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The CEO and President/CFO recommend to the
Compensation Committee the specific Company
performance objectives and their ranges. In
recommending the incentive performance objectives to
the Compensation Committee, the CEO and
President/CFO
take
into
consideration
past
performance results and scenario tests of the
Company’s financial outlook as projected by a complex
financial model. The model projects the impact on
various financial measures using different levels of total
new annualized premium sales, investment returns,
budgeted expenses, morbidity, and persistency. This
enables the Company to set ranges around most
performance objectives.
The Compensation Committee may consider 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.
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.
2014 MIP Targets and Actual Performance:
The following descriptions of the corporate and
business segment metrics and objectives for 2014 MIP
apply to the NEOs.
Corporate Metrics:
Minimum
Goal
Target
Goal
Maximum
Goal
2014 Actual
N/A
$6.31
$6.49
$6.42
16% 20% 24% 22.9%
550% 650% 750% 945%
Growth of operating earnings per diluted share on a consolidated basis for the
company (excluding foreign currency effect)
Statutory Risk Based Capital Ratio
Solvency Margin Ratio
500% 575% 650% 857%
Net Investment Income (Consolidated)
Budget
minus 2% Budget
Budget plus
2%
Budget plus
1%
0.00% 2.50% 5.00% 0.70%
0.75% 1.50% 2.25% 1.20%
Increase in Premium Income
Increase in Pretax Operating Earnings
2.00% 3.50% 5.00% 3.30%
2.00% 4.50% 7.00% 6.12%
Increase in New Annualized Premiums (increase in third sector sales)
Increase in Premium Income
1.50% 2.25% 3.00% 1.91%
Budget plus
1% Budget
Budget
minus 1%
Budget plus
1.5%
Operating expenses compared to budget
Increase in Pretax Operating Earnings before allocated expenses and foreign
currency change
-2.50% -1.50% -0.50% 0.24%
Global Investments Metrics (Eric M. Kirsch only):
Net Investment Income (Consolidated)-
-same as above
Budget
minus 2% Budget
Budget plus
2%
Budget plus
1%
Credit Losses/Impairments
(in millions)
($500)
($350)
($200)
$184
In establishing our 2014 MIP objectives, we considered
certain headwinds previously disclosed to the public in
October 2013 that pressured expected EPS growth,
direct premium growth and pretax operating earnings
growth in Japan. Therefore, these objectives were
lower than the prior year. The incentive measures
described above include statistical and non-GAAP
financial measures as more fully described as follows:
Our corporate performance measure is based
on operating earnings per diluted share,
31
U.S. Segment Metrics:
Increase in New annualized Premiums
Japan Segment Metrics:
Operating Return on Shareholder Equity (excluding foreign currency effect)