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What changed in Bowhead Specialty Holdings Inc.'s 10-K — 2024 vs 2025

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Paragraph-level year-over-year comparison of Bowhead Specialty Holdings Inc.'s 2024 and 2025 10-K annual filings, covering the Business, Risk Factors, Legal Proceedings, Cybersecurity, MD&A and Market Risk sections. Every new, removed and edited paragraph is highlighted side-by-side so you can see exactly what management changed in the 2025 report.

+271 added−242 removedSource: 10-K (2026-02-24) vs 10-K (2025-02-27)

Top changes in Bowhead Specialty Holdings Inc.'s 2025 10-K

271 paragraphs added · 242 removed · 215 edited across 5 sections

Item 1A. Risk Factors

Risk Factors — what could go wrong, per management

106 edited+29 added−18 removed306 unchanged
Biggest changeOur future level of indebtedness could affect our operations in several ways, including but not limited to the following: • increase our vulnerability to changes in general economic, industry, and competitive conditions; • require us to dedicate a portion of our cash flow to make payments on our indebtedness, thereby reducing the availability of our cash flow to fund other corporate purposes; • place us at a competitive disadvantage compared to our competitors that are less leveraged and therefore potentially more able to take advantage of opportunities that our level of indebtedness would prevent us from pursuing; and • impair our ability to obtain additional financing in the future.
Biggest changeOur future level of indebtedness could affect our operations in several ways, including but not limited to the following: • increase our vulnerability to changes in general economic, industry, and competitive conditions; • require us to dedicate a portion of our cash flow to make payments on our indebtedness, thereby reducing the availability of our cash flow to fund other corporate purposes; • place us at a competitive disadvantage compared to our competitors that are less leveraged and therefore potentially more able to take advantage of opportunities that our level of indebtedness would prevent us from pursuing; and • impair our ability to obtain additional financing in the future. 43 Table of Contents Although interest payable on the Senior Notes is at a fixed rate, borrowings under the 2025 Facility bear interest at variable rates based on prevailing conditions in the financial markets, and changes to such variable market rates may affect both the amount of cash we must pay for interest as well as our reported interest expense.
Risks Related to Laws and Regulation We are subject to extensive regulation, which may adversely affect our ability to achieve our business objectives.
Risks Related to Laws and Regulation We are subject to extensive regulation, which may adversely affect our ability to achieve our business objectives.
In addition, the NAIC has developed the IRIS, which is part of a collection of analytical tools designed to provide state insurance regulators with an integrated approach to screening and analyzing the financial condition of insurance companies operating in their respective states.
In addition, the NAIC has developed IRIS, which is part of a collection of analytical tools designed to provide state insurance regulators with an integrated approach to screening and analyzing the financial condition of insurance companies operating in their respective states.
As a result, any default by us on our debt could have a materially adverse effect on our business, financial condition, and results of operations. Our ability to incur a substantial level of indebtedness may reduce our financial flexibility, affect our ability to operate our business, and divert cash flow from operations for debt service.
As a result, any default by us on our debt could have a materially adverse effect on our business, financial condition, and results of operations. Our current debt and our ability to incur a substantial level of indebtedness may reduce our financial flexibility, affect our ability to operate our business, and divert cash flow from operations for debt service.
We use data from third parties in our BRATs and other underwriting tools as part of our underwriting process to evaluate risks and estimate losses. We rely on these third parties to ensure that the data they provide is accurate.
We use data from third parties in our BRATs and other underwriting tools as part of our underwriting process to evaluate risks and estimate losses. We rely on these third parties to help ensure that the data they provide is accurate.
In addition, our ability to pay dividends on our capital stock is limited by the terms of the Credit Agreement and may be further restricted under the terms of any future debt or preferred securities or future credit facility.
In addition, our ability to pay dividends on our capital stock is limited by the terms of the 2025 Credit Agreement and may be further restricted under the terms of any future debt or preferred securities or future credit facility.
These provisions will provide for, among other things: • a classified board of directors, subject to a seven-year sunset, as a result of which our board of directors will initially be divided into three classes, with each class serving for staggered three-year terms; • the ability of our board of directors to issue one or more series of preferred stock; • advance notice requirements for nominations of directors by stockholders and for stockholders to include matters to be considered at our annual meetings; • certain limitations on convening special stockholder meetings; • the removal of directors only for cause; and • the required approval of at least 66 ⅔ % of the voting power of the outstanding shares of capital stock entitled to vote generally in the election of directors, voting together as a single class, to adopt, amend, or repeal certain provisions of our amended and restated certificate of incorporation.
These provisions will provide for, among other things: • a classified board of directors, subject to a seven-year sunset from the time of our IPO, as a result of which our board of directors will initially be divided into three classes, with each class serving for staggered three-year terms; • the ability of our board of directors to issue one or more series of preferred stock; • advance notice requirements for nominations of directors by stockholders and for stockholders to include matters to be considered at our annual meetings; • certain limitations on convening special stockholder meetings; • the removal of directors only for cause; and • the required approval of at least 66 ⅔ % of the voting power of the outstanding shares of capital stock entitled to vote generally in the election of directors, voting together as a single class, to adopt, amend, or repeal certain provisions of our amended and restated certificate of incorporation.
Further, we have opted out of Section 203 of the General Corporation Law of the State of Delaware (the “DGCL”), but our amended and restated certificate of incorporation will provide that engaging in any of a broad range of business combinations with any “interested” stockholder (generally defined as any stockholder with 15.0% or more of our outstanding voting stock and any entity or person affiliated with or controlling or controlled by such stockholder) for a period of three years following the time on which the stockholder became an “interested” stockholder is prohibited, subject to certain exceptions (except with respect to GPC Fund and AmFam and any of their respective affiliates and any of their respective direct or indirect transferees of our common stock).
Further, we have opted out of Section 203 of the General Corporation Law of the State of Delaware (the “DGCL”), but our amended and restated certificate of incorporation will provide that engaging in any of a broad range of business combinations with any “interested” stockholder (generally defined as any stockholder with 15.0% or more of our outstanding voting stock and any entity or person affiliated with or controlling or controlled by such stockholder) for a period of three years following the time on which the stockholder became an “interested” 49 Table of Contents stockholder is prohibited, subject to certain exceptions (except with respect to GPC Fund and AmFam and any of their respective affiliates and any of their respective direct or indirect transferees of our common stock).
Among the factors that could affect our stock price are: • market conditions in the broader stock market; • actual or anticipated fluctuations in our quarterly financial and operating results; 44 Tab le of Contents • introduction of new products or services by us or our competitors; • issuance of new or changed securities analysts’ reports or recommendations; • results of operations that vary from expectations of securities analysts and investors; • short sales, hedging and other derivative transactions in our common stock; • guidance, if any, that we provide to the public, any changes in this guidance or our failure to meet this guidance; • strategic actions by us or our competitors; • announcement by us, our competitors or our acquisition targets; • sales, or anticipated sales, of large blocks of our stock, including by our directors, executive officers and principal stockholders; • additions or departures in our board of directors, senior management or other key personnel; • regulatory, legal or political developments; • public response to press releases or other public announcements by us, AmFam, or third parties, including our filings with the SEC; • litigation and governmental investigations; • changing economic conditions; • changes in accounting principles; • any indebtedness we may incur or securities we may issue in the future; • exposure to capital and credit market risks that adversely affect our investment portfolio or our capital resources; • changes in our credit ratings; and • other events or factors, including those from natural disasters, war, or actors of terrorism or responses to these events.
Among the factors that could affect our stock price are: • market conditions in the broader stock market; • actual or anticipated fluctuations in our quarterly financial and operating results; • introduction of new products or services by us or our competitors; • issuance of new or changed securities analysts’ reports or recommendations; • results of operations that vary from expectations of securities analysts and investors; • short sales, hedging and other derivative transactions in our common stock; • guidance, if any, that we provide to the public, any changes in this guidance or our failure to meet this guidance; • strategic actions by us or our competitors; • announcement by us, our competitors or our acquisition targets; • sales, or anticipated sales, of large blocks of our stock, including by our directors, executive officers and principal stockholders; • additions or departures in our board of directors, senior management or other key personnel; • regulatory, legal or political developments; • public response to press releases or other public announcements by us, AmFam, or third parties, including our filings with the SEC; • litigation and governmental investigations; • changing economic conditions; • changes in accounting principles; • any indebtedness we may incur or securities we may issue in the future; • exposure to capital and credit market risks that adversely affect our investment portfolio or our capital resources; 47 Table of Contents • changes in our credit ratings; and • other events or factors, including those from natural disasters, war, or actors of terrorism or responses to these events.
See “—Adverse economic factors, including recession, inflation, periods of high unemployment or lower economic activity could result in the sale of fewer policies than expected or an increase in frequency of claims and premium defaults, and even the falsification of claims, or a combination of these effects, which, in turn, could affect our growth and profitability.” • If claims were to become more frequent, even if we had no liability for those claims, the cost of evaluating such potential claims could escalate beyond the amount of the loss adjustment expense reserves we have established.
See “—Adverse economic factors, including recession, inflation, periods of high unemployment or lower economic activity could result in the sale of fewer 26 Table of Contents policies than expected or an increase in frequency of claims and premium defaults, and even the falsification of claims, or a combination of these effects, which, in turn, could affect our growth and profitability.” • If claims were to become more frequent, even if we had no liability for those claims, the cost of evaluating such potential claims could escalate beyond the amount of the loss adjustment expense reserves we have established.
Risks Related to Ownership of Our Common Stock • Our costs have increased significantly as a result of operating as a public company, and our management is required to devote substantial time to complying with public company regulations. • We qualify as an emerging growth company, and any decision on our part to comply with reduced reporting and disclosure requirements applicable to emerging growth companies could make our common stock less attractive to investors. 20 Tab le of Contents • GPC Fund and AFMIC exercise substantial influence over us, may engage in businesses that compete with us, and your ability to influence matters requiring stockholder approval may be limited.
Risks Related to Ownership of Our Common Stock • Our costs have increased significantly as a result of operating as a public company, and our management is required to devote substantial time to complying with public company regulations. • We qualify as an emerging growth company, and any decision on our part to comply with reduced reporting and disclosure requirements applicable to emerging growth companies could make our common stock less attractive to investors. • GPC Fund and AFMIC exercise substantial influence over us, may engage in businesses that compete with us, and your ability to influence matters requiring stockholder approval may be limited.
Although these inquiries can take many forms, regulators may require the insurance company to provide additional written explanation as to the causes of the particular ratios being outside of the usual range, the actions being taken by management to produce results that will be within the usual range in future years and what, if any, actions have been taken by the insurance regulator of the insurers’ state of domicile.
Although these inquiries 35 Table of Contents can take many forms, regulators may require the insurance company to provide additional written explanation as to the causes of the particular ratios being outside of the usual range, the actions being taken by management to produce results that will be within the usual range in future years and what, if any, actions have been taken by the insurance regulator of the insurers’ state of domicile.
In connection with our IPO we entered into a Registration Rights Agreement with GPC Fund, AFMIC and our Chief Executive Officer, pursuant to which GPC Fund, AFMIC and their permitted transferees may require us to register the offer and sale of all or a portion of their shares of our common stock under the Securities Act, subject to certain customary conditions and exclusions.
In connection with our IPO, we entered into a Registration Rights Agreement with GPC Fund, AFMIC and our Chief Executive Officer, pursuant to which the stockholders party to that agreement and their permitted transferees may require us to register the offer and sale of all or a portion of their shares of our common stock under the Securities Act, subject to certain customary conditions and exclusions.
In addition, if we fail to comply with these regulations, we may be subject to penalties, including fines, suspensions, revoking licenses, orders to cease and desist operations and criminal prosecution, which may adversely affect our financial condition and results of operations. 19 Tab le of Contents • We may become subject to additional government or market regulation, which may have a material adverse impact on our business. • Changes in law, including relating to certain perils, could adversely affect our business. • Applicable insurance laws may make it difficult to effect a change of control.
In addition, if we fail to comply with these regulations, we may be subject to penalties, including fines, suspensions, revoking licenses, orders to cease and desist operations and criminal prosecution, which may adversely affect our financial condition and results of operations. • We may become subject to additional government or market regulation, which may have a material adverse impact on our business. • Changes in law, including relating to certain perils, could adversely affect our business. • Applicable insurance laws may make it difficult to effect a change of control.
Actual or suspected information technology failures or failure to comply with applicable law could disrupt our operations, damage our reputation and adversely affect our business, operations and financial results. • Operational risk exposures, such as human or systems failures (including from third-party vendor arrangements), are inherent in our business and may result in losses. • We may change our underwriting guidelines or our strategy without your approval. • Any future acquisitions, strategic investments or new platforms could expose us to further risks or turn out to be unsuccessful. • The effects of litigation on our business are uncertain and could have an adverse effect on our business. • Loss of key vendor relationships or failure of a vendor to protect our data or confidential and proprietary information could affect our operations. • Our limited operating history may make it difficult to evaluate our current business and future prospects.
Actual or suspected information technology failures or failure to comply with applicable law could disrupt our operations, damage our reputation and adversely affect our business, operations and financial results. • Operational risk exposures, such as human or systems failures (including from third-party vendor arrangements), are inherent in our business and may result in losses. • Artificial intelligence is an evolving and rapidly growing technology • We may change our underwriting guidelines or our strategy without your approval. • Any future acquisitions, strategic investments or new platforms could expose us to further risks or turn out to be unsuccessful. • The effects of litigation on our business are uncertain and could have an adverse effect on our business. • Loss of key vendor relationships or failure of a vendor to protect our data or confidential and proprietary information could affect our operations. • Our limited operating history may make it difficult to evaluate our current business and future prospects.
The Facility restricts, subject to certain exceptions, among other things, our ability and the ability of our subsidiaries to: • incur additional indebtedness and guarantee indebtedness; • prepay, redeem, or repurchase certain debt; • create or incur liens; • make investments and loans; • pay dividends or make other distributions, in respect of, or repurchase or redeem, capital stock; • engage in mergers, consolidations, or sales of all or substantially all of our assets; • sell or otherwise dispose of assets; • amend, modify, waive, or supplement certain subordinated indebtedness to the extent such amendments would be materially adverse to the interests of the lenders; and • engage in certain transactions with affiliates.
The Indenture and/or 2025 Facility restrict, subject to certain exceptions, among other things, our ability and the ability of our subsidiaries to: • incur additional indebtedness and guarantee indebtedness; • prepay, redeem, or repurchase certain debt; • create or incur liens; • make investments and loans; • pay dividends or make other distributions, in respect of, or repurchase or redeem, capital stock; • engage in mergers, consolidations, or sales of all or substantially all of our assets; • sell or otherwise dispose of assets; • amend, modify, waive, or supplement certain subordinated indebtedness to the extent such amendments would be materially adverse to the interests of the lenders; and • engage in certain transactions with affiliates.
Following these periodic reviews, we may restrict such distributors’ access to certain types of products or terminate our relationship with them, subject to applicable contractual and regulatory requirements that limit our ability to terminate agents or require us to renew policies. Even through the utilization of these measures, we may not achieve the desired results.
Following these periodic reviews, we may restrict such distributors’ access to certain types of products or terminate our relationship with them, subject to applicable contractual and regulatory 24 Table of Contents requirements that limit our ability to terminate agents or require us to renew policies. Even through the utilization of these measures, we may not achieve the desired results.
Furthermore, if we are unable to repay, refinance, or restructure our Facility, the lenders under the Facility could proceed against the collateral granted to them to secure such indebtedness, which could force us into bankruptcy or liquidation.
Furthermore, if we are unable to repay, refinance, or restructure 2025 Facility, the lenders under the 2025 Facility could proceed against the collateral granted to them to secure such indebtedness, which could force us into bankruptcy or liquidation.
Any such action could harm our reputation and the confidence of investors in, and clients of, our Company and could negatively affect our business and cause the price of our shares of common stock to decline. We are required by Section 404 of the Sarbanes‑Oxley Act to evaluate the effectiveness of our internal control over financial reporting.
Any such action could harm our reputation and the confidence of investors in, and clients of, our Company and could negatively affect our business and cause the price of our shares of common stock to decline. 45 Table of Contents We are required by Section 404 of the Sarbanes‑Oxley Act to evaluate the effectiveness of our internal control over financial reporting.
If we are unable to conclude that our internal control over financial reporting is effective, or if our independent registered public accounting firm determines that we have a material weakness in our internal control over financial reporting, investors may lose 43 Tab le of Contents confidence in the accuracy and completeness of our financial reports, the market price of our common stock could decline, and we could be subject to sanctions or investigations by the NYSE, the SEC or other regulatory authorities.
If we are unable to conclude that our internal control over financial reporting is effective, or if our independent registered public accounting firm determines that we have a material weakness in our internal control over financial reporting, investors may lose confidence in the accuracy and completeness of our financial reports, the market price of our common stock could decline, and we could be subject to sanctions or investigations by the NYSE, the SEC or other regulatory authorities.
Changes in law and practice, including relating to certain perils for which we write insurance or reinsurance, may have a material adverse effect on our business, financial condition, results of operations and prospects. Applicable insurance laws may make it difficult to effect a change of control.
Changes in law and practice, including relating to certain perils for which we write insurance or reinsurance, may have a material adverse effect on our business, financial condition, results of operations and prospects. 36 Table of Contents Applicable insurance laws may make it difficult to effect a change of control.
Our amended and restated certificate of incorporation further provides that, unless we consent in writing to the selection of an alternative 47 Tab le of Contents forum, to the fullest extent permitted by law, the federal district courts of the United States of America will be the exclusive forum for the resolution of any complaint asserting a cause of action arising under the federal securities laws of the United States, including any claims under the Securities Act and the Exchange Act.
Our amended and restated certificate of incorporation further provides that, unless we consent in writing to the selection of an alternative forum, to the fullest extent permitted by law, the federal district courts of the United States of America will be the exclusive forum for the resolution of any complaint asserting a cause of action arising under the federal securities laws of the United States, including any claims under the Securities Act and the Exchange Act.
Our failure to pay claims accurately and timely could lead to regulatory and administrative actions or material litigation, including bad faith claims, undermine our reputation in the marketplace and materially and adversely affect our business, financial condition, results of operations and prospects. Excessive risk taking could negatively affect our financial condition and business.
Our failure to pay claims accurately and timely could lead to regulatory and administrative actions or material litigation, including bad faith claims, undermine our reputation in the marketplace and materially and adversely affect our business, financial condition, results of operations and prospects. 29 Table of Contents Excessive risk taking could negatively affect our financial condition and business.
Additionally, any increased frequency and severity of such weather events, including hurricanes, may have unanticipated impacts on our insureds and therefore could have a material adverse effect on our ability to predict, quantify, reinsure and manage risk and may materially increase our losses resulting from such events.
Additionally, any increased frequency and severity of such 33 Table of Contents weather events, including hurricanes, may have unanticipated impacts on our insureds and therefore could have a material adverse effect on our ability to predict, quantify, reinsure and manage risk and may materially increase our losses resulting from such events.
Inability to maintain our strategic relationship with AmFam would materially adversely affect our business. As of December 31, 2024, AmFam owns approximately 14.4% of our common stock. We leverage AmFam’s legal entities, ratings and licenses through the MGA Agreements and the Quota Share Agreement. Through our MGA Agreements, BSUI underwrites premiums on behalf of the AmFam Issuing Carriers.
Inability to maintain our strategic relationship with AmFam would materially adversely affect our business. As of December 31, 2025, AmFam owns approximately 14.3% of our common stock. We leverage AmFam’s legal entities, ratings and licenses through the MGA Agreements and the Quota Share Agreement. Through our MGA Agreements, BSUI underwrites premiums on behalf of the AmFam Issuing Carriers.
In addition, we are or will be subject to other reporting and corporate governance requirements, including certain requirements of and certain provisions of the Sarbanes-Oxley Act and the regulations promulgated thereunder, which impose significant compliance obligations upon us.
In addition, we are or will be subject to other reporting and corporate governance requirements, including certain 44 Table of Contents requirements of and certain provisions of the Sarbanes-Oxley Act and the regulations promulgated thereunder, which impose significant compliance obligations upon us.
These uncertainties can include, but are not limited to, the following: • the tools do not address all the possible hazard characteristics; • the tools may not accurately represent loss potential to insurance or reinsurance contract coverage limits, terms and conditions; and • the tools may not accurately reflect economic, financial, judicial, political, or regulatory impact on insurance claim payments.
These uncertainties can include, but are not limited to, the following: • the tools do not address all the possible hazard characteristics; • the tools may not accurately represent loss potential to insurance or reinsurance contract coverage limits, terms and conditions; and 27 Table of Contents • the tools may not accurately reflect economic, financial, judicial, political, or regulatory impact on insurance claim payments.
If one or more of these analysts ceases coverage of us or fails to publish reports on us regularly, demand for our common stock could decrease, which could cause our stock price and trading volume to decline. 46 Tab le of Contents Anti-takeover provisions in our organizational documents could delay a change in management and limit our share price.
If one or more of these analysts ceases coverage of us or fails to publish reports on us regularly, demand for our common stock could decrease, which could cause our stock price and trading volume to decline. Anti-takeover provisions in our organizational documents could delay a change in management and limit our share price.
As a general matter, casualty claims take longer to develop than claims for property insurance, which we do not currently write, and as a result, the impacts of inflation on casualty claims is generally greater than on property claims.
As a general matter, casualty 31 Table of Contents claims take longer to develop than claims for property insurance, which we do not currently write, and as a result, the impacts of inflation on casualty claims is generally greater than on property claims.
In such case, the trading price of our common stock could decline and you may lose all or part of your investment. Additional risks and 18 Tab le of Contents uncertainties not presently known to us or that we currently deem immaterial also may impair our business operations.
In such case, the trading price of our common stock could decline and you may lose all or part of your investment. Additional risks and uncertainties not presently known to us or that we currently deem immaterial also may impair our business operations.
We use these BRATs across departments during our underwriting process to evaluate each risk. However, given the inherent uncertainty of underwriting tools and 25 Tab le of Contents algorithms and the application of such techniques, these tools, algorithms and databases may not accurately address a variety of matters which may impact certain of our coverages.
We use these BRATs across departments during our underwriting process to evaluate each risk. However, given the inherent uncertainty of underwriting tools and algorithms and the application of such techniques, these tools, algorithms and databases may not accurately address a variety of matters which may impact certain of our coverages.
In addition, while we generally monitor vendor risk, including the security and stability of our critical vendors, we may 38 Tab le of Contents fail to properly assess and understand the risks and costs involved in the third-party relationships, and our financial condition and results of operations could be materially and adversely affected.
In addition, while we generally monitor vendor risk, including the security and stability of our critical vendors, we may fail to properly assess and understand the risks and costs involved in the third-party relationships, and our financial condition and results of operations could be materially and adversely affected.
New product launches such as environmental coverages through our Casualty division or our Baleen Specialty division, as well as resources to integrate business acquisitions, are subject to many obstacles, including ensuring we have sufficient 29 Tab le of Contents business and systems processes, determining appropriate pricing, obtaining reinsurance, assessing opportunity costs and regulatory burdens and planning for internal infrastructure needs.
New product launches such as environmental coverages through our Casualty division or our Baleen Specialty division, as well as resources to integrate business acquisitions, are subject to many obstacles, including ensuring we have sufficient business and systems processes, determining appropriate pricing, obtaining reinsurance, assessing opportunity costs and regulatory burdens and planning for internal infrastructure needs.
In addition, because BICI is considered an affiliate of AFMIC under Wisconsin insurance regulations and BICI’s business is currently comprised solely of business assumed from AFMIC, BICI’s regulatory capital requirements are lower.
In addition, because BICI is considered an affiliate of AFMIC under Wisconsin insurance regulations and BICI’s business is currently comprised solely of business assumed from AFMIC, BICI’s regulatory 42 Table of Contents capital requirements are lower.
Such actions and excessive risk taking by the program administrator could adversely affect our results of operations. 28 Tab le of Contents If actual renewals of our existing contracts do not meet expectations, our gross written premiums in future years and our future results of operations could be materially adversely affected.
Such actions and excessive risk taking by the program administrator could adversely affect our results of operations. If actual renewals of our existing contracts do not meet expectations, our gross written premiums in future years and our future results of operations could be materially adversely affected.
Assuming the Facility were to be fully drawn, a 100-basis point increase to the applicable variable rate of interest would increase the amount of interest expense by $0.75 million per annum.
Assuming the 2025 Facility were to be fully drawn, a 100-basis point increase to the applicable variable rate of interest would increase the amount of interest expense by $0.35 million per annum.
In essence, we 21 Tab le of Contents originate business on the paper of AmFam through BSUI writing policies issued by AmFam under the name of AmFam and reinsure 100.0% of the insurance business we originate to BICI, since we do not currently have the ratings to write policies under our own name and on our own paper.
In essence, we originate business on the paper of AmFam through BSUI writing policies issued by AmFam under the name of AmFam and reinsure 100.0% of the insurance business we originate to BICI, since we do not currently have the ratings to write policies under our own name and on our own paper.
See “ Regulation— Restrictions 33 Tab le of Contents on Paying Dividends” for additional information. Failure to maintain surplus and risk-based capital at the required levels could adversely affect the ability of BICI to maintain the regulatory authority necessary to conduct our business.
See “ Regulation— Restrictions on Paying Dividends” for additional information. Failure to maintain surplus and risk-based capital at the required levels could adversely affect the ability of BICI to maintain the regulatory authority necessary to conduct our business.
Retail agents and brokers generally own the “renewal rights,” and thus our business model depends on our relationships with, and the success of, the retail agents and brokers with 22 Tab le of Contents whom we do business. Further, we also depend on the relationships our wholesalers maintain with the agents and brokers from whom they source their business.
Retail agents and brokers generally own the “renewal rights,” and thus our business model depends on our relationships with, and the success of, the retail agents and brokers with whom we do business. Further, we also depend on the relationships our wholesalers maintain with the agents and brokers from whom they source their business.
Although reinsurance makes the reinsurer liable to us to the extent the risk is transferred or ceded to the reinsurer, it 27 Tab le of Contents does not relieve us (the ceding insurer) of our primary liability to our policyholders. Our current reinsurance program is designed to limit our financial risk.
Although reinsurance makes the reinsurer liable to us to the extent the risk is transferred or ceded to the reinsurer, it does not relieve us (the ceding insurer) of our primary liability to our policyholders. Our current reinsurance program is designed to limit our financial risk.
Risks Related to Liquidity and Access to Capital • We could be forced to sell investments to meet our liquidity requirements. • Because we are a holding company and substantially all or a substantial portion of our operations are conducted by our insurance and service company subsidiaries, our ability to achieve liquidity at the holding company, including the ability to pay dividends and service our debt obligations, depends on our ability to obtain cash dividends or other permitted payments from our insurance and service company subsidiaries. • We may require additional capital in the future, which may not be available or may only be available on unfavorable terms. • Our failure to comply with the terms of our credit facility, including as a result of events beyond our control, could result in an event of default that could affect our business, financial condition, and results of operations. • Our ability to incur a substantial level of indebtedness may reduce our financial flexibility, affect our ability to operate our business, and divert cash flow from operations for debt service.
Risks Related to Liquidity and Access to Capital • We could be forced to sell investments to meet our liquidity requirements. • Because we are a holding company and substantially all or a substantial portion of our operations are conducted by our insurance and service company subsidiaries, our ability to achieve liquidity at the holding company, including the ability to pay dividends and service our debt obligations, depends on our ability to obtain cash dividends or other permitted payments from our insurance and service company subsidiaries. • We may require additional capital in the future, which may not be available or may only be available on unfavorable terms. • Our failure to comply with the terms of our credit facility or senior notes indenture, including as a result of events beyond our control, could result in an event of default that could affect our business, financial condition, and results of operations. 21 Table of Contents • Our current debt and our ability to incur a substantial level of indebtedness may reduce our financial flexibility, affect our ability to operate our business, and divert cash flow from operations for debt service. • The indenture governing our senior notes and our credit facility contain restrictions on our ability to operate our business and pursue our business strategies.
We are unable to predict whether any future legislation will be enacted or future regulations adopted, or the effect any such developments may have on our business, financial condition, or profitability. 34 Tab le of Contents Changes in law, including relating to certain perils, could adversely affect our business.
We are unable to predict whether any future legislation will be enacted or future regulations adopted, or the effect any such developments may have on our business, financial condition, or profitability. Changes in law, including relating to certain perils, could adversely affect our business.
As of December 31, 2024, we had $255.1 million of aggregate reinsurance recoverables; 100% of these reinsurance recoverables were derived from reinsurers currently with an “A” (Excellent) financial strength rating from A.M. Best, or better. We may act based on inaccurate or incomplete information regarding the accounts we underwrite.
As of December 31, 2025, we had $399.7 million of aggregate reinsurance recoverables; 100% of these reinsurance recoverables were derived from reinsurers currently with an “A” (Excellent) financial strength rating from A.M. Best, or better. We may act based on inaccurate or incomplete information regarding the accounts we underwrite.
As such, higher demand for employees having the desired skills and expertise could lead to increased compensation expectations for existing and prospective personnel, making it difficult for us to retain and recruit key personnel and maintain labor costs at 35 Tab le of Contents desired levels.
As such, higher demand for employees having the desired skills and expertise could lead to increased compensation expectations for existing and prospective personnel, making it difficult for us to retain and recruit key personnel and maintain labor costs at desired levels.
GPC Fund and AFMIC exercise substantial influence over us, may engage in businesses that compete with us, and your ability to influence matters requiring stockholder approval may be limited. As of December 31, 2024, GPC Fund and AFMIC own, in the aggregate, approximately 48.0% of our outstanding common stock.
GPC Fund and AFMIC exercise substantial influence over us, may engage in businesses that compete with us, and your ability to influence matters requiring stockholder approval may be limited. As of December 31, 2025, GPC Fund and AFMIC own, in the aggregate, approximately 41.7% of our outstanding common stock.
Substantial future sales of shares of our common stock by existing stockholders, or the perception that those sales may occur, could cause the market price of our common stock to decline. As of December 31, 2024, we have an aggregate of approximately 32,662,683 shares of our common stock outstanding.
Substantial future sales of shares of our common stock by existing stockholders, or the perception that those sales may occur, could cause the market price of our common stock to decline. As of December 31, 2025, we have an aggregate of approximately 32,783,451 shares of our common stock outstanding.
A deviation from our loss estimates may adversely impact, perhaps significantly, our financial results. • We rely on third-party data, and inaccuracies in such data could adversely impact our ability to estimate losses and manage risks. • Unexpected changes in the interpretation of our coverage or provisions, including loss limitations and exclusions, in our policies could have a material adverse effect on our financial condition and results of operations. • Our reinsurers may not reimburse us for claims on a timely basis, or at all, which may materially adversely affect our business, financial condition and results of operations. • While the P&C industry is generally currently experiencing a hard market, the insurance business is historically cyclical in nature, which may affect our financial performance and cause our operating results to vary from quarter to quarter and may not be indicative of future performance.
A deviation from our loss estimates may adversely impact, perhaps significantly, our financial results. • We rely on third-party data, and inaccuracies in such data could adversely impact our ability to estimate losses and manage risks. • Unexpected changes in the interpretation of our coverage or provisions, including loss limitations and exclusions, in our policies could have a material adverse effect on our financial condition and results of operations. • Our reinsurers may not reimburse us for claims on a timely basis, or at all, which may materially adversely affect our business, financial condition and results of operations. • While the P&C industry is generally currently experiencing a hard market, the insurance business is historically cyclical in nature, which may affect our financial performance and cause our operating results to vary from quarter to quarter and may not be indicative of future performance. 20 Table of Contents • Trade relations between the United States and other countries, including the imposition of new or increased tariffs, could have an adverse effect on our insureds, business and financial results.
Best as of December 31, 2024. A downgrade or withdrawal of AmFam’s financial strength rating or reduction in its financial size category could result in any of the following consequences, among others: • causing current and future distribution partners and insureds to choose other competitors; or • severely limiting or preventing the writing of new and renewal insurance contracts. A.M.
A downgrade or withdrawal of AmFam’s financial strength rating or reduction in its financial size category could result in any of the following consequences, among others: • causing current and future distribution partners and insureds to choose other competitors; or • severely limiting or preventing the writing of new and renewal insurance contracts. 23 Table of Contents A.M.
Our relationship with any of these brokers may be discontinued at any time, subject to the terms of the respective producer agreements and applicable regulatory requirements. Even if the relationships do continue, they may not be on terms that are profitable for us.
Our relationship with any of these brokers may be discontinued at any time, subject to the terms of the respective producer agreements and applicable regulatory requirements. Even if the relationships do continue, they may not be on terms that are profitable for us. Consolidation could impact relationships with, and fees paid to, some agents and brokers.
In addition, while we generally do not delegate underwriting and binding authority, we do distribute an insurance product through a program administrator in connection with a risk purchasing group to whom we have issued a master policy. See “Business—Marketing and Distribution” for additional information.
In addition, while we generally do not delegate underwriting and binding authority, we do distribute an insurance product through a program administrator in connection with a risk purchasing group to whom our Casualty division has underwritten a master policy. See “Business—Marketing and Distribution” for additional information.
The impact of changes in current accounting practices and future pronouncements cannot be predicted but may affect the calculation of net income, total mezzanine equity and stockholders’ equity and other relevant financial statement line items. BICI is required to comply with the Statutory Accounting Principles (“SAP”).
The impact of changes in current accounting practices and future pronouncements cannot be predicted but may affect the calculation of net income, total mezzanine equity and stockholders’ equity and other relevant financial statement line items. 30 Table of Contents BICI is required to comply with the SAP.
We may also write risks that do not fall within the coverage provided by our reinsurance contracts, or we may purchase types of reinsurance that inadequately cover our risks, and in such an event, we may be exposed to greater risk and greater potential losses.
These gaps in reinsurance protection expose us to greater risk and greater potential losses. 25 Table of Contents We may also write risks that do not fall within the coverage provided by our reinsurance contracts, or we may purchase types of reinsurance that inadequately cover our risks, and in such an event, we may be exposed to greater risk and greater potential losses.
In such event, our ability to operate and compete effectively, and our ability to execute on our growth strategies, could be adversely affected, which in turn would have an adverse impact on our business, results of operations and financial condition. 41 Tab le of Contents The Facility contains restrictions on our ability to operate our business and to pursue our business strategies.
In such event, our ability to operate and compete effectively, and our ability to execute on our growth strategies, could be adversely affected, which in turn would have an adverse impact on our business, results of operations and financial condition. The 2025 Facility and Indenture contain restrictions on our ability to operate our business and to pursue our business strategies.
Of these outstanding shares, all of the shares sold in our IPO and subsequent secondary offering that closed on October 25, 2024 (the “Secondary Offering”) are freely tradable without restriction or further registration under the Securities Act, unless such shares are held by our directors, executive officers, or any of our affiliates, as 45 Tab le of Contents that term is defined in Rule 144 under the Securities Act (“Rule 144”).
Of these outstanding shares, all of the shares sold in our IPO and subsequent secondary offering that closed on October 25, 2024 (the “Secondary Offering”) and block trade under taken by GPC Fund that closed on August 8, 2025 are freely tradable without restriction or further registration under the Securities Act, unless such shares are held by our directors, executive officers, or any of our affiliates, as that term is defined in Rule 144 under the Securities Act (“Rule 144”).
The rapid evolution of artificial intelligence (“AI”) and technology in general may alter the competitive landscape. While we expect to continue to leverage technology, data, and analytics efficiently, it is possible that competitors will leverage AI and technology solutions more effectively which may adversely impact our competitive position. Competitors could enter the insurance market and further accelerate these trends.
While we expect to continue to leverage technology, data, and analytics efficiently, it is possible that competitors will leverage AI and technology solutions more effectively which may adversely impact our competitive position. Competitors could enter the insurance market and further accelerate these trends.
We rely on a select group of brokers, and such relationships may not continue. We distribute the majority of our products through a select group of brokers. For the twelve months ended December 31, 2024, 68.3%, or $475.0 million, of our gross written premiums were distributed through four of our approximately 65 brokers.
We rely on a select group of brokers, and such relationships may not continue. We distribute the majority of our products through a select group of brokers. For the twelve months ended December 31, 2025, 70.3%, or $606.6 million, of our gross written premiums were distributed through four of our approximately 67 brokers.
When the standard 30 Tab le of Contents insurance market hardens, the E&S market typically hardens, and growth in the E&S market can be significantly more rapid than growth in the standard insurance market.
When the standard insurance market hardens, the E&S market typically hardens, and growth in the E&S market can be significantly more rapid than growth in the standard insurance market.
Loss limitations or exclusions in our policies may not be enforceable in the manner we intend. Changes in legal, judicial, social and other external conditions beyond our control can cause unexpected and unintended issues related to claims and coverage. For example, there may be policy provisions for which no judicial precedent interpreting the policy language exists.
Changes in legal, judicial, social and other external conditions beyond our control can cause unexpected and unintended issues related to claims and coverage. For example, there may be policy provisions for which no judicial precedent interpreting the policy language exists.
Although interest rates have slightly decreased recently, they have increased significantly since 2021.As rate increases cease or decline, a lower interest rate environment could place pressure on our net investment income, particularly as it relates to these securities and short-term investments, which, in turn, may adversely affect our results of operations.
As rate increases cease or decline, a lower interest rate environment could place pressure on our net investment income, particularly as it relates to these securities and short-term investments, which, in turn, may adversely affect our results of operations.
GPC Fund and AmFam are not restricted from, and may, engage in, invest in or operate businesses that directly compete with ours. 48 Tab le of Contents GPC Fund or AmFam may act in a manner that advances their best interests and not necessarily those of our stockholders, by, among other things: • delaying, preventing, or deterring a change in control of us; • entrenching our management or our board of directors; or • influencing us to enter into transactions or agreements that are not in the best interests of all stockholders.
GPC Fund or AmFam may act in a manner that advances their best interests and not necessarily those of our stockholders, by, among other things: • delaying, preventing, or deterring a change in control of us; • entrenching our management or our board of directors; or • influencing us to enter into transactions or agreements that are not in the best interests of all stockholders.
The risk of a data security breach or a disruption has generally increased in frequency, intensity and sophistication. Techniques used to compromise or sabotage systems change frequently, may originate from less regulated and remote areas of the world and be difficult to detect and generally are not recognized until launched against a target.
Techniques used to compromise or sabotage systems change frequently, may originate from less regulated and remote areas of the world and be difficult to detect and generally are not recognized until launched against a target.
Consolidation could impact relationships with, and fees paid to, some 23 Tab le of Contents agents and brokers. If brokers merge with or acquire each other, there could be a resulting failure or inability of brokers to market our products successfully or the loss of a substantial portion of the business sourced by one or more of our key brokers.
If brokers merge with or acquire each other, there could be a resulting failure or inability of brokers to market our products successfully or the loss of a substantial portion of the business sourced by one or more of our key brokers.
Consequently, we seek to manage the duration of our investment portfolio based on the duration of our losses and loss adjustment expense reserves to provide sufficient liquidity and avoid having to liquidate investments to fund claims.
We invest the premiums we receive from our insureds until they are needed to pay policyholder claims. Consequently, we seek to manage the duration of our investment portfolio based on the duration of our losses and loss adjustment expense reserves to provide sufficient liquidity and avoid having to liquidate investments to fund claims.
If there were an event of default under the Facility, the lenders under the Facility could cause all amounts outstanding with respect to that debt to be due and payable immediately. Our assets or cash flow may not be sufficient to fully repay borrowing under the Facility if accelerated upon an event of default.
If there was an event of default under the 2025 Facility or the Indenture, all amounts outstanding with respect to those debts can be caused to be due and payable immediately. Our assets or cash flow may not be sufficient to fully repay borrowing under the 2025 Facility or the Indenture if accelerated upon an event of default.
We have elected to avail ourselves of this extended transition period and, as a result, we will not be required to adopt new or revised accounting standards on the relevant dates on which adoption of such standards is required for other public companies.
We have elected to avail ourselves of this extended transition period and, as a result, we will not be required to adopt new or revised accounting standards on the relevant dates on which adoption of such standards is required for other public companies. 46 Table of Contents You cannot be certain that an active trading market for our common stock will continue.
While all of our reinsurers are currently highly rated, their ratings could be downgraded in the future. Finally, a material deterioration in the capital levels of our reinsurance counterparties may reduce the amount of statutory capital relief provided by our reinsurance arrangements, which could result in our failure to meet our own statutory capital requirements.
Finally, a material deterioration in the capital levels of our reinsurance counterparties may reduce the amount of statutory capital relief provided by our reinsurance arrangements, which could result in our failure to meet our own statutory capital requirements.
As a result, we, like other insurance companies, could write insurance policies which to some extent do not have the benefit of reinsurance protection. These gaps in reinsurance protection expose us to greater risk and greater potential losses.
As a result, we, like other insurance companies, could write insurance policies which to some extent do not have the benefit of reinsurance protection.
In each case, we both review our historical data, which is limited given our short operating history, and industry data that is available to us from actuarial consultants and other publicly available sources, as well as consider the impact of such factors as: • claims inflation, which is the sustained increase in cost of raw materials, labor, medical services and other components of claims cost; • claims development patterns by line of business, as well as frequency and severity trends; • pricing for our products; • legislative activity; • social and economic patterns; and • litigation, judicial and regulatory trends. 24 Tab le of Contents These variables are affected by both internal and external events that could increase our exposure to losses, and we continually monitor our loss reserves using new information on reported claims and a variety of statistical techniques and modeling simulations.
In each case, we both review our historical data, which is limited given our short operating history, and industry data that is available to us from actuarial consultants and other publicly available sources, as well as consider the impact of such factors as: • claims inflation, which is the sustained increase in cost of raw materials, labor, medical services and other components of claims cost; • claims development patterns by line of business, as well as frequency and severity trends; • pricing for our products; • legislative activity; • social and economic patterns; and • litigation, judicial and regulatory trends.
If such competitive pressures reduce rates or negatively affect terms and conditions considerably, we may reduce our future underwriting activities in those lines thus resulting in reduced premiums and a potential reduction in expected earnings. Competitors may also have a longer operating history and more market recognition than we do in certain lines of business.
If such competitive pressures reduce rates or negatively affect terms and conditions considerably, we may reduce our future underwriting activities in those lines thus resulting in reduced premiums and a potential reduction in expected earnings.
The regulatory environment surrounding information security and privacy is increasingly demanding, with frequent imposition of new and changing requirements that are subject to differing interpretations.
As such, we are subject to various federal, state and local laws, regulations and industry standards. The regulatory environment surrounding information security and privacy is increasingly demanding, with frequent imposition of new and changing requirements that are subject to differing interpretations.
Any such eventuality could cause us to suffer, among other things, financial loss, disruption of business, liability to third parties, regulatory intervention and reputational damage, any of which could have a material adverse effect on our business, financial condition, results of operations, or prospects. We may change our underwriting guidelines or our strategy without your approval.
Any such eventuality could cause us to suffer, among other things, financial loss, disruption of business, liability to third parties, regulatory intervention and reputational damage, any of which could have a material adverse effect on our business, financial condition, results of operations, or prospects. Artificial intelligence is an evolving and rapidly growing technology.
As of December 31, 2024, all of our remaining shares of common stock outstanding are “restricted securities” within the meaning of Rule 144. Restricted securities may not be sold in the public market unless the sale is registered under the Securities Act or an exemption from registration is available.
Shares of common stock held by AFMIC and GPC Fund, our directors and our executive officers are “restricted securities” within the meaning of Rule 144. Restricted securities may not be sold in the public market unless the sale is registered under the Securities Act or an exemption from registration is available.
Additionally, changes in reinsurer’s risk appetite may have an impact on the availability of reinsurance on commercially reasonable terms, or at all. We are unable to predict how reinsurer’s risk appetite may fluctuate in the future. Collectability of reinsurance depends on the solvency of reinsurers and their willingness to make payments under the terms of reinsurance agreements.
Additionally, changes in reinsurer’s risk appetite may have an impact on the availability of reinsurance on 28 Table of Contents commercially reasonable terms, or at all. We are unable to predict how reinsurer’s risk appetite may fluctuate in the future.
In addition, individual states may impose different requirements on an insurance company’s ability to cancel a policy which may extend the period during which we are exposed to risk for a policy or individual states may have differing interpretations of contractual language or require specific wordings which may also expose us to additional risk.
If we fail to comply with such requirements or fail to comply with other applicable insurance regulations in Wisconsin, we may be subject to fines and penalties imposed by the Wisconsin OCI. 34 Table of Contents In addition, individual states may impose different requirements on an insurance company’s ability to cancel a policy which may extend the period during which we are exposed to risk for a policy or individual states may have differing interpretations of contractual language or require specific wordings which may also expose us to additional risk.
In states in which we operate on a non-admitted basis, surplus lines brokers generally are required to certify that a certain number of licensed admitted insurers had been offered and declined to write a particular risk prior to placing that risk with us or that the coverage is otherwise unavailable from an admitted carrier. 32 Tab le of Contents Our insurance company subsidiary, BICI, is subject to extensive regulation in Wisconsin, its state of domicile, and to a lesser degree, any other states in which it may operate.
In states in which we operate on a non-admitted basis, surplus lines brokers generally are required to certify that a certain number of licensed admitted insurers had been offered and declined to write a particular risk prior to placing that risk with us or that the coverage is otherwise unavailable from an admitted carrier.
Because we have no current plans to pay cash dividends on our common stock, you may not receive any return on investment unless you sell your shares of common stock for a price greater than that which you paid for it. We have no current plans to pay cash dividends on our common stock.
The amount of shares of our common stock issued in connection with an investment or acquisition could constitute a material portion of our then outstanding shares of our common stock. 48 Table of Contents Because we have no current plans to pay cash dividends on our common stock, you may not receive any return on investment unless you sell your shares of common stock for a price greater than that which you paid for it.
If in the future an active and liquid trading market does not continue, you may have difficulty selling your shares of common stock at an attractive price, or at all. The market price for our common stock is likely to be volatile.
Our common stock is listed on the NYSE under the symbol “BOW.” We cannot predict whether an active and liquid trading market will continue for our common stock. If in the future an active and liquid trading market does not continue, you may have difficulty selling your shares of common stock at an attractive price, or at all.
See “Management’s Discussion and Analysis of Financial Condition and Results of Operations—Quantitative and Qualitative Disclosures about Market Risk.” Our investment portfolio consists almost entirely of cash, cash equivalents and investment-grade fixed-income securities.
See “Management’s Discussion and Analysis of Financial Condition and Results of Operations—Quantitative and Qualitative Disclosures about Market Risk.” 32 Table of Contents Our investment portfolio consists almost entirely of cash, cash equivalents and investment-grade fixed-income securities. Although interest rates have slightly decreased recently, they have increased significantly since 2021.
Our operating results and stock price may be volatile, or may decline regardless of our operating performance, and you could lose all or part of your investment. Our quarterly operating results are likely to fluctuate in the future. In addition, securities markets worldwide have experienced, and are likely to continue to experience, significant price and volume fluctuations.
The market price for our common stock is likely to be volatile. Our operating results and stock price may be volatile, or may decline regardless of our operating performance, and you could lose all or part of your investment. Our quarterly operating results are likely to fluctuate in the future.
Sh ould any of our key personnel terminate their employment with us, or if we are unable to retain and attract talented personnel, we may be unable to maintain our current competitive position in the specialized markets in which we operate, which could adversely affect our results of operations.
Sh ould any of our key personnel terminate their employment with us, or if we are unable to retain and attract talented personnel, we may be unable to maintain our current competitive position in the specialized markets in which we operate, which could adversely affect our results of operations. 37 Table of Contents We could suffer security breaches, loss of data, cyberattacks and other information technology failures, and are subject to laws and regulations concerning data privacy and security that are continually evolving.

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Item 1C. Cybersecurity

Cybersecurity — threats and controls disclosure

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Biggest changeOur CISO conducts thorough reviews of these updates on an annual basis or as needed to help ensure their continued relevance and effectiveness in safeguarding the Company’s assets and business interests. 49 Tab le of Contents We continually seek to update our cybersecurity posture, encompassing end-user awareness training, layered defenses, critical asset identification and protection, enhanced monitoring and alerting.
Biggest changeWe continually seek to update our cybersecurity posture, encompassing end-user awareness training, layered defenses, critical asset identification and protection, enhanced monitoring and alerting. We engage with third-party experts to evaluate the efficacy of our security measures which includes network penetration testing.
Certain roles require additional role-based, specialized cybersecurity training, such as tabletop exercises to ensure proactive preparation and effective coordination in the event of a security incident. We conduct tabletop exercises annually or as needed to review our incident response plan, as well as to identify and prioritize opportunities for improvement within our cybersecurity program and associated security controls.
Certain roles require additional role-based, specialized cybersecurity training, such as tabletop exercises to help ensure proactive preparation and effective coordination in the event of a security incident. We conduct tabletop exercises annually or as needed to review our incident response plan, as well as to identify and prioritize opportunities for improvement within our cybersecurity program and associated security controls.
In addition, we annually obtain Service Organization Control (“SOC”) reports on the suitability and operating effectiveness of the service providers’ controls, known as a SOC 1 Type 2 Report. The report is prepared by an independent service auditor. We review such reports to confirm the existence of effective security controls over unauthorized access at third party service providers.
The report is prepared by an independent service auditor. We review such reports to confirm the existence of effective security controls over unauthorized access at third party service providers.
Our IT and InfoSec teams review and update such policies and procedures to adapt to the evolving cybersecurity threat landscape, industry best practices, and regulatory updates.
Our IT and InfoSec teams review and update such policies and procedures to adapt to the evolving cybersecurity threat landscape, industry best practices, and regulatory updates. Our CISO conducts thorough reviews of these updates on an annual basis or as needed to help ensure their continued relevance and effectiveness in safeguarding the Company’s assets and business interests.
We engage with third-party experts to evaluate the efficacy of our security measures which includes network penetration testing. We also regularly evaluate cybersecurity risks associated with our use of third-party service providers, conducting an annual review of hosted applications and assessing their cybersecurity readiness.
We also regularly evaluate cybersecurity risks associated with our use of third-party service providers, conducting an annual review of hosted applications and assessing their cybersecurity readiness. In addition, we annually obtain Service Organization Control (“SOC”) reports on the suitability and operating effectiveness of the service providers’ 51 Table of Contents controls, known as a SOC 1 Type 2 Report.

Item 5. Market for Registrant's Common Equity

Market for Common Equity — stock, dividends, buybacks

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Biggest changeDividends Any determination to pay dividends in the future will be at the discretion of our Board of Directors and will depend upon results of operations, financial condition, restrictions imposed by applicable law and other factors our Board of Directors deems relevant.
Biggest changeBecause most of our shares of common stock are held by brokers and other institutions on behalf of our stockholders, this number is not representative of our total stockholders. 52 Table of Contents Dividends Any determination to pay dividends in the future will be at the discretion of our Board of Directors and will depend upon results of operations, financial condition, restrictions imposed by applicable law and other factors our Board of Directors deems relevant.
Stock Performance Graph The following performance graph compares the cumulative total stockholder return of an investment in (1) our common stock, (2) the cumulative total returns to the Russell 2000 Index and (3) the cumulative total returns to the Standard & Poor's Composite 1500 Property & Casualty Insurance Index for the period from May 23, 2024 (the date our common stock began trading on the NYSE) through December 31, 2024.
Stock Performance Graph The following performance graph compares the cumulative total stockholder return of an investment in (1) our common stock, (2) the cumulative total returns to the Russell 2000 Index and (3) the cumulative total returns to the Standard & Poor's Composite 1500 Property & Casualty Insurance Index for the period from May 23, 2024 (the date our common stock began trading on the NYSE) through December 31, 2025.
May 23, 2024 December 31, 2024 Bowhead Specialty Holdings Inc. $ 100.00 $ 149.24 Russell 2000 Index $ 100.00 $ 108.87 S&P Composite 1500 P&C Insurance Index $ 100.00 $ 111.98 51 Tab le of Contents Issuer Repurchase of Equity Securities The table below provides information regarding the number of common stock repurchased in the quarter ended December 31, 2024: Period Total number of shares purchased (1) Average price paid per share Total number of shares purchased as part of publicly announced programs Maximum number (or approximate dollar value) of shares that may yet be purchased under the program October 1-31, 2024 140 $ 28.23 — — November 1-30, 2024 — $ — — — December 1-31, 2024 — $ — — — Total 140 — __________________ (1) Represents shares repurchased from employees to satisfy personal withholding tax liabilities that arise on the vesting of restricted stock units.
May 23, 2024 December 31, 2024 December 31, 2025 Bowhead Specialty Holdings Inc. $ 100.00 $ 149.24 $ 119.92 Russell 2000 Index $ 100.00 $ 108.87 $ 121.16 S&P Composite 1500 P&C Insurance Index $ 100.00 $ 111.98 $ 119.79 Unregistered Sales of Equity Securities and Use of Proceeds Not applicable. 53 Table of Contents Issuer Repurchase of Equity Securities The table below provides information regarding the number of common stock repurchased in the quarter ended December 31, 2025: Period Total number of shares purchased (1) Average price paid per share Total number of shares purchased as part of publicly announced programs Maximum number (or approximate dollar value) of shares that may yet be purchased under the program October 1-31, 2025 200 $ 24.21 — — November 1-30, 2025 — $ — — — December 1-31, 2025 — $ — — — Total 200 — __________________ (1) Represents shares repurchased from employees to satisfy personal withholding tax liabilities that arise on the vesting of restricted stock units.
ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES Market Information and Holders of our Common Stock On May 23, 2024, our common stock began trading on the NYSE under the symbol “BOW”.
ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES Market Information and Holders of our Common Stock On May 23, 2024, our common stock began trading on the NYSE under the symbol “BOW”. Prior to that time, there was no public market for our common stock.
Prior to that time, there was no public market for our common stock. 50 Tab le of Contents As of February 25, 2025, there were approximately 62 holders of record of our common stock.
As of February 19, 2026, there were approximately 38 holders of record of our common stock.
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Because most of our shares of common stock are held by brokers and other institutions on behalf of our stockholders, this number is not representative of our total stockholders.
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ITEM 6. [RESERVED] 52 Tab le of Contents

Item 7. Management's Discussion & Analysis

Management's Discussion & Analysis (MD&A) — revenue / margin commentary

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Biggest changeSee “—Reconciliation of Non-GAAP Financial Measures” for a reconciliation of diluted adjusted earnings per share to diluted earnings per share, which is the most directly comparable financial metric prepared in accordance with U.S. 56 Tab le of Contents Results of Operations Year ended December 31, 2024 compared to year ended December 31, 2023 The following table summarizes our results of operations for the years ended December 31, 2024 and 2023: Years Ended December 31, 2024 2023 $ Change % Change ($ in thousands, except percentages and per share data) Gross written premiums $ 695,717 $ 507,688 $ 188,029 37.0 % Ceded written premiums (244,295) (173,016) (71,279) 41.2 % Net written premiums $ 451,422 $ 334,672 $ 116,750 34.9 % Revenues Net earned premiums $ 385,111 $ 263,902 $ 121,209 45.9 % Net investment income 40,121 19,371 20,750 107.1 % Net realized investment losses (16) — (16) NM Other insurance-related income 444 125 319 255.2 % Total revenues 425,660 283,398 142,262 50.2 % Expenses Net losses and loss adjustment expenses 248,099 166,282 81,817 49.2 % Net acquisition costs 32,397 20,935 11,462 54.8 % Operating expenses 89,112 63,456 25,656 40.4 % Non-operating expenses 2,807 630 2,177 345.6 % Warrant expense 1,917 — 1,917 NM Credit facility interest expenses and fees 725 — 725 NM Foreign exchange losses (gains) 68 (20) 88 (440.0) % Total expenses 375,125 251,283 123,842 49.3 % Income before income taxes 50,535 32,115 18,420 57.4 % Income tax expense (12,292) (7,068) (5,224) 73.9 % Net income $ 38,243 $ 25,047 $ 13,196 52.7 % Key Operating and Financial Metrics: Underwriting income (1) $ 18,236 $ 14,035 $ 4,201 29.9 % Adjusted net income (1) 42,686 26,152 16,534 63.2 % Loss ratio 64.4 % 63.0 % Expense ratio 31.4 % 31.9 % Combined ratio 95.8 % 94.9 % Return on equity 13.6 % 18.2 % Adjusted return on equity (1) 15.2 % 19.0 % Diluted earnings per share $ 1.29 $ 1.04 Diluted adjusted earnings per share (1) $ 1.44 $ 1.09 __________________ NM - Percentage change is not meaningful.
Biggest changeGAAP. 58 Table of Contents Results of Operations Year ended December 31, 2025 compared to year ended December 31, 2024 The following table summarizes our results of operations for the years ended December 31, 2025 and 2024: Years Ended December 31, 2025 2024 $ Change % Change ($ in thousands, except percentages and per share data) Gross written premiums $ 862,806 $ 695,717 $ 167,089 24.0 % Ceded written premiums (304,619) (244,295) (60,324) 24.7 % Net written premiums $ 558,187 $ 451,422 $ 106,765 23.7 % Revenues Net earned premiums $ 491,677 $ 385,111 $ 106,566 27.7 % Net investment income 57,827 40,121 17,706 44.1 % Net realized investment gains (losses) 43 (16) 59 368.8 % Other insurance-related income 2,042 444 1,598 359.9 % Total revenues 551,589 425,660 125,929 29.6 % Expenses Net losses and loss adjustment expenses 328,022 248,099 79,923 32.2 % Net acquisition costs 46,513 32,397 14,116 43.6 % Operating expenses 102,264 89,112 13,152 14.8 % Non-operating expenses 1,425 2,807 (1,382) (49.2) % Warrant expense 3,142 1,917 1,225 63.9 % Interest expense and financing fees 2,012 725 1,287 177.5 % Loss on extinguishment of credit facility 862 — 862 NM Foreign exchange losses 50 68 (18) (26.5) % Total expenses 484,290 375,125 109,165 29.1 % Income before income taxes 67,299 50,535 16,764 33.2 % Income tax expense (13,513) (12,292) (1,221) 9.9 % Net income $ 53,786 $ 38,243 $ 15,543 40.6 % Key Operating and Financial Metrics: Underwriting income (1) $ 14,878 $ 18,236 $ (3,358) (18.4) % Adjusted net income (1) 55,598 42,686 12,912 30.2 % Loss ratio 66.7 % 64.4 % Expense ratio 29.8 % 31.4 % Combined ratio 96.5 % 95.8 % Return on equity 13.1 % 13.6 % Adjusted return on equity (1) 13.6 % 15.2 % Diluted earnings per share $ 1.59 $ 1.29 Diluted adjusted earnings per share (1) $ 1.65 $ 1.44 __________________ (1) Non-GAAP financial measure.
Adjusted return on equity is a non-GAAP financial measure defined as adjusted net income as a percentage of average beginning and ending mezzanine equity and stockholders’ equity. See “—Reconciliation of Non-GAAP Financial Measures” for a reconciliation of adjusted return on equity to return on equity, which is the most directly comparable financial metric prepared in accordance with U.S. GAAP.
See “—Reconciliation of Non-GAAP Financial Measures” for a reconciliation of adjusted net income to net income, which is the most directly comparable financial metric prepared in accordance with U.S. GAAP. Adjusted return on equity is a non-GAAP financial measure defined as adjusted net income as a percentage of average beginning and ending mezzanine equity and stockholders’ equity.
BICI is restricted from paying dividends by the lesser of: (i) 10% of statutory capital and surplus as of the preceding December 31, or; (ii) the greater of: (A) statutory net income for the calendar year preceding the date of the dividend distribution, minus realized capital gains for that year, or (B) aggregate of net income for the three months preceding the date of the dividend or distribution, minus realized capital gains for those calendar years and minus dividends paid or credited and distributions made within the first two of the preceding three calendar years.
BICI is restricted from paying dividends by the lesser of: (i) 10% of statutory capital and surplus as of the preceding December 31, or; (ii) the greater of: (A) statutory net income for the calendar year preceding the date of the dividend distribution, minus realized capital gains for that year, or (B) aggregate of net income for the three calendar years preceding the date of the dividend or distribution, minus realized capital gains for those calendar years and minus dividends paid or credited and distributions made within the first two of the preceding three calendar years.
The assets held in trust include fixed maturity securities, short-term investments and cash and cash equivalents, as collateral for transactions with AmFam. The Company is entitled to interest income earned on these restricted assets, which is included in net investment income in the Consolidated Statements of Income and Comprehensive Income (Loss).
The assets held in trust include fixed maturity securities, short-term investments and cash and cash equivalents, as collateral for transactions with AmFam. The Company is entitled to interest income earned on these restricted assets, which is included in net investment income in the Consolidated Statements of Income and Comprehensive Income.
The change in the liability due to the fluctuations in the exchange rate are included within the Consolidated Statements of Income and Comprehensive Income (Loss) at the end of each period. Income tax expense Currently, income tax expense primarily relates to federal income taxes.
The change in the liability due to the fluctuations in the exchange rate are included within the Consolidated Statements of Income and Comprehensive Income at the end of each period. Income tax expense Currently, income tax expense primarily relates to federal income taxes.
Dividend declarations We did not declare any dividends during the years ended December 31, 2024 and 2023. Investment portfolio We seek to maintain a diversified portfolio of fixed income instruments that prioritize capital preservation, with a secondary focus on generating predictable investment income. Our asset allocation strategy focuses on high-quality fixed income instruments, with no equity or alternative investment exposure.
Dividend declarations We did not declare any dividends during the years ended December 31, 2025 and 2024. Investment portfolio We seek to maintain a diversified portfolio of fixed income instruments that prioritize capital preservation, with a secondary focus on generating predictable investment income. Our asset allocation strategy focuses on high-quality fixed income instruments, with no equity or alternative investment exposure.
For the year ended December 31, 2024, net cash used in investing activities of $325.9 million was due to the growth in our business operations.
For the year ended December 31, 2024, net cash used in investing activities was $325.9 million due to the growth in our business operations.
The table below quantifies the impact of potential reserve deviations from our carried reserve as of December 31, 2024 and 2023. We applied a sensitivity factor to net reserves for unpaid losses and loss adjustment expenses by underwriting division below. We believe that potential changes such as these would not have a material impact on our liquidity.
The table below quantifies the impact of potential reserve deviations from our carried reserve as of December 31, 2025 and 2024. We applied a sensitivity factor to net reserves for unpaid losses and loss adjustment expenses by underwriting division below. We believe that potential changes such as these would not have a material impact on our liquidity.
In general, our net losses and loss adjustment expenses are affected by: • the occurrence, frequency and severity of claims associated with the particular types of insurance contracts that we write; • the mix of business written by us; • changes in the legal or regulatory environment related to the business we write; • trends in legal defense costs; • inflation in the cost of claims, including inflation related to wages, medical costs, and building materials, as well as inflation related to the increase in the severity of claims above general economic inflation (i.e., social inflation); and • the reinsurance agreements we have in place at the time of a loss.
In general, our net losses and loss adjustment expenses are affected by: • the occurrence, frequency and severity of claims associated with the particular types of insurance contracts that we write; 55 Table of Contents • the mix of business written by us; • changes in the legal or regulatory environment related to the business we write; • trends in legal defense costs; • inflation in the cost of claims, including inflation related to wages, medical costs, and building materials, as well as inflation related to the increase in the severity of claims above general economic inflation (i.e., social inflation); and • the reinsurance agreements we have in place at the time of a loss.
(1) Non-GAAP financial measure. See “—Reconciliation of Non-GAAP Financial Measures” for a reconciliation of the non-GAAP financial measure in accordance with the most comparable U.S.
See “—Reconciliation of Non-GAAP Financial Measures” for a reconciliation of the non-GAAP financial measure in accordance with the most comparable U.S.
Our reinsurance treaties are currently subject to caps, which currently range from 250% to 350% of the subject matter ceded premium, and should these caps be exceeded we would retain any losses in excess of those caps. Our reinsurance treaties typically have 12- or 18-month terms.
Our reinsurance treaties are currently subject to caps, which range from 250% to 350% of the subject matter ceded premium, and should these caps be exceeded we would retain any losses in excess of those caps. Our reinsurance treaties typically have 12-month terms.
Net earned premiums Net earned premiums represent the earned portion of our net written premiums. Our insurance policies generally have a term of one year but occasionally could be as long as seven years, and premiums are earned pro rata over the term of the policy.
Net earned premiums Net earned premiums represent the earned portion of our net written premiums. Our insurance policies generally have a term of one year but occasionally could be as long as ten years, and premiums are earned pro rata over the term of the policy.
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.
All obligations under the 2025 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 were (ii) secured by a first-priority perfected lien in substantially all of the Company’s and the subsidiary guarantors’ assets.
Following our Secondary Offering on October 25, 2024, since BIHL is no longer a holder of our common stock, BSHI may receive cash through (i) drawing on the Facility (as defined below) that we entered into on April 22, 2024, (ii) issuance of equity and debt securities, (iii) payments from our subsidiaries pursuant to our consolidated tax allocation agreement and other transactions and (iv) dividends from our insurance company subsidiary.
Following our secondary offering on October 25, 2024, since BIHL is no longer a holder of our common stock, BSHI may receive cash through (i) drawing on the 2025 Facility (as defined below) that we entered into on November 26, 2025, (ii) issuance of equity and debt securities, (iii) payments from our subsidiaries pursuant to our consolidated tax allocation agreement and other transactions and (iv) dividends from our insurance company subsidiary.
As of December 31, 2024, the maximum dividend that BICI could pay without the approval of regulatory authorities was $16.1 million. Insurance regulators have broad powers to prevent the reduction of statutory surplus to inadequate levels, and there is no assurance that dividends of the maximum amounts calculated under any applicable formula would be permitted.
As of December 31, 2025, the maximum dividend that BICI could pay without the approval of regulatory authorities was $34.1 million. Insurance regulators have broad powers to prevent the reduction of statutory surplus to inadequate levels, and there is no assurance that dividends of the maximum amounts calculated under any applicable formula would be permitted.
Diluted adjusted earnings per share is a non-GAAP financial measure defined as adjusted net income divided by the weighted average common shares outstanding for the period, reflecting the dilution that may occur if equity based awards are converted into common stock equivalents as calculated using the treasury stock method.
GAAP. 57 Table of Contents Diluted adjusted earnings per share is a non-GAAP financial measure defined as adjusted net income divided by the weighted average common shares outstanding for the period, reflecting the dilution that may occur if equity based awards are converted into common stock equivalents as calculated using the treasury stock method.
These leases expire in December 2027 and August 2028, respectively. Although each operating lease agreement contains an option to extend the length of the respective lease term, the Company is not reasonably certain it will exercise these options. As of December 31, 2024, the discounted operating lease liability was $4.3 million.
These leases expire in December 2027 and August 2028, respectively. Although each operating lease agreement contains an option to extend the length of the respective lease term, the Company is not reasonably certain it will exercise these options. As of December 31, 2025, the discounted operating lease liability was $3.0 million.
Underwriting income is a non-GAAP financial measure defined as income before income taxes excluding the impact of net investment income, net realized investment losses, other insurance-related income, non-operating expenses, warrant expense, credit facility interest expenses and fees, foreign exchange losses (gains), and certain strategic initiatives.
Underwriting income is a non-GAAP financial measure defined as income before income taxes excluding the impact of net investment income, net realized investment gains (losses), other insurance-related income, non-operating expenses, warrant expense, interest expenses and financing fees, loss on extinguishment of credit facility, foreign exchange losses (gains), and certain strategic initiatives.
Inc A+ 29.8% Endurance Assurance Corporation A+ 23.8% Markel Global Reinsurance Company A 20.8% Ascot Bermuda Limited A 9.4% American Family Connect Property and Casualty Insurance Company A 7.5% All other reinsurers At least A 8.7% Total 100.0% Contractual Obligations and Commitments We have entered into software service agreements that have purchase obligations depending on the amount of premiums written.
Inc A+ 30.1% Endurance Assurance Corporation A+ 23.5% Markel Global Reinsurance Company A 18.4% American Family Connect Property and Casualty Insurance Company A 9.1% Ascot Bermuda Limited A 7.1% All other reinsurers At least A 11.8% Total 100.0% Contractual Obligations and Commitments We have entered into software service agreements that have purchase obligations depending on the amount of premiums written.
For the year ended December 31, 2024, funds from operations and net proceeds from the IPO, together with proceeds received from the sale and maturity on fixed maturity securities of $281.2 million and short-term investments of $9.0 million, were used to purchase fixed maturity securities of $603.0 million and short-term investments of $9.9 million.
For the year ended December 31, 2024, funds from operations and net proceeds from the IPO, together with proceeds received from sales and maturities of fixed maturity securities of $281.2 million and short-term investments of $9.0 million, were used to purchase fixed maturity securities of $603.0 million and short-term investments of $9.9 million.
Deferred tax assets and liabilities are measured by applying enacted tax rates in effect for the years in which such differences are expected to reverse. Our deferred tax assets result from temporary differences primarily attributable to unearned premium reserves, unrealized losses on investments and loss reserves. Our deferred tax liabilities result primarily from deferred policy acquisition costs.
Deferred tax assets and liabilities are measured by applying enacted tax rates in effect for the years in which such differences are expected to reverse. Our deferred tax assets result from temporary differences primarily attributable to unearned premium reserves, loss reserves, deferred policy acquisition costs, share-based compensation, and unrealized gains or losses on investments.
Our fixed maturity securities, including cash equivalents, had a weighted average effective duration of 2.2 years and an average rating of “AA” at December 31, 2024. Our fixed income investment portfolio had a book yield of 4.6% and a market yield of 4.9% as of December 31, 2024, compared to 4.3% and 5.2%, respectively, as of December 31, 2023.
Our fixed maturity securities, including cash equivalents, had a weighted average effective duration of 3.0 years and an average rating of “AA” at December 31, 2025. Our investment portfolio,including cash equivalents, had a book yield of 4.6% and a market yield of 4.5% as of December 31, 2025, compared to 4.6% and 4.9%, respectively, as of December 31, 2024.
The costs incurred primarily represent expenses to implement the new platform and processes supporting the Baleen Specialty division. Adjusted net income We define adjusted net income as net income excluding the impact of net realized investment losses, non-operating expenses, foreign exchange losses (gains), and certain strategic initiatives.
The costs incurred primarily represent expenses to implement the new platform and processes supporting the Baleen Specialty division. Adjusted net income We define adjusted net income as net income excluding the impact of net realized investment gains (losses), non-operating expenses, loss on extinguishment of credit facility, foreign exchange losses (gains), and certain strategic initiatives.
See “—Reconciliation of Non-GAAP Financial Measures” for a reconciliation of underwriting 55 Tab le of Contents income to income before income taxes, which is the most directly comparable financial metric prepared in accordance with U.S. GAAP.
See “—Reconciliation of Non-GAAP Financial Measures” for a reconciliation of underwriting income to income before income taxes, which is the most directly comparable financial metric prepared in accordance with U.S. GAAP.
We categorize our reserves for unpaid losses and loss adjustment expenses into two types: case reserves and reserves for IBNR. 69 Tab le of Contents Case reserves are established for individual claims that have been reported to us. We are notified of losses by our insureds, their agents or our brokers.
We categorize our reserves for unpaid losses and loss adjustment expenses into two types: case reserves and reserves for IBNR. 72 Table of Contents Case reserves are established for individual claims that have been reported to us. We are notified of losses by our insureds, their agents or our brokers.
State insurance regulatory authorities that have jurisdiction over the payment of dividends by our insurance company subsidiary may in the future adopt statutory provisions more restrictive than those currently in effect. As of December 31, 2024, our holding company had $21.0 million in cash and investments.
State insurance regulatory authorities that have jurisdiction over the payment of dividends by our insurance company subsidiary may in the future adopt statutory provisions more restrictive than those currently in effect. As of December 31, 2025, our holding company had $72.8 million in cash and investments.
As of December 31, 2024, we had the following significant reinsurance programs: • For all lines, except Cyber, we use a quota share reinsurance treaty, where 25.0% of the exposure is ceded to reinsurers, and an excess of loss reinsurance treaty, which cedes 60.1% of losses in excess of $5 million up to $15 million to our reinsurers. • Cyber, as a specialized line of business, is placed under a separate quota share structure, where we cede 64.0% of the exposure to reinsurers.
As of December 31, 2025, we had the following significant reinsurance programs: • For all lines, except Cyber, we use a quota share reinsurance treaty, where 26.0% of the exposure is ceded to reinsurers, and an excess of loss reinsurance treaty, which cedes 65.0% of losses in excess of $5 million up to $15 million to our reinsurers. • Cyber, as a specialized line of business, is placed under a separate quota share structure, where 60.0% of the exposure is ceded to reinsurers.
We believe we have sufficient liquidity available at our holding company and subsidiaries to meet our operating cash needs and obligations for at least the next 12 months. 63 Tab le of Contents Revolving Credit Facility On April 22, 2024, the Company entered into a Credit Agreement with certain lenders and JPMorgan Chase Bank, N.A., as administrative agent, swingline lender and issuing bank.
We believe we have sufficient liquidity available at our holding company and subsidiaries to meet our operating cash needs and obligations for at least the next 12 months. 65 Table of Contents Revolving Credit Facilities On April 22, 2024, the Company entered into a Credit Agreement (the “2024 Credit Agreement”) with certain lenders and JPMorgan Chase Bank, N.A., as administrative agent, swingline lender and issuing bank.
Gross acquisition costs as a percentage of gross earned premiums was 15.7% for the year ended December 31, 2024 compared to 15.0% for the year ended December 31, 2023, and ceded earned commissions as a percentage of ceded earned premium was 29.0% for the year ended December 31, 2024 compared to 29.4% for the year ended December 31, 2023.
Gross acquisition costs as a percentage of gross earned premiums was 16.3% for the year ended December 31, 2025 compared to 15.7% for the year ended December 31, 2024, and ceded earned commissions as a percentage of ceded earned premium was 29.1% for the year ended December 31, 2025 compared to 29.0% for the year ended December 31, 2024.
IBNR (or unpaid) losses are estimated based on historical or industry reporting (or payout) development patterns and a loss + ALAE ratio based on adjusted experience to date. 70 Tab le of Contents Since our loss experience is less mature, we are primarily relying on a weighting between the initial expected loss and ALAE ratio and the indications resulting from the Reported Bornhuetter-Ferguson and Cape Cod Methods.
IBNR (or unpaid) losses are estimated based on historical or industry reporting (or payout) development patterns and a loss and ALAE ratio based on adjusted experience to date. 73 Table of Contents Since our loss experience is less mature, we are primarily relying on a weighting between the initial expected loss and ALAE ratio, the Reported Bornhuetter-Ferguson, the Reported Cape Cod Method, and the Reported Loss Development Method.
Adjusted return on equity for the years ended December 31, 2024 and 2023 reconciles to return on equity as follows: Year Ended December 31, 2024 2023 ($ in thousands, except percentages) Numerator: Adjusted net income (1) $ 42,686 $ 26,152 Denominator: Average mezzanine equity and stockholders' equity 281,259 137,726 Adjusted return on equity 15.2 % 19.0 % Diluted adjusted earnings per share We define diluted adjusted earnings per share adjusted net income divided by the weighted average common shares outstanding for the period, reflecting the dilution that may occur if equity based awards are converted into common stock equivalents as calculated using the treasury stock method.
Adjusted return on equity for the years ended December 31, 2025 and 2024 reconciles to return on equity as follows: Year Ended December 31, 2025 2024 ($ in thousands, except percentages) Numerator: Adjusted net income $ 55,598 $ 42,686 Denominator: Average mezzanine equity and stockholders' equity 409,858 281,259 Adjusted return on equity 13.6 % 15.2 % Diluted adjusted earnings per share We define diluted adjusted earnings per share adjusted net income divided by the weighted average common shares outstanding for the period, reflecting the dilution that may occur if equity based awards are converted into common stock equivalents as calculated using the treasury stock method.
The fixed and determinable portion of these purchase obligations were approximately $1.7 million for the years 2025 - 2028 as of December 31, 2024. The obligations may increase depending on the amount of premium written by the Company over the respective years.
The fixed and determinable portion of these purchase obligations were approximately $8.6 million for the years 2026 - 2029 as of December 31, 2025. The obligations may increase depending on the amount of premium written by the Company over the respective years.
GAAP, and other companies may define diluted adjusted earnings per shares differently 62 Tab le of Contents Diluted adjusted earnings per share for the years ended December 31, 2024 and 2023 reconciles to diluted earnings per share as follows: Year Ended December 31, 2024 2023 ($ in thousands, except share and per share data) Numerator: Adjusted net income $ 42,686 $ 26,152 Denominator: Diluted weighted average shares outstanding 29,677,196 24,000,000 Diluted adjusted earnings per share $ 1.44 $ 1.09 Liquidity and Capital Resources Sources and Uses of Funds BSHI is organized as a Delaware holding company with our operations primarily conducted by our wholly- owned insurance company subsidiary, BICI, domiciled in the State of Wisconsin, BSUI, our wholly-owned managing general agency, and Bowhead Underwriting Services, Inc.
GAAP, and other companies may define diluted adjusted earnings per shares differently. 64 Table of Contents Diluted adjusted earnings per share for the years ended December 31, 2025 and 2024 reconciles to diluted earnings per share as follows: Year Ended December 31, 2025 2024 ($ in thousands, except share and per share data) Numerator: Adjusted net income $ 55,598 $ 42,686 Denominator: Diluted weighted average shares outstanding 33,735,944 29,677,196 Diluted adjusted earnings per share $ 1.65 $ 1.44 Liquidity and Capital Resources Sources and Uses of Funds BSHI is organized as a Delaware holding company with our operations primarily conducted by our wholly- owned insurance company subsidiary, BICI, domiciled in the State of Wisconsin, BSUI, our wholly-owned managing general agency, and BUSI, our wholly-owned services company subsidiary.
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 December 31, 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 2025 Credit Agreement contains certain customary covenants, including financial maintenance covenants. As of December 31, 2025, the Company was in compliance with all of the 2025 Facility’s covenants. The 2025 Facility matures on the earlier of November 26, 2027, or 91 days prior to the earliest date any MGA Agreement will terminate where no MGA Agreement replacement is found.
Our cash flows for the years ended December 31, 2024 and 2023 were as follows: Years Ended December 31, 2024 2023 ($ in thousands) Net cash provided by operating activities $ 294,287 $ 236,225 Net cash used in investing activities (325,883) (274,765) Net cash provided by (used in) financing activities 133,886 77,656 Net change in cash, cash equivalents and restricted cash $ 102,290 $ 39,117 The increase in cash provided by operating activities in the year ended December 31, 2024 compared to the year ended December 31, 2023 was primarily due to the growth in our business operations compared to the timing of claim payments and subsequent reinsurance recoveries, which occur later than cash collections on premiums.
Our cash flows for the years ended December 31, 2025 and 2024 were as follows: Years Ended December 31, 2025 2024 ($ in thousands) Net cash provided by operating activities $ 331,587 $ 294,287 Net cash used in investing activities (464,391) (325,883) Net cash provided by (used in) financing activities 144,516 133,886 Net change in cash, cash equivalents and restricted cash $ 11,712 $ 102,290 The increase in cash provided by operating activities in the year ended December 31, 2025 compared to the year ended December 31, 2024 was primarily due to the growth in our business operations compared to the timing of claim payments and subsequent reinsurance recoveries, which occur later than cash collections on premiums.
The fair value of our restricted assets were as follows: As of December 31, 2024 2023 ($ in thousands) Restricted investments $ 494,828 $ 284,822 Restricted cash and cash equivalents 124,582 1,698 Total restricted assets $ 619,411 $ 286,520 Critical Accounting Policies and Estimates We identified the following accounting estimates as critical to the understanding of our financial position and results of operations: • reserve for losses and loss adjustment expenses; • reinsurance recoverable; • fair value measurements of financial assets and liabilities; and • deferred income tax.
The fair value of our restricted assets were as follows: As of December 31, 2025 2024 ($ in thousands) Restricted investments $ 838,840 $ 494,829 Restricted cash and cash equivalents 40,225 124,582 Total restricted assets $ 879,065 $ 619,411 Critical Accounting Policies and Estimates We identified the following accounting estimates as critical to the understanding of our financial position and results of operations: • reserve for losses and loss adjustment expenses; • reinsurance recoverable; • fair value measurements of financial assets and liabilities; and • deferred income tax.
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. 72 Tab le of Contents See Note 4, “Fair Value Measurements”, in our Notes to Consolidated Financial Statements included in this Annual Report on Form 10-K for further discussion regarding our fair value disclosures.
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.
Currently, the quota share reinsurance treaty for Cyber generally renews on January 1, 2025 while the remainder of our reinsurance treaties renew on May 1, 2025. 65 Tab le of Contents All reinsurance involves credit risk, since we maintain the direct obligation to pay losses incurred by our policyholders up to our policy limits.
Currently, the quota share reinsurance treaty for Cyber renews on January 1, the commercial auto quota share treaty within our Casualty division renews March 1, while the remainder of our reinsurance treaties renew on May 1. All reinsurance involves credit risk, since we maintain the direct obligation to pay losses incurred by our policyholders up to our policy limits.
The policies we write are issued on AmFam paper under their own name through BSUI, our managing general agency, in exchange for a Ceding Fee, and reinsured 100% to BICI, our wholly-owned insurance company subsidiary.
We distribute our products through carefully selected relationships with leading distribution partners in both the wholesale and retail markets. The policies we write are issued on AmFam paper under their own name through BSUI, our managing general agency, in exchange for a Ceding Fee, and reinsured 100% to BICI, our wholly-owned insurance company subsidiary.
Net earned premiums increased $121.2 million, or 45.9%, to $385.1 million for the year ended December 31, 2024 from $263.9 million for the year ended December 31, 2023. The increase was primarily due to the earning of increased gross written premiums offset by the earning of increased ceded written premiums under our ceded reinsurance treaties.
Net earned premiums increased $106.6 million, or 27.7%, to $491.7 million for the year ended December 31, 2025 from $385.1 million for the year ended December 31, 2024. The increase was primarily due to the earning of increased gross written premiums offset by the earning of increased ceded written premiums under our ceded reinsurance treaties.
There is no separate excess of loss reinsurance program for our Cyber line of business. • We also entered into a quota share treaty, effective March 1, 2024, covering commercial auto exposure in excess of $1 million up to $5 million within our Casualty book of business.
There is no separate excess of loss reinsurance program for our Cyber line of business. • Within our Casualty division, we have an additional quota share treaty covering a portion of our commercial auto exposure in excess of $1 million up to $5 million.
Underwriting income should not be viewed as a substitute for income before income taxes calculated in accordance with U.S.
Underwriting income should not be viewed as a substitute for income before income taxes calculated in accordance with U.S. GAAP, and other companies may define underwriting income differently.
Expense ratio The following table summarizes the components of our expense ratio for the years ended December 31, 2024 and 2023: Years Ended December 31, 2024 2023 Expenses % of Net Earned Premiums Expenses % of Net Earned Premiums ($ in thousands, except percentages) Net acquisition costs $ 32,397 8.4 % $ 20,935 7.9 % Operating expenses 89,112 23.1 % 63,456 24.0 % Less: Other insurance-related income (444) (0.1) % (125) — % Total expense ratio $ 121,065 31.4 % $ 84,266 31.9 % Our expense ratio was 31.4% for the year ended December 31, 2024 compared to 31.9% for the year ended December 31, 2023, a decrease of 0.5 points.
Expense ratio The following table summarizes the components of our expense ratio for the years ended December 31, 2025 and 2024: Years Ended December 31, 2025 2024 Expenses % of Net Earned Premiums Expenses % of Net Earned Premiums ($ in thousands, except percentages) Net acquisition costs $ 46,513 9.5 % $ 32,397 8.4 % Operating expenses 102,264 20.8 % 89,112 23.1 % Less: Other insurance-related income (2,042) (0.4) % (444) (0.1) % Total $ 146,735 29.8 % $ 121,065 31.4 % 61 Table of Contents Our expense ratio was 29.8% for the year ended December 31, 2025 compared to 31.4% for the year ended December 31, 2024, a decrease of 1.6 points.
The volume of our ceded written premiums is impacted by the level of our gross written premiums and any decision we make to increase or decrease retention levels and policy limits. 53 Tab le of Contents Net written premiums Net written premiums are gross written premiums less ceded written premiums.
We enter into reinsurance contracts to limit our exposure to potential losses. The volume of our ceded written premiums is impacted by the level of our gross written premiums and any decision we make to increase or decrease retention levels and policy limits. Net written premiums Net written premiums are gross written premiums less ceded written premiums.
GAAP, and other companies may define adjusted net income differently. 61 Tab le of Contents Adjusted net income for the years ended December 31, 2024 and 2023 reconciles to net income as follows: Years Ended December 31, 2024 2023 Before income taxes After income taxes Before income taxes After income taxes ($ in thousands) Income as reported $ 50,535 $ 38,243 $ 32,115 $ 25,047 Adjustments: Net realized investment losses 16 16 — — Non-operating expenses 2,807 2,807 630 630 Foreign exchange losses (gains) 68 68 (20) (20) Strategic initiatives (1) 2,733 2,733 806 806 Tax impact — (1,181) — (311) Adjusted net income $ 56,159 $ 42,686 $ 33,531 $ 26,152 _________________ (1) Strategic initiatives for the years ended December 31, 2024 and 2023 represent costs incurred to set up our Baleen Specialty division, which is recorded in operating expenses within the Consolidated Statements of Income and Comprehensive Income (Loss).
GAAP, and other companies may define adjusted net income differently. 63 Table of Contents Adjusted net income for the years ended December 31, 2025 and 2024 reconciles to net income as follows: Years Ended December 31, 2025 2024 Before Income Taxes After Income Taxes Before Income Taxes After Income Taxes ($ in thousands) Income as reported $ 67,299 $ 53,786 $ 50,535 $ 38,243 Adjustments: Net realized investment (gains) losses (43) (43) 16 16 Non-operating expenses 1,425 1,425 2,807 2,807 Loss on extinguishment of credit facility 862 862 — — Foreign exchange losses 50 50 68 68 Strategic initiatives (1) — — 2,733 2,733 Tax impact — (482) — (1,181) Adjusted net income $ 69,593 $ 55,598 $ 56,159 $ 42,686 _________________ (1) Strategic initiatives for the year ended December 31, 2024 represent costs incurred to set up our Baleen Specialty division, which is recorded in operating expenses within the Consolidated Statements of Income and Comprehensive Income.
We review the need for a valuation allowance related to our deferred tax assets each quarter. We reduce our deferred tax assets by a valuation allowance when we determine that it is more likely than not that some portion or all of the deferred tax assets will not be realized.
We reduce our deferred tax assets by a valuation allowance when we determine that it is more likely than not that some portion or all of the deferred tax assets will not be realized. The assessment of whether or not a valuation allowance is needed requires us to use significant judgment.
GAAP, and other companies may define underwriting income differently. 60 Tab le of Contents Underwriting income for the years ended December 31, 2024 and 2023 reconciles to income before income taxes as follows: Years Ended December 31, 2024 2023 ($ in thousands) Income before income taxes $ 50,535 $ 32,115 Adjustments: Net investment income (40,121) (19,371) Net realized investment losses 16 — Other insurance-related income (444) (125) Non-operating expenses 2,807 630 Warrant expense 1,917 — Credit facility interest expenses and fees 725 — Foreign exchange losses (gains) 68 (20) Strategic initiatives (1) 2,733 806 Underwriting income $ 18,236 $ 14,035 __________________ (1) Strategic initiatives for the years ended December 31, 2024 and 2023 represent costs incurred to set up our Baleen Specialty division, which is recorded in operating expenses within the Consolidated Statements of Income and Comprehensive Income (Loss).
Underwriting income for the years ended December 31, 2025 and 2024 reconciles to income before income taxes as follows: Years Ended December 31, 2025 2024 ($ in thousands) Income before income taxes $ 67,299 $ 50,535 Adjustments: Net investment income (57,827) (40,121) Net realized investment (gains) losses (43) 16 Other insurance-related income (2,042) (444) Non-operating expenses 1,425 2,807 Warrant expense 3,142 1,917 Interest expense and financing fees 2,012 725 Loss on extinguishment of credit facility 862 — Foreign exchange losses 50 68 Strategic initiatives (1) — 2,733 Underwriting income $ 14,878 $ 18,236 __________________ (1) Strategic initiatives for the year ended December 31, 2024 represent costs incurred to set up our Baleen Specialty division, which is recorded in operating expenses within the Consolidated Statements of Income and Comprehensive Income.
Our reserve estimates assume that there will not be significant changes in the regulatory and legislative environment. The impact of potential changes in the regulatory or legislative environment is difficult to quantify in the absence of specific, significant new regulation or legislation.
The impact of potential changes in the regulatory or legislative environment is difficult to quantify in the absence of specific, significant new regulation or legislation.
The following tables summarize our gross and net reserves for unpaid losses and loss adjustment expenses as of December 31, 2024 and 2023: Year Ended December 31, 2024 Gross % of Total Net % of Total ($ in thousands, except percentages) Case reserves $ 71,420 9.4 % $ 47,378 9.3 % IBNR 685,439 90.6 % 462,566 90.7 % Total reserves $ 756,859 100.0 % $ 509,944 100.0 % Year Ended December 31, 2023 Gross % of Total Net % of Total ($ in thousands, except percentages) Case reserves $ 22,616 5.2 % $ 18,063 6.1 % IBNR 408,570 94.8 % 276,850 93.9 % Total reserves $ 431,186 100.0 % $ 294,913 100.0 % The process of estimating the reserve for losses and loss adjustment expenses requires a high degree of judgment and is subject to several variables.
The following tables summarize our gross and net reserves for unpaid losses and loss adjustment expenses as of December 31, 2025 and 2024: Year Ended December 31, 2025 Gross % of Total Net % of Total ($ in thousands, except percentages) Case reserves $ 115,954 10.3 % $ 74,698 10.0 % IBNR 1,013,982 89.7 % 673,541 90.0 % Total reserves $ 1,129,936 100.0 % $ 748,239 100.0 % Year Ended December 31, 2024 Gross % of Total Net % of Total ($ in thousands, except percentages) Case reserves $ 71,420 9.4 % $ 47,378 9.3 % IBNR 685,439 90.6 % 462,566 90.7 % Total reserves $ 756,859 100.0 % $ 509,944 100.0 % The process of estimating the reserve for losses and loss adjustment expenses requires a high degree of judgment and is subject to several variables.
Accordingly, when selecting our reinsurers, a potential reinsurer’s financial strength is the paramount consideration. All of our reinsurance business is placed with reinsurers that have an A.M. Best rating of “A” (Excellent) or better. As of December 31, 2024, we have never had an allowance for uncollectible reinsurance. The following table summarizes our top five reinsurers, their A.M.
Accordingly, when selecting our reinsurers, a potential reinsurer’s financial strength is the paramount consideration. All of our reinsurance business is placed with reinsurers that have an A.M. Best rating of “A” (Excellent) or better.
The assessment of whether or not a valuation allowance is needed requires us to use significant judgment. See Note 13, “Income Taxes” in our Notes to Consolidated Financial Statements included in this Annual Report on Form 10-K for further discussion regarding our deferred tax assets and liabilities.
See Note 13, “Income Taxes” in our Notes to Consolidated Financial Statements included in this Annual Report on Form 10-K for further discussion regarding our deferred tax assets and liabilities.
Our portfolio consists entirely of cash, cash equivalents, short-term investments and investment grade fixed income securities. 66 Tab le of Contents We actively manage and monitor our investment risk, balancing the goals of capital preservation and income generation with our need to comply with relevant insurance regulatory frameworks and the capital framework agreements with AmFam.
We actively manage and monitor our investment risk, balancing the goals of capital preservation and income generation with our need to comply with relevant insurance regulatory frameworks and the capital framework agreements with AmFam.
For the year ended December 31, 2023, net cash provided by financing activities of $77.7 million was due to capital contributions from BIHL. Reinsurance We purchase various forms of reinsurance to manage loss exposures and safeguard our capital.
For the year ended December 31, 2024, net cash provided by financing activities of $133.9 million was primarily due to the $131.0 million of net proceeds we received from the IPO. 67 Table of Contents Reinsurance We purchase various forms of reinsurance to manage loss exposures and safeguard our capital.
The increase in our loss ratio and reallocation of prior accident year loss reserves are primarily based on inputs from industry data due to Bowhead’s limited loss experience. See Note 6, “Reserves for Losses and Loss Adjustment Expenses” in our Notes to the Consolidated Financial Statements included in this Annual Report on Form 10-K.
Due to Bowhead’s limited loss experience, we continue to hold expected loss ratios that rely on development patterns and other inputs primarily based on industry data. See Note 6, “Reserves for Losses and Loss Adjustment Expenses” in our Notes to the Consolidated Financial Statements included in this Annual Report on Form 10-K.
The Credit Agreement provides for a Facility in the aggregate principal amount of $75 million, which includes a $5 million sub-facility for letters of credit.
The 2024 Credit Agreement provided for a senior secured revolving credit facility (the “2024 Facility”) in the aggregate principal amount of $75 million, which included a $5 million sub-facility for letters of credit.
Net cash used in investing activities also includes purchases of property and equipment of $3.8 million. For the year ended December 31, 2024, net cash provided by financing activities of $133.9 million was primarily due to the $131.0 million of net proceeds we received from the IPO.
Net cash used in investing activities also includes purchases of property and equipment of $3.1 million. For the year ended December 31, 2025, net cash provided by financing activities of $144.5 million was primarily due to proceeds $150.0 million received from the issuance of the Senior Notes, offset by $3.6 million of debt issuance costs.
As of December 31, 2024 and 2023 , the amortized cost and estimated fair value of our fixed maturity and short-term investments were as follows: As of December 31, 2024 Amortized Cost Fair Value % of Total Fair Value ($ in thousands, except percentages) Fixed maturity securities U.S. government and government agency $ 204,205 $ 204,412 23.0 % State and municipal 73,289 67,784 7.6 % Commercial mortgage-backed securities 83,029 82,438 9.3 % Residential mortgage-backed securities 197,589 192,103 21.6 % Asset-backed securities 121,155 120,577 13.5 % Corporate 214,878 212,675 23.9 % Total fixed maturity securities $ 894,145 $ 879,989 98.9 % Short-term investments 9,961 9,997 1.1 % Total investments $ 904,106 $ 889,986 100.0 % As of December 31, 2023 Amortized Cost Fair Value % of Total Fair Value ($ in thousands, except percentages) Fixed maturity securities U.S. government and government agency $ 252,294 $ 252,541 44.8 % State and municipal 55,984 50,720 9.0 % Commercial mortgage-backed securities 26,573 25,436 4.5 % Residential mortgage-backed securities 79,032 74,702 13.3 % Asset-backed securities 42,964 42,033 7.5 % Corporate 112,166 109,192 19.4 % Total fixed maturity securities $ 569,013 $ 554,624 98.4 % Short-term investments 8,830 8,824 1.6 % Total investments $ 577,843 $ 563,448 100.0 % 67 Tab le of Contents The table below summarizes the credit quality of our fixed maturity securities as of December 31, 2024 and 2023: Years Ended December 31, 2024 2023 Fair Value % of Total Fair Value Fair Value % of Total Fair Value ($ in thousands, except percentages) Rating AAA $ 247,433 28.1 % $ 101,648 18.3 % AA 385,358 43.8 % 338,369 61.0 % A 178,775 20.3 % 76,849 13.9 % BBB 68,423 7.8 % 37,758 6.8 % Total $ 879,989 100.0 % $ 554,624 100.0 % As of December 31, 2024 and 2023, the amortized cost and estimated fair value of our available-for-sale investments in fixed maturity securities summarized by contractual maturity were as follows: As of December 31, 2024 Amortized Cost Fair Value % of Total Fair Value ($ in thousands, except percentages) Fixed maturity securities: Due in one year or less $ 206,764 $ 206,721 23.5 % Due after one year through five years 208,179 205,012 23.3 % Due after five years through ten years 45,230 43,199 4.9 % Due after ten years 32,199 29,939 3.4 % 492,372 484,871 55.1 % Commercial mortgage-backed securities 83,029 82,438 9.4 % Residential mortgage-backed securities 197,589 192,103 21.8 % Asset-backed securities 121,155 120,577 13.7 % Total $ 894,145 $ 879,989 100.0 % As of December 31, 2023 Amortized Cost Fair Value % of Total Fair Value ($ in thousands, except percentages) Fixed maturity securities: Due in one year or less $ 254,656 $ 254,443 45.9 % Due after one year through five years 122,274 118,585 21.4 % Due after five years through ten years 27,145 25,265 4.6 % Due after ten years 16,369 14,160 2.6 % 420,444 412,453 74.4 % Commercial mortgage-backed securities 26,573 25,436 4.6 % Residential mortgage-backed securities 79,032 74,702 13.5 % Asset-backed securities 42,964 42,033 7.6 % Total $ 569,013 $ 554,624 100.0 % Expected maturities may differ from contractual maturities because borrowers may have the right to call or prepay obligations with or without call or prepayment penalties, and the lenders may have the right to put the securities back to the borrower. 68 Tab le of Contents Restricted Assets We are required to maintain assets in trust accounts to support the obligations of the AmFam Quota Share Agreement.
As of December 31, 2025 and 2024 , the amortized cost and estimated fair value of our fixed maturity and short-term investments were as follows: As of December 31, 2025 Amortized Cost Fair Value % of Total Fair Value ($ in thousands, except percentages) Fixed maturity securities U.S. government and government agency $ 80,184 $ 80,368 5.9 % State and municipal 131,607 129,278 9.4 % Commercial mortgage-backed securities 170,496 171,322 12.5 % Residential mortgage-backed securities 317,905 318,561 23.2 % Asset-backed securities 168,363 169,004 12.3 % Corporate 495,673 502,473 36.7 % Total fixed maturity securities $ 1,364,228 $ 1,371,006 100.0 % Short-term investments — — — % Total investments $ 1,364,228 $ 1,371,006 100.0 % As of December 31, 2024 Amortized Cost Fair Value % of Total Fair Value ($ in thousands, except percentages) Fixed maturity securities U.S. government and government agency $ 204,205 $ 204,412 23.0 % State and municipal 73,289 67,784 7.6 % Commercial mortgage-backed securities 83,029 82,438 9.3 % Residential mortgage-backed securities 197,589 192,103 21.6 % Asset-backed securities 121,155 120,577 13.5 % Corporate 214,878 212,675 23.9 % Total fixed maturity securities $ 894,145 $ 879,989 98.9 % Short-term investments 9,961 9,997 1.1 % Total investments $ 904,106 $ 889,986 100.0 % 70 Table of Contents The table below summarizes the credit quality of our fixed maturity securities as of December 31, 2025 and 2024: Years Ended December 31, 2025 2024 Fair Value % of Total Fair Value Fair Value % of Total Fair Value ($ in thousands, except percentages) Rating AAA $ 432,121 31.5 % $ 247,433 28.1 % AA 382,549 27.9 % 385,358 43.8 % A 423,669 30.9 % 178,775 20.3 % BBB 132,667 9.7 % 68,423 7.8 % Total $ 1,371,006 100.0 % $ 879,989 100.0 % As of December 31, 2025 and 2024, the amortized cost and estimated fair value of our available-for-sale investments in fixed maturity securities summarized by contractual maturity were as follows: As of December 31, 2025 Amortized Cost Fair Value % of Total Fair Value ($ in thousands, except percentages) Fixed maturity securities Due in one year or less $ 113,224 $ 113,298 8.3 % Due after one year through five years 391,104 395,094 28.8 % Due after five years through ten years 119,589 120,687 8.8 % Due after ten years 83,547 83,040 6.1 % 707,464 712,119 52.0 % Commercial mortgage-backed securities 170,496 171,322 12.5 % Residential mortgage-backed securities 317,905 318,561 23.2 % Asset-backed securities 168,363 169,004 12.3 % Total $ 1,364,228 $ 1,371,006 100.0 % As of December 31, 2024 Amortized Cost Fair Value % of Total Fair Value ($ in thousands, except percentages) Fixed maturity securities Due in one year or less $ 206,764 $ 206,721 23.5 % Due after one year through five years 208,179 205,012 23.3 % Due after five years through ten years 45,230 43,199 4.9 % Due after ten years 32,199 29,939 3.4 % 492,372 484,871 55.1 % Commercial mortgage-backed securities 83,029 82,438 9.4 % Residential mortgage-backed securities 197,589 192,103 21.8 % Asset-backed securities 121,155 120,577 13.7 % Total $ 894,145 $ 879,989 100.0 % Expected maturities may differ from contractual maturities because borrowers may have the right to call or prepay obligations with or without call or prepayment penalties, and the lenders may have the right to put the securities back to the borrower. 71 Table of Contents Restricted assets We are required to maintain assets in trust accounts to support the obligations of the AmFam Quota Share Agreement.
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.
As of December 31, 2025, we have an allowance for credit losses of $0.2 million for our reinsurance recoverable balance. 75 Table of Contents 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.
One of the primary features of our asset allocation is maintaining sufficient readily available funds to pay claims and expenses.
One of the primary features of our asset allocation is maintaining sufficient readily available funds to pay claims and expenses. Our portfolio consists entirely of cash, cash equivalents, short-term investments and investment grade fixed income securities.
(“BUSI”), our wholly-owned services company subsidiary. Prior to the IPO, BSHI received capital contributions from BIHL.
Prior to the IPO, BSHI received capital contributions from BIHL.
MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS Year ended December 31, 2023 compared to year ended December 31, 2022 For a discussion of our year ended December 31, 2023 results and a comparison between the years ended December 31, 2023 and 2022, see “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in our Form S-1 Registration Statement, filed with the SEC on October 21, 2024.
ITEM 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS Year ended December 31, 2024 compared to year ended December 31, 2023 For a discussion of our year ended December 31, 2024 results and a comparison between the years ended December 31, 2024 and 2023, see “Part II, Item 7.
Operating expenses Operating expenses represent the general and administrative expenses of our operations including employee compensation and benefits, technology costs, office rent and professional service fees such as legal, accounting and actuarial services.
Operating expenses Operating expenses represent the general and administrative expenses of our operations including employee compensation and benefits, technology costs, office rent and professional service fees such as legal, accounting and actuarial services. Net investment income We earn interest income on our portfolio of invested assets, which are comprised of fixed maturity securities, short-term investments and cash and cash equivalents.
Adjusted net income is a non-GAAP financial measure defined as net income excluding the impact of net realized investment losses, non-operating expenses, foreign exchange losses (gains), and certain strategic initiatives. See “—Reconciliation of Non-GAAP Financial Measures” for a reconciliation of adjusted net income to net income, which is the most directly comparable financial metric prepared in accordance with U.S. GAAP.
Adjusted net income is a non-GAAP financial measure defined as net income excluding the impact of net realized investment gains (losses), non-operating expenses, loss on extinguishment of credit facility, foreign exchange losses (gains), and certain strategic initiatives.
The increase was due to the mix changes in our portfolio, where Casualty, which has higher current accident year industry loss ratios, comprised a larger proportion of the Company’s gross written premiums—62.1% in 2024 compared to 54.7% in 2023.
The increase was also due to mix changes in our portfolio, where Casualty, which had comparatively higher expected loss ratios, comprised a larger proportion of our net earned premiums compared to the prior year.
Our reserves are driven by several important factors, including litigation and regulatory trends, legislative activity, climate change, social and economic patterns, and claims inflation assumptions. Our reserve estimates reflect current inflation in legal claims’ settlements and assume we will not be subject to losses from significant new legal liability theories.
Our reserve estimates reflect current inflation in legal claims’ settlements and assume we will not be subject to losses from significant new legal liability theories. Our reserve estimates assume that there will not be significant changes in the regulatory and legislative environment.
GAAP measure. 57 Tab le of Contents Premiums The following table presents gross written premiums by underwriting division for the years ended December 31, 2024 and 2023: Years Ended December 31, 2024 % of Total 2023 % of Total $ Change % Change ($ in thousands, except percentages) Casualty $ 431,817 62.1 % $ 277,455 54.7 % $ 154,362 55.6 % Professional Liability 160,651 23.1 % 145,251 28.6 % 15,400 10.6 % Healthcare Liability 101,619 14.6 % 84,982 16.7 % 16,637 19.6 % Baleen Specialty 1,630 0.2 % — — % 1,630 NM Gross written premiums $ 695,717 100.0 % $ 507,688 100.0 % $ 188,029 37.0 % Gross written premiums increased $188.0 million, or 37.0%, to $695.7 million for the year ended December 31, 2024 from $507.7 million for year ended December 31, 2023.
GAAP measure. 59 Table of Contents Premiums The following table presents gross written premiums by underwriting division for the years ended December 31, 2025 and 2024: Years Ended December 31, 2025 % of Total 2024 % of Total $ Change % Change ($ in thousands, except percentages) Casualty $ 550,666 63.8 % $ 431,817 62.1 % $ 118,849 27.5 % Professional Liability 174,419 20.2 % 160,651 23.1 % 13,768 8.6 % Healthcare Liability 116,290 13.5 % 101,619 14.6 % 14,671 14.4 % Baleen Specialty 21,431 2.5 % 1,630 0.2 % 19,801 1214.8 % Gross written premiums $ 862,806 100.0 % $ 695,717 100.0 % $ 167,089 24.0 % Gross written premiums increased $167.1 million, or 24.0%, to $862.8 million for the year ended December 31, 2025 from $695.7 million for the year ended December 31, 2024.
The increase was driven by renewals, new business and continued growth in our platform across all four divisions. For the years ended December 31, 2024 and 2023, E&S business made up 75.8% and 79.2% of gross written premiums, respectively, while admitted business made up 24.2% and 20.8%, respectively.
For the years ended December 31, 2025 and 2024, E&S (1) business made up 80.0% and 79.8% of gross written premiums, respectively, while admitted business made up 20.0% and 20.2%, respectively.
In addition, economic conditions and/or operational performance of a particular reinsurer may deteriorate, and this could also affect the ability and willingness of a reinsurer to meet their contractual obligations As of December 31, 2024, we believe 100% of our recoverables are collectible and, therefore, the total provision for current expected credit losses recorded against recoverables is not material.
In addition, economic conditions and/or operational performance of a particular reinsurer may deteriorate, and this could also affect the ability and willingness of a reinsurer to meet their contractual obligations.
T he 0.9 point increase was du e to the 1.4 point increase in the loss ratio, partially offset by the 0.5 point decrease in the expe nse ratio. 59 Tab le of Contents Return on equity Return on equity was 13.6% for the year ended December 31, 2024, compared to 18.2% for the year ended December 31, 2023.
Combined ratio The combined ratio was 96.5% for the year ended December 31, 2025, compared to 95.8% for the year ended December 31, 2024. T he 0.7 point increase was due to the 2.3 point increase in the loss ratio, partially offset by the 1.6 point decrease in the expense ratio.
Reconciliation of Non-GAAP Financial Measures Underwriting income We define underwriting income as income before income taxes excluding the impact of net investment income, net realized investment losses, other insurance-related income, non-operating expenses, warrant expense, credit facility interest expenses and fees, foreign exchange losses (gains), and certain strategic initiatives.
The effective tax rate differs from the statutory tax rate of 21.0% primarily due to research and develop credits net of related uncertain tax position reserves, excess tax benefits from the vesting of stock-based compensation, and state and local income and franchise taxes, partially offset by estimated non-deductible excess officer compensation and non-deductible expenses. 62 Table of Contents Reconciliation of Non-GAAP Financial Measures Underwriting income We define underwriting income as income before income taxes excluding the impact of net investment income, net realized investment gains (losses), other insurance-related income, non-operating expenses, warrant expense, interest expenses and financing fees, loss on extinguishment of credit facility, foreign exchange losses (gains), and certain strategic initiatives.
Credit facility interest expenses and fees Credit facility interest expenses and fees represent certain costs associated with the Credit Agreement (as defined below), which provides for a senior secured revolving credit facility. Foreign exchange losses (gains) Foreign exchange losses (gains) represent the remeasurement of a non-U.S. dollar operating expense to U.S. dollars due to the fluctuations in the exchange rate.
Loss on extinguishment of credit facility Loss on extinguishment of credit facility represents fully expensed, previously unamortized deferred issuance costs associated with the termination of our 2024 senior unsecured credit facility. Foreign exchange losses (gains) Foreign exchange losses (gains) represent the remeasurement of a non-U.S. dollar operating expense to U.S. dollars due to the fluctuations in the exchange rate.
Loss ratio The following table summarizes the components of our loss ratio for the years ended December 31, 2024 and 2023: Years Ended December 31, 2024 2023 Net Losses and Loss Adjustment Expenses % of Net Earned Premiums Net Losses and Loss Adjustment Expenses % of Net Earned Premiums ($ in thousands, except percentages) Current accident year $ 248,099 64.4 % $ 166,282 63.0 % Prior accident year reserve development — — % — — % Total $ 248,099 64.4 % $ 166,282 63.0 % Our loss ratio was 64.4% for the year ended December 31, 2024 compared to 63.0% for the year end December 31, 2023, or an increase of 1.4 points.
(1) E&S % previously disclosed did not include business written on a facultative reinsurance basis, which is free of rate and policy form restrictions, and provides the flexibility to rapidly adjust to emerging market opportunities. 60 Table of Contents Loss ratio The following table summarizes the components of our loss ratio for the years ended December 31, 2025 and 2024: Years Ended December 31, 2025 2024 Net Losses and Loss Adjustment Expenses % of Net Earned Premiums Net Losses and Loss Adjustment Expenses % of Net Earned Premiums ($ in thousands, except percentages) Current accident year $ 325,653 66.2 % $ 248,099 64.4 % Prior accident year 2,369 0.5 % — — % Total $ 328,022 66.7 % $ 248,099 64.4 % Our net loss ratio was 66.7% for the year ended December 31, 2025 compared to 64.4% for the year end December 31, 2024, or an increase of 2.3 points.
As of December 31, 2024, the majority of our investment portfolio, or $880.0 million, was comprised of fixed maturity securities that are classified as available-for-sale and carried at fair value with unrealized gains (losses) recognized in accumulated other comprehensive loss within our Consolidated Balance Sheets. Also included in our investment portfolio were $10.0 million of short-term investments.
Our board of directors reviews and approves our investment policy and strategy on a regular basis, and considers investment activities, performance against benchmarks and new investment opportunities as they arise. 69 Table of Contents As of December 31, 2025, our fixed income investment portfolio of $1,371.0 million was comprised entirely of fixed maturity securities that are classified as available-for-sale and carried at fair value with unrealized gains (losses) recognized in accumulated other comprehensive income within our Consolidated Balance Sheets.
Net investment income We earn interest income on our portfolio of invested assets, which are comprised of fixed maturity securities, short-term investments and cash and cash equivalents. 54 Tab le of Contents Net realized investment losses Net realized investment losses are a function of the difference between the amortized cost of securities sold and the proceeds received by the Company upon the sale of a security.
Net realized investment gains (losses) Net realized investment gains (losses) are a function of the difference between the amortized cost of securities sold and the proceeds received by the Company upon the sale of a security. Unrealized investment gains (losses) on fixed maturity securities are recorded within accumulated other comprehensive income (loss) on the Consolidated Balance Sheets.
The increase was due to the growth in our investment portfolio, stemming from net cash provided by operating activities and net proceeds we received from the IPO, and higher yields on invested assets. Income tax expense Income tax expense was $12.3 million for the year ended December 31, 2024, compared to $7.1 million for the year ended December 31, 2023.
The increase in net investment income is primarily due to a higher average balance of investments for the year ended December 31, 2025 and, to a lesser extent, higher yields on invested assets. Income tax expense Income tax expense was $13.5 million for the year ended December 31, 2025, compared to $12.3 million for the year ended December 31, 2024.
Investing results Net investment income increased $20.8 million, or 107.1%, to $40.1 million for the year ended December 31, 2024 from $19.4 million for the year ended December 31, 2023.
The increase in average mezzanine equity and stockholders’ equity was partially offset by a 40.6% increase in net income for the year ended December 31, 2025. Investing results Net investment income increased $17.7 million, or 44.1%, to $57.8 million for the year ended December 31, 2025 from $40.1 million for the year ended December 31, 2024.
Potential Impact as of December 31, 2024 Underwriting Division Net Reserves for Unpaid Losses and Loss Adjustment Expenses 7.5% Higher Pre-tax Income Mezzanine Equity and Stockholders’ Equity (1) 7.5% Lower Pre-tax Income Mezzanine Equity and Stockholders’ Equity (1) ($ in thousands) Casualty $ 311,115 $ 334,449 $ (23,334) $ (18,434) $ 287,781 $ 23,334 $ 18,434 Professional Liability 119,741 128,722 (8,981) (7,095) 110,760 8,981 7,095 Healthcare Liability 78,925 84,844 (5,919) (4,676) 73,006 5,919 4,676 Baleen Specialty 163 175 (12) (10) 151 12 10 Potential Impact as of December 31, 2023 Underwriting Division Net Reserves for Unpaid Losses and Loss Adjustment Expenses 7.5% Higher Pre-tax Income Mezzanine Equity and Stockholders’ Equity (1) 7.5% Lower Pre-tax Income Mezzanine Equity and Stockholders’ Equity (1) ($ in thousands) Casualty $ 160,708 $ 172,761 $ (12,053) $ (9,522) $ 148,655 $ 12,053 $ 9,522 Professional Liability 85,739 92,169 (6,430) (5,080) 79,309 6,430 5,080 Healthcare Liability 48,466 52,101 (3,635) (2,872) 44,831 3,635 2,872 _________________ (1) The U.S. corporate income tax rate of 21% is used to estimate the potential impact to mezzanine equity and stockholders’ equity. 71 Tab le of Contents The amount by which estimated losses differ from those originally reported for a period is known as “development.” Development is unfavorable when the losses ultimately settle for more than the amount reserved or subsequent estimates indicate a basis for reserve increases on unresolved claims.
Potential Impact as of December 31, 2025 Underwriting Division Net Reserves for Unpaid Losses and Loss Adjustment Expenses 7.5% Higher Pre-tax Income Mezzanine Equity and Stockholders’ Equity (1) 7.5% Lower Pre-tax Income Mezzanine Equity and Stockholders’ Equity (1) ($ in thousands) Casualty $ 484,673 $ 521,024 $ (36,351) $ (28,717) $ 448,323 $ 36,351 $ 28,717 Professional Liability 161,059 173,138 (12,079) (9,543) 148,980 12,079 9,543 Healthcare Liability 97,612 104,933 (7,321) (5,784) 90,291 7,321 5,784 Baleen Specialty 4,895 5,262 (367) (290) 4,528 367 290 74 Table of Contents Potential Impact as of December 31, 2024 Underwriting Division Net Reserves for Unpaid Losses and Loss Adjustment Expenses 7.5% Higher Pre-tax Income Mezzanine Equity and Stockholders’ Equity (1) 7.5% Lower Pre-tax Income Mezzanine Equity and Stockholders’ Equity (1) ($ in thousands) Casualty $ 311,115 $ 334,449 $ (23,334) $ (18,434) $ 287,781 $ 23,334 $ 18,434 Professional Liability 119,741 128,722 (8,981) (7,095) 110,760 8,981 7,095 Healthcare Liability 78,925 84,844 (5,919) (4,676) 73,006 5,919 4,676 Baleen Specialty 163 175 (12) (10) 151 12 10 _________________ (1) The U.S. corporate income tax rate of 21% is used to estimate the potential impact to mezzanine equity and stockholders’ equity.
Our effective tax rate was 24.3% for the year ended December 31, 2024, compared to 22.0% for the year ended December 31, 2023. The effective tax rate may vary slightly from the statutory tax rate due to state taxes and certain tax adjustments for permanent differences.
Our effective tax rate was 20.1% for the year ended December 31, 2025, compared to 24.3% for the year ended December 31, 2024.
Best financial strength rating and percent of our total reinsurance recoverables as of December 31, 2024: Reinsurer A.M. Best Rating % of Total Renaissance Reinsurance U.S.
As of December 31, 2025, we have an allowance for credit losses of $0.2 million for our reinsurance recoverable balance. 68 Table of Contents The following table summarizes our top five reinsurers, their A.M. Best financial strength rating and percent of our total reinsurance recoverables as of December 31, 2025: Reinsurer A.M. Best Rating % of Total Renaissance Reinsurance U.S.
There was no prior accident year reserve development in our loss ratio for the year. 58 Tab le of Contents In the fourth quarter of 2024, as part of our annual independent actuarial reserve review, we reallocated prior accident year loss reserves by division, primarily from Professional Liability to Casualty, to align more closely with industry loss ratios.
We are simply putting loss reserves into the appropriate accident year regardless of when the premiums are billed and earned. As part of our annual independent actuarial reserve review, we also reallocated prior accident year loss reserves between accident years and by division, primarily from Casualty to Professional Liability, resulting in no prior accident year development on an aggregate basis.

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Item 7A. Quantitative and Qualitative Disclosures About Market Risk

Market Risk — interest-rate, FX, commodity exposure

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Biggest changeThe table below illustrates the sensitivity of the fair value of our fixed maturity securities, short-term investments and cash and cash equivalents to selected hypothetical changes in interest rates as of December 31, 2024 and 2023. 73 Tab le of Contents As of December 31, 2024 As of December 31, 2023 Estimated Fair Value Estimated Change in Fair Value Estimated % Increase (Decrease) in Fair Value Estimated Fair Value Estimated Change in Fair Value Estimated % Increase (Decrease) in Fair Value ($ in thousands, except percentages) 200 basis point increase $ 981,213 $ (43,018) (4.2) % $ 545,278 $ (22,070) (3.9) % 100 basis point increase 1,002,312 (21,919) (2.1) % 556,058 (11,290) (2.0) % No change 1,024,230 — — % 567,348 — — % 100 basis point decrease 1,046,354 22,123 2.2 % 578,978 11,631 2.1 % 200 basis point decrease 1,067,453 43,223 4.2 % 590,836 23,488 4.1 % Actual results may differ from the hypothetical change in market rates assumed in this disclosure.
Biggest changeAs of December 31, 2025 As of December 31, 2024 Estimated Fair Value Estimated Change in Fair Value Estimated % Increase (Decrease) in Fair Value Estimated Fair Value Estimated Change in Fair Value Estimated % Increase (Decrease) in Fair Value ($ in thousands, except percentages) 200 basis point increase $ 1,407,522 $ (89,364) (6.0) % $ 981,213 $ (43,018) (4.2) % 100 basis point increase 1,451,381 (45,505) (3.0) % 1,002,312 (21,919) (2.1) % No change 1,496,886 — — % 1,024,230 — — % 100 basis point decrease 1,540,745 43,859 2.9 % 1,046,354 22,123 2.2 % 200 basis point decrease 1,582,059 85,173 5.7 % 1,067,453 43,223 4.2 % Actual results may differ from the hypothetical change in market rates assumed in this disclosure.
Our investment policy is designed to primarily invest in debt instruments of high credit quality issuers and to manage the amount of credit exposure with limits on particular ratings categories, limits for any one issuer and limits for sectors and regions. We monitor our investment portfolio to ensure that credit risk does not exceed prudent levels.
Our investment policy is designed to primarily invest in debt instruments of high credit quality issuers and to manage the amount of credit exposure with limits on particular ratings categories, limits for any one issuer and limits for sectors and regions. We monitor our investment portfolio to help ensure that credit risk does not exceed prudent levels.
The majority of our investment portfolio is invested in high credit quality, investment grade fixed maturity securities. As of December 31, 2024, our fixed maturity portfolio has an average rating by at least one nationally recognized rating organization of “AA ,” with approximately 93.3% rated “A” or better.
The majority of our investment portfolio is invested in high credit quality, investment grade fixed maturity securities. As of December 31, 2025, our investment portfolio has an average rating by at least one nationally recognized rating organization of “AA ,” with approximately 91.2% rated “A” or better.
As of December 31, 2024, 100% of our reinsurance recoverables were either derived from reinsurers rated “A” (Excellent) by A.M. Best, or better. 74 Tab le of Contents
As of December 31, 2025, 100% of our reinsurance recoverables were either derived from reinsurers rated “A” (Excellent) by A.M. Best, or better. 77 Table of Contents
We had fixed maturity securities, short-term investments and cash and cash equivalents with a fair value of $1,024.2 million at December 31, 2024 and $567.3 million at December 31, 2023 that were subject to interest rate risk.
We manage this interest rate risk by investing in securities with varied maturity dates. We had fixed maturity securities, short-term investments and cash and cash equivalents with a fair value of $1,496.9 million at December 31, 2025 and $1,024.2 million at December 31, 2024 that were subject to interest rate risk.
The primary component of market risk affecting us is interest rate risk associated with our investments in fixed maturity securities. We do not have material exposure to equity prices, foreign currency exchange rate risk or commodity risk. Interest rate risk Interest rate risk is the risk that we will incur economic losses due to adverse changes in interest rates.
We do not have material exposure to equity prices, foreign currency exchange rate risk or commodity risk. 76 Table of Contents Interest rate risk Interest rate risk is the risk that we will incur economic losses due to adverse changes in interest rates. Fluctuations in interest rates have a direct effect on the market valuation of our fixed maturity securities.
Fluctuations in interest rates have a direct effect on the market valuation of our fixed maturity securities. When market interest rates rise, the fair value of our securities decreases. Conversely, as interest rates fall, the fair value of our securities increases.
When market interest rates rise, the fair value of our securities decreases. Conversely, as interest rates fall, the fair value of our securities increases. Changes in interest rates will have an immediate effect on comprehensive income (loss) and mezzanine equity and stockholders’ equity, but will not ordinarily have an immediate effect on net income.
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Changes in interest rates will have an immediate effect on comprehensive income (loss) and mezzanine equity and stockholders’ equity, but will not ordinarily have an immediate effect on net income. We manage this interest rate risk by investing in securities with varied maturity dates.
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The primary component of market risk affecting us is interest rate risk associated with our investments in fixed maturity securities.
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The table below illustrates the sensitivity of the fair value of our fixed maturity securities, short-term investments and cash and cash equivalents to selected hypothetical changes in interest rates as of December 31, 2025 and 2024.