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CNO Financial Group, Inc. DEF 14A 2007 Documents found in this filing:Table of Contents
UNITED STATES SCHEDULE 14A Proxy Statement Pursuant to Section 14(a) of the Securities
CONSECO, INC.
Payment of Filing Fee (Check the appropriate box):
Table of Contents
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Conseco, Inc.
11825 North Pennsylvania Street
Carmel, Indiana 46032
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
To Be Held May 22, 2007
Notice Is Hereby Given
That the Annual Meeting of Shareholders of Conseco, Inc.
(the Company), will be held at the Conseco
Conference Center, 530 College Drive, Carmel, Indiana, at
10:00 a.m., Eastern Daylight Time, on May 22, 2007,
for the following purposes:
Holders of record of outstanding shares of the common stock of
the Company as of the close of business on April 4, 2007,
are entitled to notice of and to vote at the meeting. Holders of
common stock have one vote for each share held of record.
Whether or not you plan to be present at the meeting, please
complete, sign and return the enclosed form of proxy. No
postage is required to return the form of proxy in the enclosed
envelope. The proxies of shareholders who attend the meeting in
person may be withdrawn, and such shareholders may vote
personally at the meeting.
April 12, 2007
Carmel, Indiana
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Conseco, Inc.
11825 North Pennsylvania Street
Carmel, Indiana 46032
PROXY STATEMENT
This Proxy Statement is furnished in connection with the
solicitation of proxies by the Board of Directors of Conseco,
Inc. (Conseco or the Company) for the
Annual Meeting of Shareholders (the Annual Meeting)
to be held at the Conseco Conference Center, 530 College
Drive, Carmel, Indiana on May 22, 2007, at 10:00 a.m.,
Eastern Daylight Time. It is expected that this Proxy Statement
and proxy will be mailed to the shareholders on or about
April 16, 2007. The enclosed proxy is solicited by our
Board of Directors. Proxies are being solicited principally
by mail. Directors, officers and regular employees of Conseco
may also solicit proxies in person, through the mail or by
telecommunications. All expenses relating to the preparation and
mailing to the shareholders of the Notice, Proxy Statement and
form of proxy are to be paid by Conseco.
If the enclosed form of proxy is properly executed and returned
in time for the meeting, the named proxy holders will vote the
shares represented by the proxy in accordance with the
instructions marked on the proxy. Proxies returned unmarked will
be voted for each of the nominees for director (Proposal 1)
and for the ratification of the appointment of
PricewaterhouseCoopers LLP as the Companys independent
registered public accounting firm for 2007 (Proposal 2). A
shareholder may revoke a proxy at any time before it is
exercised by mailing or delivering to Conseco a written notice
of revocation or a later-dated proxy, or by attending the
meeting and voting in person.
Only holders of record of shares of Consecos common stock
as of the close of business on April 4, 2007, will be
entitled to vote at the meeting. On such record date, Conseco
had 151,075,407 shares of common stock outstanding and
entitled to vote. Each share of common stock will be entitled to
one vote with respect to each matter submitted to a vote at the
meeting. The presence in person or by proxy of the holders of a
majority of the outstanding shares of common stock entitled to
vote at the Annual Meeting is necessary to constitute a quorum.
The election of directors (Proposal 1) will be determined
by the plurality of the votes cast by the holders of shares
represented (in person or by proxy) and entitled to vote at the
Annual Meeting provided a quorum is present. Consequently, the
10 nominees who receive the greatest number of votes cast will
be elected as directors of the Company. The vote required to
approve the ratification of the appointment of our independent
registered public accounting firm (Proposal 2) is the
affirmative vote of the holders of a majority of the shares
represented and entitled to vote at the Annual Meeting provided
a quorum is present. Shares present which are properly withheld
as to voting, and shares present with respect to which a broker
indicates that it does not have authority to vote (broker
non-votes), will not be counted for any purpose other than
determining the presence of a quorum at the Annual Meeting. As a
result, abstentions from voting or broker non-votes will have
the same legal effect as voting against Proposal 2.
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SECURITIES OWNERSHIP
The following table sets forth certain information concerning
the beneficial ownership of our common stock as of April 4,
2007 (except as otherwise noted) by each person known to us who
beneficially owns more than 5% of the outstanding shares of our
common stock, each of our directors, each of our current
executive officers that are named in the Summary Compensation
Table on page 22 and all of our directors and executive
officers as a group.
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PROPOSAL 1
ELECTION OF DIRECTORS
Our board of directors is currently comprised of eight members,
divided into two classes as follows: Messrs. Prieur,
Roberts and Tokarz and Ms. Perry are Class I
Directors, and Messrs. Hilliard, Schneider, Shannon and
Turner are Class II Directors. The terms of office of the
current Class I Directors and the current Class II
Directors expire at our 2007 annual meeting of shareholders.
Other than the term of office of the initial Class II
Directors (which was two years), the term of office of each
class of directors will expire at the next succeeding annual
meeting of shareholders. Accordingly, all directors are now
elected annually for one-year terms. All directors will serve
until their successors are duly elected and qualified.
Our board of directors has decided to increase its membership to
10 directors, effective at the annual meeting of
shareholders. In addition to the eight current directors who
have been nominated, the board has nominated Donna A. James for
election as a Class I director and Doreen A. Wright for
election as a Class II director. The board of directors
engaged a third-party
search firm to work with the Governance and Strategy Committee
to identify potential board candidates. Ms. James and
Ms. Wright were among the potential board candidates
identified by the search firm and after conclusion of the search
process were unanimous nominees for the board.
Unless authority is specifically withheld, the shares of common
stock represented by the enclosed form of proxy will be voted in
favor of all nominees. Should any of the nominees become unable
to accept election, the persons named in the proxy will exercise
their voting power in favor of such person or persons as the
board of directors of Conseco may recommend. All of the nominees
have consented to being named in this Proxy Statement and to
serve if elected. The board of directors knows of no reason why
any of its nominees would be unable to accept election.
THE BOARD RECOMMENDS THAT YOU VOTE FOR THE
ELECTION OF EACH OF THE NOMINEES FOR DIRECTOR.
Set forth below is information regarding each person nominated
for election as a Class I or Class II Director.
Nominees for Election as Class I Directors:
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Nominees for Election as Class II Directors:
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Board Committees
Audit and Enterprise Risk Committee. The Audit and
Enterprise Risk Committees functions, among others, are to
recommend the appointment of independent accountants; review the
arrangements for and scope of the audit by the independent
accountants; review the independence of the independent
accountants; consider the adequacy of the system of internal
accounting controls and review any proposed
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corrective actions; review and monitor the Companys
compliance with legal and regulatory requirements; and discuss
with management and the independent accountants our draft annual
and quarterly financial statements and key accounting and/or
reporting matters. The Audit and Enterprise Risk Committee
currently consists of Messrs. Schneider, Roberts and Turner
and Ms. Perry, with Mr. Schneider serving as chairman
of the committee and as audit committee financial
expert, as defined under Securities and Exchange
Commission rules promulgated under the Sarbanes-Oxley Act. All
current members of the Audit and Enterprise Risk Committee are
independent within the meaning of the regulations
adopted by the Securities and Exchange Commission and the
listing requirements adopted by the New York Stock Exchange
regarding audit committee membership. The current members also
satisfy the financial literacy qualifications of the New York
Stock Exchange listing standards. The committee met on eight
occasions in 2006. A copy of the Audit and Enterprise Risk
Committees charter is available on our website at
www.conseco.com.
Governance and Strategy Committee. The Governance
and Strategy Committee is responsible for, among other things,
establishing criteria for board membership; considering,
recommending and recruiting candidates to fill new positions on
the board; reviewing candidates recommended by shareholders; and
considering questions of possible conflicts of interest
involving board members, executive officers and key employees.
It is also responsible for developing principles of corporate
governance and recommending them to the board for its approval
and adoption, and reviewing periodically these principles of
corporate governance to insure that they remain relevant and are
being complied with. The Governance and Strategy Committee
currently consists of Messrs. Tokarz and Shannon and
Ms. Perry, with Mr. Tokarz serving as chairman of the
committee. All current members of the Governance and Strategy
Committee are independent within the meaning of the
listing requirements adopted by the New York Stock Exchange
regarding nominating committee membership. The committee held
three meetings during 2006. A copy of the Governance and
Strategy Committees charter is available on our website at
www.conseco.com. The Governance and Strategy Committee
does not have a written policy regarding shareholder nominations
for director candidates. The Governance and Strategy Committee
will, however, consider candidates for director nominees put
forward by shareholders. See Shareholder Proposals for
2008 Annual Meeting for a description of the advance
notice procedures for shareholder nominations for directors.
Human Resources and Compensation Committee. The
Human Resources and Compensation Committee is responsible for,
among other things, approving overall compensation policy;
recommending to the board the compensation of the chief
executive officer and other senior officers; and reviewing and
administering our incentive compensation and equity award plans.
The Human Resources and Compensation Committee currently
consists of Messrs. Turner, Tokarz and Shannon and
Ms. Perry, with Mr. Shannon serving as chairman of the
committee. All current members of the Human Resources and
Compensation Committee are independent within the
meaning of the listing requirements adopted by the New York
Stock Exchange regarding compensation committee membership. The
committee met on 10 occasions in 2006. A copy of the Human
Resources and Compensation Committees charter is available
on our website at www.conseco.com.
Investment Committee. The Investment Committee is
responsible for, among other things, reviewing investment
policies, strategies and programs; reviewing the procedures
which Conseco utilizes in determining that funds are invested in
accordance with policies and limits approved by it; and
reviewing the quality and performance of our investment
portfolios and the alignment of asset duration to liabilities.
The Investment Committee currently consists of
Messrs. Prieur, Schneider and Roberts, with
Mr. Roberts serving as chairman of the committee. The
committee met on five occasions in 2006. A copy of the
Investment Committees charter is available on our website
at www.conseco.com.
Executive Committee. Subject to the requirements
of applicable law, including our certificate of incorporation
and bylaws, the Executive Committee is responsible for
exercising, as necessary, the authority of the board of
directors in the management of our business affairs during
intervals between board meetings. The Executive Committee
currently consists of Messrs. Hilliard, Shannon and Turner,
with Mr. Turner serving as chairman of the committee. A
copy of the Executive Committees charter is available on
our website at www.conseco.com.
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Director Compensation
Our non-employee directors currently receive an annual cash
retainer of $70,000. The chairman of the Audit and Enterprise
Risk Committee currently receives an additional annual cash fee
of $30,000, and directors who chair one of our other board
committees receive an additional annual cash fee of $20,000.
Each member of the Audit and Enterprise Risk Committee
(including the chairman) receives an additional annual cash
retainer of $15,000. Cash fees are paid quarterly in advance.
Our non-employee directors have also been entitled to receive
$70,000 in annual equity awards. The amount of fees paid to our
non-employee directors
has not changed since it was first set in September 2003. In
addition, the directors, other than our chairman, who joined the
Board upon our emergence from bankruptcy in 2003 or within one
year thereafter (Messrs. Roberts, Schneider, Shannon, Tokarz and
Turner and Ms. Perry) were awarded a one-time equity grant
for joining the Board, consisting of 2,000 shares of
restricted common stock and an option to
purchase 10,000 shares of common stock. The
Boards policy is to review and set the compensation of the
non-employee directors
each year at the annual Board meeting and to make equity awards
to those directors at that time. Directors are reimbursed for
out-of-pocket expenses
including first class airfare incurred in connection with the
performance of their responsibilities as directors. The
compensation paid in 2006 to our non-employee directors is
summarized in the table below:
DIRECTOR COMPENSATION IN 2006
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On June 18, 2003, our predecessor entered into an agreement
with Mr. Hilliard pursuant to which he provided consulting
services to our predecessor during the pendency of the
Chapter 11 cases and agreed to serve as our non-executive
chairman for an initial term of four years following our
emergence from bankruptcy. This agreement, which became
effective upon our emergence from bankruptcy on
September 10, 2003, was negotiated with our
predecessors creditors committee and was approved by the
Bankruptcy Court in connection with the approval of the plan of
reorganization. The agreement provided for (i) an annual
directors fee of $1,000,000 for the first two years of the
term, and directors fees similar to those paid to
similarly situated non-executive chairmen for the latter two
years of the term; (ii) a signing bonus of
98,119 shares of common stock, which were issued shortly
after our emergence from bankruptcy; (iii) a retention
bonus of $1,500,000, which was paid following the first
anniversary of our emergence from bankruptcy; (iv) a
retention bonus of $750,000, which was paid following the second
anniversary of our emergence from bankruptcy; and (v) a fee
of $60,000 per month to be paid during the period from
May 15, 2003 until the Companys emergence from
bankruptcy on September 10, 2003 (this monthly fee was
waived by Mr. Hilliard on December 30, 2003 in order
to avoid any issues with his status as an independent director
at that time). Under his agreement, we also issued
Mr. Hilliard 500,000 shares of restricted stock and
options to purchase 500,000 shares of common stock, all of
which were subject to vesting, pursuant to the 2003 Plan. By the
terms of that agreement, Mr. Hilliard was also entitled to
receive on the one-year anniversary of our emergence from
bankruptcy shares of restricted stock and stock options, each in
an amount equal to .25% of the outstanding shares of common
stock on the one-year anniversary. In connection with the
agreement described in the following paragraph,
Mr. Hilliard agreed to receive 255,000 shares of
restricted stock and options to purchase an additional
255,000 shares (compared to the approximately
375,000 shares of restricted stock and 375,000 options to
which he would have been entitled to receive under his initial
agreement).
In August 2004, Mr. Hilliard was elected Executive
Chairman, and he entered into a revised agreement with Conseco
pursuant to which he agreed to serve as Executive Chairman
through September 10, 2005. The financial terms of
Mr. Hilliards agreement with the Company did not
change materially after he was elected Executive Chairman. The
revised agreement provided for Mr. Hilliard to receive an
annual salary of $1,000,000 and to receive retention bonuses of
$1,500,000 in September 2004 and $750,000 in September 2005, as
had been provided in his original agreement. Effective
September 10, 2005, Mr. Hilliard again became
Non-Executive Chairman and in accordance with his agreement now
receives directors fees
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comparable to those paid to similarly situated non-executive
chairs of other corporations as determined by the Board, which
the Board has set at 150% of the base cash fees and equity
awards paid to the other, non-management directors. Under the
agreement, Mr. Hilliard is entitled to a
gross-up for excise tax
payments under Section 280G of the Internal Revenue Code.
In addition, upon a qualifying termination, vesting of
previously granted options and restricted stock will occur as if
Mr. Hilliard continued to serve through the next
September 10th following his separation. Mr. Hilliard
is subject to a non-solicitation and non-competition clause
throughout the term of the agreement and for one year thereafter.
Board Meetings and Attendance
During 2006, the board of directors met on 14 occasions. All
directors attended at least 92 percent of the aggregate
meetings of the board and the committees on which they served.
The non-management
directors regularly meet in executive session without the CEO or
any other member of management. Mr. Hilliard presides at
such executive sessions. The independent directors also meet
periodically in executive session without Mr. Prieur or
Mr. Hilliard. Mr. Turner presides at such sessions.
Director Independence
The Board annually determines the independence of directors
based on a review by the directors. Although the board of
directors has not adopted categorical standards of materiality
for independence purposes, no director is considered independent
unless the board has determined that he or she has no material
relationship with Conseco, either directly or as an officer,
shareholder or partner of an organization that has a material
relationship with Conseco. Material relationships can include
commercial, industrial, banking, consulting, legal, accounting,
charitable and familial relationships, among others. The board
considers the New York Stock Exchange guidelines in making its
determination regarding independence and the materiality of any
relationships with Conseco. The board has determined that all
current directors other than Mr. Prieur and
Mr. Hilliard are independent and that Ms. James and
Ms. Wright will also be independent directors.
Approval of Related Party Transactions
Transactions and agreements with related persons (directors and
executive officers or members of their immediate families or
shareholders owning five percent or more of the Companys
outstanding stock) that meet the minimum threshold for
disclosure in the proxy statement under applicable SEC rules
(generally transactions involving amounts exceeding $120,000 in
which a related person has a direct or indirect material
interest) must be approved by the board of directors or a
committee comprised of only independent directors. In
considering the transaction or agreement, the board or committee
will consider all relevant factors including the business reason
for the transaction, available alternatives on comparable terms,
actual or apparent conflicts of interest and the overall
fairness of the transaction to the Company. Any proposed
transactions that might be considered a related person
transaction are to be raised with the Chairman of the Board or
the Chairman of the Governance and Strategy Committee. They will
jointly determine whether the proposed transaction should be
considered by the full board (recusing any directors with
conflicts) or by a board committee of independent directors.
Related person transactions are to be approved in advance
whenever practicable, but if not approved in advance are to be
ratified (if the board or committee considers it appropriate to
do so) as soon as practicable after the transaction.
Various Company policies and procedures, including the Code of
Business Conduct and Ethics and annual questionnaires completed
by all company directors, officers and employees, require
disclosure of transactions or relationships that may constitute
conflicts of interest or otherwise require disclosure under
applicable SEC rules. Any related person transactions that are
identified under these additional policies and procedures are to
be considered under the policy and procedures described above.
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Code of Ethics
We have adopted a Code of Business Conduct and Ethics that
applies to all officers, directors and employees regarding their
obligations in the conduct of the Companys affairs. A copy
of the Code of Business Conduct and Ethics is available on our
website at www.conseco.com. Within the time period specified by
the SEC and the New York Stock Exchange, we will post on our
website any amendment to our Code of Business Conduct and Ethics
and any waiver applicable to our principal executive officer,
principal financial officer or principal accounting officer.
Corporate Governance Guidelines
Conseco is committed to best practices in corporate governance.
Upon the recommendation of the Governance and Strategy
Committee, Conseco adopted a set of Conseco Board Governance
Operating Guidelines. A copy of the Conseco Board Governance
Operating Guidelines is available on our website at
www.conseco.com.
Communications with Directors
Shareholders and other interested parties wishing to communicate
directly with Consecos board of directors or any one or
more individual members (including the presiding director or the
non-management
directors as a group) are welcome to do so by writing to the
Conseco Corporate Secretary, 11825 North Pennsylvania
Street, Carmel, Indiana, 46032. The Corporate Secretary will
forward any communications to the director or directors
specified by the shareholder.
In addition, Conseco has a policy that all directors attend the
annual meeting of shareholders. All of our directors attended
the annual meeting of shareholders held in 2006.
Compensation Committee Interlocks and Insider
Participation
Messrs. Shannon, Tokarz and Turner served on the Human Resources
and Compensation Committee throughout 2006 and Ms. Perry
was appointed in December 2006. None of the members of the Human
Resources and Compensation Committee is or has been one of our
officers or employees. None of our executive officers serves, or
served during 2006, as a member of the board of directors or
compensation committee of any entity that has one or more
executive officers serving on our board of directors or Human
Resources and Compensation Committee.
Copies of Corporate Documents
In addition to being available on our website at
www.conseco.com, we will provide to any person, without charge,
a printed copy of our committee charters, Code of Ethics and
Board of Governance Operating Guidelines upon request to Conseco
Investor Relations, 11825 N. Pennsylvania Street,
Carmel, Indiana 46032; telephone
(317) 817-2893 or
email ir@conseco.com.
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EXECUTIVE COMPENSATION
COMPENSATION DISCUSSION AND ANALYSIS
Compensation Objectives and Strategy
The primary objective of Consecos executive compensation
program is to create a meaningful rewards system that balances
the interests of executives and shareholders. Specifically, the
following are goals of our program:
Our compensation programs are administered by our Human
Resources and Compensation Committee (the
Committee) of the Board of Directors,
which is comprised solely of independent, non-employee Directors
of Conseco. By working with management and its independent
compensation advisors (described below), the Committee has
developed a comprehensive compensation and benefits strategy
that rewards group and individual performance in a manner that
the Company believes will drive our long-term success.
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Role of the Compensation Committee
The Committee determines the amounts and elements of
compensation for our executive officers and provides overall
guidance for our executive compensation policies and programs.
Four members of our Board of Directors sit on the Committee,
each of whom is an independent director under the New York Stock
Exchange listing requirements, the exchange upon which our stock
trades. Other Board members may also participate in our
consideration of how we pay our employees. The Committees
function is more fully described in its charter which has been
approved by our full Board of Directors, and can be found on our
website at www.conseco.com.
In making executive compensation decisions, the Committee is
generally advised by our independent compensation consultant,
Pearl Meyer & Partners
(PM&P). PM&P was hired by and
reports directly to the Committee, and performs all services for
our Company at the Committees direction. PM&P has no
contract with the Committee and may be terminated without notice
by the Committee at any time. PM&P had no prior relationship
with the CEO or any of our Companys senior management at
the time of its hiring.
Though retained directly by the Committee, PM&P often
interacts with our CEO, EVP of Human Resources, internal
securities counsel and the Chief Financial Officer and their
staffs to provide the Committee with relevant compensation and
performance data for our executives and the Company. In
addition, PM&P may seek direct input and feedback from
management in preparing their consulting work product prior to
presentation to the Committee to confirm information, identify
data questions, exchange ideas or other similar issues.
In making its decisions, the Committee collects and considers
input from multiple sources. The Committee may ask one or more
of our senior executives or non-Committee Board members to
attend Committee meetings where executive compensation and
Company and individual performance are discussed and evaluated.
During these meetings, executives provide insight, suggestions
or recommendations regarding executive compensation.
Deliberations generally occur with input from the compensation
advisor, members of management and other Board members. However,
only the four
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independent Committee members vote on decisions made regarding
executive compensation, which is done in executive session, with
no members of management present.
The next section of this Compensation Discussion and Analysis
describes each aspect of our compensation and benefits structure:
Compensation and Benefits Structure
Pay Level
All employee pay levels, including our NEOs, are determined
based on a number of factors, including each individuals
roles and responsibilities within our Company, the
individuals experience and expertise, the pay levels for
peers within the Company, pay levels for similar job functions
in the marketplace, the individuals business unit, and our
Company as a whole. The Committee is responsible for approving
pay levels for our executive officers. In determining executive
pay levels, the Committee considers all forms of compensation
and benefits, and uses appropriate tools such as
tally sheets and market studies to review the value
delivered to each executive through each element of pay.
The Committee assesses competitive market
compensation using a number of sources. The primary data source
used in setting competitive market levels for our NEOs (and any
other positions for which there is sufficient disclosure) is the
information publicly disclosed by the companies in the S&P
Life and Health Insurance Index and the Russell 3000 Life
Insurance Industry Index (together, the Peer
Group). Currently, the Peer Group consists of the
17 companies listed below, however, if changes are made to
the indexes, the Committee anticipates that the Peer Group will
reflect those changes. The Committee periodically reviews the
Peer Group to ensure the companies are appropriate for both pay
and performance comparisons. Peer company information is
supplemented with general and industry specific survey data that
provides position-based compensation levels across broad
industry segments. For corporate staff positions, such as the VP
Human Resources, we consider survey data based on companies of
similar size, with less emphasis on industry specific data.
However, for industry specific positions, such as a division
head, we consider insurance industry survey data for positions
with similar size.
Companies in the S&P Life and Health Insurance Index
and/or
the Russell 3000 Life Insurance Industry Index
AFLAC Incorporated
American Equity Investment Life Holding Company
Delphi Financial Group, Inc.
Great American Financial Resources, Inc.
Kansas City Life Insurance Company
Lincoln National Corporation
MetLife, Inc.
National Western Life Insurance Company
The Phoenix Companies, Inc.
Presidential Life Corporation
Principal Financial Group
Protective Life Corporation
Prudential Financial, Inc.
StanCorp Financial Group, Inc.
Torchmark Corporation
Universal American Financial Corp
UnumProvident Corporation
Relative to the competitive market data, our Committee intends
overall total compensation opportunity for the executive group
to be approximately 50th percentile for the achievement of
target performance, with additional compensation opportunities
for the achievement of above targeted results, up to the
75th percentile of the market.
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While the compensation philosophy stated above is true on an
aggregate basis, it is possible that pay levels for specific
individuals may be above or below the targeted competitive
benchmark based on a number of factors. In fact, we avoid
automatic adjustments based on annual competitive benchmarking
data, since we believe a given executives compensation
should also reflect Company-specific factors such as the
importance of the role within the organization and the
compensation for other positions at the same level and
individual factors such as experience, expertise, personal
performance and tenure. Realized total compensation in any year
may be significantly above or below the target compensation
levels depending on whether our operating goals were attained
and whether shareholder value was created. In some cases, the
amount and structure of compensation results from negotiations
with executives, which may reflect competitive pressures to
attract and hire quality managerial talent in the insurance
industry. To help attract and retain such talent, the Committee
also seeks to provide a level of benefits in line with those of
comparable publicly traded companies, though avoids matching
such benefits item by item. This is evidenced by the absence of
a supplemental executive retirement plan for executive officers
at Conseco, despite the prevalence of such retirement plans in
the insurance industry.
Pay Mix
The Committee believes each element of the executive pay package
should be assessed relative to the overall compensation and
benefits program. As part of this process, the Committee reviews
tally sheets for each of the executive officers. The tally
sheets give the Committee members a variety of information
regarding the executives pay history, including historic
grants (since emergence from bankruptcy), salary progression,
annual equity awards, target and actual bonus levels by year,
and severance information under a variety of scenarios. Other
information provided includes an overview of benefits and
perquisites, as well as potential severance and/or
change-in-control
payment obligations. The Committee considers all of this
information, in combination with market data, in making
decisions regarding changes to Company programs or individual
pay levels.
Our compensation program consists of each of the following
components:
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Base Salaries
In establishing base salaries, the Committee begins by targeting
the 50th percentile, and adjusts upwards or downwards as
appropriate to reflect each individuals experience level,
unique skills or competencies. Final salaries generally range
from as low as 25th percentile (for recently promoted
employees or those who otherwise lack experience) to as high as
the 75th percentile (for a high performer with best in
class industry experience). While salaries outside this range
may occur, they are rare. Annual adjustments to employees
base pay levels are determined based upon numerous factors,
including
No specific weighting of these factors is used. However, given
our desire for a performance-based culture, the Committees
use of its discretion generally results in superior increases
for our top performers, and little or no increases for average
or lower performing employees.
Annual Incentive Program
Our annual incentive plan, the P4P plan, was
approved by our shareholders in 2005, and is designed to focus
on and reward achievement of annual performance goals. It is the
broadest of our management incentive programs, covering more
than 160 employees in 2006, including all of our senior
executives. Management is generally assigned to one of four
Tiers and each has unique target incentive opportunities
(expressed as a percentage of base salary) within the guideline
applicable to that Tier. Consistent with our Companys pay
level strategy, these annual incentive levels are set to
generate target annual cash compensation (i.e., the sum
of base salary plus target annual incentive amount) at
competitive market median levels, on average. For example, the
CEO is in Tier I, with a target of 125% of base salary; and
EVPs are in Tier II, where targets range from 50% to 100%
of base salary.
In 2006, our P4P payout was based on a weighted scorecard
tabulation across a variety of performance metrics, including
earnings per share, new annualized premiums and expense
reduction. Aggregate awards for 2006 generally were below
target, as performance during this period, including EPS, did
not meet the targets established by the Committee at the
beginning of the year.
Though our Company has a large net operating loss carry forward
(as a result of our emergence from bankruptcy in 2003), the
Committee continues to administer the P4P and Long Term
Incentive Plans so that payments qualify as performance
based compensation under Section 162(m) of the
Internal Revenue Code. However, the Committee does reserve the
right to make non-complying awards to the extent it deems it
necessary or advisable to do so.
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Long-Term Incentive Program
The Committee uses long-term incentives to balance the
short-term focus of the P4P program by tying rewards to
performance achieved over multi-year periods. Under the 2003
Amended and Restated Long-Term Incentive Plan (the
LTIP Plan), which our shareholders
approved at the 2005 Annual Meeting, the Committee may grant a
variety of long-term incentive vehicles, including stock
options, stock appreciation rights, restricted stock or
restricted stock units, and performance shares or units, settled
in cash or stock. The Company is progressively migrating away
from a long-term compensation scheme that relied on grants of
stock options and restricted stock (some of which were approved
by the bankruptcy court upon our emergence from bankruptcy in
2003) to a current program which will continue to
use stock options (or other appreciation rights), increase
performance share use, and decrease our use of restricted stock
grants, except in special circumstances.
Our Committee believes that combining these two types of awards
(i.e., options and performance shares) provides significant
incentive to perform while retaining our key executives. Also,
using multi-year awards settled in stock helps balance the
cash-based focus of our short-term incentive pay programs (i.e.,
base salary and annual incentives).
In general, stock option grants vest in equal installments over
3 to 4 years, and performance shares will generally be
earned over a 3-year
performance period. Employees generally must continue to work
for the Company through the vesting dates. However, the LTIP
Plan does give the Committee the right to make grants with a
different vesting schedule. Unless otherwise noted, grants to
our NEOs have identical vesting schedules as other executives.
Our current granting process involves developing option grant
ranges (by Tier) for groups of executives, and then adjusting
those awards for each individual based on their cash
compensation, amount of equity needed to achieve median
competitive pay levels, and individual performance during the
prior year. Through this method, the Committee believes it is
mindful of total cost, keeps compensation competitive with
market, and promotes internal equity among colleagues.
As with base salaries and annual incentive targets, target
long-term incentive award levels are set to generally fall in a
range between market median and 75th percentile levels. The
Committee also assesses aggregate share usage and dilution
levels in comparison to the peer group companies and general
industry norms. Within these general grant guidelines,
individual awards may be adjusted up or down to reflect the
performance of the executive and his or her potential to
contribute to the success of our initiatives to create
shareholder value and other individual considerations.
The Committee reviews and approves individual grants for the
NEOs as well as all stock options, P-Shares and restricted stock
grants made to other employees. The annual grants are generally
reviewed and approved at the Committees scheduled meeting
in March. Administration of all equity awards is managed by our
human resources department.
Burn Rate Limitation
In 2005, the Committee approved a policy to conform to
Institutional Shareholder Services
(ISS) burn rate guidelines
(as they existed at that time) which limit annual equity grant
levels. Under the agreement with ISS, our average annual burn
rate for the three-year period from January 1, 2005 through
December 31, 2007 will not exceed the greater of two
percent of the Companys shares outstanding or the mean of
its Global Industry Classification Standards Peer Group (4030
Insurance). This policy will apply to shares we issue under the
LTIP Plan. Using ISS methodology, our burn rate will be
calculated as (i) the number of shares granted in each
fiscal year by the Compensation Committee and reported in the
Companys periodic reports filed with the Securities and
Exchange Commission, and includes (a) stock options,
(b) stock-settled stock appreciation rights,
(c) restricted stock (or units) and (d) performance
shares (actually earned or deferred during this time frame), to
employees and directors divided by (ii) the fiscal year end
basic shares outstanding. Stock appreciation rights, full value
shares settled in cash and performance shares or units settled
in cash will not be included in the burn rate calculation. For
purposes
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of performing the calculation consistent with ISS methodology,
one full value share (such as a share of restricted stock) may
equal up to as many as four option shares. The actual conversion
rate is determined by ISS based upon recent volatility of
Consecos common stock, which may change during the
commitment period. Our burn rate for 2005 and 2006 was .81% and
1.59%, respectively, using ISS calculation methodology.
The Committee anticipates the Company will be in compliance with
its commitment to ISS with respect to the burn rate.
Other Benefits and Perquisites
As employees of the Company, our NEOs are eligible to
participate in all of the broad-based Company-sponsored benefits
programs on the same basis as other full-time employees. These
include the Companys health and welfare benefits (e.g.,
medical/dental plans, disability plans, life insurance, etc.).
The Company does not have any supplemental executive health and
welfare programs. Executives may also participate in the
Companys 401(k) Plan. During 2006, the Committee approved
the adoption of a non-qualified deferred compensation plan. This
plan is primarily intended as a restoration plan,
giving participants the ability to defer their own compensation
above the IRS limits imposed on the 401(k) plan. At present, the
Company does not make any contribution to the non-qualified
deferred compensation plan. In addition, Mr. Bullis has a
supplemental retirement benefit of $250,000 per annum as
part of the employment contract he signed upon our emergence
from bankruptcy.
Pay-for-Performance
The Company uses several vehicles to create a strong link
between pay and performance:
The Committee believes the overall program, particularly after
the shift from restricted stock to performance shares,
illustrates the Committees commitment to
pay-for-performance.
Performance measures for both the annual incentive plan and the
performance share plan have threshold requirements,
below which no awards are earned or paid. Currently, the maximum
amount that can be earned under either plan is 200% of the
target award opportunity, though the Committee reviews and
approves these performance levels on an annual basis and they
remain subject to change. In setting the threshold, target and
maximum performance levels, the Committee considers a number of
factors, including the Companys historical performance,
the current budget and the long-term forecasts, peer company
performance, and general economic trends and conditions. As
noted earlier, the Committee intends target performance levels
to be consistent with the 50th percentile target pay
levels, but wants executives to have the opportunity to earn
considerably more for above-market performance. Accordingly,
P-Share awards are targeted to provide the opportunity to
increase total compensation to as high as 75th percentile
of market, but only when performance is outstanding. Threshold
performance levels are meant to represent moderately acceptable
performance. Except under extraordinary circumstances,
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threshold performance levels must represent an improvement over
prior year actual performance. Maximum performance levels are
intended to represent superior performance.
Clawback Rights
Our LTI Plan contains specific recapture rights that
permit our Company to recover all or part of any
performance-based compensation in the event that the financial
information used by the Committee to determine the amount of the
award earned or vested is restated or turns out to be false.
2006 Compensation Actions
We generally review salary levels for all employees annually.
For 2006, merit increases were budgeted at 3.3% in aggregate;
however, not all employees received a merit increase, nor were
high performing employees necessarily limited to this amount.
Increases for the NEOs who are currently employed by the Company
averaged 1.4%.
For 2006, the Company paid total annual incentives of
$10.0 million to a total of 165 employees under the annual
incentive plan. This payout represented 74% of target, based on
performance relative to the goals established at the beginning
of the year.
In 2006, the Company granted a total of 1,294,950 stock options,
and 57,763 restricted shares to a total of 130 employees,
including the NEOs.
In addition to these regular compensation decisions, there were
a number of actions taken with regard to individual NEOs during
2006:
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Impact of Tax and Accounting on Compensation Decisions
As a general matter, the Committee considers the various tax and
accounting implications of compensation vehicles employed by the
Company.
When determining amounts of Long-Term Incentive grants to
executives and employees, the Committee considers the accounting
cost associated with the grants. Under SFAS 123R, grants of
stock options, restricted stock, restricted stock units and
other share-based payments result in an accounting charge for
the Company. The accounting charge is based on the grant date
fair value of the instruments being issued as determined under
SFAS 123R. This expense is amortized over the requisite
service or vesting period. However, if the award is subject to a
performance condition as determined under SFAS 123R, the
cost will vary based on our estimate of the number (and
ultimately the actual number) of shares that will vest.
Section 162(m) of the Internal Revenue Code generally
prohibits any publicly held corporation from taking a federal
income tax deduction for compensation paid in excess of
$1 million in any taxable year to the chief executive
officer and the next four highest compensated officers.
Exceptions are made for qualified performance-based
compensation, among other things. It is the Committees
policy to maximize the effectiveness of our executive
compensation plans in this regard. However, the Committee
believes that compensation and benefits decisions should be
primarily driven by the needs of the business, rather than by
tax policy. Therefore, the Committee may make pay decisions
(such as the determination of the CEOs base salary) that
result in compensation expense that is not fully deductible
under Section 162(m).
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Report of the Human Resources and Compensation Committee
The Human Resources and Compensation Committee has reviewed the
Compensation Discussion and Analysis and has discussed it with
management. Based on the committees review and discussions
with management, the committee recommended to our Board of
Directors that the Compensation Discussion and Analysis be
included in this proxy statement. This report is provided by the
following independent directors, who comprise the committee:
Debra J. Perry
Michael T. Tokarz
John G. Turner
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Summary Compensation Table for 2006
The following Summary Compensation Table sets forth compensation
paid to (i) each person who served as chief executive officer
during 2006, (ii) our chief financial officer and (iii) the
other three most highly compensated individuals who served as
executive officers of Conseco in 2006 (collectively, the
named executive officers) for services rendered
during 2006.
SUMMARY COMPENSATION TABLE FOR 2006
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Employment Agreements
Chief Executive Officer. Effective
September 7, 2006, we entered into an employment agreement
with C. James Prieur, pursuant to which he would serve as our
Chief Executive Officer for an initial term ending
December 31, 2009. The agreement provides for an annual
base salary of $975,000, an annual performance-based bonus with
a target of 125% of base salary and a maximum of 200% of his
Target
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Bonus, and a minimum bonus for 2006 equal to a pro rata portion
of his Target Bonus. Under the agreement, we provided
Mr. Prieur with an initial equity award comprised of
options to purchase 350,000 shares of common stock, with an
exercise price equal to the fair market value on the date of
grant, pursuant to the 2003 Plan. The agreement also provided
for an award of 50,000 performance shares, which were granted in
March 2007. Mr. Prieur is subject to a non-solicitation and
non-competition clause throughout the term of the agreement and
for one year thereafter.
Former Chief Executive Officer. We entered into an
employment agreement with William S. Kirsch, effective
August 12, 2004, pursuant to which he would serve as our
President and Chief Executive Officer for a term of five years.
Under the agreement, we provided Mr. Kirsch with an initial
equity award comprised of options to
purchase 400,000 shares of common stock with an
exercise price equal to fair market value on the date of grant
and 400,000 shares of restricted stock, all of which were
subject to vesting, pursuant to the 2003 Plan. On
September 2, 2005, the Company entered into an Amended and
Restated Employment Agreement with Mr. Kirsch, as had been
contemplated at the time of his initial agreement. The amended
agreement provided for an annual salary of $975,000, effective
May 1, 2005, and an annual performance-based bonus with a
target of 125% of base salary and a maximum of 250% of the
target bonus. We agreed to provide Mr. Kirsch with a total
of $2,000,000 of term life insurance coverage. If
Mr. Kirsch was terminated by the Company without just cause
or if he resigned for good reason (other than in connection with
a change of control termination), he was entitled to receive his
target bonus (prorated for the partial year period ending on the
date of termination), a cash payment equal to two times his
annual base salary and a cash payment equal to two times his
target bonus. Mr. Kirsch remains subject to a
non-solicitation and non-competition period of one year after
his employment with the Company ended on August 31, 2006.
Former President. Effective November 29,
2004, we entered into an employment agreement with James E.
Hohmann, pursuant to which he would serve as our Executive Vice
President and Chief Administrative Officer for an initial term
ending December 31, 2008. The agreement provided for an
annual base salary of $450,000, an annual performance-based
bonus with a target of 100% of base salary and a maximum of 200%
of base salary (with a minimum bonus of $450,000 for 2005) and
bonuses aggregating $600,000 that were paid in December 2004 and
January 2005. Under the agreement, we provided Mr. Hohmann
with an initial equity award comprised of options to
purchase 200,000 shares of common stock with an
exercise price equal to the fair market value on the date of
grant and 100,000 shares of restricted stock, all of which
were subject to vesting, pursuant to the 2003 Plan. We also
agreed to reimburse Mr. Hohmann for up to $5,000 per
year for premiums on term life insurance policies in effect on
his life, in lieu of any other life insurance benefit. Effective
September 7, 2006 we entered into a revised employment agreement
with Mr. Hohmann pursuant to which he would serve as
President and Chief Operating Officer, at a salary of $600,000
per year. Mr. Hohmann left the Company on December 31,
2006. He received no severance benefits. Mr. Hohmann
remains subject to a two-year non-solicitation period and
one-year non-competition period after his employment with the
Company ended, although the Company agreed to a limited waiver
of the non-competition covenant in connection with his new
employment.
Chief Financial Officer. We entered into an
employment agreement, effective September 10, 2003, with
Eugene M. Bullis pursuant to which he would serve as our
Executive Vice President and Chief Financial Officer for a term
of three years. The agreement provides for an annual base salary
of $600,000, an annual performance-based bonus with a target of
100% of base salary and an emergence bonus of $1,200,000, which
was paid shortly after our emergence from bankruptcy.
Mr. Bullis was also entitled to a future success bonus of
$1,200,000 to be paid on the third anniversary of the agreement,
subject to acceleration triggers under which one-third of the
$1,200,000 future success bonus would be paid upon the
occurrence of each of: (i) the first refinancing of our
Class A Preferred Stock and senior credit facility,
(ii) our obtaining a financial strength rating from A.M.
Best of A- or higher, and (iii) achievement of
agreed upon expense reductions. Prior to 2006, Mr. Bullis
had earned acceleration of $800,000 of the $1,200,000 future
success bonus. The remaining $400,000 due him was paid in 2006
and is included in the Bonus column of the Summary
Compensation Table. Under the agreement, we provided
Mr. Bullis with
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an initial equity award comprised of options to
purchase 250,000 shares of common stock and
250,000 shares of restricted stock, pursuant to the 2003
Plan. The agreement also provides that Mr. Bullis will
receive a supplemental retirement benefit of $250,000 per
year, commencing when he attains age 65 and continuing
until the later of his death or the death of his spouse. The
supplemental retirement benefit is now fully vested. We have
agreed to provide Mr. Bullis a life insurance policy with a
face amount of $600,000. The agreement with Mr. Bullis was
amended in 2006 to extend the term through May 10, 2007.
Mr. Bullis is subject to a non-solicitation and
non-competition clause throughout the term of the agreement and
for one year thereafter.
President, 40|86 Advisors, Inc.
40|86 Advisors, Inc., a wholly-owned investment
management subsidiary of Conseco, Inc. that manages the
investment portfolios of our insurance subsidiaries, entered
into an employment agreement, effective September 10, 2003,
with Eric R. Johnson pursuant to which he would serve as
40|86 Advisors President for a term of three
years. The agreement provided for an annual base salary of
$500,000, an annual performance-based bonus with a target of
100% of base salary and a maximum of 200% of base salary and a
bonus of $950,000 that was paid in January 2004.
Mr. Johnson was also entitled to a future success bonus of
$950,000 to be paid on the third anniversary of the agreement,
subject to acceleration triggers under which one-third of the
$950,000 future success bonus would be paid upon the occurrence
of each of: (i) the first refinancing of our Class A
Preferred Stock and senior credit facility, (ii) our
obtaining a financial strength rating from A.M. Best of
A- or higher, and (iii) the achievement of
mutually agreed-upon improvements in investment return and
quality. Prior to 2006, Mr. Johnson had earned acceleration
of $633,333 of the $950,000 future success bonus. The remaining
$316,667 due him was paid in 2006 and is included in the
Bonus column of the Summary Compensation Table.
Under the agreement, we provided Mr. Johnson with an
initial equity award comprised of options to
purchase 150,000 shares of common stock and
75,000 shares of restricted stock, all of which were
subject to vesting, pursuant to the 2003 Plan. The agreement
with Mr. Johnson was amended in 2006, to extend the term
until September 10, 2007. In the event of a change of
control of the Company, all previously granted options and
restricted stock will vest. In addition, if
Mr. Johnsons employment is terminated 6 months
prior to a change of control, all of his unvested options and
restricted stock will vest, retroactive to the date of
termination, upon the occurrence of the change of control.
Mr. Johnson is subject to a non-solicitation and
non-competition clause throughout the term of the agreement and
for one year thereafter.
President, Conseco Insurance Group. Effective
November 6, 2006, Michael J. Dubes entered into an
employment agreement with our with our subsidiary, Conseco
Services, LLC to continue to serve as President of Conseco
Insurance Group through December 31, 2007, at which time
Mr. Dubes is planning to retire. The amended employment
agreement provides for an annual salary of $455,000, an annual
performance-based bonus with a target of 100% of base salary and
a maximum of 200% of base salary. At the time his employment
agreement was amended, Mr. Dubes received an award of
25,000 shares of restricted stock which vest in full on
December 31, 2007. Mr. Dubes is subject to a
non-solicitation and non-competition clause throughout the term
of his agreement and for one-year thereafter.
President, Bankers Life and Casualty Company.
Effective October 1, 2004, Scott R. Perry entered into
an employment agreement with Conseco Services, LLC to be
Executive Vice President of Bankers Life for an initial term of
four years. On December 18, 2006, Mr. Perrys
employment agreement was amended to reflect his appointment as
President of Bankers Life and Casualty Company.
Mr. Perrys employment agreement provides for a
minimum annual salary of $400,000 and an annual
performance-based bonus with a target of 100% of base salary and
a maximum of 200% of base salary. Mr. Perry is subject to a
non-solicitation and non-competition clause throughout the term
of his agreement and for a period of up to two years.
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Grants of Plan-Based Awards in 2006
The following table shows certain information concerning grants
of plan-based awards in 2006 to the named executive officers.
GRANTS OF PLAN-BASED AWARDS IN 2006
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Outstanding Equity Awards at 2006 Fiscal Year-End
The following table sets forth certain information concerning
outstanding equity awards held by the named executive officers
as of December 31, 2006.
OUTSTANDING EQUITY AWARDS AT 2006 FISCAL YEAR-END
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Option Exercises and Stock Vested in 2006
The following table provides information, for the named
executive officers, concerning (1) stock option exercises
during 2006 (of which there were none) and (2) the number
of shares acquired upon the vesting of restricted stock awards
and the value realized (before payment of any applicable
withholding tax).
OPTION EXERCISES AND STOCK VESTED IN 2006
Pension Benefits in 2006
The following table sets forth certain information concerning
pension benefits for the named executive officers.
2006 PENSION BENEFITS
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Potential Payments Upon Termination or Change in Control
Each of the named executive officers listed below has an
employment agreement with the Company or one of its
subsidiaries. Each such employment agreement provides for
certain payments to be made upon termination of employment for
various reasons. Those payments are to be made either as a lump
sum or over a period not to exceed two years. The following
table estimates the amounts that would have been payable to the
named executive officers upon termination of employment under
each of the identified circumstances as of December 31,
2006:
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PROPOSAL 2
RATIFICATION OF THE APPOINTMENT OF OUR INDEPENDENT
REGISTERED PUBLIC ACCOUNTING FIRM
PricewaterhouseCoopers LLP served as our independent registered
public accounting firm for 2006 and has been selected by the
Audit and Enterprise Risk Committee to serve as our independent
registered public accounting firm for the fiscal year ending
December 31, 2007. Representatives of
PricewaterhouseCoopers LLP are expected to be present at the
Annual Meeting, will have the opportunity to make a statement if
they so desire, and will be available to respond to appropriate
questions from the shareholders.
THE BOARD RECOMMENDS THAT YOU VOTE FOR
RATIFICATION OF THE APPOINTMENT OF PRICEWATERHOUSECOOPERS LLP AS
OUR INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM FOR THE FISCAL
YEAR ENDING DECEMBER 31, 2007.
Fees Paid to PricewaterhouseCoopers LLP
Aggregate fees billed to the Company for the years ended
December 31, 2006 and 2005, by PricewaterhouseCoopers LLP
were as follows (dollars in millions):
Pre-Approval Policy
The Audit and Enterprise Risk Committee has adopted a policy
requiring pre-approval of all audit and permissible non-audit
services provided by our independent registered public
accounting firm. These services may include audit services,
audit-related services, tax services and other services.
In 2005 and 2006, all new engagements of PricewaterhouseCoopers
LLP were pre-approved by the Audit and Enterprise Risk Committee
for all audit, audit-related, tax and other services.
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Report of the Audit and Enterprise Risk Committee
In accordance with its written charter adopted by the Board of
Directors, the Audit and Enterprise Risk Committee provides
assistance to the Board of Directors in fulfilling its
responsibilities for oversight of the integrity of the financial
statements, public disclosures and financial reporting practices
of the Company. The Audit and Enterprise Risk Committee is
comprised entirely of independent directors meeting the
requirements of applicable rules of the Securities and Exchange
Commission and the New York Stock Exchange.
In order to discharge its oversight function, the Audit and
Enterprise Risk Committee works closely with management and with
Consecos independent registered public accounting firm,
PricewaterhouseCoopers LLP. Management is responsible for the
preparation and fair presentation of the Companys
financial statements and for maintaining effective internal
controls. Management is also responsible for assessing and
maintaining the effectiveness of internal controls over the
financial reporting process in compliance with the requirements
of Section 404 of the Sarbanes-Oxley Act. The independent
registered public accounting firm is responsible for auditing
the Companys annual financial statements and expressing an
opinion as to whether the statements are fairly stated in
conformity with generally accepted accounting principles. In
addition, the independent registered public accounting firm is
responsible for auditing the Companys internal controls
over financial reporting and for expressing opinions on both the
effectiveness of the controls and managements assertion as
to this effectiveness.
The Audit and Enterprise Risk Committee has implemented
procedures to ensure that during the course of each fiscal year
it devotes the attention that it deems necessary or appropriate
to each of the matters assigned to it under the Committees
charter. To carry out its responsibilities, the Audit and
Enterprise Risk Committee met eight times during 2006. The
members identified below have served throughout 2006 and 2007.
In overseeing the preparation of the Companys financial
statements, the Audit and Enterprise Risk Committee has met with
management and the Companys independent registered public
accounting firm to review and discuss the consolidated financial
statements prior to their issuance and to discuss significant
accounting issues. The Audit and Enterprise Risk Committee also
discussed with the independent registered public accounting firm
all communications required by generally accepted auditing
standards, including those described in Statement on Auditing
Standards No. 61, as amended, Communications with
Audit Committees.
The Audit and Enterprise Risk Committee obtained from the
independent registered public accounting firm a formal written
statement consistent with Independence Standards Board Standard
No. 1, Independence Discussions with Audit
Committees and has discussed with such firm their
independence.
Based on the reviews and discussions referenced above, the Audit
and Enterprise Risk Committee recommended to the Board of
Directors that the Companys audited financial statements
be included in its Annual Report on
Form 10-K for the
year ended December 31, 2006 for filing with the Securities
and Exchange Commission.
Submitted by the Audit and Enterprise Risk Committee:
Neal C. Schneider, Chairman
Debra J. Perry
Philip R. Roberts
John G. Turner
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SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING
COMPLIANCE
Section 16(a) of the Securities Exchange Act of 1934
requires Consecos directors and executive officers, and
each person who is the beneficial owner of more than
10 percent of any class of Consecos outstanding
equity securities, to file with the Securities and Exchange
Commission initial reports of ownership and reports of changes
in ownership of common stock and other equity securities of
Conseco. Specific due dates for these reports have been
established by the Securities and Exchange Commission, and
Conseco is required to disclose any failure by such persons to
file such reports for fiscal year 2006 by the prescribed dates.
Officers, directors and greater than 10 percent beneficial
owners are required to furnish Conseco with copies of all
reports filed with the Securities and Exchange Commission
pursuant to Section 16(a). To Consecos knowledge,
based solely on review of the copies of the reports furnished to
Conseco and written representations that no other reports were
required, all filings required pursuant to Section 16(a) of
the Securities Exchange Act of 1934 applicable to Consecos
officers, directors and greater than 10 percent beneficial
owners were timely made by each such person during the year
ended December 31, 2006.
SHAREHOLDER PROPOSALS FOR 2008 ANNUAL MEETING
Any proper proposal which a shareholder wishes to have included
in the Boards proxy statement and form of proxy for the
2008 Annual Meeting must be received by Conseco by
December 14, 2007. Such proposals must meet the
requirements set forth in the rules and regulations of the
Securities and Exchange Commission in order to be eligible for
inclusion in the proxy statement for the 2008 Annual Meeting. In
addition to the Securities and Exchange Commission rules
concerning shareholder proposals, the Companys Bylaws
establish advance notice procedures with regard to certain
matters, including shareholder nominations for directors, to be
brought before a meeting of shareholders at which directors are
to be elected. In the case of an annual meeting, notice must be
received by the Secretary of the Company not less than
60 days nor more than 90 days prior to the first
anniversary of the preceding years annual meeting. In the
case of a special meeting of stockholders at which directors are
to be elected, notice of a stockholder nomination must be
received by the Secretary of the Company no later than the close
of business on the 10th day following the earlier of the
day on which notice of the date of the meeting was mailed or
public disclosure of the meeting was made. A nomination will not
be considered if it does not comply with these notice procedures
and any additional requirements set forth in our bylaws. Please
note that these bylaw requirements are separate from the
Securities and Exchange Commissions requirements to have a
shareholder nomination or other proposal included in our proxy
statement. Any shareholder who wishes to submit a proposal to be
acted upon at the 2008 Annual Meeting or who wishes to nominate
a candidate for election as director should obtain a copy of
these bylaw provisions and may do so by written request
addressed to the Secretary of Conseco at 11825 North
Pennsylvania Street, Carmel, Indiana 46032.
ANNUAL REPORT
Consecos Annual Report for 2006 (which includes its annual
report on
Form 10-K as filed
with the Securities and Exchange Commission) is being mailed
with this proxy statement to all holders of common stock as of
April 4, 2007. The Annual Report is not part of the proxy
solicitation material. If you wish to receive an additional
copy of the Annual Report for 2006 or the
Form 10-K without
charge, please contact Conseco Investor Relations,
11825 North Pennsylvania Street, Carmel, Indiana 46032;
telephone
(317) 817-2893 or
email ir@conseco.com.
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OTHER MATTERS
Management knows of no other matters which may be presented at
the Annual Meeting. If any other matters should properly come
before the meeting, the persons named in the enclosed form of
proxy will vote in accordance with their best judgment on such
matters.
April 12, 2007
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CONSECO, INC.
Annual Meeting of Shareholders
To Be Held on May 22, 2007
This Proxy is Solicited on Behalf of the Board of Directors Each person signing this card on the reverse side hereby appoints, as proxies, Eugene M. Bullis,
John R. Kline, and Daniel J. Murphy, or any of them with full power of substitution, to vote all
shares of Common Stock which such person is entitled to vote at the Annual Meeting of Shareholders
of Conseco, Inc. to be held at the Conseco Conference Center, 530 College Drive, Carmel, Indiana at
10:00 a.m. local time on May 22, 2007, and any adjournments thereof.
This proxy card will be voted as directed. If no instructions are specified, the shares represented
by this proxy shall be voted for the election of all directors listed in item 1 and for the
ratification of the appointment of the independent registered public accounting firm in Item 2.
This proxy is continued on the reverse side.
Please sign on the reverse side and return promptly.
Table of Contents
ANNUAL MEETING OF SHAREHOLDERS OF
CONSECO,
INC.
May 22,
2007
Please date, sign and mail
your proxy card in the envelope provided as soon as possible. ê Please
detach along perforated line and mail in the envelope
provided. ê
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