Skyward Specialty Insurance Group, Inc.

Good day, and thank you for standing by. Welcome to the Skyward Specialty Insurance Group fourth quarter 2023 earnings conference call. At this time, all participants are in a listen-only mode. After the speaker's presentation, there will be a question and answer session. To ask a question during the session, you will need to press star 1-1 on your telephone. You will then hear an automated message advising your hand is raised. To withdraw your question, please press star 1-1 again. Please be advised that today's conference is being recorded. I would now like to hand the conference over to your speaker today, Natalie Schoolcraft, Head of Investor Relations. Please go ahead.

Thank you, Shannon. Good morning, everyone, and welcome to our fourth quarter 2023 earnings conference call. Today, I am joined by our Chairman and Chief Executive Officer, Andrew Robinson, and Chief Financial Officer, Mark Hochul. We will begin the call today with our prepared remarks, and then we will open the lines for questions. Our comments today 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 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 information, are included as part of our press release and available on our website, skywardinsurance.com, under the Investor section. With that, I will turn the call over to Andrew. Andrew?

Thank you, Natalie. Good morning, everyone, and thank you for joining us. We closed out 2023 strong, reporting adjusted operating income of $0.61 per diluted share. Grocery and premiums grew 21% in the quarter, and our combined ratio of 90.7% for the quarter included less than a half a point of CAT losses. While it was a quiet CAT quarter for the industry, we continue to be at the low end of our peer group, even though over 25% of our business is property. Operationally, rate, retention, and submission flow in the quarter continue to be strong. I will talk more about this later in the call. Altogether, the execution of our ruler niche strategy continues to be excellent, and our aim to deliver top quartile financial returns is visible in our growth, underwriting profitability, shareholder returns, and balance sheet strength. With that, I'll turn the call over to Mark to discuss our financial results in greater detail. Mark?

Thank you, Andrew. For the quarter, we reported net income of $29.3 million, or $0.74 per diluted share. compared to 20.4 million or 63 cents per diluted share for the same period a year ago on an adjusted operating basis we reported net income of 24.3 million or 61 cents per diluted share compared to 11.6 million or 36 cents per diluted share for the same period a year ago in the quarter gross written premiums grew by approximately 21 percent and our transactional ens captives Industry solutions and professional lines divisions each grew over 20%. Only global property and agriculture did not grow in the quarter, which is expected given the seasonality of this business. We continue to see excellent opportunities for this division in 2024. Net written premiums grew by approximately 19% to $214 million in the quarter, compared to $180 million in the fourth quarter of 2022. Fourth quarter 2023, net premium retention was approximately 67% versus 68% in the fourth quarter 2022. Year to date, net premium retention was approximately 62% versus 59% a year ago. The fourth quarter is when we renew our professional workers' compensation and excess reinsurance programs. All of these renewals were orderly and we are satisfied with the terms and structures of these programs for 2024. Turning to our underwriting results, the fourth quarter combined ratio of 90.7% improved 1.7 points compared to the fourth quarter of 2022. The 2.3 point improvement in the current accident year non-CAT loss ratio to 60.9% was principally driven by changing mix of business. During the quarter, catastrophe losses were minimal and accounted for less than half a point on the combined ratio compared to the fourth quarter of 2022, which was impacted by 1.2 points of CAT losses from winter storm Elliott. Excluding the deferred benefit from the LPT, there was no net impact from prior year development. We continue to maintain a conservative position with respect to our loss reserves as our actuarial central estimate at the end of 2023 indicated that we are in a more redundant position than at the end of 2022. The expense ratio increased slightly compared to the fourth quarter of 2022. We've talked in prior quarters regarding our business mix shift and investing in the business, so this is in line with our expectations and a target of a sub 30 expense ratio. Turning to our investment results, net investment income was $14 million in the quarter, an increase of $8.7 million compared to the same period of 2022. Consistent with our investment strategy to deploy all free cash flow to core fixed income, in the fourth quarter we put $118 million to work at 6.5%. The net investment income from our core fixed income portfolio almost doubled to 10.7 million from 5.9 million in the prior year quarter, driven by improving portfolio yield and a significant increase in the invested asset base. Our embedded yield was 4.5% at December 31st, 2023, versus 3.7% a year ago. Our core fixed income portfolio is now over a billion dollars, a 410 million increase from a year ago. Net investment income in the fourth quarter of 2023 and 2022 were impacted by negative equity mark-to-market adjustments in our opportunistic fixed income portfolio. Just a reminder that last quarter we provided a redemption notice on $42 million of the opportunistic fixed income portfolio. Given the actions that we have already taken and inclusive of that notice, of the $172 million in the opportunistic fixed income portfolio, At December 31, 68% was in redemption. We anticipate reinvesting the proceeds from this part of the portfolio into our core fixed income portfolio. At December 31, we had approximately $270 million in short-term and money market investments, resulting from strong operating cash flow of over $335 million. During the quarter, our yield on short-term investments continued to be north of 5%. We will continue to deploy this liquidity into our core fixed income portfolio. During the quarter, we executed a successful upsized follow-on offering of 5 million shares of common stock. Skyward sold 2.2 million, and West End sold approximately 2.8 million, reducing their ownership to approximately 17%. We continue to see strong interest from our existing and new shareholders, and we appreciate their support for our company and our strategy. In terms of how we look at 2024, we expect full year adjusted net income to grow over 30% to between 105 and 110 million based on a combined ratio between 91 and 92% inclusive of two to two and a half points of cap. With that, I'll turn the call back over to Andrew for concluding remarks.

Thank you, Mark. Our fourth quarter results capped off what was truly a defining year for Skyward Specialty. Operationally, we had another great quarter as we grew double digits in seven of our underwriting divisions. We continue to realize pure pricing increases in the high single digits, which is above our estimated lost cost trends. Our new business pricing was up again over our in-force book, and retention, too, remained strong in the low 80s. All are strong indicators that the attractive underwriting margins that we are generating should continue. We also continue to see strong submission activity, which is up over 34% from the prior year, the largest year over year increase we have ever achieved. Our full year results are also notable, particularly in the context of the lead up to our IPO. During that period, we communicated core metrics and committed to building a company that consistently delivers top quartile performance. Our 2023 results demonstrated our progress towards this commitment. For the year, we delivered record growth of 28%, a combined ratio of 90.7%, an adjusted operating income of $80.8 million, and we achieved a return on equity of 15.9% and grew fully diluted book value per share by 24% from $12.87 to $15.96. The year marked a significant underwriting achievement for us, as we now have all eight of our underwriting divisions producing more than $100 million, as compared to five at the end of 2022. Each division is now at a scale that can substantially contribute to the company's earnings. The three divisions that reached $100 million this year were surety, transactional ENS, and professional liability. In just three years, we've grown these three businesses in aggregate from $44 million to $383 million driven by significant investments in talent and technology. All three are generating outstanding returns and have added meaningfully to the diversification of our earnings. While each division is delivering at or above our minimum target returns on capital, we continue to capitalize on market opportunities to grow both top line and margins and ensure that we shape our portfolio to those areas that offer the best risk-adjusted returns on capital. As such, we have ongoing investments in new underwriting areas, product adjacencies, teams, and of course, technology. As I reflect on the progress following what was a remarkable year for Skyward Specialty, I find myself energized and inspired by what we have accomplished in such a short period of time, and also the possibilities for 2024 and beyond. And of course, we remain laser focused on executing our Rural Ernie strategy and our progression towards generating top quartile returns at all parts of the market cycle. Finally, I'd like to thank my 510 colleagues for their excellent performance in 2023 and their commitment and drive to achieving our shared goals for 2024. I'd now like to turn the call back over to the operator to open up for Q&A. Operator?

Thank you. As a reminder, to ask a question, please press star 1-1 on your touchstone telephone and wait for your name to be announced. To withdraw your question, please press star 1-1 again. Please stand by. We'll compile the Q&A roster. Our first question comes from the line of Matthew Carletti with Citizens JMP. Your line is now open. Matthew, your line is open. Please check your mute button.

Can you hear me? Yeah. Good morning, Matt.

Hey, Matt. All right. Good morning. Andrew, I was hoping I could kind of go 30,000 feet per second. And if we rewind a year ago when you guys were out on the IPO Roadshow, technology was a big theme about how you guys embrace it and use it to empower your underwriters, claims, so on and so forth. And I was hoping you might be able to kind of fast forward a year and what has changed there? I mean, we hear a lot about AI and things like that. Is that something you're working on embracing just maybe a quick bring us up to speed just on, you know, how, how big a role that plays, you know, in your organization and how that might've changed you over the past year?

Um, yeah, well, I think that probably, you know, we're moving at like very, I would say very, very rapid, rapid pace. Right. So a lot of stuff's being done very quickly. And yeah, I would just say to you that nearly in every part of our business, next week we have our board meeting and the first session is claims. And as part of our claims presentation, our data scientists are going to show how is it that we've been able to isolate on the claims that have the highest propensity for reserve development so the managers can be watching those with greater intensity, kind of separating out the 20% that account for the potential 80% of movement. And all that is kind of like the just turning the crank on the intelligence that we're trying to bring to the desktop of our, in this case, our claims professionals, as well as in our underwriters. And look, it's not one single thing. Great example right now is that We've completely flipped within auto the notion of using telematics. If there's a G-force event, we're not waiting for a first notice of loss to come in. We're outbound reaching out to the risk manager of the entity that had this G-force event to determine whether there was an accident. And if so, then we can rapidly respond off the back of that. And that just fundamentally sort of turns things upside down. And so all those little angles, right, that I'm describing, these are just things that we, you know, we've got a long list of things that we can be doing. We're always trying to figure out, you know, what's the stuff that we can really make an impact in our business. And, you know, it's just a big part of our DNA. And, you know, those two examples, there's equal number of examples on product, on, you know, underwriting, et cetera, et cetera.

Great. Well, thank you. That's helpful. And then if I could just speak another one in, guessing from Mark. Mark, you mentioned that at year end, 68% of the $172 million of West End funds are in redemption. Can you help us with a timeline of kind of how long that usually takes? Is that kind of a quarter or 90-day process, or can it take longer for those funds to kind of be redeemed and reinvested?

Sure, Matt. No, it won't be a quarter. I'm looking for about 30% of it to be redeemed in 24. Time will tell. But I think that's what I'm looking for, 30%-ish in 24 and the rest of it in 25. We'll let you know, but it'll take a little bit of time.

And Matt, what these are, we're just letting the loans mature, right? So You know, they were reasonably well laddered, but, you know, it's not sort of 50-50, 50% in the first year, 50% in the second year. And the average duration was around two years, a little under two years. Perfect. All right. Thanks very much. Thanks, Matt.

Thank you. Our next question comes from the line of Mark Hughes with Truist. Your line is now open. Good morning, Mark.

Morning, Andrew. Good morning, Mark. How are you doing, Mark? All is well. Good. Mark, the guidance, the 105 to 110, that's coming off of the 2023 base of, is it 81 million? Am I saying that properly?

Yep. Yes, sir, you are.

Okay. And that seems like a pretty strong result. Anything you can say in terms of the contribution from net investment income and top line as you think about that guidance? you want to do top one.

Yeah, Mark, this is Andrew. I think, you know, we'll leave it to you guys to put your models together, but with the guidance that Mark gave on combined ratio between 91-92, you know, and the cap portion of that, you know, you can, you know what our gross to net is, you know, I'll just say to you that, you know, that should be pretty consistent, and so you can work your way through it by just taking our our written premium in 2023, put your earned premium for 2024, and kind of fill in the blanks. I will say that our plans, if you're asking specifically about growth, we don't want to give guidance on growth. Our internal plans are for 15%. That's what we're planning for. That's based on the market conditions that we see. and the investments that we've made I would also say to you that it was our view and we said this a number of times that a measure of us during a you know at least a what I would describe a functional market is that we should be able to double up the growth of our of our competitors and again our competitors are the guys who you can directly compare us against in sort of the that we compete against in the sort of the public company specialty space but it's also includes the primary insurance divisions of the diversified Bermudian guys and a handful of others. And we've been consistently at 28% growth, more than doubled up the growth of that cohort this year. And we believe that kind of 15% growth is in line with sort of doubling up the growth of that cohort next year. That's our plans. We'll leave it to you guys to figure out whatever you want to put into your models, but that's what our plans call for.

Understood. And then, Mark, anything on net investment income that's relevant here?

You know, Mark, we just talked about a billion dollar fixed income portfolio with a yield of four and a half. You and I can do the math. I expect that to continue throughout 24. The other components can be a little bit more variable. So I'll leave it to you to model out the portfolio in terms of fixed income. With the rest of it, time will tell. We've done well on opportunistic, but it has moved around a little bit, as you know, in 23.

You guys are asking me to do a lot of work.

I can help you with that.

If you want to send us your models, we can fill out your models. How about that?

Yeah, I know. I'm joking about that. Global property, I hear what you're saying, it's not a seasonally strong quarter, but even on that basis, it was down a little bit year over year. You had a lot more meaningful growth earlier in the year. Anything going on in particular in the fourth quarter? No.

I genuinely, Mark, will tell you, don't read it. It would give you a false negative if you look at that. It's a very, very light quarter. I think we let one account go. We also roll Agra into that division, and there's no premium written for Agra in the fourth quarter. So honestly, I can say with great confidence already knowing how we started the year that you don't let that sort of give you a false negative. Look, obviously the property market is, I think it's either at its peak or maybe past its peak, but I feel very good about where we are, you know, and both the profit as well as the sort of, you know, growth opportunities that are available to us given our discrete focus there.

Appreciate that. Thank you.

Thank you. Our next question comes from the line of Andrew Anderson with Jefferies. Your line is now open.

Hey, good morning. Hey, good morning. Looking at the GPW growth from professional lines and transactional ENS, can you kind of help us think about the source of growth there and how much of that is retained net?

Yeah, well, without knowing the sort of the context for your question, I can only assume that given everything that's being talked about in the D&O market, and particularly the public D&O market, that probably underlies it a little bit. First off, everything that's claims made rolls into our professional underwriting division. So our main driveline there is our miscellaneous professional, which, you know, quite honestly is... relatively small face value, less than a million and a half dollar average limit. All types of classes included in that as well are things like employed lawyers, tech E&O, our excess lawyers offering. As you saw, we also did a media liability offering. Including the professional portfolio as well is our architects and engineers book of business. It also does include management liability, which I'll come to in a second, and really what's been a big growth line for us is in the healthcare professional market. For management liability, just to maybe get in front of a conversation, look, I feel great about our management liability book, but I think it's probably noteworthy that almost all of that today is you know, is private company, you know, less than a quarter of that is public. And of that, 70% is side A and 30% is side ABC. It probably has a 50% retention rate. We've been letting it go. And, you know, and on the positive side, on our management liability, like we are, we're ninja assassins going after very niche areas, right? So, We've been very successful in areas like Web 3, cannabis, amongst others, which are true sort of specialty risks where we have some pretty darn legitimate expertise as compared to the rest of the market. So our professional sort of growth and our portfolio is very atypical of maybe how it is you would compare us against others. And then lastly, to your question, because our average limit is so low, we are principally keeping it net. It's not entirely net, but it's principally net.

Very helpful. Thank you. And maybe thinking about casually lost picks here, can you kind of give us some color on how accident years 16 to 19 are developing, both for business within the LPT and non-LPT business?

Sure, Andrew. Good question. Look, so I'm glad you brought it up. The industry is talking about the 19 and prior years. Good reminder, the LPT covered policy years 2017, which of course would include part of the 18 accident year. Before we went public, we took the LPT up to the co-participation limit. We're not seeing any surprises on inflation and or loss costs. We've talked about that. Our rate increases have have exceeded what we think our inflation and lost cost trends are. And Andrew, we haven't pulled that through in terms of our income statement. We've been conservative, meaning with lost picks, we're not taking full credit for rate increases. Does that answer your question?

Yep, that's helpful. Thank you.

Thank you. Our next question comes from the line of Mayor Shields with Keith Brouillette-Lewis. Your line is now open.

great thanks and good morning one question I guess on the catastrophe load I know it's really really light compared to most of your peers but it's also at least the upper range is higher than then you guys have produced in worse pricing environments and I was wondering is this intentionally a conservative outlook or is it something changing in terms of the overall mix of cat exposure

no our cat what we what we use for our our cat number is a combination of aal and 10-year history so we're we feel like we're giving you know appropriate sort of recognition to the cat that's in our book um and then it's our job to be able to sort of continue to successfully grow our property portfolio in a way that ensures that we're not you know we're not adding a lot of concentrated aggregate um which uh you know when you're talking about two or two and a half points of caps in total um you know that's where you can really get yourself messed up is you have a you know you have a lot of agri in a small area and some event happens it may be it may be uh you know or hurricane but it might be you know convective storms or something else and so we're really good at our agration management and and yeah i i think that I think that what you find probably given our book of business, if you looked over five years is we'll probably be in that two to two and a half point range, which is a pretty darn good outcome given the amount of property that we have in our portfolio overall.

Okay. No, that's very helpful. You also mentioned property growth prospects. Does that include increasing exposure along with rate increases?

yeah well you know um look there's there is obviously uh just growth in you know in in values given inflation there's growth and values related to you know to business interruption and depending on what part of our portfolio right all that's true in our global property you know in our transactional ens business, like, you know, we might sub limit, you know, business interruption, we are likely doing actual cash value on the buildings. And so a lot of that, you know, you're not, there's not a lot of exposure growth, per se, given how we oftentimes structure those, those, you know, those policies, but, but that's not to say that, you know, we're not seeing sort of maybe the equivalent increase in price running through rate that that theoretically should be assigned to exposure for those kinds of risks. Does that help? It does, yes.

And one last question, if I can. We've been seeing a lot of reserve issues burble up around the industry, and I'm wondering what that implies for maybe talent becoming available at competitors or from competitors.

That's a really good question. I don't know if I can see a correlation to it, to be honest. Look, not that this is going to sound a little bit flippant, but I would believe that we probably would not want the talent to be flushed out of an organization due to adverse development.

Sometimes the reaction is a little bit imprecise, which is what I was asking about, but I completely get what you're saying.

One thing I will say, though, which has been the case for my three and a half years here, is we've been very targeted and intentional with... with our recruiting right so we're you know you know we tend to have a very good view of the people that we're recruiting their track records their underwriting their distribution following etc etc and so i like i i wouldn't say that we're not recruiting from a general pool we're recruiting in a quite intentional way um and the media liability announcement You know, a few weeks back was a great example that that has been an area of focus for us for a long time, and we were only targeting one of three teams. And so when we were able to move on one of those teams, we did so really fast.

Okay, completely understood. Thank you.

Thank you. Our next question comes from the line of Paul Newsome with Piper Sandler. Your line is now open.

Good morning, Paul. Good morning. Sorry, I only heard about half of that. I think it's me. Thank you. A couple of questions that I think I want linked. One is I want to ask your response to the concerns that the competitive environment has gotten a lot, at least significantly worse over the last year and maybe even more recently. And I would like, I was wondering if this is sort of the second question, if you could combine that with a conversation of what you think about what's happening from a rate versus inflation perspective. Because my sense is the fear is especially aligned, the competitive environment has just gotten to the point where the baseline is you're sort of flat with respect to what you're getting from rate versus inflation. Um, and, um, and of course the fears that somehow that continues to turn over, but you know, what's your response to that? And, you know, what do you see as you listen to both in your own book and outside of your own book that, you know, may or may not line up with those fears?

Um, okay, well, let me, I'll, let me first just, I'll make a couple industry observations. Um, you know, not to, not to, not to sort of take too much of the time on that, but you know, if you, if you follow what's been going on, I will tell you that there's no consistent theme. You're hearing, in some instances, discussions on professional. When the earnings season, before the earnings season started, there was a very large announcement around, you know, that was driven a lot by professional. Then you're hearing, you know, you've been hearing the drumbeat of auto for a long time. You know, now it's GL and excess weight making sway to the next. And so there's no clear theme. I think really great companies of which there are some fantastic competitors that we see. Everybody's been talking about rising loss costs here for a long time. It feels like a combination of the media and the analyst community, investment community said, well, now's a good time to dump your kitchen sink in this quarter. Some companies did that, but I think a lot of the great companies who have been talking about you know, just the inflationary environment on liability, you know, have recognized that in both how it is that they're writing risk and how it is that they're booking their loss ratios. For our part, you know, listen, nothing's ever perfect, but to Mark's point, you know, in the third quarter of 2022, we moved to take our LPT reserve position to the top of the COPAR, right? We've been incredibly conservative, not released a dollar of reserves, since I've joined, right? And we've reported out very consistently about, you know, our pricing above loss cost trend, our new business pricing, and all that's to ensure that our balance sheet is strong and getting stronger period over period. You know, people's, other companies' decisions about what to do in this quarter, I feel like that's just, to me, that's a little bit of a conundrum. It seemed like it was a kitchen sink for some, but the competitive environment, you know, certainly feels like it has consistently been a relatively rational environment. There are some crazies out there. The reason we're not doing anything in public D&O is because the people who are writing that business, particularly a lot of the MGAs, are nuts. We see something similar on certain areas within auto. Occasionally, I ask my underwriters to send me examples of stupidity that are happening in the market. where a competitor is just undercutting for no reason at all on what likely is a challenging kind of exposure. And I, of course, get a handful of those every week. And so you see kind of silly behavior. But in aggregate, it feels like the market this quarter, the market last quarter, the quarters before are relatively orderly and constructive. And that's showing through in our results. 34% increase in submissions in the quarter is absolutely astonishing. Now, some of that's because of the talent that we brought with us, but that tells me that there's plenty of opportunity. The fact that we grew by 21% versus proportional to the submission flow also tells me that our underwriters are doing a fantastic job of weeding through and picking out the things that really suit us at terms that suit us. So when I look at this, I feel like it's been a kind of a rational, orderly market in aggregate. You know, some of the areas that have been talked about for some period of time and the actions that folks have taken the fourth quarter, it feels like, I don't know, there was almost an escape hatch that was created. that occurred in the fourth quarter that some took advantage of. And, you know, we're just trying to be, you know, more consistent, more orderly about how it is that we're approaching things and holding onto our reserves and allowing ourselves to have a position where we can consistently see the seasoning and the redundancy play out. And at that point, you know, we would move.

Great. That's really good content. Appreciate it.

Thanks. Thank you. Our next question comes from the line of Bill Karkash with Wolf Research Securities. Your line is now open.

Thanks. Good morning, Andrew and Mark. Hey, Bill. Good morning. Following up on your investment portfolio commentary, what's your latest thinking on the possibility of extending the duration of the core fixed income here ahead of the rate cutting cycle that most expect to begin in the coming months?

You know, right now we're not looking to extend duration. Our duration is right at about four and has been for quite some time. Honestly, not real interested in extending it out just yet. We'll see how things play out, but not right now.

Understood. That's helpful. Separately, if I may, Andrew, at a high level, can you speak to how focused you are on the risk that some of the ENS business that you've written, you could ultimately see move back to the admitted markets over time? How much exposure do you think you have there?

It's hard to sort of partition it. It's also about what you believe. I was at an industry event last week. It was a big topic of conversation. What I can tell you is that within our transactional ENS unit and within our global property unit, and I'd say in most parts of our professional unit, we're not writing what I would describe as kind of ENS light. I think that the stuff that we're seeing is very sticky into the ENS market. And so I feel good about that. But that said, right, you know, the challenge around it is it's not just whether that is true ENS business. If there's less flow into the ENS marketplace, there's more competition for the business that's there. And so, you know, it does obviously have a second order effect. But I would be surprised if, you know, if it's more than a small percentage of our business that ultimately will end back up in the admitted market. I would describe ourselves as a true, true ENS writer. You know, we're looking when I give you examples where I try to write You know great example while we're being very thoughtful around where we write management Liability and we're doing only private company you want to do a web 3 risk or you want to do a cannabis risk? Well that that's not going into the standard lines markets anytime that I can imagine and it takes real expertise that You know send tends to be the domain of a small number of people and that's generally true across our business

That's very helpful context. Thank you for taking my questions.

Thank you. Our next question comes from the line of Gregory Peters with Raymond James. Your line is now open.

Hey, good morning. This is Sidon for Greg. Good morning, Sid. Oh, yeah, good morning. When we look at your growth over the last two years, it looks like it's really been driven broad-based, but more specifically in global property, transactional E&S, and professional lines.

know just hoping you can comment on the outlook from here should we expect the growth to be more balanced across your book or do you still see some more attractive opportunities and certain underwriting divisions versus others yeah i there's no question about it that that we will uh we first of all we're big believers in micro cycles right that that you know while the market is orderly and aggregate you know as i mentioned there's certain areas where things just aren't rational right and and and you know no matter how good you are um you're going to have reduced opportunities to compete there what i'd say to you is we certainly have taken advantage of the the property market you mentioned two areas surety's being another area that we've seen a lot of growth and i feel that sort of our plans for this year are relatively widespread across our business and and maybe less spikes in in a particular area or particular areas But inevitably, I think one of the sort of strong features of this organization is that we're really good at when we see a market opportunity to kind of reallocate our resources and jump on top of it. And so I suspect that, you know, while the best laid plans are sensible, it's probably not how the year is going to play out for us. And I'm sure that we'll reflect back on 2024 with, you know, an error or two where we had Better growth than we expected, and we'll have a couple areas where we had worse growth because the marketplace changed on us. I tend to find that our execution is not the reason that we're not – we've always been very good at execution, so it tends to be marketplace-driven. But as I said, I think it's more balanced and more widespread sort of as our working assumption for this year.

All right. Thank you.

Thank you. Our next question comes from the line of Michael Zaremski with BMO. Your line is now open.

Good morning, Mike. Hey, good morning. This is Jack. On for Mike. Good morning, Jack. How's it going? Good morning. The question is on reinsurance seating levels. I know there was some gross to net premium lumpiness last quarter. I guess longer term is the current 35% plus seating level the right percentage to think about? Would you expect those levels to fall over time?

yeah i think that for this is andrew for 2023 i believe that our gross than that number was i i'm not looking at 62.7 i believe um in aggregate for the quarter uh for the year excuse me i i could be wrong in that but right around that number and i think our general expectations are that that that's a good number you know rolling into next year a regional planning number i think as you do Given our outlook for 2024, when you just run the numbers and you kind of apportion underwriting income and investment income, I think you'll sort of tie back to that kind of low 60s gross to net.

Yeah. Okay, great. Thank you. And then I guess thinking about 2024, Can you talk about how you expect business mix to impact the loss ratio? I know that in 2023, a shift toward property put downward momentum on your traditional loss ratio. I was just wondering about any color for 2024.

Yeah. So, you know, implied in our view is a relatively consistent, you know, loss ratio underlying, you know, just sort of back out what we've said about expenses and then take out CAT and so forth. You'll find that we're were broadly in line. And from a mixed perspective, we've definitely been shortening up our portfolio. So at this point at the end of 2022, I believe that 49% of our business or thereabouts was what we call short duration, less than two year liabilities. This year it's 53%. I think that as we look forward to 2024, it might go up a little bit more towards short sale liabilities. But that really, you know, there's not really much going on here in terms of mix that's driving our underlying accident year. And there's also not much going on in terms of our recognition of rate, you know, over loss cost trend going in there as well. We're planning, our working assumptions are for you know, something that's relatively consistent.

Thank you.

Thank you. I would now like to hand the conference back over to Natalie Schoolcraft for closing remarks.

Thank you, everyone, for your questions, for participating in our conference call, and for your continued interest in and support of Skyward Specialty. I'm available after the call to answer any additional questions that you may have. We look forward to speaking with you again on our first quarter earnings call. Thank you and have a wonderful day.

This concludes today's conference call. Thank you for your participation. You may now disconnect.