Bowhead Specialty Holdings (BOW) Q2 2025 Earnings Call August 05, 2025 08:30 AM ET Speaker0Hello, and welcome to Bowhead Specialty's Q2 twenty twenty five Earnings Call. With that, I would like to turn the call over to Shirley Yap, Head of Investor Relations. Shirley, you may begin.Speaker1Thanks, Stefan. Good morning, and welcome to Bowhead's second quarter twenty twenty five earnings conference call. I'm Shirley Yap, Bowhead's Chief Accounting Officer and Head of Investor Relations. Joining me today are S ...

Financial Performance Highlights - SiriusPoint's Gross Premiums Written (GPW) increased by 10% year-over-year in Q2 2025[19, 47] - The Core Combined Ratio improved by 38 percentage points to 895% in Q2 2025[19] - Underlying Earnings Per Share (EPS) rose by 120% year-over-year to $066 in Q2 2025[19, 47] - Book Value Per Share (BVPS) excluding Accumulated Other Comprehensive Income (AOCI) grew by 4% in Q2 2025 and 10% year-to-date, reaching $1564[19] - The Underlying Return on Equity (ROE) was 170% in Q2 2025, contributing to 154% at HY 2025[19] Segment Results - The Insurance & Services segment experienced a 14% increase in Gross Premiums Written (GPW) in Q2 2025, resulting in an 18% growth for HY 2025[63] - The Reinsurance segment's Gross Premiums Written (GPW) grew by 5% in Q2 2025, contributing to a 2% growth year-to-date[67] Capital and Balance Sheet - The BSCR ratio is estimated at 223% in Q2 2025[13, 19] - The debt-to-capital ratio decreased slightly to 244% at Q2 2025[97, 102] - Common shareholders' equity increased 4% to $19 billion[50]

Financial Data and Key Metrics Changes - The company reported net operating income of $734 million and an annualized operating return on equity (ROE) of nearly 20% [5][20] - The combined ratio was 90.4%, reflecting strong underwriting profit of $385 million [5][20] - Net investment income was robust at $532 million, supported by favorable private equity performance [7][26] Business Line Data and Key Metrics Changes - Reinsurance generated a profit of $436 million, up $133 million from the prior year, with a combined ratio of 85.6% [7][22] - Insurance recorded an underwriting loss of $18 million with a combined ratio of 102% and an attritional loss ratio of 68.7% [12][24] - Gross written premiums for reinsurance increased by 1.6% in constant dollars, while insurance premiums decreased by 3.3% [20][23] Market Data and Key Metrics Changes - Casualty premiums declined by 7.3%, while primary casualty rates are rising [9][13] - International insurance business grew at a rate of 23% this quarter, with improving margins [16] - Property premiums increased by approximately 8% year over year, with property cat XOL growing over 15% [8][15] Company Strategy and Development Direction - The company is focused on reshaping its portfolio, particularly in the U.S. casualty business, while expanding in property, Asia, and Latin America [10][11] - The strategy includes a one renewal approach in U.S. casualty to improve portfolio quality and profitability [12][19] - The company aims to optimize its share in attractive programs with core seeds, leveraging deep relationships [11][19] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in the reinsurance business's ability to deliver strong results regardless of external conditions [12][18] - The company is optimistic about the future, focusing on executing across both businesses and managing the cycle with discipline [19] - Management noted that the current pricing environment remains favorable, with strong returns expected from property cat [44][62] Other Important Information - The company repurchased $200 million worth of shares in the second quarter, returning $400 million to shareholders year to date [17][28] - The operating income tax rate was 16.4%, slightly below the working assumption of 17% to 18% for the year [28] Q&A Session Summary Question: What is the outlook for the underlying loss ratio in insurance? - Management indicated that the risk margin is necessary due to legal uncertainties, and the mix of business will impact the overall loss ratio positively over time [32][33] Question: Can you provide insights on accident and health growth? - The company is focusing on accident business growth, particularly in business travel and participant accident coverage, which has shown strong performance [39][41] Question: What are the competitive dynamics in the reinsurance renewals? - Management noted that pricing was flat in June renewals and slightly down in July, but terms and conditions remained stable, indicating discipline in the market [42][43] Question: How is the company managing its expense ratio? - Management expects the expense ratio to improve post-remediation of the casualty book, with a focus on scaling the international business [120][121] Question: What is the company's stance on PMLs and capital deployment? - Management believes the current market is still hard, and they are comfortable deploying capital at attractive rates while remaining within risk guidelines [62][63] Question: How is the company addressing the California workers' comp market? - The company has reduced its exposure in California and is only writing comp when part of a broader portfolio, focusing on overall market recovery [112][113]

Financial Data and Key Metrics Changes - The company reported net operating income of $734 million and an annualized operating return on equity (ROE) of nearly 20% for the second quarter of 2025 [5][21] - The combined ratio was 90.4%, reflecting strong underwriting performance and light catastrophe losses [21][22] - Net investment income was strong at $532 million, supported by favorable private equity performance [5][27] Business Line Data and Key Metrics Changes - Underwriting profit totaled $385 million with a combined ratio of 90.4% [5] - Reinsurance generated a profit of $436 million, up $133 million from the prior year, with a combined ratio of 85.6% [7][23] - Insurance recorded an underwriting loss of $18 million with a combined ratio of 102% [13][24] - Gross written premiums for reinsurance increased by 1.6% in constant dollars, while insurance gross written premiums decreased by 3.3% [21][24] Market Data and Key Metrics Changes - The company experienced a 1.1% increase in reinsurance gross written premiums, while insurance premiums declined by 3.3% [21][24] - International insurance business grew at a rate of 23% this quarter, with improving margins [17] - Property premiums increased by 5% globally, with 21% growth internationally, offsetting a 2% decline in North America [16] Company Strategy and Development Direction - The company is focused on reshaping its portfolio, particularly in the U.S. casualty business, and is committed to disciplined growth [12][19] - The strategy includes expanding in U.S. property, Asia, and Latin America while reducing exposure in U.S. casualty [12][19] - The company aims to optimize its share in attractive programs with core clients, leveraging its strong relationships [12][19] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in the reinsurance business's ability to deliver strong results regardless of external conditions [13] - The company is optimistic about the quality of its casualty portfolio improving, which is expected to lead to more consistent profitability over time [19] - Management noted that the current market conditions are favorable for deploying capital into well-structured accounts [58][59] Other Important Information - The company repurchased $200 million worth of shares in the second quarter, totaling $400 million year-to-date [18][28] - The operating income tax rate for 2025 was 16.4%, slightly below the working assumption of 17% to 18% [27][28] Q&A Session Summary Question: What is the outlook for the underlying loss ratio in insurance? - Management indicated that the risk margin is necessary due to legal uncertainties, and the mix of business will impact the overall loss ratio positively over time [31][32] Question: How is the company approaching international investments? - Management acknowledged that international growth is lumpier but emphasized leveraging existing infrastructure to improve the expense ratio over time [34] Question: What are the dynamics in the accident and health market? - The company is focusing on accident coverage rather than health, with strong growth in accident business both domestically and internationally [37][38] Question: Can you elaborate on the reinsurance renewals and competitive environment? - Management noted that pricing was flat during renewals, with terms and conditions holding steady, indicating discipline in the market [40][41] Question: How does the company view the current pricing environment? - Management clarified that while rates have softened slightly, the market remains strong, and they are comfortable deploying capital at current pricing levels [58][59] Question: What is the company's strategy regarding PMLs? - Management stated that they are increasing net PMLs due to favorable pricing dynamics and are confident in the risk-reward trade-off [59][60] Question: What is the status of the London court decision? - Management believes the issue is resolved barring any unexpected legal shifts, and it does not relate to previous reserve actions [95][96]

Financial Data and Key Metrics Changes - The company achieved a record diluted book value per common share of $70.34, an increase of 18.6% year over year [6][20] - Operating earnings per share reached an all-time high of $3.29, a 12% increase over the prior year quarter [6][20] - The annualized operating return on equity was 19% for the quarter [5][20] - The combined ratio was reported at 88.9%, indicating strong underwriting performance [6][21] Business Line Data and Key Metrics Changes - The Insurance segment produced record gross premiums written of $1,900,000,000, a 7% increase compared to the prior year quarter [23] - The Reinsurance segment experienced a decline in gross premiums by 6.8%, attributed to timing issues and underwriting discipline [28] - The combined ratio for the Reinsurance segment was 92%, with an ex-catastrophe accident year loss ratio of 67.9% [29] Market Data and Key Metrics Changes - In North America, premiums in the Insurance segment increased by 8% year over year, with submission flow up more than 22% [9] - Casualty rates increased by 12% in the quarter, while U.S. Primary casualty rates rose by 12.5% [11][12] - The property market showed flat to low single-digit growth, with an overall rate reduction of 11% [12] Company Strategy and Development Direction - The company is focused on maintaining premium adequacy across its portfolio while selectively pursuing growth in attractive business lines [10] - Investments in technology and AI are being made to modernize underwriting processes and improve efficiency [17][19] - The company aims to leverage its specialty capabilities to navigate a dynamic risk environment and achieve profitable growth [19] Management's Comments on Operating Environment and Future Outlook - Management expressed optimism about the company's positioning in a competitive market, despite uncertainties from trade disruptions and geopolitical tensions [7][19] - The company anticipates continued profitable growth, particularly in the Insurance segment, with expectations for the second half of the year to exceed the first half's growth rate [26][96] - Management remains cautious regarding the reinsurance market, emphasizing a selective approach to growth and reserving practices [39][62] Other Important Information - The company recorded a release of $20,000,000 from short-tailed lines, contributing to its strong financial results [22] - The effective tax rate for the quarter was 20.1%, reflecting the geographic mix of profits [31] - The company returned substantial capital to shareholders, completing $50,000,000 in share repurchases and declaring $35,000,000 in dividends [32] Q&A Session Summary Question: Thoughts on insurance segment growth and ceded premiums - Management indicated that the reinsurance strategy remains agile and flexible, with high confidence in the insurance segment's performance [35][37] Question: Loss ratio and reserving process in reinsurance - Management expects the loss ratio to remain around 68% for the rest of the year, maintaining a cautious stance on reserving [39][43] Question: Pricing trends in insurance and reinsurance - Management noted that liability casualty pricing is ahead of loss costs, while property pricing has faced pressures [46][47] Question: Approach to MGAs and appetite for growth - The company has adopted a selective and disciplined strategy regarding MGAs, focusing on bottom-line results rather than volume [59][61] Question: Investment in AI and technology compared to competitors - Management believes the company's investments in AI and technology are well-positioned to enhance efficiency and productivity, with ongoing improvements in underwriting processes [109][113]

Financial Data and Key Metrics Changes - Core operating EPS reached a record $6.14, up 14% year-over-year, supported by record underwriting and strong investment results [5][6] - Core operating income was $2.5 billion, a 13% increase from the previous year [6] - Published underwriting income was $1.6 billion, up 15% year-over-year, leading to a combined ratio of 85.6, an improvement of over one percentage point [7] - Adjusted net investment income was nearly $1.7 billion, an 8% increase [7] - Tangible book value per share grew 23.7% year-over-year and 8% from the previous quarter [8] Business Line Data and Key Metrics Changes - North America P&C premiums excluding agriculture grew 5.3%, with personal insurance up 9.1% and commercial up 4.1% [12] - Premiums in the life insurance division grew almost 17.5% [10] - Middle market and small commercial property lines showed disciplined growth, with rates continuing to rise [11] - Casualty pricing in North America increased by 11.6% [15] - International general insurance operations saw premiums up 8.5% or over 10% in constant dollars [16] Market Data and Key Metrics Changes - Global P&C premiums grew 5.86% in constant dollars, with commercial up 4.2% and consumer up 11.9% [10] - Asia's premiums grew over 12.5% in constant dollars, while Europe and Latin America grew over 8% and 17%, respectively [17] - In the U.S., large account commercial property pricing has become competitive, leading to price softening [10][18] Company Strategy and Development Direction - The company emphasizes disciplined underwriting and is not pursuing business below adequate pricing [11] - Focus on growth in middle market and small commercial segments, which are expected to continue expanding [59] - The company is leveraging its global diversification and a talented workforce to drive growth [21] - Continued investment in digital and direct marketing strategies in Latin America and Asia [44][59] Management's Comments on Operating Environment and Future Outlook - Management noted a complex economic environment with potential headwinds from budget deficits and trade policies [20] - The company expects continued growth in both revenue and earnings, driven by strong fundamentals and market positioning [21] - Management remains optimistic about the durability of growth in the majority of its business segments [56] Other Important Information - The company authorized a new $5 billion share repurchase program [23][24] - Adjusted net investment income is expected to be approximately $1.72 billion to $1.74 billion next quarter [27] - The company closed on the acquisition of Liberty Mutual's P&C business in Thailand, which slightly diluted tangible book value growth [25] Q&A Session Summary Question: Impact of litigation challenges on casualty and general liability coverages - Management discussed the inflationary impact of litigation costs and the need for public policy reform to address these issues [32][33] Question: Growth in Latin America - Management highlighted strong growth driven by significant presence in Mexico and partnerships in Brazil and Chile [44][46] Question: Potential phase-out of FEMA and its impact on high net worth business - Management indicated that while FEMA provides modest coverage, the private flood market is growing and Chubb is well-positioned [50] Question: Stability of global P&C growth - Management confirmed that growth remains stable and durable, particularly in middle market and small commercial segments [56] Question: Sensitivity of large domestic accounts to social inflation - Management noted that terms and conditions have tightened due to increased litigation and social inflation, impacting coverage demand [78] Question: Investment income trends - Management explained that recent flatlining of investment income was due to lower-than-expected private equity income, but expects growth moving forward [102] Question: Reinsurance market attractiveness - Management stated that growth in the reinsurance business was muted due to a disciplined approach to underwriting [110] Question: Capital management and share buybacks - Management emphasized a flexible approach to capital deployment, balancing between supporting insurance business and returning capital to shareholders [112]

Financial Data and Key Metrics Changes - The company reported core income of $1,500,000,000 or $6.51 per diluted share, with a core return on equity of 18.8% for the quarter, and 17.1% for the trailing twelve months [5][14] - Underwriting income improved with a combined ratio of 90.3%, a nearly 10-point improvement, driven by lower catastrophe losses and favorable prior year reserve development [6][14] - Adjusted book value per share increased by over 14% compared to the previous year, reaching $144.57 [20] Business Line Data and Key Metrics Changes - Business Insurance segment income rose to $813,000,000, up nearly 25% from the prior year, with net written premiums increasing by 5% to $5,800,000,000 [25][30] - Bond and Specialty Insurance generated segment income of $244,000,000 with a combined ratio of 80.3% [31] - Personal Insurance delivered segment income of $534,000,000, with an underlying combined ratio of 79.3%, reflecting significant improvements in underwriting [35][36] Market Data and Key Metrics Changes - Net written premiums grew to $11,500,000,000 in the quarter, with growth across all three segments [9] - Renewal premium change in Business Insurance was strong at 7.7%, with retention rates at 85% [9][27] - In Personal Insurance, renewal premium change was 19.3%, indicating strong pricing actions [39] Company Strategy and Development Direction - The company is committed to disciplined capital allocation and value creation, as evidenced by the sale of its Canadian business for $2,400,000,000 [11][12] - The focus remains on optimizing capital deployment to generate attractive returns and profitable growth [12][14] - The company plans to relax property restrictions by the end of 2025, aiming to balance its portfolio between auto and property [40][106] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in the outlook for continued premium growth and attractive underwriting margins, supported by a strong balance sheet [14][20] - The company noted that the overall market conditions remain orderly, with a positive trajectory for investment income [14][20] - Management acknowledged the challenges posed by tort inflation but indicated that pricing strategies are in place to address these issues [58] Other Important Information - The company returned over $800,000,000 of capital to shareholders during the quarter, including $557,000,000 in share repurchases [8][21] - Operating cash flows for the quarter were strong at $2,300,000,000, marking the twenty-first consecutive quarter with cash flows exceeding $1,000,000,000 [21] Q&A Session Summary Question: Insights on Business Insurance pricing and competition - Management noted that while there are some pressures in the national property market, overall pricing remains strong in other lines, with retention indicating market stability [44][48] Question: Future expectations for Personal Lines and premium production - Management indicated that relaxing property restrictions could positively impact both property and auto opportunities, aiming for a balanced portfolio [49][106] Question: Concerns about property market durability - Management expressed confidence in the overall positive landscape and indicated that property outside of national accounts has historically performed differently [52][53] Question: Impact of tariffs on pricing and margins - Management stated that there has been no significant impact from tariffs on their businesses, but they are monitoring the situation [73] Question: Cyber insurance market dynamics - Management highlighted that the cyber insurance market remains competitive, with pricing not fully reflecting the loss environment [108]

Core Insights - Kingstone Companies, Inc. (KINS) has shown significant growth in policies-in-force (PIF), with personal lines now constituting 96% of total PIF, up from 88% a year ago [1][8] - The exit of major insurers from the New York personal lines market in 2024 allowed KINS to capture a substantial share, writing over 6,000 new policies and adding $23 million in premium volume in the latter half of 2024 [2][8] - KINS anticipates a premium growth of 15-25% in its core segment for 2025, supported by newly onboarded policies that adhere to tightened underwriting standards [3][8] Company Strategy - KINS has strategically exited underperforming and non-core areas, allowing for a more focused allocation of underwriting resources, which has resulted in a nearly 19% year-over-year increase in renewal premiums in Q1 2025 [4] - The disciplined growth strategy has led to six consecutive profitable quarters and improved combined ratios, indicating a commitment to stable, high-margin growth [4] Competitive Landscape - KINS competes closely with Kinsale Capital Group (KNSL) and Heritage Insurance Group (HRTG), both of which also emphasize disciplined underwriting and targeted market expansion [5][6] - Kinsale's growth is driven by its expanding presence in the excess and surplus insurance market, while Heritage has focused on higher-margin segments, enhancing its underwriting results [5][6] Financial Performance - KINS shares have underperformed the industry, losing 2.5% year to date [7] - The company trades at a price-to-book value ratio of 2.46, above the industry average of 1.55, but holds a Value Score of A [9] - Consensus estimates for KINS' 2025 and 2026 revenues and EPS indicate year-over-year increases, with a Growth Score of A [10][11]

Financial Data and Key Metrics Changes - The company recorded top line growth of 14% for Q1 2025, with gross premiums written amounting to $1.7 billion, compared to the same quarter last year [21][9] - The combined ratio for the quarter was 115.6%, impacted significantly by catastrophe losses, particularly from California wildfires, which accounted for $333 million in losses [23][24] - Net premiums written increased by 32% year-over-year, while net premiums earned rose by 24% [22][23] Business Line Data and Key Metrics Changes - In the insurance segment, gross premiums written increased by 7% to $1.3 billion, driven by new business and asset-backed finance [22] - The reinsurance segment saw a 39% increase in gross premiums written to $456 million, largely due to new business and reinstatement premiums related to wildfire losses [22] - The attritional loss ratio improved to 22.7% from 30% in the prior year, indicating better performance in the overall portfolio [23] Market Data and Key Metrics Changes - The company noted a favorable trading environment with strong margins across various lines of business, despite increasing competition in some areas [10][11] - The marine portfolio continued to grow year-on-year, primarily driven by new construction business [11] - The aviation and aerospace premiums saw a reduction year-on-year due to the timing of a line slip renewal [13] Company Strategy and Development Direction - The company remains committed to pursuing profitable underwriting opportunities and strategic capital management, focusing on a diversified portfolio with no casualty exposure [7][8] - Management emphasized the importance of active exposure management and the strategic use of outward reinsurance to navigate current market conditions [10][14] - The company is exploring new opportunities in highly accretive and profitable business segments to maximize returns [14] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in the ability to achieve approximately 10% growth in gross premiums written for the year, citing a strong trading environment [39][45] - The company is actively monitoring global economic conditions and adjusting its underwriting strategy accordingly, particularly in response to inflation and political risks [31][33] - Management highlighted the importance of maintaining a strong balance sheet to support profitable growth and capital management initiatives [30][41] Other Important Information - The company repurchased $41.5 million of common shares at an average cost of $15.63 per share year-to-date [17][29] - The company has settled or is in various stages of settlement discussions for approximately 80% of its total exposure related to the Russia-Ukraine aviation litigation [18][19] - The average rating of fixed income securities remains high at A+, with a book yield of 5% [27] Q&A Session Summary Question: Growth opportunities in the second half of the year - Management acknowledged a timing headwind in the aviation line and expressed confidence in achieving 10% growth for the year despite the challenges [43][45] Question: Drivers of favorable reserve movement - Management noted strong performance in the attritional book and reserve releases from prior catastrophe events as key drivers of the favorable prior year development [47][48] Question: Explanation for stock trading at a discount to book value - Management agreed on the undervaluation and emphasized the need to continue performing well to build investor confidence [52][54] Question: Impact of UK aviation litigation on share repurchases - Management indicated that they would continue to repurchase shares opportunistically, depending on market conditions and share prices [56][90] Question: Competitive environment in property insurance - Management highlighted the ability to implement pricing adjustments in real-time and noted strong demand in the market, allowing for continued growth [97][100]

Financial Data and Key Metrics Changes - The company recorded top line growth of 14% for Q1 2025, with gross premiums written amounting to $1.7 billion, compared to the same quarter last year [18][7] - The combined ratio for the quarter was 115.6%, impacted significantly by catastrophe losses, particularly from California wildfires, which accounted for $333 million in losses [20][21] - Net investment income increased to $50 million, up from $41 million in the prior year, reflecting a higher yield on cash and fixed income portfolios [25] Business Line Data and Key Metrics Changes - In the insurance segment, gross premiums written increased by 7% to $1.3 billion, driven by new business and asset-backed finance [19] - The reinsurance segment saw a 39% increase in gross premiums written to $456 million, largely due to new business and reinstatement premiums related to wildfire losses [19] - The attritional loss ratio improved to 22.7% from 30% in the prior year, indicating better performance in the overall portfolio [20] Market Data and Key Metrics Changes - The company noted a favorable trading environment with strong margins across various lines of business, despite increasing competition in some areas [9][8] - The marine portfolio continued to grow year-on-year, primarily driven by new construction business [10] - The aviation and aerospace premiums saw a reduction year-on-year due to the timing of a line slip renewal [11] Company Strategy and Development Direction - The company remains committed to pursuing profitable underwriting opportunities and strategic capital management, focusing on a diversified portfolio with no casualty exposure [6] - The management emphasized the importance of active exposure management and the strategic use of outward reinsurance to navigate current market conditions [8][12] - The company is exploring new opportunities in highly accretive business segments to maximize returns and access new risks [12] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in the ability to achieve approximately 10% growth in gross premiums written for the year, citing a strong trading environment [36][42] - The company is actively monitoring global economic conditions and adjusting its underwriting strategy accordingly, particularly in response to inflation and political risks [30][29] - Management highlighted the importance of maintaining strong relationships with clients and brokers to access business at preferential terms [34] Other Important Information - The company repurchased $41.5 million of common shares at an average cost of $15.63 per share year-to-date, indicating a commitment to returning capital to shareholders [14][27] - The company has settled or is in various stages of settlement discussions for approximately 80% of its total exposure related to the Russia-Ukraine aviation litigation [15][90] Q&A Session Summary Question: What are the growth opportunities in the second half of the year? - Management acknowledged a timing headwind in the aviation line and expressed confidence in achieving 10% growth for the year, citing a diversified portfolio [40][42] Question: Can you discuss the drivers behind the favorable reserve movement? - Management noted that the favorable prior year development of $41 million was driven by strong performance in the attritional book and reserve releases from prior catastrophe events [44][45] Question: Why is the stock trading at a discount to book value? - Management agreed on the undervaluation and emphasized the need to continue performing well to build investor confidence [48][50] Question: What is the impact of the pending UK aviation litigation on share repurchases? - Management indicated that the strong capital position allows for both profitable underwriting and share repurchases, with plans to continue buying back shares if prices remain attractive [82][85] Question: How is the company addressing the competitive environment in property insurance? - Management highlighted the ability to implement pricing adjustments in real-time and the strong demand from the admitted market, allowing for continued growth [92][94]