Ladies and gentlemen, please stand by. Good day, and welcome to AIG's first quarter 2022 financial results conference call. This conference is being recorded. Now, at this time, I would like to turn the conference over to Quentin McMillan. Please go ahead.
Thanks very much, Jake. Good morning. Today's remarks may include forward-looking statements, which are subject to risk and uncertainties. These statements are not guarantees of future performance or events and are based on management's current expectations. AIG's filings with the SEC, including our annual report on Form 10-K and quarterly reports on Form 10-Q, provide details on important factors that could cause actual results or events to differ materially. Except as required by the applicable securities laws, AIG is under no obligation to update any forward-looking statement if circumstances or management's estimates or opinions change. Additionally, today's remarks may refer to non-GAAP financial measures. The reconciliation of such measures to the most comparable GAAP figures is included in our earnings release, financial supplement, and earnings presentation, all of which are available on our website at www.aig.com.
With that, I'd now like to turn the call over to our Chairman and CEO, Peter Zaffino.
Good morning, and thank you for joining us to review our first quarter financial results. I'm very pleased to report that AIG had an excellent start to 2022. We are successfully executing on several strategic, operational, and financial priorities, and our team has significant momentum on many fronts, which we believe will continue throughout the year. Following my remarks, Shane will provide more detail on our financial results, and then we will take questions. Mark Lyons, David McElroy, and Kevin Hogan will join us for the Q&A portion of today's call. Today, I will cover four topics. First, I will outline the tremendous progress we've made towards the separation of our life and retirement business, which will be renamed Corebridge Financial.
Second, I will review the excellent first quarter performance of General Insurance, where we continue to drive top-line growth, particularly in Global Commercial and saw a meaningful improvement in underwriting profitability. Third, I will cover Life & Retirement's financial performance. This business remains a meaningful contributor to our overall results. Fourth, I'll provide an update on our capital management strategy, particularly as to stock buybacks, which we plan to accelerate over the course of 2022, given our positive view of AIG's future over the near, medium, and long term. Before I turn to these topics, I'd like to discuss the situation in Russia and Ukraine. It goes without saying that what is happening is heartbreaking. Ukrainian people are experiencing unimaginable pain and suffering, and it's our hope that a peaceful resolution will be achieved.
With respect to the insurance industry, we've not seen a situation like this in modern times. It presents a unique set of circumstances that make any exposure or coverage analysis complex. Let me start by commenting on what we saw at AIG in the first quarter and what we did with the few claims that were submitted. The claims we received were largely reported under Political Violence or Political Risk policies. While the amount of information included in the claims was limited, we did reserve our best estimate of ultimate losses, including IBNR. While we know it'll take time for the full impact of the Russia-Ukraine situation to emerge, based on the work we did in the first quarter to analyze our exposures and review known claims, we do not believe the impact will be material to AIG. In the event of losses, we have multiple reinsurance programs available.
With respect to the industry more broadly, there's not been much discussion so far in this earnings season regarding what the Russia-Ukraine situation means. I thought I'd spend a few minutes on the complexity that it presents. As a starting point, it's important to bear in mind that standard property and energy policies issued to the types of insureds most likely to have suffered losses due to the conflict typically contain broad exclusions for losses arising out of war and other hostile acts. In instances where affirmative coverage has been provided for losses that would typically fall within the scope of these exclusions, the most relevant coverages relate to policies such as political violence, political risk and trade credit, aviation, and marine. Now I'd like to spend a few minutes on aviation because it's the topic that has received the most attention over the last 30-45 days.
Aviation is similarly complex and will take time before all the relevant facts and resulting coverage implications fully emerge. Let me start with what we know. We know that aviation policies can be issued to both airline operators and airline leasing companies and typically provide separate coverage for, on the one hand, losses caused by war perils such as nationalization and confiscation, and on the other hand, losses caused by non-war perils. We also know that the invasion of Ukraine first occurred on February 24th, and there were sanctions issued by the U.K. and the E.U. on February 26th, which have since been updated. These sanctions generally required airline lessors to cancel leases with Russian airline operators and gave them a brief period in which to do so.
Additionally, we know that there was an aircraft re-registration law passed in Russia on March fourteenth, which permitted Russian airline operators to re-register aircraft leased from Western lessors on the Russian aircraft registry. What we don't know is much more expansive. As an initial matter, we don't know whether or to what extent actual losses have occurred or when they occurred, given the uncertainty surrounding the location and condition of aircraft and other equipment, as well as the timing of their potential return to lessors. Nor do we know if efforts have been undertaken by lessors to mitigate any damages. As to the question of losses caused by war perils versus non-war perils, this is a critical question that will need to be answered as the outcome will determine which policy might apply and the amount of coverage that may be available.
With respect to war perils, such as government confiscation, this type of loss would typically be included in a whole war policy, but it must first be determined if there is an actual confiscation. Even where it is determined that a government confiscation took place, consideration will also have to be given to the timing of notices and the geographic scope of coverage. The answers to these questions will impact whether there is a covered loss, and if so, whether a given whole war policy responds. With respect to reinsurance, structures likely implicated in a war peril scenario include war, marine and energy, and Political Violence. But it's also possible that other types of reinsurance contracts could be available for recoveries. If a loss is alleged to be due to a non-war peril, it could be covered in an all-risk policy.
As an initial matter, however, a determination would need to be made that a loss, in fact, has occurred, and then if it has, that it's due to a non-war peril. Additionally, as with war perils, you would have to consider if reinsurance is available. The reinsurance that would be typically available in an all-risk scenario may be in different structures than in government confiscation or other war peril scenario. As to all potentially covered perils, there are many issues requiring analysis, including the potential applicability of any sanctions. Assuming claim payments are made, insurers will also have to consider their recovery rights through salvage, subrogation, and contribution from other available insurance. This is just a high-level summary of some of the issues the industry will grapple with, but I thought they were important to highlight and you get the idea that it's a complex situation.
Now turning to separation of Life & Retirement. We made significant progress to prepare this business to be a standalone public company. We continue to target an IPO in the second quarter, subject to market conditions and required regulatory approvals. We also continue to expect that we will retain a greater than 50% interest in this business post-IPO. As you can appreciate, given where we are in the process, there are limitations on how much I can say about Life & Retirement, but let me give you some highlights of what we've accomplished since our last call. In March, we announced several important milestones, the public filing of the S-1, the new name for Life & Retirement, which as I mentioned, is Corebridge Financial, and the independent directors who currently serve on the Corebridge board of directors and those who will join and strengthen the board as of the IPO.
At the same time, we launched a $6 billion Corebridge senior notes offering, which was upsized to $6.5 billion based on significant demand. Shane will provide more detail on the maturities and coupons. We also made substantial progress on the operational separation of the Life & Retirement business from AIG, including identifying $200 million-$300 million of cost savings for this business, inclusive of the $125 million in savings already in flight as part of our AIG 200 transformation program. We continue to execute on establishing a hybrid investment management model that will allow Corebridge to benefit from strategic partnerships with world-class firms that offer excellent origination and investment capabilities and that complement our own capabilities in asset classes such as commercial mortgage loans, global real estate, and private equity.
The first step in moving to this hybrid model was our strategic partnership with Blackstone, which we announced in 2021. In March of this year, we announced an arrangement with BlackRock, whereby BlackRock will manage up to $90 billion of Corebridge liquid assets. In addition, we developed a plan to modernize the mid and back-office functionalities of the business and to transition to BlackRock's Aladdin technology platform with respect to Life & Retirement's entire investment portfolio. Aladdin enables us to replace aging and end-of-life technology infrastructure, provides risk analytics, establishes a single accounting book of record and a single investments book of record, as well as reporting, stress testing, and other services currently performed across multiple systems at AIG.
We expect that the cost for Corebridge to operate this hybrid model, taking into account both Blackstone and BlackRock, will be approximately the same as the fully loaded costs of our prior investment management operating model, where asset management was largely handled in-house. Shifting to our first quarter financial results, as you saw in our press release, adjusted after-tax income was $1.30 per diluted share, representing an increase of 24% year-over-year. This result was driven by significant improvement in profitability in General Insurance, good results in Life & Retirement, considering the current environment, continued expense discipline, savings from AIG 200, and strong execution of our capital management strategy. In General Insurance, we reported an accident year combined ratio excluding CAT of 89.5%, a 290 basis point improvement year-over-year and the 15th consecutive quarter of improvement.
We were especially pleased with the accident year combined ratio excluding CAT in commercial, which was 86%, an improvement of 440 basis points year-over-year. In Life & Retirement, first quarter results benefited from product diversity despite headwinds in the capital markets. Return on adjusted segment common equity was 10%. AIG ended the first quarter with $9.1 billion in parent liquidity after returning $1.7 billion to shareholders through $1.4 billion of common stock repurchases and $265 million of dividends. Now, let me provide more detail on our first quarter results in General Insurance, where we continue to drive improved financial performance with core fundamentals being key contributors. Gross premiums written increased 10% on an FX-adjusted basis to $11.5 billion, with commercial growing 11% and personal growing 8%.
Net premiums written increased 5% on an FX-adjusted basis to $6.5 billion. This growth was led by our commercial business, which grew 8% with personal contracting 1%. Growth in North America Commercial net premiums written was 6%, and in International, net premiums written growth was 10%, both on an FX-adjusted basis. I'd like to unpack certain components of North America Commercial net premiums written as we had a very strong growth in our core business that may not be immediately obvious. While there are always movement each quarter in various aspects of our portfolio, both positive and negative, there were three items that impacted the first quarter that I'd like to provide more insight on.
These items relate to assumed and ceded reinsurance and the timing of purchases, which is not something we have focused on previously, but which I think is worth spending a few minutes on given the impact they had on North America Commercial net premiums written. The first item relates to AIG Re, our assumed reinsurance business. Financial results for AIG Re are included in the financial results for North America Commercial, and in the first quarter represented 40% of the segment's total net premiums written. For AIG Re, the first quarter is the largest quarter of the year, with over 50% of its annual business written at January 1 . In the first quarter of 2022, AIG Re's net premiums written were flat year-over-year.
This result was deliberate as we applied a disciplined approach to underwriting, and the market environment that persisted leading up to January 1 , led us to conclude that AIG Re could not achieve appropriate levels of risk-adjusted returns in property cat in particular, even with a comprehensive retrocessional program in place. As a result, we reduced gross limits deployed in property cat, primarily in the U.S., by $500 million, which was the main reason for AIG Re's net premiums written being flat. With respect to the second item, you may recall that in 2021, AIG Re made discrete retrocessional purchases throughout the year to further reduce frequency and volatility, whereas this year, retrocessional purchases were consolidated into the January 1, 2022 renewals as the retro market rebalanced.
As a result of this decision, AIG Re's ceded premiums were higher in the first quarter of 2022, which also reduced North America Commercial's net premiums written when compared to the first quarter of 2021. Third, a similar dynamic occurred with respect to our core property cat reinsurance program for AIG. In 2021, we purchased reinsurance throughout the year to lower net retentions and reduce volatility, particularly with respect to North America property cat. In 2022, however, those purchases were also consolidated into our core property cat placement at January 1. We were able to consolidate these reinsurance purchases because our portfolio is much improved from last year with significantly reduced exposures. Like the actions we took in AIG Re, however, this reduced North America Commercial's net premiums written in the first quarter.
To summarize, some of these headwinds in the first quarter of 2022 will largely reverse in the second quarter. Now, turning back to growth. In North America Commercial, we saw a very strong growth in net premiums written, particularly in retail property, which grew more than 20%, Crop Risk Services, which also grew more than 20%, Lexington wholesale, which grew more than 15%, led by property, which grew more than 50%, and our Canadian commercial business, which grew more than 15%. In International Commercial, we also saw very strong growth, including in property, which grew 50%, specialty, which grew 34%, driven by energy and marine, and Financial Lines, which grew 14%.
In Global Commercial, we also had very strong renewal retention of 86% in our in-force portfolio in both North America and International, with North America improving retention by 300 basis points and International retention holding constant year over year. We calculate renewal retention prior to the impact of rate and exposure changes. Across commercial on a global basis, our new business was very strong, coming in north of $1 billion for the fourth consecutive quarter. New business growth in North America and in International were both up 13%. North America new business growth was led by Lexington and retail property. International Commercial new business growth was led by Financial Lines and global specialty. Turning to rate, strong momentum continued in Global Commercial, with overall rate increases of 9% or 10% if you exclude workers' compensation.
In the aggregate, rate continued to exceed loss cost trends. This continues to be a market in which we are achieving rate on rate in many cases for the fourth consecutive year, and where we're successfully driving margin expansion above loss cost trends. North America Commercial achieved 8% rate increases overall, 10% excluding workers' compensation, with some areas achieving double-digit increases led by retail property, which increased 14%, Lexington, which increased 13%. Financial lines, which increased 12%, including more than 85% rate increases in cyber and Canada, where rate increased 13%, representing the 11th consecutive quarter of double-digit rate increases in this region.
International Commercial rate increases were 10% overall, driven by Financial Lines, which increased 21%, including more than 60% rate increases in cyber, property, which increased 14%, EMEA, which also increased 14%, and Asia PAC, which increased 10%. Last quarter, we indicated that our severity trend view in the aggregate in North America Commercial ranged from 4%-5% and that we were migrating towards the upper end of that range. We now believe the upper end is moving towards 5.5%, mostly driven by shorter tail lines. Our property rate changes, where we continue to achieve mid-teen increases, equal or exceed loss cost trends in our own data and in government-published inflationary indices. Our liability trend assumptions continue to be in the 7%-9% range, with international indications continuing to be less than those in North America.
Turning to personal lines. In North America Personal, net premiums written grew nearly 40%, albeit off a smaller base, driven by a rebound in travel and A&H, which was offset by a reduction in warranty and increased reinsurance sessions supporting Private Client Group. International Personal saw a 5% reduction in net premiums written on an FX-adjusted basis due to a reduction in warranty and personal auto in Japan, offset by a rebound in A&H and travel. Overall, Personal Lines is an area where we continue to invest, where there are attractive opportunities for profitable growth. Now let me review Life & Retirement's results. This business had a good quarter, considering the headwinds created by the capital markets. These market dynamics were offset by continued strong alternative investment income and strong growth in premiums and deposits, which increased 13% year-over-year to $7.3 billion.
Adjusted pre-tax income in the first quarter was $724 million, with return on attributed segment equity of 10%. Adjusted pre-tax income decreased in the period due to lower call and tender income and continued elevated COVID-19 mortality, which is still within our previously established guidance. Blackstone's capabilities in the early days of our partnership resulted in Life & Retirement seeing one of its strongest fixed annuity sales quarters in over a decade, with premiums and deposits up nearly 150% year-over-year to $1.6 billion, while surrenders and death benefits both improved slightly. Post-separation, we continue to expect that Life & Retirement, meaning Corebridge, will achieve a return on equity of 12%-14% and that it will pay an annual dividend of $600 million.
Overall, I'm pleased with the momentum in Life & Retirement, and in particular, the early success of our partnership with Blackstone that was evident in the first quarter results. With respect to capital management, we had a very active first quarter, which ended with $9.1 billion in parent liquidity. As a result of the actions I outlined earlier in my remarks, AIG received $6.5 billion of the $8.3 billion promissory note issued to AIG from Corebridge, and those funds were used to repay outstanding AIG debt, resulting in AIG's interest expense being reduced by 23% year-over-year. In addition, AIG will receive the remaining $1.9 billion under the Corebridge promissory note during the second quarter.
Our capital management strategy will continue to be both balanced and disciplined as we maintain appropriate levels of debt while returning capital to shareholders through stock buybacks and dividends, while also allowing for investment in growth opportunities across our global portfolio. This will also be true over time as we continue to sell down our stake in Life & Retirement. With respect to share buybacks, as I mentioned earlier, we repurchased $1.4 billion of common stock in the first quarter and are on track to buy back at least $1 billion more in the second quarter. This will leave us with approximately $1.5 billion remaining under our prior board authorization. As you saw in our press release, the AIG Board of Directors recently authorized an additional $5 billion in share repurchases.
With respect to growth opportunities, our priorities continue to be focused on allocating capital in General Insurance, where we see opportunities for profitable organic growth and further improvement in our risk-adjusted returns. As we move through 2022 and are further along with the separation of Life & Retirement, we will provide updates regarding our capital management strategy. Before I turn the call over to Shane, I want to emphasize how pleased I am with how we started the year across AIG and how we are continuing to execute on multiple complex strategic priorities with high-quality results that are positioning AIG as a top-performing company. Our teams have overperformed across the board, and our deep bench continues to provide us with opportunities to leverage skill sets and further develop talent across the organization. With that, I'll turn the call over to Shane.
Thank you, Peter, and good morning to all. I'm very pleased to be AIG's CFO, and I look forward to working with everyone moving forward. I will provide more detail on our first quarter financial results and unpack a number of our key performance metrics, specifically EPS, liquidity, leverage, net investment income, and ROCE. I will begin by going through the financial results of the businesses in the quarter. I will then touch upon the balance sheet, leverage and liquidity, which benefited from excellent execution on a number of capital transactions. I will then supplement Peter's remarks on the separation of Corebridge, including the arrangement we announced with BlackRock and liability management actions we recently completed. I will then spend some time on investment income and will provide insight on the impacts of rising interest rates.
Finally, I will talk about the execution path towards our long-term 10% ROCE goal for AIG, including income drivers, AIG 200, and other areas of corporate GOE reduction. As Peter mentioned, adjusted EPS attributable to AIG common shareholders grew 24% year-over-year to $1.30 per diluted common share, compared to $1.05 per diluted common share in Q1 2021. Compared to the first quarter 2021, improvements in General Insurance contributed $0.33 year-over-year. Reduction in share count contributed $0.07, and lower interest expense contributed $0.04. Offset by Life & Retirement being $0.19 unfavorable, primarily due to $0.20 unfavorable due to lower net investment income.
General Insurance's adjusted pre-tax income contribution in the quarter was $1.2 billion, which reflects strong underwriting profit, growth in Global Commercial, and continued improvement in both the GAAP combined ratio of 590 basis points to 92.9% and the accident year combined ratio ex-CAT improving 290 basis points to 89.5%. The combined ratio improvement was due to improved underwriting, premium growth, expense discipline, and lower CATs, which all contributed to pre-tax underwriting income being six times higher than the first quarter of 2021, increasing to $446 million from $73 million.
With net investment income down $7 million year-over-year, the $366 million improvement in adjusted pre-tax income was driven by underwriting income, of which $223 million was from improved accident year underwriting income, $146 million due to lower CAT, and $4 million from improved net PYD. North America Commercial has shown a 580 basis points improvement in the accident year combined ratio ex-CAT over the prior year quarter, coming in at 88.1%. International Commercial also continued to improve profitability with 330 basis points improvement in the accident year combined ratio ex-CAT this quarter, coming in at 83.5% for the first quarter. Personal insurance GAAP combined ratio of 97.2% improved by 160 basis points year-over-year.
In the first quarter, CAT losses were $274 million or 4.5 loss ratio points compared to $422 million or 7.3 loss ratio points in the prior year quarter. The most significant loss events in the quarter came from flooding in Australia and a Japanese earthquake. The ongoing events with Russia and Ukraine, which Peter discussed, contributed approximately $85 million of the estimated loss. Prior year development, excluding related premium adjustments, was $93 million favorable this quarter compared to favorable development of $56 million in the prior year quarter. This quarter, the ADC amortization provided $42 million of favorable development, and the balance of $51 million favorable arose from old accident years in U.S. workers' compensation, along with short tail lines in North America and in Japan personal lines.
Life & Retirement adjusted pre-tax income of $724 million compared to $941 million in Q1 2021, a reduction of $217 million, mostly attributable to lower net investment income, which was $2.1 billion in the quarter compared to $2.4 billion in the prior year quarter, a decrease of $224 million, reflecting lower call and tender activity from rising interest rates. The absence of the affordable housing portfolio, which was sold in fourth quarter 2021, as well as reduced fee income and an increase in deferred acquisition costs and statement of position reserves due to lower separate account asset values.
Within Individual Retirement, excluding the retail mutual fund business which was sold, net flows were positive $8,874 million this quarter compared to positive net flows of $50 million in the prior year quarter, benefiting from higher fixed annuity sales aided by origination activity through the Blackstone partnership. Group Retirement grew deposits by 3.9% in the quarter, driven by higher group acquisition and individual deposits, driving a slight uptick in fee and advisory income due to higher assets under administration. Life Insurance adjusted pre-tax income was a loss of $44 million due to continued elevated COVID mortality, while premium and deposits grew 3.4% to $1.2 billion, benefiting from growth of international life sales. Institutional Markets grew premiums and deposits as well as reserves due to increased pension risk transfer activity in the period.
Turning to other operations, which includes interest expense, corporate general operating expenses, institutional asset management expense, run off portfolios and eliminations, and was a positive contributor to adjusted pre-tax income year-over-year by $109 million. These results benefited from lower interest expense of $51 million as we reduced our general borrowings through the course of 2021 by $4 billion and lower eliminations of $43 million. Corporate general and operating expenses, excluding increased functional costs to set up Corebridge as a standalone public company of $6 million were largely flat year-over-year. Moving on to the balance sheet, leverage and liquidity. Our financial flexibility remains strong. We closed the quarter with $9.1 billion of parent liquidity. We saw a large AOCI movement as a result of increase in interest rates.
Adjusted AOCI, which excludes the cumulative unrealized gains and losses related to Fortitude, moved from $3.9 billion positive to a $5.9 billion negative or a reduction of $9.8 billion. Although this mark-to-market impact is a drag on capital, as long as we hold the assets to maturity, we will not realize this unrealized loss. Upward interest rate movements impact our metrics primarily in two places. One, we end up with a gain on the Fortitude re-embedded derivative, which impacted GAAP EPS by $3.21 in the quarter. Second, it impacts our GAAP leverage by a little over 300 basis points. With interest rates up another 55 basis points in April, we expect to see further movement in Q2.
We exited the quarter at a GAAP leverage of 27.8%, up from 24.6%, the increase of which is attributable to the AOCI movement. The impact is larger in Life and Retirement than General Insurance, given the duration of their respective asset portfolios. Total adjusted return on common equity was 7.6%, up from 7.4% in the first quarter of 2021. Total company adjusted tangible return on common equity was 8.3%. General Insurance's adjusted attributable return on common equity was 12.3% in the first quarter, while Life and Retirement was 10%. Adjusted book value per share of $70.72 increased 2.7% sequentially and 20.5% year-over-year.
Adjusted tangible book value per share of $64.65 increased 2.9% sequentially and 22.3% year-over-year. Our primary operating subsidiaries remain profitable and well-capitalized, with General Insurance's U.S. pool fleet Risk-Based Capital ratio for the first quarter estimated to be between 470% and 480%. Life & Retirement U.S. fleet is estimated to be between 430% and 440%, both well above our target ranges.
Finally, on EPS during the quarter, we repurchased 23 million shares at an average cost of $60.02 for $1.4 billion, bringing our ending share count to 800 million with a quarterly average of 826 million, compared to 876 million in the prior year quarter, representing a 6% reduction in average share count, which contributed seven cents of EPS growth in the quarter. Turning to Corebridge since the start of the year, we continue to make progress on numerous fronts with respect to the separation. As Peter mentioned, at the end of the first quarter, Corebridge entered into a strategic partnership with BlackRock to manage up to $90 billion of liquid assets.
At the same time, AIG also entered into a separate arrangement with BlackRock, whereby BlackRock will manage liquid assets for AIG, representing up to $60 billion. Having now signed IMAs, we expect to begin transferring assets to BlackRock over the course of the second quarter. In early April, Corebridge successfully raised $6.5 billion of senior notes, which, along with the remaining $2.5 billion of delayed draw term loan facility and commitments for the $2.5 billion of revolving credit facility, this establishes the capital structure for Corebridge Financial. AIG proactively hedged Treasury rates earlier in the year, and upon unwinding the hedge at quarter end, AIG realized a $223 million gain, which equates to approximately 50 basis points in yield on the notes issued.
While the debt issuance closed early in Q2, the $223 million gain was realized as a gain in the first quarter. The senior notes offering, excluding the hedge, was well-structured and laddered with a 3.91% weighted average coupon rate. Corebridge used the proceeds from that offering to repay $6.4 billion of the $8.3 billion promissory note payable to AIG. Following the success of Corebridge's senior notes issuance, AIG initiated a debt tender offer. Taking advantage of strong demand, the tender offer was upsized, and AIG parent debt was ultimately reduced by $6.8 billion. An additional EUR 750 million will be redeemed on May 10th, bringing the total expected AIG parent debt reduction to $7.6 billion.
The average coupon on the debt that we retired was 3.82%, and the annualized interest expense saving is approximately $290 million. We continue to target debt leverage in the high twenties, excluding AOCI for Corebridge, and in the low twenties, including AOCI for AIG going forward. Given the significant progress we have made, and with 1.9 billion of proceeds from the $8.3 billion note yet to be received, we have the necessary cash to finalize our planned debt actions without utilizing any of the proceeds from the IPO. With these actions completed, we remain on track for an IPO in the second quarter, subject to market conditions and regulatory approval. Net investment income on an adjusted pretax income basis for the quarter was $3 billion. Total cash and investments were $305 billion, excluding Fortitude.
Net investment income in the first quarter decreased $193 million compared to prior year, primarily reflecting lower call and tender income. The first quarter saw significant increases in benchmark treasury yields with an 80 basis point increase on the 10-year. With General Insurance and Life & Retirement's portfolio durations of four and 8.4 years respectively, the overall rise in interest rate environment will provide a tailwind to our investment portfolio returns. In April, our portfolio crossed the equilibrium point where new money yield is now 50 basis points higher on average than the yield on the assets rolling off the portfolio. The new money yield is higher by 20 basis points in General Insurance versus assets rolling off, and 70 basis points in Life & Retirement versus the yield on sales and maturities currently.
Moving forward, the new money yield is roughly 60 basis points higher than the current portfolio in General Insurance and roughly 90 basis points higher in Life and Retirement. To illustrate the point, holding all other variables constant and assuming a 100 basis points parallel shift in the yield curve, we would anticipate approximately $500 million of benefit to adjusted net investment income over a one-year period, with nearly $200 million in General Insurance and $300 million in Life and Retirement. Within General Insurance, we have $11 billion of floating rate securities, which will begin to see some benefits in the near term, most of which are not tied to longer dated liabilities. Life and Retirement is $25 billion of floating rate assets, but most of this portfolio is tied to floating rate liabilities that will offset the benefits.
Turning to investments that have Russian exposure, at December thirty-first, AIG held $359 million of sovereign and other foreign debt of the Russian Federation, of which $79 million were within Fortitude. Through proactive sell downs of $129 million, which generated a loss of $41 million, as well as the establishment of a credit allowance of $127 million, the market value of these securities at the end of the first quarter was $86 million, of which $18 million is held by Fortitude. Looking ahead, we have three priorities beyond continued progress on underwriting optimization and completing AIG 200. They are the successful separation of the life and retirement business, continued execution on our capital management priorities, and ROCE improvement towards 10%.
Post deconsolidation of Corebridge, we expect that AIG will earn a 10% ROCE, although there are many moving pieces that will get to this result, including the size and timing of the Corebridge IPO, additional capital management actions, and continued progress on reducing expenses. As we've improved expense ratios in general insurance, one of the key drags on ROCE is corporate expenses, which we have been reducing through AIG 200 and work on the separation, but there remains more work to be done. As Peter noted with respect to AIG 200, we continue to achieve significant milestones, and in the first quarter reached $890 million of exit run rate savings with $590 million of that realized to date.
We currently expect to have full line of sight into the $1 billion of exit run rate savings, either contracted or identified by the end of the second quarter, six months earlier than originally planned. Of the $1 billion of parent expenses, we expect that approximately $300 million will move to Corebridge upon deconsolidation. We will continue to provide updates over time, but the components to get to a 10% ROCE are continued growth in underwriting profit, improved net investment income as we benefit from higher interest rates, continued execution on expense management, particularly at parent, and optimizing capital allocation in terms of leverage and returns to shareholders in the form of stock buybacks and dividends whilst making sure that we continue to grow the company. Peter, I will now hand it back to you.
Thank you, Shane. Operator, we're ready for questions.
Ladies and gentlemen, if you would like to ask a question, please signal by pressing star one on your telephone keypad. Do keep in mind if you are using a speakerphone, make sure your mute function is released so that we can hear you. We do ask that you limit yourself to one question and one follow-up question. Once again, star one if you would like to enter the queue. We will begin with Elyse Greenspan with Wells Fargo.
Hi. Thanks. Good morning. My first question is on the capital return that you guys laid out. You guys have just over $9 billion at the holdco. Peter, I think you said a minimum buybacks of $1 billion for the second quarter. You know, just given that you have above $9 billion at the holdco with, you know, additional capital coming later this year, I would think that there's some flexibility to perhaps go above that $1 billion. Can you just kind of walk us through a little bit more how you're thinking about, you know, uses of capital for growth, you know, relative to buyback, at least in the short term?
Yeah. Thanks, Elyse, for the question. Good morning. Yes, we said we would do a minimum of $1 billion of share repurchases in the second quarter. I think Shane and I tried to do as much detail as we could in our prepared remarks. In aligning what our priorities are for capital management. Certainly, you know, the board's authorization for an additional $5 billion says that we will continue to return, you know, capital to shareholders in the form of share repurchases. We think the, you know, positioning of the business, I mean, I think you see in the results, we see, you know, great opportunities for top-line growth. We see it across the world.
We see it in the commercial businesses, but also what you would have seen in, you know, some of the international that's probably A&H is that accident and health has started to rebound over the last three quarters, and we're starting to see top line growth there. We want to make sure that we are allocating the appropriate capital for growth and driving, you know, margin and making the company look at its opportunities on risk-adjusted returns and make sure that we're capitalizing on the market and our discipline.
I think really when we get to the actual IPO and Corebridge as a public company, we'll be able to outline the capital management strategy in more detail, but we wanted to provide as much guidance as we could based on what we know today, and we would expect to continue to make the progress that we've demonstrated in the earnings call today.
Okay, thanks. My follow-up, you guys pointed out that you raised some of your severity assumptions within General Insurance on the short tail side. When you guys set out that target for the accident year combined ratio of sub 90% for this year, was that contemplated? How about the cadence? Can you give us a sense, should we think about sequential improvement from the Q1 level as we move through the year, or is there some seasonality that we should be considering within General Insurance?
Let me take the first part, and then I'll ask Mark to comment on the loss cost observations. You know, we've seen, you know, when you think about the quality in the results that we produced this quarter, you know, when we look at our business, what do we look at? We look at, you know, client retention, which continues to improve. We look at new business, so we're acquiring a lot of new, you know, clients across the world. That continues to progress, and think that there's a lot of momentum there. We look at rate above loss cost trends, and that was favorable, and we continue to get, you know, rate in areas where we believe it is required in terms of its risk-adjusted returns, and again, with our leadership in terms of deploying capital.
Are all the inflation factors considered in, you know, the sub 90? Well, no, we obviously are adjusting them, but the outperformance that we have been driving wasn't contemplated either. I mean, like, we're making more progress on the business at a faster pace, and think that we will continue to, you know, show that we can grow the business top line and generate the risk-adjusted returns and improvement in combined ratios. Mark, do you want to comment on the loss costs?
Yeah. Thank you, Peter, and good morning, Elyse. I think Peter answered it very well. What I'll do is just reemphasize that, yeah, I mean the context of your question, we gave that original guidance before there was any spike of inflation. You know, like, I think any good company, you don't forecast just a point estimate. You're forecasting a range, and those ranges vary by line of business, and they all meld together. Even with the changing inflation assumptions, we'd still be inside that range, so we're comfortable with that.
Thank you.
Next question, please.
We'll go to Meyer Shields with KBW. Thanks. Good morning. I think this might also be a question for Mark as to factors. We're clearly seeing a little bit less core loss ratio improvement than the simple mathematical application of earned rate increases and loss trend, and I was hoping you could talk about how that's manifesting itself in prior year reserve reviews.
Mark, please take that. I mean, I think it's also important to give some context of, you know, the portfolio shift as well, Mark, when we look at loss ratios.
Yeah, happy to. Thank you, Meyer Shields, for the question. You know, I think on that side first on the reserve side, you know, when you look at our view of inflation and severity trends and so forth, you really got to separate short-tailed lines from longer-tailed lines, right? Like in our view, the evidence within our own information as well as looking at external indices, whether it's from the perspective of the purchaser or the seller, it's clearer, you know, in property oriented lines. It's probably worth noting back to Peter Zaffino's comment on mix is that less than 10% of our pre-ADC reserves are property. It can't move the needle too much, anyway. I don't really view that as an issue.
In terms of non-property, we've gone through looking at various, you know, basis point scenarios of lift and for various durations associated with it, and we still feel, you know, with that, all of that is pretty contained. Don't forget, especially on longer tail lines, there's still a high proportion of total reserves subject to the ADC on recoverables as well.
In terms of your first part of your question with regard to the arithmetic versus what's there, I think we've addressed this before, Meyer, but I'm happy to give some comments again, which is the book has changed so dramatically from policy year 2018, 2019, 2020, 2021, and it's actually your conversions that you need a margin of safety associated with it because nobody backs 1,000 on these things, but there's been a radical change in the quality of the risk, the distribution strategy that Dave McElroy has and his team has have instituted, getting much better risk portfolio churn purposely done to improve it, all the limit changes that Peter has talked about over time.
As a result, the arithmetic just doesn't pan out, let alone the change in mix that has been purposeful, let alone the change in net mix. All of those changes simultaneously require, in our view, a reasonable range of margin of safety, and that's what you're seeing.
Okay.
Yeah, Mark.
That was very helpful. Quick follow-up, if I can. I know there are a lot of moving parts, but is there any way of quantifying the impact of the reinsurance purchasing timing on the expense ratio in the quarter?
Thanks, Meyer. I'll take that. As I said, it's gonna be a headwind in the first quarter, will be a tailwind in the second quarter. You know, there's a couple of moving pieces. You know, we can't really provide the exact numbers, but you can look at, like in the second quarter where we purchased down on the North America Commercial CAT to lower retentions, as well as in AIG Re, where we reduced volatility by buying single shot per occurrence retrocessional at the second quarter. Both recovered, by the way, last year.
We felt that reducing the net retentions was appropriate and carrying that forward into how we were going to structure the January 1 treaty for AIG, as well as the, you know, retrocessional covers for AIG Re. We have lower nets than we would have at this time last year. It's not uncommon to, you know, purchase sometimes, you know, mid-term if there's available capacity and you're still trying to evolve a program. We felt very good about the consolidation of those programs at January 1 and really like the reinsurance that we have in both instances.
Okay. Fantastic. Thank you very much.
Thanks.
Now we'll hear from Ryan Tunis with the Autonomous Research.
Hey, thanks. Good morning. A couple questions just following up from the first two question askers. First one, we saw about 3.5 points of sequential loss ratio improvement this quarter in commercial lines in general. I noticed that last year, we also saw, like, the biggest sequential move in the first quarter. I'm curious if there's something about Q1, if it's, you know, setting a loss pick assumption or something like that it's leading to that level of, you know, sequential jump that's outsized.
Yeah. Let me start. Thanks very much for the question. Mark touched on a little bit, and I'll ask if he has any additional comments after I make a few observations on the mix of business. You know, what we had in the first quarter, obviously, is a big AIG Re, which when you look at if you're changing the composition of the portfolio from reducing CAT to doing more proportional, you're going to have, you know, lower loss ratios, higher acquisition costs, and, you know, so that will have a, you know, sometimes impact in terms of how it earns into the first quarter.
We also had in terms of the overall, you know, general insurance business, you know, the mix changes because, you know, on the one hand, we wanted to make sure that we were patient with A&H, which is a great business for us, and travel in terms of its rebound after COVID, but not really reducing the overall, you know, overhead. It does have an impact in terms of the mix and acquisition expense, and loss ratio. The other thing, you have to consider where we started. I mean, you know, the incredible improvement that we've had in the portfolio has been, you know, disciplined. We've always talked about underwriting from a risk selection standpoint, terms and conditions, attachment, reducing volatility with supplementing reinsurance, and then, of course, price above loss cost.
I think when you do that sequentially and maintain the same level of discipline, we start to see the outcome, you know, produced, like we had in the first quarter. Mark, anything you want to add to that?
Yeah. Thank you, Peter. I think your point about mix is right on point. Remember, there's two mixes. You've got the mix on the front end, and then you got the mix changes that manifest by the reinsurance purchases and how they earn in over time. You got both of those factors. I think secondly, there's also the realization that over time, the property and shorter tail businesses over the last couple of years, you got to watch the mix of that over time. Therefore, with the mix of medium and longer term lines that have volatility associated with them, you've got to watch kidding yourself that the quarter by quarter is super predictable. If you get the accident year right, I'm happy.
Accident quarter by accident quarter is a little bit more of an academic exercise. I think that may be some of what you're seeing.
Got it.
Thanks.
My follow-up just on the acquisition cost ratio. When we think about the reinsurance purchasing, the ceding commissions, the change in the mix, can you guys make a directional assessment at this point about, you know, should the acquisition costs in General Insurance, should that ratio be higher or lower in 2022 over 2021?
It's hard to predict. I think your first part of the question is, do ceding commissions as they start to earn in benefit the overall expense ratio? The answer is yes. It wasn't always the case when we were starting the turnaround. Today we have market terms or better on ceding commissions and that starts to earn in. I hate to go back to travel and accident & health. I mean, those really dipped during the pandemic, and the U.S. rebounded first, international is starting to rebound. Those businesses, just by its nature of how they're set up, have lower loss ratios and higher acquisition expenses. It's hard to predict. I mean, you know, what's the recovery look like? What's our growth look like?
What's the mix of business look like? It's really hard, Ryan, to give a, you know, forecast in terms of, you know, what the impact is. What we will focus on all the time is improvement in accident combined ratio. We're not going to be shifting, you know, from one category of loss ratio into AC, or back. I mean, we're gonna make sure we're focused on the portfolio optimization and mix of business to improve the overall results.
Thank you.
Now we'll hear from Alex Scott with Goldman Sachs.
Hi, good morning. First question I had is just on the Life and Retirement side. You know, when I look at the 10 ROE, it held up, you know, well in a tough environment. That said, like, you know, I think the skeptic would kind of point to the alternative returns and how strong they were and whether that can continue. You know, at the same time, there were probably some other things in there. I think probably DAC true-ups and things like that, you know, related to the markets would have hurt you.
You know, without maybe the details, it's a little hard from the outside to tell sort of what the ROE, you know, is running at on a run rate basis at the moment relative to that 12%-14% that you all have highlighted. Could you talk about that a little bit and how we should think about sort of the, you know, the level of ROE that you think you can earn right now?
Thanks, Alex. I mean, as you can appreciate, you know, preparing for the IPO of Life & Retirement, we do have constraints in terms of how much detail we can go into. I think if you look at the S-1 in terms of how we believe we can drive a 12%-14% ROE over the long term is something we're, you know, very confident about. If you look at the historical performance of Life & Retirement in terms of its ROE and attributed you know capital, they've done very well. I mean, Kevin, you know, keeping in mind we've got to be very careful, do you wanna provide, you know, maybe one or two items of your observations on the quarter?
Yeah. Thank you, Peter, and thanks, Alex. It really is about the combination of the lower equity markets which do impact the DAC and SI due to the lower present value of the fee income. That's kind of a one-off item, is not expected to be continuing. Then, of course, you know, we have the increased SOP reserves. These are things that will be much less of an impact under LDTI. You know, it's really the one-time impact of that. Then in terms of interest rates, right? With the increased rates, that does very much affect call tender income on a real basis.
CML prepays and with the direction of the markets, the fair value options, and I think we've provided that detail both in the, you know, the deck for today on page 11 and also in the fin sup.
Thanks, Kevin. Alex, another question?
Yeah. Maybe as a follow-up, just going back to the ROE improvement over time. You know, some of those items certainly will take some time, and I don't know if you wanna put a specific timeframe around it, but I guess the piece of it that's related to corporate cost reductions. I mean, for that piece specifically, over what time period do you think you'd be able to sort of take out, you know, call it stranded costs associated with the separation?
We provided a lot of detail in, you know, Shane's prepared remarks. I don't think it's really worth going back and going through point by point. You know, the most important thing for us at this stage is to sequence really the strategic initiatives we have in front of us, the most important being right now the Corebridge IPO. That's a big, you know, project in itself and making sure that Corebridge is set up to be a separate standalone public company and getting the IPO away. Also making sure that all of the, you know, things that are done at AIG today that need to be transferred over or worked with Corebridge is the next, you know, highest priority. We have a.
You know, our parent expenses, you have to think of it as parent and what is General Insurance today coming together as one company. Coming together as one company, we wanna be very thoughtful about the business we're in in the future, what is a target operating model, and how do we sequence that in a manner that we are not creating any risk with all the things that we have going on strategically and that we get to the right outcome, in the end.
I think our track record has demonstrated, whether it's the underwriting turnaround, AIG 200, what we're doing in terms of Corebridge, you should be highly confident we'll do it at a pace that is certainly front of mind, but at the same time making sure that we have all the very important pieces of what we're doing in the separation done very well. And so, like, that's kind of the timeframe, but it's really not gonna be what month, what quarter. It's gonna be how do we execute things and then sequence the next priority, which will be, you know, how we bring parent and General Insurance together. Okay, I think.
Ladies and gentlemen.
Yeah, I mean.
This will conclude your call for today.
If I may, let me just I just wanna thank everybody for, you know, our clients, our distribution partners and our colleagues have been tremendous in terms of, the work that they've done and the contribution that they've driven to get to these results. Everybody have a great day. Thank you for your time.
Once again, ladies and gentlemen, this does conclude your conference for today. We do thank you for your participation, and you may now disconnect.