Ladies and gentlemen, thank you for standing by. Welcome to the first quarter 2026 Skyward Specialty Earnings Conference Call. I would like now to turn the conference over to Natalie Schoolcraft, Senior Vice President. Please go ahead.
Thank you, Gina. Good morning, everyone, and welcome to our first 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 today 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 Investor section. With that, I will turn the call over to Andrew.
Thank you, Natalie. Good morning, and thank you for joining us. This quarter marks our first reporting at Skyward Group, inclusive of both the Skyward Specialty and Apollo segments. Our results reflect an excellent start as a combined company. Mark Haushill will cover the quarter in detail in a moment, but I'll start our call today with a few highlights. 1st quarter diluted operating EPS improved to $1.25 from $0.90 a share in the same quarter last year, an impressive increase of 39%, reflecting both the strong embedded earnings growth of Skyward Specialty and the realized accretion from the Apollo acquisition. Our annualized operating ROE was an outstanding 20%. Our book value per share grew to $27.50, which is up 10% over the prior quarter.
Altogether, these results reflect strong underlying earnings momentum and disciplined capital deployment, positioning us well to continue to deliver consistent top quartile returns for our shareholders. Our growth in gross written premiums on a pro forma basis was up 10% over the prior year. Managed premiums were up 20% on a pro forma basis to $968 million. As a reminder, managed premiums include a combination of group premiums and premiums supported by third-party capital providers. The underlying 49% growth in gross written premiums driving the fee aspect of Apollo's business will be an important and new earnings growth driver as we look out into the future. As is widely discussed, market conditions are increasingly challenging for significant parts of the P&C sector.
Our portfolio construction is genuinely unique amongst the P&C universe in that over 50% of the Skyward Group's business, now inclusive of Syndicate 1971 or IBOT, our digital economy syndicate, is in markets less exposed to the P&C cycles. Together with our niche focus strategy and outstanding execution, Skyward Group has never been better positioned to deliver sustained top quartile shareholder value and continued earnings growth. With that, I'll turn the call over to Mark to provide the financial details for the quarter. Mark?
Thank you, Andrew, and good morning, everyone. As Andrew outlined, our first quarter reflects a successful start as a combined company reporting net income of $50 million and operating income of $57 million. Diluted operating earnings per share was $1.25, up 39% year-over-year. Underwriting income totaled $52 million, and the combined ratio was 89.5, inclusive of 1.8 points of catastrophe losses. Ex CAT, the combined ratio was 87.7, reflecting strong underlying loss performance and disciplined expense management. Annualized operating ROE was 20.3%, underscoring the earnings power of the combined group. Gross written premiums were $668 million, up approximately 10% on a pro forma basis, driven by 9% growth in Skyward Specialty and 9% growth in Apollo.
Overall growth was driven by Skyward Specialty's A&H, credit and surety, Global Property and specialty programs divisions, and Apollo Syndicate 1969, our multi-class specialty syndicate. As Andrew emphasized, managed premiums, which include gross written premiums from which we derive fees, are an important metric for our business going forward. Managed premiums totaled $968 million, up approximately 20% year-over-year on a pro forma basis, including fee-generating premiums of $300 million, which increased 49%. In this quarter, we generated $10 million in underwriting fees. This income stream is capital-light, recurring, and incremental to underwriting profit, and it represents a structurally important earnings growth lever as managed premium volume scales over time. With the addition of Apollo, we now report through two operating segments, Skyward Specialty and Apollo, and a discrete corporate unit.
The corporate unit includes investment results, holding company costs, and enterprise-level functions that support both operating segments. The change improves transparency and provides clear visibility into the true segment-level performance. Skyward Specialty reported a combined ratio of 88.9 or 86.8 ex-CAT, reflecting another period of solid underwriting performance and an improvement from the prior year quarter. The loss ratio of 62.7 includes 2.1 points of catastrophe losses from winter and convective storms. The non-CAT loss ratio of 60.6 was in line with 2025 and reflects business mix shift as A&H and Global Property make up a larger portion of our portfolio. Loss emergence was in line with expectations, and no development was recognized.
The expense ratio was 26.2, improving by over half a point year-over-year, driven by continued operating efficiencies and business mix. Turning to Apollo, the segment produced a combined ratio of 85.3, a strong start for the first quarter as part of Skyward Group. As Apollo has not historically reported quarterly results on a comparable US GAAP basis, we are not providing year-over-year comparisons. Apollo reported a non-CAT loss ratio of 52.8, lower than full year expectations as a result of Q1 business mix and seasonality. Loss emergence in the quarter was in line with expectations. Apollo did not incur any CAT losses in the quarter, and our full-year CAT expectations remain unchanged. The expense ratio of 32.5 is broadly in line with expectations.
The $4 million of fee-based service expenses are excluded from the combined ratio but included in operating income and support the scalability of the fee-earning part of the business. Turning to investments, the portfolio now approximates $2.7 billion, of which 90% of the portfolio consists of fixed income and short-term investments. Net investment income was $27 million, an increase of $7.5 million year-over-year, driven primarily by larger invested asset base as a result of the Apollo acquisition. Alternative and strategic investments continued to experience volatility, primarily due to marks on the underlying investments. These exposures represent a modest portion of total invested assets, and the overall portfolio remains conservatively positioned.
With the addition of Apollo, over $500 million of invested assets were added to the portfolio during the quarter, which contributed $5 million of net investment income, primarily in fixed income securities and short-term investments. For the fixed income portfolio, we put $75 million to work at 5.5%. The embedded yield for the group portfolio was 5.3%. Turning to the balance sheet, stockholders' equity ended the quarter at $1.2 billion. Financial leverage was in line with expectations after the closing of the Apollo acquisition at 28%. As Andrew highlighted, book value per share was $27.50, representing a 31% increase over the prior 12 months. You will recall that on December third, we provided guidance for 2026. That guidance is unchanged. Now I'll turn the call back over to Andrew.
Thank you, Mark. As Mark shared, our financial results for the quarter were again excellent. Our portfolio diversification, particularly in categories less exposed to the P&C cycle, again served as a catalyst for strong top-line performance, which in turn will continue to drive double-digit earnings growth. Notably, our increase in gross written premiums of 25%+ in A&H, credit and surety, and AG are all in areas that are removed from the pressures of the broader P&C market. Simultaneously, we are maintaining our disciplined bottom-line focus in other areas of our business that are currently experiencing softening market conditions or a challenging loss inflation backdrop. Among small or midcap carriers in the public or private markets, there is no other company that has constructed such a well-diversified and cycle-resistant business portfolio. While only months into operating as a combined company, a number of important growth initiatives have been launched.
This includes our proprietary insurance partnership for Uber's autonomous vehicle insurance program, the launch of our life sciences product using Lloyd's paper to serve U.S.-domiciled companies with international exposure, and the 1-1 launch of Syndicate 1972, which is Apollo's internal reinsurance syndicate. I'll note that 1972 further provides strategic optionality for Skyward Specialty's outward reinsurance as we look to the future. John Burkart and James Slaughter and several of our leaders are actively advancing a number of future shared growth initiatives, including opportunities in Surety and the launch of IVOT America. These highlight only a few of the exciting developments that we will discuss as we begin to scale these initiatives in the quarters ahead. Turning to our operational metrics. For Skyward Specialty, pure rate moved up a bit to high single digits ex Global Property and mid-single digits including Global Property.
Excluding our intentional actions in construction auto, retention was in the 70s, driven by the effects of the competitive property market across our portfolio. We continue to see strong submission growth, which was solidly in the 10s again this quarter. Apollo's risk-adjusted rate change ex property was in the low single digits. Apollo remains intently focused on rate adequacy to steer and maximize returns at the account and portfolio level. Like Skyward Specialty, Apollo's diversified portfolio means that we are better positioned to capitalize on opportunities to defend our business in an evolving market. To wrap up, we had an outstanding quarter. It's clear that our niche strategy, our excellent execution, our portfolio construction, supplemented with a new fee engine, is and will be a continued source of strong earnings growth and top-quartile financial performance into the future.
The combination of Skyward Specialty and Apollo brings together differentiated talent, technology, AI, and innovation capabilities, positioning us to build on the unique strengths of each company and to pursue attractive new opportunities together. With that, I'd now like to turn the call back over to the Operator to open it up for Q&A. Operator?
Thank you. As a reminder, to ask a question, please press star 11 on your telephone and wait for your name to be announced. To withdraw your question, please press star 11 again. We ask that you please limit to one question and one follow-up. For any additional questions, please return to the queue. The first question will come from Matthew Carletti with Citizens. Your line is open.
Hey, thanks. Good morning.
Hi, Matt.
Hey, Andrew. I was hoping you spent some time talking about your differentiated platform, and I was hoping to dig a little deeper on that, and really have two questions. The first is, as you think about kinda how your business sits today, particularly with kind of Apollo on board now, and we think about where we are in the cycle, can you just give us of your view of kinda how you see kind of the impact on growth and the impact on margins, or how that unfolds for Skyward, you know, versus kind of your select peer group or the industry? Then the second part is just to go a bit deeper and, you know, appreciating kind of the half of your business that is not P&C, things like surety, like A&H, like agriculture.
You know, we hear those words at other carriers at times, usually not all three, but here and there. Can you talk a little bit about how your approach to those businesses might be a bit different than what we might think of as the average approach?
Yeah. Matt, good morning, thank you for the questions. There's a lot there to unpack. I'm gonna start, you know, sort of on the question about sort of how we see the market, our portfolio and margin outlook. Look, I think that I talk certainly about the parts that are the uncorrelated and have seen the biggest growth, and for reasons that have to do with, like, we have great product market fit, and we're not seeing kind of the cyclical factors, right? I'm gonna set those aside for a moment. I will just say to you that, you know, I view our portfolios, while very complementary and different, both Skyward Specialty and Apollo share one important sort of feature, which is the portfolios are quite niche-y.
I'll give you just a simple example, 'cause I was in London with a team just a couple weeks back, you know, we're talking about the Marine Energy and Transport Division of Apollo. What became clear to me is that, for example, in that business, they have a leadership position in shipbuilders. They have a leadership position in ports and terminals. While those two, if you will, subclasses, aren't necessarily immune from macro conditions, they certainly aren't feeling the full effects of the Marine Energy and Transportation Division.
While it feels like a faraway comparison, if you look at our management liability book, which is made up of, you know, Web3, you know, smart contract types of exposure and cannabis and distressed homeowners, you know, we're away from the parts of the management liability market that has the pressures of 50 carriers competed and, you know, and really no opportunity, you know, to create kinda margin that separates from the rest of the industry. I think if you worked across our portfolios, you would find example after example of that. I think what I would say to you is that the, those niches have a certain opportunity size. You know, listen, to write Web3 is hard. You have to build a specialized, you know, insurance contract around that and so forth.
We've done that, but it's a limited opportunity, which basically means that in soft market conditions, as long as you're disciplined and you don't sort of go chase, you know, everything else that's out there, which we don't, your growth opportunities will be a little bit more limited. I don't necessarily believe at this moment in time I see an impact on our margin. You know, we're watching closely. I think both the leaders, you know, James and John are doing an excellent job around that. I don't see an impact on our margin because of where we're competing and how we're competing, sort of the thing I would highlight.
On the other side, you know, I would put 1971 in there because, you know, if you go just talk to anybody who was at RIMS, I think that they will tell you that the IBOT team is one of one, not one of even two. There's one of one out there on what they do. I think that those are the opportunities for us to drive, you know, that's ag and A&H and the other areas we talk about, to continue to drive really outstanding growth and selectively to be able to expand our margins as well. You know, those are the things that at every opportunity we're gonna lean hard into.
Great. Thank you. Appreciate the color.
Thanks, Matt.
Thank you. The next question is gonna come from Gregory Peters with Raymond James. Your line's open.
Hey, good morning, everyone. I wanted to focus on the disclosure in your press release around the gross written premium by underwriting division. You know, you included comments about this, the managed premium growth. There's a, there's a bunch of moving pieces, you know, where we see certain lines or certain divisions where there's some substantial growth, and we see other areas where there's shrinkage. Well, I'd like to get more perspective on the moving pieces in there.
I know you just sort of answered some of it in the previous question, but, you know, when I see this substantial growth in the fee-generating gross written premium, and, you know, it begs the question, you know, how are you avoiding getting caught up in just market-sensitive types of businesses, and how are you able to avoid, you know, the stuff that's more cyclical and focus on the stuff that's less cyclical?
Hey, Greg. Good morning, and thanks for the question. I'm gonna endeavor to answer it as best I can, but this may be something that we'd wanna follow up on and make sure that if I'm not answering it, you know, fully for you here, that we are after the call. There's two things that drive that premium that is driving fees. The first part is that that's directly linked to Syndicate 1969 and Syndicate 1971, where obviously we have, you know, 25% of the capital deployed for those 2 syndicates. This is fees that correspond with the business that we're writing directly, you know, into our account.
In addition to that, as we have talked about in the past, that Apollo has a division focused on providing managing agency services to partner syndicates. In each and every instance of those partner syndicates, I would characterize, and there's 9 in total. I would characterize that there's 9 syndicates in total, that they are all really kind of away from the standard market. They include things like parametric. They include now a credit-related syndicate. They include a captive for a global technology company. In each of those instances, they're rather unique, and they fit with I would say principally the innovation mindset of our company in total, but more importantly, around Lloyd's ambition to bring new categories of risk into Lloyd's.
In fact, I believe if you ask the Lloyd's management how they view Apollo as a partner in this regard, I think that you would hear words around innovation and the ability to support some of these new ideas and provide the appropriate oversight and capabilities that they believe are requisite for those syndicates to operate effectively in Lloyd's. I have little concern about the growth potential there based on what I know on the backlog of opportunities that are in front of us.
That's good. Can we go to the just at the beginning of the question I asked about the underwriting divisions, you know. I guess, you know, I think you previously commented on the growth in credit and surety. I think, you know, seeing the shrinkage in Global Property makes sense based on what we know what's going on in the pricing environment. Maybe you could just remind us the specialty programs posting great results in the first quarter of what's going on there and anything else you wanna call out in the disclosure.
Yeah. Thanks, Greg. I mean, listen, on the growth side, you know, surety is the driver in that credit and surety and credit line item. Our team is just incredible, and they just keep moving from strength to strength. There's been a little bit of disruption. We were able to bring in some talent in a couple of geographies, unsurprisingly, the books of business followed. I mean, like, just compare our financial results in the SFAA, you know, published data, our growth and our loss performance. There's nobody who looks like us. I mean, it's just we are one of one in terms of that level of performance. The same thing on A&H, right?
The results are out in the public domain. You know, we're top 5 performer in terms of loss results. Simultaneously, the combination of our single company, you know, medical stop loss solution and our group captive solution, particularly the latter one, has really found sort of product market fit. Again, well, you know, I would say we're 1 of 1 there. I've talked about this. We are 1 of 1. While we have a diversified, you know, global reinsurance program, we also have a unique capability around the US dairy livestock program where we're the only company out there providing a risk transfer solution. 1 of 1. You'll see a theme here when I refer to, you know, Syndicate 1971 in a similar way.
On the flip side, I think our team's doing just an outstanding job, you know, defending our books and picking and choosing shots to win. If you take professional as an example, what started as, you know, soft market and public D&O bled into, you know, private D&O, which really was part of that niche focus I described that we pursued. It's present in the miscellaneous, you know, sort of E&O category. Where it's not present right now is in, you know, we're doing a good job seeing a strong opportunity and growth in healthcare professional. It just isn't visible to you in those numbers. I think on the E&S side, you know, all that shrinkage is being driven by property, straight up.
The excess market as I wouldn't say anything different than you probably heard from other CEOs. I think there's still good opportunity out there. You know, you have to be cautious in the loss inflation backdrop. I think our guys are doing it right. There's very little auto exposure in our excess book, in E&S, and we're writing smaller limit stuff. GL's a bit of a mixed bag. You know, I'd be very cautious of any company who's reporting big casualty growth out there because that kind of market opportunity just doesn't exist the way it did one and two years ago. I would say it's a very uneven market. You know, I always like to provide examples, and I'm gonna give you an example here.
You know, I oftentimes referred to during sort of the E&S growth period, one area that we capitalized on was migrant hotels. We were probably the largest writer of migrant hotels in the U.S. We had a large book in New York City alone that I think over the, over the sort of the 3 or 4-year period we built that had maybe a 20% loss ratio. It's tough business to write. You know, on the other side is that business has gone away. The corresponding opportunity that's gone into the, into the market is writing ICE detention centers. You know, that is a particularly difficult risk. We write that one way and one way only. We write it with comprehensive, you know, assault and battery exclusion, you know, no sexual abuse and molestation cover, et cetera, et cetera.
We're writing accounts. You write those at really good rates. You can make good money. You know, within like the last 2 or 3 months, I would say, companies who I would hold in high regard come into the market, you know, writing without any coverage restrictions, which from our vantage point probably triples, quadruples the loss costs. You know, if you're gonna write a $5 million exposure, instead of expecting, you know, $400,000 or $500,000 of losses, you're gonna end up with $2 million of losses. Yet they're competing almost pari passu on pricing. I would use that as an example of, well, it was really good 3 months ago, it's not good anymore, and the people who are now trying to write that aren't doing it in a responsible way.
The market has gotten very uneven, and that unevenness means you just got to be really smart, pick and choose, be in the right place at the right time. Our business, as I remind you know, I've told you a bunch of times, is it is severity driven. It's in the E&S market for the right reasons, and that's the stuff that we like to write. When you see, you know, when you see folks compromising things like terms and conditions, you have to just take pause and say, "We're not, we're not gonna chase that." You see some of that coming through our growth numbers. Rest assured, if you're an investor in us, that, you know, we're bringing the kind of discipline that you'd want us to bring.
I would On the flip side, companies who are loading up on casualty right now, for whatever set of reasons, there isn't the broad enough market opportunity to justify that kind of growth in the market right now.
That's excellent detail. Thank you.
You're welcome, Greg. Thank you.
The next question comes from Meyer Shields with KBW. Your line's open.
Great. Thanks so much. Obviously want to welcome Natalie back. Mark, you mentioned both seasonality and mix when you were talking about Apollo, I was hoping you could talk about that, because I'm assuming the mix part might be more persistent, even if seasonality evolves over the course of the year.
Yeah. Hey, Meyer. I agree with your comment. It is more mix than it is seasonality. I don't know what else to tell you. Are you asking anything else? What else can I help you with?
Well, I was hoping you'd sort of like flesh out what the seasonality is just in terms of the evolution of the Apollo books combined ratio over the course of the year.
Well, it varies, right? There are a number of classes and I don't have all of the detail in front of you, in front of me, but it varies by class. There's just a number of businesses that can impact the loss ratio.
Yeah. Meyer, I think what I would point to is that you're gonna see in the fourth quarter. Yeah, fourth quarter is heavily driven by Syndicate 1971. The third quarter is heavily driven by Syndicate 1969. It's a lot lighter in the first half of the year. Not like in the United States where most of our business is earned in ratably over the course of the year, let's say, or even if you're writing surety, maybe it's in the duration of our surety is like a 14-month average contract. Maybe it's ratably over 14 months. There's business in there that earns in over a shorter period of time, which can have, you know, an effect on how the loss ratio earns in. I think the high-level point is it is great result.
We're very, we're both pleased and proud of our Apollo colleagues. You know, I think that we just go back to what we said when we gave you guidance that, you know, you should understand that Apollo will probably consistently on a loss ratio performance all in be a bit better than us in the U.S. at Skyward Specialty and on the expense ratio, you know, a bit higher and they're relatively comparable combined ratio businesses over the course of a full year.
Okay. That's very helpful. The second question, I guess, I think this is predominantly Apollo or maybe Global Property. I was hoping you'd talk about Middle Eastern exposure, both in terms of loss potential, and where rates are apparently evolving pretty quickly.
Yeah. Great question, and thank you. This is like one of these ones I smile at, you know, whether I'm just dumb lucky, I think, as a CEO in this instance. We were with our board, it's nice to be able to have a real world event as the first test of like the great risk management and underwriting at Apollo. Short story is this. Apollo really sort of reduced their aggregate exposure in the Middle East just simply because, you know, post-Crimea, they concluded that there just wasn't the rate to support, you know, the kind of potential political risk, political violence and other sort of adjacent exposure. You know, their exposure runs through, you know, marine, war, aviation, you know, political risk, political violence.
As a percentage of the market in Lloyd's, their exposure to the Middle East is far less than their share of each of those markets. We have in our loss picks this quarter, some of that exposure. You know, we have one reported loss of really any size, and that's incorporated into our picks. If things develop, you know, beyond sort of the numbers that are being talked about over the course of the second quarter and beyond, and we believe it reflects, you know, in our book, we're gonna sort of, you know, obviously, reflect that. I think what you should understand is that we're definitely undersized in the Middle East, and that's a direct byproduct of leadership's determination that the rates really didn't support the exposure there.
Post the event, we're trying to be picky. There are some instances like we have, we've written a, you know, handful of accounts, think things like, you know, parking garage structures and, in some of the other, you know, countries that, you know, are experiencing kind of the, the collateral effects, if you will. We've written some things that are sea-bearing around, you know, you know, like, service ships and so forth. I would describe what the team has done as being, you know, very thoughtful and kind of picking and choosing and kind of waiting to see, you know, a really sort of fulsome movement on the market environment that would have us lean in further than we are.
Okay. Perfect. That's very helpful, very thorough. Final question, if I can, is if we look at the margin on the fee-based business for managing other capital providers premium, is that margin pretty steady over the course of the year?
It is pretty steady over the course of the year. I mean, I would want to bring Taryn into the conversation to make sure that I fully understand it. You know, it is, I believe it would follow the actual writings of premium. If there's seasonality there, I think that that might influence it. I tell you what, let me make sure that we come back to you on that so that I'm answering it accurately versus kind of my general understanding of how that part comes through the, you know, the true sort of partner syndicate, you know, fee income would come through.
All right. That's perfect. Thank you so much.
Thank you.
Our next question will come from Alex Scott with Barclays. Your line is open.
Hi. Good morning. I was hoping you could talk a bit about the way Apollo participates in the cyber business. I just don't know much about it, so I'd be interested in, you know, sort of the overview of what they do in that market and then just, you know, your views on any risks from, you know, some of the developments in Artificial Intelligence and identifying, you know, vulnerabilities.
Yeah. Alex, thanks for the question. I'm looking at a colleague to make sure that everything that's mentally in my mind. One of the partner syndicates I think in fact, actually it's not a partner syndicate. It's managed as like a special purpose syndicate. We participate, and it's a entity called Envelop that has what I would describe as very kind of unique IP in the cyberspace, but also a bunch of that exposure is not what you would think about as sort of traditional U.S. and even OECD exposure. I think that's probably the most notable thing, and that comes through as a reinsurance participation.
I think that beyond that, there probably is other exposure, but again, I think this is a case where, you know, first quarter trying to make sure that we're fully prepared. I would want to make sure that we're following up and checking that off with our colleagues there. That would be the one that I highlight that really does dominate, what is the substantive exposure for Apollo. In the U.S., we have really de minimis exposure to cyber.
Got it. Yeah. Thanks for that. I know kind of a nuanced question. All right. As a follow-up, maybe a broader one, I mean, we're hearing increasingly, you know, even, you know, just talking to some people in the rooms, it sounds like the specialty markets have gotten pretty, you know, pretty darn competitive. I know you all have done a great job of focusing on your niches, but any update on how you're feeling about growth and continuing to be able to find those spots, you know, you know, net of where you've got to pull back here and there? Any update that you'd give us to some of that guidance laid out, you know, for the 2026 plan?
Yeah, thanks. I, Alex, I think that, you know, I will say the one interesting dimension of the market today, you know, and this is 35 years of personal experience and, you know, Mark correspondingly 35 years. It's the speed in which things have moved has been pretty extraordinary. I think, you know, probably the most notable change separating out everything that's been discussed about MGAs and fronts and so forth is, you know, now you're seeing obviously third-party capital sidecars. More recently, you know, we're talking to folks and the desire for runoff carriers to come in and probably writing at better terms than the seeding companies for those sidecars, which is kind of like a frightening prospect. I think it makes things pretty hard to predict.
What I would say to you on the flip side, I, you know, I just can't emphasize this enough. We have this incredibly durable portfolio. As things get tougher in selective places, I know that our leadership is prepared to make sure that we're holding the line, we're writing the best accounts, we're doing it on terms and conditions that are gonna generate the returns that we seek. Simultaneous to that, the growth opportunities that we have in, you know, A&H and Surety and AG in 1971, and even some niches that sit, you know, elsewhere in the Skyward Specialty U.S. business and the Apollo 1969 business are going to continue to deliver growth well above our peers. We follow every one of the folks who reported before us.
If you take a cross-section of that cohort, and that it would include, you know, the primary insurance operations of, you know, the Bermudians who we compete against, you know, our growth looks outstanding against them. Yet, you know, we feel as good about the margin content of that growth as we did a year ago and a year before that. In fact, in some cases, we feel better about the margin content. I think we're in a really unique and outstanding place. I think our investors, you know, wanna make sure they understand that. I feel good about the year. We've never really gotten too specific about growth. I think otherwise our guidance stands. We're not changing our guidance. We've never missed consensus as a public company.
Every quarter, we've exceeded consensus. We're committed to giving guidance that we believe is achievable, and if we can beat that guidance, we'll beat the guidance.
Got it. Okay. Thank you.
Thanks, Alex.
The next question comes from Paul Newsome with Piper Sandler. Your line's open.
Good morning. Kind of more on the same topic, but maybe the other way, looking a little differently. How do you think about the proportion of your business today that isn't part of the cyclical concerns that we're talking about? You know.
Well.
Do you think your business resistant?
Where say the last part again, Paul? I missed the last part.
Just where do you think the business is resistant and not dealing with the competitive issues that you talked about today?
Well, I mean, I think that it, you know, if we look at it on a full year basis, it's gonna be well in excess of 50%. You know, we just point to the categories we've talked about in the past. They're made up of, you know, our Surety A&H, Credit Ag, Captives, 1971, we put into that. I'll also say to you that, you know, there's no shortage of pieces, as I've talked about, like we have little niches. What we write in management liability, some of those categories were one of only two or three companies who are writing that. I'll just say it again. I use my example of if you're gonna write Web3, you actually have to have a product that defines a smart contract.
You can't just use a standard management liability product. You know, you have a bit of practical barriers to entry on even some of the niche-y stuff. We don't put that into the cycle resistant 'cause it's just too hard and would require a lot of detail and disclosure. I think today, well in excess of 50% of our business. You know, I think that what Syndicate 1971, the guys that IBOT are doing, the focus on autonomy, you know, it's just like a, it is wide open in terms of what the potential is for our company, particularly given that we're starting from a leadership position.
I, again, I just, I feel like it's more than 50% of our portfolio, and I believe that in a horizon until we start to see us transition from kind of into a softening market and transition back towards a hardening market, which might be quite a few quarters or even years out, we'll probably see a larger portion of our portfolio grow in these areas that I would characterize as more cycle resistant.
Great. Different question. Reinsurance market also going through quite a bit of change. You, I think, a fair user of reinsurance. How should we think about the impact of the reinsurance market affecting your business, given that there are definitely pockets there that are pretty soft?
I think, you know, on both the Skyward Specialty and the Apollo, you know, parts of the business, we've had good success through, you know, this part of the year. I can tell you, like, we renewed our CAT program on 4/1. Obviously property's coming off. We right-sized our exposure. We stayed with a, you know, a range of kind of 1 in 10 to 1 in 250. You know, our sort of risk-adjusted rate came way off. Our second event cover dropped down lower. It was like at $7.5 million second event. It's down to $5 million. You know, we saw a lot of benefits in the U.S. and similarly at Apollo.
You know, on the, on the flip side, you know, we know still that there's margin in our reinsurance that we're placing into the, you know, the reinsurance community. I mentioned in my prepared remarks the launch of Syndicate 1972. It's a really powerful sort of innovation by the Apollo team. I think they're first to do such a structure. Like, it's a sidecar structure, but the way they did it. They basically have taken 20% of their outwards reinsurance and put it into Syndicate 1972. It's managed. We keep a quarter of that, you know, third-party capital supports that, follows the market. We're able to recapture fees on that. We're gonna be using that next year for Skyward Specialty as well.
We do that because we still believe that our reinsurance purchasing, you know, for all the right reasons, still has, you know, margin, good margin in there for the reinsurers, and that's one way that we can recapture at least a portion of it.
I appreciate the help. Thank you.
Thank you, Paul.
The next question is gonna come from Tracy Benguigui with Wolfe Research. Your line's open.
Thank you. You're clearly pulling back in Global Property within this Skyward Specialty segment. At the same time, we're hearing that the Lloyd's market has become more aggressive on property, contributing to broader property softness. I understand that most of Apollo's growth shows up in fees, but you're still taking on some of that risk. Within the Apollo segment, how would you characterize the property growth in the quarter? If you're participating on a whole account proportional basis, are you effectively assuming more property exposure to Apollo while reducing it at Skyward Specialty? How should we think about how you align those underwriting appetites across the two platforms?
Yeah. Thanks, Tracy, and good morning. Really great question. You know, Doug Davies leads our Global Property business in the United States. Kate Foster leads the property business at Apollo. Those two, you know, are certainly in communication, you know, seeing their different views of the market. To be clear, we're not writing any pro rata in London. You know, that piece is, at least as it relates to the open market business, is a direct impact business. There's no two people in our entire company that I feel better about their ability to find a way to make a buck in a tough market than those two people, and I say that with great sincerity.
They are two of the strongest underwriting leaders, who have a comprehensive view of the market, know how to work with the brokers in these kind of markets and be able to sort of get their pound of flesh out. By the way, Apollo's sort of growth or lack of growth it's following almost exactly what's happening in our published numbers that you see for Global Property Division in Skyward Specialty. I feel great about it. You know, I think that at a higher level, one thing that is really a standout capability of Apollo is something that James Slaughter has been leading around being able to ensure accounts are clearly understood in terms of risk quality.
When you're softening the You know, when you're in a softening market, particularly in places like property, you have a quantitative view of the highest risk quality, which is really where you want to defend your portfolio, because quite honestly, your ultimately, your loss content for that part of the business can be paid for, even in the kind of rate environment we're in now. I feel great, to be honest. Oh, by the way, I think, you know, you see these negative growth numbers, and yet, as a company, we're still putting up really impressive overall growth. I think in that regard, we're showing up as, you know, quite sort of thoughtful and responsible about our portfolio construction.
Neither of those 2 leaders are feeling any pressure to write business that they don't believe they can make an appropriate return on.
Got it. You mentioned James Slaughter. If he's on the call, hi. It's been a while. Also, I like seeing the segment details. Given Apollo has a different combined ratio profile, like lower loss ratio, higher expense ratio. On an enterprise level, how should we think about your loss ratio and expense ratio outlook? Is the first quarter a good representation of what we should expect?
I think our guidance is a good representation of what you should expect. You know, that's our story, and we're sticking to it. I think we're sticking with our guidance. It was a good quarter, and I'm, as I said, I'm very proud of the Apollo team for, you know, what they achieved in the first quarter. I think on a full year basis, you gotta think about CATs, and you gotta think about mix earning in, and we're still gonna see outstanding returns as a company. I'm pretty confident that we're gonna hit and hopefully, you know, meaningfully exceed the guidance that we provided late last year.
Got it. No, my question was more just on the composition of the combined ratio. Just the profile.
In the-
Yeah, like higher expense ratio. Yeah.
Oh. Oh, yeah, yeah.
Yeah.
I think, Yeah, I think that Mark might want to give a bit more detail, but I think that the expense ratio you saw for the 1st quarter from Apollo is probably a pretty good, you know, within the, you know, kind of the proximity of what we'd expect on a full year basis. Yeah, I mean, Tracy, I, in the aggregate, we target, we've said, and this quarter as well, sub 30 is our watermark for the expense ratio. Do I still believe that? I do. 28.5 for the quarter, I feel like that's right in line with what we guided. In the loss ratio, again, to Andrew's point, ex-CAT, I feel good about where it is.
As we talked about already a couple of times, business mix can impact it a little bit quarter-over-quarter, but I feel pretty good about both the expense ratio and the loss ratio given business mix. Can move around just a little bit.
That corporate expense, that's included in your view of the expense ratio?
It is.
Okay. Thank you.
Yeah. That, you know, that 30% Mendoza line that we talked about, Tracy, you know, long ago, which preceded obviously the transaction with Apollo, you know, we revisited that with Apollo fully in mind, and we think it's the right thing to sort of keep that Mendoza line for ourselves. I'd like to just say one other thing, Tracy. It hasn't been asked, but it's tied to your question. You know, obviously, a lot's happening with AI and Everybody's talking about it, right? You know, our experience so far, and we've got, you know, great results and so forth, is this stuff requires real investment. A lot of the investment happens in advance of, you know, being able to sort of see the benefits come through.
It's pretty hard to imagine, you know, doing that and not backing up on your expense ratio if you don't have the growth to offset that. We're gaining efficiencies as a company overall, but we're also funding, you know, the next and the next and the next, you know, part of our technology development. You know, as I look at that, like growth is part of what makes that possible for us and not get too close to that 30% Mendoza line. I think that as you look forward in other quarters and people are talking about, you know, AI and the investment there, you know, it's going to start to become visible when growth isn't apparent.
You know, I think that that's, you know, for us, it's comforting to know that we're able to fund that, you know, entirely within, you know, our guidance on expense ratio.
Understood. Thank you.
Thank you.
The next question will come from Mark Hughes with Truist. Your line is open.
Yeah. Thank you. Good morning.
Hey, Mark.
Andrew, Hey, Mark. In the property market, you've talked quite a bit about the pressure there, particularly in coastal national accounts. Seems like if you look across the public space, property premiums on average are, you know, up a little bit, down a little bit. You don't really see it in the published results of your competitors, again, the public companies. Is there really that much pressure or are you seeing a slower decline outside of those kind of higher volatility areas? It just seems like if you didn't know the headlines that property was horrible, if you looked at the results, you wouldn't see as much pressure in the actual P&Ls.
You may not agree with that point, I'm just sort of curious, what you make of that.
Well, I would Thanks, Mark, and good morning, by the way. I think, you know, in the U.S., Global Property specifically is a more, you know, general property book, so we have CAT exposure, but we have lots of technical, you know, so it's a. At least in the, you know, the London market, you know, part of the book for Apollo, I think there's certainly more CAT exposure there. You know, we're kind of entering the point where there's a lot of volume coming through, so we're probably better to be precise on your answer, you know, next quarter. I don't think that we're as well-positioned as some writers to really talk about CAT 'cause at least through Skyward Specialty, that definitely is not, you know, our focus.
I just think the property market by and large has lost all its sense and sensibilities. It's so fast that, you know, you might have looked back three, four, five months ago and say, "Wow, it's coming off fast." It hasn't, in our view, slowed down. You know, for those folks who are out there posting, you know, sort of results and giving whatever explanations they're giving, it just straight up wouldn't correspond with our view of the market. There are places, right? I mean, there's, you know, definitely as you get to the true small end of the property market, you know, it never went up the way the property market went up, and it doesn't come down the way the property market comes down.
You know, those are very small pockets. It's very hard to see companies say that that represents their book of business in total. From our perspective, we're doing the things to hold our margin, and if others are able to sort of do without dropping volume, they're doing it in ways that we don't understand. How's that?
Appreciate that. I also like your Jane Austen reference. You're quite the renaissance man. If, if I might ask one other question, the accident and health growth there has been fabulous. Can you talk about the sustainability there perhaps? How much might be, you know, tied to initiatives you put in place, you had some very good experience, but you may lap those at some point? Or does it feel like the opportunity there should be more durable?
Well, I have to say, like, if you use a McKinsey & Company kind of view of, you know, different horizons, feel really good about horizon 1, like the next year. I think we feel pretty good about horizon 2 because we've been pleasantly surprised with sort of 3 things. 1 is, you know, there's been a lot of disruption of parts of the market that we don't really touch, but we get the second order benefits of that. We've had a great run on talent, really great run on having talent come our way.
I think the third part of it when I think of horizon two, you know, a couple of years and so forth, is that the group captives piece is clearly bringing, it's growing its share of the overall stop loss over the overall medical market. It's, in some cases, it's a halfway house to companies, you know, fully self-insuring. In others, it's just a great structure for homogeneous cohorts. We're surprised. It's just been, you know, we would have thought the TAM was smaller. It keeps growing and growing and growing for us. Kind of in the horizon one, horizon two, I feel good. It's hard to look out beyond that.
I also think that, you know, we have a team that probably will figure out what's the next product and the next product and the next product 'cause we've done that before.
Excellent. Thank you very much.
Thanks, Mark.
Thanks, Mark.
Our next question will come from Michael Zaremski with BMO. Your line's open.
Hey, thanks. A nice quarter. A couple numbers questions. First, on the $30 million-$35 million fee income guide, just the mechanics of that. Should we be looking at the underwriting fee income line item of $10.078 million and netting some of it against the fee-based service expense line item of $4.17 million? If not, if it was just the $10 million number, is it running, you know, just better than expected early part of the year?
Hey, Mike. It's Mark. Good question. Just so we're clear for everybody, there's the fee income that we recognized for Apollo was circa $10 million, I'm rounding. There was about $5 million of expense, right? You're asking how do I look at that relative to the guidance we gave you of 30-35? Clearly, that's what you're asking.
Yes. Thanks, Mark.
Yeah. I mean, I still believe the guidance holds. When we guided you to 30/35, it was based on the 10.
Got it.
Mike-
Okay.
Mike, just one other thing I'd like to say is that the 4 million-ish that you see in the service fee expense, that will not grow proportionally with our fees. This is about explicit investments that are being made to support that capability. That is a levered number over time. If you ask, well, can you tell me what the levering looks like? The answer is we're probably not at a place where we can do that for you. I think it'll become clearer as we go quarter over quarter.
Yeah
the separation, if you will, between the fee income and the service expense that offsets that.
Got it. That's helpful. Lastly, unless I'm crazy, I don't see, I've controlled F did. I don't see any disclosure anymore on the prior accident year development. I don't think I heard any commentary either. Is there, unless I'm wrong. Is there any?
Mike
any prior development we should think about?
Sorry. I did mention it. I may have gone over very quickly. The answer is no, in terms of any prior year development. I can tell you, emergence in the quarter was in line with our expectations. Quite frankly, it was favorable. I feel we're in a great position on our reserves, both in the U.S. and in London. We're in the best point in our reserves since we've been public.
Okay. Got it. Yeah, so sorry. I didn't have a live transcript open. It's not in the press release, but it, you know, it was said on the, on the call, so we'll just, we'll look out for that in the future.
Yeah.
Thank you, Mark.
That's all right. Okay. Got it.
Our next question will come from Andrew Kligerman with TD Cowen. Your line's open.
Hey, good morning. We'll follow up on the A&H business. You know, terrific growth there. If I remember it right, you're more focused on employers with less than 2,500 employees. The question is, you know, what's currently driving the growth? Is it mostly rate? Could you give a little detail on the rate that you're seeing and, you know, maybe, you know, any expansion into larger employers? A little color overall on that.
Good morning, Andrew, and thank you for the question. By the way, on A&H, really the concentration of our accounts tend to be 500 employees and less. I, you know, I couldn't tell you the exact sort of if Pareto holds, but it's not probably not far off from the 80/20 there. Just to answer the last part of your question, right now we really have no interest in going up market. You know, there's some dead bodies on the roadside there, probably for good reasons. It doesn't fit with our whole medical cost management kind of model. It's really hard to get that enacted except in the unusual instances.
I think our sort of our focus is unchanged. You know, for us, there's in our numbers, there's kind of rate and there's effective rate. What I mean by that are things that we'll do like laser out coverages and so forth that create effective rate. Pure rate is contributing, you know, not quite 10% in there, but it's not, you know, it's an important part. The really the growth I think is just simply 2 factors. One is that, you know, we've really kind of hit it with our group captives capability. We've been growing both the number of members, and we've actually been growing the number of captives as well. That capability is really powerful.
It fits incredibly well with our medical cost management, you know, IP and capabilities. Then on the, just the single, you know, employer stop loss, you know, I think I've mentioned this on, like maybe the last two or three calls. You know, we've really seen a turn in the market, a lot of that has to do with, in our view, some stumbles of some MGAs. I think part of it's probably the, you know, the larger company market, you know, the voya serve market, you know, kind of finally got, you know, realistic, maybe there's some second order effects that are dropping down to our market. It's really both areas.
Certainly our single employer, stop loss solution is still, you know, a larger part of our book, but we are seeing good growth there, and we're seeing it on the terms that we want, and it's fully utilizing all of our medical cost management IP that are important to us to be able to drive, you know, top 5 in the industry loss ratio that we've been driving.
That was very helpful. Maybe shifting over to, you know, I guess somewhat related to captives, area, specialty segment. That one was down 13.5%. If I understand that business, you're kind of attaching at $350,000, and you write a broader mix of lines. It sounded like from your comments earlier, stop loss could even be in there, med stop loss. Where are you seeing the pressures in that segment?
Yeah.
What are the opportunities?
Yeah, no, great question. really great question. I mean, just for point of clarity, all of our medical stop loss business is reported through the A&H division. We have captives in the A&H division. What you're seeing in the captives division is pure P&C. I think there's probably two parts to the answer for you. Part number one is the downward pressure, I'll be very direct. We had, in our view, a very irresponsible party come in and basically write a captive in a way that we believe will, you know, it will cause a lot of damage. We weren't going to compete on things that weren't sensible.
Maybe that tells you a little about the market, by the way. That happened at the end of last year. Somebody was basically trying to, you know, to close out their books. It hasn't happened before, it hasn't happened since, that was a unique instance, that's really what you're seeing run through the numbers. On the flip side, Andrew, you know, I point to our really interesting success stories. You know, for example, our captive that uses a technology company called Understory to do micro weather analysis for dealer open lot, which has been an unbelievably successful and quite unique solution because you don't see too many property captives out there. We're in our, whatever, our fifth year in that captive.
I think our view is we're looking for more of those kinds of opportunities. Interestingly enough, our, our partners in London, in 1971, given some of the things that are happening in autonomy, open up some really interesting opportunities. I'll also remind you that Apollo, as part of its partner syndicates, you know, has the only Lloyd's captive with a large technology company. We, we think about potential interesting collaborations and partnerships that way. I think that what we're not gonna be doing is just doing the run-of-the-mill stuff. It's gonna be about innovation in that area. You know, those things take time, but when they come across, they come across in a way that can, you know, that can really be highly additive to your earnings and growth as well.
Awesome. Thank you. That was helpful.
Our next question is going to come from Andrew Anderson with Jefferies. Your line is open.
Hey, thanks for the extra time. Maybe just one for me. I think I heard the rate change on the Apollo business was low single digit ex property. Maybe a little bit lower than I would have thought, considering 45%-ish of that business is shared economy or liability. Maybe you could just talk about, you know, where you see that rate change in the Apollo business going. Is this maybe an intentional decision to be more competitive given the results here, or maybe the liability and shared economy pricing is a bit higher than that?
Andrew, good morning. Thank you for the question. No, actually it's neither of those things. Quite honestly, it's just mix. There is on a written basis, you know, in the U.S. as an example, the quarter-to-quarter numbers on property can influence the and it has, by the way, in the past, the rate reporting. It's even more extreme given the cyclicality or the seasonality of mix through the Apollo segment. The way I would say back to you, Andrew, as we report it out, you know, the sort of the domain of the number, but that's as much sort of seasonality. In fact, even like your reference to the within 1971, there's very little of that being autonomy at all as an example.
I just would say stay tuned because that number will move based on what division inside of 1969 and 1971 is really kind of the seasonally high gross written premium in any given quarter. I just don't think I'd read too much into it.
Thanks. Just a quick one. That's a gross rate number, I imagine?
It is. Everything we report out on is a gross rate number, that's important that you ask that because, for example, within some of our divisions, like Global Property, our gross versus our net rate, our net rate, is actually negative mid-single digits, where the gross rate is negative mid-teens. That's, you know, in our case in Skyward, especially in the U.S., that's because of the use of FAC and how that market's behaving. Some of that is similar, you know, in Apollo relative to the gross versus net. We always report on a gross rate, gross pure rate.
Thank you. I'll leave it there.
Thanks, Andrew.
I am showing no further questions at this time. I will now turn the call back over to Natalie for closing remarks.
Thanks, everyone, for your questions, for participating in our conference call and for your continued interest in and support of Skyward Group. I am available after the call to answer any additional questions that you may have. We look forward to speaking with you again on our second quarter 2026 earnings call. Thank you, and have a wonderful day.
This concludes today's conference call. Thank you for participating, and you may now disconnect.