Bowhead Specialty Holdings Inc.

Previous wording

Our principal objective is to create and sustain superior returns for our stockholders by generating consistent underwriting profits across our product lines and through all market cycles, while prudently managing capital. We believe that our current market opportunity, differentiated expertise, relationships, culture and leadership team position us well to continue to grow our business profitably. We are organized as a single operating and reportable segment.

Current wording

We were founded in September 2020, backed by capital provided by GPC Fund, a private equity fund managed by Gallatin Point, and our strategic partner, AmFam, to take advantage of favorable pricing environments, and to address a growing and unmet demand from brokers and policyholders for specialized insurance solutions and quality service in complex lines of business. Our principal objective is to create and sustain superior returns for our stockholders by generating consistent, underwriting profits across our product offerings and through all market cycles, while prudently managing capital.

Previous wording

Bowhead Specialty Holdings Inc. (“BSHI” or the “Company”) is a profitable and growing company providing specialty Property and Casualty (“P&C”) products. We focus on providing craft solutions in our specialty lines and classes of business that we believe require deep underwriting and claims expertise in order to produce attractive financial results. We have initially focused on underwriting Casualty, Professional Liability and Healthcare Liability risks where our management team has deep experience. Across our underwriting divisions, our policyholders vary in size, industry and complexity and require specialized, innovative and customized solutions where we individually underwrite and structure policies for each account. As a result, our products are primarily written on an excess and surplus lines (“E&S”) basis, where we have flexibility of rate and policy form. We distribute our products through carefully selected relationships with leading distribution partners in both the wholesale and retail markets.

Current wording

We offer commercial specialty P&C insurance products to policyholders that vary in size, industry and complexity, focusing on casualty, professional liability, and healthcare liability risks. We provide “craft” underwriting solutions, which require deep underwriting and claims expertise in order to produce attractive financial results. In May 2024, we supplemented our “craft” solution with our “flow” underwriting operation, which is a streamlined, tech-enabled low touch form of underwriting, focused on small, niche and hard-to-place risks. Our policies are primarily written on a non-admitted, or E&S basis, which is free of rate and policy form restrictions, and provides the flexibility to rapidly adjust to emerging market opportunities. We distribute our products through carefully selected relationships with leading distribution partners in both the wholesale and retail markets.

Previous wording

We earn interest income on our portfolio of invested assets, which are comprised of fixed maturity securities, cash and cash equivalents, and short-term investments.

Current wording

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.

Previous wording

Non-operating expenses represent expenses related to various transactions that we consider to be unique and non-recurring in nature, including expenses related to our initial public offering (the “IPO”).

Current wording

Non-operating expenses represent expenses related to various transactions that we consider to be unique and non-recurring in nature, including expenses related to our initial public offering (the “IPO”) and secondary offering.

Previous wording

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, other insurance-related income, non-operating expenses, warrant expense, credit facility interest expenses and fees, foreign exchange (gains) losses, and certain strategic initiatives. 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 generally accepted accounting principals in the United States (“U.S. GAAP”).

Current wording

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 (gains) losses, and certain strategic initiatives. 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 generally accepted accounting principals in the United States (“U.S. GAAP”).

Previous wording

Adjusted net incomeis a non-GAAP financial measure defined as net income excluding the impact of net realized investment gains, non-operating expenses, foreign exchange (gains) losses, 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.

Current wording

Adjusted net incomeis a non-GAAP financial measure defined as net income excluding the impact of net realized investment losses, non-operating expenses, foreign exchange (gains) losses, 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.

Previous wording

Adjusted return on equity is a non-GAAP financial measure defined as adjusted net income as a percentage of average beginning and ending 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.

Current wording

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.

Previous wording

Gross written premiums increased $48.1 million, or 32.3%, to $197.0 million for the three months ended September 30, 2024 from $148.9 million for the three months ended September 30, 2023. The increase in gross written premiums was driven by renewals, including $4.4 million of additional gross written premium from a large audit premium, new business and continued growth in our platform across all four divisions. For the three months ended September 30, 2024 and 2023, E&S business made up 75.8% and 78.7% of gross written premiums, respectively, while admitted business made up 24.2% and 21.3%, respectively. The 2.9 point decrease in the proportion of E&S business written was driven by the Casualty division, where an admitted product was required on specialty business written.

Current wording

Gross written premiums increased $36.4 million, or 26.3%, to $174.8 million for the three months ended March 31, 2025 from $138.4 million for the three months ended March 31, 2024. The increase in gross written premiums was driven by renewals and the continued growth in our platform across all four divisions. For the three months ended March 31, 2025 and 2024, E&S business made up 76.3% and 75.0% of gross written premiums, respectively, while admitted business made up 23.7% and 25.0%, respectively. The 1.3 point increase in the proportion of E&S business written was driven by the Casualty division, where policies are primarily written on an E&S basis.

Previous wording

Net earned premiums increased $34.3 million, or 48.4%, to $105.2 million for the three months ended September 30, 2024 from $70.9 million for the three months ended September 30, 2023. The increase in net earned premiums, which included $3.3 million of additional net earned premium from a large audit premium, 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.

Current wording

Net earned premiums increased $26.8 million, or 32.3%, to $109.8 million for the three months ended March 31, 2025 from $83.0 million for the three months ended March 31, 2024. The increase in net earned premiums 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.

Previous wording

Gross acquisition costs as a percentage of gross earned premiums was 15.8% for the three months ended September 30, 2024 compared to 15.0% for the three months ended September 30, 2023, and ceded earned commissions as a percentage of ceded earned premium was 29.0% for the three months ended September 30, 2024 compared to 29.3% for the three months ended September 30, 2023.

Current wording

The increase in our net acquisition costs ratio was driven by the increase in earned broker commissions due to changes in our portfolio mix, as well as the reduction in earned ceding commissions in our ceded reinsurance treaties. Gross acquisition costs as a percentage of gross earned premiums was 15.9% for the three months ended March 31, 2025 compared to 15.3% for the three months ended March 31, 2024, and ceded earned commissions as a percentage of ceded earned premium was 29.0% for the three months ended March 31, 2025 and 2024.

Previous wording

The combined ratio was 94.4% for the three months ended September 30, 2024, compared to 91.4% for the three months ended September 30, 2023. The 3.0 point increase was due to the 4.1 point increase in the loss ratio, partially offset by the 1.1 point decrease in the expense ratio.

Current wording

The combined ratio was 97.3% for the three months ended March 31, 2025, compared to 98.1% for the three months ended March 31, 2024. The 0.8 point decrease was due to the 2.2 point decrease in our expense ratio, partially offset by the 1.4 point increase in our loss ratio.

Previous wording

Net investment income increased $15.3 million to $27.9 million for the nine months ended September 30, 2024 from $12.6 million for the nine months ended September 30, 2023. The increase in net investment income is primarily due to a higher average balance of investments during the nine months ended September 30, 2024 and higher yields on invested assets.

Current wording

Net investment income increased $4.9 million to $12.6 million for the three months ended March 31, 2025 from $7.7 million for the three months ended March 31, 2024. The increase in net investment income is primarily due to a higher average balance of investments during the three months ended March 31, 2025, and higher yields on invested assets.

Previous wording

Income tax expense was $3.7 million for the three months ended September 30, 2024, compared to $2.6 million for the three months ended September 30, 2023. Our effective tax rate was 23.6% for the three months ended September 30, 2024, compared to 22.7% for the three months ended September 30, 2023. The effective tax rate may vary slightly from the statutory tax rate due to state taxes and certain tax adjustments for permanent differences.

Current wording

Income tax expense was $3.0 million for the three months ended March 31, 2025, compared to $2.0 million for the three months ended March 31, 2024. Our effective tax rate was 21.0% for the three months ended March 31, 2025, compared to 22.5% for the three months ended March 31, 2024. The effective tax rate approximates the statutory tax rate of 21.0% primarily due to expected excess tax benefits on the vesting of stock-based compensation offsetting state taxes and non-deductible expenses.

Previous wording

We define underwriting income as income before income taxes excluding the impact of net investment income, net realized investment gains, other insurance-related income, non-operating expenses, warrant expense, credit facility interest expenses and fees, foreign exchange (gains) losses, and certain strategic initiatives. Underwriting income represents the pre-tax profitability of the Company's underwriting operations and allows us to evaluate our underwriting performance without regard to net investment income. We use this metric as we believe it gives our management and other users of our financial information useful insight into our underlying business performance. 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.

Current wording

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 (gains) losses, and certain strategic initiatives. Underwriting income represents the pre-tax profitability of the Company's underwriting operations and allows us to evaluate our underwriting performance without regard to net investment income. We use this metric as we believe it gives our management and other users of our financial information useful insight into our underlying business performance. 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.

Previous wording

We define adjusted net income as net income excluding the impact of net realized investment gains, non-operating expenses, foreign exchange (gains) losses, and certain strategic initiatives. Adjusted net income excludes the impact of certain items that may not be indicative of underlying business trends, operating results, or future outlook, net of tax impact. We calculate the tax impact only on adjustments which would be included in calculating our income tax expense using the estimated tax rate at which we received a deduction for these adjustments. We use adjusted net income as an internal performance measure in the management of our operations because we believe it gives our management and other users of our financial information useful insight into our results of operations and our underlying business performance. Adjusted net income should not be viewed as a substitute for net income calculated in accordance with U.S. GAAP, and other companies may define adjusted net income differently.

Current wording

We define adjusted net income as net income excluding the impact of net realized investment losses, non-operating expenses, foreign exchange (gains) losses, and certain strategic initiatives. Adjusted net income excludes the impact of certain items that may not be indicative of underlying business trends, operating results, or future outlook, net of tax impact. We calculate the tax impact only on adjustments that would be included in calculating our income tax expense using the estimated tax rate at which we received a deduction for these adjustments. We use adjusted net income as an internal performance measure in the management of our operations because we believe it gives our management and other users of our financial information useful insight into our results of operations and our underlying business performance. Adjusted net income should not be viewed as a substitute for net income calculated in accordance with U.S. GAAP, and other companies may define adjusted net income differently.

Previous wording

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 managing general agency, and Bowhead Underwriting Services, Inc., our wholly-owned services company subsidiary (“BUSI”).

Current wording

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. (“BUSI”), our wholly-owned services company subsidiary.

Previous wording

BSHI may receive cash through (i) drawing on the Facility (as defined below) that we entered into on April 22, 2024, (ii) capital contributions or 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. We also may use the proceeds from these sources to contribute funds to our insurance company subsidiary in order to support premium growth, pay dividends and taxes and for other business purposes.

Current wording

Prior to the IPO, BSHI received capital contributions from BIHL. 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. We also may use the proceeds from these sources to contribute funds to our insurance company subsidiary in order to support premium growth, pay dividends and taxes and for other business purposes.

Previous wording

Our insurance company subsidiary, BICI, is licensed and domiciled in the State of Wisconsin. Under Wisconsin law, BICI is required to maintain specified levels of statutory capital and surplus and is restricted by law as to the amount of dividends it can pay without the approval of regulatory authorities. 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. As of December 31, 2023, the maximum dividend that BICI could pay without the approval of regulatory authorities was $2.9 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.

Current wording

Our insurance company subsidiary, BICI, is licensed and domiciled in the State of Wisconsin. Under Wisconsin law, BICI is required to maintain specified levels of statutory capital and surplus and is restricted by law as to the amount of dividends it can pay without the approval of regulatory authorities. 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. 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.

Previous wording

As of September 30, 2024, our holding company had $131.9 million in cash and investments. We believe we have sufficient liquidity available at our holding company and subsidiaries to meet our operating cash needs and obligations for the next 12 months.

Current wording

As of March 31, 2025, our holding company had $20.8 million in cash and investments. 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.

Previous wording

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

Current wording

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. 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. 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 March 31, 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.

Previous wording

Our cash flows for the nine months ended September 30, 2024 and 2023 were as follows:

Current wording

Our cash flows for the three months ended March 31, 2025 and 2024 were as follows:

Previous wording

The increase in cash provided by operating activities in the nine months ended September 30, 2024 compared to the nine months ended September 30, 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.

Current wording

The increase in cash provided by operating activities in the three months ended March 31, 2025 compared to the three months ended March 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.

Previous wording

For the nine months ended September 30, 2024, net cash used in investing activities was $324.7 million due to growth in our business operations. For the nine months ended September 30, 2024, funds from operations and net proceeds from the IPO were used to purchase fixed maturity securities of $458.4 million and short-term investments of $9.9 million. During the nine months ended September 30, 2024, we received proceeds of $137.2 million from sales of fixed maturity securities and $9.0 million from sales of short-term investments. Net cash used in investing activities also includes purchases of property and equipment of $2.6 million.

Current wording

For the three months ended March 31, 2025, net cash used in investing activities was $146.3 million due to growth in our business operations. For the three months ended March 31, 2025, funds from operations were used to purchase fixed maturity securities of $250.5 million. During the three months ended March 31, 2025, we received proceeds of $105.4 million from sales and maturities of fixed maturity securities. Net cash used in investing activities also includes purchases of property and equipment of $1.2 million.

Previous wording

For the nine months ended September 30, 2023, net cash used in investing activities was $174.0 million. For the nine months ended September 30, 2023, funds from operations were used to purchase fixed maturity securities of $217.9 million and short-term investments of $21.4 million. During the nine months ended September 30, 2023, we received proceeds of $16.7 million from sales of fixed maturity securities and $51.5 million from sales of short-term investments. Net cash used in investing activities also includes purchases of property and equipment of $2.9 million.

Current wording

For the three months ended March 31, 2024, net cash used in investing activities was $79.1 million. For the three months ended March 31, 2024, funds from operations were used to purchase fixed maturity securities of $93.7 million. During the three months ended March 31, 2024, we received proceeds of $15.3 million from sales and maturities of fixed maturity securities. Net cash used in investing activities also includes purchases of property and equipment of $0.8 million.

Previous wording

For the nine months ended September 30, 2024, net cash provided by financing activities was $133.8 million and primarily reflected net proceeds from the IPO. For the nine months ended September 30, 2023, net cash provided by financing activities was $53.1 million and reflected capital contributions from BIHL.

Current wording

For the three months ended March 31, 2025, net cash provided by financing activities was nil, and for the three months ended March 31, 2024, net cash provided by financing activities was $2.8 million, which reflected capital contributions from BIHL.

Previous wording

We purchase various forms of reinsurance to manage loss exposures and safeguard our capital. Through reinsurance, we transfer certain exposures to a reinsurer, and in return the reinsurer receives a portion of the premium (less a ceding commission paid to us). We strategically use a combination of quota share and excess of loss reinsurance treaties to retain risk (and premium) we underwrite while providing balance sheet protection from larger losses.

Current wording

We purchase various forms of reinsurance to manage loss exposures and safeguard our capital. Through reinsurance, we transfer certain exposures to a reinsurer, and in return, the reinsurer receives a portion of the premium, less a ceding commission paid to us. We strategically use a combination of quota share and excess of loss reinsurance treaties to retain risk, while providing balance sheet protection from larger losses. We may also place facultative reinsurance on specific risks we deem prudent.

Previous wording

We place reinsurance through our subsidiary, BICI, which reinsures 100% of the premium placed by BSUI under the AmFam Quota Share Agreement. In turn, BICI strategically transfers exposures to third-party reinsurers utilizing different structures depending on the line of business.

Current wording

We place reinsurance through our insurance company subsidiary, BICI, which reinsures 100% of the premium placed by BSUI with the AmFam Issuing Carriers. In turn, BICI strategically transfers exposures to third-party reinsurers utilizing different structures depending on the line of business.

Previous wording

While we offer up to $15.0 million of limit on our insurance policies, we generally seek not to retain more than $5.0 million of risk per policy and seek to utilize reinsurance to achieve that objective. At each renewal, we consider various factors when determining our reinsurance coverage, including (i) plans to change the underlying insurance coverage we offer, (ii) trends in loss activity, (iii) the level of our capital and surplus, (iv) changes in our risk appetite and (v) the cost, terms and availability of reinsurance coverage.

Current wording

We generally offer up to $15 million of limit on our insurance policies and seek not to retain more than $5 million, utilizing reinsurance to achieve that objective. At each renewal, we consider various factors when determining our reinsurance coverage, including (i) plans to change the underlying insurance coverage we offer, (ii) trends in loss activity, (iii) the level of our capital and surplus, (iv) changes in our risk appetite and (v) the cost, terms and availability of reinsurance coverage. We may adjust our reinsurance program, including our levels of retention based on these factors.

Previous wording

Currently, all of our lines of business (except our Cyber line of business within our Professional Liability division) use a quota share reinsurance treaty where 25.0% of the exposure is ceded to reinsurers. Additionally, all of our lines of business (except Cyber) use an excess of loss reinsurance treaty ceding 60.1% of losses in excess of $5.0 million up to $15.0 million to our reinsurers. Cyber, as a specialized line of business, is placed under a separate quota share structure under which we currently cede 64.0% of the exposure to reinsurers. The only reinsurance covering our Cyber line of business is pursuant to this Cyber-specific quota share reinsurance agreement. Our Cyber line of business does not benefit from our excess of loss reinsurance program and there is no separate excess of loss reinsurance program for our Cyber line of business. In addition to the core treaties outlined above, we may also place additional reinsurance on specific risk classes, as we deem prudent. For example, on March 1, 2024, we placed a quota share treaty covering commercial auto exposure in excess of $1.0 million up to $5.0 million within our Casualty book of business. 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.

Current wording

•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.

Previous wording

Our reinsurance treaties typically have a 12- or 18-month term. During each renewal cycle, we may change our coverage terms or the composition of our reinsurance panel. Currently, the quota share reinsurance treaty for Cyber generally renews on January 1, 2025 while the remainder of our reinsurance treaties renewed on May 1, 2024. Although exact cession percentages and specific coverage terms may vary at each treaty renewal, we intend to renew on similar terms as expiring to maintain our desired level of net risk appetite.

Current wording

Our reinsurance treaties typically have 12- or 18-month terms. While we intend to renew on similar terms as expiring to maintain our desired level of net risk appetite, during each renewal cycle, we may change our coverage terms or the composition of our reinsurance panel. Currently, the quota share reinsurance treaty for Cyber generally renews on January 1 while the remainder of our reinsurance treaties renew on May 1.

Previous wording

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

Current wording

The following table summarizes our top five reinsurers, their A.M. Best financial strength rating and percent of our total reinsurance recoverable as of March 31, 2025:

Previous wording

We have entered into software service agreements that have purchase obligations depending on the amount of premiums written. The fixed and determinable portion of these purchase obligations was approximately $1.8 million due for the years 2025 - 2028 at September 30, 2024. The obligations will increase depending on the amount of premium written by the Company over the respective years.

Current wording

We have entered into software service agreements that have purchase obligations depending on the amount of premiums written. At March 31, 2025, the fixed and determinable portion of these purchase obligations were approximately $6.9 million for the years 2025 - 2029. The obligations may increase depending on the amount of premium written by the Company over the respective years.

Previous wording

We have entered into a sublease agreement for our office in New York and a lease agreement for our office in Chicago. These are all classified as operating leases. These leases expire in December 2027 and May 2025, respectively. The lease for our Chicago office contains an option to extend the length of the lease term. We are not reasonably certain that we will exercise the option to extend these leases. As of September 30, 2024, the discounted operating lease liabilities were $4.1 million.

Current wording

We have entered into a sublease agreement for our office in New York and a lease agreement for our office in Chicago. On December 1, 2024, the company exercised its option to extend the Chicago lease, which will expire on August 31, 2028, with a renewal option to extend. These leases are classified as operating leases. These leases expire in December 2027 and August 2028, respectively. Although the Chicago operating lease agreement contains an option to extend the length of the lease term, the Company is not reasonably certain it will exercise this option. As of March 31, 2025, the discounted operating lease liability was $4.0 million.

Previous wording

As of September 30, 2024, total mezzanine equity and stockholders’ equity was $364.8 million compared to $192.1 million as of December 31, 2023. The increase in total mezzanine equity and stockholders’ equity as of September 30, 2024 compared to December 31, 2023 was primarily due to net proceeds received from the IPO, net income generated during the period, and capital contributions from BIHL, which include net activity related to stock-based compensation plans.

Current wording

As of March 31, 2025, total mezzanine equity and stockholders’ equity was $391.4 million compared to $370.4 million as of December 31, 2024. The $21.0 million increase was primarily due to net income generated during the period, a decrease in unrealized losses on available for sale investments, net of taxes, and net activity related to stock-based compensation plans.

Previous wording

We did not declare any dividends during the three or nine months ended September 30, 2024 and the year ended December 31, 2023.

Current wording

We did not declare any dividends during the three months ended March 31, 2025 or the year ended December 31, 2024.

Previous wording

We seek to maintain a diversified portfolio of instruments that prioritize invested capital preservation, with a secondary focus on generating predictable and stable returns. Our investment portfolio is tailored to align with the characteristics of the underlying insurance liabilities. Our asset allocation strategy focuses on high-quality fixed income instruments, with no appetite for equity or alternative investment risk. One of the primary features of our asset allocation is maintaining sufficient readily available funds to pay claims and expenses. Consequently, the bulk of our reserves are invested in securities that can be expected to maintain a close relationship between market and statement values, under most conditions. Our portfolio therefore consists entirely of cash, cash equivalents, short-term investments and investment-grade fixed income securities.

Current wording

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. 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.

Previous wording

We actively manage and monitor our investment risk to balance the goals of stable growth and liquidity with our need to comply with the insurance regulatory frameworks within which we operate as well as the capital framework agreements with AmFam. Our board of directors reviews and approves our investment policy and strategy on a regular basis.

Current wording

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. 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.

Previous wording

As of September 30, 2024, the majority of our investment portfolio, or $891.3 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 Condensed Consolidated Balance Sheets. Also included in our investment portfolio were $10.0 million of short-term 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 September 30, 2024. Our fixed income investment portfolio had a book yield of 4.7% and a market yield of 4.7% as of September 30, 2024, compared to 4.3% and 5.2%, respectively, as of December 31, 2023.

Current wording

As of March 31, 2025, the majority of our investment portfolio, or $1,034.8 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 Condensed Consolidated Balance Sheets. Also included in our investment portfolio were $10.0 million of short-term investments. Our fixed maturity securities, including cash equivalents, had a weighted average effective duration of 2.8 years and an average rating of “AA” at March 31, 2025. Our fixed income investment portfolio had a book yield of 4.7% and a market yield of 4.8% as of March 31, 2025, compared to 4.6% and 4.9%, respectively, as of December 31, 2024.

Previous wording

The amortized cost and estimated fair value of our available for sale investments in fixed maturity securities summarized by contractual maturity as of September 30, 2024 and as of December 31, 2023, were as follows:

Current wording

As of March 31, 2025 and December 31, 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:

Previous wording

We are required to maintain assets 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, 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 Condensed Consolidated Statements of Income and Comprehensive Income.

Current wording

We are required to maintain assets 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 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 Condensed Consolidated Statements of Income and Comprehensive Income.