Tom Wilson: Let me provide a little overview. And then Mario you can take it. So Josh, first, we’ll take business from anybody’s, not just for price. You are correct in that you see €“ remember, National General, we took €“ when we acquired National General, we gave them both the Encompass business, which was straight up independent agents under the Encompass brand. There’s also an Allstate independent agent channel that we’re transitioning to National General products and services over time. So the National General has both of those. On the direct versus agent piece, we’ve been shutting down growth and reducing expenses. We went first to the direct channel because it was faster, and we got more dollars out of it. That doesn’t mean that we have a preference for Allstate agent versus direct. We’ll serve customers any way they want to be served. Mario, do you want to add some additional perspective on that?
Mario Rizzo: Yes. And maybe I’ll focus on €“ first on the Allstate brand, Josh, in terms of the shift, the mix shift between direct and exclusive agents. So you’ll remember a couple of things. One of the things we did this year was we reduced the amount of advertising spend, particularly lower funnel advertising spend, which directly impacts both volume through the direct channel. And I think you’ve seen a decline in the direct Allstate branded production as a result of that. I think the other thing you’ve seen is the phenomenon we’re experiencing in the exclusive agent channel with Allstate. And I’ll take you back to one of the core tenets of transformative growth was to reduce costs. But one of the components of it was to reduce distribution costs by changing how we compensated our exclusive agents, and also introducing lower cost, higher productive new models.
And I think what you see in 2022 is that the model that we put in, that shifts agency compensation more to new customer acquisition has driven a level of engagement and behavior change on behalf of our exclusive agents that’s resulted in an increase in new business production, despite the rate actions that we’ve taken. I think as we go forward, we’re going to continue to evolve the agency model. We’ll continue to shift commission away from renewal to new business. And while at the same time, continue to enhance our direct capabilities so that when we do lean back into growth, we’re willing to accept the grow through any channel that we can write it. But I don’t think it’s unreasonable to assume that the first place you’d see kind of sequential growth would be in the direct channel, just given that when we turn advertising back on, that will be where a lot of the claim volume is driven through.
But at the same time, we are pleased with the €“ again, the engagement and the behavior shift of our exclusive agents and the performance of the new agency models in terms of their levels of productivity, which I think bode well for us from a long-term growth perspective.
Josh Shanker: Is there a difference in profitability over the lifetime of the customer, depending on the brand and the channel it’s sourced? And long-term, should there be any difference?
Mario Rizzo: Yes, I can jump in. Any Allstate brand, I think over time, it should be the same, right? Because we’re targeting and marketing to the same customer segment and looking to drive the same lifetime value, whether we write it in the agency channel or we write it in the direct channel. And you’ll remember, we’ve gone to differentiated pricing to match the cost of the channel with the price that the consumer is paying. So that kind of normalizes for the acquisition cost or the distribution cost. So we’d be getting the same lifetime value. I think in the National General brand, what we’ve got today is predominantly still a non-standard mix, which has a very different lifetime value than the standard and preferred products that we write in the Allstate brands.
