Good day, ladies and gentlemen, and welcome to The Allstate Corporation first quarter 2010 earnings conference call. At this time, all participants are in a listen-only mode. Later, we will conduct a question-and-answer session and instructions will be given at that time. (Operator Instructions) As a reminder, this conference call is being recorded. 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. Good morning everyone and thank you for joining us for Allstate’s first quarter 2010 earnings conference call. Today, Tom Wilson, Don Civgin, and I will provide some thoughts on our results for the quarter, and then we will open up the call to take your questions. Judy Greffin, Chief Investment Officer; Joe Lacher, President of Allstate Protection; Sam Pilch, Controller; and Matt Winter, President of Allstate Financial, will also participate in the Q&A session with us. If you limit yourself to one question and one follow-up, we will be able to get to more people during our time together today. Last night, we provided our earnings press release, investor supplement, and filed our 10-Q for the first quarter of 2010. We also provided a presentation that we will be using this morning. All these documents can be found on our Website. As noted on Slide 1 on the presentation, 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 2009, Form 10-Q for the first quarter 2010 and our most recent press release for information on potential risks. Also this discussion may 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 completion of the call. As always, Christine Ieuter and I are available to answer any further questions you may have once this call is completed. Let’s begin with Tom Wilson.

Thanks for joining us today and your continuing interest in Allstate. I will share my thoughts on the results for the quarter, putting them in context of the programs we put in place over the last couple of years, and looking forward for the priorities we have in place for 2010. And then Bob is going to go through the business unit results and Don will cover investments and our financial position, and then we will get to your questions. This quarter’s operational financial results were really a combination of the trends in progress we made throughout 2009. We had strong profitability in auto insurance. The homeowners business continued to underperform as we experienced near-record catastrophe losses, Allstate Financial made further progress in reinventing its strategic focus, and our investment results continued to reflect low interest rate, but improving fixed income markets. The net results were we generated $375 million of operating income and $120 million of net income as you can see on slide 2. The overall combined ratio was 98.9. The underlying combined ratio excludes the catastrophe losses in prior-year reserve re-estimates was 89.1, which is right in the middle of our full-year forecast of 88 to 90. Investment income was $1.1 billion. That’s 10.7% lower than Q1 2009, which primarily reflects two things; lower short-term interest rates and risk mitigation efforts we have taken to protect the portfolio from large economic losses if interest rates increase. Our turn optimization programs served us well as the unrealized loss on $100 billion investment portfolio decreased from$2.3 billion at year-end 2009 to about $850 million at the end of March 2010. This improvement reflects our decision to stay long in corporate credit and the continued decline in corporate credit spreads. As a result of all of that, book value per…

Thanks Don. Turning to slide 3, we provided premium and underwriting trends for property liability. Starting with the topline, total net written premium fell slightly in the first quarter about $11 million to $6.258 billion. This was driven primarily by profit improvement actions in our Encompass brand, included in all other line on the slide where net premium fell by $71 million. Allstate standard auto net written premium grew 1.1% to just over $4 billion. An increase in average premium more than offset a decline in units. After a strong year in 2009 for new business, our new issued applications fell in the first quarter of 2010. Profit actions taken in Florida and California significantly reduced the new business flows in those two states. Partially offsetting those declines were increases in new business flows for most of the states where we introduced enhanced discounts for our multiline customers. Retention, a key metric, increased by two-tenths of a point compared to the first quarter of 2009 and about the same improvement we saw in the last two quarters of 2009. Allstate brand homeowners premium increased by 1.5% in the quarter when compared to the first quarter of 2009. Increases in average premiums driven by rate actions that we have taken over the last year more than offset declines in units. We will continue to seek rate changes in order to drive this line to acceptable margins. On the bottom half of this slide, we give the combined ratio trends. Our overall combined ratio for the first quarter was 98.9, an increase from first quarter of 2009 of 2.1 points. Catastrophe losses accounted for 10 points of the combined ratio versus 7.8 points in the first quarter of 2009. Prior-year reserve re-estimates excluding those affecting catastrophe losses were favorable in 2010 whereas…

Thanks Bob. First, I will cover our investment performance and conclude with a quick review of our capital position. In the first quarter, we continued to proactively manage our investment portfolio. On slide 7, the total value of our investments finished the quarter at just over $100 billion. Fixed income securities remained the largest portion of the portfolio at $81 billion, an increase of $2.5 billion. Strategically, we maintained a significant exposure to corporate credit, which again proved to be the right call as market conditions improved and fixed income spreads narrowed. Consistent with our economic outlook, we continue to reduce our exposure to commercial real estate and municipal bonds with both asset classes declining in the quarter from year-end 2009. Municipals were reduced by $1.3 billion of amortized costs, primarily through net sales which resulted in a small trading gain, the commercial real estate portfolio made up of mortgage loans, CMBS and real estate funds declined by $0.6 billion of amortization costs, partly due to our aggressive pursuit of mortgage loan payoffs, and we did reduce our equity allocation during the quarter by $1.4 billion of costs as part of a repositioning of the portfolio. On slide 8, we lay out the investment income and realized capital gains loss trends for the last five quarters. Investment income fell 10.7% versus Q1 2009 as we maintained our defensive stance relative to rising interest rates. Realized net capital losses were $348 million for the first quarter, about the same level as in Q1 2009, but the makeup of this result was very different from last year. OTTI impairments of $255 million were $470 million less than Q1 2009. Gains from sales were significantly less than in the first quarter of 2009 to $88 million, derivative generated to $185 million loss as…

Let me quickly summarize before we turn to your questions. We made progress on our initiatives to create shareholder value and deliver a profitable quarter despite the near-record catastrophes. We continue to post strong auto margins. We made progress in raising returns in homeowners and at Allstate Financial. We proactively managed our investment portfolio to mitigate risk and to optimize returns. And we are taking action to create sustainable growth in our businesses. So, with that, let’s open it up to your questions.

Matt, you can begin the Q&A.

(Operator instructions) Our first question comes from Bob Glasspiegel from Langen McAlenney. Your question please. Bob Glasspiegel – Langen McAlenney: Good morning. I was wondering if we could review advertising. Where do you think you are this year in your spend versus prior years, and how does that stack up against Geico and Progressive, and long-term where do you think you want to need to be to grow the business?

Good morning Bob. Thanks for the question. Congratulations, you have the speediest fingers, you always get your notes out as quickly as anybody I have seen on our numbers. Bob Glasspiegel – Langen McAlenney: Thank you.

Actually I thought maybe went out before the press release, I wasn’t’ sure about that. The advertising, this business has become much more marketing-driven over the last, really since 2002 when we began to – Geico and Progress at that point were spending somewhere around a couple of hundred million dollars a year and we were spending less than that. And if you remember, in 2003, we said we were going to step away up and that really began a series of competitive responses which leave marketing as a significant in which this business competes today, besides just price. So, it’s – what you see over a long period of time is that the bigger players who advertise a lot tend to grow faster than those that do not. So, whether you look at the top 10 or you look at the heavy advertisers. So, I think you should expect to continue to see advertising be a successful and ever-increasing weapon used to grow. Sometimes, Bob, people confuse advertising with channel, that’s it big advertising that drives. It certainly got to be competitive, you need to have all the different channels, so you need to do it with people, you need to do it through call centers, you need to do it over the Internet, but what you will see is continued high levels of spend this year. I can’t speak for our competitors, but looking at the airways, it looks like they are spending about what they did last year at Progressive or at Geico. Progressive seems like it dialed up a little bit with flow, and we have been recently steady in the first part of this year as we seek to reposition some of our advertising towards our target customers and talk more about longer-term value. Last year, we spent a lot of time on price, which we needed to do because of our silence on price before that, we would perceive this too high, not longer, we brought that measure way down. So, we are shifting our focus, I mean, you should expect to continue to see us be aggressive in advertising as we go throughout this year. Bob Glasspiegel – Langen McAlenney: Thank you.

Jay Gelb – Barclays Capital: Thanks and good morning. I wanted to touch on the Allstate brand standard auto. Have trends year-over-year in the first quarter, it looks like it was down 1.5% versus being down 1% in the fourth quarter. I was hoping you could comment on that first. And then my second question is on the run rate of profits in Allstate Financial ex the DAC unlock, it was around $113 million and I was trying to get a sense of that run rate going forward or if the shift in strategy on fixing annuities business will have an impact? Thanks.

Good morning Jay. Let me make an overall comment on auto PIP and Joe can you give some specifics on it and Matt can then pick up on Allstate Financial Couple of overall comments. First, of course, our strategy is to grow our auto business. The biggest way we can do that is to keep more of the customers we already have, so retention becomes very important. As you point out, of course, you always need new customers because people die, move away or go someplace else. So, we do have to continue to find a way to get new customers, but you have to look at it in total. And Joe can help you take that one through. On Allstate Financial, Matt will take you through the specifics, but I think you are correct, not to multiply this quarter’s number by four. So, you want to start Joe and then we will go to Matt.

Terrific. Good morning Jay. Right question on auto PIP, and one of the things we are focusing on inside the organization, is recognizing there is marketplace forces where lots are driving towards auto growth and we are well in the hunt to deal with that, which is sort of little bit last year was some significant increases across in new business. And we had a couple of states where we had to temper that a little bit in the first part of this year and really a little bit in the last part of the fourth quarter of last year. That slowing in new business is helping drag down that PIP number a little bit. We do believe that that’ a near-term issue and are actively continuing on all the initiatives that Tom touched on and a number of more to improve customer loyalty and improve retention to make our value proposition clear in the marketplace and the competitiveness of our products cleared to drive crisper advertising message with focused spend there to drive callers and shoppers into our different distribution channels and potential new product initiatives later in the year. So, we are confident we are moving in the right direction, but you see near-term slowing. We are adding a fair amount of initiatives with PPD [ph] discounts and targeting our model on homeowners’ customers. So, we think those opportunities are showing fruit right now in the PPD discounts and will continue to bear fruit for us over the course of the rest of year as we drive these, our initiatives. Jay Gelb – Barclays Capital: What are those discounts, Joe?

The discounts, I am sorry. I am speaking in internal code. The discounts for our target customers with bundled, auto, and home products. It’s going to be our highest life-time value customers and we are successfully attracting more of them with these discounts and making sure our competitive position is sharpest in those segments.

Jay, it’s Matt. Your question about whether or not you can assume a new run rate for Allstate Financial, as Tom said, we did have a couple of one-time favorable items and we had some favorable volatility that worked to our benefit in both life and the Workplace. So, I would not multiply it by four, but what should start seeing as a result of the de-emphasis of the spread business and the continued focus on the underwritten products is a slow and steady increasing returns and the stabilization of those returns, that will be a result of both the products shift, the continued expense work we do and other work we are doing to improve the returns in the business. Jay Gelb – Barclays Capital: What were last year’s profits on the spread business? Should we use that as a baseline in terms of what we take out?

No, you really should for a bunch of different reasons, because we are having run-off of different blocks of business at different times. And although we think we can predict some of that, none of it is completely predictable. So, I would not encourage you to multiply anything, but instead to kind of look at some of the pre-disaster run rates in some of the sub segments on the mortality and morbidity and watch it slow trendline as the fixed annuities run off, we will expect $7 billion to $8 billion of those fixed annuities to run off over about a three-year period. And that will give you an indication of probably having our current exposure at least in the bank channel. Jay Gelb – Barclays Capital: All right. Thanks. I will follow-up offline.

Okay.

Josh Shanker – Deutsche Bank: Good morning everyone. I want to follow-up a little bit on Jay’s question about PIP, I didn’t completely understand the answer. One question I have is I noticed that in addition to the auto policy comping down, your 150 to 160 [ph] policies, the homeowners policy comes around 90,000 policies. When you lose a homeowner’s policy, what’s the likelihood that you also lose the auto policy?

Josh, good morning. Let me take a longer-term view since I have looked through some of this, and if Joe wants to fill in, he can. We work hard at trying to maintain our relationships with our customers. So, in Florida, for example, we went from a double-digit market share in homeowners to around 2.5% to 3% I think now is where we are at, yet at the same time, our market share went up, that was around 13% or something like that. So, we were able to manage our way through it in part by offering customers homeowners products that are provided by other people. So, we maintain that strong relationship between our agency owners, so that they are still covered just not on our books. So, we have been able to do that. The other item that Joe was referring to is the economies of PPD, which is a discount for people who have their home insurance and their car insurance with us and we have about 3 million homeowners who do not buy car insurance from us. It is our goal to have each and every one of those buy auto insurance, it really makes no sense to have a lower turn business for good customers and have Geico or Progressive take the high return of auto business. So, we have dramatically changed the discounts, increased them for those customers. So, when we go out to somebody and we say, hey Josh, the bad news is your homeowner insurance went from $1,000 a year to $1,150 a year, so you are up 15%. That’s the bad news. The good news is, is our discount is much higher on auto insurance. So, if you were to move your cars to us, we can package it together and maybe we can save your money in total. That’s the program that Joe has talked about that is being very successful today. Not only will help us improve our homeowner business by getting the right prices there, but it gives us good solid auto business, which then has great retention to it, because we have everything with them. So, it’s sort of a two for us, it’s a win-win deal. Is that helpful? Josh Shanker – Deutsche Bank: It is. I mean, so in terms of currently, let’s think a year ago, let’s think today, let’s think one year from now, if you were going to non-renew the homeowners, what historically has been your win rate of keeping the auto, what you think of it today, and where do you think it’s going to go?

We don’t give that out, because we think it’s competitive. I think if you went back to the Florida, for example, I would say that we have been successful in competing in a market sold as a monoline auto insurer, because we have good pricing, good products there as well as we have been in homeowners. Of course, sometimes you make people made at you, we call it, don’t offer continuing coverage as opposed to non-renewed. But if we don’t offer them continuing coverage, sometimes they get mad about that, but if you do it in the right way, we actually help them shop. We give them different alternatives. So, we have found that we have been able to maintain that balance. And have been doing that really since 2005. So, we have got a lot of experience built into the system as how to do that.

Some of what you are seeing, Josh, to give you an indication on it is the policy in force decline in homeowners exceeds the policy in force decline in auto. So, you are seeing some of the actions we are taking to drive homeowner’s profitability improvement causing a greater impact on our homeowners policy in force. Part of our issue is on the auto side. I mean, it’s simple as we are losing more customers than we are writing. The issue here is we got to drive our new business up. We have been working on those initiatives over the last several quarters and with success. We have the temper. Some of that new business drive a little bit in the late fourth quarter and the early part of this year. So, just a couple of states and are continuing to drive initiatives that we will work towards increasing that new business. At the same time, we are focusing on customer loyalty programs to improve our retention and you have seen that improve from an auto perspective. So, we are moving in the right direction. Josh Shanker – Deutsche Bank: And just quickly, finally, you said I understand – multiply the decline in policy account by four. But what do you expect your implementation sort of rate is for the new directives going through?

Josh, we were talking, I said before, we were really talking about Allstate Financial. So, I think – Josh Shanker – Deutsche Bank: You said it twice actually.

I think we were talking about that multiple. Matt said it twice with different elements of Allstate Financial. We don’t typically give revenue guidance. So, if we were almost doing it, we made a mistake. Josh Shanker – Deutsche Bank: Okay, very good. Thank you.

Your next question comes from Paul Newsome from Sandler O'Neill. Your question please. Paul Newsome – Sandler O'Neill & Partners L.P: Good morning Allstate. I was wondering if we have seen to bottom in the non-standard business, and then I would love to hear some comments upon strategically what you think you would do in Encompass as compared to the standard business?

Yes, let me give you some long-term perspective on non-standard and Joe might want to give you some short-term view on Allstate Blue and how it’s doing and he can certainly talk about Encompass as well. Paul, when you look at the non-standard business, we grew that business very rapidly a decade ago. We were actually at one point in the late 90s selling more non-standard than we were standard insurance on our weekly basis. Unfortunately, that business was mispriced and so, in about 2001, we began to reduce that book of business. And so, you will see actually our market share in policy count start to go down which was the intention on our product, because we were losing money. In 2004, we had to make a choice between whether we wanted to prioritize Your Choice Auto or growth in non-standard. At that point in the cycle, we thought prioritizing Your Choice Auto was the right thing to do. So, we did that and of course we are now I think over 5 million Your Choice Auto policies, which has really helped stabilize and protect that standard auto book. At the same time, then later in, it was about 2007 or 2008, we rolled out Allstate Blue, which was a restaged, more consumer-friendly, non-standard product, obviously targeted towards high-risk drivers, that the growth in that business is in the new state has been good, but it has not been enough to overcome the continued slide down in the non-standard business. So, the net of all that is that businesses a fraction of what it used to be, which is the bad news. The good news is that is an opportunity for us to grow. It shouldn’t continue to go down. It has become such a small piece of the overall book, but it doesn’t actually impact the total book anymore which is a bad thing from our standpoint, because it’s a good customer segment we have to figure out how to go after. So, that’s work that is underway. So, maybe you want to jump in, Joe, and talk about specifically what non-standard (inaudible).

Leveraging off of those comments, our Allstate Blue program is a more customer oriented and customer-friendly program and we are growing it at a much slower rate than we did the last time we drove our product initiative. There is some element of the non-standard marketplace that it’s not appropriate to sort of interact with it on a most customer-friendly orientation. There is a lot of complexity inside of that business in the operating model to make it run effectively and profitably, it’s somewhat different than you need in a standard and preferred marketplace. We are using our current programs now to sort of expand from our core, we will take the learnings there and leverage them to gradually and thoughtfully expand into that long-term attractive markets. But it won’t be at the pace that you saw us do it last time. Relative to Encompass, Encompass’ core business was a homeowners’ bundle business for relatively higher network in sort of the medium or middle-income America, and we are going to bring that business near term back to its core. We tried for a while to expand more significantly in that brand to a standard and near-standard auto play. And it didn’t match the distribution channel position that we had, the shelf space that we were occupying inside of agent’s offices and our operational capabilities weren’t as well matched to that as they needed to be. The core product offerings, the core niche of that business has provided to independents agents. It’s a good one a strong one and we are going to adjust our execution and focus around that and then build from there which you are going to see near term. It’s a continued retrenchment if you will to fix some of those items that will last for a couple of more quarters as we get refocused. Paul Newsome – Sandler O'Neill & Partners L.P: Great, thank you.

Our next question is from Dan Johnson from Citadel. Your question please. Dan Johnson – Citadel Investment Group, LLC: Great, thank you. Most of mine has been answered. Just a couple of remaining ones, maybe we can talk a little bit about the homeowners business, looks like we have put – there is some pricing increases over the last couple of quarters, it looks like they are starting to show in the average written premium. Can you talk a little bit about where you think that average written premium per policy is going over the next couple of quarters? And then I have got a follow-up question, please?

I will let Joe handle that, but as he said earlier, we would try to give. The guidance we would like to give you is on underlying combined ratio, it’s not on various components of the P&L, but Dan, I think Joe can give you some spec to that now.

And thanks for the question, Dan. We have clearly said before that the homeowners business is underperforming our written targets for it. We had a series of programs actively running and they are working successfully from our perspective. We have tightened underwriting guidelines and in some cases we have reduce market share and highly volatile areas. We have restructured our reinsurance programs and we continue to evaluate our claim practices. We have raised pricing, so that average premiums are up 7% this quarter over the first quarter of last year. In addition to this quarter, we received approval for price increases in another six states that also average 7%. So, without giving you a revenue guidance, you can look at those rate increases and you can look at the ones that we have received approval for, which will roll themselves forward. There should be some continued movement on pricing, and we are not just one renewal cycle or one pricing cycle away from getting the returns where we want and need to them to be, and we are committed to using our homeowners business as a competitive advantage and not as a burden on returns. So, we are going to drive towards that goal. Dan Johnson – Citadel Investment Group, LLC: I guess maybe the way to put that question a different way is that obviously the weather has been the weather, but if you look at the rate increases you have taken and you will expect sort of flow into the written premium over the next couple of quarters, are we making progress on the non-Cat loss ratios?

Yes, we are, and we have got a couple of different spots inside of our disclosures where you can see the ex-Cat loss ratio and I think it’s about 5 points improvement over prior year. So, you can clearly see that we are moving in the right direction on that, and what I would describe is that long-term, it’s moving in the right direction, short-term, you get weather volatility, and you are asking the right question, what’s the long-term view with how these initiatives are working and they are clearly making an impact. Dan Johnson – Citadel Investment Group, LLC: Great. And then a follow-up question will be just on the exit from within the financial business, from the financial institutions, distribution channel, any thoughts on the amount of sort of capital that’s sort of tied up in the products there and what sort of capital release we will see over the next, say two years by not writing any new product?

Dan, it’s a good question. We don’t have a specific release number that comes back and of course part of it depends how long the block stays in the businesses, about $17 billion there, and Matt’s working hard with his team t make sure we keep in place. But you are asking the right question, which if you go back to Matt’s comments, I think he said, I was sitting here smiling because I think he said three or four times in comments returns, which is the way we are going to improve shareholder value on Allstate Financial to get to return, we are cognizant we have to manage operating income. We need to get operating income up to get returns up, but the other piece of that is even if operating income doesn’t go up, but the size of the business is down and so the capital involved in the business is down, then return should be up. If you remember, we got I think it was about $1 billion out of Allstate Financial in ’05 and ’06. We put back a little more than $1 billion over the next two years and then we don’t think – our current view is we are not going to have to put any money in this year. So, they are focused on our returns. This will have some impact on it, but we don’t have the specific on what you are looking for on just the bank channel fixed annuities. Dan Johnson – Citadel Investment Group, LLC: Great. And then finally in your preference of capital deployment, would you prefer dividend increases over share repurchase or the other way around?

Our continued view is that dividend should be tied to profitability. So, to the extent the profitability goes up, then it’s sustainable, then we will put in dividend increases that are commensurate with that. And other than that, we said if we don’t – then we would like to deploy capital in the business and grow it, because we think that’s the best alternative for shareholders. If we cannot, then we would use share repurchases to pass that money back to shareholders. We have of course a long track record of doing that, but that’s prospectively, Don and his team don’t have any plans at this point to do anything different than what we have currently been doing at share repurchases which is nothing, and of course, you know, I say every quarter that the Board approves the dividend and that’s not for us to talk about here to make any promises for my Board that has to decide what we want to do. Dan Johnson – Citadel Investment Group, LLC: Good. Looking forward to both of those. Thank you.

Thank you.

Matthew Heimermann – J.P. Morgan: Hi, good morning. I have got two key questions. I guess one, when you talk about the multi-product discount that you offer customers, how should we think about how that impacts the profitability of that customer with respect to auto, and I guess what I am trying to drive out when you get that discount, is that discount effectively represent the lower acquisition cost for that client over its life time and so combined ratio equals that of a standalone auto customer just with a different mix between loss ratio and expense ratio. I just want to try to understand how that economics work?

I would say yes to your question, but it was only piece of it that I think you want to be careful of is that the combined ratio is equal to that of standalone auto. That of course varies widely by year but your comment about acquisition expense, lifetime value is consistent with the economic model that we use with customer relationships, which is lifetime value. Matthew Heimermann – J.P. Morgan: Okay, so it is the acquisition piece is the right way to think about it.

I think what Tom said, I am sure what Tom said was we look at lifetime value, which is the combination of acquisition costs, loss costs, how long we retain customers, there is a wholesome view inside of that, and we are going to be unable to give you or unwilling to give you as much information as you want because I think there is some competitive thought process underneath that, but we do take a broad view of the lifetime value of those customers. We recognize how that differs depending on what they buy and how they buy it. And we use that knowledge to adjust our pricing. We don’t have a point of view that derive everything to exactly the same margin. We know what those margins are, and we use the knowledge to be appropriate prices in the marketplace. Matthew Heimermann – J.P. Morgan: I guess kind of the issue underlying that, but I am trying to get at is as you discount whether or not that has any negative impact on how you think about, or how we should think about externally the loss ratio, my gut tells me that in total in terms of total combined ratio, it doesn’t really have an impact in terms of how we should think about the business running vis-à-vis pricing, general loss cost trends, but I just want to make sure I am not missing something with respect to that.

The discounts probably have some impact, but it’s not a dollar-for-dollar impact. Some impact on the combined ratio, because they do have other, they interact with other components, other than just acquisition costs, and what we tell you is we think that what it does is it will drive our capacity to increase earnings dollars and aggregate returns by attracting and keeping more customers. Matthew Heimermann – J.P. Morgan: Okay. And then I guess the other question I had was, one of your competitors noted that, because frequency trends at least relative to my expectation looked a little bit better than I thought they might, was there any benefit in the quarter from just the bad weather, in other words, people just didn’t drive as much, because when travelers mentioned on their call that, that was a benefit this quarter?

I guess I would say it’s impossible to variance analysis frequency for weather, gas prices, miles driven, good luck. So, I think we view frequency as within the expectations we had, which is why we are in the middle of the range that we committed to as 88 to 90, and we don’t see any big changes around that. Trying to specifically say that frequency was up or down on auto, I assume we talked about that. Matthew Heimermann – J.P. Morgan: Correct.

It is related to weather, it has been very difficult to prove, we have tried for years to do that, but it gets difficult even if you use meteorological data by the amount of rainfall, amount of snow. If we felt all kinds of algorithms on it, but it mattered if you get freezing rain at 2 AM, it’s different than if you get it at 3.30 PM, because people on the road at 3.30 PM, there is not time to clean it up. So we have tried very hard to build it, we find it to be extra impossible at this point with the tools to have to do it. It doesn’t mean that we won’t get there eventually, right now, I don’t think we could say frequency was essentially flat in PD because of bad weather. Matthew Heimermann – J.P. Morgan: Okay. And then clarification on Dan Johnson’s question on the fixed annuity income capital, could you quantify how your RBC ratio would improve if that’s based on current capital, if that business was wiped off the books hypothetically?

No, we couldn’t do that for you. First, we are not allowed to talk about RBC and their Illinois wall [ph], so it’s against the law to give our numbers out that way. Secondly, it’s a really complicated problem. You have covariance, you get all kinds of investment portfolio decisions. The thing to focus on is Matt understands his business well, he understands the components of returns, he believes that this action will drive returns up. So, we feel good about it. Matthew Heimermann – J.P. Morgan: All right. Cheers.

Our next question is from Ian Gutterman from Adage Capital. Your question please. Ian Gutterman – Adage Capital: Hi thanks. I am just wondering one way, back to the early question of testing growth and so forth, is there – you need to think a little bit about expanding the appetite a little bit, meaning there has been throughout I guess, it has been closer, there is focus on high lifetime value, and maybe Joe obviously at this past employer let him through an expansion of appetite. I am wondering if that’s something you are thinking about that. I am not saying you are pushing on standard or anything but you need to be sort of expand the target range a little bit, because it seems like the Geicos and the Progressives are trying to creep up from their most inner customer towards your more preferred, do you need to restart that a little bit to get that growth?

I will make an overall comment, and maybe Joe want to jump in. In 2007, in focusing on all of our programs, we decided to focus on high lifetime value really multi-car homeowners and drove our activity in actions around that because we wanted to protect that base, because we felt we were going into an unstable environment. It was not, we didn’t think it was unstable as it was, otherwise we sold everything we had put in cash, and made ton of money. As it was, we worked our way through it, but that was an intentional decision on our part which is where you see that showing up in lack of growth in those years versus in ’04 and ’05, we were growing at 4% to 5% because we did exactly what you talked about, which was expand our focus. So, that’s how we got to worry, Joe might want to talk a little bit about where we are going from here.

Yes, and it’ a good question, Ian, in the context Tom provided an important one to understand how and why we are where we are, and I think we have a point of view similar to the underlying thought process in your question that there are customers out there that generate attractive returns that exceed our return targets. They may not be as higher returning customers as our current highest lifetime value customers, but it’s an attractive business opportunity for us, and we are going to increase our focus and ability to capture those customers. Ian Gutterman – Adage Capital: Okay. And just as a follow-up, I am having a brain-freeze, I am forgetting the name, the movement you had a couple of years ago to offer the platinum and the gold tiered strategy, did that or is there something that you are looking back on that maybe that that’s going to produce the kind of growth you hoped it was (inaudible) isn’t it?

Ian, if you will give me your number after the call, I will make sure we call you and offer you Your Choice Auto. Ian Gutterman – Adage Capital: Your Choice. Thank you. I am sorry, there is too many –

We are the only people in the industry who do it, we sell it, we did it because it is a differentiated product. We never expected that it would drive growth off the top of the charts, it was really about giving customers what they want, helping them understand the products better, so it’s simply package, it helps them remember what they have, do they have gold, platinum, or did they go with the value products, so they don’t get all hung up and you know, clause to page three of the contract. So, we are being customer-focused, building the products around them, it did lead to – we believe it lead to incremental growth, so they are trying to prove that is a little difficult, because we obviously sell a lot of auto insurance every year anyway. We do know that we sold more up than down as we got into the program, so that average premiums were up and we do know that retention was better for those people, because they knew what they had and they helped the sales processes better. As we move through this current recession, one of the great benefits of that product is we have seen a – if you look over from really, I think it was about middle of last – middle of, maybe it was even end of ’08 – Ian Gutterman – Adage Capital: End of ’08?

End of ’08 through the end of ’09, the number of people moving from platinum down to either gold, standard or value just went up. And so, what that shows is we have a relationship and a product structure that enables us to work with our customers overtime in a way that’s simple that they understand that enables them to manage your premiums which they have had to do in the second recession. So, I would say that it serves the purposes. We never that it was – competitors don’t give up their customers willingly. This is not a high turnover business in general. So, it’s not like you buy a new cup of coffee every day and most of people try to stay with us. So, it worked around retention, it’s got a lot of retention features built into it. But I would echo what Joe said is that as we look forward, those people who like Your Choice Auto tended to be those people who don’t shop as much. Ian Gutterman – Adage Capital: Got it.

As we expand more marketing, we need to expand to those people who are shopping more which is the challenge that he and his team have in front him now. Ian Gutterman – Adage Capital: Got it. Thank you. Very good answer, thanks.

Our next question is from Vinay Misquith from Credit Suisse. Your question please. Vinay Misquith – Credit Suisse: Hi good morning. On Florida and California, could you give us a sense for when you think the drag from raising pricing in the states will start or rebate, would that be six months from now?

I am trying to find a balance between revenue guidance and insight into some of these. There teaches the actions that will come online very quickly. You know, measured more in months and there is pieces of it that will take a little longer, but all of that, we can get into this year. Vinay Misquith – Credit Suisse: So, the drag from this should start to rebate by the end of this year you think?

I think what ends up happening, the profitability changes we need to make and deal with will be implemented in that time period. There are competitive dynamics and any those geographies that are impossible to predict. Vinay Misquith – Credit Suisse: Sure. Fair enough. And in the other states, you had a 5% increase in new applications, just wanted to get a sense for (inaudible) excluding Florida and California? Did he manage it to stay flat or was that down and if so, how was that this year versus last year?

I think Vinay, and I would love to help you with it, but we are going to have to stay inside our fairly lengthy and detailed disclosures already and let you work off of the components that we have there, otherwise at some point, we are going to get a little more detail in our competitive actions by state is going to be helpful for us. Vinay Misquith – Credit Suisse: Okay. And then finally on Allstate Financial, just a question on what do you think are sustainable ROEs in the near term versus say the next two or three years?

We have a goal of course of getting a 15% return on equity in our business. We expected everybody to participate in getting to that level, but Vinay, Matt has quite a challenge in front of him, given that he’s down in the mid-single digits, so he’s got some work to do there. We don’t – that’s not a business you turn overnight, because it is a long-term business and I would like to describe the accounting as to Mr. Coffee. You pour everything in a cup and it just kind of drips out over a long period of time. So, it cut expenses, you know, it takes about 10 years to actually get it all into your ROE. So, he’s got some work ahead of him, but we haven’t given out specific targets as to what that business has to do, but I would go above it, and we do have to get returns up and Matt and his team will. The other thing is that business is quite helpful to our middle-income customers who need protection for life insurance, to protection at the work site, and need help in retiring. I think our challenge is, is to find ways to create products at a simple and easy for them to understand and can go to our system. And when we figure out how to do that, we will be creating good incremental returns going forward, and we will evaluate the business as to not only what is its overall return, but is the return on the new stuff we are doing and the growth and the ability to serve customers. Vinay Misquith – Credit Suisse: Thank you.

Our next question is from Terry Shu from Pioneer Investment. Your question please? Terry Shu – Pioneer Investment: Most of my questions have been answered, the main one I wanted to ask, I think you answered that the discounts that you offered to the package policies, and I think the answer, and correct me if I am wrong, is that it probably will have some upward pressures on the combined ratio and the profitability you can’t quite measure or you can’t say that there isn’t some impact on the underwriting profitability, but overall, you are going to be earning more dollars and it’s a meteor target rate. Did I target returns, did I understand that correctly?

Pretty close, Terry. We don’t think dollar-for-dollar, the discounts drop to the bottom line over the long term. And we do think and I am trying to remember how you phrased the second part of your thought process. Terry Shu – Pioneer Investment: Right, because there has been some concerns, I think that if you are offering discounts, are you growing or are you adding policies at the expense of profitability?

We understand and measure and watch the impact of the profitability on these customer segments, but we just for competitive reasons can’t and won’t disclose it. So, we know what’s happening there. We do believe that the lifetime value over the long term is appropriate and sustainable and we believe that there are long-term aggregate profitability, we will be better off by doing this. Now, of course, we will put the discounts into play and we will have to see what happens in the marketplace with customers and their adoption in sales to confirm the accuracy there, but we are confident in its effectiveness. Terry Shu – Pioneer Investment: Okay. In terms of the overall competitive landscape, I guess the message that you have given is that there was a perception that Allstate was higher price and you have corrected that, and I have seen your adds, your commercials and they are pretty good, the one with President Palmer right, they are pretty good. And so, where do you stand, you feel that your pricing is comparable and that message has gotten across? And if you look at Progressive, it has kind of turned the corner in terms of PIP growth, can you maybe just explain a little? In terms of size, it’s not like they are much small, that much smaller than Allstate, they have reached some critical mass as well. Their growth, is it just a matter of advertising that they are achieving better growth? Just a competitive dynamics.

There is obviously a whole bunch of stuff. Terry Shu – Pioneer Investment: Yes.

Helps to grow. Terry Shu – Pioneer Investment: Right.

Your advertising, how good your floating practices, your closing practices, do people want to buy, are you there when they want to call.

Plan perception.

Yes, there’s lots going on there. So, I would say that overall we feel good about our competitive position, we feel even better about where we are headed in terms of pricing, what we are going to do with advertising, what we are going to do with expanding the target group of customers we have and the things that Joe talked about we need to do tactically in some states where we are not growing. We feel good about where we are going to go. So, I can’t tell you exactly why Progressive’s numbers are up, I think their flow is working as it seems like a good program. They are putting lots of money behind it. And they tend to do that when their programs are working according to their numbers in their economic recessional people. So, I would say we think we can hunt the people, we got a great brand, we got a great distribution system, you know, 12,000 local agencies. Our direct businesses up 27% this quarter, we sell to independent agencies. We have challenges in each of those that we work on every quarter and we talked about a lot of that today, but overall, we believe we can grow and will grow our businesses including standard auto, Allstate Financial, both Workplace and through the Allstate agencies at Allstate Financial so we can drive shareholder value. We have three things we need to do, get volatility down, get returns up in homeowners and Allstate Financial, and then grow the businesses. That will drive shareholder value. Terry Shu – Pioneer Investment: All right. So, you do believe that in terms of pricing, kind of all of the top tier players, it’s not a pricing issue any more, they are all fairly comparable depending on the market.

I think it’s complicated. Terry Shu – Pioneer Investment: All right. Yes, it’s complicated.

And I would say you can never come to a conclusion that everybody is comparable as evidenced by the fact that all the advertising, everybody saves you somewhere between $3 and $100 and $500. Terry Shu – Pioneer Investment: Correct, correct. I am just saying.

The matter is, Terry, every people don’t switch if they cost more. So, the ads, let’s say, if you switch, you save $500. Well, it’s sort of de facto true. I think what you can’t take from that comment though is you are still wide divergence in pricing for any individual customer in the marketplace and sophistication that enables you to win. I am not telling you got every sell right, every place and we are at the low, that’s not our goal. Our goal is to manage it in total. So, I don’t think you can say anybody is ever a parity in total. Terry Shu – Pioneer Investment:

I think we have answered everything. Terry Shu – Pioneer Investment: Yes, right.

There are broad discrepancies between the carriers on individual customers. I don’t think you can come to conclusion about where anybody’s overall prices and draw anything out of that. All you can really do is look and say how are they growing it out. Terry Shu – Pioneer Investment: Right. Thank you.

Okay. Brian, last question. Did we lose Brian?

Our final question today is from Brian Meredith with UBS. Your question please. Brian Meredith – UBS: Okay. Thanks for helping me get in. Couple of questions here. Last one, G&A expense ratio in the P&C business looks like it’s popped up year-over-year, anything unusual there, is that we should expect that going forward, increase advertising or something?

I would encourage you to think about our target combined ratio that we give you. We are going to be in the 88 to 90. Brian Meredith – UBS: Okay. So, keep it in that context. Okay, and then, haven’t heard much out of Judy, so I am just curious to let her talk a little bit here. New money yields versus kind of current book yields on the portfolio, investment yield was down this quarter. I mean, are we getting close to bottoming, you think here?

As Tom said in his opening comments, rates continue to be low reinvesting generally as a lower yield than the overall portfolio yield. But if you look at it from quarter-to-quarter, we were down modestly from fourth quarter to first quarter and we are working to stay fully invested and also to continue to do the things that we couldn’t do in terms of risk mitigation or return optimization, but with rates as low as they are, it’s tough to really grow income with significant exposure and fixed income. Brian Meredith – UBS: My last question, Tom, if I take a look at average written premium per policy in your auto business, it’s ticked up nicely here to see the rates coming through, lost cost owning [ph] up all that much, although we are seeing the underlying loss ratios in the auto insurance business, still increase on year-over-year, I think up about 90 basis points, guess my question is, is that should we expect that to start stabilizing, you are going down, going forward here given the current dynamics, where is it that this concept putting through to kind of mitigate that?

Brian, you talk about coming down being the combined ratio or the average premium? Brian Meredith – UBS: Looking at more, I am looking more at the combined ratio in standard auto or actually even more so the action in your loss ratio ex-Cat, the underlying loss ratio?

Yes, I would say we try to manage the business in total. The 88 to 90 is a full-year number. So, we of course try to be there every quarter because you don’t want to be outside the range and not get there, but we are right in the middle of the range this quarter. We expect we will stay in that range for the year. And so, as it relates to the average premium, yes it is up about 3%. If you look at loss costs, you don’t have the benefit of some of the stuff we see where you see like paid severities down on BI this quarter. We feel good about staying in the 88 to 90, we think that’s a good place where we can grow and necessary for us to have the profitability to continue to invest and grow. So, I don’t think you should read too much into the lines other than we said it will be in 88 to 90, and that’s where we would like to be. Brian Meredith – UBS: Thank you.

Thank you for all of your questions today. Really you can see, this quarter is just really a continuation of the trends we have had over the last year-and-a-half or so, the things we have addressed successfully and that we will continue to do that. We do it a couple of ways. One is we are good at what we do and second we just take action and move forward. So, we do have three priorities there, improving customer loyalty, growing our businesses, and then reinventing protection of retirements so that we differentiate ourselves versus the competitors. When we do that, that should and will end up in reducing volatility, raising returns and growing the business which will end up driving shareholder value. So, thank you all for being patient with us. We will 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.