By James Thaler

Feb 5 - (The Insurer) - Skyward Specialty preannounced Wednesday that it grew gross premiums written by 20.8 percent to $388.4mn in Q4 and delivered a 91.6 percent adjusted combined ratio, while disclosing it has commuted its loss portfolio transfer deal with R&Q.

As part of the commutation with R&Q, Skyward received $11.7mn in cash and recorded a $9.8mn writedown on its balance for uncollectible reinsurance tied to the deal, while boosting reserves by $25.3mn.

Skyward entered into the LPT transaction with R&Q in February 2020 – back when the insurer was known as Houston International Insurance Group – for accident years 2018 and prior, in a transaction understood to cover around $100mn in net reserves.

Skyward is the first known firm to have reached a settlement with R&Q after the Bermuda Supreme Court signed off on a restructuring arrangement last week in order to facilitate claims to the reinsurer’s creditors.

The insurer said Wednesday that its 91.6 percent combined ratio for Q4 is inclusive of 220 basis points of catastrophe losses, as it also disclosed that its total estimated losses tied to the recent California wildfires is less than $10mn net of reinsurance.

Net income in the fourth quarter dipped to $14.4mn from $29.3mn in 2023’s fourth quarter, with the drop off attributed to the write down and reserve increase.

However, adjusted operating income grew to $33.2mn from $24.3mn, while net investment income climbed to $20.7mn from $13.45mn.

Skyward on Wednesday also issued guidance for its 2025 results, saying that it expects to generate between $138.0mn and $150.0mn in net income for the year and a combined ratio between 91.0 percent and 92.0 percent, including 200bps to 250bps of cat losses.

"We are pleased to have completed the commutation of the LPT and remove future reinsurance recoverable credit risk related to this portfolio,” Skyward chairman and CEO Andrew Robinson commented.

Robinson said Skyward believes its reserve charge represents a conservative view of the ultimate losses at 31 December 2024.

He called Skyward’s Q4 2024 results “simply outstanding" as he highlighted 20-plus percent GWP growth, which he said was driven by “intentional investments” in surety, global agriculture, accident and health, transactional E&S, and mortgage and credit divisions and lines of business.

“Our adjusted combined ratio for the fourth quarter is a continuation of the excellent underwriting results that we have delivered every quarter since our IPO,” Robinson continued.

“With respect to our outlook for 2025, we believe we are positioned to produce another strong year of financial results,” he added.

“While competitive dynamics can change our outlook as we progress through the year, we would expect growth in gross written premiums to be in the low to mid-teens,” Robinson explained.

The CEO also said that Skyward’s combined ratio and net income guidance “reinforces our strong conviction in the outlook of our business, and our sustained delivery of top quartile results while continuing to strategically invest in our business".

Skyward is expected to publish its full set of earnings on 25 February after markets close and host a call with Wall Street analysts on 26 February.