Hello. And welcome to the Kingstone Companies, Inc. Fourth Quarter and Full-Year 2023 Earnings Conference Call. [Operator Instructions]. At this time, let's turn the call over to Karin Daly, Vice President, The Equity Group and Kingstone's investor relations representative. Karin, you may begin.

Thank you, Kevin. Good morning, everyone. Joining us on the call today will be Chief Executive Officer, Meryl Golden, and Chief Financial Officer, Jennifer Gravelle. On behalf of the company, I would like to note that this conference call may include forward-looking statements, which involve known and unknown risks, uncertainties, and other factors that may cause actual results to be materially different from projected results. Forward-looking statements speak only as of the date on which they are made, and Kingstone undertakes no obligation to update the information discussed. For more information, please refer to the section entitled Factors That May Affect Future Results and Financial Condition in Part 1, Item 1A of the company's latest Form 10-K. Additionally, today's remarks may include references to non-GAAP measures. For a reconciliation of our non-GAAP measures to GAAP figures, please see the tables in the latest earnings release. With that, it's my pleasure to turn the call over to Meryl Golden. Meryl, you may begin.

Thanks, Karin. And good morning, everyone. As I reflect on my first six months serving as CEO of Kingstone, it has been a journey of immense learning, and I am truly honored to have been entrusted to lead this great company. I want to thank our investors for your feedback leading to enhanced transparency and to inform you that we now have an investor presentation on our website with additional data that might be of interest. It has certainly taken longer than we had hoped to get it right, but I can proudly say that we have completed the turnaround and Kingstone has returned to profitability. We are thrilled to again be positioned for consistent profitability and growth. Our products are priced right, our policyholders are insured to value, business written in the select product is producing a materially lower frequency than our legacy product, indicating our advanced segmentation is working. And the reduction in our expense ratio gives us a competitive advantage at a time when there are few active competitors in the market. I could not be more enthusiastic about our future. Returning to profitability is not just a financial milestone. It's a reflection of our commitment to sound financial management and operational efficiency that has been unwavering. Our return to profitability is a product of the hard work, dedication and perseverance of every member of the Kingstone team. Our transformation journey has been marked by bold decisions and an intense focus on execution. The past few years have been a period of profound change, growth and adaptation. The benefits of Kingstone 2.0 and Kingstone 3.0 are now flowing through to our income statement and doing so at an accelerating rate. Our numbers now speak for themselves. You can see this in the fourth quarter results and it…

Thank you, Meryl. And good morning, everyone. We're very pleased to report the profitability during the fourth quarter, achieving a net income of $2.9 million or $0.26 per diluted share. This is a very significant improvement from the same period last year when we saw a net loss of $4 million or a loss of $0.37 per share. Core direct written premiums increased 7.1% to $47 million, while the non-core business successfully declined 40.8% during the quarter. On a consolidation basis, direct premiums written decreased slightly, with price increases in new business premium in our core business offset by our planned non-core policy runoff. For the full year, direct premiums written were flat to the prior year period. Our fourth quarter combined ratio improved 24.4 points to 89.5%, primarily driven by its strong underwriting results coupled with lower catastrophe losses. The attritional loss ratio improved 7.3 points to 53.8%, and catastrophe losses were 10.7 points lower than the prior-year period. There was no development of prior year reserves for the quarter. Our expense ratio was generally in line with the prior-year period at 32.7%. For the year, our combined ratio improved 8 points to 105.3%. The attritional loss ratio improved 2.9 points to 65.3%. Catastrophe losses were 0.4 points lower than the full year of 2022, and there was no development of prior-year reserves. Our expense ratio improved by 3.1 points to 32.9%. As outlined in our most recent shareholder letter from Meryl, we expect to receive further improvement in our expense ratio, forecasting a 29% net expense ratio in 2024. Net income increased 3% and 21.7% for the fourth quarter and full year respectively. The increase was driven by higher interest rates earned on cash balances. And in regards to the improvement for the full year, there was a reversal of accrued interest income due to an accounting error in 2022. There was no correction necessary in 2023. Equity holdings, including preferred shares, fixed income ETFs, mutual funds, and hedge fund investment increased by $1.5 million. Bond holdings, excluding those classified as held to maturity, increased by $6.1 million pre-tax, resulting in a $4.8 million after-tax increase to other comprehensive income and a $0.43 increase to book value per share. The effective duration of our fixed maturity securities is 4.1 years, with an average yield of 3.58%. Book value at December 31, 2023 was $2.81 per diluted share and $3.80 excluding AOCI. We are very pleased with the progress we have made, leading to the return of equity of 9.7% during the fourth quarter. As Meryl mentioned earlier, we believe we can achieve a return on equity of 15% to 22% for the full year 2024. And with that, we'll open it up for questions. Kevin?

[Operator Instructions]. Our first question today is coming from Jon Old from Long Meadow Investors.

So I'm just curious, what level of – I know you were talking about – assuming no major storms, but what level of sort of general cat amount are you assuming in 2024? And then I also thought it would be helpful for me and everyone else to understand about how much non-cash depreciation, amortization and interest is embedded in the guidance because I think your depreciation and amortization is elevated due to the perfect spending you did on software projects and such that's bearing fruit, but a lot of that will go away over time. So if you could just add a little commentary there because I think your earnings are probably a little bit understated on a cash basis.

Before I answer your question, Jon, I just want to correct, Jen. When she was talking about net investment income, she said net income. And so, it was investment income that she was talking about that increased 3% for the year. So to your question about cats, so we've included 7 points of cats in the plan for 2024. And that is based on what our trailing 12 year or so history has been of what we call PCS events. So normal catastrophe events and not like major hurricanes. So 7 points are included in the forecast. Jen, do you want to take a shot at the non-cash question?

I'm looking it up for you right now, Jon. Trying to find it in front of me here. Yeah, I don't have the file open in front of me, Jon. We're going to have to revert back to you on that one.

Okay. But your depreciation and amortization, it's going down and it should keep going down because most of it is a three year amortization, correct? So, a lot of that expense is going to go away over time.

That is correct, that is correct.

Yeah. So, that in itself is about a $0.20 hit that eventually will go away. I just wanted to clarify that.

Next question today is coming from Gabriel McClure [ph], a private investor.

Congrats, Meryl and Jennifer, on a great quarter. I just had a couple of questions. One, the diluted and basic shares, there's a gap now there that didn't exist before. So, did the debt investor, did he exercise his warrants there or what happened there?

I'll take that, Jen. So, no, the warrants are not yet exercised, but per GAAP, when you make a profit, there's a formula where you include some of the warrants in the share count. So that's the difference for the quarter.

Kind of going forward, I know it's really early, but inquiring minds want to know, how are you thinking about capital allocation priority now that we're starting to make some money, Meryl?

Well, I would say that our top priority right now is our debt maturity. And as you know, we have $20 million of debt that matures at the end of the year. So we have nine months to figure out what to do. So that is certainly our top priority in terms of capital allocation.

Congrats again on a great quarter.

We've reached the end of our question-and-answer session. I'd like to turn the floor back over to Meryl for any further or closing comments.

Great. So thank you again for joining our call today. I want to express my deepest appreciation to our talented team members, who have worked tirelessly through the various initiatives, and to our producers, reinsurers, and shareholders for your unwavering support. We're committed to delivering long-term value to our shareholders. And have a great day. Bye.

Thank you. That does conclude today's teleconference webcast. You may disconnect your line at this time and have a wonderful day. We thank you for your participation today.