This excerpt taken from the ALL DEF 14A filed Apr 1, 2009.
Total Return Measures
Portfolio excess total return: Management uses the four following measures to assess the value of active portfolio management relative to the benchmark. The measure is calculated as the excess, in basis points, of the specific portfolio total return over a designated benchmark. Total return is principally determined using industry standards and the same sources used in preparing the financial statements to determine fair value. (See footnote 6 to our audited financial statements for our methodologies for estimating the fair value of our investments.) In general, total return represents the increase or decrease, expressed as a percentage, in the value of the portfolio over one- and three-year periods. Time weighted returns are utilized. The designated benchmark is a composite of pre-determined, customized indices which reflect the investment risk parameters established in the investment policies by the boards of the relevant subsidiaries, weighted in proportion to our investment plan, in accordance with our investment policy. Certain investments that do not have external benchmarks and for which fair value cannot readily be determined, such as investments in limited partnerships, are excluded. The specific measures and investments included are listed below:
Other Relative Return: Management uses this measure to assess its results of the activities described below. The measure is calculated as the average of the following three measures:
general, total return represents the increase or decrease, expressed as a percentage, in the value of the portfolio over a one- year period. This measure includes all investments held by Kennett Capital Partners.
Allstate Financial net spread: Management uses this measure to assess the value provided on each specific fixed income security and commercial mortgage purchase decision, up to specific purchase volumes, relative to a benchmark. Net spread is calculated as the difference between the adjusted purchase yield and the benchmark, calculated on a dollar weighted average basis for the majority of new purchases expressed in basis points. The adjusted purchase yield is the yield at purchase adjusted by a predetermined formula to align with predetermined Allstate Financial investment risk parameters. The benchmark is based on the U. S. Treasury bond yield with a comparable duration at the time of purchase adjusted on a monthly basis to reflect changes in corporate credit market spreads. As a result of this monthly adjustment process, performance ranges are adjusted accordingly.
Adjusted Net Investment Income: Management uses this measure to assess the financial operating performance provided from investments relative to internal goals. Adjusted net investment income is calculated as the total of certain amounts reported in 2008 net investment income in the consolidated financial statements. It includes interest and dividends, net investment income from partnership interests, and income from certain derivative transactions, less investment expenses adjusted to exclude the difference between actual and planned expenses for certain employee benefit and incentive expenses. It is the sum of amounts for the following group of subsidiaries: Allstate Insurance Company, Allstate Financial, and Allstate Investment Management Company.