Bowhead Specialty Holdings Inc.(BOW) - 2025 Q2 - Quarterly Results

Executive Summary & Second Quarter 2025 Highlights CEO Commentary CEO Stephen Sills attributed strong Q2 2025 results to strategic execution and underwriting discipline, driving significant premium and net income growth - CEO Stephen Sills expressed satisfaction with Q2 2025 results, highlighting strong strategic execution and underwriting discipline[1] - The company achieved a 32% year-over-year growth in premiums and impressive double-digit expansion across all craft underwriting divisions[1] - Net income for the quarter soared by 123% compared to the same period last year, underscoring dedication to sustainable and profitable growth[1] Key Financial & Operational Highlights Q2 2025 highlights include significant growth in gross written premiums, net income, and adjusted net income, with strong returns on equity Metric | Q2 2025 Value | :-------------------------------- | :------------ | | Gross written premiums | $232.4 million | | Net income | $12.3 million | | Adjusted net income | $12.8 million | | Diluted earnings per share | $0.36 | | Adjusted diluted earnings per share | $0.37 | | Return on equity | 12.4% | | Adjusted return on equity | 12.8% | | Book value per share | $12.44 | | Diluted book value per share | $12.04 | - Gross written premiums increased 32.4% to $232.4 million in Q2 2025[7] Division | Q2 2025 GWP | % Increase | :-------------------- | :---------- | :--------- | | Casualty | $150.7 million | 31.9% | | Professional Liability | $54.8 million | 23.3% | | Healthcare Liability | $23.5 million | 39.0% | | Baleen Specialty | $3.4 million | 23.2% (QoQ) | Financial Performance Analysis Summary of Operating Results Bowhead Specialty achieved robust financial growth in Q2 and H1 2025, with significant revenue increases, doubled net income, and improved profitability Summary of Operating Results (Three Months Ended June 30) | Metric | 2025 ($ in thousands) | 2024 ($ in thousands) | % Change | | :-------------------------------- | :-------------------- | :-------------------- | :------- | | Gross written premiums | 232,361 | 175,539 | 32.4% | | Net written premiums | 148,853 | 112,053 | 32.8% | | Net earned premiums | 119,137 | 90,087 | 32.2% | | Net investment income | 13,677 | 8,777 | 55.8% | | Total revenues | 133,263 | 98,898 | 34.7% | | Net losses and loss adjustment expenses | 78,900 | 59,018 | 33.7% | | Total expenses | 117,347 | 91,488 | 28.3% | | Income before income taxes | 15,916 | 7,410 | 114.8% | | Net income | 12,342 | 5,533 | 123.1% | | Adjusted net income | 12,758 | 7,880 | 61.9% | | Loss ratio | 66.2% | 65.5% | +0.7 pts | | Expense ratio | 30.6% | 33.8% | -3.2 pts | | Combined ratio | 96.8% | 99.3% | -2.5 pts | | Diluted earnings per share | $0.36 | $0.20 | - | | Diluted adjusted earnings per share | $0.37 | $0.28 | - | Summary of Operating Results (Six Months Ended June 30) | Metric | 2025 ($ in thousands) | 2024 ($ in thousands) | % Change | | :-------------------------------- | :-------------------- | :-------------------- | :------- | | Gross written premiums | 407,209 | 313,971 | 29.7% | | Net written premiums | 265,622 | 202,905 | 30.9% | | Net earned premiums | 228,954 | 173,067 | 32.3% | | Net investment income | 26,236 | 16,437 | 59.6% | | Total revenues | 255,980 | 189,569 | 35.0% | | Net losses and loss adjustment expenses | 152,327 | 113,338 | 34.4% | | Total expenses | 225,593 | 173,103 | 30.3% | | Income before income taxes | 30,387 | 16,466 | 84.5% | | Net income | 23,767 | 12,545 | 89.5% | | Adjusted net income | 24,238 | 16,068 | 50.8% | | Loss ratio | 66.5% | 65.5% | +1.0 pts | | Expense ratio | 30.4% | 33.2% | -2.8 pts | | Combined ratio | 96.9% | 98.7% | -1.8 pts | | Diluted earnings per share | $0.70 | $0.48 | - | | Diluted adjusted earnings per share | $0.72 | $0.62 | - | Underwriting Performance Q2 2025 underwriting performance showed strong premium growth, a slight loss ratio increase from portfolio mix, and a notable expense ratio decrease Gross Written Premiums - Gross written premiums increased by 32.4% to $232.4 million in Q2 2025, driven by an increasing renewal book and platform growth across all divisions[2][7] Gross Written Premiums by Underwriting Division (Three Months Ended June 30) | Division | 2025 ($ in thousands) | % of Total (2025) | 2024 ($ in thousands) | % of Total (2024) | $ Change | % Change | | :-------------------- | :-------------------- | :------------------ | :-------------------- | :------------------ | :------- | :------- | | Casualty | 150,720 | 64.9% | 114,233 | 65.1% | 36,487 | 31.9% | | Professional Liability | 54,752 | 23.5% | 44,397 | 25.3% | 10,355 | 23.3% | | Healthcare Liability | 23,505 | 10.1% | 16,909 | 9.6% | 6,596 | 39.0% | | Baleen Specialty | 3,384 | 1.5% | — | —% | 3,384 | NM | | Total | 232,361 | 100.0% | 175,539 | 100.0% | 56,822 | 32.4% | Gross Written Premiums by Underwriting Division (Six Months Ended June 30) | Division | 2025 ($ in thousands) | % of Total (2025) | 2024 ($ in thousands) | % of Total (2024) | $ Change | % Change | | :-------------------- | :-------------------- | :------------------ | :-------------------- | :------------------ | :------- | :------- | | Casualty | 273,034 | 67.1% | 205,730 | 65.5% | 67,304 | 32.7% | | Professional Liability | 80,752 | 19.8% | 69,679 | 22.2% | 11,073 | 15.9% | | Healthcare Liability | 47,293 | 11.6% | 38,562 | 12.3% | 8,731 | 22.6% | | Baleen Specialty | 6,130 | 1.5% | — | —% | 6,130 | NM | | Total | 407,209 | 100.0% | 313,971 | 100.0% | 93,238 | 29.7% | Loss Ratio Analysis - The loss ratio increased by 0.7 points to 66.2% in Q2 2025, primarily due to a 0.6 point increase in the current accident year loss ratio and a 0.1 point increase in the prior accident year loss ratio[2] - The increase in the current accident year loss ratio was driven by changes in portfolio mix, with the Casualty division (higher current accident year industry loss ratios) comprising a larger proportion of net earned premium[3] Loss Ratio Components (Three Months Ended June 30) | Component | 2025 % of Net Earned Premiums | 2024 % of Net Earned Premiums | | :------------------------------ | :---------------------------- | :---------------------------- | | Current accident year | 66.1% | 65.5% | | Prior accident year reserve development | 0.1% | —% | | Total Loss Ratio | 66.2% | 65.5% | Expense Ratio Analysis - The expense ratio decreased by 3.2 points to 30.6% in Q2 2025, mainly due to a 3.7 point decrease in the operating expenses ratio and a 0.4 point increase in other insurance-related income[5] - The decrease in the operating expenses ratio was attributed to business scaling, where net earned premiums grew faster than expenses, and prudent expense management[6] Expense Ratio Components (Three Months Ended June 30) | Component | 2025 % of Net Earned Premiums | 2024 % of Net Earned Premiums | | :-------------------------- | :---------------------------- | :---------------------------- | | Net acquisition costs | 9.3% | 8.4% | | Operating expenses | 21.7% | 25.4% | | Less: Other insurance related-income | (0.4)% | —% | | Total Expense Ratio | 30.6% | 33.8% | Investment Performance Net investment income grew substantially in Q2 2025, driven by larger investment balance and higher yields, maintaining strong credit and moderate duration - Net investment income increased 55.8% to $13.7 million in Q2 2025, primarily due to a higher balance of investments and increased yields[10][12] - As of June 30, 2025, the investment portfolio had a book yield of 4.7% and a new money rate of 4.8%[10] Net Investment Income by Source (Three Months Ended June 30) | Source | 2025 ($ in thousands) | 2024 ($ in thousands) | | :-------------------------------- | :-------------------- | :-------------------- | | U.S. government and government agency | 1,633 | 3,836 | | State and municipal | 876 | 388 | | Commercial mortgage-backed securities | 1,267 | 468 | | Residential mortgage-backed securities | 3,129 | 1,920 | | Asset-backed securities | 1,569 | (33) | | Corporate | 4,244 | 1,071 | | Short-term investments | 86 | 103 | | Cash and cash equivalents | 1,154 | 1,204 | | Gross investment income | 13,958 | 8,957 | | Investment expenses | (281) | (180) | | Net investment income | 13,677 | 8,777 | Condensed Consolidated Balance Sheets Condensed Consolidated Balance Sheets Total assets increased to $1.94 billion by June 30, 2025, driven by investments and reinsurance, with liabilities and stockholders' equity also growing Condensed Consolidated Balance Sheets (Selected Items) | Item | June 30, 2025 ($ in thousands) | December 31, 2024 ($ in thousands) | | :------------------------------------ | :----------------------------- | :--------------------------------- | | Total investments | 1,113,093 | 889,986 | | Cash and cash equivalents | 114,816 | 97,476 | | Reinsurance recoverable, net | 319,423 | 255,072 | | Total assets | 1,942,151 | 1,654,242 | | Reserve for losses and loss adjustment expenses | 950,719 | 756,859 | | Unearned premiums | 502,378 | 446,850 | | Total liabilities | 1,534,339 | 1,283,800 | | Total stockholders' equity | 407,205 | 370,177 | | Total liabilities, mezzanine equity and stockholders' equity | 1,942,151 | 1,654,242 | - Total assets increased by $287.9 million from December 31, 2024, to June 30, 2025[14] - Total stockholders' equity increased by $37.0 million from December 31, 2024, to June 30, 2025[14] Reconciliation of Non-GAAP Financial Measures Adjusted Net Income Adjusted net income, a non-GAAP measure, evaluates core business performance by excluding non-recurring items, increasing 61.9% to $12.8 million in Q2 2025 - Adjusted net income is defined as net income excluding net realized investment (losses) gains, non-operating expenses, foreign exchange losses (gains), and certain strategic initiatives, net of tax impact[22] Adjusted Net Income Reconciliation (Three Months Ended June 30) | Item | 2025 After income taxes ($ in thousands) | 2024 After income taxes ($ in thousands) | | :-------------------------------- | :------------------------------------- | :------------------------------------- | | Income as reported | 12,342 | 5,533 | | Adjustments: | | | | Net realized investment losses (gains) | 11 | (2) | | Non-operating expenses | 437 | 1,481 | | Foreign exchange losses (gains) | 79 | (4) | | Strategic initiatives | — | 1,496 | | Tax impact | (111) | (624) | | Adjusted net income | 12,758 | 7,880 | Adjusted Net Income Reconciliation (Six Months Ended June 30) | Item | 2025 After income taxes ($ in thousands) | 2024 After income taxes ($ in thousands) | | :-------------------------------- | :------------------------------------- | :------------------------------------- | | Income as reported | 23,767 | 12,545 | | Adjustments: | | | | Net realized investment losses (gains) | 15 | (2) | | Non-operating expenses | 548 | 1,698 | | Foreign exchange losses | 33 | 30 | | Strategic initiatives | — | 2,733 | | Tax impact | (125) | (936) | | Adjusted net income | 24,238 | 16,068 | Adjusted Return on Equity Adjusted return on equity, a non-GAAP measure, is annualized adjusted net income as a percentage of average equity, reaching 12.8% in Q2 2025 - Adjusted return on equity is defined as annualized adjusted net income as a percentage of average beginning and ending mezzanine equity and stockholders' equity[22][24] Adjusted Return on Equity Reconciliation (Three Months Ended June 30) | Metric | 2025 ($ in thousands, except percentages) | 2024 ($ in thousands, except percentages) | | :------------------------------------------ | :---------------------------------------- | :---------------------------------------- | | Numerator: Adjusted net income (annualized) | 51,031 | 31,519 | | Denominator: Average mezzanine equity and stockholders' equity | 399,588 | 270,551 | | Adjusted return on equity | 12.8% | 11.7% | Adjusted Return on Equity Reconciliation (Six Months Ended June 30) | Metric | 2025 ($ in thousands, except percentages) | 2024 ($ in thousands, except percentages) | | :------------------------------------------ | :---------------------------------------- | :---------------------------------------- | | Numerator: Adjusted net income (annualized) | 48,477 | 32,135 | | Denominator: Average mezzanine equity and stockholders' equity | 389,127 | 265,971 | | Adjusted return on equity | 12.5% | 12.1% | Diluted Adjusted Earnings Per Share Diluted adjusted EPS, a non-GAAP measure, is adjusted net income divided by diluted shares outstanding, reaching $0.37 in Q2 2025 - Diluted adjusted earnings per share is defined as adjusted net income divided by the weighted average common shares outstanding for the period, reflecting dilution from equity-based awards[22] Diluted Adjusted Earnings Per Share Reconciliation (Three Months Ended June 30) | Metric | 2025 ($ in thousands, except share and per share data) | 2024 ($ in thousands, except share and per share data) | | :------------------------------------------ | :--------------------------------------------------- | :--------------------------------------------------- | | Numerator: Adjusted net income | 12,758 | 7,880 | | Denominator: Diluted weighted average shares outstanding | 34,045,961 | 27,771,108 | | Diluted adjusted earnings per share | $0.37 | $0.28 | Diluted Adjusted Earnings Per Share Reconciliation (Six Months Ended June 30) | Metric | 2025 ($ in thousands, except share and per share data) | 2024 ($ in thousands, except share and per share data) | | :------------------------------------------ | :--------------------------------------------------- | :--------------------------------------------------- | | Numerator: Adjusted net income | 24,238 | 16,068 | | Denominator: Diluted weighted average shares outstanding | 33,885,414 | 25,885,554 | | Diluted adjusted earnings per share | $0.72 | $0.62 | Corporate Information About Bowhead Specialty Holdings Inc. Bowhead Specialty is a growing insurance business led by Stephen Sills, offering casualty, professional, and healthcare liability products with deep underwriting expertise - Bowhead Specialty is a growing specialty insurance business offering casualty, professional liability, and healthcare liability insurance products[27] - The company is led by industry veteran Stephen Sills and comprises highly experienced professionals with decades of underwriting and management expertise[27] - Bowhead focuses on providing 'craft' solutions in specialty lines that demand deep underwriting and claims expertise to achieve attractive financial results, fostering a collaborative culture[27][28] Conference Call Information A conference call for Q2 2025 results will be held on August 5, 2025, at 8:30 a.m. ET, accessible via webcast or dial-in, with a replay - A conference call to discuss Q2 2025 results will be held on Tuesday, August 5, 2025, at 8:30 a.m. Eastern Time[29] - Access to the conference call is available through a live webcast at https://bowhead-2q25-earnings-call.open-exchange.net/ or the Company's Investor Relations website[29] - A replay of the webcast will be available on the Company's Investor Relations website for one year[30] Forward-Looking Statements This press release contains forward-looking statements subject to risks and uncertainties, and actual results may differ materially - The press release includes forward-looking statements, as defined by the Private Securities Litigation Reform Act of 1995, which involve risks and uncertainties[31] - Actual results may differ materially from those contemplated by forward-looking statements due to risks described in the Company's SEC filings[31] - The Company does not undertake any obligation to update or revise any forward-looking information[31] Investor Relations Contact For investor relations inquiries, Shirley Yap, Head of Investor Relations, can be contacted via email - Investor Relations Contact: Shirley Yap, Head of Investor Relations[32] - Email for investor inquiries: investorrelations@bowheadspecialty.com[32]