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Good day, and welcome to the Q1 2024 Employers Holdings, Inc. Earnings Conference Call. [Operator Instructions] As a reminder, this call may be recorded. I'll now turn this call over to Lori Brown, General Counsel.
Thank you, Michelle. Good morning, and welcome to the first quarter 2024 earnings call for Employers. Today's call is being recorded and webcast from the Investors section of our website, where a replay will be available following the call. Presenting today are Kathy Antonello, our Chief Executive officer; and Mike Paquette, our Chief Financial Officer. Statements made during this conference call that are not based on historical facts are considered forward-looking statements.
These statements are made in reliance on the safe harbor provision of the Private Securities Litigation Reform Act of 1995. Although we believe the expectations expressed in our forward-looking statements are reasonable, risks and uncertainties could cause actual results to be materially different from our expectations, including the risks set forth in our filings with the Securities and Exchange Commission.
All remarks made during the call are current only at the time of the call and will not be updated to reflect subsequent developments. The company also uses its website as a means of disclosing material nonpublic information and for complying with the disclosure obligations under the SEC's Regulation FD. Such disclosures will be included in the Investors section of our website.
Accordingly, investors should monitor that portion of our website in addition to following our press releases, SEC filings, public conference calls and webcasts. In our earnings press release and in our remarks or responses to questions, we may use non-GAAP financial measures. Reconciliations of these non-GAAP measures to our GAAP results are included in our financial supplement as an attachment to our earnings press release, our investor presentation and any other materials available in the Investors section on our website.
And now I'll turn the call over to Kathy.
Thank you, Lori. Good morning to everyone, and welcome to our first quarter 2024 earnings call. Today, we will follow our typical agenda, where I'll begin by providing some highlights of our first quarter 2024 results. I'll then hand it over to Mike for more details on our financials and prior to Q&A, I'll discuss the continued improvement we expect to see during the balance of 2024.
Higher new and renewal premiums, strong net investment income and investment gains drove an 8% increase in our first quarter revenue year-over-year. Our steady growth in written premium resulted from a 38% increase in new business, a 6% increase in renewal business and continued solid audit premium recognition. Excluding adjustments for audit premium, our gross written premium increased 14% for the quarter with all major distribution channels contributing to the growth.
Our investment performance was also [indiscernible] to revenue, with continued strong net investment income and net unrealized gains from our common stock and other investments. We recorded our current accident year loss and LAE ratio on voluntary business at 64%, slightly above the 63.3% we maintained throughout 2023. And consistent with that of 2022.
We believe the accident year 2024 loss ratio that we recorded, along with our existing provision for a potential increase in medical inflation, positions us well from a reserving standpoint. As was the case in the first quarter of 2023, we did not recognize any prior year loss reserve development on our voluntary business, because the full actuarial study was not performed and the amount of indicated net prior year loss for development was consistent with our expectations.
We will evaluate our prior year reserves in more detail at midyear when we routinely perform a full reserve study. Our commission expense ratio was 13.8%, up from 13.5% a year ago. The increase was due to our strong new business premium growth, which is typically subject to a higher initial commission rate and anticipated 2024 agency incentives, which are contingent on profitable growth.
Our underwriting and general and administrative expense ratio was 24.8%, down from 25.7% a year ago. The expense ratio improvement primarily resulted from our recent Cerity integration, and we expect further expense ratio improvement throughout 2024. While our net income and adjusted net income per diluted share rose sharply by 29% and 12%, respectively, our first quarter 2024 GAAP combined ratio of 101.6% was similar to our first quarter 2023 results.
Our combined ratio does not yet fully reflect the underlying enhancements, efficiencies and economies of scale that we have recently achieved, and we expect meaningful improvements in our combined ratio for the balance of the year.
With that, Mike will now provide a deeper dive into our financial results and then I'll return to provide my closing remarks. Mike?
Thank you, Kathy. Gross premiums written were $211 million, an increase of 8%. The increase was primarily due to higher new and renewal premiums. Net premiums earned were $185 million, an increase of 7%. Our loss and loss adjustment expenses were $117 million, an increase of 8%, and our loss and loss adjustment expense ratio was 63% or 64% when excluding the effects of our loss portfolio transfer. As Kathy mentioned, we increased our current accident year loss and LAE ratio on voluntary business to 64% this quarter versus 63.3% a year ago.
In addition, we continued to settle claims throughout the quarter on an accelerated basis to both mitigate our overall tail risk and generate additional reserve salvage. Commission expenses were $26 million, an increase of 9%, and our commission expense ratio was 13.8% versus 13.5% a year ago. Underwriting and general and administrative expenses were $46 million, an increase of 3%, and our underwriting and general administration expense ratio was 24.8% versus 25.7% a year ago.
The decrease was primarily due to savings associated with the fourth quarter 2023 full integration, authorities operations into those of employers, partially offset by increases in payroll and benefit costs and bad debt expenses. Our net investment income was $27 million for the quarter, a decrease of 3%. The decrease was due to the unwinding of our former Federal Home Loan Bank leverage investment strategy in late 2023. When considering the more than $2 million worth of interest expense that we incurred from that former strategy in the first quarter of 2023, our net investment income was actually up 6% year-over-year. Our fixed maturities currently have a duration of 4.5 and an average credit quality of A+.
Our weighted average book yield was 4.3% at quarter end, which was up nicely from 4.1% a year ago. Our net income this quarter was favorably impacted by $10 million of net after-tax unrealized gains from equity securities and other investments, which are reflected on our income statement. And our stockholders' equity was unfavorably impacted by $12 million of net after-tax unrealized losses from fixed maturity securities, which are reflected on our balance sheet.
During the quarter, we repurchased $5 million of our common stock at an average price of $39.45 per share, and our remaining share repurchase authority currently stands at just over [ $16 ] million. And earlier this week, our Board of Directors declared a second quarter 2024 regular dividend of $0.30 per share, an increase of 7% from the prior quarterly dividend of $0.28 per share. This action reflects our strong balance sheet, abundant underwriting capital and our confidence in the company's future operations.
And with that, I'll now turn the call back to Kathy.
Thanks, Mike. After considering dividends declared over the last 12 months, our book value per share, including the deferred gain, increased 13% to $44.04, and our adjusted book value per share increased by 11% to $47.86. Both the combined ratio and the change in our adjusted book value per share continue to be our preferred metrics for measuring our success. We are confident we will see further improvements in these ratios in the near term. During the first quarter of 2024, we delivered a best-in-class digital claim reporting tool, which has received exceptional user experience feedback from both agents and policyholders.
Throughout 2024, we plan to deliver more self-service options and continue our appetite expansion effort, which has led to profitable growth. Our strong capital position supports both our growth and technology initiatives, and we look forward to having a successful 2024. And with that, Michelle, we will now take questions.
[Operator Instructions]
Our first question comes from Matt Carletti with Citizens JMP.
I was hoping you could -- caught the 14% growth in the top line kind of ex the audit premiums. Could you break that down a level and just help us understand a little bit what builds up to that 14%, TIF growth, payroll, exposure growth, kind of what rates are doing overall. And then alongside that, what states are you seeing the strongest growth out of and which states are a little more of a struggle.
Yes, sure. So we're really pleased with the level of growth that we're currently seeing is widespread. It's arising from all of our major distribution channels. During the first quarter, our in-force premium, our core agency segment, those are independent agents and our national partners.
That premium increased by about 9%. And then our SPA segment, which is specialty payroll and alternative distribution increased by 22%. A lot of that was driven by the alternative distribution channel, which is our digital book. I've mentioned in the past, we continue to see a big shift towards API utilization. So we're seeing major upticks in our submissions and our quotes and our bonds because we put a lot of energy into providing ease to our distribution partners in terms of finding the policies.
And then I'd also say our appetite expansion effort is contributing to that overall growth. That business is performing at a loss ratio similar to our other target classes. In the first quarter, our appetite expansion classes generated $38 million or 18% of our new annual premium. So hopefully, that gives you a little bit of color.
Yes, that's super helpful. One other, if I could. You talked a little bit on the expense ratio about a couple of reasons why it may be a little high during the quarter, continuing to expect good improvement throughout the year. Could you -- is there any onetime kind of in that number in Q1. Could you point those out, what might just be in there and won't happen again versus more of kind of pulling expenses out through the Cerity consolidation or the leveraging growth, things like that?
Sure, Matt, I'll take that. So the Cerity savings were pretty much as expected. And as we mentioned before, they nearly fully emerged in the first quarter.
So no surprises there. We mentioned payroll and benefit costs, and those are seasonally higher in the first quarter because all the kinds of things reset. So if you look year-over-year, you'll see that that's kind of seasonably higher. I think what you're referring to in this quarter in a bit of a nonrecurring manner we didn't have about $1.5 million of incremental bad debt expense and that related to some noncompliant policies, I say noncompliant because they never conform to their final audit and that is behind us. So we do not expect to see anything like that in future quarters as it relates to our noncompliant premium. And that was about it.
[Operator Instructions]
Our next question comes from Mark Hughes with Truist Securities.
You're assuming that or you're making provision in your reserves for a step-up in medical inflation. Could you go into more detail what is the inflation as you see it now? What kind of buffer are you putting in maybe not expectation, but in case medical inflation does pick up.
Yes. So up to this point, and I like the fact that you said in case medical inflation does pick up, because up to this point, medical inflation in the economic data that we review has remained relatively mild when you compare it to other sectors like energy or housing or food. And so that's really good news for workers' compensation and for us. We continue to monitor our prescription drug costs.
We started doing that about a year ago, after controlling for the mix of drugs over time. We've seen that our internal index for in-network pharmacy costs are really fairly -- they're generally consistent with what we've experienced prior to the pandemic. We did see a bit of an uptick in the most recent year, but it was really a reversal of the decrease in drug costs that we experienced in the recent years. So it's really back to kind of where it was before. The additional reserve that you spoke that we're holding for the possibility of an increased inflation that's sort of over and above the implicit amount that's buried in our reserve [ triangle ] is a little over $14 million right now. And when you think about the accident year loss ratio that we booked, it was slightly higher, we feel when we put those two together, that we're in a good place, should we see an uptick in inflation.
Do you see a competition? Clearly, you're doing pretty well on new business. Do you perceive any change in appetite on the part of other carriers? Or is it [ steady ] as you go.
Yes. We're not really seeing too much of a change there for the business sectors and the premium sizes that we write. We continue to characterize the environment as competitive -- we don't have more success finding policies that are a little bit larger than our typical average policy size. So that's increased our average policy size by about 9% in Q1, but it's still very small at about [ 5,600 ]. But when you look at new business, our average policy size is up about 12% to about [ 5,800 ]. Our average rate change for the quarter was a decrease between 5% and 6%. But when you adjust that for exposure and split it out between wages and employment changes. It's closer to what we've been seeing in the 2% to 4% range.
Is that up 2% to 4% or down 2% to 4%?
Down, down. Sorry. Down 2% to 4%, yes.
So the rate would be down 5% to 6% when you take into account wages, exposures down 2% to 4%.
It's not as big of a decrease, correct.
Yes. What's your sense on going back to your NCCI days and carrying forward, what's your sense about the pace of industry-wide reserve gains? Where do you think we stand? Do you think the industry is past peak? Or do you think it can continue at the current level or maybe even increase in the coming periods -- just sort of -- not trying to get information about your outlook on your own book, but just your sense of where the industry stands.
Yes. It's hard to say. I always look forward to AIS, which we'll be going to in a couple of weeks. And [ CCI ] will be putting out the reserves redundancy or deficiency estimates then. Last year, they increased the level of redundancy from the prior year. I was a little surprised to see that, but it's a very healthy redundancy of what they came up with last year. So it will be very interesting to see what they say this year. It appears as though carriers are continuing to release reserves, including us. So I haven't seen too much change there when I look at the industry as a whole in terms of behaviors on reserves.
There are no further questions at this time. I'd like to turn the call back over to Kathy Antonello for closing remarks.
Thank you, Michelle, and thank you, everyone, for joining us this morning. We look forward to meeting with you again in July.
Thank you for your participation. This does conclude the program. You may now disconnect. Everyone, have a great day.