Form: 10-Q

Quarterly report pursuant to Section 13 or 15(d)

November 5, 2024

Documents

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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

FORM 10-Q

(Mark One)
x QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended September 30, 2024
OR
o TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from to
Commission file number 001-42111
_________________________

Bowhead Specialty Holdings Inc.
(Exact name of registrant as specified in its charter)
_________________________
Delaware
87-1433334
(State or other jurisdiction of
incorporation or organization)
(I.R.S. Employer Identification No.)
452 Fifth Avenue, New York, New York
10018
(Address of Principal Executive Offices) (Zip Code)
(212) 970-0269
Registrant’s telephone number, including area code

Securities registered pursuant to Section 12(b) of the Act:
Title of each class Trading Symbol(s) Name of each exchange on which registered
Common Stock, par value $0.01 per share
BOW
New York Stock Exchange

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes x No o
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes x   No o
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,”and "emerging growth company" in Rule 12b-2 of the Exchange Act.
Large accelerated filer o Accelerated filer o
Non-accelerated filer
x
 Smaller reporting company o
Emerging growth company
x
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.o
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act). Yes o  No x
Number of shares of the registrant’s common stock outstanding at October 5, 2024: 32,658,823

1

Bowhead Specialty Holdings Inc.
TABLE OF CONTENTS
Page

2

PART I. - FINANCIAL INFORMATION
Item 1. Financial Statements
Bowhead Specialty Holdings Inc.
Condensed Consolidated Balance Sheets (Unaudited)
September 30,
2024		 December 31, 2023
($ in thousands, except share data)
Assets
Investments
Fixed maturity securities, available for sale, at fair value (amortized cost of $892,953 and $569,013, respectively)
 $ 891,252  $ 554,624 
Short-term investments, at amortized cost, which approximates fair value 10,002  8,824 
Total investments
901,254  563,448 
Cash and cash equivalents 132,893  118,070 
Restricted cash and cash equivalents 28,822  1,698 
Accrued investment income 7,118  4,660 
Premium balances receivable 46,706  38,817 
Reinsurance recoverable 225,011  139,389 
Prepaid reinsurance premiums 146,133  116,732 
Deferred policy acquisition costs 26,463  19,407 
Property and equipment, net 7,438  7,601 
Income taxes receivable 325  1,107 
Deferred tax assets, net 16,277  14,229 
Other assets 9,222  2,701 
Total assets
$ 1,547,662  $ 1,027,859 
Liabilities
Reserve for losses and loss adjustment expenses $ 679,568  $ 431,186 
Unearned premiums 427,096  344,704 
Reinsurance balances payable 54,162  40,440 
Income taxes payable 29  42 
Accrued expenses 14,696  14,900 
Other liabilities 7,285  4,510 
Total liabilities
1,182,836  835,782 
Commitments and contingencies (Note 13)
Mezzanine equity
Performance stock units 155  — 
Stockholders' equity
Common stock 327  240 
($0.01 par value; 400,000,000 shares authorized, 32,658,823 and 24,000,000 shares issued and outstanding at September 30, 2024 and December 31, 2023, respectively)
Additional paid-in capital 316,334  178,543 
Accumulated other comprehensive loss (1,293) (11,372)
Retained earnings 49,303  24,666 
Total stockholders' equity 364,671  192,077 
Total mezzanine equity and stockholders' equity 364,826  192,077 
Total liabilities, mezzanine equity and stockholders' equity
$ 1,547,662  $ 1,027,859 
See accompanying Notes to the Condensed Consolidated Financial Statements.
3
Bowhead Specialty Holdings Inc.
Condensed Consolidated Statements of Income and Comprehensive Income (Unaudited)

Three Months Ended
September 30,		 Nine Months Ended
September 30,
2024 2023 2024 2023
($ in thousands, except share and per share data)
Revenues
Gross written premiums $ 196,976  $ 148,919  $ 510,948  $ 361,367 
Ceded written premiums (68,643) (49,581) (179,710) (121,639)
Net written premiums
128,333  99,338  331,238  239,728 
Change in net unearned premiums
 (23,153) (28,464) (52,991) (51,818)
Net earned premiums
105,180  70,874  278,247  187,910 
Net investment income 11,491  5,188  27,928  12,589 
Net realized investment losses (18) —  (16) — 
Other insurance-related income
 108  31  171  94 
Total revenues
116,761  76,093  306,330  200,593 
Expenses
Net losses and loss adjustment expenses
 67,824  42,796  181,162  113,664 
Net acquisition costs 9,163  5,617  23,267  15,148 
Operating expenses 22,386  16,376  65,761  45,456 
Non-operating expenses 487  —  2,185  — 
Warrant expense 792  —  1,125  — 
Credit facility interest expenses and fees 252  —  477  — 
Foreign exchange losses 37  40  67  21 
Total expenses
100,941  64,829  274,044  174,289 
Income before income taxes
15,820  11,264  32,286  26,304 
Income tax expense
 (3,728) (2,556) (7,649) (6,041)
Net income $ 12,092  $ 8,708  $ 24,637  $ 20,263 
Other comprehensive income
Change in unrealized loss on investments (net of income tax (expense) benefit of $(2,928), $854, $(2,679), $735, respectively
 11,016  (3,211) 10,079  (2,765)
Total comprehensive income $ 23,108  $ 5,497  $ 34,716  $ 17,498 
Earnings per share:
Basic $ 0.37  $ 0.36  $ 0.88  $ 0.84 
Diluted $ 0.36  $ 0.36  $ 0.87  $ 0.84 
Weighted average shares outstanding:
Basic 32,658,823  24,000,000  28,119,193  24,000,000 
Diluted 33,263,958  24,000,000  28,352,420  24,000,000 
See accompanying Notes to the Condensed Consolidated Financial Statements.
4
Bowhead Specialty Holdings Inc.
Condensed Consolidated Statements of Changes in Mezzanine Equity and Stockholders' Equity (Unaudited)

Common Stock Mezzanine Equity Additional Paid-in Capital Accumulated Other Comprehensive Loss Retained Earnings (Deficit) Total Mezzanine Equity and Stockholders' Equity
($ in thousands, except shares) Number of Shares Amount
Balance, December 31, 2023 24,000,000 $ 240  $ —  $ 178,543  $ (11,372) $ 24,666  $ 192,077 
Net income — —  —  —  —  7,012  7,012 
Other comprehensive loss, net of tax — —  —  —  (916) —  (916)
Capital contribution from parent — —  —  2,839  —  —  2,839 
Capital distribution to parent — —  —  —  —  —  — 
Stock-based compensation expense — —  —  225  —  —  225 
Balance, March 31, 2024 24,000,000 $ 240  $ —  $ 181,607  $ (12,288) $ 31,678  $ 201,237 
Net income — — —  — — 5,533 5,533 
Other comprehensive loss, net of tax — — —  — (21) — (21)
Capital contribution from parent — — —  — — — — 
Capital distribution to parent — — —  — — — — 
Stock-based compensation expense — — 46  1,801 — — 1,847 
Warrant expense — —  —  —  332  —  —  332 
Proceeds from initial public offering, net 8,658,823 87  —  130,896  —  —  130,983 
Balance, June 30, 2024 32,658,823 $ 327  $ 46  $ 314,636  $ (12,309) $ 37,211  $ 339,911 
Net income — —  —  —  —  12,092 12,092 
Other comprehensive income, net of tax — —  —  —  11,016  —  11,016 
Capital contribution from parent — —  —  —  —  —  — 
Capital distribution to parent — —  —  —  —  —  — 
Stock-based compensation expense — —  109  906  —  —  1,015 
Warrant expense — —  —  792  —  —  792 
Proceeds from initial public offering, net — —  —  —  —  —  — 
Balance, September 30, 2024 32,658,823 $ 327  $ 155  $ 316,334  $ (1,293) $ 49,303  $ 364,826 
5
Bowhead Specialty Holdings Inc.
Condensed Consolidated Statements of Changes in Mezzanine Equity and Stockholders' Equity (Unaudited)
Common Stock Mezzanine Equity Additional Paid-in Capital Accumulated Other Comprehensive Loss Retained Earnings (Deficit) Total Mezzanine Equity and Stockholders' Equity
($ in thousands, except shares) Number of Shares Amount
Balance, December 31, 2022 24,000,000 $ 240  $ —  $ 100,204  $ (16,689) $ (381) $ 83,374 
Net income —  —  —  —  —  5,000  5,000 
Other comprehensive income, net of tax —  —  —  —  3,164  —  3,164 
Capital contribution from parent —  —  —  18,000  —  —  18,000 
Capital distribution to parent —  —  —  —  —  —  — 
Stock-based compensation expense —  —  —  109  —  —  109 
Balance, March 31, 2023 24,000,000 $ 240  $ —  $ 118,313  $ (13,525) $ 4,619  $ 109,647 
Net income —  —  —  —  —  6,555  6,555 
Other comprehensive loss, net of tax —  —  —  —  (2,718) —  (2,718)
Capital contribution from parent —  —  13,000  —  —  13,000 
Capital distribution to parent —  —  —  —  —  —  — 
Stock-based compensation expense —  —  —  157  —  —  157 
Balance, June 30, 2023 24,000,000 240  $ —  $ 131,470  $ (16,243) $ 11,174  $ 126,641 
Net income —  —  —  —  —  8,708  8,708 
Other comprehensive income, net of tax —  —  —  —  (3,211) —  (3,211)
Capital contribution from parent —  —  —  22,061  —  —  22,061 
Capital distribution to parent —  —  —  —  —  —  — 
Stock-based compensation expense —  —  —  227  —  —  227 
Balance, September 30, 2023 24,000,000 240  $ —  $ 153,758  $ (19,454) $ 19,882  $ 154,426 

See accompanying Notes to the Condensed Consolidated Financial Statements.
6
Bowhead Specialty Holdings Inc.
Condensed Consolidated Statements of Cash Flows (Unaudited)

Nine Months Ended
September 30,

2024 2023
($ in thousands)
Cash flows from operating activities:
Net income $ 24,637  $ 20,263 
Adjustments to reconcile net income to net cash provided by operating activities:
Net realized investment losses 16  — 
Amortization of premium/discounts on fixed maturity securities (2,929) (1,839)
Stock‐based compensation 3,087  492 
Depreciation and amortization 2,768  1,458 
Non-cash lease expense 747  433 
Deferred income taxes (4,727) (3,293)
Warrant expense 1,125  — 
Net changes in operating assets and liabilities:
Accrued investment income (2,458) (1,848)
Premium balances receivable (7,889) (7,691)
Reinsurance recoverable (85,622) (52,206)
Prepaid reinsurance premiums (29,401) (30,738)
Deferred policy acquisition costs (7,056) (5,216)
Income taxes receivable 782  (117)
Other assets (7,268) (1,520)
Reserve for losses and loss expenses 248,382  157,279 
Unearned premium 82,392  82,556 
Reinsurance balances payable 13,722  15,102 
Accrued expenses (204) (704)
Income taxes payable (13) 49 
Other liabilities 2,774  2,391 
Net cash provided by operating activities 232,865  174,851 
Net cash used in investing activities
Purchases of:
Fixed maturity securities (458,431) (217,859)
Short-term investments (9,907) (21,406)
Proceeds from the sale and maturity of:
Fixed maturity securities 137,223  16,655 
Short-term investments 8,980  51,494 
Purchase of property and equipment, net (2,605) (2,895)
Net cash used in investing activities (324,740) (174,011)
Net cash provided by financing activities
Capital contribution from parent 2,839  53,061 
Proceeds from initial public offering, net 130,983  — 
Net cash provided by financing activities 133,822  53,061 
Net change in cash, cash equivalents and restricted cash
41,947  53,901 
Cash, cash equivalents and restricted cash, beginning of period 119,768  80,651 
Cash, cash equivalents and restricted cash, end of period $ 161,715  $ 134,552 
Reconciliation of restricted cash
Cash and cash equivalents $ 132,893  $ 126,662 
Restricted cash and cash equivalents 28,822  7,890 
Total cash and cash equivalents and restricted cash $ 161,715  $ 134,552 
See accompanying Notes to the Condensed Consolidated Financial Statements.
7

Bowhead Specialty Holdings Inc.
Notes to Condensed Consolidated Financial Statements (Unaudited)
1.Nature of Operations and Significant Accounting Policies
Nature of Operations
Bowhead Specialty Holdings Inc. (“BSHI” and, together with its subsidiaries, “the Company”), is a Delaware domiciled insurance holding company that provides specialty property and casualty insurance products in the U.S., initially focusing on Casualty, Professional Liability and Healthcare Liability risks, which are primarily written on a non-admitted (or excess and surplus (“E&S”)) basis. On March 19, 2024, the Company amended its certificate of incorporation of Bowhead Holdings Inc. to change the name of the Company to Bowhead Specialty Holdings Inc.
BSHI conducts its business operations through three wholly-owned subsidiaries. Bowhead Specialty Underwriters, Inc. (“BSUI”) is Bowhead’s managing general agency, holding a resident insurance license in the State of Texas, and is domiciled in the State of Delaware. Bowhead Insurance Company, Inc. (“BICI”) is BSHI’s insurance company subsidiary licensed and domiciled in the State of Wisconsin. Bowhead Underwriting Services, Inc. (“BUSI”) is the Company’s services company domiciled in the State of Delaware.
BSUI is party to three Managing General Agency Agreements (“MGA Agreements”) with Homesite Insurance Company, Homesite Insurance Company of Florida, and Midvale Indemnity Company (together the “AmFam Issuing Carriers”), each of which is a wholly-owned subsidiary of American Family Mutual Insurance Company, S.I., (“AFMIC” and together with its wholly-owned subsidiaries, “AmFam”). AmFam beneficially owns approximately 18.6% of BSHI’s issued and outstanding common stock as of September 30, 2024. BSUI is also party to third-party broker agreements, allowing the direct payment of premiums from such brokers to BSUI. Through these MGA agreements, BSUI writes premium and provides claim handling services on behalf of the AmFam Issuing Carriers, and BICI assumes 100% of the premium, net of any inuring third-party reinsurance, through a Quota Share Agreement with AFMIC (the “AmFam Quota Share Agreement”). AmFam receives a ceding fee on net premiums assumed by BICI (“Ceding Fee”). BICI is also party to an Insurance Trust Agreement pursuant to which BICI provides collateral to support the obligations of the AmFam Quota Share Agreement.
The Company is organized as a single operating and reportable segment through which it offers a variety of specialty insurance products to a number of markets.
Basis of Presentation
The accompanying condensed consolidated financial statements for BSHI and its wholly-owned subsidiaries (collectively, “Bowhead”) are prepared in accordance with accounting principles generally accepted in the United States of America (“U.S. GAAP”) for interim financial information and do not contain all of the information and footnotes required by U.S. GAAP for complete financial statements. As such, the disclosures provided herein should be read in conjunction with the Company’s latest annual financial statements. In the opinion of management, the condensed consolidated financial statements reflect all adjustments, consisting of only normal recurring adjustments, necessary for the fair statement of the Company’s financial position. All intercompany transactions and balances are eliminated in consolidation. Interim results are not necessarily indicative of results of operations for the full year.
Use of Estimates
The preparation of the condensed financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the amounts reported in the condensed consolidated financial statements and accompanying notes. Changes in circumstances could cause actual results to differ materially from those estimates. Significant estimates in the Company’s condensed consolidated financial statements include, but are not limited to, reserves for losses and loss adjustment expenses, reinsurance recoverable on unpaid losses and loss adjustment expenses, fair value of investments, and income taxes.

8

Bowhead Specialty Holdings Inc.
Notes to Condensed Consolidated Financial Statements (Unaudited)
Management bases its estimates and assumptions on historical experience and other factors, including the current economic environment and on various other judgments that it believes to be reasonable under the circumstances. Management periodically reviews its estimates and assumptions and makes adjustments thereto when facts and circumstances dictate. Changes in accounting estimates and underlying assumptions are recognized prospectively in the condensed consolidated financial statements.
Basic and Diluted Earnings Per Share
Basic earnings per share is calculated by dividing net income by the weighted-average common stock outstanding for the period. Diluted earnings per share follows the basic earnings per share calculation, except the denominator is increased to reflect the dilution that may occur if equity based awards are converted into common stock equivalents, as calculated using the treasury stock method. Anti-dilutive equity based awards, which are awards that would increase earnings per share upon conversion under the treasury stock method, are excluded in the calculation of diluted earnings per share.
See Note 10 for the computation of basic and diluted earnings per share.
Stock Split
On May 9, 2024, the Company effected a 240 thousand-for-1 forward split of each outstanding share of BSHI’s common stock, par value $0.01 per share. As a result of the forward stock split, 100 shares of common stock issued and outstanding was increased to 24,000,000 shares of issued and outstanding common stock, without any change in the par value per share. All share, per share and related information presented in the condensed consolidated financial statements and accompanying notes have been retroactively adjusted, where applicable, to reflect the impact of the forward stock split.
Initial Public Offering
On May 28, 2024, the Company completed an upsized initial public offering (the “IPO”) with the sale of 8,658,823 shares of common stock at a price to the public of $17.00 per share, including 1,129,411 shares sold upon the exercise in full of the underwriters’ option to purchase additional shares. After underwriter discounts, commissions and offering expenses, net proceeds to the Company from the IPO were approximately $131.0 million.
Other Insurance-Related Income
Other insurance-related income includes fees associated with the issuance of policies, which are earned on the effective date of the underlying policy, and revenue we receive for providing insurance-related services, which are earned on a pro-rata basis over the service period.
Stock-Based Compensation
Class P Interests
Bowhead Insurance Holdings LP (“BIHL”), which was previously a majority owner of the Company, issued Class P Interests to certain employees in connection with the Company’s pre-IPO employee compensation structure. Each Class P Interest is structured as a profit interest award and entitles the employees to profits after the partners of BIHL receive a return of their initial investment. The Class P Interests are accounted for as equity under accounting standards codification (“ASC”) 718, Compensation – Stock Compensation (“ASC 718”). The fair value of the compensation cost incurred under these awards is measured at the date of grant based on the fair value of the award and is recognized as operating expenses within the Condensed Consolidated Statements of Income and Comprehensive Income, using a graded method over the requisite service period. The Company recognizes any award forfeitures when they occur.

9

Bowhead Specialty Holdings Inc.
Notes to Condensed Consolidated Financial Statements (Unaudited)
2024 Plan
On May 22, 2024, the Company’s Board of Directors (the “Board”) approved and adopted the 2024 Omnibus Incentive Plan (the “2024 Plan”), which provides for the grant of stock options (including incentive stock options (“ISOs”) and nonqualified stock options), stock appreciation rights, restricted stock, restricted stock units (“RSUs”), other stock-based awards, stock bonuses, cash awards and substitute awards.
Under the 2024 Plan, the Company granted RSUs to the Company’s employees and certain Board directors, and performance stock units (“PSUs”) to its chief executive officer (the “CEO”).
Restricted Stock Units
The RSUs are subject to a service condition and are accounted for as equity under ASC 718. The RSUs are valued based on the fair value of the underlying award, which is Bowhead’s common stock, at the date of grant. The Company recognizes the compensation cost for the RSUs on a straight-line basis over the awards’ vesting period as operating expenses within the Company’s Condensed Consolidated Statements of Income and Comprehensive Income. The Company recognizes any award forfeitures when they occur.
Performance Stock Units
The PSUs are subject to both a service and a market condition, and may be settled in cash upon the occurrence of an event that is outside of the Company’s control. The PSUs are accounted for as mezzanine equity on the Company’s Condensed Consolidated Balance Sheets under ASC 718 until the vesting date. The PSUs are measured at fair value based on a Monte Carlo simulation model. The Company recognizes the compensation cost for PSUs on a straight-line basis over the award’s vesting period as operating expenses within the Company’s Condensed Consolidated Statements of Income and Comprehensive Income. If the market condition is not achieved, previously recognized compensation expense is not reversed. The Company recognizes any award forfeitures when they occur.
Warrants
On May 22, 2024, the Board approved the issuance of warrants to AmFam, a related party of the Company, to purchase shares of the Company’s common stock. The warrants are subject to a service condition and are accounted for as equity under ASC 718. The fair value of the warrants are based on Black-Scholes-Merton pricing models. The Company recognizes compensation cost for the warrants on a quarterly basis over the awards’ vesting period as warrant expense within the Company’s Condensed Consolidated Statements of Income and Comprehensive Income. The Company recognizes any award forfeitures when they occur.
See Note 9 for additional information on the Company’s stock-based compensation.
Deferred Financing Fees
Costs associated with the establishment of a senior secured revolving credit facility have been deferred and are amortized using the straight-line method over the terms of such instruments. Unamortized deferred financing fees are presented within other assets on the Company’s Condensed Consolidated Balance Sheets, and amortization expenses related to such costs are included in credit facility interest expenses and fees in the Company’s Condensed Consolidated Statements of Income and Comprehensive Income.
Recent Accounting Pronouncements
Recently Adopted Accounting Standards
The Company has not adopted any new accounting standards during the three and nine months ended September 30, 2024.

10

Bowhead Specialty Holdings Inc.
Notes to Condensed Consolidated Financial Statements (Unaudited)
Recently Issued Accounting Standards Not Yet Adopted
The Company is an emerging growth company, as defined in the Jumpstart Our Business Startups Act of 2012 (the “JOBS Act”). Under the JOBS Act, emerging growth companies can delay adopting new or revised accounting standards issued subsequent to the enactment of the JOBS Act, until such time as those standards apply to private companies. The Company is provided an option to adopt new or revised accounting guidance as an “emerging growth company” under the JOBS Act either (1) within the same periods as those otherwise applicable to public business entities, or (2) within the same time periods as private companies, including early adoption when permissible.
There are no prospective accounting standards which, upon their effective date, would have a material impact on the Company’s condensed consolidated financial statements.
2.Investments
The following table summarizes the amortized cost and fair value of the Company’s fixed maturity securities, all of which are classified as available for sale:
Gross Unrealized
As of September 30, 2024 Amortized Cost Gains Losses Fair Value
($ in thousands)
Fixed maturity securities
U.S. government and government agency $ 309,181  $ 747  $ (54) $ 309,874 
State and municipal 68,779  163  (3,566) 65,376 
Commercial mortgage-backed securities 61,453  1,082  (680) 61,855 
Residential mortgage-backed securities 174,766  3,473  (3,769) 174,470 
Asset-backed securities 82,743  732  (475) 83,000 
Corporate 196,031  2,161  (1,515) 196,677 
Total
$ 892,953  $ 8,358  $ (10,059) $ 891,252 
Gross Unrealized
As of December 31, 2023 Amortized Cost Gains Losses Fair Value
($ in thousands)
Fixed maturity securities
U.S. government and government agency $ 252,294  $ 579  $ (332) $ 252,541 
State and municipal 55,984  —  (5,264) 50,720 
Commercial mortgage-backed securities 26,573  29  (1,166) 25,436 
Residential mortgage-backed securities 79,032  680  (5,010) 74,702 
Asset-backed securities 42,964  32  (963) 42,033 
Corporate 112,166  80  (3,054) 109,192 
Total
$ 569,013  $ 1,400  (15,789) $ 554,624 
11

Bowhead Specialty Holdings Inc.
Notes to Condensed Consolidated Financial Statements (Unaudited)
a)Contractual Maturity of Fixed Maturity Securities
The amortized cost and fair value of fixed maturity securities at September 30, 2024 and December 31, 2023, by contractual maturity, are shown below. Actual maturities may differ from contractual maturities because certain issuers may have the right to call or prepay obligations.
As of September 30, 2024 Amortized Cost Fair Value
($ in thousands)
Fixed maturity securities
Due in one year or less $ 133,335  $ 133,341 
Due after one year through five years 330,832  329,839 
Due after five years through ten years 79,882  80,370 
Due after ten years 29,942  28,377 
573,991  571,927 
Commercial mortgage-backed securities 61,453  61,855 
Residential mortgage-backed securities 174,766  174,470 
Asset-backed securities 82,743  83,000 
Total
$ 892,953  $ 891,252 
As of December 31, 2023 Amortized Cost Fair Value
($ in thousands)
Fixed maturity securities
Due in one year or less $ 254,656  $ 254,443 
Due after one year through five years 122,274  118,585 
Due after five years through ten years 27,145  25,265 
Due after ten years 16,369  14,160 
420,444  412,453 
Commercial mortgage-backed securities 26,573  25,436 
Residential mortgage-backed securities 79,032  74,702 
Asset-backed securities 42,964  42,033 
Total
$ 569,013  $ 554,624 
12

Bowhead Specialty Holdings Inc.
Notes to Condensed Consolidated Financial Statements (Unaudited)
b)Net Investment Income
The components of net investment income were derived from the following sources:
Three Months Ended
September 30,
2024 2023
($ in thousands)
U.S. government and government agency $ 3,793  $ 1,224 
State and municipal 467  387 
Commercial mortgage-backed securities 761  375 
Residential mortgage-backed securities 1,955  256 
Asset-backed securities 719  1,044 
Corporate 1,611  925 
Short-term investments 134  186 
Cash and cash equivalents 2,273  916 
Gross investment income 11,713  5,313 
Investment expenses (222) (125)
Net investment income $ 11,491  $ 5,188 
Nine Months Ended
September 30,
2024 2023
($ in thousands)
U.S. government and government agency $ 11,316  $ 2,162 
State and municipal 1,241  1,163 
Commercial mortgage-backed securities 1,603  1,003 
Residential mortgage-backed securities 4,118  718 
Asset-backed securities 1,760  2,537 
Corporate 3,614  2,514 
Short-term investments 350  817 
Cash and cash equivalents 4,493  2,011 
Gross investment income 28,495  12,925 
Investment expenses (567) (336)
Net investment income $ 27,928  $ 12,589 
c)Net Realized Investment Gains (Losses)
There were $18.1 thousand and $16.2 thousand net realized investment losses for the three and nine months ended September 30, 2024 from the sale of investments and nil for the three and nine months ended September 30, 2023.
13

Bowhead Specialty Holdings Inc.
Notes to Condensed Consolidated Financial Statements (Unaudited)
d)Restricted Assets
The Company is required to maintain assets as collateral in trust accounts to support the obligations of the AmFam Quota Share Agreement. The assets held in trust include fixed maturity securities, short-term investments and restricted cash and cash equivalents. The Company is entitled to interest income earned on these restricted assets, which is included in net investment income in the Condensed Consolidated Statements of Income and Comprehensive Income.
The following table summarizes the value of the Company’s restricted assets disclosed in the Condensed Consolidated Balance Sheets:
As of
 September 30,
2024		 December 31,
2023
($ in thousands)
U.S. government and government agency $ 211,665  $ 142,297 
State and municipal 30,928  19,585 
Commercial mortgage-backed securities 33,354  9,333 
Residential mortgage-backed securities 96,991  35,313 
Asset-backed securities 39,714  23,798 
Corporate 103,839  49,632 
Restricted fixed maturity securities 516,491  279,958 
Restricted short-term investments 10,002  4,864 
Restricted cash and cash equivalents 28,822  1,698 
Restricted assets $ 555,315  $ 286,520 
e)Gross Unrealized Losses
The following table summarizes available for sale securities in an unrealized loss position, the fair value and gross unrealized loss by length of time the security has been in a continual unrealized loss position:
Less than 12 Months 12 Months or Greater Total
As of September 30, 2024 Fair Value Gross
Unrealized
Losses		 Fair Value Gross
Unrealized
Losses		 Fair Value Gross
Unrealized
Losses
($ in thousands)
Fixed maturity securities
U.S. government and government agency
 $ 30,291  $ (17) $ 15,195  $ (37) $ 45,486  $ (54)
State and municipal 523  (3) 46,911  (3,563) 47,434  (3,566)
Commercial mortgage-backed securities
 843  (2) 17,194  (678) 18,037  (680)
Residential mortgage-backed securities
 13,139  (46) 31,982  (3,723) 45,121  (3,769)
Asset-backed securities
 19,846  (66) 10,604  (409) 30,450  (475)
Corporate
 14,733  (28) 55,009  (1,487) 69,742  (1,515)
Total $ 79,375  $ (162) $ 176,895  $ (9,897) $ 256,270  $ (10,059)

14

Bowhead Specialty Holdings Inc.
Notes to Condensed Consolidated Financial Statements (Unaudited)
Less than 12 Months 12 Months or Greater Total
As of December 31, 2023 Fair Value Gross
Unrealized
Losses		 Fair Value Gross
Unrealized
Losses		 Fair Value Gross
Unrealized
Losses
($ in thousands)
Fixed maturity securities
U.S. government and government agency
 $ 48,598  $ (69) $ 10,970  $ (263) $ 59,568  $ (332)
State and municipal 2,992  (14) 47,728  (5,250) 50,720  (5,264)
Commercial mortgage-backed securities
 2,485  (53) 18,423  (1,113) 20,908  (1,166)
Residential mortgage-backed securities
 17,536  (609) 31,502  (4,401) 49,038  (5,010)
Asset-backed securities
 16,253  (71) 18,491  (892) 34,744  (963)
Corporate
 24,976  (173) 62,733  (2,881) 87,709  (3,054)
Total
$ 112,840  $ (989) $ 189,847  $ (14,800) $ 302,687  $ (15,789)
All of the securities in an unrealized loss position are rated investment grade. For fixed maturity securities that management does not intend to sell or are required to sell, there is no portion of the decline in value that is considered to be due to credit factors that would be recognized in earnings. Declines in value are considered to be due to non-credit factors and are recognized in Other Comprehensive Income.
The Company has evaluated its fixed maturity securities in an unrealized loss position and concluded that the unrealized losses are due primarily to temporary market and sector-related factors rather than to issuer-specific factors. None of these securities are delinquent or in default under financial covenants. Based on the assessment of these issuers, the Company expects them to continue to meet their contractual payment obligations as they become due.
3.Fair Value Measurements
Fair value is defined as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. Fair value is determined based on a fair value hierarchy that prioritizes the use of observable inputs over the use of unobservable inputs and requires the use of observable inputs when available. The Company utilizes a fair value hierarchy that prioritizes the inputs to valuation techniques used to measure fair value into three levels, as follows:
•Level 1: Unadjusted quoted prices in active markets that are accessible at the measurement date for identical assets or liabilities.
•Level 2: Significant other observable inputs other than Level 1 inputs, such as quoted prices in active markets for similar assets or liabilities, quoted prices in inactive markets for identical assets or liabilities, or other inputs that are directly or indirectly observable through market-corroborated inputs, such as interest rates, yield curves, prepayment speeds, default rates, or loss severities.
•Level 3: Significant unobservable inputs used to measure fair value to the extent that relevant observable inputs are not available, and that reflect the Company’s best estimate of what hypothetical market participants would use to determine a transaction price for the asset or liability at the measurement date.

15

Bowhead Specialty Holdings Inc.
Notes to Condensed Consolidated Financial Statements (Unaudited)
The Company’s investments in fixed maturity securities, all of which are classified as available for sale, are carried at fair value. All of the Company’s fixed maturity securities investments were priced by independent pricing services. The prices provided by the independent pricing services are estimated based on observable market data in active markets utilizing pricing models and processes, which may include benchmark yields, reported trades, broker/dealer quotes, issuer spreads, two-sided markets, benchmark securities, bids, offers, sector groupings, matrix pricing and reference data. Under certain circumstances, if a vendor price is unavailable, a price may be obtained from a broker. The pricing services may prioritize inputs differently on any given day for any security based on market conditions, and not all inputs are available for each security evaluation on any given day. The pricing services used by the Company have indicated that they will only produce an estimate of fair value if objectively verifiable information is available. The determination of whether markets are active or inactive is based upon the volume and level of activity for a particular asset class.
The fair values of short-term investments approximate their carrying values due to their short-term maturity.
The following table presents the Company’s investments measured at fair value by level:
As of September 30, 2024 Level 1 Level 2 Level 3 Total
($ in thousands)
Fixed maturity securities
U.S. government and government agency $ 308,625  $ 1,249  $ —  $ 309,874 
State and municipal —  65,376  —  65,376 
Commercial mortgage-backed securities —  61,855  —  61,855 
Residential mortgage-backed securities —  174,470  —  174,470 
Asset-backed securities —  83,000  —  83,000 
Corporate —  196,677  —  196,677 
Total fixed maturity securities
 308,625  582,627  —  891,252 
Short-term investments 10,002  —  —  10,002 
Total investments
$ 318,627  $ 582,627  $ —  $ 901,254 
As of December 31, 2023 Level 1 Level 2 Level 3 Total
($ in thousands)
Fixed maturity securities
U.S. government and government agency $ 251,332  $ 1,209  $ —  $ 252,541 
State and municipal —  50,720  —  50,720 
Commercial mortgage-backed securities —  25,436  —  25,436 
Residential mortgage-backed securities —  74,702  —  74,702 
Asset-backed securities —  42,033  —  42,033 
Corporate —  109,192  —  109,192 
Total fixed maturity securities
 251,332  303,292  —  554,624 
Short-term investments 3,960  4,864  —  8,824 
Total investments
$ 255,292  $ 308,156  $ —  $ 563,448 
16

Bowhead Specialty Holdings Inc.
Notes to Condensed Consolidated Financial Statements (Unaudited)
4.Reserve for Losses and Loss Adjustment Expenses
The table below provides a reconciliation of the beginning and ending reserve balances for the nine months ended September 30, 2024 and September 30, 2023:
September 30,
2024		 September 30,
2023
($ in thousands)
Gross reserves for losses and loss adjustment expenses, beginning of year
 $ 431,186  $ 207,051 
Reinsurance recoverable on unpaid losses, beginning of year
 136,273  63,381 
Net reserves for unpaid losses and loss adjustment expenses, beginning of year
$ 294,913  $ 143,670 
Net incurred losses and loss adjustment expenses related to:
Current accident year 181,162  113,028 
Prior accident years —  636 
181,162  113,664 
Net paid losses and loss adjustment expenses related to:
Current accident year 2,106  1,028 
Prior accident years 17,071  6,344 
19,177  7,372 
Net reserves for unpaid losses and loss adjustment expenses, end of period
$ 456,897  $ 249,962 
Reinsurance recoverable on unpaid losses, end of period 222,671  114,368 
Gross reserves for losses and loss adjustment expenses, end of period
$ 679,568  $ 364,330 
During the nine months ended September 30, 2024 and 2023, there was nil and $0.6 million of prior accident year unfavorable loss development, respectively.
5.Premiums and Reinsurance Related Information
The following table summarizes the effects of reinsurance on the Company’s written and earned premiums and losses and loss adjustment expenses:
Three Months Ended September 30, 2024 Written
Premiums		 Earned
Premiums		 Losses and Loss
Adjustment
Expenses
($ in thousands)
Assumed $ 196,976  $ 161,683  $ 102,805 
Ceded (68,643) (56,503) (34,981)
Net $ 128,333  $ 105,180  $ 67,824 
Three Months Ended September 30, 2023 Written
Premiums		 Earned
Premiums		 Losses and Loss
Adjustment
Expenses
($ in thousands)
Assumed $ 148,919  $ 106,262  $ 63,631 
Ceded (49,581) (35,388) (20,835)
Net $ 99,338  $ 70,874  $ 42,796 
17

Bowhead Specialty Holdings Inc.
Notes to Condensed Consolidated Financial Statements (Unaudited)
Nine Months Ended September 30, 2024 Premiums Written Premiums Earned Losses and Loss Adjustment Expenses
($ in thousands)
Assumed $ 510,948  $ 428,556  $ 272,011 
Ceded (179,710) (150,309) (90,849)
Net $ 331,238  $ 278,247  $ 181,162 
Nine Months Ended September 30, 2023 Premiums Written Premiums Earned Losses and Loss Adjustment Expenses
($ in thousands)
Assumed $ 361,367  $ 278,811  $ 166,021 
Ceded (121,639) (90,901) (52,357)
Net $ 239,728  $ 187,910  $ 113,664 
All assumed amounts are assumed through the AmFam Quota Share Agreement as described in Note 11.
For the three months ended September 30, 2024 and 2023, Bowhead ceded $8.3 million and $5.2 million of written premium, $6.0 million and $2.7 million of earned premium and $3.6 million and $1.5 million of losses and loss adjustment expenses to a subsidiary of AmFam, respectively.
For the nine months ended September 30, 2024 and 2023, Bowhead ceded $20.2 million and $12.5 million of written premium, $15.4 million and $5.3 million of earned premium and $9.3 million and $3.0 million of losses and loss adjustment expenses to a subsidiary of AmFam, respectively.
The following table summarizes reinsurance recoverable on paid and unpaid losses and loss adjustment expenses:
As of
 September 30,
2024		 December 31,
2023
($ in thousands)
Reinsurance recoverable on unpaid losses and loss adjustment expenses $ 222,671  $ 136,273 
Reinsurance recoverable on paid losses and loss adjustment expenses 2,340  3,116 
Reinsurance recoverable $ 225,011  $ 139,389 
The following table summarizes the Company’s top five reinsurers, their A.M. Best financial strength rating and percent of total reinsurance recoverable as of September 30, 2024 and December 31, 2023:
Reinsurer A.M. Best Rating September 30,
2024		 December 31,
2023
Renaissance Reinsurance U.S. Inc A+ 29.7% 29.8%
Endurance Assurance Corporation A+ 23.8% 24.4%
Markel Global Reinsurance Company A 21.7% 24.5%
Ascot Bermuda Limited A 9.3% 7.3%
American Family Connect Property and Casualty Insurance Company A 6.7% 4.2%
Partner Reinsurance Company of the U.S. A+ 5.2% 8.5%
All other reinsurers At least A 3.6% 1.3%
Total
100.0% 100.0%
As of September 30, 2024 and December 31, 2023, $15.1 million and $5.9 million, respectively, of the Company’s reinsurance recoverable balance is with a subsidiary of AmFam.
18

Bowhead Specialty Holdings Inc.
Notes to Condensed Consolidated Financial Statements (Unaudited)
6.Leases
The Company and its subsidiaries had a right to use two distinct office spaces in New York and Chicago under separate lease agreements. All of the Company’s leases are classified as operating leases and the Company was not party to any finance lease arrangements as of and during the three and nine months ended September 30, 2024 and 2023. The right of use (“ROU”) asset and lease liability balances as of September 30, 2024 were $3.8 million and $4.1 million, respectively, and the ROU asset and lease liability balances as of December 31, 2023, were $0.5 million and $0.7 million, respectively.
The terms of the operating leases range from three and a half years to five years, from the dates the Company gained access to the spaces, through and to the stated termination dates, which expire in May 2025 and December 2027, respectively. Although the Chicago operating lease agreement contains an option to extend the lease term, the Company is not reasonably certain it will exercise this option. Due to this uncertainty, in the measurement of the lease liability, the Company has excluded the period covered by the renewal option from the lease terms.
The Chicago operating lease agreement contains rent escalation features that are reflected in the Company’s lease liability balances. Since the discount rates implicit in the leases are not readily available, the Company used an incremental borrowing rate to discount the remaining lease payments in measuring the lease liability. The Company did not incur any initial direct costs or make prepayments in connection with its lease arrangements; as such, these amounts are not reflected in the ROU asset.
Lease expense for the three months ended September 30, 2024 and 2023 was $0.4 million and $0.1 million, respectively, and for the nine months ended September 30, 2024 and 2023 was $0.8 million and $0.4 million, respectively. Lease expense is recognized on a straight-line basis over the lease term in operating expenses within the Condensed Consolidated Statements of Income and Comprehensive Income. The Company has immaterial variable lease costs and no short-term leases for the three and nine months ended September 30, 2024 and 2023.
The following table summarizes the Company’s future minimum lease payment obligations under non-cancelable operating leases as of September 30, 2024:
As of September 30, 2024
($ in thousands)
Contractual maturities:
Remaining 2024 $ 385 
2025 1,421 
2026 1,331 
2027 1,331 
Later years — 
Total undiscounted future minimum lease payments 4,468 
Less: Discount impact 325 
Total discounted operating lease liability $ 4,143 
The weighted average remaining lease term and weighted average discount rate for the Company’s operating leases as of September 30, 2024 were 3.2 years and 4.9%, respectively.
Cash paid for operating leases for the three months ended September 30, 2024 and 2023 was $0.5 million and $0.2 million, respectively, and for the nine months ended September 30, 2024 and 2023 was $0.9 million and $0.6 million, respectively. There were no non-cash additions from new and remeasured leases that resulted in an increase to the ROU asset and lease liability.
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Bowhead Specialty Holdings Inc.
Notes to Condensed Consolidated Financial Statements (Unaudited)
7.Revolving Credit Facility
On April 22, 2024, the Company entered into a Credit Agreement (the “Credit Agreement”) with certain lenders and JPMorgan Chase Bank, N.A., as administrative agent, swingline lender and issuing bank. The Credit Agreement provides for a senior secured revolving credit facility (the “Facility”) in the aggregate principal amount of $75 million, which includes a $5 million sub-facility for letters of credit. All obligations under the Facility and obligations in respect of certain cash management services and swap agreements with the lenders and their affiliates are (i) unconditionally guaranteed by certain of the Company’s subsidiaries and (ii) secured by a first-priority perfected lien in substantially all of the Company’s and the subsidiaries guarantors’ assets. The Credit Agreement contains certain customary covenants, including financial maintenance covenants. The Company was in compliance with all of the Facility’s covenants as of September 30, 2024. The Facility matures on the earlier of April 22, 2027, or 91 days prior to the MGA Agreement termination date where no MGA Agreement replacement is found. The Company may request that the lenders extend the maturity date by an additional year, provided that the request is made no earlier than 90 days and no later than 55 days prior to the first or second anniversary of the effective date of the Facility.
Interest on the Facility is based on a floating rate indexed to either (i) adjusted term Secured Overnight Financing Rate (“SOFR”) plus an applicable rate, (ii) the greater of (a) the prime rate, (b) the Federal Reserve Bank of New York rate plus 0.5% per annum and (c) the adjusted term SOFR rate for a one-month interest period plus 1% per annum, plus an applicable rate, or (iii) the adjusted daily simple SOFR plus an applicable rate. As of September 30, 2024, the Company did not have any borrowings outstanding under the Facility.
The Company had unamortized deferred financing fees related to the Facility of $1.5 million as of September 30, 2024, and recognized amortization expenses for deferred financing fees of $0.3 million and $0.5 million for the three and nine months ended September 30, 2024, respectively.
8.Stockholders' Equity
Capital Stock
The Company’s authorized capital stock consists of 400,000,000 shares of common stock, par value $0.01 per share and 100,000,000 shares of preferred stock, par value $0.01 per share.
BIHL Contribution
During the three months ended September 30, 2024 and 2023, BIHL contributed additional paid-in capital of nil and $22.3 million, respectively, to the Company without issuing additional shares.
During the nine months ended September 30, 2024 and 2023, BIHL contributed additional paid-in capital of $4.5 million and $53.6 million, respectively, to the Company without issuing additional shares.
Public Offerings
On May 23, 2024, the Company completed an upsized IPO with the sale and issuance of 8,658,823 shares of its common stock at a price of $17.00 per share. The Company received net proceeds from the offering of $