Skyward Specialty Insurance Group, Inc. (SKWD) Q2 2026 Earnings Report, Transcript and Summary

Good day. Thank you for standing by. Welcome to the 2026 Q2 Skyward Specialty earnings conference call. At this time, all participants are in a listen-only mode. After the speakers' presentation, there will be a question-and-answer session. To ask a question during the session, you will need to press star one one on your telephone. You will hear an automated message advising your hand is raised. To withdraw your question, please press star one one again. 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. 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. 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. Welcome to the Skyward team. We're pleased to have you on board. To our conference call participants, good morning. 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 our niche strategy, 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. 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 six months of 2026, operating income increased to $116 million, driving an 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 Skyward Specialty, Gross Written Premiums increased 14% to $668 million, led by continued momentum in Accident & Health, Global Agriculture, Credit & 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 80% growth in Platform Partner syndicates and 13% growth in capital-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, Managed 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 Global 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 Global 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 30th, and book value per share increased 15% from year-end to $28.55. Financial leverage decreased by two 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-capital 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-$100 million, reflecting our confidence in the quality of our business, earnings outlook, capital position, and improved leverage. I'll turn the call back over to Andrew.

Thank you, Mark. As discussed, our financial results for the quarter are 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 & Surety, and Global 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 Healthcare Solutions within Professional Lines, power and renewables within Energy Solutions, political risk and political violence within Syndicate 1969, and a strong pipeline of Platform 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 the 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 six months as Skyward Group. Our rule our niche strategy, diversified portfolio, disciplined underwriting and execution, and growing fee-based income continues to drive top-quartile financial performance. We're 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?

Thank you. At this time, we will conduct the question-and-answer session. As a reminder, to ask a question, you will need to press star one one on your telephone and wait for your name to be announced. To withdraw your question, please press star one one again. Please stand by. Our first question comes from Tracy Benguigui from Wolfe Research. Please go ahead.

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

Hey, Tracy. This is Andrew, and I'll start, and Mark might join in here on this. Thanks for the question and good morning. Look, I think I would just start with the fundamentals. First off, we're growing at an attractive rate, we are generating excess capital. That just is true. I think that's a nice problem to have. It has a lot to do with our returns. Look, I think in the end, what we see is strong earnings growth and still an attractive valuation. 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 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. I would just say that we'll stay opportunistic. We feel very good about our business, I think at the core, we're trading at roughly 12x our earnings guidance for 2026. We think at the most basic level, the company is immensely attractively valued, and that informs some of our thinking.

Wasn't sure if Mark was going to chime in.

No, he gave me the perfect signal, so I think he doesn't want to say any more.

Okay. 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. If you could just touch on what you think about loss cost trends and if you're maybe choosing some higher loss picks.

Yeah. First off, the simple answer on the accident year is entirely mixed. The fact is that the growth from A&H and AG is earning in, really earning in now, and that's the change. 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, 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? If you think, hey, listen, I'm getting 10 points a rate because the market will give it to me, but 10 points a 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. Even in Occurrence Liability lines, much of what we write is really not the Personal Injury intensively exposed stuff. Where we are exposed to it, we're trying, as any good underwriter should, keep your limits short. Right? I think that 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 four years ago when people were thinking that occurrence liability was five points of loss inflation, and in certain areas, it's well over 10%. I think that we've been sensible stewards of our investors' capital in thinking about this.

Thank you.

Thank you.

Thanks, Tracy.

Thank you. Our next question comes from Andrew Kligerman from TD Cowen. Please go ahead.

Hey, good morning. 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%. Maybe throw in Apollo's 37.5% and where that could go as well.

Good morning, Andrew. Thank you for the question. Let me just knock off the second part, the Apollo point. I would point to the first six months. I think that there were some adjustments that are flowing through that probably just make the six-month reference a better reference for you. 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. 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 SkyView, our award-winning underwriting workstation which is the window pane, the single window pane that our underwriters access everything through. 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 agentic underwriting and learning to sort of help the underwriters be far more efficient and effective. 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. 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. We have built capabilities called SkyScore, which allows us to ingest all financial information without any human intervention to score every principal 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. 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 15-point checklists for bond forms, 12-point checklists for contracts against what we view as the best practices. 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. I've used this analog of if you have 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 opponent's 20-yard line. 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 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. I've talked about that we have a lead, but that lead, if you sort of let up, will be fleeting. 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. It sounds like, though, you can, Andrew, kind of keep the expense ratio level here as you continue to invest?

Yeah, it's funny you say that, Andrew, because I mentioned in the last call that doing this stuff is really expensive, and you are oftentimes doing things well in advance of realizing the benefits. 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. That's how we see things right now, and I hope that the good trends that are visible in our results continue. Time is going to tell whether that's the case.

Makes sense. Then just my follow-up is around the global property area. You talked about, in your prepared remarks about the pricing pressure there. What do you like in global property? I know it's down 15% in the quarter, 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 longstanding accounts, and I think that we had a good retention rate there. I 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 marketplace as, I don't know what the right words were, 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 fac 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 write very large lines. We write the first layer above the self-insured retentions. We use fac basically to lay off at a time when the first line is a very large line, right? Because that's what soft markets do. The fac markets allow us to retain profitability that looks far better than on a gross line basis. Our underwriters are great at it. So if you're in a soft market, that's the one benefit that you get. I think we do it really well. We're entirely sensible, and you can see it in the fac that a business that went from $235 million, I believe, in 2024 is going to be far smaller this year.

Thanks for that.

Thank you.

Thank you. Our next question comes from Michael Zaremski from BMO. Please go ahead.

Hey, great. Good morning. Maybe a couple 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?

Hey, Mike, good morning, and thank you for the question. The answer is absolutely. I think probably the most, excuse me, 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. Property is an area within Apollo's portfolio comparable to the Skyward Specialty portfolio that is being managed accordingly based on the market. 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. Again, time's going to tell on that as well.

That makes sense. I guess just probably for Mark, amortization expense came in around $14. I think the guide was $8.5. Any color there or any changes to the run rate we should be factoring in? Obviously, understand this is a non-cash.

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

Okay, got it. 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. The guide is still $30-$35 for full year. Just there's a seasonality in that as well, right? For the lower levels in the second half of the year.

Hey, Mike, this is Andrew. We like to set out guidance that we have a good level of confidence that we can achieve. I think that's probably playing through in our numbers. The team at Apollo has done an outstanding job across everything, right? 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 Platform Partner syndicate piece. 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. It's the fees that you see less the specific costs associated with those fees. We've also said, Mike, just to remind you, that we believe that that's a leverage-kind of result, right? You see the costs are pretty flat quarter one to quarter two, and yet the fees have gone up quarter one over quarter two. We do think that there's leverage there. 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. Just as a follow-up, Mark, my bad on the amortization. Yeah, in line with guides. Okay. Thank you for all the color.

Sure. Thank you, Mike.

Thank you. Our next question comes from Mark Hughes from Truist. Please go ahead.

Yeah, thank you. Good morning.

Hey, Mark.

In the A&H business, Andrew,

Yeah

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

Hey, Mark. Good morning. Thanks by the way for the question. 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? We've always been focused on a medical cost management angle, and that is singularly our focus and as you know, smaller accounts. That really has been consistent. I think the thing that changed that we've talked about when we started a group captive concept, we opened up another market, and that has really inflected for us in a positive way. 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 control the benefits accounts for the benefit relationships for our clients. 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'll be like that forever. I would just tell you that growth more recently has benefited from two large industry reinsurers pulling out whose results were absolutely awful as a result of bad behaving MGAs. 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. On the talent side, look, we talk about talent all the time. We're a talent-driven organization. Mike Romica, 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. 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. Oh, I'm sorry. The last point. Sorry, Mark.

Yeah.

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 five of the top 50. That's a great result in an absolute sense, in a relative sense. Look, of course, there's volatility, but it isn't wild volatility that they can have. 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. It's just like you can't hide from the results in any way around this. It's right in front of you.

Very good. Then, I'm not sure if you've 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. 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.

Very good. Thank you.

Thank you.

Thank you. Our next question comes from Paul Newsome from Piper Sandler. Please go ahead.

Good morning. Thanks for the call. Stepping back, if we look at the first six 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 at the same kind of returns, does the tail extend given what we're doing? Are some of these, like A&H has, I think, a higher Expense Ratio. How should we think of some of those basic metrics, assuming not necessarily next quarter, next year and thereafter if that mix change continues?

Paul, thanks. Good morning, thanks for the question. Great question. Obviously something that we're thinking about, as we've talked about near since the day we went public, we're trying to be very intentional around our portfolio construction. Well, 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 I don't believe that that's possible to do that sensibly and to grow margins, plain and simple, it's certainly not true. It's long since not been true on property. 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 six months of the year inclusive of Apollo, more than 60% of our business has liability durations less than two years. 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 in 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. Combined Ratio expectations don't change, the geography, to your point, does change. I think the thing that we have to pay attention to as an executive team, 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 fac that there are some places where we clearly can see profitable growth and in other cases we're shrinking, it isn't in our long-term interest to over-rotate. We're working hard on that. I don't think that we will exit this year with any division larger than maybe 17-ish% of our overall portfolio. 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. I do think that because we're intentional in this regard, we're thoughtful in this regard, we're not going 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, it's going to answer by the way, thank you, 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's 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?

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, nothing has changed in our thinking. Our head of corporate development, Shakoor Khan, has been working closely with Taryn on looking at a whole account quota share, whether that's something that goes into the 2027 year or the year after, into 1969 or we do something different. 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 is what I would describe as an itty bitty first step in that direction. 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. Then at that point, we'll act.

Great. Thank you very much.

Thank you.

Thank you. Our next question comes from Randy Binner from Texas Capital. Please go ahead.

Hey, good morning. Thanks. I had a follow-up to Michael Zaremski's line of questioning on just kind of the fee income from Apollo. I guess we're getting a pretty good idea of what the pre-tax margin is. Maybe it's kind of coming in in the 60s, just by my calculation. Maybe you had a guide. The question though is the pre-tax margin we're seeing this year vis-á-vis that guide of $30 million-$35 million of pre-tax income, is that where that margin stays, or does that margin scale as that business grows now that it's a part of Skyward?

Hey, Randy. Thanks for the question. Welcome to covering us at Skyward. We are pleased to have you with us. 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 Taryn 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. I don't have the numbers in front of me, but we are running $4 million-$5 million of cost per quarter. I do believe that there is not a linear relationship between the growth and the fees and that underlying cost. That, of course, is something that we like done the right way. 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. Whether it be the first of its kind dedicated syndicate that we did with Coface on trade credit or the first parametric syndicate with NormanMax. These are great things for everybody. We like being close to that edge of innovation. It helps our business, and we deliver a huge amount of value. If we can make sure that we have 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 are just not updating guidance. We don't sort of do something at the beginning of the year and give you new updates. We are sticking by our guidance. We think our guidance is sensible guidance. 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 three and a half years being a public company, never once have we not met our guidance, and we would like to see that trend continue.

No, understood. That's super helpful. I was thinking about it more kind of 2027, 2028, just longer term, if that there's a lot of leverage, as you said, if that margin gets better. I had just another quick one on Apollo. I think you mentioned that the book there was seeing low single-digit decline in price, the underwritten book.

Yep.

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 Taryn 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. You have to unpack at the class level, right? Because there's a lot of mix going on there. Just a reminder, Lloyd's has a far greater reinsurance concentration as a percentage of the overall mix. I think that we don't write property cat. There's a lot of differences there. Listen, I want all of our pricing to be above loss cost trend. 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. We can follow-up with you on that. I think that we're doing the right things. I will say to you that James Slaughter, our Chief Underwriting Officer there really kind of works this angle which is much more around price adequacy. 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. 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. There's a dynamic that goes on here that's more than just sort of the straight what's happening on pure rate.

Nope. Understood. That's helpful. Thanks for the answers.

Thank you.

Thank you. Our next question comes from Andrew Andersen from Jefferies. Please go ahead.

Hey, good morning. I wanted to go back on A&H for a second. 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?

By the way, that's a great question, Andrew. Thanks for that. 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, one-one is really kind of the big date. All right? I think where this will probably be most visible is as we head towards one-one. I would say that some of the guys that left the market, we wouldn't certainly directly compete against them. Anytime you have a irresponsible competitor, even if you're not directly competing against them, it has a second order effect, right? Because there's just second order competition that runs through the market, and second order availability of business that runs through the market. Others might write that business that they were writing, we might then go write more of the business that we want to write. 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. I think from a loss ratio, look, this is a business that's a very capital-light business, the allowable loss ratio sits above where it is that we currently pick it. We haven't really moved that, right? I think our general sense here is it's kind of a great position to be 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. 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, the market just adds a little bit for us.

Thanks. 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. Also just maybe some more texture on ag, because I don't think it's U.S. MPCI, how should we think about that throughout the year?

Yeah. It's a great question. Let me be direct on just first on 2Q. Most of the growth in 2Q was really around premium true-ups, 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 exposure is less than probably $50 million of our total premium. We're certainly not overweight there. It is, as we've talked about on the crop side, a diversified global book all 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. 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 one or two of them. We have a great solution. 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 cede, while still providing plenty of upside for our reinsurers. I think that's a validation of what we're doing. I actually was exchanging emails 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. 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. We're well-positioned to grow with that program as the U.S. government grows it.

Thank you.

Thank you.

Thank you. Our next question comes from Bob Farnam from Brean Capital. Please go ahead.

Hey there, good morning. I wanted to continue on that question from Andrew. On the global ag book, I was thinking, all right, where are your largest exposures outside of the U.S.? 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.

Yeah. Hey, Bob. Thanks for the question. Listen, I think that everything that's 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. That diversification includes Canada, Brazil, China, other markets in Asia. Actually, there isn't a lot of well-structured subsidized markets in Europe that we access, that 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's a big part of it. I have to say to you that it's everything you named plus, right? Certainly fertilizer prices have to be part of the calculus of anybody in the world of crop today. I think that all those things play to why it is that we've built that particular business the way that we have.

Great. Thanks. Point taken. It's not just Europe that's having issues, it's everywhere. Thanks for the color on that.

Thank you.

Thank you. Our next question comes from Mark Hughes from Truist. Please go ahead.

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

Mark, that's a good question. Let me say this.

I really think.

First up, yeah, listen, obviously the property market, the first thing I'd say to you, 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 softness is less intense. 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 and 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. 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. You wouldn't expect for things to change anytime soon. Listen, in certain cases, the crazies have taken over, right? 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% for the second or third year in a row and justify to yourself that that's okay," right? 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. 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.

Thank you.

Thank you.

Thank you.

Thank you. Our next question comes from Greg Peters from Raymond James. Please go ahead.

Hey, good morning. 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's some movement. 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.

Hey, 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. Yeah, we're disappointed in the results. 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. We've been very disciplined and intentional around the performance of the portfolio. It's $65 million. 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 de-risk. 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. We like the risk-adjusted returns right now. We put money to work at 5.6%. As long as we can generate those types of returns, we like it. We're not big fans of duration risk, we haven't changed the underlying construction of the portfolio. 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. In 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 expressed some frustration with their surety business or the market, I think, was more their assessment. Then MGAs continue to be the talk of the town with whether they're behaving responsibly or not. Maybe you can close the loop and cover those two points for us.

Yeah. Greg, thanks for the question. Good morning, by the way. Listen, first off, I know you asked two 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. 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 unequivocally 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. We've talked about market-leading products. We've had other companies call into Mark and say, "How did you do that?" Right? "How'd you come up with that?" I just gave an example early on the things that we're doing on the technology side. It's talent, technology, product, and I feel great. We are building a business the right way. Our results are outstanding, and we are becoming one of the true, really top-notch players in that market, and I'm incredibly proud of that. That business was $7 million when I joined, right? 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've said this before, I think there are some outstanding MGAs out there, but there's also a lot of crap. At some point that stuff's going to get washed out, and it's supported by, we've had at least one company hit a trip wire on bad collateral recently. I just think fronted premium, that's going to come to roost. My example on A&H, two 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. Its 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. 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. Stay tuned and you can ask the question in subsequent quarters, and maybe there will be some things that'll be visible. Until that time, we're just going to keep doing what we're doing.

Thank you.

Thanks, Greg.

Thank you.

Thank you. Our next question comes from Meyer Shields from Keefe, Bruyette & Woods. Please go ahead.

Hey, good morning. This is Scott on for Meyer. Thanks for taking my question. 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? Thank you.

Thank you. Great question. I'd say we're probably in the middle. It's a pretty dynamic situation, right? Ceasefires while ships moving through the strait are still being bombed, right? 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. These might be things like not targeted infrastructure in countries that are better protected. I think we're being sensible. It's a dynamic situation, 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." I really appreciate how our team in London is approaching it. I think it's kind of a sensible thing that they're doing. Hopefully, the 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. I think we'll know more about that here over the coming few months.

Great. Thank you.

Thank you.

Thank you. 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.