STFC » Topics » Objectives of the Executive Compensation Program

This excerpt taken from the STFC DEF 14A filed Apr 7, 2009.

Objectives of the Executive Compensation Program

The primary goal of our executive compensation program is to provide a direct link between individual compensation awards and the successful long-term achievement of the following objectives of the State Auto Group:

 

   

Consistent underwriting profits targeted at combined ratios in the 94% – 99% range

 

   

Rational premium growth that matches or exceeds the premium growth rates of designated peer property and casualty insurance companies, as well as the property and casualty insurance industry as a whole

 

   

Capital and risk management that targets a 10% – 15% return on equity

 

   

Investment performance that protects our strong capital position and builds long-term shareholder value

To better establish the direct link between individual compensation awards and the attainment of corporate objectives, we redesigned our executive compensation program at the beginning of 2007 and continued to refine it in 2008. Prior to 2007, our executive compensation program applied to approximately 20 of our executive level employees. Since 2007, the program has covered approximately 200 of our employees who are executives, managers and other key employees selected by management and approved by the Compensation Committee (the “Leadership Team”). We believe members of the Leadership Team are in a position to make significant contributions to the overall success of the State Auto Group and should receive commensurate compensation. Our current short-term incentive component, the Leadership Bonus Plan (“LBP”), is designed to reward all Leadership Team members for the attainment of annual corporate and business unit goals and to reward Leadership Team members, other than NEOs, for the attainment of individual annual goals. NEOs may also receive discretionary, short-term cash incentive awards based upon their attainment of personal performance

 

 

(1)

See page 69 of this Proxy Statement for the list of companies included in the State Auto Group.

 

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goals, but such awards are separate from the LBP in order to preserve corporate tax benefits. Our current long-term incentive component provides for both equity awards and cash-based performance award units.

Our executive compensation program is intended to achieve the following goals:

 

   

Align annual and long-term compensation with our strategic and operational goals

 

   

Provide upside and downside risks to total compensation based on Company and individual performance outcomes

 

   

Compare favorably with the total compensation of similarly-sized property and casualty insurance companies

 

   

Reinforce our people strategies around leadership development, staffing, retention, fairness and equity

This excerpt taken from the STFC DEF 14A filed Apr 7, 2008.

Objectives of the Executive Compensation Program

The primary goal of our executive compensation program is to provide a direct link between individual compensation awards and the successful achievement of the following objectives of the State Auto Group:

 

   

Consistent underwriting profits targeted at combined ratios in the mid-90% range

 

   

Rational premium growth that matches or exceeds the premium growth rates of designated peer property and casualty insurance companies, as well as the property and casualty insurance industry as a whole

 

   

Capital management that targets a 12% – 15% return on equity

 

   

Investment performance that protects our strong capital position and builds long-term shareholder value

To better establish the direct link between individual compensation awards and the attainment of corporate objectives, we redesigned our executive compensation program at the beginning of 2007 and continue to refine it in 2008. Previously, our executive compensation program applied to approximately 20 of our executive level employees. For 2007, the program covered approximately 200 of our employees who are executives, managers and other key employees selected by management and approved by the Compensation Committee (the “Leadership Team”). We believe members of the Leadership Team are in a position to make significant contributions to the overall success of the State Auto Group and should receive commensurate compensation. Both the short-term and long-term incentive components of our new executive compensation program differ from our prior program. Our new short-term incentive component, the Leadership Bonus Plan (“LBP”), replaced the previous Executive Bonus Plan and is designed to reward all Leadership Team members for the attainment of annual corporate goals and to reward Leadership Team members, other than NEOs, for the attainment of individual annual goals. NEOs may also receive discretionary, short-term cash incentive awards based upon their attainment of personal performance goals, but such awards are separate from the LBP. Our new long-term incentive component provides for both equity awards and cash-based performance award units rather than focusing solely on the award of stock options as was the case with the previous program.

 

 

(1)

See page 59 of this Proxy Statement for a list of subsidiaries and affiliates of our Company and State Auto Mutual and page 61 for the list of companies included in the State Auto Group.

 

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Our redesigned executive compensation program is intended to achieve the following goals:

 

   

Better align annual and long-term compensation with our strategic and operational goals

 

   

Provide more upside and downside risks to total compensation based on company and individual performance outcomes

 

   

Compare favorably with the total compensation of similarly-sized property and casualty insurance companies

 

   

Reinforce our people strategies around leadership development, staffing, retention, fairness and equity

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