Skyward Specialty Insurance Group, Inc. (SKWD) stock intrinsic value fair value estimate & owner earnings analysis

Skyward Specialty Insurance Group writes specialty commercial insurance through nine underwriting divisions, including accident and health, agriculture and credit, captives, construction and energy, global property, professional lines, specialty programs, surety and transactional excess and surplus lines. Gross written premiums rose 24.3% in 2025 to $2.17 billion, and the company has been public on Nasdaq since January 2023. How we measure earnings. We start from operating cash flow, then remove the swings in premiums receivable, reinsurance recoverables, unearned premiums, loss reserves and similar balances, and subtract stock compensation and maintenance capital spending. Removing the growth in loss reserves is deliberately strict: an insurer holds that money to pay future claims, so we do not count it as profit. On this basis earnings per share were about $1.59 in 2022 (before the IPO), $2.42 in 2023, $2.36 in 2024 and $2.77 in 2025. Owner earnings grew about 17% per share in 2025. Starting level. We use 2024 and 2025 as the base, roughly $107 million in total, because earlier years describe a much smaller company. Spread over the roughly 45.7 million shares now outstanding, that is about $2.33 per share. Skyward bought Apollo Group Holdings on January 1, 2026 for $555 million, paid with $371 million in cash (funded partly by $300 million of new term loans drawn on December 30, 2025) and 3.68 million new shares. Apollo's earnings are not in the 2025 figures, and we could not isolate them cleanly from the first-half 2026 results. We therefore assume Apollo's earnings roughly cover its financing cost and added shares, and give it no separate credit. If Apollo earns clearly more than that, our estimates are too low; if it earns less, too high. Base case, about $38 per share. Earnings grow only 4% in the first year, well below the 17% achieved in 2025, then 4%, 3%, 3% and 2%, and then stay flat through year 10. This growth reflects renewals of an existing book with unearned premium already written and steady division-by-division expansion, not new products. We leave out the very fast growth in agriculture and credit (up 193% in 2025 from a small base) because it is new business with no long record. After year 10 we assume earnings slowly erode by 2% a year, because nothing in the filings guarantees that today's pricing and business mix last indefinitely. Bear case, about $18 per share. Earnings fall about 25% to roughly $1.75 per share and then decline 3% a year. This rests on disclosed pressures: global property premiums fell 11.7% on pricing pressure, prior-year claims reserves developed adversely by $25.7 million in 2024 and $22.4 million in lines the company has exited in 2025 (though total 2025 development was favorable by $7.5 million), and the company has taken on $300 million of term debt with financial covenants tied to net worth, leverage and its A.M. Best rating. Bull case, about $48 per share. Earnings grow 10%, 8%, 6%, 5% and 4% over five years, roughly in line with the pace of the past three years tapering as the business gets larger, then stay level and erode 1% a year after year 10. This requires the recent loss ratio improvement (60.9% in 2025 versus 63.4% in 2024) and expense discipline (28.4% versus 28.9%) to hold. What could make this wrong. Insurance results depend on reserves set for claims that are not yet settled, so a reserving error would hit earnings directly. Catastrophe losses, such as Hurricanes Helene, Beryl and Milton in 2024, add volatility. The Apollo acquisition adds integration and financing risk. Our valuation adds no cash and subtracts no debt separately, because the interest cost is already inside the cash-flow figures used; the newly drawn term loans are reflected only through the cautious bear case. One item we could not fully reconcile: the split of first-half 2026 earnings between Skyward's legacy business and Apollo is not disclosed in the data we reviewed.