Allstate cuts CEO Wilson's pay 11% in worst year as public firm

Allstate Corp., the largest publicly traded U.S. home and auto insurer, said Chief Executive Officer Tom Wilson's compensation fell 11 percent after the company's first unprofitable year as a public firm.

Wilson's package for 2008 was $8.34 million, compared with $9.43 million a year earlier, the Northbrook-based firm said today in a regulatory filing. Allstate shares fell 37 percent last year, compared with the 48 percent decline in the 24-stock KBW Insurance Index.

Wilson halved the firm's dividend, halted share buybacks and is cutting 1,000 jobs at Allstate's money-losing life insurance business to preserve capital. The insurer lost $1.68 billion in 2008 amid more than $5 billion in writedowns and unrealized losses on holdings including mortgage-backed securities.

Insurers typically add to profits by investing payments from their customers until the funds are needed to pay claims. The business model backfired last year, leaving 23 of the 24 companies in the KBW Insurance Index with either a profit decline or a net loss.

Allstate's book value per share, a measure of assets minus liabilities, fell 39 percent to $23.51 in the 12 months ended Dec. 31. Hurricanes Ike and Gustav, coupled with a record number of tornadoes, contributed to $3.3 billion in catastrophe claims, more than double a year earlier. Industrywide, insurers spent $25.2 billion on natural disasters in 2008, the most since the record storms of 2005, an industry group said in January.

Allstate, which became a public company in 1993, joined competitor Hartford Financial Services Group Inc. in cutting its dividend after losses from life insurance overwhelmed profits from covering cars and homes. Allstate will save about $450 million over four quarters by cutting the payout to 20 cents a share, based on 536 million shares outstanding.

Life insurers Prudential Financial Inc., Lincoln National Corp. and Principal Financial Group Inc. all cut their quarterly dividends, while auto insurer Progressive Corp. didn't pay an annual dividend for 2009 because of its 2008 results.

State Farm Mutual Automobile Insurance Co., the only U.S. home and auto insurer larger than Allstate, paid CEO Ed Rust $13.66 million in 2008 including incentives. Bloomington, Illinois-based State Farm, which is owned by its policyholders, said last month that Rust will get $9.35 million for 2009.