UNITED STATES
SCHEDULE 14A
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TABLE OF CONTENTS
We are furnishing proxy materials, including this proxy statement, in connection with the solicitation of proxies on behalf of the Board of Directors, to be voted at the 20172019 Annual Meeting of Shareholders of Unum Group and at any adjournment or postponement thereof. Our proxy materials are first being mailed and made available electronically to shareholders on or about April 13, 2017.11, 2019.
2019 PROXY STATEMENT
A LETTER FROM OUR BOARD OF DIRECTORS
April 13, 2017
Dear Fellow Shareholder:
Our vision at Unum is to be the leading provider of employee benefits products and services. Today more than 36 million workers and their families rely on us for their financial protection, and the $7.2 billion in benefits we paid in 2018 helped safeguard millions of people during some of the most difficult times of their lives.
We continue to make progress toward our vision through strong financial results, consistent operating performance and steady growth across our core businesses. In addition to investing in our existing business, in 2018 we continued to grow our newly-launched dental and vision product lines and further expanded our geographic reach through our acquisition of Pramerica Žycie TUiR SA, a leading financial protection provider in Poland.
This progress, and the impact of tax reform enacted in the U.S., translated into another profitable year at Unum. We grew adjusted operating earnings per share (EPS) by more than 20% (the thirteenth consecutive year of EPS growth), increased adjusted operating return on equity and continued to generate significant capital in our core businesses. These accomplishments have further positioned the company for long-term success.
In spite of this performance, we are disappointed that Unum's stock price declined significantly in 2018. We continue to seek to address investors' perception surrounding long-term care policies. The leadership team at Unum has successfully and actively managed our long-term care business for over a decade, and after a deep review last year, increased reserves to reflect our updated estimate of future benefit obligations. We are confident in our ongoing proactive approach to this business, and we believe our analysis sets the standard for disclosure in long-term care. The reserve increase had little impact on Unum's capital plans and overall financial strength, and we expect that, over time, investors' recognition of the performance of the core franchise will ultimately drive long-term shareholder value.
As Board members, we believe that good corporate governance is critical to our shareholders and to Unum's long-term success. We take a thorough approach to governance that assesses performance and risk, demands regulatory compliance, and provides oversight of compensation, investment activity and other financial matters. Additionally, we conduct a regular outreach and engagement program that ensures we receive valuable feedback from shareholders on a variety of topics.
More broadly, we - and the entire leadership team at Unum - recognize the obligations we have to all our key stakeholders, including customers, brokers, employers, regulators and shareholders, and we strive to deliver on those commitments. This focus on doing the right thing and making a difference also guides our approach to sustainability and social responsibility. We advocate for greater access to benefits because the need in our society is real. We work to make our local communities better places to live. We reduce the impact we have on our environment because it improves the quality of the world around us.
Operating with integrity and compassion is deeply embedded in our culture. Our We Are Unum principles as well as our Code of Conduct are important guides for how our employees approach their work each day. As a Board, we monitor Unum's culture through feedback from employee engagement surveys, the ethics hotline and other methods to ensure we remain true to our values. We also invest in our people - including striving for inclusion and smart succession planning throughout the organization - because they're the ones who deliver on our promises today and in the years ahead.
2019 PROXY STATEMENT | ![]() |
A LETTER FROM OUR BOARD OF DIRECTORS
All told, 2018 was a good year for Unum. Our focus on enhancing our customer experience, improving our operating effectiveness and expanding our reach into new markets delivered strong financial results and supported the capital needs of our business. As a result, we are confident Unum is well-positioned for the longer-term.
On behalf of the 10,000 employees and entire leadership team at Unum, thank you for your continued support of our company.
2019 PROXY STATEMENT
NOTICE OF 20172019 ANNUAL MEETING OF SHAREHOLDERS
NOTICE OF 20172019 ANNUAL MEETING OF SHAREHOLDERS
TIME: 10 a.m. Eastern Daylight Time
LOCATION: | Unum Group 2211 Congress Street Portland, ME 04102 |
DIRECTIONS: www.unum.com/directions
Attending
You will be asked to provide photo identification and appropriate proof of business are:
Who can vote to approve executive compensation;
Shareholders of record of the company’s common stock (NYSE: UNM) at the close of business on March 27, 2017,25, 2019, are entitled to vote at the meeting and any adjournments or postponements of the meeting.
Voting Items | ||
☑ | Election of Directors | p. 95 |
☑ | Advisory Vote to Approve Executive Compensation | p. 95 |
☑ | Ratification of Appointment of Independent Public Accounting Firm | p. 96 |
We mailed the proxy statement or a Notice of Internet Availability of Proxy Materials on April 11, 2019.
How to vote
Your vote is important. Please vote as soon as possible by one of the methods shown below. Be sure to have your proxy card, voting instruction form or Notice of Internet Availability in hand and follow the instructions provided. Shareholders of record may vote using any one of the following methods.
Proxy Services, c/o Computershare Investor Services,
P.O. Box 43126, Providence, Rhode Island 02940-5138
Deadline: Receipt due by close of business day on May 22, 2019
Telephone
1-800-652-VOTE (8683)
Deadline: 2:00 a.m. Eastern Daylight Time, May 23, 2019
Internet
www.envisionreports.com/UNM
Deadline: 2:00 a.m. Eastern Daylight Time, May 23, 2019
In addition to the voting items listed above, shareholders also will transact any other business that may properly come before the meeting. Management will also review the company’s 2018 performance and Corporate Secretary
Important Notice Regarding the Availability of Proxy Materials for the Annual Meeting of Shareholders to be Held on May 25, 2017:23, 2019: The proxy statement and annual report to shareholders are available at www.envisionreports.com/unm.www.edocumentview.com/UNM.
J. Paul Jullienne
Vice President, Managing Counsel and Corporate Secretary
2019 PROXY STATEMENT 1
A NOTE ABOUT NON-GAAP MEASURES
A NOTE ABOUT NON-GAAP MEASURES
In this proxy statement, we present certain measures of our performance that are not calculated in accordance with generally accepted accounting principles in the United States of America (GAAP). Non-GAAP financial measures exclude or include amounts that are not normally excluded or included in the most directly comparable measure calculated and presented in accordance with GAAP. Non-GAAP financial measures should not be viewed as substitutes for the most directly comparable financial measures calculated in accordance with GAAP, which are set forth below:
GAAP MEASURES ($ in millions, except per share data)
Year Ended December 31 | |||||||||
2018 | 2017 | 2016 | |||||||
Net Income | $ | 523.4 | $ | 994.2 | $ | 931.4 | |||
Net Income per share* | $ | 2.38 | $ | 4.37 | $ | 3.95 | |||
Total Stockholders' Equity (book value) | $ | 8,621.8 | $ | 9,574.9 | $ | 8,968.0 | |||
Total Stockholders' Equity (book value) per share | $ | 40.19 | $ | 43.02 | $ | 39.02 | |||
Return on Equity | 5.8 | % | 10.7 | % | 10.6 | % |
* Assuming dilution
This proxy statement refers to the following non-GAAP financial measures, which we believe are better performance measures and better indicators of the revenue and profitability and underlying trends in our business:
Realized investment gains or losses and unrealized gains or losses on securities and net gains on hedges depend on market conditions and do not necessarily relate to decisions regarding the underlying business of our company. Book value per common share excluding certain components of AOCI, certain of which tend to fluctuate depending on market conditions and general economic trends, is an important measure. We also exclude certain other items from our discussion of financial ratios and metrics in order to enhance the understanding and comparability of our operational performance and the underlying fundamentals. We exclude these items as we believe them to be infrequent or unusual in nature, but this exclusion is not an indication that similar items may not recur and does not replace the comparable GAAP measures in the determination of overall profitability.
For a reconciliation of the most directly comparable GAAP measures to the non-GAAP measures, refer to Appendix A to the proxy statement.
This summary is intended to highlight certain key information contained in this proxy statement that we believe will assist your review of the business items of business to be voted on at the 20172019 Annual Meeting of Shareholders of Unum Group (the "2017"2019 Annual Meeting"). As it is only a summary, we encourage you to review the full proxy statement, andas well as our annual report on Form 10-K for the year ended December 31, 20162018 (the "2016"2018 Form 10-K"), for more complete information about these topics.
Key Corporate Governance and Executive Compensation Items
2018 Say-on-Pay Vote and Shareholder Outreach
Our 2018 shareholder advisory vote to approve executive compensation passed with over 95% support. As we have done for several years, we continued our shareholder engagement through an extensive outreach effort, contacting each of our top 50 investors, representing over 68% of our outstanding shares. Consistent with the prior year, our independent Board Chairman joined several of our meetings with shareholders. Details of 2018 feedback from our shareholders can be found on page 48. | ![]() |
Corporate Governance and Executive Compensation Practices
Executive Compensation Practices | Board Practices | ||
![]() | A pay for performance philosophy | ![]() | All directors other than the CEO are independent, including the Board Chairman |
![]() | Annual say-on-pay votes | ![]() | All Board Committees fully independent |
![]() | Programs that mitigate undue risk taking in compensation | ![]() | Commitment to diversity at the Board level and within the enterprise |
![]() | Independent compensation consultant to the Human Capital Committee | ![]() | High meeting attendance by directors (average attendance of 98% in 2018) |
![]() | No golden parachute excise tax gross-ups | ![]() | Limits on outside board and audit committee service |
![]() | Minimal perquisites | ||
![]() | No NEO employment agreements | Governance Practices | |
![]() | Double-trigger provisions for severance | ![]() | Annual election of directors |
![]() | Restrictive covenants in our long-term incentive grant agreements | ![]() | Majority vote requirement for directors (in uncontested elections) |
![]() | Clawback provisions | ![]() | Proxy access bylaws |
![]() | A balance of short- and long-term incentives | ![]() | Shareholder right to call special meetings |
![]() | Robust stock ownership and retention requirements | ![]() | Annual, proactive shareholder engagement |
![]() | Relevant peer groups for benchmarking compensation | ![]() | No supermajority vote requirements |
![]() | Robust individual performance assessments of executives and directors | ![]() | Anti-pledging and anti-hedging policies applicable to executives and directors |
![]() | Annual Board, committee, and individual director evaluations | ||
![]() | Regular executive sessions of independent directors |
2019 PROXY STATEMENT 3
PROXY SUMMARY
From a financial and operating standpoint, Unum had a very successful year in 20162018 as we delivered steady growth accelerated and we continued to deliver consistent financial and operating performance. Positive sales and premium growth contributedacross our core businesses, leading to record after-tax adjusted operating earnings per shareshare. We maintained market-leading positions and a strong value proposition with customers and brokers, and focused on expanding our product and geographic footprint. Our disciplined business approach to running our business helped us maintain attractive profit margins and a high level of customer satisfaction. These results were achieved despite a very uncertain economicchallenging environment, including the pressure of continued low interest rates, uncertainty in the U.K. due to Brexit, and reflect our successful management transition as Mr. McKenney completed his first full year as CEO.industry concerns about long-term care policies.
Financial Highlights(1)
Below are financial highlights from 2018.
Record earnings | |
Unum achieved record after-tax adjusted operating earnings, continuing our recent history of strong financial performance. For 2018, we delivered strong after-tax adjusted operating income of $1.15 billion, based on total revenue of $11.6 billion. Adjusted operating earnings per share (EPS) was at an all-time high of $5.20, a significant increase over the prior year and the thirteenth consecutive year of after-tax adjusted operating EPS growth. | ![]() |
Return on equity | |
We continued to put shareholder capital to good use. Consolidated adjusted operating return on equity (ROE) increased in 2018 to 13.2%, while ROE in our core operating segments grew to 17.8%. | ![]() |
Book value | |
Our book value per share at the end of 2018 was up 3.6% from 2017 (excluding accumulated other comprehensive income, or AOCI). It was the tenth consecutive year of shareholder equity growth. | ![]() |
Strengthening of Reserves | |
We increased our long-term care GAAP reserves by $593.1 million after-tax to reflect our updated best estimate of future obligations, which had little impact on our capital plans and overall financial strength. |
(1) | ||
4 2019 PROXY STATEMENT
Operating Highlights
Unum delivered on our mission of $926.2 million, based on total revenue of $11.0 billion;
We continue to see strong growth in premium of 4.5% and solid sales growth throughout our core businesses, particularly in premium income, compared with 2017 results. This growth was achieved while maintaining our pricing and risk discipline;discipline, and demonstrates that our value story continues to resonate with customers.
We managed our investment portfolio well despite the continued low interest rate environment. Due to the nature of our business, we invest for the long term with an investment philosophy emphasizing sound risk management and credit quality.
The same skills that allow our core franchise to be successful are also beneficial to our closed block of long-term care policies that we service and support, but no longer actively market. In 2009, we closed our individual long-term care business, and in 2012 we closed our group long-term care business. Since that time, we have actively managed these blocks with a combination of rate increases, updates to our liability assumptions to reflect emerging experience, prudent cash infusions, and reserve changes. Since 2006, we have strengthened reserves $4.9 billion in this block. Through these and other steps, we continue to take proactive measures to provide for the long-term stability of this block and provide transparency to our shareholders and customers.
We continued our commitment to effectively managing our long-term care business in 2018 during our annual comprehensive review of this block. Upon completion of this review in the third quarter of 2018, we increased our long-term care GAAP reserves by $593.1 million after-tax to reflect our updated best estimate of future benefit obligations. In the process, we believe we set a standard for disclosure in long-term-care. This action had little impact on our capital plans and overall financial strength.
Strategic Positioning
We have recently taken a number of steps to fuel our growth and position us for the future.
In addition, key developments in the external environment are having a positive impact on our business.
2019 PROXY STATEMENT 5
PROXY SUMMARY
Environmental, Social and Governance
Millions of people count on our benefits as part of a leading dentalcritical financial safety net, and vision carrierwe strive to complementdeliver on those commitments. This focus on doing the offeringsright thing guides our approach to sustainability and social responsibility issues. Unum has a long tradition of engaging employees, shareholders, our communities and society at large on advocacy, community outreach, environmental responsibility and good governance.
We recognize the importance of these and other environmental, social and governance (ESG) issues to all our stakeholders. In 2018, we took important steps to enhance our efforts, including creating a fully staffed office of inclusion and diversity and hiring a Vice President, Inclusion and Diversity. This year, we are bringing greater transparency to our inclusion and diversity work, and we will begin a comprehensive review of our U.S. businesses;
While we're proud of our legacy of making a difference, we are committed to bringing additional rigor and
Our strong statutory earnings have resulted in solid capital generation, which we have deployed in a number of ways.
Our ability to generate capital remained strong and allowedin 2018, allowing us the opportunity to deploy that capital in a number of ways.
6 2019 PROXY STATEMENT
PROXY SUMMARY
Unum delivered strong financial results referenced in this documentour core businesses and record adjusted operating earnings in 2018, continuing a track record of consistent performance that spans more than a decade. However, investor perceptions in the industry surrounding long-term care and ongoing volatility in the broader market, most notably in the financial services sector, overshadowed our performance. This contributed to the decline in our stock value of more than 45% in 2018.
These results are non-GAAP financial measures that exclude certain specified items. For 2016, these excluded items were net realized investment gains and losses and non-operating retirement-related gains or losses. For reconciliationsnot indicative of the non-GAAPongoing strong financial measures, including after-tax operating income, after-tax operating earnings per share, operating return on equity and book value per share (excluding accumulated other comprehensive income, or AOCI), tooperational performance of our core businesses and the most directly comparable GAAP measures, refer to Appendix B.
2019 PROXY STATEMENT 7
PROXY SUMMARY
Our approach to CEO compensation aligns directly with our overall executive compensation philosophy and structure (see page 49). Mr. McKenney's targeted total direct compensation is a 9.76% compound annual returncombination of base pay plus short- and long-term incentives that are tied directly to shareholders overperformance goals. This structure supports the last 10 years. In fact,long-term successes of the company and the interests of our total shareholder return (TSR)shareholders. Mr. McKenney has outperformed our peers in nearly every index comparison during the last decade.
For performance goals, the Board, levelafter discussion with Mr. McKenney, annually sets:
In addition to a whole;
For 2018, as outlined in the Performance Highlights section above, the Human Capital Committee and Board have recognized that Mr. McKenney led the company to deliver strong core operating performance, including more than 20% growth in adjusted operating earnings per share and an adjusted return on equity in excess of 13%, while further strengthening the reserves for future benefits in the long-term care block. Strong capital generation and deployment returned value to shareholders of $567.7 million with dividends representing a 14% growth per share year over year. Mr. McKenney led Unum as it undertook a number of initiatives to position the company for long-term success. This included a deep strategic review of our long-term care block (see page 5), advancing our talent development strategy and a genuine commitment on inclusion and diversity. While 2018 proved to be a difficult environment for our legacy LTC business, the Board adopted amendmentshas full confidence in Mr. McKenney's leadership as CEO.
2018 Compensation Decisions
The following CEO Compensation Summary table depicts how the Human Capital Committee views its decisions concerning Mr. McKenney’s compensation for 2018, relative to his 2017 awards. It differs from the company's bylawsSummary Compensation Table (SCT) (see page 77), which is required by the Securities and Exchange Commission, as follows:
8 2019 PROXY STATEMENT
PROXY SUMMARY
The CEO Compensation Summary table is not a substitute for the required Summary Compensation Table found on page 77.
Component | 2017 | 2018 | ||||
Base Salary | $ | 1,000,000 | $ | 1,000,000 | ||
Annual Incentive Payout | 2,415,000 | 1,900,000 | ||||
Approved LTI Grant | 6,600,000 | 6,175,000 | ||||
Annual Compensation | $ | 10,015,000 | $ | 9,075,000 |
Base Salary
No change was made to provide shareholders owning at least 25%Mr. McKenney’s base salary in 2018. It has remained the same since March 2016.
Annual Incentive
As previously disclosed, in early 2018, the Committee increased Mr. McKenney’s target annual incentive opportunity from 175% to 200% of outstanding shareshis base salary. This decision reflected the rightcontinued execution of a multi-year program for Mr. McKenney to call a special meetingadjust his pay to full competitive norms as performance and experience in the job grows. With these adjustments, his targeted total direct compensation is approximately 5% below the median of the shareholdersproxy peer group.
Mr. McKenney's 2018 annual incentive payout of $1,900,000 was calculated by applying the company performance achievement under the plan formula (100% for 2018; see page 60) and Mr. McKenney’s individual performance factor (95% for 2018; see page 65).
Although stock price is not a direct criteria for assessing the CEO’s performance, the Committee considered its impact on TSR while weighing Mr. McKenney’s individual achievements and overall performance of the company (see page 65). While the stock price did decline in accordance2018, the Committee believes that active management of our LTC block along with the provisionsstrong performance of our core businesses will, over time, drive investor perceptions and long-term shareholder value. Given this, and its view that the bylaws.company is positioned for long-term success, the Committee awarded Mr. McKenney an individual performance percentage of 95% for his 2018 annual incentive which resulted in an actual award of $1,900,000, a reduction of $515,000 from his 2017 payout.
Long-Term Incentive
As previously disclosed, in early 2018, the Committee increased Mr. McKenney’s long-term incentive target opportunity from $5.5 million to $6.5 million. Again, this decision reflected the continued execution of a multi-year program as outlined above.
The design of our long-term incentive program serves to align the interests of management and shareholders. For 2018, 68% of Mr. McKenney's pay is in the form of long-term equity incentives (delivered through PBRSUs and PSUs), the value of which is based on the company’s stock price and, for his PSU achievement, is further information, please refermodified by relative TSR. Given his performance in 2018 as well as the company’s financial performance and other considerations outlined above, the Committee awarded Mr. McKenney an individual performance
2019 PROXY STATEMENT 9
PROXY SUMMARY
percentage of 95% for his long-term incentive award granted in March 2019 which resulted in an award of $6,175,000, a reduction of $425,000 from the prior year's award.
The total of Mr. McKenney's annual and long-term incentives for 2018 performance were $8,075,000, a reduction of $940,000 from his awards for 2017.
Consistent with the impact to "Adoptionshareholders over the past year, the value of Special Meeting Rights"Mr. McKenney’s Unum holdings, including his unvested equity awards, declined significantly in 2018. For example, this impact can be seen in the vesting of Mr. McKenney’s historical PSU awards, which are not only valued at the company’s lower stock price but also modified based on relative TSR (up to +/- 20%). The table below illustrates how the TSR modifier reduced the number of shares he earned following the vesting of his 2016 PSU award at the end of 2018 (see additional details on page 28.63).
Executive | Target Share Grant | Operating Performance Factor | Adjusted Shares | TSR Modifier | Earned Shares | Value of Shares as of 2/15/19(1) | |||||
Adjusted Shares | Earned Shares | ||||||||||
CEO | 98,677 | x | 120.3% | = | 118,659 | x | 80% | = | 94,927 | $4,309,683 | $3,447,746 |
(1) | The PSUs achievement was certified by the Human Capital Committee on February 18, 2019. Since that was a holiday, the shares were valued based on the prior day closing stock price of $36.32 (February 15, 2019). |
10 2019 PROXY SUMMARYSTATEMENT
PROXY SUMMARY
Voting Item | Board's Recommendation | Page Reference: | ||
Item 1: Election of Directors | FOR each nominee | |||
Eleven director nominees are standing for election this year, each for a one-year term expiring | ||||
Director Nominee | Director Since | Independent | Current Committees | |
Theodore H. Bunting, Jr. | ![]() | Regulatory Compliance (Chair) Human Capital | ||
Susan L. Cross | 2019 | ![]() | Audit Risk and Finance | |
Susan D. DeVore | 2018 | ![]() | Audit Risk and Finance | |
Joseph J. Echevarria | 2016 | ![]() | Governance Risk and Finance | |
Cynthia L. Egan | ![]() | Human Capital (Chair) Regulatory Compliance | ||
Kevin T. Kabat, Board Chairman | 2008 | ![]() | Governance Human Capital | |
Timothy F. Keaney | 2012 | ![]() | Risk and Finance (Chair) Audit | |
Gloria C. Larson | 2004 | ![]() | Governance (Chair) Regulatory Compliance | |
Richard P. McKenney,President and CEO | 2015 | — | — | |
Ronald P. | 2015 | ![]() | Governance Human Capital | |
Francis J. Shammo | 2015 | ![]() | Audit Regulatory Compliance | |
Item 2: Advisory | FOR | |||
We are seeking a non-binding advisory vote to approve the compensation of our named executive officers. We describe our compensation programs in the Compensation Discussion and Analysis section of this proxy statement. The Human Capital Committee believes these programs reward performance and align the long-term interests of management and shareholders. Although non-binding, the Human Capital Committee will take into account the outcome of the advisory vote and shareholder feedback when | ||||
Item 3: | ||||
FOR | ||||
The Audit Committee has appointed Ernst & Young LLP as our independent registered public accounting firm for |
2019 PROXY STATEMENT 11
CORPORATE GOVERNANCE
CORPORATE GOVERNANCE
The Board of Directors is elected by shareholders to oversee management and assure that the long-term interests of shareholders are being served. The Board oversees the CEO and other senior management, who are responsible for carrying out the company's day-to-day operations in a responsible and ethical manner. The Board and its committees meet regularly to review and discuss the company's strategy, business, performance, ethics, and risk culture, as well as important issues that it faces. These discussions take place with management and with appropriate outside advisers who provide independent expertise, perspectives and insights. In addition, the independent members of the Board and its committees hold regular executive sessions to discuss matters free of the presence or influence of management. Board members are also kept apprised of significant developments that arise between meetings.
Board Composition and Refreshment
The Board believes that a critical component of its effectiveness in serving the long-term interests of shareholders is to ensure that its membership remains diverse, possessing a variety of backgrounds, experiences and skill sets from which to draw upon. Fresh views and ideas help the Board to maintain a broad perspective and forward-looking vision capable of anticipating and adapting to the rapid pace of change, just as experience and continuity provide necessary context and stability for important decisions. With that in mind, the Governance Committee periodically reviews the composition of the Board to assure an appropriate balance of experiences, skills, tenure and diversity. This is an ongoing, year-round process.
The Board is committed to effective board succession planning and refreshment, including having honest and difficult conversations with individual directors when necessary. These conversations may arise in connection with the Board evaluation process, succession planning or consideration of the annual slate of Board nominees. As a result of these processes, directors may decide (for personal or professional reasons) or be asked (for reasons related to their ongoing contributions to the Board) not to stand for re-election at the next Annual Meeting. It is expected that these refreshment practices will continue in the future.
Since the beginning of 2015, we have experienced a healthy level of Board refreshment, with six new directors joining the Board and seven retiring. While some companies have tenure limits on Board service, we believe our balanced approach which places a limit on age but not on tenure delivers the right mix of directors with new ideas and perspectives along with those possessing deep knowledge of the company.
12 2019 PROXY STATEMENT
CORPORATE GOVERNANCE
Board Qualifications
The Board strives to maintain independence of thought and diverse professional experience among its membership. The Board and the Governance Committee look for directors who have qualifications and attributes in key areas relevant to Unum, and that align with both our short- and long-term business strategies. These qualifications and attributes are evaluated on an annual basis to determine that they continue to serve the best interests of the company. The table below summarizes the qualifications and attributes that are important to Unum and addresses how the composition of our Board, as a whole, meets these needs.
Qualifications and Attributes | Relevance to Unum | Board Composition(1) |
Accounting/Auditing | We operate in a complex financial and regulatory environment with disclosure requirements, detailed business processes and internal controls. | ![]() |
We have significant operations focused on customer service, claims management, sales, marketing and various back-house functions. | ![]() | |
Capital | We allocate capital in various ways to run our operations, grow our core businesses and return value to shareholders. | ![]() |
Corporate Governance/ESG | As a public company and responsible corporate citizen, we expect effective oversight and transparency, and our stakeholders demand it. | ![]() |
Financial Expertise/Literacy | Our business involves complex financial transactions and reporting requirements. | ![]() |
Independence | Independent directors have no material relationships with us and are essential in providing unbiased oversight. | ![]() |
Industry Experience | Experience in the | ![]() |
International | With global operations in several countries and prospects for further expansion, international experience helps us understand opportunities and challenges. | ![]() |
Investment Markets | We manage a large and long-term investment portfolio to | ![]() |
Other Recent Public Board Experience | We value individuals who understand public company reporting responsibilities and | ![]() |
Public Company Executive Experience | Experience leading a large, widely-held organization provides practical insights on need for transparency, accountability, and integrity. | ![]() |
Regulatory/Risk Management | A complex regulatory and risk environment requires us to develop policies and procedures that | ![]() |
Technology/Digital Transformation | We rely on technology to | ![]() |
(1) | ||
Director nominees only. |
2019 PROXY STATEMENT 13
CORPORATE GOVERNANCE
Board Tenure
Directors with varied tenure contribute to a range of perspectives and ensure we transition knowledge and experience from longer-serving members to those newer to our Board. We have a good mix of new and long-standing directors, with our 11 director nominees averaging 5.4 years of service on our Board as of the 2019 Annual Meeting.
Board Diversity
Our directors represent a range of backgrounds and overall experience. More than half are women or represent a diverse group, which places Unum's Board among the top of our industry in gender and racial/ethnic diversity. In recent years, our Governance Committee has focused on ensuring continued diversity on the Board during refreshment activities by requiring that candidate pools include diverse individuals meeting the recruitment criteria. From the candidate pools, our Governance Committee selects our director candidates based on their qualifications and attributes as addressed below. Our director nominees range from 50 to 69 years of age, with the average age being 60.2 years, as of the 2019 Annual Meeting.
14 2019 PROXY STATEMENT
CORPORATE GOVERNANCE
A healthy and vigorous Board evaluation process is an essential part of good corporate governance. A thorough evaluation process helps us achieve the right balance of perspectives, experiences and skill sets needed for prudent oversight of the company, including execution on corporate strategy, while also considering the best interests of our shareholders. At Unum, this evaluation process includes annual evaluations of the Board, each committee, and individual directors.
The Governance Committee establishes and oversees the evaluation process, which focuses on identifying areas where Board, committee and director performance is most effective, as well as opportunities for further development or improvement. Each year, the Governance Committee reviews the format and effectiveness of the evaluation process in identifying actionable feedback for directors to consider, recommending changes in process as appropriate. Determining whether to engage a third-party facilitator is also part of the review.
This past year, the evaluation process was conducted in two phases. The first phase focused on the evaluation of the effectiveness of each committee and the Board as a whole. Directors completed questionnaires evaluating the full Board and each committee they served on with topics including culture, composition, structure and engagement. The second phase focused on the evaluation of each director’s performance, and was led by the Governance Committee Chair in advance and in anticipation of the director nomination process. This two-phased approach generated robust discussions at all levels of the Board, and resulted in changes that have improved Board efficiency and effectiveness.
2019 PROXY STATEMENT 15
CORPORATE GOVERNANCE
Process for Selecting and Nominating Directors
Director Nominee and Selection
The Governance Committee is responsible for identifying and evaluating director candidates and recommending to the Board a slate of nominees for election at each Annual Meeting. The Committee has engaged a third-party search firm to assist with recruitment efforts. This firm identifies candidates who meet the criteria of our search, provides requested background and other relevant information regarding candidates, and coordinates arrangements for interviews as necessary. Nominees may also be suggested by directors, management, or shareholders. Ms. Cross, who was elected to the Board in February 2019, was recommended to the Governance Committee by a third-party search firm.
Shareholders who wish to recommend director candidates for consideration by the Governance Committee must submit to the Corporate Secretary at Unum Group, 1 Fountain Square, Chattanooga, Tennessee 37402 the same information that would be required to nominate a director candidate as described on page 102 in the section titled "Shareholder proposals and nominations for our 2020 Annual Meeting." The Governance Committee’s policy is to consider candidates recommended by shareholders in the same manner as other candidates.
In addition, our bylaws permit shareholders to nominate directors for inclusion in our proxy materials or directly at an Annual Meeting in accordance with the procedures in our bylaws, as described on page 102 in the section titled "Shareholder proposals and nominations for our 2020 Annual Meeting."
Our corporate governance guidelines specify the following criteria to be used in evaluating the candidacy of a prospective nominee:
The core qualifications and attributes sought in any particular candidate depend on the current and future needs of the Board based on an assessment of the composition of the Board and the mix of qualifications and attributes currently represented. In addition, the Governance Committee considers other specific qualifications that may be desired or required of nominees, including their independence and ability to satisfy specific Audit Committee or Human Capital Committee requirements. As part of the director selection and nomination process, the Governance Committee assesses the effectiveness of its Board membership criteria.
In determining whether to recommend a director for re-election, the Governance Committee also considers the director’s interest in continuing to serve, past attendance at meetings, contributions to the Board and committees on which the director serves, the skills, experience and background that the director brings to the Board relative to the Board’s needs and existing composition, and the results of the most recent Board, committee and individual director evaluations.
16 2019 PROXY STATEMENT
CORPORATE GOVERNANCE
Annual Election of Directors
Directors are elected each year at the Annual Meeting, to hold office until the next Annual Meeting and until their successors are elected, or until their earlier death, resignation, disqualification, or removal from office. Other than requiring retirement from the Board at the next Annual Meeting after a director reaches the age of 72, there are no term limits. However, the Governance Committee evaluates the qualifications and performance of each incumbent director before recommending the nomination of that director for an additional term.
Majority Voting Standard
Our bylaws provide that, in an election of directors where the number of nominees does not exceed the number of directors to be elected (an "uncontested election"), each nominee must receive a majority of the votes cast with respect to that nominee to be elected as a director (i.e., the number of shares voted "for" a nominee must exceed the number voted "against" that nominee). If an incumbent director is not re-elected under this majority voting standard, the director must submit an irrevocable letter of resignation to the Board, which will become effective upon acceptance by the Board. The Governance Committee will make a recommendation to the Board on whether to accept or reject the resignation, or whether other action should be taken. If the director submitting the resignation is a member of the Governance Committee, that director will not participate in the Governance Committee’s recommendation to the Board. The Board will act on the Governance Committee’s recommendation and publicly disclose its decision and rationale within 90 days from the date of the certification of the election results.
2019 PROXY STATEMENT 17
INFORMATION ABOUT THE BOARD OF DIRECTORS
Below are brief biographies for each of our current directors and descriptions of the directors’ key qualifications, skills, and experiences that contribute to the Board’s effectiveness as a whole.
![]() ![]() Director since 2013 Age Meeting 60 Independent Director Committees Regulatory Compliance (chair) Human Capital | Theodore H. Bunting, Jr. | ||||
Mr. Bunting is also a certified public accountant. | |||||
![]() | Qualifications | ||||
Entergy Corporation Group President, Utility Operations (2012-2017) Senior Vice President and Chief Accounting Officer (2007-2012) Numerous executive roles with Entergy, which he joined in 1983 | Accounting/Auditing Business Operations Capital Management Financial Expertise/Literacy Other Public Company Board Experience Public Company Executive Experience Regulatory/Risk Management | ||||
Public Company Board Experience NiSource Inc., since 2018 Imation Corp. (2012-2014) |
![]() Director since 2019 Age at Annual Meeting 59 Independent Director Committees Audit Risk and Finance | Susan L. Cross | |
Ms. Cross is the former Executive Vice President | ||
Career Experience | Qualifications | |
XL Group Ltd Executive Vice President and Global Chief Actuary (2008-2018) Senior Vice President and Chief Actuary, XL Group (2006-2008) XL Reinsurance (2000-2006) XL America (1999-2000) Significant consulting experience with Willis Towers Watson in the U.S. and Bermuda | Accounting/Auditing Business Operations Capital Management Financial Expertise/Literacy Industry Experience International Public Company Executive Experience Regulatory/Risk Management |
18 2019 PROXY STATEMENT
INFORMATION ABOUT THE BOARD OF DIRECTORS
![]() ![]() Director since 2018 Age at Annual Meeting 60 Independent Director Committee Audit Risk and Finance | Susan D. DeVore | ||||
Ms. DeVore has served as the President and Chief Executive Officer of Premier, Inc., a leading health care improvement company, since its initial public offering in 2013, and before that served in the same capacity for its predecessor company, Premier Healthcare Solutions, Inc. She also previously served as the Chief Operating Officer for a number of affiliated Premier entities. Prior to joining Premier, Ms. DeVore had two decades of finance, strategy and healthcare consulting experience. She also qualifies as an audit committee financial expert under SEC regulations. | |||||
Career Experience | Qualifications | ||||
Premier, Inc. President and CEO (since 2013) Premier Healthcare Solutions, Inc. President and CEO (2009-2013) COO (2006-2009) Significant consulting experience with Ernst & Young LLP, including service as a Partner, Executive Committee member and Senior Healthcare Industry Management Practice Leader | Accounting/Auditing Business Operations Capital Management Corporate Governance/ESG Financial Expertise/Literacy Industry Experience International Other Public Company Board Experience Public Company Executive Experience Regulatory/Risk Management Technology/Digital Transformation | ||||
Public Company Board Experience | |||||
Premier, Inc., since 2013 |
![]() Director since 2016 Age Meeting 62 Independent Director Committees Governance Risk and Finance | Joseph J. Echevarria | ||
Mr. Echevarria accountant. | |||
![]() | Qualifications | ||
Deloitte LLP CEO (2011-2014) Various executive positions during his 36 years with the company My Brother's Keeper Alliance Chair Emeritus President's Export Council Private sector member | Business Operations Capital Management Corporate Governance/ESG Financial Expertise/Literacy Industry Experience International Other Public Company Board Experience Regulatory/Risk Management | ||
Public Company Board Experience | |||
Xerox, since 2007 Bank of New York Mellon Corporation, since 2015 (Lead Independent Director since 2016) Pfizer, since 2015 |
2019 PROXY STATEMENT 19
INFORMATION ABOUT THE BOARD OF DIRECTORS
![]() Director since 2014 Age at Annual Meeting 63 Independent Director Committees Human Capital (chair) Regulatory Compliance | Cynthia L. Egan | |
Ms. Egan | ||
Career Experience | Public Company Board Experience | |
U.S. Department of the Treasury Senior Advisor on the development of a Treasury-sponsored retirement savings program (2014-2015) T. Rowe Price Retirement Plan Services, Inc. President (2007-2012) Fidelity Investments Various leadership and positions, including the (1989-2007) | BlackRock Fixed Income Funds, since 2016 The Hanover Insurance Group, Inc., since 2015 Envestnet, Inc. (2013-2016) Qualifications Business Operations Corporate Governance/ESG Financial Expertise/Literacy Industry Experience Investment Markets Other Public Company Board Experience Public Company Executive Experience Regulatory/Risk Management Technology/Digital Transformation |
![]() | |||||
![]() Director since 2008 Age at Annual Meeting 62 Independent Director Chairman of the Board of Directors Committees Governance Human Capital | Kevin T. Kabat | ||||
![]() | |||||
Mr. Kabat | |||||
Career Experience | Qualifications | ||||
Fifth Third Bancorp CEO (2007-2015) President (2006-2012) Other executive roles, including with predecessor companies Public Company Board Experience E*TRADE Financial Corporation, since 2016 NiSource Inc., since 2015 (Vice Chairman since 2018) Fifth Third Bancorp (2007-2016, including 2008-2010 and Chairman from 2012-2016) | Business Operations Capital Management Corporate Governance/ESG Financial Expertise/Literacy Industry Experience Other Public Company Board Experience Public Company Executive Experience Regulatory/Risk Management |
20 2019 PROXY STATEMENT
INFORMATION ABOUT THE BOARD OF DIRECTORS
![]() | |||||
![]() Director since 2012 Age at Annual Meeting 57 Independent Director Committees Risk and Finance (chair) Audit | Timothy F. Keaney | ||||
Mr. Keaney |
![]() | Qualifications | |||
The Bank of New York Mellon Corporation Vice Chairman (2010-2014) CEO, Investment Services (2013-2014) CEO and co-CEO, Asset Servicing (2007-2012) Other executive roles | Business Operations Capital Management Corporate Governance/ESG Financial Expertise/Literacy Industry Experience International Investment Markets Public Company Executive Experience Regulatory/Risk Management |
![]() Director since 2004 Age at Annual Meeting 69 Independent Director Committees Governance (chair) Regulatory Compliance | Gloria C. Larson | ||
Ms. Larson | |||
Career Experience | Public Company Board Experience | ||
Harvard University Graduate School of Education President in Residence (since 2018) Bentley University President (2007-2018) Foley Hoag LLP Law firm partner and Co-Chair of Governmental Practices Group Other leadership positions with the Commonwealth of Massachusetts (Secretary of Economic Affairs) and the Federal Trade Commission (Deputy Director of Consumer Protection) | Boston Private Financial Holdings, Inc., since 2015 Qualifications Accounting/Auditing Business Operations Capital Management Corporate Governance/ESG Financial Expertise/Literacy Other Public Company Board Experience Regulatory/Risk Management |
2019 PROXY STATEMENT 21
INFORMATION ABOUT THE BOARD OF DIRECTORS
![]() | |||||
![]() Director since 2015 Age at Annual Meeting 50 Director President and CEO | Richard P. McKenney | ||||
Mr. McKenney |
![]() | Qualifications | |||
Unum President and CEO (since 2015) Chief Financial Officer (2009-2015) Sun Life Financial, Inc. Executive Vice President and Chief Financial Officer Public Company Board Experience U.S. Bancorp, since 2017 | Business Operations Capital Management Corporate Governance/ESG Financial Expertise/Literacy Industry Experience International Other Public Company Board Experience Public Company Executive Experience Regulatory/Risk Management |
![]() Director since 2015 Age at Annual Meeting 62 Independent Director Committees Governance Human Capital | Ronald P. O'Hanley | ||
Mr. O’Hanley is the President and Chief Executive Officer of State Street Corporation, a provider of financial services to institutional investors worldwide, having previously served as the President and Chief Operating Officer. Prior to that he served as the President and Chief Executive Officer of State Street Global Advisors, the investment management arm of State Street | |||
Career Experience | Public Company Board Experience | ||
State Street Corporation President and CEO (since 2019) President and COO (2017-2018) Vice Chairman (during 2017) President and CEO, State Street Global Advisors (2015-2017) Fidelity Investments President of Asset Management and Corporate Services, and member of Executive Committee (2010-2014) Other senior leadership positions with The Bank of New York Mellon Corporation and McKinsey & Company, Inc. | State Street Corporation, since 2019 Qualifications Accounting/Auditing Business Operations Capital Management Corporate Governance/ESG Financial Expertise/Literacy Industry Experience International Investment Markets Public Company Executive Experience Regulatory/Risk Management |
22 2019 PROXY STATEMENT
INFORMATION ABOUT THE BOARD OF DIRECTORS
![]() ![]() Director since 2015 Age Meeting 58 Independent Director Committees Audit Regulatory Compliance | Francis J. Shammo | ||||
Mr. Shammo |
Career Experience | Qualifications | |
Stonepeak Infrastructure Partners Consultant (since 2019) Verizon Communications, Inc. EVP and CFO (2010-2016) President and CEO, Verizon Telecom and Business (2010) President – Wireline (2009-2010) Other executive positions with Verizon and its predecessor, which he joined in 1989 Public Company Board Experience Avis Budget Group, since 2018 | Accounting/Auditing Business Operations Capital Management Financial Expertise/Literacy International Other Public Company Board Experience Public Company Executive Experience Regulatory/Risk Management Technology/Digital Transformation |
Additional Current Director - Retiring at the Annual Meeting
![]() Director since 2007 (also 2004-2005) Age at Annual Meeting 72 Independent Director Committees Audit (chair) Risk and Finance | E. Michael Caulfield | |
Mr. Caulfield retired as the President of Mercer Human Resources Consulting, prior to which he held numerous executive positions at Prudential Insurance Company. He brings to the Board senior leadership experience in finance, investments and executive management in both the insurance and broader financial services industry. He serves as our Audit Committee chairman and is an audit committee financial expert under SEC regulations. | ||
Career Experience | Qualifications | |
Mercer Human Resource Consulting President (2005-2006) Chief Operating Officer (2005) Prudential Insurance Company Executive Vice President, Financial Management CEO of Prudential Investments President of Prudential Preferred Financial Services and Prudential Property and Casualty Company | Accounting/Auditing Business Operations Capital Management Corporate Governance Leadership Financial Expertise/Literacy Industry Experience International Investment Markets Public Company Executive Experience Regulatory/Risk Management |
2019 PROXY STATEMENT 23
INFORMATION ABOUT THE BOARD OF DIRECTORS
Summary of Director Qualifications and Experience
This table provides a summary view of the 2017qualifications and attributes of each director nominee.
* Tenure and age calculated as of the 2019 Annual Meeting
![]() 24 2019 PROXY STATEMENT | ||||
![]() | ||||
INFORMATION ABOUT THE BOARD OF DIRECTORS
NON-EMPLOYEE DIRECTOR COMPENSATION | |||
2016/2017 Pay | |||
All Directors: | |||
Annual cash retainer | $ | 110,000 | |
Annual restricted stock unit award | 150,000 | ||
Committee Chairs: | |||
Additional annual cash retainer - Audit Committee | 22,500 | ||
Additional annual cash retainer - Human Capital Committee | 17,500 | ||
Additional annual cash retainer - other Board committees | 10,000 | ||
Board Chairman: | |||
Additional annual cash retainer (paid in quarterly installments) | 200,000 | ||
Lead Independent Director: | |||
Additional annual cash retainer (paid in quarterly installments) | 50,000 |
NON-EMPLOYEE DIRECTOR COMPENSATION | ||||||||||||
Name | Fees Earned or Paid in Cash(1) | Stock Awards(2) | All Other Compensation(3) | Total | ||||||||
Theodore H. Bunting, Jr. | $ | 110,000 | $ | 149,985 | $ | 10,000 | $ | 269,985 | ||||
E. Michael Caulfield | 132,500 | 149,985 | - | 282,485 | ||||||||
Joseph J. Echevarria | 124,540 | 171,467 | - | 296,007 | ||||||||
Cynthia L. Egan | 110,000 | 149,985 | 10,000 | 269,985 | ||||||||
Pamela H. Godwin | 120,000 | 149,985 | 4,100 | 274,085 | ||||||||
Kevin T. Kabat | 157,445 | 149,985 | - | 307,430 | ||||||||
Timothy F. Keaney | 120,000 | 149,985 | - | 269,985 | ||||||||
Gloria C. Larson | 120,000 | 149,985 | - | 269,985 | ||||||||
A.S. (Pat) MacMillan, Jr. | - | - | 5,000 | 5,000 | ||||||||
Edward J. Muhl | 110,000 | 149,985 | - | 259,985 | ||||||||
Ronald P. O'Hanley | 110,000 | 149,985 | - | 259,985 | ||||||||
William J. Ryan | 20,192 | - | 5,000 | 25,192 | ||||||||
Francis J. Shammo | 110,000 | 149,985 | - | 259,985 | ||||||||
Thomas R. Watjen | 310,000 | 149,985 | - | 459,985 |
Director Name | Number of Unvested Restricted Stock Units at Fiscal Year End | Director Name | Number of Unvested Restricted Stock Units at Fiscal Year End | |
Theodore H. Bunting, Jr. | 4,149 | Timothy F. Keaney | 4,149 | |
E. Michael Caulfield | 4,149 | Gloria C. Larson | 4,149 | |
Joseph J. Echevarria | 4,841 | Edward J. Muhl | 4,149 | |
Cynthia L. Egan | 4,149 | Ronald P. O'Hanley | 4,149 | |
Pamela H. Godwin | 4,149 | Francis J. Shammo | 4,149 | |
Kevin T. Kabat | 4,149 | Thomas R. Watjen | 4,149 |
Our corporate governance guidelines provide that a substantial majority of the Board will be independent. For a director to be considered independent, the Board must determine that the director has no material relationship with our company, and the director must meet the requirements for independence under the listing standards of the New York Stock Exchange (NYSE). The Board has also determined that certain categories of relationships are not considered to be material relationships that would impair a director’s independence. These independence standards are listed in our corporate governance guidelines.
The Governance Committee reviews information about the directors’ relationships and affiliations that might affect their independence and makes recommendations to the Board as to the independence of the directors. In making independence determinations, the Board considers all relevant facts and circumstances. In this regard, the Board considered that each of the non-employee directors (other than Mr. Keaney), or one of their immediate family members, is or was during the last three fiscal years a director, trustee, advisor, or executive or served in a similar position at another business that had dealings with our company during those years. In each case, these have been ordinary course dealings (business where the other business obtains insurance policies from us or we receive interest on debt security investments or make payments for trustee, depository and commercial banking business relationships) involving amounts less than 1% of both our and the other business’ total consolidated revenues for such fiscal year or in which the director's only interest arose only from his or her position as a director of the other business. In addition, each of Messrs. Bunting, Caulfield, Echevarria, and O'Hanley and Mses. Egan, Godwin,DeVore and Larson, or one their immediate family members, is or was during the last three fiscal years, a director, executive, or employee of a charitable organization or university that received contributions from us (other than non-discretionary matching contributions) of less than $120,000 in any one fiscal year.
Based on a review of the findings and recommendations of the Governance Committee and applying the standards described above, the Board has determined that each of Messrs. Bunting, Caulfield, Echevarria, Kabat, Keaney, Muhl, O’Hanley and Shammo and Mses. Cross, DeVore, Egan, Godwin and Larson is (as well as Messrs. MacMillan and RyanMs. Godwin who retired in 2016, were each2018, was during theirher tenure) an independent director.
Mr. McKenney, our President and CEO, is not an independent director.
The Human Capital Committee (the "Committee") reviews our non-employee director compensation annually and Mr. Watjen, our Chairmanmakes recommendations to the Board as appropriate.
Benchmarking
With the assistance of its independent third-party compensation consultant, Pay Governance LLC, the Committee reviews peer group data to understand market practices for director compensation.
Our non-employee director compensation is compared to that of companies in two peer groups: (1) the Proxy Peer Group described beginning on page 52 of this proxy statement; and former CEO,(2) a general industry peer group, which consisted of 139 companies for the review completed in December 2018. The Committee believes the companies in the general industry peer group provide appropriate comparisons given that their market capitalizations and revenues are not independent directors.well aligned with those of the company (data below as of December 2017):
2019 PROXY STATEMENT 25
INFORMATION ABOUT THE BOARD OF DIRECTORS
The use of two peer groups provides an indication of director pay levels both within the insurance industry as well as the broader market. The Committee uses the approximate median of these peer groups as a reference point for setting director compensation. At the time of the review in December 2018, both the annual cash retainer and annual restricted stock award for non-employee directors were below the Proxy Peer Group median.
Based on its annual analysis of non-employee director compensation, the Committee’s consultant recommended an increase in order to bring compensation levels more in line with the market median. After discussion, the Committee deferred consideration of any potential action until May 2019.
Elements of Non-Employee Director Compensation in 2018
Non-employee directors receive cash retainers and equity awards as outlined in the following table:
NON-EMPLOYEE DIRECTOR COMPENSATION
2018 Pay | |||
All Directors: | |||
Annual cash retainer | $ 110,000 | ||
Annual restricted stock unit award | 150,000 | ||
Committee Chairs: | |||
Additional annual cash retainer - Audit Committee | 25,000 | ||
Additional annual cash retainer - Human Capital Committee | 20,000 | ||
Additional annual cash retainer - Risk and Finance Committee | 20,000 | ||
Additional annual cash retainer - Governance Committee | 15,000 | ||
Additional annual cash retainer - Regulatory Compliance Committee | 15,000 | ||
Board Chairman: | |||
Additional annual cash retainer (paid in quarterly installments) | 200,000 |
For new Board Profile
Directors’ expenses of attending Board and committee meetings, or other meetings relating to company business, are paid by the company. Directors are eligible to participate in our employee matching gifts program. Under this program, we match up to $10,000 each year for eligible gifts to non-profit organizations.
Mr. McKenney is employed by the company and receives no additional compensation for his Board service.
26 2019 PROXY STATEMENT
INFORMATION ABOUT THE BOARD OF DIRECTORS
2018 Compensation
Our Board compensation year starts at the Annual Meeting each year and runs to maintain athe next Annual Meeting. The annual Board with independenceand committee chair cash retainers and restricted stock unit award are paid/granted annually in advance. The additional cash retainer for the Board Chairman is paid quarterly in advance. The following table provides details of thought and diverse professional experience. The committee looks for directorsthe compensation of each person who have qualifications in areas relevant to Unum.
NON-EMPLOYEE DIRECTOR COMPENSATION
Name | Fees Earned or Paid in Cash(1) | Stock Awards(2) | All Other Compensation(3) | Total | ||||||||
Theodore H. Bunting, Jr. | $ 125,000 | $ | 150,000 | — | $ | 275,000 | ||||||
E. Michael Caulfield | 135,000 | 150,000 | 10,000 | 295,000 | ||||||||
Susan D. DeVore | 137,425 | 150,000 | — | 287,425 | ||||||||
Joseph J. Echevarria | 109,993 | 150,000 | — | 259,993 | ||||||||
Cynthia L. Egan | 130,000 | 150,000 | 10,000 | 290,000 | ||||||||
Pamela H. Godwin | — | — | 5,000 | 5,000 | ||||||||
Kevin T. Kabat | 310,000 | 150,000 | — | 460,000 | ||||||||
Timothy F. Keaney | 129,989 | 150,000 | — | 279,989 | ||||||||
Gloria C. Larson | 125,000 | 150,000 | 10,000 | 285,000 | ||||||||
Ronald P. O'Hanley | 109,993 | 150,000 | 10,000 | 269,993 | ||||||||
Francis J. Shammo | 110,000 | 150,000 | — | 260,000 |
(1) | Amounts represent retainers, including for service as Board Chairman and committee chairs, which were paid in 2018, either in cash or deferred shares, for 2018/2019 Board service. Messrs. Echevarria and O'Hanley each elected to defer their cash retainers, which were converted to deferred share rights with the value reflected in the table. Mr. Keaney elected to defer a portion of his cash retainer, which was converted to deferred share rights with the value included in the table. Ms. DeVore's amount also includes a prorated retainer for her 2017/2018 board year service based on the date she joined the Board in February of 2018. |
(2) | On May 24, 2018, each then serving non-employee director was granted 3,892 restricted stock units (RSUs) under our Stock Incentive Plan of 2017. The amounts shown are the grant date fair market values of these units. Ms. Godwin retired from the Board at the 2018 Annual Meeting and did not receive a grant of RSUs for the 2018/2019 Board year. |
We account for stock-based payments under the requirements of Accounting Standards Codification Topic 718 Compensation Stock Compensation (ASC 718). A complete discussion of the assumptions made as well as the financial impact of this type of compensation can be found in Notes 1 and driving change.
The following charts showtable provides details of the distributionunvested RSUs, including dividend equivalent units, held by each non-employee director as of certain qualifications among our 11 director nominees:December 31, 2018.
Director Name | Number of Restricted Stock Units Held at Fiscal Year End | Director Name | Number of Restricted Stock Units Held at Fiscal Year End |
Theodore H. Bunting, Jr. | 3,948 | Kevin T. Kabat | 3,948 |
E. Michael Caulfield | 3,948 | Timothy F. Keaney | 3,948 |
Susan D. DeVore | 4,693 | Gloria C. Larson | 3,948 |
Joseph J. Echevarria | 3,948 | Ronald P. O'Hanley | 3,948 |
Cynthia L. Egan | 3,948 | Francis J. Shammo | 3,948 |
(3) | With the exception of Ms. Godwin, who retired from the company in 2018, the amounts shown represent the company’s matching gifts resulting from the directors’ charitable gifts. For Ms. Godwin, in recognition of her retirement from the Board, the company made a $5,000 charitable contribution in her name. |
2019 PROXY STATEMENT 27
INFORMATION ABOUT THE BOARD OF DIRECTORS
Director Stock Ownership and Retention Requirements
Each non-employee director is required to own Unum equity securities with an aggregate value of five times the director’s annual cash retainer (for a total current retention requirement of $550,000). New directors representhave five years from the date of their election to meet the ownership requirement.
In addition, each non-employee director is required to retain 60% of the shares underlying their annual restricted stock unit award for at least one year from the time they vest, and to retain at least the amount of equity securities necessary to meet his or her ownership requirement until retirement from the Board.
The Committee annually reviews each director’s stock ownership level. If a rangedirector does not reach his or her ownership requirement within the time period provided, the Committee will determine whether action is appropriate. As of backgrounds and overall experience. More than one-third are women or represent an ethnic group, which places Unum's Board amongDecember 31, 2018, eight of the top of our industry in gender and ethnic diversity. In recent years, our Governance Committee has focused on ensuring continued diversityten non-employee directors serving on the Board during refreshment activities by requiringat that candidate pools include diverse individuals meetingtime had met the recruitment criteria. Ourownership requirement. The two directors who had not met the ownership requirement at year-end 2018 joined the Board within the past five years and are expected to meet the ownership requirement within the applicable time period provided.
28 2019 PROXY STATEMENT
BOARD AND COMMITTEE GOVERNANCE
BOARD AND COMMITTEE GOVERNANCE
Corporate Governance Guidelines
The Board of Directors has adopted corporate governance guidelines on a number of significant matters, including director nominees range from 48 to 70 years of age, withselection and independence, director responsibilities, Board leadership, and management succession. The corporate governance guidelines are available on our investor relations website under the average age being 60.2 years.
Kevin T. Kabat serves as non-executive Chairman of the Board and Richard P. McKenney serves as President and CEO of the mixcompany. As the non-executive Chairman, Mr. Kabat is also deemed the Lead Independent Director and, as such, has the responsibilities outlined in our corporate governance guidelines, including:
The Board believes the current leadership structure provides significant independent oversight of management, as Mr. McKenney (our CEO and an employee of the company) is the only member of the Board who is not an independent director. The Board holds executive sessions, without management present, at each regularly scheduled in-person Board meeting. In 2018, the independent directors met alone in executive session five times, and each session was chaired by Mr. Kabat.
Our bylaws and corporate governance guidelines allow the offices of Chairman and CEO to be filled by the same or different individuals. This allows the Board flexibility to select the appropriate leadership for our company based on a number of factors, including the specific needs of the business and what best serves the company
2019 PROXY STATEMENT 29
BOARD AND COMMITTEE GOVERNANCE
and shareholders at a given time. The independent directors of the Board will continue to review the Board’s leadership structure periodically and may modify this structure from time to time as they determine appropriate and in the discussion on page 26 under "Board Profile," the Governance Committee considers other specific qualifications that may be desired or required of nominees, including their independence and ability to satisfy specific Audit Committee or Human Capital Committee requirements. The Governance Committee assesses the effectiveness of its Board membership criteria as partbest interests of the director selectioncompany and nomination process. In determining whether to recommendshareholders.
The Board of Directors met seven times during 2018. Depending upon committee assignments, a director for re-election, the Governance Committee also considers the director’s interestgenerally would have had 16 to 22 meetings to attend in continuing to serve, past2018. Average director attendance at Board and committee meetings contributions towas 98%, and each incumbent director attended at least 89% of the total number of meetings of the Board and committees on which he or she served during the director serves,period of the skills, experiencedirector’s service in 2018.
Directors are expected to attend Annual Meetings. All current directors serving on the Board at the time of the 2018 Annual Meeting attended that meeting.
The Board of Directors has five standing committees: Audit, Risk and backgroundFinance, Governance, Human Capital, and Regulatory Compliance. Each committee has a charter that is available on our investor relations website under the director brings"Corporate Governance" heading at www.investors.unum.com. In addition to the duties contained in their respective charters, each committee may be assigned additional tasks by the Board, and each is charged with reporting its activities to the Board.
BOARD MEMBERS AND COMMITTEES
Name | Term Expires | Audit | Risk & Finance | Governance | Human Capital | Regulatory Compliance |
Theodore H. Bunting, Jr.(1) | 2019 | • | Chair | |||
E. Michael Caulfield(2) | 2019 | Chair | • | |||
Susan L. Cross(3) | 2019 | • | • | |||
Susan D. DeVore | 2019 | • | • | |||
Joseph J. Echevarria | 2019 | • | • | |||
Cynthia L. Egan | 2019 | Chair | • | |||
Kevin T. Kabat | 2019 | • | • | |||
Timothy F. Keaney | 2019 | • | Chair | |||
Gloria C. Larson | 2019 | Chair | • | |||
Richard P. McKenney | 2019 | |||||
Ronald P. O'Hanley(4) | 2019 | • | • | |||
Francis J. Shammo | 2019 | • | • | |||
2018 Committee Meetings | 9 | 5 | 5 | 6 | 4 |
(1) | Mr. Bunting rotated from the Audit Committee to the Regulatory Compliance Committee in May 2018. He was named Chair at that time as well. |
(2) | As noted on page 23, Mr. Caulfield will retire from the Board at the 2019 Annual Meeting. |
(3) | Ms. Cross joined the Board effective February 25, 2019. |
(4) | Mr. O'Hanley rotated from the Risk and Finance Committee to the Governance Committee in May 2018. |
30 2019 PROXY STATEMENT
BOARD AND COMMITTEE GOVERNANCE
COMMITTEE RESPONSIBILITIES
Audit Committee(1) |
• | A complete description of the responsibilities of the Audit Committee is included in the Report of the Audit Committee on page 39. |
Governance Committee(2) |
Human Capital Committee(3) |
2019 PROXY STATEMENT 31
BOARD AND COMMITTEE GOVERNANCE
Regulatory Compliance Committee(4) |
Risk and Finance Committee(5) |
(1) | All members of the Audit Committee meet the independence requirements of the SEC and the NYSE and our corporate governance guidelines. All five members of the Audit Committee are "audit committee financial experts" under SEC regulations, and are "financially literate" as required by the NYSE. |
(2) | All members of the Governance Committee meet the independence requirements of the NYSE and our corporate governance guidelines. |
(3) | All members of the Human Capital Committee meet the independence requirements of the NYSE for directors and compensation committee members and our corporate governance guidelines and are "non-employee directors" for purposes of Rule 16b-3 under the Securities Exchange Act of 1934 and "outside directors" for purposes of Section 162(m) of the Internal Revenue Code. |
(4) | All members of the Regulatory Compliance Committee meet the independence requirements of our corporate governance guidelines. |
(5) | All members of the Risk and Finance Committee meet the independence requirements of our corporate governance guidelines. |
32 2019 PROXY STATEMENT
BOARD AND COMMITTEE GOVERNANCE
While we recognize that Board members benefit from service on the boards of other companies and such service is encouraged, the Board believes it is critical that directors be able to dedicate sufficient time to their service on our Board. To that end, no director may serve on more than three public company boards in addition to our Board, or on more than two audit committees of public companies in addition to our Audit Committee.
Name | Term Expires | Audit | Risk & Finance | Governance | Human Capital | Regulatory Compliance |
Theodore H. Bunting, Jr. | 2017 | ● | ● | |||
E. Michael Caulfield | 2017 | Chair | ● | |||
Joseph J. Echevarria(1) | 2017 | ● | ● | |||
Cynthia L. Egan(2) | 2017 | ● | ● | |||
Pamela H. Godwin | 2017 | ● | Chair | |||
Kevin T. Kabat | 2017 | ● | Chair | |||
Timothy F. Keaney | 2017 | ● | Chair | |||
Gloria C. Larson | 2017 | ● | Chair | |||
Richard P. McKenney | 2017 | |||||
Edward J. Muhl(3) | 2017 | ● | ● | |||
Ronald P. O'Hanley | 2017 | ● | ● | |||
Francis J. Shammo | 2017 | ● | ● | |||
Thomas R. Watjen(3) | 2017 | |||||
2016 Committee Meetings | 10 | 9 | 7 | 7 | 5 |
The Board has an active role, as a whole and also at the committee level, in overseeing management of the company’s risks. The Board is responsible for managing strategic risk, and it regularly reviews information regarding our capital, liquidity and operations, as well as the risks associated with each. The Risk and Finance Committee is responsible for oversight of the company’s enterprise risk management program and receives a report on these activities at least quarterly. The Risk and Finance Committee is also responsible for overseeing risks associated with investments and related financial matters, including those pertaining to our Closed Block segment, and any other risks not specifically allocated to another committee for oversight. The Audit Committee is responsible for oversight of financial risk and continues to fulfill its NYSE-mandated responsibility to discuss guidelines and policies with respect to the process by which the company undertakes risk assessment and risk management. The Audit Committee and Risk and Finance Committee may also meet jointly as appropriate to oversee certain risks for which they have overlapping responsibility, including operational risks relating to data privacy, cybersecurity and business continuity. The Human Capital Committee is responsible for overseeing the management of risks relating to our compensation plans and programs and, as more fully described below, receives an annual report from the company’s chief risk officer with respect to these risks. The Regulatory Compliance Committee oversees management of risks related to regulatory, compliance, policy and legal matters, both current and emerging and whether of a local, state, federal or international nature. While each committee is responsible for evaluating certain risks and overseeing the management of such risks, the entire Board of Directors is regularly informed through committee reports about such risks in addition to the risk information it receives directly.
Each year, the company’s chief risk officer, in consultation with the Human Capital Committee, undertakes a risk assessment of our compensation programs and practices. This year’s process included the following steps:
Based on this assessment, the following conclusions were reached by the chief risk officer and presented to the Human Capital Committee:
2019 PROXY STATEMENT 33
BOARD AND COMMITTEE GOVERNANCE
Accordingly, our chief risk officer and the Human Capital Committee do not believe the company’s compensation programs create risks that are reasonably likely to have a material adverse effect on the company, and that the programs fall within the range of the company's risk appetite.
Our bylaws do not allow any person to serve as a director beyond the date of the annual meeting of shareholders immediately following his or her 72nd72nd birthday. In accordance with this policy, Mr. MuhlCaulfield will retire from the Board effective at the Annual Meeting.
During 2018, Ms. Egan and Messrs. Bunting, Kabat, and O'Hanley each served as a member of our Human Capital Committee. None of the members of the Human Capital Committee has served as an officer of the company, and during 20162018 none of the members of the Human Capital Committee was an employee of the company. None of our executive officers served as a member of a board of directors or compensation committee of any other entity that has one or more executive officers serving as a member of our Board or Human Capital Committee.
The Board has adopted a written policy concerning related party transactions. This policy covers any transaction in which the company was or is to be a participant and the amount involved exceeds $120,000, and in which any related party had or will have a direct or indirect material interest. A "related party" means any of our directors, director nominees, executive officers, persons known to us to beneficially own more than 5% of our outstanding common stock, and any of their respective immediate family members, and any entity in which any of these persons has an interest as an employee, principal or 10% or greater beneficial owner or other material financial interest.
Prior to entering into a transaction that may be viewed as a related party transaction, the related party must notify our general counsel of the facts and circumstances of the transaction. If the general counsel determines that the proposed transaction is a related party transaction, it is submitted to the disinterested members of the Audit Committee for consideration at the next Committee meeting (or to the chair of the Committee if it is not practical to wait until the next meeting and the chair is not a related party to the transaction). The Committee considers all relevant facts and circumstances, including the benefits to the company, if the related party is an independent director or nominee, the potential effect of entering into the transaction on the director’s or nominee’s independence, any improper conflict of interest that may exist, the availability of other sources for the products and services, the terms of the transaction, and the terms available from or to unrelated third parties generally.
34 2019 PROXY STATEMENT
BOARD AND COMMITTEE GOVERNANCE
The transaction may be approved if it is determined in good faith not to be inconsistent with the best interests of the company and shareholders. Certain types of transactions are deemed to be pre-approved by the Audit Committee, including executive officer and director compensation arrangements approved by the Board of Directors or the Human Capital Committee, indemnification payments and any transaction between the company and any entity in which a related party has a relationship solely as a director, less than 10% equity holder, or employee (other than an executive officer), or all of these relationships.
Transactions with Related Persons
The company employs a sister-in-law of Michael Q. Simonds, Executive Vice President, President and Chief Executive Officer of Unum US. Charlene Glidden serves as Vice President, Business Planning and Technology Strategy for Colonial LifeDigital Transformation and does not report within the Unum US organization. Her compensation for 20162018 was approximately $423,328,$460,621, and she participated in compensation and benefit arrangements generally applicable to similarly-situated employees.
The Board has adopted a codeCode of conductConduct establishing certain business practices and ethics applicable to all of our directors, officers and employees. Our Code guides employees on how to abide by the company's principles and access the resources available to address any ethical issues that arise. We provide online and toll-free access to report ethical issues confidentially, conduct annual training and offer self-service access to a variety of educational materials related to issues covered in our Code. The Board has also adoptedimplemented a separate codeCode of ethicsEthics applicable to our CEO and certain of our senior financial officers.
We expect all employees and officers of Unum to abide by the principles and policies set forth in our codes. Both of these codes, together with any information on certain amendments or any waivers applicable to certain of our executive officers, are available on our investor relations website under the "Corporate Governance" heading at
www.investors.unum.com.2019 PROXY STATEMENT 35
OTHER GOVERNANCE MATTERS
OTHER GOVERNANCE MATTERS
In line with our commitment to open communication and transparency, we have a robust shareholder engagement process that occurs throughout the year.
In the late summer and early fall, we begin our shareholder engagement efforts by contacting each of our top 50 investors, which in 2018 represented over 68% of our outstanding shares. The focus of these meetings is to discuss our business strategy and our governance and compensation practices, as well as to learn about any other topics that are important to our shareholders. During 2018, our independent Board Chairman joined management for several of the shareholder meetings. In the late fall, we also met with one proxy advisory firm to provide an update on our shareholder engagement efforts and gain further insight into its view regarding our compensation and governance practices and proxy disclosures. These communications promote greater engagement with our shareholders on various corporate governance issues and provide an open forum to share perspectives on our policies and practices. | ![]() | |
During the winter, we review with our Governance and Human Capital Committees, and with the full Board, the feedback we received during these shareholder meetings and use it to enhance proxy disclosures and make any recommended governance and compensation changes prior to the next Annual Meeting. Following our Annual Meeting in the spring, we review our shareholder voting results, consider compensation and governance trends and current best practices, and conduct follow-up meetings with investors to address any issues.
For additional information on feedback we received from our shareholders during our outreach efforts, refer to page 48.
Environmental, Social and Governance
Millions of people count on our benefits as part of a critical financial safety net, and we strive to deliver on those commitments and make a difference. This focus on doing the right thing guides our approach to sustainability and social responsibility issues. Unum has a long tradition of engaging employees, shareholders, our communities and society at large on advocacy, community outreach, environmental responsibility and good governance. Here are a few ways we aspire to integrate corporate responsibility into our business.
Being Good Stewards of the Environment
We’re committed to helping protect the valuable resources that we all depend on to support quality of life for everyone. We do that by striving to effectively manage our impact on the environment. Our facilities account for our biggest environmental impacts, and we have made significant strides in several areas to measure our
36 2019 PROXY STATEMENT
OTHER GOVERNANCE MATTERS
impact and improve efficiencies to reduce our carbon footprint. Employee ‘green teams’ also promote environmentally smart ways of living and working. By better managing our impacts today, we are investing in a better future.
Social Outreach and Engagement
Engaging with employees, community partners and in the public discourse are key ways we work to create better places to live and work.
Our Culture and Human Capital Management
The wellbeing of our employees is one of our top priorities and starts with a dynamic and welcoming workplace that embraces diversity, fosters collaboration and encourages employees to bring their best ideas to work every day.
In 2018, we continued a multi-year modernization of our main home offices. This investment is transforming our workspaces to spark greater collaboration, innovation and flexibility, and introduce upgraded food service and fitness amenities for employees. We believe the introduction of a more contemporary workplace will support the recruitment of top talent and the delivery of best-in-class customer service.
Work-life balance is a core value of ours, and we provide access to benefits and resources employees need to enhance their health and wellbeing. We offer comprehensive health plans, annual screenings, on-site fitness and health resource centers at our primary facilities and programs that educate employees and help them manage chronic health issues as well as generous retirement benefits.
Our company has a strong focus on training and professional development. All employees participate in an annual curriculum of training on our Code of Conduct (which covers a variety of topics including ethics, harassment, regulatory compliance and our business practices) privacy, and information security. We also provide employees and managers a variety of training and development programs tailored to their specific roles and support the professional development of our employees through our tuition assistance program.
We’re proud to have been recognized as a great place to work by several independent organizations and we will continue to make investments in our people and our culture to create a world-class workplace.
Inclusion and Diversity
We are committing greater resources to foster a workplace that welcomes diverse backgrounds and perspectives, and reflects our customers and our communities. Our commitment starts at the top, and we’re pleased to have been recognized as being a leader in gender diversity at the Board level. We set inclusion and diversity performance goals for the CEO and senior leadership team. Last year, we also established an Office of Inclusion & Diversity and hired a Vice President, Inclusion and Diversity and support staff. A variety of
2019 PROXY STATEMENT 37
OTHER GOVERNANCE MATTERS
programming and training opportunities are available for all employees to learn about issues such as unconscious bias and inclusion in the workplace.
This year, we have committed to creating and sharing a strategic inclusion and diversity plan and key goals.
Positively Impacting Our Communities
We’re dedicated to building stronger communities in the places where we live and work. Through financial gifts and employee volunteering, we partner with community organizations to improve educational opportunities, promote health and wellness, and support the arts. We encourage employee engagement in community outreach by providing time off for volunteer activities and matching employee giving to qualified organizations. We partner with dozens of local charities every year and provide significant support in the U.S. to public education, health and wellness, and arts and culture. For more information about our community outreach, visit our website.
Advocating for Financial Protection Benefits
We participate in public policy discussions on a variety of issues related to our business and industry. One of our primary areas of focus is advocating for greater access to financial protection benefits for workers and their families in the U.S. and U.K. This is an issue that continues to grow in significance as governmental revenue and funding for public safety net initiatives has declined.
Our engagement in these issues includes:
Through engagement with legislators and other public officials at the state and federal level, we educate policymakers on the importance of making financial protection benefits widely available and easy to enroll in.
38 2019 PROXY STATEMENT
Good Governance
We are committed to maintaining a sound governance framework rooted in a culture of integrity and responsiveness to the long-term interests of our shareholders. Shareholder perspectives are valued by the Board and management as they consider the current governance landscape and shape our practices to keep pace with, if not stay ahead of, best practices. We list many of our governance practices on page 3.
REPORT OF THE AUDIT COMMITTEE
The Audit Committee (in this report, the "Committee") is appointed by the Board of Directors and operates under a written charter adopted by the Board, a copy of which is available on the company’s investor relations website under the heading "Corporate Governance" at www.investors.unum.com. The Committee is comprised solely of independent directors who meet the independence requirements of the SEC and the NYSE. All members of the Committee are "financially literate" as required by the NYSE, and the Board has determined that all five current members are "audit committee financial experts" under SEC regulations. In April 2016, Joseph J. EchevarriaFebruary 2018, Susan D. DeVore became a member of the Committee upon hisher election to the Board.
The primary purpose of the Committee is to assist the Board in its oversight of the:
The Committee is also responsible for discussing guidelines and policies with respect to the process by which the company undertakes risk assessment and management, and communicates with the Risk and Finance Committee as necessary for this purpose. The Committee receives regular enterprise risk management (ERM) reports, including results of the Own Risk and Solvency Assessment (ORSA). In 2016,2018, the Committee Chair and another member of the Committee reviewed and provided input in the development of the ORSA Summary Report. This report provides strong evidence of the strengths of the company’s ERM framework, measurement approaches, key assumptions utilized in assessing our risks, and prospective solvency assessments under both normal and stressed conditions.
The Committee met 10nine times during 2016.2018. The Committee regularly held executive sessions and met separately with its independent auditor, Ernst & Young, and with the internal auditors without management present.
In fulfilling its oversight responsibilities, the Committee reviewed and discussed with management and the independent auditor matters relating to the company’s accounting and financial reporting processes, including the internal control over financial reporting; reviewed and discussed with management and the independent auditor the company’s annual and quarterly financial statements and related disclosures in reports filed with the SEC; pre-approved all audit services and permitted non-audit services to be performed by the company’s independent auditor; reviewed and discussed with management the responsibilities and performance of the internal audit function; discussed with management policies relating to risk assessment and risk management,
2019 PROXY STATEMENT 39
REPORT OF THE AUDIT COMMITTEE
as well as specific financial risks; and obtained and reviewed reports concerning the company’s policies and procedures for ensuring compliance with legal and regulatory requirements.
Management is primarily responsible for the preparation, presentation and integrity of the company’s financial statements and for the reporting process, including the establishment and effectiveness of the company’s internal control over financial reporting. The company’s independent auditor is responsible for performing an independent audit of the financial statements and of the effectiveness of the company’s internal control over financial reporting in accordance with auditing standards promulgated by the Public Company Accounting Oversight Board (PCAOB). The independent auditor reports directly to the Committee, which is responsible for the appointment, compensation, retention and oversight of the work performed by the independent auditor.
The Committee reviewed and discussed with management the company’s audited financial statements for the year ended December 31, 2016,2018, including a discussion of the quality, not just the acceptability, of the accounting principles, the reasonableness of significant estimates and assumptions which could impact the amounts reported in the company’s financial statements, and the clarity of disclosures in the financial statements. The Committee reviewed and discussed with the independent auditor the overall scope and results of the independent audit and its judgments of the quality and acceptability of the company’s accounting principles. The Committee also engaged in discussions with management and the independent auditor, among other matters, concerning management’s assessment of reserve adequacy across all major business lines, which is presented to the Committee each year. The Committee discussed with the independent auditor the matters required to be discussed by applicable standards of the PCAOB. The Committee engaged in an exercise with its independent auditor using the 2018 audit as an opportunity to better understand new standards requiring discussion of critical audit matters (CAMs) in future auditor reports and the potential impacts on the company’s and auditor’s processes and reporting. The Committee also received the written disclosures and the letter from the independent auditor required by applicable requirements of the PCAOB regarding the auditor’s communications with the Committee concerning independence. TheIn addition, the Committee also discussed with the independent auditor matters relating to its independence, including consideration of whether the independent auditor’s provision of non-audit services to the company is compatible with the auditor’s independence. In order to assure continuing auditor independence, the Committee periodically considers whether there should be a regular rotation of the independent auditor.
The company’s internal audit function, under the direction of the chief auditor, reports directly to the Committee, which is responsible for the oversight of the work performed by the internal auditors. The internal auditors are responsible for, among other matters, conducting internal audits designed to evaluate the company’s system of internal controls. The Committee reviewed and discussed with the company’s internal auditors, and received regular status reports from them concerning, the overall scope and plans for their audits. The Committee met with the internal auditors, with and without management present, to discuss their audit observations and findings, and management’s responses, and their evaluation of the effectiveness of the company’s internal control over financial reporting.
The Committee evaluates the performance of its independent auditor, including the senior audit engagement team, each year and considers whether to retain the current independent auditor or consider other audit firms. In doing so, the Committee took into consideration a number of factors, including the professional qualifications of the firm and the lead audit partner, the quality and candor of the firm’s communications with the Committee and the company, and evidence supporting the firm’s independence, objectivity, and professional skepticism. The Committee also reviewed the 2015 PCAOB inspection report of Ernst & Young which was publishedAdditionally, in 2016 and discussed its findings with the independent auditor. In conjunction with the mandated rotation of the independent auditor’s lead engagement partner, the Committee and its chair are directly involved in the selection of the independent auditor’s lead
40 2019 PROXY STATEMENT
REPORT OF THE AUDIT COMMITTEE
Based on this evaluation, the Committee has determined that the continued retention of Ernst & Young to serve as the company’s independent auditor is in the best interests of the company and its shareholders. Accordingly, the Committee appointed Ernst & Young as the company’s independent auditor for 2016.2018. Ernst & Young has served as the company’s independent auditor since the merger of Unum and Provident in 1999, and before that served at various times as the independent auditor for the company and certain predecessor companies. Although the Committee has sole authority to appoint the independent auditor, the Committee recommended that the Board of Directors seek shareholder ratification of the appointment at the Annual Meeting as a matter of good corporate governance.
Based on the reviews and discussions referred to above, the Committee recommended to the Board of Directors, and the Board approved, that the company’s audited financial statements for the year ended December 31, 20162018 be included in the company’s Annual Report on Form 10-K for filing with the Securities and Exchange Commission.
2018 Audit Committee:
E. Michael Caulfield, Chair
(1) | ||
Susan L. Cross became a member of the Audit Committee following her election to the Board in February 2019, and therefore did not participate in Committee actions with respect to the Report of the Audit Committee contained in this proxy statement. |
2019 PROXY STATEMENT 41
COMPENSATION DISCUSSION AND ANALYSIS
In this section, we provide an overview of our compensation philosophy and processes, and explain how the Human Capital Committee of our Board (referenced throughout this section as the "Committee") arrived at its compensation decisions for the below named executive officers (NEOs) for 2016, all of whom are included in the 2016 Summary Compensation Table on page 72.
Our Business
We are a leading provider of financial protection benefits in the United States and United Kingdom. Following our acquisition of Pramerica Žycie TUiR SA (which we have subsequently renamed Unum Žycie TUiR SA and refer to as Unum Poland) in the fourth quarter of 2018, we now provide financial protection benefits in Poland, which expands our European presence. Our products include disability, life, accident, critical illness, dental and vision insurance. These products, which are primarily offered through the workplace, help protect millions of working people and their families from the financial hardships that can occur in the event of illness, injury, or loss of life.
Our business operations are divided into three primary segments – Unum US, Unum UK,International (formerly solely Unum UK), and Colonial Life – andas well as a Closed Block of business that includes products, such as long-term care insurance, that we service and support but no longer actively market.
2018 Performance
From a financial and operating standpoint, Unum had a very successful year in 20162018 as we delivered steady growth accelerated and we continued to deliver consistent financial and operating performance. Positive sales and premium growth contributedacross our core businesses, leading to record after-tax adjusted operating earnings per shareshare. We maintained market-leading positions and a strong value proposition with customers and brokers, and focused on expanding our product and geographic footprint. Our disciplined business approach to running our business helped us maintain attractive profit margins and a high level of customer satisfaction. These results were achieved despite a very uncertain economicchallenging environment, including the pressure of continued low interest rates, uncertainty in the U.K. due to Brexit, and reflect our successful management transition as Mr. McKenney completed his first year as CEO.
42 2019 PROXY STATEMENT
COMPENSATION DISCUSSION AND ANALYSIS
Financial Highlights(1)
Record earnings | |
Unum achieved record after-tax adjusted operating earnings, continuing our recent history of strong financial performance. For 2018, we delivered strong after-tax adjusted operating income of $1.15 billion, based on total revenue of $11.6 billion. Adjusted operating earnings per share (EPS) was at an all-time high of $5.20, a significant increase over the prior year and the thirteenth consecutive year of after-tax adjusted operating EPS growth. | ![]() |
Return on equity | |
We continued to put shareholder capital to good use. Consolidated adjusted operating return on equity (ROE) increased to 13.2%, while ROE in our core operating segments grew to 17.8%. | ![]() |
Book value | |
Our book value per share at the end of 2018 was up 3.6% from 2017 (excluding accumulated other comprehensive income, or AOCI). It was the tenth consecutive year of shareholder equity growth. | ![]() |
Strengthening of reserves | |
We increased our long-term care GAAP reserves by $593.1 million after-tax to reflect our updated best estimate of future obligations, which had little impact on our capital plans and overall financial strength. |
Operating Highlights
Unum delivered on our mission of supporting our customers in a difficult interest rate environment while emphasizing sound risk management and credit quality.
We continue to see strong growth in premium of 4.5% and solid sales growth throughout our core businesses, particularly in premium income, compared with 2017 results. This growth was achieved while maintaining our pricing and risk discipline;
We managed our investment portfolio well despite the offeringscontinued low interest rate environment. Due to the nature of our business, we invest for the long term with an investment philosophy emphasizing sound risk management and credit quality.
(1) | Operating results referenced below include non-GAAP financial measures. Information about the non-GAAP measures used in this proxy statement is set forth in “A Note About Non-GAAP Measures” on page 2. For a reconciliation of the most directly comparable GAAP measures to the non-GAAP measures, refer to Appendix A to the proxy statement. |
2019 PROXY STATEMENT 43
COMPENSATION DISCUSSION AND ANALYSIS
The same skills that allow our core franchise to be successful are also beneficial to our closed block of long-term care policies that we service and support, but no longer actively market. In 2009, we closed our individual long-term care business, and in 2012 we closed our group long-term care business. Since that time, we have actively managed these blocks with a combination of rate increases, updates to our liability assumptions to reflect emerging experience, prudent cash infusions, and reserve changes. Since 2006, we have strengthened reserves $4.9 billion in this block. Through these and other steps, we continue to take proactive measures to provide for the long-term stability of this block and provide transparency to our shareholders and customers.
We continued our commitment to effectively managing our long-term care business in 2018 during our annual comprehensive review of this block. Upon completion of this review in the third quarter of 2018, we increased our long-term care GAAP reserves by $593.1 million after-tax to reflect our updated best estimate of future benefit obligations. In the process, we believe we set a standard for disclosure in long-term-care. This action had little impact on our capital plans and overall financial strength.
Strategic Positioning
We have recently taken a number of steps to fuel our growth and position us for the future.
In addition, key developments in the external environment are having a positive impact on our business.
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COMPENSATION DISCUSSION AND ANALYSIS
Capital Generation for Shareholders
Our strong company brand, image, and reputation.
Our ability to generate capital remained strong and allowedin 2018, allowing us the opportunity to deploy that capital in a number of ways.
CAPITAL GENERATION AND DEPLOYMENT | ||
Year | Share Repurchases | Dividend Rate Increase |
2009 | — | 10.0% |
2010 | $356 million | 12.1% |
2011 | $620 million | 13.5% |
2012 | $500 million | 23.8% |
2013 | $319 million | 11.5% |
2014 | $301 million | 13.8% |
2015 | $427 million | 12.1% |
2016 | $403 million | 8.1% |
2019 PROXY STATEMENT 45
COMPENSATION DISCUSSION AND ANALYSIS
Business Highlights
The following are 20162018 performance highlights within our primary business segments and other key areas of the company:
Unum US | ![]() |
Our Unum US segment, representing 63.8% of our consolidated premium income in 2018, continued its trend of profitable growth. The business delivered steady sales, healthy premium growth, and continued expansion of our new dental and vision offerings across the U.S. These results, combined with favorable benefits experience and effective expense management, drove adjusted operating income higher compared to 2017. | |
Unum International | |
![]() | |
Our Unum International segment represents 6.3% of our consolidated premium income in 2018. While the Unum UK line of business continued to face headwinds from the uncertain environment due to Brexit, the addition of Unum Poland helped drive growth in our International segment. | |
Colonial Life | |
![]() | |
Our Colonial Life segment, representing 17.9% of our consolidated premium income in 2018, had another good year. The business continued its trend of strong sales and premium growth. Consistent with past years, Colonial Life continues to generate solid margins and returns. |
Closed Block
Our Closed Block segment, representing 62.7%12.0% of our consolidated premium income in 2016, built on the momentum of the prior year. The business2018, delivered healthy premium growth and solid sales results, alongstable performance, with favorable benefits experience and effective expense management. Operating income improved nicely from 2015 and our acquisition of a dental and vision carrier is poised to drive growth.
Investments
Our investment results remainremained solid, although we recorded lower net investmentgenerally in line with our plan benchmarks. The portfolio was well-managed through market volatility in 2018 and continues to provide a consistent source of income in 2016. This was primarily due to a decline in the yield on invested assets as we continue to invest new cash flows at lower rates.
46 2019 PROXY STATEMENT
COMPENSATION DISCUSSION AND ANALYSIS
Total Shareholder Return
Unum has beendelivered strong financial results in our core businesses and record adjusted operating earnings in 2018, continuing a very good performertrack record of consistent performance that spans more than a decade. However, investor perceptions in the industry surrounding long-term care and ongoing volatility in the broader market, most notably in the financial services sector, overshadowed our performance. This contributed to the decline in our stock value of more than 45% in 2018.
These results are not indicative of the ongoing strong financial and operational performance of our core businesses and the active management of our closed LTC block. We believe our consistent results have made Unum an excellent long-term investment - including during one of the most challenging economic periodsworst financial crises in memory with a 9.76% compound annual return to shareholders over- and we expect that the last 10 years. In fact, our total shareholder return (TSR) has outperformed our peers in nearly every index comparison during the last decade.
2019 PROXY STATEMENT 47
COMPENSATION DISCUSSION AND ANALYSIS
Our 2018 shareholder advisory vote to approve executive compensation passed with over 95% support. As we have done for several years, we continued our shareholder engagement through an extensive outreach effort, contacting each of our top 50 investors, representing over 68% of our outstanding shares. Consistent with the prior year, our independent Board Chairman joined several of our meetings with shareholders. | ![]() |
Six investors, representing the holders of over 72% of our outstanding shares. Eight of these investors, representing 32%more than 15% of our outstanding shares, accepted our invitation for engagement. Sixengagement and we met with each of thesethem. Another eight investors, representing 8%approximately 13% of our outstanding shares, responded that a meeting was not necessary.
During the meetings, shareholders provided feedback on a variety of topics. Multiple shareholders commented that they were pleased to see the proxy disclosure with respect to our engagement and responsiveness to the say-on-pay vote in 2015. Additionally, shareholders commented that they were pleased to see a robust process for Board succession along with a focus on diversity and skills needed to support our business strategy.
Given the uncertainty of the long-term care industry during 2018, management had anticipated an increased focus on our long-term care business. However, only one shareholder commented on our long-term care business and suggested that our proxy disclosure should include how the Committee considered the long-term reserve charge when making the compensation decisions (see performance assessments beginning on page 64 for additional information).
Following consideration of the results of our 2018 say-on-pay vote and feedback we received through these meetings, we did not make any changes to our executive compensation programsprograms. However, our discussions identified opportunities for further enhancements to our proxy statement disclosure and policies.other governance topics including:
• | The addition of the CEO Compensation Summary beginning on page 8; |
• | Enhanced disclosure related to our Environmental, Social and Governance initiatives beginning on page 36; and |
• | Added footnotes to the "Elements of Pay" table, on page 49, indicating where the underlying incentive plan metrics can be found. |
In addition to our meetingmeetings with shareholders, we also met with two largeone proxy advisory firmsfirm to provide an update on our shareholder engagement efforts and gain further insight into their views regarding our compensation programs and disclosure.governance practices and disclosures. Another proxy advisory firm indicated that a meeting was not necessary.
Overall, shareholders told us they appreciated the opportunity to engage in these discussions and the company’s willingness to consider their input with respect to both executive compensation and governance practices.
48 2019 PROXY STATEMENT
COMPENSATION DISCUSSION AND ANALYSIS
Our executive compensation philosophy is to reward performance that helps us achieve our corporate objectives, increase shareholder return, andreturns, attract and retain talented individuals.individuals, and promote a culture of ownership and accountability in the company. We do this by:
There are five primary elements of pay in our executive compensation program, which are summarized in the following table.
SHORT-TERM | LONG-TERM | ||||
BASE PAY | ANNUAL INCENTIVE | PERFORMANCE- BASED RSUs | PSUs | RETIREMENT & WORKPLACE BENEFITS |
Primary Purpose | Reflects the market for similar positions as well as individual skills, abilities & performance | Rewards short-term performance(1) | Rewards long-term performance, aligns interest with stockholders & promotes a culture of ownership and accountability(1) | Addresses health, welfare & retirement needs | |
Performance Period | Ongoing | 1 year | 1 year (vests over 3 years)(2) | 3 years prospective | N/A |
Form | <--------------- Cash ---------------> | <--------------- Equity ---------------> | N/A | ||
Payment/Grant Date | Ongoing | <----- In March based on prior year performance -----> | Ongoing |
(1) | For details on performance measures see “Annual and Long-Term Incentive Programs” beginning on page 55. |
(2) | A performance threshold goal must be achieved before participants are eligible to receive an award. If the goal is not achieved, no awards are paid. |
2019 PROXY STATEMENT 49
COMPENSATION DISCUSSION AND ANALYSIS
Those pay elements that are "at risk," or contingent upon individual or corporate performance, are noted in the tablecharts below. Our NEOs, as the most senior officers of the company, have a majority of their targeted total direct compensation (consisting of(i.e., fixed salary and variable annual and long-term incentive awards) at risk. This design creates an incentive for achievement of performance goals (short- and long-term) and aligns the interests of our executives with those of our shareholders. For 2016, 88%2018, 89% of Mr. McKenney’s targeted total direct compensation was at risk. For the remaining NEOs, an average of 70%72% of their aggregate targeted total direct compensation was at risk.
The Committee, CEO, and compensation consultant each have important roles in our compensation program. The Committee, with input from the CEO, and compensation consultant, has the final authority to:
The CEO provides to the Committee:
The CEO does not participate in any decisions related to his own compensation.
Pay Governance LLC, as independent compensation consultant to the Committee, provides objective, expert analyses, independent advice, and comparative data across peer companies on executive and director
50 2019 PROXY STATEMENT
COMPENSATION DISCUSSION AND ANALYSIS
compensation. Pay Governance reports directly to the Committee, which is responsible for the appointment, compensation, retention, and oversight of the work performed by the consultant. A senior representative of the compensation consultant generally attends Committee meetings, participates in executive sessions of the Committee without management present, and communicates directly with Committee members outside of meetings. Management interacts with the compensation consultant only when doing so on behalf of the Committee or concerning proposals the Committee will review for approval.
The Committee has adopted a policy requiring that its compensation consultant be independent. During 2016,2018, the Committee completed its annual assessment of the independence of Pay Governance, taking into account the following factors:
Pay Governance has attested to its independence and does not provide any services to the company other than those related to director and executive compensation consulting. Fees paid to Pay Governance for such services provided in 20162018 totaled $130,773.
Based on its assessment, the Committee concluded that Pay Governance is independent under the Committee’s policy and that Pay Governance's work has not raised any conflict of interest.
In 2018, as a matter of good corporate governance, the Committee commissioned an executive compensation consultant benchmarking analysis. After considering the results of a Request for Information (RFI), the Committee determined to maintain its relationship with Pay Governance.
The company’s finance, human resources, and legal staff, including the Chief Financial Officer, support the Committee in its work.work, interacting with the compensation consultant only when doing so on behalf of the Committee or concerning proposals the Committee will review for approval. Employees from these departments discuss various executive compensation topics with the Committee and Pay Governance, including how compensation plans fit in with other programs and business objectives. Although these staff members may make recommendations, the final decision on all executive compensation matters rests solely with the Committee.
The Committee compares the compensation of our named executive officersNEOs to the median pay of executives in similar positions at peer companies. By generally targeting each pay element to the approximate median of the applicable comparator group (as described below), we ensure that the balance among the elements is competitive, while at the same time allowing company and individual performance to determine a majority of the compensation received by our NEOs. Overall, these benchmarking comparisons are used as points of reference and are secondary to the primary factors considered by the Committee when making compensation decisions. The primary factors are: company performance; individual performance; the executive’s level of responsibility and
2019 PROXY STATEMENT 51
COMPENSATION DISCUSSION AND ANALYSIS
tenure; internal equity considerations; the creation of shareholder value; our executive compensation philosophy; and the results of the most recent shareholder say-on-pay vote.
The two sources used by the Committee for benchmarking executive compensation are:
In addition to benchmarking executive compensation, the Committee uses a subset of the Proxy Peer Group (which we refer to as the "PSU Peer Group") for purposes of measuring relative TSR for our PSU awards (see page 5660 for details on these awards). This subset is selected because they are considered to be direct business competitors of Unum.
The Committee evaluates the composition of the Proxy Peer Group every year. Peer companies are determined based on five primary criteria (life and health GICS code; reasonable range of: assets, revenues, and market capitalization; and competition with Unum for talent and/or market share). In the past, the Committee has discussed insurance brokers and property and casualty insurers as potential peers. However, the Committee decided not to include these companies due to the differences in business models, performance cycles and executive talent markets. Based on the most recent peer review in August 2016,2018, on average, the companies in the Proxy Peer Group met three of the five criteria. Overall, Unum is at 53% of the median asset level and approximately 90%82% of the revenue median (as of the 12 months ended March 31, 2016)2018). Additionally, eight8 of the 1411 peers (57%(73%) selected Unum as a peer for compensation benchmarking purposes in their 20162018 proxy statements.
Although no changes were made to either our PSU Peer Group or Proxy Peer Group from 2017 to 2018, during its annual Proxy Peer Group analysis in August 2016,2018, the Committee with its consultant, Pay Governance, considered other insurance and financial services companies and determined to remove Assurant, Aon, and Marsh & McLennanGenworth from the Proxy Peer Group for 2017. Aon and Marsh & McLennan were2019. Genworth was removed due to their continued expansion outside of the traditional insurance business and Assurant was removed following the sale of their employee benefits and supplemental health and small lines insurance businesses. The Committee concluded that the changes to their business models makes them less relevant competitors for executive talent.pending acquisition by China Oceanwide. Furthermore, the Committee considered other insurance and financial services companies with its consultant, Pay Governance, and determined that no companies were appropriate for inclusion inBrighthouse Financial, a company that the Committee believes closely aligns as a life insurance and asset management business, will be added to the 2019 Proxy Peer Group atGroup.
Annual sensitivity tests are performed to understand the time. The effectimpact of these changes toboth larger and smaller peers on median CEO compensation levels. For the Proxy Peer Group was a 5% reductiontests conducted in median2018, excluding the two smallest and two largest peers for testing purposes had no impact on CEO targeted total direct compensation.
52 2019 PROXY STATEMENT
COMPENSATION DISCUSSION AND ANALYSIS
The following table lists the companies in the Diversified Insurance Study (DIS)(“DIS”), PSU Peer Group and Proxy Peer Group.
BENCHMARKING EXECUTIVE COMPENSATION
Proxy Peer Group Indicators | |||||||||
Company | Survey Partici- pant | Peer Group(2) | 2018 Proxy Peer Group(3) | Life & Health GICS | 0.4x to 2.5x Unum Revenues | 0.4x to 2.5x Unum Assets | 0.5x to 5.0x Unum Market Capitalization | List Unum as a Peer | |
Aflac | • | • | • | • | • | • | • | • | |
Allstate | • | ||||||||
AXA Group | • | ||||||||
Cigna | • | ||||||||
CNO Financial Group | • | • | • | • | • | • | |||
Genworth Financial | • | • | • | • | • | • | |||
Guardian Life | • | ||||||||
Hartford Financial Services Group | • | • | • | • | • | • | |||
John Hancock | • | ||||||||
Lincoln | • | • | • | • | • | • | • | ||
Massachusetts Mutual | • | ||||||||
MetLife | • | • | • | • | |||||
Nationwide | • | ||||||||
New York Life | • | ||||||||
Northwestern Mutual | • | ||||||||
OneAmerica Financial | • | ||||||||
Pacific Life | • | ||||||||
Principal Financial Group | • | • | • | • | • | • | |||
Prudential Financial | • | • | • | • | • | ||||
Reinsurance Group of America | • | • | • | • | • | ||||
Securian Financial | • | ||||||||
Sun Life Financial | • | ||||||||
Thrivent Financial | • | ||||||||
Torchmark Corporation | • | • | • | • | • | • | • | ||
Transamerica | • | ||||||||
USAA | • | ||||||||
Voya Financial | • | • | • | • | • | • |
(1) | For compensation decisions made in early |
(2) |
This peer group will be used for the relative TSR comparison under the |
(3) | The Proxy Peer Group includes both property and casualty insurers and life and health insurers, with Unum’s assets equal to 29% of the peer median as of December 31, 2017, and our revenue at 80% of the peer median for the year ended December 31, 2017. Unum is not part of the Proxy Peer Group. |
2019 PROXY STATEMENT 53
COMPENSATION DISCUSSION AND ANALYSIS
Base Salary, Annual and Long-Term Incentives
Salaries for our NEOs are established based on their position, skills, experience, responsibilities, and performance. Competitiveness of salary levels is assessed annually relative to the approximate median of salaries in the marketplace using the sources noted beginning on page 51 for similar executive positions. Adjustments may be considered for factors such as changes in responsibilities, individual performance, assessments as a factor in its determination of compensation for each NEO. Individual performance is measured against the leadership criteria and Board assessment goal areas describedand/or changes in the table below, as well ascompetitive marketplace.
Annual and long-term incentive targets are set based on consideration of each NEO’s current target, the common performance goals outlined onapproximate median of the following page. Collectively, these can be usedappropriate comparator group, and each individual’s target relative to adjust earnedother NEOs given their respective levels of responsibility. For purposes of determining the amount of annual incentive and long-term incentive awards between 0%for our NEOs, the Committee establishes a target amount as a percentage of each executive’s salary, except that the long-term incentive target is set as an absolute dollar amount for the CEO. In establishing each target for 2018 awards, the Committee considered market data from the appropriate peer group as well as each individual’s target relative to other NEOs, given their respective levels of responsibility.
At its February 2019 meeting, after consideration of company and 125%individual performance during 2018, each executive’s responsibilities, tenure and market data, the Committee made decisions with respect to our NEOs’ base salaries and annual and long-term incentive targets for 2019 as outlined in each NEOs "Performance Assessment and Highlights" summary beginning on page 64. The Committee believes the 2019 compensation decisions position all of our NEOs’ targeted total direct compensation within an appropriate range of the market median given each executive’s performance and time in his or her current position.
Individual Performance Evaluations
Individual performance is evaluated by the Committee against the NEO's goals and metrics, specific to his or her respective business area. These goals and metrics are set at the beginning of the year and include the following performance categories:
Evaluation Criteria
In evaluating how effectively each NEOthe NEOs met the leadership criteria,their goals, the Committee considered:
54 2019 PROXY STATEMENT
COMPENSATION DISCUSSION AND ANALYSIS
Leadership | |||
✓ | Statesmanship | ✓ | Building and sustaining a high-functioning organization and team |
✓ | Strategic planning, succession planning and leadership development | ✓ | Demonstrated performance |
✓ | Board relations |
Humility and ego maturity |
Each year, the Committee sets targets for several performance measures that are used to calculate annual and long-term incentive awards. Performance measures and their respective targets are established for the company as a whole as well as for each of our principal operating business segments, and weightingscompany. Weightings are assigned to each performance measure based on its relative importance to the company or business segment.
The performance targets are aligned with the company’s primary business objectives:
The performance goals in our incentive plans are a direct output of our business plans which are approved by the Board each year.
Goal Rigor
The business plans and the associated metrics carefully balance the current performance of the business and the risk appetite of the enterprise with an appropriate amount of stretch designed to drive consistent growth and improvement. In addition, the Committee considered external economic factors including: (1) the overall economic growth rate, (2) employment and wage growth, which impacts our overall premium levels, and (3) the interest rate and investment environment which can have a significant impact on our overall profit margins.
2019 PROXY STATEMENT 55
COMPENSATION DISCUSSION AND ANALYSIS
We set challenging business plans and performance measures to ensure that their achievement will drive long-term value for most of the performance metrics generally increase, there are instances where a performance goal for the year may be below or equivalent to the prior year goal, based on pressures in each of the identified factors above. Our 2016 annual incentive target for after-tax operating income and our 2016 long-term incentive target for operating return on equity (ROE) were each below the level of the comparable prior year metric. This was due to the continued low interest rate environment and increases in statutory capital requirements rather than lower operational expectations.
Once the performance measures are established, the incentive payout targets are set to appropriately reward performance above the targets and to penalize results that are below target.
Generally, the payoutperformance range for each annual incentive performance measure is set based on what is appropriate for the variability of the metric. For example, the payout range for after-tax operating income and ROE begins at achieving 75% of target with a 0% payout for achieving less than 75% of target. Performance which is 100% of the target will equate to a 100% payout, while achieving 115% of target will result in a 200% payout for that performance measure. The payout range for earned premium begins at achieving 85% of target and ranges to 120% of target. The actual ranges for each performance metric can be determined fromare shown in the table on page 55. While the59. The payout range for each metric is 0 - 200%, the overall plan maximum payout is 150%from 0-150%. Our incentive plans are subject to
To align our metrics with shareholders, over both a near-term and an annual risk assessment by our chief risk officer, which is discussed withextended timeframe, the Committee as described on page 32.
Our annual and long-term incentive plans are conditioned on the company achieving a specified level of performance. We applysubject to an incentive funding performance requirement because we believe employees and officers should receive incentive awards only afterannual risk assessment by our shareholders and creditors are paid. Additionally, the company intends that meeting this incentive funding performance requirement will allow the company to retain certain deductions in accordancechief risk officer, which is discussed with Section 162(m) of the Internal Revenue Code (the "Code").
2016 ANNUAL INCENTIVE AWARD PERFORMANCE TARGETS AND RESULTS ($s/£s IN MILLIONS) | |||||
Performance Measure | Component Weighting | Threshold(1) | Target | Maximum | Actual |
Unum Group | |||||
After-tax operating income(2) | 35% | $662.1 | $882.8 | $1,015.2 | $926.2 |
Consolidated operating return on equity(3) | 20% | 8.14% | 10.86% | 12.48% | 11.4% |
Customer experience(4) | 10% | 270% | 300% | 450% | 309% |
Earned premium(5) | 15% | $6,101.2 | $7,165.8 | $8,613.5 | $7,187.3 |
Sales | 10% | $1,151.9 | $1,534.1 | $2,150.3 | $1,511.9 |
Operating expense ratio(6) | 10% | 20.74% | 18.74% | 16.74% | 18.64% |
Unum US | |||||
Before-tax operating income(7) | 35% | $605.6 | $865.1 | $1,038.1 | $914.2 |
Consolidated operating return on equity(3) | 10% | 8.14% | 10.86% | 12.48% | 11.4% |
Customer experience(4) | 15% | 90% | 100% | 150% | 103% |
Earned premium | 15% | $4,431.9 | $5,214.0 | $6,256.8 | $5,240.9 |
Sales | 15% | $734.7 | $979.6 | $1,371.4 | $943.8 |
Operating expense ratio(6) | 10% | 21.22% | 19.22% | 17.22% | 19.00% |
Colonial Life | |||||
Before-tax operating income(7) | 35% | $221.5 | $316.4 | $379.7 | $314.2 |
Consolidated operating return on equity(3) | 10% | 8.14% | 10.86% | 12.48% | 11.4% |
Customer experience(4) | 15% | 90% | 100% | 150% | 101% |
Earned premium | 15% | $1,196.3 | $1,407.4 | $1,688.9 | $1,417.1 |
Sales | 15% | $352.5 | $470.0 | $658.0 | $483.6 |
Operating expense ratio(6) | 10% | 18.53% | 16.53% | 14.53% | 16.65% |
Unum UK | |||||
Before-tax operating income(7) | 35% | £67.5 | £96.4 | £115.7 | £94.8 |
Consolidated operating return on equity(3) | 10% | 8.14% | 10.86% | 12.48% | 11.4% |
Customer experience(4) | 15% | 90% | 100% | 150% | 105% |
Earned premium | 15% | £340.3 | £400.3 | £480.4 | £390.5 |
Sales | 15% | £46.6 | £62.1 | £86.9 | £62.7 |
Operating expense ratio(6) | 10% | 21.84% | 19.84% | 17.84% | 20.41% |
Investments | |||||
Net investment income(8) | 50% | $2,330.9 | $2,445.9 | $2,580.9 | $2,487.6 |
Avoided losses(9) | 25% | $(100.0) | $7.4 | $150.0 | $(4.4) |
Market composite(10) | 25% | 83% | 100% | 175% | 94% |
Each performance targetmetric has been selected because the Committee believes it is an appropriate driver of long-term shareholder value:
Incentive Metric | 2018 Weightings | Purpose | |
After-Tax Adjusted Operating Income | 35% | ⇨ | Measures profitability achievement |
Consolidated Adjusted Operating Return on Equity | 15% | ⇨ |
TARGETS FOR PERFORMANCE SHARE UNITS (PSUs) GRANTED IN 2016 | |||||
Corporate Performance Factors | Driver of Shareholder Value | Component Weighting | Threshold | Target | Maximum |
Average 3-year Operating Return on Equity (2016-2018) | Capital Management Effectiveness | 50% | 8.08% | 10.77% | 12.38% |
Average 3-year After-Tax Operating EPS (2016-2018) | Profitability | 50% | $3.04 | $4.05 | $4.67 |
Relative Total Shareholder Return | Modifier Percentile | -20% @ 35th | 0 @ 50th | +20% @ 75th |
Earned Premium | 15% | ⇨ | Measures growth and competitiveness of the business |
Sales |
ANNUAL INCENTIVE PLAN ACHIEVEMENT LEVELS | ||
Plan | 2016 | 2015 |
Unum Group | 115% | 103% |
Unum US | 115% | 100% |
Unum UK | 98% | 105% |
Colonial Life | 105% | 102% |
Investments | 109% | 105% |
Customer Experience | 10% | ⇨ | Measures effective and efficient customer service |
Operating Expense Ratio | 10% |
2016 ANNUAL BASE SALARY DECISIONS | |||
Name | 2016 | 2015 | % Change |
Mr. McKenney | $1,000,000 | $975,000 | 2.6% |
Mr. McGarry | 600,000 | 550,000 | 9.1% |
Mr. Simonds | 600,000 | 575,000 | 4.3% |
Ms. Iglesias | 495,000 | 485,000 | 2.1% |
Ms. Farrell | 453,000 | 446,500 | 1.5% |
2016 ANNUAL INCENTIVE TARGET DECISIONS | |||
Name | 2016 | 2015 | % Change |
Mr. McKenney | 175% | 175% | – % |
Mr. McGarry | 100% | 100% | – % |
Mr. Simonds | 90% | 90% | – % |
Ms. Iglesias | 75% | 75% | – % |
Ms. Farrell | 120% | 120% | – % |
2016 LONG-TERM INCENTIVE TARGET DECISIONS | |||
Name | 2016 | 2015 | % Change |
Mr. McKenney | $5,250,000 | $5,000,000 | 5.0% |
Mr. McGarry | 150% | 150% | – % |
Mr. Simonds | 150% | 150% | – % |
Ms. Iglesias | 125% | 125% | – % |
Ms. Farrell | 100% | 100% | – % |
Our annual incentive awards reward performance based on the achievement of both company and individual performance, which the Committee believes aligns compensation with the objectives of shareholders. The Annual Incentive Plan, under which 20162018 annual incentive awards were granted, includes:
56 2019 PROXY STATEMENT
COMPENSATION DISCUSSION AND ANALYSIS
The decision makingdecision-making process to determine 20162018 annual incentive awards was as follows:
If the 2018 Performance Threshold was met, then: |
($) | × | (%) | × | (%) | = | ($) |
2018 Annual Incentive Target for NEOs | 2018 Company Performance(1) | 2018 Individual Performance(2) | 2018 Annual Incentive Award | |||
If threshold was not met, then award not paid |
(1) | The Committee exercises discretion as to the final percentage considering all performance factors, including, but not limited to, the quality of financial results. For details on adjustments for |
(2) | |
Individual performance may range from 0% to 125%. Individual performance adjustments for 2018 are described beginning on page 65. |
Once it was determined that the performance threshold had been met for 2016,2018, specific awards for our NEOs were arrived at by:
• | Calculating company performance percentages by comparing actual results to the performance targets described beginning on page 55 (the Committee may also take into account other factors, including economic considerations as well as non-financial goals); |
• | ||
Incentive Funding Performance Requirement
The funding of awards under our Annual Incentive Plan is conditioned on the company achieving a specified level of performance. We apply an incentive funding performance requirement because we believe employees and officers should receive incentive awards only after our shareholders and creditors are paid.
The Annual Incentive Plan specifies a performance requirement of $250 million of statutory after-tax operating earnings to fund the plan. For 2018, the Committee established the same performance requirement to fund grants under the long-term incentive plan. Funds used to attain the performance requirement are derived from statutory after-tax operating earnings and other sources of cash flow available from the company’s insurance and non-insurance subsidiaries.
The company successfully achieved the performance requirement for funding the 2018 annual incentive awards and the long-term incentive grants made in March 2019.
While the "qualified performance-based compensation" exemptionexception under Section 162(m) was eliminated in 2017, the Committee has reaffirmed our pay-for-performance alignment and determined that our annual and long-term incentive plans will continue to be predicated upon the company achieving a specified level of
2019 PROXY STATEMENT 57
COMPENSATION DISCUSSION AND ANALYSIS
performance. Therefore, in 2019, we will continue to use the performance requirement of $250 million of statutory after-tax operating earnings to fund our annual and long-term incentive plans.
Items Excluded When Determining Company Performance
When establishing the performance measures and weightings for 2018, the Committee determined that the effect of certain items not included in the 2018 financial plan would be excluded from the calculation of the Code requirescompany’s performance, for purposes of both the annual and long-term incentive plans, should they occur. The Committee believes it is appropriate to exclude the items below because they: (1) are unusual or infrequent in nature, (2) do not directly reflect company or management performance, or (3) could serve as a disincentive to capital management or other decisions which are in the best interest of the company and shareholders. These criteria are the same ones that a maximum individual award be established.we used in 2018 and the Committee has also approved them for use in 2019. The maximum award that an individual may receive underitems are:
58 2019 PROXY STATEMENT
COMPENSATION DISCUSSION AND ANALYSIS
Annual Incentive Results
2018 ANNUAL INCENTIVE TARGETS AND RESULTS ($s in millions)
Threshold(1) | Target(1) | Maximum(1) | Component Weight | Result | |||||||||||
Unum Group (actual results in blue) | |||||||||||||||
After-tax adjusted operating income(2) | ![]() | 35% | Above target | ||||||||||||
Consolidated adjusted operating return on equity(3) | ![]() | 15% | Above target | ||||||||||||
Earned premium(4) | ![]() | 15% | Above target | ||||||||||||
Sales | ![]() | 15% | Below target | ||||||||||||
Customer experience(5) | ![]() | 10% | Below target | ||||||||||||
Operating expense ratio(6) | ![]() | 10% | Above target |
(1) | For each performance measure, there is no payout at or below the threshold. For each performance measure, the payout would be 150% for performance at or above the maximum. For performance between defined levels, the payout is interpolated. |
(2) | After-tax adjusted operating income is defined as net income adjusted to exclude after-tax net realized investment gains or losses and certain other items specified in the reconciliation of non-GAAP financial measures attached hereto as Appendix A. |
(3) | Consolidated adjusted operating return on equity is calculated by dividing after-tax adjusted operating income by the average of the beginning- and end-of-year stockholders’ equity adjusted to exclude the net unrealized gain or loss on securities and the net gain on hedges. |
(4) | Earned premium is calculated for our core operations (Unum US, Unum International, and Colonial Life). |
(5) | Customer Experience is based on the quality of our customers' experiences and includes measures which focus on areas that impact customer loyalty and satisfaction. |
(6) | The operating expense ratio is equal to operating expenses as a percentage of earned premium (or total company expense over total company earned premium) inclusive of the Closed Block and Corporate segments. |
Applying the criteria and standards approved by the Committee when it established the 2018 annual incentive targets, as discussed on page 58, the Committee adjusted the Annual Incentive Plan is $8 million.performance calculations for the impact of the following four items on our 2018 financial plan results that were not included in the 2018 financial plan from which the targets were initially derived:
2019 PROXY STATEMENT 59
COMPENSATION DISCUSSION AND ANALYSIS
Each year, the Committee also undertakes an overall assessment of the results while also maintaining the discretion to make final adjustments. Any adjustments are based on a review of the actual achievement for each performance measure compared to the annual incentive targets listed on page 59, as well as a qualitative assessment of results. For 2018, the Committee made minor adjustments to the overall performance based on qualitative considerations that slightly reduced the aggregate annual incentive payout (by less than 1%). The resulting Annual Incentive Plan achievement level for 2018 was 100% as shown below.
2018 Annual Incentive Plan Achievement Level | |
100% Unum Group |
The table below sets forth the target incentive and the actual annual incentive awards approved by the Committee to our NEOs for 20162018 performance. For a discussion of 20172019 annual incentive award targets for each NEO, see "2017 Compensation Decisions"the "Performance Assessment and Highlights" summary beginning on page 64.
ANNUAL INCENTIVE PAID IN 2017 | (for 2016 performance) | ||||||||
Executive | 2016 Incentive Target (%) | Eligible Earnings ($) | Company Performance (%) | Individual Performance (%) | 2016 Annual Incentive Paid ($) | ||||
Mr. McKenney(1) | 175% | X | 994,231 | X | 115% | X | 105% | = | 2,100,937 |
Mr. McGarry(1) | 100% | X | 588,461 | X | 115% | X | 110% | = | 744,404 |
Mr. Simonds(2) | 90% | X | 594,231 | X | 115% | X | 110% | = | 676,532 |
Ms. Iglesias(1) | 75% | X | 492,692 | X | 115% | X | 100% | = | 424,946 |
Ms. Farrell(3) | 120% | X | 451,500 | X | 110.5% | X | 100% | = | 598,689 |
Depending on their role in the company, the annual incentive awards for our NEOs are tied in various ways to the performance of Unum Group and its business units. The annual incentive awards of all NEOs are based on Unum Group performance though the individual goals for Mr. Simonds and Mr. Arnold include financial goals related to their respective business units. The following table outlines the annual incentives awarded for 2018 performance.
ANNUAL INCENTIVE PAID IN 2019 | ||||
(for |
Executive | 2018 Incentive Target (%) | Eligible Earnings ($) | Company Performance (%) | Individual Performance (%) | 2018 Annual Incentive Paid ($) | ||||
Mr. McKenney | 200% | X | 1,000,000 | X | 100% | X | 95% | = | 1,900,000 |
Mr. McGarry | 110% | X | 630,000 | X | 100% | X | 100% | = | 693,000 |
Mr. Simonds | 100% | X | 627,418 | X | 100% | X | 100% | = | 627,418 |
Mr. Arnold | 90% | X | 497,144 | X | 100% | X | 100% | = | 447,429 |
Ms. Iglesias | 90% | X | 521,315 | X | 100% | X | 100% | = | 469,184 |
Our long-term incentive plan aligns the long-term interests of management and shareholders by tying a substantial portion of executive compensation directly to the company’s stock price. The grants to the NEOs in February 2016 were based on the Committee’s February 2016 assessment of their performance for the prior year.
All of our NEOs received a long-term incentive grant in March 2018 in the form of PBRSUs and PSUs. All grants were awarded based on the achievement of an after-tax statutory earnings threshold for 2017, as modified by individual achievement factors for 2017. PBRSUs vest ratably over three years while PSUs vest at the end of the
60 2019 PROXY STATEMENT
COMPENSATION DISCUSSION AND ANALYSIS
3-year performance period dependent upon actual performance, modified (up to +/- 20%) by relative TSR. The decision-making process to determine long-term incentive awards granted in March 2018 was as follows:
If the 2017 Performance Threshold was met, then: |
($) | × | (%) | = | ($) |
2017 Long-term Incentive Target for NEOs | 2017 Individual Performance(1) | 2018 Long-term Incentive Award | ||
If threshold was not met, then award not granted under plan |
(1) | Individual performance may range from 0% to 125%. Individual performance adjustments for 2017 are described on pages 56 through 58 of our 2018 proxy statement. |
As outlined in the diagram, once it was determined that the performance threshold had been met, the total value of the long-term incentive awards for our NEOs were determined by:
• | Applying the individual long-term incentive targets, which were set in early 2017 by considering the market data from the appropriate comparator group (as described beginning on page 51) as well as each individual��s target relative to other NEOs, given their respective levels of responsibility, to each individual’s base salary, except that, the long-term incentive target is set as a dollar amount for Mr. McKenney; |
• | Establishing an individual performance percentage (from 0% to 125%) using the individual assessment process described beginning on page 54 (for a discussion of the individual NEO performance assessments for 2017 that determined the individual performance percentage for these 2018 grants, other than for Mr. Arnold, see page 56 of our 2018 Proxy Statement). For Mr. Arnold, the Committee applied an individual performance percentage of 110% based on his leadership of Colonial Life's 2017 performance, including sales growth of almost 8%, the continued expansion of sales territories as well as an increase in new representatives. Additionally, the Committee recognized his contributions as part of the senior leadership team; and |
Once the long-term incentive award value was determined, it was awarded as described below:
No stock do not include any actual stockis issued under PBRSUs at the time of grant. Instead, company stock is issued only when the grant is settled. During the restrictedperformance period, dividend equivalents accrue and vest only when and to the extent that the underlying PBRSUs vest. In addition, there are no shareholder voting rights unless and until the award is settled in shares.
2019 PROXY STATEMENT 61
COMPENSATION DISCUSSION AND ANALYSIS
LONG-TERM INCENTIVE GRANTED IN 2018 | (for 2017 Performance) |
Executive | 2017 Long-Term Incentive Target | Individual Performance | 2018 Long-Term Incentive Grant(2) | ||
Mr. McKenney(1) | $5,500,000 | X | 120% | = | $6,600,000 |
Mr. McGarry | 1,102,500 | X | 105% | = | $1,157,625 |
Mr. Simonds | 984,000 | X | 115% | = | $1,131,600 |
Mr. Arnold | 582,000 | X | 110% | = | $640,200 |
Ms. Iglesias | 631,250 | X | 110% | = | $694,375 |
(1) | Mr. McKenney’s target was set as a dollar amount, rather than as a percentage of salary as for the other NEOs. |
(2) | The amount shown is the award approved by the Committee for each NEO. This amount is then converted to the respective number of PBRSUs and PSUs based on the closing stock price on the date of grant. The amount included in the Summary Compensation Table on page 77 was calculated using the closing stock price for PBRSUs and the Monte Carlo valuation methodology for PSUs. |
Executive | Performance-Based Restricted Stock Units Granted (Mar. 2018) | Performance Share Units Granted (Mar. 2018) | ||||
Mr. McKenney | 66,924 | 66,924 | ||||
Mr. McGarry | 11,738 | 11,738 | ||||
Mr. Simonds | 11,474 | 11,474 | ||||
Mr. Arnold | 6,492 | 6,492 | ||||
Ms. Iglesias | 7,041 | 7,041 |
The PSUs will vest based on the achievement of three-year, prospective (2018-2020) average adjusted operating earnings per share and average adjusted operating return on equity goals, and the achievement will be modified (up to +/-20%) based on our TSR relative to eight members of our "PSU Peer Group." Assuming performance above the threshold, PSUs can be paid out at 40% to 180% of target. The eight companies in the PSU Peer Group (Aflac, Hartford Financial Services, Lincoln Financial, MetLife, Principal Financial, Prudential Financial, Torchmark and Voya Financial) were selected because they are considered to be direct business competitors of Unum (see discussion beginning on page 52 for the differences between our Proxy Peer Group and PSU Peer Group). We believe it is appropriate to modify these awards based on relative TSR performance, since Unum’s individual TSR performance directly affects the value of the equity awards. The table below outlines the three-year performance targets established by the Committee for the PSU grants made in March 2018. PSUs are notional units that will track the value of our share price over the three-year performance period, and will vest and be settled through the issuance of shares based upon the achievement of the predetermined performance metrics. Dividend equivalents accrue during the three-year performance period and will vest only when and to the extent that the underlying PSUs vest.
62 2019 PROXY STATEMENT
COMPENSATION DISCUSSION AND ANALYSIS
TARGETS FOR PERFORMANCE SHARE UNITS (PSUs) GRANTED IN 2018
LONG-TERM INCENTIVE GRANTED IN 2016 | (for 2015 Performance) | ||||
Executive | Long-Term Incentive Target | Individual Performance | 2016 Long-Term Incentive Grant(2) | ||
Mr. McKenney(1) | $5,000,000 | X | 103% | = | $5,150,000 |
Mr. McGarry | 825,000 | X | 110% | = | $907,500 |
Mr. Simonds | 862,500 | X | 110% | = | $948,750 |
Ms. Iglesias | 606,250 | X | 105% | = | $636,563 |
Ms. Farrell | 446,500 | X | 100% | = | $446,500 |
Corporate Performance Factors | Driver of Shareholder Value | Component Weighting | Threshold | Target | Maximum | ||||||||||
Unum Group |
Average 3-year Consolidated Adjusted Operating Return on Equity (2018-2020) | Effectiveness | 50% | ![]() | ||||||||||||
Average 3-year After-Tax Adjusted Operating EPS (2018-2020) | Profitability | 50% | ![]() | ||||||||||||
Relative Total Shareholder Return | Modifier Percentile | -20% @ 35th | 0 @ 50th | +20% @ 75th |
Executive | Grant Date Fair Market Value | Performance Share Units Granted (Feb. 2016) | Restricted Stock Units Granted (Feb. 2016) |
Mr. McKenney | $5,150,022 | 92,460 | 92,460 |
Mr. McGarry | 907,520 | 16,293 | 16,293 |
Mr. Simonds | 948,738 | 17,033 | 17,033 |
Ms. Iglesias | 636,539 | 11,428 | 11,428 |
Ms. Farrell | 446,491 | 8,016 | 8,016 |
Vesting of 20142016 Performance Share Units (PSUs)
The long-term incentive mix for our NEOs' 20142016 awards included 50% in the form of PSUs, which vested based on performance over a three-year performance period that ended on December 31, 2016.
The table below provides an overview of the three-year goals for the 20142016 PSU grant as well as their actual achievement levels.
2016 PERFORMANCE SHARE UNIT (PSU) AWARDS
Corporate Performance Factors | Component Weighting | Threshold | Target | Maximum | Result | ||||||||||
Unum Group | |||||||||||||||
Average 3-year Adjusted Operating Return on Equity (2016-2018) | 50% | ![]() | 12.00% | ||||||||||||
Average 3-year After-Tax Adjusted Operating EPS (2016-2018) | 50% | ![]() | $4.46 | ||||||||||||
Relative Total Shareholder Return | Modifier Percentile | -20% @ 35th | 0 @ 50th | +20% @ 75th | @ 0th |
2014 PERFORMANCE SHARE UNIT (PSU) AWARDS | |||||
Corporate Performance Factors | Component Weighting | Threshold | Target | Maximum | Actual |
Average 3-year Operating Return on Equity (2014-2016) | 50% | 8.13% | 10.84% | 12.46% | 11.32% |
Average 3-year After-Tax Operating EPS (2014-2016) | 50% | $2.83 | $3.78 | $4.35 | $3.69 |
Relative Total Shareholder Return | Modifier Percentile | -20% @ 35th | 0 @ 50th | +20% @ 75th | At 50th |
Based on the above performance, and after taking into account the factors described below, in February 2017,2019, the Committee certified the results for this grant and approved a payout of 105.2%.payout. The business goals were achieved at 105.2%120.3%, with relative TSR at the 50thlowest percentile which resulted in no additional modification to the achievement level.
As discussed under “Items Excluded When Determining Company Performance,” beginning on page 58, when setting the performance measures and weightings for the 20142016 PSU grant, the Committee determined that certain items not included in the financial plan for fiscal years 20142016 to 20162018 would be excluded from the calculation of the company’s performance, for purposes ofperformance.
Applying the performance share units, should they occur. The list of items is the same list used for our annual incentive plan, the details of which can be found under "Items Excluded When Determining Company Performance," beginning on page 57.
2019 PROXY STATEMENT 63
COMPENSATION DISCUSSION AND ANALYSIS
Performance Assessment and Highlights
The NEOs’ achievement levels, for certain investments in qualified affordable housing projects using the proportional amortization method.
64 2019 PROXY STATEMENT
COMPENSATION DISCUSSION AND ANALYSIS
RICHARD P. McKENNEY, President and Chief Executive Officer | ![]() | ||
ANNUAL COMPENSATION(1) | In assessing Mr. McKenney's performance for 2018, the Committee noted that he: • Led the company to a strong level of financial performance in 2018, including a more than 20% growth in adjusted operating earnings per share and return on equity in excess of 13%, continuing a consistent pattern of outstanding operating results; | ||
2018 | |||
Base Salary | $1,000,000 | ||
AI | $1,900,000 | ||
LTI | $6,175,000 | ||
2017 | |||
Base Salary | $1,000,000 | ||
AI | $2,415,000 | • Took actions and delivered statutory results to ensure the company maintains a very strong balance sheet and robust capital position. Capital generation and deployment met or exceeded expectations as the company returned value to shareholders through the repurchase of approximately $350 million in shares and a dividend increase of 14% per share year over year. The strong capital position also allowed the company to invest in the business and pursue acquisitions and expansion, while providing continued flexibility to respond to future challenges and opportunities; • Undertook a number of strategic initiatives designed to position the company for ongoing, long-term success. This included embarking on a digital transformation journey, reinvesting in the customer experience, launching new products, growing the distribution network, and expanding the company's footprint through the acquisition of a Poland-based financial protection provider; • Reaffirmed the company’s commitment to sustainability and social responsibility through the establishment of an Office of Inclusion & Diversity, the focus on an environmental, social and governance (ESG) platform, and continued investments in the company’s workforce through benefits such as expanded paid parental leave; and • Led the company’s continued efforts to actively and responsibly manage its closed block of long-term care policies by completing a strategic review of this business that resulted in the strengthening of reserves by approximately $590 million after-tax and set the standard for disclosure in long-term care. Although stock price is not a direct criteria for assessing the CEO’s performance, the Committee considered its impact on TSR while weighing the above individual achievements and overall performance of the company. The decline in stock value in 2018 was affected by investor perceptions in the industry surrounding long-term care and ongoing volatility in the broader market, most notably in the financial services sector. Despite this, the Committee believes the company is well-positioned for long-term success through the actions of Mr. McKenney. Given this, the Committee awarded Mr. McKenney an individual performance percentage of 95% for his 2018 annual incentive award and 95% as the individual performance modifier for his long-term incentive award granted in March 2019. | |
LTI | $6,600,000 | ||
COMPENSATION TARGETS | |||
2019 | |||
Base Salary | $1,000,000 | ||
AI Target | 200% | ||
LTI Target | $6,500,000 | ||
2018 | |||
Base Salary | $1,000,000 | ||
AI Target | 200% | ||
LTI Target | $6,500,000 | ||
(1) | Base salary shown is the earnings for the year. Annual incentive (AI) and long-term incentive (LTI) amounts are the decisions related to that performance year (e.g. annual and long-term incentive paid/granted in 2019 were adjusted based on 2018 performance and therefore are shown as 2018 compensation). For LTI, this presentation is different than the Summary Compensation Table (see page 77), which reports equity awards the year granted. The above is not a replacement for the Summary Compensation Table. |
2017 ANNUAL BASE SALARY DECISIONS | |||
Name | 2017 | 2016 | % Change |
Mr. McKenney | $1,000,000 | $1,000,000 | —% |
Mr. McGarry | 630,000 | 600,000 | 5.0% |
Mr. Simonds | 615,000 | 600,000 | 2.5% |
Ms. Iglesias | 505,000 | 495,000 | 2.0% |
Ms. Farrell | 460,000 | 453,000 | 1.5% |
2019 PROXY STATEMENT 65
2017 ANNUAL INCENTIVE TARGET DECISIONS | |||
Name | 2017 | 2016 | % Change |
Mr. McKenney | 175% | 175% | —% |
Mr. McGarry | 100% | 100% | —% |
Mr. Simonds | 90% | 90% | —% |
Ms. Iglesias | 75% | 75% | —% |
Ms. Farrell | 120% | 120% | —% |
2017 LONG-TERM INCENTIVE TARGET DECISIONS | |||
Name | 2017 | 2016 | % Change |
Mr. McKenney | $5,500,000 | $5,250,000 | 4.8% |
Mr. McGarry | 175% | 150% | 16.7% |
Mr. Simonds | 160% | 150% | 6.7% |
Ms. Iglesias | 125% | 125% | —% |
Ms. Farrell | 110% | 100% | 10% |
COMPENSATION DISCUSSION AND ANALYSIS
JOHN F. McGARRY, Executive Vice President and Chief Financial Officer | ![]() | ||
ANNUAL COMPENSATION(1) | In assessing Mr. McGarry's performance for 2018, the Committee noted that he: • Provided effective leadership as CFO through a complex capital environment, allowing the company to achieve strong operational results and grow key financial metrics while managing challenges in the Closed Block that drove market uncertainty; | ||
2018 | |||
Base Salary | $630,000 | ||
AI | $693,000 | ||
LTI | $1,260,000 | ||
2017 | |||
Base Salary | $623,077 | • Ensured the company maintained a strong capital position with flexibility to invest in growth through geographic expansion, fund technology and product investments, set aside additional reserves for our Closed Block and return capital to shareholders through dividend increases and share repurchases; • Accelerated our annual strategic review in the long-term care portion of our Closed Block segment, leading to a strengthening of reserves and revised assumptions that place the block on a path of greater sustainability; • Significantly contributed in key ways to our strategic assessment and actions, drawing not only on his financial expertise but also his deep experience throughout Unum; and • Continued driving change management and talent development in the Finance team, particularly our leadership pipeline and inclusion and diversity. Given these accomplishments, the Committee applied individual performance percentages of 100% for Mr. McGarry’s 2018 annual incentive award and 100% for his long-term incentive award granted in March 2019. | |
AI | $822,462 | ||
LTI | $1,157,625 | ||
COMPENSATION TARGETS | |||
2019 | |||
Base Salary | $630,000 | ||
AI Target | 110% | ||
LTI Target | 200% | ||
2018 | |||
Base Salary | $630,000 | ||
AI Target | 110% | ||
LTI Target | 200% | ||
(1) | Base salary shown is the earnings for the year. Annual incentive (AI) and long-term incentive (LTI) amounts are the decisions related to that performance year (e.g. annual and long-term incentive paid/granted in 2019 were adjusted based on 2018 performance and therefore are shown as 2018 compensation). For LTI, this presentation is different than the Summary Compensation Table (see page 77), which reports equity awards in the year granted. The above is not a replacement for the Summary Compensation Table. |
66 2019 PROXY STATEMENT
COMPENSATION DISCUSSION AND ANALYSIS
MICHAEL Q. SIMONDS, President and Chief Executive Officer, Unum US | ![]() | ||
ANNUAL COMPENSATION(1) | In assessing Mr. Simonds' performance for 2018, the Committee noted that he: • Led Unum US to strong financial results, including record adjusted operating income of $1.0 billion, exceeding expectations; | ||
2018 | |||
Base Salary | $627,418 | ||
AI | $627,418 | ||
LTI | $1,213,472 | ||
2017 | • Delivered strong premium growth of 5.4% despite a more competitive market environment, while maintaining risk and pricing discipline, and resulting in margins and ROE levels at the top of our industry; • Continued to drive operational improvements in Unum US that resulted in greater efficiencies and an enhanced experience for our customers • Managed the development of key strategic initiatives for Unum US and the broader enterprise to expand our product and service portfolio, leverage technology to drive growth and customer experience, and quickly redeploy resources to take advantage of new opportunities; and • Has effectively built a culture of change within Unum US led by a strong leadership team that has mentored key talent and fostered inclusion and diversity in the organization. Given these accomplishments, the Committee applied individual performance percentages of 100% for Mr. Simonds’ 2018 annual incentive award and 110% for his long-term incentive award granted in March 2019. | ||
Base Salary | $611,538 | ||
AI | $792,554 | ||
LTI | $1,131,600 | ||
COMPENSATION TARGETS | |||
2019 | |||
Base Salary | $630,375 | ||
AI Target | 100% | ||
LTI Target | 175% | ||
2018 | |||
Base Salary | $630,375 | ||
AI Target | 100% | ||
LTI Target | 175% | ||
(1) | Base salary shown is the earnings for the year. Annual incentive (AI) and long-term incentive (LTI) amounts are the decisions related to that performance year (e.g. annual and long-term incentive paid/granted in 2019 were adjusted based on 2018 performance and therefore are shown as 2018 compensation). For LTI, this presentation is different than the Summary Compensation Table (see page 77), which reports equity awards in the year granted. The above is not a replacement for the Summary Compensation Table. |
2019 PROXY STATEMENT 67
COMPENSATION DISCUSSION AND ANALYSIS
TIMOTHY G. ARNOLD, President and Chief Executive Officer, Colonial Life | ![]() | ||
ANNUAL COMPENSATION(1) | In assessing Mr. Arnold’s performance for 2018, the Committee noted that he: • Delivered another year of strong financial and operational results at Colonial Life, with growth in sales, premium and adjusted operating income; | ||
2018 | |||
Base Salary | $497,144 | ||
AI | $447,429 | ||
LTI | $656,296 | ||
• Guided an exceptional launch of our new Colonial Life dental product, with sales far exceeding expectations; • Accelerated work to automate and modernize our processes and interactions with customers, leveraging technology in areas such as claims submission, engagement with independent agents and enrollment; • Led efforts to leverage Colonial Life’s expertise in key areas, including enrollment and benefits education, to help drive growth in other areas of the company; and • Continued to strengthen a strong and talented culture at Colonial Life committed to inclusion and diversity, professional growth and leadership development. Given these accomplishments, the Committee applied individual performance percentages of 100% for Mr. Arnold’s 2018 annual incentive award and 105% for his long-term incentive award granted in March 2019. | |||
COMPENSATION TARGETS | |||
2019 | |||
Base Salary | $500,035 | ||
AI Target | 90% | ||
LTI Target | 125% | ||
2018 | |||
Base Salary | $500,035 | ||
AI Target | 90% | ||
LTI Target | 125% | ||
(1) | Base salary shown is the earnings for the year. Annual incentive (AI) and long-term incentive (LTI) amounts are the decisions related to that performance year (e.g. annual and long-term incentive paid/granted in 2019 were adjusted based on 2018 performance and therefore are shown as 2018 compensation). For LTI, this presentation is different than the Summary Compensation Table (see page 77), which reports equity awards in the year granted. The above is not a replacement for the Summary Compensation Table. |
68 2019 PROXY STATEMENT
COMPENSATION DISCUSSION AND ANALYSIS
LISA G. IGLESIAS, Executive Vice President and General Counsel | ![]() | ||
ANNUAL COMPENSATION(1) | In assessing Ms. Iglesias' performance for 2018, the Committee noted that she: • Demonstrated effective leadership as General Counsel for our legal, audit, government affairs, ethics, compliance and supply management teams during a year of substantial change and business support needs; | ||
2018 | |||
Base Salary | $521,315 | ||
AI | $469,184 | ||
LTI | $751,036 | ||
2017 | |||
Base Salary | $502,692 | • Increased accountability of key Board and Committee activities, improving communication from senior management and enhancing key processes; • Has been a valued and vocal leader in our $100 million, multiyear strategy to create a more collaborative and engaging workplace, and continued her leadership of key inclusion and diversity initiatives; • Continued her work to further strengthen our culture of ethical conduct, compliance and transparency; and • Focused on talent and leadership development in key areas, particularly in our supply management team. Given these accomplishments, the Committee applied individual performance percentages of 100% for Ms. Iglesias' 2018 annual incentive award and 110% for her long-term incentive award granted in March 2019. | |
AI | $452,423 | ||
LTI | $694,375 | ||
COMPENSATION TARGETS | |||
2019 | |||
Base Salary | $550,000 | ||
AI Target | 95% | ||
LTI Target | 135% | ||
2018 | |||
Base Salary | $525,200 | ||
AI Target | 90% | ||
LTI Target | 130% |
(1) | Base salary shown is the earnings for the year. Annual incentive (AI) and long-term incentive (LTI) amounts are the decisions related to that performance year (e.g. annual and long-term incentive paid/granted in 2019 were adjusted based on 2018 performance and therefore are shown as 2018 compensation). For LTI, this presentation is different than the Summary Compensation Table (see page 77), which reports equity awards in the year granted. The above is not a replacement for the Summary Compensation Table. |
2019 PROXY STATEMENT 69
COMPENSATION DISCUSSION AND ANALYSIS
Compensation Policies and Workplace BenefitsPractices
Equity Grant Practices
Equity grants awarded under the long-term incentive program are approved at the February meeting of the Committee, which typically occurs two to three weeks after the company’s annual earnings are released to the public. The March 1, 2018 grant was approved at the February 2018 meeting of the Committee. The closing stock price on the grant date is used to determine the number of units awarded.
Stock Ownership and Retention Requirements
Ensuring that senior officers have a significant ownership stake in the company aligns the long-term interests of management and shareholders and promotes a culture of ownership and accountability. The following table reflects the stock ownership and retention requirements across Unum Group for senior level officers beyond those described in the proxy.
STOCK OWNERSHIP AND RETENTION REQUIREMENTS FOR SENIOR OFFICERS |
Ownership as Percent of Salary | Retention Requirements | ||||
Required | Retention Percent | Holding Period | |||
Chief Executive Officer | 6x | 75% | 3 years | ||
Executive Vice President | 3x | 60% | 1 year | ||
Senior Vice President | 1x | 50% | 1 year |
We require these senior officers, including each NEO, to:
The following table presents the retirement benefits we offer are:
70 2019 PROXY STATEMENT
COMPENSATION DISCUSSION AND ANALYSIS
STOCK OWNERSHIP AND RETENTION REQUIREMENTS FOR NEOs | (as of December 31, 2018) |
Ownership as Percent of Salary | Retention Requirements | ||||||
Executive | Common Stock(1) | Restricted Stock Units(2) | Total Current Ownership | Owned | Required | Retention Percent(3) | Holding Period(4) |
Mr. McKenney | $8,178,070 | $4,113,200 | $12,291,270 | 12.3x | 6x | 75% | 3 years |
Mr. McGarry | 1,749,755 | 729,476 | 2,479,231 | 3.9x | 3x | 60% | 1 year |
Mr. Simonds | 1,438,269 | 729,388 | 2,167,657 | 3.4x | 3x | 60% | 1 year |
Mr. Arnold | 458,122 | 374,507 | 832,629 | 1.7x | 3x | 60% | 1 year |
Ms. Iglesias | 745,136 | 459,004 | 1,204,140 | 2.3x | 3x | 60% | 1 year |
(1) | Amount includes shares held in certificate form, brokerage accounts, and 401(k) Plan accounts. Shares were valued using a closing stock price of $29.38 on December 31, 2018. |
(2) | Shares/units were valued using a closing stock price of $29.38 on December 31, 2018. Performance-based restricted stock units (PBRSUs) vest over three years (see the Vesting Schedule for Unvested Restricted Stock Units table on page 82). |
(3) | Retention percentage is the net percentage of shares to be held after the payment of taxes and the costs of exercise and commissions. Retention requirements apply to shares acquired upon the exercise of options and the vesting of PBRSUs and PSUs. |
(4) | After this holding period, the officer would then be able to sell the shares as long as his or her ownership requirement is met or would be reached in the time period allotted. |
Hedging, Pledging and Insider Trading Policies
We have a non-contributory tax-qualified defined contribution for all regular U.S.policy that no director or executive officer, which includes our NEOs, may purchase or sell options, puts, calls, straddles, equity swaps or other derivatives that are directly linked to our stock.
In addition, our insider trading policy prohibits directors, executive officers (including NEOs) and employees from buying or selling our stock while in possession of material nonpublic information about the company and from conveying any such information to others. Under this policy, additional trading restrictions apply to the NEOs and other “corporate insiders,” who are scheduledgenerally permitted to work at least 1,000 hours per year, whichbuy or sell our stock only during predetermined window periods following earnings announcements, and only after they have pre-cleared the transactions with our general counsel or designee. Also under this policy, no corporate insider may make “short sales” of our stock, and no director or executive officer may pledge our stock as security for a loan.
Recoupment Policy
If the company makes a material restatement of its financial results, then the Board will, to the extent permitted by applicable law, seek recoupment of performance-based compensation paid to certain senior officers if it determines that:
The amount of performance-based compensation to be recouped will be determined by the Board after taking into account the relevant facts and circumstances. Performance-based compensation includes annual cash incentive awards, bonuses and all forms of equity compensation. The company’s right to recoup compensation is offered within our existing tax-qualified 401(k) retirement plan (401(k) Plan),in addition to other remedies that may be available under applicable law.
2019 PROXY STATEMENT 71
COMPENSATION DISCUSSION AND ANALYSIS
Tax and (2) a separate, non-qualified defined contribution plan (Non-Qualified Plan) for employees whose benefits under the tax-qualified plan are limited byAccounting Considerations
Section 162(m)
Section 162(m) of the Internal Revenue Code (the "Code"). New hires are automatically enrolledgenerally disallows a tax deduction to a public corporation for compensation over $1 million paid in any fiscal year to certain “covered employees,” which includes our named executive officers. However, in the 401(k)case of tax years commencing before 2018, the statute exempted qualifying performance-based compensation from the deduction limit if certain requirements were met. Section 162(m) was amended in December 2017 by the Tax Cuts and Non-Qualified Plan at a 5% deferral rate 45 days after hire butJobs Act to eliminate the exemption for performance-based compensation (other than with respect to payments made pursuant to certain “grandfathered” arrangements entered into prior to November 2, 2017) and to expand the group of current and former executive officers who are able to make adjustments to their deferral rate. Base paycovered by the deduction limit under Section 162(m).
Historically, our annual incentive payout and annual incentives are included in covered earnings for these defined contribution plans, but long-term incentive grants were intended to be deductible under Section 162(m). The Committee did, however, reserve the right to, in its sole discretion, pay compensation that was not deductible under Section 162(m) if it determined that paying such compensation was needed in order to attract, retain or provide incentives to our NEOs, or was otherwise desirable. Given complexities in the tax rules, it is also possible that compensation intended to qualify for the “qualified performance-based compensation” exception did not so qualify.
In light of the repeal of the performance-based compensation exception to Section 162(m), the Committee expects compensation granted or paid in 2018 and future tax years will not be fully deductible for income tax purposes. While, the Committee believes that shareholder interests are best served if it retains discretion and flexibility in awarding compensation, even though some compensation awards are not. Unum providesmay result in non-deductible compensation expenses, the following contributions:
ASC Topic 718
We account for those eligible employees whose earnings exceed the qualified plan limits, the Non-Qualified Plan)
Perquisites and Other Personal Benefits
We provide a limited number of perquisites to our employees, including all NEOs, which are described below:
72 2019 PROXY STATEMENT
COMPENSATION DISCUSSION AND ANALYSIS
component in favor of a component ensuring that, to the extent permitted under FAA regulations, the company recovers the value of the flight determined under the Standard Industry Fare Level valuation formula. Mr. McKenney did not use this benefit during 2016.
• | A tax gross-up is provided to employees who incur income on company-sponsored events where attendance is expected, including a limited number of events we host each year to recognize the contributions of various employees. These functions serve specific business purposes, and in some cases the attendance of a NEO and his or her spouse or guest is expected. If so, we attribute income to the NEO for these costs when required under Internal Revenue Service regulations. For more information, see the All Other Compensation table on page 78. |
Retirement and Workplace Benefits
We provide a benefits package for employees, including all NEOs, and their dependents, portions of which are paid for, in whole or in part, by the employee.
Among the retirement benefits we offer are:
The Unum Group 401(k) Retirement Plan. On January 1, 2014, Unum replaced its defined benefit pension plans, which were frozen to further accruals as of December 31, 2013, with an enhanced defined contribution retirement offering. This includes: (1) a non-contributory tax-qualified defined contribution plan for all regular U.S. employees who meet eligibility requirements and are generally scheduled to work at least 1,000 hours per year, which is offered within our existing tax-qualified 401(k) retirement plan (401(k) Plan), and (2) a separate, non-qualified defined contribution plan (Non-Qualified Plan) for employees whose benefits under the tax-qualified plan are limited by the Internal Revenue Code (the “Code”). New hires are automatically enrolled in the 401(k) and Non-Qualified Plan at a 5% deferral rate 45 days after hire but are able to make adjustments to their deferral rate. Base pay and annual incentives are included in covered earnings for these defined contribution plans, but long-term incentive awards are not. Unum provides the following contributions:
The transition contributions are being provided to eligible employees to more closely align with the benefits which were accrued under the frozen defined benefit plans. This benefit is provided to those employees who, incur income on company-sponsored events where attendance is expected, including a limited numberdue to their age and years of events we host each yearservice, would not have the same opportunity to recognize the contributions of various employees. These functions serve specific business purposes, and in some cases the attendance of an NEO and his or her spouse or guest is expected. If so, we attribute incomeadjust to the NEOnew defined contribution plan as other employees. Transition contributions will be made to active eligible employees until December 31, 2020.
The other workplace benefits we offer include: life, health, dental, vision, voluntary products and disability insurance; dependent and healthcare reimbursement accounts; health savings accounts; tuition reimbursement; an employee stock purchase plan; paid time off; holidays; and a matching gifts program for these costs when required under Internal Revenue Service regulations. For more information, see the All Other Compensation tablecharitable contributions.
In April 2018, we purchased corporate owned life insurance (COLI) on page
2019 PROXY STATEMENT 73
COMPENSATION DISCUSSION AND ANALYSIS
The Unum Group Pension Plan (the Qualified Plan) and bonus,the Unum Group Supplemental Pension Plan (the Excess Plan) were frozen on December 31, 2013. Benefits earned under these plans have been determined based on service and medicaleligible earnings through December 31, 2013. NEOs hired prior to this date and other benefitswho met the participation requirements at the freeze date participated in both the Unum Group Pension and Supplemental Pension Plans. Benefits earned before the freeze will continue for two years after termination.
FROZEN DEFINED BENEFIT PLANS
Unum Group Pension Plan (Qualified Plan) |
Provides funded, tax-qualified benefits up to the limits on compensation and benefits under the Code. The Qualified Plan was designed to provide tax-qualified pension benefits for most employees. On June 12, 2013, the Human Capital Committee approved a change to the terms of the Qualified Plan to freeze the further accrual of retirement benefits provided to employees on December 31, 2013. |
Unum Group Supplemental Pension Plan (Excess Plan) |
Provides unfunded, non-qualified benefits for compensation that exceeds the Code limits applicable to the Qualified Plan. On June 12, 2013, the Human Capital Committee approved a change to the terms of the Excess Plan to freeze the further accrual of retirement benefits provided to employees on December 31, 2013. |
Plan Descriptions
Following are details of how each of the frozen plan benefits are available to Mr. McKenney under his severance agreement.
Qualified Plan
In calculating the basic pension benefits in our Qualified Plan, three criteria are approved at the February meeting of the Committee, which typically occurs two to three weeks after the company’s annual earnings are released to the public. The date of approval was the grant date of the awards in 2016. The closing stock price on the grant date is used to determine the number of units awarded.used:
FROZEN QUALIFIED PLAN CRITERIA
Credited service |
Measures of the time individuals are employed at the company. One year of credited service is granted for each plan year in which 1,000 hours of employment are completed. No additional credited service will accrue to any participant after December 31, 2013. |
Highest average earnings |
The average of the highest 5 years of compensation (whether or not consecutive) during the earlier of the last 10 years of employment or as of the date the plan was frozen on December 31, 2013. |
Social Security covered compensation |
The average of the taxable wage bases in effect for each calendar year during the 35-year period ending when the plan was frozen on December 31, 2013. |
74 2019 PROXY STATEMENT
COMPENSATION DISCUSSION AND ANALYSIS
The following table presents the stock ownershipbasic benefit is provided as an annual single life annuity and retention requirements for our NEOs. Newly promoted or newly hired senior officers have five years to achieve the ownership requirement. Not meeting the requirements may impact future equity grants. All of our NEOs exceeded the requirementsis calculated as of December 31, 2016.
(1) | Can range from 3%, if the sum of an employee’s age and years of credited service is less than 30, to 8%, if the sum equals or exceeds 95. |
STOCK OWNERSHIP AND RETENTION REQUIREMENTS | (as of December 31, 2016) | ||||||
Ownership as % of Salary | Retention Requirements | ||||||
Executive | Common Stock(1) | Restricted Stock Units(2) | Total Current Ownership | Owned | Required | Retention %(3) | Holding Period(4) |
Mr. McKenney | $6,036,641 | $6,040,990 | $12,077,631 | 12.1x | 6x | 75% | 3 years |
Mr. McGarry | 1,739,277 | 1,155,315 | 2,894,592 | 4.8x | 3x | 60% | 1 year |
Mr. Simonds | 1,703,605 | 1,390,209 | 3,093,814 | 5.2x | 3x | 60% | 1 year |
Ms. Iglesias | 391,680 | 1,546,819 | 1,938,499 | 3.9x | 3x | 60% | 1 year |
Ms. Farrell | 1,914,997 | 705,252 | 2,620,249 | 5.8x | 3x | 60% | 1 year |
(2) |
All frozen pension benefits are indexed on the first day of each plan year (January 1st) following December 31, 2013 using the National Average Wage rate of increase published by the Social Security Administration in the preceding year (minimum of 2.75% and Insider Trading Policies
Benefits provided under the frozen Qualified Plan are directly linkedbased on pensionable earnings through December 31, 2013 up to our stock.
Excess Plan
As described above in the Frozen Defined Benefit Plans table, the Excess Plan disregards the annual benefit limit under Section 415 of the Code. The Excess Plan takes into account pension benefits outside of the current Qualified Plan and employees from buyingis calculated as follows:
Retirement Age
Participants in the pension plans outlined above are eligible to retire as early as age 55. Under the Qualified Plan, participants may retire early at age 55 with 5 years of vesting service. Under the Excess Plan, generally participants can retire at the latter of age 60 or selling our stock while in possession of material nonpublic information about the company and from conveying any such information to others. Under this policy, additional trading restrictions applytermination. However, if a participant begins receiving a benefit prior to the normal retirement age of 65, the normal retirement benefit will be reduced based on the applicable early reduction factors defined in the plan. The benefit formula for the Qualified and Excess plans are shown above. Mr. McGarry and Mr. Arnold are the only NEOs and other "corporate insiders," who are generally permitted to buy or sell our stockcurrently eligible for early retirement under the Qualified Plan. Mr. McGarry is the only during predetermined window periods following earnings announcements, and only after they have pre-clearedNEO currently eligible for early retirement under the transactions with our general counsel or designee. Also under this policy, no corporate insider may make "short sales" of our stock, and no director or executive officer may pledge our stock as security for a loan.Excess Plan.
2019 PROXY STATEMENT 75
COMPENSATION DISCUSSION AND ANALYSIS
REPORT OF THE HUMAN CAPITAL COMMITTEE
The Human Capital Committee has reviewed and discussed with management the Compensation Discussion and Analysis contained in this proxy statement. Based on such review and discussions, the Committee recommended to the Board of Directors that the Compensation Discussion and Analysis be included in this proxy statement and incorporated by reference into the company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2016.
2018 Human Capital Committee:
76 2019 PROXY STATEMENT
COMPENSATION TABLES
COMPENSATION TABLES
Name and Principal Position | Year | Salary ($) | Bonus ($) | Stock Awards ($)(1) | Option Awards ($) | Non-Equity Incentive Plan Compensation ($) | Change in Pension Value & Non-qualified Deferred Compensation Earnings ($) | All Other Compensation ($) | TOTAL ($) | ||||||||||||||||
Richard P. McKenney | |||||||||||||||||||||||||
President and Chief Executive Officer, and a Director | 2018 | 1,000,000 | — | 6,564,575 | (2) | — | 1,900,000 | (3) | — | (4) | 432,286 | (5) | 9,896,861 | ||||||||||||
2017 | 1,000,000 | — | 5,720,021 | — | 2,415,000 | 119,000 | 429,925 | 9,683,946 | |||||||||||||||||
2016 | 994,231 | — | 5,176,835 | — | 2,100,937 | 84,000 | 315,316 | 8,671,319 | |||||||||||||||||
John F. McGarry | |||||||||||||||||||||||||
Executive Vice President and Chief Financial Officer | 2018 | 630,000 | — | 1,151,381 | (2) | — | 693,000 | (3) | — | (4) | 239,440 | (5) | 2,713,821 | ||||||||||||
2017 | 623,077 | — | 1,040,004 | — | 822,462 | 322,000 | 231,242 | 3,038,785 | |||||||||||||||||
2016 | 588,461 | — | 912,245 | — | 744,404 | 273,000 | 196,724 | 2,714,834 | |||||||||||||||||
Michael Q. Simonds | |||||||||||||||||||||||||
Executive Vice President, President and Chief Executive Officer, Unum US | 2018 | 627,418 | — | 1,125,485 | (2) | — | 627,418 | (3) | — | (4) | 146,822 | (5) | 2,527,143 | ||||||||||||
2017 | 611,538 | — | 1,040,004 | — | 792,554 | 248,000 | 132,521 | 2,824,617 | |||||||||||||||||
2016 | 594,231 | — | 953,678 | — | 676,532 | 168,000 | 127,479 | 2,519,920 | |||||||||||||||||
Timothy G. Arnold | |||||||||||||||||||||||||
Executive Vice President, President and Chief Executive Officer, Colonial Life | 2018 | 497,144 | — | 636,801 | (2) | — | 447,429 | (3) | — | (4) | 245,965 | (5) | 1,827,339 | ||||||||||||
Lisa G. Iglesias | |||||||||||||||||||||||||
Executive Vice President and General Counsel | 2018 | 521,315 | — | 690,652 | (2) | — | 469,184 | (3) | — | (4) | 104,501 | (5) | 1,785,652 | ||||||||||||
2017 | 502,692 | — | 643,520 | — | 452,423 | — | 105,505 | 1,704,140 | |||||||||||||||||
2016 | 492,692 | — | 639,854 | — | 424,946 | — | 91,033 | 1,648,525 |
Salary | Bonus | Stock Awards | Option Awards | Non-Equity Incentive Plan Compen- sation | Change in Pension Value & Non-qualified Deferred Compensation Earnings | All Other Compen- sation | TOTAL | ||||||||||||||||||
Name and Principal Position(1) | Year | ($) | ($) | ($)(2) | ($) | ($) | ($) | ($) | ($) | ||||||||||||||||
Richard P. McKenney | |||||||||||||||||||||||||
President and Chief Executive Officer, and a Director | 2016 | 994,231 | — | 5,176,835 | (3 | ) | — | 2,100,937 | (4 | ) | 84,000 | (5 | ) | 315,316 | (6 | ) | 8,671,319 | ||||||||
2015 | 905,000 | — | 3,051,050 | — | 1,527,033 | — | 247,931 | 5,731,014 | |||||||||||||||||
2014 | 712,404 | — | 1,692,153 | — | 880,531 | 175,000 | 226,237 | 3,686,325 | |||||||||||||||||
John F. McGarry | |||||||||||||||||||||||||
Executive Vice President and Chief Financial Officer | 2016 | 588,461 | — | 912,245 | (3 | ) | — | 744,404 | (4 | ) | 273,000 | (5 | ) | 196,724 | (6 | ) | 2,714,834 | ||||||||
2015 | 517,860 | — | 629,287 | — | 509,513 | — | 221,024 | 1,877,684 | |||||||||||||||||
Michael Q. Simonds | |||||||||||||||||||||||||
Executive Vice President, President and Chief Executive Officer, Unum US | 2016 | 594,231 | — | 953,678 | (3 | ) | — | 676,532 | (4 | ) | 168,000 | (5 | ) | 127,479 | (6 | ) | 2,519,920 | ||||||||
2015 | 566,346 | — | 961,052 | — | 564,888 | — | 113,967 | 2,206,253 | |||||||||||||||||
2014 | 512,019 | — | 611,877 | — | 545,838 | 344,000 | 93,728 | 2,107,462 | |||||||||||||||||
Lisa G. Iglesias | |||||||||||||||||||||||||
Executive Vice President, General Counsel | 2016 | 492,692 | — | 639,854 | (3 | ) | — | 424,946 | (4 | ) | — | (5 | ) | 91,033 | (6 | ) | 1,648,525 | ||||||||
2015 | 470,077 | — | 1,149,997 | — | 381,291 | — | 40,410 | 2,041,775 | |||||||||||||||||
Breege A. Farrell | |||||||||||||||||||||||||
Executive Vice President and Chief Investment Officer | 2016 | 451,500 | — | 448,816 | (3 | ) | — | 598,689 | (4 | ) | 38,000 | (5 | ) | 99,493 | (6 | ) | 1,636,498 | ||||||||
2015 | 444,618 | — | 443,024 | — | 557,551 | — | 109,762 | 1,554,955 | |||||||||||||||||
2014 | 433,786 | — | 449,470 | — | 520,543 | 79,000 | 90,526 | 1,573,325 |
(1) |
"Stock Awards" consists of performance share units (PSUs) and performance-based restricted stock units (PBRSUs). The number of shares payable under the PSU awards will be based on the actual performance, modified (+/- 20%) based on relative |
These awards were comprised of 50% PSUs and 50% PBRSUs granted |
2019 PROXY STATEMENT 77
COMPENSATION TABLES
Amounts reflect the annual incentive awards paid in 55. |
The amounts |
"All Other Compensation" amounts are |
Mr. McKenney | Mr. McGarry | Mr. Simonds | Mr. Arnold | Ms. Iglesias | |
Employee and Spouse/Guest Attendance at Company Business Functions(a) | 41,752 | — | 5,494 | 44,074 | — |
Total Perquisites | 41,752 | — | 5,494 | 44,074 | — |
Matching Gifts Program(b) | 10,000 | 100 | — | 10,000 | 10,000 |
Company Matching Contributions Under our Qualified and Non-Qualified Defined Contribution Retirement Plan(c) | 169,789 | 72,017 | 70,392 | 48,817 | 48,182 |
Company Contributions to the Qualified and Non-Qualified Defined Contribution Retirement Plan(d) | 152,810 | 163,190 | 63,353 | 109,830 | 43,364 |
Non-Resident State Taxes(e) | 40,604 | 2,536 | 3,129 | 386 | 2,886 |
Tax Reimbursement Payments(f) | 17,331 | 97 | 4,454 | 32,858 | 69 |
Foreign Assignment(g) | — | 1,500 | — | — | — |
Total All Other Compensation | $432,286 | $239,440 | $146,822 | $245,965 | $104,501 |
2016 ALL OTHER COMPENSATION | |||||||||||||||
Mr. McKenney | Mr. McGarry | Mr. Simonds | Ms. Iglesias | Ms. Farrell | |||||||||||
Employee and Spouse/Guest Attendance at Company Business Functions(a) | 31,684 | — | 9,522 | — | — | ||||||||||
Aircraft Shuttle(b) | — | 14,908 | — | — | — | ||||||||||
Total Perquisites | $31,684 | $14,908 | $9,522 | $— | $— | ||||||||||
Matching Gifts Program(c) | 10,000 | 200 | 550 | 10,000 | 1,500 | ||||||||||
Company Matching Contributions Under our Qualified and Nonqualified Defined Contribution Retirement Plan(d) | 126,063 | 54,899 | 57,956 | 40,147 | 50,452 | ||||||||||
Non-Resident State Taxes(e) | 19,830 | 1,332 | 1,471 | 2,340 | 2,084 | ||||||||||
Company Contributions to the Qualified and Nonqualified Defined Contribution Retirement Plan(f) | 113,457 | 123,817 | 52,160 | 38,490 | 45,407 | ||||||||||
Tax Reimbursement Payments(g) | 14,282 | 68 | 5,820 | 56 | 50 | ||||||||||
Foreign Assignment(h) | — | 1,500 | — | — | — | ||||||||||
Total All Other Compensation | $315,316 | $196,724 | $127,479 | $91,033 | $99,493 |
(a) | Spouses or guests sometimes accompany the NEO at company business functions. When their attendance is expected, a tax gross up payment is provided. Where applicable, these payments have been included under "Tax Reimbursement Payments." Additionally, when these trips included travel on the corporate aircraft, the incremental cost was calculated to determine amounts to be reported. For purposes of compensation disclosure, the use of company aircraft is valued using an incremental cost that takes into account fuel costs, landing fees, parking, weather monitoring and maintenance fees per hour of flight. Crew travel expenses are included based on the actual amount incurred for a particular trip. Fixed costs that do not change based on usage, such as pilot salaries and depreciation of the aircraft, are excluded. Amounts represent the imputed income each NEO incurred for such attendance plus the incremental cost of the aircraft when the aircraft was used. |
Amounts represent those provided through our Matching Gifts Program, available to all full-time employees and non-employee directors. During |
Amounts represent the aggregate matching contributions into our 401(k) Plan as well as matching contributions into our Non-Qualified Plan. Matching contributions under our 401(k) Plan are provided to all eligible employees participating in the plan as described beginning on page 2018. |
78 2019 PROXY STATEMENT
COMPENSATION TABLES
(d) | These amounts represent the aggregate of company and transition contributions under our 401(k) and Non-Qualified Plans as described beginning on page 73 in the Retirement and Workplace Benefits section. Full-time employees with one year of service with the company receive 4.5% of their salary and annual incentive contributed into their 401(k) Plan. Full-time employees who, as of December 31, 2013, had either: (i) reached a minimum of 60 points (age plus service) and at least 15 years of service or (ii) reached the age of 50 with 10 years of service with the company, receive an additional contribution into their 401(k) and Non-Qualified Plans through the transition contributions, as disclosed above in the Retirement and Workplace Benefits section. |
(e) | Many of our employees are required to travel to other company locations outside of their primary state of employment. While working in a state other than their primary state of employment, employees may become subject to state income taxes in that state if days worked or earnings accrued exceed an amount specified under state law. When this happens, we pay the state income tax on behalf of those employees (including our NEOs) and gross up the income amount for FICA and Medicare taxes (gross ups on these amounts are included in "Tax Reimbursement Payments"). The employee remains responsible for any taxes they would have incurred had they worked only in their primary state of employment. |
(f) |
We provide all expatriate employees (including executives) foreign tax preparation services while they are on assignment outside their home countries and for |
2019 PROXY STATEMENT 79
COMPENSATION TABLES
Estimated Future Payouts Under Non-Equity Incentive Plan Awards ($)(1) | Estimated Future Payouts Under Equity Incentive Plan Awards (#)(3) | All Other Stock Awards (Number of Shares of Stock or Units) (#)(4) | Grant Date Fair Value of Stock Awards ($) | |||||||||||||||||||||
Grant Date | Threshold | Target | Max | Threshold | Target | Max | ||||||||||||||||||
Mr. McKenney | ||||||||||||||||||||||||
— | 500,000 | 2,000,000 | 3,750,000 | |||||||||||||||||||||
3/1/2018 | 66,924 | 3,300,022 | (5) | |||||||||||||||||||||
3/1/2018 | 26,770 | 66,924 | 120,463 | 3,264,553 | (6) | |||||||||||||||||||
Mr. McGarry(2) | ||||||||||||||||||||||||
— | 173,250 | 693,000 | 1,299,375 | |||||||||||||||||||||
3/1/2018 | 11,738 | 578,801 | (5) | |||||||||||||||||||||
3/1/2018 | 4,695 | 11,738 | 21,128 | 572,580 | (6) | |||||||||||||||||||
Mr. Simonds | ||||||||||||||||||||||||
— | 156,855 | 627,418 | 1,176,409 | |||||||||||||||||||||
3/1/2018 | 11,474 | 565,783 | (5) | |||||||||||||||||||||
3/1/2018 | 4,590 | 11,474 | 20,653 | 559,702 | (6) | |||||||||||||||||||
Mr. Arnold(2) | ||||||||||||||||||||||||
— | 111,857 | 447,429 | 838,929 | |||||||||||||||||||||
3/1/2018 | 6,492 | 320,121 | (5) | |||||||||||||||||||||
3/1/2018 | 2,597 | 6,492 | 11,686 | 316,680 | (6) | |||||||||||||||||||
Ms. Iglesias | ||||||||||||||||||||||||
— | 117,296 | 469,184 | 879,720 | |||||||||||||||||||||
3/1/2018 | 7,041 | 347,192 | (5) | |||||||||||||||||||||
3/1/2018 | 2,816 | 7,041 | 12,674 | 343,460 | (6) |
Grant Date | Estimated Future Payouts Under Non-Equity Incentive Plan Awards ($)(1) | Estimated Future Payouts Under Equity Incentive Plan Awards (#)(3) | All Other Stock Awards (Number of Shares of Stock or Units) | Grant Date Fair Value of Stock and Option Awards | |||||
Threshold | Target | Max | Threshold | Target | Max | (#)(4) | ($) | ||
Mr. McKenney | |||||||||
— | 434,976 | 1,739,904 | 3,262,320 | ||||||
2/23/2016 | 92,460 | 2,575,011 | (5) | ||||||
2/23/2016 | 36,984 | 92,460 | 166,428 | 2,601,824 | (6) | ||||
Mr. McGarry (2) | |||||||||
— | 147,115 | 588,461 | 1,103,364 | ||||||
2/23/2016 | 16,293 | 453,760 | (5) | ||||||
2/23/2016 | 6,517 | 16,293 | 29,327 | 458,485 | (6) | ||||
Mr. Simonds | |||||||||
— | 133,702 | 534,808 | 1,002,765 | ||||||
2/23/2016 | 17,033 | 474,369 | (5) | ||||||
2/23/2016 | 6,813 | 17,033 | 30,659 | 479,309 | (6) | ||||
Ms. Iglesias | |||||||||
— | 92,380 | 369,519 | 692,848 | ||||||
2/23/2016 | 11,428 | 318,270 | (5) | ||||||
2/23/2016 | 4,571 | 11,428 | 20,570 | 321,584 | (6) | ||||
Ms. Farrell | |||||||||
— | 135,450 | 541,800 | 1,015,875 | ||||||
2/23/2016 | 8,016 | 223,246 | (5) | ||||||
2/23/2016 | 3,206 | 8,016 | 14,429 | 225,570 | (6) |
(1) | These amounts reflect the threshold, target, and maximum award under the |
(2) | Mr. |
(3) | The vesting of PSUs ranges from 40% to 180% of target based on the performance and market conditions |
80 2019 PROXY STATEMENT
COMPENSATION TABLES
(4) | The grant of PBRSUs made on |
(5) | The grant date fair value of stock awards for the PBRSUs granted on |
(6) | As noted above, the grant date fair value of PSUs granted on |
Option Awards | Stock Awards | ||||||
Number of Securities Underlying Unexercised Options (# Exercisable) | Number of Securities Underlying Unexercised Options (# Unexercisable) | Option Exercise Price ($) | Option Expiration Date | Number of Shares or Units of Stock That Have Not Vested (#) | Market Value of Shares or Units of Stock That Have Not Vested(1) ($) | Equity Incentive Plan Awards: Number of Unearned Shares, Units or Other Rights That Have Not Vested(2) (#) | Equity Incentive Plan Awards: Market or Payout Value of Unearned Shares, Units or Other Rights That Have Not Vested(3) ($) |
Mr. McKenney | |||||||||||||||||||||
39,760 | — | 24.25 | 2/20/2021 | 140,000 | 4,113,200 | 125,596 | 3,690,010 | ||||||||||||||
Mr. McGarry | |||||||||||||||||||||
— | — | — | — | 24,830 | 729,505 | 22,397 | 658,024 | ||||||||||||||
Mr. Simonds | |||||||||||||||||||||
— | — | — | — | 24,827 | 729,417 | 22,127 | 650,091 | ||||||||||||||
Mr. Arnold | |||||||||||||||||||||
— | — | — | 12,747 | 374,507 | 11,418 | 335,461 | |||||||||||||||
Ms. Iglesias | |||||||||||||||||||||
— | — | — | — | 15,623 | 459,004 | 13,632 | 400,508 |
Option Awards | Stock Awards | |||||||||||||||
Number of Securities Underlying Unexercised Options | Number of Securities Underlying Unexercised Options | Equity Incentive Plan Awards: Number of Securities Underlying Unexercised Unearned Options | Option Exercise Price | Option Expiration Date | Number of Shares or Units of Stock That Have Not Vested | Market Value of Shares or Units of Stock That Have Not Vested(1) | Equity Incentive Plan Awards: Number of Unearned Shares, Units or Other Rights That Have Not Vested(2) | Equity Incentive Plan Awards: Market or Payout Value of Unearned Shares, Units or Other Rights That Have Not Vested(3) | ||||||||
(# Exercisable) | (# Unexercisable) | (#) | ($) | (#) | ($) | (#) | ($) | |||||||||
Mr. McKenney | ||||||||||||||||
— | — | — | — | — | 137,514 | 6,040,990 | 251,320 | 11,040,488 | ||||||||
26,048 | — | — | 26.29 | 2/22/2019 | — | — | — | — | ||||||||
34,270 | — | — | 23.35 | 2/23/2019 | — | — | — | — | ||||||||
39,760 | — | — | 24.25 | 2/24/2019 | — | — | — | — | ||||||||
Mr. McGarry | ||||||||||||||||
— | — | — | — | — | 26,299 | 1,155,315 | 46,758 | 2,054,079 | ||||||||
Mr. Simonds | ||||||||||||||||
— | — | — | — | — | 31,646 | 1,390,209 | 57,056 | 2,506,470 | ||||||||
Ms. Iglesias | ||||||||||||||||
— | — | — | — | — | 35,211 | 1,546,819 | 20,895 | 917,917 | ||||||||
Ms. Farrell | ||||||||||||||||
— | — | — | — | — | 16,054 | 705,252 | 26,602 | 1,168,626 |
(1) | The amounts in this column represent the aggregate value of performance-based restricted stock units (PBRSUs), including dividend equivalents, shown in the "Number of Shares or Units of Stock That Have Not Vested" column based on the closing price of |
(2) | This column reflects PSU awards that were granted on |
(3) | The amounts in this column represent the aggregate value of PSUs (including dividend equivalents) shown in the "Equity Incentive Plan Awards: Number of Unearned Shares, Units or Other Rights That Have Not Vested" column based on the closing price of |
2019 PROXY STATEMENT 81
COMPENSATION TABLES
Number of Units Vesting(1) | ||||||||||||||||
Vesting Date | Grant Date | Mr. McKenney | Mr. McGarry(2) | Mr. Simonds | Mr. Arnold(2) | Ms. Iglesias | ||||||||||
February 23, 2019 | 2/23/2016 | 33,312 | 5,870 | 6,137 | 2,911 | 4,118 | ||||||||||
March 1, 2019 | 3/1/2017 | 18,909 | 3,438 | 3,438 | 1,581 | 2,128 | ||||||||||
March 1, 2019 | 3/1/2018 | 22,537 | 3,953 | 3,864 | 2,186 | 2,371 | ||||||||||
March 1, 2020 | 3/1/2017 | 19,482 | 3,543 | 3,542 | 1,630 | 2,192 | ||||||||||
March 1, 2020 | 3/1/2018 | 22,538 | 3,953 | 3,864 | 2,186 | 2,371 | ||||||||||
March 1, 2021 | 3/1/2018 | 23,222 | 4,073 | 3,982 | 2,253 | 2,443 | ||||||||||
Total | 140,000 | 24,830 | 24,827 | 12,747 | 15,623 |
Number of Restricted Shares/Units Vesting(1) | |||||||||||
Vesting Date | Grant Date | Mr. McKenney | Mr. McGarry(2) | Mr. Simonds | Ms. Iglesias | Ms. Farrell | |||||
January 8, 2017 | 1/8/2015 | — | — | — | 8,754 | — | |||||
February 23, 2017 | 2/23/2016 | 30,993 | 5,461 | 5,709 | 3,831 | 2,687 | |||||
February 24, 2017 | 2/24/2015 | 15,234 | 3,142 | 4,798 | 3,046 | 2,212 | |||||
February 25, 2017 | 2/25/2014 | 13,125 | 3,464 | 4,747 | — | 3,487 | |||||
January 8, 2018 | 1/8/2015 | — | — | — | 8,754 | — | |||||
February 23, 2018 | 2/23/2016 | 30,994 | 5,462 | 5,710 | 3,831 | 2,687 | |||||
February 24, 2018 | 2/24/2015 | 15,235 | 3,143 | 4,799 | 3,048 | 2,213 | |||||
February 23, 2019 | 2/23/2016 | 31,934 | 5,628 | 5,884 | 3,947 | 2,769 | |||||
Total | 137,515 | 26,300 | 31,647 | 35,211 | 16,055 |
(1) | These |
(2) | Mr. |
Option Awards | Stock Awards(1) |
Name | Number of Shares Acquired on Exercise (#) | Value Realized on Exercise ($) | Number of Shares Acquired on Vesting(2) (#) | Value Realized on Vesting(3) ($) | ||||||||
Mr. McKenney | — | — | 163,758 | 6,236,606 | ||||||||
Mr. McGarry | — | — | 29,429 | 1,128,365 | ||||||||
Mr. Simonds | — | — | 32,160 | 1,252,085 | ||||||||
Mr. Arnold | — | — | 14,461 | 552,986 | ||||||||
Ms. Iglesias | — | — | 30,134 | 1,325,346 |
Option Awards | Stock Awards(3) | |||||||
Name | Number of Shares Acquired on Exercise(1) (#) | Value Realized on Exercise(2) ($) | Number of Shares Acquired on Vesting(4) (#) | Value Realized on Vesting(5) ($) | ||||
Mr. McKenney | — | — | 58,928 | 1,863,446 | ||||
Mr. McGarry | 16,983 | 281,534 | 13,495 | 434,953 | ||||
Mr. Simonds | — | — | 19,339 | 619,433 | ||||
Ms. Iglesias | — | — | 11,559 | 343,689 | ||||
Ms. Farrell | — | — | 15,535 | 491,287 |
(1) |
Reflects the |
Includes the total number of unrestricted shares acquired upon the vesting of PBRSUs and PSUs. A portion of these shares were withheld to cover taxes due upon vesting. |
82 2019 PROXY STATEMENT |
COMPENSATION TABLES
Pension benefits payable to each NEO are summarized in the following table:
Name | Plan Name | Number of Years of Credited Service (#) | Present Value of Accumulated Benefits(2) ($) | Payments During Last Fiscal Year ($) | ||||||
Mr. McKenney | Qualified | 4.42 | 100,000 | — | ||||||
Excess | 4.42 | 548,000 | — | |||||||
Mr. McGarry | Qualified | 28.00 | 1,143,000 | — | ||||||
Excess | 28.00 | 1,686,000 | — | |||||||
Mr. Simonds | Qualified | 16.25 | 491,000 | — | ||||||
Excess | 16.25 | 651,000 | — | |||||||
Mr. Arnold | Qualified | 28.83 | 1,078,000 | — | ||||||
Excess | 28.83 | 548,000 | — | |||||||
Ms. Iglesias(1) | Qualified | — | — | — | ||||||
Excess | — | — | — |
PENSION BENEFITS | |||||||
Name | Plan Name | Number of Years of Credited Service | Present Value of Accumulated Benefits(2) | Payments During Last Fiscal Year | |||
(#) | ($) | ($) | |||||
Mr. McKenney | Qualified | 4.42 | 94,000 | — | |||
Excess | 4.42 | 514,000 | — | ||||
Mr. McGarry | Qualified | 28.00 | 1,073,000 | — | |||
Excess | 28.00 | 1,583,000 | — | ||||
Mr. Simonds | Qualified | 16.25 | 460,000 | — | |||
Excess | 16.25 | 611,000 | — | ||||
Ms. Iglesias(1) | Qualified | — | — | — | |||
Excess | — | — | — | ||||
Ms. Farrell | Qualified | 3.00 | 98,000 | — | |||
Excess | 3.00 | 241,000 | — |
(1) | No amounts are shown for Ms. Iglesias because the plans were frozen to further accruals on December 31, 2013, before her employment began. |
(2) | The "Present Value of Accumulated Benefits" is based upon a measurement date of December 31, |
Retirement Age: Assumes age 65.
Discount Rate: 4.40%
Salary Increase Rate: Not applicable.
Social Security Indexing Rate: 3.5% to index the Qualified and Excess Plan benefits from the measurement date to commencement date.
Pension Increase Rate: Not applicable.
Pre-Retirement Decrements: None.
Post-Retirement Mortality Table: RP-2014 Mortality Tables projected using fully generational two-dimensional Scale MP-2017.
2019 PROXY STATEMENT 83
Non-Qualified Deferred Compensation
We have one active non-qualified defined contribution plan (Non-Qualified Plan) that allows for deferrals of compensation by our NEOs. We also maintain one other nonqualifiednon-qualified plan that allowed for deferrals of compensation and is an inactive plan originally maintained by a predecessor company in which Mr. McGarry is the only NEO participant. The last year that compensation deferrals occurred under this inactive plan was 2000.
NON-QUALIFIED DEFERRED COMPENSATION
Name | Plan | Executive Contributions in Last FY(2) $ | Registrant Contributions in Last FY(3) $ | Aggregate Earnings in Last FY(4) $ | Aggregate Withdrawals/ Distributions $ | Aggregate Balance at Last FYE(5) $ | ||||||||||
Mr. McKenney | Non-Qualified DC | 156,039 | 296,473 | (195,063 | ) | — | 1,665,201 | |||||||||
Mr. McGarry(1) | Inactive NQ Plan | — | — | (20,399 | ) | — | 24,795 | |||||||||
Non-Qualified DC | 116,535 | 198,442 | (107,946 | ) | — | 1,240,615 | ||||||||||
Mr. Simonds | Non-Qualified DC | 56,642 | 107,621 | (167,475 | ) | — | 658,407 | |||||||||
Mr. Arnold | Non-Qualified DC | 63,121 | 122,022 | (76,263 | ) | — | 701,985 | |||||||||
Ms. Iglesias | Non-Qualified DC | 103,296 | 65,421 | (30,009 | ) | — | 451,948 |
NONQUALIFIED DEFERRED COMPENSATION | |||||||||||
Name | Plan | Executive Contributions in Last FY(2) | Registrant Contributions in Last FY(3) | Aggregate Earnings in Last FY(4) | Aggregate Withdrawals/ Distributions | Aggregate Balance at Last FYE(5) | |||||
$ | $ | $ | $ | $ | |||||||
Mr. McKenney | Nonqualified DC | 112,813 | 214,345 | 97,726 | — | 779,878 | |||||
Mr. McGarry(1) | Inactive NQ Plan | — | — | 9,204 | — | 35,540 | |||||
Nonqualified DC | 83,298 | 143,716 | 62,880 | — | 582,712 | ||||||
Mr. Simonds | Nonqualified DC | 44,706 | 84,941 | 68,540 | — | 396,419 | |||||
Ms. Iglesias | Nonqualified DC | 55,659 | 55,234 | 5,635 | — | 116,528 | |||||
Ms. Farrell | Nonqualified DC | 52,084 | 70,685 | 21,529 | — | 351,964 |
(1) | Mr. McGarry has a balance under one inactive deferred compensation plan. This plan is a non-qualified defined contribution plan and includes units denominated in 100% Unum stock to be paid out in cash. The change in market value and dividends earned is included in the "Aggregate Earnings in Last FY" amount. The value of the balance is |
(2) | These amounts are included in the Summary Compensation Table in the "Salary" and "Non-Equity Incentive Plan Compensation" columns for |
(3) | These amounts represent company contributions through our Non-Qualified Plan, as described in the Retirement and Workplace Benefits section beginning on page |
(4) | These amounts were not included in the Summary Compensation Table because investment earnings were not preferential or above market. The investment options under the |
(5) | This column includes the following amounts that were reported in prior |
84 2019 PROXY STATEMENT
POST-EMPLOYMENT COMPENSATION
The discussion below outlines estimated benefits payable to our NEOs under various termination scenarios as of December 31, 2016.
The following terminology will be used throughout the discussion of the various termination scenarios:
TERMINATION DEFINITIONS
Termination with cause | |
One or more of the following factors is present: the failure to substantially perform duties; the willful engagement in illegal conduct or gross misconduct harmful to the company; or the conviction of a felony (or plea of "guilty" or "no contest"). | |
Termination without cause | |
One or more of the following factors is present: poor performance, other than for misconduct or cause (as defined above); job elimination; job requalification; or the decision to fill the position with a different resource consistent with the direction of the company. | |
Resignation for good reason | |
One or more of the following events have preceded the resignation of the NEO: assignment to a position inconsistent with his or her existing position or any other action that diminishes such position; reduction of his or her base salary or annual incentive target; failure to continue any material employee benefit or compensation plan in which he or she participates; or relocation to an office more than 50 miles from his or her location. | |
Change in control | |
A change in control occurs when one of the following situations exists: (a) the incumbent directors cease to be a majority for two years; (b) an entity acquires 20% of our voting stock (30% in some instances); (c) we consummate certain transactions such as a merger or disposition of substantially all of our assets; or (d) shareholders approve a plan of liquidation or distribution. |
In the event of any termination of employment, all named executive officers would receive benefits to which they are entitled, including unpaid base salary through the date of termination, accrued vacation, and accrued benefits under the retirement plan.
Severance and Change in Control Arrangements section beginning on page 67,
We have the following severance and change in control contracts and plans covering the NEOs.
Severance Benefits
The company provides severance benefits to all employees in the event of involuntary termination, other than for death, disability or cause.
Mr. McKenney hasMcKenney’s severance benefits are provided under a severance agreement dated effective as of April 1, 2015. The benefits provided under this agreement are described below.
The remaining NEOs are covered under our Separation Pay Plan for Executive Vice Presidents and other change in control agreements described below. In general, we provide severance in order to give our employees competitive benefits with respect to the possibility of an involuntary termination of their employment.
2019 PROXY STATEMENT 85
POST-EMPLOYMENT COMPENSATION
When termination of employment is accompanied by severance payments, the former executive is required to release claims he or she may have against us. The release contains restrictions on the former executive with respect to confidentiality, solicitation of company employees, competition, and disparagement. We also agree to indemnify the former executive for certain actions taken on the company’s behalf during his or her employment.
Change in Control Agreements
Each NEO, other than Mr. McKenney, is covered by a standalone change in control severance agreement with the company. These agreements provide an enhanced severance benefit in the event of a termination following a change in control. This ensures that shareholders have the benefit of our NEOs’ focused attention during the critical times before and after a major corporate transaction regardless of any uncertainty with respect to their future employment.
None of the NEOs have an excise tax gross-up provision in their agreements.
As described above, change in control benefits are available to Mr. McKenney under his severance agreement. Mr. McKenney's agreement specifically addresses post-employment payments, including in the event of a termination of employment in connection with a change in control. The remaining NEOs are covered by standalone change-in control severance agreements. In the event of termination within two years following the occurrence of a change in control, NEOs would receive the following benefits:
86 2019 PROXY STATEMENT
POST-EMPLOYMENT COMPENSATION
Terminations Not Related to a Change in Control
There are instances in which ana NEO’s employment may be terminated that do not involve a change in control. The company may terminate for cause or without cause. Additionally, termination of employment may occur upon ana NEO’s voluntary resignation, retirement, death, or becoming disabled.
In the event of the death, disability or retirement (if eligible) of ana NEO, all of the NEO’s unvested PBRSUs and stock options would vest and the stock options would remain exercisable until the earlier of the expiration date or, as applicable, the third anniversary of the date of death or the fifth anniversary of the date of retirement. In the event of termination of employment as a result of job elimination or requalification (or, in the case of Mr. McKenney, resignation for good reason), the NEOs would vest in a pro-rata portion of earned PSUs and in the event of termination of employment as a result of death, disability, or retirement, the NEOs would vest in earned PSUs, in each case on the date that such awards would otherwise be settled. However, to the extent necessary to avoid the imposition of penalty taxes under Internal Revenue Code Section 409A, stock would not be distributed until at least six months after the date of termination.
NEOs receive additional benefits depending upon the termination scenario as outlined in the following table:
TERMINATION BENEFITS AVAILABLE TO CEO AND OTHER NEOs UNDER NON-CHANGE IN CONTROL SCENARIOS
Benefits Received | Termination for Cause or Voluntary Resignation | Termination Without Cause or Resignation with Good Reason* | Disability | Death | Retirement |
Severance(1) | CEO, NEOs | ||||
Prorated Annual Incentive(2) | CEO | CEO, NEOs | CEO, NEOs | If Retirement Eligible | |
Early Vesting of Equity(3) | CEO | CEO, NEOs | CEO, NEOs | If Retirement Eligible | |
Benefit Continuation(4) | CEO | ||||
Outplacement Services(5) | CEO, NEOs | ||||
Disability Benefits(6) | CEO, NEOs | ||||
Group Life Ins. Benefits(7) | CEO, NEOs | ||||
Corporate Owned Life Ins.(7) | NEOs who gave approval |
* Mr. McKenney is the only NEO entitled to benefits in the event of a resignation for good reason absent a change in control.
(1) | If Mr. McKenney is terminated without cause or resigns with good reason, he will receive severance of two times the sum of his annual base salary and the average annual incentive paid to him in the three years prior to the date of |
(2) | Annual incentive will be prorated based on the date of termination of employment. For all NEOs other than Mr. McKenney, the NEO will be eligible for prorated annual incentive in the event of death, disability, or retirement only if such termination occurs on or after the last pay period in |
(3) | If Mr. McKenney is terminated without cause, a prorated portion of his unvested equity awards, with the exception of his performance share units (PSUs) will accelerate vesting under the terms of the award agreements. In the event of his death, disability, or retirement or if he is terminated without cause or resigns for good reason, Mr. McKenney would be eligible to receive a prorated portion of the PSUs based on actual performance at the end of the three-year performance cycle. For the remaining NEOs, absent a change in control their unvested equity will accelerate only in the event of death, disability, or retirement (if eligible) |
2019 PROXY STATEMENT 87
POST-EMPLOYMENT COMPENSATION
(4) | If Mr. McKenney is terminated without cause or resigns with good reason, he will receive health and welfare benefits for up to 2 years. |
(5) | Outplacement services are |
(6) | Monthly benefits from the company’s long-term disability plan until the earlier of age 65 or death. |
(7) | Group life insurance benefits are $50,000 for each full-time |
Termination Payments
Termination payments are provided to NEOs as outlined in the following table and vary with the circumstances under which the termination occurs. In the event of termination as a result of death, payments will be made to the named executive officer’s beneficiary.
Consistent with SEC requirements, all termination scenarios in the table assume a termination date of December 31, 2016.2018. Accordingly, all calculations in the following table were made using the closing market price of our common stock as of December 30, 201631, 2018 ($43.9329.38 per share). We have excluded amounts received as an annuity under our retirement plans and the "in-the-money" value of vested unexercised stock options held by NEOs since these amounts are not impacted by a termination. The amounts shown in the table also do not include distributions of plan balances under a nonqualifiednon-qualified deferred compensation plan. Those amounts are shown in the NonqualifiedNon-Qualified Deferred Compensation table on page 81.
The amounts in the following table are hypothetical based on the rules of the SEC. Actual payments depend on the circumstances and timing of any termination. The information provided in this table constitutes forward-looking statements for purposes of the Private Litigation Securities Reform Act of 1995.
TERMINATION TABLE | |||||||||||||||
Termination Scenario | Mr. McKenney | Mr. McGarry | Mr. Simonds | Ms. Iglesias | Ms. Farrell | ||||||||||
($) | ($) | ($) | ($) | ($) | |||||||||||
Termination for Cause or Voluntary Resignation | |||||||||||||||
— | — | — | — | — | |||||||||||
Total | $ | — | $ | — | $ | — | $ | — | $ | — | |||||
Termination Without Cause or Resignation with Good Reason (CEO) | |||||||||||||||
Severance | 5,620,322 | 900,000 | 900,000 | 742,500 | 679,500 | ||||||||||
Prorated Annual Incentive(1) | 1,810,161 | — | — | — | — | ||||||||||
Early Vesting of Equity(2) | 12,847,851 | — | — | — | — | ||||||||||
Benefit Continuation | 77,006 | — | — | — | — | ||||||||||
Outplacement Services | 50,000 | 50,000 | 50,000 | 50,000 | 50,000 | ||||||||||
Total | $ | 20,405,340 | $ | 950,000 | $ | 950,000 | $ | 792,500 | $ | 729,500 | |||||
Disability | |||||||||||||||
Prorated Annual Incentive(1) | 1,810,161 | 744,404 | 676,532 | 424,946 | 598,689 | ||||||||||
Early Vesting of Equity(2)(3) | 12,847,851 | 2,474,125 | 3,026,134 | 2,056,762 | 1,533,305 | ||||||||||
Disability Benefits | 359,384 | 162,118 | 425,344 | 306,295 | 206,133 | ||||||||||
Total | $ | 15,017,396 | $ | 3,380,647 | $ | 4,128,010 | $ | 2,788,003 | $ | 2,338,127 | |||||
Death | |||||||||||||||
Prorated Annual Incentive(1) | 1,810,161 | 744,404 | 676,532 | 424,946 | 598,689 | ||||||||||
Early Vesting of Equity(2)(3) | 12,847,851 | 2,474,125 | 3,026,134 | 2,056,762 | 1,533,305 | ||||||||||
Group Life Ins. Benefits | 50,000 | 50,000 | 50,000 | 50,000 | 50,000 | ||||||||||
Corporate Owned Life Ins. | — | 200,000 | — | — | — | ||||||||||
Total | $ | 14,708,012 | $ | 3,468,529 | $ | 3,752,666 | $ | 2,531,708 | $ | 2,181,994 | |||||
Termination Related to a Change in Control | |||||||||||||||
Severance | 8,430,483 | 2,400,000 | 2,329,776 | 1,752,582 | 2,021,102 | ||||||||||
Prorated Annual Incentive(1) | 1,810,161 | 600,000 | 540,000 | 371,250 | 543,600 | ||||||||||
Early Vesting of Equity | 12,847,851 | 2,474,125 | 3,026,134 | 2,056,762 | 1,533,305 | ||||||||||
Benefit Continuation | 115,510 | 68,744 | 83,264 | 81,593 | 61,503 | ||||||||||
Outplacement Services | 50,000 | 50,000 | 50,000 | 50,000 | 50,000 | ||||||||||
DC Enhancement(4) | 227,000 | 248,000 | 104,000 | — | 91,000 | ||||||||||
Total | $ | 23,481,005 | $ | 5,840,869 | $ | 6,133,174 | $ | 4,312,187 | $ | 4,300,510 | |||||
Retirement | |||||||||||||||
Prorated Annual Incentive(5) | — | 744,404 | — | — | 598,689 | ||||||||||
Early Vesting of Equity(2)(3)(6) | — | 2,474,125 | — | — | — | ||||||||||
Total | $ | — | $ | 3,218,529 | $ | — | $ | — | $ | 598,689 |
88 2019 PROXY STATEMENT
POST-EMPLOYMENT COMPENSATION
TERMINATION TABLE
Termination Scenario | Mr. McKenney ($) | Mr. McGarry ($) | Mr. Simonds ($) | Mr. Arnold ($) | Ms. Iglesias ($) | ||||||||||
Termination for Cause or Voluntary Resignation | |||||||||||||||
— | — | — | — | — | |||||||||||
Total | $ | — | $ | — | $ | — | $ | — | $ | — | |||||
Termination Without Cause or Resignation with Good Reason (CEO) | |||||||||||||||
Severance | 6,277,291 | 945,000 | 945,563 | 750,053 | 787,800 | ||||||||||
Prorated Annual Incentive(1) | 2,138,646 | — | — | — | — | ||||||||||
Early Vesting of Equity(2) | 11,250,952 | — | — | — | — | ||||||||||
Benefit Continuation | 89,947 | — | — | — | — | ||||||||||
Outplacement Services | 50,000 | 50,000 | 50,000 | 50,000 | 50,000 | ||||||||||
Total | $ | 19,806,836 | $ | 995,000 | $ | 995,563 | $ | 800,053 | $ | 837,800 | |||||
Disability | |||||||||||||||
Prorated Annual Incentive(1) | 2,138,646 | 693,000 | 627,418 | 447,429 | 469,184 | ||||||||||
Early Vesting of Equity(2)(3) | 11,250,952 | 1,995,059 | 2,014,668 | 1,011,220 | 1,285,642 | ||||||||||
Disability Benefits | 328,925 | 113,916 | 400,817 | 214,889 | 271,060 | ||||||||||
Total | $ | 13,718,523 | $ | 2,801,975 | $ | 3,042,903 | $ | 1,673,538 | $ | 2,025,886 | |||||
Death | |||||||||||||||
Prorated Annual Incentive(1) | 2,138,646 | 693,000 | 627,418 | 447,429 | 469,184 | ||||||||||
Early Vesting of Equity(2)(3) | 11,250,952 | 1,995,059 | 2,014,668 | 1,011,220 | 1,285,642 | ||||||||||
Group Life Ins. Benefits | 50,000 | 50,000 | 50,000 | 50,000 | 50,000 | ||||||||||
Corporate Owned Life Ins. | 200,000 | 400,000 | 200,000 | 200,000 | 200,000 | ||||||||||
Total | $ | 13,639,598 | $ | 3,138,059 | $ | 2,892,086 | $ | 1,708,649 | $ | 2,004,826 | |||||
Termination Related to a Change in Control | |||||||||||||||
Severance | 9,415,937 | 2,904,924 | 2,845,858 | 1,977,700 | 1,995,760 | ||||||||||
Prorated Annual Incentive(1) | 2,138,646 | 693,000 | 630,375 | 450,032 | 472,680 | ||||||||||
Early Vesting of Equity | 11,250,952 | 1,995,059 | 2,014,668 | 1,011,220 | 1,285,642 | ||||||||||
Benefit Continuation | 134,921 | 76,707 | 96,002 | 104,017 | 89,947 | ||||||||||
Outplacement Services | 50,000 | 50,000 | 50,000 | 50,000 | 50,000 | ||||||||||
DC Enhancement(4) | 306,000 | 326,000 | 127,000 | — | — | ||||||||||
Total | $ | 23,296,456 | $ | 6,045,690 | $ | 5,763,903 | $ | 3,592,969 | $ | 3,894,029 | |||||
Retirement | |||||||||||||||
Prorated Annual Incentive(5) | — | 693,000 | — | — | — | ||||||||||
Early Vesting of Equity(2)(3) | — | 1,995,059 | — | 1,011,220 | — | ||||||||||
Total | $ | — | $ | 2,688,059 | $ | — | $ | 1,011,220 | $ | — |
(1) | In these scenarios, per the terms of Mr. McKenney’s severance agreement, he would be entitled to a prorated annual incentive. The amount is to be calculated using the average annual bonuses paid for the three most-recent calendar |
(2) | In the event of job elimination, the prorated early vesting of equity awards would be as follows: Mr. McKenney |
2019 PROXY STATEMENT 89
POST-EMPLOYMENT COMPENSATION
and Mr. Arnold are eligible for retirement status under the terms of the Stock Incentive Plan of 2012.2012 and the Stock Incentive Plan of 2017. Therefore, hethey would receive full vesting of histheir unvested PBRSUs, as noted in the Retirement section of this table. HeThe amounts shown in the table represent the value of the shares at a market price of $29.38, the close price of our stock on the last trading day of the year. They would also be eligible to earn the full amount of PSUs based on histheir retirement status. The PSUs would vest based on the actual achievement of the prospective three-year goals, modified by relative total shareholder return.
(3) | The amounts reported include PBRSUs and PSUs that would accelerate vesting in the event of disability, death or retirement. The PSUs granted in |
(4) | Defined Contribution (DC) enhancement is a lump sum payment representing the amount resulting from multiplying the company’s non-contributory retirement plan contributions times two additional years of eligible earnings for |
(5) | Mr. McGarry |
90 2019 PROXY STATEMENT
CEO PAY RATIO
CEO PAY RATIO
As required by Section 953(b) of the Dodd-Frank Wall Street Reform and Consumer Protection Act, and Item 402(u) of Regulation S-K, we are providing the following information about the relationship of the annual total compensation of our median compensated employee and the annual total compensation of our Chief Executive Officer.
The following table gives information2018 annual total compensation of the median compensated of all our employees who were employed as of December 31, 2016 about2018, other than our Chief Executive Officer, was $62,475. The 2018 annual total compensation of Richard McKenney, our Chief Executive Officer, was $9,896,861. The ratio of these amounts was 1-to-158.
The SEC’s rules regarding the common stockidentification of the median compensated employee and the process of calculating the pay ratio, allow companies to adopt a variety of methodologies, to apply certain exclusions, and to make reasonable estimates and assumptions that reflect their employee populations and compensation practices. As a result, the pay ratio reported by other companies may not be issuedcomparable to the pay ratio reported above, as other companies have different employee populations and compensation practices and may utilize different methodologies, exclusions, estimates and assumptions in calculating their own pay ratios.
The pay ratio reported above is a reasonable estimate calculated in a manner consistent with SEC rules based on our payroll and employment records. To identify our median employee, we began with our entire active employee population of approximately 10,200 employees as of December 31, 2018 (after excluding approximately 200 employees that were acquired in connection with our acquisition of Pramerica Žycie TUiR SA, a leading financial protection provider in Poland). For these purposes, we identified the median compensated employee using base salary or hourly wages earned during fiscal 2018 and cash bonus paid for fiscal 2018. We annualized base salary or hourly wages, as applicable, for employees who were not designated as temporary or seasonal employees but who did not work for the entire year. We did not exclude any employees based on the allowable "De Minimis Exemption" clause in the SEC regulations.
As permitted under allSEC guidance, because our originally identified median employee had anomalous pay characteristics, we substituted another employee with substantially similar compensation to the original identified median employee. Using this methodology, we determined that the median compensated employee was a full-time, exempt employee who holds a core business role that supports field employees who deliver Unum products to our customers. This employee is located at one of our existing equity compensation plans.
2019 PROXY STATEMENT 91 | |||
OWNERSHIP OF COMPANY SECURITIES
OWNERSHIP OF COMPANY SECURITIES
The following table shows the number of shares of our common stock beneficially owned by each of our directors and named executive officers and by all directors and executive officers as a group, as of March 15, 2017.2019. The table and related footnotes also include information about stock options, deferred share rights and restricted stock units (RSUs) credited to the accounts of directors and executive officers under various compensation and benefit plans. Based upon the representations made by each director and executive officer, we do not believe that any shares held by them are pledged as security. Except as otherwise indicated below, the beneficial owners have sole voting and investment power with respect to the shares beneficially owned.
BENEFICIAL OWNERSHIP OF COMMON STOCK | (as of March 15, 2019) |
Name | Shares of Common Stock(1) | Shares Subject to Exercisable Options(2) | Shares Subject to Settleable Rights or Units(3)(4)(5) | Total Shares Beneficially Owned | Percent of Class |
Theodore H. Bunting, Jr. | 16 | — | 22,967 | 22,983 | * |
E. Michael Caulfield | 2,066 | — | 33,250 | 35,315 | * |
Susan L. Cross | — | — | 643 | 643 | * |
Susan D. DeVore | 750 | — | — | 750 | * |
Joseph J. Echevarria | — | — | 17,698 | 17,698 | * |
Cynthia L. Egan | 12,856 | — | 3,977 | 16,833 | * |
Kevin T. Kabat | 34,742 | — | 10,521 | 45,263 | * |
Timothy F. Keaney | 27,998 | — | 4,838 | 32,836 | * |
Gloria C. Larson | — | — | 78,850 | 78,850 | * |
Ronald P. O'Hanley | 11,174 | — | 9,303 | 20,477 | * |
Francis J. Shammo | 7,579 | — | 3,442 | 11,021 | * |
Richard P. McKenney | 381,603 | 39,760 | — | 421,363 | * |
John F. McGarry | 80,499 | — | 28,376 | 108,874 | * |
Michael Q. Simonds | 70,600 | — | — | 70,600 | * |
Timothy G. Arnold | 25,995 | — | — | 25,995 | * |
Lisa G. Iglesias | 40,739 | — | — | 40,739 | * |
All directors and executive officers as a group (20 persons) | 786,566 | 39,760 | 220,235 | 1,046,561 | * |
BENEFICIAL OWNERSHIP OF COMMON STOCK | (as of March 15, 2017) | ||||
Name | Shares of Common Stock(1) | Shares Subject to Exercisable Options(2) | Shares Subject to Settleable Rights or Units(3)(4)(5) | Total Shares Beneficially Owned | Percent of Class |
Theodore H. Bunting, Jr. | 16 | — | 10,675 | 10,691 | * |
E. Michael Caulfield | 5,017 | — | 32,163 | 37,180 | * |
Joseph J. Echevarria | — | — | 4,241 | 4,241 | * |
Cynthia L. Egan | 279 | — | 2,462 | 2,741 | * |
Pamela H. Godwin | 24,129 | — | 13,466 | 37,595 | * |
Kevin T. Kabat | 21,038 | — | 14,263 | 35,301 | * |
Timothy F. Keaney | 13,620 | — | 9,814 | 23,434 | * |
Gloria C. Larson | 2,460 | — | 65,637 | 68,097 | * |
Edward J. Muhl | 38,410 | — | 4,186 | 42,596 | * |
Ronald P. O'Hanley | 5,161 | — | 3,521 | 8,682 | * |
Francis J. Shammo | 75 | — | 3,200 | 3,275 | * |
Thomas R. Watjen | 164,596 | 302,619 | 4,186 | 471,400 | * |
Richard P. McKenney | 199,323 | 39,760 | — | 239,083 | * |
John F. McGarry | 49,721 | — | — | 49,721 | * |
Breege A. Farrell | 52,333 | — | — | 52,333 | * |
Michael Q. Simonds | 43,105 | — | — | 43,105 | * |
Lisa G. Iglesias | 20,254 | — | — | 20,254 | * |
All directors and executive officers as a group 20 persons) | 697,104 | 342,379 | 167,813 | 1,207,297 | * |
(1) | Includes shares credited to the accounts of certain current and former executive officers, including Mr. |
(2) | Represents the number of shares underlying stock options that may be exercised within 60 days after March 15, |
92 2019 PROXY STATEMENT
OWNERSHIP OF COMPANY SECURITIES
(3) | Represents the number of shares underlying deferred share rights and RSUs payable solely in shares (including dividend equivalent rights accrued on such rights or units) that may be settled within 60 days after March 15, |
(4) | As of March 15, |
Mr. Bunting | — | Mr. Kabat | 7,568 | ||||||||||
Mr. Caulfield | 14,847 | Mr. Keaney | 2,039 | ||||||||||
Ms. Cross | 643 | Ms. Larson | 44,521 | ||||||||||
Ms. DeVore | — | Mr. O'Hanley | 5,439 | ||||||||||
Mr. Echevarria | 9,146 | Mr. Shammo | — | ||||||||||
Ms. Egan | — |
Mr. Bunting | — | Mr. Keaney | 3,376 | |||||
Mr. Caulfield | 14,190 | Ms. Larson | 39,918 | |||||
Mr. Echevarria | 3,543 | Mr. Muhl | — | |||||
Ms. Egan | — | Mr. O'Hanley | 3,521 | |||||
Ms. Godwin | 11,120 | Mr. Shammo | — | |||||
Mr. Kabat | 9,692 |
(5) | As of March 15, |
Mr. Bunting | 22,967 | Mr. Kabat | 21,063 | Mr. McKenney | 147,671 | ||||||
Mr. Caulfield | 18,403 | Mr. Keaney | 3,977 | Mr. McGarry | 28,376 | ||||||
Ms. Cross | 955 | Ms. Larson | 34,329 | Mr. Simonds | 27,577 | ||||||
Ms. DeVore | 3,977 | Mr. O'Hanley | 3,977 | Mr. Arnold | 14,824 | ||||||
Mr. Echevarria | 12,529 | Mr. Shammo | 7,419 | Ms. Iglesias | 17,026 | ||||||
Ms. Egan | 6,592 | All directors and executive officers as a group | 415,654 |
Mr. Bunting | 14,860 | Mr. Keaney | 8,689 | Mr. McKenney | 133,639 | |||||
Mr. Caulfield | 17,973 | Ms. Larson | 25,719 | Mr. McGarry | 24,319 | |||||
Mr. Echevarria | 4,884 | Mr. Muhl | 4,186 | Ms. Farrell | 12,470 | |||||
Ms. Egan | 11,575 | Mr. O'Hanley | 4,186 | Ms. Iglesias | 25,865 | |||||
Ms. Godwin | 17,334 | Mr. Shammo | 7,385 | Mr. Simonds | 26,488 | |||||
Mr. Kabat | 24,086 | Mr. Watjen | 4,186 | All directors and executive officers as a group | 403,431 |
Detailed information about the shareholders known to us to beneficially own more than 5% of our common stock can be found in the table below, including beneficial ownership based on sole and/or shared voting power and investment (dispositive) power. Information is given as of the dates noted in the footnotes below.
BENEFICIAL OWNERSHIP
Name of Beneficial Owner | Address of Beneficial Owner | Amount of Beneficial Ownership | Percent of Common Stock Outstanding |
The Vanguard Group, Inc.(1) | 100 Vanguard Blvd. Malvern, PA 19355 | 24,176,276 | 11.05% |
BlackRock, Inc.(3) | 55 East 52nd Street New York, NY 10022 | 19,837,098 | 9.10% |
FMR LLC(2) | 245 Summer Street Boston, MA 02210 | 19,325,010 | 8.83% |
BENEFICIAL OWNERSHIP | |||
Name of Beneficial Owner | Address of Beneficial Owner | Amount of Beneficial Ownership | Percent of Common Stock Outstanding |
The Vanguard Group, Inc.(1) | 100 Vanguard Blvd. Malvern, PA 19355 | 23,337,444 | 10.05% |
FMR LLC(2) | 245 Summer Street Boston, MA 02210 | 20,866,578 | 8.99% |
BlackRock, Inc.(3) | 55 East 52nd Street New York, NY 10022 | 16,905,417 | 7.30% |
(1) | This information is based on the Schedule 13G/A filed with the Securities and Exchange Commission by The Vanguard Group, Inc. on February |
2019 PROXY STATEMENT 93
OWNERSHIP OF COMPANY SECURITIES
(2) | This information is based on the Schedule 13G/A filed with the Securities and Exchange Commission by BlackRock, Inc. on February 6, 2019, which reflects beneficial ownership as of December 31, 2018. BlackRock, Inc. reported that, in its capacity as the parent holding company or control person of the subsidiaries listed therein, it had sole voting power with respect to 16,821,130 shares of our common stock, sole dispositive power with respect to 19,837,098 shares of our common stock, and shared voting and dispositive power with respect to none of our shares. |
(3) | This information is based on the Schedule 13G/A filed with the Securities and Exchange Commission by FMR LLC on February |
Under Section 16(a) of the Securities Exchange Act of 1934, our directors, executive officers, and beneficial holders of more than 10% of our common stock are required to file with the Securities and Exchange Commission certain forms reporting their beneficial ownership of and transactions in our common stock. Based solely upon a review of those forms provided to us and any written representations that no other reports were required, we believe each of our directors and executive officers and 10% beneficial owners filed all required reports on a timely basis during the last fiscal year, except that due to an administrative error by the company one Form 4, containing one transaction, was not filed timely on behalf of Peter G. O'Donnell. Therefore, on February 14, 2017, a Form 4 was filed to report Mr. O'Donnell's grant of stock options on March 9, 2016.
94 2019 PROXY STATEMENT
ITEMS TO BE VOTED ON
ITEMS TO BE VOTED ON
(Item 1 on the Proxy Card)
Our Board of Directors currently has 1312 members. TwoOne current members, Thomas R. Watjen and Edward J. Muhl,member, E. Michael Caulfield, will retire from the Board at the 20172019 Annual Meeting. Accordingly, the Board has reduced the number of Board members to 11 effective as of the 20172019 Annual Meeting. All nominees will stand for election to one-year terms of office.
Upon the recommendation of the Governance Committee, the Board of Directors has nominated Theodore H. Bunting, Jr., E. Michael Caulfield,Susan L. Cross, Susan D. DeVore, Joseph J. Echevarria, Cynthia L. Egan, Pamela H. Godwin, Kevin T. Kabat, Timothy F. Keaney, Gloria C. Larson, Richard P. McKenney, Ronald P. O’Hanley and Francis J. Shammo for election to one-year terms expiring at the 20182020 Annual Meeting. Each nominee currently serves on the Board and, except for Ms. Cross, has been previously elected to the Board by shareholders. Each nominee has agreed to continue to serve if elected. Theelected, and the Board has no reason to believe that any nominee will be unable to serve if elected. However, if any nominee becomes unable or unwilling to serve before the 20172020 Annual Meeting, proxies may be voted for another person nominated as a substitute by the Board, or the Board may reduce the number of directors. Information concerning these nominees is provided under the section titled "Director Nominees" beginning on page 12.
The Board of Directors unanimously recommends that you vote FOR the election of each of the nominees for director: Theodore H. Bunting, Jr., E. Michael Caulfield,Susan L. Cross, Susan D. DeVore, Joseph J. Echevarria, Cynthia L. Egan, Pamela H. Godwin, Kevin T. Kabat, Timothy F. Keaney, Gloria C. Larson, Richard P. McKenney, Ronald P. O’Hanley and Francis J. Shammo.
(Item 2 on the Proxy Card)
As required by Section 14A of the Securities Exchange Act of 1934 ("Exchange Act"), we are asking you to approve an advisory resolution on the compensation of our named executive officers as described in this proxy statement. This proposal, commonly known as a "Say-on-Pay" proposal, gives you the opportunity to endorse or not endorse our 20162018 executive compensation programs and policies for the named executive officers through the following resolution:
RESOLVED, that the shareholders approve, on an advisory basis, the compensation of the company’s named executive officers, as disclosed pursuant to Item 402 of Regulation S-K in the company’s proxy statement for the 20172019 Annual Meeting of Shareholders, including the Compensation Discussion and Analysis, the compensation tables and related narrative discussion.
For additional detail concerning the compensation of our named executive officers, please refer to the Compensation Discussion and Analysis beginning on page 3842 and the compensation tables that follow.
We currently hold a Say-on-Pay vote every year. Although your vote is not binding on the Board of Directors or the Human Capital Committee, the Human Capital Committee will review the voting results and seek to understand the factors that influenced the vote. As it did last year, the Human Capital Committee will consider constructive feedback obtained through this process in making future decisions about our executive compensation programs and policies.
The Board unanimously recommends that you vote FOR approval of named executive officer compensation, as provided in the resolution above.
2019 PROXY STATEMENT 95
ITEMS TO BE VOTED ON
(Item 43 on the Proxy Card)
The Audit Committee of the Board of Directors is directly responsible for the appointment, compensation, retention and oversight of the independent registered public accounting firm (independent auditor) retained to audit our financial statements. The Audit Committee has appointed Ernst & Young LLP as our independent auditor for 2017.2019. The members of the Audit Committee and the Board believe that the
The Board is seeking shareholder ratification of the appointment even though it is not legally required, as a matter of good corporate governance. If the appointment is not ratified, the Audit Committee will consider the shareholders’ views in the future selection of the company’s independent auditor.
Representatives of Ernst & Young LLP are expected to be present at the 20172019 Annual Meeting. They will have the opportunity to make a statement if they so desire and are expected to be available to respond to appropriate questions.
The Board unanimously recommends that you vote FOR the ratification of the appointment of Ernst & Young LLP as our independent registered public accounting firm for 2017.
Independent Auditor Fees
The Audit Committee is responsible for the audit fee negotiations associated with the company’s retention of Ernst & Young LLP. Aggregate fees billed for audit and other services rendered by Ernst & Young LLP for our fiscal years ended December 31, 20162018 and 20152017 are presented in the table below.
INDEPENDENT AUDITOR FEES
Types of Fees | 2018 | 2017 |
Audit Fees(1) | $8,445,000 | $7,864,000 |
Audit-Related Fees | 445,500 | 407,000 |
Tax Fees(2) | 770,900 | 615,000 |
All Other Fees | — | — |
Total | $9,661,400 | $8,886,000 |
(1) | The year-over-year increase in Audit Fees was primarily due to audit work related to the long-term care charge. |
(2) | The year-over-year increase in Tax Fees was primarily due to work related to tax reform. |
Types of Fees | 2016 | 2015 |
Audit Fees | $7,694,000 | $7,610,000 |
Audit-Related Fees | 424,000 | 926,000 |
Tax Fees | 127,000 | 155,000 |
All Other Fees | — | — |
Total | $8,245,000 | $8,691,000 |
Audit Fees.
This category includes fees associated with the audit of our annual financial statements, the review of financial statements included in our Quarterly Reports on Form 10-Q, the audit of internal control over financial reporting, and services provided in connection with statutory and regulatory filings.Audit-Related Fees.
This category consists of fees for assurance and related services that are reasonably related to the performance of the audit or review of financial statements or internal control over financial reporting. These services principally include accounting consultations, control reviews, and audit-related services for our employee benefit plans.Tax Fees.
This category consists of fees for tax compliance and advisory services.96 2019 PROXY STATEMENT
ITEMS TO BE VOTED ON
All Other Fees. This category consists of fees for services not included in any of the above categories.
Policy for Pre-Approval of Audit and Non-Audit Services
The Audit Committee has a policy requiring advance approval of all audit and permissible non-audit services performed by the independent auditor. Under this policy, the Audit Committee sets pre-approved limits for specifically defined audit and non-audit services. The Committee considers whether such services are consistent with SEC rules on auditor independence. Specific approval by the Committee is required if fees for any particular service or aggregate fees for services of a similar nature exceed the pre-
2019 PROXY STATEMENT 97
ABOUT THE 20172019 ANNUAL MEETING
ABOUT THE 20172019 ANNUAL MEETING
We are soliciting proxies on behalf of the Board of Directors in connection with the 20172019 Annual Meeting. This means we are asking you to sign a proxy designating individuals (known as proxies) to vote on your behalf at the 20172019 Annual Meeting and at any later meeting to which the meeting may be adjourned or postponed. By use of a proxy, you can vote whether or not you attend the 20172019 Annual Meeting.
Because we are soliciting your proxy, we are required to send you either our proxy materials or a Notice of Internet Availability of proxy materials (described in the next section). Our proxy materials include this proxy statement and our annual report to shareholders, which contains audited consolidated financial statements for our fiscal year ended December 31, 2016.2018. If you received a printed copy of our proxy materials by mail, you also received a proxy card or voting instruction form for the 20172019 Annual Meeting.
Internet availability of proxy materials
We are furnishing proxy materials to our shareholders primarily over the Internet. In most cases, we are mailing only a brief Notice of Internet Availability of proxy materials, rather than a full set of printed materials. The Notice of Internet Availability contains instructions on how to access our proxy materials and vote online. It also includes instructions on how to request paper or email delivery of our proxy materials. If you previously chose to receive our proxy materials electronically, you will continue to receive access to these materials via email until you elect otherwise. Our proxy materials may also be viewed on our investor relations website under the "SEC Filings" heading at www.investors.unum.com.
Attending the 20172019 Annual Meeting in person
If you attend the 20172019 Annual Meeting in person, you must present valid, government issued photo identification, such as a driver’s license, and an admission ticket or proof of ownership of our shares as of the close of business on March 27, 2017,25, 2019, the record date. If you are a shareholder of record, your Notice of Internet Availability or the top half of your proxy card is your admission ticket. If you are a beneficial owner, you will need proof of ownership to enter the meeting. Examples of proof of ownership include your Notice of Internet Availability, or a recent brokerage statement or letter from the holder of record (your broker, bank or other nominee) confirming your beneficial ownership on the record date. For your safety and that of other shareholders, we reserve the right to inspect all personal items prior to admission. If you arrive at the 20172019 Annual Meeting without proper documentation or refuse to comply with our security procedures, you may not be admitted. Each shareholder may appoint only one proxy holder or representative to attend the 20172019 Annual Meeting on his or her behalf and we reserve the right to restrict admission to a single individual representing a shareholder.
You are a "shareholder of record" if your shares are registered directly in your name with our registrar and transfer agent, Computershare Trust Company, N.A.
You are a "beneficial owner" if your shares are held through a broker, bank or other nominee (i.e., held in street name). In this case, the broker, bank or nominee is the shareholder of record.
98 2019 PROXY STATEMENT
ABOUT THE 20172019 ANNUAL MEETING
Directions
Directions to the location of the 20172019 Annual Meeting in Chattanooga, TennesseePortland, Maine are provided in Appendix C and are also available on our website at www.unum.com/directions.
Webcast
A live webcast of the 20172019 Annual Meeting will be available on our investor relations website at www.investors.unum.com. To register, access the webcast on the website and provide the information requested. The webcast will begin at 10:00 a.m. Eastern Daylight Time on Thursday, May 25, 2017,23, 2019, and will be archived on the website through June 8, 2017.
Persons entitled to vote at the 20172019 Annual Meeting
Shareholders of record as of the close of business on March 27, 2017,25, 2019, the record date, are entitled to vote their shares at the 20172019 Annual Meeting. There were approximately 228,194,535212,290,252 shares of our common stock outstanding on the record date. Each of those shares is entitled to one vote on each item of business to be voted on at the 20172019 Annual Meeting.
If you are a beneficial owner, you are not entitled to vote in person at the 20172019 Annual Meeting without a legal proxy from the broker, bank or other nominee that is the shareholder of record of your shares. You must ask your broker, bank or other nominee to furnish you with the legal proxy before the 20172019 Annual Meeting. You must then bring that document with you to the 20172019 Annual Meeting and submit it with a signed ballot that will be provided to you there.
Voting items and Board recommendations; Vote required; Abstentions and broker non-votes
You may either vote for, against or abstain on each of the voting items to be acted on at the 20172019 Annual Meeting, except that for Item 3 you may choose whether we should hold an advisory vote to approve executive compensation every one year, every two years, or every three years, or abstain from voting.Meeting. The table below summarizes, for each voting item, the voting recommendation of the Board of Directors, the vote threshold required for approval, and the effect of abstentions and broker non-votes (i.e., shares held in street name that cannot be voted on certain matters by the shareholder of record if the beneficial owner has not provided voting instructions).
VOTING ITEMS
Items to be Voted on | Recommendation | Vote Required for Approval | Effect of Abstention | Effect of Broker Non-Vote | ||
Item 1:Election of 11 directors for terms expiring in | FOR each nominee | Majority of votes cast with respect to the nominee | No effect because not counted as vote cast | No effect because not counted as vote cast | ||
Item 2: Advisory vote to approve executive compensation | FOR | Majority of shares represented and entitled to vote | Same effect as AGAINST because is entitled to vote | No effect because not entitled to vote | ||
Item | FOR | Majority of shares represented and entitled to vote | Same effect as AGAINST because is entitled to vote | Not applicable; may be discretionarily voted by broker | ||
2019 PROXY STATEMENT 99
ABOUT THE 2019 ANNUAL MEETING
Voting your shares
If you are a shareholder of record, you may vote your shares using any of the following methods:
For shareholders of record, votes submitted by mail, over the Internet or by telephone will be voted at the 20172019 Annual Meeting by the proxies named in the proxy card in the manner you indicate. If you sign and return a proxy card without marking specific voting instructions, the proxies will vote your shares FOR each director nominee and FOR each other voting item, as recommended by the Board of Directors.
If you are a beneficial owner, please refer to the Notice of Internet Availability or voting instruction form provided to you by your broker, bank or other nominee for details on how to provide voting instructions to such person. If your broker, bank or other nominee does not receive voting instructions from you, whether your shares can be voted by such person depends on the type of item being considered for vote. The only item of business at the 20172019 Annual Meeting for which your broker, bank or other nominee has discretion to vote your shares without your voting instructions is the ratification of the appointment of our independent registered public accounting firm (Item 4)3). Unless it receives your voting instructions, your broker, bank or other nominee will not have discretion to vote your shares (resulting in a "broker non-vote") on any other item of business at the 20172019 Annual Meeting (Items 1 2, 3 and 5)2), including the election of directors. To ensure that your shares are voted on each of the important matters being voted on at the 20172019 Annual Meeting, we encourage you to provide instructions to your broker, bank or nominee on how to vote your shares. As noted above, beneficial owners may vote in person at the 20172019 Annual Meeting only if they bring a legal proxy obtained from their broker, bank or other nominee.
Changing your vote and revoking your proxy
If you are a shareholder of record and wish to change your vote after submitting a proxy, you may revoke that proxy by submitting a new proxy (either by mailing a new proxy card or by providing new voting instructions over the Internet or by telephone, in each case by the deadlines under "Voting your shares" above), by giving written notice of revocation to our Corporate Secretary, or by attending the 20172019 Annual Meeting and voting in person.
If you are a beneficial owner, you may revoke a previously submitted proxy by submitting new voting instructions in the manner specified by your broker, bank or other nominee. If you obtain a legal proxy from your broker, bank or other nominee, you may also revoke a previously submitted proxy by voting in person at the 20172019 Annual Meeting and submitting it with a signed ballot that will be provided to you there.
100 2019 PROXY STATEMENT
ABOUT THE 2019 ANNUAL MEETING
Quorum
A quorum is required to transact business at the 20172019 Annual Meeting and is reached if the holders of a majority of the shares issued and outstanding and entitled to vote at the meeting are present in person or represented by proxies. Abstentions, broker non-votes and signed but unmarked proxy cards will count for purposes of determining whether a quorum is present at the 20172019 Annual Meeting.
Inspectors of election
Representatives of our transfer agent, Computershare Trust Company, N.A., will tabulate the votes and act as inspectors of the election.
Other business
We are not aware of any business to be conducted at the 20172019 Annual Meeting, other than as described in this proxy statement. If you submit a proxy, the individuals named on the proxy card will use their own judgment to determine how to vote your shares on any business not described in this proxy statement that is properly brought before the 20172019 Annual Meeting.
Voting results
We will report the final voting results of the 20172019 Annual Meeting on a Form 8-K to be filed with the SEC within four business days after the meeting. The Form 8-K will be available on our investor relations website under the "SEC Filings" heading at www.investors.unum.com or on the SEC’s website at www.sec.gov. In addition, we will announce the Board's decision on the frequency of future advisory votes to approve executive compensation on a Form 8-K that we will file with the SEC within 150 days after the 2017 Annual Meeting.
2019 PROXY STATEMENT 101
ADDITIONAL INFORMATION
ADDITIONAL INFORMATION
We pay the cost of soliciting proxies from our shareholders. Proxies are solicited by mail, and may also be solicited personally, electronically or by telephone by our directors, officers or employees, though none will receive additional compensation for doing this. We have retained Innisfree M&A Incorporated to assist in the solicitation of proxies for the 20172019 Annual Meeting. We will pay Innisfree a fee of $20,000 and reasonable out-of-pocket expenses for its services. We also reimburse brokers, banks and other nominees for their expenses in sending proxy materials to their customers who are beneficial owners and obtaining their voting instructions.
If you intend to submit a proposal for inclusion in the proxy statement for our 20182020 Annual Meeting pursuant to SEC Rule 14a-8, it must be received by the Corporate Secretary at our principal executive offices (at the address provided below) no later than the close of business on December 14, 2017.13, 2019. Submitting a shareholder proposal does not guarantee that we will include it in our proxy statement if the proposal does not satisfy the requirements of SEC Rule 14a-8.
Our bylaws to adoptinclude a proxy access right, permitting a shareholder, or a group of up to 20 shareholders, who has maintained continuous qualifying ownership of at least 3% of our outstanding shares of capital stock entitled to vote in the election of directors for at least three years to nominate and include in our proxy materials director nominees constituting up to the greater of 20% of the Board or two directors, provided that the shareholder(s) and the nominee(s) satisfy the requirements in our bylaws. Notice of proxy access director nominees must be received by the Corporate Secretary at our principal executive offices (at the address provided below) no earlier than the close of business on November 14, 201713, 2019 and no later than the close of business on December 14, 2017.13, 2019. However, in the event that that the 20182019 Annual Meeting is to be held on a date that is more than 30 days before or after May 25, 201823, 2020 (the anniversary date of the 20172019 Annual Meeting), then such notice must be received no later than the close of business on the 180th day prior to the date of the 20182020 Annual Meeting or the 10th day following the day on which public announcement of the date of the 20182020 Annual Meeting is first made.
Our bylaws also establish advance notice procedures with respect to proposals and director nominations submitted by a shareholder for presentation directly at an Annual Meeting, rather than for inclusion in our proxy statement. To be properly brought before our 20182020 Annual Meeting, a notice of the proposal or the shareholder wishes to present at the meeting other than pursuant to SEC Rule 14a-8 or nomination the shareholder wishes to present at the meeting other than pursuant to SEC Rule 14a-8our proxy access bylaw must be received by the Corporate Secretary at our principal executive offices (at the address provided below) no earlier than the close of business on January 26, 201824, 2020 and no later than the close of business on February 25, 2018.24, 2020. However, in the event that that the 20182020 Annual Meeting is to be held on a date that is more than 30 days before or more than 70 days after May 25, 201823, 2020 (the anniversary date of this year’sthe 2019 Annual Meeting), then such notice must be received no earlier than the close of business on the 120th day prior to the date of the 20182020 Annual Meeting and no later than the close of business on the later of the 90th day prior to the date of the 20182020 Annual Meeting or the 10th day following the day on which public announcement of the date of the 20182020 Annual Meeting is first made.
All such proposals and director nominations must satisfy the requirements set forth in our bylaws, a copy of which is available on our investor relations website under the "Corporate Governance" heading at www.investors.unum.com and may also be obtained at no cost from the Office of the Corporate Secretary. The chairman of the meeting may refuse to acknowledge or introduce any shareholder proposal or nomination if notice thereof is not received within the applicable deadlines or does not comply with the bylaws. If a shareholder fails to meet these deadlines, the persons named as proxies will be allowed to use their
102 2019 PROXY STATEMENT
ADDITIONAL INFORMATION
discretionary voting authority to vote on any such proposal or nomination as they determine appropriate if and when the matter is raised at the Annual Meeting.
Communications with the Board of Directors
Shareholders and interested parties may communicate with our Chairman of the Board, Lead Independent Director, or any other director by contacting the Office of the Corporate Secretary as described below.
In accordance with a process approved by our Board of Directors, the Corporate Secretary reviews all correspondence received by the company and addressed to non-management directors. A log and copies of the correspondence are provided to the Chairman, or Lead Independent Director, who determines whether further distribution is appropriate and to whom it should be sent. Any director may at any time review this log and request copies of correspondence. Concerns relating to accounting, internal controls or auditing matters are promptly brought to the attention of our internal auditors and handled in accordance with procedures established by the Audit Committee. Copies of correspondence relating to corporate governance matters are also provided to the chair of the Governance Committee.
The Board has instructed that certain items unrelated to the duties and responsibilities of the Board be excluded from the process, including mass mailings, resumes and other forms of job inquiries, surveys, business solicitations or advertisements, and matters related to claims or employment.
Eliminating duplicate proxy materials
A single proxy statement and annual report to shareholders, along with individual proxy cards, or individual Notices of Internet Availability will be delivered in one envelope to multiple shareholders having the same last name and address and to shareholders with multiple accounts registered at our transfer agent with the same address, unless contrary instructions have been received from an affected shareholder. This is known as "householding" and it enables us to reduce the costs and environmental impact of the 20172019 Annual Meeting. We will deliver promptly upon written or oral request a separate copy of the proxy statement, annual report to shareholders or Notice of Internet Availability to any shareholder residing at a shared address to which only one copy was delivered. If you are a shareholder of record and would like to receive separate copies of our proxy materials, whether for this year or future years, please contact Computershare Investor Services by calling toll-free 800-446-2617 or by writing to them at P.O. Box 43069, Providence, Rhode Island 02940-3069. The same phone number and address may be used to request delivery of a single copy of our proxy materials if you share an address with another shareholder and are receiving multiple copies. If you are a beneficial owner, you should contact your broker, bank or other nominee.
Contacting the Office of the Corporate Secretary
You may contact the Office of the Corporate Secretary by calling toll-free 800-718-8824 or by writing to:
Office of the Corporate Secretary
2019 PROXY STATEMENT 103
ADDITIONAL INFORMATION
Principal executive offices
Our principal executive offices are located at 1 Fountain Square, Chattanooga, Tennessee 37402. Our main telephone number is 423-294-1011.
Annual Report on Form 10-K
Upon request, we will provide to you by mail a free copy of our Annual Report on Form 10-K (including financial statements and financial statement schedules) for the fiscal year ended December 31, 2016.2018. Please direct your request to the Office of the Secretary at the address provided above. The Annual Report on Form 10-K may also be accessed on our investor relations website under the "SEC Filings" heading at www.investors.unum.com or on the SEC’s website at www.sec.gov.
Incorporation by reference
To the extent that this proxy statement has been or will be specifically incorporated by reference into any of our other filings under the Securities Act of 1933 or the Securities Exchange Act of 1934, the sections of this proxy statement entitled "Report of the Audit Committee" (to the extent permitted by the rules of the SEC) and "Report of the Human Capital Committee" shall not be deemed to be so incorporated, unless specifically provided otherwise in such filing.
104 2019 PROXY STATEMENT
APPENDIX A
APPENDIX A
The following non-GAAP financial measures are better performance measures and better indicators of the revenue and profitability and underlying trends in our business:
After-Tax Adjusted Operating Income (Loss) | Average Allocated Equity(1) | Adjusted Operating Return on Equity | |||||||
Year Ended December 31, 2018 | |||||||||
Unum US | $ | 803.4 | $ | 4,368.2 | 18.4 | % | |||
Unum International | 93.1 | 694.4 | 13.4 | % | |||||
Colonial Life | 265.1 | 1,475.6 | 18.0 | % | |||||
Core Operating Segments | 1,161.6 | 6,538.2 | 17.8 | % | |||||
Closed Block | 117.0 | 3,512.5 | |||||||
Corporate | (133.6 | ) | (1,359.1 | ) | |||||
Total | $ | 1,145.0 | $ | 8,691.6 | 13.2 | % |
After-Tax Operating Income (Loss) | Average Allocated Equity(1) | Operating Return on Equity | |||||||
Year Ended December 31, 2016 | |||||||||
Unum US | $ | 598.3 | $ | 3,992.2 | 15.0 | % | |||
Unum UK | 113.8 | 610.6 | 18.6 | % | |||||
Colonial Life | 204.9 | 1,173.9 | 17.4 | % | |||||
Core Operating Segments | 917.0 | 5,776.7 | 15.9 | % | |||||
Closed Block | 87.0 | 3,055.1 | |||||||
Corporate | (77.8 | ) | (691.0 | ) | |||||
Total | $ | 926.2 | $ | 8,140.8 | 11.4 | % | |||
Year Ended December 31, 2015 | $ | 901.0 | $ | 7,961.1 | 11.3 | % | |||
Year Ended December 31, 2014 | $ | 899.1 | $ | 7,974.3 | 11.3 | % |
(1) Excludes unrealized gain (loss) on securities and net gain on cash flow hedges and is calculated using the stockholders' equity balances presented below. We updated our internal allocation formula usedDue to determine allocated the implementation of a Financial Accounting Standards Board update for which the beginning balance of 2018 for certain stockholders' equity for certain of our product lines within our operating segments, and, as a result,line items were adjusted, we are computing the average allocated equity for 20162018 using internally allocated equity which was updated effectivethat reflects the adjusted beginning balance at January 1, 2016.2018. As a result, average equity for the year ended December 31, 20162018 for certain of our segments will not compute using the historical allocated equity at December 31, 2015. There was no impact on total allocated equity or total average allocated equity.2017.
12/31/2018 | 12/31/2017 | |||||||||||
Total Stockholders' Equity | $ | 8,621.8 | $ | 9,574.9 | ||||||||
Excluding: | ||||||||||||
Net Unrealized Gain (Loss) on Securities | (312.4 | ) | 607.8 | |||||||||
Net Gain on Hedges | 250.6 | 282.3 | ||||||||||
Total Adjusted Stockholders' Equity | $ | 8,683.6 | $ | 8,684.8 |
Twelve Months Ended | ||||||||||||
12/31/2018 | ||||||||||||
Average Adjusted Stockholders' Equity | $ | 8,691.6 |
2019 PROXY STATEMENT 105
APPENDIX A
Year Ended December 31 | ||||||||||||||||||
2018 | 2017 | 2016 | ||||||||||||||||
(in millions) | per share* | (in millions) | per share* | (in millions) | per share* | |||||||||||||
Net Income | $ | 523.4 | $ | 2.38 | $ | 994.2 | $ | 4.37 | $ | 931.4 | $ | 3.95 | ||||||
Excluding: | ||||||||||||||||||
Net Realized Investment Gain (Loss) (net of tax expense (benefit) of $(11.0); $15.0; $8.4) | (28.5 | ) | (0.12 | ) | 25.3 | 0.11 | 15.8 | 0.07 | ||||||||||
Loss from Guaranty Fund Assessment (net of tax benefit of $-; $7.2; $-) | — | — | (13.4 | ) | (0.06 | ) | — | — | ||||||||||
Unclaimed Death Benefits Reserve Increase (net of tax benefit $-; $13.6; $-) | — | — | (25.4 | ) | (0.11 | ) | — | — | ||||||||||
Net Tax Benefit from Impacts of TCJA | — | — | 31.5 | 0.14 | — | — | ||||||||||||
Long-term Care Reserve Increase (net of tax benefit of $157.7; $-; $-) | (593.1 | ) | (2.70 | ) | — | — | — | — | ||||||||||
After-tax Adjusted Operating Income | $ | 1,145.0 | $ | 5.20 | $ | 976.2 | $ | 4.29 | $ | 915.6 | $ | 3.88 |
Year Ended December 31 | ||||||||||||||||||
2015 | 2014 | 2013 | ||||||||||||||||
(in millions) | per share* | (in millions) | per share* | (in millions) | per share* | |||||||||||||
Net Income | $ | 867.1 | $ | 3.50 | $ | 402.1 | $ | 1.57 | $ | 847.0 | $ | 3.19 | ||||||
Excluding: | ||||||||||||||||||
Net Realized Investment Gain (Loss) (net of tax expense (benefit) of $(17.7); $3.3; $2.9) | (26.1 | ) | (0.11 | ) | 12.8 | 0.05 | 3.9 | 0.02 | ||||||||||
Costs Related to Early Retirement of Debt (net of tax benefit of $-; $2.8; $-) | — | — | (10.4 | ) | (0.04 | ) | — | — | ||||||||||
Reserve Charge for Closed Block (net of tax benefit of $-; $244.4; $-) | — | — | (453.8 | ) | (1.77 | ) | — | — | ||||||||||
Pension Settlement Loss (net of tax benefit of $-; $22.5; $-) | — | — | (41.9 | ) | (0.16 | ) | — | — | ||||||||||
Unclaimed Death Benefits Reserve Increase (net of tax benefit of $-; $-; $33.4) | — | — | — | — | (62.1 | ) | (0.24 | ) | ||||||||||
Group Life Waiver of Premium Benefit Reserve Reduction (net of tax expense of $-; $-; $29.8) | — | — | — | — | 55.2 | 0.21 | ||||||||||||
After-tax Adjusted Operating Income | $ | 893.2 | $ | 3.61 | $ | 895.4 | $ | 3.49 | $ | 850.0 | $ | 3.20 |
*Assuming Dilution.
106 2019 PROXY STATEMENT
APPENDIX A
Year Ended December 31 | ||||||||||||||||||
2012 | 2011 | 2010 | ||||||||||||||||
(in millions) | per share* | (in millions) | per share* | (in millions) | per share* | |||||||||||||
Net Income | $ | 888.1 | $ | 3.15 | $ | 283.6 | $ | 0.94 | $ | 877.6 | $ | 2.69 | ||||||
Excluding: | ||||||||||||||||||
Net Realized Investment Gain (Loss) (net of tax expense (benefit) of $19.1; $(1.3); $9.0) | 37.1 | 0.13 | (3.6 | ) | (0.01 | ) | 15.7 | 0.05 | ||||||||||
Reserve Charge for Closed Block (net of tax benefit of $-; $265.0; $-) | — | — | (492.1 | ) | (1.62 | ) | — | — | ||||||||||
Deferred Acquisition Costs for Closed Block (net of tax benefit of $-; $68.5; $-) | — | — | (127.5 | ) | (0.42 | ) | — | — | ||||||||||
Special Tax Items | — | — | 22.7 | 0.08 | (10.2 | ) | (0.03 | ) | ||||||||||
After-tax Adjusted Operating Income | $ | 851.0 | $ | 3.02 | $ | 884.1 | $ | 2.91 | $ | 872.1 | $ | 2.67 |
Year Ended December 31 | ||||||||||||||||||
2009 | 2008 | 2007** | ||||||||||||||||
(in millions) | per share* | (in millions) | per share* | (in millions) | per share* | |||||||||||||
Net Income | $ | 847.3 | $ | 2.55 | $ | 553.4 | $ | 1.62 | $ | 679.3 | $ | 1.91 | ||||||
Excluding: | ||||||||||||||||||
Income from Discontinued Operations | — | — | — | — | 6.9 | 0.02 | ||||||||||||
Net Realized Investment Gain (Loss) (net of tax expense (benefit) of $11,5; $(161.8); $(22.0)) | 0.2 | — | (304.1 | ) | (0.89 | ) | (43.2 | ) | (0.12 | ) | ||||||||
Regulatory Reassessment Charges (net of tax benefit of $-; $-; $31.3) | — | — | — | — | (34.5 | ) | (0.10 | ) | ||||||||||
Debt Extinguishment Costs (net of tax benefit of $-; $-; $20.5) | — | — | — | — | (38.3 | ) | (0.11 | ) | ||||||||||
Special Tax Items | — | — | — | — | 2.2 | 0.01 | ||||||||||||
After-tax Adjusted Operating Income | $ | 847.1 | $ | 2.55 | $ | 857.5 | $ | 2.51 | $ | 786.2 | $ | 2.21 |
12/31/2016 | 12/31/2015 | 12/31/2014 | 12/31/2013 | ||||||||||||
Total Stockholders' Equity, As Reported | $ | 8,968.0 | $ | 8,663.9 | $ | 8,521.9 | $ | 8,639.9 | |||||||
Excluding: | |||||||||||||||
Net Unrealized Gain on Securities | 440.6 | 204.3 | 290.3 | 135.7 | |||||||||||
Net Gain on Cash Flow Hedges | 327.5 | 378.0 | 391.0 | 396.3 | |||||||||||
Total Stockholders' Equity, As Adjusted | $ | 8,199.9 | $ | 8,081.6 | $ | 7,840.6 | $ | 8,107.9 | |||||||
Twelve Months Ended | Twelve Months Ended | Twelve Months Ended | |||||||||||||
12/31/2016 | 12/31/2015 | 12/31/2014 | |||||||||||||
Average Stockholders' Equity Excluding Net Unrealized Gain on Securities and Net Gain on Cash Flow Hedges | $ | 8,140.8 | $ | 7,961.1 | $ | 7,974.3 |
Year Ended December 31 | ||||||||||||||||||||||||
2016 | 2015 | 2014 | ||||||||||||||||||||||
(in millions) | per share * | (in millions) | per share * | (in millions) | per share * | |||||||||||||||||||
Net Income | $ | 931.4 | $ | 3.95 | $ | 867.1 | $ | 3.50 | $ | 402.1 | $ | 1.57 | ||||||||||||
Excluding: | ||||||||||||||||||||||||
Net Realized Investment Gain (Loss) (net of tax expense (benefit) of $8.4; $(17.7); $3.3) | 15.8 | 0.07 | (26.1 | ) | (0.11 | ) | 12.8 | 0.05 | ||||||||||||||||
Non-operating Retirement-related Loss (net of tax benefit of $5.7; $4.1; $24.4) | (10.6 | ) | (0.04 | ) | (7.8 | ) | (0.03 | ) | (45.6 | ) | (0.18 | ) | ||||||||||||
Costs Related to Early Retirement of Debt (net of tax benefit of $-; $-; $2.8) | — | — | — | — | (10.4 | ) | (0.04 | ) | ||||||||||||||||
Reserve Charges for Closed Block (net of tax benefit of $-; $-; $244.4) | — | — | — | — | (453.8 | ) | (1.77 | ) | ||||||||||||||||
After-tax Operating Income | $ | 926.2 | $ | 3.92 | $ | 901.0 | $ | 3.64 | $ | 899.1 | $ | 3.51 | ||||||||||||
Year Ended December 31 | ||||||||||||||||||||||||
2013 | 2012 | 2011 | ||||||||||||||||||||||
(in millions) | per share * | (in millions) | per share * | (in millions) | per share * | |||||||||||||||||||
Net Income | $ | 847.0 | $ | 3.19 | $ | 888.1 | $ | 3.15 | $ | 283.6 | $ | 0.94 | ||||||||||||
Excluding: | ||||||||||||||||||||||||
Net Realized Investment Gain (Loss) (net of tax expense (benefit) of $2.9; $19.1; $(1.3)) | 3.9 | 0.02 | 37.1 | 0.13 | (3.6 | ) | (0.01 | ) | ||||||||||||||||
Non-operating Retirement-related Loss (net of tax benefit of $11.5; $16.2; $11.2) | (21.4 | ) | (0.08 | ) | (30.2 | ) | (0.11 | ) | (20.7 | ) | (0.07 | ) | ||||||||||||
Unclaimed Death Benefits Reserve Increase (net of tax benefit of $33.4; $-; $-) | (62.1 | ) | (0.24 | ) | — | — | — | — | ||||||||||||||||
Group Life Waiver of Premium Benefit Reserve Reduction (net of tax expense of $29.8; $-; $-) | 55.2 | 0.21 | — | — | — | — | ||||||||||||||||||
Reserve Charges for Closed Block (net of tax benefit of $-; $-; $265.0) | — | — | — | — | (492.1 | ) | (1.62 | ) | ||||||||||||||||
Deferred Acquisition Costs for Closed Block (net of tax benefit of $-; $-; $68.5) | — | — | — | — | (127.5 | ) | (0.42 | ) | ||||||||||||||||
Special Tax Items | — | — | — | — | 22.7 | 0.08 | ||||||||||||||||||
After-tax Operating Income | $ | 871.4 | $ | 3.28 | $ | 881.2 | $ | 3.13 | $ | 904.8 | $ | 2.98 |
*Assuming Dilution.
Year Ended December 31 | ||||||||||||||||||||||||
2010 | 2009 | 2008 | ||||||||||||||||||||||
(in millions) | per share * | (in millions) | per share * | (in millions) | per share * | |||||||||||||||||||
Net Income | $ | 877.6 | $ | 2.69 | $ | 847.3 | $ | 2.55 | $ | 553.4 | $ | 1.62 | ||||||||||||
Excluding: | ||||||||||||||||||||||||
Net Realized Investment Gain (Loss) (net of tax expense (benefit) of $9.0; $11.5; $(161.8)) | 15.7 | 0.05 | 0.2 | — | (304.1 | ) | (0.89 | ) | ||||||||||||||||
Non-operating Retirement-related Loss (net of tax benefit of $11.3; $15.2; $5.7) | (21.1 | ) | (0.06 | ) | (28.3 | ) | (0.09 | ) | (10.5 | ) | (0.03 | ) | ||||||||||||
Special Tax Items | (10.2 | ) | (0.03 | ) | — | — | — | — | ||||||||||||||||
After-tax Operating Income | $ | 893.2 | $ | 2.73 | $ | 875.4 | $ | 2.64 | $ | 868.0 | $ | 2.54 | ||||||||||||
Year Ended December 31 | ||||||||||||||||||||||||
2007** | 2006** | 2005** | ||||||||||||||||||||||
(in millions) | per share * | (in millions) | per share * | (in millions) | per share * | |||||||||||||||||||
Net Income | $ | 679.3 | $ | 1.91 | $ | 411.0 | $ | 1.23 | $ | 513.6 | $ | 1.64 | ||||||||||||
Excluding: | ||||||||||||||||||||||||
Income from Discontinued Operations | 6.9 | 0.02 | 7.4 | 0.02 | 9.6 | 0.03 | ||||||||||||||||||
Net Realized Investment Gain (Loss) (net of tax expense (benefit) of $(22.0); $0.7; $(2.4)) | (43.2 | ) | (0.12 | ) | 1.5 | 0.01 | (4.3 | ) | (0.02 | ) | ||||||||||||||
Non-operating Retirement-related Loss (net of tax benefit of $7.9; $8.5; $7.4) | (14.6 | ) | (0.04 | ) | (16.2 | ) | (0.05 | ) | (14.4 | ) | (0.05 | ) | ||||||||||||
Regulatory Reassessment Charges (net of tax benefit of $31.3; $129.0; $1.1) | (34.5 | ) | (0.10 | ) | (267.4 | ) | (0.79 | ) | (51.6 | ) | (0.16 | ) | ||||||||||||
Debt Extinguishment Costs (net of tax benefit of $20.5; $8.9, $-) | (38.3 | ) | (0.11 | ) | (16.9 | ) | (0.05 | ) | — | — | ||||||||||||||
Other (net of tax expense (benefit) of $-; $(5.8); $1.7) | — | — | (12.7 | ) | (0.04 | ) | 4.0 | 0.01 | ||||||||||||||||
Special Tax Items | 2.2 | 0.01 | 95.8 | 0.28 | 42.8 | 0.14 | ||||||||||||||||||
After-tax Operating Income | $ | 800.8 | $ | 2.25 | $ | 619.5 | $ | 1.85 | $ | 527.5 | $ | 1.69 |
**Does not reflect the impact of ASU 2010-26.
2019 PROXY STATEMENT 107
APPENDIX A
Year Ended December 31 | ||||||||||||
2006** | 2005** | |||||||||||
(in millions) | per share * | (in millions) | per share * | |||||||||
Net Income | $ | 411.0 | $ | 1.23 | $ | 513.6 | $ | 1.64 | ||||
Excluding: | ||||||||||||
Income from Discontinued Operations | 7.4 | 0.02 | 9.6 | 0.03 | ||||||||
Net Realized Investment Gain (Loss) (net of tax expense (benefit) of $0.7; $(2.4)) | 1.5 | 0.01 | (4.3 | ) | (0.02 | ) | ||||||
Regulatory Reassessment Charges (net of tax benefit of $129.0; $1.1) | (267.4 | ) | (0.79 | ) | (51.6 | ) | (0.16 | ) | ||||
Debt Extinguishment Costs (net of tax benefit of $8.9; $-) | (16.9 | ) | (0.05 | ) | — | — | ||||||
Other (net of tax expense (benefit) of $(5.8); $1.7) | (12.7 | ) | (0.04 | ) | 4.0 | 0.01 | ||||||
Special Tax Items | 95.8 | 0.28 | 42.8 | 0.14 | ||||||||
After-tax Adjusted Operating Income | $ | 603.3 | $ | 1.80 | $ | 513.1 | $ | 1.64 |
* Assuming Dilution.
** Does not reflect the impact of ASU 2010-26.
12/31/2018 | 12/31/2017 | 12/31/2016 | ||||||||||||||||
(in millions) | per share | (in millions) | per share | (in millions) | per share | |||||||||||||
Total Stockholders' Equity (Book Value) | $ | 8,621.8 | $ | 40.19 | $ | 9,574.9 | $ | 43.02 | $ | 8,968.0 | $ | 39.02 | ||||||
Excluding: | ||||||||||||||||||
Net Unrealized Gain (Loss) on Securities | (312.4 | ) | (1.46 | ) | 607.8 | 2.73 | 440.6 | 1.92 | ||||||||||
Net Gain on Hedges | 250.6 | 1.17 | 282.3 | 1.27 | 327.5 | 1.42 | ||||||||||||
Subtotal | 8,683.6 | 40.48 | 8,684.8 | 39.02 | 8,199.9 | 35.68 | ||||||||||||
Excluding: | ||||||||||||||||||
Foreign Currency Translation Adjustment | (305.2 | ) | (1.42 | ) | (254.5 | ) | (1.15 | ) | (354.0 | ) | (1.54 | ) | ||||||
Subtotal | 8,988.8 | 41.90 | 8,939.3 | 40.17 | 8,553.9 | 37.22 | ||||||||||||
Excluding: | ||||||||||||||||||
Unrecognized Pension and Postretirement Benefit Costs | (447.2 | ) | (2.08 | ) | (508.1 | ) | (2.28 | ) | (465.1 | ) | (2.02 | ) | ||||||
Total Stockholders' Equity, Excluding Accumulated Other Comprehensive Income (Loss) | $ | 9,436.0 | $ | 43.98 | $ | 9,447.4 | $ | 42.45 | $ | 9,019.0 | $ | 39.24 |
108 2019 PROXY STATEMENT
APPENDIX A
12/31/2015 | 12/31/2014 | 12/31/2013 | ||||||||||||||||
(in millions) | per share | (in millions) | per share | (in millions) | per share | |||||||||||||
Total Stockholders' Equity (Book Value) | $ | 8,663.9 | $ | 35.96 | $ | 8,521.9 | $ | 33.78 | $ | 8,639.9 | $ | 33.23 | ||||||
Excluding: | ||||||||||||||||||
Net Unrealized Gain on Securities | 204.3 | 0.84 | 290.3 | 1.15 | 135.7 | 0.52 | ||||||||||||
Net Gain on Hedges | 378.0 | 1.57 | 391.0 | 1.55 | 396.3 | 1.52 | ||||||||||||
Subtotal | 8,081.6 | 33.55 | 7,840.6 | 31.08 | 8,107.9 | 31.19 | ||||||||||||
Excluding: | ||||||||||||||||||
Foreign Currency Translation Adjustment | (173.6 | ) | (0.72 | ) | (113.4 | ) | (0.45 | ) | (47.1 | ) | (0.18 | ) | ||||||
Subtotal | 8,255.2 | 34.27 | 7,954.0 | 31.53 | 8,155.0 | 31.37 | ||||||||||||
Excluding: | ||||||||||||||||||
Unrecognized Pension and Postretirement Benefit Costs | (392.6 | ) | (1.63 | ) | (401.5 | ) | (1.59 | ) | (229.9 | ) | (0.88 | ) | ||||||
Total Stockholders' Equity, Excluding Accumulated Other Comprehensive Income | $ | 8,647.8 | $ | 35.90 | $ | 8,355.5 | $ | 33.12 | $ | 8,384.9 | $ | 32.25 |
12/31/2012 | 12/31/2011 | 12/31/2010 | ||||||||||||||||
(in millions) | per share | (in millions) | per share | (in millions) | per share | |||||||||||||
Total Stockholders' Equity (Book Value) | $ | 8,604.6 | $ | 31.84 | $ | 8,168.0 | $ | 27.91 | $ | 8,483.9 | $ | 26.80 | ||||||
Excluding: | ||||||||||||||||||
Net Unrealized Gain on Securities | 873.5 | 3.23 | 614.8 | 2.11 | 416.1 | 1.31 | ||||||||||||
Net Gain on Hedges | 401.6 | 1.48 | 408.7 | 1.39 | 361.0 | 1.14 | ||||||||||||
Subtotal | 7,329.5 | 27.13 | 7,144.5 | 24.41 | 7,706.8 | 24.35 | ||||||||||||
Excluding: | ||||||||||||||||||
Foreign Currency Translation Adjustment | (72.6 | ) | (0.26 | ) | (117.6 | ) | (0.41 | ) | (107.1 | ) | (0.34 | ) | ||||||
Subtotal | 7,402.1 | 27.39 | 7,262.1 | 24.82 | 7,813.9 | 24.69 | ||||||||||||
Excluding: | ||||||||||||||||||
Unrecognized Pension and Postretirement Benefit Costs | (574.5 | ) | (2.13 | ) | (444.1 | ) | (1.51 | ) | (318.6 | ) | (1.00 | ) | ||||||
Total Stockholders' Equity, Excluding Accumulated Other Comprehensive Income | $ | 7,976.6 | $ | 29.52 | $ | 7,706.2 | $ | 26.33 | $ | 8,132.5 | $ | 25.69 |
12/31/2009 | 12/31/2008 | |||||||||||
(in millions) | per share | (in millions) | per share | |||||||||
Total Stockholders' Equity (Book Value) | $ | 8,045.0 | $ | 24.25 | $ | 5,941.5 | $ | 17.94 | ||||
Excluding: | ||||||||||||
Net Unrealized Gain (Loss) on Securities | 382.7 | 1.16 | $ | (837.4 | ) | $ | (2.53 | ) | ||||
Net Gain on Hedges | 370.8 | 1.12 | 458.5 | 1.38 | ||||||||
Subtotal | 7,291.5 | 21.97 | 6,320.4 | 19.09 | ||||||||
Excluding: | ||||||||||||
Foreign Currency Translation Adjustment | (75.3 | ) | (0.23 | ) | (172.8 | ) | (0.52 | ) | ||||
Subtotal | 7,366.8 | 22.20 | 6,493.2 | 19.61 | ||||||||
Excluding: | ||||||||||||
Unrecognized Pension and Postretirement Benefit Costs | (330.7 | ) | (1.00 | ) | (406.5 | ) | (1.23 | ) | ||||
Total Stockholders' Equity, Excluding Accumulated Other Comprehensive Income (Loss) | $ | 7,697.5 | $ | 23.20 | $ | 6,899.7 | $ | 20.84 |
2019 PROXY STATEMENT 109
12/31/2016 | 12/31/2015 | 12/31/2014 | |||||||||||||||||||||
(in millions) | per share | (in millions) | per share | (in millions) | per share | ||||||||||||||||||
Total Stockholders' Equity (Book Value) | $ | 8,968.0 | $ | 39.02 | $ | 8,663.9 | $ | 35.96 | $ | 8,521.9 | $ | 33.78 | |||||||||||
Excluding: | |||||||||||||||||||||||
Net Unrealized Gain on Securities | 440.6 | 1.92 | 204.3 | 0.84 | 290.3 | 1.15 | |||||||||||||||||
Net Gain on Cash Flow Hedges | 327.5 | 1.42 | 378.0 | 1.57 | 391.0 | 1.55 | |||||||||||||||||
Subtotal | 8,199.9 | 35.68 | 8,081.6 | 33.55 | 7,840.6 | 31.08 | |||||||||||||||||
Excluding: | |||||||||||||||||||||||
Foreign Currency Translation Adjustment | (354.0 | ) | (1.54 | ) | (173.6 | ) | (0.72 | ) | (113.4 | ) | (0.45 | ) | |||||||||||
Subtotal | 8,553.9 | 37.22 | 8,255.2 | 34.27 | 7,954.0 | 31.53 | |||||||||||||||||
Excluding: | |||||||||||||||||||||||
Unrecognized Pension and Postretirement Benefit Costs | (465.1 | ) | (2.02 | ) | (392.6 | ) | (1.63 | ) | (401.5 | ) | (1.59 | ) | |||||||||||
Total Stockholders' Equity, Excluding Accumulated Other Comprehensive Income (Loss) | $ | 9,019.0 | $ | 39.24 | $ | 8,647.8 | $ | 35.90 | $ | 8,355.5 | $ | 33.12 |
12/31/2013 | 12/31/2012 | 12/31/2011 | |||||||||||||||||||||
(in millions) | per share | (in millions) | per share | (in millions) | per share | ||||||||||||||||||
Total Stockholders' Equity (Book Value) | $ | 8,639.9 | $ | 33.23 | $ | 8,604.6 | $ | 31.84 | $ | 8,168.0 | $ | 27.91 | |||||||||||
Excluding: | |||||||||||||||||||||||
Net Unrealized Gain on Securities | 135.7 | 0.52 | 873.5 | 3.23 | 614.8 | 2.11 | |||||||||||||||||
Net Gain on Cash Flow Hedges | 396.3 | 1.52 | 401.6 | 1.48 | 408.7 | 1.39 | |||||||||||||||||
Subtotal | 8,107.9 | 31.19 | 7,329.5 | 27.13 | 7,144.5 | 24.41 | |||||||||||||||||
Excluding: | |||||||||||||||||||||||
Foreign Currency Translation Adjustment | (47.1 | ) | (0.18 | ) | (72.6 | ) | (0.26 | ) | (117.6 | ) | (0.41 | ) | |||||||||||
Subtotal | 8,155.0 | 31.37 | 7,402.1 | 27.39 | 7,262.1 | 24.82 | |||||||||||||||||
Excluding: | |||||||||||||||||||||||
Unrecognized Pension and Postretirement Benefit Costs | (229.9 | ) | (0.88 | ) | (574.5 | ) | (2.13 | ) | (444.1 | ) | (1.51 | ) | |||||||||||
Total Stockholders' Equity, Excluding Accumulated Other Comprehensive Income (Loss) | $ | 8,384.9 | $ | 32.25 | $ | 7,976.6 | $ | 29.52 | $ | 7,706.2 | $ | 26.33 |
Usingablackinkpen,markyourvoteswithanXasshowninthisexample.Pleasedonotwriteoutsidethedesignatedareas.AnnualMeetingProxyCardIFVOTINGBYMAIL,SIGN,DETACHANDRETURNTHEBOTTOMPORTIONINTHEENCLOSEDENVELOPE.Proposals—Youmustsignthecardbelowforyourvotetobecounted.TheBoardofDirectorsrecommendsavoteFOReachofthenomineeslisted.1.ElectionofDirectors:ForAgainstAbstain01-TheodoreH.Bunting,Jr.02-SusanL.CrossForAgainstAbstain03-SusanD.DevoreForAgainstAbstain04-JosephJ.Echevarria05-CynthiaL.Egan06-KevinT.Kabat07-TimothyF.Keaney08-GloriaC.Larson09-RichardP.McKenney10-RonaldP.O'Hanley11-FrancisJ.ShammoTheBoardofDirectorsrecommendsavoteFORProposals2and3.2.Toapprove,onanadvisorybasis,thecompensationofthecompany'snamedexecutiveofficers.ForAgainstAbstain3.ToratifytheappointmentorErnst&YoungLLPasthecompany'sindependentregisteredpublicaccountingfirmfor2019.ForAgainstAbstainPLEASESIGNTHISPROXYEXACTLYASYOURNAMEORNAMESAPPEARSHEREON.IFSTOCKISHELDJOINTLY,SIGNATURESSHOULDAPPEARFORBOTHNAMES.WHENSIGNINGASANATTORNEY,EXECUTOR,ADMINISTRATOR,TRUSTEE,GUARDIANORCUSTODIAN,PLEASEINDICATETHECAPACITYINWHICHYOUAREACTING.Date(mm/dd/yyyy)—Pleaseprintdatebelow.Signature1—Pleasekeepsignaturewithinthebox.Signature2—Pleasekeepsignaturewithinthebox.
12/31/2010 | 12/31/2009 | 12/31/2008 | |||||||||||||||||||||
(in millions) | per share | (in millions) | per share | (in millions) | per share | ||||||||||||||||||
Total Stockholders' Equity (Book Value) | $ | 8,483.9 | $ | 26.80 | $ | 8,045.0 | $ | 24.25 | $ | 5,941.5 | $ | 17.94 | |||||||||||
Excluding: | |||||||||||||||||||||||
Net Unrealized Gain (Loss) on Securities | 416.1 | 1.31 | 382.7 | 1.16 | (837.4 | ) | (2.53 | ) | |||||||||||||||
Net Gain on Cash Flow Hedges | 361.0 | 1.14 | 370.8 | 1.12 | 458.5 | 1.38 | |||||||||||||||||
Subtotal | 7,706.8 | 24.35 | 7,291.5 | 21.97 | 6,320.4 | 19.09 | |||||||||||||||||
Excluding: | |||||||||||||||||||||||
Foreign Currency Translation Adjustment | (107.1 | ) | (0.34 | ) | (75.3 | ) | (0.23 | ) | (172.8 | ) | (0.52 | ) | |||||||||||
Subtotal | 7,813.9 | 24.69 | 7,366.8 | 22.20 | 6,493.2 | 19.61 | |||||||||||||||||
Excluding: | |||||||||||||||||||||||
Unrecognized Pension and Postretirement Benefit Costs | (318.6 | ) | (1.00 | ) | (330.7 | ) | (1.00 | ) | (406.5 | ) | (1.23 | ) | |||||||||||
Total Stockholders' Equity, Excluding Accumulated Other Comprehensive Income (Loss) | $ | 8,132.5 | $ | 25.69 | $ | 7,697.5 | $ | 23.20 | $ | 6,899.7 | $ | 20.84 |
ImportantnoticeregardingtheInternetavailabilityofproxymaterialsfortheAnnualMeetingofShareholders.Thematerialisavailableat:www.edocumentview.com/UNMIFVOTINGBYMAIL,SIGN,DETACHANDRETURNTHEBOTTOMPORTIONINTHEENCLOSEDENVELOPE.Proxy—UnumGroupAnnualMeetingofStockholdersMay23,201910:00amEasternDaylightTime2211CongressStreet,Portland,ME04102ThisProxyissolicitedonbehalfoftheBoardofDirectorsofUnumGroup.TheundersignedherebyappointsJohnF.McGarryandLisaG.Iglesias,oreitherofthem,proxies,eachwithfullpowerofsubstitution,actingjointlyorbyeitherofthemifonlyonebepresentandacting,tovoteandactwithrespecttoallofthesharesofcommonstockoftheundersignedinUnumGroup,attheAnnualMeeting,uponallmattersthatmayproperlycomebeforethemeeting,includingthemattersdescribedintheProxyStatementfurnishedherewith,subjecttothedirectionsindicatedonthereversesideofthiscardorthroughthetelephoneorInternetproxyprocedures,andatthediscretionoftheproxiesonanyothermattersthatmayproperlycomebeforethemeeting.Ifspecificvotinginstructionsarenotgivenwithrespecttothematterstobeacteduponandthesignedcardisreturned,theproxieswillvoteinaccordancewiththeBoardofDirectors’recommendationsprovidedonthereversesideofthiscard,andattheirdiscretiononanyothermattersthatmayproperlycomebeforethemeeting.Thisproxycard,whensignedandreturned,willalsoconstitutevotinginstructionstothetrusteeforsharesheldintheUnumGroup401(k)RetirementPlanortothebroker-dealerforsharesheldintheEmployeeStockPurchasePlan.Ifvotinginstructionsrepresentingsharesintheforegoingemployeebenefitplansarenotreceived,thoseshareswillnotbevoted.THISPROXY,WHENPROPERLYEXECUTED,WILLBEVOTEDINTHEMANNERDIRECTEDHEREINBYTHEUNDERSIGNEDSHAREHOLDER.IFNODIRECTIONISMADE,THISPROXYWILLBEVOTED“FOR”THEELECTIONOFALLOFTHEDIRECTORNOMINEESLISTEDINPROPOSAL1,AND“FOR”PROPOSALS2AND3.IFOTHERBUSINESSISPROPERLYBROUGHTBEFORETHEMEETING,THEPROXIESWILLVOTEINACCORDANCEWITHTHEIRBESTJUDGMENT.