Bowhead Specialty (NYSE:BOW) executives told investors the company delivered faster-than-expected premium growth and improved operating leverage in 2025, while maintaining a focus on underwriting discipline and conservative reserving. Management also reiterated an outlook for “around 20%” profitable premium growth in 2026, led primarily by casualty and supported by the company’s expanding digital underwriting capabilities.
2025 results: premium growth and improved expense ratio
CEO Stephen Sills said Bowhead produced “disciplined premium growth of 24% for the year,” exceeding its original expectation of 20%. He also highlighted a “meaningful improvement” in the expense ratio, which came in below 30% for the year, better than the low-30s range management expected at the start of 2025. Sills said these factors drove over 30% growth in adjusted net income, an adjusted return on equity of 13.6%, and diluted adjusted earnings per share of $1.65 for the year.
Premium trends: casualty led growth; Baleen gained momentum
Gross written premiums (GWP) increased 21% year over year in the fourth quarter to $224 million and rose 24% for the full year to about $863 million, with growth across each division and casualty as the primary driver.
- Casualty: GWP increased about 26% in the fourth quarter to $133 million and 28% for the full year to $551 million, driven primarily by excess casualty.
- Professional liability: GWP increased about 4% in the fourth quarter to $48 million and 9% for the full year to $174 million. Sills said fourth-quarter growth was primarily driven by cyber liability targeting small and mid-size accounts through digital underwriting capabilities.
- Healthcare liability: GWP increased about 8% in the fourth quarter to $34 million and 14% for the full year to $116 million, driven by healthcare management liability and senior care. Sills noted the hospitals portfolio grew while the company reduced total limits deployed.
- Baleen: GWP increased 47% from the third quarter to more than $9.1 million in the fourth quarter. For the full year, Baleen generated over $21 million.
Sills attributed stronger-than-expected fourth-quarter casualty growth partly to construction project risks quoted earlier in the year but delayed by macroeconomic factors. He said the “green lighting” of those projects added just under 30% to fourth-quarter casualty premiums, while cautioning the “non-recurring nature” of that business could create lumpiness in GWP.
Casualty market view: limit discipline, social inflation, and competition
Derek Broaddus, Bowhead’s Head of Casualty, said Bowhead entered casualty at the end of 2020 and has operated in an “uprate, relatively low-limit environment,” which he said still largely exists. He emphasized that Bowhead avoids casualty “hotspots,” including higher commercial auto risks hauling people or goods for others, and maintains limited exposure to large national accounts.
Broaddus highlighted ongoing industry pressures from social inflation, outsized verdicts, and litigation funding, and said Bowhead manages limits carefully, noting its average excess limit deployed is “just over $5 million,” versus $25 million blocks that were common pre-2020. He said limit discipline in excess casualty “largely remains,” with continued “limit compression from incumbents” creating opportunities, while also pointing to moderating influences such as admitted markets moving into E&S and additional capacity from MGAs and broker sidecars.
In the Q&A, Broaddus described a “lumpy moderation” in pricing, with differences between accounts still dealing with adverse development and those with years of compounded rate increases and strong loss experience. He added that, directionally, management continues to see rate exceeding loss trend.
Loss ratio, reserving approach, and combined ratio
Mulcahey said the company views full-year results as more meaningful because its annual reserve review occurs in the fourth quarter. Bowhead’s 2025 loss ratio was 66.7%, up 2.3 points from 64.4% in 2024. He attributed the increase in the current accident year loss ratio (up 1.8 points) partly to higher expected loss ratios and trends following the annual reserve review, as well as mix changes.
Mulcahey said the prior accident year loss ratio was unchanged as a result of the annual reserve review, but increased 0.5 points due to audit premiums recorded in 2025 related to prior accident years. He emphasized the audit premium-related reserves do not reflect losses settling above reserves, but rather aligning loss reserves to the appropriate accident year regardless of when premiums are billed and earned.
He also described reserve reallocations by division based on actuarially derived projected loss ratios and development patterns. In professional liability, the 2021 accident year performed well, resulting in a favorable $3.5 million reduction in IBNR, while the 2022 accident year was increased by $2.8 million due to early experience deviating from industry development patterns. In healthcare, he said the 2023 accident year performed well, but the 2022 accident year was increased by $2.2 million, and the 2024 accident year increased by $3.3 million “out of an abundance of caution.” Across the portfolio, Mulcahey said the reserve review produced no prior accident year development in aggregate net losses for 2025.
The 2025 expense ratio was 29.8%, down 1.6 points from 31.4% in 2024, driven by a 2.3-point decrease in operating expense ratio, partially offset by a 1.1-point increase in the net acquisition ratio. Mulcahey said the acquisition ratio increase reflected higher broker commissions from mix changes and, to a lesser extent, an increase in the ceding fee paid to American Family. The full-year combined ratio was 96.5%. Management also reiterated Bowhead does not write property or natural catastrophe-exposed risks.
Investments, capital, and 2026 outlook
Pre-tax net investment income rose about 36% year over year in the fourth quarter to $16.6 million and increased 44% for the full year to $57.8 million, driven primarily by a larger investment portfolio from increased free cash flow. At year-end, Bowhead reported a book yield of 4.6% and a new money rate of 4.5%, with an average credit quality of AA and duration increasing to three years. Mulcahey said the company expects to extend duration modestly to four years in 2026 to better match asset and liability duration, while keeping a conservative risk profile.
Mulcahey said total equity was $449 million, translating to diluted book value per share of $13.45, up 22% from year-end 2024. He also noted the company issued $150 million of 7.75% senior unsecured notes in November, maturing December 1, 2030, and said proceeds are expected to be sufficient for year-end 2026 regulatory capital requirements, with ongoing assessment during the year.
For 2026, management reiterated expectations for around 20% GWP growth, with casualty leading and incremental growth from digital capabilities. Mulcahey said the company expects a 2026 loss ratio in the mid-to-high 60s and an expense ratio below 30% for the year, with the first half slightly higher than the second half due to payroll taxes. He guided to a combined ratio in the mid-to-high 90s and return on equity in the mid-teens.
On reinsurance, Mulcahey said Bowhead renewed its cyber quota share treaty effective January 1 at 65%, up from 60% in 2025, and increased ceding commissions, while noting broader treaty renewals occur in May and reinsurers are expected to maintain financial strength ratings of A or better.
About Bowhead Specialty (NYSE:BOW)
Bowhead Specialty Holdings Inc provides specialty property and casualty insurance products in the United States. It underwrites casualty insurance solutions for risks in the construction, distribution, heavy manufacturing, real estate, and hospitality segments; professional liability insurance solutions for financial institutions, private and public directors and officers liability insurance, errors and omissions liability insurance, and cyber segments; and healthcare solutions for hospitals, senior care providers, managed care organizations, miscellaneous medical facilities, and healthcare management liability segments.
