Allstate 2008 Annual Report Download - page 54

LONG-TERM CASH INCENTIVE AWARDS, 2006-2008 CYCLE
PERFORMANCE MEASURES, WEIGHTING, AND TARGET GOALS(1)
Percentage
weight of the
total Achievement relative to
potential threshold, target,
Performance Measures award(2) Target Actual maximum goals(3)
Average adjusted return on equity 50% 5th 6th Between threshold
position position and target
relative to relative to
peers peers
Allstate Protection growth in policies in
force over the 3-year cycle 25% 5.0% (0.4)% Below threshold
Allstate Financial return on total capital
over the 3-year cycle 25% 9.5% 9.1% Between threshold
and target
(1) Information regarding our performance measures is disclosed in the limited context of our annual and long-term cash incentive
awards and should not be understood to be statements of management’s expectations or estimates of results or other guidance. We
specifically caution investors not to apply these statements to other contexts.
(2) Same weight applied for all named executives.
(3) Stated as a percentage of target goals with a range from 0% to 300%, the actual performance comprises 40% for the average
adjusted return on equity measure, 0% for the Allstate Protection measure and 5% for the Allstate Financial measure. The weighted
results for all three measures stated as a percentage of the target goals for all the named executives was 45%.
The target goal for the average adjusted return on equity was set at a level representing average projected
industry performance. The target goals for Allstate Protection growth in policies in force over the three-year cycle
and Allstate Financial return on total capital over the three-year cycle were based on evaluations of our historical
performance and plans to drive projected performance.
The average adjusted return on equity measure compares Allstate’s performance to the peer insurance
companies listed on page 38. However, for the 2006-2008 cycle, Cincinnati Financial Corporation was excluded
because it pursues a buy-and-hold equity investment strategy different than the other peers that has resulted in a
significant build up of unrealized capital gains in its equity portfolio, which impacts its adjusted return on equity
making it less comparable to Allstate’s performance and, for Safeco Corporation, the net income calculation was
adjusted to use net income from July 2007 through June 2008 prior to its acquisition by Liberty Mutual Group in
2008. Allstate’s ranked position relative to this peer group determines the percentage of the total target award for
this performance measure to be paid, as indicated in the following table. However no payment is made unless the
average adjusted return on equity exceeds the average risk free rate of return on three-year Treasury notes over
the three-year cycle, plus 200 basis points, regardless of Allstate’s standing compared to the peer group. For the
2006-2008 cycle, we achieved the 6th position and did not meet the target level of performance. The average
adjusted return on equity exceeded the average risk free rate of return by 975 basis points.
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Proxy Statement