2018 Annual Meeting of Stockholders

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 Chief Executive Officer (“CEO”). This pay ratio is a reasonable estimate calculated in a manner consistent with the final SEC rules.

For 2017,

  • the annual total compensation of our median employee was $81,573; and

  • the annual total compensation of our CEO, as reported in the Summary Compensation Table in this Proxy Statement, was $18,757,329.

  • The ratio of the annual total compensation of Mr. Wilson to our median employee was 230:1.

As required by SEC rules, the annual total compensation for both the CEO and median employee includes the change in pension value during the year. 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. If we eliminated the change in pension value from our median employee and CEO’s total compensation, our CEO to median employee pay ratio would have been 294:1.

We also note that, 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 2017 company performance), our CEO to median employee pay ratio would have been 193:1.

To calculate the ratio, we used the following methodology and material assumptions, adjustments, and estimates:

  • We selected October 2, 2017, which is within the last three months of 2017 as permitted by SEC rules, as the determination date because it enabled us sufficient time to calculate the ratio.
  • As of October 2, 2017, our U.S. and non-U.S. employee population consisted of 44,432 full-time, part-time, seasonal and temporary employees.
  • In determining the employee population to be used to calculate the compensation of the median employee, we included employees in all countries except for 2,155 employees in the United Kingdom, who represented less than 5% of our total employees, as permitted under the applicable SEC de minimis rule. As a result, the employee population that we used for purposes of determining the compensation of our median employee was 42,277.
  • We excluded our agent population since they are not employees of Allstate or its subsidiaries.
  • We selected total cash (base salary plus incentive compensation) as the most appropriate and consistently applied compensation measure to determine the median worker since we do not widely distribute equity awards.
  • We measured compensation for our employees using a nine-month look-back period ending September 30, 2017.
  • Permanent employees who were hired in 2017, but did not work for the entire period, had their compensation adjusted as if they were employed for the entire nine-month period.
  • For employees outside of the United States, we use a year-to-date average of January 1, 2017, through September 30, 2017, for each of the exchange rates.
  • After identifying the median worker based on total cash compensation, we calculated annual total compensation for that person using the same methodology we use for our named executives in the Summary Compensation Table in this Proxy Statement.
  • As noted above, the median employee’s annual total compensation was $81,573. The median employee was a U.S. claims employee with total cash compensation of $56,410, a change in pension value of $23,575, and other compensation in the amount of $1,588. The change in pension value is high in comparison to total cash compensation as a result of the median employee earning pension benefits under the final average pay formula until December 31, 2013. Approximately 30% of the pension-eligible Allstate employees in the U.S., including the CEO, earned pension benefits under the final average pay formula prior to 2014.

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 populations 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 Compensation and Succession Committee nor management of the company used the pay ratio measure in making compensation decisions.