Heritage Insurance Holdings, Inc.

of the company's total insured value. This strategic diversification helps mitigate risks and stabilize our earnings across various geographic regions. The decrease in our policies enforced has been intentional, driven by our strategic initiatives to get adequate rate, non-renew unprofitable policies to the extent permitted by individual state requirements, reduce concentrations, and fine-tune our distribution network. These activities achieve the intended impact and now puts us in a position that policy count is no longer expected to decline at the same rate we experienced over the past few years. We are pleased to announce that we have finalized our catastrophe XOL reinsurance program for 2024-2025 earlier than in previous years, reflecting our commitment to our reinsurance partners and their corresponding commitment to our strategy. This year's program includes a new southeast-only catastrophe bond, providing a limit of $100 million. The inclusion of catastrophe bonds is an important element of our risk transfer program because it includes the capital markets as a supplier of reinsurance. Contracts are multi-year, and the reinsurance we secure is fully collateralized. As we continue to navigate forward, our focus remains steadfast on enhancing shareholder value through disciplined capital management and strategic growth initiatives. The challenges of the litigated claims environment in Florida continue to be noteworthy. But with targeted underwriting and rate actions, as well as legislative actions taken to reduce the influence of claims abuse and one-way attorney fees, We believe we are positioned to successfully return to a policy count growth trajectory. Before I turn the call over to Kirk, I want to reaffirm our commitment to navigating the complexities of our market with a strategic focus that prioritizes long-term profitability and driving shareholder value. We are optimistic about the benefits of recent legislative changes in Florida and remain adaptable in our strategies to ensure sustained positive outcomes. Now let me turn things over to Kirk for a detailed review of our financial performance this quarter.

Thank you, Ernie. Good morning, everyone. As Ernie highlighted, we began 2024 on a strong note with first quarter net income of $14.2 million, or $0.47 per diluted share. This result represents an improvement in our net income over the prior year, driven by an 8% increase in net premiums earned and an unalienable rise in investment income. Additionally, it is important to note that the decrease in earnings per share was influenced by higher average weighted number of shares outstanding due to the equity issuance and stock grants net of forfeitures. Our gross premiums written this quarter were $356.7 million, a 14.9% increase from the prior year quarter, reflecting our strategic focus on enhancing our product offerings and expanding into profitable segments. Gross premiums earned followed suit, rising to $341.4 million of 7.7% from the prior year quarter. Net premiums earned increased by 8.1%, reflecting the increase in gross earned premiums outpacing the increase in seeded premiums. We expect an improvement in our seeded premium ratio going forward and for the growth in net premiums earned to accelerate throughout 2024. Total revenue for the quarter reached $191.3 million, marking an 8.1% increase compared to $176.9 million in the prior year quarter. This increase in revenue is bolstered by our hard net earned premiums and an increase in net investment income, which rose due to our positioning amidst current yield curve opportunities. Losses and loss adjustment expenses were $102 million for the quarter, compared to $97.5 million in the first quarter of 2023. The net loss ratio improved to 56.9%, down from 58.7% the prior year quarter, even with higher weather-related losses of 5.6 million and unfavorable loss development of 6.7 million compared to favorable development of 1.5 million in the prior quarter. The improvement in the loss ratio, which included a reduction of attritional losses, highlights the positive impact on our rate actions as well as what we believe is a better performing portfolio driven by the various strategic underwriting changes made over the past two years. The net expense ratio saw a slight increase to 37.1%, primarily due to a reduction in seeding commissions from our net quota share contract. This will have the most impact in the first quarter since it is the result of contracts that were run off in 2023. Our net combined ratio improves slightly to 94%, reflecting improvements in the loss ratio driven by the strategic initiatives Ernie and I have discussed. Turning to our balance sheet, the book value per share has risen to $7.67, an increase of 26.8% compared to the prior year quarter. This growth in book value is primarily driven by net income and a reduction in unrealized losses on our fixed income securities. Our financial strength is further evidenced by our cash reserves, which exceed $380 million in cash and cash equivalents, providing us with substantial liquidity to meet our operational needs. Importantly, As of the closing price on March 30, 2024, we have met the threshold necessary to qualify our inclusion in the Russell 2000 Index. While formal inclusion will be confirmed in the coming updates from the Index, meeting this threshold is a testament to our financial health and market valuation. The Board of Directors continues to evaluate our dividend distribution and stock repression strategies. As part of this prudent capital management approach, our Board has decided to continue the suspension of the quarterly dividend to further strengthen our financial position and support strategic growth initiatives. In conclusion, our financial results for the first quarter of 2024 demonstrate the effectiveness of our strategic initiatives and our ability to adapt to market conditions. We remain committed to driving shareholder value and ensuring the long-term sustainability of our operations.

Thank you. We are now ready for your questions.