AUDIT COMMITTEE MATTERS

Proposal
5

Ratification of Deloitte & Touche LLP as the Independent Registered Public Accountant for 2017

The Board recommends a vote FOR ratification of Deloitte & Touche LLP for 2017.

  • Independent firm with few ancillary services and reasonable fees.
  • Significant industry and financial reporting expertise.
  • The audit committee has solicited requests for information from other auditing firms in the last four years and determined that the retention of Deloitte & Touche LLP continues to be in the best interests of Allstate and its stockholders.

The audit committee has established strong practices to evaluate the qualifications, compensation, performance, and independence of the independent registered public accountant both on an ongoing basis throughout the year and through the completion of an annual evaluation. Deloitte & Touche LLP has been Allstate’s independent registered public accountant since Allstate became a publicly-traded entity in 1993.

As a starting point for the annual evaluation, a survey is administered by a Deloitte & Touche LLP partner who is not affiliated with the Allstate account and by a risk or internal audit executive. The survey assesses Allstate’s general satisfaction with the quality and efficiency of the services provided. Results are reported to the audit committee for its discussion and analysis.

In addition, the audit committee reviews and discusses the results of the firm’s reports on its quality controls and external assessments, including results of inspections conducted by the Public Company Accounting Oversight Board (PCAOB).

Rotation of the independent registered public accounting firm is explicitly considered each year by the committee in addition to the regular mandated rotation of audit partners.

The audit committee has adopted a policy regarding its pre-approval of all audit and permissible non-audit services provided by the independent registered public accountant. The policy identifies the basic principles that must be considered by the audit committee in approving services to ensure that the registered public accountant’s independence is not impaired, describes the type of audit, audit-related, tax and other services that may be provided, and lists the non-audit services that may not be performed. The independent registered public accountant or management will submit to the audit committee detailed schedules with all of the proposed services within each category, together with the estimated fees. Each specific service will require approval before service can begin.

Prior to requesting approval from the audit committee, the registered public accountant and management consider and conclude that the services are permissible in that they: (1) do not place the registered public accountant in the position of auditing their own work, (2) do not result in the registered public accountant’s personnel acting as management or an employee of Allstate, (3) do not place the registered public accountant in a position of being an advocate for Allstate, (4) do not create a mutual or conflicting interest between the registered public accountant and Allstate and (5) are not based on a contingent fee arrangement. The audit committee’s policy delegates to the chair the authority to grant approvals, but the decisions of the chair must be reported to the audit committee at its next regularly scheduled meeting. All services provided by Deloitte & Touche LLP in 2015 and 2016 were approved in accordance with this pre-approval policy.

Based on the results of the annual evaluation, the audit committee has appointed Deloitte & Touche LLP as Allstate’s independent registered public accountant for 2017. The factors considered by the audit committee include:

  • Focus on independence and their quality control policies;
  • Insurance and technical expertise and capability in handling the breadth and complexity of Allstate’s operations and industry;
  • Quality and efficiency of the work performed;
  • Quality of discussions and feedback sessions;
  • External data on audit quality and performance, including the results from the PCAOB; and
  • Reasonableness of fees.

The audit committee and the Board believe it is in the best interests of Allstate and its stockholders to continue to retain Deloitte & Touche LLP as Allstate’s independent registered public accountant. The committee and its chair approve the selection of Deloitte & Touche LLP’s lead engagement partner.

The following fees have been, or are anticipated to be, billed by Deloitte & Touche LLP, the member firms of Deloitte Touche Tohmatsu, and their respective affiliates, for professional services rendered to Allstate for the fiscal years ending December 31, 2015 and December 31, 2016.

  2015(5)   2016
Audit fees(1)   $9,814,000   $10,139,000
Audit-related fees(2)   $519,000   $739,000
Tax fees(3)   $611,000   $6,000
All other fees(4)   $0   $95,000
Total fees   $10,944,000   $10,979,000
(1) Fees for audits of annual financial statements, reviews of quarterly financial statements, statutory audits, attest services, comfort letters, consents, and review of documents filed with the Securities and Exchange Commission. The amount disclosed does not reflect reimbursements expected to be received for certain separate account audit fees from the managing entity in the amounts of $165,000 and $179,000 for 2015 and 2016, respectively.
(2) Audit-related fees are for professional services, such as accounting consultations on new accounting standards, internal control reviews, and audits and other attest services for non-consolidated entities (e.g., employee benefit plans, various trusts) and are set forth below.
  2015   2016
Audits and other attest services for non-consolidated entities   $359,000   $345,000
Other audit-related fees   $160,000   $394,000
Total audit-related fees   $519,000   $739,000
(3) Tax fees include income tax return preparation, compliance assistance, tax studies and research for audit support and international tax planning.
(4) “All other fees” includes all fees paid that are not audit, audit-related, or tax services. In 2016, these fees relate to advisory services.
(5) Total fees for 2015 have been reallocated between audit and audit-related fees to account for an additional required audit.

Representatives of Deloitte & Touche LLP will be present at the 2017 annual meeting to respond to questions and may make a statement if they choose. If stockholders fail to ratify the appointment, the audit committee will reconsider the appointment, but no assurance can be given that the audit committee will change the appointment.