Kinsale Capital Group, Inc.

which could cause actual results to differ materially. These risk factors are listed in the company's various SEC filings, including the 2022 annual report on Form 10-K, which should be reviewed carefully. The company has a Form 8-K with the Securities and Exchange Commission that contains the press release announcing its fourth quarter results. Kinsale's management may also reference certain non-GAAP financial measures in the call today. A reconciliation of GAAP to these measures can be found in the press release, which is available on the company's website at www.kinsalecapitalgroup.com. I will now turn the conference over to Kinsale's President and CEO, Mr. Michael Kehoe. Please go ahead, sir.

Thank you, Operator, and good morning, everyone. Brian Petruccelli, our CFO, and Brian Haney, our president and COO, and I will each offer a few remarks, and then we'll move on to any questions you may have. In the fourth quarter of 2023, Kinsale's operating earnings per share increased by 49%, and gross written premium grew by 33.8% over the fourth quarter of 2022. For the quarter, the company posted a combined ratio of 72.1% and posted an operating ROE of 31.8% for the full year 2023. The company's strategy of disciplined DNS underwriting and technology-enabled low costs drive these results and allows us effective returns and to take market share from competitors at the same time. Specifically for those newer to the company, Consale focuses exclusively on the E&S market, focusing on writing smaller accounts. We provide our brokers with the broadest risk appetite and the best customer service in the business. And we use our low expense ratio to offer our customers competitively priced insurance while also delivering best-in-class margins to our stockholders. Since much of this expense advantage is predicated on our advanced systems and our team of world-class technology professionals, we believe the competitive advantage of our technology model not only has durability to it, but has the potential to become even more powerful in the years ahead. As we have noted over the last several years, the E&S market continues to benefit from the inflow of business from standard companies and from rate increases driven by inflation, and relatively tight underwriting conditions. Our growth in the fourth quarter was similar to the third and was largely consistent with the industry commentary about the property market becoming more orderly. We continue to be optimistic about growth in 2024. Finally, a reminder about our reserving process and approach. We collect premiums upfront and pay claims out over the subsequent several years. Accordingly, we post reserves now for claims we will have to pay in the future. We deliberately set those reserves in a conservative fashion. We set aside more than we think we will need to allow for some uncertainty in the process, the possibility of a changing tort system, and the uptick of inflation we have experienced more recently in the last couple of years. Our 2016 through 19 accident years have developed favorably on an inception-to-date basis, but the level of conservatism in those years has been partially eroded by inflation. Subsequent to 2019, we have benefited from very significant rate increases above the lost cost trend, and we have used some of that additional rate to add to the level of conservatism in our reserves. Investors should have a high level of confidence in the Consale balance sheet as we expect overall reserves to continue to develop favorably in the years ahead. And with that, I'm going to turn the call over to Brian Petruccelli.

Thanks, Mike. Another solid quarter with 33.8% growth in written premium, very low CAT activity, and net income and net operating earnings increasing by 53.7% and 49.6% respectively. The 72.1% combined ratio for the quarter included 2.3 points from net favorable prior year loss reserve development compared to 3.2 points last year in negligible CAT losses in either period. The expense ratio continues to benefit from higher seating commissions from the company's casualty and commercial property proportional reinsurance agreements as a result of growth in both of those lines of business. The expense ratio can bounce around a bit from quarter to quarter, so we believe it's best to evaluate the components of the expense ratio over a 12-month period. For the year, we noted that the expense ratio decreased by 1.4 points from 22.2% in 2022 to 20.8% this year. Breaking this decrease down a little further, 1.2 points came from net commissions with the remaining 0.2 point from other underwriting expenses. On the investment side, net investment income increased by 71.2% over the fourth quarter last year as a result of continued growth in the investment portfolio generated from strong operating cash flows and higher interest rates with a gross return of 4% for the year compared to 3% last year. We're continuing to invest new money and shorter duration securities with new money yields averaging in the low to mid 5% range and duration decreased to 2.8 years down from three and a half years at the end of last year. And lastly, diluted operating earnings per share continues to improve and was $3.87 per share for the quarter compared to $2.60 per share last year.