Bowhead Specialty Holdings Inc.

1. Nature of Operations and Significant Accounting Policies

Nature of Operations

Bowhead Specialty Holdings Inc. (“BSHI” and, together with its subsidiaries, “the Company” or “Bowhead”), is a Delaware domiciled insurance holding company that provides specialty property and casualty insurance products in the U.S., initially focusing on Casualty, Professional Liability and Healthcare Liability risks, which are primarily written on a non-admitted (or excess and surplus (“E&S”)) basis. On March 19, 2024, the Company amended its certificate of incorporation of Bowhead Holdings Inc. to change the name of the Company to Bowhead Specialty Holdings Inc.

BSHI conducts its business operations through three wholly-owned subsidiaries. Bowhead Specialty Underwriters, Inc. (“BSUI”) is Bowhead’s managing general agency, holding a resident insurance license in the State of Texas, and is domiciled in the State of Delaware. Bowhead Insurance Company, Inc. (“BICI”) is BSHI’s insurance company subsidiary licensed and domiciled in the State of Wisconsin. Bowhead Underwriting Services, Inc. (“BUSI”) is the Company’s services company domiciled in the State of Delaware.

BSUI is party to three Managing General Agency Agreements (“MGA Agreements”) with Homesite Insurance Company, Homesite Insurance Company of Florida, and Midvale Indemnity Company (together the “AmFam Issuing Carriers”), each of which is a wholly-owned subsidiary of American Family Mutual Insurance Company, S.I., (“AFMIC” and together with its wholly-owned subsidiaries, “AmFam”). AmFam beneficially owns approximately 14.3% of BSHI’s issued and outstanding common stock as of September 30, 2025. BSUI is also party to third-party broker agreements, allowing the direct payment of premiums from such brokers to BSUI. Through these MGA agreements, BSUI writes premium and provides claim handling services on behalf of the AmFam Issuing Carriers, and BICI assumes 100% of the premium, net of any inuring third-party reinsurance, through a Quota Share Agreement with AFMIC (the “AmFam Quota Share Agreement”). AmFam receives a ceding fee on net premiums assumed by BICI (“Ceding Fee”). BICI is also party to an Insurance Trust Agreement pursuant to which BICI provides collateral to support the obligations of the AmFam Quota Share Agreement.

The Company is organized as a single operating and reportable segment through which it offers a variety of specialty insurance products to a number of markets.

Basis of Presentation

The accompanying condensed consolidated financial statements for BSHI and its wholly-owned subsidiaries (collectively, “Bowhead”) are prepared in accordance with accounting principles generally accepted in the United States of America (“U.S. GAAP”) for interim financial information and do not contain all of the information and footnotes required by U.S. GAAP for complete financial statements. As such, the disclosures provided herein should be read in conjunction with the Company’s latest annual financial statements. In the opinion of management, the condensed consolidated financial statements reflect all adjustments, consisting of only normal recurring adjustments, necessary for the fair statement of the Company’s financial position. All intercompany transactions and balances are eliminated in consolidation. Interim results are not necessarily indicative of results of operations for the full year.

Use of Estimates

The preparation of the condensed financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the amounts reported in the condensed consolidated financial statements and accompanying notes. Changes in circumstances could cause actual results to differ materially from those estimates. Significant estimates in the Company’s condensed consolidated financial statements include, but are not limited to, reserves for losses and loss adjustment expenses, reinsurance recoverable on unpaid losses and loss adjustment expenses, fair value of investments, and income taxes.

Management bases its estimates and assumptions on historical experience and other factors, including the current economic environment and on various other judgments that it believes to be reasonable under the circumstances. Management periodically reviews its estimates and assumptions and makes adjustments thereto when facts and circumstances dictate. Changes in accounting estimates and underlying assumptions are recognized prospectively in the condensed consolidated financial statements.

Recent Accounting Pronouncements

Recently Adopted Accounting Standards

The Company has not adopted any new accounting standards during the three and nine months ended September 30, 2025.

Recently Issued Accounting Standards Not Yet Adopted

The Company is an emerging growth company, as defined in the Jumpstart Our Business Startups Act of 2012 (the “JOBS Act”). Under the JOBS Act, emerging growth companies can delay adopting new or revised accounting standards issued subsequent to the enactment of the JOBS Act, until such time as those standards apply to private companies. The Company is provided an option to adopt new or revised accounting guidance as an “emerging growth company” under the JOBS Act either (1) within the same periods as those otherwise applicable to public business entities, or (2) within the same time periods as private companies, including early adoption when permissible.

ASU 2023-09, Improvements to Income Tax Disclosures (Topic 740)

In December 2023, the FASB issued ASU 2023-09, “Improvements to Income Tax Disclosures” (Topic 740). ASU 2023-09 requires public companies, on an annual basis, to provide enhanced rate reconciliation disclosures, including disclosures of specific categories and additional information that meet a quantitative threshold. This update also requires public companies to provide additional disclosures regarding income taxes paid, including jurisdictional details. The guidance is effective for fiscal years beginning after December 15, 2024. The Company is evaluating the effect of the amendments on its consolidated financial statements and does not expect a material impact on its financial position or results of operations.

ASU 2024-03, Income Statement—Reporting Comprehensive Income—Expense Disaggregation Disclosures (Subtopic 220-40): Disaggregation of Income Statement Expenses

In November 2024, the FASB issued ASU 2024-03, Income Statement—Reporting Comprehensive Income—Expense Disaggregation Disclosures (Subtopic 220-40): Disaggregation of Income Statement Expenses. ASU 2024-03 enhances the transparency of expense information by requiring public business entities to disclose specific types of expenses included in the expense captions presented on the face of the income statement as well as disclosures about selling expenses. The amendments are effective for fiscal years beginning after December 15, 2026. The Company is currently evaluating the impact of this ASU on its financial statement disclosures.

There are no other prospective accounting standards which, upon their effective date, would have a material impact on the Company’s condensed consolidated financial statements.

2. Investments

The following table summarizes the amortized cost and fair value of the Company’s fixed maturity securities, all of which are classified as available for sale:

a)Contractual Maturity of Fixed Maturity Securities

The amortized cost and fair value of fixed maturity securities at September 30, 2025 and December 31, 2024, by contractual maturity, are shown below. Actual maturities may differ from contractual maturities because certain issuers may have the right to call or prepay obligations.

b)Net Investment Income

The components of net investment income were derived from the following sources:

c)Net Realized Investment Losses

There were $15.0 thousand and $30.2 thousand of net realized investment losses for the three and nine months ended September 30, 2025, respectively, and $18.1 thousand and $16.2 thousand of net realized investment losses for the three and nine months ended September 30, 2024, respectively, from the sale of investments.

d)Restricted Assets

The Company is required to maintain assets as collateral in trust accounts to support the obligations of the AmFam Quota Share Agreement. The assets held in trust include fixed maturity securities, short-term investments and restricted cash and cash equivalents. The Company is entitled to interest income earned on these restricted assets, which is included in net investment income in the Condensed Consolidated Statements of Income and Comprehensive Income.

The following table summarizes the value of the Company’s restricted assets disclosed in the Condensed Consolidated Balance Sheets:

e)Gross Unrealized Losses

The following table summarizes available for sale securities in an unrealized loss position, the fair value and gross unrealized loss by length of time the security has been in a continual unrealized loss position:

All of the securities in an unrealized loss position are rated investment grade. For fixed maturity securities that management does not intend to sell or are required to sell, there is no portion of the decline in value that is considered to be due to credit factors that would be recognized in earnings. Declines in value are considered to be due to non-credit factors and are recognized in Other Comprehensive Income.

The Company has evaluated its fixed maturity securities in an unrealized loss position and concluded that the unrealized losses are due primarily to temporary market and sector-related factors rather than to issuer-specific factors. None of these securities are delinquent or in default under financial covenants. Based on the assessment of these issuers, the Company expects them to continue to meet their contractual payment obligations as they become due.

3. Fair Value Measurements

Fair value is defined as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. Fair value is determined based on a fair value hierarchy that prioritizes the use of observable inputs over the use of unobservable inputs and requires the use of observable inputs when available. The Company utilizes a fair value hierarchy that prioritizes the inputs to valuation techniques used to measure fair value into three levels, as follows:

•Level 1: Unadjusted quoted prices in active markets that are accessible at the measurement date for identical assets or liabilities.

•Level 2: Significant other observable inputs other than Level 1 inputs, such as quoted prices in active markets for similar assets or liabilities, quoted prices in inactive markets for identical assets or liabilities, or other inputs that are directly or indirectly observable through market-corroborated inputs, such as interest rates, yield curves, prepayment speeds, default rates, or loss severities.

•Level 3: Significant unobservable inputs used to measure fair value to the extent that relevant observable inputs are not available, and that reflect the Company’s best estimate of what hypothetical market participants would use to determine a transaction price for the asset or liability at the measurement date.

The Company’s investments in fixed maturity securities, all of which are classified as available for sale, are carried at fair value. All of the Company’s fixed maturity securities investments were priced by independent pricing services. The prices provided by the independent pricing services are estimated based on observable market data in active markets utilizing pricing models and processes, which may include benchmark yields, reported trades, broker/dealer quotes, issuer spreads, two-sided markets, benchmark securities, bids, offers, sector groupings, matrix pricing and reference data. Under certain circumstances, if a vendor price is unavailable, a price may be obtained from a broker. The pricing services may prioritize inputs differently on any given day for any security based on market conditions, and not all inputs are available for each security evaluation on any given day. The pricing services used by the Company have indicated that they will only produce an estimate of fair value if objectively verifiable information is available. The determination of whether markets are active or inactive is based upon the volume and level of activity for a particular asset class.

The fair values of short-term investments approximate their carrying values due to their short-term maturity.

The following table presents the Company’s investments measured at fair value by level:

4. Reserve for Losses and Loss Adjustment Expenses

The table below provides a reconciliation of the beginning and ending reserve balances for the nine months ended September 30, 2025 and September 30, 2024:

During the nine months ended September 30, 2025 and 2024, there was a $2.0 million andnil increase in prior accident year losses, respectively. The $2.0 million increase in prior accident year losses was driven by expected loss ratios applied to audit premiums earned in the period but associated with prior accident years. The increase was not based on actual losses settling for more than reserved, and did not represent an increase in estimated reserves on unresolved claims.

5. Premiums and Reinsurance Related Information

The following table summarizes the effects of reinsurance on the Company’s written and earned premiums and losses and loss adjustment expenses:

All assumed amounts are assumed through the AmFam Quota Share Agreement as described in Note 10.

For the three months ended September 30, 2025 and 2024, Bowhead ceded $9.3 million and $8.3 million of written premium, $7.9 million and $6.0 million of earned premium and $4.6 million and $3.6 million of losses and loss adjustment expenses to a subsidiary of AmFam, respectively.

For the nine months ended September 30, 2025 and 2024, Bowhead ceded $25.6 million and $20.2 million of written premium, $21.9 million and $15.4 million of earned premium and $13.8 million and $9.3 million of losses and loss adjustment expenses to a subsidiary of AmFam, respectively.

The following table summarizes reinsurance recoverable on paid and unpaid losses and loss adjustment expenses:

The following table summarizes the Company’s top five reinsurers, their A.M. Best financial strength rating and percent of total reinsurance recoverable as of September 30, 2025 and December 31, 2024:

As of September 30, 2025 and December 31, 2024, $31.7 million and $19.2 million, respectively, of the Company’s reinsurance recoverable balance is with a subsidiary of AmFam.

6. Revolving Credit Facility

On April 22, 2024, the Company entered into a Credit Agreement (the “Credit Agreement”) with certain lenders and JPMorgan Chase Bank, N.A., as administrative agent, swingline lender and issuing bank. The Credit Agreement provides for a senior secured revolving credit facility (the “Facility”) in the aggregate principal amount of $75 million, which includes a $5 million sub-facility for letters of credit. All obligations under the Facility and obligations in respect of certain cash management services and swap agreements with the lenders and their affiliates are (i) unconditionally guaranteed by certain of the Company’s subsidiaries and (ii) secured by a first-priority perfected lien in substantially all of the Company’s and the subsidiaries guarantors’ assets. The Credit Agreement contains certain customary covenants, including financial maintenance covenants. The Company was in compliance with all of the Facility’s covenants as of September 30, 2025. The Facility matures on the earlier of April 22, 2027, or 91 days prior to the MGA Agreement termination date where no MGA Agreement replacement is found. The Company may request that the lenders extend the maturity date by an additional year, provided that the request is made no earlier than 90 days and no later than 55 days prior to the first or second anniversary of the effective date of the Facility.

Interest on the Facility is based on a floating rate indexed to either (i) adjusted term Secured Overnight Financing Rate (“SOFR”) plus an applicable rate, (ii) the greater of (a) the prime rate, (b) the Federal Reserve Bank of New York rate plus 0.5% per annum and (c) the adjusted term SOFR rate for a one-month interest period plus 1% per annum, plus an applicable rate, or (iii) the adjusted daily simple SOFR plus an applicable rate. As of September 30, 2025, the Company did not have any borrowings outstanding under the Facility.

The Company had unamortized deferred financing fees related to the Facility of $0.9 million as of September 30, 2025, and recognized amortization expenses for deferred financing fees of $0.2 million and $0.3 million for the three months ended September 30, 2025 and 2024, respectively, and $0.5 million and $0.5 million for the nine months ended September 30, 2025 and 2024, respectively.

7. Stockholders' Equity

Capital Stock

The Company’s authorized capital stock consists of 400,000,000 shares of common stock, par value $0.01 per share and 100,000,000 shares of preferred stock, par value $0.01 per share.

Bowhead Insurance Holding L.P. Contribution

Prior to our initial public offering (“IPO”), BSHI was wholly-owned by Bowhead Insurance Holding LP, a Delaware limited partnership (“BIHL”). Following the IPO, the shares of our common stock held by BIHL were either distributed to BIHL’s limited partners or sold in a secondary offering of our common stock on October 25, 2024. Following October 25, 2024, BIHL was no longer a holder of our common stock.

During the three months ended September 30, 2025 and 2024, BIHL contributed additional paid-in capital ofnil andnil, respectively, to the Company without issuing additional shares.

During the nine months ended September 30, 2025 and 2024, BIHL contributed additional paid-in capital ofnil and $4.5 million, respectively, to the Company without issuing additional shares.

Public Offerings

On May 23, 2024, the Company completed an upsized IPO with the sale and issuance of 8,658,823 shares of its common stock at a price of $17.00 per share. The Company received net proceeds from the offering of $131.0 million.

8. Stock-Based Compensation

2024 Plan

On May 22, 2024, the Company's Board of Directors (the “Board”) approved and adopted the the Bowhead Specialty Holdings Inc. 2024 Omnibus Incentive Plan (“2024 Plan”), which provides for the grant of stock options (including ISOs and nonqualified stock options), stock appreciation rights, restricted stock, restricted stock units (“RSUs”), other stock-based awards, stock bonuses, cash awards and substitute awards.

A total of 3,152,941 shares of common stock were initially authorized and reserved for issuance under the 2024 Plan. The reserve increases on January 1 of each year, starting in 2025, by an amount equal to the lesser of: (a)2.0% of the fully-diluted shares on the preceding December 31, and (b) a smaller amount as determined by the Board. As of January 1, 2025,3,824,051 shares of common stock were authorized and reserved for issuance under the 2024 Plan.

The Board approved the grant of RSUs to the Company’s employees and certain Board directors, and Performance Stock Units (“PSUs”) to its Chief Executive Officer (“CEO”). As of September 30, 2025,1,220,645 shares of common stock were granted and unvested under the 2024 Plan.

Restricted Stock Units

On May 22, 2024, the Board approved the grant of 762,115 RSUs with a grant-date fair value of $17.00 per share. Additional RSUs were granted after May 22, 2024 based on the grant-date fair value of Bowhead’s common stock. The RSUs issued to employees and a one-time issuance to one of the Company’s directors have afour-year vesting period. These RSUs vest 20% per year for the first three years following issuance and 40% at the end of the fourth year, and are contingent upon the employee’s continuous employment or the director’s continuous service as a director with the Company throughout the vesting period. In addition, the RSUs issued to directors of the Company under the Company’s non-employee director compensation policy are contingent upon the director’s continuous service as a director through the vesting date, which is the earliest of: (a) the one-year anniversary of the grant date, (b) the date of the regular annual meeting of the Company’s stockholders held following the grant date, or (c) the date of the consummation of a change in control.

The following table provides a summary of RSU activities during the nine months ended September 30, 2025:

The Company recognizes the compensation cost for the RSUs on a straight-line basis over the awards’ vesting period.

The Company recognized compensation costs associated with the RSUs of $1.8 million and $4.7 million for the three and nine months ended September 30, 2025, respectively, compared to $0.9 million and $1.3 million for the same periods in 2024.

As of September 30, 2025, total unrecognized compensation cost for the RSUs was $20.2 million and the weighted average period over which the cost is expected to be recognized is approximately 2.9 years.

Performance Stock Units

On May 22, 2024, the Board approved the grant of 129,411 PSUs to the Company’s CEO. The grant-date fair value of the PSUs, which was valued based on a Monte Carlo simulation model, was $10.04 per share. The PSUs include both a service and a market condition, and may be settled in cash upon the occurrence of an event that is outside of the Company’s control. The vesting of the PSUs are contingent upon the CEO’s continuous employment and service to the Company through the third anniversary of the date of grant, or May 22, 2027. The number of PSUs earned, which range from 0 -125% of the PSUs granted, are based on the achievement of certain compounded annual growth rate milestones of BSHI’s common stock compared its IPO price of $17.00 per share for any 20 business day period between the second and third anniversaries of the grant date.

On February 21, 2025, the Board approved the grant of 67,526 PSUs to the Company’s CEO. The grant-date fair value of the PSUs, which was valued based on a Monte Carlo simulation model, was $16.09 per share. Similar to the May 22, 2024 grant, the PSUs include both a service and a market condition, and may be settled in cash upon the occurrence of an event that is outside of the Company’s control. The vesting of the PSUs are contingent upon the CEO’s continuous employment and service to the Company through the third anniversary of the date of grant, or February 21, 2028. The number of PSUs earned, which range from 0 -125% of the PSUs granted, are based on the achievement of certain compounded annual growth rate milestones of BSHI’s common stock compared to its grant price of $32.58 per share for any 20 business day period between the second and third anniversaries of the grant date.

Since the PSUs are required to be settled in cash upon the occurrence of an event that is outside of the Company’s control, the PSUs are accounted for as mezzanine equity on the Company’s Condensed Consolidated Balance Sheets until the vesting date.

The following table provides a summary of PSU activity during the nine months ended September 30, 2025:

The following table summarizes the significant inputs used in the Monte Carlo simulation model to determine the grant-date fair value of the PSUs awarded:

The Company recognizes the compensation cost for PSUs on a straight-line basis over the award’s vesting period.

The Company recognized compensation costs associated with the PSUs of $0.2 million and $0.5 million for the three and nine months ended September 30, 2025, respectively, compared to $0.1 million and $0.2 million for the same periods in 2024.

As of September 30, 2025, total unrecognized compensation cost for the PSUs was $1.6 million and the weighted average period over which the cost is expected to be recognized is approximately 1.9 years.

Warrants

On May 22, 2024, the Board approved the issuance of warrants to AmFam to purchase 1,614,250 shares of the Company’s common stock (the warrants associated with such shares the “Initial Warrants”) and, upon the exercise of the underwriters overallotment option, on May 28, 2024, the Company issued to AmFam warrants to purchase 56,471 additional shares of the Company’s common stock (the warrants associated with such additional shares, individually, the “Overallotment Warrants” and together with the Initial Warrants, the “Warrants”).

The Warrants, which are subject to afive-year service condition, are accounted for as stock-based compensation under ASC 718. The grant-date fair value of the Initial Warrants and Overallotment Warrants were $9.13 per share and $17.50 per share, respectively. The Warrants vest 20% per year over thefive-year service period and have a stated and weighted average exercise price of $17.00 per share. The vested portion of the Warrants may be exercised at any time, in whole or in part, until theten-year anniversary of the issuance dates.

As of September 30, 2025,334,144 Warrants have vested, butnone have been exercised.

The following table summarizes the significant inputs used in the Black-Scholes-Merton pricing models to determine the grant-date fair value of the Warrants issued:

The Company recognizes compensation cost for the Warrants on a quarterly basis over the awards’ vesting period.

The Company recognized compensation costs associated with the Warrants of $0.8 million and $2.4 million for the three and nine months ended September 30, 2025, respectively, compared to $0.8 million and $1.1 million for the same periods in 2024. As of September 30, 2025, total unrecognized compensation cost for the Warrants were $11.5 million.

9. Earnings Per Share

The following table provides the calculation of basic and diluted earnings per share:

(1)For the three and nine months ended September 30, 2025 and 2024, there werenil anti-dilutive awards for all periods that were excluded from the calculation of diluted weighted-average shares outstanding.

10. Related Party Transactions

Prior to the IPO, BSHI received capital contributions from BIHL up to the amount committed by BIHL’s limited partners, Gallatin Point, AMFIC, members of Bowhead’s management and other minority investors. Effective December 3, 2024, BIHL was dissolved. As of September 30, 2025, BIHL contributed $183.3 million into the Company, of whichnil was contributed in the three months ended September 30, 2025 and 2024, and of whichnil and $4.5 million were contributed in the nine months ended September 30, 2025 and 2024, respectively.

BICI is party to the AmFam Quota Share Agreement, which has been effective since 2020. Under the quota share agreement, BICI assumes 100% of all Casualty, Professional Liability, Healthcare Liability, and Baleen Specialty risks, net of inuring third-party reinsurance, written on behalf of AmFam by BSUI. AmFam receives a Ceding Fee on net premiums assumed by BICI. BICI is required to set aside assets in a trust to secure a portion of its reinsurance recoverable obligation under the agreement.

Under the MGA Agreements, BSUI is permitted to issue insurance policies on behalf of the AmFam Issuing Carriers and is also responsible for providing accounting, claims handling and other necessary services to the AmFam Issuing Carriers to support its respective regulatory, statutory and other compliance requirements. BSUI is entitled to commission in exchange for these services, which is adjusted to equal actual costs for each month in accordance with the terms of the MGA Agreements.

In 2025 and 2024, BICI entered into a ceded quota share reinsurance treaty and a ceded excess of loss reinsurance treaty with reinsurers, in which a separate subsidiary of AmFam participated. In addition, BICI also entered into a ceded cyber liability quota share reinsurance treaty with reinsurers, in which a subsidiary of AmFam also participated.

For the three months ended September 30, 2025 and 2024, Bowhead incurred $3.9 million and $2.4 million of Ceding Fees under the AmFam Quota Share Agreement, respectively, and ceded $9.3 million and $8.3 million of written premiums to AmFam under the ceded reinsurance treaties described above, respectively.

For the nine months ended September 30, 2025 and 2024, Bowhead incurred $9.3 million and $6.2 million of Ceding Fees under the AmFam Quota Share Agreement, respectively, and ceded $25.6 million and $20.2 million of written premiums to AmFam under these ceded reinsurance treaties described above, respectively.

On August 6, 2025, Bowhead entered into a usage-based service agreement with Bold Penguin, an insuretech company owned by AmFam, that streamlines small business insurance submissions. Expenses associated with the service contract are recognized as operating expenses within the Company’s Condensed Consolidated Statements of Income and Comprehensive Income. Future contractual commitments are reflected within fixed and determinable purchase obligations within Note 12.

For the three and nine months ended September 30, 2025, Bowhead incurred $0.1 million of operating expenses, respectively, under the agreement with Bold Penguin.

11. Income Taxes

The Company calculates its tax provision in interim periods using its best estimate of the effective tax rate expected for the full year.

For the three months ended September 30, 2025 and 2024, the Company recorded income tax expense of $3.9 million and $3.7 million, respectively. The effective tax rate was approximately 20.6% for the three months ended September 30, 2025, compared to 23.6% for the three months ended September 30, 2024. The effective tax rate for the three months ended September 30, 2025 differs from the statutory tax rate of 21.0% primarily due to estimated non-deductible excess officer compensation, state taxes, and non-deductible expenses, partially offset by research and development credits net of related uncertain tax positions and expected excess tax benefits on the vesting of stock-based compensation. The effective tax rate for the three months ended September 30, 2024 differs from the statutory tax rate of 21.0% primarily due to state taxes, non-deductible expenses, and the current period impact from a change of estimate in the prior year.

For the nine months ended September 30, 2025 and 2024, the Company recorded income tax expense of $10.5 million and $7.6 million, respectively. The effective tax rate was approximately 21.3% for the nine months ended September 30, 2025 compared to 23.7% for the nine months ended September 30, 2024. The effective tax rate for the nine months ended September 30, 2025 differs from the statutory tax rate of 21.0% primarily due to estimated non-deductible excess officer compensation, state taxes, and non-deductible expenses, partially offset by research and development credits net of related uncertain tax positions and expected excess tax benefits on the vesting of stock-based compensation. The effective tax rate for the nine months ended September 30, 2024 differs from the statutory tax rate of 21.0% primarily due to state taxes, non-deductible expenses, and the current period impact from a change of estimate in the prior year.

On July 4, 2025, the One Big Beautiful Bill Act (“OBBBA”) was signed into law, enacting significant changes to the 2017 Tax Cuts and Jobs Act (“TCJA”). Such changes include the restoration of 100% bonus depreciation, which was scheduled to phase out in 2027 under the TCJA. The OBBBA also permits immediate expensing of research and development expenditures previously capitalized under the TCJA and modifies various components of the international tax framework. The legislation has multiple effective dates, with some provisions taking effect in 2025 and others phased in through 2027. In accordance with ASC 740, the company has recognized the effects of the enacted provisions and determined the legislation did not have a material impact on the company’s income tax expense or effective tax rate for the three or nine months ended September 30, 2025, respectively.

As of September 30, 2025, the Company had unrecognized tax benefits of $1.3 million, including $0.2 million of interest and penalties, related to mandatory capitalization of research and development costs and research and development credits claimed on current year and prior year amended income tax returns. The Company’s policy is to record interest and penalties related to uncertain tax positions in income tax expense. No uncertain tax positions or related interest and penalties were established in prior periods.

12. Commitments and Contingencies

a)Concentrations of Credit Risk

The creditworthiness of a counterparty is evaluated by the Company, taking into account credit ratings assigned by independent agencies. The credit approval process involves an assessment of factors, including, among others, the counterparty, country, and industry credit exposure limits. Collateral may be required, at the discretion of the Company, on certain transactions based on the creditworthiness of the counterparty. The areas where significant concentrations of credit risk may exist include cash and cash equivalents, restricted cash and investments, premium balances receivable, and reinsurance recoverable.

Cash and Cash Equivalents, Restricted Cash and Investments

The Company maintains its cash and cash equivalents and restricted cash with high credit quality financial institutions. Cash deposits are in excess of the Federal Deposit Insurance Corporation (“FDIC”) insured limits. The Company has not experienced any losses in such accounts. The Company believes it is not exposed to any significant credit risk on its cash, cash equivalents and restricted cash.

The Company’s available for sale investment portfolio is managed in accordance with guidelines that have been tailored to meet specific investment strategies, including standards of diversification, which limit the allowable holdings of any single issue. There were no investments, other than cash and cash equivalents and investments in U.S. government and government agency securities, in excess of 10% of the Company’s mezzanine equity and stockholders’ equity at September 30, 2025 and December 31, 2024.

Premium Balances Receivable

The Company underwrites a significant amount of its business through brokers and a credit risk exists should any of these brokers be unable to fulfill their contractual obligations relating to the payments of premium balances owed to the Company.

The following table summarizes the brokers that make up more than 10% of the Company’s gross written premium for the nine months ended September 30, 2025 and 2024:

For the nine months ended September 30, 2025 and 2024, the Company recorded an allowance for uncollectible premiums of nil in both periods.

Reinsurance Recoverable

The Company is exposed to the credit risk associated with reinsurance recoverable to the extent that any of its reinsurers fail to meet their obligations under reinsurance contracts. The Company evaluates the financial condition of its reinsurers on a regular basis and monitors concentrations of credit risk with reinsurers. The Company assesses reinsurers based on the assigned credit and financial strength ratings from internationally recognized rating agencies.

At September 30, 2025 and December 31, 2024,100% of the Company’s reinsurers are rated “A” (Excellent) or better by A.M. Best. At September 30, 2025, the three largest balances by reinsurer accounted for 30.1%,23.7%, and 19.0% of the Company’s reinsurance recoverable balance and at December 31, 2024, the three largest balances by reinsurer accounted for 29.8%,23.8%, and 20.8% of the Company’s reinsurance recoverable balance. At September 30, 2025 and December 31, 2024, our allowance for uncollectible reinsurance was $0.2 million andnil, respectively. Refer to Note 5 for further information.

b)Purchase Obligations

The Company has entered into certain agreements in which the Company is committed to purchase services, primarily related to software service contracts. The fixed and determinable portion of such purchase obligations was approximately $9.1 million due for the years 2025 - 2029 at September 30, 2025. The obligations will increase depending on the amount of premium written by the Company over the respective years.

c)Litigation

In the ordinary course of business, the Company is subject to disputes, litigation and arbitration arising from its insurance and reinsurance operations. These matters are generally related to insurance and reinsurance claims and are considered in the establishment of reserves for losses and loss adjustment expenses. In addition, the Company may also become involved in legal actions which seek extra-contractual damages, punitive damages or penalties, including claims alleging bad faith in handling of insurance claims. The Company expects its ultimate liability with respect to such matters will not be material to its financial condition. However, adverse outcomes on such matters are possible, from time to time, and could be material to the Company’s results of operations in any particular financial reporting period.

d)Other

The Company has incurred certain employment taxes, penalties and interests related to the employment taxes for an employee domiciled in the United Kingdom since 2021. The Company accrued approximately $1.6 million as of September 30, 2025 and $1.5 million as of December 31, 2024, which represents its best estimate of such taxes, interest, and penalties.

13. Segment, Geographic, and Product Line Information

The Company is a specialty insurance group that generates revenues by underwriting and offering a variety of specialty insurance products to domestic markets through four distinct underwriting divisions. The chief operating decision maker (“CODM”) is the individual responsible for allocating resources to and assessing the financial performance of segments of the entity. The CODM of the Company, the CEO, assesses the financial health and performance of the Company and makes resource allocation decisions on a consolidated basis; accordingly, the Company has a single operating and reportable segment.

The accounting policies of the segment are the same as those described in the summary of significant accounting policies. The CODM assesses performance for the segment and decides how to allocate resources based on net income that is also reported on the Condensed Consolidated Statements of Income and Comprehensive Income (Loss) as consolidated net income. The measure of segment assets is reported on the Condensed Consolidated Balance Sheets as total consolidated assets. Net income is used to monitor budget versus actual results. The CODM uses net income in competitive analysis by benchmarking to the Company’s competitors. The competitive analysis along with the monitoring of budgeted versus actual results are used in assessing performance of the segment. The CODM uses the same level of detail as presented on the Condensed Consolidated Statements of Income and Comprehensive Income to evaluate segment revenue, net income, and significant segment expenses.

The following table presents revenues by underwriting division for the three months ended September 30, 2025 and 2024:

The following table presents revenues by underwriting division for the nine months ended September 30, 2025 and 2024:

The Company’s operations and assets are located entirely within the United States, and all of its revenues are attributed to United States-based policyholders. The Company does not have intra-entity sales or transfers.

The Company has no single major customer representing 10% or more of its total revenues during nine months ended September 30, 2025 and 2024.

14. Subsequent Events

Management of BSHI has evaluated all events occurring after September 30, 2025 through the issuance of these consolidated financial statements and determined that there are no events requiring recognition or disclosure.