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EXHIBIT 10.52
ALLIED GROUP
SHORT TERM MANAGEMENT
INCENTIVE PLAN
1. PURPOSE
The initial ALLIED Group Short Term Management Incentive Plan (the
"Plan") and the beginning of the first performance period was January 1, 1988.
This amended and restated Plan shall be effective January 1, 1996.
The purpose of this Plan is to encourage outstanding performance by
certain key employees of ALLIED Group, Inc. ("AGI") in the attainment of annual
financial and operating goals of AGI, ALLIED Mutual Insurance Company, and all
of their subsidiaries except for ALLIED Life Financial Corporation and its
subsidiaries (collectively, the "ALLIED Group").
2. DEFINITIONS
The capitalized terms used throughout the Plan have the following
meaning:
(a)"AGIMC" means ALLIED Group Insurance Marketing Company.
(b)"AGIS" means ALLIED Group Information Systems, Inc.
(c)"AGMC" means ALLIED Group Mortgage Company.
(d)"ALLIED Group Net Income" means net income after income taxes
(including net realized investment gains/losses) for the consolidated group of
companies comprising the ALLIED Group (excluding crop-hail business) computed in
conformity with generally accepted accounting principles ("GAAP").
(e)"Base Salary" is the annualized weekly base pay of the Participant in
effect as of December 31 of the Plan year.
(f)"Committee" shall mean the Compensation Committee of the Board of
Directors of AGI in consultation with the Joint Compensation Committee of the
Board of AGI and ALLIED Mutual Insurance Company.
(g)"Discretionary Award" is the increment above the Guaranteed Award
which is awarded to a Participant based on the discretion of the Committee.
(h)"DPW" is direct premiums written, net of return premiums, as reported
in the 1996 Planning Package for a particular regional office or company. For
ALLIED Group, it includes all property-casualty companies but excludes (i)
Western Heritage, (ii) crop-hail business, and (iii) flood program. For AGIMC,
DPW shall exclude any premiums generated from business that is purchased by
AGIMC from another entity.
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(i)"Eligible Award Percentage" is that percentage amount set forth on
Exhibit B which shows the direct numeric relationship associated with the
attainment of Threshold, Goal, or Maximum performance, and it is used in
determining potential Eligible Tier Awards. The Eligible Award Percentage is
calculated as follows:
Example Calculation for Eligible Award Percentage for
Profit for a Participant from Des Moines Regional Office
(DMRO) in Tier IV
Step 1: Compare actual profit results for the fiscal year (if the actual
Profit results for the fiscal year do not meet the Threshold, then the
Eligible Award Percentage is 0, and no further calculations are
necessary) to the highest goal specified in Exhibit A that it exceeds
(in this example, assume the actual profit results are $24,750,000).
$1,750,000 = $24,750,000 - $23,000,000
(Threshold)
Step 2: Interpolate between the Threshold and Goal (or between the Goal
and Maximum as the case may be) to determine what percentage the
Participant is above the Threshold or Goal. There is no need to
interpolate if the Maximum has been exceeded. In this example,
$1,750,000 is 50% between Threshold ($23,000,000) and Goal
($26,500,000).
50% = $1,750,000 / ($26,500,000 - $23,000,000)
Step 3: Take the eligible award percentage for Profit from Exhibit B for
the Participant's particular tier category and for the goal level that
has been attained (e.g., Threshold or Goal) and interpolate based on
50% attainment. The eligible award percentages for Profit in Tier IV on
Exhibit B are 12% for Threshold and 24% for Goal.
18% = ((24% - 12%) x 50%) + 12%
In this example, 18% is the Eligible Award Percentage for Profit for a
Participant from DMRO in Tier IV.
The same process is used to compute the Eligible Award Percentage for
Growth.
(j)"Eligible Individual Award" is the award potential for a Participant
based on Profit and Growth results. Eligible Individual Award is the sum of (i)
the Eligible Award Percentage for Profit multiplied by the Base Salary for the
Participant and (ii) the Eligible Award Percentage for Growth multiplied by the
Base Salary for the Participant. The Eligible Individual Award is the base used
to determine the Guaranteed Award and the Discretionary Award.
(k)"Eligible Tier Award" is the award potential for a tier based on
Profit and Growth results. Eligible Tier Award is the sum of all Eligible
Individual Awards for all of the Participants in a particular tier.
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(l)"Goal" is the expected level of performance used to establish
targeted awards as approved by the Committee.
(m) "Growth" is a performance indicator and is the increase in revenue
from the prior year stated in terms of a percentage increase or dollar target.
Generally, revenue is expressed in DPW, except as follows:
TFG Financial Division - total revenues for TFG Financial Division TFG
Insurance Division - total revenues for TFG Insurance Division. Midwest
Printing Services - percentage increase in total revenues.
(n)"Guaranteed Award" is guaranteed to Participants and is 75% of their
Eligible Individual Award.
(o) "Maximum" is the level of performance at which the maximum eligible
award could be made.
(p) "Midwest Printing Services" is Midwest Printing Services, Ltd. but
shall not include the revenues or expenses from the operations acquired in May
1995 from Monaco Computer Services, Inc.
(q)"Operating Profit" is calculated on a GAAP basis, includes net
realized investment gains/losses, and is after income taxes.
(r)"Participant" is a key employee of AGI recommended by the
President(s) of AGI and approved by the Committee to participate in this Plan.
(s)"Persistency" for AGIMC is the year-end persistency percentage as
shown on the ALLIED Group AGIMC Production Report B, which shall include any
business that is purchased by AGIMC from another entity.
(t)"Profit" is a performance indicator and shall be defined based on the
particular area for which a Participant provides services:
Regional Offices and Bonds - "Regional Office Operating
Profit"
AGIMC - "Persistency"
AGI subsidiaries - "Operating Profit"
Staff areas/all other areas - "ALLIED Group Net Income"
TFG Financial Division - net income after tax before
subsidiaries for TFG Financial Division
TFG Insurance Division - net income after tax before
subsidiaries for TFG Insurance Division.
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(u) "Regional Office Operating Profit" is the Regional Office Operating
Statement GAAP net income.
(v)"TFG Financial Division" means The Freedom Group, Inc.
(w) "TFG Insurance Division" means that division of AGIS involved in the
sale/licensing of products and services to companies not affiliated with the
ALLIED Group.
(x)"TFG Insurance and Financial Divisions" means the consolidation of
TFG Insurance Division and TFG Financial Division.
(y)"Threshold" is the minimum level of performance that will warrant an
award.
(z)"WHIC" means Western Heritage Insurance Company.
3. PARTICIPATION AND TIERS
Participation in the Plan is tiered by responsibility level and the
short-term impact of the management position.
Responsibility Levels
Tier I President(s)
Tier II Regional Vice Presidents
Subsidiary Presidents
Profit Center Officers
Tier III Primary Corporate Staff Vice Presidents
Tier IV Regional Office Managers and Subsidiary Managers
Tier V Corporate Staff Vice Presidents and Officers
Subsidiary Managers
Tier VI Subsidiary Managers
Tier VII TFG Managers
A participation list specifying the Participants in each tier shall be
approved by the Committee prior to each fiscal year. The Committee may amend
such list from time to time to add or delete Participants.
Each tier level of participation will have varying award opportunity at
the Threshold, Goal, and Maximum performance levels for each of the performance
indicators.
4. PERFORMANCE INDICATORS
Two performance indicators, Profit and Growth, will be used to measure
the success of ALLIED Group and the level of bonus to be paid under this Plan.
The Threshold for Profit must be attained before any award will be made based on
Growth. Notwithstanding the foregoing, for AGIMC, the Threshold for Profit need
not be attained for there to be an award based on Growth.
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Profit is the only indicator used to measure performance for AGMC, WHIC,
and ALLIED General Agency, and the total bonus amount is paid based upon results
of Profit.
5. AWARDS
(a)A Participant may receive an Eligible Individual Award under the
Plan. No award will be made for performance that does not meet the Threshold
goal for Profit. Upon meeting the Threshold goal for Profit, a Participant will
receive a Guaranteed Award. Depending on the determination of the Committee, a
Participant may or may not receive a Discretionary Award. A Participant's total
award is the sum of the Guaranteed Award and the Discretionary Award. The
Discretionary Award combined with the Guaranteed Award cannot exceed 150% of the
Participant's Eligible Individual Award.
(b)In addition to the requirements in the foregoing paragraph, a
pre-Threshold requirement will be applicable to Staff employees. "Staff
employees" are defined to include those employees with overall corporate
responsibilities, each of whom shall be identified as "Staff" on the
participation list approved by the Committee. Staff employees must attain a 14%
return on average equity based on AGI financial statements before they are
eligible to meet the Threshold goal. "Return on equity" is defined as the
"Return on Average Book Value per Fully-diluted Share" as calculated for and as
disclosed in the ALLIED Group, Inc. Annual Report to Stockholders.
(c)Total awards made to all of the Participants in a particular tier
shall not exceed 100% of the Eligible Tier Award, but the total awards for a
particular tier may be less than the Eligible Tier Award. Notwithstanding the
foregoing, if the Committee determines that a Participant has shown
extraordinary performance in a calendar year, the Committee may exceed the
Eligible Tier Award in order to increase the Discretionary Award for the
Participant showing such extraordinary performance.
(d)In the event a Participant does not meet the Threshold goal for
Profit, the Committee may, in unusual or extraordinary circumstances, award the
Participant a special award under the Plan. This paragraph may only be invoked
by the Committee in rare and extreme situations.
6. PRORATED AWARDS
Employees who become eligible for participation in this Plan after the
beginning of the Plan year may receive a prorated award based on the time the
employee was a Participant and based on active time employed during the Plan
year. Prorated awards will be calculated by determining the number of calendar
weeks that a Participant has been eligible for a tier and dividing that number
by the calendar weeks in that Plan year.
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7. DEATH, DISABILITY, OR RETIREMENT
In the event that a Participant dies, becomes disabled, or retires due
to age in accordance with AGI policy, a prorated award will be made based on
active time employed as a Participant during the Plan year.
8. PLAN YEAR
The Plan year will be AGI's fiscal year.
9. TRANSFERABILITY
A Participant may not sell, pledge, donate, or otherwise assign any
interest in this Plan.
10. EMPLOYMENT
Nothing in this Plan confers upon a Participant any right to continued
employment or interferes with or limits in any way ALLIED Group's right to
terminate the employment of a Participant at any time.
11. TERMINATION OF EMPLOYMENT
If a Participant terminates employment or is terminated by ALLIED Group
for any reason other than death, disability, or retirement due to age in
accordance with AGI policy, and if such termination date is prior to the payment
date of an award under this Plan, any right to an award under this Plan is
forfeited.
12. PLAN AMENDMENT OR TERMINATION
The Committee may amend or terminate the Plan at any time. Participants
will be notified of such action as soon as it is practical to do so.
In the event of any change in the corporate structure of AGI affecting
the goals set forth in Exhibit A or the eligible award percentages set forth in
Exhibit B and which change in corporate structure would adversely affect a
Participant, the Committee may adjust or amend the Plan so as not to
disadvantage a Participant.
13. ADMINISTRATION
All matters pertaining to the administration of this Plan will be the
responsibility of the Committee, and any decisions of the Committee shall be
conclusive and binding. This includes all matters of interpretation, areas not
specified in the Plan, and any other issues that may affect the Plan.
14. GOVERNING LAW
The Plan will be administered, enforced, construed, and interpreted in
accordance with the laws of the State of Iowa.
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EXHIBIT A GOALS
Threshold Goal Maximum
--------- ---- -------
PROFIT
Regional Offices:
DMRO $23,000,000 $26,500,000 $30,000,000
LRO $10,000,000 $12,000,000 $14,000,000
RMRO $5,000,000 $5,700,000 $6,400,000
PCRO $14,000,000 $16,000,000 $18,000,000
Bonds $675,000 $700,000 $725,000
Staff 1 $57,000,000 $66,000,000 $75,000,000
AGMC $2,100,000 $2,400,000 $2,700,000
WHIC $5,000,000 $6,000,000 $7,000,000
ALLIED General Agency $25,000 $30,000 $35,000
TFG Insurance Division 2 $300,000 $600,000 $900,000
TFG Financial Division 2 $650,000 $750,000 $850,000
TFG Insurance and
Financial Divisions $950,000 $1,350,000 $1,750,000
Midwest Printing Services $275,000 $350,000 $425,000
AGIMC 86.5% 88.0% 89.5%
GROWTH
Regional Offices, Bonds, AGIS,
and Staff in DPW 10.0% 12.5% 15.0%
AGIMC DPW 18.0% 22.0% 26.0%
Midwest Printing Services 10.0% 14.0% 18.0%
TFG Insurance Division 2 $9,000,000 $10,500,000 $12,000,000
TFG Financial Division 2 $8,500,000 $9,500,000 $10,500,000
TFG Insurance and
Financial Divisions $17,500,000 $20,000,000 $22,500,000
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1 A pre-Threshold requirement will be applicable to Staff employees. Staff
employees must attain a 14% return on equity based on ALLIED Group, Inc.
financial statements before they are eligible to meet the Threshold goal.
2 In the event that The Freedom Group, Inc. receives a capital contribution
in the Plan year, the Threshold, Goal, and Maximum shall each be adjusted
upwards by the addition of the dollar amount derived from the following
formula:
Dollar Amount of x 14% x Remaining / Total Number
Capital Contribution Days in of Days in
Plan Year Plan Year
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EXHIBIT B
ELIGIBLE AWARD PERCENTAGES
Threshold Goal Maximum Weight
--------- ---- ------- ------
Tier I:
Profit 19% 38% 56% 75%
Growth 6% 12% 19% 25%
Total 25% 50% 75%
Tier II:1
Profit 15% 30% 45% 75%
Growth 5% 10% 15% 25%
Total 20% 40% 60%
Tier III:
Profit 13% 27% 40% 75%
Growth 5% 9% 14% 25%
Total 18% 36% 54%
Tier IV:1,2
Profit 12% 24% 36% 75%
Growth 4% 8% 12% 25%
Total 16% 32% 48%
Tier V:
Profit 9% 18% 27% 75%
Growth 3% 6% 9% 25%
Total 12% 24% 36%
Tier VI:
Profit 6% 12% 18% 75%
Growth 2% 4% 6% 25%
Total 8% 16% 24%
Tier VII:2
Profit 3% 6% 9% 50%
Growth 3% 6% 9% 50%
Total 6% 12% 18%
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1 AGIMC award percentage weighting = 25% Persistency, 75% Growth.
2 TFG Financial and Insurance Divisions weighted 50% Profit and 50% Growth
(Revenue)