Exhibit 10.2


 


Annual Incentive Plans


Performance Goals and Target Awards for 2005


 


The registrant maintains two
shareholder-approved plans under which executive officers have the opportunity
to receive an annual cash award based on the achievement of performance goals
over a one-year period.  The Annual Covered Employee Incentive
Compensation Plan (Covered Employee Plan) governs awards to those executive
officers who are considered “covered employees” as defined in Section 162(m)(3) of
the Internal Revenue Code.  Annual incentive awards to all other executive
officers are governed by and made under the Annual Executive Incentive
Compensation Plan (Executive Plan).  The Compensation and Succession
Committee of the Board of Directors establishes performance goals for each
fiscal year and sets threshold, target and maximum award opportunities. 
The Committee has the authority to adjust the amount of awards, but has no
authority to increase the amount of an award otherwise payable under the
Covered Employee Plan.  Payments are made after the Committee has
certified in writing the degree of attainment of the performance goals.


 


On February 22, 2005, the Committee
approved performance goals and target awards under the plans for 2005. 
The same performance goals and target awards apply to both the Covered Employee
Plan and Executive Plan.  For the chief executive officer and executive
officers in corporate functions, there are two equally-weighted goals. 
One is based on an adjusted operating income per diluted share measure as
approved by the Committee at the beginning of the fiscal year.  The other
goal is based on combined business unit results.


 


For Allstate Protection executive officers,
their award opportunity is based on five performance goals, generally weighted
as follows:  50% based on a matrix that measures the results of premium
growth, policy growth and combined ratio; 15% based on a matrix measuring sales
of Allstate Financial products by Allstate exclusive agencies; 10% based on
expense ratio reduction; 15% based on a measure of customer loyalty that is a
relative ranking compared to a peer group of companies;
and 10% based on the corporate adjusted operating income per diluted share
measure.


 


For the Allstate Financial executive officer,
there are six performance goals, weighted as follows:  30% based on
adjusted Allstate Financial operating income; 20% based on expense management;
15% based on new traditional life premiums; 15% based on annuity sales; 10%
based on profitability of new sales; and 10% based on the corporate adjusted
operating income per diluted share measure.


 


For the executive officer in the Investments
business unit, there are four performance goals, weighted as follows:  45%
based on property/casualty portfolio total return; 35% on Allstate Financial
spread volume goal; 10% on Allstate Financial portfolio loss reduction; and 10%
based on the corporate adjusted operating income per diluted share measure.


 





















 


Threshold, target and maximum levels of
performance are established for each performance goal.  If the maximum
level of performance is achieved, the award would be three times the executive
officer’s target award, with target awards ranging from 70% to 120% of annual
salary for the fiscal year.


 


On July 26, 2005, the Committee approved the annual cash incentive
award opportunity for Thomas J. Wilson for the portion of 2005 during which he
is serving in his new position as President and Chief Operating Officer: 50%
based on the two equally-weighted performance goals that apply to executive
officers in corporate functions and 50% based on the five
performance goals that apply to Allstate Protection executive officers,
weighted as specified above.