Q1 2025 Bowhead Specialty Holdings Inc Earnings Call

Operator: Q1 2025 Earnings Call After the prepared remarks, we will hold a question and answer session.

Two five earnings call.

We will hold a question and answer session. For those in the Q&A room, please click the raise hand button found on the black bar at the bottom of your screen to join the question here.

Operator: For those in the Q&A room, please click the raise hand button found on the black bar at the bottom of your screen to join the question queue.

Operator: Also, as a reminder, this conference is being recorded.

Also, as a reminder, this conference is being recorded. If you have any objections, please just connect at this time.

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Operator: With that, I would like to turn the call over to Shirley Yap, Head of Investor Relations. Shirley, you may begin. Thanks, Abigail.

Speaker Change: With that, I would like to turn the call over to Shelly Yap, Head of Investor Relations. Shelly, you may begin.

Shirley Yap: Good morning, and welcome to Bowhead's first quarter 2025 earnings conference call. I'm Shirley Yap, Bowhead's Chief Accounting Officer and Head of Investor Relations. Joining me today are Stephen Sills, our Chief Executive Officer, and Brad Mulcahey, our Chief Financial Officer.

Speaker Change: Thanks Abigail. Good morning and welcome to Bowhead's first quarter 2025 earnings conference call. I'm Shirley Yap, Bowhead's chief accounting officer and head of investor relations.

Speaker Change: Joining me today are Stephen Sills, our Chief Executive Officer, and Brad Mulcahey, our Chief Financial Officer.

Shirley Yap: Earlier this morning, we released our financial results for the first quarter of 2025. You can find our earnings release in the Investor Relations section of our website.

Speaker Change: Earlier this morning, we released our financial results for the first quarter of 2025. You can find our earnings release in the Investor Relations section of our website. Our form 10Q will be also available on our website later this evening.

Shirley Yap: Our Form 10-Q will be also available on our website later this week.

Shirley Yap: Before we begin, I'd like to remind everyone that this call contains forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. Investors should not place undue reliance on any forward-looking statement. These statements are made only as of the date of this call and are based on management's current expectations and beliefs. Forward-looking statements are subject to risks and uncertainties that could cause actual results to differ materially from those contemplated by these statements.

Speaker Change: Before we begin, I'd like to remind everyone that this call contains forward-looking statements within the meaning of the Private Security's Litigation Reform Act of 1995.

Investors should not place undue reliance on any forward-looking statement.

Speaker Change: These statements are made only as of the date of this call and are based on management's current expectations and beliefs.

Speaker Change: Forlooking statements are subject to risks and uncertainties that have caused actual results to differ materially from those contemplated by these statements.

Shirley Yap: You should review the risks and uncertainties fully described in our SEC filing.

Speaker Change: You should review the risks and uncertainties fully described in our SEC filings.

Shirley Yap: We expressly disclaim any duty to update any forward-looking statement except as required by law.

Shirley Yap: Additionally, we will be referencing certain non-GAAP financial measures on this call. Reconciliations of these non-GAAP financial measures to their respective most directly comparable GAAP measure can be found in the earnings release we issued this morning and in the investor relations section of our website.

Speaker Change: Additionally, we will be referencing certain non-GAAP financial measures on this call. Reconciliation of these non-GAAP financial measures to their respective most directly comparable gap measure can be found in the earnings release we issued this morning and in the investor relation section of our website.

Stephen Sills: With that, I'll turn the call over to Stephen. Thank you, Shirley. Good morning, everyone. And thank you for taking the time to join our call today. I'm pleased to report that Bowhead generated strong discipline premium growth of over 26% in the first quarter, compared to the same quarter in 2024, writing $175 million in premium. I'd like to highlight the term disciplined premium growth, as I'm proud of the discipline our underwriters exhibited in both favorable and challenging market conditions that resulted in this growth. Once again, our Casualty Division drove the largest component of this growth with a 34% increase in premium, while our Healthcare Liability and Professional Liability Divisions grew 10% and 3% respectively.

With that, I'll turn the call over to Stephen. Stephen?

Stephen Sills: Thank you, Shirley. Good morning, everyone, and thank you for taking the time to join our call today.

Stephen Sills: I'm pleased to report that Bowhead generated strong discipline premium growth of over 26% in the first quarter compared to the same quarter in 2024, writing 175 million in premium.

Stephen Sills: I'd like to highlight the term, Disciplined Premium Growth, as I'm proud of the discipline our underwriters exhibited in both favorable and challenging market conditions that resulted

Stephen Sills: Once again, our casualty division drove the largest component of this growth.

with a 34% increase in premium.

Stephen Sills: while our health care liability and professional liability divisions grew 10% and 3% respectively.

Stephen Sills: Additionally, Baylene generated $2.7 million of premiums its third full quarter of operations, further perfecting our flow underwriting operation. In casualty, similar to previous quarters, the growth in premiums came mostly from our excess book, reflecting continued favorable underwriting and pricing conditions in the market. In addition to achieving double-digit rate increases, our underwriters continue to improve the profile of the portfolio by deploying lower average limits. Also, in our excess construction business, we continue to diversify away from writing one-off individual project policies to more practice policies which have the benefit of being renewable. In our Healthcare Liability Division, we continue to grow the book responsibly with a concerned eye on emerging regulatory, crime and abuse risks within the sector.

Stephen Sills: Additionally, Baylene generated 2.7 million premiums during its third full quarter of operations, further perfecting our flow underwriting operation.

Stephen Sills: In casualty, similar to previous quarters, the growth and premiums came mostly from our excess book, reflecting continued favorable underwriting and pricing conditions in the market.

Stephen Sills: In addition to achieving double-digit rate increases, our underwriters continued to improve the profile of the portfolio by deploying lower average limits.

Stephen Sills: Also, in our excess construction business, we continue to diversify away from writing one off individual project policies to more practice policies which have the benefit of being

Stephen Sills: In our Health Care Liability Division, we continue to grow the book responsibly with a concerned eye on emerging regulatory, crime, and abuse risks.

Stephen Sills: within the sector. Our continued success has been due to our broker partners and insured who value our healthcare expertise and analytics.

Stephen Sills: Our continued success has been due to our broker partners and insureds who value our healthcare expertise and analytics. In our Professional Liability Division, the first quarter of each year historically tends to be the smallest quarter, with many markets chasing a small inventory of new business opportunities. Nevertheless, we continue to achieve disciplined premium growth in the small and middle market space, which is core to our cross-cycle profitability strategy. Turning to Baleen, we generated $2.7 million in premiums during its third full quarter of operations, 131% sequential increase from Q4. The growth during the quarter was driven by the expansion in Baleen's distribution network.

Stephen Sills: In our professional liability division, the first quarter of each year historically tends to be the smallest quarter, with many markets chasing a small inventory of new business opportunities.

Stephen Sills: Nevertheless, we continue to achieve discipline, premium growth in the small and middle market space which is core to our cross-cycle profitability strategy.

Stephen Sills: Turning to Bailey, we generated 2.7 million in premiums during its third full quarter of operations.

131% Sequential Increase from Q4 131% Sequential Increase from Q4

Stephen Sills: While Baleen's premiums are small at this time, compared to our Kraft underwriting operation, which has been operating for over four years, we're happy with the monthly consistent growth.

Stephen Sills: While Baleen's premiums are small at this time compared to our craft underwriting operation which has been operating for over four years

We're happy with the monthly consistent growth.

Stephen Sills: We look forward to a meaningful ramp up in premiums during the second half of the year, one year after launch.

Stephen Sills: We look forward to a meaningful ramp-up in premiums during the second half of the year, one year after launch. Brad, over to you.

Brad Mulcahey: Brad, over to you. Thanks, Stephen. Bowhead is starting 2025 with an adjusted net income of $11.5 million, or $0.34 per diluted share, an adjusted return on average equity of 12.1% in the first quarter. Gross written premiums increased more than 26% to $175 million for the quarter. As Stephen mentioned, our premium growth came from each of our divisions, but we're casually driving the growth and representing a larger proportion of our portfolio compared to Q1 last year. During the quarter, we increased reserves for audit premiums that were billed and fully earned in Q1, but were associated with prior action.

Brad Mulcahey: Thanks, Stephen. Bowhead is starting 2025 with an adjusted net income of $11.5 million or 34 cents per diluted share, an adjusted return on average equity of 12.1 percent in the first quarter.

Brad Mulcahey: Rosewritten premiums increased more than 26% to $175 million for the quarter.

Brad Mulcahey: As Stephen mentioned, our premium growth came from each of our divisions, but with casually driving the growth and representing a larger proportion of our portfolio compared to Q1 last year.

Brad Mulcahey: During the quarter we increased reserves for audit premiums that were built and fully earned in Q1, but were associated with prior accident years.

Brad Mulcahey: While this manifests as 0.4 points of prior accident year reserve increases, this development was not based on actual losses settling for more than reserve and did not represent an increase in estimated reserves on unresolved claims. Additionally, changes to our portfolio mix, as well as the cash payout of compensation to our internal claims team during the first quarter, also known as paid ULA, resulted in a 2.1 point increase in our current accident year losses. The timing of these compensation payouts in Q1 results in a small level of seasonality between our loss and expense ratios that historically tends to normalize by the end of Q1.

Brad Mulcahey: While this manifests as 0.4 points of prior accident near reserve increases, this development was not based on actual losses settling for more than reserves and did not represent them in main trees in estimated reserves on unresolved claims.

Brad Mulcahey: Additionally, changes to our portfolio mix, as well as the cash payout of compensation to our internal claims team during the first quarter, also known as paid ULAY, resulted in a 2.1 point increase in our current accident year loss ratio.

Brad Mulcahey: The timing of these compensation payouts in Q1 results in a small level of seasonality between our loss and expense ratios that historically tends to normalize by the end of the year.

Brad Mulcahey: As a result of these items, our loss ratio for the quarter was 66.9 percent, an increase of 2.5 points from 64.4 percent for the full year-end of 2020. We continue to expect our loss ratio to be in the mid-60% range for the fall.

Brad Mulcahey: As a result of these items, our loss ratio for the quarter was 66.9%, an increase of 2.5 points from 64.4% for the full year end of 2024.

Brad Mulcahey: We continue to expect our loss ratio to be in the mid 60% range for the full year.

Brad Mulcahey: As a reminder, given Bowhead does not write any property risks, we did not experience any material direct losses from the recent California wildfires or any other natural catastrophes, and do not expect to in future court. Also, as a relatively new company, we are reliant on industry-observed loss information in lieu of internal data when determining which is evidenced by our high ratio of IV&R as a percentage of total reserves at 89% for the entire year. Our expense ratio for Q1 was 30.4%, a decrease of one point compared to 31.4% for the full year ended 2018. The decrease was primarily driven by the temporary reduction in our operating expense ratio due to the paid ULA item previously mentioned.

Brad Mulcahey: As a reminder, given Bowhead does not write any property risks, we did not experience any material direct losses from the recent California wildfires, or any other natural catastrophes, and do not expect to in future quarters.

Brad Mulcahey: Also as a road through we new company, we are reliant on industry observed loss information and we will have internal data when determining reserves

Brad Mulcahey: which is evidenced by our high ratio of IV&R as a percentage of total reserves at 89% for the end of the quarter.

Brad Mulcahey: Our expense ratio for Q1 was 30.4%, a decrease of one point compared to 31.4% for the full year end in 2024.

Brad Mulcahey: The decrease was primarily driven by the temporary reduction in our operating expense ratio due to the paid ULA item previously mentioned.

Brad Mulcahey: partially offset by the increase in earned broker commissions due to changes in our portfolio mix, as well as the reduction in earned seeding commissions stemming from our 2024 seeded reinsurance. As a reminder, since there's volatility in our quarterly expense ratio, we suggest that our investors view our expense ratio trends on an annual basis, which will likely be in the low 30s phase. Overall, the effect of the loss ratio and expense ratio contributed to a combined ratio of 97.3% for the quarter. In terms of our investment portfolio, net investment income increased 64% year over year to $12.6 million in the quarter, primarily due to higher average balance of investments and higher yields on invested assets.

Brad Mulcahey: Partially offset by the increase in earned broker commissions due to changes in our portfolio mix as well as the reduction in earned seeding commissions stemming from our 2024 seeded re-insurance treaties.

Brad Mulcahey: As a reminder, since there's volatility in our quarterly expense ratio, we suggest that our investors-your-expense ratio trends on an annual basis, which will likely be in the low-30s for the full year.

Brad Mulcahey: Overall, the effect of the loss ratio and expense ratio contributed to a combined ratio of 97.3% to the quarter.

Brad Mulcahey: In terms of our investment portfolio, an investment income increased 64% year-over-year to $12.6 million in the quarter, primarily due to higher average balance of investments and higher yields on invested assets.

Brad Mulcahey: Our investment portfolio had a book yield of 4.7% and a new money rate of 4.8% at the end of the quarter. The average credit quality of our investment portfolio remained at AA, and we extended our average duration from 2.2 years at the end of 2024 to 2.8 years at the end of this quarter. Our effective tax rate for the first quarter was 21%, which is below our effective tax rate of 24.3% for the year in 2024, as we expect to realize tax benefits in 2025 associated with investing a stock-based compensation that will drive our tax rate lower.

Brad Mulcahey: Our investment portfolio had a book yield of 4.7% and a new money rate of 4.8% at the end of the quarter.

Brad Mulcahey: The average credit quality of our investment portfolio remained at AA and we extended our average duration from 2.2 years at the end of 2024 to 2.8 years at the end of this quarter.

Brad Mulcahey: Our effective tax rate for the first quarter was 21%, which is below our effective tax rate of 24.3% for the year in 2024, as we expect to realize tax benefits in 2025 associated with the vesting of stock-based compensation that will drive our tax rate lower.

Brad Mulcahey: Additionally, weighted average shares outstanding and diluted weighted average shares outstanding are expected to increase in 2025 as we issue new awards and these older awards vests.

Brad Mulcahey: Additionally, weighted average shares outstanding and diluted weighted average shares outstanding are expected to increase in 2025 as we issue new awards and these older awards vest.

Brad Mulcahey: Lastly, total equity was $391 million, giving us a diluted book value per share of $11.61 at the end of the quarter, an increase of 5% from year to year.

Brad Mulcahey: Lastly, total equity was $391 million, giving us a diluted book value per share of $11.61 at the end of the quarter, an increase of 5% from urine.

Brad Mulcahey: With that, I'll turn the call back.

With that, I'll turn the call back to Stephen.

Stephen Sills: Thanks, Brad. I'd like to take a moment to reiterate Bowhead's strategic priorities for achieving cross cycle profitability. These priorities remain consistent since the founding of our company in November of 2020.

Stephen Sills: Thanks, Brad. I'd like to take a moment to reiterate Bowhead's strategic priorities for achieving cross-cycle profitability.

Stephen Sills: These priorities remain consistent since the founding of our company in November of 2020, and we believe it's especially important to reaffirm them given the volatility and uncertainty in the current environment.

Stephen Sills: And we believe it's especially important to reaffirm them, given the volatility and uncertainty in the current environment. Since inception, our strategic priorities for achieving cross-cycle profitability included profitably growing our existing lines of business, opportunistically and strategically expanding our products and markets, maintaining our underwriting first culture across market cycles, and leveraging expertise, technology, data, and analytics to drive underwriting performance. In the development of our craft underwriting operation, we focused on profitable growing lines in the attractive excess and surplus lines market, starting with professional liability in 2020, followed shortly thereafter with strategic and opportunistic expansions into casualty and healthcare liability.

Since inception, our strategic priorities for achieving cross-cycle profitability included

Stephen Sills: Profitably growing or existing lines of business, opportunistically and strategically expanding our products and markets.

Stephen Sills: In the development of our craft on the writing operation, we focused on profitable growing lines in the attractive access and surplus lines market.

Stephen Sills: Starting with professional liability in 2020, followed shortly thereafter with strategic and opportunistic expansions into casualty and health care liability.

Stephen Sills: We hired experienced underwriters who were proven leaders in their field, created a strong, disciplined, and collaborative underwriting culture, implemented technology, and utilized data and analytics to drive underwriting performance. In May of 2024, we supplemented our craft underwriting solution with our flow business, which is a streamlined, tech-enabled, low-touch form of underwriting focused on small, niche, and hard-to-place risk. Further, we're now applying our bailing technology to cost effectively underwrite small and middle market accounts, focusing initially on certain professional liability products. With our craft and flow underwriting operations, and the ability to apply Baleen technology to small and middle market accounts, we believe Bowhead is set up to generate consistent underwriting profits across our product offerings and through all market cycles.

Stephen Sills: In May of 2024, we supplemented our craft underwriting solution with our flow business, which is a streamlined, tech-enabled, blow-touch form of underwriting focused on small, niche, and heart-to-place risks.

Stephen Sills: Further, we're now applying our bailing technology to cost effectively underwrite small and middle-market accounts, focusing initially on certain professional liability products.

with our craft and flow underwriting operations.

Stephen Sills: and the ability to apply bailing technology to small and middle market accounts.

Stephen Sills: We believe Bowhead is set up to generate consistent underwriting profits across our product offerings and through all market cycles.

Stephen Sills: Unlike other startups from 2020, where money was raised for hiring underwriters to just start writing business in a hard market, we have cautiously built a franchise that will serve our investors and employees across market cycles.

Stephen Sills: Unlike other startups from 2020, where money was raised for hiring underwriters to just start writing business in a hard market, we have cautiously built a franchise that will serve our investors and employees across market cycles.

Stephen Sills: Turning to our specialty insurance industry, the uncertainty in the current environment seems to be creating a lot of confusion. On one hand, we're pleased to see fellow markets maintaining underwriting discipline like we are. But on the other hand, we're seeing no shortage of undisciplined or dare I say foolishly reckless markets and underwriting behavior. As an example, during the quarter in one of our professional liability renewals, the insured had a full tower loss. We sat in the middle excess layer. To our surprise, the rest of the tower offered a token rate reduction while we were the only market pushing for a significant rate increase.

Stephen Sills: Turning to our specialty insurance industry, the uncertainty in the current environment seems to be creating a lot of confusion. On one hand, we're pleased to see fellow markets maintaining underwriting discipline like we are.

Stephen Sills: But on the other hand, we're seeing no shortage of undisciplined or dare I say foolishly reckless markets and underwriting behavior.

Stephen Sills: As an example, during the quarter and one of our professional liability renewals, the insured have a full tower loss.

Stephen Sills: We sat in the middle excess layer. To our surprise, the risks of the tower had offered a token rate reduction while we were the only market pushing for a significant rate increase.

Stephen Sills: Needless to say, we're proud of our team for standing their ground and we're supportive of their decision to have our broker replace us at the reduced rate.

Stephen Sills: Needlet to say we're proud of our team for standing their ground and we're supportive of their decision to have our broker replace us at the reduced rates.

Stephen Sills: As we've said in the past, we've created an underwriting first organization here at Bowhead, built to achieve sustainable and profitable growth across market cycles. The uncertainty and volatility in our current environment will not change our disciplined approach to underwriting or our focus on profitable growth.

Stephen Sills: As we've said in the past, we've created an underwriting first organization here at Bowhead built to achieve sustainable and profitable growth across market cycles.

Stephen Sills: The uncertainty and volatility in our current environment will not change our discipline approach to underwriting or our focus on profitable growth.

Stephen Sills: Before we turn the call over for questions, I wanted to briefly touch on tariffs and the potential impact on the specialty insurance market in which we operate. If the tariffs were to persist, we could see a slowdown in the U.S. E&S construction industry for a period of time. However, with the excess casualty market making up for legacy losses that are still plaguing the industry and tariffs likely to increase costs, we don't expect any time soon to see a reversal of compressed limits being offered, nor do we expect to see a significant drop in pricing that would overturn the strong market we are seeing today.

Stephen Sills: Before we turn the call over for questions, I wanted to briefly touch on Tarot.

and the potential impact on the specialty insurance market.

In Which We Operate

If the tariffs were to persist [inaudible]

Stephen Sills: We could see a slowdown in the US ENS construction industry for a period of time.

Stephen Sills: However, with the excess casualty market making up for legacy losses,

that are still plaguing the industry.

Stephen Sills: and tariffs likely to increase costs. We don't expect any time soon to see a reversal of compressed limits being offered, nor do we expect to see a significant drop in pricing that would overturn the strong market we are seeing today.

Stephen Sills: From Bowhead's perspective, despite the macroeconomic uncertainty stemming from tariffs, as we've said in the past, we believe Bowhead is well positioned to profitably grow premiums by around 20% on an annual basis. In the context of the $95 billion commercial E&S market, there's ample runway for continued expansion. Our submission volume continues to grow across all our divisions. We're investing in technology and implementing process enhancements to drive greater operational efficiency and the strategic mix of our craft and flow underwriting operation, combined with our ability to leverage Baylene's technology to cost effectively underwrite small and middle market accounts, enhances both our scalability and profitability.

Speaker Change: From Bowhead's perspective, despite the macroeconomic uncertainty stemming from tariffs, as we've said in the past, we believe Bowhead is well positioned to profitably grow premiums by around 20% on an annual basis.

Speaker Change: In the context of the 95 billion commercial ENS market, there's ample runway for continued expansion. Our submission volume continues to grow across all our divisions.

Speaker Change: We're investing in technology and implementing process enhancements to drive greater operational

Speaker Change: and the strategic mix of our craft and flow underwriting operation, combined with our ability to leverage Bayley's technology to cost effectively underwrite small and new market accounts.

Speaker Change: Enhances both our scalability and profitability. Overall, with our disciplined approach to underwriting and our expanding craft and flow platforms, we believe we've positioned ourselves well for sustainable and profitable growth across market cycles.

Stephen Sills: Overall, with our disciplined approach to underwriting and our expanding craft and flow platforms, we believe we've positioned ourselves well for sustainable and profitable growth across market cycles.

Operator: With that, we'll turn the call over for.

With that, we'll turn the call over for questions.

Operator: If you would like to ask a question, please click the raise hand button found on the black bar at the bottom of your screen. When it is your turn, you will receive a message from the host allowing you to talk and then you will hear your name called. Please accept, unmute your audio and ask your question.

Speaker Change: Thank you. If you would like to ask a question, please click the raise hand button found on the black bar at the bottom of your screen.

Speaker Change: When it is your turn, you will receive a message from the host, allowing you to talk and then you will hear your name called. Please accept, unmute your audio and ask your question.

Operator: We will wait one moment to allow the queue to form.

Speaker Change: We will wait one moment to allow the queue to form.

Speaker Change: This question is for Stephanie. Our first question will come from Paul.

Paul Newson: Our first question will come from Paul Newson with PSC. Pool Please go ahead with your question. Good morning. Thanks for the call. I was hoping you might have some comments, additional comments in color about the competitive environment.

All Usen with PSC

Paul

Please go ahead with your question.

Stephen Sills, Ed.D. Stephen Sills, Ed.D

Speaker Change: Good morning, thanks for the call. I was hoping you might have some initial comments in color about the competitive environment we've heard.

Stephen Sills: We've heard a lot this quarter about increased competition, especially in large accounts, and obviously it doesn't necessarily intersect directly with what you're doing, or maybe it does, but maybe you could just kind of add some thoughts about how some of those industry comments we've heard may be intersecting with what you see in your business.

Speaker Change: Obviously, it doesn't necessarily intersect directly with what you're doing, or maybe you've

Speaker Change: But maybe you could just kind of talk, add some thoughts about how some of those industry kind of this we've heard maybe intersecting with what you see in your business.

Stephen Sills: Sure, thank you.

Sure, thank you.

Stephen Sills: First question, or the first issue is how you would define specialty. And we do casualty and professional and health care. and it's really different with each one of them. Professionals are seeing more competition, although there's some small shoots that are indicating that maybe things might start, may be starting to stabilize. Casualty is still, particularly excess casualty, is still reorganizing, if you will, with compressing limits. and, you know, creating opportunities.

Speaker Change: The first issue is how you would define specialty, and we do casualty and professional and health care.

and it's really different with each one of them.

Professional overseeing more competition, although there's some...

Speaker Change: Small shoots that are indicating that maybe things might start, may be starting to stabilize in the next couple of months.

Speaker Change: Casualty is still particularly excess casualty, is still reorganizing, if you will, with compressing

and, you know, creating opportunities.

Stephen Sills: We are not in the large company market. We don't write, you know, fortune 100 type business. So wouldn't be able to speak to that. That's predominantly, we believe, a retail market and in our casualty space, we do wholesale only.

We are not in the Lord's [inaudible]

Speaker Change: Company Market. We don't write, you know, Fortune 100 type business. So, we wouldn't be able to speak to that. That's predominantly, we believe, a retail market or a casualty space. We do wholesale only.

Speaker Change: That's great. So, a different second question. Could you walk through the mechanics of the reserve development? I haven't seen something like this where you haven't odd it.

Paul Newson: So second question, could you walk through the mechanics of the reserve development? I haven't seen something like this where you have an audit premium impact on reserves and just, you know, maybe a little bit of detail is just exactly how that mechanically works in the accounting so we have a better sense of what exactly happens.

Speaker Change: Premium Impact on Reserves and just maybe a little bit of detail, it's just exactly how that mechanically works in the accounting, so we have a better sense of what exactly happened.

Brad Mulcahey: Sure, Paul, this is Brad. Thanks for the question. We had mentioned last year that we were going to allow some prior year development for these audit premiums. They're mostly in our primary casualty book, and we started seeing them come through last year, and previously how we were handling it is, you know, the premium relates to a prior accident year by definition. And we would just kind of reallocate some IV&R in those prior accidents. or you could put some reserves into the current accident year for that audit premium. But again, it relates to a prior year.

Sure, Paul. I know it's you, Adam.

Yeah. Oh, this is Brad. Thanks for the question.

Speaker Change: We had mentioned last year that we were going to allow some prior year development for these audit premiums. They're mostly in our primary casualty book and we started seeing them come through last year and previously how we were handling it is.

Speaker Change: You know, the premium relates to a prior accident nearby definition and we would just kind of reallocate some IV&R in those prior accident years.

Brad Mulcahey: So we just thought it should be noise, it shouldn't be large, but it's just good hygiene to let it increase the prior accident years and ultimately should kind of close into zero as we scale. But for right now, we're going to let that kind of flow through. We think it's more of a good hygiene thing and just a good practice to go in to be more conservative on our reserves. So does that have also a small premium impact as well in the quarter in some way, in some place? Yeah, exactly. Yeah, there's premium on that.

Speaker Change: We just thought it should be noise, it shouldn't be large.

Speaker Change: But it's just good hygiene to let it increase the prior accident years and ultimately should kind of close into zero as we scale but for right now just we're going to let that kind of flow through. We think it's more of a good hygiene thing and...

Speaker Change: Just a good practice to go and be more conservative on our reserves.

Speaker Change: So does any of also a small premium impact as well in the quarter in some way in some place? Yeah, exactly. There's premium on that. There's a mismatch though because you don't add premium to those prior acts in years, you know, with some of the schedule P.

Brad Mulcahey: There's a mismatch, though, because you don't add premium to those prior accident years with some of the Schedule P and things like that. So there's a mismatch between where you put the premium and where you put the reserves. But ultimately, if we had a claim on those policies, the claim would be in those prior accident years. So we want the reserves to be in those accident years, irrespective of where the premium is.

Speaker Change: and things like that. So there's a mismatch between where you put the premium and where you put the reserves. But ultimately, if we had a claim on those policies, the claim would be in those prior accident years. So we want the reserves to be in those in those accident years irrespective of where the premium is booked.

Paul Newson: Okay, so bear with me and apologize for this, but if you didn't have the mismatch, if you push it all through, say, the current year, it would all, it would basically show up as. Margin Neutral Impact. Is that right in my mind? Am I getting that in my head right? If you didn't have the mismatch? Correct. Yeah, if we just forced it into the current action here, it would be fine until we had a claim, and then we'd have a claim in the prior year and the reserves in the current.

Speaker Change: Okay, so bear with them, apologize for this, but if you didn't have the mismatch, if you push it all through and say the per year, it would all do basically show up as...

Speaker Change: from Margin Neutral Impact. Is that right? My mind, I've been making that in my head right. If you didn't have the mismatch. Correct. Yeah, if we just forced it into the current actually here, it would be fine until we had a claim, and then we'd have a claim in the prior year, and it reserves in the current year.

Thank you for your patience. I appreciate it.

Paul Newson: I appreciate it.

Matthew Carletti: Our next question comes from Matthew Carletti with Citizens Bank. Matthew, please go ahead with your question. Thanks. Good morning.

Speaker Change: Our next question comes from Matthew Carletti with Citizens Bank. Matthew, please go ahead with your question.

Hey, thanks. Good morning.

Stephen Sills: Stephen, I was hoping you could maybe just dive into Baylene a little bit more now that you've had several quarters of rollout. Just a little more, I guess, qualitative rather than quantitative, just on how the rollout's gone, kind of what maybe has surprised you, good, bad, or otherwise. Sure, thanks. The The most important thing for getting Baylene up and running is to get the technology to work. We needed to be able to respond to a submission and be able to issue a bindable quota or even issue a policy in a matter of minutes. We've gotten that technology to work.

Matthew Carletti: Stephen, I was hoping you could maybe just dive into Baylene a little bit more now that you had several quarters of a rollout. Just a little more, I guess, qualitative rather the quantitative, just on how the rollout's gone, kind of what maybe a surprise you could have had or otherwise.

Sure. Thanks.

The

Thank you. Bye.

Speaker Change: The most important thing for getting bailed up and running is to get the technology to work. We needed to be able to respond to a submission and be able to issue a bindable quota, or even to issue a policy in a matter of minutes. We've gotten that technology to work.

Stephen Sills: Number two is to get the brokers to feed the business. And we believe that compared to some of the competition, we have a very viable product in several different ways. We believe that we're more transparent in the way that we do the business.

Speaker Change: Number two is to get the brokers to feed the business. And we believe that, compared to some of the competition, we have a very viable product in several different ways.

Speaker Change: We believe that we're more transparent in the way that we do the business.

Stephen Sills: What's probably been the hardest thing to prevent it from growing faster than it has, and once again, we're pleased with the way it's scaling, but even going faster, is that when you're dealing with $5,000 or $6,000 premiums, the question is how much brokers are prepared to market the business, or given the small size, do they just simply roll it over? So we've been opening up a lot of brokers. It's been uneven in terms of brokers that have supported it. Some have been, you know, all in, if you will. Some we need to keep visiting and visiting to get it to grow.

Speaker Change: So we've been opening up a lot of brokers. It's been on even in terms of brokers that have supported it. Some have been, you know, all in, if you will. Some we need to keep visiting and visiting to get it to growth.

Stephen Sills: But we're confident that we're getting there, and the way we budgeted this for the year, we showed it growing a lot larger in the second half of the year, and we're still confident that we're going to get that done in the second half of the year.

Speaker Change: But we're confident that we're getting there and the way we budgeted this for the year, we showed it growing a lot larger in the second half of the year.

and we're still...

Speaker Change: Confident that we're going to get that done in the second half of the year. So we're very pleased with the way it's rolling out. And I think you'll see the results, you know, in future quarters.

Stephen Sills: So we're very pleased with the way it's rolling out, and I think you'll see the results, you know, in future quarters.

Brad Mulcahey: And then a quick numbers question, if I could, probably for Brad. Brad, you mentioned in your comments the tax rate was lower at 21 percent in Q1. And part of it relates to anticipated benefits from stock awards. Is that 21 a good bogey of where you think for the year? Or is that just kind of a starting point and we should think a little higher? I would say that's on the lower range of where we should be. The big variable is going to be how our stock price changes and how that impacts those awards. So fingers crossed, if the stock goes up, that could be beneficial.

Speaker Change: Okay, great, and then a quick numbers question if I could probably for Brad.

Speaker Change: Is that 21 a good bogey of where you think for the year or is that just kind of a starting point and we should think a little higher?

Brad Mulcahey: I would say that's a lower range of where we should be, the big variable is going to be how our stock price changes and how that impacts those awards.

Speaker Change: So, fingers crossed, the stock goes up. That could be beneficial, but it's hard for us to determine that internally, but we're thinking that's on the low range right now.

Brad Mulcahey: But it's hard for us really to determine that internally. But we're kind of thinking that's on the low range right Okay, that makes sense.

Okay, that makes sense. Thank you, appreciate it.

Meyer Shields: Our next question will come from Meyer Shields with KBW. Please go ahead with your question. Great, thanks.

Maya Shields: Our next question will come from May Shields with KBW. Please go ahead with your question.

Brad Mulcahey: I also have a mechanics question for Brad. I was hoping you could talk us through the seasonality of the ULAE impact that you discussed, adding 2.1 points this quarter. Yeah, thanks for the question. Just to clarify what happens there. It happened last quarter too. When we pay our internal bonuses on Q1, we pay all of our employees, and that's sitting in our expense ratio as it should. For the claims team, we actually reallocate all of their costs into our loss ratio. That's pretty standard, our internal claims team. We do that every quarter, but in Q1, because we have this blip of the payments for their bonuses, it actually shows a larger transfer from our expense ratio to our loss ratio.

Maya Shields: Great, thanks. I also have a mechanics question for Brad, I was hoping you could talk us through the seasonality of the ULAE impact that you discussed adding 2.1 points this quarter.

Maya Shields: Yeah, thanks for the question, just to clarify what happens there. It happened last quarter too. When we pay our internal bonuses on Q1, we pay all of our employees.

Maya Shields: and that's sitting in our expense ratio as it should. For the claims team, we actually reallocate all of their costs into our loss ratio. That's pretty standard, our internal claims team.

Maya Shields: We do that every quarter, but in Q1 because we have this blip of the payments for their bonuses, it actually shows a larger transfer from our expense ratio to our loss ratio.

Brad Mulcahey: I think, similar to what we were talking about with the audit premiums, as we scale, these kinds of things kind of just become smaller noise, and it's not a big issue, but I think at the scale that we're at right now, it's something we just wanted to point out that added a little bit of seasonality to both ratios.

Maya Shields: I think similar to what we're talking about with the auto premiums as we scale these kinds of things kind of just become smaller noise and it's not a big issue but I think at the scale that we're at right now it's something we just wanted to point out that added a little bit of seasonality to both ratios.

Brad Mulcahey: So, going forward, and I know things are going to change, but if you had the same quarterly results without this, should we just move 2.1 points from the loss ratio to the exempt ratio?

Maya Shields: So, going forward, and then things are going to change, but if you had...

Maya Shields: The same quarterly results without this. Should we just move 2.1 points from the law phase to the exact phase? No, no, thank you. The 2.1 points is a combination of that.

Brad Mulcahey: No, thank you.

Brad Mulcahey: The 2.1 points is a combination of that compensation payment and just mixed change that we have kind of every quarter. So, I did not pay the claims team that much in compensation, so thanks for letting me clarify that.

Maya Shields: Compensation payment and just mix change that we have kind of every quarter. So, I did not pay the claims team that much in compensation. So thanks for letting me clarify that. It's a portion of that, but obviously I don't want to give the exact amount of how much we're paying people.

Brad Mulcahey: It's a portion of that, but obviously I don't want to give the exact amount of how much we're paying.

Speaker Change: Okay. No, that's helpful. Thank you. The second question is just more broadly, Stephen. You talked about obviously relying on external information given Bowhead's age.

Stephen Sills: The second question, just more broadly, Stephen, you talked about obviously relying on external information, given Bowhead's age. Do you, from that perspective, are you seeing a change in loss trends in either direction? in other direction? How do you mean? in either direction, in other words, worsening or lightening up loss trends. We see pockets of places that are not good. We were happy to see the change in the laws in Georgia because we thought it was a pretty untenable proposition there where when you've got a policy limit demand, you really had a gun to your head of you either had to agree to it or there was maybe a very much of a possibility of extra contractual obligations.

Maya Shields: Do you, from that perspective, are you seeing change in lost friends in either direction?

in other direction. How do you mean?

Maya Shields: in either direction, in other words worsening or lightning of lost friends.

Maya Shields: The change in the laws in Georgia, because we thought it was a pretty untenable...

Maya Shields: When you got policy-limit demand, you really had a gun to your head, you either had to agree with it or there was maybe a very much of a possibility of extra contractual obligations.

Stephen Sills: There's been some concern about some of the suggested changes that are going to take place in Florida. It remains to be seen whether the governor there will sign the legislation.

Maya Shields: There's been some concern about some of the suggested changes that are going to take place in Florida. It remains to be seen whether the governor there will sign the legislation.

Stephen Sills: But we do see, you know, an upward trend in claims, but we believe that the renewals and the way we're writing our business well exceed the trends that we're seeing.

Maya Shields: But we do see an upward trend in claims, but we believe that the renewals and the way we're seeing or business well exceed the trends that we're seeing.

Stephen Sills: And then just one follow up, if I can. When you see something like legislation in Georgia, is there an accompanying uptick in competition for risks in the state? Well, I'm pretty much taking a wait-and-see attitude. I mean, we've seen in a lot of states in the past, it passes one year, and then it goes away in the next year. So intuitively, you would suggest that that would be the case. But I think there are people that might be tiptoeing back in. But we're not intending of going in whole hog as if it's a whole new world.

Maya Shields: Okay, fantastic, and then just one follow-up if I can, when you see something like the legislation in Georgia, is there an accompanying uptick in competition for risks in the state?

Maya Shields: Won't pretty much taking a wait and see attitude. I mean, we've seen in a lot of states in the past that passes one year and then it goes away in the next year.

Maya Shields: So, intuitively, you would suggest that that would be the case, but I think there are people that might be towing back in, but we're not intending of going in a whole hog as if it's a home, as if it's a whole new world.

Stephen Sills: Thank you so much.

Okay, fantastic. Thank you so much.

Pablo Singzon: Our next question will come from Pablo Singzon with JP Morgan. Please go ahead with your question. Hi, good morning. Thanks for taking my question. So first of all, Stephen, I just wanted to follow up on your comments about broker receptivity with respect to the lien.

Speaker Change: Our next question will come from Pablo Singzon with JP Morgan. Please go ahead with your question.

Pablo Singleton: Hi, good morning. Thanks for taking my question. So, first of all, for Stephen, I just wanted to follow up in your comments about broker receptivity, respectively, lean. Can you talk a little bit more about what Bowhead is doing to open up broker markets further and perhaps some commentary in the facts of postal brokers where you're seeing more success or less success?

Stephen Sills: Can you talk a little bit more about what Bowhead is doing to open up brokered markets further and perhaps some commentary on the types of wholesale brokers where you're seeing more success or less? about what we're doing to open it up, he said. Correct, to improve risk effectivity, I guess. Sure. Well, it's a lot of shoe leather, if you will, involved in opening people up. As I've mentioned before, this is a wholesale-only product. Frequently, it's what falls out of binding authority business. And so we've gone around to people who have binding authority business who handle this small business.

But what we're doing is to open it up, he said.

Correct. To improve reciprocity, I guess.

Yep, sure. Well, it's a lot of...

Pablo Singleton: Shoot Letter, if you will, involved in opening people up. As I've mentioned before, this is a whole sale-only product.

Pablo Singleton: Frequently, it would fault it's what flows out of binding authority business.

Pablo Singleton: And so we've gone around to people who have binding authority business, who handle this wall business.

Stephen Sills: And we open them up to send it in to us. We have the ability of reading the submissions. And as I said before, being able to process it and issue a bindable quote within a matter of minutes. But it's still when the competition sends a renewable quote, and it's easier just to send out a renewable quote rather than send it to another market and do policy comparisons and things like that. Sometimes brokers just renew it with the incumbent market. But we are growing the business. We're continuing to grow the business. And as I said, I'm confident you're going to see a lot bigger growth in the second half of this year as we're able to explain it.

Pablo Singleton: and we open them up to sender and task.

Pablo Singleton: We have the ability of reading the submissions, and as I said before, being able to process a certain issue of being able to quote within a matter of minutes.

and, but it's still...

Pablo Singleton: When the competition sends a renewable code, and it's easier just to send that a renewable code rather than send it to another market and do policy comparisons and things like that.

Sometimes brokers just renew it with the incumbent market.

Pablo Singleton: But we are growing the business, we're continuing to grow the business, and as I said, I'm confident that you're going to see a lot bigger growth in the second half of this year, as we're able to explain it.

Stephen Sills: more hand-to-hand combat that why it's why it's superior to switch to our product.

Pablo Singleton: More hand-to-hand combat that why it's superior to switch to our product.

Thank you for that. Second question.

Stephen Sills: Yeah, yes, it is.

Speaker Change: Thank you. And then second question, just moving to the topic.

Pablo Singzon: And then second question, just moving to another topic. The 20% annual premium growth comment in the press release and what you mentioned in the remarks, is that a comment for this year, or perhaps for a median term? I was trying to square that comment versus the growth he put up right this quarter was 26%.

Pablo Singleton: The 20% annual opinion growth comment in the press release and what you mentioned in the review remarks, is that a comment for this year or perhaps more median permanence trying to square that comment versus the growth he put up right this quarter of just 26% I'm not sure if you're applying school or growth through the bus is 25 or it's not maybe in future years

Stephen Sills: I'm not sure if you're implying schoolwork growth through the balance of 25 or if not, maybe in future years. Yeah, thanks. It's something we struggle with internally, really. We, you know, we're trying to give you guys some sort of a, you know, direction of where we think the business can go, and it's the same direction we're using internally as, you know, 20%. You know, just seems comfortable for where we're scaled at right now. I will tell you, I've not adjusted my, our internal full year number. We still haven't adjusted that despite Q1 being higher than 20.

Pablo Singleton: Yeah, thanks. It's something we struggle with internally, really. We're trying to give you guys some sort of a direction of where we think the business can go, and it's the same direction we're using internally as 20%.

Pablo Singleton: You know, just seems comfortable for where we're scaled at right now.

Pablo Singleton: I will tell you, I've not ingested my our internal full-year number, we still haven't adjusted that despite...

Pablo Singleton: Q1B higher than 20. We think it is, you know, if it's there, we'll do it. Our focus is always on profitable growth.

Stephen Sills: We think it is, you know, if it's there, we'll do it. Our focus is always on profitable growth, obviously.

Stephen Sills: I would say also, you know, there's nothing that makes me think we couldn't continue the Q1 growth, but we do have, you know, Q3 and Q4, the comparables are going to be tough, so we're a little bit cautious. But again, nothing, nothing that I see that says that, you know, it's going away, but 20% is just more of a give you guys some kind of direction of what we're thinking longer term, medium to long term.

Obviously...

Pablo Singleton: I would say they also, you know, there's nothing that makes me think we couldn't continue the Q1 growth

Pablo Singleton: We do have Q3 and Q4, the comparables are going to be tough, so we're a little bit cautious, but again, nothing that I see that's supposed to be, you know, it's going away, but 20% is just more of a give you guys some kind of direction of what we're thinking, longer term, meeting the long term.

Stephen Sills: We haven't seen anything in the casualty space that indicates that in old-time incumbent markets have fixed their books completely, and there's still adjustments in terms of cutting back limits and getting prices up to a more reasonable level. And of course, we only opened up our doors for casualty in January of 21, so we don't have the remediation problems, we don't have the cutback and limit problems that the others have had, but we're still able to, you know, operate in that environment.

Pablo Singleton: We haven't seen anything in the casualty space that indicates that in all-time incumbent markets.

have.

Pablo Singleton: Fixed their books completely and there's still adjustments in terms of cutting back limits and getting prices up to a more reasonable level.

and of course, we didn't...

Pablo Singleton: We only open up our doors for casualty in January of 21, so we don't have the remediation problems, we don't have the cutback and limit problems that the others have had, but we're still able to operate in that environment.

Pablo Singleton: Thanks for those answers. And maybe you can one more for Brad. Brad, on the 4th equal yet, talk about the shielding.

Brad Mulcahey: And maybe speaking one more for Brad. Brad, on the fourth call, you had talked about the seeding fee paid to AMFAM stepping up, right? I think from 200 bps to 275 bps in the second quarter, which I think you said nets to about 2% of firm premiums after expenses. So I guess just holding all those equal and obviously not all else is equal, right?

Speaker Change: VP2M fam stepping up, right? I think from 200 Bips, 275 Bips in the second quarter.

Speaker Change: So, which I think he said nets to about 2% of firm premiums after expenses.

Speaker Change: So, I guess just holding all this equal, and obviously not all out this equal, right? But if you just think about the sequential pattern here of the acquisition ratio, how much incremental combined racial points will that jump represent, right? And then will this step up in fact fully reflected in 2Q or will it be spread between 2Q and 3Q? Thank you.

Brad Mulcahey: But if you just think about the sequential pattern here of the acquisition ratio, how much incremental points will that jump represent, right? And then will the step-up impact be fully reflected in 2Q or will it be spread between 2Q and 3Q?

Brad Mulcahey: Thank you. Yeah, I remember that, you know, we earned that expense just like any other commission expense. So it'll be gradual as it starts to, as we start to see it this quarter, goes into effect about a month maybe in Q2 at the anniversary of the IPO. So, yeah, that's a, I would call that a headwind right now for our expense ratio that it won't be a cliff, but it'll be, you know, it'll, it'll slowly impact the business as we go forward and likely offset some of the tailwinds that we have, like just the general scaling of the business that you would expect to see on the expense ratio.

Speaker Change: Yeah, I remember that, you know, we earned that expense just like any other commission expense, so it'll be gradual as it starts to, as we start to see it this quarter, goes into effect about a month maybe in Q2 at the anniversary of the IPO, so...

Speaker Change: Yeah, that's a, I would call that a headwind right now for our expense ratio, that-

Speaker Change: We won't be a cliff, but it'll slowly impact the business as we go forward and likely offset some of the tailwinds that we have, like just the general scaling of the business that you would expect to see on the expense ratio. [inaudible]

Brad Mulcahey: So that's kind of our kind of view on the low 30s number for what we're expecting on the expense ratio.

Speaker Change: are kind of view on the low 30s number for what we're expecting on the Extens ratio.

Okay, thank you for your answers.

Bob Jian Huang: Our last question will come from Bob Jian Huang with Morgan Stanley. Please go ahead with your question. Hi, good morning. So, first question is maybe on growth. You touched on this a decent amount, about the 20% premium growth. Is it fair to assume that vast majority of this should come from the casualty business for one, but also after a casualty, what should be the order of magnitude of growth for other lines? Is it going to be bailing as the next driver of growth or is it more professional liability or health care? Just kind of curious if there's a way to think about that.

Speaker Change: Our last question will come from Bob Jen Huang with Morgan Stanley . Please go ahead with your question.

Speaker Change: Hi, good morning. So first question is maybe on growth. You touched on this decent amount.

Speaker Change: About the 20% premium growth is a fair to assume that

Speaker Change: vast majority of this should come from the casualty business for one, but also.

Speaker Change: After a casualty, what should be the order of magnitude of growth for other lines? Is it going to be bailing as the next driver of growth or is it more professional liability or health care? Just kind of curious if there's a way to think about that.

Stephen Sills: Sure. On absolute number size, certainly Casualty, it's the largest and is growing, as we've said, more than the others. Percentage-wise, yeah, it'll be Baylene, because Baylene is starting from such a small base. After that, we'll probably see healthcare and then professional. As I mentioned, there is the possibility that some of the stuff in some of the professional business maybe has started to bottom out and maybe start to grow. But at the current time, in absolute dollar-wise, we see it as casualty, healthcare, professional, bailing. Percentage-wise, it'll be bailing, casualty, healthcare, and professional. Great, that's very helpful.

Sure.

Speaker Change: On absolute number size, certainly casualty. It's the largest and is growing as we've said more than the others. Percentage-wise, he had a little bebe lean, Chris Bayleam starting

After that, we'll probably see healthcare.

Speaker Change: and then professional. As I mentioned, there is the possibility that some of the stuff...

Speaker Change: Healthcare, Professional, Baylene, Percentage-wise, it will be Baylene, Casualty, Healthcare, and Professional.

Speaker Change: Great, that's very helpful. Thank you for that. Maybe my second question is on expense ratio. And this is something you guys talked about too. So maybe just expanding on this a little bit. You talked about expense ratio coming down due to scaling and you also spoke to various other aspect of it.

Stephen Sills: Thank you for that.

Brad Mulcahey: Maybe my second question is on expense ratio, and this is something you guys talked about too, so maybe just expanding on this a little bit. You talked about expense ratio coming down due to scaling, and you also spoke to various other aspects of it.

Brad Mulcahey: As you think about continuing to invest in Baylene and then also continue to build and maintain the technology spending, longer term, what would be a good way to think about your expense ratio as one, you're growing the business, but also to kind of have to maintain the momentum you're having on the technology side? What would be the balance of efficiency versus internal investment? Yeah, good question, Bob, because it's, you know, when you're in a business that's growing this fast, there's a danger that you're not investing enough in the business. And so that's kind of what we look at when we look at our expense ratio, is it's not so much keeping it down, but is it at the right level?

Speaker Change: As you think about, continue to invest in Bailean, and then also continue to build out and maintain the technology spending longer term.

Speaker Change: Like what would be a good way to think about your expense ratio as long you're growing the business, but also to kind of have to maintain that the momentum you're having on the technology side, like what would be the balance of efficiency versus internal

Speaker Change: Yeah, good question, Bob, because it's, you know, when you're in a business that's growing this fast, there's a danger that you're not investing enough in the business.

Speaker Change: And so that's kind of what we look at when we look at our expense ratio. It's not so much keeping it down, but is it at the right level? Are we investing enough? When we look at technology in particular, we have some internal metrics of how much of our premium we should be spending on technology.

Brad Mulcahey: Are we investing enough? When we look at technology in particular, we have some internal metrics of how much of our premium we should be spending on technology. And even that is more of a guidepost, where if there's a good reason to have some technology in there that we would need, we should spend it. I've heard people suggest that because we don't have legacy mainframes and things like that, we should be spending less on technology than other companies. But the reality is, it's still expensive, some of these systems. And there's always something new out there that the underwriters want to see and a new toy that's out there that we've got to manage that within our expenses.

Speaker Change: and even that is more of a guidepost where if there's a good reason to have some technology in there that we would need, we should spend it.

I would say the, you know,

Speaker Change: I've heard people suggest that because we don't have legacy mainframes and things like that, we should be spending less on technology than others.

Companies, but the reality is...

It's still expensive. Some of these ...

Speaker Change: You know, systems and there's always something new out there that the underwriters want to see in the new toy that's out there that, you know, we got to manage that within our expenses, but I would say outside of, you know, staff costs, that's our biggest.

Brad Mulcahey: But I would say outside of staff costs, that's our biggest administrative expenses is technology. And we're always looking for a cost-benefit analysis when we invest in something that we do see the efficiencies, that we will see it. And if not, we've got to cut it loose, because that's the whole purpose of investing in technology.

Speaker Change: We're always looking for a cost-benefit analysis when we invest in something that we do see the efficiencies that we will see it, and it's not.

Speaker Change: You know, we got to cut it loose because that is that's a whole purpose of investing in technology.

Brad Mulcahey: I mean, there's two parts, obviously. One is, are we able to replace a manual function by having it done automatically, like with Baylene, to be able to read something without it being manually entered? And the other is, how does it help us make better underwriting decisions, being able to find out information from other than the source of the submission? And then there's the combination of both of those, in that if we're able to present the underwriters with information at their fingertips, rather than have them go searching for it, we believe it'll help them go through more submissions to find the best ones, and then make a better underwriting decision when they finally prepare the quote.

I mean, there's two parts obviously. What is...

Are we able to replace a manual function by Hammond?

Speaker Change: having it done automatically, like would they lean to be able to read something without it being manually entered? And the other is, is having to help us make better on your writing decisions.

Speaker Change: being able to find out information from other than the source of the submission.

Speaker Change: and then there's the combination of both of those in that if we're able to present the underwriters with information at their fingertips rather than have them go searching for it.

Speaker Change: We believe it will help them go through more submissions to find the best ones and then make a better underwriting decision when they finally prepare the quote.

No, that's really helpful. Thank you.

Operator: That concludes the question and answer portion of today's call.

Speaker Change: That concludes the question and answer portion of today's call. I will now hand the call back to Stephen Sills, CEO for closing remarks.

Stephen Sills: I will now hand the call back to Stephen Sills, CEO, for closing remarks.

Stephen Sills: Thank you. Bowhead delivered another strong quarter to start a new year.

Stephen Sills: Thank you. Bowhead delivered another strong quarter to start a new year. I want to once again act the entire Bowhead team and our stockholders for your continued support. We look forward to another year of profitable growth and the continued execution of our cross-cycle strategy.

Stephen Sills: I want to once again thank the entire Bowhead team and our stockholders for your continued support. We look forward to another year of profitable growth and the continued execution of our cross-cycle strategy.

Operator: Thanks, and we'll speak to you along the way.

Thanks, and we'll speak to you all the way.

Operator: Thank you for joining today's session.

Stephen Sills: Thank you for joining today's session. The call have now concluded.

Operator: The call has now concluded.