Skyward Specialty Insurance Group Aktie

Good day, and thank you for standing by. Welcome to the 2026 Q2 Skyward Specialty Earnings Conference Call. [Operator Instructions] Please be advised that today's conference is being recorded. I would now like to hand the conference over to your first speaker today, Jordan Arnold, VP of Investor Relations. Please go ahead.

Thank you, Shannon. Good morning, everyone, and welcome to our second quarter 2026 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 with our prepared remarks, and then we will open the line for questions.

Our comments 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 or 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, Jordan, and welcome to the Skyward team. We're pleased to have you on board. To our conference call participants, good morning, and thank you for joining us. The second quarter was simply outstanding. Diluted operating earnings per share increased 46% to $1.30. Our annualized operating return on equity was an excellent 19%. Gross written premiums increased 13% over the prior year quarter, while managed premiums were up 18% -- we continue to execute at an incredibly high level across Skyward Specialty and Apollo, delivering strong top line growth and results that reinforce the strength, diversification, quality and profitability of our business.

Our Rule Niche Strategy and in particular, our business portfolio diversification allows us to lean into markets where pricing, underwriting conditions and returns remain attractive. We will continue to protect margins and play sensible defense in the softest parts of the market where pricing and terms are less attractive or loss cost inflation is uncertain. Our strong capital position provides significant flexibility as we continue to allocate capital with discipline. We believe share repurchases remain an attractive use of capital given our returns, earnings growth and current valuation. During the quarter, we repurchased approximately $10 million of shares and in July increased our repurchase authorization to $100 million. With that, I'll turn it over to Mark to provide the financial details for the quarter. Mark?

Thank you, Andrew, and good morning. We are pleased with our second quarter performance, which included double-digit premium growth, continued excellent underwriting profitability and attractive returns on capital. We reported net income of $49 million and operating income of $59 million. Diluted operating earnings per share was $1.30, an increase of 46% year-over-year. We continue to produce outstanding underwriting results, reporting a combined ratio of 89.5%, inclusive of 1.9 points of catastrophe losses.

The ex-cat combined ratio of 87.6% underscores the quality of our underwriting, the diversity of our business portfolio and the operating leverage we are achieving as we continue to scale the business. For the first 6 months of 2026, operating income increased to $116 million, driving an annualized operating return on equity of 20.4%. Premium growth remained strong. Total managed premiums increased 18% to $1.1 billion during the quarter, while gross written premiums increased 13% to $741 million. Within Skywards Specialty, gross written premiums increased 14% to $668 million, led by continued momentum in accident and health, agriculture, credit and surety and specialty programs.

Apollo gross written premiums increased 6% to $73 million, driven by the specialty lines in Syndicate 1969, which grew 8% year-over-year. Apollo's fee generation continued to be a meaningful growth driver with fee-generating gross written premiums increasing 29% to $318 million, including 8% growth in partner syndicates and 13% growth in aligned syndicates. Underwriting fee income of $13 million during the quarter was excellent as we are realizing the benefit of Apollo's capital-light business model. Given Apollo's seasonal production patterns, second quarter results are not necessarily indicative of longer-term growth trends, our focus remains on long-term opportunity to grow, manage premiums, expand both underwriting and fee-based earnings and continue building scale within the platform.

Turning to underwriting performance. Skyward Specialty delivered another outstanding quarter, reporting a combined ratio of 86.9% and an ex-cat combined ratio of 85.6%. The loss ratio was 62.6%, including 1.3 points of catastrophe losses. The non-cat loss ratio of 61.3% was up 1.4 points year-over-year driven by business mix, specifically A&H and agriculture, both of which are higher loss ratio divisions.

Loss emergence was in line with expectations and no development was recognized. The expense ratio improved by 2.7 points year-over-year to 24.3%. The reduction in net policy acquisition costs is positively impacted by the A&H and agriculture business just noted.

For other operating and general expenses, we again delivered another quarter of meaningful improvement driven by expense discipline and leverage from our technology, in particular, the widespread benefits we are realizing from AI. Apollo reported a combined ratio of 97.6%, including 5.4 points of catastrophe losses related primarily to the conflict in the Middle East. The non-cat loss ratio of 54.7% for the quarter reflects strong underlying underwriting performance and disciplined portfolio management across the platform.

Apollo's reported expense ratio was 37.5% for the quarter. The quarter included adjustments between net policy acquisition costs and other operating and general expenses. The year-to-date expense ratio of 34.9% and combined ratio of 91.3% provide a more representative view of Apollo's performance. Investment income continued to benefit from a larger asset base, inclusive of the addition of Apollo. Net investment income increased to $31 million in the quarter, up more than 60% from the prior year period, primarily due to $29 million of income from the fixed income portfolio. While the results from alternative and strategic investments remained pressured by lower valuations in certain limited partnership investments, these exposures represent only $68 million of our total $2.8 billion of invested assets.

For the fixed income portfolio, we put new money to work at yields of 5.6% and the embedded yield for the group portfolio was 5.3%. Our balance sheet remains exceptionally strong. Stockholders' equity increased to approximately $1.3 billion at June 30 and book value per share increased 15% from year-end to $28.55. Financial leverage decreased by 2 points compared to the first quarter to 26%.

During the quarter, we repaid $50 million of the $150 million term loan that matures at the end of 2027. We're rapidly moving towards our target debt-to-cap ratio of low 20s. We also repurchased 223,000 shares for approximately $10 million. In July, we announced that we increased our share repurchase authorization from $50 million to $100 million, reflecting our confidence in the quality of our business, earnings outlook, capital position and improved leverage. Now I'll turn the call back over to Andrew.

Thank you, Mark. As discussed, our financial results for the quarter were once again excellent, reflecting the benefits of our diversified portfolio and Rule Our Niche Strategy. The strength of our business mix is unique amongst commercial insurers and continues to differentiate Skyward and support attractive top line and earnings growth. As is visible over recent quarters, we continue to see meaningful growth opportunities in Accident & Health, credit and surety and agriculture, all businesses which are largely insulated from the pressures affecting the more traditional P&C markets. There are units within our reporting divisions with attractive opportunities for growth as well. Those include health care solutions within Professional, Power and Renewables within Energy Solutions, political risk and political violence within Syndicate 1969 and a strong pipeline of partner syndicates to drive fee-based income growth.

Additionally, the initiatives that bring together Skyward Specialty and Apollo are further providing unique and attractive opportunities for profitable growth. That said, market conditions remain more challenging in property, both global and E&S and in miscellaneous professional. Some other areas such as E&S liability are clearly transitioning to a more price competitive market. We continue to prioritize underwriting profitability over volume and are being selective in areas where competitive pressures or loss cost trends do not support our return objectives.

Overall, our portfolio continues to demonstrate exactly what we intended when we constructed it, a business with multiple growth engines, less dependence on the traditional P&C cycle and the flexibility to allocate capital toward the most attractive opportunities while remaining disciplined where market conditions warrant. Turning to our operational metrics. For Skyward Specialty, pure rate remained in the high single digits ex global property and low single digits, including larger premium contribution from global property in the second quarter. Retention remained in the 70s, and we continue to see strong submission growth, which was in the teens once again this quarter.

Apollo's risk-adjusted rate change moderated to a low single-digit decline. The business remains focused on maintaining rate adequacy and optimizing the portfolio with disciplined underwriting and selective growth in the most attractive opportunities. Similar to Skyward Specialty, Apollo's diversified portfolio provides multiple levers to grow, reposition and deploy capital as market conditions evolve. This flexibility enables us to capitalize on attractive opportunities while remaining disciplined in areas where competitive pressures warrant a more defensive approach.

To wrap up, we delivered another outstanding quarter and strong first 6 months at Skyward Group. Our Rule Our Strategy, diversified portfolio, disciplined underwriting and execution and growing fee-based income continues to drive top quartile financial performance. We are well positioned to capitalize on opportunities in all market cycles and to continue to create significant long-term value for our shareholders. With that, I'll turn the call over to the operator to open it up for questions. Operator?

Our first question comes from Tracy Benguigui from Wolfe Research.

The buyback this quarter made sense given the implied share price when that was done. But unlike most P&C insurers that been on a ton of excess capital, you run a more efficient capital structure and have historically raised equity to fund growth. So with the authorization that doubles to $100 million, how should we read it? Does it signal less underwriting capacity ahead? Or now that you have delevered a bit, would you tap the debt markets to fund buybacks if the opportunity arises?

Tracy, this is Andrew, and I'll start and Mark might join in here on this. Thanks for the question. So look, I think I would just start with the fundamentals. We are -- first off, we're growing at an attractive rate, but we are generating excess capital. That just is true. I think that it's a nice problem to have. It has a lot to do with our returns. But look, I think in the end, what we see is strong earnings growth and still an attractive valuation. So we think buybacks are viable.

We sort of took the preemptive move to reduce our leverage really to create the headroom, right? Because you can't sort of execute buybacks if we're starting at a leverage level that really we want to reduce, and I think we're doing a good job of that. So I would just say that we'll stay opportunistic. We feel very good about our business. And I think at the core, we're trading at roughly 12x our earnings guidance for 2026. And we think at the most basic level, the company is immensely attractively valued, and that informs some of our thinking.

I wasn't sure if Mark was going to chime in.

He gave me the perfect signal. So I think he doesn't want to say any more.

Okay. Got it. Got it. Okay. Perfect. This quarter, the topic of loss cost trends have come up a number of times. Just curious on your thoughts. I did notice that your underlying loss ratio did deteriorate year-over-year. So if you could just touch on what you think about loss cost trends and you're maybe choosing some higher loss pick.

Yes. So first off, the simple answer on the accident year is entirely mix. I mean the fact is, is that the growth from A&H and ag is earning in, really earning in now, and that's the change. And I think that there isn't anything more to it than that. I believe, Tracy, that we have been one of the most early and direct and action-oriented around our concerns around loss cost trends in -- particularly in occurrence liability and in particular, anything that had bodily injury personal injury exposure. We were talking about this a long time ago. And I think my point was just this simple, which is if you really cannot confidently know what your loss cost inflation is, why would you grow into a market?

So if you think, hey, listen, I'm getting 10 points of rate because the market will give it to me, but 10 points of rate may actually not be enough rate to cover the loss cost inflation because we've seen it move period on period on period. We have intentionally tried to steer our portfolio away from that. So even in occurrence liability lines, much of what we write is really not the sort of personal injury intensively exposed stuff and then where we are exposed to or trying as any good underwriter should keep your limits short, right? And so I think that, that isn't -- we obviously respect the commentary of others who are talking about this. But I really do think that we were one of the earliest to be talking about it and acting as far back as 4 years ago when people were thinking that occurrence liability was 5 points of loss inflation. And in certain areas, it's well over 10%. And I think that we've been sort of sensible stewards of our investors' capital and thinking about this.

Our next question comes from Andrew Kligerman from TD Cowen.

First question is around the expense ratio. Just looking year-over-year at Skyward Specialty, you've taken it down from 27% to 24.3%. You mentioned, Andrew, in the prepared remarks, AI. Maybe you could talk about what you're doing there to get the expense ratio down and where it could go from here from 24.3% -- and maybe throw in Apollo's 37.5% and where that can go as well?

Let me just knock off the second part, the Apollo point. I just -- I would point to the first 6 months. We -- I think that there were some adjustments that are flowing through that probably just make the 6-month reference a better reference for you. And so look, let me now sort of just revert to the Skyward Specialty and talk a little bit about the operating leverage and kind of the expense ratio reduction. I will say we're obviously being disciplined around any kind of cost and expenditure. But there is -- we've long discussed, if you will, our investment in technology. We've long discussed what we're doing in machine learning and predictive analytics. We've highlighted our success in different businesses.

A&H is a great example. We've talked about Sky View, our award-winning underwriting workstation, which is the window paint, the single window paint that our underwriters access everything through. And we've tried to put some new information out there for investors. You'll see in our investor deck. We talk about Bionic underwriting, which is this idea of being able to automate the ingestion of everything that is submission related, something that I think any high-quality insurer is addressing with augmentation and AgenticAI underwriting and learning to sort of help the underwriters be far more efficient and effective. And we give some statistics, right? 40% faster submissions to underwriters, 35% improvement in speed to quote. Half of our underwriting is benefiting from machine learning and predictive analytics.

And I'll -- just to bring it to life to give you a real sense for this, within surety, where we're clearly winning in comparison to our competitors, we are well down the path of using Agentic AI at the individual principal level to sort of manage our portfolio. So we have built capabilities called SkyScore, which allows us to ingest all financial information without any human intervention to score every principle on 10 different dimensions and an aggregate score for our underwriters to be able to look at their portfolios and management. It's trended over time. It shows future-facing sort of expectations on kind of this financial strength. And then at the individual opportunity level, so underwriting a bond, right?

We use Agentic AI to ingest bond forms, to ingest contracts. Without any human intervention, we do like 15-point checklist for bond forms, 12-point checklist for contracts. against what we view as the best practices. So we're looking for things like force majeure and payment terms and termination conditions, and we're rating all of these key elements and delivering it to our underwriters. So I've used this analog of like if you have like an American football kickoff instead of starting on your own 25-yard line a touchback, we're starting the very first step of our underwriting process on the opponents 20-yard line. And I think you're seeing that not just in our results, like why surety is growing profitably so much as an example, but also you're seeing it in the expense ratio. I'm not going to set out any sort of expectations or goals there.

We're working hard at it. It requires investment, and it requires like a capability inside the organization that has to be broad-based. It doesn't sit in one separate unit. It has to be across the organization. And I talked about that we have a lead, but that lead, if you sort of let up, will be fleeting. And I feel like we'll stay at it. And hopefully, we'll continue to see the benefits flow through to our financials.

Got it. That's helpful. And it sounds like though you can, Andrew, kind of keep the expense ratio level here as you continue to invest?

Yes. I think that -- it's funny you say that, Andrew, because I mentioned in the last call that doing this stuff is like really expensive, and you are oftentimes doing things well in advance of realizing the benefits. And I think that if you don't have the ability to grow profitably, then there is a risk to back up on your expense ratio. I think we're at the other end of the spectrum. I think that we have the ability to continue to fund the next piece, the next piece, the next piece and not have our expense ratio back up. But that's how we see things right now. And I hope that the good trends that are visible in our results continue and time is going to tell whether that's the case.

Makes sense. And then just my follow-up is around the global property area. And you talked about in your prepared remarks about the pricing pressure there. What do you like in global property? I mean I know it's down 15% in the quarter, but what were you seeing that you liked that you put on your books?

Well, actually, in this quarter, I think we added one account, just to be clear. We renewed kind of mid-20s accounts, and these are mostly long-standing accounts. I think that we had a good retention rate there. I'd tell you what, there isn't a lot to like because there's just -- I think one of our companies that we respect a great deal, their CEO kind of described the marketplaces, I don't know what the right words were like kind of idiotic. I think that we're seeing that absolutely to be true.

On the flip side, look, we have a world-class team. They've delivered really well. The fact markets give us the opportunity to certainly buttress the net pricing effects versus the gross pricing effects. When we talk about pricing, we're giving you gross numbers our net pricing effects are far lower because we're able to -- we write very large lines. We write the first layer above the self-insured retentions. And we use fact basically to lay off at a time when the first line is a very large line, right, because that's what soft markets do.

And the fact markets allow us to retain profitability that looks far better than on a gross line basis. And our underwriters are great at it. And so if you're in a soft market, that's the one benefit that you get. And I think we do it really well, but we're entirely sensible. And you can see it in the fact that a business that went from $235 million, I believe, in 2024 is going to be far smaller this year.

Our next question comes from Michael Zaremski from BMO.

Maybe a couple of Apollo questions, if I may. The 6% growth this quarter on premiums, is that seasonally impacted? I know 1Q was very strong at 45% or did anything in the operating environment change a bit?

And the answer is absolutely. And I think probably the most evident point is that I think as most people know, the second quarter is a very large quarter for the property business on a global basis. And property is an area within Apollo's portfolio comparable to the Skyward Specialty portfolio that is being managed accordingly based on the market. And so I think what you're seeing is exactly what you identified, which is there's some seasonality that's running through. And as a result, I don't necessarily believe that the growth that you're looking at for the second quarter is indicative of how we can and will perform as a business. But again, time is going to tell on that as well.

Got it. Makes sense. And I guess just probably for Mark, amortization expense came in around $14 million. I think the guide was $8.5 million. Any color there or any changes to the run rate we should be factoring in? Obviously, I understand this is noncash.

Mike, it's Mark. The amortization of about $8.5 million should be normalized. I'm scrambling -- I don't know where you're getting your $14 million, but I'll follow up with you after that. $8 million is the run rate.

Okay. Got it. Maybe I had it wrong. And just I think lastly, I asked this last quarter, too, on the underwriting fee income again for Apollo. It came in around $23 million first half and the guide is still $30 million to $35 million for full year. So just there's a seasonality in that as well, right, for the lower levels in the second half of the year?

Mike, this is Andrew. We like to set out guidance that we have a good level of confidence that we can achieve, and I think that's probably playing through in our numbers. The team at Apollo has done an outstanding job across everything, right? And you see that in the premiums under management and particularly the growth in the premiums that drive fees, which is really the third-party syndicate management piece of it, the partner syndicate piece. So I think we feel pretty good about the progression there. I will say to you that I do though believe that when Mark referenced that number, it's really kind of effectively a net number. So it's the fees that you see less the specific costs associated with those fees. But we've also said, Mike, just to remind you that we believe that, that's a leverage kind of result, right? And you see the costs are pretty flat quarter 1 to quarter 2, and yet the fees have gone up quarter 1 over quarter 2. We do think that there's leverage there. And so I just want to connect to the guidance there was really kind of the net of that number, the gross fees less the cost.

That's right.

Got it. And just as a follow-up, Mark, my bad on the amort in line with guide.

Our next question comes from Mark Hughes from Truist.

In the A&H business, Andrew, your distribution, your growth has been quite strong there. To what extent the new distribution is driving that new staff? Could you talk a little bit more about kind of operationally, what's driving that? And then when you reflect on kind of the historical experience in losses within A&H, is that -- is there more naturally a little more underlying variability? Or should that be as predictable as the overall P&C exposures?

So look, I think on A&H, the first thing I would say is the growth, I really believe is driven by this -- we've kind of just hit it on the product market fit, right? So we've always been focused on a medical cost management angle, and that is singularly our focus and as you know, smaller accounts. And that really has been consistent. I think the thing that has changed that we talked we a group captive concept, we opened up another market, and that has really inflected for us in a positive way. So I think that, that's the principal driver. That said, distribution has changed over time. A lot of our distribution, if you go back to the early days when I joined was really through TPA relationships.

Today, we're accessing most of our growth through retail brokers and folks that fully control the benefits accounts for the benefit relationships for our clients. And I think that what we are hearing from our distribution is that we are literally one of one in what we're doing. There just isn't somebody who's got the product that we're providing. I don't think it will be like that forever. And I would just tell you that growth more recently has benefited from 2 large industry reinsurers pulling out whose results were absolutely awful as a result of bad behaving MGAs. And so that's just given more fuel to the market. Whether that directly flows to us or we get the second order effects, it's not necessarily clear, but it's just another impetus.

And on the talent side, look, we talk about talent all the time. We're a talent-driven organization. Mike Remeika, our leader in that business, has done a world-class job. It's probably the place where we have the most young talent coming into our company. But at the same time, we've certainly taken amazing talent from very high-quality competitors and the talent tends to follow the growth that we see as opposed to leading the growth.

I'm sorry, the last point -- sorry, Mark... The other point is you asked about the volatility of the results. Look, the only thing I can refer to you is the same result that I've referred to before on the loss ratio, our 71 in the [ 24 NAIC ] published results was amongst the top 5 of the top 50. That's a great result in an absolute sense and in a relative sense. Look, there's -- of course, there's volatility, but it isn't wild volatility that you can have. And I -- of course, today, given the size of the business, the range of outcomes that we might see versus when I first came in and we reduced the business and it was $80 million or $90 million, I think we're certainly operating in a far narrower range, and it's incredibly short-tail business. I mean it's just like -- you just can't hide from the results in any way around this. It's right in front of you.

Very good. And then I'm not sure if you touched on this earlier, but any update on the autonomous vehicle initiative within Apollo?

Look, we're working hard, but I don't have anything formal to update you. We won't be shy when we have meaningful announcements to talk about. But I can say that Chris Moore and the team at IBOTT are working closely with our team in the U.S. to target and go after some business directly out of the United States that hopefully, we'll see some outcomes on here in the near future.

Our next question comes from Paul Newsome from Piper Sandler.

Maybe stepping back, if we look at the first 6 months of premium change, quite a bit of mix change happening. If that mix change continues, how should we think of some of the basic metrics? I assume you're essentially pricing everything the same kind of returns. But does the tail extend given what we're doing? Does the -- are some of these like AH has, I think, a higher expense ratio. How should we think of some of those basic metrics, assuming not necessarily next quarter, but next year and thereafter, if that mix change continues?

Obviously, something that we're thinking about because as we've talked about near since the day we went public, we're trying to be very intentional around our portfolio construction. Look, I think the first question is, I really do hope our investors appreciate how sensible we are being, right? We're not showing up on these calls and saying we've delivered 20% or 25% growth in casualty because I don't believe that that's possible to do that sensibly and to grow margins, plain and simple. And it's certainly not true. It's long since not been true on property. So I would just say I hope there's an appreciation that we're being sensible. I think the answer to your question are the following items.

First off, our tails are getting shorter and shorter through the first 6 months of the year, inclusive of Apollo, more than 60% of our business has liability durations less than 2 years. So we're definitely getting shorter. Relative to Skyward Specialty, we would expect to see the loss ratio continue to rise. Mark had said to me this morning that he expects for a full year for our accident years to be up like 1 plus maybe a bit percent over the prior year in aggregate, driven entirely by mix. That's really ag and A&H earning in and a commensurate offset in our acquisition expense ratio.

So combined ratio expectations don't change, but the geography, to your point, does change. I think the thing that we have to pay attention to is an executive team. And I think the Apollo dimension of our business overall really aids in this regard is really about the diversification of the portfolio. We want to maintain balance even in light of the fact that there are some places where we clearly can see profitable growth. In other cases, we're shrinking, but it isn't in our long-term interest to over-rotate.

And so we're working hard on that. I don't think that we will exit this year with any division larger than maybe 17-ish percent of our overall portfolio. And I think that's absolutely tolerable. I'd say that as long as our largest division stays below 20%, it feels like the right kind of spread of risk. But I do think that because we're intentional in this regard, we're thoughtful in this regard, we don't want to over-rotate in a way that should something change that we find ourselves in a less attractive position, this is something that we're paying attention to -- and I think that we're going to have to be on top of it as we roll forward to next year and the year after.

Another sort of big picture question, to answer by the way is I think after you purchased Apollo, there was some thought that you may sort of reconsider kind of the structure of how you use your capital using more Lloyd syndicates perhaps for the U.S. businesses, changes in reinsurance. What's your most recent thinking about that sort of structure moving between fee and risk businesses and from a big picture perspective?

Yes. Listen, I think that -- listen, we love the highly aligned on the underwriting capital-light model that Apollo has. It's a fantastic innovation, delivers high returns on capital and nothing has changed in our thinking. Our Head of Corporate Development, Shakoor Khan has been working closely with Karen on looking at a whole account quota share, whether that's something that goes into the 27 year or the year after into 1969 or we do something different and maybe we create a dedicated syndicate or some other structure. We're still in the process of figuring that out. That said, one thing that we're going to avail ourselves to is we've talked about effectively the internal reinsurance syndicate that Apollo created in 1972, so that effectively that they can more directly share in the economics of their outwards reinsurance placement. We're going to start rolling into next year using some portion of our outwards reinsurance into that so that, that is what I would describe as an itty-bitty first step in that direction. But our thesis has not changed, Paul. And I think that we'll continue to sort of develop our thinking. And when we're confident in the right way to do it, that's the best for us and our shareholders, and we have a good view about what to do with that capital that effectively would be released as a result of that. And then we'll -- at that point, we'll act.

Our next question comes from Randy Binner from Texas Capital.

I had a follow-up to Mike Zaremski's line of question on just kind of the fee income from Apollo. And I guess we're getting a pretty good idea of what the pretax margin is. Maybe it's kind of coming in, in the 60s just by my calculation, but maybe you're ahead of guide. The question though is, is that -- is the pretax margin we're seeing this year vis-a-vis that guide of $30 million to $35 million of pretax income. Is that where that margin stays? Or does that margin scale as that business grows now that it's a part of Sky?

Look, I think that we have said that it is a business that we believe has real earnings leverage, meaning that done the right way. And I will say that Taren and the team there are doing a lot to make sure that we do this the right way. It is a levered kind of result. So we're -- I don't have the numbers in front of me, but we're running $4 million to $5 million of cost per quarter. And I do believe that there is not a linear relationship between the growth in the fees and that underlying cost. So that, of course, is something that we like, done the right way.

And so we want to see that continue to grow. I think we are an incredibly valuable managing agent to Lloyd's because the stuff that we are doing there is all new and different and valuable to the growth at Lloyd's and consistent with kind of our positioning as really being sort of more at the edge of innovation. So whether it be the first of its kind dedicated syndicate that we did with Coface on trade credit or the first parametric syndicate with Norman Max, like these are great things for everybody, and we like being close to that edge of innovation. It helps our business, and we deliver a huge amount of value.

And so if we can make sure that we've got an operating model that allows us to manage the cost base, it is a levered result. Relative to guidance, look, as a matter of process, we're just not updating guidance. Like we don't sort of do something at the beginning of the year and give you new updates. We're sticking by our guidance. We think our guidance is sensible guidance. And if we do what we said we should do, we should be able to meet and exceed that guidance. And I think that that's our track record is 3.5 years being a public company, never once have we not met our guidance, and we'd like to see that trend continue.

No, understood. That's super helpful. And I was thinking about it more kind of '27, '28 just longer term, if that -- there's a lot of leverage, as you said, if that margin gets better. And just I had just another quick one on Apollo. I think you mentioned that the book there was seeing low single-digit decline in price to the underwritten book. Is that -- can you comment on how that compares to Lloyd's more broadly or just kind of put it in the context of that market?

That's a great question. I think to answer that the right way, I would want to get James and Taren to access what's out there in the Lloyd's domain. I believe that we're doing better than Lloyd's, just to be direct. But like you have to unpack at the class level, right, because there's a lot of mix going on there. I mean just a reminder, we don't have nearly the -- Lloyd's has a far greater reinsurance concentration as a percentage of the overall mix. I think that we don't write property cat -- and so there's a lot of differences there. So while -- listen, nobody feels -- I want all of our pricing to be above loss cost trend. But if you're better than some benchmark, I don't want to go take a victory lap without sort of having real information in front of us.

So we can follow up with you on that. But I think that we're doing the right things. And I will say to you that James Sutter, our Chief Underwriting Officer there, really kind of works this angle, which is much more around price adequacy. So what might be happening here is underlying that is that we are shedding accounts where you probably could get a better price outcome, but the price adequacy -- or excuse me, the overall price adequacy and the underwriting quality isn't where you want it to be. And so if you're facing particularly the classes that are soft or softening, what you want to do is you really want to move your portfolio to the highest quality business. And so there is a dynamic that goes on here that's more than just sort of the straight what's happening on pure rate.

Our next question comes from Andrew Anderson from Jefferies.

I wanted to go back on A&H for a second. And you had mentioned some industry participants have struggled in stop loss and capacity has left some of that market. Are you seeing more growth there and better pricing, better terms or simply more opportunities? And perhaps how has that changed your view of the appropriate loss ratio for that portfolio?

I guess that what we probably would say is there's more opportunity. It has been quarter-on-quarter that we've been surprised to the upside -- of course, 1/1 is really kind of the big date, right? And so I think where this will probably be most visible is as we head towards 1/1. I would say that some of the guys that left the market, we wouldn't certainly directly compete against them. But any time you have an irresponsible competitor, even if you're not directly competing against them, it has a second order effect, right? Because there's just competition, second order sort of competition that runs through the market and second order sort of availability of business that runs through the market.

So others might write that business that they were writing and we might then go write more of the business that we want to write. But I do think it really does come back to our growth has been largely driven by, I think, a really effective product market fit -- we hit the market at a time where medical cost management has really come into focus. It's particularly true with the smaller accounts. And I think from a loss ratio, look, we -- this business is a very capital-light business.

And the allowable loss ratio sits above where it is that we currently pick it. And so -- and we haven't really moved that, right? So I just -- I think our general sense here is it's kind of a great position to be in, in all regards from a growth perspective, from a profit perspective. We obviously like the short-tail nature of it. The duration of the liabilities is very good. And so I think in aggregate, I wouldn't push down on loss ratio or competition. I just think we're executing with a really great set of products and a great business that we feel that we're going to be successful almost regardless in the market just adds a little bit for us.

And just on the agriculture side, perhaps you could talk a bit about what's driving the growth there and maybe what you're seeing in terms of planting season and how that could shake out. But also just maybe some more texture on ag because I don't think it's kind of U.S. MPCI. So how should we think about that throughout the year?

Yes. Let me be direct on just first on 2Q. Most of the growth in 2Q was really around premium true-ups and a lot of that had to do with the U.S. dairy livestock program. To your point, I don't have the exact numbers in front of me, Andrew, but I think that our U.S. MPCI program -- MPCI exposure is less than probably $50 million of our total premium. So we're certainly not overweight there. It is, as we've talked about on the crop side, a diversified global book, all sort of subsidized programs where we believe that we have a structure where we can write business with good outcomes and diversify the book so that we're not overweight. But the growth that you really have seen has come through the U.S. dairy livestock program. It's a price protection program. We're the ones who opened up that market with effectively a quota share reinsurance solution amongst the major AIPs where we have relationships, I think, with maybe all but 1 or 2 of them.

And we have a great solution. And I think that what validates that is we have seen tremendous interest and 7/1 is the renewal date for the U.S. program. We have quota share reinsurance support that came in for a large portion of our book for 7/1 that effectively allowed us to make the trade to lock in profits via seed while still providing plenty of upside for our reinsurers. And I think that's a validation of what we're doing. I actually was exchanging e-mails with the CEO of one of those companies today and saying that we're going to sit down and have a broader conversation about strategically working together because of what we're doing there and the IP that we have. So I feel great about that. Today, it's probably -- the total market is $2 billion-ish of the U.S. dairy livestock program, and it's growing. And we're well positioned to grow with that program for -- as the U.S. government grows.

Our next question comes from Bob Farnam from Brean Capital.

I just wanted to just continue on that question for Andrew. On the global ag book, I was thinking, all right, so what are your largest exposures outside of the U.S. And I was thinking because I'm not sure what, if any, impact there is from Europe with high temperatures, droughts, wildfires and smoke and whatnot. I didn't know if that had much of an impact on your ag book?

Yes. Listen, I think that everything is going on in the world. fertilizer pricing, obviously, weather, all those things play in. It's one of the reasons that we have a well-diversified book. And that diversification includes Canada, Brazil, China, other markets in Asia, we're actually -- there isn't a lot of well-structured subsidized markets in Europe that we access.

So we certainly have exposure there. but it's a lesser exposure. Again, it starts with we want market structures where we can enter, participate, know that we can have sort of a good outcome and sort of bound the downside, if you will, and diversification is a big part of it. But I have to say to you that it's everything you name plus, right? I mean, certainly, fertilizer prices are -- have to be part of the calculus of anybody in the world of crop today. And -- but I think that all those things play to why it is that we've built that particular business the way that we have.

Yes. Yes, point taken, it's not just Europe that's having issues, it's everywhere.

Our next question comes from Mark Hughes from Truist.

Yes, Andrew, where do you think we are? How close are we to the bottom on property?

Let me say this. First off -- yes, listen, obviously, the property market -- the first thing I'd say to you is the property market is obviously a big market, right? You have everything from large to small cat to non-cat surplus lines to admitted, and it doesn't all move in lockstep. There are places where I'm sure that the sort of the softness is less intense. But I think -- look, I think we're in a world today where there's just too much capital knocking around in the insurance industry, certainly where this all started, larger accounts in cat, anybody with a model can show up and try to write some business, right? It doesn't take a lot of rocket science.

One of the reasons that as a company, we've avoided cat as a principal dimension because it comes and goes. But it's hard to say because we're obviously not going to have a set of market-moving kinds of events in the North Atlantic hurricanes based on everything that the meteorologists are picking. So you wouldn't expect for things to change anytime soon.

And listen, in certain cases, the crazies have taken over, right? And they're able to access capital. I don't understand why because guys like us who basically put their capital to work every day should be able to do that sensibly, right? It's not that unrealistic to say, "Hey, listen, you can't cut prices by 20%, 30% on -- for the second or third year in a row and justify to yourself that, that's okay, right? So I wish I knew. I wish our industry did not operate with these cycles, but it seems to do it, and it seems to have a short memory.

And I hope that as a result of that, whatever happens in the meantime, our investors look at us and say, these guys are being incredibly sensible about how it is that we're deploying capital. and get rewarded for it and let the others sort of wash out while that happens.

Our next question comes from Greg Peters from Raymond James.

So I'd probably touch on an area you haven't really talked much about yet, which is the investment income side of your results. Maybe you could just go through some of the line items there. Obviously, there is some movement. And Andrew, as you know, I'm probably going to call out the alternative strategic. I know there has been some management changes at one of your former money managers there. Just curious about how you're thinking about that small piece of the puzzle?

Greg, it's Mark. Let me go in reverse order, if I can. In terms of the alts portfolio, we've talked about this for several quarters. Yes, we're disappointed in the results. But what I will say to you is we have been very intentional in terms of understanding the movements, the underlying changes. Having said that, there's not a whole lot we can do about it, but we've been very disciplined and intentional around the performance of the portfolio. It's $65 million. So I don't -- I can't really add much to that other than that we're disappointed, but it's small. When I think about the rest of the portfolio, Greg, you've been with us since we went public. We said a couple of things.

We said, look, we're going to derisk -- we want the portfolio to be generating consistent returns. That's what we've done. When I look at the portfolio in the aggregate between fixed income and short term, about 2.5% of the 2.8% sitting in fixed income and short-term investments. And we like the risk-adjusted returns right now. We put money to work at 5.6%. And as long as we can generate those types of returns, we like it. We're not big fans of duration risk. So we haven't changed the underlying construction of the portfolio. So what I'd tell you is where the portfolio is right now, I love it. I like where we are. I like where we're putting money to work, and we're working through the alternatives. That's about all I can say.

Got it. Just back to the market commentary. On one of your answers, you called out the surety business really haven't talked about MGAs that much this call, but I know one of your peers had some -- expressed some frustration with their surety business or the market, I think, was more their assessment. And then MGAs continue to be the talk of the town with whether they're behaving responsibly or not. So maybe you can close the loop and cover those 2 points for us?

Yes. Yes, listen, I -- first off, I think that there's very little -- I know you asked 2 pieces there, surety and MGAs, just maybe for the avoidance of doubt. There are a small number of players who participate through MGAs in surety. But to be honest, they're de minimis in the grand scheme of things, and it's not actually something that we see impacting us. And I would say more broadly, the market in any way in surety. I can't speak to the other company.

What I can tell you is in unequivocal terms, I think we have the best team in the market. I think we have the best book of business. It's incredibly well diversified between commercial and contract inside of contract. It's unbelievably well diversified, trades, SBA, non-SBA business, commercial, I mean, we've talked about market-leading products. We've had other companies call into Mark and say, how did you do that, right? How did you come up with that? And I just gave an example early on, on the things that we're doing on the technology side. It's talent, technology, product, and I feel great. And we are building a business the right way. Our results are outstanding, and we are becoming one of the true really, really top-notch players in that market, and I'm incredibly proud of that. And that business was $7 million when I joined, right? So you take a look at where it is today, we'll cross $200 million here in run rate premium, generating unbelievable returns with loss ratios that are eye-wateringly good.

Look, I don't need to pile on the MGAs. I think that I've said this before, I think there are some outstanding MGAs out there, but there's also a lot of c***. And at some point, that stuff can get washed out, and it's supported by -- we've had at least one company hit a trip wire on bad collateral recently. And I just think fronted premium, that's going to come to roost. My example on A&H, 2 reinsurers leaving the market because they were burned by MGAs. That's a short-tail business, right, as compared to some of what's out there.

And so it's time will come, right? One data point on A&H may be an early indicator, might not be an early indicator. We will see. But it's really not that hard to be able to look across the market and know who's misbehaving whether they're direct writers or MGAs. And you know the time will come. You just don't know when the time will come, right? The train crash is going to happen, but I can't tell you when it's going to happen. So stay tuned, and we'll -- you can ask the question in subsequent quarters and maybe there will be some things that will be visible. But until that time, we're just going to keep doing what we're doing.

Our next question comes from Meyer Shields from Keefe, Bruyette, & Woods.

This is [ Scott ] on for Meyer. My question, you guys noted in the press release that the Apollo segment was impacted by some cat losses in the Middle East. I'm just wondering, is Apollo taking advantage of rate increases as a result of the war? Are you guys staying more conservative in that area?

And I'd say we're probably in the middle. It's a pretty dynamic situation, right? Ceasefires, while ships moving through the street are still being bombed, right? So I think that probably caution, but seeking some opportunities. I think I mentioned this. I believe I mentioned this on the last call that examples of kind of business that we wrote were things that we were able to see meaningful price movements, but we would consider the exposure to be kind of second or third order relative to where the central action might be. So these might be things like not targeted infrastructure in countries that are better protected. And so I think we're being sensible, but it's a dynamic situation. And so we're not either playing defense and we're also not sort of backing up the capital and saying, let's go lean into it. And I really appreciate how our team in London is approaching it. I think it's kind of a sensible thing that they're doing. And hopefully, the losses that are -- there's been losses that are extraordinary relative to the premium in the political violence market that hopefully, that creates a broad-based hard market, not just a localized one in the Middle East. And I think we'll know more about that here over the coming few months.

This concludes the question-and-answer session. I would now like to turn it back to Jordan for closing remarks.

Thanks, everyone, for your questions, for participating in our conference call and for your continued interest in Skyward. I am available after the call to answer any additional questions you may have. We look forward to speaking with you again on our third quarter 2026 earnings call. Thank you, and have a wonderful day.

Thank you for your participation in today's conference. This does conclude the program. You may now disconnect.

Ladies and gentlemen, thank you for standing by. Welcome to the First Quarter 2026 Skyward Specialty Earnings Conference Call. [Operator Instructions] Please be advised that today's conference is being recorded.

I would like now to turn the conference over to Natalie Schoolcraft, Senior Vice President. Please go ahead.

Thank you, Gina. Good morning, everyone, and welcome to our first quarter 2026 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, and then we will open the lines for questions.

Our comments 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 or 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, Natalie. Good morning, and thank you for joining us. This quarter marks our first reporting at Skyward Group, inclusive of both the Skyward Specialty and Apollo segments.

Our results reflect an excellent start as a combined company. Mark will cover the quarter in detail in a moment, but I'll start our call today with a few highlights.

First quarter diluted operating EPS improved to $1.25 from $0.90 a share in the same quarter last year, an impressive increase of 39%, reflecting both the strong embedded earnings growth of Skyward Specialty and the realized accretion from the Apollo acquisition.

Our annualized operating return on equity was an outstanding 20%. Our book value per share grew to $27.50, which is up 10% over the prior quarter. Altogether, these results reflect strong underlying earnings momentum and disciplined capital deployment, positioning us well to continue to deliver consistent top-quartile returns for our shareholders.

Our growth in gross written premiums on a pro forma basis was up 10% over the prior year. Managed premiums were up 20% on a pro forma basis to $968 million. And as a reminder, managed premiums include a combination of group premiums and premiums supported by third-party capital providers.

The underlying 49% growth in gross written premiums driving the fee aspect of Apollo's business will be an important and new earnings growth driver as we look out into the future. As is widely discussed, market conditions are increasingly challenging for significant parts of the P&C sector.

Our portfolio construction is genuinely unique amongst the P&C universe in that over 50% of the Skyward Group's business, now inclusive of Syndicate 1971, or iBOT, our digital economy syndicate, is in markets less exposed to the P&C cycles.

Together with our niche-focused strategy and outstanding execution, Skyward Group has never been better positioned to deliver sustained top-quartile shareholder value and continued earnings growth.

With that, I'll turn the call over to Mark to provide the financial details for the quarter. Mark?

Thank you, Andrew, and good morning, everyone. As Andrew outlined, our first quarter reflects a successful start as a combined company, reporting net income of $50 million and operating income of $57 million. Diluted operating earnings per share was $1.25, up 39% year-over-year. Underwriting income totaled $52 million, and the combined ratio was 89.5, inclusive of 1.8 points of catastrophe losses.

Ex-cat combined ratio was 87.7%, reflecting strong underlying loss performance and disciplined expense management. Annualized operating ROE was 20.3%, underscoring the earnings power of the combined group.

Gross written premiums were $668 million, up approximately 10% on a pro forma basis, driven by 9% growth in Skyward Specialty and 9% growth in Apollo.

Overall growth was driven by Skyward Specialty's accident & health, credit and surety, global agriculture and specialty programs divisions and Apollo Syndicate 1969, our multi-class specialty syndicate.

As Andrew emphasized, managed premiums, which include gross written premiums from which we derive fees are an important metric for our business going forward. Managed premiums totaled $968 million, up approximately 20% year-over-year on a pro forma basis, including fee-generating premiums of $300 million, which increased 49%.

In this quarter, we generated $10 million in underwriting fees. This income stream is capital-light recurring and incremental to underwriting profit, and it represents a structurally important earnings growth lever as managed premium volume scales over time.

With the addition of Apollo, we now report through 2 operating segments, Skyward Specialty and Apollo and a discrete corporate unit. The corporate unit includes investment results, holding company costs and enterprise-level functions that support both operating segments. The change improves transparency and provides clear visibility into the true segment level performance.

Skyward Specialty reported a combined ratio of 88.9 or 86.8 ex-cat, reflecting another period of solid underwriting performance and an improvement from the prior year quarter.

The loss ratio of 62.7 includes 2.1 points of catastrophe losses from winter and convective storms. The non-cat loss ratio of 60.6 was in line with 2025 and reflects business mix shift as A&H and global agriculture make up a larger portion of our portfolio.

Loss emergence was in line with expectations and no development was recognized. The expense ratio was 26.2, improving by over 0.5 point year-over-year, driven by continued operating efficiencies and business mix.

Turning to Apollo. The segment produced a combined ratio of 85.3, a strong start for the first quarter as part of Skyward Group. As Apollo has not historically reported quarterly results on a comparable U.S. GAAP basis, we are not providing year-over-year comparisons.

Apollo reported a non-cat loss ratio of 52.8, lower than full year expectations as a result of Q1 business mix and seasonality.

Loss emergence in the quarter was in line with expectations. Apollo did not incur any cat losses in the quarter, and our full year cat expectations remain unchanged.

The expense ratio of 32.5 is broadly in line with expectations. The $4 million of fee-based service expenses are excluded from the combined ratio, but included in operating income and support the scalability of the fee-earning part of the business.

Turning to investments. The portfolio now approximates $2.7 billion, of which 90% of the portfolio consists of fixed income and short-term investments.

Net investment income was $27 million, an increase of $7.5 million year-over-year, driven primarily by a larger invested asset base as a result of the Apollo acquisition. Alternative and strategic investments continue to experience volatility, primarily due to marks on the underlying investments. These exposures represent a modest portion of total invested assets and the overall portfolio remains conservatively positioned.

With the addition of Apollo, over $500 million of invested assets were added to the portfolio during the quarter, which contributed $5 million of net investment income, primarily in fixed income securities and short-term investments. For the fixed income portfolio, we put $75 million to work at 5.5%. The embedded yield for the group portfolio was 5.3%.

Turning to the balance sheet. Stockholders' equity ended the quarter at $1.2 billion. Financial leverage was in line with expectations after the closing of the Apollo acquisition at 28%. As Andrew highlighted, book value per share was $27.50, representing a 31% increase over the prior 12 months. You will recall that on December 3, we provided guidance for 2026, and that guidance is unchanged.

Now, I'll turn the call back over to Andrew.

Thank you, Mark. As Mark shared, our financial results for the quarter were again excellent.

Our portfolio diversification, particularly in categories less exposed to the P&C cycle, again, served as a catalyst for strong top line performance, which in turn will continue to drive double-digit earnings growth.

Notably, our increase in gross written premiums of 25-plus percent in A&H, credit and surety and ag are all in areas that are removed from the pressures of the broader P&C market.

Simultaneously, we are maintaining our disciplined bottom line focus in other areas of our business that are currently experiencing softening market conditions or a challenging loss inflation backdrop. Among small or mid-cap carriers in the public or private markets, there is no other company that has constructed such a well-diversified and cycle-resistant business portfolio.

While only months into operating as a combined company, a number of important growth initiatives have been launched. This includes our proprietary insurance partnership for Uber's autonomous vehicle insurance program, the launch of our life sciences product using Lloyd's paper to serve U.S.-domiciled companies with international exposure, and the 1/1 launch of Syndicate 1972, which is Apollo's internal reinsurance syndicate. I'll note that 1972 further provides strategic optionality for Skyward Specialty's outward reinsurance as we look to the future.

John Burkhart, James Slaughter and several of our leaders are actively advancing a number of future shared growth initiatives, including opportunities in surety and the launch of iBOT America. These highlight only a few of the exciting developments that we will discuss as we begin to scale these initiatives in the quarters ahead.

Turning to our operational metrics. For Skyward Specialty, pure rate moved up a bit to high single digits ex-global property and mid-single digits, including global property. Excluding our intentional actions in construction auto, retention was in the 70s, driven by the effects of the competitive property market across our portfolio. We continue to see strong submission growth, which was solidly in the teens again this quarter.

Apollo's risk-adjusted rate change ex-property was in the low-single digits. Apollo remains intently focused on rate adequacy to steer and maximize returns at the account and portfolio level. And like Skyward -- excuse me, like Skyward Specialty, Apollo's diversified portfolio means that we are better positioned to capitalize on opportunities to defend our business in an evolving market.

To wrap up, we had an outstanding quarter. It's clear that our niche strategy, our excellent execution, our portfolio construction, supplemented with a new fee engine is and will be a continued source of strong earnings growth and top-quartile financial performance into the future.

The combination of Skyward Specialty and Apollo brings together differentiated talent, technology, AI and innovation capabilities, positioning us to build on the unique strengths of each company and to pursue attractive new opportunities together.

With that, I'd now like to turn the call back over to the operator to open up for Q&A. Operator?

[Operator Instructions] And the first question will come from Matt Carletti with Citizens.

Andrew, I was hoping to -- you spent some time talking about your differentiated platform, and I was hoping to dig a little deeper on that, and really have 2 questions.

The first is, as you think about kind of how your business sits today, particularly with kind of Apollo on board now, and we think about where we are in the cycle, can you just give us your view of kind of how you see kind of the impact on growth and the impact on margins, or how that unfolds for Skyward versus kind of your select peer group or the industry?

And then the second part is just to go a bit deeper and appreciating kind of the half of your business that is not P&C, things like surety, like A&H, like agriculture. We hear those words at other carriers at times, usually not all 3, but here and there. Can you talk a little bit about how your approach to those businesses might be a bit different than what we might think of as the average approach?

Matt, thank you for the questions. And there's a lot there to unpack. So let me -- I'm going to start sort of on the question about sort of how we see the market, our portfolio and margin outlook. And look, I think that I talk certainly about the parts that are the uncorrelated and have seen the biggest growth and for reasons that have to do with, like we have great product market fit, and we're not seeing kind of the cyclical factors, right? I'm going to set those aside for a moment.

I will just say to you that, I view our portfolios while very complementary and different, both Skyward Specialty and Apollo share one important sort of feature, which is the portfolios are quite niche. So -- and I'll give you just a simple example because I was in London with the team just a couple of weeks back, and we're talking about the marine, energy and transport division of Apollo.

And what became clear to me is that, for example, in that business, they have a leadership position in shipbuilders. They have a leadership position in ports and terminals. And while those 2, if you will, subclasses aren't necessarily immune from macro conditions, they certainly aren't feeling the full effects of the marine, energy and transportation division. And while it feels like a faraway comparison, if you look at our management liability book, which is made up of Web3 smart contract types of exposure and cannabis and distressed homeowners, we're away from the parts of the management liability market that has the pressures of 50 carriers competed and really no opportunity to create kind of margin that separates from the rest of the industry. And I think if you worked across our portfolios, you would find example after example of that.

I think what I would say to you is that, those niches have a certain opportunity size. And so -- listen, to write Web3 is hard. You have to build a specialized insurance contract around that and so forth. And we've done that, but it's a limited opportunity, which basically means that in soft market conditions, as long as you're disciplined and you don't sort of go chase everything else that's out there, which we don't, your growth opportunities will be a little bit more limited. I don't necessarily believe at this moment in time I see an impact on our margin. We're watching closely.

I think both the leaders, James and John are doing an excellent job around that. But I don't see an impact on our margin because of where we're competing and how we're competing is sort of the thing I would highlight.

And then on the other side being the parts that are -- and I would put 1971 in there, because if you go just talk to anybody who was at RIMS, I think that they will tell you that the iBOT team is 1 of 1, not of even 2. There's 1 of 1 out there on what they do. And I think that those are the opportunities for us to drive -- that's ag and A&H and the other areas that we talk about to continue to drive really outstanding growth, and selectively to be able to expand our margins as well. And so those are the things that at every opportunity, we're going to lean hard into.

And the next question is going to come from Gregory Peters with Raymond James.

I wanted to focus on the disclosure in your press release around the gross written premium by underwriting division. And you also -- and you included comments about this, the managed premium growth. And so there's a bunch of moving pieces where we see certain lines or certain divisions where there's some substantial growth, and we see other areas where there's shrinkage.

And I thought -- I'd like to get more perspective on the moving pieces in there. And I know you just sort of answered some of it in the previous -- with the previous question. But when I see this substantial growth, in the fee-generating gross written premium, and -- it begs the question, how are you avoiding getting caught up in just market-sensitive types of businesses, and how are you able to avoid the stuff that's more cyclical and focus on the stuff that's less cyclical.

Greg, thanks for the question. I'm going to endeavor to answer it as best I can, but this may be something that we want to follow up and then make sure that if I'm not answering it fully for you here that there we are after the call.

So there's 2 things that drive that premium, that is driving fees. The first part is that, that's directly linked to 1969 and 1971, where obviously, we have 25% of the capital deployed for those 2 syndicates. And so this is fees that correspond with the business that we're writing directly into our account.

And then in addition to that, as we have talked about in the past that Apollo has a division focused on providing managing agency services to partner syndicates. And in each and every instance of those partner syndicates, I would characterize -- and there's 9 in total -- I would characterize that -- there's 9 syndicates in total that they are all really kind of away from the standard market.

So they include things like parametric. They include now a credit-related syndicate. They include a captive for a global technology company. And so in each of those instances, they're rather unique and they fit with, I would say, principally the innovation mindset of our company in total, but more importantly, around Lloyd's ambition to bring new categories of risk into Lloyd's.

And in fact, I believe if you ask the Lloyd's management how they view Apollo as a partner in this regard, I think that you would hear words around innovation and the ability to support some of these new ideas and provide the appropriate oversight and capabilities that they believe are requisite for those syndicates to operate effectively in Lloyd's. And I have little concern about the growth potential there based on what I know on the backlog of opportunities that are in front of us.

That's good. And then can we go to the -- just at the beginning of the question, I asked about the underwriting divisions. And I guess -- I think you previously commented on the growth in credit and surety. I think seeing the shrinkage in global property makes sense based on what we know what's going on in the pricing environment. Maybe you could just remind us the specialty programs posting great results in the first quarter, what's going on there, and anything else you want to call out in the disclosure.

Yes. So yes, thanks, Greg. I mean, listen, on the growth side, surety is the driver on that credit and surety -- surety and credit line item. And our team is just incredible. And they just keep moving from strength to strength. There's been a little bit of disruption. We were able to bring in some talent in a couple of geographies. And unsurprisingly, the books of business followed. And we're just -- I mean, like just compare our financial results in the SFA published data, our growth and our loss performance, there's nobody who looks like us. I mean, it's just -- we are 1 of 1 in terms of that level of performance.

And the same thing on A&H, right? The results are out in the public domain. We're a top 5 performer in terms of loss results. And simultaneously, the combination of our single company medical stop-loss solution and our group captive solution, particularly the latter one has really found sort of product market fit. And again, I would say we're one of one there.

Ag, I talked about this, we are one of one. While we have a diversified global reinsurance program, we also have a unique capability around the U.S. dairy livestock program, where we're the only company out there providing a risk transfer solution, one of one. So you'll see a theme here when I refer to 1971 in a similar way.

On the flip side, I think our team is doing just an outstanding job defending our books and picking and choosing shots to win. And I think the -- if you take professional as an example, what started as a soft market in public D&O bled into private D&O, which really was part of that niche focus I described that we pursued, but it's present in the miscellaneous sort of E&O category. Where it's not present right now is in -- we're doing a good job seeing a strong opportunity and growth in health are professional. It just isn't visible to you in those numbers.

I think on the E&S side, all that shrinkage is being driven by property straight up. The excess market is -- and I wouldn't say anything different than you probably heard from other CEOs. I think there's still good opportunity out there. You have to be cautious in the loss inflation backdrop. I think our guys are doing it right. There's very little auto exposure in our excess book in E&S, and we're writing smaller limit stuff.

GL is a bit of a mixed bag. I'd be very cautious of any company who's reporting big casualty growth out there because that kind of market opportunity just doesn't exist the way it did 1 and 2 years ago. And I would say, it's a very uneven market. And I always like to provide examples, and I'm going to give you an example here.

I oftentimes referred to, during sort of the E&S growth period, one area that we capitalized on was migrant hotels. We were probably the largest writer of migrant hotels in the United States. We had a large book in New York City alone that, I think over the sort of the 3- or 4-year period we built that had maybe a 20% loss ratio. And it's tough business to write.

On the other side, as that business has gone away, the corresponding opportunity that's gone into the market is writing ICE detention centers. That is a particularly difficult risk. We write that one way and one way only. We write it with comprehensive assault and battery exclusion, no sexual abuse and molestation cover, et cetera, et cetera. We're writing accounts. And you write those at really good rates, you can make good money.

And within like the last 2 or 3 months, I would say companies who I would hold in high regard come into the market writing without any coverage restrictions, which, from our vantage point, probably triples, quadruples the loss cost. So if you're going to write a $5 million exposure instead of expecting $400,000 or $500,000 of losses, you're going to end up with $2 million of losses. And yet they're competing almost pari-passu on pricing.

And I would use that as an example of -- well, it was really good 3 months ago. It's not good anymore and the people who are not trying to write that aren't doing it in a responsible way. So the market has gotten very uneven. And that unevenness means you just got to be really smart, pick and choose, be in the right place at the right time.

Our business, as I've told you a bunch of times, is, it is severity driven, it's in the E&S market for the right reasons, and that's the stuff that we like to write. But when you see folks compromising things like terms and conditions, you have to just take pause and say, we're not going to chase that. And so you see some of that coming through our growth numbers. And rest assured, if you're an investor in us that we're bringing the kind of discipline that you'd want us to bring.

And I would -- on the flip side, companies who are loading up on casualty right now for whatever set of reasons, there isn't a broad enough market opportunity to justify that kind of growth in the market right now.

That's excellent detail.

And the next question comes from Meyer Shields with KBW.

And obviously, I want to welcome Natalie back. Mark, you mentioned both seasonality and mix when you're talking about Apollo. I was hoping you could talk about that because I'm assuming the mix part might be more persistent even if seasonality evolves over the course of the year.

Yes. Meyer, I agree with your comment. It is more mix than it is seasonality. I don't know what else to tell you. Are you asking anything else? What else can I help you with?

Well, I was hoping you sort of like flesh out what the seasonality is just in terms of the evolution of the Apollo books combined ratio over the course of the year.

Well, it varies, right? There are a number of classes. And so I don't have all of the detail in front of me, but it varies by class. There's just a number of businesses that can impact the loss ratio.

Yes. Meyer, I think what I would point to is that, you're going to see in the fourth quarter -- fourth quarter is heavily driven by 1971. The third quarter is heavily driven by 1969. It's a lot lighter in the first half of the year. And not like in the United States where most of our business is earned in ratably over the course of the year, let's say, or even if you're writing surety, maybe it's -- and the duration of our surety is like a 14-month average contract, maybe it's ratably over 14 months. There's business in there that earns in over a shorter period of time, which can have an effect on how the loss ratio earns in.

I think the high-level point is, it is a great result. We're very -- we're both pleased and proud of our Apollo colleagues. It's a great way to come out of the blocks. But I think that, we just go back to what we said when we gave you guidance that you should understand that Apollo will probably consistently on a loss ratio performance all in be a bit better than us in the United States at Skyward Specialty and on the expense ratio, a bit higher and -- but they're relatively comparable combined ratio businesses over the course of a full year.

Okay. That's very helpful. The second question, I guess, I think this is predominantly Apollo or maybe global property. I was hoping you talk about Middle East and exposure, both in terms of loss potential and where rates are apparently evolving pretty quickly.

Yes. Great question, and thank you. This is like one of these ones I smile at whether I'm just lucky, I think, as a CEO in this instance. We are with our Board, and it's nice to be able to have a real-world event as the first test of like the great risk management and underwriting at Apollo.

Short story is this, Apollo really sort of reduced their aggregate exposure in the Middle East just simply because post-Crimea, they concluded that there just wasn't the rate to support the kind of potential political risk, political violence and other sort of adjacent exposure. And their exposure runs through marine, war, aviation, political risk, political violence.

As a percentage of the market in Lloyd's, their exposure to the Middle East is far less than their share of each of those markets. We have, in our loss picks this quarter, some of that exposure. We have one reported loss of really any size, and that's incorporated into our picks.

And if things develop beyond sort of the numbers that are being talked about over the course of the second quarter and beyond, and we believe it reflects in our book, we're going to sort of obviously reflect that. But I think what you should understand is that we're definitely undersized in the Middle East, and that's a direct byproduct of leadership's determination that the rates really didn't support the exposure there.

Post the event, we're trying to be picky. There are some instances like we have -- we've written a handful of accounts, things like parking garage structures and in some of the other countries that are experiencing kind of the collateral effects, if you will, we've written some things that are sea-bearing around, like service shifts and so forth.

But I would describe what the team has done as being very thoughtful in kind of picking and choosing and kind of waiting to see a really sort of fulsome movement on the market environment, that would have us lean in further than we are.

Okay. Perfect. That's very helpful, very thorough. Final question, if I can. If we look at the, I guess, the margin on the fee-based business for managing other capital providers premium, is that margin pretty steady over the course of the year?

It is pretty steady over the course of the year. I mean, I would want to bring Taryn into the conversation to make sure that I fully understand it. It is -- I believe it would follow the actual writings of premium. And so if there's seasonality there, I think that, that might influence it.

But I'd tell you what, let me make sure that we come back to you on that. So that I'm answering it accurately versus kind of my general understanding of how that part comes through, the true sort of partner syndicate fee income would come through.

And our next question will come from Alex Scott with Barclays.

I was hoping you could talk a bit about the way Apollo participates in the cyber business. I just don't know much about it. So I'd be interested in sort of the overview of what they do in that market. And then just your views on any risk from some of the developments in artificial intelligence and identifying vulnerabilities.

Yes. So Alex, thanks for the question. I'm looking at a colleague to make sure that everything that's mentally in my mind. So one of the partner syndicates, I think, in fact -- actually, it's not a partner syndicate. It's managed as a special purpose syndicate -- we participate and it's an entity called Envelop that has what I would describe as very kind of unique IP in the cyber space, but also a bunch of that exposure is not what you would think about as sort of traditional U.S. and even OECD exposure. So I think that, that's probably the most notable thing, and that comes through as a reinsurance participation.

I think that beyond that, there probably is other exposure. But again, I think this is a case where first quarter, trying to make sure that we're fully prepared, I would want to make sure that we're following up and checking that off with our colleagues there. So -- but that would be the one that I highlight that really does dominate what is the substantive exposure for Apollo. And in the U.S., we have really de minimis exposure to cyber.

Got it. I know kind of the last question. All right. As a follow-up, maybe a broader one. I mean, we're hearing increasingly, just talking to some people in the rooms, it sounds like the specialty markets has gotten pretty darn competitive. And I know you all have done a great job of focusing on your niches. But any update on how you're feeling about growth and continuing to be able to find those spots net of where you've got to pull back here and there? And any update that you'd give us to some of that guidance laid out for the 2026 plan?

Yes. Yes, thanks. Alex, I think that it's, I will say, the one interesting dimension of the market today, and this is 35 years of personal experience and more correspondingly 35 years, it's -- the speed in which things have moved has been pretty extraordinary. I think probably the most notable change separating out everything that's been discussed about MGAs and fronts and so forth is now you're seeing, obviously, third-party capital sidecars. And more recently, we're talking to folks and the desire for runoff carriers to come in and probably writing at better terms than the ceding companies for those sidecars, which is kind of like a frightening prospect.

I think, it makes things pretty hard to predict. What I would say to you on the flip side, and I just can't emphasize this enough. We have this incredibly durable portfolio. And so as things get tougher in selected places, I know that, our leadership is prepared to make sure that we're holding the line, we're writing the best accounts, we're doing it on terms and conditions that are going to generate the returns that we seek.

And then simultaneous to that, the growth opportunities that we have in A&H and surety and Ag and 1971 and even some niches that sit elsewhere in the Skyward Specialty U.S. business and the Apollo 1969 business are going to continue to deliver growth well above our peers. So we follow every one of the folks who reported before us.

And if you take a cross-section of that cohort, and that would include the primary insurance operations of the Bermudians who we compete against, our growth looks outstanding against them. And yet, we feel as good about the margin content of that growth as we did a year ago and a year before that. In fact, in some cases, we feel better about the margin content.

And so I just -- I think we're in a really unique and outstanding place. I think our investors want to make sure that they understand that. And I feel good about the year. We've never really gotten too specific about growth. And I think otherwise, our guidance stands. We're not changing our guidance. We've never missed consensus as a public company. Every quarter, we've exceeded consensus. We're committed to giving guidance that we believe is achievable. And if we can beat that guidance, we'll beat the guidance.

And the next question comes from Paul Newsome with Piper Sandler.

Kind of more on the same topic, but maybe the other way looking a little differently. How do you think about the proportion of your business today that isn't part of the cyclical concerns that we're talking about? Where -- do you think your business resistant?

Say the last part again, Paul? I missed the last part.

Just where do you think the business is resistant and not dealing with the competitive issues that you're talking about today?

Well, I mean, I think that if we look at it on a full year basis, it's going to be well in excess of 50%. And we just point to the categories we've talked about in the past. They're made up of our surety, A&H, credit, ag, captives, 1971, we put into that. But I'll also say to you that there's no shortage of pieces, as I've talked about, like we have little niches, what we write in management liability, some of those categories were 1 of only 2 or 3 companies who are writing that.

And so -- and I'll just -- I'll say it again, I use my example of if you're going to write Web3, you actually have to have a product that defines a smart contract. You can't just use a standard management liability product. So -- and so you have a bit of practical barriers to entry on even some of the niche stuff. We don't put that into the cycle resistant because it's like just -- it's just too hard and would require a lot of detail and disclosure. But I think today, well in excess of 50% of our business. And I think that what 1971, the guys at iBOT are doing, the focus on autonomy is, it's just like a -- it is wide open in terms of what the potential is for our company, particularly given that we're starting from a leadership position.

And so I -- again, I just -- I feel like it's more than 50% of our portfolio. And I believe that in a horizon until we start to see us transition from -- kind of into a softening market and transition back towards a hardening market, which might be quite a few quarters or even years out, we'll probably see a larger portion of our portfolio grow in these areas that I would characterize as more cycle resistant.

Great. Different question. Reinsurance market also going through quite a bit of change. I think, a fair user of reinsurance. How should we think about the impact of the reinsurance market affecting your business given that there are definitely pockets there that are pretty soft?

I think on both the Skyward Specialty and the Apollo, part of the -- parts of the business, we've had good success through this part of the year. I can tell you like we renewed our cat program on 4/1. We -- because, obviously, property is coming off. We rightsized our exposure. We stayed with a range of kind of 1 in 10 to 1 in 250.

Our sort of risk-adjusted rate came way off. Our second event cover dropped down lower. It was like at $7.5 million second event, it's down to $5 million. So we saw a lot of benefits in the states and similarly at Apollo.

On the flip side, we know still that, there's margin in our reinsurance that we're placing into the reinsurance community. I mentioned in my prepared remarks, the launch of 1972. It's a really powerful sort of innovation by the Apollo team. I think they're first to do such a structure, like it's a sidecar structure, but the way they did it. And so they basically have taken 20% of their outwards reinsurance and put it into 1972. It's managed.

We keep 1/4 of that and then third-party capital supports that follows the market. So we're able to recapture fees on that. And we're going to be using that next year for Skyward Specialty as well. And we do that because we still believe that our reinsurance purchasing, for all the right reasons, still has margin -- good margin in there for the reinsurers, and that's one way that we can recapture at least a portion of it.

The next question is going to come from Tracy Benguigui with Wolfe Research.

So you're clearly pulling back in global property within the Skyward Specialty segment. At the same time, we're hearing that the Lloyd's market has become more aggressive on property, contributing to broader property softness.

So I understand that most of Apollo's growth shows up in fees, but you're still taking on some of that risk. So within the Apollo segment, how would you characterize the property growth in the quarter? And if you're participating on a whole account proportional basis, are you effectively assuming more property exposure to Apollo while reducing it at Skyward Specialty? So how should we think about how you align those underwriting appetites across the 2 platforms?

Yes. So thanks, Tracy. Really great question. So Doug Davies leads our global property business in the United States. Kate Foster leads the property business at Apollo. Those 2 are certainly in communication, seeing their different views in the market.

To be clear, we're not writing any pro rata in London. That piece is -- at least as it relates to the open market business is a direct and fact business. There's no 2 people in our entire company that I feel better about their ability to find a way to make a buck in a tough market than those 2 people. And I say that with great sincerity. They are 2 of the strongest underwriting leaders who have a comprehensive view of the market, know how to work with the brokers in these kind of markets and be able to sort of get their pound of flesh out.

And by the way, Apollo's sort of growth or lack of growth is following almost exactly what's happening in our published numbers that you see for global property division in Skyward Specialty. And so I feel great about it. I think, that at a higher level, one thing that is really a standout capability of Apollo is something that James Slaughter has been leading around being able to ensure accounts are clearly understood in terms of risk quality.

And so when you're softening -- when you're in a softening market, particularly in places like property, you have a quantitative view of the highest risk quality, which is really where you want to defend your portfolio, because quite honestly, you're -- ultimately, your loss content for that part of the business can be paid for even in the kind of rate environment we're in now. So I feel great, to be honest.

And oh, by the way, I think you see these negative growth numbers. And yet, as a company, we're still putting up really impressive overall growth. And so I think in that regard, we're showing up as quite sort of thoughtful and responsible about our portfolio construction. Neither of those 2 leaders are feeling any pressure to write business that they don't believe they can make an appropriate return on.

Got it. You mentioned James Slaughter. He's on the call. Hi. It's been a while. Also, I like seeing the segment details. Given Apollo has a different combined ratio profile, like lower loss ratio, higher expense ratio and on an enterprise level, how should we think about your loss ratio and expense ratio outlook? Is the first quarter a good representation of what we should expect?

I think our guidance is a good representation of what you should expect. And look, like, that's our story, and we're sticking to it. I think we just -- we're sticking with our guidance. We -- it was a good quarter. And as I said, I'm very proud of the Apollo team for what they achieved in the first quarter. But I think, full year basis, you got to think about cats and you got to think about mix earning in, and we're still going to see outstanding returns as a company. And I'm pretty confident that we're going to hit and hopefully meaningfully exceed the guidance that we provided late last year.

No, my question was more just on the composition of the combined ratio, the profile.

The expense ratio?

Yes. Like, higher expense ratio, yes.

Yes, I think that Mark might want to give a bit more detail, but I think that the expense ratio you saw for the first quarter from Apollo is probably a pretty good within the kind of the proximity of what we would expect on a full year basis.

Yes. I mean, Tracy, in the aggregate, we target -- we've said and this quarter as well, sub-30% is our watermark for the expense ratio. Do I still believe that? I do. 28.5 for the quarter. I don't -- I feel like that's right in line with what we guided.

In the loss ratio, again, to Andrew's point, ex-cat, I feel good about where it is. But as we've talked about already a couple of times, business mix can impact it a little bit quarter-over-quarter, but I feel pretty good about both the expense ratio and the loss ratio given business mix. It can move around just a little bit.

And that corporate expense, that's included in your view of the expense ratio?

It is.

Okay.

Yes. That 30% Mendoza line that we talked about, Tracy, long ago, which preceded obviously the transaction with Apollo, we revisited that with Apollo fully in mind, and we think it's the right thing to sort of keep that Mendoza Line for ourselves.

I'd like to just say one other thing, Tracy. It hasn't been asked, but it's tied to your question. Obviously, a lot is happening with AI and people, everybody is talking about it, right? But our experience so far, and we've got great results and so forth, is this stuff requires real investment. And a lot of that investment happens in advance of being able to sort of see the benefits come through.

It's pretty hard to imagine doing that and not backing up on your expense ratio if you don't have the growth to offset that. We're gaining efficiencies as a company overall, but we're also funding the next and the next and the next part of our technology development.

And as I look at that, like growth is part of what makes that possible for us and not get too close to that 30% Mendoza Line. I think that as you look forward in other quarters and people are talking about AI and the investment there, it's going to start to become visible when growth isn't apparent. And I think that, that's -- for us, it's comforting to know that we're able to fund that entirely within our guidance on expense ratio.

And the next question will come from Mark Hughes with Truist.

Andrew, in the property market, you've talked quite a bit about the pressure there, particularly in coastal national accounts. It seems like if you look across the public space, property premiums on average up a little bit, down a little bit. You don't really see it in the published results of your competitors, again, the public companies. Is there really that much pressure? Or is kind of the -- are you seeing a slower decline outside of those kind of higher volatility areas? It just seems like if you didn't know the headlines that property was affordable, if you look at the results, you wouldn't see as much pressure in the actual P&Ls. You may not agree with that point, but I'm just sort of curious what you make of that.

Well, I would -- thanks, Mark. I think in the U.S. global property, specifically the more general property book, so we have cat exposure, but we have lots of technical. So it's -- and at least in the London market part of the book for Apollo, I think there's certainly more cat exposure there.

We're kind of entering the point where there's a lot of volume coming through. So we're probably better to be precise on your answer next quarter. But -- and I don't think that we're as well positioned as some writers to really talk about cat because at least through Skyward Specialty, that definitely is not our focus.

I just think the property market, by and large, has lost all its sense and sensibilities. And it's so fast that you might have looked back 3, 4, 5 months ago and say, wow, it's coming off fast, but it hasn't, in our view, slowed down. So for those folks who are out there posting sort of results and giving whatever explanations they're giving, it just straight up wouldn't correspond with our view of the market. There are places, right?

I mean there's -- definitely as you get to the true small end of the property market, it never went up the way the property market went up, and it doesn't come down the way the property market comes down. But those are very small pockets, and they -- it's very hard to see companies say that, that represents their book of business in total.

So from our perspective, we're doing the things to hold our margin. And if others are able to sort of do it without dropping volume, they're doing it in ways that we don't understand. How is that?

I appreciate that. I also like your Jane Austen referenced, you're quite the renaissance man. If I might ask one other question, the accident and health, growth there has been fabulous. Can you talk about the sustainability there perhaps? How much might be tied to initiatives you put in place. You had some very good experience, but you may lap those at some point? Or does it feel like the opportunity there should be more durable?

Well, I have to say, like if you use a McKinsey kind of view of different horizons, I feel really good about Horizon 1, like the next year. I think we feel pretty good about Horizon 2 because we're -- we've been pleasantly surprised with sort of 3 things. One is, there's been a lot of disruption in parts of the market that we don't really touch, but we get the second order benefits of that.

We've had a great run on talent, really, really great run on having talent come our way. And I think the third part of it, when I think like Horizon 2, a couple of years and so forth, is that the group captives piece is clearly bringing -- it's growing its share of the overall stop-loss -- over the overall medical market. And so it's -- in some cases, it's a halfway house to companies fully self-insuring and others, it's just a great structure for homogeneous cohorts.

And we're surprised. It's just been -- we would have thought the TAM was smaller, and it keeps growing and growing and growing for us. And so kind of in the Horizon 1, Horizon 2, I feel good. It's hard to look out beyond that. But I also think that we have a team that probably will figure out what's the next product and the next product and the next product because we've done that before.

And our next question will come from Michael Zaremski with BMO.

Nice quarter. A couple numbers questions. So first, on the $30 million to $35 million fee income guide, just the mechanics of that. Should we be looking at the underwriting fee income line item of $10.78 million and netting some of it against the fee-based service expense line item of $4.17 million? And if not, if it was just a $10 million number, is it running better than expected early part of the year?

Mike, it's Mark. Good question. So just so we're clear for everybody, there, the fee income that we recognized for Apollo was circa $10 million, I'm rounding, and it was about $5 million of expense, right? And you're asking how do I look at that relative to the guidance we gave you of $30 million to $35 million? Clearly, that's what you're asking?

Yes. Thanks, Mark.

Yes. So I mean, I still believe the guidance holds. And when we guided you to $30 million, $35 million, it was based on the $10 million.

Got it.

Mike, just one other thing I'd like to say is that the $4 million-ish that you see in the service fee expense, that will not grow proportionately with our fees. This is about explicit investments that are being made to support that capability. And so that is a levered number over time.

And if you ask, well, can you tell me what the levering looks like, the answer is we're probably not at a place where we can do that for you. But I think it will become clear as we go quarter-over-quarter, the separation, if you will, between the fee income and the service expense that offsets that.

Got it. That's helpful. And then lastly, unless I'm crazy, I don't see, I've controlled, I don't see any disclosure anymore on the prior year development. I don't think I heard any commentary either. So is there -- unless I'm wrong. So is there any prior year development we should think about?

Sorry, I did mention it. I may have gone over it very quickly. The answer is no in terms of any prior year development. I can tell you, emergence in the quarter was in line with our expectations. Quite frankly, it was favorable.

I feel we're in a great position on our reserves, both in the U.S. and in London. We're in the best point on our reserves since we've been public.

Okay. Got it. So yes, sorry, I wasn't -- I didn't have a live transcript open. So it's not in the press release, but it was said on the call. So we'll look out for that in the future.

And our next question will come from Andrew Kligerman with TD Cowen.

A little follow-up on the A&H business, terrific growth there. And if I remember it right, you're more focused on employers with less than 2,500 employees. So the question is what's currently driving the growth? Is it mostly rate? Could you give a little detail on the rate that you're seeing? And maybe any expansion into larger employers? A little color overall on that.

Andrew, thank you for the question. So by the way, on A&H, really the concentration of our accounts tend to be 500 employees and less. I couldn't tell you the exact sort of Pareto holds, but it's not probably not far off from the 80-20 there.

And just to answer the last part of your question, right now, we really have no interest in going upmarket. There's some dead bodies on the road side there and probably for good reasons. And it doesn't fit with our whole medical cost management kind of model. It just -- it's really hard to get that enacted except in the unusual instances. So I think -- our sort of our focus is unchanged.

For us, there's -- in our numbers, there's kind of rate and there's effective rate. And what I mean by that, there are things that we'll do like laser out coverages and so forth that create effective rate. Pure rate is contributing not quite 10% in there, but it's not -- it's an important part. Really, the growth, I think, is just simply 2 factors. One is that we've really kind of hit it with our group captives capability. We've been growing both the number of members, and we've actually been growing the number of captives as well. That capability is really powerful. It fits incredibly well with our medical cost management IP and capabilities.

And then on just the single employer stop-loss, we -- I think I've mentioned this on maybe the last 2 or 3 calls, we've really seen a turn in the market. And a lot of that has to do with, in our view, some stumbles of some MGAs. I think part of it is probably the larger company market, the Voya served market kind of finally got realistic.

And so maybe there's some second order effects that are dropping down to our market. But it's really both areas. And certainly, our single employer stop-loss solution is still a larger part of our book, but we are seeing good growth there, and we're seeing it on the terms that we want, and it's fully utilizing all of our medical cost management IP that are important to us to be able to drive top 5 in the industry loss ratio that we've been driving.

That was very helpful. And maybe shifting over to, I guess, somewhat related to captives specialty segment. So that one was down 13.5%. And if I understand that business, you're kind of attaching at $350,000 and you write a broader mix of lines. And it sounded like from your comments earlier, stop-loss could even be in there, med stop-loss. Where are you seeing the pressures in that segment? And what are the opportunities?

Yes. No, great question. Really great question. So I mean just for a point of clarity, all of our medical stop-loss business is reported through the A&H division. So I just -- so we have captives in the A&H division. We have single -- so what you're seeing in the captives division is pure P&C. And I think there's probably 2 parts to the answer for you.

Part number one is the downward pressure, I'll be very direct. We had, in our view, a very irresponsible party come in and basically write a captive in a way that we believe, it will cause a lot of damage. And we weren't going to compete on things that weren't sensible. And I -- and maybe that tells you a little about the market, by the way. That happened at the end of last year. So somebody was basically trying to close out their books. It hasn't happened before, and it hasn't happened since. But that was a unique instance, and that's really what you're seeing run through the numbers.

On the flip side, Andrew, I'd point to our really interesting success stories. For example, our captive that uses a technology company called Understory Weather to do micro weather analysis for dealer open lot, which has been an unbelievably successful and quite unique solution because you don't see too many property captives out there, and we're in our -- whatever our fifth year in that captive.

And I think our view is we're looking for more of those kinds of opportunities. Interestingly enough, our partners in London, in 1971, given some of the things that are happening in autonomy, open up some really interesting opportunities. I'll also remind you that Apollo as part of its partner syndicates has the only Lloyd's captive with a large technology company. So we think about potential interesting collaborations and partnerships that way.

So I think that what we're not going to be doing is just doing the run-of-the-mill stuff. It's going to be about innovation in that area. And those things take time. But when they come across, they come across in a way that can really be highly additive to your earnings and growth as well.

And our next question is going to come from Andrew Anderson with Jefferies.

Maybe just one for me. I think, I heard the rate change on the Apollo business was low-single digit ex property, maybe a little bit lower than I would have thought considering 45%-ish of that business is shared economy or liability. Maybe you could just talk about where you see that rate change in the Apollo business going? Is this maybe an intentional decision to be more competitive given the results here? Or maybe the liability and shared economy pricing is a bit higher than that?

Andrew, thank you for the question. No, actually, it's neither of those things. Quite honestly, it's just mix. There is -- on a written basis, in the U.S., as an example, the quarter-to-quarter numbers on property can influence the -- and it has, by the way, in the past, the rate reporting. It's even more extreme given the cyclicality or the seasonality of mix through the Apollo segment.

So the way I would say back to you, Andrew, is we reported out the sort of the domain of the number, but that's as much sort of seasonality. And in fact, even like your reference to the -- within 1971, there's very little of that being autonomy at all as an example. And so I just would say stay tuned because that number will move based on what division inside of 1969 and 1971 is really kind of the seasonally high gross written premium in any given quarter. And I don't -- I just don't think I'd read too much into it.

And just a quick one, that's a gross rate number, I imagine?

It is -- everything we report out on is a gross rate number. And that's important that you ask that because, for example, within some of our divisions, like global property, our gross versus our net rate, our net rate is actually negative mid-single digits where the gross rate is negative mid-teens. And that's -- in our case in Skyward Specialty in the U.S., that's because of the use of fact and how that market is behaving. And some of that is similar in Apollo relative to the gross versus net, but we always report out on a gross rate -- gross pure rate.

I am showing no further questions at this time. And I will now turn the call back over to Natalie for closing remarks.

Thanks, everyone, for your questions, for participating in our conference call and for your continued interest in and support of Skyward Group. I am available after the call to answer any additional questions that you may have.

We look forward to speaking with you again on our second quarter 2026 earnings call. Thank you, and have a wonderful day.

This concludes today's conference call. Thank you for participating, and you may now disconnect.

Hello, and welcome to the Skyward Specialty Insurance Group, Inc. 2026 Annual Meeting of Shareholders. Please note that this meeting is being recorded. The meeting is about to begin.

Good morning, ladies and gentlemen. Will the meeting please come to order? Thank you. I'd like to welcome you to the 2026 Annual Meeting of the Shareholders of Skyward Group. I'm Andrew Robinson, Chairman and CEO.

We're pleased to have with us here today, Mark Haushill, our Chief Financial Officer; Patricia Ryan, our Chief Legal Officer and Corporate Secretary; Taryn McHarg, our Deputy Chief Financial Officer. Also in attendance are our Board of Directors, our global leadership team, and representatives from Ernst & Young.

I'd like to introduce Patricia Ryan, who will serve as the Inspector of Elections for today's proceedings. She will establish that the meeting has been duly called and that a quorum is present. As inspector, she has taken and signed an oath to faithfully execute these duties with strict impartiality and according to the best of her abilities.

I'd now like to call the meeting to order. Today, we will consider the 3 business items on the agenda. We will present each of the business items one at a time, then pause briefly for voting before we close the polls. We'll then announce the results.

If you've already voted your shares and do not wish to change your vote, no further action is required. If you have not yet voted or would like to change your vote, you may do so by clicking the Vote My Shares tab at the top right of your screen.

Patty, can you report whether a quorum is present for conduct of business?

Thank you, Andrew. The Board fixed March 6, 2026, as the record date for determining the shareholders entitled to vote at this meeting.

The company's transfer agent, Equiniti Trust Company, has provided us with an affidavit of mailing attesting that the materials for the meeting and instructions to access our 2026 proxy statement and the 2025 annual report were provided to all shareholders of record based on the delivery preference they selected and a certified list of the holders of the company's common stock as of the close of business on the record date for this meeting. On the record date, there were 44,543,065 shares of our common stock outstanding.

The affidavit of mailing, proxy materials and certified list of shareholders are directed to be filed with the records of the company.

The transfer agent has computed the number of shares represented under the official form of proxy sent or made available to shareholders. I report that the holders of 38,053,436 shares of common stock are present or represented at this meeting, which shares represent approximately 85.43% of the shares entitled to vote at this meeting, and a quorum is therefore present.

The proxies and any substitution of proxies presented to the meeting are hereby ordered to be filed with the records of the company. The necessary quorum is present with respect to each of the Proposals to be acted upon by the shareholders of the company, and the meeting is properly constituted for the transaction of business.

As set forth in the materials sent to the shareholders of record of the company, the business to be conducted at this meeting includes the election of 2 directors to serve as Class I members of the Board of Directors of the company for a 3-year term to expire at the 2029 Annual Meeting of Shareholders as presented in Proposal #1 of the proxy statement. To approve on a nonbinding advisory basis, the compensation of our named executive officers as presented in Proposal #2 of the proxy statement; and three, the ratification of the appointment of Ernst & Young LLP as the company's independent auditor for the fiscal year ending December 31, 2026, as presented in Proposal #3 of the proxy statement.

In order to avoid any confusion, let me take a few moments to outline the format for today's meeting. Each Proposal will be made and seconded. After a Proposal is seconded, a vote will be taken on whether to approve the Proposal. Please note that the Board of Directors' recommendation for each of the Proposals is included in the proxy materials.

The meeting will now proceed to Proposal #1, the election of 2 Class I directors of the company. Pursuant to the company's bylaws, each elected director will hold office for a 3-year term expiring at the 2029 Annual Meeting of Shareholders or until his or her successor is elected and qualified.

The following persons have been nominated for office as directors of the company to be elected by the shareholders of the company, Gina Ash and Peter C. Hearn.

Is there a motion to approve the nominations?

I so move.

Is there a second?

I second the nomination.

I declare the nominations closed. The polls are now open with respect to Proposal #1, the election of Gina Ash and Peter C. Hearn.

[Voting]

The polls are now closed with respect to the election of directors. Patty, would you please report on the final vote taken?

I would like to advise the meeting that the appointed individuals have voted in accordance with the proxies received from shareholders. A plurality of the votes of the shares of common stock represented at the meeting have been cast in favor of each of the candidates nominated. Gina Ash is hereby elected as a Director of the company effective immediately, and Peter C. Hearn is hereby elected as a Director of the company effective August 1, 2026.

Proposal #2. The meeting will now proceed with Proposal #2, the approval on a nonbinding advisory basis of the compensation of our named executive officers as described in the compensation discussion and analysis of our 2026 proxy statement. Patty, will you present the Proposal?

The Dodd-Frank Act requires that we hold a shareholder advisory vote on executive compensation, commonly known as Say-on-Pay. This allows our shareholders to provide input on our compensation philosophy, policies and practices for our named executive officers. The Say-on-Pay Proposal is an advisory vote, which means that the results are nonbinding.

However, the Board and the Compensation Committee take shareholder feedback seriously and will consider the results of this vote as we continue to refine our executive compensation practices.

Is there a motion to approve Proposal #2 , the approval of, on a nonbinding advisory basis of the compensation of our named executive officers?

I so move.

Is there a second?

I second.

The polls are now open with respect to the approval on a nonbinding advisory basis of the compensation of our named executive officers as described in the compensation discussion and analysis in our 2026 proxy statement.

[Voting]

The polls are now closed with respect to the approval on a nonbinding advisory basis, the compensation of our named executive officers. Patty, would you please report on the vote taken?

I would like to advise the meeting that the appointed individuals have voted in accordance with the proxies received from shareholders. 33,368,413 votes have been cast in favor of Proposal #2, 2,308,030 votes have been cast against Proposal #2 and 15,465 shares abstained.

Thank you, Patty. Proposal #2 is adopted. I'll now turn to Proposal #3. So the meeting will now proceed to Proposal #3, the ratification of the appointment of Ernst & Young LLP as the company's independent registered public accounting firm for the fiscal year ending December 31, 2026. Patty, would you present the resolution?

The following resolution is presented for approval. Resolved that the appointment of Ernst & Young LLP as the independent registered public accounting firm for Skyward Specialty Insurance Group for 2026 is hereby ratified.

Is there a motion to approve Proposal #3, the appointment of Ernst & Young LLP as the independent registered public accounting firm for Skyward Specialty Insurance Group for 2026?

I so move.

Is there a second?

I second.

Polls are now open with respect to the ratification of the appointment of Ernst & Young as the company's independent auditors for 2026.

[Voting]

The polls are now closed with respect to the ratification of the company's independent auditors. Patty, would you please report on the vote taken?

I would like to advise the meeting that the appointed individuals have voted in accordance with the proxies received from shareholders. 37,739,680 votes have been cast in favor of Proposal #3, 289,410 votes have been cast against and 24,346 abstained.

Thank you, Patty. Proposal #3 is adopted. So there being no further business to come before the meeting and all votes have been collected, the polls are now closed.

The final voting results for today's proceedings will be reported to the SEC on a Form 8-K on or about May 11. That concludes the formal part of our meeting. The 2026 Annual Meeting of Shareholders is hereby adjourned. Thank you to all who attended.

And this concludes today's program. Thank you for participating. You may now disconnect.

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-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 2 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 3 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 2 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 3 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 3 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 3 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 3 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 3 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 3 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 6 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?

[Operator Instructions] And our first question for the day will be coming from the line of Meyer Shields of Keefe, Bruyette, & Woods.

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.

Yes. Look, I mean, I think that we -- thanks, by the way, for the question. And there was 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 monies sort of became available. Our view is really simple, which is we've built a really well-diversified portfolio within Surety, right? So it's not just contract in commercial. It is the fact that we're well across all the trades that we're 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 EndWell, which we obviously talked about over the last 3 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're 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's 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'll probably see in solar. And so I would expect that we're just going to continue to outperform both on the growth and on the loss side as 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. Thanks for the question. We will never do that while I'm the CEO of the company. How about that? I think that it may be appropriate for others, but our strategy is about Rule Our Niche. It is about distinct focus. It is about expertise and capabilities that we can look at and say, here's the source of your competitive advantage, your ability to have a competitive moat. And whether people are doing it under -- we're 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.

[Operator Instructions] And the next question is coming from the line of Paul Newsome of Piper Sandler.

[Operator Instructions] And the next question will be coming from the line of Gregory Peters of 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're going to have some information out on Apollo here over the coming couple of weeks as part of sort of the ordinary reporting at [indiscernible]. So there are some things that will be available. But let me just say that just sort of at the macro level, Apollo's financial results are uncannidly 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 Ibeson and [indiscernible] and [indiscernible] had undertaken to ensure that the balance sheet was every bit as conservative as ours.

And so I feel great about sort of 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 the prior 3 years. We're 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're delivering to our investors.

I'll 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're 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're 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'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 2 or 3 years ago?

Yes. Well, I mean, what I'd say to you is that what we think about when we were evaluating the potential combination, and I think it's reinforced today, there's much about Apollo portfolio that is -- first off, it's very complementary, right? We certainly really appreciate what they're 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 ibott 1971, the syndicate that's 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're talking about embedded product where all of our expertise is really the foundation for the pricing.

Our partnership with them and the insights that we bring is the foundation for the product. That's 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'm very confident that we can profitably grow and navigate the market while still delivering really exceptional 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. 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, by some of the shorter tail lines. But I'm glad you asked the question because I think it's 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've 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's 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 -- the areas that we're looking at for sure. But coming into '26, I frankly feel better about our reserve 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, 6 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 incurreds 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?

Yes. Our 1/1 were off the chart. We massively were ahead of where we thought we'd be. So that's just a quick answer to your first question. Here's what I think we're seeing. We -- I'll just sort of go back here on the history. We're a stop-loss writer. And 6 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 3 years ago, we added captive 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're also taking share in addition to the growth that we're seeing.

And that powered a lot of our growth over the course of the last 24 months. Probably about starting about 12 months ago, we saw a return to growth in sort of the non-captive part -- and as we came through 1/1, you're right in what you're 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're 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're recognized as such. And 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'll highlight something that just reinforces what you said. if you take a look at the 2024 stat data that's 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 line 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. So thank you for that.

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?

Well, let me say 3 things. First is, as we said in the prepared remarks, we're going to come back with more data. I've been cautioned by our colleagues at Apollo not to get out of 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 like you just think about the potential, right? It's just -- it's extraordinary.

And I'll 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're going to have more data as every day passes, right? So when you think about a legal and torque backdrop, I don't know who you'd like to be if you had to choose, but I couldn't 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 torque backdrop that they've done a great job of navigating. But there's 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're in the middle of that.

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

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

Go ahead.

Yes. So Mike, thanks for the question. Mark will provide more details. No change in our picks. This is a mix -- it's a mix change. We have 2 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's what you're seeing. I will tell you that our internal plans are -- we gave you the guidance, but I think that it does reflect a bit of mix change running through. But I wouldn't overread it, right? Those are also lower expense ratio businesses. And so I think on balance, what you're going to see is the sort of 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's helpful. And then lastly, moving to the comments about the material weaknesses being resolved, congrats. Just curious, any -- are there any kind of material learnings or system changes or anything you'd 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?

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 -- Mike, it was IT controls, I think we spoke at length, this is a nonfinancial matter. We remediated earlier in the year. It didn't get recognized until we -- until you issue your 10-K. 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 took over a company that was in tough conditions 6 years ago, and we took it public 3 years ago, and we became an accelerated filer last year, and the stakes went up. And so I wouldn't overread any of it. We're just executing on all dimensions, including in finance.

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

Being a public company is an absolute pleasure, as you can imagine, when it comes to things...

Maybe I'll sneak one last in since you guys have -- you mentioned reduced commercial auto by almost 2/3 now over the last few years. Are we kind of 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?

Yes. That'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's a significant part that has been consistently delivering unbelievable returns for us over the course of 12 years, predated me. And so it's 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'll 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 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 -- not development, reduction of our written premium over the course of the next couple of quarters that works its way through. But there's no additional actions, and we feel very good about our portfolio. I don't think there's anything more that we would change at this point. And so yes, there will be some impacts, but it's not anything new. It's just the nonrenewal of business that we took decisions 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. 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 3 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?

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've talked about in the past, that in 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 seed. And so -- but that isn't unique to the Uber relationship. That's 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 had the headlines right, and that's just the geography of what I described as sort of the macro geography behind that.

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?

Well, I think that -- Michael, thanks for the question. 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're 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 cost 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're making that decision on a long-term basis. But oftentimes, the pricing backdrop acts as an impetus. And I think that probably that's what you're seeing here.

Okay. That's helpful. And maybe just a quick second question on a topic we haven't talked about in a while is California and the wildfires. Given the suits on PG&E, any possible updates on any recoveries from that stuff?

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

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?

Tracy, thanks for the question. So I just will remind you, and I think we're 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're not a small account writer. That said, on the property side, I think I've talked about these statistics in the past, about a little more than 50% of our business, we're writing the full limits, the full TIVs and less than 50%, we're 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're really not in the small market. We're certainly not in the binding authority market. We're not in the market that is kind of the submit business that comes out of the binding authority market.

But if I were to highlight one area where I'm seeing it is that we -- the march on property went from very large accounts visible in our global property to now we're seeing pressure on premiums that are less than $50,000, right? It's just -- it's 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's intentional on our part. It's the same thing on the liability side. We write really, really tough classes, hazard, high severity, low frequency and we charge a lot and we get our terms and conditions. So it probably -- we're probably not well positioned to address that question as compared to others because of the makeup and I think that we're 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'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.

Yes. So the first thing I'd say -- so thanks for the question, Tracy. The first thing I'd 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 -- if you read what Uber is doing, it's more than just rideshare transporting people. 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 data set on the insurer side, to our knowledge, is the largest data set available. And so we understand the risk that you're 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 inures to the AVs is quite considerable if you're talking about a vehicle-to-vehicle collision. And so again, I think that, 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, et cetera, et cetera, the driver errors 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. There's no company better positioned. And in a difficult torque backdrop, that's an immensely valuable thing.

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?

Andrew, this is Andrew. Mark will jump in here as well. We're looking for the numbers. I think that a couple of different points I'd make. One is that I think our full year numbers were around 65%, which is, I believe, up a couple of 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's just the ebbs and flows of any given quarter and mix of business. But I believe that we've 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 of that, Andrew, we -- on our excess, we went to market with a clear intention to increase our seed, and we were able to do that and not in a material fashion, but we also made the trade-off that we were going to get the seed 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 seed quite considerably. And both those trades are very smart trades for us. Obviously, in one case, we're 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're happy to keep our own cooking.

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.

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?

Yes. I think that we are -- we certainly see opportunities. And I think as a company, I've said this before, and I would absolutely say this is true of Apollo as well. We're strategically led, right? So there are places that we want to go, but we're not necessarily saying, well, that has to happen this quarter. We're 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. What I can say is that there are things in the works. But whether those things crystallize in '26, hard to know because we're 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'll say what I've 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 wouldn't describe sort of our position as being an active acquirer. We've made 2 small other acquisitions. We made an acquisition in surety acquisition, in aviation over the sort of 5.5-year tenure that I've been at the company. But I think it's not something that will be too much of a focus, but we are very active in making sure we stay abreast of what's out there should there be a unique opportunity that's a great match 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 2?

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 would say, by and large, the companies that we hold out as being responsible competitors, I think that they're being responsible. I think they're 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 the results through the cycle. You should always take pause at companies that don't have a track record in casualty that grow a lot, whether they're public or private because the casualty market is a -- it's an interesting and challenging market in really simple terms, right?

All you have to do is your own analysis, which looks at the -- what's 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'm sure some of the guys that are growing are doing it really -- 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're better underwriters. They're doing it to get share, and they're doing it oftentimes with price and terms.

And that's just -- that's the logics of our business, right? 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're 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's like use your common sense and that common sense in 3, 4 and 5 years will prove to be right.

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

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 -- the coverage you're writing?

Yes. Matt, thanks. We're pleased that you can join. You just surprised us. We didn't think you were going to join. So look, first off, commercial auto, you're required to carry coverage to have a vehicle on the road. So this is not that, right? There's an embedded coverage. But functionally, if you think about this, right, and I'll just -- we'll just say an autonomous vehicle causes an accident, strikes something. It's hard to say whether that's sort of commercial auto in a traditional sense, product liability, general liability, et cetera, et cetera. It's a redefinition.

And the policy, which is not going to be visible to anybody, it's designed and it is proprietary and embedded into the Uber platform. So it's available to the participants to fully understand how it works. It's unique to the specifics of the fact that you're 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's helpful. And then -- and you've referenced a couple of times, obviously, the kind of lower frequency severity of AVs versus human drivers. Waymo has published some statistics on this kind of suggesting depending how you slice it, like 80% to 90% lower accident frequency across the various categories kind of in the same cities where they're rolled out. Is kind of your understanding of kind of the policies working with Uber that something of that magnitude should be expected in kind of the exposures you have to? Or is there something unique to Waymo versus what Uber is doing that would make that difference?

Well, one thing I'd say, Matt, is you should go on to 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 don't want to comment on any specific company. But I -- here's what I'd say to you. What I'd 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'm talking specifically about bodily injury because the physical damage, which we would not be involved in covering of the AV can be very expensive, right, because these are very expensive -- 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's a big part of the calculus as well. And ultimately, when you're 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's going to be a huge advantage. I like the side that we are on in this instance. And I think over time, that's going to become very well understood across the industry, including in the personal auto market.

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 you -- 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.

Good day, and thank you for standing by. Welcome to the Q3 2025 Skyward Specialty 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. Please go ahead.

Thank you, Lisa. Good afternoon, everyone, and welcome to our third quarter 2025 earnings conference call. Today, I am joined by Chairman and Chief Executive Officer, Andrew Robinson; and Chief Financial Officer, Mark Haushill.

We will begin the call today with our prepared remarks, and 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 or 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 turn the call over to Andrew.

Thank you, Kevin. Good afternoon, and thank you for joining us. Our third quarter results were exceptional, extending our outstanding and consistent track record of profitable growth and double-digit returns. We achieved a number of company-best, including $44 million in operating income, $38 million in underwriting income, and 89.2% combined ratio, and 52% growth in gross written premiums. Aside from these company records, we also grew earnings by over 40% and delivered an annualized return on equity of 19.7%.

Our results highlight the strength, durability and execution excellence of our Rule Our Niche strategy. Also, our results again demonstrate our very intentional construction of our diversified portfolio of top-notch underwriting businesses, in particular, the sizable portion of our portfolio that is a less exposed to the P&C cycles. In this quarter, 5 of 9 divisions grew by over 25%, with our Agriculture unit as the largest contributor, which I will discuss later in this call.

This quarter also underscored our prudence to walk away from business where necessary. Market conditions across much of the P&C market are now showing signs of increased competition. As always, our teams are responding with discipline, leaning in where market dynamics support our return thresholds, and stepping back where they do not.

Lastly, before I turn the call over to Mark, I want to welcome Kevin Reed, our new Vice President of Investor Relations, who opened this call. Kevin is a deeply experienced IR professional, and we're pleased to have him lead this function, allowing Natalie, who has been outstanding, taking on double duty since our IPO, to fully focus on our other financial leadership responsibilities.

With that, I'll turn the call over to Mark to discuss our financial results in greater detail. Mark?

Thank you, Andrew. We had an exceptional quarter, reporting adjusted operating income of $44 million or $1.05 per diluted share and net income of $45.9 million or $1.10 per diluted share. Gross written premiums grew by 52% in the quarter versus the prior year. One significant driver of our growth was our Agricultural unit, and more specifically, the growth of our product in the U.S. dairy and livestock industry. Setting aside Agriculture, gross written premiums grew at a strong mid-teens rate in aggregate compared to the prior year, driven by A&H, Captives, Surety, and Specialty programs with all 4 of these divisions growing by over 25%.

Going forward, we expect quarterly growth to be somewhat uneven, as some of the divisions and units such as Ag, Captives, Specialty programs and A&H have very concentrated renewal cycles, driving meaningful quarterly differences as seen this quarter. There will be quarters where growth is lower than what we have reported in each of the first 3 quarters this year. Net written premiums grew by 64% and our net retention through 9 months of 65.1%, increased over 62.9% in the prior year.

Turning to our underwriting results. Our combined ratio of 89.2% was driven by strong underlying results and a modest catastrophe quarter. The non-cat loss ratio of 60.2% improved 0.4 points compared to 2024. We continue to observe specific pockets of increased auto liability severity inflation, and -- to a lesser extent, auto exposed excess severity inflation, particularly in our construction unit. More broadly, given the wider loss inflation severity backdrop, we continue to maintain a selective position on growing our exposure in occurrence liability lines. Our shorter tail lines, including Property, Surety and Ag continue to emerge favorably as does our professional, Energy and E&S liability portfolio.

Our reserve position continues to be strong if IBNR makes up 73% of our net reserves, while the duration of our liabilities continues to shorten. As a reminder, our ground-up review of our loss reserves will be completed in the fourth quarter. The expense ratio of 28.4% improved 0.5 points over the prior year quarter due to economies of scale, and was in line with our expectation of sub-30s. The $2.7 million increase in net investment income over the prior quarter was due to $5.3 million increase in income from our fixed income portfolio, resulting from higher yield, and a significant increase in the invested asset base. This was partially offset by losses in our alternative and strategic investments.

Underlying marks on the private credit holdings and our alternative asset portfolio continued to generate some volatility in net investment income in the quarter. This portfolio now represents approximately 4% of our investment portfolio at September 30. Through 9 months, $32 million of capital was returned, and reinvested in our fixed income portfolio.

During the quarter, we completed the monetization of our equity portfolio, and realized gains of $16.3 million. We redeployed the proceeds into fixed income securities. This repositioning aligns our portfolio with our long-term risk and return objectives, enhances predictability of investment income, and provides further flexibility to support future growth. In the third quarter, we put $62 million to work at 5.6%. Our embedded yield was 5.3% at September 30, up from 5% a year ago. Our financial leverage is modest, as we finished the quarter under a 11% debt-to-capital ratio.

Finally, we continue to prepare for the Apollo acquisition, which we expect to close in the early first quarter of 2026, subject to regulatory approvals. Deal financing is progressing well and remains on track. And post close, we expect our leverage to be approximately 28%. We recognize that the equity research and investor community are working to model the impact of the Apollo acquisition. Once we are further along in the approval process likely in early December, we anticipate providing guidance on Apollo's 2026 financial metrics.

During our fourth quarter call in February, we will provide additional guidance on the Skyward business. Our teams are engaged in a thoughtful plan of execution once the transaction closes. The combination will expand our specialty capabilities, deepen our bench of underwriting talent, and strengthen our ability to deliver superior long-term returns.

Now I will turn the call back over to Andrew.

Thank you, Mark. The third quarter once again highlights the distinctiveness, strength, and consistency of our business and execution of our strategy. We continue to not only deliver excellent underwriting results and shareholder returns, but our top line growth and resulting earnings growth continue to stand out. These financial metrics clearly showcase that we are different from the rest of the P&C industry, and how we approach the market and the portfolio of businesses we have built.

Given the unusually robust growth this quarter, I want to take a moment to discuss how we are managing through this changing market. This quarter, we grew by over 25% in 5 of our 9 divisions. That said, we also reduced our writings again in Global Property and in the construction unit of our Construction and Energy Solutions division as well as parts of our Professional Lines division. In these areas, opportunities to write business at pricing terms that meet our high return thresholds are simply challenged. Within those divisions, however, we've had excellent success growing specific units, such as healthcare professional liability and professional lines, and the energy unit in our Construction and Energy Solutions division.

More broadly, Global Property and -- to a lesser extent, E&S Property and inland marine are becoming increasingly competitive. And in Casualty, we're being very selective given the loss inflation backdrop. And yet we still see opportunities in E&S Liability, and Captives, both of which are growing steadily as is our energy unit, which I noted a moment ago.

Turning to our Ag unit, our success this year is the result of 3 years of effort to build a product that is unique, and to put in place a strategy to manage potential volatility. Demand for reinsurance capacity in dairy and livestock revenue protection has surged as producers and approved insurance providers have sought stable risk transfer solutions, amid price volatility in the market. The rewards for our creativity and innovation are now fully materializing. Our success story in Ag follows other divisions.

In A&H, we have grown by 45% in the quarter and year-to-date. As we discussed in the past, we focus on the small employer market and medical cost management. We use AI predictive analytics in risk qualification and selection. Our pursued before pay claims approach has high impact for our customers, and we built captive capabilities that sit side-by-side with our single company stop-loss products. And our performance as per the recent NAIC A&H policy experience report on the 2024 calendar year highlights, we are 15 points better than the industry.

In Surety this quarter, we resumed a stronger growth trajectory and continue to gain market share as federal funds began to flow. And yet we're not resting on our laurels. We launched an industry-first product called EndWell, which is an amortized, collateralized product for decommissioning obligations for the oil and gas industry. This launch comes amid challenges to find quality Surety solutions given the dislocation that has resulted from a handful of high-profile bankruptcy-driven losses over the past few years. Undoubtedly, like our prior launches in Surety, and in other divisions, we build a strong and profitable book around this product.

Clearly, our innovation to Rule Our Niche and execution stands out, and is showing in both our growth and profitability, and allows us to navigate the more challenging P&C market in ways that others cannot. While our profitable growth is certainly externally differentiating, I continue to believe we're leading in how we're using technology to win. SkyView, which is short for Skyward Visual Underwriting Experience, our award-winning underwriting workstation allows us to multiply with great alacrity the deployment of new capabilities to our underwriters. We continue to make huge leaps forward in using bots to automate submission ingestion through generating high-impact narratives that summarize the key risk vectors of each account. And we're making strides in using GPTs to allow our underwriters and leaders to interrogate, investigate aspects of an account such as summarizing claims or more broadly summarizing performance insights on a book of business. We believe this continues to be a first mover and learning curve advantage that inures to us. And as long as we stay ahead of the AI arms race, we'll continue to lead and win.

Finally, our operational metrics remain positive. Renewal pricing bounced up a tick from the prior quarter to mid-single digits plus peer rate. And again, we realized mid-digit exposure growth, both excluding Global Property. New business pricing continued to be in line with our in-force book. Retention remained in the mid-70s for the quarter, driven by business mix and intentional actions on auto, within our construction unit. And lastly, submission growth was consistent, growing in the mid-teens this quarter.

We also remain incredibly excited about closing the Apollo acquisition and beginning to tackle the market together with our new colleagues, while we continue to operate independently until the transaction does close. The combination of our companies represents a significant step forward in our ability to innovate, lead with talent and technology, and build winning positions across the specialty insurance market.

In summary, this was another excellent quarter for Skyward Specialty. We continue to drive top quartile underwriting results, and leverage the diversity of our portfolio to continue our impressive growth and earnings, while the broader P&C market becomes more challenging.

With that, I'd now like to turn the call back over to the operator to open up for Q&A. Operator?

[Operator Instructions] The first question that I have today will be coming from the line of C. Gregory Peters of Raymond James.

I guess the logical place to start will be with your top line results. If we can put the Agricultural opportunity aside, just curious about some of the numbers we're seeing, Accident & Health, it has been strong all year, and the Captives are doing quite well, too. So maybe give us some perspective on where you're having some success in some of those other segments of your business is a good starting point?

Well, look, I think that as I said in the prepared remarks, I think we're just -- I'd start by saying we're being appropriately cautious, thoughtful. Describe it how you want in large chunks of what I would describe as the more traditional parts of the P&C market. It's just -- it's becoming more competitive and certainly more nuanced. I think the places we're writing business in those other divisions are done on smart terms and conditions. That said, look, I think that we just simply have connected in other parts of our business. You saw Surety has bounced back 26% growth this past quarter. And a lot of that really was we were still maintaining strong growth as compared to the industry on Surety, for the first half of the year, just it bounced back to an -- sort of a much more impressive level once the federal funds began to flow. And I highlighted a new product launch where we've had some really good success already. We're very bullish about the outlook on that, and that's sort of in the commercial Surety part of our business.

On A&H, I think we've talked at length about, I did highlight the loss ratio number just to provide an external reference point. Again, I think it's the small account market, medical cost management focus, and the fact that we built an operating model that I think is really quite distinctive. And we're seeing that come through both in sort of traditional single company stop-loss accounts as well as on the group Captive side. Within Captives, on the P&C side, a lot of that really is just continuing to grow with the Captives we have in place. We -- it's been some number of quarters since we launched a new Captive, but the ones that we have seem to be continuing to add members.

Of course, we're -- I think, more insulated to the market in total in terms of the price that we're able to put into the Captives, that's really much more sort of like a -- I would describe it as a stable, you're always keeping price up against loss trend, your Captive members understand that, and that seems to work really well. And so I think each one is unique, but I think the reasons are a lot about how we basically have built our business and our product? And the fact that through 9 months this year, nearly 50% of our business is in those categories that are not P&C cycle exposed. And I think that it's hard for me to sort of identify any other company who's got a portfolio that looks like ours.

I appreciate, Mark, your comments about holding back on providing '26 guidance on Apollo. But in the context of, Andrew, what you said about your business being somewhat better positioned for cycle management. Maybe you could spend a minute and talk about how the Apollo third quarter results look? And how they're positioned in the context of cycle management?

Yes, I mean, Greg, there really -- there's not a lot I can say, because to be honest, we do not have regulatory approval, and I -- there's like boundaries where -- well, I would be feel comfortable, I think others, including my General Counsel sitting my left, probably wouldn't. So, what I will say to you, Greg, is that no different than when we announced the transaction. We really, really like everything that the Apollo team has done. And I would say that on the sort of 1969 more specialty-focused syndicate, they're weighted pretty heavily towards specialty classes, and while they too are not immune to the market cycle, in many of their classes, they're definitely not seeing sort of some of the macro concerns, and certainly aren't heavily weighted towards property cat and things like that.

As we've talked about, '71 is an entirely different business and is actually tied much more closely to the exposure growth of sort of digital economy emerging industries. And in that regard, it feels like that that's rather disconnected from the P&C market largely because that business is not being competed across the market. There's very, very few -- and I would dare say one, which is 1971 and the things that they do, real competitors in that category. So I think not unlike ours, there's aspects about their business that are somewhat insulated from some of the macro concerns that you all are asking about on your interactions with other companies.

[Operator Instructions] Next question coming from the line of Tracy Benguigui of Wolfe Research.

Most of the P&C insurers right now are sitting on too much excess capital, so much so, that it's too much to deploy for underwriting opportunities. So we've seen more muted growth, and Skyward is definitely more growthy, and we've clearly seen that this quarter. I would argue that maybe you're sitting on like lower levels of capital in a way that might be a good thing, because that means you will have a lot of discipline given more is at stake. So my question is, if we see more growth continuing at these more elevated levels going forward, I get it, it might be uneven by quarter. Where would this capital be coming from? I mean it feels like you don't have a lot of debt headroom. So would you access the equity markets? Or do you think the capital growth through retained earnings could sustain your growth ambitions?

I love the positivity relative to our growth outlook. Look, I think the first thing I'd say is through 3 quarters, in every one of the 3 quarters, I would argue we were differentiated on growth by a material level compared to maybe the companies you might regularly compare us to. Yes, I would acknowledge that this quarter is kind of an eye-popping number, 27% growth through the first 3 quarters this year, I will just say straight up is more growth than we expected. So that's a good thing. That just says that the things that we're doing have sensibly positioned us against the market opportunities.

That said, look, I don't think that -- I think it's impractical to think that something like a 27% growth is kind of a reference number as we look out into the future. But should we find a situation where we are capital constrained, I'll highlight to you something that I said when we announced the Apollo transaction, which is one of the really interesting dimensions of Apollo is that they are a capital-light business. Their capital stack is effectively made up of 25% of their own capital, and 75% of other people's capital with clear alignment between them and their other capital providers. And we think that, that is always an interesting option that potentially could move not our business, but our economic model to have a greater portion that are fee-based. And I'm not saying that in any way, we are concerned about our capital.

We don't think that investors give us enough credit for the fact that we are an incredibly capital-efficient organization, driven by the fact that we've intentionally constructed our business portfolio the way we have. I mean we are very capital efficient. But that said, we don't necessarily see any capital constraints. But that doesn't sort of set aside this potential point that we will be evaluating whether some portion of our underwriting income should be recaptured through fees over time.

I appreciate hearing the commentary about A&H, Surety, Captives and Agriculture growth. But could you touch on the 52% growth in specialty programs? I believe the segment includes Property, GL, Commercial Auto, Excess Liability and Workers' Comp. So among those lines, where were the growth standouts?

Yes. Great question. And I think let me just start with one notable point, which is through 9 months, if you look at our Specialty Programs premium as a percentage of our premium overall, it's 13.4%, right? And I'd remind you that a meaningful portion of that is through relationships where we have a meaningful ownership position. So I think we're doing this in a very sort of intentional, very thoughtful way.

That said, the last few quarters, we've seen a lot of growth in programs. And as I've explained in the past, we added two programs. One was a Warranty Indemnity program, and that is one where we own a position in that entity. And the other is a long-standing personal relationship that I have, and that program is in Brownwater and Greenwater Marine. And those two programs, we started having some of the business come on to our books in -- I believe, around March of this year. And so by the time that we get through the first quarter here, we're going to continue to see growth on a relative basis in programs, that's going to be not inconsiderable through this quarter and through the next quarter. But by the time we get to the second quarter of next year, we're going to be lapping ourselves, and I don't think you're going to see that kind of growth numbers. As I've mentioned, like when you add a program, it can be chunky, and it can make your numbers look different or unique. But in this case, it's really quite controlled around two very important relationships for us.

[Operator Instructions] Our next question will be coming from the line of Matt Carletti of Citizens Capital Markets.

A lot of what I had has been asked and answered, but maybe just one if I can. Mark, you -- I think, Mark, it was you that mentioned how there's going to be more volatility quarter-to-quarter in the growth rates kind of around, which kind of lines of business have big renewal periods. Can you help us with that at all? Is there -- and should we think about certain quarters of the year is being kind of we're going to have our strongest growth in this quarter typically because of the big renewal books? And then there's another quarter that will be lighter? Or is it a little more -- you kind of see what you get as the renewals come?

I mean, look, the -- what we saw this quarter with the Ag, that's heavily a Q3 quarter, clearly. In terms of other businesses, A&H is weighted more towards the first quarter, Property towards the first half of the year. What else am I missing, Andrew? That's -- those are the three.

Yes, those are three that stand out. And then obviously, the Specialty programs is lumpy as well, based on when programs renew. What I'd say to you, Matt, is that -- because as I mentioned, I think, in response to Tracy's questions, like we ourselves are -- we're pretty elated with 27% growth through 9 months, it was more than we expected.

I think as we come around to our guidance for next year, I think we'll try to be more specific in helping you better understand as we've digested all this and harmonizing. But Mark is right. I think that, look, in general, there's nothing particularly exciting happening in the fourth quarter, and by the way, there's a bunch of companies that are way behind plan, that are leaning in maybe a little bit even more competitively than otherwise they are. And that's not me sort of saying to you our fourth quarter is not going to be a strong fourth quarter or any of those things. But there's nothing unusual happening in the fourth quarter one way or another, and it is a more competitive quarter always as companies try to fill out their full year. So -- but once we get beyond that and we get to our guidance that we'll provide you in the new year, we'll say something about that to help you make sure that you're accounting for that in your plans on written premium as opposed to earned premium.

[Operator Instructions] Our next question is coming from the line of Meyer Shields of Keefe, Bruyette, & Woods.

Sort of stay on this topic, but I wanted to get a sense as to whether the Ag premium that you wrote in this quarter, does that have even earnings patterns over the course of the year? Or is it like the crop side of things where a lot of it's earned as written?

Meyer, it's Mark. Yes, we'll earn it ratably over the next 12 months for what we wrote this quarter. We don't exposure measure or exposure account for where there's lumpy premium recognition. You'll see it in the growth. But in terms of earnings, just assume it's flat through the rest of the next 12 months. Does that help?

It helps a tremendous amount.

That's true for our entire Ag book and other businesses that have kind of unique features like that like Surety and so forth, we apply that same approach consistently.

Related question, I just want to make sure I understood the comments about the lumpiness. You're just talking about the fact that these different niches have different renewal calendar dates, not that there's anything nonrecurring or fundamentally nonrecurring in the third quarter premium?

No, there's no -- there's no nonrecurring items here at all. If something comes up that's nonrecurring or we pull a policy forward or push back that's sizable, we would highlight that. But no, there's nothing unusual. Look, I think it's our way of basically just saying, look, we delivered 27% growth through the first 3 quarters. I'm sure across the universe of each of the companies that you cover, there's maybe one, if any, companies that look like that. And this quarter at 51%, 52% growth is just -- it kind of stands out. And we just -- we're simply just trying to make sure that you as research analysts and our investors understand that there is real lumpiness here, and it's evident through the first 3 quarters.

100%. You are very clear. I just wanted to make sure that I wasn't misinterpreting stuff. Last question, I guess, there was -- it's clearly understandable step-up in operating and general expenses on a year-over-year basis. And I assume that, that relates to the growth in gross written premium. Is this a good starting point going forward? The $52 million that we saw in the quarter?

Yes, Meyer, there's not going to be much movement quarter-over-quarter. So yes, I think that's a pretty good baseline. I missed the first part of the question.

I was just -- I'm assuming, and please correct me if I'm wrong, that the reason you had this like few step-up from $41 million to $52 million from the second quarter to the third, it's just associated with the gross written premiums. Obviously, we see it an acquisition expenses. So I just wanted to confirm that it's the right baseline for G&A expense as well?

Bear with me one second.

Yes, I think, Meyer, to try to make sure we're looking at what you're looking at, we -- I would suggest let's call -- can we take that off-line and make sure that we understand and give you an explanation. I will just highlight that we're -- our other underwriting expense is going down period-on-period. So as a -- on a ratio basis, so we're getting leveraged away from acquisition expense period-on-period. So I want to make sure that we're looking at what you're looking at.

[Operator Instructions] Our next question is coming from the line of Michael Zaremski of BMO Capital Markets.

Just on the overall retention levels that you all give us, which are helpful. I guess, in mid-70s, and I guess just at a high level, when we think of E&S business, we think of E&S kind of being in the 70s and more traditional being in the mid-80s, maybe higher. So I guess the fact that you guys are mid-70s, I guess I just want to make sure just means that the non-E&S portion of your book, just -- Specialty portion is just runs at a naturally lower retention level?

Yes, Mike, this is Andrew. Just to step back on this and remind you something that we've talked about in the past, there are three big drivers of our gross to net that make us look a little bit different than maybe others, and those three that we've always reminded of are one; our Global Property business. Remember, we have a very large line, and we have a strong long-standing quota share participation that allows us to have that large line. And that's one big part. The second is Captives, which is structurally that way. And then the third is A&H, where we've had historically on the stand-alone stop-loss business, a very sizable quota share support with a very attractive seed that allows us to effectively lock in a portion of our underwriting results. And then similarly, on the A&H Captives, the same dynamic happening.

That said, in the other businesses, as things grow like Ag and so forth, there's very little reinsurance or in that case retrocessional reinsurance used. And so some of this is just straight up mix. And I wouldn't look at this quarter, I would look at the year-to-date, where I think we're sitting at about 65-ish percent, I believe, year-to-date. And I think as we get to the end of the year, that sort of end of year number will be a good proxy for your models for next year.

Pivoting to some of the comments Mark made on just kind of the overall reserve puts and takes. It seemed like nothing new there. Commercial Auto, and Construction were kind of called out as continuing to be as the industries also sees under pressure. But you also mentioned a 4Q review. So I just want to make sure there's probably nothing there. Are you saying that there might be a deeper dive in 4Q on some of these items?

Mike, it's Mark. It's just part of our process where -- and we've talked about this a lot in terms of our philosophy. Look, we do look and review our reserves each and every quarter. Our business doesn't move that quickly, where I think it's appropriate to respond every single quarter to what we see. All I'm just trying to foreshadow is that's when we will all -- we will do the deep dive review and any adjustments that we see, we'll make them in the fourth quarter.

To your point, I feel great about where we are in terms of reserves. Our philosophy has not changed. We continue to be conservative, and that will continue. The industry, and you noted auto liability, yes, that's something that we've been looking at a lot. But the other part of what I said in my comments is what we've seen in terms of favorable emergence elsewhere. So short story, Mike, I feel great about where we are, but we'll update you in the fourth quarter with what happens.

Lastly, just a follow-up to Tracy's question on the premium growth versus equity levels. So -- loud and clear what you said there. I just want to -- just with the Apollo deal coming on, there's the financing terms and the timeline that you had given us in the past. Is there -- would you guys -- would you all tinker with any of the financing or timeline based on just this much better-than-expected growth or nothing to think through there?

No, nothing to shift through that, Mike. There's nothing about this quarter that changes how we're approaching things timeline. We still expect very early in the first quarter of next year -- very early in the first quarter of next year, and really nothing has changed. The financing has gone really well. We're in a great position. And yes, we're -- there's nothing about the execution that's noteworthy. We're in a great spot.

[Operator Instructions] Our next question will be coming from the line of Andrew Andersen of Jefferies.

Maybe kind of back on reserves and just loss inflation. I think the construction inflation comment was new. And we've heard from some other specialty companies of some construction defect claims, but maybe you could just expand a bit on what you were trying to get across with the construction inflation comment?

Yes. So Andrew, this is Andrew, and Mark may add to that. I think more of what we're seeing, to be honest, is I don't know how to be sort of too vivid about this, but we basically see the kind of severity that you might see in heavy auto now making its way into F-150 accidents. Construction, some of our book, the trades basically leading the site, an accident occurring. And what we're seeing is severity inflation that, to be honest, is just -- listen, I feel like I've been one of the earliest and most consistent protagonists on this, because this is not new.

The way I know this isn't new, is because through 9 months this year, 11% of our book is auto. And we took the company public, it was 25%. And that 11% has probably gone about 80% rate since then. And so we're probably down on an exposure basis, well less than the 60% from a premium basis -- 40% from a premium basis. It's just that we keep seeing the loss inflationary dimensions emerge in areas that we're surprised by. And I don't mean like we're surprised like we're not responsible, prudent professionals about how we're looking at our business, like you're just simply surprised that, that a claim of this size and an injury of this could result in that kind of loss. And yet I have full confidence in our claims folks the way that they're executing. And it's really nothing much more complex than that. And I think that it should give everybody pause for -- even if you believe that you have ring-fenced the inflationary areas, I believe that anything that is personal injury exposed occurrence liability is further ground for considerable inflation. And you have to be incredibly thoughtful about how you're constructing your occurrence liability book. And I wouldn't read into anything more than what I just said, because that really is kind of the dimension. And you are right that we've been talking about construction now for a couple of quarters, but it has been auto-focused thing. And -- but that's been a theme that's been consistent for us for some number of quarters.

Then just on kind of the overall rate commentary, I think I heard mid-single-digit plus peer rate, and mid-single-digit exposure, both excluding Property. The mid-single digit --

Excluding Global Property, just Global Property, Andrew.

The exposure piece sounds fairly sizable. Could you maybe just help us frame how that stands relative to the first half of the year, the [ Global Property ] exposure?

Yes, great question. I highlighted in the last quarter as well. We ourselves were -- listen, I think we're all sort of trying to figure out what the economy -- what's happening in the economy. And I think in the second quarter, we similarly had a really surprisingly positive result on exposure growth. If you kind of look out over the past, I don't know, maybe 2 to 3 years, we've been bouncing between kind of like 2% and 4% on any quarter. And then the last couple of quarters, it's ticked up a bit. That's positive. I don't know if it tells us anything other than in some of our businesses, we recapture a tiny little bit of rate in exposure. I talked about Surety is somewhat unique as it relates to exposure. But we're just reporting out on what we're seeing. So I think that's a positive sign, right? I guess, certainly, you want to be able to grow premiums and exposure growth is a good way to grow premiums as long as you're priced properly.

[Operator Instructions] Our next question will be coming from the line of Paul Newsome of Piper Sandler.

Great. Just a couple of follow-ups. One was just a clarification. The debt-to-cap 21%, I assume that's -- I believe that's a decent amount above where you want it to be long term. Is it a fair assumption that after the deal, you'd be looking at basically retaining capital until that falls down into your more comfortable range?

Well, actually, Paul, I'm not uncomfortable at 28%, 28.5% at all, actually. We intentionally were under-levered, if you will to provide us with this flexibility. So yes, I'm not uncomfortable with it at all. The organic capital growth itself, as you just pointed out, will reduce the leverage and it will over time. So yes, a -- I'm not uncomfortable with the 28% and the organic capital generation over the next 12 months to 18 months will serve to reduce the deleverage ratio.

Then unrelated question, but a little bit of follow-up on reinsurance usage. It's looking like reinsurance is amongst the most competitive places. Can that be an advantage for you folks given the structure of your company? And what you've talked about previously?

Yes. This is Andrew. Look, I mean, I think if you go from top to bottom, our sort of purchase of reinsurance is pretty fairly spread. Our cat program, as you know, is not a monster cat program. Our spend is kind of mid-single digits plus kind of millions of dollars on cat. It's like, yes, the reinsurance markets becoming obviously more favorable to cedents. But I don't know if that -- listen, I think that it can be helpful, but it's not going to be a big [Technical Difficulty] improvement year-over-year.

Our next question will be coming from the line of Michael Phillips of Oppenheimer.

Andrew, maybe more of a theoretical question. How strong do you think the correlation is, if it even exists between the P&C pricing cycle and demand for captive formation?

That's a -- that's a really great question. So before we really kind of leaned in on Captives, we looked at this. And during -- if you allow us, I can follow up and try to dig out some of the information. But during the sort of the soft market period leading up to kind of, let's just call it 2019, 2020 kind of timeframe, Captive growth still was quite robust, and relative to the P&C market, very robust. There is no question to your point that a hard market environment appropriately should force -- in our case, we're talking group Captives, so mid-market kinds of risk, a company that really wants to have more direct financial connection to their cost of risk. Certainly, that becomes an impetus. But on the flip side, the retention in the Captives is very sticky, because you generally construct them in a way that is quite sort of measured and controlled renewal cycle to renewal cycle. And you're not -- you're already sort of self-selecting in risk that have an attention towards risk management, and have capabilities that the wider market on average doesn't have. And so we also think that in a softer market, you're more immune. This is the point about sort of its less cycle exposed, you're more immune to the P&C cycle than otherwise you would be even if you're riding P&C lines, which we are in our CapEx number.

You're saying you're more immune because of the retention piece?

Yes, because of the retention, and because the Captive members themselves are directly involved in seeing the experience, and so in that experience tends to be a much more stable, consistent, here's what's happening with exposure growth. Here's what's happening with losses. Here's what's happening with loss inflation, because they're eating their own cooking, right? I mean it's like they're risk managers and if they're good, they get the benefits. And if they're not good, they see the cost. And if they're just very consistent, which many of them are in our case, then you get a much more stable period-over-period kind of renewal.

Perfect, perfect. Helpful. I guess, one of the reason why I was asking the category?

It's one of the reasons we love the category. It's just -- we don't have the benefits of being travelers or Hartford writing small commercial. This is our version of kind of like stick to your writs kind of ballast for the business.

So it sounds like -- one of the reasons for the question is, should we get into a softer market, does that mean any kind of slight headwind to your growth in Captives? It sounds like that's not something you'd be concerned about?

We'll know when the time comes, but it's certainly not my top concern as compared to other things I'd be concerned about in the soft market.

Our next question will be coming from the line of Mark Hughes of Truist.

Andrew, the transactional E&S business, that's been a little slower growth. I think you talked about E&S liability being a good area for you. Does that fall under the transactional bucket or heading?

Yes.

And yes, what if --

We write -- as I think we've mentioned in the past, we -- our book there is -- it's a small, medium business, average premium between $40,000 to $50,000, on the property side, 50% to 60% of what we write, our primary and full limits and 40% to 50%, we're writing usually the primary and somebody else is writing the excess. And then on the liability side, it's a lot of million-dollar primaries and some supported and unsupported excess. Very little of what we write there has auto exposure. And that's the book. That's -- and so we talked about it, the property side, I just -- I'll just say it straight up, because we've listened to some other companies talk about this. Anybody who is presenting a case, and a few are presenting a case that property in the E&S market, even on the smaller side of it is -- from a rate perspective is going in a positive direction isn't starting from a position of good prudential pricing. And there's a couple out there with those commentary.

On the liabilities side, I think consistent with what others have said, the sort of the primary million, primary GL is pretty competitive out there, some silliness from MGAs and so forth. And the excess is a better market. And for our part, our excess is either supported over our primary, if we're writing unsupported, the thing that we're generally writing is business that has very little auto exposure to it, and we're very thoughtful about sort of the personal injury, how heavy that personal injury, loss inflation profile of exposure looks, but the market is still pretty good.

Yes. What's been the -- just a very recent trend in property, is it kind of stepped down, and therefore, your -- you've adjusted your appetite? Or is it just continuing to drift downward?

Yes. Listen, I think that there's just -- I think Tracy might have made this point. They're just -- there's way too much capacity knocking around the property market. If you're writing cat and it doesn't have to be big limit cat, it doesn't be shared and layered. It's just -- if you're writing Tier 1 cat, you're writing against -- there's some just crazy stupidity out there, like just stuff that doesn't make any sense, and anybody who believes it makes sense is fooling themselves. And what happens is that good smart underwriters will say, and I've heard this from some of the other CEOs in the calls that they're saying there's just not opportunity there, so they go to the next thing, and they go to the next thing.

So what happens as you -- you get an erosion in the market that just starts to find its way into other areas. To the point where, as I've mentioned in the past, for example, in our property book, we write fires our principal peril. We write really, really, really tough risk. We write the stuff that's in the E&S market for a reason. But when you start to see silly competition come to that part of the market, there's a price where we will write the business, and there's a price where we won't. And we're one of the best at it. I just -- I'll say straight up, we make a lot of money on the property side, we're super smart. And we're very sensible, we deliver a good product for our customers, but we charge an appropriate price for the exposure. And when the guys who come in, and don't know what they're doing in that, that's just problematic. And what's happening is that's happening in more and more categories across the property market.

Yes, I still feel very good about our business, and our ability to navigate. So I wouldn't want to be anybody else other than us.

We now have a follow-up question coming from the line of Tracy Benguigui of Wolfe Research.

I'm just curious, given the uneven growth by segment, which should lead to some mix shift. I'm wondering how we should be thinking about your underlying loss ratio and expense ratio? Like, for instance, Surety is a low loss ratio, high expense ratio product and other products have different profiles.

Yes. It's an outstanding question, because we have it all in the book, right? We have examples like Surety, which is incredibly high acquisition expense, very low loss ratio. We have A&H, which is low acquisition expense, and low expense overall and high loss ratio, similar profile on the Ag side. And what I'd say is, is that, again, what we'll do is we'll come back in our guidance. But I think that through the first 3 quarters, you're seeing the earnings of that mix change coming through. But obviously, given, for example, the volume of Ag, how that sort of manifests itself on acquisition cost versus operating expense versus loss ratio, we'll come back in the guidance -- when we give our full year guidance early in the new year, Tracy. And until then, I don't think we really want to or are prepared to say much more.

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

Thanks, Lisa, and thanks everyone, for your questions, for participating in our conference call, and for your continued interest in, and support of Skyward Specialty. I am available after the call to answer any additional questions you may have. We look forward to speaking with you again on our fourth quarter earnings call. Thank you, and have a wonderful day.

This concludes today's program. You may all disconnect.

Good day, and welcome to the Skyward Specialty Apollo Acquisition Webcast. [Operator Instructions] As a reminder, this call may be recorded. I would now like to turn the call over to Natalie Schoolcraft, Head of Investor Relations.

Thank you, Michelle, and good morning, everyone. We appreciate you joining us to discuss yesterday's announcement regarding our acquisition of Apollo. Joining me today in New York City are our Chairman and Chief Executive Officer, Andrew Robinson; and Chief Financial Officer, Mark Haushill. Joining us from London is Chief Executive Officer of Apollo, David Ibeson. We will begin the call today with Andrew and Mark providing prepared remarks accompanying a presentation, and then we will open the line for Andrew, Mark and David to answer 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 or forward-looking statements. These types of factors are included in our press release as well as in our 10-K that was previously filed with the Securities and Exchange Commission. In addition, the presentation will include non-GAAP measures that are presented for supplemental and informational purposes only. And now I would like to turn the call over to Andrew. Andrew?

Thank you, Natalie, and good morning, everyone. Today marks an important milestone for Skyward Specialty. The acquisition of Apollo is another major step in building the premier specialty insurance company that is anchored in our ruler niche strategy, specifically to have strong defensible positions in niche markets, powered by talent and technology and delivering top quartile underwriting returns across market cycles. Over nearly 3 years as a public company, we've been intentional, relentless and exacting in our execution of this strategy, which has been reflected in our results.

Every single quarter since our IPO in January 2023, we've delivered an adjusted combined ratio at or below 92%, top line growth above 12% and exceeded consensus EPS expectations. We've done this while continuing to diversify our portfolio, derisk our balance sheet, invest in exceptional talent and take a leading position in the use of advanced technology and data. Simply put, we have done what we said we would do.

Today's announcement is the next major step forward in the execution of our strategy. Apollo in nearly all regards shares our view and has similarly executed their own version of our ruler niche strategy. Their focus is and has been on building strong leading and defensible positions in niche markets. Their portfolio is nearly entirely additive with little overlap to ours, and its underlying risks are largely U.S.-based. They have been the definitive leader at Lloyd's in innovation and technology, and they've built a portfolio that is distinctive from other players in the Lloyd's market and the other leaders share our commitment to building an engaged talent pool that leans into the future and approaches their business like us with passion and creativity.

The combination of Apollo and Skyward is powerful. We broaden our specialty insurance portfolio, maintain our principal focus on the U.S. market, add powerful new niches to our business and increase the technology DNA of our company, all while maintaining top quartile underwriting returns and diversifying earnings with fee-based income without increasing the volatility profile of our business. We're also adding just under 300 outstanding colleagues who share our passion for building the preeminent specialty insurance company in the industry. I, along with our entire senior leadership team and the leadership team at Apollo are exhilarated and confident about the bright future we will share together. I'd now like to turn the call over to Mark to provide an overview of the transaction. Mark?

Thank you, Andrew, and good morning, everyone. I would like to begin by echoing Andrew's comments. It's been an incredible journey over the past few years, building Skyward into the company we are today, and the acquisition of Apollo is an exciting, bold and appropriate next step for our company. It is also very financially attractive. The purchase price of $555 million will be comprised of approximately 2/3 cash and 1/3 Skyward stock. The cash consideration will be funded through committed debt financing. We will pay cash to Apollo's financial investors, but strategic Apollo shareholders and employees will be rolling a substantial portion of their equity, reinforcing long-term alignment through shared ownership.

The valuation is attractive at less than 9x 2025 estimated EBITDA, and we expect the deal to deliver double-digit operating EPS accretion in the first full year post closing. The transaction is expected to close in the first quarter of 2026, subject to customary regulatory approvals and closing conditions. Now I'll turn the call back over to Andrew. Andrew?

Before explaining why Apollo, let me first address why entering Lloyd's is a natural expansion for Skyward and our ruler niche strategy. It is fair to say that Lloyd's is the preeminent specialty insurance marketplace, particularly as it relates to U.S. risks. There are classes that are principally written at Lloyd's, such as political risk and political violence that are difficult to access in the U.S. In addition, the underwriting talent skilled at writing these classes are concentrated at Lloyd's. And in aggregate, it is the largest writer of U.S. E&S business.

There are many reasons why Apollo is uniquely attractive and a natural complement to our business. It is high growth, low volatility, specialty focused and has a track record of top quartile underwriting. Strategically, it will give us access to highly attractive new specialty niches, including a unique proposition serving the sharing economy, autonomy and electrification and other new economy industries. It also provides us leading technology we can leverage across the combined organization to enhance performance. Most importantly is the team and culture.

Since late 2023, we've partnered with Apollo to win a credit opportunity, and we provided underwriting capacity to both syndicates 1969 and 1971. Working with David and his team up to and over that period, we learned that there is genuine alignment in philosophy, ethos and simply the quality and depth of talent match that of Skyward. Financially, the company will see compelling earnings accretion from year 1 and the addition of fee-based income will meaningfully enhance Skyward Specialty's earnings mix over time and provide an option to transition to a more capital-light model.

We've already identified considerable opportunities we intend to pursue that will add to the financial benefits in 2027 and beyond. And importantly, we are prepared. We've established a strong track record of delivery as a listed company, and our leadership team is deeply experienced in executing and overseeing successful Lloyd's acquisitions and operating in the Lloyd's market. We have the experience to realize the strategic and financial benefits of this transaction.

Now let me provide some background on Apollo. The business' specialty insurance platform operating at Lloyd's of London. It was founded in 2010 and has grown rapidly, generating $1.3 billion of premium in the last 12 months across 2 Lloyd's syndicates, 1969, a diversified specialty insurance syndicate and 1971, a differentiated new economy-focused syndicate known as ibott. It is a capital-light model, only providing approximately 1/4 of the capital backing for these 2 syndicates and derive significant fee income for managing them.

Additionally, it acts as the managing agency generating fees for overseeing several innovative third-party partner syndicates that together write an additional approximately $200 million of premium. The pie chart on the bottom right highlights that like us, Apollo has a well-balanced, highly diversified book of business. It generates roughly 2/3 of its premium from U.S. businesses with the remainder coming from the U.K. and other international markets. And Apollo is a capital-light model with 60% of its income, excluding investments derived from fees.

Over the last 5 years, Apollo has been a top quartile performer at Lloyd's of London, combining strong underwriting performance with a portfolio that is low volatility. As you can see from the chart on the left-hand side of Slide 7, Syndicate 1971 or ibott is one of the top-performing syndicates across the entire market. I'll talk more about this in a moment. Like us, Apollo is selectively partnering with leading program administrators and also providing specialty reinsurance solutions, but in both cases, at a level that we believe is appropriate and far lower than the average across Lloyd's.

With the addition of Apollo in 1969 and 1971, we'll remain focused on the U.S. specialty market with over 85% of our premium from U.S. clients. As the chart in the bottom left of Slide 8 highlights, there is less than 5% overlapping premium and well over 50% of the premium is from new and entirely new hard-to-access niches, including the sharing economy industries, political violence, product recall, fine art and species, just to highlight a handful. The global licensing and credit rating of Lloyd's will add immediate value and accelerate growth in our existing business, for example, to serve foreign coverage needs of our life science clients and broaden our reach in credit.

Apollo has a truly distinctive track record of innovation, and they have been responsible for several Lloyd's market first, including launching the first new economy syndicate, ibott, launching Lloyd's only innovation consortium in which other syndicates support Apollo's underwriting solutions in categories such as autonomy, launching the first Lloyd's captive of the modern era with a major U.S. headquartered global tech client. And I'll note for you that Lloyd's has expressly identified captives as a critical strategic area of development, and Apollo's success here is critically important to the Lloyd's market.

Importantly, this combination also advances our position as a magnet for top technology talent. It further differentiates our technology capabilities that directly supports smarter, faster and more disciplined underwriting and claims decisions, which in turn should accelerate growth, enhance underwriting performance and drive operational efficiencies. I want to take a moment to focus on ibott, Apollo's dedicated syndicate focusing on new economy industries and innovation. Ibott provides platform liability cover to some of the leading operators in industries, including the sharing economy, autonomy and electrification.

Over the last 5 years, the business has grown premium at a compound annual rate of over 40%, supported by strong industry tailwinds while also consistently delivering a sub-90s combined ratio. A large part of the business' success has been a unique partnership approach with its customers that we have not observed anywhere else in our industry and aligns with our ruler niche strategy. As our clients are new economy and digitally native, core to ibott's proposition is its foundation in data science and partnership to use their clients' exposure information to craft tailored often usage-based insurance solutions as well as identify client-specific loss cost reduction and risk management opportunities.

Our diligence has led us to the view that they are one of one in this market and by far, the most advanced in having a singular dedicated business consisting of data scientists, pricing actuaries, underwriters and claims technicians together as an integrated unit. And their clients recognize that their partnership model and the value they deliver is unique, and that's evidenced by the robust growth and outstanding underwriting results.

By adding ibott to our portfolio, we are broadening our underwriting reach into these fast-growing sectors. We are reinforcing our ability to attract top technology and data science talent. We're adding a unique capability to deploy differentiated data-driven solutions for clients, and we are further strengthening the innovation engine to serve new markets and drive underwriting excellence.

As already mentioned, Apollo will bring significant fee-based earnings and third-party capital support to Skyward. Over the last 12 months, 60% of Apollo's noninvestment income came from fees with the business earning managing agency and performance fees across syndicates 1969 and 1971 and third-party managed syndicates. Combining this with existing fee income streams at Skyward means on a go-forward basis, the combined company will generate almost 1/4 of its noninvestment income from fees.

As of today, Apollo provides 27% of the capital in aggregate to Lloyd's Syndicates 1969 and 1971 with long-tenured third-party reinsurers and other capital providing the other 73%. This transaction adds an attractive capital-light fee-based model and provides further optionality to utilize this model as a complement to managing our own U.S. balance sheet. Apollo is a highly experienced and dynamic team that we look forward to welcoming to our organization. Over the past few years, we've been consistently impressed with the caliber of the senior leadership team, the division heads and the deep talent pool at Apollo across underwriting, claims, technology, finance, actuarial and data science as well as other areas of their organization.

Equally important, we've experienced a strong cultural alignment between our organizations. Both Apollo and Skyward operate with flat structures that encourage direct communications and foster innovation through an entrepreneurial approach. Apollo like us are talent-led, performance-focused and have a winning mindset. The cultural alignment will further strengthen and enrich our already outstanding culture and will help drive a smooth integration and provide a solid foundation for our shared success going forward.

Quite simply, the financial case for this transaction is compelling. We are acquiring the business at an attractive value and expect to deliver double-digit operating EPS accretion in the first full year post closing before factoring in any upsides. We see multiple avenues for value creation, including establishing a U.S. platform for ibott, leveraging the Lloyd's license network to support international needs of North American clients, capturing reinsurance purchasing efficiencies and optimizing Apollo's investment portfolio, amongst others. Taken together, these opportunities position the transaction to generate additional substantial long-term value for Skyward shareholders that we expect to begin to crystallize in 2027.

While there's work ahead to fully realize the benefits of this acquisition, our track record demonstrates our ability to execute with precision and at a remarkably high level of performance. At the executive leadership level, Mark, Shakoor, Sean, John and I collectively bring deep Lloyd's M&A and operational experience. As a team, we've successfully executed over 20 transactions combined over the course of our careers.

Put simply, in partnership with the Apollo team, we are highly confident in our ability to drive meaningful shareholder returns from this transaction. So before we open it up for Q&A, let me reemphasize that the acquisition of Apollo fundamentally amplifies the strategy that we've been executing for 5 years. Apollo, like us, is a high-growth, top quartile specialty business that adds attractive new niches, reinforcing our position as a leading specialty insurer. Their leadership in innovation and technology, like us, is about leaning hard into the future, not the past.

Their unique position in serving new economy digitally native industries is distinctive and enormously strategically valuable. Their capital-light fee-based model adds earnings ballast and provides optionality for Skyward as we look forward to the future. Financially, the transaction is meaningfully accretive without real consideration for the upsides. We will pursue together beginning in 2026. We're not only adding expertise and scale, we're reinforcing our ability and commitment to attract the best talent with whom we pair market-leading technology in support of building the best specialty insurer in turn, delivering long-term value for our shareholders.

Lastly, I'd like to thank my 600-plus Skyward colleagues for their dedication and contribution to put us in a position to undertake this transaction. And I'd like to welcome the nearly 300 outstanding and talented staff at Apollo to our bright future together. We're excited for this combination and our partnership. I'd now like to turn the call over to the operator to open up the line for your questions. Operator?

[Operator Instructions] And our first question comes from Matt Carletti with JMP Securities.

Congrats on the announcement, exciting day for Skyward. Andrew, you mentioned a couple of times, and I see it as kind of the first item on one of the slides as a lever for creating significant value going forward is kind of create an ibott U.S. platform. Can you talk a little bit about kind of the platform that is ibott today and how that looks? And then maybe just go a little deeper on kind of what creating a U.S. platform entails and how that might look different than what the business is set up as today?

Yes. Well, I mean I would say to you, Matt, first, thanks for the question, and thank you for your kind comments at the beginning. And it is an exciting day for sure. What I'd say to you is that the ibott U.S. concept, I don't really think is any material change to their business. ibott is -- tends to be principally a U.S.-focused business, not entirely, but certainly, their largest clients are U.S. And the only way they access their business is through the London market wholesale access points.

And yet some of the business is really served directly by some of the most sophisticated U.S. tends to be Silicon Valley technology-oriented brokers. And there -- even during sort of the course of our time in interacting with them, we saw a business that they ultimately did not write largely because of the cost of that business arriving to them versus really what was a sort of realistic price that they could deliver to the market. And yet they have relationships with many of those U.S. brokers that are quite deep and significant that with a U.S. writing entity really would shorten their distribution.

And I think that that's only in very specific circumstances I can say Apollo is deeply committed to the Lloyd's wholesale market. But we are talking about technology companies where their model is very different around how they're partnering with them and the way that they're utilizing that data. And it's actually quite a bit more conducive in certain instances to accessing that business sort of more closely to the source.

And so without even including it in our immediate benefit assumptions, we believe that that's an area that we can go after pretty quickly. It also happens to be that we have a U.S. writing entity, Oklahoma Specialty that is fully licensed and yet we have no business in it. And so our ability to utilize it for strategic purposes such as this and rebranded and so forth is very attractive.

Perfect. And then maybe just a second question, if I could. Looking at kind of the capital, the capacity providers for the Apollo syndicates and kind of the slide that shows roughly 3/4 is kind of third-party capital and 1/4 Apollo. And you made the comment both on that slide, I think, in your prepared remarks about kind of having the optionality to utilize third-party capital to support growth going forward. Is the idea there that obviously keep that existing third-party capital, but when you say kind of utilize it to support growth going forward, potential to expand that further? Is that what you mean by that? Or if not, maybe you can clarify.

No, that's really the subtext of what I meant, Matt. I think that you've heard this from me. I think that our view is that we are deeply undervalued as a company, and we are constantly looking for ways for investors to appreciate the really powerful underwriting franchise that we've built. And if part of that as we're sort of watching the movements and interest of investors weighs more heavily towards a capital-light model, we now, in combination with Apollo have a really interesting capability that previously we did not have.

And so I think that this just goes straight to the point of we are underwriters to the core. Our business is going to be driven by top quartile underwriting at all parts of the market cycle. But the economic model that sits behind that is now more flexible for us. And if our investors will reward us more through a capital-light model, then we're well positioned to seek that. And if our investors would reward us more through sort of being a traditional fully insured full stack model where we're keeping as much of the risk as we possibly can, we have the means to do that as well.

Our next question comes from Michael Zaremski with BMO Capital Markets.

Congrats again on the transaction. Maybe just starting off with a couple of modeling questions. Do we know the shareholders' equity so we can kind of properly calculate the book value and tangible book value?

Yes. Mike, thanks for the nice comment. Are you asking for the number of shares specifically?

Oh, no. So sorry, what was the shareholders' equity of the company...

You're saying, what is Apollo's shareholder equity?

Yes.

We estimate that at the end of the year, roughly sort of corresponding with when the transaction will close, it should be somewhere in the $180 million to $200 million range.

Okay. Perfect. And then also just based on the double-digit guide in the first full year ex-transaction costs, what's the dollar amount of roughly, I think, would be after-tax income that you're guiding to in that first full year?

Yes. We're not -- Mike, thanks for the question, but we're not putting out guidance yet. I will refer you to -- there's a slide in the appendix that forecast the full year view for 2025. And I'll leave it to you to the extent that you'll be updating models before we provide guidance next year to sort of use that as the launch point. And you'll see that back there. And you can just build your own sort of growth assumptions based on historical performance at Apollo.

Okay. Great. Yes, I see that slide. I just wanted to make sure we could use that. I know there's some nuances between the managed premium and the earned premium, which I think is a lot very different. Okay. And then maybe lastly, high level, there's been a lot of growth, I think, from about $1 billion to maybe $2 billion annualized in managed premiums for Apollo over the last couple of years.

Maybe you can kind of talk about what -- is that growth in the shared economy premiums? And what does shared economy kind of directionally mean? And also, I think the slide that the -- there's $2 billion of managed premiums in the slide deck, but also verbiage saying adds over $1.5 billion. So I'm not sure if you're suggesting maybe there's some also managed premium you decide to not renew.

Yes. Mike, maybe after the call, you can follow up with. I don't -- we don't believe there's a reference to $2 billion of premium in the deck. And if there is, that is something that would be a mistake. It is about $1.5 billion of managed premiums. Talking to the growth, I think you have to deconstruct it a little bit into the 3 pieces. 1969, which I would describe as a sort of a true multi-class specialty insurer has certainly grown, but I think that a lot of the growth has corresponded to where the market cycle has provided the greatest opportunity. And overall growth has not been quite as substantial as it has in the other 2 areas I'll talk about.

1971, the growth has been just down right astonishing. In my prepared comments, I mentioned 40% annualized growth. And what's super interesting about that is that a very large portion of that growth is actually same clients, new -- same clients and growing exposure. By our estimations, the clients that they're serving through 1971 may be growing by as much as an order of magnitude larger than the client base that would make up sort of our and 1969's core clients. And so just exposure growth there alone drives a very large portion of that growth.

And the third part, there's $200 million of -- roughly $200 million of managed premium in the partner syndicates. And those are chunky. If you just follow the announcements, they manage a large parametric. They announced at the beginning -- or just a couple of weeks ago in partnership with Coface, Lloyd's first trade credit syndicate. And those are quite chunky. They'll grow as these new syndicates that they're managing come online. And so that's also been a big sort of driver of the premium growth. So I would think about the pieces quite distinctly. And I feel quite confident that each of the components is sort of sensible and supported by what is, I think, sensible underwriting across the piece.

Got it. That's helpful. And just the $2 billion, just to make sure, in Slide 18, that's where I saw the managed premium of $2 billion. And I wasn't sure if that was apples-to-apples with Slide 6, which shows...

Yes, that is, in fact, thank you for drawing that to our attention. That, in fact, is a mistake and will be corrected. It should say $1.5 billion of premium, and I'm sorry about that.

Yes, no problem at all. I'm happy we flush it out. Okay...

Actually, I take that back, Mike, I'm sorry about that. In my own data and -- but I will follow up. When we referenced the $1.5 billion, it was on a trailing 12 months, the $2 billion for the full year may actually be correct. I will follow up with you to -- or Mark will to just confirm. But if we publish that, that actually is probably the right number.

Okay. And just lastly, on the sharing economy and innovation segment. One of your investors asked if there's just any color on is that rideshare? Or obviously, the sharing economy is a much bigger sector than just rideshare. So any color would be great.

Yes. I mean I think that when we talk about the sharing economy, it runs the full gamut, right? So first off, it is important to note that what they are ensuring is the platforms and the platforms are effectively ensured for direct negligence, vicarious liability, those sorts of things. And it runs across the gamut, right? It's skills, it's spaces. It's certainly vehicles with and without ownership but it also runs well into micro mobility, autonomy, electrification.

I'll highlight for you on, I think, the slide that talked directly to innovation, the announcement of the $75 million drone facility, which is a market first. And so it manifests itself in a lot of different ways, but the key thing to note here is that the principal focus there is on platform liability and the principal place where ibott focuses is in the first access right above where these entities will self-insured. And the reason that's important is that they're really setting the terms for the market, and the market is wholly reliant on them to do that.

Our next question comes from Andrew Andersen with Jefferies.

Looking at Slide 18 again and the fee-based income and the projections for '24 to '25, it seems kind of flattish year-over-year despite the growth. Is there maybe some just conservatism in how you're thinking about profit commissions? And could you also just help us think about what is the split within that fee-based between management and profit commission?

I can't right now answer the first question behind the assumptions, but Andrew will definitely follow up with you. And on the second question, the relative proportion of fee-based versus management. If you give me a moment, I will pull that out so that I'm not giving you wrong information. So the fee-based component is -- well, it's about -- it's split relatively equally with the profit commission part of that, the performance-based just slightly larger for 2025.

Okay. And can you maybe just help us think about kind of within the projections and maybe how '24 shaped out, the overall pricing trends for the company and kind of what loss trends it's booking towards?

Yes. I mean the book is so diverse, Andrew, that in aggregate, it would be -- it'd be wrong for me to just give you just a simple number. What I will say to you is that the pricing trends today across -- and I'll start with 1969, sort of top view is that roughly about half the classes are at or above loss cost trend and half are slightly below loss cost trend or in instances, more than slightly. The pricing strength, which is, I think, one of the really powerful tools that we observed in how they're managing their portfolio.

By and large, I think across just about every class except for one, and there are 26 classes in total including 1971, are starting from positions that are immensely strong, meaning that the earnings power right now is really strong. And so pricing aside, the starting point is very good. In 1971, I would just say straight up that the pricing is at or above loss trend. So it's very much a part of, I think, is the way that they run that part of the business, they're very much on top of with their clients, ensuring that pricing year-on-year is keeping up with loss trend.

Our next question comes from Paul Newsome with Piper Sandler.

Just a little bit of a follow-up on the underlying assumptions for the accretion expectation. Is it safe to say that we assume some level of both profit and revenue growth that's somewhat commensurate with what they've historically done. It sounds like some of the businesses are sort of very, very fast growing, but some are getting closer to maturity. But any thoughts about that, just to make sure I know that that's kind of what we should be thinking about?

As I mentioned, Paul, we're not providing guidance for next year, but maybe just to help you and others, you should expect growth for 2026 from Apollo to be not immaterially above our expectations for 2025.

A different question. You mentioned technology several times in the presentation. Any way you could differentiate for us kind of what is really the key advantage here versus what you're doing today? It's so hard for us as outsiders to determine technology relative advantages, but any thoughts there would be helpful, I think, and interesting.

Yes. No, that's a great question, Paul. Thanks for that. The first thing I'd say is that 1971 fundamentally is -- it is very much a data science-led approach. It doesn't look like anything else that we have seen or experienced in our careers. They have a partnership-driven model. And so it's an entirely different kind of orientation. I think it's incredibly telling for a different way to serve digitally native new economy industries. And so I think that whole capability is new to our company and immensely interesting and powerful. And I'll say it again, distinct. We have not seen it elsewhere.

I think that if you look at the path that Apollo has traveled, particularly on the underwriting side and to an extent on the claims side, it is tending to follow a path that we have traveled with some important differences. So they have a critical partnership with a company that came out of the Lloyd's Labs called Artificial. That partnership has been critical to how it is that they've built their sort of augmented underwriting model and it is following very much how we are building ours.

I think there are 2 really powerful differences that we've observed that seems to be things that both we can learn from and deploy into our organization where they're more advanced, and they tend to be around portfolio level views of the pricing strength and quality of their business because they are quite advanced in deploying quite robust metrics against their portfolio and each risk around those 2 things. And so they have the ability to sort of look at their portfolio and slice and dice their portfolio around those 2 dimensions, particularly in some classes where I think are directly relevant to our business that are capabilities that would be new to us.

But if you looked at like what's happening at the underwriter's desktop and how the underwriter works a submission, we are following very similar paths as a company, which I find both super positive and reinforcing that we love seeing other forward-thinking companies do this. But I also believe that from that, there's an opportunity for both companies to take some best practices that we can apply to each other.

Our next question comes from Mitchell Rubin with Raymond James.

This is Mitch on behalf of Greg Peters. I was wondering if you could provide some additional color on the balance sheet risk you guys will be taking on and specifically how it's going to impact your leverage ratios, like net premiums written to total capital?

Yes. Thanks for the question. I think just straight up, the -- if you're asking about loss reserves specifically, which I think is probably where your question is going, their loss reserves are a little under $300 million. I think you'd find the profile of those reserves in terms of the position they reserve to, they're more specific. They target -- Apollo targets a range that is meaningfully above the central estimate. And while we don't have that same range that we target, we're effectively in a very similar place as a company. You'll also find that just simply their ratio of IBNR case looks a lot like ours. Their seasoning is a little bit longer than ours where our liability sort of duration portfolio is 60-40 sort of short and long, theirs is closer to 40-60.

And what I would say to you is that we wouldn't arrive at this place having this conversation with you if we weren't highly confident that the balance sheet is -- wasn't in excellent position. And so we feel very, very good about that. And I think that amongst us over the course of our careers, we all have enough sort of scar tissue to know that if we can't feel good about that as a first step, then it's probably not a combination that makes sense. And in this case, we do feel very good about it.

My follow-up, you mentioned on Slide 13, there's an opportunity to optimize Apollo's investment portfolio. I was wondering if you could give some details on how their portfolio is comprised in terms of risk, yield duration and how that might compare to your portfolio and what steps you might take to optimize that?

Well, in terms of steps, that's something that we will look into a little bit down the line. Look, the portfolio is pretty simple, aligned pretty closely with ours, a little bit more overweight short-term investments. But between -- in the fixed income, it's mostly corporates and govies for the most part. So it's in line with ours. Duration is a little bit shorter, but it's -- Mitch, it's a pretty -- very consistent with ours and pretty simple.

Congratulations again on the announcement.

Our next question comes from Michael Phillips with Oppenheimer.

Congrats on this news. I just had one question, actually, last question here for me. Andrew, it relates to your comments earlier. I appreciate the comments on kind of the more flexible business model at Skyward and how that might be more appreciated by investors and what this could do to your kind of -- I'm looking at Slide 11 again to the mix of fee-based versus underwriting. But if you look at the business from Apollo over, say, the next couple of years that you'll get from color over the next couple of years, would you expect that 60-40 split to kind of be maintained? Or are there pieces that you would rather keep to -- on the underwriting side yourself?

Thanks for the question. And David Ibeson is on from London. [ Dave is ] his way to Monte Carlo here shortly, where he'll be gathering with a bunch of other folks, including a number of the capital providers to Apollo. I think that the general thinking is having 25% of the risk is a good number as a company. The question earlier, I forget which person had asked it about a better view of the fees relative to the portion that is underwriting or profitability driven versus other fees brings to this effectively just the reinforcement that whether you're participating directly as a capital provider or not, you're tied to the underwriting outcomes, which is the way it should be in all situations.

But I think that the general thinking is that's probably a good level that we will plan from simply because it seems to fit well and align with the expectations of the long-standing very tenured capital providers that Apollo has that they partner with. And I don't know, David, if there's anything more you might want to add on that, but if you're able to offer a couple of additional thoughts, that would be great.

Andrew, I think you summarized it really well. The balance between our own line and that of third-party capital is important to them and to us. And at the moment, we think it's optimal.

Our next question comes from Mark Hughes with Truist Securities.

Mark, are you there?

Mark, if your telephone is muted, please unmute.

Operator, if there's another question, we can go to that and come back to Mark.

[ I'm showing ] no further questions at this time. I'd like to turn the call back over to Natalie Schoolcraft for any closing remarks.

Thank you, Michelle, and thank you, everyone, for your questions and for joining us today. We appreciate your time and continued interest in Skyward Specialty. We look forward to keeping you updated on our progress in the integration of Apollo as we move forward. Thank you again for your participation, and have a wonderful day.

This concludes the program. You may now disconnect.