Good morning, everyone. Thank you for standing by, and welcome to the Allstate First Quarter 2022 Earnings Conference Call. At this time, all participants are in a listen-only mode. After the speaker's presentation, there will be a question-and-answer session. To ask a question during this session, you will need to press star one on your telephone. We kindly ask to please limit yourselves to one question. Please be advised that today's conference is being recorded, and if you need any further assistance, you may press star zero. I would now like to hand the conference over to your speaker today, Mr. Mark Nogal.
Thank you, Kirby. Good morning, and welcome to Allstate's First Quarter 2022 Earnings Conference Call. After prepared remarks, we'll have a question-and-answer session. Yesterday, following the close of the market, we issued our news release and investor supplement, filed our 10-Q, and posted today's presentation along with our reinsurance update on our website at allstateinvestors.com. Our management team is here to provide perspective on these results. As noted on the first slide of the presentation, our discussion will contain non-GAAP measures for which there are reconciliations in the news release and investor supplement and forward-looking statements about Allstate's operations. Allstate's results may differ materially from these statements, so please refer to our 10-K for 2021 and other public documents for information on potential risks.
Before I hand it off to Tom, I want to share that we will be hosting our second special topic investor call on June 16th, focusing on the value of homeowners insurance. We look forward to the additional engagement later this quarter, and we'll share further information soon. Now, I'll turn it over to Tom.
Well, good morning, and thank you for investing your time in Allstate today. Let's start on slide two. Allstate's strategy to deliver transformative growth and higher valuation has two components, increase personal property liability market share and expand protection services, which are shown in the two ovals on the left. We're building a low-cost digital insurer with broad distribution through transformative growth. We're also diversifying our business by expanding protection offerings, as shown in the bottom oval. In the first quarter, we made progress in three key areas to execute this strategy. We're six months into a multifaceted plan to address the negative impact of inflation, which is largely in auto insurance. This begins with aggressively raising prices. We're doing this surgically and raising prices more for new or shorter-tenured customers with less profitability and less for longer-tenured profitable customers.
Progress was also made in executing programs to reduce expenses and manage loss costs. We also shifted our asset allocations by reducing the interest rate exposure of our bond portfolio in the fourth quarter of last year, which lowered the overall enterprise impact from higher inflation by $800 million. Secondly, we continue to make progress on transformative growth by expanding customer access, increasing pricing sophistication, and building new technology ecosystems. Protection services also continues its profitable growth trajectory, with revenue growth of almost 14% above the prior year. Moving to slide three, let's discuss first quarter performance in more detail. Property liability premiums earned increased 6.1% due to higher average premiums and a 2.1% growth in policies in force.
Net investment income of $594 million was 16.1% below the prior year quarter, reflecting lower fixed income reinvestment rates, the impact of reducing the bond portfolio duration, and strong performance-based portfolio income, but that was in comparison to an exceptional prior year quarter. Net income of $630 million in the first quarter compares to a $1.4 billion loss in the prior year, which included losses related to the disposition of the life and annuity businesses. Adjusted net income of $726 million or $2.58 per diluted share declined compared to the nearly $1.9 billion generated in the prior year quarter due to lower underwriting income.
You'll remember last year's first quarter reflected low auto accident frequency because of the pandemic and inflation loss costs had not yet been realized. We provided over $1 billion in cash returns to shareholders in the quarter and have reduced outstanding shares by 8.1% over the last twelve months. Moving to slide four, you can see how income from homeowners insurance, investments, protection services, and health and benefits mitigated the negative impact that inflation had on auto insurance. Insurance underwriting margins provided $267 million of after-tax adjusted net income, or $0.95 a share. Auto insurance generated a slight underwriting loss with a recorded combined ratio of 102. Our industry-leading homeowners insurance business generated underwriting income that contributed $335 million of adjusted net income, or $1.19 per share.
Although performance-based investment income declined from the record highs in 2021, results were still strong in the first quarter, with Property-Liability net investment income contributing $1.56 per share. Protection Services and Health and Benefits income more than offset the losses in auto insurance. Now let me turn it over to Glenn to discuss the Property-Liability results in more detail.
Hey, thanks, Tom. Starting on page five, we'll talk about profitability in Allstate brand auto insurance. We target a mid-90s combined ratio in auto insurance, and as you can see from the chart on the left, we have a long history of meeting or exceeding that target, supported by our pricing sophistication, underwriting, claims expertise, expense management, and of course.
When you look at 2020 in that chart, it's an outlier in terms of the view because we had much better than target results due to the early pandemic impacts. Now, the chart on the right breaks down the five most recent quarters, highlighting the significant increase in combined ratio that occurred in 2021 as we transitioned from those favorable pandemic impacts to the high inflation environment that we're in today. In late 2020 and early 2021, as Tom just mentioned, while we were running a combined ratio around 80% and benefiting from frequency and the improved cost structure changes we've made, we took price decreases. As inflation spiked in Q2 and Q3 of last year, we shifted towards rate increases, which ramped up significantly in the last six months.
The recorded and underlying combined ratios improved sequentially in the first quarter of 2022, though inflationary trends continue to pressure margins with increasing severity. Frequency is obviously higher year over year from that low point, but it's been very stable in terms of maintaining lower level, frequency compared to pre-pandemic levels. We'll go deeper into severity and pricing for auto insurance in the next few pages. Let's move to slide six and talk about Allstate auto physical damage claim severity in more detail. The story of higher severity has continued into 2022, and it's across the country, as you can see from the map on the left. Allstate brand report year 2022 incurred severity for property damage increased about 11% compared to report year 2021.
Now, recall that we shifted to report year incurred severity to give you a better view directly into what's recorded in our financials. And it's really important to note on this that when you look at paid severities, it's typically shared as a comparison to the prior year quarter or year to date or some prior period, whereas our new disclosure is an estimate of the full change in the fully developed report year severities year- over -year. The 11%, in this case, is the expected severity in 2022 over all of 2021, inclusive of the inflation seen in quarters two through four. The chart on the right, you can see that Allstate has a higher distribution of total loss claims involving newer vehicles compared to the industry.
While those vehicles come with higher premiums, they also can adversely impact total loss severity when vehicle values rise. We're adjusting pricing and using our strong claim capabilities to mitigate rising costs, and that includes leveraging our scale, our operating processes, experienced claim professionals, technology, broad repair relationships that we have, and our investments in data and analytics to help contain costs for customers. Moving to slide seven, let's talk about bodily injury severity increases because they've also contributed to auto insurance cost and price increases. Like property damage, casualty loss trends have been elevated for the past few years and continued into 2022, but the bodily injury pressure isn't quite as widespread. Allstate brand report year 2022 incurred severity for bodily injury increased about 8% compared to report year 2021.
Higher speed accidents and less congested roads are leading to harder impact crashes and more severe injuries, and an evolving legal environment is also a factor in casualty costs. If you look at the chart on the left, you'll see that claims resulting in a non-drivable vehicle, which would mean kind of a harder hit, and claims resulting in bodily injury claims with a major injury designation have increased compared to pre-pandemic levels. That's driving a shift to more complex and costly treatments and contributing to higher medical consumption. In terms of the legal environment, trial attorney advertising for claimants has doubled over the past decade and exceeds $1 billion annually now. That results in higher attorney representation rates and ultimately higher costs for consumers.
The chart on the right shows the severity variance to prior years trending higher in some of our more populous states like Texas, Florida, Georgia, New York, and California. Texas actually accounted for about 80% of the prior report year strengthening within bodily injury in the first quarter. Here again, our scale, our investments in technology and in data and analytics, and our claim expertise are helping us resolve claims fairly, accurately, and efficiently. Moving to slide eight, let's talk about another key component to our multifaceted plan to deal with inflation, and that's raising auto insurance prices. The table on the left provides a view into 2021 and the first quarter of 2022 rate actions in Allstate brand auto. We implemented rate decreases, as we talked about earlier, in early 2021 to reflect our continued lower frequency and expense reductions.
In the second quarter, as inflation picked up, we pulled back on any reductions and began increasing rates by the third quarter, and then those rate actions accelerated in the fourth quarter and then further accelerated in the first quarter this year. In the first quarter of 2022, we implemented rate in 28 states with an average increase of 9.3% and a weighted Allstate brand auto premium impact of 3.6%. When you combine that with the fourth quarter actions, we've increased weighted rates by 6.5% over the last six months, and that equates to a gross annualized written premium impact of $1.6 billion within the Allstate brand.
About 95% of our premiums in the U.S. are coming from six-month term policies, so the rates will improve margins, but there's a lag between when the rates are implemented and they're ultimately earned, which you can see in the chart on the right, which estimates when the rate increase is taken in the last six months will be earned into premium. That illustration assumes only 85% of the annualized premium will be earned to account for things like retention and the fact that, you know, customers modify their policy terms when faced with a price increase, like changing deductibles or limits. As you can see, looking at Q1 2022, the rate increases we've taken didn't have a whole lot of impact yet, but you can see it coming in the coming quarters, and it really accelerates.
We expect to see significant increases in earned premium beginning in the second half of 2022, reaching over $1.1 billion by the first quarter of next year based on the implemented rates so far. And keep in mind that additional rates and increases that we take through this year will be additive and compound on those rate increases. Given the ongoing inflationary pressure, we have increased the magnitude of rate increases we expect to take in the rest of 2022. We remain very confident in our ability to restore auto profitability to targeted levels, and we'll keep you posted on that in our new monthly disclosures of rate filings. Let's move to slide nine and take a look at something that I think is an undervalued strength at Allstate, and it's our industry-leading homeowners business.
As you know, a significant portion of our customers bundle home and auto, and that improves the retention and overall economics of both lines of business. We've differentiated our homeowners product and our homeowners capability, really, and that goes to our product, our underwriting, our reinsurance, our claims ecosystem. It is a unique entire business model and system in the industry. The graph on the left shows the history of Allstate brand combined ratio in homeowners versus the industry and competitors. We believe that in order to achieve an adequate return on the capital that's required in this particular line of business, you have to achieve a recorded combined ratio over time at a target of 90% or better. As you can see from the Allstate dots on that chart, you know, we have a long history of doing exactly that.
You can also see that some of our large competitors and the industry as a whole consistently generate combined ratios that don't meet what we find is a definition of needed for a return on capital. We've repositioned the homeowners business over a multi-year period by reducing exposure to unprofitable geographies, designing new products, creating highly sophisticated pricing plans, improving home inspection and risk selection process, and sourcing capital through multi-year reinsurance programs. As a result of all of that, we've consistently generated excellent underwriting results. Since 2017, we've earned $3.3 billion, or about $667 million annually in underwriting income, with the industry generating an underwriting loss over that same period. Homeowners insurance and Allstate's homeowners insurance is certainly not immune to the rising inflationary environment right now, though.
You know, we see that in the form of higher labor costs and higher material costs. Our products have the sophisticated pricing features needed to respond to those changes in replacement values and help offset the impacts. The chart on the right shows key Allstate brand homeowners insurance operating statistics. There you'll see that our net written premium has grown sharply through 2021 and into 2022, increasing 17% from the prior year. We grew policies in force by 1.7% in the first quarter, and our Allstate agents continue to be in a really good spot to broaden customer relationships with homeowners. Our average premiums rose 14.3%, mostly driven by increasing property values, as I mentioned earlier.
The first quarter combined ratio of 83.3 generated $368 million of underwriting income for the Allstate brand. You know, in short, our property insurance business is a competitive advantage, and we aim to continue to leverage that advantage and grow it. We look forward to sharing additional insights on homeowners with you during our upcoming special topic call on June sixteenth. With that, I will turn it over to Mario.
Thanks, Glenn. Let's move to slide 10, where we'll discuss how we're improving customer value through cost reductions. The chart on the slide shows the adjusted expense ratio, which is a metric we introduced a couple of quarters ago. This starts with our underwriting expense ratio, excluding restructuring, coronavirus-related expenses, amortization, and impairment of purchased intangibles and investments in advertising. It then adds in our claims expense ratio, excluding costs associated with settling catastrophe claims, because catastrophe-related costs tend to bounce around quarter to quarter. We believe this measure provides the best insight into the underlying expense trends within our Property-Liability business. Through innovation and strong execution, we've achieved more than three points of improvement since 2018. Over time, we expect to drive an additional three points of improvement from current levels, achieving an adjusted expense ratio of approximately 23 by year-end 2024.
This represents approximately a six-point reduction compared to 2018, enabling an improved competitive position relative to our competitors while maintaining attractive returns. While the adjusted expense ratio increased compared to the prior year quarter, primarily due to higher employee-related costs, we remain committed to our three-year reduction goals. Not included in this measure, but in the recorded expense ratio, was an increase in advertising expenses versus the prior year quarter as we took advantage of a drop in advertising costs and a seasonal increase in direct shopping to shift spending earlier in the year. Advertising will fluctuate throughout the year as we implement auto price increases and could impact year term growth. Our future cost reduction efforts are focused on digitization, sourcing, and operating efficiency and distribution related costs. Slide 11 diagrams how transformative growth will increase market share.
This multi-year initiative is designed to increase personal property liability market share by building a low-cost digital insurer with broad distribution. This will be accomplished by delivering on five key objectives. Improving customer value, expanding customer access, increasing sophistication and investment in customer acquisition, deploying new technology ecosystems, and enhancing organizational capabilities. We made significant progress across each objective in 2021, and are continuing the momentum in 2022. While the current auto operating environment required rapid price increases, we are confident this plan will generate long-term growth. Starting at the top of the flywheel, we have reduced expenses to improve customer value with more competitive prices, while earning target returns. We are building simple, affordable, and connected protection solutions that are competitively differentiated. We have enhanced and expanded distribution, including modifying the Allstate agent model to increase growth and decrease distribution costs.
We also improved the strength of our direct channel capabilities by leveraging the Allstate brand, and significantly expanded in the independent agent channel through National General. Differentiated products and expanded distribution are supported by increased marketing sophistication and investment. New technology ecosystems lower costs, support protection offerings, and improve service and speed to market. This comprehensive approach is like a flywheel that creates sustainable competitive advantage, leading to market share growth. At the bottom of the page, you can see the five phases of transformative growth. We continue to make meaningful progress as we execute on building the new model in phase III, and begin to scale the new model in phase IV. Moving to slide 12, you can see how expanding customer access better meets customer demand.
Starting on the bar on the lower left, you can see the auto insurance industry written premium distribution by channel in 2020 was roughly 1/3 exclusive agency, 1/3 direct, and 1/3 independent agency. Allstate's pre-transformative growth distribution of auto new business as of year-end 2019 is shown in the middle bar, and Allstate's first quarter 2022 distribution is shown on the right. As you can see, today, the distribution of new business more closely mirrors the industry due to transformative growth and the acquisition of National General. The National General acquisition significantly increased our presence in the independent agent channel and offers future growth potential by expanding middle market product offerings. Direct sales capabilities were improved and expanded from the Esurance base, including the use of the Allstate brand with lower pricing in this channel.
Allstate agents are, and will continue to be, the competitive strength as incentives shift to growth and costs are reduced. Today, the source of new business matches customer preferences and drove a 14% increase in new business applications in the first quarter compared to the prior-year quarter. Slide 13 shows the profitable growth of protection services. Revenues, which exclude the impact of net gains and losses on investments and derivatives, increased 13.6% to $627 million in the quarter. The increase in revenues was driven by continued growth at Allstate Protection Plans, generating a 19.6% increase in revenues to $329 million compared to the prior-year quarter. Policies in force also increased 4.7%, reflecting growth in Allstate Protection Plans and Allstate Identity Protection.
Protection services policies in force of 147 million are approximately four times that of property liability, showing how ubiquitous the Allstate brand is becoming. Adjusted net income of $53 million for the first quarter of 2022 increased $4 million compared to the prior year quarter, after generating $179 million of adjusted net income for all of 2021. Moving to slide 14. Allstate Health and Benefits expanding product offering generated growth and income. The acquisition of National General in 2021 added both group and individual health products to our portfolio, as you can see on the left. Revenues of $581 million in the first quarter of 2022 increased 4.9% to the prior year quarter, driven by higher premiums and contract charges and other revenue, primarily in group health.
Adjusted net income of $53 million decreased $12 million from the prior year quarter, driven by increased individual and group health lines. Now let's shift to slide 15, which highlights our investment performance and the reduction of fixed income duration to reduce enterprise exposure to inflation. Net investment income totaled $594 million in the quarter, which is $114 million below the prior year quarter, as shown in the chart on the left. Performance-based income, shown in dark blue, was $72 million below the prior year quarter, but 2021 was an exceptional year for private equity markets and reported income. While results are lower compared to a strong prior year, the performance-based annualized yield of 14% in the first quarter is above long-term average performance.
Market-based income, shown in blue, was $31 million below the prior year quarter. As we've discussed, our market-based portfolio yield has declined in the lower interest rate environment over the last few years, with reinvestment rates below our average fixed income portfolio yield. The fixed income yield was further reduced by actions we took in the fourth quarter of 2021 to lower portfolio duration and reduce the negative impact higher inflation and interest rates would have on our fixed income portfolio valuations. The chart on the right illustrates our proactive management of interest rate exposure over the interest rate cycle. After shortening duration late in the fourth quarter of 2021, we further reduced duration by 0.7 years in the first quarter.
The increase in interest rates in the quarter decreased our fixed income valuations by $2 billion, resulting in a negative portfolio return of 2.8%. However, our interest rate risk mitigation lowered the negative impact of higher interest rates by approximately $800 million versus our position at the end of the third quarter of last year. The shorter duration portfolio also positions us to reinvest in higher market yields as interest rates continue to rise. Now let's move to slide 16, which highlights Allstate's strong capital position. Adjusted Net Income Return on Equity of 12.8% was below the prior year period due to lower auto insurance underwriting income. Allstate's strong capital position continues to enable significant cash returns to shareholders.
We returned $1 billion through a combination of share repurchases and common stock dividends in the first quarter of 2022. Common shares outstanding were reduced by 8.1% over the last 12 months, 16.9% since 2018, and 45% since 2011, reflecting our history of providing strong cash returns to shareholders. As of March 31, 2022, we had $2.5 billion remaining on the current $5 billion share repurchase program, which is expected to be completed by early 2023. With that context, let's open up the line for questions.
As a reminder, to ask a question, you will need to press star one on your telephone, and to withdraw your question, you may press the pound key. Again, we kindly ask all participants to limit yourselves to one question. First question comes from the line of Joshua Shanker of Bank of America. Josh, your line is now open.
Yeah. Thank you for taking my question. Looking at the National General, or I guess the agency segment, you guys added 159,000 auto policies in the quarter net and lost 5,000 homeowners policies. I don't know if those are Encompass policies or if those are National General policies, but it does seem like you're adding a lot of monoline auto, which has a lower persistency than the overall Allstate book. Given where your pricing is in the National General book, how comfortable are you with the monoline drivers you're adding right now? And what is the strategy there on April of 2022 versus where it will be in a year and a half?
Josh, let me go up, and then I'll let Glen take the specific part of it. We bought National General in part to get into the monoline stuff you're talking about. We wanted to. We needed a stronger presence in the non-standard business, particularly designed with the products and the pricing on it. We also thought we had, and see great potential with the independent agent business. Our goal is to take that strength in non-standard, add our standard auto insurance and our homeowners product to that portfolio and really leverage the distribution. We expect to see not only just growth from picking up new product line, but also by expanding our existing product line through that distribution. The homeowners piece is basically we got to make them us.
We're really good at homeowners. I think they were okay at homeowners. You see some of the reduction being us getting their profit targets to where they need to be. Glenn, why don't you take the specifics of how that works?
Great. Thanks, and thanks for the question, Josh. You know, so it is definitely two different stories on the auto and home, as Tom mentioned. Auto, the first quarter is the shopping quarter in non-standard auto. It's, you know, by far the biggest shopping quarter. You know, our National General team did a really nice job of being in the market in the right places, in the places they felt they had, you know, good profitability and the right pricing and growing effectively.
Think of that one as, and you're right, it's shorter duration business in terms of lifetime value, but that is their business model, and they make a good return on those policies. They grew auto in that way. As Tom just mentioned, on the homeowners side, this has been a shift in the homeowner strategy in NatGen time that we're in, where we're really taking the Allstate strength and making it a strength of NatGen. They've had to get some pricing in there.
They haven't, you know, they've shrunk a bit in homeowners, but that's setting ourselves up for then the strategy part of this, which is, as we get our middle market products based on that, Allstate data and the Allstate capabilities into the independent agent channel marketed as National General and Allstate company, the endorsed branding, that we think we have a really great opportunity to grow homeowners with the Allstate level of sophistication and pricing and all the things I talked about in the opening remarks, but in a channel we really haven't meaningfully been in before. That's the path forward. But as we sit from a one quarter basis, we're still in I guess, correction mode of the homeowners business there, but in a really good quarter and in a really good place from a non-standard auto standpoint.
Okay, thank you. Bernsen, my reputation as the only person who asks questions about Allstate Protection Plans, I wanna go to another area that never gets any questions. Allstate commercial, as I calculated, it seems like you guys are running at about 100%, combined ratio in that business, but growing very quickly. What is it, and what exactly is going on there? Maybe I'm wrong.
No. We always appreciate your precision, Josh. First, I am not pleased, none of us are pleased with the results out of Allstate Business Insurance, so we've done a bunch of work to improve the profitability in that line. There's really two parts to the business. One is the, what I'll just call traditional commercial insurance, you know, small contractors, stuff like that we sell through Allstate agents. Then there's the shared economy business. It's the shared economy business that has been the trouble for us from a profitability standpoint, particularly a home sharing company, and then some states in the transportation network companies.
We made a decision last year that we weren't gonna chase revenue if we didn't think that the states were profitable. We exited a number of states, I think three big states in particular, in the transportation network piece because they were not profitable. In the home sharing business, we just got out of that contract altogether. Glenn, what would you like to add to that?
I would just add that if you look at when you're talking about the premium growth there, it is two things in large part. One is we've raised rates in sort of the traditional small commercial business we have. Rates are materially up, units are not. The other is that a year ago, transportation businesses, because they charge by mile and we pay them for the usage, there was very little usage still in those transportation networks, and there's a lot more usage and therefore a lot more premium right now. We have raised, as Tom said, we've gotten out of some states, and we've raised rates on those. We think the profitability going forward is better. It's not growth in that we're piling on business. We've gotten a lot more revenue coming through.
Okay. I'll keep looking out. Thank you very much.
Next question comes from the line of Greg Peters of Raymond James. Greg, your line is now open.
Good morning, everyone. Appreciate the new information and your updated investor slide deck, just FYI. I'm gonna focus my one question on slide eight, and just trying to put the pieces together of the information you've provided us around pricing. Tom, you mentioned in your opening remarks surgical pricing, and you talked about how you're differentiating between lower lifetime value customers and longer lifetime values. You know, Glenn, you talked about a lot of rate in the pipeline that's going to affect earned premium going forward. I was trying to reconcile the language difference from your February CAT and pricing report to your March CAT and pricing report.
The difference between the two, just one month later in the March pricing report, you said that effectively loss costs inflations were exceeding your targets and you were gonna have to raise prices even more just one month later from your February price, your February pricing report. I was hoping maybe you could put all those pieces together for us and sort of map out what's going on. Hello?
Tom, did you wanna start on that, or do you want me to?
Oh, yeah, sorry. I was on mute. I was quite articulate, but Greg, let me start off, and then I'll get Glenn and Mario to come. They can give you more specifics. First, obviously, increasing price is really important to getting our auto insurance profitability up. We've been aggressive, but we believe smart about spreading it between newer and less profitable customers and profitable longer tenured customers. Obviously, if let's say you have a customer who's been with you 10 years, and you're making a 95 combined ratio, and you have one that's new, and you're losing money on it, then you have to raise your rates to cover the higher inflation, which impacts both customers. If you give them both the same amount, you run the risk of losing that long-tenured profitable customer.
We've put less rate into our what we would call older closed books and more into our newer books with shorter-term customers in it. We believe that protects lifetime value and will help with retention. You know, in this new space, you know, retention is gonna be a challenge for all companies. We're trying to make sure we manage our way through it. The numbers that you see on slide eight are the total between all the customers, whether new or old, profitable, unprofitable, to help us get there. It's more surgical than it appears.
I would say the other part is, you know, that's what we're doing at auto profitability, back to Glenn's earlier slide, like we know how to make money in auto insurance, and we're gonna make money in auto insurance, but we wanna make sure it's sustainable. One is the way we're taking those prices. Two is make sure the expense reductions are permanent, not just temporary, making sure you manage your loss costs differently, and make sure you're continuing to invest in sophistication in new products. We feel good about this, but hopefully that provides some insight.
As to the change in the outlook, that may be more what we said than just sort of like waking up in the month of March and deciding we're gonna say something different. Glenn, do you wanna talk about how this is unfolded? Mario, if you wanna go into the disclosures, that'd be helpful.
So I'll start with yeah, how it unfolded. I mean, you know, I would say, you know, we continue to see, you know, inflation run, like a lot of people continue to see. We continue to see elongated time frames for development, and including prior year development. We're taking, you know, I think an appropriately conservative view and saying that, like, we're gonna need more rate and on that part of it. The other part on the precision, I wanna build on what Tom said because it's an important point because we do use a lot of precision. I think, you know, that some folks talk more or some companies talk more or less about their level of segmentation and precision.
You know, we maybe don't do a good enough job talking about the depth that we have in terms of our segmentation, which is highly sophisticated and that's what Tom's going into. It's sophistication at that level, but also on the go-to-market level. Because clearly, you know, we kept marketing open, and we took an opportunity to grow some business that the economics were good on. We did that because you know, the marketing cost itself was down with others leaving that area. There were a lot of shoppers, and first quarter tends to be a time that a lot of people shop. Now, we also did that with a lot of precision. It's the entire go-to-market system because we're not just you know, to sort of have the open sign everywhere.
It's where we're marketing precisely where we know we have a lifetime value return, based on, you know, risk type, based on market within state level. It's a combination of underwriting, marketing, pricing that all comes together in distribution, that all comes together with how we go to market and drive where we wanna grow and how we wanna grow, that I think goes into the need for rate as well.
Yeah. If I can just add, Greg, this is Mario. First, I guess where I'd start is, you know, the objective of providing that rate information monthly that we started this year was really to create a level of transparency into what we were doing with auto profitability, with rate being such a significant lever, and provide you all with a view of the progress we're making, but also some color around what we're seeing on a forward-looking basis. That's the objective and, you know, the language we used in the most recent disclosure provided, I think, some additional context.
In terms of, you know, what's happening, I think, you know, we continue to look at loss trends month in and month out, both in terms of reserve levels, severity trends, and just loss trends overall. You know, the statement we made in our most recent release was really a reflection of what we were seeing in loss trends and severity development, both in terms of what we saw in last year. You know, we strengthened reserves by $151 million in auto, this quarter. What we were seeing in terms of the physical damage severity escalation, as well as how that translated into current year severity.
We're taking that data, we're looking at it, we're working with the pricing team and factoring it into our outlook. The purpose of the disclosure, again, is to tell you what we did, but also provide, you know, a little more texture around what we're seeing in the market.
Got it. Well, I appreciate your thorough answer to my one question. Thank you.
Next question comes from the line of Andrew Kligerman of Credit Suisse. Andrew, your line is now open.
Hey, thanks a lot. Yeah, great answer to the prior question. I guess you didn't mention anything about non-rate actions. Would it be possible to discuss non-rate actions as maybe a percent of the business that you're able to get that on and maybe how much that might be contributing to improved performance?
Glenn, do you wanna take that for both, the Allstate brand and National General?
Yeah. You know, if you saw, I'll go to the National General first. We saw that National General's underlying combined ratio looked pretty good in the first quarter. One of the things that they have that's really stable is fee structure. The fee structure is a non-rate element that turns out to be really stable over time and helps them predict and plan for their combined ratio. You know, when I think about non-rate actions across the Allstate book, it really goes back to what I was talking about, where it's about.
I don't like to isolate it to the word underwriting, because then it sounds like you know you're you know sort of deciding you know to write or not to write, as opposed to getting the right level of rate for each type of risk. That also goes into with underwriting and marketing and distribution, how you go to market. Where we've really built our sophistication is in how our marketing team, our underwriting and product teams and pricing and our distribution organization deploy resources you know quickly and nimbly to where and how we're looking to grow. I think that in itself generates a lot of the long-term economic value that we drive.
Makes a lot of sense. If I could just quickly sneak one in, the buybacks, $794 million, that's pretty fast in terms of the pace. I thought you had about $3.3 billion left, and this implies you're going at a quick pace. Is there a chance that you could complete that authorization by the end of this year or do more than you anticipated? Because it seems pretty robust, and was curious about the thinking there.
Andrew, it's Tom. First on the actions. You will see, though, you know, you will see some things like down payment requirements and stuff like that we will change going forward, to help manage the selection of the business. Glenn is absolutely right that we're being very precise in which stuff we want. If we feel like there are certain policy terms and things we can change, or payment terms that we can change that will help us, we will put those in place. On the buybacks, Mario's committed to have it done, you know, early in the first quarter of next year. Mario, anything you wanna add to that?
No, I think that's right, Tom. I wouldn't, you know, read too much into any one quarter. We still have $2500 billion left to buy. We said we'll complete it, you know, by early next year, and that's the plan.
Got it. Thank you.
Next question comes from the line of David Motemaden of Evercore ISI. David, your line is now open.
Thanks. Good morning. I had a question on slide eight or page eight. It says that you guys have a higher mix of newer, more expensive vehicles. Glenn, I believe you said that those vehicles come with higher premiums, and they can adversely impact total loss severity when vehicle values rise. Does the fact that you have you know, more of a mix of more expensive vehicles, does that increase or does that mean that you need to take more rate relative to peers? Or I guess, how should I interpret this mix difference that you guys have versus peers?
Glen, do you wanna do that?
Yeah. So, you know, there's a few parts to that because, you know, I'll talk more macro about the auto, the car park out there and, like, the whole system. You know, with every new model year, you know, newer that we get and every year that passes, you know, we've done the math through what's in our book of business, what type of safety elements are in cars, you know, accident avoidance technology and everything, and we know two things. One, that we get a little bit of a tailwind with every year that passes on frequency, and we get a little bit of a headwind on severity because they're more expensive to fix, more sensors and so on. The reason I started there is that would be true of this example as well.
The fact that our book of business tends to trend that way more, it will give us a little bit of a sustainable benefit on frequency in comparison to others, and it'll give us a little bit of a sustainable headwind on the severity. We do charge premium based on, you know, make and model year, and you get a higher premium for it.
It was more of a statement in that opening that as we look at and we try to put our trends, you know, whether looking at Fast Track or looking at public disclosures, when we look at our trends on Bodily Injury or Property Damage, which are third-party vehicles, and then collision first-party vehicles, we see some of that difference come through, and then have to, like, do the math back to our premium and ensure that we're getting the right rates for all of that.
Got it. Okay. Thank you.
Next question comes from an anonymous line. If you have pressed star one, please state your first and last name and company name prior to asking your question. Your line is now open. Again, if you have pressed star one, please state your first and last name and your company name. Your line is now open.
Kirby, let's move to the next caller, please.
Next question comes from the line of Meyer Shields of KBW. Meyer, your line is now open.
Fantastic. Thanks so much. I wanted to dig in a little more to your comments on homeowners and the automatic lift because we've seen a little bit of deterioration in the underlying loss ratio all of last year and continuing into the first quarter. Is the automatic I guess inflation guard changing? Are there other steps that are necessary in homeowners?
Well, first, we're really happy with where the homeowners business is today in terms of its profitability. As you know, sometimes it bounces around because catastrophes, and we had slightly lower catastrophes this quarter than the prior year quarter, but still earn a really good return. The underlying combined ratio, as you point out, which excludes catastrophes, ticked up a little bit. We feel comfortable with where that is, in part because of the inflation parts that you mentioned that come through, we call QIA, company insurance adjustment. It really raised that average premium. As that burns in to earn premium, just like it does burns through in auto insurance, then that cover some of those increased costs. If it doesn't, we have plenty of room to go in and continue prices. Glenn, what would you add about severity in the combined ratio in homeowners?
Yeah. First, you know, I always start with, I think we're accountable for the recorded combined ratio. You know, because ultimately, you know, if we always had a good underlying, but, like, we hadn't gotten the right reinsurance, or we hadn't been in the right locations, and we hadn't done good risk mapping for wildfire or hail or hurricane or any other exposure, and we were constantly running, you know, what the industry or our key competitors run, I think you would rightfully hold us accountable for that. I always go back to the recorded combined ratio. That said, the underlying, as Tom said, it moves up and down a little bit, and we do watch that.
Primarily, though, we watch the recorded combined ratio. Right now, like Tom, I feel really good about where we are. You know, severity ran hot in the first quarter. It's tough to look at one quarter in homeowners and draw a lot of conclusions because there's a decent amount of volatility between the mix of perils in homeowners. It's not nearly as stable as auto in that way. You know, we're watching that. That was a high number. You know, we got an average price increase or average earned premium of 14.3%, burning through, which really ticked up in the latter part of the year last year. Will continue to give us benefit as that earns through. We're in really good shape in homeowners, you know, and I feel good about it.
Okay, that's helpful. Second question on the auto side. I just wanna make sure that I'm understanding the commentary on the surgical application of rate increases. Should we expect, I guess, suppressed new business as this strategy works its way through to the extent that rate increases are being focused on lower tenure customers?
I'll start off, and then Glen, you can jump in. I think a lot of this, Meyer, depends on what happens in the competitive environment. As other people are taking rates, it depends where they're spreading their rate. If you plot on the renewal book, then that will create more shoppers, because those tend to be people who shop less than just putting it all on the new business. Part it depends what happens, how people do it. That said, we feel pretty good about where we track our competitive position by the LPI index. We feel good about where our LPI index at this point. We're hopeful that as we move through this, we'll still continue to grow with transformative growth on top of that.
We think that it all still hangs together in terms of increasing market share. Glen, what would you add to that? You know, just add, if you take the long term and the short term, the long term first, you know, as Tom said, you know, our expanded customer access, our work on improving value as we get the three points of cost that Mario talked about out, and we've got access into all these systems, and we get middle market products into the IA channel and our exclusive agents are humming. We've got a really good long-term prognosis on that. With your question, you were asking, I think, some about the short term. So as you think about what we did early this year, we pulled marketing dollars forward.
We've talked about the fact that we pulled them forward. That's not the same as increasing them. It did increase in the quarter, but it's pulling it forward. That means it does have to come out of somewhere too. We decided to do that because there were good economics on the marketing. A number of companies publicly talked about pulling back from marketing that left the supply and demand curve of marketing costs that left it reasonable, and it was good economics on it. A lot of business gets sold in the first quarter. We thought with a lot of shoppers in the market with rates out there, that it would be a good time to be in the market where we had our prices in, and we felt good about the lifetime value.
That said, inflation's continuing to run, and we're taking more rate, and we pulled that money forward from later, so marketing will reduce from this point, and that could have a short-term impact on new business growth. Plus we've got, you know, everybody will have headwinds on retention with the amount of rate that's in the system across the industry.
Yeah. I think when you go, you know, to go back to Glenn's long term, bottom line, we like prospects for sustainable, profitable growth. I mean, auto insurance, we know how to make money, and with transformative growth, we believe we can grow that business. If you add homeowners on top of that, which is really a growth business. Just like price and value are important to an auto insurance customer, it's also important in investing. When you look at the price of Allstate, it's less than your other options. That's why we think transformative growth is gonna increase valuation multiples.
Okay. That was very helpful. Thank you so much.
Next question comes from the line of Brian Meredith of UBS. Brian, your line is now open.
Yeah. Thanks. Quick question here. On slide 11 of your supplement, you've got a interesting chart here that looks at Allstate profitability. Just my question is this based on an earned kind of basis, or is it on a written basis? And if it's on an earned basis, how would this chart look on a written basis as far as, you know, which states you think are currently pretty close to rate adequacy?
Well, that's a tough question. We do. I don't know if we do. Glen, do you wanna take the forward-looking view?
Yeah, I'll take it. Yeah. It's definitely earned basis, in that, you know, we look at our, you know, when you look at combined ratios, it's on an earned basis. You're hitting a really important point. It's an astute observation, because I think about that disclosure and, you could look at, when you look at the percentage of states that are above 100, for example, that is not the same as looking at the way we look at where do we wanna grow. Because the state could be above 100 right now, but we've just gotten the rate we feel we need to be adequate, so any new business we put on is going to be at a rate adequate level that we like, and we would wanna grow there.
It really does lag, and you have to go back to page eight and see where that which, you know, we don't, because that's an estimate, we don't estimate every state, you know, and disclose based on when we'll earn the premiums and what percentage we'll earn by state and what that'll do. The point is, while that's a snapshot of where we are today, that does not reflect all the written premiums and increases that we've gotten.
Okay. Well, thank you all for engaging with us today. As we go forward, we look forward to, in the next month or so, talking about homeowners, and then we continue to execute in the meantime our multi-faceted plan, both to improve profitability of auto insurance and to get transformative growth done 'cause that's a key component to sustainable growth. Both of those will improve shareholder value. Thank you for your engagement, and we'll talk to you soon.