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The incentive measures described above include
statistical and non-GAAP financial measures as more
fully described below.
Our corporate performance is measured by:
Operating earnings per diluted share and
operating return on shareholders’ equity
(“OROE”), both excluding the impact of foreign
currency effect. We define operating earnings
per diluted share to be the profits derived from
operations, inclusive of interest cash flows
associated with notes payable, before realized
investment gains and losses from securities
transactions, impairments, and derivative and
hedging activities, as well as other and
nonrecurring items, divided by the weighted-
average number of shares outstanding for the
period plus a number of weighted-average
shares to compensate for the dilutive effect of
share-based awards. Because foreign
exchange rates are outside of management’s
control, operating earnings per diluted share
growth is computed using the average
yen/dollar exchange rate for the prior year,
which eliminates fluctuations from currency
rates that can magnify or suppress reported
results in dollar terms.
The Japan Solvency Margin Ratio (“SMR”),
associated with our regulatory reporting to the
Financial Services Agency in Japan, was
applicable to 2015 MIP determinations. SMR
measures an insurance company’s ability to
satisfy policy obligations. A strong SMR serves
to protect our policyholders’ interests, while also
improving our flexibility to invest in additional
asset classes with the objective of enhancing
our risk-adjusted investment returns
and
returning capital to our shareholders through
share repurchases and cash dividends. The
SMR is an important financial indicator and key
benchmark for industry regulators. We have
viewed maintaining a strong capital position as
an important priority for years. Aflac’s SMR
also remains high and was 828% at the end of
2015.
The Net Investment Income corporate metric
emphasizes that our investment objective to
maximize the Company’s risk-adjusted
performance subject to our liability profile and
capital requirements is a key responsibility of
each NEO.
For both the U.S. and Japanese segments, we use an
industry measure referred to as the increase in total
new annualized premiums on policies sold and
incremental annual premiums on policies converted
during the reporting period.
Both segments use the percentage increase in Direct
Premiums and the percentage increase in Pretax
Operating
Earnings.
We
define
Direct
Premiums as the insurance premium earned
by each segment during the period, prior to
any
reinsurance
ceded
or
assumed.
We
define Pretax Operating Earnings on a segment
basis to be the operating profit derived from
operations before realized investment gains and
losses from securities transactions, impairments,
and derivative and hedging activities as well as
nonrecurring items. The percentage increase in pretax
operating earnings for the Japan segment is also
measured before expenses allocated from the U.S. and
excluding foreign currency effect.
Target Bonus Opportunity and Setting of Payout Opportunities:
Target bonuses for 2015 for the NEOs were determined to be in line with our peer group for the respective positions and
were as follows:
Named Executive Officer
Target MIP
(as percent of base salary)
Daniel P. Amos (Chairman & CEO)
220%
Frederick J. Crawford (EVP, CFO)
125%
Kriss Cloninger III (President)
150%
Paul S. Amos II (President, Aflac)
125%
Eric M. Kirsch (EVP, Global Chief Investment Officer, Aflac)
200%
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