Good day, ladies and gentlemen, and welcome to The Allstate Corporation fourth quarter 2009 earnings conference call. (Operator Instructions) I would now like to turn the conference over to your host, Mr. Robert Block, Vice President, Investor Relations. Mr. Block, you may begin.

Thanks, Matt, and good morning everyone and thank you for joining us today for Allstate’s fourth quarter 2009 earnings conference call. As always Tom Wilson, Don Civgin and I will make some opening comments providing color on our fourth quarter and yearly results for 2009. Following our comments we will have a question-and-answer session when Judy Greffin, our Chief Investment Officer; Joe Lacher, President of Allstate Protection; Sam Pilch, our Controller; and Matt Winter, President of Allstate Financial, will join us. During the session we ask that you please limit yourself to one question and a follow up so that we can hear from as many of you as time permits. Last night we issued our press release and the majority of our investor supplement for the fourth quarter. We also posted a Slide presentation that will be used this morning during our presentation. You can locate these documents on our website. As noted on Slide 1, this discussion may contain forward-looking statements regarding Allstate’s operations and actual results may differ materially, so refer to our Form 10-K for 2008, our 10-Q for the third quarter 2009 and our most recent press release for information on potential risks. We expect to file our 10-K for 2009 by the end of February. Also this discussion will contain some non-GAAP measures for which there are reconciliations in our press release and on our website. This call is being recorded and a replay will be available following the call. Christine Yeider and I will be available to answer any of your questions that you may have once this call is completed. Now let’s begin with Tom Wilson.

Well, good morning and thanks for your continuing interest in Allstate. I’ll begin with my thoughts on our progress then Bob will go through the business unit results and Don will cover investments and the balance sheet. We entered 2009 with three priorities; that was to keep Allstate financially strong, to improve customer loyalty and to reinvent protection retirement for consumer. And we made outstanding progress on the first two goals and while we made less progress on reinventing, we did lay out a foundation for growth. Let me go through each of these priorities in order. First, we did further strengthen Allstate’s financial position. We generated operating income of $592 million for the quarter and almost $1.9 billion for the year, which was 7% higher than the full year of 2008. We had double digit returns on our $100 billion investment portfolio, realized capital losses were reduced to $33 million for the quarter and $583 million for the year. Importantly the pretax net unrealized position improved by $6.5 billion throughout the year. Net income was $518 million in the fourth quarter and $854 million for the year. As a result, book value grew by 31% in 2009. We also built up a stronger capital base on both the GAAP and statutory basis. And we achieved this through focused operational efforts at Allstate Protection, Allstate Financial and in our investment activity. Allstate Protection achieved its objectives of providing a strong source of operating profit, improving customer loyalty and laying a foundation for growth. The combined ratio was 93.2 for the quarter as excellent operating practices, expense controls and pricing discipline resulted in all major lines generating an underwriting profit in the fourth quarter. Over the last five years, our personal lines business has generated an underwriting profit in 18 of…

Thanks, Don. Turning to Slide 3, property liability net written premium fell 0.4% for the quarter and 2.3% for the year compared to similar periods in 2008. This decline was primarily driven by reductions in units as we intentionally chose to maintain pricing discipline in a highly competitive marketplace. That said, when you look at the details by line, there are some trends indicating positive results in the future. Beginning with Allstate brand standard auto, net written premium increased 0.7% in the fourth quarter 2009 compared to the prior year quarter as new issued applications increased 11.4%, quarter over quarter. We issued over 2 million applications for the year, a 12.3% increase year-over-year. Retention increased 0.2 of a point to 88.8% after a similar increase in the third quarter 2009. Average premium climbed 2.6% reflecting our consistent approach to seeking rate changes where needed while providing distribution and product choices for consumers. Allstate brand homeowner’s net written premium increased 0.9% in fourth quarter 2009 versus the fourth quarter of 2008. Increases in average premium and retention are essentially offset by reductions in units as we continue to manage our exposure to catastrophic losses. We continue to focus on gaining appropriate rate changes in order to bring this line of business back to an acceptable return on capital. During the fourth quarter we received approval for rate changes averaging 6.5% in 22 states, bringing the countrywide impact for the year to 8.4%. The majority of these rate changes will be earned over the next two years. While the two major lines of business were both slightly improved in the fourth quarter, the primary source of the overall decline in the quarter was business written through Encompass. Efforts to improve the margins here are limiting top line growth as we maintain our…

Thanks Bob. I’ll cover our investment portfolio and results and finish with a look at our capital position. During 2009 we generated strong results from our investments with substantially improved portfolio valuations more than offsetting lower investment income. We consistently acted in a proactive way to manage the risks and returns in our investment portfolio and our approach paid off throughout the year. By remaining focused on limiting our exposure to rising interest rates while maintaining our view of credit spreads and taking specific actions to reduce exposure to specific asset classes, we ended 2009 in a strong position. On Slide 6 you can see a breakdown of our consolidated portfolio. At year end the value of the portfolio was $99.8 billion, a slight decline from September 2009 due to a lower balance in Allstate Financial and the $750 million debt repayment at corporate that we refinanced back in May. Fixed income securities still make up about 80% of the portfolio, with the bulk being high quality corporate and municipal bonds. During the year we reduced exposure to commercial real estate by $5.4 billion, reduced municipal bond positions by $1.9 billion and reduced our durations by 5% and maintained derivative positions designed to protect against rising interest rates. Our fixed income portfolio continued to generate significant amounts of cash, with $2.6 billion for the fourth quarter, consistent with our track record throughout 2009. We aggressively deployed both these cash receipts in our short term cash position by a further $7 billion for the quarter. On Slide 7, you’ll see our two year investment transfer income and realized capital gains. Our investment income declined for the fourth quarter, which was down 19% over the prior year but is consistent with the first three quarters of the year. The reasons remain the…

Thank you, Don. Let’s go to Slide 10. That shows our priorities for this year. We’ve obviously come through a very difficult economic time. We’ve improved upon our strong financial condition and so we have three goals for 2010. First, continue to improve customer loyalty. Two, to continue to differentiate ourselves amongst our competitors by reinventing protection retirement for the consumer, and third to begin to grow our businesses. So with that I would be happy to hear what’s on your mind.

Matt, if you want to start the Q&A.

Thank you sir. (Operator Instructions) Your first question comes from Jay Gelb - Barclays Capital.

Two issues I’d like to touch on. Joe, if you could give an outline of your goals and plans to achieve them given your new role as head of P&C at Allstate that would be helpful. And then Tom if you can update us or give us a bit more color in terms of your comfort level with the combine ratio range, given that it went up maybe a bit more in 2009 versus 2008. What gives you the comfort level that you’ll be maybe at the mid point of that combined ratio range [inaudible] as opposed to the higher end for 2010?

Well, let me start with the second and then give Joe a chance to come up with his goals, which are, you know, he’s been here 90 days so we’ve got to give him a little bit of a break. But they will obviously be consistent with our overall goals. So first, in terms of the combine ratio I feel pretty good about the range we have given for 2010, Jay. The reason being we’ve done a lot of work on improving the targeted pricing for our auto business and we’ve been very consistent and thoughtful in increasing prices when we need to. When you look at our competitors, they have started to raise their prices throughout ’08 and ’09 and so I feel good about our competitive position. So I think we should be able to retain customers which obviously helps our profitability because of pricing and because of what we’re doing on customer loyalty. So I feel good about our numbers here.

Jay, this is Joe. Terrific question and one that I’ve been spending a fair amount of time on in the brief time that I’ve been here. The exciting part about being part of the Allstate group is we have a lot of bright and talented people who’ve been working on a strong set of core strategies, to focus on growing our business and leveraging and realizing the scale advantage that we have. Using a stronger set of business intelligence and analytics to fuel reinvention of protection and retirement for consumers, we think will ultimately help us deliver that. We’ve got a great tradition and great strength at delivering strong profit margins. I think if we find a way to continue the improvement we’ve got in the homeowners lines we can use that business as an offensive weapon at some point, we’re not there yet; drive growth initiatives through our auto business and the other businesses inside of protection.

Your next question comes from Robert Glasspiegel - Langen McAlenney.

I’m going to actually take Jay’s question in reverse. It seems like the fourth quarter your underlying property casualty combined ratio improved by a point or two versus three quarters where it had been deteriorating. You’re getting more rate. If you take the mid point in the range, it looks like you’re looking for one point deterioration in underlying combined ratio. Aren’t you getting enough rate to keep up with underlying loss experience?

The answer is frequency, so if you look at frequency of course it was up a lot this year, it was down a lot last year. ’09 looked like ’07 and ’05. If you look at ’06, that was down. So frequency’s been bouncing around a lot lately so when we make a commitment we like to make sure that we stick to it and when we look at frequency we think it’s hard to determine where that will be next year, given where we are in the economy, the cycle. Hopefully unemployment will go down a little bit next year so you ought to see miles driven going up. So the bottom line is we’re still earning great returns in our auto business and have for a number of years. Secondly, in our homeowner business as Joe pointed out we’re well on the way to improving the profitability of that business. We earned in underwriting profit in the fourth quarter combined ratio was 89.2, so we’re feeling good about that business. Obviously one quarter does not history make, but when you look at the price increases that Bob talked about, we think we’re well on the way to keeping that business highly profitable as well.

In the third page of the release you say risk mitigation programs continue to protect the hedges against interest rate and performed as expected during the fourth quarter. I mean the fourth quarter was sort of a funky quarter from an investment point of view where equities were up and some risky assets did well and non-risky assets did poorly. I guess the question is what number should I look at to say your hedges against equity risks performed as expected in an up sort of 5, 6% market?

I guess in an up market our hedges mostly are just a cost to us, because we’re protecting against equities going down, not necessarily you wouldn’t see the value of those hedges when equities go up.

So in a sense you mean you spent what you thought you were going to spend during the quarter? Or is there some convexity thing that you’re doing that you’re looking at?

No, we spent what we thought we were going to spend. And in fact I think we came in a little bit under what we thought we were going to spend on the equity component.

Over the year you increased your equities at cost, but you’re hedging against it? And you mentioned that you sort of went passive in the quarter, I think, if I read it correctly. I mean, what are you trying to do in your equity portfolio?

So a couple of things there. First, the strategy around equities, we decided to go to a passive strategy in terms of active management around the portfolio. So the mix in the portfolio really hasn’t changed that much. It’s more that we’ve decided we’ll manage it passively. With regard to the amount of equities that we own, not only did we get the appreciation as the market rose, but also we have put more dollars into the equity market, both domestic markets as well as foreign markets.

So Bob, thanks for the second follow up. But you’re after a good point which is in our investment portfolio, it’s an equity portfolio you were talking about or what we’re doing on interest rates, we’ve taken the approach we will spend what it takes to make the right risk return trade off, whether that’s the hundreds of millions of dollars we spend making sure that if interest rates go up we don’t get clobbered. And or if it’s making sure that equity prices go down dramatically, we don’t feel that dollar for dollar pain as well. So we have continued to be proactive in our approach to risk management, spending what we think we need to spend to protect the company.

Your next question comes from Vinay Misquith - Credit Suisse.

On the shadow DAC [proviso] this quarter, could you help us understand whether there’s going to be any impact on the amortization of DAC for the future? And also related to that, could you explain whether you’ve taken any realized losses or whether you’ve made a provision for the higher expected losses that expect in 2011 and 2012 on your fixed annuity business?

Hi, it’s Don. Let me try and take both those questions. First of all, the shadow DAC to a large extent obviously is driven by the DAC amortization rate. So what we do every quarter, and I’m going to start with the income statement here, we will look at all the facts and circumstances that are available to us. We’ll look at both experience and what we anticipate for the future and then we’ll make a determination of what the proper DAC amortization rate should be for that quarter. And what we’ve done, if you’ll recall, in the third quarter which we followed in the fourth is decided not to recapitalize DAC for realized capital losses so that we did not jeopardize the future recoverability of that. In the fourth quarter we did update our assumptions including anticipated results related to the fixed annuity investment performance. All that stuff goes into a box and we end up with what is essentially a DAC amortization rate. So that’s why when we talked about the DAC amortization on the income statement, we pointed out that it was lower during the fourth quarter. And now I’m going to switch to shadow DAC, which of course only goes through OCI and not the income statement. In accordance with GAAP then we’ll take that shadow DAC, we’ll take that DAC amortization rate and apply it to the unrealized loss position on those investments in the portfolio, not all the investments that relate to the unrealized loss but only those relate to the products that we sell that relate to DAC. So let me take a step back. Shadow DAC, if you look at it on a year-over-year basis, it did kind of what you would have expected. So the unrealized loss position went down by about 75% and if you look at it net of tax and shadow DAC, it went down by a very similar amount. It does move around in the quarters, though, and it moves around because to be honest I don’t think DAC was designed to operate necessarily smoothly in this sort of very volatile environment. So it did move around a bit in the quarter. So I think the answer, though, is we’re comfortable with the numbers on a year-over-year basis and there is some disproportionately in the fourth quarter on shadow DAC but that’s just kind of the outcome of how it works. As it relates to the amortization going forward, obviously because we’re not recapitalizing DAC, not shadow DAC now, talking about DAC on the I’ll call it real DAC, there will be less amortization going forward through the income statement.

On the agent rationalization plan, Tom, can you give us a sense for where that is going and what are the risks to that strategy? What if you decide to let go of some agents? Do you think that there’s going to be some lawsuits against the company?

Vinay, we don’t have a rationalization plan so to speak. What we have is a strategy of making sure we provide our customers the best service possible and offer all of our products and services in the best way with the most experienced people we can. You will see that the number of agencies that we have in the United States has gone down over a couple of years, and that’s due to a couple of things. One is A, as the business gets more competitive and more complex, those agencies need to be larger so that they can have more experienced people in them, whether they sell all let’s say financial products, they sell boat insurance or renters insurance, things beyond auto insurance. So the size and scale of those has increased. What you don’t necessarily see in that number is the number of people we have on the street, dedicated to only our products, which includes licensed sales professionals which in fact has gone up throughout that period as well. So we look at it and say how many people do we have working on behalf of our customers? And so you’ll see that that number has gone up. So the number of agencies is a little bit of a construct of just how many contracts do we have out there as opposed to how many people sit in that agency. In addition, this year we’ve started putting standards in on performance as it relates to the agency loyalty index, which as I said in my earlier comments went up in every region across the country. All of our agencies did a better job for their customers. Those, however, that did not make that transition are leaving our organization. So I don’t see it as a risk to our organization, I see it as a benefit to all those agencies that are doing a great job for their customers. This raises the overall bar and raises our position in the marketplace.

So on store’s policy, does Allstate own those policies for which the agents are leaving and therefore you run the risk in the short term you might have lower policy in force count?

Vinay, I would start with the concept that nobody owns the customer. The customer owns themselves and their own relationship. When those agencies leave, they can either sell their agency to somebody else and we’d provide for a transition and help them do that. If there is nobody available to buy that agency we will buy it from them and then we have a variety of ways in which we take care of those customers. Sometimes we transition those customers to other agencies in the local marketplace, sometimes while we’re looking for another agency owner we have our call centers handle it. But in all cases the first and primary goal is to make sure we take care of our customers.

Your next question comes from Daniel Johnson - Citadel Investment Group, LLC.

If I do this right, the Allstate brand written premium looks like it is up year-over-year and kind of having to go back and find when that happened last. It looks like sometime in 2006, although maybe these numbers are touch wrong but I think they’re right. Do you want to point to a few things that’s helped make the turnaround? I saw new issue apps look good for a couple quarters in a row and obviously more importantly then sort of why it’s gone up is do those trends have a good chance of persisting into 2010?

I’ll start with the longer term perspective on the Allstate agencies. Joe can make a comment about Encompass which you didn’t talk about but also obviously impacts our overall auto results, as Bob talked about. On the Allstate agencies, I think it’s important to step back and look at the decisions we talked about in 2007 and 2008, which was in the face of what we saw as an upcoming difficulty in the economic environment we decided not to take price decreases in 2007, despite the fact that some of our big competitors were. We didn’t think those price decreases were justified. We didn’t think it was the right thing to do to buy growth and we chose to work on value and not reduce prices to grow. That turned out to be a good choice for us. We didn’t know the economy was going to get as bad as it did, but we’re glad that we have that strong source of profitability. It also turned out to be a good choice because many of our competitors are now increasing their prices. They started in the second half of ’08 and throughout ’09, so I think in the third quarter, Joe, I think it was about three to one increases to decreases when you look at the industry. He’s nodding acceptance of that. And so that turned out to be a good choice. When you look at the Allstate brand business itself, I would say there are three components you have to look at for growth. One is new business, which as you correctly point is up; two is retention, which is flat basically. But the leading indicator being customer loyalty headed up gives us some confidence that we should be able to move that number up, combined with the fact that our competitors are raising prices, we think that should help us some there as well. The third component which is less obvious is just the trend line. And so if you’re down because over that ’07 to ’09 period we did reduce the number of policies we have in force, that trend you’ve got to kind of turn around. We call that availables but you’ve got to do enough on new business, you’ve got to do enough on retention to offset that trend line. You’re starting to see that work its way out so we would hope to be able to see that business begin to grow as Joe pointed out as we move through 2010. Encompass you didn’t ask about, but I think it would be worthwhile to get Joe to give some perspective on that as well.

Thanks Tom. Encompass is continuing to be a challenge for us. We’ve had a couple of different strategy changes over the last several years, some of which let us into a little bit of profitability challenges and then as we worked our [inaudible] management actions, a large percentage of the Encompass book and in areas where we’ve got excess catastrophe exposure or those actions have been at their highest. What we’re seeing through 2009 and the early part of 2010 will be the results of sort of rationalizing all of those challenges and refocusing Encompass on its core value proposition and its core set of target customers. Fixing a few of those items and then getting it positioned for growth. I think we’re going to see for at least a couple more quarters’ similar results, perhaps at a lower rate of decline, and we’re going to refocus the organization and again position it to start seeing some upside.

So at least on the Allstate side, I didn’t hear anything that said the things that have been helpful over the last couple of quarters to turn premium around to the positive should be changing back to the negative.

I agree with that.

My follow up question pertains to capital I think maybe best put on Slide 9. AIC added almost $2 billion in capital this year. I realize a little bit of that came from the hold co, but sort of back of the envelope you would think that a roughly similar performance absent any super major catastrophes would be on tap again for 2010. If that’s not correct I’d be interested to hear why. And if it is correct, at what point is AIC and therefore ALIC sufficiently capitalized at a point that you risk being over capitalized in that segment?

Dan, we think obviously as Don said we think we are well capitalized. We thought we were well capitalized at the beginning of the year when many people were concerned about that and we felt we had the strategies in place to keep ourselves well capitalized. And of course that turned out to be true and we’re happy that we had the performance we did. As we’ve always said, we have a long track record and history of doing what’s right for shareholders whether that’s our dividend or our share repurchase program. I’m feeling comfortable where we are today. I’m not so comfortable with the external environment that you should expect to see a dramatic change in that which we’re doing at this point. But obviously as the external environment changes, as our performance continues to be strong, we’ll keep thinking about that.

Are you not comfortable enough to even consider replacing a piece of the lost dividend?

You know the dividend as I said, the dividend wasn’t really a capital issue. I mean it certainly helped capital by sort of $400 or $500 million, but when you look at the size of those numbers it’s important but it’s not the key driver. The dividend change was really you should pay out dividends out of what you earn. And when you look at our operating income and our net income last year that was about a 27 and maybe 50% payout, which is the net income one is obviously higher than you would see over a long term basis, the operating income looks about to be in line. And when you look at the dividend yield, it looks to be about where it’s traditionally been. So that’s the way we size the dividend, Dan, is based on how much money we’re making as opposed to using it as a way to give money back to shareholders. If we have extra capital, the most tax efficient way to give that back to shareholders is through share repurchases, not by raising the dividend.

Your next question comes from Matthew Heimermann - J.P. Morgan.

The first question is can you just help me understand what happened with the statutory surplus in AIC this quarter? Did you actually pay a dividend to the hold co?

No, we did not. However, what we did is put $400, I think $48 million into the life company.

So it was a transfer from AIC to the life and then nothing at hold co?

We did not take a dividend or put any capital into AIC. That’s right.

I guess on the business that we don’t talk about very much, everything that gets lumped into the other segment, can you talk a little bit about two things? One, just what’s happening with respect to growth trends there and two, it looks like over the last three years you’ve been seeing ex-cats, ex-development, kind of a gradual increase in the loss ratio and I’m wondering if that’s mix or if there’s something else driving that.

Matt, just help narrow down, other is a pretty broad category. Are you talking about our emerging businesses? Are you talking about discontinued?

Well, everything that’s non-homeowners and non-auto.

Okay, that would be our emerging businesses which is a large and diverse set of about five different businesses. Everything from commercial auto and a little bit of property in there into jet skis, motor homes, renter insurance. So if that’s where you’re at we’ll make some comments.

Yes, that’s exactly what I’m talking about.

Yes, it’s down over the prior year and the prior quarter, principally as a result of some contraction in the business insurance side of the house. And that’s offset by some growth in some of those other businesses that we mentioned as a group. It’s a little bit of a hard number to read when you look at it in aggregate, because it has those diverse businesses in there. The declines would be driven by refocusing a little bit on what we’re doing in the small commercial space.

What we did before Joe got here was we repositioned that commercial business, we brought in some new management, we shut down a bunch of the operating centers to bring the cost structure down. So they’re well on their way and with Joe’s help here now we’re going to accelerate their performance in rebuilding that business actually and there were some reserve releases in that business, so I’m not sure the second piece of your question made it sound like there was some drift from prior years.

Well, I actually was looking at the ex-cat and ex-development loss ratio looks like it’s been turning up and I’m not trying to imply it’s at an unhealthy level, just curious what’s driving that.

One driver underneath there may be some gap insurance we do through dealers, so.

Your next question comes from Joshua Shanker - Deutsche Bank.

Two related questions, one’s probably my own inability to crunch the numbers here. I’m just trying to understand the unrealized capital loss was stagnant pretty much from the end of the last quarter to this one, yet the DAC reserves came down dramatically. And then you had another small, you know, $178 million DAC charge in the Allstate financial book. I’m trying to reconcile all those three numbers together, how that works.

On the first piece, could I suggest that that was Vinay’s question to Don about shadow DAC, so if that answer didn’t work for you maybe we can [inaudible].

Yes. [inaudible]

On the second piece, Matt or Don do you want to make a comment, the question was on $145 million?

I guess $178 million DAC charged in Allstate financial.

Well we continued to amortize DAC as we did in previous quarters through Allstate financial. And then the other thing is we did take against some of the realized capital gains we had in Allstate financial, we took some between operating income and net income as well. We took some amortization there. We’re continuing to amortize DAC in Allstate financial as we always have.

So from that perspective we saw it in the third quarter, you know there’s the odd [second quarter], should we expect this to be a sort of run rate sort of view for the near term, given no real dramatic change in the investment portfolio?

Run rate for what?

For the amortization rate of DAC.

Maybe let me go up a second and answer it as it relates to Allstate financial operating income, because the DAC moves around depending on where investment income is, what kind of realized capital gains or losses you have. When we look at the operating income for Allstate financial, we feel good about its prospects going forward. Matt’s got a plan in place to begin to finish up on Focus to Win and to grow that business, which he might want to make a few comments about in terms of where the focus will be, but Josh I wouldn’t just focus on the DAC piece. I would look at the operating income. DAC kind of rattles through depending on what happens to the other components of that operating income as we go forward.

Josh, this is Bob. Christine and I can take you through the details of how that whole thing works after the call.

The other question was on muni, if you sold a bunch of munis during the quarter. You also had about a $450 million unrealized movement in the unrealized position. What’s your thought on munis and can you talk a little bit about the make up of the portfolio?

The make up of the portfolio continues to be a well diversified, fairly large portfolio. We are as you noted we are reducing the balance in munis. The unrealized position in the fourth quarter though was partially impacted by the rise in interest rates. So that’s a long duration portfolio relatively to the rest of our portfolio, and rates rose during the quarter.

So it’s not really credit related, it’s just interest rate driven.

I would say that, over the quarter. You know we’re not that crazy about the outlook for municipal credit but during the quarter there wasn’t any big move one way or the other.

In fact I would say that the market has been strong for municipals as people are seeking yield and are worried about increases in tax rates. So we’ve been selling into that because we’re more concerned about the long-term prospects given the 9 to 10% decline in state municipal revenue and balance sheets, which don’t look pretty.

Your next question comes from Paul Newsome - Sandler O'Neill & Partners, LP. Paul Newsome - Sandler O'Neill & Partners, Liane J. Pelletier: Turning to claim frequency, is it fair to say that Allstate has had a level of profitability where they can’t pass on that increase in frequency? And at what point if frequency continues to rise do you think you can start pushing it out as [formed] rate?

Paul, I would say a couple of things. First, there’s always 1,000 stories because there’s 51 different places that we go for pricing changes in the United States. And if you look at the average increases, they are small but consistent, reflecting what happens in that individual area. Secondly, I wouldn’t just look at frequency. I would look at frequency and severity combined. And if you look at that, which is called pay per premium, as you know that’s relatively modest and in line with where we are on average pricing, which gives us confidence to say we can be at 88 to 90 next year.

Your next question comes from Brian Meredith – UBS.

A couple of questions here for you. The first one, Bob, could you elaborate a little bit on the whole severity situation in homeowners? You said it was a mix of claims and exactly what happened there and should we expect that to continue here going forward?

In the quarter if you get more water damage claims versus fire versus lightning, that can distort the overall severity and it’s not something that you should necessarily expect each quarter happening. It’s a lever for these claims that get paid how that works out when you’re looking at the total homeowners’ severity. Brian Meredith – UBS: And then the second question, on the investment yield portfolio yields, is there any more portfolio kind of repositioning to go here and if so, given where yields are right now, should we expect the portfolio yields to potentially move down a little bit here?

The portfolio repositioning, you know, as Tom said earlier we’ve made a lot of progress in commercial real estate; we’ve made some progress in repositioning the muni portfolio. We continue to expect that we’ll bring down our balances in commercial real estate and in municipals. In terms of the yields, we are monitoring yield very closely. You know the reality is, though, that when you reposition, rates typically are lower on the reinvest than they are coming off the portfolio. So we are risk mitigating and when you risk mitigate at times it eats some of the income.

The only thing that would change would be if short term rates of course which are near zero go up, you would expect to see higher investment income in our portfolio. Offsetting that some will be what Matt has to do to fix annuity rates, so it’s not like everything will come through the portfolio. But net net, it ought to help us increase our margins in the fixed annuity portfolio.

Your next question comes from Meyer Shields - Stifel Nicolaus & Co., Inc. Meyer Shields - Stifel Nicolaus & Co., Inc.: I saw in the supplement that you’re breaking out the premiums for the direct channel and I was hoping to get either Tom or Joe to comment on what we should expect to see in terms of, I guess, supporting and advertising for the direct business.

Let me take it and if Joe wants to jump in, since I am trying to be cognizant of the fact that he’s been here I guess 90 days or close to 90, maybe not even 90, but first we do advertising in total. So when we run ads, they call our agencies, they call our call centers, they get on the Internet and when they get on the Internet they sometimes look at prices and they roll over to the agencies. So we don’t have specific advertising programs that are just targeted towards one channel, which is one of the benefits of our model which is we can spread that across all of our businesses and everybody gets a lift. So our current advertising’s working pretty well. We like the tone and tenor of the brand positioning has worked well. We pushed hard at price last year, which reduced some of the differential we had versus Geico and Progressive in terms of people thinking we were thinking more expensive so we reduced that some. We probably won’t have to do as much of that. We continue to talk about our value going forward, which is what we would hope to do. In terms of the direct business, Meyer, I think you should expect to continue to see it grow because it’s working pretty well and it’s supporting all of our business activities.

I was just going to say I echo the comments and think that’s the direction we’re heading. And one of the strengths that the place has and one of the neat opportunities is the synergies and how effectively we’re allowing consumers to move back and forth between channels. So it’s a plus for us. Meyer Shields - Stifel Nicolaus & Co., Inc.: Is it better to look at [healthy] owner retention on a sequential basis or on a year-over-year basis?

It depends on what you want to use it for. It provides insight in both cases, but it provides different insights. So I think there’s a value looking at it internally both ways and we look at it from a lot of different lenses.

Your last question comes from Alison Jacobwitz - BofA Merrill Lynch.

I was just wondering if you could talk a bit more abut the life operation and maybe put some parameters around what you’re thinking for 2010 for earnings.

We moved away from the guidance, Alison, as you’ll remember a couple of years ago. We’re not anxious to go back there. We do like to provide some sense for what the largest business, that being the property casualty business, does absent catastrophes which are not highly predictable on either a quarter or an annual basis. But I think Matt could give you some perspective on, now that he’s been here over 90 days, as we kind of have a 90 day rule here, just barely, he can give you some perspective on the business and where he’s going to take it, which I think will help you be able to start to build out what you think the forecast will look like.

As Tom mentioned in his opening remarks, we’re making some kind of fundamental, core changes to the strategic approach for Allstate financial. And we have developed what we have laid out as a six part strategy but I’ll kind of do the 80/20 rule here and focus on just two core pieces of that. The first is that we’re kind of making an all in bet. We believe the pot, the pot of gold here, is the existing Allstate channel and the existing Allstate customers and the ability to leverage the 12,000 storefronts and the mammoth customer base, the 17 million households that we have and supplement that with some worksite. So we are going to refocus and redeploy some of our resources, not necessarily to the exclusion of some of the other channels, but we are certainly going to minimize some of the investments being made in some of the other channels to allow us to really focus on the channel that we think has the greatest long-term opportunity. And at the same time we’re focusing on that channel, we’re focusing on some different product sets. I think as the last 18 to 24 months have shown, an over concentration in spread based business, specifically book value annuities and some institutional funds, have hurt us. And we are shifting our concentration towards the underwritten products, the mortality and morbidity based products. And to the extent that we need and should offer income preservation products to our customers, we’ll probably do that through a different type of annuity that has a better risk return ratio, such as the market value adjusted annuities. And to the extent that we can get it to work in our environment, through equity indexed annuities that provide strong value to the customers as well as to Allstate. So what you’ll see is a shift. You’ll see a concentration shift, again away from the spread based business towards the more underwritten products. And you’ll see a shift of resources towards working together with a protection organization and approaching our business here, not as an independent operating entity trying to compete in the vast life and retirement space, but to build enterprise value, working in conjunction with the rest of the organization, that we think actually gives us far greater leverage, a greater competitive advantage and a greater likelihood of success.

So, thank you all. Let me close. You know we’ve obviously faced a number of what I would call unprecedented challenges over the last couple of years, whether that’s high level catastrophes, tough competition in the auto insurance market, the financial market meltdown or an economic recession. We’ve successfully dealt with all of those challenges. A couple of ways we do it, being good at what we do, taking decisive action and focusing on the right answer rather than the constraints that we face. So we’ll continue to be proactive in driving shareholder value for you all, and we have three goals for this year, improved customer loyalty; reinvent protection in retirement for the consumer, and grow our businesses. If we do that while we maintain the margins we have in our strong core businesses, we should drive good shareholder value this year and that’s what we’re up to. So thank you for your interest in Allstate and we’ll see you next quarter.

Ladies and gentlemen, thank you for participating in today’s conference. This concludes the program. You may now disconnect. Good day.