Credit rating agency AM Best has upgraded its outlook on the credit ratings of several companies within Skyward Specialty Insurance Group to positive from stable, citing the group’s continued underwriting profitability and investment income.
Skyward Specialty Insurance Group (Skyward) is a Houston-based specialty insurance group whose ultimate parent is Skyward Specialty Insurance Group, Inc. (Skyward Group), which is listed on Nasdaq under the ticker SKWD. The group includes Great Midwest Insurance Company, Houston Specialty Insurance Company, Oklahoma Specialty Insurance Company and Imperium Insurance Company.
AM Best has affirmed the Financial Strength Rating (FSR) of A (Excellent) and the Long-Term Issuer Credit Rating (Long-Term ICR) of “a” (Excellent) for all four insurers, while changing the outlook for their Long-Term ICRs to positive from stable. The outlook for their FSRs remains stable.
The ratings agency has also moved the outlook for Skyward Group’s Long-Term ICR to positive from stable, while affirming the rating at “bbb” (Good). The outlook has likewise been revised to positive from stable on Skyward Group’s Long-Term Issue Credit Rating of “bbb-” (Good) for its USD $20 million of 7.25% subordinated notes due 2039.
AM Best said the ratings are supported by Skyward’s very strong balance sheet strength, adequate operating performance, neutral business profile and appropriate enterprise risk management (ERM).
The positive outlook reflects what AM Best describes as sustained strength in Skyward’s operating performance. In particular, the agency pointed to the group’s continuing record of solid underwriting profitability alongside consistent investment income.
Skyward’s management has continued to adjust its underwriting strategy where necessary, with a focus on risk selection and maintaining flexibility across the specialist markets in which it operates. AM Best noted that the insurer has maintained consistent underwriting profitability across its targeted niches, while continuing to assess the development of premium growth, underwriting results, reserves and overall earnings.
Capital management has also remained an important factor in Skyward’s financial position. AM Best said the group’s capitalisation has been supported by operating earnings as well as capital contributions from its parent when required to support the business. More recently, improved underwriting and investment performance has enabled Skyward to generate organic surplus growth through higher operating earnings.
Skyward Group’s financial leverage increased following its acquisition of Apollo Group Holdings Limited. Despite the increase, AM Best said leverage and interest coverage remain within the parameters expected for the group’s current rating.
AM Best continues to characterise Skyward’s business as that of a specialty insurer with diversification across its geographic footprint, product offering and distribution channels. The agency also considers the group’s enterprise risk management framework to be extensive and suitable for the size and complexity of its operations.
