Filed by the Registrant
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Filed by a Party other than the Registrant
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Preliminary Proxy Statement
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Confidential, for Use of the Commission Only (as permitted by Rule 14a-6(e)(2))
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Definitive Proxy Statement
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Definitive Additional Materials
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Soliciting Material under 240.14a-12
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Kemper Corporation
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(Name of registrant as specified in its charter)
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(Name of person(s) filing proxy statement, if other than the registrant)
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Payment of Filing Fee (Check the appropriate box):
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No fee required.
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Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and 0-11.
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(1)
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Title of each class of securities to which transaction applies:
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Aggregate number of securities to which transaction applies:
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Per unit price or other underlying value of transaction computed pursuant to Exchange Act Rule 0-11 (set forth the amount on which the filing fee is calculated and state how it was determined):
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Proposed maximum aggregate value of transaction:
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Total fee paid:
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Fee paid previously with preliminary materials.
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Check box if any part of the fee is offset as provided by Exchange Act Rule 0-11(a)(2) and identify the filing for which the offsetting fee was paid previously. Identify the previous filing by registration statement number, or the Form or Schedule and the date of its filing.
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(1)
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Amount Previously Paid:
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(2)
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Form, Schedule or Registration Statement No.:
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(3)
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Filing Party:
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(4)
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Date Filed:
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1.
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Elect a Board of Directors;
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2.
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Consider and vote on an advisory proposal to ratify the selection of Deloitte & Touche LLP as the Company’s independent registered public accountant for
2019
;
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3.
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Consider and vote on an advisory proposal to approve the compensation of the Company’s Named Executive Officers, as disclosed in this Proxy Statement;
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4.
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Consider and vote on a proposal to approve the Company’s 2019 Employee Stock Purchase Plan; and
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5.
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Consider and act upon such other business as may be properly brought before the meeting.
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Page
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Proxy Statement Summary
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Board and Corporate Governance
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Meetings and Committees of the Board of Directors
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Corporate Governance
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Selection of Board Nominees
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Related Person Transactions
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Director Independence
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Compensation Committee Interlocks and Insider Participation
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Board Leadership and Role in Risk Oversight
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Director Compensation
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2018 Annual Non-Employee Director Compensation Program
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Director Compensation Table
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Proposal 1: Election of Directors
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Audit Matters
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Audit Committee Report
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Independent Registered Public Accountant
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Independent Registered Public Accountant Fees for 2018 and 2017
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Pre-Approval of Services by Independent Registered Public Accountant
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Proposal 2: Advisory Vote to Ratify the Selection of Deloitte & Touche LLP as the Company's Independent Registered Public Accountant
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Executive Officers
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Discussion of Compensation Committee Governance
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Compensation Discussion and Analysis
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Executive Summary
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Executive Compensation Program
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Compensation Strategy and Analysis
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Annual Determination of Specific Compensation
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Stock Ownership Policy
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Changes Made to NEO Compensation for 2019
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Perquisites
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Employee Welfare Benefit and Retirement Plans
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Other Post-Employment Compensation
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Tax Implications
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Compensation Committee Report
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Executive Officer Compensation & Benefits
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Summary Compensation Table
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Grants of Plan-Based Awards in 2018 - Narrative and Table
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Outstanding Equity Awards at 2018 Fiscal Year-End Table
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Option Exercises and Stock Vested in 2018 Table
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Retirement Plans - Narrative and Pension Benefits Table
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Nonqualified Deferred Compensation - Narrative and Table
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Potential Payments Upon Termination or Change in Control - Narrative and Table
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Pay Ratio Disclosure
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Proposal 3: Advisory Vote to Approve the Compensation of the Company’s Named Executive Officers
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Proposal 4: Vote to Approve the Company's 2019 Employee Stock Purchase Plan
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Ownership of Kemper Common Stock
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Directors and Executive Officers
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Certain Beneficial Owners
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Section 16(a) Beneficial Ownership Reporting Compliance
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Frequently Asked Questions
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Incorporation by Reference
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Appendix A: Supplement to Compensation Discussion and Analysis
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Appendix B: Kemper Corporation 2019 Employee Stock Purchase Plan
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Proxy Statement Summary
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Annual Meeting of Shareholders
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Voting Matters and Board Recommendations
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Voting Matter
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Board Recommendation
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Page Reference
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1.
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Election of Directors;
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FOR
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2.
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Advisory vote to ratify selection of Deloitte & Touche LLP as the Company’s independent registered public accountant for 2019;
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FOR
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3.
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Advisory vote to approve the compensation of the Company’s Named Executive Officers, as disclosed in this Proxy Statement; and
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FOR
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4.
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Vote to approve the Company’s 2019 Employee Stock Purchase Plan
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FOR
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How to Cast Your Vote
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Board and Corporate Governance
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Meetings and Committees of the Board of Directors
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Name
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Board
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Audit Committee
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Compensation Committee
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Investment Committee
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NCG Committee
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Teresa A. Canida
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M
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M
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M
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George N. Cochran
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M
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C
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M
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Kathleen M. Cronin
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M
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M
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C
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Douglas G. Geoga
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M
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M
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M
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Lacy M. Johnson
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M
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M
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M
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Robert J. Joyce
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C
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M
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C
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Joseph P. Lacher, Jr.
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M
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M
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Christopher B. Sarofim
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M
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C
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David P. Storch
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M
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M
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M
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Susan D. Whiting
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M
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M
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M
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Meetings Held
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11 (1)
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8
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5
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3
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5
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Actions Taken by Written Consent
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1
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—
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2
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—
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—
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Audit Committee
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•
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integrity of the Company’s financial statements and adequacy of its internal controls;
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•
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Company’s compliance with legal and regulatory requirements;
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•
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independent registered public accountant’s qualifications, independence and performance; and
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•
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performance of the Company’s internal audit function.
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Board and Corporate Governance
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Compensation Committee
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•
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reviewing and approving corporate goals and objectives relevant to the compensation of the Company’s Chief Executive Officer (“
CEO
”) and evaluating the CEO’s performance and compensation in light of such goals and objectives;
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•
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overseeing the compensation of the Company’s executive officers and other members of senior management as may be designated by the committee from time to time;
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•
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reviewing and approving the Company’s incentive compensation and equity-based compensation plans;
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•
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reviewing and approving the material terms of any employment agreements or severance or change-in-control arrangements involving any of the Company’s executive officers; and
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•
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reviewing and making recommendations to the Board on non-employee director compensation.
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Investment Committee
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Nominating & Corporate Governance Committee
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•
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identifying potential candidates qualified to become Board members and recommending director nominees to the Board from time to time and in connection with each annual meeting of shareholders;
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•
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developing and assessing policies and guidelines for corporate governance, executive succession, business conduct and ethics;
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•
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leading the Board in its annual review of the performance of the Board and Board committees; and
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•
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recommending to the Board the members and chairs for each Board committee and a Board member to serve as Chairman of the Board.
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Board and Corporate Governance
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Corporate Governance
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Selection of Board Nominees
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•
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the highest ethical standards and integrity;
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•
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willingness and ability to devote sufficient time to the work of the Board;
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•
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willingness and ability to represent the interests of shareholders as a whole rather than those of special interest groups;
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•
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no conflicts of interest that would interfere with performance as a director;
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•
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a reputation for working constructively with others;
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•
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a history of achievement at a high level in business or the professions that reflects superior standards; and
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•
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qualities that contribute to the Board’s diversity.
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Related Person Transactions
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Board and Corporate Governance
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Director Independence
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Board and Corporate Governance
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Compensation Committee Interlocks and Insider Participation
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Board Leadership and Role in Risk Oversight
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Director Compensation
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2018 Annual Non-Employee Director Compensation Program
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Board/Committee/Position |
Annual Chair Retainer ($)
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Annual Non-Chair Retainer ($)
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Deferred Stock Unit Award ($)
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Board of Directors
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165,000
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60,000
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110,000
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(1)
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Audit Committee
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33,000
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15,000
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—
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Compensation Committee
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15,000
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8,000
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—
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Investment Committee
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15,000
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10,000
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—
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Nominating & Corporate Governance Committee
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15,000
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7,000
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—
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(1)
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Under the 2018 program, an annual deferred stock unit (“
DSU
”) award covering shares of Common Stock with a grant date value of $110,000 was granted automatically at the conclusion of the Annual Meeting to each non-employee director under the Company’s 2011 Omnibus Equity Plan (“
Omnibus Plan
”).
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Changes Made to Non-Employee Director Compensation for
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2019
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•
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Annual Chair Retainer for the Chairman of the Board increased to $200,000;
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•
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Annual Non-Chair Retainer for other members of the Board increased to $80,000;
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•
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Annual Non-Chair Retainer for the Compensation Committee members increased to $10,000; and
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•
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Annual Non-Chair Retainer for the NCG Committee members increased to $8,000.
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Director Compensation Table
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Director Compensation
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Name
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Fees Earned or Paid in Cash($)(2)
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Deferred Stock Unit Awards($)(3)
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All Other Compensation($)(4)
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Total($)
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Teresa A. Canida
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43,519
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—
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—
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43,519
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George N. Cochran
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103,000
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110,000
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6,250
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219,250
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||
Kathleen M. Cronin
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92,923
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110,000
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6,250
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209,173
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Douglas G. Geoga
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84,165
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110,000
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7,210
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201,375
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Thomas M. Goldstein (1)
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84,341
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110,000
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3,446
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197,787
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Lacy M. Johnson
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75,000
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110,000
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3,446
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188,446
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Robert J. Joyce
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188,500
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110,000
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7,210
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305,710
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Christopher B. Sarofim
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75,000
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110,000
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7,210
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192,210
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David P. Storch
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79,000
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110,000
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7,210
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196,210
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Susan D. Whiting
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83,000
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110,000
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682
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193,682
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(1)
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Mr. Goldstein resigned from the Company, effective January 29, 2019.
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(2)
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Fees shown were earned for service on the Board and/or Board committees and include any amounts deferred at the election of an individual Board member under the Deferred Compensation Plan. For more information about the Deferred Compensation Plan, see the narrative discussion in the
Executive Officer Compensation & Benefits
section under the heading
Deferred Compensation Plan
on page 48.
|
(3)
|
The amounts shown represent the aggregate grant date fair values of the annual DSU awards granted to the designated directors on
June 1, 2018
. Ms. Canida was not a member of the Board until July 2018 and so was not eligible for a DSU award in 2018. The grant date fair values for the annual DSU awards were based on the grant date closing price $77.50 per share of Common Stock. For a discussion of valuation assumptions, see Note 10, Long-term Equity-based Compensation, to the Consolidated Financial Statements included in the Company’s Annual Report on Form 10-K (“
Annual Report
”) for the year ended
December 31, 2018
. Additional information about non-employee director DSU awards is provided in the narrative preceding this table.
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Name
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Outstanding Option Shares as of 12/31/18(#)
|
|
Outstanding Deferred Stock Units
as of 12/31/18(#) |
|
Teresa A. Canida
|
—
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—
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George N. Cochran
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9,179
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7,220
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Kathleen M. Cronin
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8,000
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7,220
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Douglas G. Geoga
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29,965
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8,220
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|
Thomas M. Goldstein
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—
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4,300
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Lacy M. Johnson
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—
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4,300
|
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Robert J. Joyce
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17,179
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8,220
|
|
Christopher B. Sarofim
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16,000
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8,220
|
|
David P. Storch
|
29,179
|
|
8,220
|
|
Susan D. Whiting
|
—
|
|
1,420
|
|
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Proposal 1
|
Overview
|
Business Experience of Nominees
|
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Proposal 1
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George N. Cochran
|
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Mr. Cochran served as Chairman in the Global Financial Institutions Group at Macquarie Capital until his retirement in December 2014. Previously, he was the Chairman of Fox-Pitt Kelton Cochran Caronia Waller (“FPKCCW”) and co-founder of its predecessor firm, Cochran Caronia Waller (“CCW”). FPKCCW was acquired by Macquarie Capital in November 2009. Prior to co-founding CCW, Mr. Cochran developed Kidder Peabody’s Insurance M&A and Financing Practice and also served as Managing Director and Insurance Industry Head of Coopers & Lybrand Securities, LLC.
Mr. Cochran brings considerable insurance industry expertise to the Board, as well as substantial merger and acquisition knowledge specific to the industry. His experience in top leadership roles at several investment banking firms provides the Board with additional expertise in the areas of executive development and operational management. In addition, Mr. Cochran is a National Association of Corporate Directors (“NACD”) Governance Fellow and Board Leadership Fellow. He has demonstrated his commitment to boardroom excellence by completing NACD’s comprehensive program of study for directors and corporate governance professionals.
|
Age: 64
Director since: 2015
|
Kathleen M. Cronin
|
|
|
Ms. Cronin is Senior Managing Director, General Counsel and Corporate Secretary for CME Group Inc. (“CME Group”), the world’s leading and most diverse derivatives marketplace. Before joining CME Group in November 2002, Ms. Cronin was in private practice at the law firm of Skadden, Arps, Slate, Meagher and Flom, where she was employed for more than 10 years and focused her practice on corporate, securities offerings and transactional matters. From 1995 to 1997, Ms. Cronin served as Chief Counsel/Corporate Finance for Sara Lee Corporation.
Ms. Cronin’s role overseeing audit, compliance, regulatory and risk management functions at CME Group, and her experience in the areas of information security, corporate governance, government relations, corporate law and corporate finance, provide the Board with important knowledge and perspective on the challenges of doing business in a highly-regulated industry and expertise regarding the role of the board and its committees. Her background in these areas also makes her particularly well-suited to serve on the Audit and Compensation Committees.
|
Age: 55
Director since: 2015 |
Lacy M. Johnson
|
|
|
Mr. Johnson is a partner with the Ice Miller LLP law firm, where he has practiced since January 1993. His primary practice areas focus on public affairs services and he serves as co-chair to the firm’s Public Affairs and Gaming Group. Before joining Ice Miller, Mr. Johnson served as Attorney, Government Relations Services, Sagamore-Bainbridge, Inc., Director of Security for the Indiana State Lottery, liaison with the Indiana General Assembly, and Lt. Colonel and deputy superintendent for Support Services for the Indiana State Police. Mr. Johnson is a Democratic National Committeeman and former Lt. Commander of the United States Naval Intelligence Reserves.
Mr. Johnson’s background in public affairs and government relations brings unique perspective to the Board. In addition, Mr. Johnson provides the Board with legal acumen gained over his twenty years of legal practice in a private law firm.
|
Age: 66
Director since: 2016 |
|
|
Proposal 1
|
Robert J. Joyce
|
|
|
Mr. Joyce has served as Chairman of the Board of Directors of the Company since November 2015. Mr. Joyce served as Chairman and Chief Executive Officer of Westfield Group from July 2003 to January 2011, and as Executive Chair of Westfield’s Board from January 2011 until his retirement in March 2012. Westfield Group is privately-held and provides a broad portfolio of insurance and financial services. Mr. Joyce also served as Chairman of Westfield Bank from December 2001 to April 2010. Prior to joining Westfield in 1996, Mr. Joyce held various senior leadership positions with Reliance Insurance Group, and previously worked as a certified public accountant. Mr. Joyce served as a U.S. Navy Captain and is a veteran of Desert Storm and Desert Shield.
Mr. Joyce brings substantial leadership experience and insurance industry expertise to the Board. Mr. Joyce also gained valuable acumen and skills for his role as Chairman of the Company’s Board through his years of service as Chairman of the Board at Westfield. In addition, Mr. Joyce previously served on the Board of Governors of the Property Casualty Insurers Association of America and is a past chair of that organization. He also served as a Trustee of the Griffith Insurance Education Foundation and on the Board of the National Association of Independent Insurers.
|
Age: 70
Director since: 2012 |
Joseph P. Lacher, Jr.
|
|
|
Mr. Lacher has served as President and Chief Executive Officer of the Company since November 2015. Mr. Lacher previously served in other senior executive roles in the insurance industry. From November 2009 to July 2011, Mr. Lacher was President of Allstate Protection, a unit of Allstate Corporation, where he led the company’s property and casualty offerings serving more than 17 million American households. Prior to Allstate, Mr. Lacher spent 18 years at The Travelers Companies, Inc., most recently serving as Executive Vice President - Personal Insurance from 2002 to 2009 and additionally as Executive Vice President - Select Accounts from 2006 to 2009.
Mr. Lacher’s senior executive experience in the insurance industry provides valued expertise and perspective to the Board. In his role as the Company’s Chief Executive Officer, he fills a critical role as liaison between the Board and the members of the Company’s executive and operational teams. His strong industry background and insights complement the broad business backgrounds and skills of the other members of the Board.
|
Age: 49
Director since: 2015 |
Christopher B. Sarofim
|
|
|
Mr. Sarofim is the Vice Chairman and a member of the Board of Directors of Fayez Sarofim & Co., a registered investment advisory firm. Mr. Sarofim joined the firm in 1988 and has been a member of its Board since August 2014. He is a member of the firm’s Executive, Finance and Investment Committees, and is also the President of the firm’s foreign advisory business, Sarofim International Management Company. Mr. Sarofim shares portfolio management responsibilities for numerous separate accounts advised by the firm, as well as several Dreyfus Corporation mutual funds. Prior to joining Fayez Sarofim & Co., he was employed with Goldman, Sachs & Co. in corporate finance.
Mr. Sarofim offers the Board extensive experience in the investment world, gained with one of the nation’s premier investment advisory firms. With his financial background and investment advisory experience, Mr. Sarofim is particularly well-suited to serve on the Investment Committee and provides the Board financial market and securities analysis expertise, key aspects of the Company’s investment portfolio management function.
|
Age: 55
Director since: 2013 |
|
|
Proposal 1
|
David P. Storch
|
|
|
Mr. Storch is currently Non-Executive Chairman of the Board of AAR Corp., a leading provider of aviation services to the worldwide commercial aerospace and government/defense industries, a position he has held since June 2018. Mr. Storch had served as AAR’s Chairman of the Board and Chief Executive Officer from October 2005 through May 2018 when he retired as Chief Executive Officer, and additionally served as President from July 2015 to June 2017. He previously served various terms as AAR’s President, Chief Executive Officer and Chief Operating Officer between 1989 and 2007. Mr. Storch also served as a director of KapStone Paper and Packaging Corporation, a leading North American producer of unbleached kraft paper products and corrugated packaging products until November 2018. Mr. Storch served as Lead Director of Kemper’s Board from August 2012 to November 2015.
Mr. Storch brings the Board substantial leadership expertise and skills. The experiences he has had as Chairman of the Board and Chief Executive Officer of a large multinational public corporation, an executive responsible for business development, a board member of another public company and a business leader in his industry, offer the Board broad and unique perspectives and hands-on knowledge of the challenges of running a public company.
|
Age: 66
Director since: 2010 |
Susan D. Whiting
|
|
|
Ms. Whiting currently serves as a director and advisor to for-profit global companies, both private and public. Ms. Whiting had served as Vice Chair of Nielsen Holdings plc until she stepped down in January 2014, following her 35-year career with Nielsen, a global performance management company that provides a comprehensive understanding of what consumers watch and buy. Ms. Whiting’s prior positions with Nielsen include President, Chief Operating Officer, Chief Executive Officer and Chairman of Nielsen Media Research, and Global Executive Vice President. Ms. Whiting has also served as a director of Alliant Energy Corporation since 2013.
Ms. Whiting has an extensive background in a variety of operational and executive roles. Her resulting expertise in consumer behavior, information services and data analytics, and government and public affairs, provides the Board with strategic management know-how in these areas. In addition, Ms. Whiting’s career service with Nielsen gives the Board significant consumer-focused perspective and insight.
|
Age: 62
Director since: 2017 |
Required Vote
|
Recommendation of the Board of Directors
|
|
|
Audit Matters
|
Audit Committee Report
|
Independent Registered Public Accountant
|
Fee Type
|
2018
|
|
2017
|
|
||
Audit Fees
|
$
|
5,604,359
|
|
$
|
3,847,215
|
|
Audit-Related Fees
|
1,126,510
|
|
46,000
|
|
||
Tax Fees
|
31,017
|
|
—
|
|
||
Total Fees
|
$
|
6,761,886
|
|
$
|
3,893,215
|
|
|
|
Audit Matters
|
|
|
Proposal 2
|
Overview
|
Required Vote
|
Recommendation of the Board of Directors
|
|
|
Executive Officers
|
John M. Boschelli, Senior Vice President and Chief Investment Officer, 50
|
Charles T. Brooks, Senior Vice President, Operations and Systems, 52
|
C. Thomas Evans, Jr., Senior Vice President, Secretary and General Counsel, 60
|
Mark A. Green, Senior Vice President and President, Life & Health Division, 51
|
Kimberly A. Holmes, Senior Vice President, Chief Actuary and Strategic Analytics Officer, 55
|
James J. McKinney, Senior Vice President and Chief Financial Officer, 39
|
|
|
Executive Officers
|
Christine F. Mullins, Senior Vice President and Chief Human Resources Officer, 60
|
Richard Roeske, Vice President and Chief Accounting Officer, 58
|
Duane A. Sanders, Senior Vice President and President, Property & Casualty Division, 62
|
|
|
Compensation Committee Governance
|
Compensation Committee Authority and Delegation
|
Compensation Committee Process Overview
|
•
|
annual compensation of the Company’s executive officers;
|
•
|
determination of the amounts of any annual cash incentives payable for the prior year, including validation of performance results for determining any payouts under performance-based cash and equity-based compensation awards granted for prior years;
|
•
|
any changes to Kemper’s executive compensation plans and programs; and
|
•
|
determinations as to the current-year cash and equity-based compensation.
|
The Role of Compensation Consultants
|
|
|
Compensation Committee Governance
|
|
|
Compensation Discussion and Analysis
|
Named Executive Officer
|
Position with the Company in 2018
|
Joseph P. Lacher, Jr.
|
President and Chief Executive Officer
|
James J. McKinney
|
Senior Vice President and Chief Financial Officer
|
John M. Boschelli
|
Senior Vice President and Chief Investment Officer
|
Mark A. Green
|
Senior Vice President and President, Life & Health Division
|
Duane A. Sanders
|
Senior Vice President and President, Property & Casualty Division
|
Executive Summary
|
|
|
Compensation Discussion and Analysis
|
Major contributors to the improved financial performance in 2018
|
||||
ü
|
Specialty P&C Insurance Segment: Strong organic growth and profitability further enhanced by the addition of Infinity
|
|||
ü
|
Preferred P&C Insurance Segment: Modest premium growth with a return to profitability in 2018
|
|||
ü
|
Life & Health Insurance Segment: Stable earnings and cash flow generation with increased earned premiums in Accident & Health business
|
|||
ü
|
Investments: Continued strong performance of diversified and highly rated investment portfolio
|
|||
|
|
|
|
|
The improved financial performance led to significant gains for shareholders
|
||||
ü
|
Kemper’s share price improved from a $37.25 closing price on December 31, 2015 to $66.38 on December 31, 2018, an overall increase of 78.2% or annualized increases of 21.2% over the three-year period
|
|||
ü
|
Dividends of $0.96 per share paid to shareholders in 2018
|
•
|
Salary, the only component that is fixed and not based on performance. Salary represents a relatively small portion of total compensation and is generally not adjusted annually. No changes to the NEOs’ salaries were made for 2018.
|
•
|
Our annual performance-based cash incentive program (“
Annual Incentive Program
”) rewards participants for significant improvement and the overall performance results of the Company and its business units. The program allocates the highest compensation to the highest performing and most impactful participants. Awards increased in 2018 as compared to 2017 in the context of the Company’s improved financial performance.
|
•
|
Our performance-based equity awards include stock options and performance share units (“
PSUs
”), with three-year performance metrics tied to relative total shareholder return (“
Relative TSR
”) and adjusted return on equity (“
Three-Year Adjusted ROE
”). Equity awards are tied to key measures we believe are valued by shareholders including share price increases and relative shareholder return compared to similarly situated insurance companies, and adjusted return on equity, a key performance indicator in the insurance industry. These awards increase in value as our share price increases, aligning them with resulting gains by shareholders.
|
Executive Compensation Program
|
|
|
Compensation Discussion and Analysis
|
|
|
|
|
What We Do
|
|||
ü
|
Pay-for-Performance
: The majority of NEO total compensation is tied to Company, business unit and individual performance and is considered “at risk” by the Company, with actual value contingent upon performance results.
|
ü
|
Independence of Executive Compensation Consultant (Pay Governance)
: The Compensation Committee engaged an executive compensation advisor who is independent in accordance with SEC and NYSE rules. Pay Governance has no personal relationships with our NEOs or Board members.
|
ü
|
Clawback Rights
: Our cash incentive and equity programs include clawback rights on paid incentives in the event of certain accounting restatements or as otherwise required by applicable law.
|
ü
|
Independent Committee Members
: All Compensation Committee members are independent in accordance with SEC and NYSE requirements and guidelines.
|
ü
|
Dividend Equivalents Paid Only on Earned Awards
: Beginning with the 2018 equity grants, dividend equivalents accrue on performance shares during the performance period and are paid on shares earned when they vest.
|
ü
|
Stock Ownership Guidelines
: The Company maintains rigorous stock ownership guidelines for Directors, NEOs and other executive officers to reinforce the alignment of our executives with shareholder interests.
|
ü
|
Double-Trigger Change-in-Control
: Our Company policy provides for change of control benefits only on a qualified termination of employment in connection with a change in control.
|
ü
|
Strive to Understand Shareholders’ Views on Executive Compensation
: The supportive shareholder vote on the Company’s annual Say-on-Pay proposal demonstrates that the program aligns with shareholder expectations.
|
|
|
Compensation Discussion and Analysis
|
What We Do Not Do
|
|||
û
|
No Tax Gross-Ups
: NEOs and other executive officers are not entitled to excise tax gross-ups under any Company policies or compensation programs.
|
û
|
No Hedging or Pledging
: Directors and employees who receive equity awards are prohibited from hedging, pledging or otherwise encumbering shares of the Company’s Common Stock.
|
û
|
No Employment Contracts
: The Company does not have employment contracts with its NEOs or other executive officers, who are all employees “at will.”
|
û
|
No Excessive Perquisites
: Perquisites primarily include annual executive physical, financial planning program and limited personal aircraft use.
|
Compensation Strategy and Analysis
|
•
|
Obtain a clear understanding of the business strategies and objectives of the Company, and the reasoning and recommendations of senior management. The Compensation Committee believes it is necessary to give significant weight to the views of the CEO and senior management;
|
•
|
Consider, with the assistance of its compensation consultant, industry data on compensation levels for similar positions at similar companies, particularly in the insurance industry, to assess the comparability of the Company’s pay practices and determine if any noted variances are reasonable, appropriate and purposefully designed to successfully attract, motivate and retain skilled executives in a highly competitive marketplace;
|
•
|
Provide executive officer salary adjustments only periodically, generally not more often than every three years, or as appropriate to reflect significant changes to the Company’s profile or increased management responsibilities;
|
•
|
Provide an annual cash incentive program structured to incentivize and reward exceptional financial, business unit and individual performance during the prior year;
|
•
|
Reward longer-term results through equity-based incentives, including PSUs with three-year performance metrics based on Relative TSR and Three-Year Adjusted ROE, and stock options that gain value based on absolute share price appreciation; and
|
•
|
Monitor compliance by the senior management team with Kemper’s stock ownership policy.
|
|
|
Compensation Discussion and Analysis
|
|
|
Compensation Discussion and Analysis
|
|
|
Compensation Discussion and Analysis
|
Annual Determination of Specific Compensation
|
Name
|
Salary ($)
|
|
Effective Year of Last Salary Change
|
Joseph P. Lacher, Jr
|
750,000
|
|
2015 - Date of Hire
|
James J. McKinney
|
450,000
|
|
2016 - Date of Hire
|
John M. Boschelli
|
400,000
|
|
2015
|
Mark A. Green
|
420,000
|
|
2016 - Date of Hire
|
Duane A. Sanders
|
485,000
|
|
2018 - Date of Hire
|
•
|
A material percentage of the NEO’s compensation should be linked to Company performance; and
|
•
|
Greater responsibilities should lead to greater opportunities for incentive compensation.
|
|
|
Compensation Discussion and Analysis
|
•
|
removed references to Section 162m and its specific requirements;
|
•
|
removed references to multi-year awards (eliminated in 2016 when the multi-year component of the prior program was merged into a single annual award under the new Annual Incentive Program);
|
•
|
changed to a $6,000,000 maximum yearly individual award limitation (“EPP Limit”) from two $3,000,000 annual limitations, one for an annual and one for a multi-year award; and
|
•
|
added the Chief Financial Officer as a plan participant.
|
•
|
The
2018
annual cash incentive pool (“
EPP Incentive Pool
”) was determined by the performance results under the pre-approved formula based on pre-tax operating income from continuing operations, as adjusted, for the performance period ending on
December 31, 2018
;
|
•
|
Maximum payouts to EPP participants were determined based on the pre-approved allocations of the EPP Incentive Pool to individual participants; and
|
•
|
Actual payouts to the NEOs were determined under the Annual Incentive Program based on achievement of key performance results in the judgment of the Compensation Committee, with the CEO’s input with regard to payouts for the NEOs other than the CEO, and, in each case, resulted in the application of negative discretion.
|
Formula for 2018 EPP Incentive Pool
|
|
8.5% of Income from Continuing Operations before Income Taxes as reported in the Company’s financial statements for the year ended December 31, 2018, modified as follows to account for items the Compensation Committee deems not indicative of the Company’s core operating performance:
|
|
|
|
(a) adjust the amount of
Actual Catastrophe Losses and LAE
to equal
Expected Catastrophe Losses and LAE
(italicized terms defined below);
|
|
|
|
(b) adjust
Net Realized Gains on Sales of Investments
and
Net Impairment Losses Recognized in Earnings
(italicized terms as reported in the Company’s 2018 financial statements) to equal
Expected Net Realized Gains on Sales of Investments
and
Expected Net Impairment Losses Recognized in Earnings
(italicized terms defined below);
|
|
|
|
(c) exclude significant unusual judgments or settlements in connection with the Company’s legal
contingencies or defined benefit pension plans; and
|
|
|
|
(d) exclude additional significant unusual or nonrecurring items as permitted by the EPP.
|
|
|
Compensation Discussion and Analysis
|
•
|
“
Actual Catastrophe Losses and LAE
”
means the actual Catastrophe Losses and associated Loss Adjustment Expenses (as described on page 33), including catastrophe reserve development, as reported in the Company’s management reports for the relevant year.
|
•
|
“
Expected Catastrophe Losses,
” “
Expected Net Realized Gains on Sales of Investments,
” and “
Expected Net Impairment Losses Recognized in Earnings
” means the amounts specified in the Company’s management reports as “
Planned
” or “
Expected
” for the
2018
annual performance period for, respectively: (a) Catastrophe Losses and associated Loss Adjustment Expenses, including catastrophe reserve development, (b) Net Realized Gains on Sales of Investments, and (c) Net Impairment Losses Recognized in Earnings, as such terms as defined in
2018
Annual Report.
|
•
|
36 percent to the Chief Executive Officer; and
|
•
|
16 percent to each of the other NEOs.
|
•
|
Substantial progress on the strategic re-positioning of the Company and improved financial performance;
|
•
|
Completion of the Infinity transaction and the initial integration of Infinity into the Company;
|
|
|
Compensation Discussion and Analysis
|
•
|
Strong and consistent investment returns in a portfolio with increased assets;
|
•
|
Solid financial position, with adequate capital and liquidity to support the Company’s strategic plans;
|
•
|
Effective management of risk and expenses; and
|
•
|
Overall performance of the NEOs, based on the judgment of the Compensation Committee, the Chairman of the Board, and, in the case of the other NEOs, also the CEO, including perceptions on leadership, teamwork, effective management and oversight.
|
•
|
Reported results including Actual Catastrophe Losses and LAE
,
and Actual Catastrophe Losses and LAE adjusted to expected losses;
|
•
|
Reported results with and without unusual charges or gains; and
|
•
|
Reported results including realized gains and losses and impairments, and results adjusted to expected realized gains and losses and impairments.
|
(1)
|
Non-GAAP financial measure - See Appendix A for GAAP to Non-GAAP
|
|
|
Compensation Discussion and Analysis
|
Annual Incentive Payouts - 2018 Annual EPP Awards
|
||||||||
Name
|
Allocated Percentage of EPP Incentive Pool(%)
|
|
Maximum Award (Lower of EPP Incentive Pool Allocation or
EPP Limit) ($)
|
|
|
Actual
Award Payout($)
|
|
Actual Award Payout as Percentage of Maximum (%)
|
Joseph P. Lacher, Jr.
|
36
|
|
6,000,000
|
|
(1)
|
2,500,000
|
|
41.7
|
James J. McKinney
|
16
|
|
2,809,760
|
|
|
900,000
|
|
32.0
|
John M. Boschelli
|
16
|
|
2,809,760
|
|
|
600,000
|
|
21.4
|
Mark A. Green
|
16
|
|
2,809,760
|
|
|
500,000
|
|
17.8
|
Duane A. Sanders
|
16
|
|
2,809,760
|
|
|
1,000,000
|
|
35.6
|
•
|
Mr. Lacher, with the Board’s direction and advice and the assistance of the new leadership team which he formed, was responsible for continued execution of the turnaround strategy which realized improved financial results and generated significant value for shareholders. In addition, Mr. Lacher drove the leadership of the P&C segment to strengthen its management team and enhance the separation of its non-standard auto and preferred lines units.
Finally, Mr. Lacher with the help of the leadership team, drove the completion of the Infinity acquisition in July and the planning process for its integration into the Company.
|
•
|
Mr. McKinney directed many changes in the Finance organization that led to an increasingly strong capital position, with ample liquidity to support the Company’s strategic initiatives. In addition, his team was able to execute a credit agreement amendment that expanded the Company’s borrowing capacity and added a term loan feature to provide partial funding for the Infinity acquisition.
|
•
|
Mr. Boschelli managed a solid investment group that again produced strong consistent results, leveraged the structure of the Company’s two operating divisions, and achieved industry-leading returns with a diversified and highly-rated investment portfolio that held $1.3 billion more assets than in 2017.
|
•
|
Mr. Green led substantial changes in the Life & Health Division. Investments in the Life business to modernize internal processes and improve technology, underwriting, and collections, and to enhance the distribution system, have resulted in continued modest increases in earned premiums after years of declines; the supplemental Health business, adapting to the changing health insurance market, experienced increased earned premiums.
|
•
|
Mr. Sanders assumed leadership of the Property & Casualty Division in early 2018, directing the team’s successful Infinity integration efforts. Additionally, he oversaw the ongoing rollout of the Kemper Prime home and auto product, expanded releases to the enhanced sales and policy service technology platform introduced in 2017, and is repositioning Kemper Personal Insurance for long-term profitable growth.
|
|
|
Compensation Discussion and Analysis
|
•
|
Mr. Lacher’s 2018 award was determined by the Compensation Committee, with input from the Chairman of the Board, based on, among other factors, his overall performance in 2017, performance on the 2017 objectives, as approved by the Board, total compensation for comparable CEOs, in light of the Company’s philosophy that Mr. Lacher’s total compensation should be heavily weighted towards performance-based compensation.
|
•
|
The equity award agreements approved for the 2018 grants incorporate the following changes from the 2017 grants:
|
◦
|
maximum, target and threshold performance levels were increased from the 2017 awards for the PSUs based on Three-Year Adjusted ROE;
|
◦
|
the vesting schedule for stock option awards was changed to three annual installments beginning on the first anniversary of the grant date, instead of four annual installments beginning six months from the grant date;
|
◦
|
dividend equivalents on PSUs and RSUs accrue until vesting instead of paying out on a quarterly basis and will only be paid on total shares actually earned; and
|
◦
|
new restrictive covenants were added related to confidentiality, nonsolicitation and nondisparagement.
|
|
|
Compensation Discussion and Analysis
|
Kemper’s Relative TSR Percentile Rank
|
Total PSUs to Vest and/or Shares to be Granted on Vesting Date as Percentage of Target Shares (%)
|
|
At least 90
th
|
200
|
|
75
th
|
150
|
|
50
th
|
100
|
|
25
th
|
50
|
|
Below 25
th
|
—
|
|
Three-Year Adjusted ROE (%)
|
Total PSUs to Vest and/or Shares to be Granted on Vesting Date as Percentage of Target Shares (%)
|
|
At least 10.0
|
200
|
|
8.5
|
100
|
|
7.0
|
50
|
|
Below 7.0
|
—
|
|
•
|
adjust the amount of
Actual Catastrophe Losses and LAE
to equal
Expected Catastrophe Losses
(italicized terms defined below);
|
•
|
adjust
Net Realized Gains on Sales of Investments
and
Net Impairment Losses Recognized in Earnings
(italicized terms as reported in the Company’s financial statements) to equal
Expected Net Realized Gains on Sales of Investments
and
Expected Net Impairment Losses Recognized in Earnings
(italicized terms defined below);
|
•
|
significant unusual judgments or settlements in connection with the Company’s legal contingencies or benefit plans; and
|
•
|
additional significant unusual or nonrecurring items as permitted by the Omnibus Plan.
|
|
|
Compensation Discussion and Analysis
|
•
|
Unrealized Gains and Losses on Fixed Maturity Securities
from
Adjusted Shareholders Equity
(italicized terms as reported in the Company’s financial statements as defined above and below);
|
•
|
the modifications made in calculating
Adjusted Net Income
; and
|
•
|
additional significant, unusual or nonrecurring items as permitted by the Omnibus Plan.
|
|
|
Compensation Discussion and Analysis
|
Three-Year Adjusted ROE (%)
|
Total PSUs to Vest and/or Shares to be Granted on Vesting Date as Percentage of Target Shares (%)
|
|
At least 7.8%
|
200
|
|
6.5%
|
100
|
|
5.2%
|
50
|
|
Below 5.2%
|
0
|
|
|
Compensation Discussion and Analysis
|
|
|
Compensation Discussion and Analysis
|
Stock Ownership Policy
|
Changes Made to NEO Compensation for 2019
|
•
|
Salary increases were granted for 2019, effective February 1, 2019, and generally were targeted at or just below the market medians derived from the Company’s new peer group approved in 2018 for 2019 to better reflect the Company’s size following the acquisition of Infinity, and significantly increased management responsibilities.
|
|
2019 Salary
|
|
Change (%)
|
|
Joseph P. Lacher, Jr.
|
1,000,000
|
|
33
|
|
James J. McKinney
|
575,000
|
|
27
|
|
John M. Boschelli
|
450,000
|
|
13
|
|
Mark A. Green
|
470,000
|
|
12
|
|
Duane A. Sanders
|
600,000
|
|
24
|
|
•
|
The Compensation Committee, after consultation with the CEO and the Chairman, approved new target levels for equity awards for the NEOs other than the CEO at 180 percent of their respective base salaries. The new target levels reflect the increased size and complexity of the Company, consistent with the benchmarking data provided by PayGovernance, as well as respective increases in the responsibilities of the individual NEOs.
|
•
|
Mr. Lacher’s 2019 equity award valued at $4.5 million was determined by the Compensation Committee, with input from the Chairman, and was based on, among other factors, his overall performance in 2018 and achievement of the 2018 objectives, as approved by the Board, and the Company’s philosophy that Mr. Lacher’s total compensation should be heavily weighted towards performance-based compensation. Key factors included the successful execution of the Infinity acquisition and total compensation for CEOs at comparable peer companies.
|
|
|
Compensation Discussion and Analysis
|
ALTERNATE SUMMARY COMPENSATION TABLE (1)
|
|||||||||||||||||
Name
|
Year
|
Salary
($)(2) |
|
Bonus
($) |
|
Stock Awards
($)(3) |
|
Option Awards
($)(3) |
|
Non-Equity Incentive
Plan
Compen-
sation
($)(4) |
|
Change in Pension
Value & Nonqual-
ified
Deferred Compen-
sation
Earnings
($)(5) |
|
All Other Compen-sation
($)(6) |
|
Total
|
|
Joseph P. Lacher, Jr.
|
2018
|
750,000
|
|
—
|
|
2,288,136
|
|
2,455,441
|
|
2,500,000
|
|
—
|
|
123,695
|
|
8,117,272
|
|
James J. McKinney
|
2018
|
450,000
|
|
—
|
|
526,272
|
|
564,761
|
|
900,000
|
|
—
|
|
67,137
|
|
2,508,170
|
|
John M. Boschelli
|
2018
|
400,000
|
|
—
|
|
411,892
|
|
441,981
|
|
600,000
|
|
—
|
|
72,450
|
|
1,926,323
|
|
Mark A. Green
|
2018
|
420,000
|
|
—
|
|
430,192
|
|
461,639
|
|
500,000
|
|
—
|
|
52,833
|
|
1,864,664
|
|
Duane A. Sanders
|
2018
|
485,000
|
|
1,350,000
|
|
549,138
|
|
589,308
|
|
1,000,000
|
|
—
|
|
217,847
|
|
4,191,293
|
|
Perquisites
|
Employee Welfare Benefit and Retirement Plans
|
•
|
Employee welfare benefits
under plans generally available to all full-time salaried employees and which do not discriminate in scope, terms or operation in favor of executive officers;
|
•
|
Deferred Compensation Plan
, which allows the NEOs to elect to defer a portion of their salaries and cash incentives. Information about the Deferred Compensation Plan in general, and more specific information about participation therein by the NEOs, is provided in the section entitled
Executive Officer Compensation & Benefits
below beginning on page 48 under the heading
Deferred Compensation Plan;
|
|
|
Compensation Discussion and Analysis
|
•
|
Tax-qualified defined contribution retirement plan
applicable to all full-time salaried employees, including executive officers, meeting age and service-based eligibility requirements (“
401(k) and Retirement Plan
”).
Due to his hire date prior to 2006, Mr. Boschelli had been eligible for benefit accruals under the Company’s defined benefit pension plan (“
Pension Plan
”) in lieu of the retirement contribution under the 401(k) and Retirement Plan until June 30, 2016 when Pension Plan benefit accruals were frozen for all participants.
|
•
|
Nonqualified supplemental defined contribution retirement plan
(“
Retirement SERP
”), available to key employees designated annually by the Board of Directors to provide benefits using the same formulas used for the tax-qualified retirement plan but without regard to the limits imposed under the Internal Revenue Code. Mr. Boschelli had been eligible for a benefit accrual under the Company’s nonqualified supplemental defined benefit pension plan (“
Pension SERP
”) in lieu of the Retirement SERP until June 30, 2016 when Pension SERP benefit accruals ceased as a result of the freezing of the Pension Plan accruals; and
|
•
|
Voluntary participation in the 401(k) portion of the Company’s 401(k) and Retirement Plan
includes a Company matching contribution feature offered to all full-time salaried employees, including executive officers, meeting age and service-based eligibility requirements.
|
Other Post-Employment Compensation
|
Tax Implications
|
|
|
Compensation Discussion and Analysis
|
Compensation Committee Report
|
|
|
Executive Officer Compensation & Benefits
|
Summary Compensation Table
|
SUMMARY COMPENSATION TABLE
|
|||||||||||||||||
Name and Principal Position (1) |
Year
|
Salary
($)(2)
|
|
Bonus
($)(3)
|
|
Stock Awards
($)(4)
|
|
Option Awards
($)(4)
|
|
Non-Equity Incentive Plan Compen-sation
($)(5)
|
|
Change in Pension Value and Nonquali-fied Deferred Compen-sation Earnings
($)(6)
|
|
All Other Compen-sation
($)(7)
|
|
Total
($)
|
|
Joseph P. Lacher, Jr.,
President and Chief Executive Officer
|
2018
|
750,000
|
|
—
|
|
1,776,855
|
|
1,755,329
|
|
2,500,000
|
|
—
|
|
123,695
|
|
6,905,879
|
|
2017
|
750,000
|
|
—
|
|
617,748
|
|
1,484,099
|
|
2,000,000
|
|
—
|
|
88,298
|
|
4,940,145
|
|
|
2016
|
750,000
|
|
—
|
|
1,284,269
|
|
416,821
|
|
1,000,000
|
|
—
|
|
25,272
|
|
3,476,362
|
|
|
James J. McKinney,
Senior Vice President and Chief Financial Officer |
2018
|
450,000
|
|
—
|
|
411,210
|
|
406,232
|
|
900,000
|
|
—
|
|
67,137
|
|
2,234,579
|
|
2017
|
450,000
|
|
—
|
|
266,870
|
|
213,716
|
|
750,000
|
|
—
|
|
64,409
|
|
1,744,995
|
|
|
2016
|
51,923
|
|
1,050,000
|
|
813,635
|
|
154,632
|
|
—
|
|
—
|
|
15,955
|
|
2,086,145
|
|
|
John M. Boschelli,
Senior Vice President and Chief Investment Officer |
2018
|
400,000
|
|
—
|
|
365,520
|
|
361,095
|
|
600,000
|
|
—
|
|
72,450
|
|
1,799,065
|
|
2017
|
400,000
|
|
—
|
|
237,215
|
|
189,965
|
|
754,240
|
|
46,111
|
|
67,640
|
|
1,695,171
|
|
|
2016
|
400,000
|
|
—
|
|
125,229
|
|
142,574
|
|
512,220
|
|
213,758
|
|
19,401
|
|
1,413,182
|
|
|
Mark A. Green,
Senior Vice President and President, Life and Health Division |
2018
|
420,000
|
|
—
|
|
383,796
|
|
379,150
|
|
500,000
|
|
—
|
|
52,833
|
|
1,735,779
|
|
2017
|
420,000
|
|
—
|
|
249,067
|
|
199,467
|
|
700,000
|
|
—
|
|
44,495
|
|
1,613,029
|
|
|
2016
|
240,692
|
|
550,000
|
|
191,946
|
|
206,730
|
|
260,000
|
|
—
|
|
5,047
|
|
1,454,415
|
|
|
Duane A. Sanders,
Senior Vice President and President, Property and Casualty Division |
2018
|
485,000
|
|
1,350,000
|
|
777,950
|
|
688,595
|
|
1,000,000
|
|
—
|
|
217,847
|
|
4,519,392
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(2)
|
These amounts represent salary earned for each of the years an individual was an NEO. Pursuant to the Company’s regular compensation cycle, salary adjustments for the years shown in the table have taken effect in April of such year. As a result, for any year in which an individual officer’s salary was increased or decreased, a portion of the amount of salary shown for such year was earned at the rate in effect prior to the adjustment.
|
(4)
|
These amounts represent the aggregate grant date fair values of the equity awards (stock options, PSUs and RSUs) to the designated NEOs pursuant to the Omnibus Plan. The Black-Scholes option pricing model was used to estimate the fair value of each option (including its tandem SAR) on the grant date. A Monte Carlo simulation method was used to estimate the fair values on the grant date of the awards of the PSUs based on Relative TSR. PSUs based on ROE and RSUs were valued using the closing price of a share of Common Stock on the grant date. For a discussion of valuation assumptions, see Note 10, “Long-term Equity-based Compensation,” to the consolidated financial statements included in the Company’s
2018
Annual Report. These equity awards are subject to forfeiture and transfer restrictions until they vest in accordance with their respective grant agreements.
|
|
|
Executive Officer Compensation & Benefits
|
Name
|
Number
of Shares at
Target Level
(# of Shares)
|
|
Estimated Payout in Shares if Maximum Performance Level Achieved
(# of Shares)
|
|
Estimated Value of Payout if Maximum Performance Level Achieved ($)
|
|
Joseph P. Lacher, Jr.
|
29,167
|
|
58,334
|
|
3,553,710
|
|
James J. McKinney
|
6,750
|
|
13,500
|
|
822,420
|
|
John M. Boschelli
|
6,000
|
|
12,000
|
|
731,040
|
|
Mark A. Green
|
6,300
|
|
12,600
|
|
767,592
|
|
Duane A. Sanders
|
12,770
|
|
25,540
|
|
1,555,900
|
|
(5)
|
These amounts were earned under the Company’s annual cash incentive programs. With regard to the payments shown for Mr. Boschelli, for 2017, they were made under the Annual Incentive Program and his 2015 multi-year award under the Company’s 2009 Performance Incentive Plan (“
Multi-Year PIP Award
”) (and paid in 2018), and for 2016, they were made under the Annual Incentive Program and his 2014 Multi-Year PIP Award (and paid in 2017). The amounts shown for the other NEOs other than Mr. McKinney were made for 2018, 2017 and 2016 (and paid in 2019, 2018 and 2017, respectively), under the Annual Incentive Program and the EPP. The amounts shown for Mr. McKinney were made for 2018 and 2017 (and paid in 2019 and 2018, respectively) under the Annual Incentive Program.
|
(6)
|
These amounts represent the change in actuarial present value for Mr. Boschelli under the Company’s Pension Plan and Pension SERP as of December 31 of
2018
,
2017
and
2016
from the end of the prior calendar year. However, for 2018, no amount is shown for Mr. Boschelli because the change in actuarial present value was negative; the actual amount was ($125,957). No amounts are shown for the other NEOs because they were not eligible to participate in these plans due to their hire dates with the Company; they instead became participants in the retirement portion of the Company’s 401(k) and Retirement Plan and Retirement SERP after meeting initial eligibility requirements. Mr. Boschelli became eligible to participate in the retirement portion of the Company’s 401(k) and Retirement Plan and Retirement SERP after the Pension Plan and Pension SERP were frozen as of June 30, 2016. For more information on these plans, see the narrative captioned
Retirement Plans
on page 49. The year-to-year changes in pension values is generally attributable to a decrease in the present value of future payments due to an increase in the applicable discount rate in 2018.
|
(7)
|
The amounts shown for
2018
for each NEO include perquisites and additional compensation of the types indicated in the following table, plus employer-paid health and life benefit costs:
|
Name
|
Perquisites and Other Personal Benefits (1)
|
|
Relocation Tax Reimbursement
|
|
Company Contributions to Defined Contribution Plans
|
|
Dividend Equivalents Paid on RSUs and Certain PSUs (2)
|
|
Joseph P. Lacher, Jr.
|
45,360
|
|
—
|
|
35,750
|
|
30,025
|
|
James J. McKinney
|
19,107
|
|
—
|
|
20,250
|
|
15,652
|
|
John M. Boschelli
|
19,482
|
|
—
|
|
36,000
|
|
4,912
|
|
Mark A. Green
|
19,400
|
|
—
|
|
19,450
|
|
5,644
|
|
Duane A. Sanders
|
129,614
|
|
67,361
|
|
8,250
|
|
2,637
|
|
(1)
|
The amounts in this column include the costs of financial planning services for each NEO and, for each NEO other than Mr. Sanders, also an executive physical. For Mr. Lacher, the value also includes the incremental costs for his use of the Company aircraft and reimbursement of his travel expenses to attend board meetings of an outside non-profit organization for which he serves as a director. For Mr. Sanders, the value also includes reimbursement of relocation expenses in the amount of $112,908 and the cost for his spouse’s required attendance at a Company event.
|
|
|
Executive Officer Compensation & Benefits
|
Grants of Plan-Based Awards
|
|
|
Executive Officer Compensation & Benefits
|
GRANTS OF PLAN-BASED AWARDS IN 2018
|
|||||||||||||||||
|
|
|
Estimated Future Payouts Under Non-Equity Incentive
Plan Awards (2) |
|
Estimated Future Payouts Under Equity Incentive
Plan Awards (3) |
|
|
|
|||||||||
Name
|
Grant Date (1)
|
Award Type |
Maximum ($) |
|
|
Threshold (#) |
|
Target (#) |
|
Maximum (#) |
|
All Other Option Awards: Number of Securities Underlying Options
(#)(4) |
|
Exercise or
Base Price of Option Awards ($/Sh) (5) |
|
Grant
Date Fair Value of Stock and Option Awards ($)(6) |
|
Joseph P. Lacher, Jr.
|
2/6/2018
|
Stock Options
|
—
|
|
|
—
|
|
—
|
|
—
|
|
116,667
|
|
60.00
|
|
1,755,329
|
|
|
2/6/2018
|
PSU
|
—
|
|
|
7,292
|
|
14,584
|
|
29,168
|
|
—
|
|
—
|
|
901,875
|
|
|
2/6/2018
|
PSU
|
—
|
|
|
7,292
|
|
14,583
|
|
29,166
|
|
—
|
|
—
|
|
874,980
|
|
|
|
Annual Incentive
|
6,000,000
|
|
|
—
|
|
—
|
|
—
|
|
—
|
|
—
|
|
—
|
|
James J. McKinney
|
2/6/2018
|
Stock Options
|
—
|
|
|
—
|
|
—
|
|
—
|
|
27,000
|
|
60.00
|
|
406,232
|
|
|
2/6/2018
|
PSU
|
—
|
|
|
1,688
|
|
3,375
|
|
6,750
|
|
—
|
|
—
|
|
208,710
|
|
|
2/6/2018
|
PSU
|
—
|
|
|
1,688
|
|
3,375
|
|
6,750
|
|
—
|
|
—
|
|
202,500
|
|
|
|
Annual Incentive
|
6,000,000
|
|
|
—
|
|
—
|
|
—
|
|
—
|
|
—
|
|
—
|
|
John M. Boschelli
|
2/6/2018
|
Stock Options
|
—
|
|
|
—
|
|
—
|
|
—
|
|
24,000
|
|
60.00
|
|
361,095
|
|
|
2/6/2018
|
PSU
|
—
|
|
|
1,500
|
|
3,000
|
|
6,000
|
|
—
|
|
—
|
|
185,520
|
|
|
2/6/2018
|
PSU
|
—
|
|
|
1,500
|
|
3,000
|
|
6,000
|
|
—
|
|
—
|
|
180,000
|
|
|
|
Annual Incentive
|
6,000,000
|
|
|
—
|
|
—
|
|
—
|
|
—
|
|
—
|
|
—
|
|
Mark A. Green
|
2/6/2018
|
Stock Options
|
—
|
|
|
—
|
|
—
|
|
—
|
|
25,200
|
|
60.00
|
|
379,150
|
|
|
2/6/2018
|
PSU
|
—
|
|
|
1,575
|
|
3,150
|
|
6,300
|
|
—
|
|
—
|
|
194,796
|
|
|
2/6/2018
|
PSU
|
—
|
|
|
1,575
|
|
3,150
|
|
6,300
|
|
—
|
|
—
|
|
189,000
|
|
|
|
Annual Incentive
|
6,000,000
|
|
|
—
|
|
—
|
|
—
|
|
—
|
|
—
|
|
—
|
|
Duane A. Sanders
|
2/1/2018
|
Stock Options
|
—
|
|
|
—
|
|
—
|
|
—
|
|
15,699
|
|
63.70
|
|
250,767
|
|
|
2/1/2018
|
PSU
|
—
|
|
|
1,374
|
|
2,748
|
|
5,496
|
|
—
|
|
—
|
|
169,936
|
|
|
2/1/2018
|
PSU
|
—
|
|
|
1,374
|
|
2,747
|
|
5,494
|
|
—
|
|
—
|
|
174,984
|
|
|
2/6/2018
|
Stock Options
|
—
|
|
|
—
|
|
—
|
|
—
|
|
29,100
|
|
60.00
|
|
437,828
|
|
|
2/6/2018
|
PSU
|
—
|
|
|
1,819
|
|
3,638
|
|
7,276
|
|
—
|
|
—
|
|
224,974
|
|
|
2/6/2018
|
PSU
|
—
|
|
|
1,819
|
|
3,637
|
|
7,274
|
|
—
|
|
—
|
|
218,220
|
|
|
2/5/2019
|
Annual Incentive
|
6,000,000
|
|
|
—
|
|
—
|
|
—
|
|
—
|
|
—
|
|
—
|
|
(2)
|
No threshold or target amounts are provided under the EPP or the Annual Incentive Program. The amounts shown represent the annual maximum incentive to any participant under the terms of the EPP because the amounts determined by the Compensation Committee at its meeting on February 5, 2019 based on the previously-approved formula and allocation percentages exceeded the maximum. The maximum amounts payable to each participant could not have been determined at the beginning of the performance period. The process for determining the awards for the NEOs and the amounts of the awards that were approved by the Compensation Committee for
2018
are detailed in the narrative descriptions about the EPP and the Annual Incentive Program in the
Compensation Discussion and Analysis
section on pages 26-30 and the table captioned
Annual Incentive Payouts -
2018
Annual EPP Awards
on page 30.
|
|
|
Executive Officer Compensation & Benefits
|
(3)
|
These columns show a range of payouts possible under the PSU awards granted in
2018
under the Omnibus Plan. The amount shown in the “Target” column for each award represents 100 percent of the PSUs granted, which equals the number of units that would vest if the “Target” performance level is achieved. The “Threshold” level is the minimum level of performance that must be met before any payout may occur, and the amount shown in the “Threshold” column is 50 percent of the “Target” payout amount. The amount shown in the “Maximum” column is 200 percent of the “Target” payout amount. Further information about these awards is provided in the
Compensation Discussion and Analysis
section under the heading
PSU Awards Granted in
2018
on page 31.
|
(4)
|
These are non-qualified stock options granted under the Omnibus Plan.
|
(5)
|
The exercise price of the stock option awards is equal to the closing price of a share of Common Stock on the grant date.
|
(6)
|
The amounts shown represent the aggregate grant date fair values of the
2018
stock option and PSU awards. For stock options, the grant date fair values were estimated based on the Black-Scholes option pricing model. For PSUs based on Relative TSR, the grant date fair values were estimated using the Monte Carlo simulation method. For PSUs based on ROE, the grant date fair values were based on the closing price of a share of Common Stock on the grant date. For a discussion of valuation assumptions, see Note 10, “Long-term Equity-based Compensation,” to the consolidated financial statements included in the Company’s
2018
Annual Report.
|
Outstanding Equity Awards at 2018 Fiscal Year-End
|
OUTSTANDING EQUITY AWARDS AT 2018 FISCAL YEAR-END
|
||||||||||||||||||||
|
Option Awards
|
|
Stock Awards
|
|||||||||||||||||
Name
|
Number of
Securities Underlying Unexercised Options Exercisable (#) |
|
Number of
Securities Underlying Unexercised Options Unexercisable (#) |
|
|
Option
Exercise Price ($) |
|
Option
Expiration Date |
|
|
Number
of Shares or Units of Stock That Have Not Vested (#) |
|
|
Market
Value of Shares or Units of Stock that Have Not Vested ($) |
|
Equity Incentive
Plan Awards: Number of Unearned Shares, Units or Other Rights That Have Not Vested(#) |
|
|
Equity Incentive
Plan Awards: Market or Payout Value of Unearned Shares, Units of Other Rights That Have Not Vested($) |
|
Joseph P. Lacher, Jr.
|
73,710
|
|
24,570
|
|
(1)
|
40.70
|
|
11/19/2025
|
|
|
—
|
|
|
—
|
|
—
|
|
|
—
|
|
|
72,176
|
|
24,059
|
|
(2)
|
27.71
|
|
3/1/2026
|
|
|
—
|
|
|
—
|
|
—
|
|
|
—
|
|
|
86,605
|
|
86,606
|
|
(3)
|
43.30
|
|
2/7/2027
|
|
|
—
|
|
|
—
|
|
—
|
|
|
—
|
|
|
—
|
|
116,667
|
|
(4)
|
60.00
|
|
2/6/2028
|
|
|
—
|
|
|
—
|
|
—
|
|
|
—
|
|
|
—
|
|
—
|
|
|
—
|
|
—
|
|
|
—
|
|
|
—
|
|
48,118
|
|
(5)
|
3,194,073
|
|
|
—
|
|
—
|
|
|
—
|
|
—
|
|
|
—
|
|
|
—
|
|
48,118
|
|
(6)
|
3,194,073
|
|
|
—
|
|
—
|
|
|
—
|
|
—
|
|
|
—
|
|
|
—
|
|
14,436
|
|
(7)
|
958,262
|
|
|
—
|
|
—
|
|
|
—
|
|
—
|
|
|
—
|
|
|
—
|
|
14,434
|
|
(8)
|
958,129
|
|
|
—
|
|
—
|
|
|
—
|
|
—
|
|
|
—
|
|
|
—
|
|
29,168
|
|
(9)
|
1,936,172
|
|
|
—
|
|
—
|
|
|
—
|
|
—
|
|
|
—
|
|
|
—
|
|
29,166
|
|
(10)
|
1,936,039
|
|
James J. McKinney
|
5,038
|
|
10,075
|
|
(11)
|
40.20
|
|
11/17/2026
|
|
|
—
|
|
|
—
|
|
—
|
|
|
—
|
|
|
6,236
|
|
12,472
|
|
(3)
|
43.30
|
|
2/7/2027
|
|
|
—
|
|
|
—
|
|
—
|
|
|
—
|
|
|
—
|
|
27,000
|
|
(4)
|
60.00
|
|
2/6/2028
|
|
|
—
|
|
|
—
|
|
—
|
|
|
—
|
|
|
—
|
|
—
|
|
|
—
|
|
—
|
|
|
10,667
|
|
(12)
|
708,075
|
|
—
|
|
|
—
|
|
|
—
|
|
—
|
|
|
—
|
|
—
|
|
|
—
|
|
|
—
|
|
5,038
|
|
(5)
|
334,422
|
|
|
—
|
|
—
|
|
|
—
|
|
—
|
|
|
—
|
|
|
—
|
|
5,038
|
|
(6)
|
334,422
|
|
|
—
|
|
—
|
|
|
—
|
|
—
|
|
|
—
|
|
|
—
|
|
6,236
|
|
(7)
|
413,946
|
|
|
—
|
|
—
|
|
|
—
|
|
—
|
|
|
—
|
|
|
—
|
|
6,236
|
|
(8)
|
413,946
|
|
|
—
|
|
—
|
|
|
—
|
|
—
|
|
|
—
|
|
|
—
|
|
6,750
|
|
(9)
|
448,065
|
|
|
—
|
|
—
|
|
|
—
|
|
—
|
|
|
—
|
|
|
—
|
|
6,750
|
|
(10)
|
448,065
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Executive Officer Compensation & Benefits
|
OUTSTANDING EQUITY AWARDS AT 2018 FISCAL YEAR-END (continued)
|
||||||||||||||||||||
|
Option Awards
|
|
Stock Awards
|
|||||||||||||||||
Name
|
Number of
Securities Underlying Unexercised Options Exercisable (#) |
|
Number of
Securities Underlying Unexercised Options Unexercisable (#) |
|
|
Option
Exercise Price ($) |
|
Option
Expiration Date |
|
|
Number
of Shares or Units of Stock That Have Not Vested (#) |
|
|
Market
Value of Shares or Units of Stock that Have Not Vested ($) |
|
Equity Incentive
Plan Awards: Number of Unearned Shares, Units or Other Rights That Have Not Vested(#) |
|
|
Equity Incentive
Plan Awards: Market or Payout Value of Unearned Shares, Units of Other Rights That Have Not Vested($) |
|
John M. Boschelli
|
4,691
|
|
4,692
|
|
(2)
|
27.71
|
|
3/1/2020
|
|
|
—
|
|
|
—
|
|
—
|
|
|
—
|
|
|
11,085
|
|
11,086
|
|
(3)
|
43.30
|
|
2/7/2027
|
|
|
—
|
|
|
—
|
|
—
|
|
|
—
|
|
|
—
|
|
24,000
|
|
(4)
|
60.00
|
|
2/6/2028
|
|
|
—
|
|
|
—
|
|
—
|
|
|
—
|
|
|
—
|
|
—
|
|
|
—
|
|
—
|
|
|
—
|
|
|
—
|
|
4,692
|
|
(5)
|
311,455
|
|
|
—
|
|
—
|
|
|
—
|
|
—
|
|
|
—
|
|
|
—
|
|
4,692
|
|
(6)
|
311,455
|
|
|
—
|
|
—
|
|
|
—
|
|
—
|
|
|
—
|
|
|
—
|
|
5,544
|
|
(7)
|
368,011
|
|
|
—
|
|
—
|
|
|
—
|
|
—
|
|
|
—
|
|
|
—
|
|
5,542
|
|
(8)
|
367,878
|
|
|
—
|
|
—
|
|
|
—
|
|
—
|
|
|
—
|
|
|
—
|
|
6,000
|
|
(9)
|
398,280
|
|
|
—
|
|
—
|
|
|
—
|
|
—
|
|
|
—
|
|
|
—
|
|
6,000
|
|
(10)
|
398,280
|
|
Mark A. Green
|
17,814
|
|
5,938
|
|
(13)
|
31.83
|
|
6/3/2026
|
|
|
—
|
|
|
—
|
|
—
|
|
|
—
|
|
|
11,250
|
|
3,750
|
|
(14)
|
32.20
|
|
6/15/2026
|
|
|
—
|
|
|
—
|
|
—
|
|
|
—
|
|
|
11,640
|
|
11,640
|
|
(3)
|
43.30
|
|
2/7/2027
|
|
|
—
|
|
|
—
|
|
—
|
|
|
—
|
|
|
—
|
|
25,200
|
|
(4)
|
60.00
|
|
2/6/2028
|
|
|
—
|
|
|
—
|
|
—
|
|
|
—
|
|
|
—
|
|
—
|
|
|
—
|
|
—
|
|
|
—
|
|
|
—
|
|
5,938
|
|
(5)
|
394,164
|
|
|
—
|
|
—
|
|
|
—
|
|
—
|
|
|
—
|
|
|
—
|
|
5,938
|
|
(6)
|
394,164
|
|
|
—
|
|
—
|
|
|
—
|
|
—
|
|
|
—
|
|
|
—
|
|
5,820
|
|
(7)
|
386,332
|
|
|
—
|
|
—
|
|
|
—
|
|
—
|
|
|
—
|
|
|
—
|
|
5,820
|
|
(8)
|
386,332
|
|
|
—
|
|
—
|
|
|
—
|
|
—
|
|
|
—
|
|
|
—
|
|
6,300
|
|
(9)
|
418,194
|
|
|
—
|
|
—
|
|
|
—
|
|
—
|
|
|
—
|
|
|
—
|
|
6,300
|
|
(10)
|
418,194
|
|
Duane A. Sanders
|
—
|
|
15,699
|
|
(15)
|
63.70
|
|
2/1/2028
|
|
|
—
|
|
|
—
|
|
—
|
|
|
—
|
|
|
—
|
|
29,100
|
|
(4)
|
60.00
|
|
2/6/2028
|
|
|
—
|
|
|
—
|
|
—
|
|
|
—
|
|
|
—
|
|
—
|
|
|
—
|
|
—
|
|
|
—
|
|
|
—
|
|
5,496
|
|
(7)
|
364,824
|
|
|
—
|
|
—
|
|
|
—
|
|
—
|
|
|
—
|
|
|
—
|
|
5,494
|
|
(8)
|
364,692
|
|
|
—
|
|
—
|
|
|
—
|
|
—
|
|
|
—
|
|
|
—
|
|
7,276
|
|
(9)
|
482,981
|
|
|
—
|
|
—
|
|
|
—
|
|
—
|
|
|
—
|
|
|
—
|
|
7,274
|
|
(10)
|
482,848
|
|
(1)
|
These options are scheduled to vest on 5/19/2019.
|
(2)
|
These options are scheduled to vest on 9/1/2019.
|
(3)
|
These options are scheduled to vest ratably in equal increments on 8/7/2019 and 8/7/2020.
|
(4)
|
These options are scheduled to vest ratably in equal increments on 2/6/2019, 2/6/2020 and 2/6/2021.
|
(5)
|
These PSUs vested on March 6, 2019, the date performance results were certified following completion of the three-year performance period for the 2016 PSU Awards based on Relative TSR that ended on February 28, 2019. The number shown represents the maximum number of PSUs that could be earned (because the performance results for the performance period through fiscal year 2018 were above the target level). Market value was determined using the closing price of $66.38 per share of Common Stock on December 31, 2018, the last trading day of 2018.
|
(6)
|
These PSUs vested on March 6, 2019, the date performance results were certified following completion of the three-year performance period for the 2016 PSU Awards based on Three-Year Adjusted ROE that ended on December 31, 2018. The number shown represents the maximum number of PSUs that could be earned (because the performance results for the performance period through fiscal year 2018 were above the target level). Market value was determined using the closing price of $66.38 per share of Common Stock on December 31, 2018.
|
(7)
|
These PSUs are scheduled to vest on the date performance results are certified following completion of the three-year performance period for the 2017 PSU Awards based based on Relative TSR that ends on January 31, 2020. The number
|
|
|
Executive Officer Compensation & Benefits
|
(8)
|
These PSUs are scheduled to vest on the date performance results are certified for the three-year performance period for the 2017 PSU Awards based on Three-Year Adjusted ROE that ends on December 31, 2019. The number shown represents the maximum number of PSUs that could be earned (because the performance results for the performance period through fiscal year 2018 were above the target level). Market value was determined using the closing price of $66.38 per share of Common Stock on December 31, 2018.
|
(9)
|
These PSUs are scheduled to vest on the date performance results are certified following completion of the three-year performance period for the 2018 PSU Awards based on Relative TSR that ends on January 31, 2021 based on Relative TSR. The number shown represents the maximum number of PSUs that could be earned (because the performance results for the performance period through fiscal year 2018 were above the target level). Market value was determined using the closing price of $66.38 per share of Common Stock on December 31, 2018.
|
(10)
|
These PSUs are scheduled to vest on the date performance results are certified following completion of the three-year performance period for the 2018 PSU Awards based on Three-Year Adjusted ROE that ends on December 31, 2020. The number shown represents the maximum number of PSUs that could be earned (because the performance results for the performance period through fiscal year 2018 were above the target level). Market value was determined using the closing price of $66.38 per share of Common Stock on December 31, 2018.
|
(12)
|
These RSUs are scheduled to vest in equal increments on 4/1/2019 and 4/1/2020. Market value was determined using the closing price of $66.38 per share of Common Stock on December 31, 2018.
|
(13)
|
These options are scheduled to vest on 12/3/2019.
|
(14)
|
These options are scheduled to vest on 12/15/2019.
|
(15)
|
These options are scheduled to vest ratably in equal increments on 2/1/2019, 2/1/2020 and 2/1/2021.
|
|
Option Awards
|
|
Stock Awards
|
||||||
Name
|
Number of
Shares
Acquired on
Exercise (#)(1)
|
Value
Realized on
Exercise ($)(2)
|
|
Number of
Shares
Acquired on
Vesting (#)(3)
|
Value Realized on
Vesting ($)(4)
|
||||
Joseph P. Lacher, Jr.
|
—
|
|
—
|
|
|
—
|
|
—
|
|
James J. McKinney
|
11,272
|
|
365,610
|
|
|
5,333
|
|
303,981
|
|
John M. Boschelli
|
15,942
|
|
567,906
|
|
|
6,000
|
|
375,900
|
|
Mark A. Green
|
—
|
|
—
|
|
|
—
|
|
—
|
|
Duane A. Sanders
|
—
|
|
—
|
|
|
—
|
|
—
|
|
(1)
|
This is the total number of shares subject to the exercise transactions without deduction of any shares surrendered or withheld to satisfy the exercise price and/or tax withholding obligations related thereto.
|
(2)
|
This is the difference between the exercise price of the shares acquired and the market price of such shares on the date of exercise, without regard to any related tax obligations.
|
(3)
|
This is the gross number of shares that vested without deduction for any shares withheld to satisfy tax withholding obligations.
|
(4)
|
This is the market value on the vesting date of the shares that vested, without regard to any related tax obligations. Market value was determined using the closing price per share of Common Stock on the vesting date.
|
|
|
Executive Officer Compensation & Benefits
|
Retirement Plans
|
|
|
Executive Officer Compensation & Benefits
|
PENSION BENEFITS
|
|||||||
Name
|
Plan Name
|
Number of Years Credited Service (#)(1)
|
|
Present Value of Accumulated Benefit ($)(2)
|
|
Payments During Last Fiscal Year ($)
|
|
Joseph P. Lacher, Jr.
|
Pension Plan
|
—
|
|
—
|
|
—
|
|
|
Pension SERP
|
—
|
|
—
|
|
—
|
|
James J. McKinney
|
Pension Plan
|
—
|
|
—
|
|
—
|
|
|
Pension SERP
|
—
|
|
—
|
|
—
|
|
John M. Boschelli
|
Pension Plan
|
18.5
|
|
449,562
|
|
—
|
|
|
Pension SERP
|
18.5
|
|
498,349
|
|
—
|
|
Mark A. Green
|
Pension Plan
|
—
|
|
—
|
|
—
|
|
|
Pension SERP
|
—
|
|
—
|
|
—
|
|
Duane A. Sanders
|
Pension Plan
|
—
|
|
—
|
|
—
|
|
|
Pension SERP
|
—
|
|
—
|
|
—
|
|
(1)
|
A participant’s initial year of service as an employee is not used to determine credited service under the Pension Plan and Pension SERP. In addition, benefits for all participants under the Pension Plan were frozen as of June 30, 2016. The number of years of credited service shown for Mr. Boschelli are less than his actual years of service by nine years and six months due to the Pension Plan freeze date and a lump-sum payout of six-years of accrued benefits he received because of a break in his service with the Company in 1997.
|
(2)
|
These accumulated benefit values are based on the years of credited service shown and the Average Monthly Compensation (as defined in the Pension Plan) as of June 30, 2016, as described above in the narrative preceding this table. These present value amounts were determined on the assumption that distribution of benefits under the plans will not begin until age 65, the age at which retirement may occur under the Pension Plan and Pension SERP without any reduction in benefits, using the same measurement date, discount rate and actuarial assumptions described in Note 16, “Pension Benefits,” to the consolidated financial statements included in the Company’s
2018
Annual Report. The discount rate assumption was derived from the Aon Hewitt AA Bond Universe Curve as of December 31, 2018 with a single equivalent rate of 4.21 percent and the mortality assumptions were based on the RP-2006 Table for Employees and Healthy Annuitants, Projected Generationally with Scale MP-2018.
|
Nonqualified Deferred Compensation
|
|
|
Executive Officer Compensation & Benefits
|
NONQUALIFIED DEFERRED COMPENSATION
|
|||||||
Name
|
Plan Name
|
Registrant Contributions in Last Fiscal Year ($)
|
|
Aggregate Earnings in Last Fiscal Year ($)
|
|
Aggregate Balance at Last Fiscal Year End ($)
|
|
Joseph P. Lacher, Jr.
|
Deferred Compensation Plan
|
—
|
|
—
|
|
—
|
|
|
Retirement SERP
|
24,750
|
|
(916
|
)
|
38,634
|
|
James J. McKinney
|
Deferred Compensation Plan
|
—
|
|
—
|
|
—
|
|
|
Retirement SERP
|
9,250
|
|
—
|
|
9,250
|
|
John M. Boschelli
|
Deferred Compensation Plan
|
—
|
|
—
|
|
—
|
|
|
Retirement SERP
|
19,500
|
|
(1,254
|
)
|
40,111
|
|
Mark A. Green
|
Deferred Compensation Plan
|
—
|
|
—
|
|
—
|
|
|
Retirement SERP
|
8,450
|
|
(127
|
)
|
10,373
|
|
Duane A. Sanders
|
Deferred Compensation Plan
|
—
|
|
—
|
|
—
|
|
|
Retirement SERP
|
—
|
|
—
|
|
—
|
|
Potential Payments Upon Termination or Change in Control
|
|
|
Executive Officer Compensation & Benefits
|
•
|
a lump-sum severance payment based on a multiple of three (for Mr. Lacher) or two (for the other NEOs) of such officer’s annualized salary and annual incentive, determined as of the higher of such officer’s prior-year annual incentive or a percentage of such officer’s salary (150 percent for Mr. Lacher or 110 percent for the other NEOs) (“
Annual Incentive
”) plus a pro-rata portion of the Annual Incentive based on the number of months such officer was employed during the year in which the change in control occurred;
|
•
|
continuation for three years (for Mr. Lacher) or two years (for the other NEOs) of the life insurance benefits being provided by the Company to such NEO and his dependents immediately prior to termination;
|
•
|
a lump-sum payment equal to the excess of cost for COBRA coverage over the employee-cost for health insurance benefits for 36 months (for Mr. Lacher) or 24 months (for the other NEOs) being provided by the Company to such NEO and his family immediately prior to termination, regardless of whether COBRA coverage is elected by the NEO; and
|
•
|
outplacement services at the Company’s expense for up to 52 weeks.
|
|
|
Executive Officer Compensation & Benefits
|
Name
|
Lump-Sum Severance Payments (1)
|
|
Accelerated Stock Options
(2) |
|
Accelerated RSUs
(2)(3) |
|
Accelerated PSUs
(2)(4)(5) |
|
Services and Payments related to Welfare Benefits and Out-placement (6)
|
|
Total
|
|
Joseph P. Lacher, Jr.
|
|
|
|
|
|
|
||||||
Termination due to Change in Control
|
12,250,000
|
|
4,304,521
|
|
—
|
|
11,305,470
|
|
112,284
|
|
27,972,275
|
|
Death or Disability
|
—
|
|
4,304,521
|
|
—
|
|
6,088,374
|
|
—
|
|
10,392,895
|
|
Other Termination
|
—
|
|
—
|
|
—
|
|
—
|
|
—
|
|
—
|
|
James J. McKinney
|
|
|
|
|
|
|
||||||
Termination due to Change in Control
|
3,600,000
|
|
723,877
|
|
708,076
|
|
2,191,237
|
|
56,707
|
|
7,279,897
|
|
Death or Disability
|
—
|
|
723,877
|
|
708,076
|
|
1,196,433
|
|
—
|
|
2,628,386
|
|
Other Termination
|
—
|
|
—
|
|
—
|
|
—
|
|
—
|
|
—
|
|
|
|
Executive Officer Compensation & Benefits
|
POTENTIAL PAYMENTS UPON TERMINATION FROM A CHANGE IN CONTROL (“CIC”)
OR DEATH/DISABILITY AT DECEMBER 31, 2018 (continued)
|
||||||||||||
Name
|
Lump-Sum Severance Payments (1)
|
|
Accelerated Stock Options
(2)
|
|
Accelerated RSUs
(2)(3)
|
|
Accelerated PSUs
(2)(4)(5)
|
|
Services and Payments related to Welfare Benefits and Out-placement (6)
|
|
Total
|
|
John M. Boschelli
|
|
|
|
|
|
|
||||||
Termination due to Change in Control
|
2,600,000
|
|
590,386
|
|
—
|
|
1,976,133
|
|
62,802
|
|
5,229,321
|
|
Death or Disability
|
—
|
|
590,386
|
|
—
|
|
1,077,679
|
|
—
|
|
1,668,065
|
|
Other Termination
|
—
|
|
—
|
|
—
|
|
—
|
|
—
|
|
—
|
|
Mark A. Green
|
|
|
|
|
|
|
||||||
Termination due to Change in Control
|
2,340,000
|
|
762,760
|
|
—
|
|
2,209,193
|
|
54,727
|
|
5,366,680
|
|
Death or Disability
|
—
|
|
762,760
|
|
—
|
|
1,198,690
|
|
—
|
|
1,961,450
|
|
Other Termination
|
—
|
|
—
|
|
—
|
|
—
|
|
—
|
|
—
|
|
Duane A. Sanders
|
|
|
|
|
|
|
||||||
Termination due to Change in Control
|
3,886,667
|
|
227,731
|
|
—
|
|
1,313,833
|
|
88,574
|
|
5,516,805
|
|
Death or Disability
|
—
|
|
227,731
|
|
—
|
|
847,673
|
|
—
|
|
1,075,404
|
|
Other Termination
|
—
|
|
—
|
|
—
|
|
—
|
|
—
|
|
—
|
|
(1)
|
The amounts shown represent cash severance payable under the Severance Agreements assuming no reduction would be made under the provision in the agreements related to potential excise taxes payable by the NEOs under Sections 4999 and 280G of the Code. Any such reduction would have been determined based on the specific facts of the actual termination event.
|
(2)
|
The amounts shown for a hypothetical termination due to a change in control assume the acceleration of the vesting of outstanding stock options, PSUs and RSUs as of
December 31, 2018
. Acceleration of the vesting would occur automatically upon the death or disability of the NEO pursuant to the terms of the applicable plans and grant agreements. The amounts shown represent the “in-the-money” value of the stock options and market value of PSUs and RSUs that would have been subject to accelerated vesting as of
December 31, 2018
. The total numbers and market values of unvested PSUs and RSUs and the numbers of shares subject to outstanding stock options, and the exercise prices thereof, are set forth in the
Outstanding Equity Awards at
2018
Fiscal Year-End
table on page 44. The accelerated values shown were calculated using the closing price of $66.38 per share of Common Stock on December 31,
2018
.
|
(3)
|
The amounts shown represent the values of outstanding RSUs that would automatically vest from the hypothetical termination event.
|
(4)
|
The amounts shown for a hypothetical termination due to a change in control represent estimated values of payouts under the
2016
,
2017
and
2018
PSUs resulting from such event as of
December 31, 2018
. In such event, the payout under outstanding PSUs would be based on the greater of performance at the target level or actual performance results for a truncated performance period ending on the date of the change in control. Except for the 2018 PSUs based on Relative TSR, the values included in the table represent a payout at the maximum performance level because the actual performance for the truncated period exceed the performance level necessary to obtain a maximum payout. For the 2018 PSUs based on Relative TSR, the values included in the table represent a payout at the target performance level because the actual performance for the truncated period were below the target performance level necessary to obtain a maximum payout.
|
(5)
|
The amounts shown for a hypothetical death or disability represent estimated values of payouts under the
2016
,
2017
and
2018
PSU awards resulting from such event as of December 31, 2018. In such event, the amount of the payout for each award would have been determined at the target level but reduced pro-rata based on the number of months in the Performance Period during which the NEO was an active employee for at least fifteen days divided by the total number of months in the original Performance Period.
|
|
|
Executive Officer Compensation & Benefits
|
(6)
|
The amounts shown are the estimated costs to the Company to provide continuation of life insurance benefits for up to three years (in the case of Mr. Lacher) or two years (for the other NEOs), lump-sum payments related to health insurance, and outplacement services for fifty-two weeks pursuant to the Severance Agreements, as described in the narrative preceding this table. The lump-sum payment related to health insurance is equal to the amount the COBRA-rate would exceed the active-employee rate for the officer’s coverage for 36 months for Mr. Lacher and 24 months for all other NEOs regardless of whether such officer would elect to continue coverage under COBRA.
|
Pay Ratio Disclosure
|
|
|
Proposal 3
|
Overview
|
Recommendation of the Board of Directors
|
|
|
Proposal 4
|
Overview and Reason for Proposal
|
Summary Description of the ESPP
|
|
|
Proposal 4
|
|
|
Proposal 4
|
Ownership of Kemper Stock
|
Directors and Executive Officers
|
Name of Beneficial Owner
|
Common Shares at
March 7, 2019
(1)
|
|
Stock Options Exercisable/RSUs Vesting Through May 6, 2019 (2)
|
|
Total Shares Beneficially Owned
|
|
Percent of Class (3)
|
|
Directors:
|
|
|
|
|
||||
Teresa A. Canida
|
10,910
|
|
—
|
|
10,910
|
|
*
|
|
George N. Cochran
|
10,428
|
|
9,179
|
|
19,607
|
|
*
|
|
Kathleen M. Cronin
|
7,220
|
|
8,000
|
|
15,220
|
|
*
|
|
Douglas G. Geoga
|
17,833
|
|
29,965
|
|
47,798
|
|
*
|
|
Lacy M. Johnson
|
4,300
|
|
—
|
|
4,300
|
|
*
|
|
Robert J. Joyce
|
10,220
|
|
17,179
|
|
27,399
|
|
*
|
|
Joseph P. Lacher, Jr.
|
53,604
|
|
271,380
|
|
324,984
|
|
*
|
|
Christopher B. Sarofim
|
8,220
|
|
16,000
|
|
24,220
|
|
*
|
|
David P. Storch
|
18,220
|
|
29,179
|
|
47,399
|
|
*
|
|
Susan D. Whiting
|
2,420
|
|
—
|
|
2,420
|
|
*
|
|
NEOs (other than Mr. Lacher who is listed above):
|
|
|
|
|
||||
James J. McKinney
|
17,079
|
|
14,333
|
|
31,412
|
|
*
|
|
John M. Boschelli
|
27,621
|
|
8,000
|
|
35,621
|
|
*
|
|
Mark A. Green
|
10,398
|
|
49,104
|
|
59,502
|
|
*
|
|
Duane A. Sanders
|
—
|
|
14,933
|
|
14,933
|
|
*
|
|
Directors, NEOs and Executive Officers as a Group (19 persons)
|
317,694
|
|
578,057
|
|
887,542
|
|
1.4
|
%
|
Ownership of Kemper Stock
|
Certain Beneficial Owners
|
Name and Address of Beneficial Owner (1)
|
Amount and Nature of
Beneficial Ownership
|
Percent of Class (2)
|
|
||
BlackRock, Inc.
|
6,291,349
|
|
(3)
|
9.7
|
%
|
55 East 52nd Street
New York, New York 10055 |
|
|
|
||
The Vanguard Group, Inc.
|
5,162,109
|
|
(4)
|
7.9
|
%
|
100 Vanguard Boulevard
Malvern, Pennsylvania 19355 |
|
|
|
||
Dimensional Fund Advisors LP
|
4,333,286
|
|
(5)
|
6.7
|
%
|
Building One
6300 Bee Cave Road Austin, Texas 78746 |
|
|
|
||
Fayez Sarofim and Fayez S. Sarofim & Co.
|
3,500,012
|
|
(6)
|
5.4
|
%
|
Two Houston Center, Suite 2907
909 Fannin Street Houston, Texas 77010 |
|
|
|
(1)
|
The Singleton Group LLC (“Singleton Group”) was listed as Kemper’s largest shareholder in the beneficial ownership table of Kemper’s annual proxy statements each year since 2001. The Singleton Group is not listed this year because its assets, including Kemper Common Stock holdings, were distributed to the members of the Singleton Group in connection with the ultimate dissolution of the Singleton Group. The distribution occurred on March 4, 2019 and was reported in a Schedule 13D/A filed with the SEC by the Singleton Group on March 5, 2019.
|
(2)
|
The percentages shown are based on the shares outstanding on
March 7, 2019
.
|
(3)
|
Based on information reported in a Schedule 13G/A filed with the SEC on February 6, 2019, BlackRock, Inc. (“BlackRock”) beneficially owns an aggregate of
6,291,349
shares of Common Stock as of
December 31, 2018
, as to which BlackRock has sole dispositive power and which includes
6,168,386
shares as to which it has sole voting power. BlackRock also reported that it was filing as the parent holding company or control person of certain subsidiaries listed in an exhibit to the Schedule 13G/A.
|
(4)
|
Based on information reported in a Schedule 13G/A filed with the SEC by The Vanguard Group, Inc. (“Vanguard”) on February 11, 2019, Vanguard may be deemed to be the beneficial owner of 5,162,109 shares of Common Stock as of
December 31, 2018
. Of such shares, Vanguard reported sole voting power as to
86,494
shares, sole dispositive power as to
5,074,065
shares, shared voting power as to
6,659
shares and shared dispositive power as to
88,044
shares.
|
(5)
|
Based on information reported in a Schedule 13G/A filed with the SEC on February 8, 2019, Dimensional Fund Advisors LP (“
Dimensional
”) beneficially owns an aggregate of
4,333,286
shares of Common Stock as of
December 31, 2018
, as to which Dimensional has sole dispositive power and which includes
4,268,915
shares as to which it has sole voting power. According to the Schedule 13G/A, these shares are held by four investment companies to which Dimensional furnishes investment advice, and certain other commingled funds, group trusts and separate accounts for which Dimensional serves as investment manager or sub-adviser. Dimensional disclaimed beneficial ownership of these shares.
|
Ownership of Kemper Stock
|
(6)
|
Based on information reported in a Schedule 13G/A filed jointly with the SEC on February 5, 2019 by Fayez Sarofim, Fayez Sarofim & Co. and Sarofim International Management Co., Fayez Sarofim may be deemed to be the beneficial owner of
3,500,012
shares of Common Stock as of
December 31, 2018
. Of such shares, Fayez Sarofim reported sole voting and dispositive power as to
2,469,070
shares and shared voting power as to
1,024,440
shares and shared dispositive power as to
1,030,942
shares.
|
Section 16(a) Beneficial Ownership Reporting Compliance
|
|
|
Frequently Asked Questions
|
Proxy and Proxy Statement
|
Voting and Record Date
|
Proposal 2:
|
Advisory vote to ratify the selection of Deloitte & Touche LLP as the Company’s Independent Registered Public Accountant for
2019
;
|
Proposal 3:
|
Advisory vote to approve the compensation of the Company’s Named Executive Officers, as disclosed in this Proxy Statement; and
|
|
|
Frequently Asked Questions
|
•
|
Complete, sign and date your proxy card and return it no later than the commencement of the Annual Meeting in the postage-paid envelope provided;
|
•
|
Call the toll-free telephone number on your proxy card and follow the recorded instructions no later than 10:59 p.m. Central Daylight Time on
Tuesday
,
April 30, 2019
;
|
•
|
Access the proxy voting website identified on your proxy card and follow the instructions no later than 10:59 p.m. Central Daylight Time on
Tuesday
,
April 30, 2019
; or
|
•
|
Attend the Annual Meeting in person and deliver your proxy card or ballot to one of the ushers when requested to do so.
|
•
|
Complete, sign, date and return your proxy card, which must be received by 1:00 a.m. Central Daylight Time on
Monday
,
April 29, 2019
(“401(k) Deadline”) for your voting instructions to be effective;
|
•
|
Call the toll-free telephone number on your proxy card and follow the recorded instructions by the 401(k) Deadline, for your voting instructions to be effective; or
|
•
|
Access the proxy voting website identified on your proxy card and follow the instructions by the 401(k) Deadline, for your voting instructions to be effective.
|
|
|
Frequently Asked Questions
|
|
|
Frequently Asked Questions
|
•
|
Deliver another signed proxy card with a later date any time prior to the commencement of the Annual Meeting;
|
•
|
Notify the Company’s Secretary, C. Thomas Evans, Jr., in writing prior the commencement of the Annual Meeting that you have revoked your proxy;
|
•
|
Call the toll-free telephone number, or access the proxy voting website, identified on the proxy card and re-vote any time prior to 10:59 p.m. Central Daylight Time on
Tuesday
,
April 30, 2019
; or
|
•
|
Attend the Annual Meeting in person and deliver a new, signed proxy card or ballot to one of the ushers when requested to do so.
|
•
|
Deliver another signed proxy card with a later date prior to the 401(k) Deadline; or
|
•
|
Call the toll-free telephone number, or access the proxy voting website, identified on the proxy card and re-vote anytime prior to the 401(k) Deadline.
|
Shareholder Proposals, Nominations and Communications
|
|
|
Frequently Asked Questions
|
Cost of Proxy Solicitation
|
Additional Information about Kemper and Householding Requests
|
•
|
Contact Kemper Investor Relations by telephone at 312.661.4930, or by e-mail at investors@kemper.com; or
|
|
|
Frequently Asked Questions
|
•
|
Write to Kemper at 200 East Randolph Street, Suite 3300, Chicago, Illinois 60601, Attention: Investor Relations.
|
|
|
Appendix A
|
Non-GAAP Reconciliation
($ in Millions)
|
|||||||||||||||
|
2018 Actual
|
|
2017 Actual
|
||||||||||||
|
|
Net Income
|
|
ROE
|
|
Net Income
|
|
ROE
|
|||||||
Reported
|
|
$
|
190.1
|
|
|
7.4%
|
|
|
$
|
120.9
|
|
|
5.9
|
%
|
|
Adjustments, After-tax
|
|
|
|
|
|
|
|
|
|||||||
Exclude AOCI on Fixed Maturity Securities
|
|
—
|
|
|
0.5
|
%
|
|
—
|
|
|
0.7
|
%
|
|||
Normalize Catastrophe Losses and LAE including Development, from Reported to Expected
|
|
23.1
|
|
|
0.9
|
%
|
|
79.3
|
|
|
4.1
|
%
|
|||
Normalize Realized Gains and Losses on Sales of Investments and Other-than-temporary Impairment Losses, from Reported to Expected
|
|
(15.6
|
)
|
|
(0.6
|
)%
|
|
(20.9
|
)
|
|
(1.1
|
)%
|
|||
Change in Fair Value of Equity and Convertible Securities
|
|
50.8
|
|
|
2.1
|
%
|
|
—
|
|
|
—
|
|
|||
Purchase Accounting Related Adjustments
|
|
60.1
|
|
|
2.3
|
%
|
|
—
|
|
|
—
|
|
|||
Acquisition Related Transaction, Integration and Other Costs
|
|
36.5
|
|
|
1.4
|
%
|
|
—
|
|
|
—
|
|
|||
Partial Satisfaction of Arbitration Award
|
|
(28.2
|
)
|
|
(1.1
|
)%
|
|
—
|
|
|
—
|
|
|||
Impact of Tax Reform
|
|
(26.4
|
)
|
|
(1.0
|
)%
|
|
(7.4
|
)
|
|
(0.4
|
)%
|
|||
Total Adjustments, After-tax
|
|
100.3
|
|
|
4.6
|
%
|
|
51.0
|
|
|
3.3
|
%
|
|||
Adjusted
|
|
$
|
290.4
|
|
|
11.9
|
%
|
|
$
|
171.9
|
|
|
9.2
|
%
|
|
|
Appendix B
|
|
|
Appendix B
|
|
|
Appendix B
|
|
|
Appendix B
|
|
|
Appendix B
|
|
|
Appendix B
|
|
|
Appendix B
|
|
|
Appendix B
|