DEF 14A 1 s002590x1_def14a.htm DEF 14A

TABLE OF CONTENTS

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

SCHEDULE 14A

Proxy Statement Pursuant to Section 14(a) of the
Securities Exchange Act of 1934
(Amendment No.       )

Filed by the Registrant ☒
Filed by a Party other than the Registrant o

Check the appropriate box:

o
Preliminary Proxy Statement
o
Confidential, for Use of the Commission Only (as permitted by Rule 14a-6(e)(2))
Definitive Proxy Statement
o
Definitive Additional Materials
o
Soliciting Material Pursuant to §240.14a-12
Unum Group
(Name of Registrant as Specified In Its Charter)
 
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)

Payment of Filing Fee (Check the appropriate box):

No fee required.
o
Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and 0-11.
 
 
 
 
(1)
Title of each class of securities to which the transaction applies:
 
 
 
 
(2)
Aggregate number of securities to which the transaction applies:
 
 
 
 
(3)
Per unit price or other underlying value of the transaction computed pursuant to Exchange Act Rule 0-11 (set forth the amount on which the filing fee is calculated and state how it was determined):
 
 
 
 
(4)
Proposed maximum aggregate value of the transaction:
 
 
 
 
(5)
Total fee paid:
 
 
 
o
Fee paid previously with preliminary materials.
o
Check box if any part of the fee is offset as provided by Exchange Act Rule 0-11(a)(2) and identify the filing for which the offsetting fee was paid previously. Identify the previous filing by registration statement number, or the Form or Schedule and the date of its filing.
 
 
 
 
(1)
Amount Previously Paid:
 
 
 
 
(2)
Form, Schedule or Registration Statement No.:
 
 
 
 
(3)
Filing Party:
 
 
 
 
(4)
Date Filed:
 
 
 

TABLE OF CONTENTS

   
   

TABLE OF CONTENTS

We are furnishing proxy materials, including this proxy statement, in connection with the solicitation of proxies on behalf of the Board of Directors, to be voted at the 2019 Annual Meeting of Shareholders of Unum Group and at any adjournment or postponement thereof. Our proxy materials are first being mailed and made available electronically to shareholders on or about April 11, 2019.

   

          2019 PROXY STATEMENT

TABLE OF CONTENTS

A LETTER FROM OUR BOARD OF DIRECTORS
   
   

April 11, 2019

Dear Fellow Shareholder:

Our vision at Unum is to be the leading provider of employee benefits products and services. Today more than 36 million workers and their families rely on us for their financial protection, and the $7.2 billion in benefits we paid in 2018 helped safeguard millions of people during some of the most difficult times of their lives.

We continue to make progress toward our vision through strong financial results, consistent operating performance and steady growth across our core businesses. In addition to investing in our existing business, in 2018 we continued to grow our newly-launched dental and vision product lines and further expanded our geographic reach through our acquisition of Pramerica Žycie TUiR SA, a leading financial protection provider in Poland.

This progress, and the impact of tax reform enacted in the U.S., translated into another profitable year at Unum. We grew adjusted operating earnings per share (EPS) by more than 20% (the thirteenth consecutive year of EPS growth), increased adjusted operating return on equity and continued to generate significant capital in our core businesses. These accomplishments have further positioned the company for long-term success.

In spite of this performance, we are disappointed that Unum's stock price declined significantly in 2018. We continue to seek to address investors' perception surrounding long-term care policies. The leadership team at Unum has successfully and actively managed our long-term care business for over a decade, and after a deep review last year, increased reserves to reflect our updated estimate of future benefit obligations. We are confident in our ongoing proactive approach to this business, and we believe our analysis sets the standard for disclosure in long-term care. The reserve increase had little impact on Unum's capital plans and overall financial strength, and we expect that, over time, investors' recognition of the performance of the core franchise will ultimately drive long-term shareholder value.

As Board members, we believe that good corporate governance is critical to our shareholders and to Unum's long-term success. We take a thorough approach to governance that assesses performance and risk, demands regulatory compliance, and provides oversight of compensation, investment activity and other financial matters. Additionally, we conduct a regular outreach and engagement program that ensures we receive valuable feedback from shareholders on a variety of topics.

More broadly, we - and the entire leadership team at Unum - recognize the obligations we have to all our key stakeholders, including customers, brokers, employers, regulators and shareholders, and we strive to deliver on those commitments. This focus on doing the right thing and making a difference also guides our approach to sustainability and social responsibility. We advocate for greater access to benefits because the need in our society is real. We work to make our local communities better places to live. We reduce the impact we have on our environment because it improves the quality of the world around us.

Operating with integrity and compassion is deeply embedded in our culture. Our We Are Unum principles as well as our Code of Conduct are important guides for how our employees approach their work each day. As a Board, we monitor Unum's culture through feedback from employee engagement surveys, the ethics hotline and other methods to ensure we remain true to our values. We also invest in our people - including striving for inclusion and smart succession planning throughout the organization - because they're the ones who deliver on our promises today and in the years ahead.

   

2019 PROXY STATEMENT          

TABLE OF CONTENTS

A LETTER FROM OUR BOARD OF DIRECTORS
   
   

All told, 2018 was a good year for Unum. Our focus on enhancing our customer experience, improving our operating effectiveness and expanding our reach into new markets delivered strong financial results and supported the capital needs of our business. As a result, we are confident Unum is well-positioned for the longer-term.

On behalf of the 10,000 employees and entire leadership team at Unum, thank you for your continued support of our company.


   

          2019 PROXY STATEMENT

TABLE OF CONTENTS


NOTICE OF 2019 ANNUAL MEETING OF SHAREHOLDERS
      
   


NOTICE OF 2019 ANNUAL MEETING OF SHAREHOLDERS
   

DATE: Thursday, May 23, 2019

TIME: 10 a.m. Eastern Daylight Time

LOCATION: Unum Group
2211 Congress Street
Portland, ME 04102

DIRECTIONS: www.unum.com/directions


Attending

You will be asked to provide photo identification and appropriate proof of ownership to attend the meeting. You can find more information under “About the Annual Meeting” in the proxy statement.

Who can vote

Shareholders of record of the company’s common stock (NYSE: UNM) at the close of business on March 25, 2019, are entitled to vote at the meeting and any adjournments or postponements of the meeting.

Voting Items
Election of Directors                           
p. 95
   
 
 
Advisory Vote to Approve Executive Compensation
p. 95
   
 
 
Ratification of Appointment of Independent Public Accounting Firm
p. 96

We mailed the proxy statement or a Notice of Internet Availability of Proxy Materials on April 11, 2019.

How to vote

Your vote is important. Please vote as soon as possible by one of the methods shown below. Be sure to have your proxy card, voting instruction form or Notice of Internet Availability in hand and follow the instructions provided. Shareholders of record may vote using any one of the following methods.

Mail

Proxy Services, c/o Computershare Investor Services,
P.O. Box 43126, Providence, Rhode Island 02940-5138
Deadline: Receipt due by close of business day on May 22, 2019

Telephone

1-800-652-VOTE (8683)
Deadline: 2:00 a.m. Eastern Daylight Time, May 23, 2019

Internet

www.envisionreports.com/UNM
Deadline: 2:00 a.m. Eastern Daylight Time, May 23, 2019

In addition to the voting items listed above, shareholders also will transact any other business that may properly come before the meeting. Management will also review the company’s 2018 performance and its outlook for the future.

Important Notice Regarding the Availability of Proxy Materials for the Annual Meeting of Shareholders to be Held on May 23, 2019: The proxy statement and annual report to shareholders are available at www.edocumentview.com/UNM.



J. Paul Jullienne
Vice President, Managing Counsel and Corporate Secretary

   

2019 PROXY STATEMENT          1

TABLE OF CONTENTS

A NOTE ABOUT NON-GAAP MEASURES
   
   

   

A NOTE ABOUT NON-GAAP MEASURES

In this proxy statement, we present certain measures of our performance that are not calculated in accordance with generally accepted accounting principles in the United States of America (GAAP). Non-GAAP financial measures exclude or include amounts that are not normally excluded or included in the most directly comparable measure calculated and presented in accordance with GAAP. Non-GAAP financial measures should not be viewed as substitutes for the most directly comparable financial measures calculated in accordance with GAAP, which are set forth below:

GAAP MEASURES ($ in millions, except per share data)

 
Year Ended December 31
 
2018
2017
2016
Net Income
$
523.4
 
$
994.2
 
$
931.4
 
Net Income per share*
$
2.38
 
$
4.37
 
$
3.95
 
Total Stockholders' Equity (book value)
$
8,621.8
 
$
9,574.9
 
$
8,968.0
 
Total Stockholders' Equity (book value) per share
$
40.19
 
$
43.02
 
$
39.02
 
Return on Equity
 
5.8
%
 
10.7
%
 
10.6
%

* Assuming dilution

This proxy statement refers to the following non-GAAP financial measures, which we believe are better performance measures and better indicators of the revenue and profitability and underlying trends in our business:

After-tax adjusted operating income or loss, which excludes realized investment gains or losses, and certain other items, as applicable, which are discussed in “Executive Summary” in Part II Item 7 of our 2018 Annual Report on Form 10-K;
Adjusted operating return on equity, which is calculated using after-tax adjusted operating income or loss and excludes from equity the unrealized gain or loss on securities and net gain on hedges; and
Book value per common share, which is calculated excluding accumulated other comprehensive income (AOCI).

Realized investment gains or losses and unrealized gains or losses on securities and net gains on hedges depend on market conditions and do not necessarily relate to decisions regarding the underlying business of our company. Book value per common share excluding certain components of AOCI, certain of which tend to fluctuate depending on market conditions and general economic trends, is an important measure. We also exclude certain other items from our discussion of financial ratios and metrics in order to enhance the understanding and comparability of our operational performance and the underlying fundamentals. We exclude these items as we believe them to be infrequent or unusual in nature, but this exclusion is not an indication that similar items may not recur and does not replace the comparable GAAP measures in the determination of overall profitability.

For a reconciliation of the most directly comparable GAAP measures to the non-GAAP measures, refer to Appendix A to the proxy statement.

   

2          2019 PROXY STATEMENT

TABLE OF CONTENTS

PROXY SUMMARY
   
   

PROXY SUMMARY

This summary is intended to highlight certain key information contained in this proxy statement that we believe will assist your review of the business items to be voted on at the 2019 Annual Meeting of Shareholders of Unum Group (the "2019 Annual Meeting"). As it is only a summary, we encourage you to review the full proxy statement, as well as our annual report on Form 10-K for the year ended December 31, 2018 (the "2018 Form 10-K"), for more complete information about these topics.

Key Corporate Governance and Executive Compensation Items

2018 Say-on-Pay Vote and Shareholder Outreach

Our 2018 shareholder advisory vote to approve executive compensation passed with over 95% support. As we have done for several years, we continued our shareholder engagement through an extensive outreach effort, contacting each of our top 50 investors, representing over 68% of our outstanding shares. Consistent with the prior year, our independent Board Chairman joined several of our meetings with shareholders. Details of 2018 feedback from our shareholders can be found on page 48.

Corporate Governance and Executive Compensation Practices

Executive Compensation Practices
Board Practices
A pay for performance philosophy
All directors other than the CEO are independent, including the Board Chairman
Annual say-on-pay votes
All Board Committees fully independent
Programs that mitigate undue risk taking in compensation
Commitment to diversity at the Board level and within the enterprise
Independent compensation consultant to the Human Capital Committee
High meeting attendance by directors (average attendance of 98% in 2018)
No golden parachute excise tax gross-ups
Limits on outside board and audit committee service
Minimal perquisites
 
 
No NEO employment agreements
Governance Practices
Double-trigger provisions for severance
Annual election of directors
Restrictive covenants in our long-term incentive grant agreements
Majority vote requirement for directors (in uncontested elections)
Clawback provisions
Proxy access bylaws
A balance of short- and long-term incentives
Shareholder right to call special meetings
Robust stock ownership and retention requirements
Annual, proactive shareholder engagement
Relevant peer groups for benchmarking compensation
No supermajority vote requirements
Robust individual performance assessments of executives and directors
Anti-pledging and anti-hedging policies applicable to executives and directors
 
 
Annual Board, committee, and individual director evaluations
 
 
Regular executive sessions of independent directors

   

2019 PROXY STATEMENT          3

TABLE OF CONTENTS

PROXY SUMMARY
   
   

Performance Highlights

From a financial and operating standpoint, Unum had a very successful year in 2018 as we delivered steady growth across our core businesses, leading to record after-tax adjusted operating earnings per share. We maintained market-leading positions and a strong value proposition with customers and brokers, and focused on expanding our product and geographic footprint. Our disciplined business approach helped us maintain attractive profit margins and a high level of customer satisfaction. These results were despite a challenging environment, including the pressure of continued low interest rates, uncertainty in the U.K. due to Brexit, and industry concerns about long-term care policies.

Financial Highlights(1)

Below are financial highlights from 2018.

Record earnings
 
Unum achieved record after-tax adjusted operating earnings, continuing our recent history of strong financial performance. For 2018, we delivered strong after-tax adjusted operating income of $1.15 billion, based on total revenue of $11.6 billion. Adjusted operating earnings per share (EPS) was at an all-time high of $5.20, a significant increase over the prior year and the thirteenth consecutive year of after-tax adjusted operating EPS growth.
 

Return on equity
 
We continued to put shareholder capital to good use. Consolidated adjusted operating return on equity (ROE) increased in 2018 to 13.2%, while ROE in our core operating segments grew to 17.8%.
   

Book value
 
Our book value per share at the end of 2018 was up 3.6% from 2017 (excluding accumulated other comprehensive income, or AOCI). It was the tenth consecutive year of shareholder equity growth.
   

Strengthening of Reserves
 
We increased our long-term care GAAP reserves by $593.1 million after-tax to reflect our updated best estimate of future obligations, which had little impact on our capital plans and overall financial strength.
 

(1) Operating results referenced below include non-GAAP financial measures. Information about the non-GAAP measures used in this proxy statement is set forth in “A Note About Non-GAAP Measures” on page 2. For a reconciliation of the most directly comparable GAAP measures to the non-GAAP measures, refer to Appendix A to this proxy statement.

   

4          2019 PROXY STATEMENT

TABLE OF CONTENTS

PROXY SUMMARY
   
   

Operating Highlights

Unum delivered on our mission of supporting our customers in 2018. We paid approximately $7.2 billion in benefits to people facing illness, injury or loss of life. Satisfaction metrics measuring our interaction with customers and partners were high.

We continue to see strong growth in our core businesses, particularly in premium income, compared with 2017 results. This growth was achieved while maintaining our pricing and risk discipline, and demonstrates that our value story continues to resonate with customers.

We managed our investment portfolio well despite the continued low interest rate environment. Due to the nature of our business, we invest for the long term with an investment philosophy emphasizing sound risk management and credit quality.

Long-Term Care Review

The same skills that allow our core franchise to be successful are also beneficial to our closed block of long-term care policies that we service and support, but no longer actively market. In 2009, we closed our individual long-term care business, and in 2012 we closed our group long-term care business. Since that time, we have actively managed these blocks with a combination of rate increases, updates to our liability assumptions to reflect emerging experience, prudent cash infusions, and reserve changes. Since 2006, we have strengthened reserves $4.9 billion in this block. Through these and other steps, we continue to take proactive measures to provide for the long-term stability of this block and provide transparency to our shareholders and customers.

We continued our commitment to effectively managing our long-term care business in 2018 during our annual comprehensive review of this block. Upon completion of this review in the third quarter of 2018, we increased our long-term care GAAP reserves by $593.1 million after-tax to reflect our updated best estimate of future benefit obligations. In the process, we believe we set a standard for disclosure in long-term-care. This action had little impact on our capital plans and overall financial strength.

Strategic Positioning

We have recently taken a number of steps to fuel our growth and position us for the future.

Acquisitions: Unum's recent acquisitions of dental providers in the U.K. and U.S. have accelerated our expansion into the dental market and have been positively received. We also acquired a financial protection provider based in Poland in 2018, expanding our footprint in Europe.
Growth initiatives: We have enhanced our product portfolio with the introduction of dental, vision, stop-loss, and new voluntary offerings. Planned geographic expansion is also driving growth.
Business investments: Current and planned investments in technology, customer experience, business development, facilities, and our people are designed to further enhance our service capabilities, identify future opportunities for growth, and attract and retain talent.

In addition, key developments in the external environment are having a positive impact on our business.

Tax reform: Tax legislation enacted by the U.S. federal government in December 2017 significantly lowered our overall effective tax rate throughout 2018. The reduction in the corporate tax rate has improved the statutory earnings and cash generation of our insurance subsidiaries and our capital position remains strong.

   

2019 PROXY STATEMENT          5

TABLE OF CONTENTS

PROXY SUMMARY
   
   

Business confidence: As a provider of employee benefits offered through the workplace, we expect to benefit as employers gain more confidence in the economic environment, particularly in the U.S. These positive trends have translated to greater hiring and wage growth, business investments and investments in benefits for employees.

Environmental, Social and Governance

Millions of people count on our benefits as part of a critical financial safety net, and we strive to deliver on those commitments. This focus on doing the right thing guides our approach to sustainability and social responsibility issues. Unum has a long tradition of engaging employees, shareholders, our communities and society at large on advocacy, community outreach, environmental responsibility and good governance.

We recognize the importance of these and other environmental, social and governance (ESG) issues to all our stakeholders. In 2018, we took important steps to enhance our efforts, including creating a fully staffed office of inclusion and diversity and hiring a Vice President, Inclusion and Diversity. This year, we are bringing greater transparency to our inclusion and diversity work, and we will begin a comprehensive review of our overall ESG efforts to ensure we're focusing on the right things and measuring our progress effectively.

While we're proud of our legacy of making a difference, we are committed to bringing additional rigor and process to our ESG efforts as we look to the future. See page 36 for more information about ESG.

Capital Generation for Shareholders

Our strong statutory earnings have resulted in solid capital generation, which we have deployed in a number of ways.


Our ability to generate capital remained strong in 2018, allowing us the opportunity to deploy capital in a number of ways. For the year, we invested in our business, strengthened our long-term care reserves and paid out $217.0 million in dividends, including increasing the annual dividend rate by 14% over the prior year. We also repurchased $350.7 million worth of our outstanding shares, bringing our total share repurchases since 2007 to $4.4 billion. In addition, our credit ratings are strong and remain at our targeted levels as a result of our strong balance sheet, our favorable operating results, and our highly respected brand in the employee benefits market.

   

6          2019 PROXY STATEMENT

TABLE OF CONTENTS

PROXY SUMMARY
   
   

Total Shareholder Return

Unum delivered strong financial results in our core businesses and record adjusted operating earnings in 2018, continuing a track record of consistent performance that spans more than a decade. However, investor perceptions in the industry surrounding long-term care and ongoing volatility in the broader market, most notably in the financial services sector, overshadowed our performance. This contributed to the decline in our stock value of more than 45% in 2018.

These results are not indicative of the ongoing strong financial and operational performance of our core businesses and the active management of our closed LTC block. We believe our consistent results have made Unum an excellent long-term investment - including during one of the worst financial crises in memory - and we expect that the performance of our core franchise will again be recognized and ultimately drive long-term shareholder value.


   

2019 PROXY STATEMENT          7

TABLE OF CONTENTS

PROXY SUMMARY
   
   

2018 CEO Compensation Summary

Our approach to CEO compensation aligns directly with our overall executive compensation philosophy and structure (see page 49). Mr. McKenney's targeted total direct compensation is a combination of base pay plus short- and long-term incentives that are tied directly to performance goals. This structure supports the long-term successes of the company and the interests of our shareholders. Mr. McKenney has been and will continue to be subject to robust stock ownership and retention requirements, including a requirement to own six times his base salary in stock. In addition, he must hold 75% of the net shares acquired upon vesting of performance-based restricted stock units (PBRSUs) and performance share units (PSUs) or the exercise of stock options for a period of at least three years. The combination of these two requirements further help to directly align the long-term value of his compensation to shareholders.

For performance goals, the Board, after discussion with Mr. McKenney, annually sets:

Business and financial objectives;
Strategic objectives;
Talent management initiatives; and
Operational effectiveness and efficiency targets.

In addition to a self-assessment authored by Mr. McKenney, the Human Capital Committee and Board conduct a thorough evaluation of his performance against all objectives as well as a review of a number of professional and leadership characteristics and behaviors (beginning on page 54).

For 2018, as outlined in the Performance Highlights section above, the Human Capital Committee and Board have recognized that Mr. McKenney led the company to deliver strong core operating performance, including more than 20% growth in adjusted operating earnings per share and an adjusted return on equity in excess of 13%, while further strengthening the reserves for future benefits in the long-term care block. Strong capital generation and deployment returned value to shareholders of $567.7 million with dividends representing a 14% growth per share year over year. Mr. McKenney led Unum as it undertook a number of initiatives to position the company for long-term success. This included a deep strategic review of our long-term care block (see page 5), advancing our talent development strategy and a genuine commitment on inclusion and diversity. While 2018 proved to be a difficult environment for our legacy LTC business, the Board has full confidence in Mr. McKenney's leadership as CEO.

2018 Compensation Decisions

The following CEO Compensation Summary table depicts how the Human Capital Committee views its decisions concerning Mr. McKenney’s compensation for 2018, relative to his 2017 awards. It differs from the Summary Compensation Table (SCT) (see page 77), which is required by the Securities and Exchange Commission, as follows:

The CEO Compensation Summary table below treats equity awards similar to how annual awards are treated in the SCT (i.e., based on the performance year to which the award relates). Therefore, the value of the LTI award granted in March 2019 based on performance in 2018 is shown as 2018 compensation. In contrast, the value of LTI awards in the SCT is based on the year in which the equity awards are granted. As a result, 2018 compensation in the SCT includes the value of Mr. McKenney’s LTI award granted in 2018, which was based on performance in 2017.

   

8          2019 PROXY STATEMENT

TABLE OF CONTENTS

PROXY SUMMARY
   
   

The SCT includes amounts reported in the 'Change in Pension Value & Non-Qualified Deferred Compensation Earnings' and 'All Other Compensation' columns. Although regularly monitored by the Committee, these amounts are not considered when the Committee makes its annual performance-based compensation determinations for 2018 and are therefore not shown in the presentation below.

The CEO Compensation Summary table is not a substitute for the required Summary Compensation Table found on page 77.

CEO COMPENSATION SUMMARY

Component
2017
2018
Base Salary
$
1,000,000
 
$
1,000,000
 
Annual Incentive Payout
 
2,415,000
 
 
1,900,000
 
Approved LTI Grant
 
6,600,000
 
 
6,175,000
 
Annual Compensation
$
10,015,000
 
$
9,075,000
 

Base Salary

No change was made to Mr. McKenney’s base salary in 2018. It has remained the same since March 2016.

Annual Incentive

As previously disclosed, in early 2018, the Committee increased Mr. McKenney’s target annual incentive opportunity from 175% to 200% of his base salary. This decision reflected the continued execution of a multi-year program for Mr. McKenney to adjust his pay to full competitive norms as performance and experience in the job grows. With these adjustments, his targeted total direct compensation is approximately 5% below the median of the proxy peer group.

Mr. McKenney's 2018 annual incentive payout of $1,900,000 was calculated by applying the company performance achievement under the plan formula (100% for 2018; see page 60) and Mr. McKenney’s individual performance factor (95% for 2018; see page 65).

Although stock price is not a direct criteria for assessing the CEO’s performance, the Committee considered its impact on TSR while weighing Mr. McKenney’s individual achievements and overall performance of the company (see page 65). While the stock price did decline in 2018, the Committee believes that active management of our LTC block along with the strong performance of our core businesses will, over time, drive investor perceptions and long-term shareholder value. Given this, and its view that the company is positioned for long-term success, the Committee awarded Mr. McKenney an individual performance percentage of 95% for his 2018 annual incentive which resulted in an actual award of $1,900,000, a reduction of $515,000 from his 2017 payout.

Long-Term Incentive

As previously disclosed, in early 2018, the Committee increased Mr. McKenney’s long-term incentive target opportunity from $5.5 million to $6.5 million. Again, this decision reflected the continued execution of a multi-year program as outlined above.

The design of our long-term incentive program serves to align the interests of management and shareholders. For 2018, 68% of Mr. McKenney's pay is in the form of long-term equity incentives (delivered through PBRSUs and PSUs), the value of which is based on the company’s stock price and, for his PSU achievement, is further modified by relative TSR. Given his performance in 2018 as well as the company’s financial performance and other considerations outlined above, the Committee awarded Mr. McKenney an individual performance

   

2019 PROXY STATEMENT          9

TABLE OF CONTENTS

PROXY SUMMARY
   
   

percentage of 95% for his long-term incentive award granted in March 2019 which resulted in an award of $6,175,000, a reduction of $425,000 from the prior year's award.

The total of Mr. McKenney's annual and long-term incentives for 2018 performance were $8,075,000, a reduction of $940,000 from his awards for 2017.

Consistent with the impact to shareholders over the past year, the value of Mr. McKenney’s Unum holdings, including his unvested equity awards, declined significantly in 2018. For example, this impact can be seen in the vesting of Mr. McKenney’s historical PSU awards, which are not only valued at the company’s lower stock price but also modified based on relative TSR (up to +/- 20%). The table below illustrates how the TSR modifier reduced the number of shares he earned following the vesting of his 2016 PSU award at the end of 2018 (see additional details on page 63).

Executive
Target
Share
Grant
 
Operating
Performance
Factor
 
Adjusted
Shares 
 
TSR
Modifier
 
Earned
Shares
Value of Shares
as of 2/15/19(1)
Adjusted
Shares
Earned
Shares
CEO
98,677
x
120.3%
=
118,659
x
80%
=
94,927
$4,309,683
$3,447,746
(1) The PSUs achievement was certified by the Human Capital Committee on February 18, 2019. Since that was a holiday, the shares were valued based on the prior day closing stock price of $36.32 (February 15, 2019).

   

10          2019 PROXY STATEMENT

TABLE OF CONTENTS

PROXY SUMMARY
   
   

Voting Matters

Voting Item
Board's Recommendation
Page Reference:
Item 1: Election of Directors
FOR each nominee
Eleven director nominees are standing for election this year, each for a one-year term expiring at the 2020 Annual Meeting and until his or her successor is duly elected and qualified or until his or her earlier death, resignation, disqualification, or removal from office. The Board and the Governance Committee believe that each director nominee possesses the necessary skills and qualifications to provide effective oversight of the business. The director nominees are:
 
Director Nominee
Director Since
Independent
Current Committees
 
Theodore H. Bunting, Jr.
2013
Regulatory Compliance (Chair)
Human Capital
 
Susan L. Cross
2019
Audit
Risk and Finance
 
Susan D. DeVore
2018
Audit
Risk and Finance
 
Joseph J. Echevarria
2016
Governance
Risk and Finance
 
Cynthia L. Egan
2014
Human Capital (Chair)
Regulatory Compliance
 
Kevin T. Kabat, Board Chairman
2008
Governance
Human Capital
 
Timothy F. Keaney
2012
Risk and Finance (Chair)
Audit
 
Gloria C. Larson
2004
Governance (Chair)
Regulatory Compliance
 
 
Richard P. McKenney, President and CEO
2015
 
Ronald P. O'Hanley
2015
Governance
Human Capital
 
Francis J. Shammo
2015
Audit
Regulatory Compliance
Item 2: Advisory Vote to Approve Executive Compensation
FOR
We are seeking a non-binding advisory vote to approve the compensation of our named executive officers. We describe our compensation programs in the Compensation Discussion and Analysis section of this proxy statement. The Human Capital Committee believes these programs reward performance and align the long-term interests of management and shareholders. Although non-binding, the Human Capital Committee will take into account the outcome of the advisory vote and shareholder feedback when making future compensation decisions.
Item 3: Ratification of Appointment of Independent Registered Public Accounting Firm
FOR
The Audit Committee has appointed Ernst & Young LLP as our independent registered public accounting firm for 2019, and shareholders are being asked to ratify the appointment.

   

2019 PROXY STATEMENT          11

TABLE OF CONTENTS

CORPORATE GOVERNANCE
   
   

CORPORATE GOVERNANCE

Board Overview

The Board of Directors is elected by shareholders to oversee management and assure that the long-term interests of shareholders are being served. The Board oversees the CEO and other senior management, who are responsible for carrying out the company's day-to-day operations in a responsible and ethical manner. The Board and its committees meet regularly to review and discuss the company's strategy, business, performance, ethics, and risk culture, as well as important issues that it faces. These discussions take place with management and with appropriate outside advisers who provide independent expertise, perspectives and insights. In addition, the independent members of the Board and its committees hold regular executive sessions to discuss matters free of the presence or influence of management. Board members are also kept apprised of significant developments that arise between meetings.

Board Composition and Refreshment

The Board believes that a critical component of its effectiveness in serving the long-term interests of shareholders is to ensure that its membership remains diverse, possessing a variety of backgrounds, experiences and skill sets from which to draw upon. Fresh views and ideas help the Board to maintain a broad perspective and forward-looking vision capable of anticipating and adapting to the rapid pace of change, just as experience and continuity provide necessary context and stability for important decisions. With that in mind, the Governance Committee periodically reviews the composition of the Board to assure an appropriate balance of experiences, skills, tenure and diversity. This is an ongoing, year-round process.

The Board is committed to effective board succession planning and refreshment, including having honest and difficult conversations with individual directors when necessary. These conversations may arise in connection with the Board evaluation process, succession planning or consideration of the annual slate of Board nominees. As a result of these processes, directors may decide (for personal or professional reasons) or be asked (for reasons related to their ongoing contributions to the Board) not to stand for re-election at the next Annual Meeting. It is expected that these refreshment practices will continue in the future.

Since the beginning of 2015, we have experienced a healthy level of Board refreshment, with six new directors joining the Board and seven retiring. While some companies have tenure limits on Board service, we believe our balanced approach which places a limit on age but not on tenure delivers the right mix of directors with new ideas and perspectives along with those possessing deep knowledge of the company.

   

12          2019 PROXY STATEMENT

TABLE OF CONTENTS

CORPORATE GOVERNANCE
   
   

Board Qualifications

The Board strives to maintain independence of thought and diverse professional experience among its membership. The Board and the Governance Committee look for directors who have qualifications and attributes in key areas relevant to Unum, and that align with both our short- and long-term business strategies. These qualifications and attributes are evaluated on an annual basis to determine that they continue to serve the best interests of the company. The table below summarizes the qualifications and attributes that are important to Unum and addresses how the composition of our Board, as a whole, meets these needs.

Qualifications
and Attributes
Relevance to Unum
Board Composition(1)
Accounting/Auditing
We operate in a complex financial and regulatory environment with disclosure requirements, detailed business processes and internal controls.

Business Operations
We have significant operations focused on customer service, claims management, sales, marketing and various back-house functions.

Capital Management
We allocate capital in various ways to run our operations, grow our core businesses and return value to shareholders.

Corporate Governance/ESG
As a public company and responsible corporate citizen, we expect effective oversight and transparency, and our stakeholders demand it.

Financial
Expertise/Literacy
Our business involves complex financial transactions and reporting requirements.

Independence
Independent directors have no material relationships with us and are essential in providing unbiased oversight.

Industry Experience
Experience in the insurance and financial services industry provides a relevant understanding of our business, strategy, and marketplace dynamics.

International
With global operations in several countries and prospects for further expansion, international experience helps us understand opportunities and challenges.

Investment Markets
We manage a large and long-term investment portfolio to uphold our promises to pay the future claims of our policyholders.

Other Recent Public Board Experience
We value individuals who understand public company reporting responsibilities and have experience with the issues commonly faced by public companies.

Public Company Executive Experience
Experience leading a large, widely-held organization provides practical insights on need for transparency, accountability, and integrity.

Regulatory/Risk Management
A complex regulatory and risk environment requires us to develop policies and procedures that effectively manage compliance and risk.

Technology/Digital Transformation
We rely on technology to manage customer data, deliver products and services to the market, pay claims, and enhance the customer experience.

(1) Director nominees only.

   

2019 PROXY STATEMENT          13

TABLE OF CONTENTS

CORPORATE GOVERNANCE
   
   

Board Tenure

Directors with varied tenure contribute to a range of perspectives and ensure we transition knowledge and experience from longer-serving members to those newer to our Board. We have a good mix of new and long-standing directors, with our 11 director nominees averaging 5.4 years of service on our Board as of the 2019 Annual Meeting.

Board Diversity

Our directors represent a range of backgrounds and overall experience. More than half are women or represent a diverse group, which places Unum's Board among the top of our industry in gender and racial/ethnic diversity. In recent years, our Governance Committee has focused on ensuring continued diversity on the Board during refreshment activities by requiring that candidate pools include diverse individuals meeting the recruitment criteria. From the candidate pools, our Governance Committee selects our director candidates based on their qualifications and attributes as addressed below. Our director nominees range from 50 to 69 years of age, with the average age being 60.2 years, as of the 2019 Annual Meeting.


   

14          2019 PROXY STATEMENT

TABLE OF CONTENTS

CORPORATE GOVERNANCE
   
   

Board Evaluation Process

A healthy and vigorous Board evaluation process is an essential part of good corporate governance. A thorough evaluation process helps us achieve the right balance of perspectives, experiences and skill sets needed for prudent oversight of the company, including execution on corporate strategy, while also considering the best interests of our shareholders. At Unum, this evaluation process includes annual evaluations of the Board, each committee, and individual directors.

The Governance Committee establishes and oversees the evaluation process, which focuses on identifying areas where Board, committee and director performance is most effective, as well as opportunities for further development or improvement. Each year, the Governance Committee reviews the format and effectiveness of the evaluation process in identifying actionable feedback for directors to consider, recommending changes in process as appropriate. Determining whether to engage a third-party facilitator is also part of the review.

This past year, the evaluation process was conducted in two phases. The first phase focused on the evaluation of the effectiveness of each committee and the Board as a whole. Directors completed questionnaires evaluating the full Board and each committee they served on with topics including culture, composition, structure and engagement. The second phase focused on the evaluation of each director’s performance, and was led by the Governance Committee Chair in advance and in anticipation of the director nomination process. This two-phased approach generated robust discussions at all levels of the Board, and resulted in changes that have improved Board efficiency and effectiveness.

   

2019 PROXY STATEMENT          15

TABLE OF CONTENTS

CORPORATE GOVERNANCE
   
   

Process for Selecting and Nominating Directors

Director Nominee and Selection

The Governance Committee is responsible for identifying and evaluating director candidates and recommending to the Board a slate of nominees for election at each Annual Meeting. The Committee has engaged a third-party search firm to assist with recruitment efforts. This firm identifies candidates who meet the criteria of our search, provides requested background and other relevant information regarding candidates, and coordinates arrangements for interviews as necessary. Nominees may also be suggested by directors, management, or shareholders. Ms. Cross, who was elected to the Board in February 2019, was recommended to the Governance Committee by a third-party search firm.

Shareholders who wish to recommend director candidates for consideration by the Governance Committee must submit to the Corporate Secretary at Unum Group, 1 Fountain Square, Chattanooga, Tennessee 37402 the same information that would be required to nominate a director candidate as described on page 102 in the section titled "Shareholder proposals and nominations for our 2020 Annual Meeting." The Governance Committee’s policy is to consider candidates recommended by shareholders in the same manner as other candidates.

In addition, our bylaws permit shareholders to nominate directors for inclusion in our proxy materials or directly at an Annual Meeting in accordance with the procedures in our bylaws, as described on page 102 in the section titled "Shareholder proposals and nominations for our 2020 Annual Meeting."

Our corporate governance guidelines specify the following criteria to be used in evaluating the candidacy of a prospective nominee:

Reputation for high ethical conduct, integrity, sound judgment, and accountability;
Current knowledge and experience in one or more key areas identified in the corporate governance guidelines;
Ability to commit sufficient time to the Board and its committees;
Collegial effectiveness; and
Diversity, whether in viewpoints, gender, ethnic background, age, professional experience or other demographics.

The core qualifications and attributes sought in any particular candidate depend on the current and future needs of the Board based on an assessment of the composition of the Board and the mix of qualifications and attributes currently represented. In addition, the Governance Committee considers other specific qualifications that may be desired or required of nominees, including their independence and ability to satisfy specific Audit Committee or Human Capital Committee requirements. As part of the director selection and nomination process, the Governance Committee assesses the effectiveness of its Board membership criteria.

In determining whether to recommend a director for re-election, the Governance Committee also considers the director’s interest in continuing to serve, past attendance at meetings, contributions to the Board and committees on which the director serves, the skills, experience and background that the director brings to the Board relative to the Board’s needs and existing composition, and the results of the most recent Board, committee and individual director evaluations.

   

16          2019 PROXY STATEMENT

TABLE OF CONTENTS

CORPORATE GOVERNANCE
   
   

Annual Election of Directors

Directors are elected each year at the Annual Meeting, to hold office until the next Annual Meeting and until their successors are elected, or until their earlier death, resignation, disqualification, or removal from office. Other than requiring retirement from the Board at the next Annual Meeting after a director reaches the age of 72, there are no term limits. However, the Governance Committee evaluates the qualifications and performance of each incumbent director before recommending the nomination of that director for an additional term.

Majority Voting Standard

Our bylaws provide that, in an election of directors where the number of nominees does not exceed the number of directors to be elected (an "uncontested election"), each nominee must receive a majority of the votes cast with respect to that nominee to be elected as a director (i.e., the number of shares voted "for" a nominee must exceed the number voted "against" that nominee). If an incumbent director is not re-elected under this majority voting standard, the director must submit an irrevocable letter of resignation to the Board, which will become effective upon acceptance by the Board. The Governance Committee will make a recommendation to the Board on whether to accept or reject the resignation, or whether other action should be taken. If the director submitting the resignation is a member of the Governance Committee, that director will not participate in the Governance Committee’s recommendation to the Board. The Board will act on the Governance Committee’s recommendation and publicly disclose its decision and rationale within 90 days from the date of the certification of the election results.

   

2019 PROXY STATEMENT          17

TABLE OF CONTENTS

INFORMATION ABOUT THE BOARD OF DIRECTORS
   
   

INFORMATION ABOUT THE BOARD OF DIRECTORS

Below are brief biographies for each of our current directors and descriptions of the directors’ key qualifications, skills, and experiences that contribute to the Board’s effectiveness as a whole.

Director Nominees

   
 


Director since 2013
Age at Annual
Meeting 60
   
Independent
Director
   
Committees
   Regulatory
      Compliance
      (chair)
   Human Capital
Theodore H. Bunting, Jr.
   
 
Mr. Bunting retired as the Group President, Utility Operations of Entergy Corporation, an integrated energy company, and previously served as Senior Vice President and Chief Accounting Officer for Entergy. He has extensive financial, accounting and operational experience as a senior executive with a public company in a regulated industry. Mr. Bunting is a director at another publicly traded company and is also a certified public accountant.
Career Experience
Qualifications
Entergy Corporation
   Group President, Utility Operations
      (2012-2017)
   Senior Vice President and Chief
      Accounting Officer (2007-2012)
   Numerous executive roles with
      Entergy, which he joined in 1983
Accounting/Auditing
Business Operations
Capital Management
Financial Expertise/Literacy
Other Public Company Board Experience
Public Company Executive Experience
Regulatory/Risk Management
   
 
Public Company Board Experience
   
NiSource Inc., since 2018
Imation Corp. (2012-2014)
 
   
 

Director since 2019
Age at Annual
Meeting 59
   
Independent
Director
   
Committees
   Audit
   Risk and Finance
Susan L. Cross
   
 
Ms. Cross is the former Executive Vice President and Global Chief Actuary of XL Group Ltd (now AXA XL), a global insurance and reinsurance company. She previously held various chief actuarial positions for operational segments of XL. She brings over three decades of financial, actuarial, insurance and risk experience as a senior executive with an international company in a regulated industry. Ms. Cross also qualifies as an audit committee financial expert under SEC regulations.
Career Experience
Qualifications
XL Group Ltd
   Executive Vice President and
      Global Chief Actuary (2008-2018)
   Senior Vice President
      and Chief Actuary,
      XL Group (2006-2008)
      XL Reinsurance (2000-2006)
      XL America (1999-2000)
Significant consulting experience
   with Willis Towers Watson in
   the U.S. and Bermuda
Accounting/Auditing
Business Operations
Capital Management
Financial Expertise/Literacy
Industry Experience
International
Public Company Executive Experience
Regulatory/Risk Management

   

18          2019 PROXY STATEMENT

TABLE OF CONTENTS

INFORMATION ABOUT THE BOARD OF DIRECTORS
   
   

   
 

Director since 2018
Age at Annual
Meeting 60
   
Independent
Director
   
Committee
   Audit
   Risk and Finance
Susan D. DeVore
   
 
Ms. DeVore has served as the President and Chief Executive Officer of Premier, Inc., a leading health care improvement company, since its initial public offering in 2013, and before that served in the same capacity for its predecessor company, Premier Healthcare Solutions, Inc. She also previously served as the Chief Operating Officer for a number of affiliated Premier entities. Prior to joining Premier, Ms. DeVore had two decades of finance, strategy and healthcare consulting experience. She also qualifies as an audit committee financial expert under SEC regulations.
Career Experience
Qualifications
Premier, Inc.
   President and CEO (since 2013)
Premier Healthcare Solutions, Inc.
   President and CEO (2009-2013)
   COO (2006-2009)
Significant consulting experience
   with Ernst & Young LLP, including
   service as a Partner, Executive
   Committee member and Senior
   Healthcare Industry Management
   Practice Leader
Accounting/Auditing
Business Operations
Capital Management
Corporate Governance/ESG
Financial Expertise/Literacy
Industry Experience
International
Other Public Company Board Experience
Public Company Executive Experience
Regulatory/Risk Management
Technology/Digital Transformation
   
 
Public Company Board Experience
 
Premier, Inc., since 2013
 
   
 


Director since 2016
Age at Annual
Meeting 62
   
Independent
Director
   
Committees
   Governance
   Risk and Finance
Joseph J. Echevarria
   
 
Mr. Echevarria retired as the Chief Executive Officer of Deloitte LLP, a global provider of professional services, prior to which he served in increasingly senior leadership positions with Deloitte. He brings to the Board significant experience in finance, accounting, global operations, executive management and corporate governance. Mr. Echevarria has experience as a director at other publicly traded companies and is also a certified public accountant.
Career Experience
Qualifications
Deloitte LLP
   CEO (2011-2014)
   Various executive positions during
      his 36 years with the company
My Brother's Keeper Alliance
   Chair Emeritus
President's Export Council
   Private sector member
Accounting/Auditing
Business Operations
Capital Management
Corporate Governance/ESG
Financial Expertise/Literacy
Industry Experience
International
Other Public Company Board Experience
Regulatory/Risk Management
Public Company Board Experience
 
Xerox, since 2007
Bank of New York Mellon
   Corporation, since 2015 (Lead
   Independent Director since 2016)
Pfizer, since 2015
 

   

2019 PROXY STATEMENT          19

TABLE OF CONTENTS

INFORMATION ABOUT THE BOARD OF DIRECTORS
   
   

   
 


Director since 2014
Age at Annual
Meeting 63
   
Independent
Director
   
Committees
   Human Capital
      (chair)
   Regulatory
      Compliance
Cynthia L. Egan
   
 
Ms. Egan retired as the President of T. Rowe Price Retirement Plan Services, Inc., a subsidiary of the global investment management firm T. Rowe Price Group, Inc. Prior to her work at T. Rowe Price, she held various executive positions at Fidelity Investments. She has significant operational experience in delivering complex financial products and services on a large scale, as well as experience in using technology to lead businesses through growth and operational transitions. Ms. Egan is and has been a director at other publicly traded companies.
Career Experience
Public Company Board Experience
U.S. Department of the Treasury
   Senior Advisor on the development
      of a Treasury-sponsored
      retirement savings program
      (2014-2015)
T. Rowe Price Retirement Plan
Services, Inc.
   President (2007-2012)
Fidelity Investments
   Various leadership and executive
      positions, including President of
      the Fidelity Charitable Gift Fund
      (1989-2007)
BlackRock Fixed Income Funds,
   since 2016
The Hanover Insurance Group, Inc.,
   since 2015
Envestnet, Inc. (2013-2016)
   
Qualifications
   
Business Operations
Corporate Governance/ESG
Financial Expertise/Literacy
Industry Experience
Investment Markets
Other Public Company Board Experience
Public Company Executive Experience
Regulatory/Risk Management
Technology/Digital Transformation
   
 


Director since 2008
Age at Annual
Meeting 62
   
Independent
Director
   
Chairman of the
Board of Directors
   
Committees
   Governance
   Human Capital
Kevin T. Kabat
   
 
Mr. Kabat is the Chairman of Unum’s Board of Directors, and the retired Chief Executive Officer and Vice Chairman of Fifth Third Bancorp, a diversified financial services company. He also served in numerous executive positions with Fifth Third. He has executive leadership experience, extensive financial, operating and strategic planning expertise and understands the importance of risk management and the challenges of managing a business in a highly regulated industry. Mr. Kabat also has experience serving on boards of publicly traded companies.
Career Experience
Qualifications
Fifth Third Bancorp
   CEO (2007-2015)
   President (2006-2012)
   Other executive roles, including
      with predecessor companies
   
Public Company Board Experience
   
E*TRADE Financial Corporation,
   since 2016
NiSource Inc., since 2015 (Vice
   Chairman since 2018)
Fifth Third Bancorp (2007-2016,
   including Executive Chairman from
   2008-2010 and Executive Vice
   Chairman from 2012-2016)
Business Operations
Capital Management
Corporate Governance/ESG
Financial Expertise/Literacy
Industry Experience
Other Public Company Board Experience
Public Company Executive Experience
Regulatory/Risk Management

   

20          2019 PROXY STATEMENT

TABLE OF CONTENTS

INFORMATION ABOUT THE BOARD OF DIRECTORS
   
   

   
 


Director since 2012
Age at Annual
Meeting 57
   
Independent
Director
   

   
Committees
   Risk and Finance
      (chair)
   Audit
Timothy F. Keaney
   
 
Mr. Keaney retired as the Vice Chairman of the Bank of New York Mellon Corporation (BNY Mellon), a global investments company, prior to which he held various executive positions within the organization. He possesses significant operational, investment and financial experience with a public company in a highly regulated industry, including lengthy periods of executive leadership service in the U.K. Mr. Keaney is considered an audit committee financial expert under SEC regulations.
Career Experience
Qualifications
The Bank of New York Mellon
Corporation
   Vice Chairman (2010-2014)
   CEO, Investment Services
      (2013-2014)
   CEO and co-CEO, Asset Servicing
      (2007-2012)
   Other executive roles
Accounting/Auditing
Business Operations
Capital Management
Corporate Governance/ESG
Financial Expertise/Literacy
Industry Experience
International
Investment Markets
Public Company Executive Experience
Regulatory/Risk Management
   
 


Director since 2004
Age at Annual
Meeting 69
   
Independent
Director
   
Committees
   Governance
      (chair)
   Regulatory
      Compliance
Gloria C. Larson
   
 
Ms. Larson retired as the President of Bentley University, one of the leading business schools in the U.S. Prior to her tenure at Bentley, she held numerous leadership positions in the legal, public policy and business fields. She possesses extensive experience in public service and regulatory issues, corporate governance and advising clients in the course of practicing law. Ms. Larson also has experience serving on boards of publicly traded companies.
Career Experience
Public Company Board Experience
Harvard University Graduate
School of Education
   President in Residence
      (since 2018)
Bentley University
   President (2007-2018)
Foley Hoag LLP
   Law firm partner and Co-Chair
   of Governmental Practices Group
Other leadership positions with the
   Commonwealth of
   Massachusetts (Secretary of
   Economic Affairs) and the Federal
   Trade Commission (Deputy
   Director of Consumer Protection)
Boston Private Financial Holdings, Inc.,
   since 2015
   
Qualifications
   
Accounting/Auditing
Business Operations
Capital Management
Corporate Governance/ESG
Financial Expertise/Literacy
Other Public Company Board Experience
Regulatory/Risk Management

   

2019 PROXY STATEMENT          21

TABLE OF CONTENTS

INFORMATION ABOUT THE BOARD OF DIRECTORS
   
   

   
 


Director since 2015
Age at Annual
Meeting 50
   
Director
   
President and CEO
Richard P. McKenney
   
 
Mr. McKenney is the President and Chief Executive Officer of Unum, previously having served as Executive Vice President and Chief Financial Officer. He has significant executive management, financial and insurance industry experience through his prior service as CFO of Unum and other public insurance companies, and through his current service as CEO. He has an intimate knowledge of all aspects of our business and industry, including operational, risk management and public policy, and close working relationships with senior management. Mr. McKenney also has experience serving on boards of publicly traded companies.
Career Experience
Qualifications
Unum
   President and CEO (since 2015)
   Chief Financial Officer (2009-2015)
Sun Life Financial, Inc.
   Executive Vice President and Chief
   Financial Officer
   
Public Company Board Experience
   
U.S. Bancorp, since 2017
Accounting/Auditing
Business Operations
Capital Management
Corporate Governance/ESG
Financial Expertise/Literacy
Industry Experience
International
Other Public Company Board Experience
Public Company Executive Experience
Regulatory/Risk Management
   
 


Director since 2015
Age at Annual
Meeting 62
   
Independent
Director
   
Committees
   Governance
   Human Capital
Ronald P. O'Hanley
   
 
Mr. O’Hanley is the President and Chief Executive Officer of State Street Corporation, a provider of financial services to institutional investors worldwide, having previously served as the President and Chief Operating Officer. Prior to that he served as the President and Chief Executive Officer of State Street Global Advisors, the investment management arm of State Street Corporation. He has deep executive management and operational experience within the financial services industry, both domestically and internationally, as well as experience leading investment, financial and risk functions at large, global organizations.
Career Experience
Public Company Board Experience
State Street Corporation
   President and CEO (since 2019)
   President and COO (2017-2018)
   Vice Chairman (during 2017)
   President and CEO, State Street
      Global Advisors (2015-2017)
Fidelity Investments
   President of Asset Management
      and Corporate Services, and
      member of Executive Committee
      (2010-2014)
Other senior leadership positions
   with The Bank of New York
   Mellon Corporation and
    McKinsey & Company, Inc.
State Street Corporation, since 2019
   
Qualifications
   
Accounting/Auditing
Business Operations
Capital Management
Corporate Governance/ESG
Financial Expertise/Literacy
Industry Experience
International
Investment Markets
Public Company Executive Experience
Regulatory/Risk Management

   

22          2019 PROXY STATEMENT

TABLE OF CONTENTS

INFORMATION ABOUT THE BOARD OF DIRECTORS
   
   

   
 


Director since 2015
Age at Annual
Meeting 58
   
Independent
Director
   
Committees
   Audit
   Regulatory
      Compliance
Francis J. Shammo
   
 
Mr. Shammo retired as the Executive Vice President and Chief Financial Officer of Verizon Communications, Inc., a leading communications provider, prior to which he held increasingly senior leadership positions within the organization. He has significant executive management, financial, operational and risk management experience in the technology-heavy telecommunications industry, and has led business units with responsibility for sales, marketing and customer service for customers worldwide. He is also a certified public accountant and qualifies as an audit committee financial expert under SEC regulations.
Career Experience
Qualifications
Stonepeak Infrastructure Partners
   Consultant (since 2019)
Verizon Communications, Inc.
   EVP and CFO (2010-2016)
   President and CEO, Verizon
      Telecom and Business (2010)
   President – Wireline (2009-2010)
   Other executive positions with
      Verizon and its predecessor,
      which he joined in 1989
   
Public Company Board Experience
Avis Budget Group, since 2018
Accounting/Auditing
Business Operations
Capital Management
Financial Expertise/Literacy
International
Other Public Company Board Experience
Public Company Executive Experience
Regulatory/Risk Management
Technology/Digital Transformation

Additional Current Director - Retiring at the Annual Meeting

   
 


Director since 2007
(also 2004-2005)
Age at Annual
Meeting 72
   
Independent
Director
   
Committees
   Audit (chair)
   Risk and Finance
E. Michael Caulfield
   
 
Mr. Caulfield retired as the President of Mercer Human Resources Consulting, prior to which he held numerous executive positions at Prudential Insurance Company. He brings to the Board senior leadership experience in finance, investments and executive management in both the insurance and broader financial services industry. He serves as our Audit Committee chairman and is an audit committee financial expert under SEC regulations.
Career Experience
Qualifications
Mercer Human Resource
Consulting
   President (2005-2006)
   Chief Operating Officer (2005)
Prudential Insurance Company
   Executive Vice President,
      Financial Management
   CEO of Prudential Investments
   President of Prudential Preferred
      Financial Services and
      Prudential Property and
      Casualty Company
Accounting/Auditing
Business Operations
Capital Management
Corporate Governance Leadership
Financial Expertise/Literacy
Industry Experience
International
Investment Markets
Public Company Executive Experience
Regulatory/Risk Management

   

2019 PROXY STATEMENT          23

TABLE OF CONTENTS

INFORMATION ABOUT THE BOARD OF DIRECTORS
   
   

Summary of Director Qualifications and Experience

This table provides a summary view of the qualifications and attributes of each director nominee.


* Tenure and age calculated as of the 2019 Annual Meeting.

   

24          2019 PROXY STATEMENT

TABLE OF CONTENTS

INFORMATION ABOUT THE BOARD OF DIRECTORS
   
   

Director Independence

Our corporate governance guidelines provide that a substantial majority of the Board will be independent. For a director to be considered independent, the Board must determine that the director has no material relationship with our company, and the director must meet the requirements for independence under the listing standards of the New York Stock Exchange (NYSE). The Board has also determined that certain categories of relationships are not considered to be material relationships that would impair a director’s independence. These independence standards are listed in our corporate governance guidelines.

The Governance Committee reviews information about the directors’ relationships and affiliations that might affect their independence and makes recommendations to the Board as to the independence of the directors. In making independence determinations, the Board considers all relevant facts and circumstances. In this regard, the Board considered that each of the non-employee directors (other than Mr. Keaney), or one of their immediate family members, is or was during the last three fiscal years a director, trustee, advisor, or executive or served in a similar position at another business that had dealings with our company during those years. In each case, these have been ordinary course dealings (business where the other business obtains insurance policies from us or we receive interest on debt security investments or make payments for trustee, depository and commercial banking business relationships) involving amounts less than 1% of both our and the other business’ total consolidated revenues for such fiscal year or in which the director's only interest arose only from his or her position as a director of the other business. In addition, each of Mses. DeVore and Larson, or one their immediate family members, is or was during the last three fiscal years, a director, executive, or employee of a charitable organization or university that received contributions from us (other than non-discretionary matching contributions) of less than $120,000 in any one fiscal year.

Based on a review of the findings and recommendations of the Governance Committee and applying the standards described above, the Board has determined that each of Messrs. Bunting, Caulfield, Echevarria, Kabat, Keaney, O’Hanley and Shammo and Mses. Cross, DeVore, Egan, and Larson is (as well as Ms. Godwin who retired in 2018, was during her tenure) an independent director.

Mr. McKenney, our President and CEO, is not an independent director.

Director Compensation

The Human Capital Committee (the "Committee") reviews our non-employee director compensation annually and makes recommendations to the Board as appropriate.

Benchmarking

With the assistance of its independent third-party compensation consultant, Pay Governance LLC, the Committee reviews peer group data to understand market practices for director compensation.

Our non-employee director compensation is compared to that of companies in two peer groups: (1) the Proxy Peer Group described beginning on page 52 of this proxy statement; and (2) a general industry peer group, which consisted of 139 companies for the review completed in December 2018. The Committee believes the companies in the general industry peer group provide appropriate comparisons given that their market capitalizations and revenues are well aligned with those of the company (data below as of December 2017):

Market capitalizations ranging from $5.9 billion at the 25th percentile to $16.9 billion at the 75th percentile (compared to Unum market capitalization of $12.3 billion); and

   

2019 PROXY STATEMENT          25

TABLE OF CONTENTS

INFORMATION ABOUT THE BOARD OF DIRECTORS
   
   

Revenues ranging from $4.3 billion at the 25th percentile to $12 billion at the 75th percentile (compared to Unum revenues of $11.3 billion).

The use of two peer groups provides an indication of director pay levels both within the insurance industry as well as the broader market. The Committee uses the approximate median of these peer groups as a reference point for setting director compensation. At the time of the review in December 2018, both the annual cash retainer and annual restricted stock award for non-employee directors were below the Proxy Peer Group median.

Based on its annual analysis of non-employee director compensation, the Committee’s consultant recommended an increase in order to bring compensation levels more in line with the market median. After discussion, the Committee deferred consideration of any potential action until May 2019.

Elements of Non-Employee Director Compensation in 2018

Non-employee directors receive cash retainers and equity awards as outlined in the following table:

NON-EMPLOYEE DIRECTOR COMPENSATION

 
2018 Pay
All Directors:
 
 
 
Annual cash retainer
$      110,000
 
Annual restricted stock unit award
 
150,000
 
Committee Chairs:
 
 
 
Additional annual cash retainer - Audit Committee
 
25,000
 
Additional annual cash retainer - Human Capital Committee
 
20,000
 
Additional annual cash retainer - Risk and Finance Committee
 
20,000
 
Additional annual cash retainer - Governance Committee
 
15,000
 
Additional annual cash retainer - Regulatory Compliance Committee
 
15,000
 
Board Chairman:
 
 
 
Additional annual cash retainer (paid in quarterly installments)
 
200,000
 

For new Board members, these amounts are prorated for partial-year service based on the date of election to the Board. Amounts may be deferred at the election of each director for payment in company common stock at a future date. Directors deferring cash compensation receive a number of deferred share rights equal to the number of whole shares of common stock that could be purchased for the deferred amount, based on the closing price of a share of common stock on the date the cash compensation would otherwise be payable.

Directors’ expenses of attending Board and committee meetings, or other meetings relating to company business, are paid by the company. Directors are eligible to participate in our employee matching gifts program. Under this program, we match up to $10,000 each year for eligible gifts to non-profit organizations.

Mr. McKenney is employed by the company and receives no additional compensation for his Board service.

   

26          2019 PROXY STATEMENT

TABLE OF CONTENTS

INFORMATION ABOUT THE BOARD OF DIRECTORS
   
   

2018 Compensation

Our Board compensation year starts at the Annual Meeting each year and runs to the next Annual Meeting. The annual Board and committee chair cash retainers and restricted stock unit award are paid/granted annually in advance. The additional cash retainer for the Board Chairman is paid quarterly in advance. The following table provides details of the compensation of each person who served as a non-employee director during 2018. Ms. Cross did not join the Board until February 2019 and therefore did not receive any compensation during 2018. Mr. Bunting was elected as the chair of the Regulatory Compliance Committee in May 2018.

NON-EMPLOYEE DIRECTOR COMPENSATION

Name
Fees Earned
or Paid in Cash(1)
Stock
Awards(2)
All Other
Compensation(3)
Total
Theodore H. Bunting, Jr.
$       125,000
 
$
150,000
 
 
 
$
275,000
 
E. Michael Caulfield
 
135,000
 
 
150,000
 
 
10,000
 
 
295,000
 
Susan D. DeVore
 
137,425
 
 
150,000
 
 
 
 
287,425
 
Joseph J. Echevarria
 
109,993
 
 
150,000
 
 
 
 
259,993
 
Cynthia L. Egan
 
130,000
 
 
150,000
 
 
10,000
 
 
290,000
 
Pamela H. Godwin
 
 
 
 
 
5,000
 
 
5,000
 
Kevin T. Kabat
 
310,000
 
 
150,000
 
 
 
 
460,000
 
Timothy F. Keaney
 
129,989
 
 
150,000
 
 
 
 
279,989
 
Gloria C. Larson
 
125,000
 
 
150,000
 
 
10,000
 
 
285,000
 
Ronald P. O'Hanley
 
109,993
 
 
150,000
 
 
10,000
 
 
269,993
 
Francis J. Shammo
 
110,000
 
 
150,000
 
 
 
 
260,000
 
(1) Amounts represent retainers, including for service as Board Chairman and committee chairs, which were paid in 2018, either in cash or deferred shares, for 2018/2019 Board service. Messrs. Echevarria and O'Hanley each elected to defer their cash retainers, which were converted to deferred share rights with the value reflected in the table. Mr. Keaney elected to defer a portion of his cash retainer, which was converted to deferred share rights with the value included in the table. Ms. DeVore's amount also includes a prorated retainer for her 2017/2018 board year service based on the date she joined the Board in February of 2018.
(2) On May 24, 2018, each then serving non-employee director was granted 3,892 restricted stock units (RSUs) under our Stock Incentive Plan of 2017. The amounts shown are the grant date fair market values of these units. Ms. Godwin retired from the Board at the 2018 Annual Meeting and did not receive a grant of RSUs for the 2018/2019 Board year.

We account for stock-based payments under the requirements of Accounting Standards Codification Topic 718 Compensation Stock Compensation (ASC 718). A complete discussion of the assumptions made as well as the financial impact of this type of compensation can be found in Notes 1 and 11 of the Consolidated Financial Statements in Part II, Item 8 of our Form 10-K for the year ending December 31, 2018.

The following table provides details of the unvested RSUs, including dividend equivalent units, held by each non-employee director as of December 31, 2018.

Director Name
Number of Restricted
Stock Units Held at
Fiscal Year End
Director Name
Number of Restricted
Stock Units Held at
Fiscal Year End
Theodore H. Bunting, Jr.
3,948
Kevin T. Kabat
3,948
E. Michael Caulfield
3,948
Timothy F. Keaney
3,948
Susan D. DeVore
4,693
Gloria C. Larson
3,948
Joseph J. Echevarria
3,948
Ronald P. O'Hanley
3,948
Cynthia L. Egan
3,948
Francis J. Shammo
3,948
(3) With the exception of Ms. Godwin, who retired from the company in 2018, the amounts shown represent the company’s matching gifts resulting from the directors’ charitable gifts. For Ms. Godwin, in recognition of her retirement from the Board, the company made a $5,000 charitable contribution in her name.

   

2019 PROXY STATEMENT          27

TABLE OF CONTENTS

INFORMATION ABOUT THE BOARD OF DIRECTORS
   
   

Director Stock Ownership and Retention Requirements

Each non-employee director is required to own Unum equity securities with an aggregate value of five times the director’s annual cash retainer (for a total current retention requirement of $550,000). New directors have five years from the date of their election to meet the ownership requirement.

In addition, each non-employee director is required to retain 60% of the shares underlying their annual restricted stock unit award for at least one year from the time they vest, and to retain at least the amount of equity securities necessary to meet his or her ownership requirement until retirement from the Board.

The Committee annually reviews each director’s stock ownership level. If a director does not reach his or her ownership requirement within the time period provided, the Committee will determine whether action is appropriate. As of December 31, 2018, eight of the ten non-employee directors serving on the Board at that time had met the ownership requirement. The two directors who had not met the ownership requirement at year-end 2018 joined the Board within the past five years and are expected to meet the ownership requirement within the applicable time period provided.

   

28          2019 PROXY STATEMENT

TABLE OF CONTENTS

BOARD AND COMMITTEE GOVERNANCE
   
   

BOARD AND COMMITTEE GOVERNANCE

Corporate Governance Guidelines

The Board of Directors has adopted corporate governance guidelines on a number of significant matters, including director selection and independence, director responsibilities, Board leadership, and management succession. The corporate governance guidelines are available on our investor relations website under the "Corporate Governance" heading at www.investors.unum.com. The Governance Committee regularly reviews developments in corporate governance and recommends updates to the corporate governance guidelines and other documents as necessary or appropriate in response to regulatory requirements and evolving practices.

Board Leadership Structure

Kevin T. Kabat serves as non-executive Chairman of the Board and Richard P. McKenney serves as President and CEO of the company. As the non-executive Chairman, Mr. Kabat is also deemed the Lead Independent Director and, as such, has the responsibilities outlined in our corporate governance guidelines, including:

Presiding at all meetings of the Board, including executive sessions of the non-management and independent directors;
Communicating actions/issues arising from executive sessions to the CEO, as appropriate;
Authority to call meetings of the independent directors;
Authority to approve meeting schedules, agendas and information provided to the Board;
Advising the Board on Board development, including Board and committee leadership succession planning;
Unless otherwise determined by the Board, meeting with each director to evaluate the Board and committees and reporting this evaluation to the Governance Committee;
When requested by the independent directors, hiring advisors to the independent directors, to be paid by the company;
Receiving, through the Corporate Secretary, communications from shareholders seeking to communicate with the Board;
Serving as a liaison to the independent directors; and
If requested by major shareholders, ensuring that he is available for consultation and direct communication.

The Board believes the current leadership structure provides significant independent oversight of management, as Mr. McKenney (our CEO and an employee of the company) is the only member of the Board who is not an independent director. The Board holds executive sessions, without management present, at each regularly scheduled in-person Board meeting. In 2018, the independent directors met alone in executive session five times, and each session was chaired by Mr. Kabat.

Our bylaws and corporate governance guidelines allow the offices of Chairman and CEO to be filled by the same or different individuals. This allows the Board flexibility to select the appropriate leadership for our company based on a number of factors, including the specific needs of the business and what best serves the company

   

2019 PROXY STATEMENT          29

TABLE OF CONTENTS

BOARD AND COMMITTEE GOVERNANCE
   
   

and shareholders at a given time. The independent directors of the Board will continue to review the Board’s leadership structure periodically and may modify this structure from time to time as they determine appropriate and in the best interests of the company and shareholders.

Board Meetings and Attendance

The Board of Directors met seven times during 2018. Depending upon committee assignments, a director generally would have had 16 to 22 meetings to attend in 2018. Average director attendance at Board and committee meetings was 98%, and each incumbent director attended at least 89% of the total number of meetings of the Board and committees on which he or she served during the period of the director’s service in 2018.

Directors are expected to attend Annual Meetings. All current directors serving on the Board at the time of the 2018 Annual Meeting attended that meeting.

Committees of the Board

The Board of Directors has five standing committees: Audit, Risk and Finance, Governance, Human Capital, and Regulatory Compliance. Each committee has a charter that is available on our investor relations website under the "Corporate Governance" heading at www.investors.unum.com. In addition to the duties contained in their respective charters, each committee may be assigned additional tasks by the Board, and each is charged with reporting its activities to the Board.

BOARD MEMBERS AND COMMITTEES

Name
Term
Expires
Audit
Risk &
Finance
Governance
Human
Capital
Regulatory
Compliance
Theodore H. Bunting, Jr.(1)
2019
 
 
 
Chair
E. Michael Caulfield(2)
2019
Chair
 
 
 
Susan L. Cross(3)
2019
 
 
 
Susan D. DeVore
2019
 
 
 
Joseph J. Echevarria
2019
 
 
 
Cynthia L. Egan
2019
 
 
 
Chair
Kevin T. Kabat
2019
 
 
 
Timothy F. Keaney
2019
Chair
 
 
 
Gloria C. Larson
2019
 
 
Chair
 
Richard P. McKenney
2019
 
 
 
 
 
Ronald P. O'Hanley(4)
2019
 
 
 
Francis J. Shammo
2019
 
 
 
2018 Committee Meetings
 
9
5
5
6
4
(1) Mr. Bunting rotated from the Audit Committee to the Regulatory Compliance Committee in May 2018. He was named Chair at that time as well.
(2) As noted on page 23, Mr. Caulfield will retire from the Board at the 2019 Annual Meeting.
(3) Ms. Cross joined the Board effective February 25, 2019.
(4) Mr. O'Hanley rotated from the Risk and Finance Committee to the Governance Committee in May 2018.

   

30          2019 PROXY STATEMENT

TABLE OF CONTENTS

BOARD AND COMMITTEE GOVERNANCE
   
   

COMMITTEE RESPONSIBILITIES

Audit Committee(1)
Assists the Board in oversight of financial statement and disclosure matters, the effectiveness of internal control over financial reporting, the relationship with our independent auditor, the internal audit function, compliance with legal and regulatory requirements, and financial risk.
Has the sole authority to appoint, oversee and, if necessary, replace the company’s independent auditors.
A complete description of the responsibilities of the Audit Committee is included in the Report of the Audit Committee on page 39.
Governance Committee(2)
Assists the Board in implementation and oversight of our corporate governance policies. The Governance committee identifies qualified candidates for the Board and recommends the individuals to be nominated by the Board for election as directors.
Develops and recommends to the Board our corporate governance guidelines.
Oversees the process for Board and committee evaluations.
Advises the Board on corporate governance matters, including with respect to the size, composition, operations, leadership, succession plans and the needs of the Board and its committees.
Reviews reports concerning environmental, governance and corporate social responsibility matters of significance to the company.
Human Capital Committee(3)
Assists the Board in oversight of our compensation and benefit programs, and related risks to support business plans, attract and retain key executives, and tie compensation to performance.
Establishes our general compensation philosophy, principles and practices.
Takes into consideration the results of the company’s most recent say-on-pay vote.
Evaluates and approves compensation and benefit plans.
Annually reviews performance and approves compensation of the CEO and other executive officers.
Reviews and recommends to the Board the form and amount of director compensation.
Reviews the Compensation Discussion and Analysis and related disclosures in our proxy statements.

   

2019 PROXY STATEMENT          31

TABLE OF CONTENTS

BOARD AND COMMITTEE GOVERNANCE
   
   

Regulatory Compliance Committee(4)
Assists the Board in its oversight of regulatory, compliance, policy and legal matters and related risks and compliance with laws and regulations.
Monitors the effectiveness of our compliance efforts concerning applicable regulatory and legal requirements and internal policy.
Reviews and discusses with management any communication to or from regulators or governmental agencies and any complaints, reports and legal matters that raise significant issues regarding our compliance with applicable laws or regulations.
Monitors the investigation and resolution of any significant instances of noncompliance or potential compliance violations.
Risk and Finance Committee(5)
Assists the Board in oversight of our investments, capital and financing plans and activities, including dividends and borrowings, and related financial matters and the associated risks. It also oversees our enterprise risk management activities and other risks not specifically allocated to another committee.
Monitors, evaluates and recommends to the Board capital and financing plans, activities, requirements and opportunities.
Oversees implementation of and compliance with investment strategies, guidelines and policies.
Authorizes loans and investments of the company.
Reviews, assesses and reports on the impact of various finance activities on our debt ratings.
Monitors, evaluates and makes recommendations regarding matters pertaining to our Closed Block segment, including long-term care business, that could have meaningful impact upon any of the matters for which the Risk and Finance Committee has oversight responsibility.
(1) All members of the Audit Committee meet the independence requirements of the SEC and the NYSE and our corporate governance guidelines. All five members of the Audit Committee are "audit committee financial experts" under SEC regulations, and are "financially literate" as required by the NYSE.
(2) All members of the Governance Committee meet the independence requirements of the NYSE and our corporate governance guidelines.
(3) All members of the Human Capital Committee meet the independence requirements of the NYSE for directors and compensation committee members and our corporate governance guidelines and are "non-employee directors" for purposes of Rule 16b-3 under the Securities Exchange Act of 1934 and "outside directors" for purposes of Section 162(m) of the Internal Revenue Code.
(4) All members of the Regulatory Compliance Committee meet the independence requirements of our corporate governance guidelines.
(5) All members of the Risk and Finance Committee meet the independence requirements of our corporate governance guidelines.

   

32          2019 PROXY STATEMENT

TABLE OF CONTENTS

BOARD AND COMMITTEE GOVERNANCE
   
   

Limits on Board and Audit Committee Service

While we recognize that Board members benefit from service on the boards of other companies and such service is encouraged, the Board believes it is critical that directors be able to dedicate sufficient time to their service on our Board. To that end, no director may serve on more than three public company boards in addition to our Board, or on more than two audit committees of public companies in addition to our Audit Committee.

The Board’s Role in Risk Oversight

The Board has an active role, as a whole and also at the committee level, in overseeing management of the company’s risks. The Board is responsible for managing strategic risk, and it regularly reviews information regarding our capital, liquidity and operations, as well as the risks associated with each. The Risk and Finance Committee is responsible for oversight of the company’s enterprise risk management program and receives a report on these activities at least quarterly. The Risk and Finance Committee is also responsible for overseeing risks associated with investments and related financial matters, including those pertaining to our Closed Block segment, and any other risks not specifically allocated to another committee for oversight. The Audit Committee is responsible for oversight of financial risk and continues to fulfill its NYSE-mandated responsibility to discuss guidelines and policies with respect to the process by which the company undertakes risk assessment and risk management. The Audit Committee and Risk and Finance Committee also meet jointly as appropriate to oversee certain risks for which they have overlapping responsibility, including operational risks relating to data privacy, cybersecurity and business continuity. The Human Capital Committee is responsible for overseeing the management of risks relating to our compensation plans and programs and, as more fully described below, receives an annual report from the company’s chief risk officer with respect to these risks. The Regulatory Compliance Committee oversees management of risks related to regulatory, compliance, policy and legal matters, both current and emerging and whether of a local, state, federal or international nature. While each committee is responsible for evaluating certain risks and overseeing the management of such risks, the entire Board of Directors is regularly informed through committee reports about such risks in addition to the risk information it receives directly.

Compensation Risk

Each year, the company’s chief risk officer, in consultation with the Human Capital Committee, undertakes a risk assessment of our compensation programs and practices. This year’s process included the following steps:

Review of the overall design and philosophy of the company’s incentive compensation programs.
Review and assessment of the 2018 annual incentive program and long-term incentive program performance measures for alignment between actual results and achievement payout levels.
Identification of fundamental principles to test, including the SEC’s non-exclusive list of situations where compensation programs may have the potential to raise material risks to the company.
Assessment of the incentive programs in light of the company’s primary risks (as disclosed in the company’s 2018 Form 10-K) and the company’s annual financial and capital plans.
Assessment of proposed design changes to the 2019 incentive plans.

Based on this assessment, the following conclusions were reached by the chief risk officer and presented to the Human Capital Committee:

   

2019 PROXY STATEMENT          33

TABLE OF CONTENTS

BOARD AND COMMITTEE GOVERNANCE
   
   

The company’s incentive program targets, thresholds, caps, metric weightings and payout curves are effective control mechanisms.
The incentive plans are balanced and align the long-term interests of stakeholders and management.
The program’s goals are effectively balanced and consistent with the risk levels embedded in the company’s financial and capital plans.
All potential awards are subject to Human Capital Committee discretion and the company has a recoupment policy in place in the event of a material earnings restatement.

Accordingly, our chief risk officer and the Human Capital Committee do not believe the company’s compensation programs create risks that are reasonably likely to have a material adverse effect on the company, and that the programs fall within the range of the company's risk appetite.

Director Retirement Policy

Our bylaws do not allow any person to serve as a director beyond the date of the annual meeting of shareholders immediately following his or her 72nd birthday. In accordance with this policy, Mr. Caulfield will retire from the Board effective at the Annual Meeting.

Compensation Committee Interlocks and Insider Participation

During 2018, Ms. Egan and Messrs. Bunting, Kabat, and O'Hanley each served as a member of our Human Capital Committee. None of the members has served as an officer of the company, and during 2018 none of the members was an employee of the company. None of our executive officers served as a member of a board of directors or compensation committee of any other entity that has one or more executive officers serving as a member of our Board or Human Capital Committee.

Related Party Transactions and Policy

The Board has adopted a written policy concerning related party transactions. This policy covers any transaction in which the company was or is to be a participant and the amount involved exceeds $120,000, and in which any related party had or will have a direct or indirect material interest. A "related party" means any of our directors, director nominees, executive officers, persons known to us to beneficially own more than 5% of our outstanding common stock, and any of their respective immediate family members, and any entity in which any of these persons has an interest as an employee, principal or 10% or greater beneficial owner or other material financial interest.

Prior to entering into a transaction that may be viewed as a related party transaction, the related party must notify our general counsel of the facts and circumstances of the transaction. If the general counsel determines that the proposed transaction is a related party transaction, it is submitted to the disinterested members of the Audit Committee for consideration at the next Committee meeting (or to the chair of the Committee if it is not practical to wait until the next meeting and the chair is not a related party to the transaction). The Committee considers all relevant facts and circumstances, including the benefits to the company, if the related party is an independent director or nominee, the potential effect of entering into the transaction on the director’s or nominee’s independence, any improper conflict of interest that may exist, the availability of other sources for the products and services, the terms of the transaction, and the terms available from or to unrelated third parties generally.

   

34          2019 PROXY STATEMENT

TABLE OF CONTENTS

BOARD AND COMMITTEE GOVERNANCE
   
   

The transaction may be approved if it is determined in good faith not to be inconsistent with the best interests of the company and shareholders. Certain types of transactions are deemed to be pre-approved by the Audit Committee, including executive officer and director compensation arrangements approved by the Board of Directors or the Human Capital Committee, indemnification payments and any transaction between the company and any entity in which a related party has a relationship solely as a director, less than 10% equity holder, or employee (other than an executive officer), or all of these relationships.

Transactions with Related Persons

The company employs a sister-in-law of Michael Q. Simonds, Executive Vice President, President and Chief Executive Officer of Unum US. Charlene Glidden serves as Vice President, Digital Transformation and does not report within the Unum US organization. Her compensation for 2018 was approximately $460,621, and she participated in compensation and benefit arrangements generally applicable to similarly-situated employees.

Codes of Conduct and Ethics

The Board has adopted a Code of Conduct establishing certain business practices and ethics applicable to all of our directors, officers and employees. Our Code guides employees on how to abide by the company's principles and access the resources available to address any ethical issues that arise. We provide online and toll-free access to report ethical issues confidentially, conduct annual training and offer self-service access to a variety of educational materials related to issues covered in our Code. The Board has also implemented a separate Code of Ethics applicable to our CEO and certain of our senior financial officers.

We expect all employees and officers of Unum to abide by the principles and policies set forth in our codes. Both of these codes, together with any information on certain amendments or any waivers applicable to certain of our executive officers, are available on our investor relations website under the "Corporate Governance" heading at www.investors.unum.com.

   

2019 PROXY STATEMENT          35

TABLE OF CONTENTS

OTHER GOVERNANCE MATTERS
   
   

OTHER GOVERNANCE MATTERS

Shareholder Engagement

In line with our commitment to open communication and transparency, we have a robust shareholder engagement process that occurs throughout the year.

   

In the late summer and early fall, we begin our
shareholder engagement efforts by contacting each of
our top 50 investors, which in 2018 represented over
68% of our outstanding shares. The focus of these
meetings is to discuss our business strategy and our
governance and compensation practices, as well as to
learn about any other topics that are important to our
shareholders. During 2018, our independent Board
Chairman joined management for several of the
shareholder meetings. In the late fall, we also
met with one proxy advisory firm to provide an update
on our shareholder engagement efforts and gain
further insight into its view regarding our compensation and governance practices and proxy disclosures.
These communications promote greater engagement
with our shareholders on various corporate governance
issues and provide an open forum to share
perspectives on our policies and practices.
   
   
   
   
   

During the winter, we review with our Governance and Human Capital Committees, and with the full Board, the feedback we received during these shareholder meetings and use it to enhance proxy disclosures and make any recommended governance and compensation changes prior to the next Annual Meeting. Following our Annual Meeting in the spring, we review our shareholder voting results, consider compensation and governance trends and current best practices, and conduct follow-up meetings with investors to address any issues.

For additional information on feedback we received from our shareholders during our outreach efforts, refer to page 48.

Environmental, Social and Governance

Millions of people count on our benefits as part of a critical financial safety net, and we strive to deliver on those commitments and make a difference. This focus on doing the right thing guides our approach to sustainability and social responsibility issues. Unum has a long tradition of engaging employees, shareholders, our communities and society at large on advocacy, community outreach, environmental responsibility and good governance. Here are a few ways we aspire to integrate corporate responsibility into our business.

Being Good Stewards of the Environment

We’re committed to helping protect the valuable resources that we all depend on to support quality of life for everyone. We do that by striving to effectively manage our impact on the environment. Our facilities account for our biggest environmental impacts, and we have made significant strides in several areas to measure our

   

36          2019 PROXY STATEMENT

TABLE OF CONTENTS

OTHER GOVERNANCE MATTERS
   
   

impact and improve efficiencies to reduce our carbon footprint. Employee ‘green teams’ also promote environmentally smart ways of living and working. By better managing our impacts today, we are investing in a better future.


Social Outreach and Engagement

Engaging with employees, community partners and in the public discourse are key ways we work to create better places to live and work.

Our Culture and Human Capital Management

The wellbeing of our employees is one of our top priorities and starts with a dynamic and welcoming workplace that embraces diversity, fosters collaboration and encourages employees to bring their best ideas to work every day.

In 2018, we continued a multi-year modernization of our main home offices. This investment is transforming our workspaces to spark greater collaboration, innovation and flexibility, and introduce upgraded food service and fitness amenities for employees. We believe the introduction of a more contemporary workplace will support the recruitment of top talent and the delivery of best-in-class customer service.

Work-life balance is a core value of ours, and we provide access to benefits and resources employees need to enhance their health and wellbeing. We offer comprehensive health plans, annual screenings, on-site fitness and health resource centers at our primary facilities and programs that educate employees and help them manage chronic health issues as well as generous retirement benefits.

Our company has a strong focus on training and professional development. All employees participate in an annual curriculum of training on our Code of Conduct (which covers a variety of topics including ethics, harassment, regulatory compliance and our business practices) privacy, and information security. We also provide employees and managers a variety of training and development programs tailored to their specific roles and support the professional development of our employees through our tuition assistance program.

We’re proud to have been recognized as a great place to work by several independent organizations and we will continue to make investments in our people and our culture to create a world-class workplace.

Inclusion and Diversity

We are committing greater resources to foster a workplace that welcomes diverse backgrounds and perspectives, and reflects our customers and our communities. Our commitment starts at the top, and we’re pleased to have been recognized as being a leader in gender diversity at the Board level. We set inclusion and diversity performance goals for the CEO and senior leadership team. Last year, we also established an Office of Inclusion & Diversity and hired a Vice President, Inclusion and Diversity and support staff. A variety of

   

2019 PROXY STATEMENT          37

TABLE OF CONTENTS

OTHER GOVERNANCE MATTERS
   
   

programming and training opportunities are available for all employees to learn about issues such as unconscious bias and inclusion in the workplace.

This year, we have committed to creating and sharing a strategic inclusion and diversity plan and key goals.


Positively Impacting Our Communities

We’re dedicated to building stronger communities in the places where we live and work. Through financial gifts and employee volunteering, we partner with community organizations to improve educational opportunities, promote health and wellness, and support the arts. We encourage employee engagement in community outreach by providing time off for volunteer activities and matching employee giving to qualified organizations. We partner with dozens of local charities every year and provide significant support in the U.S. to public education, health and wellness, and arts and culture. For more information about our community outreach, visit our website.


Advocating for Financial Protection Benefits

We participate in public policy discussions on a variety of issues related to our business and industry. One of our primary areas of focus is advocating for greater access to financial protection benefits for workers and their families in the U.S. and U.K. This is an issue that continues to grow in significance as governmental revenue and funding for public safety net initiatives has declined.

Our engagement in these issues includes:

Funding research on disability trends, the economic impact of financial protection benefits and consumer insurance purchasing habits;
Sponsoring state legislation to encourage greater participation in financial protection benefits through employee auto-enrollment, with the option to opt-out;
Providing expertise to federal and state agencies related to disability benefits; and
Active participation in industry associations such as the American Council of Life Insurers.

Through engagement with legislators and other public officials at the state and federal level, we educate policymakers on the importance of making financial protection benefits widely available and easy to enroll in.

   

38          2019 PROXY STATEMENT

TABLE OF CONTENTS

REPORT OF THE AUDIT COMMITTEE
   
   

Good Governance

We are committed to maintaining a sound governance framework rooted in a culture of integrity and responsiveness to the long-term interests of our shareholders. Shareholder perspectives are valued by the Board and management as they consider the current governance landscape and shape our practices to keep pace with, if not stay ahead of, best practices. We list many of our governance practices on page 3.

REPORT OF THE AUDIT COMMITTEE

The Audit Committee (in this report, the "Committee") is appointed by the Board of Directors and operates under a written charter adopted by the Board, a copy of which is available on the company’s investor relations website under the heading "Corporate Governance" at www.investors.unum.com. The Committee is comprised solely of independent directors who meet the independence requirements of the SEC and the NYSE. All members of the Committee are "financially literate" as required by the NYSE, and the Board has determined that all five current members are "audit committee financial experts" under SEC regulations. In February 2018, Susan D. DeVore became a member of the Committee upon her election to the Board. In May 2018, Theodore H. Bunting, Jr. rotated from the Committee to the Regulatory Compliance Committee. Additionally, in February 2019, Susan L. Cross became a member of the Committee upon her election to the Board.

The primary purpose of the Committee is to assist the Board in its oversight of the:

Integrity of the company’s financial statements and related disclosures;
Effectiveness of the company’s internal control over financial reporting;
Compliance by the company with legal and regulatory requirements;
Qualifications, independence and performance of the company’s independent auditor;
Responsibilities and performance of the company’s internal audit function; and
Management of the company’s financial risks.

The Committee is also responsible for discussing guidelines and policies with respect to the process by which the company undertakes risk assessment and management, and communicates with the Risk and Finance Committee as necessary for this purpose. The Committee receives regular enterprise risk management (ERM) reports, including results of the Own Risk and Solvency Assessment (ORSA). In 2018, the Committee Chair and another member of the Committee reviewed and provided input in the development of the ORSA Summary Report. This report provides strong evidence of the strengths of the company’s ERM framework, measurement approaches, key assumptions utilized in assessing our risks, and prospective solvency assessments under both normal and stressed conditions.

The Committee met nine times during 2018. The Committee regularly held executive sessions and met separately with its independent auditor, Ernst & Young, and with the internal auditors without management present.

In fulfilling its oversight responsibilities, the Committee reviewed and discussed with management and the independent auditor matters relating to the company’s accounting and financial reporting processes, including the internal control over financial reporting; reviewed and discussed with management and the independent auditor the company’s annual and quarterly financial statements and related disclosures in reports filed with the SEC; pre-approved all audit services and permitted non-audit services to be performed by the company’s independent auditor; reviewed and discussed with management the responsibilities and performance of the internal audit function; discussed with management policies relating to risk assessment and risk management,

   

2019 PROXY STATEMENT          39

TABLE OF CONTENTS

REPORT OF THE AUDIT COMMITTEE
   
   

as well as specific financial risks; and obtained and reviewed reports concerning the company’s policies and procedures for ensuring compliance with legal and regulatory requirements.

Management is primarily responsible for the preparation, presentation and integrity of the company’s financial statements and for the reporting process, including the establishment and effectiveness of the company’s internal control over financial reporting. The company’s independent auditor is responsible for performing an independent audit of the financial statements and of the effectiveness of the company’s internal control over financial reporting in accordance with auditing standards promulgated by the Public Company Accounting Oversight Board (PCAOB). The independent auditor reports directly to the Committee, which is responsible for the appointment, compensation, retention and oversight of the work performed by the independent auditor.

The Committee reviewed and discussed with management the company’s audited financial statements for the year ended December 31, 2018, including a discussion of the quality, not just the acceptability, of the accounting principles, the reasonableness of significant estimates and assumptions which could impact the amounts reported in the company’s financial statements, and the clarity of disclosures in the financial statements. The Committee reviewed and discussed with the independent auditor the overall scope and results of the independent audit and its judgments of the quality and acceptability of the company’s accounting principles. The Committee also engaged in discussions with management and the independent auditor, among other matters, concerning management’s assessment of reserve adequacy across all major business lines, which is presented to the Committee each year. The Committee discussed with the independent auditor the matters required to be discussed by applicable standards of the PCAOB. The Committee engaged in an exercise with its independent auditor using the 2018 audit as an opportunity to better understand new standards requiring discussion of critical audit matters (CAMs) in future auditor reports and the potential impacts on the company’s and auditor’s processes and reporting. The Committee also received the written disclosures and the letter from the independent auditor required by applicable requirements of the PCAOB regarding the auditor’s communications with the Committee concerning independence. In addition, the Committee discussed with the independent auditor matters relating to its independence, including consideration of whether the independent auditor’s provision of non-audit services to the company is compatible with the auditor’s independence. In order to assure continuing auditor independence, the Committee periodically considers whether there should be a regular rotation of the independent auditor.

The company’s internal audit function, under the direction of the chief auditor, reports directly to the Committee, which is responsible for the oversight of the work performed by the internal auditors. The internal auditors are responsible for, among other matters, conducting internal audits designed to evaluate the company’s system of internal controls. The Committee reviewed and discussed with the company’s internal auditors, and received regular status reports from them concerning, the overall scope and plans for their audits. The Committee met with the internal auditors, with and without management present, to discuss their audit observations and findings, and management’s responses, and their evaluation of the effectiveness of the company’s internal control over financial reporting.

The Committee evaluates the performance of its independent auditor, including the senior audit engagement team, each year and considers whether to retain the current independent auditor or consider other audit firms. In doing so, the Committee took into consideration a number of factors, including the professional qualifications of the firm and the lead audit partner, the quality and candor of the firm’s communications with the Committee and the company, and evidence supporting the firm’s independence, objectivity, and professional skepticism. Additionally, in conjunction with the mandated rotation of the independent auditor’s lead engagement partner, the Committee and its chair are directly involved in the selection of the independent auditor’s lead engagement partner, including the current partner who assumed this role in 2014. As the current lead engagement partner has completed five years of service to the company in 2018, a subgroup of the Committee met with a candidate proposed to assume this role in 2019, as well as discussed the candidate's qualifications with management.

   

40          2019 PROXY STATEMENT

TABLE OF CONTENTS

REPORT OF THE AUDIT COMMITTEE
   
   

Based on this evaluation, the Committee has determined that the continued retention of Ernst & Young to serve as the company’s independent auditor is in the best interests of the company and its shareholders. Accordingly, the Committee appointed Ernst & Young as the company’s independent auditor for 2018. Ernst & Young has served as the company’s independent auditor since the merger of Unum and Provident in 1999, and before that served at various times as the independent auditor for the company and certain predecessor companies. Although the Committee has sole authority to appoint the independent auditor, the Committee recommended that the Board of Directors seek shareholder ratification of the appointment at the Annual Meeting as a matter of good corporate governance.

Based on the reviews and discussions referred to above, the Committee recommended to the Board of Directors, and the Board approved, that the company’s audited financial statements for the year ended December 31, 2018 be included in the company’s Annual Report on Form 10-K for filing with the Securities and Exchange Commission.

2018 Audit Committee(1):

E. Michael Caulfield, Chair
Susan D. DeVore
Timothy F. Keaney
Francis J. Shammo

(1) Susan L. Cross became a member of the Audit Committee following her election to the Board in February 2019, and therefore did not participate in Committee actions with respect to the Report of the Audit Committee contained in this proxy statement.

   

2019 PROXY STATEMENT          41

TABLE OF CONTENTS

COMPENSATION DISCUSSION AND ANALYSIS
   
   

COMPENSATION DISCUSSION AND ANALYSIS

In this section, we provide an overview of our compensation philosophy and processes, and explain how the Human Capital Committee of our Board (referenced throughout this section as the "Committee") arrived at its compensation decisions for the below named executive officers (NEOs) for 2018.

Richard P. McKenney, President and Chief Executive Officer
John F. McGarry, Executive Vice President and Chief Financial Officer
Michael Q. Simonds, President and Chief Executive Officer, Unum US
Timothy G. Arnold, President and Chief Executive Officer, Colonial Life
Lisa G. Iglesias, Executive Vice President and General Counsel

Business and Performance Review

Our Business

We are a leading provider of financial protection benefits in the United States and United Kingdom. Following our acquisition of Pramerica Žycie TUiR SA (which we have subsequently renamed Unum Žycie TUiR SA and refer to as Unum Poland) in the fourth quarter of 2018, we now provide financial protection benefits in Poland, which expands our European presence. Our products include disability, life, accident, critical illness, dental and vision insurance. These products, primarily offered through the workplace, help protect millions of working people and their families from the financial hardships that can occur in the event of illness, injury, or loss of life.

Our business operations are divided into three primary segments – Unum US, Unum International (formerly solely Unum UK), and Colonial Life – as well as a Closed Block of business that includes products, such as long-term care insurance, that we service and support but no longer actively market. In connection with our acquisition of Unum Poland, we changed the name of our Unum UK segment to Unum International. The Unum International segment is comprised of our Unum UK and Unum Poland lines of business.

2018 Performance

From a financial and operating standpoint, Unum had a very successful year in 2018 as we delivered steady growth across our core businesses, leading to record after-tax adjusted operating earnings per share. We maintained market-leading positions and a strong value proposition with customers and brokers, and focused on expanding our product and geographic footprint. Our disciplined business approach helped us maintain attractive profit margins and a high level of customer satisfaction. These results were despite a challenging environment, including the pressure of continued low interest rates, uncertainty in the U.K. due to Brexit, and industry concerns about long-term care policies.

   

42          2019 PROXY STATEMENT

TABLE OF CONTENTS

COMPENSATION DISCUSSION AND ANALYSIS
   
   

Financial Highlights(1)

Record earnings
 
Unum achieved record after-tax adjusted operating earnings, continuing our recent history of strong financial performance. For 2018, we delivered strong after-tax adjusted operating income of $1.15 billion, based on total revenue of $11.6 billion. Adjusted operating earnings per share (EPS) was at an all-time high of $5.20, a significant increase over the prior year and the thirteenth consecutive year of after-tax adjusted operating EPS growth.
 

Return on equity
 
We continued to put shareholder capital to good use. Consolidated adjusted operating return on equity (ROE) increased to 13.2%, while ROE in our core operating segments grew to 17.8%.
   

Book value
 
Our book value per share at the end of 2018 was up 3.6% from 2017 (excluding accumulated other comprehensive income, or AOCI). It was the tenth consecutive year of shareholder equity growth.
   

Strengthening of reserves
 
We increased our long-term care GAAP reserves by $593.1 million after-tax to reflect our updated best estimate of future obligations, which had little impact on our capital plans and overall financial strength.

Operating Highlights

Unum delivered on our mission of supporting our customers in 2018. We paid approximately $7.2 billion in benefits to people facing illness, injury or loss of life. Satisfaction metrics measuring our interaction with customers and partners were high.

We continue to see strong growth in our core businesses, particularly in premium income, compared with 2017 results. This growth was achieved while maintaining our pricing and risk discipline, and demonstrates that our value story continues to resonate with customers.

We managed our investment portfolio well despite the continued low interest rate environment. Due to the nature of our business, we invest for the long term with an investment philosophy emphasizing sound risk management and credit quality.

(1) Operating results referenced below include non-GAAP financial measures. Information about the non-GAAP measures used in this proxy statement is set forth in “A Note About Non-GAAP Measures” on page 2. For a reconciliation of the most directly comparable GAAP measures to the non-GAAP measures, refer to Appendix A to the proxy statement.

   

2019 PROXY STATEMENT          43

TABLE OF CONTENTS

COMPENSATION DISCUSSION AND ANALYSIS
   
   

Long-Term Care Review

The same skills that allow our core franchise to be successful are also beneficial to our closed block of long-term care policies that we service and support, but no longer actively market. In 2009, we closed our individual long-term care business, and in 2012 we closed our group long-term care business. Since that time, we have actively managed these blocks with a combination of rate increases, updates to our liability assumptions to reflect emerging experience, prudent cash infusions, and reserve changes. Since 2006, we have strengthened reserves $4.9 billion in this block. Through these and other steps, we continue to take proactive measures to provide for the long-term stability of this block and provide transparency to our shareholders and customers.

We continued our commitment to effectively managing our long-term care business in 2018 during our annual comprehensive review of this block. Upon completion of this review in the third quarter of 2018, we increased our long-term care GAAP reserves by $593.1 million after-tax to reflect our updated best estimate of future benefit obligations. In the process, we believe we set a standard for disclosure in long-term-care. This action had little impact on our capital plans and overall financial strength.

Strategic Positioning

We have recently taken a number of steps to fuel our growth and position us for the future.

Acquisitions: Unum's recent acquisitions of dental providers in the U.K. and U.S. have accelerated our expansion into the dental market and have been positively received. We also acquired a financial protection provider based in Poland in 2018, expanding our footprint in Europe.
Growth initiatives: We have enhanced our product portfolio with the introduction of dental, vision, stop-loss and new voluntary offerings. Planned geographic expansion is also driving growth.
Business investments: Current and planned investments in technology, customer experience, business development, facilities and our people are designed to further enhance our service capabilities, identify future opportunities for growth, and attract and retain talent.

In addition, key developments in the external environment are having a positive impact on our business.

Tax reform: Tax legislation enacted by the U.S. federal government in December 2017 significantly lowered our overall effective tax rate throughout 2018. The reduction in the corporate tax rate has improved the statutory earnings and cash generation of our insurance subsidiaries and our capital position remains strong.
Business confidence: As a provider of employee benefits offered through the workplace, we expect to benefit as employers gain more confidence in the economic environment, particularly in the U.S. These positive trends have translated to greater hiring and wage growth, business investments and investments in benefits for employees.

   

44          2019 PROXY STATEMENT

TABLE OF CONTENTS

COMPENSATION DISCUSSION AND ANALYSIS
   
   

Capital Generation for Shareholders

Our strong statutory earnings have resulted in solid capital generation, which we have deployed in a number of ways.


Our ability to generate capital remained strong in 2018, allowing us the opportunity to deploy capital in a number of ways. For the year, we invested in our business, strengthened our long-term care reserves and paid out $217.0 million in dividends, including increasing the annual dividend rate by 14% over the prior year. We also repurchased $350.7 million worth of our outstanding shares, bringing our total share repurchases since 2007 to $4.4 billion. In addition, our credit ratings are strong and remain at our targeted levels as a result of our strong balance sheet, our favorable operating results, and our highly respected brand in the employee benefits market.

   

2019 PROXY STATEMENT          45

TABLE OF CONTENTS

COMPENSATION DISCUSSION AND ANALYSIS
   
   

Business Highlights

The following are 2018 performance highlights within our primary business segments and other key areas of the company:

Unum US

 
Our Unum US segment, representing 63.8% of our consolidated premium income in 2018, continued its trend of profitable growth. The business delivered steady sales, healthy premium growth, and continued expansion of our new dental and vision offerings across the U.S. These results, combined with favorable benefits experience and effective expense management, drove adjusted operating income higher compared to 2017.
   
 
Unum International
 

Our Unum International segment represents 6.3% of our consolidated premium income in 2018. While the Unum UK line of business continued to face headwinds from the uncertain environment due to Brexit, the addition of Unum Poland helped drive growth in our International segment.
   
Colonial Life
 

Our Colonial Life segment, representing 17.9% of our consolidated premium income in 2018, had another good year. The business continued its trend of strong sales and premium growth. Consistent with past years, Colonial Life continues to generate solid margins and returns.

Closed Block

Our Closed Block segment, representing 12.0% of our consolidated premium income in 2018, delivered stable performance, with an increase in adjusted operating income of 1.3%. We continue to see consistent results, largely as a result of our active oversight of this block of business and ongoing investments in management resources and capabilities. Our commitment to the Closed Block was highlighted by the comprehensive review of our long-term care business we conducted in 2018 and our decision to increase LTC reserves to reflect our estimate of future benefit obligations.

Investments

Our investment results remained solid, generally in line with our plan benchmarks. The portfolio was well-managed through market volatility in 2018 and continues to provide a consistent source of income for our business. Our asset quality remains strong.

   

46          2019 PROXY STATEMENT

TABLE OF CONTENTS

COMPENSATION DISCUSSION AND ANALYSIS
   
   

Total Shareholder Return

Unum delivered strong financial results in our core businesses and record adjusted operating earnings in 2018, continuing a track record of consistent performance that spans more than a decade. However, investor perceptions in the industry surrounding long-term care and ongoing volatility in the broader market, most notably in the financial services sector, overshadowed our performance. This contributed to the decline in our stock value of more than 45% in 2018.

These results are not indicative of the ongoing strong financial and operational performance of our core businesses and the active management of our closed LTC block. We believe our consistent results have made Unum an excellent long-term investment - including during one of the worst financial crises in memory - and we expect that the performance of our core franchise will again be recognized and ultimately drive long-term shareholder value.


   

2019 PROXY STATEMENT          47

TABLE OF CONTENTS

COMPENSATION DISCUSSION AND ANALYSIS
   
   

2018 Say-on-Pay Vote and Shareholder Outreach

Our 2018 shareholder advisory vote to approve executive compensation passed with over 95% support. As we have done for several years, we continued our shareholder engagement through an extensive outreach effort, contacting each of our top 50 investors, representing over 68% of our outstanding shares. Consistent with the prior year, our independent Board Chairman joined several of our meetings with shareholders.

Six investors, representing more than 15% of our outstanding shares, accepted our invitation for engagement and we met with each of them. Another eight investors, representing approximately 13% of our outstanding shares, responded that a meeting was not necessary.

During the meetings, shareholders provided feedback on a variety of topics; however, we did not receive any suggestions for changes to our compensation programs. Overall, the shareholders we spoke with generally had favorable comments about our practices and programs, which is also evidenced by our most recent say-on-pay votes (approximately 95% in 2018; 96% in 2017; and 97% in 2016). During the 2018 outreach, we received specific positive comments related to:

Our compensation design and pay structure for executives; and
Our alignment to shareholders by using a TSR modifier.

Given the uncertainty of the long-term care industry during 2018, management had anticipated an increased focus on our long-term care business. However, only one shareholder commented on our long-term care business and suggested that our proxy disclosure should include how the Committee considered the long-term reserve charge when making the compensation decisions (see performance assessments beginning on page 64 for additional information).

Following consideration of the results of our 2018 say-on-pay vote and feedback we received through these meetings, we did not make any changes to our executive compensation programs. However, our discussions identified opportunities for further enhancements to our proxy statement disclosure and other governance topics including:

The addition of the CEO Compensation Summary beginning on page 8;
Enhanced disclosure related to our Environmental, Social and Governance initiatives beginning on page 36; and
Added footnotes to the "Elements of Pay" table, on page 49, indicating where the underlying incentive plan metrics can be found.

In addition to our meetings with shareholders, we also met with one proxy advisory firm to provide an update on our shareholder engagement efforts and gain further insight into their views regarding our compensation and governance practices and disclosures. Another proxy advisory firm indicated that a meeting was not necessary.

Overall, shareholders told us they appreciated the opportunity to engage in these discussions and the company’s willingness to consider their input with respect to both executive compensation and governance practices.

   

48          2019 PROXY STATEMENT

TABLE OF CONTENTS

COMPENSATION DISCUSSION AND ANALYSIS
   
   

Compensation Program Structure

Our executive compensation philosophy is to reward performance that helps us achieve our corporate objectives, increase shareholder returns, attract and retain talented individuals, and promote a culture of ownership and accountability in the company. We do this by:

Offering base salaries that reflect the competitive market as well as the roles, skills, abilities, experience, and performance of employees;
Providing incentive opportunities for all employees based on the achievement of corporate and individual performance goals; and
Aligning the long-term interests of management and shareholders by offering performance-based equity compensation opportunities and requiring senior officers to own a specified value of shares and retain equity awards for a specified period of time after vesting.

Elements of Pay

There are five primary elements of pay in our executive compensation program, which are summarized in the following table.

   
 
 
 
 
 

   

 
 
SHORT-TERM
LONG-TERM
 
 
BASE PAY
ANNUAL
INCENTIVE
PERFORMANCE-
BASED RSUs
PSUs
RETIREMENT &
WORKPLACE
BENEFITS

   

Primary Purpose
Reflects the market for similar positions as well as individual skills, abilities & performance
Rewards short-term performance(1)
Rewards long-term performance, aligns interest with stockholders & promotes a culture of ownership and accountability(1)
Addresses health, welfare & retirement needs
Performance Period
Ongoing
1 year
1 year
(vests over 3 years)(2)
3 years prospective
N/A
Form
<--------------- Cash --------------->
<--------------- Equity --------------->
N/A
Payment/Grant Date
Ongoing
<----- In March based on prior year performance ----->
Ongoing
(1) For details on performance measures see “Annual and Long-Term Incentive Programs” beginning on page 55.
(2) A performance threshold goal must be achieved before participants are eligible to receive an award. If the goal is not achieved, no awards are paid.

   

2019 PROXY STATEMENT          49

TABLE OF CONTENTS

COMPENSATION DISCUSSION AND ANALYSIS
   
   

Those pay elements that are "at risk," or contingent upon individual or corporate performance, are noted in the charts below. Our NEOs, as the most senior officers of the company, have a majority of their targeted total direct compensation (i.e., fixed salary and variable annual and long-term incentive awards) at risk. This design creates an incentive for achievement of performance goals (short- and long-term) and aligns the interests of our executives with those of our shareholders. For 2018, 89% of Mr. McKenney’s targeted total direct compensation was at risk. For the remaining NEOs, an average of 72% of their aggregate targeted total direct compensation was at risk.


Roles of the Committee, Chief Executive Officer and Consultant

The Committee, CEO, and compensation consultant each have important roles in our compensation program. The Committee, with input from the CEO, and compensation consultant, has the final authority to:

Evaluate, design, and administer a compensation program for our executive officers that appropriately links pay, company and individual performance, and the creation of shareholder value;
Establish performance goals and certify whether they have been attained;
Review the performance of the CEO, with input from the full Board, and determine his compensation; and
Determine compensation for each of the other NEOs.

The CEO provides to the Committee:

A self-assessment outlining his own performance for the year;
Performance assessments and compensation recommendations for executives who report directly to him, which includes all of the other NEOs; and
His perspective on the business environment and the company’s performance.

The CEO does not participate in any decisions related to his own compensation.

Pay Governance LLC, as independent compensation consultant to the Committee, provides objective, expert analyses, independent advice, and comparative data across peer companies on executive and director

   

50          2019 PROXY STATEMENT

TABLE OF CONTENTS

COMPENSATION DISCUSSION AND ANALYSIS
   
   

compensation. Pay Governance reports directly to the Committee, which is responsible for the appointment, compensation, retention, and oversight of the work performed by the consultant. A senior representative of the compensation consultant generally attends Committee meetings, participates in executive sessions of the Committee without management present, and communicates directly with Committee members outside of meetings.

The Committee has adopted a policy requiring that its compensation consultant be independent. During 2018, the Committee completed its annual assessment of the independence of Pay Governance, taking into account the following factors:

Compliance with the Committee’s independence policy;
Other services, if any, provided to the company by the consultant;
The amount of fees paid by the company to the consultant as a percentage of the consultant’s total revenues;
Any business or personal relationships between the consultant (including its representatives) and the company’s directors or senior officers; and
The policies and procedures the consultant has in place to prevent conflicts of interest, which include a prohibition against stock ownership in the company.

Pay Governance has attested to its independence and does not provide any services to the company other than those related to director and executive compensation consulting. Fees paid to Pay Governance for such services provided in 2018 totaled $187,583.

Based on its assessment, the Committee concluded that Pay Governance is independent under the Committee’s policy and that Pay Governance's work has not raised any conflict of interest.

In 2018, as a matter of good corporate governance, the Committee commissioned an executive compensation consultant benchmarking analysis. After considering the results of a Request for Information (RFI), the Committee determined to maintain its relationship with Pay Governance.

The company’s finance, human resources, and legal staff, including the Chief Financial Officer, support the Committee in its work, interacting with the compensation consultant only when doing so on behalf of the Committee or concerning proposals the Committee will review for approval. Employees from these departments discuss various executive compensation topics with the Committee and Pay Governance, including how compensation plans fit in with other programs and business objectives. Although these staff members may make recommendations, the final decision on all executive compensation matters rests solely with the Committee.

Compensation Benchmarking

The Committee compares the compensation of our NEOs to the median pay of executives in similar positions at peer companies. By generally targeting each pay element to the approximate median of the applicable comparator group (as described below), we ensure that the balance among the elements is competitive, while at the same time allowing company and individual performance to determine a majority of the compensation received by our NEOs. Overall, these benchmarking comparisons are used as points of reference and are secondary to the primary factors considered by the Committee when making compensation decisions. The primary factors are: company performance; individual performance; the executive’s level of responsibility and

   

2019 PROXY STATEMENT          51

TABLE OF CONTENTS

COMPENSATION DISCUSSION AND ANALYSIS
   
   

tenure; internal equity considerations; the creation of shareholder value; our executive compensation philosophy; and the results of the most recent shareholder say-on-pay vote and feedback received from engagement with shareholders.

The two sources used by the Committee for benchmarking executive compensation are:

For CEO and CFO compensation, a proxy peer group comprised of insurance and financial services companies that are either our business competitors or primary competitors for talent (the "Proxy Peer Group"). The Proxy Peer Group is also a reference for compensation programs and practices. The composition of the Proxy Peer Group is determined by the Committee and reviewed annually as outlined below; and
For the compensation of our other NEOs, the Willis Towers Watson Diversified Insurance Study of Executive Compensation (the "Diversified Insurance Study"). This source is used because responsibilities of our other NEOs may not be directly comparable with those of named executives at other companies in the Proxy Peer Group.

In addition to benchmarking executive compensation, the Committee uses a subset of the Proxy Peer Group (which we refer to as the "PSU Peer Group") for purposes of measuring relative TSR for our PSU awards (see page 60 for details on these awards). This subset is selected because they are considered to be direct business competitors of Unum.

The Committee evaluates the composition of the Proxy Peer Group every year. Peer companies are determined based on five primary criteria (life and health GICS code; reasonable range of: assets, revenues, and market capitalization; and competition with Unum for talent and/or market share). In the past, the Committee has discussed insurance brokers and property and casualty insurers as potential peers. However, the Committee decided not to include these companies due to the differences in business models, performance cycles and executive talent markets. Based on the most recent peer review in August 2018, on average, the companies in the Proxy Peer Group met three of the five criteria. Overall, Unum is at approximately 82% of the revenue median (as of the 12 months ended March 31, 2018). Additionally, 8 of the 11 peers (73%) selected Unum as a peer for compensation benchmarking purposes in their 2018 proxy statements.

Although no changes were made to either our PSU Peer Group or Proxy Peer Group from 2017 to 2018, during its annual Proxy Peer Group analysis in August 2018, the Committee with its consultant, Pay Governance, considered other insurance and financial services companies and determined to remove Genworth from the Proxy Peer Group for 2019. Genworth was removed due to the pending acquisition by China Oceanwide. Furthermore, the Committee considered other insurance and financial services companies and determined that Brighthouse Financial, a company that the Committee believes closely aligns as a life insurance and asset management business, will be added to the 2019 Proxy Peer Group.

Annual sensitivity tests are performed to understand the impact of both larger and smaller peers on median CEO compensation levels. For the tests conducted in 2018, excluding the two smallest and two largest peers for testing purposes had no impact on CEO targeted total direct compensation. An additional sensitivity test was conducted using a common statistical approach known as regression analysis. Regression analysis considers the correlation between two factors (e.g., compensation and revenue size) and is commonly used to adjust compensation data to remove the effects of company size. A regression analysis that considered the correlation between revenue and compensation yielded a corresponding targeted total direct compensation that was 6% less than the median. Based on these tests, the Committee determined that the 2019 Proxy Peer Group is appropriate.

   

52          2019 PROXY STATEMENT

TABLE OF CONTENTS

COMPENSATION DISCUSSION AND ANALYSIS
   
   

The following table lists the companies in the Diversified Insurance Study (“DIS”), PSU Peer Group and Proxy Peer Group.

BENCHMARKING EXECUTIVE COMPENSATION

        Proxy Peer Group Indicators
Company
DIS
Survey
Partici-
pant(1)
PSU
Peer
Group(2)
2018
Proxy
Peer Group(3)
Life &
Health
GICS
0.4x to 2.5x
Unum
Revenues
0.4x to 2.5x
Unum
Assets
0.5x to 5.0x
Unum Market
Capitalization
List
Unum
as a
Peer
Aflac
Allstate
 
 
 
 
 
 
 
AXA Group
 
 
 
 
 
 
 
Cigna
 
 
 
 
 
 
 
CNO Financial Group
 
 
Genworth Financial