UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
SCHEDULE 14A INFORMATION
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Securities Exchange Act of 1934
(Amendment No.    )
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Kemper Corporation
(Name of registrant as specified in its charter)
 
(Name of person(s) filing proxy statement, if other than the registrant)
 
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kemperlogo140x25.jpg


Notice of 20162019 Annual Meeting & Proxy Statement
 
 
 





Kemper Corporation
One200 East Wacker DriveRandolph Street
Suite 3300
Chicago, Illinois 60601
kemper.com



kemperlogo140x25.jpg
Notice of 20162019 Annual Meeting of Shareholders to Be Held May 4, 20161, 2019

The 20162019 Annual Meeting of the Shareholders (“Annual Meeting”Meeting”) of Kemper Corporation (“Company”Company” or “Kemper”“Kemper) will be held at 8:00 a.m., Central Daylight Time, on Wednesday, May 4, 2016,1, 2019, at The Kemper Building, One200 East Wacker Drive,Randolph Street, 80th Floor, Chicago, Illinois 60601. Attendees providing proper identification will be directed to the meeting room located on the 20th80th floor. The purpose of the Annual Meeting will be to:
                        
1.Elect a Board of Directors;
2.
Consider and vote on an advisory proposal on the ratification ofto ratify the selection of Deloitte & Touche LLP as the Company’s independent registered public accountant for 20162019;
3.Consider and vote on approvalan advisory proposal to approve the compensation of the material terms ofCompany’s Named Executive Officers, as disclosed in this Proxy Statement;
4.Consider and vote on a proposal to approve the performance goals under the Company's 2011 Omnibus EquityCompany’s 2019 Employee Stock Purchase Plan; and
4.5.Consider and act upon such other business as may be properly brought before the meeting.

The Board of Directors of Kemper has fixed March 11, 20167, 2019 as the record date (“Record Date”Date”) for determining shareholders entitled to receive this notice and to vote at the 20162019 Annual Meeting or any adjournments or postponements of the meeting. Only shareholders of record at the close of business on the Record Date will be entitled to notice of, and to vote at, the Annual Meeting. A list of registered shareholders as of the close of business on March 11, 20167, 2019 will be available for inspection at the Annual Meeting and for a period of ten10 days prior to May 4, 20161, 2019 during ordinary business hours at the Company’s executive offices located at One200 East Wacker Drive,Randolph Street, Suite 3300, Chicago, Illinois 60601.

By Order of the Board of Directors,
    cthomasevanssiga02.jpg
C. Thomas Evans, Jr.
Secretary
Chicago, Illinois
March 24, 201620, 2019

Important Notice Regarding the Availability of Proxy Materials for the Annual Meeting of Shareholders to be held on May 4, 2016:1, 2019: The Company’s 20162019 Proxy Statement and 20152018 Annual Report to Shareholders are available at proxyvote.com.

Regardless of whether you plan to attend the Annual Meeting, please vote your proxy as promptly as possible. You may vote by timely returning your signed and dated proxy card in the postage-paid envelope provided, or you may vote by telephone or through the Internet. Instructions are printed on your proxy card. To obtain directions to attend in person, you may contact Investor Relations by telephone at 312.661.4930, or by e-mail at investors@kemper.com.



Table of Contents



TABLE OF CONTENTS    
 
 Page
Proxy Statement Summary
1
  
Board and Corporate Governance
2
Meetings and Committees of the Board of Directors
2
Corporate Governance
4
Selection of Board Nominees
4
Related Person Transactions
54
Director Independence
5
Compensation Committee Interlocks and Insider Participation
6
Board Leadership and Role in Risk Oversight
6
Director Compensation
87
20152018 Annual Non-Employee Director Compensation Program
87
Director Compensation Table
98
Proposal 1: Election of Directors
119
Overview
11
Business Experience of Nominees
11
Required Vote
14
Recommendation of the Board of Directors
14
Audit Matters
1513
Audit Committee Report
1513
Independent Registered Public Accountant
1613
Independent Registered Public Accountant Fees for 20152018 and 20142017
1613
Pre-Approval of Services by Independent Registered Public Accountant
1614
Proposal 2: Advisory Vote on Ratificationto Ratify the Selection of Deloitte & Touche LLP as the Company's Independent Registered Public Accountant
1715
Overview
17
Required Vote
17
Recommendation of the Board of Directors
17
Executive Compensation
18
Executive Officers
1816
Discussion of Compensation Committee Governance
1918
Compensation Discussion and Analysis
20
Executive Summary
20
Executive Compensation Program
21
Compensation Strategy and Analysis
23
Annual Determination of Specific Compensation
26
Stock Ownership Policy
36
Changes Made to NEO Compensation for 2019
36
Perquisites
37
Employee Welfare Benefit and Retirement Plans
37
Other Post-Employment Compensation
38
Tax Implications
38
Compensation Committee Report
3639
Executive Officer Compensation & Benefits
3740
Summary Compensation Table
3740
Grants of Plan-Based Awards in 20152018 - Narrative and Table
3942
Outstanding Equity Awards at 20152018 Fiscal Year-End Table
4144
Option Exercises and Stock Vested in 20152018 Table
4346
Retirement Plans - Narrative and Pension Benefits Table
4447
Nonqualified Deferred Compensation - Narrative and Table
4548
Potential Payments Upon Termination or Change in Control - Narrative and Table
4649
Pay Ratio Disclosure
53
Proposal 3: Consider andAdvisory Vote on Approvalto Approve the Compensation of the Material Terms of Performance Goals under the Company's 2011 Omnibus Equity Plan
52
Overview
52
Purpose of Proposal: Approval of the Material Terms of Performance Goals under Omnibus Plan
52
Description of the Omnibus PlanCompany’s Named Executive Officers
54
Required Vote
60


Recommendation of
Proposal 4: Vote to Approve the Board of DirectorsCompany's 2019 Employee Stock Purchase Plan
6055
Ownership of Kemper Common Stock
6158
Directors and Executive Officers
6158
Certain Beneficial Owners
6259
Section 16(a) Beneficial Ownership Reporting Compliance
6460
Frequently Asked Questions
6561
  
Incorporation by Reference
7066
  
Appendix A: Supplement to Compensation Discussion and Analysis
A-1
Appendix B: Kemper Corporation 2019 Employee Stock Purchase Plan
B-1
 

    
  Proxy Statement Summary


Proxy Statement Summary
The Kemper Board of Directors (“Board of KemperDirectors” or “Board”) is furnishing you with this Proxy Statement to solicit your proxy to be voted at Kemper’s Annual Meeting. This Proxy Statement Summary highlights information contained elsewhere in this proxy statement.Proxy Statement. Please read the entire Proxy Statement carefully before voting.
Annual Meeting of Shareholders
Date:            Wednesday, May 4, 20161, 2019
Time:            8:00 a.m. Central Daylight Time    
Location:        The Kemper Building200 East Randolph Street
One East Wacker Drive80th Floor
Chicago, Illinois 60601
Record Date:        March 11, 20167, 2019
Voting Matters and Board Recommendations
Voting Matter Board Recommendation Page Reference
1.Election of Directors; FOR 
9
2.Advisory vote to ratify selection of Deloitte & Touche LLP as the Company’s independent registered public accountant for 2019; FOR 
15
3.Advisory vote to approve the compensation of the Company’s Named Executive Officers, as disclosed in this Proxy Statement; and FOR 
54
4.Vote to approve the Company’s 2019 Employee Stock Purchase Plan FOR 
55
 Matter Board Recommendation Page Reference
1.Election of Directors FOR 
11
2.Advisory vote on the ratification of independent registered public accountant FOR 
17
3.Approval of the material terms of the performance goals under the Company's 2011 Omnibus Equity Plan. FOR 
52
How to Cast Your Vote
The proxies may also be voted at any adjournments or postponements of the Annual Meeting.
The mailing address of our principal executive office is One200 East Wacker Drive,Randolph Street, Suite 3300, Chicago, Illinois 60601. We began sending these proxy materials on or about March 24, 201620, 2019 to all shareholders entitled to vote at the Annual Meeting.
All properly executed proxy cards, and all properly completed proxies submitted by telephone or through the Internet, that are timely delivered in response to this solicitation will be voted at the Annual Meeting in accordance with the directions given in the proxy, unless the proxy is revoked before the meeting. For more information, please refer to the Frequently Asked Questions section under the heading Voting and Record Date on page 65.61.

The proxies may also be voted at any adjournments or postponements of the Annual Meeting.
Board and Corporate Governance

Board and Corporate Governance
Meetings and Committees of the Board of Directors
There areThe Board has the following four principal committees of the Board of Directors (“Board of Directors” or “Board”): (1)standing committees: (i) Audit Committee; (2)(ii) Compensation Committee; (3)(iii) Investment Committee; and (4)(iv) Nominating &and Corporate Governance (“NCG”NCG”) Committee. The Board has adopted written charters for each of the committees, copies whichcommittee. These documents are available on the Company’s website at kemper.com under Governance.Governance Copies of these documents may also be obtained free of chargeand/or by mail at no cost upon request to the Company at One200 East Wacker Drive,Randolph Street, Suite 3300, Chicago, Illinois 60601, Attention: Investor Relations.
Under the Company’s Corporate Governance Guidelines and Policy on Director Attendance at Annual Meetings, directors are expected to attend: (1)attend the following types of meetings, unless unavoidable obligations or other circumstances prevent their attendance: (i) annual shareholder meetings; (2)(ii) Board meetings; and (3)(iii) Board committee meetings for the committees on which they serve, unless unavoidable obligations or other circumstances prevent their attendance.serve. Each incumbent director attended at least 9475 percent of the 20152018 meetings of the Board and Board committees on which he or she served. The non-employee and independent members of the Board meet regularly in executive sessions.session. In addition, each of the directors who was a member of the Board on the date of the 20152018 Annual Meeting attended such meeting.
The following table shows the current membership (“M”) and chair (“C”) of the Board and each of its four principal Board committees, and the number of 2015 Board and Board committee meetings held in 2018 and actions taken by unanimous written consent in lieu of meetings:
NameBoardAudit CommitteeCompensation CommitteeInvestment CommitteeNCG Committee
Teresa A. CanidaM M 
George N. CochranMC M 
Kathleen M. CroninMC 
Douglas G. GeogaM M 
Lacy M. JohnsonM M M
Robert J. JoyceCM C
Joseph P. Lacher, Jr.M M 
Christopher B. SarofimM C 
David P. StorchM M M
Susan D. WhitingMM 

Board
Audit Committee
CEO Search Committee (1)
Compensation Committee
Executive Committee (2)
Investment Committee
NCG Committee
Strategy Committee (2)
 
Meetings Held6
6
2
5
—
1
5
2
11 (1)8535
Actions Taken By Written Consent1
—
—
2
2
—
—
1
Actions Taken by Written Consent1—2——
(1)Following an organizational meeting in June 2015,
(1) In addition, the CEO Search Committee undertook its assignment through frequent consultations with a prominent executive search firm, discussions with other Board members about considerations for a new CEO, interviews with a significant number of potential candidates, and meetings with final candidates before deliberating on an ultimate recommendation to the Board. The Board approved the dissolution of the CEO Search Committee, effective as of the conclusion of the Board meeting on November 19, 2015.
(2) The Board approved the dissolutionheld a two-day, long-term strategic planning session with members of the Strategy Committee, effective as of the conclusion of the Board meeting on May 6, 2015, and the dissolution of the Executive Committee, effective as of the conclusion of the Board meeting on November 19, 2015.
The following table shows the current membership and Chair of the Board and its four principal Board committees:
NameBoardAudit CommitteeCompensation CommitteeInvestment CommitteeNCG Committee
George N. CochranüChairü
Kathleen M. Croninüüüü
Douglas G. GeogaüüChair
Robert J. JoyceChairüü
Christopher B. SarofimüChair
Joseph P. Lacher, Jr.üü
David P. StorchüüChair




2

          Board and Corporate Governance


senior management team.
The following is a brief description of the functions of the four principal Board committees:
Audit Committee
The Audit Committee (“Audit Committee”) assists the Board in fulfilling its oversight responsibilities with respect to the:
integrity of the Company’s financial statements;statements and adequacy of its internal controls;
Company’s compliance with legal and regulatory requirements;
independent registered public accountant’s qualifications, independence and performance; and
performance of the Company’s internal audit function.
Board and Corporate Governance

The Audit Committee is a standing committee established in accordance with Section 3(a)(58)(A) of the Securities Exchange Act of 1934, as amended (“Exchange Act”Act”). Under its charter, the Audit Committee is responsible for the appointment, compensation, retention and oversight of the Company’s independent registered public accountant, including prior approval of the audit engagement fees and terms. The Audit Committee is also responsible for, among other matters, reviewing and discussing with management the Company’sKemper’s financial statements and disclosures, internal controls, internal audit function, and major risk exposures and steps taken by management to monitor and control such exposures, including its enterprise risk management (“ERM”ERM”) structure and program.
The Board has determined that each member of the Audit Committee is independent and financially literate in accordance with the New York Stock Exchange (“NYSE”NYSE”) Listed Company Manual (“NYSE Listing Standards”Standards”) and meets the independence requirements for audit committee membership under the rules of the Securities and Exchange Commission (“SEC”SEC”). In addition, the Kemper Board has determined that Messrs.Mr. Cochran, and Joyce arethe Audit Committee chair, is qualified as an audit committee financial expertsexpert under the SEC rules.
Compensation Committee
The Compensation Committee assists the Board in fulfilling its responsibilities relating to:
reviewing and approving corporate goals and objectives relevant to the compensation of the Company’s Chief Executive Officer (“CEO”CEO”) and evaluating the CEO’s performance and compensation in light of such goals and objectives;
overseeing the compensation of the Company’s executive officers and other members of senior management as may be designated by the committee from time to time;
reviewing and approving the Company’s incentive compensation and equity-based compensation plans;
reviewing and approving the material terms of any employment agreements or severance or change-in-control arrangements involving any of the Company’s executive officers; and
reviewing and making recommendations to the Board on non-employee director compensation.
The Board of Directors has determined that each member of the Compensation Committee is independent in accordance with the NYSE Listing Standards. Additional information about the Compensation Committee’s proceduresgovernance is provided below on page 19 in the section entitled ExecutiveDiscussion of Compensation Committee Governance .beginning on page 18.
Investment Committee
The Investment Committee oversees the Company’s investment objectives and policies and reviews the performance of the Company’s investment portfolio on a consolidated basis. The Investment Committee is also responsible for reviewing and approving the policies and objectives for the Company’s investment activities that are established and maintained by the Company’s Chief Investment Officer.



3

          Board and Corporate Governance


NCGNominating & Corporate Governance Committee
The NCG Committee assists the Board in fulfilling its responsibilities with respect to:
identifying potential candidates qualified to become Board members and recommending director nominees to the Board from time to time and in connection with each annual meeting of shareholders;
developing and assessing principlespolicies and guidelines for corporate governance, executive succession, business conduct and ethics;
leading the Board in its annual review of the performance of the Board and Board committees; and
recommending to the Board director nominees,the members and chairs for each Board committee and a Board member to serve as Chair.Chairman of the Board.
The Board has determined that each member of the NCG Committee is independent in accordance with the NYSE Listing Standards.
Board and Corporate Governance

Corporate Governance
The Corporate Governance Guidelines, Code of Business Conduct and Ethics,Charters charters for Board committees and other corporate governance information can be found on the Company’s website at kemper.com under Governancekemper.com under Governance.. Copies of these documents may also be obtained free of charge by request to the Company at One200 East Wacker Drive,Randolph Street, Suite 3300, Chicago, Illinois 60601, Attention: Investor Relations.
Selection of Board Nominees
In accordance with its charter, the NCG Committee recommends a slate of director nominees for election each year at the Annual Meeting. As needed to fill actual or anticipated vacancies on the Board of Directors, the NCG Committee screens and interviews candidates, and conducts inquiries into each candidate’s background, qualifications and independence in accordance with the NYSE Listing Standards and SEC rules. The NCG Committee may, in its discretion, retain recruiters to identify and evaluate director candidates.
The Company will also consider director recommendations by shareholders that are made in writing, addressed to the Company’s Secretary, and include: (a)(i) the candidate’s name, address and telephone number; (b)(ii) a brief biographical description of the candidate, including his or her occupation for the lastpast five years and a statement of the qualifications of the candidate to serve as director; and (c)(iii) the candidate’s signed consent to serve as a director if elected and to be named in the Company’s proxy statementmaterials as a director nominee. The NCG Committee will consider shareholder recommendations using the same standards it uses to assess all other candidates for director.
The NCG Committee evaluates potential nominees for director against the following standards that were previously adopted by the Board, as well as other attributes and skill sets considered desirable or necessary to address particular needs from time to time:
Thethe highest ethical standards and integrity;
Willingnesswillingness and ability to devote sufficient time to the work of the Board;
Willingnesswillingness and ability to represent the interests of shareholders as a whole rather than those of special interest groups;
Nono conflicts of interest that would interfere with performance as a director;
Aa reputation for working constructively with others;
Aa history of achievement at a high level in business or the professions that reflects superior standards; and
Qualitiesqualities that contribute to the Board’s diversity.

4

          Board and Corporate Governance

The primary focus in recruitment and nomination of directors has been on skills and experience. Other than as noted in the last bullet point above, the NCG Committee does not have a specific policy or requirement with regard to its consideration of diversity in identifying director nominees, nor has it attempted to define or limit the concept of “diversity” to any particular set of characteristics. The NCG Committee and the Board believe that the Board should be comprised of members with complementary and diverse skills and experience which, collectively, contribute breadth of perspective and enable the Board to be an effective overseer ofeffectively oversee a publicly-traded insurance organization.
Related Person Transactions
The Board has adopted a written policy (“Policy on Related Person Transactions”)Transactions”) for review, approval and ratification of transactions involving the Company and “related persons” (directors,persons,” defined as directors, executive officers, and shareholders owning 5five percent or more of Kemper common stock (“Common Stock”Stock”), or their immediate family members of any of the foregoing).members. The Policy on Related Person Transactions covers any related person transaction unless it involves: (i) a transaction generally available to all employees of the Company; (ii) less than $120,000 in the aggregate;aggregate on an annual basis; or (iii) a relationship as an insurance policyholder entered and maintained in the ordinary course of business of a subsidiary of the Company on terms no more favorable to the related person than those applicable to non-affiliated third parties or those generally available to employees of the Company. Covered related person transactions must be approved or ratified by the NCG Committee. In addition,
Board and Corporate Governance

approval under the Policy on Related Person Transactions is required before the Company can make charitable contributions exceeding $120,000 in the aggregate in any fiscal year to a charitable organization for which a related person serves as an executive officer, director, trustee or in a similar capacity.
Upon learning of a proposed or existing related person transaction requiring review under the Policy on Related Person Transactions,, management is required to submit the matter for consideration to the NCG Committee, which will review the transaction and make a determination as to whether it is consistent with the best interests of the Company and its shareholders. In its review, the NCG Committee considers the facts and circumstances it deems significant and relevant to the particular transaction, including such factors as the related person’s relationship to the Company and interest in the transaction, the value of the transaction and any reasonable alternatives, and the potential impact of the transaction on the Company, the related person, and other applicable parties. No director who is on the NCG Committee will participate in the review or approval under the Policy on Related Person Transactions of a transaction involving such director or a member of his or her immediate family.
In accordance with the Policy on Related Person Transactions,, the NCG Committee has reviewed certain transactions with the Company involving Fayez Sarofim & Co. (“FS&C”&C”), a registered investment advisory firm. Christopher Sarofim, a member of the board, is Vice Chairman and a member of the board of directors of FS&C, has served on Kemper’s Board since May 2013.&C. Fayez Sarofim, Chairman of the Board, Chief Executive Officer, a director and the majority shareholder of FS&C, was a member of Kemper’sthe Kemper Board until his retirement on May 1, 2013, and is the beneficial owner of more than 5five percent of the Company’s stock. Pursuant to an agreement entered into between FS&C and the Company’s subsidiary, Trinity Universal Insurance Company (“Trinity”), FS&C provided investment management services with respect to certain Trinity assets until Trinity disposed of them in 2015 and the agreement was terminated. Pursuant to an agreement entered into between FS&C and the Company’s tax-qualified defined benefit pension plan (“Pension Plan”Plan”), FS&C provides investment management services with respect to certain Pension Plan funds. The agreements governing these services may be terminated by either party at any time on 30 days advance written notice. At December 31, 2015,2018, the Pension Plan had $137.2$124.5 million in assets under management withmanaged by FS&C. Under these arrangements,the agreement, FS&C is in the case of the Pension Plan, or was, in the case of Trinity, entitled to fees calculated and payable quarterly based on the fair market value of the assets under management. During 2015, Trinity incurred fees of $0.1 million, and2018, the Pension Plan incurred feesinvestment expenses of $0.4$0.9 million under the agreement. The agreement governing these services may be terminated by either party at any time on 30 days advance written notice. The Company believes the services described above have been provided on terms no less favorable to FS&C.the Company than could have been negotiated with non-affiliated third parties.
Director Independence
The Board has adopted categorical standards (“Director Independence Standards”Standards”) to assist in its determination of director independence as required by Section 303A of the NYSE Listing Standards and applicable SEC rules. The Director Independence Standards are posted under GovernanceGovernance on the Company’s website at kemper.comkemper.com.. Under the Director Independence Standards,, a director is not independent for purposes of his or her service on the Board or a particular Board committee unless the director and his or her immediate family members meet all independence requirements applicable to such service under the NYSE Listing Standards and SEC rules. The Director Independence Standards incorporate by reference certain

5

          Board and Corporate Governance

relationships listed in the NYSE and SEC independence rules. In addition, the Director Independence Standards define four specific types of relationships as categorically immaterial. Two of these types of relationships involve an organization or entity that either received charitable contributions from the Company or engaged in transactions with the Company, in either case to the extent the annual amounts involved did not exceed $120,000. The other two types of relationships are: (i) status as an insurance policyholder of a Company subsidiary in the ordinary course of business of the subsidiary on terms no more favorable to the director than those applicable to policies with unaffiliated third parties or those generally available to Company employees; and (ii) the receipt by a director of administrative support or retirement compensation for prior service from a former employer of such director that has a business relationship with the Company. The Board believes that these specified types of relationships would not affect or influence the Company’s business relationships or create a direct or indirect material interest in the Company’s business transactions on the part of a director.
In connection with its annual independence assessment of the individuals recommended by the NCG Committee as nominees for election to the Board at the 20162019 Annual Meeting, the Board reviewedconsidered the applicable independence rules and the factual information derived from the questionnaires and affirmations completed by the individual directors and other available information. The Board affirmatively determined that, under the NYSE Listing Standards, applicable SEC rules and the Director Independence Standards,, Mses. Canida, Cronin and Whiting and Messrs. Cochran, Geoga, Johnson, Joyce and Storch are each independent directors with no material relationships with the Company, and as a result, that a majority of the members of the Board are independent, and that director Nominees Cochran, Cronin, Geoga, Joyce and Storch are each independent and have no material relationships with the Company.independent.
Board and Corporate Governance

Compensation Committee Interlocks and Insider Participation
The Board has determined that each member of the Compensation Committee is independent in accordance with the NYSE Listing Standards. The Compensation Committee consists of NomineesMses. Cronin Geogaand Whiting and Messrs. Johnson and Storch. None of these individuals is a current or former officer or employee of the Company or any of its subsidiaries, and none of these individuals had a relationship with the Company during 20152018 that required disclosure by the Company under the SEC rules on transactions with related persons. Related person transactions and the independence of the non-employee members of the Company’s Board are discussed in more detail under the two preceding headings, Related Person Transactions and Director Independence. No executive officer of the Company has served as a director or member of the compensation committee or other board committee of another entity that had an executive officer who served on the Company’s Compensation Committee or Board.
Board Leadership and Role in Risk Oversight

Board’s Leadership Structure
The leadership of the Company’s Board changed in November 2015 when Donald G. Southwell resigned from the Board and his positions as Chairman of the Board, President and CEO. At that time, Mr. Joyce was designated Chairman of the Board, and Mr. Lacher was elected to the Board and the positions of President and CEO. Under the Company’s Corporate Governance Guidelines, the designation of an independent Chairman of the Board obviates the need for a Lead Director, a position held by Mr. Storch since 2012. The current Board structure includes a Chairman of the Board and four principal board committees. The Audit Committee, Compensation Committee and NCG Committee are comprised entirely of independent directors; the Investment Committee is comprised of anthree independent director,directors, another non-employee director and the CEO. The Chairman of the Board serves as the primary liaison between non-employee directors and the CEO, although all non-employee directors are encouraged to communicate freely with the CEO and other members of management at any time. In addition, the Chairman sets agendas for, and presides over, Board meetings and executive sessions of non-employee directors.
The Board has no set policy on whether the offices of Chairman and CEO should be held by the same person and believes the combination or separation of these offices should be determined by the circumstances of the Company and the composition of the Board. The Chairman and CEO positions were previously held by the same individual, a structure that served the Company well under the leadership of Mr. Southwell, who had held other senior executive positions with the Company and had significant interaction with the Board prior to his election as CEO. When Mr. Lacher joined the Company as President and CEO, having no prior history with the Company, the Board determined that it was appropriate to designate an incumbent director to fill the position of Chairman. The Chairman of the Board serves as the primary liaison between non-employee directors and the CEO (although all non-employee directors are encouraged to communicate freely with the CEO and other members of management at any time). In addition, the Chairman sets agendas for, and presides over, the executive sessions of non-employee directors and at Board meetings.

6

          Board and Corporate Governance

The Company believes that its leadership structure is appropriate for the Company given the role of the Chairman and current membership of the Board. In addition to the leadership provided by the Chairman and general oversight of the Company provided by the full Board, all non-employee and independent directors meet regularly in executive session, and provide independent oversight of the Company, and significant functions are also provided by the keyprincipal Board committees and the independent outside advisors those committees utilizeretain in their discretion.discretion perform significant functions for the Board and the Company.

Board’s Role in Risk Oversight
The Board plays an active role in the oversight of risk assessment and management at various levels of the Board’s leadership structure. Board and Board committee meetings provide the directors with regular opportunities to discuss key matters and raise questions with management, auditors and any consultants retained by the Board or its committees. The Board is regularly informed by members of the Company’s executive and operational management about a wide range of matters that could pose significant risks to the Company. These include, for example, strategic plans, corporate transactions, and significant operational projects and developments. In addition, Board committees have the opportunity to evaluate areas of potential risk on issues pertinent to their particular functional responsibilities.
The Audit Committee has oversight responsibilities pertaining to a number of matters that involve potential risk to the Company, most notably, the Company’s financial reporting and internal controls, ERM functions, the internal audit function, matters reported through the Company’s Corporate Responsibility Hotline, guidelines and policies regarding financial risk assessment and management, and the performance of the Company’s independent auditors. In carrying out these responsibilities, the Audit Committee reviews, for example, the Company’s quarterly and annual financial statements and related SEC disclosures and auditor’s reports and communications, ERM structure and program, major risk exposures (including risks associated with catastrophe losses)losses and mitigation thereof) and management assessments and controls, and internal audit plans and significant findings. In addition, the Audit Committee receives regular updates on the Company’s information security program, cybersecurity risks, and related developments. The Compensation Committee has oversight responsibilities pertaining to the Company’s executive compensation and equity-based compensation programs. In carrying out these responsibilities, the Compensation Committee reviews compensation risk assessments, performance goalsmetrics and metricsresults under the Company’s cash incentive and equity-based compensation plans related look-back and projection assessments, and levels of ownership of the Company’s Common Stock by its executives.executive officers and directors.

7

  Director Compensation





Director Compensation
20152018 Annual Non-Employee Director Compensation Program
The following table shows the 20152018 non-employee director compensation program:

Board/Committee/Position
Annual
Chair
Retainer($)
 Annual
Non-Chair Retainer ($)
 Meeting Attendance Fee ($)
 Stock Option Award (#)
 
Deferred
Stock
Unit
Award (#)

 
Board of Directors130,000
(1)35,000
 1,500
 4,000
(2)500
(2)
Lead Director—
 20,000
(1)—
 —
 —
 
Audit Committee27,000
 12,000
 2,000
(3)—
 —
 
CEO Search Committee (4) Chair—
 —
 —
 1,965
(5)—
 
CEO Search Committee Non-Chair—
 —
 —
 1,179
(5)—
 
Compensation Committee15,000
 8,000
 —
 —
 —
 
Executive Committee (4)—
 8,000
 —
 —
 —
 
Investment Committee15,000
 10,000
 3,000
(6)—
 —
 
NCG Committee15,000
 5,000
 —
 —
 —
 
Strategy Committee (7)30,000
 5,000
 —
 —
 —
 

Board/Committee/Position		Annual Chair Retainer ($)
Annual Non-Chair Retainer ($)
Deferred Stock Unit Award ($)
 
Board of Directors165,000
60,000
110,000
(1)
Audit Committee33,000
15,000
—
 
Compensation Committee15,000
8,000
—
 
Investment Committee15,000
10,000
—
 
Nominating & Corporate Governance Committee15,000
7,000
—
 
(1)
As described above under the heading Board’s Leadership Structure, effective November 19, 2015, the Board designated an independent Chairman of the Board, obviating the Lead Director position, and approved a retainer for the independent Chairman position.
(2)Under the 2018 program, in place for 2015,an annual deferred stock unit (“DSU”) award covering shares of Common Stock with a grant date value of $110,000 was granted automatically at the conclusion of eachthe Annual Meeting to each non-employee director who is not an employee of the Company or any subsidiary of the Company automatically received a grant of options to purchase 4,000 shares of Common Stock and a deferred stock unit (“DSU”) award covering 500 shares of Common Stock under the Company’s 2011 Omnibus Equity Plan (“Omnibus Plan”Plan”), and each new member of the Board of Directors who was not employed by the Company also received a grant of options to purchase 4,000 shares of Common Stock, with a tandem stock appreciation right..
(3)Meeting attendance fee is $2,000 for each Audit Committee meeting attended on a day other than a day when the Board of Directors meets.
(4)The Board dissolved the CEO Search Committee and Executive Committee, effective November 19, 2015.
(5)On November 19, 2015, the Board approved the retainer for each member of the CEO Search Committee, consisting of a one-time retainer in the form of a stock option award, with a value of $20,000 for the committee Chair and $12,000 for each other member of the committee, with the number of option shares granted determined by dividing such value by 25% of the closing price of a share of Common Stock on the grant date. On November 19, 2015, Mr. Geoga, as Committee Chair, received a stock option award covering 1,965 shares, and Messrs. Cochran, Joyce and Storch, as Committee members, each received a stock option award covering 1,179 shares.
(6)Meeting attendance fee is $3,000 for each Investment Committee meeting attended on a day other than a day when the Board of Directors meets.
(7)On May 6, 2015, the Board dissolved the Strategy Committee, effective as of the conclusion of the Board meeting that day.
The exercise price for options granted to non-employee directors is the closing price of a share of Common Stock on the grant date. Options are fully vested when granted. All non-employee director options expire on the tenth anniversary of the grant date and, for options granted prior to 2009, include the right to receive restorative options under specified circumstances. As discussed in the Compensation Discussion and Analysis section under the heading Elimination of Restorative Option Program on page 34, the restorative option program was eliminated on a prospective basis effective in

8

                   Director Compensation



2009. As a result, annual stock option awards granted by the Company beginning in 2009 do not include the right to receive restorative options. In connection with options granted prior to 2009, restorative options are granted automatically to replace shares of previously-owned Common Stock that an exercising option holder surrenders, either actually or constructively, to satisfy the exercise price, so long as certain requirements are met at the time of exercise.
The non-employee directors are eligible to defer up to 100 percent of the fees earned for service on the Board and Board committees under the Kemper Corporation Nonqualified Deferred Compensation Plan.Plan (“Deferred Compensation Plan”). For more information about the Deferred Compensation Plan, see the narrative discussion in the Executive Officer Compensation and& Benefits section belowon page 48 under the captionheading Deferred Compensation Plan.
The DSUs granted to non-employee directors give the holder the right to receive one share of Common Stock for each DSU issued and are fully vested on the date of grant. Holders of DSUs are entitled to receive dividend equivalents in cash in the amount and at the time that dividends would have been payable if the DSUs were shares of Common Stock. Conversion of the DSUs into shares of Common Stock is deferred until the date the holder’s service on the Board terminates.
All directors are entitled to reimbursement for travel expenses incurred in attending Board and Board committee meetings and other Company business. Each of the Company’s directors, including any director who is also a member of management, is a party to an indemnification and expense advancement agreement with the Company, as permitted by the Delaware General Corporation Law. The provisions of these agreements are substantially the same as the indemnification provisions applicable to the directors under the Company’s Amended and Restated Bylaws (“Bylaws”Bylaws”) and Certificate of Incorporation, except that the agreements may not be amended or terminated without the written consent of the respective director.
Changes Made to Non-Employee Director Compensation for2019
Effective in the second quarter of 2019, the Board approved the following annual retainer changes:
Annual Chair Retainer for the Chairman of the Board increased to $200,000;
Annual Non-Chair Retainer for other members of the Board increased to $80,000;
Annual Non-Chair Retainer for the Compensation Committee members increased to $10,000; and
Annual Non-Chair Retainer for the NCG Committee members increased to $8,000.

Changes Made to Non-Employee Director Compensation for 2016
TheIn addition, the Board revisedamended the equity-based compensationequity portion of the annual non-employee directorBoard compensation program, effective May 4, 2016. Each non-employee director will receive anto replace the annual DSU award covering shares of Common Stock with a restricted stock unit award that has a grant date value of $75,000 at the conclusion$130,000 and a one-year vesting period. Payment of each annual shareholder meeting. Stock optionsdividend equivalents will no longer be granted annually or when a new director joins the Board.deferred until vesting.
Director Compensation Table

The following table shows the compensation earned in 20152018 based on the annual non-employee director compensation program in effect for 2015.2018. The specific amountamounts of fees earned and awards granted differs for individual directors based on the particular committees on which they sit, the dates they joined or departed from the Board and specific committees,
Director Compensation





and the variable fee structure for each committee and committee chairs versus non-chair members as shown in the table above on page 8.7.

DIRECTOR COMPENSATION
NameFees Earned
or
Paid in Cash
($)(1)		Stock Option
Awards
($)(2)
Deferred
Stock Unit
Awards
($)(2)
All Other
Compensation
($)(3)
Total
($)
Fees Earned or Paid in Cash($)(2)Deferred Stock Unit Awards($)(3)
All Other Compensation($)(4)
Total($)
James E. Annable43,50028,709
19,190
240
91,639
Teresa A. Canida43,519—
—
43,519
George N. Cochran70,81165,357
19,190
360
155,718
103,000110,0006,250219,250
Kathleen M. Cronin69,30656,604
19,190
360
145,460
92,923110,0006,250209,173
Douglas G. Geoga89,30443,296
19,190
1,320
153,110
84,165110,0007,210201,375
Julie M. Howard19,615—
—
240
19,855
Thomas M. Goldstein (1)84,341110,000
3,446
197,787
Lacy M. Johnson75,000110,000
3,446
188,446
Robert J. Joyce120,71837,462
19,190
1,320
178,690
188,500110,0007,210305,710
Wayne Kauth26,500—
—
240
26,740
Christopher B. Sarofim60,51128,709
19,190
1,320
109,730
75,000110,0007,210192,210
David P. Storch93,30537,462
19,190
1,320
151,277
79,000110,0007,210196,210
Richard C. Vie22,846—
—
240
23,086
Susan D. Whiting83,000110,000682193,682

9

                   Director Compensation



(1)Mr. Goldstein resigned from the Company, effective January 29, 2019.
(2)
Fees shown were earned for service on the Board and/or Board committees and include any amounts deferred at the election of an individual Board member under the Kemper Corporation Nonqualified Deferred Compensation Plan (“Deferred Compensation Plan”).Plan. For more information about the Deferred Compensation Plan, see the narrative discussion in the Executive Officer Compensation and& Benefits section under the heading NonqualifiedDeferred Compensation Plan on page 45.48.
(2)(3)
The amounts shown represent the aggregate grant date fair values of the initial stock optionannual DSU awards granted to Mr. Cochran andthe designated directors on June 1, 2018. Ms. Cronin when they joinedCanida was not a member of the Board on February 4, 2015until July 2018 and the annual stock option andso was not eligible for a DSU awards granted on May 6, 2015 to all of the designated directors.award in 2018. The grant date fair values for the annual DSU awards were estimated for stock options at $7.18 based on the Black-Scholes option pricing model, and for DSUs were based on the grant date closing price ($38.38)$77.50 per share of Common Stock.  In addition, members of the CEO Search Committee received additional stock option awards on November 19, 2015. The grant date fair values for these stock option awards were $7.42 and were determined using the Black-Scholes option pricing model. For a discussion of valuation assumptions, see Note 10, Long-term Equity-based Compensation,, to the Consolidated Financial Statements included in the Company’s Annual Report on Form 10-K (“Annual Report”) for the year ended December 31, 2015.2018. Additional information about non-employee director stock option grantsDSU awards is provided in the narrative preceding this table.
For each non-employee director, the following table shows the total number of outstanding stock option shares and DSUs held as of December 31, 2015:2018:
NameOutstanding
Option Shares
as of 12/31/15 (#)
Deferred
Stock Units
as of 12/31/15 (#)

Outstanding Option Shares as of 12/31/18(#)
Outstanding Deferred Stock Units
as of 12/31/18(#)
James E. Annable—
—
Teresa A. Canida—
—
George N. Cochran9,179
500
9,179
7,220
Kathleen M. Cronin8,000
500
8,000
7,220
Douglas G. Geoga41,965
1,500
29,965
8,220
Julie M. Howard—
—
Thomas M. Goldstein—
4,300
Lacy M. Johnson—
4,300
Robert J. Joyce17,179
1,500
17,179
8,220
Wayne Kauth—
—
Christopher B. Sarofim16,000
1,500
16,000
8,220
David P. Storch29,179
1,500
29,179
8,220
Richard C. Vie—
—
Susan D. Whiting—
1,420
(3)
(4) The amounts shown in this column represent the amounts paid as dividend equivalents in connection with outstanding DSUs.

10

  Proposal 1

Proposal 1: Election of Directors
Overview
Shareholders are being asked to elect sevennine directors. Current Board member, Douglas G. Geoga, who has served on the Board since 2000, will be retiring from the Board effective May 1, 2019 and so is not standing for re-election. The Board of Directors commends Mr. Geoga for his long-standing commitment and exceptional contributions to the Board and the Company. As of May 1, 2019, the Board will reduce the size of the Board to nine members and, accordingly, the Board has slated nine nominees for election at the Annual Meeting.
Directors serve for aan annual term of one year or until the election of their successors, or as otherwise provided under the Bylaws. If any of the director nominees for election to the Board at the Annual Meeting named below (“Nominees”) named below declines or is unable to serve as a director (which(neither of which is not anticipated), the individuals designated as proxies on the proxy card reserve full discretion to vote for any or all other persons who may be nominated. A director nomineeNominee will be elected if the number of votes cast “for”“FOR” exceeds the number of votes cast “against”“AGAINST” his or her election.
Business Experience of Nominees
The NCG Committee considers and recommends candidates for the Board. Each of the individuals selected to serve as a Nominee meets the nominee standards for Board membersnominees as described above under the heading Selection of Board Nominees on page 4. The NCG Committee and the Board believe that each Nominee has demonstrated significant business achievements, ethical principles and commitment to serve the Company and its shareholders, and that the specific experience, qualifications, attributes and skills of each Nominee add to the collective ability of the Board to perform its duties and discharge its responsibilities with competence, professionalism and expertise.
The following is a summary of the background and public-company directorships held by each Nominee over at least the past five years, as well as some specific factors particular to such Nominee that, combined with the generally applicable factors noted above, led the Board to conclude that he or she should be selected as a Nominee for election to the Board at the Annual Meeting:
George N. Cochran
Age: 61
Director since: 2015
Mr. Cochran served as Chairman in the Global Financial Institutions Group at Macquarie Capital until his retirement in December 2014. Previously, he was the Chairman of Fox-Pitt Kelton Cochran Caronia Waller (“FPKCCW”) and a co-founder of its predecessor firm, Cochran Caronia Waller (“CCW”). FPKCCW was acquired by Macquarie Capital in November 2009. Prior to co-founding CCW, Mr. Cochran developed Kidder Peabody’s Insurance M&A and Financing Practice and also served as Managing Director and Insurance Industry Head of Coopers & Lybrand Securities, LLC.
Mr. Cochran brings considerable insurance industry expertise to the Board, as well as substantial merger and acquisition knowledge specific to the industry. His experience in top leadership roles at several investment banking firms provides the Board with additional expertise in the areas of executive development and operational management. In addition, Mr. Cochran is a National Association of Corporate Directors (“NACD”) Governance Fellow. He has demonstrated his commitment to boardroom excellence by completing NACD’s comprehensive program of study for directors and corporate governance professionals. 
Kathleen M. CroninTeresa A. Canida
terrycanidabwrectangle.jpg
Ms. Canida is currently serving as a Principal and Portfolio Manager of Cito Capital Group, LLC, a position she has held since 2016. Ms. Canida served in various capacities with Taplin, Canida & Habacht LLC, including as Chairperson from 2015 until 2016, President from 2008 until 2015, and President, Managing Principal, and Chief Compliance Officer from 1985 until 2008. Ms. Canida served as a member of the Board of Directors of Infinity Property and Casualty Corporation (“Infinity”) from May 2009 until the company was acquired by Kemper in July 2018.
Ms. Canida brings invaluable knowledge about Infinity and significant industry experience gained during her nearly decade-long tenure on the Infinity Board of Directors. In addition, Ms. Canida offers the Board expertise in the financial markets and investment community gained from her leadership roles in the investment industry, entrepreneurial skills established through co-founding and managing a multi-billion dollar investment advisory firm, and knowledge and understanding of the Company’s Hispanic customer base.
Age: 65
Director since: 2018
Age: 52
Director since: 2015
Ms. Cronin is Senior Managing Director, General Counsel and Corporate Secretary for CME Group Inc. (“CME Group”), the world’s leading and most diverse derivatives marketplace. Before joining CME Group in November 2002, Ms. Cronin was in private practice at the law firm of Skadden, Arps, Slate, Meagher and Flom, where she was employed for more than ten years and focused her practice on corporate, securities offerings and transactional matters. From 1995 to 1997, Ms. Cronin served as Chief Counsel/Corporate Finance for Sara Lee Corporation.
Ms. Cronin’s role overseeing audit, compliance, regulatory and risk management functions at CME Group, and her experience in the areas of information security, corporate governance, corporate law and corporate finance, provide the Board with

11

  Proposal 1

important knowledge and perspective on the challenges of doing business in a highly-regulated industry. Her background in these areas also makes her particularly well-suited to serve on the Audit and NCG Committees.

Douglas G. GeogaGeorge N. Cochran
cochrana03.jpg
Mr. Cochran served as Chairman in the Global Financial Institutions Group at Macquarie Capital until his retirement in December 2014. Previously, he was the Chairman of Fox-Pitt Kelton Cochran Caronia Waller (“FPKCCW”) and co-founder of its predecessor firm, Cochran Caronia Waller (“CCW”). FPKCCW was acquired by Macquarie Capital in November 2009. Prior to co-founding CCW, Mr. Cochran developed Kidder Peabody’s Insurance M&A and Financing Practice and also served as Managing Director and Insurance Industry Head of Coopers & Lybrand Securities, LLC.
Mr. Cochran brings considerable insurance industry expertise to the Board, as well as substantial merger and acquisition knowledge specific to the industry. His experience in top leadership roles at several investment banking firms provides the Board with additional expertise in the areas of executive development and operational management. In addition, Mr. Cochran is a National Association of Corporate Directors (“NACD”) Governance Fellow and Board Leadership Fellow. He has demonstrated his commitment to boardroom excellence by completing NACD’s comprehensive program of study for directors and corporate governance professionals.
Age: 64
Director since: 2015
Age: 60
Director since: 2000
Mr. Geoga is President and Chief Executive Officer of Salt Creek Hospitality, LLC, a privately-held firm engaged in making investments in the hospitality industry and providing related advisory services. Since 2013, Mr. Geoga has also served as the non-executive Chairman of the Board of Directors of Extended Stay America, Inc., the owner/operator of the Extended Stay America® Hotel chain, and ESH Hospitality, Inc., a related real estate investment trust, the common stock of which are traded together as paired shares. From October 2010 until the completion of an initial public offering of these two companies in November 2013, Mr. Geoga served as non-executive Chairman of the owner of the Extended Stay America Hotel chain. Since October 2014, Mr. Geoga has also served as Chairman of Atlantica Investment Holdings Limited, which through affiliated companies is the second largest manager of hotels in Brazil, and since February 2014, he has served as a director of Carefree Communities, Inc., a company that owns and operates a chain of recreational vehicle/mobile home communities in the United States and Canada. From October 2012 until September 2015, Mr. Geoga also served as Executive Chairman of Foundations Recovery Network, LLC, an owner and operator of residential and outpatient substance abuse treatment centers. From July 2006 until December 2009, Mr. Geoga’s primary occupation was serving as principal of Geoga Group, LLC, an investment and advisory consulting firm focused primarily on the hospitality industry. Until July 2006, Mr. Geoga served as the President of Global Hyatt Corporation, Hyatt Corporation and AIC Holding Co., which collectively operated the Hyatt chain of hotels throughout the world. From 2000 through 2005, Mr. Geoga served as the President of Hospitality Investment Fund, L.L.C., a privately-held firm which was engaged in making investments in lodging and hospitality companies and projects.
Mr. Geoga’s leadership roles at Extended Stay Hotels and Hyatt, both prominent companies in their industry, as well as his extensive experience in private business investment, brings to the Board the perspective of both an operating executive and one who is sophisticated in corporate investments and finance.

Robert J. JoyceKathleen M. Cronin
cronina02.jpg
Ms. Cronin is Senior Managing Director, General Counsel and Corporate Secretary for CME Group Inc. (“CME Group”), the world’s leading and most diverse derivatives marketplace. Before joining CME Group in November 2002, Ms. Cronin was in private practice at the law firm of Skadden, Arps, Slate, Meagher and Flom, where she was employed for more than 10 years and focused her practice on corporate, securities offerings and transactional matters. From 1995 to 1997, Ms. Cronin served as Chief Counsel/Corporate Finance for Sara Lee Corporation.
Ms. Cronin’s role overseeing audit, compliance, regulatory and risk management functions at CME Group, and her experience in the areas of information security, corporate governance, government relations, corporate law and corporate finance, provide the Board with important knowledge and perspective on the challenges of doing business in a highly-regulated industry and expertise regarding the role of the board and its committees. Her background in these areas also makes her particularly well-suited to serve on the Audit and Compensation Committees.
Age: 55
Director since: 2015
Age: 67
Director since: 2012
Lacy M. Johnson
johnsona02.jpg
Mr. Johnson is a partner with the Ice Miller LLP law firm, where he has practiced since January 1993. His primary practice areas focus on public affairs services and he serves as co-chair to the firm’s Public Affairs and Gaming Group. Before joining Ice Miller, Mr. Johnson served as Attorney, Government Relations Services, Sagamore-Bainbridge, Inc., Director of Security for the Indiana State Lottery, liaison with the Indiana General Assembly, and Lt. Colonel and deputy superintendent for Support Services for the Indiana State Police. Mr. Johnson is a Democratic National Committeeman and former Lt. Commander of the United States Naval Intelligence Reserves.
Mr. Johnson’s background in public affairs and government relations brings unique perspective to the Board. In addition, Mr. Johnson provides the Board with legal acumen gained over his twenty years of legal practice in a private law firm.
Age: 66
Director since: 2016
Mr. Joyce has served as Chairman of the Board of Directors of the Company since November 2015. Mr. Joyce served as Chairman and Chief Executive Officer of Westfield Group from July 2003 to January 2011, and as Executive Chair of Westfield’s Board from January 2011 until his retirement in March 2012. Westfield Group is privately held and provides a broad portfolio of insurance and financial services. Mr. Joyce also served as Chairman of Westfield Bank from December 2001 to April 2010. Prior to joining Westfield in 1996, Mr. Joyce held various senior leadership positions with Reliance Insurance Group and previously worked as a certified public accountant. Mr. Joyce served as a U.S. Navy Captain and is a veteran of Desert Storm and Desert Shield.
Mr. Joyce brings substantial leadership experience and insurance industry expertise to the Board. Mr. Joyce also gained valuable acumen and skills for his role as Chairman of the Company’s Board through his years of service as Chairman of the Board at Westfield. In addition, Mr. Joyce served on the Board of Governors of the Property Casualty Insurers Association of America and is a past chair of that organization. He also served as a Trustee of the Griffith Insurance Education Foundation and on the Board of the National Association of Independent Insurers.







12

  Proposal 1

Joseph P. Lacher, Jr.
Age: 46
Director since: 2015
Mr. Lacher has served as President and Chief Executive Officer of the Company since November 2015. From November 2009 to July 2011, Mr. Lacher was President of Allstate Protection, a unit of Allstate Corporation, where he led the company’s property and casualty offerings serving more than seventeen million American households. Prior to Allstate, Mr. Lacher spent eighteen years at The Travelers Companies, Inc., most recently serving as Executive Vice President - Personal Insurance from 2002 to 2009 and additionally as Executive Vice President - Select Accounts from 2006 to 2009.
Mr. Lacher’s senior executive experience in the insurance industry brings valued expertise and perspective to the Board. In his role as the Company’s Chief Executive Officer, he fills a critical role as liaison between the Board and the members of the Company’s executive and operational teams. His strong industry background and insights complement the broad business backgrounds and skills of the other members of the Board.

Christopher B. SarofimRobert J. Joyce
joycea02.jpg
Mr. Joyce has served as Chairman of the Board of Directors of the Company since November 2015. Mr. Joyce served as Chairman and Chief Executive Officer of Westfield Group from July 2003 to January 2011, and as Executive Chair of Westfield’s Board from January 2011 until his retirement in March 2012. Westfield Group is privately-held and provides a broad portfolio of insurance and financial services. Mr. Joyce also served as Chairman of Westfield Bank from December 2001 to April 2010. Prior to joining Westfield in 1996, Mr. Joyce held various senior leadership positions with Reliance Insurance Group, and previously worked as a certified public accountant. Mr. Joyce served as a U.S. Navy Captain and is a veteran of Desert Storm and Desert Shield.
Mr. Joyce brings substantial leadership experience and insurance industry expertise to the Board. Mr. Joyce also gained valuable acumen and skills for his role as Chairman of the Company’s Board through his years of service as Chairman of the Board at Westfield. In addition, Mr. Joyce previously served on the Board of Governors of the Property Casualty Insurers Association of America and is a past chair of that organization. He also served as a Trustee of the Griffith Insurance Education Foundation and on the Board of the National Association of Independent Insurers.
Age: 70
Director since: 2012
Age: 52
Director since: 2013
Mr. Sarofim is the Vice Chairman and a member of the Board of Directors of Fayez Sarofim & Co., a registered investment adviser. Mr. Sarofim joined the firm in 1988 and has been a member of its Board since August 2014. He is a member of the firm’s Executive, Finance and Investment Committees, and is also the President of the firm’s foreign advisory business, Sarofim International Management Company. Mr. Sarofim shares portfolio management responsibilities for numerous separate accounts advised by the firm, as well as several Dreyfus Corporation mutual funds. Prior to joining Fayez Sarofim & Co., he was employed with Goldman, Sachs & Co. in corporate finance.
Mr. Sarofim offers the Board extensive experience in the investment world, gained with one of the nation’s premier investment advisory firms. With his financial background and investment advisory experience, Mr. Sarofim is particularly well-suited to serve on the Investment Committee and provides the Board financial market and securities analysis expertise, key aspects in the management of the Company’s investment portfolio.

DavidJoseph P. StorchLacher, Jr.
lachera02.jpg
Mr. Lacher has served as President and Chief Executive Officer of the Company since November 2015. Mr. Lacher previously served in other senior executive roles in the insurance industry. From November 2009 to July 2011, Mr. Lacher was President of Allstate Protection, a unit of Allstate Corporation, where he led the company’s property and casualty offerings serving more than 17 million American households. Prior to Allstate, Mr. Lacher spent 18 years at The Travelers Companies, Inc., most recently serving as Executive Vice President - Personal Insurance from 2002 to 2009 and additionally as Executive Vice President - Select Accounts from 2006 to 2009.
Mr. Lacher’s senior executive experience in the insurance industry provides valued expertise and perspective to the Board. In his role as the Company’s Chief Executive Officer, he fills a critical role as liaison between the Board and the members of the Company’s executive and operational teams. His strong industry background and insights complement the broad business backgrounds and skills of the other members of the Board.
Age: 49
Director since: 2015
Age: 63
Director since: 2010
Christopher B. Sarofim
sarofima02.jpg
Mr. Sarofim is the Vice Chairman and a member of the Board of Directors of Fayez Sarofim & Co., a registered investment advisory firm. Mr. Sarofim joined the firm in 1988 and has been a member of its Board since August 2014. He is a member of the firm’s Executive, Finance and Investment Committees, and is also the President of the firm’s foreign advisory business, Sarofim International Management Company. Mr. Sarofim shares portfolio management responsibilities for numerous separate accounts advised by the firm, as well as several Dreyfus Corporation mutual funds. Prior to joining Fayez Sarofim & Co., he was employed with Goldman, Sachs & Co. in corporate finance.
Mr. Sarofim offers the Board extensive experience in the investment world, gained with one of the nation’s premier investment advisory firms. With his financial background and investment advisory experience, Mr. Sarofim is particularly well-suited to serve on the Investment Committee and provides the Board financial market and securities analysis expertise, key aspects of the Company’s investment portfolio management function.
Age: 55
Director since: 2013
Mr. Storch is currently Chairman of the Board, President and Chief Executive Officer of AAR Corp., a leading provider of aviation services to the worldwide commercial aerospace and government/defense industries. Mr. Storch has served as AAR’s Chairman of the Board and Chief Executive Officer since October 2005, and additionally as President since July 2015. He previously served various terms as AAR’s President, Chief Executive Officer and Chief Operating Officer between 1989 and 2007. Mr. Storch is also a director of KapStone Paper and Packaging Corporation, a leading North American producer of unbleached kraft paper products and corrugated packaging products. Mr. Storch served as Lead Director of the Company’s Board from August 2012 to November 2015.
Mr. Storch brings the Board substantial leadership expertise and skills. His experiences as Chairman of the Board and Chief Executive Officer of a large multinational public corporation, an executive responsible for business development, a board member of another public company and a business leader in his industry, offer the Board broad and unique perspectives and hands-on knowledge of the challenges of running a public company.

13

  Proposal 1

David P. Storch
storcha02.jpg
Mr. Storch is currently Non-Executive Chairman of the Board of AAR Corp., a leading provider of aviation services to the worldwide commercial aerospace and government/defense industries, a position he has held since June 2018. Mr. Storch had served as AAR’s Chairman of the Board and Chief Executive Officer from October 2005 through May 2018 when he retired as Chief Executive Officer, and additionally served as President from July 2015 to June 2017. He previously served various terms as AAR’s President, Chief Executive Officer and Chief Operating Officer between 1989 and 2007. Mr. Storch also served as a director of KapStone Paper and Packaging Corporation, a leading North American producer of unbleached kraft paper products and corrugated packaging products until November 2018. Mr. Storch served as Lead Director of Kemper’s Board from August 2012 to November 2015.
Mr. Storch brings the Board substantial leadership expertise and skills. The experiences he has had as Chairman of the Board and Chief Executive Officer of a large multinational public corporation, an executive responsible for business development, a board member of another public company and a business leader in his industry, offer the Board broad and unique perspectives and hands-on knowledge of the challenges of running a public company.
Age: 66
Director since: 2010
Susan D. Whiting
whtingrevisedphoto.jpg
Ms. Whiting currently serves as a director and advisor to for-profit global companies, both private and public. Ms. Whiting had served as Vice Chair of Nielsen Holdings plc until she stepped down in January 2014, following her 35-year career with Nielsen, a global performance management company that provides a comprehensive understanding of what consumers watch and buy. Ms. Whiting’s prior positions with Nielsen include President, Chief Operating Officer, Chief Executive Officer and Chairman of Nielsen Media Research, and Global Executive Vice President. Ms. Whiting has also served as a director of Alliant Energy Corporation since 2013.
Ms. Whiting has an extensive background in a variety of operational and executive roles. Her resulting expertise in consumer behavior, information services and data analytics, and government and public affairs, provides the Board with strategic management know-how in these areas. In addition, Ms. Whiting’s career service with Nielsen gives the Board significant consumer-focused perspective and insight.
Age: 62
Director since: 2017
Required Vote
Under the Company’s Bylaws, if a quorum is present, each Nominee will be elected by the affirmative vote of a majority of the votes cast, meaning that the number of shares voted “FOR” a Nominee exceeds the number of shares voted “AGAINST” such nominee.Nominee. “Abstentions” and “broker non-votes” are not considered votes cast “FOR” or “AGAINST” the foregoing purpose, and will have no effect on the election of Nominees. If a Nominee who is an incumbent director receives a greater number of votes “AGAINST” his or her election than votes “FOR” such election, ourthe Company’s Bylaws require that such director must promptly tender his or her resignation to the Board following certification of the vote.
Recommendation of the Board of Directors
The Board of Directors recommends that you vote “FOR” the Election of all Seven Nominees for Director in Proposal 1.


14


  Audit Matters

Audit Matters
Audit Committee Report
This report concerns the Audit Committee and its activities regarding the Company’s financial reporting and auditing processes. The role of the Audit Committee is one of oversight, and does not include conducting audits or determining whether the financial statements are complete and accurate. The responsibility for the completeness and accuracy of the Company’s financial statements and the assessment of the effectiveness of the Company’s internal control over financial reporting rests with the Company’s management. It is the responsibility of the Company’s independent registered public accountant to perform an audit of, and to express an opinion on whether, the Company’s annual financial statements are fairly presented in conformity with accounting principles generally accepted in the United States and the effectiveness of the Company’s internal control over financial reporting. The responsibility of the Audit Committee is to review and monitor these processes on behalf of the Board.
In this context, the Audit Committee has reviewed and discussed the Company’s audited financial statements and the effectiveness of the Company’s internal control over financial reporting with management and Deloitte & Touche LLP (“Deloitte & Touche”Touche”), the Company’s independent registered public accountant for the fiscal year ended December 31, 2015.2018. The Audit Committee has also discussed with Deloitte & Touche, the matters required to be discussed by Public Company Accounting Oversight Board (“PCAOB”PCAOB”) Auditing Standard No. 16, 1301, Communications with Audit Committees.Committees. The Audit Committee has received from, and discussed with, Deloitte & Touche its written disclosures and letter regarding its independence required by applicable requirements of the PCAOB regarding the independent registered public accountant’s communications with the Audit Committee regardingabout independence, and has discussed with Deloitte & Touche itsthe firm’s independence.
In reliance on these reviews and discussions, and the report of Deloitte & Touche as the Company’s independent registered public accountant, the Audit Committee recommended to the Board that the Company’s audited financial statements for the year ended December 31, 20152018 be included in the Company’s Annual Report on Form 10-K for that year for filing with the SEC.

Audit Committee of the Board of Directors of Kemper Corporation

Teresa A. Canida
George N. Cochran, Chair
Kathleen M. Cronin
Douglas G. Geoga
Robert J. Joyce


15Susan D. Whiting

Audit Matters

Independent Registered Public Accountant
Independent Registered Public Accountant Fees for 2015 and 2014
Independent Registered Public Accountant Fees for 2018 and 2017 and Pre-Approval of Services
Deloitte & Touche, a registered public accountant with the PCAOB, served as the Company’s independent registered public accountant for and during the years ended December 31, 20152018 and 2014.2017. The following table provides information regarding the fees for professional services provided by Deloitte & Touche for 20152018 and 2014:2017:
Fee Type2015
2014
2018
2017
Audit Fees$4,484,132
$4,566,165
$5,604,359
$3,847,215
Audit-Related Fees31,900
78,400
1,126,510
46,000
Tax Fees—
—
31,017
—
All Other Fees—
—
Total Fees$4,516,032
$4,644,565
$6,761,886
$3,893,215
Audit Matters

Audit Fees in 20152018 and 20142017 included fees for: (a)(i) the audit of the Company’s annual financial statements and to provide an opinion on the effectiveness of the Company’s internal control over financial reporting; (b)(ii) the review of the financial statements included in the Company’s quarterly reports on Form 10-Q; and (c)(iii) other services normally provided by the independent registered public accountant, including services in connection with regulatory filings by the Company and its subsidiaries for the 20152018 and 20142017 fiscal years. Audit-Related Fees in 2015 relate2018 included fees for (i) due diligence services; and (ii) the audit of several of the Company’s employee benefit plans. Audit-Related Fees in 2017 related to fees for the audit of one of the Company’s employee benefit plans. Audit-RelatedTax Fees in 2014 relate2018 included fees to feesprepare forms and schedules for (a) the audit of oneseveral of the Company’s employee benefit plans and (b) the review of auditor workpapers in connection with the Company’s pre-acquisition due diligence reviews.plans.
Pre-Approval of Services by Independent Registered Public Accountant
Under its charter, the Audit Committee is directly responsible for the appointment, compensation, retention and oversight of the Company’sKemper’s independent registered public accountant, including the prior approvalpre-approval of audit engagements and all permitted non-audit engagements of the independent registered public accountant. Prior approvalPre-approval of non-audit services may be delegated to the Chairchair of the Audit Committee. All services provided to the CompanyKemper by Deloitte & Touche in 20152018 and 20142017 were pre-approved by the Audit Committee.


16

  Proposal 2

Proposal 2: Advisory Vote on Ratificationto Ratify the Selection of Deloitte & Touche LLP as the Company's Independent Registered Public Accountant
Overview
The Audit Committee considered the performance and qualifications of Deloitte & Touche and has reappointed Deloitte & Touche to serve as the Company’s independent registered public accountant for the fiscal year 2016,2019, and the Board is asking shareholders to ratify that selection. Under applicable laws, rules and regulations, the Audit Committee is directly responsible for the appointment, compensation, retention and oversight of the Company’s independent registered public accountant. The Board believes that shareholder ratification of the appointment of the independent registered public accountant, while not legally required, represents good governance practice in light of the significance of the independent registered public accountant’s role in the process of ensuring the integrity of the Company’s financial statements.
The vote is advisory, which means that the vote is not binding on the Company, the Board or the Audit Committee. The affirmative vote of a majority of the votes cast with respect to the proposal is required to ratify the selection of Deloitte & Touche as the Company’s independent registered public accountant for the 20162019 fiscal year. In the event that the appointment is not ratified, the Audit Committee will consider whether the appointment of a different independent registered public accountant would better serve the interests of the Company and its shareholders. Despite shareholder ratification, the Audit Committee may appoint a new independent registered public accountant at any time if it determines in its sole discretion that such appointment is appropriate and in the best interests of the Company and its shareholders.
It is expected that representatives from Deloitte & Touche will be present at the Annual Meeting. Such representatives may make a statement if they desire to do so and will be available to respond to appropriate questions.
Required Vote
If a quorum is present, the selection of Deloitte and Touche as the Company’s independent registered public accountant for 20162019 will be ratified by the affirmative vote of the majority of votes cast, meaning that the number of shares voted “FOR” the proposal exceeds the number of shares voted “AGAINST” the proposal. “Abstentions” and “broker non-votes” are not considered votes cast “FOR” or “AGAINST” the foregoing purpose,proposal and will have no effect on the proposal.
The vote is advisory, which means that the vote is not binding on the Company, our Board or the Audit Committee. In the event that the appointment is not ratified, the Audit Committee will consider whether the appointment of a different independent registered public accountant would better serve the interests of the Company and its shareholders. Despite shareholder ratification, the Audit Committee may appoint a new independent registered public accountant at any time if it determines in its sole discretion that such appointment is appropriate and in the best interests of the Company and its shareholders.
Recommendation of the Board of Directors
The Board of Directors recommends that you vote “FOR” Proposal 2.

17

  Executive CompensationOfficers

Executive Compensation     
Executive Officers
The following narratives summarize the business experience over at least the last five years of the Company’s current executive officers, other than Mr. Lacher, whose business experience iswas described above inunder the heading Business Experience of Nominees section on page 13.9. The positions described below as being with the Company may have been held with Kemper or one or more of its subsidiaries. The executive officers serve at the pleasure of the Board.
John M. Boschelli, Senior Vice President and Chief Investment Officer, 50
Age: 47
Mr. Boschelli was elected Senior Vice President in May 2015, Chief Investment Officer in May 2009 and a Vice President ofassumed his current position with the Company in May 2007.2015. Mr. Boschelli served as Vice President and Chief Investment Officer of the Company from May 2009 to May 2015. Mr. Boschelli served as the Company’s Treasurer from February 2002 to May 2009. Before becoming2009, as Assistant Treasurer from December 1999 to February 2002 and in various other positions from December 1997 to April 1999.
Charles T. Brooks, Senior Vice President, Operations and Systems, 52
Mr. BoschelliBrooks joined the Company in May 2016 as Senior Vice President & Chief Information Officer and assumed his current position in March 2017. Prior to joining the Company, Mr. Brooks served as the Assistant Treasurer of the Company,Global Operations and Technology Officer for ACE Limited (now Chubb), a position he held from August 2011 to December 19972015. From February 2009 to August 2011, Mr. Brooks served as Senior Vice President/Head, Member and Plan Sponsor Services for Aetna. Mr. Brooks previously served as Senior Vice President, Operations and Chief Information Officer, Personal Lines for Travelers from December 2003 to February 2002.2009 and as Partner, Financial Services - Insurance Practice at Accenture from June 1998 to December 2003.
C. Thomas Evans, Jr., Senior Vice President, Secretary and General Counsel, 60
Age: 57
Mr. Evans was elected a Vice President and General Counselassumed his current position with the Company in May 2015 and Secretary in May 2011.2016. Mr. Evans served as the Company’s Vice President, General Counsel and Secretary from May 2015 to May 2016 and as Secretary and Associate General Counsel from May 2011 to May 2015,2015. Mr. Evans served as the Company’s Assistant General Counsel from May 2002 to May 2011, as Assistant Secretary from February 2004 to May 2011 and as Counsel from April 1992 to May 2002. Before joining the Company in 1992, Mr. Evans was in private practice with the law firm of Winston & Strawn, where his practice focused on commercial litigation.
Mark A. Green, Senior Vice President and President, Life & Health Division, 51
Mr. Greenjoined the Company in May 2016. Prior to joining the Company, Mr. Green held various executive positions with Allstate Corporation from March 2009 to May 2016, and most recently served as President-Encompass Insurance Company from August 2015 to May 2016. During his tenure with Allstate, he also served as President-Allstate Dealer Services, President-Ivantage and Senior Vice President-Allstate Financial. Prior to Allstate, Mr. Green served as Chief Risk Officer/Executive Vice President with AIX Group from July 2005 to March 2009. He previously served as Vice President-Wells Fargo Insurance Services from July 2003 to July 2005, Vice President of Chubb Financial Solutions from July 2002 to July 2003 and served in various management roles at Swiss Re from July 1995 to July 2002.

Kimberly A. Holmes, Senior Vice President, Chief Actuary and Strategic Analytics Officer, 55
Ms. Holmesjoined the Company in February 2019. Prior to joining the Company, Ms. Holmes served as Senior Vice President & Global Head of Strategic Analytics at AXA XL from December 2010 to February 2019. Prior to this position, Ms. Holmes served in various senior roles at Endurance Specialty Insurance Ltd., from March 2002 - November 2010, including Senior Vice President and Chief Actuary and as Global Head of Reinsurance Risk Management. Previously, Ms. Holmes served in senior positions at Enterprise Reinsurance Ltd. from August 1998 to March 2002 and at General Reinsurance from August 1992 to August 1998.
James J. McKinney, Senior Vice President and Chief Financial Officer, 39
Mr. McKinneyjoined the Company in November 2016. Prior to joining the Company, Mr. McKinney served as Executive Vice President, Chief Financial Officer for Banc of California from November 2015 to November 2016 and as Executive Vice President, Chief Accounting Officer from September 2015 to November 2015. From November 2012 to July 2015, Mr. McKinney held senior executive positions with International Lease Finance Corporation, a unit of AerCap Holdings N.V.,
Executive Officers

where he served most recently as Vice President, Controller and previously as Vice President, Principal Accounting Officer and Global Corporate Controller. Mr. McKinney previously held several senior financial positions with RBS Citizens Asset Finance from June 2004 to November 2012, most recently as Vice President, Head of Balance Sheet Management, Operations & Strategy.
Lisa M. KingChristine F. Mullins, Senior Vice President and Chief Human Resources Officer, 60
Age: 56
Ms. King was elected Vice President, Human Resources ofMullins joined the Companyin May 2009 and hasNovember 2016. Prior to joining the Company, Ms. Mullins served as its Ethics Officer since 2008.a Partner at CEO.works from January 2015 to October 2016. From April 2008 to December 2014, Ms. KingMullins served in a number of executive human resource positions at Zurich Insurance Group, most recently as Head of HR Strategy and Global Services from November 2012 to December 2014. She previously served as the Company’sHuman Resource Chief Operating Officer and Director of Human Resources Transformation for Zurich from April 2008June 2011 to May 2009. From 2002 to 2008, Ms. King served as Vice President of Human Resources of the Company’s wholly-owned subsidiary, Trinity Universal Insurance Company, and, beginning in 2004, as its Ethics Officer.November 2012. Prior to 2002,joining Zurich, Ms. KingMullins held a number of human resourcesvarious executive and management positions within the Kemper organization and for affiliates of its predecessor.with Motorola, Inc. from 1979 to 2008.
Richard Roeske, Vice President and Chief Accounting Officer, 58
Age: 55
Mr. Roeske was elected a Vice President ofassumed his current position with the Company in January 2001 and has served as itsthe Company’s Chief Accounting Officer since August 1999. For a portionAdditionally, for portions of 2010 and 2016, Mr. Roeske served as interimthe Company’s Interim Chief Financial Officer. Between 1990, when he joined the Company, and 1999, Mr. Roeske also held a number ofvarious accounting positions within the Kemper organization.Company from January 1990 to August 1999.
Frank J. SodaroDuane A. Sanders, Senior Vice President and President, Property & Casualty Division, 62
Age: 47
Mr. Sodaro was electedSanders joined the Company in January 2018. Prior to joining the Company, Mr. Sanders spent 16 years at Travelers, from August 2001 to January 2018, in several senior leadership roles, most recently as Senior Vice President & Chief Financial Officer in March 2013.of Small Commercial, leading Field Operations, National Programs, National Distribution, International Small Commercial, and the broader Business Insurance Low Touch initiative. From 2013 to 2016, Mr. Sodaro previously served as Vice President, Planning & Analysis for the Company from May 2009 to March 2013,Sanders held various senior leadership roles at Travelers Canada, including CEO and as Assistant Corporate Controller for the Company from June 1998 to May 2009.COO. Prior to 1998, hejoining Travelers, Mr. Sanders held a number ofvarious senior leadership positions within the Company’s accounting and internal audit departments.at Mobile America Insurance Group from 1995 to 2001.


18

  Executive Compensation Committee Governance

Discussion of Compensation Committee Governance
Compensation Committee Authority and Delegation
The scope and authority of the Compensation Committee is described in the Corporate Governance section above and is set forth in the committee’s charter, which is posted under Governance on the Company’s website at kemper.com.
The Compensation Committee has the sole authority to retain outside legal, accounting or other advisors including compensation consultants, to assist the committee in its evaluation of executive compensation, and to approve relatedthe fees and other terms of retention of such advisors. Under the terms of its charter, the Compensation Committee may delegate authority to its subcommittees, such power and authority as it deems appropriate, except where delegation is inconsistentconsistent with applicable legal and regulatory requirements.law. However, the Compensation Committee does not presently have any subcommittees and no such delegations have been made.
The Board of DirectorsCompensation Committee has delegated authority to the Company’s CEO and had previously delegated such authority to the Board’s Special Equity Grant Committee (subsequently revoked at the time of the new delegation) to grant, and designate recipients for, a limited number of awards under the Omnibus Plan, designate the recipients of such awards, and to determine the size, terms and conditions of such awards. The delegated authority covers only new hire, promotional and retention awards to employees other than the Company’s officers who are required to file reports of their beneficial ownership of shares of Common Stock under Section 16 of the Exchange Act (“Section 16 Officers”).executive officers. The delegated authority has been used sparingly and is regularly monitored by the Compensation Committee. More information about delegations and awards thereunder that have been made under the Company’s equity-based compensation plans is included under the heading Delegated Authority in the Compensation Discussion and Analysis section on page 34.
Compensation Committee Process Overview
The Compensation Committee performs an annual review of the Company’s executive compensation policies, practices and programs, and of the compensation paidprovided to the Company’s executive officers and directors. Annual reviews have historically started at a meeting of the Compensation Committee meeting held in the last quarter of each year, with compensation determinations for the Company’s executive officers approved at its first quarter meeting of the following year. At or prior to its initial meetings each year, typically held in late January or early February,first quarter meeting, the Compensation Committee generally makes decisions with regard to on:
annual compensation of the Company’s executive officers andofficers;

determination of the amounts of any changes toannual cash incentives payable for the Company’s executive compensation plans and programs, determinations as to the current-year base salary and equity-based compensation awards, selection and weighting of specific performance criteria for applicable bonus awards, andprior year, including validation of performance results for determining any payouts under applicableperformance-based cash incentive awards and performance-based equity-based compensation awards granted for prior years;

any changes to Kemper’s executive compensation plans and programs; and

determinations as to the current-year cash and equity-based compensation.
The CEO plays a key role in prior years. Also atthe decision-making process for determining the annual compensation of the other executive officers by providing performance assessments and making compensation recommendations to the Compensation Committee on salary, annual cash incentives, and equity-based compensation awards. The Compensation Committee considers these recommendations and meets with the CEO to discuss his rationale. The Compensation Committee works collaboratively with the CEO to obtain the benefit of his knowledge and judgment to determine the appropriate compensation for those executive officers.
At its initial meetingsfirst quarter meeting each year, the Compensation Committee has historically determined itsapproves recommendations to the Board aboutfor any changes to the non-employee director compensation program. The Company’s executive officers are not involved in the process of analyzing and determining compensation for the non-employee members of the Board, except the CEO, who participates as a Board member when non-employee director compensation is considered and determined by the Board.
The Role of Compensation Consultants
The Compensation Committee has engaged the services of an independent compensation consultant in connectionconsultants to assist with its annual executive and non-employee director compensation review and oversight, and for such additional services as it has deemed necessaryrequested from time to time. The Compensation Committee engaged Exequity LLPPay Governance LLC (“Exequity”Pay Governance”) as its independent compensation consultant for its deliberations on 2015 executive officer and director compensation.2018. The Compensation Committee has considered the independence of Exequity and concluded that there are no factors that present any independence issues or conflicts of interest under applicable rules of the NYSE or SEC. The Compensation Committee directed Exequityasked Pay Governance to provide the committee with benchmarking data based on comparable companies in the insurance industry, as well as general
Compensation Committee Governance

benchmarking data for certainthe executive officer positions,officers, data and practices with respect to outsidenon-employee director compensation, and advice on current trends and developments related to executive compensation, and advice on other executive and director compensation matters that arose in the context of annual shareholder meetings and proxy disclosures.ordinary course. The involvement of ExequityPay Governance in the 20152018 executive compensation decision-making process is described in more detail below in the discussion under the heading Benchmarking Analysis in the Compensation Discussion and Analysis section below..

Before retaining Pay Governance as its consultant, the Compensation Committee considered the firm’s independence and concluded that no factors existed that presented any independence issues or conflicts of interest under applicable rules of the NYSE or SEC.


19

  Executive Compensation Discussion and Analysis

Compensation Discussion and Analysis

This Compensation Discussion and Analysis (“CD&A”) describes the Company’s executive compensation program and explains how the Compensation Committee made compensation decisions for the following named executive officers (“NEOs”) in 2018:

The Role of Executive Officers
The CEO plays an important role in the annual compensation decision-making process for the executive officers of the Company other than himself by providing performance assessments and making compensation recommendations to the Compensation Committee. The information provided by the CEO includes annual recommendations regarding any changes to the annual base salary and the equity-based compensation awards to the other members of senior management and the specific performance criteria for applicable cash incentive awards.
The Chief Financial Officer has also been involved in the annual compensation decision-making process for any executive officer who reports directly to him, by providing performance assessments and making compensation recommendations to the CEO for consideration by the Compensation Committee. Additionally, at the request of the Compensation Committee, the Company’s management provides data to the committee’s independent compensation consultant about the Company’s cash and equity-based compensation programs, employee benefit and retirement plans and the compensation and stock holdings of the Company’s executive officers.
In addition to considering the benchmarking data provided by its independent compensation consultant, the Compensation Committee also considers the recommendations provided by the CEO with regard to the compensation of the other executive officers, and discusses the rationale and strategy involved in determining these recommendations in meetings with the CEO. The Compensation Committee views its role with regard to the compensation of these other executive officers as collaborative, giving due consideration to the CEO’s knowledge and judgment in determining the recommended levels of their compensation.
Non-employee director compensation is determined exclusively by the Board, after considering recommendations of the Compensation Committee. The Company’s executive officers do not make recommendations and are not otherwise involved in the process of analyzing and determining compensation for the non-employee members of the Board, except that the CEO participates as a Board member when non-employee director compensation is considered and determined by the Board.
Named Executive Officer    Position with the Company in 2018
Compensation DiscussionJoseph P. Lacher, Jr.President and AnalysisChief Executive Officer
James J. McKinneySenior Vice President and Chief Financial Officer
John M. BoschelliSenior Vice President and Chief Investment Officer
Mark A. GreenSenior Vice President and President, Life & Health Division
Duane A. SandersSenior Vice President and President, Property & Casualty Division
Executive Summary

Background

During 2018, we continued to improve our operating performance, building on the progress we achieved in 2017. We shifted our focus from financial turnaround to delivering sustainable, profitable growth, and strengthened the Company’s competitive advantage in the specialty auto insurance market through our acquisition of a leading provider, Infinity Property and Casualty Corporation (“Infinity”). The Infinity acquisition was a major step forward in our growth plans and broader strategy of acquiring businesses that strategically enhance our business and create value in underserved niche markets. The Company’s executive compensation programstrong results also reflect the continued solid performance of our Life & Health Division and its underlying philosophy have always emphasized pay-for-performance and shareholder-focused awards, with few perquisites and significant portions of compensation consisting of performance-based cash incentives and performance-based equity-based compensation awards, including stock options, the value of which is based on long-term appreciation of the Company’s Common Stock.
Significant features of the executive compensation program and related Company policies include:
components with significant at-risk compensation based on a mix of short-term and long-term goals;
performance-based cash incentives;
equity-based compensation program with stock options and three-year performance-based restricted stock/restricted stock units (“RSUs”);
grant agreements with executive officers that include:
◦clawback clauses for the recoupment or forfeiture of compensation in the event of certain accounting restatements or as otherwise required by applicable law or Company policy; and
◦a double-trigger standard in the event of termination in connection with a change in control;
no excise tax gross-ups; and
policies prohibiting directors and employee recipients of equity-based compensation awards from participating in:
◦hedging transactions limiting risks from decreases in the price of the Company’s Common Stock; and

20our investment management expertise.

Financial and Shareholder Performance

Overall Kemper financial results for 2018 compared to 2017 and 2016:
revenue.jpgnetincomea02.jpgearningsperdilutedsharechart.jpgbvs.jpgroea02.jpg
  Executive Compensation Discussion and Analysis

◦Major contributors to the improved financial performance in 2018
üpledging arrangements involving Company securities.Specialty P&C Insurance Segment: Strong organic growth and profitability further enhanced by the addition of Infinity
üPreferred P&C Insurance Segment: Modest premium growth with a return to profitability in 2018
üLife & Health Insurance Segment: Stable earnings and cash flow generation with increased earned premiums in Accident & Health business
üInvestments: Continued strong performance of diversified and highly rated investment portfolio
The improved financial performance led to significant gains for shareholders
üKemper’s share price improved from a $37.25 closing price on December 31, 2015 to $66.38 on December 31, 2018, an overall increase of 78.2% or annualized increases of 21.2% over the three-year period
üDividends of $0.96 per share paid to shareholders in 2018
This
Executive Compensation section provides detailed information about the 2015 compensation provided to Outcomes

Key features of the Company’s executive officers whose compensation program in 2018 include the following:

Salary, the only component that is disclosedfixed and not based on performance. Salary represents a relatively small portion of total compensation and is generally not adjusted annually. No changes to the NEOs’ salaries were made for 2018.

Our annual performance-based cash incentive program (“Annual Incentive Program”) rewards participants for significant improvement and the overall performance results of the Company and its business units. The program allocates the highest compensation to the highest performing and most impactful participants. Awards increased in 2018 as compared to 2017 in the context of the Company’s improved financial performance.

Our performance-based equity awards include stock options and performance share units (“Summary Compensation TablePSUs”), with three-year performance metrics tied to relative total shareholder return (“Relative TSR”) and adjusted return on page 37equity (“Named Executive Officers” or “NEOs”Three-Year Adjusted ROE”). Equity awards are tied to key measures we believe are valued by shareholders including share price increases and relative shareholder return compared to similarly situated insurance companies, and adjusted return on equity, a key performance indicator in the insurance industry. These awards increase in value as our share price increases, aligning them with resulting gains by shareholders.

Overall, we believe our 2018 financial results provided a solid basis for the annual and equity incentive awards provided to our management team for their performance. We believe the results and awards effectively link pay and performance and align with shareholder interests.

We considered the 97.8 percent shareholder vote to approve the “say-on-pay” proposal at our 2018 Annual Meeting. Because of the strong favorable expression of support, we did not make any changes to our compensation program as a result of the vote.
Recent Executive Officer ChangesCompensation Program
Effective November 19, 2015, Mr. Southwell resignedSummary of Executive Compensation Elements

The Company provides both fixed (salary) and performance-based (cash and equity incentives) compensation to NEOs. Most compensation awarded to each NEO in 2018 was “at-risk” to the executive because it was contingent on Company and individual performance and, for the performance share component, the number of shares ultimately paid out could vary from the Board and his positions asinitial award. Additionally, the Company’s Chairman, President and Chief Executive Officer and assumed the non-executive officer position of Senior Advisor, and Mr. Lacher was elected the Company’s President and Chief Executive Officer and a membervalue of the Board. Effective February 10, 2016, Ms. Lynch leftoption grants awarded will change commensurately with the Company.
Overview of CEO Compensation for 2015
Compensation for Mr. Southwell. In February 2015, the Compensation Committee approved a 2015 compensation package for Mr. Southwell with three main components: base salary, performance-based annual and long-term cash incentive awards, and equity-based incentive awards based on total shareholder return (“TSR”) and stock appreciation. The total value of this compensation package was heavily weighted to performance-based awards because of the significance of his role in the overall direction and success of the Company. Further, long-term incentive awards represent the largest component of his compensation, serving the goals of retention as well as alignment with stockholders’ interests in the long-term return and appreciation in the valueprice of the Company’s Common Stock. The componentsamount of the“at risk” compensation package are discussed in detail below.
Compensation for Mr. Lacher. In November 2015, the Compensation Committee approved a compensation package for Mr. Lacher that was set forth in his November 19, 2015 offer letter that included an initial stock option grant covering 98,280 shares of Common Stock and an annual base salary of $750,000. For 2016, the offer letter also provided for a bonus award with a guaranteed minimum bonus payment and equity awards with metricsbased on performance is designed to be determined atsignificantly more than salary. The following charts show each element of 2018 target NEO compensation, including the Compensation Committee’s meeting in February 2016. More details on Mr. Lacher’s 2016 compensation are provided on page 33 under the heading Changes Made to NEO Compensation for 2016.
2015 Compensation for Mr. Southwell
The table below illustrates the componentsmix of Mr. Southwell’s compensation mix for 2015. The percentages shown in the table are based on annual base salary, target-level values of cash incentive awards under the Performance Incentive Plan (“PIP Awards”), and grant date fair values of equity-based compensation awards. This formulation differs from the values shown in the Summary Compensation Table on page 37 that reports only actual payments under PIP Awards, rather than target-level values, and includes “Change in Pension Value and Nonqualified Deferred Compensation Earnings” or “All Other Compensation.”
Pay ComponentPercentage of Total (%)
Dollar Value ($)
Base Salary26
       1,000,000
Annual PIP Award20
           750,000
Time-Vested Stock Options17
641,572
Multi-Year PIP Award20
           750,000
Performance-Based Restricted Stock Units17
           645,750
Total Compensation100
       3,787,322
As shown above, for 2015, base salary as a percentage of Mr. Southwell’s total compensation was 26 percent, and performance-based compensation (including stock options) was 74 percent. This illustrates the focus on “at-risk” compensation with performance-based annual and multi-year cash incentive, performance-based RSU awards, and stock option awards with value based on the absolute appreciation of the Company’s Common Stock.

21

  Executive Compensation

At its meeting in February 2015, the Compensation Committee approved a compensation package for Mr. Southwell for 2015 that was identical to his compensation in 2014, including base salary at the level in effect since 2010, except that his 2015 Annual PIP Award was 70 percent based on Company Performance Criteria and 30 percent based on individual performance criteria. Prior to 2015, Mr. Southwell’s Annual PIP Awards were 100 percent based on Company Performance Criteria. The 2015 package provided a “Target Bonus Percentage” of 75 percent for each of the Annual and Multi-Year PIP Awards, and grants of 80,000 stock options and 15,000 performance-based RSUs, the same levels as in 2014.
CEO Compensation Discussion and Stock PerformanceAnalysis
Alignment of CEO Compensation with Long-Term Interests of Shareholders
As mentioned above, the Compensation Committee endeavored to align Mr. Southwell’s total compensation with thecash and long-term interests of shareholders by including a mix of components in the form of:
performance-based cash incentive awards tied to achieving key annual and multi-year financial performance metrics such as growth in Earned Premiums, Profit Margins and Return on Equity,equity incentives, as well as individual performance measures;the overall percentages of fixed versus performance-based compensation for the CEO and for the other NEOs (on average):
performance-based restricted stock/RSU awards tied to the performance of Kemper’s TSR relative to a peer group; and
stock option awards tied to achieving absolute long-term appreciation in the price of the Company’s Common Stock.ceovneocomp.jpg
Stock Ownership Policy
Consistent with its fundamental executive compensation principles, Company philosophy has always encouraged long-term ownership of Common Stock by its executive officers. The Compensation Committee believes that equity-based compensation awards to the executive officers, along with their subsequent retention of shares acquired through the exercise of stock options and vesting of restricted stock and RSUs, further align their interests with those of the Company’s shareholders.
The Company’s Stock Ownership Policy provides minimum ownership requirements for its non-employee directors and executive officers based on a multiple of their base compensation. Non-employee directors are required to maintain, at a minimum, ownership of the number of shares valued at five times the amount of their annual retainer for board service, not including fees paid for committee service and meeting attendance. Each executive officer is required to maintain, at a minimum, ownership of the number of shares valued at the following multiples of his or her annual base salary:
OfficerSalary Multiple
CEO5.0
COO/President3.0What We Do
ü
Pay-for-Performance: The majority of NEO total compensation is tied to Company, business unit and individual performance and is considered “at risk” by the Company, with actual value contingent upon performance results.
ü
Independence of Executive Vice President
2.5Compensation Consultant (Pay Governance): The Compensation Committee engaged an executive compensation advisor who is independent in accordance with SEC and NYSE rules. Pay Governance has no personal relationships with our NEOs or Board members.
Senior Vice Presidentü2.0
Clawback Rights: Our cash incentive and equity programs include clawback rights on paid incentives in the event of certain accounting restatements or as otherwise required by applicable law.
ü
Independent Committee Members: All Compensation Committee members are independent in accordance with SEC and NYSE requirements and guidelines.
Vice Presidentü1.5
Dividend Equivalents Paid Only on Earned Awards: Beginning with the 2018 equity grants, dividend equivalents accrue on performance shares during the performance period and are paid on shares earned when they vest.
ü
Stock Ownership Guidelines: The Company maintains rigorous stock ownership guidelines for Directors, NEOs and other executive officers to reinforce the alignment of our executives with shareholder interests.
ü
Double-Trigger Change-in-Control: Our Company policy provides for change of control benefits only on a qualified termination of employment in connection with a change in control.
ü
Strive to Understand Shareholders’ Views on Executive Compensation: The supportive shareholder vote on the Company’s annual Say-on-Pay proposal demonstrates that the program aligns with shareholder expectations.
The Committee monitors shareholdings by executive officers annually, as of year end. New directors and officers are provided a grace period of five years to reach the required ownership levels, and all covered officers and directors have three years to attain any increased level due to a base salary increase, promotion or change in policy. The policy enables the Compensation Committee to consider, in its discretion, possible modifications or exceptions to the policy as necessary in the event of extenuating personal circumstances.
The shareholdings of each NEO at December 31, 2015 exceeded the minimum levels required under the policy, except for Messrs. Lacher and Mr. Sodaro, who have the five-year grace period to attain the minimum share ownership required based on their current positions that began, respectively, in November 2015 and March 2013. Mr. Southwell’s shareholdings consistently exceeded the required minimum ownership level while he served as CEO. The amount of Common Stock held by each NEO as of the Record Date is disclosed in the beneficial ownership table on page 61.

22

  Executive Compensation Discussion and Analysis

Also pursuant to the Stock Ownership Policy, each equity-based compensation award agreement for a grant to an executive officer imposes a holding period of one year for shares of Common Stock acquired in connection with the exercise of stock options or the vesting of other types of equity-based compensation awards, with the exception of shares sold, tendered or withheld to pay the exercise price or settle tax liabilities in connection with such exercise or vesting. The Company has also adopted hedging and pledging policies prohibiting directors, executive officers and other employee recipients of equity-based compensation awards from participating in hedging transactions and pledging arrangements involving any Common Stock.
TSR Performance: Kemper Common Stock Compared to S&P Supercomposite Insurance Index
The metrics for each award of performance-based restricted stock/RSUs that was granted to the NEOs were based on the relative performance of Kemper’s TSR compared to the Peer Group, as discussed in more detail below on page 32. The NEOs forfeit these awards if the Company’s TSR over the applicable performance period falls below the 25th percentile of the S&P Supercomposite Insurance Index. The graph below shows relative TSR performance over the period from January 1, 2013 through December 31, 2015.


Kemper v. S&P Supercomposite Insurance Index (Peer Group)
3 Year Total Shareholder Return (2013-2015)
Allocation of Specific Elements of Compensation
The basic objective of the Company’s executive compensation program is to attract, retain and motivate the performance of the Company’s executives by providing compensation packages that include reasonable and competitive direct compensation structured to reward its executives for increasing shareholder value. As mentioned above, shifts in the program over the past several years have placed increased emphasis on contingent rewards linked to Company performance. The Company’s NEOs receive a few modest perquisites and are eligible to participate in employee health and welfare benefits and retirement plans offered by the Company.
The Company’s executive compensation program has not historically used fixed formulas to allocate compensation between cash and non-cash compensation, or determine the mix of forms or levels of compensation. Rather, the program includes a range of tools aimed at providing competitive advantage and flexibility to respond to developments within, or otherwise affecting, the Company from time to time. Consistent with the overall program objectives and underlying philosophy described above, the Company emphasizes the compensation elements linked most closely to increasing shareholder value.

23

What We Do Not Do
û
No Tax Gross-Ups: NEOs and other executive officers are not entitled to excise tax gross-ups under any Company policies or compensation programs.
Executive Compensationû
No Hedging or Pledging: Directors and employees who receive equity awards are prohibited from hedging, pledging or otherwise encumbering shares of the Company’s Common Stock.
û
No Employment Contracts: The Company does not have employment contracts with its NEOs or other executive officers, who are all employees “at will.”
û
No Excessive Perquisites: Perquisites primarily include annual executive physical, financial planning program and limited personal aircraft use.

Providing a competitive salary is important in achieving the Company’s objective of attracting and retaining superior executive talent. An individual’s responsibilities and experience as well as competitive marketplace factors are generally taken into account in determining his or her salary. The cash bonus component of compensation furthers the fundamental principle of linking compensation to Company performance and the creation of shareholder value. Equity-based compensation is considered another key source of contingent compensation intended to further align management incentives with shareholder interests. The Compensation Committee strongly believes that stock incentives, including stock options and performance-based restricted stock/RSUs, provide an effective means of motivating shareholder-focused behavior by key executives.
Compensation Strategy and Analysis

General Strategy

In its deliberations on executive compensation, the Compensation Committee considers whether the cash and equity-based compensation in light of their consistencyawards are consistent with the Company’s underlying principles and objectives, including long-term shareholder interests, the total value to individual executives and the cost to the Company. Executive compensation decisions incorporatereflect the following three-part approach by the Compensation Committee:
Reward results through long-term incentives with contingent value based on stock performance, while closely monitoring senior management’s stock retention;
Consider, with the assistance of its independent compensation consultant, industry data on levels of executive compensation for certain specific positions at similar companies in the insurance industry to assess the extent to which the Company’s practices may vary from industry practices and determine whether any noted variances are reasonable, appropriate and purposefully designed to successfully attract and retain skilled executives in a highly competitive marketplace; and
Obtain a clear understanding of the business strategies and objectives of the Company, and the reasoning and recommendations of senior management for motivating their key subordinates.management. The Compensation Committee believes it is important and appropriatenecessary to give serious considerationsignificant weight to the views of the CEO and senior management;
Consider, with the assistance of its compensation consultant, industry data on compensation levels for similar positions at similar companies, particularly in the insurance industry, to assess the comparability of the Company’s pay practices and determine if any noted variances are reasonable, appropriate and purposefully designed to successfully attract, motivate and retain skilled executives in a highly competitive marketplace;

Provide executive officer salary adjustments only periodically, generally not more often than every three years, or as appropriate to reflect significant changes to the Company’s profile or increased management responsibilities;

Provide an annual cash incentive program structured to incentivize and reward exceptional financial, business unit and individual performance during the prior year;

Reward longer-term results through equity-based incentives, including PSUs with three-year performance metrics based on Relative TSR and Three-Year Adjusted ROE, and stock options that gain value based on absolute share price appreciation; and

Monitor compliance by the senior management who run the Company and supervise its key managerial employees.team with Kemper’s stock ownership policy.

The following table summarizes the material elements of the Company’s 2018 executive compensation program. Further details regarding each of the elements are provided in the discussion that follows the table.








Compensation Discussion and Analysis

EXECUTIVE COMPENSATION PROGRAM
ElementKey CharacteristicsWhy We Pay this ElementHow We Determine Amount2018 Decisions
Fixed Compensation
SalaryFixed compensation payable in cashProvides competitive cash compensation to attract, retain and motivate performance by talented executivesEstablished using market data as a reference. Generally for NEOs, adjustments may be made every 3-5 years, and/or to reflect significant changes in size and scope of responsibilitiesNo salary increases were provided to NEOs in 2018
Performance-Based Compensation (Variable)
Annual Cash IncentiveVariable cash compensationAligns compensation program with annual performance
Earned based on corporate, business unit and individual performance

Program allocates highest compensation to the highest performing and most impactful participants
Aggregate annual incentive pool was about 115% of target pool, based on 2018 improved financial performance of the Company
Performance Share Units (PSUs)
Variable equity compensation

Earned based on results of performance metrics at the end of a three-year performance period

Realizable value is variable based on multi-year Company financial performance and stock price appreciation
Align management’s interests with those of shareholders

Performance metrics driven by Company performance

Balance short-term focus of the Annual Cash Incentive by tying rewards to performance over multi-year periods

Along with stock options, provide mix of long-term incentives supporting business strategy
Based on job scope, market data and individual performance

Actual payouts can range from 0% to 200% of target shares, based on achievement of three-year performance goals
One-half of total annual equity award value was granted in form of PSUs

PSUs were split equally between performance metrics based on Relative TSR, and Three-Year Adjusted ROE
Stock Options
Variable equity compensation

Nonqualified stock options vest over three years (assuming continued employment) and expire in 10 years

Realizable value is variable based on long-term stock price appreciation
Align management’s interests with those of shareholders

Focus management on long-term stock price appreciation

Balance short-term focus of Annual Cash Incentive by tying rewards to long-term performance over up
to 10 years

Along with PSUs, provide a mix of long-term incentives that support business strategy
Based on job scope, market data and individual performanceOne-half of total annual value of equity award granted as stock options
Restricted Stock Units (RSUs)
Variable equity compensation

Time-vested awards which generally vest over three years

RSUs are not part of the annual grant, but are used in limited circumstances
Generally used to encourage retention and serve as an inducement to join or remain with the Company under certain circumstancesBased on job scope, future potential assessment and/or to replace compensation “left on table” for candidates, which serves as an inducement to join the Company
No RSUs were granted
 to NEOs in 2018

Compensation Discussion and Analysis

Benchmarking Analysis

As part of its executive compensation review for 2015,2018, the Compensation Committee considered twoa benchmarking analyses presentedanalysis provided by Exequity. The first analysis consideredPay Governance comparing the compensation components of base salary, actual bonus,annual incentives, long-term incentives, and total compensation of the Company’s CEO Chief Financial Officer and General Counsel, based on an analysis of proxy statements filed byother executive officers relative to pay programs at a selected peer group (the “Proxy Group”(“Proxy Group”). The positions ofWhere possible, each Company position was compared to industry data using functional counterparts or executives with similar roles at the CEO, Chief Financial Officer and General Counsel were matched, to the extent these positions were disclosed by thepeer companies, in the Proxy Group, andas well as compensation data was based on disclosuresdisclosed in proxy statements filed in 2014. Long-term incentives were annualized and valued using the Exequity valuation methodology.2017.

The Proxy Group, approved by the Compensation Committee after considering recommendations of Pay Governance and input from management, consisted of eighteen15 publicly-traded companies in the insurance industry with profiles similar to the Company’s profile based on information disclosed in their annual reports and proxy statements. Most of theThe Proxy Group companies included in the Proxy Groupgenerally had a majority of operations in the property and casualty insurance industry, and the variations in their revenues, assets and market capitalization versus the Company were considered when the group was selected.

The following companies were included in the Proxy Group:

24

Executive Compensation

Alleghany CorporationHorace Mann Educators Corporation
American National Insurance CompanyInfinity Property and Casualty Corporation
Argo Group International Holdings, Ltd.Mercury General Corporation
W.R. Berkley CorporationOneBeacon Insurance Group, Ltd.
Cincinnati Financial CorporationThe Progressive Corporation
FBL Financial Group, Inc.RLI Corp.
First American Financial CorporationSelective Insurance Group, Inc.
The Hanover Insurance Group, Inc.Torchmark Corporation
HCC Insurance Holdings, Inc.White Mountains Insurance Group, Ltd.
The second benchmarking analysis presented by Exequity considered the compensation components of base salary, target bonus, long-term incentives and total compensation for the Company’s CEO, Chief Financial Officer, General Counsel, Chief Investment Officer and Group Executives with the compensation for comparable positions at companies within two peer groups of U.S.-based insurance companies participating in Equilar’s Top 25 Survey (“Equilar Survey”). The first insurance peer group consisted of all U.S.-based insurance companies in the Equilar Survey, excluding U.S.-based subsidiaries of foreign companies and mutual insurance companies without publicly-available size data (“All Insurance Peer Group”). The second insurance peer group consisted of a subset of the All Insurance Peer Group with book values of assets between one-third and three times the Company’s book value of assets (“All Insurance Peer Subgroup”).
The following companies were included in the All Insurance Peer Group; those designated with an asterisk comprise the All Insurance Peer Subgroup:
ACE LimitedAmerican National Insurance CompanyNational InterstateThe Hanover Insurance Group, Inc.
Argo Group International Holdings, Ltd.Horace Mann Educators Corporation
Aflac IncorporatedThe Navigators Group, Inc.*
The AllstateW.R. Berkley CorporationNew York Life Insurance Company
Aon plcThe Northwestern Mutual Life Insurance Company
Arthur J. Gallagher & Co.*PartnerRe Ltd.
Aspen Insurance Holding Limited*Protective Life Corporation*
Assurant, Inc.*Prudential LifeInfinity Property and Casualty Corporation
The Chubb CorporationPrudential Financial, Inc.
CNACincinnati Financial CorporationReinsurance Group of America, Incorporated*Mercury General Corporation
CNO Financial Group Inc.*RLI Corp.*
EMC Insurance Group Inc.Stewart Information Services Corporation
Erie Indemnity CompanySymetraSelective Insurance Group, Inc.
FBL Financial Corporation*Group, Inc.Torchmark Corporation
First American Financial Corporation*Torchmark Corporation*
The Hanover Insurance Group, Inc.*The Travelers Companies, Inc.
The Hartford Financial Services Group, Inc.Unum Group
Markel CorporationXL Group plc
Mercury General Corporation* 
To provide a broader context, Pay Governance also compared Kemper’s executive compensation levels against additional market references, including published survey data from similarly-sized companies in the broader insurance industry, and general industry data from Willis Tower Watson executive pay surveys. The Compensation Committee utilizeddid not consider the individual companies included in these additional market references for the CEO, and does not believe their identification to be material with respect to the compensation of the other NEOs.

The Compensation Committee used the benchmarking data as ato test of the reasonabilityreasonableness of the compensation paid to Mr. Southwell and otherthe Company’s executive officers. In evaluating the benchmarking data, the Compensation Committee did not follow a rigid process, establish specific pay objectives in evaluating the benchmarking data (such as, for example, targeting different elements of compensation at the median), or utilizeuse the data as part of specific formulas when making compensation determinations for these executives. Instead, the Compensation Committee considered the benchmarking analysis as a means of identifying any outliers and determining whether the levels of compensation provided to the CEO and other executive officers arewere within appropriate ranges in comparisonrelative to comparable companies.

The benchmarking data was also subjectively considered by the Compensation Committee as an additional point of reference in its deliberations on compensation levels for these executives, along with other factors such as Company and business unit performance, individual performance, and the Company’s compensation philosophy and objectives. The Compensation Committee believes that the Company’s

25

Executive Compensation

executive compensation program is fair, competitive with marketplace practices and effective in enhancing shareholder value.





Compensation Discussion and Analysis

Annual Determination of Specific Compensation
The determinationobjective of the specific amount of salary, participation level for cash bonus awardsCompany’s executive compensation program is to attract, retain and size of equity-based compensation awards for a particular executive officer depends in substantial part onmotivate the nature and scopeperformance of the responsibilitiesCompany’s executives by providing competitive compensation structured to incentivize performance in support of the individual’s jobCompany’s strategy, and reward executives for achieving the qualitydesired financial results and impactincreased shareholder value.

The annual compensation program for the NEOs consists of the individual’sa fixed salary component, an annual cash incentive award component that varies based on performance, and contributions.
Salary
At its meetings in November 2014an equity award based on multi-year financial metrics and February 2015,long-term stock price appreciation. For the NEOs other than the CEO, the equity award value is at a target percentage of salary. The equity award value may be increased or decreased on occasion at the discretion of the Compensation Committee deliberated with regard to Mr. Southwell’s compensation package for 2015. The Committee consideredrecognize outsized performance, under performance or other significant factors.
As salary is the only component that is fixed and not based on performance, it represents a multi-year comparative compensation summary for Mr. Southwell provided by Exequity. The Committee reviewed in detail Mr. Southwell’srelatively small portion of total compensation, package (base compensation, annual bonus, long-term incentives, benefits and perquisites and potential change-of-control payments), as well as data on his stock ownership, the value of equity received from the Company’s long-term incentive plans and available benchmarking information. The Committee determined that Mr. Southwell’s compensation package satisfied its compensation policy for the CEO that emphasizes longer-term incentives and de-emphasizes perquisites and personal benefits. Following its review and discussion of the comparative summary and Mr. Southwell’s historical compensation data and his responsibilities, accomplishments and goals for the prior year, the Compensation Committee maintained his salary at the level in effect since 2010.is not adjusted annually. The Compensation Committee took a numberbelieves compensation based on performance, including awards under the Annual Incentive Program, stock options and PSUs, provide the most effective means of factors into accountdriving successful and shareholder-focused performance. Time-based RSUs are used in determining thatlimited circumstances, specifically in grants to certain executives to induce them to join or remain with the CEO’s base salary should be held at the $1 million level and, while tax considerations were not the only issues noted, this decision does have the effect of maintaining the deductibility of the entire salary under Section 162(m) (“Section 162(m)”) of the Internal Revenue Code of 1986 and its accompanying regulations (“Internal Revenue Code”).Company.
In reviewing the amount of base salary for each of the other executive officers for 2015, the
Salaries
The Compensation Committee considered the recommendations made by the CEO based on his assessment of the individual’s job performance and contributions, relevant benchmarking analysis and observations of the Committee with respect to the individual’s job performance. The executive officer performance assessments were subjective and did not entail measurement against specific goals or other objective factors. Following its review and discussion, the Compensation Committee approved 2015 salary increasesmake any changes to NEO salaries for the2018. The 2018 salaries for NEOs based on a number of factors, including market adjustments based on the peer benchmarking analysis to better reflect their senior executive positions within the Company and consideration of the length of time in the current position and significant changes in the scope of responsibilities. In addition, following an officer’s promotion, salary level is determined in the context of a plan for a continued path of adjustments to move salary toward market level compensation over timewere as the officer’s performance in the position is assessed.follows:
Name    Salary ($)
Effective Year of Last Salary Change
Joseph P. Lacher, Jr750,000
2015 - Date of Hire
James J. McKinney450,000
2016 - Date of Hire
John M. Boschelli400,000
2015
Mark A. Green420,000
2016 - Date of Hire
Duane A. Sanders485,000
2018 - Date of Hire

Performance-Based BonusCash Incentives and Equity Awards
A significant portion of each NEO’s compensation is linked directly to the outcome of Company financial metrics. Since
Because each NEO holds a position that provides strategic direction, requires critical decision-making, and affectsdrives the overallCompany’s performance and financial results, of the Company, the Compensation Committee believes that abelieves:

A material percentage of theirthe NEO’s compensation should be linked to Company performance,performance; and that greater

Greater responsibilities should lead to moregreater opportunities for incentive compensation.
Executive Performance Plan
Accordingly, cash incentives and equity-based awards linked to the outcome of Company financial metrics comprise a significant portion of each NEO’s compensation. As previously noted, the Annual Incentive Program provides awards to the highest performing and most impactful participants.
At its meeting in February 2015, the Compensation Committee approved formulas
Annual Cash Incentives for 2015 annual and multi-year awards under the Company’s2018

Executive Performance Plan

The Executive Performance Plan (“EPP”EPP”) based on pre-tax operating income from continuing operations for the applicable performance periods, and determined the following allocations of any resulting bonus pool (“Bonus Pool”) to determine the maximum bonus payable to the plan participants: 40% to the Chief Executive Officer and 20% to each of the other officers subject to Section 162(m). The material terms of the performance goals under the plan were approved by shareholders at the 2014 Annual Meeting. The EPP is intended to serve as an “umbrella” plan and potential funding vehicle for annual cash bonusesincentives. It was originally intended to ensure full tax deductibility to the Company of performance-based cash bonuses paid to officers who are subject toincentives under Section 162(m) (“Section 162m”) of the Internal Revenue Code of 1986, as amended (“Code”), which includesbut the Chief Executive Officerperformance-based compensation deduction was eliminated by the Tax Cuts and the other three officers who are required to serve as NEOs in the proxy

26Jobs Act of 2017 (“2017 Tax Reform Act”).

  Executive Compensation Discussion and Analysis

statement for the year following the end of the performance period based upon their compensation as of the last day of such performance period. Section 162(m) does not apply to the Chief Financial Officer. Performance under the approved formulas determines the amount of the bonus pool, and the allocations of the bonus pool set by the Compensation Committee determine the maximum amount of awards to individual participants under the plan.
The Annual Bonus Pool for the 2015 annual performance period (“2015 Annual Performance Period”) ending on December 31, 2015 was set at 4% of “Pre-Tax Operating Income from Continuing Operations” adjusted by a Catastrophe Loss Collar, as defined below. The Multi-Year Bonus Pool for the 2015 multi-year performance period ending on December 31, 2017 was set at 1.5% of the sum of “Pre-Tax Operating Income from Continuing Operations” adjusted by a Catastrophe Loss Collar for each of the three years in the performance period. Pre-Tax Operating Income from Continuing Operations was defined as Income (Loss) from Continuing Operationsbefore Income Taxes, excluding (i) Net Realized Gains (Losses) on Sales of Investments, and (ii) Net Impairment Losses Recognized in Earnings, as the preceding terms are reported in the Company’s Annual Report on Form 10-K for the respective year(s).
The “Catastrophe Loss Collar” adjustments would be computed as follows:
(i) If Catastrophe Losses and Loss Adjustment Expenses (“LAE”) (including Catastrophe reserve development) reported by the Property & Casualty Insurance segment (“Reported Catastrophe Losses and LAE”) are greater than 1.5 times the planned catastrophe losses and LAE for the Property & Casualty Insurance segment (“Maximum Catastrophe Losses and LAE”), Income (Loss) from Continuing Operations before Income Taxes shall be increased by an amount equal to the difference between the Reported Catastrophe Losses and LAE and the Maximum Catastrophe Losses and LAE;
(ii) If Reported Catastrophe Losses and LAE are less than 0.5 times the planned catastrophe losses and LAE for the Property & Casualty Insurance segment (“Minimum Catastrophe Losses and LAE”), Income (Loss) from Continuing Operations before Income Taxes shall be reduced by an amount equal to the difference between the Minimum Catastrophe Losses and LAE and the Reported Catastrophe Losses and LAE; or
(iii) If Reported Catastrophe Losses and LAE are less than the Maximum Catastrophe Losses and LAE and greater than the Minimum Catastrophe Loss and LAE, no adjustment shall be made to Income (Loss) from Continuing Operations before Income Taxes.
At its meeting in February 2016,May 2018, the Compensation Committee certifiedapproved amendments to the EPP that include the following:
removed references to Section 162m and its specific requirements;

removed references to multi-year awards (eliminated in 2016 when the multi-year component of the prior program was merged into a single annual award under the new Annual Incentive Program);

changed to a $6,000,000 maximum yearly individual award limitation (“EPP Limit”) from two $3,000,000 annual limitations, one for an annual and one for a multi-year award; and
added the Chief Financial Officer as a plan participant.

The Compensation Committee intends to continue the process of approving an annual EPP formula and related allocations to plan participants as a good corporate governance practice even though the process was initially intended to comply with Section 162m requirements that no longer apply. This process will generally occur at the Compensation Committee’s first quarterly meeting of the year. In 2018, the approval occurred at the Compensation Committee’s May meeting, given the additional time needed by the Compensation Committee and its advisor, Pay Governance, to process the impact of the then-recently enacted 2017 Tax Reform Act, particularly with regard to Section 162(m).

The 2018 annual incentives under the EPP were determined by the Compensation Committee using the multi-step process followed in prior years:

The 2018 annual cash incentive pool (“EPP Incentive Pool”) was determined by the performance results under the Bonuspre-approved formula based on pre-tax operating income from continuing operations, as adjusted, for the performance period ending on December 31, 2018;

Maximum payouts to EPP participants were determined based on the pre-approved allocations of the EPP Incentive Pool to individual participants; and

Actual payouts to the NEOs were determined under the Annual Incentive Program based on achievement of key performance results in the judgment of the Compensation Committee, with the CEO’s input with regard to payouts for the NEOs other than the CEO, and, in each case, resulted in the application of negative discretion.

For 2018, the EPP participants are the NEOs in the 2019 proxy statement, including the Company’s Chief Financial Officer, whose compensation was not previously subject to the deductibility limitations of Section 162(m). The formula approved for the 2015 Annual Performance Period and determined the 2015 Annual Bonus2018 EPP Incentive Pool to be $3,015,399. The Compensation Committee determined the maximum bonus amounts for the participating NEOs pursuant to the previously-approved Bonus Pool allocations and exercised negative discretion in determining the actual EPP bonus payouts. The payout to each EPP participant was set atas follows, reflecting the amountaddition of the 2015 Annual PIP Award (as defined in the next section below) to such participant under the Performance Incentive Plan, the “underlying” plan used by the Compensation Committee to determine the actual payout of awards to the EPP participants.
As Mr. Lacher joined the Company in November 2015, he did not receive an EPP bonus for 2015. Mr. Southwell was not covered by the EPP for 2015 as he was no longer the CEO as of the end of the year. As Mr. Sodaro is the Chief Financial Officer he is notas a participant in the EPP.
The aggregate total of bonus payouts under the EPP was $468,664, significantly less than the maximum amounts allocated under the 2015 Annual Bonus Pool. The table below shows the Bonus Pool allocations and maximum amounts payable for 2015 annual awards under the EPP and the actual 2015 annual EPP award payouts approved for the EPP participants.EPP:


Formula for 2018 EPP Incentive Pool
8.5% of Income from Continuing Operations before Income Taxes as reported in the Company’s financial statements for the year ended December 31, 2018, modified as follows to account for items the Compensation Committee deems not indicative of the Company’s core operating performance:


(a) adjust the amount of Actual Catastrophe Losses and LAE to equal Expected Catastrophe Losses and LAE (italicized terms defined below);
(b) adjust Net Realized Gains on Sales of Investments and Net Impairment Losses Recognized in Earnings (italicized terms as reported in the Company’s 2018 financial statements) to equal Expected Net Realized Gains on Sales of Investments and Expected Net Impairment Losses Recognized in Earnings (italicized terms defined below);
(c) exclude significant unusual judgments or settlements in connection with the Company’s legal
      contingencies or defined benefit pension plans; and
(d) exclude additional significant unusual or nonrecurring items as permitted by the EPP.









27

  Executive Compensation Discussion and Analysis

Bonus Payouts — 2015 Annual EPP Awards
 NameAllocated Percentage of Bonus Pool(%)
Maximum Payout based on Allocation of Bonus Pool($)
2015 Actual Annual Award Payout($)(1)
2015 Annual Payout as percentage of Bonus Pool(%)
 
 
 John M. Boschelli20
603,080
250,800
8.3
 Denise I. Lynch20
603,080
124,001
4.1
 Richard Roeske20
603,080
 

93,863
3.1
(1) Amounts determined under the 2015 Annual PIP Awards but paid under the EPP


The terms as used above are defined as follows:

See“Actual Catastrophe Losses and LAE” means the narrative captioned 2015 Annual PIP Awards—Performance Resultsactual Catastrophe Losses and Payouts, beginningassociated Loss Adjustment Expenses (as described on page 29,33), including catastrophe reserve development, as reported in the Company’s management reports for detailsthe relevant year.

“Expected Catastrophe Losses,” “Expected Net Realized Gains on Sales of Investments,” and “Expected Net Impairment Losses Recognized in Earnings” means the calculationamounts specified in the Company’s management reports as “Planned” or “Expected” for the 2018 annual performance period for, respectively: (a) Catastrophe Losses and associated Loss Adjustment Expenses, including catastrophe reserve development, (b) Net Realized Gains on Sales of 2015Investments, and (c) Net Impairment Losses Recognized in Earnings, as such terms as defined in 2018 Annual PIP AwardsReport.

The following allocations of the 2018 EPP Incentive Pool were approved by the Compensation Committee to determine the maximum annual cash incentive payable to each plan participant:

36 percent to the NEOsChief Executive Officer; and the payouts of $117,294

16 percent to Mr. Sodaro and of $249,375 to Mr. Southwell under their 2015 Annual PIP Awards.
Performance Incentive Plan
The Performance Incentive Plan (“PIP”) is a cash incentive program that served as the “underlying” plan for 2015 cash bonus awards. The Compensation Committee made a selection of the specific performance criteria under the PIP that would apply to the annual incentive awards (“Annual PIP Awards”) and multi-year incentive awards (“Multi-Year PIP Awards”) (collectively “Annual and Multi-Year PIP Awards” or “PIP Awards”) to the NEOs for 2015.
Threshold, Target and Maximum Performance Levels
For each of the 2015 Annual and Multi-Year PIP Awards granted to the NEOs, the Compensation Committee established threshold, target and maximum performance levels. The threshold performance level is the minimum level of performance that must be met before a payout may occur. The maximum performance level was set at twice the target level to encourage excellence and reward superior performance, while at the same time placing a reasonable limit on the size of the potential payout.
2015 PIP Awards: Target Bonus Percentages and Performance Criteriaother NEOs.
At its meeting in February 2015,2019, the Compensation Committee granted Annualcertified the performance results under the 2018 EPP Incentive Pool formula and Multi-Year PIP Awardsdetermined the amount of the 2018 EPP Incentive Pool to be $17,561,000. The Compensation Committee determined the maximum incentive amounts for the participating NEOs pursuant to the NEOs and assigned a target bonus percentagepreviously-approved 2018 EPP Incentive Pool allocations, subject to each recipient representing a percentage of his or herthe EPP Limit. In approving the actual annual base salary (“Target Bonus Percentage”) for each award. The Target Bonus Percentageincentive award payouts for Mr. Southwell was set at 75 percent forLacher and the other NEOs under the Annual PIP AwardIncentive Program, the Compensation Committee exercised negative discretion to reduce the size of awards from the amounts determined under the EPP formula for 2018.

2018 Annual Incentive Program
The Annual Incentive Program is a cash incentive program adopted in 2016 to replace the Company’s prior cash incentive program that had included both annual and 75 percentmulti-year components. Each year, a modeled pool is established for participating employee groups. For 2018, the Multi-Year PIP Award, consistent with the 2014 PIP Awards.modeled pool was based on historical target and payout values at each organizational level in an attempt to keep total compensation generally equivalent year over year. The Target Bonus Percentagemodeled pool was adjusted for Mr. Sodaro, Mr. Boschelliextenuating factors, partial year employment for new bonus-eligible participants, and Ms. Lynch was set at 55 percent for the Annual PIP Award and 55 percent for the Multi-Year PIP Award, an increase from 50 percent for their 2014 awards. The Target Bonus Percentage for Mr. Roeske was set at 40 percent for the Annual PIP Award and 40 percent for the Multi-Year PIP Award, consistent with his 2014 award. For 2015 Annual PIP Awards, annual base salary is the recipient’s base salary in effect asachievement of the first pay period in April 2015. For 2015 Multi-Year PIP Awards, the base salary is the average of the recipient’s base salary in effect as of the first pay period in April 2015, 2016 and 2017.key strategic projects.

The 2015final Annual PIP AwardsIncentive Program pool was allocated to the NEOs were 70 percentparticipating groups and distributed in individual awards based on company performance criteria (“Company Performance Criteria”)performance. Initial recommendations were reviewed for calibration across function, organizational level, business groups and 30 percentother relevant metrics, to significantly dif
ferentiate based on the results delivered and individual performance criteria. The 2015 Multi-Year PIP Awards toperformance.

In determining awards under the NEOs were 100 percent based on Company Performance Criteria. The Company Performance Criteria adoptedAnnual Incentive Program for the 2015 PIP Awards granted toCompany’s NEOs, the NEOs were designed to take into account the Company’s business plans, which included reduction of certain risk exposures, managing capital more efficientlyCompensation Committee considered quantitative financial performance measures and re-shaping the business mix over time to improve profitability.qualitative criteria. The Compensation Committee approved Company Performance Criteriadid not use a formula or assign any relative weighting to any performance measure. The Compensation Committee believes a strictly formulaic approach to individual incentive payments is not an appropriate substitute for the 2015 PIP AwardsCompensation Committee’s deliberation and business judgment. The level of achievement of any financial or operational measure neither guarantees nor precludes the payment of an annual cash incentive but is given significant weight as a factor along with any additional information available to it at the time, including general market conditions.

The Compensation Committee applied its judgment to the NEOs consistent with those approved under their 2014 PIP Awards, except that the weightings were changed to put more emphasis on revenue growth and an additional criterion, GAAP Underlying Combined Ratio, was added to Ms. Lynch’s Annual PIP Award. For the 2015 Annual and Multi-Year PIP Awards to Mr. Boschelli, the weightings of performance criteria were unchanged from 2014, except for the portions basedfollowing qualitative factors in its overall assessment:

Substantial progress on the same criteria asstrategic re-positioning of the other NEOs that were changed as described above.

28Company and improved financial performance;

Completion of the Infinity transaction and the initial integration of Infinity into the Company;

  Executive Compensation Discussion and Analysis

Strong and consistent investment returns in a portfolio with increased assets;
Solid financial position, with adequate capital and liquidity to support the Company’s strategic plans;

Effective management of risk and expenses; and

Overall performance of the NEOs, based on the judgment of the Compensation Committee, the Chairman of the Board, and, in the case of the other NEOs, also the CEO, including perceptions on leadership, teamwork, effective management and oversight.

The Company Performance CriteriaCompensation Committee also reviewed quantitative factors and management’s progress toward improved financial and operating performance in 2018. The quantitative factors reviewed include net income, combined ratio, return on equity, written and earned premiums, and net investment income, by business segment and operating unit within each business segment. The Compensation Committee analyzed reported results against plan, prior-year and industry results and considered underlying trends. In addition, the Compensation Committee reviewed results with various adjustments for 2015 PIP Awards are shown in the following table, and definitionsitems it deemed not indicative of the relevant terms are described in Appendix A to this Proxy Statement.Company’s core operating performance.

Company Performance Criteria for 2015 PIP AwardsThe Compensation Committee reviewed results with and without certain adjustments, including the following:

Reported results including Actual Catastrophe Losses and LAE, and Actual Catastrophe Losses and LAE adjusted to expected losses;
Reported results with and without unusual charges or gains; and

Reported results including realized gains and losses and impairments, and results adjusted to expected realized gains and losses and impairments.

In determining award payouts for the individual NEOs under the Annual Incentive Program, the Compensation Committee reviewed key business results and factors considered critical to the success of their respective business units and functional areas in addition to the qualitative and quantitative factors described above.

The Compensation Committee considered net income and return on equity, with and without certain adjustments, although these measures were not individually determinative or given any specific weight in comparison with other measures considered in determining adjustments to the initial pool and specific incentive awards for the 2018 Annual Incentive Program.

The following table shows 2018 and 2017 actual Net Income and Return on Equity, each as reported and as adjusted:
2018 versus 2017 Performance Comparisons
Measure2018 Actual
2017 Actual
Net Income$190.1 million
$120.9 million
Adjusted Net Income (1)$290.4 million
$171.9 million
Return on Equity (“ROE”)7.4%
5.9%
Adjusted ROE (1)11.9%9.2%
Name(1)
Corporate Performance Measures
2015 Annual PIP Award
Corporate Performance Measures
2015 Multi-Year PIP Award
Non-GAAP financial measure - See Appendix A for GAAP to Non-GAAP
Frank J. Sodaro,
Richard Roeske and Donald G. Southwell
Annual Kemper Consolidated:
1. Earned Premium Revenue Growth
(weighted 40%)
2. Operating Profit Margin*
(weighted 60%)
3-Year Average of Kemper Consolidated:
1. Revenue Growth (weighted 40%)
2. Return on Equity*(weighted 60%)
Denise I. Lynch
Annual Kemper P&C Group:
1. Earned Premium Revenue Growth
(weighted 40%)
2. GAAP Combined Ratio
(weighted 30%)
3. GAAP Underlying Combined Ratio
(weighted 30%)
reconciliation.

The aggregate total of incentive payouts for the Annual Incentive Program under the EPP was $5.5 million, significantly less than the maximum amounts allocated under the 2018 EPP Incentive Pool and represented about 31.3 percent of the total pool available across the NEO group. The following table shows the 2018 EPP Incentive Pool allocations and maximum amounts payable for 2018 annual awards under the EPP and the actual 2018 annual EPP award payouts approved for the EPP participants:

3-Year Average of Kemper P&C Group:
1. Premium Revenue Growth
(weighted 40%)
2. Return on Allocated Equity*
(weighted 60%)

John M. Boschelli
1. Annual Excess Return from Kemper
Investments (weighted 20%)
2. Annual Excess Return from Pension
Investments (weighted 5%)
3. Annual Pre-Tax Equivalent Net
Investment Income Yield (weighted 50%)
4. Annual Kemper Consolidated:
(i)  Earned Premium Revenue Growth (40%)
(ii)  Operating Profit Margin (60%)*
(collectively weighted 25%)
1. 3-Year Excess Return from Kemper
Investments (weighted 20%)
2. 3-Year Excess Return from Pension
Investments (weighted 5%)
3. 3-Year Pre-Tax Equivalent Net
Investment Income Yield, (weighted 50%)
4. 3-Year Average of Kemper Consolidated:
(i) Revenue Growth (40%)
(ii) Return on Equity(60%)*
(collectively weighted 25%)
*Subject to Catastrophe Loss Collar adjustment
2015 Annual PIP Awards—Performance Results and Payouts
In determining the payout for each award, the actual results under the Company Performance Criteria for the performance period were compared to the applicable performance grids previously approved to determine a target multiplier percentage (“Target Multiplier”). The Target Multiplier was then applied to the NEO’s Target Bonus Percentage for Company Performance and base salary to determine the amount of any payout. For performance above or below preapproved target levels, the Target Multiplier was interpolated on a straight-line basis.
At its meeting in February 2015, the Compensation Committee certified the performance results for the 2015 Annual PIP Awards to the NEOs in accordance with the Performance Incentive Plan. The performance results were as follows:
For Messrs. Sodaro, Roeske and Southwell, annual Kemper Consolidated Earned Premium Revenue Growth of
7.91 percent and Operating Profit Margin of 3.18% resulted in a weighted Target Multiplier of 47.5 percent.
For Ms. Lynch, annual P&C Group Earned Premium Revenue Growth of 13.25 percent, GAAP Combined Ratio of 103.5 percent and Underlying Combined Ratio of 99.9 percent resulted in a weighted Target Multiplier of 67.1 percent.
For Mr. Boschelli, performance under multiple criteria resulted in a weighted Target Multiplier of 120.0 percent as shown in the following table:

29

  Executive Compensation Discussion and Analysis

Performance CriteriaExcess Return/NII Yield (%)
2015 Target Multiplier for Metric (%)
Weighting (%)
Weighted Target Multiplier
Excess Return from Corporate Investments1.61
180.5
20
36.1
Excess Return from Pension Investments0.82
141.0
5
7.1
Pre-Tax Equivalent Net Investment Income Yield0.18
130.0
50
65.0
Kemper Consolidated Earned Premium Revenue Growth & Operating Profit Margin*See results for Messrs. Sodaro, Roeske and Southwell described above25
11.8
Weighted Average of Target Multipliers120.0 
Annual Incentive Payouts - 2018 Annual EPP Awards
NameAllocated Percentage of EPP Incentive Pool(%)
Maximum Award (Lower of EPP Incentive Pool Allocation or
EPP Limit) ($)

 
Actual
Award Payout($)

Actual Award Payout as Percentage of Maximum (%)
Joseph P. Lacher, Jr.36
6,000,000
(1)2,500,000
41.7
James J. McKinney16
2,809,760
 900,000
32.0
John M. Boschelli16
2,809,760
 600,000
21.4
Mark A. Green16
2,809,760
 500,000
17.8
Duane A. Sanders16
2,809,760
 1,000,000
35.6
*Subject(1) Maximum award to Catastrophe Loss Collar adjustment
For the 2015 Annual PIP awards to each NEO, the award payouts were determined as follows:
Total Award Payable = (Company Award Percentage + Individual Award Percentage) * Base Salary
The Company Award Percentage was determined as follows:
Weighted Target Multiplier for Company Performance Criteria * Weighted Target Bonus Percentage for
Company Performance Criteria.
The Individual Award Percentage was determined as follows:
Individual Multiplier * Weighted Target Bonus Percentage for Individual Measures.
Each officer’s Company Award Percentage and Individual Award Percentage were added together, and the sum was multiplied by his or her Base Salary to determine the amount of any payout under the Annual PIP Award. The weighted Target Multiplier for Company Performance Criteria was determined from the applicable performance grids, and the Individual Multiplier was determined from an evaluation of the officer’s individual performance criteria.
Thirty percent of Mr. Southwell’s annual bonus was based upon the Committee’s evaluation of CEO performance in furtherance of several prioritized objectives that had been previously established. These include oversight of the Company’s long-term strategic planning, (ii) oversight of the Company’s compliance activities and satisfactory resolution of outstanding issues, and (iii) growth of the Company. In light of Mr. Southwell’s resignation as CEO following, and conditioned upon, the successful completion of the CEO search that resulted in Mr. Lacher becoming CEO, the longer-term nature of a number of such subjective performance objectives for Mr. Southwell, and the nature of arrangements agreed upon with Mr. Southwell related to his retirement, the Committee determined that it was not appropriate to grant a cash bonus to Mr. Southwell with respect to such thirty percent component, although the formulaic seventy percent of his annual bonus was paid in accordance with the applicable2018 EPP formula without a proration adjustmentexceeded
the $6,000,000 EPP Limit.

The Compensation Committee believes these NEO annual incentive award payouts reflect fairly the actual financial performance outcomes achieved during 2018 and the qualitative factors considered by the Compensation Committee as described above and, more specifically, the following issues deemed most pertinent to reflect his resignation as President and CEO approximately 6 weeks before the end of 2015, as he remainedindividual officer’s responsibilities:

Mr. Lacher, with the CompanyBoard’s direction and advice and the assistance of the new leadership team which he formed, was responsible for continued execution of the turnaround strategy which realized improved financial results and generated significant value for shareholders. In addition, Mr. Lacher drove the leadership of the P&C segment to strengthen its management team and enhance the separation of its non-standard auto and preferred lines units. Finally, Mr. Lacher with the help of the leadership team, drove the completion of the Infinity acquisition in July and the planning process for its integration into the Company.

Mr. McKinney directed many changes in the Finance organization that led to an increasingly strong capital position, with ample liquidity to support the Company’s strategic initiatives. In addition, his team was able to execute a credit agreement amendment that expanded the Company’s borrowing capacity and added a term loan feature to provide partial funding for the Infinity acquisition.

Mr. Boschelli managed a solid investment group that again produced strong consistent results, leveraged the structure of Senior Advisor. Also, as the Company’s two operating divisions, and achieved industry-leading returns with a diversified and highly-rated investment portfolio that held $1.3 billion more assets than in 2017.

Mr. Southwell was no longer CEO onGreen led substantial changes in the last dayLife & Health Division. Investments in the Life business to modernize internal processes and improve technology, underwriting, and collections, and to enhance the distribution system, have resulted in continued modest increases in earned premiums after years of 2015, he did not receive an award underdeclines; the EPP.
The amounts paid in March 2016 under the 2015 Annual PIP Awardssupplemental Health business, adapting to the NEOs who are participants in the EPP are set forth above in the Bonus Payouts — 2015 Annual EPP Awards table on page 28. changing health insurance market, experienced increased earned premiums.

Mr. Southwell was not covered by the EPP for 2015 as he was no longer the CEO asSanders assumed leadership of the endProperty & Casualty Division in early 2018, directing the team’s successful Infinity integration efforts. Additionally, he oversaw the ongoing rollout of the year. As Mr. SodaroKemper Prime home and auto product, expanded releases to the enhanced sales and policy service technology platform introduced in 2017, and is the Chief Financial Officer, he is not a participant in the EPP. The amount paid in March 2016 under the 2015 Annual PIP Awards to Messrs. Southwell and Sodaro were $249,375 and $117,294, respectively.repositioning Kemper Personal Insurance for long-term profitable growth.


30Equity-Based Compensation Awards

Equity-based compensation continues to be an
integral part of the Company’s executive compensation program. The Compensation Committee believes the Company’s equity-based compensation program incentivizes performance and stock ownership by its executive officers, thereby aligning the interests of the Company’s management and shareholders.
  Executive Compensation

2013 Multi-Year PIP Awards—Performance Results
At its meeting in February 2015, the Compensation Committee certified the performance results for the 2013 Multi-Year PIP Awards to the NEOs in accordance with the Performance Incentive Plan. The actual performance results for the 2013 – 2015 three-year performance period were as follows:
For Messrs. Sodaro, Roeske and Southwell, 3-year average Consolidated Revenue Growth of -5.27 percent and Return on Equity of 6.93 percent resulted in a weighted Target Multiplier of 91.1 percent.
For Ms. Lynch, 3-year average Consolidated Revenue Growth of -8.02 percent and Return on Allocated Equity of 5.71 percent resulted in a weighted Target Multiplier of 49.6 percent.
For Mr. Boschelli, performance based on multiple criteria resulted in a weighted Target Multiplier of 107.9 percent as shown in the following table:
Performance CriteriaExcess Return/NII Yield (%)2015 Target Multiplier for Metric (%)
Weighting (%)
Weighted Target Multiplier
Excess Return from Corporate Investments0.59129.5
20
25.9
Excess Return from Pension Investments-3.30—
5
—
Pre-Tax Equivalent Net Investment Income Yield (NII)0.37118.5
50
59.3
3-Year Average of Kemper Consolidated Revenue Growth and Return on Equity*See results for Messrs. Sodaro, Roeske and Southwell described above25
22.7
Weighted Average of Target Multipliers107.9 
*Subject to Catastrophe Loss Collar adjustment
The amounts paid to the NEOs (as applicable) in March 2016 under the 2013 Multi-Year PIP Awards are shown in the following table:
Bonus Payouts—2013 Multi-Year PIP Awards
Employee NameTarget as a % of 3 Year Average Base Salary (%)3 Year Average Base salary as of April 1, 2015 ($)Total Bonus Payout Based 100% on Financial Performance Measures ($)Total payout as a % of Base Salary (%)
Joseph P. Lacher____
Frank J. Sodaro50%408,333185,99645.6
John M. Boschelli50%366,667197,81754.0
Denise I. Lynch50%465,000115,32024.8
Richard Roeske30%360,50098,52527.3
Donald G. Southwell75%1,000,000683,25068.3


31

Executive Compensation

Equity-Based Compensation Discussion and Analysis
Equity-based compensation continues to be an integral part of the Company’s executive compensation program. The Compensation Committee pays close attention to share retention resulting from the exercise of equity-based awards previously granted to the Company’s executive officers, and includes share retention as one of the factors considered in determining the appropriate award level for new equity grants. However, the Committee does not utilize formulas in making such determinations, other than to assess compliance with the minimum holding requirements of the Company’s Stock Ownership Policy, as described on page 22 above under the heading Stock Ownership Policy. The Committee believes that the Company’s equity-based compensation program has played the principal role in the acquisition and retention of significant levels of Company stock owned by its executive officers, thereby better aligning the interests of the Company’s management and shareholders.

Award Methodology

The 20152018 annual executive compensation program continued the prior year’s mix of equity-based, long-term incentive compensation awards adopted in 2009, with awardsconsisting of both performance-based RSUsPSUs and stock options under the Omnibus Plan.options. The design of the Omnibus Plan provides2018 equity awards for fungible use of shares, with a fungible conversion factor of 3 to 1, so that the share authorization under the plan is reduced at two different rates, depending upon the type of award granted. Each stock option award reduces the share authorization by one share for each share of Common Stock subject to the option, while each “full value” award reduces the share authorization by three shares. “Full value” awards are awards other thanall NEOs were allocated 50 percent in stock options or SARs that are settled by the issuance of shares of Common Stock, such as restricted stock and RSUs.
In considering50 percent in PSUs, with the number of equity-based shares subject to each grant determined with reference to the Common Stock price on the date of grant. The Compensation Committee approved an equity award tofor Mr. Lacher with a particular executive officer,total value of $3.5 million. For the NEOs other than Mr. Lacher, the Compensation Committee has historically taken into accountfollowed a target-value approach, with the CEO’s and its own subjective evaluations as to the individual’s ability to influence the long-term growth and profitabilityequity award value based on a set percentage of the Company, given his or her particular job responsibilities. In light of his overall responsibility for the Company’s operations and financial results, the CEO would ordinarily be deemed to have the greatest ability to influence the long-term growth and profitability of the Company. In 2015,their respective base salaries. However, the Compensation Committee granted the CEO 80,000 stock options and 15,000 shares of performance-based RSUs, consistent with his 2014 equity awards.
Beginning in 2013 for stock options and in 2014 for RSUs, annualexercised its discretion to grant equity awards providein excess of their 150 percent target values in recognition of the Company’s strong achievements in 2017, including its significantly improved financial and operational performance in advance of anticipated milestones, strategic plan progress and exceptional stock performance. The value of the long-term incentive awards granted in February 2018 was 180 percent of salary for continued vesting following terminationMessrs. McKinney, Boschelli, Green and Sanders.

Mr. Lacher’s 2018 award was determined by the Compensation Committee, with input from the Chairman of employment (subject to applicable non-compete and claw-back clauses) if, at the timeBoard, based on, among other factors, his overall performance in 2017, performance on the 2017 objectives, as approved by the Board, total compensation for comparable CEOs, in light of termination, the award holder is “Retirement Eligible” as defined under theCompany’s philosophy that Mr. Lacher’s total compensation should be heavily weighted towards performance-based compensation.

The equity award agreements i.e., has either attained age 65 with at least five yearsapproved for the 2018 grants incorporate the following changes from the 2017 grants:

◦maximum, target and threshold performance levels were increased from the 2017 awards for the PSUs based on Three-Year Adjusted ROE;

◦the vesting schedule for stock option awards was changed to three annual installments beginning on the first anniversary of the grant date, instead of four annual installments beginning six months from the grant date;

◦dividend equivalents on PSUs and RSUs accrue until vesting instead of paying out on a quarterly basis and will only be paid on total shares actually earned; and

◦new restrictive covenants were added related to confidentiality, nonsolicitation and nondisparagement.

PSU Awards Granted in 2018

Fifty percent of service or age 60 with at least 10 years of service.
Performance-Based RSU Awards in 2015
The performance-based RSUthe PSU awards granted to the NEOs in February 2018 were based on February 4, 2015Relative TSR and 50 percent were made under the Omnibus Plan.based on Three-Year Adjusted ROE. These awards are subject to forfeiture and transfer restrictions until vesting on the third anniversary ofdate the grant dateCompensation Committee certifies the performance results (“Vesting Date”) in accordance with the award agreements. The determination of vesting will be based on the Company’s total shareholder return over a three-year performance period ending on December 31, 2016 relative to a peer group comprised of all companies in the S&P Supercomposite Insurance Index (“Peer Group”). The award agreements provide for grants of additional shares of Common Stock to the award recipient if the Company’s relative performance exceeds the “target” performance level, which is the 50th percentile based on TSR relative to the Peer Group (“Relative TSR Percentile Rank”). The number of performance-based RSUPSU shares granted to each NEO onin February 4, 20152018 (“Target Shares”Shares”) that will vest and be issued as Common Stock, if any, and the number of additional shares of Common Stock, if any, that will be granted on the Vesting Date (“Additional Shares”Shares”), will be determined based on the applicable performance results for the performance period, as described in detail below.

Shares Based on Relative TSR

For the 50 percent of PSUs based on Relative TSR, the determination of vesting will be based on the Company’s total shareholder return (“TSR”) over a three-year performance period ending on January 31, 2021 relative to a peer group comprised of all companies in the S&P 1500 Supercomposite Insurance Index (“PeerGroup”). In accordance with the award agreements, TSR is calculated based on the average of the closing stock prices for 20 consecutive trading days prior to the beginning and end of the performance period, and assumes all dividends issued over the performance period are reinvested. The award agreements provide for grants of Additional Shares to the award recipient if the Company’s relative performance exceeds the “target” performance level, which is the 50th percentile based on TSR relative to the Peer Group (“Relative
Compensation Discussion and Analysis

TSR Percentile Rank”). The number of Target Shares that will vest, if any, and the number of Additional Shares, if any, that will be granted, will be determined in accordance with the following table:
Kemper’s Relative TSR Percentile Rank
Total  SharesPSUs to Vest and/or Shares to be Granted on Vesting
Date as Percentage of Target Shares (%)
90th or higher
At least 90th
200
75th
150
50th
100
25th
  50
Below 25th
—


Shares Based on Three-Year Adjusted ROE
For the 50 percent of PSUs based on Three-Year Adjusted ROE, the determination of vesting will be based on the Company’s adjusted return on equity over a three-year performance period ending on December 31, 2020. The award agreements provide for grants of Additional Shares to the award recipient if the Company’s Three-Year Adjusted ROE exceeds the “target” performance level of 8.5 percent. The target, threshold and maximum levels shown in the table below represent increases over the respective levels applicable to the 2017 PSU awards based on Three-Year Adjusted ROE.
The number of Target Shares that will vest, if any, and the number of Additional Shares, if any, that will be granted, will be determined in accordance with the following table:
32
Three-Year Adjusted ROE (%)Total  PSUs to Vest and/or Shares to be Granted on Vesting Date as Percentage of Target Shares (%)
At least 10.0200
8.5100
7.0  50
Below 7.0—

The applicable terms are calculated as follows:

Three-Year Adjusted ROE is computed by dividing the sum of Adjusted Net Income for each of the three years in the performance period by the sum of the Adjusted Average Shareholders’ Equity for each of the three years.

Adjusted Net Income is defined as Net Income as reported in the Company’s financial statements for the respective year, adjusted to account for the after-tax impacts of the following items, to the extent the Compensation Committee deems them not indicative of the Company’s core operating performance:

adjust the amount of Actual Catastrophe Losses and LAE to equal Expected Catastrophe Losses (italicized terms defined below);

adjust Net Realized Gains on Sales of Investments and Net Impairment Losses Recognized in Earnings (italicized terms as reported in the Company’s financial statements) to equal Expected Net Realized Gains on Sales of Investments and Expected Net Impairment Losses Recognized in Earnings (italicized terms defined below);

significant unusual judgments or settlements in connection with the Company’s legal contingencies or benefit plans; and

additional significant unusual or nonrecurring items as permitted by the Omnibus Plan.

  Executive Compensation Discussion and Analysis

Adjusted Average Shareholders’ Equity is defined as the simple average of Total Shareholders’ Equity (as reported in the Company’s financial statements) for the beginning and end of year for each year in the performance period, adjusted to account for the after-tax impacts of the following items, to the extent the Compensation Committee deems them not indicative of the Company’s core operating performance:

Unrealized Gains and Losses on Fixed Maturity Securities from Adjusted Shareholders Equity (italicized terms as reported in the Company’s financial statements as defined above and below);

the modifications made in calculating Adjusted Net Income; and

additional significant, unusual or nonrecurring items as permitted by the Omnibus Plan.

Actual Catastrophe Losses and LAE means the actual Catastrophe Losses and associated Loss Adjustment Expenses, including catastrophe reserve development, as reported in the Company’s management reports for the relevant time period.

Expected Catastrophe Losses, Expected Net Realized Gains on Sales of Investments, and Expected Net Impairment Losses Recognized in Earnings means the amounts specified in the Company’s management reports as “Planned” or “Expected” for, respectively, (a) Catastrophe Losses and associated Loss Adjustment Expenses, including catastrophe reserve development, (b) Net Realized Gains on Sales of Investments, and (c) Net Impairment Losses Recognized in Earnings.

Unrealized Gains and Losses on Fixed Maturity Securities means the Unrealized Gains and Losses on Fixed Maturity Securities as reported in the Company’s management reports.

Additional Information

For performance falling between the percentile levels specified in the first column of theeach table above, the number of shares that will vest and be issued as Common Stock or be forfeited, and the number of Additional Shares, if any, that will be granted on the Vesting Date will be determined by straight-line interpolation from the percentages specified in the table. Any Target Shares that do not vest in accordance with the table above will be forfeited on the Vesting Date. Under the terms of the applicable equity-based compensation plans of the Company, outstanding2018 PSU award agreements, Target Shares of RSUs are entitled to receivePSUs accrue dividend equivalents during the vesting period on the same basis as dividends are paid to holders of outstanding shares of Common Stock.Stock, but are paid out after vesting only on the total number of shares actually earned.

The February 4, 20156, 2018 grant date fair value of the performance-based RSUsPSUs was estimated at $43.05$61.84 per share for the portion based uponon Relative TSR and $60.00 for the Monte Carlo simulation methodportion based on Three-Year Adjusted ROE. For a discussion of valuation assumptions, see Note 10, “Long-term Equity-based Compensation,” to the consolidated financial statements included in the Company’s 20152018 Annual Report.
Performance Results for 2013 Performance-Based Restricted Stock2016 PSU Awards

Messrs. Lacher, Boschelli, McKinney and Green received PSU awards in 2016, half of which were based on Relative TSR and half of which were based on Three-Year Adjusted ROE. Mr. Sanders did not receive 2016 PSU awards due to his hire date with the Company.

Shares Based on Relative TSR

TheOn March 6, 2019, the Compensation Committee certified the performance results of the Company’s Relative TSR relative to its Peer Group for the 2013 – 2015 Performance Period2016 - 2018 performance period for the Performance-Based Restricted Stock Awards granted to the NEOs in 2013.2016 PSU awards based on Relative TSR. The TSR for Kemper and each company in the Peer Group was calculated using the 20-day average trading price preceding the beginning and the end of the Performance Period.performance period. The Company’s TSR was determined to be 43.52206.5 percent for the Performance Period.performance period. Relative to the Peer Group, the Company ranked 39second out of the 49fifty companies, or at the 2198stth percentile. By comparison, peer companies closest to the 90th percentile which resulted in a payout multiplier(maximum level), 50th percentile (target level) and 25th percentile (threshold level), ranked approximately 6, 25, and 38, respectively, out of zero. As a result, all Target Shares granted under the 2013 Performance-Based Restricted Stock Awards were forfeited on50 companies. Since the vesting date, February 4, 2016, and no additional shares were granted. The number of Target Shares forfeited were as follows: Sodaro (1,500); Boschelli (2,000); Lynch (4,000); Roeske (1,600); and Southwell (15,000).Company’s performance was above the
Changes Made to NEO Compensation for 2016Discussion and Analysis
At its meeting
maximum level, the final number of shares earned equals 200 percent of the Target Shares based on February 26,Relative TSR granted in 2016. As a result, on the Vesting Date, March 6, 2019, all Target Shares vested and the same number of Additional Shares were granted. The NEOs received received the following shares of Common Stock upon the vesting of their 2016 PSU Awards based on Relative TSR on March 6, 2019: Lacher (48,118); McKinney (5,038); Boschelli (4,692); and Green (5,938). Mr. Sanders did not receive any 2016 PSU Awards due to his hire date in 2018.

Performance of Kemper Common Stock Compared to S&P 1500 Supercomposite Insurance Index

The graph below shows relative TSR performance over the period from January 1, 2016 through December 31, 2018 and prior-period comparison.        
tschart.jpg

Shares Based on Three-Year Adjusted ROE

On March 6, 2019, the Compensation Committee approved a 2016 compensation package for Mr. Lacher that includes an annual base salarycertified the performance results of $750,000, the guaranteed minimum bonus payment of 81.25 percent of base salary provided in his November 2015 offer letter, and equity-based compensation awards with a total value of $2 million, allocated one-third in stock options and two-thirds in performance-based RSUs. In addition, the Compensation Committee and Mr. Lacher revised the terms of his offer letter that had provided for an annual bonus structure consistent with the prior Annual PIP program that the Company discontinued in 2016 so that Mr. Lacher could participate in the new 2016 bonus program the Company rolled out to the executive officers and other eligible employees, subject to his guaranteed minimum bonus payment. The Compensation Committee also approved base salariesCompany’s Three-Year Adjusted ROE for the other NEOs at their 2015 levels2016 PSU Awards. The Three-Year Adjusted ROE for the 2016-2018 Performance Period was calculated on the same basis as described above for the PSU awards granted in 2018 for the 2018-2020 performance period, but payouts were determined based on the following threshold, target and equity-based compensation awards in amountsmaximum levels:
Three-Year Adjusted ROE (%)Total PSUs to Vest and/or Shares to be Granted on Vesting Date as Percentage of Target Shares (%)
At least 7.8%200
6.5%100
5.2%  50
Below 5.2%0

The Company’s Three-Year Adjusted ROE was determined under a fixed-value approach that allocates fiftyto be 9 percent for the 2016-2018 performance period.  Since the Company’s performance was above the maximum level, the final number of shares earned equals 200 percent of the valueTarget Shares granted in stock options and fifty percent in performance-based RSUs.  
In addition, the Compensation Committee approved2016. As a change in the Company’s practice regarding the annual equity award grant date to a fixed date of March 1 each year, and a new form of award agreement for grants of performance-based RSUs with a new, additional performance metric basedresult, on adjusted return on equity. The new agreement provides that the vesting terms for fifty percent of the RSUs granted will be based on the new metricdate, March 6, 2019, all Target Shares vested and the same number of Additional Shares were granted. The NEOs received received the following shares of common stock upon the vesting terms for the other fifty percent will be based on the previously-approved metric of relative TSR.
Pursuant to a separation agreement executed on March 2, 2016, the Company agreed to provide Ms. Lynch with a cash severance payment in the gross total amount of $500,000, and up to $15,000 for outplacement services at the Company’s cost through a professional outplacement provider.
Equity-Based Compensation Granting ProcessDiscussion and Analysis

their 2016 PSU Awards based on Three-Year Adjusted ROE on March 6, 2019: Lacher (48,118); McKinney (5,038); Boschelli (4,692); and Green (5,938). Mr. Sanders did not receive any 2016 PSU Awards due to his hire date in 2018.

The graph below shows the Three-Year Adjusted ROE over the period from January 1, 2016 through December 31, 2018 and prior-period comparison.
roechart.jpg

Other Features and Practices Related to the Equity Incentive Program

Equity-Based Compensation Granting Process

The Compensation Committee has followedfollows an established Company process for the review, approval and timing of grants of equity-based compensation. The Compensation Committee believes that regular timing is necessary for effective operation of the Company’s long-term incentive program, and insists that, with the exceptions explained below for restorative options and awards by the CEO under his delegated authority, all original equity-based compensation awards occur at predictable cycles, with grant dates scheduled in advance. The Company’s practice with regard to timing of equity-based compensation grants is the same for all eligible employees of the Company, including theits executive officers.

33

Executive Compensation

At its meeting in February 2016, the Compensation Committee approved a change in practice providing a March 1 grant date for its annual equity-based compensation awards beginning in 2016, as noted above. Under the Company’s prior practice, annual equity-based compensation awards were granted on the date of the Compensation Committee’s meeting at which the awards were approved, typically in late January or early February. Although the dates of regular Board and Board committee meetings are set in advance, the grant date typically varied each year depending on the actual meeting date. The new practice of using a March 1 grant date for all annual equity awards provides greater consistency. Additionally, the new practice also aligns the performance period start date of the portion of performance-based RSU awards that are based on Relative Total Shareholder Return with the grant date every year. Under current and prior practice, the exercise price for each option share granted is the closing price of a share of Common Stock on the grant date.
In making his annual grant recommendations to the Compensation Committee, the CEO follows thean established grant cycle, with the limited exception of infrequent, off-cycle grants made in connection with key new hire, promotion or retention awards which may be made with Compensation Committee approval or under the CEO’s delegated authority, mentioned above.as described in the next section. The Company’s executive officers play no role in the timing of option or other grants except with regard to such new hire, promotion or retention awards, (thethe timing of which is driven by the circumstances of the underlying personnel action), and to restorative option grants received by an executive officer (the timing of which is determined automatically on the date of exercise of the underlying option).event.

The Company provides administration of the Company’s equity-based compensation plans. Following Compensation Committee approval, the Company delivers award agreements for acceptance by the recipients. All forms of equity-based compensation award agreements are approved by the Compensation Committee in advance of their initial use.
Delegated Authority

As previously mentioned, the Board of DirectorsCompensation Committee has delegated authority to the CEO to grant up to an aggregatea limited number of 100,000 shares under the Omnibus Plan (determined in accordance with the plan’s fungible conversion factor, as described on page 32 above under the heading Equity-Based Compensation) in connection with new hire, promotional and retention awards to employees other than Section 16 Officers. A total of 7,000 RSUs (and no stock options) were awarded in 2015 pursuant to delegated authority under the Omnibus Plan.executive officers. The exercise price of each stock option awardsaward granted under the delegated authority is the closing price of a share of Common Stock on the grant date. The Compensation Committee is periodically informed about the awards granted pursuant to the delegated authority.authority and periodically replenishes the share pool used in this program from the pool of shares available in the shareholder-approved Omnibus Plan.
Elimination


Compensation Discussion and Analysis

Stock Ownership Policy
The Compensation Committee believes equity-based compensation awards to the executive officers, along with their subsequent retention of Restorative Option Program
As previously mentioned,the acquired shares, further align their interests with those of the Company’s restorative option program was discontinuedshareholders.
The Company’s Stock Ownership Policy provides minimum ownership requirements for all new stock option awards granted beginning in 2009. However, outstanding options granted priorits non-employee directors and executive officers based on a multiple of their base compensation. The minimum ownership level for the Company’s CEO is shares valued at five times his annual salary, while the minimum level for the other NEOs is two times their annual salaries. the minimum ownership level for non-employee directors is five times the retainer for non-chair members. In calculating ownership for purposes of the policy, RSUs and DSUs are included, but not performance-based awards.
The Compensation Committee monitors shareholdings by executive officers and directors annually, as of year-end. As of December 31, 2018, the NEOs subject to 2009 had a restorative option feature providing for automatic grantsthe policy either exceeded the minimum levels required under the policy or were within the five-year grace period to replace sharesattain the minimum required share ownership level due to their recent start dates with the Company. The amount of previously-owned Common Stock that an exercising option holder surrenders to satisfy the exercise price and/or related tax withholding obligations, so longbeneficially owned by each NEO as certain requirements are met at the time of exercise. Accordingly, restorative options may still be granted in accordance with the original award agreements until their final expiration or forfeiture. As restorative options are granted automatically at the time of the exercise ofRecord Date is disclosed in the underlying optiontable under the express termsOwnership of Kemper Common Stock section on page 58.
Changes Made to NEO Compensation for 2019

At its meeting on February 5, 2019, the applicable option plansCompensation Committee approved 2019 compensation for the NEOs reflecting:

Salary increases were granted for 2019, effective February 1, 2019, and award agreements previouslygenerally were targeted at or just below the market medians derived from the Company’s new peer group approved in 2018 for 2019 to better reflect the Company’s size following the acquisition of Infinity, and significantly increased management responsibilities.

The salary changes for 2019 approved by the Compensation Committee they are deemed to have beenshown below:
 2019 Salary
Change (%)
Joseph P. Lacher, Jr.1,000,000
33
James J. McKinney575,000
27
John M. Boschelli450,000
13
Mark A. Green470,000
12
Duane A. Sanders600,000
24

The Compensation Committee, after consultation with the CEO and the Chairman, approved new target levels for equity awards for the NEOs other than the CEO at 180 percent of their respective base salaries. The new target levels reflect the increased size and complexity of the Company, consistent with the benchmarking data provided by PayGovernance, as well as respective increases in the responsibilities of the individual NEOs.

Mr. Lacher’s 2019 equity award valued at $4.5 million was determined by the Compensation Committee, with input from the Chairman, and was based on, theiramong other factors, his overall performance in 2018 and achievement of the 2018 objectives, as approved by the Board, and the Company’s philosophy that Mr. Lacher’s total compensation should be heavily weighted towards performance-based compensation. Key factors included the successful execution of the Infinity acquisition and total compensation for CEOs at comparable peer companies.

The following table illustrates the total compensation for each of the NEOs based on the components included in the Summary Compensation Table in the Executive Officer Compensation & Benefits section below on page 40 (“Summary Compensation Table”), but with the values in the Stock Awards and Option Awards columns based on the equity awards approved in February 2019 instead of February 2018. The equity awards granted to the NEOs in February 2019 were greater than the equity awards granted in February 2018 because they were based on higher target levels and base salaries as a result the 2019 salary increases. As a result, the Company believes the following table better represents the total compensation of the NEOs based on 2018 performance than the total compensation amounts shown in the Summary Compensation Table.
Compensation Discussion and Analysis

ALTERNATE SUMMARY COMPENSATION TABLE (1)
NameYearSalary
($)(2)
Bonus
($)
Stock Awards
($)(3)
Option Awards
($)(3)
Non-Equity Incentive
Plan
Compen-
sation
($)(4)

Change in Pension
Value & Nonqual-
ified
Deferred Compen-
sation
Earnings
($)(5)

All Other Compen-sation
($)(6)
Total
Joseph P. Lacher, Jr.2018750,000
—
2,288,136
2,455,441
2,500,000
—
123,695
8,117,272
James J. McKinney2018450,000
—
526,272
564,761
900,000
—
67,137
2,508,170
John M. Boschelli2018400,000
—
411,892
441,981
600,000
—
72,450
1,926,323
Mark A. Green2018420,000
—
430,192
461,639
500,000
—
52,833
1,864,664
Duane A. Sanders2018485,000
1,350,000
549,138
589,308
1,000,000
—
217,847
4,191,293
(1) As noted above, this table discloses the same compensation information for the NEOs as disclosed in the Summary Compensation Table, with the exception of the Stock Awards and Option Awards columns that include the values of the respective equity awards approved in February 2019 rather than in February 2018 to better illustrate the total compensation awarded to the NEOs based on Company and individual performance in 2018.
(2) These amounts represent salaries earned for 2018.
(3) These amounts represent the aggregate grant dates.date fair values of the equity awards (stock options or PSUs) to the designated NEO approved on February 5, 2019 pursuant to the Omnibus Plan. For pricing models/methods and valuation assumptions, see footnote (4) to the Summary Compensation Table on page 40 below.
(4) These amounts were earned under the Company’s annual cash incentive programs. The amounts shown were made for 2018 performance (and paid in 2019), under the EPP and Annual Incentive Program.
(5) See footnote (6) to the Summary Compensation Table on page 41 below.
(6) See footnote (7) to the Summary Compensation Table on page 41 below.
Perquisites
Consistent with
The NEOs receive a number of perquisites, including financial planning services, comprehensive annual physical examinations and limited use of the Company’s fundamental approachaircraft. The Board has approved use of the Company’s aircraft by Mr. Lacher to executive compensation, executive officers receiveattend board meetings of an outside non-profit organization for which he serves as a few, modest perquisites fromdirector and reimbursement of his related expenses. NEOs may be reimbursed for applicable expenses under the Company. Perquisites received by the NEOs include payment forCompany’s relocation program and in connection with spousal travel when accompanying the officer to occasional off-site business meetings when required for bona fide business reasons in accordance with Company policy, andreasons. NEOs may also have incidental personal use of cell phones, computer equipment and other resources provided primarily for business purposes. For the CEO, this includes membership to a business club providing dining facilities and business meeting services. The Company does not provide the NEOs with other personal benefits or perquisites, such as country club memberships, financial planning or tax preparation services, personal use of Company-provided automobiles or use of private airplanes for personal travel.


34

Executive Compensation

Employee Welfare Benefit and Retirement Plans
The NEOs are eligible for employeethe following plans:
Employee welfare benefits under plans that aregenerally available generally to all full-time salaried employees and which do not discriminate in scope, terms or operation in favor of executive officers. Under these plans, the NEOs:officers;
receive at the Company’s cost basic life and accident insurance coverage in an amount equal to the individual’s annual base salary up to a maximum of $400,000, business travel insurance in an amount based on the individual’s annual base salary up to a maximum of $200,000, and short-term disability coverage for up to 26 weeks; and
are eligible to participate in the Company’s employee welfare benefit plans that provide typical offerings such as health and dental insurance, health and dependent care reimbursement accounts, health savings accounts, supplemental life, accident and long-term disability insurance.
Deferred Compensation Plan
The NEOs are eligible under the Deferred Compensation Plan, which allows the NEOs to elect to defer a portion of their cash salaries and bonuses.cash incentives. Information about the Deferred Compensation Plan in general, and more specific information about participation therein by the NEOs, is provided in the section entitled Executive Officer Compensation and& Benefits section below beginning on page 4548 under the heading Nonqualified Deferred Compensation Plan;.

Retirement PlansCompensation Discussion and Analysis
The NEOs are generally eligible for the following plans:
Tax-qualified defined contribution retirement plansplan applicable to all full-time salaried employees, including executive officers, meeting age and service-based eligibility requirements; this includesrequirements (“401(k) and Retirement Plan”).Due to his hire date prior to 2006, Mr. Boschelli had been eligible for benefit accruals under the Company’s defined benefit pension plan (“Pension Plan”Plan”) in lieu of the retirement contribution under the 401(k) and Retirement Plan until June 30, 2016 when Pension Plan benefit accruals were frozen for employees hired prior to 2006, and the Company’s defined contribution retirement plan (“DC Plan”) for employees hired on or after January 1, 2006;all participants.

Nonqualified supplemental retirement plans, including the Company’s nonqualified supplemental defined benefit pension plan (“SERP”) and nonqualified supplemental defined contribution retirement plan (“DC SERP”(“Retirement SERP”), available to key employees designated annually by the Board of Directors to provide benefits using the same formulas used for the respective tax-qualified retirement plansplan but without regard to the limits imposed under the Internal Revenue Code;Code. Mr. Boschelli had been eligible for a benefit accrual under the Company’s nonqualified supplemental defined benefit pension plan (“Pension SERP”) in lieu of the Retirement SERP until June 30, 2016 when Pension SERP benefit accruals ceased as a result of the freezing of the Pension Plan accruals; and

Voluntary participation in the 401(k) portion of the Company’s 401(k) Savingsand Retirement Plan (“401(k) Plan”), which includes a Company matching contribution feature offered to all full-time salaried employees, including executive officers, meeting age and service-based eligibility requirements.

Additional information about the Company’s retirement plans and participation therein by the NEOs is provided in the section entitled Executive Officer Compensation and Benefits section below beginning on page 4449 under the heading Retirement Plans.

Other Post-Employment Compensation

Change in control benefits applicable to the NEOs are described in more detail below under the section entitled Potential Payments Upon Termination or Change in Control. These benefits are provided under individual severance agreements with the NEOs and provisions in their equity and cash bonus award agreements under the Omnibus Plan and the Performance Incentive Plan which are included in agreements with all grant recipients in applicable equity award agreements under these plans.the Omnibus Plan. The NEOs are not entitled to other post-termination benefits except pursuant to the standard provisions of any of the plans discussed above.
Tax Implications
Except for compensation paid to a public company’s chief financial officer, Section 162(m) imposes an annual limit of $1 million per person on the corporate tax deduction for compensation paid by thea company to its chief executive officer and the other officers listed in its proxy compensation tables due to their compensation. Although Section 162(m) generally

35

Executive Compensation

disallowsUntil 2018, the limit did not apply to a tax deduction by the Company for compensation in excess of $1 million paidcompany’s chief financial officer, or to each such NEO, certain performance-based compensation is specifically exempt fromthat met specific exemption requirements. Under the 2017 Tax Reform Act, the $1 million deduction limit.limit on deductibility will also apply to chief financial officers, and the exemption for performance-based compensation has been eliminated, subject to applicable transition rules.
ToPrior to the 2017 Tax Reform Act, the Company had generally intended most components of executive compensation to qualify as tax deductible for federal income tax purposes, to the extent practicable in connection with particular hiring and compensation decisions, and consistent with the objectives and underlying philosophy of its executive compensation program, the Company generally intends most components of executive compensation to qualify as tax deductible for federal income tax purposes. Pursuant to Section 162(m), a portion of the guaranteed minimum annual bonus payment payable to Mr. Lacher for 2016 will be nondeductible for federal income tax purposes.program. The Executive Performance Plan,EPP, as well as the Omnibus Plan and its predecessor equity plans, arewere designed to enable the Company to grant awards that qualifyqualified as performance-based compensation under Section 162(m). As was required by Section 162(m), the Company obtained shareholder approval of the Executive Performance PlanEPP in 2014 and of the Omnibus Plan in 2011,2016. Due to the material terms of which2017 Tax Reform Act, the Company is seeking re-approval atno longer expects most incentive compensation awarded after 2017 to be tax deductible due to the 2016 Annual Meeting.elimination of the exception for performance-based compensation.

Compensation Discussion and Analysis

Compensation Committee Report
The Compensation Committee has reviewed and discussed with management the Compensation Discussion and Analysis set forth above. Based on such review and discussions, the Compensation Committee recommended to the Board of Directors that the Compensation Discussion and Analysis be included in this Proxy Statement.
Compensation Committee of the Board of Directors of Kemper Corporation

Kathleen M. Cronin, Chair
Douglas G. Geoga, ChairLacy M. Johnson
David P. Storch

Susan D. Whiting

36

  Executive Officer Compensation & Benefits

Executive Officer Compensation & Benefits

Summary Compensation Table

The following table shows the compensation for fiscal years 2015, 20142018, 2017 and 20132016 for the NEOs serving during the year ended December 31, 2015,2018, which include the Company’s Chief Executive Officer, Chief Financial Officer and three other most highly compensated executive officers and former Chief Executive Officer.

SUMMARY COMPENSATION TABLEofficers:





Name and
Principal Position






Year
      Salary($)(1)

Stock Awards ($)(2)





Option Awards($)(3)



Non-Equity Incentive Plan Compensation($)(4)

Change in Pension Value and Nonqualified Deferred Compensation Earnings ($)(5)
All Other Compensation ($)(6)






Total ($)

Joseph P. Lacher, Jr.,
President and Chief Executive Officer (7)
201577,885
—
736,633
—
—
—
814,518
Frank J. Sodaro,Senior Vice President
and Chief Financial Officer
2015444,231
172,200
160,393
303,290
136,404
7,950
1,224,468
2014406,250
162,000
199,353
231,480
328,176
7,800
1,335,059
2013331,692
113,355
—
191,565
—
7,650
644,262
John M. Boschelli,Senior Vice President
and Chief Investment Officer
2015396,538
129,150
120,295
448,617
91,047
7,950
1,193,597
2014367,500
121,500
149,514
370,643
297,598
7,800
1,314,555
2013311,250
84,240
101,421
252,705
—
7,650
757,266
Denise I. Lynch,Vice President
2015476,538
714,750
160,393
239,321
—
23,463
1,614,465
2014461,250
162,000
199,353
60,000
—
12,300
894,903
2013450,000
168,480
202,843
314,125
—
390,548
1,525,996
Richard Roeske,
Vice President and Chief Accounting Officer (7)
2015368,577
68,880
64,157
192,388
17,639
7,950
719,591
Donald G. Southwell,Former Chairman, President and Chief Executive Officer
20151,000,000
645,750
641,572
932,625
247,200
7,950
3,475,097
20141,000,000
607,500
797,410
1,001,250
1,286,864
25,475
4,718,499
20131,000,000
631,800
811,370
805,500
47,454
7,650
3,303,774
SUMMARY COMPENSATION TABLE





Name and
Principal Position (1)		Year
Salary
($)(2)

Bonus
($)(3)

Stock Awards
($)(4)

Option Awards
($)(4)

Non-Equity Incentive Plan Compen-sation
($)(5)

Change in Pension Value and Nonquali-fied Deferred Compen-sation Earnings
($)(6)

All Other Compen-sation
($)(7)

Total
($)

Joseph P. Lacher, Jr., President and Chief Executive Officer
2018750,000
—
1,776,855
1,755,329
2,500,000
—
123,695
6,905,879
2017750,000
—
617,748
1,484,099
2,000,000
—
88,298
4,940,145
2016750,000
—
1,284,269
416,821
1,000,000
—
25,272
3,476,362
James J. McKinney,
Senior Vice President and Chief Financial Officer
2018450,000
—
411,210
406,232
900,000
—
67,137
2,234,579
2017450,000
—
266,870
213,716
750,000
—
64,409
1,744,995
201651,923
1,050,000
813,635
154,632
—
—
15,955
2,086,145
John M. Boschelli,
Senior Vice President
and Chief Investment Officer
2018400,000
—
365,520
361,095
600,000
—
72,450
1,799,065
2017400,000
—
237,215
189,965
754,240
46,111
67,640
1,695,171
2016400,000
—
125,229
142,574
512,220
213,758
19,401
1,413,182
Mark A. Green,
Senior Vice President and President, Life and Health Division
2018420,000
—
383,796
379,150
500,000
—
52,833
1,735,779
2017420,000
—
249,067
199,467
700,000
—
44,495
1,613,029
2016240,692
550,000
191,946
206,730
260,000
—
5,047
1,454,415
Duane A. Sanders, 
Senior Vice President and President, Property and Casualty Division
2018485,000
1,350,000
777,950
688,595
1,000,000
—
217,847
4,519,392


































(1) Amounts for each officer are shown only for years in which he served as an NEO.
(1)(2)These amounts represent base salary earned for each of the years that an individual was an NEO. Pursuant to the Company’s regular compensation cycle, salary adjustments for any particular year generally takethe years shown in the table have taken effect in April of such year. As a result, for any year in which an individual officer’s salary was increased or decreased, a portion of the amount of salary shown for such year was earned at the rate in effect prior to the adjustment.
(3) These amounts represent signing bonuses granted to Messrs. McKinney and Green in 2016, and Mr. Sanders in 2018.
(2)(4)These amounts represent the aggregate grant date fair values of the performance-based restricted stock (in 2013) or RSUequity awards (stock options, PSUs and RSUs) to the designated NEOs and for Ms. Lynch, includes an additional time-based RSU award in 2015, granted underpursuant to the Omnibus Plan. The Black-Scholes option pricing model was used to estimate the fair value of each option (including its tandem SAR) on the grant date. A Monte Carlo simulation method was used to estimate the fair values on the grant date of the awards of the performance-based awardsPSUs based on the grant date. Time-basedRelative TSR. PSUs based on ROE and RSUs were valued using the closing price of a share of Common Stock on the grant date. For a discussion of valuation assumptions, see Note 10, “Long-term Equity-based Compensation,” to the consolidated financial statements included in the Company’s 20152018 Annual Report on Form 10-K.Report. These shares of restricted stock (in 2013) and RSUs (in 2014 and 2015)equity awards are subject to forfeiture and transfer restrictions until they vest in accordance with their respective grant agreements. Based on the Monte Carlo simulation, the grant date fair values of such performance-based shares granted on February 4, 2015, February 4, 2014 and February 4, 2013 were determined to be $43.05, $42.50 and $42.12 per share, respectively, and the grant date fair value of time-based RSUs granted on February 4, 2015 was $36.17 per share, the closing price of share of Common Stock on such date. If achievement of the performance conditions at the maximum performance level is assumed, the aggregate number and market value of the payouts of performance-based restricted RSUs would be as follows under awards granted in 2015 to each NEO:

37If achievement of the performance conditions at the maximum performance level is assumed, the aggregate number and market value of the payouts of PSUs would be as follows under awards granted in 2018 to each NEO:

  Executive Officer Compensation & Benefits

Name
a
Grant Date
b
Target
Award
issued on
Grant Date
(# of Shares)
c

Market
Value on
Grant
Date ($ per share)
d

Estimated
Payout in
Shares if
Maximum
Performance
Level
Achieved
(# of Shares)
e (=c*2)

Estimated
Value of
Payout if
Maximum
Performance
Level
Achieved ($)
f (=d*e)

Joseph P. Lacher, Jr.—
—
—
—
—
Frank J. Sodaro2/4/2015
4,000
36.17
8,000
289,360
John M. Boschelli2/4/2015
3,000
36.17
6,000
217,020
Denise I. Lynch2/4/2015
4,000
36.17
8,000
289,360
Richard Roeske2/4/2015
1,600
36.17
3,200
115,744
Donald G. Southwell2/4/2015
15,000
36.17
30,000
1,085,100
Name
Number
of Shares at
Target Level
(# of Shares)

Estimated Payout in Shares if Maximum Performance Level Achieved
(# of Shares)

Estimated Value of Payout if Maximum Performance Level Achieved ($)
Joseph P. Lacher, Jr.29,167
58,334
3,553,710
James J. McKinney6,750
13,500
822,420
John M. Boschelli6,000
12,000
731,040
Mark A. Green6,300
12,600
767,592
Duane A. Sanders12,770
25,540
1,555,900
(3)(5)
These amounts representwere earned under the aggregate grant date fair values of the stock option awards grantedCompany’s annual cash incentive programs. With regard to the designated NEOs pursuant topayments shown for Mr. Boschelli, for 2017, they were made under the Omnibus Plan. The Black-Scholes option pricing model was used to estimate the fair value of each option (including its tandem SAR) on the grant date. For a discussion of valuation assumptions, see Note 10, “Long-term Equity-based Compensation,” to the consolidated financial statements included inAnnual Incentive Program and his 2015 multi-year award under the Company’s 20152009 Performance Incentive Plan (“Multi-Year PIP Award”) (and paid in 2018), and for 2016, they were made under the Annual Report.Incentive Program and his 2014 Multi-Year PIP Award (and paid in 2017). The amounts shown for the other NEOs other than Mr. McKinney were made for 2018, 2017 and 2016 (and paid in 2019, 2018 and 2017, respectively), under the Annual Incentive Program and the EPP. The amounts shown for Mr. McKinney were made for 2018 and 2017 (and paid in 2019 and 2018, respectively) under the Annual Incentive Program.
(4)These amounts were earned under the 2015, 2014 and 2013 Annual PIP Awards (that were paid in 2016, 2015 and 2014, respectively), and under the 2013, 2012 and 2011 Multi-Year PIP Awards (that were paid in 2016, 2015 and 2014, respectively).
(5)(6)
These amounts represent the change in actuarial present value for each participating NEOMr. Boschelli under the Company’s Pension Plan and Pension SERP as of December 31 of 2015, 20142018, 2017 and 20132016 from the end of the prior calendar year. However, for 2018, no amount is shown for Mr. Boschelli because the change in actuarial present value was negative; the actual amount was ($125,957). No amounts are shown for Mr. Lacher or Ms. Lynchthe other NEOs because they arewere not eligible to participate in these plans due to their hire dates with the Company. New employees hiredCompany; they instead became participants in the retirement portion of the Company’s 401(k) and Retirement Plan and Retirement SERP after January 2006 insteadmeeting initial eligibility requirements. Mr. Boschelli became eligible to participate in the DCretirement portion of the Company’s 401(k) and Retirement Plan and DCRetirement SERP after meeting eligibility requirements,the Pension Plan and Pension SERP were frozen as discussed inof June 30, 2016. For more information on these plans, see the narrative captioned Retirement Plans on page 44.49. The year-to-year changes in pension value arevalues is generally attributable to normal, annual retirement cost which incorporatesa decrease in the present value of future payments due to an additional year of service and interest cost, but also reflect annual changesincrease in salary and bonus.the applicable discount rate in 2018.
(6)For 2015, the amounts shown for all NEOs other than Mr. Lacher include Company matching contributions of $7,950 under the Company’s 401(k) for 2015. The amount shown for Ms. Lynch for 2015 also includes contributions by the Company of $5,200 and $10,313 under the DC Plan and DC SERP, respectively.
(7)AmountsThe amounts shown for 20132018 for each NEO include perquisites and 2014 are not included for Messrs. Lacheradditional compensation of the types indicated in the following table, plus employer-paid health and Roeske because they were not NEOs for those years.life benefit costs:


38

NamePerquisites and Other Personal Benefits (1)
Relocation Tax Reimbursement
Company Contributions to Defined Contribution Plans
Dividend Equivalents Paid on RSUs and Certain PSUs (2)
Joseph P. Lacher, Jr.45,360
—
35,750
30,025
James J. McKinney19,107
—
20,250
15,652
John M. Boschelli19,482
—
36,000
4,912
Mark A. Green19,400
—
19,450
5,644
Duane A. Sanders129,614
67,361
8,250
2,637
(1)The amounts in this column include the costs of financial planning services for each NEO and, for each NEO other than Mr. Sanders, also an executive physical. For Mr. Lacher, the value also includes the incremental costs for his use of the Company aircraft and reimbursement of his travel expenses to attend board meetings of an outside non-profit organization for which he serves as a director. For Mr. Sanders, the value also includes reimbursement of relocation expenses in the amount of $112,908 and the cost for his spouse’s required attendance at a Company event.
  Executive Officer Compensation & Benefits

(2) The amounts shown are dividend equivalents paid on RSUs and PSUs based on Three-Year Adjusted ROE, which are not factored into their grant date fair values reported in the Stock Awards column of the Summary Compensation Table. Dividend equivalents paid on PSUs based on Relative TSR are factored into such grant date fair values.
Grants of Plan-Based Awards

Restricted Stock UnitsPSU Awards

The performance-based RSUs (“PBRSUs”)PSUs awarded to the NEOs under the Omnibus Plan onin February 4, 20152018 are subject to forfeiture and transfer restrictions until their vesting date following the third anniversary of the grant datethree-year performance period in accordance with the terms of the award agreements. Determination of the number of shares of Common Stock that will vest or be forfeited, and of any Additional Shares that will be granted, will be based, for half of the PSUs, on the Company’s total shareholder return over a three-year performance period ending on December 31, 2017Relative TSR relative to the Peer Group, and for the other half of the PSUs, on the Company’s Three-Year Adjusted ROE, each based on a three-year performance period as described in more detail above in the Compensation Discussion and Analysissection captionedunder the heading Performance-Based RSUPSU Awards Granted in 20152018, beginning on page 32. The time-based RSUs (“TBRSUs”) awarded to Ms. Lynch on February 4, 2015 were subject to forfeiture and transfer restrictions until the vesting date on the second anniversary of the grant date.31.

Stock Options
The stock options awarded to the NEOs in 2015 were granted under the Omnibus Plan. Each of these awards is aFebruary 2018 are non-qualified optionoptions for federal income tax purposes, hashave an exercise price that isequal to the closing price of a share of Common Stock on the grant date and expiresexpire on the tenth anniversary of the grant date. The stock options awarded to the NEOs were coupled with tandem stock appreciation rights (“SARs”)SARs and become exercisable in fourthree equal, annual installments beginning on the six-monthone-year anniversary of the grant date. References to stock options in this proxy statement generally include tandem SARs.

Incentive Plan Awards
Annual incentive compensation award payouts for 2018 were approved and Multi-Year PIP Awards were grantedmade under the PerformanceCompany’s EPP and Annual Incentive Plan toProgram in February 2019. The maximum potential amount for awards under the NEOs on February 4, 2015. The 2015 Annual PIP Awards were granted subject to vesting provisions relating to performance criteria measured over calendar year 2015, and payouts dueEPP shown in the table below is the maximum provided under these awards were made in March 2016. The 2015 Multi-Year PIP Awards were granted subject to vesting provisions related to performance criteria measured over a three-year period ending December 31, 2017, and determination asthe EPP for an annual award to any payouts under these awards will be made in early 2018. For each of these awards, the Compensation Committee established payout amounts for specified threshold, target and maximum performance levels.participant. The performance criteria and process of determining payouts under these awards are described in more detail in the Compensation Discussion and Analysis section under the heading ExecutivePerformance Incentive Plan sectionbeginning on page 28.26.
Forfeited Awards
The RSUs, stock options and Multi-Year PIP Awards granted to Ms. Lynch in 2015 were forfeited upon her departure from the Company on February 10, 2016.

39

  Executive Officer Compensation & Benefits

The following table shows each grant to the NEOs in 20152018 under the Company plans as described above:
GRANTS OF PLAN-BASED AWARDS IN 2018
   Estimated Future Payouts Under Non-Equity Incentive
Plan Awards (2)		 Estimated Future Payouts Under Equity Incentive
Plan Awards (3)		   
NameGrant Date (1)



Award Type


Maximum
($)
 


Threshold
(#)



Target
(#)



Maximum
(#)
All Other Option Awards: Number of Securities Underlying Options
(#)(4)
Exercise or
Base Price of Option Awards
($/Sh) (5)
Grant
Date Fair Value of Stock and Option Awards
($)(6)
Joseph P. Lacher, Jr.2/6/2018 Stock Options—
 —
—
—
116,667
60.00
1,755,329

2/6/2018 PSU—
 7,292
14,584
29,168
—
—
901,875

2/6/2018 PSU—
 7,292
14,583
29,166
—
—
874,980
  Annual Incentive6,000,000
 —
—
—
—
—
—
James J. McKinney2/6/2018 Stock Options—
 —
—
—
27,000
60.00
406,232

2/6/2018 PSU—
 1,688
3,375
6,750
—
—
208,710

2/6/2018 PSU—
 1,688
3,375
6,750
—
—
202,500
  Annual Incentive6,000,000
 —
—
—
—
—
—
John M. Boschelli2/6/2018 Stock Options—
 —
—
—
24,000
60.00
361,095

2/6/2018 PSU—
 1,500
3,000
6,000
—
—
185,520

2/6/2018 PSU—
 1,500
3,000
6,000
—
—
180,000
  Annual Incentive6,000,000
 —
—
—
—
—
—
Mark A. Green2/6/2018 Stock Options—
 —
—
—
25,200
60.00
379,150

2/6/2018 PSU—
 1,575
3,150
6,300
—
—
194,796

2/6/2018 PSU—
 1,575
3,150
6,300
—
—
189,000
  Annual Incentive6,000,000
 —
—
—
—
—
—
Duane A. Sanders2/1/2018Stock Options—
 —
—
—
15,699
63.70
250,767

2/1/2018PSU—
 1,374
2,748
5,496
—
—
169,936

2/1/2018PSU—
 1,374
2,747
5,494
—
—
174,984

2/6/2018 Stock Options—
 —
—
—
29,100
60.00
437,828

2/6/2018 PSU—
 1,819
3,638
7,276
—
—
224,974

2/6/2018 PSU—
 1,819
3,637
7,274
—
—
218,220

2/5/2019Annual Incentive6,000,000

—
—
—
—
—
—
GRANTS OF PLAN-BASED AWARDS IN 2015 (1) The grant date is also the date of approval for all awards shown in the table with the exception of the February 1,
 







Name






Grant Date







Award Type
Estimated Future Payouts Under Non-Equity Incentive
Plan Awards(1)
 
Estimated Future Payouts Under Equity Incentive
Plan Awards(2)
All Other Stock Awards: Number of Securities Under-lying Stock Awards(#)
All Other Option Awards: Number of Securities Underlying Options($)(3)
Exercise or
Base Price of Option Awards($/Sh)
(4)

Grant
Date Fair Value
($)(5)

 
 


Threshold
($)




Target
($)




Maximum
($)

 



Threshold
(#)




Target
(#)




Maximum
(#)

 Joseph P. Lacher, Jr.11/19/15Stock Options—
—
—
 —
—
—
—
98,280
40.70
736,633
 Frank J. Sodaro2/4/15PBRSU—
—
—
 2,000
4,000
8,000
—
—
—
172,200
  2/4/15Stock Options—
—
—
 —
—
—
—
20,000
36.17
160,393
  2/4/15Annual PIP61,875
247,500
495,000
 —
—
—
—
—
—
—
  2/4/15Multi-Year PIP61,875
247,500
495,000
 —
—
—
—
—
—
—
 John M. Boschelli2/4/15PBRSU—
—
—
 1,500
3,000
6,000
—
—
—
129,150
  2/4/15Stock Options—
—
—
 —
—
—
—
15,000
36.17
120,295
  2/4/15Annual PIP55,000
220,000
440,000
 —


—
—
—
—
—
  2/4/15Multi-Year PIP55,000
220,000
440,000
 —
—
—
—
—
—
—
 Denise I. Lynch2/4/15PBRSU—
—
—
 2,000
4,000
8,000
—
—
—
172,200
  2/4/15TBRSU—
—
—
 —
—
—
15,000
—
—
542,550
  2/4/15Stock Options—
—
—
 —
—
—
—
20,000
36.17
160,393
  2/4/15Annual PIP66,000
264,000
528,000
 —
—
—
—
—
—
—
  2/4/15Multi-Year PIP66,000
264,000
528,000
 —
—
—
—
—
—
—
 Richard Roeske2/4/15PBRSU—
—
—
 800
1,600
3,200
—
—
—
68,880
  2/4/15Stock Options—
—
—
 —
—
—
—
8,000
36.17
64,157
  2/4/15Annual PIP37,100
148,400
296,800
 —
—
—
—
—
—
—
  2/4/15Multi-Year PIP37,100
148,400
296,800
 —
—
—
—
—
—
—
 Donald G. Southwell2/4/15PBRSU—
—
—
 7,500
15,000
30,000
—
—
—
645,750
  2/4/15Stock Options—
—
—
 —
—
—
—
80,000
36.17
641,572
  2/4/15Annual PIP187,500
750,000
1,500,000
 —


—
—
—
—
—
  2/4/15Multi-Year PIP187,500
750,000
1,500,000
 —
—
—
—
—
—
—
2018 grants to Mr. Sanders, which were approved as of January 31, 2018.
(1)(2)
These columns showNo threshold or target amounts are provided under the rangeEPP or the Annual Incentive Program. The amounts shown represent the annual maximum incentive to any participant under the terms of payoutsthe EPP because the amounts determined by the Compensation Committee at its meeting on February 5, 2019 based on the previously-approved formula and allocation percentages exceeded the maximum. The maximum amounts payable to each participant could not have been determined at the beginning of the performance period. The process for determining the awards for the NEOs and the amounts of the awards that were possibleapproved by the Compensation Committee for Annual PIP Awards2018 are detailed in the narrative descriptions about the EPP and Multi-Year PIP Awards granted in 2015, which represent the percentages of the respective officer’s annual base salary applicable to specified performance levels. The amounts estimated for Multi-Year PIP Awards are based on an average of their annual base salaries for 2015, 2016 and 2017. Base salaries for 2017 were estimated at their 2016 rates. The “Threshold” level is the minimum level of performance that must be met before any payout may occur. The amounts actually paid out under the Annual PIP Awards granted on February 4, 2015 and the Multi-Year PIP Awards granted on February 4, 2013 are includedIncentive Program in the Summary Compensation TableDiscussion and Analysis above undersection on pages 26-30 and the “Non-Equitytable captioned Annual Incentive Plan Compensation” column. Because the 2015Payouts - 2018 Annual and Multi-Year PIPEPP Awards granted to the NEOs are based on multiple components, with portions of each award based on varying performance criteria, the amounts shown in the “Threshold” columnpage 30.

40

  Executive Officer Compensation & Benefits

represent the portion of their 2015 annual base salaries that would have been paid out for performance at the “Threshold” level if actual performance reached the “Threshold” level for each component of their awards.
(2)(3)
These columns show thea range of payouts possible under the performance-based RSUPSU awards granted in 2015.2018 under the Omnibus Plan. The amount shown in the “Target” column for each individualaward represents 100 percent of the RSUsPSUs granted, which equals the number of units that would vest if the “Target” performance level is achieved. The “Threshold” level is the minimum level of performance that must be met before any payout may occur, and the amount shown in the “Threshold” column is 50%50 percent of the “Target” payout amount. The amount shown in the “Maximum” column is 200 percent of the “Target” payout amount. Further information about these awards is provided in the Compensation Discussion and Analysis section under the captionheading Performance-Based RSUPSU Awards Granted in 20152018 on page 32.31.
(3)(4)These are non-qualified stock option awards granted on the date the awards were approved by the Compensation Committee. All options granted in 2015 were non-qualified options for federal income tax purposes.under the Omnibus Plan.
(4)(5)The exercise price of the stock option awards is equal to the closing price of a share of Common Stock on the grant date.
(5)(6)The amounts shown represent the aggregate grant date fair values of the 20152018 stock option and RSUPSU awards. For stock options, the grant date fair values were estimated based on the Black-Scholes option pricing model. For performance-based RSUs,PSUs based on Relative TSR, the grant date fair values were estimated using the Monte Carlo simulation method. BasedFor PSUs based on the Monte Carlo simulation,ROE, the grant date fair values were based on the closing price of a share of Common Stock on the performance-based RSUs granted on February 4, 2015 was determined to be $43.05 per share.grant date. For a discussion of valuation assumptions, see Note 10, “Long-term Equity-based Compensation,” to the consolidated financial statements included in the Company’s 20152018 Annual Report on Form 10-K.Report.
Outstanding Equity Awards at 20152018 Fiscal Year-End
The following table shows the unexercised stock option awards and unvested restricted stock/RSU and PSU awards for each NEO that were outstanding as of December 31, 2015. The awards were granted under the Company’s Omnibus Plan and its predecessor plans.

OUTSTANDING EQUITY AWARDS AT 2015 FISCAL YEAR-END plan that were outstanding as of December 31, 2018:
OUTSTANDING EQUITY AWARDS AT 2018 FISCAL YEAR-ENDOUTSTANDING EQUITY AWARDS AT 2018 FISCAL YEAR-END
Option Awards Stock Awards
NameNumber of
Securities
Underlying
Unexercised
Options
Exercisable (#)
Number of
Securities
Underlying
Unexercised
Options
Unexercisable (#)
 Option
Exercise
Price
($)
Option
Expiration
Date
 Number
of Shares
or Units
of Stock
That
Have Not
Vested
(#)
 Market
Value of
Shares or
Units of
Stock that
Have Not Vested
($)
Equity Incentive
Plan Awards:
Number of Unearned Shares, Units or Other Rights That Have Not Vested(#)
 Equity Incentive
Plan Awards:
Market or Payout Value of Unearned Shares, Units of Other Rights That Have Not Vested($)
Joseph P. Lacher, Jr.73,710
24,570
(1)40.70
11/19/2025

—

—
—

—
72,176
24,059
(2)27.71
3/1/2026

—

—
—

—
86,605
86,606
(3)43.30
2/7/2027

—

—
—

—
Option Awards Stock Awards—
116,667
(4)60.00
2/6/2028

—

—
—

—
NameNumber of
Securities
Underlying
Unexercised
Options (#)
Exercisable
Number of
Securities
Underlying
Unexercised
Options (#)
Unexercisable
 Option
Exercise
Price
($)
Option
Expiration
Date
 Number
of Shares
or Units
of Stock
That
Have Not
Vested
(#)		 Market
Value of
Shares or
Units of
Stock that
Have Not Vested
($)
Equity
Incentive
Plan Awards:
Number of
Unearned
Shares,
Units or
Other
Rights
That Have
Not Vested
(#)
 Equity
Incentive
Plan Awards:
Market or
Payout
Value of
Unearned
Shares,
Units of
Other Rights
That Have Not
Vested($)
Joseph P. Lacher, Jr.—
98,280
(1)40.70
11/19/2025
 — —
—
 —
Frank J. Sodaro6,000
—
 47.86
2/1/2016
 — —
—
 —

—
—

—
—

—

—
48,118
(5)3,194,073

—
—

—
—

—

—
48,118
(6)3,194,073

—
—

—
—

—

—
14,436
(7)958,262

—
—

—
—

—

—
14,434
(8)958,129

—
—

—
—

—

—
29,168
(9)1,936,172

—
—

—
—

—

—
29,166
(10)1,936,039
James J. McKinney5,038
10,075
(11)40.20
11/17/2026

—

—
—

—
6,000
—
 49.79
2/6/2017
 — —
—
 —
6,236
12,472
(3)43.30
2/7/2027

—

—
—

—
4,000
—
 37.15
2/5/2018
 — —
—
 —
—
27,000
(4)60.00
2/6/2028

—

—
—

—
10,000
10,000
(2)36.47
2/4/2024
 — —
—
 —
—
—

—
—

10,667
(12)708,075
—

—
5,000
15,000
(3)36.17
2/4/2025
 — —
—
 —
—
—

—
—

—

—
5,038
(5)334,422
—
—
 —
—
 375(4)13,969
—
 —
—
—

—
—

—

—
5,038
(6)334,422
—
—
 —
—
 — —
1,500
(5)55,875
—
—

—
—

—

—
6,236
(7)413,946
—
—
 —
—
 — —
4,000
(6)149,000
—
—

—
—

—

—
6,236
(8)413,946
—
—
 —
—
 — —
4,000
(7)149,000
—
—

—
—

—

—
6,750
(9)448,065
       —
—
 —
—
 —
 —
6,750
(10)448,065
                
       

41

  Executive Officer Compensation & Benefits

 Option Awards Stock Awards
NameNumber of
Securities
Underlying
Unexercised
Options (#)
Exercisable
Number of
Securities
Underlying
Unexercised
Options (#)
Unexercisable
 Option
Exercise
Price
($)
Option
Expiration
Date
 Number
of Shares
or Units
of Stock
That
Have Not
Vested
(#)		 Market
Value of
Shares or
Units of
Stock that
Have Not Vested
($)
Equity
Incentive
Plan Awards:
Number of
Unearned
Shares,
Units or
Other
Rights
That Have
Not Vested
(#)
 Equity
Incentive
Plan Awards:
Market or
Payout
Value of
Unearned
Shares,
Units of
Other Rights
That Have Not
Vested($)
John M. Boschelli10,000
—
 47.86
2/1/2016
 — —
—
 —
 10,000
—
 49.79
2/6/2017
 — —
—
 —
 10,000
—
 37.15
2/5/2018
 — —
—
 —
 7,500
2,500
(8)33.45
2/4/2023
 — —
—
 —
 7,500
7,500
(2)36.47
2/4/2024
 — —
—
 —
 3,750
11,250
(3)36.17
2/4/2025
 — —
—
 —
 —
—
 —
—
 — —
2,000
(5)74,500
 —
—
 —
—
 — —
3,000
(6)111,750
 —
—
 —
—
 — —
3,000
(7)111,750
Denise I. Lynch15,000
5,000
(8)(9)33.45
2/4/2023
 — —
—
 —
 10,000
10,000
(2)(9)36.47
2/4/2024
 — —
—
 —
 5,000
15,000
(3)(9)36.17
2/4/2025
 — —
—
 —
 —
—
 —
—
 15,000(10)558,750
—
 —
 —
—
 —
—
 — —
4,000
(5)149,000
 —
—
 —
—
 — —
4,000
(6)(9)149,000
 —
—
 —
—
 — —
4,000
(7)(9)149,000
Richard Roeske15,000
—
 47.86
2/1/2016
 — —
—
 —
 15,000
—
 49.79
2/6/2017
 — —
—
 —
 15,000
—
 37.15
2/5/2018
 — —
—
 —
 7,500
—
 23.65
2/2/2020
 — —
—
 —
 8,000
—
 27.89
2/1/2021
 — —
—
 —
 8,000
—
 29.77
1/31/2022
 — —
—
 —
 6,000
2,000
(8)33.45
2/4/2023
 — —
—
 —
 4,000
4,000
(2)36.47
2/4/2024
 — —
—
 —
 2,000
6,000
(3)36.17
2/4/2025
 — —
—
 —
 —
—
 —
—
 — —
1,600
(5)59,600
 —
—
 —
—
 — —
1,600
(6)59,600
 —
—
 —
—
 — —
1,600
(7)59,600
Donald G. Southwell100,000
—
 47.86
2/1/2016
 — —
—
 —
 100,000
—
 49.79
2/6/2017
 — —
—
 —
 60,000
20,000
(8)33.45
2/4/2023
 — —
—
 —
 40,000
40,000
(2)36.47
2/4/2024
 — —
—
 —
 20,000
60,000
(3)36.17
2/4/2025
 — —
—
 —
 —
—
 —
—
 — —
15,000
(5)558,750
 —
—
 —
—
 — —
15,000
(6)558,750
 —
—
 —
—
 — —
15,000
(7)558,750
OUTSTANDING EQUITY AWARDS AT 2018 FISCAL YEAR-END (continued)
 Option Awards Stock Awards
NameNumber of
Securities
Underlying
Unexercised
Options
Exercisable (#)
Number of
Securities
Underlying
Unexercised
Options
Unexercisable (#)
 Option
Exercise
Price
($)
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
($)
Equity Incentive
Plan Awards:
Number of Unearned Shares, Units or Other Rights That Have Not Vested(#)
 Equity Incentive
Plan Awards:
Market or Payout Value of Unearned Shares, Units of Other Rights That Have Not Vested($)
John M. Boschelli4,691
4,692
(2)27.71
3/1/2020

—

—
—

—

11,085
11,086
(3)43.30
2/7/2027

—

—
—

—

—
24,000
(4)60.00
2/6/2028

—

—
—

—

—
—

—
—

—

—
4,692
(5)311,455

—
—

—
—

—

—
4,692
(6)311,455

—
—

—
—

—

—
5,544
(7)368,011

—
—

—
—

—

—
5,542
(8)367,878

—
—

—
—

—

—
6,000
(9)398,280

—
—

—
—

—

—
6,000
(10)398,280
Mark A. Green17,814
5,938
(13)31.83
6/3/2026

—

—
—

—

11,250
3,750
(14)32.20
6/15/2026

—

—
—

—

11,640
11,640
(3)43.30
2/7/2027

—

—
—

—

—
25,200
(4)60.00
2/6/2028

—

—
—

—

—
—

—
—

—

—
5,938
(5)394,164

—
—

—
—

—

—
5,938
(6)394,164

—
—

—
—

—

—
5,820
(7)386,332

—
—

—
—

—

—
5,820
(8)386,332

—
—

—
—

—

—
6,300
(9)418,194

—
—

—
—

—

—
6,300
(10)418,194
Duane A. Sanders—
15,699
(15)63.70
2/1/2028

—

—
—

—

—
29,100
(4)60.00
2/6/2028

—

—
—

—

—
—

—
—

—

—
5,496
(7)364,824

—
—

—
—

—

—
5,494
(8)364,692

—
—

—
—

—

—
7,276
(9)482,981

—
—

—
—

—

—
7,274
(10)482,848
(1)These options are scheduled to vest ratably in equal increments on 5/19/2016, 5/19/2017, 5/19/2018 and 5/19/2019.
(2)These options are scheduled to vest ratably in equal increments on 8/4/2016 and 8/4/2017.9/1/2019.
(3)These options are scheduled to vest ratably in equal increments on 8/4/2016, 8/4/20177/2019 and 8/4/2018.7/2020.
(4)These options are time-based restricted stock awardsscheduled to vest ratably in equal increments on 2/6/2019, 2/6/2020 and 2/6/2021.
(5)These PSUs vested on March 6, 2019, the date performance results were certified following completion of the three-year performance period for the 2016 PSU Awards based on Relative TSR that ended on February 28, 2019. The number shown represents the maximum number of PSUs that could be earned (because the performance results for the performance period through fiscal year 2018 were granted to Mr. Sodaro before heabove the target level). Market value was elected Chief Financial Officer anddetermined using the closing price of $66.38 per share of Common Stock on December 31, 2018, the last trading day of 2018.
(6)These PSUs vested on March 6, 2019, the date performance results were certified following completion of the three-year performance period for the 2016 PSU Awards based on Three-Year Adjusted ROE that ended on December 31, 2018. The number shown represents the maximum number of PSUs that could be earned (because the performance results for the performance period through fiscal year 2018 were above the target level). Market value was determined using the closing price of $66.38 per share of Common Stock on December 31, 2018.
(7)These PSUs are scheduled to vest on 8/4/2016.the date performance results are certified following completion of the three-year performance period for the 2017 PSU Awards based based on Relative TSR that ends on January 31, 2020. The number

42

  Executive Officer Compensation & Benefits

shown represents the maximum number of PSUs that could be earned (because the performance results for the performance period through fiscal year 2018 were above the target level). Market value was determined using the closing price of $66.38 per share of Common Stock on December 31, 2018.
(5)(8)
These performance-based restricted stock shares werePSUs are scheduled to vest on 2/4/16. These shares were forfeited as of the vesting date as described underperformance results are certified for the caption Performance Resultsthree-year performance period for 2013 Performance-Based Restricted Stockthe 2017 PSU Awards based on page 33.Three-Year Adjusted ROE that ends on December 31, 2019. The number of shares shown represents the targetmaximum number of sharesPSUs that could be earned (because the performance results for the performance period through fiscal year 2018 were granted.above the target level). Market value of these shares was determined using the closing price of $37.25$66.38 per share of Common Stock on December 31, 2015.
2018.
(6)(9)These performance-based RSUsPSUs are scheduled to vest on 2/4/2017.the date performance results are certified following completion of the three-year performance period for the 2018 PSU Awards based on Relative TSR that ends on January 31, 2021 based on Relative TSR. The number shown represents the targetmaximum number of RSUsPSUs that were granted becausecould be earned (because the estimated performance results for the performance period through fiscal year 2018 were belowabove the target levels for the portion of the three-year performance period ending on December 31, 2016 that was completed as of December 31, 2015.level). Market value of these RSUs was determined using the closing price of $37.25$66.38 per share of Common Stock on December 31, 2015.2018.
(7)(10)These performance-based RSUsPSUs are scheduled to vest on 2/4/2018.the date performance results are certified following completion of the three-year performance period for the 2018 PSU Awards based on Three-Year Adjusted ROE that ends on December 31, 2020. The number shown represents the targetmaximum number of RSUsPSUs that were granted becausecould be earned (because the estimated performance results for the performance period through fiscal year 2018 were belowabove the target levels for the portion of the three-year performance period ending on December 31, 2017 that was completed as of December 31, 2015.level). Market value of these RSUs was determined using the closing price of $37.25$66.38 per share of Common Stock on December 31, 2015.2018.
(11) These options are scheduled to vest ratably in equal increments on 5/17/2019 and 5/17/2020.
(12)These RSUs are scheduled to vest in equal increments on 4/1/2019 and 4/1/2020. Market value was determined using the closing price of $66.38 per share of Common Stock on December 31, 2018.
(8)(13)These options are scheduled to vest on 8/4/2016.12/3/2019.
(9)(14)These options and performance-based RSUs were forfeitedare scheduled to vest on February 10, 2016 when Ms. Lynch left the Company.12/15/2019.
(10)(15)These time-based RSUs were originallyoptions are scheduled to vest ratably in equal increments on 2/4/2017, but were forfeited on February 10, 2016 when Ms. Lynch left the Company.1/2019, 2/1/2020 and 2/1/2021.

OPTION EXERCISES AND STOCK VESTED IN 20152018
  Option Awards Stock Awards
Name 
Number of
Shares
Acquired on
Exercise (#)(1)

  
Value
Realized on
Exercise ($)(2)

 
Number of
Shares
Acquired on
Vesting (#)(3)

 
Value Realized on
Vesting ($)(4)

Joseph P. Lacher, Jr. —
  —
 —
 —
Frank J. Sodaro —
  —
 750
 28,879
John M. Boschelli 20,000
  205,900
 —
 —
Denise I. Lynch 11,250
  123,413
 —
 —
Richard Roeske 7,500
  177,000
 —
 —
Donald G. Southwell 292,500
(5) 2,014,350
 —
 —
 Option Awards Stock Awards
Name
Number of
Shares
Acquired on
Exercise (#)(1)
Value
Realized on
Exercise ($)(2)
 
Number of
Shares
Acquired on
Vesting (#)(3)
Value Realized on
Vesting ($)(4)
Joseph P. Lacher, Jr.—
—
 —
—
James J. McKinney11,272
365,610
 5,333
303,981
John M. Boschelli15,942
567,906
 6,000
375,900
Mark A. Green—
—
 —
—
Duane A. Sanders—
—
 —
—
(1)This is the grosstotal number of shares subject to the exercise transactions without deduction of any shares surrendered or withheld to satisfy the exercise price and/or tax withholding obligations related thereto.
(2)This is the difference between the exercise price of the shares acquired and the market price of such shares on the date of exercise, without regard to any related tax obligations.
(3)This is the gross number of shares issuedthat vested without deduction for any shares withheld to satisfy tax withholding obligations.
(4)This is the market value on the vesting date of the shares acquired on the date of vesting,that vested, without regard to any related tax obligations. Market value was determined using the closing price per share of Common Stock on the vesting date.
(5)This includes 190,000 shares exercised by Mr. Southwell after he stepped down from the Board and his positions as President and CEO and was no longer an executive officer.

43

  Executive Officer Compensation & Benefits

Retirement Plans
The Company sponsors two tax-qualified retirement plans, the Pension Plan and the DC Plan (as defined on page 35 above), that cover certain employees meeting minimum age401(k) and service-based eligibility requirements.Retirement Plan. In general,addition to be eligible for such plans, employees must be at least 21 years old with at least one year of service with the Company (as defined in the respective plan). In addition,other requirements, eligibility for the Pension Plan also requireshad required a hire date prior to January 1, 2006. Those employees hired on or after January 1, 2006 are insteadEffective June 30, 2016, the Pension Plan was frozen and its participants, which included Mr. Boschelli, became eligible to participate infor the DCretirement portion of the 401(k) and Retirement Plan. Based onThe other NEOs were not eligible for the Pension Plan due to their hire dates, the NEOs other than Mr. Lacher and Ms. Lynch participate in the Pension Plan. Ms. Lynch was eligible to participate in the DC Plan, and Mr. Lacher will be eligible to participate in the DC Plan after he completes one year of service with the Company. The NEOs are also eligible to participate in a voluntary 401(k) plan that includes a Company-matching contribution feature offered to all employees meeting age and service-based eligibility requirements.dates.
Under the Pension Plan, a participant earnsearned a benefit in an amount equal to a specified percentage of “Average Monthly Compensation” plus an additional specified percentage of “Average Monthly Compensation” above the monthly “Social Security Covered Compensation,” multiplied by the participant’s eligible years of service, up to a maximum of 30 years. “Average Monthly Compensation” is generally equal to the average of a participant’s highest monthly compensation over a 60-consecutive-month period during the 120-month period that ends three calendar months prior to a participant’s termination date.date, or for 2016, the date the Pension Plan was frozen. The “Social Security Covered Compensation” amount is determined from tables published by the Internal Revenue Service and changes each year. For 2015, the annual Social Security Covered Compensation used was $72,636. All participating NEOs areMr. Boschelli is vested underin the Pension Plan, as participants arewere vested after completing five years of service with the Company.
UnderEmployees hired on or after January 1, 2006 were eligible to participate in the DCretirement portion of the 401(k) and Retirement Plan, as were employees hired prior to 2006 after the Company will make anPension Plan was frozen, as noted above. As a result, until 2019, each of the NEOs were participants in the retirement portion of the 401(k) and Retirement Plan. Effective January 1, 2019, the 401(k) and Retirement Plan was amended to discontinue the retirement portion in favor of a better matching contribution for all employees under the 401(k) portion, and all employee retirement accounts were fully vested. In March 2019, a final annual contribution was made under the 401(k) and Retirement Plan on behalf of each participant with a participantretirement account in an amount equal to the participant’s “Annual Compensation” multiplied by a specified contribution percentage based on the participant’s years of vesting service with the Company (as such terms are defined in the plan). Ms. Lynch is vested under the DC Plan, as participants are vested after completing three years of service with the Company.
Compensation covered by both the Pension Plan and DCthe retirement portion of the 401(k) and Retirement Plan includes the participant’s base salary and annual bonus. TheAge 65 is the normal retirement age under the qualified retirement plans is age 65.plans. The normal form of distribution under the Pension Plan is a life annuity for a single retiree, or a joint and fifty-percent50-percent survivor annuity for a married retiree. Other forms of annuity are available to participants, but all forms of payment are actuarially equivalent in value. The normal form of distribution under the DCretirement portion of the 401(k) and Retirement Plan is a lump-sum payout.
Messrs. Southwell and Roeske are the NEOs currently eligible for early retirement under theThe Pension Plan. A participant is eligible for early retirement benefits upon attaining age 55 with five years of service with the Company. The early retirement benefit payable to a participant under the Pension Plan is the retirement benefit that would have been payable at the normal retirement age of 65 actuarially reduced to give effect to the participant’s age at the time of early retirement.
The SERP and DCRetirement SERP (as defined on page 35 above)38 above in the Compensation Discussion and Analysis section) were established to provide benefits to certain individuals in excess of the limitations imposed on the Pension Plan and DCthe retirement portion of the 401(k) and Retirement Plan, respectively, under the Internal Revenue Code. The Pension SERP or DCwas effectively frozen as of June 30, 2016 when the Pension Plan was frozen. The Retirement SERP benefit is, and the Pension SERP benefit previously was, computed using the same formula used for the respective tax-qualified retirement plan, without regard to the limits imposed under the Internal Revenue Code. An employee who earns compensation over the qualified plan limitation may be eligible to participate in the Retirement SERP, or DCpreviously the Pension SERP, by designation of the Board of Directors. For 2015,2018, compensation to determine the benefit under the Pension Plan and the DCretirement portion of the 401(k) and Retirement Plan was limited to $265,000.$275,000. As noted above, the retirement portion of the 401(k) and Retirement Plan was discontinued. As a result of this change, the Retirement SERP was also discontinued as of January 1, 2019.
The NEOs are also eligible to defer on a voluntary basis a portion of their salaries under the 401(k) portion of the 401(k) and Retirement Plan that includes a matching contribution feature offered by the Company to all employees meeting the age and service-based eligibility requirements.
As noted above, only Mr. Boschelli was eligible to participate in the Pension Plan and Pension SERP due to his date of hire.




Executive Officer Compensation & Benefits

The following table shows the years of credited service and the present values of the accumulated benefits under the Pension Plan and Pension SERP for each participating NEO as of December 31, 2015. As noted above, Mr. Lacher and Ms. Lynch were not eligible to participate in the Pension Plan and SERP due to their dates of hire.

44

Executive Compensation

PENSION BENEFITS2018:
Name Plan Name Number of Years Credited Service (#)(1)
 Present Value of Accumulated Benefit ($)(2)
 Payments During Last Fiscal Year ($)
Joseph P. Lacher, Jr. Pension Plan —
 —
 —
  SERP —
 —
 —
Frank J. Sodaro Pension Plan 19
 445,650
 —
  SERP 19
 368,254
 —
John M. Boschelli Pension Plan 18
 412,465
 —
  SERP 18
 401,534
 —
Denise I. Lynch Pension Plan —
 —
 —
  SERP —
 —
 —
Richard Roeske Pension Plan 24
 769,000
 —
  SERP 24
 620,748
 —
Donald G. Southwell Pension Plan 19
 930,315
 —

 SERP 19
 4,541,697
 —
PENSION BENEFITS
NamePlan NameNumber of Years Credited Service (#)(1)
Present Value of Accumulated Benefit ($)(2)
Payments During Last Fiscal Year ($)
Joseph P. Lacher, Jr.Pension Plan—
—
—
 Pension SERP—
—
—
James J. McKinneyPension Plan—
—
—
 Pension SERP—
—
—
John M. BoschelliPension Plan18.5
449,562
—
 Pension SERP18.5
498,349
—
Mark A. GreenPension Plan—
—
—
 Pension SERP—
—
—
Duane A. SandersPension Plan—
—
—
 Pension SERP—
—
—
(1)As aA participant’s initial year of service as an employee is not used to determine credited service under the Pension Plan and SERP,Pension SERP. In addition, benefits for all participants under the numbers shown differ from each participant’s actualPension Plan were frozen as of June 30, 2016. The number of years of credited service by one year. Forshown for Mr. Boschelli the number shown also differs fromare less than his actual years of service by an additionalnine years and six years because ofmonths due to the Pension Plan freeze date and a lump-sum payout of six-years of accrued benefits that he received in connection withbecause of a break in his service with the Company in 1997.
(2)
These accumulated benefit values are based on the years of credited service shown and the Average Monthly Compensation (as defined in the Pension Plan) as of December 31, 2015,June 30, 2016, as described above in the narrative about the Pension Plan preceding this table. These present value amounts were determined on the assumption that distribution of benefits under the NEOs have been orplans will remain in servicenot begin until age 65, the age at which retirement may occur under the Pension Plan and Pension SERP without any reduction in benefits, using the same measurement date, discount rate and actuarial assumptions described in Note 16, “Pension Benefits,” toto the consolidated financial statements included in the Company’s 20152018 Annual Report on Form 10-K.Report. The discount rate assumption was 4.47derived from the Aon Hewitt AA Bond Universe Curve as of December 31, 2018 with a single equivalent rate of 4.21 percent for 2015 and the mortality assumptions were based on the RP-2006 Healthy Annuitant Table for MalesEmployees and Healthy Annuitants, Projected to 2041.
Generationally with Scale MP-2018.
Nonqualified Deferred Compensation
Deferred Compensation Plan
The Deferred Compensation Plan was established to allow certain executives who are designated by the Board of Directors, as well as the non-employee members of the Board of Directors, to elect to defer a portion of their current yearcurrent-year compensation to a future period. The NEOs are eligible to participate in the Deferred Compensation Plan, but none elected to defer any of their 2018 compensation. The Deferred Compensation Plan is unfunded and exempt from certain provisions of the Employee Retirement Income Security Act of 1974, as amended. The Company does not fund or make profit-sharing or matching contributions under the Deferred Compensation Plan, and participants have an unsecured contractual commitment by the Company to pay the amounts deferred, adjusted to recognize earnings or losses determined in accordance with their elections under the plan.
To participate in the Deferred Compensation Plan, an eligible individual must make an annual irrevocable election. The form and timing of the distribution of deferrals made during a particularany given year is chosen when a participant elects to participate for that year and generally cannot be altered or revoked. The distribution for a particular year may be in the form of annual or quarterly installments payable up to a maximum of ten10 years or a single lump-sum payment. All payments begin on January 1 of the year chosen by the participant when the election is made. A participant may elect to defer up to 60 percent of his or her regular annual base salary and up to 85 percent of each award earned under any annual or multi-year incentive plan award or annual discretionary bonus regardless of amount. Withdrawals are not permitted under the Deferred Compensation Plan other
Executive Officer Compensation & Benefits

than regularly scheduled distributions or upon Death or Disability if so chosen by the participant at the time of the annual election.

45

Executive Compensation

Each participant’s bookkeeping account is deemed to be invested in the hypothetical investment choice(s) selected by the participant from the choices made available by the Company. Investment choices may be changed by participants on a quarterlydaily basis. Generally, the hypothetical investment alternatives offered by the Company include a range of retail mutual funds selected by the Plan Administrator,plan administrator, which is the Compensation Committee of the Company’s Board of Directors. Investment choices selected by a participant are used only to determine the value of the participant’s account. The Company is not required to follow these investment selections in making actual investments of amounts deferred under the plan.
As employees designated by the Board of Directors, the NEOs are eligible to elect deferral of their cash salary and bonus under the Deferred Compensation Plan. Mr. Roeske is the only current NEO participant in the Deferred Compensation Plan, and he did not elect to defer any 2015 compensation under the plan. The fund selected for hypothetical investments in 2015 that would apply to Mr. Roeske’s balance under the Deferred Compensation Plan from prior deferrals (and the 2015 annual gain on investment) was the Wells Fargo Index Admin Fund (1.16 percent).
DCRetirement SERP
The DCRetirement SERP is discussed above in the narrative captioned Retirement Plans beginning on page 44. Ms. Lynch is a participant47. As noted in that narrative, the Retirement SERP was discontinued at the end of 2018. Contribution credits for 2018 were made in March 2019 to the Retirement SERP accounts for the NEOs other than Mr. Sanders, who was not eligible for the Retirement SERP prior to its discontinuance due to his hire date in 2018. The amounts of these contributions are shown in the DC SERP; Mr. Lacher will be eligible to participate when he completes one year of service with the Company.table below.
The following table shows the aggregate earnings in 20152018 and the balances as of December 31, 20152018 for Ms. Lynch under the DC SERP and Mr. RoeskeNEOs under the Deferred Compensation Plan. The other NEOs did not participate in either plan in 2015.

NONQUALIFIED DEFERRED COMPENSATIONPlan and Retirement SERP:
Name Plan Name Aggregate Earnings in Last Fiscal Year ($)
 Aggregate Withdrawals/Distributions ($)
 Aggregate Balance at Last Fiscal Year End ($)(1)
Joseph P. Lacher, Jr. Deferred Compensation Plan —
 —
 —
  DC SERP —
 —
 —
Frank J. Sodaro Deferred Compensation Plan —
 —
 —
  DC SERP —
 —
 —
John M. Boschelli Deferred Compensation Plan —
 —
 —
  DC SERP —
 —
 —
Denise I. Lynch Deferred Compensation Plan —
 —
 —
  DC SERP 96
 —
 20,739
Richard Roeske Deferred Compensation Plan 1,624
 —
 141,303
  DC SERP —
 —
 —
Donald G. Southwell Deferred Compensation Plan —
 —
 —
  DC SERP —
 —
 —
NONQUALIFIED DEFERRED COMPENSATION
NamePlan NameRegistrant Contributions in Last Fiscal Year ($)
Aggregate Earnings in Last Fiscal Year ($)
Aggregate Balance at Last Fiscal Year End ($)
Joseph P. Lacher, Jr.Deferred Compensation Plan—
—
—
 Retirement SERP24,750
(916)38,634
James J. McKinneyDeferred Compensation Plan—
—
—
 Retirement SERP9,250
—
9,250
John M. BoschelliDeferred Compensation Plan—
—
—
 Retirement SERP19,500
(1,254)40,111
Mark A. GreenDeferred Compensation Plan—
—
—
 Retirement SERP8,450
(127)10,373
Duane A. SandersDeferred Compensation Plan—
—
—
 Retirement SERP—
—
—
(1)The amounts shown in this column represent the aggregate balance for Ms. Lynch in the DC SERP and for Mr. Roeske in the Deferred Compensation Plan, and are based on prior deferrals plus earnings or losses accrued through December 31, 2015.
Potential Payments Upon Termination or Change in Control
The following narrative describes the applicable terms of the agreements or plans that would provide benefits to the NEOs if their employment had terminated on December 31, 2015.2018. The table below shows benefits that would have been payable to the NEOs as a direct result of either a change in control of the Company or the death or disability of the individual officer, had such an event occurred on December 31, 2015.2018. The amounts shown in the table would have been payable pursuant to individual severance agreements (“Severance Agreements”Agreements”) between the NEOs and the Company in connection withthe context of a “change in control” of the Company, as described below, or individual grant agreements executed with the Company in connection with cash bonus,incentive, stock option, PSU and/or restricted stock/RSU awards they received. None of the NEOs shown in

46

Executive Compensation

the table on page 49 below is a party to any other agreement with the Company that would entitlehave entitled him or her to receive any severance payments or other termination benefits from the Company as of December 31, 2015. As previously noted, the Company entered into a Separation Agreement with Ms. Lynch on March 2, 2016 that provided for certain severance benefits described in the Compensation Discussion and Analysis section above under the heading Changes to NEO Compensation for 2016 on page 33. 2018. 
Retirement Plans
In addition to the amounts shown in the table on page 4948 below, the NEOs would have been entitled to receive benefits to which they have vested rights upon retirement under the Pension Plan and Pension SERP (or DC401(k) and Retirement Plan and DCRetirement SERP), as described and/or quantified above under the heading Retirement Plans and in the Pension Benefits and Nonqualified Deferred Compensation tables and corresponding footnotes, as applicable. Any NEOs who had participated
Executive Officer Compensation & Benefits

in the Deferred Compensation Plan might have been entitled to receive distributions in accordance with their previously chosen elections under the plan, as described above under the caption Nonqualified Deferred Compensation. In addition, the NEOs would have been entitled to receive benefits that are generally available to employees of the Company and do not discriminate in scope, terms or operation in favor of executive officers. These include benefits payable: (i)(a) upon termination of employment, such as payments of 401(k) and Retirement Plan distributions and accrued paid time off; and (ii)(b) upon death or disability, under life, business travel or long-term disability insurance.
In None of the case of Mr. Southwell, a voluntary early retirement election effective December 31, 2015 would have entitled him to receive vested benefits under the Pension Plan and SERP, actuarially reduced to give effect to his age on such date. The specific retirement benefit amounts that would have been paid would have been determined in accordance with the form of distribution he had elected based on the present values shown above in the Pension Benefits table. Messrs. Sodaro, Boschelli and Roeske had not reached early retirement age as of December 31, 2015 and so would not have beenNEOs were eligible to begin receiving early retirement benefits as of December 31, 2015. Ms. Lynch was vested in the DC Plan and DC SERP as of December 31, 2105 and so was entitled to receive distributions thereunder in accordance with the plan terms. Mr. Lacher was not eligible to participate in the DC Plan or DC SERP as of December 31, 2015 because he had not completed one year of service with the Company.2018.
Severance Agreements
The Severance Agreements would provide various severance benefits to the NEOs in the event their employment terminates under certain circumstances within two years after a “change in control.” Such benefits are also payable to such officers in the event their employment is involuntarily terminated (other than for cause, disability or death) or voluntarily terminated with “good reason,” in either case in anticipation of a change in control. Under the Severance Agreements, a “change in control” is deemed to occur if any person (excluding certain defined persons) is or becomes, directly or indirectly, the beneficial owner of 25%25 percent or more of the voting power of the Common Stock, or the individuals who comprised the Company’s Board of Directors on the date of the Severance Agreement, or any of the individuals they nominate, cease to comprise a majority of the Board, or if, under the circumstances specified in the Severance Agreements, a merger or consolidation of the Company or sale of substantially all of the Company’s assets is consummated or a liquidation or dissolution plan is approved by the Company’s shareholders.
If applicable, each NEO would be entitled under the Severance Agreements to: (i) to receive the following, subject to execution of a release and other specified requirements:
a lump-sum severance payment based on a multiple of three (for Messrs. Lacher and Southwell)Mr. Lacher) or two (for the other NEOs) of such officer’s annualized salary; (ii) salary and annual incentive, determined as of the higher of such officer’s prior-year annual incentive or a percentage of such officer’s salary (150 percent for Mr. Lacher or 110 percent for the other NEOs) (“Annual Incentive”) plus a pro-rata portion of the Annual Incentive based on the number of months such officer was employed during the year in which the change in control occurred;
continuation for up to three years (in the case of Messrs. Lacher and Southwell)(for Mr. Lacher) or two years (for the other NEOs) of the life and health insurance benefits that were being provided by the Company to such officerNEO and his dependents immediately prior to termination;
a lump-sum payment equal to the excess of cost for COBRA coverage over the employee-cost for health insurance benefits for 36 months (for Mr. Lacher) or her24 months (for the other NEOs) being provided by the Company to such NEO and his family immediately prior to termination;termination, regardless of whether COBRA coverage is elected by the NEO; and (iii) 
outplacement services at the Company’s expense for up to fifty-two52 weeks.
Performance Incentive Plan Awards
Had there beenThe Severance Agreements include a provision related to potential excise taxes payable by the NEOs under Sections 4999 and 280G of the Code that would entitle them to receive either (a) the full benefits payable as a result of a qualifying termination related to a change inof control, of the Company (as definedwhether under the Severance Agreements, equity award agreements or other applicable award agreements) as of December 31, 2015,provisions (subject to such potential excise taxes), or (b) a reduced amount that falls below the applicable performance period for any outstanding Annual PIP Award or Multi-Year PIP Award would have ended on such date. Thesafe harbor provided under Section 280G, whichever amount of the payout due under each such award would have beenprovides the greater of the payout due: (a) based on the actual results for the revised performance period relativeafter-tax value to the applicable performance goal(s) for the award; or (b) at the target performance level for the award.

47

Executive Compensation

If the employment of one of the NEOs had terminated as of December 31, 2015 due to death or disability, the applicable performance period for any outstanding Annual PIP Award or Multi-Year PIP Award would have ended on such date. The amount of the payout due under each such award would have been the amount due at the target performance level for such award, reduced pro-rata based on the number of months remaining in the performance period as of the date of termination.
For awards granted beginning in 2014, if the employment of one of the NEOs had terminated as of December 31, 2015 and, as of such date, such officer was Retirement Eligible, the determination of any payouts under any outstanding Annual PIP Award or Multi-Year PIP Award would have been based on the actual performance results determined at the end of the original performance period for the award, but the amount due would have been prorated based on the ratio of the number of months that such officer was employed during the performance period to the total number months in the performance period. The amount due would have been paid at the same time as the payouts under the respective Annual and Multi-Year PIP Awards to active plan participants.
If the employment of an NEO had terminated as of December 31, 2015 for any other reason, any outstanding Multi-Year PIP Award would have been forfeited on the termination date.NEO.
Equity-Based Awards
Stock Option Awards
If the employment of an NEO had terminated as of December 31, 20152018 due to death or disability or due to a change in control of the Company, any outstanding unvested stock option award would have vested on the termination date. For awards granted beginning in 2014, if the employment of an NEO had terminated as of December 31, 20152018 and, as of such date, such officer was Retirement Eligible, any outstanding unvested stock option award would remain outstanding and continue to vest in accordance with the original vesting terms. If the employment of an NEO had terminated as of December 31, 20152018 for any other reason, such outstanding unvested stock option awards would have been forfeited on the termination date.
Time-Based Restricted Stock/
Executive Officer Compensation & Benefits

RSU Awards
If the employment of an NEO had terminated as of December 31, 20152018 due to death or disability or due to a change in control of the Company, any outstanding unvested time-based restricted stock/RSU awards would have vested on the termination date. For awards granted beginning in 2014, if the employment of an NEO had terminated as of December 31, 20152018 and, as of such date, such officer was Retirement Eligible, any outstanding unvested time-based restricted stock/RSU awards would remain outstanding and continue to vest in accordance with the original vesting terms. If the employment of an NEO had terminated as of December 31, 20152018 for any other reason, such outstanding unvested time-based restricted stock/RSU awards would have been forfeited on the termination date.
Performance-Based Restricted Stock/RSUPSU Awards
If the employment of an NEO had terminated as of December 31, 20152018 due to a change in control of the Company, the performance period for any outstanding performance-based restricted stock/RSU awards held by such officer would have ended on the termination date. The shares granted under each award would have vested in an amount equal to the number of shares that would vest based on the greater of the target performance level or actual performance results for the truncated performance period.
If the employment of an NEO had terminated as of December 31, 20152018 due to death or disability, the performance period for any outstanding performance-based restricted stock/RSUPSU awards held by such officer would have ended on the termination date. The shares granted under each award would have vested in an amount equal to the number of shares that would vest at the target performance level, reduced pro-rata based on the ratio of the number of months in the truncated performance period to the total number months in the original performance period.
For awards granted beginning in 2014, ifIf the employment of an NEO had terminated as of December 31, 20152018 and, as of such date, such officer was Retirement Eligible, any outstanding performance-based restricted stock/RSUPSU awards would remain outstanding until the end of the original performance period and then vest or be forfeited as determined based on actual performance results, but reduced pro-rata based on the ratio of the number of months that such officer was employed during the performance period to the total number months in the performance period. If, as of such termination date, such

48

Executive Compensation

officer was not Retirement Eligible, any outstanding unvested performance-based restricted stock/RSUPSU awards would have been forfeited on the termination date.
The following table shows amounts that would have become payable to the NEOs in connection with their termination of employment as of December 31, 20152018 resulting from a change in control of the Company or the death or disability of the individual officer.officer:

POTENTIAL PAYMENTS UPON TERMINATION
FROM A CHANGE IN CONTROL (“CIC”)
OR DEATH/DISABILITY AT DECEMBER 31, 20152018
NameLump-Sum Severance Payments (1)
Accelerated Stock Options
(2)
Accelerated RSUs
(2)(3)
Accelerated PSUs
(2)(4)(5)
Services and Payments related to Welfare Benefits and Out-placement (6)
Total
Joseph P. Lacher, Jr.





Termination due to Change in Control12,250,000
4,304,521
—
11,305,470
112,284
27,972,275
Death or Disability—
4,304,521
—
6,088,374
—
10,392,895
Other Termination—
—
—
—
—
—
James J. McKinney





Termination due to Change in Control3,600,000
723,877
708,076
2,191,237
56,707
7,279,897
Death or Disability—
723,877
708,076
1,196,433
—
2,628,386
Other Termination—
—
—
—
—
—
Executive Officer Compensation & Benefits

 Joseph P. Lacher, Jr.
 Frank J. Sodaro

John M. Boschelli
Denise I. Lynch
Richard Roeske
Donald G. Southwell
Change In Control      
Lump-Sum Severance Payments(1)2,250,000
900,000
800,000
960,000
742,000
3,000,000
Accelerated Stock Options(2)—
24,000
27,500
43,000
17,200
172,000
Accelerated Time-Based Restricted Stock/RSUs(2)—
13,969
—
558,750
—
—
Accelerated Performance-Based Restricted Stock/RSUs(2)(3)—
353,875
298,000
447,000
178,800
1,676,250
Annual PIP Awards(4)—
130,206
—
139,999
54,746
500,625
Multi-Year PIP Awards(5)—
484,421
418,213
617,430
304,325
1,566,750
Life Insurance Continuation Premium(6)25,968
17,880
17,880
18,960
22,802
63,888
Health Insurance Continuation Premium(6)—
38,969
38,969
38,969
10,259
35,162
Outplacement Services(6)14,400
14,400
14,400
14,400
14,400
14,400
280G Reduction of Benefits(7)(648,590)(787,183)—
—
—
—
Total1,641,778
1,190,537
1,614,962
2,838,508
1,344,532
7,029,075
Death or Disability      
Accelerated Stock Options(8)—
24,000
27,500
43,000
17,200
172,000
Accelerated Time-Based Restricted Stock/RSUs(8)—
13,969
—
558,750
—
—
Accelerated Performance-Based Restricted Stock/RSUs(8)(9)—
204,875
186,250
298,000
119,200
1,117,500
Annual PIP Awards(10)—
247,500
220,000
264,000
148,400
750,000
Multi-Year PIP Awards(11)—
432,500
387,500
478,000
255,150
1,500,000
Total—
922,844
821,250
1,641,750
539,950
3,539,500
POTENTIAL PAYMENTS UPON TERMINATION FROM A CHANGE IN CONTROL (“CIC”)
OR DEATH/DISABILITY AT DECEMBER 31, 2018 (continued)
NameLump-Sum Severance Payments (1)
Accelerated Stock Options
(2)

Accelerated RSUs
(2)(3)

Accelerated PSUs
(2)(4)(5)

Services and Payments related to Welfare Benefits and Out-placement (6)
Total
John M. Boschelli      
Termination due to Change in Control2,600,000
590,386
—
1,976,133
62,802
5,229,321
Death or Disability—
590,386
—
1,077,679
—
1,668,065
Other Termination—
—
—
—
—
—
Mark A. Green      
Termination due to Change in Control2,340,000
762,760
—
2,209,193
54,727
5,366,680
Death or Disability—
762,760
—
1,198,690
—
1,961,450
Other Termination—
—
—
—
—
—
Duane A. Sanders      
Termination due to Change in Control3,886,667
227,731
—
1,313,833
88,574
5,516,805
Death or Disability—
227,731
—
847,673
—
1,075,404
Other Termination—
—
—
—
—
—
(1)    The amounts shown represent cash severance payable under the Severance Agreements.
(1)The amounts shown represent cash severance payable under the Severance Agreements assuming no reduction would be made under the provision in the agreements related to potential excise taxes payable by the NEOs under Sections 4999 and 280G of the Code. Any such reduction would have been determined based on the specific facts of the actual termination event.
(2)
The amounts shown for a hypothetical termination due to a change in control assume that the Boardacceleration of Directors elected to accelerate the vesting of outstanding stock options, PSUs and restricted stock/RSU sharesRSUs as of December 31, 2015.2018. Acceleration of the vesting would occur automatically upon the death or disability of the NEO pursuant to the terms of the applicable plans and grant agreements. The amounts shown represent the “in-the-money” value of the stock options and market value of restricted stock/PSUs and RSUs that would have been subject to accelerated vesting as of December 31, 2015. The value shown for accelerated “underwater” stock options is zero.2018. The total numbers and market values of unvested restricted stock/RSU awardsPSUs and RSUs and the numbers of shares subject to unvestedoutstanding stock options, and the exercise prices thereof, are set forth in the Outstanding Equity Awards at 20152018 Fiscal Year-End table.table on page 44. The accelerated stock option and restricted stock/RSU values shown were calculated using the closing price of $37.25$66.38 per share of Common Stock on December 31, 2015.2018.
(3)The amounts shown represent the values included inof outstanding RSUs that would automatically vest from the table representhypothetical termination event.
(4)The amounts shown for a payout at the target performance level. In the event ofhypothetical termination due to a change in control represent estimated values of payouts under the 2016, 2017 and 2018 PSUs resulting from such event as of December 31, 2018. In such event, the payout under outstanding performance-based restricted stock/RSUsPSUs would be based on the greater of performance at the target level or actual performance results for a truncated performance period ending on the date of the change in control.
(4)The amounts shown Except for the 2018 PSUs based on Relative TSR, the values included in the table represent estimated values of payouts undera payout at the 2015 Annual PIP Awards resulting from a hypothetical termination event as of December 31, 2015. The amount of the payout would have been the greater of the payout due based onmaximum performance level because the actual performance results or atfor the targettruncated period exceed the performance level.level necessary to obtain a maximum payout. For the NEOs other than Mr. Lacher (who did not receive a 2015 award) and Mr. Boschelli, the payout due2018 PSUs based on actual performance results was lower thanRelative TSR, the payout atvalues included in the target performance level. Accordingly, the excess of thetable represent a payout at the target performance level overbecause the payout due based on actual performance results is included infor the table for such NEOs.truncated period were below the target performance level necessary to obtain a maximum payout.

49

Executive Compensation

For Mr. Boschelli, the payout due based on actual performance results exceeded the payout at the target performance level, entitling him to receive the payout whether there was or was not a termination event on December 31, 2015. Accordingly, no additional payout is included in the table for Mr. Boschelli. The processes for determining Annual PIP Award payouts under possible termination events are described in the narrative preceding this table.
(5)The amounts shown for a hypothetical death or disability represent estimated values of payouts under the 2013, 20142016, 2017 and 2015 Multi-Year PIP Awards2018 PSU awards resulting from a hypothetical terminationsuch event as of December 31, 2015. The amount of the payout for each award would have been the greater of the payout due based on the actual performance results or at the target performance level. For the 2013 Multi-Year PIP Awards, for all NEOs other than Mr. Lacher (who did not receive2018. In such an award) and Mr. Boschelli, the payout due based on actual performance results was lower than the payout at the target performance level. Accordingly, the excess of the payout at the target performance level over the payout due based on actual performance results is included in the table for such NEOs. For Mr. Boschelli, the payout due based on actual performance results exceeded the payout at the target performance level, entitling him to receive the payout whether or not a termination event, occurred on December 31, 2015. Accordingly, no additional payout is included in the table for Mr. Boschelli for the 2013 Multi-Year PIP awards. For all NEOs except Mr. Lacher (who did not receive such awards), the amounts included in the table for the 2014 and 2015 Multi-Year PIP Awards represent the amount of the payout for such awards at the greater of target or estimated actual performance level for the truncated performance period ending on December 31, 2015. The processes for determining Multi-Year PIP Award payouts under possible termination events are described in the narrative preceding this table.
(6)The amounts shown are the estimated costs to the Company to provide continuation of life and health insurance benefits for up to three years (in the case of Messrs. Lacher and Southwell) or two years (for the other NEOs) and outplacement services for fifty-two weeks pursuant to the Severance Agreements.
(7)The amounts shown are reductions in the payments to Messrs. Lacher and Sodaro estimated to result from a hypothetical change in control as of December 31, 2015 pursuant to a provision in each Severance Agreement that would require such reductions to ensure that the payments would not be subject to excise taxes under Sections 4999 and 280G of the Internal Revenue Code. These estimates were determined using safe harbors contained in regulations to Section 280G; however, the determination of whether the actual payment would be subject to Sections 4999 and 280G of the Internal Revenue Code would have been based on the specific facts of the actual transaction resulting in a change of control.
(8)
The amounts shown represent the in-the-money value of the stock options and the market value of restricted stock/RSUs that would have been subject to accelerated vesting as of December 31, 2015. The accelerated stock options and restricted stock/RSU values shown were calculated using the closing price of $37.25 per share of Common Stock on December 31, 2015. Acceleration of the vesting of stock options and restricted stock/RSUs would occur automatically upon the death or disability of the NEO pursuant to the terms of the applicable plans and grant agreements. The total numbers and market values of shares subject to unvested stock options, and the exercise prices thereof, and of unvested restricted stock/RSU awards are set forth in the Outstanding Equity Awards at 2015 Fiscal Year-End table on page 41.
(9)For the three-year performance period ending on December 31, 2015, the value included in the table represents 100 percent of a payout at the target performance level. For the three-year performance period ending on December 31, 2016, the value included in the table represents two-thirds of a payout at the target performance level. For the three-year performance period ending on December 31, 2017, the value included in the table represents one-third of a payout at the target performance level.
(10)The amounts shown represent estimated values of payouts under the 2015 Annual PIP Awards resulting from a hypothetical death or disability as of December 31, 2015. The value included in the table is the amount of a payout at the target performance level. No pro-rata reduction would be made since the event would have occurred on the last day of the performance period.
(11)The amounts shown represent estimated values of payouts under the 2013, 2014 and 2015 Multi-Year PIP Awards resulting from a hypothetical death or disability as of December 31, 2015. Under these circumstances, the amount of the payout for each award would have been determined at the target level but reduced pro-rata based on the number of full months in the Performance Period during which the NEO was an active Employeeemployee for at least fifteen days divided by the total number of months in the original Performance Period.

50

  Executive Officer Compensation & Benefits

(6)The amounts shown are the estimated costs to the Company to provide continuation of life insurance benefits for up to three years (in the case of Mr. Lacher) or two years (for the other NEOs), lump-sum payments related to health insurance, and outplacement services for fifty-two weeks pursuant to the Severance Agreements, as described in the narrative preceding this table. The lump-sum payment related to health insurance is equal to the amount the COBRA-rate would exceed the active-employee rate for the officer’s coverage for 36 months for Mr. Lacher and 24 months for all other NEOs regardless of whether such officer would elect to continue coverage under COBRA.
Pay Ratio Disclosure
Pay Ratio Disclosure
The Company determined our median employee from our entire employee population to provide a ratio comparison of monthsthe total compensation of Mr. Lacher, our CEO, with the total compensation of the median employee for 2018. In doing so, the Company annualized the compensation of all full-time and part-time employees. The median employee’s compensation was determined as of October 1, 2018, in accordance with the methodology and components used in the original Performance Period. ForSummary Compensation Table for our NEOs. The 2018 total compensation was determined to be $68,193 for our median employee, ($48,035 base salary plus employer-paid health, life and retirement benefit costs of $20,158), and $6,905,879 for Mr. Lacher. Based on this information, the three-year performance period ending on December 31, 2015,ratio of the value included inannual total compensation of Mr. Lacher to that of the table represents 100 percent ofmedian employee is estimated to be 101 to 1. The applicable SEC rules for identifying the median employee and calculating the pay ratio allow companies to use different methodologies and assumptions, and as a payout atresult, our estimated pay ratio may not be comparable to the target performance level. For the three-year performance period ending on December 31, 2016, the value included in the table represents two-thirds of a payout at the target performance level. For the three-year performance period ending on December 31, 2017, the value included in the table represents one-third of a payout at the target performance level. The processes for determining Multi-Year PIP Award payouts under possible termination events are described in the narrative preceding this table.pay ratios disclosed by other companies.


51

  Proposal 3

Proposal 3: Consider andAdvisory Vote on Approvalto Approve the Compensation of the Material Terms of Performance GoalsCompany’s Named Executive Officers
under the Company's 2011 Omnibus Equity Plan
Overview
The Omnibus Plan was adopted
This proposal provides you with the opportunity to vote, on a non-binding, advisory basis, to approve the compensation of the NEOs as disclosed in this Proxy Statement in accordance with the applicable compensation disclosure rules (the “Say-On-Pay Vote”). At the Company’s 2018 Annual Meeting, the Company’s shareholders approved the Company’s Say-On-Pay Vote by 97.8 percent of the Boardvotes cast on February 2, 2011, and approved bythe proposal.

In voting on Proposal 3, you will be voting whether to approve the following resolution:

“RESOLVED, that, the Company’s shareholders on May 4, 2011, for all future awards of equity-basedapprove the compensation paid to the Company’s employees and non-employee directors. AtNamed Executive Officers, as disclosed pursuant to Item 402 of SEC Regulation S-K in the 2016Proxy Statement for the 2019 Annual Meeting of Shareholders, are being askedincluding the section captioned Compensation Discussion and Analysis, the compensation tables and related narrative discussions.”

This proposal is not intended to re-approveaddress any specific element of compensation; rather, the material termsvote relates to the compensation of performance goals under the Omnibus Plan,NEOs as described below, in orderthis Proxy Statement in accordance with the compensation disclosure rules of the SEC. The vote is advisory, which means the vote is not binding on the Company, the Board of Directors or the Compensation Committee. However, the Compensation Committee will take into account the outcome of the vote when considering future executive compensation arrangements.

The Compensation Discussion and Analysis section of this Proxy Statement that begins on page 20 above provides an Executive Summary and detailed information on the executive compensation program and amounts paid to preserve the Company’s federal income tax deductionNEOs for such awards.2018. The Company is not seeking approvalencourages you to review the Compensation Discussion and Analysis in considering whether to vote in favor of additional shares or other changesthis proposal. The Company believes the 2018 executive compensation program has served as an effective means of attracting and retaining the new members of its leadership teamand that the program’s components, including the Company’s Annual Incentive Program, serves as a key supporting mechanism to the Omnibus Plan.
Section 162(m) of the Internal Revenue Code imposes an annual limit of $1 million on the federal corporate tax deduction by a publicly-held corporation on compensation paid to each of its “Covered Employees,” who are defined as the company’s chief executive officer and executive officers (except for its chiefCompany’s improved financial officer) as of the end of the applicable year, whose compensation is required under SEC rules to be disclosed in the company’s proxy statement tables. The $1 million limitation does not apply to “performance-based compensation” that satisfies the requirements of Section 162(m).
Purpose of Proposal: Approval of the Material Terms of Performance Goals under Omnibus Plan
The requirements of Section 162(m) include obtaining shareholder approval of the following material terms of the Omnibus Plan at least every five years: (1) the class of employees eligible to receive compensation upon achievement of performance goals applicable to awards under the plan; (2) the business criteria on which such performance goals may be based; and (3) the maximum amount that could be paid to any Covered Employee upon the achievement of the performance goal(s) applicable to an award under the plan.performance.
Eligibility: The ClassRecommendation of Employees Eligible to Receive Compensation upon Achievementthe Board of Performance Goals
                   Applicable to Awards under the Omnibus Plan
Directors
Eligible participants in the Omnibus Plan include all employeesThe Board of the Company’s subsidiaries and affiliates and non-employee directors of the Company, and, by specific designation of the Compensation Committee, other key individuals who provide certain consulting or advisory services to the Company or its subsidiaries. The selection of actual grant recipients from among individuals eligible to participate (“Participants”) in the Omnibus Plan will be determined from time to time in the discretion of the Compensation Committee (or by an authorized Company officer or Board committee as described the Directors recommends that you vote “AdministrationFOR section below).” Proposal 3.
As of December 31, 2015, approximately 3,000 employees and six non-employee directors were eligible to receive grants under the Omnibus Plan. Grants under the Omnibus Plan are expected to be utilized primarily for grants to a selective group of managerial-level employees and the Company’s non-employee directors.
Performance Measures: The Business Criteria on Which Such Performance Goals May be Based
For grants intended to qualify as Performance-Based Compensation, the Compensation Committee is required to approve the performance goals for the applicable performance period no later than the latest date permitted under Section 162(m). The performance goals will be based on one or more of the following performance measures that are set forth in the plan:
(a)Measures of profitability including, but not limited to, net income, operating earnings, and earnings before or after any one or more of the following: taxes, interest, depreciation, amortization and other non-cash charges;
(b)Measures of revenue including, but not limited to, earned premiums, written premiums, investment income, investment gains, and any other revenue measures reported by the Company in its financial statements;

52

  Proposal 34

(c)Measures of return including, but not limited to, return on assets, capital, invested capital, equity, earned premiums, written premiums, revenues, and returns and yields with respect to investment portfolio performance;
(d)Cash flow including, but not limited to, operating cash flow, free cash flow, and cash flow return on equity;
(e)Measures related to insurance policy retention, operating efficiencies, and productivity;
(f)The Company’s share price including, but not limited to, share appreciation measures and measures of total shareholder return;
(g)Measures based on cost or expense targets;
(h)Market share;
(i)Customer satisfaction;
(j)Bad debt experience;
(k)
Economic value added or EVA® [net operating profit after tax] less [cost of equity capital];
(l)Insurance underwriting income, combined ratios, loss ratios or expense ratios; and
(m)Recovery of capital or capital efficiency.
Determination of Award Payouts
In accordance withProposal 4: Vote to Approve the Company’s procedures, after each performance period, the Company will provide the data and calculations necessary to assess the results and achievement of performance goals applicable to grants for such performance period, and the Compensation Committee will make a determination as to the degree of achievement of each performance goal based on such results.In its evaluation of performance, the Compensation Committee may include or exclude unusual events that occur during the applicable performance period as permitted by the plan. The Compensation Committee has the discretion to adjust these awards downward, either on a formula or discretionary basis or any combination, and to grant awards with different vesting terms that do not qualify as Performance-Based Compensation.2019 Employee Stock Purchase Plan
Participant Award Limits: The Maximum Amount that Could be Paid to any Covered EmployeeOverview and other Participants
                                               upon the Achievement of the Performance Goal(s) Applicable to an Award under the
                                               Omnibus Plan
Reason for Proposal
The Omnibus
On February 6, 2019, the Board approved the Company’s 2019 Employee Stock Purchase Plan imposes(“ESPP”), subject to shareholder approval at the following annual aggregate limits onAnnual Meeting. If approved by the number ofshareholders, 1,300,000 shares of Common Stock that maywill be issued pursuantreserved for issuance under the ESPP, and the ESPP will be effective on June 1, 2019 for a term of ten years. The Company intends to register the shares reserved for issuance under the ESPP on a Form S-8 following award types to any Participant other than a non-employee director:
Award TypeAnnual Share Limit
Stock Options/SARs1,500,000
Restricted Stock and RSUs500,000
Performance Shares and Performance Units500,000
Other Stock-Based Awards500,000
approval by the shareholders.
The Omnibus Plan imposespurpose of the following limits onESPP is to provide eligible employees of the aggregate number ofCompany and its subsidiaries with the opportunity to purchase shares of Common Stock that mayat a discounted price through payroll deductions, with the goal of enhancing their sense of participation in the Company and further aligning their interests with those of the Company’s shareholders. If approved, the ESPP will be issued pursuantan important part of the Company’s overall strategy to Awards to non-employee directors:attract and retain highly qualified and motivated employees and will facilitate alignment of employee interest with the growth and success of the Company and the interests of its shareholders.
CategoryShare Limit
Aggregate maximum shares to any one director annually20,000
Aggregate maximum to all non-employee directors during the termSummary Description of the plan1,000,000
ESPP
If
The following is a summary of the numberprincipal provisions of outstanding sharesthe ESPP, and is qualified in its entirety by reference to the ESPP document, which is attached to this proxy statement as Appendix B and incorporated herein by reference. Shareholders are urged to read the actual text of Common Stock is increased or decreased through a reorganization, recapitalization, reclassification, special cash dividend, stock dividend, stock split, reverse stock split or other similar transaction, the number

53ESPP in its entirety.

Administration

The Board, or a committee designated by the Board (“ESPP Committee”) will administer the ESPP and will have full discretionary power to interpret the ESPP, issue rules for administering the ESPP, change, alter, amend or rescind such rules, and make all other determinations necessary or appropriate for the administration of the ESPP. The ESPP Committee may also delegate its responsibilities to employees of the Company or its subsidiaries.

Eligibility

All employees of the Company or a subsidiary who customarily work a minimum of 20 hours per week will be eligible to participate in the ESPP, with the exception of any employee who (i) immediately after the end of an offering period, would be deemed for purposes of Section 423(b)(3) of the Code to possess five percent or more of the total combined voting power or value of all classes of stock of the Company or any subsidiary, or (ii) is an executive officer of the Company subject to the reporting requirements under Section 16 of the Exchange Act. A subsidiary must be approved for participation in the ESPP by the Company’s CEO.

Offering Periods

Unless the ESPP Committee determines otherwise, the ESPP will be administered with four offering periods annually, each three months in duration, commencing, respectively, on January 1, April 1, July 1, and October 1 (or the next trading day, if such date is not a trading day). If approved by the shareholders at the Annual Meeting, the Company anticipates the first offering period to commence on July 1, 2019 and continue until September 30, 2019.

Payroll Deductions

To participate in an offering period, an eligible employee must authorize contributions to be collected through payroll deductions in whole number percentages of not less than one percent or more than 10 percent of such employee’s eligible compensation. Eligible compensation is an employee’s fixed salary, base hourly wage or commissions (with respect to commissioned employees). A participant may not increase the deduction during an offering period, but may decrease the deduction no more than once per offering period no more than once per offering period. A participant may change the
  Proposal 3

of shares of Common Stock that may be issued or subject to outstanding awards, the option price or grant price applicable to outstanding awards, the annual per-Participant award limits, and other value determinations are subject to adjustment by the Compensation Committee. The Compensation Committee may also make adjustments to reflect other unusual or nonrecurring events affecting the Company or changes in applicable laws, rules, regulations or accounting principles.
Description of the Omnibus Plan4
The following is a description of the other terms of the Omnibus Plan not described on the preceding pages. These descriptions are only summaries and are qualified by reference
percentage deduction for any subsequent offering period prior to the actual plan document, the current version ofdate on which was filed as Exhibit 10.1 to the Company’s Quarterly Report on Form 10-Q for the third quarter of 2013 filed with the SEC on October 31, 2013. You may access the plan document from the SEC’s website at www.sec.gov or from the Company’s website at kemper.com, or you may obtain a copy from the Company at no charge by contacting Kemper Investor Relations by telephone at 312.661.4930, by e-mail at investors@kemper.com, or by mail to One East Wacker Drive, Chicago, Illinois 60601, Attention: Investor Relations.
Plan Term
The Omnibus Plan became effective on May 4, 2011, upon shareholder approval (“Effective Date”), for a term of ten years, unless terminated soonersuch period commences in accordance with its terms.the ESPP and procedures adopted by the ESPP Committee. In addition to the percentage limit on compensation, a participant may not have more than $25,000 in payroll deductions during any calendar year for purposes pf purchasing shares under the ESPP. Any amount remaining in a participant’s account after the purchase of shares will be refunded without interest; provided that any amounts remaining in a participant’s account that were insufficient to acquire a full share will be carried forward to the next offering period.

Key Features
Purchase Price
The Omnibus Plan incorporates
Unless the following features:
offers a rangeESPP Committee determines otherwise prior to the beginning of award types, including stock options, SARs, restricted stock, RSUs, performance shares, performance units and other stock-based awards (including DSUs);
providesan offering period, the abilitypurchase price per Company share sold to include performance-based conditions on awards to tie compensation directly to performance by award recipients and the Company and its business units;
provides the ability to include “clawback” provisions in award agreements to effect the forfeiture or recoupmentparticipants will be 85 percent of the benefits payable under such awards as a result of specified events such as termination for substantial cause or misconduct resulting in an accounting restatement;
prohibits granting of options with an exercise price less than the fair market value of asuch share of Common Stock;
prohibits repricing of outstanding stock options or SARs;
prohibits “liberal”on the purchase date with respect to an offering period; provided, however, that in no event will the purchase price per share counting provisions, such as adding back shares withheld to satisfy tax obligations upon vesting or option exercise or tendered to paybe less than the exercise pricepar value of a stock option or counting onlyshare. The purchase date will be the netlast trading day of the offering period.

Purchase Limitations

No employee may purchase Common Stock in any offering period which exceed the number of shares issued upon exercise of a stock appreciation right;
prohibits paying dividends on unvested performance shares;
does not provide for the issuance of restorative options;
limits the term of the Omnibus Planequal to ten years.
Share Authorization and Fungible Design
Share Authorization
A maximum number of ten million shares of Common Stock (“Share Authorization”) may be issued pursuant to the Omnibus Plan, and may include new shares or treasury shares.
Fungible Plan Design
The design of the Omnibus Plan provides for fungible use of shares, with a fungible conversion factor of 3 to 1, so that the Share Authorization will be reduced at two different rates, depending upon the type of award granted. Each share of Common Stock issued upon the exercise of stock options or SARs will reduce the Share Authorization$25,000 divided by one share, while each share

54

                   Director Compensation



of Common Stock issued pursuant to “full value awards” will reduce the Share Authorization by three shares. “Full value awards” are awards other than stock options or SARs that are settled by the issuance of shares of Common Stock, e.g., restricted stock, RSUs, performance shares, performance units if settled with stock, and other stock-based awards.
No Liberal Share Counting
Shares are counted against the Share Authorization only to the extent they are actually issued. Therefore, shares subject to awards granted under the Omnibus Plan which terminate by expiration, forfeiture, cancellation or settlement in cash in lieu of shares will again be available for grant under the Omnibus Plan. However, shares subject to outstanding awards granted under the Prior Plans that so terminate after the Effective Date will not become available for grant under the Omnibus Plan, and shares subject to the exercise or vesting of an award granted under the Omnibus Plan will be counted against the Share Authorization and will not be available again for grant under the Omnibus Plan, even if fewer shares are actually issued as result of the award recipient’s tender of existing shares to satisfy tax withholding requirements or to pay the exercise price of an option, or the exercise of a SAR.
Administration
The Compensation Committee is responsible for administering the Omnibus Plan and has the power and discretion to interpret the terms and intent of the plan and any related documentation, to adopt forms, rules and guidelines for administering the plan, to select award recipients and establish the terms and conditions of awards, and to modify and amend the plan and any award agreement as permitted under the terms of the plan. The Compensation Committee may delegate administrative duties and powers to one or more of its members or to one or more officers of the Company, agents or advisors, and the Board may authorize one or more Company officers or a Board Committee (in addition to the Compensation Committee) to designate employees to be recipients of awards and to determine the size and terms of such awards, with limitations as required by the plan.
Types of Awards
The Omnibus Plan provides the Compensation Committee with authority to grant the following types of awards and to determine the restrictions and conditions applicable to each award.
Restricted Stock and Restricted Stock Units (RSUs)
Restricted stock awards consist of shares of Common Stock that are issued to the Participant subject to conditions or specified restrictions that may result in forfeiture if not satisfied. RSU awards are similar to restricted stock awards but do not involve the issuance of shares of Common Stock until after specified conditions are satisfied.
Stock Options
The Committee may grant both incentive stock options and nonqualified stock options under the Omnibus Plan. The exercise price for stock options cannot be less than the fair market value of a share of Common Stock on the grant date, which is the closing price as reportedfirst day of such offering period reduced by the New Yorknumber of any shares purchased by the employee in any prior offering period in the same calendar year. No right under the ESPP will be granted to an employee to purchase Common Stock Exchangeunder all employee stock purchase plans of the Company or its affiliates which (“Fair Market Value”Company Stock Purchase Plans”), and re-pricing would, in the aggregate, have a fair market value (determined as of the date of grant) in excess of $25,000 for each calendar year in which the right is prohibited.outstanding at any time. The termCompany’s Omnibus Plan or a similar Company plan involving stock options is not deemed to be a Company Stock Purchase Plan.

Termination of Eligibility; Transferability

If a stock option canparticipant ceases to be no longer than ten years (subjecteligible to a limited extensionparticipate in the ESPP, the dollar amount in such participant’s account will be refunded or distributed to to the participant, or in the event that the expiration date falls withinof death of a trading blackout applicableparticipant, distributed to the Participant).participant’s designated beneficiary or estate. A participant’s rights to purchase shares under the ESPP are not transferable and may be exercisable only by the participant.
Stock Appreciation Rights (SARs)
The Compensation Committee may grant either freestanding or tandem SARs. Tandem SARs are issuedAdjustment for Changes in connection with a stock option award. The exercise price of an SAR cannot be less than the Fair Market Value of a share of Common Stock on the grant date, and re-pricing is prohibited. The exercise price and expiration date of a tandem SAR will be the same as for the tandem option. The term of a stock appreciation right can be no longer than ten years (subject to a limited extension inShares

In the event that adjustments are made in the expiration date falls within a trading blackout applicable to the Participant). Upon exercisenumber of a SAR, the holder will receiveoutstanding shares of Common Stock or such shares are exchanged for a different class of stock of the Company or for shares of stock of any other corporation by reason of merger, consolidation, stock dividend, stock split or otherwise or an extraordinary cash dividend is paid in an amount equalrespect of the shares, the ESPP Committee will make appropriate adjustments in value(i) the number and class of shares or other securities that may be reserved for purchase, or purchased, under the ESPP, and (ii) the purchase price. All such adjustments will be made in the sole discretion of the ESPP Committee, and its decision will be binding and conclusive.

Termination; Amendment

The ESPP shall continue in effect through and including May 31, 2029, unless terminated sooner pursuant to the difference between the exercise priceterms of the SAR andESPP, or by the Fair Market ValueBoard, which shall have the right to terminate the ESPP at any time. The Board may at any time, or from time to time, amend the ESPP in any respect, except that, without approval of the Common Stock subject toshareholders, no amendment may (a) increase the SAR, although the Compensation Committee may provide for the alternative settlement in cash in lieuaggregate number of shares reserved under the ESPP, (b) materially increase the benefits accruing to participants or (c)materially modify the requirements as to eligibility for participation in the ESPP. The ESPP may not be amended in any way that will cause rights issued under the ESPP to fail to meet the requirements for employee stock purchase plans as defined in Section 423 of Common Stock.the Code or any successor thereto.



55

                     Director CompensationProposal 4

New Plan Benefits


Performance ShareBecause the number of shares that may be purchased under the ESPP will depend on each employee’s voluntary election to participate and Performance Unit Awards
Performance share awards have an initialthe fair market value based onof the Fair Market Value of a share of Common Stock onat various future dates, the grant date. Performance unit awards have an initial value asactual number of shares that may be purchased by any individual cannot be determined by the Compensation Committee. Such awardsin advance. Approximately 8,100 eligible employees will be earned only if andentitled to the extent performance goals are met. The applicable performance goals and performance periods will be set forthenroll in the individual award agreementsESPP and may vary among Participants.
Other Stock-Based Awards
The Compensation Committee may grant equity-based or equity-related awards other than options, SARs, restricted stock, RSUs, performance shares or performance units. The terms and conditions of each such “other stock-based award” shall be determined by the Compensation Committee. Other stock-based awards may entail the issue of actualmake quarterly elections to purchase shares of Common Stock or payment in cash based on the value of shares of Common Stock and may be fully vested and non-forfeitable upon grant. Other stock-based awards include DSUs, which defer conversion of the award to Common Stock until the date of the Participant’s separation from service with the Company.
Non-Employee Director Awards
The Omnibus Plan provides for awards to non-employee directors of any type available under the Omnibus Plan other than ISOs, which may be granted only to employees. The type, amount and terms of awards to be granted to non-employee directors, and the decision to grant any discretionary awards, shall be determined from time to time by the Board in its discretion after considering the recommendation of the Compensation Committee, subject to the Participant Award Limits shown on page 53 above.

56

                   Director Compensation



Plan Benefits
The following table shows the number of shares and the compensation values of the stock options and RSUs granted under the Omnibus Plan to executive officers and other employees on March 1, 2016, as well as DSUs expected to be granted to the Company’s non-employee directors on the day of the 2016 Annual Meeting. The terms of these types of awards are described in the Director Compensation section on page 8, the Compensation Discussion and Analysis section, under the heading Equity-Based Compensation on page 32, and in the footnotes and narrative discussions to the tables in the Executive Officer Compensation & Benefits section that begins on page 37.
The number of performance-based RSUs (PBRSUs) shown represent the shares that would vest if the performance goals were achieved at the “target” performance level.
NEW PLAN BENEFITS
2011 Omnibus Equity Plan
    
Name and PositionAward TypeDollar Value ($)(1)
Number of Units (#)(1)
Joseph P. Lacher, Jr.Stock Options666,667
96,235

PBRSUs1,333,333
48,118
Frank J. SodaroStock Options146,250
21,112

PBRSUs146,250
5,278
John M. BoschelliStock Options130,000
18,766

PBRSUs
130,000
4,692
Denise I. LynchStock Options—
—

PBRSUs—
—
Richard RoeskeStock Options74,200
10,711

PBRSUs74,200
2,678
Donald G. SouthwellStock Options—
—

PBRSUs—
—
Executive Group (includes NEOs listed above)Stock Options1,197,117
172,809

PBRSUs

1,863,783
67,263
Non-Executive Director GroupStock Options—
—

DSUs (2)450,000
16,240
Non-Executive Officer Employee GroupStock Options886,776
128,018

PBRSUs1,417,155
51,172
 Time-Based RSUs1,109,685
40,090

(1)The amounts in the Dollar Value column represent the compensation values of the shares of stock options and RSUs (Restricted Stock Units) shown in the Number of Units column that were granted on March 1, 2016, and the DSUs (Deferred Stock Units) the Company expects to grant to the non-employee directors on May 4, 2016. The compensation values are internal valuations used to determine the number of options/RSUs to be awarded to each employee annually. These valuations are different from the grant date fair values of equity awards determined under Accounting Standards Codification Topic 718 using Black-Scholes valuations for options and Monte-Carlo simulation to value performance-based RSUs. Based on internal valuations, stock options were valued at $6.93 (25% of $27.71, the closing price of a share of Common Stock on the grant date). Performance-based RSUs, time-based RSUs and DSUs were valued using the closing price of $27.71 of a share of Common Stock on the grant date.
(2)The amounts shown for the Non-Executive Director Group represent the DSU awards that are currently expected to be granted on the date of the 2016 Annual Meeting under the non-employee director compensation program in effect for 2016. As discussed in the Director Compensation section under the heading Changes Made to Non-Employee Director Compensation for 2016 on page 9, the non-employee director compensation program approved by the Board for 2016 provides for an annual DSU award covering shares of Common Stock with a fixed compensation value of $75,000 to be

57

                   Director Compensation



granted to each non-employee director at the conclusion of the annual shareholder meeting each year. The amount shown in the Number of Units column is an estimate of the number of DSUs that will be granted at a total compensation value of $75,000 per director based on $27.71, the closing price of a share of Common Stock on March 1, 2016.
Vesting and Forfeiture of Awards
Award Agreements and Plan Provisions
In approving award agreements that establish the terms of particular awards, the Compensation Committee will determine the vesting terms for each award and how the award will be treated following termination of the Participant’s employment or service with the Company or its subsidiaries under specified circumstances and other events that might result in forfeiture or vesting of award benefits. Default provisions set forth in the Omnibus Plan determine the consequences of such termination and other events to the extent not specified in a particular award agreement.
Forfeiture and Clawbacks
The Compensation Committee has approved the inclusion of forfeiture and “clawback” provisions in all agreements for awards under the Omnibus Plan to effect the forfeiture, reduction or recoupment of the rights, payments and benefits otherwise payable under such awards upon the occurrence of specified events, whether required by applicable law, rule, regulation or Company policy as in effect from time to time. Such events may include, without limitation, an accounting restatement or other conduct determined by the Compensation Committee to be detrimental to the business or reputation of the Company or its subsidiaries.
Termination of a Participant’s Employment
The consequences of termination of the Participant’s employment or service with the Company or its subsidiaries as a result of death, disability, retirement, divestiture, or other reasons are determined in accordance with the agreement for the particular award. Suchplan terms will determine the extent to which unvested portions of the award will be forfeited and the time and extent to which options or SARs may remain exercisable. To the extent not specified in the award agreement, the consequences are determined by the default provisions in the Omnibus Plan. In general, such default provisions provide for the vesting of awards upon the termination of a Participant’s employment due to death or disability, and the determination regarding vesting or forfeiture of unvested awards in the event a Participant’s employment otherwise terminates for reasons other than death or disability will vary by the particular circumstances and type of award.
Consequences of a Change in Control
The Compensation Committee may approve provisions for inclusion in award agreements for particular awards that determine the consequences of a change in control of the Company as defined in the Omnibus Plan (“Change in Control”). Unless otherwise provided in an award agreement, in the event that an award Participant’s employment is terminated by the employer without “substantial cause” or by the Participant without “good reason” (as such terms are defined in the plan) in connection with a Change in Control involving an acquisition of beneficial ownership or change in Board composition under the circumstances specified in the Omnibus Plan, any outstanding award not subject to performance conditions will vest, and an option or SAR award will remain exercisable for the remainder of its term, and any outstanding award subject to performance conditions will be deemed earned based on the greater of “target” or actual performance for a truncated performance period ending on the date of the Change in Control.
In the event of a Change in Control involving the merger, consolidation, dissolution or liquidation of the Company, or the sale of substantially all of the Company’s assets, under the circumstances specified in the Omnibus Plan, the Omnibus Plan will terminate and the Board will provide for one or more of the following alternatives: immediate vesting of outstanding awards; assumption of or substitution of outstanding awards by the successor corporation; continuance of the plan by the successor corporation; or payment in cash or stock in lieu of and in satisfaction of outstanding awards.
Plan Amendment and Termination
The Board may at any time amend, suspend or terminate the Omnibus Plan, but no material amendment will be made without shareholder approval if required by law or stock exchange rule, and no such action may materially and adversely affect any outstanding grant without the written consent of the affected Participant.

58summarized above.

                   Director Compensation



Other Plan Provisions
Adjustments of Awards
Subject to certain limitations under the Omnibus Plan, the Compensation Committee may make adjustments in the terms, conditions and performance criteria applicable to grants in recognition of certain unusual or nonrecurring events affecting the Company or a Participant, or of changes in applicable laws, regulations or accounting principles, whenever the Compensation Committee determines that such adjustments are appropriate to prevent unintended dilution or enlargement of the benefits or potential benefits intended to be made available under the plan.
Non-transferability of Awards
Unless approved by the Compensation Committee and set forth in particular award agreements, awards may not be transferred other than by will or by the laws of descent and distribution, and stock options and SARs may be exercised only by the Participant during his or her lifetime.
Federal Income Tax Consequences

The following discussion summarizes certain federal income tax consequences of the issuance and receiptpurchase of awards of stock options, SARs, restricted stock, RSUs, or performance shares or performance units under the Omnibus Plan underESPP as of the law in effect on the date of this Proxy Statement. The summary does not purport to cover all federal employment tax or other federal tax consequences that may be associated with the Omnibus Plan,ESPP, nor does it cover state, local, or non-U.S. taxes. Tax laws are complex and subject to change and may vary depending on individual circumstances. The summary is not tax advice and a participant should rely on the advice of his or her legal and tax advisors.
Nonqualified
The ESPP is intended to qualify as an “Employee Stock Options and SARs
NoPurchase Plan” under Section 423 of the Code. Under an employee stock purchase plan that qualifies under Section 423, no taxable income will be recognized by a participant, and no deductions will be allowable to the Company, upon either the grant or the exercise of the purchase rights. Taxable income will not be recognized until there is realized bya sale or other disposition of the Participantshares acquired under the ESPP or in the event the participant should die while still owning the purchased shares. No participant may purchase shares under the ESPP at a rate of more than $25,000 of shares in any calendar year as described above.

If the time a non-qualified optionparticipant sells or SAR is granted. Upon exercise,otherwise disposes of the Participant realizespurchased shares within two years after the start date of the offering period in which the shares were acquired or within one year after the actual purchase date of those shares, then the participant generally will recognize ordinary income in an amountthe year of sale or disposition equal to the difference betweenamount by which the fair market value and exercise price of the shares on the purchase date of exerciseexceeded the purchase price paid for those shares, and the Company iswill be entitled to aan income tax deduction, for the same amount. Upon a taxable year in which such disposition occurs equal in amount to such excess. The amount of this ordinary income will be added to the participant’s basis in the shares, appreciationand any resulting gain or depreciation afterloss recognized upon the date of exercise is treated assale or disposition will be a short-term or long-term capital gain or loss and will not result in any deduction for the Company.
Incentive Stock Options (“ISOs”)
In general, if certain holding periods are met, the Participant will not realize taxable income upon the grant or exercise of an ISO and no deduction is allowed to the Company. Instead, the Participant is taxed only at the time of sale of the shares received upon exercise.loss. If the shares have been held for at leastmore than one year since the date of purchase, the gain or loss will be long-term.

If the participant sells or disposes of the purchased shares more than two years after the start date of the offering period in which the shares were acquired and more than one year after the actual purchase date of exercise and at least two years fromthose shares, then the date of grant of the option, the Participantparticipant generally will be taxed on any appreciation in excess of the exercise price as long-term capital gain and any loss sustained will be a long-term capital loss. If the shares are disposed of before the expiration of the holding periods described above, the Participant would realizerecognize ordinary income in the year of sale or disposition in an amount equal to the excess (if any)lesser of (i) the amount by which the fair market value of the shares on the sale or disposition date exceeded the purchase price paid for those shares, or (ii) 15 percent of the fair market value of the shares at timeon the start date of exercise overthat offering period. Any additional gain upon the exercise price, and the Company would be entitled to deduct such amount. Any further gain realized woulddisposition will be taxed as a short-term or long-term capital gain and would not result in any deduction togain. Alternatively, if the Company.
Restricted Stock, RSUs and DSUs
Awards of restricted stock, RSUs and DSUs, under the terms of Awards granted by the Company, generally are not included in taxable income when granted, but instead are taxable at the time that they are converted into common sharesfair market value of the Company. Ifshares on the date of the sale or disposition is less than the purchase price, there will be no ordinary income and any loss recognized will be a long-term capital loss. The Company provides cash dividend equivalents on RSU and DSU Awards at the time that dividends are declared and paid by the Companywill not be entitled to an income tax deduction with respect to such disposition.

If the Company’s Common Stock, so that Participants receive cash payments equal toparticipant still owns the total cash dividend they would have received had the RSUs and DSUs been actualpurchased shares of Common Stock, such dividend equivalents are taxable as compensation to the Participants at the time of receipt. The Company would be entitled to a corresponding deduction atdeath, the time a Participant recognizes taxablelesser of (i) the amount by which the fair market value of the shares on the date of death exceeds the purchase price or (ii) 15 percent of the fair market value of the shares on the start date of the offering period in which those shares were acquired will constitute ordinary income on an Award or dividend equivalent payment.

59in the year of death.

The Board of Directors recommends that you vote “FOR” Proposal 4.

Proposal 3

Required Vote
If a quorum is present, the material terms of the performance goals under the Company’s 2011 Omnibus Equity Plan will be approved by the affirmative vote of the majority of the votes cast, meaning the number of shares voted “FOR” the proposal exceeds the number of shares voted “AGAINST” plus, as required by the NYSE rules related to the approval of equity compensation plans, the number of shares voted “ABSTAIN.” Abstentions will have the same effect as a vote “AGAINST” this proposal. Broker non-votes will have no effect on the vote for this proposal.
In the event that this proposal is not approved by the shareholders, future awards to Covered Employees under the Omnibus Plan would not qualify as performance-based compensation and so may be subject to the $1 million limitation on federal tax deductions.
Recommendation of the Board of Directors
The Board of Directors recommends that you vote “FOR” Proposal 3.

60

Ownership of Kemper Stock

Ownership of Kemper Common Stock
Directors and Executive Officers
On March 11, 2016,7, 2019, there were approximately 51,133,25264,933,537 shares of the Company’s Common Stock outstanding. The following table shows the beneficial ownership of the Common Stock as of March 11, 20167, 2019 (unless otherwise indicated) by: (i)(a) each director; (ii)(b) each Named Executive Officer; and (iii)(c) all directors and executive officers as a group.
Name of Beneficial OwnerCommon Shares at March 11, 2016 (1)
Stock Options Exercisable On or Before May 10, 2016 (2)
Total Shares Beneficially Owned
Percent of Class (3)
Common Shares at March 7, 2019 (1)
Stock Options Exercisable/RSUs Vesting Through May 6, 2019 (2)
Total Shares Beneficially Owned
Percent of Class (3)
Directors:







 
Teresa A. Canida10,910
—
10,910
*
George N. Cochran2,208
9,179
11,387
*
10,428
9,179
19,607
*
Kathleen M. Cronin500
8,000
8,500
*
7,220
8,000
15,220
*
Douglas G. Geoga9,330
41,965
51,295
*
17,833
29,965
47,798
*
Lacy M. Johnson4,300
—
4,300
*
Robert J. Joyce3,500
17,179
20,679
*
10,220
17,179
27,399
*
Joseph P. Lacher, Jr.,
President and Chief Executive Officer
—
—
—
*
Joseph P. Lacher, Jr.53,604
271,380
324,984
*
Christopher B. Sarofim1,500
16,000
17,500
*
8,220
16,000
24,220
*
David P. Storch6,500
29,179
35,679
*
18,220
29,179
47,399
*
Susan D. Whiting2,420
—
2,420
*
NEOs (other than Mr. Lacher who is listed above):







 
Frank J. Sodaro,
Senior Vice President and Chief Financial Officer
11,886
25,000
36,886
*
John M. Boschelli,
Senior Vice President and Chief Investment Officer
26,429
38,750
65,179
*
Denise I. Lynch,
Former Vice President (4)
24,291
30,000
54,291
*
Richard Roeske,
Vice President and Chief Accounting Officer
56,673
65,500
122,173
*
Donald G. Southwell,
Former Chairman, President and CEO
49,704
220,000
269,704
*
Directors, NEOs and Other Executive Officers as a Group (14 persons)220,496
522,877
743,373
1.5%
James J. McKinney17,079
14,333
31,412
*
John M. Boschelli27,621
8,000
35,621
*
Mark A. Green10,398
49,104
59,502
*
Duane A. Sanders—
14,933
14,933
*
Directors, NEOs and Executive Officers as a Group (19 persons)317,694
578,057
887,542
1.4%
(1) The shares shown for non-employee directors (i.e, the directors other than Mr. Lacher) include outstanding DSUs, and the numbers of shares for NEOs and other executive officers include any shares of Common Stock indirectly held in a trust or the Company’s 401(k) and Retirement Plan. The shares shown for the non-employee directors include 500the following numbers of DSUs for Mr.outstanding on March 7, 2019, which are all fully-vested: Johnson (4,300); Cochran and Ms. Cronin and 1,500 DSUs for Messrs.(7,220); Geoga, Joyce, Sarofim and Storch. RSUsStorch (8,220); and Whiting (1,420). For Mr. Geoga, the shares shown also include 8,900 shares he gifted to a family foundation that are deemed beneficially owned for purposes of this table under SEC Rule 13d-3 but not for purposes of his Form 4 reports under SEC Rule 16a-1(a)(2). The PSUs held by officers are not included in the amounts shown in this table because they are not deemed beneficially owned shares of Common Stock under SEC rules applicable to this table unless they will vest within 60 days. Accordingly, the shares shown in this table for the NEOs and the Executive Officers as a Group do not include the following performance-basedoutstanding PSUs: Lacher (73,111); McKinney (19,773); Boschelli (126,855); Green (17,668); Sanders (19,852); and for all NEOs and Executive Officers as a Group (193,145). In addition, the shares shown do not include the following outstanding RSUs held by Mr. McKinney that will not vest within 60 days: (5,334) or the NEOs: Lacher (48,118), Sodaro (13,278), Boschelli (10,692), Roeske (5,878) and Southwell (30,000).RSU shares held by Mr. McKinney referenced in footnote 2 below. To the Company’s knowledge, the beneficial owner has both sole voting and sole dispositive power with respect to the shares listed opposite his or her name, unless otherwise indicated.
(2) The shares shown include stock options, and for Mr. McKinney, 5,333 RSUs, outstanding as of March 11, 20167, 2019 that will be vested as of May 10, 2016.6, 2019. Mr. McKinney is the only Executive Officer with RSUs.
(3) The percentages shown for any individual and for the directors and executive officers as a group are based on the 51,133,25264,933,537 shares of the Company’s Common Stock outstanding on March 11, 2016, plus shares that the respective individual or the group has the right to acquire through outstanding DSU or RSU awards or the exercise of outstanding

61

Ownership of Kemper Stock

stock options that will be vested as of May 10, 2016.7, 2019. An asterisk in this column indicates a percentage of less than 1one percent.
(4) This number is based on information currently available to the Company.
Ownership of Kemper Stock

Certain Beneficial Owners
The following table sets forth information about persons, other than the Company’s directors and executive officers shown above, known by the Company to be the beneficial owner of more than five percent of the Company’s Common Stock. To the Company’s knowledge, the beneficial owner has sole voting and sole dispositive power with respect to the shares listed opposite the beneficial owner’s name, unless otherwise indicated.  
Name and Address of Beneficial Owner(1)
Amount and Nature of
Beneficial Ownership
Percent of Class (1)
Amount and Nature of
Beneficial Ownership
Percent of Class (2)
Singleton Group LLC8,334,520
(2)16.3%
3419 Via Lido, #630
Newport Beach, California 92663

 

BlackRock, Inc.6,291,349
(3)9.7%
55 East 52nd Street
New York, New York 10055
  
The Vanguard Group, Inc.5,162,109
(4)7.9%
100 Vanguard Boulevard
Malvern, Pennsylvania 19355
  
Dimensional Fund Advisors LP4,396,606
(3)8.6%4,333,286
(5)6.7%
Building One
6300 Bee Cave Road
Austin, Texas 78746

 


  
BlackRock, Inc.3,919,443
(4)7.7%
55 East 52nd Street
New York, New York 10055

 

T. Rowe Price Associates, Inc.3,378,577
(5)6.6%
100 East Pratt Street
Baltimore, Maryland 21202

 

Fayez Sarofim and Fayez S. Sarofim & Co.3,370,534
(6)6.6%3,500,012
(6)5.4%
Two Houston Center, Suite 2907
909 Fannin Street
Houston, Texas 77010

 


  
Vanguard2,825,565
(7)5.5%
100 Vanguard Blvd.
Malvern, Pennsylvania 19355

 

(1)The Singleton Group LLC (“Singleton Group”) was listed as Kemper’s largest shareholder in the beneficial ownership table of Kemper’s annual proxy statements each year since 2001. The Singleton Group is not listed this year because its assets, including Kemper Common Stock holdings, were distributed to the members of the Singleton Group in connection with the ultimate dissolution of the Singleton Group. The distribution occurred on March 4, 2019 and was reported in a Schedule 13D/A filed with the SEC by the Singleton Group on March 5, 2019.
(2)The percentages shown are based on the 51,133,252 shares outstanding on March 11, 2016.
(2)Based on information reported in a Schedule 13D/A filed jointly with the SEC on December 31, 2015, the Singleton Group LLC (“LLC”), William W. Singleton, Christina Singleton Mednick and Donald E. Rugg, as managers of the LLC, the LLC directly owns 8,334,520 shares of Common Stock. William W. Singleton, Christina Singleton Mednick and Donald E. Rugg, as managers of the LLC, share voting and dispositive power with respect to the shares of Common Stock held by the LLC, and so may be deemed beneficial owners of all such shares, and Donald E. Rugg has sole voting and dispositive power with respect to 412 shares of Common Stock. As a result of these shares beneficially owned outside of the LLC and his role as a manager of the LLC, Donald E. Rugg may be deemed a beneficial owner of 8,334,932 shares of Common Stock. In a Form 4 filed with the SEC on May 8, 2014, William W. Singleton and Christina Singleton Mednick reported having indirect interests in these shares as trustees and beneficiaries of certain trusts holding membership interests in the LLC and as managers of the LLC and disclaimed beneficial interest of the shares of Common Stock held by the LLC except to the extent of their respective pecuniary interests therein.7, 2019.
(3)Based on information reported in a Schedule 13G/A filed with the SEC on February 9, 2016, Dimensional Fund Advisors LP6, 2019, BlackRock, Inc. (“Dimensional”BlackRock”) beneficially owns an aggregate of 4,396,6066,291,349 shares of Common Stock as of December 31, 2015,2018, as to which BlackRock has sole dispositive power and which includes 6,168,386 shares as to which it has sole voting power. BlackRock also reported that it was filing as the parent holding company or control person of certain subsidiaries listed in an exhibit to the Schedule 13G/A.
(4)Based on information reported in a Schedule 13G/A filed with the SEC by The Vanguard Group, Inc. (“Vanguard”) on February 11, 2019, Vanguard may be deemed to be the beneficial owner of 5,162,109 shares of Common Stock as of December 31, 2018. Of such shares, Vanguard reported sole voting power as to 86,494 shares, sole dispositive power as to 5,074,065 shares, shared voting power as to 6,659 shares and shared dispositive power as to 88,044 shares.
According to the Schedule 13G/A, Vanguard’s wholly-owned subsidiary, Vanguard Fiduciary Trust Company, is the beneficial owner of 81,385 shares of Common Stock as a result of its serving as the investment manager of collective trust accounts. Additionally, Vanguard’s wholly-owned subsidiary, Vanguard Investments Australia, Ltd. is the beneficial owner of 11,768 shares of Common Stock as a result of its serving as the investment manager of Australian investment offerings.
(5)
Based on information reported in a Schedule 13G/A filed with the SEC on February 8, 2019, Dimensional Fund Advisors LP (“Dimensional”) beneficially owns an aggregate of 4,333,286 shares of Common Stock as of December 31, 2018, as to which Dimensional has sole dispositive power and which includes 4,349,3524,268,915 shares as to which it has sole voting power. According to the Schedule 13G/A, these shares are held by four investment companies to which Dimensional furnishes investment advice, and certain other commingled funds, group trusts and separate accounts for which Dimensional serves as investment manager or sub-adviser. Dimensional disclaimed beneficial ownership of these shares.

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Ownership of Kemper Stock

Dimensional serves as investment manager or sub-adviser. Dimensional disclaimed beneficial ownership of these shares.
(4) Based on information reported in a Schedule 13G/A filed with the SEC on January 26, 2016, BlackRock, Inc. (“BlackRock”) beneficially owns an aggregate of 3,919,443 shares of Common Stock as of December 31, 2015, as to which BlackRock has sole dispositive power and which includes 3,816,791 shares as to which it has sole voting power. BlackRock also reported that it was filing as the parent holding company or control person of certain subsidiaries listed in an exhibit to the Schedule 13G/A.
(5) Based on information reported in a Schedule 13G/A filed jointly with the SEC on February 11, 2016 by T. Rowe Price Associates, Inc. (“T. Rowe Price”) and T. Rowe Price Mid-Cap Value Fund, Inc., T. Rowe Price may be deemed to be the beneficial owner of 3,378,577 shares of Common Stock as of December 31, 2015 as to which T. Rowe Price has sole voting power as to 689,464 shares and sole dispositive power as to 3,378,577 shares. T. Rowe Mid-Cap Value Price Fund may be deemed to be the beneficial owner of 1,992,443 as of December 31, 2015 shares as to which it has sole voting power. According to information provided to the Company by T. Rowe Price, these shares are owned by various individual and institutional investors to which T. Rowe Price serves as an investment adviser with power to direct investments and/or sole power to vote the shares. T. Rowe Price disclaimed beneficial ownership of these shares.
(6) Based on information reported in a Schedule 13G/A filed jointly with the SEC on February 4, 2016 by Fayez Sarofim, Fayez Sarofim & Co., Sarofim Trust Co. and Sarofim International Management Co., Fayez Sarofim may be deemed to be the beneficial owner of 3,370,534 shares of Common Stock as of December 31, 2015. Of such shares, Fayez Sarofim reported sole voting and dispositive power as to 2,469,070 shares, shared voting power as to 890,342 shares and shared dispositive power as to 901,464 shares.
(6)Based on information reported in a Schedule 13G/A filed jointly with the SEC on February 5, 2019 by Fayez Sarofim, Fayez Sarofim & Co. and Sarofim International Management Co., Fayez Sarofim may be deemed to be the beneficial owner of 3,500,012 shares of Common Stock as of December 31, 2018. Of such shares, Fayez Sarofim reported sole voting and dispositive power as to 2,469,070 shares and shared voting power as to 1,024,440 shares and shared dispositive power as to 1,030,942 shares.
Fayez Sarofim & Co. (of which Fayez Sarofim is the Chairman of the Board, Chief Executive Officer, a director, and the majority shareholder) may be deemed to be the beneficial owner of 901,4641,030,942 shares of Common Stock as of December 31, 20152018 as to which Fayez Sarofim & Co. has shared dispositive power,voting and which includes 890,342 shares as to which it has shared votingdispositive power. According to the Schedule 13G/A, 901,464305,922 shares are held in investment advisory accounts that are managed by Fayez Sarofim & Co. for numerous clients as to which Fayez Sarofim & Co. has full investment discretion. Fayez Sarofim & Co. maintains policies that preclude Fayez Sarofim from exercising voting and dispositive power with respect to Common Stock held in accounts managed by Fayez Sarofim & Co. and its subsidiaries.
Sarofim Trust Co., a wholly-owned subsidiary of Fayez Sarofim & Co., may be deemed to be the beneficial owner of 67,910 shares of Common Stock as of December 31, 2015 as to which it has shared voting and dispositive power. According to the Schedule 13G/A, all 67,910 shares are held in investment advisory accounts managed by Sarofim Trust & Co.
Sarofim International Management Co., a wholly-owned subsidiary of Fayez Sarofim & Co., directly owns 725,020 shares of Common Stock as of December 31, 20152018 as to which it has shared voting and dispositive power.
(7) Based on information reported in a Schedule 13G filed with the SEC by The Vanguard Group (“Vanguard”) on February 10, 2016, Vanguard may be deemed to be the beneficial owner of 2,825,565 shares of Common Stock as of December 31, 2015. Of such shares, Vanguard reported sole voting power as to 57,338 shares, sole dispositive power as to 2,767,727 shares, shared voting power as to 3,100 shares and shared dispositive power as to 57,838 shares.
According to the Schedule 13G, Vanguard’s wholly-owned subsidiary, Vanguard Fiduciary Trust Company, is the beneficial owner of 54,738 shares of Common Stock as a result of its serving as the investment manager of collective trust accounts. Additionally, Vanguard’s wholly-owned subsidiary, Vanguard Investments Australia, Ltd. is the beneficial owner of 5,700 shares of Common Stock as a result of its serving as an investment manager of Australian investment offerings.

63

Ownership of Kemper Stock

Section 16(a) Beneficial Ownership Reporting Compliance
Section 16(a) of the Exchange Act requires the Company’s directors and executive officers and persons who beneficially own more than 10 percent of the registered class of the Company’s equity securities to file with the SEC reports of ownership and reports of changes in ownership of such securities. Based on the Company’s knowledge of stock transactions, its review of copies of reports filed under Section 16(a) and written representations furnished to the Company, the Company believes that all filing requirements applicable to its directors, executive officers and more than ten10 percent beneficial owners were complied with for the fiscal year ended December 31, 2015,2018, with the exception of one gift transaction by Mr. Geoga that was reported late for Ms. Lynch and one lateafter the Form 4 filed for Mr. Evans to report three vesting transactions.5 filing deadline.


64

  Frequently Asked Questions

Frequently Asked Questions 
Proxy and Proxy Statement

What is a Proxy?
A proxy is your legal appointment of another person to vote the stock you own. That other person is called a proxy. If you appoint someone as your proxy in a written document, that document is also called a proxy or a proxy card. We have designated Joseph P. Lacher, Jr., our President and Chief Executive Officer,CEO, and C. Thomas Evans, Jr., our Senior Vice President, Secretary and General Counsel, to act as proxies for the Annual Meeting. You do not need to attend the Annual Meeting to vote your shares if you provide a proxy in the manner described in this Proxy Statement.

What is a Proxy Statement?
A Proxy Statement is a document that sets forth the information required by the federal securities laws and regulations administered by the SEC which is intended to allow you to vote on an informed basis at the Annual Meeting.
Voting and Record Date
Who can vote at the Annual Meeting?
You are entitled to vote at the Annual Meeting if you owned Common Stock at the close of business on the Record Date.

How many votes do I have?
Each share of Common Stock that you owned on the Record Date entitles you to one vote. Your proxy card indicates the number of shares of Common Stock that you owned on the Record Date that may be voted at the Annual Meeting.
How many shares of Kemper stock are eligible to be voted at the Annual Meeting?
At the close of business on the Record Date, there were 51,133,25264,933,537 shares of Common Stock issued and outstanding. Accordingly, 51,133,25264,933,537 shares of Common Stock are eligible to be voted at the Annual Meeting. Kemper had no other voting securities outstanding on the Record Date.
What is a quorum?
To conduct business at the Annual Meeting, a quorum must be present; that is, a majority of the shares of Common Stock outstanding and entitled to vote as of the Record Date must be represented in person or by proxy at the Annual Meeting. If you properly submit a proxy, your shares covered by that proxy will be counted toward a quorum.
On what am I being asked to vote on?
Shareholders are being asked to vote on the following proposals at the Annual Meeting:
Proposal 1:     Election of the director Nominees listed beginning on page 11;9;
Proposal 2:Advisory vote to ratify the selection of Deloitte & Touche LLP as the Company’s Independent Registered Public Accountant for 2019;
Proposal 3:Advisory vote to approve the compensation of the Company’s Named Executive Officers, as disclosed in this Proxy Statement; and
Proposal 2:     Advisory proposal on the ratification of the selection of Deloitte & Touche LLP as the Company’s
Independent Registered Public Accountant for 2016; and
Proposal 3:     Approval of the material terms of performance goals under4: Vote to approve the Company’s 2011 Omnibus Equity
Plan.2019 Employee Stock Purchase Plan
What is the difference between a shareholder that holds shares as a “registered shareholder” or in “street name”?
The shares of a registered shareholder are registered with the Company’s transfer agent, Computershare Trust Company, N.A. (“Computershare”Computershare”), in the shareholder’s own name. Shares held in street name are registered with Computershare in the name of the stock brokerage firm or other institution (or the name of its nominee), but not in the shareholder’s own name. In this case, the institution maintains its own internal records showing the shareholder as the actual beneficial owner of the shares.

65

  Frequently Asked Questions

What are the different methods that I can use to vote my shares of Common Stock?

Shares held by registered shareholders:
If you hold your shares of Common Stock as a registered shareholder, you may give a proxy to vote your shares by one of the following methods:
Complete, sign and date your proxy card and return it no later than the commencement of the Annual Meeting in the postage-paid envelope provided;
Call the toll-free telephone number on your proxy card and follow the recorded instructions no later than 10:59 p.m. Central Daylight Time on Tuesday, May 3, 2016April 30, 2019;
Access the proxy voting website identified on your proxy card and follow the instructions no later than 10:59 p.m. Central Daylight Time on Tuesday, May 3, 2016April 30, 2019; or
Attend the Annual Meeting in person and deliver your proxy card or ballot to one of the ushers when requested to do so.

Sharesheld in street name:
If you hold your shares of Common Stock in street name, your broker (or other institution holding your shares of Common Stock in street name) generally will supply you with its own form of proxy card requesting you to provide your voting instructions in writing or, in some cases, by telephone or over the Internet. Following its receipt of your voting instructions, the institution will be authorized to provide a proxy to the Company to vote your shares in accordance with any instructions you provide.

Shares held through 401(k) and Retirement Plan:
If you hold your shares of Common Stock through the Company’s 401(k) and Retirement Plan, you may give a proxy to vote your shares by one of the following methods:
Complete, sign, date and datereturn your proxy card, and return itwhich must be received by 1:00 a.m. Central Daylight Time on Monday, May 2, 2016April 29, 2019 (“401(k) Deadline”), for your voting instructions to be effective;
Call the toll-free telephone number on your proxy card and follow the recorded instructions by by 1:00 a.m. Central Daylight Time on the 401(k) Deadline, for your voting instructions to be effective; or
Access the proxy voting website identified on your proxy card and follow the instructions by 1:00 a.m. Central Daylight Time on the 401(k) Deadline, for your voting instructions to be effective.
If you provide timely voting instructions for your 401(k) and Retirement Plan shares, the plan trustee will confidentially vote your shares in accordance with your voting instructions. In accordance with the terms of the 401(k) and Retirement Plan, if you do not vote your plan shares before the voting deadline, the plan trustee will vote your shares in the same proportion as all other shares were voted in accordance with timely voting instructions provided to the trustee by all other plan participants.
The telephone and Internet voting procedures are designed to authenticate shareholders’ identities, to allow shareholders to give their voting instructions, and to confirm that shareholders’ instructions have been recorded properly. Shareholders who wish to give proxy voting instructions over the Internet should be aware that there may be costs associated with electronic access, such as usage charges from Internet service providers and telephone companies. In addition, in choosing among the available alternatives for proxy voting, shareholders should be aware that there may be some risk that a vote either by telephone or over the Internet might not be properly recorded or counted because of an unanticipated electronic malfunction. As described above, please note that the ability of shareholders of record to submit voting instructions by telephone and over the Internet ends at 10:59 p.m. Central Daylight Time on the day before the Annual Meeting, and, for 401(k) and Retirement Plan shares, atby the 401(k) Deadline. The reason for this cut-off is to allow for the timely assembly and tabulation of voting instruction data.

Frequently Asked Questions

How do I vote my Common Stock in person?
If you owned Common Stock in your own name on the Record Date, your name will appear on the list of registered shareholders of the Company and, if you wish to attend in person, you will be admitted to the Annual Meeting and may

66

Frequently Asked Questions

vote by written ballot or by delivering a signed proxy card. However, note that: (i) Shares(a) shares held through the 401(k) and Retirement Plan must be voted by the 401(k) Deadline and, accordingly, may not be voted in person at the Annual Meeting; and (ii)(b) if your shares are held in the name of a broker, bank or other institution, you must present written evidence at the Annual Meeting from the institution indicating that you were the beneficial owner of the shares on the Record Date and that you have been authorized by that institution to vote your shares in person. This written evidence is generally called a “Legal Proxy” and should be submitted to the Company’s Secretary, C. Thomas Evans, Jr., prior to the commencement of the Annual Meeting.
If I plan to attend the Annual Meeting, should I give my proxy?
Regardless of whether you plan to attend the Annual Meeting, we urge you to give a proxy. Returning your proxy card or giving voting instructions by telephone or over the Internet will not affect your right to attend the Annual Meeting and vote in person. However, giving a proxy will ensure that your shares are represented at the Annual Meeting in the event that you are unable to attend.
How will my proxy be voted?
If you (or your broker or other institution holding your shares held in street name) properly sign and timely return your proxy card, or timely deliver your voting instruction by telephone or over the Internet, the individuals designated as proxies on the proxy card will vote your shares as you have directed. With respect to Proposal 1, you may choose to vote “FOR” or “AGAINST,”AGAINST” or to “ABSTAIN” from voting for each director Nominee. With respect to Proposals 2, 3 and 3,4, you may choose to vote “FOR” or “AGAINST,”AGAINST” or to “ABSTAIN” from voting. For specific information about the voting requirements for a particular proposal, please refer to the Required Votesection forof this Proxy Statement that pertains to such proposal.proposal as indicated in the Table of Contents.
For shares held as a registered shareholder, if you sign the proxy card but do not make specific choices, the designated proxies will vote your shares as recommended by the Company’s Board of Directors. For shares held in street name, you should contact your broker (or other institution) to determine the method by which your shares will be voted if you sign the proxy card but do not make specific choices. The Board of Directors recommends that you vote “FOR”“FOR” all of the director Nominees in Proposal 1 and “FOR”“FOR” Proposals 2, 3 and 3.4.
What does it mean if I receive more than one proxy card?
If your Kemper shares are held under different names or in more than one account, you will receive more than one proxy card. Each proxy card will indicate the number of shares you are entitled to vote on that particular proxy card.
What are broker non-votes and how might they affect voting?
The applicable NYSE rules allow a stockbroker holding securities in street name for its customer to exercise discretionary voting power for those securities with respect to some matters (called “discretionary” matters) but not others (called “non-discretionary” matters), depending on the subject matter of the proposal being voted on. Broker non-votes can occur when a stockbroker does not receive voting instructions from its customer on a non-discretionary matter. Under the current NYSE rules, director elections and all matters related to executive compensation are considered non-discretionary matters for which brokers cannot vote undirected shares. Any shares you hold in street name will not be voted with regard to Proposals 1, 3 and 34 unless you provide timely voting instructions to your broker. Under the NYSE rules, Proposal 2 is considered a discretionary matter for brokers, and a broker not receiving voting instructions from a customer will be free to cast a vote in its discretion as to this matter.
How will voting on any other business be conducted?
As of the date hereof, the Company’s management is aware of no business that will come before the Annual Meeting other than Proposals 1 through 34 as described in this Proxy Statement, and only the Board of Directors may introduce any additional business. However, if any other business should properly come before the Annual Meeting, your proxy card will authorize the persons designated as proxies to vote on any such matters in their discretion.

Frequently Asked Questions

Who will tabulate the votes, and how do I find out the voting results after the Annual Meeting?
Representatives of Broadridge Financial Solutions, Inc. will tabulate the votes and act as inspectors of election. The Company will report the voting results in a Current Report on Form 8-K that it will file with the SEC within four business days after the Annual Meeting.

67

Frequently Asked Questions

May I revoke my proxy or change my voting instructions?

Shares held as a registered shareholder:
You may revoke your proxy or change your voting instructions for registered shares as follows:
Deliver another signed proxy card with a later date anytimeany time prior to the commencement of the Annual Meeting;
Notify Kemper’sthe Company’s Secretary, C. Thomas Evans, Jr., in writing prior the commencement of the Annual Meeting that you have revoked your proxy;
Call the toll-free telephone number, or access the proxy voting website, identified on the proxy card and re-vote any time prior to 10:59 p.m. Central Daylight Time on Tuesday, May 3, 2016April 30, 2019; or
Attend the Annual Meeting in person and deliver a new, signed proxy card or ballot to one of the ushers when requested to do so.
Shares held through the 401(k) and Retirement Plan:
You may revoke your proxy or change your voting instructions for shares held through the 401(k) and Retirement Plan by completing any of the following:
Deliver another signed proxy card with a later date prior to the 401(k) Deadline; or
Call the toll-free telephone number, or access the proxy voting website, identified on the proxy card and re-vote anytime prior to the 401(k) Deadline.
Shares held in street name:
You should contact your stockbroker (or other institution holding your shares) to determine the procedures, if any, for revoking or changing your voting instructions for shares held in street name.
Shareholder Proposals, Nominations and Communications
May a shareholder nominate someone at the 2016 Annual Meeting to be a director of Kemper or bring any other business before the 20162019 Annual Meeting?
The Company’s Bylaws require advance notice to the Company if a shareholder intends to attend an annual meeting of shareholders in person and to nominate someone for election as a director or to bring other business before the meeting. Such a notice may be made only by a shareholder of record who meets the requirements set forth in Section 14 of the Company’s Bylaws and provides the required information in the notice within the time period described therein. Each year’s proxy statement states the applicable time period for providing such a notice for the next year’s annual meeting. The deadline for notices in relation to the 20162019 Annual Meeting has expired, and the Company did not receive any such notices that complied with the Bylaws requirements during the prescribed notice period. Accordingly, no such director nominations or other business proposed by shareholders from the floor of the 20162019 Annual Meeting will be in order. The procedures for shareholders to nominate directors or make other proposals relating to the 20172020 Annual Meeting are summarized below in the answers to the following two questions.
How may a shareholder nominate someone to be a director of Kemper or bring any other business before the 20172019 Annual Meeting?
In accordance with the advance notice requirements of the Bylaws described above, if a shareholder of record wishes to nominate one or more directors or bring other business to be considered by shareholders at the 20172020 Annual Meeting,
Frequently Asked Questions

such proposals must be made in writing to the Company no earlier than February 3, 20172020 and no later than March 6, 2017.2, 2020. However, if the date of the 20172020 Annual Meeting is advanced by more than 30 days or delayed by more than 60 days from the anniversary of the 20162019 Annual Meeting date (i.e., May 4, 2016)1, 2019), then such nominations and proposals must be delivered in writing to the Company no earlier than 90 days prior to the 20172020 Annual Meeting and no later than the close of business on the later of (i)(a) the 60thday prior to the 20172020 Annual Meeting, or (ii)(b) the 10th day following the day on which public announcement of the date of the 20172020 Annual Meeting is first made.

68

Frequently Asked Questions

All shareholder proposals and notices should be submitted to the Secretary of Kemper Corporation, at One200 East Wacker Drive,Randolph Street, Suite 3300, Chicago, Illinois 60601.
Please note that these requirements relate only to matters intended to be proposed from the floor of the 20172020 Annual Meeting. They are separate from certain SEC requirements that must be met to have shareholder proposals included in the Company’s Proxy Statement, as described immediately below.
When are shareholder proposals due so that they may be included in Kemper’s Proxy Statement for the 20172019 Annual Meeting?
Pursuant to the regulations of the SEC that are currently in effect, shareholders who intend to submit proposals for inclusion in the Company’s proxy materials for the 20172020 Annual Meeting must do so no later than November 25, 2016.21, 2019. Certain other SEC requirements must also be met to have a shareholder proposal included in the Company’s Proxy Statement. These requirements are independent of the advance notice requirements of the Company’s Bylaws described immediately above. Under SEC rules in effect on the date of this Proxy Statement, shareholder nominations of persons for election to the Board of Directors are not eligible for inclusion in the Company’s proxy materials. All shareholder proposals and notices should be submitted to the Secretary of Kemper Corporation, at One200 East Wacker Drive,Randolph Street, Suite 3300, Chicago, Illinois 60601.
How may a shareholder or other interested party communicate with the Board of Directors?
Shareholders and other interested parties may communicate with the Board of Directors, or with the non-management directors as a group, by calling the Kemper Corporate Responsibility Hotline at 866.398.0010888.695.3359 or by submitting a report or inquiry online at listenupreports.comMyComplianceReport.com (enter access code KEMP).
The hotline and the online reporting function are managed by an independent company, and reports can be made anonymously or confidentially. Communications will be directed to the Chair of the Nominating & Corporate GovernanceNCG Committee if addressed to the non-management or independent directors as a group.
Cost of Proxy Solicitation
What are the costs of soliciting these proxies and who pays them?
The Company has retained the services of Innisfree M&A Incorporated (“Innisfree”) to aid in the solicitation of proxies and will pay Innisfree a base fee of $12,500$15,000 for these services, plus its related costs and expenses. The Company will bear the total expense of the solicitation that will include, in addition to the amounts paid to Innisfree, amounts paid for printing and postage and to reimburse banks, brokerage firms and others for their expenses in forwarding proxy solicitation material. Although the principal distribution of proxy materials will be through the Internet, solicitation of proxies will also be made by mail. Additional proxy solicitation may be made by telephone or other direct communication with certain shareholders or their representatives by directors, officers and employees of the Company and its subsidiaries, who will receive no additional compensation for such solicitation.
Additional Information about Kemper and Householding Requests
Where can I find more information about Kemper?
The Company’s annual reports on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K and amendments thereto are accessible free of charge through its website, kemper.com, as soon as reasonably practicable after such materials are filed with or furnished to the SEC. You may also obtain at no charge a copy of the Company’s most recent Annual Report on Form 10-K, other materials filed with the SEC and additional information regarding Kemper as follows:
Contact Kemper Investor Relations by telephone at 312.661.4930, or by e-mail at investors@kemper.com; or
Frequently Asked Questions

Write to Kemper at One200 East Wacker Drive,Randolph Street, Suite 3300, Chicago, Illinois 60601, Attention: Investor Relations.
How may shareholders with the same address request delivery of either single or multiple copies of the Company’s Proxy Statement?
If you and another shareholder who shares your address received multiple copies of this Proxy Statement, you may contact the Company as described above and request that a single copy be sent to your address for future deliveries of Company

69

Frequently Asked Questions

communications. This is commonly referred to as “householding.” If your proxy statement was “householded” but you prefer to receive separate copies, you may contact the Company as described above to request separate copies now or for future deliveries of Company communications.

Incorporation by Reference
Notwithstanding any general statement to the contrary set forth in any of the Company’s previous or future filings under the Securities Act of 1933, as amended, or the Exchange Act that might incorporate this Proxy Statement into such filings, the Audit Committee Report and the Compensation Committee Report contained in this Proxy Statement are not to be incorporated by reference into any such filings, nor are they to be deemed soliciting material or deemed to be filed under such Acts.

**********

This Proxy Statement and the form of proxy are being mailed and delivered to the Company’s shareholders by the authority of the Board of Directors.

cthomasevanssiga02.jpg
C. Thomas Evans, Jr.
Secretary

70

  Appendix A

Supplement to Compensation Discussion and Analysis

TheThe information in this Appendix A supplements the disclosures in the Compensation Discussion and Analysis section of the Company’s Proxy StatementStatement.

The following table supplements the information in the table captioned 2018 versus 2017 Performance Comparisons under the heading Performance2018 Annual Incentive PlanProgram, beginning on page 28.29:
The following tables provide additional information about the Company Performance Criteria for the 2015 PIP Award payouts to the NEOs that are discussed in the above-referenced section of the Company’s Proxy Statement.
2015 Annual PIP Awards
Company Performance Criteria under 2015 Annual PIP Awards to Messrs. Sodaro, Roeske and Southwell:
Performance CriteriaDefinition of Key Terms
Annual Kemper Consolidated Earned Premium Revenue Growth (weighted 40%)
Annual Kemper Earned Premium Revenue Growth is defined as the percentage change in consolidated Earned Premium Revenues in 2015 from such revenues in 2014.
Annual Kemper Consolidated Operating Profit Margin (weighted 60%)
Annual Kemper Operating Profit Margin is defined as (i) Consolidated Net Operating Income, a non-GAAP financial measure as reported, defined and reconciled to GAAP in the Company’s Annual Report on Form 10-K, and as further adjusted for a Catastrophe Loss Collar as described below divided by (ii) Earned Premium Revenues.

The Catastrophe Loss Collar shall be computed as follows:

(i) If Catastrophe Losses and Loss Adjustment Expenses (“LAE”) (including Catastrophe reserve development) reported by the Property & Casualty Insurance segment (“Reported Catastrophe Losses and LAE”) are greater than 1.5 times the planned catastrophe losses and LAE for the Property & Casualty Insurance segment (“Maximum Catastrophe Losses and LAE”), Consolidated Net Operating Income shall be increased by an amount equal to the difference between the Reported Catastrophe Losses and LAE and the Maximum Catastrophe Losses and LAE;

(ii) If Reported Catastrophe Losses and LAE are less than 0.5 times the planned catastrophe losses and LAE for the Property & Casualty Insurance segment (“Minimum Catastrophe Losses and LAE”), Consolidated Net Operating Income shall be reduced by an amount equal to the difference between the Minimum Catastrophe Losses and LAE and the Reported Catastrophe Losses and LAE; or

(iii) If Reported Catastrophe Losses and LAE are less than the Maximum Catastrophe Losses and LAE and greater than the Minimum Catastrophe Loss and LAE, no adjustment shall be made to Consolidated Net Operating Income.
 
Non-GAAP Reconciliation
($ in Millions)
 
  2018 Actual 2017 Actual
   Net Income ROE Net Income ROE
 Reported $190.1
 7.4%
 $120.9
 5.9 %
 Adjustments, After-tax        
 Exclude AOCI on Fixed Maturity Securities —
 0.5 % —
 0.7 %
 Normalize Catastrophe Losses and LAE including Development, from Reported to Expected 23.1
 0.9 % 79.3
 4.1 %
 Normalize Realized Gains and Losses on Sales of Investments and Other-than-temporary Impairment Losses, from Reported to Expected (15.6) (0.6)% (20.9) (1.1)%
 Change in Fair Value of Equity and Convertible Securities 50.8
 2.1 % —
 —
 Purchase Accounting Related Adjustments 60.1
 2.3 % —
 —
 Acquisition Related Transaction, Integration and Other Costs 36.5
 1.4 % —
 —
 Partial Satisfaction of Arbitration Award (28.2) (1.1)% —
 —
 Impact of Tax Reform (26.4) (1.0)% (7.4) (0.4)%
 Total Adjustments, After-tax 100.3
 4.6 % 51.0
 3.3 %
 Adjusted $290.4
 11.9 % $171.9
 9.2 %




A-1

  Appendix A

Company Performance Criteria under 2015 Annual PIP Award to Mr. Boschelli:
Performance CriteriaDefinition of Key Terms
Annual Excess Return from Corporate Investments (weighted 20%).
Annual Excess Return from Corporate Investments is determined by comparing the actual “Kemper 12 Month Total Investment Return” performance of Kemper’s Investment Portfolio to the results of a “Weighted Average Peer Return” (“WAPR”) for the Performance Period. Excess Return is expressed in basis points. 
Annual Excess Return from Pension Investments (weighted 5%).
Annual Excess Return from Pension Investments is determined by comparing the actual “Kemper 12 Month Total Pension Return” for Kemper’s Pension Portfolio to the “Strategic Portfolio Return for Pension Investments” benchmark for the Performance Period. Excess Return is expressed in basis points. 
Annual Pre-Tax Equivalent Net Investment Income Yield (weighted 50%).
Annual Pre-Tax Equivalent Net Investment Income Yield shall be computed by dividing:

(i) Pre-Tax Equivalent Net Investment Income by

(ii) the average of Total Investments at the beginning of the Performance Period and Total Investments at the end of the Performance Period.

Pre-Tax Equivalent Net Investment Income shall be computed by dividing:

(i) Net Investment Income on an after-tax basis taking into
consideration tax deductions for tax-preferenced net investment income by

(ii) the sum of 100% minus Kemper's federal income tax rate.
Annual Kemper Consolidated Earned Premium Revenue Growth (40%); and Annual Kemper Consolidated Operating Profit Margin (60%) (collectively weighted 25%).See Definition of Key Terms under 2015 Annual PIP Awards to Messrs. Sodaro, Roeske and Southwell described on page A-1.B

KEMPER CORPORATION
2019 EMPLOYEE STOCK PURCHASE PLAN
Article I
Purpose and Scope of the Plan
A-21.1Purpose. The purpose of the Kemper Corporation 2019 Employee Stock Purchase Plan as set herein is to assist eligible Employees of Kemper Corporation, a Delaware corporation (the “Company”) and its Affiliates, in acquiring a stock ownership interest in the Company pursuant to a plan intended to qualify as an “employee stock purchase plan” within the meaning of Section 423(b) of the Code.
The Plan is intended to benefit the Company’s shareholders by means of (i) providing eligible Employees with a convenient means of acquiring an equity interest through payroll deductions, (ii) enhancing such Employees’ sense of participation in the Company, and (iii) aligning the interest of Employees with those of the Company’s shareholders through increased stock ownership.
1.2Definitions. Unless the context clearly indicates otherwise, the following terms have the meaning set forth below:
“Affiliate” means any Subsidiary Corporation which the Committee or the Chief Executive Officer of the Company authorizes to participate in the Plan.
“Agent” means such agent as may be appointed pursuant to Section 6.5 of the Plan.
“Board of Directors” or “Board” shall mean the Board of Directors of the Company.
“Code” shall mean the Internal Revenue Code of 1986, as amended from time to time, together with any applicable regulations issued thereunder.
“Committee” shall mean the Board, or a committee designated by the Board to administer the Plan, which Committee shall administer the Plan as provided in Article VI hereof.
“Company” shall mean Kemper Corporation, a Delaware corporation, and its successors by operation of law.
“Compensation” shall mean the fixed salary, base hourly wage, or commissions (with respect to an employee whose regular or basic rate of compensation is commissions (a “Commissioned Employee”)) paid by the Company or an Affiliate to an Employee as reported by the Company or an Affiliate to the United States government for income tax purposes, including an Employee’s portion of salary deferral contributions pursuant to Section 401(k) of the Code and any amount excludable pursuant to Section 125 of the Code, but excluding any bonus, fee, overtime pay, severance pay, expenses, stock option or other equity incentive income, commissions (other than with respect to a Commissioned Employee) or other special payment or any credit or benefit under any employee plan maintained by the Company.
“Employee” shall mean any individual classified by the Company or an Affiliate on its payroll records as a full-time or part-time employee of the Company or an Affiliate who customarily works for the Company or an Affiliate, as the case may be, for a minimum of twenty (20) hours per week. For the avoidance of doubt, “Employee” shall not include non-employee directors and independent contractors, each of which is ineligible to participate in the Plan. Notwithstanding any provision of the Plan to the contrary, any individual who is not classified by the Company or an Affiliate on its payroll records as an employee (including, but not limited to, an individual classified by the Company or an Affiliate as an independent contractor or a non-employee consultant, an individual who is
  Appendix A

Company Performance Criteria and Target Multiplier under 2015 Annual PIP Award to Ms. Lynch:
Performance CriteriaDefinition of Key Terms
Annual Consolidated Earned Premium Revenue Growth for the Kemper P&C Group (weighted 40%)

Annual Consolidated Earned Premium Revenue Growth for the Kemper P&C Group is defined as the percentage change in Consolidated Earned Premium Revenues in 2015 from such revenues in 2014 for the Kemper P&C Group.
Annual GAAP Combined Ratio for the Kemper P&C Group (weighted 30%)
Annual GAAP Combined Ratio for the Kemper P&C Group shall be computed by dividing the sum of Total Losses & LAE, as adjusted for a Catastrophe Loss Collar, and Total Underwriting Expenses for the Property & Casualty Insurance segment by Earned Premium Revenues for the Property & Casualty Insurance segment.

The Catastrophe Loss Collar shall be computed as follows:

(i) If Reported Catastrophe Losses and LAE are greater than the Maximum Catastrophe Losses and LAE, Total Losses and LAE for the Property & Casualty Insurance segment Income shall be decreased by an amount equal to the difference between the Reported Catastrophe Losses and LAE and the Maximum Catastrophe Losses and LAE;

(ii) If Reported Catastrophe Losses and LAE are less than the Minimum Catastrophe Losses and LAE, Total Losses and LAE for the Property & Casualty Insurance segment shall be increased by an amount equal to the difference between the Minimum Catastrophe Losses and LAE and the Reported Catastrophe Losses and LAE; or

(iii) If Reported Catastrophe Losses and LAE are less than the Maximum Catastrophe Losses and LAE and greater than the Minimum Catastrophe Loss and LAE, no adjustment shall be made to Total Losses and LAE for the Property & Casualty Insurance segment.
Annual GAAP Underlying Combined Ratio for the Kemper P&C Group (weighted 30%)
Annual GAAP Underlying Combined Ratio for the Kemper P&C Group is defined as the sum of Total Underlying Losses & LAE and Total Underwriting Expenses divided by Earned Premium Revenues for the Property & Casualty Insurance segment.

Total Underlying Losses & LAE is defined as Total Losses and Loss Adjustment Expenses excluding Catastrophe Losses and prior year development for the Property & Casualty Insurance segment.
B
2015 Multi-Year PIP Awards
Company Performance Criteria under 2015 Multi-Year PIP Awards to Messrs. Sodaro, Roeske and Southwell:
performing services for the Company or an Affiliate through a leasing or employment agency, or an employee of an entity other than the Company or an Affiliate) shall not be eligible to participate in the Plan, even if such classification is determined to be erroneous, or is retroactively revised by a governmental agency, by court order or as a result of litigation, or otherwise.
The “Performance CriteriaEntry Date” shall mean each January 1, April 1, July 1 and October 1 (or, if such date is not a Trading Day, the first Trading Day immediately following such date).
“Fair Market Value” of a Share means the fair market value of such Share determined by such methods or procedures as shall be established from time to time by the Committee. Unless otherwise determined by the Committee in good faith, the Fair Market Value per Share as of a particular date shall mean the closing price per Share on the national securities exchange on which the Shares are principally traded on such date.
“Offering Period” shall mean such duration (not to exceed twenty-seven (27) months or such lesser period as is required under Section 423(b)(7) of the three-year average of Kemper’s consolidated (1) Revenue Growth (weighted 60%); and (2) Return on Equity (weighted 60%),Code) as defined below. The Performance Criteria are subjectshall be determined by the Committee prior to the Catastrophe Loss Collar (as definedbeginning of such Offering Period. Unless the Committee determines otherwise before the beginning of the Offering Period, Offering Periods shall commence at three (3)-month intervals on page A-1, but with Net Income substitutedeach Entry Date over the term of the Plan, and each Offering Period shall last for Consolidated Net Operating Income whereno more than three (3) months and end on the Purchase Date for such termOffering Period. Accordingly, unless the Committee determines otherwise, four separate Offering Periods shall commence in each calendar year during which the Plan remains in existence.
“Open Enrollment Period” means the period of time prior to the start of each Offering Period during which Employees may elect to participate in the Plan as may be established by the Committee or Plan Manager from time to time.
“Participant” shall mean any Employee who (i) is used)eligible to participate in the Plan under Section 2.1 hereof and (ii) elects to participate.
“Plan” shall mean the Company’s 2019 Employee Stock Purchase Plan, as the same may be amended from time to time.
“PlanAccount” or “Account” shall mean a non-interest bearing account established and maintained in the name of each Participant.
“Plan Manager” shall mean any one or more Employees appointed pursuant to Section 6.3 hereof.
“Purchase Date” shall mean the last day of each Offering Period (i.e., March 31, June 30, September 30 and December 31, as applicable, or if such date is not a Trading Day, the last Trading Day immediately preceding such date).
“Purchase Price” shall mean the purchase price of a Share hereunder as provided in Section 3.1 hereof.
Revenue Growth“Subsidiary Corporation” shall have the meaning set forth in Section 424(f) of the Code.
“Share(s)” means a share of the common stock of the Company.
“Trading Day” means a day on which the New York Stock Exchange is defined asopen for trading.
1.3Effective Date of Plan. The Plan shall become effective on June 1, 2019 if, prior to that date, the three-year compound annual growth rate, calculated as [(A/B)^(1/3)-1], where A = Total Revenues excluding Net Realized Investment Gains (Losses)Plan (i) has been adopted by the Board of Directors of the Company, (ii) the Company has registered the Shares on Salesa Form S-8, and (iii) has been approved by an affirmative vote of Investments and Net Impairment Losses Recognizeda majority of the Shares present, in Earnings as reported in the Company’s 2017 Annual Report on Form 10-K and B = Total Revenues excluding Net Realized Investment Gains (Losses) on Sales of Investments and Net Impairment Losses Recognized in Earnings as reported in the Company’s 2015 Annual Report.person or by

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  Appendix A

Return on Equity is defined as the return on average shareholders’ equity, which shall be computed by dividing the sum of GAAP Net Income, subject to the Catastrophe Loss Collar, as reported in the Company’s Annual Reports for each of the three years in the Performance Period by the sum of the Average Shareholders’ Equity for each of the three years.

Average Shareholders’ Equity is defined as the simple average of Total Shareholders’ Equity as reported in the Company’s Annual Reports for the beginning and end of year for each year.
Definitions of Company Performance Criteria under 2015 Multi-Year PIP Award for Mr. Boschelli:
The Target Multiplier applicable to the 2014 Multi-Year PIP Award to Mr. Boschelli will be determined by computing a weighted average of the Target Multipliers derived for the following four performance criteria for the Performance Period ending December 31, 2017:
Performance Criterion 13-Year Excess Return from Corporate Investments (v. WAPR) (weighted 20%). This is determined by comparing the 3-year Kemper Total Investment Return to the 3-year WAPR. A simple average is calculated of the return for each year in the Performance Period.
Performance Criterion 23-Year Excess Return from Pension Investments (v. Benchmark) (weighted 5%). This is determined by comparing the 3-year Kemper Total Pension Return for Kemper’s Pension Portfolio to the 3-Year Strategic Portfolio Return for the Performance Period. A simple average is calculated of the return for each year in the Performance Period.
Performance Criterion 33-Year Pre-Tax Equivalent Net Investment Income Yield (weighted 50%). All aspects of the calculation for the Pre-Tax Equivalent Net Investment Income Yield, for the Multi-Year PIP Award would follow the same method as that of the Annual PIP Award for the 3-year Performance Period.
Performance Criterion 43-Year Kemper Consolidated Revenue Growth (40%) and Return on Equity (60%) (collectively weighted 25%). See definitions of key performance criteria under 2015 Multi-Year PIP Awards for Messrs. Sodaro, Roeske and Southwell.B

Definitions of Company Performance Criteria under 2015 Multi-Year PIP Award for Ms. Lynch:
The Company Performance Criteria forproxy and entitled to vote on the Kemper P&C Group are Earned Premium Revenue Growth (weighted 40%) and Return on Allocated Equity (weighted 60%)proposal, at a meeting at which a quorum is present; provided, as defined below, and calculatedhowever, that such shareholder approval occurs on a consolidated basis fordate no later than twelve (12) months following the Kemper P&C Group, as described below.

date the Plan is so adopted.
Premium Revenue Growth1.4Termination of Plan. The Plan shall continue in effect through and including May 31, 2029, unless terminated prior thereto pursuant to Section 4.3 is defined ashereof, or by the three-year compound annual growth rate, calculated as [(A/B)^(1/3)-1],Board of Directors, which shall have the right to terminate the Plan at any time. Upon any such termination, the balance, if any, in each Participant’s Account shall be refunded to him or her, or otherwise disposed of in accordance with the policies and procedures prescribed by the Committee in cases where A = Total Earned Premiums as reportedsuch a refund may not be possible.
Article II
Participation
2.1Eligibility. Participation in the December 2017 Management Reports and B = Total Earned Premiums reportedPlan is limited to Employees who meet the requirements of this Section 2.1. Each Employee may become a Participant by completing the enrollment procedures prescribed by the Committee or Plan Manager, as revised from time to time, during the Open Enrollment Period. No Employee may participate in the December 2015 Management Reports.

Return on Allocated Equity is defined asPlan if such Employee, immediately after the simple averageend of an Offering Period, would be deemed for purposes of Section 423(b)(3) of the three annual Returns on Allocated Equity,Code to possess five percent (5%) or more of the total combined voting power or value of all classes of stock of the Company or any Subsidiary Corporation. The Committee may, prior to the commencement of an Offering Period, exclude from participation any Employee who, at the time of the commencement of the Offering Period, is a highly compensated employee (within the meaning of Section 414(q) of the Code) who is subject to the reporting requirements of Section 16(a) of the Securities Exchange Act of 1934; provided that such exclusion is applied in an identical manner to all such highly compensated employees of the Company and each Affiliate whose employees are Participants under the Plan.
2.2Payroll Deductions. Payment for Shares purchased hereunder shall be made by authorized payroll deductions from each payment of Compensation in accordance with instructions received from a Participant. Such deductions shall be expressed as a whole number percentage which shall be computedat least one percent (1%) but not more than ten percent (10%). A Participant may not increase the deduction during an Offering Period; provided that no more than once per Offering Period, a Participant may decrease the deduction. Notwithstanding the foregoing, a Participant may change the percentage deduction for any subsequent Offering Period by dividingfiling notice thereof with the sumCompany prior to the date on which such Offering Period commences. Any amount remaining in a Participant’s Account after the purchase of Net Operating Income forShares shall be refunded without interest; provided that any amounts remaining in a Participant’s Account that were insufficient to acquire a full Share shall be carried forward to the Property & Casualty Insurance segment as reported in the Company’s Annual Reports, as adjustednext Offering Period. Any Participant who discontinues payroll deductions during an Offering Period may again become a Participant for a Catastrophe Loss Collar, for eachsubsequent Offering Period upon completion of the three years in the Performance Periodenrollment procedures prescribed by the sumPlan Manager, as revised from time to time. Amounts deducted from a Participant’s Compensation pursuant to this Section 2.2 shall be credited to such Participant’s Account. No interest shall be credited to a Participant’s Account and a Participant may not make any additional payments into such Account.
Article III
Purchase of Shares
3.1Purchase Price. Unless the Average Allocated Equity forCommittee determines otherwise prior to the Property & Casualty Insurance segment for eachbeginning of an Offering Period, the three years. ForPurchase Price per Share sold to Participants hereunder shall be the numerator and denominatorproduct of this calculation, Reported Catastrophe Losses and LAE for each yeareighty-five percent (85%) multiplied by the Fair Market Value of such share on the Purchase Date with respect to an Offering Period; provided, however, that in no event shall not exceed 1.5 times orthe Purchase Price per share be less than 0.5 times the planned catastrophe losses and LAE for the Property & Casualty Insurance segment for such year.par value of a Share.

Average Allocated Equity3.2Purchase of Shares. is defined as the simple average of total Allocated Equity as determined for the beginning and end of year forOn each year in the Performance Period, wherein Allocated Equity is defined asPurchase Date, the amount in a Participant’s Account shall be charged with the aggregate Purchase Price of equity determined tothe largest number of whole Shares that can be attributable to a given Company reporting unit or segment using the Allocated Equity Model.purchased with such amount.


A-4
  Appendix AB

Allocated Equity Model is defined as the risk-based method developed to allocate equity to the Company’s reporting units or segments. The risk-adjusted share of all investments and the associated tax balances are allocated using AM Best’s Capital Adequacy Ratio (“BCAR”) and internally developed risk capital measures. This method achieves the goal of fully allocating investment capital and net investment income to the operating business segments with the exception of any excess based on a BCAR % above target levels.

AdjustmentsUnless otherwise provided by the Plan Manager, the number of Shares purchased by each Participant on the Purchase Date shall be deposited into an account established in the Participant’s name with the stock brokerage or other financial services firm designated by the Committee. Any amount remaining in a Participant’s Account after the purchase of Shares shall be refunded without interest; provided that any amounts remaining in a Participant’s Account that were insufficient to Net Operating Income:acquire a full Share shall be carried forward to the next Offering Period.
3.3Limitations on Purchase.
3.3.1    Notwithstanding any provisions of the Plan to the contrary, but subject to the requirements of Section 3.3.2, an Employee may not purchase Shares in any Offering Period which exceed that number of Shares which is equal to $25,000 divided by the Fair Market Value of a Share for such Offering Period reduced by the number of any Shares that were purchased by the Employee in a prior Offering Period in the same calendar year. The Fair Market Value of a Share for each Offering Period shall be the Fair Market Value of a Share on the Entry Date for such Offering Period.
3.3.2    No right under the Plan may be granted to a Participant that would permit the Participant to purchase stock under all employee stock purchase plans maintained by the Company or its Affiliates in an amount which, in the aggregate, exceeds $25,000 of Fair Market Value (determined as of the date such right is granted) for each calendar year in which the right is outstanding at any time. For purposes of this Section 3.3.2:
(a)    The right to purchase Shares accrues when the right (or any portion thereof) first becomes exercisable during the calendar year;
(b)    A Catastrophe Loss Collarright to purchase Shares that has accrued under one grant of rights under the Plan may not be carried over to any other grant of rights under the Plan or any other plan; and
(c)    The Company’s 2011 Omnibus Equity Plan and any similar plan under which stock options may be granted that is hereafter adopted by the Company or an Affiliate shall not be deemed to be an employee stock purchase plan for purposes of this Section 3.3.2.
3.3.3    To the extent necessary to comply with Section 423(b)(8) of the Code, a Participant’s payroll deductions may be decreased to zero percent (0%) during any Offering Period which is scheduled to end during any calendar year, such that the aggregate of all payroll deductions accumulated with respect to such Offering Period and any other Offering Period ending within the same calendar year is no greater than twenty-five thousand dollars ($25,000). Payroll deductions shall re-commence at the rate provided for by the Participant’s prior election at the beginning of the first Offering Period which is scheduled to end in the following calendar year, unless suspended by the Participant pursuant to Section 2.2 of the Plan.
3.4Transferability of Rights. Rights to purchase shares hereunder shall be exercisable only by the Participant. Such rights shall not be transferable.
Article IV
Provisions Relation to Common Stock
4.1Shares Reserved; Delivery of Shares. A maximum of 1,300,000 Shares may be purchased under the Plan, subject to adjustment in accordance with Section 4.2 hereof. Subject to the limitation in the preceding sentence, as determined by the Committee in its sole discretion, any Shares purchased under the Plan may be either newly issued shares, existing treasury shares, or new purchases in the open market.
Appendix B

4.2Adjustment for Changes in Shares. In the event that adjustments are made in the number of outstanding Shares or such Shares are exchanged for a different class of stock of the Company or for shares of stock of any other corporation by reason of merger, consolidation, stock dividend, stock split or otherwise or an extraordinary cash dividend is paid in respect of the Shares, the Committee shall make appropriate adjustments in (i) the number and class of shares or other securities that may be reserved for purchase, or purchased, hereunder, and (ii) the Purchase Price. All such adjustments shall be made in the sole discretion of the Committee, and its decision shall be binding and conclusive. The existence of the Plan and any options granted hereunder shall not affect in any way the right or power of the Board of Directors or the shareholders of the Company to make or authorize any adjustment, recapitalization, reorganization or other change in the Company’s capital structure or its business, any merger or consolidation of the Company or a subsidiary, any issue of debt, preferred or prior preference stock ahead of or affecting Shares, the authorization or issuance of additional Shares, the dissolution or liquidation of the Company or any subsidiary, any sale or transfer of all or part of the Company’s or a subsidiary’s assets or business or any other corporate act or proceeding. The Board of Directors may at any time terminate an Offering Period then in progress and provide, in its discretion, that Participants’ then outstanding Account balances shall be used to adjust Net Operating Incomepurchase shares pursuant to Article III or returned to the applicable Participants.
4.3Insufficient Shares. If the aggregate funds available for the Property & Casualty Insurance segmentpurchase of Shares on any Purchase Date would cause an issuance of Shares in excess of the number provided for in Section 4.1 hereof, (i) the Committee shall proportionately reduce the number of Shares which would otherwise be purchased by each Participant in order to eliminate such excess and (ii) the Plan shall automatically terminate immediately after such Purchase Date.
4.4Confirmation. Confirmation of each purchase of Shares hereunder shall be made available to the Participant in either written or electronic format. A record of purchases shall be maintained by appropriate entries on the books of the Company. Unless otherwise determined by the Committee, Shares delivered to a Participant hereunder may not be assigned, transferred, pledged or otherwise disposed of in any way by the Participant during the one (1) year period following such delivery to the Participant (“Period of Restriction”) (other than by will or the laws of descent and distribution).
4.5Form of Shares. Subject to the provisions of applicable laws, rules and regulations and stock exchange requirements, Shares purchased under the Plan shall be issued in book entry or similar non-certificated form, or, at the request of a Participant following completion of the Period of Restriction, in the performance periodform of a stock certificate or by “DWAC” or similar electronic transfer to a brokerage or other account of the Participant.
4.6Rights as Shareholders. The Shares purchased by a Participant on a Purchase Date shall, for all purposes, be deemed to have been issued and sold by the Company as of the close of business on such Purchase Date. Prior to that time, none of the rights or privileges of a shareholder of the Company shall exist with respect to such shares.
Article V
Termination of Eligibility
5.1Termination of Eligibility. If a Participant ceases to be eligible to participate in a manner similarthe Plan under Section 2.1 hereof for any reason, the balance in such Accountwill be refunded or distributed to the methodParticipant without interest.
5.2Death of Participant. Upon the death of a Participant, the balance in the Participant’s Account shall be distributed without interest to the Participant’s designated beneficiary or estate, or otherwise disposed of in accordance with policies and procedures prescribed by the Committee or its delegate in cases where such a distribution may not be possible.
Appendix B

Article VI
Administration
6.1Plan Administration. The Committee shall administer the Plan. For purposes of administration of the Plan, a majority of the members of the Committee (but not less than two) shall constitute a quorum, and any action taken by a majority of such members of the Committee present at any meeting at which a quorum is present, or any action approved in writing by all members of the Committee, shall be the action of the Committee.
6.2Interpretation. The interpretation and construction by the Committee of any provisions or any right granted under it shall be final. Subject to the express provisions of the Plan, the Committee shall have full discretionary authority to interpret the Plan, to issue rules for administering the Plan, to change, alter, amend or rescind such rules, and to make all other determinations necessary or appropriate for the administration of the Plan.
6.3Delegation. The Committee shall have full discretionary authority to delegate administrative decisions and operations to the management of one or more of the Employees of the Company or an Affiliate, including appointment of a Plan Manager.
6.4Indemnification. No member of the Board or the Committee or any Employee to whom authority under the Plan is delegated under Section 6.3 shall be liable for any action, determination or omission taken or made in good faith with respect to the Plan or any right granted under it. The Company shall indemnify each member of the Board, the Committee and any Employee to whom authority under the Plan is delegated under Section 6.3 to the fullest extent permitted by law with respect to any claim, loss, damage or expense (including counsel fees) arising in connection with their responsibilities under the Plan.
6.5Appointment of Agent. TheCommittee or its delegate under Section 6.3 may engage an agent to perform administrative, custodial and record keeping functions for the Plan, including, but not limited to, enrolling Participants in the Plan, purchasing or issuing Shares, holding record title to the Participants’ Shares and providing periodic account status reports to such Participants. If no such agent is engaged by the Committee or its delegate, the Committee or its delegate shall serve as the agent.
Article VII
General Provisions
7.1Notices. Any notice which a Participant files pursuant to the Plan shall be made on forms prescribed by the Committee or the Plan Manager and shall be effective only when received by the Company.
7.2Condition of Employment. Neither the creation of the Plan nor participation therein shall be deemed to create any right of continued employment or in any way affect the right of the Company or an Affiliate to terminate an Employee.
7.3Withholding of Taxes. Each Participant shall, no later than the date as of which the value of an option under the Plan and/or Shares first becomes includible in the income of the Participant for income tax purposes, pay to the Company, or make arrangements satisfactory to the Committee regarding payment of, any taxes of any kind required by law to be withheld with respect to such option or Shares. The obligations of the Company under the Plan shall be conditioned upon the making of such payments or arrangements, and the Company shall, to the extent permitted by law, have the right to deduct any such taxes from any payment of any kind otherwise due to the Participant. In particular, to the extent a Participant is subject to taxation under U.S. Federal income tax law, if the Participant makes a disposition, within the meaning of Section 424(c) of the Code of any Shares issued to the Participant pursuant to the Participant’s exercise of an option, and such disposition occurs within
Appendix B

the two-year period commencing on the day after the first date of the Offering Period or within the one-year period commencing on the day after the Purchase Date, the Participant shall, within ten (10) days of such disposition, notify the Company thereof and thereafter immediately deliver to the Company any amount of Federal, state or local income taxes and other amounts which the Company informs the Participant the Company may be required to withhold.
7.4Amendment of the Plan. The Board of Directors may at any time, or from time to time, amend the Plan in any respect, except that, without approval of the shareholders, no amendment may (a) increase the aggregate number of shares reserved under the Plan other than as provided in Section 4.2 hereof, (b) materially increase the benefits accruing to Participants or (c) materially modify the requirements as to eligibility for participation in the Plan. Any amendment of the Plan must be made in accordance with applicable provisions of the Code and/or any regulations issued thereunder, any other applicable law or regulations, and the requirements of the principal exchange upon which the Shares are listed. The Plan may not be amended in any way that will cause rights issued under the Plan to fail to meet the requirements for employee stock purchase plans as defined in Section 423 of the Code or any successor thereto. To the extent necessary to comply with Rule 16b-3 under the Securities Exchange Act of 1934, as amended, Section 423 of the Code, or any other applicable law or regulation, the Company shall obtain shareholder approval of any such amendment.
7.5Application of Funds. All funds received by the Company by reason of purchases of Shares hereunder may be used for any corporate purpose.
7.6Legal Restrictions. The Company shall not be obligated to adjustsell Shares hereunder if counsel to the 2015 Annual PIP awardsCompany determines that such sale would violate any applicable law or regulation.
7.7Conditions Upon Issuance of Shares.
7.7.1    If at any time the Committee shall determine, in its discretion, that the listing, registration and/or qualification of Shares upon any securities exchange or under any state or Federal law, or the consent or approval of any governmental regulatory body, is necessary or desirable as a condition of, or in connection with, the sale or purchase of Shares hereunder, no option may be exercised or paid in whole or in part unless and until such listing, registration, qualification, consent and/or approval shall have been effected or obtained, or otherwise provided for, Messrs. Sodaro, Roeskefree of any conditions not acceptable to the Committee.
7.7.2    If at any time counsel to the Company shall be of the opinion that any sale or delivery of Shares pursuant to an option is or may be in the circumstances unlawful, contravene the requirements of any stock exchange, or result in the imposition of excise taxes on the Company or any subsidiary under the statutes, rules or regulations of any applicable jurisdiction, the Company shall have no obligation to make such sale or delivery, or to make any application or to effect or to maintain any qualification or registration under the Securities Act of 1933, as amended, or otherwise with respect to Shares or options and Southwell described above.the right to exercise any option shall be suspended until, in the opinion of such counsel, such sale or delivery shall be lawful or will not result in the imposition of excise taxes on the Company or any subsidiary.

7.7.3    The Committee, in its absolute discretion, may impose such restrictions on the ownership and transferability of the Shares purchasable or otherwise receivable by any person under any option as it deems appropriate. The certificates evidencing such Shares may include any legend that the Committee deems appropriate to reflect any such restrictions.
7.8Governing Law. The Plan and all rights and obligations thereunder shall be constructed and enforced in accordance with the laws of the State of Delaware and any applicable provisions of the Code and the related regulations.
A-5

Appendix B

7.9Jurisdiction: Waiver of Jury Trial. Any suit, action or proceeding with respect to the Plan or any agreement, or any judgment entered by any court of competent jurisdiction in respect of any thereof, shall be resolved only in the courts of the State of Delaware or State of Illinois or the United States District Court for the State of Delaware or State of Illinois, Northern District, and the appellate courts having jurisdiction of appeals in such courts, unless otherwise provided by applicable law. In that context, and without limiting the generality of the foregoing, the Company and each eligible Employee shall irrevocably and unconditionally (a) submit in any proceeding relating to the Plan or any agreement, or for the recognition and enforcement of any judgment in respect thereof (a “Proceeding”), to the exclusive jurisdiction of the courts of the State of Illinois, the court of the United States of America for the State of Illinois, and appellate courts having jurisdiction of appeals from any of the foregoing, and agree that all claims in respect of any such Proceeding shall be heard and determined in such Illinois state court or, to the extent permitted by law, in such federal court, (b) consent that any such Proceeding may and shall be brought in such courts and waives any objection that the Company and each eligible Employee may now or thereafter have to the venue or jurisdiction of any such Proceeding in any such court or that such Proceeding was brought in an inconvenient court and agree not to plead or claim the same, (c) WAIVE ALL RIGHT TO TRIAL BY JURY IN ANY PROCEEDING (WHETHER BASED ON CONTRACT, TORT OR OTHERWISE) ARISING OUT OF OR RELATING TO THE PLAN OR ANY AGREEMENT, (d) agree that service of process in any such Proceeding may be effected by mailing a copy of such process by registered or certified mail (or any substantially similar form of mail), postage prepaid, to such party, in the case of an eligible Employee, at the eligible Employee’s address shown in the books and records of the Company or, in the case of the Company, at the Company’s principal offices, attention General Counsel, and (e) agree that nothing in the Plan shall affect the right to effect service of process in any other manner permitted by the laws of the State of Illinois. Notwithstanding the foregoing, the Committee may, as a condition to participation in the Plan, require that a Participant agree in writing to submit all disputes or claims arising out of or relating to such participation to binding arbitration in accordance with such terms as the Committee shall prescribe.
7.10Unfunded Status of Plan. The Plan shall be an unfunded plan. The Committee may authorize the creation of trusts or other arrangements to meet the obligations created under the Plan to deliver Shares or make payments, provided that the existence of such trusts or other arrangements is consistent with the unfunded status of the Plan.




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Kemper Corporation
Notice of 20162019 Annual Meeting and Proxy Statement
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