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For each of the performance measures, a target
performance level is established. In addition, a
minimum and maximum level is established. The
payout for a minimum result is one-half of the target
result, while the payout for a maximum result is two
times that of the target result. Typically, the target result
is equidistant between the minimum result and the
maximum result. Interpolation is used to calculate
incentive payouts for results between minimum and
target or target and maximum.
The Compensation Committee considers the probability
of attainment of each of the various measures.
Generally, it is expected that target performance will be
attained 50% to 60% of the time, minimum performance
attained at least 75% of the time, and maximum
performance attained not more than 25% of the time.
During its annual review in February, the Compensation
Committee reviews and approves or, if deemed
appropriate, modifies the annual incentive goals for that
year.
Importance of neutralizing foreign currency effects:
Since 1991, the Company has communicated external
earnings guidance that excludes foreign currency
effects because
of the importance of our Japanese
business
to our results and the fact that currency
changes are largely outside of management’s control.
However, reported earnings do reflect the impact of
foreign currency.
The reason the MIP objectives are set on a currency
neutral basis is that the Compensation Committee
strongly believes that in a period of yen strengthening,
which was experienced as recently as 2008 through
2012, the Company’s management should not be
rewarded with MIP payments that benefit from reported
results that were enhanced by currency changes.
Similarly, the Company’s management should not be
penalized in periods of yen weakening as has been
experienced in the last several years.
In addition to currency neutrality, the business
environment in which the Company operates is taken
into consideration when setting MIP objectives for each
metric, which resulted in lower targets for pretax
operating earnings in Japan. The MIP goals were then
approved by the Compensation Committee in February
2015.
2015 MIP Targets and Actual Performance:
The following descriptions of the corporate and
business segment metrics and objectives for 2015 MIP
apply to the NEOs.
Corporate Metrics:
Minimum
Goal
Target
Goal
Maximum
Goal
2015 Actual
2% (or
$6.29 per
share)
3% (or
$6.35 per
share)
7% (or
$6.59 per
share)
7.5% (or
$6.62 per
share)
16% 20% 24% 20.2%
500% 600% 700% 828%
Grow th of operating earnings per diluted share on a consolidated basis for the
company (excluding foreign currency effect) froma
2014 base of $6.16 per share
Operating Return on Shareholder Equity (excluding foreign currency effect) (OROE)
Solvency Margin Ratio
Net Investment Income (Consolidated)
Budget
minus 2% Budget
Budget plus
2%
Budget plus
2.2%
3.00% 5.00% 7.00% 3.70%
2.00% 2.75% 3.50% 2.60%
U.S. Segment Metrics:
Increase in New Annualized Premiums
Increase in Direct Premiums
Increase in Pretax Operating Earnings
0.50% 1.50% 2.50% 2.70%
1.00% 3.00% 5.00% 13.38%
0.00% 0.75% 1.50% 1.38%
Japan Segment Metrics:
Increase in New Annualized Premiums (increase in third sector sales)
Increase in Direct Premiums
Increase in Pretax Operating Earnings before allocated expenses and foreign
currency change
-4.00% -3.00% -2.00% 0.42%
Global Investments Metrics (Eric M. Kirsch only):
Net Investment Income (Consolidated)-
-same as above
Budget
minus 2% Budget
Budget plus
2%
Budget plus
2.2%
Credit Losses/Impairments
(in millions)
($325)
($225)
($125)
$150
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