Audit (12), Compensation (5), Executive (0); Investment & Finance (4), Nominating & Governance (4),
Customer Experience & Technology (4)
Director Compensation
The compensation program for
non-employee
Directors is shown in the following table:
|
|
|
|
|
Compensation Element
|
|
Non-Employee
Director Compensation (1)(2)
|
Board Chairman Annual Retainer
|
|
$115,000
|
Board Member Annual Retainer
(other than Board Chairman)
|
|
$60,000
|
Committee Chairman Annual Retainer
|
|
$25,000 Audit Committee
$15,000 Compensation Committee
$12,000 Nominating &
Governance Committee
$15,000 Customer Experience & Technology Committee
$10,000 all other Committees (3)
|
Committee Member Annual Retainer
(other than Committee Chairman)
|
|
$10,000 Audit Committee
$ 7,500 all other Committees (3)
|
Share-based Compensation
|
|
Fair value on the date of the respective awards
is used to determine the number of Restricted Stock Units (RSUs) awarded.
An annual award of $95,000 in RSUs following the Annual Shareholder
Meeting. $95,000 in RSUs if joining the Board within 6 months after the prior Annual Shareholder Meeting, $47,500 in RSUs if joining more than 6 months after the prior Annual Shareholder Meeting but before the next Annual Shareholder Meeting.
All awards have a 1 year vesting period.
|
Basic Group Term Life Insurance
|
|
Premium for $10,000 face amount
|
Business Travel Accident Insurance
|
|
Premium for $100,000 coverage
|
(1)
|
Annual retainer fees are paid following the Annual Shareholder Meeting each year. The annual retainer fees are prorated to the extent that a
non-employee
Director joins the Board
after the Annual Shareholder Meeting.
|
(2)
|
Non-employee
Directors may elect to defer cash compensation into Common Stock equivalent units (CSUs).
|
(3)
|
All other Committees except for the Executive Committee which is not paid an Annual Retainer.
|
|
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|
Non-employee
Directors are required to hold shares of HMEC Common
Stock with a book value equal to five times their annual cash retainer.
|
|
|
Until
non-employee
Directors meet this ownership requirement, they must
retain all Common Stock equivalent units and Restricted Stock Units granted as share-based compensation (net of taxes). All
non-employee
Directors have met the guidelines with the exception of Mr. Swyers,
who joined the Board in 2014, Dr. Domenech, who joined the Board in 2015, and Mr. Reece, who joined the Board in 2016. They have 5 years to meet this requirement. Employee Directors do not receive compensation for serving on the Board and
are subject to separate stock ownership guidelines. See Compensation Discussion and Analysis Stock Ownership and Holding Requirements.
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2017 Proxy Statement Proposals and Company Information
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9
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The following table sets forth information regarding compensation earned by, or paid to, the
non-employee
Directors during 2016:
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|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Director
|
|
Fees Earned
or Paid
in Cash ($)
|
|
|
Stock Awards
($) (1)
|
|
|
All Other
Compensation
($) (2)
|
|
|
Total
($)
|
|
Daniel A. Domenech
|
|
|
0
|
|
|
|
170,000
|
|
|
|
204
|
|
|
|
170,204
|
|
Stephen J. Hasenmiller
|
|
|
82,500
|
|
|
|
95,000
|
|
|
|
204
|
|
|
|
177,704
|
|
Ronald J. Helow
|
|
|
85,000
|
|
|
|
95,000
|
|
|
|
204
|
|
|
|
180,204
|
|
Beverley J. McClure
|
|
|
85,000
|
|
|
|
95,000
|
|
|
|
51
|
|
|
|
180,051
|
|
H. Wade Reece
|
|
|
75,000
|
|
|
|
95,000
|
|
|
|
35
|
|
|
|
170,035
|
|
Gabriel L. Shaheen
|
|
|
134,500
|
|
|
|
95,000
|
|
|
|
51
|
|
|
|
229,551
|
|
Robert Stricker
|
|
|
77,500
|
|
|
|
95,000
|
|
|
|
204
|
|
|
|
172,704
|
|
Steven O.
Swyers
|
|
|
92,500
|
|
|
|
95,000
|
|
|
|
204
|
|
|
|
187,704
|
|
(1)
|
Represents fees deferred in 2016 pursuant to the HMEC 2010 Comprehensive Executive Compensation Plan, as well as $95,000 in RSUs (awarded May 25, 2016). As of December 31, 2016, each Director had 2,895
unvested RSUs.
|
(2)
|
Represents insurance premiums provided by the Company for group term life insurance and business travel accident insurance for each Director. The group term life insurance premiums are
age-banded
and this is reflected in the lower premiums for Ms. McClure, Mr. Reece and Mr. Shaheen. In addition, Mr. Reeces premiums were
pro-rated
based on the date that he joined the Board.
|
Corporate Governance
Director Independence
The Companys Corporate Governance Principles require that the Board consist of a majority of directors who meet the criteria for independence required by
the listing standards of the NYSE. Based on the independence requirements of the NYSE and after reviewing any relationships between the Directors and the Company or its management (either directly or indirectly, including as a partner, shareholder
or officer of an organization that has a relationship with the Company or its management) that could impair, or appear to impair, the Directors ability to make independent judgments, the Board determined that none of its
non-employee
Directors have a material relationship with the Company, and therefore all of these Directors are independent. These independence determinations are analyzed at least annually in both fact and
appearance to promote arms-length oversight. The current
non-employee
Directors are Dr. Domenech, Mr. Hasenmiller, Mr. Helow, Ms. McClure, Mr. Reece, Mr. Shaheen,
Mr. Stricker and Mr. Swyers.
Board Leadership Structure
The Board is committed to strong, independent Board leadership and believes that objective oversight of management is a critical aspect of effective corporate
governance. Accordingly, the Board currently has two separate individuals holding the offices of Chairman and Chief Executive Officer, and the position of Chairman is held by an independent Director. The Board of Directors believes that having an
independent Director serve as
Chairman is in the best interest of the Company at this time as this structure provides a greater role for the independent Directors in the oversight of the Company. However, as described in the
Companys Corporate Governance Principles, this situation can change in the future to permit one individual to hold both positions, if the Board deems it to be in the best interests of the Company at a given time.
Boards Role in Risk Oversight
The Board of Directors
is responsible for overseeing the processes that management has established for assessing and managing risk. In addition, the Board has delegated oversight of certain categories of risk to designated Board committees. In performing their oversight
responsibilities, the Board and relevant committees regularly discuss with management the Companys policies with respect to risk assessment and risk management. The committees report to the Board regularly on matters relating to the specific
areas of risk the committees oversee.
In addition, the Company has established an internal Enterprise Risk Management (ERM) Committee, which
is composed of certain members of senior management including the President and Chief Executive Officer; Chief Financial Officer; Chief Human Resources Officer; Chief Information Officer; General Counsel and Chief Compliance Officer; and the heads
of Field Operations and Distribution and the Life & Retirement and Property & Casualty divisions. The ERM Committee is chaired by the Chief Financial Officer of the Company.
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2017 Proxy Statement Proposals and Company Information
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Throughout the year, the Board and the relevant Board committees receive regular reports from the Enterprise Risk
Management Committee and its chairman regarding major risks and exposures facing the Company and the steps management has taken to monitor and control such risks and exposures. In addition, throughout the year, the Board and the relevant Board
committees dedicate a portion of their meetings to review and discuss specific risk topics in greater detail.
Code of Ethics, Code of Conduct and
Corporate Governance Principles
The Company has adopted a Code of Ethics and a Code of Conduct applicable to all employees, including the Chief
Executive Officer, Chief Financial Officer, Controller and Directors (in their capacity as Directors of the Company). The Company has also adopted Corporate Governance Principles. The Codes and Principles are available on the Companys website
at www.horacemann.com, under Investors - Corporate Overview - Governance Documents. A printed copy of the Codes and Principles may be obtained by Shareholders upon written request, addressed to Investor Relations, Horace Mann Educators
Corporation, 1 Horace Mann Plaza,
C-120,
Springfield, Illinois 62715-0001.
Director Education
Each Director is required to participate in at least one education program every two years and may choose to participate in up to two education programs in a
two year period at the Companys expense. All Directors are in compliance with this requirement.
Communications with Directors
The Company has established various processes to facilitate communications with the Board by Shareholders and other interested parties. Communications to
non-employee
Directors as a group or to the Chairman of the Board or to an individual Director may be submitted via regular mail addressed to the Board of Directors, c/o the Corporate Secretary, Horace Mann
Educators Corporation, 1 Horace Mann Plaza, Springfield, Illinois 62715-0001. Additionally, communications may be emailed to the Board of Directors, c/o the Corporate Secretary at hmecbofd@horacemann.com.
Compensation Committee Interlocks and Insider Participation
There are no Compensation Committee interlocks between the Company and other entities involving the Companys Executive Officers and Directors who serve as
executive officers or directors of such other entities. During 2016, no member of the Compensation Committee was a current or former officer or employee of the Company.
Review, Approval or Ratification of Transactions with Related Persons
The Board reviews issues involving potential conflicts of interest of its members and is responsible for reviewing and approving all related party transactions.
The Board does not have a formal related party transaction policy but it considers each related party transaction individually.
Related Person Transactions
BlackRock, Inc., which owns beneficially more than 5% of the issued and outstanding shares of Common Stock,
provides investment management services to the Company and has done so for more than 10 years. In 2016, the Company paid approximately $227,000 in fees to BlackRock associated with the Companys use of analytical software owned by BlackRock.
Other than the BlackRock relationship, the Company does not have any contracts or other transactions with related parties that are required to be reported under the applicable securities laws and regulations.
PROPOSAL NO. 2 - ADVISORY RESOLUTION TO APPROVE NAMED EXECUTIVE OFFICERS COMPENSATION
The Board is asking Shareholders to approve an advisory resolution to approve the compensation of the Companys Named Executive Officers
(NEOs) as reported in this Proxy Statement. The Compensation Committee has structured our NEOs compensation program as described below under Compensation Discussion and Analysis.
The Board recommends that Shareholders read the Compensation Discussion and Analysis (CD&A) included in this Proxy Statement, which
describes in more detail how our Executive Compensation policies and procedures operate and are designed to achieve our compensation objectives, as well as the Summary Compensation Table and other related compensation tables and
narrative included within the CD&A, which provide detailed information on the compensation of our NEOs. The Compensation Committee and the Board of Directors believe that the policies and procedures articulated in the CD&A are effective in
achieving our goals.
In accordance with Section 14(a) of the Exchange Act, and as a matter of good corporate governance, the Board is asking
Shareholders to approve the following advisory resolution at the 2017 Annual Meeting:
RESOLVED, that the Shareholders of Horace Mann
Educators Corporation (the Company) approve, on an
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2017 Proxy Statement Proposals and Company Information
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11
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advisory basis, the compensation of the Companys Named Executive Officers disclosed in the Compensation Discussion and Analysis, the Summary Compensation Table and the related compensation
tables, notes and narrative in the Proxy Statement for the Companys 2017 Annual Meeting of Shareholders.
This advisory resolution, commonly referred
to as a Say on Pay resolution, is
non-binding
on the Board of Directors. Although
non-binding,
the Board and the Compensation Committee will review and
consider the voting results when making future decisions regarding our NEOs compensation program.
The Board has adopted a policy providing for an
annual advisory vote to approve NEOs compensation. Unless the Board modifies its policy on the frequency of holding such advisory votes, the next advisory vote will occur at the Companys 2018 Annual Meeting of Shareholders.
The Board recommends that Shareholders vote FOR the approval of the advisory resolution to approve Named Executive Officers compensation.
PROPOSAL NO. 3 - ADVISORY VOTE ON THE FREQUENCY OF FUTURE ADVISORY VOTES ON NAMED EXECUTIVE OFFICERS
COMPENSATION
Pursuant to Section 14(a) of the Exchange Act, the Board is asking Shareholders to vote on the frequency of future advisory
votes on Named Executive Officers compensation of the nature reflected in Proposal No. 2 above. Specifically, whether such votes should occur every year, every two years or every three years.
After careful consideration, the Board of Directors has determined that holding an advisory vote on Named Executive Officers compensation every year is
the most appropriate policy for the Company at this time, and recommends that Shareholders vote for future advisory votes on Named Executive Officers compensation to occur every year. While the Companys Executive Compensation
programs are designed to promote a long-term connection between pay and performance, the Board recognizes that Named Executive Officers compensation disclosures are made annually. Holding
an annual advisory vote on Named Executive Officers compensation provides the Company with more direct and immediate feedback on our compensation programs. However, Shareholders should note that because the advisory vote on Named Executive
Officers compensation occurs well after the beginning of the compensation year, and because the different elements of our Executive Compensation programs are designed to operate in an integrated manner and to complement one another, in many
cases it may not be appropriate or feasible to change our Executive Compensation programs in consideration of any one years advisory vote on Named Executive Officers compensation by the time of the following years annual meeting of
Shareholders. Requesting an annual advisory vote on Named Executive Officers compensation also is consistent with the Companys practice of having all Directors elected annually and providing Shareholders an annual opportunity to ratify
the Audit Committees selection of an independent registered public accounting firm.
The Board understands that the Companys Shareholders may
have different views as to what is an appropriate frequency for advisory votes on Named Executive Officers compensation, and will carefully review the voting results on this proposal. Shareholders will be able to specify one of four choices
for this proposal on the proxy card: one year, two years, three years, or abstain. Shareholders are not voting to approve or disapprove the Boards recommendation. This advisory vote on the frequency of future advisory votes on Named Executive
Officers compensation is
non-binding
on the Board of Directors. Notwithstanding the Boards recommendation and the outcome of the Shareholder vote, the Board may in the future decide to conduct
advisory votes on a less frequent basis and may vary its practice based on factors such as discussions with Shareholders and the adoption of material changes to Executive Compensation programs.
The Board recommends that you vote to conduct future advisory votes on Named Executive Officers compensation every year.
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12
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2017 Proxy Statement Proposals and Company Information
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Compensation Discussion and Analysis
|
|
|
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In this section, we describe the material components of our executive compensation
program for our Named Executive Officers (NEOs), whose compensation is displayed in the 2016 Summary Compensation Table and the other compensation tables contained in this Proxy Statement. We also provide an overview of our executive
compensation philosophy and we explain how and why the Compensation Committee of our Board (the Committee) arrives at specific compensation policies and decisions.
Our 2016 NEOs are our Chief Executive Officer
(CEO), Chief Financial Officer (CFO) and the three other most highly compensated Executive Officers employed at the end of 2016:
Marita Zuraitis, President and CEO;
Dwayne D. Hallman, Executive Vice President and CFO*;
Matthew P. Sharpe, Executive Vice President, Life & Retirement;
William J. Caldwell, Executive Vice President, Property & Casualty; and
Kelly J. Stacy, Senior Vice President, Field Operations and Distribution.
*
Note Regarding Chief Financial
Officer
On Feb. 3, 2017, our Executive Vice President and Chief Financial Officer, Dwayne D.
Hallman, passed away. Bret A. Conklin was named Acting CFO. As of our Proxy Statement filing date, a permanent CFO had not been named. Because Mr. Hallman was our CFO for the entire 2016 fiscal year, we will include the compensation and pay
decisions made with respect to him when discussing the compensation of our NEOs throughout this section. We believe that this approach provides our shareholders with a representative view of our pay programs with respect to our executive
team.
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Executive Summary
This summary highlights information from this Compensation Discussion and Analysis section and may not contain all the information that is necessary to gain
a full understanding of our policies and decisions. Please read the entire Compensation Discussion and Analysis section and compensation tables for a more complete understanding of our compensation program.
Our Business
We are a personal insurance and financial
services business with approximately $10.6 billion of assets and approximately $1.1 billion in total revenue as of December 31, 2016.
Founded by Educators for
Educators
®
, we offer our products and services primarily to
K-12
teachers, administrators, and other public school employees and their
families. We underwrite personal lines of auto, property and life insurance, as well as retirement products in the United States.
2016 Business
Highlights
The Company delivered solid underlying financial results across all three segments of its business in 2016. Full year operating income was
$1.97 per diluted share. Book value per share* increased 4% in 2016 driven by the solid operating results and positive contributions from investment portfolio performance. In addition, we achieved broad-based increases in new business sales and
solid policy retentions during the past year. Total Shareholder Return was 32.9% in 2016 outperforming key insurance and general market indices.
*Excluding
|
the fair value adjustment for investments
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2017 Proxy Statement Compensation Discussion and Analysis
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13
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These results reflect significant progress on numerous strategic initiatives, including:
|
|
|
Increased sales levels year-over-year in all lines of business excluding retirement
|
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|
|
New auto and property sales premium increased 6% and 5%, respectively
|
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|
|
Strong auto and property retention ratios
|
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|
Increased annuity assets under management by 7%
|
Please see Managements Discussion
and Analysis of Financial Condition and Results of Operations in HMECs 2016 Annual Report on
Form 10-K
for a more detailed description of these financial results.
2016 Executive Compensation Highlights
|
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These elements of the executive compensation program are described more fully
below.
Pay mix comprised of base salary, cash annual incentives under the Annual Incentive Plan (AIP), and equity-based long-term
incentives under the Long-term Incentive Plan (LTIP)
Over 70% of the CEOs target compensation and over 60% of all other NEOs target compensation linked to performance-based or
service-vested incentives
Balanced performance measures designed with a focus on shareholder return, both absolute and relative, and incenting operating growth while
managing risk
Performance incentives tied to multiple overlapping performance periods
Annual Cash Incentives tied to Company and business line performance measures
Long-term Incentives entirely equity based:
➣
Performance-based RSUs vest following a
3-year
period, based on both relative measures (relative total shareholder return and
relative operating return on equity) and an absolute measure (total written premium growth)
➣
Service-vested stock options with a
4-year
vesting period
➣
Service-vested RSUs with a
3-year
vesting period
One-time,
provisional strategic equity grants of performance-based RSUs to promote continuity of leadership
Stock ownership guidelines for NEOs
➣
Twelve-month post-exercise holding requirement for stock options
Clawback policy applicable to both cash and equity awards
Executive change in control plan excludes tax
gross-up
provision
Limited perks and executive benefits
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Pay Governance
Oversight
The Committee oversees our executive
compensation program. The current members of the Committee are Mr. Hasenmiller, Ms. McClure, and Mr. Shaheen. Mr. Hasenmiller serves as the Committee Chair. Consistent with the listing standards of the NYSE, the Committee is
composed entirely of independent Directors.
The Committee retained Compensation Advisory Partners LLC (CAP) as independent compensation
consultants. CAP provides information and advice on the competitive market for executive talent, evolving market practices in our industry and the general employment market, regulatory and other external developments, and our executive compensation
philosophy and incentive program design. In this way, CAP assists the Committee with ongoing education. Also, Committee members comply with Directors education requirement to help ensure each remains up to date on current issues relevant to
the Company and its business.
The CAP consultants report directly to the Committee, attend the Committee meetings and portions of executive sessions of
the Committee at the Chairs request (generally with the Boards outside legal counsel, but without management present). CAP serves at the pleasure of the Committee, and performs no services for management. CAP works with management to
obtain necessary data and perspectives on the Companys strategic objectives, business environment, corporate culture, performance, and other relevant factors. This information is used by CAP to formulate its recommendations related to
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14
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2017 Proxy Statement Compensation Discussion and Analysis
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competitive compensation performance targets and overall design. CAPs findings and recommendations are reported directly to the Committee. The services provided by CAP during 2016 are
described in more detail throughout this analysis. Pursuant to regulatory requirements, the Committee assessed CAPs independence (along with that of its other direct and indirect consultants and advisors) and concluded that CAPs work did
not raise any conflict of interest. In addition, the Committee has the authority to hire other experts and advisors as it deems necessary.
Management also
supports the Committee by providing analysis and recommendations. When setting levels of executive compensation, the Committee requests, receives, and considers the recommendations of the CEO regarding the performance of her direct reports and other
Executive Officers. Members of management also attend and contribute to Committee meetings as relevant to the Committee agenda.
The Committee discusses
its fundamental views on compensation and guiding principles, as well as its expectations of the CEOs performance and annual goals, with the CEO and subsequently proposes the CEOs goals to the Board for approval. The Committee does not
include the CEO or other members of management in its discussions with CAP on the CEOs compensation, nor does the CEO or management participate in the Committees recommendation to the Board on the CEOs compensation.
Favorable Say on Pay
At our 2016 Annual Meeting of
shareholders, we received substantial support for the compensation of our NEOs, with 97.2% of the votes cast in favor of the Say on Pay advisory vote on executive compensation. The Committee and the Board were gratified by the favorable
vote and value the views of our shareholders. The Committee was pleased that a significant majority of our shareholders approved the proposal, showing strong support for the structure of the compensation plans, the absence of excessive perquisites,
the demonstrated
pay-for-performance
practices, and the strength of the Companys compensation processes and practices.
Executive Compensation Program
Guiding Principles
The Committee has established a set of
core principles that underlie our executive compensation program. These core principles provide guidance to the Committee and management in making decisions while administering the program or when considering changes. These core principles include
strong alignment between pay and performance, incentive to drive shareholder value, and market competiveness.
Strong pay for
performance alignment
We target compensation around the median of the competitive market, with executives earning more or less than
median, generally based on the performance of the Company and value delivered to shareholders. Our core executive compensation program includes base salary, an annual cash incentive plan (the Annual Incentive Plan or AIP),
and long-term equity awards (the Long-Term Incentive Plan or LTIP). Both AIP and LTIP are administered under the shareholder-approved 2010 Comprehensive Executive Compensation Plan, as amended and restated effective
May 20, 2015 (CECP). Incentive awards are earned upon the achievement of short-term and long-term business goals that are reviewed and approved by the Committee at the beginning of each performance period. Performance goals are
structured to reward business growth, profitability, relative total shareholder return, balanced with productivity and risk and capital management.
Executive interests should be aligned with shareholders
To encourage the long-term view, the Committee grants equity awards with multi-year performance periods and multi-year vesting. In 2016,
Ms. Zuraitis received approximately 46% of her target compensation in equity. With respect to the other NEOs, approximately 40% to 44% of their compensation was equity-based.
Incentive compensation should drive long-term value creation and reward strong performance
The AIP performance goals are based on premiums and adjusted operating income to reward strong performance. The LTIP performance goals are
directly linked to multi-year growth and return measures to keep executives focused on value creation.
A significant portion of
compensation should be at risk based on the Companys performance
For 2016, over 70% of the CEOs target total
pay (base salary plus target annual incentive plus target long-term incentive) and over 60% of target total pay for all other NEOs is at risk, and is variable from year to year, and for much of it, the level of payout is dependent on the
Companys performance.
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2017 Proxy Statement Compensation Discussion and Analysis
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15
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Compensation levels should be market competitive
The Committee sets total direct compensation for the NEOs salary and target annual and long-term incentive opportunities within a
reasonable range of the median of the competitive market, while providing the ability to decrease or increase compensation if warranted by performance. To determine competitive pay levels, we use comparable survey market data provided by CAP and
from published survey sources including Mercer, LOMA, Towers Watson, and proxy data for similar sized insurance companies in the Russell 2000
®
Index. The data from these surveys is scaled to
our size by CAP based on revenues or asset ranges. Annually, CAP provides the Committee with a comparison of the base salary, annual incentives and long-term incentives of the CEO with those of other chief executive officers based on survey data.
The other NEOs are assessed against comparable functional matches in the insurance industry and the broader general industry, as appropriate. Based on the data, and CAPs analysis, the Committee deliberates in executive session to determine its
recommendation for approval by the Board of Directors. For 2016, CAPs analysis demonstrated that our overall core total direct compensation was consistent with target pay positioning at the median of the market. Core total direct compensation
is comprised of salary, annual incentive, and our ongoing long-term incentive. In 2016, we also made a strategic incentive grant, which we do not anticipate making on a regular basis, and therefore have not included in the comparison to market data.
Compensation Mix
Our NEOs annual compensation
consists of base salary, annual incentives and long-term incentives. The targeted compensation mix of total direct compensation for the NEOs for 2016 is illustrated below. The mix of 2016 actual compensation varied as a result of actual incentives
earned.
Base Salary
Competitive
base salaries are critical to attracting and retaining high performing executive talent. The Committee seeks to pay salaries that approximate median salaries for executives of similar companies in like positions. However, in recruiting new
executives, we sometimes exceed these guidelines to attract qualified candidates. There may also be instances where an existing executives compensation deviates from the median, up or down, due to experience, performance, responsibilities,
compensation history, internal equity, or retention risk.
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16
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2017 Proxy Statement Compensation Discussion and Analysis
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Salaries for the NEOs and other executive officers are reviewed every 12 months in connection with the review of
financial results for the prior fiscal year and the annual performance review discussed under Annual Performance and Pay Review. In 2016, Ms. Zuraitis and Mr. Hallman received base salary increases to move overall compensation closer
to the market median. The other NEOs did not receive base salary increases in 2016. Base salary adjustments for 2016 are shown in the chart below.
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Named Individual
|
|
2015
Annualized
Salary
|
|
|
2016
Annualized
Salary
|
|
|
Percent
Increase
|
Marita Zuraitis
|
|
|
$750,000
|
|
|
|
$800,000
|
|
|
6.7%
|
Dwayne D. Hallman
|
|
|
$444,000
|
|
|
|
$460,000
|
|
|
3.6%
|
Matthew P. Sharpe
|
|
|
$400,000
|
|
|
|
$400,000
|
|
|
0.0%
|
William J. Caldwell
|
|
|
$350,000
|
|
|
|
$350,000
|
|
|
0.0%
|
Kelly J. Stacy
|
|
|
$300,000
|
|
|
|
$300,000
|
|
|
0.0%
|
Annual Incentive Plan
Our
Annual Incentive Plan (AIP) is a cash incentive plan, administered under the CECP, and designed to drive and reward strong performance over a
one-year
period. Annually, the Committee establishes the
performance objectives, threshold, target and maximum performance levels, and the related threshold, target and maximum AIP opportunities for each NEO, expressed as a percentage of base salary. Target incentive opportunity levels for the NEOs are
intended to approximate the median of the target bonus potential for similarly situated executives in comparable companies. Maximum incentive opportunities are set at 200% of target.
For 2016, there were four performance measures, with 50% of the award based on Company-wide net operating income, and the remaining 50% divided among specific
sales and premiums of the different business lines: P&C (20%), annuities (20%), and life (10%), as shown in the chart below. This provides a balance between shareholder return and growth, while complementing the longer-term LTIP metrics, which
focus on long-term shareholder value creation.
2016 Annual Incentive Plan Performance Measures
|
|
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|
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Adjusted Operating Income
- Operating income (GAAP net income after tax,
excluding realized investment gains and losses other than those for Fixed Indexed Annuity related options and embedded derivatives) adjusted for Property & Casualty (P&C) catastrophe costs different than Plan,
Annuity & Life deferred acquisition costs (DAC) unlocking and change in guaranteed minimum death benefit (GMDB) reserve due to capital gains and losses and market performance different than Plan, the impact on
investment income of share repurchases different than Plan, and debt structure/costs including debt retirement different than Plan
P&C Net Premium Written (GAAP)
- Amount charged for property and casualty policies issued
during the year. (Portions of such amounts may be earned and included in financial reports over future periods.)
Annuity Sales
- The amount of new business from the sales of Horace Mann annuity products, from
Horace Mann and independent agents, as measured by premiums and deposits to be collected over the 12 months following the sale
Life Sales
- The amount of new Horace Mann individual life insurance products sold during the
year, as measured by premiums and deposits to be collected over the 12 months following the sale
|
All the NEOs 2016 annual incentive amounts are based on the same corporate and business line objectives
to promote cooperation. The targets for the operating income and sales or premium measures were based on a review of market conditions and expectations of other companies in the industry as well as our financial plan for 2016 (2016
Plan). The 2016
|
|
|
2017 Proxy Statement Compensation Discussion and Analysis
|
|
17
|
Plan was the basis of our 2016 earnings guidance, which was publicly disclosed in February 2016 in connection with our release of earnings for the year ended December 31, 2015. The Committee
believes that tying the AIP to Company performance provides appropriate alignment for an executives compensation as it recognizes that the Company as a whole must perform well in order to deliver value to our Shareholders. Further, tying all
the NEOs AIP awards to the performance of specific business lines incentivizes cooperation among the business line leaders. It is the goal of the Committee to establish measurements and targets that are reasonable, but not easily achieved. The
measures and targets are discussed with the CEO, other NEOs, other members of the Board and CAP before they are set.
Each March, the Committee also
certifies performance and determines annual incentive award payouts for the prior year. Based on the 2016 results of 112.28% of target for Ms. Zuraitis and the other NEOs, the 2016 AIP payouts (paid in March 2017) were as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2016 AIP Measures
|
|
Target
(in $M)
|
|
Actual
(in $M)
|
|
Results
|
|
Weighting
|
|
Payout
|
Adjusted Operating Income
|
|
|
|
92.4
|
|
|
|
|
96.5
|
|
|
|
|
142
|
%
|
|
|
|
50
|
%
|
|
|
|
70.88
|
%
|
P&C Net Premium Written
|
|
|
|
633.6
|
|
|
|
|
634.3
|
|
|
|
|
107
|
%
|
|
|
|
20
|
%
|
|
|
|
21.40
|
%
|
Horace Mann Annuity Sales
|
|
|
|
380.8
|
|
|
|
|
356.9
|
|
|
|
|
0
|
%
|
|
|
|
20
|
%
|
|
|
|
0.00
|
%
|
Horace Mann Life Sales
|
|
|
|
12.6
|
|
|
|
|
15.5
|
|
|
|
|
200
|
%
|
|
|
|
10
|
%
|
|
|
|
20.00
|
%
|
Total
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
100
|
%
|
|
|
|
112.28
|
%
|
|
|
|
|
|
|
|
Named Individual
|
|
2016 Target
AIP Opportunity
|
|
2016 Actual
AIP Payout
|
|
2016 Actual AIP Payout
as a % of Base Salary
|
Marita Zuraitis
|
|
100%
|
|
$898,240
|
|
112.28%
|
Dwayne D. Hallman
|
|
60%
|
|
$308,096
|
|
66.98%
|
Matthew P. Sharpe
|
|
60%
|
|
$269,472
|
|
67.37%
|
William J. Caldwell
|
|
50%
|
|
$196,490
|
|
56.14%
|
Kelly J. Stacy
|
|
40%
|
|
$134,736
|
|
44.91%
|
|
|
|
18
|
|
2017 Proxy Statement Compensation Discussion and Analysis
|
Long-term Incentive Plan
The intent of our Long-term Incentive Plan (LTIP) is to focus executives on shareholder value and key strategic objectives, while promoting retention.
2016 LTIP Aggregate Target Opportunity
In setting the dollar values of the 2016 opportunities under LTIP for each NEO, the Committee targeted amounts that would achieve the
Companys overall objective of positioning total compensation at approximately the market median. The 2016 target grant values for the NEOs were as follows:
|
|
|
|
|
Named Individual
|
|
2016 LTIP
Target
|
|
Marita Zuraitis
|
|
|
$1,400,000
|
|
Dwayne D. Hallman
|
|
|
$500,000
|
|
Matthew P. Sharpe
|
|
|
$500,000
|
|
William J. Caldwell
|
|
|
$350,000
|
|
Kelly J. Stacy
|
|
|
$300,000
|
|
2016 LTIP Award Vehicles
For 2016, LTIP is comprised of three vehicles, as illustrated in the chart below: (1) performance-based RSUs;
(2) service-vested RSUs; and (3) service-vested stock options.
|
|
|
|
|
Performance-based RSUs
- Earned over a three-year period, based upon Relative and Absolute
Measures. If any shares are earned at the end of the three-year performance period, the executive fully vests in the award
|
|
Service-vested RSUs
- Vest 1/3 per year after years 1, 2 and 3
|
|
Stock
options
- Granted at fair market value with a 10 year life; options vest ratably over 4 years
|
Performance-Based RSUs (PBRSUs)
The Committee believes that PBRSUs provide an effective vehicle for rewarding executives based on a three-year performance period. Each year, a
new three-year period starts, partially overlapping the periods that started the prior two years. PBRSUs were granted on March 9, 2016 for the 2016-2018 performance period, and comprise 50% of the 2016 LTIP opportunity. These RSUs will be
earned and vested on December 31, 2018, if at all, based on the level of achievement. From the date of grant, PBRSUs accrue dividend equivalents at the same rate as dividends paid to our shareholders, but the dividend equivalents are only paid
on the corresponding shares that are earned. If no shares are earned, the dividend equivalents are forfeited. Earned dividend equivalents are converted into additional RSUs.
Service-vested RSUs
The Committee believes that service-vested RSUs assist in the retention of key executive talent. Service-vested RSUs were granted on
March 9, 2016 and comprise 20% of the 2016 LTIP opportunity. Service-vested RSUs vest 33% after the first year, vest an additional 33% after the second year and vest the final 34% after the third year from the grant date, and are subject to
continued employment to the vesting date. From the date of the grant, the RSUs accrue dividend equivalents at the same rate as dividends paid to our shareholders. These dividend equivalents are converted into additional RSUs and vest when the
underlying RSUs vest.
Stock Options
The Committee believes that stock options provide strong alignment with shareholder interests, as participants do not realize any value unless
our stock price appreciates. They also promote retention. Stock options granted under the LTIP have an exercise price equal to the closing stock price on the date of grant, vest ratably over a four-year period subject to continued employment on each
vesting date and have a
ten-year
term. Stock options were granted on March 9, 2016 and comprise 30% of the 2016 LTIP opportunity. The number of options granted was determined using the Black-Scholes
valuation method. For additional information regarding assumptions used for these valuations, see the Companys 2016 Annual Report on Form
10-K
Notes to Consolidated Financial Statements
|
|
|
2017 Proxy Statement Compensation Discussion and Analysis
|
|
19
|
Note 1 Summary of Significant Accounting Policies Share-Based Compensation. Upon exercise Executive Officers are required to hold shares equivalent to any proceeds (net of
exercise price and related taxes and the costs of the exercise) for a minimum of twelve months.
Timing of Equity Grants
The Committee has granted long-term incentives only at its regularly scheduled Board meetings. The grant date is the applicable resolution as
approved or a future date as otherwise specified in the resolution.
2016-2018 Performance-based RSUs
The Performance-based RSUs granted in 2016 have three performance measures as shown below:
|
|
|
|
|
Relative Total Shareholder Return
- Relative Total Shareholder Return for
the three-year period measured against a peer group of companies
Relative Operating Return on Equity
- Average annual relative Operating Income return on average
equity for the three-year period measured against a peer group of companies
Total Written Premium Growth
- Written premium growth measured as the compound annual growth
rate from 2016 to 2018 for Auto, Property, Annuity and Life.
|
Prior Years PBRSU Grants
2015-2017 PBRSUs
The PBRSUs granted in 2015 will
not mature until December 31, 2017. Since the applicable
3-year
performance period has not yet ended, actual performance against targets is not yet known.
2014-2016 PBRSUs
The performance-based RSUs granted
in 2014 matured and vested as of December 31, 2016. The performance measures, targets and payout levels for the PBRSUs granted in 2014 are as follows:
|
|
|
|
|
|
|
2014-2016 Relative
Performance Measures
(1)
|
|
Weighting
|
|
2014-2016
Target
(2)
|
|
Result
(as of 12/31/2016)
|
Operating Return on Equity
|
|
50%
|
|
50th
|
|
53%
|
Total Shareholder Return
|
|
50%
|
|
50th
|
|
52%
|
Total
|
|
100%
|
|
|
|
105%
|
|
(1)
|
The Performance Measures, as defined under the Long-term Incentive Plan, include:
|
|
|
|
Operating Return on Equity Relates to the average annual Operating Income return on average equity for the three-year period measures against a peer group of companies in the Russell 2000
®
Index
|
|
|
|
Total Shareholder Return Relates to the Total Shareholder Return for the three-year period measured against a peer group of companies in the Russell 2000
®
Index
|
|
(2)
|
50
th
Percentile of Peer Group
|
Strategic Incentive Grants
Working with CAP, we designed
an incentive program to achieve both (i) corporate financial goals, and (ii) strategic individual goals which, while closely aligned with, transcend short and long-term financial measures. Specifically, in March 2016, we made equity grants
to key executives, including the NEOs, under our CECP. The Companys success makes our leadership team more vulnerable to recruitment by competitors. The Committee believes the grants promote continuity of leadership as we pursue our long-term
vision, and also strengthen managements alignment with shareholder interest. We believe if the management team is successful in achieving these specific strategic objectives, it will drive incremental value for shareholders. These awards were
specifically designed to address key priorities during this strategic transition in our Companys evolution, and are not expected to be an ongoing component of our compensation.
Each NEO received a provisional equity grant of PBRSUs contingent on a corporate financial Performance Goal, EPS, and individual strategic goals. If the
Performance Goal is satisfied, 50% of the award shall be earned and vested on January 1, 2019. The remaining 50% of the award shall be eligible for vesting on January 1, 2019 subject to achievement of individual strategic goals.
|
|
|
20
|
|
2017 Proxy Statement Compensation Discussion and Analysis
|
The Individual Goal-Based PBRSUs:
|
|
|
Do not vest unless the established individual strategic goals, discussed below, are achieved during the
performance period beginning on January 1, 2016, and ending on December 31, 2018;
|
|
|
|
Are reduced to zero, if the corporate Performance Goal is not achieved;
|
|
|
|
Cannot exceed the number of shares granted (except through accrued dividend equivalents); and
|
|
|
|
Will be reduced if all individual strategic goals and their components are partially met.
|
The grant value of
the Strategic Equity Grant for each NEO is listed below. Because we do not anticipate these types of awards being a regular component of pay, these amounts were not explicitly included in the comparison to market pay data.
|
|
|
|
|
|
|
|
|
Named Individual
|
|
PBRSU
Grant Value
|
|
|
|
Marita Zuraitis
|
|
$
|
1,600,000
|
|
|
|
Dwayne D. Hallman
|
|
$
|
666,000
|
|
|
|
Matthew P. Sharpe
|
|
$
|
600,000
|
|
|
|
William J. Caldwell
|
|
$
|
525,000
|
|
|
|
Kelly J. Stacy
|
|
$
|
300,000
|
|
For all PBRSUs, the NEO must be an employee of the Company as of the vesting date for the awards to vest, except as otherwise
provided with regard to death, disability, or in the event of a change in control, or as otherwise provided under a severance or consulting arrangement. The NEO will forfeit the entire award if she or he retires prior to the end of the performance
period. Upon vesting, such units are converted into an equivalent number of shares of Common Stock.
Ms. Zuraitis individual goals are based on
execution of strategic plans related to our long-term vision and leading the execution of the management teams critical strategic initiatives, expanding the Companys external exposure, and leveraging the Companys unique industry
position and enhancing the overall customer value proposition.
Mr. Hallmans individual goals are based on establishing efficient and optimized
Capital Management, Enterprise Risk Management, Investor Relations and Rating Agency Relations, and Investment Management strategies, providing strategic support to ensure the Company achieves our aggressive long-term vision, and leading business
development and partnership opportunities.
Mr. Sharpes individual goals are based on refining and implementing an effective household
acquisition strategy, leading the implementation strategy and execution of the DOL/SEC fiduciary standard transition, and continuing to expand the Companys life insurance platform.
Mr. Caldwells individual goals are based on development of a strategy to modernize the Companys property and casualty infrastructure,
execution of a customer and agent experience strategy, and implementation of advanced pricing segmentation.
Mr. Stacys individual goals are
based on building, establishing and achieving a long-term sales plan, building an agency framework that establishes clear standards and assessing agents against those standards, and designing an optimal field structure to deliver improved results.
Achievement of the individual strategic goals will be determined by the Board of Directors, with input from the CEO (except for her own award). The CEO
will provide, periodic updates to the Board illustrating progress by each individual.
The entire award is subject to satisfaction of an objective
threshold company-wide performance goal, which must be met during the performance period beginning on January 1, 2016 and ending on December 31, 2018 (Performance Period). If an unexpected event occurs triggering a significant loss, the
awards could be eliminated entirely. With the objective threshold company-wide performance goal, the awards qualify for the performance-based compensation exception to the deduction limit in Section 162(m) of the Internal Revenue Code.
Additional Pay Practices
Stock
Ownership & Holding Guidelines
The CEO is required to accumulate and maintain beneficial stock ownership with a book value of at least 500% of
base salary and all other NEOs are required to accumulate and maintain beneficial stock ownership with a book value of at least 350% of base salary. Given recent market volatility, we use book value to measure the value of the shares we require the
NEOs to own. Book value is less volatile than stock price. For this purpose, the Companys book value per share is determined by dividing total shareholders equity, less the fair value adjustment for investments, by the number of
outstanding shares of common stock.
|
|
|
2017 Proxy Statement Compensation Discussion and Analysis
|
|
21
|
The NEOs must satisfy stock ownership guidelines within five years of attaining their position. Stock ownership
may be achieved by direct ownership or beneficial ownership through a spouse, child, or trust. The following types of beneficial ownership are considered in determining stock ownership: direct ownership, shares held through our 401(k) Plan,
deferred common stock equivalent units (only Mr. Hallman has these) and RSUs (vested and unvested). Outstanding stock options are not used in determining stock ownership.
Our executives are required to defer earned and vested RSU awards until their stock ownership guidelines are met. Beginning with the March 9, 2011 stock
option grants, the NEOs are required to hold shares equivalent to any proceeds from a long-term incentive stock option exercise, net of exercise price and related taxes and the costs of the exercise, for a minimum of twelve months after the date of
exercise. As part of its 2016 overall review of the executive compensation program, the Committee determined the existing multiples of base salary stock ownership guidelines for the Executive Officers were appropriate and would be continued in 2016.
As indicated in the following chart, all NEOs have met or exceeded their stock ownership guidelines except for Mr. Caldwell and Mr. Stacy.
Mr. Caldwell has been with the Company less than four years and Mr. Stacy has been with the Company less than two years. Mr. Caldwell and Mr. Stacy are on target to meet the requirement by their respective deadlines.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Named Individual
|
|
2016 Stock
Ownership
Target
|
|
2016 Stock
Ownership
Actual
|
|
|
2016 Stock
Ownership
|
|
|
2016 Book
Value (1)
|
|
Marita Zuraitis
|
|
500%
|
|
|
1032
|
%
|
|
|
296,955
|
|
|
$
|
8,252,375
|
|
Dwayne D. Hallman
|
|
350%
|
|
|
1130
|
%
|
|
|
187,011
|
|
|
$
|
5,197,045
|
|
Matthew P. Sharpe
|
|
350%
|
|
|
686
|
%
|
|
|
98,774
|
|
|
$
|
2,744,928
|
|
William J. Caldwell
|
|
350%
|
|
|
339
|
%
|
|
|
42,632
|
|
|
$
|
1,184,755
|
|
Kelly
J. Stacy
|
|
350%
|
|
|
241
|
%
|
|
|
25,984
|
|
|
$
|
722,099
|
|
(1)
|
Represents book value per share excluding the fair value adjustment for investments
|
HMN
|
Stock Price @ 12/31/2016 = $42.80
|
HM
|
Book Value @ 12/31/2016 = $27.79
|
Annual Performance and Pay Review
To further
reinforce a performance-based culture and the tie between Company results and compensation, the Committee reviews each executive officers performance annually, coinciding with the review of corporate performance results. Each executive officer
is reviewed not only on prior year business results but also on the individuals demonstration of leadership skills and progress on specific strategic initiatives and other key priorities. The Committee also considers any adjustments to base
salary, annual incentive opportunity, and long-term incentive opportunity at this review. The Committee recognizes the need to have market-competitive compensation opportunities to attract, retain, and reward high performing executive talent.
|
|
|
22
|
|
2017 Proxy Statement Compensation Discussion and Analysis
|
Risk Assessment
Our programs are structured to discourage excessive risk-taking through a balanced use of compensation vehicles and metrics with an overall goal of delivering
sustained long-term shareholder value while aligning our executives interests with those of our shareholders. To this end, management and CAP conduct, and the Committee and the Boards outside legal counsel reviews, an annual risk
analysis of the compensation plans and incentive metrics. Our programs require that a substantial portion of each executive officers compensation is contingent on delivering performance results. In addition, a significant portion of our
NEOs compensation is delivered in equity over a multi-year timeframe. The Committee has been advised by the Boards outside legal counsel and agrees that no unreasonable risk exists that a compensation policy or incentive plan would have
a material adverse impact on the Company.
Succession Planning Process
To mitigate enterprise risk and leadership gaps, the Committee oversees and monitors the Companys succession planning process on a regular basis. This
process identifies candidates that have the skill sets, background, training, and industry knowledge to assume critical positions on an emergency basis and also for the long-term, if necessary. The Companys succession plan is also reviewed by
the full Board annually.
Minimal Use of Employment Agreements
The Company does not have any individual employment agreements with any executive officer and intends to continue to minimize their use, while recognizing that
in isolated situations an agreement may be needed for attraction and retention of key executive talent.
Executive Severance and Change in Control Plans
To maintain market competitiveness and allow for the successful recruitment of key executives, the Company maintains the Horace Mann Service
Corporation Executive Severance Plan (Executive Severance Plan) and the Horace Mann Service Corporation Executive Change in Control Plan (CIC Plan). The Executive Severance Plan provides benefits due to loss of position with
or without a change in control. Currently, all NEOs participate in the Executive Severance Plan. The CIC Plan is intended to provide a level of security consistent with market practices, mitigate some of the conflicts an executive may be exposed to
in a potential acquisition or merger situation, and serve to insure a more stable transition if a corporate transaction were to occur. The CIC Plan provides for benefits only in the event of the loss of position following a change in control, as
defined in the CIC Plan. Participants in the CIC Plan are designated by position. This plan does not have tax
gross-up
provisions. Currently, Ms. Zuraitis, Mr. Sharpe, Mr. Caldwell, and
Mr. Stacy participate in the Executive CIC Plan. The CIC Plan does not permit duplicate benefits under the Executive Severance Plan. The Company had an individual severance agreement with Mr. Hallman, which was entered into at the time of
his employment in 2003. The agreement provided payments, benefits and tax
gross-up
provisions only if both a change in control of the Company and Mr. Hallmans actual or constructive termination of
employment occurred (double trigger).
Multiple of the sum of salary plus target annual incentive, payable in the form of salary continuation
(for Executive Severance), and payable in a lump sum (for CIC), based on the following table:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Multiple
|
|
|
Named Individual
|
|
Executive
Severance
|
|
Change In
Control
|
|
|
Marita Zuraitis
|
|
|
|
2.0
|
|
|
|
|
2.5
|
|
|
|
Dwayne D. Hallman*
|
|
|
|
N/A
|
|
|
|
|
N/A
|
|
|
|
Matthew P. Sharpe
|
|
|
|
1.5
|
|
|
|
|
2.0
|
|
|
|
William J. Caldwell
|
|
|
|
1.5
|
|
|
|
|
2.0
|
|
|
|
Kelly J. Stacy
|
|
|
|
1.0
|
|
|
|
|
1.0
|
|
|
*Following
|
his death in February 2017, Mr. Hallman is no longer a participant in our Executive Severance Plan or CIC Plan.
|
Retirement Plans
The NEOs participate in our Company-wide
Supplemental Retirement & Savings Plan 401(k) and a supplemental defined contribution plan designed to provide benefits that cannot be provided under our
tax-qualified
defined
contribution plan because of certain limitations imposed by the Internal Revenue Code. Each of these two plans includes a Company contribution. The amounts contributed for each NEO are included in the Summary Compensation Table. These
types of plans are customarily offered within our industry. No NEO participates in the Companys defined benefit plan or supplemental defined benefit retirement plan because participation in those plans was limited to individuals hired prior to
|
|
|
2017 Proxy Statement Compensation Discussion and Analysis
|
|
23
|
January 1, 1999 and all of our NEOs were hired after that date. We formerly maintained a money purchase pension plan, which was terminated in 2014 and all assets were distributed by the end
of 2016.
Deferred Compensation
Prior to 2009, the
LTIP permitted certain elective deferrals.
Pre-2009
account balances are maintained in notional deferred Common Stock equivalent units, which accrue dividend equivalents at the same rate as dividends paid to
our shareholders. These dividend equivalents are converted into additional deferred Common Stock equivalent units. Mr. Hallman was the only NEO with an account balance under this arrangement.
Nonqualified Defined Contribution and Other Nonqualified Deferred Compensation Plans
The Company offered a nonqualified deferred compensation plan to executives, which allowed them to defer receipt of Long-term Incentive cash compensation prior
to 2009 when cash was a component of the Long-term Incentive Plan. Executives were allowed to defer up to 100% of their earned long-term cash incentive into HMECs deferred Common Stock equivalent units. All the NEOs except Mr. Hallman
were hired after 2009 and do not have an account in the plan.
The Company also sponsors an unfunded excess pension plan, the Nonqualified Defined
Contribution Plan (NQDCP), which covers only the base salary compensation in excess of the Section 415 limit, which in 2016 was $265,000. The NQDCP accounts are established for the executives at the time their compensation exceeds
the Section 415 limit and the NEOs are credited with an amount equal to 5% of the excess. In addition, the NQDCP accounts are credited with the same rate of return as the qualified plan sponsored by the Company for all employees.
Clawbacks
The Committee believes that our compensation
program should reward performance that supports the Companys culture of integrity through compliance with applicable laws and regulations and our codes of ethics and conduct. As a further step to support that belief, the Committee has
determined that all executive officers are subject to the same standards as the CEO and CFO regarding cash compensation clawbacks as defined under Section 304 of the Sarbanes-Oxley Act of 2002. In addition, under the CECP, the Company is
entitled to recover any cash or equity award if it is determined that an executives own misconduct contributed materially to the executives receipt of an award. If changes are made in future applicable legislative or regulatory guidance,
the Company will modify the current clawback provisions to comply.
Hedging, Pledging Prohibitions
NEOs and other executive officers are prohibited from engaging in hedging transactions in our common stock. They are also prohibited from pledging their shares
of our common stock.
Perquisites and Personal Benefits
The only perquisites we provide are financial planning services, which are commonly provided among our peer companies. Please see the Summary Compensation
Table for further details. Our NEOs do not receive other personal benefits.
Tax Implications
Favorable accounting and tax treatment of the various elements of the Companys total compensation program is an important, not the sole, consideration in
the design of the compensation program. Section 162(m) of the Internal Revenue Code generally disallows a tax deduction to public corporations for compensation over $1,000,000 paid for any fiscal year to the corporations CEO and three
other most highly compensated Executive Officers (other than the CFO) as of the end of the fiscal year. However, the statute exempts qualifying performance-based compensation from the deduction limit if certain requirements are met.
The AIP and LTIP are designed to permit full deductibility and the Committee expects all compensation to be fully deductible. However, the Committee believes
that shareholder interests are best served by not restricting the Committees discretion and flexibility in developing compensation programs, even though such programs may result in certain
non-deductible
compensation expenses. In order to satisfy the Section 162(m) qualification requirements, the Committee allocated an incentive pool equal to 5.4% of adjusted operating income to certain individuals under the Companys compensation program.
Once the amount of the pool and the specific allocations are determined at the end of the year, the Committee can apply negative discretion to reduce (but not increase) the amount of any award payable from the incentive pool to
individuals, as determined by the amount payable to each individual based on performance criteria and actual results.
|
|
|
24
|
|
2017 Proxy Statement Compensation Discussion and Analysis
|
Compensation Tables
Summary Compensation Table
The following table sets forth
information regarding compensation of the Companys Chief Executive Officer, Chief Financial Officer, and the three other most highly compensated executive officers during 2016, 2015, and 2014.
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|
|
|
|
|
|
|
|
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|
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|
|
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Name & Principal
Position
|
|
Year
|
|
|
Salary
($) (1)
|
|
|
Bonus
($) (2)
|
|
|
Stock
Awards
($)
(3)
|
|
|
Option
Awards
($)
(4)
|
|
|
Non-Equity
Incentive Plan
Compensation
($) (5)
|
|
|
All Other
Compensation
($)
|
|
|
Total
($)
|
|
Marita Zuraitis
President & Chief
Executive Officer
|
|
|
2016
|
|
|
|
800,000
|
|
|
|
0
|
|
|
|
2,580,000
|
|
|
|
420,000
|
|
|
|
898,240
|
|
|
|
57,593
|
|
|
|
4,755,833
|
|
|
|
2015
|
|
|
|
742,333
|
|
|
|
0
|
|
|
|
770,000
|
|
|
|
330,000
|
|
|
|
749,809
|
|
|
|
55,587
|
|
|
|
2,647,729
|
|
|
|
2014
|
|
|
|
690,500
|
|
|
|
0
|
|
|
|
700,000
|
|
|
|
300,000
|
|
|
|
929,068
|
|
|
|
45,609
|
|
|
|
2,665,177
|
|
Dwayne D. Hallman
Executive Vice
President & Chief
Financial Officer
|
|
|
2016
|
|
|
|
457,333
|
|
|
|
0
|
|
|
|
1,016,000
|
|
|
|
150,000
|
|
|
|
308,096
|
|
|
|
22,225
|
|
|
|
1,953,654
|
|
|
|
2015
|
|
|
|
444,000
|
|
|
|
0
|
|
|
|
350,000
|
|
|
|
150,000
|
|
|
|
298,981
|
|
|
|
28,000
|
|
|
|
1,270,981
|
|
|
|
2014
|
|
|
|
440,502
|
|
|
|
0
|
|
|
|
350,000
|
|
|
|
150,000
|
|
|
|
329,275
|
|
|
|
30,200
|
|
|
|
1,299,977
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Matthew P. Sharpe
Executive Vice
President, Life &
Retirement
|
|
|
2016
|
|
|
|
400,000
|
|
|
|
0
|
|
|
|
950,000
|
|
|
|
150,000
|
|
|
|
269,472
|
|
|
|
40,927
|
|
|
|
1,810,399
|
|
|
|
2015
|
|
|
|
394,000
|
|
|
|
0
|
|
|
|
350,000
|
|
|
|
150,000
|
|
|
|
265,312
|
|
|
|
41,508
|
|
|
|
1,200,820
|
|
|
|
2014
|
|
|
|
354,252
|
|
|
|
0
|
|
|
|
280,000
|
|
|
|
120,000
|
|
|
|
264,803
|
|
|
|
36,053
|
|
|
|
1,055,108
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
William J. Caldwell
Executive Vice
President, Property
& Casualty
|
|
|
2016
|
|
|
|
335,417
|
|
|
|
0
|
|
|
|
770,000
|
|
|
|
105,000
|
|
|
|
196,490
|
|
|
|
39,885
|
|
|
|
1,446,792
|
|
|
|
2015
|
|
|
|
325,000
|
|
|
|
0
|
|
|
|
210,000
|
|
|
|
90,000
|
|
|
|
164,136
|
|
|
|
22,929
|
|
|
|
812,065
|
|
|
|
2014
|
|
|
|
254,174
|
|
|
|
0
|
|
|
|
122,500
|
|
|
|
52,500
|
|
|
|
136,163
|
|
|
|
25,142
|
|
|
|
590,479
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Kelly J. Stacy
Senior Vice President,
Field
Operations &
Distribution
|
|
|
2016
|
|
|
|
300,000
|
|
|
|
0
|
|
|
|
510,000
|
|
|
|
90,000
|
|
|
|
134,736
|
|
|
|
18,950
|
|
|
|
1,053,686
|
|
|
|
2015
|
|
|
|
130,769
|
|
|
|
200,000
|
|
|
|
310,000
|
|
|
|
90,000
|
|
|
|
134,676
|
|
|
|
44,287
|
|
|
|
909,732
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
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|
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|
(1)
|
Represents each NEOs actual base salary earnings as of December 31, 2016, 2015 and 2014, respectively. Mr. Stacy was hired in 2015.
|
(2)
|
For 2015 this represents a
sign-on
award for Mr. Stacy.
|
(3)
|
Represents the grant date fair value of service-based and performance-based RSUs granted in 2014 & 2015. Performance-based RSUs are valued based on the probable performance of Target with the potential of 50% to
200% being earned based on performance results. For 2015, this includes an additional
sign-on
award for Mr. Stacy. In 2016 it represents the grant date fair value of service based and performance based
RSUs, and performance based RSUs based on strategic initiatives.
|
(4)
|
Represents the grant date fair value of $5.01 per share for stock options granted on March 9, 2016. For Mr. Stacy, it represents the grant date fair value of $11.52 per share for stock options granted on
September 29, 2015.
|
(5)
|
Represents the cash payout for the AIP earned in each year.
|
|
|
|
2017 Proxy Statement Compensation Discussion and Analysis
|
|
25
|
Detail of All Other Compensation
The following table sets forth information regarding all other compensation paid to, or earned by, the NEOs in 2016.
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|
|
|
|
|
|
|
|
|
|
|
Name & Principal Position
|
|
Perquisites &
Other Personal
Benefits
($) (1)
|
|
|
Relocation ($)
|
|
|
Company
Contributions to
Defined
Contribution
Plans ($)
|
|
|
Total
($)
|
Marita Zuraitis
President and Chief Executive Officer
|
|
|
14,560
|
|
|
|
0
|
|
|
|
43,033
|
|
|
57,593
|
Dwayne D. Hallman
Executive Vice President and Chief Financial Officer
|
|
|
0
|
|
|
|
0
|
|
|
|
22,225
|
|
|
22,225
|
Matthew P. Sharpe
Executive Vice President, Life & Retirement
|
|
|
14,560
|
|
|
|
0
|
|
|
|
26,367
|
|
|
40,927
|
William J. Caldwell
Executive Vice President, Property & Casualty
|
|
|
14,560
|
|
|
|
0
|
|
|
|
25,325
|
|
|
39,885
|
Kelly J. Stacy
Senior Vice President, Field Operations and Distribution
|
|
|
0
|
|
|
|
0
|
|
|
|
18,950
|
|
|
18,950
|
|
(1)
|
Includes the use of a financial planning service to help minimize distractions and help ensure appropriate focus on his or her Company responsibilities.
|
|
|
|
26
|
|
2017 Proxy Statement Compensation Discussion and Analysis
|
Grants of Plan Based Awards
The following table sets forth information concerning the grant of the 2016 Annual Incentive, the grant of the 2016 Long-term Incentive for the 2016 2018
performance period, and the strategic incentive grants. Actual payouts under the 2016 AIP are included in the Summary Compensation Table. Payouts for the 2016 Long-term incentive grant and the determination of the actual RSUs earned will
not occur until after the completion of the 2016 2018 performance period.
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|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Named Individual
|
|
Grant
Date
|
|
|
|
|
|
Estimated Future Payouts
Under
Non-Equity
Incentive
Plan Awards (1)
|
|
|
|
|
Estimated
Future Payouts
Under Equity Incentive
Plan Awards (2)
|
|
|
All
Other
Stock
Awards:
Number
of
Shares
of
Stock
or Units
(#) (3)
|
|
|
All
Other
Option
Awards:
Number
of
Securities
Underlying
Options
(#) (4)
|
|
|
Exercise
or Base
Price
of
Option
Awards
($/Sh)
|
|
|
Grant
Date
Fair
Value
of
Stock
Option
Awards
($) (5)
|
|
|
|
Incentive
Plan
|
|
|
Threshold
($)
|
|
|
Target
($)
|
|
|
Maximum
($)
|
|
|
|
|
Threshold
(#)
|
|
|
Target
(#)
|
|
|
Maximum
(#)
|
|
|
|
|
|
Marita Zuraitis
|
|
|
|
|
|
|
AIP
|
|
|
|
400,000
|
|
|
|
800,000
|
|
|
|
1,600,000
|
|
|
|
|
|
N/A
|
|
|
|
N/A
|
|
|
|
N/A
|
|
|
|
N/A
|
|
|
|
N/A
|
|
|
|
N/A
|
|
|
|
N/A
|
|
|
|
|
3/9/2016
|
|
|
|
LTI
|
|
|
|
N/A
|
|
|
|
N/A
|
|
|
|
N/A
|
|
|
|
|
|
37,086
|
|
|
|
74,171
|
|
|
|
148,342
|
|
|
|
N/A
|
|
|
|
N/A
|
|
|
|
N/A
|
|
|
|
N/A
|
|
|
|
|
3/9/2016
|
|
|
|
LTI
|
|
|
|
N/A
|
|
|
|
N/A
|
|
|
|
N/A
|
|
|
|
|
|
N/A
|
|
|
|
N/A
|
|
|
|
N/A
|
|
|
|
9,030
|
|
|
|
N/A
|
|
|
|
N/A
|
|
|
|
N/A
|
|
|
|
|
3/9/2016
|
|
|
|
LTI
|
|
|
|
N/A
|
|
|
|
N/A
|
|
|
|
N/A
|
|
|
|
|
|
N/A
|
|
|
|
N/A
|
|
|
|
N/A
|
|
|
|
N/A
|
|
|
|
83,916
|
|
|
|
$31.01
|
|
|
|
420,001
|
|
Dwayne D. Hallman
|
|
|
|
|
|
|
AIP
|
|
|
|
137,200
|
|
|
|
274,400
|
|
|
|
548,800
|
|
|
|
|
|
N/A
|
|
|
|
N/A
|
|
|
|
N/A
|
|
|
|
N/A
|
|
|
|
N/A
|
|
|
|
N/A
|
|
|
|
N/A
|
|
|
|
|
3/9/2016
|
|
|
|
LTI
|
|
|
|
N/A
|
|
|
|
N/A
|
|
|
|
N/A
|
|
|
|
|
|
14,770
|
|
|
|
29,539
|
|
|
|
59,078
|
|
|
|
N/A
|
|
|
|
N/A
|
|
|
|
N/A
|
|
|
|
N/A
|
|
|
|
|
3/9/2016
|
|
|
|
LTI
|
|
|
|
N/A
|
|
|
|
N/A
|
|
|
|
N/A
|
|
|
|
|
|
N/A
|
|
|
|
N/A
|
|
|
|
N/A
|
|
|
|
3,225
|
|
|
|
N/A
|
|
|
|
N/A
|
|
|
|
N/A
|
|
|
|
|
3/9/2016
|
|
|
|
LTI
|
|
|
|
N/A
|
|
|
|
N/A
|
|
|
|
N/A
|
|
|
|
|
|
N/A
|
|
|
|
N/A
|
|
|
|
N/A
|
|
|
|
N/A
|
|
|
|
29,972
|
|
|
|
$31.01
|
|
|
|
150,010
|
|
Matthew P. Sharpe
|
|
|
|
|
|
|
AIP
|
|
|
|
120,000
|
|
|
|
240,000
|
|
|
|
480,000
|
|
|
|
|
|
N/A
|
|
|
|
N/A
|
|
|
|
N/A
|
|
|
|
N/A
|
|
|
|
N/A
|
|
|
|
N/A
|
|
|
|
N/A
|
|
|
|
|
3/9/2016
|
|
|
|
LTI
|
|
|
|
N/A
|
|
|
|
N/A
|
|
|
|
N/A
|
|
|
|
|
|
13,706
|
|
|
|
27,411
|
|
|
|
54,822
|
|
|
|
N/A
|
|
|
|
N/A
|
|
|
|
N/A
|
|
|
|
N/A
|
|
|
|
|
3/9/2016
|
|
|
|
LTI
|
|
|
|
N/A
|
|
|
|
N/A
|
|
|
|
N/A
|
|
|
|
|
|
N/A
|
|
|
|
N/A
|
|
|
|
N/A
|
|
|
|
3,225
|
|
|
|
N/A
|
|
|
|
N/A
|
|
|
|
N/A
|
|
|
|
|
3/9/2016
|
|
|
|
LTI
|
|
|
|
N/A
|
|
|
|
N/A
|
|
|
|
N/A
|
|
|
|
|
|
N/A
|
|
|
|
N/A
|
|
|
|
N/A
|
|
|
|
N/A
|
|
|
|
29,972
|
|
|
|
$31.01
|
|
|
|
150,010
|
|
William J. Caldwell
|
|
|
|
|
|
|
AIP
|
|
|
|
83,854
|
|
|
|
167,708
|
|
|
|
335,416
|
|
|
|
|
|
N/A
|
|
|
|
N/A
|
|
|
|
N/A
|
|
|
|
N/A
|
|
|
|
N/A
|
|
|
|
N/A
|
|
|
|
N/A
|
|
|
|
|
3/9/2016
|
|
|
|
LTI
|
|
|
|
N/A
|
|
|
|
N/A
|
|
|
|
N/A
|
|
|
|
|
|
11,288
|
|
|
|
22,575
|
|
|
|
45,150
|
|
|
|
N/A
|
|
|
|
N/A
|
|
|
|
N/A
|
|
|
|
N/A
|
|
|
|
|
3/9/2016
|
|
|
|
LTI
|
|
|
|
N/A
|
|
|
|
N/A
|
|
|
|
N/A
|
|
|
|
|
|
N/A
|
|
|
|
N/A
|
|
|
|
N/A
|
|
|
|
2,259
|
|
|
|
N/A
|
|
|
|
N/A
|
|
|
|
N/A
|
|
|
|
|
3/9/2016
|
|
|
|
LTI
|
|
|
|
N/A
|
|
|
|
N/A
|
|
|
|
N/A
|
|
|
|
|
|
N/A
|
|
|
|
N/A
|
|
|
|
N/A
|
|
|
|
N/A
|
|
|
|
20,980
|
|
|
|
$31.01
|
|
|
|
105,005
|
|
Kelly J. Stacy
|
|
|
|
|
|
|
AIP
|
|
|
|
60,000
|
|
|
|
120,000
|
|
|
|
240,000
|
|
|
|
|
|
N/A
|
|
|
|
N/A
|
|
|
|
N/A
|
|
|
|
N/A
|
|
|
|
N/A
|
|
|
|
N/A
|
|
|
|
N/A
|
|
|
|
|
3/9/2016
|
|
|
|
LTI
|
|
|
|
N/A
|
|
|
|
N/A
|
|
|
|
N/A
|
|
|
|
|
|
7,257
|
|
|
|
14,513
|
|
|
|
29,026
|
|
|
|
N/A
|
|
|
|
N/A
|
|
|
|
N/A
|
|
|
|
N/A
|
|
|
|
|
3/9/2016
|
|
|
|
LTI
|
|
|
|
N/A
|
|
|
|
N/A
|
|
|
|
N/A
|
|
|
|
|
|
N/A
|
|
|
|
N/A
|
|
|
|
N/A
|
|
|
|
1,935
|
|
|
|
N/A
|
|
|
|
N/A
|
|
|
|
N/A
|
|
|
|
|
3/9/2016
|
|
|
|
LTI
|
|
|
|
N/A
|
|
|
|
N/A
|
|
|
|
N/A
|
|
|
|
|
|
N/A
|
|
|
|
N/A
|
|
|
|
N/A
|
|
|
|
N/A
|
|
|
|
17,984
|
|
|
|
$31.01
|
|
|
|
90,010
|
|
N/A = Not applicable
(1)
|
Represents performance-based 2016 Annual Incentive.
|
(2)
|
Represents the performance-based portion of the 2016 Long-term Incentive grant, as well as a performance based RSU grant based on strategic initiatives.
|
(3)
|
Represents the service-based RSU portion of the 2016 Long-term Incentive grant.
|
(4)
|
Represents the stock option portion of the 2016 Long-term Incentive grant.
|
(5)
|
Totals equate to each NEOs 2016 Long-term Incentive amount. The fair value of stock options was determined using the Black-Scholes model.
|
|
|
|
2017 Proxy Statement Compensation Discussion and Analysis
|
|
27
|
Outstanding Equity Awards at Fiscal Year End
The following table sets forth information regarding the exercisable and unexercisable stock options, as well as the unvested RSUs held by each NEO at
December 31, 2016.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Option Awards
|
|
|
|
|
|
Stock Awards
(Restricted Stock
Units)
|
|
|
Named Individual
|
|
Number of
Securities
Underlying
Unexercised
Options
Exercisable
(#)
|
|
|
Number of
Securities
Underlying
Unexercised
Options
Unexercisable
(#) (1)
|
|
|
Equity
Incentive
Plan
Awards:
Number
of
Securities
Underlying
Unexercised
Unearned
Options
(#)
|
|
|
Option
Exercise
Price
($)
|
|
|
Grant
Date
|
|
|
Option
Expiration
Date
|
|
|
|
|
|
Number of
Shares or
Units of
Stock
that Have
Not Vested
(#)
(2)
|
|
|
Market
Value of
Shares or
Units
of
Stock
that Have
Not Vested
($) (3)
|
|
|
Equity
Incentive
Plan
Awards:
Number
of
Unearned
Shares,
Units, or
Other
Rights
that
Have
Not Vested
(#) (4)
|
|
|
Equity
Incentive
Plan
Awards:
Market
or
Payout
Value of
Unearned
Shares,
Units, or
Other
Rights
that Have
Not Vested
($) (3)
|
|
|
|
Marita Zuraitis
|
|
|
20,157
|
|
|
|
6,719
|
|
|
|
0
|
|
|
$
|
22.69
|
|
|
|
05/22/13
|
|
|
|
05/22/20
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
16,648
|
|
|
|
16,648
|
|
|
|
0
|
|
|
$
|
28.88
|
|
|
|
03/05/14
|
|
|
|
03/05/24
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
7,399
|
|
|
|
22,197
|
|
|
|
0
|
|
|
$
|
32.35
|
|
|
|
03/04/15
|
|
|
|
03/04/25
|
|
|
|
|
|
|
|
26,919
|
|
|
$
|
1,152,133
|
|
|
|
113,344
|
|
|
$
|
4,851,123
|
|
|
|
|
|
|
0
|
|
|
|
83,916
|
|
|
|
0
|
|
|
$
|
31.01
|
|
|
|
03/09/16
|
|
|
|
03/09/26
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Dwayne D. Hallman
|
|
|
9,545
|
|
|
|
0
|
|
|
|
0
|
|
|
$
|
17.01
|
|
|
|
03/09/11
|
|
|
|
03/09/18
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
22,464
|
|
|
|
0
|
|
|
|
0
|
|
|
$
|
17.32
|
|
|
|
03/07/12
|
|
|
|
03/07/19
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
13,872
|
|
|
|
4,624
|
|
|
|
0
|
|
|
$
|
20.60
|
|
|
|
03/05/13
|
|
|
|
03/05/20
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
8,324
|
|
|
|
8,324
|
|
|
|
0
|
|
|
$
|
28.88
|
|
|
|
03/05/14
|
|
|
|
03/05/24
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
3,363
|
|
|
|
10,089
|
|
|
|
0
|
|
|
$
|
32.35
|
|
|
|
03/04/15
|
|
|
|
03/04/25
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
0
|
|
|
|
29,972
|
|
|
|
0
|
|
|
$
|
31.01
|
|
|
|
03/09/16
|
|
|
|
03/09/26
|
|
|
|
|
|
|
|
14,978
|
|
|
$
|
641,058
|
|
|
|
48,080
|
|
|
$
|
2,057,824
|
|
|
|
Matthew P. Sharpe
|
|
|
14,976
|
|
|
|
0
|
|
|
|
0
|
|
|
$
|
17.32
|
|
|
|
03/07/12
|
|
|
|
03/07/19
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
8,325
|
|
|
|
2,775
|
|
|
|
0
|
|
|
$
|
20.60
|
|
|
|
03/05/13
|
|
|
|
03/05/20
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
6,660
|
|
|
|
6,660
|
|
|
|
0
|
|
|
$
|
28.88
|
|
|
|
03/05/14
|
|
|
|
03/05/24
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
3,363
|
|
|
|
10,089
|
|
|
|
0
|
|
|
$
|
32.35
|
|
|
|
03/04/15
|
|
|
|
03/04/25
|
|
|
|
|
|
|
|
12,061
|
|
|
$
|
516,211
|
|
|
|
43,996
|
|
|
$
|
1,883,029
|
|
|
|
|
|
|
0
|
|
|
|
29,972
|
|
|
|
0
|
|
|
$
|
31.01
|
|
|
|
03/09/16
|
|
|
|
03/09/26
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
William J. Caldwell
|
|
|
2,391
|
|
|
|
797
|
|
|
|
0
|
|
|
$
|
30.24
|
|
|
|
12/11/13
|
|
|
|
12/11/20
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2,914
|
|
|
|
2,914
|
|
|
|
0
|
|
|
$
|
28.88
|
|
|
|
03/05/14
|
|
|
|
03/05/24
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2,018
|
|
|
|
6,054
|
|
|
|
0
|
|
|
$
|
32.35
|
|
|
|
03/04/15
|
|
|
|
03/04/25
|
|
|
|
|
|
|
|
5,587
|
|
|
$
|
239,124
|
|
|
|
31,480
|
|
|
$
|
1,347,344
|
|
|
|
|
|
|
0
|
|
|
|
20,980
|
|
|
|
0
|
|
|
$
|
31.01
|
|
|
|
03/09/16
|
|
|
|
03/09/26
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Kelly J. Stacy
|
|
|
0
|
|
|
|
5,862
|
|
|
|
0
|
|
|
$
|
33.41
|
|
|
|
09/29/15
|
|
|
|
09/29/25
|
|
|
|
|
|
|
|
5,323
|
|
|
$
|
227,824
|
|
|
|
19,607
|
|
|
$
|
839,180
|
|
|
|
|
|
|
0
|
|
|
|
17,984
|
|
|
|
0
|
|
|
$
|
31.01
|
|
|
|
03/09/15
|
|
|
|
03/9/26
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1)
|
Long-term Incentive stock option grants are service-based and all unexercisable options vest on each anniversary of the grant date at a rate of 25% of the original grant.
|
(2)
|
Represents the unvested service-based RSUs granted in 2012, 2013, 2014, 2015, and 2016.
|
(3)
|
Represents the value of the RSUs based on the closing stock price of $42.80 at December 31, 2016.
|
(4)
|
The performance-based RSUs granted in 2014 will not be earned until the end of the 2014-2016 performance period. RSUs earned at the end of the performance period will vest 100% in 2017. The performance-based RSUs
granted in 2015 will not be earned until the end of the 2015-2017 performance period. RSUs earned at the end of the performance period will vest 100% in 2018. The performance-based RSUs granted in 2016 will not be earned until the end of the
2016-2018 performance period. RSUs earned at the end of the performance period will vest 100% in 2019.
|
|
|
|
28
|
|
2017 Proxy Statement Compensation Discussion and Analysis
|
Option Exercises and Stock Vest
The following table sets forth information regarding options exercised and stock awards acquired on vesting by the NEOs in 2016.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Named Individual
|
|
Option Awards
|
|
|
|
|
Stock Awards
|
|
|
|
Number of Shares
Acquired
on
Exercise
(#)
|
|
|
Value Realized
on Exercise
($)
|
|
|
|
|
Number of
Shares
Acquired
on Vesting
(#)
|
|
|
Value
Realized
on
Vesting
($) (1)
|
|
|
|
Marita Zuraitis
|
|
|
0
|
|
|
|
0
|
|
|
|
|
|
2,311
|
|
|
|
73,004
|
|
|
|
Dwayne D. Hallman
|
|
|
18,475
|
|
|
|
449,121
|
|
|
|
|
|
14,746
|
|
|
|
458,900
|
|
|
|
Matthew P. Sharpe
|
|
|
0
|
|
|
|
0
|
|
|
|
|
|
1,051
|
|
|
|
33,201
|
|
|
|
William J. Caldwell
|
|
|
0
|
|
|
|
0
|
|
|
|
|
|
4,757
|
|
|
|
169,989
|
|
|
|
Kelly J. Stacy
|
|
|
1,954
|
|
|
|
18,696
|
|
|
|
|
|
1,608
|
|
|
|
52,444
|
|
(1)
|
The value realized on vesting of stock awards is determined by multiplying the number of shares vested by the
closing stock price on the date of vesting. The actual amounts realized from vested stock awards will depend upon the sale price of the shares when they are actually sold.
|
Nonqualified Defined Contribution and Other Nonqualified Deferred Compensation Plans
The following table sets forth information regarding participation by the NEOs in the Companys NQDCP and the nonqualified deferred compensation plan as of
December 31, 2016.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Named Individual
|
|
Account Name
|
|
Executive
Contributions in
Last FY
($)
|
|
|
Registrant
Contributions in
Last FY
($) (1)
|
|
|
Aggregate
Earnings
in Last FY
($) (2)
|
|
|
Aggregate
Balance
at Last FYE
($)
|
|
|
|
Marita Zuraitis
|
|
NQDCP Account
|
|
|
0
|
|
|
|
26,750
|
|
|
|
726
|
|
|
|
62,412
|
|
|
|
|
|
Deferred Compensation Account
|
|
|
0
|
|
|
|
0
|
|
|
|
0
|
|
|
|
0
|
|
|
|
Dwayne D. Hallman
|
|
NQDCP Account
|
|
|
0
|
|
|
|
9,617
|
|
|
|
792
|
|
|
|
60,074
|
|
|
|
|
|
Deferred Compensation Account
|
|
|
0
|
|
|
|
0
|
|
|
|
78,086
|
|
|
|
315,735
|
|
|
|
Matthew P. Sharpe
|
|
NQDCP Account
|
|
|
0
|
|
|
|
6,750
|
|
|
|
238
|
|
|
|
21,867
|
|
|
|
|
|
Deferred Compensation Account
|
|
|
0
|
|
|
|
0
|
|
|
|
0
|
|
|
|
0
|
|
|
|
William J. Caldwell
|
|
NQDCP Account
|
|
|
0
|
|
|
|
4,250
|
|
|
|
46
|
|
|
|
7,296
|
|
|
|
|
|
Deferred Compensation Account
|
|
|
0
|
|
|
|
0
|
|
|
|
0
|
|
|
|
0
|
|
|
|
Kelly J. Stacy
|
|
NQDCP Account
|
|
|
0
|
|
|
|
1,750
|
|
|
|
0
|
|
|
|
1,750
|
|
|
|
|
|
Deferred Compensation Account
|
|
|
0
|
|
|
|
0
|
|
|
|
0
|
|
|
|
0
|
|
(1)
|
Represents the 2016 NQDCP registrant Company contributions. These contributions are included in the All Other Compensation column of the Summary Compensation Table for 2016.
|
(2)
|
Represents (a) the gains in the NQDCP in 2016 and (b) the change in the deferred compensation account balance reflecting changes in the closing stock price of HMEC Common Stock from December 31, 2015 to
December 31, 2016, each excluding contributions reflected in the first two columns.
|
|
|
|
2017 Proxy Statement Compensation Discussion and Analysis
|
|
29
|
Illustration of Potential Payments upon Termination or Change in Control
The following table presents the estimated payments and benefits that would have been payable as of the end of 2016 in the event of separation due to disability
or death, cause, voluntary termination of employment, retirement, involuntary termination of employment without cause, and a change of control of the Company.
Consistent with SEC requirements, these estimated amounts have been calculated as if the NEOs employment had been terminated as of December 30,
2016, the last business day of 2016, using the closing market price of our Common Stock on that date ($42.80). The amounts reported in the following table are hypothetical amounts based on the disclosure of compensation information about the NEOs.
Actual payments will depend on the circumstances and timing of any termination of employment or other triggering event.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Estimated
Payments ($) Assuming Termination as of December 31, 2016 (1)(2)
|
|
|
|
Name
& Benefits
|
|
Disability or
Death
|
|
|
For
Cause
|
|
|
Voluntary
|
|
|
Involuntary
Termination w/o
Cause
|
|
|
Change in
Control
|
|
|
|
Marita Zuraitis
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash Severance
|
|
|
0
|
|
|
|
0
|
|
|
|
0
|
|
|
|
3,200,000
|
|
|
|
4,000,000
|
|
|
|
AIP
|
|
|
800,000
|
|
|
|
0
|
|
|
|
0
|
|
|
|
800,000
|
|
|
|
800,000
|
|
|
|
Acceleration of Stock Options
|
|
|
989,370
|
|
|
|
0
|
|
|
|
0
|
|
|
|
0
|
|
|
|
989,370
|
|
|
|
Acceleration of RSUs
|
|
|
3,362,596
|
|
|
|
0
|
|
|
|
0
|
|
|
|
0
|
|
|
|
5,721,504
|
|
|
|
Health and Welfare
|
|
|
0
|
|
|
|
0
|
|
|
|
0
|
|
|
|
38,019
|
|
|
|
38,019
|
|
|
|
Modified Cap Adjustment (3)
|
|
|
N/A
|
|
|
|
N/A
|
|
|
|
N/A
|
|
|
|
N/A
|
|
|
|
N/A
|
|
|
|
TOTAL
|
|
|
5,151,966
|
|
|
|
0
|
|
|
|
0
|
|
|
|
4,038,019
|
|
|
|
11,548,893
|
|
|
|
Dwayne D. Hallman
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash Severance
|
|
|
0
|
|
|
|
0
|
|
|
|
0
|
|
|
|
0
|
|
|
|
0
|
|
|
|
AIP
|
|
|
329,275
|
|
|
|
0
|
|
|
|
0
|
|
|
|
0
|
|
|
|
0
|
|
|
|
Acceleration of Stock Options
|
|
|
353,370
|
|
|
|
0
|
|
|
|
0
|
|
|
|
0
|
|
|
|
0
|
|
|
|
Acceleration of RSUs
|
|
|
1,229,273
|
|
|
|
0
|
|
|
|
0
|
|
|
|
0
|
|
|
|
0
|
|
|
|
Health and Welfare
|
|
|
0
|
|
|
|
0
|
|
|
|
0
|
|
|
|
0
|
|
|
|
0
|
|
|
|
Tax
Gross-Up
|
|
|
N/A
|
|
|
|
N/A
|
|
|
|
N/A
|
|
|
|
N/A
|
|
|
|
N/A
|
|
|
|
TOTAL
|
|
|
1,911,918
|
|
|
|
0
|
|
|
|
0
|
|
|
|
0
|
|
|
|
0
|
|
|
|
Matthew P. Sharpe
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash Severance
|
|
|
0
|
|
|
|
0
|
|
|
|
0
|
|
|
|
960,000
|
|
|
|
1,280,000
|
|
|
|
AIP
|
|
|
240,000
|
|
|
|
0
|
|
|
|
0
|
|
|
|
240,000
|
|
|
|
240,000
|
|
|
|
Acceleration of Stock Options
|
|
|
353,370
|
|
|
|
0
|
|
|
|
0
|
|
|
|
0
|
|
|
|
353,370
|
|
|
|
Acceleration of RSUs
|
|
|
1,089,046
|
|
|
|
0
|
|
|
|
0
|
|
|
|
0
|
|
|
|
1,981,426
|
|
|
|
Health and Welfare
|
|
|
0
|
|
|
|
0
|
|
|
|
0
|
|
|
|
38,019
|
|
|
|
38,019
|
|
|
|
Modified Cap Adjustment (3)
|
|
|
N/A
|
|
|
|
N/A
|
|
|
|
N/A
|
|
|
|
N/A
|
|
|
|
N/A
|
|
|
|
TOTAL
|
|
|
1,682,416
|
|
|
|
0
|
|
|
|
0
|
|
|
|
1,238,019
|
|
|
|
3,892,815
|
|
|
|
William J. Caldwell
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash Severance
|
|
|
0
|
|
|
|
0
|
|
|
|
0
|
|
|
|
787,500
|
|
|
|
1,050,000
|
|
|
|
AIP
|
|
|
175,000
|
|
|
|
0
|
|
|
|
0
|
|
|
|
175,000
|
|
|
|
175,000
|
|
|
|
Acceleration of Stock Options
|
|
|
247,354
|
|
|
|
0
|
|
|
|
0
|
|
|
|
0
|
|
|
|
247,354
|
|
|
|
Acceleration of RSUs
|
|
|
809,491
|
|
|
|
0
|
|
|
|
0
|
|
|
|
0
|
|
|
|
1,519,786
|
|
|
|
Health and Welfare
|
|
|
0
|
|
|
|
0
|
|
|
|
0
|
|
|
|
10,887
|
|
|
|
10,887
|
|
|
|
Modified Cap Adjustment (3)
|
|
|
N/A
|
|
|
|
N/A
|
|
|
|
N/A
|
|
|
|
N/A
|
|
|
|
N/A
|
|
|
|
TOTAL
|
|
|
1,231,845
|
|
|
|
0
|
|
|
|
0
|
|
|
|
973,387
|
|
|
|
3,003,027
|
|
|
|
Kelly J. Stacy
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash Severance
|
|
|
0
|
|
|
|
0
|
|
|
|
0
|
|
|
|
420,000
|
|
|
|
630,000
|
|
|
|
AIP
|
|
|
120,000
|
|
|
|
0
|
|
|
|
0
|
|
|
|
120,000
|
|
|
|
120,000
|
|
|
|
Acceleration of Stock Options
|
|
|
212,031
|
|
|
|
0
|
|
|
|
0
|
|
|
|
0
|
|
|
|
212,031
|
|
|
|
Acceleration of RSUs
|
|
|
554,688
|
|
|
|
0
|
|
|
|
0
|
|
|
|
0
|
|
|
|
1,032,849
|
|
|
|
Health and Welfare
|
|
|
0
|
|
|
|
0
|
|
|
|
0
|
|
|
|
17,408
|
|
|
|
17,408
|
|
|
|
Modified Cap Adjustment (3)
|
|
|
N/A
|
|
|
|
N/A
|
|
|
|
N/A
|
|
|
|
N/A
|
|
|
|
N/A
|
|
|
|
TOTAL
|
|
|
886,719
|
|
|
|
0
|
|
|
|
0
|
|
|
|
557,408
|
|
|
|
2,012,288
|
|
N/A Not applicable
|
(1)
|
All AIP and LTI earned payouts are assumed to be at target.
|
|
(2)
|
None of the NEOs were retirement eligible at December 31, 2016.
|
|
(3)
|
Benefit reduction to avoid the imposition of a golden parachute tax.
|
|
|
|
30
|
|
2017 Proxy Statement Compensation Discussion and Analysis
|
Compensation Committee Report
The Compensation Committee has reviewed and discussed the Compensation Discussion and Analysis contained in this Proxy Statement with management. Based on our
review of, and the discussions with management with respect to, the Compensation Discussion and Analysis, we recommended to the Board of Directors that the Compensation Discussion and Analysis be included in this Proxy Statement.
COMPENSATION COMMITTEE
STEPHEN J. HASENMILLER,
Chairman
BEVERLEY J. MCCLURE and GABRIEL L. SHAHEEN,
Members
Equity Compensation Plan Information
The following table provides information as of
December 31, 2016 regarding outstanding awards and shares remaining available for future issuance under the Companys equity compensation plans (excluding the 401(k) plan):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Equity Compensation Plans
|
|
Securities to be
Issued Upon the
Exercise of
Outstanding
Options,
Warrants and
Rights
|
|
|
Weighted Average
Exercise Price of
Outstanding Options,
Warrants and Rights
|
|
|
Securities Available for
Future Issuance Under Equity
Compensation Plans (4)
|
|
|
|
Plans Approved by Shareholders
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Stock Incentive Plans (1)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Stock Options
|
|
|
747,032
|
|
|
$
|
19.05
|
|
|
|
N/A
|
|
|
|
Restricted Stock Units (2)
|
|
|
1,419,268
|
|
|
|
N/A
|
|
|
|
N/A
|
|
|
|
Subtotal
|
|
|
2,166,300
|
|
|
|
N/A
|
|
|
|
N/A
|
|
|
|
Deferred Compensation (2)(3)
|
|
|
125,560
|
|
|
|
N/A
|
|
|
|
N/A
|
|
|
|
Subtotal
|
|
|
2,291,860
|
|
|
|
N/A
|
|
|
|
2,882,735
|
|
|
|
Plans Not Approved by Shareholders
|
|
|
N/A
|
|
|
|
N/A
|
|
|
|
N/A
|
|
|
|
Total
|
|
|
2,291,860
|
|
|
|
N/A
|
|
|
|
2,882,735
|
|
N/A Not applicable
|
(1)
|
Includes grants under the HMEC 2010 Comprehensive Executive Compensation Plan, as amended, (CECP).
|
|
(2)
|
No exercise price is associated with the shares of Common Stock issuable under these rights.
|
|
(3)
|
The CECP permits Directors and participants in certain cash incentive programs to defer compensation in the form of Common Stock equivalent units, which can be settled in cash at the end of the specified deferral
period. For purposes of the CECP, Common Stock equivalent units are valued at 100% of the fair market value of Common Stock on the date of crediting to the participants deferral account. There are 45 senior executives of the Company currently
eligible to participate in the CECP. The CECP does not reserve a specific number of shares for delivery in settlement of Common Stock equivalent units but instead provides that shares will be available to the extent needed for such settlements.
Further information on the CECP appears in the Compensation Discussion and Analysis.
|
|
(4)
|
Excludes securities reflected in the Securities to be Issued column and represents shares remaining as part of a fungible share pool. The pool of shares is reduced by 2.5 shares for every full-value Award
that is granted.
|
|
|
|
2017 Proxy Statement Compensation Discussion and Analysis
|
|
31
|
Executive Officers
The following is certain information, as of March 15, 2017, with respect to the executive officers of the Company and its subsidiaries who are not
Directors of the Company (together with Marita Zuraitis, President and Chief Executive Officer, who is discussed above under Board Nominees, the Executive Officers). Dwayne D. Hallman, who was the Chief Financial Officer for
fiscal year 2016, is also included. However, Mr. Hallman passed away on February 3, 2017 and Bret A. Conklin was named Acting Chief Financial Officer as noted below.
Dwayne D. Hallman, Deceased
Executive Vice President and Chief Financial Officer
Mr. Hallman was appointed to his position as Executive Vice President and Chief Financial Officer in October 2010. He joined the Company in January 2003 as
Senior Vice President, Finance. From September 2000 to December 2002, he served as the Chief Financial Officer of Acceptance Insurance Companies, where he was responsible for financial reporting, investor relations, the treasury and investment
management functions and property-casualty operations. From July 1995 to August 2000, Mr. Hallman served as Vice President, Finance and Treasurer at Highlands Insurance Group, where he was responsible for financial reporting, treasury, planning
and office services. He served as Vice President and Controller of Ranger Insurance Company from 1988 to 1995. From 1984 to 1988, Mr. Hallman was associated with KPMG Peat Marwick, specializing in its insurance industry practice.
Mr. Hallman had over 30 years of experience in the insurance industry.
Matthew P. Sharpe, 55
Executive Vice President, Life & Retirement
Mr. Sharpe joined the Company in January 2012 as Executive Vice President, Annuity and Life. Mr. Sharpe was previously with Genworth Financial,
Inc. from 1999 to 2011 where he most recently served as Senior Vice President. During his tenure at Genworth, he gained an extensive annuity and life background while leading a variety of successful growth, product development, strategic,
marketing and sales initiatives. Mr. Sharpe has 30 years of experience in the insurance industry.
William J. Caldwell, 46
Executive Vice President, Property & Casualty
Mr. Caldwell was appointed to his present position of Executive Vice President, Property and Casualty in July 2015. He joined the Company in November 2013
as Senior Vice President, Personal Lines, and was appointed Senior Vice President, Property & Casualty in October 2014. Mr. Caldwell previously served as Head of Property Products at QBE North America from June 2011 through November
2013, Senior Vice President of Bank of America from August 2007 to June 2011 and Vice President of Unitrin from June 2001 to August 2007. Mr. Caldwell has over 20 years of experience in the insurance industry.
Kelly J. Stacy, 58
Senior Vice President, Field
Operations and Distribution
Mr. Stacy joined the Company in July 2015 as Senior Vice President, Field Operations and Distribution. Mr. Stacy
previously served as Northeast Regional President with The Hanover Insurance Group, a position he held since 2011. He served as Regional President and led Travelers Select commercial field operations from 2007 to 2011 and he served as Senior Vice
President of marketing and field operations at the Main Street America Group from 1998 to 2007. Mr. Stacy has more than 30 years of property and casualty industry experience leading field operations, distribution and sales.
Bret A. Conklin, 53
Senior Vice President, Acting Chief Financial Officer and Controller
Mr. Conklin joined the Company as Senior Vice President and Controller in January 2002. He was named the Acting Chief Financial Officer on January 30,
2017. Mr. Conklin previously served as Vice President of Kemper Insurance from January 2000 through January 2002, where he was responsible for all corporate financial reporting and accounting operations; Vice President and Controller of the
Company from July 1998 through January 2000; and Vice President and Controller of Pekin Insurance from September 1992 through June 1998. He has seven years of public accounting experience with KPMG Peat Marwick from 1985 to 1992, specializing in its
insurance industry practice. Mr. Conklin has over 30 years of experience in the insurance industry.
Sandra L. Figurski, 53
Senior Vice President and Chief Information Officer
Ms. Figurski was appointed to her present position as Senior Vice President and Chief Information Officer in November 2014. She joined the Company in
September 2013 as Chief Technology Officer. Ms. Figurski was previously with Allstate Insurance Company from 1981 to 2013 where she most recently served as Vice President and Divisional Chief Information Officer. Ms. Figurski has over 30
years of experience in the insurance industry.
John P. McCarthy, 61
Senior Vice President and Chief Human Resources Officer
Mr. McCarthy joined the Company in May 2014 as Senior Vice President and Chief Human Resources Officer. Mr. McCarthys previous experience
includes Guardian Life Insurance Company where he worked from December 2008 through March 2014, joining the company as Executive Vice President, Human Resources where he helped build a high-performing organization focusing on talent, leadership and
culture. He was with Wachovia Corporation from December 1998 to December 2008, where he held multiple positions including Senior Managing Director. Mr. McCarthy has over 30 years of experience in the financial services and insurance
industries.
Donald M. Carley, 49
Senior Vice
President, General Counsel, Corporate Secretary and Chief Compliance Officer
Mr. Carley joined the company in January 2016 as General Counsel. He
assumed the additional responsibilities of Corporate Secretary and Chief Compliance Officer in May 2016 and was appointed Senior Vice President in November 2016. Mr. Carley previously served as Associate General Counsel at State Farm Mutual
Automobile Insurance Company, a position he held since 2008. Prior to that, he spent 10 years in private practice at Sonnenschein Nath & Rosenthal LLP (now known as Dentons), most recently as partner of the firm. Mr. Carley has more
than 25 years of private practice and corporate experience with a focus on insurance industry litigation, legislative, regulatory, claims and operational issues.
|
|
|
32
|
|
2017 Proxy Statement Compensation Discussion and Analysis
|
Security Ownership of Certain Beneficial Owners and Management
The following table sets forth certain information regarding beneficial ownership of shares of Common Stock by each person who is known by the
Company to own beneficially more than 5% of the issued and outstanding shares of Common Stock, and by each of the Companys Directors, Board Nominees and the Companys Chief Executive Officer, Chief Financial Officer and the other three
highest compensated Executive Officers employed at the end of 2016 (collectively the Named Executive Officers), and by all Directors and Executive Officers of the Company as a group. Information in the table is as of March 15, 2017,
except that the ownership information for the 5% beneficial owners is as of December 31, 2016 based on information reported by such persons to the SEC. Except as otherwise indicated, to the Companys knowledge all shares of Common Stock
are beneficially owned, and investment and voting power is held solely by the persons named as owners.
|
|
|
|
|
|
|
|
|
|
|
Common Stock Ownership
|
|
Beneficial Ownership Amount
|
|
Percent of Class
|
|
|
|
5% Beneficial
Owners
|
|
|
|
|
|
|
|
|
BlackRock, Inc.
(1)
|
|
4,796,814
|
|
|
11.9
|
%
|
|
|
The Vanguard Group, Inc
(2)
|
|
3,494,893
|
|
|
8.7
|
%
|
|
|
Dimensional Fund
Advisors LP (3)
|
|
3,455,373
|
|
|
8.6
|
%
|
|
|
Silvercrest Asset
Management Group, LLC (4)
|
|
2,278,509
|
|
|
5.7
|
%
|
|
|
Hotchkis and Wiley
Capital Management, LLC (5)
|
|
2,100,881
|
|
|
5.2
|
%
|
|
|
Directors, Board
Nominees and Executive Officers
|
|
|
|
|
|
|
|
|
Daniel A. Domenech
(6)
|
|
7,050
|
|
|
*
|
|
|
|
Stephen J.
Hasenmiller
|
|
31,194
|
|
|
*
|
|
|
|
Ronald J. Helow
(7)
|
|
31,813
|
|
|
*
|
|
|
|
Beverley J. McClure
(8)
|
|
13,312
|
|
|
*
|
|
|
|
H. Wade Reece
|
|
0
|
|
|
0.0
|
%
|
|
|
Gabriel L. Shaheen
(9)
|
|
52,587
|
|
|
*
|
|
|
|
Robert Stricker
(10)
|
|
37,720
|
|
|
*
|
|
|
|
Steven O. Swyers
(11)
|
|
6,057
|
|
|
*
|
|
|
|
Marita Zuraitis
(12)
|
|
265,449
|
|
|
*
|
|
|
|
Dwayne D. Hallman
(13)
|
|
272,342
|
|
|
*
|
|
|
|
Matthew P. Sharpe
(14)
|
|
106,553
|
|
|
*
|
|
|
|
William J. Caldwell
(15)
|
|
27,258
|
|
|
*
|
|
|
|
Kelly J. Stacy
(16)
|
|
7,494
|
|
|
*
|
|
|
|
All Directors and
Executive Officers as a group (17 persons) (17)
|
|
977,496
|
|
|
2.4
|
%
|
(1)
|
BlackRock, Inc. (BlackRock) has a principal place of business at 55 East 52
nd
Street, New York, New York 10055. BlackRock has sole voting power with
respect to 4,696,402 shares and sole investment power with respect to 4,796,814 shares. The foregoing is based on Amendment No. 8 to Schedule 13G filed by BlackRock on January 12, 2017.
|
(2)
|
The Vanguard Group, Inc. (Vanguard) has a principal place of business at 100 Vanguard Boulevard, Malvern, Pennsylvania 19355. Vanguard has sole voting power with respect to 48,322 shares, sole investment
power with respect to 3,442,943 shares, and shared investment power with respect to 51,950 shares. The foregoing is based on Amendment No. 5 to Schedule 13G filed by Vanguard on February 13, 2017.
|
(3)
|
Dimensional Fund Advisors LP (Dimensional) has a principal place of business at Building One, 6300 Bee Cave Road, Austin, Texas 78746. Dimensional has sole voting power with respect to 3,348,087 shares and
sole investment power with respect to 3,455,373 shares. Dimensional disclaims beneficial ownership of such securities. The foregoing is based on Amendment No. 10 to Schedule 13G filed by Dimensional on February 9, 2017.
|
(4)
|
Silvercrest Asset Management Group, LLC (Silvercrest) has a principal place of business at 1330 Avenue of the Americas, 38
th
Floor, New York, New York
10019. Silvercrest has shared voting and investment power with respect to 2,278,509 shares. The foregoing is based on Amendment No. 3 to Schedule 13G filed by Silvercrest on February 14, 2017.
|
(5)
|
Hotchkis and Wiley Capital Management, LLC (Hotchkis and Wiley) has a principal place of business at 725 South Figueroa Street, 39th Floor, Los Angeles, California 90017. Hotchkis and Wiley has sole voting
power with respect to 1,728,861 shares and sole investment power with respect to 2,100,881 shares. Hotchkis and Wiley disclaims beneficial ownership of such securities. The foregoing is based on Amendment No. 2 to Schedule 13G filed by Hotchkis
and Wiley on February 10, 2017.
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(6)
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Consists entirely of 4,370 CSUs and 2,680 vested RSUs pursuant to the CECP.
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(7)
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Consists entirely of 31,813 vested RSUs pursuant to the CECP.
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(8)
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Consists entirely of 3,320 CSUs and 9,992 vested RSUs pursuant to the CECP.
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(9)
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Consists entirely of 14,628 CSUs and 37,959 vested RSUs pursuant to the CECP.
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(10)
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Includes 9,897 CSUs and 24,991 vested RSUs pursuant to the CECP.
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(11)
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Consists entirely of 6,057 vested RSUs pursuant to the CECP.
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(12)
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Includes 80,906 vested stock options and 182,951 vested RSUs pursuant to the CECP.
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(13)
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Includes 120,832 vested stock options, 7,377 CSUs and 125,150 vested RSUs pursuant to the CECP.
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(14)
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Includes 50,285 vested stock options and 55,544 vested RSUs pursuant to the CECP.
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(15)
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Includes 16,043 vested stock options and 5,649 vested RSUs pursuant to the CECP.
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(16)
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Includes 4,496 vested stock options and 1,282 vested RSUs pursuant to the CECP.
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(17)
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Includes 332,864 vested stock options, 48,451 CSUs and 530,956 vested RSUs pursuant to the CECP.
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2017 Proxy Statement Compensation Discussion and Analysis
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33
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Section 16(a) Beneficial Ownership Reporting Compliance
Section 16(a) of the Exchange Act requires the Companys Executive Officers and Directors and other persons who beneficially own more
than ten percent of HMECs outstanding Common Stock, whom the Company refers to collectively as the Reporting Persons, to file reports of ownership and changes in ownership with the SEC.
The Company has established procedures by which Reporting Persons provide relevant information regarding transactions in Common Stock to a Company
representative and the Company prepares and files the required ownership reports. Based on a review of those reports and other written representations, the Company believes that all such reports were timely filed in 2016.
PROPOSAL NO. 4 - RATIFICATION OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
The Audit Committee is directly responsible for the selection, compensation, retention, performance and evaluation of the Companys independent registered
public accounting firm. The Audit Committee considers the independence and evaluates the selection of the independent registered public accounting firm each year.
KPMG LLP has been the Companys independent registered public accounting firm for the past 27 years (since the Companys 1989 leveraged buyout). After
careful consideration of a number of factors, including length of time the firm has served in this role, the firms past performance, and an assessment of the firms qualifications and resources, the Audit Committee selected KPMG LLP to
serve as the independent registered public accounting firm for the year ending December 31, 2017. As a matter of good corporate governance, the Audit Committee submits its selection of the auditors to the Shareholders for ratification. If the
selection of KPMG LLP is not ratified, the Audit Committee will review its future selection of an independent registered public accounting firm in light of the vote result. Even if the selection is ratified, the Audit Committee in its discretion may
select a different registered public accounting firm at any time during the year if it determines that such a change would be in the best interests of the Company and its Shareholders. A representative from KPMG LLP is expected to be present at the
Annual Meeting. The representative will be given an opportunity to make a statement to Shareholders and is expected to be available to respond to appropriate questions from Shareholders.
The Board recommends that Shareholders vote FOR the ratification of KPMG LLP, an independent registered public accounting firm, as the Companys
auditors for the year ending December 31, 2017.
Report of the Audit Committee
Acting under a written charter, the Audit Committee oversees the Companys financial reporting process on behalf of the Board of Directors. The Audit
Committee is comprised of three directors, each of whom is independent as defined by the New York Stock Exchange listing standards. Management has the primary responsibility for the Companys financial statements and its reporting process,
including the Companys systems of internal controls. In fulfilling its oversight responsibilities, prior to the filing, the Audit Committee reviewed the audited consolidated financial statements in the Annual Report on Form
10-K
with management including a discussion of the quality, not just the acceptability, of the accounting principles, the reasonableness of significant judgments, and clarity of disclosures in the financial
statements.
The Audit Committee has discussed with the Companys independent registered public accounting firm, which is responsible for expressing an
opinion on the conformity of those audited consolidated financial statements with United States generally accepted accounting principles, their judgments as to the quality, not just the acceptability, of the Companys accounting principles and
such other matters as are required by applicable requirements of the Public Company Accounting Oversight Board. In addition, the Audit Committee has received from the independent registered public accounting firm the written disclosures and the
letter required by applicable requirements of the Public Company Accounting Oversight Board regarding the independent registered public accounting firms communications with the Audit Committee concerning independence, and discussed with them
their independence from the Company and its management taking into account the potential effect of any
non-audit
services provided by the independent registered public accounting firm.
The Audit Committee discussed with the Companys internal auditors and independent registered public accounting firm the overall scope and plans for their
respective audits. The Audit Committee meets with the internal auditors and the independent registered public accounting firm, with and without management present, to discuss the results of their audits, their evaluations of the Companys
internal controls, and the overall quality of the Companys financial reporting. The Audit Committee held twelve meetings during fiscal year 2016.
In
reliance on the reviews and discussions referred to above, the Audit Committee recommended to the Board of Directors that the audited consolidated financial statements be included in the Annual Report on Form
10-K
for the year ended December 31, 2016 for filing with the Securities and Exchange Commission. The Audit Committee approved the selection of the Companys independent registered public accounting
firm.
AUDIT COMMITTEE
STEVEN O. SWYERS,
Chairman
RONALD J. HELOW and BEVERLEY J. MCCLURE,
Members
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34
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2017 Proxy Statement Compensation Discussion and Analysis
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The Companys Independent Registered Public Accounting Firm
The independent registered public accounting firm selected by the Audit Committee to serve as the Companys auditors for the year ending
December 31, 2017 is KPMG LLP. KPMG LLP served in that capacity for the year ended December 31, 2016.
Fees of KPMG LLP
The following were the fees of KPMG LLP for the years ended December 31, 2016 and 2015.
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Fees
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2016
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2015
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Audit (1)
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$ 2,229,300
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$ 2,188,900
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Audit-Related
(2)
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$ 256,400
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$ 256,000
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Tax (3)
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0
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0
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All Other (4)
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0
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0
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(1)
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Represents the aggregate fees billed for professional services rendered by KPMG LLP for the audit of the Companys annual financial statements for the years ended December 31, 2016 and 2015, the audit of the
Companys internal control over financial reporting as of December 31, 2016 and 2014, the reviews of the financial statements included in the Companys quarterly reports on Forms
10-Q
for the
years ended December 31, 2016 and 2014 and services in connection with the Companys statutory and regulatory filings for the years ended December 31, 2016 and 2015. Fees in 2015 included $148,500 related to the Companys
issuance of its 4.50% Senior Notes due 2025.
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(2)
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Represents the aggregate fees billed for assurance and related services rendered by KPMG LLP that are reasonably related to the audit and review of the Companys financial statements for the years ended
December 31, 2016 and 2015, exclusive of the fees disclosed under Audit Fees. In 2016 and 2015, KPMG LLP audited the Companys employee benefits plans. Also in 2016 and 2015, KPMG LLP prepared SOC1 reports on the Companys
annuity operations.
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(3)
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Represents the aggregate fees billed for tax compliance, consulting and planning services rendered by KPMG LLP during the years ended December 31, 2016 and 2015.
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(4)
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Represents the aggregate fees billed for all other services, exclusive of the fees disclosed above relating to audit, audit-related and tax services, rendered by KPMG LLP during the years ended December 31, 2016
and 2015.
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Pre-Approval
of Services Provided by the Independent Registered Public Accounting Firm
The Audit Committee approves in advance any significant audit and all
non-audit
engagements or services between
the Company and the independent registered public accounting firm. As a practice, the Audit Committee does not allow prohibited
non-auditing
services as defined by regulatory authorities to be
performed by the same firm that audits the Companys annual financial statements. The Audit Committee may delegate to one or more of its members the authority to approve in advance all significant audit and all
non-audit
services to be provided by the independent registered public accounting firm so long as it is presented to the full Audit Committee at the next regularly scheduled meeting.
Pre-approval
is not necessary for de minimis audit services as long as such services are presented to the full Audit Committee at the next regularly scheduled meeting. The Audit Committee approved all of the above
listed expenses. KPMG LLP did not provide any
non-audit
related services during the years ended December 31, 2016 and 2015.
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2017 Proxy Statement Compensation Discussion and Analysis
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35
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Other Matters
Delivery of Proxy Materials
Electronic Access to Proxy Materials and Annual Report
As
we did last year, we are delivering a Notice of Internet Availability of Proxy Materials to Shareholders in lieu of a paper copy of the Proxy Statement and related materials and the Companys Annual Report to Shareholders and Form
10-K.
If you received a Notice by mail, you will not receive a paper copy of the Proxy Materials unless you request one. Instead, the Notice will instruct you as to how you may access and review the Proxy Materials
and cast your vote. If you received a Notice by mail and would like to receive a paper copy of our Proxy Materials, please follow the instructions included in the Notice.
Shareholders also can elect to receive an email message that will provide a link to the Proxy Materials on the Internet. By opting to access your Proxy
Materials via email, you will save the Company the cost of producing and mailing documents to you, reduce the amount of mail you receive and help preserve environmental resources. Shareholders who have enrolled previously in the electronic access
service will receive their Proxy Materials via email this year. If you received a Notice by mail and would like to receive your Proxy Materials via email, please follow the instructions included in the Notice.
Copies of Annual Report on Form
10-K
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The Company will furnish,
without charge, a copy of its most recent Annual Report on Form
10-K
filed with the SEC to each person solicited hereunder who mails a written request to Investor Relations, Horace Mann Educators Corporation,
1 Horace Mann Plaza,
C-120,
Springfield, Illinois, 62715-0001.
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The Company also will furnish, upon request, a copy of all exhibits to the Annual Report on Form
10-K.
In addition, the Companys Annual Report on Form
10-K,
Quarterly Reports on Form
10-Q,
Current Reports on Form
8-K,
Proxy Statements and all amendments to those reports are available free of charge through the Companys Internet website, www.horacemann.com, as soon as reasonably practicable after such reports are
electronically filed with, or furnished to, the SEC. The EDGAR filings of such reports are also available at the SECs website, www.sec.gov.
Eliminating Duplicative Proxy Materials
If you are a beneficial owner, your bank or broker may deliver a single Proxy Statement and Annual Report, along with individual proxy cards, or individual
Notices to any household at which two or more shareholders reside unless contrary instructions have been received from you. This procedure, referred to as householding, reduces the volume of duplicate materials shareholders receive and reduces
mailing expenses. Shareholders may revoke their consent to future householding mailings or enroll in householding by contacting the Companys facilitator for distribution of Proxy Materials, Broadridge Financial Solutions, Inc., at
1-800-542-1061,
or by writing to Broadridge, Householding Department, 51 Mercedes Way, Edgewood, New York 11717. Alternatively, if you
wish to receive a separate set of Proxy Materials for this years Annual Meeting, we will deliver them promptly upon request to Investor Relations, Horace Mann Educators Corporation, 1 Horace Mann Plaza,
C-120,
Springfield, Illinois, 62715-0001 or
217-789-2500.
Submitting Shareholder Proposals for the 2018 Annual Meeting of Shareholders
Any proposals of Shareholders submitted under Rule
14a-8
of the Securities Exchange Act of 1934, as amended, for
inclusion in the Companys Proxy Statement and Form of Proxy for the next Annual Meeting of Shareholders scheduled to be held in 2018 must be received in writing by the Corporate Secretary, Horace Mann Educators Corporation, 1 Horace Mann
Plaza, Springfield, Illinois, 62715-0001 not later than the close of business on December 12, 2017 in order for such proposal to be considered for inclusion in the Companys Proxy Statement and Form of Proxy relating to the 2018 Annual
Meeting of Shareholders.
In the event that a Shareholder intends to present any proposal at the 2018 Annual Meeting of Shareholders other than in
accordance with the procedures set forth in Rule
14a-8,
the Shareholder must give written notice to the Corporate Secretary no less than 45 days prior to the date of the Annual Meeting setting forth the
business to be brought before the meeting. Accordingly, proxies solicited by the Board for the 2018 Annual Meeting will confer upon the proxy holders discretionary authority to vote on any matter so presented of which the Company does not have
notice prior to April 8, 2018, which is 45 days prior to the anticipated Annual Meeting date of May 23, 2018.
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36
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2017 Proxy Statement Other Matters
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HORACE
MANN EDUCATORS CORPORATION 1 HORACE MANN PLAZA SPRINGFIELD, IL 62715-0001 VOTE BY INTERNET - www.proxyvote.com Use the Internet to transmit your voting instructions and for electronic delivery of information up until 11:59 P.M. Eastern Time the day
before the cut-off date or meeting date. Have your proxy card in hand when you access the web site and follow the instructions to obtain your records and to create an electronic voting instruction form. ELECTRONIC DELIVERY OF FUTURE PROXY MATERIALS
If you would like to reduce the costs incurred by our company in mailing proxy materials, you can consent to receiving all future proxy statements, proxy cards and annual reports electronically via e-mail or the Internet. To sign up for electronic
delivery, please follow the instructions above to vote using the Internet and, when prompted, indicate that you agree to receive or access proxy materials electronically in future years. VOTE BY PHONE - 1-800-690-6903 Use any touch-tone telephone to
transmit your voting instructions up until 11:59 P.M. Eastern Time the day before the cut-off date or meeting date. Have your proxy card in hand when you call and then follow the instructions. VOTE BY MAIL Mark, sign and date your proxy card and
return it in the postage-paid envelope we have provided or return it to Vote Processing, c/o Broadridge, 51 Mercedes Way, Edgewood, NY 11717. TO VOTE, MARK BLOCKS BELOW IN BLUE OR BLACK INK AS FOLLOWS: KEEP THIS PORTION FOR YOUR RECORDS DETACH AND
RETURN THIS PORTION ONLY THIS PROXY CARD IS VALID ONLY WHEN SIGNED AND DATED. The Board of Directors recommends you vote FOR the following: 1. Election of Directors Nominees For Against Abstain 1a Daniel A. Domenech 0 0 0 The Board of Directors
recommends you vote FOR Proposal 2. For Against Abstain 1b Stephen J. Hasenmiller 0 0 0 2 Approval of the advisory resolution to approve 0 0 0 Named Executive Officers compensation. 1c Ronald J. Helow 0 0 0 The Board of Directors recommends
you vote 1 YEAR on Proposal 3. 1 year 2 years 3 years Abstain 1d Beverley J. McClure 0 0 0 3 Advisory vote on the frequency of future 0 0 0 0 advisory votes on Named Executive Officers Compensation. 1e H. Wade Reece 0 0 0 1f Gabriel L. Shaheen
0 0 0 The Board of Directors recommends you vote FOR Proposal 4. For Against Abstain 1g Robert Stricker 0 0 0 4 Ratification of the appointment of KPMG LLP, an 0 0 0 independent registered public accounting firm, as the companys auditors for
the year ending 1h Steven O. Swyers 0 0 0 December 31, 2017. 1i Marita Zuraitis 0 0 0 NOTE: Such other business as may properly come R1.0.1.15 before the meeting or any adjournment thereof. 1 _ Materials Election - Check this box if you want to
0 Please sign exactly as your name(s) appear(s) hereon. When signing as receive a complete set of future proxy materials by attorney, executor, administrator, or other fiduciary, please give full mail, at no extra cost. If you do not take action
title as such. Joint owners should each sign personally. All holders must you may receive only a Notice to inform you of the sign. If a corporation or partnership, please sign in full corporate or 0000326554 Internet availability of proxy materials.
partnership name by authorized officer. Signature [PLEASE SIGN WITHIN BOX] Date Signature (Joint Owners) Date
Important
Notice Regarding the Availability of Proxy Materials for the Annual Meeting: The Notice & Proxy Statement, Form 10-K/Annual Report is/are available at www.proxyvote.com HORACE MANN EDUCATORS CORPORATION PROXY SOLICITED ON BEHALF OF THE
BOARD OF DIRECTORS FOR THE ANNUAL MEETING OF SHAREHOLDERS MAY 24, 2017 The undersigned Shareholder of Horace Mann Educators Corporation (the Company) hereby appoints Gabriel L. Shaheen and Marita Zuraitis, or any of them, with full power
of substitution, proxies to vote at the Annual Meeting of Shareholders of the Company (the Meeting), to be held on May 24, 2017 at 9:00 a.m. Central Daylight Saving Time, at the Horace Mann Lincoln Auditorium, 1 Horace Mann Plaza,
Springfield, Illinois, and at any adjournment thereof and to vote all shares of Common Stock of the Company held or owned by the Undersigned as directed on the reverse side and in their discretion upon such other matters as may come before the
Meeting. THIS PROXY CARD, WHEN PROPERLY EXECUTED, WILL BE VOTED IN THE MANNER DIRECTED HEREIN BY THE UNDERSIGNED. IF NO DIRECTION IS MADE BUT THE CARD IS SIGNED, THIS PROXY CARD WILL BE VOTED FOR THE ELECTION OF ALL NOMINEES UNDER PROPOSAL 1, FOR
PROPOSALS 2 AND 4, FOR 1 YEAR ON PROPOSAL 3, AND IN THE DISCRETION OF THE PROXIES WITH RESPECT TO SUCH OTHER BUSINESS AS MAY PROPERLY COME BEFORE THE MEETING. R1.0.1.15 _ 2 0000326554 Continued and to be signed on reverse side
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