Good day, ladies and gentlemen, and welcome to The Allstate First Quarter 2016 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. As a reminder, today's program is being recorded. I would now like to introduce your host for today's program, Pat Macellaro, Vice President of Investor Relations. Please go ahead.

Thank you, Jonathan. Good morning, and thanks, everyone, for joining us today for Allstate's first quarter 2016 earnings conference call. After prepared remarks by our Chairman and CEO, Tom Wilson, Chief Financial Officer Steve Shebik and myself, we'll 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 the results presentation we will use this morning in conjunction with our prepared remarks. The documents are all available on our website at allstateinvestors.com. As noted on the first slide, our discussion today will 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 2015, the 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 in our investor supplement. As always, I'll be available to answer any follow-up questions you have after the call. And now I'll turn it over to Tom Wilson. Thomas Joseph Wilson - Chairman & Chief Executive Officer: Well, good morning. We appreciate you taking the time to stay current on Allstate's operating results. This quarter shows really why we're in business, which is to protect people when disaster strikes. Overall operating profit is down largely because of two significant hailstorms in Texas in March. At the same time, good progress was made in improving the underlying combined ratio for auto insurance and the homeowners business continued to generate margins that enable us to handle large catastrophe losses like we saw in March and still generate a good return for shareholders. So as you know, severe weather creates a need for our customers to be protected. It's an…

Thanks, Tom. I'll begin with a review of our property-liability results on slide four. Beginning with the chart on the top of this page, property-liability earned premium of $7.7 billion in the first quarter of 2016 was 4% higher than the same period of last year. Recorded combined ratio of 98.4 increased 4.7 points versus the first quarter of 2015, driven by the $827 million catastrophe losses Tom mentioned earlier. While the underlying combined ratio of 87.2 improved by 1.8 points. Net investment income of $302 million for the property-liability segment decreased 15.6% from the prior-year quarter, driven by a decline in performance-based investment income, which had strong results in 2015. As a result, property-liability operating income in the first quarter was $291 million, which was $264 million lower than the first quarter of last year. The chart on the lower left-hand side of this page shows property-liability net written premium and policy in force growth rates. The red line represents policy in force growth versus the prior year and shows that policy growth was comparable to the prior-year quarter given actions in place across all three underwritten brands to improve auto returns. The blue line on this chart shows net written premium grew by 2.9% in the first quarter of 2016 as average premium continued to increase. The bottom right-hand side of this page shows the property-liability recorded and underlying combined ratio results. Let's go first to the red line, which shows the recorded property-liability combined ratio in the first quarter of 2016 was 98.4. This was 4.7 points higher than the first quarter of 2015 result of 93.7 but included 6.7 more points in catastrophe losses. The underlying combined ratio of 87.2 showed by the blue bar was 1.8 points below the first quarter of 2015. Slide five…

Certainly. Our first question comes from the line of Greg Peters from Raymond James. Your question, please. Charles Gregory Peters - Raymond James & Associates, Inc.: Good morning, and thank you for hosting the call. I appreciate the chart you had in your presentation about the increase in average premium. In the auto profitability measures slide, in your supplement, the loss ratio looks like it stabilized. Nevertheless, I'm wondering when should we expect that to start improving in the context of your rate actions that you've implemented over the last year. Thomas Joseph Wilson - Chairman & Chief Executive Officer: Good morning, Greg. It's Tom. As you know, and Pat mentioned it, it takes a while. So when we get a price approved, we obviously have to go through the regulators, and then once we do that, we have to program it in and start to roll it out to our customers, and those policies roll out over six months. And then of course it takes another six months before you collect it all. Matt can talk about the pace of change, but his team has been highly focused on this and aggressive making sure we are ahead of where the industry is going in terms of getting our pricing fixed so that when they catch up with us, we'll have an opportunity to grow again at profitable levels.

Greg, it's Matt. Thanks for the question. Everything that Tom just said is true, and that would be true if we were in a completely static environment, but we're not. So we're in a still moving environment. So we did see auto frequency moderate in the first quarter compared to the last half of 2015. And as a result, as you said, because of the rate taken, average earned begun outpacing loss cost trends in the quarter. That's a really good thing. But we are questioning whether some of the moderation of frequency may have been due to weather in the first quarter; we don't know. But we're not sure exactly whether or not we've seen the rise – the end of the rise in auto frequency, a stabilization or just normal fluctuation. So from that perspective, we continue to execute on our profit improvement plan, and we refine that profit improvement plan as time goes on and we get more information, greater clarity on the trend line, and that's true not only on frequency but it's true on severity as well. And as you've seen, I'm sure you've looked at fourth quarter Fast Track, it showed a clear acceleration across the industry in PD and collision severity. That's due to total loss is up, higher cost to repair more complex cars, greater number of parts replaced, a whole host of different factors. Allstate has historically outperformed the industry in managing those costs. It looks like in first quarter we may have given up some of that advantage due to responding to the high catastrophe load and increased frequency, but our goal is to get back to our competitive position there and lead the industry. But the end result of all of that is that we'll continue to execute all…

Thank you. Our next question comes from the line of Ryan Tunis from Credit Suisse. Your question, please. Ryan J. Tunis - Credit Suisse Securities (USA) LLC (Broker): Thanks. Good morning. Just a question I guess on the capital management. $1.5 billion buyback, it sounds like over the next five or six quarters with the common dividend it doesn't seem like it would quite add up to sort of what the street is thinking of for overall operating earnings. Just curious if we're at a point now where you think about needing to retain some capital to grow whether it's through M&A or just organic growth? I know in the 10-K you mentioned your strategic priority is now to build and acquire long-term growth platforms, not just to build. So I'm just curious if there is any M&A component to that. Thanks. Thomas Joseph Wilson - Chairman & Chief Executive Officer: Ryan, this is Tom. We have plenty of financial fire power to do whatever we need to do. Steve mentioned our debt to capital ratio is lowest it's been, I think, since I've been here and I've been here over 20 years. And we're in really strong position if we need to do anything. Steve mentioned that the thing that we had done historically, so last $3 billion program, had over $1 billion in it from Lincoln Benefit Life. So I think what happens is sometimes the confusion is people get the capital actions in the divestitures mixed up with how much we need to grow in that. And so we think this is the right amount of money, it keeps the company really strong. We have plenty of capacity to either grow our business, handle any kind of large catastrophes that might come our way or see if we find something that's attractive to us externally, we would want to add to the portfolio, we can do that. And Steve can – I mean, Steve went through the variance. Was there anything else on the variance of how we got to $1.5 billion that you want to hear more about or are you okay with that? Ryan J. Tunis - Credit Suisse Securities (USA) LLC (Broker): No, that sounds like it's just largely attributed to the deployment of excess, so that's fair. And I guess my follow up is just Esurance and how we should think about the road to profitability from here. Because for a while, it seemed like the story there was scale the top line and also improve the loss ratio. The loss ratio actually looks pretty good now, down near 73, but it doesn't look like it's growing and we're at like 105 combined. So just I guess what's the path to a sub 100 combined ratio on Esurance? Thanks.

Ryan, it's Don Civgin. Let me give you an overview on that. First, if you recall, we acquired Esurance for strategic reasons so that we could grow in the segment where customers wanted self-service and a branded experience. We have from the very beginning been running Esurance from an economic value basis as opposed to GAAP. So with the difference in accounting between the advertising being expensed in the quarter you spend it, if you run it for GAAP combined ratio, it is hard to drive it. So we've been looking at economic value. The business is twice the size it was roughly when we bought it. The GAAP numbers do matter because it's growing to be an increasing size of the Allstate portfolio. So they have spent the last roughly two years working to improve the performance of the business on a profitability basis. They've improved the loss ratio, but they've also had some operational catch up because while it's a direct business, it isn't all done online. We still have claims adjusters, we still have customers to take care of, we still have call centers. I'm really happy with the progress they've made. The combined ratio is in much better shape than it was a year ago. The number you're looking at, the underlying of 105, includes, as Tom mentioned, 3.4 points of investment in product expansion and geographic expansion that's not currently paying off in the current period. Underneath that, the loss ratio improved by over 4 points over last year. So very happy with where it is. You're right it's still over a hundred, but out of that 105, I think you have to look and take that investment of 3.4 points out. And then there's still some room on the expenses for them to bring both advertising and non-advertising expenses down. So I feel good about where they are. As far as the growth, yeah, they didn't grow this year, but in the first quarter, but they also spent 36% less on marketing. That's not a direct correlation, but they are running a better more effective business. And as Tom said, we're feeling good about where it is, and it is still our growth vehicle in that segment, but we needed to get some operational things sorted out first. Ryan J. Tunis - Credit Suisse Securities (USA) LLC (Broker): Thanks so much for the answers.

Thank you. Our next question comes from the line of Josh Shanker from Deutsche Bank. Your question, please.

Yeah, good morning, everyone. Two questions. One is can we talk a little about your rate need in auto going forward and maybe touch on rate need in Texas homeowners on top of that? And my second question relates to mass hitting about two or three quarters ago, but we're getting well ahead of it. There's always this fourth quarter seasonality in losses that didn't happen at all last 4Q as we start discounting the end of the year into our thoughts, was that seasonality just a coincidence?

Josh, it's Matt. I'll start with the first question about rate in auto going forward. You know that we don't disclose our rate plan for the year. We do disclose the fact that we have every intention of staying ahead of our loss cost trends, and as we monitor those, we continue to take rate as necessary. We have robust rate plans. We revise and amend and change them on an almost ongoing basis as we watch the emergence of loss costs. The only thing I can tell you is that there is some public information about rates that has already been filed and approved so far this quarter. You're free to go and search out publicly available information, but I can't give you anything beyond that.

And can we talk about Texas onto that specifically, whether a cat in Texas is a rate issue or whether it's just a volatility issue?

Well, I'll answer it this way: as we look, we always have a cat load that we take into account as we're looking at rate need overall. We have to figure out what is normal volatility and normal catastrophe activity and when we're at a new norm and whether weather patterns are changing and non-modeled cats are increasing due to global warming, we will and are continuing to look at that. And if we determine that this is a new norm, we will price appropriately for it. But that's a tough question, and I don't think that we will change something based upon a set of cats that took place over a ten-day period. So it will take more than that. But it's a good point that we have to look at whether or not we're in a new weather environment and a new cat environment, and if so, how we react. I guarantee we will react to ensure that we earn economic risk-adjusted returns in Texas and every other state where we have cat exposure.

Thank you. And seasonality of the loss ratio. Anything behind that or is that just a magical thing?

Boy, everybody has a theory on this one. I personally will tell you that we don't believe that there's any historical trend in seasonality that holds true all the time. There's generalities, but last quarter was one of the warmest first quarters in the last 20 years. Things change, and who knows what's going to happen in fourth quarter in terms of weather, in terms of catastrophes. And so I don't put that much credence into kind of seasonality predictions. I think they're informative, they help us plan for things, but there have been more exceptions to the rules lately than the rules. Thomas Joseph Wilson - Chairman & Chief Executive Officer: Let me add one. So as Matt pointed out, he looks at – and our team really focuses on homeowners by state, or by in total, which you saw the numbers in total, by state and by territory, right. So it's broken down. What I would say is that severe losses like hail, straight-line winds, or tornados do come through the pricing models faster than severe losses that are caused by hurricanes or earthquakes because of the longer term nature of the actuarial science on that.

That's a good answer. Thank you, Tom. And thank you, both and good luck in the rest of the year.

Thank you.

Thank you. Our next question comes from the line of Josh Stirling from Sanford Bernstein. Your question, please. Josh Stirling - Sanford C. Bernstein & Co. LLC: Hi. Good morning. Thank you for taking the question. So I wanted to start with a kind of a numbers question, in a sense I want to make sure I understand. So you said this quarter the weather appeared to be light in auto and home and that's probably driving the frequency benefit. And so the headwind there would be – in the future may be loss ratios would sort of bounce back, but the upside from an investor perspective is that you're not going to slow raising price increases because you're not ready to declare victory on frequency yet. So that's my first actuarial question. And my second related point, I'm just looking at your BI severity which has been negative for a couple of quarters and I'm trying to understand what's driving that, whether it's the claims initiatives that you've been working through or if that's more environmental? And I'm trying to get to do we actually think – do we think that those favorable trends persist and ultimately if the underlying sort of net trend for auto maybe is going to be challenging from here? Thank you. Thomas Joseph Wilson - Chairman & Chief Executive Officer: Hey, Josh, so Matt will answer your question, but just to be clear, we didn't say that favorable weather impacted first quarter results. Josh Stirling - Sanford C. Bernstein & Co. LLC: Okay. Excuse me. Thank you for correcting. Thomas Joseph Wilson - Chairman & Chief Executive Officer: I just wanted to be clear. It just is what it is.

Yeah, Josh, it's Matt. I think your question is really about – I think you referred to it as actuarial, but I think you were referring to whether or not if we have some uncertainty about some of the causal factors in gross frequency, whether that impacts our ability to price and take rate. Rate indications are at a paid, not at a gross and they're based upon your net trends and your indication, and we go to the regulators and the insurance departments with a robust actuarial package that shows net trends current indications. And so most of that, quote, uncertainty about telling you what we think weather did to gross frequency trends last quarter is irrelevant to the pricing packages that we've put together which are based upon much more precise information. As far as the BI severity and why it's down, yes, you are correct, we have talked to you about our enhanced medical injury handling program. Part of that is an attempt to get through BI cases quickly, especially those that have enhanced injuries. And so a lot of the decrease in BI severity that you saw this last quarter was a mix issue because we're paying a lot more current claims. The more current claims tend to be lower severity claims. That's one of the reasons you see BI frequency up a little this quarter because we handled a bunch more claims, and we went through them. And so you always have that volatility in results in long-tail coverages, and there's a lot of complexity in BI. So it's hard to look at BI paid severity on a quarter-by-quarter basis and make any sense out of it. You have to look at it on the longer term basis, and you have to look at it in conjunction with the frequency to see how much of that volatility is influenced by mix. And in this last quarter, we think a fair amount was influenced by mix. That being said, we think we're making good progress in managing BI severity appropriately. Josh Stirling - Sanford C. Bernstein & Co. LLC: So that's really helpful color. I guess, I don't want to put words in your mouth, but I'm trying to sort of synthesize what the net take away would be from all this. Which is I think you're probably going to continue raising prices at more or less the rates you've been because you're going to look through the severity thing as sort of mix driven and at the same time the frequency you're going to rely on the paid data more than the gross?

Well, that must be a Josh question because both Joshes have tried to get me to predict my rate taking activity, which I can't do. Josh Stirling - Sanford C. Bernstein & Co. LLC: Okay. Well, I thought I'd call it actuarial. Thomas Joseph Wilson - Chairman & Chief Executive Officer: I think to be fair we'll go through a period where we'll have to continue to raise prices. Josh Stirling - Sanford C. Bernstein & Co. LLC: Okay. I can ask an easy one, then. So I've been happy to see PIF growth has not gone negative in spite of the rate initiatives on the core auto business. Is anything in particular you guys are doing to offset that? Or is this just more a function of the fact you've got such sticky customer relationships that you have an inelastic book? Thomas Joseph Wilson - Chairman & Chief Executive Officer: I would point out actually our items in force were down this quarter from where we ended the year. So when you look at it sequentially, you really have to – we're down. We expect it to be down some. We're growing in other parts of the company. But this does have an impact on growth. We knew it was going to happen. We managed through it. We spend a bunch of time talking to our customers about policy changes and price increases. And so when you're doing that, you're not out trying to find new customers. So we're just working our way through it. Josh Stirling - Sanford C. Bernstein & Co. LLC: Okay. Thank you.

Thank you. Our next question comes from the line of Jay Gelb from Barclays. Your question, please.

Thank you. On the Allstate brand homeowners business, the first quarter ex-cat combined ratio was slightly under 60%. That's a pretty big improvement year-over-year but was actually up relative to the fourth quarter. I'm trying to get a sense of whether you feel you can keep it at or below that 60% range. Thomas Joseph Wilson - Chairman & Chief Executive Officer: When we started this, really – and you'll remember, Jay, I don't remember how many – maybe five, six years ago, we said we felt that the business needed to, with catastrophes over time, run in the low 80s% and then you can put in whatever kind of cat load you want. We're running there today. We're comfortable with it. The underlying bounces around a lot quarter-to-quarter. We didn't note in the fourth quarter that we thought that was a pretty low level at 56% and change because cat loads are typically not that high so that you need to be below 60%. So we're just trying to make sure we're competitive in the marketplace, give our customers a good return, handle the volatility. But because we handle that volatility, our shareholders get a good return, which based on the required capital levels we had initially meant in the lower part of the 80s%. That said, because we've improved the profitability, we now need to keep less capital, and so we manage it, as Matt said, we manage the stuff dynamically on – we're always looking at what's the right return on capital by state, by territory, and we adjust for it. So I think you should expect us to continue to deliver good risk-adjusted returns for our shareholders given that we're willing to take on the volatility of quarters like this quarter.

That's great. And then when I think about scenarios like we have with the Texas floods, I'm sure if it's disclosable we'll hear about it in a couple of weeks, but in that type of scenario, is there homeowners risk of loss there during a flood, or is that really just more focused on auto comprehensive? Thomas Joseph Wilson - Chairman & Chief Executive Officer: Well, I mean, obviously there's a risk of loss because homeowners will lose stuff when the house floods. The federal government sells flood insurance, we do not. Are there things that could go along with that? Cars get flooded out, stuff like that, sure. But we factor all of that into our pricing. So the Texas floods largely would not be one of the big elements we'd be responsible for.

That's what I thought. And then finally on the buyback, the $450 million that was done the first quarter, I'm just trying to square your comments around that. With regard to the new authorization, which my sense is typically it gets done earlier than is outlined, but the $450 million, should we view that as kind of a normalized quarterly run rate or is there perhaps some upside to that in terms of size? Steven E. Shebik - Chief Financial Officer & Executive Vice President: So this is Steve. The $450 million is probably a little higher than what we're going to have as we go forward. That was based on the prior program. I think I've said before what we do is we actually have outside parties perform the share buyback for us on the basis of a grid. And if you remember, earlier in the quarter, we were lower – our stock prices went down a little bit, so we were at a lower part of that grid and we didn't buy back as much stock. I'm sorry, we bought back more stock because our price was down a little bit, which caused us to do the $450 million versus a somewhat lower number, which is why we ended the program in April versus a couple months later.

Understood. Thank you. Steven E. Shebik - Chief Financial Officer & Executive Vice President: Okay.

Thank you. Our next question comes from the line of Amit Kumar from Macquarie. Your question, please. Amit Kumar - Macquarie Capital (USA), Inc.: Thanks. And good morning, and congrats on the quarter. Two quick follow-up questions, if I may. The first I guess goes back to what Greg was asking about the loss cost trends. On the last call, you had talked about competitors and spent more time on the industry. Recently one of the larger companies had adverse development in their results. Does that sort of news – did that lead you to maybe take a pause or sort of recalibrate the growth plans for 2016? Or do you just feel that, okay, this is others addressing the issues that we have addressed in the past?

Amit, it's Matt. It's an interesting question. But let me be clear that we have an Allstate philosophy for both how we reserve, which is very conservatively. Somebody else's prior-year development is really not that instructive for us. It's interesting, we look at it. It always provides context and information, but we have fairly precise ways that we approach this and that we ensure that we're reserved appropriately. And as I said when I answered Greg's, I think our level of detailed study as we determine where to take rate, how much rate to take, what the net trends are, what the indications are, number one, the level of thoroughness has shown up in our effectiveness in getting rate approved in each of the states. But two, it allows us to react to our information as opposed to others. Everybody is in a different place. Everybody is in a different place in terms of what the rate is, where their rate is, how much rate they need to take to respond to current trends. We saw at the beginning of last year very few people talking about any frequency or severity issues. And then later on, everybody talking about it. So everybody's timing appears to be different, and we're focused on our own book of business, our own trends and our own math. Amit Kumar - Macquarie Capital (USA), Inc.: Fair enough. The only other question I had was going back to the discussion on expenses and the marketing campaign, did I understand this correctly? Is it just going back to the usual normalized level, or is this sort of a reboot for Allstate and Esurance brands? Thomas Joseph Wilson - Chairman & Chief Executive Officer: What we were indicating is we're going to put some new creative out with…

Thank you. Our next question comes from the line of Bob Glasspiegel from Janney. Your question, please.

Good morning, Allstate. I really appreciate the disclosure in the bottom of slide eight on Allstate Life decomposition of earnings. And hopefully we will get that prospectively and retroactively would be even better. As we think about the Allstate Life ROE progression, Matt, when you took over several years ago, the idea was to go into mortality, morbidity, and cut back spread products, and that's played out well. And the hope was even though you had some legacy drains in the annuity block that will run off over time, the higher profit ROE will take charge to drive it forward. Now you've had lower yields and some pressures, but where are we, Tom, on the ROE progression there? Can you take capital out of there going forward to help as well? Thomas Joseph Wilson - Chairman & Chief Executive Officer: That's a good question, Bob. So as you point out, we've been working on improving the returns in that business for some time. We feel like we've been making good progress. But the other thing I would say is we look at ROE, but we really manage for shareholder value. So the items when you look at that lower right-hand side and see what happened to annuities in terms of operating income, that hurt the current ROE. But we're okay with that. It hurt it for two reasons. One is obviously we harvested, I think, it was over $0.25 billion of gains and basically front-end loaded, what would have come through as operating income into book value when we sold the bonds, and now we're going to put it in longer term investments that obviously takes a while to get invested. So you earn – as Steve pointed out, we'd like try to get about 10% on that stuff. It…

Thank you. My follow up is a detour to commercial auto. You had a mild increase in reserves in the quarter. Where are you in that book pricing-wise and what drove the reserve increase?

Hi, Bob. It's Matt. Yes, thanks for noticing. Yeah, we did have some reserve strengthening. The vast majority of it was in commercial auto and then a little bit in prop. And it's the same drivers that existed on all the other underwritten standard auto brands, it was frequency, severity trends and unfortunately I don't think we were at the proper rate level when those hit, and so catching up takes a little longer. And we have to be more dramatic, and you have seen that and you will continue to see that. So we're going to move aggressively to get that business to the point where it's really serving what I think could be a really unique strategic purpose. In addition to bringing in appropriate risk adjusted returns. This is a great marketplace for Allstate. The small business – we were Main Street, USA. We have a lot of our existing standard auto and homeowner customers' own small businesses. We have natural connections and a natural brand affinity, and my goal and our goal, the team's goal, is to get the profitability at an appropriate level, get the returns where they should be and then deploy this as a strategic asset as part of our broader trusted advisor strategy to serve the full range of customers with their full range of needs.

We've seen the commercial auto movie before in the industry over the last several quarters. So the reserve increases have tended not to be cameo appearances, but I got every confidence that you'll get your arms around it.

Hey, Matt. We'll take one more question, please.

Certainly.

Jonathan, sorry.

Our final question comes from the line of Kai Pan from Morgan Stanley. Kai Pan - Morgan Stanley & Co. LLC: Thank you so much for fitting me in. And first question is on the guidance. It looks like the first quarter 87 is below the 88 to 90 full year guidance? And it looks like the auto book will continue to improve over the coming quarters. So what is holding you back? Thomas Joseph Wilson - Chairman & Chief Executive Officer: It's a 12-month forecast and we're 3 months in. Kai Pan - Morgan Stanley & Co. LLC: Okay. So I just wonder is there any seasonality or maybe the property book is better than what you anticipated? Thomas Joseph Wilson - Chairman & Chief Executive Officer: No. We've just always said it's a 12-month forecast. We don't hold ourselves accountable for it. You'll remember last year we were bumping along towards the top end of the range. When we get to the third quarter, we thought we might actually end up outside the range so we let everybody know that, and we had a great fourth quarter and came in below the range. So it bounced around. We see no need to update our outlook there. Kai Pan - Morgan Stanley & Co. LLC: Okay. That's great. Then the bigger picture question, you have million cars connected through telematics and we have seen seemingly quicken pace in terms of technology advancements such as active safety as well as autonomous driving as well as the driving behavior like shared mobility. For all the auto industry, they tend to be backward looking using sort of actuarial table to determine rates and products. I just wonder how do you actively anticipate this technology changes that position your products and market position.…

Thank you, ladies and gentlemen, for your participation in today's conference. This does conclude the program. You may now disconnect. Good bye.