Q3 2025 Bowhead Specialty Holdings Inc Earnings Call

Today we are joined by Steve fellner, our chief operating officer who will discuss our technology initiative and other efficiencies that are enabling us to scale profitably while growing rapidly across Market Cycles.

turning to our performance earlier this morning, we released our financial results for the third quarter of 2025, you can find our earnings release in the investor relations section of our website,

Our Forum 10q will also be made available on our website later this evening.

I'd like to remind everyone that this call contains forward-looking statements within the meeting 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, 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,

you should review the risks and uncertainties fully described in our SEC filings. We expressly disclaim any duty to update any forward-looking statement except as required by law.

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 with that. It's my pleasure to turn the call over to Stephen sils.

Thank you, Shirley good morning, everyone. And thank you for taking the time to join our call today.

I'm pleased to share the bowhead once again, delivered consistent strong top and bottom line growth in Q3.

Growth rate and premiums increase 17 and 1.5% year-over-year while adjusted. Net income increased 25.5% and diluted adjusted earnings per share increased 23.7% to 47 cents, a share

These results are a testament to our disciplined approach, to underwriting to continue to expansion of our craft and flow underwriting operations and our commitment to operational excellence.

Starting with gwp bowhead generated approximately 232 million, in Gross, written premiums during the third quarter.

Or casualty division grew 20% to 145 million for the quarter.

We believe the most favorable segment in the marketplace today is excess casualty business. Our excess casualty book was the primary driver of our 20% growth

given the recent industry adverse Reserve development reported in casualty lines. I wanted to take a moment to revisit the 2 key areas. We believe, set a support from the markets experiencing these challenges.

First our timing, we launched our casualty division at the end of 2020. Giving us the opportunity to capitalize on the hardening enf casualty Market.

While Legacy carriers were grappling with pre-2020 losses, we entered the market being able to properly price business. A market that could be characterized by compounded rate increases

stronger terms and conditions and lower average limit deployment.

Second, our discipline. We are highly selective in the casualty risks. We write and equally intentional about the risks. We choose to avoid in our business. Picking winners is not as important as avoiding losers.

Or casualty division offers specialized primary and excess general liability coverage through a wholesale. Only distribution Channel focusing on the construction distribution, manufacturing, real estate and public entity segments.

Our casualty division rarely writes Fortune 10000 business which we believe has historically been underpriced.

We also did not write primary commercial auto business, as well as many of the other classes that have been the source of adverse Reserve development for others over the past several years.

Although we have Auto exposure on our excess follow form policies, We believe We appropriately price for this risk.

With the timing of our casualty division. Launched the specialized products, we offer the risks, we deliberately avoid and our disciplined underwriting approach. We believe we have built a casualty underwriting operation position for profitable and sustainable growth.

to our Healthcare liability division, our premiums increased, 11% to 35 million

driven by the growth in our Healthcare Management liability hospitals, and Senior Care portfolios, as we review, both new and renewal submissions we remain disciplined. When an accounts conditions, no longer meet our underwriting standards, we're prepared to let other carriers write those accounts.

In our professional liability division premiums increased 2% to 46 million for the quarter driven by the growth in commercial public dno and cyber liability. This growth was partially offset by the decline in premiums written in our financial institutions portfolio. A sector we highlighted last quarter that suffers from an overabundance of competitors.

The growth in our cyber liability portfolio was made possible by utilizing the technology driving baen's growth. Speaking of bailing, we're pleased to report that we generated 6.2 million in premium during the quarter which was 83% growth from Q2 and exceeded total premiums written by been in the first half of 2025, we're excited about the momentum. We've achieved in the third quarter and look forward to reporting Ben's continued strong growth in Q4.

Turning to our views on the broader ens Market, I wanted to address the September ens stamping data that came out of California, Florida and Texas.

Together these top ens States reported a 1% decline in overall ens premiums during the third quarter. However, the decline was primarily driven by the decrease in ens property premiums which is I've mentioned in the past, is a segment that both had does not participate in

Ens casualty premiums which are more relevant to bowhead continue to grow during the quarter. And we expect this trend to persist as complex risks continue to move into the ens Market.

During the quarter in casualty, we saw markets, maintaining discipline in their deployment of limits and pricing with carriers reporting. Recent adverse Reserve development from prior accident years and increasing current accident year loss, picks in casualty. We did not expect to see limits going back up or on across the board price drop anytime soon further the Everest egg renewal rights deal should create an opportunity for the industry to reunite a large segment of the business.

Turning to the ens construction project sector. We've seen a deceleration of new large residential projects due to the uncertainty around interest rates, building materials, and labor costs.

We're also seeing delays in infrastructure projects that receive public financing due to the government shutdown.

The healthcare liability Market continues to be a competitive sector but we've seen encouraging developments in a couple of areas. First a reputation within the healthcare industry is generating increased opportunities for us and second we're starting to see exclusions for sexual abuse and molestation gained traction.

In professional liability symbols that are the last quarter with the exception of commercial public dno. We're continuing to see challenging market conditions.

Particularly in the financial institutions and large cyber liability account space. As we mentioned earlier, in the call, we're utilizing the technology. Driving balines growth to cost, effectively underwrite, small and Middle Market cyber liability accounts. A space. We believe to be very favorable.

Finally, last quarter, I made a statement that I was confident that we can get our expense ratio below 30%.

I'm proud to say that we achieved an expense ratio of 29.5% during the quarter. We're using technology to do more than streamline processes. It's helping us enhance, decision-making, improve risk, selection and support our distribution Partners more effectively. In other words, we're managing expenses, while also accelerating Topline growth.

Steve to discuss these initiatives, Steve.

Thanks Stephen and good morning everyone.

Our expense ratio improved 40 basis points year-over-year reflecting continued benefits from automation workflow optimization and sharper execution. We've streamlined submission intake enriched underwriting data from third-party sources and enabled Underwriters to more effectively triage opportunities. We've achieved this by delivering the information they need. By the time, they open the file,

We are also optimizing our rating experience.

For Underwriters, it means efficient data integration and a clearer view of how each risk fits into the broader portfolio.

For actuaries. It simplifies model development and maintenance.

Freeing up time to collaborate more closely with Underwriters in claims, we are developing A system that will process incoming claims provide initial assessments and help triage workload. Allowing our claims professionals to focus where human judgment adds the most value.

Our approach to operating Leverage is about building a foundation that scales efficiently as we grow.

We expect continued improvement in our operating expense ratio as we leverage the technology Investments. We've made over the past 18 months in our core functions.

We want to grow premium without a commensurate increase in expense, that is the essence of sustainable. Profitability and long-term shareholder value. Bohot has already made, great strides in capturing efficiency gains and we look forward to continuing our progress as we move through the quarters and years ahead with that, I'll turn the call over to Brad Brad.

Thanks Steve.

Go ahead generated adjusted net income of 15.8 million or 47 cents per diluted share and adjusted return on average Equity of 15.1% for the third quarter of 2025, our strong results. Were driven by top and bottom line growth.

Gross written premiums increased approximately 18% to 232 million for the quarter.

As Steven mentioned, we achieved growth in each of our divisions with casualty continuing to be the largest driver in been generating 6.2 million dollars of premiums in the quarter.

Turning to our loss ratio. The story is the same as the past.

First, as a reminder, since we're writing longtail lines with a short history of losses, when setting our loss reserves, we're heavily reliant on industry. Observed loss information over our own internal data.

This Reliance is evident in our high ratio of ibnr as a percentage of total reserves which was 88.2% at the end of the quarter. Second product, mix continues to affect our industry Reliant loss ratio because casually products naturally have higher current action here, loss ratio assumptions since these products make up an Ever larger portion of our net earned premium, our loss ratio has been trending higher.

This mixed change had the effect of increasing our current accident year, loss ratio by 30 basis points from 64.5% in Q3 of last year to 64.8% this quarter.

As I mentioned in the past few earnings calls the change in our prior accent year loss ratio is simply due to ivnr booked on audit premiums that were billed and fully earned in the current quarter, but related to policies from prior accident years.

This is not based on actual losses settling for more than reserved and does not represent an increase in estimated reserves on unresolved claims. We are simply putting loss reserves into the appropriate accent here regardless of when the premiums are built and earned

As we continue to grow and our history continues to develop, we expect the impact of the audit premiums to be less pronounced on our prior accident year Reserves.

As a result, our loss ratio for the quarter was 65.9% a 1.4 Point increase from 64.5% year-over-year.

as we already mentioned our expense ratio for the quarter was 29.5%, a decrease of 40 basis points year-over-year

To decrease was driven by the reduction in our operating expense ratio from the continued scaling of our business, as well as The Prudent management of our expenses.

There's also an increase in our other insurance related income. That contributed to the reduction in our expense ratio from last year.

These favorable improvements were partially offset by the increase in our net acquisition ratio. Specifically, the increase in the fee, we pay to American family and to a lesser extent increasing brokerage commissions due to portfolio mix.

As we mentioned last quarter, we expect the increased fee, we pay in American family to be offset by the continued. Scaling of our business in The Prudent management of our expenses.

Overall, the loss ratio and expense ratio contributed to a combined ratio of 95.4% for the quarter.

Increased 31% year-over-year to 15 million for the quarter primarily due to higher balance of Investments and higher yields on invested assets.

Our Investment Portfolio had a book, yield of 4.8% and a new money rate of 4.6%. At the end of the quarter,

the average credit quality of our Investment Portfolio remained at double A

Our average duration was 2.9 years at the end of the quarter. We expect net investment income to grow in the future, as the balance of our Investment Portfolio. Can continue to grow.

Total equity was $431 million, giving us a diluted book value per share of $12.75. At the end of the quarter, this represents an increase of 16% from year-end.

Lastly, we announced earlier in the year that we would assess our Capital needs and the appropriate source of capital based on our growth in 2025.

Since we're growing faster than we anticipated at the time of the IPO and have available debt capacity in our capital structure. We are planning to access Capital through resources other than the equity markets by the end of the year.

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

Thank you. If you would like to ask a question, we ask that you please use the raise hand function at the bottom of your Zoom screen. Once called upon, please unmute your audio to ask your questions. As a reminder, we are allowing analysts one question and a relevant follow-up.

We will pause for a moment to allow questionaire to enter the queue.

Our first question is from mayor Shields from Keith Brigette and woods. Please unmute your line and ask your question.

Uh I'm hoping you can hear me good morning. Um, Stephen. I was hoping for a little bit more color on. I guess what we had talked about as maybe some green shoots in the various dno in Cyber Markets. So you talked a little bit about growth but I was hoping for a bigger picture of how pricing for those product lines, evolving.

Sure. Um,

Pretty much flat, maybe a little bit up, but it's still highly competitive. And certainly a lot more competitive than what we're seeing in the casualty space and what we're seeing in, uh, the hospital space and the senior living space. Uh, but it's not an area that we're seeing or looking for big growth anytime soon. Um, as I mentioned before, you know, the financial

Institution space which you know a few years back used to be viewed as kind of rarefied air. If they were 50 commercial dno markets, there were maybe 20 financial institution markets. Now for some reason I think a lot of people are piling into that space. I think it was last quarter, the quarter. Before I mentioned the private Equity Firm that that had a tower loss and they ended up, securing a decrease on their renewal and and we stepped away from it. Uh, but it's still very competitive, I would not, I would not look for big growth for us in that space.

Okay, that's very helpful. Um, and moving to Health Care. Um, are there markets for the sexual molestation cover? That's being excluded? If that's something that go ahead is interested in?

Uh, there is some talk of that with lower limits. Uh, that's been that's been the source of some very serious, very large claims uh, on a lot of Health Care Systems. Um, and for the most part, it's not totally excluded everywhere. Now it's, it's

But the market is starting to accept an exclusion in that space going forward, um, but, uh, I think there will be some markets available. I believe, uh, offering lower limits, uh, for that Sam coverage.

Great, thank you so much.

Our next question comes from. Daniel Lee at Morgan Stanley. Please unmute your line, and ask your question.

Daniel.

No, we can.

Hey, sorry. Hey, this is Dan on The Bob. Uh, thanks for taking my question. Um

I guess I wanted to ask first on growth overall. Uh, I know the construction projects folk was a driver

Daniel, you cut out.

Hey, can you can you hear me?

Uh, now we can again.

Sorry, uh, my first question is just saw growth for the casualty business.

I know the construction projects book was a driver for Topline previously but I construction Market field software now except for maybe data centers. Can you talk about

Business opportunities going forward with that construction.

Well, you're right there is there is expected growth in the data center space. Um, I'm not sure how much will participate in that because some of the terms and conditions that are being looked for, are things that, um, uh, we may not find favorable whether in terms of reinstatement, or limits or things like that, um, but there will be plenty of other construction projects. Uh, we think that once the government shutdown, uh, ends, uh, it'll, it'll

Shake loose funds for projects that were planned. And um so we still think that there's going to be plenty of opportunity in the future 1 of the things. Of course we are concerned about is you know by by planning too much in doing project business

It becomes very, very lumpy. So we're available when the opportunities come, but it's less predictable in terms of, uh, future opportunities. Uh, but we do see, uh, you know, the practice policies, we see opportunities there and and the construction will will come. It's just going to be Lumpy

Got it. Thank you. Uh, my second question is Mark Bain um as we head into 2026 and uh daily continues to ramp up. Um, will you pursue more full snail Partnerships to kind of expand the distribution Network or

maybe potentially new product lines that you may consider adding or bailing

good, good question was adding

Yeah, they'll be doing Partnerships or yeah. Well, keep it that a couple of things. Let me, let me talk around the whole subject. Um, baen at the current time is wholesale only. We started out with a limited number of wholesalers. There will be opportunities to add more wholesalers down the road.

But just as important uh as what we're doing with baen itself is the technology that we're using that technology is that you know, products that we're going to be using that for in the uh uh future and even what we're using it for right now, keep in mind it enabled us to to go almost virtually. No touch in some very small business uh and that's a lot of what we're seeing right now. Uh, that technology is enabling us to leverage our underwriting capabilities in risks that starting to be

Um a little bit larger, a little bit more complex uh and 1 area that that's happening is in the small cyber space companies, we started out with companies less than 25 million in Revenue. Now, moving up to 50 million Revenue that are now virtually no touch. So, where is an underwriter by the time they started to look through all the material, the file gets set up. Um, it took a certain amount of time and we just didn't have, you know, the resources to be able to do that, what we're able to do. Um, what we're able to do now is leverage Underwriters that are compensated less than the highest paid people in the company and enabled them to spend a few minutes on the account.

Cyber uh, such as small casualty business where where we actually get hundreds, if not thousands of submissions that are just too small for our appetite and capabilities today. We're ultimately and not too long in the future, be able to start underwriting those uh, in very short order.

Got it. Thank you.

Our next question is from cave. Montazar at Deutsche Bank, you may unmute your line and ask your question.

Hopefully, the unmute works.

Uh, good morning, my first question. Uh, maybe I'll take a

In fact, that's Steve is on the line right now, and that's on the operating expense ratio. Thank you for the, the caller, on the call, about the uh, technology advancements that you're putting through to help on that front. Uh, how much of the Improvement the operating expense ratio Discord was kind of due to, uh, these efficiencies, uh, the technology driven Improvement. And, um, and where do you think that operating expense ratio can go to, you know, in 2026 2027, or over the medium term?

Hey Kate, this is Brad. Uh, maybe I'll take a stab first at some of your trajectory questions and then head over to Steve to get some more colors. But, um, and, and thanks for uh, for joining us and initiating coverage recently honest. But it, it's really a hard as you can imagine to parse out, um, how much of the efficiency gains is driving the expense ratio. Um, but we are comfortable that that's what's driving it. Um, obviously, we've got the American family fee going up. We've got commissions, um, you know, pretty steady going up, maybe a little bit. So there's some, some puts and takes in there. But, um, when we look at our, our staff costs in particular, there's no doubt, that, that is driving some savings into our expense ratio because of these, uh, these efficiencies, that Steve mentioned. So, uh, hopefully that helps me out. I'll hand over to see if you want to get some color on those efficiencies. Yeah, sure I'd uh, I'd love to. Thanks, Kate for the question. Uh,

You know, some of these initiatives we have in place others are are coming and we're working on in progress.

Uh, I think as, as we continue down this road, you know, the efficiencies will be had by the underwriters and other core functions. Uh, and as Brad mentioned, we'll continue to see, you know, the influence of that on our operating expense ratio, uh, as we go forward, you know, we're kind of in we're in this stage now where, you know, we're taking our processes, uh, and procedures, you know, up to industrial strength. So we can continue to scale, uh, efficiently, you know, in the quarters and years ahead.

My uh, follow-up question. Brad is for you. Um, right at the end of your prepared remarks, you mentioned that you will need to tap the equity Market to fund, um, growth for 2026.

Um, could you maybe give us a bit more color? Um, just given that your net premium to equity is already above 1.2x. Um, are you thinking about, you know, getting some kind of a debt that has Equity like features

um,

still TBD. I I don't want to get into too many details on that, um, but I think what we are comfortable with is we're not going to go to the equity markets to raise to raise equity on this. Uh, we do think that, um, net premium in the Surplus ratio, um, you know, will continue the trajectory under under 1, um, you know, for the, in the next couple of years but um, stay tuned on the exact details of, uh, of what we're looking at.

Okay. Thanks man.

Our next question comes from Pablo sings on at JP Morgan. You may unmute your line and ask your question.

Uh, hi. Can you hear me?

Yes.

Okay, thanks. Um, so first question I I wanted to get an update on your medium-term view of gross premium growth, right? So you know 18% this score is still a good number 24, but it is slower than the high 20s. You're putting up in the first half of the year. Uh so it's just any thoughts and recognizing that you don't write properly, right? So that's good. But any thoughts there? And I guess a really good question is that as you grow the premium book? How much incremental expenses you need to add right in here. I'm thinking more about owning teams, you know, to generate the growth. You anticipate. Thanks.

Well.

Technology will be able to, uh, enable us to, uh, really grow that Business Without adding to a lot more staff, uh, but we're interested in in new products along the way American family is, is, you know, open to discussions in, in opening new areas. So, that is an area to grow. Having said that, there's still a lot more growth available. We think, in the casualty space, uh, whether it's, uh, Ben type growth, the small business that we're calling Express at this time, um, and, and also in the health care space. So, um, we we, we don't think we're running out of Runway, by any means. In what it is, we have to do, uh, with what it is. We've got on our plate right now.

But we are open to new opportunities.

Understood. So it sounds, and I didn't want to put words in your mouth to see them, but it sounds like just given what you have now, you think the market is growing, and without adding significant headcount expense, you think the premiums will come here? Where is the surf? A fair assessment of where things stand now.

Yes, I think when you talk about, uh, headcount, it's, it's the type of headcount that we've been adding when you look at the type of people that were necessary to start up the business versus, uh, now, as we move down into smaller business, uh, it's a different, uh, a different level of headcount.

And so, uh, but in terms of how we see the growth and the number of headcount, for the year going forward versus the year, in the past, it'll definitely be leveraged that the, the, the, the, the growth per headcount add will be a lot more uh, uh, going forward than in the past.

Understood and this will be my third question. So I apologize. I'll speak to this 1 in but um,

I, I think there's a broad view at this point that accident years during the hard markets, post 2020 might not have as much margin as initially thought, right? Mainly, because loss Trends just developed more in favorably than what people had expected. So, I guess, uh, either for you, Stephen or Brad, do you agree with this, the sort of like, I, I'll call it, like, what consensus view, uh, are you seeing it in your book and some way, right? Uh, I I I know it's a long tail, but maybe there's something that you are in the page and then I, I, I guess me for right at what point would you actually start recognizing favorable or unfavorable Reserve development, right? Uh, again recognizing that your book is quite young and uh you want to have credibility in the data, thanks.

Yeah, I think your last sword is important that it's still young. And, and it is too early to say, uh, I think, you know, over the last few years, people have been have been cutting limits while they're raising price. So, maybe people who haven't cut limits fast enough or put out too much limits, there could be some adverse development. I have no idea at this point in time, but um, uh, but it's certainly better than it was prior to when uh we got into the marketplace Brad. Do you want to add some more color on that? Yeah, color. I just mentioned everybody that we've seen on the more recent accident years

When we've looked at what we could see, we are comfortable that we're not in the same space. It's it's auto business or its primary have or, you know, just not not reflective of our book. Um, that being said, we are doing, uh, you know, in Q4 we do our annual review of our reserves, with our external actuaries. So um, we will have more more color, I think on uh, on reserves and and some of our characteristics, how those are developed me, uh, after year end, but so far, so good from from our perspective.

All right, thank you both.

As a reminder, please use the raise hand function at the bottom of your Zoom screen to join the question queue. Our next question comes from Paul gnome at Piper Sandler, you may unmute your line and ask your question.

Good morning. Thanks for the call.

Um, I would like to, to revisit the capital uh, question a little bit um, Beyond, uh, debt and Equity. Or are you also looking at other Alternatives sources of capital like reinsurance changes?

Hey, Paul. Spread 'em. Yeah, I mean that's always an option. The, um,

Um, to to to meet that requirement or kind of limited. But we do look at reinsurance, long term and do we have the optimal structure, both from a risk appetite as well as from a, a capital, uh, balance. But um, but for now, I think the only thing we've really taken off of the schedule for, um, the current year's Capital raises an equity raise. We just wanted to be clear with everybody on that.

Thank you and um, the different topic. Um, the Investment Portfolio uh is obviously maturing reliability in line. So

I would imagine you're still in the position where your float is growing, as your book. Matures does that imply? Any changes perspective as the float grows relative to equities Capital that you might be making in the future?

I'm not sure, I understand the question. Um,

can you maybe restate a call float in the float? You're a ball liability business, which means that the float will become an increasingly important part of what you do.

Um, and you'll have higher uh, amount of float relative to your Equity over time.

Um, I'm just curious if that potential change in the portfolio itself, implies any changes in the Investment Portfolio perspective, gotcha, okay, sorry. I was thinking float on our own Equity but oh, gotcha. I I should just say it, um, no, I don't think so. We, you know, we're really happy with our portfolio as it is our Investment Portfolio. Um, you know, we are still adding to it quite a bit. Um, as you mentioned we had we write long tail lines. So the benefit of that is collecting the premium and hopefully not playing a claim until much later in the

Policy, but, uh, we're still growing that portfolio. We think, you know, when we look at our returns, we we focus on risk, adjusted returns. And we think on a risk adjusted basis, our returns are, are best in class. So we're really happy with the current structure. We'll, we'll continue to assess it as obviously the interest rates change and the macro environment changes. But presently, we're we're pretty happy with it.

Great. Appreciate the help as always. Thank you very much.

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.

Thank you. Go ahead, delivered. Another quarter of strong results.

Thank you to our bowhead team members for your continued dedication.

Thank you for joining today's session. The call has now concluded.