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Long-Term Incentive
As previously disclosed, in early 2018, the Committee increased Mr. McKenney’s long-term incentive target opportunity from $5.5 million to $6.5 million. Again, this decision reflected the continued execution of a multi-year program as outlined above.
The design of our long-term incentive program serves to align the interests of management and shareholders.
For
2018, 68%2020, 72% of Mr. McKenney's pay
iswas in the form of long-term
equity incentives (delivered through
PBRSUsperformance-based restricted stock units (PBRSUs) and
PSUs), thecash incentive units (CIUs)). The value of
whichthe PBRSUs is based on the company’s stock price
while the value of his CIUs is based on growth in adjusted book value and
for his PSU achievement, isdividends, further modified by relative
TSR. GivenTSR (see “Cash Incentive Units” section below for additional details). After consideration of Mr. McKenney's strategic leadership, his total target compensation competitiveness, his performance in
2018 as well as the company’s financial performance2020 and other considerations outlined above, the Committee awarded Mr. McKenney
a grant of $7,500,000 for 2020 performance with no specific individual factor applied. This is an
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percentageincrease of 95% for$1,130,000 over his long-term incentive award granted in March 2019 which resulted in an awardlast year and remains below the median LTI target of $6,175,000, a reduction of $425,000 from the prior year's award.
our proxy peer group.
The total of Mr. McKenney's annual and long-term incentives for
20182020 performance
were $8,075,000, a reductionwas $9,312,462, an increase of
$940,000$1,232,462 from his awards for
2017.Consistent with2019 performance. This increase was primarily driven by his LTI award.
The design of our LTI program serves to align the
impact to shareholders over the past year, the valueinterests of
Mr. McKenney’s Unum holdings, including his unvested equity awards, declined significantly in 2018.management and long-term shareholders. For example, this impact can be seen in the vesting of Mr.
McKenney’sMcKenney's historical
PSUperformance share unit (PSU) awards, which are not only
valuedrealized at the
company’scompany's lower stock price but also modified based on relative TSR (up to +/- 20%). The table below illustrates how the TSR modifier reduced the number of shares he earned following the vesting of his
20162018 PSU award
atfor the
end of 2018performance period ending December 31, 2020 (see additional details on page
6373).
Executive | Target
Share
Grant | | Operating
Performance
Factor | | Adjusted
Shares | | TSR
Modifier | | Earned
Shares | Value of Shares
as of 2/15/19(1) |
Adjusted
Shares | Earned
Shares |
CEO | 98,677 | x | 120.3% | = | 118,659 | x | 80% | = | 94,927 | $4,309,683 | $3,447,746 |
PERFORMANCE IMPACT ON 2018-2020 PSU AWARDS
| | CEO | | | $3,300,000 | | | 75,836 | | | x | | | 91.8% | | | = | | | 69,580 | | | x | | | 80% | | | = | | | 55,664 | | | $1,482,332 | |
| (1)
| The 2018 Grant Date Fair Value was calculated by multiplying Mr. McKenney's target grant of 66,924 PSUs on the grant date, March 1, 2018, by the closing stock price of $49.31 on that date. |
(2)
| The Shares Eligible to Vest includes target PSUs granted and dividend equivalents accrued on the awards from the grant date until they were distributed in early 2021 when performance was certified by the Committee. |
(3)
| “Operating Performance Factor” rounded to one decimal place. |
(4)
| The PSU achievement was certified by the Human Capital Committee on February 18, 2019. Since that was a holiday, the23, 2021. The shares were valued based on the prior day closing stock price on that date of $36.32 (February 15, 2019).$26.63. |
Cash Incentive Units
In early 2020, the Committee began its review of the executive compensation program and approved changes in August (see “Key Compensation Decisions” on page 62 for more details). Since a substantial portion of the executives' compensation is denominated in Unum shares, the Committee sought to balance stock ownership priorities against continued stock price underperformance driven by negative investor perceptions of the LTC industry. These perceptions have impacted us more than our proxy peers given that only 25% of our peers have LTC exposure. After review, the Committee therefore determined to replace PSUs with CIUs that reward for financial performance (rather than financial performance and stock price changes), beginning with the long-term incentive grants in March 2021. The use of cash-based long-term incentive represents a departure from historical practice but was deemed appropriate by the Committee given the unique circumstances currently facing the company and its executive team. In reaching this decision, the Committee considered the following: 10 2019
12 2021 PROXY STATEMENT
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Executives’ holdings were generally above stock ownership requirements and will remain well- aligned with shareholders;
A mixture of long-term cash and equity awards allows diversification while providing multi-year incentives which are less impacted by the potential volatility associated with the LTC block, enabling greater focus on the achievement of key objectives; and
The CIUs would remain aligned to shareholder interests given the performance measures outlined below, which include a relative TSR component.
The Committee originally intended to grant CIUs with the same performance measures used in prior PSU awards, but establishing reasonable multi-year performance targets proved to be difficult in the current environment. Business closures and pandemic-related economic impacts have disrupted our distribution system and sales activity, and it remains unclear how long we might continue to experience this disruption. Events such as further spread of the coronavirus, spikes in the number of cases or the emergence of new strains of coronavirus (including those resistant to vaccines), and the related responses by government authorities and businesses may heighten the impacts of the pandemic and present additional risks to our business.
The Committee determined that CIUs will be earned based on the achievement of critical, multi-year shareholder return measures of adjusted book value growth, dividend yield and relative TSR. CIUs will be measured over a three-year performance period from January 1, 2021 through December 31, 2023. Awards can be earned from 0% to a maximum 200% of the targeted CIU award value following completion of the performance period based on the company's performance against these metrics.
Early in 2020, prior to the outbreak of the COVID-19 pandemic, the Committee began a discussion of the strategic initiatives that need to be accomplished over the next few years, with a strong desire to ensure that the current executive team remain in place to execute on the growth plans. With an emphasis on aligning key executive rewards with these identified strategic initiatives, the Committee undertook a comprehensive review of the company’s executive compensation program, incentive arrangements and related policies, to assess their effectiveness in incentivizing implementation of the company’s strategy. The Committee focused on doing the right thing for shareholders in the long-term while making sure that it mitigated risks and incentivized the leadership team to continue to create value.
The Committee’s evaluation took into account, among other things, the company's recent financial, operating and stock price performance. While the company’s pre-pandemic financial and core operating performance has been strong, our stock price has not performed well, including relative to peer companies. One driver has been the continued negative investor perceptions surrounding the LTC industry during the last three years. The effects of the heightened industry focus on LTC impact us more than our proxy peers since only 25% of our peers have LTC exposure. The company closed its individual LTC business in 2009 and closed its group LTC business in 2012; in other words, these policies are no longer actively sold, but existing policies are still managed by the company. Since that time, the company has actively managed this block with a combination of rate increases, updates to our liability assumptions to reflect emerging experience, prudent cash infusions and reserve changes. These measures have led to greater stability and predictability in the performance of the LTC block while continuing to provide transparency to our shareholders and customers. However, due to general market sentiment and regulatory focus regarding the prospects for LTC insurance lines, the stock price has been negatively impacted. As a result, the Committee believes that the company’s pay for performance strategy has been and may continue to be challenged by the legacy LTC business, notwithstanding its effective management by the current executive team, all of whom were either not with the company or not in their current roles when these policies were sold.
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While managing the company's closed block of LTC policies, the executive team has also continued building value for the future of the company. The Committee discussions recognized the success and continued efforts of the executive team over the past few years, including:
Finding new opportunities and showing strong capabilities by integrating and leveraging new acquisitions. This includes the recent entry into Poland markets, developing the Stop/Loss business, and adding dental and vision lines of business to the portfolio;
Developing and executing modernized technology solutions for efficient business practices;
Incorporating a culture of inclusion and diversity; and
Maintaining dividends.
Based on multiple discussions during the year, on August 24, 2020, the Committee approved several changes to the company’s executive compensation program to recognize and reinforce the executives' existing share ownership levels and maintain alignment with long-term performance objectives, while reinforcing the company's executive compensation philosophy (see “Key Compensation Decisions” beginning on page 62). With these modifications, the Committee believes that the executive compensation program supports the company's efforts to ensure proper alignment with evolving market needs and changes in the company’s business. It is also important to note that these changes were not directly in response to COVID-19. As outlined above, the Committee's discussions started early in the year before the pandemic hit; however, the pandemic only served to increase the need to ensure that this team remain in place to achieve critical business outcomes over the next several years. As part of the changes, the Committee implemented the Success Incentive Plan (SIP), under which 10 executives, including the named executive officers, received a one-time special performance grant. The SIP awards are designed to encourage achievement of critical business outcomes and to incent executives to continue employment with the company over the long term. The SIP awards include both cash success units (CSUs) and stock success units (SSUs). The CSUs (denominated in cash) were granted with a target value equal to 70% of each executive's 2020 annual long-term incentive target. Denominating the CSUs in cash reduces the influence of the LTC business, which impacts our stock price, strengthening the alignment of the awards with core operating performance.
The number of shares underlying the SSUs granted to each executive equals the number of company shares he or she held at the time of grant and committed to continue holding during the six-year SIP award vesting period, subject to a cap equal to the number of shares with a value equal to 50% of the executive's 2020 annual long-term incentive target. An executive's sale of any committed shares prior to the vesting of SSUs will result in the immediate proportional forfeiture of any unvested SSUs. The Committee believes this matching share commitment element of the SSUs reinforces the objectives of creating long-term, sustainable shareholder value and appropriately aligns executives' and shareholders' interests.
The SIP awards have a six-year term, with the opportunity for proportional accelerated vesting after one-, three- and five-year performance periods. Each performance period begins on January 1, 2021 and the SIP awards will vest in full on the sixth anniversary of the grant date (August 2026), subject to the executive’s continued employment, unless vesting is accelerated based on the company’s achievement of three performance hurdles:
(1)
| Maintaining average NAIC risk-based capital ratios of at least 325%, each measured at calendar quarter-ends over the applicable performance period; |
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(2)
| Maintaining average levels of holding company cash in excess of 1.0 times average fixed costs (which includes dividends to shareholders and interest payments due on outstanding indebtedness), each measured at calendar quarter-ends over the applicable performance period; and |
(3)
| Achieving annual (or compounded annual) growth rates of 3% or more in adjusted book value (which excludes accumulated other comprehensive income or loss). |
These performance objectives support plans for the company’s continued long-term financial positioning as an “A” rated company and will provide appropriate focus on maintaining its previously disclosed targets for key capital metrics. This structure balances the unprecedented environment with the company’s long-term goals and key priorities over the next few years while supporting long-term executive retention.
As outlined above, one-third of the SIP award will be eligible to accelerate and vest on a cumulative basis on the last day of each of the one-, three- and five-year performance periods, in each case conditioned upon the achievement of the performance hurdles during the applicable performance period. When determining whether the performance hurdles have been achieved, the Committee will exclude the effect of certain items to ensure that performance is appropriately measured under normalized conditions. Any unvested portion of the SIP awards will be forfeited upon any termination of employment prior to vesting, except in the case of certain terminations following a change in control.
Mr. McKenney received grants of $4.9 million CSUs and 186,368 SSUs. See SIP description and award details for each of the NEOs beginning on page 62. As previously disclosed, the Committee has a practice of positioning our executives' pay below median pay of external peers as they are promoted into a role and gradually making adjustments to full competitive norms as performance and experience in the job grows. Mr. McKenney was promoted to President of the company in April 2015 and subsequently promoted to CEO the following month.
In February 2021, the Committee with its consultant, Pay Governance LLC, reviewed Mr. McKenney's total targeted compensation relative to proxy peers and determined that his pay was 16% below median. After considering his experience, his performance in the CEO role, and the leadership that he has shown during the last five years, the Committee decided to increase Mr. McKenney’s long-term incentive target opportunity from $7.0 million to $7.5 million. This decision reflects Mr. McKenney's steady leadership and strategic positioning of the company. Even with this adjustment, Mr. McKenney's targeted total direct compensation continues to be below the median of our proxy peer group.
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| | Item 1: Election of Directors | | | FOR each nominee | | | | |
| | Eleven director nominees are standing for election this year, each for a one-year term expiring at the 20202022 Annual Meeting andMeeting. Each director will hold office until his or her successor is duly elected and qualified or until his or her earlier death, resignation, disqualification, or removal from office. The Board and the Governance Committee believe that each director nominee possesses the necessary skills and qualifications to provide effective oversight of the business. The director nominees are: | |
| | | | | Director Nominee | | | Director Since
| | | Independent | | | Current Committees | |
| | | | | Theodore H. Bunting, Jr. | | | 2013 | | | | | | Human Capital | | | Regulatory Compliance (Chair)
Human Capital | |
| | | | | Susan L. Cross | | | 2019 | | | | | | Audit
| | | Risk and Finance | |
| | | | | Susan D. DeVore | | | 2018 | | | | | | Audit
| | | Risk and Finance | |
| | | | | Joseph J. Echevarria | | | 2016 | | | | | | Governance
| | | Risk and Finance (Chair) | |
| | | | | Cynthia L. Egan | | | 2014 | | | | | | Human Capital (Chair)
| | | Regulatory Compliance | |
| | | | | Kevin T. Kabat,, Board Chairman | | | 2008 | | | | | | Governance
| | | Human Capital | |
| | | | | Timothy F. Keaney | | | 2012 | | | | | | Audit (Chair) | | | Risk and Finance (Chair)
Audit | |
| | | | | Gloria C. Larson | | | 2004 | | | | | | Governance (Chair)
| | | Regulatory Compliance | |
| |
| | | Richard P. McKenney, President and CEO | | | 2015 | —
| | — | | | — | | | — | |
| | | | | Ronald P. O'Hanley | | | 2015 | | | | | | Governance
| | | Human Capital | |
| | | | | Francis J. Shammo | | | 2015 | | | | | | Audit
| | | Regulatory Compliance | |
| | Item 2: Advisory Vote to Approve Executive Compensation | | | FOR | | | | |
| | We are seeking a non-binding advisory vote to approve the compensation of our named executive officers. We describe our compensation programs in the Compensation Discussion and Analysis section of this proxy statement. The Human Capital Committee believes these programs reward performance and align the long-term interests of management and shareholders. Although non-binding, the Human Capital Committee will take into account the outcome of the advisory vote and shareholder feedback when making future compensation decisions. | |
| | Item 3: Ratification of Appointment of Independent Registered Public Accounting Firm | | | FOR | | | | |
| | The Audit Committee has appointed Ernst & Young LLP as our independent registered public accounting firm for 2019,2021, and shareholders are being asked to ratify the appointment. | |
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The Board of Directors is elected by shareholders to oversee management and
assure thatpromote the long-term interests of
shareholders are being served.shareholders. The Board oversees the CEO and other senior management, who are responsible for carrying out the company's day-to-day operations in a responsible and ethical manner. The Board and its committees meet regularly to review and discuss the company's strategy, business, performance, ethics,
risk tolerance, human capital engagement, and
risk culture, as well as important issues that it faces. These discussions take place with management and,
as appropriate, with
appropriate outside advisers who provide independent expertise, perspectives and insights. In addition, the independent members of the Board and its committees hold regular executive sessions to discuss matters free of the presence or influence of management. Board members are also kept apprised of significant developments that arise between meetings.
Board Composition and Refreshment
The Board believes
that a critical component of its effectiveness in serving the long-term interests of shareholders is to ensure
that its membership remains diverse, possessing a variety of backgrounds, experiences and skill sets from which to
draw upon.draw. Fresh views and ideas help the Board to maintain a broad perspective and forward-looking vision capable of anticipating and adapting to the rapid pace of change, just as experience and continuity provide necessary context and stability for important decisions. With that in mind, the Governance Committee
periodically reviews the composition of the Board to
assureensure an appropriate balance of experiences, skills, tenure and diversity. This is an ongoing, year-round process.
The Board is committed to effective board succession planning and refreshment, including having honest and difficult conversations with individual directors when necessary. These conversations may arise in connection with the Board evaluation process, succession planning or consideration of the annual slate of Board nominees. As a result of these processes, directors may decide (for personal or professional reasons) or be asked (for reasons
relatedsuch as evolving needs for Board composition or directors' availability to
their ongoingmake sufficient contributions to the Board) not to stand for re-election at the next Annual Meeting. It is expected
that these refreshment practices will continue in the future.
Since the beginning of 2015, we have experienced a healthy level of Board refreshment, with six new directors joining the Board and seven retiring. While some companies have tenure limits on Board service, we believe our balanced approach
which places a limit on age but not on tenure delivers the right mix of directors with new ideas and perspectives along with those possessing deep knowledge of the company.
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The Board strives to maintain independence of thought and diverse professional experience among its membership. The Board and the Governance Committee look for directors who have qualifications and attributes in key areas relevant to Unum, and that align with both our short- and long-term business strategies. These qualifications and attributes are evaluated on an annual basis to determineand adjusted as needed so that they continue to serve the best interests of the company. The table below summarizes the qualifications and attributes that are important to Unum and addresses how the composition of our Board, as a whole, meets these needs.
| | Accounting/Auditing | | | We operate in a complex financial and regulatory environment with disclosure requirements, detailed business processes and internal controls. | | | | |
| | Business Operations | | | We have significant operations focused on customer service, claims management, sales, marketing and various back-house functions. | | | | |
| | Capital Management | | | We allocate capital in various ways to run our operations, grow our core businesses and return value to shareholders. | | | | |
| | Corporate Governance/ESG | | | As a public company and responsible corporate citizen, we expect effective oversight and transparency, and our stakeholders demand it. | | | | |
| | Financial
Expertise/Literacy | | | Our business involves complex financial transactions and reporting requirements. | | | | |
| | Independence | | | Independent directors have no material relationships with us and are essential in providing unbiased oversight. | | | | |
| | Industry Experience | | | Experience in the insurance and financial services industry provides a relevant understanding of our business, strategy, and marketplace dynamics. | | | | |
| | International | | | With global operations in several countries and prospects for further expansion, international experience helps us understand opportunities and challenges. | | | | |
| | Investment Markets | | | We manage a large and long-term investment portfolio to uphold our promises to pay the future claims of our policyholders. | | | | |
| | Other Recent Public Board Experience
| | | We value individuals who understand public company reporting responsibilities and have experience with the issues commonly faced by public companies. | | | | |
| | Public Company Executive Experience | | | Experience leading a large, widely-held organization provides practical insights on need for transparency, accountability, and integrity. | | | | |
| | Regulatory/Risk Management | | | A complex regulatory and risk environment requires us to develop policies and procedures that effectively manage compliance and risk. | | | | |
| | Technology/Digital Transformation | | | We rely on technology to manage customer data, deliver products and services to the market, pay claims, and enhance the customer experience. | | | | |
| (1) | Director nominees only. |
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Directors with varied tenure contribute to a range of perspectives and
ensure weallow us to transition knowledge and experience from longer-serving members to those newer to our Board. We have a
good mix of new and long-standing directors, with our 11 director nominees averaging
5.47.4 years of service on
ourthe Board as of the
20192021 Annual Meeting.
Our directors representBoard is comprised of members with a range of backgrounds and overall experience. More than half are women or represent a minority group.
Although the Board does not have a specific diversity policy, it recognizes diverse
group, which places Unum'srepresentation on the Board,
amongincluding in positions of leadership, serves to improve dialogue, decision-making, and culture in the
top of our industry in gender and racial/ethnic diversity. In recent years, ourboardroom. Our Governance Committee
has focusedfocuses on
ensuringadvancing continued diversity on the Board during refreshment activities by requiring that candidate pools include diverse individuals,
meetingincluding women, who meet the recruitment criteria. From the candidate pools, our Governance Committee selects
our director candidates based on their qualifications and attributes as addressed below. Our director nominees range from
5052 to
6971 years of age, with the average age being
60.262.2 years, as of the
20192021 Annual Meeting.
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2021 PROXY STATEMENT 19
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A healthy and vigorous Board evaluation process is an essential part of good corporate governance. A thorough evaluation process helps us achieve the right balance of perspectives, experiences and skill sets needed for prudent oversight of the company, including execution on corporate strategy, while also considering the best interests of our shareholders. At Unum, this evaluation process includes annual evaluations of the Board, each committee, and individual directors.
The Governance Committee establishes and oversees the evaluation process, which focuses on identifying areas where Board, committee and director performance is most effective, as well as opportunities for further development or
improvement.enhancement. Each year, the Governance Committee reviews the format and effectiveness of the evaluation process in identifying actionable feedback,
for directors to consider, recommending changes in process as appropriate. Determining whether to engage a third-party facilitator is also part of the review.
This past year, the
The evaluation process
wasis conducted in two phases. The first phase
focusedfocuses on the evaluation of the effectiveness of each committee and the Board as a whole. Directors
completedcomplete questionnaires evaluating the
full Board and
each committeethe committees on which they
served on withserve across a variety of topics, including culture, composition, structure and engagement.
In recent years, Board members have provided feedback regarding corporate strategy, business resiliency programs, Board composition and structure, succession plans, future agenda items, meeting materials and director education. The second phase
focusedinvolves interviewing individual directors to collect feedback on
the evaluation of each director’s performance, and waspeer directors' performance. This phase is led by the Governance Committee Chair in advance and in anticipation of the
director nomination
process.process, with key messages delivered to each director. This two-phased approach
has generated robust discussions at all levels of the Board, and resulted in changes that have improved Board efficiency and effectiveness.
For example, in recent years, these discussions have led to enhancements to Board diversity, meeting materials, director on-boarding, executive sessions, and Board member engagement. 
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Process for Selecting and Nominating Directors Director Nominee and Selection
The Governance Committee is responsible for identifying and evaluating director candidates and recommending to the Board a slate of nominees for election at each Annual Meeting. The Committee
has engagedperiodically engages a third-party search firm to assist with recruitment efforts.
ThisDuring these times, the firm
identifieshas been asked to identify candidates who meet the criteria of our search,
providesprovide requested background and other relevant information regarding candidates, and
coordinatescoordinate arrangements for interviews as necessary. Nominees may also be suggested by directors, management, or shareholders.
Ms. Cross, who was elected to the Board in February 2019, was recommended to the Governance Committee by a third-party search firm.Shareholders
who wish tomay recommend director candidates for consideration by the Governance Committee
must submit to the Corporate Secretary at Unum Group, 1 Fountain Square, Chattanooga, Tennessee 37402by providing the same information that would be required to nominate a director candidate, as described on page
102114 in the section titled
"Shareholder“Shareholder proposals and nominations for our
20202022 Annual
Meeting."Meeting”. Submissions must be made in writing to the Corporate Secretary at Unum Group, 1 Fountain Square, Chattanooga, Tennessee 37402. The Governance Committee’s policy is to consider candidates recommended by shareholders in the same manner as other candidates.
In addition, our bylaws permit shareholders to nominate directors for inclusion in our proxy materials or directly at an Annual Meeting in accordance with the procedures in our bylaws, as described on page 102 in the section titled "Shareholder proposals and nominations for our 2020 Annual Meeting."
Our corporate governance guidelines specify the following criteria to be used in evaluating the candidacy of a prospective nominee:
Reputation for high ethical conduct, integrity, sound judgment, and accountability;
Current knowledge and experience in one or more key areas identified in the corporate governance guidelines;
Ability to commit sufficient time to the Board and its committees;
Collegial effectiveness; and
Diversity, whether in viewpoints, gender, ethnic background,race, ethnicity, age, professional experience or other demographics.
The core qualifications and attributes sought in any particular candidate depend on the current and future needs of the Board based on an assessment of the composition of the Board and the mix of qualifications and attributes currently represented. In addition, the Governance Committee considers other specific qualifications that may be desired or required of nominees, including their independence and ability to satisfy specific Audit Committee or Human Capital Committee requirements.requirements for committees. As part of the director selection and nomination process, the Governance Committee assesses the effectiveness of its Board membership criteria.
In determining whether to recommend a director for re-election, the Governance Committee also considers the director’s interest in continuing to
serve,serve; past attendance at
meetings,meetings; contributions to the Board and committees on which the director
serves,serves; the skills, experience and background that the director brings to the Board relative to the Board’s needs and existing
composition,composition; and the results of the most recent Board, committee and individual director evaluations.
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Annual Election of Directors
Directors are elected each year at the Annual Meeting to hold office untilfor a one-year term expiring at the next Annual Meeting andMeeting. Directors hold office until their successors are elected, or until their earlier death, resignation, disqualification, or removal from office. Other than requiring retirement from the Board at the next Annual Meeting after a director reaches the age of75 (which was increased from age 72 this year), there are no term limits. However, the Governance Committee evaluates the qualifications and performance of each incumbent director before recommending the nomination of that director for an additional term.
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Our bylaws provide that, in an election of directors where the number of nominees does not exceed the number of directors to be elected (an
"uncontested election"“uncontested election”), each nominee must receive a majority of the votes cast with respect to that nominee to be elected as a director (i.e., the number of shares voted
"for"“for” a nominee must exceed the number voted
"against"“against” that nominee). If an incumbent director is not re-elected under this majority voting standard, the director must submit an irrevocable letter of resignation to the Board, which will become effective upon acceptance by the Board. The Governance Committee will make a recommendation to the Board on whether to accept or reject the resignation, or whether other action should be taken. If the director submitting the resignation is a member of the Governance Committee, that director will not participate in the Governance Committee’s recommendation to the Board. The Board will act on the Governance Committee’s recommendation and publicly disclose its decision and rationale within 90 days from the date of the certification of the election results.
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INFORMATION ABOUT THE BOARD OF DIRECTORS
INFORMATION ABOUT THE BOARD OF DIRECTORS
Below are brief biographies for each of our current directors and descriptions of the directors’ key qualifications, skills, and experiences that contribute to the Board’s effectiveness as a whole.
| | | | |
Director since 2013
Age at Annual
Meeting 6062
Independent
Director
Committees
Regulatory
Compliance
(chair)
Human Capital
Regulatory Compliance
(chair) | | | Theodore H. Bunting, Jr. | |
| | |
Mr. Bunting retired as the Group President, Utility Operations of Entergy Corporation, an integrated energy company, andwhere he previously served as Senior Vice President and Chief Accounting Officer for Entergy.Officer. He has extensive financial, accounting and operational experience as a senior executive with a public company in a regulated industry. Mr. Bunting ishas experience as a director at anotherother publicly traded companycompanies and is also a certified public accountant. | |
| | | | | | |
| | Career Experience | | | Qualifications | |
| | Entergy Corporation
Group President, Utility Operations (2012-2017)
(2012-2017)
Senior Sr. Vice President and Chief
Accounting Officer
(2007-2012)
Numerous other executive roles with(joined Entergy
Entergy, which he joined in 19831983) | | | Accounting/Auditing
Business Operations
Capital Management
Financial Expertise/Literacy
Other Public Company Board Experience
Public Company Executive Experience
Regulatory/Risk Management | |
| | | | | | |
| | Public Company Board Experience | |
| | The Hanover Insurance Group, Inc., since 2020
NiSource IncInc.., since 2018
Imation Corp. (2012-2014) | | | | |
| | | | | Director since 2019
Age at Annual
Meeting 5961
Independent
Director
Committees
Audit
Risk and Finance | | | Susan L. Cross | | | | | Ms. Cross is the former Executive Vice President and Global Chief Actuary of XL Group Ltd (now AXA XL), a global insurance and reinsurance company. She previously held various chief actuarial positions for operational segments of XL. SheMs. Cross brings overmore than three decades of financial, actuarial, insurance and risk experience as a senior executive with an international company in a regulated industry. Ms. CrossShe is a director of another publicly traded company, and she also qualifies as an audit committee financial expert under SEC regulations. | | | | | | | | | | | Career Experience | | | Qualifications | | | | XL Group LtdLtd.
Executive Vice President and Global
Global Chief Actuary (2008-2018)
Senior Vice President
and Chief Actuary,
XL Group (2006-2008)
XL Reinsurance (2000-2006)
XL America (1999-2000)
Significant consulting experience
with Willis Towers Watson in
the U.S. and Bermuda | | | Accounting/Auditing
Business Operations
Capital Management
Financial Expertise/Literacy
Industry Experience
International
Other Public Company Board Experience
Public Company Executive Experience
Regulatory/Risk Management | | | | | | | | | | | | | | | Public Company Board Experience | | | | | Enstar Group Limited, since 2020 | | | | |
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| | | | | Director since 2018
Age at Annual
Meeting 6062
Independent
Director
Committee Committees
Audit
Risk and Finance | | | Susan D. DeVore | | | | | Ms. DeVore has served as the President and Chief Executive Officer of Premier, Inc., a leading health care improvement company, since its initial public offering in 2013. She plans to step down as CEO and a director of Premier in May 2021 before retiring later in the year. She previously served as President of Premier from 2013 to April 2019, and before that served in the same capacityas President and Chief Executive Officer for its predecessor company, Premier Healthcare Solutions, Inc. She also previously served as the Chief Operating Officer for a number of affiliated Premier entities. Prior to joining Premier, Ms. DeVore had two decades of finance, strategy and healthcarehealth care consulting experience. She also qualifies as an audit committee financial expert under SEC regulations. | | | | | | | | | | | Career Experience | | | Qualifications | | | | Premier, Inc.
President and CEO (since 2013)
President (2013-April 2019)
Premier Healthcare Solutions, Inc.
President and CEO (2009-2013)
COO (2006-2009)
Significant consulting experience
with Ernst & Young LLP,, including service
service as a Partner, Executive
Committee member
and Senior
Healthcare Industry Management
Practice Leader
| | | Accounting/Auditing
Business Operations
Capital Management
Corporate Governance/ESG
Financial Expertise/Literacy
Industry Experience
International
Other Public Company Board Experience
Public Company Executive Experience
Regulatory/Risk Management
Technology/Digital Transformation | | | | | | | | | | | | | | | Public Company Board Experience | |
| | | Premier, Inc., since 2013 | | | | |
| | | | | Director since 2016
Age at Annual
Meeting 6264
Independent
Director
Committees
Governance
Risk and Finance
(chair) | | | Joseph J. Echevarria | | | | | Mr. Echevarria retired as the Chief Executive Officer of Deloitte LLP, a global provider of professional services, prior to whichwhere he served inpreviously held increasingly senior leadership positions with Deloitte.positions. He is currently a Senior Advisor to the President of the University of Miami, where he also serves as CEO of UHealth and Executive Vice President for Health Affairs. He brings to the Board significant experience in finance, accounting, global operations, executive management and corporate governance. Mr. Echevarria has experience as a director at other publicly traded companies and is also a certified public accountant. | | | | | | | | | | | Career Experience | | | Qualifications | | | | Deloitte LLP
CEO (2011-2014)
Various executive positions during
his 36 years with the company
My Brother's Keeper Alliance
Chair Emeritus
President's Export Council
Private sector memberDeloitte | | | Accounting/Auditing
Business Operations
Capital Management
Corporate Governance/ESG
Financial Expertise/Literacy
Industry Experience
International
Other Public Company Board Experience
Regulatory/Risk Management | | | | | | | | Public Company Board Experience | | | | Xerox, since 2007
Bank of New York Mellon Corporation,
Corporation
| | | | since 2015 (Non-Executive Chair since September 2019) Pfizer Inc., since 2015 (Lead
Independent Director since 2016)
Pfizer Xerox Holdings Corporation, since 20152017 | | | | |
2019
24 2021 PROXY STATEMENT 19
TABLE OF CONTENTS INFORMATION ABOUT THE BOARD OF DIRECTORS
| | | | |
Director since 2014
Age at Annual
Meeting 6365
Independent
Director
Committees
Human Capital (Chair)
(chair)
Regulatory
Compliance | | | Cynthia L. Egan | | | | | Ms. Egan retired as the President of T. Rowe Price Retirement Plan Services, Inc., a subsidiary of the global investment management firm T. Rowe Price Group, Inc. Prior to her work at T. Rowe Price,that, she held various executive positions at Fidelity Investments. She has significant operational experience in delivering complex financial products and services on a large scale, as well as experience in using technology to lead businesses through growth and operational transitions. Ms. Egan is and has been a director at other publicly traded companies. | | | | | | | | | | | Career Experience | | | Qualifications | | | | U.S. Department of the Treasury
Senior Advisor on the development of a Treasury-
sponsored retirement savings program (2014-2015)
T. Rowe Price Retirement Plan Services, Inc.
President (2007-2012)
Fidelity Investments
Various leadership and executive positions, including
President of the Fidelity Charitable Gift Fund (1989-2007) | | | Business Operations
Corporate Governance/ESG
Financial Expertise/Literacy
Industry Experience
Investment Markets
Other Public Company Board Experience
Public Company Executive Experience
Regulatory/Risk Management
Technology/Digital Transformation | | | | | | | | Public Company Board Experience | | U.S. Department of the Treasury
Senior Advisor on the development
of a Treasury-sponsored
retirement savings program
(2014-2015)
T. Rowe Price Retirement Plan
Services, Inc.
President (2007-2012)
Fidelity Investments
Various leadership and executive
positions, including President of
the Fidelity Charitable Gift Fund
(1989-2007)
| BlackRock Fixed Income FundsFund Complex,
since 2016
The Hanover Insurance Group, Inc.,
since 2015
(Chair since December 2020)
Huntsman Corporation, since 2020
Prior board service: Envestnet, Inc. (2013-2016)
Qualifications
Business Operations
Corporate Governance/ESG
Financial Expertise/Literacy
Industry Experience
Investment Markets
Other Public Company Board Experience
Public Company Executive Experience
Regulatory/Risk Management
Technology/Digital Transformation | |
| | | | | Director since 2008
Age at Annual
Meeting 6264
Independent
Director
Chairman of the
Board of
Directors
Committees
Governance
Human Capital | | | Kevin T. Kabat | | | | | Mr. Kabat is the Chairman of Unum’s Board of Directors, and the retired Chief Executive Officer and Vice Chairman of Fifth Third Bancorp, a diversified financial services company. He also served in numerous executive positions with Fifth Third. He has executive leadership experience, extensive financial, operating and strategic planning expertise and understands the importance of risk management and the challenges of managing a business in a highly regulated industry. Mr. Kabat also has experience serving on boards of publicly traded companies. | | | | | | | | | | | Career Experience | | | Qualifications | | | | Fifth Third Bancorp
CEO (2007-2015)
President (2006-2012)
Other executive roles, including
with predecessor
companies
Public Company Board Experience
E*TRADE Financial Corporation,
since 2016
NiSource Inc., since 2015 (Vice
Chairman since 2018)
Fifth Third Bancorp (2007-2016,
including Executive Chairman from
2008-2010 and Executive Vice
Chairman from 2012-2016) | | | Business Operations
Capital Management
Corporate Governance/ESG
Financial Expertise/Literacy
Industry Experience
Other Public Company Board Experience
Public Company Executive Experience
Regulatory/Risk Management | | | | | | | | | | | Public Company Board Experience | | | |
| | | | | | | | | NiSource Inc., since 2015 (Chair since May 2019)
Prior board experience: E*TRADE Financial Corporation
(2016-2020, including Lead Independent Director from
2016-2020); Fifth Third Bancorp (2007-2016, including
Executive Chairman from 2008-2010 and Executive
Vice Chairman from 2012-2016) | | | | |
20 2019
2021 PROXY STATEMENT 25
TABLE OF CONTENTS INFORMATION ABOUT THE BOARD OF DIRECTORS
| | | Director since 2012
Age at Annual
Meeting 5759
Independent
Director
Committees
Audit (chair)
Risk and Finance
(chair)
Audit | | Timothy F. Keaney | | | | Mr. Keaney retired as the Vice Chairman of the Bank of New York Mellon Corporation (BNY Mellon), a global investments company, prior to which he held various executive positions within the organization. He possesses significant operational, investment and financial experience with a public company in a highly regulated industry, including lengthy periods of executive leadership service in the U.K. Mr. Keaney is considered an audit committee financial expert under SEC regulations. | | | | | | | | | Career Experience | | | Qualifications | | | The Bank of New York Mellon
Corporation
Vice Chairman (2010-2014)
CEO, Investment Services (2013-2014)
(2013-2014)
CEO and co-CEO, Asset Servicing
(2007-2012)
Other executive roles | | | Accounting/Auditing
Business Operations
Capital Management
Corporate Governance/ESG
Financial Expertise/Literacy
Industry Experience
International
Investment Markets
Public Company Executive Experience
Regulatory/Risk Management | | |
| |
| | | | | Director since 2004
Age at Annual
Meeting 6971
Independent
Director
Committees
Governance
(chair)
Regulatory
Compliance | | | Gloria C. Larson | | | | | Ms. Larson retired as the President of Bentley University, one of the leading business schools in the U.S. Prior to her tenure at Bentley, she held numerous leadership positions in the legal, public policy and business fields. She possesses extensive experience in public service and regulatory issues, corporate governance and advising clients in the course of practicing law. Ms. Larson also has experience serving on boards of publicly traded companies. | | | | | | | | | | | Career Experience | | | Qualifications | | | | Harvard University Graduate School of Education
President in Residence (2018-2019)
Bentley University
President (2007-2018)
Foley Hoag LLP
Law firm partner (1996-2007, including service as
Co-Chair of Governmental Practices Group)
Other leadership positions with the Commonwealth
of Massachusetts (Secretary of Economic Affairs)
and the Federal Trade Commission (Deputy
Director of Consumer Protection) | | | Business Operations
Corporate Governance/ESG
Financial Expertise/Literacy
Other Public Company Board Experience
Regulatory/Risk Management | | | |
| | | | | | | | | | | Public Company Board Experience | | Harvard University Graduate
School of Education
President in Residence
(since 2018)
Bentley University
President (2007-2018)
Foley Hoag LLP
Law firm partner and Co-Chair
of Governmental Practices Group
Other leadership positions with the
Commonwealth of
Massachusetts (Secretary of
Economic Affairs) and the Federal
Trade Commission (Deputy
Director of Consumer Protection)
| Boston Private Financial Holdings, Inc.,
since 2015
Qualifications
Accounting/Auditing
Business Operations
Capital Management
Corporate Governance/ESG
Financial Expertise/Literacy
Other Public Company Board Experience
Regulatory/Risk Management | |
2019
26 2021 PROXY STATEMENT 21
TABLE OF CONTENTS INFORMATION ABOUT THE BOARD OF DIRECTORS
| | | | | Director since 2015
Age at Annual
Meeting 5052
Director
President and CEO | | | Richard P. McKenney | | | | | Mr. McKenney is the President and Chief Executive Officer of Unum, previously having served as Executive Vice President and Chief Financial Officer. He has significant executive management, financial and insurance industry experience through his prior service as CFO of Unum and other public insurance companies, and through his current service as CEO. He has an intimate knowledge of all aspects of our business and industry, including operational, risk management and public policy, and close working relationships with senior management. Mr. McKenney also has experience serving on boards of publicly traded companies. | | | | | | | | | | | Career Experience | | | Qualifications | | | | Unum Group
President and CEO (since 2015)
Chief Financial Officer Executive Vice President and CFO (2009-2015)
Sun Life Financial, Inc.
Executive Vice President and Chief
Financial Officer
Public Company Board ExperienceCFO (2007-2009)
U.S. Bancorp, since 2017 Executive Vice President (2006-2007) | | | Accounting/Auditing
Business Operations
Capital Management
Corporate Governance/ESG
Financial Expertise/Literacy
Industry Experience
International
Other Public Company Board Experience
Public Company Executive Experience
Regulatory/Risk Management | | | | | | | | Public Company Board Experience | | | | U.S. Bancorp, since 2017 | |
| | | | Director since 2015
Age at Annual
Meeting 6264
Independent
Director
Committees
Governance
Human Capital | | | Ronald P. O'Hanley | | | | Mr. O’Hanley is the Chairman, President and Chief Executive Officer of State Street Corporation, a provider of financial services to institutional investors worldwide, having previously served as the President and Chief Operating Officer. Prior to that he served as the President and Chief Executive OfficerCEO of State Street Global Advisors, the investment management arm of State Street Corporation. He has deep executive management and operational experience within the financial services industry, both domestically and internationally, as well as experience leading investment, financial and risk functions at large, global organizations. | | | | | | | | Career Experience | | Qualifications | | | State Street Corporation
Chairman, since 2020; President and CEO, since 2019
President and COO (2017-2018)
Vice Chairman (during 2017)
President and CEO, State Street Global Advisors
(2015-2017) Fidelity Investments
President of Asset Management and Corporate
Services, and member of Executive Committee
(2010-2014) Other senior leadership positions with The Bank
of New York Mellon Corporation and McKinsey
& Company, Inc. | | Accounting/Auditing
Business Operations
Capital Management
Corporate Governance/ESG
Financial Expertise/Literacy
Industry Experience
International
Investment Markets
Other Public Company Board Experience
Public Company Executive Experience
Regulatory/Risk Management | | | | | | | | Public Company Board Experience | | | | State Street Corporation
President and CEO (since 2019)
President and COO (2017-2018)
Vice Chairman (during 2017)
President and CEO, State Street
Global Advisors (2015-2017)
Fidelity Investments
President of Asset Management
and Corporate Services, and
member of Executive Committee
(2010-2014)
Other senior leadership positions
with The Bank of New York
Mellon Corporation and
McKinsey & Company, Inc. | State Street Corporation, since 2019
Qualifications
Accounting/Auditing
Business Operations
Capital Management
Corporate Governance/ESG
Financial Expertise/Literacy
Industry Experience
International
Investment Markets
Public Company Executive Experience
Regulatory/Risk Management
(Chairman since 2020) | |
22 2019
2021 PROXY STATEMENT 27
TABLE OF CONTENTS INFORMATION ABOUT THE BOARD OF DIRECTORS
| | | | | Director since 2015
Age at Annual
Meeting 5860
Independent
Director
Committees
Audit
Regulatory
Compliance | | | Francis J. Shammo | | | | | Mr. Shammo joined private equity firm Stonepeak Infrastructure Partners as a consultant in 2019. He retired in 2016 as the Executive Vice President and Chief Financial Officer of Verizon Communications, Inc., a leading communications provider, prior to which he held increasingly senior leadership positions within the organization.positions. He has significant executive management, financial, operational and risk management experience in the technology-heavy telecommunications industry, and has led business units with responsibility for sales, marketing and customer service for customers worldwide. He is also a certified public accountant and qualifies as an audit committee financial expert under SEC regulations. | | | | | | | | | | | Career Experience | | | Qualifications | | | | Stonepeak Infrastructure Partners
Consultant, (since 2019)since 2019
Verizon Communications, Inc.
EVP and CFO (2010-2016)
President and CEO, Verizon
Telecom and Business (2010)
President – Wireline (2009-2010)
Other executive positions with
Verizon and its predecessor,
which he joined in 1989
Public Company Board Experience
Avis Budget Group, since 2018 | | | Accounting/Auditing
Business Operations
Capital Management
Financial Expertise/Literacy
International
Other Public Company Board Experience
Public Company Executive Experience
Regulatory/Risk Management
Technology/Digital Transformation | |
Additional Current Director - Retiring at the Annual Meeting
| | | | | | | | Public Company Board Experience | | | | |  Director since 2007(also 2004-2005)Age at AnnualMeeting 72IndependentDirectorCommittees
Audit (chair) Risk and Finance | | | E. Michael CaulfieldPrior board service: Avis Budget Group Inc.
(2018-2020) | | | | | | Mr. Caulfield retired as the President of Mercer Human Resources Consulting, prior to which he held numerous executive positions at Prudential Insurance Company. He brings to the Board senior leadership experience in finance, investments and executive management in both the insurance and broader financial services industry. He serves as our Audit Committee chairman and is an audit committee financial expert under SEC regulations.
| Career Experience
| Qualifications
| Mercer Human Resource
Consulting
President (2005-2006)
Chief Operating Officer (2005)
Prudential Insurance Company
Executive Vice President,
Financial Management
CEO of Prudential Investments
President of Prudential Preferred
Financial Services and
Prudential Property and
Casualty Company
| Accounting/Auditing
Business Operations
Capital Management
Corporate Governance Leadership
Financial Expertise/Literacy
Industry Experience
International
Investment Markets
Public Company Executive Experience
Regulatory/Risk Management
|
2019
28 2021 PROXY STATEMENT 23
TABLE OF CONTENTS INFORMATION ABOUT THE BOARD OF DIRECTORS
Summary of Director Qualifications and Experience This table provides a summary view of the qualifications and attributes of each director nominee. 
*Tenure and age calculated as of the 20192021 Annual Meeting. 24 2019
2021 PROXY STATEMENT 29
TABLE OF CONTENTS INFORMATION ABOUT THE BOARD OF DIRECTORS
Our corporate governance guidelines provide that a substantial majority of the Board will be independent. For a director to be considered independent, the Board must determine that the director has no material relationship with our company, and the director must meet the requirements for independence under the listing standards of the New York Stock Exchange (NYSE). The Board has also determined that certain categories of relationships are not considered to be material relationships that would impair a director’s independence. These independence standards are listed in our corporate governance guidelines. The Governance Committee reviews information about the directors’ relationships and affiliations that might affect their independence and makes recommendations to the Board as to the independence of the directors. In making independence determinations, the Board considers all relevant facts and circumstances. In this regard, the Board considered that each of the non-employee directors (other than Mr. Keaney), or one of their immediate family members, is or was during the last three fiscal years a director, trustee, advisor, or executive or served in a similar position at another business that had dealings with our company during those years. In each case, these have been ordinary course dealings (business(e.g., where the other business obtains insurance policies from us or we acquire, dispose or receive interest on debt security investments or make payments for trustee, depository and commercial banking business relationships) involving amounts less than 1% of both our and the other business’ total consolidated revenues for such fiscal year or in which the director's only interest arose only from his or her position as a director of the other business. In addition, eachNone of Mses. DeVore and Larson,our non-employee directors, or oneany of their immediate family members, is or was during the last three fiscal years, a director, executive, or employee of a charitable organization or university that received contributions from us (other than non-discretionarynon- discretionary matching contributions) in excess of less than $120,000 in any one fiscal year. Based on a review of the findings and recommendations of the Governance Committee and applying the standards described above, the Board has determined that each of Messrs.Mr. Bunting, Caulfield,Ms. Cross, Ms. DeVore, Mr. Echevarria, Ms. Egan, Mr. Kabat, Mr. Keaney, Ms. Larson, Mr. O’Hanley and Mr. Shammo and Mses. Cross, DeVore, Egan, and Larson is (as well as Ms. Godwin who retired in 2018, was during her tenure) anare independent director.directors. Mr. McKenney, our President and CEO, is not an independent director. The Human Capital Committee (the "Committee"“Committee”) reviews our non-employee director compensation annually and makes recommendations for any adjustments to the Board as appropriate. With the assistance of its independent third-party compensation consultant, Pay Governance LLC, the Committee reviews peer group data to understand market practices for director compensation. Our non-employee director compensation is compared to that of companies in two peer groups: (1) the Proxy Peer Group described beginning on page 5258 of this proxy statement; and (2) a general industry peer group,sample, which consisted of 139126 companies for the Committee review completedheld in December 2018.2020. The Committee believes the companies in the general industry peer groupsample provide appropriate comparisons given that their market capitalizations and revenues are well aligned with those of the company (data below as of December 2017)2019): Market capitalizations ranging from $5.9$5.7 billion at the 25th percentile to $16.9$19.8 billion at the 75th percentile (compared to Unum market capitalization of $12.3$6.0 billion); and TABLE OF CONTENTS
INFORMATION ABOUT THE BOARD OF DIRECTORS
Revenues ranging from $4.3$4.8 billion at the 25th percentile to $12$12.3 billion at the 75th percentile (compared to Unum revenues of $11.3$12.0 billion). TABLE OF CONTENTS INFORMATION ABOUT THE BOARD OF DIRECTORS
The use of two peer groups provides an indication of director pay levels both within the insurance industry as well as the broader market. The Committee uses the approximate median of these peer groups as a reference point for setting director compensation. At the time of the review in December 2018, both the annual cash retainer and annual restricted stock award for non-employee directors were below the Proxy Peer Group median.Based on
The Committee's consultant provided its annual analysis of non-employee director compensation at the December 2020 Committee meeting. At that time, director compensation was slightly above the Proxy Peer Group median. Based on this review, the Committee’s consultant recommended an increase in orderdid not recommend any changes to bring compensation levels more in line with the market median. After discussion, the Committee deferred consideration of any potential action until May 2019.cash or equity retainers. Elements of Non-Employee Director Compensation in 20182020 Non-employee directors receive cash retainers and equity awards as outlined in the following table: NON-EMPLOYEE DIRECTOR COMPENSATION All Directors:
| | | | | | Annual cash retainer | | | $ 110,000120,000 | | Annual restricted stock unit award | | | 160,000 | 150,000
| | Committee Chairs:
| | | | | | Additional annual cash retainer - Audit Committee | | | 25,000 | | Additional annual cash retainer - Human Capital Committee
| | 20,000
| | Additional annual cash retainer - Risk and Finance Committee
| | 20,000
| | Additional annual cash retainer - Governance Committee
| | 15,000
| | Additional annual cash retainer - Regulatory Compliance Committee
| | 15,000
| | Board Chairman:
| | | | | | Additional annual cash retainer (paid 50% in quarterly installments)cash and 50% in equity for 2020) | | | 225,000 | 200,000
| |
For new Board members, these amounts are prorated for partial-year service based on the date of election to the Board. Amounts may be deferred at the election of each director for payment in company common stock at a future date. Directors deferring cash compensation receive a number of deferred share rights equal to the number of whole shares of common stock that could be purchased for the deferred amount, based on the closing price of a share of common stock on the date the cash compensation would otherwise be payable. Directors’ expenses offor attending Board and committee meetings, or other meetings relating to company business, are paid by the company. Directors are eligible to participate in our employee matching gifts program. Under this program, we match up to $10,000 each year for eligible gifts to non-profitnonprofit organizations. Directors can also elect to contribute to the Unum Political Action Committee (PAC) through a deduction from their annual fees earned. For those who choose to make a contribution to the Unum PAC and take advantage of the matching contribution feature, the company will make a matching contribution to the qualifying charity of the Board member's choice up to the $10,000 matching gift limit. Mr. McKenney is employed by the company and receives no additional compensation for his Board service. 26 2019
2021 PROXY STATEMENT 31
TABLE OF CONTENTS INFORMATION ABOUT THE BOARD OF DIRECTORS
Our Board compensation year starts at theeach Annual Meeting each year and runs to the next Annual Meeting. The annual Board and committee chair cash retainers and restricted stock unit award are paid/granted annually in advance. The additional cash retainer for the Board Chairman is paid quarterly in advance.the form of 50% cash and 50% equity. The following table provides details of the compensation of each person who served as a non-employee director during 2018. Ms. Cross did not join the Board until February 2019 and therefore did not receive any compensation during 2018. Mr. Bunting was elected as the chair of the Regulatory Compliance Committee in May 2018.2020. NON-EMPLOYEE DIRECTOR COMPENSATION Name | Fees Earned
or Paid in Cash(1) | Stock
Awards(2) | All Other
Compensation(3) | Total | Theodore H. Bunting, Jr. | | $ 125,000 | | $ | 150,000 | | | — | | $ | 275,000 | | E. Michael Caulfield | | 135,000 | | | 150,000 | | | 10,000 | | | 295,000 | | Susan D. DeVore | | 137,425 | | | 150,000 | | | — | | | 287,425 | | Joseph J. Echevarria | | 109,993 | | | 150,000 | | | — | | | 259,993 | | Cynthia L. Egan | | 130,000 | | | 150,000 | | | 10,000 | | | 290,000 | | Pamela H. Godwin | | — | | | — | | | 5,000 | | | 5,000 | | Kevin T. Kabat | | 310,000 | | | 150,000 | | | — | | | 460,000 | | Timothy F. Keaney | | 129,989 | | | 150,000 | | | — | | | 279,989 | | Gloria C. Larson | | 125,000 | | | 150,000 | | | 10,000 | | | 285,000 | | Ronald P. O'Hanley | | 109,993 | | | 150,000 | | | 10,000 | | | 269,993 | | Francis J. Shammo | | 110,000 | | | 150,000 | | | — | | | 260,000 | |
| | Theodore H. Bunting, Jr. | | | $145,000 | | | $159,996 | | | $5,000 | | | $309,996 | | | | Susan L. Cross | | | 120,006 | | | 159,996 | | | 10,000 | | | 290,002 | | | | Susan D. DeVore | | | 120,000 | | | 159,996 | | | 5,000 | | | 284,996 | | | | Joseph J. Echevarria | | | 144,999 | | | 159,996 | | | — | | | 304,995 | | | | Cynthia L. Egan | | | 145,000 | | | 159,996 | | | 10,000 | | | 314,996 | | | | Kevin T. Kabat | | | 232,500 | | | 272,503 | | | — | | | 505,003 | | | | Timothy F. Keaney | | | 145,000 | | | 159,996 | | | — | | | 304,996 | | | | Gloria C. Larson | | | 145,000 | | | 159,996 | | | 10,000 | | | 314,996 | | | | Ronald P. O'Hanley | | | 120,005 | | | 159,996 | | | 10,000 | | | 290,001 | | | | Francis J. Shammo | | | 120,000 | | | 159,996 | | | 10,000 | | | 289,996 | |
| (1)
| Amounts represent retainers, including for service as Board Chairman and committee chairs, which were paid in 2018,2020, either in cash or deferred shares, for 2018/20192020/2021 Board service. Messrs. Echevarria and O'Hanley each elected to defer their cash retainers, which were converted to deferred share rights with the value reflected in the table. Mr. Keaney elected to defer a portion of his cash retainer, which was converted to deferred share rights with the value included in the table. Ms. DeVore's amount also includes a prorated retainer for her 2017/2018 board year service based on the date she joined the Board in February of 2018. |
Board members were given the opportunity to make a contribution to the Unum PAC from their fees earned. If the Board member elected to make a Unum PAC contribution, it was deducted from their cash fees and the remainder was paid in cash or converted to deferred share rights, based on the Board member's election. For those who chose to make a contribution to the Unum PAC and take advantage of the matching contribution feature, the company would make a matching contribution to the qualifying charity of the Board member's choice up to the $10,000 matching gift limit. For those who elect to have their Unum PAC contribution matched, the match is made in the next calendar year (i.e., in 2020 for the 2019 contribution or in 2021 for the 2020 contribution). Ms. Cross, Mr. Echevarria and Mr. O'Hanley each elected to defer their cash retainers, which were converted to deferred share rights with the value reflected in the table. | (2)
| On May 24, 2018,28, 2020, each then servingthen-serving non-employee director was granted 3,89210,050 restricted stock units (RSUs) under our Stock Incentive Plan of 2017. Mr. Kabat was granted an additional 7,067 RSUs for his service as Board Chairman. The amounts shown are the grant date fair market values of these units. Ms. Godwin retired from the Board at the 2018 Annual Meeting and did not receive a grant of RSUs for the 2018/2019 Board year. |
We account for stock-based payments under the requirements of Accounting Standards CodificationFASB ASC Topic 718 Compensation“Compensation - Stock CompensationCompensation” (ASC 718). A complete discussion of the assumptions made as well as the financial impact of this type of compensation can be found in Notes 1 and 11 of the Consolidated Financial Statements in Part II, Item 8 of our Form 10-K for the year ending December 31, 2018.2020. TABLE OF CONTENTS INFORMATION ABOUT THE BOARD OF DIRECTORS
The following table provides details of the unvested RSUs, including dividend equivalent units credited as additional RSUs, held by each non-employee director as of December 31, 2018.Director Name | Number of Restricted
Stock Units Held at
Fiscal Year End | Director Name | Number of Restricted
Stock Units Held at
Fiscal Year End | Theodore H. Bunting, Jr. | 3,948 | Kevin T. Kabat | 3,948 | E. Michael Caulfield | 3,948 | Timothy F. Keaney | 3,948 | Susan D. DeVore | 4,693 | Gloria C. Larson | 3,948 | Joseph J. Echevarria | 3,948 | Ronald P. O'Hanley | 3,948 | Cynthia L. Egan | 3,948 | Francis J. Shammo | 3,948 |
2020. Deferred share rights are fully vested and not reflected in the table below. | | Theodore H. Bunting, Jr. | | | 10,348 | | | Kevin T. Kabat | | | 17,625 | | | | Susan L. Cross | | | 10,348 | | | Timothy F. Keaney | | | 10,348 | | | | Susan D. DeVore | | | 10,348 | | | Gloria C. Larson | | | 10,348 | | | | Joseph J. Echevarria | | | 10,348 | | | Ronald P. O'Hanley | | | 10,348 | | | | Cynthia L. Egan | | | 10,348 | | | Francis J. Shammo | | | 10,348 | |
(3)
| (3) | With the exception of Ms. Godwin, who retired from the company in 2018, theThe amounts shown represent the company’s matching gifts resulting from the directors’ charitable gifts. The Unum PAC matching gifts elections are reflected for those who chose to make a contribution to the Unum PAC during 2019 and chose to take advantage of the matching contribution feature during 2020. For Ms. Godwin, in recognition of her retirement from the Board, the companythose who made a $5,000 charitableUnum PAC contribution during 2020 and elected to have their Unum PAC contribution matched, the match will be made in her name.2021 and reflected in the Non-Employee Director Compensation table next year. |
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INFORMATION ABOUT THE BOARD OF DIRECTORS
Director Stock Ownership and Retention Requirements Each non-employee director is required to own Unum equity securities with an aggregate value of five times the director’s annual cash retainer (for a total current retentionownership requirement of $550,000)$600,000). New directors have five years from the date of their election to meet the ownership requirement. In addition, eachduring 2020, non-employee director isdirectors were required to retain 60% of the shares underlyingacquired upon the vesting of their annual restricted stock unit awardRSU awards for at least one year from the time they vest,of vesting, and to retain at least the amount of equity securities necessary to meet his or her ownership requirement until retirement from the Board. Effective January 1, 2021, non-employee directors must retain 100% of the shares they receive as director compensation until their ownership requirement is met and must thereafter continue to meet the ownership requirement after giving effect to any proposed disposition of shares. This change was made to align with a similar change to the retention requirements for executives (as discussed on page 80). The Committee annually reviews each director’s stock ownership level. If a director does not reach his or her ownership requirement within the time period provided, the Committee will determine whether action is appropriate. As of December 31, 2018, eight2020, nine of the ten10 non-employee directors serving on the Board at that time had met the ownership requirement. The two directorsonly director who had not met the ownership requirement at year-end 20182020 joined the Board within the past five years and areis expected to meet the ownership requirement within the applicable time period provided. 28 2019
2021 PROXY STATEMENT 33
TABLE OF CONTENTS BOARD AND COMMITTEE GOVERNANCE
BOARD AND COMMITTEE GOVERNANCE Corporate Governance Guidelines The Board of Directors has adopted corporate governance guidelines on a number of significant matters, including director selection and independence, director responsibilities, Board leadership, and management succession. The corporate governance guidelines are available on our investor relations website under the "Corporate Governance"“Corporate Governance” heading at www.investors.unum.com. The Governance Committee regularly reviews developments in corporate governance and recommends updates to the corporate governance guidelines and other documents as necessary or appropriate in response to regulatory requirements and evolving practices. Board Leadership Structure Kevin T. Kabat serves as non-executive Chairman of the Board and Richard P. McKenney serves as President and CEO of the company. As the non-executive Chairman, Mr. Kabat is also deemed the Lead Independent Director and, as such, has the responsibilities outlined in our corporate governance guidelines, including: Presiding at all meetings of the Board, including executive sessions of the non-management and independent directors; Communicating actions/issues arising from executive sessions to the CEO, as appropriate; Authority to call meetings of the independent directors; Authority to approve meeting schedules, agendas and information provided to the Board; Advising the Board on Board development, including Board and committee leadership succession planning; Unless otherwise determined by the Board, meeting with each director to evaluate the Board and committees and reporting this evaluation to the Governance Committee; When requested by the independent directors, hiring advisors to the independent directors, to be paid by the company; Receiving, through the Corporate Secretary, communications from shareholders seeking to communicate with the Board; Serving as a liaison to the independent directors; and If requested by major shareholders, ensuring that he is available for consultation and direct communication. The Board believes the current leadership structure provides significant independent oversight of management, as Mr. McKenney (our CEO and an employee of the company) is the only member of the Board who is not an independent director. The Board holds executive sessions, without management present, at each regularly scheduled in-person Board meeting. In 2018,2020, the independent directors met alone in executive session fivesix times, and each session was chaired by Mr. Kabat. TABLE OF CONTENTS BOARD AND COMMITTEE GOVERNANCE
Our bylaws and corporate governance guidelines allow the offices of Chairman and CEO to be filled by the same or different individuals. This allows the Board flexibility to select the appropriate leadership for our company based on a number of factors, including the specific needs of the business and what best serves the company TABLE OF CONTENTS
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and shareholders at a given time. The independent directors of the Board will continue to review the Board’s leadership structure periodically and may modify this structure from time to time as they determine appropriate and in the best interests of the company and shareholders. Board Meetings and Attendance The Board of Directors met seven11 times during 2018.2020, including additional meetings that were scheduled to brief the Board on and discuss the regulatory examination of statutory LTC reserves and the company’s response to the emergence of the pandemic and its impact on our business and operations. Depending upon committee assignments, a director generally would have had 1619 to 2226 meetings to attend in 2018.2020. Average director attendance at Board and committee meetings was 98%, and each incumbent director attended at least 89%92% of the total number of meetings of the Board and committees on which he or she served during the period of the director’s service in 2018.2020. Directors are expected to attend Annual Meetings. All current directors serving on the Board at the time of the 20182020 Annual Meeting attended that meeting. The Board of Directors has five standing committees: Audit, Risk and Finance, Governance, Human Capital, and Regulatory Compliance. Each committee has a charter that is available on our investor relations website under the "Corporate Governance"“Corporate Governance” heading at www.investors.unum.com. In addition to the duties contained in their respective charters (some of which are listed under “Committee Responsibilities” below), each committee may be assigned additional tasks by the Board, and each is charged with reporting its activities to the Board. BOARD MEMBERS AND COMMITTEES Name | Term
Expires | Audit | Risk &
Finance | Governance | Human
Capital | Regulatory
Compliance | Theodore H. Bunting, Jr.(1) | 2019 | | | | • | Chair | E. Michael Caulfield(2) | 2019 | Chair | • | | | | Susan L. Cross(3) | 2019 | • | • | | | | Susan D. DeVore | 2019 | • | • | | | | Joseph J. Echevarria | 2019 | | • | • | | | Cynthia L. Egan | 2019 | | | | Chair | • | Kevin T. Kabat | 2019 | | | • | • | | Timothy F. Keaney | 2019 | • | Chair | | | | Gloria C. Larson | 2019 | | | Chair | | • | Richard P. McKenney | 2019 | | | | | | Ronald P. O'Hanley(4) | 2019 | | | • | • | | Francis J. Shammo | 2019 | • | | | | • | 2018 Committee Meetings | | 9 | 5 | 5 | 6 | 4 |
| (1) | Mr. Bunting rotated from the Audit Committee to the Regulatory Compliance Committee in May 2018. He was named Chair at that time as well. |
| (2) | As noted on page 23, Mr. Caulfield will retire from the Board at the 2019 Annual Meeting. |
| (3) | Ms. Cross joined the Board effective February 25, 2019. |
| (4) | Mr. O'Hanley rotated from the Risk and Finance Committee to the Governance Committee in May 2018. |
| | Theodore H. Bunting, Jr. | | | | | | | | | | | | • | | | Chair | | | | Susan L. Cross | | | • | | | • | | | | | | | | | | | | | Susan D. DeVore | | | • | | | • | | | | | | | | | | | | | Joseph J. Echevarria | | | | | | Chair | | | • | | | | | | | | | | Cynthia L. Egan | | | | | | | | | | | | Chair | | | • | | | | Kevin T. Kabat | | | | | | | | | • | | | • | | | | | | | Timothy F. Keaney | | | Chair | | | • | | | | | | | | | | | | | Gloria C. Larson | | | | | | | | | Chair | | | | | | • | | | | Richard P. McKenney | | | | | | | | | | | | | | | | | | | Ronald P. O'Hanley | | | | | | | | | • | | | • | | | | | | | Francis J. Shammo | | | • | | | | | | | | | | | | • | | | | 2020 Committee Meetings | | | 8 | | | 7 | | | 4 | | | 7 | | | 4 | |
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TABLE OF CONTENTS BOARD AND COMMITTEE GOVERNANCE
COMMITTEE RESPONSIBILITIES Listed below are certain areas of responsibilities for the Board's committees. For a complete listing of each committee's responsibilities, please refer to their charters located on our investor relations website under the “Corporate Governance” heading at www.investors.unum.com. Assists the Board in oversight of financial statement and disclosure matters, the effectiveness of internal control over financial reporting, the relationship with our independent auditor, the internal audit function, compliance with legal and regulatory requirements, and financial risk.
Has the sole authority to appoint, oversee and, if necessary, replace the company’s independent auditors.
•
| Assists the Board in oversight of financial statement and disclosure matters, the effectiveness of internal control over financial reporting, the relationship with our independent auditor, the internal audit function, compliance with legal and regulatory requirements, and financial risk. |
•
| Has the sole authority to appoint, oversee and, if necessary, replace the company’s independent auditors. |
•
| A more complete description of the responsibilities of the Audit Committee is included in the Report“Report of the Audit CommitteeCommittee” on page 3948. |
Assists the Board in implementation and oversight of our corporate governance policies. The Governance committee identifies qualified candidates for the Board and recommends the individuals to be nominated by the Board for election as directors.
Develops and recommends to the Board our corporate governance guidelines.
Oversees the process for Board and committee evaluations.
Advises the Board on corporate governance matters, including with respect to the size, composition, operations, leadership, succession plans and the needs of the Board and its committees.
Reviews reports concerning environmental, governance and corporate social responsibility matters of significance to the company.
•
| Assists the Board in implementation and oversight of our corporate governance policies. The Governance Committee identifies qualified candidates for the Board and recommends the individuals to be nominated by the Board for election as directors. |
•
| Develops and recommends to the Board our corporate governance guidelines. |
•
| Oversees the process for Board and committee evaluations. |
•
| Advises the Board on corporate governance matters, including with respect to the size, composition, operations, leadership, succession plans and the needs of the Board and its committees. |
•
| Oversees the company's strategy, reputation and activities concerning corporate sustainability, including environmental and social risks and opportunities. |
Human Capital Committee(3) |
Assists the Board in oversight of our compensation and benefit programs, and related risks to support business plans, attract and retain key executives, and tie compensation to performance.
Establishes our general compensation philosophy, principles and practices.
Takes into consideration the results of the company’s most recent say-on-pay vote.
Evaluates and approves compensation and benefit plans.
Annually reviews performance and approves compensation of the CEO and other executive officers.
Reviews and recommends to the Board the form and amount of director compensation.
Reviews the Compensation Discussion and Analysis and related disclosures in our proxy statements.
•
| Assists the Board in oversight of our compensation and benefit programs, and related risks to support business plans, attract and retain key executives, and tie compensation to performance. |
•
| Establishes our general compensation philosophy, principles and practices. |
•
| Takes into consideration the results of the company’s most recent say-on-pay vote. |
•
| Evaluates and approves compensation and benefit plans. |
•
| Annually reviews performance and approves compensation of the CEO and other executive officers. |
•
| Reviews and recommends to the Board the form and amount of director compensation. |
•
| Oversees the company's development and implementation of, and monitors the effectiveness of, the company's policies and strategies relating to its human capital management function, talent management, inclusion and diversity, and workplace and employment practices. |
Regulatory Compliance Committee(4) |
•
| Assists the Board in its oversight of regulatory, compliance, policy and legal matters and related risks and compliance with laws and regulations. |
•
| Monitors the effectiveness of our compliance efforts concerning applicable regulatory and legal requirements and internal policy. |
•
| Reviews and discusses with management any communication to or from regulators or governmental agencies and any complaints, reports and legal matters that raise significant issues regarding our compliance with applicable laws or regulations. |
•
| Monitors the investigation and resolution of any significant instances of noncompliance or potential compliance violations. |
2019
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Regulatory Compliance Committee(4)
|
Assists the Board in its oversight of regulatory, compliance, policy and legal matters and related risks and compliance with laws and regulations.
Monitors the effectiveness of our compliance efforts concerning applicable regulatory and legal requirements and internal policy.
Reviews and discusses with management any communication to or from regulators or governmental agencies and any complaints, reports and legal matters that raise significant issues regarding our compliance with applicable laws or regulations.
Monitors the investigation and resolution of any significant instances of noncompliance or potential compliance violations.
Risk and Finance Committee(5) |
Assists the Board in oversight of our investments, capital and financing plans and activities, including dividends and borrowings, and related financial matters and the associated risks. It also oversees our enterprise risk management activities and other risks not specifically allocated to another committee.
Monitors, evaluates and recommends to the Board capital and financing plans, activities, requirements and opportunities.
Oversees implementation of and compliance with investment strategies, guidelines and policies.
Authorizes loans and investments of the company.
Reviews, assesses and reports on the impact of various finance activities on our debt ratings.
Monitors, evaluates and makes recommendations regarding matters pertaining to our Closed Block segment, including long-term care business, that could have meaningful impact upon any of the matters for which the Risk and Finance Committee has oversight responsibility.
•
| Assists the Board in oversight of our investments, capital and financing plans and activities, including dividends and borrowings, and related financial matters and the associated risks. It also oversees our enterprise risk management activities and other risks not specifically allocated to another committee. |
•
| Monitors, evaluates and recommends to the Board capital and financing plans, activities, requirements and opportunities. |
•
| Oversees implementation of and compliance with investment strategies, guidelines and policies. |
•
| Authorizes loans and investments of the company. |
•
| Oversees and receives reports concerning overall management of risks arising under the company's information security (including cybersecurity) and business resiliency (including disaster recovery and business continuity) programs. |
•
| Monitors, evaluates and makes recommendations regarding matters pertaining to our Closed Block segment, including long-term care business, that could have meaningful impact upon any of the matters for which the Risk and Finance Committee has oversight responsibility. |
(1)
| All members of the Audit Committee meet the independence requirements of the SEC and the NYSE and our corporate governance guidelines. All fivefour members of the Audit Committee are "audit“audit committee financial experts"experts” under SEC regulations, and are "financially literate"“financially literate” as required by the NYSE. |
| (2)
| All members of the Governance Committee meet the independence requirements of the NYSE and our corporate governance guidelines. |
| (3)
| All members of the Human Capital Committee meet the independence requirements of the NYSE for directors and compensation committee members and our corporate governance guidelines and are "non-employee directors"“non-employee directors” for purposes of Rule 16b-3 under the Securities Exchange Act of 1934 and "outside directors" for purposes of Section 162(m) of the Internal Revenue Code.1934. |
| (4)
| All members of the Regulatory Compliance Committee meet the independence requirements of our corporate governance guidelines. |
| (5)
| All members of the Risk and Finance Committee meet the independence requirements of our corporate governance guidelines. |
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Limits on Board and Audit Committee Service While we recognize that Board members benefit from service on the boards of other companies and such service is encouraged, the Board believes it is critical that directors be able to dedicate sufficient time to their service on our Board. To that end, no director may serve on more than three public company boards in addition to our Board, or on more than two audit committees of public companies in addition to our Audit Committee. The Board’s Role in Risk Oversight The Board has an active role, as a whole and also at the committee level, in overseeing management of the company’s risks. The Board is responsible for managing strategic risk, and it regularly reviews information regarding our capital, liquidity and operations, as well as the risks associated with each. The Risk and Finance Committee is responsible for oversight of the company’s enterprise risk management program, including financial risk, operational risk, and receives a report on these activities at least quarterly. The Risk and Finance Committee is also responsible for overseeing risks associated with investments, capital and financing plans and activities, and related financial matters, including those pertaining to our Closed Block segment, and any other risks not specifically allocated to another committee for oversight. In addition, the Risk and Finance Committee oversees risks arising under our information security and business resiliency programs, including cybersecurity, disaster recovery, and business continuity risks, although other committees oversee cyber-related operational risks as necessary to carry out their responsibilities. The Audit Committee is responsible for oversight of financial TABLE OF CONTENTS BOARD AND COMMITTEE GOVERNANCE
risk and continues to fulfill its NYSE-mandated responsibility to discuss guidelines and policies with respect to the process by which the company undertakes risk assessment and risk management. The Audit Committeefull Board also takes an active role in overseeing cybersecurity risk, which in 2019 included participation in a progressive, cyber incident tabletop exercise with senior management and Risk and Finance Committee also meet jointly as appropriatethird-party experts to oversee certain risksincrease preparedness for which they have overlapping responsibility, including operational risks relating toa potential data privacy, cybersecurity and business continuity.breach. The Human Capital Committee is responsible for overseeing the management of risks relating to our compensation plans and programs and, as more fully described below, receives an annual report from the company’s chief risk officer with respect toChief Risk Officer about these risks. The Regulatory Compliance Committee oversees management of risks related to regulatory, compliance, policy and legal matters, both current and emerging and whether of a local, state, federal or international nature. While each committee is responsible for evaluating certain risks and overseeing the management of such risks, the entire Board of Directors is regularly informed through committee reports about such risks in addition to the risk information it receives directly. Each year, the company’s chief risk officer,Chief Risk Officer, in consultation with the Human Capital Committee, undertakes a risk assessment of our compensation programs and practices. This year’s process included the following steps: Review of the overall design and philosophy of the company’s incentive compensation programs. programs; Review and assessment of the 20182020 annual incentive program and long-term incentive program performance measures for alignment betweenwith actual business results, and achievement payout levels. including the resiliency scorecard; Identification of fundamental principles to test, including the SEC’s non-exclusive list of situations where compensation programs may have the potential to raise material risks to the company. company; and Assessment of the incentive programs in light of the company’s primary risks (as disclosed in the company’s 20182020 Form 10-K) and the company’s annual financial and capital plans. Assessment of proposed design changes to the 2019 incentive plans.
Based on this assessment, the following conclusions were reached by the chief risk officerChief Risk Officer and presented to the Human Capital Committee: TABLE OF CONTENTS
BOARD AND COMMITTEE GOVERNANCE
The company’s incentive program targets, thresholds, caps, metric weightings and payout curves are effective control mechanisms. mechanisms; The incentive plans are balanced and align the long-term interests of stakeholders and management. management; The program’s goals are effectively balanced and consistent with the risk levels embedded in the company’s financial and capital plans. plans; and All potential awards are subject to Human Capital Committee discretion, and the company has a recoupment policy in place in the event of a material earnings restatement. Accordingly, our chief risk officerChief Risk Officer and the Human Capital Committee do not believe the company’s compensation programs create risks that are reasonably likely to have a material adverse effect on the company, and that the programs fall within the range of the company's risk appetite. Director Retirement Policy Our bylaws do not allow any person to serve as a director beyond the date of the annual meeting of shareholders immediately following his or her 72nd75th birthday. In accordance with this policy, Mr. Caulfield will retire from the Board effective at the Annual Meeting. TABLE OF CONTENTS BOARD AND COMMITTEE GOVERNANCE
Compensation Committee Interlocks and Insider Participation During 2018,2020, Ms. Egan and Messrs. Bunting, Kabat, and O'Hanley each served as a member of our Human Capital Committee. None of the members has served as an officer of the company, and during 20182020 none of the members was an employee of the company. None of our executive officers served as a member of a board of directors or compensation committee of any other entity that has one or more executive officers serving as a member of our Board or Human Capital Committee. Related Party Transactions and Policy The Board has adopted a written policy concerning related party transactions. This policy covers any transaction in which the company was or is to be a participant and the amount involved exceeds $120,000, and in which any related party had or will have a direct or indirect material interest. A "related party"“related party” means any of our directors, director nominees, executive officers, persons known to us to beneficially own more than 5% of our outstanding common stock, and any of their respective immediate family members, and any entity in which any of these persons has an interest as an employee, principal or 10% or greater beneficial owner or other material financial interest. Prior to entering into a transaction that may be viewed as a related party transaction, the related party must notify our general counsel of the facts and circumstances of the transaction. If the general counsel determines that the proposed transaction is a related party transaction, it is submitted to the disinterested members of the Audit Committee for consideration at the next Committee meeting (or to the chair of the Committee if it is not practical to wait until the next meeting and the chair is not a related party to the transaction). The Committee considers all relevant facts and circumstances, including the benefits to the company, if the related party is an independent director or nominee, the potential effect of entering into the transaction on the director’s or nominee’s independence, any improper conflict of interest that may exist, the availability of other sources for the products and services, the terms of the transaction, and the terms available from or to unrelated third parties generally. TABLE OF CONTENTS
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The transaction may be approved if it is determined in good faith not to be inconsistent with the best interests of the company and shareholders. Based on these procedures, the Committee approved the related party transaction described below. Certain types of transactions are deemed to be pre-approvedpre- approved by the Audit Committee, including executive officer and director compensation arrangements approved by the Board of Directors or the Human Capital Committee, indemnification payments and any transaction between the company and any entity in which a related party has a relationship solely as a director, less than 10% equity holder, or employee (other than an executive officer), or all of these relationships. Transactions with Related Persons The company employs Charlene Glidden, who serves as Vice President, Transformation Office Leader and is a sister-in-law of Michael Q. Simonds, the company's Executive Vice President, PresidentChief Operating Officer. She received compensation of approximately $445,626 for 2020 and Chief Executive Officer of Unum US. Charlene Glidden serves as Vice President, Digital Transformation and does not report within the Unum US organization. Her compensation for 2018 was approximately $460,621, and she participated in compensation and benefit arrangements generally applicable to similarly-situatedsimilarly situated employees. Ms. Glidden does not report within Mr. Simonds' organization, and he is not involved in decisions concerning her compensation. TABLE OF CONTENTS BOARD AND COMMITTEE GOVERNANCE
Codes of Conduct and Ethics The Board has adopted a Code of Conduct establishing certain business practices and ethics applicable to all of our directors, officers and employees. Our Code guides employees on how to abide by the company's principles and access the resources available to address any ethical issues that arise. We provide online and toll-free access to report ethical issues confidentially, conduct annual training and offer self-service access to a variety of educational materials related to issues covered in our Code. The Board has also implemented a separate Code of Ethics applicable to our CEO and certain of our senior financial officers. We expect all employees and officers of Unum to abide by the principles and policies set forth in our codes. Both of these codes, together with any information on certain amendments or any waivers applicable to certain of our executive officers, are available on our investor relations website under the "Corporate Governance"“Corporate Governance” heading at www.investors.unum.com.www.investors.unum.com. Unum continuously strives to operate with the highest standard of excellence and fully understands that integrity and trust are central to all we do to support our customers and employees. This commitment was recently recognized externally, as Unum was named one of the World's Most Ethical Companies in 2021 by The Ethisphere Institute, a nonprofit that defines and measures corporate ethical standards. 2019
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TABLE OF CONTENTS In line with our commitment to open communication and transparency, we have a robust shareholder engagement process that occurs throughout the year. In the late summer and early fall, we begin our
shareholder engagement efforts by contacting each of
our top 50 investors,shareholders, which in 20182020 represented over
68% more than 73% of our outstanding shares. The focus of
these
meetings is to discuss our business strategy and
our
governance and compensation practices, as well
as to
learn about any other topics that are important to
our
shareholders. During 2018,2020, seven shareholders,
representing approximately 24% of our outstanding
shares, accepted our invitation for engagement. Our
independent BoardHuman Capital Committee Chair
Chairman joined management for severaleach of the
shareholderthese meetings. In the late fall, weWe also
met with one
two proxy advisory firmfirms to provide an update on
on our shareholder engagement efforts and gain
further insight into its view regardingtheir views on our compensation
and governance practices and proxy disclosures.disclosures, including
the recent Success Incentive Plan awards. These
communications promote greater engagement with
with our shareholders on various corporate governance
issues and provide an open forum to share
perspectives on our policies and practices.
| |
| |
During the winter, we review with our Governance and Human Capital Committees, and with the full Board, the feedback we received during these shareholder meetings and use it to enhance proxy disclosures and make any recommended governance and compensation changes prior to the next Annual Meeting. Following our Annual Meeting in the spring, we review our shareholder voting results, consider compensation and governance trends and current best practices, and conduct follow-up meetings with investorsshareholders to address any issues. For additional information on feedback we received from our shareholders during our outreach efforts, refer to page 4855. TABLE OF CONTENTS Environmental, Social and Governance Millions of people count on our benefits as part of
We provide a critical financial safety net and we strivefor millions of people, a fact that drives us to deliver for those who count on those commitments and make a difference.us. This focus on doing the right thing guides our approach to sustainability and social responsibility issues.responsibility. Unum has a long tradition of engaging with shareholders, customers, employees, shareholders,suppliers and communities on a variety of environmental, social and governance (ESG) matters. In 2020, we took a number of steps to strengthen and mature our communitiesgovernance and society at large on advocacy, community outreach, environmental responsibilitydisclosure of ESG matters. We finalized a materiality assessment to better understand ESG issues relevant to our organization. This assessment provided valuable internal and good governance. Here are a few ways we aspireexternal stakeholder feedback and has allowed us to integrate corporate responsibility intocontinue expanding the rigor and transparency of our business.Being Good Stewardssustainability initiatives. We also reviewed our materiality assessment results in the context of the Environment
We’re committedUnited Nation's Sustainable Development Goals. These goals aim to helpingend poverty, protect the valuable resourcesplanet and ensure prosperity.
Our materiality assessment is complemented by a governance framework that helps shape our ESG strategy. The Governance Committee of the Board provides oversight and guides the company's sustainability strategy and initiatives. Strategic guidance is also provided by a Sustainability Steering Council comprised of senior officers, while a companion Sustainability Working Council of representatives from across the company provides oversight of specific initiatives. Through this oversight, we all depend ondeveloped a corporate sustainability strategic framework in 2020 to support quality of life for everyone. We do that by strivingprovide a consistent approach to effectively manageour ESG efforts, with goals focused on: Inclusive products and services; Responsible investment decisions; and Reducing our impact on the environment. By implementing business strategies that align ESG issues with key economic drivers, we strive to create long-term value for investors, customers and our employees while benefiting our suppliers and the communities in which we operate. We have also released a more comprehensive report of our progress. Our facilities account for our biggest environmental impacts, and we have made significant strides inESG report is available at www.unum.com/about/responsibility. External Recognition Our commitment to ESG issues has been validated by several areas to measure ourindependent organizations through various recognition programs, including the below. 36 2019
42 2021 PROXY STATEMENT
TABLE OF CONTENTS The Board's Role in ESG As part of their oversight of the company's strategic direction and risk management, Board members monitor progress on Unum's ESG strategies and initiatives. Discussions with senior management focus on the rapidly changing landscape, opportunities for leadership, and execution against strategic goals and priorities. The Board is committed to promoting the development of a strong corporate culture that reflects our customers and home communities. The Governance Committee is responsible for oversight of the ESG program and strategy, although other Board committees regularly discuss and oversee specific areas of risk and opportunity within the scope of their responsibilities. These areas include responsible investments, climate change, public policy, inclusion and diversity, corporate culture, employee engagement, and corporate social responsibility. The Board also seeks to understand investor and stakeholder expectations, and the impact of Unum's business operations on these and improve efficienciesother ESG-related issues. Good Governance and Responsible Business We work to reduce our carbon footprint. Employee ‘green teams’ also promote environmentally smart ways of living and working. By better managing our impacts today, we are investingmaintain a sound governance framework rooted in a better future.culture of integrity and responsiveness to the long-term interests of our shareholders. Shareholder perspectives are valued by the Board and management as they consider the current governance landscape and shape our practices to keep pace with, if not stay ahead of, best practices. We list many of our governance practices beginning on page 4. This commitment was recently recognized externally, as Unum was named one of the World's Most Ethical Companies in 2021 by The Ethisphere Institute, a nonprofit that defines and measures corporate ethical standards. Code of Conduct Integrity and doing the right thing are embedded in our culture. Our Code of Conduct is a roadmap of nine principles for doing the right thing every time for our company, our customers, our colleagues and TABLE OF CONTENTS 
ourselves. It guides employees on how to abide by Unum's principles and access the resources available to address any ethical issues that may arise. We Are Unum is a collection of guiding statements that outline our expectations of employees and the commitments we make to them in return. Responsible Investing Investment decisions on our $46 billion portfolio represent a significant component of our societal impact. Intensive research, disciplined processes and focused portfolio construction are foundational to our commitment to reliable investing. Our philosophy is to deliver consistent long-term investment returns while keeping risks at appropriate levels so we can deliver on our promises to policyholders and stakeholders. We strive to be responsible stewards of our assets within a framework of strong governance and transparency. In March 2021, we signed the Principles for Responsible Investment, a step that demonstrates our commitment to expanded disclosure and an investment approach that more formally integrates ESG factors into our decisions. Our research analysts have a strong understanding of the companies in which we invest and strive to take into account all relevant factors that contribute to informed investment decisions. Privacy and Cybersecurity Unum protects the confidentiality of personal information our customers entrust to us. Ongoing smart investments are designed to keep our information security program, including cybersecurity, highly effective, providing physical, technical and administrative controls in line with industry best practices. Customer Experience We are currently ranked first in ease of doing business, employer trust and meeting the needs of our customers in comparison to competitors. We continue to make investments in technology and our people to enhance the experience of our customers, and our goal is continue delivering the best experience for those who rely on us for their employee benefit needs. Social Outreach and EngagementImpact Engaging with employees, community partners and in the public discourse are key ways we work to create better places to live and work.
Our Culture and Human Capital Management The wellbeing of our employees is one of our top priorities and starts with a dynamic and welcoming workplace that embraces diversity, fosters collaboration and encourages employees to bring their best ideas to work every day. In 2018, we continued a multi-year modernization of our main home offices. This investment is transforming We have modernized our workspaces to spark greater collaboration and innovation, and flexibility, and introduceintroduced upgraded food serviceservices and fitness amenities for employees. We believe
We're also committed to providing the introductionflexibility our employees need to thrive. In March 2020, we shifted employees to remote working to protect the health and safety of a more contemporary workplaceour people in response to the COVID-19 pandemic. In addition to providing technology and equipment to enable fully remote work, we also helped employees navigate the unique challenges of the pandemic by providing flexible work schedules and access to enhanced caregiver and mental health resources. While we have welcomed small numbers of employees back to some of our offices, most employees continue working remotely and will support the recruitment of top talentdo so until virus infection rates have stabilized and the delivery of best-in-class customer service.vaccinations become generally available. TABLE OF CONTENTS Work-life balance is a core value of ours, and we provide access to benefits and resources that employees need to enhance their health and wellbeing. We offer comprehensive health plans, annual screenings, on-siteonsite fitness and health resource centers at our primary facilities and programs that educate employees and help them manage chronic health issues, as well as generous retirement benefits. In 2020, we introduced benefits such as online fitness classes and home office-based counselors to provide additional resources for employees during the pandemic. Our company has a strong focus on training and professional development. All employees participate in an annual curriculum of training on our Code of Conduct (which covers a variety of topics including ethics, harassment,anti-harassment, regulatory compliance and our business practices), privacy, and information security. We also provide employees and managers a variety of training and development programs tailored to their specific roles and support the professional development of our employees through our tuition assistance program. Through engagement surveys and regular pulse checks, we monitor corporate culture and develop action plans to drive improvement in specific areas. We also seek feedback from employees through these surveys, employee town halls and other opportunities. High engagement in these efforts has allowed us to track measurable improvements in engagement, inclusion and diversity and other key metrics over time. These and other steps have helped to attract and retain talent and ensure our employees are well- prepared to deliver best-in-class customer service and work flexibly when required. We’re also proud to have been recognized as a great place to work by several independent organizations and we will continue to make investments in our people and our culture to create a world-class workplace.
 We are committing greater resources to foster a workplace that welcomes diverse backgrounds and perspectives, and reflects our customers and our communities. Our commitment starts at the top, and we’re pleased to have been recognized as being a leader in gender diversity at the Board level. We set inclusion and diversity performance goals for the CEO and senior leadership team. Last year, we also established anOur Office of Inclusion & Diversity sets our strategic direction and hired a Vice President, Inclusion and Diversity and support staff.coordinates the work of our employee resource groups (grassroots organizations with more than 1,400 members). A variety of TABLE OF CONTENTS
programming and training opportunities are available for all employees to learn about issues such as unconscious bias and inclusion in the workplace. This year,
During 2020, we have committedshared our Better With You: Roadmap to creating and sharing a strategic2022 plan that defines the next steps along Unum's inclusion and diversity planjourney. This roadmap reflects a commitment to champion the perspectives of the people who engage with our company and keyfocuses on three major milestones: Increase the representation of racial/ethic minorities in management roles; Create an even more inclusive culture by maintaining a strong inclusion index score; and Increase accountability for people leaders by embedding inclusion and diversity into their performance goals. TABLE OF CONTENTS 
Racial equity and equality are core workplace values and principles. As a company, we will continue to engage in difficult conversations to make progress, while always remaining respectful and empathetic to each other. In 2020, we introduced a Unum Social Justice Fund with $500,000 in seed money that nonprofits can apply to for funding social justice initiatives. We've also incorporated these values in our partnerships with Historically Black Colleges and Universities and other targeted recruitment initiatives. Positively Impacting Our Communities We’re dedicated to building stronger communities in the places where we live and work. Through financial gifts and employee volunteering, we partner with community organizations to improve educationalcreate equitable opportunities for education and workforce development, and promote health and wellness, and support the arts.healthier communities. We encourage employee engagement in community outreach by providingprovide paid time off for employees to volunteer at company-sponsored activities and matchingmatch employee giving to qualified organizations. We partner withThrough these efforts, we support dozens of local charities every yearyear. In 2020, we took several steps to support customers and provide significanttheir employees through the pandemic, including donating more than $420,000 to community partners to support in the U.S. to public education, health and wellness, and arts and culture.response efforts. For more information about our community outreach, visit our website. 
Advocating for Financial Protection Benefits We participate in public policy discussions on a variety of issues related to our business and industry. One of our primary areas of focus is advocating for greater access to financial protection benefits for workers and their families in the U.S. and U.K. This is an issue that continues to grow in significance as governmental revenue and funding for public safety net initiatives has declined. Our engagement in these issues includes: Funding research on disability trends, the economic impact of financial protection benefits and consumer insurance purchasing habits; Sponsoring state legislation to encourage greater participation in financial protection benefits through employee auto-enrollment, with the option to opt-out;opt out; TABLE OF CONTENTS Providing expertise to federal and state agencies related to disability benefits; and Active participation in industry associations such as the American Council of Life Insurers. Through engagement with legislators and other public officials at the state and federal level, we educate policymakers on the importance of making financial protection benefits widely available and easy to enroll in. Being Good Stewards of the Environment We’re committed to helping protect the valuable resources that we all depend on to support quality of life for everyone. We do that by striving to understand and effectively manage our impact on the environment. Within our facilities, we have made significant strides in several areas to measure our impact and improve efficiencies to reduce our carbon footprint, including driving energy efficiencies, paper reduction and more efficient use of space. Through technology such as videoconferencing and remote access, and workplace flexibility initiatives, we also reduce employee travel to and from the office, and between our various locations. Ongoing employee education and engagement is key to these efforts. 38 2019
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TABLE OF CONTENTS REPORT OF THE AUDIT COMMITTEE
Good Governance
We are committed to maintaining a sound governance framework rooted in a culture of integrity and responsiveness to the long-term interests of our shareholders. Shareholder perspectives are valued by the Board and management as they consider the current governance landscape and shape our practices to keep pace with, if not stay ahead of, best practices. We list many of our governance practices on page
3.REPORT OF THE AUDIT COMMITTEE
The Audit Committee (in this report, the "Committee"“Committee”) is appointed by the Board of Directors and operates under a written charter adopted by the Board, a copy of which is available on the company’s investor relations website under the heading "Corporate Governance"“Corporate Governance” at www.investors.unum.com.www.investors.unum.com. The Committee is comprised solely of independent directors who meet the independence requirements of the SEC and the NYSE. All members of the Committee are "financially literate"“financially literate” as required by the NYSE, and the Board has determined that all fivefour current members are "audit“audit committee financial experts"experts” under SEC regulations. In February 2018, Susan D. DeVore became a member of the Committee upon her election to the Board. In May 2018, Theodore H. Bunting, Jr. rotated from the Committee to the Regulatory Compliance Committee. Additionally, in February 2019, Susan L. Cross became a member of the Committee upon her election to the Board.The primary purpose of the Committee is to assist the Board in its oversight of the: Integrity of the company’s financial statements and related disclosures; Effectiveness of the company’s internal control over financial reporting; Compliance by the company with legal and regulatory requirements; Qualifications, independence and performance of the company’s independent auditor; Responsibilities and performance of the company’s internal audit function; and Management of the company’s financial risks. The Committee is also responsible for discussing guidelines and policies with respect to the process by whichfor how the company undertakes risk assessment and management, and communicates with the Risk and Finance Committee as necessary for this purpose.risk management. The Committee receives regular enterprise risk management (ERM) reports including results ofpresented to the Risk and Finance Committee, as well as the Own Risk and Solvency Assessment (ORSA). In 2018, the Committee Chair and another member of the Committee reviewed and provided input in the development of the summary report. The ORSA Summary Report. Thissummary report provides strong evidence of the strengths of the company’s ERM framework, measurement approaches, key assumptions utilizedused in assessing our risks, and prospective solvency assessments under both normal and stressed conditions. The Committee met nine times during 2018. The Committee regularly held executive sessions and met separately with its independent auditor, Ernst & Young, and with the internal auditors without management present.
In fulfilling its oversight responsibilities, the Committee reviewed and discussed with management and the independent auditor matters relating to the company’s accounting and financial reporting processes, including the internal control over financial reporting; reviewed and discussed with management and the independent auditor the company’s annual and quarterly financial statements and related disclosures in reports filed with the SEC; pre-approved all audit services and permitted non-audit services to be performed by the company’s independent auditor; reviewed and discussed with management the responsibilities and performance of the internal audit function; discussed with management policies relating to risk assessment and risk management,
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as well as specific financial risks; and obtained and reviewed reports concerning the company’s policies and procedures for ensuring compliance with legal and regulatory requirements.
Management is primarily responsible for the preparation, presentation and integrity of the company’s financial statements and for the reporting process, including the establishment and effectiveness of the company’s internal control over financial reporting. The company’s independent auditor is responsible for performing an independent audit of the financial statements and of the effectiveness of the company’s internal control over financial reporting in accordance with auditing standards promulgated by the Public Company Accounting Oversight Board (PCAOB). The independent auditor reports directly to the Committee, which is responsible for the appointment, compensation, retention and oversight of the work performed by the independent auditor. The Committee met eight times during 2020. The Committee regularly held executive sessions and met separately with its independent auditor, Ernst & Young, and with the internal auditors without management present. In fulfilling its oversight responsibilities, the Committee reviewed and discussed with management and the independent auditor matters relating to the company’s auditedaccounting and financial statements forreporting processes, including the year ended December 31, 2018, including a discussion of the quality, not just the acceptability, of the accounting principles, the reasonableness of significant estimates and assumptions which could impact the amounts reported in the company’sinternal control over financial statements, and the clarity of disclosures in the financial statements. The Committeereporting; reviewed and discussed with the independent auditor the overall scope and results of the independent audit and its judgments of the quality and acceptability of the company’s accounting principles. The Committee also engaged in discussions with management and the independent auditor among other matters,the company’s annual and quarterly financial statements and related disclosures in reports filed with the SEC; preapproved all audit services and permissible non-audit services performed by the company’s independent auditor; reviewed and discussed with management the responsibilities and performance of the internal audit function; discussed with management policies relating to risk assessment and risk management, as well as specific financial risks; and obtained and reviewed reports concerning management’s assessment of reserve adequacy across all major business lines, which is presented tothe company’s policies and procedures for maintaining compliance with legal and regulatory requirements. In carrying out this responsibility, the Committee also monitors whether there is TABLE OF CONTENTS REPORT OF THE AUDIT COMMITTEE
appropriate external and internal auditor focus each year. The Committee discussed with the independent auditor the matters required to be discussed by applicable standards of the PCAOB. The Committee engaged in an exercise with its independent auditor using the 2018 audit as an opportunity to better understand new standards requiring discussion of critical audit matters (CAMs) in future auditor reports and the potential impactsyear on the company’s IT environment and auditor’s processescontrols, which in 2020 included internal audit plan coverage of cyber audits, information security and reporting. The Committee also received the written disclosuresprivacy risk as common scope elements of all audits, and the letter from the independent auditor required by applicable requirements of the PCAOB regarding the auditor’s communications with the Committee concerning independence. In addition, the Committee discussed with the independent auditor matters relating to its independence, including consideration of whether the independent auditor’s provision of non-audit services to the company is compatible with the auditor’s independence. In order to assure continuing auditor independence, the Committee periodically considers whether there should be a regular rotation of the independent auditor.an annual SOC 2 assessment. The company’s internal audit function, under the direction of the chief auditor, reports directly to the Committee, which is responsible for the oversight of the work performed by the internal auditors. The internal auditors are responsible for, among other matters, conducting internal audits designed to evaluate the company’s system of internal controls. The Committee reviewed and discussed with the company’s internal auditors, and received regular status reports from them concerning the overall scope and plans for their audits. The Committee met with the internal auditors, with and without management present, to discuss their audit observations and findings, and management’s responses, and their evaluation of the effectiveness of the company’s internal control over financial reporting. The Committee reviewed and discussed with management the company’s audited financial statements for the year ended December 31, 2020, including a discussion of the quality, not just the acceptability, of the accounting principles, the reasonableness of significant estimates and assumptions that could impact the amounts reported in the company’s financial statements, and the clarity of disclosures in the financial statements. The Committee reviewed and discussed with the independent auditor the overall scope and results of the independent audit and its judgments of the quality and acceptability of the company’s accounting principles. The Committee also engaged in discussions with management and the independent auditor concerning, among other matters, management’s assessment of reserve adequacy across all major business lines, which is presented to the Committee each year. The Committee discussed with the independent auditor the matters required to be discussed by applicable standards of the PCAOB. Under PCAOB standards requiring discussion of critical audit matters (CAMs) in auditor reports, the independent auditor discussed with the Committee one CAM relating to the company's reserves for long-term care policy and contract benefits and a second relating to the accounting for reinsurance of Closed Block individual disability insurance. Both CAMs are described in the independent auditor's report on the company's 2020 financial statements. During 2020, the Committee also discussed with management and the independent auditor emerging accounting standards and associated implementation plans. The Committee received the written disclosures and the letter from the independent auditor required by applicable requirements of the PCAOB regarding the auditor’s communications with the Committee concerning independence. In addition, the Committee discussed with the independent auditor matters relating to its independence, including consideration of whether the independent auditor’s provision of non-audit services to the company is compatible with the auditor’s independence. Each year, the Committee evaluates the performance of its independent auditor, including the senior audit engagement team, each year and considers whether to retain the current independent auditor or consider otherrotating the engagement to a different audit firms.firm. In doing so, the Committee tooktakes into consideration a number of factors, including the professional qualifications of the firm and the lead audit partner, the quality and candor of the firm’s communications with the Committee and the company, and evidence supporting the firm’s independence, objectivity, and professional skepticism. Additionally, in conjunction with the mandated rotation of the independent auditor’s lead engagement partner, theThe Committee and its chair are also directly involved in the selection of the independent auditor’sauditor's lead engagement partner, includingwho is required to rotate off the current partner who assumed this role in 2014. Asengagement after five years of service. Before the current lead engagement partner has completed five years of service to the company in 2018, a subgroup of the Committee met with a candidate proposed to assumeassumed this role in 2019 as well as discussed(at that time, a candidate), Committee members held discussions with the exiting partner, the candidate, and company management concerning the candidate's experience and qualifications with management.for the role. TABLE OF CONTENTS
REPORT OF THE AUDIT COMMITTEE
Based on thisits evaluation, the Committee has determined that the continued retention of Ernst & Young to serve as the company’s independent auditor is in the best interests of the company and its shareholders. Accordingly, the Committee appointed Ernst & Young as the company’s independent auditor for 2018.2021. Ernst & Young has served as the company’s independent auditor since the merger of Unum and Provident in 1999, and before that served at various times as the independent auditor for the TABLE OF CONTENTS REPORT OF THE AUDIT COMMITTEE
company and certain predecessor companies. Although the Committee has sole authority to appoint the independent auditor, the Committee recommended that the Board of Directors seek shareholder ratification of the appointment at the Annual Meeting as a matter of good corporate governance. Based on the reviews and discussions referred to above, the Committee recommended to the Board of Directors, and the Board approved, that the company’s audited financial statements for the year ended December 31, 20182020 be included in the company’s Annual Report on Form 10-K for filing with the Securities and Exchange Commission. 2018
2020 Audit Committee(1):E. Michael Caulfield,Committee:
Timothy F. Keaney, Chair
Susan L. Cross
Susan D. DeVore
Timothy F. Keaney
| (1) | Susan L. Cross became a member of the Audit Committee following her election to the Board in February 2019, and therefore did not participate in Committee actions with respect to the Report of the Audit Committee contained in this proxy statement. |
2019
50 2021 PROXY STATEMENT 41
TABLE OF CONTENTS COMPENSATION DISCUSSION AND ANALYSIS
COMPENSATION DISCUSSION AND ANALYSIS
In this section, we provide an overview of our compensation philosophy and processes, and explain how the Human Capital Committee of our Board (referenced throughout this section as the "Committee"“Committee”) arrived at its compensation decisions for the below named executive officers (NEOs) for 2018.2020. Richard P. McKenney, President and Chief Executive Officer John F. McGarry,Steven A. Zabel, Executive Vice President, and Chief Financial Officer
Michael Q. Simonds, Executive Vice President, and Chief ExecutiveOperating Officer Unum US Timothy G. Arnold, Executive Vice President, Voluntary Benefits and Chief Executive Officer,President, Colonial Life Lisa G. Iglesias, Executive Vice President, and General Counsel Mr. Simonds served as President and Chief Executive Officer of Unum US prior to being named Chief Operating Officer (COO), effective February 1, 2020. Mr. Arnold began reporting to Mr. Simonds after the transition, and in addition to leading Colonial Life, Mr. Arnold has taken on a lead role in shaping and driving our approach to voluntary benefits across the enterprise. Business and Performance Review We are a leading provider of financial protection benefits in the United States, United Kingdom and United Kingdom. Following our acquisition of Pramerica Žycie TUiR SA (which we have subsequently renamed Unum Žycie TUiR SA and refer to as Unum Poland) in the fourth quarter of 2018, we now provide financial protection benefits in Poland, which expands our European presence.Poland. Our insurance products include disability, life, accident, critical illness, hospitalization, dental and vision insurance. These products,insurance, and are primarily offered through the workplace to help protect millions of working people and their families from the financial hardships that can occur in the event of illness, injury, or loss of life. Our growing leave and absence management services help employers effectively manage leave planning and preparation, while ensuring employees understand their leave benefits and effectively transition back into the workplace and productivity. Our business operations are divided into three primary segments –core segments. Our Unum US Unum International (formerly solely Unum UK), and Colonial Life – as well as asegments market products and services in the U.S., while the Unum International segment comprises our Unum UK and Unum Poland businesses in Europe. Separately, our Closed Block of business thatsegment includes products, such as long-term care insurance, that we service and support but no longer actively market. In connectionAs discussed in greater detail below, continued negative investor perceptions surrounding the LTC industry and its impact on our stock price have influenced our compensation decisions for 2020 and going forward. 2020 Performance The COVID-19 pandemic substantially impacted Unum's financial performance in 2020. Growth trends in sales, premiums and earnings that occurred in the first quarter were disrupted by the shock to employment levels and the economy that began in the spring as the pandemic took root in the U.S. and Europe. The slowing economic activity drove sales and premium results lower. This combined with higher volumes in our acquisition of Unum Poland,short-term disability business, elevated expenses in our leave management business and higher mortality in our life insurance business to drive a decrease in earnings for the year. Additional headwinds included higher unemployment, continued low interest rates and the uncertainty in the U.K. due to Brexit. Despite the challenging environment, we changed the name of our Unum UK segment to Unum International. The Unum International segment is comprised of our Unum UK and Unum Poland lines of business.2018 Performance
From a financial and operating standpoint, Unum had a very successful yearproduced more than $1 billion in 2018 as we delivered steady growth across our core businesses, leading to record after-tax adjusted operating earnings per share.income, while experiencing strong persistency and stable premium results, and maintaining healthy margins. We maintained market-leading positions and adelivered on our purpose of helping the working world thrive throughout life's moments. The pandemic reinforced the social value of the benefits we
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provide to working people and their families and highlighted our already strong value proposition with customers and brokers,brokers. Investments in our technology and focused on expandingpeople furthered our productdigital transformation efforts and geographic footprint.allowed us to reach our customers in innovative ways. Our disciplinedrobust business approach helpedcontinuity planning allowed us maintain attractive profit marginsto swiftly shift to remote work early in the year, providing seamless service to our clients and maintaining a high level of customer satisfaction. These results were despite a challenging environment, including the pressure of continued low interest rates, uncertainty in the U.K. due to Brexit, and industry concerns about long-term care policies. TABLE OF CONTENTS
COMPENSATION DISCUSSION AND ANALYSIS
Financial Highlights((1)1) | | Record earnings
Earnings
| | | | | | | Unum achieved record after-tax adjusted operating earnings, continuing our recent history of strong financial performance. For 2018,Despite the challenging environment, we delivered strongnet income of $793 million and after-tax adjusted operating income of $1.15more than $1 billion, based on total revenue of $11.6$13.2 billion. Adjusted operating earningsEarnings per share (EPS) was at an all-time high of $5.20, a significant increase over the prior yearwere $3.89 and the thirteenth consecutive year of after-tax adjusted operating EPS growth.
was $4.93.
| | | | | | | Return on equity | | | | | | | We continued to put shareholder capital to good use. ConsolidatedReturn on Equity (ROE) was 7.6% and consolidated adjusted operating return on equity (ROE) increased to 13.2%ROE was 10.7%, while ROE in our core operating segments grew to 17.8%was 14.1%.
| | | | | | | Book value | | | | | | | Our book value per share at the end of 20182020 was up 3.6%5.4% from 20172019 (excluding accumulated other comprehensive income, or AOCI). ItThis was the tenth12th consecutive year of shareholder equity growth. | | | | |
(1)
| | StrengtheningOperating results referenced here include non-GAAP financial measures. Information about the non-GAAP financial measures used in this proxy statement is set forth in “A Note About Non-GAAP Financial Measures” on page 2. For a reconciliation of reserves | | We increased our long-term carethe most directly comparable GAAP reserves by $593.1 million after-taxfinancial measures to reflect our updated best estimatethe non-GAAP financial measures, refer to Appendix A of future obligations, which had little impact on our capital plans and overall financial strength.this proxy statement.
|
Operating Highlights Unum
We delivered on our missionpurpose of supporting our customershelping the working world thrive throughout life's moments in 2018. We2020. Unum paid approximately $7.2$7.6 billion in benefits to people facing illness, injury or loss of life. Satisfaction metrics measuring our interaction with customers and partners were high. We also continued our focus on enhancing the experience of our customers through employee training, process improvements and leveraging technology. As the expectations of our customers continue to see evolve, we have strong growthprioritized investment in our core businessesdigital transformation, particularly. This includes investing in premium income, compared with 2017 results. This growth was achieved while maintainingnew technologies to automate business processes, better understand customer behavior, deliver new products and services to market faster and improve customer satisfaction. By enhancing our pricingdigital capabilities, we enrich the experience for our customers and risk discipline, and demonstrates thatenhance the effectiveness of our value story continues to resonate with customers.people. TABLE OF CONTENTS COMPENSATION DISCUSSION AND ANALYSIS
We managed our investment portfolio welldespite the continued low interest rate environment. Our well-diversified portfolio focuses on consistent, predictable cash flows. Due to the nature of our business, we invest for the long term with an investmenta philosophy emphasizing sound risk management and credit quality. | (1) | Operating results referenced below include non-GAAP financial measures. Information about the non-GAAP measures used in this proxy statement is set forth in “A Note About Non-GAAP Measures” on page 2. For a reconciliation of the most directly comparable GAAP measures to the non-GAAP measures, refer to Appendix A to the proxy statement. |
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Operational RealignmentTABLE OF CONTENTS
COMPENSATION DISCUSSION AND ANALYSIS
Closed Block ManagementLong-Term Care Review
The same skills that allow our core franchise to be successful are also beneficial tobenefit our closed block of long-term care policies that we continue to service and support, but no longer actively market. In 2009, we closed our individualOur Closed Block segment primarily consists of long-term care business,(LTC) policies and older individual disability policies. Long-Term Care Performance We discontinued offering individual LTC insurance in 2012 we closed our2009 and group long-term care business. Since that time, weLTC insurance in 2012. We have actively managed these blocksthis block with a combination of rate increases, updates to our liability assumptions to reflect emerging experience, prudent cash infusions, and reserve changes. Since 2006, we have strengthened reserves $4.9 billion in this block. Through these and other steps — including annual comprehensive reviews — we continue to take proactive measures to provide for the long-term stability of this block and provide transparency to our shareholders and customers. Despite these continuing efforts, following an examination of one of our Maine-domiciled insurers, in 2020 the Maine Bureau of Insurance required us to establish additional LTC statutory reserves, permitting this to be done over a period of seven years. Although we do not agree with the Maine Bureau's examination conclusions, we view the additional statutory reserves as further increasing margin over our best estimate assumptions. At year-end 2020, LTC statutory reserves were increased by approximately $229 million using cash flows from operations. We continued our commitmentexpect to effectively managing our long-term care businessfund future phase-in amounts in 2018 duringthe same manner. In connection with our annual comprehensive review of this block. Upon completionpolicy reserve adequacy, at year- end 2020, we updated our interest rate assumptions to reflect the low interest rate environment and increased GAAP reserves supporting the LTC block accordingly. Individual Disability Reinsurance Transaction In December 2020, we announced an agreement to reinsure most of this reviewour Closed Block individual disability insurance business to a third party. The transaction was completed in two phases, with an initial closing in the thirdfourth quarter of 2018,2020 and a second closing at the end of the first quarter of 2021. Although we increasedwill continue to administer this block of business, the move freed up a significant amount of capital that enhances our long-term care GAAP reserves by $593.1 million after-taxfinancial flexibility and can be used to reflect our updated best estimate ofhelp fund future benefit obligations. In the process, we believe we set a standard for disclosure in long-term-care. This action had little impact on our capital plans and overall financial strength.Strategic Positioning
We have recently taken a number of steps to fuel our growth and position us for the future.
Acquisitions: Unum's recent acquisitions of dental providers in the U.K. and U.S. have accelerated our expansion into the dental market and have been positively received. We also acquired a financial protection provider based in Poland in 2018, expanding our footprint in Europe.
Growth initiatives: We have enhanced our product portfolio with the introduction of dental, vision, stop-loss and new voluntary offerings. Planned geographic expansion is also driving growth.
Business investments: Current and planned investments in technology, customer experience, business development, facilities and our people are designed to further enhance our service capabilities, identify future opportunities for growth, and attract and retain talent.
In addition, key developments in the external environment are having a positive impact on our business.
Tax reform: Tax legislation enacted by the U.S. federal government in December 2017 significantly lowered our overall effective tax rate throughout 2018. The reduction in the corporate tax rate has improved the statutory earnings and cash generation of our insurance subsidiaries and our capital position remains strong.
Business confidence: As a provider of employee benefits offered through the workplace, we expect to benefit as employers gain more confidence in the economic environment, particularly in the U.S. These positive trends have translated to greater hiring and wage growth, business investments and investments in benefits for employees.
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2021 PROXY STATEMENT 53
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Capital Generation for Shareholders Our strong statutory earnings have resulted in solid capital generation which we have deployed in a number of ways.
Our ability to generate capital remained strong in 2018,2020, allowing us the opportunity to deploy capital in a number of ways. For the year, we
We invested in our business, strengthened our long-term care reservespeople, products and technology to drive growth. We paid out $217.0$233.2 million in dividends, including increasing the annual dividend rate by 14% over the prior year. or $1.14 per share. We also repurchased $350.7 million worth ofpaused our outstanding shares, bringing our total share repurchases since 2007in 2020 in a prudent decision to $4.4 billion. In addition, ourconserve capital during the uncertain environment. Our credit ratings are strong and remain at our targeted levels as a resultreflective of our strong balance sheet, our favorable operating results, and our highly respected brand in the employee benefits market. TABLE OF CONTENTS
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Business Highlights
The following are 2018 performance highlights within our primary business segments and other key areas of the company:
Unum US
| | | Our Unum US segment, representing 63.8% of our consolidated premium income in 2018, continued its trend of profitable growth. The business delivered steady sales, healthy premium growth, and continued expansion of our new dental and vision offerings across the U.S. These results, combined with favorable benefits experience and effective expense management, drove adjusted operating income higher compared to 2017.
| | | Unum International
| | | Our Unum International segment represents 6.3% of our consolidated premium income in 2018. While the Unum UK line of business continued to face headwinds from the uncertain environment due to Brexit, the addition of Unum Poland helped drive growth in our International segment.
| | Colonial Life
| | | Our Colonial Life segment, representing 17.9% of our consolidated premium income in 2018, had another good year. The business continued its trend of strong sales and premium growth. Consistent with past years, Colonial Life continues to generate solid margins and returns.
|
Closed Block
Our Closed Block segment, representing 12.0% of our consolidated premium income in 2018, delivered stable performance, with an increase in adjusted operating income of 1.3%. We continue to see consistent results, largely as a result of our active oversight of this block of business and ongoing investments in management resources and capabilities. Our commitment to the Closed Block was highlighted by the comprehensive review of our long-term care business we conducted in 2018 and our decision to increase LTC reserves to reflect our estimate of future benefit obligations.
Investments
Our investment results remained solid, generally in line with our plan benchmarks. The portfolio was well-managed through market volatility in 2018 and continues to provide a consistent source of income for our business. Our asset quality remains strong.
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COMPENSATION DISCUSSION AND ANALYSIS
Unum delivered strongproduced solid financial results in our core businessessegments and recordmore than $1 billion in after-tax adjusted operating earnings in 2018, continuing a track record2020. However, the pandemic and unprecedented economic environment caused significant disruption in our business and the markets we serve. That, coupled with negative investor perceptions surrounding the long-term care (LTC) industry and concerns about the impact of consistent performance that spanshistorically low interest rates on our sector, drove our total shareholder return (TSR) lower. These negative perceptions affect Unum's TSR more than a decade. However, investor perceptions in the industry surrounding long-term care and ongoing volatility in the broader market, most notably in the financial services sector, overshadowedof our performance. This contributed to the decline inproxy peers, as only 25% of our stock value of more than 45% in 2018.peers have LTC exposure. These resultsreturns are not indicative of the ongoing strong financialstrength of our franchise, capital position and operational performance of our core businessesbusinesses. Pre-pandemic, we delivered record after-tax adjusted operating earnings per share for 14 consecutive years and premium growth that consistently outpaced our competitors in our U.S. businesses. We have also actively managed the active management ofClosed Block over the last decade. Recent steps we took in our closed LTC block.block have delivered improved operating earnings while providing added transparency to enhance shareholder understanding. In addition, the recent Closed Block individual disability reinsurance transaction has freed up significant capital that can be used to grow our business. The pandemic has shown that the need for our products and services has never been clearer, and continues to grow. We believe this, combined with our history of consistent results have madeexecution, makes Unum an excellent long-term investment - including during one of the worst financial crises in memory - and weinvestment. We expect that the performance of our core franchise will again be recognized and ultimately drive long-term shareholder value. 
2019 PROXY STATEMENT 47
TOTAL SHAREHOLDER RETURN | | Unum | | | (16.32)% | | | (52.98)% | | | (19.19)% | | | | Proxy Peer Group | | | (6.27) | | | (8.86) | | | 40.31 | | | | S&P 500 | | | 18.40 | | | 48.85 | | | 103.04 | | | | S&P Life & Health Index | | | (9.48) | | | (11.65) | | | 28.43 | |
**Non-GAAP financial measure, see Appendix A for reconciliation. TABLE OF CONTENTS COMPENSATION DISCUSSION AND ANALYSIS
20182020 Say-on-Pay Vote and Shareholder OutreachOur 20182020 shareholder advisory vote to approve executive compensation passed with over 95%94% support. As we have done for severalIn the Fall of 2020, as in prior years, we continued our shareholder engagement through an extensive outreach effort, contacting each ofcontacted our top 50 investors,shareholders, representing over 68%73% of our outstanding shares. Consistent with the prior year,shares, and requested meetings to discuss our independent Board Chairman joined severalcompensation programs and other topics.
Seven shareholders, representing approximately 24% of our meetingsoutstanding shares, accepted our invitation for engagement, and we met with shareholders.each of them. Our independent Human Capital Committee Chair joined each of these meetings. Another five shareholders, representing approximately 19% of our outstanding shares, responded that a meeting was not necessary. | | | |
Six investors, representing more than 15% of our outstanding shares, accepted our invitation for engagement and we met with each of them. Another eight investors, representing approximately 13% of our outstanding shares, responded that a meeting was not necessary.
During the meetings, shareholders provided constructive feedback on a variety of topics; however, we did not receive any suggestions for changes to our compensation programs.topics. Overall, the shareholders we spoke with generally had favorable comments about our practices and programs, which is also evidenced by our most recent say-on-pay votes (approximately 94% in 2020, and 95% in 2018; 96% in 2017;2019 and 97% in 2016)2018). During the 20182020 outreach, we received specific positive comments related to: feedback as follows:OurPositive commentary on our proxy statement disclosure and our compensation design and pay structure for executives; and
Our alignment to shareholders by using a TSR modifier.
Given the uncertainty of the long-term care industry during 2018, management had anticipated an increased focusFavorable feedback on our long-term care business. However, only one shareholder commented on our long-term care businessCOVID-19 response to employees and suggested that our proxy disclosure should include how the Committee considered the long-term reserve charge when making the compensation decisions (see performance assessments beginning on page 64 for additional information).
Following consideration of the results of our 2018 say-on-pay votecustomers; and feedback we received through these meetings, we did not make any changes to our executive compensation programs. However, our discussions identified opportunities for further enhancements to our proxy statement disclosure and other governance topics including:
| • | The additionMost of the shareholders that we met with sought additional information about the Success Incentive Plan (SIP) implemented in August 2020. Additionally, they highlighted the importance of clear proxy statement disclosure, including key terms and rationale (see page 62). |
Through these discussions, we were also able to confirm that shareholders would like us to continue: | • | Providing a CEO Compensation Summary beginning onin our proxy statement to help investors understand how the Committee approaches its compensation decisions (see page 8;10); and |
| • | Enhancing our ESG disclosures to enable better understanding of our corporate sustainability strategy, initiatives, and progress (see page 42). |
| • | Enhanced disclosure related to our Environmental, Social and Governance initiatives beginning on page 36; and |
| • | Added footnotes to the "Elements of Pay" table, on page 49, indicating where the underlying incentive plan metrics can be found. |
In addition to our meetings with shareholders, weWe also met with onetwo proxy advisory firmfirms to provide an update on our shareholder engagement efforts and gain further insight into their views regardingon our compensation and governance practices and disclosures. Another proxy advisory firm indicated that a meeting was not necessary.
disclosures, including the recent SIP awards. Overall, shareholders told us they appreciated the opportunity to engage in these discussions and learn more about the SIP. They also appreciated the company’s willingness to consider their input with respect toon both executive compensation and governance practices. 48 2019
2021 PROXY STATEMENT 55
TABLE OF CONTENTS COMPENSATION DISCUSSION AND ANALYSIS
Compensation Program Structure Our executive compensation philosophy is to reward performance that helps us achieve our corporate objectives, increase shareholder returns, attract and retain talented individuals, and promote a culture of ownership and accountability in the company. We do this by: Offering base salaries that reflect the competitive market as well as the roles, skills, abilities, experience, and performance of employees; Providing incentive opportunities for all employees based on the achievement of corporate and individual performance goals; and | • | Aligning the long-term interests of management and shareholders by offering performance- based equity compensation opportunities and requiring senior officers to own and retain a specified value of shares. Our long-term incentive awards are granted in the current year based on performance from the prior year (i.e., awards granted in 2020 were based on 2019 performance; see page 71 for additional details). |
Aligning the long-term interests of management and shareholders by offering performance-based equity compensation opportunities and requiring senior officers to own a specified value of shares and retain equity awards for a specified period of time after vesting.
Elements of Pay There are five primary elements of pay in our 2020 executive compensation program, which are summarized in the following table. | | | | | | SHORT-TERM | | | LONG-TERM(1)
| | | | | | | BASE PAY
| | | ANNUAL
INCENTIVE | | | PERFORMANCE-
BASED RSUs | PSUs(2)
| | | RETIREMENT &
| WORKPLACE | |
| | SHORT-TERM
| LONG-TERM
| BENEFITS | Primary Purpose | BASE PAY
| ANNUAL
INCENTIVE
| PERFORMANCE-
BASED RSUs
| PSUs
| RETIREMENT &
WORKPLACE
BENEFITS
|
Primary Purpose
| Reflects the market for similar positions as well as individual skills, abilities & performance | | | Rewards short-term performance(1)(3) | | | Rewards long-term performance, aligns interest with stockholders & promotes a culture of ownership and accountability(1)(3) | | | Addresses health, welfare & retirement needs | Performance Period | | | Ongoing | | | 1 year | | | 1 year
(vests (vests over 3 years)(2)(4) | | | 3 years prospective | | | N/A | Form | | | <--------------- Cash ---------------> | | | <--------------- Equity ---------------> | | | N/A | Payment/Grant Date | | | Ongoing | | | <----- In March based on prior year performance -----> | | | Ongoing |
(1)
| (1)Excludes the Success Incentive Plan (SIP) awards, which are not viewed as part of the annual compensation program. For further details on the SIP, see page 62. |
(2)
| Beginning with the March 1, 2021 grant, cash incentive units (CIUs) will replace PSUs. See page 65 for details on this decision and the applicable performance criteria. |
(3)
| For details on performance measures see “Annual and Long-Term Incentive Programs” beginning on page 5566. |
| (2)(4)
| A performance threshold goal must be achieved before participants are eligible to receive an award. If the goal is not achieved, no awards are paid.granted. |
2019
56 2021 PROXY STATEMENT 49
TABLE OF CONTENTS COMPENSATION DISCUSSION AND ANALYSIS
Those pay elements that are "at“at risk, "” or contingent upon individual or corporate performance, are noted in the charts below. Our NEOs, as the most senior officers of the company, have a substantial majority of their targeted total direct compensation (i.e., fixed(fixed salary and variable annual and long-term incentive awards) at risk. This design creates an incentive for achievement of performance goals (short- and long-term) and aligns the interests of our executives with those of our shareholders. For 2018, 89%2020, 90% of Mr. McKenney’s targeted total direct compensation was at risk. For the remaining NEOs, an average of 72%75% of their aggregate targeted total direct compensation was at risk. 
(1)
| Excludes the SIP awards, which are discussed beginning on page 62. |
Roles of the Committee, Chief Executive Officer and Consultant The Committee, CEO, and compensation consultant each have important roles in our compensation program. The Committee, with input from the CEO and compensation consultant, has the final authority to: Evaluate, design, and administer a compensation program for our executive officers that appropriately links pay, company and individual performance, and the creation of shareholder value; Establish performance goals and certify whether they have been attained; Review the performance of the CEO, with input from the full Board, and determine his compensation; and Determine the compensation for each of the other NEOs. The CEO provides to the Committee: A self-assessment outlining his own performance for the year; His perspective on the business environment and the company’s performance; and Performance assessments and compensation recommendations for executives who report directly to him, which includes all of the other NEOs;Mr. Zabel, Mr. Simonds and Ms. Iglesias (Mr. Simonds provides performance assessments and compensation recommendations for Mr. Arnold who reports to Mr. Simonds). His perspective on the business environment and the company’s performance.2021 PROXY STATEMENT 57
TABLE OF CONTENTS COMPENSATION DISCUSSION AND ANALYSIS
The CEO does not participate in any decisions related to his own compensation. Pay Governance LLC, as independent compensation consultant to the Committee, provides objective, expert analyses, independent advice, and comparative data across peer companies on executive and director TABLE OF CONTENTS
COMPENSATION DISCUSSION AND ANALYSIS
compensation. Pay Governance reports directly to the Committee, which is responsible for the appointment, compensation, retention, and oversight of the work performed by the consultant. A senior representative of the compensation consultant generally attends Committee meetings, participates in executive sessions of the Committee without management present, and communicates directly with Committee members outside of meetings. The Committee has adopted a policy requiring that its compensation consultant to be independent. During 2018,2020, the Committee completed its annual assessment of the independence of Pay Governance, taking into account the following factors: Compliance with the Committee’s independence policy; Other services, if any, provided to the company by the consultant; The amount of fees paid by the company to the consultant as a percentage of the consultant’s total revenues; Any business or personal relationships between the consultant (including its representatives) and the company’s directors or senior officers; and The policies and procedures the consultant has in place to prevent conflicts of interest, which include a prohibition against stock ownership in the company. Pay Governance has attested to its independence and does not provide any services to the company other than those related to director and executive compensation consulting. Fees paid to Pay Governance for such services provided in 20182020 totaled $187,583. $214,721. Based on its assessment, the Committee concluded that Pay Governance is independent under the Committee’s policy and that Pay Governance's work hasdoes not raised anygive rise to a conflict of interest. In 2018, as a matter of good corporate governance, the Committee commissioned an executive compensation consultant benchmarking analysis. After considering the results of a Request for Information (RFI), the Committee determined to maintain its relationship with Pay Governance.
The company’s finance (including the Chief Financial Officer (CFO)), human resources, and legal staff including the Chief Financial Officer, support the Committee in its work, interacting with the compensation consultantPay Governance only when doing so on behalf of the Committee or concerning proposals the Committee will review for approval. Employees from these departments discuss various executive compensation topics with the Committee and Pay Governance, including how compensation plans fit in with other programs and business objectives. Although these staff membersemployees may make recommendations, the final decision on all executive compensation matters rests solely with the Committee. Compensation Benchmarking The Committee compares the compensation of our NEOs to the median pay of executives in similar positions at peer companies. By generally targeting each pay element to the approximate median of the applicable comparator group (as described below), we ensure that the balance among the elements is competitive, while at the same time allowing company and individual performance to determine a majority of the compensation received by our NEOs. Overall, these benchmarking comparisons are used as points of reference and are secondary to the primary factors considered by the Committee when making compensation decisions. The primary factors are:are company performance;performance, individual performance;performance, the executive’s level of responsibility and TABLE OF CONTENTS
COMPENSATION DISCUSSION AND ANALYSIS
tenure; tenure, internal equity considerations;considerations, the creation of shareholder value;value, our executive compensation philosophy;philosophy, and the results of the most recent shareholder say-on-pay vote and feedback received from engagement with shareholders.
TABLE OF CONTENTS COMPENSATION DISCUSSION AND ANALYSIS
The two sources used by the Committee for benchmarking executive compensation are: For CEO and CFO compensation, a proxy peer group comprised ofcomprising insurance and financial services companies that are either our business competitors or primary competitors for talent (the "Proxy“Proxy Peer Group"Group”). The Proxy Peer Group is also a reference for compensation programs and practices. The composition of the Proxy Peer Group is determined by the Committee and reviewed annually as outlined below; and For the compensation of our other NEOs, the Willis Towers Watson Diversified Insurance Study of Executive Compensation (the "Diversified“Diversified Insurance Study"Study”). This source is used because responsibilities of our other NEOs may not be directly comparable with those of named executives at other companies in the Proxy Peer Group. In addition to benchmarking executive compensation, the Committee uses a subset of the Proxy Peer Group (which we refer to as the "PSU“Performance Peer Group"Group”) for purposes of measuring relative TSR for our PSU and CIU awards (see page 6071 for details on these awards). This subset is selected because they are considered to be direct business competitors of Unum. The Committee evaluates the composition of the Proxy Peer Group every year. Peer companies are determined based on five primary criteria (life and health GICS code; reasonable range of: assets, revenues, and market capitalization; and competition with Unum for talent and/or market share). In the past, the Committee has discussed insurance brokers and property and casualty insurers as potential peers. However, the Committee decided not to include these companies due to the differences in business models, performance cycles and executive talent markets. Based on the most recent peer review in August 2018,2020, on average, the companies in the Proxy Peer Group met three of the five criteria. Overall, Unum is at approximately 82%68% of the revenue median (as of the 12 months ended MarchJuly 31, 2018)2020). Additionally, 810 of the 1112 peers (73%(83%) selected Unum as a peer for compensation benchmarking purposes in their 20182020 proxy statements. Although no changes were made to either our PSU Peer Group or Proxy Peer Group from 2017 to 2018, during
During its annual Proxy Peer Group analysis in August 2018,2020, the Committee with its consultant, Pay Governance, considered other insurance and financial services companies and determined to remove Genworth fromthat no companies should be removed and no additional companies were appropriate for inclusion in the Proxy Peer Group for 2019. Genworth was removed due toat the pending acquisition by China Oceanwide. Furthermore, the Committee considered other insurance and financial services companies and determined that Brighthouse Financial, a company that the Committee believes closely aligns as a life insurance and asset management business, will be added to the 2019 Proxy Peer Group.time. Annual sensitivity tests are performed to understand the impact of both larger and smaller peers on median CEO compensation levels. For the tests conducted in 2018,2020, excluding the two smallest and two largest peers for testing purposes had no impact on CEO targeted total direct compensation. An additional sensitivity test was conducted using a common statistical approach known as regression analysis. Regression analysis considers the correlation between two factors (e.g., compensation and revenue size) and is commonly used to adjust compensation data to remove the effects of company size. AThe regression analysis that considered the correlation between revenue and compensation yielded a corresponding targeted total direct compensation that was 6% less than the median.compensation. Based on these tests, the Committee determined that the 20192021 Proxy Peer Group is appropriate. 52 2019
2021 PROXY STATEMENT 59
TABLE OF CONTENTS COMPENSATION DISCUSSION AND ANALYSIS
The following table lists the companies in the Diversified Insurance Study (“DIS”)(DIS), PSUPerformance Peer Group and Proxy Peer Group. BENCHMARKING EXECUTIVE COMPENSATION | | Aflac | | | • | •
| | • | •
| | • | •
| | • | •
| Allstate
| • | | | | | | | | AXA Group
| • | | | | | | | | | | Cigna
| • | | | | AIG | | | • | | | | | | | | | | | | | | | | | | | | | | | | | Allianz Life Insurance | | | • | | | | | | | | | | | | | | | | | | | | | | | | | Allstate | | | • | | | | | | | | | | | | | | | | | | | | | | | | | Brighthouse Financial | | | • | | | | | | • | | | • | | | • | | | | | | • | | | • | | | | Cigna | | | • | | | | | | | | | | | | | | | | | | | | | | | | | CNO Financial Group | •
| | • | | | •
| | | • | •
| | • | | | • | | | • | | | | | | • | | | | Equitable Holdings (f/k/a AXA Group) | | | • | | | | | | • | | | | | | • | | | | | | • | | | • | | | | Genworth Financial | •
| | • | | | •
| | | | | | | | | | | | | | | | | | | | | | Globe Life (f/k/a Torchmark) | | | | | | • | •
| | • | | | • | | | • | | | • | | | • | | | • | | | | Guardian Life | | | • | | | | | | | | | | | | | | | | | | | | | | | | | Hartford Financial Services Group | •
| | • | •
| | • | | | • | | | | | | • | | | • | | | • | | | • | | | | John Hancock | •
| | | | | | | | Lincoln National Corporation
| • | | | •
| | | | | | | | | | | | | | | | | | | | | | Lincoln Financial Group Corporation | | | • | •
| | • | | | • | | | • | | | • | | | | | | • | | | • | | | | Massachusetts Mutual | •
| | | | | | | | MetLife
| • | | | •
| | | | | | | | | | | | | | | | | | | | | | MetLife | | | • | •
| | | | | Nationwide
| • | | | • | | | • | | | | | | | | | | | | | | | | Nationwide | | | • | | | | | | | | | | | | | | | | | | | | | | | | | New York Life | | | • | | | | | | | | | | | | | | | | | | | | | | | | | Northwestern Mutual | •
| | | | | | | | OneAmerica Financial
| • | | | | | | | | | | | | | | | | | | | | | | | | | OneAmerica Financial Partners | | | • | | | | | | | | | | | | | | | | | | | | | | | | | Pacific Life | | | • | | | | | | | | | | | | | | | | | | | | | | | | | Principal Financial Group | •
| | • | •
| | • | •
| | • | | | • | | | • | | | | | | • | | | • | | | | Protective Life | | | • | | | | | | | | | | | | | | | | | | | | | | | | | Prudential Financial | •
| | • | •
| | • | | | • | | | • | | | | | | | | | • | | | | | | | Reinsurance Group of America | | | | | | | | | • | | | | | | • | •
| | • | •
| Securian Financial
| • | | | • | | | | Securian Financial Group | | | • | | | | | | | | | | | | | | | | | | | | | | | | | Sun Life Financial | | | • | | | | | | | | | | | | | | | | | | | | | | | | | Symetra Financial | | | • | | | | | | | | | | | | | | | | | | | | | | | | | Thrivent Financial | •
| | | | | | | | Torchmark Corporation
| | • | | | •
| | | | | | | | | | | | | | | | | | | | | | Transamerica | | | • | | | •
| | | | | | | | | | | | | | | | | | | | | | USAA | | | • | | | •
| | | •
| | | | | | | | | | | | | | | | | | | TransamericaVoya Financial Services
| | | • | | | | | | | | USAA
| • | | | | | | | | Voya Financial
| • | | | •
| | | • | | | • | | | • | | | • | |
| (1)
| For compensation decisions made in early 2018,2020, benchmarking comparisons were made using the 20182020 Proxy Peer Group and the 20172019 DIS (the latest data available at the time). Although Unum participates in the DIS, we are excluded from this table. As previously disclosed in our 2020 Proxy Statement on page 53, Equitable Holdings was added to the 2020 Proxy Peer Group. The number of participants in the 20172019 DIS was reducedincreased by two (Phoenix Companies and TIAA-CREF)one (Allianz Life Insurance) from the prior year. |
(2)
| (2) | This peer groupThe Performance Peer Group will be used for the relative TSR comparison under the 20182020 PSU grant.grants and for the 2021 cash incentive unit (CIU) grants. These companies are our direct competitors, are generally followed by the same sell-side research analysts, and generally compete with us for talent. |
| (3)
| The Proxy Peer Group includes both property and casualty insurers and life and health insurers, with Unum’s assets equal to 29%34% of the peer median as of December 31, 2017, and ourthe company’s revenue at 80%79% of the peer median for the year12 months ended DecemberMarch 31, 2017.2020 (the most current data as of the date of the analysis). Unum is not part of the Proxy Peer Group. |
2019
60 2021 PROXY STATEMENT 53
TABLE OF CONTENTS COMPENSATION DISCUSSION AND ANALYSIS
Components of Executive Compensation Base Salary, Annual and Long-Term Incentives Salaries for our NEOs are established based on their position, skills, experience, responsibilities, and performance. Competitiveness of salary levels is assessed annually relative to the approximate median of salaries in the marketplace using the benchmarking sources noted beginning on page 5158 for similar executive positions. Adjustments may be considered for factors such as changes in responsibilities, individual performance, and/or changes in the competitive marketplace. Annual and long-term incentive targets are set based on consideration of each NEO’s current target, the approximate median of the appropriate comparator group, and each individual’s target relative to other NEOs given their respective levels of responsibility. For purposes of determining the amount of annual incentive and long-term incentive awards for our NEOs, the Committee establishes a target amount as a percentage of each executive’s salary, except that the long-term incentive target is set as an absolute dollar amount for the CEO. In establishing each target for 2018 awards, the Committee considered market data from the appropriate peer group as well as each individual’s target relative to other NEOs, given their respective levels of responsibility.At its February 20192021 meeting, after consideration of company and individual performance during 2018,2020, each executive’sexecutive's responsibilities, tenure and market data, the Committee made decisions with respect toon our NEOs’NEOs' base salaries and annual and long-term incentive targets for 20192021 as outlined in each NEOs "PerformanceNEO's “Performance Assessment and Highlights"Highlights” summary beginning on page 6474. The Committee believes the 20192021 compensation decisions position all of our NEOs’NEOs' targeted total direct compensation within an appropriate range of the market median given each executive’sexecutive's performance and timetenure in his or her current position. Individual Performance Evaluations Individual performance is evaluated by the Committee against theeach NEO's goals and metrics, specific to his or her respective business area. These goals and metrics are set at the beginning of the year and include the following performance categories: Business and financial objectives the Board approved for the company; Strategic objectives by business area; Talent management initiatives; Building a culture of inclusion and diversity; and Operational effectiveness and efficiency. Evaluation Criteria In evaluating how effectively the NEOs met their goals, the Committee considered:considers: Company performance; For the CEO, the Board’s assessment of his performance, as well as his self-assessment; For NEOs other than the CEO, the performance assessments of the NEOs.NEOs which are completed by the CEO or the COO (Mr. Arnold reports to the COO and the remaining NEOs report to the CEO). The performance assessment is based on a combination of performance feedback from the CEO,individual's direct manager, peers, direct reports, and other partners, as well as the individual’s self-assessment; and 54 2019
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TABLE OF CONTENTS COMPENSATION DISCUSSION AND ANALYSIS
Written assessments by all Board members of each NEO against their stated goals in the areas listed below: below. | | ✓ | | | Balance of putting the company first with appropriate self-care and resilienceFinancial performance
| | | ✓ | | | Demonstrated performance | | | ✓ | | | Leads strategy and aligns goals | | | ✓ | | | Commitment to the enterprise and their business unit | | | ✓ | | | LeadershipDirects resources and talent to achieve strategic initiatives
| | | | ✓ | | | StatesmanshipAbility to balance complex and competing factors
| | | ✓ | | | Drives execution | | | ✓ | | | Humility and ego maturity | | | ✓ | | | Manages risk while leading for the future | | | ✓ | | | Effectively manages board relations | | | ✓ | | | Sets cultural norms | | | ✓ | | | Strategic and succession planning, and leadership development | | | ✓ | | | Understands and proactively addresses emerging issues | | | ✓ | | | Demonstrates leadership | | | ✓ | | | Builds relationships and communicates to all stakeholders | | | ✓ | | | Building and sustaining a high-functioning organization and team | ✓
| Strategic planning, succession planning and leadership development
| ✓ | Demonstrated performance
| | | ✓Understands governance and fosters board relationships
| | | Board relations
| ✓
| | Humility and ego maturity
|
Based on the NEOs' individual performance goals and the performance assessments completed by their managers and Board assessment in combination with the CEO's assessment of those reporting to him,members, the Committee awarded each NEOapproves an individual performance percentage for each NEO, which is used to adjust the earned annual incentive and long-term incentive awards between 0% and 125%. These percentages were used to calculate the final payout of 20182020 annual incentives and long-term incentive awards granted in 2019,2021 as described under “Performance Assessment and Highlights.” Highlights” on page 74.Key Compensation Decisions Management Transition As previously reported, effective February 1, 2020, Mr. Simonds was appointed as Executive Vice President, Chief Operating Officer with responsibility for optimizing business operations across the enterprise. Additionally, Mr. Arnold began reporting to Mr. Simonds after the transition, and in addition to leading Colonial Life, Mr. Arnold has taken on a lead role in shaping and driving our approach to voluntary benefits across the enterprise. Early in 2020, prior to the outbreak of the COVID-19 pandemic, the Committee began a discussion of the strategic initiatives that need to be accomplished over the next few years, with a strong desire to ensure that the current executive team remain in place to execute on the growth plans. With an emphasis on aligning key executive rewards with these identified strategic initiatives, the Committee undertook a comprehensive review of the company’s executive compensation program, incentive arrangements and related policies, to assess their effectiveness in incentivizing implementation of the company’s strategy. The Committee focused on doing the right thing for shareholders in the long-term while making sure that it mitigated risks and incentivized the leadership team to continue to create value. The Committee’s evaluation took into account, among other things, the company's recent financial, operating and stock price performance. While the company’s pre-pandemic financial and core operating performance has been strong, our stock price has not performed well, including relative to peer companies. One driver has been the continued negative investor perceptions surrounding the LTC industry during the last three years. The effects of the heightened industry focus on LTC impact us more TABLE OF CONTENTS COMPENSATION DISCUSSION AND ANALYSIS
than our proxy peers since only 25% of our peers have LTC exposure. The company closed its individual LTC business in 2009 and closed its group LTC business in 2012; in other words, these policies are no longer actively sold, but existing policies are still managed by the company. Since that time, the company has actively managed this block with a combination of rate increases, updates to our liability assumptions to reflect emerging experience, prudent cash infusions and reserve changes. These measures have led to greater stability and predictability in the performance of the LTC block while continuing to provide transparency to our shareholders and customers. However, due to general market sentiment and regulatory focus regarding the prospects for LTC insurance lines, the stock price has been negatively impacted. As a result, the Committee believes that the company’s pay for performance strategy has been and may continue to be challenged by the legacy LTC business, notwithstanding its effective management by the current executive team, all of whom were either not with the company or not in their current roles when these policies were sold. While managing the company's closed block of LTC policies, the executive team has also continued building value for the future of the company. The Committee discussions recognized the success and continued efforts of the executive team over the past few years, including: Finding new opportunities and showing strong capabilities by integrating and leveraging new acquisitions. This includes the recent entry into Poland markets, developing the Stop/Loss business, and adding dental and vision lines of business to the portfolio; Developing and executing modernized technology solutions for efficient business practices; Incorporating a culture of inclusion and diversity; and Maintaining dividends. Based on multiple discussions during the year, on August 24, 2020, the Committee approved several changes to the company’s executive compensation program to recognize and reinforce the executives' existing share ownership levels and maintain alignment with long-term performance objectives, while reinforcing the company's executive compensation philosophy. With these modifications, the Committee believes that the executive compensation program supports the company's efforts to ensure proper alignment with evolving market needs and changes in the company’s business. It is also important to note that these changes were not directly in response to COVID-19. As outlined above, the Committee's discussions started early in the year before the pandemic hit; however, the pandemic only served to increase the need to ensure that this team remain in place to achieve critical business outcomes over the next several years. As part of the changes, the Committee implemented the Success Incentive Plan (SIP), under which 10 executives, including the named executive officers, received a one-time special performance grant. The SIP awards are designed to encourage the achievement of critical business outcomes and to incent executives to continue employment with the company over the long term. The SIP awards include both cash success units (CSUs) and stock success units (SSUs). The CSUs (denominated in cash) were granted with a target value equal to 70% of each executive's 2020 annual long-term incentive target. Denominating the CSUs in cash reduces the influence of the LTC business, which impacts our stock price, strengthening the alignment of the awards with core operating performance. The number of shares underlying the SSUs granted to each executive equals the number of company shares he or she held at the time of grant and committed to continue to hold during the six-year SIP award vesting period, subject to a cap equal to the number of shares with a value equal to 50% of the executive's 2020 annual long-term incentive target. An executive's sale of any committed shares prior to the vesting of SSUs will result in the immediate proportional forfeiture of any unvested SSUs. The TABLE OF CONTENTS COMPENSATION DISCUSSION AND ANALYSIS
Committee believes this matching share commitment element of the SSUs reinforces the objectives of creating long-term, sustainable shareholder value and appropriately aligns executives' and shareholders' interests. The SIP awards have a six-year term, with the opportunity for proportional accelerated vesting after one-, three- and five-year performance periods. Each performance period begins on January 1, 2021 and the SIP awards will vest in full on the sixth anniversary of the grant date (August 2026), subject to the executive’s continued employment, unless vesting is accelerated based on the company’s achievement of three performance hurdles: (1)
| Maintaining average NAIC risk-based capital ratios of at least 325%, each measured at calendar quarter-ends over the applicable performance period; |
(2)
| Maintaining average levels of holding company cash in excess of 1.0 times average fixed costs (which includes dividends to shareholders and interest payments due on outstanding indebtedness), each measured at calendar quarter-ends over the applicable performance period; and |
(3)
| Achieving annual (or compounded annual) growth rates of 3% or more in adjusted book value (which excludes accumulated other comprehensive income or loss). |
These performance objectives support plans for the company’s continued long-term financial positioning as an “A” rated company and will provide appropriate focus on maintaining its previously disclosed targets for key capital metrics. This structure balances the unprecedented environment with the company’s long-term goals and key priorities over the next few years, while supporting long-term executive retention. As outlined above, one-third of the SIP award will be eligible to accelerate and vest on a cumulative basis on the last day of each of the one-, three- and five-year performance periods, in each case conditioned upon achievement of the performance hurdles during the applicable performance period. When determining whether the performance hurdles have been achieved, the Committee will exclude the effect of certain items to ensure that performance is appropriately measured under normalized conditions. Any unvested portion of the SIP awards will be forfeited upon any termination of employment prior to vesting, except in the case of certain terminations following a change in control. The following table sets forth the value of the CSUs and the total number of SSUs granted to each of the company's NEOs: | | Richard P. McKenney | | | $4,900,000 | | | 186,368 | | | | Steven A. Zabel | | | $840,000 | | | 11,328 | | | | Michael Q. Simonds | | | $1,225,000 | | | 46,592 | | | | Timothy G. Arnold | | | $437,500 | | | 16,640 | | | | Lisa G. Iglesias | | | $519,750 | | | 19,768 | |
(1)
| The CSUs were granted with a target value equal to 70% of each officer's 2020 annual long-term incentive target. |
(2)
| The number of shares subject to SSUs granted to each officer equals the number of company shares held by the executive that he or she has committed to hold during the SIP award vesting period, subject to a cap equal to 50% of the executive's 2020 annual long-term incentive target. Each of the NEOs committed to hold the maximum number of shares that they could (i.e., the greater of the number of common shares they own or 50% of their long-term incentive target). Stock units were valued at the closing stock price at the time of the grant on August 24, 2020, which was $18.78. |
TABLE OF CONTENTS COMPENSATION DISCUSSION AND ANALYSIS
In early 2020, as part of its review of the executive compensation program, the Committee reviewed the mix of long-term incentive. Since a substantial portion of the executives' compensation is denominated in Unum shares, the Committee sought to balance stock ownership priorities against continued stock price underperformance driven by negative investor perceptions of the LTC industry. These perceptions have impacted us more than our proxy peers given that only 25% of our peers have LTC exposure. After review, the Committee therefore determined to replace PSUs with CIUs that reward for financial performance (rather than financial performance and stock price changes), beginning with the long-term incentive grants in March 2021. The use of cash-based long-term incentive represents a departure from historical practice but was deemed appropriate by the Committee given the unique circumstances currently facing the company and its executive team. In reaching this decision, the Committee considered the following: Executives’ holdings were generally above stock ownership requirements and will remain well- aligned with shareholders; A mixture of long-term cash and equity awards allows diversification while providing multi-year incentives which are less impacted by the potential volatility associated with the LTC block, enabling greater focus on the achievement of key objectives; and The CIUs would remain aligned to shareholder interests given the performance measures outlined below, which include a relative TSR component. The Committee originally intended to grant CIUs with the same performance measures used in prior PSU awards, but establishing reasonable multi-year performance targets proved to be difficult in the current environment. Business closures and pandemic-related economic impacts have disrupted our distribution system and sales activity, and it remains unclear how long we might continue to experience this disruption. Events such as further spread of the coronavirus, spikes in the number of cases or the emergence of new strains of coronavirus (including those resistant to vaccines), and the related responses by government authorities and businesses may heighten the impacts of the pandemic and present additional risks to our business. The Committee determined that CIUs will be earned based on the achievement of critical, multi-year shareholder return measures of adjusted book value growth, dividend yield and relative TSR. CIUs will be measured over a three-year performance period from January 1, 2021 through December 31, 2023. Awards can be earned from 0% to a maximum 200% of the targeted CIU award value following completion of the performance period based on the company's performance against these metrics. Stock Ownership and Retention Requirements In August 2020, the Committee also approved changes to the stock ownership and retention requirements for senior officers (including the NEOs), effective January 1, 2021. Beginning in 2021, a covered officer must hold all net after-tax shares acquired upon the exercise of options and the vesting of PBRSUs, SSUs or PSUs until his or her ownership requirement is met. Once the requirement is met, the officer can sell shares only to the extent that the sale would not reduce his or her holdings below the ownership requirement. This change is aligned with the majority practice of our Proxy Peer Group. For purposes of calculating stock ownership, the Committee determined that the greater of the spot price or the preceding 12-month average closing stock price should be used to reduce volatility in outcomes. TABLE OF CONTENTS COMPENSATION DISCUSSION AND ANALYSIS
Annual and Long-Term Incentive Programs
Company Performance Targets Each year, the Committee sets performance measures and targets for several performance measures thatthe company, which are used to calculate annual and long-term incentive awards. Performance measures and their respective targets are established for the company. Weightings are assigned to each performance measure based on its relative importance to the company. The performance targets are aligned with the company’s primary business objectives: Strong operational performance Disciplined growth Effective risk management Consistent capital generation The performance goals in our incentive plans are a direct output of our business plans, which are approved by the Board each year. When designing our business plans, and the associated metricswe carefully balance the current performance of the business and the risk appetite of the enterprise with an appropriate amount of stretch designed to drive consistent growth and improvement. In addition, the Committee considered externalExternal economic factors are also considered, including: (1) the overall economic growth rate, (2) employment and wage growth, which impacts our overall premium levels, and (3) the interest rate and investment environment, which can have a significant impact on our overall profit margins. TABLE OF CONTENTS
COMPENSATION DISCUSSION AND ANALYSIS
We set challenging performance goals within our business plans and performance measures to ensure that their achievement will drive long-term value for shareholders. In setting the business plans and performance metrics, a numberAs part of this process, we conduct sensitivity tests are runtesting to determine the possibleassess upside and downside scenarios to the plan. These scenarios arerisk, which is then reviewed to be certain we have theensure an appropriate degree of rigor in the plan. Once Additionally, in setting certain goals, such as for ROE, we consider factors beyond the desire for absolute growth, including the natural increase in the proportion of equity backing our Closed Block lines of business, as well as investments required to maintain the above-industry average ROE in our growth products. This approach to balancing multiple considerations in fact led to a lower ROE expectation for 2020 relative to 2019 given the continued investments backing our growth product lines. Similarly, we continue to maintain a portfolio of investments that will lead to long-term improvement in growth and efficiency across our insurance and service lines of business. In the short-term, these investments contributed to an expected higher operating expense ratio in 2020 relative to 2019.
After considering our business plans, the Committee establishes performance measures are established, theand incentive payout targets are set tothat appropriately align pay with performance. Generally, the performance range for each annual incentive performance measure is set based on what is appropriate for the variability of the metric. The actual ranges for each performance metric are shown in the table on page 5969. The payout range for each metric is from 0-150%. To align our metrics with shareholders, over both a near-termin the near term and over an extended timeframe, the Committee determined to use ROE and EPS measures under both our annual and long-term incentive plans.plans in 2020. The Committee believes that using this metricthese metrics in incentive plans that pay out over both one-yearone- year and three-year periods encourages executives to focus on both short- and long-term results. The Committee also believes that any riskRisk of overemphasizing ROE in the annualmetrics was mitigated by minimizing their weightings under the Annual Incentive Plan and long-term incentive plans is avoided by assigning it onlyapplying a 15% weighting for the annual incentive plan and by weighting it equally with another performance measure in the long-term incentive plan (in recent years, average after-tax adjusted operating earnings per share) with further adjustment based on relative TSR modifier to the calculation of performance results for PSUs awarded TABLE OF CONTENTS COMPENSATION DISCUSSION AND ANALYSIS
under our long-term incentive plan. This risk has been eliminated with the 2021 shift from PSUs to CIUs, which do not use ROE or EPS metrics. Our incentive plans are subject to an annual risk assessment by our chief risk officer,Chief Risk Officer, which is discussed with the Committee as described on page 3338.
Annual Incentive Plan Each performance metric has been selected because the Committee believes it is an appropriate driver of long-term shareholder value: | |
After-Tax Adjusted Operating IncomeEarnings Per Share
| | |
35%
| | | ⇨ | | |
Measures profitability achievement
| | | Consolidated Adjusted Operating Return on Equity | | | 15% | | | ⇨ | | | Measures effectiveness of balancing profitability and capital management priorities | | | Earned Premium | | | 15% | | | ⇨ | | | Measures growth and competitiveness of the business | | | Sales | | | 15% | | | | Customer Experience | | | 10% | | | ⇨ | | | Measures effective and efficient customer service | | | Operating Expense Ratio | | | 10% | |
Our annual incentive awards reward performance based on the achievement of both company and individual performance, which the Committee believes aligns compensation with the objectives of shareholders. The Annual Incentive Plan, under which 2018 annual incentive awards were granted, includes: Eligibility for allSubject to eligibility requirements, non-sales employees to receive an annual incentive;
An Executive Officer Incentive Plan in which(including our NEOs participate; and
An objective performance threshold of $250 million of statutory after-tax operating earnings and other sources of cash flow available from the company’s insurance and non-insurance subsidiaries for the fiscal performance year that provides funding for incentive payments. This goal must be achieved before participantsNEOs) are eligible to receive an award.annual incentive award each year. As discussed further below, an objective performance threshold is set within the Annual Incentive Plan, which must be met in order to fund the annual incentive awards. If the goal is not achieved, no awards are paid.paid, regardless of company performance on the incentive metrics described above.
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COMPENSATION DISCUSSION AND ANALYSIS
The decision-making process to determine 2018for determining the 2020 annual incentive awards was as follows: | | If the 20182020 Performance Threshold was met, then: | |
| | ($) | | | × | | | (%) | | | × | | | (%) | | | = | | | ($) | | | | 20182020 Annual Incentive
Target for NEOs | | | 20182020 Company
Performance(1) | | | 20182020 Individual
Performance(2) | | | 20182020 Annual
Incentive Award | | | | | | | | | | | | | | | | | | | | |
| | If threshold was not met, then no award notis paid | |
| | (1) | | | The Committee exercises discretion as to the final percentage considering all performance factors, including, but not limited to, the quality of financial results. For details on adjustments for 2018,2020, see page 58.discussion below. | |
| | (2) | | | Individual performance may range from 0% to 125%. Individual performance adjustments for 20182020 are described beginning on page 6575. |
Once it was determined that the performance threshold had been met for 2018, specific awards for our NEOs were arrived at by:
Applying the individual annual incentive targets, which had been set in early 2018, to each individual’s eligible earnings;
| • | Calculating company performance percentages by comparing actual results to the performance targets described beginning on page 55 (the Committee may also take into account other factors, including economic considerations as well as non-financial goals); |
| • | Establishing an individual performance percentage (from 0% to 125%) using the individual assessment process described beginning on page 54; and |
Multiplying company performance by individual performance and the NEO’s annual incentive target.2021 PROXY STATEMENT 67
TABLE OF CONTENTS COMPENSATION DISCUSSION AND ANALYSIS
Incentive Funding Performance Requirement The funding of awards under our Annual Incentive Plan is conditioned on the company achieving a specified level of performance. We apply an incentive funding performance requirement because we believe employees and officers should receive incentive awards only after our shareholders and creditors are paid.when company performance supports the payments. The Annual Incentive Plan specifies a performance requirement ofrequires $250 million of statutory after-tax operating earnings to fund payments under the plan. For 2018,plan, which helps to ensure our commitments to shareholders and creditors. In 2020, the Committee establishedalso conditioned the same performance requirement to fundfunding of grants under the long-term incentive plan. Funds used to attain theplan on this same performance requirement are derived from statutory after-tax operating earnings and other sources of cash flow available from the company’s insurance and non-insurance subsidiaries.requirement. The company successfully achieved the performance requirement for funding the 20182020 annual incentive awards and the long-term incentive grants made in March 2019.2021. While the "qualified“qualified performance-based compensation"compensation” exception under Section 162(m) was eliminated in 2017, the Committee has reaffirmed our pay-for-performance alignment and determined that our annual and long-term incentive plans will continue to be predicated upon the company achieving a specified level of TABLE OF CONTENTS
COMPENSATION DISCUSSION AND ANALYSIS
performance. Therefore, in 2019,2021, we will continue to use the performance requirement of $250 million of statutory after-tax operating earnings to fund awards under our annual and long-term incentive plans. Items Excluded When Determining Company Performance When establishing the performance measures and weightings for 2018,2020, the Committee determined that the effect of certain items not included in the 20182020 financial plan would be excluded from the calculation of the company’s performance, for purposes of both the annual and long-term incentive plans, should they occur. The Committee believes it is appropriate to exclude these items, which are set forth below and were also approved as exclusions for the items below2021 program, because they: (1) are unusual or infrequent in nature, (2) do not directly reflect company or management performance, or (3) could serve as a disincentive to capital management or other decisions which are in the best interest of the company and shareholders. These criteria are the same ones that we used in 2018 and the Committee has also approved them for use in 2019. The items are: Unplanned adjustments resulting from accounting standards and/or policy changes, legal, tax or regulatory rule or law changes; The impact of any unplanned acquisitions, divestitures or block reinsurance transactions; Unplanned adjustments to the Closed Block of business; The effect of any unplanned regulatory, legal or tax settlements; The effect of unplanned changes to strategic asset allocation; Unplanned debt issuance, repurchasing or retirement; or stock repurchase or issuance; The effect of differences between actual currency exchange rates versus exchange rates assumed in the financial plan; Unplanned fees or assessments, including tax assessments, from new legislation; and The effect on revenue from unplanned variances from floating rate securities and index-linked securities.securities (for our Investments Plan only); and The effect of a global pandemic and other economic and environmental pressures impacting results. 58 2019
68 2021 PROXY STATEMENT
TABLE OF CONTENTS COMPENSATION DISCUSSION AND ANALYSIS
Resiliency Scorecard After discussions with management and Pay Governance, the Committee approved a resiliency scorecard in July 2020 to thoughtfully apply discretion in conjunction with existing annual incentive targets as a result of the unprecedented events of the COVID-19 pandemic. The purpose of the scorecard was to evaluate key management actions taken through the year to position the business to thrive after the pandemic has eased. Resiliency categories considered included: (1) finance and operations, (2) employees, (3) customers and community, and (4) shareholders and other stakeholders. Overall, the Committee’s final assessment of the resiliency scorecard highlighted a successful transition to working from home and an unwavering focus on delivering for our customers throughout 2020. 20182020 ANNUAL INCENTIVE TARGETS AND RESULTS ($s in millions)millions, except per share data)Unum Group (actual results in blue)
| | | | Threshold(1) | | | Target(1) | | | Maximum(1) | | | Component
Weight | | | Result | | | | Unum Group (actual results in blue) | | | | | | | | | | | After-tax adjusted operating incomeearnings per share(2) | | | | | | 35% | | | AboveSlightly
above target | | | | Consolidated adjusted operating return on equity(3) | | | | | | 15% | | | AboveSlightly
above target | | | | Earned premium(4) | | | | | | 15% | | | AboveSlightly
below target | | | | Sales | | | | | | 15% | | | Below target | | | | Customer experience(5) | | | | | | 10% | | | BelowSlightly
below target | | | | Operating expense ratio(6) | | | | | | 10% | | | AboveBelow target
| |
| (1)
| For each performance measure, there is no payout at or below the threshold. For each performance measure, theThe payout would be 150% for performance at or above the maximum. For performance between defined levels, the payout is interpolated. |
(2)
| (2) | After-tax adjusted operating incomeearnings per share is defined as net income adjusted to exclude after-tax net realized investment gains or losses and amortization of the cost of reinsurance as well as certain other items specified in the reconciliation of non-GAAP financial measures attached hereto as in Appendix A.A of this proxy statement divided by dilutive outstanding weighted average shares. |
| (3)
| Consolidated adjusted operating return on equity is calculated by dividing after-tax adjusted operating income by the average of the beginning- and end-of-year stockholders’ equity adjusted to exclude the net unrealized gain or loss on securities and the net gain on hedges. |
| (4)
| Earned premium is calculated for our core operations (Unum US, Unum International, and Colonial Life). |
| (5)
| Customer Experienceexperience is based on the quality of our customers' experiences and includes measures which focusfocused on areas that impact customer loyalty and satisfaction. |
| (6)
| The operating expense ratio is equal to operating expenses as a percentage of earned premium (or total company expense over total company earned premium) inclusive of the Closed Block and Corporate segments. |
TABLE OF CONTENTS COMPENSATION DISCUSSION AND ANALYSIS
Applying the criteria and standards approved by the Committee when it established the 20182020 annual incentive targets, as discussed beginning on page 58,68, the Committee adjusted the Annual Incentive Plan performance calculations for the impact of the following fourfive items on our 20182020 financial plan results that were not included in the 20182020 financial plan from which the targets were initially derived: The effect of a long-term care reserve increase withindifferences between actual debt issuances and the Closed Block of businessamount assumed in the financial plan (impact to equity)earnings); The effect of differences between actual stock repurchases and the amount assumed in the financial plan (actual(no actual repurchases were lower than plan which impacted equity); The effect of differences between actual debt issuances and amount assumed in the financial plan (impact to earnings); and
The effect of differences between actual foreign currency rates and the exchange rates assumed in the financial plan.plan; The effect of a tax rate change in the U.K.; and The effect of a global pandemic and other economic and environmental pressures impacting results. These adjustments included the following impacts related to COVID-19: | ° | Elevated mortality within the Life and LTC product lines; |
| ° | Increased short-term disability COVID-19 claims; |
| ° | Higher costs associated with leave management claims; and |
| ° | Lower travel and incentive expenses, offset by increased expenses related to transitioning employees to work from home, creating a safe office environment and increasing allowances for uncollectible premiums. |
The net effect of the COVID-19 impacts in 2020 was a decrease in operating results, with the negative implications of Life mortality overshadowing favorable impacts to the LTC product line and travel-related expenses. Importantly, we did not make any explicit adjustment to sales or earned premium in the Annual Incentive Plan. While we know that these metrics were negatively impacted by COVID-19, the actual impact was difficult to isolate and therefore not considered. TABLE OF CONTENTS
COMPENSATION DISCUSSION AND ANALYSIS
Based on the adjustments described above, the calculated achievement was 88.7% of the plan target. Each year, the Committee also undertakes an overall assessment of the results, while also maintaining the discretion to make final adjustments. Any discretionary adjustments by the Committee are based on a review of the actual achievement level for each performance measure compared to the annual incentive targets, listed on page 59,as well as a qualitative assessment of the results. For 2018,2020, the Committee made minor adjustmentsrecognized management's resiliency scorecard achievements, noting efforts to position the overall performance basedcompany to not only survive the pandemic but to thrive after it ends. This included the response to work from home and a focus on qualitative considerations that slightlyresponsiveness to our customers in their time of need, which showed up in the positive customer experience metric. The Committee balanced financial achievements and resiliency with the impact to shareholders from our reduced stock price. Based on this assessment, the aggregate annual incentive payout (by less than 1%). The resultingCommittee approved the Unum Group Annual Incentive Plan achievementpayout level for 2018 was 100%2020 at 80% of target, as shown below. | | 2018Unum Group 2020 Annual Incentive Plan Achievement Level | | | | 100%
Unum Group80%
| |
The table below sets forth the target incentive and the actual annual incentive awards approved by the Committee to our NEOs for 2018each NEO for 2020 performance. For a discussion of 20192021 annual incentive award targets for each NEO,the NEOs, see the "Performance“Performance Assessment and Highlights"Highlights” summary beginning on page 6474. TABLE OF CONTENTS Depending on their role in the company, the annual incentive awards for our NEOs are tied in various ways to the performance of Unum Group and its business units.
COMPENSATION DISCUSSION AND ANALYSIS
The annual incentive awards of all NEOs are based on Unum Group performance, though the individual goals for Mr. Simonds and Mr. Arnold include financial goals related to their respective business units. The following table outlines the annual incentives awarded for 20182020 performance. ANNUAL INCENTIVE PAID IN 20192021 | (for 20182020 performance)
|
| | Mr. McKenney | | | 210% | | | X | | | 1,078,846 | | | X | | | 80% | | | X | | | 100% | | | = | | | 1,812,462 | | | | Mr. Zabel | | | 110% | | | X | | | 617,308 | | | X | | | 80% | | | X | | | 110% | | | = | | | 597,554 | | | | Mr. Simonds(1) | | | 127.95% | | | X | | | 718,846 | | | X | | | 80% | | | X | | | 100% | | | = | | | 735,785 | | | | Mr. Arnold | | | 90% | | | X | | | 519,267 | | | X | | | 80% | | | X | | | 95% | | | = | | | 355,179 | | | | Ms. Iglesias | | | 95% | | | X | | | 571,154 | | | X | | | 80% | | | X | | | 100% | | | = | | | 434,077 | |
(1)
| Mr. Simonds was appointed to his new role in February 2020 and the Committee increased his annual incentive target from 110% to 130%. His actual incentive target was prorated (rounded to two decimal places) based on his time in each position. |
Executive | 2018
Incentive
Target
(%) | | Eligible
Earnings
($) | | Company
Performance
(%) | | Individual
Performance
(%) | | 2018 Annual
Incentive Paid
($) | Mr. McKenney | 200% | X | 1,000,000 | X | 100% | X | 95% | = | 1,900,000 | Mr. McGarry | 110% | X | 630,000 | X | 100% | X | 100% | = | 693,000 | Mr. Simonds | 100% | X | 627,418 | X | 100% | X | 100% | = | 627,418 | Mr. Arnold | 90% | X | 497,144 | X | 100% | X | 100% | = | 447,429 | Ms. Iglesias | 90% | X | 521,315 | X | 100% | X | 100% | = | 469,184 |
Long-Term Incentive Our long-term incentive plan aligns the long-term interests of management and shareholders by tying a substantial portion of executive compensation directly to the company’s stock price. Long-term incentive awards are granted in the year following the performance year that determines their size (i.e., awards in 2020 were based on 2019 performance). All long-term incentive awards granted in 20182020 were granted under the Stock Incentive Plan of 2017. Our long-term incentive award mix is based on a review of peer practices as well as what the Committee believes most appropriately retains and rewards our NEOs and ensures that a significant portion of each executive’s compensation is tied to the increase of our stock price over the long-term. The mix of awards forgranted to each NEO in early 2020 was 50% performance-based restricted stock units (PBRSUs) and 50% performance share units (PSUs). As with the Annual Incentive Plan, grants of PBRSUs and PSUs have been conditioned on the company first achieving a corporate performance threshold, as described on page 57.All of our NEOs received a long-term incentive grant in March 20182020 in the form of PBRSUs and PSUs. All grants were awardedconditioned on the company first achieving the corporate performance threshold for 2019 (as described on page 68). Actual awards were based on the achievement of an after-tax statutory earnings thresholdtarget incentive and individual performance for 2017, as modified by individual achievement factors for 2017.2019. PBRSUs vest ratably over three years while PSUs vest at the end of the TABLE OF CONTENTS
COMPENSATION DISCUSSION AND ANALYSIS
3-year three-year performance period dependent upon actual performance, modified (up to +/- 20%) by relative TSR. The decision-making process to determinefor determining long-term incentive awards granted in March 20182020 was as follows:
| | If the 20172019 Performance Threshold was met, then: | |
| | ($) | | | × | | | (%) | | | = | | | ($) | | | | 20172019 Long-term
Incentive
Target for NEOs | | | 20172019 Individual
Performance(1) | | | 20182020 Long-term
Incentive Award | | | | | | | | | | | | | | | | | |
| | If threshold was not met, then no award not granted under plan | |
| | (1) | | | Individual performance may range from 0% to 125%. Individual performance adjustmentsachievement percentages for 20172019 performance are described beginning on pages 56 through 58page 66 of our 2018 proxy statement.2020 Proxy Statement. | |
TABLE OF CONTENTS COMPENSATION DISCUSSION AND ANALYSIS
As outlined in the diagram, once it was determined that the performance threshold had been met, the total value of the long-term incentive awardsaward granted to each NEO was determined by multiplying: The NEO's long-term incentive target (a specified percentage of base salary for all NEOs except the CEO, which was set as a dollar amount), which was set by the Committee in early 2019 after considering market data from the appropriate comparator group (as described beginning on page 52 of our 2020 Proxy Statement) and the individual’s target relative to other NEOs were determined by:given their respective levels of responsibility; and | • | Applying the individual long-term incentive targets, which were set in early 2017 by considering the market data from the appropriate comparator group (as described beginning on page 51) as well as each individual��s target relative to other NEOs, given their respective levels of responsibility, to each individual’s base salary, except that, the long-term incentive target is set as a dollar amount for Mr. McKenney; |
| • | Establishing anThe individual performance percentage (from 0% to 125%) assigned to the NEO by the Committee using the individual assessment process described beginning on page 5461 (for a discussion of the individual NEO performance assessments for 20172019 that determined the individual performance percentage for these 20182020 grants, other than for Mr. Arnold, see disclosure beginning on page 5666 of our 20182020 Proxy Statement). For Mr. Arnold, the Committee applied an individual performance percentage of 110% based on his leadership of Colonial Life's 2017 performance, including sales growth of almost 8%, the continued expansion of sales territories as well as an increase in new representatives. Additionally, the Committee recognized his contributions as part of the senior leadership team; and |
Multiplying each NEO’s long-term incentive target by his or her individual performance percentage.
Once the long-term incentive award value was determined, it was awarded as described below: The 2018 long-term incentive award was divided evenly between PBRSUs (50%) and PSUs (50%) for each NEO; and
NEO. The PBRSUs vest based on each NEO’s continued service over a three-year period. The PSUs vest based on the achievement of three-year (2018-2020)(2020-2022) pre-established goals for average adjusted operating return on equity and average adjusted operating earnings per share, modified (up to +/- 20%) by relative TSR as described below. No stock is issued under PBRSUs at the time of grant. Instead, company stock is issued only when the grant is settled. During the performance period, dividend equivalents accrue and vest only when and to the extent that the underlying PBRSUs vest. In addition, there are no shareholder voting rights unless and until the award is settled in shares.
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COMPENSATION DISCUSSION AND ANALYSIS
LONG-TERM INCENTIVE GRANTED IN 20182020 | | | (for 20172019 Performance) |
Executive | 2017 Long-Term
Incentive Target | | Individual
Performance | | 2018 Long-Term
Incentive Grant(2) | Mr. McKenney(1) | $5,500,000 | X | 120% | = | $6,600,000 | Mr. McGarry | 1,102,500 | X | 105% | = | $1,157,625 | Mr. Simonds | 984,000 | X | 115% | = | $1,131,600 | Mr. Arnold | 582,000 | X | 110% | = | $640,200 | Ms. Iglesias | 631,250 | X | 110% | = | $694,375 |
| | Mr. McKenney(1) | | | $6,500,000 | | | X | | | 98% | | | = | | | $6,370,000 | | | | Mr. Zabel | | | 656,027 | | | X | | | 110% | | | = | | | 721,630 | | | | Mr. Simonds | | | 1,120,000 | | | X | | | 110% | | | = | | | 1,232,000 | | | | Mr. Arnold | | | 625,044 | | | X | | | 110% | | | = | | | 687,548 | | | | Ms. Iglesias | | | 742,500 | | | X | | | 100% | | | = | | | 742,500 | |
| (1)
| Mr. McKenney’s target was set as a dollar amount, rather than as a percentage of salary as for the other NEOs. |
(2)
| (2) | The amount shown is the award approved by the Committee for each NEO. This amount is then converted to the respective number of PBRSUs and PSUs based on the closing stock price on the date of grant. The amount included in the Summary“Summary Compensation TableTable” on page 7787 was calculated using the closing stock price for PBRSUs and the Monte Carlo valuation methodology for PSUs. |
Executive | Performance-Based
Restricted Stock
Units Granted
(Mar. 2018) | Performance Share
Units Granted
(Mar. 2018) | Mr. McKenney | | 66,924 | | | 66,924 | | Mr. McGarry | | 11,738 | | | 11,738 | | Mr. Simonds | | 11,474 | | | 11,474 | | Mr. Arnold | | 6,492 | | | 6,492 | | Ms. Iglesias | | 7,041 | | | 7,041 | |
| | Mr. McKenney | | | 136,636 | | | 136,637 | | | | Mr. Zabel | | | 15,479 | | | 15,479 | | | | Mr. Simonds | | | 26,426 | | | 26,426 | | | | Mr. Arnold | | | 14,748 | | | 14,748 | | | | Ms. Iglesias | | | 15,927 | | | 15,927 | |
No stock is issued when the PBRSUs are granted. Instead, company stock is issued only when the grant is settled. In addition, there are no shareholder voting rights unless and until the award is settled in shares. Beginning with the March 1, 2020 grant, during the performance period, dividend equivalents will accrue and settle in cash to the extent that the underlying PBRSUs vest. TABLE OF CONTENTS COMPENSATION DISCUSSION AND ANALYSIS
The PSUs will vest based on the achievement of three-year, prospective (2018-2020)(2020-2022) average adjusted operating earnings per share and average adjusted operating return on equity goals, and the achievement will be modified (up to +/-20%) based on our TSR relative to the eight members of our "PSU“Performance Peer Group. "” Assuming performance above the threshold, PSUs can be paid out at 40% to 180% of target. The eight companies in the PSUPerformance Peer Group (Aflac, Hartford Financial Services, Lincoln Financial, MetLife, Principal Financial, Prudential Financial, TorchmarkGlobe Life (f/k/a Torchmark) and Voya Financial) were selected because they are considered to be direct business competitors of Unum (see discussion beginning on page 5258 for the differences between our Proxy Peer Group and PSUPerformance Peer Group). We believe it is appropriate to modify these awards based on relative TSR performance, since Unum’s individual TSR performance directly affects the value of the equity awards.realized by our shareholders. The table below outlines the three-year performance targets established by the Committee for the PSU grants made in March 2018.2020. PSUs are notional units that will track the value of our share price over the three-year performance period, and will vest and be settled through the issuance of shares based upon the achievement of the predetermined performance metrics. Dividend equivalents accrue during the three-year performance period and will vest only when and to the extent that the underlying PSUs vest. TABLE OF CONTENTS
COMPENSATION DISCUSSION AND ANALYSIS
TARGETS FOR PERFORMANCE SHARE UNITS (PSUs) GRANTED IN 2018 2020| | Unum Group
| | | | | | | | | | | | | | | | | | | | | | | | | | | | Average 3-year Consolidated Adjusted Operating Return on Equity (2018-2020)(2020-2022) | | | Capital Management
Effectiveness | | | 50% | | | | | | | Average 3-year After-Tax Adjusted Operating EPS (2018-2020)(2020-2022) | | | Profitability | | | 50% | | | | | | | Relative Total Shareholder Return | | | Modifier
Percentile | | | -20% @
35th | | | 0 @
50th | | | +20% @
75th | |
Vesting of 20162018 Performance Share Units (PSUs) The long-term incentive mix for our NEOs' 20162018 awards included 50% in the form of PSUs, which vested based on performance over a three-year performance period that ended on December 31, 2018.2020. The table below provides an overview of the three-year goals for the 20162018 PSU grant as well as their actual achievement levels. 20162018 PERFORMANCE SHARE UNIT (PSU) AWARDSCorporate
Performance Factors | Component
Weighting | Threshold | Target | Maximum | Result | Unum Group | | | | | | | | | | | | | | | | Average 3-year Adjusted Operating Return on Equity (2016-2018) | 50% | | 12.00% | Average 3-year After-Tax Adjusted Operating EPS (2016-2018) | 50% | | $4.46 | Relative Total Shareholder Return | Modifier
Percentile | -20%
@ 35th | 0 @
50th | +20%
@ 75th | @
0th |
| | Unum Group | | | | | | | | | | | | | | | | | | | Average 3-year Adjusted Operating Return on Equity (2018-2020) | | | 50% | | | | | | Below Target
12.23% | | | | Average 3-year After-Tax Adjusted Operating EPS (2018-2020) | | | 50% | | | | | | Below Target
$5.19 | | | | Relative Total Shareholder Return | | | Modifier
Percentile | | | -20% @
35th | | | 0 @
50th | | | +20% @
75th | | | -20%
@ 0th | |
Based on the above performance, and after taking into account the factors described below, in February 2019,2021, the Committee certified the results for this grant and approved a payout. The business goals were achieved at 120.3%91.8%, with relative TSR at the lowest percentile which resulted in a 20% decrease for a final payout of 96.2%73.4%. TABLE OF CONTENTS COMPENSATION DISCUSSION AND ANALYSIS
As discussed under “Items Excluded When Determining Company Performance,” beginning on page 58,68, when setting the performance measures and weightings for the 20162018 PSU grant, the Committee determined that certain items not included in the financial plan for fiscal years 20162018 to 20182020 would be excluded from the calculation of the company’s performance. Applying the criteria and standards approved by the Committee, targets were adjusted for the impact of the following items:items. Each item impacted both earnings and equity unless otherwise noted below: The effect of accounting policy changes for ASC 825 (Financial Instruments - Overall) and ASC 842 (Leases) (impact to equity only); The effect of accounting policy changes for ASC 326 (Financial Instruments - Credit Losses); The effect of the newly enacted U.S. corporateUK tax rate and revaluation of the net deferred tax liability as a result of tax reform;change; The effect of a change to the presentation of the company's prior period adjusted operating earnings as a result of the inclusion of amortization of prior period actuarial gains or losses, a component of net periodic benefit cost for our pension and other postretirement benefit plans;
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COMPENSATION DISCUSSION AND ANALYSIS
The effect of unplanned acquisition expenses, and operating earningsthe majority of which were related to Starmount Life Insurance Company, Unum Poland and otherour acquisition expenses; of Pramerica Życie TUiR SA; The effect of an individual disability reinsurance treaty, a long-term care reserve increase and a group pension reserve increase, each within the Closed Block of business; The effect of a reserve increase relatedbusiness (impact to the settlement with a third party regarding unclaimed death benefits (UDB)equity only);
The effect of an unplanned change to strategic asset allocation by investing in medical stop-loss product;
The effect of differences between actual stock repurchases and the amount assumed in the financial plan; plan (impact to equity only); The effect of differences between actual debt issuances and the timing, amount and rate assumed in the financial plan; The cost related to early retirement of debt (impact to equity only); The effect of differences between actual foreign currency rates and the exchange rates assumed in the financial plan; The effect of differences in the market value of net investment income; and The effect of an unplanned reinsurance treaty; andimpairment loss on right of use (ROU) asset related to operating lease for office space not planned to support general operations (impact to equity only). TheNo adjustments were made to the 2018 PSU targets to reflect the impact of a loss from a guaranty fund assessment.the COVID-19 pandemic on our business.
Performance Assessment and Highlights The NEOs’ achievement levels, for purposes of the 20182020 annual incentive awards paid and long-term incentive awards granted in March 2019,2021, were determined in part based on the individual performance goal areas listed in the "Individual“Individual Performance Evaluations"Evaluations” beginning on page 5461. The NEO summaries, beginning on the next page, detail the Committee's decisions for each element of compensation as well as highlights of each executivesexecutive's performance. These summaries also include each NEO’sNEO's annual compensation as well as their compensation targets for 20182020 and 2019.2021. 64 2019
74 2021 PROXY STATEMENT
TABLE OF CONTENTS COMPENSATION DISCUSSION AND ANALYSIS
LTI(1)
| $6,600,000
| | | COMPENSATION TARGETS
| 2019
| Base Salary
| $1,000,000
| AI Target
| 200%
| LTI Target
| $6,500,000
| 2018
| Base Salary
| $1,000,000
| AI Target
| 200%
| LTI Target
| $6,500,000
| | |
| (1) | Base salary shown is the earnings for the year. Annual incentive (AI) and long-term incentive (LTI) amounts are the decisions related to that performance year (e.g., annual and long-term incentive paid/granted in 20192021 were adjusteddetermined based on 20182020 performance and therefore are shown as 20182020 compensation). For LTI, this presentation is different than the Summary Compensation Table (see page 7787), which reports equity awards in the year granted. The above is not a replacement for the Summary Compensation Table. |
2019
2021 PROXY STATEMENT 6575
TABLE OF CONTENTS COMPENSATION DISCUSSION AND ANALYSIS
AI
| $822,462
| LTI
| $1,157,625
| (1)
| | COMPENSATION TARGETS
| 2019
| Base Salary
| $630,000
| AI Target
| 110%
| LTI Target
| 200%
| 2018
| Base Salary
| $630,000
| AI Target
| 110%
| LTI Target
| 200%
| | |
| (1) | Base salary shown is the earnings for the year. Annual incentive (AI) and long-term incentive (LTI) amounts are the decisions related to that performance year (e.g., annual and long-term incentive paid/granted in 20192021 were adjusteddetermined based on 20182020 performance and therefore are shown as 20182020 compensation). For LTI, this presentation is different than the Summary Compensation Table (see page 7787), which reports equity awards in the year granted. The above is not a replacement for the Summary Compensation Table. |
66 2019
76 2021 PROXY STATEMENT
TABLE OF CONTENTS COMPENSATION DISCUSSION AND ANALYSIS
Base Salary(1)
| $611,538
| AI
| $792,554
| LTI
| $1,131,600
| | | COMPENSATION TARGETS
| 2019
| Base Salary
| $630,375
| AI Target
| 100%
| LTI Target
| 175%
| 2018
| Base Salary
| $630,375
| AI Target
| 100%
| LTI Target
| 175%
| | |
| (1) | Base salary shown is the earnings for the year. Annual incentive (AI) and long-term incentive (LTI) amounts are the decisions related to that performance year (e.g., annual and long-term incentive paid/granted in 20192021 were adjusteddetermined based on 20182020 performance and therefore are shown as 20182020 compensation). For LTI, this presentation is different than the Summary Compensation Table (see page 7787), which reports equity awards in the year granted. The above is not a replacement for the Summary Compensation Table. |
2019
2021 PROXY STATEMENT 6777
TABLE OF CONTENTS COMPENSATION DISCUSSION AND ANALYSIS
COMPENSATION TARGETS
| 2019
| Base Salary(1)
| $500,035
| AI Target
| 90%
| LTI Target
| 125%
| 2018
| Base Salary
| $500,035
| AI Target
| 90%
| LTI Target
| 125%
| | |
| (1) | Base salary shown is the earnings for the year. Annual incentive (AI) and long-term incentive (LTI) amounts are the decisions related to that performance year (e.g., annual and long-term incentive paid/granted in 20192021 were adjusteddetermined based on 20182020 performance and therefore are shown as 20182020 compensation). For LTI, this presentation is different than the Summary Compensation Table (see page 7787), which reports equity awards in the year granted. The above is not a replacement for the Summary Compensation Table. |
68 2019
78 2021 PROXY STATEMENT
TABLE OF CONTENTS COMPENSATION DISCUSSION AND ANALYSIS
AI(1)
| $452,423
| LTI
| $694,375
| | | COMPENSATION TARGETS
| 2019
| Base Salary
| $550,000
| AI Target
| 95%
| LTI Target
| 135%
| 2018
| Base Salary
| $525,200
| AI Target
| 90%
| LTI Target
| 130%
|
| (1) | Base salary shown is the earnings for the year. Annual incentive (AI) and long-term incentive (LTI) amounts are the decisions related to that performance year (e.g., annual and long-term incentive paid/granted in 20192021 were adjusteddetermined based on 20182020 performance and therefore are shown as 20182020 compensation). For LTI, this presentation is different than the Summary Compensation Table (see page 7787), which reports equity awards in the year granted. The above is not a replacement for the Summary Compensation Table. |
2019
2021 PROXY STATEMENT 6979
TABLE OF CONTENTS COMPENSATION DISCUSSION AND ANALYSIS
Compensation Policies and Practices Equity grants awarded under the long-term incentive program are approved at the February meeting of the Committee, which typically occurs two to three weeks after the company’s annual earnings are released to the public. Long-term incentive awards are granted in the year following the performance year that determines their size (i.e., awards in 2020 were based on 2019 performance). The March 1, 20182020 grant was approved at the February 20182020 meeting of the Committee. The closing stock price on the grant date is used to determine the number of units awarded. Stock Ownership and Retention Requirements Ensuring that senior officers have a significant ownership stake in the company aligns the long-term interests of management and shareholders and promotes a culture of ownership and accountability. The following table reflects the stock ownership and retention requirements across Unum Group for senior level officers beyond those described in the proxy.officers.
| | | STOCK OWNERSHIP AND RETENTION REQUIREMENTS FOR SENIOR OFFICERS | | | |
| | | Required
| | | | | | | Required | | | Retention Percent | | | Holding Period | | | | | | | | | | Chief Executive Officer | | | 6x | | | 75% | | | 3 years | | | | | | | | | | Executive Vice President | | | 3x | | | 60% | | | 1 year | | | | | | | | | | Senior Vice President | | | 1x | | | 50% | | | 1 year | | | | |
We require these senior officers, including each current NEO, to: Hold a multiple of the officer’s base salary in Unum shares (including unvested restricted stock units) throughout employment; Meet the ownership requirement within five years following their date of employment or promotion. Not meeting the requirements may impact future equity grants; and RetainPrior to January 1, 2021, retain a fixed percentage of the net shares (shares after the payment of taxes and the costs of exercise and commissions) received as compensation for a specified period of time. These holding period requirements apply to shares acquired upon the exercise of options and the vesting of PBRSUs and PSUs even if the stock ownership requirements have been met. Exceptions to this requirement may be made only by the Board.
As part of the changes approved by the Committee in August 2020 (see “Key Compensation Decisions” beginning on page 62), the retention requirements were changed effective January 1, 2021. Beginning in 2021, a covered officer must hold all net after-tax shares acquired upon the exercise of options and the vesting of PBRSUs, SSUs or PSUs until his or her ownership requirement is met. Once the requirement is met, the officer can sell shares only to the extent that the sale would not reduce his or her holdings below the ownership requirement. This change is aligned with the majority practice of our Proxy Peer Group. For purposes of calculating stock ownership, the Committee determined that the greater of the spot price or the preceding 12-month average closing stock price should be used to reduce volatility in outcomes. TABLE OF CONTENTS COMPENSATION DISCUSSION AND ANALYSIS
The following table presents the stock ownership and retention requirements for each current NEO. Messrs.Mr. McKenney, McGarry,Mr. Simonds, Mr. Arnold and SimondsMs. Iglesias exceeded the requirements as of December 31, 2018. Ms. Iglesias, who joined the organization in January 2015, and2020. Mr. Arnold,Zabel, who became an Executive Vice President in January 2015, areJuly 2019, is expected to meet the ownership requirements within the applicable time period provided. TABLE OF CONTENTS
COMPENSATION DISCUSSION AND ANALYSIS
STOCK OWNERSHIP AND RETENTION REQUIREMENTS FOR CURRENT NEOs | (as (as of December 31, 2018)2020)
|
| | | | | Ownership
as Percent of Salary | Retention
Requirements | Executive | Common
Stock(1) | Restricted
Stock Units(2) | Total Current
Ownership | Owned | Required | Retention
Percent(3) | Holding
Period(4) | Mr. McKenney | $8,178,070 | $4,113,200 | $12,291,270 | 12.3x | 6x | 75% | 3 years | Mr. McGarry | 1,749,755 | 729,476 | 2,479,231 | 3.9x | 3x | 60% | 1 year | Mr. Simonds | 1,438,269 | 729,388 | 2,167,657 | 3.4x | 3x | 60% | 1 year | Mr. Arnold | 458,122 | 374,507 | 832,629 | 1.7x | 3x | 60% | 1 year | Ms. Iglesias | 745,136 | 459,004 | 1,204,140 | 2.3x | 3x | 60% | 1 year |
| | Mr. McKenney | | | $10,482,189 | | | $7,801,092 | | | $18,283,281 | | | 17.4x | | | 6x | | | 75% | | | 3 years | | | | Mr. Zabel | | | 263,326 | | | 727,141 | | | 990,467 | | | 1.7x | | | 3x | | | 60% | | | 1 year | | | | Mr. Simonds | | | 2,151,803 | | | 2,045,290 | | | 4,197,093 | | | 6.0x | | | 3x | | | 60% | | | 1 year | | | | Mr. Arnold | | | 765,944 | | | 922,807 | | | 1,688,751 | | | 3.4x | | | 3x | | | 60% | | | 1 year | | | | Ms. Iglesias | | | 1,177,368 | | | 1,047,477 | | | 2,224,845 | | | 4.0x | | | 3x | | | 60% | | | 1 year | |
| (1)
| Amount includes shares held in certificate form, brokerage accounts, and 401(k) Plan accounts. Shares were valued using a closing stock price of $29.38$22.94 on December 31, 2018.2020. |
(2)
| (2) | Shares/Performance-based restricted stock units (PBRSUs) vest over three years and stock success units (SSUs) vest upon the earlier of the achievement of performance metrics or August 24, 2026 (see the “Vesting Schedule for Unvested Restricted Stock Units” table on page 93). Restricted stock units were valued using a closing stock price of $29.38$22.94 on December 31, 2018. Performance-based restricted2020. |
(3)
| “Total Current Ownership” was valued using a closing stock units (PBRSUs) vest over three years (see the Vesting Schedule for Unvested Restricted Stock Units tableprice of $22.94 on page 82).December 31, 2020. |
| (3)(4)
| Retention percentage is the net percentage of shares to be held after the payment of taxes and the costs of exercise and commissions. Retention requirements apply to shares acquired upon the exercise of options and the vesting of PBRSUs, PSUs and PSUs. |
| (4) | SSUs. After thisthe holding period, the officer would then be able to sell the shares as long as his or her ownership requirement is met or would be reached in the time period allotted. As discussed above, the holding period is no longer applicable beginning on January 1, 2021. |
Hedging, Pledging and Insider Trading Policies We have a policy that no director orbelieve our directors and executive officer,officers, which includes our NEOs, may purchaseshould not speculate or sellhedge their interests in our stock. We therefore have a policy prohibiting them from buying or selling options, puts, calls, straddles, equity swaps or other derivatives that are directly linked to our stock. In addition, This policy generally does not apply to other employees, although employees who are “corporate insiders” under our insider trading policy are prohibited from making “short sales” of our stock. We also prohibit directors and executive officers from pledging our stock as security for a loan.
Our insider trading policy prohibits our directors, executive officers (including NEOs) and other employees from buying or selling our stock while in possession of material nonpublic information about the company and from conveying any such information to others. Under this policy, additional trading restrictions apply to the NEOs“corporate insiders” (which includes our directors and other “corporate insiders,”executive officers), who are generally permitted to buy or sell our stock only during predetermined window periods following earnings announcements, and only after they have pre-cleared the transactions with our general counsel or designee. Also under this policy, no corporate insider may make “short sales” of our stock, and no director or executive officer may pledge our stock as security for a loan. If the company makes a material restatement of its financial results, then the Board will, to the extent permitted by applicable law, seek recoupment of performance-based compensation paid to certain senior officers if it determines that: The senior officer has committed or engaged in fraud or willful misconduct that resulted, either directly or indirectly, in the need to make such restatement; and TABLE OF CONTENTS COMPENSATION DISCUSSION AND ANALYSIS
Such performance-based compensation paid or awarded to the senior officer would have been a lesser amount if calculated using the restated financial results. The amount of performance-based compensation to be recouped will be determined by the Board after taking into account the relevant facts and circumstances. Performance-based compensation includes annual cash incentive awards, bonuses and all forms of equity compensation. The company’s right to recoup compensation is in addition to other remedies that may be available under applicable law. TABLE OF CONTENTS
COMPENSATION DISCUSSION AND ANALYSIS
Tax and Accounting Considerations
Section 162(m) of the Internal Revenue Code (the “Code”) generally disallows a tax deduction to a public corporation for compensation over $1 million paid in any fiscal year to certain “covered employees,” which includes our named executive officers. However, in the case of tax years commencing before 2018, the statute exempted qualifying performance-based compensation from the deduction limit if certain requirements were met. Section 162(m) was amended in December 2017 by the Tax Cuts and Jobs Act to eliminate the exemption for performance-based compensation (other than with respect to payments made pursuant to certain “grandfathered” arrangements entered into prior to November 2, 2017) and to expand the group of current and former executive officers who are covered by the deduction limit under Section 162(m).Historically, our annual incentive payout and long-term incentive grants were intended to be deductible under Section 162(m). The Committee did, however, reserve the right to, in its sole discretion, pay compensation that was not deductible under Section 162(m) if it determined that paying such compensation was needed in order to attract, retain or provide incentives to our NEOs, or was otherwise desirable. Given complexities in the tax rules, it is also possible that compensation intended to qualify for the “qualified performance-based compensation” exception did not so qualify.
In light of the repeal of the performance-based compensation exception to Section 162(m),
As a result, the Committee expects compensation granted or paid in 2018 and future tax years will not be fully deductible for income tax purposes. While, theThe Committee believes that shareholder interests are best served if it retains discretion and flexibility in awarding compensation, even though some compensation awards may result in non-deductiblenondeductible compensation expenses, the Committee intends to maintain strong pay-for-performance alignment of executive compensation arrangements notwithstanding loss of deductibility due to the repeal of the exemption for performance-based compensation.expenses. We account for stock-based payments under the requirements of FASB ASC Topic 718.718 “Compensation - Stock Compensation” (ASC 718). A complete discussion of the assumptions made as well as the financial impact of this type of compensation can be found in Notes 1 and 11 of the Consolidated Financial Statements in Part II, Item 8 of our 20182020 Form 10-K. Each year, the company provides a report to the Committee of the expense for stock-based payments. Additionally, in the event the Committee is considering new equity-based compensation programs or changes to existing programs, the accounting implications of the program or change are presented and discussed as part of the decision process. Perquisites and Other Personal Benefits We provide a limited number of perquisites and other personal benefits to our employees including all NEOs,(including our NEOs), which are described below: One of our largest employee locations is in Tennessee, which has no state income tax. Due to the frequency of travel between our corporate offices and other locations, employees often incur non-residentnonresident state taxes in multiple states. Therefore, when any employee travels to other company locations outside of his or her primary state of employment and incurs state income tax based on another state’s law, we pay the non-resident state taxes and provide a tax gross- up on this amount. Prior to 2019, the gross-up foronly included FICA and Medicare taxes since state taxes were deductible on federal returns; however, given the non-residentnew $10,000 limit on deductibility of state taxes. taxes imposed by the Tax Cuts and Jobs Act, we made the decision to cover federal taxes as part of the gross-up beginning in 2019. The company has entered into an aircraft time-sharing agreement with Mr. McKenney, effective as of May 21, 2015, pursuant to which he agrees to reimburse the company for the costs of his personal use of the corporate aircraft. During 2018, based on benchmarking data and an analysis2020, Mr. McKenney had no personal use of the fees relative to market practice, the Committee updated the time-sharing agreement to eliminate the extra fuelcorporate aircraft. TABLE OF CONTENTS
COMPENSATION DISCUSSION AND ANALYSIS
component in favor of a component ensuring that, to the extent permitted under FAA regulations, the company recovers the value of the flight determined under the Standard Industry Fare Level valuation formula. Mr. McKenney did not use this benefit during 2018.
| • | A tax gross-up is provided to employees who incur income on company-sponsored events where attendance is expected, including a limited number of events we host each year to recognize the contributions of various employees. These functions serve specific business purposes, and in some cases the attendance of a NEO and his or her spouse or guest is expected. If so, we attribute income to the NEO for these costs when required under Internal Revenue Service regulations. For more information, see the All“All Other CompensationCompensation” table on page 7888. |
TABLE OF CONTENTS COMPENSATION DISCUSSION AND ANALYSIS
Retirement and Workplace Benefits We provide a benefits package for employees including all NEOs,(including our NEOs) and their dependents, portions of which are paid for, in whole or in part, by the employee. Among the retirement benefits we offer are:
The Unum Group 401(k) Retirement Plan.Plan On January 1, 2014, Unum replaced its defined benefit pension plans, which were frozen to further accruals as of December 31, 2013, with an enhanced defined contribution retirement offering. This includes: (1) a non-contributorynoncontributory tax-qualified defined contribution plan for all regular U.S. employees who meet eligibility requirements and are generally scheduled to work at least 1,000 hours per year, which is offered within our existing tax-qualified 401(k) retirement plan (401(k) Plan), and (2) a separate, non-qualifiednon- qualified defined contribution plan (Non-Qualified Plan) for employees whose benefits under the tax-qualifiedtax- qualified plan are limited by the Internal Revenue Code (the “Code”).Code. New hires are automatically enrolled in the 401(k) and Non-Qualified Plan at a 5% deferral rate 45 days after hire but are able to make adjustments to their deferral rate. Base pay and annual incentives are included in covered earnings for these defined contribution plans, but long-term incentive awards are not. Unum provides the following contributions: A 5% match contribution (for elected deferrals provided through the 401(k) and Non-Qualified Plans); A 4.5% contribution (provided through the 401(k) and Non-Qualified Plans); and For employees who meet certain age and service requirements, a 3.5% transition contribution on covered earnings and an additional 3.5% transition contribution for covered earnings above $70,000 (provided through the 401(k) Plan and, for those eligible employees whose earnings exceed the qualified plan limits, the Non-Qualified Plan). The transition contributions are beingwere made to active eligible employees until December 31, 2020. They were provided to eligible employees to more closely align with the benefits which were accrued under the frozen defined benefit plans. This benefit iswas provided to those employees who, due to their age and years of service, would not have the same opportunity to adjust to the new defined contribution plan as other employees. Transition contributions will be made to activeDuring 2020, Mr. Arnold was the only NEO that was eligible employees until December 31, 2020. for the transition contributions. Other Workplace Benefits The other workplace benefits we offer include:include life, health,medical, pharmacy, telehealth, EHE preventive care, dental, vision, voluntary products and disability insurance; dependent and healthcarehealth care reimbursement accounts; health savings accounts; tuition, commuter and fitness reimbursement; on site and virtual fitness options; on site health resource centers; virtual behavioral health support; subsidized healthy food choices; an employee stock purchase plan; student debt relief, an employee assistance program; family building, paid time off; caregiver and paid parental leave; holidays; and a matching gifts program for charitable contributions. In April 2018, we purchased corporate owned life insurance (COLI) on all officers who gave their approval. In the event of a covered officer’sofficer's death while still employed, we will provide a death benefit to the officer’sofficer's beneficiary in the amount of $200,000. In the event of a covered officer’sofficer's death while no longer employed, we will provide a death benefit to the officer’sofficer's beneficiary in the amount of $50,000. Each of the NEOs is covered under the policy. Mr. McGarryArnold is also covered under a similar COLI policy purchased in April 2000 that willwould provide a death benefit to the officer’shis beneficiary in the amount of $200,000 in the event of his death while still employed. 2019
2021 PROXY STATEMENT 7383
TABLE OF CONTENTS COMPENSATION DISCUSSION AND ANALYSIS
The Unum Group Pension Plan (the Qualified Plan) and the Unum Group Supplemental Pension Plan (the Excess Plan) were frozen on December 31, 2013. Benefits earned under these plans have been determined based on service and eligible earnings through December 31, 2013. NEOs hired prior to this date and who met the participation requirements at the freeze date participated in both the Unum Group Pension and Supplemental Pension Plans. Benefits earned before the freeze will be paid to executivesemployees under the terms of the plans as the employeesthey terminate employment or retire. Generally, employees who terminate employment are eligible to elect to start receiving benefits under the pension plans as early as age 55 but no later than age 65. FROZEN DEFINED BENEFIT PLANS | | Provides funded, tax-qualified benefits up to the limits on compensation and benefits under the Code. The Qualified Plan was designed to provide tax-qualified pension benefits for most employees. On June 12, 2013, the Human Capital Committee approved a change to the terms of the Qualified Plan to freeze the further accrual of retirement benefits provided to employees on December 31, 2013. | |
| | Provides unfunded, non-qualified benefits for compensation that exceeds the Code limits applicable to the Qualified Plan. On June 12, 2013, the Human Capital Committee approved a change to the terms of the Excess Plan to freeze the further accrual of retirement benefits provided to employees on December 31, 2013. | |
Plan Descriptions Following are details of how each of the frozen pension plan benefits are calculated. These formulas incorporate base pay received in each plan year during which the employee accrued credited service through December 31, 2013, and payments received from the regular Annual Incentive Plan and any field or sales compensation plans through that date. Not included are other bonuses, long-term incentive awards, commissions, prizes, awards, or allowances for incidentals.
In calculating the basic pension benefits in ourthe Qualified Plan, three criteria are used: FROZEN QUALIFIED PLAN CRITERIA | | Measures of the time individuals are employed at the company. One year of credited service is granted for each plan year in which 1,000 hours of employment are completed. No additional credited service will accrue to any participant after December 31, 2013. | |
| | The average of the highest 5five years of compensation (whether or not consecutive) during the earlier of the last 10 years of employment or as of the date the plan was frozen on December 31, 2013. | |
| | The average of the taxable wage bases in effect for each calendar year during the 35-year period ending when the plan was frozen on December 31, 2013. | |
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TABLE OF CONTENTS COMPENSATION DISCUSSION AND ANALYSIS
The basic benefit is provided as an annual single life annuity and is calculated as follows: 
| (1)
| Can range from 3%, if the sum of an employee’s age and years of credited service is less than 30, to 8%, if the sum equals or exceeds 95. |
| (2)
| Equal to 9.0 for retirement at age 65 and increased by 0.2 for each whole year retirement occurs prior to age 65. |
All frozen pension benefits are indexed on the first day of each plan year (January 1st)1st) following December 31, 2013 using the National Average Wage rate of increase published by the Social Security Administration in the preceding year (minimum of 2.75% and maximum of 5%). As of January 2017, the retirement benefits will beare indexed using the Internal Revenue Service regulations. Benefits provided under the frozen Qualified Plan are based on pensionable earnings through December 31, 2013 up to the 2013 compensation limit of $255,000 under the Internal Revenue Code. In addition, as of 2020, benefits may not exceed $225,000$230,000 (payable as a single life annuity beginning at any age from 62 through Social Security Normal Retirement Age) under the Internal Revenue Code.
As described above in the Frozen Defined Benefit Plans table, the Excess Plan disregards the annual benefit limit under Section 415 of the Code. The Excess Plan takes into account pension benefits outside of the current Qualified Plan and is calculated as follows: 
Participants in the pension plans outlined above are eligible to retire as early as age 55. Under the Qualified Plan, participants may retire early at age 55 with 5five years of vesting service. Under the Excess Plan, generally participants can retire at the latterlater of age 60 or termination. However, if a participant begins receiving a benefit prior to the normal retirement age of 65, the normal retirement benefit will be reduced based on the applicable early reduction factors defined in the plan. The benefit formulaformulas for the Qualified and Excess plansPlans are shown above. Mr. McGarry and Mr. Arnold are the only NEOs currently eligible for early retirement under the Qualified Plan. Mr. McGarry is the only NEO currently eligible for early retirement under the ExcessQualified Plan. 2019
2021 PROXY STATEMENT 7585
TABLE OF CONTENTS COMPENSATION DISCUSSION AND ANALYSISCOMMITTEE REPORT
REPORT OF THE HUMAN CAPITAL COMMITTEE
COMPENSATION COMMITTEE REPORT The Human Capital Committee has reviewed and discussed with management the Compensation Discussion and Analysis contained in this proxy statement. Based on such review and discussions, the Committee recommended to the Board of Directors that the Compensation Discussion and Analysis be included in this proxy statement and incorporated by reference into the company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2018.20182020.
2020 Human Capital Committee:
Cynthia L. Egan, Chair
Theodore H. Bunting, Jr.
Kevin T. Kabat
76 2019
86 2021 PROXY STATEMENT
TABLE OF CONTENTS 20182020 Summary Compensation TableName and Principal
Position | Year | Salary
($) | Bonus
($) | Stock
Awards
($)(1) | Option
Awards
($) | Non-Equity
Incentive
Plan
Compensation
($) | Change in
Pension
Value
& Non-qualified
Deferred
Compensation
Earnings
($) | All Other
Compensation
($) | TOTAL
($) | Richard P. McKenney
| | | | | | | | | | | | | | | | | | | | | | | | | President and Chief
Executive Officer, and
a Director | 2018 | | 1,000,000 | | | — | | | 6,564,575 | (2) | | — | | | 1,900,000 | (3) | | — | (4) | | 432,286 | (5) | | 9,896,861 | | 2017 | | 1,000,000 | | | — | | | 5,720,021 | | | — | | | 2,415,000 | | | 119,000 | | | 429,925 | | | 9,683,946 | | 2016 | | 994,231 | | | — | | | 5,176,835 | | | — | | | 2,100,937 | | | 84,000 | | | 315,316 | | | 8,671,319 | | John F. McGarry | | | | | | | | | | | | | | | | | | | | | | | | | | Executive Vice President and Chief Financial Officer | 2018 | | 630,000 | | | — | | | 1,151,381 | (2) | | — | | | 693,000 | (3) | | — | (4) | | 239,440 | (5) | | 2,713,821 | | 2017 | | 623,077 | | | — | | | 1,040,004 | | | — | | | 822,462 | | | 322,000 | | | 231,242 | | | 3,038,785 | | 2016 | | 588,461 | | | — | | | 912,245 | | | — | | | 744,404 | | | 273,000 | | | 196,724 | | | 2,714,834 | | Michael Q. Simonds | | | | | | | | | | | | | | | | | | | | | | | | | Executive Vice President, President and Chief Executive Officer, Unum US | 2018 | | 627,418 | | | — | | | 1,125,485 | (2) | | — | | | 627,418 | (3) | | — | (4) | | 146,822 | (5) | | 2,527,143 | | 2017 | | 611,538 | | | — | | | 1,040,004 | | | — | | | 792,554 | | | 248,000 | | | 132,521 | | | 2,824,617 | | 2016 | | 594,231 | | | — | | | 953,678 | | | — | | | 676,532 | | | 168,000 | | | 127,479 | | | 2,519,920 | | Timothy G. Arnold | | | | | | | | | | | | | | | | | | | | | | | | | | Executive Vice President, President and Chief Executive Officer, Colonial Life | 2018 | | 497,144 | | | — | | | 636,801 | (2) | | — | | | 447,429 | (3) | | — | (4) | | 245,965 | (5) | | 1,827,339 | | Lisa G. Iglesias | | | | | | | | | | | | | | | | | | | | | | | | | | Executive Vice President and General Counsel | 2018 | | 521,315 | | | — | | | 690,652 | (2) | | — | | | 469,184 | (3) | | — | (4) | | 104,501 | (5) | | 1,785,652 | | 2017 | | 502,692 | | | — | | | 643,520 | | | — | | | 452,423 | | | — | | | 105,505 | | | 1,704,140 | | 2016 | | 492,692 | | | — | | | 639,854 | | | — | | | 424,946 | | | — | | | 91,033 | | | 1,648,525 | |
| | Richard P. McKenney
| | | | | | | | | | | | | | | | | | | | | | | | | President and Chief Executive Officer, and a Director | | | 2020 | | | 1,078,846 (2) | | | 9,906,877 (3) | | | 1,812,462 (4) | | | 167,000 (5) | | | 293,553 (6) | | | 13,258,738 | | | | 2019 | | | 1,000,000 | | | 6,420,903 | | | 1,710,000 | | | 161,000 | | | 435,283 | | | 9,727,186 | | | | 2018 | | | 1,000,000 | | | 6,564,575 | | | 1,900,000 | | | — | | | 432,286 | | | 9,896,861 | | | | Steven A. Zabel | | | | | | | | | | | | | | | | | | | | | | | | | Executive Vice President, Chief
Financial Officer | | | 2020 | | | 617,308 (2) | | | 938,550 (3) | | | 597,554 (4) | | | — (5) | | | 120,050 (6) | | | 2,273,462 | | | | 2019 | | | 456,308 | | | 280,159 | | | 410,335 | | | — | | | 73,235 | | | 1,220,037 | | | | | | | | | | | | | | | | | | | | | | | | | | Michael Q. Simonds | | | | | | | | | | | | | | | | | | | | | | | | | Executive Vice President, Chief Operating Officer | | | 2020 | | | 718,846 (2) | | | 2,114,113 (3) | | | 735,785 (4) | | | 368,000 (5) | | | 139,885 (6) | | | 4,076,629 | | | | 2019 | | | 634,817 | | | 1,261,822 | | | 628,469 | | | 340,000 | | | 143,048 | | | 3,008,156 | | | | 2018 | | | 627,418 | | | 1,125,485 | | | 627,418 | | | — | | | 146,822 | | | 2,527,143 | | | | Timothy G. Arnold
| | | | | | | | | | | | | | | | | | | | | | | | | Executive Vice President, Voluntary Benefits and President, Colonial Life | | | 2020 | | | 519,267 (2) | | | 1,004,033 (3) | | | 355,179 (4) | | | 299,000 (5) | | | 227,746 (6) | | | 2,405,225 | | | | 2019 | | | 500,035 | | | 682,420 | | | 405,029 | | | 304,000 | | | 298,749 | | | 2,190,233 | | | | 2018 | | | 497,144 | | | 636,801 | | | 447,429 | | | — | | | 245,965 | | | 1,827,339 | | | | Lisa G. Iglesias
| | | | | | | | | | | | | | | | | | | | | | | | | Executive Vice President, General Counsel | | | 2020 | | | 571,154 (2) | | | 1,118,060 (3) | | | 434,077 (4) | | | — (5) | | | 109,804 (6) | | | 2,233,095 | | | | 2019 | | | 544,277 | | | 780,971 | | | 465,357 | | | — | | | 112,906 | | | 1,903,511 | | | | 2018 | | | 521,315 | | | 690,652 | | | 469,184 | | | — | | | 104,501 | | | 1,785,652 | |
(1)
| (1) | "“Stock Awards" consistsAwards” consist of performance share units (PSUs) and, performance-based restricted stock units (PBRSUs) and stock success units (SSUs). The number of shares payable under the PSU awards will be based on the actual performance, modified (+/(up to +/- 20%) based on relative TSR, and may result in the ultimate award of 40-180% of the initial number of PSUs issued, with the potential for no award if company performance goals are not achieved during the three-year performance period. |
(2)
| (2)There were 27 pay periods during 2020; therefore, the amount shown is higher than annual base salary for each of our NEOs. |
TABLE OF CONTENTS (3)
| These awards were comprised of 50% PSUs and 50% PBRSUs granted on March 1, 20182020 for performance in 2017.2019 (see page 72 for details), as well as SSUs granted on August 24, 2020 with a one-for-one proportional share retention commitment (see details beginning on page 62). The grant date fair value of stock awards for the PSUs was calculated in accordance with FASB ASC Topic 718 – Compensation – Stock Compensation (ASC 718) as the number of units multiplied by the Monte Carlo simulation value of $48.78$23.58 on the grant date. See Note 11 (“Stock-Based Compensation”) to our consolidated financial statements in our 2020 Form 10-K for additional information about the company's accounting for share-based compensation arrangements, including the assumptions used for calculating the grant date value of PSUs. The grant date fair value of stock awards for the PBRSUs was calculated in accordance with ASC 718 as the number of units multiplied by the closing market price of $49.31$23.31 on the grant date. The grant date fair value of the SSUs was calculated as the number of units multiplied by the closing market price of $18.78 on the grant date, August 24, 2020. The value of PSUs, assuming the highest possible outcomes of performance conditions (180%) to which 20182020 awards are subject, determined based on the award amount at the time of grant and thus excluding dividend equivalent units that accrue during the performance period, would be: $5,940,040$5,799,421 for Mr. McKenney; $1,041,841$656,991 for Mr. McGarry; $1,018,409Zabel; $1,121,625 for Mr. Simonds; $576,217$625,964 for Mr. Arnold; and $624,945$676,006 for Ms. Iglesias. |
TABLE OF CONTENTS
(4)
| (3) | Amounts reflect the annual incentive awards paid in March 20192021 for performance in 2018.2020. These are discussed in further detail beginning on page 5566. |
(5)
| (4) | The amounts ofshown reflect the actuarial present value decreasesincreases from December 31, 20172019 through December 31, 2018 under all pension plans established by the company were as follows: Mr. McKenney $(79,000); Mr. McGarry $(149,000); Mr. Simonds $(177,000); and Mr. Arnold $(131,000). Pursuant to Instruction 3 to Item 402(c)(2)(iii), these amounts are shown as zero in the above table.2020. Pension values may fluctuate from year-to-year depending on a number of factors, including age at benefit commencement and the assumptions used to determine the present value, such as the discount rate and mortality rate. The assumptions used by the company in calculating the change in pension value are described beginning on page 8394 and are consistent with those set forth in Note 9 of our Consolidated Financial Statements in Part II, Item 8 of our 20182020 Form 10-K, except as otherwise provided in footnotes to the Pension Benefits“Pension Benefits” table on page 8394. |
(6)
| (5) | "“All Other Compensation"Compensation” amounts are set forth in the following table. |
20182020 ALL OTHER COMPENSATION
| Mr.
McKenney | Mr.
McGarry | Mr.
Simonds | Mr.
Arnold | Ms.
Iglesias | Employee and Spouse/Guest Attendance at Company Business Functions(a) | 41,752 | — | 5,494 | 44,074 | — | Total Perquisites | 41,752 | — | 5,494 | 44,074 | — | Matching Gifts Program(b) | 10,000 | 100 | — | 10,000 | 10,000 | Company Matching Contributions Under our Qualified and Non-Qualified Defined Contribution Retirement Plan(c) | 169,789 | 72,017 | 70,392 | 48,817 | 48,182 | Company Contributions to the Qualified and Non-Qualified Defined Contribution Retirement Plan(d) | 152,810 | 163,190 | 63,353 | 109,830 | 43,364 | Non-Resident State Taxes(e) | 40,604 | 2,536 | 3,129 | 386 | 2,886 | Tax Reimbursement Payments(f) | 17,331 | 97 | 4,454 | 32,858 | 69 | Foreign Assignment(g) | — | 1,500 | — | — | — | Total All Other Compensation | $432,286 | $239,440 | $146,822 | $245,965 | $104,501 |
| | Employee and Spouse /Guest Attendance at Company Business Functions(a) | | | — | | | — | | | — | | | 45,738 | | | — | | | | Total Perquisites | | | — | | | — | | | — | | | $45,738 | | | — | | | | Matching Gifts Program(b) | | | 10,000 | | | 10,000 | | | 9,992 | | | 10,000 | | | 10,000 | | | | Company Matching Contributions Under our Qualified and Non-Qualified Defined Contribution Retirement Plan(c) | | | 139,442 | | | 51,382 | | | 67,366 | | | 46,215 | | | 51,825 | | | | Company Contributions to the Qualified and Non Qualified Defined Contribution Retirement Plan(d) | | | 125,498 | | | 46,244 | | | 60,629 | | | 103,844 | | | 46,643 | | | | Non-Resident State Taxes(e) | | | 10,666 | | | 6,873 | | | 1,124 | | | 590 | | | 767 | | | | Tax Reimbursement Payments(f) | | | 7,947 | | | 5,486 | | | 729 | | | 21,354 | | | 569 | | | | Wellness Reward(g) | | | — | | | 65 | | | 45 | | | 5 | | | — | | | | Total All Other Compensation | | | $293,553 | | | $120,050 | | | $139,885 | | | $227,746 | | | $109,804 | |
| (a)
| Spouses or guests sometimes accompany the NEO at company business functions. When theirthis happens, we report the aggregate incremental cost to the company of such attendance. When spouse or guest attendance is expected, a tax gross up payment is provided. Where applicable, these payments have been included under "Tax“Tax Reimbursement Payments." Additionally, when these trips included travel on the corporate aircraft, the incremental cost was calculated to determine amounts to be reported.” For purposes of compensation disclosure, the use of company aircraft is valued using an incremental cost that takes into account fuel costs, landing fees, parking, weather monitoring and maintenance fees per hour of flight. Crew travel expenses are included based on the actual amount incurred for a particular trip. Fixed costs that do not change based on usage, such as pilot salaries and depreciation of the aircraft, are excluded. Amounts represent the imputed income each NEO incurred for such attendance plus the incremental cost of the aircraft when the aircraft was used. |
| (b)
| Amounts represent those provided through our Matching Gifts Program, available to all full-time employees and non-employee directors. During 2018,2020, the company matched eligible gifts from a minimum of $50 to an aggregate maximum gift of $10,000 per employee/non-employee director.employee. Amounts listed only represent company matching gifts made to qualified non-profit organizations and educational institutions on behalf of the NEOs, and do not represent total charitable contributions made by them during the year. |
TABLE OF CONTENTS contributions made by them during the year. Additionally, all full-time employees and non-employee directors were eligible to make a Unum PAC contribution. For those who chose to make a contribution to the Unum PAC and take advantage of the matching contribution feature, the company will make a matching contribution to the qualifying charity of the employee's choice up to the $10,000 matching gift limit in the following year. Therefore, if an NEO elected a match for their 2019 Unum PAC contributions, the matching gift was made in 2020 and is reflected in this amount. (c)
| (c) | Amounts represent the aggregate matching contributions into our 401(k) Plan as well as matching contributions into our Non-Qualified Plan. Matching contributions under our 401(k) Plan are provided to all eligible employees participating in the plan as described beginning on page 7383 in the Retirement“Retirement and Workplace BenefitsBenefits” section. The company matched contributions dollar-for-dollar up to 5% of eligible earnings in 2018. Matching contributions under our Non-Qualified Plan are provided to eligible officers participating in the plan as described beginning on page 7383 in the Retirement“Retirement and Workplace BenefitsBenefits” section. The company matched contributions dollar-for-dollar up to 5% of eligible earnings in 2018.2020 under both the 401(k) Plan and Non-Qualified Plan. |
TABLE OF CONTENTS
(d)
| (d) | These amounts represent the aggregate of company and transition contributions under our 401(k) and Non-QualifiedNon- Qualified Plans as described beginning on page 7383 in the Retirement“Retirement and Workplace BenefitsBenefits” section. Full-time employees with one year of service with the company receive 4.5% of their salary and annual incentive contributed into their 401(k) Plan. Full-time employees who, as of December 31, 2013, had either: (i) reached a minimum of 60 points (age plus service) and at least 15 years of service or (ii) reached the age of 50 with 10 years of service with the company, receive an additional contribution into their 401(k) and Non-Qualified Plans through the transition contributions, as disclosed above in the Retirement and Workplace Benefits section. |
| (e)
| Many of our employees are required to travel to other company locations outside of their primary state of employment. While working in a state other than their primary state of employment, employees may become subject to state income taxes in that state if days worked or earnings accrued exceed an amount specified under state law. When this happens, we pay the state income tax on behalf of those employees (including our NEOs) and gross up the income amount for FICA and Medicare taxes (gross ups on these amounts are included in "Tax“Tax Reimbursement Payments"Payments”). The employee remains responsible for any taxes they would have incurred had they worked only in their primary state of employment. |
(f)
| (f) | Amounts represent tax payments made by us on behalf of each NEO relating to Employee and Spouse/Guest Attendance at Company Business Functions and/or Non-Resident State Taxes. |
| (g) | We provide all expatriate employees (including executives) foreign As disclosed on page 82, given the changes with the Tax Cuts and Jobs Act, the Non-Resident State Taxes now includes a federal tax preparation services while they are on assignment outside their home countries and for a minimum three-year period after they return. In 2018, we provided this benefit to Mr. McGarrygross up in connection with his non-permanent relocationaddition to the United Kingdom, consistent withFICA and Medicare. |
(g)
| During 2020, full-time employees in the company's expatriate assignment policy. Mr. McGarry's assignment ended in 2012.U.S. were eligible to complete healthy activities to earn cash rewards. |
2019
2021 PROXY STATEMENT 7989
TABLE OF CONTENTS 20182020 Grants of Plan-Based Awards | Estimated Future
Payouts Under
Non-Equity
Incentive Plan
Awards ($)(1) | Estimated Future
Payouts Under
Equity Incentive
Plan Awards (#)(3) | All Other
Stock
Awards
(Number
of Shares
of Stock
or Units)
(#)(4) | Grant
Date Fair
Value of
Stock
Awards
($) | Grant Date | Threshold | Target | Max | Threshold | Target | Max | Mr. McKenney | | | | | | | | | | | | | | | | | | | | | | | | | — | | 500,000 | | | 2,000,000 | | | 3,750,000 | | | | | | | | | | | | | | | | | 3/1/2018 | | | | | | | | | | | | | | | | | | | | 66,924 | | | 3,300,022 | (5) | 3/1/2018 | | | | | | | | | | | 26,770 | | | 66,924 | | | 120,463 | | | | | | 3,264,553 | (6) | Mr. McGarry(2) | | | | | | | | | | | | | | | | | | | | | | | | | — | | 173,250 | | | 693,000 | | | 1,299,375 | | | | | | | | | | | | | | | | | 3/1/2018 | | | | | | | | | | | | | | | | | | | | 11,738 | | | 578,801 | (5) | 3/1/2018 | | | | | | | | | | | 4,695 | | | 11,738 | | | 21,128 | | | | | | 572,580 | (6) | Mr. Simonds | | | | | | | | | | | | | | | | | | | | | | | | | — | | 156,855 | | | 627,418 | | | 1,176,409 | | | | | | | | | | | | | | | | | 3/1/2018 | | | | | | | | | | | | | | | | | | | | 11,474 | | | 565,783 | (5) | 3/1/2018 | | | | | | | | | | | 4,590 | | | 11,474 | | | 20,653 | | | | | | 559,702 | (6) | Mr. Arnold(2) | | | | | | | | | | | | | | | | | | | | | | | | | — | | 111,857 | | | 447,429 | | | 838,929 | | | | | | | | | | | | | | | | | 3/1/2018 | | | | | | | | | | | | | | | | | | | | 6,492 | | | 320,121 | (5) | 3/1/2018 | | | | | | | | | | | 2,597 | | | 6,492 | | | 11,686 | | | | | | 316,680 | (6) | Ms. Iglesias | | | | | | | | | | | | | | | | | | | | | | | | | — | | 117,296 | | | 469,184 | | | 879,720 | | | | | | | | | | | | | | | | | 3/1/2018 | | | | | | | | | | | | | | | | | | | | 7,041 | | | 347,192 | (5) | 3/1/2018 | | | | | | | | | | | 2,816 | | | 7,041 | | | 12,674 | | | | | | 343,460 | (6) |
| | Mr. McKenney | | | | | | | | | | | | | | | | | | | | | | | | | | | | — | | | 566,394 | | | 2,265,577 | | | 4,247,957 | | | | | | | | | | | | | | | | | | | 3/1/2020 | | | | | | | | | | | | | | | | | | | | | 136,636 | | | 3,184,986 (6) | | | | 3/1/2020 | | | | | | | | | | | | 54,655 | | | 136,637 | | | 245,947 | | | | | | 3,221,900 (7) | | | | 8/24/2020 | | | | | | | | | | | | | | | | | | | | | 186,368 | | | 3,499,991 (8) | | | | 8/24/2020 | | | | | | 4,900,000 | | | | | | | | | | | | | | | | | | | | | | Mr. Zabel | | | | | | | | | | | | | | | | | | | | | | | | | | | | — | | | 169,760 | | | 679,039 | | | 1,273,198 | | | | | | | | | | | | | | | | | | | 3/1/2020 | | | | | | | | | | | | | | | | | | | | | 15,479 | | | 360,815 (6) | | | | 3/1/2020 | | | | | | | | | | | | 6,192 | | | 15,479 | | | 27,862 | | | | | | 364,995 (7) | | | | 8/24/2020 | | | | | | | | | | | | | | | | | | | | | 11,328 | | | 212,740 (8) | | | | 8/24/2020 | | | | | | 840,000 | | | | | | | | | | | | | | | | | | | | | | Mr. Simonds | | | | | | | | | | | | | | | | | | | | | | | | | | | | — | | | 233,625 | | | 934,500 | | | 1,752,188 | | | | | | | | | | | | | | | | | | | 3/1/2020 | | | | | | | | | | | | | | | | | | | | | 26,426 | | | 615,990 (6) | | | | 3/1/2020 | | | | | | | | | | | | 10,570 | | | 26,426 | | | 47,567 | | | | | | 623,125 (7) | | | | 8/24/2020 | | | | | | | | | | | | | | | | | | | | | 46,592 | | | 874,998 (8) | | | | 8/24/2020 | | | | | | 1,225,000 | | | | | | | | | | | | | | | | | | | | | | Mr. Arnold(5) | | | | | | | | | | | | | | | | | | | | | | | | | | | | — | | | 116,835 | | | 467,340 | | | 876,263 | | | | | | | | | | | | | | | | | | | 3/1/2020 | | | | | | | | | | | | | | | | | | | | | 14,748 | | | 343,776 (6) | | | | 3/1/2020 | | | | | | | | | | | | 5,899 | | | 14,748 | | | 26,546 | | | | | | 347,758 (7) | | | | 8/24/2020 | | | | | | | | | | | | | | | | | | | | | 16,640 | | | 312,499 (8) | | | | 8/24/2020 | | | | | | 437,500 | | | | | | | | | | | | | | | | | | | | | | Ms. Iglesias | | | | | | | | | | | | | | | | | | | | | | | | | | | | — | | | 135,649 | | | 542,596 | | | 1,017,368 | | | | | | | | | | | | | | | | | | | 3/1/2020 | | | | | | | | | | | | | | | | | | | | | 15,927 | | | 371,258 (6) | | | | 3/1/2020 | | | | | | | | | | | | 6,371 | | | 15,927 | | | 28,669 | | | | | | 375,559 (7) | | | | 8/24/2020 | | | | | | | | | | | | | | | | | | | | | 19,768 | | | 371,243 (8) | | | | 8/24/2020 | | | | | | 519,750 | | | | | | | | | | | | | | | | | | | |
(1)
| (1) | These amounts reflect the threshold, target, and maximum award under the Annual Incentive Plan. ThePlan and the target cash success units (CSUs) awarded under the Success Incentive Plan (SIP). For the Annual Incentive Plan, the threshold is 25% of the amount shown in the Target column and reflects the payout that would have been earned based on threshold achievement of each of the performance measures. Target amounts are based on the individuals’ earnings for 20182020 and their annual incentive target. The maximum award is 187.5% of such target (150% plan maximum multiplied by 125% individual maximum). For the CSUs under the SIP, the target is equal to 70% of each officers 2020 annual long-term incentive target. CSUs are eligible for accelerated vesting after one-, three- and five-year performance periods, in each case conditioned upon achievement of the performance hurdles during the applicable performance period. See the details of the SIP on page 62. |
(2)
| The vesting of performance share units (PSUs) ranges from 40% to 180% of target based on the performance and market conditions described beginning on page 71 assuming threshold performance goals are exceeded. The grant date |
TABLE OF CONTENTS fair value of each PSU was calculated in accordance with ASC 718 using a Monte Carlo simulation based on historical volatility, risk-free rates of interest, and pairwise correlation coefficients. The actual amount that will be issued will be determined based on the achievement of the three-year performance goals (2020-2022), modified by relative TSR, as described in further detail in the “Long-Term Incentive” section beginning on page 71. (3)
| (2) | Mr. McGarry and Mr. Arnold'sThe grants of performance-based restricted stock units (PBRSUs) made on March 1, 2020 were based on the achievement of a threshold of statutory after-tax operating earnings and individual performance sharefor 2019 and vest ratably over three years. These awards were granted under the Stock Incentive Plan of 2017. Details are provided in the “Long-Term Incentive Awards Granted in 2020” table and related footnotes beginning on page 72. For Mr. McKenney, 50% of these shares will be stock settled and 50% will be cash settled upon vesting. |
(4)
| The grant of stock success units (PSUs)(SSUs) on August 24, 2020 were part of the one-time SIP and will vest in full after six years on August 24, 2026. SSUs are eligible for accelerated vesting after one-, three- and five-year performance periods, in each case conditioned upon achievement of the performance hurdles during the applicable performance period. See the details of the SIP on page 62. |
(5)
| Mr. Arnold's PBRSUs and PSUs were no longer subject to service-based risk of forfeiture because theyat the date of grant since he met the age and years of service requirements for retirement eligibility under the Stock Incentive Plan of 2017. Mr. McGarry and Mr. Arnold's PBRSUs will continue to vest ratably over the three-year vesting period on each anniversary of the grant date. The actual amount of PSUs that will vest will be determined based on the achievement of the three-year performance goals, modified by relative TSR, as described in further detail in the Long-term Incentives“Long-Term Incentive” section beginning on page 6071. |
| (3) | The vesting of PSUs ranges from 40% to 180% of target based on the performance and market conditions described beginning on page 60. The grant date fair value of each PSU was calculated in accordance with Accounting Standards Codification (ASC) 718 using a Monte Carlo simulation based on historical volatility, risk-free rates of interest, and pairwise correlation coefficients. The actual amount that will be issued will be determined based on the achievement of the three-year performance goals (2018-2020), modified by relative TSR, as described in further detail in the Long-Term Incentives section beginning on page 60. |
(6)
TABLE OF CONTENTS
| (4) | The grant of PBRSUs made on March 1, 2018 for Messrs. McKenney, McGarry, Simonds and Arnold as well as Ms. Iglesias were based on the achievement of a threshold of statutory after-tax operating earnings and individual performance for 2017 and vests ratably over three years. These awards were granted under the Stock Incentive Plan of 2017. Details are provided in the Long-Term Incentive Awards Granted in 2018 Table and related footnotes beginning on page 62. |
| (5) | The grant date fair value of stock awards for the PBRSUs granted on March 1, 20182020 was calculated as the number of units multiplied by the closing market price of $49.31$23.31 on the grant date. |
| (6)(7)
| As noted above, the grant date fair value of PSUs granted on March 1, 20182020 was calculated in accordance with ASC 718 using a Monte Carlo simulation based on historical volatility, risk-free rates of interest, and pairwise correlation coefficients as of March 1, 2018.2020. The Monte Carlo valuation per share was $48.78.$23.58. See Note 11 (“Stock-Based Compensation”) to our consolidated financial statements in our 2020 Form 10-K for additional information about the company's accounting for share-based compensation arrangements, including the assumptions used for calculating the grant date value of PSUs. |
(8)
| The number of SSUs granted on August 24, 2020 was equal to the number of company shares held by the executive that he or she committed to hold during the SIP vesting period, subject to a cap equal to 50% of the executive's 2020 annual long-term incentive target. The grant date fair value of SSUs was calculated as the number of units multiplied by the closing market price of $18.78 on the grant date. |
TABLE OF CONTENTS2018 2020 Outstanding Equity Awards at Fiscal Year-End Mr. McKenney
| | | | | | | | | | | | | | | | | | | | | | 39,760 | — | 24.25 | | 2/20/2021 | | | 140,000 | | | 4,113,200 | | | 125,596 | | | 3,690,010 | | Mr. McGarry | | | | | | | | | | | | | | | | | | — | — | — | | — | | | 24,830 | | | 729,505 | | | 22,397 | | | 658,024 | | Mr. Simonds
| | | | | | | | | | | | | | | | | | — | — | — | | — | | | 24,827 | | | 729,417 | | | 22,127 | | | 650,091 | | Mr. Arnold | | | | | | | | | | | | | | | | | | | — | — | | — | | | 12,747 | | | 374,507 | | | 11,418 | | | 335,461 | | Ms. Iglesias | | | | | | | | | | | | | | | | | | — | — | — | | — | | | 15,623 | | | 459,004 | | | 13,632 | | | 400,508 | |
| | Mr. McKenney | | | | | | | | | | | | | | | | | | | | | | | | | 39,760 | | | — | | | 24.25 | | | 2/20/2021 | | | 408,383 | | | 9,368,306 | | | 226,006 | | | 5,184,578 | | | | Mr. Zabel | | | | | | | | | | | | | | | | | | | | | | | | | — | | | — | | | — | | | — | | | 31,698 | | | 727,152 | | | 17,467 | | | 400,693 | | | | Mr. Simonds | | | | | | | | | | | | | | | | | | | | | | | | | — | | | — | | | — | | | — | | | 89,158 | | | 2,045,285 | | | 43,989 | | | 1,009,108 | | | | Mr. Arnold | | | | | | | | | | | | | | | | | | | | | | | | | — | | | — | | | — | | | — | | | 40,227 | | | 922,807 | | | 24,246 | | | 556,203 | | | | Ms. Iglesias | | | | | | | | | | | | | | | | | | | | | | | | | — | | | — | | | — | | | — | | | 45,662 | | | 1,047,486 | | | 26,797 | | | 614,723 | |
| (1)
| The amounts in this column represent the aggregate value of performance-based restricted stock units (PBRSUs) and stock success units (SSUs), including accrued dividend equivalents reinvested into additional restricted stock units for grants prior to March 1, 2020, shown in the "Number“Number of Shares or Units of Stock That Have Not Vested"Vested” column based on the closing price of $29.38$22.94 on December 31, 2018,2020, the last trading day of the year. Beginning with the March 1, 2020 grant, dividends are accrued in cash and paid at the same time that the underlying PBRSUs vest. As of December 31, 2020, our NEOs had the following amounts (rounded) of accrued cash dividends on their outstanding PBRSUs and SSUs: $169,939 for Mr. McKenney; $16,463 for Mr. Zabel; $35,873 for Mr. Simonds; $17,352 for Mr. Arnold and $19,251 for Ms. Iglesias. |
| (2)
| This column reflects PSU awards that were granted on March 1, 20172019 and March 1, 2018.2020. They vest at the end of the respective performance period, subject to the level of achievement of applicable performance targets. In accordance with Instruction 3 to Regulation S-K Item 402(f)(2), the values for these awards in the "Equity“Equity Incentive Plan Awards: Number of Unearned Shares, Units or Other Rights That Have Not Vested"Vested” and the "Equity“Equity Incentive Plan Awards: Market or Payout Value of Unearned Shares, Units or Other Rights That Have Not Vested"Vested” columns are reported at target levels since the company’s performance and relative TSR for 20172019 and 20182020 awards were below target. Actual shares to be issued under PSUs granted in connection with the 2017-20192019-2021 and 2018-20202020-2022 performance periods are not yet determinable and may differ from the performance level required to be disclosed in this table. The PSUs that were granted in 20162018 (for the 2016-20182018-2020 performance period) vested on December 31, 20182020 and are shown in the "2018“2020 Option Exercises and Stock Vested"Vested” table. |
| (3)
| The amounts in this column represent the aggregate value of PSUs (including accrued dividend equivalents)equivalents reinvested into additional PSUs for the 2019 grant) shown in the "Equity“Equity Incentive Plan Awards: Number of Unearned Shares, Units or Other Rights That Have Not Vested"Vested” column based on the closing price of $29.38$22.94 on December 31, 2018,2020, the last trading day of the year. Beginning with the March 1, 2020 grant, dividends are accrued in cash and paid at the same time that the underlying PSUs vest. As of December 31, 2020, our NEOs had the following amounts (rounded) of accrued cash dividends on their 2020 outstanding PSU grant: $116,825 for Mr. McKenney; $13,235 for Mr. Zabel; $22,594 for Mr. Simonds; $12,610 for Mr. Arnold; and $13,618 for Ms. Iglesias. |
2019
92 2021 PROXY STATEMENT 81
TABLE OF CONTENTS Vesting Schedule for Unvested Performance Based Restricted Stock Units | | Number of Units Vesting(1) | Vesting Date | Grant
Date | Mr.
McKenney | Mr.
McGarry(2) | Mr.
Simonds | Mr.
Arnold(2) | Ms.
Iglesias | February 23, 2019 | 2/23/2016 | | 33,312 | | | 5,870 | | | 6,137 | | | 2,911 | | | 4,118 | | March 1, 2019 | 3/1/2017 | | 18,909 | | | 3,438 | | | 3,438 | | | 1,581 | | | 2,128 | | March 1, 2019 | 3/1/2018 | | 22,537 | | | 3,953 | | | 3,864 | | | 2,186 | | | 2,371 | | March 1, 2020 | 3/1/2017 | | 19,482 | | | 3,543 | | | 3,542 | | | 1,630 | | | 2,192 | | March 1, 2020 | 3/1/2018 | | 22,538 | | | 3,953 | | | 3,864 | | | 2,186 | | | 2,371 | | March 1, 2021 | 3/1/2018 | | 23,222 | | | 4,073 | | | 3,982 | | | 2,253 | | | 2,443 | | Total | | | 140,000 | | | 24,830 | | | 24,827 | | | 12,747 | | | 15,623 | |
| | March 1, 2021 | | | 3/1/2018 | | | 25,502 | | | 895 | | | 4,373 | | | 2,474 | | | 2,683 | | | | March 1, 2021 | | | 3/1/2019 | | | 29,491 | | | 1,968 | | | 5,795 | | | 3,135 | | | 3,587 | | | | March 1, 2021 | | | 3/1/2020 | | | 45,088 | | | 5,108 | | | 8,720 | | | 4,866 | | | 5,255 | | | | March 1, 2022 | | | 3/1/2019 | | | 30,386 | | | 2,028 | | | 5,972 | | | 3,230 | | | 3,697 | | | | March 1, 2022 | | | 3/1/2020 | | | 45,090 | | | 5,108 | | | 8,721 | | | 4,867 | | | 5,256 | | | | March 1, 2023 | | | 3/1/2020 | | | 46,458 | | | 5,263 | | | 8,985 | | | 5,015 | | | 5,416 | | | | August 24, 2026 (3) | | | 8/24/2020 | | | 186,368 | | | 11,328 | | | 46,592 | | | 16,640 | | | 19,768 | | | | Total | | | | | | 408,383 | | | 31,698 | | | 89,158 | | | 40,227 | | | 45,662 | |
| (1)
| These PBRSUs and SSUs include dividend equivalents earned through December 31, 2018.2020. Beginning with the March 1, 2020 grant, dividend equivalents accrue and settle in cash to the extent that the underlying PBRSUs and SSUs vest. |
(2)
| (2) | Mr. McGarry and Mr. Arnold’s PBRSUs are no longer subject to the risk of forfeiture because they meethe meets the age and years of service requirement for retirement eligibility. |
(3)
| These SSUs are eligible for accelerated vesting after one-, three- and five-year performance periods, in each case conditioned upon achievement of the performance hurdles during the applicable performance period. See the details of the SIP on page 62. |
20182020 Option Exercises and Stock Vested
Name | Number of Shares
Acquired
on Exercise
(#) | Value Realized
on Exercise
($) | Number of Shares
Acquired
on Vesting(2)
(#) | Value Realized
on Vesting(3)
($) | Mr. McKenney | | — | | | — | | | 163,758 | | | 6,236,606 | | Mr. McGarry | | — | | | — | | | 29,429 | | | 1,128,365 | | Mr. Simonds | | — | | | — | | | 32,160 | | | 1,252,085 | | Mr. Arnold | | — | | | — | | | 14,461 | | | 552,986 | | Ms. Iglesias | | — | | | — | | | 30,134 | | | 1,325,346 | |
| | Mr. McKenney | | | — | | | — | | | 127,653 | | | 2,954,988 | | | | Mr. Zabel | | | — | | | — | | | 4,291 | | | 99,775 | | | | Mr. Simonds | | | — | | | — | | | 22,800 | | | 527,945 | | | | Mr. Arnold | | | — | | | — | | | 12,371 | | | 286,364 | | | | Ms. Iglesias | | | — | | | — | | | 14,040 | | | 325,097 | |
| (1)
| Reflects the PBRSUs and PSUs that vested during 2018.2020. |
| (2)
| Includes the total number of unrestricted shares acquired upon the vesting of PBRSUs and PSUs. A portion of these shares were withheld to cover taxes due upon vesting. |
| (3)
| PBRSUs were multiplied by the closing stock price on the vesting date. PSUs whichthat were granted in 20162018 (for the 2016-20182018-2020 performance period) and which vested on December 31, 2018,2020, were multiplied by the closing stock price of $29.38$22.94 on December 31, 2018.2020. The PSUs granted in 20162018 were distributed on February 19, 201923, 2021 on which date the closing stock price was $36.73$26.63 per share. |
82 2019
2021 PROXY STATEMENT 93
TABLE OF CONTENTS Current Value of Pension Benefits Pension benefits payable to each NEO are summarized in the following table: PENSION BENEFITSName | Plan Name | Number of
Years of
Credited Service
(#) | Present Value of
Accumulated
Benefits(2)
($) | Payments
During Last
Fiscal Year
($) | Mr. McKenney | Qualified | | 4.42 | | | 100,000 | | | — | | | Excess | | 4.42 | | | 548,000 | | | — | | Mr. McGarry | Qualified | | 28.00 | | | 1,143,000 | | | — | | | Excess | | 28.00 | | | 1,686,000 | | | — | | Mr. Simonds | Qualified | | 16.25 | | | 491,000 | | | — | | | Excess | | 16.25 | | | 651,000 | | | — | | Mr. Arnold | Qualified | | 28.83 | | | 1,078,000 | | | — | | | Excess | | 28.83 | | | 548,000 | | | — | | Ms. Iglesias(1) | Qualified | | — | | | — | | | — | | | Excess | | — | | | — | | | — | |
| | Mr. McKenney | | | Qualified | | | 4.42 | | | 151,000 | | | — | | | | Excess | | | 4.42 | | | 825,000 | | | — | | | | Mr. Zabel(1) | | | Qualified | | | — | | | — | | | — | | | | Excess | | | — | | | — | | | — | | | | Mr. Simonds | | | Qualified | | | 16.25 | | | 795,000 | | | — | | | | Excess | | | 16.25 | | | 1,055,000 | | | — | | | | Mr. Arnold | | | Qualified | | | 28.83 | | | 1,478,000 | | | — | | | | Excess | | | 28.83 | | | 751,000 | | | — | | | | Ms. Iglesias(1) | | | Qualified | | | — | | | — | | | — | | | | Excess | | | — | | | — | | | — | |
| (1)
| No amounts are shown for Mr. Zabel and Ms. Iglesias because the plans were frozen to further accruals on December 31, 2013, before hertheir eligibility and/or employment began. |
(2)
| (2)All calculations utilize credited service and pensionable earnings as of the pension freeze date, December 31, 2013. Therefore the credited service shown reflects service through December 31, 2013. While all named executives have continued in service through the December 31, 2020 measurement date, no additional pensionable earnings or credited service have been accrued following the freeze date. |
(3)
| The "Present“Present Value of Accumulated Benefits"Benefits” is based upon a measurement date of December 31, 2018,2020, which is the same measurement date used for financial statement reporting purposes for the company’s audited financial statements as found in Note 9 to the Consolidated Financial Statements contained in the company’s 20182020 Form 10-K. All calculations utilize credited service and pensionable earnings as of the pension freeze date, December 31, 2013, in addition to the following assumptions: |
Retirement Age: Assumes age 65. Discount Rate: 4.40%2.90% Salary Increase Rate: Not applicable. Social Security Indexing Rate: 3.5% to index the Qualified and Excess Plan benefits from the measurement date to commencement date. Pension Increase Rate: Not applicable. Pre-Retirement Decrements: None. Post-Retirement Mortality Table: RP-2014Pri-2012 Mortality Tables projected using fully generational two-dimensional Scale MP-2017.MP-2020. 2019
94 2021 PROXY STATEMENT 83
TABLE OF CONTENTS Non-Qualified Deferred Compensation We have one active non-qualified defined contribution plan (Non-Qualified Plan) that allows for deferrals of compensation by our NEOs. We also maintain one other non-qualified plan that allowed for deferrals of compensation and is an inactive plan originally maintained by a predecessor company in which Mr. McGarry is the only NEO participant. The last year that compensation deferrals occurred under this inactive plan was 2000.
NON-QUALIFIED DEFERRED COMPENSATION Name | Plan | Executive
Contributions
in Last FY(2)
$ | Registrant
Contributions
in Last FY(3)
$ | Aggregate
Earnings
in Last FY(4)
$ | Aggregate
Withdrawals/
Distributions
$ | Aggregate
Balance
at Last FYE(5)
$ | Mr. McKenney | Non-Qualified DC | | 156,039 | | | 296,473 | | | (195,063 | ) | | — | | | 1,665,201 | | Mr. McGarry(1) | Inactive NQ Plan | | — | | | — | | | (20,399 | ) | | — | | | 24,795 | | | Non-Qualified DC | | 116,535 | | | 198,442 | | | (107,946 | ) | | — | | | 1,240,615 | | Mr. Simonds | Non-Qualified DC | | 56,642 | | | 107,621 | | | (167,475 | ) | | — | | | 658,407 | | Mr. Arnold | Non-Qualified DC | | 63,121 | | | 122,022 | | | (76,263 | ) | | — | | | 701,985 | | Ms. Iglesias | Non-Qualified DC | | 103,296 | | | 65,421 | | | (30,009 | ) | | — | | | 451,948 | |
| | Mr. McKenney | | | Non-Qualified DC | | | 125,192 | | | 237,865 | | | 450,614 | | | — | | | 3,406,877 | | | | Mr. Zabel | | | Non-Qualified DC | | | 37,132 | | | 70,551 | | | 32,026 | | | — | | | 214,181 | | | | Mr. Simonds | | | Non-Qualified DC | | | 53,116 | | | 100,920 | | | 152,080 | | | — | | | 1,284,377 | | | | Mr. Arnold | | | Non-Qualified DC | | | 95,894 | | | 112,397 | | | 284,682 | | | — | | | 1,614,307 | | | | Ms. Iglesias | | | Non-Qualified DC | | | 150,302 | | | 71,393 | | | 172,134 | | | — | | | 1,140,823 | |
| (1) | Mr. McGarry has a balance under one inactive deferred compensation plan. This plan is a non-qualified defined contribution plan and includes units denominated in 100% Unum stock to be paid out in cash. The change in market value and dividends earned is included in the "Aggregate Earnings in Last FY" amount. The value of the balance is shown in the "Aggregate Balance at Last FYE" column. |
| (2) | These amounts are included in the Summary Compensation Table in the "Salary"“Salary” and "Non-Equity“Non-Equity Incentive Plan Compensation"Compensation” columns for 20182020 for each NEO. |
(2)
| (3) | These amounts represent company contributions through our Non-Qualified Plan, as described in the Retirement“Retirement and Workplace BenefitsBenefits” section beginning on page 7383. The amounts are included in the "All“All Other Compensation"Compensation” column of the Summary Compensation Table for 20182020 for each NEO. |
| (4)(3)
| These amounts were not included in the Summary Compensation Table because investment earnings were not preferential or above market. The investment options under the non-qualified retirement plans are the same choices available to all employees that are eligible to participate in the 401(k) Plan and NEOs do not receive preferential earnings on their investments. |
| (5)(4)
| This column includes the following amounts that were reported in prior years’years' Summary Compensation Tables in the "Salary," "Non-Equity“Salary,” “Non-Equity Incentive Plan Compensation,"” or "All“All Other Compensation"Compensation” columns, as applicable, to the extent that the NEO was an NEO at the time: $1,097,411$1,929,823 for Mr. McKenney; $700,312$16,911 for Mr. McGarry; $476,860Zabel; $783,547 for Mr. Simonds; $361,458 for Mr. Arnold; and $272,015$620,430 for Ms. Iglesias. |
84 2019
2021 PROXY STATEMENT 95
TABLE OF CONTENTS POST-EMPLOYMENT COMPENSATION
POST-EMPLOYMENT COMPENSATION The discussion below outlines estimated benefits payable to our NEOs under various termination scenarios as of December 31, 2018.2020. The following terminology will be used throughout the discussion of the various termination scenarios: TERMINATION DEFINITIONS | | Termination with cause | | | One or more of the following factors is present: the failure to substantially perform duties; the willful engagement in illegal conduct or gross misconduct harmful to the company; or the conviction of a felony (or plea of "guilty"“guilty” or "no contest"“no contest”).
| | | Termination without cause | | | One or more of the following factors is present: poor performance, other than for misconduct or cause (as defined above); job elimination; job requalification; or the decision to fill the position with a different resource consistent with the direction of the company.
| | | Resignation for good reason | | | One or more of the following events have preceded the resignation of the NEO: assignment to a position inconsistent with his or her existing position or any other action that diminishes such position; reduction of his or her base salary or annual incentive target; failure to continue any material employee benefit or compensation plan in which he or she participates; or relocation to an office more than 50 miles from his or her location.
| | | Change in control | | | A change in control occurs when one of the following situations exists: (a) the incumbent directors at the beginning of any two-year period cease to beconstitute a majority for two years;of the Board during such period; (b) an entity acquires 20% of our voting stock (30% in some instances); (c) we consummate certain transactions such as a merger or disposition of substantially all of our assets; or (d) shareholders approve a plan of liquidation or distribution. |
In the event of any termination of employment, all named executive officerseach NEO would receive benefits to which they arehe or she is entitled, including any unpaid base salary through the date of termination, accrued vacation, and accrued benefits under the retirement plans. Severance and Change in Control Arrangements We have the following severance and change in control contracts and plans covering the NEOs. The company provides severance benefits to all employees (including our NEOs) in the event of involuntary termination, other than for death, disability or cause. Mr. McKenney’s severance benefits are provided under a severance agreement dated effective as of April 1, 2015. The benefits provided under this agreement are described below.
The remaining NEOs are covered under our Separation Pay Plan for Executive Vice Presidents and other change in control agreements described below. In general, we provide severance in order to give our employees competitive benefits with respect to the possibility of an involuntary termination of their employment.
2019 PROXY STATEMENT 85
Pursuant to arrangements more fully described in the next section, severance benefits would be provided to the NEOs as follows: (1) to Mr. McKenney under a severance agreement dated effective as of April 1, 2015, and (2) to the other NEOs under our Separation Pay Plan for Executive Vice Presidents and applicable change in control severance agreements.TABLE OF CONTENTS
POST-EMPLOYMENT COMPENSATION
When termination of employment is accompanied by severance payments, the former executive is required to release claims he or she may have against us. The release contains restrictions on the former executiveus, and to provide us with respect tocertain confidentiality, solicitation of company employees, competition,non-solicitation, non-competition, and disparagement.non-disparagement covenants. We also agree to indemnify the former executive for certain actions taken on the company’s behalf during his or her employment. TABLE OF CONTENTS POST-EMPLOYMENT COMPENSATION
Change in Control Agreements Each NEO, other than Mr. McKenney, is covered by a standalone change in control severance agreement with the company. These agreements provide an enhanced severance benefit in the event of a termination following a change in control. This ensures that shareholders have the benefit of our NEOs’covered executives remain focused attention during the critical times before and after a major corporate transaction, regardless of any uncertainty with respect to their future employment. None of the NEOs have an excise tax gross-up provision in their agreements. As describedindicated above, change in control benefits are available to Mr. McKenney under his severance agreement. Mr. McKenney's agreement specifically addresses post-employment payments, including in the event of a termination of employment in connection with a change in control. The remaining NEOs are covered by standalone change-in control severance agreements. In the event of termination within two years following the occurrence of a change in control, our NEOs (including Mr. McKenney) would receive the following benefits under thesetheir respective agreements: ThreeA multiple of the sum of base salary and annual incentive, which for Mr. McKenney is three times the sum of his annual base salary and the average of the annual incentive paid to him in the three years prior to the date of termination, and for Mr. McKenney;the other NEOs is two times the sum of his or her annual base salary and annual incentive (the greater of the current year target or the prior year annual incentive paid) for the remaining NEOs;
; Prorated annual incentive through the date of termination of employment, which for Mr. McKenney is based on the executive's average of the annual bonus forincentive paid to him in the three most recent calendar years, prior toand for the termination for Mr. McKenney andother NEOs is based on the highergreater of the executive's prior year actual or the current year target bonus foror the remaining NEOs; prior year annual incentive paid; Health and welfare benefits, which for Mr. McKenney are provided for up to three years, and for Mr. McKenney andthe other NEOs are provided for up to two years for the remaining NEOs; years; Outplacement services (20% of base salary, maximum of $50,000); and VestingAccelerated vesting of unvested CSUs and equity awards as follows: If awards are(including SSUs) that were assumed inupon the transaction, a change in control, would not triggerbut only if the vesting of grants unless a termination of employment forwas due to death or disability, by the company without cause, or by the executive for good reason were to occur within two years following the change in control. Upon termination, the(provided that PSUs would be deemed earned at target performance and outstanding stock options would remain exercisable until the earlier of the expiration date or the 90th day after such termination of employment;employment).
Grants of performance share units would be deemed earned at target performance and be settled atNotwithstanding the earlier of the end of the performance period or a termination of employment due to death, disability, or retirement, by the company without cause or by the executive for good reason within two years after the change in control; and
In the event of a change in control and termination,above, the change in control payments would be reduced if suchthe reduction would result in greater after-tax proceeds to the executive absent such athe reduction. Otherwise, the executive officer receives payment of all change in control benefitswould receive the above payments and isbe responsible for paying any excise tax imposed on the payment.payments.
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Terminations Not Related to a Change in Control There are instances in which a NEO’s employment may be terminated that do not involve a change in control. The company may terminate for cause or without cause. Additionally, termination of employment may occur upon a NEO’s voluntary resignation, retirement, death, or becoming disabled. In the event of the death, disability or retirement (if eligible) of a NEO, all of the NEO’s unvested PBRSUs and stock options would vest and the stock options would remain exercisable until the earlier of the expiration date or, as applicable, the third anniversary of the date of death or the fifth anniversary of the date of retirement. In the event of termination of employment as a result of job elimination or TABLE OF CONTENTS POST-EMPLOYMENT COMPENSATION
requalification (or, in the case of Mr. McKenney, resignation for good reason), the NEOs would vest in a pro-rata portion of earned PSUs and in the event of termination of employment as a result of death, disability, or retirement, the NEOs would vest in earned PSUs, in each case on the date that such awards would otherwise be settled.settled based on actual performance. However, to the extent necessary to avoid the imposition of penalty taxes under Internal Revenue Code Section 409A, stock would not be distributed until at least six months after the date of termination. NEOs receive additional benefits depending upon the termination scenario as outlined in the following table:
TERMINATION BENEFITS AVAILABLE TO CEO AND OTHER NEOs UNDER NON-CHANGE IN CONTROL SCENARIOS | | Severance(1) | | | | | | CEO, NEOs | | | | | | | | | | | | | Prorated Annual Incentive(2) | | | | | | CEO | | | CEO, NEOs | | | CEO, NEOs | | | If Retirement
Eligible | | | | Early Vesting of Equity(3)(4) | | | | | | CEO | | | CEO, NEOs | CEO, NEOs
| If Retirement
Eligible
| Benefit Continuation(4)
| | CEO
| | | | Outplacement Services(5)
| | CEO, NEOs | | | If Retirement Eligible | | | | | Disability BenefitsBenefit Continuation(5)
| | | | | | CEO | | | | | | | | | | | | | Outplacement Services(6) | | | | | | CEO, NEOs | | | | | | | | | | | | | Disability Benefits(7) | | | | | | | | | CEO, NEOs | | | | | | | | | | Group Life Ins. Benefits(7)(8) | | | | | | | | | | | | CEO, NEOs | | | | | | | Corporate Owned Life Ins.(7)(8) | | | | | | | | | | | | NEOs who gave
approval | | | | |
* Mr. McKenney is the only NEO entitled to benefits in the event of a resignation for good reason absent a change in control.
*
| Mr. McKenney is the only NEO entitled to benefits in the event of a resignation for good reason absent a change in control. |
(1)
| If Mr. McKenney is terminated without cause or resigns with good reason, he will receive severance of two times the sum of his annual base salary and the average of the annual incentive paid to him in the three years prior to the date of termination. Other NEOs who are terminated without cause will receive eighteen18 months of base salary. See the following table for termination benefits related to a change in control. |
| (2)
| Annual incentive will be prorated based on the date of termination of employment. For all NEOs other than Mr. McKenney, the NEO will be eligible for prorated annual incentive in the event of death, disability, or retirement (if eligible) only if such termination occurs on or after the last pay period in June. |
| (3)
| If Mr. McKenney is terminated without cause, a prorated portion of his unvested equity awards, with the exception of his performance share units (PSUs)SSUs, will accelerate vesting under the terms of the award agreements. In the event of his death, disability, or retirement (if eligible at the time) or if he is terminated without cause or resigns for good reason, Mr. McKenney would be eligible to receive a prorated portion of the PSUs based on actual performance at the end of the three-year performance cycle. |
(4)
| For the remainingall NEOs, absent a change in control, their unvested equityPBRSUs will accelerate only in the event of death, disability, or retirement (if eligible); however,. Additionally, they willwould be eligible to continue to vestreceive a prorated portion of the PSUs based on actual performance at the end of the three-year performance cycle. Absent a change in outstanding PSUs upon such a termination.control, all unvested CSUs and SSUs would be forfeited. |
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| (4)(5)
| If Mr. McKenney is terminated without cause or resigns with good reason, he will receive health and welfare benefits for up to 2two years. |
| (5)(6)
| Outplacement services are capped at 20% of base salary (up to a maximum of $50,000). |
| (6)(7)
| Monthly benefits from the company’s long-term disability plan until the earlier of age 65 or death. |
TABLE OF CONTENTS POST-EMPLOYMENT COMPENSATION
| (7)(8)
| Group life insurance benefits are $50,000 for each full-time employee. Corporate owned life insurance (COLI) benefits are applicable for each NEO who gave their approval. If Messrs. McKenney, Simonds, and Arnold as well as Ms. Iglesias are active employees at the date of their death, their respectiveThe beneficiary as(as defined in the policypolicy) of Mr. McKenney, Mr. Zabel, Mr. Simonds, and Ms. Iglesias will receive $200,000;$200,000 if they are not active employees at the date of their death, their respective beneficiary as defined in the policy will receive $50,000. Mr. McGarry is covered under two COLI benefits and if heNEO is an active employee onat death, or $50,000 if the date of his death, his beneficiaries as defined in the policies would receive $400,000, one for each COLI policy. If Mr. McGarryNEO is not an active employee at the date ofdeath. Mr. Arnold is covered under two COLI benefits; his death, his beneficiaries as defined in the policybeneficiary will receive $50,000.a total of $400,000 if Mr. Arnold is an active employee at death, or $50,000 if he is not an active employee at death. |
Termination Payments Termination payments are provided to NEOs as outlined in the following table and vary with the circumstances under which the termination occurs. In the event of termination as a result of death, payments will be made to the named executive officer’s beneficiary. Consistent with SEC requirements, all termination scenarios in the table below assume a termination date of December 31, 2018.2020. Accordingly, all calculations in the following table were made using the closing market price of our common stock as of December 31, 20182020 ($ 29.3822.94 per share). We have excluded amounts received as an annuity under our retirement plans and the "in-the-money"“in-the-money” value of vested unexercised stock options held by NEOs since these amounts are not impacted by a termination. The amounts shown in the table also do not include distributions of plan balances under a non-qualified deferred compensation plan.the Non- Qualified Plan. Those amounts are shown in the Non-Qualified“Non-Qualified Deferred CompensationCompensation” table on page 8495. The amounts in the following table are hypothetical based on the rules of the SEC. Actual payments depend on the circumstances and timing of any termination. The information provided in this table constitutes forward-looking statements for purposes of the Private Litigation Securities Reform Act of 1995. 88 2019
2021 PROXY STATEMENT 99
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TERMINATION TABLE Termination Scenario | Mr.
McKenney
($)
| Mr.
McGarry
($) | Mr.
Simonds
($) | Mr.
Arnold
($) | Ms.
Iglesias
($) | Termination for Cause or Voluntary Resignation | | | — | | | — | | | — | | | — | | | — | | Total | $ | — | | $ | — | | $ | — | | $ | — | | $ | — | | Termination Without Cause or Resignation with Good Reason (CEO) | Severance | | 6,277,291 | | | 945,000 | | | 945,563 | | | 750,053 | | | 787,800 | | Prorated Annual Incentive(1) | | 2,138,646 | | | — | | | — | | | — | | | — | | Early Vesting of Equity(2) | | 11,250,952 | | | — | | | — | | | — | | | — | | Benefit Continuation | | 89,947 | | | — | | | — | | | — | | | — | | Outplacement Services | | 50,000 | | | 50,000 | | | 50,000 | | | 50,000 | | | 50,000 | | Total | $ | 19,806,836 | | $ | 995,000 | | $ | 995,563 | | $ | 800,053 | | $ | 837,800 | | Disability | Prorated Annual Incentive(1) | | 2,138,646 | | | 693,000 | | | 627,418 | | | 447,429 | | | 469,184 | | Early Vesting of Equity(2)(3) | | 11,250,952 | | | 1,995,059 | | | 2,014,668 | | | 1,011,220 | | | 1,285,642 | | Disability Benefits | | 328,925 | | | 113,916 | | | 400,817 | | | 214,889 | | | 271,060 | | Total | $ | 13,718,523 | | $ | 2,801,975 | | $ | 3,042,903 | | $ | 1,673,538 | | $ | 2,025,886 | | Death | Prorated Annual Incentive(1) | | 2,138,646 | | | 693,000 | | | 627,418 | | | 447,429 | | | 469,184 | | Early Vesting of Equity(2)(3) | | 11,250,952 | | | 1,995,059 | | | 2,014,668 | | | 1,011,220 | | | 1,285,642 | | Group Life Ins. Benefits | | 50,000 | | | 50,000 | | | 50,000 | | | 50,000 | | | 50,000 | | Corporate Owned Life Ins. | | 200,000 | | | 400,000 | | | 200,000 | | | 200,000 | | | 200,000 | | Total | $ | 13,639,598 | | $ | 3,138,059 | | $ | 2,892,086 | | $ | 1,708,649 | | $ | 2,004,826 | | Termination Related to a Change in Control | Severance | | 9,415,937 | | | 2,904,924 | | | 2,845,858 | | | 1,977,700 | | | 1,995,760 | | Prorated Annual Incentive(1) | | 2,138,646 | | | 693,000 | | | 630,375 | | | 450,032 | | | 472,680 | | Early Vesting of Equity | | 11,250,952 | | | 1,995,059 | | | 2,014,668 | | | 1,011,220 | | | 1,285,642 | | Benefit Continuation | | 134,921 | | | 76,707 | | | 96,002 | | | 104,017 | | | 89,947 | | Outplacement Services | | 50,000 | | | 50,000 | | | 50,000 | | | 50,000 | | | 50,000 | | DC Enhancement(4) | | 306,000 | | | 326,000 | | | 127,000 | | | — | | | — | | Total | $ | 23,296,456 | | $ | 6,045,690 | | $ | 5,763,903 | | $ | 3,592,969 | | $ | 3,894,029 | | Retirement | Prorated Annual Incentive(5) | | — | | | 693,000 | | | — | | | — | | | — | | Early Vesting of Equity(2)(3) | | — | | | 1,995,059 | | | — | | | 1,011,220 | | | — | | Total | $ | — | | $ | 2,688,059 | | $ | — | | $ | 1,011,220 | | $ | — | |
| | Termination for Cause or Voluntary Resignation | | | | | | | — | | | — | | | — | | | — | | | — | | | | Total | | | $— | | | $— | | | $— | | | $— | | | $— | | | | Termination Without Cause or Resignation with Good Reason (CEO) | | | | Severance | | | 6,116,667 | | | 900,000 | | | 1,050,000 | | | 750,053 | | | 825,000 | | | | Prorated Annual Incentive(1) | | | 2,008,333 | | | — | | | — | | | — | | | — | | | | Early Vesting of Equity(2) | | | 11,788,175 | | | — | | | — | | | — | | | — | | | | Benefit Continuation | | | 85,460 | | | — | | | — | | | — | | | — | | | | Outplacement Services | | | 50,000 | | | 50,000 | | | 50,000 | | | 50,000 | | | 50,000 | | | | Total | | | $20,048,635 | | | $950,000 | | | $1,100,000 | | | $800,053 | | | $875,000 | | | | Disability | | | | Prorated Annual Incentive(1)(3) | | | 2,008,333 | | | 597,554 | | | 735,785 | | | 355,179 | | | 434,077 | | | | Early Vesting of Equity(2)(4) | | | 11,788,175 | | | 909,354 | | | 2,249,682 | | | 1,246,381 | | | 1,370,299 | | | | Disability Benefits | | | 321,940 | | | 315,216 | | | 419,556 | | | 179,337 | | | 247,979 | | | | Total | | | $14,118,448 | | | $1,822,124 | | | $3,405,023 | | | $1,780,897 | | | $2,052,355 | | | | Death | | | | Prorated Annual Incentive(1)(3) | | | 2,008,333 | | | 597,554 | | | 735,785 | | | 355,179 | | | 434,077 | | | | Early Vesting of Equity(2)(4) | | | 11,788,175 | | | 909,354 | | | 2,249,682 | | | 1,246,381 | | | 1,370,299 | | | | Group Life Ins. Benefits | | | 50,000 | | | 50,000 | | | 50,000 | | | 50,000 | | | 50,000 | | | | Corporate Owned Life Ins. | | | 200,000 | | | 200,000 | | | 200,000 | | | 400,000 | | | 200,000 | | | | Total | | | $14,046,508 | | | $1,756,908 | | | $3,235,467 | | | $2,051,560 | | | $2,054,376 | | | | Termination Related to a Change in Control | | | | Severance | | | 9,175,000 | | | 2,520,000 | | | 3,177,676 | | | 1,900,133 | | | 2,145,000 | | | | Prorated Annual Incentive(1)(3) | | | 2,008,333 | | | 660,000 | | | 888,838 | | | 450,032 | | | 522,500 | | | | Early Vesting of Cash Success Units | | | 4,900,000 | | | 840,000 | | | 1,225,000 | | | 437,500 | | | 519,750 | | | | Early Vesting of Equity | | | 16,116,572 | | | 1,172,447 | | | 3,331,781 | | | 1,632,845 | | | 1,829,411 | | | | Benefit Continuation | | | 128,191 | | | 78,119 | | | 102,362 | | | 111,614 | | | 98,732 | | | | Outplacement Services | | | 50,000 | | | 50,000 | | | 50,000 | | | 50,000 | | | 50,000 | | | | DC Enhancement(5) | | | 251,000 | | | — | | | 121,000 | | | — | | | — | | | | 280G Cut-back(6) | | | (2,074,424) | | | — | | | (148,245) | | | — | | | — | | | | Total | | | $30,554,672 | | | $5,320,566 | | | $8,748,412 | | | $4,582,124 | | | $5,165,393 | | | | Retirement | | | | Prorated Annual Incentive(7) | | | — | | | — | | | — | | | — | | | — | | | | Early Vesting of Equity(2)(4) | | | — | | | — | | | — | | | 1,246,381 | | | — | | | | Total | | | $— | | | $— | | | $— | | | $1,246,381 | | | $— | |
| (1)
| In these scenarios, per the terms of Mr. McKenney’s severance agreement, he would be entitled to a prorated annual incentive. The amount is to be calculated using the average of the annual bonuses paid for the three most-recent calendar years. |
TABLE OF CONTENTS POST-EMPLOYMENT COMPENSATION
| (2)
| In the event of job elimination, the prorated early vesting of equity awards would be as follows: Mr. McKenney $2,659,830,$3,187,582; Mr. Zabel $269,201; Mr. Simonds $476,397,$607,658; and Ms. Iglesias $302,849.$370,573. These NEOs would also be eligible to receive a prorated portion of their unvested PSUs in the event of job elimination or requalification. The prorated amount would be calculated based on their termination date and the vesting of those units would be based on achievement of the prospective three-year goals, modified by relative TSR. Assuming a job elimination date of December 31, 2018,2020, the prorated number of unitsPSUs that each NEO would be eligible to receive would be as follows: Mr. McKenney 60,964.81,105,125; Mr. Zabel 6,485; Mr. Simonds 10,848.43,20,517; and Ms. Iglesias 6,692.68.12,556. Mr. McGarryArnold is eligible for retirement status under the terms of the Stock Incentive Plan of 2017. Therefore, he would receive full vesting of his unvested PBRSUs, as noted in the Retirement section of this table. The amounts shown in the table represent the value of the shares at a market price of $22.94, the closing price of our stock on the last trading day of the year. Mr. Arnold would also be eligible to earn the full amount of earned PSUs based on his retirement status. The PSUs would vest based on the actual achievement of the prospective three-year goals, modified by relative TSR. |
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POST-EMPLOYMENT COMPENSATION
and Mr. Arnold are eligible for retirement status under the terms of the Stock Incentive Plan of 2012 and the Stock Incentive Plan of 2017. Therefore, they would receive full vesting of their unvested PBRSUs, as noted in the Retirement section of this table. The amounts shown in the table represent the value of the shares at a market price of $29.38, the close price of our stock on the last trading day of the year. They would also be eligible to earn the full amount of PSUs based on their retirement status. The PSUs would vest based on the actual achievement of the prospective three-year goals, modified by relative TSR.
(3)
| (3)Per the terms of the Annual Incentive Plan, in the event of death or disability during the plan year, on or after the last payday of June, the participant or their beneficiary (as applicable) would receive a prorated payment based on plan results. Per the terms of the change in control severance agreements, in the event of a change in control for NEOs other than Mr. McKenney, each NEO is eligible for a prorated annual incentive based on the higher of the executive's prior year actual or the current year target bonus. |
(4)
| The amounts reported include PBRSUs and PSUs that would accelerate vesting in the event of disability, death or retirement. The PSUs granted in 20172019 and 20182020 may be fully earned, in the event of disability, death or retirement, based on the satisfaction of the performance goals. In each of these scenarios the awards would not be payable until the end of the applicable performance period. In accordance with Regulation S-K, Item 402(j), the PSUs reported in connection with the PSU awards granted in 20172019 and 20182020 are reported at target levels since the company’s performance and relative shareholder returnTSR to date for these awards is not yet determinable. Actual shares to be issued under PSUs granted in connection with the 20172019 and 20182020 awards may differ from the performance level required to be disclosed in this table. |
| (4)(5)
| Defined Contribution (DC) enhancement is a lump sum payment representing the amount resulting from multiplying the company’s non-contributory retirement plan contributions times two additional years of eligible earnings for Messrs. McKenney McGarry, and Simonds. |
| (5)(6)
| Mr. McGarry is eligible for retirement statusMcKenney and Mr. Simonds' benefits and payments are subject to a cutback to eliminate any excise tax payable under the termssection 4999 of the Annual Incentive PlanCode if the net after-tax amount that each would receive with respect to such payments or benefits exceeds the net after-tax amount Messrs. McKenney and Simonds respectively would receive if the amounts of such payments and benefits were not reduced and each paid the excise tax. In respect of a termination occurring as of December 31, 20182020, both Mr. McKenney and Mr. Simonds would receive a greater benefit by having such benefits and payments reduced than by receiving such benefits and payments and paying the excise tax. The amounts included above (which reduces the total for the termination scenario) is the amount by which such payments and benefits must be eligiblereduced in order for a prorated annual incentive in the event of retirement. Messrs. McKenney and Simonds Arnold as well as Ms. Iglesias did not meetto avoid paying the excise tax. |
(7)
| None of the NEOs met the eligibility criteria for retirement status under the terms of the Annual Incentive Plan as of December 31, 20182020 and therefore would not have been eligible for a prorated annual incentive payment in the event of retirement. |
90 2019
2021 PROXY STATEMENT 101
TABLE OF CONTENTS As required by Section 953(b) of the Dodd-Frank Wall Street Reform and Consumer Protection Act, and Item 402(u) of Regulation S-K,SEC rules, we are providing the following information about the relationshipratio of the annual total compensation of our median compensated employee andto the annual total compensation of our Chief Executive Officer. The 20182020 annual total compensation of the median compensated of all our employees who were employedemployee as of December 31, 2018, other than our Chief Executive Officer,2020 was $62,475.$68,394. The 20182020 annual total compensation of Richard McKenney, our Chief Executive Officer, was $9,896,861.$13,258,738. The ratio of these amounts (also referred to as the “CEO pay ratio”) was 1-to-158.1-to-194. We understand that the CEO pay ratio is intended to provide greater transparency to annual CEO pay and how it compares to the pay of the median employee on an ongoing basis. As such, we are providing a supplemental ratio that compares the pay of the median-paid employee to our CEO's regular annual pay, excluding the special one-time Success Incentive Plan award (see page 62), as we believe that this supplemental ratio reflects a more representative comparison. The resulting supplemental CEO pay ratio is 1-to-143. The CEO pay ratio reported above is a reasonable estimate calculated in a manner consistent with SEC rules based on our payroll and employment records. The SEC’s rules regarding the identification of the median compensated employee and the process of calculating the pay ratio, allow companies to adopt a variety of methodologies, to apply certain exclusions, and to make reasonable estimates and assumptions that reflect their employee populations and compensation practices. As a result, the pay ratio reported by other companies may not be comparable to the CEO pay ratio reported above, as other companies have different employee populations and compensation practices and may utilize different methodologies, exclusions, estimates and assumptions in calculating their own pay ratios. The CEO pay ratio reported above is a reasonable estimatefor the 2020 fiscal year was calculated using the same median employee identified with respect to the 2019 and 2018 fiscal years as there was no material change in a manner consistent with SEC rules based on our payroll and employment records. employee population or employee compensation arrangements during the 2020 fiscal year that we reasonably believe would significantly impact our CEO pay ratio disclosure. The steps described below were performed in 2020 to determine the annual total compensation of the median employee. To identify our median employee, we began with our entire active employee population of approximately 10,200 employees as of December 31, 2018 (after excluding approximately 200 employees that were acquired in connection with our acquisition of Pramerica ŽycieŻycie TUiR SA, a leading financial protection provider in Poland). For these purposes, we identified the median compensated employee using base salary or hourly wages earned during fiscal 2018 and cash bonus paid for fiscal 2018. We annualized base salary or hourly wages, as applicable, for employees who were not designated as temporary or seasonal employees but who did not work for the entire year. We did not exclude any employees based on the allowable "De Minimis Exemption" clause in the SEC regulations.As permitted under SEC guidance, because our originally identified median employee had anomalous pay characteristics, we substituted another employee with substantially similar compensation to the original identified median employee.compensation. Using this methodology, we determined that the median compensated employee was a full-time, exempt employee who holds a core business role that supports field employees who deliver Unum products to our customers. This employee is located at one of our campuses in the northeastern United States. To calculate the CEO pay ratio for 2020, we identified the elements of such employee's compensation for 2020 using the same methodology applied for calculating our CEO's total compensation as reported in the Summary Compensation Table, resulting in annual total compensation of $68,394. 2019
102 2021 PROXY STATEMENT 91
TABLE OF CONTENTS OWNERSHIP OF COMPANY SECURITIES
OWNERSHIP OF COMPANY SECURITIES
The following table shows the number of shares of our common stock beneficially owned by each of our directors and named executive officers and by all directors and executive officers as a group, as of March 15, 2019.April 1, 2021. The table and related footnotes also include information about stock options, deferred share rights, and restricted stock units (RSUs), and stock success units (SSUs) credited to the accounts of directors and executive officers under various compensation and benefit plans. Based upon the representations made by each director and executive officer, we do not believe that any shares held by them are pledged as security. Except as otherwise indicated below, the beneficial owners have sole voting and investment power with respect to the shares beneficially owned. | | BENEFICIAL OWNERSHIP OF COMMON STOCK | | | (as of March 15, 2019)April 1, 2021) | |
Name | Shares of
Common
Stock(1) | Shares Subject
to Exercisable
Options(2) | Shares Subject
to Settleable
Rights or
Units(3)(4)(5) | Total Shares
Beneficially
Owned | Percent of
Class | Theodore H. Bunting, Jr. | 16 | — | 22,967 | 22,983 | * | E. Michael Caulfield | 2,066 | — | 33,250 | 35,315 | * | Susan L. Cross | — | — | 643 | 643 | * | Susan D. DeVore | 750 | — | — | 750 | * | Joseph J. Echevarria | — | — | 17,698 | 17,698 | * | Cynthia L. Egan | 12,856 | — | 3,977 | 16,833 | * | Kevin T. Kabat | 34,742 | — | 10,521 | 45,263 | * | Timothy F. Keaney | 27,998 | — | 4,838 | 32,836 | * | Gloria C. Larson | — | — | 78,850 | 78,850 | * | Ronald P. O'Hanley | 11,174 | — | 9,303 | 20,477 | * | Francis J. Shammo | 7,579 | — | 3,442 | 11,021 | * | Richard P. McKenney | 381,603 | 39,760 | — | 421,363 | * | John F. McGarry | 80,499 | — | 28,376 | 108,874 | * | Michael Q. Simonds | 70,600 | — | — | 70,600 | * | Timothy G. Arnold | 25,995 | — | — | 25,995 | * | Lisa G. Iglesias | 40,739 | — | — | 40,739 | * | All directors and executive officers as a group (20 persons) | 786,566 | 39,760 | 220,235 | 1,046,561 | * |
| | Theodore H. Bunting, Jr. | | | 2,903 | | | 27,480 | | | 30,383 | | | * | | | | Susan L. Cross | | | 80 | | | 12,011 | | | 12,091 | | | * | | | | Susan D. DeVore | | | 9,810 | | | 10,463 | | | 20,274 | | | * | | | | Joseph J. Echevarria | | | — | | | 53,871 | | | 53,871 | | | * | | | | Cynthia L. Egan | | | 24,623 | | | 10,463 | | | 35,086 | | | * | | | | Kevin T. Kabat | | | 64,890 | | | 24,586 | | | 89,475 | | | * | | | | Timothy F. Keaney | | | 20,204 | | | 11,413 | | | 31,617 | | | * | | | | Gloria C. Larson | | | 10,374 | | | 89,976 | | | 100,350 | | | * | | | | Ronald P. O'Hanley | | | 18,900 | | | 27,255 | | | 46,125 | | | * | | | | Francis J. Shammo | | | 11,224 | | | 20,109 | | | 31,333 | | | * | | | | Richard P. McKenney | | | 529,600 | | | — | | | 529,600 | | | * | | | | Steven A. Zabel | | | 17,989 | | | — | | | 17,989 | | | * | | | | Michael Q. Simonds | | | 87,951 | | | — | | | 87,951 | | | * | | | | Timothy G. Arnold | | | 38,152 | | | 25,212 | | | 63,364 | | | * | | | | Lisa G. Iglesias | | | 64,423 | | | — | | | 64,423 | | | * | | | | All directors and executive officers as a group (20 persons) | | | 961,070 | | | 312,810 | | | 1,273,879 | | | * | |
(1)
| Includes shares credited to the accounts of certain current and former executive officers, including Mr. McGarry – 3,205Arnold - 680 shares, under the company’s 401(k) Plan. Does not include shares credited to the accounts of certain executive officers under an inactive non-qualified defined contribution planplans because, though measured in share value, they will be settled only in cash. |
| (2) | Represents the number of shares underlying stock options that may be exercised within 60 days after March 15, 2019. |
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OWNERSHIP OF COMPANY SECURITIES
| (3) | Represents the number of shares underlying deferred share rights and RSUs payable solely in shares (including dividend equivalent rightsequivalents accrued on such rights or units) that may be settled within 60 days after March 15, 2019,April 1, 2021, including deferred share rights and RSUs that may be settled upon the termination of a director’s service on the Board. For each non-employee director other than Ms. Cross, Ms. DeVore, Mr. Echevarria and Mr. Shammo, the amount includes shares underlying unvested RSUs that would vest upon retirement because the director meets the years of service requirement. Also does not include shares underlying RSUs (including dividend equivalent rights accrued thereon) that will not vest or cannot be settled within 60 days after March 15, 2019. |
TABLE OF CONTENTS OWNERSHIP OF COMPANY SECURITIES
share rights and RSUs that may be settled upon the termination of a director’s service on the Board. For each non-employee director other than Ms. Cross and Ms. DeVore, the amount includes shares underlying unvested RSUs that would vest upon retirement because the director meets the years of service requirement. Also does not include shares underlying RSUs (including dividend equivalents accrued thereon) and SSUs that will not vest or cannot be settled within 60 days after April 1, 2021. | (4)(3)
| As of March 15, 2019,April 1, 2021, the total number of shares underlying deferred share rights (including dividend equivalent rightsequivalents accrued thereon) held by our non-employee directors, including those rights which cannot be settled in shares or within 60 days after March 15, 2019April 1, 2021 and thus are not deemed to be beneficially owned for purposes of this table, was as follows: |
Mr. Bunting | | — | | Mr. Kabat | | 7,568 | | | | | | | | Mr. Caulfield | | 14,847 | | Mr. Keaney | | 2,039 | | | | | | | | Ms. Cross | | 643 | | Ms. Larson | | 44,521 | | | | | | | | Ms. DeVore | | — | | Mr. O'Hanley | | 5,439 | | | | | | | | Mr. Echevarria | | 9,146 | | Mr. Shammo | | — | | | | | | | | Ms. Egan | | — | | | | | | | | | | | |
Mr. Bunting | | | — | | | Mr. Kabat | | | 3,262 | Ms. Cross | | | 12,011 | | | Mr. Keaney | | | 950 | Ms. DeVore | | | — | | | Ms. Larson | | | 46,049 | Mr. Echevarria | | | 24,333 | | | Mr. O'Hanley | | | 15,008 | Ms. Egan | | | — | | | Mr. Shammo | | | — |
| (5)(4)
| As of March 15, 2019,April 1, 2021, the total number of shares underlying RSUs (including dividend equivalent rightsequivalents accrued thereon) held by our directors and executive officers, including those units which will not vest, or be settleablesettled in shares, within 60 days after March 15, 2019April 1, 2021 and thus are not deemed to be beneficially owned for purposes of this table, was as follows: |
Mr. Bunting | | | 37,964 | | | Mr. Kabat | | | 23,149 | | | Mr. McKenney(a) | | | 260,141 | Ms. Cross | | | 16,693 | | | Mr. Keaney | | | 10,463 | | | Mr. Zabel | | | 34,481 | Ms. DeVore | | | 10,463 | | | Ms. Larson | | | 43,927 | | | Mr. Simonds | | | 54,901 | Mr. Echevarria | | | 29,538 | | | Mr. O'Hanley | | | 14,848 | | | Mr. Arnold | | | 25,212 | Ms. Egan | | | 10,463 | | | Mr. Shammo | | | 20,109 | | | Ms. Iglesias | | | 28,058 | | | | | | | | | | | | | All directors and executive officers as a group(a) | | | 700,618 |
(a)
| Includes 45,774 shares underlying cash-settled RSUs that have been granted to Mr. McKenney. |
In addition, as of April 1, 2021, the total number of shares underlying SSUs held by our executive officers (none are held by non-executive directors), which will not vest, or be settled in shares, within 60 days of April 1, 2021 and thus are not deemed to be beneficially owned for purposes of this table, was as follows: Mr. McKenney - 186,368; Mr. Zabel - 11,328; Mr. Simonds - 46,592; Mr. Arnold - 16,640; Ms. Iglesias - 19,768; and All executive officers as a group - 309,539. Mr. Bunting | | 22,967 | | Mr. Kabat | | 21,063 | | Mr. McKenney | | 147,671 | | Mr. Caulfield | | 18,403 | | Mr. Keaney | | 3,977 | | Mr. McGarry | | 28,376 | | Ms. Cross | | 955 | | Ms. Larson | | 34,329 | | Mr. Simonds | | 27,577 | | Ms. DeVore | | 3,977 | | Mr. O'Hanley | | 3,977 | | Mr. Arnold | | 14,824 | | Mr. Echevarria | | 12,529 | | Mr. Shammo | | 7,419 | | Ms. Iglesias | | 17,026 | | Ms. Egan | | 6,592 | | | | | | All directors and executive officers as a group | | 415,654 | |
TABLE OF CONTENTS OWNERSHIP OF COMPANY SECURITIES
Security Ownership of Certain Shareholders Detailed information about the shareholders known to us to beneficially own more than 5% of our common stock can be found in the table below, including beneficial ownership based on sole and/or shared voting power and investment (dispositive) power. Information is given as of the dates noted in the footnotes below. BENEFICIAL OWNERSHIP Name of Beneficial Owner | Address of Beneficial
Owner | Amount of Beneficial
Ownership | Percent of Common
Stock Outstanding | The Vanguard Group, Inc.(1) | 100 Vanguard Blvd.
Malvern, PA 19355 | 24,176,276 | 11.05% | BlackRock, Inc.(3) | 55 East 52nd Street
New York, NY 10022 | 19,837,098 | 9.10% | FMR LLC(2) | 245 Summer Street
Boston, MA 02210 | 19,325,010 | 8.83% |
| | The Vanguard Group, Inc.(1) | | | 100 Vanguard Blvd.
Malvern, PA 19355 | | | 25,058,682 | | | 12.30% | | | | FMR LLC(2) | | | 245 Summer Street
Boston, MA 02210 | | | 18,204,505 | | | 8.94% | | | | BlackRock, Inc.(3) | | | 55 East 52nd Street
New York, NY 10055 | | | 16,167,499 | | | 7.90% | |
| (1)
| This information is based on the Schedule 13G/A filed with the Securities and Exchange Commission by The Vanguard Group, Inc. on February 11, 2019,10, 2021, which reflects beneficial ownership as of December 31, 2018.2020. The Vanguard Group, Inc. reported that, in its capacity as investment adviser, it had sole voting power with respect 250,649to none of our shares of our common stock, shared voting power with respect to 48,455281,558 shares of our common stock, sole dispositive power with respect to 23,884,83924,322,833 shares of our common stock, and shared dispositive power with respect to 291,437735,849 shares of our common stock. |
TABLE OF CONTENTS
OWNERSHIP OF COMPANY SECURITIES
| (2) | This information is based on the Schedule 13G/A filed with the Securities and Exchange Commission by BlackRock, Inc. on February 6, 2019, which reflects beneficial ownership as of December 31, 2018. BlackRock, Inc. reported that, in its capacity as the parent holding company or control person of the subsidiaries listed therein, it had sole voting power with respect to 16,821,130 shares of our common stock, sole dispositive power with respect to 19,837,098 shares of our common stock, and shared voting and dispositive power with respect to none of our shares. |
| (3) | This information is based on the Schedule 13G/A filed with the Securities and Exchange Commission by FMR LLC on February 13, 2019,10, 2021, which reflects beneficial ownership as of December 31, 2018.2020. FMR LLC reported that, in its capacity as a parent holding company, it had sole voting power with respect to 3,095,8332,685,341 shares of our common stock, sole dispositive power with respect to 19,325,01018,204,505 shares of our common stock, and shared voting and dispositive power with respect to none of our shares. The Schedule 13G/A includes shares beneficially owned by subsidiaries controlled by or through FMR LLC, Abigail P. Johnson, Director, Vice Chairman and Chief Executive Officer of FMR LLC, and/or members of the family of Abigail P. Johnson, and Fidelity Low-Priced Stock Fund. |
(3)
| This information is based on the Schedule 13G/A filed with the Securities and Exchange Commission by BlackRock, Inc. on February 1, 2021, which reflects beneficial ownership as of December 31, 2020. BlackRock, Inc. reported that, in its capacity as the parent holding company or control person of the subsidiaries listed therein, it had sole voting power with respect to 14,690,549 shares of our common stock, sole dispositive power with respect to 16,167,499 shares of our common stock, and shared voting and dispositive power with respect to none of our shares. |
Delinquent Section 16(a) — Beneficial Ownership Reporting Compliance Reports Under Section 16(a) of the Securities Exchange Act of 1934, our directors, executive officers, and beneficial holders of more than 10% of our common stock are required to file with the U.S. Securities and Exchange Commission (SEC) certain forms reporting their beneficial ownership of and transactions in our common stock. BasedDue to an administrative error by the company, one Form 4 (containing one transaction relating to the grant of stock options under the U.K. stock purchase plan on March 8, 2019) was not timely filed on behalf of Peter G. O’Donnell and was subsequently filed on March 9, 2021. With the exception of this late report, based solely upon a review of those forms provided to usthe reports (and amendments thereto) filed electronically with the SEC and any written representations from the reporting persons that no other reports were required, we believe each of our directors and executive officers and 10% beneficial owners filed all required reports on a timely basis during the last fiscal year. 94 2019
2021 PROXY STATEMENT 105
TABLE OF CONTENTS (Item 1 on the Proxy Card) Our Board of Directors currently has 1211 members. One current member, E. Michael Caulfield, will retire from the Board at the 2019 Annual Meeting. Accordingly, the Board has reduced the number of Board members to 11 effective as of the 2019 Annual Meeting. All nominees will stand for election to one-year terms of office. Upon the recommendation of the Governance Committee, the Board of Directors has nominated Theodore H. Bunting, Jr., Susan L. Cross, Susan D. DeVore, Joseph J. Echevarria, Cynthia L. Egan, Kevin T. Kabat, Timothy F. Keaney, Gloria C. Larson, Richard P. McKenney, Ronald P. O’Hanley and Francis J. Shammo for election to one-year terms expiring at the 20202022 Annual Meeting. Each nominee currently serves on the Board and except for Ms. Cross, has been previously elected to the Board by shareholders. Each nominee has agreed to continue to serve if elected, and the Board has no reason to believe that any nominee will be unable to serve if elected. However, if any nominee becomes unable or unwilling to serve before the 2020 Annual Meeting, proxies may be voted for another person nominated as a substitute by the Board, or the Board may reduce the number of directors. Information concerning these nominees is provided under the section titled "Director Nominees"“Director Nominees” beginning on page 1823.
The Board of Directors unanimously recommends that you vote FOR the election of each of the nominees for director: Theodore H. Bunting, Jr., Susan L. Cross, Susan D. DeVore, Joseph J. Echevarria, Cynthia L. Egan, Kevin T. Kabat, Timothy F. Keaney, Gloria C. Larson, Richard P. McKenney, Ronald P. O’Hanley and Francis J. Shammo.Advisory Vote to Approve Executive Compensation ("Say-on-Pay"(“Say-on-Pay”)
(Item 2 on the Proxy Card) As required by Section 14A of the Securities Exchange Act of 1934 ("(“Exchange Act"Act”), we are asking you to approve an advisory resolution on the compensation of our named executive officers as described in this proxy statement. This proposal, commonly known as a "Say-on-Pay"“Say-on-Pay” proposal, gives you the opportunity to endorse or not endorse our 20182020 executive compensation programs and policies for the named executive officers through the following resolution: RESOLVED, that the shareholders approve, on an advisory basis, the compensation of the company’s named executive officers, as disclosed pursuant to Item 402 of Regulation S-K in the company’s proxy statement for the 20192021 Annual Meeting of Shareholders, including the Compensation Discussion and Analysis, the compensation tables and related narrative discussion. For additional detail concerning the compensation of our named executive officers, please refer to the Compensation“Compensation Discussion and AnalysisAnalysis” beginning on page 4251 and the compensation tables that follow. We currently hold a Say-on-Pay vote every year. Although your vote is not binding on the Board of Directors or the Human Capital Committee, the Human Capital Committee will review the voting results and seek to understand the factors that influenced the vote. As it did last year, the Human Capital Committee will consider constructive feedback obtained through this process in making future decisions about our executive compensation programs and policies. Shareholders will next have an opportunity to cast a Say-on-Pay vote in 2020.at the 2022 Annual Meeting. The Board unanimously recommends that you vote FOR approval of named executive officer compensation, as provided in the resolution above.2019
106 2021 PROXY STATEMENT 95
TABLE OF CONTENTS Ratification of Appointment of Independent Registered Public Accounting Firm
(Item 3 on the Proxy Card) The Audit Committee of the Board of Directors is directly responsible for the appointment, compensation, retention and oversight of the independent registered public accounting firm (independent auditor) retained to audit our financial statements. The Audit Committee has appointed Ernst & Young LLP as our independent auditor for 2019.2021. The members of the Audit Committee and the Board believe that the continued retention of Ernst & Young LLP to serve as our independent auditor is in the best interests of the company and its shareholders. The Board is seeking shareholder ratification of the appointment even though it is not legally required, as a matter of good corporate governance. If the appointment is not ratified, the Audit Committee will consider the shareholders’ views in the future selection of the company’s independent auditor. Representatives of Ernst & Young LLP are expected to be present atattend the 20192021 Annual Meeting. They will have the opportunity to make a statement if they so desire and are expected to be available to respond to appropriate questions.
The Board unanimously recommends that you vote FOR the ratification of the appointment of Ernst & Young LLP as our independent registered public accounting firm for 2019.2021. The Audit Committee is responsible for the audit fee negotiations associated with the company’s retention of Ernst & Young LLP. Aggregate fees billed for audit and other services rendered by Ernst & Young LLP for our fiscal years ended December 31, 20182020 and 20172019 are presented in the table below. INDEPENDENT AUDITOR FEES Types of Fees | 2018 | 2017 | Audit Fees(1) | $8,445,000 | $7,864,000 | Audit-Related Fees | 445,500 | 407,000 | Tax Fees(2) | 770,900 | 615,000 | All Other Fees | — | — | Total | $9,661,400 | $8,886,000 |
| | Audit Fees(1) | | | $9,617,800 | | | $8,316,250 | | | | Audit-Related Fees | | | 412,500 | | | 421,500 | | | | Tax Fees | | | 587,000 | | | 608,950 | | | | All Other Fees | | | — | | | — | | | | Total | | | $10,617,600 | | | $9,346,700 | |
| (1)
| The year-over-year increase in Audit Fees was primarily due to audit workincreased efforts related to the long-term care charge.company’s ongoing adoption of ASC 944 accounting and disclosure requirements for long-duration insurance contracts and the company’s Closed Block individual disability reinsurance transaction. |
| (2) | The year-over-year increase in Tax Fees was primarily due to work related to tax reform. |
Audit Fees.This category includes fees associated with the audit of our annual financial statements, the review of financial statements included in our Quarterly Reports on Form 10-Q, the audit of internal control over financial reporting, and services provided in connection with statutory and regulatory filings.
Audit-Related Fees. This category consists of fees for assurance and related services that are reasonably related to the performance of the audit or review of financial statements or internal control over financial reporting. These services principally include accounting consultations, control reviews, and audit-related services for our employee benefit plans.
Tax Fees. This category consists of fees for tax compliance and advisory services.TABLE OF CONTENTS
All Other Fees.This category consists of fees for services not included in any of the above categories. TABLE OF CONTENTS Policy for Pre-Approval of Audit and Non-Audit Services The Audit Committee has a policy requiring advance approval of all audit and permissible non-audit services performed by the independent auditor. Under this policy, the Audit Committee sets pre-approvedpre- approved limits for specifically defined audit and non-audit services. The Committee considers whether such services are consistent with SEC rules on auditor independence. Specific approval by the Committee is required if fees for any particular service or aggregate fees for services of a similar nature exceed the pre-approved limits. The Committee has delegated to its chair the authority to approve permitted services, and the chair must report any such decisions to the Committee at its next scheduled meeting. 2019
108 2021 PROXY STATEMENT 97
TABLE OF CONTENTS ABOUT THE 20192021 ANNUAL MEETING
ABOUT THE 20192021 ANNUAL MEETING Proxies
We are soliciting proxies on behalf
In light of the continuing COVID-19 pandemic, the Board of Directors has determined that the 2021 Annual Meeting will be conducted as a virtual-only meeting via live webcast in order to facilitate shareholder attendance and participation by enabling shareholders to participate from any location and at no cost. This process will also enable engagement with our shareholders, regardless of size, resources or physical location, while safeguarding the health and wellbeing of our shareholders, employees, and members of the Board and management. The 2021 Annual Meeting live webcast will begin promptly at 10:00 a.m. Eastern Daylight Time on May 27, 2021. We are committed to ensuring that shareholders will be afforded the same rights and opportunities to participate as they would at an in-person meeting. This includes access to the live webcast, voting your shares electronically, and submitting questions online. You will need a 16-digit control number to participate. Further details are provided below under “Attending the 2021 Annual Meeting.” Proxy materials The Board of Directors is providing these proxy materials to you in connection with the 2019 Annual Meeting. This means we are asking youits solicitation of proxies to sign a proxy designating individuals (known as proxies) to vote on your behalfbe voted at the 20192021 Annual Meeting and at any later meeting to which the meetingit may be adjourned or postponed. By useAll shareholders who held shares of athe company's common stock as of the close of business on March 29, 2021 are entitled to attend the 2021 Annual Meeting and to vote on the items of business described in this proxy you can vote whetherstatement. Whether or not you choose to attend or participate in the 20192021 Annual Meeting.Meeting, you may vote your shares via the Internet, by telephone, or by mail. Because we are soliciting your proxy, we are required to send you either our proxy materials or a Notice ofRegarding the Internet Availability of proxy materialsProxy Materials (described in the next section). Our proxy materials include this proxy statement and our annual report to shareholders, which contains audited consolidated financial statements for our fiscal year ended December 31, 2018.2020. If you received a printed copy of ourthese documents, the proxy materials by mail, you also receivedinclude a proxy card or voting instruction form for the 20192021 Annual Meeting. Internet availability of proxy materials We are furnishing
In accordance with rules adopted by the SEC, commonly referred to as “Notice and Access,” we may furnish proxy materials by providing access to the documents on the Internet, rather than mailing printed copies. This process allows us to expedite our shareholders’ receipt of proxy materials, lower the costs of printing and mailing the proxy materials, and reduce the environmental impact of the 2021 Annual Meeting. As a result, most shareholders primarily overwill not receive printed copies of the Internet. In most cases, we are mailing onlyproxy materials unless they request them. Instead, a brief Notice ofRegarding the Internet Availability of proxyProxy Materials (“Notice”) was mailed on or about April 15, 2021 to shareholders of record as of March 29, 2021 who have not previously requested to receive printed or emailed materials rather than a full set of printed materials.on an ongoing basis. The Notice of Internet Availability containsprovides instructions on how to access ourthe proxy materials for the 2021 Annual Meeting, how to request a printed set of proxy materials, and vote online. It also includes instructions on how to request paper or email delivery of our proxy materials. If you previously chose to receive our proxy materials electronically, you will continue to receive access to these materials via email until you elect otherwise.vote your shares. Our proxy materials may also be viewed on our investor relations website under the "SEC Filings"“SEC Filings” heading at www.investors.unum.com.Attendingwww.investors.unum.com.
You may elect to receive proxy materials in printed form by mail or electronically by email on an ongoing basis by following the 2019 Annual Meetinginstructions in personIfthe Notice. Choosing to receive your future proxy materials by email will save us the cost of printing and mailing documents to you attendand will reduce the 2019 Annual Meeting in person, you must present valid, government issued photo identification, such as a driver’s license, and an admission ticket or proof of ownership of our shares as of the close of business on March 25, 2019, the record date. If you are a shareholder of record, your Notice of Internet Availability or the top half of your proxy card is your admission ticket. If you are a beneficial owner, you will need proof of ownership to enter the meeting. Examples of proof of ownership include your Notice of Internet Availability, or a recent brokerage statement or letter from the holder of record (your broker, bank or other nominee) confirming your beneficial ownership on the record date. For your safety and that of other shareholders, we reserve the right to inspect all personal items prior to admission. If you arrive at the 2019 Annual Meeting without proper documentation or refuse to comply with our security procedures, you may not be admitted. Each shareholder may appoint only one proxy holder or representative to attend the 2019 Annual Meeting on his or her behalf and we reserve the right to restrict admission to a single individual representing a shareholder.
You are a "shareholder of record" if your shares are registered directly in your name with our registrar and transfer agent, Computershare Trust Company, N.A.
You are a "beneficial owner" if your shares are held through a broker, bank or other nominee (i.e., held in street name). In this case, the broker, bank or nominee is the shareholder of record.
environmental impact 98 2019
2021 PROXY STATEMENT 109
TABLE OF CONTENTS ABOUT THE 20192021 ANNUAL MEETING
of our annual meetings. If you choose to receive future proxy materials by email, you will receive an email next year with instructions containing a link to those materials and a link to the location ofproxy voting site. Your election to receive proxy materials by email will remain in effect until you terminate it. Attending the 20192021 Annual Meeting in Portland, Maine are provided on our website at www.unum.com/directions.Webcast
A live webcast of the 2019
The 2021 Annual Meeting will be available on our investor relations website at www.investors.unum.com. To register, access thea virtual meeting conducted exclusively via live webcast on the Internet. Shareholders will not be able to attend the meeting in person. | • | Shareholder participation. We are committed to ensuring that shareholders will be afforded the same rights and opportunities to participate as they would at an in-person meeting. You will be able to attend the 2021 Annual Meeting online, vote your shares electronically, and submit questions during the meeting electronically. |
| • | Accessing the meeting online. You may attend and participate in the 2021 Annual Meeting via the Internet at www.virtualshareholdermeeting.com/UNM2021. You will need the 16-digit control number included on your Notice, proxy card, or voting instruction form to log-in. If your shares are held through a bank, brokerage firm, or other custodian and your voting instruction form or Notice indicates that you may vote those shares through the www.proxyvote.comwebsite, then you may access, participate in, and vote at the meeting with the 16-digit control number indicated on that voting instruction form or Notice. Otherwise, shareholders who hold their shares in street name should contact their bank, broker, or other nominee (preferably at least five days before the 2021 Annual Meeting) and obtain a “legal proxy” in order to be able to attend, participate in or vote at the meeting. The meeting webcast will begin promptly at 10:00 a.m. Eastern Daylight Time on May 27, 2021. We encourage you to access the meeting prior to the start time. Online check-in will begin approximately 15 minutes prior to the start time, and you should allow ample time for the check-in procedures. We will post a replay of the meeting as soon as it is available on our investor relations website at www.investors.unum.com under the “Proxy Materials” heading. |
| • | Technical Assistance. If you encounter any difficulties accessing the virtual meeting during the check-in or during the meeting, please call the technical support number that will be posted on the virtual meeting log-in page. |
| • | Submitting questions. An online portal will be available at www.proxyvote.com on or about April 15, 2021. By accessing this portal, shareholders will be able to submit questions and vote in advance of the 2021 Annual Meeting. Shareholders may also submit questions and vote on the day of, or during, the 2021 Annual Meeting at www.virtualshareholdermeeting.com/UNM2021. We will try to answer as many shareholder-submitted questions as time permits that comply with the meeting rules of conduct. However, we reserve the right to edit profanity or other inappropriate language, or to exclude questions that are not pertinent to meeting matters or the company’s business, or that are otherwise inappropriate. If we receive substantially similar questions, we will group such questions together and provide a single response to avoid repetition. Answers to questions not addressed during the meeting will be posted on our investor relations website at www.investors.unum.com under the “Proxy Materials” heading. |
TABLE OF CONTENTS ABOUT THE 2021 ANNUAL MEETING
Differences between shareholders of record and provide the information requested. The webcast will begin at 10:00 a.m. Eastern Daylight Time on Thursday, May 23, 2019,beneficial owners Most of our shareholders hold their shares as a beneficial owner through a broker or other nominee rather than directly in their own name. As summarized below, there are some distinctions between shares held of record and will be archived on the website through June 6, 2019.those owned beneficially. | • | Shareholder of record. If your shares are registered directly in your name with our transfer agent, Computershare Trust Company, N.A., you are considered, with respect to those shares, the shareholder of record, and the Notice was sent directly to you. As the shareholder of record, you have the right to grant your voting proxy directly to the company or to vote at the 2021 Annual Meeting. If you requested to receive printed proxy materials, we have enclosed a proxy card for you to use. You may also vote on the Internet, or by telephone. You are also invited to attend the 2021 Annual Meeting via the Internet. |
| • | Beneficial owner. If your shares are held in an account in the name of a brokerage firm, bank, broker-dealer, trust or other similar organization (i.e., in street name), like the vast majority of our shareholders, you are considered the beneficial owner of shares held in street name. As the beneficial owner, you must instruct the broker or other nominee about how to vote your shares. Under the rules of the New York Stock Exchange (NYSE), if you do not provide such instructions, the firm that holds your shares will have discretionary authority to vote your shares only with respect to “routine” matters, as described in “Voting your shares” below. You are also invited to attend the 2021 Annual Meeting via the Internet. |
Persons entitled to vote at the 20192021 Annual Meeting Shareholders of record as of the close of business on March 25, 2019,29, 2021, the record date, are entitled to vote their shares at the 20192021 Annual Meeting. There were approximately 212,290,252204,188,556 shares of our common stock outstanding on the record date. Each of those shares is entitled to one vote on each item of business to be voted on at the 20192021 Annual Meeting. If you are We will make available a beneficial owner, you are not entitledlist of shareholders of record as of the record date for inspection by shareholders for any purpose germane to vote in person at the 20192021 Annual Meeting without a legal proxy fromduring normal business hours at our corporate headquarters in Chattanooga, Tennessee. Please contact our Corporate Secretary to schedule an appointment. The list will also be available during the broker, bank or other nominee that is the shareholder of record of your shares. You must ask your broker, bank or other nominee to furnish you with the legal proxy before the 2019 Annual Meeting. You must then bring that document with you to the 20192021 Annual Meeting and submit it with a signed ballot that will be provided to you there.
at www.virtualshareholdermeeting.com/UNM2021. Voting items and Board recommendations; Vote required; Abstentions and broker non-votes You may either vote for, against or abstain on each of the voting items to be acted on at the 20192021 Annual Meeting. The table below summarizes, for each voting item, the voting recommendation of the Board of Directors, the vote threshold required for approval, and the effect of abstentions and broker non-votes (i.e., shares held in street name that cannot be voted on certain matters by the shareholder of record if the beneficial owner has not provided voting instructions). TABLE OF CONTENTS ABOUT THE 2021 ANNUAL MEETING
VOTING ITEMS | | | | | | Item 1: Election of 11 directors for terms expiring in 20202022 | | | FOR each nominee | | | Majority of votes
cast with respect
to the nominee | | | No effect because not counted as
vote cast | | | No effect because
not counted as
vote cast | | | | | | | | | | | | Item 2: Advisory vote to approve executive compensation | | | FOR | | | Majority of shares
represented and
entitled to vote | | | Same effect as
AGAINST because
is entitled to vote | | | No effect because
not entitled to
vote | | | | | | | | | | | | | Item 3: Ratification of the appointment of Ernst & Young LLP as our independent registered public accounting firm for 20192021 | | | FOR | | | Majority of shares
represented and
entitled to vote | | | Same effect as
AGAINST because
is entitled to vote | | | Not applicable; may
be discretionarily
voted
by broker | | | | | |
TABLE OF CONTENTS
ABOUT THE 2019 ANNUAL MEETING
Voting your shares If you are a shareholder of record, you
You may vote your shares using any of the following methods: | • | By Internet. Before the meeting, you may vote via the Internet by going to www.proxyvote.com and following the instructions on the screen. You will need the control number found on your Notice, proxy card (for shareholders of record) or voting instruction form (for beneficial owners) when you access the web page. Voting by Internet before the 2021 Annual Meeting is available until 11:59 p.m. Eastern Daylight Time on May 26, 2021. |
In person – AttendDuring the 20192021 Annual Meeting, andyou may vote in person.
Mail – If you received a paper copy of our proxy materials, mark, date and signonline by following the proxy card and mail it to Proxy Services, c/o Computershare Investor Services, P.O. Box 43126, Providence, Rhode Island 02940-5138, using the accompanying pre-addressed, stamped envelope, so that it is received no later than the close of business on May 22, 2019.
Internet or telephone – Visit www.envisionreports.com/UNM to vote over the Internet or call toll free 1-800-652-VOTE (8683) to vote using a touchtone telephone, in either case no later than 2:00 a.m. Eastern Daylight Time, May 23, 2019.instructions at www.virtualshareholdermeeting.com/UNM2021. You will need the control number found on your Notice, proxy card, or voting instruction form when you access the virtual meeting web page.
| • | By telephone. You may vote by telephone by calling the applicable toll-free telephone number, 1-800-690-6903 (for shareholders of record) or 1-800-454-8683 (for beneficial owners), which is available 24 hours a day, and following the pre-recorded instructions. You will need the control number found on your Notice, proxy card, or voting instruction form when you call. You may vote by telephone until 11:59 p.m. Eastern Daylight Time on May 26, 2021. |
| • | By mail. If you received a paper copy of your proxy materials, you may vote by mail by completing the enclosed proxy card or voting instruction form, dating and signing it, and returning it in the postage-paid envelope provided or returning it to Vote Processing, c/o Broadridge, 51 Mercedes Way, Edgewood, NY 11717. Your proxy card or voting instruction form, as applicable, must be received by May 26, 2021. |
The Board of Internet Availability orDirectors has appointed certain individuals named on the proxy card. For shareholderscard (“proxies”) to vote shares at the 2021 Annual Meeting in accordance with the instructions of record, votes submitted by mail, overour shareholders. If you authorize the Internet or by telephoneproxies to vote your shares with respect to any matter to be acted upon, the shares will be voted at the 2019 Annual Meeting byin accordance with your instructions. If you are a shareholder of record and you authorize the proxies named in the proxy card in the manner you indicate. If you sign and return a proxy card without marking specific voting instructions,to vote your shares but do not specify how your shares should be voted on one or more matters, the proxies will vote your shares FOR each director nominee and FOR each other voting item,on those matters as recommended by the Board of Directors.
Directors recommends. If any other matter properly comes before the 2021 Annual Meeting, the proxies will vote on that matter in their discretion. If you are a beneficial owner please refer to the Notice of Internet Availability or voting instruction form provided to you byshares held in street name and do not provide your broker bank or other nominee for detailsinstructions on how to provide voting instructions to such person. Ifvote your shares, a “broker non-vote” occurs. Under the rules of the NYSE, the organization that holds your shares (i.e., your broker bank or other nominee does not receive voting instructions from you, whether your shares can be voted by such person dependsnominee) may generally vote on the type of item being considered for vote. TABLE OF CONTENTS ABOUT THE 2021 ANNUAL MEETING
routine matters at its discretion but cannot vote on “non-routine” matters. The only item of business at the 20192021 Annual Meeting for which your broker bank or other nominee has discretion to vote your shares without your voting instructions is the ratification of the appointment of our independent registered public accounting firm (Item 3). Unless it receives your voting instructions, your broker bank or other nominee will not have discretion to vote your shares (resulting in a "broker non-vote")broker non-vote) on any other item of business at the 20192021 Annual Meeting (Items 1 and 2), including the election of directors. To ensure that your shares are votedvote will be counted on each of the importantall matters, being voted on at the 2019 Annual Meeting, we encourage you to provide instructions to your broker bank or other nominee on how to vote your shares. As noted above, beneficial owners may vote in person at the 2019 Annual Meeting only if they bring a legal proxy obtained from their broker, bank or other nominee. Changing your vote and revoking your proxy You may revoke any proxy that you previously granted or change your vote by: Submitting a subsequent vote via the Internet, by telephone, or by mailing a new proxy card or voting instruction form before the closing of those facilities at 11:59 p.m. Eastern Daylight Time on May 26, 2021; Requesting a “legal proxy” or attending the virtual 2021 Annual Meeting and voting online, as indicated above under “Voting your shares”; or If you are a shareholder of record, and wish to change your vote after submitting a proxy, you may revoke that proxy by submitting a new proxy (either by mailing a new proxy card or by providing new voting instructions over the Internet or by telephone, in each case by the deadlines under "Voting your shares" above), by giving written notice of revocation to ourthe Corporate Secretary, Unum Group, 1 Fountain Square, Chattanooga, TN 37402, so that it is received by 4:00 p.m. Eastern Daylight Time on May 26, 2021. Your new vote or by attendingrevocation in advance of the 2019 Annual Meeting and votingmeeting must be submitted in person.If you are a beneficial owner, you may revoke a previously submitted proxy by submitting new voting instructions inaccordance with the manner specified bytime frames above under “Voting your broker, bank or other nominee. If you obtain a legal proxy from your broker, bank or other nominee, you may also revoke a previously submitted proxy by voting in person at the 2019 Annual Meeting and submitting it with a signed ballot that will be provided to you there.
shares.” 100 2019 PROXY STATEMENT
QuorumTABLE OF CONTENTS
ABOUT THE 2019 ANNUAL MEETING
Quorum
A quorum is required to transact business at the 20192021 Annual Meeting and is reachedMeeting. A quorum exists if the holders of a majority of the shares issued and outstanding and entitled to vote generally in the election of directors are present online at the meeting are present in personvirtual 2021 Annual Meeting or represented by proxies. Abstentions and broker non-votes and signed but unmarked proxy cards will countbe counted for purposes of determining whether a quorum is present at the 20192021 Annual Meeting. Meeting, but neither will be counted as votes cast. Representatives of our transfer agent, Computershare Trust Company, N.A.,Broadridge Financial Solutions, Inc. (“Broadridge”) will tabulate the votes and act as inspectors of the election. Other business
We are not aware of any business to be conducted at the 2019 Annual Meeting, other than as described in this proxy statement. If you submit a proxy, the individuals named on the proxy card will use their own judgment to determine how to vote your shares on any business not described in this proxy statement that is properly brought before the 2019 Annual Meeting.
We will report the final voting results of the 20192021 Annual Meeting on a Form 8-K to be filed with the SEC within four business days after the meeting. The Form 8-K will be available on our investor relations website under the "SEC Filings"“SEC Filings” heading at www.investors.unum.com or on the SEC’s website at www.sec.gov.www.sec.gov. 2019
2021 PROXY STATEMENT 101113
TABLE OF CONTENTS Cost of proxy solicitation We pay the cost of soliciting proxies from our shareholders. Proxies are solicited by mail, and may also be solicited personally, electronically or by telephone by our directors, officers or employees, though none will receive additional compensation for doing this. We have retained Innisfree M&A Incorporated to assist in the solicitation of proxies for the 20192021 Annual Meeting. We will pay Innisfree a fee of $20,000 and reasonable out-of-pocket expenses for its services. We also reimburse brokers, banks and other nominees for their expenses in sending proxy materials to their customers who are beneficial owners and obtaining their voting instructions. Shareholder proposals and nominations for our 20202022 Annual Meeting If you intend to submit a proposal for inclusion in the proxy statement for our 20202022 Annual Meeting pursuant to SEC Rule 14a-8, it must be received by the Corporate Secretary at our principal executive offices (at the address provided below) no later than the close of business on December 13, 2019.16, 2021. Submitting a shareholder proposal does not guarantee that we will include it in our proxy statement if the proposal does not satisfy the requirements of SEC Rule 14a-8. Our bylaws include a proxy access right, permitting a shareholder, or a group of up to 20 shareholders, who has maintained continuous qualifying ownership of at least 3% of our outstanding shares of capital stock entitled to vote in the election of directors for at least three years to nominate and include in our proxy materials director nominees constituting up to the greater of 20% of the Board or two directors, provided that the shareholder(s) and the nominee(s) satisfy the requirements in our bylaws. Notice of proxy access director nominees must be received by the Corporate Secretary at our principal executive offices (at the address provided below) no earlier than November 13, 201916, 2021 and no later than the close of business on December 13, 2019.16, 2021. However, in the event that that the 20192022 Annual Meeting is to be held on a date that is more than 30 days before or after May 23, 202027, 2022 (the anniversary date of the 20192021 Annual Meeting), then such notice must be received no later than the close of business on the 180th day prior to the date of the 20202022 Annual Meeting or the 10th day following the day on which public announcement of the date of the 20202022 Annual Meeting is first made. Our bylaws also establish advance notice procedures with respect to proposals and director nominations submitted by a shareholder for presentation directly at an Annual Meeting, rather than for inclusion in our proxy statement. To be properly brought before our 20202022 Annual Meeting, a notice of the proposal or the shareholder wishes to present at the meeting other than pursuant to SEC Rule 14a-8 or nomination the shareholder wishes to present at the meeting other than pursuant to our proxy access bylaw must be received by the Corporate Secretary at our principal executive offices (at the address provided below) no earlier than the close of business on January 24, 202027, 2022 and no later than the close of business on February 24, 2020.26, 2022. However, in the event that that the 20202022 Annual Meeting is to be held on a date that is more than 30 days before or more than 70 days after May 23, 202027, 2022 (the anniversary date of the 20192021 Annual Meeting), then such notice must be received no earlier than the close of business on the 120th day prior to the date of the 20202022 Annual Meeting and no later than the close of business on the later of the 90th day prior to the date of the 20202022 Annual Meeting or the 10th day following the day on which public announcement of the date of the 20202022 Annual Meeting is first made. TABLE OF CONTENTS All such proposals and director nominations must satisfy the requirements set forth in our bylaws, a copy of which is available on our investor relations website under the "Corporate Governance"“Corporate Governance” heading at www.investors.unum.com and may also be obtained at no cost from the Office of the Corporate Secretary. The chairman of the meeting may refuse to acknowledge or introduce any shareholder proposal or nomination if notice thereof is not received within the applicable deadlines or does not comply with the bylaws. If a shareholder fails to meet these deadlines, the persons named as proxies will be allowed to use their TABLE OF CONTENTS
discretionary voting authority to vote on any such proposal or nomination as they determine appropriate if and when the matter is raisedpresented and introduced at the Annual Meeting. Communications with the Board of Directors Shareholders and interested parties may communicate with our Chairman of the Board, or any other director by contacting the Office of the Corporate Secretary as described below. In accordance with a process approved by our Board of Directors, the Corporate Secretary reviews all correspondence received by the company and addressed to non-management directors. A log and copies of the correspondence are provided to the Chairman, who determines whether further distribution is appropriate and to whom it should be sent. Any director may at any time review this log and request copies of correspondence. Concerns relating to accounting, internal controls or auditing matters are promptly brought to the attention of our internal auditors and handled in accordance with procedures established by the Audit Committee. Copies of correspondence relating to corporate governance matters are also provided to the chair of the Governance Committee. The Board has instructed that certain items unrelated to the duties and responsibilities of the Board be excluded from the process, including mass mailings, resumes and other forms of job inquiries, surveys, business solicitations or advertisements, and matters related to claims or employment. Eliminating duplicate proxy materials A
Under SEC rules, a single proxy statement and annual report to shareholders, along with individual proxy cards or individual Notices, of Internet Availability will be delivered in one envelope to multiple shareholders having the same last name and address and to shareholders with multiple accounts registered at our transfer agent with the same address, unless contrary instructions have been received from an affected shareholder. This is known as "householding"“householding” and it enables us to reduce the costs and environmental impact of the 20192021 Annual Meeting. We will deliver promptly upon written or oral request a separate copy of the proxy statement, annual report to shareholders or Notice of Internet Availability to any shareholder residing at a shared address to which only one copy was delivered. If you are a shareholder of record and would like to receive separate copies of our proxy materials, whether for this year or future years, please contact Computershare Investor Services by callingBroadridge toll-free 800-446-2617at 1-866-540-7095 or by writing to them at P.O. Box 43069, Providence, Rhode Island 02940-3069.Broadridge, Householding Department, 51 Mercedes Way, Edgewood, NY 11717. The same phone number and address may be used to request delivery of a single copy of our proxy materials if you share an address with another shareholder and are receiving multiple copies. If you are a beneficial owner, you should contact your broker, bank or other nominee. TABLE OF CONTENTS Contacting the Office of the Corporate Secretary You may contact the Office of the Corporate Secretary by calling toll-free 800-718-8824 or by writing to: Office of the Corporate Secretary
Unum Group
1 Fountain Square
Chattanooga, Tennessee 37402 TABLE OF CONTENTS
Principal executive offices Our principal executive offices are located at 1 Fountain Square, Chattanooga, Tennessee 37402. Our main telephone number is 423-294-1011. Annual Report on Form 10-K Upon request, we will provide to you by mail a free copy of our Annual Report on Form 10-K (including financial statements and financial statement schedules) for the fiscal year ended December 31, 2018.2020. Please direct your request to the Office of the Corporate Secretary at the address provided above. The Annual Report on Form 10-K may also be accessed on our investor relations website under the "SEC Filings"“SEC Filings” heading at www.investors.unum.com or on the SEC’s website at www.sec.gov.www.sec.gov. Incorporation by reference To the extent that this proxy statement has been or will be specifically incorporated by reference into any of our other filings under the Securities Act of 1933 or the Securities Exchange Act of 1934, the sections of this proxy statement entitled "Report“Report of the Audit Committee"Committee” (to the extent permitted by the rules of the SEC) and "Report of the Human Capital Committee"“Compensation Committee Report” shall not be deemed to be so incorporated, unless specifically provided otherwise in such filing. 104 2019
116 2021 PROXY STATEMENT
TABLE OF CONTENTS Reconciliation of Non-GAAP Financial Measures The following is a reconciliation of the most directly comparable GAAP financial measures to the non-GAAP financial measures as presented in this proxy statement. | After-Tax Adjusted Operating
Income (Loss) | Average Allocated Equity(1) | Adjusted Operating
Return on Equity | Year Ended December 31, 2018 | | | | | | | | | | Unum US | $ | 803.4 | | $ | 4,368.2 | | | 18.4 | % | Unum International | | 93.1 | | | 694.4 | | | 13.4 | % | Colonial Life | | 265.1 | | | 1,475.6 | | | 18.0 | % | Core Operating Segments | | 1,161.6 | | | 6,538.2 | | | 17.8 | % | Closed Block | | 117.0 | | | 3,512.5 | | | | | Corporate | | (133.6 | ) | | (1,359.1 | ) | | | | Total | $ | 1,145.0 | | $ | 8,691.6 | | | 13.2 | % |
| | Year Ended December 31, 2020
| | | | | | | | | | | | | Unum US | | | $651.4 | | | $4,458.2 | | | 14.6% | | | | Unum International | | | 51.9 | | | 797.7 | | | 6.5% | | | | Colonial Life | | | 264.5 | | | 1,584.1 | | | 16.7% | | | | Core Operating Segments | | | 967.8 | | | 6,840.0 | | | 14.1% | | | | Closed Block | | | 183.8 | | | 3,979.2 | | | | | | | Corporate | | | (146.2) | | | (1,395.2) | | | | | | | Total | | | $ 1,005.4 | | | $ 9,424.0 | | | 10.7% | |
(1)
| Excludes unrealized gain (loss) on securities and net gain on hedges and is calculated using the stockholders' equity balances presented below. Due to the implementation of a Financial Accounting Standards Board update for which the beginning balance of 2020, 2019, and 2018 for certain stockholders' equity line items were adjusted, we are computing the average equity for 2020, 2019, and 2018 using internally allocated equity that reflects the adjusted beginning balance at January 1, 2020 , January 1, 2019, and January 1, 2018. As a result, average equity for the year ended December 31, 2020, December 31, 2019, and December 31, 2018 for certain of our segments will not compute using the historical allocated equity at December 31, 2019, 2018, and 2017, respectively. |
(1) Excludes unrealized gain (loss) on securities and net gain on hedges and is calculated using the stockholders' equity balances presented below. Due to the implementation of a Financial Accounting Standards Board update for which the beginning balance of 2018 for certain stockholders' equity line items were adjusted, we are computing the average equity for 2018 using internally allocated equity that reflects the adjusted beginning balance at January 1, 2018. As a result, average equity for the year ended December 31, 2018 for certain of our segments will not compute using the historical allocated equity at December 31, 2017.
| 12/31/2018 | 12/31/2017 | | | Total Stockholders' Equity | $ | 8,621.8 | | $ | 9,574.9 | | | | | | | | Excluding: | | | | | | | | | | | | | Net Unrealized Gain (Loss) on Securities | | (312.4 | ) | | 607.8 | | | | | | | | Net Gain on Hedges | | 250.6 | | | 282.3 | | | | | | | | Total Adjusted Stockholders' Equity | $ | 8,683.6 | | $ | 8,684.8 | | | | | | | |
| | Total Stockholders' Equity | | | $ 10,871.0 | | | $ 9,965.0 | | | | Excluding: | | | | | | | | | | | | | | | | Net Unrealized Gain (Loss) on Securities | | | 1,067.7 | | | 615.9 | | | | Net Gain on Hedges | | | 97.8 | | | 187.8 | | | | Total Adjusted Stockholders' Equity | | | $ 9,705.5 | | | $ 9,161.3 | | | | | | | |
| 12/31/2018
| | | | | | | | Average Adjusted Stockholders' Equity | | | $ 9,667.3 | | | 8,691.6
| | | | | | | | | | | | |
2019
2021 PROXY STATEMENT 105117
TABLE OF CONTENTS APPENDIX A
| Year Ended December 31 | | 2018 | 2017 | 2016 | | (in millions) | per share* | (in millions) | per share* | (in millions) | per share* | Net Income | $ | 523.4 | | $ | 2.38 | | $ | 994.2 | | $ | 4.37 | | $ | 931.4 | | $ | 3.95 | | Excluding:
| | | | | | | | | | | | | | | | | | | Net Realized Investment Gain (Loss) (net of tax expense (benefit) of $(11.0); $15.0; $8.4) | | (28.5 | ) | | (0.12 | ) | | 25.3 | | | 0.11 | | | 15.8 | | | 0.07 | | Loss from Guaranty Fund Assessment (net of tax benefit of $-; $7.2; $-) | | — | | | — | | | (13.4 | ) | | (0.06 | ) | | — | | | — | | Unclaimed Death Benefits Reserve Increase (net of tax benefit $-; $13.6; $-) | | — | | | — | | | (25.4 | ) | | (0.11 | ) | | — | | | — | | Net Tax Benefit from Impacts of TCJA | | — | | | — | | | 31.5 | | | 0.14 | | | — | | | — | | Long-term Care Reserve Increase (net of tax benefit of $157.7; $-; $-) | | (593.1 | ) | | (2.70 | ) | | — | | | — | | | — | | | — | | After-tax Adjusted Operating Income | $ | 1,145.0 | | $ | 5.20 | | $ | 976.2 | | $ | 4.29 | | $ | 915.6 | | $ | 3.88 | |
| Year Ended December 31 | | 2015 | 2014 | 2013 | | (in millions) | per share* | (in millions) | per share* | (in millions) | per share* | Net Income | $ | 867.1 | | $ | 3.50 | | $ | 402.1 | | $ | 1.57 | | $ | 847.0 | | $ | 3.19 | | Excluding:
| | | | | | | | | | | | | | | | | | | Net Realized Investment Gain (Loss) (net of tax expense (benefit) of $(17.7); $3.3; $2.9) | | (26.1 | ) | | (0.11 | ) | | 12.8 | | | 0.05 | | | 3.9 | | | 0.02 | | Costs Related to Early Retirement of Debt (net of tax benefit of $-; $2.8; $-) | | — | | | — | | | (10.4 | ) | | (0.04 | ) | | — | | | — | | Reserve Charge for Closed Block (net of tax benefit of $-; $244.4; $-) | | — | | | — | | | (453.8 | ) | | (1.77 | ) | | — | | | — | | Pension Settlement Loss (net of tax benefit of $-; $22.5; $-) | | — | | | — | | | (41.9 | ) | | (0.16 | ) | | — | | | — | | Unclaimed Death Benefits Reserve Increase (net of tax benefit of $-; $-; $33.4) | | — | | | — | | | — | | | — | | | (62.1 | ) | | (0.24 | ) | Group Life Waiver of Premium Benefit Reserve Reduction (net of tax expense of $-; $-; $29.8) | | — | | | — | | | — | | | — | | | 55.2 | | | 0.21 | | After-tax Adjusted Operating Income | $ | 893.2 | | $ | 3.61 | | $ | 895.4 | | $ | 3.49 | | $ | 850.0 | | $ | 3.20 | |
*Assuming Dilution.
106 2019
| | Net Income
| | | $793.0 | | | $3.89 | | | | Excluding:
| | | | | | | | | | Net Realized Investment Gains and Losses | | | | | | | | | | Net Realized Investment Gain Related to Reinsurance Transaction (net of tax expense of$273.5) | | | 1,028.8 | | | 5.05 | | | | Net Realized Investment Loss, Other (net of tax benefit of $20.9) | | | (82.3) | | | (0.40) | | | | Total Net Realized Investment Gain | | | 946.5 | | | 4.65 | | | | Items Related to Closed Block Individual Disability Reinsurance Transaction | | | | | | | | | | Change in Benefit Reserves and Transaction Costs (net of tax benefit of $274.2) | | | (1,031.3) | | | (5.06) | | | | Amortization of the Cost of Reinsurance (net of tax benefit of $0.6) | | | (2.0) | | | (0.01) | | | | Net Tax Benefits of Reinsurance Transaction | | | 36.5 | | | 0.18 | | | | Total Items Related to Closed Block Individual Disability Reinsurance Transaction | | | (996.8) | | | (4.89) | | | | Long-term Care Reserve Increase (net of tax benefit of $31.8) | | | (119.7) | | | (0.59) | | | | Group Pension Reserve Increase (net of tax benefit of $3.7) | | | (13.8) | | | (0.07) | | | | Costs Related to Organizational Design Updated (net of tax benefit of $4.7) | | | (18.6) | | | (0.09) | | | | Impairment Loss on ROU Asset (net of tax benefit of $2.7) | | | (10.0) | | | (0.05) | | | | After-tax Adjusted Operating Income | | | $1,005.4 | | | $4.93 | |
*Assuming Dilution TABLE OF CONTENTS APPENDIX A
| Year Ended December 31 | | 2012 | 2011 | 2010 | | (in millions) | per share* | (in millions) | per share* | (in millions) | per share* | Net Income | $ | 888.1 | | $ | 3.15 | | $ | 283.6 | | $ | 0.94 | | $ | 877.6 | | $ | 2.69 | | Excluding:
| | | | | | | | | | | | | | | | | | | Net Realized Investment Gain (Loss) (net of tax expense (benefit) of $19.1; $(1.3); $9.0) | | 37.1 | | | 0.13 | | | (3.6 | ) | | (0.01 | ) | | 15.7 | | | 0.05 | | Reserve Charge for Closed Block (net of tax benefit of $-; $265.0; $-) | | — | | | — | | | (492.1 | ) | | (1.62 | ) | | — | | | — | | Deferred Acquisition Costs for Closed Block (net of tax benefit of $-; $68.5; $-) | | — | | | — | | | (127.5 | ) | | (0.42 | ) | | — | | | — | | Special Tax Items | | — | | | — | | | 22.7 | | | 0.08 | | | (10.2 | ) | | (0.03 | ) | After-tax Adjusted Operating Income | $ | 851.0 | | $ | 3.02 | | $ | 884.1 | | $ | 2.91 | | $ | 872.1 | | $ | 2.67 | |
Net Income | | | $ 1,100.3 | | | $ 5.24 | | | $ 523.4 | | | $ 2.38 | | | $ 994.2 | | | $ 4.37 | Excluding: | | | | | | | | | | | | | | | | | | | Net Realized Investment Gain (Loss)(net of tax expense (benefit) of $(4.5); $(11.0); $15.0) | | | (18.7) | | | (0.09) | | | (28.5) | | | (0.12) | | | 25.3 | | | 0.11 | Cost Related to Early Retirement of Debt (net of tax benefit $5.7; $-; $-) | | | (21.6) | | | (0.11) | | | — | | | — | | | — | | | — | Long-term Care Reserve Increase (net of tax benefit of $-; $157.7; $-) | | | — | | | — | | | (593.1) | | | (2.70) | | | — | | | — | Loss from Guaranty Fund Assessment (net of tax benefit of $-; $-; $7.2;) | | | — | | | — | | | — | | | — | | | (13.4) | | | (0.06) | Unclaimed Death Benefits Reserve Increase (net of tax benefit $-; $-; $13.6) | | | — | | | — | | | — | | | — | | | (25.4) | | | (0.11) | Net Tax Benefit from Impacts of TCJA | | | — | | | — | | | — | | | — | | | 31.5 | | | 0.14 | After-tax Adjusted Operating Income | | | $1,140.6 | | | $5.44 | | | $1,145.0 | | | $5.20 | | | $976.2 | | | $4.29 |
Net Income | | | $ 931.4 | | | $ 3.95 | | | $ 867.1 | | | $ 3.50 | | | $ 402.1 | | | $ 1.57 | Excluding: | | | | | | | | | | | | | | | | | | | Net Realized Investment Gain (Loss) (net of tax expense (benefit) of $8.4;$(17.7); $3.3) | | | 15.8 | | | 0.07 | | | (26.1) | | | (0.11) | | | 12.8 | | | 0.05 | Costs Related to Early Retirement of Debt (net of tax benefit of $-; $-;$2.8) | | | — | | | — | | | — | | | — | | | (10.4) | | | (0.04) | Reserve Charge for Closed Block (net of tax benefit of $-; $-; $244.4) | | | — | | | — | | | — | | | — | | | (453.8) | | | (1.77) | Pension Settlement Loss (net of tax benefit of $-; $-; $22.5) | | | — | | | — | | | — | | | — | | | (41.9) | | | (0.16) | After-tax Adjusted Operating Income | | | $915.6 | | | $3.88 | | | $893.2 | | | $3.61 | | | $895.4 | | | $3.49 |
*Assuming Dilution 2021 PROXY STATEMENT 119
| Year Ended December 31 | | 2009 | 2008 | 2007** | | (in millions) | per share* | (in millions) | per share* | (in millions) | per share* | Net Income | $ | 847.3 | | $ | 2.55 | | $ | 553.4 | | $ | 1.62 | | $ | 679.3 | | $ | 1.91 | | Excluding:
| | | | | | | | | | | | | | | | | | | Income from Discontinued Operations | | — | | | — | | | — | | | — | | | 6.9 | | | 0.02 | | Net Realized Investment Gain (Loss) (net of tax expense (benefit) of $11,5; $(161.8); $(22.0)) | | 0.2 | | | — | | | (304.1 | ) | | (0.89 | ) | | (43.2 | ) | | (0.12 | ) | Regulatory Reassessment Charges (net of tax benefit of $-; $-; $31.3) | | — | | | — | | | — | | | — | | | (34.5 | ) | | (0.10 | ) | Debt Extinguishment Costs (net of tax benefit of $-; $-; $20.5) | | — | | | — | | | — | | | — | | | (38.3 | ) | | (0.11 | ) | Special Tax Items | | — | | | — | | | — | | | — | | | 2.2 | | | 0.01 | | After-tax Adjusted Operating Income
| $ | 847.1 | | $ | 2.55 | | $ | 857.5 | | $ | 2.51 | | $ | 786.2 | | $ | 2.21 | |
TABLE OF CONTENTS Net Income | | | $ 847.0 | | | $ 3.19 | | | $ 888.1 | | | $ 3.15 | | | $ 283.6 | | | $ 0.94 | Excluding:
| | | | | | | | | | | | | | | | | | | Net Realized Investment Gain (Loss) (net of tax expense (benefit) of $2.9; $19.1; $(1.3)) | | | 3.9 | | | 0.02 | | | 37.1 | | | 0.13 | | | (3.6) | | | (0.01) | Reserve Charge for Closed Block (net of tax benefit of $-; $-; $265.0) | | | — | | | — | | | — | | | — | | | (492.1) | | | (1.62) | Unclaimed Death Benefits Reserve Increase (net of tax benefit of $33.4; $-; $-) | | | (62.1) | | | (0.24) | | | — | | | — | | | — | | | — | Deferred Acquisition Costs for Closed Block (net of tax benefit of $-; $-; $68.5) | | | — | | | — | | | — | | | — | | | (127.5) | | | (0.42) | Group Life Waiver of Premium Benefit Reserve Reduction (net of tax expenses of $29.8; $-; $-) | | | 55.2 | | | 0.21 | | | — | | | — | | | — | | | — | Special Tax Items | | | — | | | — | | | — | | | — | | | 22.7 | | | 0.08 | After-tax Adjusted Operating Income | | | $850.0 | | | $3.20 | | | $851.0 | | | $3.02 | | | $884.1 | | | $2.91 |
Net Income | | | $ 877.6 | | | $ 2.69 | | | $ 847.3 | | | $ 2.55 | | | $ 553.4 | | | $ 1.62 | Excluding: | | | | | | | | | | | | | | | | | | | Net Realized Investment Gain (Loss) (net of tax expense (benefit) of $9.0; $11,5; $(161.8)) | | | 15.7 | | | 0.05 | | | 0.2 | | | — | | | (304.1) | | | (0.89) | Special Tax Items | | | (10.2) | | | (0.03) | | | — | | | — | | | — | | | — | After-tax Adjusted Operating Income | | | $872.1 | | | $2.67 | | | $847.1 | | | $2.55 | | | $857.5 | | | $2.51 |
*Assuming Dilution TABLE OF CONTENTS Net Income | | | $ 679.3 | | | $ 1.91 | | | $ 411.0 | | | $ 1.23 | | | $ 513.6 | | | $ 1.64 | Excluding: | | | | | | | | | | | | | | | | | | | Income from Discontinued Operations | | | 6.9 | | | 0.02 | | | 7.4 | | ��� | 0.02 | | | 9.6 | | | 0.03 | Net Realized Investment Gain (Loss) (net of tax expense (benefit) of $(22.0); $0.7; $(2.4)) | | | (43.2) | | | (0.12) | | | 1.5 | | | 0.01 | | | (4.3) | | | (0.02) | Regulatory Reassessment Charges (net of tax benefit of $31.3; $129.0; $1.1) | | | (34.5) | | | (0.10) | | | (267.4) | | | (0.79) | | | (51.6) | | | (0.16) | Debt Extinguishment Costs (net of tax benefit of $20.5; $8.9; $-) | | | (38.3) | | | (0.11) | | | (16.9) | | | (0.05) | | | — | | | — | Other (net of tax expense (benefit) of $-; $(5.8); $1.7) | | | — | | | — | | | (12.7) | | | (0.04) | | | 4.0 | | | 0.01 | Special Tax Items | | | 2.2 | | | 0.01 | | | 95.8 | | | 0.28 | | | 42.8 | | | 0.14 | After-tax Adjusted Operating Income | | | $786.2 | | | $2.21 | | | $603.3 | | | $1.80 | | | $513.1 | | | $1.64 |
** Does not reflect the impact of ASU 2010-26.Total Stockholders' Equity (Book Value) | | | $ 10,871.0 | | | $ 53.37 | Excluding: | | | | | | | Net Unrealized Gain on Securities | | | 1,067.7 | | | 5.24 | Net Gain on Hedges | | | 97.8 | | | 0.48 | Subtotal | | | 9,705.5 | | | 47.65 | Excluding: | | | | | | | Foreign Currency Translation Adjustment | | | (261.3) | | | (1.28) | Subtotal | | | 9,966.8 | | | 48.93 | Excluding: | | | | | | | Unrecognized Pension and Postretirement Benefit Costs | | | (530.0) | | | (2.61) | Total Stockholders' Equity, Excluding Accumulated Other Comprehensive Income | | | $10,496.8 | | | $51.54 |
2019
2021 PROXY STATEMENT 107121
TABLE OF CONTENTS APPENDIX A
| Year Ended December 31 | | 2006** | 2005** | | (in millions) | per share * | (in millions) | per share * | Net Income | $ | 411.0 | | $ | 1.23 | | $ | 513.6 | | $ | 1.64 | | Excluding:
| | | | | | | | | | | | | Income from Discontinued Operations | | 7.4 | | | 0.02 | | | 9.6 | | | 0.03 | | Net Realized Investment Gain (Loss) (net of tax expense (benefit) of $0.7; $(2.4)) | | 1.5 | | | 0.01 | | | (4.3 | ) | | (0.02 | ) | Regulatory Reassessment Charges (net of tax benefit of $129.0; $1.1) | | (267.4 | ) | | (0.79 | ) | | (51.6 | ) | | (0.16 | ) | Debt Extinguishment Costs (net of tax benefit of $8.9; $-) | | (16.9 | ) | | (0.05 | ) | | — | | | — | | Other (net of tax expense (benefit) of $(5.8); $1.7) | | (12.7 | ) | | (0.04 | ) | | 4.0 | | | 0.01 | | Special Tax Items | | 95.8 | | | 0.28 | | | 42.8 | | | 0.14 | | After-tax Adjusted Operating Income | $ | 603.3 | | $ | 1.80 | | $ | 513.1 | | $ | 1.64 | |
* Assuming Dilution.
** Does not reflect the impact of ASU 2010-26.
| 12/31/2018 | 12/31/2017 | 12/31/2016 | | (in millions) | per share | (in millions) | per share | (in millions) | per share | Total Stockholders' Equity (Book Value) | $ | 8,621.8 | | $ | 40.19 | | $ | 9,574.9 | | $ | 43.02 | | $ | 8,968.0 | | $ | 39.02 | | Excluding:
| | | | | | | | | | | | | | | | | | | Net Unrealized Gain (Loss) on Securities | | (312.4 | ) | | (1.46 | ) | | 607.8 | | | 2.73 | | | 440.6 | | | 1.92 | | Net Gain on Hedges | | 250.6 | | | 1.17 | | | 282.3 | | | 1.27 | | | 327.5 | | | 1.42 | | Subtotal | | 8,683.6 | | | 40.48 | | | 8,684.8 | | | 39.02 | | | 8,199.9 | | | 35.68 | | Excluding:
| | | | | | | | | | | | | | | | | | | Foreign Currency Translation Adjustment | | (305.2 | ) | | (1.42 | ) | | (254.5 | ) | | (1.15 | ) | | (354.0 | ) | | (1.54 | ) | Subtotal | | 8,988.8 | | | 41.90 | | | 8,939.3 | | | 40.17 | | | 8,553.9 | | | 37.22 | | Excluding:
| | | | | | | | | | | | | | | | | | | Unrecognized Pension and Postretirement Benefit Costs | | (447.2 | ) | | (2.08 | ) | | (508.1 | ) | | (2.28 | ) | | (465.1 | ) | | (2.02 | ) | Total Stockholders' Equity, Excluding Accumulated Other Comprehensive Income (Loss) | $ | 9,436.0 | | $ | 43.98 | | $ | 9,447.4 | | $ | 42.45 | | $ | 9,019.0 | | $ | 39.24 | |
108 2019
Total Stockholders' Equity (Book Value) | | | $ 9,965.0 | | | $ 49.10 | | | $ 8,621.8 | | | $ 40.19 | | | $ 9,574.9 | | | $ 43.02 | Excluding: | | | | | | | | | | | | | | | | | | | Net Unrealized Gain (Loss) on Securities | | | 615.9 | | | 3.03 | | | (312.4) | | | (1.46) | | | 607.8 | | | 2.73 | Net Gain on Hedges | | | 187.8 | | | 0.93 | | | 250.6 | | | 1.17 | | | 282.3 | | | 1.27 | Subtotal | | | 9,161.3 | | | 45.14 | | | 8,683.6 | | | 40.48 | | | 8,684.8 | | | 39.02 | Excluding: | | | | | | | | | | | | | | | | | | | Foreign Currency Translation Adjustment | | | (281.6) | | | (1.39) | | | (305.2) | | | (1.42) | | | (254.5) | | | (1.15) | Subtotal | | | 9,442.9 | | | 46.53 | | | 8,988.8 | | | 41.90 | | | 8,939.3 | | | 40.17 | Excluding: | | | | | | | | | | | | | | | | | | | Unrecognized Pension and Postretirement Benefit Costs | | | (484.8) | | | (2.39) | | | (447.2) | | | (2.08) | | | (508.1) | | | (2.28) | Total Stockholders' Equity, Excluding Accumulated Other Comprehensive Income (Loss) | | | $9,927.7 | | | $48.92 | | | $9,436.0 | | | $43.98 | | | $9,447.4 | | | $42.45 |
Total Stockholders' Equity (Book Value) | | | $ 8,968.0 | | | $ 39.02 | | | $ 8,663.9 | | | $ 35.96 | | | $ 8,521.9 | | | $ 33.78 | Excluding: | | | | | | | | | | | | | | | | | | | Net Unrealized Gain on Securities | | | 440.6 | | | 1.92 | | | 204.3 | | | 0.84 | | | 290.3 | | | 1.15 | Net Gain on Hedges | | | 327.5 | | | 1.42 | | | 378.0 | | | 1.57 | | | 391.0 | | | 1.55 | Subtotal | | | 8,199.9 | | | 35.68 | | | 8,081.6 | | | 33.55 | | | 7,840.6 | | | 31.08 | Excluding: | | | | | | | | | | | | | | | | | | | Foreign Currency Translation Adjustment | | | (354.0) | | | (1.54) | | | (173.6) | | | (0.72) | | | (113.4) | | | (0.45) | Subtotal | | | 8,553.9 | | | 37.22 | | | 8,255.2 | | | 34.27 | | | 7,954.0 | | | 31.53 | Excluding: | | | | | | | | | | | | | | | | | | | Unrecognized Pension and Postretirement Benefit Costs | | | (465.1) | | | (2.02) | | | (392.6) | | | (1.63) | | | (401.5) | | | (1.59) | Total Stockholders' Equity, Excluding Accumulated Other Comprehensive Income | | | $9,019.0 | | | $39.24 | | | $8,647.8 | | | $35.90 | | | $8,355.5 | | | $33.12 |
TABLE OF CONTENTS APPENDIX A
| 12/31/2015 | 12/31/2014 | 12/31/2013 | | (in millions) | per share | (in millions) | per share | (in millions) | per share | Total Stockholders' Equity (Book Value) | $ | 8,663.9 | | $ | 35.96 | | $ | 8,521.9 | | $ | 33.78 | | $ | 8,639.9 | | $ | 33.23 | | Excluding:
| | | | | | | | | | | | | | | | | | | Net Unrealized Gain on Securities | | 204.3 | | | 0.84 | | | 290.3 | | | 1.15 | | | 135.7 | | | 0.52 | | Net Gain on Hedges | | 378.0 | | | 1.57 | | | 391.0 | | | 1.55 | | | 396.3 | | | 1.52 | | Subtotal | | 8,081.6 | | | 33.55 | | | 7,840.6 | | | 31.08 | | | 8,107.9 | | | 31.19 | | Excluding:
| | | | | | | | | | | | | | | | | | | Foreign Currency Translation Adjustment | | (173.6 | ) | | (0.72 | ) | | (113.4 | ) | | (0.45 | ) | | (47.1 | ) | | (0.18 | ) | Subtotal | | 8,255.2 | | | 34.27 | | | 7,954.0 | | | 31.53 | | | 8,155.0 | | | 31.37 | | Excluding:
| | | | | | | | | | | | | | | | | | | Unrecognized Pension and Postretirement Benefit Costs | | (392.6 | ) | | (1.63 | ) | | (401.5 | ) | | (1.59 | ) | | (229.9 | ) | | (0.88 | ) | Total Stockholders' Equity, Excluding Accumulated Other Comprehensive Income | $ | 8,647.8 | | $ | 35.90 | | $ | 8,355.5 | | $ | 33.12 | | $ | 8,384.9 | | $ | 32.25 | |
Total Stockholders' Equity (Book Value) | | | $ 8,639.9 | | | $ 33.23 | | | $ 8,604.6 | | | $ 31.84 | | | $ 8,168.0 | | | $ 27.91 | Excluding: | | | | | | | | | | | | | | | | | | | Net Unrealized Gain on Securities | | | 135.7 | | | 0.52 | | | 873.5 | | | 3.23 | | | 614.8 | | | 2.11 | Net Gain on Hedges | | | 396.3 | | | 1.52 | | | 401.6 | | | 1.48 | | | 408.7 | | | 1.39 | Subtotal | | | 8,107.9 | | | 31.19 | | | 7,329.5 | | | 27.13 | | | 7,144.5 | | | 24.41 | Excluding: | | | | | | | | | | | | | | | | | | | Foreign Currency Translation Adjustment | | | (47.1) | | | (0.18) | | | (72.6) | | | (0.26) | | | (117.6) | | | (0.41) | Subtotal | | | 8,155.0 | | | 31.37 | | | 7,402.1 | | | 27.39 | | | 7,262.1 | | | 24.82 | Excluding: | | | | | | | | | | | | | | | | | | | Unrecognized Pension and Postretirement Benefit Costs | | | (229.9) | | | (0.88) | | | (574.5) | | | (2.13) | | | (444.1) | | | (1.51) | Total Stockholders' Equity, Excluding Accumulated Other Comprehensive Income | | | $8,384.9 | | | $32.25 | | | $7,976.6 | | | $29.52 | | | $7,706.2 | | | $26.33 |
Total Stockholders' Equity (Book Value) | | | $ 8,483.9 | | | $ 26.80 | | | $ 8,045.0 | | | $ 24.25 | | | $��� 5,941.5 | | | $ 17.94 | Excluding: | | | | | | | | | | | | | | | | | | | Net Unrealized Gain (Loss) on Securities | | | 416.1 | | | 1.31 | | | 382.7 | | | 1.16 | | | $(837.4) | | | $(2.53) | Net Gain on Hedges | | | 361.0 | | | 1.14 | | | 370.8 | | | 1.12 | | | 458.5 | | | 1.38 | Subtotal | | | 7,706.8 | | | 24.35 | | | 7,291.5 | | | 21.97 | | | 6,320.4 | | | 19.09 | Excluding: | | | | | | | | | | | | | | | | | | | Foreign Currency Translation Adjustment | | | (107.1) | | | (0.34) | | | (75.3) | | | (0.23) | | | (172.8) | | | (0.52) | Subtotal | | | 7,813.9 | | | 24.69 | | | 7,366.8 | | | 22.20 | | | 6,493.2 | | | 19.61 | Excluding: | | | | | | | | | | | | | | | | | | | Unrecognized Pension and Postretirement Benefit Costs | | | (318.6) | | | (1.00) | | | (330.7) | | | (1.00) | | | (406.5) | | | (1.23) | Total Stockholders' Equity, Excluding Accumulated Other Comprehensive Income (Loss) | | | $8,132.5 | | | $25.69 | | | $7,697.5 | | | $23.20 | | | $6,899.7 | | | $20.84 |
| 12/31/2012 | 12/31/2011 | 12/31/2010 | | (in millions) | per share | (in millions) | per share | (in millions) | per share | Total Stockholders' Equity (Book Value) | $ | 8,604.6 | | $ | 31.84 | | $ | 8,168.0 | | $ | 27.91 | | $ | 8,483.9 | | $ | 26.80 | | Excluding:
| | | | | | | | | | | | | | | | | | | Net Unrealized Gain on Securities | | 873.5 | | | 3.23 | | | 614.8 | | | 2.11 | | | 416.1 | | | 1.31 | | Net Gain on Hedges | | 401.6 | | | 1.48 | | | 408.7 | | | 1.39 | | | 361.0 | | | 1.14 | | Subtotal | | 7,329.5 | | | 27.13 | | | 7,144.5 | | | 24.41 | | | 7,706.8 | | | 24.35 | | Excluding:
| | | | | | | | | | | | | | | | | | | Foreign Currency Translation Adjustment | | (72.6 | ) | | (0.26 | ) | | (117.6 | ) | | (0.41 | ) | | (107.1 | ) | | (0.34 | ) | Subtotal | | 7,402.1 | | | 27.39 | | | 7,262.1 | | | 24.82 | | | 7,813.9 | | | 24.69 | | Excluding:
| | | | | | | | | | | | | | | | | | | Unrecognized Pension and Postretirement Benefit Costs | | (574.5 | ) | | (2.13 | ) | | (444.1 | ) | | (1.51 | ) | | (318.6 | ) | | (1.00 | ) | Total Stockholders' Equity, Excluding Accumulated Other Comprehensive Income | $ | 7,976.6 | | $ | 29.52 | | $ | 7,706.2 | | $ | 26.33 | | $ | 8,132.5 | | $ | 25.69 | |
| 12/31/2009 | 12/31/2008 | | (in millions) | per share | (in millions) | per share | Total Stockholders' Equity (Book Value) | $ | 8,045.0 | | $ | 24.25 | | $ | 5,941.5 | | $ | 17.94 | | Excluding:
| | | | | | | | | | | | | Net Unrealized Gain (Loss) on Securities | | 382.7 | | | 1.16 | | $ | (837.4 | ) | $ | (2.53 | ) | Net Gain on Hedges | | 370.8 | | | 1.12 | | | 458.5 | | | 1.38 | | Subtotal | | 7,291.5 | | | 21.97 | | | 6,320.4 | | | 19.09 | | Excluding:
| | | | | | | | | | | | | Foreign Currency Translation Adjustment | | (75.3 | ) | | (0.23 | ) | | (172.8 | ) | | (0.52 | ) | Subtotal | | 7,366.8 | | | 22.20 | | | 6,493.2 | | | 19.61 | | Excluding:
| | | | | | | | | | | | | Unrecognized Pension and Postretirement Benefit Costs | | (330.7 | ) | | (1.00 | ) | | (406.5 | ) | | (1.23 | ) | Total Stockholders' Equity, Excluding Accumulated Other Comprehensive Income (Loss) | $ | 7,697.5 | | $ | 23.20 | | $ | 6,899.7 | | $ | 20.84 | |
20192021 PROXY STATEMENT 109123
TABLE OF CONTENTS 
 Usingablackinkpen,markyourvoteswithanXasshowninthisexample.Pleasedonotwriteoutsidethedesignatedareas.AnnualMeetingProxyCardIFVOTINGBYMAIL,SIGN,DETACHANDRETURNTHEBOTTOMPORTIONINTHEENCLOSEDENVELOPE.Proposals—Youmustsignthecardbelowforyourvotetobecounted.TheBoardofDirectorsrecommendsavoteFOReachofthenomineeslisted.1.ElectionofDirectors:ForAgainstAbstain01-TheodoreH.Bunting,Jr.02-SusanL.CrossForAgainstAbstain03-SusanD.DevoreForAgainstAbstain04-JosephJ.Echevarria05-CynthiaL.Egan06-KevinT.Kabat07-TimothyF.Keaney08-GloriaC.Larson09-RichardP.McKenney10-RonaldP.O'Hanley11-FrancisJ.ShammoTheBoardofDirectorsrecommendsavoteFORProposals2and3.2.Toapprove,onanadvisorybasis,thecompensationofthecompany'snamedexecutiveofficers.ForAgainstAbstain3.ToratifytheappointmentorErnst&YoungLLPasthecompany'sindependentregisteredpublicaccountingfirmfor2019.ForAgainstAbstainPLEASESIGNTHISPROXYEXACTLYASYOURNAMEORNAMESAPPEARSHEREON.IFSTOCKISHELDJOINTLY,SIGNATURESSHOULDAPPEARFORBOTHNAMES.WHENSIGNINGASANATTORNEY,EXECUTOR,ADMINISTRATOR,TRUSTEE,GUARDIANORCUSTODIAN,PLEASEINDICATETHECAPACITYINWHICHYOUAREACTING.Date(mm/dd/yyyy)—Pleaseprintdatebelow.Signature1—Pleasekeepsignaturewithinthebox.Signature2—Pleasekeepsignaturewithinthebox.
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 ImportantnoticeregardingtheInternetavailabilityofproxymaterialsfortheAnnualMeetingofShareholders.Thematerialisavailableat:www.edocumentview.com/UNMIFVOTINGBYMAIL,SIGN,DETACHANDRETURNTHEBOTTOMPORTIONINTHEENCLOSEDENVELOPE.Proxy—UnumGroupAnnualMeetingofStockholdersMay23,201910:00amEasternDaylightTime2211CongressStreet,Portland,ME04102ThisProxyissolicitedonbehalfoftheBoardofDirectorsofUnumGroup.TheundersignedherebyappointsJohnF.McGarryandLisaG.Iglesias,oreitherofthem,proxies,eachwithfullpowerofsubstitution,actingjointlyorbyeitherofthemifonlyonebepresentandacting,tovoteandactwithrespecttoallofthesharesofcommonstockoftheundersignedinUnumGroup,attheAnnualMeeting,uponallmattersthatmayproperlycomebeforethemeeting,includingthemattersdescribedintheProxyStatementfurnishedherewith,subjecttothedirectionsindicatedonthereversesideofthiscardorthroughthetelephoneorInternetproxyprocedures,andatthediscretionoftheproxiesonanyothermattersthatmayproperlycomebeforethemeeting.Ifspecificvotinginstructionsarenotgivenwithrespecttothematterstobeacteduponandthesignedcardisreturned,theproxieswillvoteinaccordancewiththeBoardofDirectors’recommendationsprovidedonthereversesideofthiscard,andattheirdiscretiononanyothermattersthatmayproperlycomebeforethemeeting.Thisproxycard,whensignedandreturned,willalsoconstitutevotinginstructionstothetrusteeforsharesheldintheUnumGroup401(k)RetirementPlanortothebroker-dealerforsharesheldintheEmployeeStockPurchasePlan.Ifvotinginstructionsrepresentingsharesintheforegoingemployeebenefitplansarenotreceived,thoseshareswillnotbevoted.THISPROXY,WHENPROPERLYEXECUTED,WILLBEVOTEDINTHEMANNERDIRECTEDHEREINBYTHEUNDERSIGNEDSHAREHOLDER.IFNODIRECTIONISMADE,THISPROXYWILLBEVOTED“FOR”THEELECTIONOFALLOFTHEDIRECTORNOMINEESLISTEDINPROPOSAL1,AND“FOR”PROPOSALS2AND3.IFOTHERBUSINESSISPROPERLYBROUGHTBEFORETHEMEETING,THEPROXIESWILLVOTEINACCORDANCEWITHTHEIRBESTJUDGMENT.
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