Bowhead Specialty (BOW) Financial Report Summaries

Risks

• Our financial condition and results of operations could be materially adversely affected if we do not accurately assess our underwriting risk.
• Competition for business in our industry is intense.
• Inability to maintain our strategic relationship with AmFam would materially adversely affect our business.
• A decline in AmFam’s financial strength rating or financial size category may adversely affect our financial condition and results of operations.
• Because our business depends on insurance retail agents, brokers and wholesalers, we are exposed to certain risks arising out of our reliance on these distribution channels that could adversely affect our results.
• We rely on a select group of brokers, and such relationships may not continue.
• We may be unable to continue purchasing third-party reinsurance in amounts we desire on commercially acceptable terms or on terms that adequately protect us, and this inability may materially adversely affect our business, financial condition and results of operations.
• Our losses and loss expense reserves may be inadequate to cover our actual losses, which could have a material adverse effect on our financial condition, results of operations and cash flows.
• Given the inherent uncertainty of risk assessment and underwriting tools and algorithms, the usefulness of such tools to evaluate risk is subject to a high degree of uncertainty that could result in actual losses that are
• materially different than our estimates. A deviation from our loss estimates may adversely impact, perhaps significantly, our financial results.
• We rely on third-party data, and inaccuracies in such data could adversely impact our ability to estimate losses and manage risks.
• Unexpected changes in the interpretation of our coverage or provisions, including loss limitations and exclusions, in our policies could have a material adverse effect on our financial condition and results of operations.
• Outward reinsurance is a key part of our strategy, subjecting us to the credit risk of our reinsurers and may not be available, affordable or adequate to protect against losses.
• Our reinsurers may not reimburse us for claims on a timely basis, or at all, which may materially adversely affect our business, financial condition and results of operations.
• We may act based on inaccurate or incomplete information regarding the accounts we underwrite.
• Our failure to accurately and timely pay claims could materially and adversely affect our business, financial condition, results of operations and prospects.
• Excessive risk taking could negatively affect our financial condition and business.
• If actual renewals of our existing contracts do not meet expectations, our gross written premiums in future years and our future results of operations could be materially adversely affected.
• Cyber threats are an evolving risk area affecting not only the specific cyber insurance market but also the liability coverage we provide which may adversely affect us.
• Changes in accounting practices and future pronouncements may materially affect our reported financial results and business.
• We may not be able to effectively start up or integrate new product opportunities.
• Adverse economic factors, including recession, inflation, periods of high unemployment or lower economic activity could result in the sale of fewer policies than expected or an increase in the frequency of claims and premium defaults, and even the falsification of claims, or a combination of these effects, which, in turn, could affect our growth and profitability.
• While the property and casualty insurance industry is generally currently experiencing a hard market, the insurance business is historically cyclical in nature, which may affect our financial performance and cause our operating results to vary from quarter to quarter and may not be indicative of future performance.
• Performance of our investment portfolio is subject to a variety of investment risks that may adversely affect our financial results.
• Pandemics, geopolitical and social events, severe weather conditions, including the effects of climate change and catastrophes, as well as man-made event events may adversely affect our business, results of operations and financial condition.
• We are subject to extensive regulation, which may adversely affect our ability to achieve our business objectives. In addition, if we fail to comply with these regulations, we may be subject to penalties, including fines, suspensions, revoking licenses, orders to cease and desist operations and criminal prosecution, which may adversely affect our financial condition and results of operations.
• We may become subject to additional government or market regulation, which may have a material adverse impact on our business.
• Changes in law, including relating to certain perils, could adversely affect our business.
• Applicable insurance laws may make it difficult to effect a change of control.
• We could be adversely affected by the loss of one or more key personnel or by an inability to attract and retain qualified personnel, including failure to develop a succession plan for Stephen Sills, our founder and Chief Executive Officer, or other members of our senior management team.
• We could suffer security breaches, loss of data, cyberattacks and other information technology failures, and are subject to laws and regulations concerning data privacy and security that are continually evolving. Actual or
• suspected information technology failures or failure to comply with applicable law could disrupt our operations, damage our reputation and adversely affect our business, operations and financial results.
• Operational risk exposures, such as human or systems failures (including from third-party vendor arrangements), are inherent in our business and may result in losses.
• We may change our underwriting guidelines or our strategy without your approval.
• We may not be able to manage our growth effectively.
• Any future acquisitions, strategic investments or new platforms could expose us to further risks or turn out to be unsuccessful.
• The effects of litigation on our business are uncertain and could have an adverse effect on our business.
• Loss of key vendor relationships or failure of a vendor to protect our data or confidential and proprietary information could affect our operations.
• We may fail or be unable to protect our intellectual property rights, which could adversely affect our brand and business.
• Our limited operating history may make it difficult to evaluate our current business and future prospects.
• We could be forced to sell investments to meet our liquidity requirements.
• Because we are a holding company and substantially all or a substantial portion of our operations are conducted by our insurance and service company subsidiaries, our ability to achieve liquidity at the holding company, including the ability to pay dividends and service our debt obligations, depends on our ability to obtain cash dividends or other permitted payments from our insurance and service company subsidiaries.
• We may require additional capital in the future, which may not be available or may only be available on unfavorable terms.
• Our failure to comply with the terms of our credit facility, including as a result of events beyond our control, could result in an event of default that could affect our business, financial condition, and results of operations.
• Our ability to incur a substantial level of indebtedness may reduce our financial flexibility, affect our ability to operate our business, and divert cash flow from operations for debt service.
• The Facility contains restrictions on our ability to operate our business and to pursue our business strategies.
• Our costs have increased significantly as a result of operating as a public company, and our management is required to devote substantial time to complying with public company regulations.
• We are required by Section 404 of the Sarbanes‑Oxley Act to evaluate the effectiveness of our internal control over financial reporting. If we are unable to achieve and maintain effective internal controls, our operating results and financial condition could be harmed and the market price of our common stock may be negatively affected.
• We qualify as an emerging growth company, and any decision on our part to comply with reduced reporting and disclosure requirements applicable to emerging growth companies could make our common stock less attractive to investors.
• You cannot be certain that an active trading market will continue or a specific share price will be established.
• Our operating results and stock price may be volatile, or may decline regardless of our operating performance, and you could lose all or part of your investment.
• Substantial future sales of shares of our common stock by existing stockholders, or the perception that those sales may occur, could cause the market price of our common stock to decline.
• Because we have no current plans to pay cash dividends on our common stock, you may not receive any return on investment unless you sell your shares of common stock for a price greater than that which you paid for it.
• If securities or industry analysts do not publish research or publish inaccurate or unfavorable research about our business, our stock price and trading volume could decline.
• Anti-takeover provisions in our organizational documents could delay a change in management and limit our share price.
• Our amended and restated certificate of incorporation provides that the Court of Chancery of the State of Delaware (or if such court does not have jurisdiction, another state or the federal courts (as appropriate) located within the State of Delaware) will be the sole and exclusive forum for certain stockholder litigation matters, which could limit our stockholders’ ability to obtain a favorable judicial forum for disputes with us or our directors, officers, employees, or stockholders.
• We are a “controlled company” within the meaning of the rules of NYSE and, as a result, will qualify for, and rely on, exemptions from certain corporate governance requirements. You do not have the same protections afforded to stockholders of companies that are subject to such requirements.
• GPC Fund and AFMIC exercise substantial influence over us, may engage in businesses that compete with us, and your ability to influence matters requiring stockholder approval may be limited.
• The track record of our executives may not be indicative of our future growth, profitability and performance.