Skyward Specialty Insurance Group, Inc. (SKWD) Q3 2026 Earnings Report, Transcript and Summary

Hello, and welcome to the Third Quarter Skyward Group Earnings Conference Call. [Operator Instructions] Please be advised that today's conference is being recorded. It is now my pleasure to introduce Vice President of Investor Relations, Jordan Arnold.

Thank you, Andrew. Good morning, everyone, and welcome to our third quarter 2026 earnings conference call. Today, I am joined by our Chairman and Chief Executive Officer, Andrew Robinson; Chief Financial Officer, Mark Haushill; and Deputy Chief Financial Officer, Taryn McHarg. We will begin the call with our prepared remarks, and then we will open the lines for questions. Our comments may include forward-looking statements, which, by their nature, involve a number of risk factors and uncertainties, which may affect future financial performance. Such risk factors may cause actual results to differ materially from those contained in our projections or forward-looking statements. These types of factors are discussed in our press release as well as in our 10-K that was previously filed with the Securities and Exchange Commission. Financial schedules containing reconciliations of certain non-GAAP measures, along with other supplemental financial schedules are included as part of our press release and available on our website under the Investors section. With that, I will turn the call over to Andrew.

Good morning, everyone, and thank you for joining us. Before we begin, I'd like to take a minute to recognize an important leadership transition. As previously announced, Mark Haushill will retire as Chief Financial Officer effective March 31, 2027. Mark has been an exceptional partner in helping build Skyward into the organization it is today, and we're immensely grateful for his leadership and his contributions. I'm also pleased to formally introduce Taryn McHarg, who will succeed Mark as CFO upon his retirement. Taryn is a highly respected leader with deep financial and operating experience, and she's already become an important contributor to our organization. We look forward to a seamless transition over the coming months and are excited about the future under her financial leadership. Turning to the quarter. Our third quarter results were outstanding and further demonstrate the strength of our Rule Our Niche strategy, our outstanding execution and our diversified portfolio that we have built. Gross written premiums were up 9% and fee-generating gross written premiums were up more than 18%. Diluted operating earnings per share increased 22% to $1.28. And through 9 months, our annual operating return on equity exceeded 20%. We continue to benefit from multiple earnings growth engines across the organization, allowing us to allocate capital to the most attractive opportunities while remaining disciplined in areas where risk-adjusted returns are less compelling. As we have discussed for several years, the objective has been to build a truly diversified specialty insurance business so we can continue to deliver top quartile returns regardless of cycle. And that design continues to prove its value. With that, I'll turn the call over to Mark and Taryn to provide the financial details for the quarter. Mark?

Thank you, Andrew, and good morning, everyone. We delivered another strong quarter with solid growth across the business, excellent underwriting profitability and continued momentum in our fee-based earnings. Importantly, we generated these results while remaining disciplined in areas where market conditions are becoming more competitive. Operating income was $58 million or $1.28 per diluted share. Through 9 months, we've generated approximately $175 million in operating income and an annualized operating return on equity of over 20%, demonstrating the consistency of our earnings and the attractive returns we're generating across the portfolio. As Andrew mentioned, premium growth remained strong with gross written premiums up 9% to $803 million and fee-generating gross written premiums up over 18% to $517 million. Underwriting performance was excellent with a consolidated combined ratio of 89.9% and an 88.1% ex-cat combined ratio. We are particularly pleased with these results given the increasingly competitive environment in certain property classes and continued loss cost pressures affecting parts of the casualty market. Within Skywards Specialty, gross written premiums increased 10% to $668 million, led by continued momentum in accident and health, global agriculture, credit and surety and strategic distribution partners, partially offset in areas where competitive market conditions and pricing pressure have increased, particularly across portions of the property market and select casualty and liability classes. Growth in our agriculture business remained strong. We experienced lower-than-expected take-up as higher input costs continue to pressure farmer cash flow and margins, impacting dairy and livestock growth. True-ups related to the 2025 and 2026 treaty year were the primary driver of lower net earned premiums in the quarter. The benefit of the data and monitoring capabilities we have built allowed us to identify and respond to the change and trend quickly. Skyward Specialty's net earned premium growth year-to-date is over 13%. Our new dairy livestock reinsurance placed at 7/1 mitigated our exposures, reduced net written premiums and locked in a portion of our profits via ceding commissions. Skyward Specialty reported a combined ratio of 88.3% and an ex-cat combined ratio of 86.8%. The loss ratio was 62.6%, including 1.5 points of catastrophe losses, primarily from convective storm activity. The non-cat loss ratio was 61.1%, an increase of approximately 1 point year-over-year, driven primarily by business mix, specifically growth in Accident & Health and global agriculture. Skyward Specialty's expense ratio in the quarter improved to 25.7%. Our year-to-date expense ratio of 25.4% has improved 1.7 points from the prior year period. Pure rate ex property was in the mid-single digits. Retention remains in the mid- to upper 70s, and we're seeing elevated submission growth in the low 20s. Now I will turn the call over to Taryn to discuss Apollo results.

Thank you, Mark. Good morning, all. Apollo gross written premiums increased 3% to $135 million in the quarter, driven by our Specialty Risk Syndicate 1969, which grew 11% year-over-year. This was partially offset by a modest decrease in our digital economy-focused ibott Syndicate 1971, reflecting the timing of a renewal as well as seasonally lower new business opportunities. Apollo's fee generation continued to be a meaningful growth driver with fee-generating gross written premiums increasing 18% to $517 million, including 70% growth in partner syndicates. Underwriting fee income was $11 million, bringing the total for the first 9 months to approximately $34 million. Growth across both aligned and partner syndicates demonstrates the benefit of Apollo's capital-light business model as we expand both underwriting and fee-based earnings. Apollo reported a combined ratio of 90.5% and an ex-cat combined ratio of 87.7%. The loss ratio was 58%, including 2.8 points of catastrophe losses also from convective storm activity. The 55% non-cat loss ratio reflects strong underlying underwriting performance across the business. Apollo's expense ratio was 32.5% for the quarter. Lastly, while Apollo's rate was slightly negative, rate adequacy continues to be strong. Retention remains in the mid-80s. I'll now pass back to Mark.

Thank you, Taryn. Moving to reserves. We're in the process of completing the Skyward Specialty ground-up review. Initial indications are positive with emergence as expected or better from occurrence liability, property, surety, and A&H with some pressure in exited portfolios for commercial auto and claims made professional liability. Apollo emergence in the quarter was in line with our expectations. We continue to maintain a strong overall reserve position with IBNR now making up 77% of our total reserves, the highest level in company history. We did not recognize any prior year reserve development during the quarter, and we'll provide a more comprehensive update on our fourth quarter call. Turning to investments. Investment income continued to benefit from the addition of the Apollo portfolio and higher yields. Net investment income increased 54% to $34 million for the quarter, primarily due to $30 million of income from the fixed income portfolio. Results from alternative and strategic investments remain pressured by lower valuations in certain limited partnership investments. For the fixed income portfolio, we put new money to work at yields of 6.4% and the embedded yield for the group portfolio was 5.5%. Our balance sheet remains exceptionally strong. Book value per share increased more than 15% from December 2025 to $28.74. As we've seen over the last 2 years, certain areas of the market have softened and competitive conditions typically intensify in the fourth quarter. Despite that, we remain on track to deliver full year growth near the upper end of our original guidance range of $2.65 billion to $2.8 billion. We remain bullish about our growth and in turn our earnings growth outlook. We continue to have numerous attractive opportunities to profitably grow our business. Now I'll turn the call back over to Andrew.

Thanks, Mark. The underlying story of the quarter is straightforward. Our business simply continues to perform. Strong growth and profitability across a number of our specialty businesses, together with the continued expansion of our fee-based earnings streams demonstrate the benefits of operating a diversified business with multiple avenues for profitable growth. As market conditions evolve, we remain focused on directing capital toward our most attractive opportunities and maintaining the underwriting discipline that has been a hallmark of Skyward. Growth remained broad-based across the portfolio, underscoring the strength of our Rule Our Niche strategy. Our expertise, technology leadership and disciplined execution continue to create differentiated and defensible positions that drive outstanding absolute returns and sustained profitable earnings growth. To highlight one, our Accident & Health business continues to be one of the best examples of high-quality growth, more than doubling over the past 2 years. Our 76% loss ratio ranked fourth best amongst the 30 carriers writing more than $250 million of premium and outperformed the industry average by -- of 91 by approximately 15 points as reported in the NAIC's 2025 stop-loss industry analysis. AI embedded into our A&H underwriting process developed over the last 5 years continues to mature into a distinctive advantage. Our focus on the smaller employer market, together with our distinctive IP and medical cost management delivered through single company and group captive products is unique as demonstrated by our results. Recently, we announced 2 strategic growth initiatives, the launch of ibott in the U.S. and a partnership and founding investment in Slingshot, an AI-native insurance platform for embedded insurance products. We intend to report these through our strategic distribution partners division. As is visible by our growth in fee-generating premium from Apollo, the partner syndicate platform is an exciting and unique differentiator for Skyward. As existing syndicates scale and new partners join the platform, so does high-quality recurring fee income. In the quarter, we launched 2 partner syndicates and continue to see a strong pipeline of future opportunities heading into 2027. We believe we are still in the early innings of realizing the full potential of this business and remain very encouraged by the opportunities ahead. To wrap up, we are very pleased with our performance in the quarter and through the first 9 months of the year. The diversity of our business continues to create opportunities to profitably grow where market conditions are attractive, and we'll continue to defend our book in areas that are becoming more competitive. We've never been more confident in the quality of our portfolio, the positions we have built, the talent we have and our leadership in the use of technology and AI as demonstrated by our Bionic underwriting and claims at Skyward Specialty and augmented underwriting at Apollo. Altogether, we are exceptionally well positioned to continue to deliver strong earnings growth and top quartile financial returns for our shareholders. With that, I'll turn the call over to the operator to open it up for questions. Operator?

[Operator Instructions] Our first question comes from the line of Gregory Peters with Raymond James.

I guess from a big picture perspective, you've reaffirmed sort of the guidance -- the revenue guidance for -- or premium guidance for this year. I was wondering perhaps if you could just segue and talk a little bit about what you think the outlook looks like for 2027 in terms of premium growth. And of course, there's the follow-up questions relating to what happened in the dairy business. And I think you called out ibott headwinds in Apollo. So it's a 3-part question. Sorry about that.

All right. I'll start, Greg. I think that -- first off, thanks for the question. I think that we're going to be giving guidance and the specifics of the guidance will be provided in the fourth quarter earnings call. I don't think we really want to say much more than what we've already said. I think our sort of results speak for themselves. Growth through the first 9 months of the year continues to be kind of low teens, and it's in the places where I think investors should appreciate that we are delivering because those are in the places that, by their very nature, we have opportunities to deliver higher returns on capital. And unsurprisingly, it's sort of consistent with the sort of the Skyward way here, we always are leaning into kind of the next thing, the next thing that should help provide new avenues for earnings growth. And I think anything more specific than that, we'll talk about when we get to the fourth quarter call. Listen, I'll speak very quickly on the dairy livestock. This is really quite simple. We effectively saw just a change in take-up rate amongst farmers as diesel prices started to move. So like if you look back to the first quarter of the year, diesel prices in January, February were kind of like in the $3.50, $3.70. And now you sort of fast forward to October and we're at $6.25. And as we got into the second quarter of the year, it really started to accelerate. And the product, the dairy livestock product offered through the federal government is a voluntary product. It's the ability to sort of lock in their profits. And as margins and cash flows were squeezed amongst farmers, we just simply saw a lower uptake. I will tell you that because of our sort of our data that we are using to monitor exposure, we think we are probably the first in the market, maybe even ahead of some of the cedents that we exchange that data with and really seeing the trends. And you saw the effect of that coming through in the quarter in terms of our adjustment to net earned premium. And notwithstanding that adjustment, I think the results are still outstanding on every dimension.

Great. Just the follow-up, can we just -- speak to Apollo the premium growth -- and by the way, I didn't -- and the follow-up on that would just be -- and then talk about the managed premium portion because that showed growth. So yes, please.

Yes. I mean, Taryn might want to jump in here, but I think that we were not giving any caution on ibott. I think that the commentary was just simply that the growth this quarter was, there was seasonality and sort of new business opportunities that we would ordinarily expect, and there was one account where there was just a change in the renewal terms that moved it out in time. And otherwise, I think it's -- I wouldn't read into it because it's a small number and everything that we have sort of said about ibott and seeing that as a unique and quite honestly, a cyclical, noncyclical growth platform still holds today. And on the managed premium, I think that we would, as a company, broadly expect our growth in managed premium, which is the -- includes the capture of the premium that drives our fee earnings growth should outgrow sort of our reported GWP. And we don't see anything there that would give us pause to sort of say that quite explicitly now, and we would expect to keep saying that as we look forward as well.

And our next question comes from the line of Alex Scott with Barclays.

This is Justin on for Alex. First question I just had was just around on growth. I understand there was some question on the livestock. I was just wondering, like based on the comments that you have made around the pressures on the cash flow, like should we expect this to be sort of more ongoing? Or is the true-up impact more of a large-sized onetime? I would be curious if you can kind of give a little color there.

Okay. Well, again, this is Andrew. I'll jump in first. I think that we don't know, right? I mean you take a look at July to August, diesel prices went from under $5 to roughly $5.50 and they jumped above $6. And you can see that genuinely affecting farmers, right? And so it's really hard for us to say. There are some other things that are going on that will affect it. Farmers will want to lock in on profits, as beef prices are high. What I can say to you quite specifically is that as we rolled into the '26 to '27 treaty year, the expected earned premium that we would ordinarily book in this quarter, which is a direct byproduct of effectively the subject premium from our cedents that are placing quota share reinsurance with us, we, in fact, have haircutted that with the expectation that a conservative position given the cost of diesel and the cost of input for farmers may affect their buying behavior. But I don't -- I think the most important thing I would say to you, and I would say to all on the call and to our investors is the fundamentals of this remain outstanding. In this market, as far as we can tell, we have created this product. We are one of one. It's an incredibly profitable product. It's uncorrelated for us. The -- in fact, what we have built is so attractive to the retrocessional quota share reinsurance community that we are able to lock in a meaningful portion of our underwriting profits via retrocessional insurance where we capture it on our ceding commission. What we've manufactured is viewed as something that could not easily be replicated. And so guess what, we get paid for that. And certainly at some point here, the input cost for farmers come down, and we'll continue on the kind of high-growth trajectory that you've seen. And yet still growth in our ag driven by dairy livestock is still good growth. I mean it's just that we had this net earned premium adjustment in the quarter.

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

It's Taryn. You're absolutely right. We've seen great growth in our fee-generating GWP through the year, and we expect that to continue in line with the guidance we've given. The fee income does lag a little, but the run rate through the year and the 9 months to date is a good indicator of where the year is going to land. And then as we look to guidance for next year, we'll give you a further view of what 2027 looks like.

Our next question comes from the line of Meyer Shields with KBW.

This is Scott on for Meyer. My first question is on reinsurance purchasing plans for 2027. How are you guys thinking about both traditional reinsurance and the use of non-owned syndicate paper? Are you planning any changes relative to 2026?

Well, I think we'll probably -- I'll try to gang tackle this one. I think generally speaking, most of our reinsurance, the big things are relatively set for Skyward Specialty in the United States. There is certainly one specific area that we are looking at, and we're active on that right now. And should some development there come to pass, we'll certainly update you on the next earnings call. But I think that unsurprisingly, as you would expect from any good management team, we're in an environment where there -- I think across the board in the insurance market, there's abundant capital, but the reinsurance market, in particular, the -- obviously, the emergence of additional forms of third-party capital open up the sort of aperture as to what's possible we're spending time on that for sure as a company. I will note that I've said this sort of in -- I think, in a prior call, we will avail ourselves to Syndicate 1972 for a portion of the placement of the U.S.-based reinsurance through 1972, which, of course, inures to our benefit as a company where we're able to recapture some fees through that process. And I think more broadly, [ Raleigh ], Apollo, I don't know if, Taryn, you want to just add specifics to what you expect for '27 there.

Yes. Thanks, Andrew. So I think at this point, working through our plans for 2027. But in terms of the structure and the way that reinsurance buying works at Apollo, we don't see any changes moving into 2027. But as we get closer and revisit where the market is at, we'll firm up our plans.

I would also just make one additional point. While not reinsurance, as you very well know, 1969 and 1971 are both supported by third-party capital. And both those -- the capital is 75% of the total capital for those 2 syndicates. And every indication is that is also where we will land for next year as well.

Got it. And then some peers have mentioned on this quarter's earnings, seeing some E&S premium shift back to the admitted market. Have you guys observed any meaningful flow of premium back to the admitted market from E&S?

I'm going to take this one. No. We have listened to some of that commentary as well. I think some of that commentary we had heard from at least one broker who has both retail and wholesale platforms. No is the answer. I mean our -- if I let go directly to our E&S business, strangely, and I'm happy to talk about this in more detail, property submissions this quarter were up 60% for our E&S property. And just another example within our -- the excess portion of the liability part of our E&S business, submissions were up 32%. I will tell you, consistent with some of the other messages you've heard, our average premium is down. Our hit rates are down. I have specific examples of where competitors are doing things that are just -- they're just downright kind of irresponsible and will come back around. But just straight up in terms of the amount of flow that we're seeing, I think that just part of that is that more business is being marketed. So maybe we don't necessarily see what's happening on the front end, but we're seeing a very significant step-up in flow. And the good news is because we're so far ahead in our use of technology, our ability to service that submission flow is really great while as you see in our results, simultaneously meaningfully reducing our expense ratio.

And our next question comes from the line of Matt Carletti with Citizens.

Andrew, you touched a little bit on a few of the kind of diversifying non-P&C lines. We touched on ag a bit and A&H. Can you talk about surety? You're seeing good growth there? Just kind of where you're seeing success and how we should think about that going forward?

Yes. I mean thanks, Matt. I will oftentimes say that surety is like genuinely maybe our and certainly a Patina business. It's just -- we have an amazing team. We keep adding talent. And quite honestly, the growth is really, really broad-based. I mean -- and I mean that like we are -- on commercial surety, we've talked about some of our proprietary products, but not just in oil and gas, we're seeing growth in judicial and fiduciary bonds on the commercial side. We've seen a big step-up in transactional commercial surety, which is very sort of small bonds stick to your ribs, some of the spaces that we occupy that others don't, like bonds for the cannabis industry, we have a dominant position in. And meanwhile, oftentimes, we're turned to for some of the most interesting creative things that are happening in the world of renewables as another area. And I think across the board, energy infrastructure is building and growing and creating opportunities for us, and I think that there will be more of that. And on the contract side, we're very broad-based in terms of the trades that we serve. I think one of the most interesting things is that we have a really special relationship with, in particular, one distributor in the world of bonding on the federal side. With that, we see opportunities. We're in the process right now of getting licensed in Puerto Rico, where we see a really unique and special opportunity, specifically tied to the federal world. And I just -- it's broad-based. And the growth -- I mean, listen, we're the 14th largest surety in the country. We'll cross $200 million plus in premium. Our results are out in the public domain, and they're just amazing and outstanding. And I'm pretty confident that in the course of the next 6 weeks, we'll be adding an additional team that in itself will probably bring a following that will be measured in $20 million-ish kind of book of business. And so I just -- I couldn't feel better about where we're at. And I think the backdrop, given the diversity of that business and our ability to tap into multiple sources is really distinct and unique for us.

That's great. One more, if I could. I think it's been a few quarters now ago, you announced kind of a partnership with Uber around autonomous vehicles. And in listening to Uber, it sounds like they put out some pretty aggressive timeline in terms of how many cities they expect to be live in kind of this year, next year, 2028. Can you maybe update us on -- from your standpoint on how that's going and how we should think about that?

Yes. I think it's going well, to be honest. And I -- as I mentioned to you when we -- mentioned everybody when we launched that I think that you have a little bit of kind of like a J-curve here. It will start slow and then it will inflect. It takes a while for the exposure to earn through. I also will say to you that it is our expectation, time is going to tell, that we will have other very high-profile announcements that should follow in this area that will broaden and widen the potential sort of sources for growth all related to autonomy. And so I think that we feel great about it. I don't think we want to commit any more than what we had said previously, which is we really start to see probably the -- like the '28 fiscal year as being kind of the point in time where we should probably start to see all those exposures really earn in, in a way that might be particularly visible for investors.

Our next question comes from the line of Mark Hughes with Truist. Mark, not to be too simple, but when we think about the earned premium for 4Q, obviously, 3Q is about, what, 407. 2Q was 445. What's the right starting point when we think about the earned yes, just trying to get a sense of what, if any, recurring impact there might be and what that means for earned in the fourth quarter?

Yes. Let me come at it, Mark, a little bit differently. We talked about it earlier. When I think about Skywards Specialty, the earned is up 13% for the 9 months. Clearly, there's a nuance in the quarter relative to the adjustment that we made. Does that help?

I think what Mark is pointing you towards is that we -- there isn't a reason to expect anything anomalous in the fourth quarter and that earned premium through the 9 months is pretty -- feels like a pretty good referenceable number. I mean we can't say whether it's going to be 10% or 11% or 12% or 14% or 15%, but like we don't expect an anomalous earned premium adjustment in the fourth quarter. I mean think about -- I'd say to be more specific and maybe to articulate for everybody, if you take a look at the dairy livestock '25, '26 treaty year, effectively, it's a July 1 treaty year. And we have certainly seen quarters where exposure is above our expectations, and we've seen quarters that are below our expectations. And we try not to react to that until the end of the treaty year unless there's something really quite anomalous going on. We did react until -- after the treaty year concluded, which you saw. But we also, as I mentioned in my earlier comments, we preemptively reduced our expected annual premium for the subsequent treaty year, which was registered in our gross premium this quarter, just based on trying to take a bit more conservative position. And I think all that adds up to -- we would never say that there's not going to be a net earned premium true up in the fourth quarter, but it's not something we would expect.

Okay. Appreciate that clarity. Andrew, you talked about the competitive environment in the fourth quarter. Often, there's maybe push at year-end to hit top line budgets. How much of an impact are you seeing? Is that kind of theoretical or it's actually happening? And then are there any particular end markets where you're seeing it more pronounced, presumably property, but curious any more thoughts on that front?

Yes. It's a great question, Mark. So I think that last year, we definitely saw -- we really saw a more competitive fourth quarter. And I think the year before, which was really like the beginning of the -- you're probably 2 quarters into the turn on property, most visible in our case in global property, definitely saw a more competitive environment, but it was more focused in the prior year. And yes, I think that we're seeing it -- there's multiple sides to this. So not to be too long-winded. We're certainly seeing more submissions, and I do believe that's because more business is being marketed, but more business is being marketed and it's getting a lot more competitive response. I'll just say like in the third quarter, as an example, while property submissions in the E&S business were up 60% our hit ratio was simultaneously down by 1/3. Our average premium was down by 20%. If I look at -- if I look like on primary liability side, our retention within the third quarter was down 6 points. I'll give you an example of -- I don't know if this is a fourth quarter thing or just more what I would consider to be ignorant, irresponsible sort of writing. There's one particular competitor that effectively has kind of a fast track on certain liability classes. And the question that they ask is, check no if you do not think you have an abuse exposure. And if somebody checks no, it removes the salt and battery exclusion at bine. Well -- and meanwhile, you see habitational Section 8 housing frequently being placed without at battery exclusion sublimits. I heard one carrier, one public carrier like discovering that maybe we should be charging for that or for human traffic and so forth. It's like welcome to the world of casualty where as one of our competitor CEO says, it's not for the optimistic. This is a sophisticated part of the market where you should be really responsible with your capital. And we've seen increasingly more and more individual competitors like the example I gave that are not operating in a responsible way, whether that is a fourth quarter phenomenon or heading into the fourth quarter and will lease up going into the new year, really hard to know. But regardless, those competitors will not be long for the market. That will end in tiers. There's no question about it.

And our next question comes from the line of Tracy Benguigui with Wolfe Research.

Nice to hear about 2 new partner syndicates. I saw the announcement on Red Bridge with Generali. Just to confirm, you're not seeding any of your own capital to these partnerships, these are all fees. And is it fair to assume that Generali is maybe a little bit larger than Apollo manages? And if that's the case, should we...

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

Yes. Tracy, so the 2 new syndicates, no, we're not proposing to have participations behind those 2 as we have in the rest of our partner platform syndicates, we don't participate. The Generali syndicate commences underwriting shortly. It is in line with the way that it's projected to grow. It's in line with a number of our other syndicates and the way that they would grow. In early days, they start small and build from there. So I don't think we see it as being the biggest in the next period anyway.

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

Certainly. Our next question comes from the line of Michael Zaremski with BMO.

I guess just sticking with the pricing power environment. Maybe you can kind of tease out no surprise, pricing is kind of decelerating a bit. I think you said ex property were in mid-singles. The last couple of quarters were high single digits. Maybe you can kind of tease out what's causing the trend line?

Yes. I mean I -- Mike, great question, and thanks. I don't give too much -- one of the reasons that we don't get overly specific and give you like a point number is because there's a lot of mix change that's going on. And even in some -- like some of our businesses, like professional liability, some of that's even mix change where in the quarter, we might be writing more miscellaneous and, for example, less health care professional. I wouldn't overread that too much. I do think that we're definitely in an incrementally more competitive environment. I think more recently, you probably see a bit more on GL. And I think excess probably coming down a point or 2. But I don't know if I would draw a trend line per se because in our company, you're talking about a company that across in the U.S., in particular, 9 different divisions, there's a lot going on underneath there given the amount of premium we're dealing with. Obviously, this is not the largest company in the world. So small numbers can sometimes lead you to false negatives or even false positives as well.

Okay. Yes. That's helpful. Understood. Maybe touching on the commentary about IBNR levels moving up to kind of a record high 77%. I believe earlier in the year, you updated us, or the 10-Q is probably mid-ish 70s. And I think you also said that loss emergence initial indications are positive in occurrence liability as well. So just -- I guess, are you just -- you guys trying to make an effort to kind of just continue kind of increase conservatism? Or just any other color you may want to add would be helpful.

Mike, that's a great code question for asking whether we're going to release reserves, and we'll just -- we'll defer to the fourth quarter. I mean, Mark will comment, but we really do feel good about our reserve position overall as a company, things that you'll obviously get to see as the full year financials come through, our paid to incurred through 9 months are the lowest they've ever been. They're running at like 62%. I look at our paid to incurred by line of business as compared to the high-quality guys that we compete with. And I see that both our IBNR and our paid to incurred are pretty damn favorable. And I think that there's just confidence in terms of both our absolute position and kind of how we might even see our conservatism broadly compared against others. And look, I think we're not done with our reserve review for the year. That will be something, obviously, we'll report out on when we get to the fourth quarter.

But it was a good try.

Good data point on page.

Our next question comes from the line of Paul Newsome with Piper Sandler.

Hit on the big hot button. Just maybe as a round out thing, update your thoughts on capital management where you are today. You've got Apollo in your belt, I think, probably pretty solidly and maybe growth decelerates next year, so maybe less of a capital strain. So thoughts on capital management and how you would allocate things prospectively?

Paul, it's Mark. Look, we continue to generate excess capital. And the way we've said it to you, which still holds is clearly, we have about 3 choices and probably in order currently. We would deploy capital first to the business. We clearly did that this quarter. Then we have the choice as to repay paying down debt or buying back stock. Look, once we get -- once we wrap up year-end, we will then figure out or complete our analysis as to where we're going to deploy the capital. But I would say, first, to the business. And right now, I would lean more in toward repaying debt. But we just kind of held true in the third quarter, waiting for the fourth quarter to finish out to solidify our capital position.

And our next question comes from the line of Andrew Kligerman with TD Cowen.

So I'd love to zero in a little bit more on the A&H segment where premium was up 57%. Could you kind of dice it into how much of that was rate versus new business and maybe a little color on where you're seeing the great opportunities. And then, Mark, I think you -- caught you in the comments early in the prepared remarks when talking about prior year reserve analysis that A&H might have a little bit of negative. If so, maybe color on that. And then just in general, the loss cost environment in A&H, I'd love some color there. A lot of questions in one.

No, no, that's -- no, they're great. Thank you, Andrew. Thanks for the questions as well. So on A&H, look, I think it's a continued trend, obviously, which is not unique to this quarter. This has been sort of a thing that has been quite visible in our results probably now for coming up on 8-plus quarters. Listen, I think pure -- if you think about rate alone, you're talking about kind of high teens rate. And you have by the studies that I think most folks would use inflation that is kind of in the mid-teens. And so no surprise there. That's kind of visible to everybody. There are levers, of course, that are available to us as a company that we utilize that effectively are kind of non-rate actions where maybe you're carving out very specific drugs or lasering out specific exposures. And those have rate effects, but those are broad numbers. Our retention is pretty high. And so you -- a good day in the office for A&H, if you have a good book of business like we do, would be kind of in the 80s retention. And once you get below that, you might be bleeding out business that you really want to keep due to competitive reasons. And I think we're in a pretty good place on retention. But that should give you a sense for rate less retention and then what we're adding as new business. We're hitting our growth in really both areas, group captives, has certainly been a big driver of growth. And that's both a combination of winning new captive mandates and new members coming into captives. And then our more sort of historical product of single company solutions has also probably over the course of the last 6 quarters or so, really been growing at a nice clip. And that's historically the lion's share of the business, but now that mix is changing with the group captives piece. As I mentioned in the opening remarks, and I talked about a lot, our focus is on smaller employers, our focus is on medical cost management. So these are setups where the employers themselves have jointly committed to a set of things that we do with them to ensure that medical cost management is overseen and managed differently than you might ordinarily have elsewhere in the market. And yes, and I think that the results, it's a short-tail line of business, that NAIC data I shared with you is out in the public domain, second year in a row that we've been sort of top 5, and we're very proud of the results.

Andrew, it's Mark. Let me clarify. No, I did not -- I wasn't referencing A&H in terms of pressure. What I said is we had seen some pressure in commercial auto and claims made liability, not A&H.

And both in areas of business that we have exited. So it's not -- these are areas that we had seen trend before, and we acted upon that.

Great. And my follow-up is around the expense ratio. It continuously gets better as you guys scale. So I'm kind of looking at Skyward Specialty at 25.7%. Could that grind a little lower over the next few years? Any specifics there would be helpful. And then with Apollo, being so new. And again, I get it's seasonal, but at 32.5%, do you see potential in Apollo as well for expense ratio improvement?

Yes. Listen, I think that this is -- I appreciate you bringing this up, Andrew, because I think it's an area that we probably should highlight more and maybe hopefully get more credit for because that expense ratio, recognizing we have a bit of a point more sitting outside in corporate is genuinely outstanding. I believe we'd probably be the second or maybe at worst, third lowest amongst sort of the public peers are broadly in the specialty -- commercial specialty market. And look, I think that I would just go to what I said earlier, I gave examples of submission count up in some of our businesses by 30% to 60% and yet we're able to improve our service and not add headcount there. And that's all being driven as a result of the advances we've made in AI, and it's coming through. And those advances, by the way, aren't just our underwriting. They include, obviously, claims and all of our support functions as well. And we were -- after last quarter, I hope all of our investors were able to see it. I hope all of the research analysts who follow us are able to see it. We put out a very powerful video to demonstrate in cogent terms what bionic underwriting is. And you should assume that those investments directly correlate to our expense ratio improvement. On Apollo, we're making similar kinds of investments, but it is probably worth noting that oftentimes, you are dealing with small pockets of teams serving very specific classes. And so investments can improve fidelity of risk selection and pricing, which James Slaughter is absolutely pushing and leading. And I certainly would expect that you would get a lot of expense leverage under different market conditions. Obviously, the headwinds here are a challenge for everybody. So I think that probably we wouldn't expect as much there as probably what you're seeing coming through on the Skyward Specialty part of the business.

I'll now hand the call back over to Vice President of Investor Relations, Jordan Arnold, for any closing remarks.

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

Ladies and gentlemen, thank you for participating. This does conclude today's program, and you may now disconnect.