CNO Financial Group, Inc. DEF 14A 2007
Documents found in this filing:
Proxy Statement Pursuant to Section 14(a) of the Securities
Payment of Filing Fee (Check the appropriate box):
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 The proxies of shareholders who attend the meeting in person may be withdrawn, and such shareholders may vote personally at the meeting.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
TABLE OF CONTENTS
11825 North Pennsylvania Street
Carmel, Indiana 46032
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.
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.
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:
Nominees for Election as Class II Directors:
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
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.
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
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
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.
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.
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 firstname.lastname@example.org.
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.
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
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
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
American Equity Investment Life Holding Company
Delphi Financial Group, Inc.
Great American Financial Resources, Inc.
Kansas City Life Insurance Company
Lincoln National Corporation
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.
Universal American Financial Corp
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.
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.
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:
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.
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
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.
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,
threshold performance levels must represent an improvement over prior year actual performance. Maximum performance levels are intended to represent superior performance.
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:
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).
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
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
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
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
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.
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
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
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
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:
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):
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.
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
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.
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 email@example.com.
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
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.
ANNUAL MEETING OF SHAREHOLDERS OF
May 22, 2007
Please date, sign and mail
your proxy card in the
envelope provided as soon
ê Please detach along perforated line and mail in the envelope provided. ê