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This excerpt taken from the AFL DEF 14A filed Mar 17, 2006. Salaries In 2005, salaries for the Company’s executive officers generally were increased at an average rate of 3.5% . The Committee considered the findings of reports prepared in 2005 (collectively, the “Consultant Report”) for purposes of compensation evaluation by an independent compensation consultant (the “Consultant”) as to the comparative performance of the Company. The Consultant had been retained by the Compensation Committee to evaluate the total compensation of the Company’s most highly compensated executives, to critique the Company’s executive compensation program in relation to data from other companies and to identify trends in executive compensation. The Consultant Report compared the Company with a peer group of 15 generally successful industry-related companies of relative size (generally one-fourth to two and a half times the Company’s revenue size). The Consultant Report assigned the companies relative performance rankings on performance measures in the areas of assets and revenues, net income, premium income, earnings per share, return on average equity, return on average assets, and three-year total shareholder return, and found that the Company ranked second in composite performance for 2004. The comparator insurance companies were identified to the Compensation Committee by the Consultant as appropriate comparators to the Company based on company size and the competitive structure within the insurance industry. The peer group includes certain members of the S&P Life and Health Insurance Index, which is one of the indices used in the Company’s “Stock Performance Graph” (see page 17), but also includes a broader group of companies, including those historically viewed by the Company as its most direct competitors. Based on the recommendation of the Consultant Report, the Compensation Committee determined to increase Mr. Amos’ annual salary effective February 8, 2005 by 3.5% . The full increase is to be deferred until Mr. Amos’ retirement in order for the Company to continue to qualify for Section 162(m) deductibility, which limits the deductibility of annual salaries exceeding $1 million. Mr. Cloninger’s salary was increased by 3.5%, Mr. Matsui’s salary was increased by 3.5% and Mr. Kan’s salary was increased by 11.1%. 13 This excerpt taken from the AFL DEF 14A filed Mar 17, 2005. Salaries In 2004, salaries for executive officers generally were increased at an average rate of 3.5% to reflect cost-of-living increase. The Committee considered the findings of reports prepared in 2004 (collectively, the “Consultant Report”) for purposes of compensation evaluation by an independent compensation consultant (the “Consultant”) as to the comparative performance of the Company. The Consultant had been retained by the Compensation Committee to evaluate the total compensation of the Company’s most highly compensated executives, to critique the Company’s executive compensation program in relation to data from other companies and to identify trends in executive compensation. The Consultant Report compared the Company with a peer group of 14 generally successful industry-related companies of relative size (generally one-fifth to three times the Company’s revenue size) in the areas of assets and revenues, net income, premium income, earnings per share, return on average equity, 13 return on average assets, and three-year total shareholder return, and found that the Company ranked sixth in composite performance for 2003, placing the Company between the top quartile and the median. The comparator insurance companies were identified to the Compensation Committee by the Consultant as appropriate comparators to the Company based on company size and the competitive structure within the insurance industry. The peer group includes certain members of the S&P Life and Health Insurance Index, which is one of the indices used in the Company’s “Stock Performance Graph” (see page 17), but also includes a broader group of companies, including those historically viewed by the Company as its most direct competitors. 2003 was the first time the Company was not ranked in the top quartile. The Consultant Report presented several reasons for this. One reason was that the Company had an outstanding 2002 when many of its peers had weak performance, thus the Company was challenged to better its 2002 results by as much as those peers rebounding from a poor 2002. In addition, each year the yen to dollar translation impact is removed from the analysis. Usually the performance rank impact is nominal. However, for 2003, it lowered the Company’s rank. With respect to Mr. Amos, he had essentially had no salary increase since 1994, the year following the passage of Section 162(m) limiting deductibility of annual salaries exceeding $1 million. Based on the recommendation of the Consultant Report, the Compensation Committee determined to increase his annual salary for 2004 over the $1 million level. Mr. Amos’ annual salary was increased from $1 million to $1.2 million with $200,000 of said salary being deferred until Mr. Amos’ retirement in order for the Company to continue to qualify for the Section 162(m) deductibility. Mr. Cloninger’s salary was increased by 3.5%, Mr. Matsui’s salary was increased by 3.5%, Mr. Kan’s salary was increased by 8.1%, and Mr. Smith’s salary was increased by 3.6%. | EXCERPTS ON THIS PAGE:
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