By David Bull

Feb 25 - (The Insurer) - Shares in Bowhead Specialty closed up around 7% Tuesday after a Q4 earnings beat and commentary from founding CEO Stephen Sills that the company expects to profitably grow its top line by around 20% in 2025, including a strong contribution from its expansive casualty book.

The New York-based specialty lines player reported adjusted net income of $0.42 a share for the quarter that was ahead of Wall Street consensus forecasts of $0.33 a share.

Gross written premiums (GWP) climbed 26.3% to $184.8 million in the quarter and in a year when Bowhead Specialty went public in an IPO and then successfully closed a secondary offering, GWP grew 37.0% to $695.7 million for the 12-month period.

For the full year, Sills highlighted 56% top-line growth in casualty and double-digit premium growth in healthcare liability and professional liability.

The company also launched its tech-enabled low touch “flow” underwriting operation Baleen Specialty in the second quarter as well as new products, including in environmental.

“As we look ahead into 2025, our focus is to build on the momentum we generated in 2024 and continue to grow our business profitably. This is just the beginning for Bowhead and I couldn’t be more excited for what I expect to be a company that is capable of cross cycle profitability,” said Sills.

For the quarter, Bowhead Specialty reported a combined ratio that improved from 100.5% to 92.7%, with a loss ratio that narrowed from 69.2% to 62.6%.

For the full year, the combined ratio was 95.8%, up from 94.9%, with a loss ratio that increased from 63.0% to 64.4%.

EXCESS CASUALTY RATE INCREASES “SUSTAINABLE”

On the company’s call with analysts, Sills was asked about the outlook in excess casualty, where there have been significant rate increases.

“We think it is very sustainable. We think that… we’ve got a few more years of it at least. I think all the talk about social inflation and nuclear verdicts is not fantasy – it’s real. We don’t write primary auto, we don’t write fleets. But, of course, we write contractors and contractors have trucks… we’ve seen on some of the excess business that we write verdicts that are eye-watering in what they’re settled for.

“And I think the market overall is scrambling to catch up. So we think that there’s more opportunity in terms of new business, but a substantial opportunity in terms of increased rates on existing business,” said the industry veteran.

Sills said the company is actively recruiting in the primary and excess casualty space, as he also highlighted its move last year to start up in the environmental space.

Asked about professional liability conditions and the outlook for 2025, Sills said that the company’s cyber book is seeing “really nice growth” and has been a successful line to enter.

But he noted the pressure that large publicly traded D&O risks are under, where there is “really aggressive” behaviour. Bowhead Specialty has looked to play higher up towers, but said often it is too competitive and “not worth the effort”.

“We go out there, we get enough submissions to work on, but it’s just not worth it to put in a low price per million in the hope that nothing is going to be in a giant tower lost. As I’ve said before, hope is not a strategy, so we’ve let a lot of that business go.

“We think we can grow in the private business. We think we can grow in the very small publicly traded business and certainly believe we can grow in the cyber business,” he said, adding that the company has focused on larger accounts in that line of business, but will target smaller risks where it can bring technology.

Bowhead Specialty also expects to see growth in healthcare, particularly in the hospital space.

20% GROWTH FORECAST

Commenting more generally on growth prospects, Sills said: “We expect to profitably grow our business around 20% in 2025, continue to build upon the momentum we've achieved with Baleen and apply the technology to other areas in our business, opportunistically and strategically expand into new products or markets and maintain our underwriting-first culture in both our craft and flow underwriting operations.”

In a note reiterating his Outperform view on the stock, JMP analyst Matt Carletti said: “Bowhead is well positioned to take advantage of prevailing hard market conditions in specialty casualty insurance lines.”

He added that while in some areas of property, where Bowhead has non exposure, there are signs of moderating, the ongoing recognition of troublesome and under-reserved accident years, including 2015 to 2019 as well as 2020-2021, is leading to a “reacceleration of improvement in pricing and terms/conditions that will extend the cycle’s runway in the areas of the market Bowhead focuses on (casualty, professional liability, and healthcare”.

“With deep broker relationships and a reputation for providing thoughtful solutions in complex areas of the market, we believe Bowhead has a long runway for growth ahead,” said Carletti.

On Tuesday, shares in Bowhead closed up 6.7% at $33.63, close to two times its IPO price of $17 when it went public last May.