Skyward Specialty Insurance Group, Inc.SKWD

Skyward Specialty Insurance Group, Inc. Income Taxes Disclosure

10-KFiled Mar 2, 20264 min read
Income Taxes
The following table sets forth the components of the Company’s income tax expense for the year ended December 31, 2025 after the adoption of ASU 2023-09:
($ in thousands)2025
Income from continuing operations before income tax expense
United States$208,763 
Foreign7,661 
   Total 216,424 
Income tax expense (benefit) from continuing operations
Current tax expense
United States51,758 
U.S. state and local1,107 
Deferred tax benefit related to:
United States(5,584)
U.S. state and local(885)
Total income tax expense$46,396 
The following table sets forth the components of the Company's income tax expense for the years ended December 31, 2024 and 2023 prior to the adoption of ASU 2023-09:
($ in thousands)20242023
Current income tax expense$42,626 $14,736 
Deferred tax (benefit) expense related to temporary differences(8,715)9,382 
Total income tax expense$33,911 $24,118 
The following table reconciles the Company's annual effective tax rate to the U.S. Federal statutory tax rate for the year ended December 31, 2025 after the adoption of ASU 2023-09:
2025
($ in thousands)AmountPercentage
U.S. federal statutory income tax rate$45,449 21.0 %
State income taxes, net of federal benefit(1)
(508)(0.3)%
Foreign tax effects
Bermuda statutory rate differential(1,609)(0.7)%
Effects of other cross-border tax laws717 0.3 %
Change of Valuation Allowance68 — %
Nondeductible and Nontaxable items
Nondeductible transaction costs1,689 0.8 %
Other nondeductible and nontaxable items590 0.3 %
Effective tax rate$46,396 21.4 %
(1) The following state(s) and/or local jurisdictions make up more than 50% of the state income taxes: Florida
The following table presents the required disclosures prior to our adoption of ASU 2023-09 and reconciles the statutory U.S. federal income tax rate to the Company’s effective tax rate for continuing operations for the years ended December 31, 2024 and 2023:
20242023
($ in thousands)AmountPercentageAmountPercentage
Income tax expense at federal statutory rate$32,075 21.0 %$23,121 21.0 %
Tax advantaged investments(239)(0.2)(295)(0.3)
Other2,075 1.4 1,292 1.2 
Total income tax expense$33,911 22.2 %$24,118 21.9 %
The following table presents income taxes paid (net of refunds received) for the year ended December 31, 2025:
($ in thousands)2025
United States$49,830 
U.S. state and local(1)
1,164 
Total income taxes paid$50,994 
(1) No single state or jurisdiction accounts for greater than 5% of total taxes paid.
The Company paid $37.0 million and $15.8 million in federal income taxes during the years ended December 31, 2024 and 2023, respectively.
The following table sets forth the tax effects of temporary differences that give rise to significant portions of the deferred tax assets and deferred tax liabilities at December 31, 2025 and 2024:
($ in thousands)20252024
Deferred tax assets:
Net operating losses$9,409 $9,389 
Losses and loss adjustment expenses21,401 16,967 
Unearned premiums22,775 18,178 
Unrealized losses on fixed maturity securities, available-for-sale— 5,893 
Stock options/awards2,446 2,453 
Other8,933 6,067 
Total deferred tax assets before valuation allowance64,964 58,947 
Valuation allowance(654)(586)
Total deferred tax assets64,310 58,361 
Deferred tax liabilities:
Deferred policy acquisition costs19,132 15,277 
Other long-term investments2,888 2,625 
Section 481(a) adjustment87 1,391 
Unrealized gains on equity securities7 4,818 
Unrealized gains on fixed maturity securities, available-for-sale3,101 — 
Unrealized gains on other investments5,465 — 
Depreciation2,152 1,426 
Other3,613 2,338 
Total deferred tax liabilities36,445 27,875 
Net deferred tax asset$27,865 $30,486 
The Company has federal net operating loss carryforwards of approximately $40.3 million. These net operating losses are set to expire beginning in 2032. The Company is limited on the utilization of $40.3 million of the net operating losses under Internal Revenue Code Section 382 which imposes limitations on a corporation’s ability to utilize tax attributes if the corporation experiences an “ownership change.” The Company experienced an ownership change during 2014. The 382 limitation is expected to result in an expiration of $2.8 million ($0.6 million tax effected) of net operating losses. In 2025, a valuation allowance has been established against this balance that is expected to expire without utilization. Out of the total $40.3 million federal NOL, $0.3 million ($0.1 million tax effected) is related to dual consolidated loss that Skyward is not expected to be able to utilize. The Company also has net operating losses in various state and local jurisdictions of $0.9 million which are set to expire between 5 and 20 years or carryforward indefinitely, depending on the jurisdiction. The Company expects to fully utilize these state and local net operating losses.
The following table presents the change in the Company's valuation allowance for the years ended December 31, 2025 and 2024:
($ in thousands)20252024
Balance at beginning of the period$586 $586 
   Increase related to net operating loss68 — 
Balance at the end of the period$654 $586 
The Company’s federal income tax returns for tax years 2022-2024 are subject to examination by the Internal Revenue Service.
As of December 31, 2025, the Company had no provision for uncertain tax positions and no provision for penalties or interest. In addition, management does not believe there are any uncertain tax benefits that could be recognized within the next twelve months that would impact the Company’s effective tax rate.
Tax Legislative Update
On July 4, 2025, the One Big Beautiful Bill Act (“OBBB Act”), which includes a broad range of tax reform provisions, was signed into law in the United States. The OBBB Act did not have a material impact on the Company's annual effective tax rate in 2025 and no material impact is expected in 2026.

Historical Timeline

Fiscal YearFiled
2025Mar 2, 2026Showing above
2024Mar 3, 2025
2023Apr 1, 2024
2022Mar 28, 2023

About Income Taxes Disclosures

The income tax disclosure reveals how much a company actually pays in taxes versus what the statutory rate would predict. Analysts focus on the effective tax rate (ETR) reconciliation, which breaks down every item driving the gap between the 21% federal rate and the company's reported ETR — including R&D credits, foreign rate differentials, and state taxes. Deferred tax assets (DTAs) and their valuation allowances signal management's confidence in future profitability: a rising allowance suggests the company doubts it can use accumulated tax benefits. Uncertain tax benefit (UTB) reserves quantify exposure to IRS challenges on aggressive positions.

Key signals to watch: sudden ETR drops without clear operational reasons, large increases in valuation allowances, growing UTB balances, and significant unremitted foreign earnings. Post-TCJA, pay attention to GILTI and BEAT provisions that affect multinational tax structures. Compare the cash taxes paid (from the cash flow statement) against the income tax provision to gauge earnings quality.

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