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Bowhead Specialty Holdings Inc. (BOW)·Q1 2025 Earnings Summary

Executive Summary

  • Q1 2025 delivered disciplined growth: gross written premiums rose 26.3% to $174.8M, adjusted net income was $11.5M ($0.34), and combined ratio was 97.3% as mix shifted further toward Casualty .
  • EPS modestly beat consensus and revenue was slightly below, with strength from net investment income (+64% YoY to $12.6M) supporting earnings despite a higher loss ratio; management reiterated premium growth of “around 20%” annually and mid‑60s loss ratio for 2025 . EPS consensus $0.326* vs actual $0.34; revenue consensus $125.48M* vs actual $122.716M (S&P Global).
  • Strategic progress: Casualty led with 33.7% GWP growth to $122.3M; Baleen “flow” underwriting ramped to $2.7M (+131% QoQ), with broader distribution and plans for a second-half premium ramp .
  • Key watch items: prior accident year reserve impact from audit premiums (0.4 pts) and seasonal ULAE shifting into loss ratio; fronting fee to AmFam rising in Q2 (2.75%) is an expense headwind, partially offset by scale .

What Went Well and What Went Wrong

What Went Well

  • Premium growth and underwriting discipline: “disciplined premium growth of over 26%... our Casualty division drove the largest component of this growth” with lower average limits and continued double‑digit rate increases .
  • Investment income tailwind: Net investment income +64% YoY to $12.6M; book yield 4.7% and new money 4.8%, with AA average credit and duration extended to 2.8 years .
  • Flow underwriting ramp: Baleen generated $2.7M, +131% QoQ, with instant quote/bind capabilities; management expects a meaningful second‑half ramp one year post‑launch .

What Went Wrong

  • Loss ratio higher: Q1 loss ratio rose to 66.9% (vs 65.5% LY) from 0.4 pts prior-year audit premiums and 1.0 pt mix shift toward higher-loss Casualty .
  • Seasonal ULAE in claims: Paid ULAE in Q1 shifted expenses into loss ratio (part of a 2.1 pt increase in current accident year loss ratio), adding volatility to quarterly ratios .
  • Competitive pressure in Professional: Management cited undisciplined market behavior and rate pressure, particularly higher in large public D&O, although cyber remains a bright spot .

Financial Results

Revenue, EPS, Estimates

MetricQ3 2024Q4 2024Q1 2025 ActualQ1 2025 Consensus*
Revenue ($USD Millions)$116.671*$119.331 $122.716 $125.480*
Diluted EPS ($)$0.36*$0.41 $0.34 $0.326*
  • EPS beat: $0.34 vs $0.326 consensus (+$0.01) and revenue was slightly below ($122.716M vs $125.48M). Values with asterisks retrieved from S&P Global.

Underwriting and Margins

MetricQ3 2024Q4 2024Q1 2025
Loss Ratio (%)64.5 62.6 66.9
Expense Ratio (%)29.9 30.1 30.4
Combined Ratio (%)94.4 92.7 97.3
Net Investment Income ($M)$11.5 $12.193 $12.559

Segment GWP Breakdown

Segment GWP ($USD Millions)Q4 2024Q1 2025
Casualty$105.9 $122.3
Professional Liability$46.0 $26.0
Healthcare Liability$31.7 $23.8
Baleen Specialty$1.2 $2.7
Total GWP$184.8 $174.8

KPIs and Balance Sheet

KPIQ4 2024Q1 2025
Diluted BVPS ($)$11.03 $11.61
Book Yield (%)4.6 4.7
New Money Rate (%)4.9 4.8
Portfolio Duration (years)2.2 2.8
IBNR as % of Reserves90.7% (YE2024) 89% (Q1)
Total Equity ($M)$370.2 $391.0

Guidance Changes

MetricPeriodPrevious GuidanceCurrent GuidanceChange
Premium GrowthFY 2025~20% growth (Q4 call) ~20% growth reiterated Maintained
Loss RatioFY 2025Mid‑60s% Mid‑60s% reiterated Maintained
Expense RatioFY 2025Low‑30s% (slightly higher 1H vs 2H) Low‑30s% reiterated; note paid ULAE/bonus in Q1, RSU vest in Q2 Maintained (with seasonal notes)
Combined RatioFY 2025Mid‑90s% Mid‑90s% reiterated Maintained
ROEFY 2025Mid‑teens Mid‑teens reiterated Maintained
Fronting/Ceding Fee (AmFam)Effective Q2 2025~2.0% of earned (net) 2.75% fronting fee (net ~2% after expenses) Raised
Tax RateFY 2025~24% in 2024 baseline ~21% Q1 (lower range for year; variable with stock awards) Lower vs 2024 baseline
Cyber Quota Share202564% in 2024 60% (higher ceding commissions) Improved terms

Earnings Call Themes & Trends

TopicQ3 2024 (Prev‑2)Q4 2024 (Prev‑1)Q1 2025 (Current)Trend
Casualty market/pricingStrong excess casualty tailwinds; towers collapsing; mix to Casualty Sustainable opportunity; social inflation/nuclear verdicts drive rates Casualty GWP +34%; higher mix raises current loss pick Continued strength; higher portfolio mix
Professional Liability competitionCompetitive; undisciplined behavior, rate softening outside cyber Large public D&O very competitive; cyber growth Competition persists; disciplined underwriting, small/mid market focus Persistent competition; selective growth
Baleen (flow) rolloutTechnology proven; expanding eligible classes; brokers changing habits Early traction; Q4 GWP $1.2M Q1 GWP $2.7M; expecting 2H ramp Scaling; distribution broadening
Reserves & IBNRIBNR >91%; no PYD; audit premiums impact quarterly ratios Reallocation by division; no aggregate PYD; IBNR 90.7% 0.4 pt PYD from audit premiums; IBNR 89% Conservative stance; audit mechanics recurring
Investment portfolioFully invested IPO proceeds; 4.7% yield, 2.2 years duration 4.6% book yield; AA; 2.2 years 4.7% yield; AA; duration extended to 2.8 years Higher income; modest duration extension
Macro/tariffs——Tariffs could slow E&S construction; expect maintained discipline/limits Watch macro headwinds; underwriting discipline intact

Management Commentary

  • “Disciplined premium growth of over 26%… Casualty drove the largest component… deploying lower average limits” — Stephen Sills .
  • “Adjusted net income of $11.5M or $0.34… loss ratio 66.9%… combined 97.3%… NII up 64% to $12.6M… book yield 4.7%, new money 4.8%” — Brad Mulcahey .
  • “We believe Bowhead is well positioned to profitably grow premiums by around 20% on an annual basis” — Stephen Sills .
  • “Baleen can ingest submissions and issue a bindable quote within minutes… we’re confident you’ll see larger growth in the second half” — Stephen Sills .
  • “Paid ULAE in Q1 reallocates claims team costs to loss ratio… adds seasonality to both ratios” — Brad Mulcahey .

Q&A Highlights

  • Competitive environment: Professional seeing more competition; excess casualty reorganizing with compressed limits; Bowhead stays wholesale‑only and avoids large Fortune 100 .
  • Reserve mechanics: Audit premiums related to prior accident years booked as PYD to improve reserve hygiene; mismatches can arise vs premium recognition .
  • Expense ratio outlook: Fronting fee step‑up to 2.75% in Q2 is a headwind; expect low‑30s expense ratio with scale leverage offsetting some pressure .
  • Baleen brokers/distribution: Mixed receptivity; opening many brokers; expect bigger 2H ramp as habits shift away from auto‑renewals on small premiums .
  • Tax rate: Q1 effective tax rate at 21% is “low range”; variability tied to stock price/awards .

Estimates Context

  • Q1 2025 vs consensus (S&P Global):
    • EPS: $0.34 actual vs $0.326 consensus* → bold beat.
    • Revenue: $122.716M actual vs $125.480M consensus* → bold slight miss.
  • Drivers: Higher loss ratio from mix and audit PYD offset by stronger net investment income and lower operating expense ratio; management maintained full‑year underwriting and growth outlook .
MetricQ1 2025 ActualQ1 2025 Consensus*Surprise
EPS ($)$0.34 $0.326*Beat
Revenue ($M)$122.716 $125.480*Miss

Values with asterisks retrieved from S&P Global.

Key Takeaways for Investors

  • Mix shift toward Casualty remains the core growth engine; expect higher current accident year loss picks but attractive rates and improved terms support profitability .
  • Quarterly margin volatility (audit premiums, paid ULAE) is mechanical/seasonal; management guides to annual loss mid‑60s and expense low‑30s despite Q1 ratio noise .
  • Investment income is a meaningful tailwind with higher yields and extended duration, underpinning EPS resilience amid underwriting mix changes .
  • Baleen’s tech‑enabled “flow” underwriting is scaling and should contribute more materially in 2H 2025; distribution build‑out is the near‑term lever .
  • Watch expense headwinds in Q2 from AmFam fronting fee (2.75%) and RSU vesting; scale efficiency expected to offset over time .
  • Conservative reserving posture (high IBNR, prior‑year audit treatment) and no property cat exposure reduce tail risk and revenue volatility from CATs .
  • Medium‑term thesis: disciplined underwriting in E&S, data/tech leverage, and balanced craft/flow platform support cross‑cycle ROE in mid‑teens, with premium CAGR “around 20%” guided by management .
Note: All document-derived figures are cited inline. Consensus estimates marked with * are values retrieved from S&P Global.