The Progressive Corporation (NYSE:PGR) Q1 2022 Earnings Conference Call May 3, 2022 9:30 AM ET

Company Participants

Tricia Griffith – President and Chief Executive Officer

Doug Constantine – Director of Investor Relations

Pat Callahan – President of Personal Lines

Conference Call Participants

Jimmy Bhullar – JPMorgan

Andrew Kligerman – Credit Suisse

Elyse Greenspan – Wells Fargo

Michael Phillips – Morgan Stanley

Gary Ransom – Dowling & Partners

Joshua Shanker – Bank of America

Greg Peters – Raymond James

David Motemaden – Evercore ISI

Yaron Kinar – Jefferies

Tracy Benguigui – Barclays

Brian Meredith – UBS

Alex Scott – Goldman Sachs

Meyer Shields – Keefe, Bruyette & Woods, Inc.

Ryan Tunis – Autonomous Research

Operator

Welcome to the Progressive Corporation's First Quarter Investor Event. The company will not make detailed comments related to quarterly results in addition to those provided in its quarterly report on Form 10-Q and the letter to shareholders, which have been posted on the company's website, although our CEO Tricia Griffith will make a brief statement. The company will then use the remainder of the events to respond to questions. Action is moderation for the event will be Progressive Director of Investor Relations Doug Constantine. At this time, I will turn the event over to Mr. Constantine.

Doug Constantine

Thank you, Emily, and good morning. Although our Quarterly Investor Relations events often include a presentation on a specific portion of our business, we will instead use the 60-minute schedule for today's event for introductory comments by our CEO and a question-and-answer session with members of our leadership team. Questions can only be asked by telephone dial-in participants. The dial-in instructions maybe be found at investors. Progressive. com/events. As always, discussions in this event may include forward-looking statements.

These statements are based on management's current expectations and are subject to many risks and uncertainties that could cause actual events and results to differ materially from those discussed during today's event. Additional information concerning those risks and uncertainties is available in our annual report on Form 10-K for the year ended December 31, 2021, as supplemented by our 10-Q reports for the first quarter of 2022, where you will find discussions of the risk factors affecting our business, safe harbor statements related to forward-looking statements, and other discussions of the challenges we face. Before going to our first question from the conference call line, our CEO, Tricia Griffith, will make some introductory comments. Tricia?

Tricia Griffith

Well, thanks, Doug. Good morning and thank you for joining us today. Anniversaries are natural time to look back on the past, and since this is the first investor call of Progressive's 85th year, I wanted to do just that. We have grown from a scrappy startup trying to find a foothold in the great depression to the tenth largest homeowners carrier, the third largest personal auto carrier, and the Number 1 commercial auto carrier. In just the last five years, our total company-wide written premium has nearly doubled.

Nowhere has growth been more remarkable than in Commercial Lines, which just passed the major milestone of over $9 billion in written premiums on a trailing 12-month basis. We grew commercial auto premiums over 200% in the last five years all while generally achieving a better than average industry profit margin and ended March just shy of $1 million, Commercial Line's policies enforced. It has truly been an incredible run with significant opportunities still waiting to be captured.

Congratulations to the Commercial Lines team, and thank you to all Progressive's employees and customers who have made the last 85 years so extraordinary. Throughout our 85-year history, we've have worked through many hard and soft markets, and we continue to address the hard market we're in today. While some indices suggest the value of used vehicle does leveling or even beginning to decline, used vehicle values are still significantly above those of early 2021. Steady but increasing trend in bodily injury severity has also contributed to the increase in loss cost we've experienced.

Further as a country emerge from the Omicron wave. We saw Personal Auto vehicle miles traveled recover to fourth-quarter 2021 levels, which were in the 9% to 10% range below the pre -pandemic baseline. Our response to these trends have been to reduce marketing expenses, increase underwriting scrutiny, limits bill plan options. And in the first quarter, we implemented rate increases of 7 points in Personal Auto that still in to earn in, which is an addition to the eight points we expecting 2021.

While we're making progress, we still have more work to do to ensure all of our states reach rate adequacy. Our rate and non-rate actions have had the expected effect on Personal Auto growth. While Personal Lines PPIF growth is still positive on a year-over-year basis, sequential PPIF growth is negative. New applications are down year-over-year, and a policy life expectancy is also declining. When we look across all the metrics we track, it seems likely that we're ahead of our competitors and increasing rates, which explains a large part of our slowdown in growth.

As we look forward to the rest of 2022 we're optimistic. As more states reach rate adequacy, we expect to be able to increase marketing spend and re-engage the growth engine. Because of the advantages we believe we have and the way we buy media, we can adjust marketing spend at the local and segment level and in such a way to ensure the new business we write meets our economic goals. And since we believe we are ahead of the competitors in taking right actions, we hope to continue our long-term trend of writing more than our fair share of clubs.

Even as we face these macroeconomic pressures, we have not slowed our pursuit of segmentation superiority. Our U.S. Personal Auto product model is now available in over eight -- in over half the states and is showing early promising results, especially among more preferred segments. We have also further expanded the footprint of our 4.1 homeowners’ product into four additional states in the first quarter bringing the total to 12. Our new normal since the onset of the pandemic has been disruptions in the economy that has buffeted our business. While there are many paths, the future can take, I'm confident in our strategy and our people and believe our greatest successes are still to come in the next 85 years. Thank you. I will take your questions.

Question-and-Answer Session

Operator

To be added to the questions [Operator Instructions] In order to get to as many questions as possible, please limit yourself to one question and one follow-up The last question comes from the line of Jimmy Bhullar from JPMorgan. Jimmy, your line is open.

Jimmy Bhullar

Hi, good morning. So I had a question first, just on the pricing environment and what your expectations are in terms of getting price hikes through all of the states because I think some of the states like California, obviously, been robust into raised price -- to give permission to raise prices. Are you seeing any changes in that at all, or do you expect changes over the next few months?

Tricia Griffith

We still have some challenges in a few states, including the one you mentioned, and we're working closely with regulators to get the rates that we need. Our desire is to be able to be more open, to open up our bill plan options, to open up or to loosen our underwriting restrictions. And once we get that rate, we can start to have that growth engine move. So we've got a couple of states that we're still working with -- a couple of big states that we've had some success in and why we feel pretty optimistic about the future.

Jimmy Bhullar

And the reluctance of California and some of the states that have been difficult as it is because of the strong results companies had in 2020 and early '21, or is there something else behind?

Tricia Griffith

Specifically, in California, it's a little bit how they look back versus perspective. And so I think the data is showing that these are real trends -- inflationary trends, and the need across the industry is very significant, and we want to be open for Californians, and we'll work closely with the regulators. So let's make that happen.

Jimmy Bhullar

Okay. And then just on the claims trends in January and February, do you think your business saw benefit from the Omicron wave at all in the early parts of the first quarter?

Tricia Griffith

I don't know if there was a huge benefit. Things open up a little bit more, but still vehicle miles traveled and frequency is still both on pre -pandemic levels or do you want to add anything on that.

During the early period we did see vehicle miles’ travel drop a little relative to the fourth quarter of 2021, we've seen that since return in March. So a very modest benefit, if any at all.

Jimmy Bhullar

And then just lastly, have you changed anything in terms of how you're investing in this environment, any major classes that you're reemphasizing or conversely, where you're seeing good value?

Tricia Griffith

I'll talk a little bit about our investing guidelines and then John Bowers and assigned John, if you want to add anything, let me now. We've had a line standing approach to our investing and that is, we don't want to target a certain book yields or level of investment and income for that matter. We want to earn the best risk adjusted rate of that we're showing on our portfolio. And most importantly, John's team, their most important job is to protect the balance sheet. That way the operating company can grow as profitably and as fast as possible. John, do you want to add anything?

Unidentified Analyst

Yes. Thanks, Tricia. I would only add to that. Obviously, the environment is pretty dynamic right now, and we continue to search out for good opportunities that would create long-term value for the portfolio, but always with a focus on Number 1, protecting the capital, and then getting the best total return that we can in the portfolio.

Doug Constantine

Thank you.

Operator

Our next question comes from Andrew Kligerman from Credit Suisse. Andrew, please, go ahead.

Andrew Kligerman

Okay. Thank you. Good morning. Regarding the underwriting restrictions that you mentioned, could you give a little color on what in particular you're doing there?

Tricia Griffith

Yeah. Andrew, first of all, I enjoyed your write-up last week. Welcome to P&C Insurance. And --

Andrew Kligerman

Okay.

Tricia Griffith

Yeah. And we have a couple of different underwriting restrictions. So we look at -- we'll look at gathering additional data, possibly, if we have more questions on a customer. So we call it pre -binding verification. So we may ask a little more specifics to make sure we have the [Indiscernible] adjust right and -- things like that. Do you want to add anything, Pat?

Pat Callahan

I think that's exactly what we do, is when we want to be certain, we've got all the underwriting characteristics accurately reported, we will have some additional follow-up questions for customers, both at new business and then occasionally at renewal. Additionally, we will put restrictions on how open we are from a bill plan perspective and other things. Just as we look at overall profitability, we want to make sure we're getting the right rate for our new business customers at inception.

Andrew Kligerman

And as a results of these initiatives, what percent of your book ends up with -- or has ended up with the rate change over the last quarter and maybe even the last 12 months as you've gone through these underwriting restrictions?

Tricia Griffith

I think it's more of the entering in and getting the right rate at inception. So we've had a higher percentage of customers that once we have the additional information, we have blocked and they've likely gotten somewhere else because we don't have the accurate information.

Andrew Kligerman

I see, I see. And any sense of proportion on that, Tricia? That you could give us, like, how much of your book you're seeing that on?

Tricia Griffith

Probably, I would say of incoming close, probably double-digit low.

Low double digits which is from half that when we were more comfortable with underwriting margin. So what we're trying to do here is ensure that every piece of new business coming in the door is going to be profitable for us. We understand that there is a distribution or on our pricing. So on the tail where we're less sure that we are going to make money, that is where we're going to ask a lot more questions and frequently those questions lead to the customer seeking insurance elsewhere. That has more frequently the outcome than an adjustment in the overall premium because frankly, some customers are looking to achieve a lower premium by not answering the questions accurately. So some of these efforts are focused on that segment. By pushing that segment to our competitors, obviously, we ensure that we're profitable. And to the extent our competitors do not employ such methods, it will affect our competitors adversely.

Andrew Kligerman

Lastly, our Commercial Lines, you noted in the letter that it was a remarkable 63% growth since their optimism that you can continue to grow in the double-digits. And what would give you that optimism?

Tricia Griffith

Well that process significant for a couple of different reasons. So we did grow a double-digits in all of our business marketing carriers, and still are growing significantly in FHT in us for-hire transportation based on still amount. So not good being moved across the countries since the pandemic. In addition to that, about half of that increase came from our transportation network renewals. So we had one of our partners, we went from 6 months to 12-month policies, so that obviously is significant. We increased our projected mileage which is how we compute our premium. So that was part of the increase.

We had rate increases to reflect the inflationary environment and forth, we see this last for us reinsure, so about half that increase wasn't CNCs. So all that said, even if on the commercial that the BMTs that we have now, the five on commercial, even if they slowed down a little bit, the great part about what we've been doing, and you wrote about this, over the last several years, is thinking about the future. So we just are getting going on our BOP, our Business Owners Policy, small business continues to grow. There we have 37 new states are being rolled out and three new states are actually this year.

We have our fleet program where we've expanded the number of power units that we write from 10 to 40. We have the acquisition of protectors from medium to larger fleet. How we think about really, business in all -- at least, Horizon 1 and 2 for now, and ultimately, we will do that and Horizon 3, is, how do we continue to have growth even if maybe one segment of that business may slow down or may fluctuate based on macroeconomic conditions? So I'm excited about all the opportunities in Commercial Lines because we've spent the last four or five years investing in the future.

Andrew Kligerman

Thanks so much.

Operator

Our next question comes from Elyse Greenspan with Wells Fargo. Elyse, your line is open.

Elyse Greenspan

Hi, thanks. Good morning. My first question, I was hoping that you could quantify what percent of premium per state's represents where you think the majority of rate increases behind you. And then, associated with that question, what gives you guys the confidence to make that statement about rate versus forward loss trend given there is just so much uncertainty still with both frequency and severity?

Tricia Griffith

I probably would dissect all these days, I would say, that we feel pretty positive that, one, we got ahead of competitors, which we think is important -- is a bit important in the past. And we're watching trends closely. I don't -- the crystal ball, I wish we had, would help us, but we'll watch those trends. We still are watching labor rates and some other indicators that could make us to take more rate. I think the beautiful part is we got out ahead of rate that -- our hope is that the rate we take, if we need to, in some states will be less -- will be the smaller bites of the apple that we like to take.

We obviously couldn't do it in this environment because the trends were so dramatically increased. But we think there is a few states we're working on. We think that the majority of the rate actions are behind us, and what we're really thinking about now is when we can pull the trigger on some of that growth. And Pat, and John, and I sit down with the controller from Personal Lines very frequently to talk about return to profit and return to growth, in that order.

And what we're looking at is literally state-by-state, channel-by-channel in the auto book and say, okay, if April results come out here, could we reduce underwriting restrictions? Could we open up a little bit of the local marketing? And I talked in my opening comments about how we have the ability to do so in each segment, in each market because of the way we buy media. So it's a complicated question, and there's 50 shades of this and actually a 100 because of the channels and that we're working closely to figure out when to do that. But we feel confident, and of course we had that 7 points to earn in, so more will come to the story, but we're watching things closely.

Elyse Greenspan

Okay. And then my second question, as you've gone through this environment, have you guys noticed any change with your Snapshot and the take-up on your UBI products, and then has there been any change in discounts that you guys have offered are or the time period on -- that you guys are observing with your products?

Tricia Griffith

We saw initially a pretty big increase in the take rate and the agency channel, which has been a challenge with us. So right now we sit at about 40% take rate on the direct channel, about 10% in the agency channel, and this of course is excluding California and North Carolina where we can't use telematics. So that blended amount is about 28% take rate. We continue -- we have surcharges and discounts and of course, participation discount, and we continued to learn from those and really try to make sure that ultimately we try to price to the whole curve. And that's so we will continue to do as our Snapshot evolves.

Elyse Greenspan

Okay. Thanks for the color.

Tricia Griffith

Thanks, Elyse.

Operator

Our next question comes from Michael Phillips from Morgan Stanley. Your line is open.

Michael Phillips

I'm sorry. Can you talk about, I guess, earlier lessons learned from -- I guess it's been about a month end since you've gone continuous in one state, but takeaways from that, maybe what we can expect, if -- for that to be a national plan for you guys, one that could be the case. And then, just what does that mean for you? Well, if you do go national for that, what does it mean? Does it -- more accurate pricing and therefore, better loss ratios, better gross, just talk about what that means for you.

Tricia Griffith

It's literally been in one state, Oklahoma, for 30 days. We'll have to answer that question of how it's going on -- maybe next quarter or the quarter after that. We'd like to continue it because -- especially as we've thought about the pandemic, it more responsive in changed to driving behavior, and we think we can -- we know the costs have gone down overtime on both mobile and then [Indiscernible], and so we thought it was a good time. And we have high hopes that Oklahoma will be successful, and that we'll continue to roll that out once we have more data.

Michael Phillips

Okay, thanks. Second, totally unrelated question, what percent of your new customers -- when they come in the door, start off by going online and then end up switching from online to actually using a call center from you guys. And I'm wondering, is there any near-term opportunity you can take advantage of given the unit’s funds from [Indiscernible] competitor, what they are doing with their [Indiscernible] cars?

Tricia Griffith

I think it's a pretty small percentage. It used to be much larger, but I think our technology has gotten so much more sophisticated that more people finished the buy online when they're there. It's a small percentage.

Michael Phillips

Okay. Thank you, Tricia.

Tricia Griffith

Thanks, Phillips.

Operator

Our next question comes from Gary Ransom with Dowling & Partners. Gary, please go ahead.

Gary Ransom

Thank you and good morning. I wanted to ask about claims counts and claims personnel, and you've had a lot of growth on the commercial side. Maybe it's flat or but I wondered if you heard a little bit flatter on the first line side, but I wondered if you could talk to us about having the right people as things are changing rapidly. And if there's any difficulty in getting the staffing right there.

Tricia Griffith

And it's a great question. And over the year as we really spent a lot of time making sure that we think about centralization, and consolidation and having the right file with the right representative at the right time. And we took advantage of the slowdown when frequency plummeted during the beginning of the pandemic to do the same thing on the Commercial Lines side because is it such a different animal. On what I would say is turnover is up, especially with new hires. And we're seeing that game you're seeing across the industry and across with entry-level jobs.

That said, we've had this recruiting machine that is just amazing, and it has enabled us to really continue to hire at a rate that helps us to get out in front of our growth. So we want to make sure that people, are not just here, but they are trained and can do the right thing on behalf of our customers. I think one of the things that I am proudest of that we didn't do, was to reduce our claims for us during the pandemic, we were severely overstaffed for several months. And Mike Caesar, who was the client is President of time and I made the decision that we just couldn't do it, that we knew that this was for the country not for our company.

And that allowed us to have staff waiting and available when things picked up. So we're going to continue to hire in advance of need and benefit claims and CRM side. Make sure we have the right training in both the virtual and maybe sometimes in office environment. We also look at in this group reports to John [Indiscernible] our internal audit group looks at the quality of the files and we have seen continued good results in there in that.

Gary Ransom

For just Snapshot, I know you've talked on other times about using Snapshot stuff under the claims process as well. Have you --

Tricia Griffith

I -- you cut out, but I think what you're saying is we -- are you using that in the claims process. That's something we'll definitely consider as we think about continuance, we'll think about other services and claims could be one where we could actually help with the investigation should our customers have that Snapshot device.

Gary Ransom

So that's still a future thing you're looking at, nothing really happening now.

Tricia Griffith

We're testing all the time. That's what I would say.

Gary Ransom

Got it. Thank you very much.

Tricia Griffith

Thanks, Gary.

Operator

Our next question comes from Josh Shanker from Bank of America. Josh, your line is open.

Josh Shanker

Thank you. During the re-pricing and marketing rationalization. The policy count growth in Progressive property was still fairly healthy. I'm going to guess that you're not terribly interested in insuring someone's home, they're not often going to give you their cars. Can you talk a little bit about the different in hearings and retaining stems versus retaining Robinsons and getting new ones over the past nine months?

Tricia Griffith

Yeah, thank you, Scott. I said -- so Sam's have always been defined as shoppers, and so they are very expensive. And so we know that our attention is going to be less when we crank up rates on the auto side, and that has proven to be true. And we've had less of a retention far in the Robinsons side. From the home perspective, we've been clear on our desire to de -risk and to get more of our nonvolatile storm states more in the 2/3 of our book versus the 50% it is now. This quarter we'll start to non-renew the policies that we talked about in Florida, about 60,000 policies over the next year.

And we continue to try to de -risk our portfolio. With property, it takes a little bit of time because there are 12-month policies, and it's also reflective of industry pricing. I think you've seen the storms that have happened in March and now again in April. A lot of it has to do with growth. Could be that right now, it's still a competitive market because everyone has increasing rates. But we're going to continue to increase rates and try to stay ahead of that trend and to de -risk our book a bit.

Josh Shanker

So net of the Florida non-renewals, obviously you're growing in 47 other states with fairly desirous appetites. Should we feel that the deceleration and policy count growth overall for property, or do you think that those two things neutralize each other and it will be hard for us, from our perspective, to be able to see that going through the numbers?

Tricia Griffith

Yes. I mean, our desire is to grow in the non-volatile state, so we're taking actions to do so with more agents that are able to sell our property book. So it's hard to say. Again, that'll be relative to what our competitors do. And in addition, I talked a little bit in my opening comments about our increased use of deeper segmentation in the property products. We believe we have industry-leading segmentation auto side where our R&D departments were closely together to get that same level of segmentation in homes. I think that'll be really important.

And in many of the states that -- we still have a decent amount of policies and we've been able to have higher deductibles, have cost sharing. And so that -- this was not treated as a maintenance policy that -- just wait for that hailstorm to come and we'll replace your roof. And so those are some of the other things that we've changed. I can't really look out into the future and know how we're going to grow in a non-volatile space, but that is our approach. And I think it will take some time.

Josh Shanker

Okay. Thanks very much.

Tricia Griffith

Thank you.

Operator

Our next question comes from Greg Peters with Raymond James. Your line is open.

Greg Peters

Good morning, everyone. So in your answers, you mentioned eventually returning to growth. And I'm want us to focus on the advertising piece of that. Your advertising spend is down in the quarter or down year-over-year. And I'm just wondering whether you actually need the lowest price to win the customer or put it another way, does the brand Progressive get you to a customer when -- even if you don't have the lowest price and when will be advertising spigot be turned back on if most your rates increases are behind you?

Tricia Griffith

Oh, yeah. I do think our brand would have us win in the marketplace and doesn't always have to be this lowest rate, especially for people that have had experiences with us. I remember years ago, when I ran claims, we had really high NPS for those people that had claims because of the way we treated them when they needed us most. So yeah, I think that makes sense. And when we look at the difference between agency and direct, as far as PLE, we see that Direct has gone down a lot, and we think that has to do with some brand. So what Pat and I talked about is really state-by-state, and we'll do some sensitivity analysis of if we turn on local marketing by X Amount X plus X plus, what we think could happen to new apps, etc.

We will only do that if we're sure we're in the position to start that growth again. So we are as anxious as anyone. We did not like having new business app negative. We want to grow. We want to grow as fast as we can, but again, profit is one of our core values, and that will trump growth. But let me tell you, these conversations are happening every day, and when we turn it on, we will feel all pretty confident that we're in a good position to do so. Of course, things can change, and we'll always be -- we have to be nimble with those changes, and we we'll be able to do that based on the data that we look at literally daily.

Greg Peters

My second question, I wanted to pivot you. You talked about rolling out the new homeowners’ product. Can you just step back and tell us a little bit about that product and what differentiates from what you were offering before?

Tricia Griffith

I'll let Pat say that.

Pat Callahan

Yeah. Happy to talk about that. So part of the segmentation that we need to enhance in the property side of the business is on the age of the home and the age of the roof primarily. And we've just got better segmentation that we're bringing in as we expand that product over time, there's also some coverage expansion that agents have asked for, but primarily it's understanding the risk better and recognizing that the majority of our losses are coming from damage to the roof on that home and capturing both the age of the roofs and or the age of the home or in most cases, both, helps us better rate and better underwrite.

Greg Peters

And just as a follow-up to that answer, does that mean that the older the roof that you're -- is there a depreciation schedules that you're applying allowing the customer to buy out for roof placement? I am just trying to understand how that fits with what some of your competitors are offering in the marketplace.

Pat Callahan

Yes, it certainly varies by state what we can offer. And when we talk about a market like Florida that limits our ability to price a depreciated roof accurately. That's one of the challenges that we see in a market like Florida, but we do offer a depreciation or effectively a roof depreciation schedule for customers, so they're not, I guess, incentivized to have that roof replaced when it's old and there's damage to it.

Greg Peters

Okay. Thanks for the answers.

Tricia Griffith

Thanks.

Operator

Our next question comes from David Motemaden from ethical. Your line is open.

David Motemaden

Hey, thanks. Good morning. Tricia, you had said you believe that the major auto rate increases are behind you and obviously looking to turn on the growth. I guess, just saying that the major auto rate increases are behind you. We still have 7 points of rate that's going to earn in over the course of the rest of '22, how should we think about the auto loss ratio? And when that will start to stabilize and eventually improved, do you think that's a second half of '22 event or how are you thinking about that?

Tricia Griffith

That's follow-up and data. So we watched as the rates earn into the loss ratio, and we have a couple of big states where we were able to get rate pretty quickly in on mainly, Texas and Florida. And so those are two big states for us. And so we'll watch those states closely to see when we think it's the right time to grow. And again, we're watching all the macroeconomic factors that are going into the inflationary pressures specifically with collision and property damage to make sure those down continued to increase. I think of labor rates and items like that's the will watch those close to make sure we have the right amount of rates to start the growth.

David Motemaden

Got it. Thanks. And then, I guess just -- thinking about, maybe, on that last point, just some of the severity factors in trends that you're observing throughout the course of the first quarter and then also your outlooks, could you maybe break down how you guys are thinking about used car prices as well as -- labor is one that you mentioned and the outlook on those items as we move forward from here?

Tricia Griffith

Yes. So we've launched we watched the Manheim Index pretty closely, and even though there is a couple of data points that say it's flattened or maybe even gone down, it's still 35% higher than January of 2021. So there hasn't been a step function change and a drop in used car prices. In addition, we know accidents are happening at a higher rate of speed, so there's more damage. We know that parts are up over 12%. Labor is only being up a couple of percentage points. We're watching that closely just because of watching the unemployment environment and how tough it is to hire in the industry and tax in the industry.

And then, because of body shop capacity, we're also seeing rental car extensions of several days. And so all those things go in some play when we think about severity on both collision and PD, and that's why they're higher. I feel pretty good and pretty stable on the BI side. In the last four quarters, it's been in the 6% to 8% range. We'll continue to watch that. We have -- we've seen a little bit of a turning rep rate, increase some of the general damages, which are the non-medical damages increase. But we feel that that's, at least, stabilized over four quarters, but we'll watch that, of course. But those are the big drivers that go into the extreme severity trends in collision and PD.

David Motemaden

Got it. And the follow-up, when you say that you're ready to move potentially to more growth, and your rates, you feel like most of them are behind you, what is the severity view that you're making into that statement?

Tricia Griffith

The severity view? I think we're just looking to see if we can -- the severity will be what it'll be in terms of what's happening from an inflationary perspective, so we're just pricing to that, and when we believe we can make our calendar year and lifetime target mark -- as the profit margins will start to grow.

Unidentified Analyst

It's important to recognize a lot of these decisions are made locally, so we are product managers who are responsible for geography and products, and they are obviously adjusting rates with their view and the pricing team's view of future loss trends. They take the rates up. And while they are fairly confident that the projections are right, normally, you are going to want to see some results come in before you open up the [Indiscernible] on new business side. That said, there are -- in geographies now where we have done that.

But there are also a lot of geographies where we have either not gotten the rate we need, such as some of the large states we mentioned earlier or we're still a bit tentative on understanding if we have taken enough rate such that we can open up the [Indiscernible]. So it really is a day-to-day [Indiscernible] geography level decision on when to turn advertising back on, when to loosen the underwriting. But again, I think one of the strengths we have is that team of product managers who are considering everything locally and making the best call, again, on a day-to-day basis. So it's not something we can predict at the aggregate level. It's going to come down the state level decisions, and we're confident we are going to be making right ones in each state at the right time.

David Motemaden

Understood. Thanks so much for your time.

Tricia Griffith

Thank you, David.

Operator

Our next question comes from Yaron Kinar with Jefferies. Please go ahead.

Yaron Kinar

Thank you. And good morning. Excuse me. I was just curious with the situation in Eastern Europe and Russia. Seems like some of the European OEMs have had some supply chain issues. Are you seeing that impact in maybe U.S. manufacturers or priced of cars, used cars, parts or the like?

Tricia Griffith

Not really. We see the same sort of bottlenecks in supply chain with kits that happened before what's happening in Russia and the Ukraine, and so there's still some supply issues there, especially with new cars and that has of course increased used car prices, but that was prior to this.

Yaron Kinar

Right. Okay. And then I think one of the comments you made around homeowners is that your ability to grow is going to depend on the competitive environment. Can you maybe talk about how you see the competitive environment in homeowners outside of the Southeastern Florida?

Tricia Griffith

That's also state-by-state as well because if you got west there's issues in terms of fires, etc. So I think we look at each day, look at proclivity to have a major weather events. Understand our segmentation more deeply. And then we will look around. It's a competition on both direct and agency side, so we've got not just the agency side where we sell Progressive home against some of the captives or bigger players. But we also have the Direct side where we have the opportunity to have Progressive Home as well as many unaffiliated partners. And so we have some advantage to get Robinsons, they're not always on our paper as well. But we look across the country, try to get -- we're trying to get to the more non-volatile states. We believe when we look at our results against the industry and non-weather in those states, we're very competitive.

Unidentified Analyst

And we have great and broad distribution network in those non-volatile states that are quite committed to Progressive as a company they use in their offices. So our independent agents across those non-volatile states ensure a lot of Robinsons. So we have access to a lot of that business, and we're going to spend more time going after it. I know you excluded Florida in the south [Indiscernible] in the question, but it's really important that there are solutions in those states that are viable for consumers and the industry.

And it has been very challenging in some of those environments, and so we're working with regulators and legislators to find solutions because Florida, specifically, right now is a very disruptive market. Pat was talking about the liability of depreciating a roof from Florida. It -- you must offer a full replacement value on your roof in Florida. So it's very difficult to find solutions for homes that have older roofs, that are not up to code. So we hope to, obviously, growing in the non-volatile states. We also hope for solutions in some of those cap current states that are, again, amenable to both consumers and the industry.

Yaron Kinar

Thank you.

Operator

The next question is from the line of Tracy vendor AG from Barclays. Tracy your line is open.

Tracy Benguigui

Good morning. Before declaring victory [Indiscernible] with the exception [Indiscernible] I'm wondering if you're seeing favorable seasonality in the first quarter, like others are talking about. And if so have you taken that into account when you say the majority of your rate increases are behind you?

Tricia Griffith

I think our seasonality has been relatively stable as it has been in the past. I'm not saying we're winning, Tracy. What we're saying is that we believe we got out in front of our competitors with rate from the data that we look at. We're watching trends very closely. A lot of caveats to that. And all we're saying is that with the rate we have from last year and the rate that we have on the street. We believe we're well-positioned. Again, lots of caveats on making sure that we have enough and that we can grow in turn on that local media. So and maybe in a quarter or two we can have a different conversation helpful, but right now we're still tentative, but we wanted to just give some color on the fact that we're really proud of our rate-making machine and that we're able to get out in front of that despite a lot of headwinds.

Tracy Benguigui

I hear your optimism, but I'm also just wondering, in some states, are you just simply reaching your maximum limit you think regulators will allow you to take, or in theory, you'd choose to take more rate you could do so?

Tricia Griffith

We look at the data, and we look at perspective rates in terms of what we're seeing in trends. And if we need more, even states where we have already increased rates several times, we will share the actuarial data to get the right rate, to get to our profit target margin. And that's how we've always worked. And I think regulators are thinking about their constituents because of all the other inflationary pressures. But this industry has been very clear. It needs rate -- has needed rate for some time since last year. And now we feel good that we're starting to get it in many of our larger states.

So I'm just optimistic because we were able to have great conversations, great relationships in a couple of key states and many states across the board with key regulators where they get it. They see the data. They understand it, and they know the worst thing you can do is not give the rate because then, you're not going to have insurance available for their constituents and ultimately, you're going to have to get the rate. So it's going to be, over time, there will be bigger rates in the future. So I think that's how it works. And so I am very optimistic.

Tracy Benguigui

Okay. And I know you make local decisions but to any extent, are you taking any cross states up to dates like higher rates of states where you have success to make up for inadequacies in states like California?

Tricia Griffith

No. We have a very specific goal of not subsidizing and to have every one of our products in aggregate common to our 96 combined ratio goal.

Tracy Benguigui

Okay. I'm sorry, just really quick, you mentioned is 20% take-up in telematics. Is that for new business only? If not what percentage of your in-force uses telematics?

Tricia Griffith

The 28% is in-force. It's no -- new. I'm sorry, new. 40% new in direct, 10% new in agency, yeah.

Are we going to report [Indiscernible] I'm sorry?

Tracy Benguigui

Sorry. What would it be for your in-force, which is a lot larger than your new business.

Tricia Griffith

I think we are saying we don't share that.

Tracy Benguigui

Oh, you don't share that. Okay. Thank you for taking my questions.

Tricia Griffith

Thanks. Tracy.

Operator

Our next question is from Brian Meredith with UBS. Brian, your line is open.

Brian Meredith

Yes. Thanks. John, first one for you. Just curious. Where do you knew money yields stand right now as of today versus your kind of book yield on your fixed income portfolio and maybe perhaps you could give us just a general sense of how much of your portfolio roles every 12 months.

Unidentified Analyst

Thanks. I'll take that one. So --

Brian Meredith

Okay.

Unidentified Analyst

-- I don't like to give too specific, but I would think in broad swaths, if you look at March, 2022, in terms of where investments were, inclusive of treasuries, there was about 2.5% and taking that out on either side of 3%. Generally, if you think about a portfolio with a three-year duration and our size, I would think about it every 12 months, anywhere from $6 billion to $8 billion of that portfolio rolling off.

Brian Meredith

Great, really helpful. And then, second question, I'm just curious, Tricia, would you care to speculate or tell us -- give us some sense of when you think California will actually start granting rate increases?

Tricia Griffith

Well, Brian, if I knew the answer to that -- we're -- all I can say is we're working --

Brian Meredith

[Indiscernible]

Tricia Griffith

Yeah, we're working with the regulators and doing all that we can because we want to be able to open up, and we want to be able to have affordable, available insurance for California and just -- most populous state, we'd love to grow there, and we'll do what we can to do so.

Brian Meredith

Great. I mean, is there -- I'm -- but just curious, is there amount of time that you're willing to wait to get those rate increases? Are you taking pretty -- some pretty significant none underrating actions here to improve results right now?

Tricia Griffith

Yeah. We're taking very significant non-rate actions because of the inability to get the rate. And obviously we will work with the regulators to figure out the best thing to do for our mutual constituents and we just need to continue to do so.

Brian Meredith

Great. Can I ask one more quick one. I'm just curious. PLE continue to drop pretty significantly. Is that reflective of what exchange in business mix or is that just the pricing environment? Just maybe remind us exactly what that PLE reflects.

Tricia Griffith

It really does reflect the pricing environment. And I talked a little bit about the difference in agency and direct with agency being a little bit more elastic. And when we look at PLEs, Texas and Florida, they obviously don't drop as dramatically, which would tell you it's pricing because we got out in those two big states pretty early. I think that our holy grail is retention, but we also have to be priced right.

And we also noticed some consumers are trying to figure out, can they change their coverages or do things differently or as Snapshot and things like that to reduce their prices. So I know in our CRM organization we continue to try to grow what we call our customer preservation teams. So if they call in and they are challenged to pay their bill because of increases. Can we work with them on bill plans, on coverage to make sure they are obviously still covered, but to get them the right rate in order for them to stay? But it is it is reflective on the majority with prices.

Unidentified Analyst

Just to reiterate a couple of parts made earlier in response to that question. We do see different use to study bear consumer segments. So on the more preferred end, less elastic and more non-standard or Sanmen far more elastic. So that obviously plays itself through. And for the change. Additionally, as Tricia noted earlier, we do see a difference by channel. So some of that's because our agents have access to other markets and light proactively shop. But we also think there's some brand benefits. So we do see less degradation in the direct channel than we do in the agency channel.

Brian Meredith

Very helpful. Thank you.

Tricia Griffith

Thanks, [Indiscernible]

Operator

Our next question is from Alex Scott from Goldman Sachs. Alex, please go ahead with your question.

Alex Scott

Thanks. First one I had is just on the Personal Auto NPW growth. I think high level when we try to triangulate the PIF growth you're getting in the rate. NPW growth isn't showing as much of the rate flowing through as I would've expected. I'm just interested if there's any makeshift or something affecting that or if there's any nuances to that that I should be considering.

Tricia Griffith

Probably point to average written premium growth with the pricing increases coming in. And I think that's reflective of our new business growth in overall growth.

Unidentified Analyst

A couple of other comments on that. We did mention we still have seven points of rate to earn in, in our Personal Auto programs, so some of the rate we've taken has not yet affected the policies. We report the written premium change, so the earnings will affect combined ratio, more so down the road. But if you look at the change in new average written premium versus renewal, you'll see renewal is up significantly more. So as we take revisions that are predominantly base rate revisions, those will flow through directly to all our renewal customers.

On the new business side, people shop, so we won't see all that average written premium benefit for new customers perhaps at any time when we are taking rates up. So there are some timing issues there, but we're also cognizant of the new renewal mix and how that flows through in terms of the total average premiums. We think the rate we're taking is definitely earning into the book. It's being accepted by consumers actually at a little higher rate than we've seen historically, which is also reflected. We think of the market conditions. So we think the actions we're taking are absolutely resulting in the outcomes we're expecting.

Alex Scott

Got it, and thank you. And second I had been just on competition. You talked about some of the advantages you have in your sophistication with the ad spend, and I'm just interested if you've seen anything as we've gone through the pandemic, which I think was a bit of a wake-up call to some of the more brick-and-mortar type distribution companies. Are you seeing more competition there? Are you able to execute that strategy to the same degree you've been able to in the past, even just thinking beyond where pricing is at the moment and how it appears near-term?

Tricia Griffith

Yeah. I would direct you back to our four strategic pillars that we talk about all the time we make sure we invest in all the time and I have seen our strength there. So the first one is our people and our culture are our most important competitive advantage. So during the pandemic, we have really made sure that we are connecting even, if it's the virtual to our employees, like continue to do every new hire class. I am out and about virtually and now more in-person, but people and culture are really important. And it's important for people to feel good about being on a winning team. The second we've talked about a lot is our brands.

So we're going to continue to invest in our brands and have some really great creative coming out end of this month or early June. And then of course, competitive prices, we've been talking about that for the last hour, we want to get to where we're really competitive. Some part of that is getting the right rates. But it's also that continuation of our superior segmentation and making sure that we care deeply about expenses. So we continue to create expense goals for the future.

And then lastly, and John have brought this up, is our broad coverage, so we're going to continue to be where, when, and how customers want to shop. And I think that's the key. So regardless of the people entered independent agency channel or the direct channel, we've been in both for a long time, we appreciate both. We appreciate the fact that consumers have a choice that if they want to buy on their phone, their iPad, through an agent, through 1-800 Progressive, and we're going to be there as they change, especially if we've invested more in business closed floor on the commercial side of HomeQuote Explorer. So all those four strategic pillars really worked hand and glove to make sure that we stay competitive. I feel really great about our position in both channels and how we think about the future.

Alex Scott

Okay thank you.

Tricia Griffith

Thank you.

Operator

Our next question comes from Meyer Shields from KBW. Your line is open.

Q - Meyer Shields

Great. Thanks so much. Tricia, in your -- [Indiscernible] earlier question, you talked about the returns profit proceeding, the return to growth in conversations with controller. Is that to a monthly basis or is that a full year? In other words, if you are priced adequately, but having earned in all the rate increases that are in the market now, will that constrain growth?

Tricia Griffith

Yeah, we'll look at timing of when to start, when you ramp up some local advertising. Remember, we haven't shut off our national advertising, so it's not like our brand isn't out there, so we still have some ability to grow. But yeah, we'll look at the pivotal time or right time of when we should start that growth, making sure that the rates in each particular state are adequate for us to reach our target profit margins.

Q - Meyer Shields

Okay. But there's some monthly combined ratio pressure because of lower prior rate. That's not an impediment to growth?

Tricia Griffith

I don't understand you.

Unidentified Analyst

No, we're obviously managing through a calendar year, '96 or better, so we have that as an objective function for sure, as do big product managers. But if they've taken rates up to where they think the lifetime combined ratio for new customers they are writing is adequate, they will likely air towards growing more. There is the consideration of the calendar year combined ratio for sure as well, but generally, if they think the new business customers they're writing today are adequately priced over their lifetime, they will be happy to go for growth.

Q - Meyer Shields

Okay. Perfect. Thanks. I apologize for not expressing the question well. Second question, on price sensitivity, is that heightened across various customer segments when overall in place in outside of car insurance is elevated?

Tricia Griffith

Yeah. Not really sure if we know that. But I think what John was saying too, in terms of elasticity, our renewals are improving on the elasticity side, which tells us that and we do histogram on decreases or increases, to a certain percentage or buckets of percentages. And we're seeing more people even if they are shopping, they're staying when they get their renewal, which likely means they can't find a better rate. That's the only thing we can look at. What's in data, but it's hard to say with all of the economics is going on in the country.

Q -Meyer Shields

Looking perfect. Thanks so much.

Tricia Griffith

Thank you, Meyer.

Operator

Our next question is from Ryan Tunis from Autonomous Research. Ryan, please go ahead.

Ryan Tunis

Hey, thanks. Good morning. I just had a question on operating within Progressive's constraints. So the plan, historically, has always been doing 96 or better and grow as fast as you can. The vast majority of the time, growth is easy because you got usually close to the 96. But whenever you've gotten kind of closer to 96, like the second half of last year, it's been focused on re-underwriting, focused less on growth, all that. I guess I'm just curious -- and you did that before you're even at a 96, but we're getting there. So after having gone through the first quarter when you've been -- and again, somewhere running 94 on a group basis and above a 96 in personal auto, is it safe to say that you have the same risk appetite that you did later in 20 -- later last years?

Tricia Griffith

Yeah. I mean, I think our standard and our operating policy hasn't changed. And remember for reporting and 94.5%, we're still looking at perspective rates and we're looking at trends, that will be future over 96% if we don't do some. So the data is in a moment in time we're looking at rate need ahead of time to make sure that we put that good business on the books for both a calendar year, '96 and a lifetime '96, I think those constraints, as you call them, I mean, I think I'd call them just our operating plans have worked well over the years. And in fact, the first time we talked about '96 was in our annual report, 1971 and when we went public.

And it's worked really well for us. If you look at our long-term trend, it's nice to have that Governor, it helps keep us disciplined around our pricing, helps keep us disciplined around our expense philosophy. And it has built us to the number three, and our Personal Auto carrier. And I can tell you when I started in 1988, we were nowhere there, so we will continue with that of course '96 is in the aggregate, so it doesn't mean that obviously our new business on the direct side wouldn't come in at a '96 and there's other areas where we aggregate are up to the 96. And I think it's been a great winning business model.

Ryan Tunis

That's clear. My follow-up was just on retention. So retention has continued to actually hold up a lot better than I would have expected. And you're seeing how much rate you implemented in the first quarter. Yes, I was just maybe wondering some clarity of what you've implemented and how much has actually been -- I mean, showing you the customers that was that mainly on first-quarter, but I'm just trying to think of like maybe that might be somewhat of a tailwind headed in the second quarter.

Tricia Griffith

Well, I think it depends on if you're looking at the trailing three or trailing 12. I think trailing three as more responsive to our rate increases. And so like I'd started to say before, we saw early results with our retention in some of the states where we took increases more quickly. When could still seeing a little bit of degradation again, a lot of that is relative to what our competition is doing. So if you're getting your renewal and you're stopping and rates are going up. And again, that's why we tried to get ahead of rate.

Because if we can be stable, which is what consumers want and they go to shop and now it's much more increased with our competitors, they're going to stay with us then of course, the new business we've been talking about for a while. So we keep a close eye on retention, especially because we've been really proud of the work we've done today over the many, many years. But we'll watch that closely and do everything in our power to keep our customers that we've taken so much to acquire.

Ryan Tunis

Thank you.

Tricia Griffith

Thank you.

Doug Constantine

We've exhausted our scheduled time, and so that concludes our event. Emily, I will hand the call back over to you for the closing scripts.

Operator

That concludes the Progressive Corporation's First Quarter Investor Event. Information of actual replay of the event will be available on the Investor Relations section of Progressive's website for next year. You may now disconnect.