Bowhead Specialty Holdings Inc. Q4 FY2025 earnings call

• Bowhead delivered 24% premium growth in 2025, expense ratio below 30%, adjusted net income up over 30%, adjusted ROE 13.6%, diluted EPS $1.65.
• Utilizes craft and digital underwriting models: craft led by experienced underwriters for complex risks; digital with Baleen and Express for small/midsized risks, automating underwriting.
• Derek Broaddus discussed casualty business, emphasizing underwriting talent, avoiding hotspots, limit discipline, and focus on profitable classes.

Gross written premiums (GWP) increased 21% in Q4 to $224 million and 24% for full year to ~$863 million. Casualty: Q4 GWP ~$133 million (+26%), full year ~$551 million (+28%), driven by excess casualty portfolio. Professional Liability: Q4 ~$48 million (+4%), full year ~$174 million (+9%), driven by cyber liability and commercial public D&O. Healthcare Liability: Q4 ~$34 million (+8%), full year ~$116 million (+14%), driven by health care management and senior care portfolios. Baleen: Q4 GWP up 47% from Q3 to over $9.1 million, full year over $21 million.

• Expect 20% GWP growth in 2026, led by Casualty and digital capabilities.
• 2026 loss ratio expected mid- to high 60s due to product mix and industry trends.
• Expense ratio expected below 30% for full year, first half slightly higher than second half due to payroll taxes.
• Combined ratio mid- to high 90s, ROE mid-teens.
• Investment portfolio duration expected to extend from 3 to 4 years.
• Proceeds from $150 million notes sufficient for 2026 regulatory capital requirements.

• Nonrecurring nature of construction project business in casualty may cause GWP lumpiness.
• Social inflation, outsized awards, and litigation funding pose risks to casualty portfolio.
• Movement of admitted markets into E&S space and entry of nonrisk-bearing MGAs/broker sidecars may moderate rate.

Q: Brad, walk us through what prior year reserve development implies for price adequacy for 2026 for professional health care?

A: Brad says they think priced well, small changes in reserving, no big pricing impact.

Q: On Baleen, when it grows, should we think of it as having same loss ratio as Casualty?

A: Stephen says Baleen's loss ratio will be superior to large casualty business.

Q: How translate industry data into loss ratio picks?

A: Brad says use third-party actuary's proprietary info, tailor to portfolio.

Q: Expense ratio target, long term where to?

A: Brad says technology initiatives help, still squeezing to get lower, comfortable low 30s.

Q: Sign of pricing environment plateauing in casualty for 2026?

A: Derek says limit discipline holding, mix of responses in market.

Q: AI and automation, disintermediating brokers?

A: Stephen says disintermediating not on radar, focus on speed to handle submissions.

Q: Mix impact on 2025 loss ratio uptick and 2026 impact?

A: Brad says no precise number yet, will review quarterly.

Q: Baleen growth in second half 2025 and 2026 growth?

A: Stephen says acceptance building, adding infrastructure, Express to help grow.

Q: Investment portfolio duration increase, go up risk curve?

A: Brad says no, keeping conservative risk profile.

Q: Lower expense ratio guide 2026, attributable to scale vs mix?

A: Brad says difference between low 30s and below 30% is impact of technology across both craft and digital business