But we are like, why go out and advertise if you are going to write it at 105 combined ratio. So we think about it economically first and in terms of creating long-term value. Mario, do you want to talk about how you are thinking about expenses and where you go this year?
Mario Rizzo: Yeah. So, Greg, I think, when you combine the pieces that Tom talked about, I think, you can get comfortable that we can continue to improve our expense ratio and our cost structure to get more competitively priced and invest in marketing at the same time. So when I think about the broad areas where we are looking to get more efficient and where we have gotten more efficient over the last several years, first, distribution costs. So when you look at the progress we have made on creating a lower cost but more productive Allstate agency distribution system. We are really happy with the progress we have made there. And I have talked a little bit earlier about the increases in overall production. But underneath that, the even more significant increases in average productivity as we have fewer agents producing more volume today than was the case a couple of years ago.
And within our expense ratio, the distribution cost component of our expense ratio has continued to come down while we have been able to do that. So I am really optimistic that as we move forward and look to grow in more states that our Allstate agency force is going to be a core part of that and we will continue to be able to do that, but do that at a lower distribution cost overall. On the operating cost side through the combination of becoming more digital, outsourcing, offshoring, just improving processes, we have seen pretty significant reduction in operating costs going forward and we are going to continue to hammer on that one. We have also seen similar improvements on the claim side. Although I will say we are going to continue to invest in claims as part of profit improvement plan to get more effective on a number of processes.
And I think the combination of the efficiencies we will get in those three areas will help fund the marketing investments that we want to make and will make as we look to accelerate growth.
Gregory Peters: Okay.
Tom Wilson: But if we need to spend money to grow on advertising and we like the profitability, we are going to spend more money on advertising.
Gregory Peters: That makes sense. Can you just help remind me how the transformative growth plan moves over and touches National General or is National General sort of in its own ecosystem in terms of how you are thinking about expenses?
Mario Rizzo: No. National General is a core part of transformative growth. The reason we acquired National General was to, first and foremost improve our competitive positioning in the independent agent channel and we have done that. With the business, we got a very well run non-standard auto business that we have continued to grow and grow profitably over the last several years. We are in the, I will say, early stages of rolling out what we call Custom 360. As I mentioned, that’s the standard and preferred auto and homeowners offering. So we think there’s significant opportunity in the independent agent space. When you look at the size of the National General business when we bought it compared to what it is now, our total IA presence, say, at the beginning of 2021 was a little over $5 billion, which included National General plus the Allstate independent agent business, as well as the encompass business.
It’s over $9 billion currently. So we have had a lot of success in that channel and we think there’s just a ton of opportunity both in non-standard auto, but in standard preferred homeowners in the IA channel, and we expect to continue to capture that opportunity and that’s a core part of how we are going to grow and a core part of the transformative growth strategy.
Gregory Peters: Got it. Thank you for the answers.
Operator: Thank you. One moment for our next question. And our next question comes from the line of Yaron Kinar from Jefferies. Your question please.
Yaron Kinar: Thank you. Good morning. I want to stay on the line of growth, if I can. So based on the expectation that Allstate will be better competitively positioned in 2024? Like, how quickly and aggressively can you pivot a growth and is it more a matter of improving the retention rates, which I would think would be pretty quick or is it more about the ability to pivot to new business?
Tom Wilson: Well, how quickly will depend what happens in the marketplace, Yaron. So, I fully expect that Progressive and GEICO are going to spend more money in advertising and seeking to grow this year based on where their profitability is. State Farm has also been aggressive in trying to grow. Although they still have to improve their price position so that they are earning profit. But I expect it to continue to be a competitive environment. But you are right about the — and then, it will just be how effective are we versus them. We feel — Mario showed you the numbers, where two-thirds of the country were like all systems go. When you add in California, that’s another big chunk. So we think we have got plenty of open fields, so to speak, to run in and to compete with transformative growth.
We have validated a lot of the underlying assumptions, but we have yet to bring it to market in a consolidated way in particular states with all of our channels, that’s on Mario’s list to do this year. So we feel good about those opportunities. So we will grow as fast as we can and still make sure we have a good combined ratio. Mario, what would you add to that?
Mario Rizzo: Yeah. I think that’s a comprehensive answer, Tom. And I think the short answer, Yaron, is it’s going to be both through retention and new business acquisition. And certainly, as we said earlier, as more states get into the right zone from a margin perspective, we would expect the amount of rate we need to take in those states to diminish. That’s really, again, as Tom said earlier, is going to be a function of what the future loss trend looks like, but having to take less rate is a good thing from a retention perspective and we will continue to focus on that. And then in terms of new business, as we begin to invest in more states and do things like unwinding some of the restrictive underwriting actions we had to take to limit growth, invest in marketing and take full advantage of the broad distribution capabilities we have built across the Allstate exclusive agency system, direct and independent agent.
We think we can fully leverage all the things we have been building with a better competitive position to help drive growth. But timing will be dependent on state-by-state, market-by-market, and influenced in large part by the competitive marketplace we are going to be operating in.
Yaron Kinar: Thanks. And then maybe as my follow-up, tying the appetite to grow as much as you can profitably to the question of capital. You talked in the past and even on this call, about the — about maybe selling the Health and Benefits business, you talked about the stop loss that you were looking to maybe purchase last year. Do you need to take any of these actions or other strategic actions in order to satisfy the growth appetite or do you have all the capital you need to grow as much as you want today?
Mario Rizzo: No. We don’t have to take any of those actions, we have plenty of capital and we have plenty of capital today. When you look at our earnings power, we will have plenty of capital to fund whatever growth we think we can achieve.
Yaron Kinar: Thank you.
Operator: Thank you. One moment for our next question. And our next question comes from the line of Elyse Greenspan from Wells Fargo. Your question please.
Elyse Greenspan: Hi. Thanks. Good morning. My first question is on the holdco cash. It did go up in the quarter. Did you guys take a dividend out of AIC or another entity in the third quarter.
Jesse Merten: Good morning, Elyse. It’s Jess. So as it relates to holdco cash, you can see that it went up from the prior quarter and this was really in accordance with our normal practice of moving capital around to maximize flexibility. So what we did do is move some capital up from a statutory legal entity was not AIC. But we moved some money out from statutory legal entities, as well as a few dividends out of non-insurance companies into the holding company. I know when we have talked in prior quarters, we had a few insurance companies that had fair amount of capital in them and didn’t have risk, because the risk was all reinsured into the Allstate Insurance Company, so sort of in the normal-course of creating flexibility, we looked at those entities and move some of that surplus up to the holdco in the quarter.
Elyse Greenspan: Thanks. And then my second question is on policy growth, but on the Nat Gen side, right? You guys have been showing on as growth slow within Allstate brand. You have been showing pretty strong growth within Nat Gen policies in-force. Just hoping to get some color there as you have kind of put way through books like what’s been driving the growth within NAT Gen and how should we think about that continuing from here?
