Bowhead Specialty Holdings Inc.(BOW) - 2024 Q2 - Quarterly Report

Business Overview - Bowhead Specialty Holdings Inc. focuses on providing specialty Property and Casualty products, particularly in Casualty, Professional Liability, and Healthcare risks[124]. - The company originated business on the paper of American Family Mutual Insurance Company, reinsuring 100% of the insurance business to its wholly-owned subsidiary, Bowhead Insurance Company, Inc.[126]. - The company was founded in September 2020, capitalizing on a favorable pricing environment and unmet demand for specialized insurance solutions[126]. Financial Performance - Gross written premiums increased by $58.8 million, or 50.4$175.5 million for the three months ended June 30, 2024, compared to $116.7 million for the same period in 2023[153]. - Net written premiums rose by$35.6 million, or 46.6%, to $112.1 million for the three months ended June 30, 2024, from$76.4 million in the prior year[154]. - Net earned premiums increased by $28.7 million, or 46.8$90.1 million for the three months ended June 30, 2024, compared to $61.4 million for the same period in 2023[155]. - Net income for the six months ended June 30, 2024, was$12.55 million, an increase of 8.6% from $11.56 million in the prior year[181]. - Adjusted net income increased by$4.53 million, or 39.2%, to $16.07 million for the six months ended June 30, 2024, compared to$11.54 million in the prior year[176]. Underwriting Metrics - Key operating metrics include loss ratio, expense ratio, and combined ratio, which are critical for assessing financial performance[150]. - The loss ratio was 65.5% for the three months ended June 30, 2024, an increase of 4.5 points from 61.0% in the same period of 2023[156]. - The expense ratio increased to 33.8% for the three months ended June 30, 2024, compared to 31.9% for the same period in 2023[158]. - The combined ratio was 99.3% for the three months ended June 30, 2024, up from 92.8% in the prior year[161]. Investment Performance - Net investment income increased by $4.7 million to$8.8 million for the three months ended June 30, 2024, from $4.0 million in the prior year[163]. - Net investment income rose by$9.0 million to $16.4 million for the six months ended June 30, 2024, from$7.4 million in the same period of 2023[180]. - The investment portfolio as of June 30, 2024, comprised $706.2 million in fixed maturity securities with a market yield of 5.5$859.4 million as of June 30, 2024, compared to $567.3 million as of December 31, 2023[265]. Capital Management - The company aims to generate consistent underwriting profits across product lines while managing capital prudently, with a focus on operational excellence and superior service[125]. - The Company entered into a senior secured revolving credit facility with an aggregate principal amount of$75 million, including a $5 million sub-facility for letters of credit[203]. - As of June 30, 2024, the holding company had$140.1 million in cash and investments, indicating sufficient liquidity for the next 12 months[202]. Risk Management - Future performance is subject to various risks, including competition, regulatory changes, and operational disruptions[123]. - The company utilizes a combination of quota share and excess of loss reinsurance treaties to manage loss exposures and safeguard capital[212]. - The company manages interest rate risk by investing in securities with varied maturity dates and aligning the duration of the investment portfolio with reserves[264]. Reserves and Losses - The reserve for losses and loss adjustment expenses totaled $587,905,000 as of June 30, 2024, with IBNR representing 93.2$222.464 million, with a potential 7.5% increase leading to $239.149 million[252].