Executive Compensation

Proposal 2

Say-on-Pay: Advisory Vote on the Compensation of the Named Executives

The Board recommends a vote FOR this proposal.

We conduct a say-on-pay vote every year at the annual meeting. While the vote is non-binding, the Board and the compensation and succession committee (the “committee” as referenced throughout the Compensation Discussion and Analysis and Executive Compensation sections) consider the results as part of their annual evaluation of our executive compensation program.

You may vote to approve or not approve the following advisory resolution on the executive compensation of the named executives:

RESOLVED, on an advisory basis, the stockholders of The Allstate Corporation approve the compensation of the named executives, as disclosed pursuant to the compensation disclosure rules of the SEC, including the Compensation Discussion and Analysis and accompanying tables and narrative on pages 34-69 of the Notice of 2019 Annual Meeting and Proxy Statement.

Compensation Discussion and Analysis

Executive Overview

Our Compensation Discussion and Analysis describes Allstate’s executive compensation program, including total 2018 compensation for our named executives listed below(1):

THOMAS J. WILSON

Chair, President, and Chief Executive Officer (CEO)

MARIO RIZZO

Executive Vice President and Chief Financial Officer (CFO)

JOHN E. DUGENSKE

Executive Vice President and Chief Investment and Corporate Strategy Officer

GLENN T. SHAPIRO

President, Allstate Personal Lines

STEVEN E. SHEBIK

Vice Chair

  1.  See Appendix C for a full list of Allstate’s executive officers.

Business Highlights

In 2018, Allstate delivered strong results and implemented multiple initiatives to drive long-term profitable growth. Our management team continued to advance all five Operating Priorities:

$2.8 billion

Distributed to stockholders in cash through stock repurchases and common stock dividends
Operating Priorities Results
Better serve customers
  • Net Promoter Score increased for all major businesses
  • Renewal ratio improved across Allstate, Esurance, and Encompass brands
Achieve target economic returns on capital
  • Adjusted net income return on common shareholders’ equity* of 14.8% for 2018
Grow customer base
  • Policy growth accelerated for Allstate and Esurance property-liability businesses
  • SquareTrade policies grew 29.9 million, or 77.1%, compared to the prior year
Proactively manage investments
  • Net investment income of $3.2 billion in 2018, and total return on $81 billion investment portfolio of 0.8%
Build long-term growth platforms
  • Expanded telematics offerings, Arity collecting 10 billion miles of data per month
  • SquareTrade continued its rapid growth, adding a leading U.S. retailer during the year
  • Acquired InfoArmor, a fast-growing identity protection provider
  • Measures used in this proxy statement that are not based on generally accepted accounting principles (“non-GAAP”) are denoted with an asterisk (*). These measures are defined and reconciled to the most directly comparable GAAP measures in Appendix A.

Allstate’s one, three, and five-year total shareholder return was -19.5%, 40.7%, and 66.2%, respectively. The following chart shows Allstate’s total shareholder return over one, three and five years relative to the market cap weighted average of the peer group used for 2018 compensation benchmarking (identified on page 48).

COMPARISON OF TOTAL SHAREHOLDER RETURN (%)
comparisonoftotalshareholder_high.png
  1. Market Cap Weighted Average

Compensation Highlights

Compensation Governance

Allstate’s executive compensation program includes industry best practices with a focus on pay for performance and a strong link between performance measures and strategic objectives.

NEW Allstate added a one-year minimum equity vesting provision in its equity compensation plan.

Comparison with Peers

The committee uses the 50th percentile of our peer companies as a guideline when setting total target direct compensation.

Shareholder Feedback

The Board considers feedback from shareholders on matters including compensation. At our last shareholder meeting, 93% of votes cast supported our executive compensation program. The committee considered the vote results, investor input, and current market practices and determined that no significant changes should be made to the program.

Independent Consultant

An independent compensation consultant provides advice on incentive design and the overall executive compensation program and pay levels.

Alignment of Pay with Performance

ANNUAL CASH INCENTIVE
annualcashincentive_high.png
 
  1. For a description of how these measures are determined, see pages 67-68
AIP % of Target
aipoftarget_high.png

 

2016-2018 PERFORMANCE STOCK AWARDS
2016-2018 Performance Stock_High.jpg
  1. For a description of how these measures are determined, see page 69
2018 Compensation Mix

The committee designs the executive compensation program to award pay in accordance with corporate, business unit and individual performance. A large percentage of total target compensation is at risk through long-term equity awards and annual cash incentive awards. These awards are linked to performance measures that correlate with long-term stockholder value creation. The mix of target total direct compensation for 2018 for our CEO and the average of our other named executives is shown in the chart below.

CHIEF EXECUTIVE OFFICER
chiefexecofficer_high.png
OTHER NEOS
otherneos_high.png
 

Allstate’s Executive Compensation Principles

Allstate’s executive compensation program is designed to ensure that the interests of our executives are aligned with our shareholders:

We Pay for Performance
The majority of our CEO's and other NEOs' compensation opportunity is at-risk and based on measurable performance goals.
We Establish a Strong Link Between Performance Measures and Strategic Objectives
Performance measures are linked to operating priorities designed to create long-term stockholder value.

Moreover, our program adheres to high standards of compensation governance.


What We Do
  • Benchmark to Peers of Similar Industry, Size and Business Complexity.
  • Target Pay at 50th Percentile of Peers.
  • Independent Compensation Consultant.
  • Moderate Change-in-Control Benefits.
  • Double Trigger in the Event of a Change in Control.
  • Maximum Payout Caps for Annual Cash Incentive Compensation and Performance Stock Awards (“PSAs”).
  • Robust Equity Ownership Requirements.
  • Clawback of Certain Compensation if Restatement Resulting from Fraud or Intentional Misconduct or Non-Competition or Non-Solicitation Covenant Breach.
  • NEWOne-Year Minimum Equity Vesting Provision in the Equity Plan.

What We Do Not Do
  • No Employment Agreements for Executive Officers.
  • No Guaranteed Annual Salary Increases or Bonuses.
  • No Special Tax Gross Ups.
  • No Repricing or Exchange of Underwater Stock Options.
  • No Plans that Encourage Excessive Risk-Taking.
  • No Hedging or Pledging of Allstate Securities.
  • No Inclusion of Equity Awards in Pension Calculations.
  • No Dividends Paid on Unvested PSAs.
  • No Excessive Perks.

Compensation Elements

The following table lists the elements of target direct compensation for our 2018 executive compensation program.

 
 
   
Element and Delivery(1)
Why We Pay This Element
Key Characteristics
How We Determine Amount
   

Base Salary; Cash

Attract and retain executives with competitive level of cash compensation. Reviewed annually and adjusted when appropriate. Amounts based on experience, job scope, market data, and individual performance.
               
   

Annual Cash Incentive Awards; Cash

Motivate and reward executives for performance on key strategic, operational, and financial measures during the year.

A corporate-wide funding pool based on performance on three measures:

  • Total Premiums(2)
  • Performance Net Income(2)
  • Net Investment Income(2)
Pool is then allocated based on individual performance.
Individual awards are based on job scope, market data, pool funding, and individual performance.
   

Performance Stock Awards; Equity

Motivate and reward executives for performance on key long-term measures.

Align the interests of executives with long-term stockholder value.

Retain executive talent.

PSAs vest on the day before the third anniversary of the grant date.

Actual amounts of PSAs vesting based on performance on three-year Performance Net Income Return on Equity(2) and Earned Book Value(2) with a requirement of positive Net Income for any payout above target.

Awards based on job scope, market data, and individual performance.

   

Stock Options; Equity

Align the interests of executives with long-term stockholder value.

Retain executive talent.

Non-qualified stock options to purchase shares at the market price when awarded. Vest ratably over three years.

Expire in ten years or, in the event of retirement, the earlier of five years or normal expiration.

Awards based on job scope, market data, and individual performance.

 

  1. Represents the average of the target direct compensation elements for all of the named executives in 2018.
  2. For a description of how these measures are determined, see pages 67-69.
  3. The committee may award cash and/or restricted stock units in connection with the hire of a new executive. Awards are typically to cover compensation amounts forfeited at the new executive’s prior employer.

Compensation Decisions for 2018

THOMAS J. WILSON

Chair, President, and Chief Executive Officer
Key Responsibilities

Our Chair, President, and CEO is responsible for managing the Company’s strategic direction, operating results, organizational health, ethics and compliance, and corporate responsibility.

wilson_2018comp.png
 

2018 Performance
Mr. Wilson’s total compensation and the amount of each compensation element are driven by the design of our compensation program, his responsibilities, experience and performance, and peer company CEO compensation. The committee’s independent compensation consultant annually reviews Mr. Wilson’s compensation payments to advise the committee if any changes are warranted.

Mr. Wilson’s performance as Chair, President, and CEO is evaluated under five categories: operating results, developing and implementing long-term strategy, maintaining and motivating a high-performance team, corporate stewardship and Board effectiveness. Performance is assessed over one- and three-year time periods.

  • Operating Results. Achieved all five 2018 Operating Priorities. Insurance premiums and contract charges increased by $1.8 billion (5.3%), and policies in force grew by 38.4% to 113.9 million. Adjusted net income* rose to $2.85 billion in 2018 from $2.47 billion in the prior year. Allstate’s annual total shareholder return was down for 2018. Allstate’s three-year period total return was 40.7%, which exceeds both the three-year return of peers (25.3%), and the three-year return of the S&P 500 index (30.4%).
  • Long-term Strategy. Improved competitive position of existing businesses while continuing to build long-term growth platforms. Acquisition of SquareTrade in 2017 is exceeding performance metrics. Acquired InfoArmor in 2018.
  • High-Performance Team. Extremely competent, highly engaged team with excellent collaboration to achieve strategic vision.
  • Corporate Stewardship. Corporate reputation is at an all-time high. Allstate is a leader in supporting youth empowerment and ending domestic violence.
  • Board Effectiveness. Excellent governance processes, Board diversity, and shareholder engagement.

2018 Compensation Decisions
Mr. Wilson’s annual cash incentive target of 300% of salary remained unchanged but his long-term equity incentive target was increased to 775% of salary (previously 750%).

  • Salary. In 2018, the Board increased Mr. Wilson’s salary from $1,250,000 to $1,300,000, based on an evaluation of his performance, level of responsibility, experience, and target compensation as compared to the peer group.
  • Annual Cash Incentive Award. Mr. Wilson’s target annual incentive payment of 300% of base salary with a maximum funding opportunity for the award pool of 200% of target was unchanged in 2018. The committee approved an annual cash incentive award of $6,719,194, which was equal to the funding level as determined by the actual results for the three performance measures of 173.4% of target.
  • Equity Incentive Awards. In February 2018, based on its assessment of Mr. Wilson’s performance in delivering strong business results in 2017, the committee granted him equity awards with a grant date fair value of $9,687,526, which was Mr. Wilson’s target equity incentive award opportunity of 775% of salary.
 

MARIO RIZZO

Executive Vice President and Chief Financial Officer

Key Responsibilities
Our CFO has primary responsibility for the management of the Company’s overall financial condition, system of internal controls, capital allocation, financial reporting, investor relations, acquisitions and divestitures, and capital market transactions.

rizzo_2018comp.png
 

2018 Performance
Strong performance in first year as CFO, ensuring utilization of strong financial discipline and internal controls. Successfully executed numerous capital management actions.

2018 Compensation Decisions

  • Salary. $700,000
  • Incentive Targets. Mr. Rizzo’s annual incentive target was 125% of salary and his target equity incentive opportunity was 300% of salary.
  • Annual Cash Incentive Award. The committee approved an annual cash incentive award of $1,510,788 for Mr. Rizzo, which was equal to the funding level as determined by the actual results for the three performance measures of 173.4% of target.
  • Equity Incentive Awards. In February 2018, based on a review of Mr. Rizzo’s performance during 2017, the committee granted him equity awards with a grant date fair value of $2,100,042, which was Mr. Rizzo’s target equity incentive award opportunity.
 

JOHN E. DUGENSKE

Executive Vice President and Chief Investment and Corporate Strategy Officer

Key Responsibilities
Mr. Dugenske is Executive Vice President and Chief Investment and Corporate Strategy Officer of Allstate Insurance Company and President of Allstate Investments. He oversees the Company’s $81 billion investment portfolio. He is also responsible for facilitating the development of strategy for the Company and its market-facing businesses.

dugenske_2018comp.png
 
2018 Performance

Net Investment Income of $3.2 billion was above Plan, and total return on the portfolio exceeded relevant benchmarks. Enhanced investment decision processes and added responsibility for corporate strategy development.

2018 Compensation Decisions
  • Salary. The committee approved an increase from $725,000 to $750,000 during 2018, based on his added responsibilities for corporate strategy, an evaluation of his performance, level of responsibility, and target compensation as compared to the peer group.
  • Bonus. In connection with the commencement of his employment on March 1, 2017, Mr. Dugenske received a sign-on bonus of $4,000,000 payable in cash in two installments to offset the value of awards forfeited upon leaving his prior employer. The first installment was paid within sixty days of his start date, and the balance of $2,000,000 was paid thirty days after the first anniversary of his start date. If Mr. Dugenske terminates his employment within twenty-four months of either sign-on payment date, he must repay a prorated amount calculated over a twenty-four month period from the payment date.
  • Incentive Targets. No changes were made to Mr. Dugenske’s incentive targets in 2018. Mr. Dugenske’s annual incentive target was 125% of salary and his target equity incentive opportunity was 300% of salary.
  • Annual Cash Incentive Award. The committee approved an annual cash incentive award of $1,616,607 for Mr. Dugenske, which was equal to the funding level as determined by the actual results for the three performance measures of 173.4% of target.
  • Equity Incentive Awards. In February 2018, based on a review of Mr. Dugenske’s performance during 2017, the committee granted him equity awards with a grant date fair value of $2,300,036, which was Mr. Dugenske’s target equity incentive award opportunity.
 

GLENN T. SHAPIRO

President, Allstate Personal Lines

Key Responsibilities
Mr. Shapiro is President of Allstate Brand Personal Lines and leads the product, claims, operations, risk, finance and distribution for this business, which comprises approximately 90% of Allstate’s total earned premiums.

shapiro_2018comp.png
 

2018 Performance

Successfully transitioned leadership from Allstate’s President, further expanded Integrated Digital Enterprise initiatives, including Drivewise® telematics utilization and QuickFoto Claim. Allstate brand property-liability business had growth in policies in force of 2.3%, and underlying profitability exceeded plan.

2018 Compensation Decisions

  • Salary. $750,000.
  • Incentive Targets. Mr. Shapiro’s annual incentive target was 150% of salary and his target equity incentive opportunity was 325% of salary.
  • Annual Cash Incentive Award. The committee approved an annual cash incentive award of $2,050,000 for Mr. Shapiro, which was 182.8% of target and above the funding level as determined by the actual results for the three performance measures. The award was calculated above pool funding to recognize strong business results for Allstate Brand Personal Lines.
  • Equity Incentive Awards. In February 2018, based on a review of Mr. Shapiro’s performance during 2017, the committee granted him equity awards with a grant date fair value of $2,437,523, which was Mr. Shapiro’s target equity incentive award opportunity.
 

STEVEN E. SHEBIK

Vice Chair

Key Responsibilities
Our Vice Chair has primary responsibility for oversight of Allstate Life and Retirement, Allstate Benefits, Encompass, Esurance, Allstate Business Insurance, Business Transformation, Discontinued Lines, and D3, a corporate analytics team. Mr. Shebik was previously the Chief Financial Officer.

 

shebik_2018com.png
 

2018 Performance

Strong performance as Vice Chair with broad impact across the Company, including initiation of a relationship with a transportation network company, significant improvement in Esurance profitability, and acquisition of InfoArmor.

2018 Compensation Decisions

  • Salary. The committee approved an increase from $800,000 to $850,000 during 2018, based on his new role.
  • Incentive Targets. Mr. Shebik’s annual incentive and equity incentive target opportunities were increased based on his new role and benchmarking against Allstate’s peers. Mr. Shebik’s annual incentive target was 200% of salary (previously 175%) and his target equity incentive opportunity was 350% of salary (previously 300%).
  • Annual Cash Incentive Award. The committee approved an annual cash incentive award of $2,945,289 for Mr. Shebik, which was equal to the funding level as determined by the actual results for the three performance measures of 173.4% of target.
  • Equity Incentive Awards. In February 2018, based on a review of Mr. Shebik’s performance during 2017, the committee granted him equity awards with a grant date fair value of $2,975,013, which was Mr. Shebik’s target equity incentive award opportunity.
 

Incentive Design and Goal Setting

For the annual and long-term incentive programs, the committee oversees a rigorous and comprehensive goal-setting process. The committee works to identify performance measures and ranges of performance in the annual and long-term programs that (1) align with the Company’s strategy, operating principles and priorities, and stockholder interests, (2) support the achievement of corporate goals, and (3) reflect the Company’s overall performance. The following timeline of key events reflects the committee’s process:

Incentive Design, Payout, and Goal-Setting Process

incentivedesign_high.jpg
 

Salary

  • In setting executive salary levels, the committee uses the 50th percentile of total target direct compensation of our peer companies as a guideline, which supports Allstate’s ability to compete effectively for and to retain executive talent. Annual merit increases for named executives are based on evaluations of their performance, using the enterprise-wide merit increase budget as a guideline.

Annual Cash Incentive Awards

  • The committee sets annual cash incentive performance goals based on the annual operating plan. Target performance is equal to the operating plan. Threshold and maximum measures are based on a range of sensitivities relative to the operating plan. To further test the appropriateness of the ranges, the committee’s independent consultant provides advice based on peer performance, market expectations and industry trends. The chief risk officer reviews the performance measures and ranges to ensure they are consistent with Allstate’s risk and return principles.
  • Actual performance on the performance measures determines the overall funding level of the corporate pool and the aggregate total award budget for eligible employees. In 2018, the pool was funded based on the collective results of three measures: Total Premiums, Performance Net Income, and Net Investment Income. Funding for each measure is equal to 0% below threshold, 50% at threshold, 100% at target and 200% at maximum, and results between threshold, target and maximum are subject to interpolation. For 2018, Total Return was eliminated as a performance measure since it accounted for only 4% of funding and can be a volatile measure, with wide variations year-over-year.
  • In the event of a net loss, the corporate pool funding is reduced by 50% of actual performance for senior executives. For example, if performance measures ordinarily would fund the corporate pool at 60% and there was a net loss, then the corporate pool would be funded at 30% for senior executives. This mechanism ensures alignment of pay and performance in the event of multiple large natural catastrophes and/or extreme financial market conditions.
  • Target annual incentive percentages for each named executive are based on pay levels of peer companies and our benchmark target for total direct compensation at the 50th percentile.
  • Individual awards are based on job scope, market data, pool funding, and individual performance.
  • We paid the 2018 cash incentive awards in March 2019. The following description shows how this corporate pool was funded and distributed to individual participants:
Step 1: Determine Calculation of Corporate Funding Pool
Formulaic with negative discretion applied by the committee in 2018
  • The total pool available for distribution was calculated based on three performance measures established by the committee at the beginning of the performance period:
    • Total Premiums (43%) – captures growth and competitive position of the businesses
    • Performance Net Income (43%) – aligns with stockholders’ expectations of operating profitability
    • Net Investment Income (14%) – reflects a significant component of profitability
  • The committee approved the total corporate funding pool after the end of the performance period based on the actual results on these performance measures. The committee exercised negative discretion to adjust the Performance Net Income measure to reflect tax savings that were not utilized as planned during the year. For the actual results and detail on how each measure was defined and calculated, see pages 67-68.
  The annual incentive compensation plan was funded at 173.4% of target in 2018 for officers.
 
Step 2: Determine Annual Incentive Payments to the Named Executives and other Executive Officers
Minimal discretion was applied to the Named Executives by the committee in 2018
  • Committee’s compensation recommendations for the CEO are reviewed and approved by the independent directors of our Board in executive session.
  • Committee reviews and approves CEO recommendations for executive officers based on individual performance.
  • The individual performance factors considered by the committee for both CEO and executive officer performance are outlined on pages 40-42.
 

The payout for the Named Executives ranged from $1.5 million to $6.7 million and the average was 174.7% of target.

 
Step 3: Determine Annual Incentive Payment for Other Eligible Participants
The committee was not involved with annual incentive decisions below executive officers
  • The CEO allocated the corporate pool between the market-facing businesses and areas of responsibility based on relative performance against annual operating goals
  For 2018, the CEO exercised discretion in allocating pool funding to certain areas of responsibility.
  • Individual awards for eligible employees were determined by senior leaders and were subject to approval by the CEO
    • Senior leaders were tasked to ensure high-performing participants earned awards that were at least two times the awards earned by lower-performing participants on a relative basis.
 

For 2018, actual differentiation for high performers was 2.2.

 

Performance Stock Awards and Stock Options

  • We grant equity awards annually to executives consistent with market practice and our philosophy that a significant amount of compensation should be in the form of equity. Additionally, from time to time, equity awards are granted to attract new executives and to retain existing executives.
  • Since 2016, the mix of equity incentives for senior executives has been 60% PSAs and 40% stock options. We believe both PSAs and stock options are forms of performance-based incentive compensation because PSAs are earned based on achieving established performance goals and stock options require stock price appreciation to deliver value to an executive. The PSAs vest based on results for Average Performance Net Income ROE (70%) and Earned Book Value (30%) over the three-year measurement period. The actual number of PSAs vesting is between 0% to 200% of the target number of PSAs granted.
  • The committee selected Performance Net Income ROE as one performance measure because it:
    • Measures performance in a way that is tracked and understood by investors.
    • Captures both income statement and balance sheet impacts, including capital management actions.
    • Correlates to changes in long-term stockholder value.
  • Earned Book Value was selected as the second measure since it includes unrealized changes in the value of the investment portfolio and excludes the impacts of change in utilization of debt.
  • Both measures are further described on page 69. For both measures, the committee considered historical and expected performance, market expectations and industry trends when approving the range of performance.
  • For all PSA awards, Performance Net Income and Earned Book Value include a minimum or maximum amount of after-tax catastrophe losses if actual catastrophe losses are less than or exceed those amounts, respectively, which serves to decrease volatility and stabilize the measure.
  • The committee requires positive Net Income in order for our executives to earn PSAs based on Average Performance Net Income ROE above target. If Allstate has a net loss in a measurement period, the number of PSAs vested would not exceed target, regardless of the Average Performance Net Income ROE. This positive Net Income hurdle is included to prevent misalignment between Allstate reported net income and the PSAs vested based on the Average Performance Net Income ROE result. This situation could occur if, for example, catastrophe losses or capital losses that are not included in Performance Net Income ROE caused Allstate to report a net loss for the period. For a description of the calculation, see page 69.
  • At the end of each measurement period, the committee certifies the level of our Average Performance Net Income ROE and Earned Book Value achievement. PSAs will vest following the end of the three-year performance cycle if the performance conditions are met, subject to continued employment (other than in the event of death, disability, retirement, or a qualifying termination following a change in control).

For the 2019-2021 award, the Average Performance Net Income ROE and Earned Book Value measures are calculated, respectively, as follows:

Performance Net Income(1) ± Catastrophe Losses  ÷ Adjusted Common Shareholders’ Equity(2) = Average Performance Net Income ROE
Average for three years in the performance cycle   Adjusted to reflect a minimum or maximum amount of catastrophe losses   Average of common shareholders’ equity excluding unrealized gains and losses, after tax, at December 2018, and at the end of each year in the performance cycle   70% of PSA Performance Measure
Common Shareholders’ Equity + Capital Transactions ± Catastrophe Losses  Earned Book Value(3):
Reported common shareholders’ equity at December 2021   Adjusted to add back common share repurchases and common share dividends during the performance period   Adjusted to reflect a minimum or maximum amount of catastrophe losses   Compound annual growth rate between reported common shareholders’ equity at December 2018 and adjusted common shareholders’ equity at December 2021
            30% of PSA Performance Measure
Three-Year Measurement Period  

 

  1. Performance Net Income for the 2019-2021 PSA award is defined on pages 67-69.
  2. Adjusted Common Shareholders’ Equity for the 2019-2021 PSA award is defined on page 69.
  3. Earned Book Value is defined on page 69.
2019-2021 PERFORMANCE STOCK AWARD RANGE OF PERFORMANCE
 
Performance Measures
 
Threshold
Target
Maximum
Average Performance Net Income ROE (70%)(1)
7.0%
14.0%
16.0%
Earned Book Value (Compound Annual Growth) (30%)
7.0%
12.0%
14.0%
Payout
0%
100%
200%
  1. Subject to positive Net Income hurdle. For a description of how this measure is determined, see page 45.

Equity Ownership Requirements

Instituted in 1996, stock ownership requirements oblige each of the named executives to own Allstate common stock worth a multiple of base salary to link management and stockholders’ interests. The following chart shows the salary multiple requirement and the equity holdings that count toward the requirement.

The current stock ownership requirements apply to 107 of our senior executives and other officers as of December 31, 2018, and require these executives to hold 75% of net shares received as a result of equity compensation awards until their salary multiple requirements is met.

STOCK OWNERSHIP AS MULTIPLE OF BASE SALARY AS OF DECEMBER 31, 2018
Named Executive
Requirement
Actual
Vested in The
Money Option
Value (after-tax)
Mr. Wilson
6
39 33
Mr. Rizzo(1)
3
1 1
Mr. Dugenske
3
5 0
Mr. Shapiro(1)
3
2 0
Mr. Shebik
3
11 7
39

TIMES ANNUAL SALARY

The value of shares of Allstate’s common stock held by Mr. Wilson as of December 31, 2018
  1. Messrs. Rizzo’s and Shapiro’s stock ownership requirement and salaries changed in 2018 as a result of their promotions.

What Counts Toward the Requirement
  • Allstate shares owned personally and beneficially
  • Shares held in the Allstate 401(k) Savings Plan
  • Unvested restricted stock units

What Does Not Count Toward the Requirement
  • Unexercised stock options
  • Unvested performance stock awards

Policies on Hedging and Pledging Securities

We have a policy that prohibits all officers, directors, and employees from engaging in transactions in securities issued by Allstate or any of its subsidiaries that might be considered speculative or hedging, such as selling short or buying or selling options. We also have a policy that prohibits senior executives and directors from pledging Allstate securities as collateral for a loan or holding such securities in a margin account, unless an exception is granted by the Chair or lead director.

Timing of Equity Awards and Grant Practices

Typically, the committee approves grants of equity awards during a meeting in the first fiscal quarter. The timing allows the committee to align awards with our annual performance and business goals.

Throughout the year, the committee may grant equity incentive awards to newly hired or promoted executives or to retain or recognize executives. The grant date for these awards was fixed as the third business day of a month following the later of committee action or the date of hire or promotion, or for recognition grants, such other date specified by the committee.

For additional information on the committee’s practices, see portions of the Board’s Risk Oversight Responsibilities and Board Meetings and Committees sections of this proxy statement on pages 21 and 27, respectively.

Peer Benchmarking

The committee monitors performance toward goals throughout the year and reviews the executive compensation program design and executive pay levels annually. As part of that evaluation, Compensation Advisory Partners, the committee’s independent compensation consultant, provided executive compensation data, information on current market practices, and alternatives to consider when determining compensation for our named executives. The committee benchmarks executive compensation program design, executive pay, and performance against a group of peer companies that are publicly traded. Product mix, market segment, annual revenues, premiums, assets, and market value were considered when identifying peer companies. The committee believes Allstate competes against these companies for executive talent, business and stockholder investment. The committee reviews the composition of the peer group annually with the assistance of its compensation consultant.

The compensation consultant’s recommendation has been to use a peer group that reflects Allstate’s business and operations. Currently, eight out of ten of Allstate’s peer companies also include Allstate in their respective peer company lists. The following table reflects the peer group used for 2018 compensation benchmarking. No changes were made to the peer group for 2019.

PEER COMPANIES(1)
Company Name Revenue
($ in billions)
Market Cap
($ in billions)
Assets
($ in billions)
Premiums
($ in billions)
Total Shareholder Return (%)
One Year Three
Years
Five
Years
AFLAC Inc. 21.8 34.4 140.4 18.7 6.2 63.2 53.7
American International Group Inc. 47.4 34.2 492.0 33.4 (32.1) (31.8) (15.3)
Chubb Limited 32.7 59.3 167.8 30.1 (9.6) 17.8 40.6
CNA Financial Corporation 9.1 12.0 57.2 7.3 (11.2) 58.4 46.7
The Hartford Financial Services Group Inc. 19.0 16.0 62.3 16.2 (19.2) 8.6 34.9
Manulife Financial Corporation 28.8 28.0 549.8 18.5 (29.3) 5.8 (15.0)
MetLife Inc. 67.9 39.4 687.5 49.3 (15.8) 5.9 0.0
The Progressive Corporation 32.0 35.2 46.6 30.9 9.4 103.0 158.7
Prudential Financial Inc. 63.0 33.5 815.1 41.8 (26.5) 10.7 3.2
The Travelers Companies Inc. 30.3 31.6 104.2 27.1 (9.6) 13.7 48.3
Allstate 39.8 27.4 112.2 36.5 (19.5) 40.7 66.2
Allstate Ranking Relative to Peers:              
Property and Casualty Insurance Products 3 of 8 6 of 8 4 of 8 2 of 8 7 of 8 3 of 8 2 of 8
Life Insurance and Financial Products 4 of 7 6 of 7 6 of 7 3 of 7 4 of 7 2 of 7 1 of 7
All Peer Companies 4 of 11 9 of 11 7 of 11 3 of 11 8 of 11 4 of 11 2 of 11
  1. Information as of year-end 2018.

The committee uses compensation surveys for certain executives that provide information on companies of similar size and business mix as Allstate, as well as companies with a broader market context.

The committee uses the 50th percentile of our peer group as a guideline in setting the target total direct compensation of our named executives. Within the guideline, the committee balances the various elements of compensation based on individual experience, job scope and responsibilities, performance, tenure, and market practices.

Other Elements of Compensation

To remain competitive with other employers and to attract, retain, and motivate highly talented executives and other employees, we offer the benefits listed in the following table.

Benefit or Perquisite
Named Executives
Other Officers
and Certain
Managers
All Full-time
and Regular
Part-time
Employees
401(k)(1) and defined benefit pension
Supplemental retirement benefit
 
Health and welfare benefits(2)
Supplemental long-term disability
 
Deferred compensation
 
Tax preparation and financial planning services(3)
 
Personal use of aircraft, ground transportation, and mobile devices(4)
 
Tickets to Allstate events(5)
  1. Allstate contributed $0.80 for every dollar of matchable pre-tax or Roth 401(k) deposits made in 2018 (up to 5% of eligible pay).
  2. Including medical, dental, vision, life, accidental death and dismemberment, long-term disability, and group legal insurance. For named executives and other senior officers, Allstate offers an executive physical program.
  3. All officers are eligible for tax preparation services. Financial planning services were provided only to senior executives.
  4. The Board encourages the CEO to use our corporate aircraft when it improves his efficiency in managing the company, even if it is for personal purposes. Personal usage is counted as taxable compensation. In limited circumstances approved by the CEO, other senior executives are permitted to use our corporate aircraft for personal purposes. Ground transportation is available to senior executives. Mobile devices are available to senior executives, other officers, and certain managers and employees depending on their job responsibilities.
  5. Tickets to Allstate-sponsored events or the Allstate Arena are offered as recognition for service.

Retirement Benefits

Each named executive participates in two different defined benefit pension plans. The Allstate Retirement Plan (ARP) is a tax qualified defined benefit pension plan available to all of our regular full-time and regular part-time employees who meet certain age and service requirements. The ARP provides an assured retirement income based on an employee’s level of compensation and length of service at no cost to the employee. As the ARP is a tax qualified plan, federal tax law limits (1) the amount of an individual’s compensation that can be used to calculate plan benefits and (2) the total amount of benefits payable to a plan participant on an annual basis. For certain employees, these limits may result in a lower benefit under the ARP than would have been payable otherwise. Therefore, the Supplemental Retirement Income Plan (SRIP) is used to provide ARP-eligible employees whose compensation or benefit amount exceeds the federal limits with an additional defined benefit in an amount equal to what would have been payable under the ARP if the federal limits did not exist. Effective January 1, 2014, Allstate modified its defined benefit pension plans so that thereafter, all eligible employees earn pension benefits under a new cash balance formula. The total value of Mr. Wilson’s pension benefit as of December 31, 2018, is $18,422,050 less than it would have been without the 2014 pension change.

Change in Control and Post-Termination Benefits

Consistent with our compensation objectives, we offer these benefits to attract, motivate, and retain executives. Change in control benefits and post-termination benefits are designed to maintain alignment between the interests of our executives and our stockholders in the event of a sale or merger of the Company.

The following summarizes Allstate’s change-in-control benefits for the executive officers:

  • For the CEO, the amount of cash severance payable is three times the sum of base salary and target annual incentive. For the other executive officers, the amount of cash severance payable is two times the sum of base salary and target annual incentive.
  • The change in control severance plan (“CIC Plan”) does not include excise tax gross ups or a lump sum cash pension enhancement.
  • In order to receive the cash severance benefits under the CIC Plan, a participant must have been terminated (other than for cause, death, or disability) or the participant must have terminated employment for good reason (such as adverse changes in the terms or conditions of employment, including a material reduction in base compensation, a material change in authority, duties, or responsibilities, or a material change in job location) within two years following a change in control.
  • Long-term equity incentive awards vest on an accelerated basis due to a change in control only if the participant has been terminated (other than for cause, death, or disability) or the participant terminated employment for good reason (as defined above) within two years following a change in control.

The change in control and post-termination arrangements that are described in the Potential Payments as a Result of Termination or Change in Control section on pages 63-65 are not provided exclusively to the named executives. A larger group of management employees is eligible to receive many of the post-termination benefits described in that section.

Clawback of Compensation

Awards made to executive officers after May 19, 2009, under short- and long-term incentive compensation plans, are subject to clawback in the event of certain financial restatements. Annual cash incentive and equity awards granted after May 19, 2009, are also subject to cancellation or recovery in certain circumstances if the recipient violates non-solicitation covenants. Equity awards granted after February 21, 2012, are subject to cancellation in certain circumstances if the recipient violates non-competition covenants.

Impact of Tax Considerations on Compensation

Internal Revenue Code Section 162(m) generally precludes Allstate from taking a tax deduction for compensation paid in excess of $1 million annually to certain current and former executive officers, including our CEO, CFO and the three other most highly compensated executives, unless the compensation is paid pursuant to certain “grandfathered” arrangements entered into prior to November 2, 2017. Prior to the passage of the Tax Cuts and Jobs Act of 2017 the (“Tax Legislation”), we were able to deduct more than $1 million in compensation if the compensation was performance-based, was paid under a plan that met certain performance-based requirements and otherwise met certain requirements under Internal Revenue Code Section 162(m).

In determining compensation for our executive officers, the committee considers the extent to which the compensation is deductible, including the effect of Internal Revenue Code Section 162(m). In prior years, the committee generally sought to structure our executive incentive compensation so that it qualified as performance-based compensation under Section 162(m) where doing so was consistent with Allstate’s compensation objectives, but it reserved the right to award nondeductible compensation and on occasion did so. The committee continues to evaluate the changes to Internal Revenue Code Section 162(m) and their significance to Allstate’s compensation programs, but in any event its primary focus in its compensation decisions will remain on most productively furthering Allstate’s business objectives and not on whether the compensation is deductible. The committee did not make significant changes to Allstate’s executive compensation program for 2018 in response to the Tax Legislation.

Earned Annual Cash Incentive Awards

In 2018, the total corporate pool was based on three measures: Total Premiums, Performance Net Income, and Net Investment Income. The 2018 annual incentive plan targets for the Total Premiums and Performance Net Income measures were 2.8% and 3.6% above 2017 actual results, respectively. The Net Investment Income measure was lower than prior year performance to reflect greater than expected results in 2017 from performance-based investments in Allstate’s portfolio. Modest adjustments were made to the range between threshold and maximum for the performance measures in alignment with sensitivities in the operating plan.

The 2019 annual incentive plan targets are not included since those targets do not relate to 2018 pay, and because target performance is set at the 2019 operating plan, which is proprietary information.

The compensation and succession committee considers the Company’s operating plan as well as prior year targets and actual results in setting annual incentive plan goals.

  2017   2018
Measure Target Actual Payout %   Target Actual Payout %
Total Premiums (in millions) $ 34,900 $ 35,120 158.7%   $ 36,100 $ 37,451 200.0%
Performance Net Income (in millions) $ 2,000 $ 2,703 200.0%   $ 2,800 $ 3,095 149.2%
Net Investment Income (in millions) $ 3,000 $ 3,188 200.0%   $ 3,100 $ 3,240 162.2%
Total Return(1)   3.5%   5.9% 180.0%      
Aggregate Payout Percentage     181.4%       173.4%
  1. For 2018, Total Return was eliminated as a performance measure since it accounted for only 4% of funding and can be a volatile measure, with wide variations year-over-year.

For a description of how the 2018 measures are determined, see pages 67-68. The ranges of performance and 2018 actual results are shown in the following table.

2018 ANNUAL CASH INCENTIVE AWARD RANGES OF PERFORMANCE
Measure Threshold   Target Maximum Actual Results % Target
Total Premiums (in millions) $ 35,600   $ 36,100 $ 36,600 $ 37,451 200.0%
Performance Net Income (in millions) $ 2,200   $ 2,800 $ 3,400 $ 3,095 149.2%
Net Investment Income (in millions) $ 2,875   $ 3,100 $ 3,325 $ 3,240 162.2%
Payout Percentages                    
Named Executives(1)   50% (2)   100%   200%     173.4%
  1. Payout percentages reflect contribution to incentive compensation pool. Actual awards vary depending on individual performance.
  2. Actual performance below threshold results in a 0% payout.

Performance Stock Awards (“PSAs”)

For the last five PSA grants, the performance measures and levels of performance needed to earn the threshold, target and maximum number of PSAs, as well as actual results and payout percentages, are set forth in the table below. The total shareholder returns for Allstate and its peers are also shown for completed cycles.

Performance Stock Awards Ranges of Performance
                 
                 
 
Subject to positive Net Income hurdle
For Performance Net Income ROE
         
         
Actual
Results
Payout
Percentage
 
Total
Shareholder
Return
Performance Cycle(1)
Threshold
Target
Maximum
 
Allstate
Peers
Vested Awards
               
2014-2016
6.0%
13.0%
14.5%
12.1%
87.1%
 
43.2%
26.8%
2015-2017
6.0%
13.5%
14.5%
12.2%
82.7%
 
56.8%
40.0%
2016-2018
        161.5%  
40.7%
25.3%
- Performance Net Income ROE (70%)
6.0%
13.0%
14.0%
13.9%
190%
     
- Earned Book Value (30%)
6.0%
12.0%
15.0%
11.7%
95%
     
Outstanding Awards
               
2017-2019
               
- Performance Net Income ROE (70%)
6.0%
11.0%
13.0%
Two year results are above
Target for both measures

(2)
   
- Earned Book Value (30%)
6.0%
9.0%
11.0%
2018-2020
               
- Performance Net Income ROE (70%)
7.0%
13.5%
15.0%
One year results are above
Target for both measures

(2)
   
- Earned Book Value (30%)
7.0%
12.5%
14.0%
Payout Percentages
0%
100%
200%
         
  1. For the performance cycles prior to 2016, Average Performance Net Income ROE was the performance measure. In 2016, Earned Book Value was added as a second performance measure.
  2. Payouts under the PSAs are based on performance over the three-year period, and actual results will not be known until the end of the performance period.

The following table shows the target number of PSAs granted to each of our named executives for the 2016-2018, 2017-2019, and 2018-2020 performance cycles.

Performance Cycle(1)
  Target Number of PSAs for
Named Executive 2016-2018 Performance Cycle 2017-2019 Performance Cycle 2018-2020 Performance Cycle
Mr. Wilson 86,650 68,922 62,635
Mr. Rizzo 2,901 2,929 13,578
Mr. Dugenske N/A 15,942 14,871
Mr. Shapiro N/A 11,966 15,760
Mr. Shebik 26,476 25,463 19,235
  1. The actual number of PSAs that will vest will vary from 0% to 200% of the target PSAs based on Average Performance Net Income ROE and Earned Book Value for the measurement period. The number of PSAs that vest will be determined in 2019, 2020, and 2021, respectively.

Compensation Committee Report

The committee has reviewed and discussed with management the Compensation Discussion and Analysis contained on pages 34-52 of this proxy statement. Based on such review and discussions, the committee recommended to the Board that the Compensation Discussion and Analysis be included in this proxy statement.

The Compensation and Succession Committee

MICHAEL L. ESKEW (CHAIR)
MARGARET M. KEANE
ANDREA REDMOND
PERRY M. TRAQUINA

 

Summary Compensation Table

The following table summarizes the compensation of the named executives for the last three fiscal years. However, for Messrs. Rizzo and Shapiro, only the last fiscal year is shown since this is their first year as a named executive. For Mr. Dugenske, only the last two fiscal years are shown since this is his second year as a named executive.

Name and
Principal Position
Year Salary
($)
Bonus
($)(1)
Stock
Awards
($)(2)(3)
Option
Awards
($)(4)
Non-Equity
Incentive Plan
Compensation
($)
Change in
Pension
Value and
Non-qualified
Deferred
Compensation
Earnings
($)(5)
All Other
Compensation
($)(6)
Total
($)
Total
Without
Change in
Pension
Value
($)(7)
Thomas J. Wilson
Chair, President, and Chief Executive Officer
2018 1,290,385 5,812,528 3,874,998 6,719,194 873,170 116,971 18,687,246 17,814,076
2017 1,241,346 5,400,039 3,599,997 6,759,264 1,688,142 68,541 18,757,329 17,069,187
2016 1,200,000 5,400,028 3,600,000 1,982,880 1,574,760 55,847 13,813,515 12,238,755
Mario Rizzo
Executive Vice President and Chief Financial Officer
2018 690,577 1,260,038 840,004 1,510,788 25,391 4,326,798 4,326,798
                   
John E. Dugenske
Executive Vice President and Chief Investment and Corporate Strategy Officer
2018 745,192 2,000,000 1,380,029 920,007 1,616,607 78,006 24,560 6,764,401 6,686,395
2017 593,942 2,000,000 5,305,014 870,005 1,377,908 17,026 10,163,895 10,163,895
Glenn T. Shapiro
President, Allstate Personal Lines
2018 743,942 1,462,528 974,995 2,050,000 46,564 38,270 5,316,299 5,269,735
Steven E. Shebik
Vice Chair
2018 848,654 1,785,008 1,190,005 2,945,289 351,319 37,560 7,157,835 6,806,516
2017 795,673 1,995,026 1,329,994 2,600,000 512,201 38,398 7,271,292 6,759,091
2016 770,673 1,649,984 1,100,001 600,000 479,800 28,690 4,629,148 4,149,348
  1. Mr. Dugenske received a sign-on bonus in connection with the commencement of his employment on March 1, 2017. The cash bonus was payable in two installments. The first installment was paid within sixty days of his start date, and the second installment was paid within thirty days after the first anniversary of his start date. In certain circumstances, these amounts are subject to repayment.
  2. Mr. Dugenske received a sign-on grant of restricted stock units (“RSUs”) on April 5, 2017. These RSUs will become 100% vested on April 4, 2020.
  3. The aggregate grant date fair value of PSAs granted in 2018, 2017, and 2016, and the RSUs granted in 2017 to Mr. Dugenske, is computed in accordance with Financial Accounting Standards Board (FASB) Accounting Standards Codification Topic 718 (ASC 718). The fair value of PSAs and RSUs is based on the final closing price of Allstate’s common stock on the grant date, which in part reflects the payment of expected future dividends. (See note 18 to our audited financial statements for 2018.) This amount reflects an accounting expense and does not correspond to actual value that will be realized by the named executives. The value of PSAs is based on the probable satisfaction of the performance conditions. The number of PSAs granted in 2018 to each named executive is provided in the Grants of Plan-Based Awards table on page 56. The value of the PSAs granted in 2018 at grant date fair value share price if maximum corporate performance were to be achieved is as follows: Mr. Wilson $11,625,056, Mr. Rizzo $2,520,077, Mr. Dugenske $2,760,058, Mr. Shapiro $2,925,056, and Mr. Shebik $3,570,016.
  4. The aggregate grant date fair value of option awards is computed in accordance with FASB ASC 718. The fair value of each option award is estimated on the grant date using a binomial lattice model and the assumptions (see note 18 to our audited financial statements for 2018) as set forth in the following table:
     
    2018
    2017
    2016
    Weighted average expected term
    5.7 years
    6.1 years
    5.0 years
    Expected volatility
    15.6-30.7%
    15.7-32.7%
    16.0-34.3%
    Weighted average volatility
    19.8%
    21.0%
    24.3%
    Expected dividends
    1.5-2.2%
    1.4-1.9%
    1.9-2.1%
    Weighted average expected dividends
    2.0%
    1.9%
    2.1%
    Risk-free rate
    1.3-3.2%
    0.5-2.5%
    0.2-2.4%
    This amount reflects an accounting expense and does not correspond to actual value that will be realized by the named executives. The number of options granted in 2018 to each named executive is provided in the Grants of Plan-Based Awards table on page 56.
  5. Amounts reflect the aggregate increase in actuarial value of the pension benefits as set forth in the Pension Benefits table, accrued during 2018, 2017, and 2016. These are benefits under the Allstate Retirement Plan (ARP) and the Supplemental Retirement Income Plan (SRIP). Non-qualified deferred compensation earnings are not reflected since our Deferred Compensation Plan does not provide above-market earnings. The pension plan measurement date is December 31. (See note 17 to our audited financial statements for 2018.)

    The following table reflects the respective change in the actuarial value of the benefits provided to the named executives in 2018:

    Name ARP
    ($)
    SRIP
    ($)
    Mr. Wilson 26,769 846,401
    Mr. Rizzo (34,216) 17,743
    Mr. Dugenske 7,917 70,089
    Mr. Shapiro 7,182 39,382
    Mr. Shebik 42,161 309,158

    Interest rates and other assumptions can have a significant impact on the change in pension value from one year to another. Effective January 1, 2014, Allstate modified its pension plans so that all eligible employees earn future pension benefits under a new cash balance formula. Had these pension benefit changes not been made, the change in actuarial value of benefits provided for each named executive in 2018 would have been as indicated in the following table under the prior formula:

    Name ARP
    ($)
    SRIP
    ($)
    Mr. Wilson 101,414 3,150,777
    Mr. Rizzo (33,062) 342,695
    Mr. Dugenske 7,152 47,867
    Mr. Shapiro 6,593 38,402
    Mr. Shebik 62,839 2,907,282
  6. The following table describes the incremental cost of other benefits provided in 2018 that are included in the “All Other Compensation” column.
    Name Personal
    Use of
    Aircraft(1)
    ($)
    401(k)
    Match(2)
    ($)
    Other(3)
    ($)
    Total
    All Other
    Compensation
    ($)
    Mr. Wilson 72,331 11,000 33,640 116,971
    Mr. Rizzo 0 11,000 14,391 25,391
    Mr. Dugenske 0 11,000 13,560 24,560
    Mr. Shapiro 0 11,000 27,270 38,270
    Mr. Shebik 0 11,000 26,560 37,560
    1. The amount reported for personal use of aircraft is based on the incremental cost method, which is calculated based on Allstate’s average variable costs per flight hour. Variable costs include fuel, maintenance, on-board catering, landing/ramp fees, and other miscellaneous variable costs. The total annual variable costs are divided by the annual number of flight hours flown by the aircraft to derive an average variable cost per flight hour. This average variable cost per flight hour is then multiplied by the flight hours flown for personal use to derive the incremental cost. This method of calculating the incremental cost excludes fixed costs that do not change based on usage, such as pilots’ and other employees’ salaries, costs incurred in purchasing the aircraft, and non-trip-related hangar expenses.
    2. Each of the named executives participated in our 401(k) plan during 2018. The amount shown is the amount allocated to their accounts as employer matching contributions. Each of Messrs. Dugenske and Shapiro will not be vested in the employer matching contribution until they have completed three years of vesting service, respectively.
    3. “Other” consists of personal benefits and perquisites related to mobile devices, tax preparation services, financial planning, ground transportation, executive physical related items and supplemental long-term disability coverage. There was no incremental cost for the use of mobile devices. We provide supplemental long-term disability coverage to all regular full- and part-time employees who participate in the long-term disability plan and whose annual earnings exceed the level that produces the maximum monthly benefit provided by the long-term disability plan. This coverage is self-insured (funded and paid for by Allstate when obligations are incurred). No obligations for the named executives were incurred in 2018, and therefore, no incremental cost is reflected in the table.
  7. We have included an additional column to show total compensation minus the change in pension value. The amounts reported in this column may differ substantially from, and are not a substitute for, the amounts reported in the “Total” column required under SEC rules. The change in pension value is subject to several external variables, including interest rates, that are not related to Company or individual performance and may differ significantly based on the formula under which the benefits were earned.

Grants of Plan-Based Awards at Fiscal Year-end 2018

The following table provides information about awards granted to our named executives during fiscal year 2018.

Name Grant
Date
Plan
Awards
(1)



Estimated Possible Payouts
Under Non-Equity Incentive
Plan Awards
(2)
     Estimated Future Payouts
Under Equity Incentive
Plan Awards
(3)
All Other
Option
Awards:
Number of
Securities
Underlying
Options
(#)
Exercise
or Base
Price of
Option
Awards
($/Sh)
(4)
Grant Date
Fair Value ($)
(5)
Threshold
($)
Target
($)
Maximum
($)
  Threshold
(#)
Target
(#)
Maximum
(#)
Stock
Awards
Option
Awards
Mr. Wilson Annual cash incentive 1,937,261 3,874,521 15,498,084                
02/22/2018 PSAs         0 62,635 125,270     5,812,528  
02/22/2018 Stock options               227,406 92.80   3,874,998
Mr. Rizzo Annual cash incentive 435,587 871,173 3,484,692                
02/22/2018 PSAs         0 13,578 27,156     1,260,038  
02/22/2018 Stock options               49,296 92.80   840,004
Mr. Dugenske Annual cash incentive 466,096 932,192 3,728,768                
02/22/2018 PSAs         0 14,871 29,742     1,380,029  
02/22/2018 Stock options               53,991 92.80   920,007
Mr. Shapiro Annual cash incentive 560,718 1,121,436 4,485,744                
02/22/2018 PSAs         0 15,760 31,520     1,462,528  
02/22/2018 Stock options               57,218 92.80   974,995
Mr. Shebik Annual cash incentive 849,178 1,698,356 6,793,424                
02/22/2018 PSAs         0 19,235 38,470     1,785,008  
02/22/2018 Stock options               69,836 92.80   1,190,005
  1. Awards under the Annual Executive Incentive Plan and the 2013 Equity Incentive Plan. An explanation of the amount of salary and bonus in proportion to total compensation can be found under the Compensation Elements and Compensation Decisions for 2018 captions on pages 39-42.
  2. The amounts in these columns consist of the threshold, target, and maximum annual cash incentive awards for the named executives. The threshold amount for each named executive is 50% of target, as the minimum amount payable (subject to individual performance) if threshold performance is achieved. If the threshold is not achieved, the payment to the named executives would be zero. The target amount is based upon achievement of the performance measures listed under the Earned Annual Cash Incentive Awards caption on page 50. The maximum amount is equal to 200% of target plus an additional individual performance factor of 200% of plan funding to recognize extraordinary performance. In 2018, one named executive received positive discretion for a cash incentive award greater than the pool payout percentage as calculated at 173.4%. For a description of the ranges of performance established by the committee for the 2018 annual incentive, see page 51.
  3. The amounts shown in these columns reflect the threshold, target, and maximum PSAs for the named executives. The threshold amount for each named executive is 0% payout. The target and maximum amounts are based upon achievement of the performance measures listed under the Performance Stock Awards caption on page 51.
  4. The exercise price of each option is equal to the closing sale price on the NYSE on the grant date or, if there was no such sale on the grant date, then on the last previous day on which there was a sale.
  5. The aggregate grant date fair value of the PSAs was $92.80 and for stock option awards was $17.04, computed in accordance with FASB ASC 718 based on the probable satisfaction of the performance conditions. The assumptions used in the valuation are discussed in footnotes 3 and 4 to the Summary Compensation Table on pages 53-54.

Performance Stock Awards (“PSAs”)

PSAs represent our promise to transfer shares of common stock in the future if certain performance measures are met. For the awards granted in 2018, the actual number of PSAs that vest will vary from 0% to 200% of target PSAs based on Average Performance Net Income ROE (70%) and Earned Book Value (30%) results for a three-year measurement period. For a definition of how those measures are calculated, see pages 67-69. Vested PSAs will be converted into shares of Allstate common stock and dividend equivalents accrued on these shares will be paid in cash. No dividend equivalents will be paid prior to vesting. PSAs will vest following the end of the three-year performance cycle if the performance conditions are met, subject to continued employment (other than in the event of death, disability, retirement, or a qualifying termination following a change in control).

Stock Options

Stock options represent an opportunity to buy shares of Allstate common stock at a fixed exercise price at a future date. Stock options align the interests of executives with long-term stockholder value since the stock price must appreciate from the grant date for the executives to earn compensation.

Under our stockholder-approved equity incentive plan, the exercise price cannot be less than the closing price of a share on the grant date. Stock option repricing is not permitted.

All stock option awards have been made in the form of non-qualified stock options. The options granted to the named executives become exercisable over three years. One-third of the stock options become exercisable on the anniversary of the grant date for each of the three years. All of the options expire ten years from the grant date, unless an earlier date has been approved by the committee in connection with certain change-in-control situations or other special circumstances such as termination, death, or disability.

Restricted Stock Units

Each restricted stock unit transfers one fully vested share of stock in the future if and when the restrictions expire (when the unit “vests”). Under the terms of the restricted stock unit award, the executive has only the rights of a general unsecured creditor of Allstate and no rights as a stockholder until delivery of the underlying shares. The restricted stock units granted to Messrs. Dugenske and Shapiro in 2017 and 2016, respectively, will become 100% vested on the day prior to the third anniversary of the grant date, except in certain change-in-control situations or under other special circumstances approved by the committee. The restricted stock units granted to Messrs. Dugenske and Shapiro include the right to receive previously accrued dividend equivalents payable in cash when the underlying restricted stock units vest.

Outstanding Equity Awards at Fiscal Year-end 2018

The following table summarizes the outstanding equity awards of the named executives as of December 31, 2018.

  Option Awards(1)   Stock Awards(2)
Name Option
Grant Date
Number of
Securities
Underlying
Unexercised
Options (#)
Exercisable(3)
Number of
Securities
Underlying
Unexercised
Options (#)
Unexercisable(3)
Option
Exercise
Price
($)
Option
Expiration
Date
  Stock Award
Grant Date
Number
of Shares
or Units
of Stock
That Have
Not Vested
(#)(4)
Market
Value of
Shares or
Units of
Stock
That Have
Not Vested
($)(5)
Equity
Incentive
Plan
Awards:
Number of
Unearned
Shares,
Units, or
Other
Rights
that Have
Not Vested
(#)(6)
Equity
Incentive
Plan
Awards:
Market or
Payout
Value of
Unearned
Shares,
Units,
or Other
Rights that
Have Not
Vested
($)(5)
Mr. Wilson 02/22/2011 447,808 0 31.74 02/22/2021            
02/21/2012 444,060 0 31.56 02/21/2022            
02/12/2013 363,409 0 45.61 02/12/2023            
02/18/2014 309,237 0 52.18 02/18/2024            
02/18/2015 294,494 0 70.71 02/18/2025            
02/11/2016 196,882 98,442 62.32 02/11/2026            
            02/11/2016 139,940 11,563,242    
02/09/2017 82,815 165,632 78.35 02/09/2027            
            02/09/2017     137,844 11,390,050
02/22/2018 0 227,406 92.80 02/22/2028            
            02/22/2018     125,270 10,351,060

Mr. Rizzo

02/22/2011 10,804 0 31.74 02/22/2021            
02/21/2012 12,763 0 31.56 02/21/2022            
02/18/2015 5,202 0 70.71 02/18/2025            
02/11/2016 6,591 3,296 62.32 02/11/2026            
            02/11/2016 4,685  387,122     
02/09/2017 3,519 7,040 78.35 02/09/2027            
            02/09/2017     5,858 484,047
02/22/2018 0 49,296 92.80 02/22/2028            
            02/22/2018     27,156 2,243,900
Mr. Dugenske 03/03/2017 19,180 38,360 81.86 03/03/2027            
            03/03/2017     31,884  2,634,575 
            04/05/2017 49,128 4,059,447    
02/22/2018 0 53,991 92.80 02/22/2028            
            02/22/2018     29,742 2,457,581
Mr. Shapiro 04/05/2016 0 12,269 66.70 04/05/2026            
            04/05/2016 9,176 758,213    
02/09/2017 0 28,756 78.35 02/09/2027            
            02/09/2017      23,932  1,977,501 
02/22/2018 0 57,218 92.80 02/22/2028            
            02/22/2018     31,520 2,604,498
Mr. Shebik 02/21/2012 26,446 0 31.56 02/21/2022            
03/06/2012 35,014 0 31.00 03/06/2022            
02/12/2013 75,188 0 45.61 02/12/2023            
02/18/2014 72,289 0 52.18 02/18/2024            
02/18/2015 72,023 0 70.71 02/18/2025            
02/11/2016 60,158 30,080 62.32 02/11/2026            
            02/11/2016 42,759 3,533,176    
02/09/2017 30,595 61,192 78.35 02/09/2027            
            02/09/2017     50,926 4,208,015
02/22/2018 0 69,836 92.80 02/22/2028            
            02/22/2018     38,470 3,178,776
  1. The options vest over three years: one-third will become exercisable on the anniversary of the grant date for each of the three years. The exercise price of each option is equal to the closing price of Allstate’s common stock on the grant date.
  2. The stock awards listed in this table are PSAs, except for Mr. Dugenske’s sign-on award of 49,128 restricted stock units in 2017, and Mr. Shapiro’s award of 9,176 restricted stock units in 2016. Each restricted stock unit represents the right to receive, without the payment of any consideration, one share of Allstate common stock on the conversion date, which for Mr. Dugenske’s award is April 5, 2020, and for Mr. Shapiro’s award is April 5, 2019.
  3. The aggregate value and aggregate number of exercisable and unexercisable in-the-money options as of December 31, 2018, for each of the named executives are as follows:
      Exercisable   Unexercisable
    Name Aggregate
    Number
    (#)
    Aggregate
    Value
    ($)
      Aggregate
    Number
    (#)
    Aggregate
    Value
    ($)
    Mr. Wilson 2,138,705 76,200,250   264,074 2,708,262
    Mr. Rizzo 38,879 1,412,554   10,336 97,073
    Mr. Dugenske 19,180 14,769   38,360 29,537
    Mr. Shapiro 0 0   41,025 318,521
    Mr. Shebik 371,713 10,354,300   91,272 872,827
  4. The PSAs vest in one installment on the day before the third anniversary of the grant date.
  5. Amount is based on the closing price of our common stock of $82.63 on December 31, 2018.
  6. The PSAs vest in one installment on the day before the third anniversary of the grant date. The number of shares that ultimately vest may range from 0 to 200% of the target depending on actual performance during the three-year performance period. For a description of the PSA program and the performance measures used, see pages 45-46 and 51-52. The number of PSAs reflected in this column for the 2017 and 2018 awards is the number of shares that would vest if the maximum level of performance is achieved. Final payouts under the PSAs will not be known until the respective performance period is completed.

Option Exercises and Stock Vested During 2018

The following table summarizes the options exercised by the named executives during 2018 and the PSAs or restricted stock units that vested during 2018.

  Option Awards   Stock Awards
Name Number of
Shares
Acquired on
Exercise
(#)
Value
Realized
on Exercise
($)(1)
  Number of
Shares
Acquired on
Vesting
(#)
Value
Realized
on Vesting
($)
Mr. Wilson 0 0   53,780 5,111,251
Mr. Rizzo 0 0   3,447 327,603
Mr. Dugenske 0 0   0 0
Mr. Shapiro 26,645 687,646   2,211 213,428
Mr. Shebik 0 0   13,153 1,250,061
  1. The dollar amount realized upon exercise of the option is determined based on the difference between the market price of the underlying securities at exercise and the exercise price of the options.

Retirement Benefits

The following table provides information about the pension plans in which the named executives participate. Each of the named executives participates in the Allstate Retirement Plan (ARP) and the Supplemental Retirement Income Plan (SRIP).

Pension Benefits
Name Plan Name Number
of Years
Credited
Service
(#)
Present
Value of
Accumulated
Benefit(1)(2)
($)
Payments
During Last
Fiscal Year
($)
Mr. Wilson ARP 25.8 1,181,255 0
  SRIP 25.8 16,875,827 0
Mr. Rizzo ARP 29.9 979,014 0
  SRIP 29.9 613,631 0
Mr. Dugenske(3) ARP 1.8 7,917 0
  SRIP 1.8 70,089 0
Mr. Shapiro(3) ARP 2.8 15,711 0
  SRIP 2.8 69,338 0
Mr. Shebik ARP 30.2 1,437,419 0
  SRIP 30.2 4,368,898 0
  1. These amounts are estimates and do not necessarily reflect the actual amounts that will be paid to the named executives, which will be known only at the time they become eligible for payment. The present value of the accumulated benefit was determined using the same measurement date (December 31, 2018) and material assumptions that we use for year-end financial reporting purposes, except that we made no assumptions for early termination, disability, or pre-retirement mortality. Other assumptions include the following:
    • Retirement at the normal retirement age as defined in the plans (age 65).
    • Discount rate of 4.35%.
    Other assumptions for the final average pay formula include the following:
    • 80% paid as a lump sum and 20% paid as an annuity; for the cash balance formula, 100% paid as a lump sum.
    • ARP lump-sum/annuity conversion segmented interest rates of 2.00% for the first five years, 4.50% for the next 15 years, and 5.25% for all years after 20.
    • SRIP lump-sum conversion segmented interest rates of 1.75% for the first five years, 4.25% for the next 15 years, and 5.25% for all years after 20.
    • Lump-sum calculations were done using the Internal Revenue Code Section 417(e)(3) mortality table projected with the MP-2018 projection table.
    • Annuity calculations were done using the RP-2014 white-collar mortality table for annuitants projected with the MP-2018 projection table.
    Other assumptions for the cash balance formula include the following:
    • Accounts were projected to retirement using an assumed interest crediting rate of 3.75%.
    See note 17 to our audited financial statements for 2018 for additional information.
  2. The following table shows the lump-sum present value of the non-qualified pension benefits for each named executive earned through December 31, 2018, if the named executive’s employment terminated on that date.
    Name Plan Name Lump Sum
    Amount
    ($)
    Mr. Wilson SRIP 17,303,244
    Mr. Rizzo SRIP 1,948,157
    Mr. Dugenske SRIP 74,571
    Mr. Shapiro SRIP 74,342
    Mr. Shebik SRIP 4,473,610
    The amount shown is based on the lump-sum methodology used by the Allstate pension plans in 2019. Specifically, the interest rate for 2019 is based on 100% of the average corporate bond segmented yield curve from August of the prior year. As required under the Internal Revenue Code, the mortality table used for 2019 is the 2019 combined static Pension Protection Act funding mortality table with a blend of 50% males and 50% females.
  3. Messrs. Dugenske and Shapiro are not currently vested in the ARP or the SRIP.

Allstate Retirement Plan (ARP)

Contributions to the ARP are made entirely by Allstate and are paid into a trust fund from which benefits are paid. Before January 1, 2014, ARP participants earned benefits under one of two formulas (final average pay or cash balance) based on their date of hire or their choice at the time Allstate introduced the cash balance formula. In order to better align our pension benefits with market practices, provide future pension benefits more equitably to Allstate employees, and reduce costs, final average pay benefits were frozen as of December 31, 2013. As of January 1, 2014, all eligible participants earn benefits under a cash balance formula only.

Final Average Pay Formula — Frozen as of 12/31/13

Benefits under the final average pay formula were earned and are stated in the form of a straight life annuity payable at the normal retirement age of 65. Messrs. Rizzo, Shebik and Wilson have earned final average pay benefits equal to the sum of a Base Benefit and an Additional Benefit. The Base Benefit equals 1.55% of the participant’s average annual compensation, multiplied by credited service after 1988 through 2013. The Additional Benefit equals 0.65% of the amount of the participant’s average annual compensation that exceeds the participant’s covered compensation, multiplied by credited service after 1988 through 2013. Covered compensation is the average of the maximum annual salary taxable for Social Security over the 35-year period ending the year the participant would reach Social Security retirement age. Messrs. Rizzo, Shebik and Wilson are eligible for a reduced early retirement benefit that would reduce their Base Benefit by 4.8% for each year of early payment before age 65 and their Additional Benefit by 8% for each year of early payment from age 62 to age 65 and 4% for each year of early payment from age 55 to age 62, prorated on a monthly basis based on age at the date payments begin.

Cash Balance Formula — For All Participants Beginning 1/1/14

All named executives earned benefits under the cash balance formula in 2018. Under this formula, participants receive pay credits while employed at Allstate, based on a percentage of eligible annual compensation and years of service, plus interest credits. Pay credits are allocated to a hypothetical account in an amount equal to 3% to 5% of eligible annual compensation, depending on years of vesting service. Interest credits are allocated to the hypothetical account based on the interest crediting rate in effect for that plan year as published by the Internal Revenue Service. The interest crediting rate is set annually and is currently based on the average yield for 30-year U.S. Treasury securities for August of the prior year.

Supplemental Retirement Income Plan (SRIP)

SRIP benefits are generally determined using a two-step process: (1) determine the amount that would be payable under the ARP formula(s) specified above if Internal Revenue Code limits did not apply, then (2) reduce the amount described in (1) by the amount actually payable under the applicable ARP formula(s). The normal retirement date under the SRIP is age 65. If eligible for early retirement under the ARP, the employee also is eligible for early retirement under the SRIP. SRIP benefits are not funded and are paid out of Allstate’s general assets.

Credited Service

No additional service credit beyond service with Allstate or its predecessors is granted under the ARP or the SRIP to any of the named executives. Messrs. Shebik and Wilson have combined service with Allstate and its former parent company, Sears, Roebuck and Co., of 30.2 and 25.8 years, respectively. As a result, a portion of their retirement benefits will be paid from the Sears pension plan. Consistent with the pension benefits of other employees with Sears service who were employed by Allstate at the time of the spin-off from Sears in 1995, Messrs. Shebik’s and Wilson’s final average pay pension benefits under the ARP and the SRIP are calculated as if each had worked his combined Sears-Allstate career with Allstate through December 31, 2013, and then are reduced by amounts earned under the Sears pension plan.

Eligible Compensation

Under both the ARP and SRIP, eligible compensation consists of salary, annual cash incentive awards, and certain other forms of compensation, but does not include long-term cash incentive awards or income related to equity awards. Compensation used to determine benefits under the ARP is limited in accordance with the Internal Revenue Code. For final average pay benefits, average annual compensation is the average compensation of the five highest consecutive calendar years within the last ten consecutive calendar years through 2013.

Payment Options

Payment options under the ARP include a lump sum, straight life annuity, and various survivor annuity options. The lump sum under the final average pay benefit is calculated in accordance with the applicable interest rate and mortality assumptions as required under the Internal Revenue Code. The lump-sum payment under the cash balance benefit is generally equal to a participant’s account balance. Payments from the SRIP are paid in the form of a lump sum using the same interest rate and mortality assumptions used under the ARP.

Timing of Payments

Eligible employees are vested in the normal ARP and SRIP retirement benefits on the earlier of the completion of three years of service or upon reaching age 65.

Final average pay benefits are payable at age 65. A participant with final average pay benefits may be entitled to a reduced early retirement benefit on or after age 55 if he or she terminates employment after completing 20 or more years of vesting service.

A participant earning cash balance benefits who terminates employment with at least three years of vesting service is entitled to a lump sum benefit equal to his or her cash balance account balance.

The following SRIP payment dates assume a retirement or termination date of December 31, 2018:

  • Messrs. Shebik’s and Wilson’s SRIP benefits earned prior to 2005 would become payable as early as January 1, 2019. Benefits earned after 2004 would be paid on July 1, 2019, or following death.
  • Mr. Rizzo’s SRIP benefit would be paid on January 1, 2022, or following death.
  • Mr. Dugenske’s and Mr. Shapiro’s SRIP benefits are not currently vested but would become payable following death.

Non-Qualified Deferred Compensation at Fiscal Year-end 2018

The following table summarizes the non-qualified deferred compensation contributions, earnings, and account balances of our named executives in 2018. All amounts relate to The Allstate Corporation Deferred Compensation Plan.

Name Executive
Contributions
in Last FY
($)
Registrant
Contributions
in Last FY
($)
Aggregate
Earnings
in Last FY
($)(1)
Aggregate
Withdrawals/
Distributions
in Last FY
($)
Aggregate
Balance
at Last FYE
($)(2)
Mr. Wilson 0 0 (87,006) 0 960,791
Mr. Rizzo 150,289 0 (7,782) 0 242,135
Mr. Dugenske 0 0 0 0 0
Mr. Shapiro 1,000,000 0 28,348 0 1,371,708
Mr. Shebik 0 0 (20,217) 0 165,921
  1. Aggregate earnings were not included in the named executive’s compensation in the last completed fiscal year in the Summary Compensation Table.
  2. There are no amounts reported in the Aggregate Balance at Last FYE column that previously were reported as compensation in the Summary Compensation Table.

In order to remain competitive with other employers, we allow the named executives and other employees whose annual compensation exceeds the amount specified in the Internal Revenue Code ($275,000 in 2018), to defer under the Deferred Compensation Plan up to 80% of their salary and/or up to 100% of their annual cash incentive award that exceeds the Internal Revenue Code limit. Allstate does not match participant deferrals and does not guarantee a stated rate of return.

Deferrals under the Deferred Compensation Plan are credited with earnings or debited for losses based on the results of the notional investment option or options selected by the participants. The notional investment options available in 2018 under the Deferred Compensation Plan are: stable value, S&P 500, international equity, Russell 2000, mid-cap, and bond funds. Under the Deferred Compensation Plan, deferrals are not actually invested in these funds, but instead are credited with earnings or debited for losses based on the funds’ investment returns. Because the rate of return is based on actual investment measures in our 401(k) plan, no above-market earnings are credited, recorded, or paid. Our Deferred Compensation Plan and 401(k) plan allow participants to change their investment elections daily, subject to certain trading restrictions.

The Deferred Compensation Plan is unfunded. This means that Allstate does not set aside funds for the plan in a trust or otherwise. Participants have only the rights of general unsecured creditors and may lose their balances in the event of the company’s bankruptcy. Account balances are 100% vested at all times.

An irrevocable distribution election is required before making any deferrals into the Deferred Compensation Plan. Generally, a named executive may elect to begin receiving a distribution of his or her account balance immediately upon separation from service or in one of the first through fifth years after separation from service or, for amounts deferred on or after January 1, 2018, in the fifth year after separation from service. The earliest distribution date for deferrals made on or after January 1, 2005, and earnings and losses on these amounts, is six months following separation from service. The named executive may elect to receive payment in a lump sum or in annual cash installment payments over a period of two to ten years, or, for amounts deferred on or after January 1, 2018, over a period of up to five years. In addition, a named executive may elect an in-service withdrawal of his or her entire balance earned and vested prior to January 1, 2005, and earnings and losses on these amounts, subject to forfeiture of 10% of such balance. A named executive may also elect an in-service withdrawal of all or a portion of the deferrals he or she made on or after January 1, 2018, together with earnings and losses on those amounts. Upon proof of an unforeseen emergency, a plan participant may be allowed to access certain funds in a deferred compensation account earlier than the dates specified above.

Potential Payments as a Result of Termination or Change in Control (“CIC”)

The following table lists the compensation and benefits that Allstate would generally provide to the named executives in various scenarios involving a termination of employment, other than compensation and benefits generally available to salaried employees. The table describes equity granting practices for the 2018 equity incentive awards. Relevant prior practices are described in the footnotes.

  Termination Scenarios
Compensation
Elements
Termination(1) Retirement Termination due to
Change in Control(2)
Death Disability
Base Salary Ceases immediately Ceases immediately Ceases immediately Ceases immediately Ceases immediately
Severance Pay None None Lump sum equal to two times salary and annual incentive at target, except for CEO, who receives three times salary and annual incentive at target(3) None None
Annual Incentive(4) Forfeited Prorated for the year and subject to discretionary adjustments(5) Prorated at target (reduced by any amounts actually paid) Prorated for the year and subject to discretionary adjustments Prorated for the year and subject to discretionary adjustments
Stock Options(4)(6) Unvested are forfeited, vested expire at the earlier of three months or normal expiration Awards granted more than 12 months before, and pro rata portion of award granted within 12 months of retirement, continue to vest. All expire at earlier of five years or normal expiration(7) Awards vest upon qualifying termination after a CIC Awards vest immediately and expire at earlier of two years or normal expiration Awards vest immediately and expire at earlier of two years or normal expiration
Restricted Stock Units(4)(6) Forfeited Awards granted more than 12 months before, and pro rata portion of awards granted within 12 months of retirement, continue to vest(7) Awards vest upon qualifying termination after a CIC Awards vest and are payable immediately Awards vest and are payable immediately
Performance Stock Awards(4)(6) Forfeited Awards granted more than 12 months before, and pro rata portion of awards granted within 12 months of retirement, continue to vest and are paid out based on actual performance(7) Awards vest based on performance upon a qualifying termination after a CIC(8) Awards vest and are payable immediately(9) Awards vest and are payable immediately(9)
Non-Qualified Pension Benefits(10) Distributions commence per plan Distributions commence per plan Immediately payable upon a CIC Distributions commence per plan Participant may request payment if age 50 or older
Deferred Compensation(11) Distributions commence per participant election Distributions commence per participant election Immediately payable upon a CIC Payable within 90 days Distributions commence per participant election
Health, Welfare and Other Benefits None None Outplacement services provided; lump sum payment equal to additional cost of welfare benefits continuation coverage for 18 months(12) None Supplemental Long Term Disability benefits if enrolled in basic long-term disability plan
  1. Includes both voluntary and involuntary termination. Examples of involuntary termination independent of a change in control include performance-related terminations; terminations for employee dishonesty and violation of Allstate rules, regulations, or policies; and terminations resulting from lack of work, rearrangement of work, or reduction in force.
  2. In general, a change in control is one or more of the following events: (1) any person acquires 30% or more of the combined voting power of Allstate common stock within a 12-month period; (2) any person acquires more than 50% of the combined voting power of Allstate common stock; (3) certain changes are made to the composition of the Board; or (4) the consummation of a merger, reorganization, or similar transaction. These triggers were selected because any of these could cause a substantial change in management in a widely held company the size of Allstate. Effective upon a change in control, the named executives become subject to covenants prohibiting solicitation of employees, customers, and suppliers until one year after termination of employment. If a named executive incurs legal fees or other expenses in an effort to enforce the change-in-control plan, Allstate will reimburse the named executive for these expenses unless it is established by a court that the named executive had no reasonable basis for the claim or acted in bad faith.
  3. Under the change-in-control plan, severance benefits would be payable if a named executive’s employment is terminated either by Allstate without cause or by the executive for good reason as defined in the plan during the two years following the change in control. Cause means the named executive has been convicted of a felony or other crime involving fraud or dishonesty, has willfully or intentionally breached the restrictive covenants in the change-in-control plan, has habitually neglected his or her duties, or has engaged in willful or reckless material misconduct in the performance of his or her duties. Good reason includes a material diminution in a named executive’s base compensation, authority, duties, or responsibilities, or a material change in the geographic location where the named executive performs services.
  4. Named executives who receive an equity award or an annual cash incentive award after May 19, 2009, are subject to a non-solicitation covenant while they are employed and for the one-year period following termination of employment. If a named executive violates the non-solicitation covenant, to the extent permitted by applicable law, compensation provided to the named executive (including cancellation of outstanding awards or recovery of all or a portion of any gain realized upon vesting, settlement, or exercise of an award or recovery of all or a portion of any proceeds resulting from any disposition of shares received pursuant to an award) may be recovered if the vesting, settlement, or exercise of the award or the receipt of the sale proceeds occurred during the 12-month period prior to the violation.
  5. Retirement for purposes of the Annual Executive Incentive Plan is defined as termination on or after the date the named executive attains age 55 with at least 10 years of service or age 60 with five years of service.
  6. Named executives who receive an equity award on or after May 21, 2013, that remains subject to a period of restriction or other performance or vesting condition are subject to a non-compete provision for the one-year period following termination of employment. If a named executive violates the non-competition covenant, to the extent permitted by applicable law, any or all of the named executive’s outstanding awards that remain subject to a period of restriction or other performance or vesting condition as of the date on which the named executive first violated the non-competition provision may be canceled.
  7. Retirement definitions and treatment for purposes of stock options, restricted stock units, and performance stock awards are as follows:
     
    Date of award on or after February 21, 2012
    Definition
    Normal Retirement: age 55 with 10 years of service or age 60 with at least five years of service
    Treatment
    • Unvested awards not granted within 12 months of retirement continue to vest.
    • Prorated portion of unvested awards granted within 12 months of the retirement date continue to vest.
    • Vested stock options expire at the earlier of five years from the date of retirement or the expiration date of the option.
    Stock option awards granted in 2012 and before have vested and will expire at the expiration date of the option.
  8. The committee will determine the number of PSAs that continue to vest based on actual performance up to the change in control.
  9. For open cycles, the payout is based on the target number of PSAs.
  10. See the Retirement Benefits section for further detail on non-qualified pension benefits and timing of payments.
  11. See the Non-Qualified Deferred Compensation at Fiscal Year-end 2018 section for additional information on the Deferred Compensation Plan and distribution options available.
  12. If a named executive’s employment is terminated due to death during the two years after the date of a change in control, the named executive’s estate or beneficiary will be entitled to survivor and other benefits, including retiree medical coverage, if eligible, that are not less favorable than the most favorable benefits available to the estates or surviving families of peer executives of Allstate. In the event of termination due to disability during the two years after the date of a change in control, Allstate will pay disability and other benefits, including supplemental long-term disability benefits and retiree medical coverage, if eligible, that are not less favorable than the most favorable benefits available to disabled peer executives.

Estimate of Potential Payments Upon Termination(1)

The table below describes the value of compensation and benefits payable to each named executive upon termination that would exceed the compensation or benefits generally available to salaried employees in each termination scenario. The total column in the following table does not reflect compensation or benefits previously accrued or earned by the named executives, such as deferred compensation and non-qualified pension benefits. Benefits and payments are calculated assuming a December 31, 2018, employment termination date.

Name Severance
($)
Annual
Incentive
Plan(2)
($)
Stock
Options —
Unvested and
Accelerated
($)
Restricted
Stock Units and
Performance
Stock Awards —
Unvested and
Accelerated
($)
Welfare
Benefits and
Outplacement
Services
($)
  Total
($)
Mr. Wilson              
Termination/Retirement(3) 0 6,719,194 2,708,262 21,696,489 0   31,123,945
Termination due to Change in Control(4) 15,600,000 3,900,000 2,708,262 22,433,797 69,431 (5) 44,711,490
Death 0 6,719,194 2,708,262 22,433,797 0   31,861,253
Disability 0 6,719,194 2,708,262 22,433,797 16,482,312 (6) 48,343,565
Mr. Rizzo              
Termination/Retirement(3) 0 0 0 0 0   0
Termination due to Change in Control(4) 2,718,574(7) 875,000 97,073 1,751,095 69,772 (5) 5,511,514
Death 0 1,510,788 97,073 1,751,095 0   3,358,956
Disability 0 1,510,788 97,073 1,751,095 4,755,273 (6) 8,114,229
Mr. Dugenske              
Termination/Retirement(3) 0 0 0 0 0   0
Termination due to Change in Control(4) 3,375,000 937,500 29,537 6,605,525 69,431 (5) 11,016,993
Death 0 1,616,607 29,537 6,605,525 0   8,251,669
Disability 0 1,616,607 29,537 6,605,525 10,106,704 (6) 18,358,373
Mr. Shapiro              
Termination/Retirement(3) 0 0 0 0 0   0
Termination due to Change in Control(4) 3,750,000 1,125,000 318,521 3,049,213 63,702 (5) 8,306,436
Death 0 2,050,000 318,521 3,049,213 0   5,417,734
Disability 0 2,050,000 318,521 3,049,213 8,563,879 (6) 13,981,613
Mr. Shebik              
Termination/Retirement(3) 0 2,945,289 872,827 7,000,166 0   10,818,282
Termination due to Change in Control(4) 5,100,000 1,700,000 872,827 7,226,572 69,431 (5) 14,968,830
Death 0 2,945,289 872,827 7,226,572 0   11,044,688
Disability 0 2,945,289 872,827 7,226,572 4,618,345 (6) 15,663,033
  1. A “0” indicates either that there is no amount payable to the named executive, or the amount payable is the same for both the named executives and all salaried employees.
  2. The 2018 annual incentive plan payment is payable to all named executives as a result of death and disability. In addition, it is payable to Messrs. Wilson and Shebik in the event of retirement. The amount listed for the annual incentive plan payment upon termination due to a change in control is shown at target as defined in the CIC Plan.
  3. As of December 31, 2018, Messrs. Wilson and Shebik are the only named executives eligible to retire in accordance with Allstate’s policy and the terms of its equity incentive compensation and benefit plans.
  4. The values in this change-in-control row represent amounts paid if both the change in control and qualifying termination occur on December 31, 2018. PSAs are paid out based on actual performance; for purposes of this table, the 2016-2018 cycle is shown at 161.5% of target, 2017-2019, and 2018-2020 cycles are reflected at target.
    Beginning with awards granted in 2012, equity awards do not accelerate in the event of a change in control unless also accompanied by a qualifying termination of employment. A change in control also would accelerate the distribution of each named executive’s non-qualified deferred compensation and SRIP benefits. Please see the Non-Qualified Deferred Compensation at Fiscal Year-end 2018 table and footnote 2 to the Pension Benefits table in the Retirement Benefits section for details regarding the applicable amounts for each named executive.
  5. The Welfare Benefits and Outplacement Services amount includes the cost to provide certain welfare benefits to the named executive and family during the period the named executive is eligible for continuation coverage under applicable law. The amount shown reflects Allstate’s costs for these benefits or programs assuming an 18-month continuation period. The value of outplacement services is $50,000 for each named executive.
  6. The named executives who participate in the long-term disability plan are eligible to participate in Allstate’s supplemental long-term disability plan for employees whose annual earnings exceed the level that produces the maximum monthly benefit provided by the long-term disability plan (basic plan). The monthly benefit is equal to 60% of the named executive’s qualified annual earnings divided by twelve and rounded to the nearest $100, reduced by $7,500, which is the maximum monthly benefit payment that can be received under the basic plan. The amount reflected assumes the named executive remains totally disabled until age 65 and represents the present value of the monthly benefit payable until age 65.
  7. Under the change in control plan, severance benefits for Mr. Rizzo were reduced by $431,426 to avoid the imposition of excise taxes and maximize the severance benefit available under the plan.

Performance Measures for 2018

The following pages contain descriptions of the performance measures used for executive incentive compensation. They were developed uniquely for incentive compensation purposes, are non-GAAP measures and are not reported in our financial statements. The committee has approved the use of non-GAAP measures when appropriate to drive executive focus on particular strategic, operational, or financial factors, or to exclude factors over which our executives have little influence or control. The committee monitors compensation estimates during the year based on actual performance on these measures, and the internal audit department reviews the final results.

Performance Net Income: This measure is calculated uniquely for annual cash incentive awards and each PSA performance cycle. For each plan, Performance Net Income is equal to net income applicable to common shareholders as reported in The Allstate Corporation Annual Report on Form 10-K adjusted for the after-tax effect of the items indicated below:

  Indicates adjustments to Net Income
Annual Cash
Incentive Awards
Performance
Stock Awards(1)
Net income applicable to common shareholders, excluding:
 
 
Realized capital gains and losses (which includes the related effect on amortization of deferred acquisition and deferred sales inducement costs) except for periodic settlements and accruals on certain non-hedge derivative instruments
Valuation changes on embedded derivatives not hedged (which includes the related effect on amortization of deferred acquisition and deferred sales inducement costs)
Business combination expenses and amortization of purchased intangible assets
Gain (loss) on disposition of operations
Other significant non-recurring, infrequent or unusual items, when the nature of the charge or gain is such that it is reasonably unlikely to recur within two years or there has been no similar charge or gain within the prior two years
 
  • Goodwill impairment
 
  • Tax Legislation benefit
Adjusted Net Income subtotal (See Appendix A)
 
 
Restructuring and related charges
Underwriting results of Discontinued Lines and Coverages segment
Effects of acquiring and selling businesses in excess of $20 million after-tax
 
Adjustments to be consistent with financial reporting used in establishing the measure for items exceeding $20 million after-tax
 
Adjustments for other significant, non-recurring, infrequent or unusual items
Adjustment to exclude income associated with parent holding company level deployable assets in excess of $1 billion(2)
 
Adjustment to include unutilized tax savings investment(3)
 
Performance Net Income before adjustment for volatile items(4)
 
 
Adjustment for after-tax volatile items
Adjusted to include minimum or maximum amount of after-tax catastrophe losses and income from performance-based investments
Three-year average adjusted to include a minimum or maximum amount of after-tax catastrophe losses
Performance Net Income
 
 
  1. Performance Net Income is a performance measure for the 2016-2018, 2017-2019, 2018-2020, and 2019-2021 performance cycles. The 2017-2019, 2018-2020, and 2019-2021 performance cycles do not qualify for final measurement as of December 31, 2018; the items checked above and after-tax volatile items indicate items that by definition may impact the final measurement when the three-year cycle and final measurement is completed.
  2. Adjustment for 2018-2020 and 2019-2021 performance cycles.
  3. The committee exercised negative discretion to adjust this measure to reflect tax savings that were not utilized as planned during the year.
  4. Volatile items include catastrophe losses and income from performance-based investments (“PB income”) depending on the measure.

Annual Cash Incentive Award Performance Measures for 2018

  • Total Premiums: This measure is used to assess growth within the Allstate Protection, Service Businesses, Allstate Life, Allstate Benefits, and Allstate Annuities businesses. It is equal to the sum of Allstate Protection and Service Businesses premiums written and Allstate Life, Benefits, and Annuities premiums and contract charges as described below.
    Premiums written is equal to the Allstate Protection and Service Businesses net premiums written as reported in management’s discussion and analysis in The Allstate Corporation Annual Report on Form 10-K. Premiums and contract charges are equal to life premiums and contract charges reported in the consolidated statement of operations in The Allstate Corporation Annual Report on Form 10-K.
    Total Premiums is subject to adjustment for the following individual items to the extent they exceed $30 million: adjustments to be consistent with financial reporting standards and foreign exchange rates used in establishing the measure and adjustments to exclude the effects of acquiring and selling businesses. No such adjustments were necessary in 2018.
    Total Premiums of $37,451 million were equal to reported Total Premiums in 2018.
  • Performance Net Income: This measure is used to assess financial performance. In 2018, Performance Net Income was $3,095 million compared to reported Adjusted Net Income* of $2,851 million, an increase of $244 million. It was adjusted to remove the impacts of the underwriting loss of the Discontinued Lines and Coverages segment, restructuring and related charges and a pension settlement charge. The committee also exercised negative discretion to reflect an unutilized tax savings investment. 
  • Net Investment Income: This measure is used to assess the financial operating performance provided from investments. Net Investment Income as reported in the consolidated statement of operations is adjusted to include a minimum or maximum amount of PB income if the actual amounts are less than or exceed those amounts, respectively. Net Investment Income is also subject to adjustments to be consistent with the financial reporting used in establishing the measure and to exclude the effects of acquiring and selling businesses in excess of a threshold. No such adjustments were necessary in 2018.
    Net Investment Income of $3,240 million was equal to reported Net Investment Income in 2018.

Performance Stock Award Performance Measures for the 2016-2018, 2017-2019, 2018-2020, and 2019-2021 Performance Cycles

  • Three-Year Average Performance Net Income Return on Equity (measure weighted at 70%): It is calculated as the ratio of the average Performance Net Income for the three years in the period divided by the average of Adjusted Common Shareholders’ Equity at December 31 of the year-end immediately preceding the period and at the end of each year in the three-year period. It is adjusted to reflect the foreign exchange rate used in establishing the measure (in place of actual foreign currency translation) for any period if the Total Premiums measure for the Annual Incentive Plan is adjusted for foreign exchange rates. For the 2018-2020 and 2019-2021 performance cycles, average common shareholders’ equity will also be adjusted to remove the impact of other significant non-recurring, infrequent or unusual items in excess of a threshold and parent holding company level deployable assets in excess of $1 billion. The 2019-2021 performance cycle will also be adjusted for unplanned utilization of alternative capital exceeding $20 million after-tax. Also, Average Performance Net Income Return On Equity requires positive Net Income applicable to common shareholders’ for the three-year performance cycle, and for the 2019-2021 performance cycle, subject to adjustments to exclude the effects of acquiring and selling businesses exceeding $20 million after-tax and to exclude certain fair value adjustments.
  • Adjusted Common Shareholders’ Equity is equal to common shareholders’ equity excluding the net effects of unrealized net capital gains and losses. It is subject to adjustments to be consistent with the financial reporting used in establishing the measure and to exclude the net effects of acquiring and selling businesses in excess of a threshold. Adjusted Common Shareholders’ Equity at December 31 of the year-end immediately preceding the period is not subject to adjustment.
  • Three-year Average Performance Net Income Return on Equity for the 2016-2018 performance cycle was 13.9%, compared to our reported Adjusted Net Income return on equity* of 14.8%, 13.4% and 10.4% for the years ended 2018, 2017, and 2016, respectively, and the three-year average of 12.9%. The primary adjustments relate to underwriting loss of the Discontinued Lines and Coverages segment, restructuring and related charges, net effects of acquiring business, employee share-based accounting tax benefit, pension settlement charges, and changes in investment accounting rules.
  • The committee requires positive Net Income in order for our executives to earn PSAs for Average Performance Net Income ROE above target. For the 2019-2021 performance cycle, net income is adjusted to exclude gains and losses related to fair value accounting for pension and post-retirement plans, after-tax valuation of equity securities included in realized capital gains and losses, and the effects of acquiring and selling businesses.
  • Earned Book Value (measure weighted at 30%): Earned Book Value is the increase between common shareholders’ equity at December 31 of the year-end immediately preceding the three-year period and adjusted common shareholders’ equity at December 31 of the last year of the three-year period expressed as a compound annual growth rate. Adjusted common shareholders’ equity is equal to common shareholders’ equity at December 31 of the last year of the three-year period adjusted to:
    • Add back reductions for common share repurchases and declared common shareholder dividends during the three-year period.
    • Remove the impact of other significant non-recurring, infrequent or unusual items exceeding $20 million after-tax.
    • Reflect a minimum or maximum amount of after-tax catastrophe losses if the actual pre-tax catastrophe losses are more or less than +/- 20% respectively of the three years of catastrophe losses used to establish the measure.
    • Be consistent with the financial reporting used in establishing the measure for items exceeding $20 million after-tax.
    • Exclude the effects of acquiring and selling businesses exceeding $20 million after-tax.
    • Reflect the foreign exchange rate used in establishing the measure (in place of actual foreign currency translation) for any period if the Total Premiums measure for the Annual Incentive Plan is adjusted for foreign exchange rates.
    • For the 2019-2021 performance cycle, earned book value will also be adjusted for unplanned utilization of alternative capital exceeding $20 million after-tax.

CEO Pay Ratio

As required by the Dodd-Frank Wall Street Reform and Consumer Protection Act, we are providing information about the relationship of the annual total compensation of our employees to the annual total compensation of Mr. Wilson, our CEO. This pay ratio is a reasonable estimate calculated in a manner consistent with SEC rules.

For 2018:

  • the annual total compensation of our median employee was $72,363; and
  • the annual total compensation of our CEO, as reported in the Summary Compensation Table in this Proxy Statement, was $18,687,246.
  • The ratio of the annual total compensation of Mr. Wilson to our median employee was 258:1.

In contrast to the compensation of the median employee, a significant portion of our CEO’s compensation is tied to company performance. If we were to calculate the ratio using Mr. Wilson’s target annual cash incentive (as opposed to the actual cash incentive award paid to him based on 2018 company performance), our CEO to median employee pay ratio would have been 218:1.

To calculate the ratio, we followed SEC permitted rules and used the following methodology and material assumptions, adjustments, and estimates:

  • December 31, 2018 was selected as the determination date as it enabled us to choose a pay date that aligned across our enterprise.
  • Employees in all countries were included and as of December 31, 2018, our U.S. and non-U.S. employee population consisted of 46,656 full-time, part-time, seasonal and temporary employees.
  • The agent population was excluded since they are not employees of Allstate or its subsidiaries.
  • Total cash (base salary plus incentive compensation) was selected as the most appropriate and consistently applied compensation measure to determine the median worker since equity awards are not broadly distributed.
  • Employee compensation was measured using a twelve-month look-back period ending December 31, 2018.
  • Permanent employees hired in 2018 that did not work for the entire period had their compensation adjusted as if they were employed for the entire twelve-month period.
  • For non-U.S. employees, an annual average was used for each of the exchange rates.
  • After identifying the median worker based on total cash compensation, annual total compensation was calculated for that person using the same methodology used for the named executives in the Summary Compensation Table on page 53.
  • As noted above, the median employee’s annual total compensation was $72,363. The median employee was a claims adjuster in the United States with total cash compensation of $67,388, a change in pension value of $2,240, and other compensation in the amount of $2,735.

The SEC rules for identifying the median of our employees and calculating the pay ratio allow companies to use a variety of methodologies, to apply certain exclusions, and to make reasonable estimates and assumptions that reflect a company’s employee population and compensation practices. For that reason, the pay ratio reported by other companies may not be comparable to the pay ratio reported above. Neither the committee nor management of the company used the pay ratio measure in making compensation decisions.