Skyward Specialty Insurance Group, Inc.
For the period ended Dec 31, 2025. Filed Mar 2, 2026.
View on SEC.govAbout this filing
A company's yearly report to the SEC, with audited financial statements. It is the fullest account a company gives of its business, its finances and the risks it sees.
FY2025 · Filed Mar 2, 2026
SKWD$60.35-5.5%Stored close · as of Nov 6, 2026
What changed in Management’s Discussion and Analysis?
Read the current filingPrevious report: 10-K
Period ended 2024-12-31; filed 2025-03-03.
0001519449-25-000011
Item 7. Management's Discussion and Analysis of Financial Condition and Results of OperationsCurrent report: 10-K
Period ended 2025-12-31; filed 2026-03-02.
0001519449-26-000015
Item 7. Management's Discussion and Analysis of Financial Condition and Results of OperationsThe baseline is this issuer’s latest earlier reporting period of the same form that was filed before the current report. A previous 10-Q is a different quarter, not a year-over-year comparison. Amendments are excluded.
Compared 133 previous paragraphs and 129 current paragraphs.
83 unchanged; 33 reworded; 13 added; 17 removed; 0 previous and 0 current paragraphs rearranged.
Tables are not compared: 21 previous and 21 current tables excluded. Dates, whitespace, punctuation and numbering changes are ignored; changes to financial figures remain significant.
A changed paragraph is not evidence that risk increased or decreased. An unchanged paragraph does not establish that risk stayed the same.
Added paragraphs (13)
Current report
During the first quarter of 2025, we updated our underwriting divisions to align with how management currently oversees the business, allocates resources and evaluates operating performance. We added a ninth division, Agriculture and Credit (Re)insurance, which includes the Global Agriculture unit, previously reported with Global Property, and the Mortgage and Credit units, and focuses on specialty classes for which reinsurance provides a more attractive market entry. The Industry Solutions division is now the Construction & Energy Solutions division and the Inland Marine unit is now included in the Transactional E&S division. Programs is now Specialty Programs. Prior reporting periods have been conformed to reflect the new presentation.
Current report
On September 2, 2025, we entered into two share purchase agreements (the "Apollo Majority SPAs") with institutional and management shareholders, respectively, of Apollo Group Holdings Limited ("Apollo") (the "Majority Sellers"). Pursuant to the Apollo Majority SPAs and in accordance with the terms and subject to the conditions therein, we agreed to acquire all of the issued shares of Apollo held by the Majority Sellers, representing approximately 87% of the issued share capital of Apollo. In addition, closing of the transaction ("Closing") was conditioned upon our acquiring 100% of the issued share capital of Apollo (the “Acquisition”) at Closing pursuant to additional short-form share purchase agreements (the "Apollo Minority SPAs" and together with the Apollo Majority SPAs, the "Apollo SPAs") with the remaining minority shareholders of Apollo (the "Minority Sellers" and together with the Majority Sellers, the "Sellers"). The consideration for the entire issued share capital of Apollo under the Apollo SPAs was $555.0 million, which included (i) $371.0 million in cash (the “Cash Consideration”) and (ii) the issuance of 3,679,332 shares of the Company’s common stock. In connection with the Apollo SPAs, on December 30, 2025, we entered into a Term Loan Credit Agreement (the “Facility”) we the lenders from time to time parties thereto (each a “Lender” and collectively, the “Lenders”), Barclays Bank PLC, as Administrative Agent (the “Agent”), and the Agent, Truist Securities, Inc., Citizens Bank, N.A. and Texas Capital Bank as joint lead arrangers, joint book runners and co-syndication agents for the Tranche B Term Facility. The facility includes (a) an unsecured senior delayed draw term loan facility in the aggregate principal amount of $150.0 million (the “Tranche A Term Facility”) and (b) an additional unsecured senior delayed draw term loan facility in the aggregate principal of $150.0 million. The acquisition closed on January 1, 2026. The consideration for the transaction was satisfied by the issuance of common stock of the Company to certain sellers and the remainder in cash. As of December 31, 2025, we recognized $14.0 million in transaction expenses associated with the transaction.
Current report
The year-over-year increase of $423.1 million in gross written premiums, when compared to 2024, was primarily driven by growth from the agriculture and credit (re)insurance division due to (i) new opportunities in dairy and livestock and crop, and (ii) growth in our credit portfolio which we started writing in the fourth quarter of 2024. Specialty programs, accident & health, surety and captives also contributed meaningfully to the growth in 2025. The growth in specialty programs was primarily due to the addition of two new programs in 2025. The growth in accident and health was primarily driven by the acquisition of more high deductible accident and health captives when compared to 2024. The increase in surety was primarily due to market expansion in both commercial and contract bonds. The growth in the captives division was primarily due to rate increases and new business.
Current report
Partially offsetting the growth in gross written premiums were decreases in our global property, construction and energy solutions and professional lines divisions due to (i) continued downward pricing pressure in the global property market, although retention remained steady, and (ii) the exit of unprofitable lines in construction and energy solutions and professional lines during 2025.
Current report
Term Loan Facility
Current report
During the fourth quarter of 2025, we entered into a Term Loan Credit Agreement (the “Term Loan Facility”) with a syndicate of participating banks The Term Loan Facility includes (a) an unsecured senior delayed draw term loan facility (“DDTL”) in the aggregate principal amount of $150.0 million (the “Tranche A DDTL”) and (b) an additional unsecured senior DDTL in the aggregate principal amount of $150.0 million (the “Tranche B DDTL”) and together with the Tranche A DDTL, the “Term Loan Facility”).
Current report
We used the Term Loan Facility to fund a portion of the consideration of the acquisition of Apollo Group Holdings Limited (“Apollo”) and related transaction fees and expenses. Amounts drawn under the Term Loan Facility will bear interest at either term SOFR plus a margin, which will range from 150 basis points to 190 basis points, or the base rate plus a margin, which will range from 50 basis points to 90 basis points, each depending on our debt to capitalization ratio. SOFR will be calculated using a SOFR floor of 0.00% and a credit spread adjustment of 0.10%. The base rate will be the highest of (i) the Agent’s then-current prime lending rate, (ii) the Federal Funds Rate plus 0.50%, (iii) SOFR plus 1.00% and (iv) zero percent (0%). In addition, we will also pay a fee ranging from 0.20% to 0.35% on average daily undrawn amounts under the Facility, depending on our debt to capitalization ratio. The Tranche A DDTL matures on January 1, 2028 and the Tranche B DDTL matures on July 2, 2029. On December 30, 2025, we drew $150 million of the Tranche A DDTL and $150 million of the Tranche B DDTL for the acquisition of Apollo on January 1, 2026.
Current report
The Term Loan Facility includes customary covenants, including certain limitations on the incurrence by us of additional indebtedness exceeding $10.0 million and on our ability to make distributions to our stockholders, or redeem, repurchase or retire shares of stock, upon the occurrence of certain events and certain financial covenants, including financial covenants relating to our minimum consolidated net worth, maximum total debt to capitalization, minimum A.M. Best rating and minimum liquidity, as well as customary events of default. As of December 31, 2025, we were in compliance with all covenants.
Current report
The Term Loan Facility is unsecured. In connection with the Credit Agreement, during the fourth quarter of 2025, we and the subsidiary guarantors party thereto, entered into a guaranty agreement, pursuant to which our obligations under the Term Loan Facility are guaranteed by us and our existing wholly-owned subsidiaries and subsequently acquired or organized subsidiaries, excluding insurance company subsidiaries and subject to certain other exceptions.
Current report
Revolving Credit Facilities
Current report
During the fourth quarter of 2025, we entered into a Credit Agreement (the “Revolving Credit Facility”) with a syndicate of participating banks. The Revolving Credit Facility is unsecured and provided us with up to an initial maximum principal amount of $150.0 million which was increased to $250.0 million on the closing date of our acquisition of Apollo. Also, during the fourth quarter of 2025, we amended the Revolving Credit Facility to permit the funding of certain revolving loans in connection with the acquisition of Apollo, among other things.
Current report
We initially drew $43.0 million, which was used to redeem our prior revolving credit facility (described below). On December 30, 2025, we drew an additional $71.5 million which was used for the consideration paid for the acquisition. The proceeds from the draws on the Term Loan Facility and the draw of the Revolving Credit Facility are presented net with the liabilities on the Consolidated Balance Sheets for the year ended December 31, 2025. The proceeds were used for the acquisition of Apollo on January 1, 2026.
Current report
Interest on the Revolving Credit Facility is payable quarterly. Amounts drawn under the Facility bear interest at either term SOFR plus a margin, which range from 150 and 190 basis points, or the base rate plus a margin, which range from 50 basis points to 90 basis points, each depending on our debt to capitalization ratio. SOFR will be calculated using a SOFR floor of 0.00% and a credit spread adjustment of 0.10%. The base rate will be the highest of (i) the Agent’s then current prime lending rate, (ii) the Federal Funds Rate plus 0.50%, (iii) SOFR plus 1.00% and (iv) zero percent (0%). In addition, we will also pay a fee ranging from 0.20% to 0.35% on average daily undrawn amounts under the Facility, depending on our debt to capitalization ratio. The availability period under the Facility will terminate on November 12, 2030.
Removed paragraphs (17)
Previous report
The year-over-year increase in gross written premiums, when compared to 2023, was driven by double-digit premium growth from our captives, surety, transactional E&S, programs and global property & agriculture underwriting divisions. We continued to broaden and diversify our product portfolio during 2024, growing in areas that are less exposed to the P&C cycles. The gross written premium increases were primarily driven by (i) new captive members and growth in existing captives, (ii) new product offerings, including participation in the Small Business Administration (“SBA”) Bond Guarantee Program, and regional expansion in surety, (iii) new business and rate in transactional E&S, (iv) the addition of four new programs, including Aviation. and (iv) new business in global agriculture. Slightly offsetting the gross written premium increases were (i) downward pricing pressure in the global property market, and (ii) our intentional actions to address profitability in commercial auto.
Previous report
In 2024, the Company transitioned from evaluating reserves on a policy year basis to an accident year basis which results in earlier recognition of underlying claim trends, better alignment of exposure to risks, and adherence to commonly used industry best practices. In prior years, the Company’s methodology allocated IBNR from its policy year analysis to accident year. As a result of transitioning to accident year, IBNR within short-tail/monoline specialty lines, multi-line solutions, and exited lines was reallocated for the years ended December 31, 2023, 2022, 2021 and 2020, and certain amounts have been conformed to the current year presentation.
Previous report
The expense ratios for the periods presented exclude the impact of IPO related stock compensation and secondary offering expenses, which are reported in other expenses in our consolidated statements of operations and comprehensive income.
Previous report
Beginning January 1, 2024, we simplified the investment portfolio classifications to align with our strategy and the underlying risk characteristics of the portfolio. The prior period has been reclassified to conform to the current period presentation.
Previous report
Net cash used in financing activities in 2024 was driven by net payments on debt.
Previous report
Revolving Credit Facility
Previous report
On March 14, 2024, we drew $50.0 million on the Revolving Credit Facility and used the proceeds and existing cash to fund the redemption of the Debentures (see “Debentures” below for additional information regarding the redemption).
Previous report
On August 30, 2024, we fully redeemed the March 15, 2024 draw on the Revolving Credit Facility and redeemed $7.0 million of the March 29, 2023 draw on the Revolving Credit Facility. As of December 31, 2024, we had $43.0 million outstanding under the Revolving Credit Facility with another $107.0 million of undrawn capacity.
Previous report
Interest on the Revolving Credit Facility is payable quarterly. The interest rate on the Revolving Credit Facility is the SOFR plus a margin of between 150 and 190 basis points based on the ratio of debt to total capital and a credit spread adjustment of 10 basis points. At December 31, 2024, the six-month SOFR on the Revolving Credit Facility was 4.25%, plus a margin of 1.60%.
Previous report
In August 2006, we received $58.0 million of proceeds from a debenture offering through a statutory trust, Delos Capital Trust (the “Trust”). The sole asset of the Trust consists of Fixed/Floating Rate Junior Subordinated Deferrable Interest Debentures (the “Trust Preferred”) with a principal amount of $59.8 million issued by us and cash of $1.8 million from the issuance of Trust common shares purchased by us equal to 3% of the Trust capitalization. On March 15, 2024, the Company redeemed the Debentures and paid $1.4 million of accrued interest.
Previous report
Subordinated Debt
Previous report
At December 31, 2024 the ratio of total debt outstanding, including the FHLB Loan, the Revolving Credit Facility and the Notes, to total capitalization (defined as total debt plus stockholders’ equity) was 13.1% and at December 31, 2023, the ratio of total debt outstanding, including the Term Loan, the Revolver, the Trust Preferred and the Notes, to total capitalization was 16.3%.
Previous report
•Reported and/or Paid Loss Development Methods
Previous report
•Reported Bornhuetter-Ferguson Methods
Previous report
•Paid Bornhuetter-Ferguson Method
Previous report
When evaluating reserves related to less mature policy years, our actuaries rely on the Bornhuetter-Ferguson Method as the primary method for our ultimate loss indications. As we move to more mature policy years, we transition to the Reported and/or Paid Loss Development Methods. We primarily rely on reported methods where case reserving is consistently applied across policy years, however, when there is a change in reserving philosophy we will blend both reported and paid methods in our evaluation of ultimate loss indications.
Previous report
In November 2023, the FASB issued ASU 2023-07, Improvements to Reportable Segment Disclosures (Topic 280). ASU 2023-07 requires segment disclosures for (i) significant segment expenses that are regularly provided to the chief operating decision maker (“CODM”), (ii) how the CODM uses the reported measure(s) of segment profitability in assessing segment performance and resource allocation and (iii) the title and position of the CODM. This update states that entities with a single reportable segment are required to provide full segment disclosures. The guidance became effective for fiscal years beginning after December 15, 2023, and interim periods within fiscal years beginning after December 15, 2024. This update is applied retrospectively to all prior periods presented. We have added additional segment disclosures as required by ASU 2023-07. There was no impact to the consolidated financial statements.
Reworded paragraphs (33)
Previous wording
Our portfolio of insured risks is highly diversified — we insure customers operating in a wide variety of industries; we distribute through multiple channels; we write multiple lines of business, including general liability, excess liability, professional liability (which includes cyber and media liability insurance), commercial auto, group accident and health, property, agriculture, credit, surety and workers’ compensation; we insure both short and medium duration liabilities; and our business mix is principally primary insurance and balanced between E&S and admitted markets. A small portion of our business is specialty reinsurance (principally agriculture and credit) which is similarly focused on attractive specialty classes where we believe it is more efficient to approach these classes through reinsurance given factors such as cost of entry, including the costs of geographic expansion. All of these factors enable us to respond to market opportunities and dislocations by deploying capital with attractive risk-adjusted returns. We believe this diversification, which includes businesses not typically aligned with traditional P&C pricing cycles, combined with our underwriting and claims expertise, will more consistently produce strong growth and profitability across all insurance pricing cycles.
Current wording
Our portfolio of insured risks is highly diversified — we insure customers operating in a wide variety of industries; we distribute through multiple channels; we write multiple lines of business, including general liability, excess liability, professional liability (which includes cyber and media liability insurance), commercial auto, group accident and health, property, agriculture, credit, surety and workers’ compensation; we insure both short and medium duration liabilities; and our business mix is principally primary insurance and balanced between E&S and admitted markets. A portion of our business is specialty reinsurance (principally agriculture and credit) which is similarly focused on attractive specialty classes where we believe it is more efficient to approach these classes through reinsurance given factors such as cost of entry, including the costs of geographic expansion. All of these factors enable us to respond to market opportunities and dislocations by deploying capital with attractive risk-adjusted returns. We believe this diversification, which includes businesses not typically aligned with traditional P&C pricing cycles, combined with our underwriting and claims expertise, will more consistently produce strong growth and profitability across all insurance pricing cycles.
Previous wording
The following table provides a reconciliation of the adjusted loss and LAE ratio and adjusted combined ratio to the loss and LAE ratio and combined ratio for the years ended December 31, 2024 and 2023:
Current wording
The following table provides a reconciliation of the adjusted loss and LAE ratio and adjusted combined ratio to the loss and LAE ratio and combined ratio for the year ended December 31, 2024:
Previous wording
Net written premiums were $1,123.6 million compared to $910.7 million in 2023, an increase of $212.9 million or 23.4%. The increase in net written premiums was primarily driven by the same reasons that drove the increases in gross written premiums discussed above.
Current wording
Net written premiums were $1,406.2 million compared to $1,123.6 million in 2024, an increase of $282.7 million, or 25.2%. The increase in net written premiums was primarily driven by the same reasons that drove the increase in gross written premiums discussed above.
Previous wording
Net earned premiums for 2024 were $1,056.7 million compared to $829.1 million for 2023, an increase of $227.6 million, or 27.4%. The increase in net earned premiums was primarily driven by the same reasons that drove the increases in gross written premiums discussed above.
Current wording
Net earned premiums for 2025 were $1,304.5 million compared to $1,056.7 million for 2024, an increase of $247.8 million, or 23.4%. The increase in net earned premiums was primarily driven by the same reasons that drove the increase in gross written premiums discussed above.
Previous wording
The 2024 loss ratio increased 1.3 points, respectively, when compared to 2023, primarily due to the net impact of prior accident year development related to the LPT, which added 1.1 points to the loss ratio. The non-cat loss and LAE ratio for 2024 improved 0.3 points when compared to 2023, primarily driven by the shift in the mix of business. The 2024 cat loss and LAE ratio increased 0.3 points when compared to 2023, primarily due to catastrophe losses from Hurricanes Helene and Beryl in the third quarter of 2024 and Hurricane Milton in the fourth quarter of 2024.
Current wording
The 2025 loss ratio improved 2.5 points when compared to 2024, primarily due to favorable prior accident year development compared to adverse development due to the net impact of the LPT in 2024. The non-cat loss and LAE ratio for 2025 improved 0.3 points when compared to 2024, primarily driven by the shift in the mix of business. The 2025 cat loss and LAE ratio improved 0.5 points when compared to 2024, which was impacted by Hurricanes Helene and Beryl in the third quarter of 2024 and Hurricane Milton in the fourth quarter of 2024.
Previous wording
During the year ended December 31, 2023, the Company recognized adverse development related to prior years’ loss and loss expense reserves of $10.8 million. Adverse development of $11.7 million in multi-line solutions was driven by greater than expected severity in auto, general, and excess liability lines of business primarily from accident years 2020 to 2022. The adverse development was partially offset by favorable development in short-tail/monoline specialty lines. The favorable development was in the property line of business primarily from accident years 2021 and 2022.
Current wording
For the year ended December 31, 2025, we recognized favorable development related to prior years’ loss and loss expense reserves of $7.5 million due to favorable development of $24.6 million and $5.3 million in short-tail/monoline specialty lines and multi-line solutions, respectively, partially offset by $22.4 million of adverse development in exited lines. The adverse development is primarily attributable to commercial auto and excess over auto in divisions that we have non-renewed or significantly reduced our exposure over the past three years. This was offset by favorable development in surety and property.
Previous wording
For the year ended December 31, 2024, the Company recognized adverse development related to prior years’ loss and loss expense reserves of $25.7 million; $10.1 million and $15.2 million in multi-line solutions and exited lines, respectively, were related to losses previously subject to the LPT from accident years 2018 and prior.
Current wording
For the year ended December 31, 2024, we recognized adverse development related to prior years’ loss and loss expense reserves of $25.7 million; $10.1 million and $15.2 million in multi-line solutions and exited lines, respectively, were related to losses previously subject to the LPT from accident years 2018 and prior.
Previous wording
The expense ratio for 2024 increased 0.3 points when compared 2023, primarily driven by the business mix shift partially offset by earnings leverage.
Current wording
The expense ratio for 2025 improved 0.5 points when compared to 2024, primarily due to earnings leverage, partially offset by higher acquisition costs due to the business mix shift.
Previous wording
Net investment income for the year ended 2024 increased $40.4 million when compared to 2023.
Current wording
Net investment income for the year ended 2025 increased $3.0 million when compared to 2024.
Previous wording
The increase in income from our fixed income portfolio for 2024, when compared to 2023, was due to (i) a larger asset base as we continued to increase our allocation to this part of our investment portfolio and (ii) a higher book yield of 5.2% at December 31, 2024 compared to 4.5% at December 31, 2023. The increase in income from short-term investments & cash and cash equivalents for 2024 when compared to 2023 was due to higher investment yields and a larger asset base. The fair value of our alternative and strategic investments portfolio for 2024 increased when compared to 2023 due to an increase in the fair value of limited partnership investments.
Current wording
The increase in income from our fixed income portfolio for 2025, when compared to 2024, was due to (i) a larger asset base as we continued to increase our allocation to this part of our investment portfolio and (ii) a higher book yield of 5.4% at December 31, 2025 compared to 5.2% at December 31, 2024. The decrease in income from short-term investments & cash and cash equivalents for 2025 when compared to 2024 was due to an overall decrease in yields. The decrease in income from our alternative and strategic investments portfolio in 2025 when compared to 2024 due to a decline in the fair value of limited partnership investments. The decrease in income from equities was due to the sale of the equity portfolio in the third quarter of 2025.
Previous wording
The weighted average credit rating of our available-for-sale fixed income portfolio was “AA-” by Standard & Poor’s Financial Services, LLC (“Standard & Poor’s”) at December 31, 2024 and 2023. The following table sets forth the credit quality of our available-for-sale fixed income portfolio at December 31, 2024 and 2023, as rated by Standard & Poor’s or equivalent designation:
Current wording
The weighted average credit rating of our available-for-sale fixed income portfolio was “A+” at December 31, 2025 and “AA-” at December 31, 2024. The following table sets forth the credit quality of our available-for-sale fixed income portfolio at December 31, 2025 and 2024:
Previous wording
The average duration of our fixed income portfolio was approximately 4.34 years and 4.24 years, respectively, as of December 31, 2024 and 2023.
Current wording
The average duration of our fixed income portfolio was approximately 3.60 years and 4.34 years, respectively, as of December 31, 2025 and 2024.
Previous wording
The equities portfolio primarily consists of domestic preferred stocks, common equities, exchange traded funds, limited partnerships, limited liability corporations and other types of equity interests, 100.0% of which are publicly traded.
Current wording
The equities portfolio primarily consisted of domestic preferred stocks, common equities, exchange traded funds, limited partnerships, limited liability corporations and other types of equity interests, 100.0% of which were publicly traded. During the third quarter of 2025, we sold almost all of our equities portfolio, retaining only our preferred stocks.
Previous wording
Credit risk is the potential loss resulting from adverse changes in an issuer’s ability to repay its debt obligations. We have exposure to credit risk as a holder of debt instruments in our core fixed income and opportunistic fixed income portfolios. Our risk management strategy and investment policy is to invest primarily in debt instruments of high credit quality issuers and to limit the amount of credit exposure with respect to particular ratings categories and any one issuer. At December 31, 2024, our core fixed income portfolio had an average rating of “AA-,” with approximately 81.5% of securities in that portfolio rated “A” or better by at least one nationally recognized rating organization. Our policy is to invest in investment grade fixed income securities which are high quality and liquid, providing a stable income stream, supplemented by opportunistic fixed income and equity securities, with the objective of further enhancing the portfolio’s diversification and risk-adjusted returns. At December 31, 2024, approximately 1.7% of our core fixed income portfolio was unrated or rated below investment-grade. Through our investment managers, we monitor the financial condition of all of the issuers of securities in our portfolio.
Current wording
Credit risk is the potential loss resulting from adverse changes in an issuer’s ability to repay its debt obligations. We have exposure to credit risk as a holder of debt instruments in our core fixed income and opportunistic fixed income portfolios. Our risk management strategy and investment policy is to invest primarily in debt instruments of high credit quality issuers and to limit the amount of credit exposure with respect to particular ratings categories and any one issuer. At December 31, 2025, our fixed income portfolio had an average rating of “A+,” with approximately 78.5% of securities in that portfolio rated “A” or better by at least one nationally recognized rating organization. Our policy is to invest in investment grade fixed income securities which are high quality and liquid, providing a stable income stream, supplemented by opportunistic fixed income and equity securities, with the objective of further enhancing the portfolio’s diversification and risk-adjusted returns. At December 31, 2025, approximately 1.1% of our fixed income portfolio was unrated or rated below investment-grade. Through our investment managers, we monitor the financial condition of all of the issuers of securities in our portfolio.
Previous wording
In addition, we are subject to credit risk with respect to our third-party reinsurers. Although our third-party reinsurers are obligated to reimburse us to the extent we cede risk to them, we are ultimately liable to our policyholders on all risks we have ceded. As a result, reinsurance contracts do not limit our ultimate obligations to pay claims covered under the insurance policies we issue, and we might not collect amounts recoverable from our reinsurers. We address this credit risk by seeking to purchase reinsurance from reinsurers that are rated at least “A-” (Excellent) or better by A.M. Best. We also perform, along with our reinsurance broker, periodic credit reviews of our reinsurers. At December 31, 2024, 99% of our reinsurance recoverables were either derived from reinsurers rated “A-” (Excellent) by A.M. Best, or better, or were collateralized through funds held, trusts and letters of credit by the reinsurer. If one of our reinsurers suffers a credit downgrade, we may consider various options to lessen the risk of asset impairment, including commutation, novation and letters of credit.
Current wording
In addition, we are subject to credit risk with respect to our third-party reinsurers. Although our third-party reinsurers are obligated to reimburse us to the extent we cede risk to them, we are ultimately liable to our policyholders on all risks we have ceded. As a result, reinsurance contracts do not limit our ultimate obligations to pay claims covered under the insurance policies we issue, and we might not collect amounts recoverable from our reinsurers. We address this credit risk by seeking to purchase reinsurance from reinsurers that are rated at least “A-” (Excellent) or better by A.M. Best. We also perform, along with our reinsurance broker, periodic credit reviews of our reinsurers. At December 31, 2025, 98% of our reinsurance recoverables were either derived from reinsurers rated “A-” (Excellent) by A.M. Best, or better, or were collateralized through funds held, trusts and letters of credit by the reinsurer. If one of our reinsurers suffers a credit downgrade, we may consider various options to lessen the risk of asset impairment, including commutation, novation and letters of credit.
Previous wording
Interest rate risk is the risk that we will incur economic losses due to adverse changes in interest rates. The primary market risk to our investment portfolio is interest rate risk associated with investments in fixed income securities. Fluctuations in interest rates have a direct effect on the market valuation of these securities. When market interest rates rise, the fair value of our securities decreases. Conversely, as interest rates fall, the fair value of our securities increases. We manage this interest rate risk by investing in securities with varied maturity dates and by managing the duration of our investment portfolio in directional relation to the duration of our reserves. Expressed in years, duration is the weighted average payment period of cash flows, where the weighting is based on the present value of the cash flows. We set duration targets for our core fixed income investment portfolio after consideration of the estimated duration of our liabilities and other factors. Our fixed maturity securities had a weighted average effective duration of 4.34 years as of December 31, 2024.
Current wording
Interest rate risk is the risk that we will incur economic losses due to adverse changes in interest rates. The primary market risk to our investment portfolio is interest rate risk associated with investments in fixed income securities. Fluctuations in interest rates have a direct effect on the market valuation of these securities. When market interest rates rise, the fair value of our securities decreases. Conversely, as interest rates fall, the fair value of our securities increases. We manage this interest rate risk by investing in securities with varied maturity dates and by managing the duration of our investment portfolio in directional relation to the duration of our reserves. Expressed in years, duration is the weighted average payment period of cash flows, where the weighting is based on the present value of the cash flows. We set duration targets for our core fixed income investment portfolio after consideration of the estimated duration of our liabilities and other factors. Our fixed maturity securities had a weighted average effective duration of 3.6 years as of December 31, 2025.
Previous wording
We had fixed income securities that were subject to interest rate risk with a fair value of $1,292.2 million at December 31, 2024. Our opportunistic fixed income securities are excluded from our interest rate sensitivity analysis as they are primarily floating rate and treated as held to maturity securities.
Current wording
We had fixed income securities that were subject to interest rate risk with a fair value of $1,856.3 million at December 31, 2025. Our opportunistic fixed income securities are excluded from our interest rate sensitivity analysis as they are primarily floating rate and treated as held to maturity securities.
Previous wording
Equity price risk represents the potential economic losses due to adverse changes in equity security prices. At December 31, 2024, approximately 6.7% of the fair value of our investment portfolio (excluding cash and cash equivalents and short-term investments) was invested in equity securities. We manage equity price risk through portfolio diversification and maintain a tail-risk management strategy that is designed to provide some protection for the equity portfolio if there is a significant decline in the S&P 500 within a 30 day period.
Current wording
Equity price risk represents the potential economic losses due to adverse changes in equity security prices. At December 31, 2025, approximately 0.1% of the fair value of our investment portfolio (excluding cash and cash equivalents and short-term investments) was invested in equity securities. During the third quarter of 2025, we sold almost all of our equities portfolio, retaining only our preferred stocks.
Previous wording
Income tax expense for the year ended December 31, 2024 was $33.9 million, compared to $24.1 million, for the year ended December 31, 2023. Our effective tax rate for the year ended December 31, 2024 was 22.2%, compared to 21.9%, for the year ended December 31, 2023.
Current wording
Income tax expense for the year ended December 31, 2025 was $46.4 million, compared to $33.9 million, for the year ended December 31, 2024. Our effective tax rate for the year ended December 31, 2025 was 21.4%, compared to 22.2%, for the year ended December 31, 2024.
Previous wording
At December 31, 2024, our holding company had $2.9 million in cash and investments compared to $3.0 million at December 31, 2023.
Current wording
At December 31, 2025, our holding company had $3.5 million in cash and investments compared to $2.9 million at December 31, 2024.
Previous wording
The timing of our cash flows from operating activities can vary among periods due to the timing by which payments are made or received. Some of our payments and receipts, including loss settlements and subsequent reinsurance receipts, can be significant, and as a result their timing can influence cash flows from operating activities in any given period. Management believes that cash receipts from premiums and proceeds from investment income are sufficient to cover cash outflows in the foreseeable future.
Current wording
The timing of our cash flows from operating activities can vary amongst periods due to the timing by which payments are made or received. Some of our payments and receipts, including loss settlements and subsequent reinsurance receipts, can be significant, and as a result their timing can influence cash flows from operating activities in any given period. Management believes that cash receipts from premiums and proceeds from investment income are sufficient to cover cash outflows in the foreseeable future.
Previous wording
The decrease in cash provided by operating activities in 2024 when compared to 2023 was primarily due an increase in cash outflows from our net reinsurance recoverables and net premiums receivables. Cash from operations can vary from period to period due to the timing of premium receipts, claim payments and reinsurance activity. Cash flows from operations in each of the past two years were used primarily to fund investing activities.
Current wording
The increase in cash provided by operating activities in 2025 when compared to 2024 was primarily due to an increase in cash inflows from our insurance operations. Cash from operations can vary from period to period due to the timing of premium receipts, claim payments and reinsurance activity. Cash flows from operations in each of the past two years were used primarily to fund investing activities.
Previous wording
Net cash used in investing activities in 2024 was primarily driven by purchases of fixed maturity securities, partially offset by sales and maturities of investment securities and sales of short-term investments. Net cash used in investing activities in 2023 was primarily driven by purchases of fixed maturity securities.
Current wording
Net cash used in investing activities in 2025 was primarily driven by purchases of fixed maturity securities, partially offset by sales and maturities of investment securities. Net cash used in investing activities in 2024 was driven by purchases of fixed maturity securities, partially offset by sales and maturities of investment securities and sales of short-term investments.
Previous wording
On August 30, 2024, we entered into a loan (the “FHLB Loan”) with the Federal Home Loan Bank of Dallas (the “FHLB”) pursuant to its Advances and Security Agreement. The FHLB Loan is a 4.5-year term loan in the principal amount of $57.0 million. The FHLB Loan provides for interest-only payments during its term, with principal due in full at maturity. The interest rate is fixed over the term of the loan at 4.00%. The FHLB Loan is fully secured by a pledge of specific investment securities of HSIC. We used the proceeds to fund the redemption of the March 15, 2024 draw on the Revolving Credit Facility and redeemed $7.0 million of the March 29, 2023 draw on the Revolving Credit Facility (see “Revolving Credit Facility” below for additional information regarding the redemption).
Current wording
On August 30, 2024, we entered into a loan (the “FHLB Loan”) with the Federal Home Loan Bank of Dallas (the “FHLB”) pursuant to its Advances and Security Agreement. The FHLB Loan is a 4.5-year term loan in the principal amount of $57.0 million. The FHLB Loan provides for interest-only payments during its term, with principal due in full at maturity. The interest rate is fixed over the term of the loan at 4.00%. The FHLB Loan is fully secured by a pledge of specific investment securities of HSIC. We used the proceeds to fund redemptions of the draws on the 2023 Revolving Credit Facility (see “Revolving Credit Facility” below for additional information regarding the redemption).
Previous wording
We are subject to covenants on the Revolving Credit Facility based on minimum net worth, maximum debt to capital ratio, minimum A.M. Best Rating and minimum liquidity. As of December 31, 2024, we are in compliance with all covenants.
Current wording
We are subject to covenants on the Revolving Credit Facility based on minimum net worth, maximum debt to capital ratio, minimum A.M. Best Rating and minimum liquidity, as well as customary events of default. As of December 31, 2025, we were in compliance with all covenants.
Previous wording
On March 29, 2023, we entered into an unsecured revolving credit facility (the “Revolving Credit Facility”) with a syndicate of participating banks. The Revolving Credit Facility provides us with up to a $150.0 million revolving credit facility and a letter of credit sub-facility of up to $30.0 million.
Current wording
During the first quarter of 2023, we entered into an agreement to obtain a unsecured revolving credit facility (the “2023 Revolving Credit Facility”) with a syndicate of participating banks. The 2023 Revolving Credit Facility provided us with up to a $150.0 million revolving credit facility and a letter of credit sub-facility of up to $30.0 million. On November 13, 2025, we redeemed the 2023 Revolving Credit Facility, paid $0.3 million of accrued interest and recognized $0.6 million of expense for the remaining unamortized deferred financing costs.
Previous wording
In May 2019, we issued unsecured subordinated notes (the “Notes”) with an aggregate principal amount of $20.0 million. Interest on the subordinated notes is 7.25% fixed for the first eight years and 8.25% fixed thereafter. Early retirement of the debt ahead of the eight-year commitment requires all interest payments to be paid in full, as well as the return of all capital. Principal payment is due at maturity on May 24, 2039 and interest is payable quarterly.
Current wording
In May 2019, we entered into an agreement to issue unsecured subordinated notes (the “Notes”) with an aggregate principal amount of $20.0 million. Interest on the Notes is fixed at 7.25% for the first 8 years and fixed at 8.25% thereafter. Early retirement of the debt ahead of the 8-year commitment requires all interest payments to be paid in full as well as the return of outstanding principal. Principal is due at maturity on May 24, 2039 and interest is payable quarterly. The Notes have junior priority to all previously issued debt. We report debt related to the Notes in our December 31, 2025 and 2024 Consolidated Balance Sheets, net of debt issuance costs of approximately $0.4 million and $0.5 million, respectively. These deferred financing costs are presented as a direct deduction from the carrying amount of the subordinated debt.
Previous wording
Reserves for losses and LAE represent our best estimate of the ultimate cost of settling reported and unreported claims and related expenses. Estimating reserves for losses and LAE is based on various complex and subjective judgments. Actual losses and settlement expenses paid may deviate, perhaps substantially, from the reserve estimates reflected in our financial statements. Similarly, the timing for payment of our estimated losses is not fixed and is not determinable on an individual or aggregate basis. The assumptions used in estimating the payments due by period are based on our own, industry and peer group claims payment experience. Due to the uncertainty inherent in the process of estimating the timing of such payments, there is a risk that the amounts paid in any period will be significantly different than the amounts disclosed above. Amounts disclosed above are gross of anticipated amounts recoverable from reinsurers. Reinsurance balances recoverable on reserves for losses and LAE are reported separately as assets, instead of being netted with the related liabilities, since reinsurance does not discharge us of our liability to policyholders. Reinsurance balances recoverable on reserves for paid and unpaid losses and LAE totaled $857.9 million and $596.3 million at December 31, 2024 and December 31, 2023, respectively.
Current wording
Reserves for losses and LAE represent our best estimate of the ultimate cost of settling reported and unreported claims and related expenses. Estimating reserves for losses and LAE is based on various complex and subjective judgments. Actual losses and settlement expenses paid may deviate, perhaps substantially, from the reserve estimates reflected in our financial statements. Similarly, the timing for payment of our estimated losses is not fixed and is not determinable on an individual or aggregate basis. The assumptions used in estimating the payments due by period are based on our own, industry and peer group claims payment experience. Due to the uncertainty inherent in the process of estimating the timing of such payments, there is a risk that the amounts paid in any period will be significantly different than the amounts disclosed above. Amounts disclosed above are gross of anticipated amounts recoverable from reinsurers. Reinsurance balances recoverable on reserves for losses and LAE are reported separately as assets, instead of being netted with the related liabilities, since reinsurance does not discharge us of our liability to policyholders. Reinsurance balances recoverable on reserves for paid and unpaid losses and LAE totaled $1,119.9 million and $857.9 million at December 31, 2025 and December 31, 2024, respectively.
Previous wording
The reserves for unpaid losses and LAE is the largest and most complex estimate in our consolidated balance sheet. The reserves for unpaid losses and LAE represent our estimated ultimate cost of all unreported and reported but unpaid insured claims and the cost to adjust these losses that have occurred as of or before the balance sheet date. We do not discount our reserves for losses and LAE to reflect estimated present value. We estimate the reserves using individual case-basis valuations of reported claims and statistical analyses and various actuarial procedures. Those estimates are based on our historical information, industry and peer group information and our estimates of future trends in variable factors such as loss severity, loss frequency and other factors such as inflation. We regularly review our estimates and adjust them as necessary as experience develops or as new information becomes known to us. Additionally, during the loss settlement period, it often becomes necessary to refine and adjust the estimates of liability on a claim either upward or downward. Even after such adjustments, the ultimate liability may exceed or be less than the revised estimates. Accordingly, the ultimate settlement of losses and the related LAE may vary significantly from the estimate included in our financial statements.
Current wording
The reserves for unpaid losses and LAE is the largest and most complex estimate in our Consolidated Balance Sheets. The reserves for unpaid losses and LAE represent our estimated ultimate cost of all unreported and reported but unpaid insured claims and the cost to adjust these losses that have occurred as of or before the balance sheet date. We do not discount our reserves for losses and LAE to reflect estimated present value. We estimate the reserves using individual case-basis valuations of reported claims and statistical analyses and various actuarial procedures. Those estimates are based on our historical information, industry and peer group information and our estimates of future trends in variable factors such as loss severity, loss frequency and other factors such as inflation. We regularly review our estimates and adjust them as necessary as experience develops or as new information becomes known to us. Additionally, during the loss settlement period, it often becomes necessary to refine and adjust the estimates of liability on a claim either upward or downward. Even after such adjustments, the ultimate liability may exceed or be less than the revised estimates. Accordingly, the ultimate settlement of losses and the related LAE may vary significantly from the estimate included in our financial statements.
Previous wording
Our Reserve Committee includes our Chief Actuary, Chief Financial Officer and Chief Claims Officer. The Reserve Committee meets quarterly to review the actuarial reserving recommendations made by the Chief Actuary and uses their judgment to determine the best estimate to be recorded for the reserve for losses and LAE on our balance sheet. In establishing the quarterly actuarial recommendation for the reserves for losses and LAE, our actuary estimates an initial expected ultimate loss ratio for each of our underwriting divisions. Input from our underwriting and claims departments, including premium pricing assumptions and historical experience, is considered in setting our reserves.
Current wording
Our Reserve Committee includes our Chief Actuary, Chief Reserving Actuary, Chief Financial Officer and Chief Claims Officer. The Reserve Committee meets quarterly to review the actuarial reserving recommendations made by the Chief Actuary and uses their judgment to determine the best estimate to be recorded for the reserve for losses and LAE on our balance sheet. In establishing the quarterly actuarial recommendation for the reserves for losses and LAE, our actuary estimates an initial expected ultimate loss ratio for each of our underwriting divisions. Input from our underwriting and claims departments, including premium pricing assumptions and historical experience, is considered in setting our reserves.
Previous wording
The actuarial review considers multiple actuarial methods are used to estimate the reserve for losses and LAE. These methods utilize, to varying degrees, the initial expected loss ratio, detailed statistical analysis of past claims reporting and payment patterns, claims frequency and severity, paid loss experience, industry loss experience, and changes in market conditions, policy forms, exclusions, and exposures. The actuarial methods used to estimate losses and LAE reserves are:
Current wording
The actuarial review considers multiple actuarial methods to estimate the reserve for losses and LAE. These methods include paid and incurred loss development methods, paid and incurred Bornhuetter-Ferguson methods, paid and incurred loss ratio cape cod methods and frequency and severity methods. In circumstances where one actuarial method is considered more credible than the others, that method is used to set the point estimate. For example, the paid loss and incurred loss development methods rely on historical paid and incurred loss data. For new lines of business, where there is insufficient history of paid and incurred claims data, or in circumstances where there have been significant changes in claim practices, the paid and incurred loss development methods would be less credible than other actuarial methods. The actuarial point estimate may also be based on a judgmental weighting of estimates produced from each of the methods considered. These methods utilize, to varying degrees, the initial expected loss ratio, detailed statistical analysis of past claims reporting and payment patterns, claims frequency and severity, paid loss experience, industry loss experience, and changes in market conditions, policy forms, exclusions, and exposures.
Previous wording
A 5% change in net IBNR would result in a $38.4 million change in our reserves for losses and LAE and a $30.4 million change in net income and stockholders’ equity.
Current wording
A 5% change in net IBNR would result in a $51.8 million change in our reserves for losses and LAE and a $40.9 million change in net income and stockholders’ equity.
Previous wording
In December 2023, the FASB issued ASU 2023-09, Improvements to Income Tax Disclosures (Topic 740). ASU 2023-09 requires public companies, on an annual basis, provide enhanced rate reconciliation disclosures, including disclosures of specific categories and additional information that meet a quantitative threshold. This update also requires public companies to, among other things, disaggregate income taxes paid by federal, state and foreign taxes. The guidance is effective for fiscal years beginning after December 15, 2024. We do not expect the amendments will have a material impact on our consolidated financial statements.
Current wording
In December 2023, the FASB issued ASU 2023-09, Improvements to Income Tax Disclosures (Topic 740). ASU 2023-09 requires public companies, on an annual basis, provide enhanced rate reconciliation disclosures, including disclosures of specific categories and additional information that meet a quantitative threshold. This update also requires public companies to, among other things, disaggregate income taxes paid by federal, state and foreign taxes. The guidance became effective for fiscal years beginning after December 15, 2024. This update is applied prospectively. We have added additional disclosures as required by ASU 2023-09. There was no impact to the consolidated financial statements.