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Skyward's Q3 combined ratio rises to 96.4% despite underlying loss improvement

Skyward Specialty Insurance Houston.jpg

Skyward Specialty’s combined ratio during the third quarter rose to 96.4% from 95.9% in Q3 2020.

Despite intense cat activity during the quarter, the specialty insurer’s loss ratio decreased to 67.8% from 72.4% year on year, propelled mostly by rate increases over recent months.

The improvement was offset, however, by a deterioration in the firm’s expense ratio from 23.5% in Q3 2020 to 28.6%.

Westaim-owned Skyward’s underlying loss ratio, excluding the effects of catastrophes and prior-year developments, improved to 63% in Q3 from 68.8% the previous year as rates soared.

Overall, the company’s underwriting profit climbed to $4.5mn from $4.1mn in Q3 a year ago, driving its net income during the period to $7.7mn from $6.7mn.

Westaim recorded net income from its share of Skyward Specialty of $3mn in the quarter compared with $3.3mn in Q3 2020, attributing the results to underwriting improvements, primarily from strategic actions taken over the past year to re-underwrite the portfolio, and to improved industry market conditions.

Growth: Skyward grew gross written premiums 12.4% to $215mn from $191mn, and the insurer’s net written premiums rose 24% to $123.8mn from 99.8mn year on year.

Excluding the firm’s discontinued lines, however, Skyward’s net written premiums increased by 43.4% to $116.4mn from $81.1mn from Q3 2020.

Investment: The Houston, Texas-based carrier booked an investment income of $6.8mn in Q3 2021 compared with $5.8mn in the same quarter of 2020. The net income increase was primarily due to an improvement in Skyward’s operating results.

Commentary: Westaim president and CEO said: “With respect to Skyward Specialty, we are very encouraged by the growth and profitability of the continuing businesses, which excludes businesses exited by the company as its portfolio was repositioned over the past year.

“For example, 94% of Q3 2021 net written premium was related to continuing businesses and grew 43% over the prior year.

“We believe these metrics are leading indicators of future margin expansion given the earnings profile of continuing businesses compared to those discontinued over the past year.”

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