Skyward Specialty Insurance (SKWD)

Specialty insurance provider Skyward Specialty Insurance (NASDAQ:SKWD) beat Wall Street’s revenue expectations in Q3 CY2025, with sales up 27.1% year on year to $382.5 million. Its non-GAAP profit of $1.05 per share was 18.6% above analysts’ consensus estimates.

Company Overview

Founded in 2006 to serve markets where standard insurance coverage falls short, Skyward Specialty Insurance (NASDAQ:SKWD) provides customized commercial property, casualty, and health insurance solutions for underserved or specialized market niches.

Property & Casualty (P&C) insurers protect individuals and businesses against financial loss from damage to property or from legal liability. This is a cyclical industry, and the sector benefits when there is 'hard market', characterized by strong premium rate increases that outpace loss and cost inflation, resulting in robust underwriting margins. The opposite is true in a 'soft market'. Interest rates also matter, as they determine the yields earned on fixed-income portfolios. On the other hand, P&C insurers face a major secular headwind from the increasing frequency and severity of catastrophe losses due to climate change. Furthermore, the liability side of the business is pressured by 'social inflation'—the trend of rising litigation costs and larger jury awards.

Skyward Specialty Insurance competes with other specialty insurers such as Kinsale Capital Group (NYSE:KNSL), RLI Corp (NYSE:RLI), and James River Group Holdings (NASDAQ:JRVR), as well as larger commercial insurers that offer specialty lines like Travelers (NYSE:TRV) and Chubb (NYSE:CB).

Insurance companies generate revenue three ways. The first is the core insurance business itself, represented in the income statement as premiums earned. The second source is investment income from investing the “float” (premiums collected but not yet paid out as claims) in assets such as fixed-income assets and equities. The third is fees from policy administration, annuities, and other value-added services. Over the last four years, Skyward Specialty Insurance grew its revenue at an incredible 26.5% compounded annual growth rate. Its growth surpassed the average insurance company and shows its offerings resonate with customers, a great starting point for our analysis.

We at StockStory place the most emphasis on long-term growth, but within financials, a stretched historical view may miss recent interest rate changes, market returns, and industry trends. Skyward Specialty Insurance’s annualized revenue growth of 27.1% over the last two years aligns with its four-year trend, suggesting its demand was predictably strong. Note: Quarters not shown were determined to be outliers, impacted by outsized investment gains/losses that are not indicative of the recurring fundamentals of the business.

This quarter, Skyward Specialty Insurance reported robust year-on-year revenue growth of 27.1%, and its $382.5 million of revenue topped Wall Street estimates by 14.3%.

Net premiums earned made up 92.7% of the company’s total revenue during the last five years, meaning Skyward Specialty Insurance lives and dies by its underwriting activities because non-insurance operations barely move the needle.

Markets consistently prioritize net premiums earned growth over investment and fee income, recognizing its superior quality as a core indicator of the company’s underwriting success and market penetration.

When insurers sell policies, they protect themselves from extremely large losses or an outsized accumulation of losses with reinsurance (insurance for insurance companies). Net premiums earned are therefore gross premiums less what’s ceded to reinsurers as a risk mitigation and transfer strategy.

Skyward Specialty Insurance’s net premiums earned has grown at a 26.8% annualized rate over the last four years, much better than the broader insurance industry and in line with its total revenue.

When analyzing Skyward Specialty Insurance’s net premiums earned over the last two years, we can paint a similar picture as it recorded an annual growth rate of 26.6%. This performance was similar to its total revenue.

In Q3, Skyward Specialty Insurance produced $351.8 million of net premiums earned, up a hearty 30.5% year on year and topping Wall Street Consensus estimates by 13.5%.

Revenue growth is one major determinant of business quality, and the efficiency of operations is another. For insurance companies, we look at the combined ratio rather than the operating expenses and margins that define sectors such as consumer, tech, and industrials.

Combined ratio sums operating costs (salaries, commissions, overhead) with what is paid out in claims (losses) and divides this by net premiums earned. Combined ratios under 100% means profits while ones over 100% mean losses on its core operations of selling insurance policies.

Given the calculation, a lower expense ratio is better. Over the last two years, Skyward Specialty Insurance’s combined ratio has swelled by 1.1 percentage points, going from 90.8% to 89.7%. Said differently, the company’s expenses have grown at a slower rate than revenue, which typically signals prudent management.

In Q3, Skyward Specialty Insurance’s combined ratio was 89.2%, beating analysts’ expectations by 174.4 basis points (100 basis points = 1 percentage point). This result was 3 percentage points better than the same quarter last year.

Insurance companies are balance sheet businesses, collecting premiums upfront and paying out claims over time. The float–premiums collected but not yet paid out–are invested, creating an asset base supported by a liability structure. Book value per share (BVPS) captures this dynamic by measuring these assets (investment portfolio, cash, reinsurance recoverables) less liabilities (claim reserves, debt, future policy benefits). BVPS is essentially the residual value for shareholders.

We therefore consider BVPS very important to track for insurers and a metric that sheds light on business quality. While other (and more commonly known) per-share metrics like EPS can sometimes be lumpy due to reserve releases or one-time items and can be managed or skewed while still following accounting rules, BVPS reflects long-term capital growth and is harder to manipulate.

Fortunately for investors, Skyward Specialty Insurance’s BVPS grew at an incredible 29.3% annual clip over the last two years.

Over the next 12 months, Consensus estimates call for Skyward Specialty Insurance’s BVPS to grow by 22% to $22.72, elite growth rate.

The debt-to-equity ratio is a widely used measure to assess a company's balance sheet health. A higher ratio means that a business aggressively financed its growth with debt. This can result in higher earnings (if the borrowed funds are invested profitably) but also increases risk.

If debt levels are too high, there could be difficulties in meeting obligations, especially during economic downturns or periods of rising interest rates if the debt has variable-rate payments.

Skyward Specialty Insurance currently has $119.6 million of debt and $961.4 million of shareholder's equity on its balance sheet, and over the past four quarters, has averaged a debt-to-equity ratio of 0.1×. We think this is safe and raises no red flags. In general, we’re comfortable with any ratio below 1.0× for an insurance business. Anything below 0.5× is a bonus.

We were impressed by how significantly Skyward Specialty Insurance blew past analysts’ net premiums earned expectations this quarter. We were also excited its revenue outperformed Wall Street’s estimates by a wide margin. Zooming out, we think this was a solid print. The stock traded up 4.2% to $46.85 immediately following the results.

Updated: December 4, 2025 at 11:22 PM EST

The latest quarterly earnings matters, sure, but we actually think longer-term fundamentals and valuation matter more. Investors should consider all these pieces before deciding whether or not to invest in Skyward Specialty Insurance.

Skyward Specialty Insurance is one of the best insurance companies out there. To begin with, its revenue growth was exceptional over the last four years, and its growth over the next 12 months is expected to accelerate. On top of that, its net premiums earned growth was exceptional over the last four years, and its astounding EPS growth over the last two years shows its profits are trickling down to shareholders.

Skyward Specialty Insurance’s P/B ratio based on the next 12 months is 1.9x. Looking across the spectrum of insurance businesses, Skyward Specialty Insurance’s fundamentals clearly illustrate it’s a special business. We like the stock at this price.

Wall Street analysts have a consensus one-year price target of $62.80 on the company (compared to the current share price of $47.17), implying they see 33.1% upside in buying Skyward Specialty Insurance in the short term.