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Table of ContentsUNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Proxy Statement Pursuant to Section 14(a) ofthe Securities Exchange Act of 1934 (Amendment No. )Filed by the Registrant ☒ | | |
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Soliciting Material under §240.14a-12
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CNO Financial Group, Inc.☐ |
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| | (4) | | Date Filed:
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Preliminary Proxy Statement
Confidential, for Use of Contentsthe Commission Only (as permitted by Rule 14a-6(e)(2))
Definitive Proxy Statement
Definitive Additional Materials
☐
Soliciting Material under §240.14a-12
CNO Financial Group, Inc.
(Name of Registrant as Specified In Its Charter)
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
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11825 North Pennsylvania Street
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Carmel, Indiana 46032
Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and 0-11.
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NOTICE(2)
Aggregate number of securities to which transaction applies:
(3)
Per unit price or other underlying value of transaction computed pursuant to Exchange Act Rule 0-11 (set forth the amount on which the filing fee is calculated and state how it was determined):
(4)
Proposed maximum aggregate value of transaction:
(5)
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Check box if any part of the fee is offset as provided by Exchange Act Rule 0-11(a)(2) and identify the filing for which the offsetting fee was paid previously. Identify the previous filing by registration statement number, or the Form or Schedule and the date of its filing.
(1)
Amount Previously Paid:
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Form, Schedule or Registration Statement No.:
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(4)
Date Filed:
Annual Meeting
of Shareholders
Proxy Statement
Notice of Annual Meeting of Shareholders
Voting Items
| | | | | Proposal 1: To elect the 10 directors nominated to the Board of Directors of the Company and named in the Proxy Statement, each for a one-year term ending in 2022. | |
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| | | | | Proposal 2: To approve, by non-binding advisory vote, the executive compensation of the Company’s Named Executive Officers as disclosed in the Proxy Statement. | |
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| | | | | Proposal 3: To approve the adoption of the Amended and Restated Section 382 Shareholder Rights Plan. | |
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| | | | | Proposal 4: To ratify the appointment of PricewaterhouseCoopers LLP as the Company’s independent registered public accounting firm for 2021. | |
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| | | | | To consider other matters, if any, as may properly come before the Annual Meeting and any adjournment or postponement thereof. | |
The Board of
CNO Financial Group, Inc. (the "Company"), will be held at the CNO Conference Center, 11825 North Pennsylvania Street, Carmel, Indiana, at 8:00 a.m., Eastern Daylight Time, on May 10, 2019, for the following purposes:1.To elect nine directors,Directors unanimously recommends that you vote FOR all director nominees and in favor of approving each for a one-year term ending in 2020;
2.To approve the Replacement NOL Protective Amendment to the Company's Amended and Restated Certificate of Incorporation to preserve the value of tax net operating losses and certain other tax losses;
3.Ratification of the appointment of PricewaterhouseCoopers LLP as the Company's independent registered public accounting firm for 2019;
4.To approve, by non-binding advisory vote, the executive compensation of the Company's named executive officers; and
5.To consider such other matters, if any, as may properly come before the meeting and any adjournment or postponement thereof.
Holders of record of outstanding shares of the common stock of the Company as of the close of business on March 12, 2019, are entitled to notice of and to vote at the meeting and any adjournment or postponement thereof. Holders of common stock have one vote for each share held of record.
above proposals.
Your Vote is Important.
In accordance with the rules of the Securities and Exchange Commission (the "SEC"“SEC”), on or about March 27, 2019,26, 2021, we either mailed you a Notice of Internet Availability of Proxy Materials ("Notice"(the “Notice”) notifying you how to vote online and how to electronically access aan electronic copy of this Proxy Statement and the Company'sCompany’s Annual Report to Shareholders (together referred to as the "Proxy Materials"“Proxy Materials”) or mailed you a complete set of the Proxy Materials and proxy card. If you have not received but would like to receive printed copies of these documents, including a proxy card in paper format, you should follow the instructions for requesting such materials contained in the Notice. Management
If you received a paper copy of the Proxy Materials, management and the Board of Directors respectfully request that (if you received a paper copy of the Proxy Materials) you date, sign and return the enclosed proxy card in the postage-paid envelope so that we receive the proxy card prior to the Annual Meeting, or, ifMeeting. Alternatively, you prefer,may follow the instructions on your proxy card or Notice for submitting a proxy electronically or by telephone. If your shares are held in the name of a bank, broker or other holder of record, please follow the procedures as described in the voting form that they send to you. If you subsequently attend the virtual meeting, in person you may withdraw your proxy and vote personallyduring the meeting.
Our Proxy Statement follows. Our Proxy Statement (including all attachments), the Company’s Annual Report to Shareholders (which includes the Annual Report on Form 10-K for the year ended December 31, 2020) (which is not deemed to be part of the official proxy soliciting materials), and any amendments to the foregoing materials that are required to be provided to shareholders are available at www.proxyvote.com. Shareholders may obtain copies of the meeting.Proxy Statement, Annual Report to Shareholders (including financial statements and schedules thereto) and form of proxy relating to this or future meetings of the Company’s shareholders, free of charge on our website at www.CNOinc.com in the “Investors—SEC Filings” section, by calling (317) 817-2893 or by emailing the Company at ir@CNOinc.com.
By Order of the Board of Directors,
Rachel J. Spehler
Vice President, Deputy General Counsel and Secretary
March 26, 2021
Carmel, Indiana
| | Meeting and Voting
Information | |
| | Date and Time May 7, 2021
8:00 a.m.
Eastern Daylight Time Record Date March 9, 2021 | |
| | By Order ofAdmission
The Annual Meeting is being held virtually only. You will be able to attend the Board of Directors
Karl W. Kindig,Annual Meeting, vote and submit your questions during the meeting via live webcast by visiting Senior Vice President and Secretarywww.virtualshareholdermeeting.com/CNO2021. To participate in the meeting, you must have your 16-digit control number that is shown on your Notice or proxy card. | |
| | Voting You may cast your vote
online, by telephone, by mail,
or virtually at the meeting.
For more details on how to vote, see the Q&A beginning on page 7. | |
March 27, 2019
Carmel, Indiana
Table of Contents
TABLE OF CONTENTS
| | | |
| | Page |
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Solicitation of Proxies
| Page | 1 |
| | | | | 12 | | |
| | | | | 23 | | |
| | | | | 45 | | |
| | | | | 7 | | |
| | | | | | | |
| | | | | Director11 | | |
| | | | | 612 | | |
Board Nominees Refreshment | | | | | 614 | | |
| | | | | 15 | | |
| | | | | 16 | | |
| | | | | 1022 | | |
| | | | | 1022 | | |
| | | | | 1126 | | |
Board Leadership Structure | | | | | 1429 | | |
Board Meetings and Attendance | | | | | 1430 | | |
| | | | | 1530 | | |
Board'sBoard’s Role in Risk Oversight
| | | | | 1531 | | |
Relationship of Compensation Policies and Practices to Risk Management | | | | | 1532 | | |
| | | | | 32 | | |
| | | | | 1632 | | |
| | | | | 1633 | | |
Corporate Governance Guidelines | | | | | 1733 | | |
Director Stock Ownership Guidelines
| | 17 |
Talent Management and Succession Planning
| | 17 |
Communications with Directors | | | | | 1733 | | |
Compensation Committee Interlocks and Insider Participation | | | | | 1733 | | |
Copies of Corporate Documents | | | | | 1733 | | |
| | | | | 34 | | |
| | | | | 1836 | | |
Proposal 2—Non-Binding Advisory Vote on Executive Compensation | | | | | | | |
| | | | | 41 | | |
| | | | | 1941 | | |
Compensation Committee Report | | | | | 4764 | | |
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Summary Compensation Table for 2018 2020 | | | | | 4865 | | |
Grants of Plan-Based Awards in 2018 2020 | | | | | 5066 | | |
Narrative Supplement to the Summary Compensation Table for 2020 and the Grants of Plan-Based Awards in 20182020 Table | | | | | 5167 | | |
Outstanding Equity Awards at 20182020 Fiscal Year-End | | | | | 5369 | | |
Option Exercises and Stock Vested in 2018 2020 | | | | | 5672 | | |
Nonqualified Deferred Compensation in 2018 2020 | | | | | 5672 | | |
Potential Payments Upon Termination or Change in Control | | | | | 5773 | | |
| | | | | 5875 | | |
Proposal 2 — Replacement NOL Protective Amendment to the3—Approval of Amended and Restated Certificate of Incorporation to Preserve the Value of Tax Net Operating Losses and Certain Other Tax Losses Section 382 Shareholders Rights Plan | | | | | | | |
Proposal 3 — 4—Ratification of the Appointment of Our Independent Registered Public Accounting Firm for 2021 | | | | | | | |
Fees Paid to PricewaterhouseCoopers LLP | | | | | 6782 | | |
Pre-Approval Policy and Independence | | | | | 6882 | | |
Report of the Audit and Enterprise Risk Committee | | | | | 6883 | | |
| | | | | 84 Proposal 4 — Non-Binding Advisory Vote on Executive Compensation
| | 69 |
| | | | | 7086 | | |
Shareholder Proposals for 20202022 Annual Meeting | | | | | 7086 | | |
| | | | | 7186 | | |
Householding of Proxy Materials | | | | | 7187 | | |
Information Related to Certain Non-GAAP Financial Measures | | | | | 7288 | | |
| | | | | 7793 | | |
Annex A — Amendment to the A—Amended and Restated Certificate of IncorporationSection 382 Shareholders Rights Plan | | | | | A-1 | | |
Table of Contents
CNO Financial Group, Inc.
11825 North Pennsylvania Street
Carmel, Indiana 46032
This Proxy Statement is furnished in connection with the solicitation of proxies by the Board of Directors (the "Board") of CNO Financial Group, Inc. ("CNO"2021 Proxy Statement1
Our Business
CNO Financial Group, Inc. (“CNO,” the “Company,” “we,” “us,” or “our”) is a Fortune 1000 company with $3.8 billion in total revenues for the "Company"year ended December 31, 2020. Our mission is to secure the future of middle-income America by providing insurance and financial services that help protect their health, income and retirement needs, while building enduring value for all of our stakeholders. Our strategic plan focuses on top- and bottom-line growth and delivering long-term value for our shareholders.
CNO has a unique set of highly valuable distribution assets. Our exclusive agent distribution force is among the largest in the industry and has deep and established customer relationships. We operate a top 5* direct-to-consumer life insurance business with significant brand awareness and a highly leverageable platform. We also operate a growing workforce benefits solutions business.
In January 2020, we announced a strategic transformation to create a leaner, more integrated, customer-centric organization. Our new operating model realigned our three businesses into two divisions centered on the customers we serve: Consumer and Worksite. Changing consumer behaviors, including increased comfort with transacting online, drove our transformation. COVID-19 hastened this shift to digital purchasing across all industries, including insurance. The pandemic response accelerated the pace and execution of our transformation strategy.
Within the Consumer Division, we are lowering the barriers between our direct-to-consumer and exclusive field agency distribution channels. By uniting these distribution capabilities, we are enabling cross-channel efficiencies to better serve our customers. In 2020, customers were able to choose to transact with us online, over the phone, in person with a local agent, or a combination of the three means of interaction. Our ability to provide customers with this type of hybrid experience—an integrated blend of virtual and local service—is key to how we think about serving our market. It allows us to build deeper, more meaningful relationships with our clients and establish a level of trust that is difficult to duplicate without local agents.
Creating a dedicated Worksite Division formalized our commitment to this business. This effort began in 2019 with the acquisition of Web Benefits Design by adding its best-in-class benefits administration technology platform to CNO. In February 2021, we acquired DirectPath, a leading national provider of employee benefits management services to employers and employees, to further enhance our Worksite offerings. This acquisition is a natural next step in the evolution of our Worksite business. Building out our capabilities gets us deeper into the employer/employee value chain and strengthens our position to capture future growth. As employers continue to reduce benefits and shift more responsibility for managing healthcare costs onto employees, the demand for our supplementary products and services is likely only to grow.
2020 Business and Operational Highlights
In 2020, we delivered solid financial results and made significant progress optimizing our business realignment in the midst of the COVID-19 pandemic.
In conjunction with the transformation announcement in 2020, we updated our reporting structure. We moved from a distribution-oriented reporting structure to a product-focused structure aligned with our three primary insurance product lines (Annuity, Health and Life), and investment and fee income. We believe this new reporting structure is more reflective of how management makes operating decisions and assesses the performance of the business, while creating more transparency for our stakeholders.
Our diversified business model enabled us to navigate the pandemic from a position of strength, as our broad offering of health, life and annuity products provided a natural hedge. We experienced favorable morbidity impacts within our health products, which served to strongly offset the unfavorable mortality impacts in our life products. Demand for products within our direct-to-consumer distribution channel surged in 2020. This helped offset pockets of weakness within our face-to-face and Worksite channels that faced significant restrictions due to the pandemic. Our fee businesses also performed well and helped offset challenges in other areas of our business.
Given our diversified business model, no changes to our performance targets for incentive compensation were needed or made as a result of the COVID-19 pandemic. Additional information on our executive compensation program can be found under “Compensation Discussion and Analysis” beginning on page 41.
*
Based on Company research of carrier-owned direct-to-consumer programs and carrier-owned captive agencies.
2
CNO Financial Group, Inc. 2021 Proxy Statement
Company Initiatives
CNO’s mission is to secure the future of middle-income America by providing insurance and financial services that help protect their health, income and retirement needs, while building enduring value for all of our stakeholders.
Strategic Objectives
Our Board of Directors (“Board”) frequently discusses our strategy and holds a multi-day, long-term strategy session each year. The Board holds management accountable for consistent execution of our strategy. Our strategic objectives remain unchanged:
»
Execute our strategic transformation
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Extend the breadth and depth of our product offerings
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Leverage our diverse distribution channels and unique product combinations
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Expand to serve slightly younger and wealthier consumers within the middle-income market
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Enhance the customer experience
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Deploy excess capital to its highest and best use
Execute Our Strategic Transformation
In 2020, we placed increased emphasis on successfully executing our strategic transformation, which was accelerated by our response to the pandemic. Within our Consumer Division, we focused on unifying our direct-to-consumer and exclusive agent distribution channels, enabling cross-channel efficiencies. At our Worksite business, we laid the foundation to capture future growth as the economy reopens. Examples include:
»
Life insurance consumers served by the Consumer Division are able to transact with us online, over the phone, in person with a local agent, or a combination of the three means of interaction.
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Lead-sharing programs and collaboration efforts between exclusive agent and direct-to-consumer channels drove significant increases in life insurance sales growth, higher conversion rates and lower overall customer acquisition costs.
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The Worksite Division developed new virtual approaches to engage with employers and employees and expanded our product and service offerings both organically and through the acquisition of DirectPath.
Extend the Breadth and Depth of Our Product Offerings
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We introduced 16 new products and product enhancements in 2020, including:
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Medicare Supplement Plan High G, designed as a price-sensitive alternative for healthy Medicare customers;
•
Security Builder, a high participation rate indexed annuity offering; and
•
Monthly Income Protection, a unique form of group term life insurance.
»
We introduced additional third-party products through our new online health insurance marketplace, myHealthPolicy.com. Sales of third-party policies grew 5% in 2020 over the prior year.
CNO Financial Group, Inc. 2021 Proxy Statement3
Leverage Our Diverse Distribution Channels and Unique Product Combinations
»
We launched our new online health insurance marketplace, myHealthPolicy.com, in October.
»
Ongoing investments in agent recruiting and retention initiatives continued to generate positive results, including improvements in agent productivity.
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Our producing agent count was unfavorably impacted by the COVID-19 pandemic, particularly in the second quarter, but has seen solid recovery over the subsequent months. Our total exclusive agent count remained stable throughout the year and increased 3% during the fourth quarter.
Expand to Serve Slightly Younger and Wealthier Consumers Within the Middle-Income Market
»
Our Broker Dealer and Registered Investment Adviser businesses continued to grow. Client assets in brokerage accounts increased 18% over the prior year, to approximately $1.8 billion.
»
Annuity collected premiums, which rely on face-to-face interaction, were down 11% for the year, but finished strong, up 6% in the fourth quarter.
Enhance the Customer Experience
»
We developed dedicated COVID-19 pages on CNO and our consumer-facing brand websites to provide information to customers on our response and consumer support resources.
»
Digital tools such as Zoom, eApp, Docusign, voice authorizations and telesales assistance allowed customers to file claims, submit applications, pay bills and easily view claim information online.
»
During the COVID-19 pandemic, we provided our policyholders with extended time to pay premiums without the risk of losing their benefits.
Deploy Excess Capital to its Highest and Best Use
»
See “Returning Capital to Shareholders” on page 5 for 2020 highlights.
4
CNO Financial Group, Inc. 2021 Proxy Statement
Company Results
Strong Financial Performance
As a result of the significant positive momentum created by growth initiatives that were implemented over the past few years, we entered 2020 well-positioned for strong financial performance. The COVID-19 pandemic directly impacted our business.
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Underwriting results overall were favorably impacted by the COVID-19 pandemic as many consumers deferred healthcare treatments. Underlying margins excluding the effects of the COVID-19 pandemic and other significant items remained stable.
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CNO reported net income of $301.8 million, or $2.11 per diluted share, compared to $409.4 million, or $2.61 per diluted share, in 2019. The 2019 results reflect the $194 million favorable impact of a tax planning strategy that is expected to utilize net operating loss carryforwards that otherwise would have expired.
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Net operating income1 was $362.3 million, or $2.53 per diluted share, in 2020, compared to $290.0 million, or $1.85 per diluted share, in 2019.
•
Shelter-in-place orders and state restrictions limited our agents’ face-to-face meetings with customers. Sales of health products that typically rely on face-to-face interactions were pressured. New annualized premium (“NAP”) for health products was down 21% in 2020.
•
At the same time, the pandemic underscored the crucial need for life insurance products among our consumer base. Demand for life insurance, particularly within our direct-to-consumer channels, increased meaningfully. Compared to the prior year, NAP for life insurance was up 12%.
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We experienced strong policy persistency in 2020, suggesting that our customers recognized the value of the protection products that we provide.
•
Life and health collected premiums were up 0.5%, and annuity collected premiums were down 10.8%.
Disciplined Expense Control and Lowered Structural Costs
The insurance industry faces significant headwinds from the lower interest rate environment and other macro-economic challenges. In response, we remain focused on reducing our operating expenses while balancing the need to invest in growth.
»
Total allocated and unallocated expenses were essentially flat in 2020, excluding significant items in both periods.
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Total allocated and unallocated expenses are expected to be down slightly in 2021 as compared to 2020, excluding significant items in both periods.
Returning Capital to Shareholders
CNO remains committed to deploying 100% of our excess capital to its highest and best use.
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In 2020, the Company generated $387 million in free cash flow(1) and returned $330 million to shareholders—$263 million in the form of share repurchases, which reduced our share count by 9% in 2020, and $67 million in the form of common stock dividends.
»
For the 10-year period ended December 31, 2020, we returned $3.0 billion to shareholders—$2.6 billion in the form of securities repurchases, which reduced our share count by 46% during this period, and $0.4 billion in the form of common stock dividends.
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As of December 31, 2020, we had $269.3 million of share repurchase authorization remaining.
»
In February 2021, we acquired privately owned DirectPath, LLC, a leading national provider of employee benefits management services to employers and employees.
(1) Net operating income; net operating income per diluted share; Operating ROE; book value per diluted share, excluding accumulated other comprehensive income (loss); debt to total capital ratio, excluding accumulated other comprehensive income; and free cash flow, are non-GAAP financial measures. See “Information Related to Certain Non-GAAP Financial Measures” beginning on page 88 for a description of these measures and a reconciliation to the corresponding GAAP measure.
CNO Financial Group, Inc. 2021 Proxy Statement5
Solid Capital and Liquidity
We ended 2020 on solid footing with robust capital and liquidity.
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The unrestricted cash and investments held by CNO and its non-insurance subsidiaries was $388.1 million, and we had a consolidated risk-based capital ratio of 411% at December 31, 2020.
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Book value per diluted share, excluding accumulated other comprehensive income (loss)(1), increased to $23.95 at the end of 2020 from $22.09 at the end of 2019.
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Debt to total capital ratio at the end of 2020, excluding accumulated other comprehensive income1, was 25.6%.
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We issued $150 million of subordinated debt in 2020.
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Our senior debt is rated as investment grade by all four primary rating agencies.
(1) Net operating income; net operating income per diluted share; Operating ROE; book value per diluted share, excluding accumulated other comprehensive income (loss); debt to total capital ratio, excluding accumulated other comprehensive income; and free cash flow, are non-GAAP financial measures. See “Information Related to Certain Non-GAAP Financial Measures” beginning on page 88 for a description of these measures and a reconciliation to the corresponding GAAP measure.
2020 Total Return Performance*
*
$100 invested on 12/31/2019 in stock or index, including reinvestment of dividends.
| | | | Dec-19 | | | Jan-20 | | | Feb-20 | | | Mar-20 | | | Apr-20 | | | May-20 | | | Jun-20 | | | Jul-20 | | | Aug-20 | | | Sep-20 | | | Oct-20 | | | Nov-20 | | | Dec-20 | |
| CNO Financial Group, Inc. | | | | $ | 100.00 | | | | | $ | 97.02 | | | | | $ | 88.36 | | | | | $ | 68.87 | | | | | $ | 78.16 | | | | | $ | 79.77 | | | | | $ | 87.17 | | | | | $ | 84.54 | | | | | $ | 91.26 | | | | | $ | 90.45 | | | | | $ | 100.09 | | | | | $ | 119.99 | | | | | $ | 125.99 | | |
| S&P 500 | | | | | 100.00 | | | | | | 99.96 | | | | | | 91.73 | | | | | | 80.40 | | | | | | 90.71 | | | | | | 95.03 | | | | | | 96.92 | | | | | | 102.38 | | | | | | 109.74 | | | | | | 105.57 | | | | | | 102.77 | | | | | | 114.02 | | | | | | 118.40 | | |
| S&P 400 Mid Cap | | | | | 100.00 | | | | | | 97.39 | | | | | | 88.14 | | | | | | 70.30 | | | | | | 80.27 | | | | | | 86.14 | | | | | | 87.22 | | | | | | 91.25 | | | | | | 94.45 | | | | | | 91.38 | | | | | | 93.37 | | | | | | 106.70 | | | | | | 113.66 | | |
| S&P 500 Life & Health Insurance | | | | | 100.00 | | | | | | 96.90 | | | | | | 82.37 | | | | | | 59.43 | | | | | | 69.24 | | | | | | 69.30 | | | | | | 69.69 | | | | | | 71.53 | | | | | | 74.22 | | | | | | 71.14 | | | | | | 71.13 | | | | | | 88.53 | | | | | | 90.52 | | |
6
CNO Financial Group, Inc. 2021 Proxy Statement
Annual Meeting Information
Q: How are proxies solicited, and who pays the costs of
Shareholders (the "Annual Meeting") to be held at the CNO Conference Center, 11825 North Pennsylvania Street, Carmel, Indiana on May 10, 2019, at 8:00 a.m., Eastern Daylight Time. We are sending the Notice or the Proxy Materials and proxy to shareholders on or about March 27, 2019.soliciting them?
Solicitation of Proxies
The proxies are solicited by the Board of Directors.Proxies may be solicited by mail, telephone, internet or in person. Proxies may bybe solicited by members of the CNO DirectorsBoard, officers and officers.other Company representatives. All expenses relating to the preparation and distribution to shareholders of the Notice, the Proxy Materials and the form of proxy are towill be paid by CNO.
Q: Who is entitled to vote?
Only holders of record of shares of CNO’s common stock as of the close of business on March 9, 2021 will be entitled to vote at the Annual Meeting. On such record date, CNO had 133,609,605 shares of common stock outstanding and entitled to vote at the Annual Meeting and any adjournment or postponement thereof. Each share of common stock will be entitled to one vote with respect to each matter submitted to a vote at the Annual Meeting. Information on how to vote by internet, phone, mail or during the Annual Meeting is set forth below.
Q: What constitutes a quorum at the Annual Meeting?
The presence in person or by proxy of the holders of a majority of the outstanding shares of common stock entitled to vote at the Annual Meeting is necessary to constitute a quorum.
Q: How do I attend the Annual Meeting?
You will be able to attend, vote and submit your questions during the Annual Meeting via live webcast by visiting www.virtualshareholdermeeting.com/CNO2021. To participate in the meeting, you must have your 16-digit control number that is shown on your Notice or on your proxy card if you receive the Proxy Materials by mail. If you encounter any difficulties accessing the virtual Annual Meeting during the check-in or meeting time, please call the technical support number that will be posted on the virtual meeting log-in page.
Q: How do I submit a question to be answered during the Annual Meeting?
This year’s shareholders’ question-and-answer session will include questions submitted in advance of, and questions submitted live during, the Annual Meeting. If you would like to submit a question in advance of the Annual Meeting, please email your question to ir@CNOinc.com. If you would like to submit a question during the Annual Meeting, once you have logged into the webcast, simply type your question in the “ask a question” box and click “submit.” Questions pertinent to meeting matters will be answered during the Annual Meeting, subject to time constraints. Any questions pertinent to meeting matters that cannot be answered during the Annual Meeting due to time constraints will be posted on the Company’s website after the Annual Meeting.
Q: What will I be voting on at the Annual Meeting?
You are being asked to:
1.
Elect the 10 directors nominated to the Board;
2.
Approve, by non-binding advisory vote, the executive compensation of the Company’s Named Executive Officers as disclosed in the Proxy Statement;
3.
Approve the adoption of the Amended and Restated Section 382 Shareholder Rights Plan; and
4.
Ratify the appointment of PricewaterhouseCoopers LLP as the Company’s independent registered public accounting firm for 2021.
The Board unanimously recommends that you vote FOR all director nominees and in favor of approving Proposals 2, 3 and 4.
While it’s possible that other matters could come up for a vote at the meeting, the Board is not presently aware of any such matters.
CNO Financial Group, Inc. 2021 Proxy Statement7
Q: How many votes are needed to approve each proposal?
Assuming that a quorum is present, a majority of the votes cast in person or by proxy by the holders of shares entitled to vote at the Annual Meeting is required to elect each director. Proposals 2, 3 and 4 are approved with the affirmative vote of a majority of the shares represented in person or by proxy and entitled to vote on the applicable subject matter.
Q: How do abstentions, unmarked proxy cards and broker non-votes affect the voting results?
Abstentions: Abstentions and shares represented by “broker non-votes,” as described below, are counted as present and entitled to vote for the purpose of determining a quorum. Abstentions from voting will have no impact on the election of directors (Proposal 1) and will have the same effect as voting against each other proposal.
Unmarked proxy cards: If you submit a proxy card without giving specific voting instructions, your shares will be voted in accordance with the Board recommendations set forth above.
Broker non-votes: A broker non-vote occurs if you hold your shares in street name and do not provide voting instructions to your broker, bank or other holder of record on a proposal and your broker, bank or other holder of record does not have discretionary authority to vote on such proposal. The New York Stock Exchange (“NYSE”) rules determine whether uninstructed brokers have discretionary voting power on a particular proposal. Broker non-votes will have no effect on the outcomes of Proposals 1, 2 and 3 because the shares subject to the broker non-vote will not be entitled to vote on such matters.
Q: Why did I receive this Proxy Statement or notice of internet availability of Proxy Materials?
On or about March 26, 2021, we either (1) mailed you a Notice detailing how to vote online and how to access an electronic copy of the Proxy Materials, or (2) mailed you a complete set of the Proxy Materials. If you received the Notice but would like to receive printed copies of the Proxy Materials and proxy card, please follow the instructions for requesting such materials in the Notice. A completed proxy should be returned in the envelope provided to you for that purpose (if you have requested or received a paper copy of the Proxy Materials) for delivery no later than May 7, 2021, as further detailed below. If the form of proxy is properly executed and delivered in time for the Annual Meeting, the named proxy holders will vote the shares represented by the proxy in accordance with the instructions marked on the proxy.
Each shareholder may appoint a person (who need not be a shareholder), other than the persons named in the proxy to represent him or her at the Annual Meeting by properly completing a proxy. In either case, such completed proxy should be returned inPersons appointed as proxies may vote at their discretion on other matters as may properly come before the envelope providedmeeting.
Whether or not you plan to
you for that purpose (if you have requested or received a paper copy of the Proxy Materials) for delivery no later than May 9, 2019. Proxies received that are unmarked will be voted for each of the Board's nominees for director (Proposal 1), for the approval of the amendment to the Company's Amended and Restated Certificate of Incorporation to preserve the value of tax net operating losses and certain other tax losses (the "Replacement NOL Protective Amendment") (Proposal 2), for ratification of the appointment of the Company's independent registered public accounting firm (Proposal 3), and for approval of the compensation paid to our Named Executive Officers (Proposal 4). A shareholder may revoke a proxy at any time before it is exercised by mailing or delivering to CNO a written notice of revocation or a later-dated proxy, or by attendingattend the Annual Meeting,
and voting in person. Record Date and Voting
Only holders of record of shares of CNO's common stock as of the close of business on March 12, 2019, will be entitledwe encourage you to grant a proxy to vote at the Annual Meeting. On such record date, your shares.
8
CNO had 161,237,699Financial Group, Inc. 2021 Proxy Statement
Q: How do I vote?
You may vote:
| | | | | ONLINE. You can vote in advance of the Annual Meeting at www.proxyvote.com, 24 hours a day, seven days a week. You will need the 16-digit control number that is shown on your Notice or on your proxy card (if you received a paper copy of the Proxy Materials). You may attend the Annual Meeting via the webcast and vote during the Annual Meeting. The Annual Meeting can be accessed by visiting www.virtualshareholdermeeting.com/CNO2021 and entering the 16-digit control number that is shown on your Notice or on your proxy card (if you received a paper copy of the Proxy Materials). Please have your Notice in hand when you access the website and then follow the instructio ns. | |
| | | | | BY TELEPHONE. You can vote using a touch-tone telephone by calling the toll-free number included on your Notice, 24 hours a day, seven days a week. You will need the 16-digit control number that is shown on your Notice or on your proxy card (if you received a paper copy of the Proxy Materials). The internet and telephone voting procedures, which comply with Delaware law and the SEC rules, are designed to authenticate shareholders’ identities, to allow shareholders to vote their shares and to confirm that their instructions have been properly recorded. | |
| | | | | BY MAIL. If you have received a paper copy of the Proxy Materials by mail, you may complete, sign, date and return by mail the paper proxy card sent to you in the envelope provided to you with your Proxy Materials. | |
Q: What if my voting shares
of common stock outstanding and entitled to vote at the Annual Meeting. Each share of common stock will be entitled to one vote with respect to each matter submitted to a vote at the Annual Meeting. The presenceare held in
person or by proxy of the holders of a majority of the outstanding shares of common stock entitled to vote at the Annual Meeting is necessary to constitute a quorum. On or about March 27, 2019, we either mailed you a Notice notifying you how to vote online and how to electronically access a copy of the Proxy Materials or mailed you a complete set of the Proxy Materials. If you have not received but would like to receive printed copies of these documents, including a proxy card in paper format, you should follow the instructions for requesting such materials contained in the Notice.
street name?
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The following sets forth how a shareholder can vote over the Internet, by telephone or by mail:
Voting By Internet
If you hold your shares in street name (that is, if you hold your shares through a broker, bank or other holder of record), you can vote at www.proxyvote.com, 24 hours a day, seven days a week. You will needmust follow the 12-digit Control Number includedinstructions printed on your Notice or your paper voting instruction form (if you received a paper copy of the Proxy Materials).
Voting By Telephone
If you hold your shares in street name, you can vote using a touch-tone telephone by calling the toll-free number included on your paper voting instruction form (if you received a paper copy of the Proxy Materials), 24 hours a day, seven days a week. You will need the 12-digit Control Number included on your notice or your paper voting instruction form.
If In most instances, you hold your shares in street name, you may alsowill be able to submit voting instructions to your bank, broker or other holder of record. In most instances, you will be able to do thisrecord over the Internet,internet, by telephone, or by mail. Please refer
If you want to vote virtually at the informationAnnual Meeting and hold your shares in street name, you must obtain a legal proxy from your bank, broker or other holder of record on how to submit voting instructions. The Internet and telephone voting procedures, which comply with Delaware law and the Securities and Exchange Commission ("SEC") rules, are designed to authenticate shareholders' identities, to allow shareholdersauthorizing you to vote their shares and to confirm that theirfollow the instructions have been properly recorded.
Voting By Mail
If you have received a paper copy of the Proxy Materials by mail, you may complete, sign, date and return by mail the paper proxy card orprinted on your voting instruction form sent to you inform.
Q: What is the
envelope provided to you with your Proxy Materialsdeadline for submitting votes by internet, telephone or
voting instruction form.mail?
Deadline for Submitting Votes by Internet, Telephone or Mail If you hold your shares in street name, proxiesProxies submitted over the Internetinternet or by telephone as described above must be received by 11:59 p.m., Eastern Daylight Time, on May 9, 2019.
6, 2021.
Proxies submitted by mail should be returned in the envelope provided to you with your paper proxy card or voting instruction form and must be received no later than May 9, 2019. If you want to vote in person at the Annual Meeting and you hold your shares in street name, you must obtain a legal proxy from your bank, broker or other holder of record authorizing you to vote. You must then bring the legal proxy to the Annual Meeting.
6, 2021.
Please note that you may receive multiple copies of the Notice or Proxy Materials (electronically and/or by mail). These materials may not be duplicates as you may receive separate copies of the Notice or Proxy Materials for each type of account in which you hold shares. Please be sure to vote all of your shares in each of your accounts in accordance with the directions on the proxy card(s) and/or voting instruction form(s) that you receive. In the case of duplicate votes for shares in a particular account, only your last vote will count.
Q: Can I revoke my proxy or change my vote after I vote my proxy?
A shareholder may revoke a proxy at any time before it is
exercised by mailing or delivering to the
one that counts. Votes Required
The electionCorporate Secretary a written notice of each director (Proposal 1) will be determined by the vote of the majority of the votes cast (where the number of votes cast "for"revocation or a director exceeds the number of votes cast "against" that director) by the holders of shares represented (in personlater-dated proxy, or by proxy) and entitled to vote onattending the subject matter provided a
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quorum is present. The vote required to approve the Replacement NOL Protective Amendment (Proposal 2) is a majority of the outstanding shares. The vote required to ratify the appointment of the Company's independent registered public accounting firm (Proposal 3), to approve, by non-binding advisory vote, the compensation of the Company's named executive officers (Proposal 4), and any other proposal properly brought before thevirtual Annual Meeting is the affirmative vote of a majority of the shares represented (in person or by proxy) and entitled to vote on the applicable subject matter. Abstentions from voting will have no impact on the election of directors (Proposal 1) and will have the same legal effect as voting against each other proposal.
Abstentions and shares represented by "broker non-votes", as described below, are counted as present and entitled to vote for the purpose of determining a quorum. A broker non-vote occurs if you hold your shares in street name and do not provide voting instructions to your broker, bank or other holder of record on a proposal and your broker, bank or other holder of record does not have discretionary authority to vote on such proposal. Under current New York Stock Exchange rules, your broker, bank or other holder of record will not have discretionary authority to vote your shares at the Annual Meeting with respect to Proposal 1 (election of nine directors as listed in this Proxy Statement), Proposal 2 (approval of the Replacement NOL Protective Amendment), and Proposal 4 (advisory vote to approve executive compensation). "Broker non-votes" will have no effect on the outcome of Proposals 1 and 4, but will have the effect of voting against Proposal 2. Your broker, bank or other holder of record will have discretion to vote your uninstructed shares on Proposal 3 (ratification of the appointment of PricewaterhouseCoopers LLP as the Company's independent registered public accounting firm for 2019).
voting.
IMPORTANT NOTICE REGARDING THE AVAILABILITY OF PROXY MATERIALS FOR THE SHAREHOLDER MEETING TO BE HELD ON MAY 10, 2019ThisCNO Financial Group, Inc. 2021 Proxy Statement (including all attachments), the Company's Annual Report to Shareholders (which includes the Annual Report on Form 10-K for the year ended December 31, 2018, filed with the SEC on February 26, 2019) (which is not deemed to be part of the official proxy soliciting materials), and any amendments to the foregoing materials that are required to be provided to shareholders are available atwww.proxyvote.com.9 Shareholders may obtain copies of the Proxy Statement, Annual Report to Shareholders (including financial statements and schedules thereto) and form of proxy relating to this or future meetings of the Company's shareholders, free of charge on our Internet website atwww.CNOinc.com in the "Investors — SEC Filings" section, by calling 317-817-2893 or by sending the Company an email atir@CNOinc.com. For directions to the Company's 2019 Annual Meeting, please call us at 317-817-2893.
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SECURITIES OWNERSHIP
The following table sets forth certain information concerning the beneficial ownership of our common stock as of March 12, 2019 (except as otherwise noted) by each person known to us to beneficially own more than 5% of the outstanding shares of our common stock, each of our directors and nominees, each of the executive officers that are named in the Summary Compensation Table on page 48 and all of our directors and executive officers as a group. Shares of our common stock subject to options that are currently exercisable or exercisable within 60 days of March 12, 2019 and restricted stock units that are scheduled to vest within 60 days of March 12, 2019, are deemed to be outstanding and to be beneficially owned by the person holding the options or restricted stock units for the purpose of computing the percentage ownership of that person or group of persons but are not treated as outstanding for the purpose of computing the percentage ownership of any other person.
| | | | | | | | | |
| |
| | Shares Beneficially Owned | |
|---|
| Title of Class | | Name of Beneficial Owner | | Number | | Percentage | |
|---|
| Common stock | | BlackRock, Inc.(1) | | | 20,673,231 | | | 12.6 | % |
| Common stock | | The Vanguard Group(2) | | | 15,266,333 | | | 9.3 | % |
| Common stock | | Dimensional Fund Advisors LP(3) | | | 11,302,789 | | | 6.9 | % |
| Common stock | | Gary C. Bhojwani(4) | | | 297,605 | | | * | |
| Common stock | | Ellyn L. Brown | | | 56,548 | | | * | |
| Common stock | | Stephen N. David | | | 10,000 | | | * | |
| Common stock | | Robert C. Greving | | | 66,200 | | | * | |
| Common stock | | Mary R. (Nina) Henderson | | | 31,137 | | | * | |
| Common stock | | Charles J. Jacklin | | | 28,330 | | | * | |
| Common stock | | Daniel R. Maurer | | | 14,624 | | | * | |
| Common stock | | Neal C. Schneider | | | 85,273 | | | * | |
| Common stock | | Frederick J. Sievert(5) | | | 60,508 | | | * | |
| Common stock | | Bruce K. Baude(6) | | | 299,897 | | | * | |
| Common stock | | Erik M. Helding(7) | | | 152,355 | | | * | |
| Common stock | | Eric R. Johnson(8) | | | 660,653 | | | * | |
| Common stock | | Matthew J. Zimpfer(9) | | | 302,331 | | | * | |
| Common stock | | All directors, nominees and executive officers as a group (19 persons)(10) | | | 2,517,829 | | | 1.5 | % |
*Less than 1%.
(1)Based solely on Amendment No. 6 to Schedule 13G filed with the SEC on January 24, 2019 by BlackRock, Inc. The Amendment No. 6 to Schedule 13G reports sole power to vote or direct the vote of 19,824,334 shares and sole power to dispose or direct the disposition of 20,673,231 shares. The business address for BlackRock, Inc. is 55 East 52nd Street, New York, NY 10055.
(2)Based solely on Amendment No. 6 to Schedule 13G filed with the SEC on February 11, 2019 by The Vanguard Group. The Amendment No. 6 to Schedule 13G reports sole power to vote or direct the vote of 160,970 shares, shared power to vote or direct the vote of 21,588 shares, sole power to dispose or direct the disposition of 15,099,983 shares, and shared power to dispose or direct the disposition of 166,350 shares. The business address for The Vanguard Group is 100 Vanguard Blvd., Malvern, PA 19355.
(3)Based solely on Amendment No. 7 to Schedule 13G filed with the SEC on February 8, 2019 by Dimensional Fund Advisors LP. The Amendment No. 7 to Schedule 13G reports sole power to vote or direct the vote of 11,175,322 shares and sole power to dispose or direct the disposition of 11,302,789 shares. The business address for Dimensional Fund Advisors LP is Building One, 6300 Bee Cave Road, Austin, TX 78746.
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(4)Includes options, exercisable currently or within 60 days of March 12, 2019, to purchase 112,725 shares of common stock and includes 18,824 restricted stock units scheduled to vest within 60 days of March 12, 2019.
(5)Includes 8,014 shares held by a family foundation, as to which Mr. Sievert has shared voting power. He disclaims beneficial ownership of the shares held by the family foundation.
(6)Includes options, exercisable currently or within 60 days of March 12, 2019, to purchase 243,505 shares of common stock and includes 6,143 restricted stock units scheduled to vest within 60 days of March 12, 2019.
(7)Includes options, exercisable currently or within 60 days of March 12, 2019, to purchase 113,740 shares of common stock and includes 10,402 restricted stock units scheduled to vest within 60 days of March 12, 2019.
(8)Includes options, exercisable currently or within 60 days of March 12, 2019, to purchase 246,845 shares of common stock and includes 6,143 restricted stock units scheduled to vest within 60 days of March 12, 2019.
(9)Includes options, exercisable currently or within 60 days of March 12, 2019, to purchase 185,155 shares of common stock and includes 6,561 restricted stock units scheduled to vest within 60 days of March 12, 2019.
(10)Includes options, exercisable currently or within 60 days of March 12, 2019, to purchase an aggregate of 1,201,355 shares of common stock held by executive officers and includes an aggregate of 74,352 restricted stock units scheduled to vest within 60 days of March 12, 2019.
TABLE OF CONTENTS Director Deferred Stock Units
Under the CNO Board of Directors Deferred Compensation Plan, the non-management directors may elect each year to defer some or all of their compensation, including the equity portion of the annual director fees. Any equity that is so deferred is represented by vested deferred stock units, on which dividend equivalents are paid during the deferral period. The deferred stock units are not entitled to vote. At the end of the deferral period selected by the director, one share of common stock will be issued for each deferred stock unit. As of March 12, 2019, the non-management directors held deferred stock units as set forth below (these units are in addition to the share ownership set forth above):
| | Proposal 1 | | | |
Name
| | Number of
Deferred
Stock Units | |
|---|
Stephen N. David
| | | 13,706 | |
Mary R. (Nina) Henderson
| Election of Directors | | 13,706 | |
Daniel R. Maurer
| Ten individuals are nominated for election to the Board at the Annual Meeting for one-year terms expiring at the 2022 annual meeting of shareholders. Other than Mr. Ragavan, each nominee is a current member of the Board. All directors will serve until their successors are duly elected and qualified. Mr. Jacklin will retire from the Board at the conclusion of his current term, which ends at the close of the Annual Meeting. The table below lists each director nominee and our current directors’ membership on the five committees of the Board: Audit and Enterprise Risk (“Audit Committee”), Governance and Nominating (“Governance Committee”), Human Resources and Compensation (“Compensation Committee”), Investment, and Executive. | |
| | 18,463 | | | The Board of Directors recommends you vote FOR the election of all director nominees. | |
| | | | | | | | | | | | Committee Memberships | | | | | |
| | | | Director Nominees | | | | IND | | | | Age | | | | Director
Since | | | | AR | | | | GOV | | | | HRC | | | | I | | | | E | | | | | |
| | | Gary C. Bhojwani
Chief Executive Officer,
CNO Financial Group, Inc. | | | | — | | | | 53 | | | | 2017 | | | | – | | | | – | | | | – | | | | ● | | | | ● | | | |
| | | Ellyn L. Brown
Retired Principal, Brown & Associates | | | | ★ | | | | 71 | | | | 2012 | | | | – | | | | ▲ | | | | ● | | | | – | | | | – | | | |
| | | Stephen N. David
Senior Advisor,
The Boston Consulting Group | | | | ★ | | | | 72 | | | | 2017 | | | | ● | | | | ● | | | | – | | | | – | | | | – | | | |
| | | David B. Foss
President and Chief Executive Officer,
Jack Henry & Associates, Inc. | | | | ★ | | | | 59 | | | | 2019 | | | | – | | | | ● | | | | ● | | | | – | | | | – | | | |
| | | Robert C. Greving
Retired Executive Vice President, Chief
Financial Officer and Chief Actuary, Unum Group | | | | ★ | | | | 69 | | | | 2011 | | | | ▲ | | | | – | | | | – | | | | ● | | | | ● | | | |
| | | Mary R. (Nina) Henderson
Managing Partner, Henderson Advisory | | | | ★ | | | | 70 | | | | 2012 | | | | – | | | | – | | | | ▲ | | | | ● | | | | – | | | |
| | | Daniel R. Maurer
Chair of the Board, CNO Financial Group, Inc.
Retired Executive, Intuit Inc. | | | | ★ | | | | 64 | | | | 2015 | | | | – | | | | – | | | | – | | | | – | | | | ▲ | | | |
| | | Chetlur S. Ragavan
Retired Executive Vice President
and Chief Risk Officer, Voya Financial | | | | ★ | | | | 66 | | | | – | | | | – | | | | – | | | | – | | | | – | | | | – | | | |
| | | Steven E. Shebik
Retired Vice Chair, The Allstate Corporation and Allstate Insurance Company | | | | ★ | | | | 64 | | | | 2020 | | | | ● | | | | – | | | | – | | | | ● | | | | – | | | |
| | | Frederick J. Sievert
Retired President, New York Life Insurance Company | | | | ★ | | | | 73 | | | | 2011 | | | | – | | | | ● | | | | ● | | | | – | | | | – | | | |
| | | | Retiring Director | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | Charles J. Jacklin
Retired Chair, Mellon Capital Management Corporation | | | | ★ | | | | 66 | | | | 2015 | | | | ● | | | | – | | | | – | | | | ▲ | | | | – | | | |
Neal C. Schneider
| | | 20,276 | |
Frederick J. SievertAR Audit and Enterprise Risk
GOV Governance and Nominating
| | | 13,706HRC Human Resources and Compensation | | | E Executive
I Investment | |
10
CNO Financial Group, Inc. 2021 Proxy Statement
Diversity of
ContentsPROPOSAL 1
ELECTION OF DIRECTORS
Nine individuals will be electedNominees
Our Board believes that a diverse mix of directors is essential to
the Board at the Annual Meeting for one-year terms expiring at the 2020 annual meeting
of shareholders. Each nominee listed below currently is a member of the Board. All directors will serve until their successors are duly elected and qualified. Director Qualifications and Experience
In considering candidates for the Board, the Governance and Nominating Committee reviews the experience, skills, attributes and qualifications of current Board members and other potential candidates to ensure that the Board can effectively guide the strategic future of our Company and oversee its management. In doing so, the Committee considers the depth of experiences and skills, in addition to the attributes and qualifications, of candidates in such areas as insurance and financial services, investment management, accounting and finance, legal and regulatory, actuarial, marketing, technology implementation and transformation, and talent management and compensation.
Consideration also is given to each nominee's independence, financial literacy, personal and professional accomplishments and experience in light of the current and future needs of the Company. For incumbent directors, past performance on the Board and contributions to their respective committees are reviewed. The Governance and Nominating Committee and the Board seek directors with qualities that will contribute to the goal of having a well-rounded, diverse Board that functions well as a unit and is able to effectively fulfill its oversight responsibilities. responsibility.
The Committee expects each director to exercise leadership, sound judgment, high ethical standards and a commitment to the current and future success of the Company. Although the Governance and Nominating Committee does not have a specific diversity policy with respect to Board candidates, it strongly believes that the Board and the Company benefit from a variety of viewpoints, professional experiences, educational background and skills, and from the different perspectives that may be brought to the Board by individuals with different characteristics. To that end, the Governance Committee considers numerous factors in evaluating, recruiting and recommending candidates to fill open Board positions. Such factors include, among others, diversity in gender, ethnicity, race, age, cultural framework, economic background and geographic origin.
The tables below highlight the characteristics of different races, gendersour director nominees. Each director nominee’s background and ages. As such,relevant experience is described in more detail commencing on page 16.
CNO Financial Group, Inc. 2021 Proxy Statement11
Board of Directors’ Qualifications and Experience
Our directors are expected to exercise leadership, sound judgment, high ethical standards and a commitment to the Committeecurrent and future success of the Board consider issues of diversity and divergent backgrounds in the process of selectingCompany.
In considering candidates for the Board.Board, the Governance Committee considers:
»
The key experiences, qualifications,depth and types of experience, skills, attributes and skillsqualifications of eachcurrent Board members and potential candidates to ensure that the Board can effectively guide the Company’s strategic future and oversee its management;
»
Independence, financial literacy, personal and professional accomplishments and experience in light of the nomineesCompany’s current and future needs;
»
For incumbent directors, overall engagement and continued contributions to the Board’s effectiveness;
»
Succession planning to replace directors who are includedanticipated to retire in their individualone to three years; and
»
Diversity factors, including those previously discussed.
The following table summarizes each director nominee’s areas of focus or expertise on which the Board particularly relies and highlights the balanced mix of experience, qualifications and attributes of the Board as a whole. The biographies
below. Over the past year,commencing on page 16 describe each director nominee’s background and relevant experience in more detail.
12
CNO Financial Group, Inc. 2021 Proxy Statement
| | Financial Expertise. Experience as a financial expert, public company Chief Financial Officer or audit partner enables in-depth analysis of our financial statements, capital structure and financial reporting processes. | | | Risk Management. Expertise in managing risk in complex, highly regulated organizations facilitates a deep understanding of the challenges facing our business and effective oversight of the processes and procedures for managing those risks. | |
| | Investments. Investment management or mergers and acquisitions expertise adds valuable perspective on, and provides oversight of, these critical functions of our business. | | | Governance. Expertise in public company corporate governance matters enables appropriate exercise of the Board’s fiduciary duties to the Company and its shareholders and compliance with applicable regulatory mandates. | |
| | Industry Experience. Experience working as a senior executive in the insurance or financial services industry provides a deep understanding of the opportunities and challenges of our industry necessary to set the strategic direction of the Company. | | | Consumer Insights. Experience in marketing, sales and consumer behavior analytics provides perspective on growth opportunities for our Company. | |
| | Technology and Innovation. Technology, innovation and data security expertise is important to achieve our strategic objectives and to maintain the security of our customers’ information and Company data. | |
| | Corporate Affairs. Experience in strategic planning, sustainability, community relations and corporate social responsibility offers valuable insight on our goals and programs in these areas. | |
| | Management. Experience managing a multi-function enterprise in developing and executing business plans through human capital to deliver sustainable financial results provides a range of Board perspectives on meeting business opportunities and challenges. | | | | |
CNO Financial Group, Inc. 2021 Proxy Statement13
Board Refreshment
Our Governance Committee seeks to build and Nominatingmaintain a well-rounded, diverse Board that functions well as a unit and effectively fulfills its oversight responsibilities.
The Committee completed a comprehensive inventory of current directors' respective experiences and skills, assessedregularly assesses a timetable of anticipated Board member retirements, and put in place a planactively plans for Board replenishment that is future-focusedfocuses on the Company'sBoard’s oversight and risk management responsibilities and also considers the Company’s future growth and innovative development.continued innovation. As one element of this ongoing assessment, the Governance Committee maintains and utilizes an extensive inventory of current directors’ respective skills and experiences. This allows the Committee to identify particular skill sets that will optimize Board effectiveness, particularly for key Board positions such as committee chairs. The Committee has begunscreens candidates from a wide range of sources. For example, the processCommittee engaged an independent search firm in connection with the appointment and nominations of working with a professionalMessrs. Shebik and Ragavan. The Committee expects to continue to engage search firmfirms to identify potential candidates who can bring the requisite skills and experience, in addition to diverse qualities and perspectives, to further enhance the Board'sBoard’s value to the Company and its shareholders. Board Nominees
Should any See pages 12 and 13 for more details on the diversity of skills and experiences of the nominees become unableBoard nominees.
![[MISSING IMAGE: tm212336d4-fc_boardinde4c.gif]](https://files.docoh.com/DEF 14A/0001104659-21-041985/tm212336d4-fc_boardinde4c.gif)
14
CNO Financial Group, Inc. 2021 Proxy Statement
Director Onboarding
As one element of our director onboarding, each new director participates in a variety of orientation sessions with current Board members and management to accept election,provide a working knowledge of our business, strategic initiatives, performance and culture. During onboarding and throughout a director’s tenure, directors regularly meet with and have direct access to management. In addition, new directors meet with committee chairs to learn about the persons named inissues and decisions within each committee’s purview. When appointed to a committee, a new director receives additional information and perspectives on committee responsibilities and activities. Targeted onboarding sessions also are provided when a sitting director assumes a leadership role, such as becoming a committee chair.
Board Evaluation
Pursuant to its charter, the proxy will haveGovernance Committee evaluates Board and committee performance and establishes the rightprocedures by which such evaluations are conducted. The evaluation process includes:
»
Annually, the full Board evaluates its effectiveness, and considers areas of strengths and areas of potential improvement.
»
Interviews are conducted with each director individually to exercise their voting power in favorcollect robust feedback regarding the functioning of such person or persons as the Board and its committees.
»
The Governance Committee performs an annual evaluation of the Board Chair, and interviews are conducted with each director individually to solicit feedback.
»
Discussions occur regularly throughout the year regarding Board meeting effectiveness and logistics, including with respect to Board agenda items and materials, and feedback is acted upon promptly.
Additional information on the key responsibilities of the Governance Committee may recommend. All nominees have consented to being named in thisbe found on page 23.
CNO Financial Group, Inc. 2021 Proxy Statement and to serve if elected. The Board is not aware of any reason that any of its nominees would be unable to accept election. The Governance and Nominating Committee will consider candidates for director nominees put forward by shareholders. See "Shareholder Proposals for 2020 Annual Meeting" for a description of the proxy access and advance notice procedures for shareholder nominations for directors.
15
Table of Contents
Set forth below is information regarding each person nominated by the Board for election as a director.
Nominees for Election as Directors:
Director Nominee Biographies
| | | |
 | | Gary C. Bhojwani Chief Executive Officer,
CNO Financial Group, Inc. Age: 51, has been chief executive officer of53
Director since: 2017 Member, Executive Committee
and Investment Committee
| |
| |
| | Career Prior to joining CNO, since January 1, 2018 and a director since May 2017. He served as president of CNO from April 2016 through December 2017. Mr. Bhojwani served aswas a Membermember of the Board of Management at Allianz SE, and aswas Chairman of Allianz of America, Allianz Life Insurance Company and Fireman'sFireman’s Fund Insurance Company from 2012 to January 1, 2015. From 2007 to 2012, he served asHe was Chief Executive Officer of Allianz Life Insurance Company of North America. From April 2015 until joining CNO,America from 2007 to 2012, and was President of Commercial Business, Fireman’s Fund Insurance Company from 2004 to 2007. Mr. Bhojwani was Chief Executive Officer of Lincoln General Insurance Company from 2002 to 2004, Founder and Chief Executive Officer of Avalon Risk Management from 1998 to 2002 and President, Trade Insurance Services from 1995 to 1997. Mr. Bhojwani served as President of CNO from April 2016 to December 2017, prior to his appointment as Chief Executive Officer on January 1, 2018. His areas of responsibility included overseeing the Bankers Life, Colonial Penn and Washington National businesses as well as marketing, underwriting and new business. Mr. Bhojwani is a member of the Governing Committee of CEO Action for Racial Equity and a signatory of the CEO Action for Diversity & Inclusion™ pledge to advance diversity and inclusion within the workplace. | |
| |
| | Qualifications Experience as Chief Executive Officer of GCB, LLC, an insurance and financial services consulting company that he founded. He has been a director of Hormel Foods Corporation since 2014. With respect to Mr. Bhojwani's nomination for re-election, the Board and the Governance and Nominating Committee considered his experience as chief executive officer of the Company and his extensive insurance, financial services, corporate affairs, consumer insights, sales and executive management experience.experience | |
 |
| | Other Board Experience »
Hormel Foods Corporation (NYSE: HRL), 2014–present »
Allina Health, 2016–present |
|
| | | | | Ellyn L. Brown Retired Principal,
Brown & Associates Age:, 69, joined our Board in May 2012. 71
Director since: 2012 Chair, Governance and
Nominating Committee Member, Human Resources
and Compensation Committee | |
| |
| | Career Until her retirement from full-timefull time law practice, Ms. Brown practiced corporate and securities law, most recently as principal of Brown & Associates, a boutique law and consulting firm that provided operations, regulatory and governance services to financial services industry clients and other clients that operated in heavily regulated, high-scrutiny environments. Ms. Brown served aswas a member of the board of directorsBoard of NYSE Euronext (and predecessor companies) (NYSE:NYX)entities) from 2005 until the acquisition of NYX by the Intercontinental Exchange into 2013, and also chaired the boardBoard of NYSE Regulation, Inc., the entity that oversaw market regulation at theindependent NYSE and its affiliated exchanges. She joined the board of trustees of Brinker Capital Destinations Trust in January 2017, and became chair of that board in April 2018, and was a membersubsidiary responsible for regulatory oversight of the boardmembers and operations of directors of Walter Investment Management Corp. from 2009-2017. Ms. Brownall NYSE-owned exchanges, through 2014. She also served as a governor of the Financial Industry Regulatory Authority (“FINRA”) from 2007-20122007 to 2012 and, from 2007-2011,2007 to 2011, was a trustee of the Financial Accounting Foundation, the parent entity of the Financial Accounting Standards Board and the Governmental Accounting Standards Board. With respect to Ms. Brown's nomination for re-election, the Board and the Governance and Nominating Committee considered her extensive | |
| |
| | Qualifications Extensive financial industry, legal, compliance, governance and regulatory experience.experience | |
 |
| | Other Board Experience »
Brinker Capital Destinations Trust, 2017–present (chair since April��2018) »
Walter Investment Management Corp., 2009–2017 |
|
16
CNO Financial Group, Inc. 2021 Proxy Statement
| | | | | Stephen N. David Senior Advisor,
The Boston Consulting Group Age:, 70, joined our Board in May 2017. 72
Director since: 2017 Member, Audit and Enterprise
Risk Committee and
Governance and Nominating
Committee | |
| |
| | Career Mr. David has been a Senior Advisor with The Boston Consulting Group since 2005, providing strategic planning services in sales, marketing and technology to a variety of clients across multiple industries, including financial services. He retired in 2005 after 34 years with Procter & Gamble ("(“P&G"&G”). During his P&G career, Mr. David held multiple senior management positions including Chief Information Officer, Global Customer Development Officer, and Senior Vice President, Business Development. He served as a director of Checkpoint Systems, Inc., which provides merchandise availability solutions for the retail industry, encompassing loss prevention and merchandise visibility, from 2012 until the completion of the sale of the company in May 2016. He also served as a director of Iomega Corporation, a consumer technology company, from 2002 until its acquisition in 2008. With respect to Mr. David's nomination for re-election, the Board and the Governance and Nominating Committee considered his extensive | |
| |
| | Qualifications Extensive leadership experience in technology, strategy,innovation, data security, corporate affairs, marketing and sales.sales | |
| |
| | Other Board Experience »
Checkpoint Systems, Inc., 2012–2016 »
Iomega Corporation, 2002–2008 | |
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| | | | | David B. Foss President and Chief Executive
Officer, Jack Henry &
Associates, Inc. Age: 59
Director since: 2019 Member, Governance and
Nominating Committee and
Human Resources and
Compensation Committee | |
 |
| | Career Mr. Foss is President and Chief Executive Officer of Jack Henry and Associates, Inc. (“Jack Henry”), a leading provider of technology solutions to the financial services industry. He was named President and Chief Executive Officer of Jack Henry in 2016, after serving as President from 2014 to 2016. He joined Jack Henry in 1999 when he arranged the sale of BancTec’s financial solutions division to Jack Henry and subsequently served as President of Jack Henry’s Open Systems Group and General Manager of the Complementary Solutions Group. He was named General Manager of Jack Henry’s ProfitStars division in 2006 and as its President in 2009. He previously served as President and a board member of the Association for Financial Technology from 2007 to 2012. Before joining Jack Henry, Mr. Foss held a variety of positions in the financial services industry, including senior operations management, sales management and supervisory roles at BancTec, Advanced Computer Systems and NCR. | |
| |
| | Qualifications Extensive experience in technology, data security, financial services, innovation, corporate affairs, change management and leadership, and experience as a public company chief executive officer | |
| |
| | Other Board Experience »
Jack Henry & Associates, Inc. (NASDAQ: JKHY), 2017–present »
Association for Financial Technology, 2007–2012 | |
CNO Financial Group, Inc. 2021 Proxy Statement17
| | | | | Robert C. Greving Retired Executive Vice
President, Chief Financial
Officer and Chief Actuary,
Unum Group Age:, 67, joined our Board in May 2011. 69
Director since: 2011 Chair, Audit and Enterprise
Risk Committee; Member,
Executive Committee and
Investment Committee | |
| |
| | Career Mr. Greving is the retired executive vice president, chief financial officerExecutive Vice President, Chief Financial Officer and chief actuaryChief Actuary for Unum Group, having held those positions from 2005 to 2009. Mr. Greving also served as presidentPresident of Unum International Ltd., Bermuda. Before becoming executive vice presidentExecutive Vice President and chief financial officerChief Financial Officer of Unum Group in 2003, he held senior vice president, finance,Senior Vice President, Finance, and chief actuaryChief Actuary positions with Unum Group and with The Provident Companies, Inc., which merged with Unum Group. His duties prior to retirement included directing all aspects of the finance and actuarial responsibilities for the corporate and nine insurance subsidiary insurance companies of Unum Group. He previously held senior positions with PennCorp Dallas Operations, Southwestern Life Insurance Company, American Founders Insurance Company, Aegon USA and Horace Mann Life Insurance Company during his 35 years in the insurance industry. He is a Fellow of the Society of Actuaries. With respect to Mr. Greving's nomination for re-election, the Board and the Governance and Nominating Committee considered his extensive | |
| |
| | Qualifications Extensive experience with the management of companies in the life, health, disability and annuity lines of business and in particular with the actuarial, financial, risk management, cybersecurity and investment disciplines.disciplines | |
 |
| | Other Experience »
Earned the CERT Certification in Cybersecurity Oversight from Carnegie Mellon University »
Fellow of the Society of Actuaries |
|
| | | | | Mary R. (Nina) Henderson Managing Partner,
Henderson Advisory Age:, 68, joined our Board in August 2012. 70
Director since: 2012 Chair, Human Resources and
Compensation Committee;
Member, Investment
Committee
| |
| |
| | Career Ms. Henderson is the managing partnerManaging Partner of Henderson Advisory, a consulting practice providing marketing perspective and business evaluation to investment management firms on consumer products. markets. She wasis a corporate vice presidentformer Corporate Vice President of Bestfoods and presidentPresident of Bestfoods Grocery. During her 30-year career with Bestfoods, and its predecessor company CPC International, Ms. Henderson held a wide variety of international and North American general management and executive marketing positions. Ms. Henderson has been a director of IWG plc (formerly Regus plc) since May 2014 and has been a director of Hikma Pharmaceuticals plc since October 2016. She previously served as a director of Walter Energy, Inc. (2013 – 2016), Del Monte Foods Company (2002 – 2011), The Equitable Companies (1996 – 2000), AXA Financial (2001 – 2011), Pactiv Corporation (2000 – 2010), Royal Dutch Shell plc and its predecessor The Shell Transport and Trading Company (2001 – 2009) and the Hunt Corporation (1991 – 2002). She is Vice Chair of the Board of Drexel University and a director of the Visiting Nurse Service of New York and the Foreign Policy Association. With respect to Ms. Henderson's nomination for re-election,She also serves as Commissioner of the BoardSmithsonian National Portrait Gallery and as the GovernancePresident of the Kent Land Trust Foundation. | |
| |
| | Qualifications Extensive management, corporate affairs, human capital management, governance, risk management and Nominating Committee considered her management leadership experience, consumer marketing background, and hersales experience as a director of companies in a variety of industries, including insurance. | |
| |
| | Other Board Experience »
IWG plc (formerly Regus plc), 2014–present »
Hikma Pharmaceuticals plc, 2016–present »
Walter Energy, Inc., 2013–2016 »
Del Monte Foods Company, 2002–2011 »
The Equitable Companies, 1996–2000 »
AXA Financial, 2001–2011 »
Pactiv Corporation, 2000–2010 »
Royal Dutch Shell plc and its predecessor The Shell Transport and Trading Company, 2001–2009 »
Hunt Corporation, 1991–2002 | |
18
CNO Financial Group, Inc. 2021 Proxy Statement
| | | | | Daniel R. Maurer Retired Executive, Intuit Inc. Age: 64 Chair, Board; Chair, Executive
Committee
|
|
| |
| |
Charles J. JacklinCareer, 64, joined our Board Mr. Maurer has extensive experience in May 2015. Mr. Jacklin has more than 30 years of financeconsumer sales, marketing and investment experience. He served as Chief Executive Officer and President of Mellon Capital Management Corporation fromproduct management. From 2006 until March 2011 and then served as Chairman until his retirement at the end of 2012. Mr. Jacklin also held several other executive management positions in his 18 years with Mellon Capital Management including chief investment strategist, where he was responsible for investment strategies and research, and director of asset allocation strategies, where he was responsible for portfolio management in domestic, international and global asset allocation strategies. He has also taught finance and investment strategy for 10 years at the University of Chicago and Stanford University Schools of Business. With respect to Mr. Jacklin's nomination for re-election, the Board and the Governance and Nominating Committee considered his extensive investment, investment risk management and finance experience.
|
Table of Contents
| | |
 | | Daniel R. Maurer, 62, joined our Board in May 2015.2014, Mr. Maurer was a member of the senior management team at Intuit Inc. from 2006 until his retirement in 2014. In his most recent role at Intuit, he oversaw the Small Business Solutions Group (including QuickBooks payroll, DemandForce, and QuickBase), and.He previously led the TurboTax®TurboTax®, Mint, and Quicken brands.brands where he developed significant digital marketing and product management skills. Prior to Intuit, Mr. Maurer has extensive global consumer retail sales and marketing experience withspent over 20 years in executive management at Procter & Gamble ("(“P&G"&G”), including 15 years internationally. As General Manager of Global Customer Development at P&G's headquarters, he was tasked with building an effective marketing strategy to achieve a competitive advantage with P&G's largest global customers including Wal-Mart, Costco, Ahold, Tessco, and Carrefour. Subsequent to his tenure at P&G, Mr. Maurer was Vice President of Strategy for Global Sales and USU.S. Business at Campbell's Soup. He has served since 2012 on the board of directors of Zagg Inc, which designs, produces and distributes mobile accessory solutions, and served as a director of Checkpoint Systems, Inc., which provides merchandise availability solutions for the retail industry, encompassing loss prevention and merchandise visibility, from January 2016 until the completion of the sale of the company in May 2016. Previously, Mr. Maurer served as a director of Iomega Corporation, a consumer technology company, from 2006 until its acquisition in 2008. With respect to Mr. Maurer's nomination for re-election, the Board and the Governance and Nominating Committee considered his extensiveCampbell Soup Company. | |
| |
| | Qualifications Extensive experience in marketingconsumer sales, product management, financial services, corporate affairs, management, technology and marketing strategy,consumer insights, including the use of digital marketing strategies to reach the middle market.market | |
 |
| | Other Board Experience »
|
Neal C. SchneiderZagg Inc. (formerly NASDAQ: ZAGG), 74, joined our Board in September 2003. Mr. Schneider served from 2003 until 2010 as the non-executive chairman2012–2021 »
Checkpoint Systems, Inc., January 2016–May 2016 (upon sale of the boardcompany) »
Iomega Corporation, 2006–2008 | |
| | | | | Chetlur S. Ragavan Retired Executive Vice
President and Chief Risk
Officer, Voya Financial Age: 66 Director Nominee | |
| |
| | Career Mr. Ragavan is the former Executive Vice President and Chief Risk Officer of PMA Capital Corporation, whose subsidiaries provide insurance products, including workers' compensation and other commercial property and casualty lines of insurance, as well as fee-based services. He also served on the executive, audit and governance committees for PMA Capital. UntilVoya Financial, a position he held from 2014 until his retirement in 2019. He was a member of Voya’s Executive Committee and Chair of its Enterprise Risk Committee. From 2008 to 2013, he served as Managing Director and Chief Risk Officer for Voya Investment Management. Prior to joining Voya Financial, Mr. Ragavan was Managing Director and Co-Head of the Portfolio Analytics Group for BlackRock from 2006 to 2008. Mr. Ragavan began his career at Merrill Lynch in 1980 and held several senior technology, investment and risk management positions within its various subsidiaries during his 26-year career with the company. His leadership roles included serving as Managing Director and Global Head of Fixed-Income Research of Merrill Lynch Investment Managers from 2000 to 2006 and as Managing Director and Head of Risk Management of Merrill Lynch Asset Management from 1992 to 2000. Mr. Schneider spent 34 yearsRagavan is a current board member of the Council for Economic Education (CEE) and a former board member of the Voya Foundation and the Fixed Income Analysts Society. | |
| |
| | Qualifications Extensive insurance and financial services industry experience in risk management, portfolio optimization, data analytics, accounting, investment research and strategy | |
| |
| | Other Experience »
Chartered Financial Analyst (CFA) charterholder since 1987 | |
CNO Financial Group, Inc. 2021 Proxy Statement19
| | | | | Steven E. Shebik Retired Vice Chair, The Allstate
Corporation and Allstate
Insurance Company Age: 64
Director since: 2020 Member, Investment
Committee and Audit and
Enterprise Risk Committee
| |
| |
| | Career Mr. Shebik served as the Vice Chair of The Allstate Corporation and Allstate Insurance Company and Chief Executive Officer of Allstate Life Insurance Company from 2018 until his retirement in May 2020, after a 25-year career with the company. He was a member of Allstate’s executive management team from 2012 to 2020. As Vice Chair, Mr. Shebik oversaw Allstate Life and Retirement, Allstate Benefits, the direct and independent agency personal property-casualty and commercial insurance businesses, and corporate business transformation and analytics. From 2012 to 2018, Mr. Shebik served as Executive Vice President and Chief Financial Officer and was Interim Chief Investment Officer from 2016 to 2017 and Interim Chief Risk Officer on two occassions. Other leadership positions included being the senior financial executive for Allstate Investments, Allstate Protection, and Allstate Financial along with roles in accounting, treasury and mergers and acquisitions. Prior to joining Allstate in 1995, he held roles in finance and accounting with Sears, Roebuck and Co. and auditing with Arthur Andersen & Co., including service as partner in charge of the Worldwide Insurance Industry Practice and the North American Financial Service Practice. Between 2000 and 2002, he was an independent consultant and between 2002 and 2003, Mr. Schneider was a partner of Smart and Associates, LLP, a business advisory and accounting firm. With respect to Mr. Schneider's nomination for re-election, the Board and the Governance and Nominating Committee considered his extensive knowledge and | |
| |
| | Qualifications Extensive experience in accountinginsurance company management, finance, investment and financial matters, particularly with respect to insurance companies,risk management and in corporate governance.financial reporting and mergers and acquisitions | |
 |
| | Other Experience »
Certified Public Accountant (CPA) since 1978 |
|
| | | | | Frederick J. Sievert Retired President,
New York Life Insurance
Company Age:, 71, joined our Board in May 2011. 73
Director since: 2011 Member, Governance and
Nominating Committee and
Human Resources and
Compensation Committee | |
| |
| | Career Mr. Sievert is the retired President of New York Life Insurance Company, having served in that position from 2002 throughto 2007. Mr. Sievert shared responsibility for overall company management in the Office of the Chairman, from 2004 until his retirement in 2007. Mr. Sievert joined New York Life in 1992 as senior vice presidentSenior Vice President and chief financial officerChief Financial Officer of the individual insurance businesses. In 1995, he was promoted to executive vice presidentExecutive Vice President and was elected to the New York Life boardBoard of directorsDirectors in 1996. Prior to joining New York Life, Mr. Sievert was a senior vice presidentSenior Vice President for Royal Maccabees Life Insurance Company, a subsidiary of the Royal Insurance Group of London, England. Mr. Sievert is a Fellow of the Society of Actuaries. He has been a director of | |
| |
| | Qualifications Extensive insurance, finance, actuarial, human capital management, risk management and consumer insights experience | |
| |
| | Other Board Experience »
Reinsurance Group of America, Incorporated since 2010. With respect to Mr. Sievert's nomination for re-election, the Board and the Governance and Nominating Committee considered his extensive insurance, actuarial and executive management experience.(NYSE: RGA), 2010–present | |
20
CNO Financial Group, Inc. 2021 Proxy Statement
Voting for
Directors;Directors: Required Vote
The election of each director will be determined by the vote of the majority of the votes cast (where(by which the number of votes cast "for"“for” a director exceeds the number of votes cast "against"“against” that director) by the holders of shares of common stock present in person, or represented by proxy, and entitled to vote on the proposal at the Annual Meeting. In an uncontested election of directors at which a quorum is present, any incumbent director who fails to receive a majority of the votes cast (where the number of votes cast
"for"“for” a director exceeds the number of votes cast
"against"“against” that director) shall offer to tender his or her resignation to the Board. In such event, the Governance
and Nominating Committee will consider the offer and make a recommendation to the Board
as to whether
to acceptthe director’s resignation should be accepted or
reject the resignationrejected or whether other action should be taken. The Board will publicly disclose its decision and
its rationale
therefore within 90 days from the certification of the election results.
CNO Financial Group, Inc. 2021 Proxy Statement21
Board
of Directorsand Governance Matters
OUR BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS THAT YOU VOTE "FOR" THE ELECTION TO THE BOARD OF EACH OF THE COMPANY'S DIRECTOR NOMINEES LISTED ABOVE.
BOARD AND GOVERNANCE MATTERS
Board Committees
Our Board has five committees: (1) Audit and Enterprise Risk,
Committee. The Audit and Enterprise Risk Committee's functions, among others, are to recommend the appointment of independent accountants; review the arrangements for and scope of the audit by the independent accountants; review the independence of the independent accountants; consider the adequacy of the system of internal accounting controls and review any proposed corrective actions; provide oversight of the Company's internal audit department; review and monitor the Company's compliance with legal and regulatory requirements; discuss with management and the independent accountants our draft annual and quarterly financial statements and key accounting and/or reporting matters; and oversee management's processes for managing enterprise risk, including cyber security risk. The Audit and Enterprise Risk Committee itself does not prepare financial statements or perform audits and its members are not auditors or certifiers of the Company's financial statements. The Audit and Enterprise Risk Committee currently consists of Mr. Greving, Ms. Henderson, Mr. Jacklin and Mr. Schneider, with Mr. Greving serving as committee chair. Based on their experience, Mr. Greving and Mr. Schneider each qualify as an "audit committee financial expert," as defined under SEC rules promulgated under the Sarbanes-Oxley Act. All current members of the Audit and Enterprise Risk Committee are "independent" within the meaning of the regulations adopted by the SEC including Section 10A(m)(3) of the Securities Exchange Act of 1934 and the listing requirements adopted by the New York Stock Exchange regarding audit committee membership. The current members also satisfy the financial literacy qualifications of the New York Stock Exchange listing standards. The committee met on 11 occasions in 2018. The duties and responsibilities of the Audit and Enterprise Risk Committee are set forth in its charter, which is available in the Investor Relations section of our website atwww.CNOinc.com.(2) Governance and Nominating, Committee. The Governance and Nominating Committee is responsible for, among other things, establishing criteria for Board membership; considering, recommending and recruiting candidates to fill new positions on the Board; reviewing candidates recommended by shareholders; and considering questions of possible conflicts of interest involving Board members, executive officers and key employees. It is also responsible for developing principles of corporate governance and recommending them to the Board for its approval and adoption, and reviewing periodically these principles of corporate governance to ensure that they remain relevant and are being followed. The Governance and Nominating Committee currently consists of Ms. Brown, Mr. David, Mr. Schneider and Mr. Sievert, with Ms. Brown serving as committee chair. All current members of the Governance and Nominating Committee are "independent" within the meaning of the listing requirements adopted by the New York Stock Exchange regarding nominating committee membership. The
Table of Contents
committee held seven meetings during 2018. The duties and responsibilities of the Governance and Nominating Committee are set forth in its charter, which is available in the Investor Relations section of our website atwww.CNOinc.com.
(3) Human Resources and Compensation, Committee. The Human Resources(4) Investment and Compensation Committee is responsible for, among other things, approving overall compensation philosophy and strategy; evaluating the performance(5) Executive.
Each of the chief executive officer and recommendingour committees operates pursuant to the Board the compensation of the chief executive officer; reviewing and approving on an annual basis the evaluation process and compensation structure for the Company's other executive officers as recommended by the chief executive officer; ensuring that appropriate programs and procedures are established to provide for the development, selection, retention and succession of officers and key personnel; and reviewing and administering our incentive compensation and equity award plans. The report of the Human Resources and Compensation Committee appears on page 47 of this Proxy Statement. The Human Resources and Compensation Committee currently consists of Mr. Sievert, Ms. Brown and Mr. David, with Mr. Sievert serving as committee chair. All current members of the Human Resources and Compensation Committee are "independent" within the meaning of the listing requirements adopted by the New York Stock Exchange regarding compensation committee membership and qualify as "non-employee" directors for purposes of Rule 16b-3 of the Securities Exchange Act of 1934 and as "outside directors" for purposes of Section 162(m) of the Internal Revenue Code. The committee met on eight occasions in 2018. The duties and responsibilities of the Human Resources and Compensation Committee are set forth in itsa written charter which is available in(available at the Investor Relations section of our website atwww.CNOinc.com).
AUDIT AND ENTERPRISE RISK COMMITTEEwww.CNOinc.com.(1) | | Committee Members | | | Key Responsibilities | |
| | All Independent | | | »
Appoints, sets compensation, determines retention and oversees the Company’s independent registered public accounting firm (“independent auditor”) which is retained to provide an audit opinion on the Company’s financial statements and internal control over financial reporting •
Reviews the arrangements for the scope of the audit and reviews any non-audit services and the impact of such services on the continued independence of the independent auditor •
Meets regularly with the independent auditor’s lead engagement partner to discuss, among other matters, audit issues, the effectiveness of internal controls over financial reporting and Critical Audit Matters (“CAMs”) arising from the audit and the relevant financial statement accounts or disclosures that relate to each CAM •
Annually evaluates the performance of the independent auditor, including the senior members of the audit engagement team and determines whether to reengage the independent auditor or to engage another independent registered public accounting firm •
Selects a new lead engagement partner when such partner is required to rotate off the Company’s audit (generally every five years) »
Evaluates the adequacy of the Company’s accounting control systems, along with the Company’s internal audit department and independent auditor »
Reviews and monitors the Company’s compliance with legal and regulatory requirements »
Discusses draft annual and quarterly financial statements with management and the independent auditor as well as other key accounting and reporting matters »
Prepares the Audit Committee report (the Committee does not prepare financial statements or perform audits, and its members are not auditors or certifiers of the Company’s financial statements) »
Oversees management’s processes for managing enterprise risk, including cybersecurity and technology risks Additional information regarding the Audit Committee, including the factors considered by the Audit Committee in the appointment of the independent auditor and selection of the lead engagement partner, can be found under “Proposal 4—Ratification of the Appointment of Our Independent Registered Public Accounting Firm,” which begins on page 81. | |
| | | | | Robert C. Greving, Chair | |
| | | | | Stephen N. David | |
| | | | | Steven E. Shebik | |
| | | | | Charles J. Jacklin | |
| | Key Skills & Experience •
Financial literacy or expertise •
Risk management •
Cyber and data security •
Industry experience •
Technology and innovation •
Consumer insights (1) Based on their respective experience, the Board has determined that Mr. Greving and Mr. Shebik each qualify as an “audit committee financial expert,” as defined by SEC rules promulgated under the Sarbanes-Oxley Act. In addition, the Board has determined that director nominee Mr. Ragavan also qualifies as an audit committee financial expert. Mr. Greving holds the CERT Certification in Cybersecurity Oversight from Carnegie Mellon University. The current Audit Committee members (and director nominee Mr. Ragavan) satisfy the financial literacy qualifications of the NYSE listing standards. | |
Investment Committee.22
CNO Financial Group, Inc. 2021 Proxy Statement
GOVERNANCE AND NOMINATING COMMITTEE
| | Committee Members | | | Key Responsibilities | |
| | All Independent | | | »
Develops, maintains and periodically reviews the Company’s governance policies, including the Corporate Governance Guidelines and Code of Conduct, and recommends to the Board new or amended policies designed to encourage the highest levels of ethical corporate conduct by the Board, the Company and its officers, employees and agents »
Identifies, evaluates, recruits and recommends director candidates (including any nominees recommended by shareholders) for nomination by the Board and election by the shareholders at annual or special meetings. »
Establishes criteria for Board membership, including, among others: •
Experience •
Skill sets •
Understanding of the Board’s fiduciary duty to act in the best interests of the Company and its shareholders •
Diversity in gender, ethnicity, race, age, cultural framework, economic background and geographic origin, in addition to numerous other personal and professional characteristics, experiences and competencies »
With the Board Chair, evaluates Board and committee performance and establishes procedures by which such evaluations will be conducted »
Considers questions of possible conflicts of interest involving Board members, senior officers and key employees »
Recommends to the Board new or amended policies intended to enhance the Board’s effectiveness, including with respect to the size and composition of the Board and its committees, and the frequency and structure of the Board and committee meetings »
Oversees and reviews, in coordination with the Company’s management committee, the formulation and execution of the Company’s social responsibility and sustainability strategy, including providing input as to the Company’s public reporting of such matters and potential impact on the Company’s sustainability and corporate social responsibility profile and reputation For additional information on the Committee’s practices, see pages 11-15. | |
| | | | | Ellyn L. Brown, Chair | |
| | | | | Stephen N. David | |
| | | | | David B. Foss | |
| | | | | Frederick J. Sievert | |
| | Key Skills & Experience •
Governance •
Legal and regulatory compliance •
Executive management •
Sustainability | |
| | | |
CNO Financial Group, Inc. 2021 Proxy Statement The Investment Committee is responsible for, among other things, reviewing investment policies, strategies and programs; reviewing the procedures which the Company utilizes in determining that funds are invested in accordance with policies and limits approved by it; and reviewing the quality and performance of our investment portfolios and the alignment of asset duration to liabilities. The Investment Committee currently consists of Mr. Jacklin, Mr. Bhojwani, Mr. Greving and Ms. Henderson, with Mr. Jacklin serving as committee chair. The committee met on four occasions in 2018. The duties and responsibilities of the Investment Committee are set forth in its charter, which is available in the Investor Relations section of our website at23
HUMAN RESOURCES AND COMPENSATION COMMITTEE
| | Committee Members | | | Key Responsibilities | |
| | All Independent | | | »
Evaluates the performance of the CEO against his or her goals pursuant to the Company’s plans, incorporating other directors’ input, and recommends CEO compensation to the Board for final determination »
Reviews and approves the corporate goals and objectives relevant to CEO compensation »
On an annual basis, reviews, modifies and approves (or if appropriate, recommends to the full Board for determination and approval) the Company’s executive compensation philosophy and strategy »
On an annual basis, and in conjunction with the CEO, reviews and approves the evaluation process and compensation structure for the Company’s other executive officers »
Ensures that appropriate programs and procedures are established to provide for the development, selection, retention and succession of officers and key personnel » •
Establishes compensation programs and practices intended to align management’s interests with those of shareholders in order to contribute to the creation of long-term shareholder value » •
Carries out similar review functions with respect to the Company’s incentive compensation, equity awards and human resource asset programs to support the Company’s objectives, including environmental, social and governance ("ESG") principles | |
| | | | | Mary R. (Nina) Henderson, Chair | |
| | | | | Ellyn L. Brown | |
| | | | | David B. Foss | |
| | | | | Frederick J. Sievert | |
| | Key Skills & Experience •
Human capital management •
Corporate affairs •
Governance | |
| | | | | »
Produces the annual Compensation Committee Report in compliance with SEC rules, which Report appears on page 64 of this Proxy Statement The Committee may, in its discretion, delegate all or a portion of its duties and responsibilities to a subcommittee. Additional information regarding the compensation of the CEO and other executives can be found under “Compensation Discussion and Analysis” beginning on page 41. | |
24
CNO Financial Group, Inc. 2021 Proxy Statement
INVESTMENT COMMITTEE
| | Committee Members | | | Key Responsibilities | |
| | Majority Independent | | | »
Reviews investment policies, strategies, tolerances and programs of the Company and its subsidiaries, including those relating to: •
Asset−liability management •
Diversification •
Applicable regulations •
ESG factors »
Reviews the quality and performance of the Company’s and its subsidiaries’ investment portfolios and the investment-related aspects of the Company’s asset−liability management practices, including: •
Alignment of asset duration to liabilities •
Investment performance of accounts managed on behalf of third parties •
The Company’s, and its subsidiaries’, investment borrowings in furtherance of their respective investment plans and activities »
Together with the Compensation Committee and/or the Board, participates in the selection, appointment and review of the Company’s Chief Investment Officer and the design and periodic review of the responsibilities thereof | |
| | | | | Charles J. Jacklin, Chair | |
| | | | | Gary C. Bhojwani | |
| | | | | Robert C. Greving | |
| | | | | Mary R. (Nina) Henderson | |
| | | | | Steven E. Shebik | |
| | Key Skills & Experience •
Investments •
Risk management •
Industry experience | |
EXECUTIVE COMMITTEE
| | Committee Members | | | Key Responsibilities | |
| | Majority Independent | | | »
Assists the Board in handling matters which, in the opinion of the Board Chair, are not advisable to postpone until the next scheduled meeting of the Board »
Subject to the requirements of applicable law, including the Company’s Certificate of Incorporation and Bylaws, exercises the authority, to the extent determined necessary or appropriate by the Executive Committee, of the Board in the management of the business and affairs of the Company during the intervals between Board meetings | |
| | | | | Daniel R. Maurer, Chair | |
| | | | | Gary C. Bhojwani | |
| | | | | Robert C. Greving | |
| | Key Skills & Experience •
Leadership and strategy •
Industry experience •
Corporate affairs | |
CNO Financial Group, Inc. 2021 Proxy Statementwww.CNOinc.com.25 Executive Committee. Subject to the requirements of applicable law, including our certificate of incorporation and bylaws, the Executive Committee is responsible for exercising, as necessary, the authority of the Board in the management of our business affairs during intervals between Board meetings. The Executive Committee currently consists of Mr. Maurer, Mr. Bhojwani and Mr. Greving, with Mr. Maurer serving as committee chair. The duties and responsibilities of the Executive Committee are set forth in its charter, which is available in the Investor Relations section of our website atwww.CNOinc.com.
In general, the Board reviews the compensation of non-employee directors every other year, commencing with a study undertaken by the Governance and Nominating Committee, ("Governance Committee"). The objective of this study, and the Board's subsequent review, isin order to provide fair and reasonable compensation in light of the demands and obligations placed upon directors, and also to align with director compensation at our peer companies. As one element of itsThe last such compensation study was conducted in 2018,2018. In May 2020, the Governance Committee considered data provided by the Board's independentdiscussed its process for reviewing non-employee director compensation consultant. Prior to approval of the changes described below, Board compensation had not changed since 2015, either as to the amount or the structure of compensation. The following summarizes the elements of compensation approved and putdetermined that, in place as of May 2018 for our eight non-employee directors, and notes any changes both in compensation levels and compensation structure that was instituted at that time.
With respect to our non-employee directors, base fees are paid 40% in cash and 60% in the stock of the Company. This remains unchanged from prior years. In May 2018, base compensation was increased by $20,000,
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which was consistent with market and peer trends that had increased since our previous consideration of this issue in 2015 and which was paid out on the 40%/60% basis. Cash fees are paid quarterly, in advance, and equity awards are granted annually, on the date of our Annual Meeting, and vest immediately. Following the change to base compensation made in May 2018, between cash payments of $96,000 and the value of the annual stock award ($144,000), the value of non-employee Board member base compensation currently is $240,000.
No change was made as to additional compensation paid to Board members who chair a standing committee, although the Board revised the components of that compensation. (For example, the Chair of the Audit and Enterprise Risk Committee previously received a chair's fee of $30,000 and a member's fee of $15,000, but now receives a single fee of $45,000 per year.) Since 2015 and currently, the Chairs of Board committees receive the following additional annual cash fees: Audit and Enterprise Risk, $45,000; Human Resources and Compensation, $40,000; Investment, $20,000; Governance, $20,000.
The members of all Board committees, other than the respective chairs, also now receive additional cash compensation for their service. This committee member compensation remains unchanged from 2015 for Audit and Enterprise Risk ($15,000 per year) and Human Resources and Compensation ($10,000 per year). Prior to May 2018, members of the Investment and Governance Committees, other than the respective chairs, did not receive additional compensation for service on those committees. In light of the increasingly complex and time-consuming work withinimpact of the purviewCOVID-19 pandemic, its next market-based review of those committees, thedirector compensation practices should occur in 2021. Thus, no changes to Board determined that, effective May 8,compensation have been made since 2018, those committee members would receive a $5,000 additional annual cash fee.
Withwith respect to additional annual compensation for service aseither amount or structure.
Key Features of Director Compensation
»
Appropriately values the Chairsignificant time commitment required of our Board, in May 2018 the Board substantially changed the formula by which the Chair's compensation is calculated. Previously, the Chair had received additional compensation equaldirectors to two times the base fee paid to non-employee directors; in 2017, that formula resulted in additional compensation of $220,000 (also paid out 40% in cashprepare for and 60% in stock) over and above the base fee paid to directors. In May 2018, the Board eliminated the multiplier formula and decreased the Board Chair's additional annual compensation to a flat fee of $160,000, to be paid out on the same 40%/60% basis. In addition, the Board eliminated the payment of any additional fees to the Chair for service on a Board committee, and clarified that the Chairattend meetings of the Board and its committees and to actively engage with directors and management outside of the formal meeting cycle
»
Emphasizes long-term alignment of director interests with shareholders
»
Designed to attract and retain highly qualified and diverse directors
| | What We Do Emphasis on Equity Compensation »
Includes significant equity-based awards »
Aligns with the Company’s pay-for-performance philosophy Robust Equity Ownership Requirements »
Each director has five years from the date of his or her initial election to own shares of common stock with a value of at least five times his or her annual base cash compensation. As of March 9, 2021, each director who has served on the Board for at least five years met these stock ownership guidelines, and each director who has served for fewer than five years either has already met or is on track to meet these guidelines. | | | | |
| | What We Don’t Do »
We do not permit directors to hedge or pledge CNO stock. »
We do not pay additional compensation to CNO’s CEO for service as a director. »
We do not pay meeting fees to directors. »
We do not offer a retirement program for our non-employee directors. | |
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CNO Financial Group, Inc. 2021 Proxy Statement
The 2020 director compensation is anex officio member of each committee. Thus, over and abovesummarized in the base compensation paidtable below:
| | | 2020 Director Compensation | | |
| | | Components | | | | Annual Compensation(1) | | | | Form of Payment | | |
| | | Non-Chair Base Fees | | | | $240,000 | | | | $96,000 cash; annual equity award valued at approximately $144,000 | | |
| | | Committee Chair Fees | | | | $20,000–$45,000(2) | | | | Cash | | |
| | | Committee Participation Fees | | | | $5,000–$15,000(3) | | | | Cash | | |
| | | Board Chair Fees(4) | | | | $400,000 | | | | $160,000 cash;
annual equity award valued at approximately $240,000 | | |
(1)
In addition to non-employeethe amounts set forth in this table, directors the Board Chair currently is entitled to an additional cash retainer of $64,000 and an additional annual equity award of $96,000. Directors are reimbursed for out-of-pocket expenses including first-class airfare, incurred in connection with their responsibilities as Board members.
(2)
(3)
Audit Committee, $15,000; Compensation Committee, $10,000; Investment Committee, $5,000; and Governance Committee, $5,000. Members of Contentsthe Executive Committee do not receive any additional compensation for service on that committee.
(4)
The Board Chair is an ex officio member of each Board committee (other than the Executive Committee) and receives no additional committee-related compensation.
CNO Financial Group, Inc. 2021 Proxy Statement27
The compensation earned or paid in 20182020 to our non-employee directors is summarized in the table below:
DIRECTOR COMPENSATION IN 2018
| | | Director Compensation in 2020 | | |
| | | Name | | | | Fees Earned or
Paid in Cash(1) | | | | Stock Awards(2) | | | | Total | | |
| | | Ellyn L. Brown(3) | | | | | $ | 126,000 | | | | | | $ | 144,001 | | | | | | $ | 270,001 | | | |
| | | Stephen N. David(4) | | | | | | 116,000 | | | | | | | 144,001 | | | | | | | 260,001 | | | |
| | | David B. Foss(5) | | | | | | 111,000 | | | | | | | 144,001 | | | | | | | 255,001 | | | |
| | | Robert C. Greving(6) | | | | | | 146,000 | | | | | | | 144,001 | | | | | | | 290,001 | | | |
| | | Mary R. (Nina) Henderson(7) | | | | | | 141,000 | | | | | | | 144,001 | | | | | | | 285,001 | | | |
| | | Charles J. Jacklin(8) | | | | | | 131,000 | | | | | | | 144,001 | | | | | | | 275,001 | | | |
| | | Daniel R. Maurer(9) | | | | | | 160,000 | | | | | | | 240,001 | | | | | | | 400,001 | | | |
| | | Neal C. Schneider(10) | | | | | | 12,110 | | | | | — | | | | | | 12,110 | | | |
| | | Steven E. Shebik(11) | | | | | | 44,950 | | | | | | | 69,992 | | | | | | | 114,942 | | | |
| | | Frederick J. Sievert(12) | | | | | | 111,000 | | | | | | | 144,001 | | | | | | | 255,001 | | | |
| | | | | | | | | | |
Name | | Fees
Earned or
Paid in
Cash(1) | | Stock
Awards(2) | | Total | |
|---|
Ellyn L. Brown(3) | | $ | 130,165 | | $ | 144,004 | | $ | 274,169 | |
Stephen N. David(4) | | | 109,643 | | | 144,004 | | | 253,647 | |
Robert C. Greving(5) | | | 144,643 | | | 144,004 | | | 288,647 | |
Mary R. (Nina) Henderson(6) | | | 114,643 | | | 144,004 | | | 258,647 | |
Charles J. Jacklin(7) | | | 130,165 | | | 144,004 | | | 274,169 | |
Daniel R. Maurer(8) | | | 153,819 | | | 240,001 | | | 393,820 | |
Neal C. Schneider(9) | | | 124,049 | | | 144,004 | | | 268,053 | |
Frederick J. Sievert(10) | | | 139,643 | | | 144,004 | | | 283,647 | |
(1)(1)- This column represents the amount of cash compensation earned or paid in
20182020 for Board service, for service as non-executivethe Chair of the Board, Chair, for service on the Audit and Enterprise Risk Committee, the Human Resources and Compensation Committee, the Governance Committee, the Investment Committee, and for chairingservice as a committee chair, as applicable.
(2)
(2)The amounts in this column are computed in accordance with Financial Accounting Standards Board Accounting Standards Codification Topic 718 ("(“ASC 718"718”) and represent the grant date fair values for shares of common stock awarded. On May 10, 2018,11, 2020, Mr. Maurer received an award of 11,893 restricted share units17,417 RSUs and each of the other directors listedother than Mr. Shebik and Mr. Schneider, received an award of 7,136 restricted share units.10,450 RSUs. On November 11, 2020, Mr. Shebik received an award of 3,431 RSUs. These restricted share unitsRSUs vested immediately upon grant. Each restricted share unitRSU entitles the director to receive one share of common stock. As described on page 585 of this Proxy Statement, several directors have elected to defer receipt of the common stock pursuant to the Company'sCompany’s Board of Directors Deferred Compensation Plan.
(3)
(3)In addition to the base compensation paid to all non-employee directors, Ms. Brown received cash fees of (i) $20,000 for chairing the Governance Committee and (ii) $10,000 for serving as a member of the Human Resources and Compensation Committee.
(4)
(4)In addition to the base compensation paid to all non-employee directors, Mr. David received cash fees of (i) $10,000$15,000 for serving as a member of the Human Resources and CompensationAudit Committee and (ii) $5,000 (prorated from May 2018) for serving as a member of the Governance Committee.
(5)
In addition to the base compensation paid to all non-employee directors, Mr. Foss received cash fees of (i) $10,000 for serving as a member of the Compensation Committee and (ii) $5,000 for serving as a member of the Governance Committee.
(6)
(5)In addition to the base compensation paid to all non-employee directors, Mr. Greving received cash fees of (i) $45,000 for chairing the Audit and Enterprise Risk Committee and (ii) $5,000 (prorated from May 2018) for serving as a member of the Investment Committee. He also served as a member of the Executive Committee, for which he received no additional compensation.
(7)
(6)In addition to the base compensation paid to all non-employee directors, Ms. Henderson received cash fees of (i) $15,000$40,000 for serving as a member ofchairing the Audit and Enterprise RiskCompensation Committee and (ii) $5,000 (prorated from May 2018) for serving as a member of the Investment Committee.
(8)
(7)In addition to the base compensation paid to all non-employee directors, Mr. Jacklin received cash fees of (i) $20,000 for chairing the Investment Committee and (ii) $15,000 for serving as a member of the Audit and Enterprise Risk Committee.
(9)
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was electedreceived no additional compensation beyond the Board Chair on May 9, 2018, succeedingfees set forth above. Mr. Schneider who servedMaurer serves as Chair in 2018 until that date. In addition to the base compensation paid to all non-employee directors, he received $160,000 for serving as Chair, which was paid out 40% in cash (prorated from May 9, 2018) and 60% in stock. Prior to that date, Mr. Maurer was a member of the GovernanceExecutive Committee, for which he receivedreceives no additional compensation, and the Human Resources and Compensation Committee, for which he received an additional cash fee of $10,000 (prorated through May 9, 2018).compensation. As Board Chair, Mr. Maurer has chairedis also an ex officio member of each Board committee (other than the Executive Committee since May 9, 2018, for which he receivedCommittee) and receives no additional committee-related compensation.
(10)
(9)Mr. Schneider served asretired from the Board Chair in 2018 untilon May 9, 2018 when Mr. Maurer was elected Board Chair.8, 2020. In addition to the base compensation paid to all non-employee directors, Mr. Schneider received a fee of $220,000 through May 9, 2018 for serving as Chair. The cash portion (40%) of that additional fee was prorated through May 9, 2018. The stock portion of that additional fee was paid in 2017, and Mr. Schneider did not receive a stock award in 2018 for his service as Chair. Mr. Schneider also received cash fees of (i) $15,000 (prorated through May 8, 2020) for serving as a member of the Audit and Enterprise Risk Committee and (ii) $5,000 (prorated fromthrough May 2018)8, 2020) for serving as a member of the Governance Committee. Mr. Schneider chaireddid not receive an equity award grant in 2020 due to his retirement.
(11)
In addition to the Executivebase compensation paid to all non-employee directors, prorated from November 2020, Mr. Shebik received cash fees of (i) $15,000 (prorated from November 2020) for serving as a member of the Audit Committee in 2018 until May 9, 2018,and (ii) $5,000 (prorated from November 2020) for which heserving as a member of the Investment Committee. The annual equity grant received no additional compensation.by Mr. Shebik reflects a prorated annual grant as paid to all non-employee directors.
(12)
(10)In addition to the base compensation paid to all non-employee directors, Mr. Sievert received cash fees of (i) $40,000$10,000 for chairingserving as a member of the Human Resources and Compensation Committee and (ii) $5,000 (prorated from May 2018) for serving as a member of the Governance Committee.
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CNO Financial Group, Inc. 2021 Proxy Statement
Board Leadership Structure
Powers and Duties of Our Independent Board Chair
CNO has a non-executive,an independent director who serves as Chair of the Board. Mr. Maurer was electedhas served as Board Chair onsince May 9, 2018, succeeding Mr. Schneider who served as Chair in 2018 until that date. 2018.
The Board believes that itsBoard’s leadership structure, with an independent Chair in addition to a non-executive Chair position separate from the chief executive officer,CEO, provides appropriate independentnon-executive oversight of management and the Company. The non-executive Chair of the Board (1) presidesChair:
»
Presides at all meetings of the Board and shareholders; (2) presides
»
Presides during regularly held executive sessions with only the independent directors; (3) encourages
»
Encourages and facilitates active participation of all directors; (4)directors in meetings and fulfillment of other Board responsibilities;
»
In consultation with the CEO and other members of the Board, develops the calendar of, and agendas for, Board meetings inmeetings;
»
In consultation with the chief executive officerCEO, determines the topics for Board discussion and other members of the Board; (5) determines, in consultation with the chief executive officer, the informationmaterials that shouldwill be provided to the Board in advance of each meeting;
»
Consults with the meeting; (6) unless otherwise determined byGovernance Committee to develop and oversee the Board, meets with each director to evaluateperformance of evaluations of the Board and Board, committees and reports this evaluation to the Governance and Nominating Committee; (7) participatestheir respective Chairs;
»
Engages with shareholders as requested in meetings with shareholders; (8) receives,appropriate, including leading scheduled shareholder outreach calls;
»
Receives, through the Corporate Secretary, communications from shareholders wishingwho seek to communicate with the Board; and (9) performs any
»
Performs other appropriate duties as requested by the other membersBoard.
CNO Financial Group, Inc. 2021 Proxy Statement29
Board Meetings and Attendance
Commitment of
the Board. As discussed below, each member of our Board is independent other than Mr. Bhojwani, our chief executive officer. As CEO, Mr. Bhojwani, subject to the direction of the Board, is in charge of the business and affairs of CNO and is our chief policy making officer. Our Directors
Our Board and its committees play an active rolemet frequently in overseeing the Company's business. The directors bring a broad range of leadership, business and professional experience to the Board and actively participate in Board discussions. 2020.
| | | | | | | 2020 Meetings | | |
| | | Board of Directors | | | | | | 10 | | | |
| | | Audit and Enterprise Risk Committee | | | | | | 12 | | | |
| | | Governance and Nominating Committee | | | | | | 9 | | | |
| | | Human Resources and Compensation Committee | | | | | | 9 | | | |
| | | Investment Committee | | | | | | 4 | | | |
| | | Executive Committee | | | | | | 2 | | | |
| | »
During 2020, the Board met on 10 occasions and the committees met 36 times in the aggregate. Since March 2020, due to the COVID-19 pandemic and related health and safety concerns, all Board and committee meetings have been conducted virtually. »
In between formal Board and committee meetings, the Board and management communicated frequently, including with respect to the changing circumstances of the pandemic and potential impacts to the Company’s business, associates, customers and communities. »
Each director attended at least 95% of the aggregate meetings of the Board and respective committees on which he or she served. »
The independent directors routinely meet in executive session without the CEO or any other member of management. The Board Chair presides over executive sessions of the Board. Committee Chairs preside over the executive sessions of their respective committees. »
All directors are expected to attend the annual meetings of shareholders. All of our directors attended the Annual Meeting of shareholders held in 2020. | | | | |
Director Independence
The Board believes that having a non-executive Chair and a Board comprised almost entirely of independent, non-employee directors best serves the interests of our shareholders and the Company. Board Meetings and Attendance
During 2018, the Board met on 12 occasions. Each director attended at least 75% of the aggregate meetings of the Board and Board committees on which he or she served. The independent directors regularly meet in executive session without the chief executive officer or any other member of management. The non-executive Chair presides at such executive sessions.
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In addition, CNO has a policy that all directors attend the annual meeting of shareholders. All of our directors except Ms. Henderson attended the annual meeting of shareholders held in 2018. Ms. Henderson was unable to attend the annual meeting due to a conflicting business commitment established prior to the setting of our annual meeting date.
Director Independence
The Board annually determines the independence of directors on an annual basis, based on a reviewquestionnaire completed by the directors.each director that is analyzed against Company standards, applicable SEC rules and regulations, and NYSE listing standards. Although the Board has not adopted categorical standards of materiality for independence purposes, no director is considered independent unless the Board has determined that he or she has no material relationship with CNO, either directly or as an officer, shareholder or partner of an organization that has a material relationship with CNO. Material relationships can include commercial, industrial, banking, consulting, legal, accounting, charitable and familial relationships, among others. The Board considers the Company's Corporate Governance Guidelines, the applicable rules and regulations of the SEC and the listing standards of the New York Stock Exchange in making its determination regarding independence and the materiality of any relationships with CNO.
The Board has determined that, other than our CEO, Mr. Bhojwani, all current directors other than Mr. Bhojwaniand director nominees are independent. The Board believes that having an independent Chair and a Board comprised of independent directors, in addition to the CEO, best serves the interests of the Company and its shareholders.
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CNO Financial Group, Inc. 2021 Proxy Statement
Board’s Role in Risk Oversight
Enterprise risk management is integral to our business. The Board is responsible for overseeing the Company'sCompany’s risk profile and management'smanagement’s processes for managing risk. The Board has appropriately delegated responsibility for various aspects of risk oversight of certain risks, including those relatingto its committees, as detailed below. The committees regularly report to the Company's capital structurefull Board on certain risk areas, and capital management, is done by the full Board. The Board has delegatedmaintains primary responsibility for many aspects of the Board's risk oversight to the Audit and Enterprise Risk Committee. The Audit and Enterprise Risk Committee receives reports at its meetings and oversees management's processes for managing enterprise risk, including the risk management process associated with financial controls, insurance reserves, legal, regulatory and compliance risks, and the overall risk management structure, process and function. Other Board committees oversee risk management related to specific functions. The Investment Committee oversees investment and asset-liability management risk. The Human Resources and Compensation Committee oversees risks associated with our compensation programs so that incentives are not provided for inappropriate risk taking, as further discussed below. Our leadership strongly supports an active and engaged risk management process. CNO has established an enterprise risk management committee comprised of senior management from business units and functions throughout the Company. This enterprise risk management committee meets at least once each quarter and is chaired by the chief financial officer. CNO also has an investment and asset-liability management committee comprised of senior management from various functions and the presidents of each business segment. This committee meets at least once each quarter and is chaired by the chief investment officer. The Company has a senior vice president who is responsible for the coordination of enterprise risk management activities. Reports on different aspects of the Company's enterprise risk management are provided to the Board, to the Audit and Enterprise Risk Committee, to the Investment Committee and to other Board committees, as appropriate, on a regular basis.
As part of its risk oversight responsibilities,oversight.
During 2020, the Board and its committees review policiesregularly considered additional risks related to the pandemic. The Board’s oversight included active consideration of these risks and processesthe potential impacts to the Company’s business, associates, customers and communities.
Our Board believes that senioropen communication with management uses to manage the Company'sis an important element of effective risk exposure. In doing so, themanagement and oversight. The Board and its committees regularly meet with senior management to review material risks, including with respect to the matters identified above. For additional information on the risk management activities of management, see the discussion on ethical and responsible business practices on pages 36 and 37.
To learn more about the risks facing the Company, please review the
Company's risk appetite statement, overall risk function and senior management's establishment of appropriate systems and processesfactors included in Item 1A. Risk Factors in the Company’s Annual Report on Form 10-K for
managing insurance risk, interest rate and asset-liability management risk, credit and counterparty risk, liquidity risk, operational risk and reputational risk.the year ended December 31, 2020, as updated by subsequent filings by the Company with the SEC.
CNO Financial Group, Inc. 2021 Proxy Statement31
Relationship of Compensation Policies and Practices to
Risk Management
The Human Resources and Compensation Committee has reviewed our compensation programs and believes that they carefully and appropriately balance risks and rewards and do not incentivize inappropriate risk taking. Our incentive plans include multiple performance measures, most of which are financial in nature, and are
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designed to hold employees accountable for sustained improvement in the core operating performance of the Company and to minimize the potential for any single indicator of performance to have an undue influence. We structure our pay to include both fixed and variable compensation and our variable compensation is capped at no more than two times the target opportunities, thus mitigating the risk of excessive rewards for temporary, unsustainable results. In addition, our officers' equity-based compensation aligns our officers' interests with those of shareholders. The multiple year vesting of such awards serves as a retention tool and mitigates the risk that executives can reap excessive rewards from temporary stock price increases. In addition, our executives are subject to stock ownership guidelines, requiring minimum stock holdings for the duration of the executives' employment, which encourage our executives to focus on sustaining long-term performance rather than maximizing performance in any single year. Further, our Annual Cash Incentive/Pay-for-Performance and Long-Term Incentive Plans have clawback provisions that include recapture rights of any incentive amount paid or vested in the event that the Committee determines that the achievement of performance goals was based on incorrect data, errors, omissions or fraud. See the "Compensation Discussion and Analysis" for more information.
Other Governance Matters
Approval of Related Party Transactions
Under the Company'sCompany’s written policy, transactions and agreements with a Related Person (defined to include directors, director nominees and executive officers or members of their immediate families, or shareholders owning five percent or more of the Company'sCompany’s outstanding stock) that meet the minimum threshold for disclosure in the proxy statementProxy Statement under applicable SEC rules (generally(which generally apply to transactions involving amounts of $120,000 or more in which a Related Person has a direct or indirect material interest) are required to be approved by the Board or by the Governance and Nominating Committee (or other designated committee comprised exclusively of independent directors). In considering whether to approve the transaction or agreement, the Board or committee will consider all relevant factors including the business reasonreasons for the transaction, available alternatives on comparable terms, actual or apparent conflicts of interest and the overall fairness of the transaction or agreement to the Company.
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CNO Financial Group, Inc. 2021 Proxy Statement
A Related Person is required to report, in a timely manner, either to the chairChair of the Board or the chairChair of the Governance and Nominating Committee, any proposed transaction or agreement that could be considered a Related Person transaction or agreement. The two chairs willChairs then jointly determine if the proposed transaction or agreement should be considered by the Board or a Board committee, and whether any director should be recused from participating in that consideration because of conflict. The Board or Board committee will consider whether to approve the proposed transaction or agreement in a timely manner, taking into account the facts and circumstances enumerated above, in a timely manner.above. If such proposed transaction or agreement is not approved in advance, the Board or Board committee will take action in the manner described above as soon as practicable after it becomes aware of the transaction or agreement. There were no such transactions or agreements involving the Company and a Related Person in 20182020 or to date in 2019.2021.
Various Company policies and procedures, including the Code of Conduct and the annual questionnaires that are completed by all Company directors, officers and employees, require timely disclosure of transactions or relationships that may constitute conflicts of interest or otherwise require disclosure under applicable SEC rules. Any Related Person transactions or agreements that are identified under these additional policies and procedures are towill be considered under the process described above.
We have adopted a Code of Conduct that applies to all directors, officers directors and employees regarding their obligations in the conduct of the Company'sCompany’s affairs. During 2018, the Company performed a comprehensive review of its Code of Business Conduct and Ethics, and adopted a revised Code of Conduct in February 2019. A copy of our current Code of Conduct is available under Corporate Governance in the Investor RelationsInvestors section of our website atwww.CNOinc.com. www.CNOinc.com. Within the time period specified, and to the extent required, by the SEC and the New York Stock Exchange,NYSE, we will post on our website any amendment to our Code of Conduct and any
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waiver applicable to our principal executive officer, principal financial officer or principal accounting officer (thereexecutives. No such waivers have been no such waivers).
requested or granted in 2020 or to date in 2021.
Corporate Governance Guidelines
CNO is committed to best practices in corporate governance. The Board, upon the recommendation of the Governance and Nominating Committee, has adopted a set of Corporate Governance Guidelines, covering a number of significant matters, includingwhich include director responsibilities, independence, selection and review. These guidelines are periodically reviewed and updated by the Governance and Nominating Committee and the Board and updated periodically to reflect the Board'sBoard’s view of current best practices. A copy of the CNO Corporate Governance Guidelines is available under Corporate Governance in the Investor RelationsInvestors section of our website at www.CNOinc.com.www.CNOinc.com. Director Stock Ownership Guidelines
The Board has adopted guidelines regarding ownership of CNO common stock by the directors. The amounts set forth in these guidelines provide for each director to own shares of common stock with a value of at least five times his or her annual base cash compensation. Directors are given five years from the date of their initial election to reach that level of ownership. Based on the current base cash compensation for directors of $96,000 per year, the ownership guidelines call for each director to own shares with a value of at least $480,000. As of March 12, 2019, all directors who have served on the Board for at least five years met these stock ownership guidelines, and each of the other directors met, or was on track to meet, these guidelines.
Talent Management and Succession Planning
The Board is actively involved with the Company's talent management process. At least annually, the Board in coordination with the Human Resources and Compensation Committee, reviews the Company's leadership team, which includes a detailed discussion of the succession plans for the chief executive officer and other members of executive management. In addition, the Board regularly discusses the Company's plans for talent development, with a focus on high potential individuals who are in the position to make the most significant contributions to the Company and to serve as its future leaders.
Communications with Directors
Shareholders and other interested parties wishing to communicate directly with the Board or any one or more individual members (including the Chair of the Board or the non-management directors as a group) are welcome to do so by writing to the CNO Corporate Secretary, 11825 North Pennsylvania Street, Carmel, Indiana 46032. The Corporate Secretary will forward any communications to the director or directors specified by the shareholder or other interested party.
Compensation Committee Interlocks and Insider Participation
Ms. Henderson, Ms. Brown, Mr. David,Foss and Mr. Sievert and Mr. Maurer served on the Human Resources and Compensation Committee throughout 2018. Mr. Maurer served on the committee until May 2018.2020. None of the members of the Human Resources and Compensation Committee during 20182020 is or has been onean officer or employee of our officers or employees.the Company. None of our executive officers serves, or served during 2018,2020, as a member of the board of directors or compensation committee of any entity that has one or more executive officers serving on our Board or the Human Resources and Compensation Committee.
Copies of Corporate Documents
In addition to being available under Corporate Governance in the Investor RelationsInvestors section of our website atwww.CNOinc.com,, we will provide to any person, without charge, a printed copy of our committee charters, Code of Conduct and Corporate Governance Guidelines upon request being made to CNO Investor
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Relations, 11825 N. Pennsylvania Street, Carmel, Indiana 46032; or by telephone: (317) 817-2893 or email:ir@CNOinc.com ir@CNOinc.com.
CNO Financial Group, Inc. 2021 Proxy Statement33
The Human Resource and Compensation Committee of our Board is actively engaged in the oversight of our human resource initiatives and receives regular updates from management on progress and developments.
As of December 31, 2020, we employed approximately 3,400 full-time associates, all located in the United States. CNO associates are among our most important resources and are critical to achieving our mission to secure the future of middle-income America. We rely on our associates to develop products, advise clients, service customers and support the efficient running of the organization. Therefore, we focus significant attention on attracting and retaining talented, experienced individuals to serve our customers and manage and support our operations.
Our commitment to our associates is demonstrated through several areas of focus, including those discussed below. Our efforts have been recognized through numerous awards, including being certified as a 2020 Great Place to Work®, a reflection of the support that we receive from our associates, customers and communities in which we live, work and serve. See page 39 for more detail.
Associate Development and Engagement
CNO provides a supportive environment designed to encourage all associates to pursue their professional goals and career objectives through coaching, continuing education, professional education and training. We also regularly collect associate feedback through surveys to better learn and understand associates’ needs, priorities and issues of concern.
Compensation
At CNO, we strive for a culture of strong performance. We believe in developing associates through a challenging work environment coupled with extensive support and training. Our compensation philosophy is focused on pay-for-performance. We reward overall and individual performance that drives long-term success for the Company. Further information on our compensation program may be found in the “Compensation Discussion and Analysis” begining on page 41.
Health and Well-Being
Supporting our associates’ physical, mental and financial well-being is at the center of how we engage our workforce. Our benefits package for associates includes medical, dental and vision insurance coverage as well as an employee well-being program. Associate programs encourage healthy lifestyle choices and completing preventive exams and screenings. Our commitment to our associates’ well-being has adapted to the pandemic environment of the past year.
CNO provides its associates with well-being services that include preventive care services, mental well-being services, health coaching, tobacco cessation programs and biometric screening services. In addition, the Company offers our associates wellness time off, wellness financial incentives and physical activity programs.
For business-critical associates whose jobs did not allow them to work remotely in 2020, we took significant steps to safeguard their health and safety at the office. We also further strengthened our existing well-being programs, including additional personal time off, reimbursement of 100% of all COVID-19 related treatment and preventive costs, free telemedicine services for associates and family members covered by CNO medical plans since April 1, 2020, and augmented mental well-being programs and caregiver resources.
CNO’s commitment to health and well-being earned CNO the recognition as the second highest-ranked company in the top Healthiest 100 Workplaces in America by Springbuk®. 34
CNO Financial Group, Inc. 2021 Proxy Statement
Diversity, Equity & Inclusion
Diversity, Equity & Inclusion (“DE&I”) is one of CNO’s highest corporate values. We are committed to creating an inclusive culture that encourages, supports, celebrates, and values diversity of our associates and customers. We believe an environment that fosters collaboration, inclusion and trust supports our mission, builds a strong sense of community, and leads to greater innovation and better solutions. This environment and inclusive culture creates benefits that are shared by our associates, customers and, ultimately, our shareholders.
Our commitment to diversity, equity and inclusion is supported at the highest levels of the Company. In 2018, our CEO signed the CEO Action for Diversity & Inclusion™ pledge and, in 2020, joined the newly formed CEO Action for Racial Equity Governing Committee on behalf of CNO and our associates. CNO has a Diversity Council as well as four associate-led business resource groups (“BRGs”): (i) Women’s BRG; (ii) SOUL African American & Black BRG; (iii) PRISM LGBTQ+ BRG; and (iv) Veterans & Families BRG. Each BRG focuses on mentoring, education and community outreach.
CNO Financial Group, Inc. 2021 Proxy Statement35
Corporate Social Responsibility
Social responsibility is at the core of CNO'sour culture. Operating with integrity, while putting the needs of our customers first, are practices that are deeply embedded in our corporate DNA. Our products help millions of middle-income Americans gain access to financial protection to help them build a more secure futures for themselves and their families. We realize that ourfuture. Our long-term success is intimately connectedtied to the well-being of our customers, associates, neighborsagents, communities and the way that we conduct our business. ESG principles have become—and will continue to the mannerbe—central to our overall business strategy.
We published our first Corporate Social Responsibility Report (“CSR Report”) in 2019, in which we conductproudly highlighted the work of our business. In recognitionassociates, agents, leadership team and Board to influence positive change. Our next CSR Report will be available this spring on our website, www.CNOinc.com. Recognizing the strategic importance of the increased importance that investors now place on environmental, social and governance ("ESG")ESG matters, we have formedrecently created a management committee comprised of senior managementCNO Council on Sustainability which, in coordination with our Board and Governance Committee and other leaders, will partner with key groups across the Company to formulate andcontinue to drive the executionadvancement of the Company's social responsibilityour ESG strategy. Our Board is highly involved in developing our ESG strategies and sustainability strategy. The Board will review that committee's efforts and accomplishments on a regular basis.
overseeing our progress.
Our Six Focus Areas
Our ESG approach is focused on foursix key areas:areas that are most relevant to our business:
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Promoting ethical and responsible business practices | | | »
Investing prudently | |
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Serving our customers | | | »
Philanthropy and community relations | |
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Developing and supporting our associates | | | »
Environmental responsibility | |
Promoting Ethical and Responsible Business Practices
At CNO, our business is built on trust and promises.
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Our customers trust us with their healthcare and retirement planning, and we promise to honor our policy commitments and serve their needs.
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Our shareholders trust us to return fair value for their investment, and we promise to be responsible stewards of our Company resources.
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Our agents and associates trust one another, and we promise to be accountable and respectful to each other and to our Company.
We recognize that the decisions we make as a company, and the actions of our associates and agents, directly impact our ability to keep our promises and maintain the trust that we hold as essential.
Our Code of Conduct outlines our expectations surrounding key issues and business practices, including anti-money laundering, political activities and contributions, conflicts of interest, fraud prevention, data security, confidentiality, gift giving and fair competition. Our associates are required to be familiar with, and to act in accordance with, our Code of Conduct. A copy of our current Code of Conduct is available under Corporate Governance in the Investors section of our website at www.CNOinc.com.
Our directors bring a diverse range of leadership, business, professional and personal experiences to the Board. We observe governance best practices relating to our Board structure, shareholder rights and governance philosophy. More information can be found under “Board and Governance Matters” and “Compensation Discussion and Analysis—Key Practices in Corporate Governance and Executive Compensation” beginning on pages 22 and 45, respectively.
Enterprise risk management is integral to our business. The Board is responsible for overseeing the Company’s risk profile and management’s processes for managing risk. More information as to how the Board oversees risk management can be found on page 31.
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CNO Financial Group, Inc. 2021 Proxy Statement
At CNO, we take very seriously the privacy and security of all customer and employee personal information in our custody. Our cybersecurity program uses generally accepted principles and practices for securing information systems and information. We use the National Institute of Standards and Technology’s (NIST) Cybersecurity Framework to better manage and reduce cybersecurity risk. Our Chief Information Security Officer (CISO), who reports directly to our Chief Information Officer, is responsible for the overall strategy and function of the cybersecurity program.
CNO’s cybersecurity governance includes the Cybersecurity Steering Committee, which helps set strategic direction for security initiatives and provides oversight and guidance for overall information security risk management. The CISO provides regular reports regarding the status of CNO’s cybersecurity program and potential risks to the Audit Committee. Numerous processes and procedures were enhanced in 2020 to reflect the expanded remote work environment. More information on our data security and privacy programs can be found in our CSR Report.
Serving Our Customers
Enhancing the customer experience is one of our core strategic initiatives. Every customer purchase of a CNO product represents a promise between our Company and the policyholder. We take seriously this responsibility by prioritizing the care and attention needed to achieve a positive customer experience.
Examples of support for our customers during the COVID-19 pandemic include:
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We delivered many new products and product enhancements and offered customers contactless enrollment to provide peace of mind during the pandemic.
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We offered customers web chat, digital claim filing, and benefit from improved claims efficiency through digital processing.
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We continued to make available online the studies, articles and awareness campaigns created by our consumer education program, the Center for a Secure Retirement, in order to provide insight and practical advice to help middle-income Americans achieve financial security in retirement.
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We provided policyholders an extended period of time in 2020 to pay premiums without the risk of losing their benefits.
Developing and Supporting Our Associates
We believe that corporate social responsibility starts with our responsibility to our associates. We are proud to offer a workplace that encourages diversity, fosters collaboration, values integrity and promotes professional growth. For additional information on our commitment to our associates, see pages 34-35.
Investing Prudently
To fulfill our promises and financial commitments to our policyholders, which in some cases may arise many years in the future, we must responsibly invest the premiums that we collect in high-quality assets that generate appropriate risk-adjusted returns and, to the extent practical and expected by our stakeholders, reflect our core values.
At CNO, we recognize that integration of ESG principles into our investment process can enhance our ability to identify, evaluate, monitor and react to tail risks in a manner that promotes our investment objectives, particularly over the long term. Our investment approach centers on developing high-quality portfolios diversified across asset classes, and which closely adhere to risk tolerances and practices, including discipline around quality, diversification and liquidity parameters.
In 2020, CNO became a signatory of the Principles for Responsible Investment (PRI), an international network of investors working together to implement its six aspirational principles. CNO is committed to the adoption and implementation of the PRI's six principles.
CNO Financial Group, Inc. 2021 Proxy Statement37
Philanthropy and Community Development and Philanthropy.Relations
CNO supports our communities, our associates and our customers through nonprofit organizations that addressfocus on the health and financial wellness of middle-income Americans. From our executive leadership group to our individual associates, CNO is committed to making service in our communities a vital element of our corporate culture. In 2018, Some highlights of 2020 include:
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$2 million—the approximate value of all of ourtotal, local community impact from the philanthropic efforts which were aimed at the neighborhoods in which we live and work, totaled more than $2.4 million. Our Company,of CNO, our associates and our insurance producers donated more than $2.2 million toagents.
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Approximately 80% of our local community impact comes from financial and in-kind donations from the Company. Approximately $175,000 of our local community impact was raised through grass root efforts and community fundraising.
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CNO supports several partner organizations, which includeincluding the American Cancer Society, the Alzheimer'sAlzheimer’s Association, the American Heart Association, and various scholarship programs, and we raised an additional $200,000 throughprograms.
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5,500 hours—the approximate amount of time our associates' participation in community fundraising. Our associates also contributed more than 11,200 hours to volunteer service in 2018,their local communities, including donating time donated to our virtual CNO Afternoon of Service projects in Indianapolis, Chicago and Philadelphia.
Environmental Responsibility
Employee Well-being. Our associates' well-beingCNO is a key priority forcommitted to minimizing the Company. We offerimpact of our employees a workplace that encourages diversity, fosters collaboration, values integrityoperations on the environment while integrating environmental and encourages professional growth. Corporate accomplishments in 2018 include new diversity and inclusion initiatives, an expanded incentive compensation program, one-time stock grants provided to all employees and the introduction of an employee stock purchase plan. In 2018 we were named to theForbes Magazine World's Best Employers list and were recognized by the National Business Group on Health as having one of the top workforce well-being programs in the nation. CNO also provides its employees with wellness services including onsite clinics at each of its three primary locations. Preventive care visits, various medications and routine lab services generally are offered at no charge, as are health coaching, tobacco cessation programs and biometric screening services. In addition, the Company offers its associates wellness time off, wellness financial incentives and physical activity programs.
Ethics and Governance. CNO maintains the highest standards for ethics, fairness and personal responsibility, and promotes a culture of honesty, integrity and transparency. These standards apply to the Board of Directors and to each individual employee. We manage our business with the goal of delivering protection and service to our customers and long-term value tosustainability processes into all of our stakeholders.
Environmental Responsibilitybusiness practices and Enterprise Risk Management. Our commitment to operating responsibly includes aligningthroughout our ESGvalue chain. Through our recently formed CNO Council on Sustainability, discussed above, and our environmental working group, both comprised of senior leaders, associates and facilities team members, CNO is advancing efforts with our broader business priorities. These initiatives include developing best-in-class cyber security protocols as well as exploring additional opportunities to reduce our environmentalcarbon footprint, encourage sustainability in the workplace, and improve efficiencies.drive enterprise-wide green initiatives.
Examples of our sustainability efforts within our operations include:
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Over the past four years, we have reduced our paper usage by 53%.
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In 2020, we conducted our first greenhouse gas emissions inventory, which is helping to inform our enterprise-wide emissions reduction strategy.
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CNO Financial Group, Inc. 2021 Proxy Statement
Awards and Recognition
CNO has been recognized through numerous awards for diversity, associate engagement and well-being. These awards would not be possible without the support of our associates, customers and communities in which we live, work and serve. Highlights of CNO’s 2020 recognition includes:
Certification as Great Place to Work® in our first year participating in the survey
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Being named a 2020 Forbes Magazine Best Employers for Diversity
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Ranking second on the list of Healthiest 100 Workplaces in America®
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Being honored with the 2020 Best Employers Excellence in Health & Well-being Platinum award for the seventh year
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Recognition by Training Magazine as a Top 125 company
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Qualification for the American Heart Association Workplace Health Achievement Index Gold recognition for the third year
CNO Financial Group, Inc. 2021 Proxy Statement39
| | Proposal 2 | |
| | Approval, by non-binding advisory vote, of the executive compensation of the Company’s named executive officers | |
| | | | | The Board of Directors unanimously recommends you vote FOR this proposal. | |
General
As required by Section 14A of the Securities Exchange Act of 1934 and the related rules of the SEC, we are asking shareholders to approve, in a non-binding advisory vote, the compensation paid to our Named Executive Officers as discussed under “Executive Compensation,” beginning on page 41, through the following resolution:
EXECUTIVE COMPENSATION“RESOLVED, that the compensation paid to the Company’s Named Executive Officers, as disclosed in this Proxy Statement pursuant to the rules of the SEC, including the Compensation Discussion and Analysis, compensation tables and related narrative discussion, is hereby approved.”
While the results of the vote are non-binding and advisory in nature, the Board and the Compensation Committee will carefully consider the results of this vote. Currently, a non-binding advisory vote on executive compensation occurs annually, and we anticipate that the next vote will be at the next annual meeting of shareholders.
Our compensation programs are designed to attract, retain and motivate the executives who lead our Company. The Compensation Committee has established programs and practices that pay for performance and are intended to align management’s interests with those of the Company’s shareholders. Key features of our compensation programs are described in the “Compensation Discussion and Analysis” section that follows.
Required Vote
The affirmative vote of the majority of shares of common stock present in person or represented by proxy and entitled to vote on the subject matter is required to approve, in a non-binding advisory vote, the compensation paid to our Named Executive Officers. Abstentions will have the effect of a vote “against” this proposal.
CNO Financial Group, Inc. 2021 Proxy Statement
Compensation Discussion and Analysis
Executive Summary
COMPENSATION DISCUSSION AND ANALYSIS
This Compensation Discussion and Analysis ("(“CD&A"&A”) describes the Company'sCompany’s executive compensation program and explains how the Human Resources and Compensation Committee (the "Board Compensation Committee"“Compensation Committee” or the “Committee”) made compensation decisions for the following Named Executive Officers (the "NEOs"“NEOs”) in 2018:
2020.2020 Compensation Design Highlights
Our compensation programs are designed to attract, retain and motivate the executives who lead our Company. The Compensation Committee has established programs and practices that pay for performance and are intended to align management’s interests with those of the Company’s shareholders.
Our executive compensation program consists of three primary components: base salary, annual cash incentive, and long-term incentive compensation. Key 2020 decisions and actions regarding the compensation of our NEOs are described below.
In January 2020, we announced a strategic transformation to create an integrated, customer-centric organization. This transformation is designed to meet changing consumer and employee/employer behaviors. This includes consumers’ increased comfort with transacting online and employers’ increased focus on employee self-directed benefit enrollment. Our strategic transformation is enabled by a new operating model. The model realigned our three businesses into two divisions that center on the customers we serve: Consumer and Worksite.
In connection with our transformation, we made several changes to our 2020 executive compensation program. These changes were intended to (1) better align our long-term incentives with our strategic growth goals and shareholder value creation, (2) encourage collaboration and motivate the successful execution of the transformation and (3) recognize that 2020 was a transitional year for CNO.
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Annual cash incentive/Pay-for-Performance Plan (“Annual Cash Incentive/P4P Plan”)
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Higher weighting given to corporate financial metrics; investment metrics added for all NEOs; total quantitative performance factors weighted at 80%
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Added individual qualitative performance factor weighted at 20%
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Added the following corporate metrics aligned with business plan objectives and delivery: Combined Total Life and Health Collected Premium, Annuity Collected Premium and Combined Total Fee Revenue (in place of Operating EPS, Combined Value of New Business, GAAP Revenue and Combined Collected Premium)
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Additional detail on our Annual Cash Incentive/P4P Plan can be found beginning on page 51.
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Long-Term Incentive (“LTI”) Plan
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Changed LTI award mix to 55% Performance Shares (“P-shares”) and 45% restricted stock units (“RSUs”), placing a greater emphasis on our performance-based awards, while balancing the retentive qualities of time-vested RSUs (previously 50% P-shares, 30% RSUs and 20% Stock Options in 2019)
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Eliminated Stock Options as an award type within our LTI award mix
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Changed P-share metrics to 50% operating return on equity (“Operating ROE”) and 50% operating earnings per share (“Operating EPS”) (previously 50% Operating ROE and 50% relative total shareholder return (“TSR”))
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Adopted one-year financial metrics, while preserving a three-year vesting period, to appropriately align with the Company’s strategic transformation
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Adopted a relative TSR modifier; the one-year Operating ROE and Operating EPS results are subsequently adjusted by the relative TSR over a three-year period
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Modified the peer group used for relative TSR to reflect companies that respond to the macro-economic environment similarly to CNO
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Additional detail on our LTI Plan can be found beginning on page 57.
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| | Named Executive Officer
| | Position with the Company in 2018
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| | Gary C. Bhojwani | | Chief Executive Officer | | |
| | Erik M. Helding | | Chief Financial Officer | | |
| | Bruce K. Baude | | Chief Operations & Technology Officer | | |
| | Eric R. Johnson | | Chief Investment Officer | | |
| | Matthew J. Zimpfer | | General Counsel | | |
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Executive Summary
Our Business
CNO Financial Group, Inc. ("CNO") is a Fortune 1000 company, with $4.3 billion in total revenues for2021 Proxy Statement41
With these design changes, we maintained our strong pay-for-performance philosophy. The following charts show each element of 2020 target NEO compensation, including the
year ending December 31, 2018. CNO provides healthmix of short-term and
life insurance,long-term incentives, as well as
retirement solutions, to middle-income Americans through our familythe amount of
insurance brands: Bankers Life, Colonial Penn and Washington National. Our vision is to be the leader in meeting the needs of middle-income Americans for financial security and readiness“Pay-at-Risk” for the lifeCEO and for the other NEOs:
2020 Compensation Results Highlights
In the midst of their retirement. Our strategic plan is focused on top- and bottom-line growth while delivering long-term value for all of our stakeholders. We continue to serve the middle-income market through a diverse set of distribution channels and products. We will grow the franchise by introducing new products and services and expanding to attract younger and slightly more affluent customers who can also benefit from our product solutions. Due in large part to our strategic accomplishments in 2018, management and the Board are confident that we are taking the right steps to continue to drive profitable growth with an improved risk, earnings and return on equity ("ROE") profile.2018 Business Highlights
In 2018,COVID-19 pandemic, CNO delivered solid underlying2020 financial results and made significant progress againsttoward optimizing our strategic objectives. We generated strong production results in nearly every business line, grew our asset accumulation business, accelerated new product introductions, and increased operating earnings. Comparedrealignment. Throughout this difficult time, CNO associates’ commitment to the prior year, first year collected premiums were up 8%, total collected premiums were up 3%,Company and new annualized premium ("NAP") for lifeits customers was exemplary, and CNO continued to focus on the well-being and safety of our associates and customers. The pandemic underscored the importance, value and resilience of our diversified business model, which enabled us to navigate from a position of strength. We experienced favorable morbidity impacts within our health products was flat.
On September 27, 2018, we completedwhich served to more than offset the unfavorable mortality impacts in our life products, demonstrating the benefits of a transformative long-term care risk-reduction transaction indiverse product offering. Demand for products within our direct-to-consumer distribution channel surged, helping to offset pockets of weakness within our face-to-face and Worksite channels, which Bankers Life ceded all of its legacy (prior to 2003) comprehensive and nursing home long-term care policies to Wilton Reassurance Company through 100% indemnity coinsurance (the "LTC Reinsurance Transaction"). By completing this transaction, we achieved our stated objective to reduce our exposureencountered significant restrictions due to the most volatile portion of our long-term care business. In doing so, we have materially reduced the possibilitypandemic. Our fee businesses also performed well, which helped offset challenges in other parts of the needbusiness. Given our diversified business model, no changes to incurour performance targets were needed or made as a future reserve strengthening charge. Bankers Life paid a ceding commission of $825 million, which was funded through excess capital held in the insurance subsidiaries and the holding company. While this loss was material, the transaction significantly improved the Company's risk profile, long-term earnings growth prospects, and ROE.
For 2018, CNO reported a net loss of $315 million, or $1.90 per diluted share, which compares to net income of $175.6 million, or $1.02 per diluted share in 2017. The 2018 results reflect a loss of $661 million, or $4.00 per diluted share, related to the LTC Reinsurance Transaction. The 2018 results also were unfavorably
Table of Contents
impacted by financial market volatility. The 2017 results included the one-time unfavorable impact of $172.5 million related to the federal Tax Cuts and Jobs Act ("Tax Reform") which was enacted in December 2017. Net operating income per share(1) in 2018 was $1.83, a 5% increase from 2017 net operating income per share(1) of $1.75.
Capital Management
CNO remains committed to the deployment of 100% of our excess capital to its highest and best use. During 2018, the Company generated $259 million in free cash flow, spent $100.9 million on share repurchases, paid $64.8 million in common stock dividends, and used the balance to fund the ceding commission relating to the LTC Reinsurance Transaction.
Since 2011, we have spent $2.1 billion to repurchase our common stock and have $284.6 million remaining on our current authorization to repurchase shares. Operating ROE excluding significant items(1), was 10.3% in 2018, which compares to 8.8% in 2017.
We maintained a strong balance sheet with unrestricted cash and investments held by the holding company of $220 million at December 31, 2018 and an estimated consolidated risk-based capital ratio of 393%. Book value per diluted share, excluding accumulated other comprehensive income (loss)(1), decreased to $19.52 at the end of 2018 from $21.43 at the end of 2017, which reflected the impact of the LTC Reinsurance Transaction. Our debt-to-total-capital ratio at the end of 2018, excluding accumulated other comprehensive income, was 22.3%.
Management Highlights
On January 1, 2018, Gary C. Bhojwani was promoted to the position of Chief Executive Officer, having served as President since he joined the Company in April 2016. Mr. Bhojwani's appointment was the result of the Board's ongoing succession planning process. On January 1, 2018,COVID-19 pandemic. Additional information on our 2020 financial performance can be found on pages 2-6 and 55-57.
The table below lists each NEO for 2020 and summarizes the Board increased Mr. Bhojwani's annual base salary2020 compensation package delivered to $1,000,000 and increased his target annual bonus to 150% of his annual base salary. In addition, upon assumingeach NEO.
| | | NEO Compensation Delivered in 2020 | | |
| | | Named Executive Officer | | | | January 1, 2020
Base Salary | | | | December 31, 2020
Base Salary | | | | % Change
During
2020 | | | | 2020 Annual Cash
Incentive/P4P
Payout | | | | 2020 Annual LTI
Grant(1) | | |
| | | Gary C. Bhojwani
Chief Executive Officer | | | | | $ | 1,000,000 | | | | | | $ | 1,030,000 | | | | | | | 3% | | | | | | $ | 2,231,527 | | | | | | $ | 4,901,181 | | | |
| | | Paul H. McDonough
Chief Financial Officer | | | | | | 600,000 | | | | | | | 618,000 | | | | | | | 3% | | | | | | | 836,823 | | | | | | | 980,275 | | | |
| | | Bruce K. Baude
Chief Operations & Technology
Officer | | | | | | 635,000 | | | | | | | 654,000 | | | | | | | 3% | | | | | | | 872,558 | | | | | | | 761,068 | | | |
| | | Eric R. Johnson
Chief Investment Officer | | | | | | 550,000 | | | | | | | 550,000 | | | | | | | 0% | | | | | | | 745,242 | | | | | | | 870,623 | | | |
| | | Matthew J. Zimpfer
General Counsel | | | | | | 583,000 | | | | | | | 600,000 | | | | | | | 3% | | | | | | | 812,548 | | | | | | | 870,623 | | | |
(1)
Expressed as the role of CEO, Mr. Bhojwani was awarded a one-time promotion grant of 82,110 restricted stock units with aaggregate grant date fair value of $1.9 million, that will vestP-shares and RSUs granted in equal installments in March2020.
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CNO Financial Group, Inc. 2021 Proxy Statement
CEO 2020
and March 2021. The Committee is of the view that this stock grant was reasonable relative to market standards. All of these elements of Mr. Bhojwani's 2018 compensation were disclosed in last year's proxy.CEO Compensation Philosophy
Consistent with our pay-for-performance philosophy, whereby a significant portion of our executive officers' compensation varies with operating and share price performance, the Committee designed the majority of Mr. Bhojwani's annual and long-term incentives to be performance-based, that is, "Pay-at-Risk." In 2018, 83% of Mr. Bhojwani's target total compensation was at risk.
1.Net operating income per share; Operating ROE, excluding significant items; book value per diluted share, excluding accumulated other comprehensive income (loss); and debt-to-total capital ratio, excluding accumulated other comprehensive income, are non-GAAP financial measures. See "Information Related to Certain Non-GAAP Financial Measures" on page 72 for a description of these measures and a reconciliation to the corresponding GAAP measure.
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The table below reflects the total direct compensation ("TDC") for Mr. Bhojwani. Further detail about these compensation components can be found on pages 24-25.
2018 CEO Total Direct Compensation (including one-time promotion grant)(1)
and Compensation Committee Philosophy of CEO Compensation
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| | Named Executive Officer
| | Type of
Compensation
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Salary
| | Target Total
Annual Cash
| | Stock Option
Value(2)(3)
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Value(2)
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Value(2)
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Value(2)
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| | Gary C. Bhojwani (2017) | | Regular Annual | | $ | 750,000 | | $ | 1,687,500 | | $ | 274,363 | | $ | 687,277 | | $ | 292,523 | | $ | 1,254,164 | | $ | 2,941,664 | | |
| | % of total | | | | | 25% | | | 57% | | | 9% | | | 23% | | | 10% | | | 43% | | | 100% | | |
| | Gary C. Bhojwani (2018) | | Regular Annual | | $ | 1,000,000 | | $ | 2,500,000 | | $ | 633,319 | | $ | 1,773,364 | | $ | 977,060 | | $ | 3,383,743 | | $ | 5,883,743 | | |
| | % of total | | | | | 17% | | | 25% | | | 11% | | | 30% | | | 17% | | | 58% | | | 100% | | |
| | Gary C. Bhojwani (2018) | | Promotion Grant | | | | | | | | | | | | | | $ | 1,915,626 | | | | | $ | 1,915,626 | | |
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(1)Annual incentive expressed as target levels as of award date; value of equity expressed as grant date fair value.
(2)Represents stock option, performance share and restricted share aggregate grant date fair values granted in 2017 and 2018; actual value realized will depend on stock price appreciation and achievement of performance metrics at time of vesting. Valuation methodology is discussed later in this proxy statement.
(3)The amounts shown for the stock option grants reflect the grant date fair value in accordance with FASB ASC 718. See the explanation in the "Impact of Tax and Accounting on Compensation Decisions" section.
(4)Target TDC includes Target Total Annual Cash and the Total LTI Value provided at the time of the annual grant.
In determining target total direct compensation for our Chief Executive Officer,CEO, the Compensation Committee reviewed strategic business goals, peer group data, proprietary and publicly available compensation surveys and data, hisand considered our CEO’s experience, level of responsibility, individual job performance, to date, contributions to corporate performance, job tenure and future potential. In doing so,Following this process, the Compensation Committee confirmeddetermined that a regular target total direct compensation opportunity of $5.9approximately $7.6 million for the Chief Executive OfficerCEO was appropriate and in line with market competitive levels. Additional information concerning the components of Mr. Bhojwani’s total direct compensation is at a market-competitive level.
detailed under “—2020 Target Compensation” on page 49.
Consistent with our pay-for-performance philosophy, the Compensation Committee designed the majority of Mr. Bhojwani’s annual and long-term incentives to be performance based (i.e., “Pay-at-Risk”). In 2020, 86% of Mr. Bhojwani’s target total direct compensation was Pay-at-Risk, which compares to 85% Pay-at-Risk in the prior year.
In order to further align the interests of the CEO with those of the Company and its shareholders, Mr. Bhojwani is subject to the
Company'sCompany’s stock ownership guidelines, which
specifyrequire that the CEO
ownership ofhold Company securities
having awith an aggregate value of
at least five times his base salary. Mr. Bhojwani is in full compliance with this
requirement.requirement, meaning his actual holdings are greater than five times his base salary. His performance-based compensation also is subject to the
Company'sCompany’s clawback
policy, which enables the Company to recoup amounts of incentive compensation paid basedrights described on
achievement of performance goals determined to be based on incorrect data, errors, omissions, or fraud.page 63.
2018CNO Financial Group, Inc. 2021 Proxy Statement43
2020 Shareholder Outreach
Prior to 2018, our shareholder advisory vote to approve executive compensation had consistently exceeded 95%. In 2018, it passed with 53.9% support. This decline signaled to the Board and management that additional shareholder outreach was needed in order to discuss our executive compensation decisions. Throughout the fall of 2018, a team consisting of members of the Board and senior management conducted an extensive shareholder outreach effort to gain a better understanding of our investors' perspectives and to obtain feedback on our governance and compensation practices. This effort consisted of the following:
•Each of our top 30 investors, representing 74% of our outstanding shares, were contacted.
•Nine of these investors, representing 37% of our outstanding shares, accepted our invitation for engagement, and calls were held with each of those investors.
•Another five investors, representing 7% of outstanding shares, responded that they did not wish to engage at that time and declined our offer to speak with Board members and management.
•We received no response from the other 16 of our top 30 shareholders that we contacted.
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•Calls also were held with the research teams at proxy advisory firms Institutional Shareholder Services Inc. and Glass, Lewis & Co., LLC, during which our investor feedback was shared and discussed.
These calls were led by our Chair, with participation from the Board and management to ensure access to key participants in the executive compensation planning process and other decision-making. These other participants included the Chair of the Board Compensation Committee, the Chief Financial Officer, Chief Human Resources Officer, Corporate Secretary, Vice President of Total Rewards, and Vice President of Investor Relations.
During these calls, Board members and management responded to questions and discussed our executive compensation programs, corporate governance practices, sustainability efforts and other topics of interest to our shareholders. Overall, shareholders told us that they appreciated the opportunity to engage, particularly with our directors, and our willingness to consider their input into our decision-making process. They generally spoke favorably about our governance practices and approach and provided constructive feedback and important insights on various aspects of our executive compensation programs and disclosure. All feedback received was shared and discussed with the Board. We found the shareholder engagement process to be highly valuable and intend to proactively seek and consider such input on an ongoing basis.
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A number of common themes emerged in these conversations. The following table summarizes the consensus feedback that we received and the Board's actions in response to this shareholder input.
Our Annual Engagement Program Promotes Greater Communication With Our Investors
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| | Our investors’ feedback is important to us. Throughout the spring and fall of 2020, senior management and Board members invited shareholders representing approximately 79% of our outstanding shares to engage on matters of interest to them, including executive compensation. Three of these investors, representing approximately 20% of our outstanding shares, accepted our invitation. Our Board Chair led these calls, with participation from other Board members and senior management, to ensure access to key participants in the executive compensation planning process and other decision-making processes. Key participants in these calls included the Chair of the Human Resources and Compensation Committee, Chair of the Governance and Nominating Committee, Chief Financial Officer, Chief Human Resources Officer, Corporate Secretary, Vice President of Total Rewards, and Vice President of Investor Relations. During these calls, Board members and senior management responded to questions and discussed our executive compensation programs, corporate governance practices, sustainability efforts and other topics of interest to our shareholders. The shareholder representatives who participated in these meetings told us that they appreciated the opportunity to engage, particularly with our Board members, and our willingness to consider their input into our decision-making process. They spoke favorably about our governance practices and approach and provided constructive feedback and insights on various aspects of our executive compensation programs and disclosures. CNO participants in these calls shared their experiences with the Board, which led to meaningful discussions on incorporating and responding to such feedback. We continue to find our shareholder engagement process to be highly valuable and intend to proactively seek and consider such input on an ongoing basis. | | | | |
| | | 2020 Shareholder Outreach Feedback | | |
| | | What We Heard | | | | |
| | What We Heard
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| Intended Outcome | | 2017 Payment to Retiring CEO:Explain rationale for and process by which any one-time awards or payments are determined.
| | | | Provided disclosure and context, including contractual obligations, if any, regarding any one-time or unusual awards to NEOs. | | | | Demonstrated:•
The Company's understanding that it is critically important that as an element of any one-time or unusual awards, more robust disclosure be made as to the rationale, context, performance objectives, if relevant, and other applicable terms.
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| | | Board Disclosures •
Provide detail on Board’s role during COVID-19 •
Describe virtual director onboarding process •
Discuss Board assessment / refreshment strategy | | | | | | Provided additional disclosure about Board’s heightened level of oversight during COVID-19; provided additional information on Board assessment, recruiting and onboarding methods | | | | | | |
| | Annual Incentive:Disclose target-setting process and rationale, opportunity-setting process and rationale, and effect of any unusual or infrequent items.
| | | | Substantially revised and expandedDemonstrate our disclosures regarding the Annual Cash Incentive / P4P:•
Described the thoughtful, deliberate process employed to set targets and opportunity levels and to evaluate performance and to determine payout levels.
•
Discussed treatment of unusual or infrequent items and their effect on determination of goal achievement.
| | | | Demonstrated:•
Rigor of the goals set by the Board Compensation Committee.
•
Thoroughness of the goal-setting process.
•
Challenging level of achievement necessary before any payout is earned.
•
Objective nature of handling of one-time events.
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| | Long-Term Incentive:Disclose threshold and maximum performance levels and disclose rationale for Total Shareholder Return ("TSR") target level.
| | | | Added disclosure of threshold and maximum performance levels for relative TSR and Operating ROE metrics related to the Performance Shares for in-cycle grants. | | | | Communicated:•
Nature of payout curve for levels of long-term performance.
•
Reasoning underlying the target, threshold and maximum levels set by the Board Compensation Committee.
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| | Peer Group:Review congruence and suitability of peer group companies and enhance disclosure of process of peer group selection.
| | | | Revised and expanded disclosure regarding the peer group companies adopted for 2018 compensation decisions.•
Augmented description of criteria used to develop peer group.
•
Added such information to enable evaluation of the Company relative to the peer group.
•
Noted intention to revise 2019 peer group companies.
| | | | Demonstrated:•
Appropriate process in developing peer group that serves as an appropriate benchmark.
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| | Disclosure:Enhance disclosure of linkage between strategy and performance metrics.
| | | | Enhanced description of rationale for use of specific metrics in the annual and long-term incentive plans and their connection to strategic goals. | | | | Communicated:•
Means by which the executive compensation program is designed to motivate and incentivize achievement of performance metrics that drive growth and long-term shareholder value creation.
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| | Proxy Access:Adopt proxy access bylaws.
| | | | The Board adopted proxy access bylaw amendments in February 2019, which provide the right for shareholders to include nominees for election to the Board in our proxy materials, subject to market standard limitations and stock holding, informational and other requirements. | | | | Demonstrated:•
The Company's willingness to give shareholders direct access to the Board election process.
•
Our commitment to best practices in corporate governance.
governance | | |
| | | Executive Compensation Consider above-median TSR performance for P-share targets | | | | | | As part of the compensation changes made in connection with our business transformation, our 2020-2022 P-share awards did not include TSR as a stand-alone metric. Instead, P-shares will pay out after three years based on one-year Operating ROE (50%) and one-year Operating EPS (50%), each as adjusted by the relative TSR for the three-year period. A positive adjustment is only made if three-year TSR exceeds the 75th percentile. | | | | Maintain a long-term performance outlook and align payouts with shareholder experience over time | | |
| | Corporate Responsibility:Provide disclosure regarding Company's Corporate Responsibility and Environmental, Social and Governance ("ESG") efforts.
| | | | Added disclosure as to the manner in which the Company currently handles matters of corporate social responsibility, sustainability and other ESG issues. | | | | Communicate:•
The Company takes these issues seriously and is addressing these risks and opportunities through an organized, coordinated structure with Board oversight.
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| | | ESG •
Reinforce importance of ESG in reducing risk •
Include reporting framework •
Provide details on DE&I initiatives and metrics tracked | | | | | | Expect to adopt the Sustainability Accounting Standards Board (SASB) and Task Force on Climate-Related Financial Disclosures (TCFD) reporting frameworks; and provide additional information about ESG risk management and DE&I program in our 2020 CSR report | | | | Communicate that the Company is committed to enhanced ESG transparency and progress with various ESG programs | | |
44
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2018 Key Compensation Items
Our compensation programs are designed to attract, retain and motivate the executives who lead our Company. The Committee has established programs and practices that align management's interests with those of the Company's shareholders, and thus help drive the creation of long-term shareholder value. We believe that our compensation program supports our belief in pay-for-performance by providing a significant amount of compensation in the form of equity, by balancing both short- and long-term incentives that are tied to Company performance, and by delivering both fixed and "Pay-at-Risk" compensation in appropriate measure to retain and motivate our leaders, all of which are tied to our business results and market practices.
Our executive compensation program consists of three primary components. Summarized below are the highlights of the key decisions and actions taken regarding the compensation of our NEOs in 2018. These actions were approved by the Board Compensation Committee with advice from Aon Consulting, the independent compensation consultant to the Committee, and are consistent with our stated compensation philosophy.
Base Salary
•Base salary is the only fixed component of executive compensation. It comprises the smallest percentage of total executive compensation.
•As a matter of Board Compensation Committee policy and practice, there is no expectation that senior executives will receive annual base salary increases. During 2018, however, in order to remain competitive with industry peer companies, each of our NEOs with the exception of Mr. Bhojwani received merit base salary increases, that ranged from 3% to 13%.
•Concurrent with his promotion to CEO, Mr. Bhojwani's salary was increased from $750,000 to $1,000,000 on January 1, 2018.
Annual Cash Incentive
•Our annual incentive plan, or "Annual Cash Incentive / P4P" plan, is designed to focus on and reward achievement of annual performance goals. It is the broadest of our management incentive programs, covering our NEOs and approximately 1,970 other employees.
•This program was expanded by 1,370 employees in 2018. The expansion was made in response to the expected future benefits from Tax Reform, and to broaden the base of employees eligible for performance-based incentives. The Company is of the view that we benefit by further aligning the interests of a broader base of employees to the Company's long-term success.
•These additional employees were added to the Annual Cash Incentive / P4P plan at an incremental cost of approximately $3 million.
•All participants in the Annual Cash Incentive / P4P plan, including our NEOs, are assigned target incentive opportunities expressed as a percentage of base salary.
•The 2018 target bonus opportunities were increased for Messrs. Bhojwani, Helding and Zimpfer. Mr. Bhojwani's target bonus increase was based on his new role and attendant increased responsibilities. Messrs. Helding's and Zimpfer's target bonus opportunities were increased to align them with internal and external peers.
•The Annual Cash Incentive / P4P target metrics and weightings did not change from 2017 except that an additional metric was included for Mr. Johnson.
CNO Financial Group, Inc. 2021 Proxy Statement
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•Payouts ranged from 89% to 121% of target for our NEOs excluding our CEO, and 89% for our CEO.
•In calculating the Annual Cash Incentive / P4P payouts based on 2018 performance, the Committee excluded the impacts of the LTC Reinsurance Transaction as it had not been considered in setting the 2018 operating plan or the Annual Cash Incentive / P4P targets. Additional information on this matter may be found on pages 38-39.
Long-Term Equity Incentive Compensation ("LTI")
•We believe that "Pay-at-Risk" equity compensation aligns our NEOs to shareholder interests and helps to drive long-term shareholder value creation, while also facilitating the retention of key executive talent.
•Annual equity awards are delivered in the form of Performance Shares ("P-shares"), stock options and restricted stock units ("RSUs") that are earned and vested over a three-year performance period.
•The P-share allocation of the long-term equity incentive mix remained the same as in 2017, at 50%. The mix of RSUs and stock option grants shifted in 2018 in that RSUs were increased from 25% to 30% of the total awards, and the mix of stock option grants was decreased from 25% to 20%.
•There was no change to the LTI target metrics and weightings.
•For the 2016-2018 P-share performance period, the total P-share payout was 81%. There was a 161% payout for the P-shares that were based on Operating ROE and no payout for those based on relative TSR.
•As noted above, Mr. Bhojwani received a one-time RSU grant at the time of his promotion to CEO.
•Mr. Zimpfer received a one-time RSU grant for retention purposes, and an additional one-time RSU grant to recognize the key role that he played in managing and finalizing the LTC Reinsurance Transaction.
The table below reflects the total 2018 compensation package delivered to our NEOs.
Regular NEO Compensation Delivered in 2018
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| | Named Executive Officer | | January 1, 2018
Base Salary | | December 31, 2018
Base Salary | | % Change
During
2018 | | 2018
Annual Cash
Incentive / P4P | | 2018 Annual LTI
Grant(1) | |
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| | Gary C. Bhojwani(2) | | $ | 1,000,000 | | $ | 1,000,000 | | | 0.0% | | $ | 1,338,333 | | $ | 3,383,743 | | |
| | Erik M. Helding | | $ | 400,000 | | $ | 450,000 | | | 12.5% | | $ | 380,968 | | $ | 696,874 | | |
| | Bruce K. Baude | | $ | 600,000 | | $ | 618,000 | | | 3.0% | | $ | 553,521 | | $ | 696,874 | | |
| | Eric R. Johnson | | $ | 500,000 | | $ | 525,000 | | | 5.0% | | $ | 631,893 | | $ | 696,874 | | |
| | Matthew J. Zimpfer(3) | | $ | 500,000 | | $ | 550,000 | | | 10.0% | | $ | 470,671 | | $ | 796,316 | | |
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(1)Expressed as the aggregate grant date fair value of stock options, P-shares, and RSUs granted in 2018. P-shares are subject to a three-year performance period.
(2)As disclosed in last year's proxy, Mr. Bhojwani received a one-time grant of 82,110 RSUs on February 21, 2018, valued at $1.9 million, upon his promotion to CEO. This grant is excluded from the table above as it is unusual and non-recurring in nature. See page 42 for further detail.
(3)Mr. Zimpfer received a one-time grant of 8,210 RSUs on February 21, 2018, valued at $191,539, for retention purposes. He received an additional 17,592 RSUs, valued at $373,302, on September 28, 2018 in recognition of the key role that he played in the successful completion of the LTC Reinsurance Transaction. Both grants are excluded from the above table as they are unusual and non-recurring in nature. See page 42 for further detail.
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Key Practices in Corporate Governance and Executive Compensation
The Board Compensation Committee strives to maintain best practices in corporate governance in our executive compensation programs.| | | | | | | | | |
What We Do | | |
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| | What We Do
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| | ✔ | | | | Pay-for-PerformancePay for Performance:: The majority of NEO target total compensation is tied to Company, business-segment and/Company-wide, business segment or individual performance or a combination thereof and therefore is considered by the Company to be "Pay-at-Risk".“Pay-at-Risk.”
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| | ✔ | | | | Balanced View on PerformancePerformance:: We take a balanced approach to measuring our performance by employing both(1) relative and absolute and (2) quantitative and qualitative, performance measuresmetrics in our compensation programs. | | |
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| | ✔ | | | | Stock Ownership GuidelinesGuidelines:: In order to align our executives with shareholder interests, our CEO and all of his direct reports (including theall other NEOs) are required to maintain ownership levels in accordance with Company policy. The CEO is required to maintain ownership equal to 5xfive times his base salary, while all other NEOs are required to maintain ownership equal to 3xthree times their respective base salaries. As of December 31, 2018,2020, all NEOs have met or are within their allowable timeframes for meeting these guidelines. | | |
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| | ✔ | | | | Double-Trigger Change in ControlControl:: All employment agreements Severance and accelerated vesting of equity award agreements for NEOs require a qualified termination of employment,awards are triggered in addition toconnection with a change in control of the Company only by a qualified termination of employment within six months in order to triggeranticipation of, or within two years following, a change in control benefits.event. | | |
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| | ✔ | | | | Strong Clawback RightsRights:: Our incentive compensation is subject to strong clawback rights. Our Annual Cash Incentive / Incentive/P4P and LTI plans contain clawback provisions that include the right to recapture any incentive amount paid or vested in the event that the Board Compensation Committee determines that the achievement of performance goals was based on incorrect data, errors, omissionsdata. In early 2020, the Board adopted a Clawback Policy containing additional rights to recapture incentive compensation from executive officers in the event of a material restatement of the Company’s financial statements or fraud.other detrimental conduct that causes material financial, operational or reputational harm to the Company. | | |
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| | ✔ | | | | Independence of Executive Compensation Consultant (Aon Consulting)Consultant:: The Board Compensation Committee has engagedengages an independent executive compensation advisor,consultant, taking SEC and New York Stock ExchangeNYSE guidelines into consideration. Aon Consulting Willis Towers Watson has served as the Compensation Committee’s independent executive compensation consultant since August 6, 2019; Willis Towers Watson was engaged following the Committee’s thorough review of potential consultants and an analysis by the Compensation Committee of their independence. Willis Towers Watson has no business or personal relationships with any of our NEOs or Board members.NEOs. | | |
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| | ✔ | | | | Ongoing Succession PlanningPlanning:: Throughout the year, the Board Compensation Committee regularly engages in in-depth discussions regarding executive succession planning and talent development of our executives.development. Succession planning is reviewed by the entire Board at least annually. | | |
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| | ✔ | | | | Strive to Understand Our Shareholders' Views on Executive CompensationShareholders’ Views:: In 2018 we implemented We undertake an annual shareholder outreach program focused on governance and compensation issues and, more recently, sustainability issues.environmental, social and governance issues including diversity, equity and inclusion matters. We have taken all feedback fromconsider our shareholders into consideration as we have updatedshareholders’ views when updating our executive compensation programs. | | |
| | | | | | | | | Proxy Access: Our Bylaws provide shareholders with proxy access rights for Board member nominations. | | |
| | ✔ | | | | Proxy Access: In early 2019, the Board adopted proxy access amendments to our bylaws.
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| | ✔ | | | | Corporate Responsibility / ESG Program: We are committedSocial responsibility is at the core of CNO’s culture. ESG principles have become—and will continue to being environmentally conscious, socially aware,be—central to our overall business strategy. Our Board is highly involved in setting our ESG strategies and overseeing our progress. Our ESG approach focuses on six key areas: (1) promoting responsibleethical and ethicalresponsible business practices, at all times.(2) serving our customers, (3) developing and supporting our associates, (4) investing prudently, (5) philanthropy and community relations and (6) environmental responsibility. In 2020, we expanded our commitment by adding a full-time DE&I leader to CNO to further embed our talent development and associate engagement strategy throughout the organization. We recently formedpublish a management committee comprised of senior management and other leaders to formulate and driveCorporate Social Responsibility Report, which is available in the executionInvestors section of our ESG strategy. The Board will review the committee's efforts on a regular basis.website at www.CNOinc.com. | | |
| | | | | | | | | Contractual Protections: Every executive is subject to non-solicitation and confidentiality agreements that extend one year beyond termination of employment. In addition, our CEO and Division Presidents are subject to non-competition agreements that extend one year beyond termination of employment. | | |
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What We Do Not Do | | |
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| | What We Do Not Do | | |
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| | ✘ | | | | No Supplemental Executive Retirement PlansPlans:: We do not offer SERPs to our current executives.executives other than the Company’s non-qualified deferred compensation plan (“Deferred Compensation Plan”). | | |
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| | ✘ | | | | No Excise Tax Gross UpGross-Up Provisions: We do not increase the gross amount of payments to account for deductions such asexcise taxes. | | |
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| | ✘ | | | | No Significant PerquisitesPerquisites:: Our executives participate in broad-based, Company-sponsored benefits programs on the same basis as other full-time associates.associates (e.g., 401(k), medical, dental, life insurance). | | |
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| | ✘ | | | | No Re-Pricing of Stock OptionsOptions:: Re-pricing of underwater stock optionsStock Options without shareholder approval is prohibited (except in the event of certain permissible corporate events including but not limited to stock splits or recapitalizations). | | |
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| | ✘ | | | | No HedgingHedging:: Senior Executives,executives, including NEOs, are prohibited from hedging activities related to our equity securities, including holding CNO shares in margin accounts. | | |
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| | | | | | | Limited Use of Employment Contracts: Except for our CEO, none of our executive officers are parties to employment agreements. Additional information on the CEO’s employment agreement may be found on page 64. | | |
Table of Contents
Compensation Program Structure and Decision-Making Process
The chart below summarizes the key components of our executive compensation program and shows how and why the Board Compensation Committee arrived at compensation decisions involving NEOs in 2018. It also explains the roles of the Committee, Compensation Consultant, and influence of our Comparator Peer Companies.
Our compensation program is composed of the following components:
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| | Executive Compensation ComponentsNo Uncapped Awards:
All awards under our Annual Cash Incentive/P4P and LTI plans are subject to caps.
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Type of
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Component
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Description
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Why We Pay This
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How We Determine
Amount
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| | Fixed Pay | | | | Base Salary | | | | Fixed Cash CompensationMay be adjusted each year based on individual performance and relevant market data
| | | | To attract, motivate and retain top talent | | | | Established using data targeting 50th percentile of market so as to remain competitive with peersAdjusted up or down to reflect factors such as scope of position, experience level, unique skills and competencies, promotions or added responsibilities
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| | Pay-At-Risk
(Annual) |
| | | Annual Cash Incentive / P4P | | | | Variable Cash CompensationEarned based on Company, business-segment and individual financial and operational performance
| | | | To incentivize achievement of annual financial and operational performance goals | | | | Established using market data targeting the 50th percentile of the marketTarget incentive opportunities are expressed as a percentage of base salary
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| | Pay-At-Risk
(Long-Term) |
| | | Performance Shares (P-shares) | | | | Equity CompensationEarned based on achievement of performance goals at the end of a three-year performance period
Realizable value is variable based on long-term Company performance measured in stock price appreciation and ROE performance
| | | | To focus management on long-term Company performanceTo balance the short-term focus of the Annual Cash Incentive / P4P by tying rewards to performance achieved over multi-year periods
To align the interests of management with those of shareholders
| | | | The Committee establishes compensation levels for equity compensation based on competitive market dataIndividual awards may be adjusted up or down to reflect performance, potential and other individual considerations
P-shares account for 50% of the annual grant target, and were divided evenly between those tied to (1) Operating ROE and (2) relative TSR
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| | | | | | Stock Options | | | | Equity CompensationTime-vested awards that generally vest over three years
Realizable value is variable based on long-term stock price appreciation
| | | | To balance the short-term focus of the Annual Cash Incentive / P4P by tying rewards to performance achieved over multi-year periodsTo focus management on long-term stock price appreciation
To align the interests of management with those of shareholders
| | | | The Board Compensation Committee establishes compensation levels for equity compensation based on competitive market dataIndividual awards may be adjusted up or down to reflect performance, potential or other individual considerations
Stock Options accounted for 20% of the annual target from a grant value perspective
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| | | | | | Restricted Stock Units (RSUs) | | | | Equity CompensationTime-vested awards that generally vest over three years
Realizable value is variable based on long-term stock price appreciation
In addition to the annual grant, used selectively for retention and recognition
| | | | To encourage retention and reward for exceptional performance and/or potentialTo balance the short-term focus of the Annual Cash Incentive / P4P by tying rewards to performance achieved over multi-year periods
To align the interests of management with those of shareholders
| | | | The Board Compensation Committee establishes compensation levels for equity compensation based on competitive market dataIndividual awards may be adjusted up or down to reflect performance, potential or other individual considerations
RSUs accounted for 30% of the annual target from a grant value perspective
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“Say-on-Pay” Results
At our 2020 annual meeting, shareholders expressed strong support for our executive compensation programs with over 88% of votes cast in favor of the non-binding advisory resolution on executive compensation.
Role of the Human Resources and
Board Compensation Committee
The Boardpurpose of the Human Resources and Compensation Committee is to provide oversight of the Company’s human resource asset and executive compensation programs and to support delivery of the Company’s objectives incorporating sound ESG principles. The Compensation Committee determines the components and amount of compensation for our executive officers and provides overall guidance for our employee compensation policies and programs. In addition, the Compensation Committee actively monitors our executive development and succession planning activities relatedwith respect to our senior executives and other officers. The Committee and the Board are fully cognizant of our overall executive talent. Reviews of our key managers and officers are conducted annually and discussed with the Board.
Table of Contents
Currently, threefour of our Board members sit on the Compensation Committee, each of whom is an independent director as required by the New York Stock ExchangeNYSE listing requirements, the exchange upon which our stock trades.requirements. From time to time, other Board members also participate in the Committee'sCompensation Committee’s meetings, thoughalthough these non-member ad hoc participants do not vote on decisions made at the Committeecommittee level. The Board receives regular reports of Committeecommittee deliberations and decisions and, at least once annually, the Board reviews the Committee'sCompensation Committee’s written evaluation of the Chief Executive Officer'sCEO’s performance and compensation. The Committee'sCompensation Committee’s functions are more fully described in its charter, which can be found in the Investor RelationsInvestors section of our website at www.CNOinc.com.www.CNOinc.com.
Role of the Compensation Consultant
In making executive compensation decisions, the Board Compensation Committee receives advice from its independent compensation consultant. Willis Towers Watson was the Compensation Committee’s independent executive compensation consultant Aon Consulting. in 2020.
Although
Aon Consultingthe compensation consultant is retained directly by the
Compensation Committee, its personnel
may also interact with our executive officers as needed, particularly
the Chief Executive Officer,our CEO, Chief Human Resources Officer, General Counsel, and
each of their staffs, to provide the Committee with relevant compensation and performance data for our executives and the
Company.Company overall. In addition,
Aon Consultingthe compensation consultant’s personnel may interact with management to confirm information, identify data questions, and/or exchange ideas.
46
CNO Financial Group, Inc. 2021 Proxy Statement
As requested by the Compensation Committee, Aon Consulting'sthe compensation consultant’s services to the Committee in 20182020 included: »
Providing competitive analysis of total compensation components for our senior executive officers, including our NEOs;
»
•Researching and presenting competitive and emerging compensation practices and regulatory issues;
»
•Recommending peer groups for compensation and performance;
»
•Attending Committee meetings, in personin-person or virtually; and telephonically; and
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•Reviewing and evaluating changes to the Company’s executive compensation philosophy and proposed plan changes.
The Board Compensation Committee has the authority under its charter to retain outside consultants or other advisors. One element of that decision process is the Committee'sCommittee’s assessment of an advisor'sadvisor’s independence. Relative to that determination, the Compensation Committee takes into account certain independence factors as enumerated by the SEC and New York Stock Exchange. IncludedNYSE.
The Company paid $356,198 in the Committee's assessment of Aon Consulting's independence for 2018 was management's decision in 2018 to engage Aon Risk Services to assist in the placement of an Agents Errors and Omissions policy and Aon Consulting to work on design of the Employee Stock Purchase Plan ("ESPP"), which was enacted in 2018. With respect to those activities, Aon Risk Services received an estimated commission of $200,000 from the carrier of the insurance policy and fees for the ESPP were $39,443. Aon Risk Services and Aon Consulting are subsidiaries of Aon plc and each operates under separate management structures. The Committee considered that the estimated commission of $200,000 paid to Aon Risk Services for its brokerage services was less than .01% of Aon plc's 2018 revenues. Fees paid by CNO to Aon Consultingaggregate for executive compensation advisoryconsulting services were $287,930 in 2018. The2020. In addition, management engaged Willis Towers Watson and its affiliates (including TZ Insurance Solutions LLC) to provide other services during 2020 for which the Company and its affiliates paid $958,043 in the aggregate. These other services consisted of sales leads, policyholder and prospect marketing services; broad-based associate compensation analysis; and certain data services.
How Our Compensation Committee
determined Aon Consulting to be independent.Makes Decisions: Philosophy and Objectives
In making its decisions, the Board Compensation Committee collects and considers input from multiple sources. The Compensation Committee may ask senior executive officers to attend Committee meetings at which executive compensation and overall and individual performance is discussed and evaluated, during which time executives may provide insight, suggestions or recommendations regarding executive compensation. Deliberations generally occur with input from Aon Consulting,the consultant, members of management and other Board members, however, only the members of the Compensation Committee vote on matters of executive compensation. All elements of the CEO’s compensation of the CEO, however, are submitted to the full Board for its review and approval.
Philosophy
Table of ContentsPhilosophy and Objectives
Philosophy
The Board Compensation Committee which is comprised solely of independent, non-employee directors, has developed a philosophy and a comprehensive compensation strategy to reward overall and individual performance that drives long-term success for our shareholders.
Our compensation philosophy consists of the following
three guiding principles:
Pay-for-Performance: Rewards will be differentiated based on Company, business segment and individual performance.CNO Financial Group, Inc. 2021 Proxy Statement47
•Target Total Rewards Position: The overall rewards will be competitive by targeting compensation at approximately the median of the relevant comparator group with additional compensation for achieving superior performance.
•Relevant Comparator Group: We utilize a relevant comparator group of companies in the insurance/financial services industry and general industry when appropriate, taking both asset size and revenue into consideration, which will include the best available data for comparison with our peers and companies with which we compete for executive talent.
Pay-for-Performance Objectives
The Board Compensation Committee strives to provide a clear reward program that allows us to attract, motivate and retain seasoned executive talent with the significant industry experience required to continuously improve our performance and build long-term shareholder value. To achieve this, our programs are designed to: »
Reward operational and productivity improvements that are sustainable. This means that we establish (1) performance goals under our Annual Cash Incentive / P4P plan at targeted performance levels for key financial metrics under (1) our Annual Cash Incentive/P4P Plan, and (2) multi-year performance goals for our P-share (performance share) awards;
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•Align the interests of our executives with those of our shareholders by rewarding shareholder value creation;
»
•Integrate individual goal-setting and quarterly coaching and feedback with the Company-wide annual performance management program of individual goal setting and formal evaluation;program;
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•Exercise appropriate discretion to make adjustments and modifications based upon how well individual executives meet ourexecutives’ achievement of performance standards for expected achievement of business results, as well as the contribution that an executive may make to uphold our values, leadership behaviors, and overall corporate culture; and
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•Offer the opportunity to earn additional compensation when overall or individual performance exceeds expectations.
Compensation Benchmarking Approach and
individual performances exceed expectations.Selection of theRelevant Comparator Groups
Group Selection
In setting target executive compensation opportunities, the Board Compensation Committee looks at base salary, target total annual cash (comprised of base salary and target annual cash incentives / P4P) and total direct compensation, (the sum of total annual cash and long-term incentives), and reviews thisthese compensation components relative to a select group of peer companies ("(“Comparator Peer Companies"Companies”). Our long-term incentives may include a combinationFor additional information on the components of P-shares, stock option awards, and RSUs. executive compensation, see pages 50-62.
The Committee'sCompensation Committee’s general policyphilosophy is to compensate our executives at approximately the 50th percentile level for total direct compensation, for the achievement of target performance, with additional compensation opportunities for the achievement of superior results.
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The Compensation Committee annually assesses "competitive market"“competitive market” compensation using a number of sources.and reviews both peer group proxy data and survey data developed by Willis Towers Watson. In determining the competitive compensation levels in consultationfor our NEOs, the Committee consults with our independent compensation consultant, the Committee reviews proxy data, including assets, premiums, and market capitalization from our Comparator Peer Companies, identified below for the NEOs, and also compares our other executives to the Diversified Insurance Study published by Willis Towers Watson.
The Comparator Peer Companies listed below were used as a reference point for 2018 compensation.
2018 Comparator Peer Companiesadvisor.
| | |
Aflac Incorporated | | Primerica, Inc. |
American Financial Group, Inc. |
|
Principal Financial Group, Inc. |
Arch Capital Group Ltd. |
|
Reinsurance Group of America, Incorporated |
Assurant, Inc. |
|
The Hanover Insurance Group, Inc. |
Cincinnati Financial Corporation |
|
Torchmark Corporation |
Genworth Financial, Inc. |
|
Universal American Corp (now WellCare) |
Horace Mann Educators Corporation |
|
Unum Group |
Kemper Corporation |
|
Voya Financial, Inc. |
Lincoln National Corporation |
|
|
Following feedback received from our 2018 shareholder outreach program as well as an extensive analysis of existing and potential peers, considering business and talent competitors and financial metrics including assets, premiums and market capitalization, the Compensation Committee has decided to makemade changes to the Comparator Peer Companies beginning within 2019. In 2020, the 2019 performance period. Changes will includeCompensation Committee and Willis Towers Watson reviewed the addition of two companies: Brighthouse Financial, Inc.Comparator Peer Companies and American Equity Investment Life Holding Company, and the exclusion of five companies: Aflac Incorporated, Arch Capital Group Ltd., Genworth Financial, Principal Financial Group, Inc., and Universal American Corp (now WellCare).determined that no additional changes were needed. The Compensation Committee is of the view that thesethe current peers more appropriately reflect our principal business competitors and those companies with which we currently compete for executive talent.
The Comparator Peer Companies listed below were used as a reference point for 2020 executive compensation levels and program design.
| | | 2020 Comparator Peer Companies | | |
| | | American Equity Investment Life Holding Co. | | | | Horace Mann Educators Corporation | | |
| | | American Financial Group, Inc. | | | | Kemper Corporation | | |
| | | Assurant, Inc. | | | | Lincoln National Corporation | | |
| | | Brighthouse Financial, Inc. | | | | Primerica, Inc. | | |
| | | Cincinnati Financial Corporation | | | | Reinsurance Group of America, Incorporated | | |
| | | Globe Life Inc. | | | | Unum Group | | |
| | | The Hanover Insurance Group, Inc. | | | | Voya Financial, Inc. | | |
48
CNO Financial Group, Inc. 2021 Proxy Statement
2020 Target Compensation
The table below summarizes the target level of 2020 total annual cash and total direct compensation for our NEOs. This table differs from the Summary Compensation Table for 2020 beginning on page 65 in that most values below represent target amounts and equity grants that were granted in 2020 but not yet earned or paid.
| | | Summary of Components of Regular Total Direct Compensation (TDC) in 2020 at Target(1) | | |
| | | Named Executive
Officer | | | | Base
Salary | | | | Target
Incentive | | | | Target
Total
Annual
Cash | | | | P-Share
Value (2) | | | | RSU
Value (2) | | | | Total LTI
Value (2) | | | | Target
TDC (3) | | |
| | | Gary C. Bhojwani % of TDC | | | | $1,030,000 14% | | | | $1,648,000 21% | | | | 160% | | | | $2,678,000 | | | | $2,754,708 | | | | $2,146,473 | | | | $4,901,181 65% | | | | $7,579,181 100% | | |
| | | Paul H. McDonough % of TDC | | | | 618,000 28% | | | | 618,000 28% | | | | 100% | | | | 1,236,000 | | | | 551,756 | | | | 428,519 | | | | 980,275 44% | | | | 2,216,275 100% | | |
| | | Bruce K. Baude % of TDC | | | | 654,000 32% | | | | 654,000 32% | | | | 100% | | | | 1,308,000 | | | | 427,560 | | | | 333,508 | | | | 761,068 37% | | | | 2,069,068 100% | | |
| | | Eric R. Johnson % of TDC | | | | 550,000 28% | | | | 550,000 28% | | | | 100% | | | | 1,100,000 | | | | 488,640 | | | | 381,983 | | | | 870,623 44% | | | | 1,970,623 100% | | |
| | | Matthew J. Zimpfer % of TDC | | | | 600,000 29% | | | | 600,000 29% | | | | 100% | | | | 1,200,000 | | | | 488,640 | | | | 381,983 | | | | 870,623 42% | | | | 2,070,623 100% | | |
(1)
Base salaries are as of December 31, 2020. Annual incentive expressed as target levels as of award date. Value of equity is expressed as grant date fair value. Variances between values and totals may exist due to rounding.
(2)
Represents P-share and RSU aggregate grant date fair values granted in 2020; actual value realized will depend on stock price appreciation and achievement of performance metrics at time of vesting.
(3)
Target TDC includes Target Total Annual Cash and the Total LTI Value provided at the time of the annual grant.
In determining executive compensation levels, the Compensation Committee uses market studies to review the value delivered to each executive through each component of compensation.
These studies provide the means by which the Compensation Committee can objectively examine external market practices and compare those practices to our internal evaluations and decisions. These studies capture and report:
»
Competitive external market data by position on a base salary, total annual cash incentive (including bonus) and total direct compensation basis;
»
Long-term equity grants and the vesting status and valuation methodologies of such grants; and
»
Employment agreement terms and conditions.
Although aggregate pay levels generally are consistent with our compensation philosophy, it is possible that pay levels for specific individuals may be above or below the targeted competitive benchmark levels. Variances may arise from such factors as an individual'sindividual’s role and responsibilities within our Company, the individual'sindividual’s experience and expertise, the individual’s time in position, the pay levels for peers within the Company, and the pay levels for similar job functionsresponsibilities in the marketplace. The Committee is responsible for approving all compensation programs for our senior executive officers. In determining executive compensation, the Committee considers all forms of compensation and benefits, and uses appropriate tools and market studies to review the value delivered to each executive through each component of compensation. These studies provide the means by which the Committee can objectively examine external market practices and compare those practices to our internal evaluations and decisions. These studies capture and report:
•Competitive external market data on a base salary, total annual cash incentive (including bonus) and total direct compensation basis;
•Individual total annual cash incentive compensation including annual salary, target bonus opportunity, and actual bonus paid;
•Long-term equity grants and the vesting status and value at a hypothetically established share price of such grants; and
•Employment agreement terms and conditions.
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Competitive market data is used as a reference point. We avoid adjusting compensation based exclusively on a single year of competitive benchmarking data. The Board Compensation Committee is of the view that an executive's compensation should reflect Company-specific factors such as the relative importance of the individual's role within the organization, the compensation for other positions at the same level, and individual factors such as experience, expertise, and performance.
In addition to the objective review of external factors, the Committee also considers internal equity among colleagues when determining executive compensation levels. This means that, although the Committee examines competitive pay data for specific positions, market data are not the sole factor considered in setting pay levels. The Committee also considers factors such as our organizational structure and the relative roles and responsibilities of individuals within that structure. The Committee believes that this approach fosters an environment of cooperation among executives that enhances sales growth, profitability and customer satisfaction.
Realized total compensation in any year may be above or below targeted compensation levels depending on whether our incentive goals were attained and whether shareholder value was created. In some instances, the amount and structure of compensation results from negotiations with an executive at the time the individual was hired, which may reflect competitive pressures to attract and hire quality executive talent in our industry. To attract and retain such talent, the CommitteeCompany also seeks to provide benefit levels in line with those offered by comparable publicly-tradedpublicly traded companies, although without necessarily matching on an item-by-item basis.
CNO Financial Group, Inc. 2021 Proxy Statement2018 Target Compensation49 The table below summarizes the target level of 2018 total annual cash and total direct compensation for our NEOs. This table differs from the Summary Compensation Table on page 48 in that values generally represent target amounts and equity grants that were granted but not yet earned or paid as such targets and grants are subject to certain three-year performance criteria, as one element of our normal long-term incentive program.
Summary of Components of Regular Total Direct Compensation in 2018 at Target(1)
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | |
| | | Named Executive
Officer | | Base
Salary | | Target
Incentive
(% of
Salary) | | Target
Total
Annual
Cash | | Stock
Option
Value(2)(3) | | P-Share
Value(2) | | RSU
Value(2) | | Total LTI
Value(2) | | Target TDC(4) | | |
| | | | | | | | | | | | | | | | | | | | | |
| | | Gary C. Bhojwani(5) | | $ | 1,000,000 | | | 150 | % | | | $ | 2,500,000 | | | | $ | 633,319 | | | $ | 1,773,364 | | $ | 977,060 | | $ | 3,383,743 | | | $ | 5,883,743 | | | |
| | | % of TDC | | 17 | % | | | | | | 42 | % | | | 11 | % | | 30 | % | 17 | % | 58 | % | | 100 | % | | |
| | | | | | | | | | | | | | | | | | | | | |
| | | Erik M. Helding | | $ | 450,000 | | | 100 | % | | | $ | 900,000 | | | | $ | 130,395 | | | $ | 365,142 | | $ | 201,338 | | $ | 696,874 | | | $ | 1,596,874 | | | |
| | | % of TDC | | 28 | % | | | | | | 56 | % | | | 8 | % | | 23 | % | 13 | % | 44 | % | | 100 | % | | |
| | | | | | | | | | | | | | | | | | | | | |
| | | Bruce K. Baude | | $ | 618,000 | | | 100 | % | | | $ | 1,236,000 | | | | $ | 130,395 | | | $ | 365,142 | | $ | 201,338 | | $ | 696,874 | | | $ | 1,932,874 | | | |
| | | % of TDC | | 32 | % | | | | | | 64 | % | | | 7 | % | | 19 | % | 10 | % | 36 | % | | 100 | % | | |
| | | | | | | | | | | | | | | | | | | | | |
| | | Eric R. Johnson | | $ | 525,000 | | | 100 | % | | | $ | 1,050,000 | | | | $ | 130,395 | | | $ | 365,142 | | $ | 201,338 | | $ | 696,874 | | | $ | 1,746,874 | | | |
| | | % of TDC | | 30 | % | | | | | | 60 | % | | | 7 | % | | 21 | % | 12 | % | 40 | % | | 100 | % | | |
| | | | | | | | | | | | | | | | | | | | | |
| | | Matthew J. Zimpfer(6) | | $ | 550,000 | | | 100 | % | | | $ | 1,100,000 | | | | $ | 149,050 | | | $ | 417,232 | | $ | 230,034 | | $ | 796,316 | | | $ | 1,896,316 | | | |
| | | % of TDC | | 29 | % | | | | | | 58 | % | | | 8 | % | | 22 | % | 12 | % | 42 | % | | 100 | % | | |
| | | | | | | | | | | | | | | | | | | | | |
50
(1)Annual incentive expressed as target levels as of award date; value of equity expressed as grant date fair value.
(2)Represents stock option, performance share and RSU aggregate grant date fair values granted in 2018; actual value realized will depend on stock price appreciation and achievement of performance metrics at time of vesting.
CNO Financial Group, Inc. 2021 Proxy Statement
(3)The amounts shown for the 2018 stock option grants reflect the grant date fair value in accordance with FASB ASC 718. See the explanation in the section entitled "Impact of Tax and Accounting on Compensation Decisions."
(4)Target TDC includes Target Total Annual Cash and the Total LTI Value provided at the time of the annual grant.
(5)Concurrent with his promotion to CEO, on February 21, 2018, Mr. Bhojwani received a one-time grant of 82,110 RSUs, valued at $1.9 million, which is not included above. See page 42 for further detail.
(6)In recognition of his valuable contributions to the Company and for retention purposes, Mr. Zimpfer received a one-time grant of 8,210 RSUs, valued at $191,539, on February 21, 2018. He received an additional 17,592 RSUs, valued at $373,302, on September 28, 2018 in recognition of his key role in the consummation of the LTC Reinsurance Transaction. Both are excluded from the above table. See page 42 for further detail.
In delivering total direct compensation to our NEOs, the Company provided both fixed (base salary) and variable (cash and equity incentives) compensation to the NEOs in 2018. The vast majority of compensation awarded to NEOs in 2018 is "Pay-at-Risk" because the amount actually paid may vary from the target compensation value that was awarded by the Committee as such payments are dependent on Company, business segment and individual performance. Consistent with the Company's compensation policy for all NEOs, the percentage of total target compensation that is "Pay-at-Risk" was significantly greater than the amount of base salary.
2018 Actual Compensation
The following charts show each element of 2018 target NEO compensation, including the mix of short-term and long-term incentives, as well as the amount of "Pay-at-Risk" for the CEO and for the other NEOs (on average):
Composition of 2018 CEO and NEO Total Incentive
Overview
OverviewBase salary is the singleonly fixed component of executive compensation and comprises the smallest percentage of total compensation. Each senior executive'sexecutive’s base salary is reviewed annually by the Board Compensation Committee, or more frequently in the event of a promotion, a change in job responsibilities, an assessment of level of expertise or performance, or based on market data or internal pay guidelines.
Design
Table of Contents
ExecutiveThe Compensation Policies
The Committee generally initiates the formulation of executive compensation levels by targeting the 50th percentile of the competitive market. Annual reviews of executives'executives’ base salaries take into consideration numerous factors, including:
•Mix mix of compensation;
•Job job role and responsibility;
•Individual individual leadership, experience and expertise;
•Individual individual historical performance,performance; retention risk,risk; future potential and future potential;
•Competitivetime in position; competitive labor market pressures;
•Comparison comparison to market data; and
•Internal internal equity of peers.
No specific weighting of these factors is employed. Given our Company'sCompany’s performance-based compensation culture, however, the Committee'sCompensation Committee’s analysis of the factors generally results in increases for our top performers and little or no increases in base salary for averageaverage- or lower performinglower-performing employees.2018
The Compensation Committee does not anticipatepresume that senior executives will receive annual base salary increases. To remain competitive with industry peer companies, however, allIn recognition of our NEOs withtheir respective job performances, in early 2020, the exception of Mr. Bhojwani received merit baseCommittee approved merit-based salary increases during 2018for the NEOs, ranging from 3%0% to 13%3%. As previously noted herein, the Board increased Mr. Bhojwani's annual base salary from $750,000 to $1,000,000, effective January 1, 2018, in conjunction with his promotion to CEO.
Annual Cash
IncentivesIncentives/P4P Plan
Overview
OverviewOur annual incentive plan, the Annual Cash Incentive / Incentive/P4P planPlan focuses on and rewards achievement of annual performance goals. It is the broadest of our management incentive programs, covering all of our NEOs. All participants inNEOs and most of our associates. Prior to the beginning of the annual performance period, all Annual Cash Incentive / Incentive/P4P planPlan participants are assigned target incentive opportunities expressed as a percentage of base salary.
In 2018, we expanded the Annual Cash Incentive / P4P plan to include an additional 1,370 associates, up from 600 key employees in 2017. This added an incremental compensation cost of approximately $3 million in 2018. The Company is of the view that we benefit by further aligning the interests of a broader base of employees to the Company's long-term success.
Strategy
In 2018, Operating EPS and GAAP Revenue were metrics for all of our NEOs. With respect to Messrs. Bhojwani, Helding, Baude, and Zimpfer, additional metrics applied, those being Policies In-Force, Combined In-Force EBIT and Combined Value of New Business ("VNB"). GAAP Investment Yield, GAAP Investment Income, and Corporate Development were additional metrics for Mr. Johnson only. See pages 35-36 for more information on these metrics.
Table of Contents
Payout Opportunities
The table below provides the threshold, target and maximum payouts for 2018 for each of our NEOs under the Annual Cash Incentive / P4P plan.
Summary of 2018 Annual Cash Incentive / P4P Opportunities for NEOs
| | | | | | | | | | |
| | | | | | | | | | | |
| | Named Executive Officer | | Threshold Payout
(% of Salary) | | Target Payout
(% of Salary) | | Maximum Payout
(% of Salary) | | |
| | | | | | | | | | | |
| | Gary C. Bhojwani | | 75% | | 150% | | 300% | | |
| | Erik M. Helding | | 50% | | 100% | | 200% | | |
| | Bruce K. Baude | | 50% | | 100% | | 200% | | |
| | Eric R. Johnson | | 50% | | 100% | | 200% | | |
| | Matthew J. Zimpfer | | 50% | | 100% | | 200% | | |
| | | | | | | | | | | |
The target percentages wereare based on external and internal factors applicable to the positions held by these individuals. The percentage of base salary that represented the threshold, targetindividuals, as described in more detail below.
Design and maximum annual incentive opportunity was increased for Messrs. Bhojwani, Helding and Zimpfer. Changes
The increases reflect Mr. Bhojwani's expanded role and responsibilities, and, in the case of Messrs. Helding and Zimpfer, more closely align them with internal and external peers.2018 Annual Cash Incentive / P4P Plan Design: Performance Metrics
During February 2018, the Board Compensation Committee reviewed the Annual Cash Incentive / Incentive/P4P planPlan design for 20182020 in order to optimize alignment between shareholder and plan participant interests,interests. Given the strategic transformation to an integrated customer-centric organization, the compensation design was developed to keep senior executives focused on the financial performance of the enterprise,enterprise; improve alignment with financial metrics that participants influence,influence; and select operational/business metrics that are assessed to be the most significant drivers of financial success.
In connection with the Compensation Committee’s review and to support the business transformation, three primary changes were introduced for all executive officers (including the NEOs):
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Increased weighting of corporate performance measures to 60% in total (except for the Chief Investment Officer, who has a 40% total weighting) to drive enhanced collaboration during our transformation.
»
An investment metric weighted at 20% (except for the Chief Investment Officer, who has a 40% weighting) to better capture the significance of investment income to overall Company performance.
»
A qualitative goal weighted at 20% to acknowledge and differentiate individual NEO contributions to corporate strategy.
Additional details on the metrics and their weightings are provided below.
CNO Financial Group, Inc. 2021 Proxy Statement51
PERFORMANCE METRICS
The table below summarizes the 2020 financial metrics and weightings for our NEOs under the Annual Cash Incentive/P4P Plan. In 2020, to better align with our business plan and measure growth performance in areas of focus, the metrics of Combined Total Life and Health Collected Premium, Annuity Collected Premium and Combined Total Fee Revenue replaced with the metrics of Operating EPS, Combined Value of New Business, GAAP Revenue and Combined Collected Premium. In addition, the Corporate Development metric (which applied only to Mr. Johnson) was removed, as individual results, contributions and leadership are now measured by the qualitative metric.
| | | NEO 2020 Annual Cash Incentive/P4P Plan Metrics | | |
| | | Performance Measures | | | | Gary C.
Bhojwani | | | | Paul H.
McDonough | | | | Bruce K.
Baude | | | | Eric R.
Johnson | | | | Matthew J.
Zimpfer | | |
| | | Combined In-Force EBIT | | | | 30% | | | | 30% | | | | 30% | | | | 20% | | | | 30% | | |
| | | Combined Total Life and Health Collected Premium | | | | 10.5% | | | | 10.5% | | | | 10.5% | | | | 7% | | | | 10.5% | | |
| | | Annuity Collected Premium | | | | 10.5% | | | | 10.5% | | | | 10.5% | | | | 7% | | | | 10.5% | | |
| | | Combined Total Fee Revenue | | | | 9% | | | | 9% | | | | 9% | | | | 6% | | | | 9% | | |
| | | Investment Performance Metrics (see below) | | | | 20% | | | | 20% | | | | 20% | | | | 40% | | | | 20% | | |
| | | Individual Qualitative Assessment | | | | 20% | | | | 20% | | | | 20% | | | | 20% | | | | 20% | | |
| | | Investment Performance Metrics | | |
| | | Effective Yield (GAAP Net Yield %) | | | | 35% | | | | 35% | | | | 35% | | | | 35% | | | | 35% | | |
| | | Pre-tax C1/AUM | | | | 35% | | | | 35% | | | | 35% | | | | 35% | | | | 35% | | |
| | | Portfolio Excess Returns | | | | 20% | | | | 20% | | | | 20% | | | | 20% | | | | 20% | | |
| | | Total Return versus Benchmark | | | | 10% | | | | 10% | | | | 10% | | | | 10% | | | | 10% | | |
These targets align with our business objectives to drive strong operational performance, deliver consistent yet disciplined growth and improved profitability, generate strong investment returns, and manage risk effectively. Our plan also is designed to establish performance levels that are challenging yet achievable, and that appropriately balance risk and reward. These metrics also align with the day-to-day metrics that we use to run the Company. As a result of this review, most performance metrics and weightings remained consistent with those used in 2017. Metrics that previously were employed in 2017 and continued as elements
Individual Qualitative Metric
In 2020, an individual qualitative metric was added to the Annual Cash Incentive/P4P Plan design for each NEO, weighted at 20% of the 2018 incentive plans applicable to all NEOs are:•- total. The qualitative metric addresses individual results, contributions, and leadership.
Operating Earnings Per Share (EPS), defined as Operating Income (net of tax) dividedQualitative metric results are determined by the weighted average numberCompensation Committee using a variety of diluted shares outstanding.sources, including:
Peer-level input during quarterly business reviews;
»
CEO assessment (other than for the CEO); and
»
Compensation Committee isobservation and assessment of the view that Operating EPS is a key measure of our operating performance, is less effected by events that are unrelated to the underlying fundamentals of our business, and is directly impacted by management during the calendar year. Operating EPS is a key metric that is widely employed by analysts and investors to gauge ouran NEO’s overall performance and value our shares.•contribution to Company success.
In addition, the qualitative metric is capped; if Combined and/or Business Segment In-Force Earnings Before Interest and Taxes (EBIT), whereby (“EBIT”) is below threshold performance, this metric can achieve no greater than its 20% target.
52
CNO Financial Group, Inc. 2021 Proxy Statement
2020 Annual Cash Incentive/P4P Plan Metrics Defined
The following provides additional detail in explaining and defining the metrics that are applicable to all NEOs:
»
Combined In-Force EBIT is, defined as the sum of individual business segment In-forceIn-Force EBIT. In-Force EBIT includes pre-tax revenues and expenses associated with the sales of insurance products that were completed more than one year before the end of the reporting period.
The bulk of an insurer'sinsurer’s earnings typically are generated from policies sold in prior periods, or "policies in-force," so it is important to distinguish those earnings from new business earnings.“policies in-force.” In addition, in the Committee'sCompensation Committee’s view, this metric enhances "line“line of sight"sight” for our operating management and increases their focus on retaining business and improving the longer-term profitability of our core operations.
»
Table of Contents•- Combined
and/or Business Segment Value of New Business (VNB) which calculates the present value of expected profits from product sales. The selection of VNB as an important metric is based on the Committee's view of the importance of growing through sales of profitable products versus rewarding only top-line sales growth.Total Life and Health Collected Premium
•GAAP Revenue is, defined as revenuesLife & Health premiums received, net of reinsurance, and as currently reported in our quarterly financial results.
»
Annuity Collected Premium, defined as annuity premiums received, net of reinsurance, on annuity products and as currently reported in our quarterly financial results.
»
Combined Total Fee Revenue, defined as fees from our operating segments (included in operating earnings) in CNO's Form 10-K, excluding items that are considered to be non-operating in nature and certain revenues generally representing the change in fair value of certain investments that are substantially offset by a corresponding amount included in benefits and expenses. This metric measures the growth and competitiveness of the business and aligns with our focus on topline growth.
•Policies In-Force means the number of policies for which a reserve has been established (and third party counts forthird-party policies sold, by Bankers Life agents). This metric not only aligns Annual Cash Incentive / P4P participants to CNO's strategic focus on customer growth, but also measures retentionBroker Dealer/ Registered Investment Adviser accounts, and persistency, as well as external stakeholders' expectations in this important growth area for the Company.revenue from Web Benefits Design (a wholly-owned subsidiary).
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Effective Yield (or GAAP Net Yield %)
•GAAP Investment Yield is, defined as period investment income (net of investment expenses) divided by average invested assets for the same period.
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Pre-tax C1/AUM
•GAAP Investment Income is, defined as the income earned on general account invested assets, netaggregate of investment expenses.
•Corporate Development, a qualitative metric, is an elementasset National Association of Insurance Commissioners (NAIC) risk-based capital charges divided by assets under management. This measures the risk of default (of bonds and mortgages) or decrease in the value of the assets held in the investing portfolio as a percentage of assets under management.
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Portfolio Excess Returns, which measures the annual value-added basis points from asset allocation and security selection decisions (expressed as a percentage) relative to an assigned industry benchmark. It is calculated by industry standard attribution formulas.
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Total Return versus Benchmark, which measures the full-year portfolio total return for non-cash investments as compared to the full-year total return for a stated benchmark.
2020 Payout Opportunities
Target Annual Cash Incentive / Incentive/P4P planPlan payout amounts for Mr. Johnson,each NEO are determined by the Chief Investment Officer. In additionCompensation Committee at the beginning of the performance period based on external and internal factors applicable to his continuing CIO responsibilities, Mr. Johnson also is leading efforts to further advance the Company's investment capabilitiespositions held by establishing and deepening external relationships, refining protocols and processes, as well as evaluating potential opportunities and overseeing the successful execution of opportunistic transactions, as appropriate.each NEO. 2018»
Target Annual Cash Incentive / Incentive/P4P Plan Design: Metric Weightings Our Annual Cash Incentive / P4P plan design rewardsas a threshold levelpercentage of financial performance that corresponds toeach NEO base salary:
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Mr. Bhojwani, 160%
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Other NEOs, 100%
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Threshold payout: 50% of a target payout to a target level of performance that provides
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Target payout: 100% of target payout and to a maximum level of performance that provides a payout of
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Maximum payout: 200% of target. Anytarget payout
A linear interpolation is used to determine payout percentages between these financialthreshold and target performance, goals is determined through straight line interpolation between the appropriate levels ofand target and maximum performance. Consistent with our compensation philosophy, target annual incentive levels are established to generate total annual cash compensation at competitive market median levels. The table below summarizes the 2018 financial metrics and weightings for our NEOs under the
2020 Annual Cash
Incentive / Incentive/P4P
plan. Summary of 2018 Annual Cash Incentive / P4P Metrics and Weightings for NEOs
Plan Targets
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| | Performance Measures | | | | | Gary C. Bhojwani | | | Erik M. Helding | | | Bruce K. Baude | | | Eric R. Johnson | | | Matthew J. Zimpfer | | |
| | Operating EPS | | | | | 40 | % | | 40 | % | | 30 | % | | 30 | % | | 30 | % | |
| | Policies In-Force | | | | | 10 | % | | 10 | % | | 10 | % | | — | | | 10 | % | |
| | GAAP Revenue | | | | | 20 | % | | 20 | % | | 20 | % | | 15 | % | | 20 | % | |
| | Combined In-Force EBIT | | | | | 20 | % | | 20 | % | | 20 | % | | — | | | 20 | % | |
| | Combined VNB | | | | | 10 | % | | 10 | % | | 20 | % | | — | | | 20 | % | |
| | GAAP Yield | | | | | — | | | — | | | — | | | 25 | % | | — | | |
| | GAAP Investment Income | | | | | — | | | — | | | — | | | 20 | % | | — | | |
| | Corporate Development | | | | | — | | | — | | | — | | | 10 | % | | — | | |
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Table of Contents
The Committee established the above weightings to prioritize the generation of Operating EPS, followed by GAAP Revenue and Combined In-Force EBIT, for all but one of the NEOs. These weightings are consistent with the Company's strategy over the last several years as we have sought to de-risk and deploy our capital largely to repurchase shares. Mr. Johnson's weightings recognize his role as Chief Investment Officer and his focus on investment returns and portfolio optimization.
2018 Annual Cash Incentive / P4P Plan: Targets and Results
Consistent with our investor feedback, we are providing more transparency surrounding the target setting process and the manner in which we treat unusual or non-recurring events that may impact our targets or actual results. In this section, we explain how we set our 2018 targets, what types of ranges we set and how, if at all, the actual results were adjusted.
The primary purpose of the Annual Cash Incentive / Incentive/P4P planPlan is to reward executive officers for delivering targeted financial results. For the reasons set forth below, the Compensation Committee set the targets in February 2020 for each of the performance metrics at levels that it considered rigorous and challenging as compared to normalized 20172019 results. No changes were made to such targets after they were established. The Compensation Committee set the applicable financial objectives based on the Board-approved business plan for fiscal year 2018,2020, which entailed a detailed vetting process prior to presentation and approval by the Board. The Compensation Committee historically has considered a number of factors in setting incentive performance targets, as well as the threshold
CNO Financial Group, Inc. 2021 Proxy Statement53
level and the maximum level, to require strong performance to achieve targets. These factors include Company business plans and current forecasts, historical performance, incentive practices used by peer companies, and analyst expectations. Consistent with our compensation philosophy, target annual cash incentive levels are established to generate total annual cash compensation at competitive market median levels. The tabletables below summarizessummarize the normalizations that were made to 2017our 2019 reported results to account for various unusual and non-recurring items that impacted 20172019 performance, both favorably and unfavorably. By normalizing, the Compensation Committee was able to establish a baseline level of performance from which we2020 targets were then able to set 2018 targets that reflected a proper balance between ambition and achievability, while removing the unusual and non-recurring events from 20172019 that were not expected to continue. Baseline for 2018 Annual Cash Incentive / P4P Target Setting
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2017 Normalized
for 2018 Plan
Creation |
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2018 Target |
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| | | Operating EPS(1) | | $1.75 | | $1.60 | | $1.97 | | |
| | | Policies In-Force | | 3,486.4 MM | | 3,486.4 MM | | 3,471.5 MM | | |
| | | GAAP Revenue | | $4,028.3 MM | | $3,979.7 MM | | $4,017.7 MM | | |
| | | Combined In-Force EBIT | | $705.0 MM | | $665.7 MM | | $673.8 MM | | |
| | | Combined VNB | | $74.5 MM | | $74.5 MM | | $81.3 MM | | |
| | | GAAP Yield | | 5.63% | | 5.49% | | 5.41% | | |
| | | GAAP Investment Income | | $1,268.8 MM | | $1,237.7 MM | | $1,261.3 MM | | |
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•2017 Operating EPS, GAAP Revenue, and Combined In-Force EBIT were normalized to adjust for the impact of approximately $49 million of unusual 2017 pretax investment outperformance which was considered non-recurring. Strong equity market performance drove higher than anticipated returns within our Company-owned life insurance ("COLI") policy, and market interest rate expectations triggered record corporate debt refinancing activity that generated significant unanticipated prepayment income. This was not expected to, and did not, recur in 2018.
1.Operating EPS is a non-GAAP measure. See "Information Related to Certain Non-GAAP Financial Measures" for a reconciliation to the corresponding GAAP measure.
Table of Contents
•In addition to the aforementioned investment income outperformance, 2017 Operating EPS and Combined In-Force EBIT were normalized to exclude the impact of other insurance margin and expense items that were determined to be unusual and/or non-recurring. In the aggregate, these normalizing items reduced pre-tax income by an additional $9 million.
•2017 GAAP Yield and GAAP Investment Income were normalized to adjust for the impact of the significant and unanticipated prepayment income that was not expected to, and did not recur in 2018.
Certain 2018 performance targets were set below the 2017 normalized results. On a comparable basis, when both periods are normalized for unusual and non-recurring events, or items associated with strategies deemed to be in the best interests of shareholders such as the cessation of sales of certain products that are now in run-off, the 20182020 targets incorporate growth over 2017both 2019 as reported and normalized levels. As an example,
The Compensation Committee determined that, following such normalization, 2020 corporate performance measure targets were appropriately rigorous.
| | | Baseline for 2020 Annual Cash Incentive/P4P Plan Target Setting | | |
| | | Corporate Performance
Measures | | | | 2019 As Reported | | | | 2019 Normalized | | | | 2020 Target | | |
| | | Combined In-Force EBIT | | | | $625.8 MM | | | | $623.2 MM | | | | $638.7 MM | | |
| | | Combined Total Life and Health Collected Premium | | | | $2,519.4 MM | | | | $2,519.4 MM | | | | $2,543.2 MM | | |
| | | Annuity Collected Premium | | | | $1,306.4 MM | | | | $1,306.4 MM | | | | $1,333.3 MM | | |
| | | Combined Total Fee Revenue | | | | $88.4 MM | | | | $77.1 MM | | | | $100.4 MM | | |
The Compensation Committee consulted with Willis Towers Watson in setting the 2018 targets for Operating EPS, Policies In-Force, GAAP Revenue, Combined In-Force EBIT and GAAP Investment Income2020 investment performance measure targets. The 2019 investment performance measures were not normalized. The 2020 Effective Yield (GAAP Net Yield %) was set higher than 2017 actualbelow 2019 results to reflect business growth, but were partially offset by continued run-off of certain closed blocks. The 2018 GAAP Yield and GAAP Investment Income targets also reflectedgiven the continued low interest rate environment that pressuredcontinued to pressure average investment portfolio yields. The Pre-tax C1/AUM target was set in line with the Company’s 2020 risk-based capital plan, while taking into consideration the target yield. The Portfolio Excess Returns and Total Return versus Benchmark metrics measure performance relative to certain benchmarks and are designed to reward performance generally in line with or exceeding market performance. The Compensation Committee determined that 2018the 2020 investment performance measure targets were sufficiently rigorous, notwithstanding the fact that some were set below 2017 target and actual performance levels.
appropriately rigorous.
| | | Baseline for 2020 Annual Cash Incentive/P4P Plan Target Setting | | |
| | | Investment Performance Measures | | | | 2019 As Reported | | | | 2020 Target | | |
| | | Effective Yield (GAAP Net Yield %) | | | | 5.19% | | | | | | 5.0% | | | |
| | | Pre-tax C1/AUM | | | | 1.25% | | | | | | 1.50% | | | |
| | | Portfolio Excess Returns | | | | 18 bps | | | | Benchmark Performance | | |
| | | Total Return versus Benchmark | | | | 26 bps | | | | Benchmark Performance | | |
54
CNO Financial Group, Inc. 2021 Proxy Statement
The table below summarizes the threshold, target and maximum performance targets for the 20182020 Annual Cash Incentive / P4P plan./P4P Plan. See page 53 for definitions of each metric. 2018
| | | 2020 Annual Cash Incentive/P4P Target Plan Performance Levels | | |
| | | Corporate Performance Measures | | | | Threshold | | | | Target | | | | Maximum | | |
| | | Combined In-Force EBIT | | | | $574.8 MM | | | | $638.7 MM | | | | $702.6 MM | | |
| | | Combined Total Life and Health Collected Premium | | | | $2,416.0 MM | | | | $2,543.2 MM | | | | $2,670.4 MM | | |
| | | Annuity Collected Premium | | | | $1,266.6 MM | | | | $1,333.3 MM | | | | $1,400.0 MM | | |
| | | Combined Total Fee Revenue | | | | $90.4 MM | | | | $100.4 MM | | | | $110.4 MM | | |
| | | Investment Performance Measures | | |
| | | | | | | Threshold | | | | Target | | | | Maximum | | |
| | | Effective Yield (GAAP Net Yield %) | | | | 4.8% | | | | 5.0% | | | | 5.2% | | |
| | | Pre-tax C1/AUM | | | | 1.65% | | | | 1.50% | | | | 1.35% | | |
| | | Portfolio Excess Returns | | | | ≥ −150 bps of
benchmark performance | | | | Benchmark
Performance | | | | ≥ +150 bps of
benchmark performance | | |
| | | Total Return versus Benchmark | | | | ≥ −150 bps of
benchmark performance | | | | Benchmark
Performance | | | | ≥ +150 bps of
benchmark performance | | |
2020 Annual Cash
Incentive / Incentive/P4P
Target Performance LevelsPlan Results
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| | Performance Measures | | Threshold | | Target | | Maximum | | |
| | Operating EPS(1) | | $1.77 | | $1.97 | | $2.27 | | |
| | Policies In-Force | | 3,298.0 MM | | 3,471.5 MM | | 3,645.1 MM | | |
| | GAAP Revenue | | $3,816.8 MM | | $4,017.7 MM | | $4,218.6 MM | | |
| | Combined In-Force EBIT | | $606.4 MM | | $673.8 MM | | $774.9 MM | | |
| | Combined VNB | | $73.2 MM | | $81.3 MM | | $89.4 MM | | |
| | GAAP Yield | | 5.14% | | 5.41% | | 5.68% | | |
| | GAAP Investment Income | | $1,198.2 MM | | $1,261.3 MM | | $1,324.4 MM | | |
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The Board Compensation Committee has the authority to adjust performance goals or results for the impact of certain industry, market or company-specificCompany-specific special items from year to year. The Board takes very seriously the consideration of any such adjustments and generally prefers to avoid any such modifications. Nonetheless, the Board is responsible for ensuring that management acts in the best interests of shareholders, regardless of the impact toon its incentives. Therefore, we believeare of the view that any adjustment that may be applied must be (1) material, (2) non-recurring or unusual in nature, and (3) reflect items that management either cannot control or, if controllable, has determined to be in the long-term best interests of the Company and its shareholders. These adjustments may vary from year to year and may have either a favorable or unfavorable impact on the funding of the Annual Cash Incentive / Incentive/P4P plan.
1.Operating EPS is a non-GAAP measure. See "Information RelatedPlan.
For 2020, the Compensation Committee considered two items to Certain Non-GAAP Financial Measures" for a reconciliationbe material, non-recurring items that were beyond management’s control and should be adjusted in determining the 2020 Annual Cash Incentive/P4P Plan payouts. Those two items related to the corresponding GAAP measure.
Tablesettlement of Contents
The table below summarizesa legacy regulatory matter and the adjustments that were made to 2018 results on accountinsurance margin impacts of the LTC Reinsurance Transaction,actuarial assumption review driven by the unexpectedly steep decline in interest rates in 2020. Neither had been considered in setting the 2020 operating plan or the Annual Cash Incentive/P4P Plan targets. In the aggregate, these adjustments decreased the total bonus pool (which covers the NEOs and the overall payout percentagesmajority of our employees) by approximately 4%. The adjusted amounts are reflected in the “2020 Adjusted for each metric.
LTC Reinsurance Transaction Adjustments to 2018 Annual Cash Incentive / P4P Targets and Payout Percentages
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| | | Operating EPS(1) | | $1.83 | | $1.90 | | 83% | | |
| | | Policies In-Force | | 3,415.7 MM | | 3,482.7 MM | | 106.4% | | |
| | | GAAP Revenue | | $3,934.5 MM | | $4,021.6 MM | | 101.9% | | |
| | | Combined In-Force EBIT | | $638.8 MM | | $648.2 MM | | 81.0% | | |
| | | Combined VNB | | $79.7 MM | | $79.7 MM | | 90.0% | | |
| | | GAAP Yield | | 5.56% | | 5.57% | | 159.0% | | |
| | | GAAP Investment Income | | $1,247.4 MM | | $1,297.5 MM | | 157.3% | | |
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As originally established, the 2018 business plan did not contemplate the LTC Reinsurance Transaction. That transaction, which had the effect of improving our risk, earnings and ROE profiles, also reduced our reported 2018 results relative to all performance metrics except Combined VNB. The Board Compensation Committee viewed this transaction as a critical step in serving the long-term best interests of shareholders. Thus, so as not to penalize management for taking actions that were vitally important to the Company's long-term results, but which were not built into the 2018 Annual Cash Incentive / P4P plan, the Board and Board Compensation Committee adjusted our 2018 results by removing the impact of the LTC Reinsurance Transaction, as shownCompensation” column in the table above.
below.
CNO Financial Group, Inc. 2021 Proxy Statement55
| | | Corporate Performance Measures | | | | 2020 As Reported | | | | 2020 Adjusted
for Incentive
Compensation | | | | Payout % | | |
| | | Combined In-Force EBIT | | | | $726.4 MM | | | | $692.2 MM | | | | 183.8% | | |
| | | Combined Total Life and Health Collected Premium | | | | $2,531.3 MM | | | | — | | | | 95.3% | | |
| | | Annuity Collected Premium | | | | $1,165.0 MM | | | | — | | | | 0% | | |
| | | Combined Total Fee Revenue | | | | $106.0 MM | | | | — | | | | 155.6% | | |
| | | Investment Performance Measures | | | | 2020 As Reported | | | | 2020 Adjusted
for Incentive
Compensation | | | | Payout % | | |
| | | Effective Yield (GAAP Net Yield %) | | | | 5.04% | | | | — | | | | 120.0% | | |
| | | Pre-tax C1/AUM | | | | 1.33% | | | | — | | | | 200.0% | | |
| | | Portfolio Excess Returns | | | | 54 bps | | | | — | | | | 136.0% | | |
| | | Total Return versus Benchmark | | | | 2 bps | | | | — | | | | 101.3% | | |
The table below sets forth the actual 20182020 cash bonuses paid out to the NEOs pursuant to our Annual Cash Incentive / Incentive/P4P plan.Plan. These figures combine the individual performance opportunities, weightings and targets previously discussed. | | | 2020 Annual Cash Incentive/P4P Plan Payouts(1) | | |
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| | | | | | | Target Annual P4P
Incentive(2) | | | | Financial Metrics
(80% of Total) | | | | Qualitative Metric
(20% of Total) | | | | Total P4P Payout | | |
| | | Named Executive
Officer | | | | % of
Base Salary | | | | $ | | | | % | | | | $ | | | | % | | | | $ | | | | % of Target | | | | $ | | |
| | | Gary C. Bhojwani | | | | | | 160 | | | | | | | 1,640,656 | | | | | | | 136 | | | | | | | 1,788,550 | | | | | | | 135 | | | | | | | 442,977 | | | | | | | 136 | | | | | | | 2,231,527 | | | |
| | | Paul H. McDonough | | | | | | 100 | | | | | | | 615,246 | | | | | | | 136 | | | | | | | 670,706 | | | | | | | 135 | | | | | | | 166,116 | | | | | | | 136 | | | | | | | 836,823 | | | |
| | | Bruce K. Baude | | | | | | 100 | | | | | | | 651,093 | | | | | | | 136 | | | | | | | 709,785 | | | | | | | 125 | | | | | | | 162,773 | | | | | | | 134 | | | | | | | 872,558 | | | |
| | | Eric R. Johnson | | | | | | 100 | | | | | | | 550,000 | | | | | | | 141 | | | | | | | 618,741 | | | | | | | 115 | | | | | | | 126,500 | | | | | | | 135 | | | | | | | 745,242 | | | |
| | | Matthew J. Zimpfer | | | | | | 100 | | | | | | | 597,399 | | | | | | | 136 | | | | | | | 651,250 | | | | | | | 135 | | | | | | | 161,298 | | | | | | | 136 | | | | | | | 812,548 | | | |
(1)
Variances between values and totals may exist due to rounding.
(2)
Percentage is applied pro rata to base salary changes occurring during the calendar year. Target amounts reflect such pro rata salary changes.
56
CNO Financial Group, Inc. 2021 Proxy Statement
SummaryQualitative metric results are determined by the Compensation Committee using a variety of 2018 Annual Cash Incentive / P4P Overall Payouts
sources including peer-level input during quarterly business reviews, CEO assessment (other than for the CEO), and Compensation Committee observation and assessment. For 2020, NEO qualitative metric payouts ranged from 115% to 135% of target. These results reflect each NEO’s: | | | | | | | | | | | | | | |
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| | Named Executive Officer | | Base Salary | | Target Annual
Incentive
Opportunity (%
of Base Salary | | Target Annual
Incentive | | Actual Annual
Incentive Payout | | Actual Annual
Incentive Plan
Payout % | | |
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| | Gary C. Bhojwani | | $1,000,000 | | 150% | | $1,500,000 | | $1,338,333 | | 89% | | |
| | Erik M. Helding | | $450,000 | | 100% | | $450,000 | | $380,968 | | 89% | | |
| | Bruce K. Baude | | $618,000 | | 100% | | $618,000 | | $553,521 | | 90% | | |
| | Eric R. Johnson | | $525,000 | | 100% | | $525,000 | | $631,893 | | 121% | | |
| | Matthew J. Zimpfer | | $550,000 | | 100% | | $550,000 | | $470,671 | | 90% | | |
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Leadership in navigating pandemic-related challenges and social justice issues;
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Contributions to our ESG and DE&I programs;
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Progress on succession planning; and
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Involvement in mentoring others.
Long-Term
Equity Incentives
Overview
OverviewWe are strongly of the viewbelieve that performance-based equity compensation aligns our NEOsNEOs’ interests to those of our shareholders and helps to drive long-term shareholder value creation while also facilitating the retention of key executive talent.
1.
Changes to Long-Term Incentive Award Mix
Stock Options were eliminated as an award type in 2020. This simplifies our equity award mix from three types to two—performance-based awards (P-shares) and RSUs. This aligns with prevalent market practice, which show declining use of Stock Options by our peer companies. In 2019, our grants were awarded as 50% P-shares, 30% RSUs, and 20% Stock Options. In 2020, grants were awarded as 55% P-shares and 45% RSUs, placing a greater emphasis on our P-shares while balancing the retentive qualities of time-vested RSUs.
Changes to Long-Term Incentive Performance Metrics
The P-share awards with respect to the performance period commencing on January 1, 2020 and ending on December 31, 2022, under our LTI Plan, will pay out after three years based on one-year Operating ROE and one-year Operating EPS, each as adjusted by the relative TSR for the three-year period. The P-share awards for the 2019-2021 performance period were based on three-year Operating ROE and three-year relative TSR.
The Compensation Committee believes the change to one-year financial metrics, while preserving three-year vesting, was most appropriate due to the Company’s strategic transformation. A one-year metric promotes simplicity and understandability of performance goals during the Company’s transformation. Continued use of Operating ROE aligns with shareholder interests. The addition of Operating EPS provides a clear gauge of performance, requiring solid operational execution as well as disciplined capital management, and is a non-GAAP measure. See "Information Relatedmetric closely followed by both sell-side analysts and buy-side investors.
TSR will be measured relative to Certain Non-GAAP Financial Measures" for a reconciliation to the corresponding GAAP measure.
Tablepeer group of Contents
Design and Strategy
Annual long-term equity incentive awards are delivered in the form of P-shares, stock options and RSUs. The Board Compensation Committee establishes the annual target for all long-term equity incentive grantscompanies over three years. Shares that will vest after three years based on competitive market data. This approachone-year financial performance may be modified by the relative TSR result over the three-year period. If relative TSR performance is intendedat the 75th percentile or above, vested shares will increase by 25%, subject to deliver median total direct compensation using a combinationcap of P-shares, stock options and RSUs. In200%. Relative TSR at the 2018 annual grant, the Committee used a 30-day average of our stock price to calculate25th percentile or lower will reduce vested shares by 25%. There is no change in the number of vested shares for performance between the 25th and 75th percentile. The modifier cannot increase the P-share payout above the cap of 200%.
Use of a three-year relative TSR modifier maintains a long-term performance outlook and aligns payouts with shareholder experience over time. Comparing TSR to be granteda group of industry peer companies measures our ability to each executive and continued, as it previously has,perform relative to use a Black-Scholes valuation model for stock options. RSUs were added tothose affected by the annual long-term incentive grant in 2017. Utilizing RSUs as incentives is a prevalent market practice that aids in the retention and recognition of executives while supporting long-term planning and strategic thinking. Providing RSUs in the annual grant also continues our policy of aligning the interests of management and shareholders.
same macro-economic conditions.
CNO Financial Group, Inc. 2021 Proxy Statement57
Design
The Compensation Committee reviews and approves individual grants for the NEOs, as well as all stock options, P-share grants and any RSU awards made to other executives under the purview of the Committee.Compensation Committee based on competitive market data. Annual grants for all officers are reviewed and approved at the Committee'sCompensation Committee’s scheduled meeting at approximately the same time each year. Stock options mayIn determining the 2020 annual grant, the Compensation Committee used a 30-day average of our stock price to calculate the number of P-shares and RSUs to be granted only with an exercise price at or above the closing market price of our common stock on the date of grant ("Fair Market Value").to each executive. Interim or off-cycle grants are reviewed and approved by the Compensation Committee as circumstances warrant. The Chief Executive OfficerCEO is authorized by the Compensation Committee to utilize a designated number of shares each year to grant equity awards to non-executive officers to attract, reward, motivate and/or retain such employees, as deemed appropriate by the CEO. Such awards are regularly reviewed by the Compensation Committee. Unless otherwise noted, grants to our NEOs have vesting schedules identical to those for other executives.
To be eligible to vest in long-term equity incentive awards, associatesgenerally NEOs must continue to be employed by us through the vesting dates or satisfy the definitions of "Retirement,“Retirement, Death or Disability"Disability” in our award agreements.agreements or upon an involuntary termination within six months in anticipation of or within two years after a Change in Control (as defined in our award agreements). For additional information on the terms of our equity-based awards, see pages 67-68.
The Compensation Committee assesses aggregate share usage and dilution levels in comparison to general industry norms. This enables the Committee to be mindful of total cost, grants awards that are competitive in the market, a policy of internal equity, and reinforcement of our philosophy of pay-for-performance. In 2018,
Performance Metrics/Targets
As noted previously, the Committee approved the mix of award grants as 50% P-shares, 20% stock options and 30% RSUs. This mix of long-term equity incentives focuses on performance elements and better aligns our long-term compensation with shareholder value creation.Target Setting
Multi-year performance periods are used to determine LTI awards in order to encourage long-term sustainable performance. TheCompensation Committee chose two one-year performance metrics and one relative three-year modifier for setting LTI P-share awards.
The first one-year metric is an absolute measure, Operating ROE, which is directly linked to the Company'sCompany’s business plan and is one of the principal tools used by our management and the investment community to evaluate our performance and assess valuation.
Operating ROE, is a key indicator of our ongoing operational performance and profitability, and it focuses management on the efficient use of capital. Operating ROEnon-GAAP financial measure. is defined as net operating earningsincome divided by average equity. In calculating average equity, we exclude accumulated other comprehensive income or loss ("AOCI"(“AOCI”) and deferred tax assets related to net operating loss carryforwards ("NOLs"losses (“NOLs”). The Committee has chosenWe believe it is common industry practice to exclude AOCI from the equity component of the Operating ROE calculation as it can be highly volatile due to changes in general market interest rates rather than a result of the business decisions made by management. Our deferred tax assets related to NOLs are excluded as these assets do not provide any return to shareholders until after the NOLs are realized as a reduction toutilized, reducing taxes that would otherwise would be due.
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The second one-year metric is an absolute measure, Operating EPS.
Operating EPS, a non-GAAP financial measure, is defined as net operating income divided by the weighted average number of diluted shares outstanding.
Net operating income is defined as net income excluding: (i) loss related to reinsurance transaction, including impact of taxes; (ii) net realized investment gains or losses from sales, impairments and change in allowance for credit losses, net of related amortization and taxes; (iii) net change in market value of investments recognized in earnings, net of taxes; (iv) fair value changes due to fluctuations in the interest rates used to discount embedded derivative liabilities related to our fixed index annuities, net of related amortization and taxes; (v) fair value changes related to the agent deferred compensation plan, net of taxes; (vi) loss on extinguishment of debt, net of taxes; (vii) changes in the valuation allowance for deferred tax assets and other tax items; and (viii) other non-operating items consisting primarily of earnings attributable to variable interest entities (VIEs), net of taxes. Net operating income is used consistently by CNO’s management to evaluate the operating performance of the Company and is a measure commonly used in the life insurance industry. Management and the Board believe an analysis of net operating income is important in understanding the profitability and operating trends of the Company’s business.
For additional information on these non-GAAP financial measures, see “Information Related to Certain Non-GAAP Financial Measures” beginning on page 88 and the information set forth in our periodic filings with the SEC.
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CNO Financial Group, Inc. 2021 Proxy Statement
The three-year modifier is a relative measure of Total Shareholder Return ("TSR")TSR based on our stock price performance relative to a group of industry peers against which we compete for business, capital, and executive talent.(see “—Total Shareholder Return Performance Peers” below). We believe that relative TSR provides a strong alignment between the interests of management withand those of our shareholders. The Compensation Committee believes that targeting the 50th percentile of stock pricedecreasing shares by 25% when three-year relative TSR performance is consistentat the 25th percentile or lower or increasing by 25% when performance is at the 75th percentile or higher, maintains a long-term performance outlook and aligns payouts with typical market practicesshareholder experience over time. No modification occurs when performance is between the 25th and provides sufficient rigor.75th percentile.
Similar to the Annual Cash Incentive / Incentive/P4P planPlan award measurements, the Board Compensation Committee has the authority to adjust results for events that are (1) material, (2) non-recurring or unusual, and (3) that management cannot control or, if controllable, has determined to be in the long-term best interests of the Company and its shareholders. These adjustments may vary from year to year and may have either a favorable or unfavorable impact on the funding of long-term equity incentives.
Long-Term Incentive
ProgramPlan Grants in
20182020
The P-shares awarded in 2018 required2020 require a threshold-levelthreshold level performance ofto receive 50% of the target award,number of shares, and the upside opportunity for maximum performance wasis 200% of the target award,number of shares, based on a three-yearthe one-year performance period, ending in 2020.subject to adjustment based on the three-year TSR. RSUs vest ratably over thea three-year period. Stock options vest 50% at the second anniversary of the grant date and 50% at the third anniversary. Dividends are paid on previously granted shares of restricted stock prior to vesting, and dividendDividend equivalents are paid on P-shares and RSUs upon vesting. The table below shows grant date fair value of the annual equity awards granted to our NEOs in 2018, which are subject2020.
| | | 2020 Annual LTI Grants | | |
| | | | | | | 2020 Equity Grant | | |
| | | Named Executive Officer | | | | P-Shares | | | | RSUs | | |
| | | Gary C. Bhojwani | | | | | | 135,300 | | | | | | | 110,700 | | | |
| | | Grant Date Fair Value | | | | | $ | 2,754,708 | | | | | | $ | 2,146,473 | | | |
| | | Paul H. McDonough | | | | | | 27,100 | | | | | | | 22,100 | | | |
| | | Grant Date Fair Value | | | | | $ | 551,756 | | | | | | $ | 428,519 | | | |
| | | Bruce K. Baude | | | | | | 21,000 | | | | | | | 17,200 | | | |
| | | Grant Date Fair Value | | | | | $ | 427,560 | | | | | | $ | 333,508 | | | |
| | | Eric R. Johnson | | | | | | 24,000 | | | | | | | 19,700 | | | |
| | | Grant Date Fair Value | | | | | $ | 488,640 | | | | | | $ | 381,983 | | | |
| | | Matthew J. Zimpfer | | | | | | 24,000 | | | | | | | 19,700 | | | |
| | | Grant Date Fair Value | | | | | $ | 488,640 | | | | | | $ | 381,983 | | | |
No One-Time Grants
No special one-time grants were made in 2020 to
a three-year performance period.any NEOs.
CNO Financial Group, Inc. 2021 Proxy Statement59
| | | | | | | | | | | | | | | |
2018 Annual LTI Grants | | |
| | | | | | | | | | | |
| | | | | 2018 Equity Grant | | |
| | | | | | | | | | | |
| | Named Executive Officer | | Stock Options(1) | | P-Shares
| | RSUs
| | |
| | Gary C. Bhojwani(2) | | | 100,150 | | | 69,790 | | 41,880 | | |
| | Grant Date Fair Value | | | $ | 633,319 | | | $ | 1,773,364 | | $ | 977,060 | | |
| | Erik M. Helding | | | 20,620 | | | 14,370 | | 8,630 | | |
| | Grant Date Fair Value | | | $ | 130,395 | | | $ | 365,142 | | $ | 201,338 | | |
| | Bruce K. Baude | | | 20,620 | | | 14,370 | | 8,630 | | |
| | Grant Date Fair Value | | | $ | 130,395 | | | $ | 365,142 | | $ | 201,338 | | |
| | Eric R. Johnson | | | 20,620 | | | 14,370 | | 8,630 | | |
| | Grant Date Fair Value | | | $ | 130,395 | | | $ | 365,142 | | $ | 201,338 | | |
| | Matthew J. Zimpfer(3) | | | 23,570 | | | 16,420 | | 9,860 | | |
| | Grant Date Fair Value | | | $ | 149,050 | | | $ | 417,232 | | $ | 230,034 | | |
| | | | | | | | | | | |
2018–2020 P-Share Performance
The amounts shown for2018 P-share award grants were based on two performance goals over the 2018 stock option grants reflect the aggregate grant date fair value in accordance with FASB ASC 718. See the explanation in the "Impact of Tax and Accounting on Compensation Decisions" section below.
(2)Concurrent with his promotion to CEO, on February 21, 2018, Mr. Bhojwani received a one-time grant of 82,110 RSUs, valued at $1.9 million, which is not included above. See below for further detail.
(3)In recognition of his valuable contributions to the Company and for retention purposes, Mr. Zimpfer received a one-time grant of 8,210 RSUs, valued at $191,539, on February 21, 2018. He received an additional 17,592 RSUs, valued at $373,302, on September 28, 2018 in recognition of his key role in the consummation of the LTC Reinsurance Transaction. Both are excluded from the above table. See below for further detail.
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Certain One-Time Grants
In the course of the shareholder engagement that the Company initiated last fall, the Board Compensation Committee learned that investors desire more fulsome disclosure concerning any one-time or unusual payments to NEOs, including the terms, rationale, and context therefor, and also including any contractual obligation pursuant to which payment was made. Accordingly, going forward, the Company will enhance disclosures of such compensation.
Upon assuming the role of Chief Executive Officerperformance period commencing on January 1, 2018 Mr. Bhojwani was awarded a one-time promotion grant of 82,110 restricted stock units with a grant date fair value of $1.9 million, that will vest in equal installments in March 2020 and March 2021. The Committee is of the view that this stock grant was reasonable relative to market standards.
One of the Company's key strategic accomplishments in 2018 was the completion of the LTC Reinsurance Transaction. Mr. Zimpfer was the Company's leaderending on this transaction. In recognition of the successful execution of this transformational transaction, the Committee granted Mr. Zimpfer 17,592 RSUs, which vest in three equal annual installments beginning on September 28, 2019. In addition, as Mr. Zimpfer's skills and experience are considered to be highly valuable and his future contributions are expected to be instrumental in driving the Company's long-term success, he was granted a retention incentive in the form of 8,210 RSUs that will vest on March 25, 2021.
The Committee views these grants as special and unusual rewards in recognition of new roles and responsibilities undertaken, outstanding work effort, or made in order to retain exemplary talent. The Committee continues to prudently and carefully evaluate our compensation program, including one-time grants, to ensure that our decisions align with the interests of our shareholders, the Company, and our executive officers, and in all instances, links our NEOs' compensation to the Company's performance.
Long-Term Incentive Program Performance for Awards Granted in 2016, 2017, and 2018
2016 – 2018 P-Share Performance
•P-share awards for the 2016-2018 grant were evenly split between two performance goals:December 31, 2020: (1) a three-year average Operating ROE with an 8.80%8.84% threshold, a 9.5%10.40% target, and 10.25%an 11.96% maximum for all NEOs, and (2) relative TSR for comparator group ("(“TSR Performance Peers"Peers”), targetingwith the 50th50th percentile set for target performance.
| | | 2018-2020 3-Year Operating ROE | | | | % Amount | | |
| | | ≥ 11.96 | | | | 200% | | |
| | | 10.40% (Target) | | | | 100% | | |
| | | 8.84% (Threshold) | | | | 50% | | |
| | | < 8.84% | | | | 0% | | |
| | | Actual Results: 11.14% | | | | Payout as % of Target: 147.37% | | |
»
•The Operating ROE targets were established in late 2015/early 2016,2018, based on our strategic goals and internal projections at that time, and their respective impacts on the components of the Operating ROE calculation.
»
The threshold value reflects the Committee'sCompensation Committee’s view of the minimum acceptable result deemed worthy of a payout, the determination that the target value aligns with our strategic plan, and the premise that the maximum value signifies exceptional performance. The Compensation Committee believesconcluded that the combination of the two metrics willwould continue to focus management on improving long-term earnings growth and creating value for shareholders.
»
•The Company reported Operating ROE(1) of 8.7%9.8%, 9.2%10.7% and 9.8%12.9% for the years 2016, 2017,2018, 2019 and 2018,2020, respectively.
1.Operating ROE is a non-GAAP financial measure. See "Information Related to Certain Non-GAAP Financial Measures" for a reconciliation to the corresponding GAAP measure.
•
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•For the 20162018–2020 period, the Committee approved two adjustments to the reported Operating ROE related to the following:
oLoss on reinsurance recapture of $53 million on closed block long-term care liabilities, which was reported as a non-operating item in the Company's financial statements for the period ending December 31, 2016; and
oGain on tax settlements with the IRS of $118.7 million, which was reported as a non-operating item in the Company's financial statements for the period ending December 31, 2016.
•As a result, Operating ROE in 2016 as adjusted, was 10.84%.
•For the 2017 and 2018 periods, there were no adjustments made to the Operating ROE calculations.
•
•For the 2016 – 20182018–2020 grant, the Company'sCompany’s three-year average Operating ROE was 9.96%11.14%, which was abovegenerated a payout of 147.37% of the target number of 9.5%shares.
»
The 2018-2020 Operating ROE payout of 147.37% reflects (1) strong 2020 operating earnings resulting from, among other things, the resiliency of our diversified business model during the COVID-19 pandemic and generatedstrong variable investment income results and (2) a 161% payout. lower equity balance due to the 2018 long-term care (LTC) reinsurance transaction.
»
Three-year average Relativerelative TSR performance produced a result of –4.8%. This placed us belowwas at the 25th36.8th percentile relative to TSR Performance Peers, resulting in noa payout of 73.6% for that metric.the target number of shares.
| | | 3-Year Relative TSR Performance
(1/1/18 to 12/31/20) | | | | TSR Performance Share Payout (Vesting) | | |
| | | ≥ 75th Percentile | | | | 200% | | |
| | | 50th Percentile | | | | 100% | | |
| | | 25th Percentile | | | | 50% | | |
| | | < 25th Percentile | | | | NO PAYOUT | | |
| | | Actual Results: 36.8% | | | | Payout as % of Target: 73.60% | | |
(1)
Operating ROE is a non-GAAP financial measure. See “Information Related to Certain Non-GAAP Financial Measures” beginning on page 88 for a reconciliation to the corresponding GAAP measure.
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CNO Financial Group, Inc. 2021 Proxy Statement
The table below shows actual Operating ROE and relative TSR P-share vesting for NEOs related to the 2016 – 20182018-2020 award.
| | | P-Share Vesting for the 2018–2020 Performance Period | | |
| | | Named Executive Officer | | | | Measure(1) | | | | P-Shares
Granted | | | | P-Shares Opportunity
Earned (% of Target) | | | | P-Shares Vested | | |
| | | Gary C. Bhojwani | | | | Operating ROE | | | | | | 34,895 | | | | | | | 147.37% | | | | | | | 51,424 | | | |
| | | | | | | Relative TSR | | | | | | 34,895 | | | | | | | 73.60% | | | | | | | 25,682 | | | |
| | | Paul H. McDonough(2) | | | | Operating ROE | | | | | | — | | | | | | | — | | | | | | | — | | | |
| | | | | | | Relative TSR | | | | | | — | | | | | | | — | | | | | | | — | | | |
| | | Bruce K. Baude | | | | Operating ROE | | | | | | 7,185 | | | | | | | 147.37% | | | | | | | 10,588 | | | |
| | | | | | | Relative TSR | | | | | | 7,185 | | | | | | | 73.60% | | | | | | | 5,288 | | | |
| | | Eric R. Johnson | | | | Operating ROE | | | | | | 7,185 | | | | | | | 147.37% | | | | | | | 10,588 | | | |
| | | | | | | Relative TSR | | | | | | 7,185 | | | | | | | 73.60% | | | | | | | 5,288 | | | |
| | | Matthew J. Zimpfer | | | | Operating ROE | | | | | | 8,210 | | | | | | | 147.37% | | | | | | | 12,099 | | | |
| | | | | | | Relative TSR | | | | | | 8,210 | | | | | | | 73.60% | | | | | | | 6,042 | | | |
| | | | | | | | | | | | | | | |
2018 P-Share Vesting | | | | | |
| | | | | | | | | | | | | | | | |
| | Named Executive Officer(1) | | Measure | | | P-Shares
Granted | | | P-Share Opportunity
Earned (% of Target) | | | P-Shares
Vested | | |
| | | | | | | | | | | | | | | | |
| | Erik M. Helding | | Operating ROE | | | 2,800 | | | 161 | % | | 4,517 | | |
| | | | Relative TSR | | | 2,800 | | | 0 | % | | 0 | | |
| | Bruce K. Baude | | Operating ROE | | | 11,550 | | | 161 | % | | 18,633 | | |
| | | | Relative TSR | | | 11,550 | | | 0 | % | | 0 | | |
| | Eric R. Johnson | | Operating ROE | | | 11,550 | | | 161 | % | | 18,633 | | |
| | | | Relative TSR | | | 11,550 | | | 0 | % | | 0 | | |
| | Matthew J. Zimpfer | | Operating ROE | | | 13,200 | | | 161 | % | | 21,295 | | |
| | | | Relative TSR | | | 13,200 | | | 0 | % | | 0 | | |
| | | | | | | | | | | | | | | | |
(2)
Mr. BhojwaniMcDonough was not employed by the Company and Mr. Helding was not an executive officer at the time of the 2016-20182018-2020 P-share grant.
2017 – 2019
2019–2021 P-Share Performance Metrics and Targets
Continuing the use of average Operating ROE in the 2017 - 20192019-2021 P-share grants encourages decisions and rewards performances that contribute to the long-term growth of the Company. Continuing theThe use of relative Total Shareholder ReturnTSR provides an incentive to CNO executives to deliver shareholder value by outperforming our peers. The 2017 – 20192019-2021 P-share grant was evenly split between three-year average Operating ROE, with an 8.25%a 10.4% target for all NEOs, and relative TSR for our TSR Performance Peers, targeting the 50th50th percentile for target performance.
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•- The
2017-2019 three-year average2019-2021 Operating ROE target was set belowequal to our management plan at 10.4% and was set equal to the 2016-2018 three-yearprior period (2018-2020), which primarily reflected an expectation for lower net income offset in part by lower average Operating ROEequity from the 2018 LTC reinsurance transaction. The 2019-2021 P-shares require a threshold level performance to receive 50% of the target for the following reasons:
•When the Operating ROE target was established in late 2016 /early 2017, 2017 earnings were expected to be below 2016 levels due to:
oExpected incremental costs associated with new regulatory requirements (including the costsnumber of compliance with new cyber security regulationsshares, and the expected costs of implementing and complying with the Department of Labor's Fiduciary Standards related to sales and marketing of certain insurance products).
oMacro-economic challenges including (1) continued low interest rates and (2) a strong labor market, which impacted our ability to recruit and retain agents, both of which were expected to have a significant impact on earnings growth rates.
oOther unusual items that positively impacted 2016 results but were not expected to (and did not) impact 2017 results, including (1) final payments of transition service income paid to CNO by Wilton Re as partupside opportunity for maximum performance is 200% of the agreement to sell Conseco Life Insurance Company to Wilton Re in 2014, and (2) reserve releases related to policyholder actions following notificationtarget number of rate increases on certain long-term care policies.shares.
•At the time that the targets were set, the pressures on 2017 earnings were not expected to abate in 2018 or 2019.
2018 – 2020
2020–2022 P-Share Performance Metrics and Targets
The 2018 - 20202020-2022 P-share grant was evenly split between three-year averageone-year Operating ROE and one-year Operating EPS, and both are modified by relative TSR for our TSR Performance Peers, targeting the 50th50th percentile for target performance. With the higher Operating ROE in 2017 and signs of growth reinvigorating in 2018, the 2018 - 2020The 2020-2022 Operating ROE target was set equal to our management plan at 10.4%.10.2%, lower than the target set for the 2019-2021 period. The reduction in target ROE in 2020 as compared to 2019 was driven primarily by an expected decline in net investment income due to continued low interest rates and an expected increase in average shareholders’ equity due to the Company’s utilization of its NOLs. The Operating EPS target was set to our management plan at $2.02, higher than 2019 as-reported EPS of $1.85 and normalized EPS of $1.80, reflecting our expectation of a lower weighted average share count from share repurchases. The 2020-2022 P-shares require a threshold level performance to receive 50% of the target number of shares, and the upside opportunity for maximum performance is 200% of the target number of shares.
CNO Financial Group, Inc. 2021 Proxy Statement61
Total Shareholder Return Performance Peers
Our Comparator Peer Companies are one source used to develop our TSR Performance Peers, are selected bybut TSR Performance Peers may differ from our Comparator Peer companies due to the use of additional selection criteria not related to organizational size and competition for executive talent. These criteria include stock price correlation, ownership concentration and macro-economic response similarities. The Compensation Committee onbelieves the basisuse of many factors, including market capitalization, premiums, revenue, assets, and lines of business, among others.a second peer group that is developed with these variances from the Comparator Peer Companies more accurately measures our relative TSR performance. The Compensation Committee reviews the TSR Performance Peers annually and obtains feedback from Aon Consultingits independent executive compensation consultant on their continued appropriateness. The Committee believes these companies are appropriate for TSR benchmarking because each is a competitor in one or moreFor additional information on the selection of our core business units and/or competes directly with us for talent and distribution of our products.
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The TSR Performance Peers have remained consistent year-over-year except when a company has been acquired or has experienced a significant change in business conditions, scope of business, or operations. Below are the TSR Performance Peers that the Committee referenced for 2018 TSR benchmarking:
Comparator Peer Companies, see page 48.
| | |
2018 TSR Performance Peers |
Aflac, Inc. | | Kemper Corporation |
American Financial Group, Inc. | | Lincoln National Corporation |
Arch Capital Group | | MetLife, Inc. |
Assurant, Inc. | | Primerica, Inc. |
Cincinnati Financial Corporation | | Principal Financial Group, Inc. |
Genworth Financial, Inc. | | Prudential Financial, Inc. |
Hanover Insurance Group, Inc. | | Reinsurance Group of America, Incorporated |
The Hartford Financial Services Group, Inc. | | Torchmark Corporation |
Horace Mann Educators Corporation | | Unum Group |
| | Voya Financial, Inc. |
Following feedback received from our shareholder outreach program, as well as an extensive analysis of existing and potential peers undertaken in 2019, the Compensation Committee has determined that changes to our TSR Performance Peers will bewere appropriate beginning with our 20192020 performance period. The TSR Performance Peers are used to determine the value of the modifier of our 2020-2022 P-share grant. Changes will includeincluded the addition of two companies: American Equity Investment LifeAthene Holding CompanyLtd. and Brighthouse Financial,AXA Equitable Holdings, Inc.,; and the exclusion of twoeight companies: Arch CapitalAmerican Financial Group, Inc., Assurant, Inc., Cincinnati Financial Corporation, The Hanover Insurance Group, Inc., The Hartford Financial Services Group, Inc., Horace Mann Educators Corporation, Kemper Corporation and Genworth Financial, Inc.
The table below showsReinsurance Group of America, Incorporated.
Below are the opportunitiesTSR Performance Peers that the Compensation Committee referenced for NEOs related2020 TSR benchmarking and will use to determine the modifier of our 2020-2022 P-share vesting, depending on the level of performance achieved in relation to the associated grant metrics.grant:
| | | 2020 TSR Performance Peers | | |
| | | Aflac, Inc. | | | | MetLife, Inc. | | |
| | | American Equity Investment Life Holding Co. | | | | Primerica, Inc. | | |
| | | Athene Holding Ltd. | | | | Principal Financial Group, Inc. | | |
| | | AXA Equitable Holdings, Inc. | | | | Prudential Financial, Inc. | | |
| | | Brighthouse Financial, Inc. | | | | Unum Group | | |
| | | Globe Life, Inc. | | | | Voya Financial, Inc. | | |
| | | Lincoln National Corporation | | | |
Benefits
| | | | | | | | | | | | | |
2017 – 2019 and 2018 – 2020 P-Share Opportunities for NEOs | | |
| | | | | | | | | | | | | | |
| | Named Executive Officer | | | Threshold
(as a % of Granted
P-Shares) | | | Target
(as a % of Granted
P-Shares) | | | Maximum
(as a % of Granted
P-Shares) | | |
| | | | | | | | | | | | | | |
| | Gary C. Bhojwani | | | 50 | % | | 100 | % | | 200 | % | |
| | Erik M. Helding | | | 50 | % | | 100 | % | | 200 | % | |
| | Bruce K. Baude | | | 50 | % | | 100 | % | | 200 | % | |
| | Eric R. Johnson | | | 50 | % | | 100 | % | | 200 | % | |
| | Matthew J. Zimpfer | | | 50 | % | | 100 | % | | 200 | % | |
| | | | | | | | | | | | | | |
Benefits
Our NEOs are eligible to participate in all of the broad-based, Company-sponsored, benefits programs on the same basis as other full-time employees. These include our health and welfare benefits, such as our medical/dental plans, disability plans and life insurance. We do not offer any form of supplemental executive health or welfare programs.programs, other than our Deferred Compensation Plan. Executives also may participate in our 401(k) Plan. In addition, the Company has a non-qualified deferred compensation plan thatour Deferred Compensation Plan primarily is intended as a "restoration"“restoration” plan that provides participants the ability to defer their own compensation above the Internal Revenue Service limits imposed on the 401(k) Plan. P-shares and RSUs granted in 2019 and prior also may be deferred into a deferred compensation plan.the Deferred Compensation Plan. We do not make annual contributions to non-qualified deferred compensation plansthe Deferred Compensation Plan in addition to the amounts contributed by our executives.
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CNO Financial Group, Inc. 2021 Proxy Statement
Prohibition Against Trading in Derivatives
It is a violation of Company policy for any Board member or senior executivesexecutive to purchase, sell or engage in any other transaction involving any derivative securities or hedging related to any of our equity securities. This prohibition
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does not apply, however, to any exercise of our stock optionsStock Options pursuant to our Amended and Restated Long-TermLong Term Incentive Plan or any other benefit plans that we may adopt from time to time, any sale of our stock in connection with any cashless exercise (if otherwise permitted), or payment of withholding tax upon the exercise, of any such stock option.
Stock Option.
Clawback Rights
Our Amended and Restated Long-Term Incentive Plan, Annual Cash Incentive/P4P Plan and Clawback Policy provide for strong clawback rights related to our incentive compensation. The Company'sCompany’s Amended and Restated Long-Term Incentive Plan contains a clawback provision relatingapplicable to ourany covered employee in receipt of any long-term equity awards that is, stock options,(including P-shares, RSUs and RSUs.Stock Options). Under this provision, if our financial statements are restated becausethe Compensation Committee determines the achievement of a performance goal was based on incorrect data, errors, omissions,and the performance goal had not actually been achieved or fraud,such achievement was overstated, then the Board Compensation Committee may, at its discretion and basedCompany is permitted to recapture such portion of the award that was granted, vested or paid to a covered employee on the facts and circumstances surrounding the restatement, direct the recoverybasis of all or a portion of any equity award from one or more executives with respect to any fiscal year in which our financial results are negatively affected by such restatement.incorrect data. To effect this provision, we may pursue various means of recovery of awards from one or more executives, including (1) seeking repayment from the executive; (2) offsetting the recovery from an amount that otherwise would be payable to the executive under another benefit plan; (3) withholding of future equity grants, bonus awards, or salary increases; or (4) any combination of these actions. Our Annual Cash Incentive / Incentive/P4P Plan also contains recapture rights of any incentive amount paid or vested in the event that the Compensation Committee determines that the achievement of performance goals was based on incorrect data. In addition to the clawback rights described above, effective January 31, 2020, the Board adopted a Clawback Policy for all current and former executive officers, which provides for the recoupment of certain cash and equity performance-based incentive compensation in the event of (1) an accounting restatement resulting from material noncompliance with financial reporting requirements under applicable law, or (2) other detrimental conduct that has caused or is likely to cause material financial, operational or reputational harm to the Company. The incentive compensation recoverable in the case of an accounting restatement will be, in respect of the three years prior to such restatement, the sum of (a) the Board’s determination of the amount of excess incentive compensation received by the covered executive as a result of the error in the financial statements, (b) costs incurred by the Company in connection with the restatement, and (c) any equity–based awards that were either granted or vested during the three– year recoupment period as calculated in a manner deemed appropriate by the Board. In the case of misconduct, the amount will be determined by the Board based on its assessment of the covered executive’s involvement, the impact of the conduct on the magnitude of loss to the Company and such other relevant facts and circumstances. The Board has discretion to determine the method for recovering any incentive compensation under the Clawback Policy.
Impact of Tax and Accounting on Compensation Decisions
As a general matter, the
The Compensation Committee considers the various tax and accounting implications of our compensation vehicles. When determining the awards of long-term equity incentive grants to executives and employees, the Compensation Committee considers the accounting costs associated with the grants. Under FASB ASC Topic 718, grants of stock options,Stock Options, restricted stock, RSUs, and other share-based payments result in an accounting charge that is reflected in our financial statements. Section 162(m) of the Internal Revenue Code generally prohibits any publicly held corporation from taking a federal income tax deduction for compensation paid in excess of $1 million in any taxable year to certain current and former senior corporate officers. The enactment of the chief executive officerTax Cuts and Jobs Act of 2017 eliminated the three most highly compensated corporate officers, excluding the chief financial officer. Exceptions are made forpreviously commonly-used qualified performance-based compensation among other things. Itexception to Section 162(m) and as a result, compensation paid in 2020 and later years to our NEOs in excess of $1 million will not be deductible under Section 162(m) of the Code even if subject to performance conditions. While the Compensation Committee is
CNO Financial Group, Inc. 2021 Proxy Statement63
mindful of the Committee's policy to maximizebenefit of the effectiveness of our executive compensation plans in this regard. Notwithstanding the consideration of tax issues, however,deductibility, the Committee also is of the view that compensation and benefits decisions should be driven primarily by the needs of the business, rather than by tax policy. Therefore,
Amendment to CEO Agreement
On November 12, 2020, the Company and Gary C. Bhojwani entered into an amendment (the “Amendment”) to Mr. Bhojwani’s existing employment agreement. In approving the Amendment, the Compensation Committee may make pay decisions (such asconsidered that Mr. Bhojwani’s existing employment agreement was set to expire on December 31, 2020 and that it was in the determinationbest interests of the Chief Executive Officer'sCompany to continue to have Mr. Bhojwani lead the Company. Pursuant to the Amendment, the term of Mr. Bhojwani’s employment agreement was extended through December 31, 2023. The Amendment also updated the existing employment agreement to reflect Mr. Bhojwani’s current base salary) that result in a compensation expense that is not fully deductible under Section 162(m). The Committee administers our incentive plans for 2018 so that payments qualify as "performance-based compensation" under Section 162(m)salary of $1,030,000 per year. Further, with respect to any termination of Mr. Bhojwani’s employment, the Amendment clarifies the relationship between the terms of his employment agreement and of the Internal Revenue Code.award agreements of any then-outstanding awards granted pursuant to the Company’s Amended and Restated Long-Term Incentive Plan.
Termination and Change in Control Arrangements
Pursuant to the terms of award agreements made in accordance with our equity-based compensation plans, our severance plan and our CEO’s employment agreements,agreement, NEOs are entitled to payments and benefits upon the occurrence of certain specified events, including termination of employment for various reasons. The specific terms of these arrangements, as well as an estimate of the compensation that would have been payable had they been triggered as of fiscal year-end, are described in the section entitled "Potential“Potential Payments Upon Termination or Change in Control"Control” beginning on page 57. The terms of these arrangements were set through the course of respective employment negotiations with each NEO, with an emphasis on internal consistency.73. In order to align with market best practices, the payments triggered by a change in control for the CEO and his direct reportsthe other NEOs are three times and
Table of Contents
two times, respectively, their respective annual base salarysalaries plus target bonus.bonuses. A "double“double trigger,"” constituting both a change in control and termination, is required before such payments are necessary.
The termination of employment provisions of the agreements withentitlements held by NEOs werewas negotiated and entered into in order to address competitive concerns in the NEO recruitment process. Providing highly qualified and skilled individuals with a fixed amount of compensation offsets the potential risk of their departure from a prior employer and/or foregoing other opportunities in order to join our Company. At the time of entering intoproviding each such arrangement,entitlement, the Compensation Committee carefully considers both the desirability of hiring the particular individual at the proposed compensation and also the Company'sCompany’s aggregate potential obligations to our NEOs as a group.
Compensation Committee Report
The Human Resources and Compensation Committee has reviewed the Compensation Discussion and Analysis and has discussed it with management. Based on the Committee'sCompensation Committee’s review and discussions with management, the Compensation Committee has recommended to the Board that the Compensation Discussion and Analysis be included in this Proxy Statement. This report is provided by the following independent directors, who comprise the Compensation Committee: Chair Mary R. (Nina) Henderson
Ellyn L. Brown
David B. Foss
Frederick J. Sievert Chair
Ellyn L. Brown
Stephen N. David
64
CNO Financial Group, Inc. 2021 Proxy Statement
Summary Compensation Table for
20182020
The following Summary Compensation Table for 2020 sets forth compensation paid to (i) our chief executive officer,Chief Executive Officer, (ii) our chief financial officer,Chief Financial Officer, and (iii) the other three most highly compensated individuals who served as executive officers of CNO as of December 31, 20182020 (collectively, our “Named Executive Officers” (the "Named Executive Officers"“NEOs”)) for services rendered during 2018, 20172020, 2019 and, 2016.
where applicable, 2018.SUMMARY COMPENSATION TABLE FOR 2018
| Name and Principal Position | | | Year | | | Salary | | | Bonus | | | Stock
Awards(1) | | | Option
Awards | | | Non-Equity
Incentive Plan
Compensation(2) | | | All Other
Compensation(3) | | | Total | | | | | | | | | |
Gary C. Bhojwani
Chief Executive Officer | | | | | 2020 | | | | | $ | 1,025,000 | | | | | $ | — | | | | | $ | 4,901,181 | | | | | $ | — | | | | | $ | 2,231,527 | | | | | $ | 103,178 | | | | | $ | 8,260,886 | | | | | | | | | | |
| | | | | | 2019 | | | | | | 1,000,000 | | | | | | — | | | | | | 3,356,211 | | | | | | 661,099 | | | | | | 1,727,442 | | | | | | 48,071 | | | | | | 6,792,823 | | | | | | | | | | |
| | | | | | 2018 | | | | | | 996,528 | | | | | | — | | | | | | 4,666,051 | | | | | | 633,319 | | | | | | 1,338,333 | | | | | | 67,103 | | | | | | 7,701,334 | | | | | | | | | | |
Paul H. McDonough
Chief Financial Officer(4) | | | | | 2020 | | | | | | 615,000 | | | | | | — | | | | | | 980,275 | | | | | | — | | | | | | 836,823 | | | | | | 15,349 | | | | | | 2,447,447 | | | | | | | | | | |
| | | | | | 2019 | | | | | | 441,667 | | | | | | 309,799 | | | | | | 603,015 | | | | | | 116,563 | | | | | | 492,787 | | | | | | 12,597 | | | | | | 1,976,428 | | | | | | | | | | | | | | | | | | | | | | | | | | |
Bruce K. Baude
Chief Operations & Technology Officer | | | | | 2020 | | | | | | 650,833 | | | | | | — | | | | | | 761,068 | | | | | | — | | | | | | 872,558 | | | | | | 37,082 | | | | | | 2,321,541 | | | | | | | | | | |
| | | | | | 2019 | | | | | | 632,167 | | | | | | — | | | | | | 601,348 | | | | | | 118,484 | | | | | | 679,575 | | | | | | 40,466 | | | | | | 2,072,040 | | | | | | | | | | |
| | | | | | 2018 | | | | | | 615,000 | | | | | | — | | | | | | 566,480 | | | | | | 130,395 | | | | | | 553,521 | | | | | | 31,595 | | | | | | 1,896,991 | | | | | | | | | | |
Eric R. Johnson
Chief Investment Officer | | | | | 2020 | | | | | | 550,000 | | | | | | — | | | | | | 870,623 | | | | | | — | | | | | | 745,242 | | | | | | 24,407 | | | | | | 2,190,272 | | | | | | | | | | |
| | | | | | 2019 | | | | | | 545,833 | | | | | | — | | | | | | 687,309 | | | | | | 135,754 | | | | | | 600,060 | | | | | | 17,937 | | | | | | 1,986,893 | | | | | | | | | | |
| | | | | | 2018 | | | | | | 520,833 | | | | | | — | | | | | | 566,480 | | | | | | 130,395 | | | | | | 631,893 | | | | | | 17,317 | | | | | | 1,866,918 | | | | | | | | | | |
Matthew J. Zimpfer
General Counsel | | | | | 2020 | | | | | | 597,167 | | | | | | — | | | | | | 870,623 | | | | | | — | | | | | | 812,548 | | | | | | 36,222 | | | | | | 2,316,560 | | | | | | | | | | |
| | | | | | 2019 | | | | | | 577,500 | | | | | | — | | | | | | 687,309 | | | | | | 135,754 | | | | | | 621,057 | | | | | | 30,585 | | | | | | 2,052,205 | | | | | | | | | | |
| | | | | | 2018 | | | | | | 541,667 | | | | | | — | | | | | | 1,212,107 | | | | | | 149,050 | | | | | | 470,671 | | | | | | 28,257 | | | | | | 2,401,752 | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | |
Name and Principal Position | | Year | | Salary | | Bonus(1) | | Stock
Awards(2) | | Option
Awards(3) | | Non-Equity
Incentive
Plan
Compensation(4) | | All Other
Compensation(5) | | Total | |
|---|
Gary C. Bhojwani(6) | | 2018 | | $996,528 | | $— | | $ | 4,666,051 | | $633,319 | | $1,338,333 | | $67,103 | | $ | 7,701,334 | |
Chief Executive Officer | | 2017 | | 750,000 | | 750,000 | | | 979,801 | | 274,363 | | 1,573,194 | | 95,276 | | | 4,422,634 | |
| | 2016 | | 517,307 | | — | | | 4,312,620 | | 520,705 | | 751,579 | | 74,843 | | | 6,177,054 | |
Erik M. Helding(7) | | 2018 | | 441,667 | | — | | | 566,480 | | 130,395 | | 380,968 | | 25,291 | | | 1,554,801 | |
Chief Financial Officer | | 2017 | | 400,000 | | — | | | 900,793 | | 219,491 | | 503,422 | | 21,831 | | | 2,045,537 | |
| | 2016 | | 357,813 | | — | | | 427,010 | | 303,152 | | 302,946 | | 16,289 | | | 1,407,210 | |
Bruce K. Baude | | 2018 | | 615,000 | | — | | | 566,480 | | 130,395 | | 553,521 | | 31,595 | | | 1,896,991 | |
Chief Operations & | | 2017 | | 600,000 | | — | | | 685,649 | | 192,023 | | 964,114 | | 22,469 | | | 2,464,255 | |
Technology Officer | | 2016 | | 559,487 | | 800,000 | | | 813,702 | | 390,122 | | 635,149 | | 28,683 | | | 3,227,143 | |
Eric R. Johnson | | 2018 | | 520,833 | | — | | | 566,480 | | 130,395 | | 631,893 | | 17,317 | | | 1,866,918 | |
Chief Investment Officer | | 2017 | | 500,000 | | — | | | 685,649 | | 192,023 | | 794,133 | | 8,617 | | | 2,180,422 | |
| | 2016 | | 500,000 | | — | | | 469,161 | | 390,122 | | 551,696 | | 13,960 | | | 1,924,939 | |
Matthew J. Zimpfer | | 2018 | | 541,667 | | — | | | 1,212,107 | | 149,050 | | 470,671 | | 28,257 | | | 2,401,752 | |
General Counsel | | 2017 | | 500,000 | | — | | | 685,649 | | 192,023 | | 602,571 | | 16,309 | | | 1,996,552 | |
| | 2016 | | 491,667 | | — | | | 536,184 | | 445,854 | | 419,963 | | 17,636 | | | 1,911,304 | |
(1)(1)The amount in this column for Mr. Bhojwani in 2017 represents an amount paid pursuant to the terms of his employment agreement in connection with his relocation to Chicago, Illinois. The amount in this column for Mr. Baude in 2016 represents a Company contribution to his account in the CNO deferred compensation plan. One half of that contribution vested on June 1, 2017 and the balance vested on June 1, 2018. Amounts paid to the Named Executive Officers under the Company's Annual Cash Incentive/P4P Plan are included in the column "Non-Equity Incentive Plan Compensation."
(2)- This column represents the aggregate grant date fair value of
restricted stockRSU and performance shareP-share awards, in accordance with ASC 718, excluding the impact of estimated forfeitures related to service-based vesting conditions. For additional information, see Note 11 to the CNO financial statements in the Form 10-K for the year ended December 31, 2018,2020, as filed with the SEC. See the "GrantsGrants of Plan-Based Awards"Awards in 2020 table for information on awards made in 2018.2020. The amounts in this column do not necessarily correspond to the actual value that will be recognized by the Named Executive Officers.NEOs. The amounts in this column for 20182020 include the grant date value of performance shareP-share awards based on the targetedtarget amounts for each of the Named Executive Officers.NEOs. Under the terms of those performance shareP-share awards, the officers are entitled to receive 200% of the targetedtarget number of shares if the Company equals or exceeds the maximum performance levels set forth in those awards. If the maximum performance levels are achieved for the performance shareP-share awards made in 2018,2020, the aggregate grant date value of the awards shown in this column would be as follows: Mr. Bhojwani, $6,439,415;$7,655,889; Mr. Helding, $931,621;McDonough, $1,532,031; Mr. Baude, $931,621;$1,188,628; Mr. Johnson, $931,621;$1,359,263; and Mr. Zimpfer $1,629,340.
(3)This column represents the aggregate grant date fair value of stock options granted to each of the Named Executive Officers, in accordance with ASC 718, excluding the impact of estimated forfeitures related to service-based vesting conditions. For additional information on the valuation assumptions with respect to the 2018 grants, refer to Note 11 of the CNO financial statements in the Form 10-K for the year ended December 31, 2018, as filed with the SEC. For information on the valuation assumptions with respect to
$1,359,263.
(2)
Table of Contentsgrants made prior to 2018, refer to the note on shareholders' equity and stock-related information to the CNO financial statements in the Form 10-K for the respective year-end. See the "Grants of Plan-Based Awards" table for information on options granted in 2018, and see "Impact of Tax and Accounting on Compensation Decisions" in the Compensation Discussion and Analysis for additional discussion. The amounts in this column do not necessarily correspond to the actual value that will be recognized by the Named Executive Officers.
(4)- This column represents the dollar amount of payments made after year end to the
Named Executive OfficersNEOs based on performance for the specified year with respect to the targets established under the Company'sCompany’s Annual Cash Incentive/P4P Plan.
(3)
(5)For 2018,2020, the amounts reported in this column represent theinclude amounts paid for: (i)(a) group life insurance premiums; (ii)(b) Company contributions to the 401(k) Plan; (iii)(c) (i) dividend equivalents payable in cash upon vesting of RSUs (granted since May 2017) to the extent that cash dividends are paid on unvested shares of restrictedthe common stock underlying the RSUs after the award date and prior to the issuance of shares upon vesting and (ii) dividend equivalents paid upon vesting of performance shareP-share awards; (iv) spousal travel; (v) reimbursement for taxes paid on amounts related to spousal travel; and (vi) other amounts.(d) tax reimbursement.
The table below shows suchthe amounts paid in 2020 for 2018group life insurance premiums, 401(k) plan contributions and tax reimbursements for each Named Executive Officer:NEO.
| Name | | | Group
Life Insurance
Premiums | | | 401(k) Plan
Contributions | | | Dividends | | | Tax
Reimbursement | |
| Gary C. Bhojwani | | | | $ | 966 | | | | | $ | 8,550 | | | | | $ | 86,347 | | | | | $ | 7,315 | | |
| Paul H. McDonough | | | | | 1,806 | | | | | | 8,550 | | | | | | 1,885 | | | | | | 3,108 | | |
| Bruce K. Baude | | | | | 1,806 | | | | | | 8,550 | | | | | | 20,921 | | | | | | 5,805 | | |
| Eric R. Johnson | | | | | 2,772 | | | | | | — | | | | | | 21,635 | | | | | | — | | |
| Matthew J. Zimpfer | | | | | 966 | | | | | | 8,507 | | | | | | 26,750 | | | | | | — | | |
| | | | | | | | | | | | |
Name | | Group
Life
Insurance
Premiums | | 401(k) Plan
Contributions | | Dividends | | Spousal
Travel | | Tax
Reimbursement | | Other |
|---|
Gary C. Bhojwani | | $966 | | $8,250 | | $41,440 | | $9,184 | | $7,263 | | $— |
Erik M. Helding | | 630 | | 8,250 | | 16,411 | | — | | — | | — |
Bruce K. Baude | | 966 | | 8,250 | | 22,379 | | — | | — | | — |
Eric R. Johnson | | 1,806 | | — | | 15,511 | | — | | — | | — |
Matthew J. Zimpfer | | 966 | | 8,250 | | 18,997 | | — | | 19 | | 25 |
(6)- Mr.
BhojwaniMcDonough became President of CNO on April 18, 2016 and became Chief Executive Officer on January 1, 2018.
(7)Mr. Helding became an executive officer of CNO upon his promotion toour Chief Financial Officer on April 11, 2016. On March 18,1, 2019. The amount set forth in the bonus column for Mr. McDonough for 2019 the Company announced that Paul H. McDonough has been appointed Chiefrepresents an amount paid pursuant to his then-current employment agreement in connection with his hiring and relocation to Chicago, Illinois.
CNO Financial Officer of the Company, effective April 1, 2019 and that Mr. Helding will remain Chief Financial Officer through March 29, 2019.Group, Inc. 2021 Proxy Statement65
Grants of Plan-Based Awards in
20182020
The following table shows certain information concerning grants of plan-based awards in 2018 to2020 for the Named Executive Officers.
NEOs.GRANTS OF PLAN-BASED AWARDS IN 2018
| | | | | | | | | | Estimated Future Payouts Under
Non-Equity Incentive Plan Awards(1) | | | Estimated Future Payouts
(in Shares of Common Stock)
Under Equity Incentive
Plan Awards(2) | | | All Other
Stock
Awards:
Number of
Shares of
Stock or
Units(3) | | | Grant Date
Fair Value
of Stock
and Option
Awards(4) | |
| Name | | | Grant
Date | | | Threshold | | | Target | | | Maximum | | | Threshold | | | Target | | | Maximum | |
| Gary C. Bhojwani | | | | | | | | | | $ | 820,328 | | | | | $ | 1,640,656 | | | | | $ | 3,281,312 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | 2-18-20 | | | | | | | | | | | | | | | | | | | | | | | | 67,650 | | | | | | 135,300 | | | | | | 270,600 | | | | | | | | | | | $ | 2,754,708 | | |
| | | | 2-18-20 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | 110,700 | | | | | | 2,146,473 | | |
| Paul H. McDonough | | | | | | | | | | | 307,623 | | | | | | 615,246 | | | | | | 1,230,492 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | 2-18-20 | | | | | | | | | | | | | | | | | | | | | | | | 13,550 | | | | | | 27,100 | | | | | | 54,200 | | | | | | | | | | | | 551,756 | | |
| | | | 2-18-20 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | 22,100 | | | | | | 428,519 | | |
| Bruce K. Baude | | | | | | | | | | | 325,547 | | | | | | 651,093 | | | | | | 1,302,186 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | 2-18-20 | | | | | | | | | | | | | | | | | | | | | | | | 10,500 | | | | | | 21,000 | | | | | | 42,000 | | | | | | | | | | | | 427,560 | | |
| | | | 2-18-20 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | 17,200 | | | | | | 333,508 | | |
| Eric R. Johnson | | | | | | | | | | | 275,000 | | | | | | 550,000 | | | | | | 1,100,00 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | 2-18-20 | | | | | | | | | | | | | | | | | | | | | | | | 12,000 | | | | | | 24,000 | | | | | | 48,000 | | | | | | | | | | | | 488,640 | | |
| | | | 2-18-20 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | 19,700 | | | | | | 381,983 | | |
| Matthew J. Zimpfer | | | | | | | | | | | 298,700 | | | | | | 597,399 | | | | | | 1,194,798 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | 2-18-20 | | | | | | | | | | | | | | | | | | | | | | | | 12,000 | | | | | | 24,000 | | | | | | 48,000 | | | | | | | | | | | | 488,640 | | |
| | | | 2-18-20 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | 19,700 | | | | | | 381,983 | | |
| | | | | | | | | | | | | | | | | | | | | | |
| |
| |
| |
| |
| | Estimated Future Payouts
(in Shares of Common Stock)
Under Equity Incentive
Plan Awards(2) | | All Other
Stock
Awards:
Number of
Shares of
Stock or
Units(3) | | All Other
Option
Awards:
Number of
Securities
Underlying
Options(4) | |
| |
|
|---|
| |
| | Estimated Future Payouts Under
Non-Equity Incentive Plan Awards(1) | | Exercise
or Base
Price of
Option
Awards(5) | | Grant Date
Fair Value
of Stock
and Option
Awards(6) |
|---|
| | Grant
Date |
|---|
Name | | Threshold | | Target | | Maximum | | Threshold | | Target | | Maximum |
|---|
Gary C. Bhojwani | | | | $750,000 | | $1,500,000 | | $3,000,000 | | | | | | | | | | | | | | |
| | 2-21-18 | | | | | | | | | | | | | | | | 100,150 | | $23.33 | | $633,319 |
| | 2-21-18 | | | | | | | | 34,895 | | 69,790 | | 139,580 | | | | | | | | 1,773,364 |
| | 2-21-18 | | | | | | | | | | | | | | 123,990 | | | | | | 2,892,687 |
Erik M. Helding | | | | 213,493 | | 426,986 | | 853,972 | | | | | | | | | | | | | | |
| | 2-21-18 | | | | | | | | | | | | | | | | 20,620 | | 23.33 | | 130,395 |
| | 2-21-18 | | | | | | | | 7,185 | | 14,370 | | 28,740 | | | | | | | | 365,142 |
| | 2-21-18 | | | | | | | | | | | | | | 8,630 | | | | | | 201,338 |
Bruce K. Baude | | | | 307,619 | | 615,238 | | 1,230,476 | | | | | | | | | | | | | | |
| | 2-21-18 | | | | | | | | | | | | | | | | 20,620 | | 23.33 | | 130,395 |
| | 2-21-18 | | | | | | | | 7,185 | | 14,370 | | 28,740 | | | | | | | | 365,142 |
| | 2-21-18 | | | | | | | | | | | | | | 8,630 | | | | | | 201,338 |
Eric R. Johnson | | | | 260,582 | | 521,164 | | 1,042,328 | | | | | | | | | | | | | | |
| | 2-21-18 | | | | | | | | | | | | | | | | 20,620 | | 23.33 | | 130,395 |
| | 2-21-18 | | | | | | | | 7,185 | | 14,370 | | 28,740 | | | | | | | | 365,142 |
| | 2-21-18 | | | | | | | | | | | | | | 8,630 | | | | | | 201,338 |
Matthew J. Zimpfer | | | | 261,576 | | 523,151 | | 1,046,302 | | | | | | | | | | | | | | |
| | 2-21-18 | | | | | | | | | | | | | | | | 23,570 | | 23.33 | | 149,050 |
| | 2-21-18 | | | | | | | | 8,210 | | 16,420 | | 32,840 | | | | | | | | 417,232 |
| | 2-21-18 | | | | | | | | | | | | | | 18,070 | | | | | | 421,573 |
| | 9-28-18 | | | | | | | | | | | | | | 17,592 | | | | | | 373,302 |
(1)(1)- These amounts represent the threshold, target and maximum amounts that would have been payable for
20182020 if the corresponding performance-based metrics under the Annual Cash Incentive/P4P Plan had been achieved.achieved in such year. The amounts shown have been pro-ratedprorated to reflect any change during the year in the base salary or in the target as a percentage of base salary. The amounts paid for 20182020 performance under the Annual Cash Incentive/P4P Plan are listed in the Summary Compensation Table for 2020 beginning on page 4865 of this Proxy Statement under the column heading "Non-Equity“Non-Equity Incentive Plan Compensation."”
(2)
(2)These amounts represent the threshold, target and maximum number of shares that the Named Executive OfficersNEOs can receive under the terms of the performance shareP-share awards made in 2018.that were awarded to the NEOs during 2020 under the Amended and Restated Long-Term Incentive Plan. See footnote (3)3 to the "OutstandingOutstanding Equity Awards at 20182020 Fiscal Year-End"Year-End table belowbeginning on page 69 for additional information regarding the 2018 performance share2020 P-share awards.
(3)
(3)The amount in this column represents the number of restricted stock unitsRSUs that were awarded to the Named Executive Officers during 20182020 under the Amended and Restated Long-Term Incentive Plan. A portion of the restricted stock units awarded to Mr. Bhojwani and Mr. Zimpfer on February 21, 2018 were one-time in nature. See "—Certain One-Time Grants" in the Compensation Discussion and Analysis for more information.
(4)
(4)The amounts in this column represent the number of stock options granted to the Named Executive Officers during 2018 under the Amended and Restated Long-Term Incentive Plan.
(5)The exercise price equals the closing sales price of CNO common stock on the New York Stock Exchange on the date of grant.
(6)The values included in this column represent the grant date fair value of restricted stock, performance shareRSU and P-share (at target) and option awards computed in accordance with ASC 718. A description of the assumptions used in calculating these values may be found in Note 11 to the CNO financial statements in the Form 10-K for the year ended December 31, 2018,2020, as filed with the SEC.
66
CNO Financial Group, Inc. 2021 Proxy Statement
Narrative Supplement to the Summary Compensation Table
for 2020 and the Grants of Plan-Based Awards in
20182020 Table
Amended Employment
Agreement and Executive Agreements
Chief Executive Officer. We haveThe Company is a party to an employment agreement with Mr. Bhojwani pursuant to which he servesgoverns the terms of his employment as the Company’s Chief Executive Officer for a term endingthat is currently scheduled to expire on December 31, 2020. His employment agreement2023 (the “Amended CEO Agreement”) unless earlier terminated in accordance with its terms or renewed or extended by mutual agreement. The Amended CEO Agreement subjects Mr. Bhojwani to non-solicitation and non-competition covenants that apply during the term and for one year thereafter. The Amended CEO Agreement provides for an annual base salary (currently $1,000,000),of $1,030,000, with increases from time to time based on hisMr. Bhojwani’s performance, and an annual performance-based bonus with a target of 150%160% of base salary with respect to any calendar year. The threshold payout for Mr. Bhojwani is 50% of his target payout, and the maximum payout is 200% of his target payout. For a maximumsummary of 300%Mr. Bhojwani’s entitlements in connection with various types of base salary. As described more fully in "Potentialterminations of his employment during the term, see the “Potential Payments upon Termination or Change in Control," if Mr. Bhojwani's employment is terminated by us without "Cause" or if he resigns "With Reason"Control” section below.
Other Executive Officers. On August 6, 2019, the Compensation Committee approved and adopted the CNO Executive Severance Pay Plan (as defined in his employment agreement), or his employment is terminated by reasonrestated effective November 13, 2019 and further amended effective October 1, 2020, the “Severance Plan”). The Severance Plan covers the executive officers of his death or "Disability" (as defined in his employment agreement), Mr. Bhojwani would be entitledthe Company who report to receive specified additional benefits. Mr. Bhojwani is subject to a non-solicitation and non-competition clause throughout the term of his agreement and for one year thereafter.Company’s Chief Executive Officer, including the Chief Financial Officer. We have an employment agreement with Mr. Helding, pursuant to which he serves as Executive Vice President and Chief Financial Officer. On March 18, 2019, the Company announced that Paul H. McDonough has been appointed Chief Financial Officerand other NEOs Bruce K. Baude, Eric R. Johnson and Matthew J. Zimpfer. For a summary of each NEO’s (other than our CEO’s) entitlements in connection with various terminations of employment, see the Company, effective April 1, 2019 and that Mr. Helding will remain Chief Financial Officer through March 29, 2019. Mr. Helding's employment agreement provides for an annual base salary (currently $465,000), with increases from time to time based on his performance, and an annual performance-based bonus with a target of 100% of base salary and a maximum of 200% of base salary. In addition, Mr. Helding's employment agreement entitles him to receive specified additional benefits if his employment is terminated by us without "Cause" or if he resigns "With Reason" (as defined in his employment agreement), or his employment is terminated by reason of his death or "Disability" (as defined in his employment agreement). See "Potential Payments Upon Termination or Change in Control" for the amounts that would have been payable under each circumstance as of December 31, 2018. Mr. Helding is subject to a non-solicitation clause throughout the term of his employment and for one year thereafter.
Chief Operations and Technology Officer. We have an employment agreement with Mr. Baude pursuant to which he serves as Executive Vice President and Chief Operations and Technology Officer, for a term ending on July 31, 2019. His employment agreement provides for an annual salary (currently $635,000), with increases from time to time based on his performance) and an annual performance-based bonus with a target of 100% of base salary and a maximum of 200% of base salary. As described more fully in "Potential“Potential Payments upon Termination or Change in Control," ifControl” section below. In connection with the adoption of the Severance Plan, the Compensation Committee approved, and each NEO (other than Mr. Baude's employment is terminatedBhojwani) entered into, a Confidential Information and Nonsolicitation Agreement (the “Executive Agreement”) with the Company, effective August 6, 2019, pursuant to which each NEO (other than Mr. Bhojwani) agreed to be bound by us without "Cause" or if he resigns "With Reason" (as defined in his employment agreement), or his employment is terminated by reason of his death or "Disability" (as defined in his employment agreement), Mr. Baude would be entitled to receive specified additional benefits. Mr. Baude is subject to a non-solicitation clause throughoutcovenant that applied during the executive’s term of the agreementemployment and for a period of one year thereafter.
Chief Investment Officer. We have an employment agreement with Mr. Johnson, pursuant to which he serves as Executive Vice President and Chief Investment Officer of CNO and President of 40--86 Advisors, Inc., a wholly owned subsidiary of CNO, for a term ending on September 30, 2019. His employment agreement provides for an annual base salary (currently $550,000), with increases from time to time based on his performance, and an annual performance-based bonus with a target of 100% of base salary and a maximum of 200% of base salary. As described more fully in "Potential Payments upon Termination or Change in Control," if Mr. Johnson's employment is terminated by us without "Cause" or if he resigns "With Reason" (as defined in his employment agreement), or his employment is terminated by reason of his death or "Disability" (as defined in his employment agreement), Mr. Johnson would be entitled to receive specified additional benefits. Mr. Johnson is subject to a non-solicitation clause throughout the term of his agreement and for one year thereafter.
General Counsel. We have an employment agreement with Mr. Zimpfer, pursuant to which he serves as Executive Vice President and General Counsel, for a term ending on June 30, 2020. His employment agreement provides for an annual base salary (currently $583,000), with increases from time to time based on his performance, and an annual performance-based bonus with a target of 100% of base salary and a maximum of
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200% of base salary. As described more fully in "Potential Payments upon Termination or Change in Control," if Mr. Zimpfer's employment is terminated by us without "Cause" or if he resigns "With Reason" (as defined in his employment agreement), or his employment is terminated by reason of his death or "Disability" (as defined in his employment agreement), Mr. Zimpfer would be entitled to receive specified additional benefits. Mr. Zimpfer is subject to a non-solicitation clause throughout the term of his agreement and for one year thereafter.
See "Summary of Components of Regular Total Direct Compensation in 2018 at Target" on page 32 of this Proxy Statement for information regarding the portion of total compensation for the Named Executive Officers represented by the salary and bonus payable under the executive employment agreements described above.
Terms of Equity-Based Awards
Vesting Schedule
Unless otherwise provided in the footnote disclosure to the table of Outstanding Equity Awards at 2018 Fiscal Year-End on pages 54 and 55 of this Proxy Statement, one-half of each option award vests on the second anniversary of the date of grant and the other one-half vests on the third anniversary of the date of grant. Options granted in 2015 – 2018 expire ten years from the date of grant, and options granted in 2012 – 2014 expire seven years from the date of grant.
Awards of restricted stockRSUs generally vest in three equal annual installments beginning one year after the grant, subject to continued service through the vesting dates. Performance shareP-share awards are measuredgenerally vest based on performance over aone three-year performance period, atafter the conclusion of which time they will vest only if and to the extent that the financial goalsperformance metrics specified in the award agreement have been achieved for such period, subject to continued service through the vesting dates.date on which the Committee determines such achievement. See “Compensation Discussion and Analysis” beginning on page 41 for more information on the P-share awards. Unless otherwise noted, grants to the Named Executive OfficersNEOs have vesting schedules identical to other officers.
Forfeiture and Post-Employment Treatment
Holders
Unvested RSUs and P-shares granted in 2020 generally provide that, in the event of stock options generally have 90 days after termination by the Company for any reason (other than for “cause”, as a result of employmentthe executive’s death or disability or in connection with a change in control), (i) a pro rata portion of the next installment of each RSU will vest in connection with such termination, and (ii) a pro rata portion of the P-shares granted will remain eligible to exercise optionsvest and will be payable to the extent they were vestedthe performance criteria are met at the same time as other holders receive payments under such P-share award. In the event that an executive’s employment is terminated by the Company without “cause” or by the executive for “good reason” within six months prior to and in anticipation of or within 24 months after a “change in control” has occurred, then a pro rata portion of the P-shares will vest (based on the number of days from the beginning of the performance period to and including the date of termination. Unvested restricted stocktermination) and performance shares are generally forfeited upon terminationany RSU awards will vest in full, in each case as of employment except upon retirement, disability or death. such date of termination.
Awards outstanding under the Company'sCompany’s Amended and Restated Long-Term Incentive Plan will be treated as follows upon termination of employment due to an individual'sindividual’s retirement or disability (except as otherwise provided in the individual award agreement): (i) outstanding stock options will continue to vest on the original vesting schedule and the individual may exercise the options until the earlier of the expiration date for such options or five years after the date of retirement; (ii) any unvested restricted stockRSUs will continue to vest after retirement on the same vesting schedule as if the individual had remained employed by CNO; and (iii)(ii) a pro rata portion of any performance sharesP-shares will
CNO Financial Group, Inc. 2021 Proxy Statement67
vest and will be payable to the extent the performance criteria are met at the same time as othersother holders receive payments under such performance shareP-share award. For the purpose of the Amended and Restated Long-Term Incentive Plan, "retirement"“retirement” means voluntary termination of employment after achieving either 62 years of age, or 60 years of age with at least 10 years of employment with the Company. Upon an individual'sindividual’s death: (i) outstanding stock options(a) RSUs will vest in full; and be exercisable for 12 months; (ii) restricted stock will vest; and (iii)(b) a pro rata portion of any performance sharesP-shares will vest (based on the number of days from the beginning of the performance period to and including the date of termination) and be payable to the extent the performance criteria are met at the same time as othersother holders receive payments under such performance shareP-share award.Option Exercise Price
Options granted under the Company's Amended and Restated Long-Term Incentive Plan have an exercise price equal to the closing price on the date of grant.
Dividends
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Dividends
Holders of unvested restricted stock or restricted stock units granted prior to May 2017 are entitled to receive any cash dividends or dividend equivalents at the same times and in the same amounts per share as holders of the Company's common stock.
For
restricted stock units granted since May 2017, the recipient will beRSUs, NEOs are entitled to dividend equivalents upon vesting. The payments of cash dividends and dividend equivalents are taxed as compensation income to the holders of the
restricted stock or restricted stock units.RSUs. Holders of
performance shareP-share awards are entitled to dividend equivalents on any
performance sharesP-shares that vest. Such dividend equivalents are payable in cash at the time of vesting of the
performance sharesP-shares to the extent that cash dividends
arewere paid on the common stock underlying the
performance sharesP-shares after the award date and prior to the issuance of shares upon vesting.
68
CNO Financial Group, Inc. 2021 Proxy Statement
Outstanding Equity Awards at
20182020 Fiscal Year-End
The following table sets forth certain information concerning outstanding equity awards held by the Named Executive OfficersNEOs as of December 31, 2018.2020.
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OUTSTANDING EQUITY AWARDS AT 2018 FISCAL YEAR-END
| | | | | | | | | | OPTION AWARDS | | | STOCK AWARDS | |
| Name | | | Award
Date | | | Number of
Securities
Underlying
Unexercised
Options
Exercisable | | | Number of
Securities
Underlying
Unexercised
Options
Unexercisable | | | Option
Exercise
Price | | | Option
Expiration
Date | | | Number of
Shares or
Units of
Stock That
Have Not
Vested(1) | | | Market
Value of
Shares or
Units of
Stock That
Have Not
Vested(2) | | | Equity
Incentive
Plan Awards:
Number of
Unearned
Shares,
Units or
Other
Rights That
Have Not
Vested(3) | | | Equity
Incentive
Plan Awards:
Market or
Payout
Value of
Unearned
Shares,
Units or
Other
Rights That
Have Not
Vested(4) | |
| Gary C. Bhojwani | | | | | 5-5-16 | | | | | | 90,600 | | | | | | — | | | | | $ | 18.43 | | | | | | 5-5-26 | | | | | | — | | | | | $ | — | | | | | | — | | | | | $ | — | | |
| | | | | | 2-23-17 | | | | | | 44,250 | | | | | | — | | | | | | 21.06 | | | | | | 2-23-27 | | | | | | — | | | | | | — | | | | | | — | | | | | | — | | |
| | | | | | 2-21-18(5) | | | | | | 50,075 | | | | | | 50,075 | | | | | | 23.33 | | | | | | 2-21-28 | | | | | | 13,820 | | | | | | 307,219 | | | | | | — | | | | | | — | | |
| | | | | | 2-21-18(6) | | | | | | — | | | | | | — | | | | | | — | | | | | | — | | | | | | 41,055 | | | | | | 912,653 | | | | | | — | | | | | | — | | |
| | | | | | 2-21-18(7) | | | | | | — | | | | | | — | | | | | | — | | | | | | — | | | | | | 25,682 | | | | | | 570,911 | | | | | | — | | | | | | — | | |
| | | | | | 2-21-18(8) | | | | | | — | | | | | | — | | | | | | — | | | | | | — | | | | | | 51,424 | | | | | | 1,143,156 | | | | | | — | | | | | | — | | |
| | | | | | 2-19-19(9) | | | | | | — | | | | | | 164,600 | | | | | | 17.48 | | | | | | 2-19-29 | | | | | | 44,484 | | | | | | 988,879 | | | | | | 56,150 | | | | | | 1,248,215 | | |
| | | | | | 2-19-19(10) | | | | | | — | | | | | | — | | | | | | — | | | | | | — | | | | | | — | | | | | | — | | | | | | 112,300 | | | | | | 2,496,429 | | |
| | | | | | 2-18-20(11) | | | | | | — | | | | | | — | | | | | | — | | | | | | — | | | | | | 110,700 | | | | | | 2,460,861 | | | | | | 135,300 | | | | | | 3,007,719 | | |
| | | | | | 2-18-20(12) | | | | | | — | | | | | | — | | | | | | — | | | | | | — | | | | | | — | | | | | | — | | | | | | 135,300 | | | | | | 3,007,719 | | |
| Paul H. McDonough | | | | | 4-1-19(13) | | | | | | — | | | | | | 31,800 | | | | | | 16.50 | | | | | | 4-1-29 | | | | | | 8,316 | | | | | | 184,865 | | | | | | 10,450 | | | | | | 232,304 | | |
| | | | | | 4-1-19(14) | | | | | | — | | | | | | — | | | | | | — | | | | | | — | | | | | | — | | | | | | — | | | | | | 20,900 | | | | | | 464,607 | | |
| | | | | | 2-18-20(11) | | | | | | — | | | | | | — | | | | | | — | | | | | | — | | | | | | 22,100 | | | | | | 491,283 | | | | | | 27,100 | | | | | | 602,433 | | |
| | | | | | 2-18-20(12) | | | | | | — | | | | | | — | | | | | | — | | | | | | — | | | | | | — | | | | | | — | | | | | | 27,100 | | | | | | 602,433 | | |
| Bruce K. Baude | | | | | 2-25-15 | | | | | | 51,290 | | | | | | — | | | | | | 16.42 | | | | | | 2-25-25 | | | | | | — | | | | | | — | | | | | | — | | | | | | — | | |
| | | | | | 2-23-16 | | | | | | 71,400 | | | | | | — | | | | | | 17.38 | | | | | | 2-23-26 | | | | | | — | | | | | | — | | | | | | — | | | | | | — | | |
| | | | | | 2-23-17 | | | | | | 30,970 | | | | | | — | | | | | | 21.06 | | | | | | 2-23-27 | | | | | | — | | | | | | — | | | | | | — | | | | | | — | | |
| | | | | | 2-21-18(5) | | | | | | 10,310 | | | | | | 10,310 | | | | | | 23.33 | | | | | | 2-21-28 | | | | | | 2,847 | | | | | | 63,289 | | | | | | — | | | | | | — | | |
| | | | | | 2-21-18(7) | | | | | | — | | | | | | — | | | | | | — | | | | | | — | | | | | | 5,288 | | | | | | 117,552 | | | | | | — | | | | | | — | | |
| | | | | | 2-21-18(8) | | | | | | — | | | | | | — | | | | | | — | | | | | | — | | | | | | 10,588 | | | | | | 235,371 | | | | | | — | | | | | | — | | |
| | | | | | 2-19-19(9) | | | | | | — | | | | | | 29,500 | | | | | | 17.48 | | | | | | 2-19-29 | | | | | | 7,986 | | | | | | 177,529 | | | | | | 10,050 | | | | | | 223,412 | | |
| | | | | | 2-19-19(10) | | | | | | — | | | | | | — | | | | | | — | | | | | | — | | | | | | — | | | | | | — | | | | | | 20,100 | | | | | | 446,823 | | |
| | | | | | 2-18-20(11) | | | | | | — | | | | | | — | | | | | | — | | | | | | — | | | | | | 17,200 | | | | | | 382,356 | | | | | | 21,000 | | | | | | 466,830 | | |
| | | | | | 2-18-20(12) | | | | | | — | | | | | | — | | | | | | — | | | | | | — | | | | | | — | | | | | | — | | | | | | 21,000 | | | | | | 466,830 | | |
| | | | | | | | | | | | | | | | | | |
| |
| |
| |
| |
| |
| | STOCK AWARDS |
|---|
| |
| |
| |
| |
| |
| |
| |
| |
| | Equity
Incentive
Plan Awards:
Market or
Payout
Value of
Unearned
Shares,
Units or
Other
Rights That
Have Not
Vested(4) |
|---|
| |
| |
| |
| |
| |
| |
| |
| | Equity
Incentive
Plan Awards:
Number of
Unearned
Shares,
Units or
Other
Rights That
Have Not
Vested(3) |
|---|
| |
| | OPTION AWARDS | |
| |
|
|---|
| Name | | Award
Date | | Number of
Securities
Underlying
Unexercised
Options
Exercisable | | Number of
Securities
Underlying
Unexercised
Options
Unexercisable | | Option
Exercise
Price | | Option
Expiration
Date(1) | | Number of
Shares or
Units of
Stock That
Have Not
Vested | | Market
Value of
Shares or
Units of
Stock That
Have Not
Vested(2) |
|---|
Gary C. Bhojwani | | 5-5-16(5) | | 45,300 | | 45,300 | | $18.43 | | 5-5-26 | | 78,000 | | $1,160,640 | | — | | $— |
| | 2-23-17(6) | | — | | 44,250 | | 21.06 | | 2-23-27 | | 9,167 | | 136,405 | | 13,890 | | 206,683 |
| | 2-23-17(7) | | — | | — | | — | | — | | — | | — | | 27,780 | | 413,366 |
| | 2-21-18(8) | | — | | 100,150 | | 23.33 | | 2-21-28 | | 82,110 | | 1,221,797 | | 34,895 | | 519,238 |
| | 2-21-18(9) | | — | | — | | — | | — | | — | | — | | 69,790 | | 1,038,475 |
| | 2-21-18(10) | | — | | — | | — | | — | | 41,880 | | 623,174 | | — | | — |
Erik M. Helding | |
2-28-12 | |
5,750 | |
— | |
7.51 | |
2-28-19 | |
— | |
— | |
— | |
— |
| | 2-27-13 | | 15,200 | | — | | 10.88 | | 2-27-20 | | — | | — | | — | | — |
| | 3-20-14 | | 12,170 | | — | | 19.15 | | 3-20-21 | | — | | — | | — | | — |
| | 2-25-15 | | 14,530 | | — | | 16.42 | | 2-25-25 | | — | | — | | — | | — |
| | 2-23-16(11) | | 8,650 | | 8,650 | | 17.38 | | 2-23-26 | | 1,766 | | 26,278 | | — | | — |
| | 5-5-16(12) | | 18,150 | | 18,150 | | 18.43 | | 5-5-26 | | 12,000 | | 178,560 | | — | | — |
| | 2-23-17(6) | | — | | 35,400 | | 21.06 | | 2-23-27 | | 12,892 | | 191,833 | | 11,110 | | 165,317 |
| | 2-23-17(7) | | — | | — | | — | | — | | — | | — | | 22,220 | | 330,634 |
| | 2-21-18(8) | | — | | 20,620 | | 23.33 | | 2-21-28 | | 8,630 | | 128,414 | | 7,185 | | 106,913 |
| | 2-21-18(9) | | — | | — | | — | | — | | — | | — | | 14,370 | | 213,826 |
Bruce K. Baude | |
2-27-13 | |
65,200 | |
— | |
10.88 | |
2-27-20 | |
— | |
— | |
— | |
— |
| | 3-20-14 | | 40,130 | | — | | 19.15 | | 3-20-21 | | — | | — | | — | | — |
| | 2-25-15 | | 51,290 | | — | | 16.42 | | 2-25-25 | | — | | — | | — | | — |
| | 2-23-16(11) | | 35,700 | | 35,700 | | 17.38 | | 2-23-26 | | 6,608 | | 98,327 | | — | | — |
| | 2-23-17(6) | | — | | 30,970 | | 21.06 | | 2-23-27 | | 6,415 | | 95,455 | | 9,720 | | 144,634 |
| | 2-23-17(7) | | — | | — | | — | | — | | — | | — | | 19,440 | | 289,267 |
| | 2-21-18(8) | | — | | 20,620 | | 23.33 | | 2-21-28 | | 8,630 | | 128,414 | | 7,185 | | 106,913 |
| | 2-21-18(9) | | — | | — | | — | | — | | — | | — | | 14,370 | | 213,826 |
Eric R. Johnson | |
2-28-12 | |
69,300 | |
— | |
7.51 | |
2-28-19 | |
— | |
— | |
— | |
— |
| | 2-27-13 | | 65,200 | | — | | 10.88 | | 2-27-20 | | — | | — | | — | | — |
| | 3-20-14 | | 43,470 | | — | | 19.15 | | 3-20-21 | | — | | — | | — | | — |
| | 2-25-15 | | 51,290 | | — | | 16.42 | | 2-25-25 | | — | | — | | — | | — |
| | 2-23-16(11) | | 35,700 | | 35,700 | | 17.38 | | 2-23-26 | | — | | — | | — | | — |
| | 2-23-17(6) | | — | | 30,970 | | 21.06 | | 2-23-27 | | 6,415 | | 95,455 | | 9,720 | | 144,634 |
| | 2-23-17(7) | | — | | — | | — | | — | | — | | — | | 19,440 | | 289,267 |
| | 2-21-18(8) | | — | | 20,620 | | 23.33 | | 2-21-28 | | 8,630 | | 128,414 | | 7,185 | | 106,913 |
| | 2-21-18(9) | | — | | — | | — | | — | | — | | — | | 14,370 | | 213,826 |
Matthew J. Zimpfer | |
3-20-14 | |
36,780 | |
— | |
19.15 | |
3-20-21 | |
— | |
— | |
— | |
— |
| | 2-25-15 | | 51,290 | | — | | 16.42 | | 2-25-25 | | — | | — | | — | | — |
| | 2-23-16(11) | | 40,800 | | 40,800 | | 17.38 | | 2-23-26 | | — | | — | | — | | — |
| | 2-23-17(6) | | — | | 30,970 | | 21.06 | | 2-23-27 | | 6,415 | | 95,455 | | 9,720 | | 144,634 |
| | 2-23-17(7) | | — | | — | | — | | — | | — | | — | | 19,440 | | 289,267 |
| | 2-21-18(8) | | — | | 23,570 | | 23.33 | | 2-21-28 | | 18,070 | | 268,882 | | 8,210 | | 122,165 |
| | 2-21-18(9) | | — | | — | | — | | — | | — | | — | | 16,420 | | 244,330 |
| | 9-28-18(13) | | — | | — | | — | | — | | 17,592 | | 261,769 | | — | | — |
| | | | | | | | | | OPTION AWARDS | | | STOCK AWARDS | |
| Name | | | Award
Date | | | Number of
Securities
Underlying
Unexercised
Options
Exercisable | | | Number of
Securities
Underlying
Unexercised
Options
Unexercisable | | | Option
Exercise
Price | | | Option
Expiration
Date | | | Number of
Shares or
Units of
Stock That
Have Not
Vested(1) | | | Market
Value of
Shares or
Units of
Stock That
Have Not
Vested(2) | | | Equity
Incentive
Plan Awards:
Number of
Unearned
Shares,
Units or
Other
Rights That
Have Not
Vested(3) | | | Equity
Incentive
Plan Awards:
Market or
Payout
Value of
Unearned
Shares,
Units or
Other
Rights That
Have Not
Vested(4) | |
| Eric R. Johnson | | | | | 3-20-14 | | | | | | 43,470 | | | | | | — | | | | | $ | 19.15 | | | | | | 3-20-21 | | | | | | — | | | | | $ | — | | | ��� | | | — | | | | | $ | — | | |
| | | | | | 2-25-15 | | | | | | 51,290 | | | | | | — | | | | | | 16.42 | | | | | | 2-25-25 | | | | | | — | | | | | | — | | | | | | — | | | | | | — | | |
| | | | | | 2-23-16 | | | | | | 71,400 | | | | | | — | | | | | | 17.38 | | | | | | 2-23-26 | | | | | | — | | | | | | — | | | | | | — | | | | | | — | | |
| | | | | | 2-23-17 | | | | | | 30,970 | | | | | | — | | | | | | 21.06 | | | | | | 2-23-27 | | | | | | — | | | | | | — | | | | | | — | | | | | | — | | |
| | | | | | 2-21-18(5) | | | | | | 10,310 | | | | | | 10,310 | | | | | | 23.33 | | | | | | 2-21-28 | | | | | | 2,751 | | | | | | 61,155 | | | | | | — | | | | | | — | | |
| | | | | | 2-21-18(7) | | | | | | — | | | | | | — | | | | | | — | | | | | | — | | | | | | 5,288 | | | | | | 117,552 | | | | | | — | | | | | | — | | |
| | | | | | 2-21-18(8) | | | | | | — | | | | | | — | | | | | | — | | | | | | — | | | | | | 10,588 | | | | | | 235,371 | | | | | | — | | | | | | — | | |
| | | | | | 2-19-19(9) | | | | | | — | | | | | | 33,800 | | | | | | 17.48 | | | | | | 2-19-29 | | | | | | 8,803 | | | | | | 195,691 | | | | | | 11,500 | | | | | | 255,645 | | |
| | | | | | 2-19-19(10) | | | | | | — | | | | | | — | | | | | | — | | | | | | — | | | | | | — | | | | | | — | | | | | | 23,000 | | | | | | 511,290 | | |
| | | | | | 2-18-20(11) | | | | | | — | | | | | | — | | | | | | — | | | | | | — | | | | | | 19,041 | | | | | | 423,281 | | | | | | 24,000 | | | | | | 533,520 | | |
| | | | | | 2-18-20(12) | | | | | | — | | | | | | — | | | | | | — | | | | | | — | | | | | | — | | | | | | — | | | | | | 24,000 | | | | | | 533,520 | | |
| Matthew J. Zimpfer | | | | | 2-25-15 | | | | | | 51,290 | | | | | | — | | | | | | 16.42 | | | | | | 2-25-25 | | | | | | — | | | | | | — | | | | | | — | | | | | | — | | |
| | | | | | 2-23-16 | | | | | | 81,600 | | | | | | — | | | | | | 17.38 | | | | | | 2-23-26 | | | | | | — | | | | | | — | | | | | | — | | | | | | — | | |
| | | | | | 2-23-17 | | | | | | 30,970 | | | | | | — | | | | | | 21.06 | | | | | | 2-23-27 | | | | | | — | | | | | | — | | | | | | — | | | | | | — | | |
| | | | | | 2-21-18(5) | | | | | | 11,785 | | | | | | 11,785 | | | | | | 23.33 | | | | | | 2-21-28 | | | | | | 3,253 | | | | | | 72,314 | | | | | | — | | | | | | — | | |
| | | | | | 2-21-18(7) | | | | | | — | | | | | | — | | | | | | — | | | | | | — | | | | | | 6,042 | | | | | | 134,314 | | | | | | — | | | | | | — | | |
| | | | | | 2-21-18(8) | | | | | | — | | | | | | — | | | | | | — | | | | | | — | | | | | | 12,099 | | | | | | 268,961 | | | | | | — | | | | | | — | | |
| | | | | | 2-21-18(15) | | | | | | — | | | | | | — | | | | | | — | | | | | | — | | | | | | 8,210 | | | | | | 182,508 | | | | | | — | | | | | | — | | |
| | | | | | 9-28-18(16) | | | | | | — | | | | | | — | | | | | | — | | | | | | — | | | | | | 5,864 | | | | | | 130,357 | | | | | | — | | | | | | — | | |
| | | | | | 2-19-19(9) | | | | | | — | | | | | | 33,800 | | | | | | 17.48 | | | | | | 2-19-29 | | | | | | 9,108 | | | | | | 202,471 | | | | | | 11,500 | | | | | | 255,645 | | |
| | | | | | 2-19-19(10) | | | | | | — | | | | | | — | | | | | | — | | | | | | — | | | | | | — | | | | | | — | | | | | | 23,000 | | | | | | 511,290 | | |
| | | | | | 2-18-20(11) | | | | | | — | | | | | | — | | | | | | — | | | | | | — | | | | | | 19,700 | | | | | | 437,931 | | | | | | 24,000 | | | | | | 533,520 | | |
| | | | | | 2-18-20(12) | | | | | | — | | | | | | — | | | | | | — | | | | | | — | | | | | | — | | | | | | — | | | | | | 24,000 | | | | | | 533,520 | | |
(1)All options
The amounts in this table that werecolumn reflect (a) RSUs; and (b) the number of shares of CNO common stock to which the NEO will be entitled to receive in respect of P-shares granted in 2015 – 2018 haveas a 10 year expiration date,result of the Company’s achievement of (i) 147.37% of the applicable Operating ROE targets and options granted(ii) 73.60% of the relative TSR targets, in 2012 – 2014 have a seven year expiration date. All options areeach case, over the performance period commencing on January 1, 2018 and ending December 31, 2020 and subject to acceleration for certain events.employment by the award recipient through February 16, 2021, the date the Compensation Committee certified performance achievement levels and released such awards.
(2)
TableThe dollar amounts in this column equal the number of Contents(2)Based onRSUs or P-shares, as applicable, calculated as described in footnote (1) above, each as multiplied by $22.23 (which was the closing sales price of CNO common stock on December 31, 2018 ($14.88)2020) (the “Year-End Closing Price”).
(3)
(3)In accordance with SEC rules, theThe amounts included in this column represent the number of shares of CNO common stock to which the Named Executive OfficerNEO will be entitled if the Company achieves the maximum performance level with respect to the performance shareP-share awards made in 20172019 and 20182020 assuming achievement of (i) maximum performance levels for P-share awards based on average operating return on equityOperating ROE and achieves theOperating EPS and (ii) target levelperformance levels with respect to the performance shareP-share awards made in 2017 and 2018 based on total shareholder return. For the 2017 and 2018 performance share awards, one-halfrelative TSR. Vesting for 50% of the aggregate awardP-share awards granted in 2019 is based on the Company'sCompany’s three-year average operating return on equity,Operating ROE, with a target of 8.25%10.4% for 2017the three-year period, and 9.25% for 2018. The other half of the performance share awards made in 2017 and 2018remaining 50% is based on relative total shareholder return for a comparator group,TSR over the same three-year period, targeting the 50th percentile. For purposes of theseVesting for the P-share awards average operating returngranted in 2020 is based 50% on equityone-year Operating ROE, with a target set at 10.2%, and the remaining 50% is calculated based on "Operating earnings", definedone-year Operating EPS, with a target set at $2.02, each as net income applicable to common stock before: (i) loss on extinguishment of debt, net of income taxes; (ii) net realized investment gains or losses, net of related amortization and income taxes; (iii) fair value changes due to fluctuations inadjusted by relative TSR for the interest rates used to discount embedded derivative liabilities related to fixed index annuities, net of related amortization and income taxes; (iv) equity in earnings of certain non-strategic investments, earnings attributable to non-controlling interests and earnings from discontinued operations, in each case net of income taxes; (v) changes to the valuation allowance for deferred tax assets; (vi) the cumulative effect of change in accounting principles, net of income taxes; (vii) after-tax mark-to-market change in the agent deferred compensation liability; (viii) gain or loss related to any long-term care reinsurance transaction entered into after the grant date; and (ix) unusual income or expense items, net of income taxes, that are unlikely to recur as determined by the Human Resources and Compensation Committee.2020-2022 performance period.
(4)
(4)The dollar amounts in this column equal the number of performance shares,P-shares, calculated as described in footnote (3) above, multiplied by the closing sales priceYear-End Closing Price.
(5)
Any remaining options vested on February 21, 2021. Any remaining RSUs awarded on this date vest on March 25, 2021.
(6)
Any remaining RSUs awarded on this date vest on March 25, 2021.
(7)
These are the number of shares of CNO common stock to which the NEO is entitled following release of P-share awards based on achieved relative TSR over the performance period commencing on January 1, 2018, and ending on December 31, 2018 ($14.88).2020, and subject to employment through February 16, 2021. See footnote (1) above for additional information.
(8)
(5)One-halfThese are the number of these options vestedshares of CNO common stock to which the NEO is entitled following release of P-share awards based on May 5,achieved Operating ROE over the performance period commencing on January 1, 2018, and the balance vestsending on May 5, 2019. The remaining shares of restricted stock from this award vest on May 5, 2019.December 31, 2020, and subject to employment through February 16, 2021. See footnote (1) above for additional information.
70
CNO Financial Group, Inc. 2021 Proxy Statement
(9)
One-half of these options vested on February 23, 201919, 2021, and the balance vests on February 23, 2020. Any19, 2022. The remaining restricted stock units from the awardRSUs awarded on this date vest in two equal installments beginning March 25, 2019.2021. The performance shareP-share awards included in the last two columns are based on total shareholder returnrelative TSR over the 2017 –performance period commencing on January 1, 2019 performance period.
(7)These are performance share awards basedand ending on average operating return on equity over the 2017 – 2019 performance period.December 31, 2021. See footnote (3) above for additional information.
(10)
(8)One-half of these options vestThese are P-share awards based on February 23, 2020Operating ROE over the performance period commencing on January 1, 2019, and the balance vestsending on February 23,December 31, 2021. See footnote (3) above for additional information.
(11)
The restricted stock unitsRSUs awarded on this date vest in three equal installments beginning March 25, 2019.2021. The performance shareP-share awards included in the last two columns were made in 2020 and are based on one-year Operating EPS, as adjusted by the relative TSR over a three-year period. See footnote (3) above for additional information.
(12)
These are P-share awards granted in 2020 based on annual Operating ROE, as adjusted by the relative TSR over a three-year period. See footnote (3) above for additional information.
(13)
One-half of these options vest on April 1, 2021, and the balance vests on April 1, 2022. The remaining RSUs awarded on this date vest in two equal installments beginning April 1, 2021. The P-share awards included in the last two columns are based on total shareholder returnrelative TSR over the 2018 – 2020 performance period.
(9)These are performance share awards basedperiod commencing on average operating returnJanuary 1, 2019, and ending on equity over the 2018 – 2020 performance period.December 31, 2021. See footnote (3) above for additional information.
(14)
(10)These restricted stock unitsare P-share awards based on Operating ROE over the performance period commencing on January 1, 2019 and ending on December 31, 2021. See footnote (3) above for additional information.
(15)
These RSUs vest in full on March 25, 2021.
(16)
(11)One-half of these options vested on February 23, 2018 and the balance vested on February 23, 2019. AnyThe remaining shares of restricted stockRSUs awarded on this date vest on March 25, 2019.
(12)One-half of these options vested on May 5, 2018 and the balance vests on May 5, 2019. The shares of restricted stock awarded on this date vest on May 5, 2019.
(13)The restricted stock units awarded on this date vest in three equal annual installments beginning September 28, 2019.
CNO Financial Group, Inc. 2021 Proxy Statement71
Option Exercises and Stock Vested in
20182020
The following table provides information, for the Named Executive Officers,NEOs, concerning (i) stock optionStock Option exercises during 20182020 and the value realized upon exercise (before payment of any applicable withholding tax) and, (ii) the number of shares acquired upon the vesting of restricted stockRSU awards and restricted stock units in 2018(iii) the number of shares to which the NEO is entitled following release of P-share awards based on achieved average operating return on equity over the performance period commencing on January 1, 2017, and performance share awards (forending on December 31, 2019, as certified and released by the 2016 – 2018 performance period)Compensation Committee on February 18, 2020, and the value realized upon vesting thereof (in each case before payment of any applicable withholding tax).
OPTION EXERCISES AND STOCK VESTED IN 2018
| | | | OPTION AWARDS | | | STOCK AWARDS | |
| Name | | | Number of
Shares
Acquired On
Exercise | | | Value
Realized
Upon Exercise | | | Number of
Shares
Acquired on
Vesting | | | Value
Realized on
Vesting | |
| Gary C. Bhojwani | | | | | — | | | | | $ | — | | | | | | 109,527 | | | | | $ | 1,587,474 | | |
| Paul H. McDonough | | | | | — | | | | | | — | | | | | | 4,284 | | | | | | 46,953 | | |
| Bruce K. Baude | | | | | 105,330 | | | | | | 494,661 | | | | | | 29,170 | | | | | | 499,406 | | |
| Eric R. Johnson | | | | | 65,200 | | | | | | 368,380 | | | | | | 30,808 | | | | | | 526,164 | | |
| Matthew J. Zimpfer | | | | | 36,780 | | | | | | 85,841 | | | | | | 85,841 | | | | | | 607,487 | | |
| | | | | | | | |
| | OPTION AWARDS | | STOCK AWARDS |
|---|
Name | | Number of
Shares
Acquired On
Exercise | | Value
Realized
Upon Exercise | | Number of
Shares
Acquired on
Vesting | | Value
Realized on
Vesting |
|---|
Gary C. Bhojwani | | — | | $— | | 82,723 | | $1,682,157 |
Erik M. Helding | | — | | — | | 10,640 | | 240,904 |
Bruce K. Baude | | — | | — | | 36,506 | | 826,722 |
Eric R. Johnson | | 83,100 | | 1,310,487 | | 27,867 | | 643,230 |
Matthew J. Zimpfer | | — | | — | | 27,867 | | 643,230 |
Nonqualified Deferred Compensation in 2018
2020
The following table shows certain information concerning nonqualified deferred compensation activity in 20182020 for our Named Executive Officers.
NEOs.NONQUALIFIED DEFERRED COMPENSATION IN 2018
| Name | | | Executive
Contributions
in 2020 | | | CNO
Contributions
in 2020 | | | Aggregate
Earnings (Loss)
in 2020(1) | | | Aggregate
Withdrawals/
Distributions | | | Aggregate
Balance at
12/31/20(2) | |
| Gary C. Bhojwani | | | | $ | — | | | | | $ | — | | | | | $ | 120,570 | | | | | $ | — | | | | | $ | 975,533 | | |
| Paul H. McDonough | | | | | — | | | | | | — | | | | | | — | | | | | | — | | | | | | — | | |
| Bruce K. Baude | | | | | — | | | | | | — | | | | | | — | | | | | | — | | | | | | — | | |
| Eric R. Johnson | | | | | — | | | | | | — | | | | | | — | | | | | | — | | | | | | — | | |
| Matthew J. Zimpfer | | | | | 48,968 | | | | | | — | | | | | | 73,609 | | | | | | — | | | | | | 688,002 | | |
| | | | | | | | | | |
Name | | Executive
Contributions
in 2018 | | CNO
Contributions
in 2018 | | Aggregate
Earnings (Loss)
in 2018(1) | | Aggregate
Withdrawals/
Distributions | | Aggregate
Balance at
12/31/18(2) |
|---|
Gary C. Bhojwani | | $— | | $— | | $(48,686) | | $— | | $706,144 |
Erik M. Helding | | 132,599 | | — | | (38,454) | | — | | 291,740 |
Bruce K. Baude | | — | | — | | 34 | | 461,395 | | — |
Eric R. Johnson | | — | | — | | — | | — | | — |
Matthew J. Zimpfer | | 57,212 | | — | | (8,215) | | — | | 437,560 |
(1)(1)- Amounts in this column are not required to be included in the Summary Compensation Table for 2020 beginning on page
4865 of this Proxy Statement.
(2)
(2)Amounts included in this column reflect the following amounts contributed under the deferred compensation plan by or on behalf of the Named Executive Officers,NEOs, which amounts were in each case included in the summary compensation tableSummary Compensation Table for the named executive officersNEOs for the year(s) to which the compensation relates: Mr. Bhojwani, $750,000; Mr. Helding, $279,409; and Mr. Zimpfer, $57,212.$158,589.
The 20182020 Nonqualified Deferred Compensation table presents amounts deferred under our Deferred Compensation Plan. Participants may defer up to 100% of their base salary and annual incentive plan payments, as well as equity awards, under the Deferred Compensation Plan. Deferred amounts (other than equity awards) are credited with earnings or losses based on the return of mutual funds selected by the executive, which the executive may change at any time. We do not make matching contributions to participants'participants’ accounts under the Deferred Compensation Plan. Distributions are made in either a lump sum or an annuity as chosen by the executive at the time of deferral.
72
CNO Financial Group, Inc. 2021 Proxy Statement
Potential Payments Upon Termination or Change in Control
Each of the Named Executive Officers listed below would be entitled to certain payments upon termination of employment arising under (i) benefit plans covering all employees such as group life insurance coverage, (ii) agreements covering awards made under the Company's Long-Term Incentive Plan and (iii) the terms of an employment agreement between the Named Executive Officer and the Company or one of its subsidiaries. See "Termination and Change in Control Arrangements" on page 46 of this Proxy Statement for additional information regarding these arrangements.
The following table estimatesdescribes the amountsvalue of the compensation and benefits, other than compensation and benefits generally available to salaried employees, that would have been payable to each of our NEOs in the Named Executive Officers uponevent that such NEOs experienced a termination of employment on December 31, 2020, under each of the scenarios identified circumstances asbelow:
| Name | | | Voluntary
Resignation Not
With Reason or
For Cause
Termination(1) | | | Disability(2) | | | Death(3) | | | Without
Just Cause or
With
Reason(4) | | | Involuntary
Termination or
Resignation With
Reason within
6 months
before or
2 years after
Change In
Control(5) | |
Gary C. Bhojwani(6) | | | | $ | — | | | | | $ | 7,868,399 | | | | | $ | 12,938,010 | | | | | $ | 13,552,198 | | | | | $ | 22,008,502 | | |
Paul H. McDonough(7) | | | | | — | | | | | | 867,059 | | | | | | 1,943,207 | | | | | | 3,890,695 | | | | | | 5,084,519 | | |
Bruce K. Baude(8) | | | | | — | | | | | | 1,111,700 | | | | | | 2,134,874 | | | | | | 3,875,334 | | | | | | 5,407,922 | | |
Eric R. Johnson(9) | | | | | — | | | | | | 1,220,738 | | | | | | 2,300,865 | | | | | | 3,571,092 | | | | | | 5,051,042 | | |
Matthew J. Zimpfer(10) | | | | | — | | | | | | 1,271,089 | | | | | | 2,696,670 | | | | | | 3,804,033 | | | | | | 5,721,952 | | |
(1)
For purposes of December 31, 2018: | | | | | | | | | | |
Name | | Voluntary or
For Cause
Termination | | Disability | | Death | | Without
Cause or
With Good
Reason | | Involuntary
Termination
within 6 months
before or
2 years after
Change In
Control |
|---|
Gary C. Bhojwani(1) | | — | | $1,500,000 | | $1,400,000 | | $3,854,871 | | $14,191,187 |
Erik M. Helding(2) | | — | | 450,000 | | 850,000 | | 1,280,968 | | 3,522,743 |
Bruce K. Baude(3) | | — | | 618,000 | | 1,018,000 | | 1,789,521 | | 4,102,357 |
Eric R. Johnson(4) | | — | | 525,000 | | 925,000 | | 1,681,893 | | 3,710,402 |
Matthew J. Zimpfer(5) | | — | | 550,000 | | 950,000 | | 1,570,671 | | 4,097,173 |
(1)Forthis table, “Voluntary Resignation” means a voluntary termination of employment that occurs prior to the NEO becoming retirement-eligible and that is not a resignation “With Reason” for purposes of the Severance Plan (or, for Mr. Bhojwani, his employment agreement provides for payments uponAmended CEO Agreement).
(2)
Upon a termination of employment as follows: (i) due to a NEO’s disability, a pro rata portion (determined based on the number of his target annual bonus ($1,500,000days from the beginning of the performance period through the date employment is terminated) of any P-share awards will remain eligible to vest as of the end of the performance period without regard to continued employment, subject to achievement of the applicable performance criteria for such performance period. Amounts reflected in this column assume: (a) achievement of applicable Operating ROE targets and TSR targets for the performance period commencing on January 1, 2018, and ending December 31, 2018);2020, as certified and released by the Compensation Committee on February 16, 2021, (b) achievement of target performance levels with respect to awards based on TSR and of maximum performance levels of awards based on Operating ROE for the performance period commencing on January 1, 2019, and ending on December 31, 2021, and (c) achievement of maximum performance levels with respect to awards based on one-year Operating ROE and one-year Operating EPS for the performance period commencing on January 1, 2020 and ending on December 31, 2022, in each case, as multiplied by the closing sales price of CNO common stock on December 31, 2020 ($22.23).
(3)
Upon a termination of employment due to a NEO’s death, (i) a pro rata portion (determined based on the number of days from the beginning of the performance period through the date employment is terminated) of any P-share awards will remain eligible to vest in the same manner as described in footnote (2), (ii) upon death, an amount equalRSUs subject to his annual salary (in addition, he wouldservice-based vesting conditions only will vest in full and (iii) the decedent NEO’s estate will be entitled to receive $400,000 under the Company'sCompany’s group life insurance plan); (iii)plan.
(4)
In the event that the employment of a NEO (other than Mr. Bhojwani) had terminated on December 31, 2020, either by the Company without "Just Cause"“Just Cause” or "With Reason" (asby such NEO “With Reason” (in each case, as defined in his agreement)the Severance Plan), an amount equalsuch NEO would have been eligible, pursuant to the terms of the Severance Plan, to receive the following payments and benefits:
| | | | Pro Rata Bonus | | | 1.5x Base Salary and
Target Bonus | |
Paul H. McDonough(7) | | | | $ | 836,823 | | | | | $ | 1,849,869 | | |
Bruce K. Baude(8) | | | | | 872,558 | | | | | | 1,957,640 | | |
Eric R. Johnson(9) | | | | | 745,242 | | | | | | 1,650,000 | | |
Matthew J. Zimpfer(10) | | | | | 812,548 | | | | | | 1,796,099 | | |
In addition to the amounts payable under the Severance Plan, a pro rata portion of his actual bonus ($1,338,333each award granted to each NEO in 2019 and 2020 would have vested in accordance with the terms of each such award’s applicable grant agreement. See footnote (2) above for 2018) plus an amount equal to the sum of his target bonus and his annual salary plus continued participation for up to 12 months for Mr. Bhojwani and his family in all medical, health and life insurance plans at the same benefit level at which he and his family were participatingadditional information on the datevesting of his termination (the amountpro rata portions of the P-shares. Further, each such NEO would be eligible to receive the (a) outplacement services, (b) financial and tax preparation and (c) eighteen months of subsidization of certain welfare benefit coverages (defined as “COBRA Coverages under the Severance Plan”), in each case, as set forth in the table includes $16,538below in footnote (5).
CNO Financial Group, Inc. 2021 Proxy Statement73
(5)
In the event that the employment of a NEO (other than Mr. Bhojwani) had terminated on December 31, 2020, either by the Company for 12 months of such benefits); and (iv) upon an involuntary terminationany reason, or by the NEO “With Reason,” in either case, within six months in anticipation of or within two years afterfollowing a change“Change in control, an amount equalControl” (as defined in the Severance Plan) (a “Change in Control Termination”), such NEO would have been eligible, pursuant to histhe terms of the Severance Plan, to receive the following payments and benefits:
| | | | Pro Rata
Bonus | | | 2x Base
Salary and
Target Bonus | | | Outplacement
Services | | | Financial
and Tax
Preparation | | | Welfare
Benefit
Subsidy | |
Paul H. McDonough(7) | | | | $ | 836,823 | | | | | $ | 2,466,492 | | | | | $ | 25,000 | | | | | $ | 10,000 | | | | | $ | 20,784 | | |
Bruce K. Baude(8) | | | | | 872,558 | | | | | | 2,610,186 | | | | | | 25,000 | | | | | | 10,000 | | | | | | 15,179 | | |
Eric R. Johnson(9) | | | | | 745,242 | | | | | | 2,200,000 | | | | | | 25,000 | | | | | | 10,000 | | | | | | 9,384 | | |
Matthew J. Zimpfer(10) | | | | | 812,548 | | | | | | 2,394,798 | | | | | | 25,000 | | | | | | 10,000 | | | | | | 22,386 | | |
In addition to the amounts payable under the Severance Plan, a pro rata actual bonus forportion of the yearP-shares held by such NEO would have vested as of such date of termination plus(based on the number of days from the beginning of the performance period through the date of termination), as described in footnote (2) above, and any RSU and option awards would have vested in full as of such date of termination.
(6)
The following table contains the amounts that would have been payable to Mr. Bhojwani had his employment been terminated on December 31, 2020, pursuant to the following termination scenarios in accordance with his Amended CEO Agreement:
| | | | Death or
Disability | | | Without Just
Cause or
With Reason | | | Change in
Control Termination | |
| Pro Rata Target Bonus | | | | $ | 1,648,000 | | | | | $ | — | | | | | $ | — | | |
| Pro Rata Actual Bonus | | | | | — | | | | | | 2,231,527 | | | | | | 2,231,527 | | |
Multiple of Base Salary and Target Bonus(a) | | | | | — | | | | | | 5,356,000 | | | | | | 8,034,000 | | |
Welfare Benefit Subsidy(b) | | | | | — | | | | | | 18,057 | | | | | | 36,114 | | |
| Outplacement Services | | | | | — | | | | | | 25,000 | | | | | | 25,000 | | |
| Financial and Tax Preparation | | | | | — | | | | | | 10,000 | | | | | | 10,000 | | |
Company Group Life Insurance(c) | | | | | 400,000 | | | | | | — | | | | | | — | | |
| Option Acceleration | | | | | — | | | | | | 363,228 | | | | | | 781,850 | | |
Restricted Stock Unit Acceleration(d) | | | | | 4,669,612 | | | | | | 1,042,053 | | | | | | 4,669,612 | | |
| Performance Share Acceleration | | | | | 6,220,399 | | | | | | 4,506,332 | | | | | | 6,220,399 | | |
(a)
Multiple is three times the sum(3) if such termination is a Change in Control Termination and two (2) in other qualifying termination scenarios.
(b)
Twenty-four (24) months of his salary and target bonus plus continued participation in the event of a Change in Control Termination and twelve (12) months in other qualifying termination scenarios.
(c)
Not applicable for uptermination for disability.
(d)
RSUs subject to 24 monthsservice-based vesting conditions will vest in full upon death but will not result in accelerated vesting upon disability.
The acceleration of awards shown in the table above in this footnote (6) for Mr. Bhojwani reflect vesting terms similar to the other NEOs under the Company’s Amended and his familyRestated Long-Term Incentive Plan, as described in all medical, healthmore detail in each such applicable award agreement and life insurance plans at the same benefit level at which he and his family were participating onnarrative description for the date of his termination (the amountother NEOs in the tablefootnotes above.
(7)
The amount shown for Mr. McDonough includes $33,076 for 24 monthsthe value, as of December 31, 2020, of such benefits).accelerated vesting of options ($182,214), RSUs ($676,148) and P-shares ($867,059), in each case, that would accelerate in the event of a Change in Control Termination. In the event of a termination uponby the Company for any reason other than for cause, death or disability (or in connection with a change in control,control), in addition to the amounts payable under his employment agreement, the vesting of his awards under the Company's Long-Term IncentiveSeverance Plan, would be accelerated and the amount shown for Mr. BhojwaniMcDonough also includes the value, as of December 31, 20182020, of the prorated accelerated vesting of options ($0)79,779), restricted stockRSUs ($3,142,016)201,382) and target performance sharesP-share awards ($2,177,762).
(2)For867,059) that Mr. Helding, his employment agreement providesMcDonough would receive in connection with such termination. See footnotes 2, 3, 4 and 5 for payments upon termination of employment as follows: (i) due to disability, a pro rata portion of his target annual bonus ($450,000 as of December 31, 2018); (ii) upon death, an amount equal to his annual salary (in addition, he would be entitled to receive $400,000 under the Company's group life insurance plan); (iii) without "Just Cause" or "With Reason" (as defined in his agreement), an amount equal to the pro rata portion of his actual bonus ($380,968 for 2018) plus an amount equal to the sum of his target bonus and his annual salary; and (iv) upon an involuntary termination within six months in anticipation of or within two years after a change in control, an amount equal to his pro rata actual bonus for the year of termination plus two times the sum of his salary and target bonus. In the event of a termination upon a change in control, in addition to the amounts payable under his employment agreement, the vesting of his awards under the Company's Long-Term Incentive Planadditional information.
(8)
Table of Contentswould be accelerated and the amount shown for Mr. Helding includes the value as of December 31, 2018 of the accelerated vesting of options ($0), restricted stock ($525,085) and target performance shares ($816,690).
(3)For Mr. Baude, his employment agreement provides for payments upon termination of employment as follows: (i) due to disability, a pro rata portion of his target annual bonus ($618,000 as of December 31, 2018); (ii) upon death, an amount equal to his annual salary (in addition, he would be entitled to receive $400,000 under the Company's group life insurance plan); (iii) without "Just Cause" or "With Reason" (as defined in his agreement), an amount equal to the pro rata portion of his actual bonus ($553,521 for 2018) plus an amount equal to the sum of his target bonus and his annual salary; and (iv) upon an involuntary termination within six months in anticipation of or within two years after a change in control, an amount equal to his pro rata actual bonus for the year of termination plus two times the sum of his salary and target bonus. In the event of a termination upon a change in control, in addition to the amounts payable under his employment agreement, the vesting of his awards under the Company's Long-Term Incentive Plan would be accelerated and theThe amount shown for Mr. Baude includes the value, as of December 31, 20182020, of thesuch accelerated vesting of options ($0)140,125), restricted stockRSUs ($322,196)623,174) and target performance sharesP-shares ($754,640).
(4)For Mr. Johnson, his employment agreement provides for payments upon termination1,111,700), in each case, that would accelerate in the event of employment as follows: (i) due to disability, a pro rata portion of his target annual bonus ($525,000 as of December 31, 2018); (ii) upon death, an amount equal to his annual salary (in addition, he would be entitled to receive $400,000 under the Company's group life insurance plan); (iii) without "Just Cause" or "With Reason" (as definedChange in his agreement), an amount equal to the pro rata portion of his actual bonus ($631,893 for 2018) plus an amount equal to the sum of his target bonus and his annual salary; and (iv) upon an involuntary termination within six months in anticipation of or within two years after a change in control, an amount equal to his pro rata actual bonus for the year of termination plus two times the sum of his salary and target bonus.Control Termination. In the event of a termination uponby the Company for any reason other than for cause, death or disability (or in connection with a change in control,control), in addition to the amounts payable under his employment agreement, the Severance Plan, the amount for Mr. Baude also includes the value, as of December 31, 2020, of the prorated accelerated vesting of hisoptions ($65,099), RSUs ($171,082) and P-share awards under the Company's Long-Term Incentive Plan($758,777) that Mr. Baude would be acceleratedreceive in connection with such termination. See footnotes 2, 3, 4 and the5 for additional information.
(9)
The amount shown for Mr. Johnson includes the value, as of December 31, 20182020, of thesuch accelerated vesting of options ($0)160,550), restricted stockRSUs ($223,869)680,127) and target performance sharesP-shares ($754,640).
(5)For Mr. Zimpfer, his employment agreement provides for payments upon termination1,220,738), in each case, that would accelerate in the event of employment as follows: (i) due to disability, a pro rata portion of his target annual bonus ($550,000 as of December 31, 2018); (ii) upon death, an amount equal to his annual salary (in addition, he would be entitled to receive $400,000 under the Company's group life insurance plan); (iii) without "Just Cause" or "With Reason" (as definedChange in his agreement), an amount equal to the pro rata portion of his actual bonus ($470,671 for 2018) plus an amount equal to the sum of his target bonus and his annual salary; and (iv) upon an involuntary termination within six months in anticipation of or within two years after a change in control, an amount equal to his pro rata actual bonus for the year of termination plus two times the sum of his salary and target bonus.Control Termination. In the event of a termination uponby the Company for any reason other than for cause, death or disability (or in connection with a change in control,control), in addition to the amounts payable under his employment agreement, the Severance Plan, the amount for Mr. Johnson also includes the value, as of December 31, 2020, of the prorated accelerated vesting of hisoptions ($74,585), RSUs ($189,066) and P-share awards under the Company's Long-Term Incentive Plan($867,815) that Mr. Johnson would be acceleratedreceive in connection with such termination. See footnotes 2, 3, 4 and the5 for additional information.
(10)
The amount shown for Mr. Zimpfer includes the value, as of December 31, 20182020, of thesuch accelerated vesting of options ($0)160,550), restricted stockRSUs ($626,106)1,025,581) and target performance sharesP-shares ($800,396).1,271,089), in each case, that would accelerate in the event of a Change in Control Termination. In the event of termination by the Company for any reason other than for cause, death or disability (or in connection with a change in control), in addition to the amounts payable under the Severance Plan, the amount for Mr. Zimpfer also includes the value, as of December 31, 2020, of the prorated accelerated vesting of options ($74,585), RSUs ($195,602) and P-share awards ($867,815) that Mr. Zimpfer would receive in connection with such termination. See footnotes 2, 3, 4 and 5 for additional information.
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CNO Financial Group, Inc. 2021 Proxy Statement
The following is a reasonable estimate, prepared under applicable SEC rules, of the ratio of the annual total compensation of our
Chief Executive OfficerCEO to the median of the annual total compensation of our other employees. We determined our median employee based on W-2 gross earnings of each of our
3,3373,494 employees as of December 31,
2018.2020. W-2 gross earnings data are readily available, consistently reported for our entire employee population and provide a fair representation of the total compensation an employee receives in a given year. Of
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the two potential median employees, we selected the salaried versus commission-based employee who is not on a sales incentive plan due to the greater consistency expected in future years in the amount earned by the salariedthat employee. The 2020 annual total compensation of our median employee for 2018 was $62,652.$67,291. As disclosed in the Summary Compensation Table appearingfor 2020 beginning on page 48,65, the 20182020 annual total compensation for Mr. Bhojwani was $7,701,334.$8,260,886. Based on the information above, our estimate of the ratio of the annual total compensation of our CEO to the median of the annual total compensation of all other employees is 123 to 1.
CNO Financial Group, Inc. 2021 Proxy Statement75
PROPOSAL 2REPLACEMENT NOL PROTECTIVE AMENDMENT
TO THE AMENDED AND RESTATED CERTIFICATETABLE OF INCORPORATION
TO PRESERVE VALUE OF TAX NET OPERATING LOSSES AND CERTAIN OTHER TAX LOSSES
CONTENTS
| | Proposal 3 | |
| | Approval of Amended and Restated Section 382 Shareholders Rights Plan | |
| | | | | The Board of Directors unanimously recommends you vote FOR this proposal. | |
Introduction
Introduction and Effective Date
In 2016, following shareholder approval, we filedOn November 12, 2020, the Board adopted a Certificate of Amendment to ourFourth Amended and Restated CertificateSection 382 Rights Agreement (the “Fourth Amended Rights Plan”), which became effective on November 13, 2020. The Board had previously declared a dividend of Incorporationone preferred share purchase right (a “Right”) for each outstanding share of common stock, par value $0.01 per share, of the Company (the "NOL Protective Amendment"“Common Stock”) that was paid to the shareholders of record as of the close of business on January 30, 2009 pursuant to the Company’s original Section 382 Rights Agreement, dated as of January 20, 2009 (the “Original Rights Plan”). The Original Rights Plan was amended and restated on December 6, 2011 (the “First Amended Rights Plan”) and was approved by shareholders at the 2012 annual meeting. The First Amended Rights Plan was amended and restated on November 13, 2014 (the “Second Amended Rights Plan”) and was approved by the shareholders at the 2015 annual meeting. The Second Amended Rights Plan was amended and restated effective November 13, 2017 (the “Third Amended Rights Plan”) and was approved by the shareholders at the 2018 annual meeting. The Third Amended Rights Plan expired on November 13, 2020.
The Fourth Amended Rights Plan, among other things, extendthings:
»
Extended the termfinal expiration date of the Third Amended Rights Plan from November 13, 2020 to November 13, 2023;
»
Updated the purchase price of the Rights; and
»
Provided for a new series of preferred stock relating to the Rights that is substantially identical to the prior series of preferred stock.
The Fourth Amended Rights Plan approval proposal is an opportunity for shareholders to approve the decision by the Board to adopt the Fourth Amended Rights Plan. If the shareholders do not approve the Fourth Amended Rights Plan at the Annual Meeting, the Fourth Amended Rights Plan will expire upon the adjournment of the Annual Meeting.
Purpose of the Fourth Amended Rights Plan
The Fourth Amended Rights Plan is designed to prevent certain restrictions on transfers of our common stockCommon Stock or other securities interests (collectively, “Company 382 Securities”) that would be treated as our "stock"“stock” for purposes of Section 382 ("(“Section 382"382”) of the Internal Revenue Code of 1986, as amended (the "Code"“Code”). These restrictions were designed to prevent transfers of our stock that, which could otherwise result in an ownership change under Section 382 and, therefore, adversely affect our ability to utilize tax net operating losses ("NOLs"(“NOLs”) and certain other tax losses (collectively, "Tax Benefits"“Tax Benefits”) to offset our taxable income for U.S. federal income tax purposes. The NOL Protective Amendment will expire according to its terms on July 31, 2019. At the Annual Meeting, you will consider and vote on an amendment (the "Replacement NOL Protective Amendment") to our Amended and Restated Certificate of Incorporation to replace the NOL Protective Amendment with a new amendment that is substantially the same as the NOL Protective Amendment. The Replacement NOL Protective Amendment will take effect on July 31, 2019 and will replace the NOL Protective Amendment. The Replacement NOL Protective Amendment will expire according to its terms on July 31, 2022.
Purpose of the Replacement NOL Protective Amendment
As of December 31, 2018,2020, we had approximately $3.3$1.6 billion of federal tax NOLs (which expire in years 2023 through 2035) resulting in deferred tax assets of approximately $.7 billion (of which $.5 billion expires in years 2023 through 2035 and $.2 billion has no expiration date). Generally, the$0.3 billion. The unexpired balance of our Tax BenefitsNOLs can be used to offset tax onall of the favorable income (if any)generated from our non-life companies and the lesser of (i) 35% of the taxable income from our life insurance companies and (ii) 35% of the total loss of the non-life companies (including the NOLs of the non-life entities). However, as discussed further below, the utilization of Tax Benefits to offset taxable income can be further limited in certain circumstances. Because the amount and timing of our future taxable income cannot be accurately predicted, we cannot predict the amount of Tax Benefits that will ultimately be used to reduce our income tax liability. Although we are unable to quantify an exact value, we believe that the Tax Benefits are a very valuable assetassets and the Board believes it is in the Company'sCompany’s best interests to attempt to prevent the imposition of limitations on their use by adopting the Replacement NOL Protective Amendment.
Fourth Amended Rights Plan.
The benefit of the Tax Benefits to the Company could be significantly reduced or eliminated if we experience an "ownership change"“ownership change” within the meaning of Section 382 of the Code (an "Ownership Change"“Ownership Change”). An Ownership Change
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CNO Financial Group, Inc. 2021 Proxy Statement
can occur through one or more acquisitions of our stock, whether or not occurring pursuant to a single plan, by which shareholders or groups of shareholders, each of whom owns or is deemed to own directly or indirectly at least 5% or more in value of our stock, increase their aggregate ownership of our stock by more than 50 percentage points over their lowest aggregate percentage interest within a rolling three-year period. See "— “—Section 382 Ownership Change Calculations"Calculations” below for additional detail. If that were to happen, we would only be allowed to use a limited amount of Tax Benefits to offset our taxable income subsequent to an Ownership Change (the "Annual“Annual 382 Limitation"Limitation”).
The Annual 382 Limitation is obtained by multiplying (i) the aggregate value of our outstanding equity immediately prior to the Ownership Change (reduced by certain capital contributions made during the immediately preceding two years and certain other items) by (ii) the federal
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long-term tax-exempt rate (as defined by Section 382 of the Code and regularly published by the Internal Revenue Service (the "IRS"“IRS”)) in effect for the month of the Ownership Change. The Annual 382 Limitation is subject to certain adjustments and limitations. If we were to experience an Ownership Change at our current stock price levels, we believe we would be subject to the Annual 382 Limitationan annual Tax Benefits limitation which would result in a material amount of Tax BenefitsNOLs expiring unused, resulting in a significant impairment to the Company'sCompany’s deferred tax assets. Additionally, the writedown of our deferred tax assets that would occur in the event of an Ownership Change for purposes of Section 382 could cause us to breach the debt to total capitalization covenant in our senior secured credit facility.
If the Company were to have taxable income in excess of the Annual 382 Limitation following an Ownership Change, it would not be able to utilize Tax Benefits to offset the tax liability on the excess of taxable income over the Annual 382 Limitation. Although any Tax Benefits not used as a result of the Annual 382 Limitation would remain available to offset taxable income in future years (subject to the Annual 382 Limitation) until the expiration of such Tax Benefits, an Ownership Change could (i) significantly defer the utilization of such Tax Benefits, (ii) accelerate payment of tax liabilities and (iii) result in the expiration of certain Tax Benefits prior to their utilization. Because the aggregate value of our outstanding common stockCommon Stock and the federal long-term tax-exempt interest rate fluctuate, it is impossible to predict with any accuracy the Annual 382 Limitation which would apply upon an Ownership Change, but such limitation could be material. Currently, we do not believe that we have experienced an Ownership Change, but calculating whether an Ownership Change has occurred is subject to inherent uncertainty. This uncertainty results from the complexity of the Section 382 provisions, as well as limitations on the knowledge that any publicly traded company can have about the ownership of and transactions in its securities. However, we and our advisors have analyzed the information available, along with various scenarios of possible future changes of ownership. We believe that if no actions were taken it is possible that we couldwould undergo an Ownership Change in the future. Effective November 13, 2017, the Board adopted a Third Amended and Restated Section 382 Rights Agreement (the "Third Amended and Restated Section 382 Rights Agreement"), which was approved by the shareholders at the Company's 2018 Annual Meeting. Although the Third Amended and Restated Section 382 Rights Agreement assists in protecting the Tax Benefits by acting as a deterrent to any person or group acquiring 4.99% or more of our stock without the approval of the Board, we do not have the ability to completely restrict transactions that could result in an Ownership Change and there is nothing we can do under the Third Amended and Restated Section 382 Rights Agreement to block the impact of any resulting Ownership Change. The Board believes the best interests of shareholders will be served by extending the effective date of the provisions in the NOL Protective Amendment that are designed to restrict direct and indirect transfers of our stock if such transfers will affect the percentage of stock that is treated as owned by a 4.99% shareholder.
In addition, the Replacement NOL Protective Amendment, like the NOL Protective Amendment, includes a mechanism to prevent an Ownership Change while allowing purchasers to receive their money back from prohibited purchases. In order to continue these transfer restrictions beyond July 31,May 2019, the Replacement NOL Protective Amendment must be approved. The Replacement NOL Protective Amendment is contained in a proposed amended and restated ARTICLE FIFTEENCompany’s shareholders approved an amendment to ourthe Company’s Amended and Restated Certificate of Incorporation (the “NOL Protective Amendment”) that is designed to assist in protecting the NOLs by preventing certain transfers of stock which would otherwise adversely affect our ability to use the Tax Benefits. Despite the NOL Protective Amendment, there still remains a risk that certain changes in relationships among shareholders or other events would cause an Ownership Change. We also cannot assure you that the NOL Protective Amendment is enforceable under all circumstances, particularly against shareholders who did not vote in favor of the NOL Protective Amendment proposal at our 2019 Annual Meeting.
The Fourth Amended Rights Plan is not designed to protect shareholders against the possibility of a hostile takeover. Instead, it is meant to protect shareholder value by attempting to preserve our ability to use the Tax Benefits. Because of the significant value of the Tax Benefits to the Company, the Board believes it is in the best interest of the Company and its shareholders to approve the adoption of the Fourth Amended Rights Plan. Our Board has unanimously approved the Fourth Amended Rights Plan and unanimously recommends that shareholders approve the Fourth Amended Rights Plan at the Annual Meeting.
The description of the Fourth Amended Rights Plan in this Proxy Statement is qualified in its entirety by reference to the text of the Fourth Amended Rights Plan, which is attached hereto asAnnex A to this Proxy Statement and is incorporated by reference herein.You are urged to read carefully the Replacement NOL Protective AmendmentFourth Amended Rights Plan in its entirety as the discussion in this Proxy Statement is only a summary. The Replacement NOL Protective Amendment will only become effective if approved by the requisite vote of shareholders.
Section 382 Ownership Change Calculations
Generally, an Ownership Change can occur through one or more acquisitions by which one or more shareholders, each of whom owns or is deemed to own directly or indirectly 5% or more in value of a
corporation'scorporation’s stock, increase their aggregate percentage ownership by more than 50 percentage points over the lowest
aggregate percentage of stock owned by such shareholders at any time during the preceding rolling
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three-year period. The amount of the increase in the percentage of stock ownership (measured as a percentage of the value of the corporation'scompany’s outstanding
CNO Financial Group, Inc. 2021 Proxy Statement77
shares rather than voting power) of each "5-percent shareholder" (within“5-percent shareholder” (within the meaning of Section 382) is computed separately, and each such increase is then added together with any other such increases to determine whether an Ownership Change has occurred. For example, if a single investor acquired 50.1% of our stock in a three-year period, an Ownership Change would occur. Similarly, if ten10 persons, none of whom owned our stock, each acquired slightly over 5% of our stock within a three-year period (so that such persons owned, in the aggregate, more than 50%), an Ownership Change would occur. In determining whether an Ownership Change has occurred, the rules of Section 382 are very complex and are beyond the scope of this summary discussion. Some of the factors that must be considered in determining whether an Ownership Change has occurred include the following: »
All holders who each own less than 5% of a corporation's stockcompany’s Company 382 Securities are generally (but not always) treated as a single "5-percent“5-percent shareholder."” Transactions in the public markets among shareholders who are not "5-percent shareholders"“5-percent shareholders” are generally (but not always) excluded from the calculation.
»
•There are several rules regarding the aggregation and segregation of shareholders who otherwise do not qualify as "5-percent“5-percent shareholders."”
»
•Acquisitions by a person which cause that person to become a "5-percent shareholder"“5-percent shareholder” generally result in a five percentage (or more) percentage point change in ownership, regardless of the size of the final purchase(s) that caused the threshold to be exceeded.
»
•Certain constructive ownership rules, which generally attribute ownership of stockCompany 382 Securities owned by estates, trusts, corporations, partnerships or other entities to the ultimate indirect individual owner thereof, or to related individuals, are applied in determining the level of stockCompany 382 Securities ownership of a particular holder. Special rules can result in the treatment of options (including warrants) or other similar interests as having been exercised if such treatment would result in an Ownership Change.
»
•The redemption or buyback of shares by an issuer will increase the ownership of any
"5-percent shareholders"“5-percent shareholders” (including groups of shareholders who are not themselves
"5-percent shareholders"“5-percent shareholders”) and can contribute to an Ownership Change. In addition, it is possible that a redemption or buyback of shares could cause a holder of less than 5% to become a
"5-percent“5-percent shareholder,
"” resulting in a five
percentage (or more)
percentage point change in ownership.
Shareholders are advised to carefully monitor their ownership of our stockCompany 382 Securities and consult with their own legal advisors to determine whether their ownership of our stockCompany 382 Securities approaches the proscribed level.
Description of the
Replacement NOL Protective AmendmentFourth Amended Rights Plan
The followingFourth Amended Rights Plan is intended to act as a summary of the proposed Replacement NOL Protective Amendment. This summary is qualified in its entirety by referencedeterrent to the full text of the Replacement NOL Protective Amendment, which is contained in the proposed amended and restated ARTICLE FIFTEEN to our Amended and Restated Certificate of Incorporation attached asAnnex A to this Proxy Statement and incorporated by reference herein.Shareholders are urged to read in their entirety the transfer restrictions and other provisions set forth in the accompanyingAnnex A. Prohibited Transfers. The transfer restrictions generally will restrict any directperson or indirect transfer (such as transfers of our stock that result from the transfer of interests in other entities that own our stock) if:
•the transferor is a Person (as defined below) who directly or indirectly owns or is deemed to owngroup acquiring 4.99% or more of our stock;
•- outstanding Common Stock or any other class of Company 382 Securities then outstanding (an “Acquiring Person”) without the
effect of the transfer would be to increase the direct or indirect ownershipapproval of our stock by any Person from less than 4.99% toBoard of Directors. Shareholders who owned 4.99% or more of our stock; or
•- the
effectCompany’s outstanding Common Stock as of the transfer would be to increaseclose of business on November 13, 2020 will not trigger the percentageFourth Amended Rights Plan so long as they do not (i) acquire additional shares of our stock owned directlyCommon Stock or indirectly by a Person owningother interests in Company 382 Securities representing more than 1% of the Company 382 Securities then outstanding or deemed to own(ii) fall under 4.99% ownership of the shares of Common Stock or any other class of Company 382 Securities and then re-acquire 4.99% or more of our stock.
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"Person" means any individual, firm, corporation, business trust, joint stock company, partnership, trust association, limited liability company, limited partnership, or other entity,the Common Stock or any other class of Company 382 Securities. Any Rights held by a person who is or becomes an Acquiring Person are void and may not be exercised or transferred. The Board of Directors may, in its sole discretion, exempt any person or group from being deemed an Acquiring Person for purposes of Persons makingthe Fourth Amended Rights Plan.
The Rights. Subject to the terms, provisions and conditions of the Fourth Amended Rights Plan, if the Rights become exercisable, each Right would initially represent the right to purchase from us one one-thousandth of a "coordinated acquisition"share of stockour Series E Junior Participating Preferred Stock, par value $0.01 per share (the “Series E Preferred Stock”) for a purchase price of $95.00 (the “Purchase Price”). If issued, each fractional share of Series E Preferred Stock would give the shareholder approximately the same dividend, voting and liquidation rights as does one share of Common Stock. However, prior to exercise or otherwise treatedexchange as provided in the Fourth Amended Rights Plan, a Right does not give its holder any rights as a shareholder, including without limitation any dividend, voting or liquidation rights.
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CNO Financial Group, Inc. 2021 Proxy Statement
Exercisability. The Rights will not be exercisable until the earlier of (i) 10 business days after the first date of a public announcement that a person or group (other than an entityExempted Person within the meaning of Treasury Regulation Section 1.382-3(a)(1)(i),the Fourth Amended Rights Plan) has become an Acquiring Person and shall include(ii) 10 business days (or such later date as may be determined by the Board by action prior to such person or group becoming an Acquiring Person) after the date of commencement of, or the first public announcement of an intention to commence, a tender offer or exchange offer, the consummation of which would result in any successor (by merger or otherwise)person (other than an Exempted Person) becoming an Acquiring Person. We refer to the date that the Rights become exercisable as the “Distribution Date.” Until the Distribution Date, Common Stock certificates will evidence the Rights and may contain a notation to that effect. Any transfer of any such entity;provided,however, thatshares of Common Stock prior to the Distribution Date will constitute a Person shall not mean a "public group" (as defined under Treasury Regulation Section 1.382-2T(f)(13)). Transfers included undertransfer of the associated Rights. After the Distribution Date, the Rights may be transferred other than in connection with the transfer restrictions include sales to Persons whose resulting percentage ownership (direct or indirect) of stock would exceed the 4.99% thresholds discussed above, or to Persons whose direct or indirect ownershipunderlying shares of stock would by attribution cause another Person to exceed such threshold. We will apply complicated rulesCommon Stock.
After the Distribution Date, each holder of constructive ownership, aggregation, segregation, combination anda Right, other stock ownership rules prescribed by the Code (and related regulations) in determining whether a Person or group of Persons constitutes a 4.99% shareholder under the Replacement NOL Protective Amendment. For purposes of determining the existence and identity of, and the amount of stockthan Rights beneficially owned by any shareholder, weAcquiring Person (which will be entitled to rely on the existence or absence of filings with the SEC of Schedules 13D and 13G (or any similar filings) as of any date, subject to our actual knowledge of the ownership of stock. A transfer from one member of a "public group" (as defined under Treasury Regulation Section 1.382-2T(f)(13)) to another member of the same public group does not increase the percentage of our stock owned directly or indirectly by the public group, and, therefore, such transfers are not restricted. The transfer restrictionsthereupon become void), will includethereafter have the right to require a proposed transferee, as a condition to registrationreceive upon exercise of a transfer of any stock, to provide all information reasonably requested regarding such person's directRight and indirect ownership of stock. The transfer restrictions may result in the delay or refusal of certain requested transfers of our stock. As a result of these rules, the transfer restrictions could result in prohibiting ownership (thus requiring dispositions) of our stock as a result of a change in the relationship between two or more persons or entities, or of a transfer of an interest in an entity other than us, such as an interest in an entity that, directly or indirectly, owns our stock. The transfer restrictions will also apply to proscribe the creation or transfer of certain "options" (which are broadly defined by Section 382) in respect of our stock to the extent that, in certain circumstances, creation, transfer or exercisepayment of the option would result in a proscribed levelPurchase Price, that number of ownership.
Consequencesshares of Prohibited Transfers. Any direct or indirect transfer attempted in violation of the Replacement NOL Protective Amendment would be void as of the date of the purported transfer as to the purported transferee (or, in the case of an indirect transfer, the ownership of the direct owner of stock would terminate simultaneously with the transfer), and the purported transferee (or in the case of any indirect transfer, the direct owner) would not be recognized as the owner of the shares owned in violation of the restrictions for any purpose, including for purposes of voting and receiving dividends Common Stock and/or other distributions in respect of such stock,securities or in the case of options, receiving stock in respect of their exercise. In this Proxy Statement, stock purportedly acquired in violation of the transfer restrictions is referred to as "excess stock."
In addition to the purported transfer being void as of the date of the purported transfer, upon demand by the Company sent within 30 days of the date on which the Board determines that such transfer would result in excess stock, the purported transferee must transfer the excess stock to our agent along with any dividends or other distributions paid with respect to such excess stock within 30 days of such demand. Our agent is required to sell such excess stock in an arm's-length transaction (or series of transactions) that would not constituteproperty having a violation under the transfer restrictions. The net proceeds of the sale, together with any dividends or other distributions with respect to such excess stock received by our agent, after deduction of all costs incurred by the agent, will be distributed first to the purported transferee in an amount, if any, up to the cost (or in the case of gift, inheritance or similar transfer, the fair market value of two times the excessPurchase Price.
Exchange. After the Distribution Date, subject to certain limitations, the Board may exchange the Rights (other than Rights owned by an Acquiring Person which will have become void), in whole or in part, at an exchange ratio of one share of Common Stock or a fractional share of Series E Preferred Stock (or of a share of a similar class or series of our preferred stock at the timehaving similar rights, preferences and privileges) of the prohibited transfer) incurred by the purported transfereeequivalent value, per Right (subject to acquire such excess stock,adjustment).
Expiration. The Rights and the balance of the proceeds, if any,Fourth Amended Rights Plan will be distributed to one or more charitable organizations selected by the Board. If the excess stock is sold by the purported transferee before receiving the Company's demand, such person will be treated as having sold the excess stock on behalf of the agent, and will be required to remit all proceeds to our agent, along with any dividends or other distributions
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paid with respect to such excess stock (except to the extent we grant written permission to the purported transferee to retain a portion of such sales proceeds not exceeding the amount such purported transferee would have received from our agent had our agent sold such shares).
To the fullest extent permitted by law, any shareholder who knowingly violates the transfer restrictions, and any persons controlling, controlled by or under common control with such shareholder, will be jointly and severally liable for any and all damages suffered by the Company as a result of such violation, including damages resulting from a reduction in or elimination of the ability to utilize the Tax Benefits and any professional fees incurred in connection with addressing such violation.
With respect to any transfer of stock which does not involve a transfer of "securities" of the Company within the meaning of Delaware law but which would cause any 4.99% shareholder to violate the transfer restrictions, the following procedure will apply in lieu of those described above. In such case, no such 4.99% shareholder shall be required to dispose of any interest that is not a security of the Company, but such 4.99% shareholder and/or any Person whose ownership of securities of the Company is attributed to such 4.99% shareholder shall be deemed to have disposed of (and shall be required to dispose of) sufficient securities, simultaneously with the transfer, to cause such 4.99% shareholder, following such disposition, not to be in violation of the transfer restrictions, and such securities shall be treated as excess stock to be disposed of through the agent under the provisions summarized above, with the maximum aggregate amount payable to such 4.99% shareholder, or such other Person that was the direct holder of such excess stock, from the proceeds of sale by the agent being the fair market value of such excess stock at the time of the prohibited transfer.
Modification and Waiver of Transfer Restrictions. Our Board has the discretion to approve a transfer of stock that would otherwise violate the transfer restrictions. In considering a waiver, we expect the Board to consider, such factors, among others, as:
•the impact of the proposed transfer on our Section 382 change in ownership percentage;
•the then existing level of our Section 382 change in ownership percentage;
•the timing of the expected "roll-off" of our existing change in ownership;
•the economic impact of any Section 382 limitation that might result, taking into account factors such as our market capitalization and cash position;
•the impact on possible future issuances or purchases of our stock by us;
•any changes or expected changes in applicable tax law; and
•the existing contractual obligations the Company has to permit transfers of stock.
If the Board decides to grant a waiver, it may impose conditions on the acquirer or selling party.
In addition, in the event of a change in law, the Board will be authorized to modify the applicable allowable percentage ownership interest (currently less than 4.99%) or modify any of the definitions, terms and conditions of the transfer restrictions or to eliminate the transfer restrictions;provided that the Board determines, by adopting a written resolution, that such action is reasonably necessary or advisable to preserve the Tax Benefits or that the continuation of the transfer restrictions is no longer reasonably necessary for such purpose, as applicable. Shareholders of the Company will be notified of any such determination through a filing with the SEC or such other method of notice as the Secretary of the Company shall deem appropriate.
The Board may establish, modify, amend or rescind by-laws, regulations and procedures of the Company not inconsistent with the provisions of the Replacement NOL Protective Amendment for purposes of determining whether any transfer of stock would jeopardize the Company's ability to preserve and use the Tax Benefits.
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Implementation and Expiration of the Replacement NOL Protective Amendment
If the Replacement NOL Protective Amendment is approved by our shareholders at the Annual Meeting, we intend to enforce its transfer restrictions to preserve future use of the Tax Benefits. The Replacement NOL Protective Amendment would expire on the earlierearliest of (i) July 31, 2022,the close of business on November 13, 2023, (ii) the close of business on November 12, 2021 if shareholder approval of the Fourth Amended Rights Plan has not been received by or on such date, (iii) the adjournment of the 2021 Annual Meeting if shareholder approval of the Fourth Amended Rights Plan has not been received prior to such time, (iv) the repeal of Section 382 or any successor statute if the Board determines that the Replacement NOL Protective AmendmentFourth Amended Rights Plan is no longer necessary for the preservation of the Tax Benefits and (iii)or (v) the beginning of a taxable year of the Company to which the Board determines that no Tax Benefits may be carried forward. The
Redemption. At any time prior to the time an Acquiring Person becomes such, the Board is also permittedmay redeem the Rights in whole, but not in part, at a price of $0.01 per Right, subject to accelerateadjustment to reflect stock splits, stock dividends or similar transactions (the “Redemption Price”) payable, at the expiration dateoption of the transfer restrictionsCompany, in cash, shares of Common Stock or such other form of consideration as the Board may determine. The redemption of the Rights may be made effective at such time, on such basis and with such conditions as the Board in its sole discretion may establish. Immediately upon any redemption of the Rights, the right to exercise the Rights will terminate and the only right of the holders of Rights will be to receive the Redemption Price.
Anti-Dilution Provisions. The Purchase Price payable, and the number of shares of Series E Preferred Stock or other securities or property issuable, upon exercise of the Rights are subject to adjustment from time to time to prevent dilution that may occur as a result of certain events, including among others, a stock dividend, a stock split or a reclassification. Subject to certain exceptions, no adjustment in the eventPurchase Price will be required until cumulative adjustments require an adjustment of a changeat least 1% in law if it determines by adopting a written resolution that such action is reasonably necessary or advisable to preservePurchase Price.
Amendments. Before the Tax Benefits or thatDistribution Date, the continuation of the transfer restrictions is no longer reasonably necessary for the preservation of Tax Benefits, as applicable. Effectiveness and Enforceability
Although the Replacement NOL Protective Amendment is intended to reduce the likelihood of an Ownership Change, we cannot eliminate the possibility that an Ownership Change will occur even if we adopt it:
•The Board can permit a transfer to an acquirer that results or contributes to an Ownership Change.
•A court could find that part or all of the Replacement NOL Protective Amendment is not enforceable, either in general or as to a particular fact situation. Under the laws of the State of Delaware, our jurisdiction of incorporation, a corporationCompany may, provide in its certificate of incorporation for restrictions on the transfer of securities for the purpose of maintaining any tax advantage (including operating losses). Delaware law provides that transfer restrictionsexcept with respect to shares of our stock issued prior to the effectivenessRedemption Price, amend or supplement the Fourth Amended Rights Plan without the consent of the Replacement NOL Protective Amendment will be effective against (i) shareholdersholders of the Rights. After the Distribution Date, the Company may amend, except with respect to sharesthe Redemption Price, the Fourth Amended Rights Plan in any manner that were voted in favordoes not adversely affect the interests of this proposal and (ii) purported transferees of shares that were voted for this proposal if (A) the transfer restrictions are conspicuously noted on the certificate(s) representing such shares or (B) the transferee had actual knowledgeholders of the transfer restrictions (even absent such conspicuous notation). As has been the case under the NOL Protective Amendment, the Company intends that shares of stock issued after the effectiveness of the Replacement NOL Protective Amendment will be issued with the transfer restriction conspicuously noted on the certificate(s) representing such shares and therefore under Delaware law such newly issued shares will be subject to the transfer restriction. We also intend to disclose such restrictions to persons holding our stock in uncertificated form. For the purpose of determining whether a shareholder is subject to the Replacement NOL Protective Amendment, we intend to take the position that all shares issued prior to the effectiveness of the Replacement NOL Protective Amendment that are proposed to be transferred were voted in favor of the Replacement NOL Protective Amendment unless the contrary is established to our satisfaction. We also intend in certain circumstances to assert the position that shareholders have waived the right to challenge or are estopped from challenging the enforceability of the Replacement NOL Protective Amendment, unless a shareholder establishes, to our satisfaction, that such shareholder did not vote in favor of the Replacement NOL Protective Amendment. Nonetheless, we are not aware of case law supporting these positions and a court could find that the provision is unenforceable, either in general or as applied to a particular shareholder or fact situation.Rights.
CNO Financial Group, Inc. 2021 Proxy Statement
79•Despite the adoption of the Replacement NOL Protective Amendment, there would still remain a risk that certain changes in relationships among shareholders or other events would cause an Ownership Change of us and our subsidiaries under Section 382. We cannot assure you that the Replacement NOL Protective Amendment is enforceable under all circumstances, particularly against shareholders who do not vote in favor of this proposal or who do not have notice of the transfer restrictions at the time they subsequently acquire their shares. Accordingly, we cannot assure you that an Ownership Change will not occur.
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•The Company agreed with certain holders to permit certain transfers which would be prohibited by the NOL Protective Amendment and the Replacement NOL Protective Amendment.
As a result of these and other factors, the Replacement NOL Protective Amendment serves to reduce, but does not eliminate, the risk that we will undergo an Ownership Change. We cannot assure you that upon audit, the IRS would agree that all of the Tax Benefits are allowable. See "—
Certain Considerations Relating to the
Replacement NOL Protective Amendment" for a further discussion of the matters you should consider before voting. Vote Needed for Approval
Approval of the proposed amendment to ourFourth Amended and Restated Certificate of Incorporation requires the affirmative vote of at least a majority of the votes of the Company's issued and outstanding shares of common stock entitled to vote at the Annual Meeting. The presence in person or by proxy of the holders of a majority of the Company's issued and outstanding shares of common stock entitled to vote at the Annual Meeting shall constitute a quorum for the transaction of business.
In determining whether the proposal has received the requisite number of affirmative votes, broker non-votes and abstentions will have the same effect as votes cast against the proposal.
The Replacement NOL Protective Amendment, if approved, would become effective upon the later of (i) July 31, 2019 or (ii) the filing of a certificate of amendment with the Secretary of State of the State of Delaware.
Rights Plan
Certain Considerations Relating to the Replacement NOL Protective Amendment
Our Board believes that attempting to protect the Tax Benefits described above is in the best interests of the Company and our shareholders. Nonetheless, we cannot eliminate the possibility that an Ownership Change will occur even if the Replacement NOL Protective AmendmentFourth Amended Rights Plan is approved. You should consider the factors below when making your decision.
Continued Risk of Ownership Change. Although the Replacement NOL Protective Amendment is intended to reduce the likelihood of an Ownership Change that could adversely affect us, weWe cannot assure you that such restrictions would preventthe Fourth Amended Rights Plan will be effective in deterring all transfersacquisitions that could result in such an Ownership Change. In particular, absent a court determination, there can be no assurance thatit will not protect against an Ownership Change resulting from purchasers of shares who become “5-percent shareholders” notwithstanding the transfer restrictionsFourth Amended Rights Plan, either because the purchaser is unaware of the Replacement NOL Protective Amendment will be enforceable against all our shareholders, and they may be subjectFourth Amended Rights Plan or makes a conscious decision to challenge on equitable grounds. In particular,discount the transfer restrictions may not be enforceable against shareholders who vote against or abstain from voting onpotential consequences under the Replacement NOL Protective Amendment or who do not have notice of the transfer restrictions at the time when they subsequently acquire their shares.Fourth Amended Rights Plan. Potential IRS Challenge to the Tax Benefits. The amount of the Tax Benefits has not been audited or otherwise validated by the IRS. The IRS could challenge the amount of the Tax Benefits, which could result in an increase in our liability in the future for income taxes. As discussed above, determining whether an Ownership Change has occurred is subject to uncertainty, both because of the complexity of the Section 382 provisions and because of limitations on the knowledge that any publicly traded company can have about the ownership of, and transactions in, its securities on a timely basis. Therefore, we cannot assure you that the IRS or other taxing authority will not claim that we experienced an Ownership Change and attempt to reduce or eliminate our utilization of Tax Benefits even if the Replacement NOL Protective AmendmentFourth Amended Rights Plan is in place. Potential Effects on Liquidity. The Replacement NOL Protective AmendmentFourth Amended Rights Plan is intended to deter persons or groups of persons from acquiring beneficial ownership of shares of our stockCommon Stock in excess of the specified limitations. A shareholder'sshareholder’s ability to dispose of our stockCommon Stock may be limited if the Replacement NOL Protective AmendmentFourth Amended Rights Plan reduces the number of persons willing to acquire our stockCommon Stock or the amount they are willing to acquire.
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Potential Impact on Value. If the Replacement NOL Protective Amendment is approved, the Board intends to impose a legend reflecting the Replacement NOL Protective Amendment on certificates representing newly issued or transferred shares held by shareholders that voted for approval of the Replacement NOL Protective Amendment. It is possible that the Replacement NOL Protective AmendmentFourth Amended Rights Plan could deter certain buyers, including persons who wish to acquire more than 4.99% of our stock and certain institutional holders that may not be comfortable holding stock with restrictive legends,Common Stock, and that this could result in diminished demand for and, therefore, potentially decrease the value of our stock.Common Stock. We believe, however, the value protected as a result of the preservation of the Tax Benefits would outweigh any such potential decrease in the value of our stock.Common Stock.
Potential Anti-Takeover Effect. The Replacement NOL Protective AmendmentFourth Amended Rights Plan is designed to preserve the long-term value of our accumulated Tax Benefits and is not intended to prevent a takeover of the Company. However, it could be deemed to have an "anti-takeover"“anti-takeover” effect because, among other things, it will restrictrestricts the ability of a person, entity or group to accumulate our stockCommon Stock above the applicable thresholds, without the approval of our Board. The Replacement NOL Protective AmendmentFourth Amended Rights Plan approval proposal is not part of a plan by us to adopt a series of anti-takeover measures, and we are not presently aware of any potential takeover transaction. Required Vote
Approval of this proposal will require the affirmative vote of the holders of a majority in voting power of the shares of Common Stock that are present, or represented by proxy, and entitled to vote on the proposal at the Annual Meeting. Abstentions will have the effect of a vote “against” this proposal. Broker non-votes will have no effect on the outcome of the vote with respect to this proposal because the shares subject to the broker non-vote will not be entitled to vote on this matter.
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CNO Financial Group, Inc. 2021 Proxy Statement
| | Proposal 4 | |
| | Ratify the appointment of PricewaterhouseCoopers LLP as the Company’s independent registered public accounting firm for 2021 | |
| | | | | The Board of Directors unanimously recommends you vote FOR this proposal. | |
Recommendation of our Board of Directors
OUR BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS THAT YOU VOTE "FOR" THE APPROVAL OF THE REPLACEMENT NOL PROTECTIVE AMENDMENT.
PROPOSAL 3
RATIFICATION OF THE APPOINTMENT OF OUR INDEPENDENT
REGISTERED PUBLIC ACCOUNTING FIRM
PricewaterhouseCoopers LLP ("PwC"(“PwC”) served as our independent registered public accounting firm for 20182020 and has been selected to serve as our independent registered public accounting firm for the fiscal year ending December 31, 2019.2021. Representatives of the Company'sCompany’s independent registered public accounting firm are expected to be present at the Annual Meeting, will have the opportunity to make a statement if they so desire, and will be available to respond to appropriate questions from the shareholders.
Required Vote
Approval of the ratification of the appointment of PricewaterhouseCoopers LLP as our independent registered public accounting firm for the fiscal year ending December 31, 2019 requires the affirmative vote of the majority of shares of common stock present in person, or represented by proxy, and entitled to vote on the proposal at the Annual Meeting.
Recommendation of our Board of Directors
OUR BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS THAT YOU VOTE "FOR" RATIFICATION OF THE APPOINTMENT OF PRICEWATERHOUSECOOPERS LLP AS OUR INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM FOR THE FISCAL YEAR ENDING DECEMBER 31, 2019.
Evaluation of the Independent Registered Public Accounting Firm
Annually,
The Audit Committee is responsible for the Auditappointment, compensation, retention and Enterprise Risk Committee (the "Audit Committee") evaluates the performanceoversight of the Company's independent registered public accounting firm ("(“independent auditor"auditor”), retained to provide an audit opinion on the Company’s financial statements and internal control over financial reporting. Annually, the Audit Committee meets in executive session, without the independent auditors present, to evaluate the performance of the Company’s independent auditor, including the senior members of the audit engagement team, and determines whether to reengage PwC or to consider other audit firms. In doing so, the Audit Committee considers several factors, including the following factors: »
The appropriateness of the proposed audit fee in comparison to the fees reported by the CNO peer group;
»
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•theThe experience and professional qualifications of the firm and the lead audit partner assigned to CNO, including both industry experience and technical expertise in accounting, auditing and auditing;tax;
»
•theThe quality and candor of the firm'sfirm’s communications with the Audit Committee and the Company during the prior audit;
»
•the results of the independent review of the firm'sThe firm’s quality control system;procedures;
»
•evidenceEvidence supporting the firm'sfirm’s independence, objectivity, and professional skepticism;skepticism and information publicly available in the Public Company Accounting Oversight Board (“PCAOB”) inspection reports;
»
•theThe quality and efficiency of the services provided by the firm during prior audits; and
»
•the firm'sThe firm’s capability, technical expertise, and knowledge of the Company'sCompany and its operations, proces ses, personnel, industry, accounting systems and industry.risk profile;
»
If reappointment is considered, the length of time the firm has been engaged as the Company’s independent auditor;
»
Use of technology and data analytics in the firm’s audit process; and
»
Other potential accounting firms with comparable professional qualifications.
In accordance with SEC rules and PwC'sPwC’s policies, audit partners are subject to rotation requirements to limit the number of consecutive years an individual partner may provide service to the Company. For the lead audit partner, the maximum number of consecutive years of service in that capacity is five years. In conjunction with the mandated rotation of the independent auditor'sauditor’s lead audit partner, the Audit Committee and its chair areChair were directly involved in the selection of the independent auditor'sauditor’s current lead audit partner, including the current partner, who assumed this role in 20152020 after meeting with the Audit Committee and management during which his qualifications were discussed. As part of the lead audit partner selection process, the Audit Committee considered candidates who meet professional, industry, personal and other criteria consistent with the factors specified above.
CNO Financial Group, Inc. 2021 Proxy Statement81
The Audit Committee meets regularly with the independent auditor, including attendance by the independent auditor at all regularly scheduled Audit Committee meetings and separate executive sessions at least four meetings per year. The Audit Committee uses these interactions, as well as the factors noted above, to assess the performance of the independent auditor. CNO undertakes an annual benchmarking of audit fees paid by our peers in the insurance industry. This data provides a reference point to the Audit Committee to judge the appropriateness of the audit fee. Additionally, the Audit Committee evaluates the scope of the audit, the complexity of the CNO environment, any history of prior issues and adjustments and the overall audit plan presented by the independent auditor in arriving at an appropriate fee. After giving due attention to the factors and considerations mentioned herein, the Audit Committee has appointed PwC as the Company’s independent auditor for the fiscal year ending December 31, 2021. PwC’s background knowledge of the Company and its subsidiaries, combined with its industry expertise, has enabled it to carry out its audits of the Company’s financial statements and the effectiveness of the Company’s internal controls over financial reporting with effectiveness and efficiency. Fees Paid to PricewaterhouseCoopers LLP
Aggregate fees (including out-of-pocket expenses) billed to the Company for the years ended December 31, 20182020 and 2017,2019, by PwC were as follows (dollars in millions):
| | | | Year Ended December 31, | |
| | | | 2020 | | | 2019 | |
Audit fees(1) | | | | $ | 4.8 | | | | | $ | 5.2 | | |
Audit-related fees(2) | | | | | — | | | | | | — | | |
Tax fees(3) | | | | | — | | | | | | — | | |
All other fees(4) | | | | | — | | | | | | — | | |
| Total | | | | $ | 4.8 | | | | | $ | 5.2 | | |
| | | | | | | |
| | Year Ended
December 31, | |
|---|
| | 2018 | | 2017 | |
|---|
Audit fees(1) | | $ | 4.8 | | $ | 5.2 | |
Audit-related fees(2) | | | — | | | — | |
Tax fees | | | — | | | — | |
All other fees(3) | | | — | | | — | |
| | | | | | | | |
Total | | $ | 4.8 | | $ | 5.2 | |
| | | | | | | | |
| | | | | | | | |
| | | | | | | | |
(1)(1)- Audit fees were for professional services rendered for the audits of
CNO'sCNO’s consolidated financial statements, statutory and subsidiary audits, and assistance with review of documents filed with the SEC.
(2)
(2)Audit-related fees primarily include services provided for employee benefit plan audits and other assurance-related services.
(3)
(3)Fees include services provided for tax compliance, tax advice and tax planning.
(4)
All other permittedfees for products and services.
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Pre-Approval Policy and Independence
The Audit Committee has adopted an auditor independence policy that, among other things, mandates pre-approval by the Audit Committee of all audit and permissible non-audit services performed by our independent registered public accounting firm and the related fees, and that the Audit Committee be provided each quarter with a summary of the services provided by and fees paid to, PwC. These services may include work associated with the following: internal»
Internal control reviews and assistance with internal control reporting requirements;
»
•
taxTax compliance, tax planning and related tax services; and
»
•dueDue diligence work for potential transactions.
Each proposed service is evaluated by the Audit Committee to ensure that it would not impair the independence of PwC under SEC and other applicable rules. In
20172019 and
2018,2020, all new engagements of PwC were pre-approved by the Audit Committee for all audit, audit-related, tax and other services.
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CNO Financial Group, Inc. 2021 Proxy Statement
Report of the Audit and Enterprise Risk Committee
The Audit Committee provides assistance to the Board in fulfilling its responsibilities for oversight of the integrity of the financial statements, public disclosures and financial reporting practices of the Company, including the systems of internal controls. The Audit Committee has sole authority to appoint or replace the Company'sCompany’s independent registered public accounting firm. The independent registered public accounting firm reports directly to the Audit Committee. In overseeing the preparation of the Company'sCompany’s audited financial statements for the year ended December 31, 2018,2020, the Audit Committee reviewed and discussed the audited financial statements with the Company'sCompany’s management and with PwC, the Company'sCompany’s independent registered public accounting firm. The Audit Committee also discussed with PwC the matters required to be discussed under Public Company Accounting Oversight Board ("PCAOB"(“PCAOB”) Auditing Standard No. 1301. The Audit Committee has received from PwC and reviewed the written disclosures and the letter required by applicable PCAOB requirements regarding PwC'sPwC’s communications with the Audit Committee concerning independence, and the Audit Committee has discussed with PwC its independence from the Company. In addition, the Audit Committee has reviewed and discussed PwC'sPwC’s most recent PCAOB inspection report of the firm'sfirm’s internal quality controls. Based on the reviews and discussions referenced above, the Audit Committee recommended to the Board of Directors that the audited financial statements be included in the Company'sCompany’s Annual Report on Form 10-K for the year ended December 31, 20182020 for filing with the Securities and Exchange Commission. Submitted by the Audit and Enterprise Risk Committee: Robert C. Greving, Chair
Mary R. (Nina) HendersonStephen N. David
Charles J. Jacklin
Neal C. SchneiderSteven E. Shebik
Required Vote
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PROPOSAL 4
NON-BINDING ADVISORY VOTE ON EXECUTIVE COMPENSATION
General
In accordance with the requirements of Section 14A
Approval of the
Exchange Act (which was added by the Dodd-Frank Wall Street Reform and Consumer Protection Act (the "Dodd-Frank Act")) and the related rulesratification of the
SEC, we are including in these proxy materials a separate resolution subject to shareholder vote to approve, in a non-binding advisory vote,appointment of PwC as our independent registered public accounting firm for the
compensation paid to our Named Executive Officers as discussed on pages 19 – 59. While the results of the vote are non-binding and advisory in nature, the Board and the Human Resources and Compensation Committee intend to carefully consider the results of this vote. The current frequency of non-binding advisory votes on executive compensation is an annual vote and we anticipate that the next vote will be at the next Annual Meeting. The language of the resolution is as follows: "RESOLVED, that the compensation paid to the Company's named executive officers, as disclosed in this Proxy Statement pursuant to the rules of the SEC, including the Compensation Discussion and Analysis, compensation tables and any related narrative discussion, is hereby approved."
The compensation of our executive officers is based on a philosophy and a comprehensive compensation and benefits strategy developed by the Human Resources and Compensation Committee designed to reward overall and individual performance that drives long-term success for our shareholders. The Human Resources and Compensation Committee strives to provide a clear award program that allows us to attract, retain and motivate seasoned executive talent with significant industry experience required to continuously improve our performance and build long-term shareholder value. Key features of our compensation programs include:
Pay-for-Performance. The majority of target total compensation for our Named Executive Officers is tied to Company, business segment and/or individual performance, and is therefore considered by the Company to be "Pay-at-Risk" (payouts contingent upon performance).
Alignment of Management Interests with Shareholders. We believe our performance-based equity compensation program aligns our management's interests to those of our shareholders and helps drive long-term shareholder value creation while also facilitating the retention of key executive talent. In addition, in order to align our executives with shareholder interests, our CEO and all of his direct reports (including the other Named Executive Officers) are required to maintain ownership levels in accordance with Company policy. The CEO is required to maintain ownership equal to 5x his base salary, while all other Named Executive Officers are required to maintain ownership equal to 3x their base salaries. As offiscal year ending December 31, 2018, all Named Executive Officers have met or are within their allowable timeframes for meeting these guidelines.
Governance/Compensation Best Practices. Among2021 requires the best practices we follow: We have an independent Human Resources and Compensation Committee and independent executive compensation advisor (Aon Consulting); we have a double-trigger requirement in order for change of control benefits to be triggered; we have strong clawback rights in our incentive plans; and we have implemented a shareholder outreach program focused on governance and compensation issues.
In considering their vote, shareholders are urged to read the section of this Proxy Statement entitled "Executive Compensation", including the "Compensation Discussion and Analysis," for a detailed discussion of how our compensation policies and practices implement our compensation philosophy.
Required Vote
The affirmative vote of the majority of shares of common stock present in person, or represented by proxy, and entitled to vote on the subject matter is required to approve, in a non-binding advisory vote,proposal at the compensation paid to our Named Executive Officers.Annual Meeting. Abstentions will have the effect of a vote "against"“against” this
proposal. CNO Financial Group, Inc. 2021 Proxy Statement83
Stock Ownership Information
Securities Ownership
TableThe following table sets forth certain information concerning the beneficial ownership of Contentsproposal. Broker non-votes will have no effect on the outcomeour common stock as of March 9, 2021 (except as otherwise noted) by each person known to us to beneficially own more than 5% of the vote with respect to this proposal because theoutstanding shares of our common stock, each of our directors and nominees, each of our Named Executive Officers and all of our directors, nominees and executive officers as a group. Shares of our common stock subject to options that are currently exercisable or exercisable within 60 days of March 9, 2021 and RSUs that are scheduled to vest within 60 days of March 9, 2021 are deemed to be outstanding and to be beneficially owned by the broker non-vote willperson holding the options or RSUs for the purpose of computing the percentage ownership of that person or group of persons but are not betreated as outstanding for the purpose of computing the percentage ownership of any other person.
| | | Name of Beneficial Owner | | | | Shares Beneficially Owned | | |
| | Number(1) | | | | Percentage | | |
| | | BlackRock, Inc.(2) | | | | | | 15,572,529 | | | | | 11.2% | | |
| | | The Vanguard Group(3) | | | | | | 14,438,023 | | | | | 10.4% | | |
| | | Dimensional Fund Advisors LP(4) | | | | | | 10,388,688 | | | | | 7.5% | | |
| | | Pzena Investment Management, LLC(5) | | | | | | 7,273,559 | | | | | 5.2% | | |
| | | Gary C. Bhojwani(6) | | | | | | 708,577 | | | | | * | | |
| | | Ellyn L. Brown | | | | | | 79,768 | | | | | * | | |
| | | Stephen N. David | | | | | | 13,000 | | | | | * | | |
| | | David B. Foss | | | | | | 16,400 | | | | | * | | |
| | | Robert C. Greving | | | | | | 75,801 | | | | | * | | |
| | | Mary R. (Nina) Henderson | | | | | | 23,963 | | | | | * | | |
| | | Charles J. Jacklin | | | | | | 36,394 | | | | | * | | |
| | | Daniel R. Maurer | | | | | | 24,624 | | | | | * | | |
| | | Chetlur S. Ragavan | | | | | | — | | | | | — | | |
| | | Steven E. Shebik | | | | | | 7,431 | | | | | * | | |
| | | Frederick J. Sievert | | | | | | 43,079 | | | | | * | | |
| | | Bruce K. Baude(7) | | | | | | 239,456 | | | | | * | | |
| | | Eric R. Johnson(8) | | | | | | 662,438 | | | | | * | | |
| | | Paul H. McDonough(9) | | | | | | 42,452 | | | | | * | | |
| | | Matthew J. Zimpfer(10) | | | | | | 301,879 | | | | | * | | |
| | | All directors, nominees and executive officers as a group – 22 persons(11) | | | | | | 2,742,431 | | | | | 2.0% | | |
*
Represents less than 1% of the outstanding shares of our common stock as of March 9, 2021.
(1)
Does not include an aggregate of 149,274 deferred stock units held by certain directors, as described below under “— Director Deferred Stock Units.”
(2)
Based solely on Amendment No. 8 to Schedule 13G filed with the SEC on February 8, 2021 by BlackRock, Inc. The Amendment No. 8 to Schedule 13G reports sole power to vote or direct the vote of 15,311,443 shares and sole power to dispose or direct the disposition of 15,572,529 shares. The business address for BlackRock, Inc. is 55 East 52 nd Street, New York, NY 10055.
(3)
Based solely on Amendment No. 10 to Schedule 13G filed with the SEC on February 10, 2021 by The Vanguard Group. The Amendment No. 10 to Schedule 13G reports shared power to vote or direct the vote of 153,244 shares, sole power to dispose or direct the disposition of 14,168,086 shares, and shared power to dispose or direct the disposition of 269,937 shares. The business address for The Vanguard Group is 100 Vanguard Blvd., Malvern, PA 19355.
(4)
Based solely on Amendment No. 9 to Schedule 13G filed with the SEC on February 12, 2021 by Dimensional Fund Advisors LP. The Amendment No. 9 to Schedule 13G reports sole power to vote or direct the vote of 10,316,911 shares and sole power to dispose or direct the disposition of 10,388,688 shares. The business address for Dimensional Fund Advisors LP is Building One, 6300 Bee Cave Road, Austin, TX 78746.
(5)
Based solely on Schedule 13G filed with the SEC on February 2, 2021 by Pzena Investment Management, LLC. The Schedule 13G reports sole voting power of 6,432,667 shares and sole dispositive power of 7,273,559 shares. The business address for Dimensional Fund Advisors LP is Building One, 6300 Bee Cave Road, Austin, TX 78746.
(6)
Includes options, exercisable currently or within 60 days of March 9, 2021, to purchase 317,300 shares of common stock and includes 114,755 RSUs scheduled to vest within 60 days of March 9, 2021. Amount also includes 191,017 shares of common stock held in a revocable trust and 36,052 shares of common stock held in irrevocable family trusts.
(7)
Includes options, exercisable currently or within 60 days of March 9, 2021, to purchase 137,740 shares of common stock and includes 12,688 RSUs scheduled to vest within 60 days of March 9, 2021.
84
CNO Financial Group, Inc. 2021 Proxy Statement
(8)
Includes options, exercisable currently or within 60 days of March 9, 2021, to purchase 191,180 shares of common stock and includes 13,626 RSUs scheduled to vest within 60 days of March 9, 2021.
(9)
Includes options, exercisable currently or within 60 days of March 9, 2021, to purchase 15,900 shares of common stock and includes 11,672 RSUs scheduled to vest within 60 days of March 9, 2021.
(10)
Includes options, exercisable currently or within 60 days of March 9, 2021, to purchase 153,040 shares of common stock and includes 22,715 RSUs scheduled to vest within 60 days of March 9, 2021.
(11)
Includes options, exercisable currently or within 60 days of March 9, 2021, to purchase an aggregate of 1,067,440 shares of common stock held by executive officers and includes an aggregate of 219,639 RSUs scheduled to vest within 60 days of March 9, 2021.
Director Deferred Stock Units
Under the CNO Board of Directors Deferred Compensation Plan, the non-employee directors may elect each year to defer some or all of their compensation, including the equity portion of the annual director fees. Any equity that is so deferred is represented by vested deferred stock units, on which dividend equivalents are paid during the deferral period. The deferred stock units are not entitled to vote on this matter. Recommendationvote. At the end of our Boardthe deferral period selected by the director, one share of Directors
common stock will be issued for each deferred stock unit. As of March 9, 2021, the non-employee directors held deferred stock units as set forth below (these units are in addition to the share ownership set forth above):
OUR BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS THAT YOU VOTE "FOR" THE APPROVAL OF THE COMPENSATION PAID TO OUR NAMED EXECUTIVE OFFICERS.
SECTION
| | | Name | | | | 2020 Number of
Deferred Stock Units | | | | Total Deferred Stock Units | | |
| | | Stephen N. David | | | | | | 10,450 | | | | | | | 32,926 | | | |
| | | Mary R. (Nina) Henderson | | | | | | 10,450 | | | | | | | 32,926 | | | |
| | | Daniel R. Maurer | | | | | | 17,417 | | | | | | | 50,496 | | | |
| | | Frederick J. Sievert | | | | | | 10,450 | | | | | | | 32,926 | | | |
Delinquent Section 16(a)
BENEFICIAL OWNERSHIP REPORTING COMPLIANCEReports
Section 16(a) of the Securities Exchange Act of 1934 requires CNO'sCNO’s directors and executive officers, and each person who is the beneficial owner of more than 10 percent of any class of CNO'sCNO’s outstanding equity securities, to file with the SEC initial reports of ownership and reports of changes in ownership of common stock and other equity securities of CNO. Specific due dates for these reports have been established by the SEC, and CNO is required to disclose any failure by such persons to file such reports for fiscal year 20182020 by the prescribed dates. Officers, directors and greater than 10 percent beneficial owners are required to furnish CNO with copies of all reports filed with the SEC pursuant to Section 16(a). To CNO'sCNO’s knowledge, based solely on the review of the copies of the reports furnished to CNO and written representations that no other reports were required, all filings required pursuant to Section 16(a) of the Securities Exchange Act of 1934 applicable to CNO'sCNO’s officers, directors and greater than 10 percent beneficial owners were timely made by each such person during the year ended December 31, 2018.2020.
CNO Financial Group, Inc. 2021 Proxy Statement85
Shareholder Proposals for 2022 Annual Meeting
SHAREHOLDER PROPOSALS FOR 2020 ANNUAL MEETING
Any proper proposal which a shareholder wishes to have included in the Board'sBoard’s proxy statement and form of proxy for the 2020 Annual Meeting2022 annual meeting of shareholders pursuant to SEC Rule 14a-8 must be received by CNO by November 27, 2019.26, 2021. Such proposals must meet the requirements set forth in the rules and regulations of the SEC in order to be eligible for inclusion in the proxy statement for the 2020 Annual Meeting.
2022 annual meeting of shareholders.
The Board has implemented a proxy access provision in the Company'sCompany’s Bylaws, which permits a shareholder or group of up to 20 shareholders owning 3% or more of the Company'sCompany’s common stock continuously for at least three years to nominate for election to the Board, and include in the Company'sCompany’s proxy materials for its annual meeting of shareholders, nominees constituting up to the greater of 20% of the number of directors then serving on the Board (rounding down to the closest whole number) or two individuals, subject to certain limitations and provided that such nominating shareholder(s) and nominee(s) satisfy the informational and other applicable requirements specified in the Bylaws. Pursuant to theour proxy access Bylaw, notice must be received by the Secretary of the Company not less than 120 days nor more than 150 days prior to the first anniversary of the date on which the Company'sCompany’s definitive proxy statement was released to shareholders in connection with the prior year'syear’s annual meeting. Accordingly, to be timely for inclusion in the proxy materials for the Company's 2020 Annual Meeting,Company’s 2022 annual meeting of shareholders, the Secretary must receive a shareholder'sshareholder’s notice to nominate a director using the Company'sCompany’s proxy materials between October 28, 201927, 2021 and November 27, 2019,26, 2021, inclusive. In addition, the Company'sCompany’s Bylaws establish advance notice procedures with regard to certain matters, including shareholder nominations for directors, to be brought before a meeting of shareholders at which directors are to be elected. In the case of an annual meeting, notice must be received by the Secretary of the Company not less than 60 days nor more than 90 days prior to the first anniversary of the preceding year'syear’s annual meeting. In the case of a special meeting of shareholders at which directors are to be elected, notice of a shareholder nomination must be received by the Secretary of the Company no later than the close of business on the 10th day following the earlier of the day on which notice of the date of the meeting was mailed or public disclosure of the meeting was made. A nomination will not be considered if it does not comply with these notice procedures and the additional requirements set forth in our Bylaws.
Table of Contents
Any shareholder who wishes to submit a proposal to be acted upon at the 2020 Annual Meeting2022 annual meeting of shareholders or who wishes to nominate a candidate for election as director should obtain a copy of these Bylaw provisions and may do so by written request addressed to the Secretary of CNO Financial Group, Inc. at 11825 North Pennsylvania Street, Carmel, Indiana 46032. Please note that these Bylaw requirements are separate from the SEC'sSEC’s requirements to have a shareholder nomination or other proposal included in our proxy statement.
ANNUAL REPORT
Annual Report
Access to CNO'sCNO’s Annual Report for 20182020 (which includes its annual report on Form 10-K as filed with the SEC) is being provided with this Proxy Statement to all holders of common stock as of March 12, 2019.9, 2021. The Annual Report is not part of the proxy solicitation material.If you wish to receive an additional copy of the Annual Report for 2018,2020, the Form 10-K, this Proxy Statement or the Notice without charge, please contact CNO Financial Group, Inc. Investor Relations, 11825 North Pennsylvania Street, Carmel, Indiana 46032; or by telephone (317) 817-2893 or emailir@CNOinc.com. ir@CNOinc.com.
CNO Financial Group, Inc. 2021 Proxy Statement
HOUSEHOLDING OF PROXY MATERIALS
Householding of Proxy Materials
SEC rules permit companies and intermediaries such as brokers to satisfy delivery requirements for proxy statements and notices with respect to two or more shareholders sharing the same address by delivering a single proxy statement or a single notice addressed to those shareholders. This process, which is commonly referred to as "householding,"“householding,” provides cost savings for companies. Some brokers household proxy materials, delivering a single proxy statement or notice to multiple shareholders sharing an address unless contrary instructions have been received from the affected shareholders. Once you have received notice from your broker that they will be householding materials to your address, householding will continue until you are notified otherwise or until you revoke your consent. If, at any time, you no longer wish to participate in householding and would prefer to receive a separate proxy statement or notice, or if you are receiving duplicate copies of these materials and wish to have householding apply, please notify your broker. You may also call (800) 542-1061 or write to: Broadridge Financial Solutions, Inc., 51 Mercedes Way, Edgewood, New York, New York 11717, and include your name, the name of your broker or other nominee, and your account number(s). You can also request prompt delivery of a copy of the Proxy Statement and annual reportAnnual Report by contacting CNO Financial Group, Inc. Investor Relations, 11825 North Pennsylvania Street, Carmel, Indiana 46032, (317) 817-2893 or emailir@CNOinc.com.
CNO Financial Group, Inc. 2021 Proxy Statement87
INFORMATION RINFORMATION RELATEDELATED TO CERTAIN NON-GAAP FINANCIAL MEASURES
CERTAIN NON-GAAP FINANCIAL MEASURES
Net operating income is defined as net income before: (i) loss related to reinsurance transaction, including impact of taxes; (ii) net realized investment gains or losses from sales, impairments and impairments,change in allowance for credit losses, net of related amortization and taxes; (iii)(ii) net change in market value of investments recognized in earnings, net of taxes; (iv)(iii) fair value changes due to fluctuations in the interest rates used to discount embedded derivative liabilities related to our fixed index annuities, net of related amortization and taxes; (v)(iv) fair value changes related to the agent deferred compensation plan, net of taxes; (v) loss on extinguishment of debt, net of taxes; (vi) changes in the valuation allowance for deferred tax assets and other tax items; and (vii) other non-operating items consisting primarily of earnings attributable to variable interest entities, net of taxes. Management uses this measure to evaluate performance because the items excluded from net operating income can be affected by events that are unrelated to the Company'sCompany’s underlying fundamentals. A reconciliation from net income to net operating income (and related per share amounts) to net income is as follows (dollars in millions)millions, except per share amounts):| | | | Year ended December 31, | |
| | | | 2020 | | | 2019 | |
| Insurance product margin: | | | | | | | | | | | | | |
| Annuity margin | | | | $ | 296.7 | | | | | $ | 230.1 | | |
| Health margin | | | | | 459.8 | | | | | | 362.9 | | |
| Life margin | | | | | 165.0 | | | | | | 196.1 | | |
| Total insurance product margin | | | | | 921.5 | | | | | | 789.1 | | |
| Allocated expenses | | | | | (557.7) | | | | | | (543.0) | | |
| Income from insurance products | | | | | 363.8 | | | | | | 246.1 | | |
| Fee income | | | | | 16.7 | | | | | | 23.5 | | |
| Investment income not allocated to product lines | | | | | 167.1 | | | | | | 152.1 | | |
| Expenses not allocated to product lines | | | | | (83.8) | | | | | | (53.4) | | |
| Operating earnings before taxes | | | | | 463.8 | | | | | | 368.3 | | |
| Income tax expense on operating income | | | | | (101.5) | | | | | | (78.3) | | |
| Net operating income | | | | | 362.3 | | | | | | 290.0 | | |
| Non-operating items: | | | | | | | | | | | | | |
| Net realized investment gains (losses) from sales, impairments and change in allowance for credit losses (net of related amortization) | | | | | (31.1) | | | | | | 2.1 | | |
| Net change in market value of investments recognized in earnings | | | | | (2.7) | | | | | | 25.5 | | |
| Fair value changes in embedded derivative liabilities (net of related amortization) | | | | | (79.1) | | | | | | (81.4) | | |
| Fair value changes related to agent deferred compensation plan | | | | | (16.3) | | | | | | (20.4) | | |
| Loss on extinguishment of debt | | | | | — | | | | | | (7.3) | | |
| Other | | | | | 9.7 | | | | | | (12.6) | | |
| Non-operating loss before taxes | | | | | (119.5) | | | | | | (94.1) | | |
| Income tax benefit: | | | | | | | | | | | | | |
| On non-operating loss | | | | | (25.0) | | | | | | (19.8) | | |
| Valuation allowance for deferred tax assets and other tax items | | | | | (34.0) | | | | | | (193.7) | | |
| Net non-operating income (loss) | | | | | (60.5) | | | | | | 119.4 | | |
| Net income | | | | $ | 301.8 | | | | | $ | 409.4 | | |
88
CNO Financial Group, Inc. 2021 Proxy Statement
| | | | | | | |
| | | Year ended
December 31,
| |
|
|
|
2018
|
|
|
2017
|
|
| | | | | | | |
Net income (loss) | | $ | (315.0 | ) | $ | 175.6 | |
| | | | | | | | |
Non-operating items: | | | | | | | |
Net realized investment gains from sales and impairments, net of related amortization | | | (37.9 | ) | | (34.3 | ) |
Net change in market value of investments recognized in earnings | | | 48.8 | | | (15.0 | ) |
Fair value changes in embedded derivative liabilities, net of related amortization | | |
(55.5 |
) | |
2.5 | |
Fair value changes related to agent deferred compensation plan | | | (11.9 | ) | | 12.2 | |
Loss related to reinsurance transaction | | | 704.2 | | | - | |
Other | | | (1.7 | ) | | 8.8 | |
| | | | | | | | |
Non-operating (income) loss before taxes | | | 646.0 | | | (25.8 | ) |
Income tax (expense) benefit: | | | | | | | |
On non-operating (income) loss | | | 135.7 | | | (9.0 | ) |
Valuation allowance for deferred tax assets and other tax items | | | (107.8 | ) | | (142.1 | ) |
| | | | | | | | |
Net non-operating loss | | | 618.1 | | | 125.3 | |
| | | | | | | | |
Net operating income (a non-GAAP financial measure) | |
$ |
303.1 | |
$ |
300.9 | |
| | | | | | | | |
| | | | | | | | |
| | | | | | | | |
Per diluted share: | | |
| | |
| |
Net income (loss) | |
$ |
(1.90 |
) |
$ |
1.02 | |
Net realized investment gains from sales and impairments, net of related amortization and taxes | | | (.18 | ) | | (.13 | ) |
Net change in market value of investments recognized in earnings, net of taxes | | | .23 | | | (.06 | ) |
Fair value changes in embedded derivative liabilities, net of related amortization and taxes | | |
(.27 |
) | |
..01 | |
Fair value changes related to agent deferred compensation plan, net of taxes | | | (.06 | ) | | .05 | |
Loss related to reinsurance transaction, net of taxes | | | 4.00 | | | - | |
Valuation allowance for deferred tax assets and other tax items | | | .02 | | | .83 | |
Other | | | (.01 | ) | | .03 | |
| | | | | | | | |
Net operating income (a non-GAAP financial measure) | |
$ |
1.83 | |
$ |
1.75 | |
| | | | | | | | |
| | | | | | | | |
| | | | | | | | |
| | | | Year ended
December 31, | |
| | | | 2020 | | | 2019 | |
| Per diluted share: | | | | | | | | | | | | | |
| Net operating income | | | | $ | 2.53 | | | | | $ | 1.85 | | |
| Net realized investment gains (losses) from sales, impairments and change in allowance for credit losses (net of related amortization and taxes) | | | | | (.17) | | | | | | .01 | | |
| Net change in market value of investments recognized in earnings (net of taxes) | | | | | (.02) | | | | | | .13 | | |
Fair value changes in embedded derivative liabilities (net of related amortization and
taxes) | | | | | (.44) | | | | | | (.41) | | |
| Fair value changes related to agent deferred compensation plan (net of taxes) | | | | | (.09) | | | | | | (.10) | | |
| Loss on extinguishment of debt (net of taxes) | | | | | — | | | | | | (.04) | | |
| Valuation allowance for deferred tax assets and other tax items | | | | | .24 | | | | | | 1.23 | | |
| Other | | | | | .06 | | | | | | (.06) | | |
| Net income | | | | $ | 2.11 | | | | | $ | 2.61 | | |
Expenses not allocated to product lines were higher in 2020, due to a $23.5 million increase (recognized in the second quarter of 2020) in our liability for claims and interest pursuant to the Global Resolution Agreement as the third-party auditor has provided information that we have processed and verified allowing us to more accurately estimate the ultimate liability pursuant to the agreement. In addition, expenses not allocated to product lines in 2020 included a $3.7 million charge related to asset impairments. Expenses not allocated to product lines in 2019 included a $20 million expense reduction related to the net favorable impact from legal and regulatory matters.
The following summarizes total allocated and unallocated expenses adjusted for the significant items summarized above (dollars in millions):
| | | | 2020 | | | 2019 | |
| Expenses allocated to product lines | | | | $ | 557.7 | | | | | $ | 543.0 | | |
| Expenses not allocated to product lines | | | | | 83.8 | | | | | | 53.4 | | |
| Total | | | | | 641.5 | | | | | | 596.4 | | |
| Increase to liability for the Global Resolution Agreement | | | | | (23.5) | | | | | | — | | |
| Charge related to asset impairments | | | | | (3.7) | | | | | | — | | |
| Net favorable impact from legal and regulatory matters | | | | | — | | | | | | 20.0 | | |
| Adjusted total | | | | $ | 614.3 | | | | | $ | 616.4 | | |
Table of ContentsManagement also believes that an operating return on equity, excluding significant items, is important as the impact of these itemsaccumulated other comprehensive income and net operating loss carryforwards, enhances the understanding of our operating results.
This non-GAAP financial measure also differs from return on equity because accumulated other comprehensive income (loss) has been excluded from the value of equity used to determine this ratio. Management believes this non-GAAP financial measure is useful because it removes the volatility that arises from changes in accumulated other comprehensive income (loss). Such volatility is often caused by changes in the estimated fair value of our investment portfolio resulting from changes in general market interest rates rather than the business decisions made by management. In addition, our equity includes the value of significant net operating loss carryforwards (included in income tax assets). In accordance with GAAP, these assets are not discounted, and accordingly will not provide a return to shareholders (until after it is realized as a reduction to taxes that would otherwise be paid). Management believes that excluding this value from the equity component of this measure enhances the understanding of the effect these non-discounted assets have on operating returns and the comparability of these measures from period-to-period.period to period. Operating return measures are used in measuring the performance of our business units and are used as a basis for incentive compensation. The calculations of: (i) operating return on equity, excluding accumulated other comprehensive income (loss) and net operating loss carryforwards (a non-GAAP financial measure); (ii) operating return, excluding significant items, on equity, excluding accumulated other comprehensive income (loss) and net operating loss carryforwards (a non-GAAP financial measure); and (iii) return on equity are as follows (dollars in millions):
CNO Financial Group, Inc. 2021 Proxy Statement89
| | | | | | |
| | Year ended
December 31, |
|
|
|
2018
|
|
|
2017
|
| | | | | | |
Operating income | | $ | 303.1 | | $ | 300.9 |
| | | | | | | |
| | | | | | | |
| | | | | | | |
Operating income, excluding significant items | |
$ |
317.3 | |
$ |
288.3 |
| | | | | | | |
| | | | | | | |
| | | | | | | |
Net Income (loss) | |
$ |
(315.0) | |
$ |
175.6 |
| | | | | | | |
| | | | | | | |
| | | | | | | |
Average common equity, excluding accumulated other comprehensive income (loss) and net operating loss carryforwards (a non-GAAP financial measure) | |
$ |
3,086.7 | |
$ |
3,263.2 |
| | | | | | | |
| | | | | | | |
| | | | | | | |
Average common shareholders' equity | |
$ |
4,200.3 | |
$ |
4,733.8 |
| | | | | | | |
| | | | | | | |
| | | | | | | |
Operating return on equity, excluding accumulated other comprehensive income (loss) and net operating loss carryforwards (a non-GAAP financial measure) | | |
9.8% | | |
9.2% |
Operating return, excluding significant items, on equity, excluding accumulated other comprehensive income (loss) and net operating loss carryforwards (a non-GAAP financial measure) | | |
10.3% | | |
8.8% |
Return on equity | | |
-7.5% | | |
3.7% |
(Continued on next page)
| | | | Year ended December 31, | |
| | | | 2020 | | | 2019 | | | 2018 | |
| Net operating income | | | | $ | 362.3 | | | | | $ | 290.0 | | | | | $ | 303.1 | | |
| Net Income (loss) | | | | $ | 301.8 | | | | | $ | 409.4 | | | | | $ | (315.0) | | |
Average common equity, excluding accumulated other comprehensive income
(loss) and net operating loss carryforwards (a non-GAAP financial measure) | | | | $ | 2,812.4 | | | | | $ | 2,703.9 | | | | | $ | 3,086.7 | | |
| Average common shareholders’ equity | | | | $ | 4,665.4 | | | | | $ | 4,166.8 | | | | | $ | 4,200.3 | | |
| Operating return on equity, excluding accumulated other comprehensive income (loss) and net operating loss carryforwards (a non-GAAP financial measure) | | | | | 12.9% | | | | | | 10.7% | | | | | | 9.8% | | |
| Return on equity | | | | | 6.5% | | | | | | 9.8% | | | | | | (7.5)% | | |
Table of Contents
The following summarizes: (i) operating earnings; (ii) significant items; (iii) operating earnings, excluding significant items; and (iv) net income(loss) (dollars in millions):
| | | | | | | | | | | | | | | | | | | |
| | | Net
Operating
income
| | | Significant
items (a)
| | | Net
Operating
income,
excluding
significant
items
| | | Net Operating
Income,
excluding
significant
items - trailing
four quarters
| | | Net
income (loss)
| | | Net income
(loss) - trailing
four quarters
| |
1Q17 | | $ | 59.8 | | $ | 1.9 | | $ | 61.7 | | $ | 244.2 | | $ | 62.3 | | $ | 375.0 | |
2Q17 | | | 78.6 | | | (6.1 | ) | | 72.5 | | | 255.9 | | | 83.4 | | | 398.5 | |
3Q17 | | | 76.7 | | | (2.0 | ) | | 74.7 | | | 269.7 | | | 100.8 | | | 480.7 | |
4Q17 | | | 85.8 | | | (6.4 | ) | | 79.4 | | | 288.3 | | | (70.9 | ) | | 175.6 | |
1Q18 | | | 73.9 | | | (0.9 | ) | | 73.0 | | | 299.6 | | | 84.3 | | | 197.6 | |
2Q18 | | | 81.9 | | | - | | | 81.9 | | | 309.0 | | | 102.2 | | | 216.4 | |
3Q18 | | | 87.5 | | | - | | | 87.5 | | | 321.8 | | | (529.8 | ) | | (414.2 | ) |
4Q18 | | | 59.8 | | | 15.1 | | | 74.9 | | | 317.3 | | | 28.3 | | | (315.0 | ) |
(Continued on next page)
Table of Contents
A reconciliation of consolidated capital, excluding accumulated other comprehensive income (loss) and net operating loss carryforwards (a non-GAAP financial measure) to common shareholders'shareholders’ equity, is as follows (dollars in millions):
| | | | 1Q17 | | | 2Q17 | | | 3Q17 | | | 4Q17 | |
| Consolidated capital, excluding accumulated other comprehensive income (loss) and net operating loss carryforwards (a non-GAAP financial measure) | | | | | | | | | | | | | $ | 3,225.6 | | |
| Net operating loss carryforwards | | | | | | | | | | | | | | 409.8 | | |
| Accumulated other comprehensive income | | | | | | | | | | | | | | 1,212.1 | | |
| Common shareholders’ equity | | | | | | | | | | | | | $ | 4,847.5 | | |
| | | | 1Q18 | | | 2Q18 | | | 3Q18 | | | 4Q18 | |
| Consolidated capital, excluding accumulated other comprehensive income (loss) and net operating loss carryforwards (a non-GAAP financial measure) | | | | $ | 3,318.7 | | | | | $ | 3,366.0 | | | | | $ | 2,705.8 | | | | | $ | 2,687.3 | | |
| Net operating loss carryforwards | | | | | 404.2 | | | | | | 388.7 | | | | | | 510.6 | | | | | | 505.9 | | |
| Accumulated other comprehensive income | | | | | 894.3 | | | | | | 700.2 | | | | | | 403.5 | | | | | | 177.7 | | |
| Common shareholders’ equity | | | | $ | 4,617.2 | | | | | $ | 4,454.9 | | | | | $ | 3,619.9 | | | | | $ | 3,370.9 | | |
| | | | 1Q19 | | | 2Q19 | | | 3Q19 | | | 4Q19 | |
| Consolidated capital, excluding accumulated other comprehensive income (loss) and net operating loss carryforwards (a non-GAAP financial measure) | | | | $ | 2,703.4 | | | | | $ | 2,702.9 | | | | | $ | 2,685.0 | | | | | $ | 2,761.9 | | |
| Net operating loss carryforwards | | | | | 479.6 | | | | | | 451.1 | | | | | | 425.4 | | | | | | 542.6 | | |
| Accumulated other comprehensive income | | | | | 654.9 | | | | | | 1,098.2 | | | | | | 1,442.9 | | | | | | 1,372.5 | | |
| Common shareholders’ equity | | | | $ | 3,837.9 | | | | | $ | 4,252.2 | | | | | $ | 4,553.3 | | | | | $ | 4,677.0 | | |
| | | | 1Q20 | | | 2Q20 | | | 3Q20 | | | 4Q20 | |
| Consolidated capital, excluding accumulated other comprehensive income (loss) and net operating loss carryforwards (a non-GAAP financial measure) | | | | $ | 2,701.2 | | | | | $ | 2,784.2 | | | | | $ | 2,905.1 | | | | | $ | 2,956.2 | | |
| Net operating loss carryforwards | | | | | 469.4 | | | | | | 426.8 | | | | | | 377.2 | | | | | | 341.9 | | |
| Accumulated other comprehensive income | | | | | 595.2 | | | | | | 1,520.2 | | | | | | 1,801.6 | | | | | | 2,186.1 | | |
| Common shareholders’ equity | | | | $ | 3,765.8 | | | | | $ | 4,731.2 | | | | | $ | 5,083.9 | | | | | $ | 5,484.2 | | |
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CNO Financial Group, Inc. 2021 Proxy Statement
| | | | | | | | | | | | | | |
| | | | | | | | | | | | | | 4Q16
| |
| | Consolidated capital, excluding accumulated other comprehensive income (loss) and net operating loss carryforwards (a non-GAAP financial measure) | | | | | | | | | | | $ | 3,209.5 | |
| | Net operating loss carryforwards | | | | | | | | | | | |
655.0 | |
| | Accumulated other comprehensive income | | | | | | | | | | | |
622.4 | |
| | | | | | | | | | | | | | | |
| | Common shareholders' equity | | | | | | | | | | | $ | 4,486.9 | |
| | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | |
| | | | | 1Q17
| | | 2Q17
| | | 3Q17
| | | 4Q17
| |
| | Consolidated capital, excluding accumulated other comprehensive income (loss) and net operating loss carryforwards (a non-GAAP financial measure) | | $ | 3,236.6 | | $ | 3,263.2 | | $ | 3,335.0 | | $ | 3,225.6 | |
| | Net operating loss carryforwards | | |
640.6 | | |
621.6 | | |
613.1 | | |
409.8 | |
| | Accumulated other comprehensive income | | |
729.6 | | |
894.5 | | |
933.6 | | |
1,212.1 | |
| | | | | | | | | | | | | | | |
| | Common shareholders' equity | | $ | 4,606.8 | | $ | 4,779.3 | | $ | 4,881.7 | | $ | 4,847.5 | |
| | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | |
| | | | | 1Q18
| | | 2Q18
| | | 3Q18
| | | 4Q18
| |
| | Consolidated capital, excluding accumulated other comprehensive income (loss) and net operating loss carryforwards (a non-GAAP financial measure) | | $ | 3,318.7 | | $ | 3,366.0 | | $ | 2,705.8 | | $ | 2,687.3 | |
| | Net operating loss carryforwards | | |
404.2 | | |
388.7 | | |
510.6 | | |
505.9 | |
| | Accumulated other comprehensive income | | |
894.3 | | |
700.2 | | |
403.5 | | |
177.7 | |
| | | | | | | | | | | | | | | |
| | Common shareholders' equity | | $ | 4,617.2 | | $ | 4,454.9 | | $ | 3,619.9 | | $ | 3,370.9 | |
| | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | |
Table of Contents
A reconciliation of consolidated capital, excluding accumulated other comprehensive income (loss) and net operating loss carryforwards (a non-GAAP financial measure) to common shareholders'shareholders’ equity, is as follows (dollars in millions):
| | | | Trailing four quarter average | |
| | | | 4Q20 | | | 4Q19 | | | 4Q18 | |
| Consolidated capital, excluding accumulated other comprehensive income (loss) and net operating loss carryforwards (a non-GAAP financial measure) | | | | $ | 2,812.4 | | | | | $ | 2,703.9 | | | | | $ | 3,086.7 | | |
| Net operating loss carryforwards | | | | | 428.9 | | | | | | 470.1 | | | | | | 440.4 | | |
| Accumulated other comprehensive income | | | | | 1,424.1 | | | | | | 992.8 | | | | | | 673.2 | | |
| Common shareholders’ equity | | | | $ | 4,665.4 | | | | | $ | 4,166.8 | | | | | $ | 4,200.3 | | |
| | | | | | |
| | Trailing Four Quarter Average |
| | | 4Q18
| | | 4Q17
|
Consolidated capital, excluding accumulated other comprehensive income (loss) and net operating loss carryforwards (a non-GAAP financial measure) | | $ | 3,086.7 | | $ | 3,263.2 |
Net operating loss carryforwards | | | 440.4 | | | 601.9 |
Accumulated other comprehensive income | | | 673.2 | | | 868.7 |
| | | | | | | |
Common shareholders' equity | | $ | 4,200.3 | | $ | 4,733.8 |
| | | | | | | |
| | | | | | | |
| | | | | | | |
Book value per diluted share reflects the potential dilution that could occur if outstanding stock options were exercised; and restricted stock and performance units were vested. The dilution from options, restricted shares and performance units is calculated using the treasury stock method. Under this method, we assume the proceeds from the exercise of the options (or the unrecognized compensation expense with respect to restricted stock and performance units) will be used to purchase shares of our common stock at the closing market price on the last day of the period. In addition, the calculation of this non-GAAP measure differs from the corresponding GAAP measure because accumulated other comprehensive income (loss) has been excluded from the value of capital used to determine this measure. Management believes this non-GAAP measure is useful because it removes the volatility that arises from changes in the unrealized appreciation (depreciation) of our investments.
A reconciliation from book value per share to book value per diluted share, excluding accumulated other comprehensive income (loss) is as follows (dollars in millions, except share and per share amounts):| | | | December 31, | |
| | | | 2020 | | | 2019 | |
| Total shareholders’ equity | | | | $ | 5,484.2 | | | | | $ | 4,677.0 | | |
| Shares outstanding at period end | | | | | 135,279,119 | | | | | | 148,084,178 | | |
| Book value per share | | | | $ | 40.54 | | | | | $ | 31.58 | | |
| Total shareholders’ equity | | | | $ | 5,484.2 | | | | | $ | 4,677.0 | | |
| Less accumulated other comprehensive income | | | | | (2,186.1) | | | | | | (1,372.5) | | |
| Adjusted shareholders’ equity excluding accumulated other comprehensive income | | | | $ | 3,298.1 | | | | | $ | 3,304.5 | | |
| Shares outstanding at period end | | | | | 135,279,119 | | | | | | 148,084,178 | | |
| Dilutive common stock equivalents related to: | | | | | | | | | | | | | |
| Amounts related to employee benefit plans | | | | | 2,438,176 | | | | | | 1,496,546 | | |
| Diluted shares outstanding | | | | | 137,717,295 | | | | | | 149,580,724 | | |
| Book value per diluted share (a non-GAAP financial measure) | | | | $ | 23.95 | | | | | $ | 22.09 | | |
CNO Financial Group, Inc. 2021 Proxy Statement91
| | | | | | | | |
| | | | December 31, | |
| | | | | 2018
| | | 2017
| |
| | Total shareholders' equity | | $ | 3,370.9 | | $ | 4,847.5 | |
| | | | | | | | | |
| | | | | | | | | |
| | | | | | | | | |
| | Shares outstanding at period end | | | 162,201,692 | | | 166,857,931 | |
| | | | | | | | | |
| | | | | | | | | |
| | | | | | | | | |
| | Book value per share | | $ | 20.78 | | $ | 29.05 | |
| | | | | | | | | |
| | | | | | | | | |
| | | | | | | | | |
|
Total shareholders' equity |
|
$ |
3,370.9 |
|
$ |
4,847.5 |
|
|
Less accumulated other comprehensive income |
|
|
(177.7 |
) |
|
(1,212.1 |
) |
| | | | | | | | | |
| | Adjusted shareholders' equity excluding accumulated other comprehensive income | | $ | 3,193.2 | | $ | 3,635.4 | |
| | | | | | | | | |
| | | | | | | | | |
| | | | | | | | | |
| | Shares outstanding at period end | | | 162,201,692 | | | 166,857,931 | |
|
Dilutive common stock equivalents related to: |
|
|
|
|
|
|
|
| | Stock options, restricted stock and performance units | | |
1,391,458 | | |
2,796,385 | |
| | | | | | | | | |
| | Diluted shares outstanding | | | 163,593,150 | | | 169,654,316 | |
| | | | | | | | | |
| | | | | | | | | |
| | | | | | | | | |
| | Book value per diluted share (a non-GAAP financial measure) | | $ | 19.52 | | $ | 21.43 | |
| | | | | | | | | |
| | | | | | | | | |
| | | | | | | | | |
Table of Contents
The debt to capital ratio, excluding accumulated other comprehensive income (loss), differs from the debt to capital ratio because accumulated other comprehensive income (loss) has been excluded from the value of capital used to determine this measure. Management believes this non-GAAP financial measure is useful because it removes the volatility that arises from changes in the unrealized appreciation (depreciation) of our investments. A reconciliation of these ratios is as follows (dollars in millions):
| | | | December 31, 2020 | |
| Corporate notes payable | | | | $ | 1,136.2 | | |
| Total shareholders’ equity | | | | | 5,484.2 | | |
| Total capital | | | | $ | 6,620.4 | | |
| Debt to capital ratio | | | | | 17.2% | | |
| Corporate notes payable | | | | $ | 1,136.2 | | |
| Total shareholders’ equity | | | | | 5,484.2 | | |
| Less accumulated other comprehensive income | | | | | (2,186.1) | | |
| Total capital | | | | $ | 4,434.3 | | |
| Debt to total capital ratio, excluding accumulated other comprehensive income (a non-GAAP financial measure) | | | | | 25.6% | | |
The following reconciles our free cash flow to the change in holding company cash and investments (dollars in millions):
| | | | Year ended
December 31, 2020 | |
Holding company cash flows, excluding capital transactions(1): | | |
| Dividends from subsidiaries | | | | $ | 339.8 | | |
| Management fees | | | | | 111.7 | | |
| Surplus debenture interest | | | | | 57.4 | | |
| Earnings on corporate investments | | | | | 29.1 | | |
| Tax refund | | | | | — | | |
| Other | | | | | 34.4 | | |
| Holding company sources of cash, excluding capital transactions: | | | | | 572.4 | | |
| Holding company expenses and other | | | | | (110.6) | | |
| Tax payments | | | | | (21.8) | | |
| Interest expense | | | | | (53.2) | | |
| Cash flow to holding company, excluding capital transactions: | | | | | 386.8 | | |
| Share repurchases | | | | | (264.8) | | |
| Dividend payments to stockholders | | | | | (67.0) | | |
| Net proceeds from new debt | | | | | 146.4 | | |
| Acquisition | | | | | — | | |
| Net change in holding company cash and investments | | | | | 201.4 | | |
| Non-cash changes in investment balances | | | | | — | | |
| Cash and investments, beginning of period | | | | | 186.7 | | |
| Cash and investments, end of period | | | | $ | 388.1 | | |
(1)
Cash flows exclude share repurchases, capital contributions to insurance subsidiaries, dividend payments and refinancing and acquisition transactions.
92
CNO Financial Group, Inc. 2021 Proxy Statement
| | | | | | | | |
| | | | December 31, | |
| | | | | 2018
| | | 2017
| |
| | Corporate notes payable | | $ | 916.8 | | $ | 914.6 | |
| | Total shareholders' equity | | |
3,370.9 | | |
4,847.5 | |
| | | | | | | | | |
| | Total capital | |
$ |
4,287.7 | |
$ |
5,762.1 | |
| | | | | | | | | |
| | | | | | | | | |
| | | | | | | | | |
| | Debt to capital ratio | | |
21.4 |
% | |
15.9 |
% |
| | | | | | | | | |
| | | | | | | | | |
| | | | | | | | | |
| | Corporate notes payable | |
$ |
916.8 | |
$ |
914.6 | |
| | Total shareholders' equity | | |
3,370.9 | | |
4,847.5 | |
| | Less accumulated other comprehensive income | | |
(177.7 |
) | |
(1,212.1 |
) |
| | | | | | | | | |
| | Total capital | |
$ |
4,110.0 | |
$ |
4,550.0 | |
| | | | | | | | | |
| | | | | | | | | |
| | | | | | | | | |
| | Debt to total capital ratio, excluding accumulated other comprehensive income (a non-GAAP financial measure) | | | 22.3 | % | | 20.1 | % |
| | | | | | | | | |
| | | | | | | | | |
| | | | | | | | | |
Other Matters
OTHER MATTERS
Management knows of no other matters which may be presented at the Annual Meeting. If any other matters should properly come before the meeting or any adjournment or postponement thereof, the persons named in the form of proxy will vote in accordance with their best judgment on such matters.
CNO Financial Group, Inc. 2021 Proxy Statement93
A-1
CNO Financial Group, Inc. 2021 Proxy Statement
FOURTH AMENDED AND RESTATED SECTION 382 RIGHTS AGREEMENT
CNO FINANCIAL GROUP, INC.
and
AMERICAN STOCK TRANSFER & TRUST COMPANY, LLC
as Rights Agent
Dated as of November 12, 2020; effective as of November 13, 2020
CNO Financial Group, Inc. 2021 Proxy StatementA-2
March 27, 2019
A-3
CNO Financial Group, Inc. 2021 Proxy Statement
CNO Financial Group, Inc. 2021 Proxy StatementANNEX AA-4
AMENDMENT TO THE
FOURTH AMENDED AND RESTATED CERTIFICATE OF INCORPORATION
OF
SECTION 382 RIGHTS AGREEMENT
This Fourth Amended and Restated Section 382 Rights Agreement, dated as of November 12, 2020 (as amended, supplemented or otherwise modified from time to time, the “Rights Agreement”) between CNO FINANCIAL GROUP, INC.
Financial Group, Inc., a Delaware corporation (the “ARTICLE FIFTEEN
Company
”), and American Stock Transfer & Trust Company, LLC, as rights agent (the “Rights Agent”), amends and restates effective as of November 13, 2020, that certain Third Amended and Restated Section 382 Rights Agreement, dated as of October 3, 2017 (the “Third A&R Rights Agreement”) between the Company and the Rights Agent, which amended and restated that certain Amended and Restated Section 382 Rights Agreement, dated as of October 3, 2014 (the “Second A&R Rights Agreement”), which amended and restated that certain Amended and Restated Section 382 Rights Agreement, dated as of December 6, 2011 (the “First A&R Rights Agreement”), which amended and restated that certain Section 382 Rights Agreement, dated as of January 20, 2009 (the “Original Rights Agreement”) between the Company and the Rights Agent.
WHEREAS, (a) the Company and certain of its Subsidiaries (as defined below) have generated net operating losses for United States federal income tax purposes (“NOLs”); (b) such NOLs may potentially provide valuable Tax Benefits (as defined below) to the Company; (c) the Company desires to avoid an “ownership change” within the meaning of Section 382 (as defined below), and thereby preserve the ability to utilize such Tax Benefits; and (d) in furtherance of such objective, the Company entered into the Original Rights Agreement, the First A&R Rights Agreement, the Second A&R Rights Agreement and the Third A&R Rights Agreement;
WHEREAS, in connection with the adoption of the Original Rights Agreement, the Board of Directors of the Company on January 20, 2009 authorized and declared a dividend of one preferred share purchase right (a “Right”) for each share of Common Stock (as defined below) of the Company outstanding as of the Close of Business (as defined below) on January 30, 2009 (the “Record Date”), each Right representing the right to purchase one one-thousandth (subject to adjustment) of a share of Preferred Stock (as defined below), upon the terms and subject to the conditions set forth in the Original Rights Agreement, and the Board of Directors further authorized and directed the issuance of one Right (subject to adjustment as provided herein) with respect to each share of Common Stock that shall become outstanding between the Record Date and the earlier of the Distribution Date and the Expiration Date (as such terms are hereinafter defined); provided, however, that Rights may be issued with respect to shares of Common Stock that shall become outstanding after the Distribution Date and prior to the Expiration Date in accordance with Section 22;
WHEREAS, the Board of Directors has determined it is in the best interests of the Company and its stockholders to extend the term of the Third A&R Rights Agreement and to amend certain other provisions therein; and
WHEREAS, pursuant to Section 27 of the Third A&R Rights Agreement, the Board of Directors has authorized and approved the amendment and restatement of the Third A&R Rights Agreement, and an appropriate officer of the Company has delivered a certificate to the Rights Agent in accordance with Section 27 of the Third A&R Rights Agreement.
NOW THEREFORE, in consideration of the premises and the mutual agreements herein set forth, the parties hereby agree effective as of November 13, 2020 as follows:
Section 1. Certain Definitions. As used inFor purposes of this ARTICLE FIFTEEN,Rights Agreement, the following capitalized terms have the following meanings when used herein with initial capital letters (and any references to any portions of Treasury Regulation Sections 1.382-2T, 1.382-3 and 1.382-4meaning indicated:
(a) “Acquiring Person” shall include any successor provisions): "4.99% Stockholder" meansmean any Person with(as defined below) who is or shall have become a PercentageThreshold Holder (as defined below), whether or not such Person continues to be a Threshold Holder, but shall not include (i) an Exempted Person (as defined below), or (ii) any Grandfathered Person (as defined below); provided, however, that a Person will not be deemed to have become an Acquiring Person solely as a result of (x) a reduction in the number of shares of Common Stock Ownershipor any other class of 4.99%Company 382 Securities outstanding, (y) the exercise of any options, warrants, rights or more.
"4.99% Transaction" meanssimilar interests (including restricted stock) granted by the Company to its directors, officers and employees, or (z) any Transfer describedunilateral grant of any security by the Company, unless and until such time as such Person thereafter acquires beneficial ownership of any additional shares of Common Stock or additional shares of any class of Company 382 Securities (other than Common Stock), as applicable. Notwithstanding the foregoing, the Board of Directors may, in clause (x) or (y) of Section 2its sole discretion, determine that any Person shall not be deemed to be an “Acquiring Person” for any purposes of this ARTICLE FIFTEEN.Rights Agreement.
"(b) “Affiliate"” and "“Associate"” shall mean, with respect to any Person, any other Person whose common stock would be deemed to be (i) constructively owned by such first Person, or (ii) otherwise aggregated with the shares owned by such first Person (other than aggregation solely by reason of such shares being part of the same "public group"
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CNO Financial Group, Inc. 2021 Proxy Statement
“public group” as defined under Treasury Regulation Section 1.382-2T(f)(13), in each case pursuant to the provisions of Section 382, of the Code, or any successor or replacement provision, and the Treasury Regulations promulgated thereunder. "(c) “AgentApproved Acquisition" has” shall mean (i) any acquisition of Company 382 Securities that would cause a Person to qualify as a Threshold Holder and that is approved in advance by the meaningBoard of Directors, or (ii) a conversion (or other exchange) of Company 382 Securities for other Company 382 Securities where such conversion (or other exchange) does not increase the Beneficial Ownership in the Company by any Person for purposes of Section 382.
(d) Except as may expressly be set forth in Section 5(a) of this ARTICLE FIFTEEN. Aelsewhere herein, a Person shall be deemed the "“beneficial ownerBeneficial Owner"” of, shall be deemed to have "“beneficial ownershipBeneficial Ownership"” of and shall be deemed to "“beneficially ownBeneficially Own"” any securities which such Person: (i) directly owns, or (ii) would be deemed to own constructively pursuant to Section 382 of the Code and the Treasury Regulations promulgated thereunder (including as a result of the deemed exercise of an "option"“option” pursuant to Treasury Regulation Section 1.382-4(d) and including, without duplication, Stock,Company 382 Securities, as applicable, owned by any Affiliate or Associate of such Person);provided,that, a Person shall not be treated as "beneficially owning" Stock“Beneficially Owning” Company 382 Securities pursuant to clause (i) above to the extent that such Person is acting solely in a fiduciary capacity in respect of such StockCompany 382 Securities and does not have the right to receive or the power to direct the receipt of dividends from, or the proceeds from the sale of, Company 382 Securities.
(e) “Book Entry” shall mean an uncertificated book entry for the shares of Common Stock. "(f) “BoardBusiness Day” shall mean any day other than a Saturday, a Sunday, or a day on which banking institutions in the State of Directors" meansIndiana, or the board of directorsState in which the principal office of the Corporation.Rights Agent is located, are authorized or obligated by law or executive order to close.(g) “Close of Business” on any given date shall mean 5:00 P.M., New York, New York time, on such date; provided, however, "that if such date is not a Business Day it shall mean 5:00 P.M., New York, New York time, on the next succeeding Business Day.
(h) “Code" means” shall mean the United States Internal Revenue Code of 1986, as amended from time to time, or any comparable successor statute, andstatute.
(i) “Common Stock” when used with reference to the Treasury Regulations issued thereunder. "Common Stock" meansCompany shall mean the common stock, par value $0.01 per share, of the Corporation.Company. “Common Stock” when used with reference to any Person other than the Company shall mean the capital stock (or, in the case of an entity other than a corporation, the equivalent equity interest) with the greatest voting power of such other Person or, if such other Person is a Subsidiary of another Person, the Person or Persons which ultimately control such first-mentioned Person.
"(j) “Corporation SecurityCompany 382 Securities" or "Corporation Securities" means (i) shares of” shall mean the Common Stock (ii) shares of Preferred Stock (other than preferred stock described in Section 1504(a)(4) of the Code), (iii) warrants, rights, or optionsCompany and any other interest that would be treated as “stock” of the Company for purposes of Section 382 (including options within the meaning ofpursuant to Treasury Regulation Section 1.382-2T(h)(4)(v)1.382-2T(f)(18)) to purchase.
(k) “Exchange Act” shall mean the Securities Exchange Act of 1934, as amended.
(l) “Exempted Person” shall mean (i) the Company, (ii) any Subsidiary (as defined below) of the CorporationCompany, (in the case of subclauses (i) and (ii) including, without limitation, in its fiduciary capacity), (iii) any employee benefit plan or compensation arrangement of the Company or of any Subsidiary of the Company, (iv) any Stock.entity or trustee holding (or acting in a fiduciary capacity in respect of) Company 382 Securities to the extent organized, appointed or established by the Company or any Subsidiary of the Company for or pursuant to the terms of any such plan or for the purpose of funding any such employee benefit plan or compensation arrangement, (v) any Person (together with its Affiliates and Associates) whose status as a Threshold Holder will, in the sole judgment of the Board of Directors, not jeopardize or endanger the availability to the Company of its NOL carryforwards to be used to offset its taxable income in such year or future years (but in the case of any Person determined by the Board of Directors to be an Exempted Person pursuant to this subparagraph (l)(v) only for so long as such Person’s status as a Threshold Holder continues not to jeopardize or endanger the availability of such NOL carryforwards, as determined by the Board of Directors in its good faith discretion), or (vi) any Person who or which would qualify as a Threshold Holder as a result of an Approved Acquisition and, to the extent approved by the Board of Directors, any Person who or which acquires Company 382 Securities from any such Person. "(m) “EffectiveFinal Expiration Date" means” shall mean the laterearliest to occur of (i) July 31, 2019 orthe Close of Business on November 13, 2023, (ii) the dateClose of filingBusiness on November 12, 2021 if stockholder approval of this Certificate of Amendment of Amended and Restated Certificate of Incorporation withRights Agreement has not
CNO Financial Group, Inc. 2021 Proxy StatementA-6
been received by or on such date, (iii) the Secretary of Stateadjournment of the Statefirst annual meeting of Delaware.
Tablethe stockholders of Contents
"Excess Securities" has the meaning given such term in Section 4Company following November 13, 2020 if stockholder approval of this ARTICLE FIFTEEN.
"Expiration Date" means the earlier of (i) July 31, 2022, (ii)Rights Agreement has not been received prior to such time, (iv) the repeal of Section 382 of the Code or any successor statute if the Board of Directors determines that this ARTICLE FIFTEENRights Agreement is no longer necessary for the preservation of Tax Benefits (iii)or (v) the beginning of a taxable year of the CorporationCompany to which the Board of Directors determines that no Tax Benefits may be carried forwardforward.
(n) “Grandfathered Person” shall mean any Person who or (iv)which, together with all Affiliates and Associates of such Person, was on November 13, 2020, the Beneficial Owner of 4.99% or more of the Company 382 Securities outstanding on such date, unless and until such time as such Person after the Board of Directors shall fix in accordance with Section 12date of this ARTICLE FIFTEEN. "Percentage Stock Ownership" means the percentage Stock Ownership interestRights Agreement acquires beneficial ownership of any Personadditional shares or group (as the context may require) for purposes of Sectionother interests in Company 382 Securities representing more than 1% of the Code as determined in accordanceCompany 382 Securities then outstanding. Any Grandfathered Person who, together with all of its Affiliates and Associates, subsequently becomes the Treasury Regulation Sections 1.382-2T(g), (h), (j) and (k) and 1.382-4 or any successor provision.Beneficial Owner of less than 4.99% of the Company 382 Securities shall cease to be a Grandfathered Person.
"(o) “PersonNYSE" means” shall mean the New York Stock Exchange, Inc.
(p) “Person” shall mean any individual, firm, corporation, business trust, joint stock company, partnership, trust association, limited liability company, limited partnership, or other entity, or any group of Persons making a "coordinated acquisition"“coordinated acquisition” of StockCompany 382 Securities or otherwise treated as an entity within the meaning of Treasury Regulation Section 1.382-3(a)(1)(i), or otherwise and shall include any successor (by merger or otherwise) of any such entity;provided,however, that a Personentity.
(q) “Preferred Stock” shall not mean a Public Group. "the Series E Junior Participating Preferred Stock," means the preferred stock, par value $0.01 per share, of the Corporation.Company having the rights and preferences set forth in the Form of Certificate of Designations attached to this Rights Agreement as
Exhibit A "Prohibited Distributions" means any and, all dividends or other distributions paid by the Corporation with respect to any Excess Securities received by a Purported Transferee.
"Prohibited Transfer" means any Transfer or purported Transfer of Corporation Securities to the extent that such Transferthere is prohibited and/or void under this ARTICLE FIFTEEN.
"Public Group" has the meaning set forth in Treasury Regulation Section 1.382-2T(f)(13).
"Purported Transferee" has the meaning set forth in Section 4a not sufficient number of this ARTICLE FIFTEEN.
"Securities" and "Security" each has the meaning set forth in Section 7 of this ARTICLE FIFTEEN.
"Stock" means any interest that would be treated as "stock"shares of the CorporationSeries E Junior Participating Preferred Stock authorized to permit the full exercise of the Rights, any other series of preferred stock of the Company designated for purposessuch purpose containing terms substantially similar to the terms of the Series E Junior Participating Preferred Stock.
(r) “Section 382” shall mean Section 382 of the Code, (includingor any comparable successor provision.
(s) “Securities Act” shall mean the Securities Act of 1933, as amended.
(t) “Stock Acquisition Date” shall mean the first date of public announcement (which for purposes of this definition shall include, without limitation, a report filed pursuant to Treasury Regulation Section 1.382-2T(f)(18)). "Stock Ownership" means any direct13(d), Section 13(f) or indirect ownership of Stock, including any ownership by virtue of application of constructive ownership rules, with such direct, indirect, and constructive ownership determinedSection 13(g) under the provisionsExchange Act) by the Company or an Acquiring Person that an Acquiring Person has become such or that discloses information which reveals the existence of Section 382an Acquiring Person, or such earlier date as a majority of the Code.Board of Directors becomes aware of the existence of an Acquiring Person.
"(u) “Subsidiary" or "Subsidiaries"” of any Person meansshall mean any corporation or other entity of which securities or other ownership interests having ordinary voting power sufficient to elect a majority of the board of directors or other Personspersons performing similar functions are beneficially owned, directly or indirectly, by such Person, and any corporation or other entity that is otherwise controlled by such Person. "(v) “Tax Benefits" means” shall mean the net operating loss carryovers, capital loss carryovers, general business credit carryovers, alternative minimum tax credit carryovers and foreign tax credit carryovers, as well as any loss or deduction attributable to a "net“net unrealized built-in loss" of the Corporation or any of its Subsidiaries,loss” within the meaning of Section 382, and the Treasury Regulations promulgated thereunder, of the Code.Company or any of its Subsidiaries. "(w) “TransferThreshold Holder" means, any direct or indirect sale, transfer, assignment, conveyance, pledge or other disposition or other action taken by a Person, other than the Corporation, that alters the Percentage Stock Ownership of” shall mean any Person who or group. A Transfer also shall includewhich, together with all Affiliates and Associates of such Person, is the creationBeneficial Owner of 4.99% or grantmore of an option (including an option within the meaningshares of Treasury Regulation Sections 1.382-2T(h)(4)(v) and 1.382-4).
Table of Contents
For the avoidance of doubt, a Transfer shall not include the creation or grant of an option by the Corporation, nor shall a Transfer include the issuance ofCommon Stock by the Corporation.
"Transferee" means any Person to whom Corporation Securities are Transferred.
"Treasury Regulations" means the regulations, including temporary regulations or any successorother class of Company 382 Securities then outstanding.
(x) “Treasury Regulations” shall mean any income tax regulations promulgated under the Code, including any amendments thereto.
Any determination required by the definitions in this Rights Agreement shall be made by the Board of Directors in its good faith judgment, which determination shall be binding on the Rights Agent and the holders of Rights.
Section 2. Appointment of Rights Agent. The Company hereby appoints the Rights Agent to act as amendedagent for the Company and the holders of the Rights (who, in accordance with Section 3 hereof, shall prior to the Distribution Date also be the holders of Common Stock) in accordance with the terms and conditions hereof, and the Rights Agent hereby accepts such appointment. The Company may from time to time.time appoint such co-Rights Agents as it A-7
CNO Financial Group, Inc. 2021 Proxy Statement
may deem necessary or desirable upon 10 days’ prior notice to the Rights Agent. The Rights Agent shall have no duty to supervise, and shall in no event be liable for the acts or omissions of any such co-Rights Agent.
Section 3. Issuance of Right Certificates. (a) Until the Close of Business on the earlier of (i) the tenth Business Day after the Stock Acquisition Date (or, if the Stock Acquisition Date occurs before the Record Date, the Close of Business on the Record Date) or (ii) the tenth Business Day (or such later date as may be determined by action of the Board of Directors prior to such time as any Person becomes an Acquiring Person) after the date of the commencement by any Person (other than an Exempted Person) of, or of the first public announcement of the intention of such Person (other than an Exempted Person) to commence, a tender or exchange offer the consummation of which would result in any Person (other than an Exempted Person) becoming an Acquiring Person (irrespective of whether any shares are actually purchased pursuant to any such offer) (including, in the case of both clause (i) and (ii), any such date which is after the date of this Rights Agreement and prior to the issuance of the Rights) (the earlier of such dates being herein referred to as the “Distribution Date”), (x) the Rights will be evidenced (subject to the provisions of Section 3(b) hereof) by the certificates representing the Common Stock registered in the names of the holders thereof (or by Book Entry shares in respect of such Common Stock) and not by separate Right Certificates (as defined below), and (y) the Rights will be transferable only in connection with the transfer of Common Stock. As soon as practicable after the Distribution Date, the Company will prepare and execute, the Rights Agent will countersign, and the Company will send or cause to be sent (and the Rights Agent will, if requested, send) by first-class, postage-prepaid mail, to each record holder of Common Stock as of the Close of Business on the Distribution Date (other than any Acquiring Person or any Associate or Affiliate of an Acquiring Person), at the address of such holder shown on the records of the Company, a Right Certificate, in substantially the form of Exhibit B hereto (a “Right Certificate”), evidencing one Right (subject to adjustment as provided herein) for each share of Common Stock so held. In the event that an adjustment in the number of Rights per share of Common Stock has been made pursuant to Section 2. Transfer11 or 13 hereof, at the time of distribution of the Right Certificates, the Company shall make the necessary and Ownership Restrictions.appropriate rounding adjustments (in accordance with Section 14(a) (a) In order to preserve the Tax Benefits, fromhereof), so that Right Certificates representing only whole numbers of Rights are distributed and cash is paid in lieu of any fractional Rights. As of and after the EffectiveDistribution Date, the Rights will be evidenced solely by such Right Certificates.
(b) In connection with the adoption of the Original Rights Agreement, the Company sent a copy of a Summary of Rights to Purchase Shares of Preferred Stock (the “Summary of Rights”), by first-class, postage-prepaid mail, to each record holder of Common Stock and holder of Book Entry shares as of the Close of Business on the Record Date, at the address of such holder shown on the records of the Company as the address at which such holder has consented to receive notice. With respect to shares of Common Stock outstanding as of the Record Date, until the Distribution Date, the Rights associated with such shares will be evidenced by the share certificate for such shares of Common Stock registered in the names of the holders thereof or the Book Entry shares, in each case together with the Summary of Rights, in substantially the form of Exhibit C hereto. Until the Distribution Date (or, if earlier, the Expiration Date), the surrender for transfer of any certificate for Common Stock or Book Entry shares outstanding on the Record Date, with or without a copy of the Summary of Rights, shall also constitute the transfer of the Rights associated with the shares of Common Stock represented by such certificate or Book Entry shares.
(c) Rights shall be issued in respect of all shares of Common Stock issued or disposed of (including, without limitation, upon disposition of Common Stock out of treasury stock or issuance or reissuance of Common Stock out of authorized but unissued shares) after the Record Date but prior to the earlier of the Distribution Date and the Expiration Date, or in certain circumstances provided in Section 22 hereof, after the Distribution Date. Certificates issued for Common Stock (including, without limitation, upon transfer of outstanding Common Stock, disposition of Common Stock out of treasury stock or issuance or reissuance of Common Stock out of authorized but unissued shares) after the Record Date but prior to the earlier of the Distribution Date and the Expiration Date shall have impressed on, printed on, written on or otherwise affixed to them a legend substantially to the effect of the following:
This certificate also evidences and entitles the holder hereof to certain rights as set forth in the Fourth Amended and Restated Section 382 Rights Agreement between CNO Financial Group, Inc. and American Stock Transfer & Trust Company, LLC, as Rights Agent, dated as of November 12, 2020 as the same may be amended, supplemented or otherwise modified from time to time (the “Rights Agreement”), the terms of which are hereby incorporated herein by reference and a copy of which is on file at the principal executive offices of CNO Financial Group, Inc. Under certain circumstances, as set forth in the Rights Agreement, such Rights will be evidenced by separate certificates and will no longer be evidenced by this certificate. CNO Financial Group, Inc. will mail to the holder of this ARTICLE FIFTEEN,certificate a copy of the Rights Agreement without charge after receipt of a written request therefor. Under certain circumstances, as set forth in the Rights Agreement, Rights owned by or
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transferred to any attempted Person who is or becomes an Acquiring Person (as defined in the Rights Agreement) and certain transferees thereof will become null and void and will no longer be transferable.
With respect to any Book Entry shares of Common Stock, such legend shall be included in a notice to the registered holder of such shares in accordance with applicable law. With respect to such certificates containing the foregoing legend, or any notice of the foregoing legend delivered to holders of Book Entry shares, until the Distribution Date, the Rights associated with the Common Stock represented by such certificates or Book Entry shares shall be evidenced by such certificates or Book Entry shares alone, and the surrender for transfer of any such certificate or Book Entry share, except as otherwise provided herein, shall also constitute the transfer of the Rights associated with the Common Stock represented thereby. In the event that the Company purchases or otherwise acquires any Common Stock after the Record Date but prior to the Distribution Date, any Rights associated with such Common Stock shall be deemed cancelled and retired so that the Company shall not be entitled to exercise any Rights associated with the shares of Common Stock which are no longer outstanding.
Notwithstanding this Section 3(c), neither the omission of a legend nor the failure to deliver the notice of such legend required hereby shall affect the enforceability of any part of this Rights Agreement or the rights of any holder of the Rights.
Section 4. Form of Right Certificates. The Right Certificates (and the forms of election to purchase shares and of assignment to be printed on the reverse thereof) shall be substantially in the form set forth in Exhibit B hereto and may have such marks of identification or designation and such legends, summaries or endorsements printed thereon as the Company may deem appropriate and as are not inconsistent with the provisions of this Rights Agreement, or as may be required to comply with any applicable law or with any rule or regulation made pursuant thereto or with any rule or regulation of the NYSE or of any other stock exchange or automated quotation system on which the Rights may from time to time be listed or quoted, or to conform to usage. Subject to the provisions of this Rights Agreement, the Right Certificates shall entitle the holders thereof to purchase such number of one one-thousandths of a share of Preferred Stock as shall be set forth therein at the Purchase Price (as determined pursuant to Section 7), but the amount and type of securities purchasable upon the exercise of each Right and the Purchase Price thereof shall be subject to adjustment as provided herein.
Section 5. Countersignature and Registration. (a) The Right Certificates shall be executed on behalf of the Company by the Chief Executive Officer, the President, any of the Vice Presidents or the Treasurer of the Company, either manually or by facsimile signature, shall have affixed thereto the Company’s seal or a facsimile thereof and shall be attested by the Secretary or an Assistant Secretary of the Company, either manually or by facsimile signature. The Right Certificates shall be countersigned by the Rights Agent, either manually or by facsimile signature, and shall not be valid for any purpose unless countersigned. In case any officer of the Company who shall have signed any of the Right Certificates shall cease to be such officer of the Company before countersignature by the Rights Agent and issuance and delivery by the Company, such Right Certificates, nevertheless, may be countersigned by the Rights Agent and issued and delivered by the Company with the same force and effect as though the Person who signed such Right Certificates had not ceased to be such officer of the Company; and any Right Certificate may be signed on behalf of the Company by any Person who, at the actual date of the execution of such Right Certificate, shall be a proper officer of the Company to sign such Right Certificate, although at the date of the execution of this Rights Agreement any such Person was not such an officer.
(b) Following the Distribution Date, the Rights Agent will keep or cause to be kept, at an office or agency designated for such purpose, books for registration and transfer of the Right Certificates issued hereunder. Such books shall show the names and addresses of the respective holders of the Right Certificates, the number of Rights evidenced on its face by each of the Right Certificates and the date of each of the Right Certificates.
Section 6. Transfer, Split Up, Combination and Exchange of Corporation SecuritiesRight Certificates; Mutilated, Destroyed, Lost or Stolen Right Certificates. (a) Subject to the provisions of this Rights Agreement, at any time after the Close of Business on the Distribution Date, and prior to the Close of Business on the Expiration Date, any Right Certificate or Right Certificates may be transferred, split up, combined or exchanged for another Right Certificate or Right Certificates, entitling the registered holder to purchase a like number of one one-thousandths of a share of Preferred Stock (or, following such time, other securities, cash or assets as the case may be) as the Right Certificate or Right Certificates surrendered then entitled such holder to purchase. Any registered holder desiring to transfer, split up, combine or exchange any Right Certificate or Right Certificates shall make such request in writing delivered to the Rights Agent, and shall surrender the Right Certificate or Right Certificates to be transferred, split up, combined or exchanged at the office or agency of the Rights Agent designated for such purpose. Thereupon the Rights Agent, subject to the provisions of this Rights Agreement, shall countersign and deliver to the Person entitled
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thereto a Right Certificate or Right Certificates, as the case may be, as so requested. The Company may require payment of a sum sufficient to cover any tax or governmental charge that may be imposed in connection with any transfer, split up, combination or exchange of Right Certificates.
(b)�� Subject to the provisions of this Rights Agreement, at any time after the Distribution Date and prior to the Expiration Date, upon receipt by the Company and the Rights Agent of evidence reasonably satisfactory to them of the loss, theft, destruction or mutilation of a Right Certificate, and, in case of loss, theft or destruction, of indemnity or security reasonably satisfactory to them, and, at the Company’s request, reimbursement to the Company and the Rights Agent of all reasonable expenses incidental thereto, and upon surrender to the Rights Agent and cancellation of the Right Certificate if mutilated, the Company will make and deliver a new Right Certificate of like tenor to the Rights Agent for delivery to the registered holder in lieu of the Right Certificate so lost, stolen, destroyed or mutilated.
Section 7. Exercise of Rights, Purchase Price; Expiration Date of Rights. (a) Except as otherwise provided herein, the Rights shall become exercisable on the Distribution Date, and thereafter the registered holder of any attempted TransferRight Certificate may, subject to Section 11(a)(ii) hereof and except as otherwise provided herein, exercise the Rights evidenced thereby in whole or in part upon surrender of Corporation Securities pursuantthe Right Certificate, with the form of election to an agreement entered intopurchase on the reverse side thereof duly executed, to the Rights Agent at the office or agency of the Rights Agent designated for such purpose, together with payment of the Purchase Price for each one one-thousandth of a share of Preferred Stock (or other securities, cash or assets, as the case may be) as to which the Rights are exercised, at any time which is both after the Distribution Date and prior to the time (the “Expiration Date”) that is the earliest of (i) the Final Expiration Date, (ii) the time at which the Rights are redeemed as provided in Section 23 hereof (the “Redemption Date”) or (iii) the time at which such Rights are exchanged as provided in Section 24 hereof.
(b) The purchase price (the “Purchase Price”) shall be prohibitedinitially $95.00 for each one one-thousandth of a share of Preferred Stock purchasable upon the exercise of a Right. The Purchase Price and voidthe number of one one-thousandths of a share of Preferred Stock or other securities or property to be acquired upon exercise of a Right shall be subject to adjustment from time to time as provided in ab initioSections 11 (x)and 13 hereof and shall be payable in lawful money of the United States of America in accordance with paragraph (c) of this Section 7.
(c) Except as otherwise provided herein, upon receipt of a Right Certificate representing exercisable Rights, with the form of election to purchase properly completed and duly executed, accompanied by payment of the aggregate Purchase Price for the number of shares of Preferred Stock to be purchased and an amount equal to any applicable transfer tax or charge required to be paid by the holder of such Right Certificate in accordance with Section 6 hereof, in lawful money of the United States of America, in cash or by certified check, cashier’s check or money order payable to the order of the Company, the Rights Agent shall thereupon promptly (i) either (A) requisition from any transfer agent of the Preferred Stock, or make available if the transferorRights Agent is the transfer agent for the Preferred Stock, certificates for the total number of shares of Preferred Stock to be purchased (and the Company hereby irrevocably authorizes its transfer agent to comply with all such requests), or (B) if the Company shall have elected to deposit the Preferred Stock with a 4.99% Stockholder or (y)depositary agent under a depositary arrangement, requisition from the depositary agent appointed by the Company depositary receipts representing interests in the number of one one-thousandths of a share of Preferred Stock as are to be purchased, in which case certificates for the Preferred Stock represented by such receipts shall be deposited by the transfer agent with the depositary agent (and the Company hereby directs any such depositary agent to comply with all such requests), (ii) when necessary to comply with this Rights Agreement (or otherwise when appropriate, as determined by the Company with notice to the extent that, as a resultRights Agent) requisition from the Company the amount of cash, if any, to be paid in lieu of issuance of fractional shares in accordance with Section 14 hereof, (iii) promptly after receipt of such Transfercertificates or depositary receipts, cause the same to be delivered to or upon the order of the registered holder of such Right Certificate, registered in such name or names as may be designated by such holder and (iv) when necessary to comply with this Rights Agreement (or otherwise when appropriate, as determined by the Company with notice to the Rights Agent), after receipt of the cash requisitioned from the Company, promptly deliver such cash, if any, seriesto or upon the order of Transfersthe registered holder of which such Transfer isRight Certificate.
(d) Except as otherwise provided herein, in case the registered holder of any Right Certificate shall exercise less than all of the Rights evidenced thereby, a part), eithernew Right Certificate evidencing Rights equivalent to the exercisable Rights remaining unexercised shall be issued by the Rights Agent to the registered holder of such Right Certificate or to his, her or its duly authorized assigns, subject to the provisions of Section 14 hereof.
(e) Notwithstanding anything in this Rights Agreement to the contrary, neither the Rights Agent nor the Company shall be obligated to undertake any action with respect to a registered holder of Rights upon the occurrence
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of any purported transfer or exercise of Rights pursuant to Section 6 hereof or this Section 7 unless such registered holder shall have (i) any Person or group of Persons would become a 4.99% Stockholder or (ii)completed and signed the Percentage Stock Ownershipcertificate contained in the Corporationform of assignment or form of election to purchase set forth on the reverse side of the Right Certificate surrendered for such transfer or exercise and (ii) provided such additional evidence of the identity of the Beneficial Owner (for the purposes of this Section 7(e), as such term is defined in Rule 13d-3 or 13d-5 of the General Rules and Regulations under the Exchange Act), former Beneficial Owner and/or Affiliates or Associates (for purposes of this Section 7(e), as such terms are respectively defined for purposes of Rule 12b-2 of the General Rules and Regulations under the Exchange Act) thereof as the Company shall reasonably request.
Section 8. Cancellation and Destruction of Right Certificates. All Right Certificates surrendered for the purpose of exercise, transfer, split up, combination or exchange shall, if surrendered to the Company or to any 4.99% Stockholder wouldof its agents, be increased.delivered to the Rights Agent for cancellation or in cancelled form, or, if surrendered to the Rights Agent, shall be cancelled by it, and no Right Certificates shall be issued in lieu thereof except as expressly permitted by any of the provisions of this Rights Agreement. The prior sentence is not intendedCompany shall deliver to prevent Corporation Securities from being DTC-eligiblethe Rights Agent for cancellation and retirement, and the Rights Agent shall not precludeso cancel and retire, any other Right Certificate purchased or acquired by the settlementCompany otherwise than upon the exercise thereof. The Rights Agent shall deliver all cancelled Right Certificates to the Company, or shall, at the written request of the Company, destroy or cause to be destroyed such cancelled Right Certificates, and in such case shall deliver a certificate of destruction thereof to the Company.
Section 9. Availability of Shares of Preferred Stock. (a) The Company covenants and agrees that it will cause to be reserved and kept available out of its authorized and unissued shares of Preferred Stock or any transactionsshares of Preferred Stock held in Corporation Securities entered into throughits treasury, the facilitiesnumber of shares of Preferred Stock that will be sufficient to permit the exercise in full of all outstanding Rights.
(b) So long as the shares of Preferred Stock (and, following the time that a Person becomes an Acquiring Person, shares of Common Stock and/or other securities) issuable upon the exercise of Rights may be listed or admitted to trading on the NYSE or listed on any other national securities exchange or quotation system, the Company shall use its best efforts to cause, from and after such time as the Rights become exercisable, all shares reserved for such issuance to be listed or admitted to trading on the NYSE or listed on any other national securities exchange or quotation system;providedthatsystem upon official notice of issuance upon such exercise.
(c) From and after such time as the Rights become exercisable, the Company shall use its best efforts, if then necessary to permit the settlementissuance of shares of Preferred Stock (and following the time that a Person first becomes an Acquiring Person, shares of Common Stock and other securities) upon the exercise of Rights, to register and qualify such shares of Preferred Stock (and following the time that a Person first becomes an Acquiring Person, shares of Common Stock and/or other securities) under the Securities Act and any applicable state securities or “Blue Sky” laws (to the extent exemptions therefrom are not available), cause such registration statement and qualifications to become effective as soon as possible after such filing and keep such registration and qualifications effective until the earlier of (x) the date as of which the Rights are no longer exercisable for such securities and (y) the Expiration Date. The Company may temporarily suspend, for a period of time not to exceed 90 days, the exercisability of the transaction would resultRights in order to prepare and file a Prohibited Transfer,registration statement under the Securities Act and permit it to become effective. Upon any such Transfersuspension, the Company shall nonetheless beissue a Prohibited Transfer subject to allpublic announcement stating that the exercisability of the provisions and limitations set forth in this ARTICLE FIFTEEN. (b) The Corporation may requireRights has been temporarily suspended, as well as a conditionpublic announcement at such time as the suspension is no longer in effect. Notwithstanding any provision of this Rights Agreement to the registration ofcontrary, the Transfer ofRights shall not be exercisable in any Corporation Securitiesjurisdiction unless the requisite qualification or the payment of any distribution on any Corporation Securities that the proposed Transferee or payee furnish to the Corporation all information reasonably requested by the Corporation with respect to all the direct or indirect ownership interestsexemption in such Corporation Securities.jurisdiction shall have been obtained and until a registration statement under the Securities Act (if required) shall have been declared effective.
(d) The Corporation may makeCompany covenants and agrees that it will take all such arrangements or issue such instructions to its stock transfer agentaction as may be determined bynecessary to ensure that all shares of Preferred Stock (and, following the Boardtime that a Person becomes an Acquiring Person, shares of Directors to be necessary or advisable to implement this ARTICLE FIFTEEN, including, without limitation, authorizing such transfer agent to require an affidavit from a proposed Transferee regarding such Person's actual and constructive ownership ofCommon Stock and other evidence that a Transfer will not be prohibited by this ARTICLE FIFTEEN as a condition to registering any Transfer. Section 3. Waiversecurities) delivered upon exercise of Transfer and Ownership Restrictions. The restrictions set forth in Section 2(a)Rights shall, at the time of this ARTICLE FIFTEEN shall not apply to a Transfer that is a 4.99% Transaction if the transferor or the Transferee obtains the written approvaldelivery of the Boardcertificates therefor (subject to payment of Directors or athe Purchase Price), be duly and validly authorized committee thereof.and issued and fully paid and nonassessable shares.
(e) The
Board of Directors may impose any conditionsCompany further covenants and agrees that it
deems reasonablewill pay when due and
appropriate in connection with such approval, including, without limitation, restrictions on the ability ofpayable any
Transferee to Transfer Stock acquired through a Transfer. Approvals of the Board of Directors hereunderand all federal and state transfer taxes and charges which may be
given prospectively or retroactively. The Board of Directors, to the fullest extent permitted by law, may exercise the authority granted by this ARTICLE FIFTEEN through duly authorized officers or agents of the Corporation. Nothing in this Section 3 shall be construed to limit or restrict the Board of Directors in the exercise of its fiduciary duties under applicable law. Section 4. Excess Securities. No employee or agent of the Corporation shall record any Prohibited Transfer, and the purported transferee of such a Prohibited Transfer (the "Purported Transferee") shall not be recognized as a stockholder of the Corporation for any purpose whatsoeverpayable in respect of the Corporation Securities which are the subjectissuance or delivery of the Prohibited Transfer (the "Right Certificates or of any shares of Preferred Stock (or shares of Common Stock or other securities) upon the exercise of Rights. The Company shall not, however, be required to pay any transfer tax or charge which may be payable in respect of any transfer or delivery of Right Certificates to a Person other than, or the issuance or delivery of certificates or depositary receipts for the Preferred Stock (or shares of Common Stock or other securities) in a name other than
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that of, the registered holder of the Right Certificate evidencing Rights surrendered for exercise or to issue or deliver any certificates or depositary receipts for Preferred Stock (or shares of Common Stock or other securities) upon the exercise of any Rights until any such tax or charge shall have been paid (any such tax or charge being payable by that holder of such Right Certificate at the time of surrender) or until it has been established to the Company’s reasonable satisfaction that no such tax or charge is due.
Section 10. Excess SecuritiesPreferred Stock Record Date"). Until the Excess Securities are acquired by anotherEach Person in whose name any certificate for Preferred Stock is issued upon the exercise of Rights shall for all purposes be deemed to have become the holder of record of the shares of Preferred Stock represented thereby on, and such certificate shall be dated, the date upon which the Right Certificate evidencing such Rights was duly surrendered and payment of the Purchase Price (and any applicable transfer taxes or charges) was made; provided, however, that if the date of such surrender and payment is a Transfer that is notdate upon which the Preferred Stock transfer books of the Company are closed, such Person shall be deemed to have become the record holder of such shares (fractional or otherwise) on, and such certificate shall be dated, the next succeeding Business Day on which such transfer books are open. Prior to the exercise of the Rights evidenced thereby, the holder of a Prohibited Transfer, the Purported TransfereeRight Certificate shall not be entitled with respect to such Excess Securities to any rights of stockholdersa holder of Preferred Stock for which the Corporation,Rights shall be exercisable, including, without limitation, the right to vote such Excess Securities andor to receive dividends or other distributions, whether liquidatingand shall not be entitled to receive any notice of any proceedings of the Company, except as provided herein.
Section 11. Adjustment of Purchase Price, Number and Kind of Shares and Number of Rights. The Purchase Price, the number of shares of Preferred Stock or other securities or property purchasable upon exercise of each Right and the number of Rights outstanding are subject to adjustment from time to time as provided in this Section 11.
(a)(i) In the event the Company shall at any time after the date of this Rights Agreement (A) declare and pay a dividend on the Preferred Stock payable in shares of Preferred Stock, (B) subdivide the outstanding shares of Preferred Stock, (C) combine the outstanding shares of Preferred Stock into a smaller number of shares of Preferred Stock or (D) issue any shares of its capital stock in a reclassification of the shares of Preferred Stock (including any such reclassification in connection with a consolidation or merger in which the Company is the continuing or surviving corporation), except as otherwise provided in this Section 11(a), the Purchase Price in effect at the time of the record date for such dividend or of the effective date of such subdivision, combination or reclassification, as the case may be, and the number and kind of shares of capital stock issuable on such date, shall be proportionately adjusted so that the holder of any Right exercised after such time shall be entitled to receive the aggregate number and kind of shares of capital stock which, if such Right had been exercised immediately prior to such date and at a time when the Preferred Stock transfer books of the Company were open, the holder would have owned upon such exercise and been entitled to receive by virtue of such dividend, subdivision, combination or reclassification; provided, however, that in no event shall the consideration to be paid upon the exercise of one Right be less than the aggregate par value of the shares of capital stock of the Company issuable upon exercise of one Right.
(ii) Subject to Section 24 of this Rights Agreement and except as otherwise provided in this Section 11(a)(ii) and Section 11(a)(iii), in the event that any Person becomes an Acquiring Person, each holder of a Right shall thereafter have the right to receive, upon exercise thereof at a price equal to the then-current Purchase Price, in accordance with the terms of this Rights Agreement and in lieu of shares of Preferred Stock, such number of shares of Common Stock (or at the option of the Company, such number of one one-thousandths of a share of Preferred Stock) as shall equal the result obtained by (x) multiplying the then-current Purchase Price by the number of one one-thousandths of a share of Preferred Stock for which a Right is then exercisable and dividing that product by (y) 50% of the then-current per share market price of the Company’s Common Stock (determined pursuant to Section 11(d) hereof) on the date of the occurrence of such event; provided, however, that the Purchase Price (as so adjusted) and the number of shares of Common Stock so receivable upon exercise of a Right shall thereafter be subject to further adjustment as appropriate in accordance with this Section 11. Notwithstanding anything in this Rights Agreement to the contrary, however, from and after the time (the “Invalidation Time”) when any Person first becomes an Acquiring Person, any Rights that are beneficially owned by (x) any Acquiring Person (or any Affiliate or Associate of any Acquiring Person), (y) a transferee of any Acquiring Person (or any such Affiliate or Associate) who becomes a transferee after the Invalidation Time or (z) a transferee of any Acquiring Person (or any such Affiliate or Associate) who became a transferee prior to or concurrently with the Invalidation Time pursuant to either (I) a transfer from the Acquiring Person to holders of its equity securities or to any Person with whom it has any continuing agreement, arrangement or understanding, written or otherwise, regarding the transferred Rights or (II) a transfer that the Board of Directors has determined is part of a plan, arrangement or understanding, written or otherwise, which has the purpose or effect of avoiding the provisions of this paragraph, and subsequent transferees of such Persons, shall be void without any further action and any holder of such Rights shall thereafter have no rights whatsoever with
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respect to such Rights under any provision of this Rights Agreement. The Company shall use all reasonable efforts to ensure that the provisions of this Section 11(a)(ii) are complied with, but shall have no liability to any holder of Right Certificates or other Person as a result of its failure to make any determinations with respect to an Acquiring Person or its Affiliates, Associates or transferees hereunder. From and after the Invalidation Time, no Right Certificate shall be issued pursuant to Section 3 or Section 6 hereof that represents Rights that are or have become void pursuant to the provisions of this paragraph, and any Right Certificate delivered to the Rights Agent that represents Rights that are or have become void pursuant to the provisions of this paragraph shall be cancelled. From and after the occurrence of an event specified in Section 13(a) hereof, any Rights that theretofore have not been exercised pursuant to this Section 11(a)(ii) shall thereafter be exercisable only in accordance with Section 13 and not pursuant to this Section 11(a)(ii).
(iii) The Company may at its option substitute for a share of Common Stock issuable upon the exercise of Rights in accordance with the foregoing subparagraph (ii) such number or fractions of shares of Preferred Stock having an aggregate current market value equal to the current per share market price of a share of Common Stock. In the event that there shall be an insufficient number of shares of Common Stock authorized but unissued (and unreserved) to permit the exercise in full of the Rights in accordance with the foregoing subparagraph (ii), the Board of Directors shall, with respect thereof,to such deficiency, to the extent permitted by applicable law and any material agreements then in effect to which the Company is a party (A) determine the excess of (x) the value of the shares of Common Stock issuable upon the exercise of a Right in accordance with the foregoing subparagraph (ii) (the “Current Value”) over (y) the then-current Purchase Price multiplied by the number of one one-thousandths of a share of Preferred Stock for which a Right was exercisable immediately prior to the time that the Acquiring Person became such (such excess, the “Spread”), and (B) with respect to each Right (other than Rights which have become void pursuant to Section 11(a)(ii)), make adequate provision to substitute for the shares of Common Stock issuable in accordance with the foregoing subparagraph (ii) upon exercise of the Right and payment of the Purchase Price (as adjusted in accordance therewith), (1) cash, (2) a reduction in such Purchase Price, (3) shares of Preferred Stock or other equity securities of the Company (including, without limitation, shares or fractions of shares of preferred stock which, by virtue of having dividend, voting and liquidation rights substantially comparable to those of the shares of Common Stock, are deemed in good faith by the Board of Directors to have substantially the same value as the shares of Common Stock (such shares of preferred stock and shares or fractions of shares of preferred stock are hereinafter referred to as “Common Stock Equivalents”)), (4) debt securities of the Company, (5) other assets or (6) any combination of the foregoing, having a value which, when added to the value of the shares of Common Stock actually issued upon exercise of such Right, shall have an aggregate value equal to the Current Value (less the amount of any reduction in such Purchase Price), where such aggregate value has been determined by the Board of Directors upon the advice of a nationally recognized investment banking firm selected in good faith by the Board of Directors; provided, however, if the Company shall not make adequate provision to deliver value pursuant to clause (B) above within 30 days following the date that the Acquiring Person became such (the “Section 11(a)(ii) Trigger Date”), then the Company shall be obligated to deliver, to the extent permitted by applicable law and any material agreements then in effect to which the Company is a party, upon the surrender for exercise of a Right and without requiring payment of the Purchase Price, shares of Common Stock (to the extent available), and then, if necessary, such number or fractions of shares of Preferred Stock (to the extent available) and then, if necessary, cash, which shares and/or cash have an aggregate value equal to the Spread. If within the 30 day period referred to above the Board of Directors shall determine in good faith that it is likely that sufficient additional shares of Common Stock could be authorized for issuance upon exercise in full of the Rights, then, if the Board of Directors so elects, such 30 day period may be extended to the extent necessary, but not more than 90 days after the Section 11(a)(ii) Trigger Date, in order that the Company may seek stockholder approval for the authorization of such additional shares (such 30 day period, as it may be extended, is hereinafter called the “Substitution Period”). To the extent that the Company determines that some action need be taken pursuant to the second and/or third sentence of this Section 11(a)(iii), the Company (x) shall provide, subject to Section 11(a)(ii) hereof and the Excess Securitieslast sentence of this Section 11(a)(iii) hereof, that such action shall apply uniformly to all outstanding Rights and (y) may suspend the exercisability of the Rights until the expiration of the Substitution Period in order to seek any authorization of additional shares and/or to decide the appropriate form of distribution to be made pursuant to such second sentence and to determine the value thereof. In the event of any such suspension, the Company shall issue a public announcement stating that the exercisability of the Rights has been temporarily suspended, as well as a public announcement at such time as the suspension is no longer in effect. For purposes of this Section 11(a)(iii), the per share value of the shares of Common Stock shall be the current per share market price (as determined pursuant to Section 11(d)(i)) on the Section 11(a)(ii) Trigger Date and the per share or fractional value of any Common Stock Equivalent shall be deemed to remainequal the current per share market price of the Common Stock on such date. The Board of
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CNO Financial Group, Inc. 2021 Proxy Statement
Directors of the Company may, but shall not be required to, establish procedures to allocate the right to receive shares of Common Stock upon the exercise of the Rights among the holders of Rights pursuant to this Section 11(a)(iii).
(b) In case the Company shall fix a record date for the issuance of rights, options or warrants to all holders of Preferred Stock entitling them (for a period expiring within 45 calendar days after such record date) to subscribe for or purchase Preferred Stock (or shares having similar rights, privileges and preferences as the Preferred Stock (“Equivalent Preferred Shares”)) or securities convertible into Preferred Stock or Equivalent Preferred Shares at a price per share of Preferred Stock or Equivalent Preferred Shares (or having a conversion price per share, if a security convertible into shares of Preferred Stock or Equivalent Preferred Shares) less than the then-current per share market price of the Preferred Stock (determined pursuant to Section 11(d) hereof) on such record date, the Purchase Price to be in effect after such record date shall be determined by multiplying the Purchase Price in effect immediately prior to such record date by a fraction, the numerator of which shall be the number of shares of Preferred Stock and Equivalent Preferred Shares outstanding on such record date plus the number of shares of Preferred Stock and Equivalent Preferred Shares which the aggregate offering price of the total number of such shares so to be offered (and/or the aggregate initial conversion price of the convertible securities so to be offered) would purchase at such current market price, and the denominator of which shall be the number of shares of Preferred Stock and Equivalent Preferred Shares outstanding on such record date plus the number of additional shares of Preferred Stock and/or Equivalent Preferred Shares to be offered for subscription or purchase (or into which the convertible securities so to be offered are initially convertible); provided, however, that in no event shall the consideration to be paid upon the exercise of one Right be less than the aggregate par value of the shares of capital stock of the Company issuable upon exercise of one Right. In case such subscription price may be paid in a consideration part or all of which shall be in a form other than cash, the value of such consideration shall be as determined in good faith by the Board of Directors of the Company, whose determination shall be described in a statement filed with the transferorRights Agent and which shall be binding on the Rights Agent. Shares of Preferred Stock and Equivalent Preferred Shares owned by or held for the account of the Company shall not be deemed outstanding for the purpose of any such computation. Such adjustment shall be made successively whenever such a record date is fixed; and in the event that such rights, options or warrants are not so issued, the Purchase Price shall be adjusted to be the Purchase Price which would then be in effect if such record date had not been fixed.
(c) In case the Company shall fix a record date for the making of a distribution to all holders of the Preferred Stock (including any such distribution made in connection with a consolidation or merger in which the Company is the continuing or surviving corporation) of evidences of indebtedness or assets (other than a regular quarterly cash dividend or a dividend payable in Preferred Stock) or subscription rights or warrants (excluding those referred to in Section 11(b) hereof), the Purchase Price to be in effect after such record date shall be determined by multiplying the Purchase Price in effect immediately prior to such record date by a fraction, the numerator of which shall be the then-current per share market price of the Preferred Stock (determined pursuant to Section 11(d) hereof) on such record date, less the fair market value (as determined in good faith by the Board of Directors of the Company whose determination shall be described in a statement filed with the Rights Agent and shall be binding on the Rights Agent) of the portion of such assets or evidences of indebtedness so to be distributed or of such subscription rights or warrants applicable to one share of Preferred Stock, and the denominator of which shall be such current per share market price of the Preferred Stock (determined pursuant to Section 11(d) hereof); provided, however, that in no event shall the consideration to be paid upon the exercise of one Right be less than the aggregate par value of the shares of capital stock of the Company to be issued upon exercise of one Right. Such adjustments shall be made successively whenever such a record date is fixed; and in the event that such distribution is not so made, the Purchase Price shall again be adjusted to be the Purchase Price that would then be in effect if such record date had not been fixed.
(d)(i) Except as otherwise provided herein, for the purpose of any computation hereunder, the “current per share market price” of any security (a “Security” for the purpose of this Section 11(d)(i)) on any date shall be deemed to be the average of the daily closing prices per share of such Security for the 30 consecutive Trading Days (as such term is hereinafter defined) immediately prior to such date; provided, however, that in the event that the current per share market price of the Security is determined during a period following the announcement by the issuer of such Security of (A) a dividend or distribution on such Security payable in shares of such Security or securities convertible into such shares, or (B) any subdivision, combination or reclassification of such Security, and prior to the expiration of 30 Trading Days after the ex-dividend date for such dividend or distribution, or the record date for such subdivision, combination or reclassification, then, and in each such case, the current per share market price shall be appropriately adjusted to reflect the current market price per share equivalent of such Security. The closing price for each day shall be the last sale price, regular way, or, in case no such sale takes place on such day,
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the average of the closing bid and asked prices, regular way, in either case as reported by (w) the principal consolidated transaction reporting system with respect to securities listed or admitted to trading on the NYSE or, (x) if the Security is not listed or admitted to trading on the NYSE, as reported in the principal consolidated transaction reporting system with respect to securities listed on the principal national securities exchange on which the Security is listed or admitted to trading or, (y) if the Security is not listed or admitted to trading on any national securities exchange, the last quoted price or, if not so quoted, the average of the high bid and low asked prices in the over-the-counter market, as reported by the system then in use, or, (z) if on any such date the Security is not so quoted or reported, the average of the closing bid and asked prices as furnished by a professional market maker making a market in the Security selected by the Board of Directors of the Company. The term “Trading Day” shall mean a day on which the principal national securities exchange on which the Security is listed or admitted to trading is open for the transaction of business or, if the Security is not listed or admitted to trading on any national securities exchange, a Business Day.
(ii) For the purpose of any computation hereunder, if the Preferred Stock is publicly traded, the “current per share market price” of the Preferred Stock shall be determined in accordance with the method set forth in Section 11(d)(i). If the Preferred Stock is not publicly traded but the Common Stock is publicly traded, the “current per share market price” of the Preferred Stock shall be conclusively deemed to be the current per share market price of the Common Stock, as determined pursuant to Section 11(d)(i), multiplied by one thousand (appropriately adjusted to reflect any stock split, stock dividend or similar transaction occurring after November 13, 2020). If neither the Common Stock nor the Preferred Stock is publicly traded, “current per share market price” shall mean the fair value per share as determined in good faith by the Board of Directors of the Company, whose determination shall be described in a statement filed with the Rights Agent and shall be binding on the Rights Agent.
(e) No adjustment in the Purchase Price shall be required unless such adjustment would require an increase or decrease of at least 1% in the Purchase Price; provided, however, that any adjustments which by reason of this Section 11(e) are not required to be made shall be carried forward and taken into account in any subsequent adjustment. All calculations under this Section 11 shall be made to the nearest cent or to the nearest one ten-thousandth of a share of Preferred Stock or share of Common Stock or other share or security as the case may be. Notwithstanding the first sentence of this Section 11(e), any adjustment required by this Section 11 shall be made no later than the earlier of (i) three years from the date of the transaction which requires such adjustment or (ii) the Expiration Date. If as a result of an adjustment made pursuant to Section 11(a) hereof, the holder of any Right thereafter exercised shall become entitled to receive any shares of capital stock of the Company other than the Preferred Stock, thereafter the Purchase Price and the number of such other shares so receivable upon exercise of a Right shall be subject to adjustment from time to time in a manner and on terms as nearly equivalent as practicable to the provisions with respect to the Preferred Stock contained in Sections 11(a), 11(b), 11(c), 11(e), 11(h), 11(i) and 11(m) hereof, as applicable, and the provisions of Sections 7, 9, 10, 13 and 14 hereof with respect to the Preferred Stock shall apply on like terms to any such other shares.
(f) All Rights originally issued by the Company subsequent to any adjustment made to the Purchase Price hereunder shall evidence the right to purchase, at the adjusted Purchase Price, the number of one one-thousandths of a share of Preferred Stock purchasable from time to time hereunder upon exercise of the Rights, all subject to further adjustment as provided herein.
(g) Unless the Company shall have exercised its election as provided in Section 11(i), upon each adjustment of the Purchase Price as a result of the calculations made in Sections 11(b) and 11(c), each Right outstanding immediately prior to the making of such adjustment shall thereafter evidence the right to purchase, at the adjusted Purchase Price, that number of one one-thousandths of a share of Preferred Stock (calculated to the nearest ten-thousandth of a share of Preferred Stock) obtained by (i) multiplying (x) the number of one one-thousandths of a share of Preferred Stock purchasable upon the exercise of a Right immediately prior to such adjustment by (y) the Purchase Price in effect immediately prior to such adjustment of the Purchase Price and (ii) dividing the product so obtained by the Purchase Price in effect immediately after such adjustment of the Purchase Price.
(h) The Company may elect on or after the date of any adjustment of the Purchase Price or any adjustment to the number of shares of Preferred Stock for which a Right may be exercised made pursuant to Sections 11(a)(i), 11(b) or 11(c) hereof to adjust the number of Rights, in substitution for any adjustment in the number of one one-thousandths of a share of Preferred Stock purchasable upon the exercise of a Right. Each of the Rights outstanding after such adjustment of the number of Rights shall be exercisable for the number of one one-thousandths of a share of Preferred Stock for which a Right was exercisable immediately prior to such adjustment. Each Right held of record prior to such adjustment of the number of Rights shall become that number of Rights (calculated to the
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nearest ten-thousandth) obtained by dividing the Purchase Price in effect immediately prior to adjustment of the Purchase Price by the Purchase Price in effect immediately after adjustment of the Purchase Price. The Company shall make a public announcement of its election to adjust the number of Rights, indicating the record date for the adjustment, and, if known at the time, the amount of the adjustment to be made. Such record date may be the date on which the Purchase Price is adjusted or any day thereafter, but, if the Right Certificates have been issued, shall be at least 10 days later than the date of the public announcement. If Right Certificates have been issued, upon each adjustment of the number of Rights pursuant to this Section 11(i), the Company may, as promptly as practicable, cause to be distributed to holders of record of Right Certificates on such record date Right Certificates evidencing, subject to Section 14 hereof, the additional Rights to which such holders shall be entitled as a result of such adjustment, or, at the option of the Company, shall cause to be distributed to such holders of record in substitution and replacement for the Right Certificates held by such holders prior to the date of adjustment, and upon surrender thereof, if required by the Company, new Right Certificates evidencing all the Rights to which such holders shall be entitled as a result of such adjustment. Right Certificates so to be distributed shall be issued, executed and countersigned in the manner provided for herein and shall be registered in the names of the holders of record of Right Certificates on the record date specified in the public announcement.
(i) Irrespective of any adjustment or change in the Purchase Price or the number of one one-thousandths of a share of Preferred Stock issuable upon the exercise of the Rights, the Right Certificates theretofore and thereafter issued may continue to express the Purchase Price and the number of one one-thousandths of a share of Preferred Stock which were expressed in the initial Right Certificates issued hereunder.
(j) Before taking any action that would cause an adjustment reducing the Purchase Price below the then par value, if any, of the shares of Preferred Stock or other shares of capital stock issuable upon exercise of the Rights, the Company shall take any corporate action which may, in the opinion of its counsel, be necessary in order that the Company may validly and legally issue fully paid and nonassessable shares of Preferred Stock or other such shares at such adjusted Purchase Price.
(k) In any case in which this Section 11 shall require that an adjustment in the Purchase Price be made effective as of a record date for a specified event, the Company may elect to defer until the occurrence of such event the issuing to the holder of any Right exercised after such record date the Preferred Stock, Common Stock or other capital stock or securities of the Company, if any, issuable upon such exercise over and above the Preferred Stock, Common Stock or other capital stock or securities of the Company, if any, issuable upon such exercise on the basis of the Purchase Price in effect prior to such adjustment; provided, however, that the Company shall deliver to such holder a due bill or other appropriate instrument evidencing such holder’s right to receive such additional shares upon the occurrence of the event requiring such adjustment.
(l) Notwithstanding anything in this Section 11 to the contrary, the Company shall be entitled to make such adjustments in the Purchase Price, in addition to those adjustments expressly required by this Section 11, as and to the extent that the Board of Directors in its sole discretion shall determine to be advisable in order that any consolidation or subdivision of the Preferred Stock, issuance (wholly for cash) of any shares of Preferred Stock at less than the current market price, issuance (wholly for cash) of Preferred Stock or securities which by their terms are convertible into or exchangeable for Preferred Stock, dividends on Preferred Stock payable in shares of Preferred Stock or issuance of rights, options or warrants referred to hereinabove in Section 11(b), hereafter made by the Company to holders of its Preferred Stock shall not be taxable to such stockholders.
(m) Notwithstanding anything in this Rights Agreement to the contrary, in the event that at any time after the date of this Rights Agreement and prior to the Distribution Date, the Company shall (i) declare and pay any dividend on the Common Stock payable in Common Stock, or (ii) effect a subdivision, combination or consolidation of the Common Stock (by reclassification or otherwise than by payment of a dividend payable in Common Stock) into a greater or lesser number of shares of Common Stock, then in each such case, the number of Rights associated with each share of Common Stock then outstanding, or issued or delivered thereafter, shall be proportionately adjusted so that the number of Rights thereafter associated with each share of Common Stock following any such event shall equal the result obtained by multiplying the number of Rights associated with each share of Common Stock immediately prior to such event by a fraction the numerator of which shall be the total number of shares of Common Stock outstanding immediately prior to the occurrence of the event and the denominator of which shall be the total number of shares of Common Stock outstanding immediately following the occurrence of such event.
(n) The Company agrees that, after the earlier of the Distribution Date or the Stock Acquisition Date, it will not, except as permitted by Sections 23, 24 or 27 hereof, take (or permit any Subsidiary to take) any action if at the time such action is taken it is reasonably foreseeable that such action will diminish substantially or eliminate the benefits intended to be afforded by the Rights.
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Section 12. Certificate of Adjusted Purchase Price or Number of Shares. Whenever an adjustment is made as provided in Section 11 or 13 hereof, the Company shall promptly (a) prepare a certificate setting forth such adjustment, and a brief statement of the facts accounting for such adjustment, (b) file with the Rights Agent and with each transfer agent for the Common Stock and the Preferred Stock a copy of such certificate and (c) mail a brief summary thereof to each holder of a Right Certificate (or if prior to the Distribution Date, to each holder of a certificate representing shares of Common Stock) in accordance with Section 26 hereof (if so required under Section 25 hereof). Notwithstanding the foregoing sentence, the failure of the Company to give such notice shall not affect the validity of or the force or effect of or the requirement for such adjustment. The Rights Agent shall be fully protected in relying on any such certificate and on any adjustment therein contained and shall not be deemed to have knowledge of any such adjustment unless and until it shall have received such certificate. Any adjustment to be made pursuant to Sections 11 or 13 hereof shall be effective as of the Excess Securities are transferreddate of the event giving rise to such adjustment.
Section 13. Consolidation, Merger or Sale or Transfer of Assets or Earning Power. (a) In the event, directly or indirectly, at any time after any Person has become an Acquiring Person, (i) the Company shall merge with and into any other Person (other than one or more of its wholly-owned Subsidiaries), (ii) any Person (other than one or more of its wholly-owned Subsidiaries) shall consolidate with the Company, or any Person (other than one or more of its wholly-owned Subsidiaries) shall merge with and into the Company and the Company shall be the continuing or surviving corporation of such merger and, in connection with such merger, all or part of the Common Stock shall be changed into or exchanged for stock or other securities of any other Person (or of the Company) or cash or any other property, or (iii) the Company shall sell or otherwise transfer (or one or more of its Subsidiaries shall sell or otherwise transfer), in one or more transactions, assets or earning power aggregating to 50% or more of the assets or earning power of the Company and its Subsidiaries (taken as a whole) to any other Person (other than the Company or one or more of its wholly-owned Subsidiaries), then, and in each such case, proper provision shall be made so that:
(A) each holder of record of a Right (other than Rights which have become void pursuant to Section 11(a)(ii)) shall thereafter have the right to receive, upon the exercise thereof at a price equal to the Agentthen-current Purchase Price multiplied by the number of one one-thousandths of a share of Preferred Stock for which a Right was exercisable (whether or not such Right was then exercisable) immediately prior to the time that any Person first became an Acquiring Person (each as subsequently adjusted thereafter pursuant to Section 5Sections 11(a)(i), 11(b), 11(c), 11(f), 11(h), 11(i) and 11(m)), in accordance with the terms of this ARTICLE FIFTEENRights Agreement and in lieu of Preferred Stock, such number of validly issued, fully paid and non-assessable and freely tradeable shares of Common Stock of the Principal Party (as defined below) not subject to any liens, encumbrances, rights of first refusal or untilother adverse claims, as shall be equal to the result obtained by (1) multiplying the then-current Purchase Price by the number of one one-thousandths of a share of Preferred Stock for which a Right was exercisable immediately prior to the time that any Person first became an approvalAcquiring Person (as subsequently adjusted thereafter pursuant to Sections 11(a)(i), 11(b), 11(c), 11(f), 11(h), 11(i) and 11(m)) and (2) dividing that product by 50% of the then-current per share market price of the Common Stock of such Principal Party (determined pursuant to Section 11(d)(i) hereof) on the date of consummation of such consolidation, merger, sale or transfer; provided, that the Purchase Price and the number of shares of Common Stock of such Principal Party issuable upon exercise of each Right shall be further adjusted as provided in Section 11(f) of this Rights Agreement to reflect any events occurring in respect of such Principal Party after the date of such consolidation, merger, sale or transfer;
(B) such Principal Party shall thereafter be liable for, and shall assume, by virtue of such consolidation, merger, sale or transfer, all the obligations and duties of the Company pursuant to this Rights Agreement;
(C) the term “Company” as used herein shall thereafter be deemed to refer to such Principal Party; and
(D) such Principal Party shall take such steps (including, but not limited to, the reservation of a sufficient number of its shares of its Common Stock) in connection with such consummation of any such transaction as may be necessary to assure that the provisions hereof shall thereafter be applicable, as nearly as reasonably may be, in relation to the shares of its Common Stock thereafter deliverable upon the exercise of the Rights; provided, that upon the subsequent occurrence of any consolidation, merger, sale or transfer of assets or other extraordinary transaction in respect of such Principal Party, each holder of a Right shall thereupon be entitled to receive, upon exercise of a Right and payment of the Purchase Price as provided in this Section 13(a), such cash, shares, rights, warrants and other property which such holder would have been entitled to receive had such holder, at the time of such transaction, owned the Common Stock of the Principal Party receivable upon the exercise of a Right pursuant to this Section 13(a), and such Principal Party shall take such steps (including,
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but not limited to, reservation of shares of stock) as may be necessary to permit the subsequent exercise of the Rights in accordance with the terms hereof for such cash, shares, rights, warrants and other property.
(b) “Princi pal Party” shall mean:
(i) in the case of any transaction described in clauses (i) or (ii) of the first sentence of Section 13(a) hereof: (A) the Person that is obtainedthe issuer of the securities into which the shares of Common Stock are converted in such merger or consolidation, or, if there is more than one such issuer, the issuer of the shares of Common Stock of which have the greatest aggregate market value of shares outstanding, or (B) if no securities are so issued, (x) the Person that is the other party to the merger, if such Person survives said merger, or, if there is more than one such Person, the Person the shares of Common Stock of which have the greatest aggregate market value of shares outstanding or (y) if the Person that is the other party to the merger does not survive the merger, the Person that does survive the merger (including the Company if it survives) or (z) the Person resulting from the consolidation; and
(ii) in the case of any transaction described in clause (iii) of the first sentence in Section 13(a) hereof, the Person that is the party receiving the greatest portion of the assets or earning power transferred pursuant to such transaction or transactions, or, if each Person that is a party to such transaction or transactions receives the same portion of the assets or earning power so transferred or if the Person receiving the greatest portion of the assets or earning power cannot be determined, whichever of such Persons is the issuer of Common Stock having the greatest aggregate market value of shares outstanding;
provided, however, that in any such case described in the foregoing clause (b)(i) or (b)(ii), if the Common Stock of such Person is not at such time or has not been continuously over the preceding 12-month period registered under Section 312 of the Exchange Act, then (1) if such Person is a direct or indirect Subsidiary of another Person the Common Stock of which is and has been so registered, the term “Principal Party” shall refer to such other Person, or (2) if such Person is a Subsidiary, directly or indirectly, of more than one Person, and the Common Stock of all of such Persons have been so registered, the term “Principal Party” shall refer to whichever of such Persons is the issuer of Common Stock having the greatest aggregate market value of shares outstanding, or (3) if such Person is owned, directly or indirectly, by a joint venture formed by two or more Persons that are not owned, directly or indirectly, by the same Person, the rules set forth in clauses (1) and (2) above shall apply to each of the owners having an interest in the venture as if the Person owned by the joint venture was a Subsidiary of both or all of such joint venturers, and the Principal Party in each such case shall bear the obligations set forth in this Section 13 in the same ratio as its interest in such Person bears to the total of such interests.
(c) The Company shall not consummate any consolidation, merger, sale or transfer referred to in Section 13(a) hereof unless prior thereto the Company and the Principal Party involved therein shall have executed and delivered to the Rights Agent an agreement confirming that the requirements of Sections 13(a) and (b) hereof shall promptly be performed in accordance with their terms and that such consolidation, merger, sale or transfer of assets shall not result in a default by the Principal Party under this Rights Agreement as the same shall have been assumed by the Principal Party pursuant to Sections 13(a) and (b) hereof and providing that, as soon as practicable after executing such agreement pursuant to this Section 13, the Principal Party will:
(i) prepare and file a registration statement under the Securities Act, if necessary, with respect to the Rights and the securities purchasable upon exercise of the Rights on an appropriate form, use its best efforts to cause such registration statement to become effective as soon as practicable after such filing and use its best efforts to cause such registration statement to remain effective (with a prospectus at all times meeting the requirements of the Securities Act) until the Expiration Date, and similarly comply with applicable state securities laws;
(ii) use its best efforts, if the Common Stock of the Principal Party shall be listed or admitted to trading on the NYSE or on another national securities exchange, to list or admit to trading (or continue the listing of) the Rights and the securities purchasable upon exercise of the Rights on the NYSE or such securities exchange, or, if the Common Stock of the Principal Party shall not be listed or admitted to trading on the NYSE or a national securities exchange, to cause the Rights and the securities receivable upon exercise of the Rights to be reported by such other system then in use;
(iii) deliver to holders of the Rights historical financial statements for the Principal Party which comply in all respects with the requirements for registration on Form 10 (or any successor form) under the Exchange Act; and
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(iv) obtain waivers of any rights of first refusal or preemptive rights in respect of the Common Stock of the Principal Party subject to purchase upon exercise of outstanding Rights.
In the event that any of the transactions described in Section 13(a) hereof shall occur at any time after the occurrence of a transaction described in Section 11(a)(ii) hereof, the Rights which have not theretofore been exercised shall thereafter be exercisable in the manner described in Section 13(a).
(d) In case the Principal Party has a provision in any of its authorized securities or in its certificate of incorporation or by-laws or other instrument governing its affairs, which provision would have the effect of (i) causing such Principal Party to issue (other than to holders of Rights pursuant to this Section 13), in connection with, or as a consequence of, the consummation of a transaction referred to in this Section 13, shares of Common Stock or Common Stock Equivalents of such Principal Party at less than the then-current market price per share thereof (determined pursuant to Section 11(d) hereof) or securities exercisable for, or convertible into, Common Stock or Common Stock Equivalents of such Principal Party at less than such then-current market price, or (ii) providing for any special payment, tax or similar provision in connection with the issuance of the Common Stock of such Principal Party pursuant to the provisions of Section 13, then, in such event, the Company hereby agrees with each holder of Rights that it shall not consummate any such transaction unless prior thereto the Company and such Principal Party shall have executed and delivered to the Rights Agent a supplemental agreement providing that the provision in question of such Principal Party shall have been canceled, waived or amended, or that the authorized securities shall be redeemed, so that the applicable provision will have no effect in connection with, or as a consequence of, the consummation of the proposed transaction.
(e) The Company covenants and agrees that it shall not, at any time after a Person first becomes an Acquiring Person, enter into any transaction of the type contemplated by Sections 13(a)(i)-(iii) hereof if (x) at the time of or immediately after such consolidation, merger, sale, transfer or other transaction there are any rights, warrants or other instruments or securities outstanding or agreements in effect which would substantially diminish or otherwise eliminate the benefits intended to be afforded by the Rights, (y) prior to, simultaneously with or immediately after such consolidation, merger, sale, transfer or other transaction, the stockholders of the Person who constitutes, or would constitute, the Principal Party for purposes of Section 13(b) hereof shall have received a distribution of Rights previously owned by such Person or any of its Affiliates or Associates or (z) the form or nature of organization of the Principal Party would preclude or limit the exercisability of the Rights.
Section 14. Fractional Rights and Fractional Shares. (a) The Company shall not be required to issue fractions of Rights (except prior to the Distribution Date in accordance with Section 11(n) hereof) or to distribute Right Certificates which evidence fractional Rights. In lieu of such fractional Rights, there shall be paid to the registered holders of the Right Certificates with regard to which such fractional Rights would otherwise be issuable, an amount in cash equal to the same fraction of the current market value of a whole Right. For the purposes of this ARTICLE FIFTEEN. AfterSection 14(a), the Excess
Tablecurrent market value of Contents
Securitiesa whole Right shall be the closing price of the Rights for the Trading Day immediately prior to the date on which such fractional Rights would have been acquiredotherwise issuable. The closing price for any day shall be the last sale price, regular way, or, in case no such sale takes place on such day, the average of the closing bid and asked prices, regular way, in either case as reported by (w) the principal consolidated transaction reporting system with respect to securities listed or admitted to trading on the NYSE or, (x) if the Rights are not listed or admitted to trading on the NYSE, as reported in the principal consolidated transaction reporting system with respect to securities listed on the principal national securities exchange on which the Rights are listed or admitted to trading or, (y) if the Rights are not listed or admitted to trading on any national securities exchange, the last quoted price or, if not so quoted, the average of the high bid and low asked prices in the over-the-counter market, as reported by such system then in use or, (z) if on any such date the Rights are not so quoted or reported, the average of the closing bid and asked prices as furnished by a Transferprofessional market maker making a market in the Rights selected by the Board of Directors of the Company. If on any such date no such market maker is making a market in the Rights, the fair value of the Rights on such date as determined in good faith by the Board of Directors of the Company shall be used.
(b) The Company shall not be required to issue fractions of shares of Preferred Stock (other than fractions which are integral multiples of one one-thousandth of a share of Preferred Stock) upon exercise of the Rights or to distribute certificates which evidence fractional shares of Preferred Stock (other than fractions which are integral multiples of one one-thousandth of a share of Preferred Stock). Interests in fractions of Preferred Stock in integral multiples of one one-thousandth of a share of Preferred Stock may, at the election of the Company, be evidenced by depositary receipts, pursuant to an appropriate agreement between the Company and a depositary selected by it; provided, that such agreement shall provide that the holders of such depositary receipts shall have all the rights, privileges and preferences to which they are entitled as beneficial owners (for the purposes of this Section 14(b),
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as such term is defined in Rule 13d-3 or 13d-5 of the General Rules and Regulations under the Exchange Act) of the Preferred Stock represented by such depositary receipts. In lieu of fractional shares of Preferred Stock that are not integral multiples of one one-thousandth of a share of Preferred Stock, the Company shall pay to the registered holders of Right Certificates at the time such Rights are exercised or exchanged as herein provided an amount in cash equal to the same fraction of the current market value of one share of Preferred Stock. For the purposes of this Section 14(b), the current market value of a share of Preferred Stock shall be the closing price of a share of Preferred Stock (as determined pursuant to Section 11(d)(ii) hereof) for the Trading Day immediately prior to the date of such exercise or exchange.
(c) The Company shall not be required to issue fractions of shares of Common Stock or to distribute certificates which evidence fractional shares of Common Stock upon the exercise or exchange of Rights. In lieu of such fractional shares of Common Stock, the Company shall pay to the registered holders of the Right Certificates with regard to which such fractional shares of Common Stock would otherwise be issuable an amount in cash equal to the same fraction of the current market value of a whole share of Common Stock. For purposes of this Section 14(c), the current market value of one share of Common Stock for which a Right is exercisable shall be deemed to be the closing price of one share of Common Stock (as determined in accordance with Section 11(d)(i) hereof), for the Trading Day immediately prior to the date of such exercise or exchange.
(d) The holder of a Right by the acceptance of the Right expressly waives the right to receive any fractional Rights or any fractional shares upon exercise or exchange of a Right (except as provided above).
Section 15. Rights of Action. All rights of action in respect of this Rights Agreement, excepting the rights of action given to the Rights Agent under Section 18 hereof, are vested in the respective registered holders of the Right Certificates (and, prior to the Distribution Date, the registered holders of the Common Stock); and any registered holder of any Right Certificate (or, prior to the Distribution Date, of the Common Stock), without the consent of the Rights Agent or of the holder of any other Right Certificate (or, prior to the Distribution Date, of the Common Stock), on such holder’s own behalf and for such holder’s own benefit, may enforce, and may institute and maintain any suit, action or proceeding against the Company to enforce, or otherwise act in respect of, such holder’s right to exercise the Rights evidenced by such Right Certificate (or, prior to the Distribution Date, such Common Stock) in the manner provided in such Right Certificate and in this Rights Agreement. Without limiting the foregoing or any remedies available to the holders of Rights, it is specifically acknowledged that the holders of Rights would not have an adequate remedy at law for any breach of this Rights Agreement and will be entitled to specific performance of the obligations under, and injunctive relief against actual or threatened violations of the obligations of any Person subject to, this Rights Agreement.
Section 16. Agreement of Right Holders. Every holder of a Right, by accepting the same, consents and agrees with the Company and the Rights Agent and with every other holder of a Right that:
(i) prior to the Distribution Date, the Rights will not be evidenced by a Right Certificate and will be transferable only in connection with the transfer of the Common Stock;
(ii) after the Distribution Date, the Right Certificates are transferable only on the registry books of the Rights Agent if surrendered at the office or agency of the Rights Agent designated for such purpose, duly endorsed or accompanied by a proper instrument of transfer;
(iii) the Company and the Rights Agent may deem and treat the Person in whose name the Right Certificate (or, prior to the Distribution Date, the Common Stock certificate (or Book Entry shares in respect of Common Stock)) is registered as the absolute owner thereof and of the Rights evidenced thereby (notwithstanding any notations of ownership or writing on the Right Certificates or the Common Stock certificate (or notices provided to holders of Book Entry shares of Common Stock) made by anyone other than the Company or the Rights Agent) for all purposes whatsoever, and neither the Company nor the Rights Agent, subject to Section 7(e) hereof, shall be affected by any notice to the contrary; and
(iv) notwithstanding anything in this Rights Agreement to the contrary, neither the Company nor the Rights Agent shall have any liability to any holder of a Right or other Person as a result of its inability to perform any of its obligations under this Rights Agreement by reason of any preliminary or permanent injunction or other order, judgment, decree or ruling (whether interlocutory or final) issued by a court or by a governmental, regulatory, self-regulatory or administrative agency or commission, or any statute, rule, regulation or executive order promulgated or enacted by any governmental authority, prohibiting or otherwise restraining performance of such obligation; provided, however, that the Company must use its reasonable best efforts to have any such injunction, order, judgment, decree or ruling lifted or otherwise overturned as soon as possible.
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Section 17. Right Certificate Holder Not Deemed a Stockholder. No holder, as such, of any Right Certificate shall be entitled to vote, receive dividends or be deemed for any purpose the holder of the Preferred Stock or any other securities of the Company which may at any time be issuable on the exercise or exchange of the Rights represented thereby, nor shall anything contained herein or in any Right Certificate be construed to confer upon the holder of any Right Certificate, as such, any of the rights of a stockholder of the Company or any right to vote for the election of directors or upon any matter submitted to stockholders at any meeting thereof, or to give or withhold consent to any corporate action, or to receive notice of meetings or other actions affecting stockholders (except as provided in this Rights Agreement), or to receive dividends or subscription rights, or otherwise, until the Rights evidenced by such Right Certificate shall have been exercised or exchanged in accordance with the provisions hereof.
Section 18. Concerning the Rights Agent. (a) The Company agrees to pay to the Rights Agent reasonable compensation for all services rendered by it hereunder and, from time to time, on demand of the Rights Agent, its reasonable expenses and counsel fees and other disbursements incurred in the administration and execution of this Rights Agreement and the exercise and performance of its duties hereunder. The Company also agrees to indemnify the Rights Agent for, and to hold it harmless against, any loss, liability or expense, incurred without gross negligence, bad faith or willful misconduct on the part of the Rights Agent, for anything done or omitted by the Rights Agent in connection with the acceptance and administration of this Rights Agreement, including the costs and expenses of defending against any claim of liability arising therefrom, directly or indirectly.
(b) The Rights Agent shall be protected and shall incur no liability for, or in respect of any action taken, suffered or omitted by it in connection with, its administration of this Rights Agreement in reliance upon any Right Certificate or certificate representing the Preferred Stock, the Common Stock or any other securities of the Company, instrument of assignment or transfer, power of attorney, endorsement, affidavit, letter, notice, direction, consent, certificate, statement, or other paper or document reasonably believed by it to be genuine and to be signed, executed and, where necessary, verified or acknowledged, by the proper Person or Persons, or otherwise upon the advice of counsel as set forth in Section 20 hereof.
Section 19. Merger or Consolidation or Change of Name of Rights Agent. (a) Any corporation or entity into which the Rights Agent or any successor Rights Agent may be merged or with which it may be consolidated, or any corporation or entity resulting from any merger or consolidation to which the Rights Agent or any successor Rights Agent shall be a party, or any corporation or entity succeeding to the stock transfer or corporate trust powers of the Rights Agent or any successor Rights Agent, shall be the successor to the Rights Agent under this Rights Agreement without the execution or filing of any paper or any further act on the part of any of the parties hereto; provided, that such corporation or entity would be eligible for appointment as a successor Rights Agent under the provisions of Section 21 hereof. In case at the time such successor Rights Agent shall succeed to the agency created by this Rights Agreement, any of the Right Certificates shall have been countersigned but not delivered, any such successor Rights Agent may adopt the countersignature of the predecessor Rights Agent and deliver such Right Certificates so countersigned; and in case at that time any of the Right Certificates shall not have been countersigned, any successor Rights Agent may countersign such Right Certificates either in the name of the predecessor Rights Agent or in the name of such successor Rights Agent; and in all such cases such Right Certificates shall have the full force provided in the Right Certificates and in this Rights Agreement.
(b) In case at any time the name of the Rights Agent shall be changed and at such time any of the Right Certificates shall have been countersigned but not delivered the Rights Agent may adopt the countersignature under its prior name and deliver Right Certificates so countersigned; and in case at that time any of the Right Certificates shall not have been countersigned, the Rights Agent may countersign such Right Certificates either in its prior name or in its changed name and in all such cases such Right Certificates shall have the full force provided in the Right Certificates and in this Rights Agreement.
Section 20. Duties of Rights Agent. The Rights Agent undertakes the duties and obligations imposed by this Rights Agreement upon the following terms and conditions, by all of which the Company and the holders of Right Certificates, by their acceptance thereof, shall be bound:
(a) The Rights Agent may consult with legal counsel (who may be legal counsel for the Company), and the opinion of such counsel shall be full and complete authorization and protection to the Rights Agent as to any action taken or omitted by it in good faith and in accordance with such opinion.
(b) Whenever in the performance of its duties under this Rights Agreement the Rights Agent shall deem it necessary or desirable that any fact or matter be proved or established by the Company prior to taking or suffering any action hereunder, such fact or matter (unless other evidence in respect thereof be herein specifically prescribed) may be deemed to be conclusively proved and established by a certificate signed by any one of the Chief
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Executive Officer, President, any Vice President, the Treasurer or the Secretary of the Company (each, an “Authorized Officer”) and delivered to the Rights Agent; and such certificate shall be full authorization to the Rights Agent for any action taken or suffered in good faith by it under the provisions of this Rights Agreement in reliance upon such certificate.
(c) The Rights Agent shall be liable hereunder to the Company and any other Person only for its own gross negligence, bad faith or willful misconduct.
(d) The Rights Agent shall not be liable for or by reason of any of the statements of fact or recitals contained in this Rights Agreement or in the Right Certificates (except its countersignature thereof) or be required to verify the same, but all such statements and recitals are and shall be deemed to have been made by the Company only.
(e) The Rights Agent shall not be under any responsibility in respect of the validity of this Rights Agreement or the execution and delivery hereof (except the due execution hereof by the Rights Agent) or in respect of the validity or execution of any Right Certificate (except its countersignature thereof); nor shall it be responsible for any breach by the Company of any covenant or condition contained in this Rights Agreement or in any Right Certificate; nor shall it be responsible for any change in the exercisability of the Rights (including the Rights becoming void pursuant to Section 11(a)(ii) hereof) or any adjustment in the terms of the Rights (including the manner, method or amount thereof) provided for in Sections 3, 11, 13, 23 and 24, or the ascertaining of the existence of facts that would require any such change or adjustment (except with respect to the exercise of Rights evidenced by Right Certificates after receipt of a certificate furnished pursuant to Section 12, describing such change or adjustment); nor shall it by any act hereunder be deemed to make any representation or warranty as to the authorization or reservation of any shares of Preferred Stock or other securities to be issued pursuant to this Rights Agreement or any Right Certificate or as to whether any shares of Preferred Stock or other securities will, when issued, be validly authorized and issued, fully paid and nonassessable.
(f) The Company agrees that it will perform, execute, acknowledge and deliver or cause to be performed, executed, acknowledged and delivered all such further and other acts, instruments and assurances as may reasonably be required by the Rights Agent for the carrying out or performing by the Rights Agent of the provisions of this Rights Agreement.
(g) The Rights Agent is hereby authorized and directed to accept instructions with respect to the performance of its duties hereunder from any person reasonably believed by the Rights Agent to be one of the Authorized Officers, and to apply to such Authorized Officers for advice or instructions in connection with its duties, and it shall not be liable for any action taken or suffered by it in good faith in accordance with instructions of any such Authorized Officer or for any delay in acting while waiting for those instructions. Any application by the Rights Agent for written instructions from the Company may, at the option of the Rights Agent, set forth in writing any action proposed to be taken or omitted by the Rights Agent under this Rights Agreement and the date on and/or after which such action shall be taken or such omission shall be effective. The Rights Agent shall not be liable for any action taken by, or omission of, the Rights Agent in accordance with a proposal included in any such application on or after the date specified in such application (which date shall not be less than five Business Days after the date any Authorized Officer of the Company actually receives such application, unless any such Authorized Officer shall have consented in writing to an earlier date) unless, prior to taking any such action (or the effective date in the case of an omission), the Rights Agent shall have received written instructions in response to such application specifying the action to be taken or omitted.
(h) The Rights Agent and any stockholder, director, officer or employee of the Rights Agent may buy, sell or deal in any of the Rights or other securities of the Company or become pecuniarily interested in any transaction in which the Company may be interested, or contract with or lend money to the Company or otherwise act as fully and freely as though it were not Rights Agent under this Rights Agreement. Nothing herein shall preclude the Rights Agent from acting in any other capacity for the Company or for any other legal entity.
(i) The Rights Agent may execute and exercise any of the rights or powers hereby vested in it or perform any duty hereunder either itself or by or through its attorneys or agents, and the Rights Agent shall not be answerable or accountable for any act, default, neglect or misconduct of any such attorneys or agents or for any loss to the Company resulting from any such act, default, neglect or misconduct, provided, that reasonable care was exercised in the selection and continued employment thereof.
(j) If, with respect to any Right Certificate surrendered to the Rights Agent for exercise or transfer, the certificate contained in the form of assignment or the form of election to purchase set forth on the reverse thereof, as the case may be, has not been completed to certify the holder is not an Acquiring Person (or an Affiliate or
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Associate thereof) or a Prohibited Transfer,transferee thereof, the Corporation SecuritiesRights Agent shall ceasenot take any further action with respect to such requested exercise or transfer without first consulting with the Company.
Section 21. Change of Rights Agent. The Rights Agent or any successor Rights Agent may resign and be Excess Securities. Fordischarged from its duties under this purpose,Rights Agreement upon 30 days’ notice in writing mailed to the Company and, in the event that the Rights Agent or one if its affiliates is not also the transfer agent for the Company, to each transfer agent of the Common Stock or Preferred Stock by registered or certified mail, and, following the Distribution Date, to the holders of the Right Certificates by first-class mail. The Company may remove the Rights Agent or any Transfersuccessor Rights Agent upon 30 days’ notice in writing, mailed to the Rights Agent or successor Rights Agent, as the case may be, and to each transfer agent of Excess Securitiesthe Common Stock or Preferred Stock by registered or certified mail, and, following the Distribution Date, to the holders of the Right Certificates by first-class mail. If the Rights Agent shall resign or be removed or shall otherwise become incapable of acting, the Company shall appoint a successor to the Rights Agent. If the Company shall fail to make such appointment within a period of 30 days after giving notice of such removal or after it has been notified in writing of such resignation or incapacity by the resigning or incapacitated Rights Agent or by the holder of a Right Certificate (who shall, with such notice, submit his, her or its Right Certificate for inspection by the Company), then the registered holder of any Right Certificate may apply to any court of competent jurisdiction for the appointment of a new Rights Agent. Any successor Rights Agent, whether appointed by the Company or by such a court, shall be (A) a corporation or other entity organized and doing business under the laws of the United States or any State thereof, which is authorized under such laws to exercise corporate trust or stock transfer powers and is subject to supervision or examination by federal or state authority and which has at the time of its appointment as Rights Agent a combined capital and surplus of at least $50 million or (B) an affiliate of a corporation or entity described in clause (A) of this sentence. After appointment, the successor Rights Agent shall be vested with the same powers, rights, duties and responsibilities as if it had been originally named as Rights Agent without further act or deed; but the predecessor Rights Agent shall deliver and transfer to the successor Rights Agent any property at the time held by it hereunder, and execute and deliver any further assurance, conveyance, act or deed necessary for the purpose. Not later than the effective date of any such appointment the Company shall file notice thereof in writing with the predecessor Rights Agent and each transfer agent of the Common Stock or Preferred Stock, and, following the Distribution Date, mail a notice thereof in writing to the registered holders of the Right Certificates. Failure to give any notice provided for in this Section 21, however, or any defect therein, shall not affect the legality or validity of the resignation or removal of the Rights Agent or the appointment of the successor Rights Agent, as the case may be.
Section 22. Issuance of New Right Certificates. Notwithstanding any of the provisions of this Rights Agreement or of the Rights to the contrary, the Company may, at its option, issue new Right Certificates evidencing Rights in such forms as may be approved by its Board of Directors to reflect any adjustment or change in the Purchase Price and the number or kind or class of shares or other securities or property purchasable under the Right Certificates made in accordance with the provisions of this Section 4 or Section 5 of this ARTICLE FIFTEEN shall also be a Prohibited Transfer. For the avoidance doubt, all of the Corporation Securities which are the subject of a Prohibited Transfer shall constitute Excess Securities. Section 5. Transfer to Agent.
(a) If the Board of Directors determines that a Transfer of Corporation Securities constitutes a Prohibited Transfer, then, upon written demand by the Corporation sent within thirty (30) days of the date on which the Board of Directors determines that the attempted Transfer would result in Excess Securities, the Purported Transferee shall transfer or cause to be transferred any certificate or other evidence of ownership of the Excess Securities within the Purported Transferee's possession or control, together with any Prohibited Distributions, to an agent designated by the Board of Directors (the "Agent"). The Agent shall thereupon sell to a buyer or buyers, which may include the Corporation, the Excess Securities transferred to it in one or more arm's-length transactions (on the public securities market on which such Excess Securities are traded, if possible, or otherwise privately);provided,however, that any such sale must not constitute a Prohibited Transfer andprovided,further, that the Agent shall effect such sale or sales in an orderly fashion and shall not be required to effect any such sale or sales within any specific time frame if, in the Agent's discretion, such sale or sales would disrupt the market for the Corporation Securities, would otherwise adversely affect the value of the Corporation Securities or would be in violation of applicable securities laws.
(b) If the Purported Transferee has resold the Excess Securities before receiving the Corporation's demand to surrender Excess Securities to the Agent, the Purported Transferee shall be deemed to have sold the Excess Securities for the Agent, and shall be required to transfer to the Agent any Prohibited Distributions and proceeds of such sale, except to the extent that the Corporation grants written permission to the Purported Transferee to retain a portion of such sale proceeds not exceeding the amount that the Purported Transferee would have received from the Agent pursuant to Section 6 of this ARTICLE FIFTEEN if the Agent rather than the Purported Transferee had resold the Excess Securities.
Section 6. Application of Proceeds and Prohibited Distributions. The Agent shall apply any proceeds of a sale by it of Excess Securities and, if the Purported Transferee has previously resold the Excess Securities, any amounts received by it from a Purported Transferee, together, in either case, with any Prohibited Distributions, as follows: (a) first, such amounts shall be paid to the Agent to the extent necessary to cover its costs and expenses incurredRights Agreement. In addition, in connection with its duties hereunder; (b) second, any remaining amounts shall be paidthe issuance or sale of Common Stock following the Distribution Date and prior to the Purported Transferee, up toExpiration Date, the amount paid by the Purported Transferee for the Excess Securities (or the fair market value at the time of the Transfer, in the event the purported Transfer of the Excess Securities was, in whole or in part, a gift, inheritance or similar Transfer) which amount shall be determined at the discretion of the Board of Directors; and (c) third, any remaining amounts shall be paid to one or more organizations qualifying under Section 501(c)(3) of the Code (or any comparable successor provision) selected by the Board of Directors. The Purported Transferee of Excess Securities shall have no claim, cause of action or any other recourse whatsoever against any transferor of Excess Securities. The Purported Transferee's sole rightCompany may with respect to such shares shall be limitedof Common Stock so issued or sold (i) pursuant to the amount payableexercise of stock options, (ii) under any employee plan or arrangement, (iii) upon the exercise, conversion or exchange of securities, notes or debentures issued by the Company or (iv) pursuant to a contractual obligation of the Company, in each case existing prior to the Purported Transferee pursuant to this Section 6. In no event shallDistribution Date, issue Right Certificates representing the proceeds of any sale of Excess Securities pursuant to this Section 6 inure to the benefit of the Corporation or the Agent, except to the extent used to cover costs and expenses incurred by Agent in performing its duties hereunder.
Section 7. Modification of Remedies for Certain Indirect Transfers. In the event of any Transfer which does not involve a transfer of securities of the Corporation within the meaning of Delaware law ("Securities," and individually, a "Security") but which would cause a 4.99% Stockholder to violate a restriction on Transfers provided for in this ARTICLE FIFTEEN, the application of Section 5 and Section 6 of this ARTICLE FIFTEEN shall be modified as described in this Section 7. In such case, no such 4.99% Stockholder shall be required to dispose of any interest that is not a Security, but such 4.99% Stockholder and/or any Person whose ownership of
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Securities is attributed to such 4.99% Stockholder shall be deemed to have disposed of and shall be required to dispose of sufficient Securities (which Securities shall be disposed of in the inverse order in which they were acquired) to cause such 4.99% Stockholder, following such disposition, not to be in violation of this ARTICLE FIFTEEN. Such disposition shall be deemed to occur simultaneously with the Transfer giving rise to the application of this provision, and suchappropriate number of Securities that are deemed to be disposed of shall be considered Excess Securities and shall be disposed of through the Agent as provided in Sections 5 and 6 of this ARTICLE FIFTEEN, except that the maximum aggregate amount payable either to such 4.99% Stockholder, or to such other Person that was the direct holder of such Excess Securities,Rights in connection with such sale shall be the fair market value of such Excess Securities at the time of the purported Transfer. All expenses incurred by the Agent in disposing of such Excess Securities shall be paid out of any amounts due such 4.99% Stockholderissuance or such other Person. The purpose of this sale.
Section 7 is to extend the restrictions in Sections 2 and 5 of this ARTICLE FIFTEEN to situations in which there is a 4.99% Transaction without a direct Transfer of Securities, and this Section 7, along with the other provisions of this ARTICLE FIFTEEN, shall be interpreted to produce the same results, with differences as the context requires, as a direct Transfer of Corporation Securities. Section 8. Legal Proceedings; Prompt Enforcement. If the Purported Transferee fails to surrender the Excess Securities or the proceeds of a sale thereof to the Agent within thirty (30) days from the date on which the Corporation makes a written demand pursuant to Section 5 of this ARTICLE FIFTEEN (whether or not made within the time specified in Section 5 of this ARTICLE FIFTEEN), then the Corporation may take all such actions as it deems appropriate to enforce the provisions hereof, including the institution of legal proceedings to compel the surrender. Nothing in this Section 8 shall (a) be deemed inconsistent with any Transfer of the Excess Securities provided in this ARTICLE FIFTEEN being void23. ab initioRedemption, (b) preclude the Corporation in its discretion from immediately bringing legal proceedings without a prior demand or (c) cause any failure of the Corporation to act within the time periods set forth in Section 5 of this ARTICLE FIFTEEN to constitute a waiver or loss of any right of the Corporation under this ARTICLE FIFTEEN. The Board of Directors may authorize such additional actions as it deems advisable to give effect to the provisions of this ARTICLE FIFTEEN.
Section 9. Liability. To the fullest extent permitted by law, any stockholder subject to the provisions of this ARTICLE FIFTEEN who knowingly violates the provisions of this ARTICLE FIFTEEN and any Persons controlling, controlled by or under common control with such stockholder shall be jointly and severally liable to the Corporation for, and shall indemnify and hold the Corporation harmless against, any and all damages suffered as a result of such violation, including but not limited to damages resulting from a reduction in, or elimination of, the Corporation's ability to utilize its Tax Benefits, and attorneys' and auditors' fees incurred in connection with such violation.
Section 10. Obligation to Provide Information. As a condition to the registration of the Transfer of any Stock, any Person who is a beneficial, legal or record holder of Stock, and any proposed Transferee and any Person controlling, controlled by or under common control with the proposed Transferee, shall provide such information as the Corporation may request from time to time in order to determine compliance with this ARTICLE FIFTEEN or the status of the Tax Benefits of the Corporation.
Section 11. Legends. The Board of Directors may require that any certificates issued by the Corporation evidencing ownership of shares of Stock that are subject to the restrictions on transfer and ownership contained in this ARTICLE FIFTEEN bear the following legend:
"THE AMENDED AND RESTATED CERTIFICATE OF INCORPORATION, AS AMENDED (THE "AMENDED AND RESTATED CERTIFICATE OF INCORPORATION"), OF THE CORPORATION CONTAINS RESTRICTIONS PROHIBITING THE TRANSFER (AS DEFINED IN THE AMENDED AND RESTATED CERTIFICATE OF INCORPORATION) OF STOCK OF THE CORPORATION (INCLUDING THE CREATION OR GRANT OF CERTAIN OPTIONS, RIGHTS AND WARRANTS) WITHOUT THE PRIOR AUTHORIZATION OF THE BOARD OF DIRECTORS OF THE CORPORATION (THE "BOARD OF DIRECTORS") IF SUCH TRANSFER AFFECTS THE PERCENTAGE OF STOCK OF THE CORPORATION (WITHIN THE MEANING OF SECTION 382
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OF THE INTERNAL REVENUE CODE OF 1986, AS AMENDED (THE "CODE") AND THE TREASURY REGULATIONS PROMULGATED THEREUNDER), THAT IS TREATED AS OWNED BY A 4.99% STOCKHOLDER (AS DEFINED IN THE AMENDED AND RESTATED CERTIFICATE OF INCORPORATION). IF THE TRANSFER RESTRICTIONS ARE VIOLATED, THEN THE TRANSFER WILL BE VOIDAB INITIO AND THE PURPORTED TRANSFEREE OF THE STOCK WILL BE REQUIRED TO TRANSFER THE EXCESS SECURITIES (AS DEFINED IN THE AMENDED AND RESTATED CERTIFICATE OF INCORPORATION) TO THE CORPORATION'S AGENT. IN THE EVENT OF A TRANSFER WHICH DOES NOT INVOLVE SECURITIES OF THE CORPORATION WITHIN THE MEANING OF THE GENERAL CORPORATION LAW OF THE STATE OF DELAWARE ("SECURITIES") BUT WHICH WOULD VIOLATE THE TRANSFER RESTRICTIONS, THE PURPORTED TRANSFEREE (OR THE RECORD OWNER) OF THE SECURITIES WILL BE REQUIRED TO TRANSFER SUFFICIENT SECURITIES PURSUANT TO THE TERMS PROVIDED FOR IN THE CORPORATION'S AMENDED AND RESTATED CERTIFICATE OF INCORPORATION TO CAUSE THE 4.99% STOCKHOLDER TO NO LONGER BE IN VIOLATION OF THE TRANSFER RESTRICTIONS. THE CORPORATION WILL FURNISH WITHOUT CHARGE TO THE HOLDER OF RECORD OF THIS CERTIFICATE A COPY OF THE AMENDED AND RESTATED CERTIFICATE OF INCORPORATION, CONTAINING THE ABOVE-REFERENCED TRANSFER RESTRICTIONS, UPON WRITTEN REQUEST TO THE CORPORATION AT ITS PRINCIPAL EXECUTIVE OFFICE."
The Board of Directors may also require that any certificates issued by the Corporation evidencing ownership of shares of Stock that are subject to conditions imposed by the Board of Directors under Section 3 of this ARTICLE FIFTEEN also bear a conspicuous legend referencing the applicable restrictions.
Section 12. Authority of Board of Directors.
(a) The Board of Directors shall haveof the powerCompany may, at its option at any time prior to determinesuch time as any Person first becomes an Acquiring Person, redeem all matters necessary for assessing compliancebut not less than all the then-outstanding Rights at a redemption price of $0.01 per Right, appropriately adjusted to reflect any stock split, stock dividend or similar transaction occurring in respect of the Common Stock of the Company after November 13, 2020 (the redemption price hereinafter referred to as the “
Redemption Price”). The redemption of the Rights may be made effective at such time, on such basis and with this ARTICLE FIFTEEN, including, without limitation, determining (i) the identification of 4.99% Stockholders, (ii) whether a Transfer is a 4.99% Transaction or a Prohibited Transfer, (iii) whether it shall grant a waiver in accordance with Section 3 of this ARTICLE FIFTEEN, (iv) the Percentage Stock Ownership in the Corporation of any 4.99% Stockholder, (v) whether an instrument constitutes a Corporation Security, (vi) the amount (or fair market value) due to a Purported Transferee pursuant to Section 6 of this ARTICLE FIFTEEN, and (vii) any other matters whichsuch conditions as the Board of Directors deems relevant; andin its sole discretion may establish. The Company may, at its option, pay the good faith determinationRedemption Price in cash, shares of Common Stock (based on the current market price of the Common Stock at the time of redemption as determined pursuant to Section 11(d)(i) hereof) or any other form of consideration deemed appropriate by the Board of Directors. (b) Immediately upon the action of the Board of Directors on such matters shall be conclusive and binding for allordering the purposesredemption of the Rights pursuant to paragraph (a) of this ARTICLE FIFTEEN. In addition,Section 23 (or at such later time as the Board of Directors may establish for the effectiveness of such redemption), and without any further action and without any notice, the right to exercise the extent permitted by law, from time to time establish, modify, amend or rescind by-laws, regulationsRights will terminate and proceduresthe only right thereafter of the Corporationholders of Rights shall be to receive the Redemption Price. The Company shall promptly give public notice of any such redemption; provided, however, that the failure to give, or any defect in, any such notice shall not inconsistent withaffect the provisionsvalidity of this ARTICLE FIFTEEN for purposes of determining whether any Transfer of Corporation Securities would jeopardize the Corporation's ability to preserve and use the Tax Benefits and for the orderly application, administration and implementation of this ARTICLE FIFTEEN. (b) Nothing contained in this ARTICLE FIFTEEN shall limit the authoritysuch redemption. Within 10 days after such action of the Board of
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Directors to take such other action toordering the extent permitted by law as it deems necessary or advisable to protect the Corporation and its stockholders in preserving the Tax Benefits;provided that the Board of Directors shall not extend the Expiration Date. Without limiting the generalityredemption of the foregoing, in the event of a change in law making one or more of the following actions necessary or desirable,Rights (or such later time as the Board of Directors may by adoptingestablish for the effectiveness of such redemption), the Company shall mail a written resolution, (i) acceleratenotice of redemption to all the Expirationholders of the then-outstanding Rights at their last addresses as they appear upon the registry books of the Rights Agent or, prior to the Distribution Date, (ii) modifyon the percentage Stock Ownership interestregistry books of the transfer agent for the Common Stock. Any notice which is mailed in the Corporationmanner herein provided shall be deemed given, whether or not the Persons or groups coveredholder receives the notice. Each such notice of redemption shall state the method by which the payment of the Redemption Price will be made. The failure to give notice required by this ARTICLE FIFTEEN, (iii) modifySection 23(b) or any defect therein shall not affect the definitions of any terms set forth in this ARTICLE FIFTEEN or (iv) modify the terms of this ARTICLE FIFTEEN as appropriate, in each case, in order to prevent an ownership change for purposes of Section 382validity of the Code as a result of any changes in applicable Treasury Regulations or otherwise;provided,however, thataction taken by the Board of Directors shall not cause there to be such acceleration or modification unless it determines, by adopting a written resolution, that such action is reasonably necessary or advisable to preserve the Tax Benefits or that the continuation of these restrictions is no longer reasonably necessary for the preservation of the Tax Benefits. Stockholders of theCompany.
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Corporation shall be notified of such determination through a filing with the Securities and Exchange Commission or such other method of notice as the Secretary of the Corporation shall deem appropriate.
(c) In the case of an ambiguity ina redemption under Section 23(a) hereof, the applicationCompany may, at its option, discharge all of anyits obligations with respect to the Rights by (i) issuing a press release announcing the manner of redemption of the provisionsRights and (ii) mailing payment of this ARTICLE FIFTEEN, includingthe Redemption Price to the registered holders of the Rights at their last addresses as they appear on the registry books of the Rights Agent or, prior to the Distribution Date, on the registry books of the transfer agent of the Common Stock, and upon such action, all outstanding Right Certificates shall be void without any definition used herein,further action by the Company.
Section 24. Exchange. (a) The Board of Directors shall have the power to determine the application of such provisions with respect to any situation based on its reasonable belief, understanding or knowledge of the circumstances. InCompany may, at its option, at any time after any Person first becomes an Acquiring Person, exchange all or part of the event this ARTICLE FIFTEEN requires an action by the Board of Directors but fails to provide specific guidance with respect to such action, the Board of Directorsthen-outstanding Rights (which shall not include Rights that have the power to determine the action to be taken so long as such action is not contrarybecome effective or that have become void pursuant to the provisions of this ARTICLE FIFTEEN. All such actions, calculations, interpretations and determinations which are doneSection 11(a)(ii) hereof) for shares of Common Stock at an exchange ratio of one share of Common Stock (or one one-thousandth of a share of Preferred Stock) per Right, appropriately adjusted to reflect any stock split, stock dividend or made bysimilar transaction occurring after November 13, 2020 (such amount per Right being hereinafter referred to as the Board of Directors in good faith shall be conclusive and binding on“Exchange Ratio”). Notwithstanding the Corporation, the Agent, and all other parties for all other purposes of this ARTICLE FIFTEEN. The Board of Directors may delegate all or any portion of its duties and powers under this ARTICLE FIFTEEN to a committee of the Board of Directors as it deems necessary or advisable and, to the fullest extent permitted by law, may exercise the authority granted by this ARTICLE FIFTEEN through duly authorized officers or agents of the Corporation. Nothing in this ARTICLE FIFTEEN shall be construed to limit or restrict the Board of Directors in the exercise of its fiduciary duties under applicable law. Section 13. Reliance. To the fullest extent permitted by law, the Corporation and the members of the Board of Directors shall be fully protected in relying in good faith upon the information, opinions, reports or statements of the chief executive officer, the chief financial officer, the chief accounting officer or the corporate controller of the Corporation or of the Corporation's legal counsel, independent auditors, transfer agent, investment bankers or other employees and agents in making the determinations and findings contemplated by this ARTICLE FIFTEEN, and the members offoregoing, the Board of Directors shall not be responsibleempowered to effect such exchange at any time after an Acquiring Person becomes the Beneficial Owner of shares of Common Stock aggregating 50% or more of the shares of Common Stock then outstanding. From and after the occurrence of an event specified in Section 13(a) hereof, any Rights that theretofore have not been exchanged pursuant to this Section 24(a) shall thereafter be exercisable only in accordance with Section 13 and may not be exchanged pursuant to this Section 24(a). The exchange of the Rights by the Board of Directors may be made effective at such time, on such basis and with such conditions as the Board of Directors in its sole discretion may establish. Prior to effecting an exchange pursuant to this Section 24, the Board of Directors may direct the Company to enter into a Trust Agreement in such form and with such terms as the Board of Directors shall then approve (the “Trust Agreement”). If the Board of Directors so directs, the Company shall enter into the Trust Agreement and shall issue to the trust created by such agreement (the “Trust”) all of the shares of Common Stock issuable pursuant to the exchange, and all stockholders entitled to receive shares pursuant to the exchange shall be entitled to receive such shares (and any dividends or distributions made thereon after the date on which such shares are deposited in the Trust) only from the Trust and solely upon compliance with the relevant terms and provisions of the Trust Agreement.
(b) Immediately upon the effectiveness of the action of the Board of Directors of the Company ordering the exchange of any Rights pursuant to paragraph (a) of this Section 24 and without any further action and without any notice, the right to exercise such Rights shall terminate and the only right thereafter of a holder of such Rights shall be to receive that number of shares of Common Stock equal to the number of such Rights held by such holder multiplied by the Exchange Ratio. The Company shall promptly give public notice of any such exchange and shall promptly mail a notice of any such exchange to all of the holders of the Rights so exchanged at their last addresses as they appear upon the registry books of the Rights Agent; provided, however, that the failure to give, or any defect in, such notice shall not affect the validity of such exchange. Any notice which is mailed in the manner herein provided shall be deemed given, whether or not the holder receives the notice. Each such notice of exchange will state the method by which the exchange of the shares of Common Stock for Rights will be effected and, in the event of any good faith errors madepartial exchange, the number of Rights which will be exchanged. Any partial exchange shall be effected pro rata based on the number of Rights (other than Rights which have become void pursuant to the provisions of Section 11(a)(ii) hereof) held by each holder of Rights.
(c) The Company may at its option substitute and, in connection therewith. Forthe event that there shall not be sufficient shares of Common Stock issued but not outstanding or authorized but unissued (and unreserved) to permit an exchange of Rights for Common Stock as contemplated in accordance with this Section 24, the Company shall substitute to the extent of such insufficiency, for each share of Common Stock that would otherwise be issuable upon exchange of a Right, a number of shares of Preferred Stock or fractions thereof (or Equivalent Preferred Shares as such term is defined in Section 11(b)) such that the current per share market price (determined pursuant to Section 11(d) hereof) of one share of Preferred Stock (or Equivalent Preferred Share) multiplied by such number or fraction is equal to the current per share market price of one share of Common Stock (determined pursuant to Section 11(d) hereof) as of the date of such exchange.
CNO Financial Group, Inc. 2021 Proxy StatementA-24
Section 25. Notice of Certain Events. (a) In case the Company shall at any time after the earlier of the Distribution Date or the Stock Acquisition Date propose (i) to pay any dividend payable in stock of any class to the holders of its Preferred Stock or to make any other distribution to the holders of its Preferred Stock (other than a regular quarterly cash dividend), (ii) to offer to the holders of its Preferred Stock rights or warrants to subscribe for or to purchase any additional shares of Preferred Stock or shares of stock of any class or any other securities, rights or options, (iii) to effect any reclassification of its Preferred Stock (other than a reclassification involving only the subdivision or combination of outstanding Preferred Stock), (iv) to effect the liquidation, dissolution or winding up of the Company, or (v) to pay any dividend on the Common Stock payable in Common Stock or to effect a subdivision, combination or consolidation of the Common Stock (by reclassification or otherwise than by payment of dividends in Common Stock), then, in each such case, the Company shall give to each holder of a Right Certificate, in accordance with Section 26 hereof, a notice of such proposed action, which shall specify the record date for the purposes of determiningsuch stock dividend, or distribution or offering of rights or warrants, or the existence and identity of,date on which such liquidation, dissolution, reclassification, subdivision, combination, consolidation or winding up is to take place and the amountdate of participation therein by the holders of the Common Stock and/or Preferred Stock, if any such date is to be fixed, and such notice shall be so given in the case of any Corporation Securities ownedaction covered by clause (i) or (ii) above at least 10 days prior to the record date for determining holders of the Preferred Stock for purposes of such action, and in the case of any stockholder,such other action, at least 10 days prior to the Corporation is entitleddate of the taking of such proposed action or the date of participation therein by the holders of the Common Stock and/or Preferred Stock, whichever shall be the earlier.
(b) In case any event described in Section 11(a)(ii) or Section 13 shall occur then the Company shall as soon as practicable thereafter give to relyeach holder of a Right Certificate (or if occurring prior to the Distribution Date, the holders of the Common Stock) in accordance with Section 26 hereof, a notice of the occurrence of such event, which notice shall describe such event and the consequences of such event to holders of Rights under Section 11(a)(ii) and Section 13 hereof.
(c) The failure to give notice required by this Section 25 or any defect therein shall not affect the validity of the action taken by the Company or the vote upon any such action.
Section 26. Notices. Notices or demands authorized by this Rights Agreement to be given or made by the Rights Agent or by the holder of any Right Certificate to or on the existence and absenceCompany shall be sufficiently given or made if sent by overnight delivery service or first-class mail, postage prepaid, addressed (until another address is filed in writing with the Rights Agent) as follows:
CNO Financial Group, Inc.
11825 North Pennsylvania Street
Carmel, Indiana 46032
Attn: Chief Financial Officer
Subject to the provisions of filings of Schedule 13DSection 21 hereof, any notice or 13G underdemand authorized by this Rights Agreement to be given or made by the Securities Exchange Act of 1934, as amended (or similar filings), asCompany or by the holder of any date,Right Certificate to or on the Rights Agent shall be sufficiently given or made if sent by overnight delivery service or first-class mail, postage prepaid, addressed (until another address is filed in writing with the Company) as follows:
American Stock Transfer & Trust Company, LLC
6201 15th Avenue
Brooklyn, New York 11219
Attn: Corporate Trust Department
with a copy (which shall not constitute notice) to:
American Stock Transfer & Trust Company, LLC
6201 15th Avenue
Brooklyn, New York 11219
Attn: General Counsel
Notices or demands authorized by this Rights Agreement to be given or made by the Company or the Rights Agent to the holder of any Right Certificate shall be sufficiently given or made if sent by first-class mail, postage prepaid, addressed to such holder at the address of such holder as shown on the registry books of the Company.
Section 27. Supplements and Amendments. Except as otherwise provided in this Section 27, for so long as the Rights are then redeemable, the Company may in its sole and absolute discretion, and the Rights Agent
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CNO Financial Group, Inc. 2021 Proxy Statement
shall if the Company so directs, supplement or amend any provision of this Rights Agreement in any respect without the approval of any holders of the Rights. At any time when the Rights are no longer redeemable, except as otherwise provided in this Section 27, the Company may, and the Rights Agent shall, if the Company so directs, supplement or amend this Rights Agreement without the approval of any holders of Rights in order to (i) cure any ambiguity, (ii) correct or supplement any provision contained herein which may be defective or inconsistent with any other provisions herein, (iii) shorten or lengthen any time period hereunder, or (iv) change or supplement the provisions hereunder in any manner which the Company may deem necessary or desirable; provided, however, that no such supplement or amendment shall adversely affect the interests of the holders of Rights as such (other than an Acquiring Person or an Affiliate or Associate of an Acquiring Person), and no such amendment may cause the Rights again to become redeemable or cause this Rights Agreement again to become amendable other than in accordance with this sentence. Notwithstanding anything contained in this Rights Agreement to the contrary, no supplement or amendment shall be made which decreases the Redemption Price. Upon the delivery of a certificate from an appropriate officer of the Company which states that the supplement or amendment is in compliance with the terms of this Section 27, the Rights Agent shall execute such supplement or amendment; provided, that any supplement or amendment that does not amend Section 18, 19, 20 or 21 hereof or this Section 27 in a manner adverse to the Rights Agent shall become effective immediately upon execution by the Company, whether or not also executed by the Rights Agent.
Section 28. Process to Seek Exemption. Any Person who desires to effect any acquisition of Company 382 Securities that might, if consummated, result in such Person (together with its Affiliates and Associates) Beneficially Owning 4.99% or more of any class of Company 382 Securities then outstanding (or, in the case of a Grandfathered Person, additional shares of Company 382 Securities in excess of those permitted by the definition of Grandfathered Person) (a “Requesting Person”) may, prior to the Stock Acquisition Date and in accordance with this Section 28, request that the Board of Directors grant an exemption with respect to such acquisition under this Agreement so that such Person would be deemed to be an “Exempted Person” under subsections (v) or (vi) of Section 1(l) hereof for purposes of this Agreement (an “Exemption Request”). An Exemption Request shall be in proper form and shall be delivered by registered mail, return receipt requested, to the Secretary of the Company at the principal executive office of the Company. To be in proper form, an Exemption Request shall set forth (i) the name and address of the Requesting Person, (ii) the number and percentage of shares of Company 382 Securities then Beneficially Owned by the Requesting Person, together with all Affiliates and Associates of the Requesting Person, and (iii) a reasonably detailed description of the transaction or transactions by which the Requesting Person would propose to acquire Beneficial Ownership of Company 382 Securities aggregating 4.99% or more of any class of the then outstanding Company 382 Securities (or, in the case of a Grandfathered Person, additional shares of Company 382 Securities in excess of those permitted by the definition of Grandfathered Person) and the maximum number and percentage of shares of Company 382 Securities that the Requesting Person proposes to acquire. The Board of Directors shall endeavor to respond to an Exemption Request within 30 Business Days after receipt of such Exemption Request; provided, that the failure of the Board of Directors to make a determination within such period shall be deemed to constitute the denial by the Board of Directors of the Exemption Request. The Requesting Person shall respond promptly to reasonable and appropriate requests for additional information from the Company or the Board of Directors and its advisors to assist the Board of Directors in making its determination. The Board of Directors shall only grant an exemption in response to an Exemption Request if the Board of Directors determines in its sole discretion that the acquisition of Beneficial Ownership of Company 382 Securities by the Requesting Person will not jeopardize or endanger the availability to the Company of its NOL carryforwards. Any exemption granted hereunder may be granted in whole or in part, and may be subject to its actual knowledgelimitations or conditions (including a requirement that the Requesting Person agree that it will not acquire Beneficial Ownership of shares of Company 382 Securities in excess of the ownershipmaximum number and percentage of Corporation Securities.shares approved by the Board of Directors), in each case as and to the extent the Board shall determine necessary or desirable to provide for the protection of the Company’s NOLs. Section 14. 29. Successors. All the covenants and provisions of this Rights Agreement by or for the benefit of the Company or the Rights Agent shall bind and inure to the benefit of their respective successors and assigns hereunder.
Section 30. Benefits of This ARTICLE FIFTEENthis Rights Agreement. Nothing in this ARTICLE FIFTEENRights Agreement shall be construed to give to any Person other than the Corporation orCompany, the Rights Agent and the registered holders of the Right Certificates (and, prior to the Distribution Date, the Common Stock) any legal or equitable right, remedy or claim under this ARTICLE FIFTEEN. This ARTICLE FIFTEENRights Agreement; but this Rights Agreement shall be for the sole and exclusive benefit of the CorporationCompany, the Rights Agent and the Agent.registered holders of the Right Certificates (and, prior to the Distribution Date, the Common Stock). CNO Financial Group, Inc. 2021 Proxy StatementA-26
Section 15. Severability31. Determinations and Actions by the Board of Directors. The purposeBoard of Directors of the Company shall have the exclusive power and authority to administer this Rights Agreement and to exercise the rights and powers specifically granted to the Board of Directors of the Company or to the Company, or as may be necessary or advisable in the administration of this ARTICLE FIFTEEN isRights Agreement, including, without limitation, the right and power to facilitate(i) interpret the Corporation's abilityprovisions of this Rights Agreement and (ii) make all determinations deemed necessary or advisable for the administration of this Rights Agreement (including, without limitation, a determination to maintainredeem or preserve its Tax Benefits.exchange or not redeem or exchange the Rights or to amend or not amend this Rights Agreement). All such actions, calculations, interpretations and determinations that are done or made by the Board of Directors of the Company in good faith, shall be final, conclusive and binding on the Company, the Rights Agent, the holders of the Rights, as such, and all other parties.
Section 32. Severability. If any term, provision, covenant or restriction of this ARTICLE FIFTEENRights Agreement or the application of any such provisionapplicable to any Person or under any circumstance shall bethis Rights Agreement is held invalid, illegal or unenforceable in any respect by a court of competent jurisdiction such invalidity, illegality or unenforceability shall not affect any other provisionauthority to be invalid, void or unenforceable, the remainder of the terms, provisions, covenants and restrictions of this ARTICLE FIFTEEN.Rights Agreement shall remain in full force and effect and shall in no way be affected, impaired or invalidated; provided, however, Section 16. Waiver. With regard to any power, remedy or right provided herein or otherwise availablethat notwithstanding anything in this Rights Agreement to the Corporationcontrary, if any such term, provision, covenant or the Agent under this ARTICLE FIFTEEN, (a) no waiver willrestriction is held by such court or authority to be effective unless expressly contained in a writing signed byinvalid, void or unenforceable and the waiving party; and (b) no alteration, modification or impairment will be implied by reason of any previous waiver, extension of time, delay or omission in exercise, or other indulgence.
If you would like to reduce the costs incurred by our company in mailing proxy 1234567 VOTE BY MAIL 123,456,789,012.12345 TO VOTE, MARK BLOCKS BELOW IN BLUE OR BLACK INK AS FOLLOWS: KEEP THIS PORTION FOR YOUR RECORDS DETACH AND RETURN THIS PORTION ONLY THIS PROXY CARD IS VALID ONLY WHEN SIGNED AND DATED. The Board of Directors recommends you vote FORdetermines in its good faith judgment that severing the following: 1. Electioninvalid language from this Rights Agreement would adversely affect the purpose or effect of this Rights Agreement, the right of redemption set forth in Section 23 hereof shall be reinstated (with prompt notice to the Rights Agent) and shall not expire until the Close of Business on the tenth Business Day following the date of such determination by the Board. Without limiting the foregoing, if any provision requiring a specific group of Directors Nominees Gary C. Bhojwani For 0 0 0 0 0 0 0 0 0 Against 0 0 0 0 0 0 0 0 0 Abstain 0 0 0 0 0 0 0 0 0 1A Theof the Company to act is held by any court of competent jurisdiction or other authority to be invalid, void or unenforceable, such determination shall then be made by the Board of Directors recommends you vote FOR proposals 2, 3in accordance with applicable law and 4. For 0 Against 0 Abstain 0 1B Ellyn L. Brown 2. Approval of the Replacement NOL Protective Amendment to the Company'sCompany’s Amended and Restated Certificate of Incorporation and Amended and Restated Bylaws.
Section 33. Governing Law. This Rights Agreement and each Right Certificate issued hereunder shall be deemed to preservebe a contract made under the value of tax net operating losses and certain other tax losses. Ratificationlaws of the appointmentState of PricewaterhouseCoopers LLP as the Company's independent registered public accounting firm for 2019. 1C Stephen N. David 0 0 0 1D Robert C. Greving 3. 1E Mary R. Henderson 0 0 0 1F Charles J. Jacklin 4. Approval, by non-binding advisory vote, of the compensation of the Company's named executive officers. 1G Daniel R. Maurer 1H Neal C. Schneider NOTE: Such other business as may properly come before the meeting and any adjournment or postponement thereof. 1I Frederick J. Sievert Please sign exactly as your name(s) appear(s) hereon. When signing as attorney, executor, administrator, or other fiduciary, please give full title as such. Joint owners should each sign personally. All holders must sign. If a corporation or partnership, please sign in full corporate or partnership name by authorized officer. Signature [PLEASE SIGN WITHIN BOX] Date Signature (Joint Owners) Date 02 0000000000 1 OF 1 1 2 0000406027_1 R1.0.1.18 SHARES CUSIP # JOB #SEQUENCE # VOTE BY INTERNET - www.proxyvote.com Use the Internet to transmit your voting instructionsDelaware and for electronic delivery of information up until 11:59 P.M. Eastern Time the day before the cut-off date or meeting date. Have your proxy card in hand when you access the web siteall purposes shall be governed by and follow the instructions to obtain your records and to create an electronic voting instruction form. ELECTRONIC DELIVERY OF FUTURE PROXY MATERIALS materials, you can consent to receiving all future proxy statements, proxy cards and annual reports electronically via e-mail or the Internet. To sign up for electronic delivery, please follow the instructions above to vote using the Internet and, when prompted, indicate that you agree to receive or access proxy materials electronically in future years. VOTE BY PHONE - 1-800-690-6903 Use any touch-tone telephone to transmit your voting instructions up until 11:59 John Sample 234567P.M. Eastern Time the day before the cut-off date or meeting date. Have your proxy card in hand when you call and then follow the instructions. 1234567 Mark, sign and date your proxy card and return it in the postage-paid envelope we have provided or return it to Vote Processing, c/o Broadridge, 51 Mercedes Way, Edgewood, NY 11717. NAME THE COMPANY NAME INC. - COMMON THE COMPANY NAME INC. - CLASS A THE COMPANY NAME INC. - CLASS B THE COMPANY NAME INC. - CLASS C THE COMPANY NAME INC. - CLASS D THE COMPANY NAME INC. - CLASS E THE COMPANY NAME INC. - CLASS F THE COMPA N Y NAME INC. - 401 K CONTROL # SHARES123,456,789,012.12345 123,456,789,012.12345 123,456,789,012.12345 123,456,789,012.12345 123,456,789,012.12345 123,456,789,012.12345 123,456,789,012.12345 x PAGE1 OF 2 CNO FINANCIAL GROUP, INC. 11825 N PENNSYLVANIA ST CARMEL, IN 46032 Investor Address Line 1 Investor Address Line 2 Investor Address Line 3 Investor Address Line 4 Investor Address Line 5 8 8 8 1 1234 ANYWHERE STREET ANY CITY, ON A1A 1A1 234567 234567 234567 234567
Important Notice Regarding the Availability of Proxy Materials for the Annual Meeting: The Annual Report and Notice & Proxy Statement are available at www.proxyvote.com . CNO FINANCIAL GROUP, INC. Annual Meeting of Shareholders May 10, 2019 8:00 AM This proxy is solicited by the Board of Directors The shareholder(s) hereby appoint(s) matthew J. Zimpfer, Eric R. Johnson and John R. Kline, or any of them, as proxies, each with the power to appoint his substitute, and hereby authorizes them to represent and to vote, as designated on the reverse side of this card, all of the shares of Common Stock of CNO FINANCIAL GROUP, INC. that the shareholder(s) is/are entitled to vote at the Annual Meeting of Shareholders to be held at 8:00 AM, EDT on May 10, 2019, at 11825 N. Pennsylvania St., Carmel, Indiana, and any adjournment or postponement thereof. This proxy, when properly executed, will be voted in the manner directed herein. If no such direction is made, this proxy will be votedconstrued in accordance with the Boardlaws of Directors' recommendations. Continued andsuch State applicable to contracts to be signed on reverse side 0000406027_2 R1.0.1.18made and performed entirely within such State.
Section 35. Descriptive Headings. Descriptive headings of the several sections of this Rights Agreement are inserted for convenience only and shall not control or affect the meaning or construction of any of the provisions hereof.
Section 36. Prior Agreement. This Rights Agreement amends and restates in its entirety the Third A&R Rights Agreement and the terms and provisions of the Third A&R Rights Agreement are superseded hereby.
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CNO Financial Group, Inc. 2021 Proxy Statement
CNO Financial Group, Inc.
11825 N. Pennsylvania Street
Carmel, IN 46032
(317) 817-6100
CNOinc.com
© 2021 CNO Financial Group, Inc.
(03/21) 198706
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