SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
ANNUAL REPORT PURSUANT TO SECTION 13 OR 15 (d)
OF THE SECURITIES EXCHANGE ACT OF 1934
Georgia 58-1167100
____________________________________ ____________________________
(State of Incorporation) (I.R.S. Employer
Identification No.)
1932 Wynnton Road, Columbus, Georgia 31999
____________________________________ ____________________________
(Address of principal executive offices) (Zip Code)
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Registrant's telephone number, including area code 706-323-3431
SECURITIES REGISTERED PURSUANT TO SECTION 12(b) OF THE ACT:
Name of Each Exchange
Title of Each Class on Which Registered
___________________________________________________________________
Common Stock, $.10 Par Value New York Stock Exchange
Pacific Stock Exchange
Tokyo Stock Exchange
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SECURITIES REGISTERED PURSUANT TO SECTION 12(g) OF THE ACT: NONE
The number of shares of the registrant's Common Stock outstanding at March
18, 1994, with $.10 par value, was 102,585,388. The aggregate market
value of the voting stock held by non-affiliates of the registrant as of
March 18, 1994 was $3,103,576,720.
PAGE
DOCUMENTS INCORPORATED BY REFERENCE
PART I Item 1 Pages 13-5 to 13-13; 13-22 to 13-28 and
13-34 of Exhibit 13 (notes 2, 3 and 9 of
Notes to the Consolidated Financial
Statements) The applicable portions of the
Company's Annual Report to Shareholders for
the year ended December 31, 1993, are
included as Exhibit 13
Item 2 Pages 13-13 and 13-29 (note 5) of Exhibit 13
PART II Item 5 Pages 13-1, 13-2 and 13-34 (note 9) of
Exhibit 13
Item 6 Pages 13-3 and 13-4 of Exhibit 13
Item 7 Pages 13-5 to 13-13 of Exhibit 13
Item 8 Pages 13-14 to 13-40 of Exhibit 13
PART III Item 10 Incorporated by reference from the definitive Proxy Statement for the Annual Meeting of Shareholders to be held April 25, 1994 (the "Proxy Statement")
Item 11 Incorporated by reference from the Proxy
Statement
Item 12 Incorporated by reference from the Proxy
Statement
Item 13 Incorporated by reference from the Proxy
Statement
AFLAC Incorporated Annual Report on Form 10-K For the Year Ended December 31, 1993
Table of Contents
Page
______
PART I
Item 1. Business............................................. I- 1
Item 2. Properties........................................... I-11
Item 3. Legal Proceedings.................................... I-12
Item 4. Submission of Matters to a Vote of Security Holders.. I-13
Item 4A. Executive Officers of the Company.................... I-14
PART II
Item 5. Market for Company's Common Equity and Related
Shareholder Matters................................ II- 1
Item 6. Selected Financial Data.............................. II- 1
Item 7. Management's Discussion and Analysis of Financial
Condition and Results of Operations................ II- 1
Item 8. Financial Statements and Supplementary Data.......... II- 1
Item 9. Changes in and Disagreements with Accountants on
Accounting and Financial Disclosure................ II- 1
PART III
Item 10. Directors and Executive Officers of the Company...... III- 1
Item 11. Executive Compensation............................... III- 1
Item 12. Security Ownership of Certain Beneficial Owners and
Management......................................... III- 1
Item 13. Certain Relationships and Related Transactions....... III- 1
PART IV
Item 14. Exhibits, Financial Statement Schedules, and Reports
on Form 8-K........................................ IV- 1
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PAGE
PART I
ITEM 1. BUSINESS
GENERAL DESCRIPTION:
AFLAC Incorporated (the "Parent Company") was incorporated in 1973, under the laws of the State of Georgia, and acts as a general business holding company. The Parent Company is a management company principally engaged, through its insurance subsidiaries, in providing supplemental health insurance in the United States and Japan. Additionally, the Parent Company through subsidiaries operates in television broadcasting and other industries. As a management company, the Parent Company oversees the operations of its subsidiaries and provides capital and management services.
AFLAC Incorporated and its subsidiaries ("the Company") have only one significant industry segment - insurance. For financial information relating to the Company's foreign and U.S. operations, see Exhibit 13, pages 13-5 to 13-13 and page 13-22 (note 2 of Notes to the Consolidated Financial Statements), which are incorporated herein by reference.
The Parent Company's principal operating subsidiary is American Family Life Assurance Company of Columbus ("AFLAC"), which has both U.S. and foreign operations (principally in Japan). AFLAC is a specialty insurer whose dominant business is individual supplemental health insurance with emphasis on the sale of cancer expense insurance plans. Management believes AFLAC is the world's leading writer of cancer expense insurance. The Japanese operation ("AFLAC Japan") also sells long-term care plans ("Super Care"), old age assistance plans ("dementia care") and supplemental general medical expense plans. The United States operation ("AFLAC U.S."), in addition to cancer expense plans, also sells other types of supplemental health insurance, including hospital intensive care, accident and disability, hospital indemnity, long-term care, home health care and Medicare supplement plans. AFLAC U.S. also offers several life insurance plans.
AFLAC, or through its subsidiaries, is authorized to conduct insurance business in all 50 states, the District of Columbia, American Samoa, Guam, Puerto Rico, the U.S. Virgin Islands, the Commonwealth of the Northern Mariana Islands and several foreign countries. The Company's only significant foreign operations are those of AFLAC's branch in Japan, which accounted for 82% of the Company's total revenues in 1993.
Insurance premiums and investment income from insurance operations are the major sources of revenues. The Company's consolidated premium income was $4.2 billion for 1993, $3.4 billion for 1992 and $2.8 billion for 1991. The following table lists, for each of the last three years, the percentage of consolidated premiums contributed by each class of insurance sold:
Percentage of
Insurance Class Consolidated Premium Income
______________________ ___________________________________
1993 1992 1991
______ ______ ______
Health insurance 99.6% 99.2% 99.0%
Life insurance 0.3 0.4 0.5
Credit insurance* 0.1 0.4 0.5
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* During 1992, the marketing of credit insurance was discontinued.
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The following table sets forth consolidated earned premiums by each class and information with respect to the health insurance plans, primarily cancer, offered by AFLAC principally in Japan and the United States for the three years ended December 31.
Earned premiums (in thousands): 1993 1992 1991
__________ __________ __________
Health insurance $ 4,205,637 $ 3,342,439 $ 2,737,646
Life insurance 14,488 14,642 14,665
Credit insurance 5,265 12,120 13,038
__________ __________ __________
Total earned premiums $ 4,225,390 $ 3,369,201 $ 2,765,349
========= ========= =========
Health insurance plans:
No. of policies issued 1,954,417 1,923,232 1,840,068
No. of policies terminated 1,122,952 1,002,020 982,508
No. of policies in force
at year-end 15,478,468 14,647,003 13,725,791
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INVESTMENTS AND INVESTMENT RESULTS:
The Company's investments (including cash) amounted to $12.5 billion at December 31, 1993, an increase of $3.0 billion over 1992. Net investment income of $689.3 million in 1993 continues to be a growing source of revenues and earnings of the Company, increasing $156.1 million in 1993 over 1992 and $101.9 million in 1992 over 1991. It is generally AFLAC's policy to invest in high-grade investments, principally in high- quality government, public utility and corporate bonds.
AFLAC primarily operates within the investment environments of the United States and Japan. Although aspects of these two financial markets are slowly converging, they remain fundamentally different. For example, differences in asset selection, liquidity, credit quality, accounting practices, and insurance and tax regulations affects the way the Company invests and purchases securities.
The challenge is to integrate the varied market characteristics of Japan and the United States into a unified and coherent set of investment strategies. The Company has streamlined and integrated the organizational structure of the investment department into a single functional unit and has set specific worldwide criteria regarding credit quality, liquidity, compliance with regulatory requirements and conformance to product needs.
During 1993, 91.5% of AFLAC Japan's yen cash flow available for investments was allocated to yen-denominated securities, while the remaining 8.5% was invested in dollar-denominated securities. Of the total amount invested in 1993, 37.7% was invested in Japanese government bonds at a yield of 5.56%, 29.1% was invested in the longer-dated private sector at a rate of 5.95%, 5.6% was invested in municipal bonds at a rate of 4.31%, and the remaining 19.1% of yen cash flow was invested in yen in assorted sectors at an average rate of 4.80%.
At year-end 1993, Japanese government bonds accounted for 33.7% of AFLAC Japan's yen-denominated investments. Twenty-year government bonds accounted for 84% of AFLAC Japan's government bond holdings. AFLAC Japan continued to use longer-dated corporate instruments in 1993. These yen-
denominated securities, which the Company has arranged with groups such as McDonald's, AMP Japan and the Canadian Province of Quebec, are essential in achieving the optimal asset/liability match, an investment goal vital to the Company's overall strategy. Such longer-dated instruments accounted for 17.2% of the invested assets in Japan at year-end. Other sectors included: municipal securities representing 7.2% of the portfolio, utility bonds representing 19.1%, and assorted other sectors accounting for 17.2%.
The Company continued to avoid the Japanese equity and investment real estate markets in 1993. AFLAC Japan's equity portfolio accounted for only .1% of invested assets at year-end, and the Company does not expect this portion to increase in 1994. The Company also does not anticipate any change in the current level of mortgage loans on Japanese real estate, which was less than .1% of invested assets at year-end.
The Company increased its commitment to the dollar-denominated portfolio of AFLAC Japan's invested assets during 1993. AFLAC Japan added $221.2 million to this portfolio at an average yield of 6.34%. AFLAC Japan's dollar-denominated portfolio represented 5.7% of invested assets in Japan, or $647.7 million at the end of 1993, compared with $426.5 million at the end of 1992. This portfolio carries certain tax and yield advantages that make it attractive; however, the Company is careful to balance yield enhancement with its corporate goal of increasing profit repatriation.
In the United States, profits repatriated from Japan totaled $97.9 million in 1993, up from $33.4 million in 1992. This repatriation enhances total company results since the Company can earn increased investment income on these funds by investing them in U.S. dollar- denominated securities versus yen-denominated investments. During 1993, repatriated funds were invested in dollar-denominated securities at an average rate of 6.81%. The Company expects profit repatriation to continue to have a positive impact on its total company after-tax earnings in the future.
The Company's portfolio allocation in the United States continued its emphasis on investment-grade corporate bonds, which accounted for 83.0% of the new money purchases in 1993, at an average yield of 6.96%. AFLAC U.S. maintained its overall investment quality throughout the year, with 53.2% of the portfolio rated "AA" or better. The continued active management of this portfolio produced realized investment gains before taxes of $4.3 million.
The equity portion of the AFLAC U.S. portfolio remained fairly constant at $55.8 million, but its size relative to total AFLAC U.S. invested assets fell from 7.0% in 1992 to 5.6% in 1993. AFLAC U.S. has taken a cautious stance toward U.S. equities given the prevailing market levels. Mortgage loans on real estate continued to decline and were immaterial at year-end.
For information on the composition of the Company's investment portfolio and investment results, see Part IV, Schedule I, and Exhibit 13, pages 13-11, 13-13 (discussions relating to Balance Sheet and Cash Flow) and pages 13-23 to 13-28 (note 3 of Notes to the Consolidated Financial Statements), which are incorporated herein by reference.
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INSURANCE - FOREIGN
AFLAC:
The following table sets forth AFLAC Japan's earned premiums by product line for the last three years ended December 31.
Earned premiums (in thousands): 1993 1992 1991
__________ __________ __________
Health insurance,
principally cancer expense $ 3,275,915 $ 2,545,055 $ 2,051,832
Dementia and Super care insurance 208,345 137,265 95,456
__________ __________ __________
Total earned premiums $ 3,484,260 $ 2,682,320 $ 2,147,288
========== ========== ==========
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In 1974, AFLAC became the second foreign (non-Japanese) life insurance company to gain direct access to the Japanese insurance market by obtaining a license to do business in Japan. A thorough study of the market in Japan indicated a definite need for a cancer insurance supplement to the coverage provided by that nation's comprehensive national health program. Through 1981, AFLAC was the only company in Japan authorized to issue a cancer expense insurance policy. Since that time, several other life and non-life companies have been permitted to offer cancer insurance. However, AFLAC remains the leading issuer of cancer expense insurance coverage in Japan, principally due to its lead time in the market, its unique marketing system (see "Agency Force") and its product expertise developed in the United States. AFLAC has been very successful in the sale of cancer expense policies in Japan, with over 10.9 million cancer policies in force at December 31, 1993.
HEALTH INSURANCE PLANS:
AFLAC's insurance is supplemental in nature and is designed to provide insurance to cover the medical and nonmedical costs that are not reimbursed by other forms of Japanese health coverage.
The cancer expense insurance plans offered in Japan are basically daily indemnity plans, providing a flat amount for each day the insured is hospitalized for the treatment of cancer. The plans differ from the AFLAC U.S. cancer plans (described on pages I-7 and I-8) in that our policies in Japan also provide death benefits and cash surrender values (the Company estimates that approximately 28% of the premiums earned are associated with these benefits). Also, premiums for only new policies issued can be revised with consent of the Japanese Ministry of Finance (MOF).
During 1990, AFLAC introduced the Super Cancer Plan. The Super Cancer Plan includes, for the first time in Japan, first occurrence and outpatient benefits in addition to the benefits of the previous cancer coverages. The premium is approximately 33% to 35% higher than the previous cancer plan. Recent sales of new policies and conversions of existing policies resulted in 48.2% of all cancer units in force being Super Cancer Plans as of December 31, 1993.
In May 1992, AFLAC broadened its product line with the introduction of a new care product, "Super Care". Super Care provides periodic benefits to those who become bedridden, demented or seriously disabled due to illness or accident. The new plan is offered with several riders, providing death benefits or additional care benefits, to enhance coverage.
Prior to the introduction of the "Super Care" plan, AFLAC actively marketed a dementia care policy. At December 31, 1993, there were 32,150 policies in force of this type of policy, which provides a lump-sum benefit upon death or occurrence of dementia and a cash surrender value until age 60, 65, or 70; and thereafter provides a periodic indemnity benefit upon occurrence of dementia, together with a reduced death benefit. If no claims are made, a reduced cash benefit is paid for each five-year period thereafter.
AFLAC also sells a supplemental general medical policy on a limited basis. This policy is similar to products offered by other companies in Japan and is offered in order to provide some competitive protection to the existing cancer insurance business.
The Ministry of Finance (MOF) in Japan has started to permit insurance companies to increase the premiums on new policy issues in response to the lower investment yield rates available in the Japanese market. AFLAC Japan increased the premiums on Super Care new issues by an average of 10% (effective November 1993) and will increase the premiums on Super Cancer new issues by an average of 16% starting in July 1994. Since the premium increases apply to new policies only, Management does not expect any significant adverse impact on AFLAC Japan's policy persistency rate due to higher premiums.
AGENCY FORCE:
The development of a "Corporate Agency" system has been important to the growth of AFLAC Japan. This method of distributing our products permits Japanese companies to form insurance agencies as subsidiaries which offer our insurance plans to the total affiliated group's employees, suppliers and customers. About 92% of all companies listed on the Tokyo Stock Exchange have either a corporate agency or allow payroll deduction of premiums for AFLAC's products.
AFLAC products are also sold through unaffiliated corporate agencies and through agencies formed by individuals. At December 31, 1993, there were 4,539 agencies in Japan with 17,838 licensed agents. Agents' activities are principally limited to insurance sales, with policyholder service functions handled by the main office in Tokyo and 66 sales offices located in 44 locations throughout Japan.
REGULATION AND REMITTANCE OF FUNDS:
The Parent Company and AFLAC U.S. receive funds from AFLAC Japan in the form of management fees, allocated AFLAC U.S. expenses and profit remittances. These cash transfers to the U.S. aggregated $133.4 million, $65.5 million and $48.5 million in 1993, 1992 and 1991, respectively. Management fees paid to the Parent Company are largely based on expense allocations. It is expected that profit remittances will grow in future years, based on projected annual earnings of AFLAC Japan as computed on a Japanese regulatory accounting basis and using a March 31 year-end. Japanese earnings available for profit remittance reflect investments generally valued at the lower of market value or cost. Also, AFLAC Japan's statutory earnings reflect foreign exchange gains and losses on the translation of its U.S. dollar-denominated investments. Therefore, changes in interest rate levels, yen/dollar exchange rates and other factors that affect market values of investment securities can cause wide fluctuations from year to year in the amounts of regulatory earnings in Japan and, therefore, profit remittances to AFLAC U.S.
As part of the deregulation process, the MOF is developing new solvency regulations and standards which represent a form of risk-based capital requirements. AFLAC Japan must meet these requirements to continue profit transfers to AFLAC U.S. At present, AFLAC Japan is in compliance with the proposed new standards.
The insurance business in Japan, which is conducted through a branch office of AFLAC, is subject to regulation by the Japanese Ministry of Finance (the "MOF"), similar to the regulation and supervision in the United States as described on page I-9 under "Insurance U.S. Regulation". AFLAC Japan files annual reports and financial statements for the Japan insurance operations based on a March 31 year-end, prepared in accordance with Japanese regulatory accounting practices prescribed or permitted by the MOF. Also, the financial and other affairs of AFLAC Japan are subject to examination by the MOF.
Reconciliations of AFLAC Japan net assets on a GAAP basis to net assets determined on a Japanese regulatory accounting basis as of December 31 are as follows:
(in thousands - unaudited) 1993 1992
_________ __________
Net assets on GAAP basis $1,099,712 $ 832,671
Elimination of deferred policy
acquisition costs (1,537,128) (1,233,691)
Reduction in carrying value of fixed
maturity investments for market value
and foreign exchange adjustments (113,349) (114,488)
Adjustment to liability for future
policy benefits 40,943 (59,945)
Elimination of deferred income taxes
and adjustment to prepaid Japan taxes 791,268 832,330
Reduction in premiums receivable (83,064) (60,404)
Other, net (14,010) 1,350
_________ _________
Net assets on Japanese regulatory
accounting basis $ 184,372 $ 197,823
========= =========
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The Japanese government is continuing the discussions begun in 1991
with the insurance industry and other groups to explore various long-term
deregulation approaches for the financial services businesses in Japan.
The principles upon which deregulation of the Japanese insurance industry
are based are: (1) to promote competition and to enhance efficiency
through deregulation and liberalization; (2) to preserve soundness; and
(3) to secure fairness and equity in business operations. This project is
still in a preliminary stage and the ultimate changes and their effects
are not presently determinable.
Due to the Company's unique marketing distribution system in Japan, Management believes that deregulation will not have an immediate material effect on the Company.
For additional information regarding AFLAC Japan's operations, see Exhibit 13, pages 13-7 to 13-9 and pages 13-22 and 13-34 (notes 2 and 9 of Notes to the Consolidated Financial Statements), which are incorporated herein by reference.
EMPLOYEES:
AFLAC Japan employed 1,473 full-time and 213 part-time employees at
December 31, 1993. AFLAC Japan considers its employee relations to be
excellent.
OTHER FOREIGN INSURANCE OPERATIONS:
Presently, the Company's developmental efforts are focused on the Canadian subsidiary and the branch operation in Taiwan. For additional information regarding other foreign insurance operations, see Exhibit 13, page 13-10, (discussion relating to other operations), incorporated herein by reference.
INSURANCE - U.S.
The following table sets forth AFLAC U.S. (excluding AFLAC N.Y.) earned premiums by product line for the last three years ended December 31.
Earned premiums (in thousands): 1993 1992 1991
________ ________ ________
Cancer expense $ 369,185 $ 356,732 $ 346,033
Intensive care 115,611 116,873 117,362
Medicare supplement 110,969 95,711 68,933
Accident 53,653 36,945 23,135
Other A&H plans 53,319 37,079 23,342
Life insurance 14,095 14,280 14,293
_______ ________ ________
Total AFLAC U.S. earned
premiums $ 716,832 $ 657,620 $ 593,098
======== ======== ========
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HEALTH INSURANCE PLANS:
AFLAC's insurance is supplemental in nature and is typically sold to persons who have private or governmental major medical insurance. All of AFLAC's supplemental health insurance plans are guaranteed renewable for the lifetime of the policyholder. Guaranteed renewable coverage may not be canceled by the insurer, but premium rates on existing and future policies may be increased by class of policy in response to claims experience higher than originally expected (subject to federal and state loss-ratio guidelines) on a uniform, non-discriminatory, state-wide basis subject to state regulatory approval. Ongoing rate increase programs have aided the increase in revenues, helped improve loss ratios and contributed to the profitability of the Company.
AFLAC's cancer plans are designed to provide insurance benefits for medical and non-medical costs which are generally not reimbursed by major medical insurance. AFLAC currently offers a series of five different cancer plans in the United States that vary by benefit amounts and type. All five plans provide a first occurrence benefit that pays an initial amount when internal cancer is first diagnosed, a flat amount for each day an insured is hospitalized for cancer treatment, and benefits for medical, radiation, chemotherapy, nursing, blood, plasma, physician, transportation, prosthesis and ambulance expenses. Some of the plans currently offered contain benefits which reimburse the insured for anesthesia and surgical expenses incurred in connection with cancer treatment, as well as benefits for a second surgical opinion and a "wellness" benefit applicable toward certain diagnostic tests such as pap smears and mammograms. AFLAC also issues several riders that may be purchased, including one that increases the amount of the first occurrence
benefit for each month until age 65 that the coverage remains in force. AFLAC periodically introduces new forms of coverage, revising benefits and related premiums based upon the anticipated needs of the policyholders and AFLAC's claims experience.
AFLAC currently markets five of the Medicare Supplement Standardized Plans, with the majority of sales being for Plans F and C. The plans are priced on an issue age basis. Under this method, rates are revised due to changes in the medicare program and medical inflation. There is no automatic rate increase due to the aging of the insured. Premium rates are determined based on zip code groupings, which are adjusted for increases in costs for each area. The benefits provided range from the basic plan, covering Part A and B coinsurance, to plans with more extensive coverage, including Part A and B deductibles, skilled nursing coinsurance, Part B excess and other benefits. AFLAC U.S. does not market the standardized plans covering prescription drug benefits.
AFLAC also issues other supplemental health insurance, such as intensive care, which is a low-premium policy that provides protection against the high cost of intensive care facilities during hospital confinement, regardless of reimbursements from other insurers. Other types of health insurance issued by AFLAC include a long-term convalescent care policy, a home health care policy, an accident and disability protection policy, and a hospital confinement indemnity policy.
LIFE INSURANCE PLANS:
AFLAC issues various life insurance policies including whole life, limited pay life and term life coverage. LifeCare policies, which constitute the majority of the life insurance sales, are written under master policies issued through several employer trusts. LifeCare policies are marketed in a manner similar to the health plans, as described below.
AGENCY FORCE AND MARKETING:
AFLAC's sales agents are licensed to sell accident and health insurance, and many are also licensed to sell life insurance. Most agents' efforts are directed toward selling supplemental health insurance. The 1993 monthly average number of U.S. agents and brokers actively producing business was 5,437 as compared to 4,960 in 1992.
Agents' activities are principally limited to sales, with all policyholder service functions, including issuance of policies, premium collection, payment notices and claims handled by the staff at headquarters. Agents are paid commissions based on first-year and renewal premiums from their sales of health and life insurance products. AFLAC's State, Regional and District Sales Coordinators are compensated by override commissions.
AFLAC has concentrated on the development of "cluster selling" in marketing its policies. Cluster selling offers policies to individuals through common media such as trade and other associations or place of employment. This manner of marketing is distinct from "group" insurance sales in that each individual insured is directly contacted by the sales associate. Policies are individually underwritten and issued to the insured, and most employers do not contribute to the payment of premiums. Additionally, individuals may retain their full insurance coverage upon separation from employment or such affiliation, generally at the same premium. A major portion of premiums on such sales are collected through
payroll deduction or other forms of group billings. Group billed plans normally result in a lower average age of the insured at the time of policy issuance, and also result in certain savings in administrative costs, a portion of which are passed on to the policyholder in the form of reduced premiums. Management believes that cluster selling enables the agency force to reach a greater number of prospective policyholders than individual solicitation, and that such sales lower distribution costs.
Another valuable marketing and sales tool is the flexible benefits program, or cafeteria plan, which allows an employee to pay for medical insurance using pretax dollars. These programs help achieve increased penetration as agents are required to present the program to all employees. They also help improve overall persistency levels due to the limited changes allowed during the plan year.
During 1993 and 1992, AFLAC continued to develop marketing arrangements with insurance brokers. AFLAC has signed joint marketing agreements with several large companies within and outside of the insurance industry. Although the core of the Company's distribution network will remain independent agents, the Company expects business generated by insurance brokers and joint marketing agreements to play an important role in the Company's future expansion.
In 1993, AFLAC's U.S. premiums collected were $717.9 million, 6.9% of which was collected in Georgia, 6.9% in Florida, 6.6% in Texas, 5.6% in North Carolina, and 5.1% in Tennessee. Premiums collected in all other states were individually less than 5% of AFLAC's U.S. premiums.
REGULATION:
The Parent Company and its insurance subsidiaries are subject to state regulations as an insurance holding company system. Such regulations generally provide that transactions between companies within the holding company system must be fair and equitable. In addition, transfer of assets among such affiliated companies, certain dividend payments from insurance subsidiaries and material transactions between companies within the system are subject to prior notice to, or approval by, state regulatory authorities.
AFLAC and its insurance subsidiaries, in common with all U.S. insurance companies, are subject to regulation and supervision in the states and other jurisdictions in which they do business. In general, the insurance laws of the various jurisdictions establish supervisory agencies with broad administrative powers relating to, among other things: granting and revoking licenses to transact business, regulating trade practices, licensing agents, prior approval of forms of policies and premium rate increases, standards of solvency and maintenance of specified policy benefit reserves and capital for the protection of policyholders, limitations on dividends to shareholders, the nature of and limitations on investments, deposits of securities for the benefit of policyholders, filing of annual reports and financial statements prepared in accordance with statutory insurance accounting practices prescribed or permitted by the regulatory authorities, and periodic examinations of the financial and other affairs of insurance companies.
For further information concerning state regulatory and dividend restrictions see Exhibit 13, page 13-34 (note 9 - Statutory Accounting and Dividend Restrictions of Notes to the Consolidated Financial Statements), incorporated herein by reference.
A number of state regulatory initiatives have been adopted or are in process of development. One such initiative which has been finalized by
the National Association of Insurance Commissioners (NAIC) is the risk based capital (RBC) formula. The RBC model law was approved by the NAIC and requires the calculation of capital requirements based on risks inherent within a company's products and assets. The RBC model law is in the process of being adopted by the various state insurance departments; however, several states have promulgated their own RBC calculations during the last several years. The Company has monitored its RBC position under the various calculations. The RBC calculations at the end of 1993 and 1992 reflected that the Company's capital and surplus levels were well in excess of those calculations in the enacted formulae.
Currently, four states have laws, regulations or regulatory practices which either prohibit the sale of specific disease insurance, such as AFLAC's cancer expense insurance, or make its sale impractical. These states are Connecticut, Massachusetts, New Jersey and New York. The remainder of the states do not impose prohibitions or restrictions that prevent AFLAC from marketing cancer expense insurance. The Company is marketing several of its other products in these states, directly or through a subsidiary.
The Company will be monitoring developments in the U.S. Congress concerning possible changes to the U.S. health care system. Due to the tremendous costs associated with providing health care insurance to the U.S. citizens that are not covered by health insurance, it is Management's opinion that any health care reform package will leave gaps in coverage that will continue to provide a market for supplemental health insurance.
COMPETITION:
The accident and health and life insurance industry in the United States is highly competitive. AFLAC competes with a large number of other insurers, some of which have been in business for a longer period of time or have greater financial resources. In the United States, there are more than 2,000 life and accident and health insurance companies, most of which compete in the states in which AFLAC conducts business.
Private insurers and voluntary and cooperative plans, such as Blue Cross and Blue Shield, provide insurance for meeting basic hospitalization and medical expenses. Much of this insurance is sold on a group basis. The federal and state governments also pay substantial costs of medical treatment through Medicare and Medicaid programs. Such major medical insurance generally covers a substantial amount of the medical (but not non-medical) expenses incurred by an insured as a result of cancer or other major illnesses. AFLAC's policies are designed to provide coverage which is supplemental to that provided by major medical insurance and may also be used to defray non-medical expenses.
Since other insurers generally do not provide full coverage of medical expenses or any coverage of non-medical expenses, AFLAC's supplemental insurance is not an alternative to major medical insurance, but is sold to complement major medical insurance by covering the gap between major medical insurance reimbursements and the total costs of an individual's health care. AFLAC thus competes only indirectly with major medical insurers in terms of premium rates and similar factors. However, the scope of the major medical coverage offered by other insurers does represent a limitation on the market for AFLAC's products. Accordingly, expansion of coverage by other insurers or governmental programs, such as the comprehensive federal health insurance program now being discussed in the United States, could adversely affect AFLAC's business opportunities.
AFLAC competes directly with other insurers offering supplemental health insurance and believes that its current policies and premium rates are generally competitive with those offered by other companies selling similar types of insurance.
For additional information regarding U.S. insurance operations, see Exhibit 13, page 13-9, which is incorporated herein by reference.
EMPLOYEES:
In its U.S. insurance operations, the Company employed 1,618 full- time and 40 part-time employees at December 31, 1993. The Company considers its employee relations to be excellent.
OTHER OPERATIONS:
At December 31, 1993, the AFLAC Broadcast Division owned seven network-affiliated television stations with total assets of $205.5 million. The Broadcast Division employed 495 full-time and 96 part-time employees at December 31, 1993. The Broadcast Group considers its employee relations to be excellent.
The broadcast division produced increased revenues and earnings during 1993, despite difficult comparisons to 1992 when revenues benefited from election-year spending. Revenues increased 3.3%, to $68.5 million. Pretax earnings before interest expense rose .8%, to $13.4 million.
The broadcast division has succeeded despite significant changes in the industry. With the emergence of new cable networks and stations, there are more outlets for advertising dollars than ever before. Despite the segmentation of television entertainment and news, network-affiliated stations continue to effectively deliver mass audiences to advertisers. As a result, the AFLAC Broadcast Division is able to successfully compete in a crowded, competitive marketplace. With the strong market positions of our stations, an improving U.S. economy and advertising benefits from off-year elections, Management expects the operating results to improve in 1994.
For additional information regarding broadcast operations, see Exhibit 13, page 13-10, which is incorporated herein by reference.
The Company's other operations employed 316 full-time and 5 part-time employees at December 31, 1993; employee relations are considered to be excellent.
ITEM 2. PROPERTIES
AFLAC owns an 18-story office building, which is the worldwide headquarters of the Parent Company and AFLAC, along with a six-story parking garage. These structures are located on approximately 14 acres of land in Columbus, Georgia. In addition, AFLAC Real Estate Holdings, Inc. (AREH), a wholly owned subsidiary of the Parent Company, owns a two-story building located on the same property and an administrative office building located nearby leased to AFLAC. The Parent Company, AFLAC and AREH also own and lease office space and warehouse facilities at other locations in the United States.
In Japan, AFLAC leases office space in Tokyo, along with regional sales offices located throughout the country, and owns a training and computer facility in Tokyo. A new administrative office building is under construction in Tokyo. For further information concerning the new building in Japan, see Exhibit 13, pages 13-13, (discussion concerning cash flow) and 13-29 (note 5, of Notes to the Consolidated Financial Statements), which are incorporated herein by reference. Other foreign affiliates of the Company also have leased office space.
The Broadcast Group owns and leases land, buildings, transmission towers and other broadcast equipment in the cities where the seven television stations are located.
ITEM 3. LEGAL PROCEEDINGS
On December 1, 1988, a lawsuit purporting to be a shareholders derivative suit was filed by Susie H. Millsap on behalf of the Company in the Superior Court of Meriwether County, Georgia, naming as individual defendants the Company's Board of Directors (the "Action"). Mrs. Millsap is the daughter of Kenneth M. Henson, a former employee of and counsel for the Company. The original complaint was subsequently amended to substitute The Henson Company in place of Mrs. Millsap as plaintiff. The Company was named a party defendant in the suit but no claim was asserted against the Company. The Action alleged that the members of the Board of Directors improperly approved or acquiesced in certain transactions between the Company and Mr. John B. Amos (the Company's former Chairman and Chief Executive Officer).
Since the Action purported to be a shareholder derivative suit, any recovery (except recovery of attorneys' fees and costs of litigation) would inure to the Company's benefit and not to the plaintiff. The Board of Directors of the Company appointed a Special Litigation Committee of independent Directors to inquire into the matters alleged in the Action and to report its findings.
The Special Litigation Committee issued its final report on March 12, 1990. The report recommended that the Company collect the amount of $64,600 from Mr. John Amos as additional interest due on a promissory note executed by Mr. Amos in 1975 when he purchased shares of common stock from the Company. Mr. Amos paid this amount to the Company in March 1990. The report also concluded that the allegations made in the lawsuit were without merit and recommended that no action be brought by or on behalf of the Company against any officer or Director with regard to such allegations and that the Company seek dismissal of the lawsuit.
Pursuant to the Company's Motion to Dismiss the Action, the Superior Court of Meriwether County, Georgia, entered its Order and Judgement on January 27, 1992, in which the Court dismissed the Action based on its findings that the Special Litigation Committee and its counsel were independent, that the Committee's investigation was adequate, and that its conclusions and recommendations were reasonable and appropriate within the bounds of the business judgement rule under Georgia law.
This decision was affirmed by the Court of Appeals of Georgia on March 12, 1993. A motion for reconsideration was denied by the Court on March 30, 1993.
On September 10, 1993, the Supreme Court of Georgia denied a motion
for rehearing of the Supreme Court's previous July 15, 1993 denial of a
writ of certiorari filed by the plaintiff with respect to the Court of
Appeals decision.
The Company is also a defendant in various other litigation considered to be in the normal course of business. Management does not believe the outcome of any pending litigation in which it is a defendant will have a material effect on the Company.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
There were no matters submitted to the security holders for a vote in the fourth quarter ended December 31, 1993.
ITEM 4A. EXECUTIVE OFFICERS OF THE COMPANY
NAME PRINCIPAL OCCUPATION (*) AGE
___________________ _____________________________________ ___
Paul S. Amos Chairman of the Board of the Company 67
and AFLAC since August 1990; Vice
Chairman of the Company and AFLAC
until August 1990
Daniel P. Amos Chief Executive Officer of the 42
Company and AFLAC, Vice Chairman
of the Company, since August 1990;
President of the Company since
August 1991; President of AFLAC
Deputy Chief Executive Officer
of the Company, until August 1990;
Chief Operating Officer of AFLAC,
until August 1990
William J. Bugg, Jr. Senior Vice President, Corporate 54
Actuary of AFLAC
Monthon Chuaychoo Vice President, Financial Services of 50
the Company and AFLAC since September
1993; Second Vice President, Assistant
Controller of the Company and AFLAC
from June 1991 to September 1993;
Second Vice President of AFLAC until
June 1991
Kriss Cloninger III Executive Vice President, Chief 46
Financial Officer and Treasurer
of the Company, and Executive
Vice President, Chief Financial
Officer of AFLAC since March 1993;
Senior Vice President, Chief
Financial Officer and Treasurer
of the Company, and Senior Vice
President, Chief Financial Officer
of AFLAC from March 1992 until March
1993; Principal, KPMG Peat Marwick,
Atlanta, GA until March 1992
Martin A. Durant, III Senior Vice President, Corporate Services 45
of the Company and AFLAC since August
1993; Vice President and Controller of
the Company, from 1990 to August 1993,
and of AFLAC from June 1991 to August
1993; President of Rebuilding Service,
Inc., until 1990
|
Norman P. Foster Executive Vice President, Corporate 58
Finance of the Company and AFLAC
since March 1992; Senior Vice
President, Chief Financial Officer
and Treasurer of the Company, and
Senior Vice President and Chief
Financial Officer of AFLAC until
March 1992
David Halmrast Senior Vice President, Corporate 54
Development of AFLAC since December
1993; Senior Vice President, Corporate
Development of the Company from April
1993 to December 1993; Senior Vice
President and Chief Financial Officer
of Colonial Companies, Inc. until July
1992
Kerry W. Hand Senior Vice President, Home Office 41
Administration of AFLAC
Kenneth S. Janke Jr. Senior Vice President, Investor 35
Relations of the Company since
August 1993; Vice President Investor
Relations of the Company, since 1990;
Second Vice President, Investor
Relations of the Company until 1990
Akitoshi Kan Vice President, AFLAC Japan Branch, 46
Accounting Department since 1992;
Manager, AFLAC Japan Branch Accounting
Department until 1992
Kyoichi Kasuya Vice President, AFLAC Japan Branch, 56
Actuary since 1992; General Manager,
AFLAC Japan Branch, Actuarial
Department until 1992
|
Joseph P. Kuechenmeister Senior Vice President, Director 52 of Marketing of AFLAC, since December 1990; Vice President, Agency Director of AFLAC, October 1990 until December 1990; Second Vice President, Director of Direct Product and Sales Development of AFLAC until October 1990
Joey M. Loudermilk Senior Vice President, General Counsel 40
and Corporate Secretary of the
Company, and Senior Vice President,
General Counsel and Director, Legal
and Governmental Relations and
Corporate Secretary of AFLAC since
May 1992; Senior Vice President,
Corporate Counsel and Assistant
Secretary of the Company and AFLAC
and Director, Legal and Governmental
Affairs of AFLAC, from 1990 until
May 1992; Senior Vice President,
Corporate Counsel and Assistant
Secretary of the Company and Senior
Vice President, Director, Legal and
Governmental Affairs of AFLAC, from
August 1989 until 1990; Vice President
of the Company, and Vice President,
Legal and Regulatory Department of
AFLAC, until August 1989
Hidefumi Matsui Executive Vice President, AFLAC Japan 49
Branch since January 1992; Senior
Vice President, Director of Marketing,
AFLAC Japan Branch from January 1990
until January 1992; Senior Vice
President, AFLAC Japan Branch until
January 1990
Minoru Nakai President, AFLAC International, Inc., 52
since October 1991; Senior Vice
President, U.S.-Japan Operations of
AFLAC, until October 1991
Yoshiki Otake President, AFLAC Japan Branch; Vice 54
Chairman, AFLAC International, Inc.,
since October 1991; Executive Vice
President, AFLAC, from January 1991
until October 1991
Thomas L. Paul President of AFLAC Broadcast Group, Inc.; 64
Vice President, Corporate Development
of the Company until 1993
Huey B. Pennington, Jr. Executive Vice President, U.S. Operations 46
of AFLAC, since January 1991; First
Senior Vice President, U.S. Operations
of AFLAC until January 1991
E. Stephen Purdon, M.D. Senior Vice President, Medical Director 46
of AFLAC
|
Joseph W. Smith, Jr. Chief Investment Officer of the Company 40
and AFLAC since August 1991; Senior
Vice President, Investments of AFLAC,
until August 1991
William B. Steele Senior Vice President, Corporate 64
Projects of AFLAC since January 1993;
Senior Vice President, International
Operations of AFLAC, from 1990 until
January 1993; Senior Vice President,
International Marketing of AFLAC,
until 1990
Gary L. Stegman Senior Vice President, Assistant Chief 44
Financial Officer of the Company and
AFLAC since June 1991; Senior Vice
President, Treasurer of AFLAC until
June 1991
|
(*) Unless specifically noted the respective executive officer has held the occupation(s) set forth in the table for at least five years. Each executive officer is appointed annually by the Board of Directors and serves until his successor is chosen and qualified, or until his death, resignation or removal.
PAGE
PART II
Pursuant to General Instruction G to Form 10-K, Items 5 through 8 are incorporated by reference from the Company's 1993 Annual Report to Shareholders, the appropriate sections of which are included herein as Exhibit 13. The page numbers of the selected information from the Annual Report (as well as the Annual Report) containing the required information are set forth below:
Refer To Refer To
Exhibit 13 Annual Report Pages Pages __________ _____________ |
ITEM 5. MARKET FOR THE COMPANY'S COMMON 13-1; 13-2; 1; 44 (note
EQUITY AND RELATED SHAREHOLDER 13-29 9); 47; and 51
MATTERS (note 5)
ITEM 6. SELECTED FINANCIAL DATA 13-3; 13-4 30 - 31
ITEM 7. MANAGEMENT'S DISCUSSION AND 13-5 to 24 - 29
ANALYSIS OF FINANCIAL CONDITION 13-13
AND RESULTS OF OPERATIONS
ITEM 8. FINANCIAL STATEMENTS AND 13-14 to 32 - 47
SUPPLEMENTARY DATA 13-40
ITEM 9. CHANGES IN AND DISAGREEMENTS None None
WITH ACCOUNTANTS ON ACCOUNTING
AND FINANCIAL DISCLOSURE
|
II-1
PAGE
PART III
Pursuant to General Instruction G to Form 10-K, Items 10 through 13 are incorporated by reference to the Company's definitive Proxy Statement relating to the Company's 1994 Annual Meeting of Shareholders which was filed with the Securities and Exchange Commission on March 14, 1994, pursuant to Regulation 14A under the Securities Exchange Act of 1934.
Refer to the Information Refer to
Contained in the Proxy Printed Statement under Captions Proxy (filed electronically) Statement |
Pages
________________________ _________
ITEM 10. DIRECTORS AND EXECUTIVE Security Ownership of 2 - 7
OFFICERS OF THE COMPANY Management. 1. Election
Directors of Directors
Executive Officers -
see Part I, Item 4A
herein
ITEM 11. EXECUTIVE COMPENSATION Board and Committee 8 - 20
Meetings and Other
Information. Compensa-
tion Report; Summary
Compensation Table; De-
fined Benefit Pension
Plan; Retirement Plans
for Key Executives;
Stock Option Plans;
Employment Contracts and
Termination of Employ-
ment Arrangements
ITEM 12. SECURITY OWNERSHIP OF Voting Securities and 1 - 7
CERTAIN BENEFICIAL Principal Holders
OWNERS AND Thereof. Security Owner-
MANAGEMENT ship of Management.
1. Election of Directors
ITEM 13. CERTAIN RELATIONSHIPS Certain Transactions 20 - 21
AND RELATED and Relationships
TRANSACTIONS
|
III-1
PAGE
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K
(a) 1. FINANCIAL STATEMENTS Refer to Page(s)
Included in Part II of this report and
incorporated by reference to the following
pages of Exhibit 13:
AFLAC Incorporated and Subsidiaries:
Consolidated Statements of Earnings, for 13-14
each of the years in the three-year
period ended December 31, 1993
Consolidated Balance Sheets, at December 13-15.1 -
31, 1993 and 1992 13-15.2
Consolidated Statements of Shareholders' 13-16.1 -
Equity, for each of the years in the 13-16.2
three-year period ended December 31,
1993
Consolidated Statements of Cash Flows, 13-17.1 -
for each of the years in the three-year 13-17.2
period ended December 31, 1993
Notes to the Consolidated Financial 13-18 to
Statements 13-38
Report of Independent Auditors 13-39
2. FINANCIAL STATEMENT SCHEDULES
Included in Part IV of this report:
Auditors' Report on Financial Statement Schedules IV-3
Schedule I - Summary of Investments - Other IV-4
Than Investments in Related
Parties, at December 31, 1993
Schedule II - Amounts Receivable from Related IV-5
Parties and Underwriters,
Promoters and Employees Other
Than Related Parties, for each
of the years in the three-year
period ended December 31, 1993
Schedule III - Condensed Financial Information of IV-6 -
Registrant, at December 31, 1993 IV-10
and 1992 and for each of the
years in the three-year period
ended December 31, 1993
Schedule VI - Reinsurance, for each of the IV-11
years in the three-year period
ended December 31, 1993
Schedule IX - Short-Term Borrowings, for each of IV-12
the years in the three-year
period ended December 31, 1993
|
Schedules other than those listed above are omitted because they are not required or are not applicable, or the required information is shown in the financial statements or notes thereto. Columns omitted from schedules filed have been omitted because the information is not applicable.
IV-1
3. EXHIBITS
3.0 - Articles of Incorporation, as amended - incorporated by
reference from 1991 Form 10-K, Commission file number
1-7434, Exhibit 3.0; and Bylaws of the Company, as
amended - incorporated by reference from 1992 Form 10-K,
Commission file number 1-7434, Exhibit 3.0.
10.0* - American Family Corporation Incentive Stock Option Plan
(1982) - incorporated by reference from Registration
Statement No. 33-44720 on Form S-8 with respect to the
AFLAC Incorporated (Formerly American Family
Corporation) Incentive Stock Option Plan (1982) and
Stock Option Plan (1985).
10.1* - American Family Corporation Stock Option Plan (1985) -
incorporated by reference from Registration Statement
No. 33-44720 on Form S-8 with respect to the AFLAC
Incorporated (Formerly American Family Corporation)
Incentive Stock Option Plan (1982) and Stock Option Plan
(1985).
10.1.1* - AFLAC Incorporated Amended 1985 Stock Option Plan -
incorporated by reference from 1994 Shareholders' Proxy
Statement, Commission file number 1-7434, Accession No.
0000004977-94-000003, Exhibit A.
10.2* - American Family Corporation Retirement Plan for Senior
Officers, as amended and restated October 1, 1989.
10.3* - American Family Corporation Supplemental Executive
Retirement Plan - incorporated by reference from 1989
Form 10-K, Commission file number 1-7434, Exhibit 10.9.
10.3.1* - AFLAC Incorporated Supplemental Executive Retirement
Plan, as amended, effective September 1, 1993.
10.4* - AFLAC Incorporated Employment Agreement with Daniel P.
Amos, dated August 1, 1993.
10.5* - American Family Life Assurance Company of Columbus
Employment Agreement with Yoshiki Otake, dated January
1, 1986.
10.6* - AFLAC Incorporated Employment Agreement with Kriss
Cloninger, III, dated February 14, 1992, and as amended
November 12, 1993.
10.7* - AFLAC Incorporated Management Incentive Plan -
incorporated by reference from 1994 Shareholders' Proxy
Statement, Commission file number 1-7434, Accession
No. 0000004977-94-000003, Exhibit B.
13.0 - Selected information from the AFLAC Incorporated Annual
Report to Shareholders for 1993.
22.0 - Subsidiaries.
24.0 - Consent of independent auditor, KPMG Peat Marwick, to
Form S-8 Registration Statement No. 33-44720 with
respect to the AFLAC Incorporated (Formerly American
Family Corporation) Incentive Stock Option Plan (1982)
and Stock Option Plan (1985).
24.1 - Consent of independent auditor, KPMG Peat Marwick, to
Form S-3 Registration Statement No. 33-41926 with
respect to the AFLAC Associate Stock Bonus Plan.
24.2 - Consent of independent auditor, KPMG Peat Marwick, to
Form S-8 Registration Statement No. 33-41552 with
respect to the AFLAC Incorporated 401(K) Retirement
Plan.
28.0* - AFLAC Incorporated 401(K) Retirement Plan incorporated
by reference from 1992 Form 10-K, Commission file number
1-7434, Exhibit 28.0.
|
IV-2
(b) REPORTS ON FORM 8-K
There were no reports filed on Form 8-K for the quarter ended December 31, 1993.
(c) EXHIBITS FILED WITH CURRENT FORM 10-K
10.2* - AFLAC Incorporated (formerly American Family Corporation)
Retirement Plan for Senior Officers, as amended and
restated October 1, 1989.
10.3.1* - AFLAC Incorporated Supplemental Executive Retirement
Plan, as amended, effective September 1, 1993.
10.4* - AFLAC Incorporated Employment Agreement with Daniel P.
Amos, dated August 1, 1993.
10.5* - American Family Life Assurance Company of Columbus
Employment Agreement with Yoshiki Otake, dated January 1,
1986.
10.6* - AFLAC Incorporated Employment Agreement with Kriss
Cloninger, III, dated February 14, 1992, and as amended
November 12, 1993.
13.0 - Selected information from the AFLAC Incorporated Annual
Report to Shareholders for 1993.
22.0 - Subsidiaries.
24.0 - Consent of independent auditor, KPMG Peat Marwick, to
Form S-8 Registration Statement No. 33-44720 with respect
to the AFLAC Incorporated (Formerly American Family
Corporation) Incentive Stock Option Plan (1982) and Stock
Option Plan (1985).
24.1 - Consent of independent auditor, KPMG Peat Marwick, to
Form S-3 Registration Statement No. 33-41926 with respect
to the AFLAC Associate Stock Bonus Plan.
24.2 - Consent of independent auditor, KPMG Peat Marwick, to
Form S-8 Registration Statement No. 33-41552 with respect
to the AFLAC Incorporated 401(K) Retirement Plan.
|
* Management contract or compensatory plan or arrangement.
IV-3
PAGE
INDEPENDENT AUDITORS' REPORT ON FINANCIAL STATEMENT SCHEDULES
The Shareholders and Board of Directors
AFLAC Incorporated:
Under date of January 31, 1994, we reported on the consolidated balance sheets of AFLAC Incorporated and subsidiaries as of December 31, 1993 and 1992, and the related consolidated statements of earnings, shareholders' equity, and cash flows for each of the years in the three-year period ended December 31, 1993, as contained in the 1993 annual report to shareholders. These consolidated financial statements and our report thereon are incorporated by reference in the annual report on Form 10-K for the year 1993. In connection with our audits of the aforementioned consolidated financial statements, we also have audited the related financial statement schedules as listed in Item 14. These financial statement schedules are the responsibility of the Company's management. Our responsibility is to express an opinion on these financial statement schedules based on our audits.
In our opinion, such financial statement schedules, when considered in relation to the basic consolidated financial statements taken as a whole, present fairly, in all material respects, the information set forth therein.
KPMG PEAT MARWICK
Atlanta, Georgia
January 31, 1994
IV-4
PAGE
SCHEDULE I
AFLAC INCORPORATED AND SUBSIDIARIES
Summary of Investments - Other than Investments in Related Parties December 31, 1993
(In thousands) Amount in
Market Balance
Type of Investment Cost Value Sheet
----------- ---------- ---------
Fixed Maturities:
Bonds:
United States Government and $ 192,760 $ 202,227 $ 192,760
government agencies and
authorities
States, municipalities and 532,537 570,835 532,537
political subdivisions
Foreign governments 5,771,748 6,782,752 5,771,748
Public utilities 2,503,870 2,894,418 2,503,870
Convertibles 21,478 23,938 21,478
All other corporate bonds 3,115,068 3,514,433 3,115,068
Redeemable preferred stocks 301 323 301
---------- ---------- ----------
Total fixed maturities * 12,137,762 13,988,926 12,137,762
---------- ---------- ----------
Equity securities:
Common stocks:
Public utilities 2,091 2,647 2,647
Banks, trusts and insurance
companies 4,037 5,420 5,420
Industrial, miscellaneous
and all other 61,564 73,998 73,998
---------- ---------- ----------
Total equity securities 67,692 82,065 82,065
---------- ---------- ----------
Total fixed maturities and
equity securities 12,205,454 14,070,991 12,219,827
---------- ---------- ----------
Mortgage loans on real estate 57,485 81,482 57,485
Policy loans 1,184 1,184 1,184
Other long-term investments 542 542 542
Short-term investments 166,689 166,689 166,689
---------- ---------- ----------
Total investments $ 12,431,354 $ 14,320,888 $ 12,445,727
=========== =========== ===========
|
* Includes fixed maturities held to maturity, at amortized cost of $2,082,326 and with a market value of $2,418,540; and fixed maturities available for sale, at amortized cost of $10,055,436 and with a market value of $11,570,386.
IV-5
PAGE
SCHEDULE II
AFLAC INCORPORATED AND SUBSIDIARIES
Amounts Receivable from Related Parties and Underwriters, Promoters
and Employees Other than Related Parties
Years Ended December 31, 1993, 1992 and 1991
(In thousands)
Balance at Deductions Balance at end
Beginning Amounts Other of year
Name of Debtor of Year Additions Collected Reductions Current Not Current
________________________________ __________ _________ _____________________ ____________________
Year ended 12-31-93
Daniel P. Amos $ 2,000 $ - $ - $ - $ 0 $ 2,000
Michael Henry 130 - 124 - 6 0
David Halmrast 0 120 - - 120 0
Minoru Nakai 352 - 2 - 11 339
Gary Stegman 56 100 8 - 8 140
Year ended 12-31-92
Daniel P. Amos $ 1,253 $ 2,000 $ 1,253 $ - $ 0 $ 2,000
R. Lee Anderson, II 225 - 225 - 0 0
Michael Henry - 130 - - 130 0
Francis O. Mathews - 150 150 - 0 0
Minoru Nakai - 352 - - 0 352
Keitaro Toyoda 241 - 241 - 0 0
Year ended 12-31-91
Daniel P. Amos $ 1,398 $ - $ 145 $ - $ 1,253 $ 0
R. Lee Anderson, II 225 - - - 63 162
H. Jefferson Bickerstaff 162 - 111 - 15 36
Salvador Diaz-Verson, Jr. 459 799 459 - 292 507
Minoru Nakai 126 - 126 - 0 0
Ronald Richey 162 38 44 - 22 134
Keitaro Toyoda 241 - - - 40 201
The year end receivable balances consist of demand notes receivable collateralized by AFLAC Incorporated
common stock, with principal and interest payable in various amounts and open account balances due currently.
Interest rates related to the loans are as follows:
Debtor Rates
___________________ _____________
Daniel P. Amos 6.00%
Michael Henry 6.65%
David Halmrast 0%
Minoru Nakai 5.54%
Gary Stegman 5.54% & 4.83%
|
IV-6
PAGE
SCHEDULE III
CONDENSED FINANCIAL INFORMATION OF REGISTRANT
Condensed Balance Sheets
AFLAC Incorporated (Parent Only)
(In thousands)
December 31,
1993 1992
__________ _________
Assets:
Investments:
Investments in subsidiaries* $ 1,489,961 $1,180,478
Other investments 23,955 9,252
---------- ---------
Total investments 1,513,916 1,189,730
---------- ---------
Cash - 333
Due from subsidiaries* 6,674 5,039
Refundable federal income taxes - 1,363
Other receivables 6,472 3,428
Property and equipment, net 10,107 11,240
Other 1,924 2,289
---------- --------
Total assets $ 1,539,093 $ 1,213,422
========== ==========
Liabilities and Shareholders' Equity:
Liabilities:
Due to subsidiaries* $ 3,145 $ 5,376
Notes payable (note A) 54,511 65,930
Employee and beneficiary benefit plans 84,445 57,865
Income taxes, primarily deferred 25,977 -
Other 5,391 2,369
Commitments and contingencies (note B)
---------- ---------
Total liabilities 173,469 131,540
---------- ---------
Shareholders' equity:
Common stock of $.10 par value:
Authorized 175,000; issued 103,710
shares in 1993 and 82,549 shares
in 1992 10,371 8,255
Additional paid-in captial 195,730 190,871
Unrealized foreign currency translation 123,294 68,978
Unrealized gains on equity securities 14,811 5,167
Retained earnings (note D) 1,029,625 814,355
Treasury stock (6,568) (4,171)
Notes receivable for stock purchases (1,639) (1,573)
---------- ---------
Total shareholders' equity 1,365,624 1,081,882
---------- ----------
Total liabilities and
shareholders' equity $ 1,539,093 $ 1,213,422
========== ==========
|
* Eliminated in consolidation. See the accompanying Notes to Condensed Financial Statements.
IV-7
PAGE
SCHEDULE III
CONDENSED FINANCIAL INFORMATION OF REGISTRANT
Condensed Statements of Earnings
AFLAC Incorporated (Parent Only)
(In thousands)
Years ended December 31,
1993 1992 1991
---------- ---------- ----------
Revenues:
Dividends from subsidiaries* $ 71,268 $ 46,657 $ 48,002
Management and service fees
from subsidiaries* 30,357 28,227 27,326
Other income from subsidiaries,
principally rental and interest* 992 828 2,943
Other income (620) 693 433
--------- --------- ---------
Total revenues 101,997 76,405 78,704
--------- --------- ---------
Operating expenses:
Interest expense - subsidiaries* 162 293 1,587
Interest expense - others 3,362 2,743 3,016
Capitalized interest (3,250) (1,333) -
Other operating expense 53,595 48,760 42,718
--------- --------- ---------
Total operating expenses 53,869 50,463 47,321
--------- --------- ---------
Earnings before income taxes,
equity in undistributed earnings
of subsidiaries and cumulative
effect of accounting changes 48,128 25,942 31,383
Income tax expense (benefit)(note C) 1,063 1,103 (6,493)
--------- --------- ---------
Earnings before equity in
undistributed earnings of
subsidiaries and cumulative
effect of accounting changes 47,065 24,839 37,876
Equity in undistributed earnings
of subsidiaries 196,824 158,528 110,808
--------- --------- ---------
Earnings before cumulative
effect of accounting changes 243,889 183,367 148,684
Cumulative affect on prior years
of accounting changes (including a
$46,100 increase in undistributed
earnings of subsidiaries) (note F) 11,438 - -
--------- --------- ---------
Net earnings $ 255,327 $ 183,367 $ 148,684
========= ========= =========
|
* Eliminated in consolidation. See the accompanying Notes to Condensed Financial Statements.
IV-8
PAGE
SCHEDULE III
CONDENSED FINANCIAL INFORMATION OF REGISTRANT
Condensed Statements of Cash Flows
AFLAC Incorporated (Parent Only)
(In thousands)
Years ended December 31,
1993 1992 1991
---------- ---------- ----------
Cash flows from operating activities:
Net earnings $ 255,327 $ 183,367 $ 148,684
Adjustments to reconcile net
earnings to net cash provided
from operating activities:
Cumulative effect on prior
years of accounting changes (11,438) - -
Equity in undistributed
earnings of subsidiaries (196,824) (158,528) (110,808)
Deferred income taxes (300) 1,103 (6,493)
Employee and beneficiary
benefit plans 18,195 12,659 16,561
Other, net 190 8,020 (3,962)
--------- --------- ---------
Net cash provided by
operating activities 65,150 46,621 43,982
--------- --------- ---------
Cash flows from investing activities:
Additions to property and
equipment, net (75) (1,368) 1,250
Cost of other investments (14,703) (9,301) 7,479
Additional capitalization
of subsidiaries - (10,430) (32,751)
--------- --------- ---------
Net cash used by
investing activities (14,778) (21,099) (24,022)
--------- --------- ---------
Cash flows from financing activities:
Proceeds from borrowings/assumption
of subsidiary debt - 11,300 20,000
Proceeds from exercise of
stock options 6,975 7,534 1,835
Principal payments under debt
obligations (11,419) (3,598) (1,202)
Dividends paid to shareholders (40,057) (35,283) (30,190)
Net increase in due to/from
subsidiaries (3,866) (2,338) (9,501)
Other, net (2,397) (3,067) (860)
--------- --------- ---------
Net cash used by
financing activities (50,764) (25,452) (19,918)
--------- --------- ---------
Net change in cash (392) 70 42
Cash at beginning of year 333 263 221
_________ _________ _________
Cash at end of year $ (59) $ 333 $ 263
========= ========= =========
|
See the accompanying Notes to Condensed Financial Statements.
IV-9
PAGE
SCHEDULE III
CONDENSED FINANCIAL INFORMATION OF REGISTRANT
Notes to Condensed Financial Statements AFLAC Incorporated (Parent Only)
The accompanying condensed financial statements should be read in conjunction with the consolidated financial statements and notes thereto of AFLAC Incorporated and Subsidiaries (see Part II - Item 8).
(A) NOTES PAYABLE
A summary of notes payable serviced by the Parent Company at December 31, 1993 and 1992 follows:
(In thousands) 1993 1992
________ ________
5.965% unsecured note payable to banks,
due in semiannual installments beginning
1995 through 1997............................ $ 49,000 $ -
8.3% note payable, due in monthly
installments through 1997,
secured by equipment......................... 5,511 6,930
Unsecured notes payable to banks, with
interest not to exceed prime................. - 59,000
_______ _______
Total notes payable $ 54,511 $ 65,930
======= =======
|
The aggregate maturities of the notes payable for each of the five years after December 31, 1993, are as follows:
(In thousands)
1994............................................ $ 1,541 1995............................................ 11,507 1996............................................ 21,485 1997............................................ 19,978 1998............................................ 0 |
IV-10
PAGE
(B) CONTINGENCIES
In prior years, the Parent Company executed promissory notes and transferred the proceeds to its non-insurance subsidiaries for the acquisition of television broadcasting stations and other businesses. During 1991, a majority of these notes were assumed by a partnership formed by the Broadcast Group and AFLAC. The outstanding balances on these notes assumed were $40,722,000 as of December 31, 1993, and are not included in the accompanying condensed balance sheet.
In addition, the Parent Company has also guaranteed repayment of certain indebtedness of its subsidiary. The related outstanding loan balance at December 31, 1993 was $1,700,000. The Company has also guaranteed to AFLAC repayment of intercompany borrowings from subsidiaries, which approximated $1,102,000 at December 31, 1993.
(C) INCOME TAXES
The Company and its eligible U.S. subsidiaries file a consolidated U.S. federal income tax return. Income tax liabilities or benefits are recorded by each principal subsidiary based upon separate return calculations and any difference between the consolidated provision and the aggregate amounts recorded by the subsidiaries is reflected in the Parent Company financial statements. (See Exhibit 13, page 13-32, note 8, Income Taxes, of Notes to the Consolidated Financial Statements.)
(D) DIVIDEND RESTRICTIONS
See Exhibit 13, pages 13-34 and 13-35 (note 9, Statutory Accounting and Dividend Restrictions, of Notes to the Consolidated Financial Statements) for information regarding dividend restrictions.
(E) SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION
1993 1992 1991
(In thousands) ________ ________ ________
Cash payments during the year for:
Interest on debt obligations $ 3,588 $ 2,781 $ 3,016
Income taxes - 139 230
|
In 1993, non-cash investing activities included issuance of common stock for purchase of a company amounting to $8,730. For further information see note 9, Other, page 13-35 of Exhibit 13.
(F) CUMULATIVE EFFECT
For information concerning the cumulative affect of accounting changes, see page 13-20 of Exhibit 13, note 1, section on Accounting Pronouncements Adopted in 1993, of Notes to the Consolidated Financial Statements.
IV-11
PAGE
SCHEDULE VI
AFLAC INCORPORATED AND SUBSIDIARIES
Reinsurance
Years Ended December 31, 1993, 1992 and 1991
(In thousands)
Percentage
Ceded to Assumed from of amount
Gross other other assumed
Amount companies companies Net amount to net
------------ ------------ ------------ ------------ ------------
Year ended December 31, 1993:
Life insurance in force $ 10,107,259 $ 119,771 $ - $ 9,987,488 -
============ ============ ============ ============ ============
Premiums:
Health insurance $ 4,210,723 $ 392 $ - $ 4,210,331 -
Life insurance 15,497 438 - 15,059 -
------------ ------------ ------------ ------------ ------------
Total premiums $ 4,226,220 $ 830 $ - $ 4,225,390 -
============ ============ ============ ============ ============
Year ended December 31, 1992:
Life insurance in force $ 10,552,890 $ 109,125 $ - $ 10,443,765 -
============ ============ ============ ============ ============
Premiums:
Health insurance $ 3,352,737 $ 218 $ - $ 3,352,519 -
Life insurance 17,245 563 - 16,682 -
------------ ------------ ------------ ------------ ------------
Total premiums $ 3,369,982 $ 781 $ - $ 3,369,201 -
============ ============ ============ ============ ============
Year ended December 31, 1991:
Life insurance in force $ 9,838,589 $ 179,498 $ - $ 9,659,091 -
============ ============ ============ ============ ============
Premiums:
Health insurance $ 2,748,588 $ 203 $ - $ 2,748,385 -
Life insurance 18,297 1,300 (33) 16,964 (0.2%)
------------ ------------ ------------ ------------ ------------
Total premiums $ 2,766,885 $ 1,503 $ (33) $ 2,765,349 -
============ ============ ============ ============ ============
|
IV-12
PAGE
SCHEDULE IX
AFLAC INCORPORATED AND SUBSIDIARIES
Short-Term Borrowings
Years Ended December 31, 1993, 1992, and 1991
(In Thousands)
Maximum Average Weighted
Weighted amount amount average
Balance average outstanding outstanding interest
at end of interest during during the rate during
period rate the period period (*) the period (*)
--------------- -------------- -------------- -------------- --------------
Year ended December 31, 1993:
Amounts payable to banks
(Due on demand and
within one year) $ 0 0.0% $ 59,403 $ 14,638 3.4%
============== ============== ============= ============= =============
Year ended December 31, 1992:
Amounts payable to banks
(Due on demand and
within one year) $ 59,403 3.8% $ 60,719 $ 60,067 4.5%
============== ============== ============= ============= ==============
Year ended December 31, 1991:
Amounts payable to banks
(Due on demand) $ 51,780 5.4% $ 60,153 $ 52,680 7.6%
============== ============== ============= ============= ==============
(*) Average borrowings represent the average monthly short-term debt outstanding during the year, and the weighted
average interest rate during the period is computed by dividing total interest expense on short-term debt by the
average borrowings.
|
IV-13
PAGE
SIGNATURES
Pursuant to the requirements of Section 12 or 15(d) of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
AFLAC Incorporated
Date MARCH 30, 1994 By /s/ PAUL S. AMOS
________________________ _____________________________
(Paul S. Amos)
Chairman of the Board
|
Pursuant to the requirements of the Securities Exchange Act of 1934, this Report has been signed below by the following persons on behalf of the Registrant and in the capacities and on the dates indicated.
/s/ DANIEL P. AMOS Chief Executive Officer, MARCH 30, 1994 ________________________ President and Vice ________________ (Daniel P. Amos) Chairman Board of Directors |
/s/ KRISS CLONINGER, III Executive Vice President, MARCH 30, 1994 ________________________ Chief Financial Officer ________________ (Kriss Cloninger, III) and Treasurer |
/s/ NORMAN P. FOSTER Executive Vice President, MARCH 30, 1994 ________________________ Corporate Finance ________________ (Norman P. Foster) |
IV-14
/s/ J. SHELBY AMOS, II Director MARCH 30, 1994
______________________________ ________________
(J. Shelby Amos, II)
/s/ MICHAEL H. ARMACOST Director March 30, 1994
______________________________ ________________
(Michael H. Armacost)
/s/ M. DELMAR EDWARDS, M.D. Director MARCH 30, 1994
______________________________ ________________
(M. Delmar Edwards, M.D.)
/s/ GEORGE W. FORD, JR. Director MARCH 30, 1994
______________________________ ________________
(George W. Ford, Jr.)
/s/ CESAR E. GARCIA Director MARCH 30, 1994
______________________________ ________________
(Cesar E. Garcia)
/s/ JOE FRANK HARRIS Director MARCH 30, 1994
______________________________ ________________
(Joe Frank Harris)
/s/ ELIZABETH J. HUDSON Director MARCH 30, 1994
______________________________ ________________
(Elizabeth J. Hudson)
/s/ KENNETH S. JANKE, SR. Director MARCH 30, 1994
______________________________ ________________
(Kenneth S. Janke, Sr.)
/s/ CHARLES B. KNAPP Director MARCH 30, 1994
______________________________ ________________
(Charles B. Knapp)
IV-15
|
/s/ PETER D. MORROW Director MARCH 30, 1994
______________________________ ________________
(Peter D. Morrow)
/s/ YOSHIKI OTAKE Director MARCH 30, 1994
______________________________ ________________
(Yoshiki Otake)
/s/ JOHN M. POPE Director MARCH 30, 1994
______________________________ ________________
(John M. Pope)
/s/ E. STEPHEN PURDOM, M.D. Director MARCH 30, 1994
______________________________ ________________
(E. Stephen Purdom, M.D.)
/s/ JACK S. SCHIFFMAN Director MARCH 30, 1994
______________________________ ________________
(Jack S. Schiffman)
/s/ HENRY C. SCHWOB Director MARCH 30, 1994
______________________________ ________________
(Henry C. Schwob)
/s/ J. KYLE SPENCER Director MARCH 30, 1994
______________________________ ________________
(J. Kyle Spencer)
/s/ KOJI TAKAHASHI Director MARCH 30, 1994
______________________________ ________________
(Koji Takahashi)
/s/ GLENN VAUGHN, JR. Director MARCH 30, 1994
______________________________ ________________
(Glenn Vaughn, Jr.)
|
IV-16
Exhibit Index
3.0 - Articles of Incorporation, as amended - incorporated by
reference from 1991 Form 10-K, Commission file number
1-7434, Exhibit 3.0; and Bylaws of the Company, as
amended - incorporated by reference from 1992 Form 10-K,
Commission file number 1-7434, Exhibit 3.0.
10.0* - American Family Corporation Incentive Stock Option Plan
(1982) - incorporated by reference from Registration
Statement No. 33-44720 on Form S-8 with respect to the
AFLAC Incorporated (Formerly American Family Corporation)
Incentive Stock Option Plan (1982) and Stock Option Plan
(1985).
10.1* - American Family Corporation Stock Option Plan (1985) -
incorporated by reference from Registration Statement No.
33-44720 on Form S-8 with respect to the AFLAC
Incorporated (Formerly American Family Corporation)
Incentive Stock Option Plan (1982) and Stock Option Plan
(1985).
10.1.1* - AFLAC Incorporated Amended 1985 Stock Option Plan -
incorporated by reference from 1994 Shareholders' Proxy
Statement, Commission file number 1-7434, Accession No.
0000004977-94-000003, Exhibit A.
10.2* - American Family Corporation Retirement Plan for Senior
Officers, as amended and restated October 1, 1989.
10.3* - American Family Corporation Supplemental Executive
Retirement Plan - incorporated by reference from 1989
Form 10-K, Commission file number 1-7434, Exhibit 10.9.
10.3.1* - AFLAC Incorporated Supplemental Executive Retirement
Plan, as amended, effective September 1, 1993.
10.4* - AFLAC Incorporated Employment Agreement with Daniel P.
Amos, dated August 1, 1993.
10.5* - American Family Life Assurance Company of Columbus
Employment Agreement with Yoshiki Otake, dated January 1,
1986.
10.6* - AFLAC Incorporated Employment Agreement with Kriss
Cloninger, III, dated February 14, 1992, and as amended
November 12, 1993.
10.7* - AFLAC Incorporated Management Incentive Plan - incorporated
by reference from 1994 Shareholders' Proxy Statement,
Commission file number 1-7434, Accession
No. 0000004977-94-000003, Exhibit B.
13.0 - Selected information from the AFLAC Incorporated Annual
Report to Shareholders for 1993.
22.0 - Subsidiaries.
24.0 - Consent of independent auditor, KPMG Peat Marwick, to
Form S-8 Registration Statement No. 33-44720 with respect
to the AFLAC Incorporated (Formerly American Family
Corporation) Incentive Stock Option Plan (1982) and Stock
Option Plan (1985).
24.1 - Consent of independent auditor, KPMG Peat Marwick, to
Form S-3 Registration Statement No. 33-41926 with respect
to the AFLAC Associate Stock Bonus Plan.
24.2 - Consent of independent auditor, KPMG Peat Marwick, to
Form S-8 Registration Statement No. 33-41552 with respect
to the AFLAC Incorporated 401(K) Retirement Plan.
28.0* - AFLAC Incorporated 401(K) Retirement Plan incorporated
by reference from 1992 Form 10-K, Commission file number
1-7434, Exhibit 28.0.
|
Exhibits Filed with Current Form 10-K:
10.2* - AFLAC Incorporated (formerly American Family Corporation)
Retirement Plan for Senior Officers, as amended and restated
October 1, 1989.
10.3.1* - AFLAC Incorporated Supplemental Executive Retirement
Plan, as amended, effective September 1, 1993.
10.4* - AFLAC Incorporated Employment Agreement with Daniel P.
Amos, dated August 1, 1993.
10.5* - American Family Life Assurance Company of Columbus
Employment Agreement with Yoshiki Otake, dated January 1,
1986.
10.6* - AFLAC Incorporated Employment Agreement with Kriss
Cloninger, III, dated February 14, 1992, and as amended
November 12, 1993.
13.0 - Selected information from the AFLAC Incorporated Annual
Report to Shareholders for 1993.
22.0 - Subsidiaries.
24.0 - Consent of independent auditor, KPMG Peat Marwick, to
Form S-8 Registration Statement No. 33-44720 with respect
to the AFLAC Incorporated (Formerly American Family
Corporation) Incentive Stock Option Plan (1982) and Stock
Option Plan (1985).
24.1 - Consent of independent auditor, KPMG Peat Marwick, to
Form S-3 Registration Statement No. 33-41926 with respect
to the AFLAC Associate Stock Bonus Plan.
24.2 - Consent of independent auditor, KPMG Peat Marwick, to
Form S-8 Registration Statement No. 33-41552 with respect
to the AFLAC Incorporated 401(K) Retirement Plan.
|
* Management contract or compensatory plan or agreement.
EXHIBIT 10.2*
AMERICAN FAMILY CORPORATION
American Family Corporation (the "Company") in recognition of the role of its senior officers in the success and growth of the Company and its subsidiaries, and in consideration of the value to the Company of offering to its senior officers a retirement plan which will encourage their continued employment until date of retirement and thereafter assure their continued service in an advisory capacity and preclude them from rendering any service, assistance or advice to any competition of the Company or its subsidiaries, has adopted the following Retirement Plan for Senior Officers (hereinafter called the "Plan"):
AMERICAN FAMILY CORPORATION
RETIREMENT PLAN FOR SENIOR OFFICERS
(as amended and restated October 1, 1989)
I. ELIGIBILITY.
Participation in this Plan shall be limited to the following senior officers of the Company (hereinafter identified as "Participants" of the Plan):
W. L. Amos, Sr.
Paul S. Amos
Daniel P. Amos
Herbert A. Bowick
Salvador Diaz-Verson, Jr.
James Graham
G. Othell Hand
George W. Jeter
W. W. Sasser
J. R. Thompson
II. CREDITED SERVICE.
Credited service shall be calculated from the date of first entering the service of the Company or any of its subsidiaries, and no time shall be deducted from any interrupted period of service.
III. RETIREMENT.
Subject to all the terms and conditions of this Plan and except as described in Article VII, Participants shall be eligible for retirement as follows:
Age and Service Status Retirement Status and Benefits
______________________ ______________________________
A. Age 65 or older with 10 or Voluntary retirement with full
more years of credited benefits.
service on date of adoption
of the Plan.
B. With 20 or more years of Voluntary retirement with full
credited service. benefits.
1
|
C. Upon attainment of age 60 At the request of the Participant
with less than 20 but more and subject to approval by the
than 10 years of credited Board of Directors, voluntary
service. retirement with reduced benefits
(based on years of actual credited
service expressed as a percentage
of 20 years).
D. Total and Permanent Dis- Retirement with full benefits.
ability prior to attainment
of age 60, with 10 or more
years of credited service.
Disability is defined as any
physical or mental condition
which prevents Participant
from performing the normal
functions of his regular
work.
E. Involuntary termination Retirement with reduced benefits
before eligible for any (based on years of actual credited
category above, but with service expressed as a percentage
more than 10 years of 20 years).
credited service.
|
NOTE: Retirement under B. and D. above may be made effective on January 1 of the calendar year in which Participant will reach age 60.
IV. RETIREMENT BENEFITS.
A. For the 12-month period beginning with the date of retirement, Participant shall be paid full compensation the same as he would have received had he continued in his regular active employment capacity. (In the case of W. L. Amos, Sr., only, this full compensation period shall continue through the end of the calendar year in which he attains age 65.) Thereafter, Participant shall be paid retirement benefits under either subsection (1) or (2) below:
1. FULL RETIREMENT WITHOUT SURVIVING SPOUSE BENEFIT. Participant shall be paid, at the same pay intervals as active employees of the Company, at the rate of sixty percent (60%) of the total compensation received from the Company or its subsidiaries for either (a) the last 12 months of active employment with the Company, or (b) the highest compensation received in any calendar year of the last three years preceding the date of retirement, whichever is higher; such retirement compensation to be paid for the lifetime of the Participant and to terminate at the end of the calendar month in which Participant's death occurs.
2. FULL RETIREMENT WITH SURVIVING SPOUSE BENEFIT. At the option of the Participant, and subject to written notice of such election being filed by the Participant with the Company on or before the effective date of retirement, Participant may elect to receive for his lifetime a reduced compensation in the amount of fifty-four percent (54%) of previous compensation, as set forth in Paragraph 1 above, with the additional provision that, effective with the calendar month following the death of the Participant after
retirement, the Company will pay monthly to the surviving spouse of the Participant one-half (1/2) of the amount which Participant would have received as retirement income had he survived, such survivor's income to be paid for the appropriate period of time shown below:
(a) If at time of death of Participant, the surviving
spouse is 55 years of age or older, then such
survivor's benefit shall be paid for the lifetime of
the surviving spouse.
OR
(b) If at time of death of Participant, the surviving
spouse is younger than 55 years of age, then such
survivor's benefit shall be paid only for a maximum
period of 20 years from date of Participant's death
or until the surviving spouse's earlier death,
whichever occurs first.
B. All retirement benefits paid under Section A above shall be subject to annual cost-of-living type increases proportionate to any such type compensation increases granted each year to the Company's active Senior Officers or, at the option of the Board of Directors, by any alternative reasonable index of cost-of-living increases.
C. Retired Participants shall be furnished for their lifetime suitable office space and secretarial support for the maintenance of their consultation work for the Company, their civic responsibilities and personal affairs, with payment by the Company of appropriate expenses.
D. Retired Participants and their spouses shall receive for their lifetime full medical expense benefits, either through direct payment by the Company or, at the option of the Company, by insurance paid by the Company.
E. In the event of the death of the Participant after 10 years of credited service, but prior to retirement, the surviving spouse (if any) shall be entitled to benefits as calculated under Article IV.A.(2), "Full Retirement With Surviving Spouse Benefit", from the date of the Participant's death, as well as full medical expense benefits as provided in Article IV.D., above.
V. CONDITIONS.
A. CONSULTATION. As a condition to the payment of retirement benefits as set forth in this Plan, the Participant agrees to make himself available to the Company after retirement as an independent consultant for consultation by request of the Company at reasonable business hours and upon reasonable notice, and subject to conditions of health, without further compensation except necessary and proper business or travel expenses required in connection with such consultation.
B. NON-COMPETITION. As a condition to his payment of retirement benefits as set forth in this Plan, the Retired Participant agrees that so long as retirement benefits are paid to him by the Company,
he will not, without the prior consent of the Board of Directors, directly or indirectly, render advisory or any other services to, or become employed by, or participate or engage in any business competitive with any of the business activities of the Company or its subsidiaries in any states and/or foreign countries in which it or its subsidiaries do business.
C. RIGHTS UNDER EMPLOYEE STOCK BONUS PLAN. All rights of the Participant to participate in the Employee Stock Bonus Plan of the Company shall terminate as of the end of the calendar quarter in which retirement occurs.
D. IRREVOCABLE. Once this Plan has been executed with an eligible Participant, this Plan shall be a binding obligation of the Company and the obligations assumed herein by the Company shall be irrevocable, and cannot be amended, modified, suspended, or supplemented in any respect except by an agreement in writing voluntarily signed by the party against whom such enforcement of any amendment, modification or supplement is sought.
E. SUCCESSORS OF THE COMPANY. This Plan shall be binding upon any successor to the Company and such successor shall be deemed substituted for the Company for all purposes under this Plan.
F. CONSOLIDATION OR MERGER. The Company will not consolidate or merge into another corporation which survives the consolidation or merger where the stock of the Company is not outstanding after the merger, unless such surviving corporation shall assume this Plan, as far as it pertains to officers then covered by this Plan, and upon such assumption, Participants and the survivor shall become obligated to perform the terms and conditions hereof and the term "Company" as used in this Agreement shall be deemed to refer to such survivor.
G. EFFECT OF COMPANY BREACH OF AGREEMENT. In the event that the Company shall fail to pay in accordance with this Plan any sums provided for hereunder, the entire amount of compensation which would accrue to a Participant during the remainder of his life (or, if applicable, the spouse's life subsequent to the death of the Participant), based on proper mortality tables, shall, at Participant's option immediately become due and owing.
H. APPLICABLE LAW. This Agreement is intended to and shall be governed by the laws of the State of Georgia.
I. PRECEDENCE. This Agreement shall supersede any other contract of employment or retirement, whether oral or in writing, between the Company and the Participant.
VI. LEGAL EXPENSES.
The Company shall pay or reimburse a Participant for all fees and disbursements of counsel, if any, incurred by the Participant in seeking to obtain or enforce any right or benefit provided by this Plan.
IN WITNESS WHEREOF, AMERICAN FAMILY CORPORATION has caused this Agreement to be executed in its Corporate name and by its officers thereunto fully authorized, this 25th day of October, 1989, all done in the State of Georgia.
AMERICAN FAMILY CORPORATION
Attest: /s/Lewis A. Hazouri, Jr. By: /s/John B. Amos
_________________________ __________________________
Chairman, CEO
__________________________
Title
ACCEPTED:
/s/Daniel P. Amos
__________________________________
Participant
|
EXHIBIT 10.3.1*
AFLAC INCORPORATED
SUPPLEMENTAL EXECUTIVE RETIREMENT PLAN
In order to provide retirement benefits for certain key executives of the Company and its subsidiaries, the Company hereby adopts this Supplemental Executive Retirement Plan, originally effective as of October 1, 1989 and as amended, effective September 1, 1993, to provide as follows:
1. DEFINITIONS.
Except as otherwise expressly provided herein, or as otherwise required by the context, the following terms, whenever used in capitalized form, shall have the meaning set forth below:
(a) "Board" means the Board of Directors of the Company.
(b) "Company" means AFLAC Incorporated, a Georgia corporation, and any successor thereto.
(c) "Early Retirement Benefit" means an annual pension which,
when combined with the retirement income payable under the
AFLAC Incorporated Pension Plan (assuming benefits
thereunder are paid immediately as a single life annuity
with an early commencement reduction as specified in the
qualified Pension Plan without regard to years of service
requirement) will equal fifty percent (50%) of the
Participant's Final Pay, payable in accordance with
Section 3(b) of the Plan.
(d) "Early Retirement Date" means the date a Participant attains age 55, and for those who participate on or after August 11, 1992, it means the date a Participant attains age 55 and completes 15 years of employment; provided, however, that an earlier or later date may be agreed to between a Participant and the Compensation Committee of the Board.
(e) "Effective Date" means October 1, 1989.
(f) "Final Pay" means the highest annual base salary paid to a Participant during any calendar year in the three calendar year period preceding the Participant's Termination of Employment.
(g) "Normal Retirement Benefit" means an annual pension which, when combined with the retirement income payable under the AFLAC Incorporated Pension Plan (assuming benefits thereunder are paid as a single life annuity) will equal sixty-five percent (65%) of the Participant's Final Pay, payable in accordance with Section 3(a) of the Plan.
(h) "Norman Retirement Date" means the date a Participant attains age 65; provided, however, that an earlier or later date may be agreed to between a Participant and the Compensation Committee of the Board.
(i) "Participant" means any employee of the Company (or any subsidiary or affiliate of the Company) who meets the requirements for participation set forth in Section 2 hereof.
(j) "Plan" means this AFLAC Incorporated Supplemental Executive Retirement Plan, including any and all schedules and appendices hereto.
(k) "Retirement" means a Participant's Termination of Employment on or after his Early Retirement Date.
(l) "Retirement Benefit" means a Participant's Early Retirement Benefit or Normal Retirement Benefit, as applicable.
(m) "Termination of Employment" means termination of a Participant's employment with the Company (and its subsidiaries and affiliates) for any reason except approved leaves of absence.
2. ELIGIBILITY.
Participation in the Plan shall be limited to key employees of the Company (and its subsidiaries and affiliates) designated by the Board from time to time.
3. RETIREMENT BENEFITS.
(a) NORMAL RETIREMENT. If a Participant's Termination of Employment occurs on or after his Normal Retirement Date for any reason other than Cause or death, he shall be entitled to receive an annual Retirement Benefit equal to the Normal Retirement Benefit, payable in the form of annuity for the life of the Participant (except as otherwise provided in Section 3(h)).
(b) EARLY RETIREMENT. If a Participant's Termination of Employment occurs on or after his Early Retirement Date but before his Normal Retirement Date for any reason other than Cause (as defined in Section 8(e) hereof) or death, he shall be entitled to receive an annual Retirement Benefit equal to the Early Retirement Benefit, payable in the form of an annuity for the life of the Participant (except as otherwise provided in Section 3(h)).
(c) DEATH BENEFIT. If a Participant dies after qualifying for an early or normal Retirement Benefit but before his commencing to receive such Retirement Benefit, the Participant's spouse shall receive a death benefit equal to fifty percent (50%) of the Retirement Benefit which the Participant would have been entitled to receive had he retired on the day preceding his date of death.
(d) TERMINATION FOR CAUSE. Notwithstanding any other
provisions of this Plan, if a Participant's Termination of
Employment is by the Company (or any subsidiary or
affiliate of the Company) for Cause (as defined in Section
8(e)) he shall immediately forfeit all rights and
entitlements under the Plan.
(e) NONCOMPETITION. The payment of Retirement Benefits to a Participant, as set forth in this Plan, shall immediately cease and be forfeited if the Participant, without the prior consent of the Board, directly or indirectly, renders
advisory or any other services to, or becomes employed by, or participates or engages in any business competitive with any of the business activities of the Company (or any subsidiary or affiliate of the Company) in any states and/or foreign countries in which the Company or any of its subsidiaries or affiliates do business.
(f) CONSULTATION. As a condition to the payment of Retirement Benefits as set forth in this Plan, a Participant shall make himself available to the Company for ten (10) years after Retirement as an independent consultant for consultation at the request of the Company at reasonable business hours and upon reasonable notice, and subject to the conditions of health, without further compensation except necessary and proper business or travel expenses required in connection with such consultation.
(g) NON-DISCLOSURE OF INFORMATION. As a condition to the payment of Retirement Benefits as set forth in this Plan, a Participant shall not, directly or indirectly, use or permit the use of any confidential or other proprietary information of a special and unique nature and value to the Company, including, but not limited to, technological data, trade secrets, systems, procedures, confidential reports, client lists, client relationships, marketing strategies of the Company (or any subsidiary or affiliate of the Company), information with respect to the nature and type of services rendered by the Company, or financial information concerning the Company.
(h) OPTIONAL FORMS OF PAYMENT. In lieu of a life annuity, a Participant may elect to receive his Retirement Benefit in the form of a joint and survivor annuity by electing such alternate form of benefit prior to his Retirement. Under this option, the Participant shall receive for his lifetime under this Plan a reduced annual Retirement Benefit with the additional provision that, effective with the calendar month following the death of the Participant after Retirement, the Company will pay to the surviving spouse of the Participant a monthly benefit equal to one-half (1/2) of the amount which had been payable to the Participant. The reduced amount payable to the Participant shall be determined such that the joint and survivor benefit is the actuarial equivalent (determined using the same fifty percent (50%) Joint and Survivor conversion factors as specified in the AFLAC Incorporated Pension Plan) of the Participant's Retirement Benefit payable as a life annuity.
4. TIME OF PAYMENT.
A Retirement Benefit shall commence on the first day of the calendar month coinciding with or next following a Participant's Retirement or death (in the case of the benefit provided under Section 3(c) hereof).
5. VESTING.
Except as otherwise provided in Section 8 of the Plan, no benefit shall be payable to a Participant if the Participant incurs a Termination of Employment or is removed from participation in the Plan by the Board prior to his Early Retirement Date.
6. NONALIENABILITY.
Except for the withholding of any tax under the laws of the United States or any state or locality, no Retirement Benefit payable at any time hereunder shall be subject in any manner to alienation, sale, transfer, assignment, pledge, attachment or other legal process, or encumbrance of any kind. Any attempt to alienate, sell, transfer, assign, pledge or otherwise encumber any such Retirement Benefit, whether currently or hereafter payable, shall be void. Except as otherwise specifically provided by law, no Retirement Benefit shall, in any manner, be liable for or subject to the debts or liabilities of any Participant or any other person entitled to such benefits.
7. MISCELLANEOUS.
(a) NO RIGHT TO CONTINUED EMPLOYMENT. This Plan shall not be construed as providing any Participant with the right to be retained in the employ of the Company (or any subsidiary or affiliate of the Company) or to receive any benefit not specifically provided for hereunder.
(b) PARTICIPATION IN OTHER PLANS. Nothing contained herein shall exclude or in any manner modify or otherwise affect any existing or future rights of any Participant to participate in and receive the benefits of any compensation, bonus, pension, life insurance, medical and hospitalization insurance or other employee benefit plan or program to which he otherwise might be or become entitled as an employee of the Company (or any subsidiary or affiliate of the Company).
(c) GOVERNING LAW. This Plan shall be construed in accordance with and governed by the laws of the State of Georgia, without regard to the conflict of law principles of Georgia.
(d) INCAPACITY. If the Company determines that any Participant is unable to care for his affairs because of illness or accident, any Retirement Benefit payment due hereunder (unless a prior claim therefore shall have been made by a duly appointed guardian, committee, or other legal representative) may be paid to such Participant's spouse, child, brother or sister, or to any person deemed by the Company to have incurred expenses for such person otherwise entitled to payment. Any such payment shall be a complete discharge of the liabilities of the Company hereunder.
(e) AMENDMENT OR TERMINATION OF THE PLAN. The Company shall have the right, at any time and from time to time, to amend in whole or in part, or to terminate any of the provisions of this Plan, and such amendment or termination shall be binding upon all Participants and parties in interest; provided, however, that no such amendment or termination shall impair any vested rights which have accrued to Participants hereunder prior to the date of such amendment or termination. Notwithstanding any other provisions of this Plan, for a period of three years following a Change in Control (as defined in Section 8(c) hereof), this Plan may not be (i) terminated or (ii) amended in any manner which would adversely affect in any way the amount of or the entitlement to retirement benefits hereunder or remove
a Participant from participation hereunder.
Notwithstanding any other provisions of this Section 7, the
foregoing provisions of this paragraph may not be amended
following a Change in Control without the written consent
of a majority in both number and interest of the
Participants who are actively employed by the Company (or
any subsidiary or affiliate of the Company), both
immediately prior to the Change in Control and at the date
of such amendment.
(f) GENDER. The masculine pronoun wherever used shall include the feminine pronoun, and the singular shall include the plural unless the context clearly indicates the distinction.
(g) HEADINGS. The headings of Sections and paragraphs herein are included solely for convenience of reference and shall not affect the meaning or interpretation of any of the provisions of this Plan.
8. CHANGE IN CONTROL OF THE COMPANY.
(a) TERMINATION WITHIN TWO YEARS OF A CHANGE IN CONTROL. If a
Participant's Termination of Employment occurs during the
two-year period following a Change in Control of the
Company, unless such Termination of Employment is (A)
because of the Participant's death or Disability (as
defined in Section 8(d)), (B) by the Company (or any
subsidiary or affiliate of the Company) for Cause (as
defined in Section 8(e)), or (C) by the Participant other
than for Good Reason (as defined below) (such Termination
of Employment being hereinafter referred to as "Qualifying
Termination"), such Participant shall be one hundred
percent (100%) vested in his Retirement Benefit and the
Company shall pay to the Participant, no later than the
fifth day following the date of the Participant's
Qualifying Termination, a lump sum amount (the "Cash-Out
Payment") equal to the greater of (i) the present value
(determined as of the date of the Qualifying Termination)
of the Retirement Benefit (assuming payment in the form
of a single life annuity) (a) to which the Participant is
entitled as of the date of the Qualifying Termination, or
(b) in the case of a Participant who has not yet qualified
for early retirement as of the date of his Qualifying
Termination, to which the Participant would have been
entitled had he remained in the employ of the Company until
his Early Retirement Date, and (ii) three times the
Participant's Final Pay. The present value of the
Retirement Benefit described in clause (i) above shall be
determined by using the mortality table and interest rate
utilized in the most recent actuarial valuation for the
AFLAC Incorporated Pension Plan.
(b) LIMITATION ON PAYMENTS. Notwithstanding any other provisions of this Plan in the event that any payment or benefit received or to be received by a Participant in connection with a Change in Control or the termination of the Participant's employment (whether pursuant to the terms of this Plan or any other plan, arrangement or agreement with the Company, any Person whose actions result in a Change in Control or any Person affiliated with the
Company or such Person) (all such payments and benefits
including the Cash-Out Payment, being hereinafter called
"Total Payments") would not be deductible (in whole or in
part), by the Company, an affiliate or Person making such
payment or providing such benefit as a result of Section
280G of the Internal Revenue Code of 1986 (the "Code"),
then, to the extent necessary to make such portion of the
Total Payments deductible (and after taking into account
any reduction in the Total Payments provided by reason of
Section 280G of the Code in such other plan, arrangement
or agreement), the Cash-Out Payment shall be reduced (if
necessary, to zero). For purposes of this limitation: (i)
no portion of the Total Payments, the receipt or enjoyment
of which the Participant shall have effectively waived in
writing prior to the Termination of Employment shall be
taken into account; (ii) no portion of the Total Payments
shall be taken into account which in the opinion of tax
counsel selected by the Company's independent auditors and
reasonably acceptable to the Participant does not
constitute a "parachute payment" within the meaning of
Section 280G(b)(2) of the Code, including by reason of
Section 280G(b)(4)(A) of the Code; (iii) the Cash-Out
Payment shall be reduced only to the extent necessary so
that the Total Payments (other than those referred to in
clauses (i) or (ii)) in their entirety constitute
reasonable compensation for services actually rendered
within the meaning of Section 280(b)(4)(B) of the Code or
are otherwise not subject to disallowance as deductions,
in the opinion of the tax counsel referred to in clause
(ii); and (iv) the value of any non-cash benefit or any
deferred payment or benefit included in the Total Payments
shall be determined by the Company's independent auditors
in accordance with the principles of Sections 280G(d)(3)
and (4) of the Code.
(c) CHANGE IN CONTROL. For purposes of the Plan, a "Change in Control of the Company" shall be deemed to have occurred if the conditions set forth in any one of the following paragraphs shall have been satisfied:
(I) any Person is or becomes the Beneficial Owner, directly or indirectly, of securities of the Company (not including in the securities beneficially owned by such Person any securities acquired directly from the Company or its affiliates) representing thirty percent (30%) or more of the combined voting power of the Company's then outstanding securities; or
(II) during any period of two consecutive years (not including any period prior to adoption of this Plan), individuals who at the beginning of such period constitute the Board and any new director (other than a director designated by a Person who has entered into an agreement with the Company to effect a transaction described in clause (I), (III) or (IV) of this paragraph), whose election by the Board of nomination for election by the Company stockholders was approved by a vote of at least two-thirds (2/3) of the directors then still in office who either were directors at the beginning of the period or whose election or nomination for election was previously so
approved, cease for any reason to constitute a majority thereof; or
(III) the shareholders of the Company approve a merger or
consolidation of the Company with any other
corporation, other than (i) a merger or consolidation
which would result in the voting securities of the
Company outstanding immediately prior thereto
continuing to represent (either by remaining
outstanding or by being converted into voting
securities of the surviving entity), in combination
with the ownership of any trustee or other fiduciary
holding securities under an employee benefit plan of
the Company, at least seventy-five percent (75%) of
the combined voting power of the voting securities of
the Company or such surviving entity outstanding
immediately after such merger or consolidation, or
(ii) a merger or consolidation effected to implement
a recapitalization of the Company (or similar
transaction) in which no Person acquires more than
fifty percent (50%) of the combined voting power of
the Company's then outstanding securities; or
(IV) the shareholders of the Company approve a plan of complete liquidation of the Company or an agreement for the sale or disposition by the Company of all or substantially all the Company's assets.
(d) DISABILITY. As used herein, the term "Disability" shall mean, as a result of a Participant's incapacity due to physical or mental illness, his absence from the full-time performance of his duties with the Company (or any subsidiary or affiliate of the Company) for six consecutive months, and his failure to return to the full-time performance of his duties within thirty (30) days after written notice of termination is given.
(e) CAUSE. As used herein, the term "Cause" shall mean (i) the
willful and continued failure by a Participant to
substantially perform the Participant's duties with the
Company or a subsidiary or affiliate of the Company (other
than any such failure resulting from the Participant's
incapacity due to physical or mental illness or any such
actual or anticipated failure after a Participant gives a
notice of termination of employment for Good Reasons) after
a written demand for substantial performance is delivered
to the Participant by the Board, which demand specifically
identifies the manner in which the Board believes that the
Participant has not substantially performed the
Participant's duties, or (ii) the willful engaging by the
Participant in conduct which is demonstrably and
materially injurious to the Company or its subsidiaries,
monetarily or otherwise. For purposes of clauses (i) and
(ii) of this definition, no act, or failure to act, on the
Participant's part shall be deemed "willful" unless done,
or omitted to be done, by the Participant not in good
faith and without reasonable belief that the Participant's
act, or failure to act, was in the best interest of the
Company. Notwithstanding the foregoing, a termination for
Cause shall not be deemed to have occurred unless and until
there shall have been delivered to the Participant a copy
of a resolution duly adopted by the affirmative vote of not less than three-quarters (3/4) of the entire membership of the Board at a meeting of the Board called and held for such purpose (after reasonable notice to the Participant and an opportunity for him, together with his counsel, to be heard before the Board), finding that in the good faith opinion of the Board the Participant engaged in conduct set forth above in this Section 8(e) and specifying the particulars thereof in detail.
(f) GOOD REASON. As used herein, the term "Good Reason" shall mean, without the express written consent of the Participant, the occurrence after a Change in Control of the Company of any of the following circumstances unless, in the case of paragraph (i), (v) or (vi), such circumstances are fully corrected prior to the date the Participant terminates employment.
(i) the assignment to the Participant of any duties
inconsistent with the position he held in the Company
(or any subsidiary or affiliate of the Company)
immediately prior to the Change in Control of the
Company, or a significant adverse alteration in the
nature or status of his responsibilities from those
in effect immediately prior to such change;
(ii) a reduction by the Company in the Participant's annual base salary, or a reduction by the Company in the Participant's total compensation, as in effect on the Effective Date or as the same may be increased from time to time;
(iii) the relocation of the Company's principal executive offices to a location outside the Columbus, Georgia Metropolitan Area (or, if different, the metropolitan area in which such offices are located immediately prior to the Change in Control of the Company) or the Company's requiring the Participant to be based anywhere other than the Company's principal executive offices except for required travel on the Company's business to an extent substantially consistent with the Participant's business travel obligations immediately prior to the Change in Control;
(iv) the failure by the Company (or any subsidiary or
affiliate of the Company) to pay to the Participant
any portion of his current compensation within seven
(7) days of the date such compensation is due;
(v) the failure by the Company (or any subsidiary or affiliate of the Company) to continue in effect any compensation plan in which the Participant participates immediately prior to the Change in Control of the Company which is material to the Participant's total compensation, unless an equitable arrangement (embodied in an ongoing substitute or alternative plan) has been made with respect to such plan, or the failure by the Company (or any subsidiary or affiliate of the Company) to continue the Participant's participation therein (or in such substitute or alternative plan) on a basis not
materially less favorable, both in terms of the amount of benefits provided and the level of the Participant's participation relative to other Participants, as existed at the time of the Change in Control of the Company; or
(vi) the failure by the Company (or any subsidiary or affiliate of the Company) to continue to provide the Participant with benefits substantially similar to those enjoyed by him under any of the Company's life insurance, medical, health and accident, retirement, or used in Sections 13(d) and 14(d) thereof; however, a Person shall not include (i) the Company or any of its subsidiaries, (ii) a trustee or other fiduciary holding securities under an employee benefit plan of the Company or any of its subsidiaries, (iii) an underwriter temporarily holding securities pursuant to an offering of such securities, or (iv) a corporation owned, directly or indirectly, by the stockholders of the Company in substantially the same proportions as their ownership of stock of the Company.
9. SUCCESSORS.
The Company shall require any successor (whether direct or indirect, by purchase, merger, consolidation or otherwise) to all or substantially all of the business and/or assets of the Company to expressly assume the Company's obligations hereunder in the same manner and to the same extent that the Company would be required to perform if no such succession had taken place.
10. LEGAL EXPENSES.
The Company shall pay or reimburse a Participant for all fees and disbursements of counsel, if any, incurred by the Participant in seeking to obtain or enforce any right or benefit provided by this Plan.
AFLAC INCORPORATED
/s/ Daniel P. Amos
_____________________________
DANIEL P. AMOS
Chief Executive Officer
ATTEST: /s/ Joey M. Loudermilk
_____________________________
Corporate Secretary
|
(CORPORATE SEAL)
EXHIBIT 10.4*
STATE OF GEORGIA
COUNTY OF MUSCOGEE
EMPLOYMENT AGREEMENT
THIS AGREEMENT, made and entered into as of the 1st day of August, 1993, by and between AFLAC Incorporated, a Georgia corporation, hereinafter referred to as "Corporation," and DANIEL P. AMOS, a resident of said State and county, hereinafter referred to as "Employee;"
W I T N E S S E T H T H A T:
WHEREAS, Employee has been employed as an executive by Corporation since 1973 in various capacities, most recently in his position as Chief Executive Officer; and
WHEREAS, Corporation and Employee desire to set forth the existing and continuing terms and conditions of Employee's employment by Corporation as its Chief Executive Officer;
NOW, THEREFORE, the parties, for and in consideration of the mutual covenants and agreements hereinafter contained, do contract and agree as follows, to-wit:
1. PURPOSE AND EMPLOYMENT. The purpose of this Agreement is to define the relationship between Corporation as an employer and Employee as an employee and Chief Executive Officer of Corporation.
2. DUTIES. Employee agrees to continue to provide executive management services as Chief Executive Officer of Corporation to Corporation and its subsidiaries and affiliates on a full-time and exclusive basis; provided, however, nothing shall preclude Employee from serving on boards of directors of other corporations; engaging in charitable and community affairs or managing his own or his family's personal investments.
3. PERFORMANCE. Employee agrees to devote all necessary time and his best efforts in the performance of his duties as Chief Executive Officer of Corporation on behalf of Corporation and its subsidiaries and affiliates.
4. TERM. The term of employment under this Agreement shall begin August 1, 1993, and shall continue for a period of three (3) years until July 31, 1996, unless extended or sooner terminated as hereinafter provided. On an annual basis beginning effective August 1, 1994, the scheduled term of this Agreement shall be extended for successive one year periods unless written notice of termination is given prior to such annual date of party to the other party that the Agreement will not be extended by its terms.
5. BASE SALARY. For all the services rendered by Employee, Corporation shall continue to pay Employee a base salary of $893,585.00 per year commencing August 1, 1993, said salary to be payable in accordance with Corporation's normal payroll procedures. Employee's base salary shall be increased annually during the term of this Agreement and any extensions hereof in the same general proportion as the annual increases in the base salaries of other senior executive officers of Corporation as determined by the Corporation's Compensation Committee acting on behalf of the Board of Directors of Corporation (the "Board").
6. ADJUSTMENTS TO BASE SALARY. Corporation and Employee shall, from time to time, reflect increases in Employee's base salary as provided for in Paragraph 5 by entering the change on the "Schedule of Compensation," attached hereto as Exhibit "A" and made a part hereof. If an increase in compensation is entered on said Schedule and duly signed by the proper officers of Corporation and by Employee, said entry shall constitute an amendment to this Employment Agreement as of the date of said entry and shall supersede the base salary provided for in Paragraph 5 and any other increases in Employee's base salary previously entered on said Schedule.
7. MANAGEMENT INCENTIVE PLAN. In addition to the base salary paid to Employee in accordance with Paragraph 5, Corporation shall for each calendar year of Employee's employment by Corporation, beginning with the calendar year 1993, continue to pay Employee, as performance bonus compensation, an amount determined each year under Corporation's current Management Incentive Plan (short-term Incentive Program) with a target level based on Seventy percent (70%) of base salary. Nothing in this paragraph shall preclude Employee from receiving additional discretionary bonuses approved by the Board.
8. EMPLOYEE BENEFITS. Employee shall be eligible to participate with other employees of the Corporation in all fringe benefit programs applicable to employees generally which may be authorized and adopted from time to time by the Board, including without limitation: a qualified pension plan, a profit sharing plan, a disability income or sick pay plan, a thrift and savings plan, an accident and health plan (including medical reimbursement and hospitalization and major medical benefits), and a group life insurance plan. In addition, Corporation shall furnish to Employee such other "fringe" or employee benefits as are provided to key executive employees of Corporation and such additional employee benefits which the Compensation Committee of the Board shall determine to be appropriate to Employee's duties and responsibilities as Chief Executive Officer of Corporation, including, without limitation, reimbursement of legal and accounting expenses incurred by Employee in connection with the preparation of his employment or other agreements with Corporation and any expenses for legal, accounting or financial services incurred by Employee in connection with his employment.
9. RETIREMENT PLAN FOR SENIOR OFFICERS. Employee shall continue to participate in Corporation's Retirement Plan for Senior Officers which provides retirement, medical, and other benefits to certain senior officers of the Corporation, upon all of the terms and conditions of the Plan, said Plan being entitled Retirement Plan for Senior Officers (as amended and restated October 1, 1989).
10. STOCK OPTIONS.
A. Employee shall continue to be eligible to be awarded stock options to purchase Corporation's common stock under Corporation's Stock Option Plans for selected key employees and Directors during the term of this Agreement.
B. As an inducement to enter into this Agreement, the Employee shall be granted an option to purchase Three Hundred Thousand (300,000) shares of the common stock of the Corporation pursuant to the Corporation's 1985 Stock Option Plan (the "Plan") as in effect on the date of grant at a price equal to the full market value of the Corporation's stock as of the date of the grant of the option and upon such other terms as set forth in the Plan and the related Option Agreement, said option to be exercisable subject to the following vesting schedule: 150,000 on
August 1, 1993 and 150,000 on January 1, 1994. The foregoing option grant shall be subject to approval of an amendment to increase the number of shares authorized pursuant to the Plan by the shareholders of the Corporation at the next Annual Meeting of Shareholders and to compliance in all respects with the provisions of Rule 16b-3. Employee shall not be entitled to any additional stock option grants until the expiration of the initial term of this Agreement (July 31, 1996).
11. WORKING FACILITIES AND EXPENSES. Employee shall continue to be provided with an office, books, periodicals, stenographic and technical help, ground and air transportation, and such other facilities, equipment, supplies and services suitable to his position and adequate for the performance of his duties. The Corporation shall continue to pay Employee's dues in such social and country clubs, civic clubs and business societies and associations as shall be appropriate in facilitating Employee's job performance and in the best interest of Corporation. The Corporation shall also continue to pay all appropriate business liability insurance and any business licenses and fees pertaining to the services rendered by Employee hereunder.
Employee is encouraged and is expected, from time to time to incur reasonable expenses for promoting the business of Corporation, including expenses for social and civic club memberships and participation, entertainment, travel and other activities associated with Employee's duties. The cost of all such activities shall be the expense of Corporation unless the Compensation Committee of the Board shall determine in advance that any such expense of Employee should be paid by Employee.
12. VACATION. Employee shall continue to be entitled to his vacation time with pay during each calendar year in accordance with Corporation's vacation policy for senior executive employees. In addition, Employee shall be entitled to such holidays as Corporation shall recognize for its employees generally.
13. SICKNESS AND TOTAL DISABILITY. Employee's absence from work because of sickness or accident (not resulting in Employee becoming "totally disabled," as that term is hereinafter defined) shall not result in any adjustment in Employee's compensation or other benefits under this Agreement.
Should Employee become totally disabled as a result of sickness or
accident and unable to adequately perform his regular duties prescribed
under this Agreement, his base salary (which shall continue to be adjusted
as provided for in Paragraph 5), together with incentive bonuses under the
Corporation's Management Incentive Plan and his participation in
Corporation's employee benefit programs and retirement plans shall
continue without reduction except as hereinafter provided, during the
continuance of such disability for a period not exceeding the earlier of
(1) the end of the term of this Agreement or any extension hereof or (2)
a period of one and one-half (1-1/2) years (547 calendar days) for each
continuous disability. Payments pursuant to this paragraph 13 shall be
reduced by any amounts paid to Employee during any such period of
disability from time to time under any disability programs, plans or
policies maintained by Corporation, its subsidiaries or affiliates.
Should Employee's total disability continue for a period beyond the end of the term of this Agreement or in excess of 547 calendar days, this Agreement shall, at the end of such period which first occurs, be automatically terminated. If, however, prior to such time, Employee's total disability shall have ceased and he shall have resumed the adequate performance of his duties hereunder, this Agreement shall continue in full
force and effect and Employee shall be entitled to continue his employment hereunder and to receive his full compensation and other benefits as though he had not been disabled; provided, however, unless Employee shall adequately perform his duties hereunder for a continuous period of at least sixty (60) calendar days following a period of total disability before Employee again becomes totally disabled, he shall not be entitled to start a new 547-day period under this paragraph, but instead may only continue under the remaining portion of the original 547-day period of total disability. In the event Employee shall not adequately perform his duties hereunder for a continuous period of at least sixty (60) calendar days following a period of total disability, the running of the original 547-day period shall cease during the time of Employee's adequate performance of his duties hereunder before Employee again becomes totally disabled.
It is understood that for purposes of this Paragraph 13, Employee shall, upon his becoming totally disabled, be given such additional "credited service" if necessary to fully qualify Employee under Corporation's Retirement Plan for Senior Officers and to provide a survivor annuity to Employee's spouse under the Plan.
For the purpose of this Agreement, the term "totally disabled" or "total disability" shall mean Employee's inability to adequately perform his executive and management duties hereunder on account of accident or illness. It is understood that Employee's occasional sickness or other incapacity of short duration may not result in his being or becoming "totally disabled;" however, such illness or incapacity could constitute Employee's being or becoming "totally disabled" if such illness or incapacity is prolonged or recurring.
14. TERMINATION OF EMPLOYMENT.
A. TERMINATION BY CORPORATION. Corporation may, when acting in accordance with resolutions adopted by a two-third's (2/3) majority vote of its entire Board acting at a meeting called for the purpose of considering Employee's termination, terminate this Agreement, at any time, with or without "good cause" ("good cause" being hereinafter defined), by giving at least sixty (60) days' written notice to Employee of its intention to terminate Employee's employment without "good cause" or at least five (5) days' written notice to Employee of its intention to terminate Employee's employment for "good cause"; provided, however, Corporation may, at its election, terminate Employee's actual employment (so that Employee no longer renders services on behalf of Corporation) at any time during said sixty (60) day or five (5) day period; and,
(1) In the event such termination is for "good cause," Corporation shall be obligated only to:
(a) pay Employee his base salary as provided for in
Paragraph 5 of this Agreement up to the termination
date stated in said written notice; provided,
however, if Corporation does not elect to terminate
Employee's employment during said five (5) day
period, but Employee, after receiving such notice of
termination from Corporation, elects to leave the
employ of Corporation prior to the end of said five
(5) day period without the approval of Corporation,
then Corporation shall pay said base salary only up
to the date on which Employee actually terminates
his employment;
(b) pay Employee any performance bonus due Employee under Paragraph 7 of this Agreement for the period ending on the termination date stated in said written notice or on such earlier date of Employee's actual termination of his employment prior to the end of said five (5) day period if such termination is without the approval of Corporation. The amount of said bonus, if any shall be calculated on a prorata basis, using the number of days Employee was actually employed during such period, and the amount so calculated shall be paid to Employee within a reasonable time after the end of Corporation's fiscal year in which written notice of Employee's termination is given;
(c) continue to honor all fully vested stock options, subject to the terms thereof, granted to Employee prior to the termination date stated in said written notice or prior to such earlier date of Employee's actual termination of his employment prior to the end of said five (5) day period if such termination is without the approval of the Corporation;
(d) continue to pay all of Employee's fringe and other employee benefits as provided for in this Agreement up to the termination date sated in said written notice or up to such earlier date of Employee's actual termination of his employment prior to the end of said five (5) day period if such termination is without the approval of the Corporation.
(e) For purposes of this subparagraph (1) and Paragraph
19 hereof, "good cause" shall mean: (i) the willful
and deliberate failure by Employee to substantially
perform his executive and management duties
hereunder for a continuous period of more than sixty
(60) days for reasons other than Employee's
sickness, injury or disability; (ii) the willful and
deliberate conduct by Employee which is intended by
Employee to cause, and which does in fact result in
substantial injury or damage to Corporation; or
(iii) the conviction or plea of guilty by Employee
of a felony crime involving moral turpitude.
Prior to the Corporation's decision to terminate Employee's employment for "good cause" as hereinabove provided, the Board shall give written notice to Employee setting forth the specific charges against Employee being considered by the Board to constitute "good cause" as defined in this subparagraph and the Board shall, within thirty (30) days after such notice, give Employee an opportunity to fully respond and defend himself against such charges before the Board. Within fifteen (15) days after the last day on which Employee is given the opportunity to defend himself before the Board, the Board, acting in good faith, shall make its determination as to whether or not the charges against Employee constitute "good cause" and shall notify Employee in writing of its determination together with a full explanation of the basis thereof.
(2) In the event such termination is without "good cause," as defined in subparagraph (1)(e) of this Paragraph and, if applicable, subject to the terms of Paragraph 19 Corporation shall be obligated to:
(a) pay Employee his base salary as provided for in Paragraph 5 of this Agreement up to the end of the scheduled term of this Agreement;
(b) pay Employee his performance bonus compensation as provided for in Paragraph 7 of this Agreement up to the end of the scheduled term of this Agreement;
(c) continue to honor all stock options, subject to the terms thereof, granted to Employee prior to the termination date stated in said written notice, all of said options to be or become fully vested as of the termination date stated in said written notice;
(d) continue to pay or provide to Employee all of the retirement, health, life and disability benefits, as are provided for in this Agreement or under any programs, plans or policies covering Employee at the time of any such notice of termination, up to the end of the scheduled term of this Agreement; and
(e) pay Employee and, if elected by Employee, his wife
such retirement benefits as provided for in the
Retirement Plan for Senior Officers under Paragraph
9 hereof, said benefits to commence on the first
(1st) day of the month immediately following the
scheduled termination date of this Agreement. For
purposes of this subparagraph, Employee shall
continue to accrue "credited service" as an employee
under the Retirement Plan for Senior Officers up
through the scheduled termination date of this
Agreement.
B. TERMINATION BY EMPLOYEE. Employee may terminate this Agreement, at any time, by giving at least sixty (60) days' written notice to Corporation of his intention to terminate his employment; and
(1) in the event such termination by Employee shall be without "good reason" (as defined in Paragraph 19 hereof) and with a bona fide intent to retire or to work or engage in a business or activity which is not in competition with Corporation or any of its subsidiaries or affiliates, Corporation shall be obligated to:
(a) pay Employee his base salary due him under Paragraph 5 of this Agreement up to the termination date stated in said written notice;
(b) pay Employee any performance bonus compensation due him under Paragraph 7 of this Agreement for the period ending on the termination date stated in said written notice. The amount of such performance bonus, if any, shall be calculated on a prorata basis, using the number of days Employee was actually employed by Corporation during such year of termination; and the amount so calculated shall be paid to Employee within a reasonable time after the end of Corporation's fiscal year in which Employee's notice of termination is given;
(c) continue to honor all stock options, subject to the terms thereof, granted to Employee which are fully
vested prior to the termination date stated in said written notice;
(d) pay Employee, and if elected by Employee, his wife such retirement benefits as are provided for in the Retirement Plan for Senior Officers under Paragraph 9 hereof, said benefits to commence at such time as provided for under the Retirement Plan. For purposes of this subparagraph, Employee shall continue to accrue "credited service" as Employee under the Retirement Plan for Senior Officers up through the termination date stated in said written notice.
(2) In the event such termination by Employee shall be for "good reason" (as defined in paragraph 19 hereof), the Corporation shall be obligated to provide employee with the payments, benefits and rights specified in subparagraphs a.(2)(a)-(e) of this Paragraph 14 hereof.
(3) In the event such termination by Employee shall be without "good reason" (as defined in paragraph 19 hereof) and with the intention or purpose to work or invest, directly or indirectly, in a business or activity which is in competition, directly or indirectly, with Corporation or any of its subsidiaries or affiliates or, irrespective of Employee's intention at the time of his termination, if Employee shall violate his covenant not to compete under Paragraph 16 or the requirements of paragraph 17, then Corporation shall not be obligated to make or provide any further payments or benefits to Employee under this Agreement except as herein provided in this subparagraph.
(a) Subject to Corporation's rights under Paragraphs 16 and 17, Corporation shall pay Employee his base salary due him under Paragraph 5 of this Agreement up to the termination date stated in said written notice;
(b) Subject to Corporation's rights under Paragraphs 16 and 17 hereof, Corporation shall continue to honor all stock options, subject to the terms thereof, granted to Employee which are fully vested prior to the termination date stated in said written notice;
(c) Corporation shall, subject to consent of the Board, pay Employee, and if elected by Employee, his wife such retirement benefits as are provided for in the Retirement Plan for Senior Officers under Paragraph 9 hereof, said benefits to commence at such time as provided for under the Retirement Plan.
C. TERMINATION WHILE DISABLED. If Employee is totally disabled at the time any such notice of termination is given, then, notwithstanding the provisions of this Paragraph 14, Corporation shall nevertheless continue to pay Employee, as his sole compensation hereunder, the compensation and other benefits for the remaining period of Employee's total disability as provided for in Paragraph 13 hereinabove. It is understood that in no event shall such disabled Employee be entitled to compensation under this Paragraph 14 in addition to the continuation of his compensation under Paragraph 13.
D. COOPERATION AFTER NOTICE OF TERMINATION. Following any such notice of termination, Employee shall fully cooperate with Corporation in
all matters relating to the winding up of his pending work on behalf of Corporation and the orderly transfer of any such pending work to other employees of Corporation as may be designated by the Board; and to that end, Corporation shall be entitled to such full-time or part-time services of Employee as Corporation may reasonably require during all or any part of the 60-day period following any such notice of termination.
15. DEATH OF EMPLOYEE. In the event of Employee's death during the term of this Agreement or any extension hereof, this Agreement shall terminate immediately, and Employee's estate shall be entitled to receive terminal pay in an amount equal to the amount of Employee's base salary and any performance bonus compensation actually paid by Corporation to Employee during the last thirty-six (36) months of his life, said terminal pay to be paid in thirty-six (36) equal monthly installments beginning on the first day of the month next following the month during which Employee's death occurs. Terminal pay as herein provided for in this paragraph shall be in addition to amounts otherwise receivable by Employee or his estate under this or any other agreements with Corporation or under any employee benefit or retirement plans established by Corporation and in which Employee is participating at the time of his death. In addition, Corporation shall honor all stock options, subject to the terms thereof, granted to Employee prior to his death and Employee or his estate shall, if not otherwise vested, become fully vested in said options as of the date of Employee's death. For purposes of this Paragraph, Employee shall, upon his death, be given such additional "credited service" as necessary to fully qualify Employee under Corporation's Retirement Plan for Senior Officers and to provide a survivor annuity to Employee's spouse under the Plan.
16. AGREEMENT NOT TO COMPETE. It is specifically agreed that, in the event Employee shall voluntarily terminate his employment without "good reason" (as defined in paragraph 19) or be terminated by Corporation for "good cause" (as defined in Paragraph 14), Employee shall not work for a period of two (2) years from the date of such termination as a manager, officer, owner, partner or employee or render any services as a consultant or advisor or engage or invest, directly or indirectly, in any business activity which is in competition, directly or indirectly, with Corporation, its subsidiaries or affiliates within the United States of America (excluding any state in which Corporation, its subsidiaries, and affiliates have not been engaged in business activities within one (1) year prior to the date of Employee's termination of employment), the country of Japan, or within two hundred (200) miles of any office of Corporation, its subsidiaries or affiliates outside the United States of America or Japan which was in existence, or in the process of being established, at the time of Employee's termination of employment. Provided, however, it is agreed that Employee may invest in the publicly traded securities of any corporation, partnership or trust which is in competition with Corporation so long as such investment does not exceed three percent (3%) of such securities at any time. It is specifically agreed that if, after Employee's termination of employment, Employee engages in any such prohibited activity at any time during said two (2) year period, Corporation shall, in addition to any other rights it may have under this contract and applicable law, be entitled to injunctive relief or, if Corporation shall so elect (due to the difficulty of determining damages) be entitled to liquidated damages in the amount of One Million Dollars ($1,000,000.00) which Employee agrees to promptly pay to Corporation upon demand.
17. NONDISCLOSURE OF TRADE SECRETS AND CONFIDENTIAL INFORMATION. Employee agrees to protect the business interest of Corporation, its subsidiaries and affiliates, and not to disclose any trade secrets,
confidential information or any organizations, operating, marketing, product design, or businesses know-how which Employee has access to or knowledge of as a result of his employment by Corporation. It is specifically agreed that if, at any time during the term of this Agreement and for a period of two (2) years after the date of Employee's termination of employment with Corporation for any reason, Employee shall violate the provisions of this Paragraph 17, Corporation shall, in addition to any rights it may have under this contract and applicable law, be entitled to liquidated damages of One Million Dollars ($1,000,000.00) which employee agrees to promptly pay Corporation upon demand. It is understood and agreed that Corporation's remedies under this Paragraph 17 shall be separate and in addition to the remedies provided to Corporation under Paragraph 16 hereof. It is also understood and agreed that, notwithstanding the foregoing two (2) year period, Employee shall not sue or disclose any written confidential information or any policyholder lists at any time or times hereafter, except in the performance of Employee's obligations to the Corporation.
18. RIGHT TO ACQUIRE INSURANCE. If Employee shall terminate his employment hereunder for any reason other than death, he may, at his election, acquire any insurance policies upon his life owned by the Corporation by giving written notice of his election to Corporation within ninety (90) days after his termination of employment. Such policies shall be transferred to the employee upon his payment to Corporation of the then interpolated terminal reserve value of said insurance. In the event any policies transferred to Employee as herein provided shall not have an interpolated terminal reserve value, then the amount to be paid by Employee shall be its then fair market value.
19. CHANGE IN CONTROL.
A. IN GENERAL. In the event there is a Change in Control (as defined in this Paragraph) of Corporation, this Agreement shall, in order to help eliminate the uncertainties and concerns which may arise at such time, be automatically extended upon all of the same terms and provisions contained herein, for an additional period of three (3) years, beginning on the first day of the month during which such Change in Control shall occur.
B. Notwithstanding the terms of subparagraphs A(2) and B(2) of
Paragraph 14, and in lieu of the obligations of the Corporation under such
Paragraphs, if, after a Change in Control, Employee's employment is
terminated by Corporation without "good cause" (as defined in Paragraph
4), or is terminated by Employee for "good reason" (as defined in this
Paragraph 19), any such termination by Corporation to be made only in
accordance with the requirements specified by paragraph 14A, Employee
shall be entitled to the following:
(1) The Corporation shall pay Employee's full base salary to Employee though the date of termination stated in Corporation's written notice required pursuant to Paragraph 14A hereof (hereinafter in this Paragraph the "Termination Date") at the rate in effect on the date such notice is given and, additionally shall pay Employee all compensation and benefits payable to Employee under the terms of any compensation or benefit plan, program or arrangement maintained by the Corporation during such period through the Termination Date.
(2) The Corporation shall pay Employee all compensation and benefits due Employee under Corporation's retirement, insurance and other compensation or benefit plans, programs or arrangements as such payments become due. The amount of such compensation and benefits shall be
determined under, and paid in accordance with, Corporation's retirement, insurance and other compensation or benefit plans, programs and arrangements.
(3) In lieu of any further salary payments to Employee for periods subsequent to the Termination Date, the Corporation shall pay to Employee, immediately after the Termination Date, a lump sum severance payment, in cash, equal to three times the sum of (i) Employee's annual base salary in effect immediately prior to the Change in Control and (ii) the higher of the amount paid to Employee pursuant to the Corporation's Management Incentive Plan (or any successor plan thereto) for the year preceding the year in which the Termination Date occurs or paid in the year preceding the year in which the Change in Control occurs.
(4) The Corporation shall pay to Employee, immediately after the Termination Date, a lump sum amount, in cash, equal to a prorata portion (based on the number of days Employee is an employee during the year in which the Termination Date Occurs) of the aggregate value of the maximum annual target amount of all contingent incentive compensation awards to Employee for all uncompleted periods under the Corporation's Management Incentive Plan (or successor plan thereto).
(5) For a thirty-six (36) month period after the Termination date, the Corporation shall provide Employee with life, disability, accident and health insurance benefits substantially similar to and equal or greater in economic value than such benefits which Employee is receiving immediately prior to the Termination Date (without giving effect to any reduction in such benefits subsequent to a Change in Control which reduction in benefits would constitute "good reason" as defined in this Paragraph). Benefits required to be provided to Employee pursuant to this subparagraph B5 shall be reduced by or made available to Employee without cost during such thirty-six (36) month period and any such benefit actually received by Employee shall be reported to the Corporation by Employee.
C. In addition to the payments provided for in subparagraph B of this Paragraph 19, in the event that after a Change in Control Employee's employment by the Corporation is terminated by the Corporation without "good cause" or by Employee for "good reason," the Corporation shall continue to honor all stock options granted to Employee (subject to the terms of such options) prior to the Termination Date, and all stock options granted to Employee prior to the Termination Date shall become fully vested and exercisable as of the Termination Date.
D. Notwithstanding any other provision of this Agreement, in the event that any payment or benefit received or to be received by Employee in connection with a Change in Control or the termination of Employee's employment (whether pursuant to the terms of this Agreement or any other plan, arrangement or agreement with the Corporation, any Person whose actions result in a Change in Control or any Person affiliated with the Corporation or such Person) (all such payments and benefits being hereinafter called "Total Payments") would not be deductible (in whole or in part) by the Corporation, an affiliate or Person making such payment or providing such benefits as a result of section 280G of the Internal Revenue Code of 1986 (the "Code") then, to the extent necessary to make such portion of the Total Payments deductible (and after taking into account any reduction in the Total Payment provided by reason of Section 280G of the Code in such other plan, arrangement or agreement), adjustments in such payments shall be made as follows: (1) the cash payments provided pursuant to subparagraph B.(3) and B.(4) of this Paragraph 19 shall first be reduced (if necessary, to zero), and (2)
benefits provided under subparagraph B.(5) of this Paragraph 19 shall next
be reduced. For purposes of this limitation (i) no portion of the Total
Payments the receipt or enjoyment of which Employee shall have effectively
waived in writing prior to the date of termination of employment shall be
taken into account, (ii) no portion of the Total Payments shall be taken
into account which in the opinion of tax counsel selected by the
Corporation's independent auditors and reasonably acceptable to Employee
does not constitute a "parachute payment" within the meaning of section
280G(b) (2) of the Code, including by reason of section 280G(b) (4) (A) of
the Code, (iii) the payments and benefits provided under subparagraphs
B.(3)-(5) of this Paragraph 19 shall be reduced only to the extent
necessary so that the Total Payments (other than those referred to in
clauses (i) or (ii)) in their entirety constitute reasonable compensation
for services actually rendered within the meaning of section 280G(b) (4)
(B) of the Code or are otherwise not subject to disallowance as
deductions, in the opinion of the tax counsel referred to in clause (ii);
and (iv) the value of any non-cash benefit or any deferred payment or
benefit included in the Total Payments shall be determined by the
Corporation's independent auditor in accordance with the principles of
sections 280G(d) (3) and (4) of the Code. In no event shall the
Corporation's obligation to continue to honor all stock options granted to
Employee prior to the Termination Date nor the vesting of stock options in
accordance with Paragraph 19.C hereof be effected by this Paragraph 19.D.
E. DEFINITIONS.
(1) "Beneficial Owner" has the meaning provided in Rule 13d- 3 under the Exchange Act.
(2) "Change in Control" means the occurrence of either (a),
(b), (c) or (d), as hereinafter set forth:
(a) any Person is or becomes the Beneficial Owner, directly or indirectly, of securities of the Corporation (not including in the securities beneficially owned by such Person any securities acquired directly from the Corporation, subsidiaries or its affiliates) representing 30% or more of the combined voting power of the Corporation's then outstanding securities; or
(b) during any period of two consecutive years (not
including any period prior to the execution of this
Agreement), individuals who at the beginning of such
period constitute the Board and any director (other
than a director designated by a Person who has
entered into an agreement with the Corporation to
effect a transaction described in clause (a), (c) or
(d) of this subparagraph) whose election by the
Board or nomination for election by the
Corporation's stockholders was approved by a vote of
at least two-thirds (2/3) of the members of the
Board (or, if Board nominations are not voted on by
the full Board, members of the Board Committee
voting on such nominations) then still in office who
either were members of the Board at the beginning of
the period or whose election or nomination for
elections was previously so approved, cease for any
reason to constitute a majority of the Board; or
(c) the shareholders of the Corporation approve a merger or consolidation of the Corporation with any other Corporation, other than (i) a merger or consolidation which would result in the voting securities of the Corporation outstanding immediately prior thereto continuing to represent (either by remaining outstanding or by being converted into voting securities or the surviving entity), in combination with the ownership of any trustee or other fiduciary holding securities under an employee benefit plan of the Corporation, at least 75% of the combined voting power of the voting securities of the Corporation or such surviving entity outstanding immediately after such merger or consolidation, or (ii) a merger or consolidation effected to implement a recapitalization of the Corporation (or similar transaction) in which no Person acquires more than 30% of the combined voting power of the Corporation's then outstanding securities; or
(d) the shareholders of the Corporation approve a plan of complete liquidation of the Corporation or an agreement for the sale or disposition by the Corporation of all or substantially all the Corporation's assets.
(3) "Exchange Act" shall mean the Securities Exchange Act of 1934, as amended.
(4) "Person" shall have the meaning given in Section 3(a)
(9) of the Exchange Act, as modified and used in Sections 13(d) and 14(d)
of the Exchange Act; however, a Person shall not include (a) the
Corporation or any of its subsidiaries, (b) a trustee or other fiduciary
holding securities under an employee benefit plan of the Corporation or
any of its subsidiaries, (c) an underwriter temporarily holding securities
pursuant to an offering of such securities, or (d) a corporation owned,
directly or indirectly, by the stockholders of the Corporation in
substantially the same proportions as their ownership of stock of the
Corporation.
(5) "Good reason" shall mean the termination of employment by Employee upon the occurrence of any one or more of the following events:
(a) Any breach by Corporation of the terms and conditions of this Agreement affecting Employee's salary and bonus compensation, any employee benefit, stock options or the loss of any of Employee's titles or positions with Corporation;
(b) A significant diminution of Employee's duties and responsibilities;
(c) The assignment to Employee of any duties inconsistent with or significantly different from his duties and responsibilities existing at the time of a Change in Control.
(d) Any purported termination of Employee's employment by Corporation other than as permitted by this Agreement;
(e) The relocation of Corporation's principal office or of Employee's own office to any place beyond twenty- five (25) miles from the current principal office of Corporation in Columbus, Georgia;
(f) The failure of any successor to Corporation to expressly assume and agree to discharge Corporation's obligations to Employee under this Agreement as extended under this Paragraph, in form and substance satisfactory to Employee.
F. CONTINUATION OF COMPENSATION AND BENEFIT. If Corporation shall attempt to terminate Employee's employment at any time after a Change in Control and such termination is in good faith disputed by Employee, Corporation shall continue to pay Employee all of his compensation and benefits provided for in this Agreement until the dispute is finally resolved, either by mutual written agreement or by final judgment, order or decree of a court of competent jurisdiction.
20. NO REQUIREMENT TO SEEK EMPLOYMENT AND NO OFFSET. Corporation agrees that, if Employee's employment is terminated by Corporation during the term of this Agreement, Employee is not required to see other employment or attempt in any way to reduce the amounts payable to Employee by Corporation pursuant to the applicable terms of this Agreement; it being understood and agreed that the amount of any payment or benefit to Employee provided for hereunder shall not be reduced by any compensation or other benefits earned by Employee as a result of his employment by another employer or, after a Change in Control, by Corporation's attempt to offset any amount claimed to be owed by Employee to Corporation or otherwise.
21. WAIVER OF BREACH OR VIOLATION NOT DEEMED CONTINUING. The waiver by either party of a breach or violation of any provisions of this Agreement shall not operate as or be construed to be a waiver of any subsequent breach hereof.
22. NOTICES. Any and all notices required or permitted to be given under this Agreement will be sufficient if furnished in writing, sent by registered or certified mail to his last known residence in the case of Employee or to its principal office in Columbus, Georgia, in the case of the Corporation.
23. AUTHORITY. The provisions of this Agreement required to be approved by the Board of Directors of Corporation have been so approved and authorized.
24. ARBITRATION. Except for any dispute or matter arising after a Change in Control, as defined in Paragraph 19, any dispute arising under this Agreement, to the maximum extent allowed by applicable law, shall be subject to arbitration and prior to commencing any court action, the parties agree that they shall arbitrate all controversies. The arbitration shall be pursuant to the terms of the Federal Arbitration Act. The parties shall notify each other of the existence of an arbitrable controversy by certified mail and shall attempt in good faith to resolve their differences within fifteen (15) days after the receipt of such notice. Notice to Employee shall be sent to Employee's address as it appears in Corporation's records and notice to Corporation shall be sent to: Arbitration Officer, AFLAC Incorporated, AFLAC Worldwide Headquarters, Columbus, Georgia 31999. If the dispute cannot be resolved within said fifteen (15) day period, either party may file a written demand for arbitration with the other party. The party filing such demand
shall simultaneously specify his or its arbitrator, giving the name, address and telephone number of said arbitrator. The party receiving such notice shall notify the party demanding the arbitration of his or its arbitrator giving the name, address, and telephone number of said arbitrator within five (5) days of the receipt of such demand. The arbitrator named by the respective parties need not be neutral. The Senior Judge of the Superior Court of Muscogee County, Georgia, on request by either party, shall appoint a neutral person to serve as the third arbitrator and shall also appoint an arbitrator for any party failing or refusing to name his arbitrator within the time herein specified. The arbitrators thus constituted shall promptly meet, select a chairperson, fix the time and place of the hearing, and notify the parties. The majority of the panel shall render an award within ten (10) days of the completion of the hearing, and shall promptly transmit an executed copy of the award to the respective parties. Such an award shall be binding and conclusive upon the parties hereto, in the absence of fraud or corruption. Each party shall have the right to have the award made the judgment of a court of competent jurisdiction.
25. GOVERNING LAW. This Agreement shall be interpreted, construed and governed according to the laws of the State of Georgia.
26. PARAGRAPH HEADINGS. The paragraph headings contained in this Agreement are for convenience only and shall in no manner be construed as part of this Agreement.
27. TWO ORIGINALS. This Agreement is executed in two (2) originals, each of which shall be deemed an original and together shall constitute one and the same Agreement, with one original being delivered to each party hereto.
IN WITNESS WHEREOF, Corporation has hereunto caused its name to be signed and its seal to be affixed by its duly authorized officers, and Employee has hereunto set his hand and seal, all being done in duplication original with one original being delivered to each party as of the 1st day of August, 1993.
/s/ Daniel P. Amos
___________________________(L.S.)
Employee AFLAC INCORPORATED
By: /s/ Kriss Cloninger, III
________________________
Executive Vice President
Attest: /s/ Joey M. Loudermilk
________________________
Secretary
Corporation
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EXHIBIT 10.5*
EMPLOYMENT AGREEMENT
WHEREAS, AMERICAN FAMILY LIFE ASSURANCE COMPANY OF COLUMBUS, a Georgia corporation (hereinafter "AFLAC"), and YOSHIKI OTAKE (hereinafter "OTAKE") wish to enter into the instant Employment Agreement effective January 1, 1986, and AFLAC and OTAKE wish to terminate any and all other employment agreements heretofore existing between them prior to January 1, 1986; and
WHEREAS, AFLAC believes that OTAKE has made and continues to make substantial and highly significant contributions to the development and expansion of the Japan Branch of AFLAC; and
WHEREAS, OTAKE was one of the founders of AFLAC's Japan Branch and has continuously headed its sales force, and AFLAC recognizes the special contributions made by OTAKE, including the development and continuing expansion of AFLAC's Japan Branch;
NOW, THEREFORE, for and in consideration of the premises and of the mutual agreements provided for herein, AFLAC and OTAKE agree as follows:
1. EMPLOYMENT. AFLAC agrees to employ OTAKE for the term of this Agreement in the capacity set forth herein and OTAKE agrees to devote full-time to his duties hereunder as specified.
2. TERM. OTAKE's employment hereunder shall be for the period commencing January 1, 1986, and continuing through December 31, 1995 (10 years), and may be renewed thereafter on an annual basis by mutual consent of the parties to this Agreement.
3. SALARY.
A. For the year 1986, AFLAC shall pay as salary to OTAKE an amount equal to 38,000,000 yen, for 1987, 43,000,000 yen and for 1988, 50,000,000 yen. And for 1989 and subsequent years, OTAKE shall be considered for salary increases in the same manner and at the same time as the senior officers of AFLAC. However, at no time during the term of this Agreement after 1988 shall the salary be less than the salary paid in 1988.
B. For the year 1986 and subsequent, OTAKE will be included in AFLAC's short-term and long-term Incentive Stock Option Plan in the same manner as the most senior officers, other than the Chief Executive Officer, of AFLAC based upon the attainment of goals set for the Japan Branch by AFLAC. These plans may involve cash awards, as well as awards of stock or stock-equivalent units as determined by the Board of Directors or such committee as the Board might appoint.
4. DUTIES. Pursuant to the terms and conditions of this Agreement, OTAKE will assume the title and position of President of AFLAC's Japan Branch (hereinafter referred to as the "JAPAN PRESIDENT"). The JAPAN PRESIDENT shall be directly responsible to the Chief Executive Officer of AFLAC and shall perform any and all assignments that the Chief Executive Officer or the President of AFLAC or their designated representatives may request the JAPAN PRESIDENT to perform. It is specifically agreed and understood that the policies and directives of AFLAC will be promptly and fully implemented by the JAPAN PRESIDENT in the management and operation of the Japan Branch of AFLAC to the extent such policies and directives do not contravene or violate Japanese laws, MOF directives or administrative
guidance governing the operations of AFLAC in Japan. Subject to the preceding, the JAPAN PRESIDENT shall conduct, manage and carry on the day- to-day insurance business of the Japan Branch of AFLAC.
The JAPAN PRESIDENT shall serve as and retain said position and title at the pleasure of the Chief Executive Officer of AFLAC. However, in the event of his removal or replacement as JAPAN PRESIDENT for any reason during the term of this Agreement, OTAKE will retain the status and recognition equivalent to a senior officer of AFLAC, with the salary, retirement and other benefits and rights hereunder unaffected, and will be assigned no duties or tasks inconsistent with that status.
5. OTHER BENEFITS. During the term of this agreement, OTAKE will be furnished office space suitable to his position, an automobile and driver, secretarial support and other benefits usual to a similar position in Japan.
6. RETIREMENT. AFLAC in recognition of OTAKE's role in the development and expansion of the Japan Branch of AFLAC, and in consideration of the value to AFLAC of offering OTAKE a retirement plan which will encourage his continued employment until date of retirement and thereafter assure his continued service in an advisory capacity and preclude him from rendering any service, assistance or advice to any competition of AFLAC, hereby agrees to the following retirement plan for OTAKE:
A. ELIGIBILITY FOR RETIREMENT. Subject to the terms and conditions of this agreement, OTAKE shall be eligible for retirement as follows:
(1) Age 65 with 20 or more years of credited service-- mandatory retirement with full benefits.
(2) Age 60 with 20 or more years of credited service-- voluntary retirement with full benefits.
(3) Early retirement--at the request of OTAKE and subject to approval of the Chief Executive Officer of AFLAC, OTAKE may take voluntary retirement with reduced benefits (based upon years of actual credited service expressed as a percentage of 20 years).
(4) Total and Permanent Disability prior to attainment of age 60, retirement with full benefits. Disability is defined as any physical or mental condition which prevents OTAKE from performing the normal functions of his regular work.
B. CREDITED SERVICE. Credited service for OTAKE shall be calculated from the date of the granting of the Japan Branch of AFLAC license, and no time shall be deducted for any interrupted period of service.
C. RETIREMENT BENEFITS. Upon retirement OTAKE shall be paid benefits under either subsection (1) or (2) below:
(1) Full Retirement Without Surviving Spouse Benefit. Participant shall be paid, at the same intervals as active employees of the Japan Branch of AFLAC, at the rate of sixty percent (60%) of the total compensation received from AFLAC, or the Japan Branch of AFLAC, for either:
(a) the last 12 months of active employment with AFLAC, or;
(b) the highest compensation received in any calendar year of this Agreement years preceding the date of retirement, whichever is higher; such retirement compensation to be paid for the lifetime of OTAKE and to terminate at the end of the calendar month in which OTAKE's death occurs.
(2) Full Retirement With Surviving Spouse Benefit. At the option of OTAKE, and subject to his written notice of such election being filed by OTAKE with the Secretary of AFLAC on or before the effective date of retirement, OTAKE may elect to receive for his lifetime a reduced compensation in the amount of fifty-four percent (54%) of previous compensation, as set forth in Section (1) above, with the additional provision that, effective with the calendar month following the death of OTAKE after retirement, AFLAC will pay monthly to the surviving spouse of OTAKE one-half (1/2) of the amount which OTAKE would have received as retirement income had he survived, such survivor's income to be paid for the appropriate period of time shown below:
(a) if at the time of OTAKE's death, the surviving spouse is 55 years of age or older, then such survivor's benefit shall be paid for the lifetime of the surviving spouse, or;
(b) if at the time of OTAKE's death, the surviving spouse is younger than 55 years of age, then such survivor's benefit shall be paid only for a maximum period of 20 years from OTAKE's death or until the surviving spouse's earlier death, whichever occurs first.
D. ADJUSTMENTS TO RETIREMENT BENEFITS. All retirement benefits paid under subsection (C) above shall be subject to annual cost- of-living type increases proportionate to any such compensation increases granted each year to the Japan Branch of AFLAC's senior managers, or, at the option of the Board of Directors, by any alternate reasonable index of cost-of-living increases.
E. After retirement, OTAKE shall be furnished suitable office space and secretarial support for the maintenance of his consultation work for AFLAC, with payment by AFLAC of appropriate expenses.
F. After retirement, OTAKE and his spouse shall receive for their lifetime full medical expense benefits, either through direct payment by AFLAC or, at the option of AFLAC, by insurance paid by AFLAC.
G. After 1995, and up until OTAKE reaches the age of 65, where mutual consent to renew this Agreement has not been obtained, but where OTAKE remains mentally and physically sound, OTAKE shall be allowed to continue his employment with such status as deemed appropriate by AFLAC, with a starting salary equivalent to seventy percent (70%) of his last salary, subject to annual cost-of-living increases. This continued employment shall not adversely affect the base figure for the retirement benefits as set forth in subsection (C) above.
7. CONSULTATION. As a condition to the payment of retirement benefits as set forth in this Employment Agreement, OTAKE agrees to make himself available to AFLAC after retirement as an independent consultant for consultation by request of AFLAC at reasonable business hours and upon
reasonable notice, and subject to conditions of health, without further compensation except necessary and proper business, travel or entertainment expenses required in connection with such consultation.
8. NON-COMPETITION. As a condition to the payment of benefits (including retirement benefits), OTAKE agrees that so long as benefits are paid to him by AFLAC he will not, without the prior consent of the Board of Directors, directly or indirectly, render advisory or any other services to, or become employed by, or participate or engage in any business competitive with any of the insurance business activities of AFLAC or its subsidiaries in any states and/or foreign countries in which it or its subsidiaries do business.
9. RIGHTS UNDER OTHER AFLAC RETIREMENT PLANS. In consideration of the benefits contained herein; OTAKE waives any and all rights to participate in any and all other AFLAC or AFLAC's Japan Branch retirement or pension plans.
10. IRREVOCABLE. Upon execution by both parties hereto, the agreement shall be binding on the parties hereto and can not be amended, modified, suspended, or supplemented in any respect except by an agreement in writing voluntarily executed by both parties hereto.
11. SUCCESSORS OF AFLAC. This Agreement shall be binding upon any successor to AFLAC and such successor shall be deemed substituted for AFLAC for all purposes under this Agreement.
12. CONSOLIDATION OR MERGER. AFLAC will not consolidate or merge into another corporation which survives the consolidation or merger, unless such surviving corporation shall assume this Agreement, and upon such assumption OTAKE and the survivor shall become obligated to perform the terms and conditions hereof and the term "AFLAC" as used in this Agreement shall be deemed to refer to such survivor.
13. ARBITRATION. Matters not specifically mentioned herein shall be resolved upon mutual consultation in accordance with the principles of good faith and trust. Any unresolved dispute arising out of or relating to this Agreement or controversy relating to the interpretation or breach hereof shall be settled by arbitration at a mutually agreeable location in the United States in accordance with the commercial arbitration rules of the American Arbitration Association.
14. APPLICABLE LAW. This Agreement is intended to and shall be governed by the laws of the State of Georgia.
15. This Agreement shall supersede any other contract of employment or retirement, whether oral or in writing, between AFLAC and OTAKE.
IN WITNESS WHEREOF, AMERICAN FAMILY LIFE ASSURANCE COMPANY OF COLUMBUS has caused this Agreement to be executed in its corporate name and by its officers thereto fully authorized, this 5th day of October, 1985, in the State of Georgia.
AMERICAN FAMILY LIFE ASSURANCE COMPANY
OF COLUMBUS
Attest: /s/ Salvador Diaz-Verson, Jr. By: /s/ John B. Amos
_____________________________ _________________________
Title: Executive Vice President Title: CEO - Chairman
_____________________________ _________________________
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Accepted this 5th day of October, 1985, by Yoshiki Otake.
Yoshiki Otake: /s/ Yoshiki Otake
__________________________
Employee
Witness: /s/ George Jeter
_____________________________
I elect: ______ Full retirement WITHOUT surviving spouse benefit.
X Full retirement WITH surviving spouse benefit.
______
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EXHIBIT 10.6*
STATE OF GEORGIA
COUNTY OF MUSCOGEE
EMPLOYMENT AGREEMENT
THIS AGREEMENT, made and entered into as of the 14th day of February, 1992, by and between AFLAC Incorporated, a Georgia corporation, hereinafter referred to as "Corporation," and Kriss Cloninger, III, a resident of said State and County, hereinafter referred to as "Employee;"
W I T N E S S E T H T H A T:
WHEREAS, Corporation and Employee desire to enter into an Employment Agreement and to set forth the terms and conditions of Employee's employment by Corporation as its Chief Financial Officer;
NOW, THEREFORE, the parties, for and in consideration of the mutual covenants and agreements hereinafter contained, do contract and agree as follows, to-wit:
1. PURPOSE AND EMPLOYMENT. The purpose of this Agreement is to define the relationship between Corporation as an employer and Employee as an employee and Chief Financial Officer of the Corporation.
2. DUTIES. Employee agrees to provide executive management services as Chief Financial Officer of Corporation to Corporation and its subsidiaries and affiliates on a full-time and exclusive basis; provided, however, nothing shall preclude Employee from engaging in charitable and community affairs or managing his own or his family's personal investments.
3. PERFORMANCE. Employee agrees to devote all necessary time and his best efforts in the performance of his duties as Chief Financial Officer of Corporation on behalf of Corporation and its subsidiaries and affiliates.
4. TERM. The term of employment under this Agreement shall begin March 16, 1992, and shall continue for a period of three (3) years until March 15, 1995, unless extended or sooner terminated as hereinafter provided. On an annual basis beginning effective March 16, 1994, the scheduled term of this Agreement shall be extended for successive one year periods unless written notice of termination is given prior to such annual date by one party to the other party that the Agreement will not be extended by its terms.
5. BASE SALARY. For all the services rendered by Employee, Corporation shall continue to pay Employee a base salary of $250,000.00 per year commencing March 16, 1992, said salary to be payable in accordance with Corporation's normal payroll procedures. Employee's base salary shall be increased annually during the term of this Agreement and any extensions hereof as determined by the Chief Executive Officer.
6. ADJUSTMENTS TO BASE SALARY. Corporation and Employee shall, from time to time, reflect increases in Employee's base salary as provided for in Paragraph 5 by entering the change on the "Schedule of Compensation," as shown by the form attached hereto as Exhibit "A" and made a part hereof. If an increase in compensation is entered on said Schedule and duly signed by the proper officers of Corporation and by Employee, said entry shall constitute an amendment to this Employment Agreement as of the date of said entry and shall supersede the base salary provided for in Paragraph 5 and any other increases in Employee's base salary previously entered on said Schedule.
7. MANAGEMENT INCENTIVE PLAN. In addition to the base salary paid to Employee in accordance with Paragraph 5, Corporation shall for each calendar year of Employee's employment by Corporation, beginning with the calendar year 1992, continue to pay Employee, as performance bonus compensation, an amount determined each year under Corporation's current Management Incentive Plan (short-term Incentive Program) with a target level based on at least twenty-five percent (25%) of base salary. Nothing in this paragraph shall preclude Employee from receiving additional discretionary bonuses approved by the Board.
8. EMPLOYEE BENEFITS. Employee shall be eligible to participate with other employees of the Corporation in all fringe benefit programs applicable to employees generally which may be authorized and adopted from time to time by the Board, including without limitation: a qualified pension plan, a profit sharing plan, a disability income or sick pay plan, a thrift and savings plan, an accident and health plan (including medical reimbursement and hospitalization and major medical benefits), and a group life insurance plan. In addition, Corporation shall furnish to Employee such other "fringe" or employee benefits as are provided to key executive employees of Corporation and such additional employee benefits which the Compensation Committee of the Board shall determine to be appropriate to Employee's duties and responsibilities as Chief Financial Officer of Corporation, including, without limitation, reimbursement of legal and accounting expenses incurred by Employee in connection with the preparation of his employment or other agreements with Corporation and any expenses for legal, accounting or financial services incurred by Employee in connection with his employment.
9. STOCK OPTION PLANS. Employee shall be eligible to be awarded stock options to purchase Corporation's common stock under Corporation's Stock Option Plans for selected key employees and Directors during the term of this Agreement.
10. WORKING FACILITIES AND EXPENSES. Employee shall be provided with an office, books, periodicals, stenographic and technical help, ground and air transportation, and such other facilities, equipment, supplies and services suitable to his position and adequate for the performance of his duties. The Corporation shall pay Employee's fees and dues in such social and country clubs, civic clubs and business societies and associations as shall be appropriate in facilitating Employee's job performance and in the best interest of Corporation. The Corporation shall also pay all appropriate business liability insurance and any business licenses and fees pertaining to the services rendered by Employee hereunder.
Employee is encouraged and is expected, from time to time to incur reasonable expenses for promoting the business of Corporation, including expenses for social and civic club memberships and participation, entertainment, travel and other activities associated with Employee's duties. The cost of all such activities shall be the expenses of Corporation unless the Compensation Committee of the Board shall determine in advance that any such expense of Employee should be paid by Employee.
11. VACATION. Employee shall continue to be entitled to his vacation time with pay during each calendar year in accordance with Corporation's vacation policy for senior executive employees. In addition, Employee shall be entitled to such holidays as Corporation shall recognize for its employees generally.
12. SICKNESS AND TOTAL DISABILITY. Employee's absence from work because of sickness or accident (not resulting in Employee becoming "totally disabled," as that term is hereinafter defined) shall not result in any adjustment in Employee's compensation or other benefits under this Agreement.
Should Employee become totally disabled as a result of sickness
or accident and unable to adequately perform his regular duties prescribed
under this Agreement, his base salary (which shall continue to be adjusted
as provided for in Paragraph 5), together with incentive bonuses under the
Corporation's Management Incentive Plan and his participation in
Corporation's employee benefit programs and retirement plans shall
continue without reduction except as hereinafter provided, during the
continuance of such disability for a period not exceeding the earlier of
(1) the end of the term of this Agreement or any extension hereof or (2)
a period of one and one-half (1 1/2) years (547 calendar days) for each
continuous disability. Payments pursuant to this Paragraph 12 shall be
reduced by any amounts paid to Employee during any such period of
disability from time to time under any disability programs, plans or
policies maintained by Corporation, its subsidiaries or affiliates.
Should Employee's total disability continue for a period beyond the end of the term of this Agreement or in excess of 547 calendar days, this Agreement shall, at the end of such period which first occurs, be automatically terminated. If, however, prior to such time, Employee's total disability shall have ceased and he shall have resumed the adequate performance of his duties hereunder, this Agreement shall continue in full force and effect and Employee shall be entitled to continue his employment hereunder and to receive his full compensation and other benefits as though he had not been disabled; provided, however, unless Employee shall adequately perform his duties hereunder for a continuous period of at least sixty (60) calendar days following a period of total disability before Employee again becomes totally disabled, he shall not be entitled to start a new 547-day period under this paragraph, but instead may only continue under the remaining portion of the original 547-day period of total disability. In the event Employee shall not adequately perform his duties hereunder for a continuous period of at least sixty (60) calendar days following a period of total disability, the running of the original 547-day period shall cease during the time of Employee's adequate performance of his duties hereunder before Employee again becomes totally disabled.
It is understood that for purposes of this Paragraph 12, Employee shall, upon his becoming totally disabled, be given such additional "credited service" if necessary to fully qualify Employee under Corporation's Retirement Plan for Senior Officers and to provide a survivor annuity to Employee's spouse under the Plan.
For the purpose of this Agreement, the term "totally disabled" or "total disability" shall mean Employee's inability to adequately perform his executive and management duties hereunder on account of accident or illness. It is understood that Employee's occasional sickness or other incapacity of short duration may not result in his being or becoming "totally disabled;" however, such illness or incapacity could constitute Employee's being or becoming "totally disabled" if such illness or incapacity is prolonged or recurring.
13. TERMINATION OF EMPLOYMENT.
A. TERMINATION BY CORPORATION. The Corporation's Chief Executive Officer may terminate this Agreement, at any time, with or without "good cause" ("good cause" being hereinafter defined), by giving at least sixty (60) days' written notice to Employee of its intention to terminate Employee's employment without "good cause" or at least five (5) days' written notice to Employee of its intention to terminate Employee's employment for "good cause;" provided, however, Corporation may, at its selection, terminate Employee's actual employment (so that Employee no longer renders services on behalf of Corporation) at any time during said sixty (60) day or five (5) days period; and,
(1) In the event such termination is for "good cause," Corporation shall be obligated only to:
(a) pay Employee his base salary as provided for in Paragraph 5 of this Agreement up to the termination date stated in said written notice; provided, however, if Corporation does not elect to terminate Employee's employment during said five (5) day period, but Employee, after receiving such notice of termination from Corporation, elects to leave the employ of Corporation prior to the end of said five (5) day period without the approval of Corporation, then Corporation shall pay said base salary only up to the date on which Employee actually terminates his employment;
(b) pay Employee any performance bonus due Employee under Paragraph 7 of this Agreement for the period ending on the termination date stated in said written notice or on such earlier date of Employee's actual termination of his employment prior to the end of said five (5) day period if such termination is without the approval of Corporation. The amount of said bonus, if any, shall be calculated on a prorata basis, using the number of days Employee was actually employed during such period, and the amount so calculated shall be paid to Employee within a reasonable time after the end of Corporation's fiscal year in which written notice of Employee's termination is given;
(c) continue to honor all fully vested stock options, subject to the terms thereof, granted to Employee prior to the termination date stated in said written notice or prior to such earlier date of Employee's actual termination of his employment prior to the end of said five (5) day period if such termination is without the approval of the Corporation;
(d) continue to pay all of Employee's fringe and other employee benefits as provided for in this Agreement up to the termination date stated in said written notice or up to such earlier date of Employee's actual termination of his employment prior to the end of said five (5) day period if such termination is without the approval of the Corporation;
(e) for purposes of this subparagraph (1) and Paragraph 18 hereof, "good cause" shall mean: (i) the willful and deliberate failure of Employee to substantially perform his executive and management duties hereunder for a continuous period of more than sixty (60) days for reasons other than Employee's sickness, injury or disability; (ii) the willful and deliberate conduct by Employee which is intended by Employee to cause, and which does in fact result in substantial injury or damage to Corporation; or (iii) the conviction or plea of guilty by Employee of a felony crime involving morale turpitude.
Prior to the Corporation's decision to
terminate Employee's employment for "good cause" as hereinabove provided,
the Board shall give written notice to Employee setting forth the specific
charges against Employee being considered by the Board to constitute "good
cause' as defined in this subparagraph and the Board shall, within thirty
(30) days after such notice, give Employee an opportunity to fully respond
and defend himself against such charges before the Board. Within fifteen
(15) days after the last day on which Employee is given the opportunity to
defend himself before the Board, the Board, acting in good faith, shall
make its determination as to whether or not the charges against Employee
constitute "good cause" and shall notify Employee in writing of its
determination together with a full explanation of the basis thereof.
(2) In the event such termination is without "good cause," as defined in subparagraph (1)(e) of this Paragraph and, if applicable, subject to the terms of Paragraph 18 Corporation shall be obligated to:
(a) pay employee his base salary as provided for in Paragraph 5 of this Agreement up to the end of the scheduled term of this Agreement;
(b) pay employee his performance bonus compensation as provided for in Paragraph 7 of this Agreement up to the end of the scheduled term of this Agreement;
(c) continue to honor all stock options, subject to the terms thereof, granted to Employee prior to the termination date stated in said written notice, all of said options to be or become fully vested as of the termination date stated in said written notice;
(d) continue to pay or provide to Employee all of the retirement, health, life and disability benefits, as are provided for in this Agreement or under any programs, plans or policies covering Employee at the time of any such notice of termination, up to the end of the scheduled term of this Agreement.
B. TERMINATION BY EMPLOYEE. Employee may terminate this Agreement, at any time, by giving at least sixty (60) days' written notice to Corporation of his intention to terminate his employment;
(1) in the event such termination by Employee shall be without "good reason" (as defined in Paragraph 19 hereof) and with a bona fide intent to retire or to work or engage in a business or activity which is not in competition with Corporation or any of its subsidiaries or affiliates, Corporation shall be obligated to:
(a) pay Employee his base salary due him under Paragraph 5 of this Agreement up to the termination date stated in said written notice;
(b) pay Employee any performance bonus compensation due him under Paragraph 7 of this Agreement for the period ending on the termination date stated in said written notice. The amount of such performance bonus, if any shall be calculated on a prorata basis, using the number of days Employee was actually employed by Corporation during such year of termination; and the amount so calculated shall be paid to Employee within a reasonable time after the end of Corporation's fiscal year in which Employee's notice of termination is given;
(c) continue to honor all stock options, subject to the terms thereof, granted to Employee which are fully vested prior to the termination date stated in said written notice;
(d) pay Employee, and if elected by Employee, his wife such retirement benefits as are provided for in the
Retirement Plan for Senior Officers under Paragraph 9 hereof, said benefits to commence at such time as provided for under the Retirement Plan. For purposes of this subparagraph, Employee shall continue to accrue "credited service" as Employee under the Retirement Plan for Senior Officers up through the termination date stated in said notice.
(2) In the event such termination by Employee shall be for "good reason" (as defined in paragraph 18 hereof), the Corporation shall be obligated to provide Employee with the payments, benefits and rights specified in subparagraphs A.(2)(a)-(e) of this Paragraph 13 hereof.
(3) In the event such termination by Employee shall be without "good reason" (as defined in Paragraph 19 hereof) and with the intention or purpose to work or invest, directly or indirectly, in a business or activity which is in competition, directly or indirectly, with Corporation or any of its subsidiaries or affiliates or, irrespective of Employee's intention at the time of his termination, if Employee shall violate his covenant not to compete under Paragraph 15 or the requirements of Paragraph 16, then Corporation shall not be obligated to make or provide any further payments or benefits to Employee under this Agreement except as herein provided in this subparagraph:
(a) subject to Corporation's rights under Paragraph 15 and 16, Corporation shall pay Employee his base salary due him under Paragraph 5 of this Agreement up to the termination date stated in said written notice;
(b) subject to Corporation's rights under Paragraphs 15 and 16 hereof, Corporation shall continue to honor all stock options, subject to the terms thereof, granted to Employee which are fully vested prior to the termination date stated in said written notice.
C. TERMINATION WHILE DISABLED. If Employee is totally disabled at the time any such notice of termination is given, then notwithstanding the provisions of this Paragraph 13, Corporation shall nevertheless continue to pay Employee, as his sole compensation hereunder, the compensation and other benefits for the remaining period of Employee's total disability as provided for in Paragraph 12 hereinabove. It is understood that in no event shall such disabled Employee be entitled to compensation under this Paragraph 13 in addition to the continuation of his compensation under Paragraph 12.
D. COOPERATION AFTER NOTICE OF TERMINATION. Following any such notice of termination, Employee shall fully cooperate with Corporation in all matters relating to the winding up of his pending work on behalf of Corporation and the orderly transfer of any such pending work to other employees of Corporation as may be designated by the Board; and to that end, Corporation shall be entitled to such full-time or part-time services of Employee as Corporation may reasonably require during all or any part of the sixty (60) day period following any such notice of termination.
14. DEATH OF EMPLOYEE. In the event of Employee's death during the term of this Agreement or any extension hereof, this Agreement shall terminate immediately, and Employee's estate shall be entitled to receive terminal pay in an amount equal to the amount of Employee's base salary and any performance bonus compensation actually paid by Corporation to Employee during the last thirty-six (36) months of his life, said terminal pay to be paid in thirty-six (36) equal monthly installments beginning on the first day of the month next following the month during which Employee's death occurs. If the Employee's death occurs before he has been employed for 36 months, the terminal pay shall be based on an amount
equal to the Employee's base salary and any performance bonus actually paid by Corporation to Employee during the period of his employment plus the amount of base salary and performance bonus the Employee would have been paid had he survived for the full initial thirty-six (36) month period. Terminal pay as herein provided for in this paragraph shall be in addition to amounts otherwise receivable by Employee or his estate under this or any other agreements with Corporation or under any employee benefit or retirement plans established by Corporation and in which Employee is participating at the time of his death. In addition, Corporation shall honor all stock options, subject to the terms thereof, granted to Employee prior to his death and Employee or his Estate shall, if not otherwise vested, become fully vested in said options as of the date of Employee's death. For purposes of this paragraph, Employee shall, upon his death, be given such additional "credited service" as necessary to fully qualify Employee under Corporation's Retirement Plan for Senior Officers and to provide a survivor annuity to Employee's spouse under the Plan.
15. AGREEMENT NOT TO COMPETE. It is specifically agreed that, in the event Employee shall voluntarily terminate his employment without "good reason" (as defined in Paragraph 18) or be terminated by Corporation for "good cause" (as defined in Paragraph 13), Employee shall not work for a period of two (2) years from the date of such termination as a manager, officer, owner, partner or employee or render any services as a consultant or advisor or engage or invest, directly or indirectly, in any business activity which is in competition, directly or indirectly, with Corporation, its subsidiaries or affiliates within the United States of America (excluding any state in which Corporation, its subsidiaries and affiliates have not been engaged in business activities within one (1) year prior to the date of Employee's termination of employment), the country of Japan or within two hundred (200) miles of any office of Corporation, its subsidiaries or affiliates outside the United States of America or Japan which was in existence, or in the process of being established, at the time of Employee's termination of employment. Provided, however, it is agreed that Employee may invest in the publicly traded securities of any corporation, partnership or trust which is in competition with Corporation so long as such investment does not exceed three percent (3%) of such securities at any time. It is specifically agreed that if, after Employee's termination of employment, Employee engages in any such prohibited activity at any time during said two (2) year period, Corporation shall, in addition to any other rights it may have under this contract and applicable law, be entitled to injunctive relief or, if Corporation shall so elect, (due to the difficulty of determining damages) be entitled to liquidated damages in the amount of One Million Dollars ($1,000,000.00) which Employee agrees to promptly pay to Corporation upon demand.
16. NONDISCLOSURE OF TRADE SECRETS AND CONFIDENTIAL INFORMATION. Employee agrees to protect the business interest of Corporation, its subsidiaries and affiliates, and not to disclose any trade secrets, confidential information or any organizational, operating, marketing, product design, or business know-how which Employee has access to or knowledge of as a result of his employment by Corporation. It is specifically agreed that if, at any time during the term of this Agreement and for a period of two (2) years after the date of employee's termination of employment with Corporation for any reason, Employee shall violate the provisions of this Paragraph 16, Corporation shall, in addition to any rights it may have under this contract and applicable law, be entitled to liquidated damages of One Million Dollars ($1,000,000.00) which Employee agrees to promptly pay Corporation upon demand. It is understood and agreed that Corporation's remedies under this Paragraph 16 shall be separate and in addition to the remedies provided to Corporation under Paragraph 15 hereof. It is also understood and agreed that, notwithstanding the foregoing two (2) year period, Employee shall not use or disclose any written confidential information or any policyholder lists
at any time or times hereafter, except in the performance of Employee's obligations to the Corporation.
17. RIGHT TO ACQUIRE INSURANCE. If Employee shall terminate his employment hereunder for any reason other than death, he may, at his election, acquire any insurance policies upon his life owned by the Corporation by giving written notice of his election to Corporation within ninety (90) days after his termination of employment. Such policies shall be transferred to the Employee upon his payment to Corporation of the then interpolated terminal reserve value of said insurance. In the event any policies transferred to Employee as herein provided shall not have an interpolated terminal reserve value, then the amount to be paid by Employee shall be its then fair market value.
18. CHANGE IN CONTROL.
A. IN GENERAL. In the event there is a Change in Control (as defined in this paragraph) of Corporation, this Agreement shall, in order to help eliminate the uncertainties and concerns which may arise at such time, be automatically extended upon all of the same terms and provisions contained herein, for an additional period of three (3) years, beginning on the first day of the month during which such Change in Control shall occur.
B. Notwithstanding the terms of subparagraph A.(2) and B.(2) of Paragraph 13, and in lieu of the obligations of the Corporation under such paragraph, if, after a Change in Control Employee's employment is terminated by Corporation without "good cause" (as defined in Paragraph 13), or is terminated by Employee for "good reason" (as defined in this Paragraph 18), any such termination by Corporation to be made only in accordance with the requirements specified by Paragraph 13.A, Employee shall be entitled to the following:
(1) The Corporation shall pay Employee's full base salary to Employee through the date of termination stated in Corporation's written notice required pursuant to Paragraph 13.A hereof (hereinafter in this paragraph the "Termination Date") at the rate in effect on the date such notice is given and, additionally, shall pay Employee all compensation and benefits payable to Employee under the terms of any compensation or benefit plan, program or arrangement maintained by the Corporation during such period through the Termination Date.
(2) The Corporation shall pay Employee all compensation and benefits due Employee under Corporation's retirement, insurance and other compensation or benefit plans, programs or arrangements as such payments become due. The amount of such compensation and benefits shall be determined under, and paid in accordance with, Corporation's retirement, insurance and other compensation or benefit plans, programs and arrangements.
(3) In lieu of any further salary payments to Employee for periods subsequent to the Termination Date, the Corporation shall pay to Employee, immediately after the Termination Date, a lump sum severance payment, in cash, equal to three times the sum of (i) Employee's annual base salary in effect immediately prior to the Change in Control and (ii) the higher of the amount paid to Employee pursuant to the Corporation's Management Incentive Plan (or any successor plan thereto) for the year preceding the year in which the Termination Date occurs or paid in the year preceding the year in which the Change in Control occurs.
(4) The Corporation shall pay to Employee, immediately after the Termination Date, a lump sum amount, in cash, equal to a prorata portion (based on the number of days Employee is an employee during the year in which the Termination Date occurs) of the aggregate value of the maximum annual target amount of all contingent incentive compensation
awards to Employee for all uncompleted periods under the Corporation's Management Incentive Plan (or successor plan thereto).
(5) For a thirty-six (36) month period after the Termination Date, the Corporation shall provide Employee with life, disability, accident and health insurance benefits substantially similar to and equal or greater in economic value than such benefits which Employee is receiving immediately prior to the Termination Date (without giving effect to any reduction in such benefits subsequent to a Change in Control which reduction in benefits would constitute "good reason" as defined in this paragraph). Benefits required to be provided to Employee pursuant to this subparagraph B.(5) shall be reduced to the extent comparable benefits are actually received by or made available to Employee without cost during such thirty-six (36) month period and any such benefit actually received by Employee shall be reported to the Corporation by Employee.
C. In addition to the payments provided for in subparagraph B of this Paragraph 18, in the event that after a Change in Control Employee's employment by the Corporation is terminated by the Corporation without "good cause" or by Employee for "good reason," the Corporation shall continue to honor all stock options granted to Employee (subject to the terms of such options) prior to the Termination Date, and all stock options granted to Employee prior to the Termination Date shall become fully vested and exercisable as of the Termination Date.
D. Notwithstanding any other provisions of this Agreement, in
the event that any payment or benefit received or to be received by
Employee in connection with a Change in Control or the termination of
Employee's employment (whether pursuant to the terms of this Agreement or
any other plan, arrangement or agreement with the Corporation, any person
whose actions result in a Change in Control or any person affiliated with
the Corporation or such person) (all such payments and benefits being
hereinafter called "Total Payments") would not be deductible (in whole or
in part) by the Corporation, an affiliate or person making such payment or
providing such benefit as a result of Section 280G of the Internal Revenue
Code of 1986 (the "Code") then, to the extent necessary to make such
portion of the Total Payments deductible (and after taking into account
any reduction in the Total Payments provided by reason of Section 280G of
the Code in such other plan, arrangement or agreement), adjustments in
such payments shall be made as follows: (1) the cash payments provided
pursuant to subparagraph B.(3) and B.(4) of this Paragraph 18 shall first
be reduced (if necessary, to zero), and (2) benefits provided under
subparagraph B.(5) of this paragraph 18 shall next be reduced. For
purposes of this limitation (i) no portion of the Total Payments, the
receipt or enjoyment of which Employee shall have effectively waived in
writing prior to the date of termination of employment shall be taken into
account, (ii) no portion of the Total Payments shall be taken into account
which in the opinion of the tax counsel selected by the Corporations
independent auditors and reasonably acceptable to Employee does not
constitute a "parachute payment" within the meaning of Section 280G(b)(2)
of the Code, including by reason of Section 280G(b)(4)(A) of the Code,
(iii) the payments and benefits be reduced only to the extent necessary so
that the Total Payments (other than those referred to in clauses (i) or
(ii) in their entirety constitute reasonable compensation for services
actually rendered within the meaning of Section 280G(b)(4)(B) of the Code
or are otherwise not subject to disallowance as deductions, in the opinion
of the tax counsel referred to in clause (ii); and (iv) the value of any
non-cash benefit or any deferred payment or benefit included in the Total
Payments shall be determined by the Corporation's independent auditors in
accordance with the principles of Sections 280G(d)(3) and (4) of the Code.
In no event shall the Corporation's obligation to continue to honor all
stock options granted to Employee prior to the Termination Date nor the
vesting of stock options in accordance with Paragraph 19.C hereof be
affected by this Paragraph 19.D.
E. DEFINITIONS.
(1) "Beneficial Owner" has the meaning provided in Rule 13d- 3 under the Exchange Act.
(2) "Change in Control" means the occurrence of either (a),
(b), (c) or (d), as hereinafter set forth:
(a) any person is or becomes the Beneficial Owner, directly or indirectly, of securities of the Corporation (not including in the securities beneficially owned by such person any securities acquired directly from the Corporation, subsidiaries or its affiliates) representing thirty percent (30%) or more of the combined voting power of the Corporation's then outstanding securities; or
(b) during any period of two consecutive years (not
including any period prior to the execution of this
Agreement), individuals who at the beginning of
such period constitute the Board and any director
(other than a director designated by a person who
has entered into an agreement with the Corporation
to effect a transaction described in clause (a),
(c) or (d) of this subparagraph) whose election by
the Board or nomination for election by the
Corporation's stockholders was approved by a vote
of at least two-thirds (2/3) of the members of the
Board (or, if Board nominations are not voted on by
the full Board, members of the Board Committee
voting on such nominations) then still in office
who either were members of the Board at the
beginning of the period or whose election or
nomination for election was previously so approved,
cease for any reason to constitute a majority of
the Board; or
(c) the shareholders of the Corporation approve a
merger or consolidation of the Corporation with any
other corporation, other than (i) a merger or
consolidation which would result in the voting
securities of the Corporation outstanding
immediately prior thereto continuing to represent
(either by remaining outstanding or by being
converted into voting securities or the surviving
entity), in combination with the ownership of any
trustee or other fiduciary holding securities under
an employee benefit plan of the Corporation, at
least seventy-five percent (75%) of the combined
voting power of the voting securities of the
Corporation or such surviving entity outstanding
immediately after such merger or consolidation, or
(ii) a merger or consolidation effected to
implement a recapitalization of the Corporation (or
similar transaction) in which no person acquires
more than thirty percent (30%) of the combined
voting power of the Corporation's then outstanding
securities, or
(d) the shareholders of the Corporation approve a plan of complete liquidation of the Corporation or an agreement for the sale or disposition by the Corporation of all or substantially all the Corporation's assets.
(3) "Exchange Act" shall mean the Securities Exchange Act of 1934, as amended.
(4) "Person" shall have the meaning given in Section 3(a)(9) of the Exchange Act, as modified and used in Section 13(d) and 14(d) of the Exchange Act; however, a person shall not include (a) the Corporation or any of its subsidiaries, (b) a trustee or other fiduciary holding securities under an employee benefit plan of the Corporation or any of its subsidiaries, (c) an underwriter temporarily holding securities pursuant to an offering of such securities, or (d) a corporation owned, directly or indirectly, by the stockholders of the Corporation in substantially the same proportions as their ownership of stock of the Corporation.
(5) "Good reason" shall mean the termination of employment by Employee upon the occurrence of any one or more of the following events:
(a) any breach by Corporation of the terms and conditions of this Agreement affecting Employee's salary and bonus compensation, any employee benefit, stock options or the loss of any of Employee's titles or positions with Corporation;
(b) a significant diminution of Employee's duties and responsibilities;
(c) the assignment to Employee of any duties inconsistent with or significantly different from his duties and responsibilities existing at the time of a Change in Control;
(d) any purported termination of Employee's employment by Corporation other than as permitted by this Agreement;
(e) the relocation of Corporation's principal office or of Employee's own office to any place beyond twenty-five (25) miles from the current principal office of Corporation in Columbus, Georgia;
(f) the failure of any successor to Corporation to expressly assume and agree to discharge Corporation's obligations to Employee under this Agreement as extended under this Paragraph, in form and substance satisfactory to Employee.
F. CONTINUATION OF COMPENSATION AND BENEFITS. If Corporation shall attempt to terminate Employee's employment at any time after a Change in Control and such termination is in good faith disputed by Employee, Corporation shall continue to pay Employee all of his compensation and benefits provided for in this his Agreement until the dispute is finally resolved, either by mutual written agreement or by final judgement, order or decree of a court of competent jurisdiction.
19. NO REQUIREMENT TO SEEK EMPLOYMENT AND NO OFFSET. Corporation agrees that, if Employee's employment is terminated by Corporation during the term of this Agreement or by Employee for "good reason" during the term of this Agreement, Employee is not required to seek other employment or attempt in any way to reduce the amounts payable to Employee by Corporation pursuant to the applicable terms of this Agreement; it being understood and agreed that the amount of any payment or benefit to Employee provided for hereunder shall not be reduced by any compensation or other benefits earned by Employee as a result of his employment by another employer or, after a Change in Control, by Corporation's attempt to offset any amount claimed to be owed by Employee to Corporation or otherwise.
20. WAIVER OF BREACH OR VIOLATION NOT DEEMED CONTINUING. The waiver by either party of a breach or violation of any provision of this Agreement shall not operate as or be construed to be a waiver of any subsequent breach hereof.
21. NOTICES. Any and all notices required or permitted to be given under this Agreement will be sufficient if furnished in writing, sent by registered or certified mail to his last known residence in the case of Employee or to its principal office in Columbus, Georgia, in the case of the Corporation.
22. AUTHORITY. The provisions of this Agreement required to be approved by the Board of Directors of Corporation have been so approved and authorized.
23. ARBITRATION. Except for any dispute or matter arising after a
Change in Control, as defined in Paragraph 18, any dispute arising under
this Agreement, to the maximum extent allowed by applicable law, shall be
subject to arbitration and prior to commencing any court action, the
parties agree that they shall arbitrate all controversies. The
arbitration shall be pursuant to the term of the Federal Arbitration Act.
The parties shall notify each other of the existence of an arbitrable
controversy by certified mail and shall attempt in good faith to resolve
their differences within fifteen (15) days after the receipt of such
notice. Notice to Employee shall be sent to Employee's address as it
appears in Corporation's records and notice to Corporation shall be sent
to: Arbitration Officer, AFLAC Incorporated, AFLAC Center, Columbus,
Georgia, 31999. If the dispute cannot be resolved within said fifteen
(15) day period, either party may file a written demand for arbitration
with the other party. The party filing such demand shall simultaneously
specify his or its arbitrator, giving the name, address and telephone
number of said arbitrator. The party receiving such notice shall notify
the party demanding the arbitration of his or its arbitrator giving the
name, address, and telephone number of said arbitrator within five (5)
days of the receipt of such demand. The arbitrator named by the
respective parties need not be neutral. The Senior Judge of the Superior
Court of Muscogee County, Georgia, on request by either party, shall
appoint a neutral person to serve as the third arbitrator and shall also
appoint an arbitrator for any party failing or refusing to name his
arbitrator within the time herein specified. The arbitrators thus
constituted shall promptly meet, select a chairperson, fix the time and
place of the hearing, and notify the parties. The majority of the panel
shall render an award within ten (10) days of the completion of the
hearing, and shall promptly transmit an executed copy of the award to the
respective parties. Such an award shall be binding and conclusive upon
the parties hereto, in the absence of fraud or corruption. Each party
shall have the right to have the award made the judgment of a court of
competent jurisdiction.
24. GOVERNING LAW. This Agreement shall be interpreted, construed and governed according to the laws of the State of Georgia.
25. PARAGRAPH HEADINGS. The paragraph headings contained in this Agreement are for convenience only and shall in no manner be construed as part of this Agreement.
26. TWO ORIGINALS. This Agreement is executed in two (2) originals, each of which shall be deemed an original and together shall constitute one and the same agreement, with one original being delivered to each party hereto.
IN WITNESS WHEREOF, Corporation has hereunto caused its name to be signed and its seal to be affixed by its duly authorized officers, and Employee has hereunto set his hand and seal, all being done in duplicate originals, with one original being delivered to each party as of the 14th day of February, 1992.
AFLAC Incorporated
By: /s/ Daniel P. Amos
_________________________________
DANIEL P. AMOS, President and
Chief Executive Officer
ATTEST: /s/ Joey M. Loudermilk
_____________________________
Assistant Secretary
|
CORPORATE SEAL
/s/ Kriss Cloninger, III _______________________________(L.S.) KRISS CLONINGER, III /s/ Kathelen V. Spencer ____________________________________ WITNESS |
AMENDMENT TO BASE SALARY
1.
The undersigned hereby agree that Employee's base salary due under Paragraph 5 of the foregoing Employment Agreement shall be $325,000.00 per year, beginning March 15, 1993, and for each successive year thereafter during the term of said Agreement and any extensions thereof unless hereafter changed by mutual agreement.
This 15 day of March, 1993.
AFLAC Incorporated
By: /s/ Daniel P. Amos
_______________________________
President
Attest: /s/ Joey M. Loudermilk
_______________________________
Secretary
|
CORPORATION
/s/ Kriss Cloninger, III
__________________________(L.S.)
Employee
|
AMENDMENT TO EMPLOYMENT AGREEMENT
This Amendment, made and entered into as of the 12th day of November, 1993, by and between AFLAC Incorporated (hereinafter "AFLAC") and Kriss Cloninger, III (hereinafter "Employee").
WHEREAS, AFLAC and Employee have previously entered into an Employment Agreement dated February 14, 1992; and
WHEREAS, said Employment Agreement should have provided for a two (2) year "evergreen" provision; and
WHEREAS, said Employment Agreement mistakenly refers to Employee's inclusion in AFLAC's "Retirement Plan for Senior Officers" instead of the "Supplemental Executive Retirement Plan;" and
WHEREAS, the parties desire to amend said Employment Agreement to make these corrections;
NOW, THEREFORE, the parties do amend said Employment Agreement as follows:
1. The second sentence of Paragraph 5 entitled "Term" shall be stricken in its entirety and the following sentence substituted therefore:
"On an annual basis beginning effective March 16, 1994, the scheduled term of this Agreement shall be extended for successive two (2) year periods unless written notice of termination is given prior to such annual date by one party to the other party that the Agreement will not be extended by its terms."
2. The fourth paragraph of Paragraph 12 entitled "Sickness and Total Disability" shall be stricken in its entirety and the following paragraph substituted therefore:
"It is understood that for purposes of this Paragraph 12, Employee shall, upon his becoming totally disabled, be given such additional "credited service" if necessary to fully qualify Employee under Corporation's Supplemental Executive Retirement Plan (SERP) and to provide a survivor annuity to Employee's spouse under the Plan."
3. The last sentence of Paragraph 14 entitled "Death of Employee" shall be stricken in its entirety and the following paragraph substituted therefore:
"For purposes of this paragraph, Employee shall, upon his death, be given such additional "credited service" as necessary to fully qualify Employee under Corporation's Supplemental Executive Retirement Plan (SERP) and to provide a survivor annuity to Employee's spouse under the Plan."
4. Except as specifically set forth in this Amendment, said Employment Agreement between the parties dated February 14, 1992, shall continue in full force and effect and is hereby reaffirmed, it being the sole intent of the parties to make only the corrections set forth hereinabove.
IN WITNESS WHEREOF, AFLAC has hereunto caused its name to be signed and its seal to be affixed by its duly authorized officers, and Employee has hereunto set his hand and seal, all being done in duplicate originals, with one original being delivered to each party as of the 12th day of November, 1993.
AFLAC INCORPORATED /s/ Kriss Cloninger, III
____________________________(L.S.)
Employee
BY: /s/ Daniel P. Amos
__________________________
President /s/ LaWanda G. Lugo
__________________________________
ATTEST: /s/ Joey M. Loudermilk Witness
______________________
Secretary
|
[SEAL]
AMENDMENT TO BASE SALARY
2.
The undersigned hereby agree that Employee's base salary due under Paragraph 5 of the foregoing Employment Agreement shall be $341,250.00 per year, beginning January 1, 1994, and for each successive year thereafter during the term of said Agreement and any extensions thereof unless hereafter changed by mutual agreement.
This 4th day of January, 1994.
AFLAC Incorporated
BY: /s/ Daniel P. Amos
______________________________
President
ATTEST: /s/ Joey M. Loudermilk
______________________________
Secretary
|
CORPORATION
/s/ Kriss Cloninger, III
_________________________(L.S.)
Employee
|
EXHIBIT 13
EXHIBIT 13
The following information is contained in the 1993 Annual Report to Shareholders. The required information incorporated by reference to the preceding pages of this 1993 Form 10-K have been reproduced herein as Exhibit 13 for purposes of electronic filing of this Form 10-K.
PART II
ITEM 5. (a) Market Information:
The Company's common stock is principally traded on the New York Stock Exchange. The Company is also listed on the Pacific Stock Exchange and the Tokyo Stock Exchange.
The high, low and closing quarterly sales prices for the Company's common stock, as published in the U.S. consolidated transaction reporting system, for the last three fiscal years ended December 31, 1993, are as follows:
Quarterly Common Stock Prices
1993 High Low Close
- ---------------------------------------------------------------
4th Quarter $32.75 $24.75 $28.50
3rd Quarter 34.00 27.88 32.25
2nd Quarter 32.20 27.60 28.38
1st Quarter 29.50 26.40 28.80
1992
- ---------------------------------------------------------------
4th Quarter $27.90 $23.50 $27.60
3rd Quarter 27.20 23.00 25.20
2nd Quarter 24.30 19.20 24.20
1st Quarter 26.30 21.50 22.00
1991
- ---------------------------------------------------------------
4th Quarter $24.90 $18.60 $23.90
3rd Quarter 19.80 16.00 19.80
2nd Quarter 21.60 16.20 17.40
1st Quarter 20.20 14.30 18.50
|
Share prices have been adjusted to reflect a five-for-four stock split in June 1993.
EXH 13-1
ITEM 5. (b) Holders:
1993 1992 1991
- ------------------------------------------------------------------
Number of common
shares outstanding 103,471,417 103,014,646 102,168,929
Number of registered
common shareholders 27,866 24,474 23,365
Total number of
common shareholders 51,566 43,781 40,238
|
ITEM 5. (c) Quarterly cash dividends:
1993 1992
-------- ----------
4th Quarter $.10 $.088
3rd Quarter .10 .088
2nd Quarter .10 .088
1st Quarter .088 .08
|
For information concerning dividend restrictions, see Management's Discussion and Analysis of Financial Condition, the section concerning the balance sheet, presented in this Exhibit 13 on pages 13-12, and note 9 of the Notes to the Consolidated Financial Statements, the section concerning Statutory Accounting and Dividend Restrictions, also presented in this Exhibit 13 on page 13-34.
EXH 13-2
PAGE
ITEM 6. SELECTED FINANCIAL DATA
(In thousands, except for per share):
For the Year 1993 1992 1991 1990 1989
Revenues:
Premiums, principally supplemental health $ 4,225,390 $ 3,369,201 $ 2,765,349 $ 2,259,122 $ 2,033,195
Net investment income 689,272 533,166 431,315 340,966 295,656
Realized investment gains (losses) 2,937 (3,264) (1,451) 407 5,834
Other income 83,019 87,369 87,456 77,859 103,487(2)
_________ _________ _________ _________ ---------
Total revenues 5,000,618 3,986,472 3,282,669 2,678,354 2,438,172
--------- --------- --------- --------- ---------
Benefits and expenses:
Benefits and claims 3,423,297 2,692,353 2,188,817 1,759,191 1,561,138
Expenses 1,148,937 969,575 829,160 702,763 698,988(3)
--------- --------- --------- --------- ---------
Total benefits and expenses 4,572,234 3,661,928 3,017,977 2,461,954 2,260,126
--------- --------- --------- --------- ---------
Pretax earnings 428,384 324,544 264,692 216,400 178,046
Income taxes 184,495 141,177 116,008 99,214 97,240
--------- --------- --------- --------- ---------
Net earnings $ 243,889(1) $ 183,367 $ 148,684 $ 117,186 $ 80,806
========= ========= ========= ========= =========
- -----------------------------------------------------------------------------------------------------------------
Per Common Share
Net earnings $ 2.32(1) $ 1.79 $ 1.46 $ 1.15 $ .80
Cash dividends .388 .344 .296 .264 .232
Shareholders' equity 13.20 10.50 9.04 7.77 6.91
Price range: High $ 34.00 $ 27.90 $ 24.90 $ 15.40 $ 18.00
Low 24.75 19.20 14.30 9.70 10.70
Close 28.50 27.60 23.90 15.30 14.40
Price/earnings ratio:* High 14.8x 15.6x 17.1x 13.4x 23.7x
Low 10.8 10.7 9.8 8.4 14.1
Common shares used for EPS 105,201 102,544 101,980 101,719 101,420
- ------------------------------------------------------------------------------------------------------------------
At End of Year
Assets:
Investments and cash $12,469,140 $ 9,461,341 $ 8,056,657 $ 6,269,478 $ 5,000,501
Other 2,973,546 2,440,033 2,087,843 1,765,354 1,514,936
---------- ---------- ---------- --------- ---------
Total assets $15,442,686 $11,901,374 $10,144,500 $ 8,034,832 $ 6,515,437
========== ========== ========== ========= =========
Liabilities and shareholders' equity:
Policy liabilities $11,947,137 $ 9,263,008 $ 7,799,338 $ 6,149,177 $ 4,865,642
Notes payable 122,062 125,800 138,810 157,738 213,931
Income taxes, primarily deferred 950,278 848,514 768,515 684,118 568,306
Other liabilities 1,057,585 582,170 514,348 252,833 165,354
Shareholders' equity 1,365,624 1,081,882 923,489 790,966 702,204
---------- --------- ---------- --------- ---------
Total liabilities and
shareholders' equity $15,442,686 $11,901,374 $10,144,500 $ 8,034,832 $ 6,515,437
=========== ========== ========== ========= =========
- -----------------------------------------------------------------------------------------------------------------
EXH 13-3
PAGE
|
Supplemental Data
Operating earnings** $ 241,654(1) $ 183,426 $ 148,076 $ 116,976 $ 76,658
Operating earnings per share** $ 2.30(1) $ 1.79 $ 1.46 $ 1.15 $ .76
Pretax profit margin** 8.5% 8.2% 8.1% 8.1% 6.8%
After-tax profit margin** 4.8%(1) 4.6% 4.5% 4.4% 3.0%
Return on equity 19.9%(1) 18.3% 17.3% 15.7% 12.1%
Yen/dollar exchange rate at year-end 112.00 124.70 125.25 134.60 143.55
Daily average yen/dollar exchange rate 111.21 126.67 134.52 144.83 138.00
Notes: (1) Excludes gain of $11,438 ($.11 per share) from cumulative effect of accounting changes in 1993;
(2) Includes $12,058 gain on sale of television station in 1989;
(3) Includes $34,454 business restructuring write-down in 1989.
(*) Based on operating earnings.
(**) Excludes realized investment gains/losses, net of tax.
Share and per-share amounts have been adjusted to reflect a five-for-four stock split in June 1993.
|
EXH 13-4
PAGE
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
AFLAC Incorporated (the "Parent Company") and its subsidiaries (the
"Company") achieved record-setting results during each of the three years
from 1991 through 1993.
The Company's primary business activity is supplemental health
insurance, which is marketed and administered primarily through American
Family Life Assurance Company of Columbus (AFLAC). Our operations in
Japan (AFLAC Japan) and the United States (AFLAC U.S.) service the two
principal markets for our insurance operations. Because of their
significance to the Company's consolidated financial condition and results
of operations, AFLAC Japan and AFLAC U.S. are the primary components for
this discussion and analysis.
The following discussion of earnings comparisons for 1993 excludes a
gain of $11.4 million, or $.11 per share, from the cumulative effect of
accounting changes from the adoption of three new Statements of Financial
Accounting Standards (SFAS) in the first quarter of 1993. Components of
the cumulative adjustment were: an increase to net earnings of $22.0
million from the release of previously provided deferred income taxes
(SFAS No. 109), a charge to net earnings of $9.6 million for the accrual
of retirement benefits other than pensions (SFAS No. 106), and a charge of
$1.0 million for the accrual of post-employment benefits (SFAS No. 112).
The financial information in prior years was not restated. These new
accounting standards did not have a material effect on the Company's 1993
operating results.
EXH 13-5
SUMMARY OF OPERATING RESULTS BY BUSINESS COMPONENT
(In millions)
Percentage Change Years ended
over previous year December 31,
__________________ _______________________
1993 1992 1993 1992 1991
__________________ _______________________
AFLAC Japan................ 25.6% 20.0% $ 398.9 $317.7 $264.7
AFLAC U.S.................. 20.1 15.3 75.1 62.5 54.2
Other foreign insurance.... 43.3 (34.5) (7.8) (13.8) (10.2)
Realized investment
gains (losses)............ 2.9 (3.3) (1.4)
Broadcast division......... .8 13.0 13.4 13.3 11.8
Interest expense,
non-insurance operations.. (8.1) (8.5) (11.6)
Capitalized interest, on
building construction..... 8.8 4.5 -
Parent Company, other
operations and
eliminations.............. (14.3) (12.3) (54.8) (47.9) (42.8)
Pretax earnings............ 32.0 22.6 428.4 324.5 264.7
Income taxes............... 30.7 21.7 184.5 141.1 116.0
Earnings before cumulative
effect of accounting
changes................... 33.0 23.3 243.9 183.4 148.7
Cumulative effect of
accounting changes........ 11.4 - -
Net earnings............... $255.3 $183.4 $148.7
===== ===== =====
|
RESULTS OF OPERATIONS
The increases in reported results in U.S. dollars of AFLAC Japan and of consolidated earnings from 1991 through 1993 were aided by favorable currency translations from yen to dollars. The continued strength of the Japanese yen caused our yen-based earnings to be translated for reporting purposes into a greater number of dollars during the three-year period when compared with the results for each of the previous years. AFLAC Japan's pretax operating earnings (excluding realized investment gains/losses) in yen increased 10.2%, 13.1% and 12.1% for the years ended December 31, 1993, 1992 and 1991, respectively. The reported U.S. dollar results for AFLAC Japan were affected by the increasingly favorable cumulative-average yen-to-dollar exchange rates of 111.21 in 1993, 126.67 in 1992 and 134.52 in 1991. As a result, percentage increases in U.S. dollars for AFLAC Japan's pretax operating earnings were 25.6% in 1993, 20.0% in 1992 and 20.5% in 1991.
EXH 13-6
The strengthening of the yen benefited consolidated operating
earnings by approximately $.24 per share in 1993 and $.08 per share in
both 1992 and 1991. Excluding the benefit of the stronger yen, operating
earnings per share increased 15.1%, 17.1% and 20.0% for the years ended
December 31, 1993, 1992 and 1991, respectively.
During the last two years, pretax operating earnings have benefited
from the capitalization of interest costs of $8.8 million in 1993 and $4.5
million in 1992 associated with the cost of construction of an
administrative office building in Tokyo. Total interest expense in 1993
was $10.6 million, compared with $10.4 million in 1992. Upon completion
of the building at the end of the first quarter of 1994, the interest
costs will no longer be capitalized and will be expensed thereafter.
The effective corporate income tax rate continued to decline slightly
from 43.8% in 1991 to 43.5% in 1992 to 43.1% in 1993, principally due to
a change in the mix of the contributions from the Company's business
components. Most of the Company's income tax expense represents Japanese
income taxes on AFLAC Japan's operating results, which are taxed at
Japan's corporate income tax rate of 46.2%. For U.S. income tax purposes,
worldwide earnings are taxed either at 35% (34% for 1992 and 1991), less
available foreign tax credits, or under the alternative minimum tax basis,
where the use of foreign tax credits is more restrictive. For the last
three years, the Company has been taxed in the United States under the
alternative minimum tax basis.
INSURANCE OPERATIONS, AFLAC JAPAN
AFLAC Japan, a branch of AFLAC and the principal contributor to the
Company's earnings, is the fourth largest life insurance company in Japan
in terms of policies in force and the only foreign life insurer that ranks
among the top 10 of the 30 life insurance companies in Japan. The more
significant percentage changes and ratios for pretax operating results of
AFLAC Japan are shown in the table below.
AFLAC JAPAN
SUMMARY OF OPERATING RESULTS
In Dollars In Yen
1993 1992 1991 1993 1992 1991
____________________ ____________________
Percentage increase
over previous year:
Premium income....... 29.9% 24.9% 27.4% 14.1% 17.6% 18.3%
Investment income.... 31.0 25.0 28.8 14.9 17.7 19.8
Total revenues....... 30.1 24.9 27.6 14.2 17.6 18.5
Pretax operating
earnings............ 25.6 20.0 20.5 10.2 13.1 12.1
- -----------------------------------------------------------------------
In Dollars
1993 1992 1991
_________________________________
Ratios to total revenues:
Benefits and claims............. 72.1% 71.5% 71.0%
Operating expenses.............. 18.2 18.4 18.5
Pretax operating earnings....... 9.7 10.1 10.5
=======================================================================
|
The percentage increases in premium income in yen reflect the growth of premiums in force. The increases in annualized premiums in force of 13.2% in 1993, 15.9% in 1992 and 18.7% in 1991 reflect the high persistency rate of our business, steady sales of new policies, and conversions of existing policies to higher benefit and premium policies. New annualized premiums from sales and conversions were $576.1 million in
EXH 13-7
1993, up 6.3% (a decline of 7.5% in yen); $542.2 million in 1992, up 17.5%
(10.3% in yen); and $461.6 million in 1991, up 27.7% (19.9% in yen). The
1993 decline in new annualized premium sales in yen principally resulted
from a slowdown in the conversion program of older cancer plans to the
Super Cancer Plan.
The Super Cancer Plan, which was introduced in 1990, accounted for
55.9% of cancer insurance premiums in force at December 31, 1993, compared
with 44.1% and 26.8% at December 31, 1992 and 1991, respectively. Total
new annualized premiums from cancer policy sales and conversions were
$466.2 million in 1993, down 3.7% (a decline of 16.2% in yen); $484.2
million in 1992, up 17.1% (10.0% in yen); and $413.3 million in 1991, up
27.2% (19.5% in yen). Sales of the Super Cancer Plan in both 1993 and
1992 were affected by reduced disposable income resulting from the
troubled Japanese economy and the introduction of our new supplemental
insurance product, Super Care, in May 1992.
Sales of Super Care continued to meet our expectations in 1993. New
annualized premiums from the sale of Super Care policies totaled $105
million in 1993, or 20% of new annualized premium sales, compared with $34
million sold in 1992. Super Care policies accounted for 3% of total
annualized premiums in force as of December 31, 1993.
The Ministry of Finance (MOF) in Japan has started to permit
insurance companies to increase the premiums on new policy issues in
response to the lower investment yield rates available in the Japanese
market. AFLAC Japan increased the premiums on Super Care new issues by an
average of 10% (effective November 1993) and will increase the premiums on
Super Cancer new issues by an average of 16% starting in July 1994. Since
the premium increases apply to new policies only, we do not expect any
significant adverse impact on our policy persistency rate due to higher
premiums.
Investment income, which is affected by available cash flow from
operations and investment yields achievable on new investments,
continually increased during the three-year period from 1991 to 1993. The
investment yields in Japan, however, have been steadily decreasing since
1990. The cumulative effect of the lower investment yields is reflected
in the overall rate of return (net of investment expenses) on AFLAC
Japan's average invested assets. In 1993, the overall rate of return
declined to 6.16%, compared with 6.22% in 1992 and 6.17% in 1991.
While the yields on new investments acquired in Japan during 1993
declined from a peak in 1990, we continued to seek the highest investment
yields available in longer-dated securities without sacrificing investment
quality. Additional investments in AFLAC Japan's dollar-denominated bond
portfolio and Euroyen private placements were made during 1993 in an
effort to obtain the highest investment yields available within our safety
parameters.
In anticipation of a further decline in investment yields, we have
elected to use forward purchase agreements to secure current investment
yields. As of December 31, 1993, we had outstanding purchase commitments
for the delivery of securities in 1994 of $657.5 million, or 38% of our
expected 1994 cash flow, at an average yield to maturity of 4.80%. At
December 31, 1992, outstanding purchase commitments amounted to $213.7
million, with an average yield to maturity of 6.04%.
Two factors slowed AFLAC Japan's growth in investment income during
the last three years. Annual profit transfers to AFLAC U.S. of $20.2
million in 1991, $33.4 million in 1992 and $97.9 million in 1993
diminished the amount of funds available for investment by AFLAC Japan.
The other factor was expenditures of $177.6 million during the last two
years for the construction costs of our administrative office building in
Tokyo. These two factors reduced the growth of AFLAC Japan's investment
income by approximately $.7 million in 1991, $6.5 million in 1992 and
$16.9 million in 1993.
EXH 13-8
The factors described above have also contributed to reduced rates of
increase in AFLAC Japan's pretax operating earnings and to less favorable
operating ratios during the last two years. The percentage increases of
pretax operating earnings in yen were 10.2% in 1993, 13.1% in 1992 and
12.1% in 1991. During the same three-year period, the benefit ratio
increased, and the operating expense ratio declined slightly. The
increase in the benefit ratio also reflects the strengthening of policy
liabilities to provide for lower assumed interest rates and the continued
increase in claims experience due to the excellent persistency of our
policies in force. Our annual claims experience studies continue to
support our current reserving assumptions.
Even with Japan's economic slowdown, we believe the market for
supplemental insurance remains bright. The demand for our products in
Japan has continued. We remain optimistic about increasing penetration
within existing groups, opening new accounts and developing new
supplemental products for the Japanese market. We also believe that Super
Care is a good addition to our product line and will appeal to our cancer
insurance policyholders as well as to new customers. AFLAC Japan's
objective is to increase new annualized premium sales, excluding
conversions, by 10% in 1994.
INSURANCE OPERATIONS, AFLAC U.S.
AFLAC U.S. has improved its performance during the last three years. The more significant percentage changes and ratios for pretax operating results of AFLAC U.S. are shown in the table below.
AFLAC U.S.
Summary of Operating Results
1993 1992 1991
__________________________
Percentage increase over previous year:
Premium income....................... 9.5% 11.1% 7.6%
Investment income.................... 18.5 16.0 14.4
Total revenues....................... 10.2 10.9 8.6
Pretax operating earnings............ 20.1 15.3 16.5
_______________________________________________________________________
1993 1992 1991
__________________________
Ratios to total revenues:
Benefits and claims.................. 56.8% 57.5% 58.2%
Operating expenses................... 33.7 33.8 33.4
Pretax operating earnings............ 9.5 8.7 8.4
=======================================================================
|
The percentage increases in premium income reflect the growth of
premiums in force. The increases in annualized premiums in force of
10.0% in 1993, 11.9% in 1992 and 7.8% in 1991 were favorably affected by
an improvement in the persistency for several lines of our business,
increased sales through Section 125 plans (commonly known as "cafeteria
plans"), our product-broadening program and affiliations with insurance
brokers. New annualized premiums from sales and conversions were $229.0
million in 1993, $206.1 million in 1992 and $171.8 million in 1991. The
percentage increases of new annualized premiums from sales and conversions
were 11.1% in 1993, 20.0% in 1992 and 13.1% for 1991.
The growth of pretax operating earnings during the last three years
has been due to several factors. The percentage increases of 20.1% in
1993, 15.3% in 1992 and 16.5% in 1991 reflect lower benefit ratios. The
benefit ratios shown above reflect greater sales of accident and hospital
EXH 13-9
indemnity policies, which have a lower loss ratio compared with most of
our other products. Increased revenues resulting from investment income
generated by strong cash flow from operations and profit transfers from
AFLAC Japan also affected the benefit ratio and pretax operating earnings
growth. By improving our administrative systems and controlling other
costs, we have been able to offset increased spending for our national
advertising programs without significantly affecting the operating expense
ratio.
The benefit ratio has declined during the last three years. However,
we expect future benefit ratios for some of our supplemental products to
increase slightly because of our efforts to enhance policy benefits. In
addition, potential future pricing restrictions by insurance regulators
may also affect the ratio. At the same time, we expect our operating
expense ratio to decline in the future due to continued improvements in
policy persistency and operating efficiencies. As a result, we expect the
pretax profit margin to continue to improve in 1994.
The Company is monitoring developments in the U.S. Congress
concerning possible changes to the U.S. health care system. One proposal
under discussion is the restriction of cafeteria plans. We believe that
most of our sales through cafeteria plans are based on the merits of the
coverage and not on the tax-savings effect. However, we also believe that
part of the persistency improvement we have experienced has been due to
the popularity of cafeteria plans. Restrictions on the use of these plans
could have a negative impact on sales and the persistency of business in
force; however, we cannot determine the extent of this effect at this
time.
Even with changes to the U.S. health care system, we believe that
opportunities for marketing high-quality, affordable supplemental
insurance policies in the United States will continue. We believe that a
reformed health care system will require individuals to assume
responsibility for larger portions of their total health care expenses,
which should increase the demand for supplemental insurance products in
the long term. AFLAC U.S. will continue to explore new distribution
channels. AFLAC U.S.' objective is for new annualized premium sales in
1994 to exceed our 1993 results by 10% or more.
OTHER OPERATIONS
The Company's other operations include insurance operations in two
foreign countries (other than Japan) and seven network-affiliated
television stations located in small to mid-size U.S. markets.
A decision was made in 1992 to discontinue the underwriting of credit
insurance in the United Kingdom and in 1993, all sales activity was
discontinued there. During the last three years, deferred acquisition
costs were written off, and the reserves were strengthened for the
discontinued insurance products. The U.K. operation is presently in a
runoff mode.
In most respects, our ongoing foreign insurance operations have made
progress toward the accomplishment of their developmental goals. We
believe our insurance operations in Taiwan and Canada will continue to
improve.
The Broadcast Division's operating results continued to be affected
by the sluggish economy. Television advertising revenues in 1993 were
also affected by the absence of election-year and Olympic advertising that
benefited 1992. Future recovery in advertising revenues will likely
depend on positive developments in the U.S. economy. Advertising revenues
should benefit from off-year political elections in 1994. Due to the
growth and size of our insurance operations, the Broadcast Division will
remain a small part of the Company's overall operating results.
EXH 13-10
The Parent Company's operating expenses consist primarily of corporate overhead expenses such as salary costs, retirement provisions and professional fees. These expenses have increased during the last three years, principally due to growth in corporate service activities.
FINANCIAL ACCOUNTING STANDARDS BOARD'S STATEMENTS
The Financial Accounting Standards Board has issued Statement of Financial Accounting Standards No. 115, Accounting for Certain Equity Securities and Fixed-Maturity Investments (SFAS No. 115). Under SFAS No. 115, which the Company adopted effective January 1, 1994, fixed-maturity securities available for sale will be carried at market value in the balance sheet. At December 31, 1993, these securities were carried at lower of cost or market. If the Company had adopted SFAS No. 115 as of December 31, 1993, $1.5 billion would have been added to our total invested assets, and shareholders' equity would have increased by approximately $350 million, after adjustments to reflect deferred income taxes and amounts that are not expected to inure to the benefit of shareholders.
ANALYSIS OF FINANCIAL CONDITION
BALANCE SHEET
The financial condition of the Company has remained strong during the
last two years. The investment portfolios of AFLAC Japan and AFLAC U.S.
have continued to grow and still consist of high-quality securities.
Due to the relative size of AFLAC Japan, changes in the yen/dollar
exchange rate can have a significant effect on the Company's financial
statements. The yen/dollar exchange rate at the end of each period is
used to convert yen-denominated balance sheet items to U.S. dollars for
reporting purposes. The exchange rate at December 31, 1993, was 112.00
yen to one U.S. dollar, 11.3% stronger than the December 31, 1992,
exchange rate of 124.70. Management estimates that the stronger yen rate
increased invested assets, including cash, by $1.1 billion, total assets
by $1.3 billion, and total liabilities by $1.3 billion, over the amounts
that would have been reported using the previous year's exchange rate.
For additional information on exchange rates, see Note 2, Foreign and
Business Segment Information, on page 38.
Since December 31, 1992, total invested assets have increased $3.0
billion, or 31.8%. AFLAC Japan investments increased $2.8 billion
(32.7%), while AFLAC U.S. investments increased $199.8 million (22.3%).
During 1993, deferred policy acquisition costs increased 21.0%, and total
assets increased 29.8%. During 1992, total invested assets increased $1.4
billion, or 17.4%. The continued growth in assets reflects the strength
of our primary business, the substantial cash flows from operations, the
record-breaking new annualized premium sales by AFLAC U.S., the
substantial renewal premiums collected by AFLAC Japan (87% of AFLAC
Japan's premiums) and the effect of the stronger yen.
The market value of the Company's investments in fixed-maturity
securities (both those held to maturity and available for sale) exceeded
the financial statement carrying value by $1,851 million at December 31,
1993, and consisted of $1,891 million in gross unrealized gains less $40
million in gross unrealized losses. At year-end 1992, the market value
was $499 million more than the carrying value. The increase in net
unrealized gains of $1,352 million ($1,323 million in Japan) during 1993
was primarily due to the continued decrease in general-market interest
rates in the United States and Japan.
Mortgage loans on real estate and other long-term investments
amounted to less than 1% of invested assets at December 31, 1993 and 1992.
Cash and short-term investments totaled $190.1 million as of December 31,
EXH 13-11
1993, or 1.5% of total invested assets, compared with $207.2 million, or
2.2%, at December 31, 1992. For additional information concerning
investments and market values, see Note 3, Investments, and Note 4, Fair
Value of Financial Instruments, on pages 39 and 41.
The increase in net property and equipment primarily resulted from
the construction in progress of our new administrative office building in
Japan, which was started during 1992. For additional information
concerning property and equipment, see Note 5 on page 41.
Policy liabilities increased $2.7 billion, or 29.0%, during 1993.
AFLAC Japan's policy liabilities increased $2.5 billion, or 31.2%, and
AFLAC U.S.' policy liabilities increased $136.4 million, or 12.7%. During
1992, policy liabilities increased $1.5 billion, or 18.8%. These
increases are due to the continuing growth of new business, as well as the
maturing of existing policies in force in both AFLAC Japan and AFLAC U.S.,
and the effect of the stronger yen.
The Company's insurance operations continue to provide the primary
sources of liquidity for the Company. Capital needs can also be
supplemented by borrowed funds. The principal sources of cash from
insurance operations are premiums and investment income. The insurance
operations' primary uses of cash are policy claims, commissions, operating
expenses, income taxes and payments to the Parent Company for management
fees and dividends. Both the sources and uses of cash are reasonably
predictable. Our investment policy provides for liquidity through the
ownership of high-quality investment securities. AFLAC's insurance
policies are generally not interest-sensitive and therefore are not
subject to unexpected policyholder redemptions due to investment yield
changes. Also, the majority of AFLAC's policies provide indemnity
benefits rather than reimbursement for actual medical costs and therefore
are not subject to the increasing risks of medical cost inflation.
We believe outside sources for additional debt and equity capital, if
needed, will continue to be available for capital expenditures and
business expansion. The Parent Company's capital resources are largely
dependent upon the ability of its subsidiaries to pay management fees and
dividends. Insurance regulatory authorities impose certain limitations
and restrictions on payments of dividends, management fees, loans and
advances by AFLAC to the Parent Company.
The Georgia Insurance Code requires prior approval for dividend
distributions that exceed the greater of statutory earnings for the
previous year, or 10% of statutory capital and surplus as of the previous
year-end. These regulatory limitations are not expected to affect the
level of management fees or dividends paid by AFLAC to the Parent Company.
Also a new risk-based capital formula was adopted by the National
Association of Insurance Commissioners (NAIC) in 1992 for U.S. life
insurance companies, which establishes capital requirements relating to
insurance risk, business risk, asset risk and interest rate risk. AFLAC's
NAIC risk-based capital ratio continues to reflect a very strong statutory
capital and surplus position. In addition, there are several ongoing
regulatory initiatives being developed by the NAIC relating to
investments, reinsurance, dividend restrictions and other accounting
requirements. We will continue to review these proposals to determine the
effect on the Company.
In addition to restrictions by U.S. insurance regulators, the
Japanese Ministry of Finance imposes restrictions on, and requires
approval for, the remittances of earnings from AFLAC Japan to AFLAC U.S.
The Parent Company and AFLAC U.S. receive funds from AFLAC Japan in the
form of management fees, allocated expenses and profit remittances. Total
funds received from AFLAC Japan were $133.4 million in 1993, $65.5 million
in 1992 and $48.5 million in 1991. During the last two years, the MOF has
developed solvency standards, a version of risk-based capital
requirements, as part of its long-term deregulation process. For
EXH 13-12
additional information on Japanese regulatory restrictions on profit transfers and other remittances, see the section on Statutory Accounting and Dividend Restrictions, in Note 9, Shareholders' Equity, on page 44.
CASH FLOW
In 1993, consolidated cash flow from operations increased 22.7% to
$1.8 billion, compared with $1.5 billion in 1992 and $1.2 billion in 1991.
Net cash flow from operations for AFLAC Japan increased 23.8% to $1.7
billion in 1993, compared with $1.3 billion in 1992 and $1.1 billion in
1991. AFLAC Japan represented 90% of the consolidated net cash flow from
operations in 1993, compared with 89% in 1992 and 87% in 1991. The
continued growth of our insurance operations in Japan and the U.S. is the
principal reason for the increasing cash flow from operations.
Consolidated cash flow used for investing activities (purchases less
dispositions of investment securities and additions to property and
equipment) increased 22.0% to $1.8 billion in 1993, compared with $1.5
billion in 1992 and $1.2 billion in 1991. AFLAC Japan accounted for 88%
of the consolidated net cash used by investing activities in 1993,
compared with 89% in 1992 and 91% in 1991. Included in AFLAC Japan's
portion for 1993 and 1992 were the expenditures required for the
construction of an administrative office building in Tokyo for use by
AFLAC Japan. The first two payments of 10.2 billion yen each for the
construction costs of the building were made in March of 1992 and 1993.
The final payment of approximately 13.6 billion yen will be due upon the
building's completion at the end of the first quarter of 1994. The total
costs of the project are estimated to be approximately 40 billion yen
($357.1 million based on the exchange rate at December 31, 1993).
Operating cash flow is primarily used to purchase high-quality
fixed-maturity securities. When market opportunities arise, the Company
disposes of certain fixed-maturity securities to improve future investment
yields or lengthen maturities by reinvesting in securities of similar or
higher quality. Therefore, dispositions before maturity can vary
significantly from year to year. Dispositions before maturity represented
approximately 8% of the annual average investment portfolio of fixed-
maturity securities in 1993, compared with 18% in 1992 and 14% in 1991.
In 1993, net cash used for financing activities (principally
dividends to shareholders and debt repayments less borrowings) was $68
million, compared with $44 million in 1992 and $48 million in 1991. All
cash dividends paid by the Parent Company were funded by dividends
received from its subsidiaries. During 1993, cash dividends paid to
shareholders were $.388 per share ($40.1 million), an increase of 12.8%
over 1992. The 1992 cash dividend of $.344 per share ($35.3 million)
represented an increase of 16.2% over the 1991 cash dividend of $.296 per
share ($30.2 million). We have increased our cash dividend per share at
a compound rate of 15.0% over the last 10 years. A five-for-four stock
split was distributed on June 15, 1993, effectively increasing the number
of outstanding shares by 25% (all share and per-share amounts have been
restated for the stock split).
Subsequent to year-end, on February 8, 1994, the Company announced a
stock repurchase plan. The Company's board of directors authorized the
repurchase of up to 4.6 million shares of the Company's stock from time to
time, depending on market conditions. The repurchased shares may be held
as treasury stock or reissued in connection with the Company's stock
purchase and benefit plans.
EXH 13-13
AFLAC INCORPORATED AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF EARNINGS
Years Ended December 31, 1993, 1992 and 1991
(In thousands, except for per 1993 1992 1991
share amounts) --------- --------- ---------
Revenues:
Premiums, principally supplemental
health insurance $4,225,390 $3,369,201 $2,765,349
Net investment income 689,272 533,166 431,315
Realized investment gains (losses) 2,937 (3,264) (1,451)
Other income 83,019 87,369 87,456
--------- --------- ---------
Total revenues 5,000,618 3,986,472 3,282,669
---------- ---------- ---------
Benefits and expenses:
Benefits and claims 3,423,297 2,692,353 2,188,817
Acquisition and operating expenses:
Amortization of deferred policy
acquisition costs 127,108 88,009 78,631
Insurance commissions 561,678 451,871 368,980
Insurance expenses 340,350 304,963 256,815
Interest expense 10,554 10,446 14,070
Capitalized interest on
building construction (8,766) (4,522) -
Other operating expenses 118,013 118,808 110,664
--------- --------- ---------
Total acquisition and
operating expenses 1,148,937 969,575 829,160
--------- --------- ---------
Total benefits and expenses 4,572,234 3,661,928 3,017,977
--------- --------- ---------
Earnings before income taxes
and cumulative effect
of accounting changes 428,384 324,544 264,692
Income taxes:
Current 136,930 105,429 60,312
Deferred 47,565 35,748 55,696
--------- --------- ---------
Total income taxes 184,495 141,177 116,008
--------- --------- ---------
Earnings before cumulative
effect of accounting changes 243,889 183,367 148,684
Cumulative effect on prior years of
accounting changes 11,438 - -
--------- --------- ---------
Net earnings $255,327 $183,367 $148,684
========= ========= =========
Earnings per share:
Earnings before cumulative
effect of accounting changes $2.32 $1.79 $1.46
Cumulative effect of
accounting changes 0.11 - -
--------- --------- ---------
Net earnings $2.43 $1.79 $1.46
========= ========= =========
Common shares used in computing
earnings per share (In thousands) 105,201 102,544 101,980
========= ========= =========
|
See the accompanying Notes to the Consolidated Financial Statements. Share and per-share amounts have been adjusted to reflect a five-for-four stock split in June 1993.
EXH 13-14 PAGE
AFLAC INCORPORATED AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
Years Ended December 31, 1993 and 1992
(In thousands)
1993 1992
----------- ----------
ASSETS:
Investments:
Fixed maturities held to maturity,
at amortized cost (market value,
$2,418,540 in 1993 and
$1,161,940 in 1992) $ 2,082,326 $ 1,084,430
Securities available for sale:
Fixed maturities, at lower of amortized
cost or market (market value,
$11,570,386 in 1993 and $8,433,293
in 1992) 10,055,436 8,011,455
Equity securities, at market value
(cost, $67,692 in 1993 and $65,653
in 1992) 82,065 68,343
Mortgage loans on real estate 57,485 85,265
Other long-term investments 1,726 4,657
Short-term investments 166,689 171,053
----------- ----------
Total investments 12,445,727 9,425,203
Cash 23,413 36,138
Receivables, primarily premiums 231,977 179,528
Accrued investment income 184,087 148,990
Deferred policy acquisition costs 1,953,248 1,614,394
Property and equipment, at cost less
accumulated depreciation 361,246 223,230
Intangible assets, at cost less accumulated
amortization of $31,801 in 1993 and $27,820
in 1992 114,165 116,585
Other assets 128,823 157,306
----------- ----------
Total assets $ 15,442,686 $11,901,374
=========== ==========
|
See the accompanying Notes to the Consolidated Financial Statements.
EXH 13-15.1
AFLAC INCORPORATED AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
Years Ended December 31, 1993 and 1992
(In thousands)
1993 1992
___________ ___________
LIABILITIES AND SHAREHOLDERS' EQUITY:
Liabilities:
Policy liabilities:
Future policy benefits $ 10,932,225 $ 8,437,829
Unearned premiums 302,846 263,493
Unpaid policy claims 712,066 561,686
---------- ----------
Total policy liabilities 11,947,137 9,263,008
Notes payable 122,062 125,800
Income taxes, primarily deferred 950,278 848,514
Payables for security transactions 659,158 276,847
Other liabilities 398,427 305,323
Commitments and contingencies (Notes 3, 5 and 10)
---------- ----------
Total liabilities 14,077,062 10,819,492
---------- ----------
Shareholders' equity:
Common stock of $.10 par value. Authorized
175,000; issued 103,710 shares in 1993
and 82,549 in 1992 10,371 8,255
Additional paid-in capital 195,730 190,871
Unrealized foreign currency translation gains 123,294 68,978
Unrealized gains on equity securities 14,811 5,167
Retained earnings 1,029,625 814,355
Treasury stock (6,568) (4,171)
Notes receivable for stock purchases (1,639) (1,573)
---------- ----------
Total shareholders' equity 1,365,624 1,081,882
---------- ----------
Total liabilities and
shareholders' equity $ 15,442,686 $ 11,901,374
=========== ===========
|
See the accompanying Notes to the Consolidated Financial Statements.
EXH 13-15.2
AFLAC INCORPORATED AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY
Years Ended December 31, 1993, 1992 and 1991
(In thousands)
1993 1992 1991
__________ __________ __________
Common Stock - number of shares:
Issued:
Balance at beginning of year 82,549 81,778 81,464
Exercise of stock options 370 771 314
Shares issued in connection
with acquisition (Note 9) 104 - -
Five-for-four stock split 20,687 - -
________ ________ ________
Balance at end of year 103,710 82,549 81,778
Less treasury shares 239 137 43
________ ________ ________
Shares outstanding at end of year 103,471 82,412 81,735
======== ======== ========
|
See the accompanying Notes to the Consolidated Financial Statements.
EXH 13-16.1
AFLAC INCORPORATED AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY
Years Ended December 31, 1993, 1992 and 1991
(In thousands) 1993 1992 1991
---------- ---------- ----------
Common stock:
Balance at beginning of year $ 8,255 $ 8,178 $ 8,146
Shares issued in connection
with acquisition (Note 9) 10 - -
Five-for-four stock split 2,069 - -
Exercise of stock options 37 77 32
---------- ---------- ----------
Balance at end of year 10,371 8,255 8,178
---------- ---------- ----------
Additional paid-in capital:
Balance at beginning of year 190,871 183,414 181,611
Shares issued in connection
with acquisition (Note 9) 3,227 - -
Five-for-four stock split (2,069) - -
Cash in lieu of fractional shares (84) - -
Exercise of stock options 3,785 7,457 1,803
---------- ---------- ----------
Balance at end of year 195,730 190,871 183,414
---------- ---------- ----------
Unrealized foreign currency translation gains:
Balance at beginning of year 68,978 66,750 56,876
Change in unrealized translation
gains during year 54,316 2,228 14,961
Deferred income taxes - - (5,087)
---------- ---------- ----------
Balance at end of year 123,294 68,978 66,750
---------- ---------- ----------
Unrealized gains (losses) on equity securities:
Balance at beginning of year 5,167 1,400 (1,165)
Change in unrealized gains (losses)
during year 11,809 113 5,133
Deferred income taxes (2,165) 3,654 (2,568)
---------- ---------- ----------
Balance at end of year 14,811 5,167 1,400
---------- ---------- ----------
Retained earnings:
Balance at beginning of year 814,355 666,271 547,777
Net earnings 255,327 183,367 148,684
Cash dividends on common stock
($.388 per share in 1993, $.344
in 1992 and $.296 in 1991) (40,057) (35,283) (30,190)
---------- ---------- ----------
Balance at end of year 1,029,625 814,355 666,271
---------- ---------- ----------
Treasury stock:
Balance at beginning of year (4,171) (1,104) (244)
Purchase of treasury stock (7,893) (3,067) (860)
Shares issued in connection
with acquisition (Note 9) 5,496 - -
---------- ---------- ----------
Balance at end of year (6,568) (4,171) (1,104)
---------- ---------- ----------
Notes receivable for stock purchases (1,639) (1,573) (1,420)
---------- ---------- ----------
Total shareholders' equity $ 1,365,624 $ 1,081,882 $ 923,489
========== ========== ==========
|
See the accompanying Notes to the Consolidated Financial Statements.
EXH 13-16.2
AFLAC INCORPORATED AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
Years Ended December 31, 1993, 1992 and 1991
(In thousands)
1993 1992 1991
__________ __________ __________
Cash flows from operating activities:
Net earnings $ 255,327 $ 183,367 $ 148,684
Adjustments to reconcile net
earnings to net cash provided
by operatings activities:
Increase in policy liabilities 1,782,689 1,405,926 1,188,667
Deferred income taxes 47,565 35,748 55,696
Change in income taxes payable (37,022) 47,911 (36,345)
Increase in deferred policy
acquisition costs (200,124) (199,973) (169,204)
Increase in receivables (38,490) (19,034) (8,398)
Other, net 35,304 49,530 61,819
__________ __________ __________
Net cash provided by
operating activities 1,845,249 1,503,475 1,240,919
__________ __________ __________
Cash flows from investing activities:
Proceeds from investments sold or matured:
Fixed-maturity securities matured 129,170 77,771 150,501
Fixed-maturity securities sold 915,629 1,532,182 932,160
Equity securities 45,131 53,271 69,023
Mortgage loans, net 24,955 406 -
Other long-term investments, net 2,931 - -
Short-term investments, net 18,483 11,771 9,143
Costs of investments acquired:
Fixed-maturity securities (2,766,509) (2,986,728) (2,251,516)
Equity securities (51,237) (60,435) (70,997)
Mortgage loans, net - - (1,970)
Other long-term investments, net - (1,488) (114)
Additions to property and equipment,net (112,207) (96,670) (11,288)
__________ __________ __________
Net cash used by investing
activities (1,793,654) (1,469,920) (1,175,058)
__________ __________ __________
Cash flows from financing activities:
Proceeds from borrowings - 2,300 8,150
Principal payments under debt
obligations (32,197) (15,310) (27,078)
Dividends paid to shareholders (40,057) (35,283) (30,190)
Other, net 4,578 4,467 975
__________ __________ __________
Net cash used by
financing activities (67,676) (43,826) (48,143)
__________ __________ __________
Effect of exchange rate changes
on cash 3,356 87 2,229
__________ __________ __________
Net change in cash (12,725) (10,184) 19,947
Cash at beginning of year 36,138 46,322 26,375
__________ __________ __________
Cash at end of year $ 23,413 $ 36,138 $ 46,322
========== ========== ==========
|
See the accompanying Notes to the Consolidated Financial Statements.
EXH 13-17.1
AFLAC INCORPORATED AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
Years Ended December 31, 1993, 1992 and 1991
(In thousands)
1993 1992 1991
__________ __________ __________
Supplemental disclosures of cash
flow information:
Cash payments during the year for:
Interest on debt obligations $ 9,459 $ 10,148 $ 14,936
Income taxes 148,071 59,153 93,920
|
In 1993, noncash financing activities included capital lease obligations incurred for computer equipment totaling $28,460, and non-cash investing activities included issuance of common stock for purchase of a company amounting to $8,730 (see Note 9).
See the accompanying Notes to the Consolidated Financial Statements.
EXH 13-17.2
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(1) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
BASIS OF PRESENTATION: The accompanying consolidated financial statements of AFLAC Incorporated (the Parent Company) and subsidiaries (the Company) are prepared in accordance with generally accepted accounting principles. These principles are established primarily by the Financial Accounting Standards Board (FASB) and the American Institute of Certified Public Accountants. All significant intercompany items have been eliminated in consolidation. The Company operates predominantly in the insurance industry and primarily sells supplemental health insurance in Japan and the United States. Substantially all of the Company's insurance operations are conducted through American Family Life Assurance Company of Columbus (AFLAC), which operates in the United States (AFLAC U.S.) and as a branch in Japan (AFLAC Japan).
TRANSLATION OF FOREIGN CURRENCIES: Financial statement accounts expressed in foreign currencies, principally Japanese yen, are translated into U.S. dollars as follows: The functional foreign currency assets and liabilities are translated at the rates of exchange at the balance sheet dates, and the related unrealized translation adjustments are included in a separate component of shareholders' equity. Revenues, expenses and cash flows expressed in functional foreign currencies are translated into U.S. dollars using daily average exchange rates for the year. Realized currency exchange gains and losses resulting from foreign currency transactions are included in earnings.
INSURANCE REVENUE AND EXPENSE RECOGNITION: Substantially all supplemental health insurance contracts issued by the insurance subsidiaries are classified as long-duration contracts. The contract provisions generally cannot be changed or canceled during the contract period; however, premiums for policies issued in the United States usually may be adjusted in conformity with guidelines prescribed by state insurance regulatory authorities.
Insurance premiums for health policies are recognized as earned income ratably over the terms of the policies. When revenues are recorded, the related amounts of benefits and expenses are charged against such revenues, so as to result in recognition of profits in the current year and all future years for which the policies are expected to be renewed. This association is accomplished by means of the provision for future policy benefits and the deferral and subsequent amortization of policy acquisition costs.
Actuarial assumptions and deferrable acquisition costs are reviewed each year and revised when necessary for new policies issued to more closely reflect recent experience and studies of actual acquisition costs.
DEFERRED POLICY ACQUISITION COSTS: The costs of acquiring new business are deferred and amortized, with interest, over the same expected periods used for computing future policy benefit reserves. In this manner, the related acquisition expenses are matched with revenues. Costs deferred include commissions and certain direct and allocated policy issue, underwriting and marketing expenses, all of which vary with and are primarily related to the production of new business. Policy acquisition costs deferred were $334.5 million in 1993, $285.2 million in 1992 and $251.6 million in 1991. Commissions represented 62.4% in 1993, 65.2% in 1992 and 64.3% in 1991 of the policy acquisition costs deferred.
EXH 13-18
INSURANCE LIABILITIES: The liabilities for future policy benefits are computed by a net level premium method using estimated future investment yields, withdrawals, morbidity and mortality as derived from the Company's experience, recognized morbidity and mortality tables, and national Japanese studies, with reasonable provision for possible future adverse deviations in experience.
Unpaid policy claims are computed using statistical analyses of historical claim experience and represent the estimated ultimate unpaid cost of all claims incurred.
INVESTMENTS: Fixed-maturity securities (principally bonds) are investments that mature at a specified future date more than one year after being issued. Fixed-maturity securities which the Company intends to hold until maturity are classified as "fixed maturities held to maturity" and are carried at amortized cost. Amortized cost is based on the purchase price and is adjusted periodically in order that the carrying value will equal the face or par value at maturity. Fixed-maturity securities, which may be sold prior to maturity due to changes in interest rates, prepayment risks, liquidity needs, tax planning purposes or other similar factors, have been classified as "securities available for sale" and are being carried at the lower of aggregate amortized cost or market. If the aggregate market value for fixed maturities available for sale is less than the aggregate amortized cost of such securities, the excess is an unrealized loss, which is reported in a separate component of shareholders' equity.
Equity securities (nonredeemable preferred and common stocks) are carried at current market value, which represents closing quotes on the trading exchanges. If the current market value of equity securities is higher than purchase cost, the excess is an unrealized gain; and if lower than cost, the difference is an unrealized loss. The net unrealized gains or losses on equity securities are reported in a separate component of shareholders' equity, along with the unrealized losses on fixed-maturity securities available for sale, if applicable.
For investments that have experienced a decline in value below their carrying value or cost which is considered to be other than temporary, the decline is recorded as a realized investment loss in the earnings statement. Costs of securities sold are determined on the first-in, first-out method.
INVESTMENT INCOME: Interest is recorded as income when earned and is adjusted for amortization of any premium or discount. Dividends on equity securities are recorded as income on the ex-dividend dates.
INCOME TAXES: Different rules are used in computing the U.S. and
foreign income tax expense presented in the accompanying financial
statements from those used in preparing the Company's income tax returns.
Deferred income taxes represent the tax effects of income and expense
items that are reported in different years for tax and financial statement
reporting purposes.
The Parent Company and its U.S. subsidiaries, including their foreign branches, file a consolidated U.S. income tax return. Additionally, AFLAC Japan is subject to Japanese corporate income taxes.
INTANGIBLES: Intangible assets, which primarily consist of television network affiliations and FCC licenses of broadcast businesses acquired, are being amortized using the straight-line method, generally over 40 years.
EXH 13-19
EARNINGS PER SHARE: Earnings per share are based on the weighted average number of common shares outstanding during the periods, including dilutive shares issuable under the stock option plans. All share and per- share amounts have been adjusted to reflect the five-for-four stock split in June 1993.
ACCOUNTING PRONOUNCEMENTS ADOPTED IN 1993: Effective January 1, 1993, the Company adopted three new Statements of Financial Accounting Standards (SFAS) as prescribed by the FASB, through a one-time cumulative increase of $11.4 million in the statement of earnings. The financial information for prior years was not restated. These new accounting standards did not have a material effect on the Company's 1993 operating earnings. The three standards adopted were as follows:
A cumulative gain of $22.0 million was recognized for SFAS No. 109, Accounting for Income Taxes. This new income tax accounting standard replaces the income statement orientation of the previous income tax accounting standard with a balance sheet approach. Under this new accounting standard, a deferred income tax liability is recognized for all existing taxable temporary differences. A deferred income tax asset is also recognized for all existing deductible temporary differences and operating loss and tax credit carryforwards, less a valuation allowance for the portion of such deferred tax asset that is not likely to be realized in future years. A deferred income tax asset or liability is measured using the marginal tax rate that is expected to apply to the last dollars of taxable income in future years. The effects of enacted changes in tax laws or rates are recognized in the period such changes are enacted.
A cumulative charge of $9.6 million was incurred upon adoption of SFAS No. 106, Employers' Accounting for Postretirement Benefits Other Than Pensions. This new accounting standard requires accrual of liabilities for postretirement benefits, other than pensions, for retirees during their active service years. The expected costs of providing these benefits (principally health care costs) to future retirees are recognized each year the employee renders service.
A cumulative charge of $1.0 million was incurred upon the adoption of SFAS No. 112, Employers' Accounting for Postemployment Benefits. This new standard requires accrual of costs relating to benefits provided to former or inactive employees. These benefits principally include salary continuation, severance benefits, health care benefits and life insurance benefits. The expected future costs of providing these benefits are accrued when it is probable that such obligation exists.
ACCOUNTING PRONOUNCEMENTS NOT YET ADOPTED: Financial statements
issued by the Company beginning with the first quarter of 1994 will
reflect SFAS No. 115, Accounting for Certain Investments in Debt and
Equity Securities. This statement addresses the accounting for investments
in equity securities that have readily determinable fair values and all
investments in debt securities. These investments are to be classified in
three categories and accounted for as follows. Debt securities that the
Company has the positive intent to hold to maturity are classified as
held-to-maturity securities and are reported at amortized cost. Debt and
equity securities that are bought and held principally for the purpose of
selling in the near term are classified as trading securities and reported
at fair value, with unrealized gains and losses included in earnings.
(The Company did not hold any such securities as of December 31, 1993.)
Debt and equity securities not classified as either held-to-maturity
securities or trading securities are classified as available-for-sale
securities and reported at fair value, with unrealized gains and losses
EXH 13-20
excluded from earnings and reported in a separate component of shareholders' equity. The Company adopted this new standard January 1, 1994. If the Company had adopted SFAS No. 115 as of December 31, 1993, $1.5 billion would have been added to total invested assets, and shareholders' equity would have been increased by $350 million, after adjustments to reflect deferred income taxes and amounts that are not expected to inure to the benefit of shareholders.
Another new accounting standard that will be effective for financial statements issued in 1995 is SFAS No. 114, Accounting by Creditors for Impairment of a Loan. Since mortgage loans represent less than 1% of invested assets, this new standard will not have a material effect on the Company.
RECLASSIFICATIONS: Certain prior year amounts have been reclassified to conform to the current-year presentation.
EXH 13-21
(2) FOREIGN AND BUSINESS SEGMENT INFORMATION
The Company's only reportable industry segment is insurance, and its principal foreign operations are conducted in Japan. The components of operations for the years ended December 31 were as follows:
(In thousands) 1993 1992 1991
_________ _________ _________
Total revenues:
Insurance:
Foreign $4,127,289 $3,178,625 $2,549,524
U.S. 796,587 724,400 653,681
_________ _________ _________
Total insurance 4,923,876 3,903,025 3,203,205
Broadcast - U.S. 68,431 66,272 64,428
Corporate and other U.S.
operations 51,721 59,256 62,444
Intercompany eliminations (43,410) (42,081) (47,408)
_________ _________ _________
Total $5,000,618 $3,986,472 $3,282,669
========= ========= =========
Earnings before income taxes and
cumulative effect of accounting changes:
Insurance:
Foreign $ 390,945 $ 297,335 $ 248,844
U.S. 78,047 66,758 58,729
_________ _________ _________
Total insurance 468,992 364,093 307,573
Broadcast - U.S. 8,673 7,567 4,575
Corporate and other U.S.
operations (49,281) (47,116) (47,456)
________ _________ _________
Total $ 428,384 $ 324,544 $ 264,692
========= ========= =========
|
Total assets at December 31 were as follows:
(In thousands)
Total assets: 1993 1992
__________ __________
Insurance:
Foreign $13,656,280 $10,365,883
U.S. 1,667,125 1,420,030
__________ __________
Total insurance 15,323,405 11,785,913
Broadcast - U.S. 205,533 217,419
Corporate and other U.S.
operations 1,585,296 1,263,101
Intercompany eliminations (1,671,548) (1,365,059)
__________ __________
Total $15,442,686 $11,901,374
========== ==========
|
Foreign assets included investments in U.S. dollar-denominated securities of $647.7 million and $426.5 million as of December 31, 1993 and 1992, respectively. The investment income received from such investments was $42.7 million in 1993, $40.1 million in 1992 and $42.5 million in 1991.
EXH 13-22
Total insurance assets at December 31, 1993, included premiums receivable of $167.0 million in Japan and $34.6 million in the United States.
The 1993 year-end yen-to-dollar exchange rate, which is used to convert balance sheet items to U.S. dollars, strengthened 11.3%, while the 1992 year-end exchange rate strengthened .4%, compared with the prior year-end exchange rates based on the yen/dollar rates of 112.00, 124.70 and 125.25 at December 31, 1993, 1992 and 1991, respectively. Had the exchange rates remained unchanged from the prior year-end rates, the change in total assets would have been lower by approximately $1.3 billion (9.3%) in 1993 and $43 million (.4%) in 1992. Total liabilities would have been lower by approximately $1.3 billion (9.9%) in 1993 and $42 million (.4%) in 1992.
The daily average yen/dollar exchange rate for 1993, 1992 and 1991 of 111.21, 126.67 and 134.52, respectively, strengthened 13.9%, 6.2% and 7.7%, respectively, over the prior years. The strengthening increased net earnings by approximately $24.5 million in 1993 and $7.8 million for both 1992 and 1991.
Earnings before income taxes included net realized foreign exchange transaction gains of $ .8 million in both 1993 and 1992, and $1.8 million in 1991.
Annual payments are made from AFLAC Japan for management fees to the Parent Company, and allocated expenses and remittances of earnings to AFLAC U.S. These payments totaled $133.4 million in 1993, $65.5 million in 1992 and $48.5 million in 1991. See Note 9 for information concerning restrictions on remittances of AFLAC Japan earnings.
(3) INVESTMENTS The amortized cost and estimated market values of investments in fixed-maturity securities held to maturity at December 31 were as follows:
December 31, 1993
_________________________________________
Gross Gross Estimated
Amortized Unrealized Unrealized Market
(In millions) Cost Gains Losses Value
_________ __________ __________ _________
Yen-denominated, corporate
obligations:
Foreign issuers
(Euroyen and Samurai) $ 1,732.8 $ 299.5 $ - $ 2,032.3
Other 322.5 53.7 19.0 357.2
________ ______ _______ ________
2,055.3 353.2 19.0 2,389.5
U.S. dollar-denominated:
Corporate obligations 27.0 2.0 - 29.0
________ ______ _______ ________
Total fixed-maturity
securities held to
maturity $ 2,082.3 $ 355.2 $ 19.0 $ 2,418.5
======== ====== ======= ========
|
EXH 13-23
December 31, 1992
_________________________________________
Gross Gross Estimated
Amortized Unrealized Unrealized Market
(In millions) Cost Gains Losses Value
_________ __________ __________ _________
Yen-denominated, corporate
obligations:
Foreign issuers
(Euroyen and Samurai) $ 752.9 $ 84.5 $ - $ 837.4
Other 295.5 12.4 20.0 287.9
________ ______ ________ _______
1,048.4 96.9 20.0 1,125.3
U.S. dollar-denominated:
Corporate obligations 36.0 .6 - 36.6
________ ______ ________ _______
Total fixed-maturity
securities held to
maturity $ 1,084.4 $ 97.5 $ 20.0 $1,161.9
======== ====== ======== =======
|
The amortized cost and estimated market values of investments in fixed-maturity securities available for sale at December 31 were as follows:
December 31, 1993
_________________________________________
Gross Gross Estimated
Amortized Unrealized Unrealized Market
(In millions) Cost Gains Losses Value
_________ __________ __________ _________
Yen-denominated:
Japan national government
direct obligations $ 3,845.9 $ 822.7 $ - $ 4,668.6
Japan government guaranteed 506.2 50.0 - 556.2
Japan municipalities 824.1 75.7 - 899.8
Japan public utilities 2,183.5 351.7 - 2,535.2
Corporate obligations:
Banks and other financial
institutions 218.2 17.5 - 235.7
Foreign issuers
(Euroyen and Samurai) 928.8 86.7 - 1,015.5
Other 29.5 2.9 - 32.4
________ _______ _______ ________
Total yen-denominated 8,536.2 1,407.2 - 9,943.4
________ _______ _______ ________
U.S. dollar-denominated:
U.S. government direct
obligations 144.0 8.5 - 152.5
U.S. agencies (FNMA, etc.) 75.0 3.3 .4 77.9
U.S. mortgage-backed
securities (GNMA) .5 - - .5
Corporate obligations 1,283.3 103.5 7.3 1,379.5
________ _______ _______ ________
Total dollar-denominated 1,502.8 115.3 7.7 1,610.4
________ _______ _______ ________
Other foreign securities 16.4 .2 - 16.6
________ _______ _______ ________
Total fixed-maturity
securities available
for sale $10,055.4 $1,522.7 $ 7.7 $11,570.4
======== ======= ======= ========
|
EXH 13-24
December 31, 1992
_________________________________________
Gross Gross Estimated
Amortized Unrealized Unrealized Market
(In millions) Cost Gains Losses Value
_________ __________ __________ _________
Yen-denominated:
Japan national government
direct obligations $2,965.7 $ 144.6 $ - $3,110.3
Japan government guaranteed 440.6 25.8 - 466.4
Japan municipalities 612.7 36.6 - 649.3
Japan public utilities 1,809.7 127.3 .5 1,936.5
Corporate obligations:
Banks and other financial
institutions 176.1 9.5 - 185.6
Foreign issuers
(euroyen and samurai) 851.5 13.3 5.9 858.9
Other 42.7 1.1 - 43.8
_______ ______ ______ _______
Total yen-denominated 6,899.0 358.2 6.4 7,250.8
_______ ______ ______ _______
U.S. dollar-denominated:
U.S. government direct
obligations 175.0 8.8 .1 183.7
U.S. agencies (FNMA, etc.) 62.4 3.2 .1 65.5
U.S. mortgage-backed
securities (GNMA) .8 - - .8
Corporate obligations 855.7 59.4 1.2 913.9
_______ ______ ______ _______
Total dollar-denominated 1,093.9 71.4 1.4 1,163.9
_______ ______ ______ _______
Other foreign securities 18.6 - - 18.6
_______ ______ ______ _______
Total fixed-maturity
securities available
for sale $8,011.5 $ 429.6 $ 7.8 $8,433.3
======= ====== ====== =======
|
The amortized cost and estimated market value of investments in fixed- maturity securities held to maturity at December 31, 1993, by contractual maturity are shown below:
Estimated
Amortized Market
(In millions) Cost Value
_________ _________
Due in one year or less $ 4.7 $ 5.0
Due after one year through five years 6.2 7.0
Due after five years through 10 years 178.9 219.0
Due after 10 years 1,892.5 2,187.5
________ ________
Total fixed-maturity securities
held to maturity $ 2,082.3 $ 2,418.5
======== ========
|
EXH 13-25
The amortized cost and estimated market values of investments in
fixed-maturity securities available for sale at December 31, 1993, by
contractual maturity are shown below:
Estimated
Amortized Market
Cost Value
___________ ___________
(In millions)
Due in one year or less $ 160.8 $ 164.9
Due after one year through
five years 2,303.0 2,543.4
Due after five years through
10 years 3,141.2 3,611.5
Due after 10 years 4,449.9 5,250.1
U.S. Mortgage-backed
securities (GNMA) .5 .5
__________ __________
Total fixed-maturity securities
available for sale $ 10,055.4 $ 11,570.4
========== ==========
|
Expected maturities will differ from contractual maturities because some issuers have the right to call or prepay obligations with or without call or prepayment penalties.
Estimated market values for fixed-maturity securities were provided by outside consultants using market quotations, prices provided by market makers, or estimates of market values obtained from yield data relating to investment securities with similar characteristics. The estimated market values for equity securities were determined by using market quotations as of the end of the year on the principal public exchange markets such as the New York Stock Exchange and the Tokyo Stock Exchange.
Realized and unrealized gains and losses from investments for the years ended December 31 were as follows:
(In thousands) 1993 1992 1991
__________ __________ __________
Realized gains (losses) on
sale or maturity of investments:
Fixed-maturity securities:
Gross gains from sales $ 16,447 $ 17,458 $ 10,635
Gross losses from sales (8,980) (22,311) (11,691)
Net gains from redemptions 2,369 2,027 1,170
________ ________ ________
9,836 (2,826) 114
Equity securities (5,864) 280 (572)
Other long-term securities (1,035) (718) (993)
________ ________ ________
Net realized gains (losses) $ 2,937 $ (3,264) $ (1,451)
======== ======== ========
Changes in unrealized gains:
Fixed-maturity securities $1,303,052 $ 410,888 $ 311,560
Equity securities 12,143 113 5,133
_________ ________ ________
Net unrealized gains $1,315,195 $ 411,001 $ 316,693
========= ======== ========
|
EXH 13-26
Investments in fixed-maturity securities held to maturity are carried in the financial statements at amortized cost. Investments in fixed- maturity securities available for sale are carried in the financial statements at aggregate lower of cost or market. As of December 31, 1993 and 1992, the market values of fixed-maturity securities available for sale were higher than amortized cost. Therefore, unrealized gains and losses for all fixed-maturity securities are not reflected in the financial statements. Equity securities are carried in the financial statements at market value. Unrealized gains and losses for equity securities and aggregate unrealized losses for fixed maturities available for sale (none in 1993 or 1992) are included as a separate component of shareholders' equity.
The following fixed-maturity securities individually exceeded 10% percent of shareholders' equity at December 31:
(In millions) 1993 1992
___________________ ___________________
Amortized Market Amortized Market
Cost Value Cost Value
___________________ ___________________
Japan National Government $3,845.9 $4,668.6 $2,965.7 $3,165.6
Tokyo Electric Power
Company, Ltd. 695.6 812.4 568.8 611.9
Chubu Electric Power 486.2 556.4 408.3 429.7
Tokyo Metropolitan
Government 391.0 423.7 312.4 320.2
Finance Corp. of Local
Enterprise 311.4 345.4 271.8 288.6
Province De Quebec 231.9 244.5 * -
Kyushu Electric Power
Company, Ltd. 209.1 243.5 169.0 181.5
Kansai Electric Power
Company, Ltd. 207.1 240.9 195.6 208.9
Tohoku Electric Power 169.3 195.2 140.6 149.7
Nippon Telephone and
Telegraph Corp. 143.9 164.2 * -
Chugoku Electric Power 137.0 159.6 123.4 132.1
|
*Less than 10%
The components of net investment income for the years ended December 31 were as follows:
(In thousands) 1993 1992 1991
_________ _________ _________
Fixed-maturity securities $ 691,482 $ 529,829 $ 421,244
Equity securities 1,554 1,225 775
Mortgage loans on real estate 6,024 6,615 6,446
Other long-term investments 369 1,096 2,243
Short-term investments 8,094 11,239 16,322
________ ________ ________
Gross investment income 707,523 550,004 447,030
Less investment expenses 18,251 16,838 15,715
________ ________ ________
Net investment income $ 689,272 $ 533,166 $ 431,315
======== ======== ========
|
EXH 13-27
At December 31, 1993, the Company had outstanding forward commitments to purchase yen-denominated bonds for $657.5 million (fair value $682.5 million) with an average yield to maturity of 4.80%. These commitments secured yields that existed in late 1993 for investment of operating cash flows that will occur in 1994. At December 31, 1992, the outstanding forward commitments amounted to $213.7 million (fair value $216.2 million), with an average yield to maturity of 6.04%. These contractual purchase commitments are reflected in invested assets and in payables for security transactions in the accompanying balance sheet.
(4) FAIR VALUES OF FINANCIAL INSTRUMENTS
The carrying amounts for cash, short-term investments, premium receivables, investment receivables and payables, and short-term notes payable approximate their fair values due to the short-term maturity of these instruments.
The carrying amounts and fair values (market values) of the Company's fixed-maturity and equity securities are disclosed in Note 3.
The fair values for mortgage loans are estimated using the quoted market prices for securities collateralized by similar mortgage loans, adjusted for the difference in loan characteristics. For mortgage loans where quoted market prices are not available, the fair values are estimated using discounted cash flow analysis and interest rates currently being offered for similar loans to borrowers with similar credit ratings. Loans with similar characteristics are aggregated for purposes of these calculations. The fair values for notes payable are estimated using discounted cash flow analysis, based on the Company's current borrowing rates for similar types of borrowings.
The carrying values and estimated fair values of the Company's investments in mortgage loans and notes payable as of December 31 are as follows:
1993 1992
__________________ __________________
(In thousands) Carrying Fair Carrying Fair
Amount Value Amount Value
__________________ __________________
Mortgage loans:
Commercial $ 47,132 $ 61,896 $ 59,227 $ 70,454
Residential 10,353 19,586 26,038 33,028
_______ _______ _______ _______
Total $ 57,485 $ 81,482 $ 85,265 $103,482
======= ======= ======= =======
Notes payable $122,062 $127,398 $125,800 $132,575
======= ======= ======= =======
|
EXH 13-28
(5) PROPERTY AND EQUIPMENT
Property and equipment consisted of the following at December 31:
(In thousands) 1993 1992
________ ________
Land........................................ $ 22,447 $ 20,747
Buildings................................... 79,441 74,468
Construction in progress (AFLAC Japan)...... 202,428 90,203
Equipment................................... 144,923 108,809
_______ _______
449,239 294,227
Less accumulated depreciation............... 87,993 70,997
_______ _______
Net property and equipment................ $361,246 $223,230
======= =======
|
In March 1992, the Company entered into a contract for the construction of an administrative office building in Tokyo, Japan. The total costs of the building will be approximately 40 billion yen ($357.1 million at the 1993 year-end exchange rate).
The building is being built on partially leased land. The Company is committed to purchase the leased land at an unspecified date, upon the demand of the owners of the land. The purchase price is to be based on the fair market value of the land at the time of purchase. As of December 31, 1993, the fair market value of the leased land is estimated to be 3.6 billion yen ($32.6 million).
Construction is being funded from AFLAC Japan's cash flow. In accordance with generally accepted accounting principles, interest expense on outstanding debt is being capitalized during the construction period.
EXH 13-29
(6) FUTURE POLICY BENEFITS
The liability for future policy benefits at December 31 consists of the following:
(In millions) Liability Amounts Interest rates
____________________________ ___________________
Policy Year
Issue of In 20
Year 1993 1992 Issue Years
______ _______ ________ ________ _________
Health insurance:
Foreign: 1990-93 $ 3,795.1 $ 2,054.9 5.5% 5.5%
1988-93 863.5 710.0 5.25 5.25
1987-88 1,077.5 928.0 5.5 5.5
1985-87 197.1 189.4 5.65 5.65
1985-86 889.2 802.3 6.75 5.5
1978-84 2,467.3 2,322.6 6.5 5.0
1974-79 647.8 535.0 7.0 5.0
Other 23.9 42.7
U.S.:
1988-93 211.7 107.4 8.0 6.0
1986-93 299.3 288.4 6.0 6.0
1985-86 22.8 21.5 6.5 6.5
1981-86 268.8 268.9 7.0 5.5
1973-80 55.1 57.4 6.0 4.5
1956-79 6.6 7.0 4.0-5.5 4.0-5.5
Other 82.7 81.0
Life insurance 1956-93 23.8 21.3 4.0-6.75 5.5
________ ________
Total $10,932.2 $ 8,437.8
======== ========
|
The weighted average interest rates reflected in the statements of earnings for health insurance future policy benefits for foreign policies were 5.8% in 1993, 5.9% in 1992 and 6.0% in 1991, and for U.S. policies, 6.3% in 1993 and 6.2% in 1992 and 1991.
EXH 13-30
(7) NOTES PAYABLE
A summary of notes payable at December 31 follows:
(In thousands) 1993 1992
_________ _________
5.965% unsecured note payable to banks, due
in semi-annual installments beginning
1995 through 1997 $ 49,000 $ -
9.60% to 10.72% unsecured notes payable to
bank, due in semi-annual installments
through 1998 40,722 49,167
Obligations under capitalized leases, due in
monthly installments through 1998, secured
by computer equipment in Japan 25,052 -
8.3% notes payable, due
in monthly installments through
1997, secured by equipment 5,511 6,930
10.05% unsecured note payable to bank,
due in quarterly installments
through 1997 1,700 2,100
Unsecured notes payable to banks,
with interest not to exceed prime: - 62,203
8.5% mortgage note payable - 4,595
Other 77 805
_______ _______
Total notes payable $122,062 $125,800
======= =======
|
The aggregate maturities of notes payable during each of the five years after December 31, 1993, are: 1994, $15.3 million; 1995, $25.6 million; 1996, $36.0 million; 1997, $34.7 million; and 1998, $10.3 million.
In 1993, the Company refinanced $59.0 million of its unsecured demand notes payable with a new 5.965% note payable. The loan agreement for the new note contains various covenants, which, among other things, require the Company to maintain a minimum consolidated net worth of $750 million.
EXH 13-31
(8) INCOME TAXES
The income tax effects of the temporary differences that give rise to deferred income tax assets and liabilities as of December 31, 1993, were as follows:
(In thousands)
Deferred income tax liabilities:
Deferred acquisition costs $ 785,699
Policy benefit reserves 97,199
Other 96,402
____________
Total deferred income tax liabilities $ 979,300
Deferred income tax assets:
Difference in tax basis of investment in
Japan branch of AFLAC 69,204
Foreign tax credit carryover 61,758
Other 92,370
____________
Total gross deferred tax assets $ 223,332
Less valuation allowance 74,711
____________
Total deferred income tax assets $ 148,621
____________
Deferred income tax liability $ 830,679
Current income tax liability 119,599
____________
Total income tax liability $ 950,278
============
|
Foreign tax credit carryovers of $13.4 million, $25.4 million and $23.0 million expire in 1995, 1997 and 1998, respectively.
The components of income tax expense for the years ended December 31 were as follows:
Foreign,
Principally
(In thousands) Japan U.S. Total
___________ _________ ___________
Income tax expense:
1993:
Current $ 126,439 $ 10,491 $ 136,930
Deferred 47,222 343 47,565
__________ ________ __________
Total $ 173,661 $ 10,834 $ 184,495
========== ======== ==========
1992:
Current $ 97,979 $ 7,450 $ 105,429
Deferred 33,786 1,962 35,748
__________ ________ __________
Total $ 131,765 $ 9,412 $ 141,177
========== ======== ==========
1991:
Current $ 53,546 $ 6,766 $ 60,312
Deferred 53,244 2,452 55,696
__________ ________ __________
Total $ 106,790 $ 9,218 $ 116,008
========== ======== ==========
|
EXH 13-32
Income tax expense in the accompanying consolidated financial statements is greater than the amount computed by applying the expected U.S. tax rate of 35% for 1993 and 34% for 1992 and 1991 to pretax earnings before the cumulative effect of accounting changes. The principal reasons for the differences and the related tax effects are summarized as follows:
(In thousands) 1993 1992 1991
_________ _________ _________
Income taxes based on U.S.
statutory rates $ 149,934 $ 110,345 $ 89,995
U.S. alternative minimum tax 9,542 7,380 6,230
Unrecognized foreign tax credits 17,275 14,612 7,605
Non-insurance losses generating
no current tax benefit 1,598 1,754 3,800
Other, net 6,146 7,086 8,378
________ ________ ________
Income tax expense $ 184,495 $ 141,177 $ 116,008
======== ======== ========
|
Most of the Company's income tax expense represents Japanese income taxes on AFLAC Japan operating results. Japan's corporate tax rate was 46.2% in 1993, 1992 and 1991. Income tax benefits on net unrealized investment gains in 1993 and 1992 reflect a tax benefit of 46.2% on unrealized losses of AFLAC Japan.
Income tax expense (benefit) for the years ended December 31 was allocated as follows:
Liability Deferred Deferred
Method Method Method
(In thousands) 1993 1992 1991
_________ ________ ________
Operating earnings (excluding realized
investment gains and losses) $183,793 $144,382 $118,067
Realized investment gains and losses 702 (3,205) (2,059)
_______ _______ _______
Earnings before the cumulative
effect of accounting changes 184,495 141,177 116,008
Unrealized gains and losses on
securities available for sale 2,165 (3,654) 2,568
_______ _______ _______
Total income tax expense $186,660 $137,523 $118,576
======= ======= =======
|
Deferred income tax expense, which results from differences in the timing of reporting various income and expense items between the financial statements and the income tax returns, are summarized as follows:
Liability Deferred Deferred
Method Method Method
(In thousands) 1993 1992 1991
_________ ________ ________
Recognition of deferred policy
acquisition costs $ 56,786 $ 52,097 $ 41,307
Adjustments of liability for
future policy benefits 584 201 1,184
Unrecognized foreign tax credits (3,548) (6,393) 7,605
Non-insurance losses generating
no current tax benefit 2,214 1,754 1,639
Current year utilization of foreign
tax credit carryforwards - - 6,521
Other, net (8,471) (11,911) (2,560)
________ _______ _______
Deferred income tax expense $ 47,565 $ 35,748 $ 55,696
======== ======= =======
|
EXH 13-33
(9) SHAREHOLDERS' EQUITY
STATUTORY ACCOUNTING AND DIVIDEND RESTRICTIONS: The insurance subsidiaries are required to report their results of operations and financial position to state insurance regulatory authorities, and in the case of AFLAC Japan, to the Japanese Ministry of Finance, on the basis of statutory accounting practices prescribed or permitted by such authorities. U.S. statutory net income of AFLAC was $149.2 million in 1993, $153.2 million in 1992 and $163.8 million in 1991. Statutory capital and surplus was $992.7 million and $864.5 million at December 31, 1993 and 1992, respectively, as determined on a U.S. statutory accounting basis.
Reconciliations of total AFLAC net assets on a generally accepted accounting principles basis to net assets determined on a U.S. statutory accounting basis as of December 31 are as follows:
(In thousands) 1993 1992
__________ __________
Net assets on generally accepted
accounting principles basis $ 1,447,352 $ 1,165,449
Elimination of deferred policy
acquisition costs (1,950,845) (1,611,606)
Adjustment to liability for future
policy benefits 828,932 714,922
Adjustment to income tax liability 857,124 743,482
Reduction in premiums receivable (42,989) (37,318)
Establishment of asset valuation reserve (106,431) (77,447)
Elimination of statutory
non-admitted assets (37,038) (39,305)
Other, net (3,405) 6,339
__________ __________
Net assets on U.S. statutory
accounting basis $ 992,700 $ 864,516
========== ==========
|
The Parent Company depends on its subsidiaries for cash flow, primarily in the form of dividends and management fees. Consolidated retained earnings in the accompanying financial statements largely represent undistributed earnings of the subsidiaries. Net assets of the insurance subsidiaries aggregated $1,447.4 million at December 31, 1993. Dividends, management fees (see Note 2) and other payments to the Parent Company by its insurance subsidiaries are subject to various regulatory restrictions and approvals related to safeguarding the interests of insurance policyholders. Dividend payments by AFLAC during 1994 in excess of $151.9 million would require prior approval of U.S. state insurance regulatory authorities.
AFLAC Japan accounted for $1,099.7 million of the above net assets on a generally accepted accounting principles basis at December 31, 1993.
A portion of earnings, as determined on a Japan statutory accounting basis, can be remitted to AFLAC U.S. after satisfying various restrictions imposed by Japanese regulatory authorities for protecting policyholders and obtaining remittance approvals from such authorities. Profit remittances to the United States can fluctuate due to changes in the amounts of regulatory earnings. Among other items, factors affecting regulatory earnings include changes in the market value of investments and fluctuations in foreign currency translations of AFLAC Japan's U.S. dollar-denominated investments.
EXH 13-34
Net assets (unaudited) of AFLAC Japan, based on Japan statutory accounting practices, aggregated $184.4 million, and $197.8 million at December 31, 1993, and 1992, respectively. Japan statutory accounting practices differ in many respects from U.S. generally accepted accounting principles including: different policy benefit reserving methods, immediate charge-off of policy acquisition costs, investment securities generally carried at lower of cost or market and nonrecognition of deferred income tax liabilities.
Earnings were remitted from AFLAC Japan to AFLAC U.S. in the amount of $97.9 million in 1993, $33.4 million in 1992 and $20.2 million in 1991. Management expects to continue to obtain approvals from Japan regulatory authorities for annual transfers in line with projected increases in regulatory basis earnings.
STOCK SPLIT: All share and per-share amounts have been adjusted to reflect a five-for-four stock split in June 1993.
STOCK OPTIONS: The following table summarizes data relating to qualified and non-qualified stock options:
1993 1992 1991
_________ _________ _________
Number of shares subject to options:
Outstanding at
beginning of year 3,505,379 4,212,674 4,453,165
Granted 22,501 425,143 397,375
Expired/canceled - (12,657) (8,450)
Exercised (470,365) (1,119,781) (629,416)
_________ _________ _________
Outstanding at end
of year 3,057,515 3,505,379 4,212,674
========= ========= =========
Exercisable at end
of year 2,761,980 2,913,053 3,177,811
========= ========= =========
Available for future
grants 276 22,777 435,263
========= ========= =========
Exercise price per
share for options
exercised $3.07-24.20 $3.07-18.40 $3.07-14.70
========== ========== ==========
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The exercise price of options outstanding at December 31, 1993, ranged from $3.07 to $31.40 per share.
OTHER: In accordance with the Parent Company's Articles of Incorporation, shares of common stock are generally entitled to one vote per share until they have been held by the same beneficial owner for a continuous period of 48 months, at which time they become entitled to 10 votes per share.
In December 1993, the Parent Company issued 213,060 shares from treasury stock and 103,688 newly-issued shares of common stock for a total of 316,748 shares in exchange for the common stock of a corporation owned by the Company's president and chief executive officer. The assets of the acquired corporation consisted of 238,308 shares of the Parent Company's common stock (valued at the stock exchange average closing market price over the preceding 18 trading-day period) and future renewal commission rights on certain AFLAC insurance policies sold in the officer's territory
EXH 13-35
while he served as an independent agent for the Company on a commission- only basis prior to 1983 (computed at fair value based on the average of three appraisals of the present value determinations made by three independent actuarial consultants). The 238,308 shares of Parent Company stock acquired have been reflected as the purchase of treasury shares in the accompanying consolidated financial statements.
(10) BENEFIT PLANS
RETIREMENT PLANS: The Company sponsors several defined-benefit retirement plans covering substantially all employees. The retirement benefits for employees are generally based on years of service and formula-determined salaries at retirement for AFLAC Japan employees, and salary during the five highest consecutive years out of the last 10 years preceding retirement for U.S. employees.
It is the Company's general policy to annually fund through a trust the accrued costs for the U.S. employee plans to the extent deductible for U.S. federal income tax purposes (such accrued costs are calculated under the frozen entry-age actuarial cost method). A portion of the AFLAC Japan employee retirement program is funded under a group annuity arrangement with another insurance company. An accrued liability is included in the consolidated financial statements for the unfunded portion of the AFLAC Japan program and supplemental plans for certain Japan and U.S. officers.
The components of retirement expense and significant actuarial assumptions for the years ended December 31 are shown below.
1993 1992 1991
______________ _____________ _____________
(In thousands) Japan U.S. Japan U.S. Japan U.S.
______ ______ ______ ______ ______ ______
Basic employee plans:
Service cost for benefits
earned during the year $1,500 $ 1,602 $1,249 $ 1,160 $1,077 $ 902
Interest cost on projected
benefit obligations 801 2,145 618 1,745 517 1,456
Less actual investment
return on plan assets (355) (1,195) (538) (1,538) (346) (2,819)
Net amortization
and deferral 213 (487) 97 (308) 74 1,269
_____ ______ _____ ______ _____ ______
Total retirement
expense for basic
employee plans 2,159 2,065 1,426 1,059 1,322 808
Officers, retirees and
beneficiaries unfunded
supplemental plans 1,021 18,007 932 16,506 866 16,869
_____ ______ _____ ______ _____ ______
Total retirement expense $3,180 $20,072 $2,358 $17,565 $2,188 $17,677
===== ====== ===== ====== ===== ======
Significant actuarial
assumptions:
Discount rate for:
Net periodic pension
costs 5.5% 8.0% 5.5% 9.0% 5.5% 9.0%
Benefit obligations 4.0 7.0 5.5 9.0 5.5 9.0
Projected increase in
salary levels 4.5 5.0 4.5 6.6 4.5 6.6
Expected long-term
return on plan assets 5.5 9.0 5.5 9.0 5.5 9.0
EXH 13-36
|
Reconciliations of the funded status of the basic employee plans with amounts recognized in the accompanying consolidated balance sheets as of December 31 are as follows:
1993 1992
________________ ________________
(In thousands) Japan U.S. Japan U.S.
_______ _______ _______ _______
Plan assets, at fair market
value (primarily bonds, stocks
and insurance contracts) $12,615 $22,874 $ 9,125 $21,575
______ ______ ______ ______
Actuarial present value of
benefit obligations:
Accumulated benefit obligations,
based on employee service to
date and present salary levels:
Vested benefits 10,953 22,159 6,422 12,245
Non-vested benefits 203 1,298 184 1,001
Effect of assumed future
salary increases 10,452 10,919 5,349 7,585
______ ______ ______ ______
Projected benefit obligations 21,608 34,376 11,955 20,831
______ ______ ______ ______
Plan assets over (less than)
unamortized projected benefit
obligations (8,993) (11,502) (2,830) 744
Unamortized net losses or (gains)
from plan experience variations
and changes in actuarial
assumptions 4,802 13,317 (651) 3,894
Unrecognized prior service
cost (credit) - 596 - (774)
Unamortized net transition (gain)
loss 966 (1,448) 948 (1,570)
Adjustment required to recognize
minimum liability - (1,976) - -
______ ______ ______ ______
Prepaid retirement cost
(liability) recognized in
consolidated balance sheets $(3,225) $(1,013) $(2,533) $ 2,294
====== ====== ====== ======
|
In addition to the funded benefit obligations shown above, the accrued retirement liability at December 31, 1993 and 1992, was $73.0 million and $53.9 million, respectively, for unfunded supplemental retirement plans for various officers and beneficiaries. The actuarial present value of projected benefit obligations was $117.4 million and $71.4 million at December 31, 1993 and 1992, respectively. The discount rates used were 4.0% and 5.5% for AFLAC Japan, and 7.0% and 9.0% for AFLAC U.S., for 1993 and 1992, respectively.
Such supplemental retirement plans include a lifetime obligation to the surviving spouse of the Company's former chairman of the board. Current benefits are payable at 1% of the previous year's "net earnings" as defined in the agreement. Benefits after 1994 will be reduced by one- half.
POST-RETIREMENT BENEFITS: In addition to pension benefits, substantially all U.S. employees of the Company participate in health care benefit plans. Employees become eligible for these benefits, up to age
EXH 13-37
65 if they terminate employment after age 55 with 15 years of service. Certain employees are eligible for non-medical benefits.
In 1993, the Company adopted the accrual method of accounting for post-retirement benefits and elected to recognize the transition obligation in earnings in the current year. The cumulative effect of recognizing this transition obligation was a decrease to earnings of $9.6 million during 1993.
Post-retirement cost for the year ended December 31, 1993, based on an assumed discount rate of 8% was $1.0 million, of which $.2 million is service cost and $.8 million is interest cost. The accumulated benefit obligation at December 31, 1993, was $11.2 million based on an assumed discount rate of 7%.
The health care cost trend rate assumed was 15%, graded to 7% over 8 years. Increasing the assumed health care cost trend rate by one percentage point in each year would increase the accumulated benefit obligation as of December 31, 1993, by $.5 million, and the estimated service cost and interest cost components for 1993 by $.4 million.
STOCK BONUS PLAN: AFLAC U.S. maintains a Stock Bonus Plan for eligible U.S. sales associates. Contributions to the plan, which are determined based on sales of insurance policies, are made by AFLAC U.S. to a trust and are used to purchase the Parent Company's common stock for later distribution to the participants. The net costs of this plan, which are included in deferred policy acquisition costs, amounted to $3.5 million in 1993, $4.1 million in 1992 and $4.8 million in 1991.
EXH 13-38
INDEPENDENT AUDITORS' REPORT
The Shareholders and Board of Directors
AFLAC Incorporated:
We have audited the accompanying consolidated balance sheets of AFLAC Incorporated and subsidiaries as of December 31, 1993 and 1992, and the related consolidated statements of earnings, shareholders' equity and cash flows for each of the years in the three-year period ended December 31, 1993. These consolidated financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on these consolidated financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing standards. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of AFLAC Incorporated and subsidiaries at December 31, 1993 and 1992, and the results of their operations and their cash flows for each of the years in the three-year period ended December 31, 1993, in conformity with generally accepted accounting principles.
KPMG PEAT MARWICK
Atlanta, Georgia
January 31, 1994
EXH 13-39
PAGE
SELECTED QUARTERLY FINANCIAL DATA
Unaudited Consolidated Quarterly Financial Data
(In thousands, except per-share amounts)
- -----------------------------------------------------------------------------------------------------------------------------
Three Months ended, March 31 June 30 September 30 December 31
- -----------------------------------------------------------------------------------------------------------------------------
1993 Amount % Change Amount % Change Amount % Change Amount % Change
- -----------------------------------------------------------------------------------------------------------------------------
Total revenues $1,121,470 20.0 % $1,236,720 29.5 % $1,308,241 27.6 % $1,334,187 24.5 %
Net earnings before
cummulative effect of
accounting changes 53,746 26.8 58,741 32.7 64,540 34.8 66,861 36.9
Net earnings 65,184 58,741 64,540 66,861
- -----------------------------------------------------------------------------------------------------------------------------
Per common share:
Net earnings before
cummulative effect of
accounting changes $ .51 24.4 $ .56 27.3 $ .61 32.6 $ .64 33.3
- -----------------------------------------------------------------------------------------------------------------------------
Three Months ended, March 31 June 30 September 30 December 31
- -----------------------------------------------------------------------------------------------------------------------------
1992 Amount % Change Amount % Change Amount % Change Amount % Change
- -----------------------------------------------------------------------------------------------------------------------------
Total revenues $ 934,466 21.1 % $ 955,293 22.0 % $1,025,294 23.4 % $1,071,419 19.4 %
Net earnings 42,397 25.8 44,250 27.4 47,873 24.1 48,848 17.3
- -----------------------------------------------------------------------------------------------------------------------------
Per common share:
Net earnings $ .41 24.2 $ .44 29.4 $ .46 21.1 $ .48 17.1
- -----------------------------------------------------------------------------------------------------------------------------
Per-share amounts have been adjusted to reflect a five-for-four stock split in June 1993.
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EXH 13-40
PAGE
EXHIBIT 22.0
AFLAC INCORPORATED
SUBSIDIARIES
The following list sets forth the subsidiaries of the Company:
Company Jurisdiction
___________________________________________ ______________
AFI Japan Co., Ltd. ("AFIJC") Japan
AFLAC Broadcast Partners ("AFLACBP") Georgia
AFLAC Insurance Company, Ltd. ("AICL") United Kingdom
AFLAC Insurance Company of Canada ("AFLACIC") Canada
AFLAC International, Inc. ("AII") Georgia
AFLAC Life Assurance Company, Ltd. ("ALACL") United Kingdom
AFLAC plc ("AL") United Kingdom
AFLAC Real Estate Holdings, Inc. ("AREH") Georgia
A. S. Hospitality, Inc. ("ASH") Tennessee
American Family Broadcast Group, Inc. ("AFBG") Georgia
American Family, Ltd. ("AF") United Kingdom
American Family Life Assurance Company
of Columbus ("AFLAC") Georgia
American Family Life Assurance Company
of New York ("AFLAC-NY") New York
Communicorp, Inc. ("COMM") Georgia
Communicorp International, Inc. ("CI") Hong Kong
Famous Artists Corporation ("FAC") Pennsylvania
Hotel Columbus, Inc. ("HCI") Georgia
Service American Corporation ("SAC") Georgia
WITN Television Company ("WITN") North Carolina
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The above subsidiaries are 100% directly owned by the Company, except:
WITN is 100% directly owned by AFBG.
CI is 100% directly owned by COMM.
AF, AICL and ALACL are 100% directly owned by AL.
AFLACIC and AFLAC-NY are 100% directly owned by AFLAC.
AFIJC and SAC are 100% directly owned by AREH.
AFLACBP is 99% owned by AFLAC and 1% owned by AFBG.
EXH-22.0
Exhibit 24.0
KPMG PEAT MARWICK
Certified Public Accountants
303 Peachtree Street, N.E.
Suite 2000
Atlanta, GA 30308
INDEPENDENT AUDITORS' CONSENT
The Shareholders and The Board of Directors AFLAC Incorporated
We consent to incorporation by reference in the Registration Statement No. 33-44720 on Form S-8 of AFLAC Incorporated of our report dated January 31, 1994, relating to the consolidated balance sheets of AFLAC Incorporated and subsidiaries as of December 31, 1993 and 1992, and the related consolidated statements of earnings, shareholders' equity, and cash flows for each of the years in the three-year period ended December 31, 1993, which report appears in the 1993 annual report to shareholders and is incorporated by reference in the December 31, 1993 annual report on Form 10-K of AFLAC Incorporated.
KPMG PEAT MARWICK
Atlanta, Georgia
March 28, 1994
EXH-24.0
Exhibit 24.1
KPMG PEAT MARWICK
Certified Public Accountants
303 Peachtree Street, N.E.
Suite 2000
Atlanta, GA 30308
INDEPENDENT AUDITORS' CONSENT
The Shareholders and The Board of Directors AFLAC Incorporated
We consent to incorporation by reference in the Registration Statement No. 33-41926 on Form S-3 of AFLAC Incorporated of our report dated January 31, 1994, relating to the consolidated balance sheets of AFLAC Incorporated and subsidiaries as of December 31, 1993 and 1992, and the related consolidated statements of earnings, shareholders' equity, and cash flows for each of the years in the three-year period ended December 31, 1993, which report appears in the 1993 annual report to shareholders and is incorporated by reference in the December 31, 1993 annual report on Form 10-K of AFLAC Incorporated.
KPMG PEAT MARWICK
Atlanta, Georgia
March 28, 1994
EXH-24.1
EXHIBIT 24.2
KPMG PEAT MARWICK
Certified Public Accountants
303 Peachtree Street, N.E.
Suite 2000
Atlanta, GA 30308
INDEPENDENT AUDITORS' CONSENT
The Shareholders and The Board of Directors AFLAC Incorporated
We consent to incorporation by reference in the Registration Statement No. 33-41552 on Form S-8 of AFLAC Incorporated of our report dated January 31, 1994, relating to the consolidated balance sheets of AFLAC Incorporated and subsidiaries as of December 31, 1993 and 1992, and the related consolidated statements of earnings, shareholders' equity, and cash flows for each of the years in the three-year period ended December 31, 1993, which report appears in the 1993 annual report to shareholders and is incorporated by reference in the December 31, 1993 annual report on Form 10-K of AFLAC Incorporated.
KPMG PEAT MARWICK
Atlanta, Georgia
March 28, 1994
EXH-24.2