Market capitalization remains the best correlation for totalchief executive officer compensation for property-casualtyinsurance industry executives, Bank of America advised.

Brian Meredith, the bank's property-casualty insurance analyst,in a report last week said the figure that multiplies the stockprice times the share outstanding is particularly relevant whencorrelating annual cash bonuses.

"There was little if any correlation with return on equity, bookvalue growth, operating earnings/earnings per share,premiums/revenues and combined ratio," Mr. Meredith wrote.

What the analyst termed a positive was the fact the next bestcorrelation for total CEO compensation after market capitalizationwas total return to shareholders, which is the stock performanceplus dividends.

Mr. Meredith termed 2005 a challenging year forproperty-casualty insurers, where only 10 out of 27 companies inthe Bank of America p-c reporting universe reported growth inoperating earnings. CEO compensation was up 5 percent compared with2004, he noted.

"But that said, the average increase in total CEO compensationwas 38 percent, while the median change was down .5 percent." Mr.Meredith wrote.

Record hurricane losses in 2004 and 2005 contributed to thisfactor in that some companies awarded no bonuses.

"Total annual cash bonuses were up 10 percent, with 12 companiesgiving the CEO a higher bonus and 10 companies giving lowerbonuses," he wrote.

The Philadelphia companies appeared to provide the most value toshareholders relative to CEO compensation, whether related to totalreturns, underwriting results or return on equity. "Arch Capital,Chubb, Republic and ProAssurance also delivered consistent value onthis basis," Mr. Meredith wrote.

Mr. Meredith wrote that the insurers do a poor job of definingincentive compensation metrics in their proxies. "Moreover, thereis little correlation between the performance metrics laid out inthe proxy and CEO compensations," he added.

Among the factors contributing to that were the discretionaryauthority of board compensation committees and the timingdifference of when long-term incentive compensation is grantedversus when it is earned and how it is paid out, he said.