Good morning. I'm Greg Peters. I'm the insurance analyst for Raymond James. Welcome to the Raymond James 41st Annual Institutional Investors Conference. I'm pleased to welcome back The Allstate Corporation. It was on our Analyst Best Pick List last year and remains one of our top picks in the personal line space this year. For management, we have Brent Vandermause, who serves as Director of Investor Relations, and Mark Nogal, who's Head of Investor Relations. To present the Allstate story, we have Mario Rizzo, who's the Chief Financial Officer. I'm going to turn it over to Mario.
Thanks, Greg. Good morning, everybody. Thanks for investing the time to learn more about why Allstate is an attractive investment. If you turn to slide one, you'll note that before we begin, this is a statement that says there will be forward-looking statements and references to non-GAAP measures today. This presentation and more specific information on potential risks are included within our 10-K for 2019 and other public documents on our website at allstateinvestors.com. As you know, our strategy has two components, increase personal property-liability market share and expand into other protection businesses. Starting with the upper oval, we have been a leader in creating differentiated personal insurance products with features such as declining deductibles and new car replacement. We use sophisticated pricing, have strong claims expertise, and are building an integrated digital enterprise to lower costs.
We're also diversifying our businesses by expanding our protection offerings, highlighted in the bottom oval. We leverage the Allstate brand, customer base, and capabilities to drive growth in these businesses. Allstate offers customers a circle of protection through a wide range of protection products, Allstate Life, workplace benefits, commercial insurance, roadside services, car warranties, Protection Plans, and Identity Protection. These growth platforms have extremely broad distribution, including major retailers, insurance brokers, work sites, auto dealers and manufacturers, telcos, and directly to consumers. This strategy creates shareholder value through customer satisfaction, unit growth, and attractive returns on capital. It also ensures we have sustainable profitability and a diversified business platform. This two-part strategy of growing personal property-liability market share and expanding protection businesses is working as Allstate delivered excellent results and achieved all five operating priorities in 2019. Revenues were $44.7 billion, and net income was $4.7 billion.
Adjusted net income was $3.5 billion, increasing 11.1% compared to the prior year, reflecting excellent underlying profitability and lower catastrophe losses. Returns were also excellent with an adjusted net income return on equity of 16.9%. These results were driven by the strong performance within our property-liability segment. Policy and premium growth continued, and all of our brands had strong underlying profitability. Underwriting income of $2.8 billion in 2019 was significantly higher than prior year, driven by lower catastrophe losses and the continued improvement in the expense ratio. Moving to the table on the bottom left, net written premium increased 5.6% for the full year, driven by policy and average premium growth in Allstate brand auto and homeowners insurance and the Esurance brand. Total policies in force increased 1.3% to 33.7 million in 2019.
The underlying combined ratio, which excludes catastrophes, prior year reserve re-estimates, and the $51 million pre-tax impairment charge related to our decision to utilize the Allstate brand for direct sales, was 85.0 in 2019 at the favorable end of the full-year guidance range of 84.5%-86.5%. Focusing on the table on the bottom right of the page, you can see our recorded combined ratio trend over time by line of business as well as total property liability. Auto insurance profitability remains strong with a combined ratio of 92.8, excluding the Esurance impairment. Increased average earned premium and lower property damage and bodily injury frequency offset higher severity in 2019. Property damage severity continues to be impacted by higher costs to repair vehicles, which increases the number of total losses. Bodily injury severity increased at a rate above medical care inflation indices, which factors into our pricing algorithms.
Homeowners insurance continues to generate excellent returns as well. Lower catastrophe losses were significant in achieving a combined ratio of 88.4 for the year. In total, Allstate has industry-leading combined ratios for our property liability businesses. Operating from this position of strength, in December, we announced our Transformative Growth Plan to increase personal property-liability market share. The Transformative Growth Plan is a multi-year effort, builds on our strengths, and includes three primary components: expanding customer access, enhancing the customer value proposition by lowering expenses and redesigning property liability products, and investing in technology and marketing. Allstate has a significant number of competitive strengths we leverage in property liability, including a broad distribution platform from Allstate agents to Esurance's direct capabilities to Encompass independent agent partners. As a result, we are growing, but GEICO and Progressive are growing auto insurance market share faster through massive advertising spending and low-cost structures.
Our plan also recognizes that customer needs are changing due to increased connectivity and advanced analytics. Our leading position in telematics and digital auto collision estimates are two examples of how we are embracing these changes. At the same time, a majority of customers prefer an insurance agent when purchasing a policy but are comfortable with self-service for routine transactions. We are increasing mobile application capabilities and building lower cost, centralized, integrated service capabilities. Let's spend a few minutes discussing each of the three components of Transformative Growth in a little more detail. Expanded customer access will be provided by utilizing Esurance's direct capabilities to sell Allstate branded policies. Esurance has strong direct capabilities, which has led to a business that is 2.4 times its size relative to when it was acquired a little over eight years ago.
As a result, we can further leverage these capabilities by selling Allstate branded policies directly to consumers. We will also transform Allstate agency distribution by providing services and capabilities to increase effectiveness and efficiency. We will enhance customer value by improving insurance affordability by reducing costs. As part of this effort, customers will be offered differentiated pricing based on the service model they choose. As we execute on this plan, we will launch new products while providing a circle of protection to our customers through a wide range of product and service offerings. Our strategy also requires increasing investments in technology and marketing. The technology stack will be redesigned with a focus on adaptability and speed. Consistent technology platforms will be utilized across the enterprise, which is expected to lower costs over time.
As we reposition the Allstate brand, the advertising previously deployed for the Esurance brand will be shifted to the Allstate brand, and the Esurance brand will then be phased out in late 2020. This comprehensive multi-year plan will make us a stronger competitor and lead to increased market share over time. Now let's focus on the bottom oval. We are continuing to expand into other protection products and services by leveraging our enterprise capabilities and the Allstate brand through a wide variety of distribution channels. These businesses are comprised of innovative growth platforms, which include Allstate Protection Plans, voluntary workplace benefits, auto warranties, Allstate Life Insurance, Allstate Identity Protection, roadside services, agreements with shared economy companies, Arity, which is our telematics platform, and Avail, which is our car sharing platform.
We distribute these products through Allstate agencies, workplace benefits brokers, major retailers such as Walmart, Costco, and Target, car dealers, and telecom providers. We also have insurance partnerships with leading shared economy companies. These businesses have substantially expanded our customer relationships with over 112 million policies in force through year-end 2019, reflecting significant growth of over 38% relative to prior year. They generated $4.9 billion of premiums and adjusted net income of $428 million in 2019. The service businesses segment comprises the majority of these businesses in the bottom oval that I just discussed. This group of businesses continued to grow the number of customers protected, with policies in force increasing 42% to 105.9 million. This is largely due to the increase in Allstate Protection Plans. Revenues grew 25.1%, reaching $1.6 billion for the full year 2019.
Adjusted net income was $38 million for the full year, increasing compared to the prior year period as improved loss performance in Allstate Protection Plans and Allstate Dealer Services were partially offset by continued growth in integration investments in Allstate Identity Protection. The chart on the bottom right provides additional detail on the successful acquisition of SquareTrade, which we have since rebranded Allstate Protection Plans. We acquired this business for $1.4 billion at the beginning of 2017 for its high growth and return prospects. Allstate Protection Plans is exceeding their measures of acquisition success. They are growing rapidly with policies in force increasing from under 30 million at the acquisition to nearly 100 million at the end of 2019. This represents a compound annual growth rate in excess of 60%.
Profitability and returns have also improved with adjusted net income of $60 million in 2019, an increase of $37 million relative to the prior year. Allstate Protection Plans has also created sustainable growth beyond U.S. retail through continued investment and expansion in Europe. These highly attractive businesses and a track record of innovation represent meaningful enterprise value, which we do not believe is currently reflected in Allstate's valuation. Starting this year, we will no longer provide annual property liability underlying combined ratio guidance and instead focus on longer-term return on equity expectations. As we've discussed throughout 2019, we believe this is a better measure of our performance for multiple reasons. It is a broader long-term measure of performance than the underlying combined ratio, which focused on just one part of our businesses and excluded significant items such as investment income, catastrophes, and other protection businesses income.
It factors in capital management, it is more correlated with stock price, and it fosters a better comparison with our peers. On a long-term basis, and based on our current business portfolio, our adjusted net income return on equity goal is 14%-17%. Generating these types of returns while growing our business will create sustained shareholder value. This range also aligns with executive compensation, as discussed in our annual proxy statement. While we are investing in growth and expanding protection businesses, Allstate continues to provide excellent cash returns to shareholders. In 2019, we returned $2.5 billion to common shareholders through a combination of $1.8 billion in share repurchases and $653 million in common stock dividends. We repurchased 16.4 million, or 4.9%, of common shares outstanding over the last 12 months and increased our book value per share by more than $15 to $73.12.
Over the last five years, we have repurchased $9.6 billion or 28.7% of common shares outstanding. The $3 billion share repurchase program announced in October 2018 was completed in late January 2020, and the board approved a new $3 billion share repurchase authorization to be completed by the end of 2021. While buying back stock was economically attractive when our board authorized the new program, it is even more attractive given what's occurred in the market over the last week. In February, we also announced an 8% increase to the upcoming quarterly dividend, further reflecting our commitment to returning cash to shareholders. We also reduced the cost of capital by redeeming multiple series of preferred stock and issued two new series at lower rates in 2019, which will reduce preferred dividends by $17 million annually. The bottom line is Allstate represents an attractive investment opportunity.
Our strategy is working and resonating with consumers. Long-term growth prospects exist in the personal property liability businesses as we execute our transformative growth plan. We are leveraging enterprise capabilities and resources to expand into other protection businesses. We are proactively managing our capital structure and returning significant amounts of cash to shareholders. With this context, I'll open it up for questions. Greg?
Yeah. Last year, for last year's part of the story is the improvement in expense ratio. Can you talk, I mean, since last year when you guided around that, can you talk about how you're thinking about expense ratio improvement after what you just said about last year? Are we thinking about 20 in 2021 more?
Thanks, Greg. The question was around how we're thinking about our expense ratio going forward given what we saw last year. I guess, the place I'd start, Greg, would be, again, I'd refer back to the Transformative Growth Plan that I just talked about. The objective of that plan is to accelerate our growth over time in personal property liability. The second component of it, improving customer value and the customer value proposition, a core component of that is getting more price competitive. We know that the path toward getting more price competitive is to continue to focus on our cost structure and take costs out of the system. That by reducing our expense ratio over time, that'll translate into more competitive pricing, which in turn should translate into higher levels of growth. It's a core component of our strategy.
I think it comes in a variety of ways, in terms of operating costs. We look at processes. We're going to leverage the digital capabilities that we've already built through things like QuickFoto Claim, leveraging analytics, technology investments. Today, if you think about the way we're structured from a branding perspective, we underwrite products in Allstate, Esurance, and Encompass, and as a result, we have unique technology stacks integrated within each of those businesses. Part of our strategy is to leverage the Allstate brand in both the captive agency channel and for direct, and then for independent agent distribution to utilize Encompass, because we have independent agent business, about $700 million or $800 million of independent agent business that we write through the Allstate brand currently. We're going to combine that all into the independent agent channel through Encompass.
By going from effectively three different underwriting platforms to two, potentially one in some cases, we think there's the opportunity to take meaningful cost out of the system over time. Now, we're going to invest some dollars as well while we do this, right? We're going to invest in marketing, repositioning the Allstate brand, and looking to leverage those capabilities. Going back to the original question, cost structure improvement is really a central theme of Transformative Growth and really creates one of the ways that we can create the capacity, and the path toward accelerating growth. Yes, sir.
Will you guys accelerate your buyback given the stock's down quite a bit in the last few weeks?
The question was about the buyback program. We'll take a look at it. I think what you see over time is, generally, we'll go in, and we've done ASRs in the past. We've done open market buyback programs. We'll take a look at it certainly, just given what's happened, and adjust accordingly. The good news is we're really in the early stages of the new $3 billion authorization that our board approved earlier this year, and we have a lot of flexibility. We certainly have a lot of capital and liquidity to be able to do what we think is right.
Can you give us an update on home pricing, the pricing environment? I know home pricing has been down for several weeks. Any signs of-
Was the question on home pricing or-
Auto pricing.
Auto pricing. Auto pricing. I would say there's really two components. The question was our view on auto prices. Certainly, there have been a number of competitors that have reduced rates over time. Notably, State Farm, I think, has been pretty open in that regard, and others have done it to a lesser degree. What certainly has happened is the level of rate being taken in the industry has gone down. If you look at our rate increase trends, we've slowed down the amount of rate. We're taking that low single-digit level of rate increases in auto. That's really, I think, reflective of the industry. Auto pricing has certainly gotten a lot more competitive, driven in large part by industry frequency experience.
If you look at frequency, if you look at Fast Track, other more industry-wide metrics, the industry continues to benefit from improving frequency, which is translating into better pricing. Now offsetting that is higher severity levels, and we continue to see increases, not only for ourselves, but more broadly for the industry, certainly in physical damage coverages as the cost of repairing newer vehicles, given the complexity and the technology embedded in those vehicles, has increased. We've seen an uptick, again, broadly in bodily injury severities as well. That's offset, to a certain degree, the frequency. I think the path forward, it really depends on at what point those two lines cross. It's very difficult to predict what's going to happen with frequency.
Given the severity trends that I think the industry has seen and that we've seen, it's really a question of if the frequency trends either level out or the level of improvement tapers off, you'll start to see more and more pressure to offset some of those severity increases. It's really dependent on what happens with frequency going forward. Clearly, from an overall rate taking, there's far less of it, and in some cases, there have been rate reductions across a number of competitors in the industry, which certainly has increased the competitive intensity within auto. Yeah, go ahead.
[audio distortion] , State Farm results for the last couple years. As an analyst, when you try to balance sheets, it's something you have to understand. Can you give us your opinion on what is keeping State Farm from becoming more aggressive in the marketplace with regards to able to promote? If you have any perspective on how we should be thinking about those results.
The question was around State Farm's results that came out over the weekend, which I just saw this morning. In terms of their growth and their focus, first of all, State Farm is a really formidable competitor, obviously, and has the financial wherewithal, with $115 billion or so of surplus, to continue to be a formidable competitor. The things they've done in auto insurance, they've been fairly aggressive in taking rates down, to generate unit growth. It seems, at least on the surface, to have had limited success. While you see a lot of the direct companies, particularly GEICO and Progressive in particular, growing at fairly healthy clips. Certainly, the advertising spend with those two companies has increased as it has across the industry.
It is hard to tell why they just haven't gotten the traction, why State Farm hasn't gotten the traction with rates that you would expect. I would continue to believe that they'll continue to look to grow. I don't think they're going to back off anytime soon. As we look at the competitive set, State Farm is always in there. The way I would respond from an Allstate perspective, that's really why we created the Transformative Growth Plan. It is really reflecting the fact that there are companies that are growing more rapidly than we are. We increased units by a little over 1% last year, we want to build on that.
We want to build on that through those three pillars, broadening customer access, leveraging the Allstate brand in both the captive agency channel and direct, leveraging the Esurance capabilities in the direct channel with the Allstate brand. It was interesting when we announced our Transformative Growth Plan, there was some people that picked that up as we were discontinuing Esurance, the reality is that's not what it is at all. What it is is we want to leverage the really strong direct-to-consumer capabilities that Esurance has and has built, we want to do that using the Allstate brand because the strength of the Allstate brand will allow us to leverage those capabilities in a more effective way. We're going to broaden access. We're going to focus on things like mobile connectivity. We're going to improve our costs and our relative price positioning.
We're going to redesign the personal property liability products to create a unique offering while we're investing in technology and marketing. It is a comprehensive plan that's really designed to compete with all the competitors across the set, both from an agency and a direct perspective. We think over time, we'll certainly accelerate our growth prospects. It is certainly a very competitive environment out there.
Part of the forward growth plan, I think it's integrated services platform piece of it. Can you talk a little bit about how that relates to operations and maybe new business development?
Sure. The question was around integrated services. Where I'd start is, and I mentioned this in my remarks, the majority of customers, based on our consumer research, still prefer to have an agent involved, particularly during the purchase of a policy where they can get advice and get their questions asked and talk about coverages. Then as you go forward, as your needs change, the ability for agents to interact with customers knowing who they are and doing things like insurance reviews, to adjust coverages and products as people's protection needs change is still a core part of the customer value proposition. Where integrated service comes in is there's less value that customers place on more transactional interactions with agents. We believe that through integrated service, which is centralizing the service that we provide our customers, that today, in many ways, happens locally agency by agency.
By centralizing it, number one, we believe we can execute on those transactional interactions more efficiently than our agents and their support staff can individually. There's an efficiency play. There's a consistency and a customer experience perspective. By doing it all in one place and focusing on hiring people, training, and developing them, we can provide those services in a far more consistent way than our 10,500 agency owners can, doing it in maybe their own unique way. There's a consistency and an experience component to it. The third part of it, though, which will take a little bit more time. Once we've centralized the service and we've generated that consistency in the customer experience, we can begin to focus investments on self-service and on removing the necessity of some of those service interactions, that will reduce costs even further over time.
There's really a 2-phase component to the cost opportunity there. The first one is centralizing it and just doing it more efficiently. The longer-term view is eliminating some of those processes by providing, say, information and interactions to customers proactively. Over time, further reducing the cost by eliminating the certain elements of service that need to happen today. That's really how we think about it strategically. We're in the early stages of integrated service with our agents, we'll continue to expand that moving forward.