SKWD Q3 2026 earnings call transcript, November 6, 2026

The fourth quarter call. Listen, I'll speak very quickly on the, you know, on the dairy livestock. This is really quite simple. You know, we effectively saw just a change in take up rate amongst farmers as diesel prices started to move. So like if you look back to the first quarter of the year, you know, diesel prices in January, February were kind of like in the 350, 370. And now you sort of fast forward to October and we're at, you know, six and a quarter. And, you know, as we got into the second quarter of the year, it really started to accelerate. And, and, you know, the product, the dairy livestock product offered through the federal government, you know, is a, it's a voluntary product. It's a, it's the ability to sort of lock in their profits. And as, as margins and cash flows were squeezed amongst farmers, we just simply saw a lower uptake. Um, I will. Tell you that because of our, our sort of our, our data that we are using to monitor exposure, um, you know, we think we're probably the first in the market, maybe even, um, uh, you know, ahead of some of the sedents that we, that we, um, you know, we exchange that data with in really seeing the trends and, and, you know, you saw the effect of that coming through, you know, in the, in the quarter in terms of our adjustment to netter. premium and notwithstanding that adjustment, you know, I think the results are still outstanding on every dimension.

Great. Just the, the follow-up, can you just, um, you know, I speak to Apollo, the, the, and then, and, and by the way, I didn't add, and the, the follow-up on that would just be, and then talk about the managed premium portion. Cause that, that showed growth. So yeah, please. Yeah, I, I mean, Terry might want to jump in here, but I think that we were not giving any caution on IBOT. I think that the, the commentary was just simply that, that, that the, the growth this quarter was where there was seasonality and sort of new business opportunities that we would ordinarily expect. And there was one account where, you know, there was just a change in the renewal terms that moved it out in time. And otherwise I think it's, I wouldn't read into it cause it's a small number. And. Everything that we have sort of said about iBot and, you know, seeing that as a unique and quite honestly, a cyclical, non-cyclical growth platform still holds today. Got it. And on the and on the managed premium, I think that that we would as a company broadly expect our growth and managed premium. You know, which is the includes the capture of the premium that drives our fee earnings growth should outgrow sort of our reported GWP. And we don't see anything there that would give us pause to sort of say that quite explicitly now. And we would expect to keep saying that as we look forward as well. Got it. Thank you.

Thanks, Greg.

Thank you.

But I think the most important thing I would say to you and I would say to all on the call and to our investors is the fundamentals of this remain outstanding. In this market, as far as we can tell, we have created this product. We are one of one. It's an incredibly profitable product. It's uncorrelated for us. In fact, what we have built is so attractive to the retrocessional quota share reinsurance community that we are able to lock in a meaningful portion of our underwriting profits via retrocessional insurance where we capture it on our seeding commission. What we've manufactured is viewed as something that could not easily be replicated. Guess what? We get paid for that. Certainly, at some point here, the input cost for farmers... ...come down and we'll continue on the kind of high growth trajectory that you've seen. And yet, still, the growth in our ag driven by dairy livestock is still good growth. I mean, it's just that we had this net earned premium adjustment in the quarter.

Understood.

Thank you for the color.

And maybe the second one I had was just around sort of the... When I see the growth in sort of the fee-generating written premiums against sort of the fee income, I was just wondering, like, I think we've seen, you know, pretty significant growth in the managed premiums. So I was wondering if you can kind of give a little bit more color on how that should look for the trajectory of the underwriting fee income going forward.

Hi, it's Taryn.

And I think more broadly, Paula, I don't know if, Taryn, you want to just add specifics to what you expect for 27 there.

Yeah, thanks, Andrew. So I think at this point, working through our plans for 2027, but in terms of the structure and the way that reinsurance buying works at Apollo, I don't see any changes moving into 2027. But as we get closer and revisit where the market is at, we'll firm up our plan. I would also just make one additional point. Well, not reinsurance, as you very well know, 1969 and night. 1971 are both supported by third-party capital. And both those, the capital is 75% of the total capital for those two syndicates. And every indication is that is also where we will land for next year as well. Got it.

Hey, Mark.

Good morning.

And our gross premium this quarter, just based on trying to take a bit more conservative position. And I think all that adds up to, we would never say that there's not going to be, you know, a net earned premium trip in the fourth quarter, but it's not something we would expect. Okay. Appreciate that clarity. Andrew, you talked about the competitive environment. In the fourth quarter, often there's a maybe push at year end to hit top line budgets. How much of an impact are you seeing? Is that kind of theoretical or it's actually happening? And then are there any particular end markets where you're seeing it more pronounced, presumably property, but curious, any more thoughts on that front? Yeah. It's a great question, Mark. So I think that last year we definitely saw, we really saw a more competitive fourth quarter. I think the year before, which was really like the beginning of the, you were probably two quarters into the turn on property, you know, most visible in our case in global property, definitely saw, you know, a more competitive environment, but it was more focused in the prior year. And I, you know, yeah, I think that we're seeing it. You know, you know, there's, there's multiple sides to this. So not to be too long winded, we're certainly seeing more submissions. And I do believe that's because more business is being marketed, but more business is being marketed and is getting a lot more competitive response. I'll just say like in the third quarter, as an example, while, while property submissions in the NS business were up 60%, our hit ratio was simultaneously down by a third.

Our average premium was down by 20%. You know, if I look at, you know, if I look like on primary liability side, our retention in the third quarter was down six points. I'll give you an example of, I don't know if this is a fourth quarter thing or just more what I would consider to be ignorant, irresponsible sort of writing. There's one particular competitor that affects. Collectively has a, you know, kind of a fast track on certain liability classes. And the question that they ask is, check no if you do not think you have an abuse exposure. And if somebody checks no, it removes the assault and battery exclusion, you know, at buying. Well, and meanwhile, you see habitational Section 8 housing frequently being, you know, placed without, you know, assault. Battery exclusion, sublimits. You know, I heard one carrier, one public carrier, like discovering that, you know, maybe we should be charging for that or for, you know, for human traffic and so forth. It's like, you know, welcome to the world of casualty where, as one of our competitor CEOs says, it's not for the optimistic. You know, this is a sophisticated part of the market where, you know, you should be really responsible with your capital. And we've seen. But increasingly, more and more individual competitors, like the example I gave, that are not operating in a responsible way, whether that is a fourth quarter phenomenon or heading into the fourth quarter and it leaves up, you know, going into the new year, you know, really hard to know. But regardless, those competitors will not be long for the market. That will end in tears. There's no question about it.

Hey, Tracy, you broke up, but I think your question, and Taryn will answer this, I think you were asking whether we're participating and whether the Generali profile is unique in terms of size. And I think Taryn's probably best positioned to answer both those. Yeah.

Hi, Tracy.

So the two new syndicates know we're not proposing to have participations behind those two. As we have in the rest of our partner platform syndicates, we don't participate. The Generali syndicate commences underwriting shortly. It is in line with the way that it's projected to grow. It's in line with it. The number of our other syndicates and the way that they would grow in early days, they start small and build from there. So I don't think we'd see it as being the biggest in the next period anyway.

Tracy, I don't know if we lost you, Operator. If we have, maybe we can move on to another question and come back to Tracy if we have lost her. Certainly.

Okay, yeah, that's helpful. Understood.

Maybe touching on the... Commentary about IB and R levels moving up to kind of a record high 77%. I believe earlier in the year you updated us or the 10Q is probably mid-ish 70s. And I think you also said that loss emergence, initial indications are positive in occurrence liability as well. So just, I guess, are you just... Are you guys trying to make an effort to kind of just continue to kind of increase conservatism or just any other color you might want to add to the helpful things? Mike, that's a great code question for asking whether we're going to release reserves. And we'll just defer to the fourth quarter. I mean, Mark will comment, but, you know, we really do feel good about our reserve position overall as a company. You know, things that you'll obviously get to see as the full year financials come through, you know, our pay to incurreds through nine months are the lowest they've ever been. They're running at like 62%. You know, I look at our pay to incurreds by line of business as compared to the high quality guys that we compete with. And I see that, you know, both our IBMR and our pay to incurreds are pretty damn favorable. And, you know, I think that there's just confidence in terms of... in terms of both our absolute position and kind of how we might even see our conservatism broadly compared against others. And, and look, I think we're not done with our reserve review for the year. That'll, that'll be something obviously we'll report out on when we get to the fourth quarter. But it was a good try.

Oh, it's a good, good data point on Pants. Thank you. Of course. Thank you.

Hey, Paul, it's Mark.

Thanks, Paul.

So I'd love to zero in a little bit more on the A&H segment where premium was up 57%. Could you kind of... Dice it into how much of that was rate versus new business and maybe a little color on where you're seeing the great opportunities. And then, Mark, I think I caught you in the comments early, you know, in the prepared remarks when talking about prior year reserve analysis that A&H might have a little bit of negative. If so, maybe... Color on that. And then just in general, the lost cost environment in A&H, I'd love some color there. A lot of questions in one, but... No, no, no. That's... No, they're great. Thank you.

Thank you, Andrew.

Thanks for the questions as well. So on A&H, look, I think it's a continued trend, obviously, which is not unique to this quarter. This has been sort of a thing that has been... quite visible in our results probably now for coming up on, you know, eight plus quarters. Listen, I think pure, you know, if you think about rate alone, you're talking about kind of high teens rate. And, you know, you have by the studies that I think most folks would use, you know, inflation that, you know, is kind of in the mid-teens. And so, you know, no surprise there. That's kind of visible to everybody. There are levers, of course, that are available to us as a company that we utilize that effectively, you know, are kind of non-rate actions where maybe you're carving out very specific drugs or lasering out specific exposures. And those have rate effects. But, you know, those are broad numbers. Our retention, you know, is pretty high. And so, you know, a good day in the office for A&H, if you have a good book of business like we do, would be kind of in the 80s retention. And, you know, once you get below that, you might be bleeding out business that you really want to keep due to competitive reasons. And I think we're in a pretty good place on retention. But that should give you a sense for rate, less retention, and then what we're adding as new business. You know, we're hitting our... our growth in really both areas. Group captives has certainly been a big driver of growth. And that's both a combination of winning new captive mandates and new members coming into captives. And then, you know, our more sort of historical product of, you know, single company solutions has also probably over the course of the last six quarters or so, really been growing in a nice clip. And that's...

I mean, it's not particularly the lion's share of the business, but now that mix is changing with the group captives piece. As I mentioned in the opening remarks, and I've talked about a lot, our focus is on smaller employers, our focus is on medical cost management. So these are setups where the employers themselves have jointly committed to a set of things that we do with them to ensure that medical cost management... is overseen and managed differently than you might ordinarily have elsewhere in the market. And yeah, and I think that the results, it's a short tail line of business. That NAIC data I shared with you is out in the public domain. Second year in a row that we've been sort of top five, and we're very proud of the results.

Hey, Andrew, it's Mark.

Thanks, everyone, for your questions, for participating in the conference call, and for your continued interest and in support of Skyward. I am available after- the call to answer any additional questions you may have. We look forward to speaking with you again in the new year on our fourth quarter, 2026 earnings call.