Aflac's No. 2 man

The face of Columbus-based Aflac is a duck.

The most recognizable face behind the duck is Chairman and Chief Executive Officer Dan Amos, a homegrown man credited with driving the marketing machine that sells supplemental insurance in the United States and Japan.

But when it comes to numbers, the face people inside and outside Aflac turn to belongs to President and Chief Financial Officer Kriss Cloninger, clearly second in command.

A round-faced Texan knocking on the door of 60, Cloninger has been with Amos every step the last 15-plus years. They start each morning with a meeting that can last as long as an hour.

The two men at the top of a nearly $26 billion company have a trust in each other. "We rely on each other," Cloninger said.

That reliance and trust is deep-seated in a high-stakes game.

"We deal with things and have to make calls on hundreds of millions of dollars in decisions — even billions if there is an error,” Amos said. “. . . If he tells me something, I don't think I have ever gone against him.”

Consider where decisions made by Amos and Cloninger have taken the company since 1992:

  • Revenues: Up from $4 billion to $14.6 billion.
  • Assets: Up from $11.9 billion to $59.8 billion.
  • Stock market value: Up from $2.8 billion to $25.6 billion.
  • This morning, Aflac shareholders will gather for the annual meeting at the Columbus Museum to hear another chapter in what has been an amazing financial story, one that has gotten better since Amos and Cloninger joined forces.

    Looking at trends

    To understand how Cloninger processes information, ask him a simple question.

    At the end of a recent interview, he was asked if the Styrofoam cup of water in front of him was half full or half empty. It was a question designed to see if the driving force behind Aflac's big and small financial decisions is an optimist or pessimist.

    Cloninger thought about the question for a few seconds, then answered deliberately.

    “It's not very full, but it depends on the trend,” Cloninger said. “When I look at a glass, I think about the trend. Is the water being drunk? Is it evaporating? Is someone standing next to the cup ready to pour more in it. I try to take into account, the environment — what's going on as well as the physical contents of the cup.”

    Welcome to Cloninger's world, where he has to predict the future and tens of millions of dollars ride on those predictions. He is trained as an actuary, dealing with probability and statistics and attempting to forecast when certain events will occur, and the financial value of those events.

    Cloninger, Texas born and educated, is all about trends.

    To illustrate the way Cloninger examines trends, Amos tells a story about a difference of opinion between Cloninger and another high-ranking Aflac executive.

    Amos and a man who was the company's chief actuary at the time were flying back from Japan, where the company does more than 70 percent of its business. The two men boarded the plane in Tokyo and not long after the door closed, the man turned to Amos and said, "We have a problem with claims in Japan. I think we are are going to have to take a hit to earnings."

    "When you talk about Japan, you are talking about big numbers," Amos said. "Tell me that when we land, so I can start making calls. Don't tell me that when I got 12 hours on a plane."

    When they landed, the first person Amos called was Cloninger.

    "Kriss said, 'I understand what he has said. And I understand his theory, but I am not sure I agree. I don't think we have enough data,’ ” Amos said.

    Cloninger said he could support his reasoning with data, just as the other person with a competing theory could do the same.

    "If the actuary is right, everybody in Japan loses face," Amos said. "You have resignations. I talked to the people in Japan. They all came back and said they agreed with Kriss."

    Cloninger was right. What looked to be a trend was a blip.

    "I will trust him over anybody," Amos said. "In that case, he wasn't absolute. But what he said was ‘I think I'm right.’ ”

    Cloninger also carries great trust on Wall Street. Last year, he was named the nation's Best CFO in the insurance/life category by Institutional Investor magazine. It was the third consecutive year he received the honor.

    "He has kept everything on a steady course," Amos said. "The analysts always feel comfortable after he speaks. He speaks with such authority because he is an authority."

    Building trust

    The trust between Amos and Cloninger was forged even earlier when Cloninger was an actuary working for Aflac's outside auditor KPMG, a large international firm.

    It was the mid-1980s and Amos was climbing the corporate ladder. His uncle, Aflac founder John Amos, was in charge of the company. Dan Amos was in charge of the U.S. operations.

    They had a problem in Japan that was about to cause the company to take a $6 million hit on earnings — the kind of ding that erodes shareholder confidence in a publicly owned company.

    "Kriss found the error in Japan," Dan Amos said. "John said, ‘You got to straighten this out.’ ”

    Dan Amos worked out a plan that involved converting old policies to new ones over a nine-month period. He went to Cloninger to see if he would agree to it. Cloninger told Amos he needed to convert 50,000 policies to avoid the hit.

    "I realized at that point he was not only brilliant financially, but he was a person who was willing to look at other ways to accomplish an objective. It was a very complicated issue and some financial people don't look for alternative ways to resolve problems."

    It was a turning point in their relationship.

    "He realized we thought alike," Cloninger said.

    After that, Amos gained control of Japan operations and became the company's CEO in 1990 when John Amos died.

    In 1992, Amos was looking for a chief financial officer. His target was Cloninger, who had been with on the Aflac account for 15 years.

    Cloninger, again, looked at the trend. He saw nothing but potential with an Amos-led Aflac.

    "Aflac presented a lot of opportunities," Cloninger said.

    Cloninger and Amos have cultivated that potential. Together, they run the company. They are friends, but per company policy, they don't get in the same airplane together.

    Amos, 55 and five years younger than Cloninger, said he would like for Cloninger to stay with him as long he is in charge of Aflac. Cloninger has told the boss he is willing to do that.

    "I want him to stay as long as he wants to stay," Amos said. "You can't underestimate how great it is to have smart people in an organization. Experience and intellectual capacity are worth so much to a company. Small decisions have enormous consequences."

    To illustrate his point, Amos points out that each hour Aflac is open — based on a 40-hour week — the company makes $1 million in profit.

    "Now, that's a ballpark figure," Amos said. "I ballpark everything with numbers. Kriss won't ballpark anything. When he says a number, it becomes law."