BOW - Earnings call transcript Q2 2024 | Bowhead Specialty Holdings Inc.

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Operator

Good day, ladies and gentlemen, and welcome to the Bowhead Specialty Second Quarter 2024 Earnings Call.

Our host for today's call is Shirley Yap, Chief Accounting Officer and Head of Investor Relations.

[Operator Instructions] I would like to now turn the call over to your host. Ms. Yap, you may begin.

Shek Yap

operator. Thanks, welcome Quarter and Call. Earnings Bowhead's to morning, XXXX Second Conference Good Shirley Officer Accounting Bowhead's Head I'm Chief Relations. and Yap, of Investor

today quarter of our Sills, were released Mulcahey, Officer. are morning. Officer; XXXX results me this Financial second Brad Financial our Chief the for earlier and Chief Joining Executive Stephen

earnings in Investor Relations can of our You release find section our the website.

Reform Investors meaning remind and current expectations contains management's forward-looking Before not call and of Private reliance we forward-looking this the begin, on XXXX. as this on everyone statement. are I'd that the Act Securities place undue These call beliefs. Litigation like date of based should made within the of of to any are statements only statements

that materially to could cause Forward-looking are statements actual from statements. contemplated uncertainties differ by these subject to and those results risks

should risks You update required SEC described filings. duty in forward-looking expressly fully by statements, our uncertainties to disclaim except as any any the We and law. review

financial call. the be morning found over be the earnings their comparable section to in can referencing measure Additionally, financial website. Relations these we that, our issued GAAP With release respective, Stephen? of most on Investor to Reconciliations measures certain in turn we measures non-GAAP and of directly will non-GAAP I'll this this Stephen. the call

Stephen Sills

call you, and a company. as earnings us public to thanks, our our again, on stockholders Thank first Shirley, joining and analysts for

the thank our we New Bowhead on all under Before I initial the to XX, day On get us started, offering. symbol May BOW. Exchange first Stock began of of moment to I'd members the a public who like York team our take trading helped through

new the evolution. are company's excited in We chapter to this very begin

rapid incredibly the years to over We success ago work X company's date. contributed have and under our founded to proud the Bowhead of are XXX employees hard just

who to key For us weren't the differentiators. those and reiterate roadshow, I to our able are we on who wanted join highlight

and where free surplus the rapidly specialty lines operating is specialty form growing market provides of and are adjust our premium rate substantially the market. insurance in emerging being growing within XX% of company, to to E&S a opportunities. market About excess flexibility the restrictions We profitable and

to company top successful, present our and come It our is underwriting Star. North within the first. down, ever profitability From is our our For must be people underwriting culture.

in-house to for strong, legal, accountable integrated claims, operations, with is underwriting accountable value chain. clients all culture long-term must generating our us This us Product our profits. deliver successful. be consistently distribution complemented and and to solutions while This to actuarial, underwriting together chain a custom seamlessly relationships IT work value development, fully allows

Not only hard are management across our we markets. in strategy. but market we not products cycles, of deliver were successful profitability across our primary and to excess created just part today, We've cycle capabilities as designed differentiated

subject today write experts proven that we with experienced underwriters Within the or underwriting profits. record a track lines matter highly are of generating

to even joining for earned, just team. has authority Underwriting be our experienced underwriters

on encourage For line, be organization. we and discussing we should time throughout evaluated, and spend the how agreeing close each risk collaboration considerable

based is by with experienced highly and have bring is this and as We to of. a with group entrepreneurial believe insurance dealing reside. starting time group a is my over where expertise, regardless operate part we business, We on of in This country. hybrid I've a that publicly mutual team and right. privilege, a that of backed on people the the as they any easily team best good and model management traded been a which depth people have across enables a us running as specialty third distribution long-standing relationships We select partners, benefit. not also XXX of up Furthermore, our service Bowhead the

exposures. cat prior years a investors, have no no with we to clean reserves accident sheet property from to XXXX balance Critical and

LPTs We conservative portfolio. intangibles, a have and no and no complicated investment simple

IPO that we have we profitability the turn it and attractive us that market and growth. a returns. discuss strong introduction that well growth conditions I track we believe with our our including profitable Mulcahey, robust balance supportive let capital quarter. details sheet, CFO, Lastly, have for me Bowhead, our of record platform With raised continued to Brad our the of positions over in to Brad? to and

Brad Mulcahey

and of ended share of income We $X.XX with adjusted of diluted Thanks, Rate divisions an improvement, to contribute most representing net record We our average casualty, with Stephen. written an particularly a casualty growth adjusted of accelerated per saw growing in to of book on our a more to premiums portion $XXX.X continues increase top in million the from than the larger the equity the or quarter compared line. premium XX.X%. $X.X Gross each return year. XX% with last million. to

of to X.X from loss book as internal others only of increase limited shift our utilize the loss that in where currently These loss percentage last The light for mix casualty, operating year ratios industry in ended using of from year. our ratio history. from XX.X%, ratios we've being by our industry expected I the greater QX in of of was which aggregate of levels of from are our rather quarter a have picks our the highlight the than high loss loss informed points an the IBNR, reflects in to have would XX% elected reported. reserves loss movement net and end business unchanged at prior quarter, like to at this data the ratio a deteriorated data

experience of reserves own excess nor take in expectations. not our quarter, any the During did did we any we activity loss down

of the due The profit being expense compensation at of by portion to continued business the to stock-based operating The slightly million an certain ratio the in to costs, points ratio in X.X $X.X the prior management's as of year. as ratio expense due expense IPO-related X.X% our investment product XX.X% increased change XX.X%, related well onetime increased increase ended largest acquisition X.X interest. quarter mix. points the the points X.X to for The from to

our Excluding the this investment the continued and decreased ratio noncash loss of our since of ratio contributed the which XX.X%, effect Overall, the onetime start-up expense ratio XXXX combined will of XX.X% to in to trend later. for item, of Stephen ratio despite from QX discuss expense quarter. a Baleen, XX.X%

moving reinsurance on portion to from auto start a the premium. The book. about allows retention impact exposure quarter, a Before casualty as of the this was Bowhead impacted vary treaty QX, each underwriting retained excess reduction the point underlying This impact the written premiums the results, within were But X for ceded the quarter will during treaty its cede premium varies. a of in exposure by new net of treaty.

turning income Now the doubled to more book. $X.X Pretax our investment to in quarter. net million current investment than

year-end, than XX% $XXX of which an net was influenced more million Our by proceeds. IPO additional portfolio increased since

the portfolio combination Excluding quarter, yield end of and while the increasing were IPO a of roll-off the the for an proceeds, rate for the X.X%, the had well above money positions was asset which income growth. book quarter. the X.X% future full not investment new at rate money yields new invested This company the of base

proceeds. and the effective again, portfolio credit to of addition, years X.X IPO quarter The for second the was excluding X.X tax of from quarter, the years In remains the duration at rate AA, increased second impact in the quality XX.X%.

with consistent rates range We expect future. in this the tax be to

at end XX% and the million the increase an year-end. it stockholders' was And book the $XXX.X back was equity Stephen, per quarter. value our of share With your quarter, I'll from to on you lastly, that, for turn $XX.XX of thoughts

Stephen Sills

Brad. Thanks,

professional market for of state provide Let growth on care and each E&S my is the of divisions: a observations our about and platform X give which policies. the smaller-dollar me of brief initiative, I'll liability. Baleen, hard-to-place, underwriting also streamlined our the casualty, health our update growth

across mentioned, consolidated of million each to was over basis, $XXX driven year which Brad of by a As on of a divisions. our growth ago, premium, XX% wrote compared Bowhead strength

submission growth in book, strong remained with quote our at Looking growth. at overall and premium levels line

at is in note are our We rates, appetite. disposal they also the wins more while business to quoted several efficiencies. that drivers growth year, one that our future last than growth within only operational submission addition We'd are and submissions of important, business new indicating

$XX lion's compared our the XX% years. up by was to rate for ago. for We division, disruptions tailwinds accident these in growth believe This due continue will foreseeable share that from casualty driven to over strong close or environment year was the the a the By of older the favorable future. dynamics million to growth, premium marketplace Bowhead

to team in offer we're in expect Additionally, the underwriting to expertise, which expanding quarter. fourth include QX, we our environmental casualty

liability division rate XX% renewals plus Healthcare grew strong Our driven new on and business. good retention by by over

business, X%. professional cyber, Our which liability by grew includes

pressure the public We space. in continue see to D&O

X% our While public the D&O last from competitive, by year. market increased is book

experiencing. the we're returns continue to reaching growth current the But runway for environment, clear, a To is very the long risk-adjusted can market see not Bowhead growth. are dynamics Overall, be favorable attractive given generate. in for the we we

Lastly, open we It call on focuses non-admitted before on a hard-to-place the new written me late the questions, XXX% for on give division XXXX. brief launched Baleen let significant a this low-touch streamlined, business This believe that low-touch this is to model, "flow" we But today. gradually. being has that underwriting plan operation execute a "flow" solutions growth one "craft" that a quarter Baleen, is a small second supplements update we of the; I in risks we potential. is offer with underwriting a basis.

XXXX rollout, limited was for the our with quarter deliberate, line Baleen minimal. In second of and premium measured

don't I'll over quarter we during expect third the we remarks Baleen plan first report call our to call. to full With While earnings conclude my XXXX, during quarter meaningfully turn and contribute questions. premium for Baleen's that,

Operator

KBW. from Meyer Instructions] comes Shields Your with question [Operator first

Meyer Shields

Great. Fantastic.

to the guess, additional the wanted pace appointments I start and, the about distribution over of quarter. of agency So by asking course I

Stephen Sills

of there's it The Thank in even we're divisions. XX look to think I that X business. we different different you. Recall lines though by need lines of kind at --

considerably So the commercial say, private find we what are smaller in let's number increased, is business. than casualty that in might being

they're we But So to having going for access we're that us each it varies. just us. open looking versus support commitments to somebody, time really

Meyer Shields

helpful. That's Okay.

pricing how and little wondering loss professional casualty. ratios And a I relative about lines. was much impacting that's or talked the professional some pressure components the in of lines You between bit whether

Stephen Sills

at The back certainly you professional that's professional I -- I'm of lines, when when we between on favorably. to lines not seen think back going seeing we're years you early between look have When we've open very litigation. what say -- we we -- our developing casualty, sure and follow

of a I on been class dismissal XX% think security there's XX%, history actions.

that but comfortable very things with we're still there's that. open, So are

in biggest on been has Keep business. we the the auto write concern basis casualty. on don't Casualty, primary auto primary our mind, a

is claims. lower earlier, the excess, we've volatility within covered bought those as think auto policies. auto we an carve-out, the And it which was On will mentioned from

Meyer Shields

that. I understand No,

else lines. all segments? the look predominantly loss we is loss I delta and book. casualty, think And increase ratio, the a between there's change wondering the higher pricing when more pricing loss than is I'm the in professional in of because in at equal, ratio Just casualty, casualty And in how ratio moderating those whether X the professional lines in change the the that's year-over-year

Stephen Sills

more relative independent loss of advice be of -- booking mix. going the basis. So we're in using versus the the up, casualty higher not think ratios the the the has showing flatness in professional the on formula will because outside, we're loss the using growth large book, a that actuaries, of I book the because mix because that case ratio with the we've been -- been -- But of

Operator

Your question Citizens. with Carletti comes Matt next from

Matthew Carletti

bit and Or there could are products driving give handful of the into growth you was the bit a color that all in is little areas hoping on the broad-based small pretty across underlying different of I growth? offer some lines. the really the you Stephen, segment? little Are the dig us of of it that a casualty maybe business a

Stephen Sills

We've that to X, in the be -- and in in was of the that number started construction underwriters, construction. to they growing. which month of was mix team or certainly attract have We've added a to at beginning, that's led believe at of just followings move we've the away casualty or the casualty of high-ranking last underwriters not increase to plus added will mix. has business, recently, business. more -- of there us. terms become of more the several construction very in from substantially an casualty of we a terms amount lot outside business than that's and organization, The the the We've least project heavy the It to will

Matthew Carletti

A the could. seen And have Great. cyber then the the anything one, I if business, following another CrowdStrike smaller loss of not incident, it. thinking business, side you about

underwriting the potential in just I from buyers. but our think perspective perspective it around we from an have be reaction or from that, market, more demand hands whether so a

Stephen Sills

is what comfortable think been what's Well, And seeing I we're we things to claims reported terms like with the with -- of and we're us that. in think there more demand.

starting potential But the I evaluate is more losses. to do think the industry of catastrophe

people's think billion, $X in I press all it's as have turned I to their been $X.X industry. the talking bricks reported what if insurance way how to think I into would trying about future. the get computers these would that the People happened in claims. And going were have how this very is evaluated billion. what's arms be manageable everybody the affected that's and are think But around

that high except large book cyber part in a Keep excess larger And overwhelmingly, is it's accounts. relatively our mind side. the of on level on

for we're demand seeing. going the we the see way to we're pretty uptick comfortable But coverage. an -- are going in So to sure see we're I'm

Operator

JPMorgan. question next from with Your Singzon Pablo comes

Pablo Singzon

insurers that the And did late those reserve to in Are see adding reserves post-XXXX been did surprised data your when trend? Some review in movements accident years. have you by 'XX? you you industry

Brad Mulcahey

Pablo, question. is Brad. this Thanks for the

the I side initially think surplus in we the side. -- it -- on surprised or surplus by happening of -- on we primary line the looked excess But more, more at as that. most that's sorry, were

in happening here. react So see those that of other quicker had we rates that the some with able were don't We're carriers markets. earlier to than

our we So think I see over don't side. really here that on

data. talk data, our reserves, data We industry -- that our the informs industry about own data it's using when in we

that with data. and So limited we history, complemented our own just industry have we some of

complements see is we as book as we kind what we to of our and can specifically what just see. So

the our and we're So experience mentioned. seeing reserves happy and with we're we that as

Stephen Sills

Yes.

our than to more said, as adding Keep in think mind, type I mix different group mix the seeing excess the that's of of Brad you're reserves, is what in from primary. business. we're

from past. in is the and of capacity that people limits what's the And versus they also, out the rates that. typically smaller that's lines said, as are $XX Brad a than Remember, going much opportunity Our been lot the put down us admitted. to coming on got million then surplus

we before, commercial not don't commercial se, it write we're also trucking Obviously, We I or per casualty, risk as and write some primary pick of even writing trucking. we up auto, auto risk. excess excess said pure trucking but

Pablo Singzon

Brad. Maybe Yes. That makes sense. better is And last me. then this just second and for for

the $XXX the quarter, time you of into I do So of to much balance of think over million what How end sheet. the reinvest expect that at fixed had you assets pace? cash on income and at

Brad Mulcahey

Yes. Pablo. Thanks,

that those think the obviously, I bond proceeds mentioned. May. the a We million late summer. is what takes you're $XXX to invest got in in market IPO while the seeing And during we it

a always around. we cash laying -- expect we have So bit little of

But have in being pretty most bills is to We in our that some particular. of pay, process big reinsurers for invested.

in better IPO kind cash rate noise think you'll our that I investment QX, a see of versus split. without run

Pablo Singzon

Yes.

you rate think holdco? to cash cash this, much right? you a on do company run So to And basis, on sorry, need you much how a the bow to need hold the at put at, just how run

Brad Mulcahey

to How holding what Is to much cash the run do we as the company? we question? that need sit opposed at

Pablo Singzon

Yes.

Sorry, have I it should phrased better.

hold cash of now right? need on to hold an But that of a amount go-forward basis? is cash to So is in go-forward What position, really, right? basis, you on that cash, need you you some excess amount mentioned a

Brad Mulcahey

It really varies quarter. every

basically number So it a invest actually. month. do that month what everything need, do and we don't we every We changes is that twice we

a solid really quarter. it could it changes truly of wish kind I I number, give So -- you but every

Operator

comes Heleniak Capital. question next from RBC Scott with Your

Scott Heleniak

not use of or kind longer -- there And you -- about up question, levels. you X. capital on talking year kind talking about on that And follow ratio just next debt? surplus-level just about not there can are that? I'm next just share quarter, Anything over over premium of to term that just how is the I'm the targeting And if I'm about of you're also, wanted Just time? a last to thinking

Brad Mulcahey

Yes.

bit I we going because our the the at a obviously the creating there. IPO in in high little excess to surplus have think ratio it's be if look upside a you QX, of --

more look of number kind our to prior towards would our number a I QX get or that. run rate So year for full

on bit some business the debt, execute capital, facility next but question better to returns to the from have that route did other just us we to revolving that opportunity little need the in to notice a you'll might the little add be debt, debt. think I ways that. we're credit a the Your a gives on We go, think a -- QX time we add business

Scott Heleniak

Yes.

And just that. I casualty seeing major versus helpful. know loss industry. then don't been on versus just the like share you're was the by or by rates across pretty you rate book ticking there Okay. segment can up cost anything anything any That's know QX? if you if And much on trend share can across what have -- change I

color the on there's loss areas, rate any if different you share versus can any So trend?

Stephen Sills

picks as originally it of we by business Yes. rate was in Casualty, seeing loss change, care the health We're And varies, earlier, -- a seeing mentioned we're as strongest trends suggest, our lines by in professional business. the terms we're the industry seeing expected. change by but business not from use we've followed and what you division. then

Scott Heleniak

Okay.

a QX is it is or So in much it the points versus Or... up QX? more by ticking casualty it that? Is few areas, than

Stephen Sills

is yes, say, a would lot. that kicking We it up

Operator

further to further no for to in questions I'd queue. like over our are back presenters any there call time, remarks. this At turn the

Stephen Sills

forward made company, public ahead including look Okay. the earnings I'd executing joining We're about opportunity very Bowhead's as to to on team us our strategy. everyone Morgan. possible. on all like for thank Thank us that of members a this excited call you, first and our

us puts strong returns within market. attractive a model and E&S large talk and you Thanks the to along the to position in underwriting differentiated growth way. generate again, underserved Our at we'll

Operator

Quarter Bowhead Call. the Second Earnings and for have Specialty XXXX a attending, your concludes This day. Thank wonderful rest you of

Bowhead Specialty (BOW) 6 Aug 242024 Q2 Earnings call transcript