Allstate Corp (NYSE:ALL) recently reported its second quarter earnings and discussed the following topics in its earnings conference call.
Michael Nannizzi – Goldman Sachs: So just one question on standard auto. It looks like, sequentially, PIF grew – the year-over-year decline was the lowest it’s been in a while. If we were to just roll forward that sequential growth, I mean, you could be looking at PIF growth for the first time in a long time later this year. I mean, is that something that you’re thinking about? Is that something that you’re moving towards just given where the profitability is there now or you just love your thoughts on that?
Thomas J. Wilson – Chairman, President and CEO, The Allstate Corporation and Allstate Insurance Company: Mike, I assume you’re talking about The Allstate brand, which…?
Michael Nannizzi – Goldman Sachs: Correct, yeah.
Thomas J. Wilson – Chairman, President and CEO, The Allstate Corporation and Allstate Insurance Company: Yeah, I’ll throw it to Matt’s way.
Matthew Winter – President, Allstate Auto, Home and Agencies: Certainly, we’re looking at that and focused on that, and our goal is to do what we’ve been working on for many years, which is to position ourselves so that we can get in a position that both new business and retention are improving, and we retain the strong muscle of auto profitability at the same time, and so a lot of effort has gone into that, a lot of that was influenced by actions that we had to take in the homeowners market. As you know, now that a decline in the homeowners PIF has slowed and the new business has picked up there, that has also assisted in the standard auto line. 80% of our homeowners new business comes with at least one auto. And so that, in combination with all of the work that the team has done and the agency owners have done to drive new business and improve retention, has put us in a position where we’re looking forward to continuing to make momentum on the new business and the retention. And we believe that over time, that will yield favorable results for us…
Michael Nannizzi – Goldman Sachs: So looking at that to 2Q to 1Q sequential, I mean, is that something — is that fair to kind of think about extrapolating in terms of your — internally, your own goal to say, look, we’re here. We think we can start turning this into actually positive growth this year?
Matthew Winter – President, Allstate Auto, Home and Agencies: No, it’s always dangerous to extrapolate from one quarter. We think we see a lot of positive trends. We think we’re doing a lot of things that have long-term, sustainable impact. And we believe, as long as we’re diligent, they’ll have long-term favorable results.
Michael Nannizzi – Goldman Sachs: Then just one quick one on the Life business. Is there anything in there for the second quarter that’s nonrecurring? I mean, when we want to — let’s think about what the economics are there, excluding the transaction that you guys just completed. Is there anything else we need to peel out from those results to have sort of a clean number?
Thomas J. Wilson – Chairman, President and CEO, The Allstate Corporation and Allstate Insurance Company: Yes, I’ll let Don answer that, but you should not expect the operating interest to stay at its level as that — obviously, there’s some one-time items Don can talk about. But secondly, remember that business keeps keeping smaller. So as it gets smaller in size, obviously, it’s going to generate less operating income.
Don Civgin – President and CEO, Allstate Financial: Mike, its Don. I’d say there is nothing strictly speaking it’s non-recurring it’s nothing from the sales of LDLs reflected in there. But there is a lot of volatility in the investment income line and we had a really good quarter.
Return on Equity Outlook
Josh Stirling – Sanford C. Bernstein: So, a couple of years ago, you guys identified 13% ROE by 2014 as a sort of the primary operating goal that the firm is going to be positioned around you’ve made a lot of progress to that. You’re coming close to I think you’re regularly sort of hitting a 12% on an operating basis. Should we still think about that as a 2014 as sort of as the firm’s 2014 objective as you are now starting to work through your annual planning process?
Thomas J. Wilson – Chairman, President and CEO, The Allstate Corporation and Allstate Insurance Company: This is Tom. Good memory. So, two years ago, we established a goal of 13% by ’14 when we’re operating at about 9% return, which was 400 basis point improvement and at that point it was really to show that we had conviction that we can make substantial improvements of returns. It was not an indicator that 13% was the exact right sweet spot on creating shareholder value. Now there were some assumptions underneath that 400 basis points improvement, one was we had to make sure we maintained our profitability which is say we’ve continued to do. Second, about 70% of that increase was related to improving returns in homeowners and we’re well on our way there expect we’ll get some more, we’ll get in that this morning. Matt, can give you an update on that. There were two other goals, one was maintain investment income and rates have moved down by about 250 basis points at that time. So, we’re not on track to maintain that portion of the increase, and then lastly, it was to raise returns at Allstate Financial from about 9% to 10%, and as you can see, because of the interest rates and some other things that are going on there, we’re not at that point either. So we’re working hard on those last two items as you know. At the same time, we’re also investing more in Esurance than we thought we were, because we like their growth there, and we’ve changed the capital structure. So there’s a bunch of moving pieces in there. As we get closer to 2014, we’ll be updating our range and you’ll be able to figure out where the capital structure is and where we are, what it will look like for next year, but we’re not giving any indication. I’ll tell you, though, our goal, of course, is just to get as attractive a return as we can while driving growth in the business, in the environment, but I don’t want it us to blindly chase a number that’s an accounting number as opposed to an economic number, which ultimately drives shareholder value. So working hard on driving it up, but – so for example, when we shortened the duration in the portfolio, which saves us a bunch of money this quarter. Of course, if you just market to market this quarter, that took away some of that ROE, but we thought it was a good trade, from a risk-return standpoint. So we’re going to always manage to what we think is good long-term value, and then we’ll update it as we go forward in 2014…
Josh Stirling – Sanford C. Bernstein: I guess I’ll just ask you the follow-up question, you’re sort of teed up on, which is on homeowners margin expansion. Would you guys still think of that as the primary earnings lever, I mean, recognizing that you’re doing a bunch of stuff, expenses, expenses on the both on the debt side, as well as internally, but is that still sort of the primary lever we should be focused on and the question would be, how much more good news do you think you can get out of the various initiatives House & Home and things like that, that you’re pursuing today?
Thomas J. Wilson – Chairman, President and CEO, The Allstate Corporation and Allstate Insurance Company: Well, I’ll let Matt talk about what he’s doing. I’ll just remind you, we think we’ve captured a lot of where we were. We were in the 70s underlying combined ratio at that time. I don’t remember the exact number, Josh, but now we’re in the low 60s, which is where we said we thought we need to go. Matt is doing a whole bunch of things, though, and with his team to take it from what would became a competitive disadvantage in the marketplace for competitive advantage. And I’ll let him talk about both that and sustainability and profitability.
Matthew Winter – President, Allstate Auto, Home and Agencies: Sure. Thanks for the question. You’re correct that we’ve looked to homeowners for several years to improve the overall profitability of the enterprise. Well, the good news is the underlying profitability continues to improve as we benefit from some of the actions taken in the last several quarters. It has allowed us to begin growth if you look at new business growth in homeowners and retention. Both are improved as we’ve had to take less rate because we’re closer to rate adequate. And all the house and home that goes in, goes in as rate adequate. So we’re — we continue to make improvement in what we have and at this point, as we put on profitable high-margin, high-return business, our goal is to figure out how to do more and more of that while remaining in the proper risk profile. So a lot of the work we’re doing now has to do with how we manage that risk, how we manage concentration risk and how we can manage those two elements and still grow and continue to expand the homeowners business and all the auto that — and other products that come with it.