Bowhead Specialty Holdings Inc. Reports Second Quarter 2024 Results
Second Quarter 2024 Highlights
-
Gross written premiums increased 50.4% to
$175.5 million . -
Net income of
$5.5 million , or$0.20 per diluted share. -
Adjusted net income(1) of
$7.9 million , or$0.28 per diluted share(1). - Return on equity of 8.2% and adjusted return on equity(1) of 11.7%.
-
Upsized initial public offering completed in
May 2024 , raising$131.0 million in net proceeds through the issuance of 8,658,823 shares of common stock at$17.00 per share.
___________________ | ||
(1) Non-GAAP financial measure. See “—Reconciliation of Non-GAAP Financial Measures” for a reconciliation of the non-GAAP financial measures to their most directly comparable |
Bowhead Chief Executive Officer
Underwriting Results
The 50.4% increase in gross written premiums to
-
Our Casualty division led the growth with a 78.8% increase to
$114.2 million ; -
Healthcare increased 46.4% over the same period to
$16.9 million ; and -
Professional Liability increased 7.5% to
$44.4 million . - Late in the second quarter of 2024, we launched a new division called Baleen, which focuses on small, hard-to-place risks written 100% on a non-admitted basis. Baleen is a streamlined, low touch “flow” underwriting operation that supplements the “craft” solutions we offer today. In line with our deliberate, measured and limited roll out, Baleen gross written premiums for the second quarter of 2024 was minimal. We will report Baleen’s first full quarter gross written premiums during our third quarter earnings call.
Our loss ratio of 65.5% in the second quarter of 2024 utilizes the same industry loss ratios used since the fourth quarter of 2023 and remained unchanged compared to the first quarter of 2024. There were no changes to loss picks or prior year reserves during the quarter. As of
Our expense ratio of 33.8% included
Investment Results
Net investment income was
Excluding the net proceeds from our IPO, the weighted average effective duration of our investment portfolio, which included cash equivalents, increased from 1.9 years at
___________________ |
* Comparisons in this release are made to |
Summary of Operating Results
The following table summarizes the Company’s results of operations for the three months ended
|
Three Months Ended |
|||||||||
|
|
2024 |
|
|
2023 |
|
$ Change |
|
% Change |
|
($ in thousands, except percentages and per share data) |
||||||||||
Gross written premiums |
$ |
175,539 |
|
$ |
116,742 |
|
$ |
58,797 |
|
50.4 % |
Ceded written premiums |
|
(63,486) |
|
|
(40,310) |
|
|
(23,176) |
|
57.5 % |
Net written premiums |
$ |
112,053 |
|
$ |
76,432 |
|
$ |
35,621 |
|
46.6 % |
|
|
|
|
|
|
|
|
|||
Revenues |
|
|
|
|
|
|
|
|||
Net earned premiums |
$ |
90,087 |
|
$ |
61,374 |
|
$ |
28,713 |
|
46.8 % |
Net investment income |
|
8,777 |
|
|
4,048 |
|
|
4,729 |
|
116.8 % |
Net realized investment gains |
|
2 |
|
|
— |
|
|
2 |
|
NM |
Other insurance-related income |
|
32 |
|
|
31 |
|
|
1 |
|
4.8 % |
Total revenues |
|
98,898 |
|
|
65,453 |
|
|
33,445 |
|
51.1 % |
|
|
|
|
|
|
|
|
|||
Expenses |
|
|
|
|
|
|
|
|||
Net losses and loss adjustment expenses |
|
59,018 |
|
|
37,409 |
|
|
21,609 |
|
57.8 % |
Net acquisition costs |
|
7,582 |
|
|
4,960 |
|
|
2,622 |
|
52.9 % |
Operating expenses |
|
22,855 |
|
|
14,616 |
|
|
8,239 |
|
56.4 % |
Non-operating expenses |
|
1,481 |
|
|
— |
|
|
1,481 |
|
NM |
Warrant expense |
|
332 |
|
|
— |
|
|
332 |
|
NM |
Credit facility interest expenses and fees |
|
224 |
|
|
— |
|
|
224 |
|
NM |
Foreign exchange (gains) losses |
|
(4) |
|
|
8 |
|
|
(12) |
|
(148.5) % |
Total expenses |
|
91,488 |
|
|
56,993 |
|
|
34,495 |
|
60.5 % |
|
|
|
|
|
|
|
|
|||
Income before income taxes |
|
7,410 |
|
|
8,460 |
|
|
(1,050) |
|
(12.4) % |
Income tax expense |
|
(1,877) |
|
|
(1,905) |
|
|
28 |
|
(1.5) % |
Net income |
$ |
5,533 |
|
$ |
6,555 |
|
$ |
(1,022) |
|
(15.6) % |
|
|
|
|
|
|
|
|
|||
Key Operating and Financial Metrics: |
|
|
|
|
|
|
|
|||
Adjusted net income(1) |
$ |
7,880 |
|
$ |
6,561 |
|
$ |
1,319 |
|
20.1 % |
Loss ratio |
|
65.5 % |
|
|
61.0 % |
|
|
|
|
|
Expense ratio |
|
33.8 % |
|
|
31.9 % |
|
|
|
|
|
Combined ratio |
|
99.3 % |
|
|
92.8 % |
|
|
|
|
|
Return on equity(2) |
|
8.2 % |
|
|
22.2 % |
|
|
|
|
|
Adjusted return on equity(1)(2) |
|
11.7 % |
|
|
22.2 % |
|
|
|
|
|
Diluted earnings per share |
$ |
0.20 |
|
$ |
0.27 |
|
|
|
|
|
Diluted adjusted earnings per share(1) |
$ |
0.28 |
|
$ |
0.27 |
|
|
|
|
|
__________________ | ||||||||||
NM - Percentage change is not meaningful. | ||||||||||
(1) Non-GAAP financial measure. See “—Reconciliation of Non-GAAP Financial Measures” for a reconciliation of the non-GAAP financial measures to their most directly comparable |
||||||||||
(2) For the three months ended |
Condensed Consolidated Balance Sheets
|
|
|
|
||
|
($ in thousands, except share data) |
||||
Assets |
|
|
|
||
Investments |
|
|
|
||
Fixed maturity securities, available for sale, at fair value (amortized cost of |
$ |
706,199 |
|
$ |
554,624 |
Short-term investments, at amortized cost, which approximates fair value |
|
12,712 |
|
|
8,824 |
Total investments |
|
718,911 |
|
|
563,448 |
|
|
|
|
||
Cash and cash equivalents |
|
180,324 |
|
|
118,070 |
Restricted cash and cash equivalents |
|
18,494 |
|
|
1,698 |
Accrued investment income |
|
6,728 |
|
|
4,660 |
Premium balances receivable |
|
69,495 |
|
|
38,817 |
Reinsurance recoverable |
|
192,025 |
|
|
139,389 |
Prepaid reinsurance premiums |
|
133,992 |
|
|
116,732 |
Deferred policy acquisition costs |
|
24,564 |
|
|
19,407 |
Property and equipment, net |
|
7,481 |
|
|
7,601 |
Income taxes receivable |
|
1,320 |
|
|
1,107 |
Deferred tax assets, net |
|
17,071 |
|
|
14,229 |
Other assets |
|
24,768 |
|
|
2,701 |
Total assets |
$ |
1,395,173 |
|
$ |
1,027,859 |
|
|
|
|
||
Liabilities |
|
|
|
||
Reserve for losses and loss adjustment expenses |
$ |
587,905 |
|
$ |
431,186 |
Unearned premiums |
|
391,802 |
|
|
344,704 |
Reinsurance balances payable |
|
45,767 |
|
|
40,440 |
Income taxes payable |
|
29 |
|
|
42 |
Accrued expenses |
|
11,287 |
|
|
14,900 |
Other liabilities |
|
18,472 |
|
|
4,510 |
Total liabilities |
|
1,055,262 |
|
|
835,782 |
|
|
|
|
||
Commitments and contingencies (Note 13) |
|
|
|
||
|
|
|
|||
Mezzanine equity |
|
|
|
||
Performance stock units |
|
46 |
|
|
— |
|
|
|
|
||
Stockholders' equity |
|
|
|
||
Common stock |
|
327 |
|
|
240 |
( |
|
|
|
||
Additional paid-in capital |
|
314,636 |
|
|
178,543 |
Accumulated other comprehensive loss |
|
(12,309) |
|
|
(11,372) |
Retained earnings |
|
37,211 |
|
|
24,666 |
Total stockholders' equity |
|
339,865 |
|
|
192,077 |
Total mezzanine equity and stockholders' equity |
|
339,911 |
|
|
192,077 |
|
|
|
|
||
Total liabilities, mezzanine equity and stockholders' equity |
$ |
1,395,173 |
|
$ |
1,027,859 |
Gross Written Premiums
The following table presents gross written premiums by underwriting division for the three months ended
|
Three Months ended |
|||||||||||||
|
|
2024 |
|
% of Total |
|
|
2023 |
|
% of Total |
|
$ Change |
|
% Change |
|
|
($ in thousands, except percentages) |
|||||||||||||
Casualty |
$ |
114,233 |
|
65.1 % |
|
$ |
63,890 |
|
54.7 % |
|
$ |
50,343 |
|
78.8 % |
Professional Liability |
|
44,397 |
|
25.3 % |
|
|
41,302 |
|
35.4 % |
|
|
3,095 |
|
7.5 % |
Healthcare |
|
16,909 |
|
9.6 % |
|
|
11,550 |
|
9.9 % |
|
|
5,359 |
|
46.4 % |
Gross written premiums |
$ |
175,539 |
|
100.0 % |
|
$ |
116,742 |
|
100.0 % |
|
$ |
58,797 |
|
50.4 % |
Loss Ratio
The following table summarizes current and prior accident loss ratios for the three months ended
|
Three Months Ended |
||||||||
|
2024 |
|
2023 |
||||||
|
Net Losses and
|
|
% of Net Earned
|
|
Net Losses and
|
|
% of Net Earned
|
||
|
($ in thousands, except percentages) |
||||||||
Current accident year |
$ |
59,018 |
|
65.5 % |
|
$ |
37,148 |
|
60.5 % |
Prior accident year reserve development |
|
— |
|
— % |
|
|
261 |
|
0.4 % |
Total |
$ |
59,018 |
|
65.5 % |
|
$ |
37,409 |
|
61.0 % |
Expense Ratio
The following table summarizes the components of our expense ratio for the three months ended
|
Three Months Ended |
||||||||
|
2024 |
|
2023 |
||||||
|
Expenses |
|
% of Net Earned
|
|
Expenses |
|
% of Net Earned
|
||
|
($ in thousands, except percentages) |
||||||||
Net acquisition costs |
$ |
7,582 |
|
8.4 % |
|
$ |
4,960 |
|
8.1 % |
Operating expenses |
|
22,855 |
|
25.4 % |
|
|
14,616 |
|
23.8 % |
Total expense ratio |
$ |
30,437 |
|
33.8 % |
|
$ |
19,576 |
|
31.9 % |
Net Investment Income
The following table summarizes the sources of net investment income for the three months ended
|
Three Months Ended |
||||
|
|
2024 |
|
|
2023 |
|
($ in thousands) |
||||
|
$ |
3,836 |
|
$ |
656 |
State and municipal |
|
388 |
|
|
388 |
Commercial mortgage-backed securities |
|
468 |
|
|
363 |
Residential mortgage-backed securities |
|
1,920 |
|
|
246 |
Asset-backed securities |
|
(33) |
|
|
894 |
Corporate |
|
1,071 |
|
|
893 |
Short-term investments |
|
103 |
|
|
208 |
Cash and cash equivalents |
|
1,204 |
|
|
511 |
Gross investment income |
|
8,957 |
|
|
4,159 |
Investment expenses |
|
(180) |
|
|
(111) |
Net investment income |
$ |
8,777 |
|
$ |
4,048 |
Reconciliation of Non-GAAP Financial Measures
This earnings release contains certain financial measures that are not presented in accordance with generally accepted accounting principles in
- Adjusted net income is defined as net income excluding the impact of net realized investment gains, non-operating expenses, foreign exchange (gains) losses, and certain strategic initiatives. Adjusted net income excludes the impact of certain items that may not be indicative of underlying business trends, operating results, or future outlook, net of tax impact. We calculate the tax impact only on adjustments which would be included in calculating our income tax expense using the estimated tax rate at which we received a deduction for these adjustments.
- Adjusted return on equity is defined as adjusted net income as a percentage of average beginning and ending mezzanine equity and stockholders’ equity.
- Diluted adjusted earnings per share is defined as adjusted net income divided by the weighted average common shares outstanding for the period, reflecting the dilution that may occur if equity base awards are converted into common stock equivalents as calculated using the treasury stock method.
You should not rely on these non-GAAP financial measures as a substitute for any
Adjusted net income
Adjusted net income for the three months ended
|
Three Months Ended |
||||||||||
|
2024 |
|
2023 |
||||||||
|
Before income
|
|
After income
|
|
Before income
|
|
After income
|
||||
|
($ in thousands) |
||||||||||
Income as reported |
$ |
7,410 |
|
$ |
5,533 |
|
$ |
8,460 |
|
$ |
6,555 |
Adjustments: |
|
|
|
|
|
|
|
||||
Net realized investment gains |
|
(2) |
|
|
(2) |
|
|
— |
|
|
— |
Non-operating expenses |
|
1,481 |
|
|
1,481 |
|
|
— |
|
|
— |
Foreign exchange (gains) losses |
|
(4) |
|
|
(4) |
|
|
8 |
|
|
8 |
Strategic initiatives(1) |
|
1,496 |
|
|
1,496 |
|
|
— |
|
|
— |
Tax impact |
|
— |
|
|
(624) |
|
|
— |
|
|
(2) |
Adjusted net income |
$ |
10,381 |
|
$ |
7,880 |
|
$ |
8,468 |
|
$ |
6,561 |
___________________ | |||||||||||
(1) Strategic initiatives for the three months ended |
Adjusted return on equity
Adjusted return on equity for the three months ended
|
Three Months Ended |
||
|
2024 |
|
2023 |
|
($ in thousands, except percentages) |
||
Numerator: Adjusted net income(1) |
31,519 |
|
26,245 |
Denominator: Average mezzanine equity and stockholders' equity |
270,551 |
|
118,144 |
Adjusted return on equity |
11.7 % |
|
22.2 % |
___________________ | |||
(1) For the three months ended |
Diluted adjusted earnings per share
Diluted adjusted earnings per share for the three months ended
|
Three Months Ended |
||||
|
|
2024 |
|
|
2023 |
|
($ in thousands, except share and per share data) |
||||
Numerator: Adjusted net income |
$ |
7,880 |
|
$ |
6,561 |
Denominator: Diluted weighted average shares outstanding |
|
27,771,108 |
|
|
24,000,000 |
Diluted adjusted earnings per share |
$ |
0.28 |
|
$ |
0.27 |
About
Bowhead Specialty is a growing specialty insurance business providing casualty and professional liability insurance products. We were founded and are led by industry veteran
We pride ourselves on the quality and experience of our people, who are committed to exceeding our partners’ expectations through excellent service and expertise. Our collaborative culture spans all functions of our business and allows us to provide a consistent, positive experience for all of our partners.
Conference Call
The Company will host a conference call to discuss its results on the same day,
A replay of the event webcast will be available on the company’s Investor Relations website for one year following the call.
Forward-Looking Statements
This press release contains forward-looking statements. All statements other than statements of historical facts contained in press release are forward-looking statements. In some cases, forward-looking statements can be identified by terms such as "anticipates," "believes," "estimates," "expects," "intends," "plans," "predicts," "projects," "seeks," "future," "outlook," "prospects" "will," "would," "should," "could," "may," "can have" or similar words. Forward-looking statements involve risks and uncertainties that could cause actual results to differ materially from those contemplated by the forward-looking statements. These risks include those described under the caption "Risk Factors" in the Company's registration statement on Form S-1, Quarterly Report on Form 10-Q and other filings made with the
View source version on businesswire.com: https://www.businesswire.com/news/home/20240806859625/en/
Investor Relations:
investorrelations@bowheadspecialty.com
Source: