CNO CNO Financial Group Inc

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

SCHEDULE 14A INFORMATION

Proxy Statement Pursuant to Section 14(a) of the
Securities Exchange Act of 1934

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CNO FINANCIAL GROUP, INC.

(Name of registrant as specified in its charter)

   

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CNO Financial Group, Inc.
11825 North Pennsylvania Street
Carmel, Indiana 46032

TABLE OF CONTENTS

CNO Financial Group, Inc.
11825 North Pennsylvania Street
Carmel, Indiana 46032

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The following sets forth how a shareholder can vote over the Internet, by telephone or by mail:

Voting By Internet

If you hold your shares in street name (that is, if you hold your shares through a broker, bank or other holder of record), you can vote at www.proxyvote.com, 24 hours a day, seven days a week. You will need the 12-digit Control Number included on your Notice or your paper voting instruction form (if you received a paper copy of the Proxy Materials).

Voting By Telephone

If you hold your shares in street name, you can vote using a touch-tone telephone by calling the toll-free number included on your paper voting instruction form (if you received a paper copy of the Proxy Materials), 24 hours a day, seven days a week. You will need the 12-digit Control Number included on your paper voting instruction form.

If you hold your shares in street name, you may also submit voting instructions to your bank, broker or other holder of record. In most instances, you will be able to do this over the Internet, by telephone, or by mail. Please refer to the information from your bank, broker or other holder of record on how to submit voting instructions.

The Internet and telephone voting procedures, which comply with Delaware law and the SEC rules, are designed to authenticate shareholders’ identities, to allow shareholders to vote their shares and to confirm that their instructions have been properly recorded.

Voting By Mail

If you have received a paper copy of the Proxy Materials by mail, you may complete, sign, date and return by mail the paper proxy card or voting instruction form sent to you in the envelope provided to you with your Proxy Materials or voting instruction form.

Deadline for Submitting Votes by Internet, Telephone or Mail

If you hold your shares through a bank or brokerage account, proxies submitted over the Internet or by telephone as described above must be received by 11:59 p.m., Eastern Daylight Time, on May 3, 2016.

Proxies submitted by mail should be returned in the envelope provided to you with your paper proxy card or voting instruction form, and must be received no later than May 3, 2016.

If you want to vote in person at the Annual Meeting and you hold your shares in street name, you must obtain a legal proxy from your bank, broker or other holder of record authorizing you to vote. You must then bring the legal proxy to the Annual Meeting.

Please note that you may receive multiple copies of the Notice or Proxy Materials (electronically and/or by mail). These materials may not be duplicates as you may receive separate copies of the Notice or Proxy Materials for each type of account in which you hold shares. Please be sure to vote all of your shares in each of your accounts in accordance with the directions on the proxy card(s) and/or voting instruction form(s) that you receive. In the case of duplicate votes for shares in a particular account, your last vote is the one that counts.

Votes Required

The election of each director (Proposal 1) will be determined by the vote of the majority of the votes cast (where the number of votes cast “for” a director exceeds the number of votes cast “against” that director) by the holders of shares represented (in person or by proxy) and entitled to vote on the subject matter provided a quorum is present. The vote required to approve the Replacement NOL Protective Amendment (Proposal 2) is a majority of the outstanding shares. The vote required to approve the ratification of the appointment of the Company’s independent registered public accounting firm (Proposal 3) and for the advisory vote to approve executive compensation (Proposal 4), and any other proposal

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properly brought before the Annual Meeting, is the affirmative vote of a majority of the shares represented (in person or by proxy) and entitled to vote on the applicable subject matter. Abstentions from voting will have no impact on the election of directors (Proposal 1) and will have the same legal effect as voting against each other proposal.

Abstentions and shares represented by “broker non-votes”, as described below, are counted as present and entitled to vote for the purpose of determining a quorum. A broker non-vote occurs if you hold your shares in street name and do not provide voting instructions to your broker on a proposal and your broker does not have discretionary authority to vote on such proposal. Under current New York Stock Exchange rules, your broker will not have discretionary authority to vote your shares at the Annual Meeting with respect to Proposal 1 (election of nine directors as listed in this Proxy Statement), Proposal 2 (approval of the Replacement NOL Protective Amendment) and Proposal 4 (advisory vote to approve executive compensation). “Broker non-votes” will have no effect on the outcome of Proposals 1, 3 and 4, but will have the effect of voting against Proposal 2. Your broker will have discretion to vote your uninstructed shares on Proposal 3 (ratification of the appointment of PricewaterhouseCoopers LLP as the Company’s independent registered public accounting firm for 2016).

IMPORTANT NOTICE REGARDING THE AVAILABILITY OF PROXY MATERIALS FOR THE SHAREHOLDER MEETING TO BE HELD ON MAY 4, 2016

This Proxy Statement (including all attachments), the Company’s Annual Report to Shareholders (which includes the Annual Report on Form 10-K for the year ended December 31, 2015, filed with the Securities and Exchange Commission (“SEC”) on February 19, 2016) (which is not deemed to be part of the official proxy soliciting materials), and any amendments to the foregoing materials that are required to be provided to shareholders are available at www.proxyvote.com. Shareholders may obtain copies of the Proxy Statement, Annual Report to Shareholders (including financial statements and schedules thereto) and form of proxy relating to this or future meetings of the Company’s shareholders, free of charge on our Internet website at www.CNOinc.com in the “Investors — SEC Filings” section, by calling 317-817-2893 or by sending the Company an email at ir@CNOinc.com . For directions to the Company’s 2016 Annual Meeting, please call us at 317-817-2893.

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SECURITIES OWNERSHIP

The following table sets forth certain information concerning the beneficial ownership of our common stock as of March 7, 2016 (except as otherwise noted) by each person known to us to beneficially own more than 5% of the outstanding shares of our common stock, each of our directors and nominees, each of our current executive officers that are named in the Summary Compensation Table on page 33 and all of our current directors, nominees and executive officers as a group. Shares of our common stock subject to options that are currently exercisable or exercisable within 60 days of March 7, 2016 are deemed to be outstanding and to be beneficially owned by the person holding the options for the purpose of computing the percentage ownership of that person or group of persons but are not treated as outstanding for the purpose of computing the percentage ownership of any other person.

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Less than 1%.

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(1)

Based solely on Amendment No. 3 to Schedule 13G filed with the SEC on February 12, 2016 by Capital World Investors. The Amendment No. 3 to Schedule 13G reports sole power to vote or direct the vote of 16,804,120 shares and sole power to dispose or direct the disposition of 16,804,120 shares. The business address for Capital World Investors is 333 South Hope Street, Los Angeles, CA 90071.

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(2)

Based solely on Amendment No. 2 to Schedule 13G filed with the SEC on January 26, 2016 by BlackRock, Inc. The Amendment No. 2 to Schedule 13G reports sole power to vote or direct the vote of 15,675,305 shares and sole power to dispose or direct the disposition of 16,139,517 shares. The business address for BlackRock, Inc. is 55 East 52nd Street, New York, NY 10055.

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(3)

Based solely on Amendment No. 4 to Schedule 13G filed with the SEC on February 9, 2016 by Dimensional Fund Advisors LP. The Amendment No. 4 to Schedule 13G reports sole power to vote or direct the vote of 14,745,108 shares and sole power to dispose or direct the disposition of 14,851,559 shares. The business address for Dimensional Fund Advisors LP is Building One, 6300 Bee Cave Road, Austin, TX 78746.

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(4)

Based solely on Amendment No. 3 to Schedule 13G filed with the SEC on February 11, 2016 by The Vanguard Group. The Amendment No. 3 to Schedule 13G reports sole power to vote or direct the vote

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of 235,851 shares, shared power to vote or direct the vote of 10,700 shares, sole power to dispose or direct the disposition of 12,357,272 shares, and shared power to dispose or direct the disposition of 234,951 shares. The business address for The Vanguard Group is 100 Vanguard Blvd., Malvern, PA 19355.

(5)

Includes options, exercisable currently or within 60 days of March 7, 2016, to purchase 583,445 shares of common stock.

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(6)

Includes options, exercisable currently or within 60 days of March 7, 2016, to purchase 148,155 shares of common stock.

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(7)

Includes options, exercisable currently or within 60 days of March 7, 2016, to purchase 309,335 shares of common stock.

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(8)

Includes options, exercisable currently or within 60 days of March 7, 2016, to purchase 456,635 shares of common stock.

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(9)

Includes options, exercisable currently or within 60 days of March 7, 2016, to purchase an aggregate of 1,981,740 shares of common stock held by executive officers.

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Set forth below is information regarding each person nominated by the Board for election as a director.

Nominees for Election as Directors:

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Voting for Directors; Required Vote

The election of each director will be determined by the vote of the majority of the votes cast (where the number of votes cast “for” a director exceeds the number of votes cast “against” that director) by the holders of shares of common stock present in person, or represented by proxy, and entitled to vote on the proposal at the Annual Meeting.

In an uncontested election of directors at which a quorum is present, any incumbent director who fails to receive a majority of the votes cast (where the number of votes cast “for” a director exceeds the number of votes cast “against” that director) shall offer to tender his or her resignation to the Board. In such event, the Governance and Nominating Committee will consider the offer and make a recommendation to the Board whether to accept or reject the resignation or whether other action should be taken. The Board will publicly disclose its decision and rationale within 90 days from the certification of the election results.

Recommendation of our Board of Directors

OUR BOARD OF DIRECTORS RECOMMENDS THAT YOU VOTE “FOR” THE ELECTION TO THE BOARD OF EACH OF THE COMPANY’S DIRECTOR NOMINEES LISTED ABOVE.

Board Committees

Audit and Enterprise Risk Committee.     The Audit and Enterprise Risk Committee’s 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; provide oversight of the Company’s internal audit department; review and monitor the Company’s compliance with legal and regulatory requirements; discuss with management and the independent accountants our draft annual and quarterly financial statements and key accounting and/or reporting matters; and oversight of management’s processes for managing enterprise risk. The Audit and Enterprise Risk Committee itself does not prepare financial statements or perform audits and its members are not auditors or certifiers of the Company’s financial statements. The Audit and Enterprise Risk Committee currently consists of Mr. Greving, Ms. Henderson, Mr. Jacklin and Mr. Schneider, with Mr. Greving serving as chairman of the committee. Based on their experience, Mr. Greving and Mr. Schneider each qualify as an “audit committee financial expert,” as defined under SEC 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 SEC including Section 10A(m)(3) of the Securities Exchange Act of 1934 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 nine occasions in 2015. The duties and responsibilities of the Audit and Enterprise Risk Committee are set forth in its charter, which is available in the Investor Relations section of our website at www.CNOinc.com.

Governance and Nominating Committee.     The Governance and Nominating 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 Nominating Committee currently consists of Mr. Tokarz, Ms. Brown, Mr. Schneider and Mr. Sievert, with Mr. Tokarz serving as chairman of the committee. All current members of the Governance and Nominating Committee are “independent” within the meaning of the listing requirements adopted by the New York Stock Exchange regarding nominating committee membership. The committee held four meetings during 2015. The duties and responsibilities of the Governance and Nominating Committee are set forth in its charter, which is available in the Investor Relations section of our website at www.CNOinc.com.

Human Resources and Compensation Committee.     The Human Resources and Compensation Committee is responsible for, among other things, approving overall compensation philosophy and strategy;

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evaluating the performance of the chief executive officer and recommending to the Board the compensation of the chief executive officer; reviewing and approving on an annual basis the evaluation process and compensation structure for the Company’s other executive officers as recommended by the chief executive officer; ensuring that appropriate programs and procedures are established to provide for the development, selection, retention and succession of officers and key personnel; and reviewing and administering our incentive compensation and equity award plans. The report of the Human Resources and Compensation Committee appears on page 33 of this Proxy Statement. The Human Resources and Compensation Committee currently consists of Mr. Sievert, Ms. Brown, Mr. Maurer and Mr. Tokarz, with Mr. Sievert serving as committee chair. 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 and qualify as “non-employee” directors for purposes of Rule 16b-3 of the Securities Exchange Act of 1934 and as “outside directors” for purposes of Section 162(m) of the Internal Revenue Code. The committee met on seven occasions in 2015. The duties and responsibilities of the Human Resources and Compensation Committee are set forth in its charter, which is available in the Investor Relations section of our website at www.CNOinc.com.

Investment Committee.     The Investment Committee is responsible for, among other things, reviewing investment policies, strategies and programs; reviewing the procedures which the Company 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 Mr. Jacklin, Mr. Bonach, Mr. Greving and Ms. Henderson, with Mr. Jacklin serving as chairman of the committee. The committee met on four occasions in 2015. The duties and responsibilities of the Investment Committee are set forth in its charter, which is available in the Investor Relations section of our website at www.CNOinc.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 in the management of our business affairs during intervals between Board meetings. The Executive Committee currently consists of Mr. Schneider, Mr. Bonach and Mr. Greving, with Mr. Schneider serving as chairman of the committee. The duties and responsibilities of the Executive Committee are set forth in its charter, which is available in the Investor Relations section of our website at www.CNOinc.com.

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for Board meetings in consultation with the chief executive officer and other members of the Board; (5) determines, in consultation with the chief executive officer, the information that should be provided to the Board in advance of the meeting; and (6) performs any other duties requested by the other members of the Board.

As discussed below, each member of our Board is independent other than Mr. Bonach, our chief executive officer. As CEO, Mr. Bonach, subject to the direction of the Board, is in charge of the business and affairs of CNO and is our chief policy making officer. Our Board and its committees play an active role in overseeing the Company’s business. The directors bring a broad range of leadership, business and professional experience to the Board and actively participate in Board discussions. The Board believes that having a non-executive chairman and a Board comprised almost entirely of independent, non-employee directors best serves the interests of our shareholders and the Company.

Board Meetings and Attendance

During 2015, the Board met on 11 occasions. Each director attended at least 75% of the aggregate of the meetings of the Board and Board committees on which he or she served. The independent directors regularly meet in executive session without the chief executive officer or any other member of management. The non-executive chairman presides at such executive sessions.

In addition, CNO has a policy that all directors attend the annual meeting of shareholders. All of our directors attended the annual meeting of shareholders held in 2015.

Director Independence

The Board annually determines the independence of directors based on a review by the directors. Although the Board 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 CNO, either directly or as an officer, shareholder or partner of an organization that has a material relationship with CNO. Material relationships can include commercial, industrial, banking, consulting, legal, accounting, charitable and familial relationships, among others. The Board considers the Company’s Corporate Governance Guidelines, the applicable rules and regulations of the Securities and Exchange Commission and the listing standards of the New York Stock Exchange in making its determination regarding independence and the materiality of any relationships with CNO. The Board has determined that all current directors other than Mr. Bonach are independent.

Board’s Role in Risk Oversight

Enterprise risk management is integral to our business. The Board is responsible for overseeing the Company’s risk profile and management’s processes for managing risk. The oversight of certain risks, including those relating to the Company’s capital structure and capital management is done by the full Board. The Board has delegated primary responsibility for many aspects of the Board’s risk oversight to the Audit and Enterprise Risk Committee. The Audit and Enterprise Risk Committee receives reports at its meetings and oversees management’s processes for managing enterprise risk, including the risk management process associated with financial controls, insurance reserves, legal, regulatory and compliance risks, and the overall risk management structure, process and function. Other Board committees oversee risk management related to specific functions. The Investment Committee oversees investment and asset-liability management risk. The Human Resources and Compensation Committee oversees risks associated with our compensation programs so that incentives are not provided for inappropriate risk taking, as further discussed below.

Our leadership strongly supports an active and engaged risk management process. CNO has established an enterprise risk management committee comprised of senior management from business units and functions throughout the Company. This enterprise risk management committee meets at least once each quarter and is co-chaired by the chief executive officer and the chief financial officer. CNO also has an investment and asset-liability management committee comprised of senior management from various functions and the presidents of each business segment. This committee meets at least once each quarter and is chaired by the chief investment officer. The Company has a senior vice president who is responsible for

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the coordination of enterprise risk management activities. Reports on different aspects of the Company’s enterprise risk management are provided to the Board, to the Audit and Enterprise Risk Committee, to the Investment Committee and to other Board committees, as appropriate, on a regular basis.

As part of its risk oversight responsibilities, the Board and its committees review policies and processes that senior management uses to manage the Company’s risk exposure. In doing so, the Board and its committees review the Company’s risk appetite statement, overall risk function and senior management’s establishment of appropriate systems and processes for managing insurance risk, interest rate and asset-liability management risk, credit and counterparty risk, liquidity risk, operational risk and reputational risk.

Relationship of Compensation Policies and Practices to Risk Management

The Human Resources and Compensation Committee has reviewed our compensation programs and believes that they carefully and appropriately balance risks and rewards and do not incentivize inappropriate risk taking. Our incentive plans include multiple performance measures, most of which are financial in nature, and are designed to hold employees accountable for sustained improvement in the core operating performance of the Company. We structure our pay to include both fixed and variable compensation and our variable compensation is capped at no more than two times the target opportunities. In addition, our officers’ compensation aligns them with shareholder interests through equity-based awards with multiple year vesting.

Approval of Related Party Transactions

Under the Company’s written policy, transactions and agreements with related persons (directors, director nominees and executive officers or members of their immediate families, or shareholders owning five percent or more of the Company’s 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 or a committee comprised solely of 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 Nominating 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. There were no related party transactions or agreements involving the Company in 2015 or to date in 2016.

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 process 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 Company’s affairs. A copy of the Code of Business Conduct and Ethics is available under Corporate Governance in the Investor Relations section of our website at www.CNOinc.com . Within the time period specified, and to the extent required, 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 (there have been no such waivers).

Corporate Governance Guidelines

CNO is committed to best practices in corporate governance. The Board, upon the recommendation of the Governance and Nominating Committee, has adopted a set of Board Governance Operating

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Guidelines. These are reviewed by the Governance and Nominating Committee and the Board and updated periodically to reflect the Board’s view of current best practices. A copy of the CNO Board Governance Operating Guidelines is available under Corporate Governance in the Investor Relations section of our website at www.CNOinc.com .

Director Stock Ownership Guidelines

The Board has adopted guidelines regarding ownership of CNO common stock by the directors. The amounts set forth in these guidelines provide for each director to own shares of common stock with a value of at least five times his or her annual base cash compensation. Directors are given five years from the date of their initial election to reach that level of ownership. Based on the current base cash compensation for directors of  $88,000 per year, the ownership guidelines call for each director to own shares with a value of at least $440,000. As of March 7, 2016, all directors who have served on the Board for at least five years met these stock ownership guidelines, and each of the other directors met, or was on track to meet, these guidelines.

Succession Planning

The Board is actively involved with the Company’s talent management process. Annually, the Board reviews the Company’s leadership team, which includes a detailed discussion of succession plans for the chief executive officer and other members of executive and senior management. In addition, the Board regularly discusses the Company’s plans for talent development, with a focus on high potential individuals who are in the position to make the most significant contributions to the Company and to serve as its future leaders.

Communications with Directors

Shareholders and other interested parties wishing to communicate directly with the Board or any one or more individual members (including the chairman of the Board or the non-management directors as a group) are welcome to do so by writing to the CNO 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 or other interested party.

Compensation Committee Interlocks and Insider Participation

During 2015, the directors who served on the Human Resources and Compensation Committee were the current members (Ms. Brown, Mr. Sievert, Mr. Maurer (who was elected to the Board in May 2015) and Mr. Tokarz) and Mr. Turner (who served until his retirement in May 2015). None of the members of the Human Resources and Compensation Committee during 2015 is or has been one of our officers or employees. None of our executive officers serves, or served during 2015, 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 or Human Resources and Compensation Committee.

Copies of Corporate Documents

In addition to being available under Corporate Governance in the Investor Relations section of our website at www.CNOinc.com , we will provide to any person, without charge, a printed copy of our committee charters, Code of Business Conduct and Ethics and Board Governance Operating Guidelines upon request being made to CNO Investor Relations, 11825 N. Pennsylvania Street, Carmel, Indiana 46032; or by telephone: (317) 817-2893 or email: ir@CNOinc.com .

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individuals and current base salary to the market, the Human Resources and Compensation Committee (the “Committee”) approved base salary increases, ranging from 0.0% to 3.1%, for our Named Executive Officers in 2015.

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The annual equity grant mix continues to include only stock options and performance shares for most officers:    Our annual equity grant consists of stock options and performance shares (P-Shares), directly linking our annual grant to Company performance and shareholder return. The mix of award grants was changed from the previous 67% stock options and 33% P-Shares to 50% stock options and 50% P-Shares. Restricted Shares are used selectively to promote retention and recognition of high potential executives.

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2015 – 2017 P-Shares:    The performance metrics for our 2015 P-Share award included both three-year average Operating ROE and relative TSR for our performance comparator group. To better align with our industry and general market peer practices and trends, the payout for threshold-level performance was increased from 25% of the target award to 50%, and the opportunity for maximum performance was increased from 150% of the target award to 200%.

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2015 P4P results:    For 2015, consistent with competitive practice, the payout for threshold-level performance was increased from 25% of the target award to 50%, and GAAP Revenue replaced Operating ROE as a plan metric. Driven by strong financial results of the Company and our operating segments, including an 11% increase in net operating income per diluted share, P4P payouts ranged from 79.3% to 102.8% of target for the Named Executive Officers.

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2013-2015 P-Shares earned:    At the end of the performance period (December 31, 2015), the performance goal for the TSR P-Share grant was achieved at maximum level and the performance goal for the three-year average Operating ROE P-Share grant was achieved above target. Accordingly, 150% of the TSR P-Shares and 137% of the Operating ROE P-Shares were earned and vested from this grant.

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These key actions, decisions and results delivered the following compensation for our Named Executive Officers in 2015:

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(1)

P4P, or “Pay for Performance”, is our annual management cash incentive plan.

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(2)

Expressed as the grant date fair value of stock options, performance shares and restricted shares granted in 2015.

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(3)

The 2015 compensation for Frederick Crawford, our former Chief Financial Officer, is addressed in a separate section.

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Summary of Compensation Governance Practices

The Human Resources and Compensation Committee (the “Committee”) strives to maintain good governance standards in our compensation practices. They include:

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Stock Ownership Guidelines:    In 2011, the Committee approved stock ownership guidelines for the Chief Executive Officer and the senior executive officers who report to him. All Named Executive Officers met their ownership guidelines as of December 31, 2015.

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No significant perquisites offered:    Our executives participate in broad-based Company-sponsored benefits programs on the same basis as other full-time associates.

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Change in control agreements are governed by double trigger arrangements:    All employment agreements and equity award agreements for Named Executive Officers and other senior executives require a termination of employment in addition to a change in control of the Company before change in control benefits are triggered.

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No Supplemental Executive Retirement Programs (SERPs) offered:    We do not offer SERPs to our current executives.

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Independence of executive compensation consultant (Aon Hewitt):    The Committee has engaged an independent, executive compensation advisor, taking SEC and NYSE guidelines into consideration. Aon Hewitt has no business or personal relationships with our Chief Executive Officer, other Named Executive Officers or Board Members.

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Independence of Committee Members:    All Committee members are independent.

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Percent of Variable and Performance-Based Pay:     Variable pay comprises between 75% and 87% of Total Direct Compensation (as described below) for our Named Executive Officers, with the majority of variable pay composed of long-term incentives.

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Strong Clawback Rights:    Our P4P and Long-term Incentive (LTI) plans have clawback provisions that include recapture rights of any incentive amount paid or vested in the event that the Committee determines that the achievement of performance goals was based on incorrect data, errors, omissions or fraud.

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Assessing level of risk:    The Committee annually assesses the level of risk associated with our incentive plans.

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Ongoing succession planning:     The Committee regularly engages throughout the year in in-depth discussions regarding succession planning and talent development of our executives.

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Philosophy, Objectives and Role of Human Resources and Compensation Committee

Philosophy

The Committee, which is comprised solely of independent, non-employee Directors, has developed a philosophy and a comprehensive compensation strategy to reward overall and individual performance that drives long-term success for our shareholders.

Our compensation philosophy consists of the following guiding principles:

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Pay for Performance:    Rewards will vary based on company, business segment and individual performance.

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Target Total Rewards Position:    The overall rewards will be competitive by targeting compensation at approximately the median of the relevant comparator group with additional compensation for achieving superior performance.

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Relevant Comparator Group:    We will utilize a relevant comparator group of companies in the insurance/financial services industry and general industry where appropriate, taking both asset size and revenue into consideration, which includes the best available data for comparison with our peers and companies with which we compete for executive talent.

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Pay for Performance Objectives

The Committee strives to provide a clear reward program that allows us to attract, motivate and retain seasoned executive talent with the significant industry experience required to continue to improve our performance and build long-term shareholder value. To achieve this, our programs are designed to:

•

Reward sustainable operational and productivity improvements. This means that (1) we set performance goals under our P4P plan at targeted performance levels for key financial metrics and (2) we set multi-year performance goals for our P-Share (performance share) awards;

​

•

Align the interests of our executives with those of our shareholders by rewarding shareholder value creation;

​

•

Integrate with the Company-wide annual performance management program of individual goal setting and formal evaluation;

​

•

Provide for discretion to make adjustments and modifications based upon how well individual executives meet our performance standards for expected achievement of business results, as well as uphold our values and leadership behaviors; and

​

•

Offer the opportunity to earn above-market compensation when overall and individual performances exceed expectations.

​

Target Total Rewards and Selection of the Comparator Groups

In setting target executive compensation opportunities, the Committee looks at Total Annual Cash (which is comprised of base salary and target cash incentives) and Total Direct Compensation (which is the sum of Total Annual Cash and long-term incentives). Our long-term incentives may include annual stock option awards as well as restricted shares and P-Share awards. The Committee intends to compensate our executives at approximately the 50th percentile (meaning within a range of  +/- 15% of the 50th percentile dollar value) for total direct compensation, for the achievement of target performance, with additional compensation opportunities for the achievement of superior results.

The Committee assesses “competitive market” compensation annually using a number of sources. In determining the competitive compensation levels, at the recommendation of the independent compensation consultant, the Committee reviews targeted proxy data from a select group of peer companies identified below for the Named Executive Officers, and also compares our other executives to the Diversified Insurance Study published by Willis Towers Watson. Both of these sources provide a much more focused analysis of very specific industry peers with whom the Company competes for talent. We will continue to use our peer companies for the Named Executive Officers as the relevant comparator group and all other executives have been compared to the Willis Towers Watson Diversified Industry Study in 2015.

Although aggregate pay levels are generally consistent with our compensation philosophy, it is possible that pay levels for specific individuals may be above or below the targeted competitive benchmark levels based on a number of factors, including each individual’s role and responsibilities within our Company, the individual’s experience and expertise, the pay levels for peers within the Company, and the pay levels for similar job functions in the marketplace. The Committee is responsible for approving all compensation

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programs for our senior executive officers. In determining executive compensation, 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 component of compensation.

Tally sheets provide a vehicle for the Committee to examine external market practices and compare them to our internal evaluations and decisions. Our tally sheets capture and report:

•

Competitive external market data on a base salary, Total Annual Cash and Total Direct Compensation basis;

​

•

Individual Total Annual Cash compensation including annual salary, target bonus opportunity, and actual bonus paid;

​

•

Long-term equity grants and their vesting status and value at a hypothetically established share price; and

​

•

Employment agreement terms and conditions.

​

Competitive market data is used as a reference point, and we avoid automatic adjustments based on annual competitive benchmarking data, since we believe a given executive’s compensation should also reflect Company-specific factors such as the relative importance of the role within the organization, the compensation for other positions at the same level, and individual factors such as experience, expertise, and individual performance.

In addition to the objective review of external factors, the Committee also considers internal equity among colleagues when determining executive compensation levels. This means that, although the Committee examines competitive pay data for specific positions, market data is not the sole factor considered in setting pay levels. The Committee also considers factors such as our organizational structure and the relative roles and responsibilities of individuals within that structure. The Committee believes that this approach fosters an environment of cooperation among executives that enhances sales growth, profitability and customer satisfaction.

Realized total compensation in any year may be significantly above or below the target compensation levels depending on whether our incentive goals were attained and whether shareholder value was created. In some cases, the amount and structure of compensation results from negotiations with executives at the time they were hired, which may reflect competitive pressures to attract and hire quality executive 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 without matching such benefits item by item.

Role of the Human Resources and Compensation Committee

The Committee determines the components and amount of compensation for our executive officers and provides overall guidance for our employee compensation policies and programs. In addition, the Committee actively monitors our executive development and succession planning activities related to our senior executives and other members of management. Currently, 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. From time to time, other Board members may also participate in the Committee’s meetings, though these ad hoc participants do not participate in making pay decisions. The full Board of Directors receives regular reports of Committee deliberations and decisions and, at least once annually, the full Board reviews the Committee’s written evaluation of the Chief Executive Officer’s performance and compensation. The Committee’s functions are more fully described in its charter, which can be found in the Investor Relations section of our website at www.CNOinc.com .

In making executive compensation decisions, the Committee receives advice from its independent compensation consultant, Aon Hewitt. The Committee evaluates Aon Hewitt’s independence annually, and pursuant to the SEC’s rules and the NYSE’s rules, concluded that no conflict of interest existed in connection with the services Aon Hewitt performed for the Compensation Committee in 2015. In making its determination, the Committee took into account that no member of the Aon Hewitt team that works for the Committee has a business or personal relationship with either any member of executive management or

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member of the Committee as defined by the NYSE’s rules. The Committee also took into consideration that for 2015, management determined to engage Aon Risk Services to assist in the placement of an Agents Errors and Omissions policy. Aon Risk Services received a commission of  $225,000 from the carrier of the insurance policy. Aon Risk Services and Aon Hewitt are subsidiaries of Aon plc operating under separate management structures. The Committee considered that the brokerage services provided by a related Aon plc entity noting that the commission of  $225,000 was less than .01% of Aon plc’s revenues and that Aon Hewitt and Aon Risk Services are separately managed subsidiaries of Aon plc. Fees paid to Aon Hewitt for executive compensation advisory services were $224,855 in 2015.

Although Aon Hewitt is retained directly by the Committee, Aon Hewitt personnel interact with our executive officers as needed, specifically the Chief Executive Officer, Executive Vice President of Human Resources and General Counsel and their staffs to provide the Committee with relevant compensation and performance data for our executives and the Company. In addition, Aon Hewitt personnel may interact with management to confirm information, identify data questions, and/or exchange ideas.

As requested by the Committee, Aon Hewitt’s services to the Committee in 2015 included:

•

Providing competitive analysis of total compensation components for our senior executive officers, including our Named Executive Officers;

​

•

Researching and presenting competitive and emerging compensation practices and regulatory issues;

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•

Attending Committee meetings, in person and telephonically;

​

•

Reviewing and evaluating changes to the executive compensation philosophy and proposed plan changes; and

​

•

Assisting with the assessment of the risk analysis of our compensation plans.

​

The Committee has the authority under its charter to retain outside consultants or other advisors. In making its decisions, the Committee collects and considers input from multiple sources. The Committee may ask senior executive officers to attend Committee meetings where executive compensation, overall 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 Aon Hewitt, members of management and other Board members. However, only the members of the Committee make decisions regarding executive compensation. In the case of the Chief Executive Officer’s compensation, these decisions are submitted to the full Board for its review and approval.

The Committee reviewed the results of the shareholder vote on the Say on Pay proposal from the 2015 Annual Meeting, at which approximately 99% of the votes cast were for approval of the Company’s 2014 executive compensation as described in last year’s proxy statement. After consideration of the positive voting results and its discussion with Aon Hewitt, the Committee determined that its approach to compensation is balanced and effective and made no fundamental changes to the program for fiscal year 2015.

Compensation Components

Our compensation program is composed of the following components:

•

Base Salary

​

•

Annual cash incentives (P4P)

​

•

Long-term equity incentives (stock options and P-Shares)

​

•

Benefits

​

Table 1 summarizes information about the target level of 2015 Total Annual Cash (TAC) and Total Direct Compensation (TDC) for our Named Executive Officers. This table differs from the Summary Compensation Table on page 33 in that values generally represent target amounts and equity grants which

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are part of our normal long-term incentive program for 2015 only. Further discussion about these compensation components can be found later in this section. Each component is discussed with a brief description of the strategy, plan design and plan performance.

Table 1 — Summary of Components of TDC in 2015 at Target(1)

(1)

Annual Incentive expressed as Target levels, value of equity expressed as grant date fair value.

​

(2)

Represents stock option, performance share and restricted share grant date fair values granted in 2015; actual value realized will depend on stock price appreciation and achievement of performance metrics at time of vesting. Valuation methodology is discussed later in this proxy statement.

​

(3)

The amounts shown for the 2015 stock option grants reflect the grant date fair value in accordance with ASC 718. See Impact of Tax and Accounting on Compensation section below for additional discussion.

​

(4)

Target TDC includes Target TAC and the Total LTI Value provided at the time of the annual grant.

​

Compensation Mix

In delivering compensation to our Named Executive Officers, the mix of pay is heavily weighted to variable, performance-based pay (currently between 75% and 87% of Target TDC, with the majority of variable pay composed of long-term incentives) with base salary comprising a relatively small portion of Target TDC (between 13% and 26%) for all the Named Executive Officers. The focus of the pay mix on variable pay elements continues to support our objectives of pay for performance and shareholder value creation.

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The pie charts below summarize the 2015 annual compensation pay mix at target for our Chief Executive Officer and other Named Executive Officers:

Base Salaries

Strategy

In establishing base salaries, the Committee begins by targeting the 50th percentile of the competitive market and adjusts upwards or downwards as appropriate to reflect each position’s responsibilities and each individual’s experience level, unique skills or competencies. Base salaries generally range from the 25th percentile (for recently promoted employees or those who otherwise have less experience in the current position) to the 75th percentile (for high performers with significant industry experience) of the competitive market data. Annual reviews of executives’ base salaries consider numerous factors, including:

•

Current base salary;

​

•

Job responsibilities;

​

•

Impact on the development and achievement of our strategic initiatives;

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•

Competitive labor market pressures;

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•

Company performance for the prior 12 months;

​

•

Individual performance for the prior 12 months, as expressed in the executive’s performance review; and

​

•

Salaries paid for comparable positions within our relevant comparator group.

​

No specific weighting of these factors is used. However, given our desire for a performance-based culture, the Committee’s use of discretion generally results in increases for our top performers and little or no increases in base salary for average or lower performing employees.

2015 Merit Increases

There is no expectation on the part of the Committee for senior executives to receive base salary increases annually. Factors taken into consideration include company performance, a review of general trends, and an analysis of positioning relative to the comparator market data, the Committee awarded a base salary increase to only one of the Named Executive Officers in addition to most of the other executives in February 2015.

•

The base salary increase for Mr. Baude of 3.1% reflected his overall performance and base salary in relation to the market pay level for his position.

​

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Annual Cash Incentives

Strategy

Our annual incentive plan, the “Pay for Performance” Plan (P4P), is designed to focus on and reward achievement of annual performance goals. It is the broadest of our management incentive programs, covering our Named Executive Officers and other key employees. All participants in the P4P plan, including our Named Executive Officers, are assigned target incentive opportunities expressed as a percentage of base salary.

2015 Pay for Performance (P4P) Plan Design

During February and March 2015, the Committee reviewed the P4P plan design for 2015 in order to ensure alignment between shareholder and participant interests, to keep senior executives focused on the financial performance of the enterprise, to improve alignment with financial metrics that participants influence and to select operational/business metrics that drive financial success. This review was accomplished by focusing on the selection of appropriate performance metrics and the determination of performance levels which would contribute to financial success. As a result of this review, most performance metrics and weightings remained the same. Metrics which continued to be part of 2015 incentive plans applicable to Named Executive Officers include:

•

Operating Earnings Per Share (EPS) , defined as operating income (net of tax) divided by the weighted average number of diluted shares outstanding. Operating earnings exclude the impact of realized gains (losses), loss on extinguishment or modification of debt, fair value changes due to fluctuations in the interest rates used to discount embedded derivatives related to our fixed index annuities, fair value changes related to the agent deferred compensation plan, changes to our valuation allowance for deferred taxes and other non-operating items consisting primarily of earnings attributable to variable interest entities. The Committee believes Operating EPS is a key measure of our operating performance, is less impacted by events that are unrelated to the underlying fundamentals of the business and is directly impacted by management during the calendar year.

​

•

Combined and/or Business Segment In-force Earnings Before Interest and Taxes (EBIT) , where Combined In-force EBIT is the sum of individual business segment In-force EBIT. In-force EBIT includes pre-tax revenues and expenses associated with the sales of insurance products that were completed more than one year before the end of the reporting period, but excludes the impact of realized gains (losses), and fair value changes due to fluctuations in the interest rates used to discount embedded derivatives related to our fixed index annuities. In the Committee’s view, this metric enhances line of sight for our operating management and increases their focus on improving the longer-term core profitability of our operations. In-force EBIT excludes the impacts of activities related to the generation of New Business.

​

•

Combined and/or Business Segment Value of New Business (VNB) , which calculates the present value of expected profits from product sales. The selection of VNB is based on the Committee’s desire to have a focus on growing through sales of profitable products as opposed to rewarding only top-line sales growth.

​

•

GAAP Yield , which is period investment income (net of investment expenses), divided by average invested assets for the same period.

​

•

GAAP Investment Income , which is the income earned on general account invested assets, net of investment expenses.

​

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To provide a better balance with our other metrics and improve alignment with our growth and customer experience plans, Operating ROE was replaced with the following metric for 2015:

•

GAAP Revenue , which is defined as reported revenue in CNO’s 10-K, after elimination of items that are considered to be non-operating in nature (such as realized gains (losses)) and revenues that are offset by corresponding expenses (such as revenues related to call options associated with our fixed indexed annuities, the rabbi trust related to a deferred compensation plan and the transitional services agreement relating to the sale of our former Conseco Life Insurance Company subsidiary).

​

Our P4P plan design rewards a threshold level of financial performance which corresponds to 50% of target payout (increased from the 2014 level of 25% to better align with market competitive practices and trends); target level of performance which provides 100% of target payout; and a maximum level of performance which provides a payout of 200% of target. Any payout between these financial performance goals is determined through straight line interpolation between the appropriate levels of performance. Consistent with our compensation philosophy, target annual incentive levels are established to generate Total Annual Cash compensation at competitive market median levels. Further, in 2015 we continued a policy that 50% of the approved target performance level for Combined In-force EBIT must be achieved in order for the maximum potential P4P awards to be funded for the executive officers, with the Committee retaining the right to reduce the P4P payments to such officers based on its judgment of other factors.

Although we have a large net operating loss carry-forward, 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 awards that do not qualify as “performance-based compensation” under Section 162(m) to the extent it deems it advisable to do so.

Table 2 summarizes the 2015 financial metrics and weightings for our Named Executive Officers under the P4P plan.

Table 2 — Summary of 2015 P4P Metrics and Weightings for Named Executive Officers

2015 P4P Plan Performance

The primary purpose of P4P is to reward for core annual operating performance. Under the terms of that 2015 Pay For Performance Plan (P4P Plan) as approved by shareholders, the Committee has the authority to adjust performance goals or results for various items as the Committee determines to be required to properly reflect the year’s operating results.

The Committee takes into account a number of factors in setting incentive performance targets as well as the threshold and maximum levels. These factors include company business plans and current forecasts, historical performance, incentive practices used by peer companies and analyst expectations. The Committee believes that the range of performance goals for the P4P metrics provide appropriate stretch. After reviewing all of these factors the Committee determined that all of the participants with corporate measures would have the same threshold and maximum performance levels, however the target levels for the CEO were set at a higher level on Operating EPS, Combined In-force EBIT and Value of New Business. The purpose of this action was to provide additional motivation for the CEO to find ways to accelerate the Company’s improvement on these measures.

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Table 3 provides a summary of 2015 performance targets and actual results for our Named Executive Officers under the P4P plan.

Table 3 — Summary of 2015 P4P Performance Targets and Actual Results for Named Executive Officers

(1)

The targets for Mr. Bonach were set at $1.44 for Operating EPS, $686.7 MM for Combined In-force EBIT and $83.5 MM for Combined Value of New Business.

​

Table 4 provides the threshold, target and maximum payouts for 2015 for each of our Named Executive Officers under the P4P plan.

Table 4 — Summary of 2015 P4P Opportunities for Named Executive Officers

Table 5 sets forth the actual bonuses paid out for 2015 to the Named Executive Officers pursuant to our P4P plan.

Table 5 — 2015 P4P Target and Actual Bonuses

The Committee uses long-term equity incentives to balance the short-term focus of the P4P program by tying rewards to performance achieved over multi-year periods. Under the Amended and Restated Long-Term Incentive Plan, the Committee may grant a variety of long-term incentive awards, including stock options, stock appreciation rights, restricted stock or restricted stock units, and performance shares or units, settled in cash or stock. We currently use stock options, performance shares, and a limited amount of restricted stock as our long-term compensation vehicles.

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To focus executives’ efforts on longer-term results, we have historically granted awards of stock options that generally vest over three years, performance shares that vest at the end of a three-year period, and restricted stock that generally vests over three years. Recent stock option grants vest in equal installments in the second and third years from the anniversary date of grant, and performance shares are measured over a three-year performance period at which time they will vest only if the financial goals have been achieved. Unless otherwise noted, grants to our Named Executive Officers have vesting schedules identical to those for other executives. To be eligible to vest in long-term equity incentive awards, employees must continue to work for us through the vesting dates or satisfy the definition of Retirement.

Our current granting process involves developing long-term incentive grant values (by position level) for groups of executives, including our Named Executive Officers. 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, as well as other individual considerations. The Committee also assesses aggregate share usage and dilution levels in comparison to general industry norms. Through this method, the Committee believes it is mindful of total cost, grants awards that are competitive within the market, promotes internal equity and reinforces our philosophy of pay for performance.

The Committee reviews and approves individual grants for the Named Executive Officers as well as all stock options, performance share (P-Share) grants and any restricted share awards made to other executives under the purview of the Committee. Annual grants for all officers are reviewed and approved at the Committee’s scheduled meeting at approximately the same time each year. Stock options may be granted only with an exercise price at or above the closing market price of our common stock on the date of grant (Fair Market Value). Interim or off-cycle grants are reviewed and approved by the Committee as circumstances warrant. The Chief Executive Officer has been authorized by the Committee to utilize a designated number of shares each year to grant equity awards to non-Section 16 executives to attract, reward, motivate and/or retain such employees, as deemed appropriate by the CEO. Such awards are regularly reviewed by the Committee.

Equity Grants in 2015

The Committee established the annual target for all long-term equity incentive grants based on competitive market data. The approach was intended to deliver median Total Direct Compensation using a combination of stock options and P-Shares. In 2015, the Committee used a 15-day average of our stock price to calculate the number of shares granted to each executive and continued to use a Black-Scholes valuation model.

In 2015, the Committee changed the mix of award grants from 67% stock options and 33% P-Shares to 50% stock options and 50% P-Shares. This mix of long-term equity incentives focuses solely on performance elements and better aligns our long-term compensation with generating shareholder value. The P-Shares awarded in 2015 are bifurcated and subject to meeting goals based on average Operating ROE (as defined below) and relative Total Shareholder Return (“TSR”) for our comparator group over the course of the three-year performance period ending December 31, 2017. To better align with our industry and general market peer practices and trends, the payout for threshold-level performance was increased from 25% to 50% of the target award, and the up side opportunity for maximum performance was increased from 150% to 200% of the target award. Dividends are paid on previously granted shares of restricted stock prior to vesting, and dividend equivalents are paid on P-Shares upon vesting.

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Table 6 shows the annual equity awards granted to our Named Executive Officers in 2015.

Table 6 — 2015 Annual Equity Grants

(1)

The amounts shown for the 2015 stock option grants reflect the grant date fair value in accordance with ASC 718. See Impact of Tax and Accounting on Compensation section below for additional discussion.

​

Long-Term Incentive Program Performance for Awards Granted in 2013, 2014 and 2015

2013 – 2015 P-Share Performance

P-Share vestings for the 2013–2015 grant were bifurcated between three-year average Operating ROE and relative TSR over the performance period. The Committee believed that the combination of the two metrics would focus the management team on improving long-term earnings growth and creating value for shareholders. For the 2013 – 2015 grant, we intended to deliver compensation at the 50th percentile of the relevant comparator group at target performance. At the end of the performance period (December 31, 2015), the Company achieved a three-year average Operating ROE of 8.8% (the target was 8.25%), and a three-year average TSR performance result of 28.8%, which places CNO above the 75th percentile (88th percentile) performance of our peer companies. The TSR P-Share results were above the maximum performance target and the Operating ROE P-Share grant was achieved above target. Accordingly, 150% of the TSR P-Shares and 137% of the three-year average Operating ROE P-Shares vested from this grant.

Table 7 shows actual Operating ROE P-Share vesting for Named Executive Officers related to the 2013−2015 award.

Table 7 — 2013 – 2015 Operating ROE P-Share Award Vesting for Named Executive Officers in 2015

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Table 8 shows actual TSR P-Share vesting for Named Executive Officers related to the 2013-2015 award.

Table 8 — 2013 – 2015 TSR P-Share Award Vesting for Named Executive Officers in 2015

2014 – 2016 and 2015 – 2017 P-Share Performance Metrics and Targets

The 2014 – 2016 grant was bifurcated between three year average Operating ROE, with a 9.25% target, and relative TSR for our comparator group, targeting the 50th percentile for target performance.

The 2015 – 2017 grant was bifurcated between three year average Operating ROE, with a 9.43% target for the CEO and a 9.25% target for all other NEOs, and relative TSR for our comparator group, targeting the 50th percentile for target performance.

Continuing the use of relative Total Shareholder Return in the 2014 – 2016 and 2015 – 2017 grants provides an incentive to CNO executives to deliver shareholder value by outperforming our peers. The Company’s relative TSR will be ranked for the 2014 – 2016 and 2015 – 2017 performance period against the following TSR performance peers, derived from common industry companies and those companies with competing products:

(1)

Any company in the peer group that is acquired during the performance period will be deleted from the peer group.

​

Tables 9 and 10 show the opportunities for Named Executive Officers related to P-Share vesting, depending on the level of performance achieved in relation to the associated grant metrics.

Table 9 — 2014 – 2016 P-Share Opportunities for Named Executive Officers

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Table 10 — 2015-2017 P-Share Opportunities for Named Executive Officers

Benefits

Our Named Executive Officers 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 our health and welfare benefits, such as our medical/dental plans, disability plans and life insurance. We do not offer any supplemental executive health and welfare programs. Executives may also participate in our 401(k) Plan. The Company also has 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 Internal Revenue Service limits imposed on the 401(k) Plan. At present, we do not make annual contributions to the non-qualified deferred compensation plan in addition to the amounts contributed by our executives.

Compensation of Chief Executive Officer

Mr. Bonach’s base salary, target incentive, and equity compensation awards for fiscal 2015 were determined in accordance with the compensation philosophy described above, including the policy of targeting our compensation within our “competitive market” as described above. In setting his salary, target incentive and equity compensation, the Committee relied on market competitive pay data and the strong belief in the necessity of appropriately incentivizing the Chief Executive Officer who significantly and directly influences our overall performance. Mr. Bonach took over the Principal Financial Officer role (PFO) once Mr. Crawford terminated. He received no extra compensation for this.

Based upon CNO’s approach towards total compensation, Mr. Bonach’s base salary remained at $1,000,000 in 2015, and his target incentive rate remained at 135%. This pay mix continues CNO’s focus on pay for performance and focus on total compensation levels by placing an emphasis on his variable compensation component. Through the additional delivery of equity in both stock options and performance shares, the Committee strengthened the alignment of Mr. Bonach’s total compensation level with the interests of our shareholders.

Based on the achievement of Operating EPS at $1.41 per share, Combined EBIT of  $669.1 million, GAAP Revenue of  $3,823.5 million and Combined VNB of  $71.8 million, Mr. Bonach’s incentive payment for 2015 was $1,070,279. In addition, the Board awarded Mr. Bonach an annual equity grant in recognition for his performance and leadership in delivering on our business objectives and strengthening our capital position.

Compensation of Former Chief Financial Officer

Mr. Crawford’s base salary, target incentive, and equity compensation awards for fiscal 2015 were determined in accordance with the compensation philosophy described above, including the policy of targeting our compensation within our “competitive market” as described above.

Based upon the competitive placement of his compensation relative to his peers in the market, Mr. Crawford did not receive a base salary increase or change to his target annual incentive opportunity in 2015. Through the additional delivery of equity in both stock options and performance shares, the Committee sought to strengthen the alignment of Mr. Crawford’s total compensation level with the interests of our shareholders.

Mr. Crawford’s employment with the Company ended on June 24, 2015.

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(1)

Annual Incentive expressed as Target level. The percent of salary that Mr. Crawford would have received at threshold was 50% and at maximum the percent of salary would have been 200%. Mr. Crawford’s 2015 P4P Metrics (and their respective weightings) were Operating EPS (40%), Combined In-force EBIT (20%), GAAP Revenue (20%) and Combined Value of New Business (20%). Mr. Crawford did not receive a 2015 P4P payout due to his employment with the Company ending prior to the payout date.

​

(2)

Represents stock option, performance share and restricted share grant date fair values granted in 2015. Valuation methodology is discussed later in this proxy statement. These grants were cancelled upon Mr. Crawford’s departure from the Company.

​

(3)

Target TDC includes Target TAC and the Total LTI Value provided at the time of the annual grant.

​

Additional Information

Stock Ownership Guidelines

In 2011 the Committee adopted Stock Ownership Guidelines for our Chief Executive Officer and the executives who report to him. The Guidelines further align management’s interests with those of our shareholders and provide a continuing incentive for management to focus on long-term growth. The individuals covered by the guidelines have until the fifth anniversary of the executive’s appointment to the covered position to meet those guidelines. Until such time as the individual meets the guidelines, he or she shall retain ownership of not less than one-half of the net shares of common stock received, after payment of applicable taxes, upon the vesting or exercise, as applicable, of any equity award under the Company’s Long-Term Incentive Plan or any other similar plan adopted by the Company.

Table 11 shows the ownership guidelines for our Named Executive Officers.

Table 11 — Stock Ownership Guidelines and Compliance

Stock ownership for the purpose of these guidelines includes direct ownership, indirect beneficial ownership (such as shares owned by immediate family or trusts), pre-tax unvested restricted stock and vested but unexercised “in-the-money” stock options as of December 31, 2015. The Committee reviews adherence to these guidelines each year.

Prohibition against Trading in Derivatives

It violates our policy for any senior personnel to purchase, sell or engage in any other transaction involving any derivative securities or hedging related to any of our equity securities. This prohibition does not, however, apply to any exercise of our stock options pursuant to our Amended and Restated Long-Term Incentive Plan or any other benefit plans that we may adopt from time to time, any sale of our stock in connection with any cashless exercise (if otherwise permitted), or payment of withholding tax upon the exercise, of any such stock option.

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Clawback Rights

Our Amended and Restated Long-Term Incentive Plan contains a clawback provision relating to our long-term equity awards: stock options, P-Shares and restricted stock. Under this clawback provision, if our financial statements are required to be restated as a result of errors, omissions, or fraud, the Committee may, at its discretion, based on the facts and circumstances surrounding the restatement, direct the recovery of all or a portion of an equity award from one or more executives with respect to any fiscal year in which our financial results are negatively affected by such restatement. To do this, we may pursue various ways to recover awards from one or more executives: (1) seek repayment from the executive; (2) reduce the amount that would otherwise be payable to the executive under another benefit plan; (3) withhold future equity grants, bonus awards, or salary increases; or (4) take any combination of these actions.

Our Pay for Performance (P4P) Plan contains recapture rights of any incentive amount paid or vested in the event that the Committee determines that the achievement of performance goals was based on incorrect data.

Impact of Tax and Accounting on Compensation Decisions

As a general matter, the Committee considers the various tax and accounting implications of our compensation vehicles.

When determining amounts of long-term equity incentive grants to executives and employees, the Committee considers the accounting cost associated with the grants. Under FASB ASC Topic 718, grants of stock options, restricted stock, restricted stock units and other share-based payments result in an accounting charge that is reflected in our financial statements.

For the 2015 stock option grant, the change in option term from seven years to a more competitive ten years contributed to a higher grant date fair value under ASC 718 compared to the stock options granted in 2014. The longer term led to a higher volatility calculation, resulting in a higher required option valuation, because the required period for calculating volatility now covered a greater portion of the high volatility 2009 – 2010 period. The Committee did not take this one time change in calculated volatility into consideration in determining the number of options to be granted in 2015. The higher required valuation accounts for a material portion of the increase in reported value, despite the decision to change the percentage of total long-term compensation awarded in the form of stock options from 67% in 2014 to 50% in 2015.

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 three highest compensated officers excluding the Chief Financial Officer. Exceptions are made for qualified performance-based compensation, among other things. It is the Committee’s 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 Chief Executive Officer’s base salary) that result in compensation expense that is not fully deductible under Section 162(m). Despite our large net operating loss carry-forward, the Committee continues to administer our incentive plans so that payments qualify as “performance-based compensation” under Section 162(m) of the Internal Revenue Code.

Termination and Change in Control Arrangements

Under the terms of award agreements under our equity-based compensation plans and under our employment agreements, the Named Executive Officers are entitled to payments and benefits upon the occurrence of specified events including termination of employment for various reasons. The specific terms of these arrangements, as well as an estimate of the compensation that would have been payable had they been triggered as of fiscal year-end, are described in the section entitled “Potential Payments Upon Termination or Change in Control” on page 40. The terms of these arrangements were set through the course of employment agreement negotiations with each of the Named Executive Officers, with an

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emphasis on internal consistency. The potential payments upon a change in control for the CEO and his direct reports are three times and two times, respectively, their annual base salary plus target bonus, to better align with evolving market best practices. A double trigger, both CIC and termination, continues to be required before CIC payments are made.

The termination of employment provisions of the employment agreements were entered into in order to address competitive concerns when the Named Executive Officers were recruited. Providing those individuals with a fixed amount of compensation offset the potential risk of leaving their prior employer or foregoing other opportunities in order to work for us. At the time of entering into these arrangements, the Committee considered our aggregate potential obligations in the context of the desirability of hiring the individual and the expected compensation upon joining us.

Compensation Committee Report

The Human Resources and Compensation Committee has reviewed the Compensation Discussion and Analysis and has discussed it with management. Based on the Committee’s review and discussions with management, the Committee recommended to our Board 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:

Frederick J. Sievert, Chair
Ellyn L. Brown
Daniel R. Maurer
Michael T. Tokarz

Summary Compensation Table for 2015

The following Summary Compensation Table sets forth compensation paid to (i) our chief executive officer, (ii) our chief financial officer and (iii) the other three most highly compensated individuals who served as executive officers of CNO as of December 31, 2015 (collectively, the “Named Executive Officers”) for services rendered during 2015, 2014 and 2013.

(1)

From time to time a bonus or additional payment is made pursuant to the terms of the individual’s employment agreement. No such payments were made to the Named Executive Officers during 2013 –  2015. Amounts paid under the Company’s Pay for Performance Incentive Plan are included in the column “Non-Equity Incentive Plan Compensation.”

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(2)

This column represents the aggregate grant date fair value of restricted stock and performance share awards, in accordance with ASC 718, excluding the impact of estimated forfeitures related to service-based vesting conditions. For additional information, see Note 11 to the CNO financial statements in the Form 10-K for the year ended December 31, 2015, as filed with the SEC. See the Grants of Plan-Based Awards table for information on awards made in 2015. The amounts in this column do not necessarily correspond to the actual value that will be recognized by the Named Executive Officers. The amounts in this column for 2015 include the grant date value of performance share awards based on the targeted amounts for each of the Named Executive Officers. Under the terms of those performance share awards, the officers are entitled to receive 200% of the targeted number of shares if the Company equals or exceeds the maximum levels set forth in those awards. If the maximum levels are achieved for the performance share awards made in 2015, the aggregate grant date value of the awards shown in this column would be as follows: Mr. Bonach, $3,720,151; Mr. Perry, $975,020; Mr. Johnson, $649,904; and Mr. Baude, $750,066. As noted below, the performance share awards to Mr. Crawford were cancelled upon his resignation.

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(3)

This column represents the aggregate grant date fair value of stock options granted to each of the Named Executive Officers, in accordance with ASC 718, excluding the impact of estimated forfeitures related to service-based vesting conditions. For additional information on the valuation assumptions with respect to the 2015 grants, refer to Note 11 of the CNO financial statements in the Form 10-K for the year ended December 31, 2015, as filed with the SEC. For information on the valuation assumptions with respect to grants made prior to 2015, refer to the note on stockholders’ equity and stock-related information to the CNO financial statements in the Form 10-K for the respective year-end. See the Grants of Plan-Based Awards table for information on options granted in 2015 and see Impact of Tax and Accounting on Compensation for additional discussion. The amounts in this column do not necessarily correspond to the actual value that will be recognized by the Named Executive Officers.

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(4)

This column represents the dollar amount of payments made after year end to the Named Executive Officers based on performance for the specified year with respect to the targets established under the Company’s Pay for Performance (P4P) Incentive Plan.

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(5)

For 2015, the amounts reported in this column represent the amounts paid for: (i) group life insurance premiums, (ii) Company contributions to the 401(k) Plan, (iii) dividends paid on unvested shares of restricted common stock and dividend equivalents accrued on unvested performance share awards; and (iv) other income.

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The table below shows such amounts for 2015 for each Named Executive Officer:

(6)

Mr. Crawford served as Chief Financial Officer until his resignation effective June 24, 2015. On an interim basis, Mr. Bonach has served in such capacity since Mr. Crawford’s resignation. The stock awards made to Mr. Crawford during 2013 – 2015 were cancelled upon his resignation. The option awards made to Mr. Crawford in 2015 were also cancelled as was the half of his 2014 option award which had not vested. The remaining vested options held by Mr. Crawford were exercisable, in accordance with their terms, for 90 days after his resignation.

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(7)

Mr. Perry also served as President of Bankers Life and Casualty Company until September 2013.

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(1)

These amounts represent the threshold, target and maximum amounts that would have been payable for 2015 if the corresponding performance-based metrics under the CNO Pay for Performance Incentive Plan had been achieved. The amounts paid for 2015 performance under the Pay for Performance Incentive Plan are listed in the Summary Compensation Table on page 33 of this proxy statement under the column heading “Non-Equity Incentive Plan Compensation.”

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(2)

These amounts represent the threshold, target and maximum number of shares that the Named Executive Officers can receive under the terms of the performance share awards made in 2015. See footnote (3) to the “Outstanding Equity Awards at 2015 Fiscal Year-End” table below for additional information regarding the 2015 performance share awards.

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(3)

The amount in this column represents the number of shares of restricted stock that were awarded to the Named Executive Officer during 2015 under the Amended and Restated Long-Term Incentive Plan.

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(4)

The amounts in this column represent the number of stock options granted to the Named Executive Officers during 2015 under the Amended and Restated Long-Term Incentive Plan.

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(5)

The exercise price equals the closing sales price of CNO common stock on the New York Stock Exchange on the date of grant.

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(6)

The values included in this column represent the grant date fair value of restricted stock, performance share and option awards computed in accordance with ASC 718. A description of the assumptions used in calculating these values may be found in Note 11 to the CNO financial statements in the Form 10-K for the year ended December 31, 2015, as filed with the SEC.

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Narrative Supplement to the Summary Compensation Table and the Grants of Plan-Based Awards in 2015 Table

Employment Agreements

Chief Executive Officer.    We have an employment agreement with Mr. Bonach, pursuant to which he serves as our Chief Executive Officer, for a term ending on October 1, 2017. His employment agreement provides for an annual base salary (currently $1,000,000), with increases from time to time based on his

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performance, and an annual performance-based target bonus (currently 150% of base salary, with a maximum of 300% of his annual base salary). As described more fully in “Potential Payments upon Termination or Change in Control,” if Mr. Bonach’s employment is terminated by us without “Cause” or if he resigns “With Reason” (as defined in his employment agreement), or his employment is terminated by reason of his death or “Disability” (as defined in his employment agreement), Mr. Bonach would be entitled to receive specified additional benefits. Mr. Bonach is subject to a non-solicitation and non-competition clause throughout the term of the agreement and for one year thereafter.

Chief Business Officer.    We have an employment agreement with Mr. Perry, pursuant to which he serves as Chief Business Officer, for a term ending on July 6, 2017. His employment agreement provides for an annual base salary (currently $575,000), with increases from time to time based on his performance, and an annual performance-based bonus with a target of 100% of base salary and a maximum of 200% of base salary. As described more fully in “Potential Payments upon Termination or Change in Control,” if Mr. Perry’s employment is terminated by us without “Cause” or if he resigns “With Reason” (as defined in his employment agreement), or his employment is terminated by reason of his death or “Disability” (as defined in his employment agreement), Mr. Perry would be entitled to receive specified additional benefits. Mr. Perry is subject to a non-solicitation and non-competition clause throughout the term of his agreement and for one year thereafter.

Chief Investment Officer and President, 40|86 Advisors, Inc.    We have an employment agreement with Mr. Johnson pursuant to which he serves as Chief Investment Officer of CNO and President of 40|86 Advisors, Inc., our wholly-owned investment management subsidiary that manages the investment portfolios of our insurance subsidiaries, for a term ending on September 30, 2016. His employment agreement provides for an annual base salary (currently $500,000), with increases from time to time based on his performance, and an annual performance-based bonus with a target of 100% of base salary and a maximum of 200% of base salary. As described more fully in “Potential Payments upon Termination or Change in Control,” if Mr. Johnson’s employment is terminated by us without “Cause” or if he resigns “With Reason” (as defined in his employment agreement), or his employment is terminated by reason of his death or “Disability” (as defined in his employment agreement), Mr. Johnson would be entitled to receive specified additional benefits. Mr. Johnson is subject to a non-solicitation clause throughout the term of his agreement and for one year thereafter.

Chief Operations and Technology Officer.    We have an employment agreement with Mr. Baude pursuant to which he serves as Executive Vice President and Chief Operations and Technology Officer, for a term that expires on July 31, 2018. His employment agreement provided for an annual salary (currently $500,000), with increases from time to time based on his performance) and an annual performance-based bonus with a target of 100% of base salary and a maximum of 200% of base salary. As described more fully in “Potential Payments upon Termination or Change in Control,” if Mr. Baude’s employment is terminated by us without “Cause” or if he resigns “With Reason” (as defined in his employment agreement), or his employment is terminated by reason of his death or “Disability” (as defined in his employment agreement), Mr. Baude would be entitled to receive specified additional benefits. Mr. Baude is subject to a non-solicitation clause throughout the term of the agreement and for one year thereafter.

See “Compensation Mix” on pages 22 – 23 of this proxy statement for information regarding the portion of total compensation for the Named Executive Officers represented by the salary and bonus payable under the executive employment agreements described above.

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Terms of Equity-Based Awards

Vesting Schedule

Unless otherwise provided in the footnote disclosure to the table of Outstanding Equity Awards at 2015 Fiscal Year-End on pages 38 and 39 of this Proxy Statement, one-half of each option award vests on the second anniversary of the date of grant and the other one-half vests on the third anniversary of the date of grant. Options granted in 2006 and 2015 expire ten years from the date of grant; options granted in 2007-2009 expired five years from the date of grant; and options granted in 2010-2014 expire seven years from the date of grant.

Awards of restricted stock generally vest in three equal annual installments beginning one year after the grant, subject to continued service through the vesting dates. Performance share awards are measured over a three-year performance period at which time they will vest only if the financial goals have been achieved, subject to continued service through the vesting dates. Unless otherwise noted, grants to the Named Executive Officers have vesting schedules identical to other officers.

Forfeiture and Post-Employment Treatment

Holders of stock options generally have 90 days after termination of employment to exercise options to the extent they were vested on the date of termination. Unvested restricted stock and performance shares are generally forfeited upon termination of employment except upon retirement, disability or death. Awards outstanding under the Company’s Amended and Restated Long-Term Incentive Plan will be treated as follows upon termination of employment due to an individual’s retirement or disability (except as otherwise provided in the individual award agreement): (i) outstanding stock options will continue to vest on the original vesting schedule and the individual may exercise the options until the earlier of the expiration date for such options or five years after the date of retirement; (ii) any unvested restricted stock will continue to vest after retirement on the same vesting schedule as if the individual had remained employed by CNO; and (iii) a pro rata portion of any performance shares will vest and will be payable to the extent the performance criteria are met at the same time as others receive payments under such performance share award. For the purpose of the Amended and Restated Long-Term Incentive Plan, “retirement” means voluntary termination of employment after achieving either 62 years of age, or 60 years of age with at least 10 years of employment with the Company. Upon an individual’s death: (i) outstanding stock options will vest and be exercisable for 12 months; (ii) restricted stock will vest; and (iii) a pro rata portion of any performance shares will vest and be payable to the extent the performance criteria are met at the same time as others receive payments under such performance share award.

Option Exercise Price

Options granted under the Company’s Amended and Restated Long-Term Incentive Plan have an exercise price equal to the closing price on the date of grant.

Dividends

Holders of unvested restricted stock are entitled to receive any cash dividends at the same times and in the same amounts per share as holders of the Company’s common stock. Such payments are taxed as compensation income to the holders of restricted stock. Holders of performance share awards are entitled to dividend equivalents on any performance shares that vest. Such dividend equivalents are payable in cash at the time of vesting of the performance shares to the extent that cash dividends are paid on the common stock underlying the performance shares after the award date and prior to the issuance of shares upon vesting.

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Outstanding Equity Awards at 2015 Fiscal Year-End

The following table sets forth certain information concerning outstanding equity awards held by the Named Executive Officers as of December 31, 2015.