| (1) | After-tax adjusted operating income, while experiencing strong persistency and stable premium results, and maintaining healthy margins. We maintained market-leading positions and delivered on our purpose of helping the working world thrive throughout life's moments. The pandemic reinforced the social value of the benefits weTABLE OF CONTENTS
COMPENSATION DISCUSSION AND ANALYSIS
provide to working people and their families and highlighted our already strong value proposition with customers and brokers. Investments in our technology and people furthered our digital transformation efforts and allowed us to reach our customers in innovative ways. Our robust business continuity planning allowed us to swiftly shift to remote work early in the year, providing seamless service to our clients and maintaining a high level of customer satisfaction.
Financial Highlights(1)
| Earnings
| | | | | | Despite the challenging environment, we delivered net income of $793 million and after-tax adjusted operating income of more than $1 billion, based on total revenue of $13.2 billion. Earnings per share (EPS) were $3.89 and after-tax adjusted operating EPS was $4.93.
| | | | | | Return on equity
| | | | | | We continued to put shareholder capital to good use. Return on Equity (ROE) was 7.6% and consolidated adjusted operating ROE was 10.7%, while ROE in our core operating segments was 14.1%.
| | | | | | Book value
| | | | | | Our book value per share at the end of 2020 was up 5.4% from 2019 (excluding accumulated other comprehensive income, or AOCI). This was the 12th consecutive year of growth.
| | | | |
(1)
| Operating results referenced here include non-GAAP financial measures. Information about the non-GAAP financial measures used in this proxy statement is set forth in “A Note About Non-GAAP Financial Measures” on page 2.2. For a reconciliation of the most directly comparable GAAP financial measures to the non-GAAP financial measures, refer to Appendix AB of this proxy statement. |
| (2) | Excluding accumulated other comprehensive income. |
| 52 | 2022 UNUM PROXY STATEMENT |
COMPENSATION DISCUSSION AND ANALYSIS Operating Highlights We delivered on our purpose of helping the working world thrive throughout life's momentsin 2020.2021. Unum paid approximately $7.6$8.2 billion in benefits to people facing illness, injury or loss of life. Satisfaction metrics measuring our interaction with customers and partners were high. We also continued our focusremained focused on enhancing the experience of our customers through employeeleveraging technology, improving processes and training process improvements and leveraging technology. As the expectations ofemployees.We accelerated our customersdigital transformation in response to evolving customer expectations. We continue to evolve, we have prioritized investmentinvest in ourtechnologies that allow us to rapidly address market needs by creating new digital transformation. This includes investing in new technologies to automateexperiences for customers, automating business processes, better understand customer behavior, delivertracking metrics, delivering new products and services to market faster, and improve customerimproving satisfaction. By enhancing our digital capabilities, we enrich the experience for our customers and enhance the effectiveness of our people. TABLE OF CONTENTS
COMPENSATION DISCUSSION AND ANALYSIS
We managed our investment portfolio welldespite the continued low interest rate environment. Our well-diversified portfolio focuses on consistent, predictable cash flows. Due to the nature of our business, we invest for the long term with a philosophy emphasizing sound risk management and credit quality. Operational Realignment
Delivering consistent long-term success in In early 2021, we signed the United Nations Principles for Responsible Investment, a constantly evolving employee benefits market requires usstep that demonstrates our commitment to continually challengeexpanded disclosure and an investment approach that more formally integrates ESG factors into our approach to how we do business. In February 2020, we appointed Michael Q. Simonds to serve as Chief Operating Officer (COO) for the enterprise and aligned our core business operations under this role. We believe this change has enabled us to sharpen our focus on growth opportunities and further enhance the experience for our customers.
decisions.Closed Block Management The same skills that allow our core franchise to be successful also benefit our closed block of policies that we continue to service and support, but no longer actively market. Our Closed Block segment primarily consists of long-term care (LTC) policies and older individual disability policies. Long-Term Care PerformanceWe discontinued offering individual LTC insurance in 2009 and group LTC insurance in 2012. LONG-TERM CARE PERFORMANCE
We have actively managed this block with a combination of rate increases, updates to our liability assumptions to reflect emerging experience, prudent cash infusions, and reserve changes.adjustments. Through these and other steps — including annual comprehensive adequacy reviews — we continue to take proactive measures to provide for the long-term stability of this block and providepromote transparency tofor our shareholders and customers. Despite these continuing efforts, following an examination of one of our Maine-domiciled insurers, in 2020 the Maine Bureau of Insurance required us to establish additional LTC statutory reserves, permitting this to be done over a period of seven years. Although we do not agree with the Maine Bureau's examination conclusions, weWe view the additional statutory reserves as further increasing margin over our best estimate assumptions. At year-end 2020,In the last two years, LTC statutory reserves were increased by approximately $229$667 million, using cash flows from operations. We expect to fund future phase-in amounts inand we plan on accelerating the same manner. recognition of these additional required reserves. INDIVIDUAL DISABILITY REINSURANCE TRANSACTION In connection with our annual reviewthe first quarter of policy reserve adequacy, at year- end 2020,2021, we updated our interest rate assumptions to reflectcompleted the low interest rate environment and increased GAAP reserves supporting the LTC block accordingly. Individual Disability Reinsurance Transaction
In December 2020, we announced an agreementsecond phase of a transaction to reinsure most of our Closed Block individual disability insurance business to a third party. The transaction was completed in two phases, with an initial closing in the fourth quarter of 2020 and a second closing at the end of the first quarter of 2021. Although we will continue to administer this block of business, the movetransaction freed up a significant amount of capital that enhances our financial flexibility and can be used to help fund future growth.
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Capital Generation for Shareholders Our strong statutory earnings resultedDespite the pandemic, we generated premium growth and strengthened our capital position in solid capital generation in 2020,2021, allowing us the opportunity to deploy capital in a number of ways. We invested in our people, products and technology to drive growth. We paid out $233.2$240.6 million in dividends, or $1.14$1.17 per share. We pausedpurchased $50 million of our shares in the fourth quarter of 2021, resuming our share repurchasesrepurchase program that we suspended in 2020 in a prudent decision to conserve capital duringat the uncertain environment.start of the pandemic. | 2022 UNUM PROXY STATEMENT | 53 |
COMPENSATION DISCUSSION AND ANALYSIS Our credit ratings are reflective of our strong balance sheet, our favorable operating results, and our highly respected brand in the employee benefits market. In 2021, we received upgrades to our outlook from key rating agencies, a noteworthy achievement in this uncertain environment.Total Shareholder Return Unum producedWhile we continue to produce solid financial results in our core segments and more than $1 billion in after-tax adjusted operating earnings in 2020. However,operations, the pandemic and unprecedenteduncertain economic environment caused significant disruptioncontinue to significantly disrupt our business. As described in "2021 Performance" on page 52, dramatic increases over the last two years in our businesslife and the markets we serve. That, coupled withdisability insurance lines, and leaves administered, have impacted our financial performance. We also face ongoing negative investor perceptions surrounding the long-term care (LTC) insurance industry, and concerns about the impact of historically low interest rates on our sector, drove our total shareholder return (TSR) lower. These negative perceptions affect Unum's TSRa dynamic that impacts us more than most of our proxy peers as only 25% ofdue to our Closed Block segment. Despite these challenges, Unum saw total shareholder return increase nearly 12% from 2020. While an improvement, these returns trailed our peers have LTC exposure. These returnsand we believe are not indicativefully reflective of the ongoing strength of our franchise, capital position and operational performancecore operations' performance. We have seen premiums and book value per share (excluding AOCI) increase throughout the pandemic, and have significant financial flexibility that allows us to continue investing to grow our business for the future.In addition to our core operations, our Closed Block segment primarily consists of LTC policies and older individual disability policies that we continue to service and support. Through the active management of our core businesses. Pre-pandemic, we delivered record after-tax adjusted operating earnings per share for 14 consecutive years and premium growth that consistently outpaced our competitors in our U.S. businesses. We have also actively managed the Closed Block, overwe have taken steps to improve the last decade. Recent stepsperformance and shareholder understanding of this legacy business. In 2021, we took incompleted the second phase of a reinsurance transaction for our LTC block have delivered improved operating earnings while providing added transparency to enhance shareholder understanding. In addition, the recent Closed Blockolder individual disability reinsurance transaction hasblock, which freed up significant capital that can be used to grow our business.
The In addition, our capital position and performance of our LTC block has allowed us to accelerate planned contributions to that block’s statutory reserves.Over the last two years, the pandemic has shown thathighlighted the critical role and growing need for our products and services has never been clearer, and continues to grow.services. We believe this, combined with our history of consistent execution, makes Unum an excellent long-term investment. We expect that the performance of our core franchise will again be recognized and ultimately drive long-term shareholder value. TOTAL SHAREHOLDER RETURN
| | Unum | | | (16.32)% | | | (52.98)% | | | (19.19)% | | | | Proxy Peer Group | | | (6.27) | | | (8.86) | | | 40.31 | | | | S&P 500 | | | 18.40 | | | 48.85 | | | 103.04 | | | | S&P Life & Health Index | | | (9.48) | | | (11.65) | | | 28.43 | |
*| TOTAL SHAREHOLDER RETURN | | CORE OPERATIONS PREMIUM GROWTH (Billions) | BOOK VALUE PER SHARE (Excl AOCI)* | | | 1 Year | 3 Year | 5 Year | |  |  | | Unum | 11.86% | (3.96)% | (33.1)% | | Proxy Peer Group | 28.85 | 58.49 | 44.72 | | | S&P 500 | 28.71 | 100.37 | 133.41 | | S&P Life & Health Index | 36.68 | 52.41 | 40.59 | |
*Non-GAAP financial measure, see Appendix AB for reconciliation. | 54 | 2022 UNUM PROXY STATEMENT |
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20202021 Say-on-Pay Vote and Shareholder Outreach
Our 20202021 shareholder advisory vote to approve executive compensation passed with 94%92% support. In the Fall of 2020,2021, as in prior years, we contactedinvited our top 50 shareholders, representing over 73%approximately 60% of our outstanding shares, to engage with us on business, governance, and requested meetings to discuss our compensation programs and other topics.
Sevenmatters. Four shareholders, representing approximately 24%10% of our outstanding shares, accepted our invitation for engagement, and we met with each of them. Our independent Human Capital Committee Chair joined each of these meetings. Another five10 shareholders, representing approximately 19%26% of our outstanding shares, responded that a meeting was not necessary.
Our independent Human Capital Committee Chair was available upon request and joined two of the meetings. |  | | | |
During the meetings, shareholders provided constructive feedback on a variety of topics. Overall, the shareholders we spoke with generally had favorable comments about our practices and programs, which is also evidenced by our most recent say-on-pay votes (approximately 92% in 2021, 94% in 2020 and 95% in 2019 and 2018)2019). During the 20202021 outreach, we received specific feedback as follows: Positive commentary on our proxy statement disclosure and our compensation design and pay structure for executives;executives, as well as on our proxy statement disclosure and FavorableComplimentary feedback on the detailed disclosure and rationale of the 2020 Success Incentive Plan (SIP) awards set forth in our COVID-19 response2021 Proxy Statement.
In addition to employees and customers; and • | Most of the shareholders that we met with sought additional information about the Success Incentive Plan (SIP) implemented in August 2020. Additionally, they highlighted the importance of clear proxy statement disclosure, including key terms and rationale (see page 62). |
Through these discussions,the above comments related to our compensation programs, we were also able to confirm that shareholders would like us to continue:
• | Providing a CEO Compensation Summary in our proxy statement to help investors understand how the Committee approaches its compensation decisions (see page 10); and |
• | Enhancing our ESG disclosures to enable better understanding of our corporate sustainability strategy, initiatives, and progress (see page 42). |
received feedback on other governance matters, which are detailed on page 7.We also met with twoone proxy advisory firmsfirm to provide an update on our shareholder engagement efforts and gain further insight into their views on our compensation and governance practices and disclosures, includingdisclosures. While we extended an invitation to another proxy advisory firm, they declined the recent SIP awards. meeting citing the lack of any governance or compensation concerns.Overall, shareholders appreciated the opportunity to engage in these discussions and learn more aboutwe are committed to continuing our shareholder engagement in the SIP. They also appreciated the company’s willingness to consider their input on both executive compensation and governance practices. future.TABLE OF CONTENTS
COMPENSATION DISCUSSION AND ANALYSIS
Compensation Program Structure Our executive compensation philosophy is to reward performance that helps us achieve our corporate objectives, increase shareholder returns, attract and retain talented individuals, and promote a culture of ownership and accountability in the company. We do this by: Offering base salaries that reflect the competitive market as well as the roles, skills, abilities, experience, and performance of employees; Providing incentive opportunities for all employees based on the achievement of corporate and individual performance goals; and Aligning the interests of management and shareholders by offering long-term cash and equity awards that are performance-based and requiring senior officers to own and retain a specified value of shares. Our long-term incentive awards are granted in the current year based on performance from the prior year (i.e., awards granted in 2021 were based on 2020 performance; see page 63 for additional details). •2022 UNUM PROXY STATEMENT | Aligning the long-term interests of management and shareholders by offering performance- based equity compensation opportunities and requiring senior officers to own and retain a specified value of shares. Our long-term incentive awards are granted in the current year based on performance from the prior year (i.e., awards granted in 2020 were based on 2019 performance; see page 71 for additional details). |
COMPENSATION DISCUSSION AND ANALYSIS Elements of Pay There are five primary elements of pay in our 20202021 executive compensation program, which are summarized in the following table. | | | | | | SHORT-TERM | | | LONG-TERM(1)
| | | | | | | BASE PAY | SHORT-TERM | LONG-TERM (1) | RETIREMENT &
WORKPLACE
BENEFITS | | | ANNUAL INCENTIVE | ANNUAL
INCENTIVE
CIUs (2) | | | PERFORMANCE-
BASED RSUs | PSUs(2)
| | | RETIREMENT &
WORKPLACE
BENEFITS
| Primary Purpose | | | Reflects the market for similar positions as well as individual skills, abilities & performance | | | Rewards short-term performance(3) | | | Rewards long-term performance, aligns interest with stockholders & promotes a culture of ownership and accountability(3) | | | Addresses health, welfare & retirement needs | Performance Period | Ongoing | | Ongoing
| | | 1 year
| | | 1 year (vests(4) | 3 years prospective (4) | 1 year (vests over 3 years)(4) | | | 3 years prospective
| | | N/A | Form | | | <--------------- Cash ---------------> | Equity | | <--------------- Equity --------------->
| | | N/A | Payment/Grant Date | Ongoing | | Ongoing
| | | <----- In March based on prior year performance -----> | | | Ongoing |
(1)
| (1) | Excludes the Success Incentive Plan (SIP) awards granted in 2020, which are not viewed as part of the current annual compensation program. For further detailsan overview of this grant, see Vesting of 2020 Success Incentive Plan Awards section on page 66. A full explanation of and rationale for the SIP seeawards, which were granted in 2020, can be found on page 62. of our 2021 Proxy Statement. |
(2)
| (2) | Beginning with the March 1, 2021 grant, cash incentive units (CIUs) will replacereplaced PSUs. See the "Long-Term Incentive" section beginning on page 6562 for further details on this decision and the applicable performance criteria. |
(3)
| (3) | For details on performance measures see “Annual"Annual and Long-Term Incentive Programs”Programs" beginning on page 66.58. |
| (4)
| A performance threshold goal must be achieved before participants are eligible to receive an award. If the goal is not achieved, no awards are granted. |
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COMPENSATION DISCUSSION AND ANALYSIS
Those pay elements that are “at"at risk,”" or contingent upon individual or corporate performance, are noted in the charts below. Our NEOs as the most senior officers of the company, have a substantial majority of their targeted total direct compensation (fixed salary and variable annual and long-term incentive awards) at risk. This design creates an incentive for achievement of performance goals (short- and long-term) and aligns the interests of our executives with those of our shareholders. For 2020,In 2021, 90% of Mr. McKenney’s targeted total direct compensation was at risk. For the remaining NEOs, an average of 75%76% of their aggregate targeted total direct compensation was at risk.
(1)
| (1) | Excludes the SIPSuccess Incentive Plan awards, which are discussed in further detail on page 66. |
| 56 | 2022 UNUM PROXY STATEMENT |
COMPENSATION DISCUSSION AND ANALYSIS Components of Executive Compensation Base Salary, Annual and Long-Term Incentives Salaries for our NEOs are established based on their position, skills, experience, responsibilities, and performance. Competitiveness of salary levels is assessed annually relative to the approximate median of salaries in the marketplace using the benchmarking sources noted beginning on page 74 for similar executive positions. Adjustments may be considered for factors such as changes in responsibilities, individual performance, and/or changes in the competitive marketplace. Annual and long-term incentive targets are set based on consideration of each NEO’s current target, the approximate median of the appropriate comparator group, and each individual’s target relative to other NEOs given their respective levels of responsibility. For purposes of determining the amount of annual incentive and long-term incentive awards for our NEOs, the Committee establishes a target amount as a percentage of each executive’s salary, except that the long-term incentive target is set as an absolute dollar amount for the CEO. At its February 2022 meeting, after consideration of company and individual performance during 2021, each executive's responsibilities, tenure and market data, the Committee made decisions on our NEOs' base salaries and annual and long-term incentive targets for 2022 as outlined in each NEO's "Performance Assessment and Highlights" summary beginning on page 67. The Committee believes the 2022 compensation decisions position all of our NEOs' targeted total direct compensation within an appropriate range of the market median given each executive's performance and tenure in his or her current position. Individual Performance Evaluations Individual performance is evaluated by the Committee against each NEO's goals and metrics, specific to his or her respective business area. These goals and metrics are set at the beginning of the year and include the following performance categories: Business and financial objectives the Board approved for the company; Strategic objectives by business area; Talent management initiatives; Building a culture of inclusion and diversity; and Operational effectiveness and efficiency. Evaluation Criteria In evaluating how effectively the NEOs met their goals, the Committee considers: Company performance; For the CEO, the Board’s assessment of his performance, as well as his self-assessment; For NEOs other than the CEO, the performance assessments of the NEOs which are completed by the CEO. The performance assessment is based on a combination of performance feedback from the individual's direct manager, peers, direct reports, and other partners, as well as the individual’s self-assessment; and Written assessments by Board members of each NEO against their stated goals in the areas listed below. | 2022 UNUM PROXY STATEMENT | 57 |
COMPENSATION DISCUSSION AND ANALYSIS | CEO | | Other NEOs | | ✓ | Financial performance | ✓ | Demonstrated performance | | ✓ | Leads strategy and aligns goals | ✓ | Commitment to the enterprise and their business unit | | ✓ | Directs resources and talent to achieve strategic initiatives | ✓ | Ability to balance complex and competing factors | | ✓ | Drives execution | ✓ | Builds relationships and communicates to all stakeholders | | ✓ | Manages risk while leading for the future | ✓ | Effectively manages board relations | | ✓ | Sets cultural norms | ✓ | Strategic and succession planning, and leadership development | | ✓ | Understands and proactively addresses emerging issues | ✓ | Demonstrates leadership | | ✓ | Builds relationships and communicates to all stakeholders | ✓ | Building and sustaining a high-functioning organization | | ✓ | Understands governance and fosters board relationships | | |
Based on the NEOs' individual performance goals and the performance assessments completed by their manager and Board members, the Committee approves an individual performance percentage for each NEO, which is used to adjust the earned annual incentive and long-term incentive awards between 0% and 125%. These percentages were used to calculate the final payout of 2021 annual incentives and long-term incentive awards granted in 2022 as described under "Performance Assessment and Highlights" on page 67. Annual and Long-Term Incentive Programs Company Performance Targets Each year, the Committee sets corporate performance measures along with targets for each performance measure. The Committee assigns weightings to each performance measure based on relative importance to the company, and uses actual performance against these measures to calculate annual and long-term incentive award values. Targets for each performance measure align with our core operating principles: Strong operational performance Disciplined growth Effective risk management Consistent capital generation The performance measures in incentive plans are a direct output of our business plans, which are approved by the Board each year. Goal Rigor When designing our business plans, we carefully balance the current performance of the business and the risk appetite of the enterprise with an appropriate amount of stretch designed to drive consistent growth and improvement. External economic factors are also considered, including: (1) the overall economic growth rate, (2) employment and wage growth, which impacts our overall premium levels, and (3) the interest rate and investment environment, which can have a significant impact on our overall profit margins. We set challenging performance measures within our business plans to align their achievement with long-term value for shareholders. As part of this process, we conduct sensitivity testing to assess upside and downside risk, which is then reviewed to ensure an appropriate degree of rigor in the plan. In setting certain goals, such as for ROE, we consider factors beyond the desire for absolute growth, including the natural increase in the proportion | 58 | 2022 UNUM PROXY STATEMENT |
COMPENSATION DISCUSSION AND ANALYSIS of equity backing our Closed Block lines of business, as well as investments required to maintain the above-industry average ROE in our core operations. Additionally, we need to consider extraordinary circumstances such as the recent COVID-19 pandemic which create unavoidable impacts upon our business and the market in general. Balancing these multiple considerations, particularly in reflection of the expected ongoing implications of COVID-19 on all aspects of our business during 2021, led to a lower ROE and EPS expectation for 2021 relative to 2020.
Based on the above, the Committee established performance measures and incentive payout targets that appropriately align pay with performance. During 2021, the payout opportunity for each performance measure was 0-150%. Based on a review of proxy peer practices, the Committee determined to change the payout opportunity for each measure to 0-200%, in alignment with market practices, effective in 2022. The majority of our peers have maximum payouts under their plans of 200% of target. As part of this change, the Committee removed the individual multiplier for Executive Vice Presidents and the CEO. The CEO will continue to have discretion with respect to his recommendations to the Committee for the Executive Vice Presidents. Our incentive plans are subject to an annual risk assessment by our Chief Risk Officer, which is discussed with the Committee as described on page 37. Annual Incentive Plan Each performance measure has been selected because the Committee believes it is an appropriate driver of long-term shareholder value: | Annual Incentive Performance Measure | 2021 Weighting | | Purpose | | After-Tax Adjusted Operating Earnings Per Share | 35% |  | Measures profitability achievement | | Consolidated Adjusted Operating Return on Equity | 15% |  | Measures effectiveness of balancing profitability and capital management priorities | | Earned Premium | 15% | | Measure growth and competitiveness of the business | | Sales | 15% | | Customer Experience | 10% | | Measure effective and efficient customer service | | Operating Expense Ratio | 10% | | | | |
Our annual incentive awards reward performance based on the achievement of both company and individual performance, which the Committee believes aligns compensation with the objectives of shareholders. Subject to eligibility requirements, non-sales employees (including our NEOs) are eligible to receive an annual incentive award each year. Our plan has objective performance targets which are used to determine overall company performance. The process for determining the 2021 annual incentive awards was as follows: | ($) | × | (%) | × | (%) | = | ($) | | | 2021 Annual Incentive
Target for NEOs | 2021 Company
Performance(1) | 2021 Individual
Performance(2) | 2021 Annual
Incentive Award | | | |
| (1) | The Committee exercises discretion as to the final percentage considering all performance measures, including, but not limited to, the quality of financial results. For details on adjustments for 2021, see discussion below. |
| (2) | Individual performance may range from 0% to 125%. Individual performance adjustments for 2021 are described beginning on page 62.68. |
| 2022 UNUM PROXY STATEMENT | 59 |
COMPENSATION DISCUSSION AND ANALYSIS Incentive Funding Performance Requirement The funding of awards under our Annual Incentive Plan (AIP) is conditioned on the company achieving a specified level of performance. In 2021, the AIP required $250 million of statutory after-tax operating earnings to fund payments under the plan. In 2021 the Committee also conditioned the funding of grants under the long-term incentive plan on this same performance requirement. The company successfully achieved the requirement for funding the 2021 annual incentive awards and the long-term incentive grants made in March 2022. The funding requirement was originally included in our plan as part of the "qualified performance-based compensation" exception under Section 162(m). The Tax Cuts and Jobs Act of 2017 eliminated this exception to the annual deduction limit established by Section 162(m). Therefore, the Committee adopted a new AIP beginning with the 2022 performance year, which eliminates all previous Section 162(m) design elements, including the funding requirement. Our plans will continue to have objective, performance-based goals which will be used to determine incentive plan payouts. Items Excluded When Determining Company Performance When establishing the performance measures and weightings for 2021, the Committee determined that the effect of certain items not included in the 2021 financial plan would be removed from the calculation of the company’s performance, for purposes of both the annual and long-term incentive plans, should they occur. The Committee believes it is appropriate to exclude the items below because they: (1) are unusual or infrequent in nature, (2) do not directly reflect company or management performance, or (3) could serve as a disincentive to capital management or other decisions in the best interest of the company and shareholders. The Committee has approved the same criteria for 2022, adding three new items to align with the definition of operating income (last three bullets). The items are: Unplanned adjustments resulting from accounting standards and/or policy changes, legal, tax or regulatory rule or law changes; The impact of any unplanned acquisitions, divestitures or block reinsurance transactions; Unplanned adjustments to the Closed Block of business; The effect of any unplanned regulatory, legal or tax settlements; The effect of unplanned changes to strategic asset allocation; Unplanned debt issuance, repurchasing or retirement; or stock repurchase or issuance; The effect of differences between actual currency exchange rates versus exchange rates assumed in the financial plan; Unplanned fees or assessments, including tax assessments, from new legislation; The effect on revenue from unplanned variances from floating rate securities and index-linked securities (for our Investments Plan only); The effect of a global pandemic and other economic and environmental pressures impacting results; Unplanned reserve assumption updates; The effect of asset Impairments - including, but not limited to, premiums receivable, reinsurance recoverable, property and equipment, right-of-use assets, value of business acquired and goodwill; and Unplanned restructuring costs. | 60 | 2022 UNUM PROXY STATEMENT |
COMPENSATION DISCUSSION AND ANALYSIS Annual Incentive Results | 2021 ANNUAL INCENTIVE TARGETS AND RESULTS ($ in millions, except per share data) | | Threshold(1) | Target(1) | Maximum(1)
| Component Weight | Result | | Unum Group (actual results in blue) | | | | | | After-tax adjusted operating earnings per share(2) |  | 35% | Capped at maximum | Consolidated adjusted operating return on equity(3) |  | 15% | Capped at maximum | | Earned premium(4) |  | 15% | Slightly below target | | Sales |  | 15% | Below target | | Customer experience(5) |  | 10% | Slightly below target | | Operating expense ratio(6) |  | 10% | Slightly above target |
| (1) | For each performance measure, there is no payout at or below the threshold. The payout would be 150% for performance at or above the maximum. For performance between defined levels, the payout is interpolated. |
| (2) | After-tax adjusted operating earnings per share is defined as net income adjusted to exclude after-tax net investment gains or losses and amortization of the cost of reinsurance as well as certain other items specified in the reconciliation of non-GAAP financial measures in Appendix B of this proxy statement divided by dilutive outstanding weighted average shares. Investment gains or losses primarily include realized investment gains or losses, expected investment credit losses, and gains or losses on derivatives. |
| (3) | Consolidated adjusted operating return on equity is calculated by dividing after-tax adjusted operating income by the average of the beginning- and end-of-year stockholders’ equity adjusted to exclude the net unrealized gain or loss on securities and the net gain on hedges. |
| (4) | Earned premium is calculated for our core operations (Unum US, Unum International, and Colonial Life). |
| (5) | Customer experience is based on the quality of our customers' experiences and includes measures focused on areas that impact customer loyalty and satisfaction. |
| (6) | The operating expense ratio is equal to operating expenses as a percentage of earned premium (or total company expense over total company earned premium) inclusive of the Closed Block and Corporate segments. |
As discussed on page 60, the Committee applied the criteria and standards approved when it established the 2021 annual incentive targets to adjust annual incentive plan performance calculations for the impact of four items which were not included in the 2021 financial plan from which the targets were initially derived: The effect of differences between actual debt issuances and resulting interest expense and the amounts assumed in the financial plan (impact to earnings); The effect of differences between actual stock repurchases and the amount assumed in the financial plan (no actual repurchases which impacted equity); The effect of differences between actual foreign currency rates and exchange rates assumed in the financial plan; and The effect of a global pandemic and other economic and environmental pressures impacting results. | – | The net effect of the COVID-19 impacts in 2021 was a decrease in operating results, with the negative implications of Life mortality overshadowing favorable impacts to the LTC product line. Importantly, we did not make any adjustments to sales or earned premium in the Annual Incentive Plan. While we know
|
| 2022 UNUM PROXY STATEMENT | 61 |
COMPENSATION DISCUSSION AND ANALYSIS
|
| that these metrics were negatively impacted by COVID-19, the actual impact was difficult to isolate and therefore not considered. |
Based on the adjustments described above, the calculated achievement was 119.9% of the plan target. Each year, the Committee also undertakes an overall assessment of the results, maintaining the discretion to make final adjustments. Any adjustments by the Committee are based on a review of the actual achievement level for each performance measure compared to the annual incentive targets, as well as a qualitative assessment of the results. Based on this assessment, the Committee approved the Unum Group Annual Incentive Plan payout level for 2021 at 120% of target, as shown below. | Unum Group 2021 Annual Incentive Plan Achievement Level | 120% | | |
The table below sets forth the target incentive and the actual annual incentive awards approved by the Committee for each NEO for 2021 performance. For a discussion of 2022 annual incentive targets for each NEO, see the "Performance Assessment and Highlights" summary beginning on page 67. The annual incentive awards of all NEOs are based on Unum Group performance, though the individual goals for Mr. Simonds include financial goals related to his business units. The following table outlines the annual incentives awarded for 2021 performance. | ANNUAL INCENTIVE PAID IN 2022 | (for 2021 performance) | | | 2021 Incentive
Target (%) | | Eligible Earnings
($) | | Company
Performance (%) | | Individual
Performance (%) | | 2021 Annual
Incentive Paid ($) | | McKenney | 210% | X | 1,050,000 | X | 120% | X | 100% | = | 2,646,000 | | Zabel | 120% | X | 620,192 | X | 120% | X | 105% | = | 937,730 | | Simonds | 130% | X | 700,000 | X | 120% | X | 105% | = | 1,146,600 | | Iglesias | 95% | X | 550,000 | X | 120% | X | 100% | = | 627,000 | | Bhasin | 100% | X | 540,000 | X | 120% | X | 100% | = | 648,000 |
Long-Term Incentive Our long-term incentive plan aligns the long-term interests of management and shareholders by tying a substantial portion of executive compensation directly to the company’s stock price. Long-term incentive awards are granted in the year following the performance year that determines their size (i.e., awards in 2021 were based on 2020 performance). Our long-term incentive award mix is based on a review of peer practices as well as what the Committee believes most appropriately retains and rewards our NEOs and ensures a significant portion of each executive’s compensation is tied to the increase of our stock price over the long-term. The mix of awards granted to each NEO in early 2021 was 50% performance-based restricted stock units (PBRSUs) and 50% cash incentive units (CIUs). The awards were granted under the Stock Incentive Plan of 2017.
All of our NEOs received long-term incentive grants in March 2021 in the form of PBRSUs and CIUs. All grants were conditioned on the company first achieving the incentive funding requirement for 2020 (as described on page 60). Actual award grant values were based on the target incentive and individual performance for 2020. PBRSUs vest ratably over three years while CIUs vest at the end of the three-year performance period | 62 | 2022 UNUM PROXY STATEMENT |
COMPENSATION DISCUSSION AND ANALYSIS dependent upon actual performance, modified (up to +/- 20%) by relative TSR. The process for determining long-term incentive awards granted in March 2021 was as follows: | | | ($) | × | (%) | = | ($) | | | | | 2020 Long-term Incentive Target for NEOs | 2020 Individual Performance | 2021 Long-term Incentive Award | | | | |
As outlined in the diagram, the total value of the long-term incentive award granted to each NEO was determined by multiplying: The NEO's long-term incentive target (a specified percentage of base salary for all NEOs except the CEO, which was set as a dollar amount), which was set by the Committee in early 2020 after considering market data from the appropriate comparator group (as described beginning on page 58 of our 2021 Proxy Statement) and the individual’s target relative to other NEOs given their respective levels of responsibility; and The individual performance percentage (from 0% to 125%) assigned to the NEO by the Committee using the individual assessment process described beginning on page 57 (for a discussion of the individual NEO performance assessments for 2020 that determined the individual performance percentage for these 2021 grants, other than for Mr. Bhasin, see disclosure beginning on page 75 of our 2021 Proxy Statement). For Mr. Bhasin, the Committee applied an individual performance percentage of 100% based on his leadership in our technology transformation. The individual performance applied for each of the NEOs is shown below in the "Long-Term Incentive Granted in 2021" table. Once the long-term incentive award value was determined, it was divided evenly between PBRSUs (50%) and CIUs (50%) for each NEO. The PBRSUs vest annually based on each NEO’s continued service over a three-year period. The CIUs vest based on the company's achievement of critical, multi-year shareholder return measures of adjusted book value growth and dividend yield, modified (up to +/- 20%) by relative TSR as described below. | LONG-TERM INCENTIVE GRANTED IN 2021 | (for 2020 Performance) | | | 2020 Long-Term
Incentive Target | | Individual
Performance | | 2021 Long-Term
Incentive Grant(2) | | McKenney | $7,000,000 | | | n/a (1) | | $7,500,000 | | | Zabel | 1,200,000 | | X | 100% | = | 1,200,000 | | | Simonds | 1,694,918 | | X | 100% | = | 1,694,918 | | | Iglesias | 742,500 | | X | 100% | = | 742,500 | | | Bhasin | 675,000 | | X | 100% | = | 675,000 | |
| (1) | After consideration of Mr. McKenney's strategic leadership highlighted on page 68 as well as the fact that his total targeted compensation was below the market median, the Committee awarded Mr. McKenney a grant of $7.5 million. |
| (2) | The amount shown is the award approved by the Committee for each NEO. Half of the amount is then converted to the respective number of PBRSUs based on the closing stock price on the date of grant. The remaining half of the amount is granted as CIUs, which are tracked and denominated in dollars. The amount included in the "Summary Compensation Table" on page 83 was calculated using the closing stock price for PBRSUs. CIUs are reported in the "Summary Compensation Table" when vested. |
| 2022 UNUM PROXY STATEMENT | 63 |
COMPENSATION DISCUSSION AND ANALYSIS | Executive | PBRSUs Granted (Mar. 2021) (#) | CIUs Granted (Mar. 2021) ($) | | McKenney | 137,868 | | 3,750,000 |
| | Zabel | 22,059 | | 600,000 | | | Simonds | 31,157 | | 847,459 | | | Iglesias | 13,649 | | 371,250 | | | Bhasin | 12,408 | | 337,500 | |
No stock is issued when the PBRSUs are granted. Instead, company stock is issued only when the grant is settled. In addition, there are no shareholder voting rights unless and until the award is settled in shares. During the performance period, dividend equivalents will accrue and settle in cash to the extent that the underlying PBRSUs vest. As described in our 2021 Proxy Statement, in early 2020, the Committee reviewed the mix of long-term incentive. Since a substantial portion of the executives' compensation is denominated in Unum shares, the Committee sought to balance stock ownership priorities against continued stock price underperformance driven by negative investor perceptions of the LTC insurance industry. These perceptions have impacted us more than our proxy peers given that only 25% of our peers have LTC exposure. After review, the Committee therefore determined to replace performance share units (PSUs) with CIUs that reward for financial performance (rather than financial performance and stock price changes), beginning with the long-term incentive grants in March 2021. The use of cash-based long-term incentive represents a departure from historical practice but was deemed appropriate by the Committee given the unique circumstances currently facing the company and its executive team. In reaching this decision, the Committee considered the following: Executives’ holdings were generally above stock ownership requirements and will remain well-aligned with shareholders; A mixture of long-term cash and equity awards allows diversification while providing multi-year incentives which are less impacted by the potential volatility associated with the LTC block, enabling greater focus on the achievement of key objectives; and The CIUs would remain aligned to shareholder interests given the performance measures outlined below, which include a relative TSR component. The Committee determined that CIUs will be earned based on the achievement of critical, multi-year shareholder return measures of adjusted book value growth and dividend yield. CIUs will be measured over a three-year performance period from January 1, 2021 through December 31, 2023. Awards can be earned up to a maximum of 200% of the targeted CIU award value following completion of the performance period based on the company's performance against these metrics. The achievement will be modified (up to +/-20%) based on our TSR relative to the eight members of our "Performance Peer Group." The eight companies in the Performance Peer Group (Aflac, Hartford Financial Services, Lincoln Financial, MetLife, Principal Financial, Prudential Financial, Globe Life (f/k/a Torchmark) and Voya Financial) were selected because they are considered to be direct business competitors of Unum (see discussion beginning on page 74 for the differences between our Proxy Peer Group and Performance Peer Group). We believe it is appropriate to modify these awards based on relative TSR performance, since Unum’s individual TSR performance directly affects the value realized by our shareholders. The illustration below outlines the three-year performance metrics established by the Committee for the CIU grants made in March 2021. | 64 | 2022 UNUM PROXY STATEMENT |
COMPENSATION DISCUSSION AND ANALYSIS  Vesting of 2019 Performance Share Units (PSUs) The long-term incentive mix for our NEOs' 2019 awards included 50% in the form of PSUs, which vested based on performance over a three-year performance period that ended on December 31, 2021. The table below provides an overview of the three-year goals for the 2019 PSU grant as well as their actual achievement levels. | 2019 PERFORMANCE SHARE UNIT (PSU) AWARDS | | Corporate Performance Factors | Component Weighting | Threshold | Target | Maximum | Result | | Unum Group | | | | | | | Average 3-year Adjusted Operating Return on Equity (2019-2021) | 50% |  | Below Target 11.24% | | Average 3-year After-Tax Adjusted Operating EPS (2019-2021) | 50% |  | Below Target $5.14 | | Relative Total Shareholder Return | Modifier Percentile | ' -20% @ 35th | 0 @ 50th | '+20% @ 75th | -20% @ 0th |
Based on the above performance, and after taking into account the factors described below, in February 2022, the Committee certified the results for this grant and approved a payout. The business goals were achieved at 79.3%, with relative TSR at the lowest percentile which resulted in a 20% decrease for a final payout of 63.4%. As discussed under "Items Excluded When Determining Company Performance," beginning on page 60, when setting the performance measures and weightings for the 2019 PSU grant, the Committee determined that certain items not included in the financial plan for fiscal years 2019 to 2021 would be excluded from the calculation of the company’s performance. Applying the criteria and standards approved by the Committee, PSU targets were adjusted for the impact of the following items. Each item impacted both earnings and equity unless otherwise noted below: The effect of accounting policy changes for ASC 326 Credit Losses; The effect of the UK tax rate change from planned rate of 17% to 19%; The effect of differences between actual debt issuances and the amount assumed in the financial plan; | 2022 UNUM PROXY STATEMENT | 65 |
COMPENSATION DISCUSSION AND ANALYSIS The effect of differences between actual foreign currency rates and the exchange rates assumed in the financial plan; The effect of differences in the market value of net investment income; The effect of accounting policy changes for ASC 842 Leases (impact to equity only); The effect of UK tax rate change from 19% to 25% (impact to equity only); The effect of impairment loss on right of use (ROU) asset related to operating lease for office space not planned to support general operations (impact to equity only); The effect of an individual disability reserve increase, an individual disability transaction, a long-term care reserve increase and a group pension reserve increase, each within the Closed Block of business (impact to equity only); The effect of differences between actual stock repurchases and the amount assumed in the financial plan (impact to equity only); and The cost related to early retirement of debt (impact to equity only). No adjustments were made to the 2019 PSU targets to reflect the impact of the COVID-19 pandemic on our business. Vesting of 2020 Success Incentive Plan Awards As described in the 2021 Proxy Statement, the 2020 Success Incentive Plan (SIP) was a grant under which 10 executives, including each of the named executive officers, received a one-time special performance grant. The SIP awards were designed to encourage the achievement of critical business outcomes and to incent executives to continue employment with the company over the long term. The SIP awards include both cash success units (CSUs) and stock success units (SSUs). The SIP awards will vest in full on the sixth anniversary of the grant date (August 2026), subject to the executive's continued employment, with the opportunity for one-third to vest after the one-, three- and five-year performance periods based on the company's achievement of three performance hurdles: | (1) | Maintaining average NAIC risk-based capital ratios of at least 325%, each measured at calendar quarter-ends over the applicable performance period; |
| (2) | Maintaining average levels of holding company cash in excess of 1.0 times average fixed costs (which includes dividends to shareholders and interest payments due on outstanding indebtedness), each measured at calendar quarter-ends over the applicable performance period; and |
| (3) | Achieving annual (or compounded annual) growth rates of 3% or more in adjusted book value (which excludes accumulated other comprehensive income or loss). |
In February 2022, the Committee reviewed and certified that the above three performance hurdles were met for the performance period January - December 2021. Therefore, the first one-third of CSUs and SSUs vested and were distributed. Details on SSUs vested during 2021 for each of the NEOs can be found at the "Option Exercises and Stock Vested" table on page 87. The values of vested CSUs are included in the "Summary Compensation Table" on page 83 (footnote 2 includes details for each of the NEOs). As noted in "2021 Say-on-Pay Vote and Shareholder Outreach" on page 55, the Company received 92% support for say-on-pay in 2021, as well as positive feedback from shareholders specifically related to the detailed disclosure and rationale of the 2020 Success Incentive Plan (SIP) awards in our 2021 Proxy Statement. | 66 | 2022 UNUM PROXY STATEMENT |
COMPENSATION DISCUSSION AND ANALYSIS Performance Assessment and Highlights The NEOs’ achievement levels, for purposes of the 2021 annual incentive awards paid and long-term incentive awards granted in March 2022, were determined in part based on the individual performance goal areas listed in the "Individual Performance Evaluations" beginning on page 57. The NEO summaries, beginning on the next page, detail the Committee's decisions for each element of compensation as well as highlights of each executive's performance. These summaries also include each NEO's annual compensation as well as their compensation targets for 2021 and 2022. | 2022 UNUM PROXY STATEMENT | 67 |
COMPENSATION DISCUSSION AND ANALYSIS  | | | ACTUAL COMPENSATION(1) | | 2021 | | | Base Salary | $1,050,000 | | AI | $2,646,000 | | LTI | $8,400,000 | | 2020 | | | Base Salary | $1,078,846 | | AI | $1,812,462 | | LTI | $7,500,000 | | | | COMPENSATION TARGETS | | 2022 | | | Base Salary | $1,100,000 | | AI Target | 230% | | LTI Target | $8,400,000 | | 2021 | | | Base Salary | $1,050,000 | | AI Target | 210% | | LTI Target | $7,500,000 | |
RICHARD P. McKENNEY President, Chief Executive Officer and a Director In assessing Mr. McKenney's performance for 2021, the Committee noted that he: Effectively guided the company through an exceedingly challenging year of significant disruption from the pandemic, including substantially elevated COVID related life and disability claims. Through this uncertainty, Mr. McKenney drove the company’s continued focus on our Purpose of helping the working world thrive throughout life’s moments, while delivering solid financial results. Proactively managed capital generation and deployment in an uncertain environment, positioning Unum well to respond to future opportunities and challenges. The company’s strong capital position allowed us to weather ongoing economic uncertainty while maintaining the flexibility needed to invest in product innovation, digital transformation and talent recruitment and retention. Unum also returned $290.6 million to shareholders. Drove a proactive change agenda to steer Unum through the ongoing evolution of the workplace and prepare customers for a digitally focused future. Mr. McKenney oversaw operational realignments and planning for a shift to a hybrid work model that prepared the company to successfully meet the challenges of the environment, and championed investments in technologies that continue to enhance digital engagement with customers. Strengthened the company’s commitment to integrity, sustainability and social responsibility through a variety of ESG and other programs that reflects the goals of the company, investors and other key stakeholders. Mr. McKenney led efforts to promote inclusion and diversity of thought, mental health and social justice throughout the company and externally. Independent recognition of Unum’s efforts demonstrate the integration of specific goals to drive long-term company sustainability. Led the company’s ongoing efforts to responsibly manage its Closed Block of business. Completion of a reinsurance transaction for Unum’s legacy individual disability block and accelerated funding of planned contributions to long term care reserves highlight active management of the block and provide predictable performance and effective capital planning. The Committee weighed the above individual achievements along with the Company's overall performance during a challenging year. Even so,the pandemic has shown that the need for our products and services has never been clearer and continues to grow. The Committee believes the company is well-positioned for long-term success through the actions of Mr. McKenney. Given these accomplishments and considerations, the Committee awarded Mr. McKenney an individual performance percentage of 100% for his 2021 annual incentive award and a LTI award of $8.4 million with no specific individual/strategic factor applied for his LTI award granted in March 2022. Further, the Committee with its consultant, Pay Governance LLC, reviewed Mr. McKenney's total targeted compensation relative to proxy peers and determined that his pay was 14% below median. After considering his experience, his performance in the CEO role, and the leadership that he has shown during his almost seven years in the role, the Committee decided to increase Mr. McKenney’s annual base salary by 5% to $1.1 million; annual incentive target from 210% to 230%; and long-term incentive target opportunity from $7.5 million to $8.4 million. These decisions reflect Mr. McKenney's steady leadership and strategic positioning of the company. Even with these adjustments, Mr. McKenney's targeted total direct compensation continues to be below the median of our proxy peer group.
| (1) | Base salary shown is the earnings for the year. Annual incentive (AI) and long-term incentive (LTI) amounts are the decisions related to that performance year (e.g., annual and long-term incentive paid/granted in 2022 were determined based on 2021 performance and therefore are shown as 2021 compensation). For LTI, this presentation is different than the Summary Compensation Table (see page 83), which reports equity awards in the year granted. The above is not a replacement for the Summary Compensation Table. |
| 68 | 2022 UNUM PROXY STATEMENT |
COMPENSATION DISCUSSION AND ANALYSIS  | | | ACTUAL COMPENSATION(1) | | 2021 | | | Base Salary | $620,192 | | AI | $937,730 | | LTI | $1,546,875 | | 2020 | | | Base Salary | $617,308 | | AI | $597,554 | | LTI | $1,200,000 | | | | COMPENSATION TARGETS | | 2022 | | | Base Salary | $640,000 | | AI Target | 135% | | LTI Target | 250% | | 2021 | | | Base Salary | $625,000 | | AI Target | 120% | | LTI Target | 225% | |
STEVEN A. ZABEL Executive Vice President, Chief Financial Officer In assessing Mr. Zabel's performance for 2021, the Committee noted that he: Continued to grow and execute in the role of chief financial officer during a challenging economic and regulatory environment. Mr. Zabel delivered key advancements in the Finance team’s capabilities around forecasting and effective capital management transactions which provided clear insight and financial flexibility during an unprecedented time. Unum also received upgrades from key rating agencies on the company’s outlook. Delivered solid financial results given the ongoing disruption caused by the pandemic. Continued stability in premiums, effective expense management and a laser focus on risk management led by Mr. Zabel have helped Unum respond to the unique challenges we faced. Enhanced our strong capital position through sustained engagement across key initiatives. Unum unlocked significant capital through a reinsurance transaction and debt issuance at historically low rates and took other steps to position us to invest in growth. Took steps to enhance predictability in the Closed Block. In addition to completing the IDI reinsurance transaction, Mr. Zabel drove efforts to accelerate Unum’s funding of planned contributions to long term care reserves and actively led operations for the block during a leadership transition. Strengthened the culture and operation of the Finance team. Mr. Zabel’s promotion of inclusion, diversity of thought and social responsibility to better serve stakeholders has enhanced engagement with the team, while his planning for key leadership changes has positioned the organization well to continue steering key initiatives at Unum. Given Mr. Zabel's leadership during the continuing pandemic as well as enhancements to forecasting and effective capital management transactions, the Committee applied individual performance percentages of 105% for Mr. Zabel’s 2021 annual incentive award and 110% for his long-term incentive award granted in March 2022. As previously disclosed, the Committee has a practice of positioning our executives' pay below median pay of external peers as they are promoted into a role and gradually making adjustments to full competitive norms as performance and experience in the job grows. After considering his performance in the CFO role as well as his positioning relative to the market, the Committee set his annual and long-term incentive targets for 2022 to 135% and 250%, respectively. (1) | Base salary shown is the earnings for the year. Annual incentive (AI) and long-term incentive (LTI) amounts are the decisions related to that performance year (e.g., annual and long-term incentive paid/granted in 2022 were determined based on 2021 performance and therefore are shown as 2021 compensation). For LTI, this presentation is different than the Summary Compensation Table (see page 83), which reports equity awards in the year granted. The above is not a replacement for the Summary Compensation Table. |
| 2022 UNUM PROXY STATEMENT | 69 |
COMPENSATION DISCUSSION AND ANALYSIS  | | | ACTUAL COMPENSATION(1) | | 2021 | | | Base Salary | $700,000 | | AI | $1,146,600 | | LTI | $1,925,000 | | 2020 | | | Base Salary | $718,846 | | AI | $735,785 | | LTI | $1,694,918 | | | | COMPENSATION TARGETS | | 2022 | | | Base Salary | $720,000 | | AI Target | 140% | | LTI Target | 300% | | 2021 | | | Base Salary | $700,000 | | AI Target | 130% | | LTI Target | 275% | |
MICHAEL Q. SIMONDS Executive Vice President, Chief Operating Officer In assessing Mr. Simonds' performance for 2021, the Committee noted that he: Steered the company to greater operational excellence during a period of significant uncertainty. Mr. Simonds leveraged strong existing relationships within Unum and among key customers to introduce clear strategic goals, strengthen workforce planning, drive differentiation in the market and promote adoption of digital tools. Effectively guided critical leadership transitions during the year for key operating segments. Mr. Simonds brought high-level talent into the organization to lead our International and Solutions business while leveraging our internal talent pipeline for key roles on the Colonial Life leadership team. Led the company’s operational areas to deliver on our Purpose throughout the significant disruption of the pandemic. The operational areas have managed substantial increases in COVID-related life and disability claims, and leaves administered, while continuing to deliver new enrollment and service capabilities. Drove product and service innovation across business lines. Introducing digital-first offerings like Unum Total Leave™, Unum Behavioral Health and Unum Vaccine Verifier™ provided creative solutions to key workplace challenges, while an ongoing focus on the customer experience resulted in high service marks. Continues to be a strong advocate for inclusion and diversity. Mr. Simonds has led by example through active mentorships, participation in ally groups, setting clear expectations for inclusive hiring practices and encouraging greater diversity of thought. Given these accomplishments, the Committee applied individual performance percentages of 105% for Mr. Simonds’ 2021 annual incentive award and 100% for his long-term incentive award granted in March 2022. Based on a review of Mr. Simonds' performance in the COO role, as well as his competitive positioning relative to the market, the Committee set his annual and long-term incentive targets for 2022 to 140% and 300%, respectively.
| (1) | Base salary shown is the earnings for the year. Annual incentive (AI) and long-term incentive (LTI) amounts are the decisions related to that performance year (e.g., annual and long-term incentive paid/granted in 2022 were determined based on 2021 performance and therefore are shown as 2021 compensation). For LTI, this presentation is different than the Summary Compensation Table (see page 83), which reports equity awards in the year granted. The above is not a replacement for the Summary Compensation Table. |
| 70 | 2022 UNUM PROXY STATEMENT |
COMPENSATION DISCUSSION AND ANALYSIS  | | | ACTUAL COMPENSATION(1) | | 2021 | | | Base Salary | $550,000 | | AI | $627,000 | | LTI | $742,500 | | 2020 | | | Base Salary | $571,154 | | AI | $434,077 | | LTI | $742,500 | | | | COMPENSATION TARGETS | | 2022 | | | Base Salary | $565,000 | | AI Target | 100% | | LTI Target | 145% | | 2021 | | | Base Salary | $550,000 | | AI Target | 95% | | LTI Target | 135% | |
LISA G. IGLESIAS Executive Vice President and General Counsel In assessing Ms. Iglesias' performance for 2021, the Committee noted that she: Provided effective leadership of a diverse organization beyond the scope of most general counsels. The legal, audit, government affairs, ethics, compliance and corporate services teams continue to provide excellent support of evolving corporate needs under Ms. Iglesias’ leadership during a time of ongoing change. Effectively guided the company through a dynamic legislative environment during the pandemic. Unum remained well-prepared to navigate the diverse workplace regulatory environment that had varying impacts on our company and customers. Remains a key and compelling voice for inclusion across the enterprise. Ms. Iglesias’ championing of diversity of thought, encouraging active participation among employees, advocating for social justice and serving as a thought leader in this space have enhanced our inclusion and diversity programs throughout Unum. Continued her work to further strengthen our culture of ethical conduct. Ms. Iglesias and her team remain persuasive advocates for Unum values and through the efforts of the team were recognized as among the World’s Most Ethical Companies by Ethisphere. Oversaw efforts to prepare for our shift to a hybrid work environment. Under the guidance of Ms. Iglesias, the Corporate Services team provided extensive logistical leadership to facilitate our employees anticipated return on a flexible schedule and developed creative ways to encourage engagement across the workforce. Given these accomplishments, the Committee applied individual performance percentages of 100% for Ms. Iglesias' 2021 annual incentive award and 100% for her long-term incentive award granted in March 2022. Based on a review of Ms. Iglesias' performance, as well as her competitive positioning relative to the market, the Committee set her annual and long-term incentive targets for 2022 to 100% and 145%, respectively.
| (1) | Base salary shown is the earnings for the year. Annual incentive (AI) and long-term incentive (LTI) amounts are the decisions related to that performance year (e.g., annual and long-term incentive paid/granted in 2022 were determined based on 2021 performance and therefore are shown as 2021 compensation). For LTI, this presentation is different than the Summary Compensation Table (see page 83), which reports equity awards in the year granted. The above is not a replacement for the Summary Compensation Table. |
| 2022 UNUM PROXY STATEMENT | 71 |
COMPENSATION DISCUSSION AND ANALYSIS  | | | ACTUAL COMPENSATION(1) | | 2021 | | | Base Salary | $540,000 | | AI | $648,000 | | LTI | $675,000 | | | | COMPENSATION TARGETS | | 2022 | | | Base Salary | $540,000 | | AI Target | 100% | | LTI Target | 135% | | 2021 | | | Base Salary | $540,000 | | AI Target | 100% | | LTI Target | 125% |
PUNEET BHASIN Executive Vice President, Chief Information and Digital Officer In assessing Mr. Bhasin's performance for 2021, the Committee noted that he: Guided the Digital Transformation Organization to be a crucial delivery arm and enabler of our corporate priorities. The organization has driven digital adoption, facilitated the company’s collaboration and connectivity capabilities, and delivered new technology to help Unum reach its efficiency goals. Delivered key digital solutions to support the business. Offerings like Unum Total Leave™, Unum Behavioral Health and Unum Vaccine Verifier™ positioned the company at the leading edge in the market, while greater use of artificial intelligence and digital capabilities created a modern experience for customers and employees. Strengthened partnerships across the company. Mr. Bhasin took steps to enhance cross-functional planning and align technology resources with business deliverables to promote collaboration among disparate teams and clarify project accountability. Positioned Unum as a destination for top technology talent. In a highly competitive environment, Mr. Bhasin has increased investments to recruit key talent, retained existing high performers and enhanced career development opportunities. He also took steps to raise awareness of inclusion and diversity issues in the organization and prioritize diverse representation on the team. Fostered a collaborative and engaged technology organization. Mr. Bhasin’s actions to cultivate an engaged workforce by encouraging feedback and diversity of thought, driving positive change, and emphasizing accountability have delivered improved engagement in culture metrics. Based on the above accomplishments, the Committee applied individual performance percentages of 100% for Mr. Bhasin's 2021 annual incentive award and 100% for his long-term incentive award granted in March 2022. Based on a review of Mr. Bhasin's performance, as well as his competitive positioning relative to the market, the Committee increased his long-term incentive target for 2022 to 135%.
| (1) | Base salary shown is the earnings for the year. Annual incentive (AI) and long-term incentive (LTI) amounts are the decisions related to that performance year (e.g., annual and long-term incentive paid/granted in 2022 were determined based on 2021 performance and therefore are shown as 2021 compensation). For LTI, this presentation is different than the Summary Compensation Table (see page 83), which reports equity awards in the year granted. The above is not a replacement for the Summary Compensation Table. |
| 72 | 2022 UNUM PROXY STATEMENT |
COMPENSATION DISCUSSION AND ANALYSIS Roles of the Committee, Chief Executive Officer and Consultant The Committee, CEO, and compensation consultant each have important roles in our compensation program. The Committee, with input from the CEO and compensation consultant, has the final authority to: Evaluate, design, and administer a compensation program for our executive officers that appropriately links pay, company and individual performance, and the creation of shareholder value; Establish performance goals and certify whether they have been attained; Review the performance of the CEO, with input from the full Board, and determine his compensation; and Determine the compensation of the other NEOs. The CEO provides to the Committee: A self-assessment outlining his own performance for the year; His perspective on the business environment and the company’s performance; and Performance assessments and compensation recommendations for executives who report directly to him, which includes Mr. Zabel, Mr. Simonds and Ms. Iglesias (Mr. Simonds provides performance assessments and compensation recommendations for Mr. Arnold who reports to Mr. Simonds).included all of the other NEOs during 2021. TABLE OF CONTENTS
COMPENSATION DISCUSSION AND ANALYSIS
The CEO does not participate in any decisions related to his own compensation. Pay Governance LLC, as independent compensation consultant to the Committee, provides objective, expert analyses, independent advice, and comparative data across peer companies on executive and director compensation. Pay Governance reports directly to the Committee, which is responsible for the appointment, compensation, retention, and oversight of the work performed by the consultant. A senior representative of the compensation consultant generally attends Committee meetings, participates in executive sessions of the Committee without management present, and communicates directly with Committee members outside of meetings. The Committee has adopted a policy requiring its compensation consultant to be independent. During 2020,2021, the Committee completed its annual assessment of the independence of Pay Governance, taking into account the following factors: Compliance with the Committee’s independence policy; Other services, if any, provided to the company by the consultant; The amount of fees paid by the company to the consultant as a percentage of the consultant’s total revenues; Any business or personal relationships between the consultant (including its representatives) and the company’s directors or senior officers; and The policies and procedures the consultant has in place to prevent conflicts of interest, which include a prohibition against stock ownership in the company. Pay Governance has attested to its independence and does not provide any services to the company other than those related to director and executive compensation consulting. Fees paid to Pay Governance for such services provided in 20202021 totaled $214,721. $150,169.Based on its assessment, the Committee concluded that Pay Governance is independent under the Committee’s policy and that Pay Governance's work does not give rise to a conflict of interest. The company’s finance (including the Chief Financial Officer (CFO)), human resources, and legal staff support the Committee in its work, interacting with Pay Governance only when doing so on behalf of the Committee or concerning proposals the Committee will review for approval. Employees from these departments discuss various executive compensation topics with the Committee and Pay Governance, including how compensation plans fit in with other programs and business objectives. Although these employees may make recommendations, the final decision on all executive compensation matters rests solely with the Committee. | 2022 UNUM PROXY STATEMENT | 73 |
COMPENSATION DISCUSSION AND ANALYSIS Compensation Benchmarking The Committee compares the compensation of our NEOs to the median pay of executives in similar positions at peerindustry companies. By generally targeting each pay element to the approximate median of the applicable comparator group (as described below), we ensure the balance among the elements is competitive, while at the same time allowing company and individual performance to determine a majority of the compensation received by our NEOs. Overall, these benchmarking comparisons are used as points of reference and are secondary to the primary factors considered by the Committee when making compensation decisions. The primary factors are company performance, individual performance, the executive’s level of responsibility and tenure, internal equity considerations, the creation of shareholder value, our executive compensation philosophy, and the results of the most recent shareholder say-on-pay vote and feedback received from engagement with shareholders. TABLE OF CONTENTS
COMPENSATION DISCUSSION AND ANALYSIS
The two sources used by the Committee for benchmarking executive compensation are: For CEO and CFO compensation, a proxy peer group comprising insurance and financial services companies that are either our business competitors or primary competitors for talent (the “Proxy"Proxy Peer Group”Group"). The Proxy Peer Group is also a reference for compensation programs and practices. The composition of the Proxy Peer Group is determined by the Committee and reviewed annually as outlined below; and For the compensation of our other NEOs, the Willis Towers Watson Diversified Insurance Study of Executive Compensation (the “Diversified"Diversified Insurance Study”Study"). This source is used because responsibilities of our other NEOs may not be directly comparable with those of named executives at other companies in the Proxy Peer Group. In addition to benchmarking executive compensation, the Committee uses a subset of the Proxy Peer Group (which we refer to as the “Performance"Performance Peer Group”Group") for purposes of measuring relative TSR for our PSU and CIU awards (see page 7162 for details on these awards). This subset is selected because they are considered to be direct business competitors of Unum. The Committee evaluates the composition of the Proxy Peer Group every year. Peer companies are determined based on five primary criteria (life and health GICS code; reasonable range of: assets, revenues, and market capitalization; and competition with Unum for talent and/or market share). In the past, the Committee has discussed insurance brokers and property and casualty insurers as potential peers. However, the Committee decided not to include these companies due to the differences in business models, performance cycles and executive talent markets. Based on the most recent peer review in August 2020,2021, on average, the companies in the Proxy Peer Group met three of the five criteria. Overall, Unum is at approximately 68%90% of the revenue median (as of the 12 months ended JulyDecember 31, 2020). Additionally, 10 of the 12 peers (83%) selected Unum as a peer for compensation benchmarking purposes in their 20202021 proxy statements. During its annual Proxy Peer Group analysis in August 2020,2021, the Committee with its consultant, Pay Governance, considered other insurance and financial services companies and determined that no companies should be removed and no additional companies were appropriate for inclusion in the Proxy Peer Group at the time. Annual sensitivity tests are performed to understand the impact of both larger and smaller peers on median CEO compensation levels. For the tests conducted in 2020,2021, excluding the two smallest and two largest peers for testing purposes had no impact on CEO targeted total direct compensation. An additional sensitivity test was conducted using a common statistical approach known as regression analysis. Regression analysis considers the correlation between two factors and is commonly used to adjust compensation data to remove the effects of company size. The regression analysis considered the correlation between revenue and compensation. Based on these tests, the Committee determined that the 2021 Proxy Peer Group is appropriate. TABLE OF CONTENTS
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The following table lists the companies in the Diversified Insurance Study (DIS), Performance Peer Group and Proxy Peer Group. | 74 | 2022 UNUM PROXY STATEMENT |
COMPENSATION DISCUSSION AND ANALYSIS BENCHMARKING EXECUTIVE COMPENSATION | | | | | | | | | | | | | Proxy Peer Group Indicators | | |
Aflac | Aflac
• | • | • | • | • | • | •
| | | • | | | •
| | | •
| | | •
| | | | | | •
| | AIG | AIG
• | | | •
| | | | | | | | | | | | | | | | | | | | | | | | Allianz Life Insurance | • | | •
| | | | | | | | | | | | | | | | | | | | | | | Allstate | Allstate
• | | | •
| | | | | | | | | | | | | | | | | | | | | | | | Brighthouse Financial | • | | • | • | • | | • | | • | | | •
| | | •
| | | | | | •
| | | •
| | Cigna | Cigna
• | | | •
| | | | | | | | | | | | | | | | | | | | | | | | CNO Financial Group | • | | • | • | | • | • | | • | | | •
| | | •
| | | •
| | | | | | •
| | | Equitable Holdings (f/k/a AXA Group) | • | | • | | • | | • | | • | | | | | | •
| | | | | | •
| | | •
| | | Genworth Financial | • | | •
| | | | | | | | | | | | | | | | | | | | | | | | Globe Life (f/k/a Torchmark) | | • | • | • | • | • | • | | • | | | •
| | | •
| | | •
| | | •
| | | •
| | | Guardian Life | • | | •
| | | | | | | | | | | | | | | | | | | | | | | | Hartford Financial Services Group | • | • | • | | • | • | • | | • | | | | | | •
| | | •
| | | •
| | | •
| | | John Hancock | • | | •
| | | | | | | | | | | | | | | | | | | | | | | | Lincoln Financial Group Corporation | • | • | • | • | • | •
| • | | • | | | •
| | | •
| | | | | | •
| | | •
| | | Massachusetts Mutual | • | | •
| | | | | | | | | | | | | | | | | | | | | | | MetLife | MetLife
• | • | • | • | | | •
| | | •
| | | •
| | | | | | | | | | | | | | Nationwide | Nationwide
• | | | •
| | | | | | | | | | | | | | | | | | | | | | | | New York Life | • | | •
| | | | | | | | | | | | | | | | | | | | | | | | Northwestern Mutual | • | | •
| | | | | | | | | | | | | | | | | | | | | | | | OneAmerica Financial Partners | • | | •
| | | | | | | | | | | | | | | | | | | | | | | | Pacific Life | • | | •
| | | | | | | | | | | | | | | | | | | | | | | | Principal Financial Group | • | • | • | • | • | •
| • | | • | | | •
| | | •
| | | | | | •
| | | •
| | | Protective Life | • | | •
| | | | | | | | | | | | | | | | | | | | | | | | Prudential Financial | • | • | • | • | | •
| | | •
| | | •
| | | | | | | | | •
| | | | | | Reinsurance Group of America | | | • | | • | • | • | | • | | | | | | •
| | | •
| | | •
| | | •
| | | Securian Financial Group | • | | •
| | | | | | | | | | | | | | | | | | | | | | | | Sun Life Financial | • | | •
| | | | | | | | | | | | | | | | | | | | | | | | Symetra Financial | • | | •
| | | | | | | | | | | | | | | | | | | | | | | | Thrivent Financial | • | | •
| | | | | | | | | | | | | | | | | | | | | | | Transamerica | Transamerica
• | | | •
| | | | | | | | | | | | | | | | | | | | | | | USAA | USAA
• | | | •
| | | | | | | | | | | | | | | | | | | | | | | | Voya Financial Services | • | • | • | | • | • | • | • |
| (1) | •
| | | •
| | | •
| | | | | | •
| | | •
| | | •
| | | •
| |
(1)
| For compensation decisions made in early 2020,2021, benchmarking comparisons were made using the 20202021 Proxy Peer Group and the 20192020 DIS (the latest data available at the time). Although Unum participates in the DIS, we are excluded from this table. As previously disclosed in our 2020 Proxy Statement on page 53, Equitable Holdings was added to the 2020 Proxy Peer Group. The number of participants in the 20192020 DIS was increased by one (Allianz Life Insurance)remained the same from the prior year.
|
(2)
| (2) | The Performance Peer Group will be used for the relative TSR comparison under the 2020 PSU grants2021 and for the 20212022 cash incentive unit (CIU) grants. These companies are our direct competitors, are generally followed by the same sell-side research analysts, and generally compete with us for talent.
|
| (3)
| The Proxy Peer Group includes both property and casualtymultiline insurers, reinsurers and life and health insurers, with Unum’s assets equal to 34%33% of the peer median and the company’scompany's revenue at 79%90% of the peer median for the 12 months ended MarchDecember 31, 2020 (the most current data as of the date of the analysis). Unum is not part of the Proxy Peer Group. |
| 2022 UNUM PROXY STATEMENT | 75 |
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Components of Executive CompensationBase Salary, Annual and Long-Term IncentivesSalaries for our NEOs are established based on their position, skills, experience, responsibilities, and performance. Competitiveness of salary levels is assessed annually relative to the approximate median of salaries in the marketplace using the benchmarking sources noted beginning on page 58 for similar executive positions. Adjustments may be considered for factors such as changes in responsibilities, individual performance, and/or changes in the competitive marketplace.Annual and long-term incentive targets are set based on consideration of each NEO’s current target, the approximate median of the appropriate comparator group, and each individual’s target relative to other NEOs given their respective levels of responsibility. For purposes of determining the amount of annual incentive and long-term incentive awards for our NEOs, the Committee establishes a target amount as a percentage of each executive’s salary, except that the long-term incentive target is set as an absolute dollar amount for the CEO.
At its February 2021 meeting, after consideration of company and individual performance during 2020, each executive's responsibilities, tenure and market data, the Committee made decisions on our NEOs' base salaries and annual and long-term incentive targets for 2021 as outlined in each NEO's “Performance Assessment and Highlights” summary beginning on page 74. The Committee believes the 2021 compensation decisions position all of our NEOs' targeted total direct compensation within an appropriate range of the market median given each executive's performance and tenure in his or her current position.Individual Performance EvaluationsIndividual performance is evaluated by the Committee against each NEO's goals and metrics, specific to his or her respective business area. These goals and metrics are set at the beginning of the year and include the following performance categories:
Business and financial objectives the Board approved for the company;
Strategic objectives by business area;
Talent management initiatives;
Building a culture of inclusion and diversity; and
Operational effectiveness and efficiency.
Evaluation Criteria
In evaluating how effectively the NEOs met their goals, the Committee considers:
Company performance;
For the CEO, the Board’s assessment of his performance, as well as his self-assessment;
For NEOs other than the CEO, the performance assessments of the NEOs which are completed by the CEO or the COO (Mr. Arnold reports to the COO and the remaining NEOs report to the CEO). The performance assessment is based on a combination of performance feedback from the individual's direct manager, peers, direct reports, and other partners, as well as the individual’s self-assessment; and
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Written assessments by all Board members of each NEO against their stated goals in the areas listed below.
| ✓
| | | Financial performance
| | | ✓
| | | Demonstrated performance
| | ✓
| | | Leads strategy and aligns goals
| | | ✓
| | | Commitment to the enterprise and their business unit
| | ✓
| | | Directs resources and talent to achieve strategic initiatives
| | | ✓
| | | Ability to balance complex and competing factors
| | ✓
| | | Drives execution
| | | ✓
| | | Humility and ego maturity
| | ✓
| | | Manages risk while leading for the future
| | | ✓
| | | Effectively manages board relations
| | ✓
| | | Sets cultural norms
| | | ✓
| | | Strategic and succession planning, and leadership development
| | ✓
| | | Understands and proactively addresses emerging issues
| | | ✓
| | | Demonstrates leadership
| | ✓
| | | Builds relationships and communicates to all stakeholders
| | | ✓
| | | Building and sustaining a high-functioning organization
| | ✓
| | | Understands governance and fosters board relationships
| | | | | | |
Based on the NEOs' individual performance goals and the performance assessments completed by their managers and Board members, the Committee approves an individual performance percentage for each NEO, which is used to adjust the earned annual incentive and long-term incentive awards between 0% and 125%. These percentages were used to calculate the final payout of 2020 annual incentives and long-term incentive awards granted in 2021 as described under “Performance Assessment and Highlights” on page 74.Key Compensation DecisionsManagement Transition
As previously reported, effective February 1, 2020, Mr. Simonds was appointed as Executive Vice President, Chief Operating Officer with responsibility for optimizing business operations across the enterprise. Additionally, Mr. Arnold began reporting to Mr. Simonds after the transition, and in addition to leading Colonial Life, Mr. Arnold has taken on a lead role in shaping and driving our approach to voluntary benefits across the enterprise.
Early in 2020, prior to the outbreak of the COVID-19 pandemic, the Committee began a discussion of the strategic initiatives that need to be accomplished over the next few years, with a strong desire to ensure that the current executive team remain in place to execute on the growth plans. With an emphasis on aligning key executive rewards with these identified strategic initiatives, the Committee undertook a comprehensive review of the company’s executive compensation program, incentive arrangements and related policies, to assess their effectiveness in incentivizing implementation of the company’s strategy. The Committee focused on doing the right thing for shareholders in the long-term while making sure that it mitigated risks and incentivized the leadership team to continue to create value.
The Committee’s evaluation took into account, among other things, the company's recent financial, operating and stock price performance. While the company’s pre-pandemic financial and core operating performance has been strong, our stock price has not performed well, including relative to peer companies. One driver has been the continued negative investor perceptions surrounding the LTC industry during the last three years. The effects of the heightened industry focus on LTC impact us more
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than our proxy peers since only 25% of our peers have LTC exposure. The company closed its individual LTC business in 2009 and closed its group LTC business in 2012; in other words, these policies are no longer actively sold, but existing policies are still managed by the company. Since that time, the company has actively managed this block with a combination of rate increases, updates to our liability assumptions to reflect emerging experience, prudent cash infusions and reserve changes. These measures have led to greater stability and predictability in the performance of the LTC block while continuing to provide transparency to our shareholders and customers. However, due to general market sentiment and regulatory focus regarding the prospects for LTC insurance lines, the stock price has been negatively impacted. As a result, the Committee believes that the company’s pay for performance strategy has been and may continue to be challenged by the legacy LTC business, notwithstanding its effective management by the current executive team, all of whom were either not with the company or not in their current roles when these policies were sold.
While managing the company's closed block of LTC policies, the executive team has also continued building value for the future of the company. The Committee discussions recognized the success and continued efforts of the executive team over the past few years, including:
Finding new opportunities and showing strong capabilities by integrating and leveraging new acquisitions. This includes the recent entry into Poland markets, developing the Stop/Loss business, and adding dental and vision lines of business to the portfolio;
Developing and executing modernized technology solutions for efficient business practices;
Incorporating a culture of inclusion and diversity; and
Maintaining dividends.
Based on multiple discussions during the year, on August 24, 2020, the Committee approved several changes to the company’s executive compensation program to recognize and reinforce the executives' existing share ownership levels and maintain alignment with long-term performance objectives, while reinforcing the company's executive compensation philosophy. With these modifications, the Committee believes that the executive compensation program supports the company's efforts to ensure proper alignment with evolving market needs and changes in the company’s business. It is also important to note that these changes were not directly in response to COVID-19. As outlined above, the Committee's discussions started early in the year before the pandemic hit; however, the pandemic only served to increase the need to ensure that this team remain in place to achieve critical business outcomes over the next several years.
As part of the changes, the Committee implemented the Success Incentive Plan (SIP), under which 10 executives, including the named executive officers, received a one-time special performance grant. The SIP awards are designed to encourage the achievement of critical business outcomes and to incent executives to continue employment with the company over the long term. The SIP awards include both cash success units (CSUs) and stock success units (SSUs). The CSUs (denominated in cash) were granted with a target value equal to 70% of each executive's 2020 annual long-term incentive target. Denominating the CSUs in cash reduces the influence of the LTC business, which impacts our stock price, strengthening the alignment of the awards with core operating performance.
The number of shares underlying the SSUs granted to each executive equals the number of company shares he or she held at the time of grant and committed to continue to hold during the six-year SIP award vesting period, subject to a cap equal to the number of shares with a value equal to 50% of the executive's 2020 annual long-term incentive target. An executive's sale of any committed shares prior to the vesting of SSUs will result in the immediate proportional forfeiture of any unvested SSUs. The
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Committee believes this matching share commitment element of the SSUs reinforces the objectives of creating long-term, sustainable shareholder value and appropriately aligns executives' and shareholders' interests.
The SIP awards have a six-year term, with the opportunity for proportional accelerated vesting after one-, three- and five-year performance periods. Each performance period begins on January 1, 2021 and the SIP awards will vest in full on the sixth anniversary of the grant date (August 2026), subject to the executive’s continued employment, unless vesting is accelerated based on the company’s achievement of three performance hurdles:
(1)
| Maintaining average NAIC risk-based capital ratios of at least 325%, each measured at calendar quarter-ends over the applicable performance period; |
(2)
| Maintaining average levels of holding company cash in excess of 1.0 times average fixed costs (which includes dividends to shareholders and interest payments due on outstanding indebtedness), each measured at calendar quarter-ends over the applicable performance period; and |
(3)
| Achieving annual (or compounded annual) growth rates of 3% or more in adjusted book value (which excludes accumulated other comprehensive income or loss). |
These performance objectives support plans for the company’s continued long-term financial positioning as an “A” rated company and will provide appropriate focus on maintaining its previously disclosed targets for key capital metrics. This structure balances the unprecedented environment with the company’s long-term goals and key priorities over the next few years, while supporting long-term executive retention.
As outlined above, one-third of the SIP award will be eligible to accelerate and vest on a cumulative basis on the last day of each of the one-, three- and five-year performance periods, in each case conditioned upon achievement of the performance hurdles during the applicable performance period. When determining whether the performance hurdles have been achieved, the Committee will exclude the effect of certain items to ensure that performance is appropriately measured under normalized conditions. Any unvested portion of the SIP awards will be forfeited upon any termination of employment prior to vesting, except in the case of certain terminations following a change in control.
The following table sets forth the value of the CSUs and the total number of SSUs granted to each of the company's NEOs:| | Richard P. McKenney | | | $4,900,000 | | | 186,368 | | | | Steven A. Zabel | | | $840,000 | | | 11,328 | | | | Michael Q. Simonds | | | $1,225,000 | | | 46,592 | | | | Timothy G. Arnold | | | $437,500 | | | 16,640 | | | | Lisa G. Iglesias | | | $519,750 | | | 19,768 | |
(1)
| The CSUs were granted with a target value equal to 70% of each officer's 2020 annual long-term incentive target. |
(2)
| The number of shares subject to SSUs granted to each officer equals the number of company shares held by the executive that he or she has committed to hold during the SIP award vesting period, subject to a cap equal to 50% of the executive's 2020 annual long-term incentive target. Each of the NEOs committed to hold the maximum number of shares that they could (i.e., the greater of the number of common shares they own or 50% of their long-term incentive target). Stock units were valued at the closing stock price at the time of the grant on August 24, 2020, which was $18.78. |
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In early 2020, as part of its review of the executive compensation program, the Committee reviewed the mix of long-term incentive. Since a substantial portion of the executives' compensation is denominated in Unum shares, the Committee sought to balance stock ownership priorities against continued stock price underperformance driven by negative investor perceptions of the LTC industry. These perceptions have impacted us more than our proxy peers given that only 25% of our peers have LTC exposure. After review, the Committee therefore determined to replace PSUs with CIUs that reward for financial performance (rather than financial performance and stock price changes), beginning with the long-term incentive grants in March 2021. The use of cash-based long-term incentive represents a departure from historical practice but was deemed appropriate by the Committee given the unique circumstances currently facing the company and its executive team. In reaching this decision, the Committee considered the following:
Executives’ holdings were generally above stock ownership requirements and will remain well- aligned with shareholders;
A mixture of long-term cash and equity awards allows diversification while providing multi-year incentives which are less impacted by the potential volatility associated with the LTC block, enabling greater focus on the achievement of key objectives; and
The CIUs would remain aligned to shareholder interests given the performance measures outlined below, which include a relative TSR component.
The Committee originally intended to grant CIUs with the same performance measures used in prior PSU awards, but establishing reasonable multi-year performance targets proved to be difficult in the current environment. Business closures and pandemic-related economic impacts have disrupted our distribution system and sales activity, and it remains unclear how long we might continue to experience this disruption. Events such as further spread of the coronavirus, spikes in the number of cases or the emergence of new strains of coronavirus (including those resistant to vaccines), and the related responses by government authorities and businesses may heighten the impacts of the pandemic and present additional risks to our business.
The Committee determined that CIUs will be earned based on the achievement of critical, multi-year shareholder return measures of adjusted book value growth, dividend yield and relative TSR. CIUs will be measured over a three-year performance period from January 1, 2021 through December 31, 2023. Awards can be earned from 0% to a maximum 200% of the targeted CIU award value following completion of the performance period based on the company's performance against these metrics.
Stock Ownership and Retention Requirements
In August 2020, the Committee also approved changes to the stock ownership and retention requirements for senior officers (including the NEOs), effective January 1, 2021. Beginning in 2021, a covered officer must hold all net after-tax shares acquired upon the exercise of options and the vesting of PBRSUs, SSUs or PSUs until his or her ownership requirement is met. Once the requirement is met, the officer can sell shares only to the extent that the sale would not reduce his or her holdings below the ownership requirement. This change is aligned with the majority practice of our Proxy Peer Group. For purposes of calculating stock ownership, the Committee determined that the greater of the spot price or the preceding 12-month average closing stock price should be used to reduce volatility in outcomes.
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Annual and Long-Term Incentive ProgramsCompany Performance Targets
Each year, the Committee sets performance measures and targets for the company, which are used to calculate annual and long-term incentive awards. Weightings are assigned to each performance measure based on its relative importance to the company.
The performance targets are aligned with the company’s primary business objectives:
Strong operational performance
Disciplined growth
Effective risk management
Consistent capital generation
The performance goals in our incentive plans are a direct output of our business plans, which are approved by the Board each year.
Goal Rigor
When designing our business plans, we carefully balance the current performance of the business and the risk appetite of the enterprise with an appropriate amount of stretch designed to drive consistent growth and improvement. External economic factors are also considered, including: (1) the overall economic growth rate, (2) employment and wage growth, which impacts our overall premium levels, and (3) the interest rate and investment environment, which can have a significant impact on our overall profit margins.
We set challenging performance goals within our business plans to ensure that their achievement will drive long-term value for shareholders. As part of this process, we conduct sensitivity testing to assess upside and downside risk, which is then reviewed to ensure an appropriate degree of rigor in the plan. Additionally, in setting certain goals, such as for ROE, we consider factors beyond the desire for absolute growth, including the natural increase in the proportion of equity backing our Closed Block lines of business, as well as investments required to maintain the above-industry average ROE in our growth products. This approach to balancing multiple considerations in fact led to a lower ROE expectation for 2020 relative to 2019 given the continued investments backing our growth product lines. Similarly, we continue to maintain a portfolio of investments that will lead to long-term improvement in growth and efficiency across our insurance and service lines of business. In the short-term, these investments contributed to an expected higher operating expense ratio in 2020 relative to 2019.
After considering our business plans, the Committee establishes performance measures and incentive payout targets that appropriately align pay with performance.
Generally, the performance range for each annual incentive performance measure is set based on what is appropriate for the variability of the metric. The actual ranges for each performance metric are shown in the table on page 69. The payout range for each metric is 0-150%.To align our metrics with shareholders, both in the near term and over an extended timeframe, the Committee determined to use ROE and EPS measures under our annual and long-term incentive plans in 2020. The Committee believes that using these metrics in incentive plans that pay out over both one- year and three-year periods encourages executives to focus on both short- and long-term results. Risk of overemphasizing the metrics was mitigated by minimizing their weightings under the Annual Incentive Plan and applying a relative TSR modifier to the calculation of performance results for PSUs awarded
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under our long-term incentive plan. This risk has been eliminated with the 2021 shift from PSUs to CIUs, which do not use ROE or EPS metrics.
Our incentive plans are subject to an annual risk assessment by our Chief Risk Officer, which is discussed with the Committee as described on page 38.Annual Incentive Plan
Each performance metric has been selected because the Committee believes it is an appropriate driver of long-term shareholder value:
|
After-Tax Adjusted Operating Earnings Per Share
| | |
35%
| | | ⇨
| | |
Measures profitability achievement
| | Consolidated Adjusted Operating Return on Equity
| | | 15%
| | | ⇨
| | | Measures effectiveness of balancing profitability and capital management priorities
| | Earned Premium
| | | 15%
| | | ⇨
| | | Measures growth and competitiveness of the business
| | Sales
| | | 15%
| | | Customer Experience
| | | 10%
| | | ⇨
| | | Measures effective and efficient customer service
| | Operating Expense Ratio
| | | 10%
| |
Our annual incentive awards reward performance based on the achievement of both company and individual performance, which the Committee believes aligns compensation with the objectives of shareholders. Subject to eligibility requirements, non-sales employees (including our NEOs) are eligible to receive an annual incentive award each year. As discussed further below, an objective performance threshold is set within the Annual Incentive Plan, which must be met in order to fund the annual incentive awards. If the goal is not achieved, no awards are paid, regardless of company performance on the incentive metrics described above.
The process for determining the 2020 annual incentive awards was as follows:
| If the 2020 Performance Threshold was met, then:
| |
| ($)
| | | ×
| | | (%)
| | | ×
| | | (%)
| | | =
| | | ($)
| | | 2020 Annual Incentive
Target for NEOs
| | | 2020 Company
Performance(1)
| | | 2020 Individual
Performance(2)
| | | 2020 Annual
Incentive Award
| | | | | | | | | | | | | | | | | | | |
| If threshold was not met, then no award is paid
| |
| (1)
| | | The Committee exercises discretion as to the final percentage considering all performance factors, including, but not limited to, the quality of financial results. For details on adjustments for 2020, see discussion below.
| |
| (2)
| | | Individual performance may range from 0% to 125%. Individual performance adjustments for 2020 are described beginning on page 75. | |
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Incentive Funding Performance RequirementThe funding of awards under our Annual Incentive Plan is conditioned on the company achieving a specified level of performance because we believe employees and officers should receive incentive awards only when company performance supports the payments.
The Annual Incentive Plan requires $250 million of statutory after-tax operating earnings to fund payments under the plan, which helps to ensure our commitments to shareholders and creditors. In 2020, the Committee also conditioned the funding of grants under the long-term incentive plan on this same performance requirement.
The company successfully achieved the performance requirement for funding the 2020 annual incentive awards and the long-term incentive grants made in March 2021.
While the “qualified performance-based compensation” exception under Section 162(m) was eliminated in 2017, the Committee reaffirmed our pay-for-performance alignment and determined that our annual and long-term incentive plans will continue to be predicated upon the company achieving a specified level of performance. Therefore, in 2021, we will continue to use the performance requirement of $250 million of statutory after-tax operating earnings to fund awards under our annual and long-term incentive plans.
Items Excluded When Determining Company PerformanceWhen establishing the performance measures and weightings for 2020, the Committee determined that the effect of certain items not included in the 2020 financial plan would be excluded from the calculation of the company’s performance, for purposes of both the annual and long-term incentive plans, should they occur. The Committee believes it is appropriate to exclude these items, which are set forth below and were also approved as exclusions for the 2021 program, because they: (1) are unusual or infrequent in nature, (2) do not directly reflect company or management performance, or (3) could serve as a disincentive to capital management or other decisions in the best interest of the company and shareholders.
Unplanned adjustments resulting from accounting standards and/or policy changes, legal, tax or regulatory rule or law changes;
The impact of any unplanned acquisitions, divestitures or block reinsurance transactions;
Unplanned adjustments to the Closed Block of business;
The effect of any unplanned regulatory, legal or tax settlements;
The effect of unplanned changes to strategic asset allocation;
Unplanned debt issuance, repurchasing or retirement; or stock repurchase or issuance;
The effect of differences between actual currency exchange rates versus exchange rates assumed in the financial plan;
Unplanned fees or assessments, including tax assessments, from new legislation;
The effect on revenue from unplanned variances from floating rate securities and index-linked securities (for our Investments Plan only); and
The effect of a global pandemic and other economic and environmental pressures impacting results.
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COMPENSATION DISCUSSION AND ANALYSIS
Resiliency Scorecard
After discussions with management and Pay Governance, the Committee approved a resiliency scorecard in July 2020 to thoughtfully apply discretion in conjunction with existing annual incentive targets as a result of the unprecedented events of the COVID-19 pandemic. The purpose of the scorecard was to evaluate key management actions taken through the year to position the business to thrive after the pandemic has eased. Resiliency categories considered included: (1) finance and operations, (2) employees, (3) customers and community, and (4) shareholders and other stakeholders. Overall, the Committee’s final assessment of the resiliency scorecard highlighted a successful transition to working from home and an unwavering focus on delivering for our customers throughout 2020.
Annual Incentive Results
2020 ANNUAL INCENTIVE TARGETS AND RESULTS ($ in millions, except per share data) | Unum Group (actual results in blue)
| | | After-tax adjusted operating earnings per share(2)
| | | | | | 35%
| | | Slightly
above target
| | | Consolidated adjusted operating return on equity(3)
| | | | | | 15%
| | | Slightly
above target
| | | Earned premium(4)
| | | | | | 15%
| | | Slightly
below target
| | | Sales
| | | | | | 15%
| | | Below target
| | | Customer experience(5)
| | | | | | 10%
| | | Slightly
below target
| | | Operating expense ratio(6)
| | | | | | 10%
| | | Below target
| |
(1)
| For each performance measure, there is no payout at or below the threshold. The payout would be 150% for performance at or above the maximum. For performance between defined levels, the payout is interpolated. |
(2)
| After-tax adjusted operating earnings per share is defined as net income adjusted to exclude after-tax net realized investment gains or losses and amortization of the cost of reinsurance as well as certain other items specified in the reconciliation of non-GAAP financial measures in Appendix A of this proxy statement divided by dilutive outstanding weighted average shares.
|
(3)
| Consolidated adjusted operating return on equity is calculated by dividing after-tax adjusted operating income by the average of the beginning- and end-of-year stockholders’ equity adjusted to exclude the net unrealized gain or loss on securities and the net gain on hedges. |
(4)
| Earned premium is calculated for our core operations (Unum US, Unum International, and Colonial Life). |
(5)
| Customer experience is based on the quality of our customers' experiences and includes measures focused on areas that impact customer loyalty and satisfaction. |
(6)
| The operating expense ratio is equal to operating expenses as a percentage of earned premium (or total company expense over total company earned premium) inclusive of the Closed Block and Corporate segments. |
TABLE OF CONTENTS
COMPENSATION DISCUSSION AND ANALYSIS
Applying the criteria and standards approved by the Committee when it established the 2020 annual incentive targets, as discussed beginning on page 68, the Committee adjusted the Annual Incentive Plan performance calculations for the impact of the following five items on our 2020 financial plan results that were not included in the 2020 financial plan from which the targets were initially derived:The effect of differences between actual debt issuances and the amount assumed in the financial plan (impact to earnings);
The effect of differences between actual stock repurchases and the amount assumed in the financial plan (no actual repurchases which impacted equity);
The effect of differences between actual foreign currency rates and exchange rates assumed in the financial plan;
The effect of a tax rate change in the U.K.; and
The effect of a global pandemic and other economic and environmental pressures impacting results. These adjustments included the following impacts related to COVID-19:
° | Elevated mortality within the Life and LTC product lines; |
° | Increased short-term disability COVID-19 claims; |
° | Higher costs associated with leave management claims; and |
° | Lower travel and incentive expenses, offset by increased expenses related to transitioning employees to work from home, creating a safe office environment and increasing allowances for uncollectible premiums. |
The net effect of the COVID-19 impacts in 2020 was a decrease in operating results, with the negative implications of Life mortality overshadowing favorable impacts to the LTC product line and travel-related expenses. Importantly, we did not make any explicit adjustment to sales or earned premium in the Annual Incentive Plan. While we know that these metrics were negatively impacted by COVID-19, the actual impact was difficult to isolate and therefore not considered.
Based on the adjustments described above, the calculated achievement was 88.7% of the plan target. Each year, the Committee also undertakes an overall assessment of the results, maintaining the discretion to make final adjustments. Any discretionary adjustments by the Committee are based on a review of the actual achievement level for each performance measure compared to the annual incentive targets, as well as a qualitative assessment of the results. For 2020, the Committee recognized management's resiliency scorecard achievements, noting efforts to position the company to not only survive the pandemic but to thrive after it ends. This included the response to work from home and a focus on responsiveness to our customers in their time of need, which showed up in the positive customer experience metric. The Committee balanced financial achievements and resiliency with the impact to shareholders from our reduced stock price. Based on this assessment, the Committee approved the Unum Group Annual Incentive Plan payout level for 2020 at 80% of target, as shown below.
| Unum Group 2020 Annual Incentive Plan Achievement Level | | | 80%
| |
The table below sets forth the target incentive and the actual annual incentive awards approved by the Committee for each NEO for 2020 performance. For a discussion of 2021 annual incentive award targets for the NEOs, see the “Performance Assessment and Highlights” summary beginning on page 74.TABLE OF CONTENTS
COMPENSATION DISCUSSION AND ANALYSIS
The annual incentive awards of all NEOs are based on Unum Group performance, though the individual goals for Mr. Simonds and Mr. Arnold include financial goals related to their respective business units. The following table outlines the annual incentives awarded for 2020 performance.
ANNUAL INCENTIVE PAID IN 2021 | (for 2020 performance)
|
| | Mr. McKenney | | | 210% | | | X | | | 1,078,846 | | | X | | | 80% | | | X | | | 100% | | | = | | | 1,812,462 | | | | Mr. Zabel | | | 110% | | | X | | | 617,308 | | | X | | | 80% | | | X | | | 110% | | | = | | | 597,554 | | | | Mr. Simonds(1) | | | 127.95% | | | X | | | 718,846 | | | X | | | 80% | | | X | | | 100% | | | = | | | 735,785 | | | | Mr. Arnold | | | 90% | | | X | | | 519,267 | | | X | | | 80% | | | X | | | 95% | | | = | | | 355,179 | | | | Ms. Iglesias | | | 95% | | | X | | | 571,154 | | | X | | | 80% | | | X | | | 100% | | | = | | | 434,077 | |
(1)
| Mr. Simonds was appointed to his new role in February 2020 and the Committee increased his annual incentive target from 110% to 130%. His actual incentive target was prorated (rounded to two decimal places) based on his time in each position. |
Our long-term incentive plan aligns the long-term interests of management and shareholders by tying a substantial portion of executive compensation directly to the company’s stock price. Long-term incentive awards are granted in the year following the performance year that determines their size (i.e., awards in 2020 were based on 2019 performance). All long-term incentive awards granted in 2020 were granted under the Stock Incentive Plan of 2017. Our long-term incentive award mix is based on a review of peer practices as well as what the Committee believes most appropriately retains and rewards our NEOs and ensures a significant portion of each executive’s compensation is tied to the increase of our stock price over the long-term. The mix of awards granted to each NEO in early 2020 was 50% performance-based restricted stock units (PBRSUs) and 50% performance share units (PSUs).
All of our NEOs received a long-term incentive grant in March 2020 in the form of PBRSUs and PSUs. All grants were conditioned on the company first achieving the corporate performance threshold for 2019 (as described on page 68). Actual awards were based on the target incentive and individual performance for 2019. PBRSUs vest ratably over three years while PSUs vest at the end of the three-year performance period dependent upon actual performance, modified (up to +/- 20%) by relative TSR. The process for determining long-term incentive awards granted in March 2020 was as follows: | If the 2019 Performance Threshold was met, then:
| |
| ($)
| | | ×
| | | (%)
| | | =
| | | ($)
| | | 2019 Long-term
Incentive Target for NEOs
| | | 2019 Individual
Performance(1)
| | | 2020 Long-term
Incentive Award
| | | | | | | | | | | | | | | | |
| If threshold was not met, then no award granted
| |
| (1)
| | | Individual performance may range from 0% to 125%. Individual performance achievement percentages for 2019 performance are described beginning on page 66 of our 2020 Proxy Statement. | |
TABLE OF CONTENTS
COMPENSATION DISCUSSION AND ANALYSIS
As outlined in the diagram, once it was determined that the performance threshold had been met, the total value of the long-term incentive award granted to each NEO was determined by multiplying:
The NEO's long-term incentive target (a specified percentage of base salary for all NEOs except the CEO, which was set as a dollar amount), which was set by the Committee in early 2019 after considering market data from the appropriate comparator group (as described beginning on page 52 of our 2020 Proxy Statement) and the individual’s target relative to other NEOs given their respective levels of responsibility; and
• | The individual performance percentage (from 0% to 125%) assigned to the NEO by the Committee using the individual assessment process described beginning on page 61 (for a discussion of the individual NEO performance assessments for 2019 that determined the individual performance percentage for these 2020 grants, see disclosure beginning on page 66 of our 2020 Proxy Statement). |
Once the long-term incentive award value was determined, it was divided evenly between PBRSUs (50%) and PSUs (50%) for each NEO. The PBRSUs vest based on each NEO’s continued service over a three-year period. The PSUs vest based on the achievement of three-year (2020-2022) pre-established goals for average adjusted operating return on equity and average adjusted operating earnings per share, modified (up to +/- 20%) by relative TSR as described below.
LONG-TERM INCENTIVE GRANTED IN 2020 | | | (for 2019 Performance)
|
| | Mr. McKenney(1) | | | $6,500,000 | | | X | | | 98% | | | = | | | $6,370,000 | | | | Mr. Zabel | | | 656,027 | | | X | | | 110% | | | = | | | 721,630 | | | | Mr. Simonds | | | 1,120,000 | | | X | | | 110% | | | = | | | 1,232,000 | | | | Mr. Arnold | | | 625,044 | | | X | | | 110% | | | = | | | 687,548 | | | | Ms. Iglesias | | | 742,500 | | | X | | | 100% | | | = | | | 742,500 | |
(1)
| Mr. McKenney’s target was set as a dollar amount, rather than as a percentage of salary as for the other NEOs. |
(2)
| The amount shown is the award approved by the Committee for each NEO. This amount is then converted to the respective number of PBRSUs and PSUs based on the closing stock price on the date of grant. The amount included in the “Summary Compensation Table” on page 87 was calculated using the closing stock price for PBRSUs and the Monte Carlo valuation methodology for PSUs. |
| | Mr. McKenney | | | 136,636 | | | 136,637 | | | | Mr. Zabel | | | 15,479 | | | 15,479 | | | | Mr. Simonds | | | 26,426 | | | 26,426 | | | | Mr. Arnold | | | 14,748 | | | 14,748 | | | | Ms. Iglesias | | | 15,927 | | | 15,927 | |
No stock is issued when the PBRSUs are granted. Instead, company stock is issued only when the grant is settled. In addition, there are no shareholder voting rights unless and until the award is settled in shares. Beginning with the March 1, 2020 grant, during the performance period, dividend equivalents will accrue and settle in cash to the extent that the underlying PBRSUs vest.
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COMPENSATION DISCUSSION AND ANALYSIS
The PSUs will vest based on the achievement of three-year, prospective (2020-2022) average adjusted operating earnings per share and average adjusted operating return on equity goals, and the achievement will be modified (up to +/-20%) based on our TSR relative to the eight members of our “Performance Peer Group.” Assuming performance above the threshold, PSUs can be paid out at 40% to 180% of target. The eight companies in the Performance Peer Group (Aflac, Hartford Financial Services, Lincoln Financial, MetLife, Principal Financial, Prudential Financial, Globe Life (f/k/a Torchmark) and Voya Financial) were selected because they are considered to be direct business competitors of Unum (see discussion beginning on page 58 for the differences between our Proxy Peer Group and Performance Peer Group). We believe it is appropriate to modify these awards based on relative TSR performance, since Unum’s individual TSR performance directly affects the value realized by our shareholders. The table below outlines the three-year performance targets established by the Committee for the PSU grants made in March 2020. PSUs are notional units that will track the value of our share price over the three-year performance period, and will vest and be settled through the issuance of shares based upon the achievement of the predetermined performance metrics. Dividend equivalents accrue during the three-year performance period and will vest only when and to the extent that the underlying PSUs vest.TARGETS FOR PERFORMANCE SHARE UNITS (PSUs) GRANTED IN 2020
| Unum Group
| | | | | | | | | | | | | | | | | | Average 3-year Consolidated Adjusted Operating Return on Equity (2020-2022)
| | | Capital Management
Effectiveness
| | | 50%
| | | | | | Average 3-year After-Tax Adjusted Operating EPS (2020-2022)
| | | Profitability
| | | 50%
| | | | | | Relative Total Shareholder Return
| | | Modifier
Percentile
| | | -20% @
35th
| | | 0 @
50th
| | | +20% @
75th
| |
Vesting of 2018 Performance Share Units (PSUs)
The long-term incentive mix for our NEOs' 2018 awards included 50% in the form of PSUs, which vested based on performance over a three-year performance period that ended on December 31, 2020.
The table below provides an overview of the three-year goals for the 2018 PSU grant as well as their actual achievement levels.
2018 PERFORMANCE SHARE UNIT (PSU) AWARDS | Unum Group
| | | | | | | | | | | | | | | | | | Average 3-year Adjusted Operating Return on Equity (2018-2020)
| | | 50%
| | | | | | Below Target
12.23%
| | | Average 3-year After-Tax Adjusted Operating EPS (2018-2020)
| | | 50%
| | | | | | Below Target
$5.19
| | | Relative Total Shareholder Return
| | | Modifier
Percentile
| | | -20% @
35th
| | | 0 @
50th
| | | +20% @
75th
| | | -20%
@ 0th
| |
Based on the above performance, and after taking into account the factors described below, in February 2021, the Committee certified the results for this grant and approved a payout. The business goals were achieved at 91.8%, with relative TSR at the lowest percentile which resulted in a 20% decrease for a final payout of 73.4%.
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COMPENSATION DISCUSSION AND ANALYSIS
As discussed under “Items Excluded When Determining Company Performance,” beginning on page 68, when setting the performance measures and weightings for the 2018 PSU grant, the Committee determined that certain items not included in the financial plan for fiscal years 2018 to 2020 would be excluded from the calculation of the company’s performance.Applying the criteria and standards approved by the Committee, targets were adjusted for the impact of the following items. Each item impacted both earnings and equity unless otherwise noted below:
The effect of accounting policy changes for ASC 825 (Financial Instruments - Overall) and ASC 842 (Leases) (impact to equity only);
The effect of accounting policy changes for ASC 326 (Financial Instruments - Credit Losses);
The effect of the UK tax rate change;
The effect of unplanned acquisition expenses, the majority of which were related to our acquisition of Pramerica Życie TUiR SA;
The effect of an individual disability reinsurance treaty, a long-term care reserve increase and a group pension reserve increase, each within the Closed Block of business (impact to equity only);
The effect of differences between actual stock repurchases and the amount assumed in the financial plan (impact to equity only);
The effect of differences between actual debt issuances and the amount assumed in the financial plan;
The cost related to early retirement of debt (impact to equity only);
The effect of differences between actual foreign currency rates and the exchange rates assumed in the financial plan;
The effect of differences in the market value of net investment income; and
The effect of impairment loss on right of use (ROU) asset related to operating lease for office space not planned to support general operations (impact to equity only).
No adjustments were made to the 2018 PSU targets to reflect the impact of the COVID-19 pandemic on our business.
Performance Assessment and HighlightsThe NEOs’ achievement levels, for purposes of the 2020 annual incentive awards paid and long-term incentive awards granted in March 2021, were determined in part based on the individual performance goal areas listed in the “Individual Performance Evaluations” beginning on page 61. The NEO summaries, beginning on the next page, detail the Committee's decisions for each element of compensation as well as highlights of each executive's performance. These summaries also include each NEO's annual compensation as well as their compensation targets for 2020 and 2021.TABLE OF CONTENTS
COMPENSATION DISCUSSION AND ANALYSIS
(1)
| Base salary shown is the earnings for the year. Annual incentive (AI) and long-term incentive (LTI) amounts are the decisions related to that performance year (e.g., annual and long-term incentive paid/granted in 2021 were determined based on 2020 performance and therefore are shown as 2020 compensation). For LTI, this presentation is different than the Summary Compensation Table (see page 87), which reports equity awards in the year granted. The above is not a replacement for the Summary Compensation Table. |
TABLE OF CONTENTS
COMPENSATION DISCUSSION AND ANALYSIS
(1)
| Base salary shown is the earnings for the year. Annual incentive (AI) and long-term incentive (LTI) amounts are the decisions related to that performance year (e.g., annual and long-term incentive paid/granted in 2021 were determined based on 2020 performance and therefore are shown as 2020 compensation). For LTI, this presentation is different than the Summary Compensation Table (see page 87), which reports equity awards in the year granted. The above is not a replacement for the Summary Compensation Table. |
TABLE OF CONTENTS
COMPENSATION DISCUSSION AND ANALYSIS
(1)
| Base salary shown is the earnings for the year. Annual incentive (AI) and long-term incentive (LTI) amounts are the decisions related to that performance year (e.g., annual and long-term incentive paid/granted in 2021 were determined based on 2020 performance and therefore are shown as 2020 compensation). For LTI, this presentation is different than the Summary Compensation Table (see page 87), which reports equity awards in the year granted. The above is not a replacement for the Summary Compensation Table. |
TABLE OF CONTENTS
COMPENSATION DISCUSSION AND ANALYSIS
(1)
| Base salary shown is the earnings for the year. Annual incentive (AI) and long-term incentive (LTI) amounts are the decisions related to that performance year (e.g., annual and long-term incentive paid/granted in 2021 were determined based on 2020 performance and therefore are shown as 2020 compensation). For LTI, this presentation is different than the Summary Compensation Table (see page 87), which reports equity awards in the year granted. The above is not a replacement for the Summary Compensation Table. |
TABLE OF CONTENTS
COMPENSATION DISCUSSION AND ANALYSIS
(1)
| Base salary shown is the earnings for the year. Annual incentive (AI) and long-term incentive (LTI) amounts are the decisions related to that performance year (e.g., annual and long-term incentive paid/granted in 2021 were determined based on 2020 performance and therefore are shown as 2020 compensation). For LTI, this presentation is different than the Summary Compensation Table (see page 87), which reports equity awards in the year granted. The above is not a replacement for the Summary Compensation Table. |
TABLE OF CONTENTS
COMPENSATION DISCUSSION AND ANALYSIS
Compensation Policies and Practices Equity grants awarded under the long-term incentive program are approved at the February meeting of the Committee, which typically occurs two to three weeks after the company’s annual earnings are released to the public. Long-term incentive awards are granted in the year following the performance year that determines their size (i.e., awards in 20202021 were based on 20192020 performance). The March 1, 20202021 grant was approved at the February 20202021 meeting of the Committee. The closing stock price on the grant date is used to determine the number of units awarded. Stock Ownership and Retention Requirements Ensuring that senior officers have a significant ownership stake in the company aligns the long-term interests of management and shareholders and promotes a culture of ownership and accountability. The following table reflects the stock ownership and retention requirements for senior level officers. | | | STOCK OWNERSHIP AND RETENTION REQUIREMENTS FOR SENIOR OFFICERS | | | |
| | | | Officer Level | | | Required Ownership
as Percent of Salary | | | Retention Requirements | | | | (1) | | | | | | | | Required
| | | Retention Percent
| | | Holding Period
| | | | | | | | | Chief Executive Officer | 6x | | 6x
| | | 75%
| | | 3 years
| | | | 100% of Ownership Requirement | | | | | Executive Vice President | 3x | | 3x
| | | 60%
| | | 1 year
| | | | 100% of Ownership Requirement | | | | | Senior Vice President | 1x | 100% of Ownership Requirement |
| (1) | Covered officers must hold all net after-tax shares acquired upon the exercise of options and the vesting of PBRSUs, SSUs or PSUs until his or her ownership requirement is met. Once the requirement is met, the officer can sell shares only to the extent that the sale would not reduce his or her holdings below the ownership requirement. |
to:Holdto hold a multiple of the officer’s base salary in Unum shares (including unvested restricted stock units)units and unvested stock success units but not unvested performance awards) throughout employment;
Meetemployment and meet the ownership requirement within five years following their date of employment or promotion. Not meeting the requirements may impact future equity grants; and
Prior to January 1, 2021, retain a fixed percentage of the net shares (shares after the payment of taxes and the costs of exercise and commissions) received as compensation for a specified period of time. These holding period requirements apply to shares acquired upon the exercise of options and the vesting of PBRSUs and PSUs even if the stock ownership requirements have been met. Exceptions to this requirement may be made only by the Board.
As part of the changes approved by the Committee in August 2020 (see “Key Compensation Decisions” beginning on page 62), the retention requirements were changed effective January 1, 2021. Beginning in 2021, a covered officer must hold all net after-tax shares acquired upon the exercise of options and the vesting of PBRSUs, SSUs or PSUs until his or her ownership requirement is met. Once the requirement is met, the officer can sell shares only to the extent that the sale would not reduce his or her holdings below the ownership requirement. This change is aligned with the majority practice of our Proxy Peer Group. grants.For purposes of calculating stock ownership, the Committee determined that the greater of the spot price or the preceding 12-month average closing stock price should be used to reduce volatility in outcomes. TABLE OF CONTENTS
COMPENSATION DISCUSSION AND ANALYSIS
The following table presents the stock ownership and retention requirements for each current NEO. Mr. McKenney, Mr. Simonds, Mr. Arnold and Ms. Iglesias exceeded the requirements as of December 31, 2020. Mr.2021. Messrs. Zabel who became an Executive Vice President in July 2019, isand Bhasin are expected to meet the ownership requirements within the applicable time period provided. STOCK OWNERSHIP AND RETENTION REQUIREMENTS FOR CURRENT NEOs (as of December 31, 2020)
76 | 2022 UNUM PROXY STATEMENT |
| | Mr. McKenney | | | $10,482,189 | | | $7,801,092 | | | $18,283,281 | | | 17.4x | | | 6x | | | 75% | | | 3 years | | | | Mr. Zabel | | | 263,326 | | | 727,141 | | | 990,467 | | | 1.7x | | | 3x | | | 60% | | | 1 year | | | | Mr. Simonds | | | 2,151,803 | | | 2,045,290 | | | 4,197,093 | | | 6.0x | | | 3x | | | 60% | | | 1 year | | | | Mr. Arnold | | | 765,944 | | | 922,807 | | | 1,688,751 | | | 3.4x | | | 3x | | | 60% | | | 1 year | | | | Ms. Iglesias | | | 1,177,368 | | | 1,047,477 | | | 2,224,845 | | | 4.0x | | | 3x | | | 60% | | | 1 year | |
COMPENSATION DISCUSSION AND ANALYSIS | STOCK OWNERSHIP AND RETENTION REQUIREMENTS FOR CURRENT NEOs (as of December 31, 2021) | | | Common Stock (1) | Restricted Stock Units (2) | Total Current Ownership (3) | Ownership as Percent of Salary | | | Owned | Required | | McKenney | $13,280,011 | $10,787,349 | $24,067,360 | 22.9x | 6x | | Zabel | 487,620 | 1,231,806 | 1,719,426 | 2.8x | 3x | | Simonds | 2,438,653 | 2,730,528 | 5,169,181 | 7.4x | 3x | | Iglesias | 1,192,763 | 1,287,502 | 2,480,265 | 4.5x | 3x | | Bhasin | 521,837 | 947,949 | 1,469,786 | 2.7x | 3x |
(1)
| (1) | Amount includes shares held in certificate form, brokerage accounts, and 401(k) Plan accounts. Shares were valued using athe 12-month average closing stock price of $22.94$26.85 on December 31, 2020.2021.
|
| (2)
| Performance-based restricted stock units (PBRSUs) vest over three years and stock success units (SSUs) vest upon the earlier of the achievement of performance metrics or August 24, 2026 (see the “Vesting"Vesting Schedule for Unvested Restricted Stock Units”Units" table on page 93)87). Restricted stock unitsAmounts shown here were valued using athe 12-month average closing stock price of $22.94$26.85 on December 31, 2020.2021.
|
(3)
| “(3) | "Total Current Ownership”Ownership" was valued using athe 12-month average closing stock price of $22.94$26.85 on December 31, 2020. |
(4)
| Retention percentage is the net percentage of shares to be held after the payment of taxes and the costs of exercise and commissions. Retention requirements apply to shares acquired upon the exercise of options and the vesting of PBRSUs, PSUs and SSUs. After the holding period, the officer would then be able to sell the shares as long as his or her ownership requirement is met or would be reached in the time period allotted. As discussed above, the holding period is no longer applicable beginning on January 1, 2021. |
Hedging, Pledging and Insider Trading Policies We believe our directors and executive officers, which includes our NEOs, should not speculate or hedge their interests in our stock. We therefore have a policy prohibiting them from buying or selling options, puts, calls, straddles, equity swaps or other derivatives directly linked to our stock. This policy generally does not apply to other employees, although employees who are “corporate insiders”"corporate insiders" under our insider trading policy are prohibited from making “short sales”"short sales" of our stock. We also prohibit directors and executive officers from pledging our stock as security for a loan. Our insider trading policy prohibits our directors, executive officers and other employees from buying or selling our stock while in possession of material nonpublic information about the company and from conveying any such information to others. Under this policy, additional trading restrictions apply to “corporate insiders”"corporate insiders" (which includes our directors and executive officers), who are generally permitted to buy or sell our stock only during predetermined window periods following earnings announcements, and only after they have pre-cleared the transactions with our general counsel or designee. If the company makes a material restatement of its financial results, then the Board will, to the extent permitted by applicable law, seek recoupment of performance-based compensation paid to certain senior officers, including each of the NEOs, if it determines that: The senior officer has committed or engaged in fraud or willful misconduct that resulted, either directly or indirectly, in the need to make such restatement; and TABLE OF CONTENTS
COMPENSATION DISCUSSION AND ANALYSIS
Such performance-based compensation paid or awarded to the senior officer would have been a lesser amount if calculated using the restated financial results. The amount of performance-based compensation to be recouped will be determined by the Board after taking into account the relevant facts and circumstances. Performance-based compensation includes annual cash incentive awards, bonuses and all forms of equity compensation. The company’s right to recoup compensation is in addition to other remedies that may be available under applicable law. | 2022 UNUM PROXY STATEMENT | 77 |
COMPENSATION DISCUSSION AND ANALYSIS Tax and Accounting Considerations
Section 162(m) of the Internal Revenue Code (the “Code”"Code") generally disallows a tax deduction to a public corporation for compensation over $1 million paid in any fiscal year to certain “covered"covered employees,”" which includes our named executive officers. As a result, the Committee expects compensation granted or paid in 2018 and future tax years will not be fully deductible for income tax purposes. The Committee believes that shareholder interests are best served if it retains discretion and flexibility in awarding compensation, even though some compensation awards may result in nondeductible compensation expenses.
We account for stock-based payments under the requirements of FASBFinancial Accounting Standards Board (FASB) ASC Topic 718 “Compensation"Compensation - Stock Compensation”Compensation" (ASC 718). A complete discussion of the assumptions made as well as the financial impact of this type of compensation can be found in Notes 1 and 11 of the Consolidated Financial Statements in Part II, Item 8 of our 20202021 Form 10-K. Each year, the company provides a report to the Committee of the expense for stock-based payments. Additionally, in the event the Committee is considering new equity-based compensation programs or changes to existing programs, the accounting implications of the program or change are presented and discussed as part of the decision process. Perquisites and Other Personal Benefits We provide a limited number of perquisites and other personal benefits to our employees (including our NEOs), which are described below: One of our largest employee locations is in Tennessee, which has no state income tax. Due to the frequency of travel between our corporate offices and other locations, employees often incur nonresident state taxes in multiple states. Therefore, when any employee travels to other company locations outside of his or her primary state of employment and incurs state income tax based on another state’s law, we pay the non-resident state taxes and provide a tax gross- upgross-up on this amount. Prior to 2019, the gross-up only included FICA and Medicare taxes since state taxes were deductible on federal returns; however, given the new $10,000 limit on deductibility of state taxes imposed by the Tax Cuts and Jobs Act, we made the decision to cover federal taxes as part of the gross-up beginning in 2019. The company has entered into an aircraft time-sharing agreement with Mr. McKenney, pursuant to which he agrees to reimburse the company for the costs of his personal use of the corporate aircraft. During 2020,2021, Mr. McKenney had no personal use of the corporate aircraft. A tax gross-up is provided to employees who incur income on company-sponsored events where attendance is expected, including a limited number of events we host each year to recognize the contributions of various employees. These functions serve specific business purposes, and in some cases the attendance of a NEO and his or her spouse or guest is expected. If so, we attribute income to the NEO for these costs when required under Internal Revenue Service regulations. For more information, see the "All Other Compensation" table on page 84. In early 2022, following a review of peer company and broader market practices, the Committee modified the corporate aircraft arrangement with our CEO to allow him 20 hours of personal use of the corporate aircraft paid by the company. This will allow effective use of Mr. McKenney's time, given the company's locations and distance from major commercial airports. Additionally, this enables him to work more productively on confidential and sensitive matters while traveling. Income will be imputed to him for this usage and he will be responsible for the taxes (i.e., the amount will not be grossed-up for taxes). If Mr. McKenney wishes to use the •78 | A tax gross-up is provided to employees who incur income on company-sponsored events where attendance is expected, including a limited number of events we host each year to recognize the contributions of various employees. These functions serve specific business purposes, and in some cases the attendance of a NEO and his or her spouse or guest is expected. If so, we attribute income to the NEO for these costs when required under Internal Revenue Service regulations. For more information, see the “All Other Compensation” table on page 88. |
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COMPENSATION DISCUSSION AND ANALYSIS aircraft more than 20 hours each year, he would need to use his time-sharing arrangement (see above) in which he reimburses the company.
Additionally, the Committee approved executive financial counseling and tax planning services for our U.S.-based executive vice presidents and above, which includes all of our NEOs. While the company provides financial planning services to all employees, we are providing additional services to executives due to the amount of pay they have at risk and other complexities of their compensation packages. Retirement and Workplace Benefits We provide a benefits package for employees (including our NEOs) and their dependents, portions of which are paid for, in whole or in part, by the employee. Among the retirement benefits we offer are: The Unum Group 401(k) Retirement Plan On January 1, 2014, Unum replacedfroze its defined benefit pension plans which were frozen to furtherany future service and accruals as of December 31, 2013, with anand enhanced their defined contribution retirement offering. This includes:enhancement included: (1) a noncontributory tax-qualified defined contribution plan for all regular U.S. employees who meet eligibility requirements and are generally scheduled to work at least 1,000 hours per year, the contribution of which is offered within ourthe existing tax-qualified 401(k) retirement plan (401(k) Plan), and (2) a separate, non- qualifiednon-qualified defined contribution plan (Non-Qualified Plan) for employees whose benefits under the tax- qualifiedtax-qualified plan are limited by the Code. New hires are automatically enrolled in the qualified 401(k) Plan at a 5% deferral rate 45 days after hire but are able to make adjustments to their deferral rate. Base pay and annual incentives are included in covered earnings for these defined contribution plans, but long-term incentive awards are not. Unum provides the following contributions: A 5% match contribution (for elected deferrals provided through the 401(k) and Non-Qualified Plans); and A 4.5% contribution (provided through the 401(k) and Non-Qualified Plans); and For employees who meet certain age and service requirements, a 3.5% transition contribution on covered earnings and an additional 3.5% transition contribution for covered earnings above $70,000 (provided through the 401(k) Plan and, for those eligible employees whose earnings exceed the qualified plan limits, the Non-Qualified Plan).
The transition contributions were made to active eligible employees until December 31, 2020. They were provided to eligible employees to more closely align with the benefits accrued under the frozen defined benefit plans. This benefit was provided to those employees who, due to their age and years of service, would not have the same opportunity to adjust to the defined contribution plan as other employees. During 2020, Mr. Arnold was the only NEO that was eligible for the transition contributions.
Other Workplace Benefits  | Insurance: medical, pharmacy, dental, vision, life, short- and long-term disability, voluntary products (whole life, hospital indemnity, critical illness, accident) | | |  | Programs: preventive services, telehealth services, family building resources, back-up child care services | | |  | Accounts: healthcare and dependent reimbursement accounts, Health Savings Account | | |  | Paid Time Away: paid time off, paid holidays, parental and caregiver leave | | |  | Financial Resources: financial planning resources, employee stock purchase plan, student debt relief, tuition assistance | | |  | Health and Wellness: onsite & virtual fitness memberships, health resource centers, digital behavioral health support, employee assistance program, subsidized healthy food options in home office locations | | |  | Other: matching gifts program for charitable contributions |
| 2022 UNUM PROXY STATEMENT | 79 |
The other workplace benefits we offer include life, medical, pharmacy, telehealth, EHE preventive care, dental, vision, voluntary products and disability insurance; dependent and health care reimbursement accounts; health savings accounts; tuition, commuter and fitness reimbursement; on site and virtual fitness options; on site health resource centers; virtual behavioral health support; subsidized healthy food choices; an employee stock purchase plan; student debt relief, an employee assistance program; family building, paid time off; caregiver and paid parental leave; holidays; and a matching gifts program for charitable contributions.
COMPENSATION DISCUSSION AND ANALYSIS In April 2018, we purchased corporate owned life insurance (COLI) on all officers who gave their approval. In the event of a covered officer's death while still employed, we will provide a death benefit to the officer's beneficiary in the amount of $200,000. In the event of a covered officer's death while no longer employed, we will provide a death benefit to the officer's beneficiary in the amount of $50,000. Each of the NEOs, other than Mr. Bhasin, is covered under the policy. Mr. Arnold is also covered under a similar COLI policy purchased in April 2000 that would provide a death benefit to his beneficiary in the amount of $200,000 in the event of his death while still employed. TABLE OF CONTENTS
COMPENSATION DISCUSSION AND ANALYSIS
The Unum Group Pension Plan (the Qualified Plan) and the Unum Group Supplemental Pension Plan (the Excess Plan) were frozen on December 31, 2013. Benefits earned under these plans have been determined based on service and eligible earnings through December 31, 2013. NEOs hired prior to this date and who met the participation requirements at the freeze date participated in both the Unum Group Pension and Supplemental Pension Plans. Benefits earned before the freeze will be paid to employees under the terms of the plans as they terminate employment or retire. Generally, employees who terminate employment are eligible to elect to start receiving benefits under the pension plans as early as age 55 but no later than age 65. FROZEN DEFINED BENEFIT PLANS
FROZEN DEFINED BENEFIT PLANS | Unum Group Pension Plan (Qualified Plan) | | | Provides funded, tax-qualified benefits up to the limits on compensation and benefits under the Code. The Qualified Plan was designed to provide tax-qualified pension benefits for most employees. On June 12, 2013, the Human Capital Committee approved a change to the terms of the Qualified Plan to freeze the further accrual of retirement benefits provided to employees on December 31, 2013. | |
| Unum Group Supplemental Pension Plan (Excess Plan) | | | Provides unfunded, non-qualified benefits for compensation that exceeds the Code limits applicable to the Qualified Plan. On June 12, 2013, the Human Capital Committee approved a change to the terms of the Excess Plan to freeze the further accrual of retirement benefits provided to employees on December 31, 2013. | |
Following are details of how each of the frozen pension plan benefits are calculated. These formulas incorporate base pay received in each plan year during which the employee accrued credited service through December 31, 2013, and payments received from the regular Annual Incentive Plan and any field or sales compensation plans through that date. Not included are other bonuses, long-term incentive awards, commissions, prizes, awards, or allowances for incidentals. Qualified Plan
QUALIFIED PLAN In calculating the basic pension benefits in the Qualified Plan, three criteria are used: FROZEN QUALIFIED PLAN CRITERIA
| Credited service
| FROZEN QUALIFIED PLAN CRITERIA | Credited service | Measures of the time individuals are employed at the company. One year of credited service is granted for each plan year in which 1,000 hours of employment are completed. No additional credited service will accrue to any participant after December 31, 2013. | |
| Highest average earnings | | | The average of the highest five years of compensation (whether or not consecutive) during the earlier of the last 10 years of employment or as of the date the plan was frozen on December 31, 2013. | |
| Social Security covered compensation | | | The average of the taxable wage bases in effect for each calendar year during the 35-year period ending when the plan was frozen on December 31, 2013. | |
| 80 | 2022 UNUM PROXY STATEMENT |
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COMPENSATION DISCUSSION AND ANALYSIS
The basic benefit is provided as an annual single life annuity and is calculated as follows:
| (1)
| Can range from 3%, if the sum of an employee’s age and years of credited service is less than 30, to 8%, if the sum equals or exceeds 95. |
| (2)
| Equal to 9.0 for retirement at age 65 and increased by 0.2 for each whole year retirement occurs prior to age 65. |
All frozen pension benefits are indexed on the first day of each plan year (January 1st) following December 31, 2013 using the National Average Wage rate of increase published by the Social Security Administration in the preceding year (minimum of 2.75% and maximum of 5%). As of January 2017, the retirement benefits are indexed using the Internal Revenue Service regulations. Benefits provided under the Qualified Plan are based on pensionable earnings through December 31, 2013 up to the 2013 compensation limit of $255,000 under the Code. In addition, as of 2020,2021, benefits may not exceed $230,000 (payable as a single life annuity beginning at any age from 62 through Social Security Normal Retirement Age) under the Code. Excess Plan
EXCESS PLAN
As described above in the Frozen Defined Benefit Plans table, the Excess Plan disregards the annual benefit limit under Section 415 of the Code. The Excess Plan takes into account pension benefits outside of the Qualified Plan and is calculated as follows:  
RETIREMENT AGE
Retirement Age
Participants in the pension plans outlined above are eligible to retire as early as age 55. Under the Qualified Plan, participants may retire early at age 55 with five years of vesting service. Under the Excess Plan, generally participants can retire at the later of age 60 or termination. However, if a participant begins receiving a benefit prior to the normal retirement age of 65, the normal retirement benefit will be reduced based on the applicable early reduction factors defined in the plan. The benefit formulas for the Qualified and Excess Plans are shown above. Mr. Arnold is the only NEO currently eligible for early retirement under the Qualified Plan. | 2022 UNUM PROXY STATEMENT | 81 |
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REPORT OF CONTENTS COMPENSATIONTHE HUMAN CAPITAL COMMITTEE REPORT
COMPENSATION COMMITTEE REPORT
Compensation Committee ReportThe Human Capital Committee has reviewed and discussed with management the Compensation Discussion and Analysis contained in this proxy statement. Based on such review and discussions, the Committee recommended to the Board of Directors that the Compensation Discussion and Analysis be included in this proxy statement and incorporated by reference into the company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2020. 20202021.2021 Human Capital Committee:
CommitteeCynthia L. Egan, Chair
| 82 | 2022 UNUM PROXY STATEMENT |
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Compensation Tables20202021 Summary Compensation Table
| | Richard P. McKenney
| | | | | | | | | | | | | | | | | | | | | | | | | President and Chief Executive Officer, and a Director | | | 2020 | | | 1,078,846 (2) | | | 9,906,877 (3) | | | 1,812,462 (4) | | | 167,000 (5) | | | 293,553 (6) | | | 13,258,738 | | | | 2019 | | | 1,000,000 | | | 6,420,903 | | | 1,710,000 | | | 161,000 | | | 435,283 | | | 9,727,186 | | | | 2018 | | | 1,000,000 | | | 6,564,575 | | | 1,900,000 | | | — | | | 432,286 | | | 9,896,861 | | | | Steven A. Zabel | | | | | | | | | | | | | | | | | | | | | | | | | Executive Vice President, Chief
Financial Officer | | | 2020 | | | 617,308 (2) | | | 938,550 (3) | | | 597,554 (4) | | | — (5) | | | 120,050 (6) | | | 2,273,462 | | | | 2019 | | | 456,308 | | | 280,159 | | | 410,335 | | | — | | | 73,235 | | | 1,220,037 | | | | | | | | | | | | | | | | | | | | | | | | | | Michael Q. Simonds | | | | | | | | | | | | | | | | | | | | | | | | | Executive Vice President, Chief Operating Officer | | | 2020 | | | 718,846 (2) | | | 2,114,113 (3) | | | 735,785 (4) | | | 368,000 (5) | | | 139,885 (6) | | | 4,076,629 | | | | 2019 | | | 634,817 | | | 1,261,822 | | | 628,469 | | | 340,000 | | | 143,048 | | | 3,008,156 | | | | 2018 | | | 627,418 | | | 1,125,485 | | | 627,418 | | | — | | | 146,822 | | | 2,527,143 | | | | Timothy G. Arnold
| | | | | | | | | | | | | | | | | | | | | | | | | Executive Vice President, Voluntary Benefits and President, Colonial Life | | | 2020 | | | 519,267 (2) | | | 1,004,033 (3) | | | 355,179 (4) | | | 299,000 (5) | | | 227,746 (6) | | | 2,405,225 | | | | 2019 | | | 500,035 | | | 682,420 | | | 405,029 | | | 304,000 | | | 298,749 | | | 2,190,233 | | | | 2018 | | | 497,144 | | | 636,801 | | | 447,429 | | | — | | | 245,965 | | | 1,827,339 | | | | Lisa G. Iglesias
| | | | | | | | | | | | | | | | | | | | | | | | | Executive Vice President, General Counsel | | | 2020 | | | 571,154 (2) | | | 1,118,060 (3) | | | 434,077 (4) | | | — (5) | | | 109,804 (6) | | | 2,233,095 | | | | 2019 | | | 544,277 | | | 780,971 | | | 465,357 | | | — | | | 112,906 | | | 1,903,511 | | | | 2018 | | | 521,315 | | | 690,652 | | | 469,184 | | | — | | | 104,501 | | | 1,785,652 | |
| Name and Principal Position | Year | Salary | | Stock Awards | | Non-Equity Incentive Plan Compensation | | Change in Pension Value & Non-Qualified Deferred Compensation Earnings | | All Other Compensation | | Total | | ($) | | ($) | | ($) | | ($) | | ($) | | ($) | | Richard P. McKenney | | | | | | | | | | | | | President and Chief Executive Officer, and a Director | 2021 | 1,050,000 | | 3,750,010 | (1) | 4,263,000 | (2) | — | (3) | 286,670 | (4) | 9,349,680 | | 2020 | 1,078,846 | (5) | 9,906,877 | (6) | 1,812,462 | | 167,000 | | 293,553 | | 13,258,738 | | 2019 | 1,000,000 | | 6,420,903 | (7) | 1,710,000 | | 161,000 | | 435,283 | | 9,727,186 | | Steven A. Zabel | | | | | | | | | | | | Executive Vice President, Chief Financial Officer | 2021 | 620,192 | | 600,005 | (1) | 1,214,930 | (2) | — | (3) | 128,138 | (4) | 2,563,265 | | 2020 | 617,308 | (5) | 938,550 | (6) | 597,554 | | — | | 120,050 | | 2,273,462 | | 2019 | 456,308 | | 280,159 | (7) | 410,335 | | — | | 73,235 | | 1,220,037 | | Michael Q. Simonds | | | | | | | | | | | | Executive Vice President, Chief Operating Officer | 2021 | 700,000 | | 847,470 | (1) | 1,550,850 | (2) | — | (3) | 144,113 | (4) | 3,242,433 | | 2020 | 718,846 | (5) | 2,114,113 | (6) | 735,785 | | 368,000 | | 139,885 | | 4,076,629 | | 2019 | 634,817 | | 1,261,822 | (7) | 628,469 | | 340,000 | | 143,048 | | 3,008,156 | | Lisa G. Iglesias | | | | | | | | | | | | | | Executive Vice President, General Counsel | 2021 | 550,000 | | 371,253 | (1) | 798,518 | (2) | — | (3) | 103,624 | (4) | 1,823,395 | | 2020 | 571,154 | (5) | 1,118,060 | (6) | 434,077 | | — | | 109,804 | | 2,233,095 | | 2019 | 544,277 | | 780,971 | (7) | 465,357 | | — | | 112,906 | | 1,903,511 | | Puneet Bhasin | | | | | | | | | | | | | Executive Vice President, Chief Information and Digital Officer | 2021 | 540,000 | | 337,498 | (1) | 803,925 | (2) | — | (3) | 94,061 | (4) | 1,775,484 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
(1)
| “Stock Awards” consist(1) | These amounts reflect the value of performance share units (PSUs), performance-based restricted stock units (PBRSUs) and stock success units (SSUs). The number of shares payable under the PSU awards will be based on the actual performance, modified (up to +/- 20%) based on relative TSR, and may result in the ultimate award of 40-180% of the initial number of PSUs issued, with the potential for no award if company performance goals are not achieved during the three-year performance period. |
(2)
| There were 27 pay periods during 2020; therefore, the amount shown is higher than annual base salary for each of our NEOs. |
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(3)
| These awards were comprised of PSUs and PBRSUs granted on March 1, 20202021 for performance in 20192020 (see page 7263 for details) , as well as SSUs granted on August 24, 2020 with a one-for-one proportional share retention commitment (see details beginning on page 62). The grant date fair value of the PSUs was calculated in accordance with ASC 718 as the number of units multiplied by the Monte Carlo simulation value of $23.58 on the grant date. See Note 11 (“Stock-Based Compensation”) to our consolidated financial statements in our 20202021 Form 10-K for additional information about the company'scompany’s accounting for share-based compensation arrangements, including the assumptions used for calculating the grant date value of PSUs.arrangements. The grant date fair value of the PBRSUs was calculated in accordance with ASC 718 as the number of units multiplied by the closing market price of $23.31$27.20 on the grant date. The grant date fair value of the SSUs was calculated as the number of units multiplied by the closing market price of $18.78 on the grant date, August 24, 2020. The value of PSUs, assuming the highest possible outcomes of performance conditions (180%) to which 2020 awards are subject, determined based on the award amount at the time of grant and thus excluding dividend equivalent units that accrue during the performance period, would be: $5,799,421 for Mr. McKenney; $656,991 for Mr. Zabel; $1,121,625 for Mr. Simonds; $625,964 for Mr. Arnold; and $676,006 for Ms. Iglesias. |
(4)
| Amounts(2)
| These amounts reflect theboth annual and long-term incentive awards. The annual incentive awards were paid in March 20212022 for performance in 2020. These2021 and are discussed in further detail beginning on page 6662. The long-term incentive awards consist of cash success units (CSUs) which were granted in 2020 under the one-time Success Incentive Plan (SIP). One-third of the CSUs vested at the end of the first performance period, on December 31, 2021. As a result, our NEOs received the following amounts upon settlement of the vested CSUs: $1,617,000 for Mr. McKenney; $277,200 for Mr. Zabel; $404,250 for Mr. Simonds; $171,518 for Ms. Iglesias and $155,925 for Mr. Bhasin. Details on the SIP award vesting can be found on page 66. |
(5)
(3) | The amounts shown reflect the actuarial present value increases from December 31, 20192020 through December 31, 2020.2021. Pension values may fluctuate from year-to-year depending on a number of factors, including age at benefit commencement and the |
| 2022 UNUM PROXY STATEMENT | 83 |
COMPENSATION TABLES |
| assumptions used to determine the present value, such as the discount rate and mortality rate. The assumptions used by the company in calculating the change in pension value are described beginning on page 9488 and are consistent with those set forth in Note 9 of our Consolidated Financial Statements in Part II, Item 8 of our 20202021 Form 10-K, except as otherwise provided in footnotes to the “Pension Benefits” table on page 94.88. The actual change in present value of accumulated benefits was ($2,000) and ($11,000) for Mr. McKenney’s Qualified and Excess Plan benefits, respectively, and ($17,000) and ($23,000) for Mr. Simonds’ Qualified and Excess Plan Benefits, respectively. The increase in discount rate more than offset the increase due to the passage of time. |
(6)
| (4) | “All Other Compensation” amounts are set forth in the following table. |
20202021 ALL OTHER COMPENSATION | | Employee and Spouse /Guest Attendance at Company Business Functions(a) | | | — | | | — | | | — | | | 45,738 | | | — | | | | Total Perquisites | | | — | | | — | | | — | | | $45,738 | | | — | | | | Matching Gifts Program(b) | | | 10,000 | | | 10,000 | | | 9,992 | | | 10,000 | | | 10,000 | | | | Company Matching Contributions Under our Qualified and Non-Qualified Defined Contribution Retirement Plan(c) | | | 139,442 | | | 51,382 | | | 67,366 | | | 46,215 | | | 51,825 | | | | Company Contributions to the Qualified and Non Qualified Defined Contribution Retirement Plan(d) | | | 125,498 | | | 46,244 | | | 60,629 | | | 103,844 | | | 46,643 | | | | Non-Resident State Taxes(e) | | | 10,666 | | | 6,873 | | | 1,124 | | | 590 | | | 767 | | | | Tax Reimbursement Payments(f) | | | 7,947 | | | 5,486 | | | 729 | | | 21,354 | | | 569 | | | | Wellness Reward(g) | | | — | | | 65 | | | 45 | | | 5 | | | — | | | | Total All Other Compensation | | | $293,553 | | | $120,050 | | | $139,885 | | | $227,746 | | | $109,804 | |
| | McKenney | Zabel | Simonds | Iglesias | Bhasin | | | ($) | ($) | ($) | ($) | ($) | | Matching Gifts Program(a) | 10,000 | 10,000 | 7,492 | 10,000 | — | | Company Matching Contributions Under our Qualified and Non-Qualified Defined Contribution Retirement Plan(b) | 143,123 | 60,887 | 71,789 | 49,204 | 48,178 | | Company Contributions to the Qualified and Non-Qualified Defined Contribution Retirement Plan(c) | 128,811 | 54,799 | 64,610 | 44,283 | 43,360 | | Non-Resident State Taxes(d) | 2,872 | 1,487 | 121 | 83 | 1,530 | | Tax Reimbursement Payments(e) | 1,864 | 965 | 78 | 54 | 993 | | Company Meeting - Gift Card(f) | — | — | 23 | — | — | | Total All Other Compensation | $286,670 | $128,138 | $144,113 | $103,624 | $94,061 |
(a)
| Spouses or guests sometimes accompany the NEO at company business functions. When this happens, we report the aggregate incremental cost to the company of such attendance. When spouse or guest attendance is expected, a tax gross up payment is provided. Where applicable, these payments have been included under “Tax Reimbursement Payments.” For purposes of compensation disclosure, the use of company aircraft is valued using an incremental cost that takes into account fuel costs, landing fees, parking, weather monitoring and maintenance fees per hour of flight. Crew travel expenses are included based on the actual amount incurred for a particular trip. Fixed costs that do not change based on usage, such as pilot salaries and depreciation of the aircraft, are excluded. Amounts represent the imputed income each NEO incurred for such attendance plus the incremental cost of the aircraft when the aircraft was used. |
(b)
(a) | Amounts represent those provided through our Matching Gifts Program, available to all full-time employees and non-employee directors. During 2020,2021, the company matched eligible gifts from a minimum of $50 to an aggregate maximum gift of $10,000 per employee. Amounts listed only represent company matching gifts made to qualified non-profit organizations and educational institutions on behalf of the NEOs, and do not represent total charitable contributions made by them during the year. Additionally, all full-time employees and non-employee directors were eligible to make a Unum Political Action Committee (PAC) contribution. For those who chose to make a contribution to the Unum PAC and take advantage of the matching contribution feature, the company will make a matching contribution to the qualifying charity of the employee’s choice up to the $10,000 matching gift limit in the following year. Therefore, if an NEO elected a match for their 2020 Unum PAC contributions, the matching gift was made in 2021 and is reflected in this amount. |
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contributions made by them during the year. Additionally, all full-time employees and non-employee directors were eligible to make a Unum PAC contribution. For those who chose to make a contribution to the Unum PAC and take advantage of the matching contribution feature, the company will make a matching contribution to the qualifying charity of the employee's choice up to the $10,000 matching gift limit in the following year. Therefore, if an NEO elected a match for their 2019 Unum PAC contributions, the matching gift was made in 2020 and is reflected in this amount.
(c)
| (b) | Amounts represent the aggregate matching contributions into our 401(k) Plan as well as matching contributions into our Non-Qualified Plan. Matching contributions under our 401(k) Plan are provided to all eligible employees participating in the plan as described beginning on page 8379 in the “Retirement and Workplace Benefits” section. Matching contributions under our Non-Qualified Plan are provided to eligible officers participating in the plan, aswhich is also described beginning on page 83 in the “Retirement and Workplace Benefits” section.79. The company matched contributions dollar-for-dollar up to 5% of eligible earnings in 20202021 under both the 401(k) Plan and Non-Qualified Plan. |
(d)
| (c) | These amounts represent the aggregate of company and transition contributions under our 401(k) and Non- QualifiedNon-Qualified Plans as described beginning on page 8379 in the “Retirement and Workplace Benefits” section. Full-time employees with one year of service with the company receive 4.5% of their salary and annual incentive contributed into their 401(k) Plan. Full-time employees who, as of December 31, 2013, had either: (i) reached a minimum of 60 points (age plus service) and at least 15 years of service or (ii) reached the age of 50 with 10 years of service with the company, receive an additional contribution into their 401(k) and Non-Qualified Plans through the transition contributions, as disclosed above in the Retirement and Workplace Benefits section. |
(e)
| (d) | Many of our employees are required to travel to other company locations outside of their primary state of employment. While working in a state other than their primary state of employment, employees may become subject to state income taxes in that state if days worked or earnings accrued exceed an amount specified under state law. When this happens, we pay the state income tax on behalf of those employees (including our NEOs) and gross up the income amount for taxes (gross ups on these amounts are included in “Tax Reimbursement Payments”). The employee remains responsible for any taxes they would have incurred had they worked only in their primary state of employment. |
(f)
| (e) | Amounts represent tax payments made by us on behalf of each NEO relating to Employee and Spouse/Guest Attendance at Company Business Functions and/or Non-Resident State Taxes. As disclosed on page 82,78, given the changes with the Tax Cuts and Jobs Act, the Non-Resident State Taxes now includes a federal tax gross up in addition to the FICA and Medicare. |
(g)
| (f) | During 2020, full-time employees2021, Mr. Simonds received a gift card as part of his attendance at a business meeting |
| (5) | There were 27 pay periods during 2020; therefore, the amount shown is higher than annual base salary for each of the NEOs. |
| (6) | These awards were comprised of performance share units (PSUs), performance-based restricted stock units (PBRSUs) and stock success units (SSUs). SSUs were granted under the one-time SIP awards in 2020. Beginning with the March 2021 long-term incentive grants, cash incentive units (CIUs) replaced the prior PSU awards. Since CIUs are tracked and denominated in cash, these awards are no longer reported in the U.S.“Stock Awards” column and will only be reported in the Summary Compensation Table under the “Non-Equity Incentive Plan Compensation” column at the time of vesting. For further details on CIUs granted in 2021, see page 62. |
| (7) | These awards were eligible to complete healthy activities to earn cash rewards.comprised of performance share units (PSUs) and performance-based restricted stock units (PBRSUs). |
| 84 | 2022 UNUM PROXY STATEMENT |
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20202021 Grants of Plan-Based Awards
| | Mr. McKenney | | | | | | | | | | | | | | | | | | | | | | | | | | | | — | | | 566,394 | | | 2,265,577 | | | 4,247,957 | | | | | | | | | | | | | | | | | | | 3/1/2020 | | | | | | | | | | | | | | | | | | | | | 136,636 | | | 3,184,986 (6) | | | | 3/1/2020 | | | | | | | | | | | | 54,655 | | | 136,637 | | | 245,947 | | | | | | 3,221,900 (7) | | | | 8/24/2020 | | | | | | | | | | | | | | | | | | | | | 186,368 | | | 3,499,991 (8) | | | | 8/24/2020 | | | | | | 4,900,000 | | | | | | | | | | | | | | | | | | | | | | Mr. Zabel | | | | | | | | | | | | | | | | | | | | | | | | | | | | — | | | 169,760 | | | 679,039 | | | 1,273,198 | | | | | | | | | | | | | | | | | | | 3/1/2020 | | | | | | | | | | | | | | | | | | | | | 15,479 | | | 360,815 (6) | | | | 3/1/2020 | | | | | | | | | | | | 6,192 | | | 15,479 | | | 27,862 | | | | | | 364,995 (7) | | | | 8/24/2020 | | | | | | | | | | | | | | | | | | | | | 11,328 | | | 212,740 (8) | | | | 8/24/2020 | | | | | | 840,000 | | | | | | | | | | | | | | | | | | | | | | Mr. Simonds | | | | | | | | | | | | | | | | | | | | | | | | | | | | — | | | 233,625 | | | 934,500 | | | 1,752,188 | | | | | | | | | | | | | | | | | | | 3/1/2020 | | | | | | | | | | | | | | | | | | | | | 26,426 | | | 615,990 (6) | | | | 3/1/2020 | | | | | | | | | | | | 10,570 | | | 26,426 | | | 47,567 | | | | | | 623,125 (7) | | | | 8/24/2020 | | | | | | | | | | | | | | | | | | | | | 46,592 | | | 874,998 (8) | | | | 8/24/2020 | | | | | | 1,225,000 | | | | | | | | | | | | | | | | | | | | | | Mr. Arnold(5) | | | | | | | | | | | | | | | | | | | | | | | | | | | | — | | | 116,835 | | | 467,340 | | | 876,263 | | | | | | | | | | | | | | | | | | | 3/1/2020 | | | | | | | | | | | | | | | | | | | | | 14,748 | | | 343,776 (6) | | | | 3/1/2020 | | | | | | | | | | | | 5,899 | | | 14,748 | | | 26,546 | | | | | | 347,758 (7) | | | | 8/24/2020 | | | | | | | | | | | | | | | | | | | | | 16,640 | | | 312,499 (8) | | | | 8/24/2020 | | | | | | 437,500 | | | | | | | | | | | | | | | | | | | | | | Ms. Iglesias | | | | | | | | | | | | | | | | | | | | | | | | | | | | — | | | 135,649 | | | 542,596 | | | 1,017,368 | | | | | | | | | | | | | | | | | | | 3/1/2020 | | | | | | | | | | | | | | | | | | | | | 15,927 | | | 371,258 (6) | | | | 3/1/2020 | | | | | | | | | | | | 6,371 | | | 15,927 | | | 28,669 | | | | | | 375,559 (7) | | | | 8/24/2020 | | | | | | | | | | | | | | | | | | | | | 19,768 | | | 371,243 (8) | | | | 8/24/2020 | | | | | | 519,750 | | | | | | | | | | | | | | | | | | | |
| | Estimated Future Payouts Under Non-Equity Incentive Plan Awards ($) | All Other Stock Awards
(Number of Shares of
Stock or Units) (1) (#) | Grant Date Fair
Value of Stock
Awards
($) | | | Threshold | Target | Max | | | McKenney | | | | | | | | | | 551,250 | 2,205,000 | 4,134,375 | (2) | | | | | 3/1/2021 | | 3,750,000 | 7,500,000 | (3) | | | | | 3/1/2021 | | | | | 137,868 | 3,750,010 | (4) | | Zabel | | | | | | | | | | 186,058 | 744,230 | 1,395,431 | (2) | | | | | 3/1/2021 | | 600,000 | 1,200,000 | (3) | | | | | 3/1/2021 | | | | | 22,059 | 600,005 | (4) | | Simonds | | | | | | | | | | 227,500 | 910,000 | 1,706,250 | (2) | | | | | 3/1/2021 | | 847,459 | 1,694,918 | (3) | | | | | 3/1/2021 | | | | | 31,157 | 847,470 | (4) | | Iglesias | | | | | | | | | | 130,625 | 522,500 | 979,688 | (2) | | | | | 3/1/2021 | | 371,250 | 742,500 | (3) | | | | | 3/1/2021 | | | | | 13,649 | 371,253 | (4) | | Bhasin | | | | | | | | | | 135,000 | 540,000 | 1,012,500 | (2) | | | | | 3/1/2021 | | 337,500 | 675,000 | (3) | | | | | 3/1/2021 | | | | | 12,408 | 337,498 | (4) |
(1)
| (1) | Performance-based restricted stock units (PBRSUs) were granted on March 1, 2021 under the Stock Incentive Plan of 2017. Details are provided in the “Long-Term Incentive Awards Granted in 2021” table and related footnotes beginning on page 63. |
| (2) | These amounts reflect the threshold, target, and maximum award under the Annual Incentive Plan and the target cash success units (CSUs) awarded under the Success Incentive Plan (SIP).Plan. For the Annual Incentive Plan, the threshold is 25% of the amount shown in the Target“Target” column and reflects the payout that would have been earned based on threshold achievement of each of the performance measures. Target amounts are based on the individuals’ earnings for 20202021 and their annual incentive target. The maximum award is 187.5% of such target (150% plan maximum multiplied by 125% individual maximum). For |
| (3) | These amounts reflect the CSUstarget and maximum award for the cash incentive units (CIUs) awarded under the SIP, the target is equal to 70% of each officers 2020 annual long-term incentive target. CSUs are eligible for accelerated vesting after one-, three- and five-year performance periods, in each case conditioned upon achievement of the performance hurdles during the applicable performance period. See the details of the SIP on page 62. |
(2)
| The vesting of performance share units (PSUs) ranges from 40% to 180% of target based on the performance and market conditions described beginning on page 71 assuming threshold performance goals are exceeded. The grant date |
TABLE OF CONTENTS
fair value of each PSU was calculated in accordance with ASC 718 using a Monte Carlo simulation based on historical volatility, risk-free rates of interest, and pairwise correlation coefficients.Long-Term Incentive plan. The actual amount that will be issued will be determined based on the achievement of the three-year performance goals (2020-2022), modified by relative TSR, as described in further detail in the “Long-Term Incentive” section beginning on page 71.(3)
| The grants of performance-based restricted stock units (PBRSUs) made on March 1, 2020 were based on the achievement of a threshold of statutory after-tax operating earnings and individual performance for 2019 and vest ratably over three years. These awards were granted under the Stock Incentive Plan of 2017. Details are provided in the “Long-Term Incentive Awards Granted in 2020” table and related footnotes beginning on page 72. For Mr. McKenney, 50% of these shares will be stock settled and 50% will be cash settled upon vesting. |
(4)
| The grant of stock success units (SSUs) on August 24, 2020 were part of the one-time SIP and will vest in full after six years on August 24, 2026. SSUs are eligible for accelerated vesting after one-, three- and five-year performance periods, in each case conditioned upon achievement of the performance hurdles during the applicable performance period. See the details of the SIP on page 62. |
(5)
| Mr. Arnold's PBRSUs and PSUs were no longer subject to service-based risk of forfeiture at the date of grant since he met the age and years of service requirements for retirement eligibility under the Stock Incentive Plan of 2017. Mr. Arnold's PBRSUs will continue to vest ratably over the three-year vesting period on each anniversary of the grant date. The actual amount of PSUs that will vest will be determined based on the achievement of the three-year performance goals (2021-2023), modified by relative TSR, as described in further detail in the “Long-Term Incentive” section beginning on page 71. |
(6)
| (4) | The grant date fair value of the PBRSUs granted on March 1, 20202021 was calculated as the number of units multiplied by the closing market price of $23.31$27.20 on the grant date. |
(7)
2022 UNUM PROXY STATEMENT | As noted above, the grant date fair value of PSUs granted on March 1, 2020 was calculated in accordance with ASC 718 using a Monte Carlo simulation based on historical volatility, risk-free rates of interest, and pairwise correlation coefficients as of March 1, 2020. The Monte Carlo valuation per share was $23.58. See Note 11 (“Stock-Based Compensation”) to our consolidated financial statements in our 2020 Form 10-K for additional information about the company's accounting for share-based compensation arrangements, including the assumptions used for calculating the grant date value of PSUs.85 |
(8)
| The number of SSUs granted on August 24, 2020 was equal to the number of company shares held by the executive that he or she committed to hold during the SIP vesting period, subject to a cap equal to 50% of the executive's 2020 annual long-term incentive target. The grant date fair value of SSUs was calculated as the number of units multiplied by the closing market price of $18.78 on the grant date. |
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20202021 Outstanding Equity Awards at Fiscal Year-End
| STOCK AWARDS | | | Number of Shares or Units of Stock That Have Not Vested | Market Value of Shares or Units of Stock That Have Not Vested(1) | Equity Incentive Plan Awards:
Number of Unearned Shares, Units or Other Rights That Have Not Vested(2) | Equity Incentive Plan Awards: Market or Payout Value of Unearned Shares, Units or Other Rights That Have Not Vested(3) | | | (#) | ($) | (#) | ($) | | McKenney | 386,036 | 9,484,905 | 136,637 | 3,357,171 | | Zabel | 42,139 | 1,035,355 | 15,479 | 380,319 | | Simonds | 86,321 | 2,120,907 | 26,426 | 649,287 | | Iglesias | 41,429 | 1,017,911 | 15,927 | 391,326 | | Bhasin | 32,212 | 791,449 | 15,484 | 380,442 |
| Option Awards
| | | Stock Awards
| |
| | Mr. McKenney | | | | | | | | | | | | | | | | | | | | | | | | | 39,760 | | | — | | | 24.25 | | | 2/20/2021 | | | 408,383 | | | 9,368,306 | | | 226,006 | | | 5,184,578 | | | | Mr. Zabel | | | | | | | | | | | | | | | | | | | | | | | | | — | | | — | | | — | | | — | | | 31,698 | | | 727,152 | | | 17,467 | | | 400,693 | | | | Mr. Simonds | | | | | | | | | | | | | | | | | | | | | | | | | — | | | — | | | — | | | — | | | 89,158 | | | 2,045,285 | | | 43,989 | | | 1,009,108 | | | | Mr. Arnold | | | | | | | | | | | | | | | | | | | | | | | | | — | | | — | | | — | | | — | | | 40,227 | | | 922,807 | | | 24,246 | | | 556,203 | | | | Ms. Iglesias | | | | | | | | | | | | | | | | | | | | | | | | | — | | | — | | | — | | | — | | | 45,662 | | | 1,047,486 | | | 26,797 | | | 614,723 | |
(1)
| The amounts in this column represent the aggregate value of performance-based restricted stock units (PBRSUs) and stock success units (SSUs), including accrued dividend equivalents reinvested into additional restricted stock units for grants prior to March 1, 2020, shown in the “Number of Shares or Units of Stock That Have Not Vested” column represent the aggregate value of performance-based restricted stock units (PBRSUs), including dividend equivalents as applicable, and stock success units (SSUs) based on the closing price of $22.94$24.57 on December 31, 2020,2021, the last trading day of the year. Beginning with the March 1, 2020 grant,grants, dividends are accrued in cash and paid at the same time that the underlying PBRSUs and SSUs vest. As of December 31, 2020,2021, our NEOs had the following amounts (rounded) of accrued cash dividends on their outstanding PBRSUs and SSUs: $169,939$609,305 for Mr. McKenney; $16,463$67,119 for Mr. Zabel; $35,873$133,449 for Mr. Simonds; $17,352$66,249 for Ms. Iglesias and $53,787 for Mr. Arnold and $19,251 for Ms. Iglesias.Bhasin. |
| (2)
| This column reflects PSU awards that were granted on March 1, 2019 and March 1, 2020. They vest at the end of the respective performance period, subject to the level of achievement of applicable performance targets. In accordance with Instruction 3 to Regulation S-K Item 402(f)(2), the values for these awards in the “Equity Incentive Plan Awards: Number of Unearned Shares, Units or Other Rights That Have Not Vested” and the “Equity Incentive Plan Awards: Market or Payout Value of Unearned Shares, Units or Other Rights That Have Not Vested” columns are reported at target levels since the company’s performance and relative TSR for 2019 and 2020 awards were below target. Actual shares to be issued under PSUs granted in connection with the 2019-2021 and 2020-2022 performance periods are not yet determinable and may differ from the performance level required to be disclosed in this table. The PSUs that were granted in 20182019 (for the 2018-20202019-2021 performance period) vested on December 31, 20202021 and are shown in the “2020“2021 Option Exercises and Stock Vested” table. |
| (3)
| The amounts in this column represent the aggregate value of PSUs (including accrued dividend equivalents reinvested into additional PSUs for the 2019 grant) shown in the “Equity Incentive Plan Awards: Number of Unearned Shares, Units or Other Rights That Have Not Vested” column based on the closing price of $22.94$24.57 on December 31, 2020,2021, the last trading day of the year. Beginning with the March 1, 2020 grant, dividendsDividends are accrued in cash and paid at the same time that the underlying PSUs vest. As of December 31, 2020,2021, our NEOs had the following amounts (rounded) of accrued cash dividends on their 2020 outstanding PSU grant: $116,825$276,690 for Mr. McKenney; $13,235$31,345 for Mr. Zabel; $22,594$53,513 for Mr. Simonds; $12,610$32,252 for Ms. Iglesias; and $31,355 for Mr. Arnold; and $13,618 for Ms. Iglesias.Bhasin. |
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Vesting Schedule for Unvested Performance Based Restricted Stock Units | | March 1, 2021 | | | 3/1/2018 | | | 25,502 | | | 895 | | | 4,373 | | | 2,474 | | | 2,683 | | | | March 1, 2021 | | | 3/1/2019 | | | 29,491 | | | 1,968 | | | 5,795 | | | 3,135 | | | 3,587 | | | | March 1, 2021 | | | 3/1/2020 | | | 45,088 | | | 5,108 | | | 8,720 | | | 4,866 | | | 5,255 | | | | March 1, 2022 | | | 3/1/2019 | | | 30,386 | | | 2,028 | | | 5,972 | | | 3,230 | | | 3,697 | | | | March 1, 2022 | | | 3/1/2020 | | | 45,090 | | | 5,108 | | | 8,721 | | | 4,867 | | | 5,256 | | | | March 1, 2023 | | | 3/1/2020 | | | 46,458 | | | 5,263 | | | 8,985 | | | 5,015 | | | 5,416 | | | | August 24, 2026 (3) | | | 8/24/2020 | | | 186,368 | | | 11,328 | | | 46,592 | | | 16,640 | | | 19,768 | | | | Total | | | | | | 408,383 | | | 31,698 | | | 89,158 | | | 40,227 | | | 45,662 | |
| | | Number of Units Vesting | | Vesting Date | Grant Date | McKenney | Zabel | Simonds | Iglesias | Bhasin | | March 1, 2022 (1) | 3/1/2019 | 31,753 | 2,119 | 6,240 | 3,862 | 3,149 | | March 1, 2022 | 3/1/2020 | 45,090 | 5,108 | 8,721 | 5,256 | 5,110 | | March 1, 2022 | 3/1/2021 | 45,496 | 7,279 | 10,281 | 4,504 | 4,094 | | March 1, 2023 | 3/1/2020 | 46,458 | 5,263 | 8,985 | 5,416 | 5,265 | | March 1, 2023 | 3/1/2021 | 45,496 | 7,279 | 10,282 | 4,504 | 4,095 | | March 1, 2024 | 3/1/2021 | 46,876 | 7,501 | 10,594 | 4,641 | 4,219 | | August 24, 2026 (2) | 8/24/2020 | 124,867 | 7,590 | 31,217 | 13,245 | 6,280 | | Total | | 386,036 | 42,139 | 86,320 | 41,428 | 32,212 |
| (1)
| These PBRSUs and SSUs include dividend equivalents earned through December 31, 2020.2021. Beginning with the March 1, 2020 grant, dividend equivalents accrue and settle in cash to the extent that the underlying PBRSUs and SSUs vest. |
(2)
| Mr. Arnold’s PBRSUs are no longer subject to the risk of forfeiture because he meets the age and years of service requirement for retirement eligibility. |
(3)
(2) | These SSUs are eligible for accelerated vesting after one-, three- and five-year performance periods, in each case conditioned upon achievement of the performance hurdles during the applicable performance period. See the details of the SIPSuccess Incentive Plan on page 62. |
20202021 Option Exercises and Stock Vested
| | Option Awards | Stock Awards(1) | | | Number of Shares Acquired
on Exercise (#) | Value Realized on Exercise
($) | Number of Shares Acquired
on Vesting(2) (#) | Value Realized on Vesting(3)(4)
($) | | McKenney | 39,760 | 52,086 | 222,019 | 5,835,011 | | Zabel | — | — | 13,071 | 353,460 | | Simonds | — | — | 46,133 | 1,215,777 | | Iglesias | — | — | 25,395 | 669,921 | | Bhasin | — | — | 20,974 | 565,773 |
| | | | Option Awards
| | | Stock Awards(1)
| |
| | Mr. McKenney | | | — | | | — | | | 127,653 | | | 2,954,988 | | | | Mr. Zabel | | | — | | | — | | | 4,291 | | | 99,775 | | | | Mr. Simonds | | | — | | | — | | | 22,800 | | | 527,945 | | | | Mr. Arnold | | | — | | | — | | | 12,371 | | | 286,364 | | | | Ms. Iglesias | | | — | | | — | | | 14,040 | | | 325,097 | |
(1)
| Reflects the PBRSUs, PSUs and PSUsSSUs that vested during 2020.2021. |
| (2)
| Includes the total number of unrestricted shares acquired upon the vesting of PBRSUs, PSUs and PSUs.SSUs. Accrued dividend equivalents were reinvested into additional restricted stock units for grants prior to March 1, 2020, which are included in the “Number of Shares Acquired on Vesting” column. A portion of these shares were withheld to cover taxes due upon vesting. |
| (3)
| Beginning with March 1, 2020 grants, dividends are accrued in cash and paid at the same time that the underlying PBRSUs and SSUs vest. During 2021, our NEOs had the following amounts (rounded) of accrued cash dividends on their vested PBRSUs and SSUs: $115,184 for Mr. McKenney; $11,262 for Mr. Zabel; $32,311 for Mr. Simonds; $15,482 for Ms. Iglesias and $10,325 for Mr. Bhasin. Accrued cash dividends were distributed on March 1, 2021 for the PBRSUs and February 18, 2022 for the SSUs, respectively, and are included in the “Value Realized on Vesting” column. Prior to the distribution of the vested SSU awards, the first quarter 2022 dividend was paid in February 2022 and was due on the SSUs which had vested on December 31, 2021. Therefore, the following amounts were included in the distributions of the SSUs: $18,450 for Mr. McKenney, $1,121 for Mr. Zabel; $4,613 for Mr. Simonds; $1,957 for Ms. Iglesias and $928 for Mr. Bhasin. These February 2022 amounts were excluded from the “Value Realized on Vesting” column above since they were earned after the vesting date of the SSUs. |
| (4) | PBRSUs were multiplied by the closing stock price on the vesting date.date, March 1, 2021. PSUs that were granted in 20182019 (for the 2018-20202019-2021 performance period) and whichone-third of the SSUs that were granted in 2020 vested on December 31, 2020,2021. They were multiplied by the closing stock price of $22.94$24.57 on December 31, 2020. The2021. PSUs granted in 2018and SSUs were distributed on February 23, 202118, 2022 on which date the closing stock price was $26.63$28.82 per share. |
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Current Value of Pension Benefits Pension benefits payable to each NEO are summarized in the following table: | | Mr. McKenney | | | Qualified | | | 4.42 | | | 151,000 | | | — | | | | Excess | | | 4.42 | | | 825,000 | | | — | | | | Mr. Zabel(1) | | | Qualified | | | — | | | — | | | — | | | | Excess | | | — | | | — | | | — | | | | Mr. Simonds | | | Qualified | | | 16.25 | | | 795,000 | | | — | | | | Excess | | | 16.25 | | | 1,055,000 | | | — | | | | Mr. Arnold | | | Qualified | | | 28.83 | | | 1,478,000 | | | — | | | | Excess | | | 28.83 | | | 751,000 | | | — | | | | Ms. Iglesias(1) | | | Qualified | | | — | | | — | | | — | | | | Excess | | | — | | | — | | | — | |
| | Plan Name | Number of Years of
Credited Service(2) (#) | Present Value of Accumulated Benefits(3) ($) | Payments During Last Fiscal Year ($) | | McKenney | Qualified | 4.42 | 149,000 | — | | Excess | 4.42 | 814,000 | — | | Zabel(1) | Qualified | — | — | — | | Excess | — | — | — | | Simonds | Qualified | 16.25 | 778,000 | — | | Excess | 16.25 | 1,032,000 | — | | Iglesias(1) | Qualified | — | — | — | | Excess | — | — | — | | Bhasin(1) | Qualified | — | — | — | | Excess | — | — | — |
| (1)
| No amounts are shown for Mr.Messrs. Zabel and Bhasin and Ms. Iglesias because the plans were frozen to further accruals on December 31, 2013, before their eligibility and/or employment began. |
| (2)
| All calculations utilize credited service and pensionable earnings as of the pension freeze date, December 31, 2013. Therefore the credited service shown reflects service through December 31, 2013. While all named executives have continued in service through the December 31, 20202021 measurement date, no additional pensionable earnings or credited service have been accrued following the freeze date. |
| (3)
| The “Present Value of Accumulated Benefits” is based upon a measurement date of December 31, 2020,2021, which is the same measurement date used for financial statement reporting purposes for the company’s audited financial statements as found in Note 9 to the Consolidated Financial Statements contained in the company’s 20202021 Form 10-K. All calculations utilize the following assumptions: |
Retirement Age: Assumes age 65. Discount Rate: 2.90%3.10% Salary Increase Rate: Not applicable. Social Security Indexing Rate: 3.5% to index the Qualified and Excess Plan benefits from the measurement date to commencement date. Pension Increase Rate: Not applicable. Pre-Retirement Decrements: None. Post-Retirement Mortality Table: Pri-2012 Mortality Tables projected using fully generational Scale MP-2020. | 88 | 2022 UNUM PROXY STATEMENT |
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Non-Qualified Deferred Compensation We have one active non-qualified defined contribution plan (Non-Qualified Plan) that allows for deferrals of compensation by our NEOs. NON-QUALIFIED DEFERRED COMPENSATION | | Mr. McKenney | | | Non-Qualified DC | | | 125,192 | | | 237,865 | | | 450,614 | | | — | | | 3,406,877 | | | | Mr. Zabel | | | Non-Qualified DC | | | 37,132 | | | 70,551 | | | 32,026 | | | — | | | 214,181 | | | | Mr. Simonds | | | Non-Qualified DC | | | 53,116 | | | 100,920 | | | 152,080 | | | — | | | 1,284,377 | | | | Mr. Arnold | | | Non-Qualified DC | | | 95,894 | | | 112,397 | | | 284,682 | | | — | | | 1,614,307 | | | | Ms. Iglesias | | | Non-Qualified DC | | | 150,302 | | | 71,393 | | | 172,134 | | | — | | | 1,140,823 | |
| | Plan | Executive Contributions in Last FY(1) ($) | Registrant Contributions in Last FY(2) ($) | Aggregate Earnings in Last FY(3) ($) | Aggregate Withdrawals/ Distributions ($) | Aggregate Balance at Last FYE(4) ($) | | McKenney | Non-Qualified DC | 128,623 | 244,384 | 734,596 | — | 4,514,480 | | Zabel | Non-Qualified DC | 46,387 | 88,136 | 44,666 | — | 393,370 | | Simonds | Non-Qualified DC | 57,289 | 108,850 | 293,936 | — | 1,744,452 | | Iglesias | Non-Qualified DC | 138,815 | 65,937 | 166,644 | — | 1,512,219 | | Bhasin | Non-Qualified DC | 67,355 | 63,988 | 3,776 | — | 659,352 |
| (1)
| These amounts are included in the Summary Compensation Table in the “Salary” and “Non-Equity Incentive Plan Compensation” columns for 20202021 for each NEO. |
(2)
| (2) | These amounts represent company contributions through our Non-Qualified Plan, as described in the “Retirement and Workplace Benefits” section beginning on page 83.79. The amounts are included in the “All Other Compensation” column of the Summary Compensation Table for 20202021 for each NEO. |
| (3)
| These amounts were not included in the Summary Compensation Table because investment earnings were not preferential or above market. The investment options under the non-qualified retirement plans are the same choices available to all employees that are eligible to participate in the 401(k) Plan and NEOs do not receive preferential earnings on their investments. |
| (4)
| This column includes the following amounts that were reported in prior years'years’ Summary Compensation Tables in the “Salary,” “Non-Equity Incentive Plan Compensation,” or “All Other Compensation” columns, as applicable, to the extent that the NEO was ana NEO at the time: $1,929,823$2,292,880 for Mr. McKenney; $16,911$124,594 for Mr. Zabel; $783,547$937,583 for Mr. Simonds; $361,458 for Mr. Arnold; and $620,430$842,125 for Ms. Iglesias. Mr. Bhasin’s balance in the Non-qualified DC plan was $524,233 at December 31, 2020, which is included in the aggregate balance at December 31, 2021. |
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POST-EMPLOYMENT COMPENSATION
POST-EMPLOYMENT COMPENSATION
Post-Employment CompensationThe discussion below outlines estimated benefits payable to our NEOs under various termination scenarios as of December 31, 2020. 2021.The following terminology will be used throughout the discussion of the various termination scenarios: TERMINATION DEFINITIONS
TERMINATION DEFINITIONS | Termination with cause | | One or more of the following factors is present: the failure to substantially perform duties; the willful engagement in illegal conduct or gross misconduct harmful to the company; or the conviction of a felony (or plea of “guilty” or “no contest”).
| | Termination without cause | | One or more of the following factors is present: poor performance, other than for misconduct or cause (as defined above); job elimination; job requalification; or the decision to fill the position with a different resource consistent with the direction of the company.
| | Resignation for good reason | | One or more of the following events have preceded the resignation of the NEO: assignment to a position inconsistent with his or her existing position or any other action that diminishes such position; reduction of his or her base salary or annual incentive target; failure to continue any material employee benefit or compensation plan in which he or she participates; or relocation to an office more than 50 miles from his or her location.
| | Change in control | | A change in control occurs when one of the following situations exists: (a) the incumbent directors at the beginning of any two-year period cease to constitute a majority of the Board during such period; (b) an entity acquires 20% of our voting stock (30% in some instances); (c) we consummate certain transactions such as a merger or disposition of substantially all of our assets; or (d) shareholders approve a plan of liquidation or distribution. |
In the event of any termination of employment, each NEO would receive benefits to which he or she is entitled, including any unpaid base salary through the date of termination, accrued vacation, and accrued benefits under the retirement plans. Severance and Change in Control Arrangements We have the following severance and change in control contracts and plans covering the NEOs. Severance Benefits
SEVERANCE BENEFITS
The company provides severance benefits to all employees (including our NEOs) in the event of involuntary termination, other than for death, disability or cause. In general, we provide severance in order to give our employees competitive benefits with respect to the possibility of an involuntary termination of their employment. Pursuant to arrangements more fully described in the next section, severance benefits would be provided to the NEOs as follows: (1) to Mr. McKenney under a severance agreement dated effective as of April 1, 2015, and (2) to the other NEOs under our Separation Pay Plan for Executive Vice Presidents and applicable change in control severance agreements. When termination of employment is accompanied by severance payments, the former executive is required to release claims he or she may have against us, and to provide us with certain confidentiality, non-solicitation, non-competition, and non-disparagement covenants. We also agree to indemnify the former executive for certain actions taken on the company’s behalf during his or her employment. | 90 | 2022 UNUM PROXY STATEMENT |
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POST-EMPLOYMENT COMPENSATION CHANGE IN CONTROL AGREEMENTS
Change in Control AgreementsEach NEO, other than Mr. McKenney, is covered by a standalone change in control severance agreement with the company. These agreements provide an enhanced severance benefit in the event of a termination following a change in control. This ensures the covered executives remain focused during the critical times before and after a major corporate transaction, regardless of any uncertainty with respect to their future employment. None of the NEOs have an excise tax gross-up provision in their agreements. As indicated above, change in control benefits are available to Mr. McKenney under his severance agreement. Mr. McKenney'sMcKenney’s agreement specifically addresses post-employment payments, including in the event of a termination of employment in connection with a change in control. In the event of termination within two years following the occurrence of a change in control, our NEOs (including Mr. McKenney) would receive the following benefits under their respective agreements: A multiple of the sum of base salary and annual incentive, which for Mr. McKenney is three times the sum of his annual base salary and the average of the annual incentive paid to him in the three years prior to the date of termination, and for the other NEOs is two times the sum of his or her annual base salary and annual incentive (the greater of the current year target or the prior year annual incentive paid); Prorated annual incentive through the date of termination of employment, which for Mr. McKenney is based on the average of the annual incentive paid to him in the three most recent calendar years, and for the other NEOs is based on the greater of the current year target or the prior year annual incentive paid; Health and welfare benefits, which for Mr. McKenney are provided for up to three years, and for the other NEOs are provided for up to two years; Outplacement services (20% of base salary, maximum of $50,000); and Accelerated vesting of unvested CIUs, CSUs and equity awards (including SSUs) that were assumed upon the change in control, but only if the termination of employment was due to death or disability, by the company without cause, or by the executive for good reason, (providedprovided that PSUs would be deemed earned at target performance and outstanding stock options would remain exercisable untilperformance. The date of a change in control shall be deemed the earlierlast day of the expiration date orperformance period solely for the 90th day after such terminationpurpose of employment).calculating performance for CIUs. Notwithstanding the above, the change in control payments would be reduced if the reduction would result in greater after-tax proceeds to the executive absent the reduction. Otherwise, the executive would receive the above payments and be responsible for paying any excise tax imposed on the payments. Terminations Not Related to a Change in Control
TERMINATIONS NOT RELATED TO A CHANGE IN CONTROL
There are instances in which a NEO’s employment may be terminated that dodoes not involve a change in control. The company may terminate for cause or without cause. Additionally, termination of employment may occur upon a NEO’s voluntary resignation, retirement, death, or becoming disabled. In the event of the death, disability or retirement (if eligible) of a NEO, all of the NEO’s unvested PBRSUs and stock options would vest and the stock options would remain exercisable until the earlier of the expiration date or, as applicable, the third anniversary of the date of death or the fifth anniversary of the date of retirement.vest. In the event of termination of employment as a result of job elimination or TABLE OF CONTENTS
POST-EMPLOYMENT COMPENSATION
requalification (or, in the case of Mr. McKenney, resignation for good reason), the NEOs would vest in a pro-rata portion of earned PSUs and CIUs and in the event of termination of employment as a result of death, disability, or retirement, the NEOs would vest in earned PSUs and CIUs, in each case on the date that such awards would otherwise be settled based on actual performance. However, to the extent necessary to avoid the imposition of penalty taxes under Code Section 409A, stock would not be distributed until at least six months after the date of termination. | 2022 UNUM PROXY STATEMENT | 91 |
POST-EMPLOYMENT COMPENSATION NEOs receive additional benefits depending upon the termination scenario as outlined in the following table: TERMINATION BENEFITS AVAILABLE TO CEO AND OTHER NEOs UNDER NON-CHANGE IN CONTROL SCENARIOS | Benefits Received | | | Termination for
for Cause or
Voluntary
Resignation
| | | Termination
Without Cause or Voluntary
Resignation
| Termination Without Cause
or Resignation with Good
Reason* | Disability | Death | Disability
| | | Death
| | | Retirement | | | Severance(1) | | | | | | CEO, NEOs | | | | | | | | | | | | Prorated Annual Incentive(2) | | CEO | | | | CEO
| | | CEO, NEOs | | | CEO, NEOs | | | If Retirement Eligible | | | Early Vesting of EquityLTI (3)(4) | | CEO | | | | CEO
| | | CEO, NEOs | | | CEO, NEOs | | | If Retirement Eligible | | | Benefit Continuation(5) | | CEO | | | | CEO
| | | | | | | | | | | | Outplacement Services(6) | | | | | | CEO, NEOs | | | | | | | | | | | | Disability Benefits(7) | | | | | | | | | CEO, NEOs | | | | | | | | | Group Life Ins. Benefits(8) | | | | | | | | | | | | CEO, NEOs | | | | | | Corporate Owned Life Ins.(8) | | | | | | | | | | | | NEOs who gave approval | | | | |
| *
| Mr. McKenney is the only NEO entitled to benefits in the event of a resignation for good reason absent a change in control. |
| (1)
| If Mr. McKenney is terminated without cause or resigns with good reason,Good Reason, he will receive severance of two times the sum of his annual base salary and the average of the annual incentive paid to him in the three years prior to the date of termination. Other NEOs who are terminated without cause will receive 18 months of base salary. See the following table for termination benefits related to a change in control. |
| (2)
| Annual incentive will be prorated based on the date of termination of employment. For all NEOs other than Mr. McKenney, the NEO will be eligible for prorated annual incentive in the event of death, disability, or retirement (if eligible) only if such termination occurs on or after the last pay period in June. |
| (3)
| If Mr. McKenney is terminated without cause or resigns for Good Reason, a prorated portion of his unvested equity awards, with the exception of his SSUs,PBRSUs will accelerate vesting under the terms of the award agreements. In the event of his death, disability, or retirement (if eligible at the time) or ifAdditionally, he is terminated without cause or resigns for good reason, Mr. McKenney would be eligible to receive a prorated portion of theunvested PSUs and CIUs based on actual performance at the end of the three-year performance cycle. |
| (4)
| For all NEOs, absent a change in control, their unvested PBRSUs will accelerate only in the event of death, disability, or retirement (if eligible)., their unvested PBRSUs will accelerate. Additionally, they would be eligible to receive a prorated portion of theany unvested PSUs and CIUs based on actual performance at the end of the three-year performance cycle. Absent a change in control, all unvested CSUs and SSUs would be forfeited. |
| (5)
| If Mr. McKenney is terminated without cause or resigns with good reason,Good Reason, he will receive health and welfare benefits for up to two years. |
| (6)
| Outplacement services are capped at 20% of base salary (up to a maximum of $50,000). |
| (7)
| Monthly benefits from the company’s long-term disability plan until the earlier of age 65 or death. |
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POST-EMPLOYMENT COMPENSATION
| (8)
| Group life insurance benefits are $50,000 for each full-time employee. Corporate owned life insurance (COLI) benefits are applicable for each NEO who was eligible at the time of purchase and gave their approval. The beneficiary (as defined in the policy) of Mr. McKenney, Mr. Zabel, Mr. Simonds, and Ms. Iglesias will receive $200,000 if the NEO is an active employee at death, or $50,000 if the NEO is not an active employee at death. Mr. Arnold is covered under two COLI benefits; his beneficiary will receive a total of $400,000 if Mr. Arnold is an active employee at death, or $50,000 if he is not an active employee at death. |
Termination Payments
TERMINATION PAYMENTS Termination payments are provided to NEOs as outlined in the following table and vary with the circumstances under which the termination occurs. In the event of termination as a result of death, payments will be made to the named executive officer’s beneficiary. Consistent with SEC requirements, all termination scenarios in the table below assume a termination date of December 31, 2020.2021. Accordingly, all calculations in the following table were made using the closing market price of our common stock as of December 31, 20202021 ($22.9424.57 per share). We have excluded amounts received as an annuity under our retirement plans and the “in-the-money” value of vested unexercised stock options held by NEOs since these amounts are not impacted by a termination.plans. The amounts shown in the table also do not include distributions of plan balances under the Non- QualifiedNon-Qualified Plan. Those amounts are shown in the “Non-Qualified Deferred Compensation” table on page 95.89. | 92 | 2022 UNUM PROXY STATEMENT |
POST-EMPLOYMENT COMPENSATION The amounts in the following table are hypothetical based on the rules of the SEC. Actual payments depend on the circumstances and timing of any termination. The information provided in this table constitutes forward-looking statements for purposes of the Private Litigation Securities Reform Act of 1995. TABLE OF CONTENTS
POST-EMPLOYMENT COMPENSATION
TERMINATION TABLE
| | Termination for Cause or Voluntary Resignation | | | | | | | — | | | — | | | — | | | — | | | — | | | | Total | | | $— | | | $— | | | $— | | | $— | | | $— | | | | Termination Without Cause or Resignation with Good Reason (CEO) | | | | Severance | | | 6,116,667 | | | 900,000 | | | 1,050,000 | | | 750,053 | | | 825,000 | | | | Prorated Annual Incentive(1) | | | 2,008,333 | | | — | | | — | | | — | | | — | | | | Early Vesting of Equity(2) | | | 11,788,175 | | | — | | | — | | | — | | | — | | | | Benefit Continuation | | | 85,460 | | | — | | | — | | | — | | | — | | | | Outplacement Services | | | 50,000 | | | 50,000 | | | 50,000 | | | 50,000 | | | 50,000 | | | | Total | | | $20,048,635 | | | $950,000 | | | $1,100,000 | | | $800,053 | | | $875,000 | | | | Disability | | | | Prorated Annual Incentive(1)(3) | | | 2,008,333 | | | 597,554 | | | 735,785 | | | 355,179 | | | 434,077 | | | | Early Vesting of Equity(2)(4) | | | 11,788,175 | | | 909,354 | | | 2,249,682 | | | 1,246,381 | | | 1,370,299 | | | | Disability Benefits | | | 321,940 | | | 315,216 | | | 419,556 | | | 179,337 | | | 247,979 | | | | Total | | | $14,118,448 | | | $1,822,124 | | | $3,405,023 | | | $1,780,897 | | | $2,052,355 | | | | Death | | | | Prorated Annual Incentive(1)(3) | | | 2,008,333 | | | 597,554 | | | 735,785 | | | 355,179 | | | 434,077 | | | | Early Vesting of Equity(2)(4) | | | 11,788,175 | | | 909,354 | | | 2,249,682 | | | 1,246,381 | | | 1,370,299 | | | | Group Life Ins. Benefits | | | 50,000 | | | 50,000 | | | 50,000 | | | 50,000 | | | 50,000 | | | | Corporate Owned Life Ins. | | | 200,000 | | | 200,000 | | | 200,000 | | | 400,000 | | | 200,000 | | | | Total | | | $14,046,508 | | | $1,756,908 | | | $3,235,467 | | | $2,051,560 | | | $2,054,376 | | | | Termination Related to a Change in Control | | | | Severance | | | 9,175,000 | | | 2,520,000 | | | 3,177,676 | | | 1,900,133 | | | 2,145,000 | | | | Prorated Annual Incentive(1)(3) | | | 2,008,333 | | | 660,000 | | | 888,838 | | | 450,032 | | | 522,500 | | | | Early Vesting of Cash Success Units | | | 4,900,000 | | | 840,000 | | | 1,225,000 | | | 437,500 | | | 519,750 | | | | Early Vesting of Equity | | | 16,116,572 | | | 1,172,447 | | | 3,331,781 | | | 1,632,845 | | | 1,829,411 | | | | Benefit Continuation | | | 128,191 | | | 78,119 | | | 102,362 | | | 111,614 | | | 98,732 | | | | Outplacement Services | | | 50,000 | | | 50,000 | | | 50,000 | | | 50,000 | | | 50,000 | | | | DC Enhancement(5) | | | 251,000 | | | — | | | 121,000 | | | — | | | — | | | | 280G Cut-back(6) | | | (2,074,424) | | | — | | | (148,245) | | | — | | | — | | | | Total | | | $30,554,672 | | | $5,320,566 | | | $8,748,412 | | | $4,582,124 | | | $5,165,393 | | | | Retirement | | | | Prorated Annual Incentive(7) | | | — | | | — | | | — | | | — | | | — | | | | Early Vesting of Equity(2)(4) | | | — | | | — | | | — | | | 1,246,381 | | | — | | | | Total | | | $— | | | $— | | | $— | | | $1,246,381 | | | $— | |
| TERMINATION TABLE | | | | | | McKenney | | | Zabel | | | Simonds | | | Iglesias | | | Bhasin | | | Termination Scenario | | ($) | | | ($) | | | ($) | | | ($) | | | ($) | | | Termination for Cause or Voluntary Resignation | | | | — | | | — | | | — | | | — | | | — | | | Total | | $ | — | | | $ | — | | | $ | — | | | $ | — | | | $ | — | | | Termination Without Cause or Resignation with Good Reason (CEO) | | Severance | | | 5,714,975 | | | | 937,500 | | | | 1,050,000 | | | | 825,000 | | | | 810,000 | | | Prorated Annual Incentive(1) | | | 1,807,487 | | | | — | | | | — | | | | — | | | | — | | | Early Vesting of Long-Term Incentive(2) | | | 7,972,185 | | | | — | | | | — | | | | — | | | | — | | | Benefit Continuation | | | 89,973 | | | | — | | | | — | | | | — | | | | — | | | Outplacement Services | | | 50,000 | | | | 50,000 | | | | 50,000 | | | | 50,000 | | | | 50,000 | | | Total | | $ | 15,634,620 | | | $ | 987,500 | | | $ | 1,100,000 | | | $ | 875,000 | | | $ | 860,000 | | | Disability | | Prorated Annual Incentive(1)(3) | | | 1,807,487 | | | | 937,730 | | | | 1,146,600 | | | | 627,000 | | | | 648,000 | | | Early Vesting of Long-Term Incentive(4) | | | 14,228,406 | | | | 1,916,609 | | | | 2,992,192 | | | | 1,534,287 | | | | 1,431,096 | | | Disability Benefits | | | 297,600 | | | | 290,833 | | | | 395,315 | | | | 222,960 | | | | 148,952 | | | Total | | $ | 16,333,493 | | | $ | 3,145,172 | | | $ | 4,534,107 | | | $ | 2,384,247 | | | $ | 2,228,048 | | | Death | | Prorated Annual Incentive(1)(3) | | | 1,807,487 | | | | 937,730 | | | | 1,146,600 | | | | 627,000 | | | | 648,000 | | | Early Vesting of Long-Term Incentive(4) | | | 14,228,406 | | | | 1,916,609 | | | | 2,992,192 | | | | 1,534,287 | | | | 1,431,096 | | | Group Life Ins. Benefits | | | 50,000 | | | | 50,000 | | | | 50,000 | | | | 50,000 | | | | 50,000 | | | Corporate Owned Life Ins. | | | 200,000 | | | | 200,000 | | | | 200,000 | | | | 200,000 | | | | — | | | Total | | $ | 16,285,893 | | | $ | 3,104,339 | | | $ | 4,388,792 | | | $ | 2,411,287 | | | $ | 2,129,096 | | | Termination Related to a Change in Control | | Severance | | | 8,572,462 | | | | 2,750,000 | | | | 3,220,000 | | | | 2,145,000 | | | | 2,160,000 | | | Prorated Annual Incentive(1)(3) | | | 1,807,487 | | | | 750,000 | | | | 910,000 | | | | 522,500 | | | | 540,000 | | | Early Vesting of Long-Term Incentive | | | 20,761,070 | | | | 2,676,939 | | | | 4,625,364 | | | | 2,227,220 | | | | 1,911,108 | | | Benefit Continuation | | | 130,459 | | | | 79,353 | | | | 98,602 | | | | 101,791 | | | | 101,791 | | | Outplacement Services | | | 50,000 | | | | 50,000 | | | | 50,000 | | | | 50,000 | | | | 50,000 | | | DC Enhancement(5) | | | 258,000 | | | | — | | | | 129,000 | | | | — | | | | — | | | 280G Cut-back(6) | | | (4,322,043 | ) | | | — | | | | (915,390 | ) | | | — | | | | — | | | Total | | $ | 27,257,435 | | | $ | 6,306,292 | | | $ | 8,117,576 | | | $ | 5,046,511 | | | $ | 4,762,899 | | | Retirement(7) | | | | | — | | | | — | | | | — | | | | — | | | | — | | | Total | | $ | — | | | $ | — | | | $ | — | | | $ | — | | | $ | — | |
| (1)
| In these scenarios, per the terms of Mr. McKenney’s severance agreement, he would be entitled to a prorated annual incentive. The amount is to be calculated using the average of the annual bonuses paid for the three most-recent calendar years. |
| 2022 UNUM PROXY STATEMENT | 93 |
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POST-EMPLOYMENT COMPENSATION
(2)
| (2) | In the event Mr. McKenney resigns with Good Reason, the amount shown in the table represents the value of the prorated PBRSUs and PSUs (and their related accrued cash dividends) that would vest at a market price of $24.57, the closing price of our stock on the last trading day of the year plus the prorated amount of CIUs. In the event of job elimination, the prorated early vesting of equity awardsPBRSUs would be as follows: Mr. McKenney $3,187,582;$4,167,170; Mr. Zabel $269,201;$517,985; Mr. Simonds $607,658; and$864,201; Ms. Iglesias $370,573.$459,312 and Mr. Bhasin $421,769. These NEOs would also be eligible to receive a prorated portion of their unvested PSUs and CIUs in the event of job elimination or requalification. The prorated amount would be calculated based on their termination date and the vesting of those unitsthe PSUs and CIUs would be based on achievement of the prospective three-year goals, modified by relative TSR. Assuming a job elimination date of December 31, 2020,2021, the prorated number of PSUs and CIUs that each NEO would be eligible to receive would be as follows: Mr. McKenney 105,125;91,091 PSUs and $1,250,000 CIUs; Mr. Zabel 6,485;10,319 PSUs and $200,000 CIUs; Mr. Simonds 20,517;17,617 PSUs and $282,486 CIUs; Ms. Iglesias 12,556.10,618 PSUs and $123,750 CIUs and Mr. Arnold is eligibleBhasin 10,323 PSUs and $112,500 CIUs. In the event of job elimination, the accrued cash dividends related to the prorated PBRSUs and PSUs for retirement status under the terms of the Stock Incentive Plan of 2017. Therefore, he would receive full vesting of his unvested PBRSUs, as noted in the Retirement section of this table. The amounts shown in the table represent the value of the shares at a market price of $22.94, the closing price of our stock on the last trading day of the year. Mr. Arnoldeach executive would also be eligible to earn the full amount of earned PSUs based on his retirement status. The PSUs would vest based on the actual achievement of the prospective three-year goals, modified by relative TSR.vest. |
| (3)
| Per the terms of the Annual Incentive Plan, in the event of death or disability during the plan year, on or after the last payday of June, the participant or their beneficiary (as applicable) would receive a prorated payment based on plan results. Per the terms of the change in control severance agreements, in the event of a change in control for NEOs other than Mr. McKenney, each NEO is eligible for a prorated annual incentive based on the higher of the executive'sexecutive’s prior year actual or the current year target bonus. |
| (4)
| The amounts reported include PBRSUs and PSUs that would accelerate vesting in the event of disability, death or retirement.retirement (if eligible) plus the value of PSUs and CIUs at target. The PSUs granted in 2019 and 2020CIUs may be fully earned in the event of disability, death or retirement, based on the satisfaction of the performance goals. In each of these scenarios theThe awards would not be payable until the end of the applicable performance period. In accordance with Regulation S-K, Item 402(j), the PSUs reported in connection with the PSU awards granted in 2019 and 2020CIUs are reported at target levels since the company’s performance and relative TSR to date for these awards is not yet determinable. Actual shares and cash to be issued under PSUs granted in connection with the 2019 and 2020 awards may differ from the performance level required to be disclosed in this table. |
| (5)
| Defined Contribution (DC) enhancement is a lump sum payment representing the amount resulting from multiplying the company’s non-contributory retirement plan contributions times two additional years of eligible earnings for Messrs. McKenney and Simonds. |
| (6)
| Mr. McKenney and Mr. Simonds'Simonds’ benefits and payments are subject to a cutback to eliminate any excise tax payable under section 4999 of the Code if the net after-tax amount that each would receive with respect to such payments or benefits exceeds the net after-tax amount Messrs. McKenney and Simonds respectively would receive if the amounts of such payments and benefits were not reduced and each paid the excise tax. In respect of a termination occurring as of December 31, 2020,2021, both Mr. McKenney and Mr. Simonds would receive a greater benefit by having such benefits and payments reduced than by receiving such benefits and payments and paying the excise tax. The amounts included above (which reduces the total for the termination scenario) is the amount by which such payments and benefits must be reduced in order for Messrs. McKenney and Simonds to avoid paying the excise tax. |
| (7)
| None of the NEOs met the eligibility criteria for retirement status under the terms of the Annual Incentive Plan as of December 31, 20202021 and therefore would not have been eligible for a prorated annual incentive payment in the event of retirement. |
| 94 | 2022 UNUM PROXY STATEMENT |
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PAY RATIOAs required by SEC rules, we are providing the following information about the ratio of the annual total compensation of our median compensated employee to the annual total compensation of our Chief Executive Officer. The 20202021 annual total compensation of the median employee as of December 31, 20202021 was $68,394.$68,308. The 20202021 annual total compensation of Richard McKenney, our Chief Executive Officer, was $13,258,738.$9,349,680. The ratio of these amounts (also referred to as the “CEO"CEO pay ratio”ratio") was 1-to-194. 1-to-137.We understand that the CEO pay ratio is intended to provide greater transparency to annual CEO pay and how it compares to the pay of the median employee on an ongoing basis. As such, we are providing a supplemental ratio that compares the pay of the median-paid employee to our CEO's regular annual pay, excluding the amount vested under the special one-time Success Incentive Plan awardawards (see page 62)66), as we believe that this supplemental ratio reflects a more representative comparison. The resulting supplemental CEO pay ratio is 1-to-143. 1-to-113.The CEO pay ratio reported above is a reasonable estimate calculated in a manner consistent with SEC rules based on our payroll and employment records. The SEC’s rules regarding the identification of the median compensated employee and the process of calculating the pay ratio, allow companies to adopt a variety of methodologies, to apply certain exclusions, and to make reasonable estimates and assumptions that reflect their employee populations and compensation practices. As a result, the pay ratio reported by other companies may not be comparable to the CEO pay ratio reported above, as other companies have different employee populations and compensation practices and may utilize different methodologies, exclusions, estimates and assumptions in calculating their own pay ratios. The CEO pay ratio for the 2020 fiscal year was calculated using the same median employee identified with respect to the 2019 and 2018 fiscal years as there was no material change in our employee population or employee compensation arrangements during the 2020 fiscal year that we reasonably believe would significantly impact our CEO pay ratio disclosure. The steps described below were performed in 2020 to determine the annual total compensation of the median employee.
To identify our median employee, we began with our entire active employee population of approximately 10,20010,250 employees as of December 31, 20182021 (after excluding approximately 200276 employees that were acquired in connection with our acquisition of Pramerica Życie TUiR SA, a leading financial protection provider in Poland). For these purposes, we identified the median compensated employee using base salary or hourly wages earned during fiscal 20182021 and cash bonus paid for fiscal 2018.2021. We annualized base salary or hourly wages, as applicable, for employees who were not designated as temporary or seasonal employees but who did not work for the entire year. As permitted under SEC guidance, because our originally identified median employee had anomalous pay characteristics, we substituted another employee with substantially similar compensation. Using this methodology, we determined that the median compensated employee was a full-time, exemptnon-exempt employee who holds a core business role that supports field employees who deliver Unum products to ourwhose accountabilities include billing and premium reconciliation, plan changes and other service requests from customers. This employee is located in the northeastern United States.
To calculate the CEO pay ratio for 2020,2021, we identified the elements of such employee's compensation for 20202021 using the same methodology applied for calculating our CEO's total compensation as reported in the Summary Compensation Table, resulting in annual total compensation of $68,394. | 2022 UNUM PROXY STATEMENT | 95 |
EQUITY COMPENSATION PLAN INFORMATION Equity Compensation Plan Information The following table gives information as of December 31, 2021 PROXY STATEMENTabout the common stock that may be issued under all of our existing equity compensation plans. EQUITY COMPENSATION PLANS | Plan Category | (a) Number of securities to be issued upon exercise of outstanding options, warrants and rights | (b) Weighted average exercise price of outstanding options, warrants and rights (5) | (c) Number of securities remaining available for future issuance under equity compensation plans (excluding securities reflected in column (a)) | Equity Compensation Plans Approved by Shareholders (1) | 3,465,414 (3) | N/A | 10,180,572 (6) | | Equity Compensation Plans Not Approved by Shareholders (2) | 38,090 (4) | N/A | 9,855 (7) | | Total | 3,503,504 | N/A | 10,190,427 |
| (1) | Our shareholders have approved the following plans: (a) Stock Incentive Plan of 2007 (2007 Plan), (b) Unum Group 2020 Employee Stock Purchase Plan (ESPP), (c) Stock Incentive Plan of 2012 (2012 Plan), (d) Unum European Holding Company Limited Savings-Related Share Option Scheme 2016 (2016 SAYE), (e) Stock Incentive Plan of 2017 (2017 Plan), and (f) Unum European Holding Company Limited Savings-Related Share Option Scheme 2021 (2021 SAYE). |
| (2) | Our shareholders have not approved the Unum Group Amended and Restated Non-Employee Director Compensation Plan of 2004 (2004 NED Plan). |
| (3) | Includes 2,461,182 performance-based restricted stock units (RSUs), 75,881 deferred share rights issuable pursuant to outstanding awards (including dividend equivalents accrued thereon), and 928,351 performance share units (PSUs) assuming maximum achievement. The awards shown are issuable under the 2007 Plan, the 2012 Plan, and the 2017 Plan. |
| (4) | Consists of 35,191 deferred share rights (each representing the right to one share of common stock), and 2,899 deferred RSUs, including dividend equivalents accrued thereon, granted to non-employee directors under the 2004 NED Plan in accordance with the deferral elections of such directors in respect of cash retainers and meeting fees payable to them. |
| (5) | RSUs, PSUs, and deferred share rights are not included in the weighted average exercise price in column (b) because they have no exercise price. |
| (6) | Includes 67,607 shares and 112,064 shares available for future issuance as dividend equivalents in respect of outstanding awards under the 2007 Plan and the 2012 Plan, respectively, and 8,345,032 shares remaining available for future issuance under the 2017 Plan. If the Unum Group 2022 Stock Incentive Plan (2022 Plan) set forth in Item 4 is approved by our shareholders, we will no longer grant any awards under the 2017 Plan on or after the effective date of the 2022 Plan and the share reserve for future dividend equivalents will be eliminated. Also includes 1,256,706 shares remaining available for issuance under the ESPP; 199,163 shares remaining available for future issuance under the 2016 SAYE; and 200,000 shares remaining available for future issuance under the 2021 SAYE. |
| (7) | Represents number of shares available for future issuance as dividend equivalents in respect of outstanding awards under the 2004 NED Plan. If the 2022 Plan set forth in Item 4 is approved by our shareholders, the share reserve for future dividend equivalents will be eliminated. |
Below is a brief description of the equity compensation plans not approved by shareholders. Unum Group Amended and Restated Non-Employee Director Compensation Plan of 2004 This plan provided for the payment of annual retainers and meeting fees (discontinued in May 2011) to the non-employee directors who served on our Board of Directors. Under the plan, directors made an irrevocable election each year to receive all or a portion of their retainers and meeting fees in either cash or deferred share rights. A deferred share right is a right to receive one share of common stock on the earlier of (i) the director’s separation from service as a director of the company, or (ii) another designated date at least three years after the date of the deferral election. The number of deferred share rights granted is calculated as the number of whole shares equal to (i) the dollar amount of the annual retainer and/or fees that the director elects to have paid in deferred share rights, divided by (ii) the fair market value per share on the grant date. The aggregate
| 96 | 2022 UNUM PROXY STATEMENT |
EQUITY COMPENSATION PLAN INFORMATION number of shares which were authorized for issuance under the plan is 500,000. This plan terminated in May 2010 with respect to new awards, though dividend equivalents remain available for future issuance in respect of awards that were outstanding at that time. If the 2022 Plan set forth in Item 4 is approved by our shareholders, the share reserve for future dividend equivalents under this plan will be eliminated. The plan is administered by the Human Capital Committee. The plan includes provisions restricting the transferability of the deferred share rights, provisions for adjustments to the number of shares available for grants, and the number of shares subject to outstanding grants in the event of recapitalization, reclassification, stock split, reverse stock split, reorganization, merger, consolidation, or other similar corporate transaction.| 2022 UNUM PROXY STATEMENT | 97 |
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OWNERSHIP OF COMPANY SECURITIES
OWNERSHIP OF COMPANY SECURITIES
Ownership of Company SecuritiesThe following table shows the number of shares of our common stock beneficially owned by each of our directors and named executive officers and by all directors and executive officers as a group, as of April 1, 2021.March 28, 2022. The table and related footnotes also include information about deferred share rights, restricted stock units (RSUs), and stock success units (SSUs) credited to the accounts of directors and executive officers under various compensation and benefit plans.plans, in the column entitled "Shares Subject to Settleable Rights or Units". Based upon the representations made by each director and executive officer, we do not believe that any shares held by them are pledged as security. Except as otherwise indicated below, the beneficial owners have sole voting and investment power with respect to the shares beneficially owned. | BENEFICIAL OWNERSHIP OF COMMON STOCK (as of March 28, 2022) | | Name | Shares of Common
Stock(1) | Shares Subject to
Settleable Rights or
Units(2)(3)(4) | Total Shares
Beneficially Owned | Percent of Class | | Theodore H. Bunting, Jr. | 12,922 | 23,680 | 36,602 | * | | Susan L. Cross | 80 | 16,387 | 16,466 | * | | Susan D. DeVore | 20,373 | 5,348 | 25,721 | * | | Joseph J. Echevarria | — | 66,450 | 66,450 | * | | Cynthia L. Egan | 24,623 | 16,275 | 40,898 | * | | Kevin T. Kabat | 89,667 | 11,057 | 100,724 | * | | Timothy F. Keaney | 30,767 | 6,340 | 37,106 | * | | Gale V. King | — | — | — | * | | Gloria C. Larson | 20,936 | 88,379 | 109,315 | * | | Ronald P. O'Hanley | 29,462 | 22,851 | 52,314 | * | | Francis J. Shammo | 20,650 | 21,769 | 42,419 | * | | Richard P. McKenney | 628,920 | — | 628,920 | * | | Steven A. Zabel | 32,904 | — | 32,904 | * | | Michael Q. Simonds | 103,634 | — | 103,634 | * | | Lisa G. Iglesias | 65,197 | — | 65,197 | * | | Puneet Bhasin | 35,527 | — | 35,527 | * | | All directors and executive officers as a group (21 persons) | 1,243,076 | 304,422 | 1,547,498 | * |
* Denotes less than 1%. | BENEFICIAL OWNERSHIP OF COMMON STOCK
| | | (as of April 1, 2021)
| |
| | Theodore H. Bunting, Jr. | | | 2,903 | | | 27,480 | | | 30,383 | | | * | | | | Susan L. Cross | | | 80 | | | 12,011 | | | 12,091 | | | * | | | | Susan D. DeVore | | | 9,810 | | | 10,463 | | | 20,274 | | | * | | | | Joseph J. Echevarria | | | — | | | 53,871 | | | 53,871 | | | * | | | | Cynthia L. Egan | | | 24,623 | | | 10,463 | | | 35,086 | | | * | | | | Kevin T. Kabat | | | 64,890 | | | 24,586 | | | 89,475 | | | * | | | | Timothy F. Keaney | | | 20,204 | | | 11,413 | | | 31,617 | | | * | | | | Gloria C. Larson | | | 10,374 | | | 89,976 | | | 100,350 | | | * | | | | Ronald P. O'Hanley | | | 18,900 | | | 27,255 | | | 46,125 | | | * | | | | Francis J. Shammo | | | 11,224 | | | 20,109 | | | 31,333 | | | * | | | | Richard P. McKenney | | | 529,600 | | | — | | | 529,600 | | | * | | | | Steven A. Zabel | | | 17,989 | | | — | | | 17,989 | | | * | | | | Michael Q. Simonds | | | 87,951 | | | — | | | 87,951 | | | * | | | | Timothy G. Arnold | | | 38,152 | | | 25,212 | | | 63,364 | | | * | | | | Lisa G. Iglesias | | | 64,423 | | | — | | | 64,423 | | | * | | | | All directors and executive officers as a group (20 persons) | | | 961,070 | | | 312,810 | | | 1,273,879 | | | * | |
(1)
| Includes shares credited to the accounts of certain current and former executive officers including Mr. Arnold - 680 shares, under the company’s 401(k) Plan. Does not include shares credited to the accounts of certain executive officers under non-qualified defined contribution plans because, though measured in share value, they will be settled only in cash. |
| (2)
| Represents the number of shares underlying deferred share rights and RSUs payable solely in shares (including dividend equivalents accrued on such rights or units) that may be settled within 60 days after April 1, 2021,March 28, 2022, including deferred share rights and RSUs that may be settled upon the termination of a director’s service on the Board. For each non-employee director other than Ms. Cross and Ms. King, the amount includes shares underlying unvested RSUs that would vest upon retirement because the |
| 98 | 2022 UNUM PROXY STATEMENT |
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OWNERSHIP OF COMPANY SECURITIES
share rights and RSUs that may be settled upon the termination of a director’s service on the Board. For each non-employee director other than Ms. Cross and Ms. DeVore, the amount includes shares underlying unvested RSUs that would vest upon retirement because the director meets the years of service requirement. Also does not include shares underlying RSUs (including dividend equivalents accrued thereon) and SSUs that will not vest or cannot be settled within 60 days after April 1, 2021.
|
| director meets the years of service requirement. Does not include shares underlying RSUs (including dividend equivalents accrued thereon) and SSUs that will not vest or cannot be settled within 60 days after March 28, 2022. |
| (3)
| As of April 1, 2021,March 28, 2022, the total number of shares underlying deferred share rights (including dividend equivalents accrued thereon) held by our non-employee directors, including those rights which cannot be settled in shares or within 60 days after April 1, 2021March 28, 2022 and thus are not deemed to be beneficially owned for purposes of this table, was as follows: |
Mr. Bunting | | | — | | | Mr. Kabat | | | 3,262 | Ms. Cross | | | 12,011 | | | Mr. Keaney | | | 950 | Ms. DeVore | | | — | | | Ms. Larson | | | 46,049 | Mr. Echevarria | | | 24,333 | | | Mr. O'Hanley | | | 15,008 | Ms. Egan | | | — | | | Mr. Shammo | | | — |
| Bunting | — | | Egan | — | | Larson | 48,087 | | Cross | 16,387 | | Kabat | 835 | | O'Hanley | 15,672 | | DeVore | — | | Keaney | 992 | | Shammo | — | | Echevarria | 30,256 | | King | — | |
|
|
| (4)
| As of April 1, 2021,March 28, 2022, the total number of shares underlying RSUs (including dividend equivalents accrued thereon) held by our directors and executive officers, including those units which will not vest, or be settled in shares, within 60 days after April 1, 2021March 28, 2022 and thus are not deemed to be beneficially owned for purposes of this table, was as follows: |
Mr. Bunting | | | 37,964 | | | Mr. Kabat | | | 23,149 | | | Mr. McKenney(a) | | | 260,141 | Ms. Cross | | | 16,693 | | | Mr. Keaney | | | 10,463 | | | Mr. Zabel | | | 34,481 | Ms. DeVore | | | 10,463 | | | Ms. Larson | | | 43,927 | | | Mr. Simonds | | | 54,901 | Mr. Echevarria | | | 29,538 | | | Mr. O'Hanley | | | 14,848 | | | Mr. Arnold | | | 25,212 | Ms. Egan | | | 10,463 | | | Mr. Shammo | | | 20,109 | | | Ms. Iglesias | | | 28,058 | | | | | | | | | | | | | All directors and executive officers as a group(a) | | | 700,618 |
(a)
| Includes 45,774 shares underlying cash-settled RSUs that have been granted to Mr. McKenney. |
| Bunting | 34,628 | | Kabat | 10,222 | | McKenney(a) | 295,080 | | Cross | 22,780 | | Keaney | 5,348 | | Zabel | 48,817 | | DeVore | 5,348 | | King | 1,322 | | Simonds | 65,668 | | Echevarria | 36,194 | | Larson | 40,292 | | Iglesias | 28,372 | | Egan | 16,275 | | O'Hanley | 9,926 | | Bhasin | 26,135 | | | | | Shammo | 21,769 | | All directors and executive officers as a group(a) | 770,181 | | | | | | | | | (a) Includes 23,229 shares underlying cash-settled RSUs that have been granted to Mr. McKenney. |
In addition, as of April 1, 2021,March 28, 2022, the total number of shares underlying SSUs held by our executive officers (none are held by non-executive directors), which will not vest, or be settled in shares, within 60 days of April 1, 2021March 28, 2022 and thus are not deemed to be beneficially owned for purposes of this table, was as follows: Mr. McKenney - 186,368;124,867; Mr. Zabel - 11,328;7,590; Mr. Simonds - 46,592; Mr. Arnold - 16,640;31,217; Ms. Iglesias - 19,768;13,245; Mr. Bhasin - 6,280; and All executive officers as a group - 309,539. | 2022 UNUM PROXY STATEMENT | 99 |
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Security Ownership of Certain Shareholders Detailed information about the shareholders known to us to beneficially own more than 5% of our common stock can be found in the table below, including beneficial ownership based on sole and/or shared voting power and investment (dispositive) power. Information is given as of the dates noted in the footnotes below. BENEFICIAL OWNERSHIP
| | The Vanguard Group, Inc.(1) | | | 100 Vanguard Blvd.
Malvern, PA 19355 | | | 25,058,682 | | | 12.30% | | | | FMR LLC(2) | | | 245 Summer Street
Boston, MA 02210 | | | 18,204,505 | | | 8.94% | | | | BlackRock, Inc.(3) | | | 55 East 52nd Street
New York, NY 10055 | | | 16,167,499 | | | 7.90% | |
| BENEFICIAL OWNERSHIP | | | | | | Address of Beneficial Owner | Amount of Beneficial
Ownership | Percent of Common Stock
Outstanding | | BlackRock, Inc.(1) | 55 East 52nd Street New York, NY 10055 | 22,845,078 | 11.20% | | The Vanguard Group, Inc.(2) | 100 Vanguard Blvd. Malvern, PA 19355 | 21,827,583 | 10.68% | | FMR LLC(3) | 245 Summer Street Boston, MA 02210 | 17,395,254 | 8.51% |
| (1)
| This information is based on the Schedule 13G/A filed with the Securities and Exchange Commission by BlackRock, Inc. on January 27, 2022, which reflects beneficial ownership as of December 31, 2021. BlackRock, Inc. reported that, in its capacity as the parent holding company or control person of the subsidiaries listed therein, it had sole voting power with respect to 20,892,631 shares of our common stock, sole dispositive power with respect to 22,845,078 shares of our common stock, and shared voting and dispositive power with respect to none of our shares |
| (2) | This information is based on the Schedule 13G/A filed with the Securities and Exchange Commission by The Vanguard Group, Inc. on February 10, 2021,2022, which reflects beneficial ownership as of December 31, 2020.2021. The Vanguard Group, Inc. reported that, in its capacity as investment adviser, it had sole voting power with respect to none of our shares of our common stock, shared voting power with respect to 281,558126,361 shares of our common stock, sole dispositive power with respect to 24,322,83321,534,889 shares of our common stock, and shared dispositive power with respect to 735,849292,694 shares of our common stock. |
(2)
| (3) | This information is based on the Schedule 13G/A filed with the Securities and Exchange Commission by FMR LLC on February 10, 2021,9, 2022, which reflects beneficial ownership as of December 31, 2020.2021. FMR LLC reported that, in its capacity as a parent holding company, it had sole voting power with respect to 2,685,3412,011,048 shares of our common stock, sole dispositive power with respect to 18,204,50517,395,254 shares of our common stock, and shared voting and dispositive power with respect to none of our shares. The Schedule 13G/A includes shares beneficially owned by subsidiaries controlled by or through FMR LLC, Abigail P. Johnson, Director, Chairman and Chief Executive Officer of FMR LLC, and/or members of the family of Abigail P. Johnson, and Fidelity Low-Priced Stock Fund. |
(3)
100 | This information is based on the Schedule 13G/A filed with the Securities and Exchange Commission by BlackRock, Inc. on February 1, 2021, which reflects beneficial ownership as of December 31, 2020. BlackRock, Inc. reported that, in its capacity as the parent holding company or control person of the subsidiaries listed therein, it had sole voting power with respect to 14,690,549 shares of our common stock, sole dispositive power with respect to 16,167,499 shares of our common stock, and shared voting and dispositive power with respect to none of our shares. 2022 UNUM PROXY STATEMENT |
Delinquent Section 16(a) ReportsUnder Section 16(a) of the Securities Exchange Act of 1934, our directors, executive officers, and beneficial holders of more than 10% of our common stock are required to file with the U.S. Securities and Exchange Commission (SEC) certain forms reporting their beneficial ownership of and transactions in our common stock. Due to an administrative error by the company, one Form 4 (containing one transaction relating to the grant of stock options under the U.K. stock purchase plan on March 8, 2019) was not timely filed on behalf of Peter G. O’Donnell and was subsequently filed on March 9, 2021. With the exception of this late report, based solely upon a review of the reports (and amendments thereto) filed electronically with the SEC and written representations from the reporting persons that no other reports were required, we believe each of our directors and executive officers and 10% beneficial owners filed all required reports on a timely basis during the last fiscal year.
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Items to be Voted OnElection of Directors (Item 1 on the Proxy Card) Our Board of Directors currently has 1112 members. All nominees will stand for election to one-year terms of office. Upon the recommendation of the Governance Committee, the Board of Directors has nominated Theodore H. Bunting, Jr., Susan L. Cross, Susan D. DeVore, Joseph J. Echevarria, Cynthia L. Egan, Kevin T. Kabat, Timothy F. Keaney, Gale V. King, Gloria C. Larson, Richard P. McKenney, Ronald P. O’Hanley and Francis J. Shammo for election to one-year terms expiring at the 20222023 Annual Meeting. Each nominee currently serves on the Board and has been previously elected to the Board by shareholders.shareholders, other than Gale V. King, who was elected by the Board of Directors to fill a vacancy on the Board, effective as of March 4, 2022. Each nominee has agreed to continue to serve if elected, and the Board has no reason to believe that any nominee will be unable to serve if elected. However, if any nominee becomes unable or unwilling to serve before the 20202023 Annual Meeting, proxies may be voted for another person nominated as a substitute by the Board, or the Board may reduce the number of directors. Information concerning these nominees is provided under the section titled “Director Nominees”"Director Nominees" beginning on page 23. 22.The Board of Directors unanimously recommends that you vote FOR the election of each of the nominees for director: Theodore H. Bunting, Jr., Susan L. Cross, Susan D. DeVore, Joseph J. Echevarria, Cynthia L. Egan, Kevin T. Kabat, Timothy F. Keaney, Gale V. King, Gloria C. Larson, Richard P. McKenney, Ronald P. O’Hanley and Francis J. Shammo. Advisory Vote to Approve Executive Compensation (“Say-on-Pay”) (Item 2 on the Proxy Card) As required by Section 14A of the Securities Exchange Act of 1934 (“Exchange Act”), we are asking you to approve an advisory resolution on the compensation of our named executive officers as described in this proxy statement. This proposal, commonly known as a “Say-on-Pay” proposal, gives you the opportunity to endorse or not endorse our 20202021 executive compensation programs and policies for the named executive officers through the following resolution: RESOLVED, that the shareholders approve, on an advisory basis, the compensation of the company’s named executive officers, as disclosed pursuant to Item 402 of Regulation S-K in the company’s proxy statement for the 20212022 Annual Meeting of Shareholders, including the Compensation Discussion and Analysis, the compensation tables and related narrative discussion. For additional detail concerning the compensation of our named executive officers, please refer to the “Compensation Discussion and Analysis” beginning on page 51 and the compensation tables that follow. We hold a Say-on-Pay vote every year. Although your vote is not binding on the Board of Directors or the Human Capital Committee, the Human Capital Committee will review the voting results and seek to understand the factors that influenced the vote. As it did last year, the Human Capital Committee will consider constructive feedback obtained through this process in making future decisions about our executive compensation programs and policies. Shareholders will next have an opportunity to cast a Say-on-Pay vote at the 20222023 Annual Meeting. The Board unanimously recommends that you vote FOR approval of named executive officer compensation, as provided in the resolution above. | 2022 UNUM PROXY STATEMENT | 101 |
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Ratification of Appointment of Independent Registered Public Accounting Firm (Item 3 on the Proxy Card) The Audit Committee of the Board of Directors is directly responsible for the appointment, compensation, retention and oversight of the independent registered public accounting firm (independent auditor) retained to audit our financial statements. The Audit Committee has appointed Ernst & Young LLP as our independent auditor for 2021.2022. The members of the Audit Committee and the Board believe that the continued retention of Ernst & Young LLP to serve as our independent auditor is in the best interests of the company and its shareholders. The Board is seeking shareholder ratification of the appointment even though it is not legally required, as a matter of good corporate governance. If the appointment is not ratified, the Audit Committee will consider the shareholders’ views in the future selection of the company’s independent auditor. Representatives of Ernst & Young LLP are expected to attend the 20212022 Annual Meeting. They will have the opportunity to make a statement if they so desire and are expected to be available to respond to appropriate questions. The Board unanimously recommends that you vote FOR the ratification of the appointment of Ernst & Young LLP as our independent registered public accounting firm for 2021. 2022.Independent Auditor Fees The Audit Committee is responsible for the audit fee negotiations associated with the company’s retention of Ernst & Young LLP. Aggregate fees billed for audit and other services rendered by Ernst & Young LLP for our fiscal years ended December 31, 20202021 and 20192020 are presented in the table below. INDEPENDENT AUDITOR FEES
| | Audit Fees(1) | | | $9,617,800 | | | $8,316,250 | | | | Audit-Related Fees | | | 412,500 | | | 421,500 | | | | Tax Fees | | | 587,000 | | | 608,950 | | | | All Other Fees | | | — | | | — | | | | Total | | | $10,617,600 | | | $9,346,700 | |
| INDEPENDENT AUDITOR FEES | | | | Types of Fees | 2021 | 2020 | | Audit Fees(1) | $10,151,811 | $9,617,800 | | Audit-Related Fees | 415,642 | 412,500 | | Tax Fees(2) | 203,972 | 587,000 | | All Other Fees | — | — | | Total | $10,771,425 | $10,617,300 |
(1)
| (1) | The year-over-year increase in Audit Fees was primarily due to increased efforts related to the company’s ongoing adoption of ASC 944 accounting and disclosure requirements for long-duration insurance contracts and the company’s Closed Block individual disability reinsurance transaction.adoption of IFRS 9 within the Unum UK business. |
| (2) | The year-over-year decrease in Tax Fees was primarily due to tax compliance work performed in 2020. |
Audit Fees. This category includes fees associated with the audit of our annual financial statements, the review of financial statements included in our Quarterly Reports on Form 10-Q, the audit of internal control over financial reporting, and services provided in connection with statutory and regulatory filings. Audit-Related Fees.This category consists of fees for assurance and related services that are reasonably related to the performance of the audit or review of financial statements or internal control over financial reporting. These services principally include accounting consultations, control reviews, and audit-related services for our employee benefit plans. Tax Fees.This category consists of fees for tax compliance and advisory services. All Other Fees.This category consists of fees for services not included in any of the above categories. | 102 | 2022 UNUM PROXY STATEMENT |
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Policy for Pre-Approval of Audit and Non-Audit Services The Audit Committee has a policy requiring advance approval of all audit and permissible non-audit services performed by the independent auditor. Under this policy, the Audit Committee sets pre- approvedpre-approved limits for specifically defined audit and non-audit services. The Committee considers whether such services are consistent with SEC rules on auditor independence. Specific approval by the Committee is required if fees for any particular service or aggregate fees for services of a similar nature exceed the pre-approved limits. The Committee has delegated to its chair the authority to approve permitted services, and the chair must report any such decisions to the Committee at its next scheduled meeting. Approval of the Unum Group 2022 Stock Incentive Plan (Item 4 on the Proxy Card) We ask that our shareholders vote to approve the Unum Group 2022 Stock Incentive Plan (the “2022 Plan”). The 2022 Plan was adopted by the Board on April 4, 2022, subject to approval by our shareholders. If approved by shareholders at the 2022 Annual Meeting, the 2022 Plan will become effective on that date (the “Effective Date”). As part of the Board’s decision to approve the 2022 Plan, including the total number of shares authorized for issuance under the plan, the Board considered a number of factors, including the company’s historical burn rate, anticipated future equity award needs, and the dilutive impact of the 2022 Plan’s share reserve. Shares Remaining Available under Equity Plans: As of March 15, 2022, a total of 6,983,920 shares remained available for issuance under the Stock Incentive Plan of 2017 (the “2017 Plan”). As of March 15, 2022, the only other shares available for issuance under equity plans were a total of 1,655,869 shares available for issuance pursuant to our separate stock purchase plans for our employees in the U.S. and U.K., and 187,759 shares reserved for future dividend equivalent accruals in respect of outstanding deferred share awards under otherwise frozen stock plans ("Dividend Equivalent Reserves"). If the 2022 Plan is approved by our shareholders, we will no longer grant any awards under the 2017 Plan on or after the Effective Date and all Dividend Equivalent Reserves will be eliminated. In addition, subject to shareholder approval of the 2022 Plan, any awards previously granted under the 2017 Plan or our Stock Incentive Plan of 2012 (the “Prior Plans”) that, after March 15, 2022, are forfeited, terminated, expired, lapse without being exercised or are settled for cash, will become available for future awards under the 2022 Plan. Outstanding Awards: As of March 15, 2022, the shares issuable pursuant to outstanding awards under our existing equity compensation plans were as follows: | ◦ | No stock options were outstanding; and |
| ◦ | 3,341,340 shares underlying outstanding full value awards (consisting of 553,910 performance share units assuming maximum achievement,2,467,809 restricted stock units, 207,393 stock success units and 112,228 deferred share rights, including dividend equivalents accrued thereon). |
As of March 15, 2022, we had a total of 201,861,023 common shares outstanding and our closing price per common share, as reported on the New York Stock Exchange, was $27.78. Historical Burn Rate: Our equity plan share usage over 2019, 2020, and 2021 represented a three-year average burn rate of 0.78% of our weighted average common shares outstanding for each such year. This rate assumes that all performance-based awards are settled at maximum. This rate is materially consistent with the 0.63% median three-year average burn rate for Fortune 500 companies (pursuant to a report prepared by the Human Capital Committee’s independent consultant). | 2022 UNUM PROXY STATEMENT | 103 |
ITEMS TO BE VOTED ON Dilution: Dilution is commonly measured by “overhang,” which generally refers to the amount of potential dilution to current shareholders that could result from the future issuance of the shares reserved under an equity compensation plan. Overhang is typically expressed as a percentage (equal to a fraction where the numerator is the sum of the number of shares reserved but not issued under the applicable equity compensation plan plus the number of shares subject to outstanding awards, and the denominator is the sum of the numerator plus the total number of shares outstanding). If the 2022 Plan is approved, our voting power dilution will be approximately 5.50% as of March 15, 2022. This rate assumes that performance-based awards are settled at maximum. This rate is materially consistent with the 6.12% median overhang of Fortune 500 companies (pursuant to a report prepared by Human Capital Committee’s independent consultant). Key Features of the 2022 Plan The 2022 Plan contains a number of “best practice” features designed to protect the interests of shareholders, including: No Evergreen Feature. The maximum number of shares that may be issued pursuant to awards under the 2022 Plan is limited to 6,750,000, which is subject to adjustment only as described below under "Summary of the 2022 Plan ; Shares Available and Share Counting." There is no “evergreen” feature. Limits on Terms of Stock Options and SARs. The maximum term of each stock option and SAR granted under the 2022 Plan is ten years. No Liberal Share Counting. If the exercise price of any stock option or SAR or the tax obligations relating to any award are satisfied by delivering or withholding shares relating to such award, the full gross number of shares subject to the award will nonetheless be deducted from the plan’s share reserve. Minimum Vesting. Subject to limited exceptions, awards granted under the 2022 Plan may not vest prior to the first anniversary of the date of grant. Director Compensation Limits. The total dollar value of equity and cash compensation (whether granted under the 2022 Plan or otherwise) during any calendar year for any non-employee director of the company may not exceed $500,000, or $1,000,000 in the calendar year in which the director first joins the Board or in any calendar year in which the director is designated as Board Chairman or Lead Independent Director. Clawback Requirements. Any awards granted under the 2022 Plan will be subject to recovery under any law, government regulation, stock exchange listing requirement, and any clawback policy adopted by the company. No Stock Option Repricing. The repricing of “underwater” options and SARs, whether by amending an existing award, substituting a new award at a lower price or executing a cash buyout, without shareholder approval is prohibited. No Discounted Stock Options. The exercise price of each option and SAR granted under the 2022 Plan must be no less than the fair market value of a share of Unum common stock on the date of grant. No Dividends or Dividend Equivalents on Unvested Awards. The 2022 Plan does not permit the payment of dividends or dividend equivalents on restricted stock or restricted stock units unless and until the underlying award vests. Summary of the 2022 Plan A summary of the 2022 Plan is set forth below. The summary of the 2022 Plan is qualified in its entirety by the full text of the 2022 Plan, which is included in this Proxy Statement as Appendix A. Purpose and Design. The 2022 Plan is intended to allow the company to attract, retain and motivate officers, employees, directors and/or consultants and to provide the company with a long-term incentive plan providing | 104 | 2022 UNUM PROXY STATEMENT |
ITEMS TO BE VOTED ON
incentives directly linked to shareholder value. Awards under the 2022 Plan may be in the form of stock options, stock appreciation rights (“SARs”), restricted stock, restricted stock units, performance units, and other stock-based awards.
Administration. The Human Capital Committee (the “Committee”) is the plan administrator and has sole discretion, among other things, to select eligible individuals to receive awards, to determine the terms and conditions of awards, to interpret the provisions of the 2022 Plan and any awards under the plan, to adopt and amend sub-plans, to make and vary such regulations for the implementation and administration of the 2022 Plan, and to take all other actions not inconsistent with the terms of the 2022 Plan as the Committee deems necessary or appropriate to administer the 2022 Plan. Shares Available and Share Counting. The aggregate number of shares of our common stock that may be issued pursuant to awards under the 2022 Plan cannot exceed (i) 6,750,000, plus (ii) the number of shares subject to any award outstanding under a Prior Plan as of March 15, 2022 that after such date is not issued because such award is forfeited, terminates, expires or otherwise lapses without being exercised, or is settled for cash (with each full-value award counted as 1.76 shares for purposes of these add-backs, which is the ratio specified under the Prior Plans). The number of shares that may be issued under the 2022 Plan will be reduced by one share for every share subject to an award of options or stock appreciation rights granted under the 2017 Plan after March 15, 2022 and prior to the Effective Date and by 1.76 shares for every one share subject to an award other than options or stock appreciation rights granted under the 2017 Plan after March 15, 2022 and prior to the Effective Date. All of the foregoing share amounts are subject to adjustment in certain circumstances, including in connection with stock splits or stock dividends, to prevent dilution or enlargement. The maximum number of shares that may be granted pursuant to incentive stock options is 6,750,000. Shares underlying awards under the 2022 Plan that expire or are forfeited or terminated without being exercised or settled for cash will again be available for the grant of additional awards within the limits provided by the 2022 Plan. Shares withheld by or delivered to us to satisfy the exercise price of options or SARs or tax withholding obligations with respect to any award granted under the 2022 Plan will nonetheless be deemed to have been issued under the 2022 Plan. Eligibility. Awards may be made to directors, officers, employees and consultants of the company and its affiliates, and prospective employees and consultants who have accepted offers of employment or consultancy from the company or one of its affiliates, except that incentive stock options may be granted only to employees of the company and its subsidiaries. As of March 15, 2022, there were 12 directors, approximately 10,500 employees (including approximately 500 officers) and no consultants who would have been eligible to participate in the 2022 Plan. Our current executive officers named in the Summary Compensation Table on page 83 and each of our directors are among the individuals eligible to receive awards under the 2022 plan. Limitation on Non-Employee Director Awards. The 2022 Plan includes a $500,000 limitation on the total value of equity-based awards (based on grant date value) and cash compensation that may be granted or paid to our non-employee directors, whether under the 2022 Plan or otherwise, in any single calendar year. This limitation is increased to $1,000,000 for the calendar year in which a non-employee director first joins the Board or is designated as Board Chairman or Lead Independent Director. Minimum Vesting Provisions. Subject to carve outs for (i) up to 5% of the maximum number of shares that may be granted under the 2022 Plan, (ii) awards granted to non-employee directors prior to the next annual meeting held at least 50 weeks after the prior annual meeting, and (iii) in the cases of death, disability, retirement or a change in control, all awards under the plan may not vest prior to the first anniversary of the grant date. Stock Options. Subject to the terms and provisions of the 2022 Plan, options to purchase shares of our common stock may be granted to eligible individuals at any time and from time to time as determined by the Committee. Options may be granted as incentive stock options, which are intended to qualify for favorable treatment to the recipient under U.S. Federal tax law, or as nonqualified stock options, which do not qualify for this favorable tax | 2022 UNUM PROXY STATEMENT | 105 |
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ITEMS TO BE VOTED ON treatment. Subject to the limits provided in the 2022 Plan, the Committee determines the number of options granted to each recipient. Each option grant will be evidenced by a stock option agreement that specifies the option exercise price, whether the options are intended to be incentive stock options or nonqualified stock options, the duration of the options, the number of shares to which the options pertain and such additional limitations, terms and conditions as the Committee may determine.
The Committee determines the exercise price for each option granted, except that the option exercise price may not be less than 100% of the fair market value of a share of our common stock on the date of grant. All options granted under the 2022 Plan will expire no later than ten years from the date of grant. The method of exercising an option granted under the 2022 Plan is set forth in the 2022 Plan as are the general provisions regarding the exercisability of options following certain terminations of employment. Stock options are nontransferable except by will or by the laws of descent and distribution or, in the case of nonqualified stock options, as otherwise expressly permitted by the Committee. The granting of an option does not accord the recipient the rights of a shareholder, and such rights accrue only after the exercise of an option and the resignation of shares of our common stock in the recipient’s name. Stock Appreciation Rights. The Committee in its discretion may grant SARs under the 2022 Plan. SARs may be “tandem SARs,” which are granted in conjunction with an option, or “free-standing SARs,” which are not granted in conjunction with an option. A SAR entitles the holder to receive from us upon exercise an amount equal to the excess, if any, of the aggregate fair market value of a specified number of shares of our common stock to which such SAR pertains over the aggregate exercise price for the underlying shares. The exercise price of a free-standing SAR will not be less than 100% of the fair market value of a share of our common stock on the date of grant. A tandem SAR may be granted at the grant date of the related option. A tandem SAR will be exercisable only at such time or times and to the extent that the related option is exercisable and will have the same exercise price as the related option. A tandem SAR will terminate or be forfeited upon the exercise or forfeiture of the related option, and the related option will terminate or be forfeited upon the exercise or forfeiture of the tandem SAR. Each SAR will be evidenced by an award agreement that specifies the base price, the number of shares to which the SAR pertains and such additional limitations, terms and conditions as the Committee may determine in accordance with the 2022 Plan. We may make payment of the amount to which the participant exercising the SAR is entitled by delivering shares of our common stock, cash or a combination of stock and cash as set forth in the award agreement relating to the SAR. The method of exercising a SAR granted under the 2022 Plan is set forth in the 2022 Plan as are the general provisions regarding the exercisability of SARs following terminations of employment. SARs are not transferable except by will or the laws of descent and distribution or with respect to SARs that are not granted in “tandem” with an option, as expressly permitted by the Committee. Restricted Stock. The 2022 Plan provides for the award of shares of our common stock that are subject to forfeiture and restrictions on transferability as set forth in the 2022 Plan and as may be otherwise determined by the Committee. Except for these restrictions and any others imposed by the Committee, upon the grant of restricted stock, the recipient will have rights of a shareholder with respect to the restricted stock, including the right to vote the restricted stock; however, any dividends on awards of restricted stock will, subject to vesting of the underlying award, either be automatically deferred (and, with regard to cash dividends, reinvested in additional shares of restricted stock), or accrued in a bookkeeping account in the applicable Participant’s name. During the restriction period set by the Committee, the recipient may not sell, transfer, pledge, exchange or otherwise encumber the restricted stock. Restricted Stock Units. The 2022 Plan authorizes the Committee to grant restricted stock units and deferred share rights. Restricted stock units and deferred share rights are not shares of our common stock and do not entitle the recipients to the rights of a shareholder. Restricted stock units granted under the 2022 Plan may or may not be subject to performance conditions. The recipient may not sell, transfer, pledge or otherwise encumber restricted stock units granted under the 2022 Plan prior to their vesting. Restricted stock units will be settled in | 106 | 2022 UNUM PROXY STATEMENT |
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ITEMS TO BE VOTED ON
cash or shares of our common stock, in an amount based on the fair market value of our common stock on the settlement date. Any dividend equivalent rights with respect to restricted stock units will not be paid to the applicable participant unless and until, and only to the extent that, the underlying award actually vests.
Performance Units. The 2022 Plan provides for the award of performance units that are valued by a reference to a designated amount of cash or other property other than shares of our common stock. The payment of the value of a performance unit is conditioned upon the achievement of performance goals set by the Committee in granting the performance unit and may be paid in cash, shares of our common stock, other property or a combination thereof. Other Stock-Based Awards. The 2022 Plan also provides for the award of shares of our common stock and other awards that are valued by reference to our common stock, including unrestricted stock, dividend equivalents and convertible debentures. Awards of unrestricted stock may be granted only in lieu of compensation that would otherwise be payable to the participant and will count against the 5% pool referenced under “Minimum Vesting Provisions” above. Performance Goals. The 2022 Plan provides that financial, operational, strategic, or other performance goals may be established by the Committee in connection with the grant of any award, and that the Committee may adjust the performance goals applicable to any awards to reflect any events or circumstances that are unusual in nature or infrequently occurring, any impact of charges for restructurings, any discontinued operations, and the cumulative effects of accounting or tax changes, each as defined by generally accepted accounting principles or as identified in the company’s financial statements, notes to the financial statements, management’s discussion and analysis or the company’s filings with the Securities and Exchange Commission. Dividends and Dividend Equivalents. The Committee may provide that dividends or dividend equivalents (if any) may accrue on any award granted under the 2022 Plan in cash or in additional shares that are subject to the same terms of the award to which such dividends or dividend equivalents relate. The Committee may provide that dividend equivalents accruing on any award outstanding under any of the Company’s prior equity compensation plans may be settled in shares issued under the 2022 Plan. Notwithstanding the foregoing, with respect to any award under the 2022 Plan or any prior equity compensation plan that is subject to performance goals and/or vesting conditions, dividends or dividend equivalents shall only be paid or settled if and to the extent that the performance goals and any vesting conditions associated with such underlying award are satisfied. Change in Control. Unless provided otherwise in the applicable award agreement, in the event of a “change in control” of the company (as defined in the 2022 Plan): If equivalent replacement awards are substituted for awards outstanding under the 2022 Plan at the time of such change in control, then upon the termination of employment of a participant during the two-year period following the change in control by reason of death, disability, termination without cause, or resignation for good reason, (i) all such replacement awards held by such participant will vest in full; and (ii) any option or SAR held by the participant as of the date of the change in control that remains outstanding as of the date of such termination of employment may thereafter be exercised until (A) in the case of incentive stock options, the last date on which such options would otherwise be exercisable, and (B) in the case of nonqualified options and SARs, the later of (1) the last date on which such option or SAR would otherwise be exercisable and (2) the earlier of (y) the third anniversary of the change in control and (z) the expiration of the option’s or SAR’s term; and If equivalent replacement awards are not substituted for awards outstanding under the 2022 Plan at the time of such change in control, outstanding options and SARs will become fully vested and exercisable and any other awards will vest in full (with performance-based awards deemed earned in a pro-rata amount based on the portion of the performance period completed and the greater of (i) the applicable target level of achievement of the performance goals and (ii) the level of actual achievement of the performance goals | 2022 UNUM PROXY STATEMENT | 107 |
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of our annual meetings.Annual Meetings. If you choose to receive future proxy materials by email, you will receive an email next year with instructions containing a link to those materials and a link to the proxy voting site. Your election to receive proxy materials by email will remain in effect until you terminate it. | 110 | 2022 UNUM PROXY STATEMENT |
ABOUT THE 2022 ANNUAL MEETING Attending the 20212022 Annual Meeting The 20212022 Annual Meeting will be a virtual meeting conducted exclusively via live webcast on the Internet. Shareholders will not be able to attend the meeting in person. | • | Shareholder participation. We are committed to ensuring that shareholders will be afforded the same rights and opportunities to participate as they would at an in-person meeting. You will be able to attend the 20212022 Annual Meeting online, vote your shares electronically, and submit questions during the meeting electronically. |
| • | Accessing the meeting online. You may attend and participate in the 20212022 Annual Meeting via the Internet at www.virtualshareholdermeeting.com/UNM2021. UNM2022. You will need the 16-digit control number included on your Notice, proxy card, or voting instruction form to log-in. If your shares are held through a bank, brokerage firm, or other custodian and your voting instruction form or Notice indicates that you may vote those shares through the www.proxyvote.com website, then you may access, participate in, and vote at the meeting with the 16-digit control number indicated on that voting instruction form or Notice. Otherwise, shareholders who hold their shares in street name should contact their bank, broker, or other nominee (preferably at least five days before the 20212022 Annual Meeting) and obtain a “legal proxy”"legal proxy" in order to be able to attend, participate in or vote at the meeting. The meeting webcast will begin promptly at 10:00 a.m. Eastern Daylight Time on May 27, 2021.26, 2022. We encourage you to access the meeting prior to the start time. Online check-in will begin approximately 15 minutes prior to the start time, and you should allow ample time for the check-in procedures. We will post a replay of the meeting as soon as it is available on our investor relations website at www.investors.unum.com under the “Proxy Materials”"Proxy Materials" heading. |
| • | Technical Assistanceassistance. If you encounter any difficulties accessing the virtual meeting during the check-in or during the meeting, please call the technical support number that will be posted on the virtual meeting log-in page. |
| • | Submitting questions. An online portal will be available at www.proxyvote.com starting on or about April 15, 2021.14, 2022. By accessing this portal, shareholders will be able to submit questions and vote in advance of the 20212022 Annual Meeting. Shareholders may also submit questions and vote on the day of, or during, the 20212022 Annual Meeting at www.virtualshareholdermeeting.com/UNM2021.UNM2022. We will try to answer as many shareholder-submitted questions as time permits that comply with the meeting rules of conduct. However, we reserve the right to edit profanity or other inappropriate language, or to exclude questions that are not pertinent to meeting matters or the company’scompany's business, or that are otherwise inappropriate. If we receive substantially similar questions, we will group such questions together and provide a single response to avoid repetition. Answers to questions not addressed during the meeting will be posted on our investor relations website at www.investors.unum.com under the “Proxy Materials”"Proxy Materials" heading. |
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Differences between shareholders of record and beneficial owners Most of our shareholders hold their shares as a beneficial owner through a broker or other nominee rather than directly in their own name. As summarized below, there are some distinctions between shares held of record and those owned beneficially. | • | Shareholder of record. If your shares are registered directly in your name with our transfer agent, Computershare Trust Company, N.A., you are considered, with respect to those shares, the shareholder of record, and the Notice was sent directly to you. As the shareholder of record, you have the right to grant your voting proxy directly to the company or to vote at the 20212022 Annual Meeting. If you requested to receive printed proxy materials, we have enclosed a proxy card for you to use. You may also vote on the Internet, or by telephone. You are also invited to attend the 20212022 Annual Meeting via the Internet. |
| • | Beneficial owner. If your shares are held in an account in the name of a brokerage firm, bank, broker-dealer, trust or other similar organization (i.e., in street name), like the vast majority of our shareholders, |
| 2022 UNUM PROXY STATEMENT | 111 |
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|
| you are considered the beneficial owner of shares held in street name. As the beneficial owner, you must instruct the broker or other nominee about how to vote your shares. Under the rules of the New York Stock Exchange (NYSE), if you do not provide such instructions, the firm that holds your shares will have discretionary authority to vote your shares only with respect to “routine” matters, as described in “Voting"Voting your shares”shares" below. You are also invited to attend the 20212022 Annual Meeting via the Internet. |
Persons entitled to vote at the 20212022 Annual Meeting Shareholders of record as of the close of business on March 29, 2021,28, 2022, the record date, are entitled to vote their shares at the 20212022 Annual Meeting. There were approximately 204,188,556 sharesapproximately 201,866,676 shares of our common stock outstanding on the record date. Each of those shares is entitled to one vote on each item of business to be voted on at the 20212022 Annual Meeting. We will make available a list of shareholders of record as of the record date for inspection by shareholders for any purpose germane to the 20212022 Annual Meeting during normal business hours at our corporate headquarters in Chattanooga, Tennessee. Please contact our Corporate Secretary to schedule an appointment. The list will also be available during the 20212022 Annual Meeting at www.virtualshareholdermeeting.com/UNM2022. www.virtualshareholdermeeting.com/UNM2021.
Voting items and Board recommendations; Vote required; Abstentions and broker non-votes You may either vote for, against or abstain on each of the voting items to be acted on at the 20212022 Annual Meeting. The table below summarizes, for each voting item, the voting recommendation of the Board of Directors, the vote threshold required for approval, and the effect of abstentions and broker non-votes (i.e., shares held in street name that cannot be voted on certain matters by the shareholder of record if the beneficial owner has not provided voting instructions). Abstentions and broker non-votes are discussed in more detail under "Voting your shares" below.TABLE OF CONTENTS
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VOTING ITEMS
VOTING ITEMS | | | | | | Items to be Voted on | | | Board Voting
Recommendation | | | Vote Required
for Approval | | | Effect of
Abstention | | | Effect of Broker Non-
Non-Vote
| Vote | | Item 1: Election of 11the 12 directors for terms expiring in 2022 2023 | | | FOR each nominee | | | Majority of votes cast with respect to the nominee | | | No effect because not counted as vote cast | | | No effect because not counted as vote cast | | | Item 2: Advisory vote to approve executive compensation | FOR | | FOR
| | | Majority of shares represented and entitled to vote | | | Same effect as AGAINST because is entitled to vote | | | No effect because not entitled to vote | | | Item 3: Ratification of the appointment of Ernst & Young LLP as our independent registered public accounting firm for 2021 2022 | FOR | | FOR
| | | Majority of shares represented and entitled to vote | | | Same effect as AGAINST because is entitled to vote | | | Not applicable; may be discretionarily voted by broker | | Item 4: Approval of the Unum Group 2022 Stock Incentive Plan | FOR | Majority of votes cast | No effect because not counted as vote cast | No effect because not counted as vote cast |
| 112 | 2022 UNUM PROXY STATEMENT |
ABOUT THE 2022 ANNUAL MEETING Voting your shares You may vote your shares using any of the following methods: | • | By Internet. Before the meeting, you may vote via the Internet by going to www.proxyvote.com and following the instructions on the screen. You will need the control number found on your Notice, proxy card (for shareholders of record) or voting instruction form (for beneficial owners) when you access the web page. Voting by Internet before the 20212022 Annual Meeting is available until 11:59 p.m. Eastern Daylight Time on May 26, 2021. 25, 2022. |
During the 20212022 Annual Meeting, you may vote online by following the instructions at www.virtualshareholdermeeting.com/UNM2021. UNM2022. You will need the control number found on your Notice, proxy card, or voting instruction form when you access the virtual meeting web page. | • | By telephone. You may vote by telephone by calling the applicable toll-free telephone number, 1-800-690-6903 (for shareholders of record) or 1-800-454-8683 (for beneficial owners), which is available 24 hours a day, and following the pre-recorded instructions. You will need the control number found on your Notice, proxy card, or voting instruction form when you call. You may vote by telephone until 11:59 p.m. Eastern Daylight Time on May 26, 2021. 25, 2022. |
| • | By mail. If you received a paper copy of your proxy materials, you may vote by mail by completing the enclosed proxy card or voting instruction form, dating and signing it, and returning it in the postage-paid envelope provided or returning it to Vote Processing, c/o Broadridge, 51 Mercedes Way, Edgewood, NY 11717. Your proxy card or voting instruction form, as applicable, must be received by May 26, 2021. 25, 2022. |
The Board of Directors has appointed certain individuals named on the proxy card (“proxies”("proxies") to vote shares at the 20212022 Annual Meeting in accordance with the instructions of our shareholders. If you authorize the proxies to vote your shares with respect to any matter to be acted upon, the shares will be voted in accordance with your instructions. If you are a shareholder of record and you authorize the proxies to vote your shares but do not specify how your shares should be voted on one or more matters, the proxies will vote your shares on those matters as the Board of Directors recommends. If any other matter properly comes before the 20212022 Annual Meeting, the proxies will vote on that matter in their discretion. If you are a beneficial owner of shares held in street name and do not provide your broker or other nominee instructions on how to vote your shares, a “broker non-vote”"broker non-vote" occurs. Under the rules of the NYSE, the organization that holds your shares (i.e., your broker or other nominee) may generallyis permitted, but not required, to vote your shares on TABLE OF CONTENTS
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routine matters at its discretion but cannot vote on “non-routine”"non-routine" matters. The only item of business at the 20212022 Annual Meeting for which your broker or other nominee has discretionis permitted, but not required, to vote your shares without your voting instructions is the ratification of the appointment of our independent registered public accounting firm (Item 3). Unless it receives your voting instructions, your broker or other nominee will not have discretion to vote your shares (resulting in a broker non-vote) on any other item of business at the 20212022 Annual Meeting (Items(Items 1, 2 and 2)4), including the election of directors. To ensure that your vote will be counted on all matters, we encourage you to provide instructions to your broker or other nominee on how to vote your shares. Changing your vote and revoking your proxy You may revoke any proxy that you previously granted or change your vote by: Submitting a subsequent vote via the Internet, by telephone, or by mailing a new proxy card or voting instruction form before the closing of those facilities at 11:59 p.m. Eastern Daylight Time on May 26, 2021;25, 2022; Requesting a “legal proxy”"legal proxy" or attending the virtual 20212022 Annual Meeting and voting online, as indicated above under “Voting"Voting your shares”shares"; or | 2022 UNUM PROXY STATEMENT | 113 |
ABOUT THE 2022 ANNUAL MEETING If you are a shareholder of record, giving written notice of revocation to the Corporate Secretary, Unum Group, 1 Fountain Square, Chattanooga, TN 37402, so that it is received by 4:00 p.m. Eastern Daylight Time on May 26, 2021.25, 2022. Your new vote or revocation in advance of the meeting must be submitted in accordance with the time frames above under “Voting"Voting your shares.” A quorum is required to transact business at the 20212022 Annual Meeting. A quorum exists if the holders of a majority of the shares issued and outstanding and entitled to vote generally in the election of directors are present online at the virtual 20212022 Annual Meeting or represented by proxies. Abstentions and broker non-votes will be counted for purposes of determining whether a quorum is present at the 20212022 Annual Meeting, but neither will be counted as votes cast. Representatives of Broadridge Financial Solutions, Inc. (“Broadridge”("Broadridge") will tabulate the votes and act as inspectors of the election. We will report the final voting results of the 20212022 Annual Meeting on a Form 8-K to be filed with the SEC within four business days after the meeting. The Form 8-K will be available on our investor relations website under the “SEC Filings”"SEC Filings" heading at www.investors.unum.comor on the SEC’s website at www.sec.gov.. | 114 | 2022 UNUM PROXY STATEMENT |
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Additional InformationCost of proxy solicitation We pay the cost of soliciting proxies from our shareholders. Proxies are solicited by mail, and may also be solicited personally, electronically or by telephone by our directors, officers or employees, though none will receive additional compensation for doing this. We have retained Innisfree M&A Incorporated to assist in the solicitation of proxies for the 20212022 Annual Meeting. We will pay Innisfree a fee of $20,000 $20,000 and reasonable out-of-pocket expenses for its services. We also reimburse brokers, banks and other nominees for their expenses in sending proxy materials to their customers who are beneficial owners and obtaining their voting instructions. Shareholder proposals and nominations for our 20222023 Annual Meeting If you intend to submit a proposal for inclusion in the proxy statement for our 20222023 Annual Meeting pursuant to SEC Rule 14a-8, it must be received by the Corporate Secretary at our principal executive offices (at the address provided below) no later than the close of business onon December 16, 2021. 2022. Submitting a shareholder proposal does not guarantee that we will include it in our proxy statement if the proposal does not satisfy the requirements of SEC Rule 14a-8. Our bylaws include a proxy access right, permitting a shareholder, or a group of up to 20 shareholders, who has maintained continuous qualifying ownership of at least 3% of our outstanding shares of capital stock entitled to vote in the election of directors for at least three years to nominate and include in our proxy materials director nominees constituting up to the greater of 20% of the Board or two directors, provided that the shareholder(s) and the nominee(s) satisfy the requirements in our bylaws. Notice of proxy access director nominees must be received by the CorporateCorporate Secretary at our principal executive offices (at the address provided below) no earlier than November 16, 202115, 2022 and no later than the close of business on December 16, 2021.15, 2022. However, in the event that that the 20222023 Annual Meeting is to be held on a date that is more than 30 days before or after May 27, 202226, 2023 (the anniversary date of the 20212022 Annual Meeting), then such notice must be receivedreceived no later than the close of business on the 180th day prior to the date of the 20222023 Annual Meeting or the 10th day following the day on which public announcement of the date of the 20222023 Annual Meeting is first made. Our bylaws also establish advance notice procedures with respect to proposals and director nominations submitted by a shareholder for presentation directly at an Annual Meeting, rather than for inclusion in our proxy statement. To be properly brought before our 20222023 Annual Meeting, a notice of the proposal the shareholder wishes to present at the meeting other than pursuant to SEC Rule 14a-8 or nomination the shareholder wishes to present at the meeting other than pursuant to our proxy access bylaw must be received by the Corporate Secretary at our principal executive offices (at the address provided below) no earlier than the close of business on January 27, 202226, 2023 and no later than the close of business on February 26, 2022.25, 2023. However, in the event that that the 20222023 Annual Meeting is to be held on a date that is more than 30 days before or more than 70 days after May 27, 202226, 2023 (the anniversary date of the 20212022 Annual Meeting), then such notice must be received no earlier than the close of business on the 120th day prior to the date of the 20222023 Annual Meeting and no later than the close of business on the later of the 90th day prior to the date of the 20222023 Annual Meeting or the 10th day following the day on which public announcement of the date of the 20222023 Annual Meeting is first made. | 2022 UNUM PROXY STATEMENT | 115 |
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deadline for a shareholder to provide notice to the Corporate Secretary pursuant to SEC Rule 14a-19, the SEC’s universal proxy rule, of the shareholder’s intent to solicit proxies in support of candidates submitted under the advance notice procedures in our bylaws is March 27, 2023. However, in the event that the 2023 Annual Meeting is to be held on a date that is more than 30 days before or after May 26, 2023 (the anniversary date of the 2022 Annual Meeting), then such notice must be provided by the later of 60 days prior to the date of the 2023 Annual Meeting or 10 days following the day on which public announcement of the date of the 2023 Annual Meeting is first made.
All such proposals and director nominations must satisfy the requirements set forth in our bylaws, a copy of which is available on our investor relations website under the “Corporate Governance”"Corporate Governance" heading at www.investors.unum.com and may also be obtained at no cost from the Office of the Corporate Secretary. The chairman of the meeting may refuse to acknowledge or introduce any shareholder proposal or nomination if notice thereof is not received within the applicable deadlines or does not comply with the bylaws. If a shareholder fails to meet these deadlines, the persons named as proxies will be allowed to use their discretionary voting authority to vote on any such proposal or nomination as they determine appropriate if the matter is presented and introduced at the Annual Meeting. Communications with the Board of Directors Shareholders and interested parties may communicate with our Chairman of the Board, or any other director by contacting the Office of the Corporate Secretary as described below. In accordance with a process approved by our Board of Directors, the Corporate Secretary reviews all correspondence received by the company and addressed to non-management directors. A log and copies of the correspondence are provided to the Chairman, who determines whether further distribution is appropriate and to whom it should be sent. Any director may at any time review this log and request copies of correspondence. Concerns relating to accounting, internal controls or auditing matters are promptly brought to the attention of our internal auditors and handled in accordance with procedures established by the Audit Committee. Copies of correspondence relating to corporate governance matters are also provided to the chair of the Governance Committee. The Board has instructed that certain items unrelated to the duties and responsibilities of the Board be excluded from the process, including mass mailings, resumes and other forms of job inquiries, surveys, business solicitations or advertisements, and matters related to claims or employment. Eliminating duplicate proxy materials Under SEC rules, individual Notices, and, to the extent we mail printed proxy materials or an annual report in accordance with the procedures described herein, a single proxy statement and annual report to shareholders, along with individual proxy cards or individual Notices, will be delivered in one envelope to multiple shareholders having the same last name and address and to shareholders with multiple accounts registered at our transfer agent with the same address, unless contrary instructions have been received from an affected shareholder. This is known as “householding”"householding" and it enables us to reduce the costs and environmental impact of the 20212022 Annual Meeting. We will deliver promptly upon written or oral request a separate copy of the proxy statement, annual report to shareholders or Notice to any shareholder residing at a shared address to which only one copy was delivered. If you would like to receive separate copies of our proxy materials, whether for this year or future years, please contact Broadridge toll-free at 1-866-540-7095 or by writing to Broadridge, Householding Department, 51 Mercedes Way, Edgewood, NY 11717. The same phone number and address may be used to request delivery of a single copy of our proxy materials if you share an address with another shareholder and are receiving multiple copies. | 116 | 2022 UNUM PROXY STATEMENT |
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Contacting the Office of the Corporate Secretary You may contact the Office of the Corporate Secretary by calling toll-free 800-718-8824 or by writing to: Office of the Corporate Secretary
Chattanooga, Tennessee 37402 Principal executive offices Our principal executive offices are located at 1 Fountain Square, Chattanooga, Tennessee 37402. Our main telephone number is 423-294-1011. Annual Report on Form 10-K Upon request, we will provide to you by mail a free copy of our Annual Report on Form 10-K (including financial statements and financial statement schedules) for the fiscal year ended December 31, 2020.2021. Please direct your request to the Office of the Corporate Secretary at the address provided above. The Annual Report on Form 10-K may also be accessed on our investor relations website under the “SEC Filings”"SEC Filings" heading at www.investors.unum.com or on the SEC’s website at www.sec.gov. www.sec.gov.
Incorporation by reference To the extent that this proxy statement has been or will be specifically incorporated by reference into any of our other filings under the Securities Act of 1933 or the Securities Exchange Act of 1934, the sections of this proxy statement entitled “Report"Report of the Audit Committee”Committee" (to the extent permitted by the rules of the SEC) and “Compensation"Compensation Committee Report”Report" shall not be deemed to be so incorporated, unless specifically provided otherwise in such filing. | 2022 UNUM PROXY STATEMENT | 117 |
APPENDIX A Appendix A Unum Group 2022 Stock Incentive Plan Section 1. Purpose; Definitions The purpose of this Plan is to allow the Company to attract, retain and motivate officers, employees, directors and/or consultants and to provide the Company and its Subsidiaries and Affiliates with a long-term incentive plan providing incentives directly linked to stockholder value. Certain terms used herein have definitions given to them in the first place in which they are used. In addition, for purposes of this Plan, the following terms are defined as set forth below: (a) "Act” means the Securities Act of 1933, as amended from time to time, and any successor thereto. (b) “Affiliate” means a corporation or other entity controlled by, controlling or under common control with the Company. (c) “Applicable Exchange” means the New York Stock Exchange or such other securities exchange as may at the applicable time be the principal market for the Common Stock. (d) “Award” means an Option, Stock Appreciation Right, Restricted Stock, Restricted Stock Unit, Performance Unit or Other Stock-Based Award granted pursuant to the terms of this Plan. (e) “Award Agreement” means a document or agreement setting forth the terms and conditions of a specific Award. (f) “Board” means the Board of Directors of the Company. (g) “Cause” means, unless otherwise provided in an Award Agreement, (i) “Cause” as defined in any Individual Agreement to which the applicable Participant is a party, or (ii) if there is no such Individual Agreement or if it does not define “Cause,” (A) conviction of the Participant for committing, or a guilty or nolo contendere plea to, a felony under federal law or the law of the state or other jurisdiction in which such action occurred, (B) dishonesty or illegal conduct in the course of fulfilling the Participant’s employment duties, (C) failure on the part of the Participant to perform substantially such Participant’s employment duties in any material respect, or (D) a material violation of the Company’s ethics and compliance program. (h) “Change in Control” means, unless otherwise provided in an Award Agreement, any of the following: (i) during any period of two consecutive years, individuals who, at the beginning of such period, constitute the Board (the “Incumbent Directors”) cease for any reason to constitute at least a majority of the Board, provided that any person becoming a director and whose election or nomination for election was approved by a vote of at least two-thirds of the Incumbent Directors then on the Board (either by a specific vote or by approval of the proxy statement of the Company in which such person is named as a nominee for director, without written objection to such nomination) shall be deemed an Incumbent Director; provided, however, that no individual initially elected or nominated as a director of the Company as a result of an actual or threatened election contest (as described in Rule 14a-12(c) under the Exchange Act) (“Election Contest”) or other actual or threatened solicitation of proxies or consents by or on behalf of any “person” (as such term is defined in Section 3(a)(9) of the Exchange Act and as used in Sections 13(d)(3) and 14(d)(2) of the Exchange Act) other than the Board (“Proxy Contest”), including by reason of any agreement intended to avoid or settle any Election Contest or Proxy Contest, shall be deemed an Incumbent Director;
(ii) any person is or becomes a “beneficial owner” (as defined in Rule 13d-3 under the Exchange Act), directly or indirectly, of securities of the Company representing 20% (30% with respect to deferred compensation subject to Section 409A of the Code) or more of the combined voting power of the Company’s | 118 | 2022 UNUM PROXY STATEMENT |
APPENDIX A then outstanding securities eligible to vote for the election of the Board (the “Company Voting Securities”); provided, however, that the event described in this paragraph (ii) shall not be deemed to be a Change in Control of the Company by virtue of any of the following acquisitions: (A) by the Company or any Subsidiary, (B) by any employee benefit plan (or related trust) sponsored or maintained by the Company or any Subsidiary, (C) by an underwriter temporarily holding securities pursuant to an offering of such securities, (D) pursuant to a Non-Qualifying Transaction (as defined below), or (E) a transaction (other than one described in paragraph (iii) below) in which Company Voting Securities are acquired from the Company, if a majority of the Incumbent Directors approve a resolution providing expressly that the acquisition pursuant to this clause (E) does not constitute a Change in Control of the Company under this paragraph (ii); (iii) the consummation of a merger, consolidation, statutory share exchange or similar form of corporate transaction involving the Company or any of its Subsidiaries that requires the approval of the Company’s stockholders, whether for such transaction or the issuance of securities in the transaction (a “Reorganization”), or sale or other disposition of all or substantially all of the Company’s assets to an entity that is not an Affiliate (a “Sale”), unless immediately following such Reorganization or Sale: (A) more than 50% of the total voting power of (x) the corporation resulting from such Reorganization or the corporation which has acquired all or substantially all of the assets of the Company (in either case, the “Surviving Corporation”), or (y) if applicable, the ultimate parent corporation that directly or indirectly has beneficial ownership of 100% of the voting securities eligible to elect directors of the Surviving Corporation (the “Parent Corporation”), is represented by the Company Voting Securities that were outstanding immediately prior to such Reorganization or Sale (or, if applicable, is represented by shares into which such Company Voting Securities were converted pursuant to such Reorganization or Sale), and such voting power among the holders thereof is in substantially the same proportion as the voting power of such Company Voting Securities among the holders thereof immediately prior to the Reorganization or Sale, (B) no person (other than any employee benefit plan (or related trust) sponsored or maintained by the Surviving Corporation or the Parent Corporation) is or becomes the beneficial owner, directly or indirectly, of 20% (30% with respect to deferred compensation subject to Section 409A of the Code) or more of the total voting power of the outstanding voting securities eligible to elect directors of the Parent Corporation (or, if there is no Parent Corporation, the Surviving Corporation) and (C) at least a majority of the members of the board of directors of the Parent Corporation (or, if there is no Parent Corporation, the Surviving Corporation) following the consummation of the Reorganization or Sale were Incumbent Directors at the time of the Board’s approval of the execution of the initial agreement providing for such Reorganization or Sale (any Reorganization or Sale which satisfies all of the criteria specified in clauses (A), (B) and (C) above shall be deemed to be a “Non-Qualifying Transaction”); or (iv) the stockholders of the Company approve a plan of complete liquidation or dissolution of the Company. Notwithstanding the foregoing, a Change in Control shall not be deemed to occur solely because any person acquires beneficial ownership of more than 20% (30% with respect to deferred compensation subject to Section 409A of the Code) of the Company Voting Securities as a result of the acquisition of Company Voting Securities by the Company which reduces the number of Company Voting Securities outstanding; provided, that if after such acquisition by the Company such person becomes the beneficial owner of additional Company Voting Securities that increases the percentage of outstanding Company Voting Securities beneficially owned by such person, a Change in Control of the Company shall then occur. (i) “Code” means the Internal Revenue Code of 1986, as amended from time to time, and any successor thereto, the Treasury Regulations thereunder and other relevant interpretive guidance issued by the Internal Revenue Service or the Treasury Department. Reference to any specific section of the Code shall be deemed to include such regulations and guidance, as well as any successor provision of the Code.
(j) “Committee” means the Human Capital Committee of the Board or such other committee of the Board as the Board may from time to time designate to discharge the Board’s responsibilities relating to oversight of the | 2022 UNUM PROXY STATEMENT | 119 |
TABLE OF CONTENTS
APPENDIX A compensation and benefits of the directors, officers and employees of the Company, which shall be composed of not less than two directors, and shall be appointed by the Board. (k) “Common Stock” means common stock, par value $0.10 per share, of the Company. (l) “Company” means Unum Group, a Delaware corporation. (m) “Disability” means, unless otherwise provided in an Award Agreement, (i) “Disability” as defined in any Individual Agreement to which the Participant is a party, or (ii) if there is no such Individual Agreement or it does not define “Disability,” the Participant is (A) unable to engage in any substantial gainful activity by reason of any medically determinable physical or mental impairment that can be expected to result in death or can be expected to last for a continuous period of not less than 12 months, or (B) by reason of any medically determinable physical or mental impairment that can be expected to result in death or can be expected to last for a continuous period of not less than 12 months, receiving income replacement benefits for a period of not less than three months under an accident and health plan covering employees of the Company. The Committee may require such medical or other evidence as it deems necessary to judge the nature and duration of the Participant’s condition. Notwithstanding the above, with respect to an Incentive Stock Option, Disability shall mean Permanent and Total Disability as defined in Section 22(e)(3) of the Code. (n) “Disaffiliation” means a Subsidiary’s or Affiliate’s ceasing to be a Subsidiary or Affiliate for any reason (including as a result of a public offering, or a spinoff or sale by the Company, of the stock of the Subsidiary or Affiliate) or a sale of a division of the Company and its Affiliates. (o) “Eligible Individuals” means directors, officers, employees and consultants of the Company or any of its Subsidiaries or Affiliates, and prospective employees and consultants who have accepted offers of employment or consultancy from the Company or any of its Subsidiaries or Affiliates; provided, however, that the only consultants who may be Eligible Individuals are those who qualify for registration of Awards under Form S-8 under the Act. (p) “Exchange Act” means the Securities Exchange Act of 1934, as amended from time to time, and any successor thereto. (q) “Fair Market Value” means the closing price of a share of Common Stock on the Applicable Exchange on the date of measurement, or if Shares were not traded on the Applicable Exchange on such measurement date, then on the next preceding date on which Shares were traded, all as reported by such source as the Committee may select. If the Common Stock is not listed on a national securities exchange, Fair Market Value shall be determined by the Committee in its good faith discretion using a reasonable valuation method which shall include consideration of the following factors, as applicable: (i) the value of the Company’s tangible and intangible assets; (ii) the present value of the Company’s future cash-flows; (iii) the market value of stock or equity interests in similar corporations and other entities engaged in substantially similar trades or businesses, the value of which can be readily determined objectively (such as through trading prices on an established securities market or an amount paid in an arm’s-length private transaction); (iv) control premiums or discounts for lack of marketability; (v) recent arm’s-length transactions involving the sale or transfer of such stock or equity interests; and (vi) other relevant factors. (r) “Good Reason” means, unless otherwise provided in an Award Agreement, (i) “Good Reason” as defined in any Individual Agreement to which the applicable Participant is a party, or (ii) if there is no such Individual Agreement or if it does not define “Good Reason,” (A) a material adverse change in the Participant’s authority, powers, functions, duties or responsibilities as in effect immediately prior to the Change in Control; (B) a material reduction in the Participant’s base salary or annual bonus opportunity, in each case as in effect immediately prior to the Change in Control; or (C) the reassignment of the Participant’s place of employment to an office location more than 50 miles from the Participant’s then-current place of employment. Notwithstanding the foregoing, any assertion by the Participant of a Termination of Employment for “Good Reason” shall not be effective unless all of the following conditions are satisfied: (1) the condition giving rise to the Participant’s | 120 | 2022 UNUM PROXY STATEMENT |
APPENDIX A
(s) “Grant Date” means (i) the date on which the Committee by resolution selects an Eligible Individual to receive a grant of an Award and determines the number of Shares to be subject to such Award, or (ii) such later date as the Committee shall provide in such resolution. (t) “Incentive Stock Option” means any Option that is designated in the applicable Award Agreement as an “incentive stock option” within the meaning of Section 422 of the Code, and that in fact so qualifies. (u) “Individual Agreement” means an employment, consulting or similar agreement between a Participant and the Company or any of its Subsidiaries or Affiliates. (v) “Nonqualified Option” means any Option that is not an Incentive Stock Option. (w) “Option” means an Award granted under Section 5. (x) “Other Stock-Based Award” means an Award of Common Stock or other Award that is valued in whole or in part by reference to, or is otherwise based upon, Common Stock, including unrestricted stock, dividend equivalents, and convertible debentures. (y) “Participant” means an Eligible Individual to whom an Award is or has been granted. (z) “Performance Goals” means the financial, operational, strategic or other performance goals established by the Committee in connection with the grant of an Award. The Committee may adjust the Performance Goals applicable to any Award to reflect any events or circumstances that are unusual in nature or infrequently occurring, any impact of charges for restructurings, any discontinued operations, and the cumulative effects of accounting or tax changes, each as defined by generally accepted accounting principles or as identified in the Company’s financial statements, notes to the financial statements, management’s discussion and analysis or the Company’s SEC filings. (aa) “Performance Period” means that period established by the Committee at the time any Award subject to Performance Goals is granted or at any time thereafter during which any Performance Goals specified by the Committee with respect to such Award are to be measured. (bb) “Performance Unit” means any Award granted under Section 8 of a unit valued by reference to a designated amount of cash or other property other than Shares, which value may be paid to the Participant by delivery of such property as the Committee shall determine, including cash, Shares, or any combination thereof, upon achievement of such Performance Goals during the Performance Period as the Committee shall establish at the time of such grant or thereafter. (cc) “Plan” means this Unum Group 2022 Stock Incentive Plan, as set forth herein and as hereafter amended from time to time. (dd) “Prior Plan” means the Unum Group Stock Incentive Plan of 2012, as amended, and the Unum Group Stock Incentive Plan of 2017. (ee) “Restricted Stock” means an Award granted under Section 6. (ff) “Restriction Period” means the period set by the Committee, commencing with the date of an Award, during which vesting restrictions apply to such Award. (gg) “Retirement” means, unless otherwise provided in an Award Agreement, the Participant’s Termination of Employment other than for Cause after (i) the attainment of age 65 or (ii) the attainment of age 60 with at least 15 years of service. | 2022 UNUM PROXY STATEMENT | 121 |
The following is a reconciliation of the most directly comparable GAAP financial measures to the non-GAAP financial measures as presented in this proxy statement. | | Year Ended December 31, 2020
| | | | | | | | | | | | | Unum US | | | $651.4 | | | $4,458.2 | | | 14.6% | | | | Unum International | | | 51.9 | | | 797.7 | | | 6.5% | | | | Colonial Life | | | 264.5 | | | 1,584.1 | | | 16.7% | | | | Core Operating Segments | | | 967.8 | | | 6,840.0 | | | 14.1% | | | | Closed Block | | | 183.8 | | | 3,979.2 | | | | | | | Corporate | | | (146.2) | | | (1,395.2) | | | | | | | Total | | | $ 1,005.4 | | | $ 9,424.0 | | | 10.7% | |
| | | After-Tax Adjusted Operating Income
(Loss) | | | Average Allocated Equity(1) | | | Adjusted Operating
Return on Equity | | Year Ended December 31, 2021 | | | | | | | | | | | | | Unum US | | $ | 367.8 | | | $ | 4,500.0 | | | 8.2 | % | | Unum International | | | 84.1 | | | | 806.1 | | | 10.4 | % | | Colonial Life | | | 259.9 | | | | 1,580.3 | | | 16.4 | % | | Core Operating Segments | | | 711.8 | | | | 6,886.4 | | | 10.3 | % | | Closed Block | | | 248.6 | | | | 4,208.6 | | | | | | Corporate | | | (69.7 | ) | | | (1,046.0 | ) | | | | | Total | | $ | 890.7 | | | $ | 10,049.0 | | | 8.9 | % | | | | | | | | | | | | | | | Year Ended December 31, 2020 | | | | | | | | | | | | | Unum US | | $ | 651.4 | | | $ | 4,458.2 | | | 14.6 | % | | Unum International | | | 51.9 | | | | 797.7 | | | 6.5 | % | | Colonial Life | | | 264.5 | | | | 1,584.1 | | | 16.7 | % | | Core Operating Segments | | | 967.8 | | | | 6,840.0 | | | 14.1 | % | | Closed Block | | | 183.8 | | | | 3,979.2 | | | | | | Corporate | | | (146.2 | ) | | | (1,395.2 | ) | | | | | Total | | $ | 1,005.4 | | | $ | 9,424.0 | | | 10.7 | % | | | | | | | | | | | | | | | Year Ended December 31, 2019 | | | | | | | | | | | | | Unum US | | $ | 816.3 | | | $ | 4,526.6 | | | 18.0 | % | | Unum International | | | 88.4 | | | | 757.9 | | | 11.7 | % | | Colonial Life | | | 272.7 | | | | 1,558.6 | | | 17.5 | % | | Core Operating Segments | | | 1,177.4 | | | | 6,843.1 | | | 17.2 | % | | Closed Block | | | 104.4 | | | | 3,842.2 | | | | | | Corporate | | | (141.2 | ) | | | (1,764.5 | ) | | | | | Total | | $ | 1,140.6 | | | $ | 8,920.8 | | | 12.8 | % |
(1)
| Excludes unrealized gain (loss) on securities and net gain on hedges and is calculated using the stockholders' equity balances presented below. Due to the implementation of a Financial Accounting Standards Board (FASB) update for which the beginning balancebalances of 2020 2019, and 20182019 for certain stockholders' equity line items were adjusted, we are computing the average allocated equity for 2020 2019, and 20182019 using internally allocated equity that reflects the adjusted beginning balancebalances at January 1, 2020 , January 1,and 2019, and January 1, 2018.respectively. As a result, average equity for the yearyears ended December 31, 2020 December 31,and 2019 and December 31, 2018 for certain of our segments will not compute using the historical allocated equity at December 31, 2019 2018, and 2017,2018, respectively. |
| 134 | 2022 UNUM PROXY STATEMENT |
| | Total Stockholders' Equity | | | $ 10,871.0 | | | $ 9,965.0 | | | | Excluding: | | | | | | | | | | | | | | | | Net Unrealized Gain (Loss) on Securities | | | 1,067.7 | | | 615.9 | | | | Net Gain on Hedges | | | 97.8 | | | 187.8 | | | | Total Adjusted Stockholders' Equity | | | $ 9,705.5 | | | $ 9,161.3 | | | | | | | |
APPENDIX B | | | 12/31/2021 | | 12/31/2020 | | 12/31/2019 | | 12/31/2018 | | Total Stockholders' Equity | | $ | 11,416.4 | | | $ | 10,871.0 | | | $ | 9,965.0 | | | $ | 8,621.8 | | | Excluding: | | | | | | | | | | | | | | | | | | Net Unrealized Gain (Loss) on Securities | | | 962.2 | | | | 1,067.7 | | | | 615.9 | | | | (312.4 | ) | | Net Gain on Hedges | | | 61.8 | | | | 97.8 | | | | 187.8 | | | | 250.6 | | | Total Adjusted Stockholders' Equity | | $ | 10,392.4 | | | $ | 9,705.5 | | | $ | 9,161.3 | | | $ | 8,683.6 | |
| | | Twelve Months Ended | | | | | | | | | 12/31/2021 | | | 12/31/2020 | | | 12/31/2019 | | | | | | | Average Adjusted Stockholders' Equity | | $ | 10,049.0 | | | $ | 9,424.0 | | | $ | 8,920.8 | | | | | |
| | | 2021 | | | | (in millions) | | per share * | | Net Income | | $ | 824.2 | | | $ | 4.02 | | | Excluding: | | | | | | | | | | Net Investment Gains and Losses | | | | | | | | | | Net Realized Investment Gain Related to Reinsurance Transaction (net of tax expense of $14.2) | | | 53.4 | | | | 0.26 | | | Net Investment Gain, Other (net of tax expense of $1.9) | | | 7.2 | | | | 0.03 | | | Total Net Investment Gain | | | 60.6 | | | | 0.29 | | | Items Related to Closed Block Individual Disability Reinsurance Transaction | | | | | | | | | | Change in Benefit Reserves and Transaction Costs (net of tax benefit of $29.2) | | | (110.1 | ) | | | (0.53 | ) | | Amortization of the Cost of Reinsurance (net of tax benefit of $16.8) | | | (62.3 | ) | | | (0.31 | ) | | Total Items Related to Closed Block Individual Disability Reinsurance Transaction | | | (172.4 | ) | | | (0.84 | ) | | Net Reserve Change Related to Reserve Assumption Updates (net of tax expense of $38.1) | | | 143.3 | | | | 0.70 | | | Impairment Loss on Internal-Use Software (net of tax benefit of $2.5) | | | (9.6 | ) | | | (0.05 | ) | | Costs Related to Early Retirement of Debt (net of tax benefit of $14.1) | | | (53.2 | ) | | | (0.26 | ) | | Impairment Loss on ROU Asset (net of tax benefit of $2.9) | | | (11.0 | ) | | | (0.05 | ) | | Impact of U.K. Tax Rate Increase | | | (24.2 | ) | | | (0.12 | ) | | After-tax Adjusted Operating Income | | $ | 890.7 | | | $ | 4.35 | |
*Assuming Dilution 2022 UNUM PROXY STATEMENT | | | | Twelve Months
Ended
| | | | | | | | | | | | Average Adjusted Stockholders' Equity
| | | $ 9,667.3
| | | | | | | 135 |
APPENDIX B | | | 2020 | | 2019 | | | | (in millions) | | per share * | | (in millions) | | per share * | | Net Income | | $ | 793.0 | | | $ | 3.89 | | | $ | 1,100.3 | | | $ | 5.24 | | | Excluding: | | | | | | | | | | | | | | | | | | Net Investment Gains and Losses | | | | | | | | | | | | | | | | | | Net Realized Investment Gain Related to Reinsurance Transaction (net of tax expense of $273.5; $—) | | | 1,028.8 | | | | 5.05 | | | | — | | | | — | | | Net Investment Loss, Other (net of tax benefit of $20.9; $4.5) | | | (82.3 | ) | | | (0.40 | ) | | | (18.7 | ) | | | (0.09 | ) | | Total Net Investment Gain (Loss) | | | 946.5 | | | | 4.65 | | | | (18.7 | ) | | | (0.09 | ) | | Items Related to Closed Block Individual Disability Reinsurance Transaction | | | | | | | | | | | | | | | | | | Change in Benefit Reserves and Transaction Costs (net of tax benefit of $274.2; $—) | | | (1,031.3 | ) | | | (5.06 | ) | | | — | | | | — | | | Amortization of the Cost of Reinsurance (net of tax benefit of $0.6; $—) | | | (2.0 | ) | | | (0.01 | ) | | | — | | | | — | | | Net Tax Benefits of Reinsurance Transaction | | | 36.5 | | | | 0.18 | | | | — | | | | — | | | Total Items Related to Closed Block Individual Disability Reinsurance Transaction | | | (996.8 | ) | | | (4.89 | ) | | | — | | | | — | | | Net Reserve Change Related to Reserve Assumption Updates (net of tax benefit of $35.5; $—) | | | (133.5 | ) | | | (0.66 | ) | | | — | | | | — | | | Costs Related to Organizational Design Updated (net of tax benefit of $4.7; $—) | | | (18.6 | ) | | | (0.09 | ) | | | — | | | | — | | | Impairment Loss on ROU Asset (net of tax benefit of $2.7; $—) | | | (10.0 | ) | | | (0.05 | ) | | | | | | | | | | Costs Related to Early Retirement of Debt (net of tax benefit of $—; $5.7) | | | — | | | | — | | | | (21.6 | ) | | | (0.11 | ) | | After-tax Adjusted Operating Income | | $ | 1,005.4 | | | $ | 4.93 | | | $ | 1,140.6 | | | $ | 5.44 | |
*Assuming Dilution | | | 12/31/2021 | | | | | (in millions) | | | per share | | | Total Stockholders' Equity (Book Value) | | $ | 11,416.4 | | | $ | 56.37 | | | Excluding: | | | | | | | | | | Net Unrealized Gain on Securities | | | 962.2 | | | | 4.75 | | | Net Gain on Hedges | | | 61.8 | | | | 0.30 | | | Subtotal | | | 10,392.4 | | | | 51.32 | | | Excluding: | | | | | | | | | | Foreign Currency Translation Adjustment | | | (273.9 | ) | | | (1.35 | ) | | Subtotal | | | 10,666.3 | | | | 52.67 | | | Excluding: | | | | | | | | | | Unrecognized Pension and Postretirement Benefit Costs | | | (396.0 | ) | | | (1.96 | ) | | Total Stockholders' Equity, Excluding Accumulated Other Comprehensive Income | | $ | 11,062.3 | | | $ | 54.63 | |
| 136 | 2022 UNUM PROXY STATEMENT |
APPENDIX B | | | 12/31/2020 | | | 12/31/2019 | | | 12/31/2018 | | | | | (in millions) | | | per share | | | (in millions) | | | per share | | | (in millions) | | | per share | | | Total Stockholders' Equity (Book Value) | | $ | 10,871.0 | | | $ | 53.37 | | | $ | 9,965.0 | | | $ | 49.10 | | | $ | 8,621.8 | | | $ | 40.19 | | | Excluding: | | | | | | | | | | | | | | | | | | | | | | | | | | Net Unrealized Gain (Loss) on Securities | | | 1,067.7 | | | | 5.24 | | | | 615.9 | | | | 3.03 | | | | (312.4 | ) | | | (1.46 | ) | | Net Gain on Hedges | | | 97.8 | | | | 0.48 | | | | 187.8 | | | | 0.93 | | | | 250.6 | | | | 1.17 | | | Subtotal | | | 9,705.5 | | | | 47.65 | | | | 9,161.3 | | | | 45.14 | | | | 8,683.6 | | | | 40.48 | | | Excluding: | | | | | | | | | | | | | | | | | | | | | | | | | | Foreign Currency Translation Adjustment | | | (261.3 | ) | | | (1.28 | ) | | | (281.6 | ) | | | (1.39 | ) | | | (305.2 | ) | | | (1.42 | ) | | Subtotal | | | 9,966.8 | | | | 48.93 | | | | 9,442.9 | | | | 46.53 | | | | 8,988.8 | | | | 41.90 | | | Excluding: | | | | | | | | | | | | | | | | | | | | | | | | | | Unrecognized Pension and Postretirement Benefit Costs | | | (530.0 | ) | | | (2.61 | ) | | | (484.8 | ) | | | (2.39 | ) | | | (447.2 | ) | | | (2.08 | ) | | Total Stockholders' Equity, Excluding Accumulated Other Comprehensive Income | | $ | 10,496.8 | | | $ | 51.54 | | | $ | 9,927.7 | | | $ | 48.92 | | | $ | 9,436.0 | | | $ | 43.98 | |
| | | 12/31/2017 | | 12/31/2016 | | 12/31/2015 | | | | (in millions) | | | per share | | | (in millions) | | | per share | | | (in millions) | | | per share | | | Total Stockholders' Equity (Book Value) | | $ | 9,574.9 | | | $ | 43.02 | | | $ | 8,968.0 | | | $ | 39.02 | | | $ | 8,663.9 | | | $ | 35.96 | | | Excluding: | | | | | | | | | | | | | | | | | | | | | | | | | | Net Unrealized Gain on Securities | | | 607.8 | | | | 2.73 | | | | 440.6 | | | | 1.92 | | | | 204.3 | | | | 0.84 | | | Net Gain on Hedges | | | 282.3 | | | | 1.27 | | | | 327.5 | | | | 1.42 | | | | 378.0 | | | | 1.57 | | | Subtotal | | | 8,684.8 | | | | 39.02 | | | | 8,199.9 | | | | 35.68 | | | | 8,081.6 | | | | 33.55 | | | Excluding: | | | | | | | | | | | | | | | | | | | | | | | | | | Foreign Currency Translation Adjustment | | | (254.5 | ) | | | (1.15 | ) | | | (354.0 | ) | | | (1.54 | ) | | | (173.6 | ) | | | (0.72 | ) | | Subtotal | | | 8,939.3 | | | | 40.17 | | | | 8,553.9 | | | | 37.22 | | | | 8,255.2 | | | | 34.27 | | | Excluding: | | | | | | | | | | | | | | | | | | | | | | | | | | Unrecognized Pension and Postretirement Benefit Costs | | | (508.1 | ) | | | (2.28 | ) | | | (465.1 | ) | | | (2.02 | ) | | | (392.6 | ) | | | (1.63 | ) | | Total Stockholders' Equity, Excluding Accumulated Other Comprehensive Income | | $ | 9,447.4 | | | $ | 42.45 | | | $ | 9,019.0 | | | $ | 39.24 | | | $ | 8,647.8 | | | $ | 35.90 | |
| 2022 UNUM PROXY STATEMENT | 137 |
 
TABLE OF CONTENTS
| | Net Income
| | | $793.0 | | | $3.89 | | | | Excluding:
| | | | | | | | | | Net Realized Investment Gains and Losses | | | | | | | | | | Net Realized Investment Gain Related to Reinsurance Transaction (net of tax expense of$273.5) | | | 1,028.8 | | | 5.05 | | | | Net Realized Investment Loss, Other (net of tax benefit of $20.9) | | | (82.3) | | | (0.40) | | | | Total Net Realized Investment Gain | | | 946.5 | | | 4.65 | | | | Items Related to Closed Block Individual Disability Reinsurance Transaction | | | | | | | | | | Change in Benefit Reserves and Transaction Costs (net of tax benefit of $274.2) | | | (1,031.3) | | | (5.06) | | | | Amortization of the Cost of Reinsurance (net of tax benefit of $0.6) | | | (2.0) | | | (0.01) | | | | Net Tax Benefits of Reinsurance Transaction | | | 36.5 | | | 0.18 | | | | Total Items Related to Closed Block Individual Disability Reinsurance Transaction | | | (996.8) | | | (4.89) | | | | Long-term Care Reserve Increase (net of tax benefit of $31.8) | | | (119.7) | | | (0.59) | | | | Group Pension Reserve Increase (net of tax benefit of $3.7) | | | (13.8) | | | (0.07) | | | | Costs Related to Organizational Design Updated (net of tax benefit of $4.7) | | | (18.6) | | | (0.09) | | | | Impairment Loss on ROU Asset (net of tax benefit of $2.7) | | | (10.0) | | | (0.05) | | | | After-tax Adjusted Operating Income | | | $1,005.4 | | | $4.93 | |
*Assuming Dilution
TABLE OF CONTENTS
Net Income | | | $ 1,100.3 | | | $ 5.24 | | | $ 523.4 | | | $ 2.38 | | | $ 994.2 | | | $ 4.37 | Excluding: | | | | | | | | | | | | | | | | | | | Net Realized Investment Gain (Loss)(net of tax expense (benefit) of $(4.5); $(11.0); $15.0) | | | (18.7) | | | (0.09) | | | (28.5) | | | (0.12) | | | 25.3 | | | 0.11 | Cost Related to Early Retirement of Debt (net of tax benefit $5.7; $-; $-) | | | (21.6) | | | (0.11) | | | — | | | — | | | — | | | — | Long-term Care Reserve Increase (net of tax benefit of $-; $157.7; $-) | | | — | | | — | | | (593.1) | | | (2.70) | | | — | | | — | Loss from Guaranty Fund Assessment (net of tax benefit of $-; $-; $7.2;) | | | — | | | — | | | — | | | — | | | (13.4) | | | (0.06) | Unclaimed Death Benefits Reserve Increase (net of tax benefit $-; $-; $13.6) | | | — | | | — | | | — | | | — | | | (25.4) | | | (0.11) | Net Tax Benefit from Impacts of TCJA | | | — | | | — | | | — | | | — | | | 31.5 | | | 0.14 | After-tax Adjusted Operating Income | | | $1,140.6 | | | $5.44 | | | $1,145.0 | | | $5.20 | | | $976.2 | | | $4.29 |
Net Income | | | $ 931.4 | | | $ 3.95 | | | $ 867.1 | | | $ 3.50 | | | $ 402.1 | | | $ 1.57 | Excluding: | | | | | | | | | | | | | | | | | | | Net Realized Investment Gain (Loss) (net of tax expense (benefit) of $8.4;$(17.7); $3.3) | | | 15.8 | | | 0.07 | | | (26.1) | | | (0.11) | | | 12.8 | | | 0.05 | Costs Related to Early Retirement of Debt (net of tax benefit of $-; $-;$2.8) | | | — | | | — | | | — | | | — | | | (10.4) | | | (0.04) | Reserve Charge for Closed Block (net of tax benefit of $-; $-; $244.4) | | | — | | | — | | | — | | | — | | | (453.8) | | | (1.77) | Pension Settlement Loss (net of tax benefit of $-; $-; $22.5) | | | — | | | — | | | — | | | — | | | (41.9) | | | (0.16) | After-tax Adjusted Operating Income | | | $915.6 | | | $3.88 | | | $893.2 | | | $3.61 | | | $895.4 | | | $3.49 |
*Assuming Dilution
TABLE OF CONTENTS
Net Income | | | $ 847.0 | | | $ 3.19 | | | $ 888.1 | | | $ 3.15 | | | $ 283.6 | | | $ 0.94 | Excluding:
| | | | | | | | | | | | | | | | | | | Net Realized Investment Gain (Loss) (net of tax expense (benefit) of $2.9; $19.1; $(1.3)) | | | 3.9 | | | 0.02 | | | 37.1 | | | 0.13 | | | (3.6) | | | (0.01) | Reserve Charge for Closed Block (net of tax benefit of $-; $-; $265.0) | | | — | | | — | | | — | | | — | | | (492.1) | | | (1.62) | Unclaimed Death Benefits Reserve Increase (net of tax benefit of $33.4; $-; $-) | | | (62.1) | | | (0.24) | | | — | | | — | | | — | | | — | Deferred Acquisition Costs for Closed Block (net of tax benefit of $-; $-; $68.5) | | | — | | | — | | | — | | | — | | | (127.5) | | | (0.42) | Group Life Waiver of Premium Benefit Reserve Reduction (net of tax expenses of $29.8; $-; $-) | | | 55.2 | | | 0.21 | | | — | | | — | | | — | | | — | Special Tax Items | | | — | | | — | | | — | | | — | | | 22.7 | | | 0.08 | After-tax Adjusted Operating Income | | | $850.0 | | | $3.20 | | | $851.0 | | | $3.02 | | | $884.1 | | | $2.91 |
Net Income | | | $ 877.6 | | | $ 2.69 | | | $ 847.3 | | | $ 2.55 | | | $ 553.4 | | | $ 1.62 | Excluding: | | | | | | | | | | | | | | | | | | | Net Realized Investment Gain (Loss) (net of tax expense (benefit) of $9.0; $11,5; $(161.8)) | | | 15.7 | | | 0.05 | | | 0.2 | | | — | | | (304.1) | | | (0.89) | Special Tax Items | | | (10.2) | | | (0.03) | | | — | | | — | | | — | | | — | After-tax Adjusted Operating Income | | | $872.1 | | | $2.67 | | | $847.1 | | | $2.55 | | | $857.5 | | | $2.51 |
*Assuming Dilution
TABLE OF CONTENTS
Net Income | | | $ 679.3 | | | $ 1.91 | | | $ 411.0 | | | $ 1.23 | | | $ 513.6 | | | $ 1.64 | Excluding: | | | | | | | | | | | | | | | | | | | Income from Discontinued Operations | | | 6.9 | | | 0.02 | | | 7.4 | | ��� | 0.02 | | | 9.6 | | | 0.03 | Net Realized Investment Gain (Loss) (net of tax expense (benefit) of $(22.0); $0.7; $(2.4)) | | | (43.2) | | | (0.12) | | | 1.5 | | | 0.01 | | | (4.3) | | | (0.02) | Regulatory Reassessment Charges (net of tax benefit of $31.3; $129.0; $1.1) | | | (34.5) | | | (0.10) | | | (267.4) | | | (0.79) | | | (51.6) | | | (0.16) | Debt Extinguishment Costs (net of tax benefit of $20.5; $8.9; $-) | | | (38.3) | | | (0.11) | | | (16.9) | | | (0.05) | | | — | | | — | Other (net of tax expense (benefit) of $-; $(5.8); $1.7) | | | — | | | — | | | (12.7) | | | (0.04) | | | 4.0 | | | 0.01 | Special Tax Items | | | 2.2 | | | 0.01 | | | 95.8 | | | 0.28 | | | 42.8 | | | 0.14 | After-tax Adjusted Operating Income | | | $786.2 | | | $2.21 | | | $603.3 | | | $1.80 | | | $513.1 | | | $1.64 |
*Assuming Dilution.
**Does not reflect the impact of ASU 2010-26.
Total Stockholders' Equity (Book Value) | | | $ 10,871.0 | | | $ 53.37 | Excluding: | | | | | | | Net Unrealized Gain on Securities | | | 1,067.7 | | | 5.24 | Net Gain on Hedges | | | 97.8 | | | 0.48 | Subtotal | | | 9,705.5 | | | 47.65 | Excluding: | | | | | | | Foreign Currency Translation Adjustment | | | (261.3) | | | (1.28) | Subtotal | | | 9,966.8 | | | 48.93 | Excluding: | | | | | | | Unrecognized Pension and Postretirement Benefit Costs | | | (530.0) | | | (2.61) | Total Stockholders' Equity, Excluding Accumulated Other Comprehensive Income | | | $10,496.8 | | | $51.54 |
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Total Stockholders' Equity (Book Value) | | | $ 9,965.0 | | | $ 49.10 | | | $ 8,621.8 | | | $ 40.19 | | | $ 9,574.9 | | | $ 43.02 | Excluding: | | | | | | | | | | | | | | | | | | | Net Unrealized Gain (Loss) on Securities | | | 615.9 | | | 3.03 | | | (312.4) | | | (1.46) | | | 607.8 | | | 2.73 | Net Gain on Hedges | | | 187.8 | | | 0.93 | | | 250.6 | | | 1.17 | | | 282.3 | | | 1.27 | Subtotal | | | 9,161.3 | | | 45.14 | | | 8,683.6 | | | 40.48 | | | 8,684.8 | | | 39.02 | Excluding: | | | | | | | | | | | | | | | | | | | Foreign Currency Translation Adjustment | | | (281.6) | | | (1.39) | | | (305.2) | | | (1.42) | | | (254.5) | | | (1.15) | Subtotal | | | 9,442.9 | | | 46.53 | | | 8,988.8 | | | 41.90 | | | 8,939.3 | | | 40.17 | Excluding: | | | | | | | | | | | | | | | | | | | Unrecognized Pension and Postretirement Benefit Costs | | | (484.8) | | | (2.39) | | | (447.2) | | | (2.08) | | | (508.1) | | | (2.28) | Total Stockholders' Equity, Excluding Accumulated Other Comprehensive Income (Loss) | | | $9,927.7 | | | $48.92 | | | $9,436.0 | | | $43.98 | | | $9,447.4 | | | $42.45 |
Total Stockholders' Equity (Book Value) | | | $ 8,968.0 | | | $ 39.02 | | | $ 8,663.9 | | | $ 35.96 | | | $ 8,521.9 | | | $ 33.78 | Excluding: | | | | | | | | | | | | | | | | | | | Net Unrealized Gain on Securities | | | 440.6 | | | 1.92 | | | 204.3 | | | 0.84 | | | 290.3 | | | 1.15 | Net Gain on Hedges | | | 327.5 | | | 1.42 | | | 378.0 | | | 1.57 | | | 391.0 | | | 1.55 | Subtotal | | | 8,199.9 | | | 35.68 | | | 8,081.6 | | | 33.55 | | | 7,840.6 | | | 31.08 | Excluding: | | | | | | | | | | | | | | | | | | | Foreign Currency Translation Adjustment | | | (354.0) | | | (1.54) | | | (173.6) | | | (0.72) | | | (113.4) | | | (0.45) | Subtotal | | | 8,553.9 | | | 37.22 | | | 8,255.2 | | | 34.27 | | | 7,954.0 | | | 31.53 | Excluding: | | | | | | | | | | | | | | | | | | | Unrecognized Pension and Postretirement Benefit Costs | | | (465.1) | | | (2.02) | | | (392.6) | | | (1.63) | | | (401.5) | | | (1.59) | Total Stockholders' Equity, Excluding Accumulated Other Comprehensive Income | | | $9,019.0 | | | $39.24 | | | $8,647.8 | | | $35.90 | | | $8,355.5 | | | $33.12 |
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Total Stockholders' Equity (Book Value) | | | $ 8,639.9 | | | $ 33.23 | | | $ 8,604.6 | | | $ 31.84 | | | $ 8,168.0 | | | $ 27.91 | Excluding: | | | | | | | | | | | | | | | | | | | Net Unrealized Gain on Securities | | | 135.7 | | | 0.52 | | | 873.5 | | | 3.23 | | | 614.8 | | | 2.11 | Net Gain on Hedges | | | 396.3 | | | 1.52 | | | 401.6 | | | 1.48 | | | 408.7 | | | 1.39 | Subtotal | | | 8,107.9 | | | 31.19 | | | 7,329.5 | | | 27.13 | | | 7,144.5 | | | 24.41 | Excluding: | | | | | | | | | | | | | | | | | | | Foreign Currency Translation Adjustment | | | (47.1) | | | (0.18) | | | (72.6) | | | (0.26) | | | (117.6) | | | (0.41) | Subtotal | | | 8,155.0 | | | 31.37 | | | 7,402.1 | | | 27.39 | | | 7,262.1 | | | 24.82 | Excluding: | | | | | | | | | | | | | | | | | | | Unrecognized Pension and Postretirement Benefit Costs | | | (229.9) | | | (0.88) | | | (574.5) | | | (2.13) | | | (444.1) | | | (1.51) | Total Stockholders' Equity, Excluding Accumulated Other Comprehensive Income | | | $8,384.9 | | | $32.25 | | | $7,976.6 | | | $29.52 | | | $7,706.2 | | | $26.33 |
Total Stockholders' Equity (Book Value) | | | $ 8,483.9 | | | $ 26.80 | | | $ 8,045.0 | | | $ 24.25 | | | $��� 5,941.5 | | | $ 17.94 | Excluding: | | | | | | | | | | | | | | | | | | | Net Unrealized Gain (Loss) on Securities | | | 416.1 | | | 1.31 | | | 382.7 | | | 1.16 | | | $(837.4) | | | $(2.53) | Net Gain on Hedges | | | 361.0 | | | 1.14 | | | 370.8 | | | 1.12 | | | 458.5 | | | 1.38 | Subtotal | | | 7,706.8 | | | 24.35 | | | 7,291.5 | | | 21.97 | | | 6,320.4 | | | 19.09 | Excluding: | | | | | | | | | | | | | | | | | | | Foreign Currency Translation Adjustment | | | (107.1) | | | (0.34) | | | (75.3) | | | (0.23) | | | (172.8) | | | (0.52) | Subtotal | | | 7,813.9 | | | 24.69 | | | 7,366.8 | | | 22.20 | | | 6,493.2 | | | 19.61 | Excluding: | | | | | | | | | | | | | | | | | | | Unrecognized Pension and Postretirement Benefit Costs | | | (318.6) | | | (1.00) | | | (330.7) | | | (1.00) | | | (406.5) | | | (1.23) | Total Stockholders' Equity, Excluding Accumulated Other Comprehensive Income (Loss) | | | $8,132.5 | | | $25.69 | | | $7,697.5 | | | $23.20 | | | $6,899.7 | | | $20.84 |
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