Bowhead's Q3 2025: Contradictions Emerge on Growth, Capital Strategy, and Risk Management

Date of Call: November 4, 2025

Financials Results

• Revenue: $232M gross written premiums, up 17.5% YOY
• EPS: $0.47 per diluted share (adjusted), up 23.7% YOY

Guidance:

• No equity raise planned for 2025; management expects to access capital via non‑equity resources by year-end.
• Continued improvement in operating/expense ratios expected as technology and automation scale underwriting and claims.
• Net investment income expected to grow as investment balances and yields increase.
• Baleen and related technology to continue scaling premiums (small/mid-market cyber and small casualty) without commensurate expense growth.

Business Commentary:

Gross Written Premiums Growth:* - Bowhead Specialty Holdings reported gross written premiums of $232 million for Q3 2025, an increase of 17.5% year-over-year. - This growth was driven by a 20% increase in the Casualty division's premiums to $145 million for the quarter, with the excess casualty business being a key driver.

• Expense Ratio Improvement:
• The company's expense ratio improved by 40 basis points year-over-year, with an overall ratio of 29.5% for the quarter.

• This improvement is attributed to efficiency gains from automation, workflow optimization, and sharper execution in underwriting processes.

• Investment Income Increase:

• Net investment income rose by 31% year-over-year, totaling $15 million for the quarter.

• This increase is due to a higher balance of investments and higher yields on invested assets, with a book yield of 4.8% and a new money rate of 4.6% at the end of the quarter.

• Technology-Driven Efficiency:

• Enhancements in technology have allowed the company to scale efficiently, with the potential for further improvement in the expense ratio.
• Bowhead has leveraged technology to streamline underwriting processes, enhance decision-making, and improve risk selection, resulting in better operational efficiency.
  

  Sentiment Analysis:

  Overall Tone: Positive

  • Management: "delivered consistent strong top and bottom line growth." Key metrics: GWP $232M (+17.5% YOY), adjusted EPS $0.47 (+23.7% YOY), expense ratio 29.5% (down 40 bps YOY), combined ratio 95.4%. Management emphasized scaling efficiencies and continued premium and investment income growth.

Q&A:

• Question from Meyer Shields (Keefe, Bruyette, & Woods): 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 D&O and cyber markets. So you talked a little bit about growth. So I was hoping for a bigger picture of how pricing for those product lines is evolving.
  Response: Pricing in D&O/cyber is flat-to-slightly up but remains highly competitive; management does not expect material near-term growth there and will be selective, especially in financial‑institution D&O.

• Question from Meyer Shields (Keefe, Bruyette, & Woods): And moving to health care. Are there markets for the sexual molestation cover that's being excluded? Is that something that Bowhead is interested in?
  Response: The market is beginning to accept sexual abuse/molestation (SAM) exclusions with lower limits; some carriers still offer limited SAM coverage, and Bowhead sees limited-market availability rather than broad participation.

• Question from Daniel Lee (Morgan Stanley): I know the construction projects work was a driver for top line previously, but given the construction market feels softer now, except for maybe data centers, can you talk about business opportunities going forward within construction?
  Response: Construction opportunity pipeline remains but will be lumpy; data centers present some opportunity but often with unfavorable terms; management will participate selectively and expects pickup when government-funded projects resume.

• Question from Daniel Lee (Morgan Stanley): As we head into 2026 as Baleen continues to ramp up, will you pursue more wholesale partnerships to kind of expand the distribution network or maybe potentially new product lines that you may consider adding for Baleen?
  Response: Baleen remains wholesale-first and will add wholesalers over time; its technology enables near no‑touch underwriting, letting it scale into larger small‑business cyber and small casualty without heavy underwriting headcount.

• Question from Cave Montazeri (Deutsche Bank): How much of the improvement in the operating expense ratio this quarter was kind of due to these efficiencies, the technology-driven improvement? And where do you think that operating expense ratio can go to in 2026, 2027 or over the medium term?
  Response: Technology-driven efficiencies materially contributed to the expense-ratio improvement; management expects continued operating-expense ratio improvement as processes are industrialized, though no specific long-term target was given.

• Question from Cave Montazeri (Deutsche Bank): Right at the end of your prepared remarks, you mentioned that you won't need to tap the equity market to fund growth for 2026. Could you maybe give us a bit more color just given that your net premium to equity is already above 1.2x, are you thinking about getting some kind of debt that has equity-like features?
  Response: Management ruled out an equity raise for now and is evaluating alternative capital options (debt or other structures) but no final decision; details remain TBD.

• Question from Pablo Singzon (JPMorgan): Any update on your medium-term view of gross premium growth? As you grow the premium book, how much incremental expense do you need to add, particularly underwriting teams to generate the growth you anticipate?
  Response: Management expects continued premium growth and believes technology and scaled, lower‑cost underwriting roles will allow growth without proportionate increases in headcount or expense.

• Question from Pablo Singzon (JPMorgan): It sounds like given what you have now, you think the market is growing and without adding significant headcount or expense, you think the premiums will come your way? Is that a fair assessment?
  Response: Yes — future growth should be more leveraged per headcount, with added hires focused on lower-cost roles enabling higher premium per FTE.

• Question from Pablo Singzon (JPMorgan): There's a view that accident years during the post‑2020 hard market might not have as much margin as initially thought due to favorable loss trends. Do you agree or see that in your book, and when would you start recognizing favorable or unfavorable reserve development?
  Response: The book is still young; management sees no evidence of the adverse development peers reported and will provide more reserve color after the Q4 annual reserve review with external actuaries.

• Question from Jon Paul Newsome (Piper Sandler): Beyond debt and equity, are you also looking at other alternative sources of capital like reinsurance changes?
  Response: Reinsurance is a long-term capital tool under consideration, but for the current 2025 capital requirement reinsurance options are limited; equity issuance is off the table for now.

• Question from Jon Paul Newsome (Piper Sandler): As the float grows relative to equity, does that imply any changes prospectively to the investment portfolio?
  Response: No immediate changes planned; management is satisfied with an AA-quality portfolio (book yield 4.8%, new money 4.6%) and will continue to assess asset allocation on a risk‑adjusted basis as macro conditions evolve.

Contradiction Point 1

Growth Opportunities and Market Conditions

It involves differing perspectives on growth opportunities and market conditions, which are crucial for investor expectations regarding the company's performance and strategy.

Can you update your medium-term view on gross premium growth, given the 18% growth this quarter (slower than the high 20s in H1 2024) and a tough comp against last year? - Pablo Singzon(JPMorgan Chase & Co)

2025Q3: Bowhead sees opportunities for growth in existing lines, particularly casualty and healthcare. Technological advancements allow for expansion without proportional staff increases. While the exact growth rate is uncertain, Bowhead anticipates sustainable growth. - Stephen Sills(CEO)

Where do you see the strongest growth opportunities over the next year given the current market environment? - Siddhant Shah(Morgan Stanley)

2025Q2: In terms of absolute dollars, the Casualty business presents the strongest growth opportunities. However, in terms of percentage, Baleen shows the most potential given its smaller starting point. - Stephen Sills(CEO)

Contradiction Point 2

Capital Strategy and Funding Growth

It involves differing statements on the company's capital strategy and funding growth plans, which are crucial for financial planning and investor expectations.

Given your net premium to equity ratio is above 1.2x, are you considering debt with equity-like features for 2026 growth funding? - Cave Montazeri(Deutsche Bank AG)

2025Q3: Bowhead is not looking to raise equity for 2026 growth. Possible alternatives for capital include debt options similar to equity, aiming to maintain a surplus ratio below 1 without issuing equity. - Brad Mulcahey(CFO)

Will you need to raise equity capital again? - Meyer Shields(Keefe, Bruyette, & Woods)

2025Q2: We are not anticipating any equity raise in 2025, maybe limited in '26, and it will be a function of how quickly we can scale. - Brad Mulcahey(CFO)

Contradiction Point 3

Baleen's Growth and Strategy

It involves differing perspectives on Baleen's growth strategy and its role in the company's overall expansion, which could affect investor expectations and strategic planning.

Will you pursue additional wholesale partnerships or new product lines for Baleen as it ramps up through 2026? - Daniel Lee(Morgan Stanley)

2025Q3: Baleen is wholesale-only and may increase wholesalers in the future. Key growth will be driven by leveraging technology to underwrite smaller businesses effectively, expanding into areas like small cyber liability and casualty lines. - Stephen Sills(CEO)

Can you elaborate on the rollout of Baleen given several quarters of operations? - Matthew Carletti(Citizens Bank)

2025Q1: Baleen represents a new business line that is expected to grow significantly in the second half of the year, as we launch new products, including commercial auto, professional liability, and specialty casualty. This launch is the result of the successful integration of the technology platform. - Stephen Sills(CEO)

Contradiction Point 4

Reserve Development and Loss Ratio Trends

It involves differing outlooks on the development of loss reserves and loss ratio trends, which could impact financial forecasting and risk management.

Are post-2020 hard market accident years showing lower margins than expected in your portfolio? When will you recognize favorable/unfavorable reserve development? - Pablo Singzon(JPMorgan Chase & Co, Research Division)

2025Q3: It's too early to determine the impact on Bowhead's reserves, but initial reviews suggest no adverse development like other marketplace issues. Bowhead will continue to monitor reserves, with a comprehensive review planned post-year-end. - Stephen Sills(CEO), Brad Mulcahey(CFO)

Can you explain the difference in the fourth quarter accident year loss ratio compared to the first nine months of the year? Was it due to mix changes or a reassessment of loss trends? - Meyer Shields(Keefe, Bruyette, & Woods)

2024Q4: We did see a $3 million favorable development, which was primarily due to the change in mix and our projections of ongoing accident year losses. - Brad Mulcahey(CFO)

Contradiction Point 5

Sexual Molestation Coverage

It relates to the company's stance on covering sexual molestation claims, which could affect their risk profile and regulatory compliance.

Is there a market for excluded sexual molestation coverage? Is Bowhead interested in this? - Meyer Shields(Keefe, Bruyette, & Woods, Inc., Research Division)

2025Q3: Sexual molestation cover is becoming excluded in some lower limit policies, addressing the significant claims affecting health care systems. The market is starting to accept these exclusions, and lower limit coverage may still be available. - Stephen Sills(CEO)

What caused the slowdown in health care liability GWP, and do you expect growth in 2025? - Scott Heleniak(RBC Capital Markets)

2024Q4: The recognition of sexual abuse and molestation claims and rising settlement values has led to rate increases. - Stephen Sills(CEO)