Bowhead Specialty Holdings Inc. (NYSE: BOW), a growing specialty
lines insurance group focused on providing casualty, professional
liability and healthcare liability insurance products, today
announced preliminary financial results for the third quarter ended
September 30, 2024.
Preliminary Third Quarter 2024 Highlights
- Gross written premiums are expected to increase 27% to 34% year
over year to $193 million to $200 million.
- Net income is expected to be between $11.5 million and $12.5
million, or $0.34 to $0.37 per diluted share.
- Adjusted net income(1) is expected to be between $12 million
and $13 million or $0.36 to $0.39 per diluted share(1).
- Return on equity is expected to be between 13.0% and 14.0% and
adjusted return on equity(1) is expected to be between 13.5% and
14.5%.
- Book value per share is expected to be between $11.00 and
$11.25 and diluted book value per share is expected to be between
$10.80 and $11.00.
(1)
Non-GAAP financial measure. See
“Reconciliation of Non-GAAP Financial Measures” for a
reconciliation of the non-GAAP financial measure to the most
comparable U.S. GAAP measure.
Bowhead Chief Executive Officer Stephen Sills commented, “We are
pleased to share our preliminary third quarter results.
Additionally, since Bowhead does not write any property risks, we
do not expect any material direct losses as a result of the recent
hurricane activities. We look forward to sharing more about our
third quarter results on November 5th.”
Preliminary Underwriting Results
The expected increase in gross written premiums of 27% to 34%
year over year to $193 million to $200 million was driven by
renewals, new business, and continued growth in our platform across
all divisions.
- Our Casualty division led the gross written premium growth with
an approximately 40% increase year over year, which included a
preliminary $4 million of additional gross written premium (a
preliminary $3 million from a net earned premium basis) from an
unusually large audit premium from one insured;
- Healthcare Liability gross written premiums grew over 25% year
over year;
- Professional Liability gross written premiums grew over 10%
year over year;
- Late in the second quarter of 2024, we launched a new division
called Baleen Specialty, 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. In line with our
deliberate, measured and limited roll out, Baleen Specialty
generated a preliminary $0.4 million of gross written premiums for
the third quarter of 2024.
Our loss ratio is expected to be between 64.0% and 65.0% in the
third quarter of 2024, which utilized the same industry loss ratios
used since the fourth quarter of 2023. The expected decrease from
65.5% in the second quarter of 2024 was primarily driven by mix
changes in the portfolio, as well as the large audit premium being
fully earned and associated with older accident years with lower
loss pick assumptions. There were no changes to loss picks or prior
year reserves during the quarter. As of September 30, 2024,
incurred but not reported liabilities comprised over 90% of our net
loss reserves.
Our expense ratio is expected to be between 29.5% and 30.5% in
the third quarter of 2024, which represents an expected decrease
from 33.8% in the second quarter of 2024, or 32.3% excluding the
one-time stock-based compensation acceleration expense of $1.3
million in the second quarter of 2024. The expected decrease was
driven by continued prudent management of operating expenses, as
well as the impact of the large audit premium increasing net earned
premium.
Preliminary Investment Results
Net investment income is expected to be between $11 million and
$12 million for the three months ended September 30, 2024. Our IPO
proceeds were fully invested during the quarter and there were no
changes to our investment strategy from the previous quarter.
Summary of Selected Preliminary Financial Results
The following table summarizes selected preliminary financial
results for the three months ended September 30, 2024:
Three Months Ended September
30,
2024
($ in millions, except
percentages and per share data)
Gross written premiums
$
193 - 200
Net earned premiums
104 - 107
Net investment income
11 - 12
Total revenues
114 - 119
Net income
11.5 - 12.5
Key Operating and Financial
Metrics:
Adjusted net income(1)
$
12 - 13
Loss ratio
64.0% - 65.0%
Expense ratio
29.5% - 30.5%
Combined ratio
93.5% - 95.5%
Return on equity(2)
13.0% - 14.0%
Adjusted return on equity(1)(2)
13.5% - 14.5%
Diluted earnings per share
$
0.34 - 0.37
Diluted adjusted earnings per share(1)
$
0.36 - 0.39
(1)
Non-GAAP financial measure. See
“Reconciliation of Non-GAAP Financial Measures” for a
reconciliation of the non-GAAP financial measure to the most
comparable U.S. GAAP measure.
(2)
For the three months ended September 30,
2024, preliminary net income and preliminary adjusted net income
are annualized to arrive at preliminary return on equity and
preliminary adjusted return on equity.
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 the United States (“U.S. GAAP”). We use these
non-GAAP financial measures when planning, monitoring and
evaluating our performance. Management believes that each of the
non-GAAP financial measures described below provides useful insight
into our underlying business performance.
- Adjusted net income is defined as net income excluding the
impact of net realized investment gains (losses), 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 U.S. GAAP financial measure. While we believe
that these non-GAAP financial measures are useful in evaluating our
business, this information should be considered supplemental in
nature and not as a replacement for or superior to the comparable
U.S. GAAP measures. In addition, other companies, including
companies in our industry, may calculate such measures differently,
which reduces their usefulness as comparative measures.
Adjusted net income
Preliminary adjusted net income for the three months ended
September 30, 2024 reconciles to preliminary net income as
follows:
Three Months Ended September
30,
2024
Before income taxes
After income taxes
($ in millions)
Income as reported
$
15 - 16
$
11.5 - 12.5
Adjustments(1)
0 - 1
0 - 1
Adjusted net income
$
16 - 17
$
12 - 13
(1)
Adjustments include expected net realized
investment gains (losses) of less than $0.1 million, non-operating
expenses of approximately $0.5 million, and foreign exchange
(gains) losses and strategic initiatives of less than $0.1 million.
Estimated tax impact is applied to the “After income tax” column to
arrive at adjusted net income.
Adjusted return on equity
Preliminary adjusted return on equity for the three months ended
September 30, 2024 reconciles to preliminary return on equity as
follows:
Three Months Ended September
30,
2024
($ in millions, except
percentages)
Numerator: Adjusted net income(1)
$
47 - 51
Denominator: Average mezzanine equity and
stockholders' equity
351 - 352
Adjusted return on equity
13.5% - 14.5%
(1)
For the three months ended September 30,
2024 preliminary net income and preliminary adjusted net income are
annualized to arrive at preliminary return on equity and
preliminary adjusted return on equity.
Diluted adjusted earnings per share
Preliminary diluted adjusted earnings per share for the three
months ended September 30, 2024 reconciles to preliminary diluted
earnings per share as follows:
Three Months Ended September
30,
2024
($ in millions, except per share
data)
Numerator: Adjusted net income
$
12 - 13
Denominator: Diluted weighted average
shares outstanding
33
Diluted adjusted earnings per
share
$
0.36 - 0.39
About Bowhead Specialty Holdings Inc.
Bowhead Specialty is a growing specialty insurance business
providing casualty, professional liability and healthcare liability
insurance products. We were founded and are led by industry veteran
Stephen Sills. The team is composed of highly experienced and
respected industry veterans with decades of individual, successful
underwriting and management experience. We focus on providing
“craft” solutions in our specialty lines and classes of business
that we believe require deep underwriting and claims expertise in
order to produce attractive financial results.
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 Tuesday, November 5, 2024, beginning at 8:30 a.m. Eastern Time.
Interested parties may access the conference call through a live
webcast, which can be accessed via this link, by visiting the
Company’s Investor Relations website, or by dialing (877) 407-3949
(toll-free) or (215) 268-9917 (international). Please join the live
webcast or dial in at least 10 minutes before the start of the
call.
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 as that
term is defined in the Private Securities Litigation Reform Act of
1995. 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 and uncertainties include, but are not limited to, those
described in the Company’s Quarterly Report on Form 10-Q for the
quarterly period ended June 30, 2024 and any subsequent filings
with the Securities and Exchange Commission. Forward-looking
statements speak only as of the date of this press release and the
Company does not undertake any obligation to update or revise any
forward-looking information to reflect changes in assumptions, the
occurrence of unanticipated events or otherwise.
View source
version on businesswire.com: https://www.businesswire.com/news/home/20241021342620/en/
Investor Relations: Shirley Yap, Head of Investor
Relations investorrelations@bowheadspecialty.com
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