Good day, ladies and gentlemen, and welcome to The Allstate First Quarter 2014 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 introduce your host for today’s conference, Mr. Pat Macellaro. Sir, you may begin.

Thanks, Matt. Good morning, everyone and thank you for joining us today for Allstate’s first quarter 2014 earnings conference call. After prepared remarks by Tom Wilson and Steve Shebik, we will have a question-and-answer session. Yesterday, following the close of the market, we issued our news release and investor supplement, filed our 10-Q for the first quarter, and posted a slide presentation to be viewed in conjunction with our prepared remarks. We also posted a document describing our current reinsurance program. These are all available on our website at allstateinvestors.com. As noted on the first slide, our discussion today may contain forward-looking statements regarding Allstate’s operations. Allstate’s results may differ materially from these statements, so please refer to our 10-K for 2013, slides and our most recent news release for information on potential risks. Also, this discussion will contain some non-GAAP measures for which there are reconciliations in our news release and on our website. We are recording this call and a replay will be available following its conclusion. I, along with Steve Shebik, and our Treasurer, Mario Rizzo will be available to answer any follow-up questions you may have after the call. Now, let’s begin with Tom Wilson.

Well, good morning. Thank you for investing your time with us to keep updated on Allstate’s progress. Before we begin, I’d like to say a few words about Bob Block, who most of you passed away a couple of weeks ago after a battle with cancer. Bob led our Investor Relations efforts for 17 years and was a member of the Allstate family for 39 years. And everything he did, he was just a consummate professional. He was balanced, direct, thoughtful, respectful. We will miss his expertise and friendship. Bob’s family greatly appreciates all of your messages and prayers as well as the donations many of you made to the Pancreatic Cancer Action Network on his behalf. In the room today with me in addition to Pat and Steve are Matt Winter, who leads Allstate Personal Lines; Don Civgin, who is responsible for Allstate Financial and Insurance; Kathy Mabe who leads Allstate Business to Business; Judy Greffin, our Chief Investment Officer; and Sam Pilch, our Corporate Controller. Let’s begin with Slide 2. Allstate’s first quarter results show the resiliency and strength of our strategic and operating platform. The strategic decision to create unique customer value propositions for each customer segment in personal lines is providing profitable growth opportunities. Operationally, we are making good progress on all of our 2014 annual operating priorities. Financial results for the quarter were good despite the severe weather in January and February. We also completed two strategic initiatives of the sale of Lincoln Benefit Life was closed on April 1. We also completed the capital restructuring program that we initiated early last year. So, let’s go through each of these and then Steve will cover the operating results. So, the visual depiction of our strategy is on Slide 3. On an overall basis, we achieved…

Thanks Tom. I will start by reviewing the first quarter financial highlights on Slide 6. Starting in the upper left, property-liability had earned premium of $7.1 billion in the first quarter, 4.2% higher in the first quarter of 2013 and a recorded combined ratio of 94.7. The underlying combined ratio was 88.4 for the quarter, which is within our full year outlook range of 87 to 89. Catastrophe losses were $445 million, 24% higher in the first quarter of 2013. Net investment income for the property-liability segment was down 8.5% in the prior year quarter, reflecting interest rate risk reduction actions taken during 2012 and 2013. As a result, property-liability operating income in the first quarter was $468 million, 15.8% lower than the first quarter of 2013. The property-liability combined ratio on a recorded and underlying basis is shown in the chart on the upper right hand side of the slide. You can see that both the recorded and underlying combined ratios rose in the first quarter. Severe winter weather as Tom had mentioned impacted the combined ratios of all three brands in the first quarter. The table below this chart provides a view of the underlying combined ratio by brand for the past five quarters. We have also broken out the Esurance underlying loss ratio to provide greater visibility excluding investments in advertising and expansion which are immediately expensed. The Esurance loss ratio remains higher than we would like it to be on a long-term basis so we continued to adjust price – pricing underwriting to ensure long-term profitable growth. These actions had negative impact on growth which is offset by higher spending on a new advertising campaign to further strengthen the Esurance brand. The Encompass brand’s combined ratio for the first quarter was 102.6. The underlying combined ratio…

Thank you, sir. (Operator Instructions) And first question is from Bob Glasspiegel of Janney Capital. Your question please.

Good morning, and let me echo your kind memories of Bob, Tom, he’s definitely be missed by all. Question on Esurance, what exactly is the strategy right now? It seems like the increase in advertising would suggest that you think you’ve got the underwriting fixed within the plan. Is that a fair read of the scenario?

Bob thanks for the comments about, Bob. They make a macro comment about Esurance is to how it fits into our overall portfolio and then Don can talk about the new advertising program. So, first, we like having four approaches to the marketplace. It gives us ability to get very clean customer value propositions for each of those target segments. For example, an Esurance segment is one of the components of the customer value proposition is give me tools to make me smart, whereas in the Allstate agency channel, it would be my agency – and my agent knows me so, we can see the difference that – you can think of that difference as it relates to our operating so, we like the ability it gives us to really hone in and get a customer exactly what they want. It also gives us the ability to compete more effectively against those people who are trying to serve multiple brands and so, we use those brands in conjunction to compete on two fronts as suppose to just competing on one front. We – obviously in all brands, they are supposed to make the adequate return on capital and we’ve talked about Esurance is progress to improve their loss ratio. We’re happy with where the progress they’re making but they are not where they need to be at. That said that doesn’t stop us from wanting to continue to invest and compete aggressively because the returns are still above our cost of capital in that business. So, Don, perhaps you want to talk about the new advertising program john, you’re actually want to talk about the new advertising program and what we have going.

Yes, hey, Bob, first of all, let me reiterate, I mean our strategy with Esurance is to grow the business as fast as possible while maintaining positive economics over the lifetime of the business we’re running. And we’ve talked about this many times before, but that’s, by definition, going to be reflected in a higher GAAP combined ratio, which you saw again this quarter. It was a pretty exciting quarter for Esurance and they built on a number of things that they’ve been doing with the customer value proposition by continuing to build their advantage. So they continue to be the only direct multiline carrier with the addition of motorcycle homeowners. They continue to build out their features which are making their product differentiated from the competitors and they continue to improve the ease of doing business. The ad campaign, I think we transitioned this past quarter. In the past, we talked about Esurance and what quadrant and what customers they were serving. This past quarter we spent more effort to make sure people understood just how good we were getting within that quartile and against the competitor. So you see us – went very aggressively against the fact that we can do quotes on the Esurance website instead of the half minutes and obviously we put a lot of advertising rate behind that you can see in the supplement, another 12.8 points in expense. I say by all measures that campaign has worked quite well. The Super Bowl campaign, we had 3.4 million entrants, we had 2.7 billion social impressions. Unaided awareness and consideration of the brand is up to all-time highs. The trust level is up. The quotes are obviously up pretty dramatically in the quarter. And I think those are good results in particular because we’ve been taking a lot of pricing action and lot of underwriting action to get the loss ratio back to where we wanted to be and while we’re not entirely there, as Tom said, absent the January, February whether we’ve actually seen a nice improvement in the loss ratio during the first quarter. I would also say that the results for Esurance in the first quarter are particularly good because we know at least through February, that the main competitors had substantially increased their spend as well. So, I think we feel good about where the campaign is working, it is all predicated our Esurance building a customer value proposition that is differentiated than the competition. And so I think we will continue to build that out, but we still have work to do on the loss ratio and Gary and the team are all over that and we continued to expect – I would continue to expect us to improve the loss ratio throughout this year. But it’s going to come at same on pressure on the top line.

Okay. And the final question is what free cash was generated from your life company, is it consistent with what your earlier guidance was going to be?

Bob, do you mean free cash on the sale of Lincoln Benefit or free cash in total?

Yes.

It’s consistent with what we have, which was $1 billion of freed up capital, but we got – as you know we got to move it through the system to get it up to the holding company.

Okay. Thank you.

Our next question is from Josh Stirling of Bernstein. Your question please.

Hi, good morning. Thanks for taking the call. So I wanted to ask you a question, a follow-up on Bob’s question on Esurance, so just to be clear you guys have doubled your ad spend at least in sort of recent run rate. I am wondering if that’s sort of a sense of how you expect to continue to spend money in Esurance. And as we think about looking to profitability of the business going forward should we expect you to continue to spend that kind of money should end and as we think about sort of total earnings is this sort of thing that pays off over the next year or two. Are we going to be lagging sort of the additional ad spend in terms of sort of Esurance driven profitability and Esurance driven underlying growth for some time? Thank you.

Good morning, Josh. Thanks for your question. Let me split it into a couple of pieces when we launch a new advertising program that’s trying to get new features across, we invest every year upfront in that than we would on a continuing basis. So you saw that whether that’s you buy a Super Bowl ad which is expensive or you just buy a lot more media in February, March. We don’t disclose what our future advertising program will be because that tends to competitive. But the normal pattern will be you invest heavier upfront and then you come back to something that’s more sustainable over time. So I wouldn’t expect to see it at the same – you shouldn’t expect to see it at the same level and for the rest of the year as you would here. But that said we do believe that to the extent we are writing economic business, we have the earnings capacity as the total company to continue to grow. We have brands that we will continue invest to the extent it is economic. So I would – our commitment is to grow the business in total to balance between the brands that deliver the right strategy and to serve each customer. How we move that the money around between them as long as we are meeting our overall underlying combined ratio commitment to the street, we feel like we – it should use the strategic and operating flexibility to drive what are the ultimate economics for the shareholders which is discounted of cash flow. Is that helpful?

Yes. That’s helpful Tom. Thank you. And if I can ask you just sort of a bigger question and I was sort of looking beyond the numbers to trying to link some of your strategies together, you guys have a very broad product set auto, home, accident, house and traditional life and a couple years ago, you are talking about sort of cross selling I think we are seeing you started to do that, obviously, Esurance, Encompass has been successful for – with the package for long time and you got sort of the voluntary benefits thing working and in your Allstate brand I am wondering if you can sort of give us the sense of how big a lever this is especially in your more mature channels, will you actually be able to get any meaningful sort of cross selling opportunities from selling say voluntary benefits to PNC or term life and things like that to PNC customers?

I will make a general comment and Matt can talk about the efforts he has undertaken on what we would call the trusted advisor. So you are right we do have a broad range of products in the portfolio. We are thrilled actually, you saw that Allstate Benefits has now over $3 million policyholders that sometimes gets lost by people. Our Good Hands Roadside is well over 1.5 customers. So we have garnered these – and that’s product we launched like three years ago or something. We garnered these people like with millions and it tends to get lost because they are so large, but we do think it is an advantage for us. We obviously Don mentioned the work that Esurance is doing to leverage the skills and capabilities we have in the company. We have also created our business-to-business unit under Kathy Mabe, we’re just trying to leverage that broad set of skills and capabilities as it relates to business customers because we’ve always been highly focused on consumers. We think we have plenty to offer businesses, particularly small businesses, and so we have a lot of work going on there. And then, as you point out, we’ve been at in our main channel with Allstate agencies, we’ve been working on having multiline relationships for as long as I been here, which is 19 years. And made some progress, but it’s been one of those areas where we feel like we have much greater potential. And Matt is hard at work on that trusted advisor piece. Matt, do you want to talk a little about…

Thanks, Tom. So that the company as Tom has described it several times before is really in an evolutionary status. So, we went through period early on where there was an attempt to create a bundled offering for our customers. But that was disrupted somewhat by what happened with homeowners for a four to five period as we had to do some risk mitigation there. When you take homeowners out of the mix, it really is problematic to try to create a diverse set of offerings and present a whole bundled offering to your customers. Now that as you can see homeowners business is back in a fully fledged mode, we then able to shift out of what I call the subcontractor auto specialist mode to more of a general contractor trusted advisor mode for our agency owners who are able to position themselves as the personal risk advisors for their customers offering a variety of risk mitigation and protection products including not only auto, not only home, but life products, but retirement products, motorcycle, renters, LPP, the full line of personalized products in life and retirement products that an individual customer might need and might come to an Allstate agency owner for. The trusted advisor model is based upon some work done by David Meister – the Meister model and many of you in consulting and others probably familiar with that model and we begun shifting towards a trust based advisory model here and are building the entire system around including the technology, information, capabilities for the agency owners. The processes we’re doing a fair amount of continuous improvement, re-engineering work to change some of the work flows. We’re doing some work that we call unbundling the value chain to make sure that our agency owners are spending their…

Thanks, Matt, Tom. I appreciate the thorough answer. Good luck.

Thank you. I am very excited about what Matt has got going there. Beside, as Matt pointed out the alignment with customers, we are building stronger local businesses – those agencies which are worth billions of dollars. One of Matt’s jobs is also to make those agencies worth more and to the extent they have a stronger relationship with customers, it makes them more valuable. I am very excited about what it does for them and for us.

Our next question is from Jay Gelb of Barclays. Your question, please.

Thank you. First, for the impact of non-cat weather on the underlying combined ratio in the quarter, what was that versus a year ago?

Jay- Matt do you want to I think maybe just talk about winter weather frequency. You are talking about frequencies, is that right Jay.

Yes. I mean I am sure there is a good portion of winter weather that’s not included in the cat impacts I am just trying to get a better sense of the baseline on the underlying excluding the impact of non-cat weather?

No, it’s really a good question and as you know we manage our business with great precision. Matt can deal with that…

Yes. So Jay, it’s interesting it was intuitive to all of us that winter weather is going to have an impact on first quarter. But we wanted to really spend some time looking at it in a granular – at a granular level to ensure that we weren’t just kind of discounting the rise in frequency as the result of winter weather when we weren’t absolutely 100% sure that was the causing factor. So we did some a fairly intense work on a state-by-state basis. So let me give you some facts because I think rather than just conclusions the facts should be helpful. And I will do it on auto and I will do with then on a home for you. So when you look at physical damage frequency for total auto, it was – the increase was driven entirely by states that experienced increased snowfall or dramatically lower temperatures that caused icing, so let me give you a breakdown there. We had 25 states and we do this comparison by month, by state comparing this year’s snowfall and temperature with last year’s snowfall and temperature looking for statistically significant deviations and what the impact was on frequency. We had 25 states that had increased snowfall and elevated frequency and those 25 states represented about 55% of our premium (indiscernible). The first quarter PD frequency in those states was 7% above the three year average. If you look at the 10 states with the largest increase in snowfall that account for 25% of the total, they contributed over 50% of the unfavorable variance in frequency. So that’s just on the snowfall side. Now look at the temperature side which as I said caused unexpected icing there we had 32 states with colder temperatures that includes 24 of the 25…

Yes, just back on the original point, what was the – can you quantify the impact of non-cat weather in that underlying combined ratio of 88.4?

Matt gave you the impact on our frequency. We haven’t taken it so close to say it’s X point of the combined ratio. I would say when you go above all that if you look at our auto combined ratio it’s 93 to 94, depending on which one that you want to use, whether it’s underlying reported. And so, we covered at that way or if you look at homeowners, what we’ve done with homeowners is combined ratio was 87.25 basis. So, while it’s clearly – and you would expect it to bounce around, so we don’t want to – weather happens every quarter, sometimes it happens in January and February and it’s cold, sometimes it’s fog, sometimes it’s other things, so we don’t want to act like you should ignore the impact of weather. We still are responsible for an overall combined ratio, but that gave you was the information to help you see that. We don’t think the bump in the underlying combined ratio up is a sustainable bump to the general trends around the country, which are not weather related. But I don’t want you also just taken out and say that next quarter that we’re not going to have weather because we’ll have weather every quarter, is that make sense.

I understand. Absolutely, and then just a quick follow-up on Esurance, it looks like the company is looking to raise rates to address the loss ratio issue. But at the same time, ad spend is also going up, so how do you clarify those two countervailing issues?

How about we want it all? We want to grow and we want to make money.

Fair enough. Thank you.

I’m looking at Don as I say that.

Our next question is from John Hall of Wells Fargo. Your question please.

Good morning, everyone. My first question has to do with Allstate Financial. During the quarter, there was a quite significant drop in the expenses over there. I was just wondering if you could comment on sort of the profit profile of Allstate Financial going forward ex-LVL and whether that drop in expenses is a permanent stair step down.

Okay, Don will take that.

Yes, let me first address the LVL question, it’s – we had about $34 million of operating income in the quarter that was related to LVL and so obviously going forward that business is no longer part of Allstate. As it relates to expenses given that we reduced the size of our business pretty substantially, you should expect that expenses will come down. We’ve been hard at work during the last six or nine months of expenses. A lot of it is driven by the headcount. The fact is we’re running the smaller business, we’re running a simpler business. Matt and Tom talked earlier about advancing the Allstate customer value proposition with the Trusted Advisor and Allstate Financial over the last 10 years or so has been in a lot of distribution channels that takes a lot of resources, a lot of efforts. With the conclusion of the LVL transaction, we are now committed 100% to the Allstate customer. There’s only one channel. We’re all in on the Trusted Advisor Model. So we’re changing our expense structure and our organization around to simplify it quite honestly make the adjustments we need to because we simply can’t spend the way we did two or three years ago and we’ve been successful in that. We’ve also had benefits from lower pension expense from what we did last year and some shared services expenses and so forth as well. It isn’t all just what we’ve done. But yes we’re committed to getting the expenses down so we can maintain our profitability.

John, there is a paragraph in the queue that does a good job of breaking out the three components of that which – when you get a chance we can direct it to you.

Great, thank you. And then just following up on the homeowners if I look at the ads that you guys have been running fire kitchen – kitchen fire and return of Mayhem as a cleaning person, it seems that you’re actually targeting homeowners rather directly. Should we be expecting homeowners to go from a negative PIF to a positive PIF over the near term?

I would agree with everything you said other than perhaps near term. We’re obviously working and Matt’s team’s hard work as we talked about and Trusted Advisor is driving that. We’ve not yet called when we think that negative will become positive but obviously with what we’ve done with the homeowners business we like to turn it into a growth initiative as well.

Great. Thank you.

Our next question is from Vinay Misquith of Evercore. Your question please.

Hi, good morning. The first question is really on the loss trends versus the earned premiums. In the last four quarters, the loss trends seemed to be up around 1.9% to 2.4% on the Allstate brand auto. And the earned premiums I believe are up around 0.7%. So – now you guys are taking pricing up (2.4%) now, so that should be a positive for the future. Just curious as to whether we should expect pressure on margins at least in the near term while the earned premiums catch up with the loss trends?

Vinay, this is Tom, I’ll ask Matt to deal with both where he feels they are in pricing and loss cost trends in auto in general. We do read all of your – everybody stuff and earlier this morning we’re trying to figure out to you 19. So we couldn’t, so we’ll get back to you on the specific on the 19 after the call. But Matt can talk in general about both where he feels the business and what he is doing to make sure we keep in line with our second priority which is to maintain underlying combined ratios.

Good morning, Vinay. We’re overall feeling very good about where we stand in auto in the underlying and our margin and our capabilities for continued growth and maintenance of good profitability. As I’ve talked about on previous calls we really run the auto business by geography not solely as one large system and it’s managed on a real-time basis by quite confident teams at the market operating committee level who are aware of what’s going on in each geography, watching trends emerge, looking at regulatory issues, watching demographics and other factors and making calls on a day-to-day basis to ensure we’re staying ahead of those trends to the extent we can and that we’re maintaining the margins. And as I said before we breakdown our combined ratio and our loss ratio in what I would call almost agonizing detail. We know what’s happening there. We’re not surprised by any and we feel confident that we’re approaching it in a rational way. We’re as I’ve said also previously trying to optimize the point between growth and profitability to ensure we’re able to continue the kind of growth that we’ve been experiencing recently. We just had in terms of new business production, one of the best total auto quarters since 2001. We like that. Retention is up significantly and it has been up for a steady period of time now and we like that. And we’re balancing our desire to grow, capture market share and retain profitability and ensure we meet all the commitments we’ve made regarding underlying combined ratio.

Okay. That’s helpful. The second question was on the net investment income on the P&C portfolio and I’m looking at it ex-prepays and litigation. And we actually saw per stabilization in the – some interest-earning securities there and a stabilization in the yield. Are you doing something now more positive in a sense that changing the asset mix there where we’ll see a stable yield and should we and is your move away from longer duration to shorter duration securities or instead we’ll see more stable net investment income from the earn-out?

Judy will answer that question and let me make sure I get the math right. So the stabilization are you talking about the earned deals fourth quarter of 2013 to first quarter of 2014 or.

Yes.

Stabilization, okay, because it is down about 20 basis points versus a year ago.

Yes, yes.

So there is stabilization and as Tom mentioned over the past year we have moved – shortened the duration in the portfolio. And that work is largely done. So when you look at the portfolio at this point we’ve got a duration a little bit under three years and you plan to stay there for the time-being. So it isn’t necessarily a change in the mix, it’s more that we’ve done the work that we wanted to do. We’re going to continue to see the impact of the work that we did last year in terms of year-over-year but quarter-over-quarter it has largely stabilized where we are today. And the portfolio yield is down so the differential between where we’re investing today in the portfolio yields isn’t as great as it would have been a few years ago.

Okay. That’s helpful. Thank you.

Our next question is from Michael Nannizzi of Goldman Sachs. Your question please.

Thanks. Tom, I wanted to ask you a little bit about the other personal lines business I mean it’s come up a little bit more recently in some of the calls. A couple billion dollar book I mean it looks like now three quarters of double-digit growth, margins are in mid-to-high 80s on an underlying basis. Want to just get a little bit better understanding of what’s in there. I mean I guess specifically it looks like the growth is coming from Dealer Services and Roadside. What are the margins in those businesses specifically and are those higher – if you can tell us higher-margin business than the rest of the stuff that’s in there? Thanks.

Okay. I’ll make some general comments and then Kathy you can talk specifically about what we’re doing in Roadside and Dealer Services. But first when you go all the way up in other personal lines there’s lots of other stuff in there. So there is a number of consumer household products where that be personal umbrella policies, many of the policies Matt talked about that fit inside of that organization and are fully integrated with the way we do with our agencies just like auto, home and everything else. In those businesses Matt mentioned are also growing well. So renters and some other things we’re having a good year there. In addition to that as you pointed out we have a number of other really strong and significant businesses that oftentimes don’t get the attention that auto and home do. So one of those would be Roadside, the other would be Dealer Services. Roadside we have really three parts to that business. There is our standard, our auto – our Motor Club policies we sell for fee, then we have our Good Hands Roadside where it’s paid when you use it that’s why I mentioned we have over 1.5 customers. And then there is our wholesale business. Kathy, if you can talk about that business is growing quite rapidly in that third piece if she can talk about what she is doing there and what we need to do to – in terms of profitability there. And then Dealer Services sales extended warranties and things through dealers. That’s also a pretty large business. That’s a longer tail business. So the profitability as you have to – turns in over time, if she could talk about what we have going there as well.

Thank you, and thank you, Michael. With regard to Roadside, Tom talked about the different components. Inside that in terms of it’s profitability the business is growing rapidly. The wholesale business is less profitable than what we call the retail business or the Allstate segment of the business. So in the short term we’re focused on slowing the growth a little bit in the wholesale side while we focus on increasing the profitability of that segment. Where at the same time we’re doing picking steps to aggressively grow the Allstate branded part of Roadside which is highly attractive and we’re doing that, Matt talked about the Trusted Advisor that’s a component of key steps we want to sell through the Allstate agency distribution force. With regard to Dealer Services, there are a number of things going on there. It is a rapidly growing business, most of the growth is coming from the vehicle service contract portion of the business. We feel the – that it’s adequately priced although we’re taking steps to make sure that we’re getting the profit margin that we need on that business and working aggressively to pursue that. We love some of the synergies that we see in Dealer Services with regard to the property casualty business as well and some of the other businesses in B2B.

And I guess the question is I mean you’ve seen them really I mean just looking at your supplement I mean those two have seen the lion’s share of growth in other personal lines over the last at least quarter over the last year. And over that – over the past couple of years the underlyings have come down and really kind of settled into that 80s, low 90s sort of range. I’m just wondering like are the areas that are growing, are those just more profitable than the others or is there something else that’s happening at the same time that these two areas are growing that’s caused that profitability to kind of settle in? Thanks.

I think where Kathy was is the wholesale business, it grew quite rapidly, we picked up GM which was the giant account and actually that business is not as profitable of the other businesses, they actually reduced our overall profitability. And in the Dealer Services business we like to profiting, we think it’s got good pricing and it’s growth is profitable. I think Michael there maybe some other pieces in there in terms of what we’re doing in renters and personal umbrella policies. So I would say let us help you we’ll dissect that for you because I think you’re looking at a broader combined ratio measure than just the businesses that we’re talking about.

Got it. Okay, great. Thank you.

Our next question is from Joshua Shanker of Deutsche Bank. Your question please.

I apologize I have between Jay and John. My questions were answered.

Okay. It’s easy.

Thank you.

Our next question is from Meyer Shields of KBW. Your question please.

Thanks. One nitpicky question. The corporate expenses went down – were flat year-over-year, but were down significantly from the fourth quarter. Is the first quarter number a good run rate going forward?

You’re talking about the corporate expense line we’ve broken out. So there is – you have – yes interest expenses down some and then there are some shared service cost that rattled through their pension and other things that are down. In terms of the number we mentioned we took a big shot because we restructured the pension plans added to the balance sheet and as a result in terms of – we took the liability down and reduced our expenses by well over $100 million a year. So part of that rattles through but a large part of that also as Don mentioned gets allocated back out to him, so which is a good thing so – because it gets reflected in the profitability of our businesses. So but there is no big trends going on in corporate I guess – I’d say once you get through the capital restructuring plan and you got to look at the preferred dividends relative to interest expense because that shows up in a different line item. So…

Okay, no, that’s helpful. Bigger picture I guess is there a time frame for expanding the target focus of the Encompass to maybe attack a more broad segment of the independent agency customer base?

Our current strategy with Encompass is to continue to rollout and expand the package policy because we think we have room geographically to do that and room within some of the agencies to do it that we exist to do business with. And why we’re doing that we’re still working to improve profitability in some of the space. So we’ve actually shrunk Meyer the – what we would call the segment business which is the standalone auto policy over the last four, five years. Over time I believe you’re right that we know how to price auto, we ought to be back and expanding that business, but right now it’s not on our list of priorities.

Okay, great. Thanks very much.

We’ll take one last question.

Our final question is from Adam Klauber of William Blair. Your question please.

Thanks. Good morning. The BI severity was pretty low. It’s been trending down. Is that more Allstate specific actions or is that some market phenomena?

It’s hard to answer what the market phenomena is, but Matt might want to talk some about the actual results we have.

Yes. I think well that’s an interesting question to try to break it down from the entire market. We have – as I said before we’ve taken a fair amount of effort to look at this on a state-by-state basis and manage it as well as we could. We – there is always geographic mix issues and policy limit shifts and other things that impact that. And I guess I would say I don’t believe that we’ve done anything dramatic recently to indicate a trend line that you should read into this.

So remember part of the trend is Florida. We have some profit issues in Florida and New York, they tend to be BI space. So it’s (definitely) – you really got to look at it by state. And I would say if you go all the way up and it’s we’re – to the extent our BI cost severities go up, frequency goes up in BI or same with PD frequency or severity will reflect that in our pricing and all of it is manageable if you look at our average pricing and we’re feeling pretty good about it.

Okay, thanks a lot. Very helpful.

Thank you all for participating in our strategy. It gives us the flexibility as you can see they’re operating in a variety of different customer segments and we’re going to stay highly focused on our 2014 priorities. And the success we’ve had maybe proactive from an operating and strategic standpoint over the last four years. It put us in a position to just begin to build on a great franchise. Thank you all. 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.