strategically led. Right? So there are places that we want to go, but we are not necessarily saying, well, that has to happen this quarter. We are targeting people and teams that we know that we have confidence in. And sometimes, it takes quite some time to get those folks across. Ag was a great example of that. You know, what I can say is that there are things in the works.

But whether those things crystallize in 2026, hard to know, because we are more patient and strategically minded in targeting people and teams that we know are great performers in the categories we want to enter. On the M&A side I will say what I have said in the past. We have a financial responsibility as a company to make sure that we are being incredibly mindful of the way that we use the capital that our shareholders give us. And we were never a company that said we are going to acquire to scale.

The Apollo transaction was a unique transaction that matched what we thought would be appropriate for the next turn of our company. We were in London looking at ways to organically grow and develop our presence there. And so I would describe our position as being not an active acquirer. We have made two small other acquisitions. We made an acquisition in surety, an acquisition in aviation over the sort of five-and-a-half-year tenure that I have been at the company.

But I think it is not something that will be too much of a focus, but we are very active in making sure we stay abreast of what is out there should there be a unique opportunity that is a great match for us.

Mark Douglas Hughes, Truist.

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

The former, not the latter. I think that, as I think I mentioned earlier, Mark, that we are about to lap ourselves. Right? It was 2025 that you really started to see the pressure come in. And so this is the point where if I am me and I am you, I would be watching that space to see whether at this point the market kind of settles at the point it is at or whether some of the bad behavior out there continues. And it is really hard to know because we are not quite at the point where we are lapping ourselves. We are just a few months away from it.

But, yeah, I would not say that there is 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 FAC pricing, to effectively limit the net margin impact for every dollar of premium that we have written, recognizing that we have written less. Right? But the contribution we feel continues to be not far off where it was over the course of the year prior.

Yeah. Appreciate that. And then final question on the liability side. You said you are 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 is putting the marginal pressure on the liability side?

I would say, by and large, the companies that we hold out as being responsible competitors, I think that they are being responsible. I think they are great companies. We follow and try to mimic organizationally the good things they do. And I think that responsible competitors are responsible, and you see it in their results through the cycle. You know, you should always take pause at companies that do not have a track record in casualty that grow a lot, whether they are public or private. Because the casualty market is a -- you know, it is an interesting and challenging market in really simple terms. Right?

All you have to do is your own analysis, which looks at what has been happening in the general liability market, and occurrence liability broadly should be a concern, and the loss cost backdrop is a challenging backdrop. I am sure some of the guys that are growing -- growing in big numbers -- are doing it well. But by and large, the people who are chomping up big chunks of this market and growing at quite considerable levels, are not doing it and beating the better-to-best players out there because they are better underwriters. They are doing it to get share, and they are doing it oftentimes with price and terms.

And that is just the logics of our business. Right? You know, our strategy has been -- and you can see it in our results -- nobody should take pause by the fact that some of our divisions are flat or even shrinking, because we are being the responsible purveyors of our shareholders' investment in us by redeploying our capital away from places that are overly competitive or where the loss cost inflation is not something that you can have a high level of confidence in. And so I just think it is like use your common sense, and that common sense in three, four, and five years will prove to be right.

Matt Carletti, Citizens.

Hey. Thanks. Good morning. Andrew, I heard your comments on Uber. That is not a commercial auto policy. Can you help me understand, like, what a potential loss would stem from or what it might look like in that -- what the coverage you are writing?

Yeah. Matt, thanks. We are pleased that you can join. You just surprised us. Did not think you were going to join. So look, first off, auto -- you are required to carry coverage to have a vehicle on the road. So this is not that. Right? This is an embedded coverage. But functionally, if you think about this, right, and I will just -- we will just say an autonomous vehicle had -- causes an accident, strikes something it is hard to say whether that is sort of commercial auto in a traditional sense, product liability, general liability, etcetera, etcetera. It is a redefinition.

And the policy, which is not going to be visible to anybody -- it is designed and it is proprietary and embedded into the Uber platform. So it is available to the participants to fully understand how it works. You know, it is unique to the specifics of the fact that you are dealing with effectively a robot, an autonomous vehicle moving around in an environment where you have people, other vehicles, physical structures, and everything else.

And so the fundamental exposure is the same, but the definition and the way things respond, and certainly the information that we have available, and, of course, what we believe to be true is both safety -- and so frequency and severity are certainly meaningfully impacted as a result. And so I think that you can think about exposure has comparability. The product itself is a rather different product, unique to the specifics of an autonomous vehicle.

Okay. That is helpful. And then you have referenced a couple times, obviously, the potential of lower frequency severity of AVs versus human drivers. You know, Waymo has published some statistics on this, kind of suggesting, depending how you slice it, like, 80% to 90% lower accident frequency across various categories, kind of in the same cities where they are rolled out. Is it kind of your understanding of the power teams working with Uber that something of that magnitude should be expected in kind of the exposures you have too, or is there something unique to Waymo versus what Uber is doing that make that difference?

Well, one thing I would say, Matt, is, you should go on to the -- you should go on to the the Uber announcement, because you can see all the terrific autonomous -- the manufacturers of the product that are on the platform. And so the performance of any individual provider is going to be different based on their technology. So I do not want to comment on any specific company. But here is what I would say to you. What I would say to you is that it is a dramatic difference on both frequency, but I also would say a dramatic difference in severity.

We can say through our own analysis, unequivocally, that we can see that, for example, the way an AV responds in a particular situation that results in an accident of some sort -- that the severity of the accident, and I am talking specifically about bodily injury because the physical damage, which we would not be involved in covering of the AVs, can be very expensive, right? Because these are very expensive. It is very expensive equipment. But the way the AV, in the situations that form a good part of our view, the way that they behave is effectively in a way that would reduce severity of a loss event.

And that is a big part of the calculus as well. And ultimately when you are sitting trying to basically resolve a claim, and God forbid something ends up being litigated, the wealth of information that will be available to prove that out will be considerable, and that is going to be a huge advantage. I like the side that we are on in this instance, and I think over time that is going to become very well understood across the industry, including in the personal auto market.

Thank you. 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, everyone, for your questions, for participating in our conference call, and for your continued interest in and support of Skyward Group. I'm available after the call to answer any additional questions you may have, and we look forward to speaking with you again on our first-quarter 2026 earnings call. Thank you, and have a wonderful day.

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