Allstate (ALL)

Executive Compensation Program Goals and Components

        Because we believe that the long-term value of Allstate is dependent on the quality, skills and commitment of our executives, the goals of our executive compensation program are to attract and retain talented leadership and to reward the achievement of positive annual and long-term performance.

        We use the following compensation elements to achieve these goals:

•

Annual cash compensation



•

Long-term cash incentive compensation



•

Long-term equity-based compensation

Annual cash compensation—salary and annual incentive bonus

        We annually review the base salaries for the Chief Executive Officer and other senior executive officers, having considered the materials provided by our outside compensation consultant. Individual salary determinations are subject to approval by the entire Board. During the year, we also consider internally developed analyses of short and long-term components of the compensation elements, computed at a target level of performance for both the Chief Executive Officer and senior executives to

39

assist us with our salary review process. Using these materials helps with our comparative and competitive review of salaries. We set the base salaries for Allstate's executive officers at a level designed to be competitive in the U.S. insurance industry.

        After considering all relevant data and analysis, we determined the Chief Executive Officer's base salary should be set at 12% of the total target compensation and the remaining 88% of his compensation tied to Allstate's annual and long-term performance. The target total compensation for Allstate's named executive officers is set at 17-19% for base salary with the remaining 81-83% tied to Allstate's annual and long-term performance.

        Annual cash incentive bonus awards are designed to provide management-level employees and officers, including the named executive officers, with a cash award based on the achievement of corporate performance goals, business unit performance goals, or a combination thereof. Each year prior to the end of the first quarter, we approve financial and other objectives that take into account revenue and profit goals as well as brand loyalty, expense management and investment return goals that are designed to reward the current and future profitable growth of Allstate. We set threshold, target and maximum goals for each objective. Target annual incentive bonus opportunities are set as a specified percentage of annual salary ranging from 15% for management-level employees, 80-100% for named executive officers and 120% for the Chief Executive Officer. If the maximum level of performance is achieved, the award would be three times the executive's target award, and two times the management employee's target award.

        Annual incentive bonuses are paid in March of the year following the year of performance, after we determine the extent to which the performance goals were met. We have the authority to adjust the amount of awards payable to executives generally; however, we have no authority to increase the amount of an award payable to the Chief Executive Officer and the other named executive officers.

Annual incentive bonus award objectives for 2005

        The annual performance goals for 2005 reflected our overall goal to achieve a balance between revenue growth and profitability.

        For 2005, the performance goals for the annual incentive bonus for Mr. Liddy and the executives of corporate functions including finance were based on two equally weighted goals. The first was based on a corporate measure of adjusted operating income per diluted share. The second was based on the combined weighted results of the Allstate Protection, Allstate Financial and Investments business units performance goals.

        For executives in business unit functions, the performance goals for the 2005 annual incentive bonus included a combination of corporate and specific business unit goals. The corporate goal was based on the adjusted operating income per diluted share measure and accounted for 10% of the total award opportunity.

        The remaining 90% of the 2005 total annual incentive bonus award opportunity for the Allstate Protection business unit was comprised of four performance goals. The primary goal (worth 50% of the total award opportunity) was a matrix measuring the results of premium growth, policy growth and combined ratio. This matrix was designed to achieve a balance among revenue growth, unit growth and profit goals. A second goal (worth 15% of the total award opportunity) was based on the sales of Allstate Financial products by Allstate exclusive agencies, including the sale of traditional life insurance products as well as annuity and other financial product sales. The third goal (worth 10% of the total award opportunity) was an expense management objective for the Allstate Protection business unit. The fourth goal (worth 15% of the total award opportunity) was based on Allstate's ranking relative to peer companies on an external customer loyalty index.

40

        The remaining 90% of the 2005 total incentive bonus award opportunity for the Allstate Financial business unit was based on five performance goals that balance profitability with growth. The first performance goal (worth 30% of the total award opportunity) was based on an adjusted Allstate Financial operating income measure. The second performance goal (worth 20% of the total award opportunity) was an expense management objective for the Allstate Financial business unit. The third and fourth performance goals (each worth 15% of the total award opportunity) were based on new sales of traditional life insurance products and annuities, respectively. The fifth performance goal was based on a measure of the return achieved on new sales of products (worth 10% of the total award opportunity).

        The remaining 90% of the 2005 total annual incentive bonus award opportunity for the Investment business unit was based on Allstate's strategy to maximize returns on its investments and was comprised of three performance goals. The first was based on a measurement of Allstate's property/casualty portfolio total return (worth 45% of the total award opportunity). The second performance goal (worth 35% of the total award opportunity) was based on a measurement of the excess spread achieved on the Allstate Financial investment portfolio against an external market benchmark. The third performance goal was based on Allstate Financial portfolio loss reduction (worth 10% of the total award opportunity).

Long-term cash incentive bonuses

        Long-term cash incentive bonuses are designed to focus our executives on balancing the long-term performance objectives and goals of Allstate with its annual performance goals and to also balance and reward executives for efforts exerted during varying periods of company performance challenges. To reinforce this balance, long-term cash incentive bonuses are awarded for positive performance achieved over a three-year cycle. Our long-term incentive bonus component is provided to the majority of executives, including the named executive officers. We set the performance goals at the beginning of each three-year cycle. By doing so, it is our intention to have any compensation paid qualify as performance-based compensation that is deductible under Section 162(m) of the Internal Revenue Code. Threshold, target and maximum benchmarks are set for each performance goal. Each year, before any bonus awards are paid at the end of a cycle, we determine the extent to which the performance goals were met. We have the authority to adjust the amount of awards payable to executives generally; however, we have no authority to increase the amount of an award payable to the Chief Executive Officer and the other named executive officers. Long-term incentive bonuses are paid in March of the year following the end of each respective three-year cycle.

Current long-term cash incentive bonus award objectives

        There were three outstanding performance cycles for long-term incentive bonuses during 2005. A new cycle starts at the beginning of each calendar year and includes three years of performance. Each of the three outstanding cycles had an adjusted return on equity goal that measures and ranks Allstate's performance against a peer group's performance. Allstate's ranked position relative to the peer group determines the percentage of the total target award to be paid. The adjusted return on equity objective is the sole performance goal for the 2003-2005 cycle. For the 2004-2006 and the 2005-2007 cycles, this goal comprises 50% of the total potential award.

        To measure performance under this objective, Allstate's adjusted return on equity is compared to that of peer companies representing both the property/casualty and financial services industries for the three-year period. This peer group consists of six large public companies predominately in the property/casualty business, three large public companies predominately in the life/financial services business and one large public company that competes in both the property/casualty and life/financial services businesses. Including life/financial services companies in the peer group more accurately aligns the goals of the long-term incentive bonus with Allstate's strategy of becoming better, bigger and broader in its financial services business. No payment based on the adjusted return on equity goal is made unless the

41

adjusted return on equity exceeds the average risk free rate of return on three-year Treasury notes over the three-year cycle, plus 200 basis points, regardless of Allstate's standing compared to the peer group.

        The remaining 50% of the long-term incentive bonus for the 2004-2006 and 2005-2007 cycles is based on two performance goals. The first goal (weighted to account for 25% of the total potential award) is a measurement of growth in Allstate Protection policies in force, a key measurement used in the property/casualty insurance business. The last performance goal (weighted to account for the final 25% of the total potential award) is based on a measurement of the growth in Allstate Financial premiums and deposits, a key measurement used in the life insurance business. Executives' target long term cash incentive bonus awards generally range from 70% to 155% of annual salary with award opportunities ranging from 0% to 300% of an executive's target award.

Long-term equity-based compensation

        Another component of our long-term executive compensation program is the grant of equity-based awards to our eligible management-level employees and officers, including the named executive officers. We believe these equity-based awards directly link the interests of our employee-recipients with those of our shareholders because each is served by an increase in Allstate's stock value. Restricted stock and restricted stock unit awards are important components to our executive compensation philosophy and goals to incentivize and reward a long-term focus by executives on company performance.

        Our 2001 Equity Incentive Plan provides for the following types of equity-based compensation: stock options, performance units and performance stock, stock appreciation rights, restricted or unrestricted common stock, restricted stock units and stock in lieu of cash awards to plan participants. Each type of equity-based award is linked to the underlying value and performance of Allstate's stock. To date, only nonqualified stock options, restricted stock and restricted stock units have been granted under the 2001 Equity Incentive Plan.

        One of our responsibilities is to administer the Company's equity incentive plans for employees and as part of the fulfillment of our responsibilities, we formed a subcommittee in 2004 which is currently comprised solely of our committee chairman. This subcommittee has the authority to grant restricted stock and restricted stock units to eligible persons, excluding individuals who are executive officers for purposes of Section 16 of the Securities Exchange Act of 1934, in new hire situations that occur between regularly scheduled committee meetings. In addition, pursuant to the authority provided by Delaware law, beginning in 2002 we authorized the Chief Executive Officer to make stock option awards to eligible employees who are not Section 16 officers. This authority is limited to specific circumstances, including new hires, promotions and awards to key contributors.

        We generally grant awards on an annual basis to management-level employees and officers, including each of the named executive officers. We base the size of each executive's award on a specified percentage of the executive's annual salary and our assessment of individual performance. The annual salary percentages for the total targeted value of the awards range from 15% for management-level employees to 200-350% for the named executive officers and 465% for the Chief Executive Officer.

        Our equity-based awards generally provide for grants weighted to provide 35% of the total value in the form of restricted stock units and the remaining 65% in the form of stock options.     The relative mix of restricted stock units and stock options is based on the advice of our outside compensation consultants, evolving market trends and the overall goals of our executive compensation program to retain talented leadership and reward the achievement of positive long-term performance. Restricted stock units that were granted in 2005 convert to shares of common stock at the end of a four-year vesting period generally measured from the date of grant. All stock option awards are made in the form of nonqualified stock options at exercise prices equal to 100% of the fair market value of Allstate common stock on the date of grant. Except in certain change of control situations or under other special circumstances approved by our committee, options are not fully exercisable until four years after the date

42

of grant and expire in ten years. The vested portions of options may be transferred during the holder's lifetime to any defined family member, to a trust in which the family members have more than fifty percent of the beneficial interest, a foundation in which the family members (or the option holder) control the management of assets, and any other entity in which the family members (or option holder) own more than fifty percent of the voting interests. Any taxes payable upon a transferee's subsequent exercise of the option remain the obligation of the original option holder.

Executive Compensation Program Goals and Components

        Because we believe that the long-term value of Allstate is dependent on the quality, skills and commitment of our executives, the goals of our executive compensation program are to attract and retain talented leadership and to reward the achievement of positive annual and long-term performance.

        We use the following compensation elements to achieve these goals:

•

Annual cash compensation



•

Long-term cash incentive compensation



•

Long-term equity-based compensation

Annual cash compensation—salary and annual incentive bonus

        We annually review the base salaries for the Chief Executive Officer and other senior executive officers with individual salary determinations subject to approval by the entire Board. We set the base salaries for Allstate's executive officers at a level designed to be competitive in the U.S. insurance industry. Only 12% of the total target compensation for the Chief Executive Officer is base salary with the remaining 88% tied to Allstate's annual and long-term performance. The total target compensation for Allstate's named executive officers is set at 17-19% for base salary with the remaining 81-83% tied to Allstate's annual and long-term performance.

        Annual cash incentive bonus awards are designed to provide management-level employees, including the named executive officers, with a cash award based on the achievement of corporate performance goals, business unit performance goals, or a combination thereof. Each year, we approve financial objectives that take into account revenue and profit measures designed to reward the current

22

and future profitable growth of Allstate. These objectives are approved prior to the end of the first quarter. We set threshold, target and maximum goals for each objective. Target annual incentive bonus opportunities are set as a specified percentage of annual salary ranging from 15% for management-level employees, 80-90% for named executive officers and 120% for the Chief Executive Officer. If the maximum level of performance is achieved, the award would be three times the executive's target award, and two times the management employee's target award.

        Annual incentive bonuses are paid in March of the year following the year of performance, after we certify the achievement of the performance goals. We have authority to adjust the amount of awards made to executives generally, except with respect to the Chief Executive Officer and the other named executive officers. For these individuals, we cannot increase the amount of any annual incentive bonus above the amount specified for the level of performance achieved.

Annual incentive bonus award objectives for 2004

        The annual performance goals for 2004 reflected our overall goal to achieve a balance between revenue growth and profitability.

        For 2004, the performance goals for the annual incentive bonus for Mr. Liddy and the executives of corporate functions including finance and administration were based on two equally-weighted goals. The first was based on a corporate measure of adjusted operating income per diluted share. The second was based on the combined weighted results of the Allstate Protection, Allstate Financial and Investments business units.

        For executives in business unit functions, the performance goals for the 2004 annual incentive bonus included a combination of corporate and specific business unit goals. The corporate goal was based on the adjusted operating income per diluted share goal and accounted for 10% of the total award opportunity.

        The remaining 90% of the 2004 total annual incentive bonus award opportunity for the Allstate Protection business unit was comprised of four performance goals. The primary goal (worth 50% of the total award opportunity) was a matrix measuring the results of premium growth, policy growth and combined ratio. This matrix was designed to achieve a balance among revenue, unit growth and profit goals. A second goal (worth 20% of the total award opportunity) was based on the sales of financial services products by Allstate agencies, including the sale of traditional life insurance products as well as annuity and other financial product sales. The third goal (worth 10% of the total award opportunity) was a reduction of the business unit's expense ratio, consistent with our ongoing goals to contain expenses. The fourth goal (worth 10% of the total award opportunity) was based on improving Allstate's score on an external customer loyalty index.

        The remaining 90% of the 2004 total annual incentive bonus award opportunity for the Allstate Financial business unit was based on five performance goals that emphasized an increase in new sales, consistent with Allstate's strategy to grow Allstate's financial services business. The first performance goal (worth 30% of the total award opportunity) was based on an adjusted Allstate Financial operating income measure. The second performance goal (worth 20% of the total award opportunity) was an expense management objective for the Allstate Financial business unit. The third and fourth performance goals (each worth 15% of the total award opportunity) were based on new sales of traditional life insurance products and annuities, respectively. The fifth performance goal was based on a measure of the return achieved on new sales of products (worth 10% of the total award opportunity).

        The remaining 90% of the 2004 total annual incentive bonus award opportunity for the Investments business unit was based on Allstate's strategy to maximize returns on its investments and was comprised of three performance goals. The first was based on a measurement of Allstate's portfolio total return (worth 45% of the total award opportunity). The second performance goal (worth 35% of the total award

23

opportunity) was based on a measurement of the excess spread achieved on the Allstate Financial investment portfolio against an external market benchmark. The third performance goal was based on portfolio defaults and losses (worth 10% of the total award opportunity).

Long-term cash incentive bonuses

        Long-term cash incentive bonuses are designed to focus our executives on balancing the long-term performance objectives and goals of Allstate with its annual performance goals. To reinforce this balance, long-term cash incentive bonuses are awarded for positive performance achieved over a three-year cycle. Our long-term incentive bonus component is provided to executives at the vice president level and above, including the named executive officers. We set the performance goals at the beginning of each three-year cycle so that any compensation paid is intended to qualify as performance-based compensation that is deductible under Section 162(m) of the Internal Revenue Code. Threshold, target and maximum benchmarks are set for each performance goal. Each year, before any bonus awards are paid at the end of a cycle, we determine the extent to which the performance goals are met. We have the authority to adjust the amount of awards payable; however, we have no authority to increase the amount of an award otherwise payable to a "covered employee" as defined in the Code. Long-term incentive bonuses are paid in March of the year following the end of each respective three-year cycle.

Current long-term cash incentive bonus award objectives

        There are three outstanding performance cycles for long-term incentive bonuses. A new cycle starts at the beginning of each calendar year and includes three years of performance. Each of the three outstanding cycles has an adjusted return on equity goal that measures and ranks Allstate's performance against a peer group's performance. Allstate's ranked position relative to the peer group will determine the percentage of the total target award to be paid. The adjusted return on equity objective is the sole performance goal for the 2002-2004 and 2003-2005 cycles. For the 2004-2006 cycle, this goal comprises 50% of the total potential award. No payment based on the adjusted return on equity goal for any of the three outstanding performance cycles will be made unless the adjusted return on equity exceeds the average risk free rate of return on three-year Treasury notes over the three-year cycle, plus 200 basis points.

        For the 2002-2004 performance cycle, Allstate's adjusted return on equity was compared to that of the peer companies in the S&P 500 Property/Casualty index for the three-year period. An executive's target award for this cycle generally ranges from 30% of annual salary for executives at the vice president level to 155% for the Chief Executive Officer, with award opportunities ranging from 0% to 250% of the executive's target award.

        For the 2003-2005 and 2004-2006 performance cycles, Allstate's adjusted return on equity will be compared to that of peer companies representing both the property/casualty and financial services industries for the three-year period. This peer group consists of 6 large public companies predominately in the property/casualty business, 3 large public companies predominately in the life/financial services business and 1 large public company that competes in both the property/casualty and life/financial services businesses. Including life/financial services companies in the peer group more accurately aligns the goals of the long-term incentive bonus with Allstate's strategy of becoming better, bigger and broader in its financial services business. An executive's target award for these cycles generally ranges from 40% of annual salary for executives at the vice president level to 155% for the Chief Executive Officer, with award opportunities ranging from 0% to 300% of the executive's target award.

        The remaining 50% of the long-term incentive bonus for the 2004-2006 cycle is based on two performance goals. The first goal (weighted to account for 25% of the total potential award) is a measurement of growth in policies in force, a key measurement used in the property/casualty insurance business. The last performance goal (weighted to account for the final 25% of the total potential award))

24

is based on a measurement of the growth in Allstate Financial premiums and deposits, a key measurement used in the life insurance business.

Long-term equity-based compensation

        Another component of our long-term executive compensation program is the grant of equity-based awards to our eligible management level employees and officers, including the named executive officers. We believe these equity-based awards directly link the interests of our employee-recipients with those of our shareholders because each interest is served by an increase in Allstate's stock value.

        Our 2001 Equity Incentive Plan provides for the following types of equity-based compensation: stock options, performance units and performance stock, stock appreciation rights, restricted or unrestricted common stock, restricted stock units and stock in lieu of cash awards to plan participants. Each type of equity-based award is linked to the underlying value and performance of Allstate's stock. Through December 31, 2004, only nonqualified stock options and restricted stock have been granted under the 2001 Equity Incentive Plan.

        One of our responsibilities is to administer the Company's equity incentive plans. In 2004, we formed a subcommittee to grant restricted stock to newly hired eligible persons, excluding individuals who are executive officers for purposes of Section 16 of the Securities Exchange Act of 1934, in situations that occur between regularly scheduled Committee meetings. The subcommittee is currently comprised solely of our Committee chairman. In addition, pursuant to the authority provided by Delaware law, we authorized the Chief Executive Officer to make stock option awards to eligible employees who are not Section 16 officers. This authority is limited to specific circumstances, including new hires, promotions and awards to key contributors.

        We generally grant awards on an annual basis to management-level employees, including each of the named executive officers. We base the size of each executive's award on a specified percentage of the executive's annual salary and our assessment of individual performance. The annual salary percentages for the total targeted value of the awards range from 15% for management-level employees to 200-290% for the named executive officers and 465% for the Chief Executive Officer.

        In 2004, we adjusted the mix of our equity-based awards, to grant 35% of the total value in restricted stock and 65% in stock options. We previously granted half of the value of awards in restricted stock and the other half in stock options. The adjustment was based on several factors including, a review of the relationship between Allstate's executive pay and Company performance, the performance goals relative to the payout opportunities, evolving market trends and the overall goals of our executive compensation program to retain talented leadership and reward the achievement of positive long-term performance. Restricted stock awards vest at the end of a four-year vesting period generally measured from the date of grant. All stock option awards are made in the form of nonqualified stock options at exercise prices equal to 100% of the fair market value of Allstate common stock on the date of grant. Beginning with stock option awards granted in 2004, we eliminated the reload provision previously included in awards to executives, based in part on a recommendation from our outside compensation consultant. Except in certain change of control situations, options are not fully exercisable until four years after the date of grant and expire in ten years. The vested portions of options may be transferred during the holder's lifetime to any defined family member, to a trust in which the family members have more than fifty percent of the beneficial interest, a foundation in which the family members (or the option holder) control the management of assets, and any other entity in which the family members (or option holder) own more than fifty percent of the voting interests.

25