34 / 72
COMPENSATION DISCUSSION AND ANALYSIS
This Compensation Discussion and Analysis (“CD&A”) section provides a detailed description of our executive
compensation philosophy and programs, the compensation decisions made by the Compensation Committee related to
those programs, and the factors considered in making those decisions. This CD&A focuses on our named executive
officers (“NEOs”) for 2015, who were:
Named Executive Officer
Title
Daniel P. Amos
Chairman & Chief Executive Officer
Frederick J. Crawford
Executive Vice President, Chief Financial Officer (effective June 30, 2015)
Kriss Cloninger III
President
Paul S. Amos II
President, Aflac
Eric M. Kirsch
Executive Vice President, Global Chief Investment Officer, Aflac
Successful 2015 Leadership Transition
In 2015, the Company underwent a successful leadership transition. Mr. Crawford joined the Company as the Executive
Vice President, Chief Financial Officer effective June 30, 2015, replacing Mr. Cloninger as Chief Financial Officer
effective as of that date. Mr. Cloninger remains President with a particular emphasis on capital and strategic planning,
as well as helping the Company grow while ensuring solid profitability.
Overview
The Company’s compensation philosophy is to provide
pay-for-performance that is directly linked to the
Company’s results. We believe this is the most effective
method for creating shareholder value, and that it has
played a significant role in making the Company an
industry leader. Importantly, the performance-based
elements of our compensation programs apply to all
levels of Company management, not just the executive
officers. In fact, pay-for-performance components
permeate every employee level at the Company. The
result is that we are able to attract, retain, motivate and
reward talented individuals who have the necessary
skills to manage our growing global business on a day-
to-day basis, as well as for the future.
Our executive compensation program is designed to
drive shareholder value via the following guiding
principles:
a
pay-for-performance
philosophy
and
compensation program structure that directly
incentivizes our executives to achieve our
annual and long-term strategic and operational
goals;
compensation elements that help us attract and
retain high-caliber talent to lead the Company in
its execution of its business plan; and
best practices with respect to corporate
governance policies, such as stock ownership
guidelines, clawback provisions, and no
change-in-control excise tax gross-ups.
Summary of 2015 Results
The Company delivered strong financial and operating
results in 2015. Notable achievements that contributed
to shareholder value creation included:
growing total operating revenues, excluding foreign
currency effect, by 1.3% to $22.8 billion;
meeting our operating earnings objective for the 2
6
th
consecutive year as operating earnings per diluted
share increased by 7.5% (excluding impact from
foreign currency);
generating $2.5 billion in total combined new
annualized premium sales in the United States and
Japan driven by a 13.4% increase in third sector
sales (cancer and medical) in Japan and 3.7%
increase in U.S. sales;
increasing the quarterly dividend by 5.1% to $.41
per quarter and the annual dividend by 5.3% to
$1.58, marking the 33
rd
consecutive year in which
the dividend has been increased;
generating an industry-leading return on equity of
14.1%; additionally, our operating return on
shareholders’ equity excluding foreign currency
effect (“OROE”) for the full year was 20.2%;
our capital ratios, as of December 31, 2015 remain
strong:
o
Risk-based capital (“RBC”) ratio was 933%;
o
Solvency margin ratio (“SMR”), the principal
capital adequacy measure in Japan, was 828%;
and
repurchasing $1.3 billion (21.2 million) of the
Company’s shares as part of a balanced capital
allocation program, made possible due to the
strength of our capital ratios and liquidity position.
27