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CIGNA CORPORATION
900 COTTAGE GROVE ROAD
BLOOMFIELD, CONNECTICUT 06002
Notice of 2012 Annual Meeting of Shareholders
|
">Wednesday, April 25, 2012
Time and Date:
| 3:30 p.m. on Wednesday, April 25, 2012.
| Place:
| The Bushnell Performing Arts Center, Autorino Great Hall Theater, 166 Capitol Avenue, Hartford, Connecticut 06106.
| Items of Business:
| •
Elect the four director nominees named in the proxy statement for terms expiring in April 2015.
| | •
Advisory approval of Cigna’s executive compensation.
| | •
Ratify the appointment of PricewaterhouseCoopers, LLP as the independent registered public accounting firm for 2012.
| | •
Approve Cigna’s Amended and Restated Executive Incentive Plan.
| | •
Consider a Company proposal to amend Cigna’s By-laws to provide for the declassification of the Board of Directors.
| | •
Consider any other business properly brought before the meeting.
| Record Date:
| Monday, February 27, 2012. Only Cigna shareholders of record at the close of business on that date may vote at the meeting.
| Proxy Voting:
| Your vote is very important, even if you do not own many shares. We urge you to vote by telephone, by using the Internet, or,
if you received a proxy/voting instruction card, by marking, dating, signing and returning it by mail.
|
20 1 8 PROXY STATEMENT913017_Proxy_Statement_cover_v7-Single pgs.indd 1 People Purpose performance 2/28/18 10:38 AM
45K+ employees who serve Customers around the globe 95M+ Customer relationships around the world 1M+ relationships with health Care providers, CliniCs and faCilities globally Cigna is a global health serviCe Company dediCated to helping people improve their health, well-being and sense of seCurity. $41.6B in revenues $61.8B in assets $13.7B in shareholders’ equity913017_Proxy_Statement_cover_v7-Single pgs.indd 2 2/28/18 10:38 AM
March —, 2012 | By order of the Board of Directors,
| | 
| | Lindsay K. Blackwood
| | Corporate Secretary
|
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">Table of contents
INFORMATION ABOUT ITEM 3
| RATIFICATION OF APPOINTMENT OF PRICEWATERHOUSECOOPERS, LLP AS CIGNA’S INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
| 71
|
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Cigna Corporation[ ], 2018
900 Cottage Grove Road Bloomfield, Connecticut 06002 Dear Cigna Shareholder: March , 2012
Dear Shareholders:
YouOn behalf of the Cigna Corporation Board of Directors, our Enterprise Leadership Team and our colleagues around the globe, we are pleased to cordially invitedinvite you to attend Cigna Corporation’sour 2018 Annual Meeting of Shareholders to be held on April 25, 2012 at 3:30 p.m. (Eastern Time)2018. The attached Notice of 2018 Annual Meeting of Shareholders and Proxy Statement contains important information about the business to be conducted at the Bushnell Performing Arts Center, Autorino Great Hall Theater, 166 Capitol Avenue, Hartford, Connecticut 06106.Annual Meeting.
2017 marked another consecutive year of delivering strong, differentiated results, while generating considerable momentum for 2018 and the years ahead. This proxy statement providesexceptional performance reflects the opportunityefforts of an exceptionally talented Cigna team – individuals who are proud to communicate with you,serve as champions on behalf of our shareholders, on important matters relatedcustomers and communities around the world. In support of Cigna’s belief that our communities play an essential role in meeting the health and wellness needs of individuals, we continue to Cigna’s governance. We maintain our strong commitmenttake leadership roles to effective governance practices, including those that surround executive compensation - and we value our shareholders and their perspectives. This commitment was evidenced byconfront a number of actionssocietal challenges. Cigna is addressing the needs of our friends, families and neighbors through efforts such as combatting the opioid crisis in partnership with providers, empowering veterans to address difficult health and life circumstances and establishing a multi-city health improvement tour to bring free health screenings nationwide. We continue to be led by ourGo strategy, which we tookadopted in 2011, including:2009 and evolved inmid-2017 toGo Deeper, Go Local andGo Beyond to further accelerate our ability to drive significant value creation for our customers, clients, partners, communities and shareholders. By consistently and effectively executing on ourGo strategy over this extended period of time, we have proven that we can actively align Cigna with the needs of our diverse stakeholders and succeed in an evolving, highly dynamic and disruptive global marketplace. ·Enhancing this strategy is our continued commitment to innovation, a relentless focus on serving our customers, and a drive to be a convener for both organizations and individuals across an increasingly complex landscape. Taken together with our unwavering mission to improve the health, well-being and sense of security of those we are privileged to serve, we are solidifying Cigna’s role as a partner of choice, and are creating value for stakeholders across the markets where we compete.
Proactively engagingOur ability to create and deliver this value is clearly reflected in our financial performance and in our ability to deliver competitively attractive top and bottom line growth, as well as earning the right to serve more than 95 million customer relationships around the world.
As we enter 2018, Cigna’s strong capital position and flexibility further enable our organization to drive attractive earnings and customer growth both in 2018 and over the long-term. To position us for continued strong performance, this year we named five tenured and proven leaders to our enterprise leadership, allowing us to further emphasize our focus on customer engagement, local markets and value-based partnerships. Our Board of Directors, comprised of individuals with diverse experiences and skills, remains committed to strong corporate governance as a framework for financial integrity, shareholder transparency and competitively attractive performance. In consideration of the vote on the shareholder proposal regarding proxy access at the last annual meeting and following outreach to shareholders, in discussions around our effective and innovative governance practices.December 2017 the Board adopted proxy access, representing a significant enhancement of shareholder rights. ·
Working to enhance transparency with our shareholders on matters of concern to them.
·
Carefully considering and addressing our shareholders’ views relative to the frequency of advisory votes on executive compensation.
·
Further aligning our long-term incentive programs to shareholder interest by phasing in equity-denominated long term compensation and applying that structure to a broader employee population.
·
Maintaining a commitment to our pay for performance philosophy that balances annual and long-term rewards with delivering value for our shareholders.
We look forward to the opportunity to reflect on our successes in 2011 (which are addressed in more detail in our Annual Report) and look ahead to our future when we convene the Annual Meeting in April.
All shareholders of record at the close of business on February 27, 2012 may attend the Annual Meeting. ItYour vote is important that your shares be represented at the meeting whethervery important. Whether or not you attend the meeting in person. Please read the attached Proxy Statement, and vote by telephone, by using the Internet, or, if you received a proxy/voting instruction card, by marking, dating, signing and returning the card by mail. To ensure your vote is counted at the Annual Meeting, please vote as promptly as possible, even if you plan to attend the meeting.2018 Annual Meeting, we hope that you will cast your vote as soon as possible.
On behalf of the Board of Directors and Cigna’s leadership team, we would like to express our appreciationAs always, thank you for your continued support of Cigna.
Sincerely, | Sincerely,
| | | /s/ David M. Cordani | 
| /s/ Isaiah Harris, Jr. | | David M. Cordani | | President and Chief Executive Officer | | 
| | Isaiah Harris, Jr. | | Chairman of the Board |
| NOTICE OF 2018 ANNUAL MEETING OF SHAREHOLDERS |
| | | | DATE AND TIME: | | Wednesday, April 25, 2018 at 8:00 a.m. | | PLACE: | | Delamar Hotel, Ballroom 1 Memorial Road West Hartford, Connecticut 06107 | | ITEMS OF BUSINESS: | | Proposal 1: Election of ten director nominees named in this Proxy Statement forone-year terms to expire at the next annual meeting of shareholders. Proposal 2: Advisory approval of executive compensation. Proposal 3:Ratification of the appointment of PricewaterhouseCoopers LLP as the Company’s independent registered public accounting firm for 2018. Proposal 4:Approval of an amendment to the Company’s Restated Certificate of Incorporation to eliminate the supermajority voting requirement. Consideration of any other business properly brought before the meeting. | | RECORD DATE: | | You may vote on the matters presented at the Annual Meeting if you were a shareholder of record at the close of business on February 26, 2018. | | PROXY VOTING: | | Your vote is very important, regardless of the number of shares you own. We urge you to promptly vote by telephone, by using the Internet, or, if you received a proxy card or instruction form, by completing, dating, signing and returning it by mail. |
| | | | | | March [ ], 2018 | | | | By order of the Board of Directors, | | | | | | | | /s/ Neil Boyden Tanner Neil Boyden Tanner | | | | | Corporate Secretary |
| Important Notice Regarding the Availability of Proxy Materials for the Annual Meeting of Shareholders To Be Held on April 25, 2018 The Notice of Annual Meeting, Proxy Statement and Annual Report for the fiscal year ended December 31, 2017 are available at www.envisionreports.com/ci. |
We provide below highlights of certain information in this Proxy Summary To assist you in reviewing Cigna’s proxy statement, several key topics are summarized below. The following descriptionStatement. As it is only a summary. For moresummary, please refer to the complete information about these topics, please review the rest of the proxy statementProxy Statement and the Company’s2017 Annual Report on Form 10-K.
Business Highlightsbefore you vote.
Cigna is a global health services organization with insurance subsidiaries that are major providers of medical, dental, disability, lifeMission and accident insurance and related products and services. In the U.S., the majority of these products and services are offered through employers and other groups (e.g. unions and associations) and, in selected international markets, Cigna offers supplemental health, life and accident insurance products and international health care coverage and services to businesses, governmental and non-governmental organizations and individuals.
Financial PerformanceStrategy
Cigna had a very strong 2011, driven by effective execution of the Company’s strategy and reflecting the strength of our global diversified portfolio of businesses. Highlights of our 2011 consolidated results are noted below and you are encouraged to review our Annual Report on Form 10-K for more complete financial information.
•
Revenues rose 4% in 2011, primarily reflecting solid growth in the Company’s strategically targeted U.S. and international customer segments of our ongoing health care, disability and life, and international businesses. These increases were partially offset by the exit from certain non-strategic markets (primarily the Medicare Advantage Individual Private Fee For Service (Medicare IPFFS) business).
•
Adjusted income from operations* increased 12% in 2011, continuing to demonstrate the value of the Company’s diversified portfolio of businesses, resulting in strong earnings contributions from each of our ongoing businesses. These results were achieved primarily as a result of continued growth, effective execution of the Company’s business strategy and low medical services utilization trend in the health care business.
•
Shareholders’ net income from continuing operations decreased 1% in 2011, reflecting higher losses in the Guaranteed Minimum Income Benefits business (which is part of the Company’s run-off reinsurance segment), substantially offset by higher overall earnings from the Company’s ongoing businesses.
Strategy
Cigna’s mission is dedicated to improveimproving the health, well-being and sense of security of the individuals we serve through our more than 95 million customer relationships around the globe. Since 2009, our strategic focus in support of our mission has been toGo Deep, Go Global and Go Individual. To further accelerate the differentiated value we deliver for our customers, clients, partners and communities, we have evolved this strategy toGo Deeper, Go Local and Go Beyond in order to expand avenues for growth and performance. Creating value for our customers, clients, partners, communities and in turn, our shareholders, is a direct result of the continued, effective execution of this proven strategy. | | | Our Mission To improve the health, well-being and sense of security of the people we serve | | | Our Strategy | | | | Go Deeper: | | To expand and deepen our customer, client and partner relationships; depth in targeted sub-segments, geographies | | | | Go Local: | | To ensure our solution suite and services meet customer, client and partner needs at a local market level | | | | Go Beyond: | | To innovate and further differentiate our businesses, the experiences we deliver, and overall social impact | | | How We Will Win | |  |
Cigna is a growth company with a proven track record of strongtop-line and bottom-line growth and a clear, focused strategy. We create value by delivering differentiated and innovative solutions to our customers, clients and partners. We have an attractive, long-term outlook, enabled by the significant opportunity in our existing businesses, our strong talent, capabilities and capital position. We also believe that our corporation has a social responsibility, and that we can work to actively address gaps in health and well-being to help individuals in the markets where we operate around the world. KeyOur perspective is that companies like Cigna can partner more with communities to contribute and make a difference. | | | | | | |  | | Cigna 2018 Notice of Annual Meeting of Shareholders and Proxy Statement | | | 1 | |
Business Performance In 2017, consolidated revenue increased 5% to $41.6 billion, as we continued to focus on our mission and strategy is our customer-centric approach; we seek to engage our U.S.-based and global customers in maintaining and improving theirimprove the health, well-being and sense of security by offering effective, easy-to-understand insurance, health and wellness products and programs that meet their unique individual needs. We do this by providing accessof the people we serve. Shareholders’ net income for 2017 was $2.2 billion, compared to relevant information$1.9 billion for 2016. Consolidated adjusted income from operations* for 2017 was $2.7 billion, compared to ensure informed buying decisions, partnering with physicians and care providers$2.1 billion in the U.S. and around the world, and delivering a highly personalized customer experience. This approach aims to deliver high quality care at lower costs for2016, reflecting increased earnings contributions from each of our stakeholders: individuals, employersbusiness segments. Our results included strong performance across each of our priority growth platforms – Commercial Employer, U.S. Seniors, Global Supplemental Benefits, and government payors. Our long-term growth strategy is based on: (1) repositioning our portfolioGroup Disability and Life. These results provide us with momentum for continued growth in targeted geographies, product lines, buying segments and distribution channels; (2) improving our strategic and financial flexibility; and (3) pursuing additional opportunities in high-growth markets with particular focus on individuals. Our mission is carried out through our enterprise growth strategy, which has the following three tenets:2018.
•
GO DEEP — We seek to drive scale by increasing presence and brand strength in key geographic areas, growing in targeted segments or capabilities, and deepening our relationships with current customers.
•
GO GLOBAL — We deliver a range of differentiated products and superior service to meet the distinct needs of a growing global middle class and the globally mobile workforce through expansion in existing international markets as well as an extension of our business model to new geographic areas.
•
GO INDIVIDUAL — We strive to establish a deep understanding of our customers’ unique needs and to be a highly customer-centric organization through simplifying the buying process by providing choice, transparency of information, and a personalized customer experience. Our goal is to build long-term relationships with each of the individuals we serve and meet their needs throughout the stages of their lives.
* Adjusted income from operations is not a financial measure calculated | * | We encourage you to review our Annual Report on Form10-K for the year ended December 31, 2017 for more complete financial information. Consolidated adjusted income from operations is a measure of profitability used by Cigna’s management because it presents the underlying results of operations of Cigna’s businesses and permits analysis of trends in underlying revenue, expenses and shareholders’ net income. This consolidated measure is not determined in accordance with accounting principles generally accepted in the United States (GAAP) and should not be viewed as a substitute for the most directly comparable GAAP measure, shareholders’ net income. Shareholders’ net income was $1.5 billion, $2.1 billion, $2.1 billion, $1.9 billion and $2.2 billion for the years ended December 31, 2013, 2014, 2015, 2016 and 2017, respectively. For a reconciliation of consolidated adjusted income from operations to shareholders’ net income, see Annex A. |
Total Shareholder Return The following chart shows our cumulative Total Shareholder Return (TSR) as of December 31, 2017, on aone-, three- and five-year basis. Cigna’s three-year annual compounded TSR was 25.5%, placing Cigna at the 78th percentile of its Strategic Performance Share (SPS) performance peer group for the 2015–2017 performance period. For more information regarding our SPS program, see “Long-Term Incentives – Strategic Performance Share Program” in the U.S. (GAAP). See “Item 7. Management’sCompensation Discussion and& Analysis of Financial Condition and Results of Operations—Consolidated Results of Operations” on page 54 of our Annual Report on Form 10-K for a reconciliation of this non-GAAP financial measure to the most directly comparable GAAP financial measure, which is shareholders’ income from continuing operations.(CD&A). | | | 2 | | Cigna 2018 Notice of Annual Meeting of Shareholders and Proxy Statement |
CIGNA – 2012 Notice of Annual Meeting of Shareholders and Proxy Statement – 4
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HealthSpring Acquisition
Key to Cigna’s strategy is the effective deployment of capital in pursuing additional opportunities in high-growth markets. Consistent with this objective, we achieved a significant milestone in this area, with the acquisition of HealthSpring, Inc. in January 2012. HealthSpring, a leading provider of medical benefits to the 65 and over population through the Medicare Advantage program, strengthens our ability to serve individuals across their life stages as well as deepens Cigna’s presence in a number of geographic markets. The addition of HealthSpring brings industry leading physician partnership capabilities and creates the opportunity to deepen Cigna’s existing client and customer relationships, as well as facilitates a broader deployment of Cigna’s range of health and wellness capabilities and product offerings.
Corporate Governance
Cigna’s Board of Directors and management adhere to sound governance principles, and regularly evaluate and implement emerging practices. Cigna’s governance practices include:
•
Independent Chairman of the Board of Directors
•
| | | | | | | CURRENT DIRECTORS | | AGE | | OCCUPATION | | COMMITTEE MEMBERSHIPS | | | | | David M. Cordani | | 52 | | President and Chief Executive Officer of Cigna | | Executive | | | | | Eric J. Foss | | 59 | | Chairman, President and Chief Executive Officer of ARAMARK Corporation | | Corporate Governance People Resources | | | | | Isaiah Harris, Jr. | | 65 | | Former President and Chief Executive Officer of AT&T Advertising & Publishing — East | | Chairman of the Board Executive (Chair) | | | | | Jane E. Henney, M.D. | | 70 | | Former Senior Vice President, Provost and Professor of Medicine, University of Cincinnati College of Medicine | | Corporate Governance (Chair) Audit Executive | | | | | Roman Martinez IV | | 70 | | Private Investor | | Audit (Chair) Executive Finance | | | | | John M. Partridge | | 68 | | Former President of Visa, Inc. | | Finance (Chair) Executive People Resources | | | | | James E. Rogers | | 70 | | Former Chairman, President and Chief Executive Officer of Duke Energy Corporation | | Audit Finance | | | | | Eric C. Wiseman | | 62 | | Former Executive Chairman, President and Chief Executive Officer of VF Corporation | | Finance People Resources | | | | | Donna F. Zarcone | | 60 | | President and Chief Executive Officer of The Economic Club of Chicago | | Audit Corporate Governance | | | | | William D. Zollars | | 70 | | Former Chairman, President and Chief Executive Officer of YRC Worldwide, Inc. | | People Resources (Chair) Executive Corporate Governance |
| | | | | | | | | Cigna 2018 Notice of Annual Meeting of Shareholders and Proxy Statement | | | 3 | |
Corporate Governance Cigna is committed to ensuring strong corporate governance practices on behalf of our shareholders. We believe that strong corporate governance provides the foundation for financial integrity and shareholder confidence. The Office of the Corporate Secretary engages with shareholders on issues related to corporate governance, executive compensation and social responsibility. In 2017, the Office of the Corporate Secretary engaged in extensive outreach with shareholders, particularly regarding proxy access, as further described on page 16. During these meetings, shareholders also expressed an interest in learning more about our board refreshment plans and our corporate responsibility efforts. As a result, we have included additional disclosure on these topics, which can be found on pages 9 and 23, respectively. In 2017, the Board, after a full evaluation that included outreach to Cigna’s largest shareholders and consideration of Directors oversightthe vote on the shareholder proposal regarding proxy access at the 2017 annual meeting of riskshareholders, implemented proxy access. As a result, a shareholder or a group of up to 20 shareholders owning 3% or more of Cigna’s outstanding common stock continuously for at least three years may nominate and enterprise risk management •
Majority voting standard
•
Independent Committeesinclude in the Company’s proxy materials director nominees constituting up to the greater of 20% of the Board or two individuals, provided the shareholder(s) and the nominee(s) satisfy the requirements specified in theBy-Laws. The Board believes that this proxy access bylaw framework provides meaningful proxy access rights, reflects generally accepted governance practices around proxy access and is consistent with the overall feedback we received as part of Directorsour shareholder engagement.
•
Compensation Clawback policy
•
Limited perquisites
•
LimitedIn February 2018, the Board approved an amendment to the Company’s Restated Certificate of Incorporation to eliminate the supermajority vote provision, subject to shareholder approval at this Annual Meeting. Following shareholder approval, the Board will amend theBy-Laws to eliminate a similar supermajority voting requirement in ourBy-Laws. Thereafter, all supermajority voting provisions will have been removed and shareholders may amend all provisions of the Restated Certificate and theBy-Laws by the affirmative vote of a majority of the Company’s outstanding common stock.
•At the 2016 annual meeting of shareholders, the phased implementation of the Board’s declassified structure began and, beginning with this Annual Meeting, all directors are elected toone-year terms and the classified structure is fully eliminated.
Alignment between rewards and business priorities
•
Shareholder outreach and engagement
•
Robust
| | | | | KEY GOVERNANCE PRACTICES | | | | | • Independent board of directors with diversity in composition, skills and experience • Independent Chairman of the Board • Regular executive sessions of the Board and its committees, without management present • Directors elected by majority voting • Annual election of all directors • Proxy access right for shareholders | | | | • Separate Code of Business Conduct and Ethics for the Board • Independent Audit, Corporate Governance, Finance and People Resources Committees • Annual self-evaluations of the Board, its committees and individual directors, including periodic independent third party assessments • Majority of director compensation delivered in Cigna common stock • Meaningful stock ownership guidelines for directors | | | | | |
| | | 4 | | Cigna 2018 Notice of Annual Meeting of Shareholders and Proxy Statement |
Executive Compensation Cigna’s executive compensation program is based on the philosophy that executive pay should strongly align with the interests of our shareholders, directly link to Company and individual performance and attract and retain executive talent. We believe the achievement of our enterprise goals will result in the creation of meaningful and sustained long-term value for our shareholders. Each of the measures in our performance-based plans are designed to align with and support our business strategy. We focus on driving enterprise profitability, growth and operating expense efficiency to support investment in innovation, customer loyalty and stock holding requirementsperformance. •In 2017, our shareholders cast advisory votes in favor of our executive compensation program, with approximately 93% of votes cast in favor.
No tax gross-up benefits on a change of control
•
Double-trigger vesting for equity awards on change of controle
Voting Matters
| | | | | | | | | | | | | | | | | COMPENSATION GOVERNANCE AND CONTROLS | | | | | | | | | | | | | Proposal
• “Double trigger” requirement for change of control benefits • No taxgross-up of severance pay upon a change of control • Regular review of executive compensation governance market practices, particularly when considering the adoption of new practices or changes to existing programs or policies • Robust stock ownership guidelines and holding requirements for equity awards to align executives’ interests with shareholders • Prohibition of hedging of Cigna stock by all directors, executive officers and employees, and restrictions on pledging of Cigna stock by directors and Section 16 officers • A disgorgement of awards (clawback) policy beyond the mandates of Sarbanes-Oxley | | | | • Management of Long-Term Incentive Plan annual share usage (or burn rate) and total dilution by setting an annual share usage limit, which is below the maximum permitted under the plan • No excessive perquisites • Oversight by the People Resources Committee of people development, policies and processes, including consideration of assessments of executive officers and key senior management • CEO and executive officer succession plans overseen by the Board of Directors, with assistance from the People Resources Committee • An annual assessment by the People Resources Committee of any potential risks and associated internal controls in our incentive compensation programs and policies | | | | | | | | | | | | | | | | | |
The target pay mix for the Chief Executive Officer and the other named executive officers during 2017 reflects our executive compensation philosophy that emphasizes performance-based compensation over fixed compensation. The percentages shown below are targets only and will not match the percentages calculable from the actual compensation paid as reflected in the Summary Compensation Table. | | | CEO TARGET PAY MIX | | OTHER NEO AVERAGE TARGET PAY MIX |
| | | | | | | | | Cigna 2018 Notice of Annual Meeting of Shareholders and Proxy Statement | | | Board of Directors’ Vote Recommendation
5 | Page Reference
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| | | Voting Matters and Board Recommendations | PROPOSALS | | BOARD
RECOMMENDATION | | | Proposal 1. Election of DirectorsDirectors. The Board and the Corporate Governance Committee believe that the ten director nominees named in this Proxy Statement bring a combination of diverse qualifications, skills and experiences that contribute to a well-rounded Board. As determined by the Board and Corporate Governance Committee as part of the most recent Board evaluation, each director nominee has proven leadership ability, good judgment and has been an active and valued participant on the Board during his or her tenure. | | FOR each Director Nominee | 8of the nominees
| | | Proposal 2. Advisory Approval of Executive Compensation. The Board believes that Cigna’s Executive Compensationexecutive compensation program design effectively aligns the interests of our executive officers with those of our shareholders by tying a significant portion of their compensation to Cigna’s performance and rewarding our executive officers for the creation of long-term value for Cigna’s shareholders. Because your vote is advisory, it will not be binding upon the Board. However, the Board and People Resources Committee value your opinion and will review and consider the voting results when making future executive compensation decisions. | FOR
| 32
FOR | | | Proposal 3. Ratification of the Appointment of PricewaterhouseCoopers LLP as our Independent Registered Public Accounting Firm for 2018. The Audit Committee approved the appointment of PricewaterhouseCoopers LLP as Cigna’s independent registered public accounting firm for 20122018. The Audit Committee and the Board believe that the continued retention of PricewaterhouseCoopers LLP to serve as the Company’s independent registered public accounting firm is in the best interests of the Company and its shareholders. As a matter of good corporate governance, the Board is seeking shareholder ratification of the appointment. | FOR
| 67
FOR | | | Proposal 4. Approval of Cigna’s Amandedan Amendment to the Company’s Restated Certificate of Incorporation to Eliminate the Supermajority Voting Requirement. The Board recognizes that the elimination of the supermajority vote required to amend Section 2 of Article III of the Company’sBy-Laws, which relates to the number, qualifications, election and Restated Executive Incentive Plan | FOR
| 69
| 5. Proposal to Amend By-laws to provide for Declassificationterm of office of the Board of Directors, aligns with best practices in corporate governance.
| NO RECOMMENDATION
| 72
FOR | 6. Shareholder Proposal
| AGAINST2018 Annual Meeting of Shareholders
| 73Wednesday, April 25, 2018
8:00 a.m. Delamar Hotel, Ballroom 1 Memorial Drive West Hartford, Connecticut 06107 |
CIGNA – 2012
| | | 6 | | Cigna 2018 Notice of Annual Meeting of Shareholders and Proxy Statement |
| CORPORATE GOVERNANCE MATTERS |
Election of Directors (Proposal 1) Beginning with this Annual Meeting, of Shareholders and Proxy Statement – 5
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Board of Directors Nominees
Name | Age | Director Since | Occupation | Independent (Yes/No) | Committee Memberships | John M. Partridge | 62 | 2009 | President of VISA Inc. | Yes | Finance (Chair) Audit | James E. Rogers | 64 | 2007 | Chairman, President and CEO of Duke Energy Corporation | Yes | People Resources (Chair) Finance | Joseph P. Sullivan | 69 | 2010 | Private Investor (former Chairman and CEO of Protocare, Inc.) | Yes | People Resources Corporate Governance | Eric C. Wiseman | 56 | 2007 | Chairman, President and CEO of VF Corporation | Yes | Audit Corporate Governance |
Executive Compensation
The Company adheres to a pay for performance compensation philosophy. This philosophy was confirmed by the People Resources Committee’s compensation determinations for named executive officers in 2011, and the compensation outcomes for the named executive officers described throughout the proxy statement reflect Cigna’s strong financial performance and results in 2011. Specifically, Cigna performed well against the performance goals established under its annual incentive plan, highlighted by the performance with respect to the adjusted income from operations. In determining the compensation for the named executive officers, the People Resources Committee took into consideration these strong enterprise results as well as significant individual performance contributions from each of the named executive officers.
CIGNA – 2012 Notice of Annual Meeting of Shareholders and Proxy Statement – 6
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Total Compensation Mix
Elements of Cigna’s executive compensation program include base salary, annual incentives and long-term incentives. Consistent with our philosophy, both the annual incentive and long-term incentive elements—a significant majority of total direct compensation—are based on performance and are “at-risk.” The chart below illustrates that approximately 91% of the Chief Executive Officer’s 2011 target pay is performance-based (with 76% in long-term equity incentives and 15% in annual incentives), and 77% of 2011 average target pay among Cigna’s other active named executive officers is performance-based (with 58% in long-term equity incentives and 19% in annual incentives).
 2011 Executive Officer Compensation
Please see the 2011 Summary Compensation Table on page 48 and the table on page 50 that reflects the People Resources Committee’s perspective of the total direct compensation for named executive officers. Due to the Company’s transition from the strategic performance unit (SPU) program to the strategic performance share (SPS) program in 2010, the 2011 Summary Compensation Table includes both SPU payouts for the 2009-2011 performance period and SPS grants made in 2011 for the 2011-2013 performance period, in effect, double-counting a portion of the long-term incentive award for named executive officers in 2011. No shares were paid in 2011 under the SPS program, because shares for this performance period, if any, will be issued in 2014. See “Compensation Discussion and Analysis—Long-Term Incentives” for a description of these programs and how they are reported in the Summary Compensation Table.
Shareholder Engagement
At last year’s annual meeting, 74% of shares voting approved the compensation awarded to the named executive officers. Although last year’s meeting took place after the 2011 executive compensation program was established, the Board of Directors and the People Resources Committee take the results of the “say-on-pay” vote into account in the ongoing design and administration of the Company’s executive compensation programs. With voting results being positive, the Board of Directors and the People Resources Committee currently do not expect to make any major changes to the Company’s programs. However, to better understand these voting results, the Board of Directors encouraged members of senior management to engage with our largest shareholders. Management reached out to many of these shareholders, with several agreeing to have discussions with Cigna. During these meetings, management had the opportunity to discuss Cigna’s governance and compensation practices and programs, and to listen to shareholders’ perspectives. The tone of these meetings was positive, with shareholders generally indicating support for Cigna’s programs and previous proxy statements. There was no explanation that emerged as to why last year’s “say-on-pay” voting results were not higher than 74%, and no issues were raised in these meetings that suggested the People Resources Committee should make changes to Cigna’s executive compensation program. Management reported back to the Board of Directors and its committees on these shareholder discussions.
CIGNA – 2012 Notice of Annual Meeting of Shareholders and Proxy Statement – 7
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ANNUAL MEETING INFORMATION
Questions and Answers about the Annual Meeting
Why did I receive in the mail a notice of the Internet availability of proxy materials?
You received in the mail either a notice of the Internet availability of proxy materials or a printed proxy statement and annual report because you owned shares of Cigna common stock on Monday, February 27, 2012, the record date, and that entitles you to vote at the 2012 Annual Meeting of Shareholders (Annual Meeting). The Cignaentire Board of Directors is soliciting your proxy to voteelected annually by Cigna’s shareholders. Based on input from shareholders, we began the phased implementation of the Board’s declassified structure at the scheduled2016 annual meeting. The classified structure is now fully eliminated. At this Annual Meeting, the Board is nominating the ten directors named in this Proxy Statement forone-year terms to expire at the next annual meeting of shareholders. The role of the Board, its leadership structure and governance practices are described in “Corporate Governance Policies and Practices.” This section describes the process for director elections and director nominations, identifies the director expectations and qualifications considered by the Board and the Corporate Governance Committee in selecting and nominating directors, discusses our board refreshment activities and presents the biographies, skills and qualifications of the director nominees.
PROCESS FOR DIRECTOR ELECTIONS Cigna has adopted a majority voting standard for the election of directors in uncontested elections. Under this standard, each director must receive a majority of the votes cast for him or at any later meetingher. This means that the number of votes cast “for” a director nominee must exceed the number of votes cast “against” that nominee for the director to be elected. Each director has agreed to tender, and not withdraw, his or her resignation if he or she does not receive a majority of the scheduled Annual Meeting is adjourned or postponed for any reason. Your proxy will authorize specified people (proxies) to vote on your behalfvotes cast at the Annual Meeting. By use ofThe Corporate Governance Committee will make a proxy, you can voterecommendation to the Board on whether to accept the resignation. The Board has discretion to accept or reject the resignation. A director whose resignation is under consideration will not you attendparticipate in the meeting.
This proxy statement describes the matters on which Cigna would like you to vote, provides information on those matters, and provides information about Cigna that we must disclose when we solicit your proxy.
Why haven’t I received a printed copydecisions of the proxy statementCorporate Governance Committee or annual report?
This year Cigna has elected to take advantagethe Board concerning his or her resignation. In a contested election, where the number of the Securities and Exchange Commission’s rule that allows us to furnish proxy materials to you online. We believe electronic delivery will expedite shareholders’ receipt of materials, while lowering costs and reducing the environmental impact of our Annual Meeting because we will print and mail fewer full sets of materials. On March —, 2012, we mailed to our shareholders a notice containing instructions on how to access Cigna’s proxy statement and annual report online. If you received a notice by mail, you will not receive a printed copy of the proxy materials, unless you specifically request one. The notice contains instructions on how to request a paper copy of the materials.
Are the proxy materials available online?
Yes. As described in the prior question, most shareholders will receive the proxy statement online. If you received a paper copy, you can also view these documents on the Internet by accessing our website at http://www.cigna.com/aboutus/investor-relations.
What will I be voting on?
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Election of the four director nominees named in this proxy statement for terms expiring in April 2015 (see page 11).
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Approvalexceeds the number of an advisory resolution on executive compensation (see page 32).
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Ratification of the appointment of PricewaterhouseCoopers, LLP as the Company’s independent registered public accounting firm for 2012 (see page 67).
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Approval of Cigna’s Amended and Restated Executive Incentive Plan (see page 69).
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Consider a Company proposal to amend Cigna’s By-laws to provide for the declassification of the Board of Directors (see page 72).
Could other matters be decided at the Annual Meeting?
We do not know of any other matters that will come before the shareholders during the Annual Meeting. The Chairman will allow presentation of a proposal or a nomination for the Board from the floor at the Annual Meeting only if the proposal or nomination was properly submitted. Cigna’s 2011 proxy statement described the requirements for properly submitting proposals and nominations from the floor at this year’s Annual Meeting. The requirements are similar to those described on page 77 for the 2013 annual meeting. The proxies will have discretionary authority, to the extent permitted by law, to vote for or against other matters that come before the Annual Meeting as those persons deem advisable.
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How many votes can be cast by all shareholders?
Each share of Cigna common stock is entitled to one vote on each of the four directors to be elected, the voting standard is a plurality of votes cast.
PROCESS FOR SELECTING AND NOMINATING DIRECTORS Director Selection and one vote on eachNomination Process The Corporate Governance Committee assesses the Board’s composition as part of the annual self-evaluation of the Board (described in “Corporate Governance Policies and Practices — Board Evaluations and Board Effectiveness”). When considering whether to nominate current directors forre-election, the Corporate Governance Committee and the Board review the individual director’s performance against the expectations for Board membership (identified below under “Director Expectations and Qualifications”). The Board considers its composition as part of its annual evaluation. The Board may nominate for election, and appoint to fill vacant or new Board positions, only those persons who agree to adhere to the Company’s majority voting standard (described above). From time to time, the Corporate Governance Committee retains a third-party search firm to assist in identifying and evaluating candidates for Board membership. In 2017, the Corporate Governance Committee retained an outside firm to assist the Committee and the Board with its board refreshment plan, as further described on page 9. The Corporate Governance Committee also considers suggestions for Board nominees submitted by shareholders, which are evaluated using the same criteria as new director candidates and current director nominees. Once a potential candidate has been identified, the Corporate Governance Committee reviews the background of the new director candidate and presents him or her to the Board for consideration. When considering director candidates and the current and future composition of the Board, the Corporate Governance Committee and the Board consider how each candidate’s background, experiences, skills and/or prior board and committee service will contribute to the diversity of the Board. In addition, the Corporate Governance Committee and the Board consider the Company’s business strategy and how each director candidate’s background complements that strategy. Candidates interview with the Chief Executive Officer, the Chair of the Corporate Governance Committee and the Chairman of the Board, as well as other mattersmembers of the Board, as appropriate. Shareholders that want to nominate directors for inclusion in our proxy statement or directly at an annual meeting in accordance with ourBy-Laws should follow the instructions described in “Annual Meeting Information.” | | | | | | | | | Cigna 2018 Notice of Annual Meeting of Shareholders and Proxy Statement | | | 7 | |
| CORPORATE GOVERNANCE MATTERS |
Director Expectations and Qualifications The Corporate Governance Committee, in consultation with the Board, has identified individual director expectations and qualifications, characteristics, skills and experience that it believes every member of the Board should have. In addition, the Corporate Governance Committee has identified areas of expertise that it believes support Cigna’s business strategy in the short- and long-term, enable the Board to exercise its oversight function and contribute to a well-rounded Board. These expectations and qualifications, as well as the identified areas of expertise, are considered and reviewed as part of the Board’s annual evaluation and as part of each individual Director’s evaluation. In developing these areas of expertise, the Board also considered the skills necessary to support the business strategy and the skills and experiences reflected on the boards of companies within Cigna’s peer group, as well as best practices among other large companies. The Board regularly reviews the identified areas to ensure they support changes in the Company’s strategy and the Board’s needs. The Corporate Governance Committee and the Board take into consideration these criteria and the mix of skills and experience as part of the director recruitment, selection, evaluation and nomination process. | | | | | | | | | | | | | Expectations of Every Director | | | | | | | | | | | • Understand Cigna’s businesses and the importance of the creation of shareholder value • Participate in an active, constructive and objective way at Board and committee meetings • Review and understand advance briefing materials • Contribute effectively to the Board’s evaluation of executive talent, compensation and succession
planning | | | | | | • Contribute effectively to the Board’s assessment of strategy and risk • Share expertise, experience, knowledge and insights on matters before the Board • Advance Cigna’s business objectives and reputation • Demonstrate an ongoing commitment to consult and engage with the CEO and senior management outside of Board and committee meetings on matters impacting Cigna | | | | | | | | | | | | | |
| | | | | | | | | | | | | Qualifications, Characteristics, Skills and Experience of Every Director | | | | | • Good judgment and strong commitment to ethics and integrity • Ability to analyze complex business and public policy issues and provide relevant input concerning the Company’s business strategy • Free from conflicts of interest | | | | | | • Ability to assess different risks and impact on shareholder value • Contribution to the Board’s overall diversity of thought • High degree of achievement in their respective fields | | | | | | | | | | | | | |
While the Board does not have a formal policy with regard to diversity, the Board remains committed to diversity and the Corporate Governance Committee works to ensure that the Board is properly presentedcomprised of individuals with expertise in fields relevant to Cigna’s business, experience from different professions and industries, a diversity of age, ethnicity, gender and global experience and a range of tenures. The Board believes that a range of tenure allows both new perspective and continuity. This continuity has proven beneficial given the complexities of, and the significant change and uncertainty in, the health care industry over the past several years. The above tables show the diversity of our independent board members. | | | 8 | | Cigna 2018 Notice of Annual Meeting of Shareholders and Proxy Statement |
| CORPORATE GOVERNANCE MATTERS |
AREAS OF EXPERTISE REFLECTED ON CIGNA’S BOARD OF DIRECTORS Business Leader Directors who have served as a chief executive officer, aCEO-equivalent or a business unit leader of a large company bring a practical understanding of large organizations, processes, strategy and risk management. Finance An understanding of finance, capital markets and financial reporting processes is necessary for a well-rounded Board because of the importance we place on accurate financial reporting and robust financial controls and compliance. In addition, Cigna’s business involves complex financial transactions. Healthcare and Delivery Systems As we work to create a sustainable health care ecosystem, the Board values directors with experience on issues related to improving access to care and reducing health costs to patients through the provision of care management and the use of innovative delivery system solutions. Information Technology Effective information systems and the integrity and timeliness of data we use to serve our customers and health care professionals are integral to the operation of our business. For this reason, the Board benefits from directors with leadership experience related to the development, installation, implementation, security or maintenance of computer systems, applications and digital informatics. International/Global The Board values directors with leadership experience overseeingnon-U.S. operations and working in diverse cultures around the globe. Marketing and Consumer Insights Our customer-focused strategy benefits from inclusion of directors with leadership experience in marketing, advertising and consumer insight functions. These directors also have experience with product development and brand building, particularly as it focuses onend-user consumers. Regulated Industry/Public Policy Our business is highly regulated at the Annual Meeting.federal, state, local and international levels. For this reason, the Board benefits from directors with experience in regulated industries and public policy to help us identify, assess and respond to new trends in the legislative and regulatory environment. Board Refreshment and Succession Planning We had 287,321,926 shares of common stock outstanding and entitled to vote on Monday, February 27, 2012.
How many votes must be present to holdThe Corporate Governance Committee is responsible for identifying new director candidates, reviewing the Annual Meeting?
At least two-fifthscomposition of the issuedBoard and outstanding shares entitledits committees and for making recommendations to vote,the full Board on these matters. On an ongoing basis, the Corporate Governance Committee engages in Board succession planning, taking into account input from Board discussions and from the Board and committee evaluation process regarding the specific backgrounds, skills and experience that would contribute to overall Board and committee effectiveness.
In 2017, the Corporate Governance Committee began a long-term board refreshment plan. The Corporate Governance Guidelines require that directors retire no later than the annual meeting of shareholders coinciding with or 114,928,770 shares, present in personfollowing his or by proxy,her 72nd birthday. As a result, within the next five years, five directors are neededexpected to holdretire from the Annual Meeting. We urge youBoard. To assist with board refreshment planning, the Corporate Governance Committee engaged Russell Reynolds Associates, Inc. to vote by proxy even if youprovide advisory services related to board succession planning and to assist with the recruitment of director candidates. The plan includes a needs assessment and an interview with each director to attendunderstand his or her perspective on Cigna’s strategy, the Annual Meeting. This will help us know that enough votes will be present to holdculture of the meeting.
How many votes are needed to approve each proposal and what are the effects of abstentions or broker non-votes?
The following table summarizes the vote threshold required for approval of each proposalBoard and the effectBoard’s relationship with management, and to seek the Board’s views on the skills that may be relevant in the coming years and in light of abstentions, uninstructed shares held by brokers (which result in broker non-votes whenupcoming retirements. The Corporate Governance Committee is focused on identifying candidates that possess skills and qualifications that will support the Company’s short- and long-term strategy, while being mindful of the skills that the retiring directors bring to the Board and the ongoing significant complexity and uncertainty within the health care industry. The goal of the refreshment plan is to balance the knowledge that results from long-term service on the Board with the new skills and experience that results from adding new directors to the Board, at a beneficial owner of shares held in street name does not provide voting instructionspace that allows the Board to maintain its high-performing and as a result, the institution that holds the shares is prohibited from voting those shares on certain proposals) and signed but unmarked proxy cards.diverse culture.
| | | | | | | | | Proposal
NumberCigna 2018 Notice of Annual Meeting of Shareholders and Proxy Statement
| | | Item
9 | Vote Required for
Approval of Each Item
|
| CORPORATE GOVERNANCE MATTERS |
Other Practices and Policies Related to Director Service In addition to working to ensure that the Board is comprised of diverse and qualified individuals, the Board has adopted the following governance policies and practices that contribute to a well-functioning Board. | | | Limits on Public Company Directorships | Abstentions
| Uninstructed Shares/Effect
To ensure each director is able to devote sufficient time and attention to his or her responsibilities as a board member, the Board has established the following limits on outside directorships: • Each director who also is a chief executive officer of Brokera public company may not serve on more than one other public company board in addition to Cigna’s Board and the board of his or her employer (for a total of three public company directorships); and Non-votes
| Signed but Unmarked
Proxy Cards• Each director who is not a chief executive officer of a public company may serve on no more than four boards of other public companies (for a total of five such directorships).
All of our directors are in compliance with these limits on outside directorships. | 1Change in Director’s Principal Position
| Election of Directors
| Majority of votes cast
| No effect
| Not voted/
No effectIf a director changes his or her principal employment position, that director is required to tender his or her resignation from the Board to the Corporate Governance Committee. The Committee will then recommend to the Board whether to accept or decline the resignation.
| Voted “for”
| 2Mandatory Retirement Age
| | Advisory Approval
A director is required to retire no later than the annual meeting of Cigna’s Executive Compensation | Majority of shares present and entitled to vote
| Counted as “against”
| Not voted/shareholders coinciding with or following his or her 72nd birthday.
No effect
| Voted “for”
| 3Continuing Education for Directors
| Ratification of Appointment of Independent Auditor
| Majority of shares present
The Board is regularly updated on Cigna’s businesses, strategies, customers, operations and entitledemployee matters, as well as external trends and issues that affect the Company. Directors also are encouraged to vote | Counted as “against”
| Discretionary vote by broker
| Voted “for”
| 4
| Approval ofattend continuing education courses relevant to their service on Cigna’s Amended and Restated Executive Incentive Plan
| Majority of shares present and entitled to vote
| Counted as “against”
| Not voted/
No effect
| Voted “for”
| 5
| Approval of the Declassification ofBoard at Cigna’s expense. Cigna regularly makes the Board aware of Directors
| 80%continuing education opportunities that may be of shares outstanding
| Counted as “against”
| Not voted/interest. The Corporate Governance Committee oversees the continuing education practices, and the Company is kept apprised of director participation.
Counted as “against”
| Not voted
|
How do I vote if I hold shares as a record holder?BOARD OF DIRECTORS’ NOMINEES
If your nameUpon the recommendation of the Corporate Governance Committee, the Board is registered on Cigna’s shareholder records asnominating the owner of shares, you are the “record holder.” If you hold shares as a record holder, there are four ways that you can vote your shares, described below. Please note that you cannot vote using the notice of Internet availability of proxy materials. The notice identifies the itemsten directors listed below forre-election to be voted onone-year terms to expire at the Annual Meeting and describes how to vote, but you cannot vote by marking the notice and returning it.
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Over the Internet. Vote at http://www.proxyvoting.com/ci. The Internet voting system is available 24 hours a day until 11:59 p.m. Eastern time on Tuesday, April 24, 2012. Once you enter the Internet voting system, you can record and confirm (or change) your voting instructions.
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By telephone. Use the telephone number shown on your proxy card. The telephone voting system is available 24 hours a day in the United States until 11:59 p.m. Eastern time on Tuesday, April 24, 2012. Once you enter the telephone voting system, a seriesnext annual meeting of prompts will tell you how to record and confirm (or change) your voting instructions.
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By mail. If you received a proxy card, mark your voting instructions on the proxy card, and sign and date it. Then, return the proxy card in the postage-paid envelope provided. If you only received a notice and not a paper proxy card, the notice includes instructions on how to request and return a paper proxy card for those who would like to vote by mail. For your mailed proxy card to be counted, we must receive it before the polls close at the meeting on Wednesday, April 25, 2012.
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In person. Attend the Annual Meeting, or send a personal representative with an appropriate proxy, in order to vote.
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How do I vote if my Cigna shares are held by BNY Mellon Shareowner Services in an employee stock account?
Employee stock accounts maintained by BNY Mellon Shareowner Services hold restricted stock that has not yet vested, formerly restricted stock that has vested, and shares acquired through an option exercise. If you have these kinds of shares, you are the record holder and you should follow the rules above for voting shares held as a record holder.
How do I vote if my Cigna shares are held by a bank, broker or custodian other than BNY Mellon?
If your shares are held by a bank, broker, or other custodian (commonly referred to as shares held “in street name”), the holder of your shares will provide you with a copy of this proxy statement, a voting instruction form and directions on how to provide voting instructions. These directions may allow you to vote over the Internet or by telephone. Unless you provide voting instructions, your shares will not be voted on any matter except for ratifying the appointment of our independent auditors. To ensure that your shares are counted in the election of directors and the other important matters being voted on at the Annual Meeting, we encourage you to provide instructions on how to vote your shares.
Can I vote if I have money in the Cigna Stock Fund of the Cigna 401(k) Plan or Cigna Health Management 401(k) Plan?
Yes, but you have an earlier deadline for submitting voting instructions. Your voting instructions must be received by 11:59 p.m. Eastern time on Thursday, April 19, 2012. You may vote over the Internet, by telephone, or by mail (as described above), but you may not vote in person at the Annual Meeting. If you have money invested in the Cigna Stock Fund of the Cigna 401(k) Plan or the Cigna Health Management 401(k) Plan, the plan trustees have the legal authority to vote those shares. Under the plans, however, you have pass-through voting rights based on your interest in the Cigna Stock Fund. You may exercise these voting rights by submitting a proxy that reflects your voting instructions. Your voting instructions will be kept confidential under the terms of the plans. If you do not give voting instructions (or they are received after 11:59 p.m. Eastern time on Thursday, April 19, 2012), the trustees will vote your interest in the Cigna Stock Fund of the Cigna 401(k) Plan or the Cigna Health Management 401(k) Plan as instructed by Cigna’s Corporate Benefit Plan Committee.
Can I change my vote?
Yes. If you are a record holder, you may:
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Enter new instructions on either the telephone or Internet voting system before 11:59 p.m. Eastern time on Tuesday, April 24, 2012.
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Send a new proxy card with a later date than the card submitted earlier. We must receive your new proxy card before the polls close at the meeting on Wednesday, April 25, 2012.
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Write to the Corporate Secretary at the address listed on page 16. Your letter should contain the name in which your shares are registered, the date of the proxy you wish to revoke or change, your new voting instructions, if applicable, and your signature. Your letter must be received by the Corporate Secretary before the Annual Meeting begins on Wednesday, April 25, 2012.
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Attend the Annual Meeting on Wednesday, April 25, 2012 and vote in person (or send a personal representative with a valid proxy).
If you hold your shares in street name, you may:
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Submit new voting instructions in the manner provided by your bank, broker or other custodian; or
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Contact your bank, broker or other custodian of your shares to request a “legal proxy” in order to vote your shares in person at the Annual Meeting.
Is my vote confidential?
If you want your vote to be confidential, you must indicate that choice when you submit your proxy. If you choose confidential voting, your voting records will not be disclosed to us except as required by law or in contested Board elections.
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Who will count the votes?
BNY Mellon Shareowner Services has been appointed Inspector of Election for the Annual Meeting. The Inspector will determine the number of shares outstanding and the voting power of each share, the shares represented at the Annual Meeting, the existence of a quorum, and the validity of any proxies and ballots, and will count all votes and ballots.
How do I attend the Annual Meeting? What do I need to bring?
If you are a shareholder of record, your admission card for the Annual Meeting is the notice you received in the mail stating that the proxy materials are available online, or, if you received paper copies of the proxy materials, your admission card is the proxy card included with those materials. You will need to bring your notice or proxy card with you to the meeting.
If you own shares in street name, you will need to bring your most recent brokerage statement or a letter from your bank, broker or other custodian with you to the meeting so that we can verify your ownership of common stock and admit you to the meeting. You will not be able to vote your shares at the Annual Meeting without a legal proxy from the record holder as described above.
Regardless of how you hold your shares, you must bring a valid photo ID to be admitted to the meeting. Please note that no cameras, recording equipment, electronic devices, large bags, briefcases or packages will be permitted in the Autorino Great Hall Theater at the Bushnell Performing Arts Center.
Who pays for the proxy solicitation and how will Cigna solicit votes?
Cigna pays the cost of preparing the Company’s proxy materials and soliciting your vote. Proxies may be solicited on our behalf by our directors, officers, employees and agents by telephone, electronic or facsimile transmission or in person. We will enlist the help of banks and brokerage houses in soliciting proxies from their customers and reimburse them for their related out-of-pocket expenses. In addition, we have engaged Georgeson, Inc. (Georgeson) to assist in soliciting proxies. Cigna will pay Georgeson a fee of approximately $15,000 and reimburse Georgeson for its reasonable out-of-pocket expenses associated with this work.
How do I find out the Annual Meeting voting results?
The voting results of the Annual Meeting will be published no later than four business days after the Annual Meeting on a Form 8-K filed with the Securities and Exchange Commission. The Form 8-K will be available online at http://www.cigna.com/aboutus/sec-filings.
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INFORMATION ABOUT ITEM 1.
ELECTION OF DIRECTORS
At the Annual Meeting, four directors are seeking election for terms expiring in 2015. Cigna’s Board of Directors currently consists of 11 members divided among three classes, each with a three-year term.
shareholders. All nominees have consented to serve, and the Board does not know of any reason why any nominee would be unable to serve. If a nominee becomes unavailable or unable to serve before the Annual Meeting, the Board canmay either reduce its size or designate a substituteanother nominee. If the Board designates a substitute,nominee, your proxy will be voted for the substitute nominee. At the recommendation of its Corporate Governance Committee, the Board is nominating the following four directors for re-election:
•
John M. Partridge
•
James E. Rogers
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Joseph P. Sullivan
•
Eric C. Wiseman
Below are brief biographies, skills and qualifications for each of the fournominees. Each of the director nominees and for eachcurrently serves on the Board. The Board believes that the combination of the directors continuing in office. Following each director’s biography is a description of the director’s key qualifications,various experiences, skills and experiencequalifications represented contributes to an effective and well-functioning Board and that in addition tothe nominees possess the qualifications, based on the criteria and characteristics described on page 15 under “Director Selection Criteria,” are important in lightabove, to provide meaningful oversight of Cigna’s business and structure. The Company believes that having a Board with both breadth and depth of experience allows Cigna’s directors to most capably, efficiently and productively oversee and guide the Company’s strategy and operations. The Board of Directors’ Nominees for Terms to Expire in April 2015strategy.
| | | | | | | | | | | | | | | | | | | | The Board of Directors unanimously recommends that shareholders vote FOR the nominees listed below. | | | | | | | | | | | | | | | | | | | |
| | | 10 | | Cigna 2018 Notice of Annual Meeting of Shareholders and Proxy Statement |
 John M. Partridge (62)
Mr. Partridge has been a Director of Cigna since 2009.
Mr. Partridge has served as President of Visa Inc. (a consumer credit company) since October 2009 and served as Chief Operating Officer from 2007 to 2009. He joined VISA USA in October 1999 and served as President and Chief Executive Officer of Inovant (a VISA subsidiary) from 2000 to 2007 and also served as Interim President of VISA USA in 2007. His current term as a Director of Cigna began in 2009 and expires in 2012.
Mr. Partridge brings to Cigna his extensive experience in the financial services industry, including positions with Wells Fargo, Credicorp, Unum and VISA. He has served in a number of executive positions with oversight of financial operations, merger and acquisition activities and corporate restructurings. He also contributes his experience as a business executive with Chief Information Officer responsibilities and international business leadership. Further, Cigna values his experience managing information technology investments in support of business objectives gained through each of his executive leadership positions.
 James E. Rogers (64)
Mr. Rogers has been a Director of Cigna since 2007.
Mr. Rogers has served as Chairman of Duke Energy Corporation (an electric power company) since 2007 and as the President, Chief Executive Officer and a director since 2006. He was formerly the Chairman, President and Chief Executive Officer of CINERGY Corp. (which merged with Duke Energy Corporation in 2006) from 1994 until 2006. Mr. Rogers has been a Director of Applied Materials, Inc. since 2008 and served as a director of Fifth Third Bancorp from 1995 until 2009. He received recognition from the National Association of Corporate Directors as an NACD Directorship 100 “Class of 2011” member. His current term as a Director of Cigna began in 2009 and expires in 2012.
As the current Chief Executive Officer of a large, public company in the highly-regulated energy industry, Mr. Rogers’s extensive management expertise and regulatory and public policy experience are highly valuable to Cigna. In addition, he contributes his insights on board leadership developed through his role as Chairman of the Board of a large, public company and a long tenure of service on several boards of other large, public companies.
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 Joseph P. Sullivan (69)
Mr. Sullivan has been a Director of Cigna since 2010.
Mr. Sullivan has been a private investor since 2003. He was Chairman and Chief Executive Officer of Protocare, Inc. (a clinical trials and pharmaceutical industries consulting firm) from 2000 to 2003. Mr. Sullivan has been a Director of Amylin Pharmaceuticals, Inc. since 2003; a Director of HCP, Inc. since 2004 and a Director of MPG Office Trust, Inc. since 2009. He has also served as Chairman of the Board of Advisors of RAND Health since 2001. His current term as Director of Cigna began in 2010 and expires in 2012.
Mr. Sullivan brings his extensive senior leadership experience in the health industry to his role on the Cigna Board, having served as the Chairman and Chief Executive Officer of Protocare, Inc. He also brings health policy experience gained as Chairman of the Board of Advisors of RAND Health. In addition, he possesses a strong understanding of the function and role of the Board developed through varied Board experience, including service on the boards of companies within the health care and pharmaceutical industries.
 Eric C. Wiseman (56)
Mr. Wiseman has been a Director of Cigna since 2007.
Mr. Wiseman has served as Chairman of VF Corporation (an apparel company) since August 2008, as Chief Executive Officer since January 2008, and as President and a Director since 2006. He served as Chief Operating Officer of VF Corporation from 2006 to 2007; Executive Vice President, Global Brands from 2005 to 2006; Vice President and Chairman, Sportswear and Outdoor Coalitions from 2004 until 2005; and Vice President and Chairman, Global Intimates and Sportswear Coalition from 2003 until 2004. Mr. Wiseman has been a Director of Lowe’s Companies, Inc. since 2011. His current term as a Director of Cigna began in 2009 and expires in 2012.
Mr. Wiseman brings to Cigna leadership experience from his role as Chairman and Chief Executive Officer of a large, public company. Mr. Wiseman also has significant and varied management expertise, developed in roles of increasing responsibility at VF Corporation. His familiarity with consumer marketing, brand initiatives and market trends and the challenges of operating a global business, as well as his strategic planning experience, are highly valuable to Cigna’s Board and in shaping the direction and strategy of the Company.
The Board of Directors unanimously recommends that shareholders vote FOR the nominees listed above.
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Directors Who Will Continue in Office
 David M. Cordani (46)
Mr. Cordani has been a Director of Cigna since 2009.
| CORPORATE GOVERNANCE MATTERS |
| | | | | |  | | | DAVID M. CORDANI President, Chief Executive Officer
and Director of Cigna AGE: 52 DIRECTOR SINCE: 2009 COMMITTEES: Executive |
Mr. Cordani has served as Cigna’s Chief Executive Officer since December 2009 and as President since June 2008. He served as Chief Operating Officer from June 2008 until December 2009; President, Cigna HealthCare from 2005 until 2008; and Senior Vice President, Customer Segments & Marketing, Cigna HealthCare from 2004 until 2005. He has been employed by Cigna since 1991. His current term asHe is a Director of Cigna began in 2010 and expires in 2013.
As the only member of the Company’s senior management whoBusiness Roundtable and serves on the U.S.-India Business Council Board of Directors,Directors. In 2017, he was also named Chairman of the U.S. Chamber of Commerce’s U.S.-Korea Business Council. In 2016, Mr. Cordani provides significant global health services industry experiencereceived the Leadership in the Nation’s Interest award from the Committee for Economic Development, a nonprofit, nonpartisan,business-led public policy organization. Mr. Cordani was named one of Fortune Magazine’s Top Business Persons of the Year in 2015. Mr. Cordani received his Bachelor of Business Administration from Texas A&M University and unique expertise onhis MBA from the Company’s products and services delivered across multiple linesUniversity of business, developed through his 20-year tenure with the Company. The Board of Directors also benefits from Hartford.
Other Public Company Directorships: General Mills, Inc. (2014-Present) Business Leader.Mr. Cordani’sCordani has extensive executive leadership and management experience, gainedincluding through holding various positions of increasing responsibility at Cigna, particularly his leadership roles within Cigna’s Health Care business segmentcurrent role as President and his roles as Chief Executive Officer President andof Cigna. Mr. Cordani has spearheaded Cigna’s transformation into a leading global health service company, more than doubling the size of the business since 2009. His prior role as Chief Operating Officer which encompassalso encompassed broad responsibility for Cigna’s global business and corporate functions.  Eric J. Foss (53)
Finance.Mr. Cordani served as Business Financial Officer for Cigna’s healthcare division and in senior roles in corporate accounting and planning. He was formerly a CPA with public accounting experience at Coopers & Lybrand. Healthcare and Delivery Systems.Mr. Cordani’s long tenure with Cigna, as President and Chief Executive Officer and previously as President of the Cigna HealthCare business segment provides him with unique perspective of the evolution of the healthcare service sector and the innovation of health delivery models. Information Technology.Mr. Cordani manages Cigna’s information technology investments in support of business and strategic objectives. Marketing and Consumer Insights. As Chief Executive Officer, he leads the development and execution of Cigna’sGostrategy to deliver value in more than 95 million customer relationships around the world. Regulated Industry/Public Policy. Mr. Cordani is actively engaged in public policy related to the highly regulated healthcare industry and other global business markets. | | | | | |  | | | ERIC J. FOSS Chairman, President and Chief
Executive Officer of ARAMARK
Corporation AGE: 59 DIRECTOR SINCE: 2011 COMMITTEES: Corporate
Governance, People Resources |
Mr. Foss has been Chairman of the Board of ARAMARK Corporation, a Directorpublicly traded provider of Cignafood services, facilities management and uniform services, since July 2011. Mr. FossFebruary 2015, and President and Chief Executive Officer since May 2012. He served as Chief Executive Officer of Pepsi Beverages Company, (beveragea beverage manufacturer, seller and distributor)distributor and a division of PepsiCo, Inc., from 2010 until December 2011. He served aswas the Chairman and Chief Executive Officer of The Pepsi Bottling Group, Inc. from 2008 until 2010; President and Chief Executive Officer from 2006 until 2007;2008; and Chief Operating Officer from 2005 until 2006. Mr. Foss has served on the Boardreceived his Bachelor of Science degree from Ball State University.
Other Public Company Directorships: ARAMARK Corporation (2012-Present), UDR, Inc. since 2003. His term as a Director of Cigna began in 2011 and expires in 2014.(2003-2015), The Pepsi Bottling Company (2006-2010) Business Leader.Mr. Foss has significantextensive leadership experience through his roles as Chairman, President and varied management expertise, developed in rolesCEO of increasing responsibility overARAMARK Corporation, combined with his30-year career at Pepsi. His familiarity with consumer marketing, brand initiativesPepsi Beverages Company and market trendsThe Pepsi Bottling Group, including his role as Chairman and CEO. Finance.As Chairman, President and CEO of ARAMARK and as CEO of Pepsi Beverages Company and The Pepsi Bottling Group, his experience includes oversight of financial operations, financial reporting, merger and acquisition activities and corporate restructurings. He led ARAMARK’s initial public offering in 2013 and was instrumental in The Pepsi Bottling Group’s initial public offering and oversaw its acquisition by PepsiCo. International/Global.Mr. Foss’ responsibilities at ARAMARK, Pepsi Beverages Company and The Pepsi Bottling Group included international business leadership, managing the challenges of operating a global business as well asand strategic planning. At ARAMARK, he has oversight of operations in 20 countries, and throughout his strategic planning experience, are highly valuable to Cigna’s Boardtenure at Pepsi Beverage Company and in shaping the direction and strategy of the Company.  Isaiah Harris, Jr. (59)The Pepsi Bottling Group, had responsibilities for global operations including international assignments.
Marketing and Consumer Insights.Mr. Foss’ service as CEO of Pepsi Beverages Company and The Pepsi Bottling Group provided him experience as an executive officer of a consumer oriented company. | | | | | | | | | Cigna 2018 Notice of Annual Meeting of Shareholders and Proxy Statement | | | 11 | |
Mr. Harris has been a Director of Cigna since 2005.
| CORPORATE GOVERNANCE MATTERS |
| | | | | |  | | | ISAIAH HARRIS, JR. Former President and Chief
Executive Officer of AT&T
Advertising & Publishing — East AGE: 65 DIRECTOR SINCE: 2005 COMMITTEES: Executive (Chair) |
Mr. Harris has served as Cigna’s Chairman of the Board since December 2009 and served as Vice-Chairman of the Board from July 2009 through December 2009. Mr. Harris served as President and Chief Executive Officer of AT&T Advertising & Publishing — East (formerly BellSouth Advertising & Publishing Group,Group), a communications services company)company, from 2005 until his retirement in 2007; and as President, BellSouth Enterprises, Inc. from 2004 until 2005.2005 and as President, Consumer Services, BellSouth Corporation from 2000 until 2004. Mr. Harris has served as an Independent Trustee of Wells Fargo Advantage Funds, a provider of mutual funds, since 2008 and served as a Director of Deluxe Corporation from 2004 until 2011.2008. Mr. Harris was recognized bynominated as NYSE 2014 Chairman of the Outstanding Directors ExchangeYear. Mr. Harris received his Bachelor of Science degree from Iowa State University and his MBA from the University of Minnesota.
Other Public Company Directorships: Deluxe Corporation (2004-2011) Business Leader. In his executive business leadership roles, including as a 2010 Outstanding Director. His current term as a DirectorCEO of Cigna beganAT&T Advertising and Publishing, Mr. Harris managed large organizations, developed and executed business strategies and led transformational change initiatives in 2010both domestic and expires in 2013.international operations. Finance.Mr. Harris’ extensive businessfinance experience includes 19 years of corporate finance and operational experience in multi-national organizations, including as Vice President of Finance, BellSouth Corporation, preceded by 13 years as a certified public accountantCPA with KPMG. In his executive business leadership rolesKPMG LLP. Through service on the board of directors of Deluxe Corporation, a provider of customized products and services including financial services and direct checks, and as a trustee of Wells Fargo Advantage Funds, he managed large organizations, developedhas insight into financial services-related issues. Marketing and executed business strategies and led transformational change initiatives.Consumer Insights.As President, Consumer Services, BellSouth Corporation, Mr. Harris also bringsfocused on marketing communication services to Cigna leadership experience fromend-user consumers. Regulated Industry/Public Policy.Throughout his role as Chief Executive Officercareer at AT&T Advertising & Publishing, Mr. Harris navigated a heavily regulated and dynamic legal environment. | | | | | |  | | | JANE E. HENNEY, M.D. Former Senior Vice President,
Provost and Professor of Medicine,
University of Cincinnati College of
Medicine AGE: 70 DIRECTOR SINCE: 2004 COMMITTEES: Corporate
Governance (Chair), Audit,
Executive |
Dr. Henney was appointed to the position of Home Secretary of the National Academy of Medicine, a significant division of a large, public company. He has also servedThe National Academies of Sciences designed to advise the nation on several corporate boards and previously chaired audit, corporate governance and compensation committees.  Jane E. Henney, M.D. (64)
health issues, in April 2014. Dr. Henney has been a Director of Cigna since 2004. Dr. Henney has served as a professorProfessor of Medicine at the University of Cincinnati College of Medicine, (anan educational institution) since 2008.institution, from 2008 until 2012. She served as Senior Vice President and Provost, Health Affairs at the University of Cincinnati Academic Health Center from 2003 until 2008. From 1998 to 2001,Appointed by President Bill Clinton, Dr. Henney served as the first female U.S. Commissioner of Food and Drugs at the U.S. Food and Drug Administration. Dr. Henneyfrom 1998 to 2001. She has been aserved as Lead Independent Director of AmerisourceBergen Corporation, a publicly tradedbio-pharmaceutical company, since 2002 and she2016. Dr. Henney also served as a Director of AstraZeneca PLC from 2001 until 2011.on the China Medical Board since 2004. She received recognition from the National Association of Corporate Directors as an NACD Directorship 100 “Class of 2011”2012” member. Her current term as aDr. Henney is also an NACD Board Leadership Fellow. Dr. Henney received her Bachelor of Science degree from Manchester College and her Doctor of Medicine from Indiana University.
Other Public Company Directorships: AmerisourceBergen Corporation (2002-Present) and Lead Independent Director of Cigna began in 2010(2016-Present), Cubist Pharmaceuticals, Inc. (2012-2015), AstraZeneca PLC (2001-2011) Healthcare and expires in 2013. Delivery Systems.Dr. Henney’s clinical and health policy expertise, particularly her experiencepositions as Medical Doctor, Home Secretary of the Senior Vice President and Provost at a major medical center and asNational Academy of Medicine, Commissioner of Food and Drugs, atand Executive of Academic Health Center provide her with direct experience regarding emerging health care issues and complex health delivery systems. Regulated Industry/Public Policy. As former Commissioner of Food and Drugs and Home Secretary of the National Academy of Medicine, Dr. Henney has extensive insight into the highly regulated health industry in the U.S. Food and Drug Administration, provides significant industry-specific perspective to the Board. She also brings to Cigna her deep understanding of the function and role of the Board of Directors, developed through varied board experience, including service on the boards of companies within the health care and pharmaceutical industries.abroad. | | | 12 | | Cigna 2018 Notice of Annual Meeting of Shareholders and Proxy Statement |
| CORPORATE GOVERNANCE MATTERS |
CIGNA – 2012 Notice of Annual Meeting of Shareholders and Proxy Statement – 14
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 Roman Martinez | | | | | |  | | | ROMAN MARTINEZ IV (64) Mr. Martinez has been a Director of Cigna since 2005.
Private Investor AGE: 70 DIRECTOR SINCE: 2005 COMMITTEES: Audit (Chair),
Executive, Finance |
Mr. Martinez has been a private investor since 2003. In 2003, he retired as Managing Director of Lehman Brothers, an investment banking firm, following a31-year career with the firm. He has been a Directorserved on the Board of Trustees of New York Presbyterian Hospital since 1996. Mr. Martinez received his Bachelor of Science degree from Boston College and his MBA from the Wharton School of the University of Pennsylvania. Other Public Company Directorships:Orbital ATK, Inc. (2015-Present), Alliant Techsystems, Inc. since 2004 and a Director of Bacardi Limited since 2008. His current term as a Director of Cigna began in 2011 and expires in 2014.(2004-2015) Finance.Mr. Martinez has significant financialover ten years of experience developed through his service as an investment banking executive with Lehman Brothers (from 1971 through 2003) and also as a private investor.investor and serves on the Investment Committees of severalnon-profit organizations. He also contributes his deep understanding of the function and role of the Board of Directors, developed through his experience on other boards of directors, including publicly-traded and private corporations, non-profit organizations, andpreviously served on the Investment Advisory Council of the State of Florida.  Donna F. Zarcone (54)31-year tenure with Lehman Brothers where he was involved in a broad spectrum of U.S. and international investment banking activities covering financing, mergers and acquisitions and restructuring advisory assignments as well as financing transactions for governments and corporations.
Healthcare and Delivery Systems.Through his over 20 years serving on the Board of Trustees of New York Presbyterian Hospital, Mr. Martinez developed insights into the issues facing health care systems in a rapidly changing environment, including the provision of care management and delivery systems. | | | | | |  | | | JOHN M. PARTRIDGE Former President of Visa, Inc. AGE: 68 DIRECTOR SINCE: 2009 COMMITTEES: Finance (Chair),
Executive, People Resources |
Mr. Partridge served as President of Visa, Inc., a publicly traded consumer credit company, from 2009 until 2013 and as Chief Operating Officer from 2007 to 2009. He joined Visa USA in October 1999 and served as President and Chief Executive Officer of Inovant (a Visa subsidiary) from 2000 to 2007 and as Interim President of Visa USA in 2007. From 1998 until joining Visa USA, Mr. Partridge served as Senior Vice President and Chief Information Officer of Unum Provident Corp., a publicly traded disability insurance company. From 1989 to 1998, Mr. Partridge was Executive Vice President for Credicorp Inc., a commercial banking, insurance and investment banking company, where he was responsible for consumer banking, technology and operations. Prior to joining Credicorp Inc., Mr. Partridge held various management positions with Wells Fargo Bank. Mr. Partridge has served as Chairman and Chief Executive Officer of Velo Payments, a global smart data network for business disbursements, since March 2017 and as an operating partner of Corsair Capital, a private equity firm focused on the financial services industry, since October 2015. Mr. Partridge received his Bachelor of Science degree from the University of California. Ms. ZarconeOther Public Company Directorships: Global Payments, Inc. (2013-Present)
Business Leader.Mr. Partridge has beenextensive senior leadership experience through his positions with Visa, Inc., Visa USA, Inovant, Unum and Credicorp. Finance. As President and CEO of Inovant, he had direct oversight of financial operations, financial reporting, merger and acquisition activities and corporate restructurings. As President of Visa, he was involved with financial oversight and reporting and strategic transactions. His responsibilities at Credicorp provided significant financial services experience. Information Technology. Mr. Partridge has experience managing and overseeing information technology investments in support of business objectives which he gained through each of his executive leadership positions, including as Chief Information Officer of Unum and as a Directordirector of Global Payments, a provider of electronic transaction processing services. As President of Inovant, he oversaw Visa’s electronic payment processing service. International/Global. As President of Visa, Mr. Partridge’s responsibilities included international business leadership. He also serves as a director of a large public company with extensive international operations. His responsibilities with Credicorp included international assignments. Marketing and Consumer Insights. Through his tenure with Visa, Mr. Partridge focused heavily on consumer credit and oversaw marketing, product, client service, support and processing services. As Executive Vice President of Credicorp, his responsibilities included consumer banking. | | | | | | | | | Cigna 2018 Notice of Annual Meeting of Shareholders and Proxy Statement | | | 13 | |
| CORPORATE GOVERNANCE MATTERS |
| | | | | |  | | | JAMES E. ROGERS Former Chairman, President and
Chief Executive Officer of Duke
Energy Corporation AGE: 70 DIRECTOR SINCE: 2007 COMMITTEES: Audit, Finance |
Mr. Rogers served as Chairman of Duke Energy Corporation, a publicly traded electric power company, from 2007 until 2013 and as the President and Chief Executive Officer from 2006 until 2013. He was formerly the Chairman, President and Chief Executive Officer of CINERGY Corp. (which merged with Duke Energy Corporation in 2006) from 1994 until 2006. Mr. Rogers has served as a senior operating partner of Stonepeak Infrastructure Partners, a private equity firm focused on infrastructure investments since October 2016. Heco-founded and has served as Chairman of Brightlight Foundation, anon-profit provider of globally accessible and affordable energy solutions, since 2011. He has served as Chairman and Chief Executive Officer of Intrepid Energy Partners LLC, an advisory business that specializes in energy sector transactions, since 2014. Mr. Rogers received his Bachelor of Business Administration and his juris doctor from the University of Kentucky. Other Public Company Directorships: Duke Energy Corporation (2007-2013), Applied Materials, Inc. (2008-2015), CINERGY Corp. (1994-2005), Fifth Third Bancorp (1995-2009) Business Leader. Mr. Rogers has extensive senior leadership experience through his positions with Duke Energy and in the utility industry for 25 years. Over the course of his career, he served on the boards of eight Fortune 500 companies. Finance. As President and CEO of Duke Energy, he had oversight of financial operations, financial reporting, merger and acquisition activities and corporate restructurings. As a director of Fifth Third Bancorp, a regional banking corporation, Mr. Rogers developed a deeper understanding of several facets of commercial and consumer financial services. Regulated Industry/Public Policy. Throughout his career at Duke Energy and CINERGY, Mr. Rogers operated in a heavily regulated environment and oversaw and implemented strategic policy initiatives. Before his corporate career, he served as the Deputy General Counsel for the Federal Energy Regulatory Commission and as a partner in the law firm of Akin Gump Strauss Hauer & Feld in Washington, D.C. | | | | | |  | | | ERIC C. WISEMAN Former Executive Chairman,
President and Chief Executive
Officer of VF Corporation AGE: 62 DIRECTOR SINCE: 2007 COMMITTEES: Finance, People
Resources |
Mr. Wiseman served as Executive Chairman of VF Corporation, a publicly traded apparel and footwear company, from August 2008 until October 2017. He served as Chief Executive Officer from January 2008 until December 2016 and President from 2006 until June 2015. He served as Chief Operating Officer of VF Corporation from 2006 to 2008; Executive Vice President, Global Brands from 2005 to 2006; and Vice President and Chairman, Sportswear and Outdoor Coalitions from 2004 until 2005. Mr. Wiseman received his Bachelor of Science degree and MBA from Wake Forest University. Other Public Company Directorships: VF Corporation (2006-2017), Lowe’s Companies, Inc. (2011-Present) Business Leader. Mr. Wiseman has extensive senior leadership experience through his positions with VF Corporation. Finance.As Chairman and CEO of VF Corporation, he has had oversight of financial operations, merger and acquisition activities and corporate restructurings. International/Global. Through leadership positions at VF Corporation, Mr. Wiseman oversaw operations and product sales in over 150 countries. Prior to joining VF Corporation, he held executive leadership roles at Sara Lee Corporation that included international business leadership and international assignments. Marketing and Consumer Insights.Through leadership roles at VF Corporation, Mr. Wiseman oversaw marketing of a variety of brands through all channels of distribution, both domestically and internationally. As a director of Lowe’s, a retail home improvement and appliances company, he focuses onend-user consumer-related issues. | | | 14 | | Cigna 2018 Notice of Annual Meeting of Shareholders and Proxy Statement |
| CORPORATE GOVERNANCE MATTERS |
| | | | | |  | | | DONNA F. ZARCONE President and Chief Executive Officer of The Economic Club of Chicago AGE: 60 DIRECTOR SINCE: 2005 COMMITTEES: Audit, Corporate Governance |
Ms. Zarcone has been the President and Chief Executive Officer of The Economic Club of Chicago, (aa civic and business leadership organization)organization, since February 2012. She served as Interim President of The Economic Club of Chicago from October 2011 until February 2012 and as President and Chief Executive Officer of D. F. Zarcone & Associates LLC, (aa strategic advisory firm)firm, from 2007 until February 2012. Ms. Zarcone served as the President and Chief Operating Officer of Harley-Davidson Financial Services, Inc. (a, a provider of wholesale and retail financing, insurance and credit card programs),programs and a wholly-ownedwholly owned subsidiary of Harley-Davidson, Inc., from 1998 until 2006. She has been a Director of CDW LLC since 2011 and will retire as a Director of The Jones Group, Inc. in May 2012, a role she has held since 2007. She also served as Chairman of the Board of Eaglemark Savings Bank, a financial services provider, from 2002 to 2006. Her current termShe received recognition from the National Association of Corporate Directors as a Directoran NACD Directorship 100 “Class of Cigna began in 2010 and expires in 2013. 2012” member. Ms. Zarcone has extensive experience inis also an NACD Board Leadership Fellow. Ms. Zarcone received her Bachelor of Science degree from Illinois State University and her MBA from the areasUniversity of finance and risk management that she brings to her role on the Cigna Board, having served asChicago Booth School of Business. Other Public Company Directorships: CDW Corporation (2011-Present), The Jones Group (2007-2012) Finance.As an executive at Harley-Davidson Financial Services and as the Chairman of the Board of Eaglemark Savings Bank, an FDIC-regulated entity.entity, Ms. Zarcone oversawend-user consumer financial services matters. She is also a certified public accountantaccountant. As President and has leadership experience inCEO of The Economic Club of Chicago, she monitors social and economic issues facing the U.S. and global markets. Information Technology. As a director of CDW, a leading provider of integrated information technology solutions, Ms. Zarcone oversees issues facing the information technology industry. Marketing and Consumer Insights. As President of Harley-Davidson Financial Services, Ms. Zarcone also bringsoversaw direct marketing initiatives to Cigna her deep understandingend-user consumers for a portfolio of the functionfinancial products. As head of Enthusiast Services at Harley-Davidson, she oversaw brand loyalty initiatives. As a director of The Jones Group, a designer, marketer and rolewholesaler of the Board of Directors, developed through board experience, particularly in the financial services industry.  William D. Zollars (64)end-user consumer-related issues.
Mr. Zollars has been a Director of Cigna since 2005.
| | | | | |  | | | WILLIAM D. ZOLLARS Former Chairman, President and Chief Executive Officer of YRC Worldwide, Inc. AGE: 70 DIRECTOR SINCE: 2005 COMMITTEES: People Resources (Chair), Executive, Corporate Governance |
Mr. Zollars served from 1999 to July 2011 as Chairman, President and Chief Executive Officer of YRC Worldwide, Inc. (a, a holding company whose subsidiaries provide regional, national and international transportation and related services).services. Prior to that, Mr. Zollars served as Directorwas President of Yellow Transportation, Inc., from September 1996 through November 1999. From 1994 to 1996, he was Senior Vice President of Ryder Integrated Logistics. He also held various executive positions with Eastman Kodak. Mr. Zollars received his Bachelor of Arts degree from the University of Minnesota. Other Public Company Directorships: Cerner Corporation (2005-Present), ProLogis Trust (2001-2010; 2011-Present), YRC Worldwide, Inc. (1999-2011) Business Leader. Mr. Zollars’ role as Chairman, President and Chief Executive Officer of YRC Worldwide and various executive leadership positions with Yellow Transportation, Ryder Integrated Logistics and Eastman Kodak provided him extensive senior leadership experience. Finance. As Chairman, President and CEO of YRC Worldwide, Mr. Zollars had oversight of financial operations, merger and acquisition activities and corporate restructurings and led YRC’s comprehensive recovery plan to reduce cost structure and improve operating results, cash flow from 2004 through 2010operations, liquidity and rejoined the Board of ProLogis in 2011. He has served asfinancial condition. Healthcare and Delivery Systems. As a Directordirector of Cerner, Corporation (aa supplier of health care information technology) since 2005. Histechnology, he oversees issues facing the healthcare industry, particularly health information technology. International/Global. As President and CEO of YRC, Mr. Zollars oversaw global operations and strategic planning, and he undertook international assignments at Kodak. | | | | | | | | | Cigna 2018 Notice of Annual Meeting of Shareholders and Proxy Statement | | | 15 | |
| CORPORATE GOVERNANCE MATTERS |
Corporate Governance Policies and Practices Cigna is committed to ensuring strong corporate governance practices on behalf of our shareholders. We believe that strong corporate governance and an independent Board provide the foundation for financial integrity and shareholder confidence. The Corporate Governance Committee annually reviews Cigna’s governance program based on, among other things, developments in corporate governance, feedback received during shareholder engagement, legal or regulatory actions, proxy advisory firm positions, Securities and Exchange Commission (SEC) guidance and New York Stock Exchange (NYSE) requirements. The Board and the Corporate Governance Committee developed the Board Corporate Governance Guidelines (the Guidelines) which set forth the key governance principles that guide the Board. The Guidelines, together with the charters of the Audit, Corporate Governance, Finance, People Resources and Executive Committees, provide a framework of policies and practices for our effective governance. The Board and the Corporate Governance Committee review the Guidelines, and the committees review their respective charters, at least annually and update these governing documents as necessary to reflect changes in the regulatory environment, evolving practices and input from shareholders. The full text of the Guidelines and committee charters are available on our website atwww.cigna.com/about-us/corporate-governance/ and are available to any shareholder who requests a copy.(1) | | | | | | | | | | | | | | | | Corporate Governance Highlights | | | | | | | | | • Independent board of directors with diversity in composition, skills and experience • Independent Chairman of the Board • Regular executive sessions of the Board and its committees without management present • Director elections by majority voting • Annual election of all directors • Proxy access right for shareholders | | | | • Separate Code of Business Conduct and Ethics for the Board • Independent Audit, Corporate Governance, Finance and People Resources Committees • Annual self-evaluations of the Board, its committees and individual directors, including periodic independent third party assessments • Majority of director compensation delivered in Cigna common stock • Meaningful stock ownership guidelines for directors | | | | | | | | | | | |
PROXY ACCESS At our 2017 Annual Meeting, shareholders voted on anon-binding shareholder proposal regarding shareholder proxy access. As we described in our 2017 proxy statement, the Cigna Board was not opposed to proxy access, but at that time, due to the merger agreement with Anthem, Inc. (Anthem), we were restricted in our ability to amend our bylaws or propose or commit to any bylaw amendment. The Board strongly believed that any proxy access framework should be thoughtfully and carefully considered. The Board committed to conducting a full evaluation of proxy access in 2017, with a goal of implementing a proxy access bylaw amendment on terms that reflected input from our shareholders and that the Board believed were in Cigna’s shareholders’ best interests in advance of the 2018 Annual Meeting. In advance of the 2017 Annual Meeting, at the direction of the Board, Cigna’s Office of the Corporate Secretary reached out to discuss the shareholder proposal with our 50 largest shareholders (representing approximately 65% of outstanding shares) and engaged with holders of approximately 40% of shares outstanding. During this engagement, shareholders provided feedback on their views of the shareholder proposal and proxy access generally. At the 2017 Annual Meeting, just over 50% of the votes cast supported the proxy access shareholder proposal. Following the 2017 Annual Meeting and after the Company was no longer subject to the restrictions of the merger agreement with Anthem, the Board resumed its evaluation of proxy access. As part of this review, the Corporate Governance Committee evaluated and considered the terms of the bylaw proposed by the shareholder proponent as compared to current termmarket practice, other bylaw features not specified by the shareholder proponent that are necessary to provide for a balanced and effective proxy access framework, the views of proxy advisory firms and the input of Cigna’s shareholders received in connection with Cigna’s outreach efforts. In the fall of 2017, at the direction of the Board, the Office of the Corporate Secretary engaged again with our largest shareholders to (1) Throughout this Proxy Statement, we reference information available on our website. The information on our website is not, and shall not be deemed to be, part of this Proxy Statement or incorporated herein or into any of our other filings with the SEC. | | | 16 | | Cigna 2018 Notice of Annual Meeting of Shareholders and Proxy Statement |
| CORPORATE GOVERNANCE MATTERS |
further discuss proxy access and potential terms for a proxy access bylaw, as well as other areas of interest, such as board refreshment and corporate responsibility. The Office of the Corporate Secretary reached out to our top 20 shareholders (representing approximately 50% of outstanding shares) as well as the shareholders we had engaged with in the spring of 2017 that had requested further discussions in connection with the Board’s consideration of the implementation of a proxy access bylaw. Holders of approximately 33% of shares outstanding engaged with the Office of the Corporate Secretary as part of this shareholder outreach effort. Shareholders indicated their support for a proposed proxy access bylaw incorporating a 3% ownership requirement, a three-year holding requirement, a cap of 20 shareholders that may form a group to meet the ownership requirement, and a right to nominate directors in an amount equal to the greater of two or 20% of the Board — terms that are consistent with current market practice. Several of the shareholders that had voted for the shareholder proposal at the 2017 Annual Meeting indicated that their vote was not intended as a Directorvote on the specific terms proposed, but rather a vote in favor of Cigna beganthe Company’s adoption of proxy access generally. Many shareholders also provided input regarding other terms of proxy access. The Corporate Governance Committee discussed and carefully considered all feedback when constructing the proxy access bylaw and, following this review, the Corporate Governance Committee recommended and the Board approved amendments to ourBy-Laws to implement proxy access in 2011 and expires in 2014. Mr. Zollars contributes to Cigna’s Board his extensive senior management expertise, particularly from his role as the Chairman and Chief Executive Officer of a public corporation.December 2017. As a result, a shareholder or a group of his 15up to 20 shareholders owning 3% or more of Cigna’s outstanding common stock continuously for at least three years may nominate and include in the Company’s proxy materials director nominees constituting up to the greater of service on20% of the boardsBoard or two individuals, provided the shareholder(s) and the nominee(s) satisfy the requirements specified in theBy-Laws. The Board believes that this proxy access bylaw framework provides meaningful proxy access rights, reflects generally accepted governance practices around proxy access and is consistent with the overall feedback received as part of publicly-held corporations, including companies withinour shareholder engagement.
DIRECTOR INDEPENDENCE Cigna believes in the health care industry, he understands the function and roleimportance of a board comprised largely of independent,non-employee directors. The current Board includes ninenon-employee directors. On an annual basis, the Board, through its Corporate Governance Committee, reviews relevant relationships between directors, their immediate family members and the Company, consistent with Cigna’s independence standards. Cigna’s independence standards, which are detailed in the Guidelines, are consistent with the independence requirements set forth in the NYSE’s listing standards. To be independent under Cigna and NYSE standards, the Board must affirmatively determine that a director has no material relationships with the Company directly or as an officer, shareholder or partner of an organization that has a relationship with the Company. In making its assessment, the Board considers all relevant facts and circumstances, including the nature of transactions with such organizations and/or the amount of such transactions (in aggregate or as a percentage of the organization’s revenues or assets). The Board also considers that, in the ordinary course of business, the Company may sell products and services to, and/or purchase products and services from, organizations affiliated with our directors and adds strategic planning, risk managementmay hold investments (generally, debt securities) in organizations affiliated with our directors. Based on its review of director relationships, the Board has affirmatively determined that there are no material relationships between thenon-employee directors and leadership skills. CIGNA – 2012 Notice of Annual Meeting of Shareholdersthe Company and Proxy Statement – 15
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CORPORATE GOVERNANCE
The Roleallnon-employee directors (Dr. Henney, Ms. Zarcone and Messrs. Foss, Harris, Martinez, Partridge, Rogers, Wiseman and Zollars) are independent as defined in both Cigna’s Guidelines and the NYSE listing standards. In addition, at the committee level, all members of the BoardAudit, Corporate Governance, Finance and Board LeadershipPeople Resources Committees are independent and the members of the Audit Committee and the People Resources Committee meet the NYSE’s heightened independence requirements for service on those committees.
BOARD LEADERSHIP STRUCTURE The Board’s main dutyBoard is committed to advance the interestslong-term growth of the Company’s shareholders by engaging in activebusiness and independent oversightthe successful execution of our mission to improve the health, well-being and sense of security of the management of Cigna’s business affairs and assets. In order topeople Cigna serves around the globe. To fulfill its responsibilities to the Company’sour shareholders, Cigna’s Board, both directly and through the Board’sits committees, regularly engages with management, ensures management accountability and reviews the most critical issues that face Cigna, such as succession planning, approvalCigna. The Board is committed to meeting the dynamic needs of the Company’s strategyCompany and mission, executionfocusing on the interests of its shareholders and, as a result, regularly evaluates and adapts its composition, role and relationship with management. Independent Chairman of the Company’s financial and strategic goals, oversightBoard We currently separate the roles of risk management, and determination of executive compensation. The roles ofthe Chairman of the Board and Chief Executive Officer (CEO) are separated to allow an independent Chairman to leadCEO. Our CEO sets the governance aspects ofstrategic direction for the Company, working with the Board, of Directors. Theand providesday-to-day leadership, while our Chairman leads the Board believes that this leadership structure is appropriate for Cigna in the current environment,performance of its duties and aids the Company in adhering to sound corporate governance principles. Cigna’s CEO, who reports to the Board of Directors, is responsible for the execution of Cigna’s strategic goals and management of the Company’s senior leaders. The independent Chairman serves as the principal representative of the Board, presides over meetings of the Board of Directors and meetings of Cigna shareholders, drives the meeting agendas and acts as the liaison between the Boardindependent directors and the Company’s senior management. Together, the CEO and Chairman of the Board collaborate on agendas, ensureCEO. We believe that management is responsive to the Board’s concerns and questions and ensure that members of management are available to directors, as appropriate. Other key responsibilities of thehaving an independent Chairman include:
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facilitating discussion among the independent directors on key issues and concerns and advising the CEO on the flow of information between the Board and Cigna’s management;
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advising the CEO on issues of concern to the Board and, together with the independent members of the Board, evaluating the CEO’s performance;
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leadingassists the Board in CEO succession planning;
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developingensuring independent oversight of the schedule of Board meetings together with the CEO and conferring regularly with the CEOCompany and the Committee Chairsmanagement team. The Board regularly assesses the appropriateness of this leadership structure and has concluded that this structure best suits Cigna’s needs at this time.
| | | | | | | | | Cigna 2018 Notice of Annual Meeting of Shareholders and Proxy Statement | | | 17 | |
| CORPORATE GOVERNANCE MATTERS |
In February 2018, the Boardre-elected Isaiah Harris, Jr. to develop meeting agendas; and •
engaging inserve as our independent Chairman. The Board elects the director recruiting process, including focusing on diversity of director candidates and meeting with all qualified candidates.
The independent Chairman of the Board is elected to a three-year term, expiring at the annual meeting occurring at the end of the third year. Mr. Harris’ current term as Chairman will expire in April 2021, subject to his annual election to the Board by shareholders. The full Board evaluates the Chairman’s performance on an annual basis. In the last year of a term, the evaluation is the first step in the nomination process. During the third quarter preceding the end of the Chairman’s term, the Corporate Governance Committee (CGC) conducts the nomination process, which culminates in the Board’s formal nomination of the Chairman of the Board in the first quarter.
Board Composition
Cigna has a strong commitment to a Board composed principally of independent, non-employee directors. Currently, the Company’s CEO is the only employee director who serves on the Board. Cigna’s Board is committed to meeting the evolving needs of the Company and its shareholders and, as a result, evaluates and adapts its role, its relationship with management, and its composition on a regular basis.
Criteria and Process for Nominating Directors
Director Selection Criteria
The CGC, in consultation with the Board, has developed and periodically reviews director selection criteria and takes into consideration the responsibilities of Cigna directors as part of the director recruitment process. Directors must:
•
represent the interests of shareholders;
•
demonstrate good judgment and strong commitment to ethics and integrity;
CIGNA – 2012 Notice of Annual Meeting of Shareholders and Proxy Statement – 16
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•
possess the ability to analyze complex business and public policy issues and provide relevant input regarding the Company’s business strategy;
•
be free of conflicts of interest;
•
have demonstrated a high degree of achievement in their respective fields; and
•
contribute to the overall diversity (in its various forms) of the Board of Directors.
The CGC and the Board also strive to ensure that the Board consists of individuals who together possess a wide range of capabilities and professional attributes, among them:
•
financial acumen;
•
ability to assess risk and its impact on shareholder value;
•
insight into the process of developing employees, as well as developing and delivering high-quality products and services that respond directly to customer needs and expectations;
•
awareness of consumer market trends;
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familiarity with the challenges of operating businesses in the international marketplace;
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insight into government relationships and processes;
•
familiarity with channels of distribution; and
•
familiarity with processes for developing and implementing effective human resources policies and practices.
Director Selection Policy and Process
The CGC reviews the background of potential candidates and presents them to the Board for consideration prior to selection. Director candidates are then interviewed by the Chair of the CGC, the Chairman of the Board and other members of the Board, as appropriate. When considering director candidates and the current composition of the Board, the CGC and Board consider how each nominee’s background, experiences, skills, prior board service, board and committee engagement and unique perspective will contribute to the diversity of the Board of Directors as a whole. The CGC assesses the Board’s compositionbasis as part of the annual self-evaluation of the Board (described on page 17).evaluation.
The Board may nominate for election and appoint to fill vacant or new Board positions only those persons who agree to adhere to the Company’s majority voting standard. The standard requires a director to tender his or her resignation to the Company in case of failure to achieve more “for” votes than “against” votes at any future meeting at which he or she faces an uncontested election. The Board has discretion to accept or reject the tendered resignation after the election.
| | | | | | | | | | | | | | | | | Chairman Responsibilities | | | | | | | • Serve as principal representative of the Board • Facilitate discussion among independent directors on key issues • Advise the CEO on issues of concern for the Board • Develop agenda for Board meetings, in consultation with the CEO and other directors | | | | | | • Act as liaison between Board and management • Lead the Board in CEO succession planning • Preside over Board and shareholder meetings • Engage in the director recruitment process • Represent the Company in interactions with external stakeholders, as appropriate | | | | | | | | | | | | | |
That tender of resignation cannot be withdrawn. If a nominee does not receive a majority of votes for his or her election, the CGC will act on an expedited basis to determine whether to accept the resignation and will submit the recommendation for prompt consideration by the Board. A director whose resignation is under consideration would abstain from participating in any decision about that resignation.
Consideration of Shareholder Suggestions for Director Selection
The CGC is responsible for advising and reporting to the Board on the Board’s membership and director selection. The CGC welcomes shareholder suggestions for Board nominees. A shareholder who wishes to suggest a Board nominee should submit the candidate’s name, together with appropriate biographical information and qualifications, to the CGC. Correspondence may be addressed to:
Corporate Secretary
Cigna Corporation
Two Liberty Place, 16thFloor
1601 Chestnut Street
Philadelphia, PA, 19192-1550
The CGC generally considers nominees in October for the following annual meeting. Accordingly, suggestions for Board nominees should be submitted by October 1st to ensure consideration for the following annual meeting. Shareholder suggestions for Board nominees are evaluated using the same criteria described in the Director Selection Criteria section on page 15.
Third-Party Director Search Firm
The CGC retains a third-party search firm to assist the CGC in identifying and evaluating candidates for Board membership who best match Cigna’s director recruitment criteria as described on page 15. Heidrick & Struggles has served as the CGC’s director recruiting firm since December 2010, identifying qualified candidates for Board membership.
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Cigna Corporation’s Corporate Governance Policies
The Board and its committees regularly review their corporate governance policies and practices and make changes from time to time to implement developing best practices that the Board has determined are appropriate for Cigna. Many of these policies and practices are embodied in the Board Practices and the charters of the Audit, Corporate Governance, Finance, People Resources and Executive Committees. The Board Practices, committee charters and Cigna’s Code of Ethics are posted at http://www.cigna.com/aboutus/corporate-governance.
They also are available in print to any shareholder who submits a written request to the Corporate Secretary at:
Corporate Secretary
Cigna Corporation
Two Liberty Place, 16thFloor
1601 Chestnut Street
Philadelphia, PA 19192-1550
Other Board Practices
Limit on Directorships
Each director who is also a chief executive officer of a public company may not serve on more than one public company board in addition to Cigna’s Board and the board of his or her employer (for a total of three public company directorships). Each director who is not a chief executive officer of a public company may serve on no more than four boards of public companies in addition to Cigna’s Board (for a total of five such directorships).
Board Meetings
The Board meeting schedule and agenda are developed with input from directors. The duration of each meeting varies as business needs dictate. During Board meetings, the Board holds executive sessions both with the CEO (an employee director) and without any members of management (including the CEO) present. The Board met in executive session without any members of management present ten times in 2011. The Chairman presides at the executive sessions.
Access to Management and Independent Advisors A member of senior management is assigned to each committee to act as a staff officer. The Chief Financial Officer serves as the staff officer for the Audit and Finance Committees; the General Counsel serves as the staff officer for the Corporate Governance Committee; and the Executive Vice President — Human Resources and Services serves as the staff officer for the People Resources Committee. These executive officers work with their respective committee chair to assist in setting and developing meeting agendas and materials and attend meetings as appropriate. Committee chairs communicate frequently with staff officers, the other executive officers and other members of management between scheduled Board meetings with respect to committee issues and management is expected to update the Board on any significant Company matters or competitive developments between Board meetings. Independent directors have regular access to senior managers and employees. In addition, theThe Board and its committees are able to access and retain appropriate independent advisors as, and to the extent, they deem necessary or appropriate.
BOARD EVALUATIONS AND BOARD EFFECTIVENESS Continuing EducationEvaluation Process
A meaningfully designed director evaluation process allows the Board to gain insights into the effectiveness of and Self-Evaluation Thechallenges facing the Board, its committees and its individual members, with the goal of enhancing Board performance and, as a result, increasing shareholder value. Cigna’s Board is regularly updatedcommitted to ongoing improvement and the evaluation process is an important vehicle that fosters and supports effectiveness. Our board evaluations are designed to solicit input and perspective on Cigna’s businesses, strategies, customers, operationsvarious matters, including:
board leadership structure; board configuration, including size, diversity and employee matters, as well as external trendsskillset; board dynamics, including individual director preparation and issues that affectparticipation; governance policies and practices; strategy and risk oversight; interaction with management; and progress achieved against prior year evaluation initiatives. As set forth in its charter, the Company. Directors are also encouraged to attend continuing education courses relevant to their service on Cigna’s Board. The CGCCorporate Governance Committee oversees the continuing education process,Board, committee and individual director evaluation process. Annually, the Company is kept apprised of director participation. Cigna reimburses directors for expenses they incur in connection with such continuing education courses. The Board, each of its committees,Corporate Governance Committee and the Chairman of the Board determine the appropriate form of evaluation and consider the design of the process to ensure it is both meaningful and effective. In 2017, each conduct a self-assessment, anddirector was interviewed by either the CGC annually conducts a review of each individual director’s performance (including the Chairman’s) against the established responsibilities of Cigna Board members. On an ongoing basis, directors offer suggestions and alternatives intended to further improve Board performance. CIGNA – 2012 Notice of Annual Meeting of Shareholders and Proxy Statement – 18
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Resignation and Retirement
If a director’s principal position is discontinued, that director is required to tender his or her resignation to the CGC. The CGC will then recommend to the Board whether to accept or decline the resignation. In any event, a director is required to retire no later than the annual meeting of shareholders coinciding with or following his or her 72nd birthday.
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Communications to the Board
Shareholders and interested parties may contact the Board of Directors, the Chairman, the independent directors, or specific individual directors by submitting an e-mail to DirectorAccessMailbox@cigna.com or writing to them at:
Director Access
Attn: OfficeChair of the Corporate Secretary
Cigna Corporation
Two Liberty Place, 16th Floor
1601 Chestnut Street
Philadelphia, PA 19192-1550Governance Committee or the Chairman of the Board. In response to feedback provided from directors regarding the Board evaluation process, the Chairman of the Board and the Chair of the Corporate Governance Committee also interviewed various members of management to better understand management’s perspective on the Board. In addition, each member of the Board was able to submit anonymous written feedback to the Corporate Secretary.
The Chair of the Corporate Secretary will compile all communications other than routine commercial solicitationsGovernance Committee summarized the feedback from the individual director interviews in a report for the Chairman of the Board and opinion surveys sent toeach of the Committee Chairs. The Chair of the Corporate Governance Committee and the Chairman of the Board members and periodically submit themthen presented the report to the Board. Communications addressed to individual directors at the director address will be promptly submitted to such individual directors. The Corporate Secretary also will promptly advise the appropriate member of management of any concerns relating to Cigna’s products or services, and the Corporate Secretary will notify the Board of the resolution of those concerns. CIGNA – 2012 Notice of Annual Meeting of Shareholders and Proxy Statement – 20
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Board of Directors and Committee Meetings, Membership, Attendance, Independence and Other Board Matters
Meetings and Membership
The full Board held 10 meetings during 2011. for review, discussion and determination of action items. The chairs of each committee led a similar self-assessment discussion for their particular committee.
From time to time, the Board or its committees act by unanimous written consent when it is impracticable for themhas engaged an independent third party to meet. The following table showsconduct the membership, summary of responsibilities and number of meetings in 2011 for each of the committees. Additional information about the committees can be found in the committee charters which are posted at http://www.cigna.com/aboutus/board-committees.Board evaluation, most recently
Committees
| 2011 Membership
| Primary Responsibilities
| Number
of Meetings
| Audit
18 | D. F. Zarcone* (Chair)
E. J. Foss*
J. E. Henney, M.D.*
J. M. Partridge*
E. C. Wiseman*
| •
RepresentingCigna 2018 Notice of Annual Meeting of Shareholders and assisting the Board in fulfilling its oversight responsibilities regarding the adequacy of internal controls, integrity of financial statements, compliance with legal and regulatory requirements, and enterprise risk management.
•
Assessing qualification and independence of, appointing, compensating, overseeing the work of and removing, if appropriate, Cigna’s independent registered public accounting firm.Proxy Statement
|
10
| Corporate Governance
| C. C. Wait* (1) (Chair)
E. J. Foss*CORPORATE GOVERNANCE MATTERS
J. E. Henney, M.D.* (2)
J. P. Sullivan*
E. C. Wiseman*
| •
Reviewing, advising, and reporting to the Board on the Board’s membership, structure, organization, governance practices and performance.
•
Reviewing committee assignments annually.
•
Overseeing director selection and compensation and developing specific director recruitment criteria.
| 6
| Finance
| J. M. Partridge* (Chair)
R. Martinez*
J. E. Rogers*
D. F. Zarcone*
W. D. Zollars*
| •
Overseeing and advising the Board regarding the structure and use of Cigna’s capital, long-term financial objectives and progress against those objectives, Cigna’s annual operating plan and budget, investment policies, and information technology strategy and execution.
| 9
| People Resources
| J. E. Rogers* (Chair)
R. Martinez*
J. P. Sullivan*
C. C. Wait* (1)
W. D. Zollars*
| •
Overseeing the policies and processes for people development, including the succession plan for the executive officers.
•
Evaluating the CEO annually and sharing its assessment with the Board when recommending compensation actions for the CEO.
•
Reviewing and approving executive compensation plans and equity-based plans, subject to applicable Board and shareholder approvals.
| 6
| Executive
| I. Harris* (Chair)
D. M. Cordani
J. E. Henney, M.D.* (3)
J. M. Partridge*
J. E. Rogers*
C. C. Wait* (1)
D. F. Zarcone*
| •
Meeting on an as needed basis to advise the Independent Chairman of the Board.
•
Exercising the power and authority of the Board as specifically delegated by the Board when convening a meeting of the full Board of Directors is impracticable or difficult.
| 0
| * Meets independence standards described on page 20
(1) Ms. Wait retired from the Board of Directors effective December 31, 2011.
(2) Dr. Henney became acting Chair of the CGC upon Ms. Wait’s retirement and was appointed Chair effective February 22, 2012.
(3) Upon her appointment as Chair of the CGC, Dr. Henney became a member of the Executive Committee.
|
in 2014. The Corporate Governance Committee and Board has determined that all membershave agreed to use an independent third party to facilitate the Board evaluation process approximately every three to five years, or on an as needed basis. The results of the Audit Committee qualify as financially literate under New York Stock Exchange standards and meetevaluation process support the qualifications for independence as described below. The Board also determinedBoard’s belief that Donna Zarcone and John Partridge are the “audit committee financial experts” (as defined in the applicable rules of the Securities and Exchange Commission). Attendance
During 2011, Board and committee attendance averaged 97%committees are operating effectively.
Board Refreshment and Succession Planning The Corporate Governance Committee is responsible for identifying new director candidates, reviewing the Board as a whole. Each incumbent director attended at least 80% of the combined total meetingscomposition of the Board and its committees on which he or she served during 2011. The Board encourages independent directors to attend the annual meeting of shareholders. Eight directors attended the 2011 annual meeting: David Cordani, John Partridge, James Rogers, Joseph Sullivan, Carol Wait, Eric Wiseman, Donna Zarcone, and Isaiah Harris, Jr., who chaired the meeting. CIGNA – 2012 Notice of Annual Meeting of Shareholders and Proxy Statement – 21
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Independence
Cigna’s Board maintains director independence standards, which are listed in the Board Practices posted on Cigna’s website at http://www.cigna.com/aboutus/corporate-governance. Cigna’s director independence standards provide that a director is not independent if the director:
•
is, or has been within the last three years, an employee of Cigna, or an immediate family member (defined as a spouse, parent, child, sibling, mother or father-in-law, son or daughter-in-law, brother or sister-in-law or anyone (other than a domestic employee) who shares the director’s home) is, or has been within the last three years, an executive officer of Cigna;
•
has received, or has an immediate family member who has received, during any twelve-month period within the last three years, more than $120,000 in direct compensation from Cigna, other than director and Committee fees and pension or other forms of deferred compensation for prior service (provided such compensation is not contingent in any way on continued service);
•
is a current partner or employee of Cigna’s external auditor or an employee of Cigna’s internal audit department, or an immediate family member is a current partner of Cigna’s external auditor or an employee of Cigna’s internal audit department;
•
is, or an immediate family member was, within the last three years (but is no longer) a partner or employee of Cigna’s external auditor or an employee of Cigna’s internal audit department and personally worked on Cigna’s audit within that time;
•
is, or an immediate family member is, or has been within the last three years, employed as an executive officer of another company where any of Cigna’s present executives at the same time serves or served on that company’s compensation committee; or
•
is a current employee, or an immediate family member is a current executive officer, of a company that has made payments to, or received payments from, Cigna for property or services in an amount which, in any of the last three fiscal years, exceeds the greater of $1 million, or two percent of the other company’s consolidated gross revenue.
The Company’s director independence standards further provide that certain relationships are not material and do not impair a director’s independence. In particular, a director’s independence will not be impaired if a director:
•
is an executive officer of another company in which Cigna owns a common stock interest, and the amount of Cigna’s common stock interest is less than five percent of the total shareholders’ equity of the company for which the director serves as an executive officer;
•
is an executive officer of another company in which Cigna owns debt securities and the amount of the debt holdings is less than five percent of the total outstanding debt securities of that company;
•
serves as a member of the board of directors or serves in a position with similar duties and responsibilities (such as a trustee) of another organization that makes payments to or receives payments from Cigna in the ordinary course of business;
•
has an immediate family member who serves as an employee or director (but does not serve as an executive officer or partner or in another position with principal policymaking responsibilities) of an organization that makes payments to or receives payments from Cigna in the ordinary course of business;
•
is an executive officer of another company that owns less than five percent of the total shareholders’ equity of Cigna;
•
serves as, or has a spouse or anyone (other than domestic employees) sharing his/her home who serves as, an executive officer, director or trustee (or equivalent) of a charitable organization, and Cigna’s discretionary charitable contributionsmaking recommendations to the organization duringfull Board on these matters. As further described on page 9, in 2017, the past year are less than the greater of $100,000 or two percent of that organization’s annual gross revenue (Cigna’s automatic matching of employee charitable contributions will not be included in the amount of Cigna’s contributions for this purpose);
•
or his immediate family members purchase insurance, services or other products of Cigna, or uses Cigna’s financial services, all on terms and conditions similar to those available to other similarly situated persons;
•
is a member in the same professional association, social, fraternal or religious organization or club as an executive officer or other director of Cigna;
•
currently or previously attended the same educational institution as an executive officer or other director of Cigna;
•
serves on the board of directors of another public company on which an executive officer or other director of Cigna also serves as a director, except for prohibited compensation committee interlocks; or
•
serves as an executive officer of a public company that also uses Cigna’s registered independent public accounting firm.
For any relationship outside the above guidelines, the determination of whether the relationship is material or not, and therefore whether the director would be independent or not, will be made by the directors who do satisfy the independence standards.
The director independence standards described above meet the independence standards specified in the listing standards of the New York Stock Exchange. Based on the standards described above and the Board’s review, the Board affirmatively determined that:
•
the following directors, consisting of all of the current directors and director nominees, except for Mr. Cordani, are independent: Dr. Henney, Ms. Zarcone and Messrs. Foss, Harris, Martinez, Partridge, Rogers, Sullivan, Wiseman and Zollars; and
•
all members of the Audit, Corporate Governance FinanceCommittee began a long-term board refreshment plan and People Resources Committees are independent.
In addition, Ms. Wait served on the Board until December 31, 2011 and in February 2011, the Board determined that she was independent. In assessing directors’ independence, the Board and CGC reviewed material provided by managementengaged an outside firm to provide advisory services related to Cigna’s transactionssuccession planning and to assist with and investments in entities affiliated with Cigna directors and their immediate family members, based on answers to directors’ responses to a questionnaire about such relationships.the recruitment of director candidates.
CIGNA – 2012 Notice of Annual Meeting of Shareholders and Proxy Statement – 22
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In applying the independence standards, the Board and the CGC considered that from time to time during the past three years, Cigna and its subsidiaries: (1) engaged in arms-length, ordinary course business transactions with, or made charitable contributions to, corporations or organizations where Messrs. Foss, Harris, Martinez, Rogers, Sullivan, Wiseman and Zollars, Dr. Henney and Ms. Zarcone serve on the other corporation’s or organization’s board of directors, where in each case, the transaction fell within the guidelines described above, and (2) engaged in arms-length, ordinary course business transactions with, or made charitable contributions to, corporations or organizations with which Messrs. Harris, Martinez, Partridge, Rogers and Wiseman, Dr. Henney and Ms. Zarcone, or their immediate family members, serve as an employee or executive officer, where in each case, the amount paid to or received from these companies in each of the last three years was significantly less than 2% of annual gross revenue or the $1 million threshold as described in Cigna’s director independence standards or otherwise fell within the guidelines described above.
RESPONSIBILITIES OF THE BOARDBoard Oversight of Risk and Enterprise Risk Management The Board of Directors is ultimately responsiblehas the ultimate responsibility for risk oversight of theunder Cigna’s risk management function of the Company.framework. The Board executes its duty both directly and through its Audit, Corporate Governance, Finance and People Resources Committees. The Audit Committee oversees Cigna’s enterprise risk management (ERM) framework. ERM is a Company-wide initiative that involves the Board, Cigna’s management, Cigna’s Chief Risk Officer and General Auditor (CRO) and internal audit function in an integrated effort to (1) identify, assess, prioritize and monitor a broad range of risks and (2) formulate and execute plans to monitor and, to the extent possible, mitigate the effect of those risks. The CRO meets with the Audit Committee regularly during its People Resources Committeeexecutive sessions and its Finance Committee. Overreports to the past several years Board at least annually. Cigna has implemented practices so that the Board and its committees are regularly briefed on issues related to the Company’s risk profile, as described below. Atprofile. These briefings are designed to provide visibility to the Board level, Cigna’s Chief Risk Officerabout the identification, assessment and General Auditor (CRO) presents at least annually to the full Boardmanagement of Directors. The full Board of Directors regularly receives reports from the Audit Committee on matters related to enterprise risk and risk management and devotes time during its meetings to engage in a focused discussion on risk oversight.
The Audit Committee oversees the Company’s financialcritical risks and reviewsmanagement’s risk mitigation strategies. These briefings address strategic, operational, financial reporting, succession and discusses with management the Company’s Enterprise Risk Management (ERM) framework and process for identifying, assessing, and monitoring key business risks. Cigna’s CRO reports directly to the Audit Committee at least quarterly to discuss the Company’s ERM activities and progress made against established ERM objectives for the year. ERM is a company-wide initiative that involves the Board, Cigna’s management and CRO, and internal audit function in an integrated effort to (1) identify, assess, prioritize and monitor (as each of their roles dictates) a broad range of risks (e.g., financial, operational, business,compensation, cyber-security, compliance, reputational, governance and managerial), and (2) formulate and execute plans to monitor and, to the extent possible, mitigate the effect of those risks. In addition, the CRO meets with the Audit Committee during each of its executive sessions.other risks, as appropriate.
The Finance CommitteeBoard, including its committees, oversees risks associated with their respective areas of responsibility, as summarized below. Each committee meets in executive session without management present and with key management personnel and representatives of outside advisors as necessary. | | | BOARD/COMMITTEE | | PRIMARY AREAS OF RISK OVERSIGHT | | | Full Board | | Strategic, financial and execution risks and exposures associated with Cigna’s business strategy, including impact of changes to laws and regulations, significant litigation and regulatory exposures and other current matters that may present material risk to financial performance, operations, infrastructure, plans, prospects, reputation, acquisitions and divestitures. | | | | | | Audit
Committee | | In addition to overseeing Cigna’s ERM framework, oversees risks related to the Company’s financial statements, the financial reporting process, accounting, cyber-security and certain legal and compliance matters. The Audit Committee also oversees the internal audit function and the Company’s ethics and compliance program. | | | | | | Corporate
Governance Committee | | Oversees risks and exposures associated with director succession and refreshment planning, corporate governance and overall Board effectiveness. Also oversees the Company’s risks related to political and charitable contributions. In exercising this oversight, the Corporate Governance Committee reviews and discusses financial contributions to such organizations. | | | | | | Finance
Committee | | Oversees the Company’s deployment of capital, technology and investment-related initiatives. In exercising this oversight, the Finance Committee regularly reviews and discusses the technology, financial market and capital management risks that are monitored through the Company’s ERM process. | | | | | | People Resources Committee | | Oversees compensation related-risks and management succession planning. For additional information regarding the People Resources Committee’s role in evaluating the impact of risk on executive compensation, see “Processes and Procedures for Determining Executive Compensation — Risk Oversight” in the Compensation Discussion & Analysis (CD&A). | | | |
| | | | | | | | | Cigna 2018 Notice of Annual Meeting of Shareholders and Proxy Statement | | | 19 | |
| CORPORATE GOVERNANCE MATTERS |
Oversight of Business Strategy Our directors provide unique insights into the Company’s capital, technologystrategic issues facing the Company, including changes in the regulatory environment, changing market dynamics and investment-related risks. In exercising this oversight, the Finance Committee regularly reviews and discusses the technology, financial market and capital management risks that are monitored through the Company’s ERM process. The People Resources Committee oversees compensation-related risk and receives written reports from the CRO that assist the PRC in assessing risks related to compensation design and awards.competitive landscape. As part of anits oversight of business strategy, the Board:
Formally reviews Cigna’s annual processand longer-term strategic plan, financial targets and strategies for achieving those targets; Regularly reviews and assesses Cigna’s results of operations, financial performance, prospects and competitive position; Regularly discusses external factors that affect the PRCCompany, such as regulatory developments and trends impacting the health care industry generally; Regularly reviews our performance compared to our competitors; and Regularly evaluates potential strategic alternatives relating to Cigna and our business, including possible acquisitions, divestitures and business combinations. Management Succession Planning At the direction of the Chairman, the Board oversees management conducted an in-depth review of Cigna’s executive and employee compensation programs and policies,succession planning, including incentive compensation plans, and in February 2012 presented a summary of its findings tofor the PRC. The review included analyzing the relationship between the incentives created by these programs and the Company’s risk profile, internal controls that mitigate the risk of incentive compensation having an unintended negative financial impact on the Company, and plan design features including clawback arrangements, holding periods, earnings thresholds, payment structure and plan caps. The review concluded that Cigna’s compensation programs and policies, including goal-setting, target-setting, and payouts, do not create or increase risks that are reasonably likely to have a material adverse effect on the Company. People Development and Succession Planning Matters
The Board oversees CEO succession planning. To carry out this responsibility, the Board, withrole. With the assistance of the People Resources Committee, (PRC),the Board reviews and approves regular and emergency succession plans and, as part of those plans, develops and evaluates potential candidates who meet the Board’s established criteria for the CEO position.plans. The PRCPeople Resources Committee is responsible for overseeing the Company’s policies and processes for people development in general, includinggeneral. The People Resources Committee also ensures that management succession planning meets the succession plan for all other executive officers. In fulfilling that responsibility,Board’s expectations. Annually, the PRC considers an annualCEO presents to the Board a review of executive officers and key senior management, presented by the CEO, including a discussion of those employees who are considered to be potential successors to executive and senior level positions with regard to their readiness and developmentaldevelopment opportunities. In 2017, succession planning related to the promotions of Brian C. Evanko, Christopher J. Hocevar, Alan M. Muney, Eric P. Palmer and Michael W. Triplett to executive officer roles, and the retirements of Thomas A. McCarthy and Matthew G. Manders.
Shareholder Interests The Board and the Corporate Governance Committee oversee the Company’s shareholder engagement practice. The Office of the Corporate Secretary engages with shareholders on issues related to corporate governance, executive compensation and social responsibility. In 2017, the Office of the Corporate Secretary engaged in extensive outreach with shareholders, particularly regarding proxy access, as further described on page 16. During these meetings, shareholders also expressed an interest in learning more about our board refreshment plans and our corporate responsibility efforts. As a result, we have included additional disclosure on these topics, which can be found on pages 9 and 23, respectively. Senior management and the Investor Relations team regularly meet with shareholders and respond to their questions and feedback throughout the year. In June 2017, Cigna hosted an Investor Day. During Investor Day, Cigna’s management discussed our track record of delivering value and our growth path moving forward. Investor Day was a highly interactive event, providing the investment community with many formal and informal opportunities to further understand Cigna’s strategy toGo Deeper, Go Local and Go Beyond, as well as the depth and breadth of Cigna’s management team. In addition, the Board has adopted a number of practices that align the interests of the directors with those of the shareholders, including: a director compensation program whereby a majority of compensation is delivered in common stock; robust stock ownership requirements for directors; and no shareholder rights plan and, at this time, the Board has no intention of adopting such a plan. Information regarding how our executive compensation policies and practices align with the interests of shareholders can be found in the CD&A. | | | 20 | | Cigna 2018 Notice of Annual Meeting of Shareholders and Proxy Statement |
| CORPORATE GOVERNANCE MATTERS |
BOARD MEETINGS AND COMMITTEES In 2017, the Board held 11 meetings and the committees of the Board held a total of 33 meetings. At all regular meetings held in 2017, the independent members of the Board met in executive session without management present. As part of all regularly scheduled Board meetings, the Chairman presides over all executive sessions of the Board. Each committee also met in executive session without management on a regular basis in connection with their respective meetings. Each director attended more than 75% of the aggregate of all meetings of the Board and committees on which he or she served during 2017. During 2017, Board and committee attendance averaged 93% for the Board as a whole. In addition to formal Board meetings, the Board engages with management regularly throughout the year. The Board expects directors to attend the annual meeting of shareholders. All directors attended the 2017 annual meeting and Mr. Harris chaired the meeting. All directors are expected to attend the Annual Meeting in 2018. The Board has five committees: Executive, Audit, Corporate Governance, Finance and People Resources. Complete copies of the committee charters are available on Cigna’s website atwww.cigna.com/about-us/company-profile/corporate-governance/. The composition of the Audit, Corporate Governance, Finance and People Resources Committees is set forth below. | | | | | | | | | | | | Audit* | | Corporate Governance | | Finance | | People Resources | | | | | | Eric J. Foss | | | | ✓ | | | | ✓ | | | | | | Jane E. Henney, M.D. | | ✓ | | Chair | | | | | | | | | | Roman Martinez IV | | Chair # | | | | ✓ | | | | | | | | John M. Partridge | | | | | | Chair | | ✓ | | | | | | James E. Rogers | | ✓ # | | | | ✓ | | | | | | | | Eric C. Wiseman | | | | | | ✓ | | ✓ | | | | | | Donna F. Zarcone | | ✓ # | | ✓ | | | | | | | | | | William D. Zollars | | | | ✓ | | | | Chair | | | | | | Meetings in 2017 | | 9 | | 8 | | 8 | | 8 | | | | | | | | | | |
| # | Designated “audit committee financial expert” as defined in the SEC rules. |
| * | All members of the Audit Committee are financially literate within the meaning of the NYSE listing standards. |
The Executive Committee may exercise the power and authority of the Board as specifically delegated by the Board when convening a meeting of the full Board of Directors is impracticable. Mr. Harris is Chairman of the Executive Committee and Dr. Henney and Messrs. Cordani, Martinez, Partridge and Zollars serve on the Executive Committee. In 2017, the Board of Directors did not delegate any actions to the Executive Committee and, therefore, the Executive Committee did not meet in 2017. | | | | | | | | | Cigna 2018 Notice of Annual Meeting of Shareholders and Proxy Statement | | | 21 | |
| CORPORATE GOVERNANCE MATTERS |
| | | | | | | Committee | | Responsibilities | | | | | | Audit Committee | | • Assesses the qualification and independence of, appoints, compensates, oversees the work of and removes, if appropriate, Cigna’s independent registered public accounting firm. • Represents and assists the Board in fulfilling its oversight responsibilities regarding the adequacy and effectiveness of internal controls and the integrity of financial statements. • Reviews annual and quarterly financial statements, earnings releases, earnings guidance and significant accounting policies with management and, if appropriate, the independent registered public accounting firm. • Oversees compliance with material legal and regulatory requirements, including those that apply to federal and state health care programs. • Oversees the Company’s enterprise risk management program and internal audit function and advises the Board on financial and enterprise risks, including risks related to the security of information technology systems. • Maintains procedures for and reviews the receipt, retention and treatment of complaints and concerns regarding accounting, controls, auditing, reporting and disclosure matters. | | | | | | | | | | | | | | | | Corporate Governance Committee | | • Reviews, advises and reports to the Board on the Board’s membership, structure, organization, governance practices and performance, as well as shareholder engagement activities. • Assists the Board in board refreshment planning. • Reviews committee assignments and director independence. • Oversees director nomination and compensation and develops specific director recruitment criteria. • Oversees communications with external stakeholders, including shareholders. • Oversees corporate political and charitable contributions and the Company’s corporate responsibility and sustainability efforts. | | | | | | | | | | | | | | | | Finance Committee | | • Oversees the structure and use of Cigna’s capital. • Oversees Cigna’s long-term financial objectives and progress against those objectives. • Reviews Cigna’s strategic operating plan and budget. • Oversees Cigna’s investment strategy and sets investment policies and guidelines. • Oversees information technology strategy and execution. | | | | | | | | | | | | | | | | People Resources Committee | | • Oversees the policies and processes for people development and assists the Board in reviewing executive officer succession plans. • Establishes company goals and objectives relevant to the CEO’s compensation, evaluates the CEO’s performance in light of those established goals and objectives, and based on this evaluation, recommends the CEO’s compensation to the independent members of the Board for approval. • Reviews and approves compensation targets, base salaries, cash and equity-based incentive compensation payments and arrangements, severance, and other compensation and benefits arrangements for any current or prospective executive officers other than the CEO, subject to required Board or shareholder approvals. • Establishes performance measures and goals and assesses whether these goals are met for awards under short-term and long-term cash-based and equity-based compensation plans. • Reviews and monitors the Company’s diversity program. |
| | | 22 | | Cigna 2018 Notice of Annual Meeting of Shareholders and Proxy Statement |
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CODES OF ETHICS Cigna is committed to conducting business in accordance with the highest standards of integrity, legal compliance and ethical conduct. In 2015, at the recommendation of the Corporate Governance Committee, the Board adopted a Director Code of Business Conduct and Ethics, available on Cigna’s website atwww.cigna.com/about-us/corporate-governance/. The Board believes that having a separate code of conduct for the Board meaningfully enhances Cigna’s governance framework by making Board-specific policies clearer, while also addressing general shareholder concerns over transparency of company and board practices. All directors and employees, including executive officers, must comply with the Company’s Code of Ethics, available on Cigna’s website atwww.cigna.com/about-us/corporate-governance/. Both the Director Code of Business Conduct and Ethics and the Company Code of Ethics, together with Cigna’s related policies and procedures, address major areas of professional conduct, including, among others, conflicts of interest, protection of private, sensitive or confidential information, insider trading and adherence to laws and regulations affecting the conduct of Cigna’s business. Directors and employees affirm their adherence to the Code of Ethics and the Director Code of Business Conduct and Ethics, as applicable, annually. CORPORATE RESPONSIBILITY As a global health service company with the mission of helping improve the health, well-being and sense of security of the people we serve, Cigna believes that its success depends on earning trust through responsible business practices, corporate citizenship and providing superior services that meet our customers’ individual needs. Inspired by our mission, Cigna works to positively impact the health of people, communities and the environment. As evidence of this, in 2015, Cigna was the first U.S. health insurance company to sign on to the United Nations Global Compact (UNGC), a policy initiative for companies committed to areas such as human rights, labor standards, environmental responsibility and business integrity in business operations. In 2017, Cigna became a member of the UNGC Health is Everyone’s Business action platform, which is a coalition working to develop a global business agenda to address goals related to good health and well-being. In 2017, Cigna was named to the Dow Jones Sustainability Index, a benchmark for investors who integrate sustainability considerations into their portfolios. We achieved the leading spot among the Health Care Providers & Services industry sector. Cigna was recognized in both the Dow Jones Sustainability World Index and the Dow Jones Sustainability North America Index. Our inclusion on the index was driven by our responsible business practices. The assessmentCorporate Governance Committee is responsible for overseeing Cigna’s positions on, and policies with respect to, Cigna’s corporate responsibility efforts around the globe. To support the Corporate Governance Committee’s responsibility, Cigna has established the Cigna Connects Corporate Responsibility Governance Council to provide input on Cigna’s policies, initiatives and reporting relative to corporate responsibility. Led by Cigna’s Director of Corporate Responsibility & Civic Affairs, this Council is a cross-functional team of leaders from various areas of the Company, including ethics and compliance, global real estate, risk management, supply chain, human resources and the Cigna Foundation. Cigna annually publishes a corporate responsibility report, Cigna Connects, highlighting our corporate responsibility goals and initiatives. Cigna Connects covers areas such as Cigna’s practices around ethics and governance, diversity, environmental sustainability, and our Cigna Foundation. It also provides more information about our recent recognitions, including being named to Corporate Responsibility Magazine’s 100 Best Corporate Citizens List, our listing on the MSCI Sustainability Index, and our “Innovation in Advancing Health Equity” award from the National Business Group on Health. Cigna Connects is presented to the full BoardCorporate Governance Committee, which reviews the report with the Board. We encourage our shareholders to review our most current report, which is available on Cigna’s website atwww.cigna.com/about-us/corporate-responsibility/report/. Cigna’s corporate responsibility efforts are focused on the PRC’s direction.following areas: Health and Well-Being. Cigna’s goal is to make health care better for all, by striving to build a sustainable health care system that lowers health risks, fosters health equality, improves health status and promotes preventative health interventions. For example, Cigna is committed to being a national leader on modernizing the approach to the prevention, treatment and communication of substance use disorders, and pledged to reduce opioid usage among our customers by 25% by 2019. Cigna is addressing the needs of our communities through efforts such as empowering veterans to address difficult health and life circumstances and establishing the free Cigna Health Improvement Tour. In 2017, we provided more than10,000 free Cigna Health Improvement Tour biometric screenings (blood pressure, cholesterol, blood sugar and body-mass index) and health coaching to participants in 100 locations. CIGNA – 2012Environment.As a health service company, Cigna takes a precautionary approach to its environmental sustainability efforts, recognizing that environmental stewardship can have a health impact and also make sound business sense. We currently have 16 LEED certified buildings and 25 sites
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are enrolled in the U.S. Environmental Protection Agency’s ENERGY STAR® program. In 2017, Cigna’s greenhouse gas emissions data was verified by an independent third party expert. Cigna considers managing the risks and opportunities associated with climate change and resource scarcity as a significant aspect of Annual Meetingour corporate responsibility platform. Our Environmental Policy Statement, which is described in greater detail in the Corporate Responsibility section of Shareholderswww.cigna.com, outlines our environmental sustainability policies and Proxy Statement – 23practices.
BackEthical and Inclusive Business Practices. We strive to Contents
Certain Transactionsfoster relationships with various stakeholders to help us better understand their priorities and to further Cigna’s goal of bringing positive changes in areas such as human capital, diversity and inclusion, supply chain management, stakeholder engagement and human rights. Cigna seeks to partner with organizations that are guided by similar principles. Our Supplier Code of Ethics, with which all of our suppliers are expected to comply, explicitly prohibits the use of child or forced labor, and requests that our suppliers demonstrate ethics, compliance and integrity in human rights, business conduct and the environment. The Supplier Code of Ethics is an important part of the internal control structure and helps promote ethical business practices. As an example of our focus on inclusive business practices, in 2017, we welcomed the inaugural class of our diverse supplier Mentor Protégé Program. This program, consisting of certified minority, veteran and LGBT business enterprises, providesone-on-one mentoring with Cigna management, and insights into growth strategies and best practices to help grow their businesses.
The Cigna Foundation The Cigna Foundation, established more than 50 years ago, carries out our corporate philanthropy goals of bringing Cigna’s mission and brand promise to life for individuals and communities around the globe. The Cigna Foundation accomplishes these goals through strategically focused charitable grants to nonprofit organizations whose work enhances the health of individuals and families and the well-being of their communities. Cigna’s World of Difference grants center around collaborations with nonprofits pursuing projects that help people overcome barriers to their health and well-being related to factors such as ethnicity, race, gender, age, education, economic status or place of residence. In 2017, we added a focus on community health workers. Cigna funded 27 Cigna Foundation Grants to address health disparities and advance community health navigation in 2017. ANNUAL POLITICAL CONTRIBUTIONS AND LOBBYING ACTIVITY REPORT Cigna is committed to transparency and strives to provide clarity about our goals and positions related to the Company’s federal and state lobbying and advocacy efforts as well as why we believe active engagement in the public policy arena is important to our mission, business and customers. Cigna has engaged with shareholders to gain feedback regarding desired political contribution disclosure and published its first annual political contributions and lobbying activity report in 2011. The initial report provided information about Cigna’s political contributions, lobbying activities, trade association affiliations and related matters. Since then, we have significantly enhanced this report to incorporate subsequent input from shareholders and to provide greater clarity on our overall lobbying framework, including the areas in which we focus our advocacy efforts and why we believe active engagement in the public policy arena is necessary to support the achievement of our mission, the success of our business and the well-being of our customers. The report also provides information about: (1) direct political contributions that Cigna makes at a corporate level; (2) contributions that Cigna makes through the Cigna Political Action Committee; and (3) the total amount of dues paid to any industry trade association to which Cigna pays $50,000 or more in annual dues, as well as the portion of any such dues that such trade associations inform us are allocable to anynon-deductible lobbying expenses. The Corporate Governance Committee oversees Cigna’s political and lobbying activities. The Company updates the report annually and we encourage you to review our 2017 report which is available on Cigna’s website atwww.cigna.com/about-us/corporate-governance/. CERTAIN TRANSACTIONS Transactions with Related Persons Cigna has not adopted a written policy concerning review, approval or ratification of related person transactions. Cigna compiles information about transactions between Cigna and itsCigna’s directors, director nominees, executive officers and officers, theirany immediate family members and their affiliated entities includingidentified by directors, director nominees and executive officers as having any form of relationship with Cigna, as well as shareholders that identified themselves during 2017 as holding 5% of Cigna’s common stock. Cigna’s Office of the Corporate Secretary analyzes the nature of eachany transaction andto determine whether the amount involved. Althoughtransaction may require disclosure under SEC rules as a related person transaction. On an annual basis, the Company has not implemented a written policy concerningCorporate Governance Committee reviews the review of related party transactions,analysis prepared by the CGC annually reviews and evaluates the outcome of this analysis, with respect to directors, as part of its assessment of each director’s independenceCompany, and presents its assessment to the full Board of Directors. The Company reviews the transaction information with respect to both directors and executive officers to determine whether any transaction may be subject to disclosure under applicable rules regarding transactions with related persons, and submits a description of any transaction subject to such disclosure to the CGC for review. In addition, all directors, officers and employees of Cigna are subject to the Company’s Conflict of Interest Policy, which requires directors to disclose any existing or proposed relationship, financial interest or business transaction that could, or might appear to be, a conflict of interest. Any reported transactions are to be brought to the attention of the Chief Compliance and Ethics Officer for review and disposition.
Based on athis review, there are no related person transactions requiring disclosure under SEC rules. Compensation Committee Interlocks and Insider Participation The People Resources Committee is comprised of the transactions between Cignafour independent directors: William D. Zollars (Chair), Eric J. Foss, John M. Partridge and its directors and officers, their immediate family members, and their affiliated entities, Cigna has determined that, since the beginning of 2011, it was not a party to any transaction in which the amount involved exceeds $120,000 and in which any of Cigna’s directors, executive officers or greater than five percent stockholders, or any of their immediate family members or affiliates, have a direct or indirect material interest.Eric C. Wiseman. There are no compensation committee interlocks. | | | 24 | | Cigna 2018 Notice of Annual Meeting of Shareholders and Proxy Statement |
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Processes and Procedures for Determining Executive andNon-Employee Director Compensation
PRC Role in Executive CompensationOVERVIEW
Cigna’s director compensation program is designed to attract and retain highly qualified independent directors, by addressing the time, effort, expertise and accountability required of active board membership. The Board believes that the current director compensation program: The PRC
aligns with shareholder interests because it includes a significant equity-based compensation component, the value of which is composed entirelytied to Cigna’s stock price; and is competitive based on the work required of independent directors. Pursuant to its charter,directors serving on the PRC represents and assists the Boardboard of Directors in fulfilling its responsibilities related to oversight of Cigna’s human resources. In carrying out this responsibility, the PRC is charged with oversightan entity of the Company’s compensationsize, complexity and benefit plans and policies that apply to executive officers (including the named executive officers). In fulfilling its responsibilities, the PRC continuously seeks to improve the program’s effectiveness in reinforcing strong links between executive pay and performance. Actions that the PRC has taken include:•
annually reviewing the link between pay and performance and ensuring that executive compensation program design focuses on at-risk, performance-based compensation;
•
assessing the relationship between the Company’s risk profile and compensation plans;
•
hiring an independent compensation consultant to advise on executive compensation issues;
•
establishing reviews of detailed compensation tally sheets for all executive officers twice a year; and
•
conducting executive sessions without Cigna management present, at PRC meetings.
scope. The PRC regularly reviews Cigna’s compensation programs against the Company’s strategic goals, industry practices, and emerging trends in order to ensure alignment with shareholder interests. The PRC retains the flexibility to modify the programs to address changes in the competitive landscape. To help it fulfill its responsibilities, the PRC has engaged an independent compensation consultant, as described below. As described under the heading Board Oversight of Risk and Enterprise Risk Management, the PRC conducts an annual review of executive and employee compensation programs to determine whether those programs create or increase risks that are reasonably likely to have a material adverse effect on the Company. On an ongoing basis, the PRC also monitors these risks by regularly reviewing the risk mitigation and controls associated with various aspects of the PRC’s charter responsibilities.
The PRC also oversees the administration of Cigna’s stock plans (including reviewing and approving equity awards to the named executive officers), reviews and recommends to the Board compensation decisions for the CEO and reviews and approves all compensation decisions relating to executive officers other than the CEO. The PRC reports to the Board on all actions taken.
The PRC, together with the Chairman of the Board, annually evaluates the CEO’s performance and Cigna’s established enterprise goals and makes recommendations to the independent members of the Board of Directors about the CEO’s compensation. After the compensation determinations are approved by the PRC and the independent members of the Board of Directors, the Chairman of the Board reviews the results of the evaluation with the CEO.
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Management Role in Executive Compensation
The PRC has approved processes to support the independent development and review of executive officer compensation as described below.
Chief Executive Officer Compensation
The CEO is not present when the PRC and the Board are making CEO compensation decisions based on the CEO’s performance and Cigna’s established enterprise goals. The Executive Vice President, Human Resources and Services and the compensation consultant attend this session at the request of the Committee.
Other Named Executive Officer Compensation
The PRC approves the compensation targets, base salaries, annual incentives and long-term incentives and similar arrangements for Cigna’s executive officers (including the named executive officers), with the exception of the CEO, whose compensation elements are determined by the PRC and the Board as described above. In order to determine total target compensation for the named executive officers, the compensation consultant presents to the PRC relevant market data prepared by Cigna’s compensation department and the compensation consultant. This relevant market data relates to base salary, annual incentive compensation, long-term incentive compensation and retirement programs for Cigna’s primary peer group and the broader industry (see page 36 for a discussion of the peer group). Generally, the Executive Vice President, Human Resources and Services presents any recommendations for changes to named executive officers’ compensation targets for the PRC’s consideration and approval, and the Vice President, Talent Optimization presents recommendations regarding compensation targets for the Executive Vice President, Human Resources and Services. For actual compensation decisions (payouts) regarding the named executive officers, Cigna’s CEO presents his recommendations to the PRC for its consideration. In making his recommendations, the CEO discusses Cigna’s performance and the individual officers’ performance. The Executive Vice President, Human Resources and Services is generally present for the discussion of compensation for named executive officers excluding himself.
Compensation Consultant Role in Executive Compensation
The PRC has the authority under its charter to engage the services of outside advisors for assistance. During 2011, the PRC engaged Pearl Meyer & Partners (PM&P) as its independent compensation consultant to advise the PRC on Cigna’s executive compensation programs. The primary role of the compensation consultant is to provide the PRC with objective analysis, advice and information and to assist the PRC in the performance of its duties; however, the PRC or Board ultimately makes all of the decisions related to determining the amount or form of executive compensation. These decisions may reflect factors and considerations other than the information and advice provided by the compensation consultant. At the request of the PRC, one or more representatives of PM&P attended all of the PRC meetings in 2011.
The PRC requests information and recommendations directly from PM&P as it deems appropriate in order to structure and evaluate Cigna’s compensation programs, practices and plans. As part of its engagement by the PRC, PM&P also works with and exchanges information with the Executive Vice President, Human Resources and Services and Cigna’s compensation department to support management’s executive compensation work for the PRC.
During 2011, PM&P provided the services described throughout the Compensation Discussion and Analysis (beginning on page 33) and also:
•
evaluated the effect of Cigna’s equity programs on annual share use, burn rate (the number of shares awarded per year divided by the shares outstanding at the end of the year) and total dilution (the number of stock options and restricted stock outstanding, plus the number of shares available for grants under the Long-Term Incentive Plan, divided by the total number of shares of common stock outstanding), and advised the PRC in its determination of the maximum share limit for use in 2012;
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evaluated the long-term incentive structure including eligibility, award vehicles and mix, advising the PRC that the use of stock options and strategic performance shares for the executive officers continues to be aligned with market practice;
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evaluated the reasonableness and the rigor of the performance targets within Cigna’s Management Incentive Plan, considering historical performance for Cigna and the primary peer group, as well as analyst expectations; and
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reviewed the Compensation Discussion and Analysis section of the 2011 and 2012 proxy statements.
Cigna’s policy on compensation consultant independence, which applies to both the PRC’s (for executive compensation) and the CGC’s (for director compensation) engagement of compensation consultants, requires the compensation consultant be independent of the Company as assessed by the relevant committee each year. A compensation consultant is deemed independent under the policy if the compensation consultant:
•
is retained by the PRC or CGC, and reports solely to the PRC or CGC (as appropriate) for all services related to executive or director compensation; and
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does not provide any services or products to the Company and its affiliates or management except with approval of the Chair of the PRC or CGC (as appropriate).
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In assessing the independence of compensation consultants, the PRC and/or CGC considers the nature and amount of work performed for the relevant committee during the year, the nature of any non-executive or director compensation services performed for the Company, and the amount of fees paid for those services in relation to the compensation consultant’s total revenues. The compensation consultant annually prepares for the PRC and/or CGC an independence letter providing appropriate assurances and confirmation of the compensation consultant’s independent status under the policy. The PRC regularly reviews and evaluates its compensation consultant engagement, and annually reviews the compensation consultant’s performance.
Compensation Consultant Role in Director Compensation
The CGC’sCorporate Governance Committee’s charter provides that the CGCit will periodically review thedirector compensation of non-employee directors periodically, recommend changes toand assist the Board and assist in the administration of director compensation plans as authorized byplans. The Board approves the Board.amount and form of director compensation. The CGC reviews the non-employee director compensation program periodically for competitiveness and appropriateness of compensation levels and program design andCorporate Governance Committee may then make recommendations to the Board for action.
To help it fulfill its responsibilities, the CGC from time to time engages one or more compensation consultants. Aengage an independent compensation consultant engaged by the CGC is directly responsible to the CGC for advising it on assist in its review of director compensation.
DIRECTOR COMPENSATION PROGRAM The Corporate Governance Committee reviews Cigna’snon-employee director compensation and providing it with objective analysis and advice about benchmarking, pay policies and practices at competitors, potential tax consequences,program on an annual basis. The Corporate Governance Committee last engaged an independent compensation magnitude and mix, program structure, and alignment with shareholder interests; however, all decisions that determineconsultant in 2011 to assist in the amount or formCommittee’s review of director compensation are made by the full Boardamount and may reflect factors and considerations other than the information and advice provided bypay mix. As a compensation consultant. The CGC may also engage a compensation consultant to advise it on industry practices and emerging trends in director compensation. With respect to director compensation, the compensation consultant obtains from the Executive Vice President, Human Resources and Services and membersresult of his staff, information needed to carry out its assignments, and from the General Counsel and members of her staff, information related to legal issues. At the request of the CGC, one or more representatives of a compensation consultant engaged by the CGC may attend certain CGC meetings to present information and recommendations and to be available to answer questions and advise the CGC.
During 2011, PM&P presented to the CGC a full review of Cigna’s directors’ compensation program, including the structure, pay mix and stock ownership guidelines and recommendations for changes. Following that review, the CGC implemented changes to the amount of the annual Board, retainer and the pay mix, which are effective for 2012 and are described on page 26.
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DIRECTOR COMPENSATION
Non-Employee Director Compensation Program
This section describes the Company’s compensation program for its non-employee directors, including annual board and committee retainers, independent Chairman compensation, director stock ownership guidelines, stock ownership, the Director Compensation Table for fiscal year 2011, aggregate outstanding equity awards, and the director Deferred Compensation Plan. It also covers other benefits offered to directors. Finally, it describes director compensation programs and plans from previous years under which certain directors may continue to hold deferred share units, restricted share equivalents, and frozen retirement plans.
Annual Board and Committee Retainers
Annual retainers are part of a compensation program for non-employee directors that is regularly evaluated by the CGC against relevant market data provided by an independent compensation consultant. In 2011, each director received an annual Board Retainer of $225,000, payable in (1) cash, (2) common stock, (3) deferred stock units (DSUs) settled in cash or (4) DSUs settled in common stock, depending upon whether the director has met his or her stock ownership guidelines. In October 2011, the Board of Directors, upon recommendation from the CGC,Corporate Governance Committee, approved certain changes tothe current director compensation program, effective January 2012. The Board has not increased compensation since that time.
In 2017, the Board and the Corporate Governance Committee reviewed the director compensation program effective for 2012. These changes areand did not make any changes. As part of this review, the Corporate Governance Committee reviewed benchmarking data from the Company’s compensation peer group (as described on page 26. In 2011, new directors could choose to receive annual retainersin “Executive Compensation Policies and Practices — 2017 Peer Groups” in the forms available to other directors. If a director’s service starts afterCD&A), as well as the annual meeting of shareholders, he or she receives a pro-rated annual Board Retainer, determined based on the number of calendar quarters during the year for which active service was provided for at least one day.
If a director elects to receive any portiontop 200 companies of the annual Board Retainer in cash, it is paid quarterly. If a director electsS&P 500, to receive any portion of the annual Board Retainer in equity, it is granted in full on the first day of the open trading period during the second quarter.
If a director does not meet the stock ownership guideline of $500,000, a portion of the annual Board Retainer is paid as a mandatory equity award equal to the lesser of: (1) 50% of the annual Board Retainer or (2) the amount needed to meet the stock ownership guideline. The mandatory equity portion of the annual Board Retainer will generally be paid in the form of Cigna common stock, but directors may elect to receive it in the form of DSUs settled in cash, DSUs settled in Cigna common stock, or a combination.
During 2011, the CGC conducted a review of the compensation program for non-employee directorsensure that our pay practices were competitive and considered relevant market data provided by PM&P, the independent compensation consultant. The CGC had not made any changes to the amount of non-employee director compensation since 2006. In October 2011, the Board of Directors, upon recommendation from the CGC, approved certain changes to the director compensation program. Beginning in 2012, each director will receive an annual Board retainer in the amount of $275,000. A portion ($180,000, which is approximately 66%) will be paid in Cigna common stock and the balance ($95,000, which is approximately 34%) of the annual Board retainer will be paid in cash.
Each director receives $10,000 annually for each committee membership (excluding the Executive Committee for which there is no retainer), and committee chairs receive an additional $5,000 annually for each committee chaired. These amounts are paid in cash in quarterly installments. There were no changes to the committee retainers for 2012 as a result of the CGC’s review of non-employee director compensation.
CIGNA – 2012 Notice of Annual Meeting of Shareholders and Proxy Statement – 27
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The following chart showssummarizes the annual retainersretainer compensation provided to directors for their service on Cigna’s Board and its committees. A director who also is an employee of the Non-Employee Director Compensation ProgramCompany does not receive payment for service as a director. The CEO is the only employee who currently serves as a director. There is no retainer for service on the Executive Committee. All retainer payments are made in effect for 2011.equal, quarterly installments. | | | | | Retainer
RETAINER TYPE | | Annual
AmountANNUAL AMOUNT
| Method of Payment
| Payment or Award Frequency
METHOD OF PAYMENT | Additional Information
| | | Board Retainer | | $275,000 $225,000
| | Cash, Cigna common stock deferred stock units settled in cash, deferred stock units settled in Cigna common stock, or a combination.($180,000)
Cash ($95,000) | | | | Chairman of the Board | | $225,000 | | Cash payments are made quarterly. Common stock and deferred stock units are awarded annually.
Deferred stock units are paid in cash or Cigna common stock on the third anniversary of the award or upon separation from service, if earlier.
| Each deferred stock unit provides for a future payment of one share of Cigna common stock or a cash payment equal to the fair market value of one share of Cigna common stock. Deferred stock units are entitled to dividend equivalents, which are treated as reinvested in additional deferred stock units.
| | | Committee Membership Retainerchair | | $ 15,000 $10,000
| | Cash | | Paid quarterly
| —
| Committee Chair Retainermember | | $ 10,000 $5,000
| | Cash | Paid quarterly
| This amount is paid to Committee Chairs in addition to their Board and Committee Membership Retainers.
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As discussed above, the Board of Directors, upon recommendation from the CGC, approved certain changes to the director compensation program, including to the annual Board retainer, effective January 1, 2012. Committee membership and committee chair retainers were not increased for 2012.
The following chart shows the annual retainers of the Non-Employee Director Compensation Program in effect for 2012.
Retainer
| Annual
Amount
| Method of Payment
| Payment or Award Frequency
| Additional Information
| Board Retainer
| $275,000
| A portion ($180,000, or approximately 66%) payable in Cigna common stock and the balance ($95,000, or approximately 34%) in cash.
| Paid quarterly
| —
| Committee Membership Retainer
| $10,000
| Cash
| Paid quarterly
| —
| Committee Chair Retainer
| $5,000
| Cash
| Paid quarterly
| This amount is paid to Committee Chairs in addition to their Board and Committee Membership Retainers.
|
Independent Chairman Compensation
In addition to the annual Board Retainer, the independent Chairman of the Board, Isaiah Harris, Jr., received an annual Chairman retainer of $225,000. The Chairman retainer was determined by the CGC following a review of market analysis provided by PM&P and consideration of the continuing duties and responsibilities for this role. The CGC made no change to the amount or form of the Chairman Retainer for 2012.
Stock Ownership Guideline
Pursuant to the terms of the Non-Employee Director Compensation Program, directors are required to hold at least $500,000 in any combination of Cigna common stock, deferred common stock, deferred stock units, and restricted share equivalents. Messrs. Foss, Sullivan and Wiseman had not yet met the directors’ stock ownership guideline as of December 1, 2011. With the changes to the Non-Employee Director Compensation Program adopted for 2012, directors receive approximately 66% of the Annual Board Retainer in Cigna common stock, which means that each director will continue to make progress each year towards meeting the guideline.
CIGNA – 2012 Notice of Annual Meeting of Shareholders and Proxy Statement – 28
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Director Compensation Table for Fiscal Year 2011
The table below includes information about 2011 compensation for non-employee directors, which consisted of cash and equity retainer payments, various share equivalent awards (listed below at their grant date fair value), matching charitable awards and company-paid life insurance premiums. Because the annual Board Retainer of $225,000 for each director may be paid in cash, Cigna common stock, deferred stock units or a combination of these payment vehicles (see page 26), annual Board Retainer payments are reflected below in the “Fees Earned or Paid in Cash” column, the “Stock Awards” column or both of these columns. Annual Committee Retainer payments are reflected in the “Fees Earned or Paid in Cash” column. The Director Compensation and the Director Aggregate Outstanding Equity Awards Tables that follow include 2011 information for Ms. Wait, who retired from the Board effective December 31, 2011. Mr. Cordani is the only management representative on the Board of Directors and does not receive additional compensation related to his service on the Board of Directors; his compensation is reflected in the Compensation Discussion and Analysis and Executive Compensation Tables sections beginning on pages 33 and 48, respectively.
Name (a) | Fees Earned or Paid in Cash ($) (b)(1) | Stock Awards ($) (c )(2) | All Other Compensation ($) (d)(3) | Total Compensation ($) (e) | Eric J. Foss(4) | 66,250 | 56,250 | 4,136 | 126,636 | Isaiah Harris, Jr. | 225,000 | 225,000 | 1,323 | 451,323 | Jane E. Henney, M.D. | 245,000 | - | 6,563 | 251,563 | Roman Martinez IV | 188,750 | 56,250 | 1,323 | 246,323 | John M. Partridge | 137,500 | 112,500 | 5,711 | 255,711 | James E. Rogers | 25,000 | 225,000 | 770 | 250,770 | Joseph P. Sullivan | 132,500 | 112,500 | 5,450 | 250,450 | Carol C. Wait | 250,000 | - | 6,884 | 256,884 | Eric C. Wiseman | 240,330 | 4,670 | 799 | 245,799 | Donna F. Zarcone | 150,000 | 100,000 | 19,579 | 269,579 | William D. Zollars | 245,000 | - | 1,125 | 246,125 | (1) Messrs. Partridge and Rogers, and Mmes. Wait and Zarcone each served as a committee chair and as a member of another committee. For all or a part of 2011, Messrs. Foss, Martinez, Sullivan, Wiseman and Zollars, and Dr. Henney each served as a member of two committees. Mr. Harris served as Chairman of the Board. For this service, Mr. Harris received a Chairman Retainer. See page 26 for additional information regarding the Board, Committee and Chairman Retainers. Director fees reflected in this column may be deferred by directors under the Director Deferred Compensation Plan, as discussed in “Deferral of Payments” on page 29. (2) This column includes the aggregate grant date fair value of Cigna common stock and/or deferred stock units awarded to directors as part of their annual Board Retainer, computed in accordance with FASB Accounting Standards Codification (ASC) Topic 718, applying the same model and assumptions as Cigna applies for financial statement reporting purposes as described in Note 20 to Cigna’s consolidated financial statements in the Company’s Annual Report on Form 10-K for the year ended December 31, 2011 (disregarding any estimates for forfeitures). See page 26 for additional information about the part of the annual Board Retainer granted in common stock or deferred stock units. (3) This column includes: • reinvested dividends on mandatory deferrals of deferred stock units and other share equivalents, and dividends paid in cash on Restricted Share Equivalents; • matching charitable awards made by Cigna as part of its matching gift program (also available on a broad basis to Cigna employees) in the amount of $5,000 each for Dr. Henney, Messrs. Partridge and Sullivan, and Mmes. Wait and Zarcone; and $4,000 for Mr. Foss; • the dollar value of company-paid life insurance premiums (also available on a broad basis to Cigna employees) for Messrs. Foss, Harris, Martinez, Partridge, Rogers, Sullivan, Wiseman, Dr. Henney, and Mmes. Wait and Zarcone; and • for Ms. Zarcone, company-paid premiums for family medical/dental insurance and business travel accident insurance in the amount of $13,172. These benefits are available on a broad basis to Cigna employees. This column does not include the value of premiums, if any, paid by the directors for additional life insurance, medical/dental care programs, long-term care, property/casualty personal lines, and various other insurance programs that are also available on a broad basis to Cigna employees and are described on page 30. (4) Mr. Foss became a director in July 2011, therefore, the compensation amounts reflect service for a portion of the year. |
CIGNA – 2012 Notice of Annual Meeting of Shareholders and Proxy Statement – 29
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Director Stock Ownership
Common Stock, Stock Unit, Share Equivalent, Hypothetical and Deferred Stock Ownership
The table below shows each independent director’s total ownership stake by listing the total holdings of Cigna common stock plus any share equivalents, stock units, deferred common stock and hypothetical shares of Cigna stock credited to a director’s deferred compensation account as of December 31, 2011 and the total value of such holdings, based on Cigna’s stock price on December 31, 2011, which was $42.00. This table includes stock ownership for Ms. Wait, who retired from the Board effective December 31, 2011. Mr. Cordani is the only management representative on the Board of Directors and his stock ownership is listed in the Executive Compensation Tables beginning on page 48 and the Stock Held by Directors, Nominees and Executive Officers Table on page 75.
Name | Common Stock | Restricted Share Equivalents, Deferred Stock Units, Hypothetical Shares of Cigna Stock, and Deferred Shares of Cigna Stock(1) | Total Stock Ownership | Total Stock Ownership Value ($) | Eric J. Foss | 1,302 | - | 1,302 | 54,684 | Isaiah Harris, Jr. | - | 43,222 | 43,222 | 1,815,324 | Jane E. Henney, M.D. | - | 45,950 | 45,950 | 1,929,900 | Roman Martinez IV | 3,000 | 46,069 | 49,069 | 2,060,898 | John M. Partridge | 2,372 | 9,977 | 12,349 | 518,658 | James E. Rogers | - | 33,542 | 33,542 | 1,408,764 | Joseph P. Sullivan | - | 5,832 | 5,832 | 244,944 | Carol Wait | - | 49,304 | 49,304 | 2,070,768 | Eric C. Wiseman | - | 7,365 | 7,365 | 309,330 | Donna F. Zarcone | 2,000 | 28,002 | 30,002 | 1,260,084 | William D. Zollars | - | 29,788 | 29,788 | 1,251,096 | (1) Restricted share equivalents, granted under the Restricted Share Equivalent Plan, are described on page 30; deferred stock units, awarded as a portion of the Board and/or Chairman Retainers, are described on page 26; hypothetical shares of Cigna common stock, credited to a director’s deferred compensation account under the Director Deferred Compensation Plan are described on page 29; and deferred common stock, awarded as a part of the Board and/or Chairman Retainers, is described on page 26. |
CIGNA – 2012 Notice of Annual Meeting of Shareholders and Proxy Statement – 30
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2011 Director Aggregate Outstanding Equity Awards Table
This table lists each director’s total number of share equivalent awards outstanding on December 31, 2011. The table does not include any Cigna common stock purchased by a director, and deferred Cigna common stock resulting from deferred stock units settled in Cigna common stock, or any share equivalents resulting from voluntary deferral of cash compensation invested in the Cigna stock fund.
Name | Deferred Common Stock(1) | Deferred Stock Units(2) | Restricted Share Equivalents(3) | Compensation Required to be Invested in Hypothetical Stock(4) | Hypothetical Shares of Common Stock(5) | Total Deferred Common Stock, Deferred Stock Units and Other Share Equivalents | Eric J. Foss | - | - | - | - | - | - | Isaiah Harris, Jr. | - | 11,298 | 13,500 | 328 | - | 25,126 | Jane E. Henney, M.D. | - | 13,426 | 13,500 | 1,482 | 4,833 | 33,241 | Roman Martinez IV | - | 11,169 | 13,500 | 328 | - | 24,997 | John M. Partridge | - | 9,977 | - | - | - | 9,977 | James E. Rogers | 11,660 | 6,529 | - | - | - | 18,189 | Joseph P. Sullivan | - | 5,832 | - | - | - | 5,832 | Carol C. Wait | - | 6,529 | - | 9,774 | 18,063 | 34,366 | Eric C. Wiseman | - | 7,365 | - | - | - | 7,365 | Donna F. Zarcone | - | 11,713 | 13,500 | 731 | 2,058 | 28,002 | William D. Zollars | - | 6,529 | 13,500 | 731 | 2,058 | 22,818 | (1) This column includes the equity portion of the 2011 (and any previous year’s) Board Retainer granted in Cigna common stock and further deferred under the Director Deferred Compensation Plan (see page 26 for additional information about the Board Retainers). (2) This column includes the equity portion of the 2011 (and any previous year’s) annual Board Retainer granted in Cigna deferred stock units and any related dividend equivalents (see page 26 for additional information about the annual Board and Chairman Retainers). (3) This column includes restricted share equivalents granted under the Restricted Share Equivalent Plan. See page 30 for additional information about these grants. (4) This column includes hypothetical shares of Cigna common stock acquired pursuant to a pre-2006 requirement that directors invest or defer a portion of their Board Retainer in shares of hypothetical Cigna common stock as well as any reinvested hypothetical dividends earned on hypothetical shares. (5) This column includes hypothetical shares of Cigna common stock credited to directors’ restricted deferred compensation accounts under the terms of the retirement plan in effect between 1997 and 2005 as described on page 31. |
All units and other share equivalents are fully vested with the exception of the 13,500 restricted share equivalents granted under the Restricted Share Equivalent Plan to each of Dr. Henney, Mmes. Wait and Zarcone and Messrs. Harris, Martinez and Zollars described on page 30. The number of share equivalents resulting from voluntary deferrals of cash compensation invested into the Cigna stock fund for Mr. Harris equals 18,096; for Dr. Henney equals 12,709; for Mr. Martinez equals 13,862; for Mr. Rogers equals 8,143; for Ms. Wait equals 14,938; and for Mr. Zollars equals 6,970. The number of shares of deferred Cigna common stock resulting from deferred stock units settled in equity equals 7,210 for both Messrs. Martinez and Rogers. These amounts are not included in the table above.
Deferral of Payments Directors may elect to defer the payment of their annual Board and Committee Retainers beyond their designated payment date underUnder the Deferred Compensation Plan of 2005 for Directors of Cigna Corporation (Director Deferred Compensation(Deferral Plan). Under, directors may elect to defer the Director Deferred Compensation Plan, anypayment of the cash and/or common stock portion of thetheir annual Board or Committee Retainers that is voluntarily deferredretainers. Deferred common stock compensation is credited to a director’s deferred compensation account. Amounts deferred that would have been payable in common stock are creditedaccount as a number of shares of hypothetical common stock and ultimately paid in shares. For deferredDeferred cash compensation is ultimately paid in cash, and directors are offeredhave a choice of hypothetical investment funds whose rates of return gains and losses are credited to that account. Subject to limitations under Section 16 of the Securities Exchange Act of 1934 and Cigna’s insider trading policy, directors who participate in the Director Deferred Compensation Plan can make deferral elections on an annual basis and change their hypothetical investment allocations for cash deferrals once per quarter. TheThese funds offered to directors include a hypothetical Cigna stock fund and several other funds that are selected from those offered to all Cigna employees under the Cigna 401(k) Plan. Directors may elect to receive payments under the Director Deferred CompensationDeferral Plan in a lump sum or in installments. TheLump sum payments are made, in a lump sum or payment installments beginningbegin, in January of the year following a director’s separation from service as a director or a specified year while still in service.
Amounts deferred under the Director Deferred Compensation Plan are not subject to forfeiture. Deferred compensation balances are a general unsecured and unfunded obligation of the Company.
| | | | | | | | | Cigna 2018 Notice of Annual Meeting of Shareholders and Proxy Statement | | | 25 | |
| CORPORATE GOVERNANCE MATTERS |
CIGNA – 2012 Notice of Annual Meeting of Shareholders and Proxy Statement – 31
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Insurance CoverageStock Ownership Guidelines
Cigna offersrequires directors to each non-employee director,maintain a stock ownership level of at no cost to him or her, group term life insurance coverageleast $500,000 in the amountvalue of the annual Board Retainer ($225,000 during 2011), and business travel accident insurance coverage in the amount of threeCigna common stock, which is more than five times the annual Board Retainer ($675,000 during 2011). Directors may purchase or participate in, throughcash retainer. Under the paymentguidelines, directors have five years from their election to the Board to satisfy this ownership obligation. Common stock, deferred common stock, restricted stock units and hypothetical shares of premiums on an after-tax basis, additional life insurance, medical/dental care programs, long-term care, property/casualty personal lines, and various other insurance programs available onCigna common stock held by a broad basis to Cigna employees. In addition,director count toward the stock ownership guidelines for directors may elect to purchase worldwide emergency assistance coverage. This program provides international emergency medical, personal, travel and security assistance, and is also currently available to Cigna executive officers and certain other Cigna employees who frequently travel abroad for business. Each non-employee director whose service started before January 1, 2006 is eligible, upon separation fromFebruary 2014. Directors whose service started after February 2014 may only count common stock and deferred common stock for compliance with at least nine yearsstock ownership guidelines. As of Board service, to continue to (1) participate for two years in the medical/dental care programs currently offered by Cigna to retired employees, through the payment of premiums by the director on an after-tax basis, and (2) use for one year, financial planning and tax preparation services in the amount of up to $6,500, paid by Cigna. Cigna will also provide eligible retired directors, at no cost to the director, with $10,000 of group term life insurance coverage for life. In addition,December 31, 2017, all directors may, at their own expense and if otherwise eligible, continue other life insurance, long-term care insurance and property/casualty personal lines insurance pursuant to the terms of the applicable policies. New directors whose service onare in compliance with the Board started after January 1, 2006 are not eligible for these benefits.stock ownership guidelines and met or exceeded their ownership requirement.
Financial Planning and Matching Charitable Gift ProgramPrograms Non-employee directorsDirectors may participate in the same financial planning and tax preparation program available to Cigna executive officers. Under this program, Cigna will make direct payments or reimburse directors for financial planning services that are provided by firms designated by Cigna and for tax preparation services. Non-employee directorsservices in the amount of up to $6,500 annually. Each director whose service started before 2006 and has at least nine years of board service upon separation from service also is eligible for direct payments or reimbursement in the amount of up to $5,000 for financial planning and tax preparation services during theone-year period following separation from service.
Directors also may also participate in the matching charitable gift program available to Cigna employees, under which Cigna will make a matching charitable gift of up to $5,000 annually. Director Compensation Program 2006-2009 In addition, upon a director’s retirement, in recognition of the retiring director’s service, the Board may make a donation in the amount of $10,000 to a charitable organization of the director’s choice.
Insurance Coverage Effective from 2006 through 2009,Cigna provides each director, received anon the same basis as employees and at no cost to the director, group term life insurance coverage equal to the annual Board Retainer initially valuedretainer ($275,000 during 2017), and business travel accident insurance coverage equal to three times the annual Board retainer ($825,000 during 2017).
Directors also may purchase or participate in, by paying premiums on anafter-tax basis, additional life insurance, medical care, long-term care, property/casualty personal lines and various other insurance programs available on a broad basis to Cigna employees. Directors also may elect to purchase worldwide emergency assistance coverage. This program, which provides international emergency medical, personal, travel and security assistance, also is available to Cigna executive officers and certain other Cigna employees who frequently travel abroad for business. Cigna provides each retired director whose service started before 2006 and who has at $225,000. Ofleast nine years of Board service upon separation from service with $10,000 of group term life insurance coverage, with premiums paid by Cigna. In addition, these directors may also participate for two years following separation from service in the medical care programs currently offered by Cigna to retired employees, with premiums paid by the director on anafter-tax basis. | | | 26 | | Cigna 2018 Notice of Annual Meeting of Shareholders and Proxy Statement |
| CORPORATE GOVERNANCE MATTERS |
DIRECTOR COMPENSATION TABLE FOR 2017 The table below includes information about the compensation paid tonon-employee directors in 2017. Mr. Cordani, the only Company employee on the Board of Directors, does not receive any director compensation for his Board service. | | | | | | | | | | | | | | | | | | | | | | NAME | | FEES EARNED OR PAID IN CASH ($) | | STOCK AWARDS ($) | | ALL OTHER
COMPENSATION ($) | | TOTAL
COMPENSATION ($) | (a) | | (b) | | (c) | | (d) | | (e) | | | | | | Eric J. Foss | | | | 115,000 | | | | | 180,000 | | | | | 365 | | | | | 295,365 | | | | | | | Michelle D. Gass(1) | | | | 28,750 | | | | | 45,000 | | | | | 61 | | | | | 73,811 | | | | | | | Isaiah Harris, Jr. | | | | 320,000 | | | | | 180,000 | | | | | 918 | | | | | 500,918 | | | | | | | Jane E. Henney, M.D. | | | | 120,000 | | | | | 180,000 | | | | | 6,157 | | | | | 306,157 | | | | | | | Roman Martinez IV | | | | 120,000 | | | | | 180,000 | | | | | 1,373 | | | | | 301,373 | | | | | | | John M. Partridge | | | | 120,000 | | | | | 180,000 | | | | | 5,365 | | | | | 305,365 | | | | | | | James E. Rogers | | | | 115,000 | | | | | 180,000 �� | | | | | 820 | | | | | 295,820 | | | | | | | Eric C. Wiseman | | | | 115,000 | | | | | 180,000 | | | | | 820 | | | | | 295,820 | | | | | | | Donna F. Zarcone | | | | 115,000 | | | | | 180,000 | | | | | 6,316 | | | | | 301,316 | | | | | | | William D. Zollars | | | | 120,000 | | | | | 180,000 | | | | | 1,017 | | | | | 301,017 | | | | | | | | | | | | | | | | | | | | | | | |
(1) Ms. Gass resigned from the Board of Directors on February 21, 2017. Fees Earned or Paid in Cash (Column (b)) In addition to the annual cash retainer for Board service received by each director: Dr. Henney and Messrs. Martinez, Partridge and Zollars each served as a committee chair and as a member of another committee. Ms. Zarcone and Messrs. Foss, Rogers and Wiseman each served as a member of two committees. Mr. Harris served as Chairman of the Board. Director fees listed in this column may be deferred by directors under the Deferral Plan (see “Deferral of Payments” above). Stock Awards (Column (c)) Column (c) lists the aggregate grant date fair value of Cigna common stock awarded to directors as part of their Board retainer, computed in accordance with FASB Accounting Standards Codification (ASC) Topic 718, applying the same model and assumptions that amount, $75,000 was fixed compensationCigna applies for financial statement reporting purposes as described in Note 16 to Cigna’s consolidated financial statements in the Company’s Annual Report onForm 10-K for the year ended December 31, 2017 (disregarding any estimates for forfeitures). Common stock awards listed in this column may be deferred by directors under the Deferral Plan. See “Director Ownership” below for amounts and a description of equity-based awards outstanding as of December 31, 2017. All Other Compensation (Column (d)) Column (d) includes: reinvested dividends on certain share equivalent awards and on deferred Cigna common stock, and dividends paid in cash and $150,000 was mandatorily deferred for three yearson restricted stock units, as described below under “Director Ownership;” matching charitable awards made by Cigna as part of its matching gift program (also available on a broad basis to Cigna employees) in the formamount of $5,000 each for Dr. Henney, Ms. Zarcone and Mr. Partridge; and the dollar value of Company-paid life insurance premiums for all directors. There were no perquisites or personal benefits provided tonon-employee directors that exceeded $10,000, as permitted by SEC rules. | | | | | | | | | Cigna 2018 Notice of Annual Meeting of Shareholders and Proxy Statement | | | 27 | |
| CORPORATE GOVERNANCE MATTERS |
DIRECTOR OWNERSHIP The table shows Cigna securities held by eachnon-employee director as of December 31, 2017. The value of these securities was calculated using $203.09, which was Cigna’s closing stock price on December 29, 2017, the last business day of the year. | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | NAME | | COMMON STOCK (a) | | DEFERRED COMMON STOCK (b) | | RESTRICTED STOCK UNITS (c) | | HYPOTHETICAL SHARES OF COMMON STOCK (d) | | TOTAL OWNERSHIP (e) | | TOTAL OWNERSHIP VALUE (f) | | | | | | | | Eric J. Foss | | | | 13,413 | | | | | — | | | | | — | | | | | — | | | | | 13,413 | | | | $ | 2,724,046 | | | | | | | | | Isaiah Harris, Jr. | | | | 1,937 | | | | | — | | | | | 13,500 | | | | | 23,255 | | | | | 38,692 | | | | $ | 7,857,958 | | | | | | | | | Jane E. Henney, M.D. | | | | 1,836 | | | | | — | | | | | 13,500 | | | | | 19,024 | | | | | 34,360 | | | | $ | 6,978,172 | | | | | | | | | Roman Martinez IV | | | | 9,496 | | | | | 22,780 | | | | | 13,500 | | | | | 15,423 | | | | | 61,199 | | | | $ | 12,428,905 | | | | | | | | | John M. Partridge | | | | 33,267 | | | | | — | | | | | — | | | | | — | | | | | 33,267 | | | | $ | 6,756,195 | | | | | | | | | James E. Rogers | | | | — | | | | | 37,520 | | | | | — | | | | | 11,299 | | | | | 48,819 | | | | $ | 9,914,651 | | | | | | | | | Eric C. Wiseman | | | | 4,200 | | | | | 12,117 | | | | | — | | | | | 3,652 | | | | | 19,969 | | | | $ | 4,055,504 | | | | | | | | | Donna F. Zarcone | | | | 5,971 | | | | | 8,230 | | | | | 13,500 | | | | | 2,797 | | | | | 30,498 | | | | $ | 6,193,839 | | | | | | | | | William D. Zollars | | | | 212 | | | | | — | | | | | 13,500 | | | | | 9,784 | | | | | 23,496 | | | | $ | 4,771,803 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Deferred Common Stock (Column (b)) Column (b) includes the equity portion of the 2017 and any previous year’s Board retainer granted in Cigna common stock or deferred stock units whose value tracks that have been deferred under the Deferral Plan. Restricted Stock Units (Column (c)) Column (c) includes restricted stock units that were issued in April 2014 upon the cancellation and exchange of Cigna common stock. After shareholder approval13,500 restricted share equivalents held by each of Dr. Henney, Ms. Zarcone and Messrs. Harris, Martinez and Zollars. The restricted share equivalents were originally granted pursuant to the terms of the Directors Equity Plancompensation program in 2010, directors were offeredplace at the opportunitytimes of the directors’ election to elect to settle outstanding deferredthe Board between 2004 and 2006. The restricted share equivalents and the restricted stock units have the same terms and conditions, except that, upon separation of service, the restricted share equivalents would have settled in cash and the restricted stock units will settle in shares of Cigna common stock. The number of deferredrestricted stock units awarded to a director each quarter was determined based on the closing price of Cigna common stock on the last business day of the second month of that quarter. Dividend equivalents are credited on deferred stock units and treated as reinvested in additional whole deferred stock units. Three yearsvest after the original award, the payout per awarded stock unit is calculated based on the closing price of Cigna common stock on the last business day of the second month of the quarter in which the third anniversary of the grant date falls, and payment is made in cash the following month. If service as a director ends during the three-year deferral period, valuation and payment would be made in the quarter following separation from service on the same basis as described above. The deferred stock units awarded under the Non-Employee Director Compensation Program in effect from 2006 through 2009 are not subject to forfeiture and are a general unsecured and unfunded obligation of the Company.
CIGNA – 2012 Notice of Annual Meeting of Shareholders and Proxy Statement – 32
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Amended and Restated Restricted Share Equivalent Plan for Non-Employee Directors
From 1989 to 2005, non-employee directors were awarded a one-time grant upon joining the Board of Directors. Directors who joined the Board before October 1, 2004 received a grant of shares of Cigna restricted common stock, and directors who joined the Board after October 1, 2004, received a grant of restricted share equivalents. These grants were made under the Amended and Restated Restricted Share Equivalent Plan for Non-Employee Directors of Cigna Corporation (Restricted Share Equivalent Plan). Effective January 16, 2006, the Restricted Share Equivalent Plan was frozen and no new awards were made to anyone joining the Board of Directors after that date.
The provisions of the Restricted Share Equivalent Plan provide for the vesting of restricted share equivalents issued under the plan on the later of: (1) six months after the date of grant; or (2) the earliest of nine years of continuous service on the Board, attainmentor upon reaching age 65. All of age 65, changethese restricted stock units are vested.
Hypothetical Shares of control, death or disability of the director. However, if a director’s resignation is accepted because he or she failed to receive the required majority vote for reelection and the director’s restrictedCommon Stock (Column (d)) Column (d) includes (1) share equivalents have not yet vested, then a prorated portionresulting from voluntary deferrals of the director’s restricted share equivalents, determined by the number of complete months the director served on the Board, shall vest effective as of the date of the director’s resignation. As a result of the resignation or any other termination of service as a director before vesting, any unvested restricted share equivalents are forfeited, except to the extent that a majority of the Board of Directors (other than the separating director) approves their vesting. As of the end of 2011, Messrs. Harris, Martinez and Zollars, Dr. Henney and Ms. Zarcone each have 13,500 unvested restricted share equivalents under the Restricted Share Equivalent Plan. Payment of the value of vested restricted share equivalents is made in cash after a director’s separation from service. The payout is calculated based on the closing price of Cigna common stock on the director’s last business day of service with Cigna, and payment is made in cash within 45 days thereafter.
Each year that a restricted share equivalent is outstanding under the Restricted Share Equivalent Plan, a director receives a payment equal to the amount of any dividends declared and paid on a share of Cigna common stock during that year (to the extent that the record date for any such dividend occurs while the restricted share equivalent is outstanding).
Frozen Retirement Plan
Cigna directors who served on the Board before December 31, 2005 participated in a retirement plan that replaced a retirement plan that had been frozen December 31, 1996. Under the revised plan, an annual credit was made to a restricted deferred compensation account established for each director. This revised retirement plan was available to directors who were not fully vestedhypothetically invested in the former retirement plan when it was frozen on December 31, 1996 and to those who joined Cigna’s Board after 1996, but before December 31, 2005. In addition to the annual credit, a one-time credit equal to the director’s accumulated unvested benefits under the former retirement plan was made in 1997 to those directors who had not vested in the former plan. The amounts credited to a director’s restricted deferred compensation account under the revised retirement plan were invested inCigna stock fund; (2) hypothetical shares of Cigna common stock. The per share price for the one-time credit in 1997 was equalstock credited to the average closing price of Cigna common stock over the last ten business days of 1996.
For each hypothetical share in a directors’ restricted deferred compensation account,accounts under the terms of the retirement plan in effect between 1997 and 2005; and (3) hypothetical dividends equal to the amount of actual dividends paid on shares of Cigna common stock acquired pursuant to apre-2006 requirement that directors invest or defer a portion of their Board retainer in shares of hypothetical Cigna common stock. Although these securities are not common stock, the value of the hypothetical shares of Cigna common stock credited to a director’s deferred compensation account is tied directly to the value of Cigna common stock.
| | | 28 | | Cigna 2018 Notice of Annual Meeting of Shareholders and Proxy Statement |
Advisory Approval of Executive Compensation (Proposal 2) Our Board is committed to strong governance and are hypothetically reinvested in one or more of the available hypothetical funds. CIGNA – 2012 Notice of Annual Meeting of Shareholders and Proxy Statement – 33
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INFORMATION ABOUT ITEM 2.
ADVISORY APPROVAL OF CIGNA’S EXECUTIVE COMPENSATION
Cigna is seeking your approval of an advisory resolution on the 2011 compensation for the named executive officers as reported in this proxy statement. The Company has a pay-for-performance compensation philosophyrecognizes that includes a focus on long-term incentives. In making determinations regarding compensation of Cigna’s named executive officers, the People Resources Committee (PRC) and the Board are guided by an established compensation philosophy and the following key compensation program goals:
•
reward the creation of long-term value for Cigna shareholders and align the interests of the Company’s executives with those of its shareholders;
•
emphasize performance-based short-term and long-term compensation;
•
motivate executives to deliver superior results, with appropriate consideration of risk while maintaining commitment to the Company’s ethics and values;
•
reward the achievement of long-term financial results more heavily than the achievement of short-term results, with greater rewards for sustained, long-term performance; and
•
provide market-competitive compensation opportunities designed to attract and retain highly skilled executives.
These compensation goals were appliedhave an interest in the PRC’s compensation determinations for Cigna’s executive officers in 2011, and the compensation outcomes for the named executive officers described throughout the proxy statement reflect Cigna’s strong financial performance and results in 2011. Specifically, Cigna performed well against the performance goals established under its annual incentive plan, highlighted by the performance with respect to adjusted income from operations. In determining the compensation for the named executive officers, the PRC took into consideration these strong enterprise results as well as significant individual performance contributions from each of the named executive officers.
To achieve the goals listed above, the PRC uses a number of strong governance practices and controls in makingour executive compensation decisions, including:
•
Paying for Performance – The PRC conducts an annual pay-for-performance review, facilitated by the compensation consultant, during which the PRC assesses the relationship between the Company’s resultspolicies and the compensation awarded to executive officers.
•
Aligning Interests of Executives and Shareholders – Under the Long-Term Incentive Plan, executives are compensated for creating long-term growth for Cigna shareholders. Stock options and strategic performance shares (SPSs) are not fully vested until the end of three-year performance periods, and the payout of SPSs is based on relative total shareholder return, revenue growth, and adjusted income from operations growth. Shareholder interests are also aligned with the operation of the Management Incentive Plan, which is designed to motivate executives to achieve the Company’s annual financial goals, and also provides that if the Company misses the performance threshold, no annual incentives will be paid under the Plan.
•
Emphasizing Performance-Based and Long-Term Compensation – In 2011, performance-based compensation represented approximately 91% of total target direct compensation for the CEO, and on average 77% of total target direct compensation for all other active named executive officers. Of the CEO’s target performance-based compensation, 83% represented long-term incentive compensation. On average, 76% of the other active named executive officers’ target performance-based compensation was in the form of long-term incentives.
•
Using an Independent Compensation Consultant – The PRC regularly retains an independent compensation consultant to the PRC to advise on market practices and facilitate evaluation of the relationship between the compensation of the Company’s executive officers and the Company’s performance.
•
Conducting Market Analysis and Alignment – The PRC regularly reviews market analysis regarding compensation of Cigna’s named executive officers and generally aligns target compensation to the 50th percentile of that market data (with superior pay awarded for superior performance).
Disclosure related to the compensation of Cigna’s named executive officers in 2011 appears in the Compensation Discussion and Analysis section beginning on page 33 and the Executive Compensation Tables section of this proxy statement beginning on page 48. You are encouraged to review this information before casting your vote on this item. Additional information is also included in the Proxy Summary beginning on page 4.
In accordance with the rules underpractices. Section 14A of the Securities Exchange Act of 1934, as amended (the Exchange Act) requires that we provide our shareholders with the opportunity to vote to approve, on an advisory basis, the compensation of our named executive officers (NEOs). In recognition of the preference of shareholders expressed at our 2011 annual meeting and reaffirmed at our 2017 annual meeting, the Board has held “say on pay” advisory votes on an annual basis. Consistent with this practice and SEC rules, we are asking shareholdersyou to approve the following advisory resolution at the Annual Meeting:resolution:
Resolved, that the shareholders approve, on an advisory basis, the compensation of the Company’s named executive officers as disclosed in the Company’s Proxy Statement for the 20122018 Annual Meeting of Shareholders pursuant to the compensation disclosure rules of the Securities and Exchange Commission, including the Compensation Discussion and Analysis, Executive Compensation Tables and accompanying narrative disclosure. CIGNA – 2012 NoticeWe believe that our executive compensation program design effectively aligns the interests of Annual Meetingour executive officers with those of Shareholdersour shareholders by tying a significant portion of their compensation to Cigna’s performance and rewarding our executive officers for the creation of long-term shareholder value. In considering your vote, we encourage you to review the Proxy Statement – 34 Summary, the Compensation Discussion and Analysis and the Executive Compensation Tables.
BackThis advisory vote is intended to Contents
address our overall compensation policies and practices related to the NEOs rather than any specific element of compensation. Because your vote is advisory, it will not be binding upon the Board. Although non-binding,However, the PRC values the opinions of our shareholdersBoard and People Resources Committee value your opinion and will review and consider the voting results when consideringmaking future executive compensation arrangements.decisions. The Board of Directors unanimously recommends that shareholders vote FOR advisory approval of the Company’s executive compensation.
| | | | | | | | | | | | | | | | | | | | The Board of Directors unanimously recommends that shareholders vote FOR the advisory approval of the Company’s executive compensation. | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | Cigna 2018 Notice of Annual Meeting of Shareholders and Proxy Statement | | | 29 | |
REPORT OF THE PEOPLE RESOURCES COMMITTEECompensation Discussion and Analysis
The People Resources Committee of the Board of Directors (PRC) reviewed and discussed with Cigna’s management the following
This Compensation Discussion and Analysis (CD&A). Based on this review and discussion, the PRC recommended to the Board of Directors that the CD&A be included in this proxy statement and be incorporated by reference in the Annual Report on Form 10-K for the year ended December 31, 2011 filed with the Securities and Exchange Commission. The Board accepted the PRC’s recommendation. People Resources Committee:
James E. Rogers, Chairman
Roman Martinez IV
Joseph P. Sullivan
William D. Zollars
CIGNA – 2012 Notice of Annual Meeting of Shareholders and Proxy Statement – 35
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COMPENSATION DISCUSSION AND ANALYSIS
Objectives and Philosophy
Cigna’s compensation philosophy supports our business strategy and adheres to the following key goals:
•
reward the creation of long-term value for Cigna shareholders and align the interests of the Company’s executives with those of its shareholders;
•
emphasize performance-based short-term and long-term compensation;
•
motivate executives to deliver superior enterprise results, with appropriate consideration of risk while maintaining commitment to the Company’s ethics and values;
•
reward the achievement of favorable long-term financial results more heavily than the achievement of short-term results, with greater rewards for sustained, long-term performance; and
•
provide market-competitive compensation opportunities designed to attract and retain highly skilled executives.
To achieve the key goals of Cigna’s compensation philosophy, the PRC uses a number of strong governance practices and controls in making executive compensation decisions, including:
•
Paying for Performance – The PRC conducts an annual pay-for-performance review, facilitated by describes the compensation consultant, during whichpolicies, programs and decisions regarding our named executive officers (NEOs) for 2017, who include our Chief Executive Officer, Chief Financial Officer, the PRC assesses the relationship between the Company’s results and the compensation awarded tothree most highly-compensated executive officers.
•
Aligning Interestsofficers as of Executives and Shareholders – Under the Long-Term Incentive Plan, executives are compensated for creating long-term growth for Cigna shareholders. Stock options and strategic performance shares (SPSs) are not fully vested until the end of three-year performance periods,2017, as well as our former Chief Financial Officer and the payout of SPSsone other executive officer who retired during 2017. The People Resources Committee (the Committee) is based on measures of relative total shareholder return, revenue growth, and adjusted income growth. Shareholder interests are also alignedcharged with the operation of the Management Incentive Plan, which is designed to motivate executives to achieve the Company’s annual financial goals, and also provides that if the Company misses the performance threshold, no annual incentives will be paid under the Plan.
•
Emphasizing Performance-Based and Long-Term Compensation – In 2011, performance-based compensation represented approximately 91% of total target direct compensation for the Chief Executive Officer (CEO), and on average 77% of total target direct compensation for all other active named executive officers. Of the CEO’s target performance-based compensation, 83% represented long-term incentive compensation. On average, 76% of the other active named executive officers’ target performance-based compensation was in the form of long-term incentives.
•
Using an Independent Compensation Consultant – The PRC regularly retains an independent compensation consultant to the PRC to advise on market practices and facilitate evaluation of the relationship between the compensation of the Company’s executive officers and the Company’s performance.
•
Conducting Market Analysis and Alignment – The PRC regularly reviews market analysis regarding compensation of Cigna’s named executive officers and generally aligns target compensation to the 50th percentile of that market data (with superior pay awarded for superior performance).
Best Practices
Cigna seeks to be a leader in compensation governance practices. The PRC regularly considers competitive market trends and strives to understand the views of shareholders when adopting emerging compensation best practices or considering changes to existing policies. Examplesoversight of the Company’s executive compensation governance practices include:
•
no tax gross-up benefits upon a change of control;
•
“double trigger” vesting of equity awards following a change of control (requiring termination of employment);
•
a disgorgement of awards (or “clawback”) policy beyond the mandates of Sarbanes-Oxley that includes annual incentive, stock option and SPS awards so that incentiveplans and makes all compensation awarded to nameddecisions for our executive officers can be recouped inwith the eventexception of a restatement ofour CEO, for whom the Company’s financials, the executive’s termination on certain grounds or the executive’s violation of restrictive covenants;
•
robust stock ownership guidelines and holding requirements for equity awards and a prohibition against hedging, to promote alignment of officers’ interests with shareholders;
•
management of Cigna’s equity plan share use, burn rate and total dilution to determine an annual maximum share usage limit, which has been below the maximum limits of the Long-Term Incentive Plan; and
•
limited perquisites provided to executive officers.
CIGNA – 2012 Notice of Annual Meeting of Shareholders and Proxy Statement – 36
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Results of Shareholder Vote on Executive Compensation
At the 2011 annual meeting, shareholders cast advisory votes on the 2010 compensation of the Company’s named executive officers (“say-on-pay”) and on the frequency of future say-on-pay votes (“say-on-pay vote frequency”). Shareholders voted to approve the say-on-pay proposal, with 74% of votes cast in favor, and expressed their preference that future say-on-pay votes be held on an annual basis, with 71% of votes cast for this frequency. With respectCommittee makes recommendations to the say-on-pay vote frequency proposal,Board of Directors. This section also describes why the PRCCommittee has chosen each element of compensation and the full Board took the shareholder vote into account and decided that future say-on-pay votes would be held annually (the Board’s original recommendation at the 2011 annual meeting had been to hold say-on-pay votes triennially). Although last year’s annual meeting took place after the 2011how it made compensation decisions. For 2017, our NEOs are:
| | | | | NAME | | TITLE | | | David M. Cordani | | President and Chief Executive Officer | | | Eric P. Palmer(1) | | Executive Vice President and Chief Financial Officer | | | Christopher J. Hocevar(2) | | President, Strategy, Segments and Solutions | | | Nicole S. Jones | | Executive Vice President and General Counsel | | | Jason D. Sadler(3) | | President, International Markets | | | Thomas A. McCarthy(4) | | Retired Executive Vice President and Chief Financial Officer | | | Matthew G. Manders(5) | | Retired President, Government & Individual Programs and Group Insurance | | | |
| (1) | Mr. Palmer was appointed Executive Vice President and Chief Financial Officer effective June 16, 2017. |
| (2) | Mr. Hocevar was appointed President, Strategy, Segments and Solutions effective February 23, 2017. |
| (3) | Mr. Sadler is based in Hong Kong. His base salary and annual incentive award are paid in Hong Kong dollars and, throughout this CD&A, have been converted to U.S. dollars using an exchange rate of $1 Hong Kong dollar = $0.12799676 U.S. dollar, the average of the dailymid-points between the bid and the ask prices for each trading day in the month of December 2017. |
| (4) | Mr. McCarthy retired from the Company effective June 16, 2017. |
| (5) | Mr. Manders retired from the Company effective November 3, 2017. |
This CD&A is organized as follows: | | | | | | | Executive Summary provides an overview of our compensation philosophy and ourpay-for-performance alignment. | | | Pages 31 — 33 | | | | | | | | | | | Executive Compensation Policies and Practicesdescribes our compensation objectives and practices, as well as how we set target total direct compensation and target pay mix. | | | Pages 33 — 36 | | | | | | | | | | | Elements of Compensationdescribes each form of compensation we pay and how our executive compensation program is tied strongly to performance. | | | Pages 37 — 47 | | | | | | | | | | | Employment Arrangements and Post-Termination Paymentssummarizes any employment agreements, our severance and other post-termination arrangements as well as our change of control arrangements. | | | Pages 48 — 49 | | | | | | | | | | | Processes and Procedures for Determining Executive Compensationprovides an overview of the Committee’s role in executive compensation, the process for determining executive officer compensation and the compensation consultant’s role. | | | Pages 49 — 50 | | | | | | | | | | | Other Practicesdescribes our stock ownership guidelines, our hedging and pledging restrictions, our clawback policy and the impact of tax and accounting treatment on our executive compensation program. | | | Pages 51 — 53 | |
| | | 30 | | Cigna 2018 Notice of Annual Meeting of Shareholders and Proxy Statement |
EXECUTIVE SUMMARY Cigna’s executive compensation program is based on the philosophy that executive pay should strongly align with the interests of our shareholders, directly link to Company and individual performance and attract and retain executive talent. We believe the achievement of our enterprise goals will result in the creation of meaningful and sustained long-term value for our shareholders. Each of the measures in our performance-based plans are designed to align with and support our business strategy. We focus on driving enterprise profitability, growth and operating expense efficiency to support investment in innovation, customer loyalty and stock performance. The primary principles underlying our compensation philosophy are to: | | | | | | | | | | | | | | | | | | Motivate superior
enterprise results
with appropriate
consideration of risk
while maintaining a
commitment to the
Company’s ethics and
values. | | Align the interests of
the Company’s
executives with
those of its
shareholders and
reward the creation
of long-term value
for Cigna
shareholders. | | Emphasize
performance-based
short-term and
long-term
compensation over
fixed
compensation. | | Reward the
achievement of
favorable long-
term financial
results more
heavily than the
achievement of
short-term results. | | Provide market-
competitive
compensation
opportunities
designed to attract
and retain highly
qualified
executives. | | | | | | | | | |
Pay-for-Performance Alignment Cigna’s compensation program is heavily weighted to emphasize performance-based pay over fixed compensation. Our Management Incentive Plan (MIP) is a cash-based program designed to reward the achievement of annual enterprise results. Long-term performance is rewarded through annual long-term incentive (LTI) awards, including Strategic Performance Shares (SPSs), the payout of which is based upon performance over a three-year period. Financial measures within the MIP and SPS program, such as adjusted income from operations,(1) revenue and operating expense ratio improvement, are tied to the performance of Cigna’s three ongoing business segments — Global Health Care, Global Supplemental Benefits and Group Disability and Life. Our MIP and SPS plans are designed to reward our NEOs for the Company’s performance relative topre-established enterprise goals. Short- and Long-Term Performance For 2017, adjusted income from operations(1) for Cigna’s ongoing business segments was established,$2.8 billion, compared to $2.3 billion in 2016, reflecting significantly increased earnings contributions across each of Global Health Care, Global Supplemental Benefits and Group Disability and Life. Revenue for the three ongoing business segments grew to $40.9 billion, reflecting continued growth in Cigna’s targeted customer segments. Our results included strong performance across each of our priority growth platforms — Commercial Employer, U.S. Seniors, Global Supplemental Benefits, and Group Disability and Life. These results provide us with momentum for continued growth in 2018. | | | | | | | | | Cigna 2018 Notice of Annual Meeting of Shareholders and Proxy Statement | | | 31 | |
2017 Management Incentive Plan Payouts under the 2017 Management Incentive Plan rewarded our NEOs for our strong performance in 2017, reflectingpay-for-performance alignment. MIP awards reward the achievement of annual enterprise results relative topre-established goals, as well as individual performance, accomplishments and contributions. | | | | | Measure | | Result | | Award | | | | Adjusted income from operations(1)(2) | | 24.5% growth was above target range | | Individual payouts ranged from 130% to 155% of target for each of the NEOs serving as executive officers at the end of 2017. | Revenue(2) | | 4.9% growth was within target range | | Operating expense ratio improvement(2) | | 2.3% improvement was within target range | | Strategic Priorities | | Above target performance reflects: • Strong progress in community health and client retention • A higher NPS score relative to 2016 • Strong employee engagement results • Advancement of enterprise compliance initiatives | |
2015—2017 Strategic Performance Share Program Long-term performance was rewarded through the payout of our 2015—2017 SPSs. Our TSR over this three-year period, which accounts for 50% of the SPS payout, was 25.5%, placing Cigna at the 78th percentile relative to the SPS performance peer group for the period. Over the three-year performance period, adjusted income from operations,(1)(2) which accounts for 50% of the SPS payout, grew as described above. | | | | | Measure | | Result ($ in million) | | Award | | | | Relative TSR(3) | | 78th percentile (183% of target) | | 2015—2017 SPSs were paid out at 139.8% of target. | Adjusted income from operations(1)( 2) | | $7,532 (97.1% of target) | |
| (1) | We encourage you to review our Annual Report on Form10-K for the year ended December 31, 2017 for more complete financial information. Cigna uses adjusted income from operations as the principal financial measure for operating performance because management believes it presents the underlying results of our business operations and permits analysis of trends in underlying revenue, expenses and profitability. For a reconciliation of adjusted income from operations for the Global Health Care, Global Supplemental Benefits and Group Disability and Life segments to shareholders’ net income for each of the three businesses, see Annex A to this Proxy Statement. As appropriate, adjustments are made for acquisitions, dispositions and the implementation of accounting changes to ensure comparability of actual results and targets. |
| (2) | Reflects results for Cigna’s three ongoing business segments — Global Health Care, Global Supplemental Benefits and Group Disability and Life. |
| (3) | The peer group used to measure relative TSR is the SPS performance peer group which, at the time of the 2015—2017 SPS payout, included: Aetna, Inc., Aflac Incorporated, Anthem, Inc., The Hartford Financial Services Group, Inc., Humana, Inc., Manulife Financial Corporation, MetLife, Inc., UnitedHealth Group Incorporated and Unum Group. |
2017 Long-Term Incentive Award In February 2017, the Committee (and, for Mr. Cordani, the Board, upon the recommendation of the Committee) approved the annual LTI award for each NEO, 50% of which was awarded in stock options and 50% of which was awarded in an SPS award with a 2017—2019 performance period. The exercise price of the stock options awarded was $149.135, which means our stock must trade above that price for the NEOs to realize value from these awards. The payout of the 2017—2019 SPS award will be based on the Company’s performance over the three-year period ending December 31, 2019. In determining the annual LTI award, the Committee primarily evaluates individual contributions, but also may consider the other factors described in “Elements of Compensation — Long-Term Incentives.” | | | 32 | | Cigna 2018 Notice of Annual Meeting of Shareholders and Proxy Statement |
Shareholders Continue to Support our Executive Compensation Program The Committee and the PRC takeBoard consider the results of the “say-on-pay”annual shareholder executive compensation“say-on-pay” vote, into accountas well as other compensation-related shareholder votes, in determining the ongoing design and administration of the Company’s executive compensation programs. With voting results being positive,Shareholders have expressed their strong support for our executive compensation program, with approximately 93% of votes cast at the 2017 annual meeting in favor of the advisory vote on executive compensation. Also, in 2017, shareholders recommended that Cigna hold an annual advisory vote on executive compensation. In light of and consistent with the vote of Cigna shareholders, the Board anddetermined that Cigna will continue to hold future“say-on-pay” votes on an annual basis until the PRC do not expect to make any major changes tonext required vote on the Company’sfrequency of shareholder votes for this purpose (which will occur no later than 2023). The Committee also considers feedback on our executive compensation programs. However, to better understand these voting results, Cigna increased its shareholder outreach efforts, seeking feedback from shareholders and insight on the factors motivating the say-on-pay vote. Management reached out to many of Cigna’s largest shareholders, with several agreeing to have discussions with Cigna. During these meetings, management had the opportunity to discuss Cigna’s governance and compensation practices and programs, and to listen to shareholders’ perspectives. The tone of these meetings was positive, with shareholders generally indicating support for Cigna’s programs and previous proxy statements. There was no explanation that emergedprogram received as to why last year’s “say-on-pay” voting results were not higher than 74%, and no issues were raised in these meetings that suggested the PRC should make changes to Cigna’s executive compensation program. Management reported back to the Board of Directors and its committees on these shareholder discussions.
Company Performance in 2011
Cigna had a very strong 2011, driven by effective execution of the Company’s strategy and reflecting the strengthpart of our global diversified portfolio of businesses. You are encouraged to review our Annual Report on Form 10-K for more complete financial information.ongoing communications with shareholders.
In 2011, consolidated revenues increased 4% from $21.2 billion to $22.0 billion, primarily reflecting solid growth in the Company’s strategically targeted U.S. and international customer segments of its ongoing health care, disability and life, and international businesses. In addition, the increase in consolidated revenue reflects the effect of the programs to hedge equity and growth interest rate exposures in the Company’s run-off reinsurance operations. These increases were partially offset by the exit from certain non-strategic markets (primarily the Medicare Advantage Individual Private Fee For Service (Medicare IPFFS) business).EXECUTIVE COMPENSATION POLICIES AND PRACTICES
Adjusted income from operations* increased 12% from $1.277 billion in 2010 to $1.428 billion in 2011, continuing to demonstrate the value of the Company’s diversified portfolio of businesses, resulting in strong earnings contributions from each of the Company’s ongoing businesses. These results were achieved primarily as a result of continued growth, effective execution of the Company’s business strategy and low medical services utilization trend in the health care business. Shareholders’ income from continuing operations decreased by 1% in 2011 from $1.345 billion to $1.327 billion, reflecting higher losses in the Guaranteed Minimum Income Benefits business (which is part of the Company’s run-off reinsurance segment) principally reflecting lower interest rates, substantially offset by higher overall earnings from the Company’s ongoing businesses.
* Adjusted income from operations is not a financial measure calculated in accordance with accounting principles generally accepted in the U.S. (GAAP). See “Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations—Consolidated Results of Operations” on page 54 of our Annual Report on Form 10-K for a reconciliation of this non-GAAP financial measure to the most directly comparable GAAP financial measure, which is shareholders’ income from continuing operations.
CIGNA – 2012 Notice of Annual Meeting of Shareholders and Proxy Statement – 37
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Snapshot of Major Compensation Program Elements in 2011
While the components of our compensation program are discussed in detail beginning on page 37, the following is a snapshot of the three primary compensation elements that comprise total direct compensation:
Compensation Element
| Objective
| Key Features
| Base Salary
(page 38)
| Base salary represents the fixed portion of an executive officer’s total compensation package.
| •
Base salary levels are set based on both: (1) competitive market data; and (2) individual performance.
•
A competitive range for the relevant market data is recommended by PM&P, and is defined as within 15% of the 50th percentile of the primary market reference.
•
The individual performance of named executive officers, like all employees, is assessed annually. Base salary merit increases may be made based on updated relevant market data, individual performance assessments and business affordability.
| Annual Incentives
(page 38)
| Cigna uses performance-based annual incentive awards to recognize achievement of annual enterprise results versus goals and individual performance accomplishments and contributions.
| •
Annual incentives are paid primarily under the Management Incentive Plan (MIP). The PRC annually approves:
(1) enterprise performance measures and goals; and
(2) funding levels for actual awards under the MIP.
•
Total cash compensation (base salary plus annual incentive) is targeted at the 50th percentile of the primary market reference.
•
Subject to certain limits described below, the actual award for an eligible employee can range from 0% to 200% of the individual’s target and is paid in the first quarter following the end of the performance year.
| Long-Term Incentives
(page 41)
| Cigna’s long-term incentive (LTI) program, also considered performance-based compensation, is designed to:
(1) motivate and reward executive behaviors and accomplishments that lead to Cigna’s long-term growth and profitability;
(2) align the interests of executives with shareholders through equity compensation tied to Cigna stock price performance; (3) align compensation with Cigna’s pay-for-performance strategy; and
(4) attract and retain highly skilled executives by providing competitive LTI opportunity with vesting over multiple years.
In accordance with Cigna’s compensation strategy for executives, the predominant portion of an executive officer’s compensation opportunity is tied to the long-term success of the Company.
An executive officer can receive from 0% to 200% of his or her individual LTI target based on enterprise and individual performance.
| •
Stock Options — Represents a portion of the LTI award for executive officers in 2011. Typically, stock options represent 50% of the LTI awards.
The actual realized value of stock options depends upon stock price appreciation (if any) over the term of the option, which is 10 years.
Stock options generally vest in equal installments over three years beginning on the first anniversary of the grant. The annual grant is made in the first quarter.
•
Strategic Performance Shares (SPSs) — Represents a portion of the LTI award for executive officers in 2011. Typically, SPSs represent 50% of the LTI awards.
SPSs have a three-year performance period and are denominated in shares of Cigna common stock. At the end of the three-year performance period, the number of shares awarded is based on performance against pre-established goals, including performance versus Cigna’s competitors.
The SPSs earned and actually issued to eligible executives are based on enterprise and individual performance and will range from 0% to 200% of the SPSs awarded at the beginning of the performance period.
•
Strategic Performance Units (SPUs) — Prior to 2010, the Company awarded SPUs as a portion of its LTI awards. SPUs are performance awards denominated in units that can be paid in cash or shares of Cigna common stock or a combination thereof. SPU value is based on Cigna’s performance over a three-year period measured against pre-established criteria, including performance versus Cigna’s competitors.
Although SPUs are no longer awarded as part of Cigna’s annual long-term incentive awards, many of the named executive officers continue to have outstanding SPUs from prior years’ awards and transitional awards were made for new hires and promotions in 2011.
|
Executive Compensation PoliciesObjectives and Practices
Cigna’s executive compensation policiesprogram is based on the philosophy that executive pay should strongly align with the interests of our shareholders, directly link to Company and individual performance and attract and retain executive talent. By emphasizing performance-based awards over fixed compensation, we strive to motivate superior enterprise results that we believe will result in the creation of meaningful and sustained long-term value for our shareholders and exceptional service for our customers. To further our compensation philosophy, the Committee uses the following compensation practices, including the PRC’s useprocesses and instruments: A regular and rigorous analysis of relevant market compensation data peer groups,for each executive officer position. The analysis includes market data for competitors and factors consideredthe broad-based general industry based on companies of similar size and scope; Annualpay-for-performance assessment of the degree of achievement of the Company’s short-term and long-term goals and an evaluation of each executive officer’s contribution to the Company’s performance; A MIP designed to motivate executive officers to achieve the Company’s annual performance goals. No MIP awards are made unless the Company achieves apre-defined minimum level of adjusted income from operations for the ongoing businesses; An equity-based incentive plan (the Cigna Long-Term Incentive Plan or LTIP) focused on long-term shareholder value creation. We grant SPS awards and stock options to executives under the LTIP. SPS awards reward executives for relative TSR performance as compared to our competitors and the achievement of financial goals over a three-year performance period. Through stock options, executives have the potential to realize value as a result of stock price appreciation; The retention of an independent compensation consultant to assist the Committee in determining target pay mixits design and targetimplementation of the Company’s executive compensation are described below. programs; and Ongoing monitoring of compensation best practices and investors’ views on compensation and the modification of our compensation programs as appropriate to align with good governance standards. For information on the oversight of the Executive Compensation Program,executive compensation program, see “Processes and Procedures for Determining Executive Compensation” in this CD&A. | | | | | | | | | Cigna 2018 Notice of Annual Meeting of Shareholders and Proxy Statement | | | 33 | |
Strong Compensation Governance and Director Compensation” beginning on page 23.Controls This
| | | What We Do | | • Strong alignment between pay and performance. • “Double trigger” requirement for change of control benefits. • Regular review of executive compensation governance market practices, particularly when considering the adoption of new practices or changes to existing programs or policies. • Robust stock ownership guidelines and shareholding requirements for equity awards to align executives’ interests with shareholders. • A disgorgement of awards (clawback) policy beyond the mandates of Sarbanes-Oxley. • Management of LTIP annual share usage (or burn rate) and total dilution by setting an annual share usage limit, which is below the maximum permitted under the plan. • Oversight of people development policies and processes, including consideration of assessments of executive officers and key senior management. • CEO and executive officer succession plans overseen by the Board of Directors, with assistance from the Committee. • An annual assessment by the Committee of any potential risks and associated internal controls in our incentive compensation programs and policies. • Minimum acceptable level of financial performance required in order for any payments under the MIP to be made. • Approximately 90% of our CEO’s target total direct compensation is performance based. |
| | | What We Don’t Do | | • No taxgross-up of severance pay upon a change of control. • No excessive perquisites. • No hedging of Cigna stock by any directors, executive officers or employees, and no pledging of Cigna stock by directors or Section 16 officers unless approved in limited circumstances. • No discounting, reloading or repricing of stock options without shareholder approval. • No payment of dividends on unvested shares. |
Compensation Discussion and Analysis (CD&A) section and the Executive Compensation Tables that follow describe compensation decisions regarding Cigna’s named executive officers, including certain executives who have left Cigna and executives who joined the Company during the year. In 2011, Cigna experienced changes in the executive leadership team, including the departure of Carol Ann Petren, General Counsel, and Bertram L. Scott, President, U.S. Commercial Markets. Nicole S. Jones was appointed General Counsel in June 2011 and Ralph J. Nicoletti was appointed as the Chief Financial Officer (CFO) in June 2011, following Thomas A. McCarthy who served as acting CFO from September 2010 until June 2011. Pursuant to Securities and Exchange Commission rules, compensation information regarding Ms. Petren and Messrs. McCarthy and Scott is included in certain tables and descriptions, as applicable. However, where the PRC did not assess compensation for these individuals—for Mr. McCarthy, because he was no longer serving as the acting CFO, or for Mr. Scott or Ms. Petren because they were no longer with the Company—their compensation is not described or included the table.
CIGNA – 2012 Notice of Annual Meeting of Shareholders and Proxy Statement – 38
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Relevant Market Data
The PRCCommittee establishes target and actual compensation levels for the named executive officers based on a variety of factors, including the practicesa rigorous analysis of relevant published market compensation data of the Company’s primarycompensation peer group (Primaryand a general industry peer group. 2017 Peer Group), which is comprisedGroups Compensation Peer Group. The Committee periodically requests that its independent compensation consultant conduct a review of organizationsthe composition of the Company’s compensation peer group and offer suggested modifications for benchmarking future executive pay decisions. The Committee’s consultant utilizes multiple sources to develop and recommend potential peer companies for the Committee to consider. Sources for possible peers include companies screened by industry and business focus, peer groups developed by proxy advisory firms, peers identified in the marketvarious analyst reports, and peers of companies in which Cigna competes for capital, customers and talent, as well as (in some circumstances) published survey data.Cigna’s compensation peer group. | | | 34 | | Cigna 2018 Notice of Annual Meeting of Shareholders and Proxy Statement |
The Primary Peer Group was established during 2009, and in 2010 the PRC approved the Primary Peer Group, effective for the determination of target pay mix, target compensation and compensation plan design beginning in 2010 (see page 37). The Primary Peer Group includes diversified insurance and health services companies and companies with larger or expanding global operations because these companies are the organizations with which Cigna currently competes for capital, customers and talent. The charttable below lists the companies included in Cigna’s Primary Peer Group.the 2017 compensation peer group. | | | | Primary
2017 Compensation Peer Group | | | Aetna, Inc. | Humana, Inc.
| Coventry Health Care, Inc.
| WellPoint, Inc.
| Health Net, Inc.
| Medco Health Solutions, Inc.
| Express Scripts Inc.
| MetLife
| Aflac Incorporated
| ACE Limited
| Unum Group
| The Hartford Financial Services Group, Inc. |
Cigna also has a secondary peer group (Secondary Peer Group), which is used as an additional reference point for compensation target setting and reviews, but is not the sole or primary market reference for any of the named executive officers. The Secondary Peer Group consists of the following companies: Aetna, Coventry Health Care, Health Net, Humana, UnitedHealth Group and WellPoint. As described further on page 50, Cigna used the Secondary Peer Group within the 2009-2011 SPU program to evaluate Cigna’s relative total shareholder return because the Secondary Peer Group was Cigna’s primary peer group at the time the performance goals were established for the program. Within the SPS program (which was introduced in 2010), Cigna’s total shareholder return is measured against the Primary Peer Group.
Cigna uses publicly available information disclosed in proxy statements and other filings with the Securities and Exchange Commission pertaining to these companies’ compensation practices, for benchmarking compensation levels, evaluating pay practices and assessing the alignment of rewards and performance for the named executive officers.
To determine executive officer compensation targets, the PRC reviews the Primary Peer Group and Secondary Peer Group data, and when there is a lack of publicly available information for an executive officer role, the PRC also reviews published survey data (Survey Data) for companies in the health care and group insurance businesses, as well as companies with similar revenue size (approximately 1/2 to 2 times Cigna’s revenues). The data for individual companies participating in these surveys is not relied upon in any material manner in the decision making process.
Survey Data is reviewed for all named executive officer roles, but where publicly available information for the Primary Peer Group exists, the publicly available data is used as the primary market reference. In cases where the critical skills and abilities of the position are either unique to another industry or applicable on a broader all-industry basis, Cigna uses unique reference groups, rather than the Primary Peer Group, as either the primary or an additional secondary reference point for compensation target recommendations. PM&P generally assists the PRC by compiling and analyzing publicly available information for the executive officer roles, by reviewing Survey Data for executive officers compiled by Cigna’s internal compensation department and making recommendations. See “Compensation Consultant Role in Executive Compensation” beginning on page 24 for a description of the other services performed by the Compensation Consultant for the PRC.
The specific primary market references currently used by the PRC in determining compensation targets for each of the named executive officers are set forth below:
Named Executive Officer
| Primary Market Reference
| | | David M. CordaniAflac Incorporated
| | Humana, Inc. Primary Peer Group— Functional Role Match (CEO)
| | | Ralph J. NicolettiAmerican International Group, Inc.
| | Manulife Financial Corporation Primary Peer Group— Functional Role Match (CFO)
| | | Nicole S. JonesAnthem, Inc.
| | MetLife, Inc. Primary Peer Group– Functional Role Match (General Counsel)
| | | John M. Murabito(1)Centene Corp.
| | Prudential Financial, Inc. Survey Data — Functional Role Match (Top Administrative Executive and Top HR Executive)
| | | Matthew G. Manders(2)Chubb Limited
| | Unum Group Primary Peer Group - Proxy Named Executive Officer Rank Match
| (1) An additional benchmark, a subset of S&P 500 companies with Top Human Resources executives included in their proxies, reflecting 11 companies, also is used as a reference point in setting Mr. Murabito’s compensation.
(2) Given Mr. Manders’ role in the organization and the lack of a sufficient number of functional role matches within the proxy data, PM&P advised that a functional role match from Survey Data is less relevant than named executive officer information from the Primary Peer Group.
| | |
CignaA broader cut of survey data, representingsize-adjusted health and life insurance companies, was used multiple surveys, and benchmarks within the surveys, in the developmentto benchmark Mr. Sadler’s compensation because peer group data were insufficient or unavailable for his specific role. A list of the Survey Data that iscompanies used as the primary market reference forto determine Mr. Murabito. Primary Peer Group data was not available; therefore, the Survey Data was used as the primary market reference. Additional detail on the Survey Data is provided in Appendix A, beginning on page 78. The benchmarks are selected based on similarity to the responsibilities inherent in the roles.
CIGNA – 2012 Notice of Annual Meeting of Shareholders and Proxy Statement – 39
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Factors Considered in Determining Target Pay Mix and Target Compensation
Cigna’s executive compensation programs are designed to: (1) place greater emphasis on performance-based compensation rather than fixed compensation; and (2) with respect to the different types of performance-based compensation, place more weight on long-term incentives than annual incentives.
As illustrated in the charts below, performance-based compensation represents approximately 91% of Mr. Cordani’s total target direct compensation, including 76% in long-term incentives and 15% in annual incentives. On average, performance-based compensation represents 77% of total target direct compensation for the other active named executive officers, including an average of 58% in long-term incentives and 19% in annual incentives.
The PRC approves base salary and targets for annual incentives and long-term incentives for each named executive officer annually. The “competitive range” for compensation is considered to be within 15% of the 50th percentile of the relevant market data being used for comparison purposes. Based on the relevant market data included in the report prepared by PM&P for the PRC’s December 2011 meeting, theSadler’s 2017 target total direct compensation (base salary, annual incentiveand target and long-term incentive target)total pay mix is included on Annex B.
General Industry Peer Group.The Committee also recognizes that Cigna often competes for eachtalent from companies beyond that of the namedits compensation peer group. As an additional reference to provide a broader perspective on market practices, particularly for those executive officers may be outsidewith job functions that could apply to a variety of industries, the competitiveCommittee utilizes a general industry peer group. For 2017, the Committee, with the assistance of its independent compensation consultant, reviewed the companies included in its general industry peer group by screening publicly traded, U.S.-based companies within certain industry classifications, including insurance, banking and financial services, healthcare equipment and services, pharmaceutical, biotechnology and life sciences, household and personal products, software services and telecommunications. The list was then narrowed to companies whose revenues were within the range of the 50th percentile0.4 to 2.5 times that of the primaryCigna and whose market reference due to factors such as, but not limited to, tenure in role, range of data within the applicable market reference, and/or prior compensation. For each of the named executive officers, there may be variation in the target pay mix, such that target amounts for individual compensation elements may be above or below the competitive range of the 50th percentile for the individual element. Target total direct compensationcapitalization was within the competitive range of 0.25 to 4 times that of Cigna. The screening process resulted in a group of 35 companies, which are listed on Annex C.
SPS Performance Peer Group. Before 2015, Cigna’s compensation peer group was used to track relative TSR for our long-term incentive program. In consultation with its compensation consultant, the CEOCommittee created a performance peer group to be used exclusively to track relative TSR within the SPS program, effective beginning with the 2015—2017 performance period. The Committee recognized that certain of our competitors were not included in the compensation peer group due to their size. While size is a relevant factor in determining a compensation peer group, it is less relevant when measuring relative performance. Other companies were included in the compensation peer group because Cigna competes with them for talent; however, because of significant differences in business focus, these companies do not make optimal comparators for performance purposes. For these reasons, the Committee created an SPS performance peer group comprising the same companies in its compensation peer group, but adding UnitedHealth Group Incorporated and all other active named executive officers exceptremoving Chubb Limited and Prudential Financial, Inc. Beginning with the 2017—2019 performance period, the Committee added Centene, Inc. to the SPS performance peer group. Updates to Peer Groups for Messrs. Nicoletti (whose2018.The Committee removed MetLife, Inc. from the SPS performance peer group beginning in 2018. The Committee determined that, due to a major divestiture and changes in the business focus at MetLife, Inc., it was belowno longer an optimal comparator for performance purposes given industry differences and differences in business models. In order to keep the range)SPS performance peer group robust, the Committee added Prudential Financial Inc., which has overlap with the Company’s businesses and Murabito (whose was above the range). Mr. Nicoletti’s target total direct compensation is below competitive market dataof similar scope and in late 2011, the PRC approvedcomplexity. The Committee did not make changes to his 2012 targetsthe compensation peer group or general industry peer group for certain compensation elements to align with the market reference. Mr. Murabito’s target total compensation is above the competitive range of both the primary and additional market references, due to the key role that the Executive Vice President, Human Resources and Services plays in execution of the Company’s strategic goals, as compared to the organizations in Cigna’s Primary Peer Group.2018. Tally Sheets The Company preparesCommittee reviews tally sheets for all of its executive officers for review by the PRC twice a year (when targets are being reviewed and prior toas part of its annual compensation award decisions) to inform the PRC as it determinesdetermination process. The tally sheets summarize historical actual compensation and current target compensation for each officer. The Committee believes that tally sheets are a useful reference tool when considering whether executive compensation decisions are appropriate in the context ofreflect Cigna’s compensation philosophy and performance. Atperformance, but are not a determining factor when making executive compensation decisions. | | | | | | | | | Cigna 2018 Notice of Annual Meeting of Shareholders and Proxy Statement | | | 35 | |
Target Total Direct Compensation and Target Pay Mix Emphasizes Performance-Based Compensation The Committee’s decisions regarding target total direct compensation and target pay mix are consistent with its principles that (1) performance-based compensation should be emphasized over fixed compensation; and (2) long-term incentives should be more heavily weighted than annual incentives. Target total direct compensation consists of base salary, the PRC’s request,annual incentive target and the tally sheets were updatedlong-term incentive target. The Committee approves each of these amounts for each NEO on an annual basis, seeking to target an executive officer’s total direct compensation in 2011 with input from PM&P, to provide more robust informationa “competitive range” of within 15% of the 50th percentile of the relevant market data for the PRC’s use. Tally sheets summarize historical actualcompensation peer group and the general industry peer group. When setting total target direct compensation, the Committee evaluates survey data and other public information, such as proxy data, available for both peer groups. While the Committee targets total direct compensation in the competitive range, there may be variation in the target pay mix such that target amounts for individual compensation elements may be above or below the competitive range for the individual element. Target total direct compensation for a NEO also may vary outside of the competitive range of the 50th percentile of the survey data for the compensation peer group or general industry peer group due to factors such as performance, tenure in role, range of data available and market and economic conditions. In general, compensation levels for an executive officer who is newer to a position tend to be at the lower end of the competitive range, while seasoned executive officers with strong performance are typically positioned at the higher end of the competitive range. Internal pay comparisons among the NEOs are not generally considered by the Committee for purposes of determining target pay mix and target total direct compensation. For 2017, target total direct compensation currentof our NEOs as a group resulted in a target compensation opportunity outstanding equity (stock options,in the aggregate of within 15% of the 50th percentile of both our compensation peer group and our general industry peer group. As illustrated in the charts below, performance-based compensation represents approximately 90% of Mr. Cordani’s target total direct compensation, including 70% in long-term incentives and 20% in annual incentives. On average, performance-based compensation represents 79% of target total direct compensation for the other NEOs, including an average of 57% in long-term incentives and 22% in annual incentives. These percentages are targets only and will not match the percentages calculable from the actual compensation paid reflected in the Summary Compensation Table. | | | CEO TARGET PAY MIX | | OTHER NEO AVERAGE TARGET PAY MIX |
| | | 36 | | Cigna 2018 Notice of Annual Meeting of Shareholders and Proxy Statement |
ELEMENTS OF COMPENSATION Cigna’s 2017 executive compensation program consists of the following elements: | | | | | ELEMENT | | PURPOSE | Base salary | | Fixed portion of total direct compensation, set with reference to competitive market data and designed to attract and retain key talent. | | | | | | Management Incentive Plan (MIP) | | Performance-based cash compensation designed to reward the achievement of annual enterprise results relative topre-established goals, as well as individual performance, accomplishments and contributions. | | | | | | Long-Term
Incentives (LTI) | | Stock Options | | Performance-based compensation, the potential realized value of which is determined by stock price appreciation from the date of grant through the date of exercise. | | | Strategic Performance Shares | | Performance-based compensation, the payout of which is based upon the achievement ofpre-determined enterprise goals and the Company’s relative TSR over a three-year performance period. | | | | | | Retirement and Deferred Compensation | | Savings-based component that is aligned to competitive market practice and includes 401(k) plans and a voluntarynon-qualified deferred compensation program that does not have any Company contributions. U.S.-based NEOs hired before July 1, 2009 have accrued benefits from defined benefit pension plans that were frozen on July 1, 2009. | | | | | | Limited Perquisites and Other Benefits | | Limited perquisites that are designed to attract and retain key talent or to provide for the safety and security of executive officers. | | | | | |
Actions Impacting 2017 Compensation Promotions. In connection with Mr. Palmer’s promotion to Executive Vice President, Chief Financial Officer in June 2017, the Committee reviewed and approved his base salary, 2017 MIP target and LTI target. In addition, Mr. Palmer was awarded transitional SPSs for the 2017-2019 performance period, as further described on page 44. In connection with Mr. Hocevar’s promotion to President, Strategy, Segments and Solutions in February 2017, the Committee reviewed and approved his base salary, 2017 MIP target and LTI target. The Committee approved the base salaries, 2017 MIP targets and LTI targets for Mr. Palmer and Mr. Hocevar following a review of the market data for both the compensation peer group and the general industry peer group. The base salaries, 2017 MIP targets and LTI targets for Mr. Palmer and Mr. Hocevar are reflected in the tables on pages 38, 41 and 44, respectively. Market-Based Adjustments. Due to the operating covenants in the merger agreement with Anthem that restricted stockadjustments to executive officer compensation, the Committee and, SPS) and SPU holdings, retirement and deferred compensation values, and potential payouts uponwith respect to Mr. Cordani, the Board, had not approved increases to MIP targets since December 2014 or base salaries since March 2015 for most executive officers. In July 2017, following termination of employment. CIGNA – 2012 Notice of Annual Meeting of Shareholdersthe merger agreement, the Committee and, Proxy Statement – 40
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Elements of Compensation
The Company’s 2011 Executive Compensation Program consists of three elements: (1)Mr. Cordani, the Board reviewed and approved adjustments to the base salary (2) annual incentives, includingand 2017 MIP targets for Mr. Cordani, Ms. Jones and Mr. Sadler. The Committee believed that these adjustments were necessary to maintain the Management Incentive Plan (MIP),competitive positioning of target total direct
compensation. The base salary increases were effective July 31, 2017 and (3) long-term incentives, including stock options and SPSs.are reflected in the table on page 38. The 2017 MIP targets are reflected in the table on page 41. Base Salary | | | | | | | | | | | | | | | | | | | | Base salary
represents only 10%
of CEO target pay
and an average of 21% for
all other NEOs, with the
balance of target
compensation being
performance-based. | | | | | | | | | | | | | | | | | | | |
Base salary is the only fixed portion of a NEO’s total target direct compensation and, consistent with the Committee’s philosophy that executive pay should strongly align with the interests of our shareholders, represents a small portion of total target direct compensation. Base salary levels are set with reference to both competitive market data and individual performance. Base salaries are reviewed annually and may be adjusted based on relevantas a result of updated market datainformation and an assessment of an executive’s skills, role and performance contributions, including the executive’s demonstration of Cigna leadership behaviorsCigna’s core values and core values. Minimal increases were made to named executive officer base salaries in 2011 as partthe achievement of the annual merit increase process. These merit increases were based on market analysis and individual performance assessments. During 2011, salary increases were also made for Mr. Manders, in association expectations associated
| | | | | | | | | Cigna 2018 Notice of Annual Meeting of Shareholders and Proxy Statement | | | 37 | |
with his promotionor her role. As further described above, the Committee, and with respect to President, Regional and Operations,Mr. Cordani, the Board, approved changes to Mr. Cordani’s, Ms. Jones’ and Mr. McCarthy, relatingSadler’s base salary to his VP, Finance role. Basemaintain the competitive positioning of their target total direct compensation. The average base salary levels are included below, including adjustments.increase for these NEOs was 12%. Base salaries listed below may differ from the values reported in the Summary Compensation Table on page 48,for these executive officers had not been increased since March 2015 due to the timing of such changes.operating covenants in the merger agreement with Anthem that restricted adjustments to executive officer compensation.
Named Executive Officer | 2010 Annual Base Salary ($) | 2011 Annual Base Salary ($) | % Change | David M. Cordani | 1,000,000 | 1,000,000 | - | Ralph J. Nicoletti | - | 550,000 | N/A | Nicole S. Jones | - | 515,000 | N/A | John M. Murabito | 592,250 | 592,250 | - | Matthew G. Manders | 525,000 | 575,000 | 9.5% | Thomas A. McCarthy | 335,000 | 425,000 | 26.9% | Bertram L. Scott | 600,000 | 612,000 | 2.0% | Carol Ann Petren | 580,000 | 580,000 | - |
BaseThe table below shows base salaries for Messrs.each of the NEOs. The base salaries for Mr. Cordani, and Manders and Ms. Jones are withinand Mr. Sadler reflect the competitive range (+/-15% ofincreases approved in July 2017. The base salaries for Mr. Palmer and Mr. Hocevar reflect the 50th percentile) of the primary market reference. Mr. Nicoletti’s base salary is below the competitive range of the primary market reference; and Mr. Murabito’s is above the competitive range for base salary. Mr. McCarthy received an increase associatedlevels approved in connection with his new role within the finance organization following his service as acting CFO, and Mr. Manders received an increase associated with his new appointment as President Regional and Operations. Mr. Scott received a base salary increase in 2011, which was made in order to better position his base salary within a competitive range of the primary market reference.their promotions.
| | | | NEO | | 2017 ANNUAL
BASE SALARY ($) | David M. Cordani | | 1,400,000 | Eric P. Palmer | | 675,000 | Christopher J. Hocevar | | 550,000 | Nicole S. Jones | | 630,000 | Jason D. Sadler | | 648,837 | Thomas A. McCarthy | | 740,000 | Matthew G. Manders | | 750,000 |
Annual Incentives | | | | | | | | | | | | | | | | | | | | Because profitability is critical to the long-term success of the business, no annual incentive award payments are made to executive officers unless the Company achieves a pre-defined minimum level of adjusted income from operations. | | | | | | | | | | | | | | | | | | | | | | | |
Management Incentive Plan (MIP) Overview Annual incentives are paid under the MIP. The MIP is designed to reward executives for the achievement of short-term, or annual, performance goals. On an annual basis, the Committee approves: Enterprise performance measures and goals, which are designed to align with, and drive execution of, the Company’s business strategy; Individual targets for the NEOs, except for Mr. Cordani’s target, which is approved by the Board upon the recommendation of the Committee; Aggregate funding levels for actual MIP awards; and Actual MIP awards for the NEOs, except for Mr. Cordani’s award, which is approved by the Board upon the recommendation of the Committee. Subject to certain limits described below, the actual annual incentive can range from 0% to 200% of the individual’s target, allowing the Committee to differentiate awards based on an individual’s contributions and how those contributions impacted the attainment of enterprise goals. This includes factors such as the extent to which an executive delivers results that provide improved financial performance, customer service or employee engagement and an executive’s level of innovation and thoughtful risk-taking. At times, the Committee may also use this flexibility to aid in the retention of select key talent. For 2017, MIP awards ranged from 130% to 155% of target for the NEOs serving as executive officers at the end of 2017, based on Company results and individual contributions. MIP Performance Measures Goals and FundingGoals Each year, the PRCCommittee sets enterprise performance measures, weightings and goals for annual incentive awards based on Cigna’s business priorities and annual operating plan. The operating plan aligns with our strategy, long-term commitment to shareholders and expected performance in the industry. The Committee works with its independent compensation consultant to evaluate the appropriateness of these measures and weightings and the degree of challenge in the MIP performance goals. The measures are designed to align with and drive execution of the Company’s business strategy. For 2017, performance measures included adjusted income from operations, revenue, operating expense ratio improvement and strategic priorities. More detailed information on these measures is included in the 2017 Performance Goals, Measures and Actual Results table. In past years, we have included net promoter score (NPS) as a performance measure in the MIP. In 2017, we replaced the former NPS measure with a “strategic priorities” measure to emphasize the importance of incentivizing and recognizing progress in certain areas beyond financial results that support our business strategy. The goals may identify threshold (minimum)strategic priorities measure, weighted 20% of the overall MIP value, measures the Company’s progress in three key strategic categories: (1) customer, client and reputational focus (which includes NPS); (2) employee engagement; and (3) enterprise focus on compliance. The operating expense improvement ratio measure is now weighted 10%. The weightings for the adjusted income from operations and revenue measures, 50% and 20%, respectively, remain unchanged. For each MIP goal other than strategic priorities, the Committee specifies certain below target, target and | | | 38 | | Cigna 2018 Notice of Annual Meeting of Shareholders and Proxy Statement |
above target and superior levels of performance. Annual incentive awards are paid to named executive officers under the Management Incentive Plan (MIP) and pursuant to the parameters of the Executive Incentive Plan (EIP). For the 2011 performance year, annual incentive awards tostrategic priorities measure, the active named executive officers were made at a level of 138% to 156% (depending onCommittee evaluates the named executive officer) ofCompany’s progress among the target award value, reflecting individual contributions andthree key strategic categories against the Company’s performance versus Adjusted Incomein the prior year. To aid the Committee in setting the financial performance targets, and to assess the reasonableness and rigor of those targets, the Committee’s compensation consultant annually presents a comprehensive report to the Committee that evaluates Cigna’s historical relationship between pay and performance in comparison with Cigna’s compensation peer group. The compensation consultant also reviews performance goals determined by the Committee in the context of historical performance and analyst expectations of future performance for Cigna and Cigna’s SPS performance peer group. Executive Officer MIP Funding and Award Determination Process The key considerations to funding the MIP and determining individual award amounts are discussed below. STEP 1 Achieve Earnings Minimum The Committee believes that achieving Cigna’s profitability goals is critically important to the long-term success of the business. In recognition of this importance, the Committee establishes a minimum level of adjusted income from Operations, Revenue Growth and Operating Expenses goals, as discussedoperations that must be achieved for the year in 2011 Performance Measures and Goals beginning on page 39. order for any MIP award to be earned. If the Company does not meet a specified thresholdthatpre-defined minimum level, of Adjusted Income from Operations, the MIP will not be funded andthen no annual incentives will be paid underto executive officers. STEP 2 Company Performance Drives Funding Level If the MIP.Company achieves the earnings minimum, the Committee may fund the executive officer MIP pool from 0% to 200% of the aggregate targets based upon whether each performance measure is below target, at target, or above target. The Adjusted Income from Operations threshold level in 2011 was $1,024 million,following table sets forth the ranges between which the Company exceeded as discussed below. The threshold reinforces the fundamental importance of achieving Cigna’s profitability goals. If the Adjusted Income from Operations threshold is met, the MIP allows for payment of an incentive award even when other resultspool may be below target. Cigna believes it is important to maintainfunded for each performance measure, in each case, assuming the flexibility to retain key talent over the long-term and encourage management to make decisions that could yield lesser results in the short-term, but are in the best interests of the Company’s shareholders over the long-term.earnings minimum has been achieved: | | | | | Measure | | Performance | | Funding Range | Adjusted income from
operations | | Above target range | | Above 120% to 200% | Revenue | | Within target range | | 80% to 120% | Operating expense ratio
improvement | | Below target range | | Less than 80% | Strategic Priorities | | The Committee evaluates progress in the three key strategic
categories year over year. | | | | | |
The Company’s actual performance isrelative to each measure determines which funding range applies for purposes of that measure. However, the basis for establishingCommittee maintains the range of funding available for awards, but the PRC exercises discretion to determine at which point within the pre-establishedthat range thatthe actual funding of the MIP pool will be set. In exercising its judgment to setsetting the actual funding levels,percentage for each measure, the PRCCommittee considers Cigna’s performance as a whole (both in absolute terms and relative to competitors), as well as Cigna’s achievement of the goals within eachthe performance measure. The MIP funding mechanisms ensure that a minimum level of performance is achieved and that NEOs’ MIP awards reflect the Company’s performance. CIGNA – 2012 Notice
STEP 3 Award Amounts Based on Individual Contributions to Company Performance Once MIP funding has been determined, the Committee (and for Mr. Cordani, the Board of Annual Meeting of Shareholders and Proxy Statement – 41
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Executive Incentive Plan and Section 162(m) Considerations
Annual incentives are administered primarily underDirectors upon the MIP for executives. For named executive officers, annual incentives are also subject to the EIP, which operates in conjunction with the MIP. The purposerecommendation of the EIP is to ensure that annual incentive awards paid to certain executive officers qualify for treatment as performance-based compensation and remain fully tax deductible. Section 162(m) of the Internal Revenue Code imposes a $1 million limit on the amount that Cigna may deduct for federal income tax purposes for compensation paid to the CEO and each of the three other most highly compensated executive officers, other than the CFO, who are employed as of the end of the year. This limitation does not apply to compensation that meets the requirements under Section 162(m) for “qualifying performance-based” compensation (i.e., compensation paid only if performance meets pre-established objective goals based on performance criteria approved by shareholders).
In accordance with Section 162(m) and pursuant to the terms of the EIP, the PRC establishes objective corporate performance goals for the named executive officers within the first 90 days of each year. At year end, if the PRC certifies that Cigna has achieved these performance goals, thenCommittee) assesses each named executive officer is eligible to receiveofficer’s individual contributions and how such contributions impacted the maximum annual incentive award for that performance year, which is $3 million in cash and 225,000 shares of Cigna common stock. However, the PRC retains “negative discretion” to reduce the award below the maximum amount, which the PRC uses to reduce the named executive officer’s annual award to an amount determined in accordance with the individual’s annual incentive target by applying the assessment process under the termsachievement of the MIP as described below. The PRC does not have discretion to increase the size of the awards. The PRC has consistently exercised its negative discretion to reduce the size of annual incentive awards below the maximum to a level that did not exceed the amount determined under the MIP.
As part of health care reform legislation enacted in 2010, Section 162(m) was revised as it pertains to compensation paid by health insurers, including Cigna. Starting in 2013, an annual tax deduction limit of $500,000 will apply to compensation that Cigna pays to any individual. This tax deduction limitation also applies to compensation earned. The tax deduction limitation will apply whether or not compensation is performance-based or is being provided pursuant to a shareholder-approved plan. See “Information about Item 4 – Re-approval of Cigna’s Amended and Restated Executive Incentive Plan” on page 69 for a discussion of the EIP.
2011 Performance Measures and Goals
The PRC works with PM&P, its independent compensation consultant,goals to determine the actual award amounts for each NEO. Actual awards can range from 0% to 200% of a NEO’s MIP target, allowing the Committee to differentiate payouts based on each individual’s contributions.
| | | | | | | | | Cigna 2018 Notice of Annual Meeting of Shareholders and Proxy Statement | | | 39 | |
2017 Performance Goals, Measures and Actual Results The Committee considers the appropriate measures for the MIP. The measures are designed to align with and drive execution of the Company’s evolving business strategy. In 2011, the MIP measures included Adjusted Income from Operations, Revenue Growth, and Operating Expenses (each described in more detail in the table below). The Adjusted Income from Operations (weighted 50%) is used within the program to reinforce the importance of profitable growth across the enterprise. The Revenue Growth measure (weighted 25%) is used to focus on enterprise revenue growth, encourage business decisions that optimize results for the enterprise, promote cross-selling effortsupcoming year at its October and collaboration across business units,December meetings, and drive customer centricity. In 2011,then considers and approves the Company continued to include an operating expense measure (Operating Expenses), expandingactual performance targets at its meetings in January and February. For 2017, the measure to include the Disability and Life and International segments, as well as the Health Care segment) to drive continued focus on the Company’s imperative of cost management across the Company. This measure is also weighted 25%. For 2011, the PRCCommittee established the followingperformance measures, weightings and target performance goals below, which were used to determine the range of potential aggregate funding for MIP awards. The pool can be funded from 0% to 200% for below target, target and above target performance, with target funding at 80% to 120%.
| | | | | | | | | Measure
MEASURE | | Weighting
ALIGNMENT WITH
BUSINESS STRATEGY | | Performance Goals
WEIGHTING | | TARGET PERFORMANCE GOALS | | ACTUAL RESULT | | | | | | Adjusted Incomeincome from Operations (Earnings)*operations* | | Reinforces the importance
of profitable growth
across the enterprise.50%
| | 50% Target
| | 10.5% to 19.5%
growth | | 24.5% growth was -4% to 4% changeabove target range | The target was set as a year-over-year comparative goal for Cigna’s three ongoing businesses (Health Care, Disability and Life, and International).
| | | * This non-GAAP measure is adjusted income from operations, as described in Company Performance in 2011 on page 34, excluding results from the Company’s Run-off Reinsurance, Other Operations and Corporate segments.
| | | Revenue Growth
| 25%
| Target was 5% to 9% growth
| The target was set as a year-over-year growth goal for Cigna’s three ongoing businesses (HealthGlobal Health Care, Global Supplemental Benefits and Group Disability and Life and International).segments. | | | | | | | | | | | | | | | | | Operating ExpensesRevenue
| | Focuses on enterprise
growth, encourages
business decisions that
optimize results for the
enterprise, promotes
collaboration across
business units and drives
customer focus.25%
| | 20% Target
| | 0.0% to 6.0%
growth | | 4.9% growth was -2% to 2% versus planwithin target range | | The target iswas set as a year-over-year growth goal for Cigna’s Global Health Care, Global Supplemental Benefits and Group Disability and Life segments. | | | | | | Operating expense ratio improvement | | Drives continued focus on
delivering ongoing
expense efficiency while
furthering investment
capacity for ongoing
innovation. | | 10% | | 1.0% to 5.5%
improvement | | 2.3% improvement was within target range | | The target was set as a composite objective, which measures progress against operating expense improvement in Cigna’s Global Health Care, Global Supplemental Benefits and Group Disability and Life segments versus 2016. Operating expenses are expressed as a percent of revenue for each segment. | | | | | | | | | | | | | | | Strategic Priorities | | Emphasizes the
importance of recognizing
progress in areas beyond
financial results and of
aligning our goals,
contributions and rewards
with our business
strategy. | | 20% | | The Committee evaluates
progress in each category
compared to 2016. | | Above target performance reflects: • Strong progress in community health and client retention • A higher NPS score relative to 2016 • Strong employee engagement results • Advancement of enterprise compliance initiatives | | The categories for the strategic priorities measure for 2017 include (1) customer, client and reputational focus; (2) employee engagement; and (3) enterprise focus on compliance. |
| * | Cigna uses adjusted income from operations as the principal financial measure for operating performance because management believes it presents the underlying results of our business operations and permits analysis of trends in underlying revenue, expenses and profitability. For a reconciliation of adjusted income from operations for the Global Health Care, Global Supplemental Benefits and Group Disability and Life segments to shareholders’ net income for each of the Company’s ongoingthree businesses, (Health Care, Disabilitysee Annex A to this Proxy Statement. As appropriate, adjustments are made for acquisitions, dispositions and Life,the implementation of accounting changes to ensure comparability of actual results and International) versus the 2011 operating plan, weighted according to the relative size of each line of business. | | targets. |
In setting the target performance levelsgoals for each performance measure in February 2017, the PRCCommittee considered Cigna’s publicly disclosed earnings estimates, historical Company and SPS performance peer company results, analyst commentary and the Company’s then-current expectations for the year, historical company performanceindustry and peer companies’ performance. With respecteconomic environment. The Committee considered | | | 40 | | Cigna 2018 Notice of Annual Meeting of Shareholders and Proxy Statement |
various market forces impacting the Company and related uncertainties, including the expectation that the industry would continue to Adjusted Income from Operations,face significant market changes and disruption in 2017 and initial reactions to the 2016 U.S. election, as well as uncertainty regarding the proposed merger with Anthem. The Committee believed that the target performance range was set at -4%goals represented competitively attractive goals that would be challenging to 4% change from 2010, which represented the Company’s expectationsachieve in light of the challenging industrycircumstances facing the Company in 2017. 2017 Individual MIP Targets and economic environment for 2011. To aid the PRC in setting performance targets, and to assess the reasonableness and rigor of those targets, PM&P presents a comprehensive report annually to the PRC with compensation and performance information that includes historical performance information and analyst expectations of future performance for Cigna and Cigna’s Primary Peer Group.Awards For full year 2011, Cigna reported Adjusted Income from Operations for the Company’s three ongoing businesses of $1.561 billion, which represents year-over-year growth of 13%; and revenue for the Company’s three ongoing business segments of $21.3 billion, which represents year-over-year growth of 7%. Operating expense results were below target at -3.5% versus the Company’s 2011 operating plan. Overall, these results well exceeded the target performance level for Adjusted Income from Operations and were within the target level for Revenue Growth. Relative to operating expenses, strong results in our International segment were offset by below target operating expense results in our Health Care and Disability and Life segments, primarily related to customer growth levels as well as investments in strategic capabilities and initiatives. Under the 2011 MIP, the Adjusted Income from Operations target level was exceeded; the Revenue Growth target level was met; and the Operating Expenses target level was not met. Based on these results, the PRC approved funding in the above target range for the enterprise.
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For the 2011 performance year, MIP target levels werefor the 2017 performance year for the NEOs are set asforth in the table below. As further described on page 37, the Committee, and with respect to Mr. Cordani, the Board, approved changes to Mr. Cordani’s, Ms. Jones’ and Mr. Sadler’s 2017 MIP targets to maintain the competitive positioning of their target total direct compensation. The average MIP target increase was 26%. MIP targets for these executive officers had not been increased since December 2014 due to the operating covenants in the merger agreement with Anthem that restricted adjustments to executive officer compensation. The 2017 MIP targets in the table below forreflect the named executive officers.approved increases. The target cash compensation for Messrs. Cordani, Manders and Ms. Jones are within a competitive range of the primary market reference. Mr. Murabito’s target cash compensation is above the competitive range of the market, but within a competitive range of the 75th percentile. The target cash compensation2017 MIP targets for Mr. Nicoletti is belowPalmer and Mr. Hocevar reflect the competitive range.targets approved in connection with their promotions.
Named Executive Officer | 2010 MIP Target ($) | 2011 MIP Target ($) | % Change | David M. Cordani (1) | 1,500,000 | 1,800,000 | 20.0% | Ralph J. Nicoletti (2) | - | 293,836 | N/A | Nicole S. Jones (2) | - | 415,000 | N/A | John M. Murabito (3) | 425,000 | 425,000 | - | Matthew G. Manders (4) | 375,000 | 475,000 | 26.7% | Thomas A. McCarthy (5) | 184,250 | 275,000 | 49.3% | Bertram L. Scott (6) | 650,000 | 650,000 | N/A | Carol Ann Petren (6) | 600,000 | 300,000 | N/A | (1) In December 2010 the PRC approved an increase to Mr. Cordani’s 2011 MIP target (eligible for payout in 2012) from $1,500,000 to $1,800,000 to align to the median of the competitive market data for his role. (2) Mr. Nicoletti and Ms. Jones were hired in 2011. The PRC approved the MIP targets for Mr. Nicoletti and Ms. Jones when it approved their respective new hire compensation packages. The MIP target included in the table above reflects the pro-rated target based on Mr. Nicoletti’s employment start date. On an annual basis, the target amount would be $550,000. In December 2011, the PRC approved changes to Mr. Nicoletti’s and Ms. Jones’ 2012 MIP targets, to align each with the competitive market data. Mr. Nicoletti’s 2012 target (eligible for payout in 2013) will change from $550,000 to $600,000. Ms. Jones’ target will change from $415,000 to $ 435,750. (3) MIP target for 2011 remained the same for Mr. Murabito because his current MIP target exceeded the competitive range of the primary market reference for his role in 2011. (4) In October 2011 the PRC approved an increase to Mr. Manders’ 2011 target (eligible for payout in 2012) to align to the median of the competitive market data for his new role, President Regional and Operations. (5) Mr. McCarthy’s MIP target was increased when he assumed a new role in the Finance organization after he completed the acting CFO role. The Vice President, Finance role is not an executive officer role, and therefore the PRC was not required to approve the changes. (6) Payout of Mr. Scott and Ms. Petren’s 2011 MIP awards will be at the target amounts based on the terms of their separation agreement with the Company as described further on page 63. Ms. Petren’s target is pro-rated to $300,000, based on her retirement mid-year. |
For the 2011 performance year, the PRC and the Board made annual incentive awards to the named executive officers at a level of 138% to 156% of the target award value. Annual incentive awards made to named executive officers are paid from the MIP pool, for which funding is determined by the PRC (and more fully described on page 38) based on Cigna’s performance against certain pre-established goals (see page 37 for a discussion of the 2011 performance goals). In determining named executive officers’ individual annual incentiveactual MIP awards, the PRCCommittee (and for Mr. Cordani, the Board of Directors)Directors upon the recommendation of the Committee) takes an integrated approach, assessing enterprise results together with each named executive officer’s individual performance contributions during 2011.2017. Payouts under the 2017 Management Incentive Plan rewarded our NEOs for our strong performance in 2017, reflectingpay-for-performance alignment.
Below is a description
| | | | | | | | | | | | | | | | | NEO | | 2017 MIP TARGET ($) | | | ACTUAL MIP PAYOUT ($) | | | PAYOUT
AS A PERCENT OF TARGET (%) | | | | | | David M. Cordani | | | 2,800,000 | | | | 4,000,000 | | | | 143 | | | | | | Eric P. Palmer | | | 750,000 | | | | 975,000 | | | | 130 | | | | | | Christopher J. Hocevar | | | 500,000 | | | | 775,000 | | | | 155 | | | | | | Nicole S. Jones | | | 680,000 | | | | 1,054,000 | | | | 155 | | | | | | Jason D. Sadler | | | 648,837 | | | | 908,371 | | | | 140 | | | | | | Thomas A. McCarthy(1) | | | 800,000 | | | | 400,000 | | | | 50 | | | | | | Matthew G. Manders(2) | | | 900,000 | | | | 900,000 | | | | 100 | |
| (1) | Mr. McCarthy’s Agreement and Release provided that he would receive a 2017 MIP payment of $400,000, or 50% of his target, subject to the Company’s attainment of 2017 MIP targets. |
| (2) | Mr. Manders’ Agreement and Release provided that he would receive a 2017 MIP payment of $900,000, or 100% of his target, subject to the Company’s attainment of 2017 MIP targets. |
Mr. Cordani In early 2018, the Committee, together with the independent Chairman of the 2011 MIP award received by each named executive officer. Board, assessed the performance of Mr. Cordani in the context of the overall Company performance. This assessment included a review of the Company’s financial performance in 2017 as well as Mr. Cordani’s individual contributions. Following this review, the Committee made certain recommendations to the Board relating to Mr. Cordani’s MIP award was 156%for 2017. The Board considered these recommendations as part of his target. Underits own independent review of Mr. Cordani’s performance. More specifically, the Board considered the following factors: Enterprise Performance. Cigna’s 2017 results included strong performance across each of our priority growth platforms – Commercial Employer, U.S. Seniors, Global Supplemental Benefits, and Group Disability and Life, providing Cigna with momentum for continued growth in 2018. Specifically, 2017 enterprise performance included: Consolidated revenue of $41.6 billion, an increase of 5% over 2016; Consolidated adjusted income from operations of $2.7 billion, compared to $2.1 billion in 2016, reflecting increased earnings contributions from each of our business segments; Global medical customer growth of 700,000 customers during the year, totaling 15.9 million customers at year end, driven by strong growth across our Commercial market segments; and | | | | | | | | | Cigna 2018 Notice of Annual Meeting of Shareholders and Proxy Statement | | | 41 | |
An industry leading medical cost trend, reflecting benefits from increased alignment for our customers and clients, deeper collaborative relationships with providers and differentiated specialty integration models. Strategy Execution. During 2017, following termination of the merger with Anthem, Mr. Cordani led the evolution of Cigna’sGo strategy toGo Deeper, Go Local and Go Beyond and effectively communicated this evolved strategy to investors, clients, customers and partners. Highlights of the execution of the Company’sGostrategy, include: Strategic investments through the acquisitions of Zurich Middle East, which enabled Cigna to provide more personalized products to individuals, employers and government entities in the Middle East, and Brighter, an innovative technology company working with leading health service and dental organizations to engage patients and providers in personalized and seamlessly integrated experiences to more efficiently deliver higher-value healthcare; The increase in number of members using Cigna One Guide, a personalized multi-modal service experience that supports consumers consultatively at the point they choose a plan, find care and other “moments that matter,” to more than two million Cigna customers; and Targeted initiatives and increased investments that benefit our customers and communities and further promote Cigna’s mission and global brand, including the TV Doctors of America campaign for preventive care, the creation of the Health Improvement Tours featuring health screening, opioid reduction initiatives and veterans support. Enterprise Leadership. The Board recognized Mr. Cordani’s leadership during a year of significant change and uncertainty, focusing on talent retention, employee development and engagement initiatives. Despite two key retirements, he ensured a strong leadership team remained in 2011,place through a number of internal promotions. Throughout 2017, Cigna continued to effectively execute on its growth strategy. In 2011, eachthe implementation and execution of the ongoing businesses demonstrated positive performance, with particularly strong performance with respectoperating model announced in early 2017, which is designed to targeted market growth, customer/client/partnerensure the executional focus necessary to deliver greater choice, quality, affordability and bottom line financial performance.personalization to Cigna’s customers and clients. In addition, the results of employee engagement efforts were positive and turnover, particularly among key employees, remained low. Cigna also delivered meaningful results on diversity and inclusion efforts. Regulatory Environment and Compliance.Mr. Cordani led Cigna’s efforts to pursue key acquisitionsrepresented Cigna and alliances to further diversify the Company’s global portfolio. In particular,health care industry in 2011 Cigna signed an agreement to acquire HealthSpring (a transaction that closed earlya number of forums in first quarter 2012). The acquisition further expands Cigna’s growth strategy by extending health solutionsWashington, D.C. and across the government, employer-sponsored and consumer spaces – specifically withincountry to reinforce the seniors and Medicare segment. Also under Mr. Cordani’s leadership, Cigna continued to invest in strategic priorities with the launchneeds of the Company’s new “GO YOU” brand campaign,customers and clients. In 2017, Cigna restructured the Enterprise Compliance team to further align with Cigna’s strategic plan and operating model. In June 2017, the CMS audit work was completed and Cigna resumed marketing its Medicare Advantage-Prescription Drug and Medicare Part D Plans and enrolling beneficiaries. Cigna’s Seniors business emerged from the audit with a joint venture partnershipstrong operating model and a continued commitment to customer centricity and compliance. Based on these factors, and in India and new operations in Turkey. Mr. Cordani continues to position Cigna as a leading global health services company, focused on improved health outcomes and personalized services. Mr. Nicoletti’s MIP award was 144% of his pro-rated target. Mr. Nicoletti joined Cigna as the CFO in June 2011. Under Mr. Nicoletti’s leadership, the earnings results continued to be strong for the year and he continued to drive focus and discipline around financial plans, results andparticular given the Company’s growth strategy.strong 2017 financial performance, the positive momentum going into 2018 and Mr. Nicoletti quickly acclimated to Cigna’s business model and the competitive landscape. He strengthened the performanceCordani’s continued focus on execution of the Company’s finance function through process improvementsstrategy and efficiencies.leading the organization during a challenging year, the Board awarded Mr. Nicoletti personally, along withCordani a MIP payout for 2017 of $4,000,000, or 143% of his 2017 MIP target.
Other NEOs For all other NEOs, Mr. Cordani makes recommendations to the Committee regarding MIP awards based on his evaluation of each NEO’s performance and contributions to enterprise goals. The Committee considers Mr. Cordani’s recommendations when determining MIP awards. While not exhaustive, below are certain key factors the Committee considered when making award determinations. Mr. Palmer.Mr. Palmer was appointed Executive Vice President and Chief Financial Officer in June 2017. Since that time, he has led the partnership between the Company’s business teams and their financial counterparts and has provided critical guidance and leadership in support of the Company’s development and assessment of strategic paths. Through this leadership, Mr. Palmer supported the delivery of strong results in each of our ongoing businesses in 2017. In addition, he successfully executed on Cigna’s capital management objectives, including a $1.6 billion debt offering and a tender offer for $1 billion of outstanding debt. He also led the reorganization of the finance leadership team played a significant role in developingto align with and executing the strategy for the acquisition of HealthSpring. Ms. Jones’ MIP award was 138% of her target. Ms. Jones joined Cigna as the General Counsel in June 2011. Under Ms. Jones’ leadership, the legal department has demonstrated a strengthening of capabilities, particularly in the area of public policy and also in overall client focus and partnership throughout the organization. Ms. Jones has driven these improvements through process enhancements and development of her leadership team. Under Ms. Jones’ leadership, the legal team played an instrumental role in the HealthSpring acquisition, in particular by facilitating a smooth and efficient regulatory approval process.
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Mr. Murabito’s MIP award was 150% of his target. Under Mr. Murabito’s leadership, there were several new senior executives successfully recruited and assimilated into enterprise leadership roles within the Company. He also played a critical role in the formation and development of a new enterprise leadership team. Mr. Murabito played an integral role in establishing the retention strategy for key members of the HealthSpring leadership team, an important element in the acquisition strategy. Under Mr. Murabito’s leadership, the Human Resources team has enhancedsupport the Company’s diversityevolved operating model and inclusion strategy, succession planning strategyinitiated a process to streamline and processes, and has laid the framework for executing against the Company’s customer-centric strategy.
Mr. Manders’ MIP award was 150% of his target. Under Mr. Manders’ leadership, the Group, Pharmacy and Dental businesses had strong results. Mr. Manders’ organization led effective strategies and programs to partner with health care professionals and customers, which resulted in industry-leading medical cost trends along with very strong clinical quality. Mr. Manders’ organization successfully developed and implemented a customer-centric service strategy to integrate service and medical management, further improving the overall customer experience and clinical quality. Mr. Manders also strengthened his leadership team through development of talent internally and recruitment of key external hires.
Mr. McCarthy’s MIP award was 150% of his target. Mr. McCarthy served as the acting CFO from September 1, 2010 until June 2011. Under Mr. McCarthy’s leadership in the acting CFO role, earnings results continued to be strong through focused and disciplined financial plans that contributed to the successful executionimprove efficiencies of the Company’s core finance and underwriting disciplines. As a result of Mr. Palmer’s contributions in 2017, Mr. Cordani recommended, and the Committee approved, a 2017 MIP payment of $975,000, or 130% of his target.
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Mr. Hocevar.Mr. Hocevar was appointed President, Strategy, Segments and Solutions in February 2017. In this role, Mr. Hocevar is responsible for the strategic, growth strategy.and profitability plans for the Company’s U.S. Commercial, Pharmacy and Group Insurance businesses. He also oversees the strategic development of product solutions and their market positioning and the enterprise informatics strategy and analytics teams, aligning internal resources to deliver valuable solutions to our customers. During 2017, Mr. Hocevar led the delivery of strong financial performance and robust customer growth within our U.S. Commercial business and made meaningful progress in advancing strategic initiatives, including the Company’s localization, personalization and affordability strategies. In addition, he was key to the development and execution of Cigna’s sovereign strategy in 2017. As a result of Mr. McCarthy’sHocevar’s contributions in 2017, Mr. Cordani recommended, and the Committee approved, a 2017 MIP payment of $775,000, or 155% of his target. Ms. Jones. As Executive Vice President Finance role, heand General Counsel, Ms. Jones continued to lead Cigna’s legal, compliance and government affairs teams in 2017 and the partnership between those teams and the Company’s businesses and other corporate functions. During the past year, Ms. Jones continued to enhance and strengthen the Company’s compliance organization and created and led his team’s work on a variety of issues, in particular,cross-functional teams to identify and mitigate potential compliance risks across the enterprise. With respect to the proposed merger with Anthem, Ms. Jones provided key strategic legal counsel. She also provided legal guidance related to the Company’s global business and mergers and acquisitions strategy. As a result of Ms. Jones’ contributions in 2017, Mr. Cordani recommended, and capital management. the Committee approved, a 2017 MIP payment of $1,054,000, or 155% of her target. Mr. Sadler.Mr. McCarthy played an instrumental roleSadler continued to serve as President, International Markets in 2017, delivering strong performance, value and service to clients, customers and partners across all businesses in our international markets, with particularly strong results in the HealthSpring acquisitionGlobal Supplemental Benefits business. Mr. Sadler led the continued evolution of our International Markets strategy and structuringthe reorganization of our International Markets team in support of that strategy.He also led continued growth in the Middle East, furthered by the Company’s acquisition of Zurich Insurance Middle East. As a compelling offerresult of Mr. Sadler’s contributions in an extremely competitive environment.2017, Mr. Cordani recommended, and the Committee approved, a 2017 MIP payment of $908,371, or 140% of his target. | | | | | | | | | Cigna 2018 Notice of Annual Meeting of Shareholders and Proxy Statement | | | 43 | |
Long-Term Incentives | | | | | | | | | | | | | | | | | | | | Long-term incentives are designed to incent and reward sustained financial success and strategic accomplishments that benefit Cigna and its shareholders over the long-term. | | | | | | | | | | | | | | | | | | | | |
LTI Overview Long-term incentives (LTI) are administered under the Cigna Long-Term Incentive Plan. AnPlan and are delivered annually through a mix of strategic performance shares (SPSs) and stock options. SPS awards have a three-year performance period and are denominated in shares of Cigna common stock. At the end of the three-year performance period, the actual number of shares earned is based on Cigna’s performance againstpre-established enterprise goals. The SPSs earned will range from 0% to 200% of the SPS award opportunity. Cigna’s stock options, whose actual value realized depends upon stock price appreciation at the time that the options are exercised, generally vest (or first become exercisable) in equal installments over three years beginning on the first anniversary of the grant and have aten-year term. 2017 Individual LTI Targets and Awards A named executive officer’s LTI target is expressed as a dollar value and is determined based on the relevantcompensation peer group and the general industry peer group market data for the executive’sofficer’s role. The target is set byCommittee sets the PRCtarget as an absolute dollar value, not as a percentage of salary, with the primary consideration being the comparison to the 50th percentile LTI target level withinof the relevant market data. Andata for both peer groups. For 2017, an executive cancould receive an awarda grant between 0% and 200% of thehis or her individual target basedvalue. In determining awards for the NEOs, the Committee (and, for Mr. Cordani, the Board, upon the recommendation of the Committee) primarily onevaluates individual contributions, however, the PRC retains discretion to adjust the awards, takingbut also may take into consideration enterprise performance, LTIP share utilization, succession planning needs and other factors as circumstances warrant. 2017 LTI awards in 2011ranged from 100% to 115% of each NEO’s target for the NEOs who served as an executive officer at the time of the 2017 LTI award. These awards were delivered 50% in stock options and 50% in SPSs, which the PRCSPS awards having a 2017-2019 performance period. The Committee believes to bethis mix provides an appropriate balance between emphasizing stock price performance (through stock option awards)appreciation and enterprise performance (through SPS awards).performance. The following table summarizesbelow provides more detail about the changes to named executive officers’ LTI targets from 2010 to 2011. Changes to the 2011 LTI targets for Messrs. Cordani and Manders were made to align with the market based on the PRC’s annual review of competitive market data as presented by the compensation consultant. Mr. McCarthy’s2017 LTI target was not reviewed by the PRCvalues, grant values and percentages relative to LTI targets. | | | | | | | | | | | | | | | | 2017 LTI TARGET ($) | | | ACTUAL LTI GRANT
VALUE(1) ($) | | | LTI AWARD
AS A PERCENT OF TARGET (%) | | David M. Cordani | | | 9,600,000 | | | | 11,040,000 | | | | 115 | | Eric P. Palmer(2) | | | 2,100,000 | | | | 1,266,000 | | | | — | (2) | Christopher J. Hocevar | | | 1,250,000 | | | | 1,250,000 | | | | 100 | | Nicole S. Jones | | | 1,424,500 | | | | 1,638,175 | | | | 115 | | Jason D. Sadler | | | 1,000,000 | | | | 1,150,000 | | | | 115 | | Thomas A. McCarthy | | | 2,400,000 | | | | 2,400,000 | | | | 100 | | Matthew G. Manders | | | 2,600,000 | | | | 2,600,000 | | | | 100 | |
| (1) | Awarded in February 2017. The LTI Grant Value referenced in the table differs from the sum of the Stock Award and Option Award grant date fair values referenced in the Summary Compensation Table. This is largely due to the timing and determination of the grant date fair value of SPS awards under ASC Topic 718. Under ASC Topic 718, SPS grant date fair values reflect a probable achievement level of the TSR performance condition as of grant date; however this probable achievement level is not determined until after the Committee has determined the dollar amount of the LTI grant. Thus, an SPS award’s grant date fair value for accounting purposes may be higher or lower than the dollar amount of the LTI grant approved by the Committee if the TSR probable achievement level is above or below target, respectively. For more information on the TSR performance condition, please see the “Stock Awards” footnote for the Summary Compensation Table. |
| (2) | Reflects the LTI target approved by the Committee in connection with Mr. Palmer’s promotion to Executive Vice President, Chief Financial Officer in June 2017. The actual LTI grant value includes the LTI award granted to Mr. Palmer in February 2017, prior to his promotion, plus the aggregate value of transitional SPSs that he was awarded for the 2017-2019 performance period in connection |
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| with his promotion. The objective of the transitional SPS award is to align Mr. Palmer’s 2017-2019 SPS award with his new LTI target. As Mr. Palmer was not an executive officer at the time the 2017 LTI award was granted, we have not included his award as a percent of target. |
Equity awards granted in the acting CFO role at the time,2017 are disclosed in terms of their grant date fair value in columns (e) and the CFO Primary Peer Group data was therefore not a relevant comparison. Changes were approved for the 2012 LTI targets for Mr. Nicoletti and Ms. Jones as a result(f) of the review of competitive market data in December 2011. The PRC also approved changes to Mr. Manders’ 2012 LTI target to maintain competitive positioning to the market in connection with his promotion to the President, RegionalSummary Compensation Table and Operations role. Named Executive Officer | 2010 Long-Term Incentive Target ($) | 2011 Long-Term Incentive Target ($) | % Change | David M. Cordani(1) | 7,500,000 | 9,000,000 | 20.0% | Ralph J. Nicoletti(2) | - | 1,900,000 | N/A | Nicole S. Jones(2) | - | 1,295,000 | N/A | John M. Murabito | 1,150,000 | 1,150,000 | - | Matthew G. Manders(3)(4) | 900,000 | 1,150,000 | 27.8% | Thomas A. McCarthy | 352,680 | 358,560 | 1.7% | Bertram L. Scott | 1,750,000 | 1,750,000 | - | Carol Ann Petren | 1,500,000 | 1,500,000 | - | (1) In December 2010, the Board approved increasing Mr. Cordani’s 2011 LTI target to $9,000,000 to align with the competitive market data for the President and CEO role. (2) Mr. Nicoletti and Ms. Jones were hired in 2011 and therefore did not have 2010 LTI targets. They were not employees at the time of the 2011 annual grant; however, their 2011 LTI targets were approved by the PRC as part of their respective new hire compensation packages. In December 2011, the PRC approved increasing Mr. Nicoletti and Ms. Jones 2012 LTI targets to $2,100,000 and $1,424,500, respectively. The changes were made to align with the competitive market data for the CFO and General Counsel roles. (3) In January 2011, the PRC approved an increase to Mr. Manders’ 2011 LTI target to align with the competitive data for his role at that time. (4) In October 2011, the PRC approved increasing Mr. Manders’ 2012 LTI target to $1,500,000 in light of his additional responsibilities as President, Regional and Operations and to align to the competitive market data. |
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For 2011, the PRC approved LTI awards (grants of stock options and SPSs) for the named executive officers at a level of 100% to 120% of the target award value shown in the table above. The awards were made at and above target as a result of individual performance. Retention considerations and changes in roles or responsibilities also were considered in determining award levels.
The 2011 annual LTI awards were approved by the PRC in February 2011 and were granted during the first week of March 2011, after Cigna’s 10-K filing and following the end of a quarterly blackout period. Detail on the LTI awards to each named executive officer appear in the Grants of Plan-Based Awards Table on pages 50Table.
Strategic Performance Shares Program Our SPS program is designed to incent and 51. SPSsreward sustained long-term financial discipline and strategic accomplishments that benefit Cigna and its shareholders over the long-term.
SPSs are performance awards denominated in shares that will be paid in shares of Cigna common stock the year after the end of a three-year performance period. Beginning with the 2010 awards, Cigna replaced the SPU portion of long-term incentive awards with SPSs. This change was made to continue to reinforce the link between pay and performance at the time of both award and payout and further strengthens the alignment between Cigna’s executives and shareholders by settling the awards in Cigna common stock and therefore linking their value to Cigna’s stock price.
Grants SPSs were granted in March 2011 and the number of SPS awards earned and paid in 2014 will be based on Cigna’s performance over a three-year period measured against pre-established measures and goals. There are three measures within the 2011-2013 SPS program: Relative Total Shareholder Return (TSR), which is stock price appreciation assuming reinvestment of dividends (weighted 50%), Revenue Growth (weighted 25%) and Adjusted Income from Operations growth (weighted 25%). At the time of award, the PRC approved angrant, a total LTI dollar value and theis approved for each named executive officer. The SPS portion of
the award (50% of the total LTI award wasvalue) is converted into a specific number of SPSs on the grant date based on Cigna’s stock price on that will ultimately be settleddate. Vesting SPSs vest in sharesthe first quarter of Cigna common stock afterthe year following the end of the three-year performance period. When Payout Determination The Committee determines a performance factor of 0% to 200% based on Company achievement ofpre-established measures during the PRC approvedperformance period, and that factor is multiplied by each SPS award to determine the number of shares to be paid in respect of vested awards. | | | Measure: Relative TSR, compounded over the three-year performance period Weighting: 50% Alignment with Business Strategy: Rewards NEOs for stock performance relative to Cigna’s applicable peer group at the time of the award Comparator:The SPS performance peer group is used to measure relative TSR. | | Measure: Adjusted income from operations Weighting: 50% Alignment with Business Strategy: Reinforces the importance of sustained profitable growth across the enterprise Segments Included: Global Health Care, Global Supplemental Benefits and Group Disability and Life Threshold Performance: Performance that would result in funding of less than 35% of target yields no payment for this measure |
Final Payout SPS awards are ultimately settled in Cigna stock, so the actual value of the earned awards is based on Cigna’s stock price at the time of payment. The SPS program is designed to pay at the competitive median for performance results against stretch targets. Each year, when the Committee approves the performance measures and goals for the 2011-2013 SPS performance period, the PRC anticipatedCommittee sets the goals with the expectation that performance resulting in fundinga number of shares paid between 80% and 120% of target would be challenging and not certain, while performance resulting in fundinga number of shares paid over 120% of target would be difficult, but not unattainable. The actual numberCommittee believes that the SPS performance measures are effective in evaluating the Company’s long-term success and value created for shareholders. The SPS programs outstanding as of sharesthe end of 2017 include the 2015-2017 performance period, the 2016- | | | | | | | | | Cigna 2018 Notice of Annual Meeting of Shareholders and Proxy Statement | | | 45 | |
2018 performance period and the 2017-2019 performance period. If earned, these SPSs will be paid can range from 0%out in 2018, 2019 and 2020, respectively. For each of these programs, the SPS performance peer group, which is used to 200% ofmeasure relative TSR, includes Aetna, Inc., Aflac Incorporated, Anthem, Inc., The Hartford Financial Services Group, Inc., Humana, Inc., Manulife Financial Corporation, MetLife, Inc., UnitedHealth Group Incorporated and Unum Group. Centene Corp. was added to the SPS performance peer group for the 2017-2019 performance period. In the event the number of SPSs awarded. Because the payment will be madecompanies in Cigna stock, the actual value of the earned awards is based on Cigna’s common stock price at the time of payment. SPS awards for the 2011-2013 performance period are disclosed in terms of their grant date fair value in column (e) of the Summary Compensation Table on page 46 , in the Grants of Plan-Based Awards Table on pages 50 and 51 and in the Outstanding Equity Awards Table on page 53. No shares were paid in 2011 under this program for the 2011-2013 performance period. Rather, shares for this performance period, if any, will be issued in 2014. Due to the transition from the SPU program to the SPS program, both SPS grants in 2011 for the 2011-2013 performance period and SPU payouts in 2012 for the 2009-2011 performance period are reported in the Summary Compensation Table on page 46 and described in the narrative to the Grant of Plan-Based Awards Table on page 50 and 51.
SPUs
Prior to 2010 (when the SPS program was introduced), SPU awards typically constituted half of the LTI awards for named executive officers. Therefore, although SPUs are no longer awarded as part of the annual LTI awards, named executive officers still received SPU payouts in 2012. There is one SPU award performance period remaining that includes 2011 in the performance period. The 2008-2010 performance period, for which payout occurred in 2011, is also listed below. Descriptions of how SPU payments are calculated appear in the narratives to the Summary Compensation and Grants of Plan-Based Awards Tables beginning on pages 46 and 50, respectively.
Award Year | Performance Period | Scheduled Payout | 2008 | 2008 - 2010 | 2011 | 2009 | 2009 - 2011 | 2012 |
The measures in the SPU program for the cycles listed above are Relative TSR and Adjusted Income from Operations. These measures were selected by the PRC because the PRC believes that the measures strike an appropriate balance between shareholder return and earnings growth. Each performance measure is weighted 50%. The goals for Adjusted Income from Operations and the peer group for TSR are set at the beginning of the performance period. See the Strategic Performance Units discussion in the Summary Compensation Table Narrative on page 48 for a description of the performance objectives and measures for the SPU program. At the time the PRC approved the performance measures and goals for the 2008-2010 and 2009-2011 performance periods, the PRC anticipated that the achievement of threshold levels of performance would be attainable, but not certain, and that the achievement of superior levels of performance would be unlikely.
The actual payout level for SPUs is determined by the PRC by assessing Cigna’s overall performance against the pre-established goalsfalls below ten during the three-year performance period. period, the Company’s TSR will be ranked against the remaining companies.
2015-2017 SPS Program The PRC has discretionperformance goals for the 2015-2017 SPSs are presented in the table below, along with actual results for the three-year performance period. | | | | | | | | | | MEASURE | | WEIGHTING | | | TARGET PERFORMANCE GOALS (DOLLARS IN MILLIONS) | | ACTUAL RESULT
(DOLLARS IN MILLIONS) | Relative TSR | | | 50 | % | | 50th Percentile | | 78th Percentile (183% of target) | | | | | | | | | | Adjusted income
from operations(1) | | | 50 | % | | Cumulative adjusted income from operations of $7,220 to $7,948, calculated assuming a compound annual growth rate of 3.5%-8.5% | | $7,532 (97.1% of target) | | | | | | | | | |
| (1) | Reflects results for Cigna’s three ongoing business segments — Global Health Care, Global Supplemental Benefits and Group Disability and Life. Cigna uses adjusted income from operations as the principal financial measure for operating performance because management believes it presents the underlying results of our business operations and permits analysis of trends in underlying revenue, expenses and profitability. For a reconciliation of adjusted income from operations for the Global Health Care, Global Supplemental Benefits and Group Disability and Life segments to shareholders’ net income for each of the three businesses, see Annex A to this Proxy Statement. As appropriate, adjustments are made for acquisitions, dispositions and the implementation of accounting changes to ensure comparability of actual results and targets. |
Over the three-year period from 2015 to reduce2017, three-year annual compounded TSR was 25.5%, which ranked at the payout. This approach allows the PRC to consider the totality of Cigna’s performance in determining final awards, rather than using a purely mechanical formula. In 2011, the PRC elected to make SPU payouts in cash78th percentile relative to the named executive officers who had met their stock ownership guidelines atapplicable peer group companies and was 183% of target. Based on the timeresults in the table above, in February 2018, the Committee approved a payout of the awards. Messrs. Cordani, Murabito, Manders, McCarthy and Scott and Ms. Petren received the SPU payouts in cash. Mr. Nicoletti and Ms. Jones were not employed by Cigna2015-2017 SPSs at the time139.8% of this award so they received no payment. SPU payouts for the 2009-2011 period are disclosed in column (g) of the Summary Compensation Table on page 46 and a summary of the SPU program appears in the Summary Compensation Table Narrative on page 48 and in the narrative to the Grants of Plan-Based Awards Table on page 60.target. The payout of SPUs for the 2009-2011 period, which occurred during the first quarter of 2012, was the final payment of outstanding SPU awards under the SPU program.
CIGNA – 2012 Notice of Annual Meeting of Shareholders and Proxy Statement – 45
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Transitional SPS and SPU Awards
Cigna may award transitional SPUs to newly-hired executives, employees who first become eligible to receive SPSs and SPUs mid-year due to a promotion for increased responsibilities, and executives whose LTI targets are increased mid-year. Transitional SPS and SPU awards for executive officers are recommended by the Executive Vice President, Human Resources and Services and are subject to the PRC’s approval. A typical award of transitional SPSs and/or SPUs includes SPSs and/or SPUs for the performance periods that are running concurrently at the time. Generally, the number of transitional SPSs and/or SPUs awarded is based on the difference between an executive’s current, if any, LTI target and the new target, prorated for the number of months remaining in the respective performance periods.
All executives are responsible for achieving SPS and SPU goals. Transitional SPSs and SPUs are awarded to help retain and motivate executives so that all executives have a meaningful stake in attaining the relevant performance goals. In that way, executives who become newly eligible to participate in the SPS and/or SPU program, or participate at a higher award level mid-cycle, can be rewarded in the same way as other executives who have already received SPU awards. Details of both transitional unit awards and the forfeitures can be found in the Grants of Plan-Based Awards Narrative on page 50.
Transition Compensation Actions
Retention awards and transition compensation actions for executive officers, while not a frequent practice, are considered and used by the PRC as circumstances warrant in order to facilitate business continuity associated with the executive officer roles. In considering the use of these compensation vehicles, the PRC does not generally consider prior awards in determining a subsequent performance period’s awards. However, it may consider outstanding unvested awards for current executives in order to determine existing retention incentive values and whether any new awards should be made. For potential candidates outside of the organization, the PRC may consider prior awardscalculations utilized to determine the compensation necessarypayout were reviewed for accuracy by PricewaterhouseCoopers LLP.
2014-2016 SPS Program The shares earned under the 2014-2016 SPS program were measured using performance through December 31, 2016 and were delivered to attracteach executive officer in February 2017. The total share value realized by each NEO on the candidate. In 2010payment date is reflected in the Option Exercises and 2011,Stock Vested Table. The performance measures, targets, results and payout for the PRC approved transition compensation actions to support the leadership transitions associated2014-2016 SPS program are discussed in greater detail in our definitive proxy statement for our 2017 annual meeting of shareholders, filed with the acting CFO, CFO, General Counsel and the President, Regional and Operations roles.SEC on March 17, 2017. While serving as the acting CFO, in September 2010 Mr. McCarthy was awarded a special incentive restricted stock award under the Cigna Long-Term Incentive Plan of 13,926 shares of Cigna common stock (with a grant date value of approximately $450,000) for his service to the Company as the acting CFO. The award vests on the third anniversary of the grant date. In 2011, Mr. McCarthy received a cash bonus of $450,000, which was contingent on his service as acting CFO until the appointment of the CFO. The cash bonus was determined by the CEO based on Mr. McCarthy’s performance as acting CFO and was within the range of bonus approved by the PRC. Both the 2010 restricted stock award and the 2011 cash bonus were made in recognition of the difference between Mr. McCarthy’s target compensation in his role as Vice President, Strategy and Business Control and the market compensation level for the CFO position.
Mr. Nicoletti was hired as the CFO in June 2011. As part of his new hire compensation package, he was awarded transitional SPUs and SPSs, a restricted stock grant, and a stock option grant, all of which are disclosed in the Grant of Plan-Based Awards Table on pages 50 and 51. He did not receive any other stock-based awards for 2011. Mr. Nicoletti was also given a one-time cash payment of $50,000 and relocation benefits in the amount of $64,905, which are disclosed in the Summary Compensation Table on page 46.
Ms. Jones was hired as the General Counsel in June 2011. As part of her new hire compensation package, she was awarded transitional SPU and SPS awards, a restricted stock grant, and a stock option grant, all of which are disclosed in the Grant of Plan-Based Awards Table on pages 60 and 51. She did not receive any other stock-based awards for 2011. Ms. Jones was also given a one-time cash payment of $100,000 and relocation benefits in the amount of $675,006 which are disclosed in the Summary Compensation Table on page 46.
Mr. Manders assumed additional responsibilities as President, Regional and Operations in November 2011. As part of his promotion compensation package, he was awarded transitional SPU and SPS awards, which are disclosed in the Grant of Plan-Based Awards Table on pages 50 and 51.
Executive Stock Ownership Guidelines and Hedging Prohibition
Cigna believes that executive stock ownership is critical to align management and shareholder interests. Cigna has adopted policies that require named executive officers to have a meaningful economic stake in Cigna as shareholders. Cigna believes that requiring executives to meet stock ownership guidelines encourages them to act in the best long-term interests of Cigna shareholders.
Consistent with market practice, Cigna’s stock ownership guidelines have the following features:
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The CEO is required to own stock valued at five times base salary, and other executive officers are required to own stock valued at three times base salary.
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Wholly-owned shares, restricted stock, stock equivalents, SPSs and shares owned through benefit plans (such as investments in the Cigna Stock Fund of the Cigna 401(k) Plan) are counted towards meeting guidelines. Outstanding stock options are not counted toward these guidelines.
CIGNA – 2012 Notice of Annual Meeting of Shareholders and Proxy Statement – 46
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•
If a named executive officer has not met the stock ownership guideline, the PRC may require that the officer’s SPU payouts be made in the form of shares of Cigna common stock.
Cigna evaluates situations in which executives are below their guidelines on a case-by-case basis rather than setting a formal deadline for executives to meet stock ownership guidelines. In general, however, Cigna expects executives to accumulate required shares as quickly as practical. As of December 31, 2011, all of Cigna’s named executive officers were at or above stock ownership guidelines with the exception of Ms. Jones. Ms. Jones joined Cigna in June 2011, and we expect that she will continue to acquire stock and stock equivalents in order to meet the guideline within a reasonable timeframe.
Cigna has other practices in place to encourage a long-term ownership philosophy for executives, including:
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allowing executives to sell only shares that exceed stock ownership guidelines;
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prohibiting the sale of more than 50% of the shares held above guidelines in any single open period;
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requiring CEO approval of all sales of Cigna stock by executive officers; and
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requiring General Counsel approval of all sales of Cigna stock by the CEO.
Cigna also requires executive officers to retain, for at least one year, a minimum of 50% of the shares acquired upon exercise of any stock options and 50% of the shares acquired upon vesting of restricted stock grants. This mandatory holding period is designed to encourage share retention and align executive officers’ interests with those of Cigna shareholders.
In addition, each of Cigna’s named executive officers is prohibited from engaging in a short sale of Cigna stock to hedge the economic risk of owning Cigna stock.
Retirement and Deferred Compensation 401(k) PlansRetirement Plan and Supplemental 401(k) Plan Effective January 1, 2010, Cigna increasedAll U.S. full-time employees are eligible for the matching contribution in thetax-qualified 401(k) Plan, and provided a new non-qualified supplemental 401(k) benefitwhich provides for earnings thatemployee contributions as well as Company matching contributions of up to 4.5% of eligible pay. Certain employees, including the U.S.-based NEOs, are not eligible for the regular 401(k) Plan because of IRS rules. The following summarizes the current Plans:
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The Company match is 4.5% of eligible pay.
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Employees are immediately eligible for the company match as soon as they join theCigna Supplemental 401(k) Plan.
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Employees become 100% vested in post-2009 company matching contributions after two years of service, instead of vesting over a period of five years.
The Cigna Supplemental 401(k) Plan is anon-qualified deferred compensation plan that provides an annual credit to employees equal to 1.5% of earnings that cannot be treated as eligible earnings under the regular 401(k) Plan due to Internal Revenue Code limits and cannot therefore, be the basis for either employee or companyCompany matching contributions.contributions under the regular 401(k) Plan. Earnings eligible for the credit are salary and bonus amounts that exceed the IRS annual limit on eligible earnings ($245,000270,000 in 2011)2017) or that an employee defers under the Cigna Deferred Compensation Plan. The annual credits are made to an unfunded account after the end of the year. Credits accumulate with hypothetical interest equal to the rate of return under the 401(k) Plan’s Fixed Income Fund (4.5%(3.0% as of January 1, 2012)2017 and January 1, 2018). The account will vest under the same rules that apply to the regular 401(k) Plan. The account balance will be paid after termination of employment in accordance with the Plan.plan. Nonqualified Deferred Compensation Plan Cigna provides the named executive officersNEOs and certain other employees with the opportunity to defer base salary and annual | | | 46 | | Cigna 2018 Notice of Annual Meeting of Shareholders and Proxy Statement |
incentive awards under the Cigna Deferred Compensation Plan. The purpose ofCigna does not make any contributions to this plan is to provideon behalf of employees. This plan provides eligible employees an opportunity to postpone both the receipt of compensation and the income tax on that compensation — typically—typically until after termination of employment with Cigna. Participants elect when to receive a payoutpayment and can choose to receive the deferred compensation ineither a single lump sum or in annual installments. For amounts deferred before 2005, participants can request an accelerated payment of all or part of their account balance subject to a 10% penalty. Otherwise, early withdrawals are permitted only under financial hardship circumstances. Additional information about deferred compensation can be found in the Nonqualified Deferred Compensation Table and the Nonqualified Deferred Compensation Table Narrative on page 58.accompanying narrative. CIGNA – 2012 Notice of Annual Meeting of Shareholders and Proxy Statement – 47
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Defined Benefit Pension Plans On July 1, 2009, the Company froze theThe Cigna Pension Plan a defined benefit pension plan. Employees do not earn any new benefits under the Cigna Pension Plan after this date. In connection with the freezing of the Cigna Pension Plan, the Company also frozeand the Cigna Supplemental Pension Plan of 2005 (the Supplemental Plan), a non-qualified deferred compensation plan. Effective as ofwere frozen on July 1, 2009, all future benefit accruals2009. Benefits earned under the Supplemental Plan automatically ceased for all participants. The accrued benefits under the Cigna Pension Plan as well as the Supplemental Planthese plans have been determined and frozen based on eligible earnings through that date. These changes to the Cigna Pension Plan and the Supplemental Plan doJuly 1, 2009. The freeze did not affect benefits earned by participants prior tobefore July 1, 2009. The Company’s executive officers, including the named executive officersNEOs hired before July 1, 2009 participated in the Cigna Pension Plan and the Supplemental Pension Plan.
Additional information about pension benefits can be found in the Pension Benefits Table and accompanying narrative. Retirement Plans forNon-U.S.-based Employees Mr. Sadler participates in the Mandatory Provident Fund program for Hong Kong employees. Local law requires employees to contribute 5% of their monthly salary up to a maximum amount ($1,500 KHD or approximately $200 USD per month). Employers also are required to contribute 5% of the employee’s monthly salary up to the same maximum amount. Employer contributions vest at a rate of 10% per year and are fully vested after 10 years of service. Participants may withdraw their lump sum benefit upon attaining the normal retirement age of 60. As a citizen of the United Kingdom working in Hong Kong, Mr. Sadler also participates in Cigna’s Third Country National Pension Plan. At the end of each calendar quarter, Cigna allocates a hypothetical contribution equivalent to 9% of eligible base and bonus earnings for the period. The hypothetical balance earns interest based on page 56investment elections. Employees are vested in plan benefits after five years of service. At the time of separation of service from Cigna, Mr. Sadler will receive a lump sum payment of his vested plan benefit. Limited Perquisites and the Pension Benefits Table Narrative beginning on page 57. Other Benefits Cigna’s executive compensation program provides limited perquisites to executive officers, offered primarily to attract and retain key talent or provide for an executive officer’s safety and security. Perquisites generally have included an annual allowance under our executive financial services program (as described below), payments for residential security system monitoring and maintenance and relocation benefits when a move is required. Executive officers working outside of the United States also may be provided with benefits that are customary in the country in which they are based. In addition, Mr. Cordani is expected to use the corporate aircraft for business and personal travel to increase his time available for business purposes and as a means to better ensure his safety and security. Mr. Cordani is fully responsible for any personal income tax liability associated with his personal use of the corporate aircraft. Cigna’s executive financial services program offers executive officers an annual allowance of up to $6,500 for the costs of financial or estate planning (including associated legal services) and tax return preparation, with the exception of Mr. Cordani who is reimbursed for all such expenses incurred for any year. The named executive officersNEOs also are eligible to receive all of the benefits offered to Cigna employees generally, including medical benefits,and other health and welfare benefits participationas well as voluntary benefits. Actions Impacting 2018 Compensation In July 2017, following termination of the merger agreement with Anthem, which restricted adjustments to executive compensation, and in December 2017, as part of the 401(k) Plan (includingannual review of target total direct compensation, the Company’s matching contribution) and Supplemental 401(k) Plan, the frozen defined benefit pension plan (as described above)Committee reviewed survey data and other voluntary benefits. Perquisites are notpublic information to evaluate the competitive positioning of the NEOs’ compensation. As a major portionresult of Cigna’s total executive compensation program. In 2011, Cigna providedthese reviews, the Committee, and with respect to Mr. Cordani, the Board, approved the following benefitsadjustments:
MIP. The 2018 MIP targets for Mr. Cordani, Mr. Palmer and perquisitesMr. Hocevar were increased to its executives,$3,000,000, $825,000 and $575,000, respectively. LTI. The Board approved a target range of $9,000,000 to $13,000,000 for future LTI awards for Mr. Cordani, replacing the LTI target of $10,000,000 that the Board approved in July 2017. Mr. Cordani’s future LTI awards will continue to be based primarily to attracton enterprise performance and retain key talent, but also to providehis individual contributions, as well as an assessment of then-current market data. The LTI targets for the safetyfuture awards for Mr. Palmer, Ms. Jones, Mr. Hocevar and security of its executive officers: installationMr. Sadler were set at $2,500,000, $1,690,000, $1,600,000 and maintenance of security alarm systems at executive officers’ residences; use of Company aircraft in limited circumstances; payment for financial planning, tax preparation, and legal services related to estate planning; and relocation benefits.$1,500,000, respectively. | | | | | | | | | Cigna 2018 Notice of Annual Meeting of Shareholders and Proxy Statement | | | 47 | |
These perquisites and the associated value and methodology for valuation are described in the footnotes to the Summary Compensation Table on page 46.
EMPLOYMENT ARRANGEMENTS AND POST-TERMINATION PAYMENTS Employment Arrangements and Post-Termination Payments Cigna generally doesWe typically do not enter into individual employment contracts with our executive officers. Consistent with our approach of rewarding performance, employment is not guaranteed, and either Cigna or the executive officer may terminate the relationship at any time. An executive officer receives an offer letter upon his or her hire or promotion that describes initial compensation terms, such as base salary, anysign-onor other advance arrangements with itscash bonus or equity awards, any relocation assistance and target opportunities for annual cash incentive and long-term equity incentive compensation.
Severance Arrangements Other than following a change of control of Cigna, the Committee generally has discretion to determine, on acase-by-case basis, whether to make any post-termination payments to an executive officers that provide forofficer. In the paymentpast, the Committee has approved varying amounts of severance pay upon terminationfor departing executive officers in exchange for certain obligations, including, for example, a general release of all claims or an extendednon-competition andnon-solicitation period. In approving a severance arrangement, the Committee exercises its business judgment based on individual circumstances, including, but not limited to, the executive officer’s term of employment, (other thanpast accomplishments, reasons for severancetermination, opportunities for future employment and total unvested annual or long-term incentive compensation. Jason Sadler As an employee based in Hong Kong, Mr. Sadler is entitled to certain protections in the event of ahis termination following a changethat are customary for local employees. Unless he is terminated for cause, to terminate his employment, either Cigna or Mr. Sadler must provide at least three months’ prior written notice of control).the termination, or payment in lieu thereof. Other Post-Termination Arrangements Under the Cigna does not provide any single-trigger change of control benefits (that is, a mere change of control itself does not trigger such benefits). As a result, executive officers generally serve at the will of Cigna and its Board of Directors, and their entitlement to base salary, annual incentives and long-term incentives ceases at termination. Thus, other than afterLong-Term Incentive Plan, if, absent a change of control, as outlined below,an executive officer’s employment terminates prior to the PRC has discretion to determine whether to make any salary, annual incentive, SPUvesting of a stock option, restricted stock, RSU or SPS payments to a terminated executive officer. The PRC addresses situations on a case-by-case basis given individual circumstances, and the PRC may decide to provide post-termination payments in exchange for certain restrictive covenants, including, for example, agreement not to compete with Cigna for customers or to solicit Cigna customers or employees. In 2011, the PRC approved the terms of separation for Ms. Petren and Mr. Scott, as described in Terms of Separation for Ms. Petren and Mr. Scott on page 63. Cigna has also established policies related to the impact of various termination events on stock option and restricted stock awards. If a named executive officer terminates before an option or restricted stock award, vests, the award is generally forfeited, subject to specific exceptions. These exceptions include termination of employment on account offor disability, death and disability. In these exceptional cases, awards vest as ofor retirement (as defined in the termination date to enable theplan). Upon an executive officer’s disability, death or his or her estate to realize the equity value that existed at the time of the termination event. In the case of voluntary retirement, stock options, restricted stock, RSUs and SPS awards may vest, depending on the date of retirement so that an employee’s decision as to the appropriate date of retirement is not influenced by potential lost compensation. The intent of that arrangement is to avoid discouraging retirement when the executive has reached eligibility for early retirement. For restricted stock, the PRC has the discretion to vest unvested awards at retirement, which allows for a case-by-case examinationnature of the particular setaward, the termination event, and the terms of circumstances. These policiesthe grant agreements. For a full explanation of how equity awards are designed to enable Cigna’s Board of Directors or the PRC to remove an executive officer prior to retirement whenever it is in the best interests of Cigna and to give Cigna full discretion to develop an appropriate severance package on a case-by-case basis. When an executive officer is removed from his or her position, the PRC exercises its business judgment in approving an appropriate severance arrangement for the individual in light of all relevant circumstances, including, but not limited to, his or her term of employment, past accomplishments, reasons for termination, opportunity for future employment and total unvested compensation. Historically, the PRC has approved varying amounts of severance pay for executive officers.
Cigna’s change of control policies are intended to provide Cigna’s named executive officers with sufficient economic valuetreated in the event of termination so that theyan executive officer’s disability, death or retirement,
please see “Executive Compensation Tables — Potential Payments Upon Termination or Change of Control.” In 2017, in connection with their retirements, the Committee approved the terms of an Agreement and Release for each of Mr. McCarthy and Mr. Manders as well as an Advisory Services Agreement for Mr. McCarthy. These agreements are encourageddescribed in “Potential Payments Upon Termination or Change of Control — Terms of Mr. McCarthy’s Retirement Arrangement” and “— Terms of Mr. Manders’ Retirement Arrangement” in the Executive Compensation Tables. Change of Control Arrangements | | | | | | | | | | | | | | | | | | | | Cigna does not provide
executive officers with any
single-trigger payments or golden parachute excise taxgross-ups or excise tax reimbursements
upon a change of control. | | | | | | | | | | | | | | | | | | | |
The Cigna Executive Severance Benefits Plan applies to executive officers in the event of a qualified separation of service of the executive officer. A mere change of control itself (i.e., a “single trigger”) does not trigger benefits. The intent of the plan is to encourage executives to continue to act in theshareholders’ best interest of shareholdersinterests in evaluating potential transactions. The Company does not provide for golden parachute excise tax gross-ups upon a change of control. The components oftransactions and ensure management talent will be available to assist with the change of control payments are as follows:transaction and business integration. CIGNA – 2012 Notice of Annual Meeting of ShareholdersUnder the Cigna Executive Severance Benefits Plan and Proxy Statement – 48
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•
Severance payments are made only upon involuntary termination ofCigna Long-Term Incentive Plan, an executive officer will be eligible for benefits if his or resignation for good cause,her employment is terminated upon or during thetwo-year period following a change of control (i.e., a “double trigger”) if such termination is:
initiated by the company other than “for cause” as defined in the applicable plan; or initiated by the executive officer after determining, in his or her reasonable judgment, that there has been a material reduction in authority, duties or responsibilities, any reduction in compensation or any changes in the executive’s principal office location of Cigna as described under Potential Payments upon Termination or Changemore than 35 miles from the location on the date of Control beginning on page 59.•
For named executive officers, cash severance is a lump sum payment equal to a specified multiple of base salary plus a specified multiple of the higher of the most recent annual incentive paid or the target annual incentive.
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Unvested stock options and restricted stock vest upon termination of employment following a change of control. Under the Executive Severance Benefits Plan, the executive must deliver notice to the company within 30 days after such reduction or change and at least 30 days before separation, after which the company has 30 days to remedy the circumstances before a separation upon a change of control is deemed to have occurred.
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Benefits in a double-trigger situation include the following: | • | | A lump sum cash severance payment equal to 156 weeks (approximately three years) of base salary plus three times thehigher of (i) the most recent annual incentive paid or (ii) the target annual incentive. The intent of the formula for the annual incentive amount is to reward the executive officer for his or her level of expected performance prior to the change of control. |
Full vesting of all unvested stock options, restricted stock and RSUs. As a result, if an executive is involuntarily terminated without cause or resigns for good reason (such as reduction in compensation or responsibilities) after a change of control, the executive is able to realize the shareholder value to which he or she contributed while employed at Cigna.the company. •
Unvested SPUs are paid
Full vesting of all unvested SPS awards with the calculation of such vesting made at the highest of: (1) unitthe target value;vesting percentage; (2) valuethe vesting percentage for any unit payments in the most recent 12 months;payout of SPS awards (i.e., the prior cycle); or (3) the average of the valuesvesting percentage established by the PRCCommittee for the most recent two SPUSPS payouts. Unvested SPS awards are treated the same as SPUs, except the SPS payment formula is based on the percentage of shares that vested instead of the unit value. The intent of this payment formula is to provide executivesexecutive officers with a reasonable estimate of the potential payouts under the SPU and SPS program and to avoid placing executivesexecutive officers at a disadvantage as a result of a change of control. At the company’s expense, twelve months of basic life insurance plan coverage and six months of reasonable outplacement services following a change of control. If any portion of the change of control benefits paid to an executive officer would be subject to a change in control excise tax, then either (1) the executive will receive the full amount of the benefits and will pay any resulting excise tax or (2) the change of control benefits will be reduced enough to avoid the excise tax entirely, whichever alternative provides the executive with the greater amount ofafter-tax benefits. For more information concerning the financial amount of these benefits, see “Executive Compensation Tables —Potential Payments upon Termination or Change of Control.” PROCESSES AND PROCEDURES FOR DETERMINING EXECUTIVE COMPENSATION CIGNA – 2012 NoticeThe Role of Annual Meetingthe People Resources Committee in Executive Compensation
The Committee is composed entirely of Shareholdersindependent directors. Pursuant to its charter, the Committee is charged with oversight of the Company’s compensation and Proxy Statement – 49
Backbenefit plans and policies that apply to Contentsexecutive officers. The Committee regularly reviews Cigna’s compensation programs against the Company’s strategic goals, industry practices, and emerging trends to ensure a strong linkage between executive pay and performance and alignment with shareholder interests. At each of its regularly scheduled meetings, the Committee conducts executive sessions, without Cigna management present. In addition, the Committee has engaged Pay Governance as its independent compensation consultant to assist the Committee in its responsibilities.
Risk Oversight As part of its responsibilities, the Committee considers whether Cigna’s compensation programs and policies encourage unnecessary or excessive risk-taking behavior. At the request of the Committee, on an annual basis, the Chief Risk Officer conducts a comprehensive review of executive and employee compensation programs to determine whether incentive compensation plans are likely to promote risk-taking behavior that could have a material adverse effect on the Company. The findings of this review are presented to, and discussed by, the Committee in February of each year. The review analyzes: compensation governance processes, including general design philosophy and risk considerations in structuring compensation and incentive plans; situations where compensation programs may have the potential to raise material risks to the Company; internal controls that mitigate the risk of incentive compensation having an unintended negative impact; and plan design features that further mitigate compensation risk, including clawback arrangements, holding periods, earnings thresholds, payment structures and plan caps. After conducting the review and assessing potential risks, the Committee determined that the Company’s incentive programs do not create risks that are reasonably likely to have a material adverse effect on the Company. | | | | | | | | | Cigna 2018 Notice of Annual Meeting of Shareholders and Proxy Statement | | | 49 | |
Process for Executive Compensation Decisions Chief Executive Officer Compensation | | | | | | | | | | | | | | The Committee and independent Chairman of the Board evaluate CEO performance and enterprise goals. | | The Committee makes recommendations to the independent members of the Board about CEO performance and compensation. | | The Board considers the Committee’s recommendations as it reviews and determines the CEO’s compensation. | | The Chairman of the Board reviews the results of the performance evaluation with the CEO. | | | | | | | |
Mr. Cordani is not present when the Committee and the Board make decisions about his compensation. At the request of the Committee, the Executive Vice President, Human Resources and Services and the independent compensation consultant may attend this Committee session. Other NEO Compensation Generally, the Executive Vice President, Human Resources and Services presents recommendations for all other NEOs’ compensation targets for the Committee’s consideration. For compensation decisions involving actual payouts for the NEOs, Mr. Cordani presents his recommendations to the Committee for its consideration. Mr. Cordani discusses Cigna’s performance and the individual officer’s performance. The Executive Vice President, Human Resources and Services is generally present for the discussion of compensation for all executive officers other than himself. Compensation Consultant Role in Executive Compensation While the Committee or Board ultimately makes all executive compensation decisions, the Committee engages the services of outside advisors for assistance. The Committee utilized Pay Governance as the Committee’s independent compensation consultant throughout 2017 to provide independent, objective analysis, advice and information and to generally assist the Committee in the performance of its duties. The Committee will typically request information and recommendations directly from the compensation consultant as it deems appropriate to structure and evaluate Cigna’s compensation programs, practices and plans. As part of its engagement, at the direction of the Committee, the compensation consultant will work with the Committee chair, the Executive Vice President, Human Resources and Services and Cigna’s compensation department in their work on the Committee’s behalf. | ADVICE RECEIVED BY THE COMMITTEE FROM ITS COMPENSATION CONSULTANT FOR 2017 COMPENSATION DECISIONS | • Analyzed compensation levels and pay practices as compared to Cigna’s compensation peer group to assess whether three- and five-year realizable pay were aligned with Cigna’s performance and compensation philosophy • Presented a comparison of competitive market data to the current compensation levels of each executive officer to assist in setting compensation targets • Provided market research on incentive plans to assist in the design of short-term and long-term incentive compensation plans • Reviewed incentive measures in the 2017 MIP and 2017–2019 SPS program to provide the Committee with objective reference points to consider when determining target goals • Evaluated the effect of Cigna’s equity programs on annual share use, burn rate and total overhang to provide the Committee with context for its determination of the maximum share limit for use in 2017 |
At the request of the Committee, a representative of Pay Governance regularly attended the Committee’s meetings in 2017. The Committee regularly reviews and evaluates its compensation consultant engagement, and annually reviews the compensation consultant’s performance. Independence of the Compensation Consultant The Committee’s policy requires that the compensation consultant be independent of the Company. A compensation consultant is deemed independent under the policy if the compensation consultant (1) is retained by and reports solely to the Committee for all executive compensation services; (2) does not provide any services or products to the Company or management except with approval of the Committee’s chair; and (3) is otherwise free from conflicts. The Committee has assessed Pay Governance’s independence pursuant to Cigna’s policy and NYSE rules and concluded that Pay Governance is free from conflicts and independent. In addition, each year the Committee receives a letter from its compensation consultant providing appropriate assurances and confirmation of independence. | | | 50 | | Cigna 2018 Notice of Annual Meeting of Shareholders and Proxy Statement |
OTHER PRACTICES | | | | | | | | | | | | | | | | | | | | Executive officers are subject to robust stock ownership requirements, prohibited from hedging and restricted in their ability to pledge Cigna securities. | | | | | | | | | | | | | | | | | | | |
Stock Ownership Guidelines We believe that the ownership of meaningful levels of Cigna stock by our executive officers is a critical factor in aligning the long-term interests of management and our shareholders. To promote this goal, we have adopted stock ownership guidelines that apply to all of our executive officers, including our NEOs. As of December 31, 2017, all of our NEOs are in compliance with the stock ownership guidelines and each of our NEOs met or exceeded their ownership requirements, or are within the five-year share accumulation period described below. The chart below shows the stock ownership requirements and actual value of holdings as a multiple of base salary as of December 31, 2017 for the CEO and the average of the other NEOs that are presently employed by the Company. 
| | FEATURES OF OUR STOCK OWNERSHIP GUIDELINES | • Wholly owned shares, restricted stock, stock equivalents, and shares owned through benefit plans (such as investments in the Cigna stock fund of the Cigna 401(k) Plan) are counted toward meeting the guidelines. SPSs and stock options do not count toward meeting guidelines. • Executive officers have five years from date of hire, promotion or any other event that changes their multiple of base salary to meet their applicable ownership requirement. Prior to meeting their stock ownership requirement, executives may only engage in transactions that increase their holdings. Once an executive attains his or her required holding level, the executive must maintain the requirement on a continuous basis, even if the requirement is met before the end of the five-year period. |
| | SHARE RETENTION REQUIREMENTS ENCOURAGE A LONG-TERM OWNERSHIP PHILOSOPHY | • Once ownership requirements are met, ¡ executive officers may not sell more than 50% of the shares held above their applicable guideline in any single open trading period; and ¡ executive officers must retain, for at least one year, a minimum of 50% of the shares acquired upon exercise of any stock options and 50% of the shares acquired upon vesting of restricted stock grants, net of shares withheld for taxes or payment of exercise prices, fees and expenses. |
| | | | | | | | | Cigna 2018 Notice of Annual Meeting of Shareholders and Proxy Statement | | | 51 | |
| | OTHER PRACTICES REGARDING TRANSACTIONS IN CIGNA STOCK | • Executive officers may only transact in Cigna securities during approved open trading periods after satisfying mandatory clearance requirements. • CEO approval is required for all transactions in Cigna stock by executive officers. • General Counsel approval is required for all transactions in Cigna stock by the CEO. |
Hedging and Pledging Restrictions Our insider trading policy prohibits our directors, executive officers and all employees from engaging in hedging, speculative or other transactions that hedge or offset any decrease in the market value of Cigna stock. Prohibited transactions include, but are not limited to, trading in put or call options, short sales, zero cost collars and forward sale contracts. The Committee has adopted a policy that prohibits directors and Section 16 officers from pledging Cigna stock as loan collateral or holding Cigna stock in a margin account. Cigna’s Office of the Corporate Secretary, in consultation with the Chairman of the Board and the Chief Executive Officer, may grant exceptions to this prohibition only with respect to shares held above the stock ownership guidelines. Exceptions may be granted upon a determination that the pledge is reasonable in amount and scope and structured to minimize risks associated with pledging. This determination will be based on the following considerations, among others: the amount of the pledge as compared to Cigna’s total stock outstanding, market value or trading volume; the amount of the pledge as compared to the total value of Cigna stock held by the individual above the applicable stock ownership guideline; the individual’s ability to repay loans secured by Cigna stock or substitute other assets as collateral; and the terms of the pledging documentation. In 2017, none of our directors, NEOs or other Section 16 officers received an exception from our policy prohibiting pledging. Disgorgement of Awards (Clawbacks)(Clawback) Policy The Board of Directors has the authority to recoup compensation paid to executive officers in the event of a restatement of financial results, beyond the mandates of Sarbanes-Oxley. In February 2011, the Board approved an expansion of the Disgorgement of Awards policy to include SPS awards in the compensation that can be recouped in the event of a restatement of financial results under the circumstances described below. In addition, once final rules are released regarding clawback requirements under the Dodd-Frank Act, Cigna intends towill review its current clawback policiespolicy and, if necessary, amend themit to comply with theany new mandates.clawback mandates under applicable law. Currently, the Board will, in all appropriate cases and to the full extent permitted by governing law, require reimbursement of any bonus or other cash incentive compensation awarded to an executive officer or cancel unvested restricted or deferred stock awards previously granted to the executive officer if: •
the amount of the bonus or incentive compensation was calculated based upon the achievement of certain financial results that were later the subject of a restatement; •
the executive engaged in intentional misconduct that caused or partially caused the need for the restatement; and •
the amount of the bonus or incentive compensation that would have been awarded to the executive had the financial results been properly reported would have been lower than the amount actually awarded. In addition, Cigna’s stock option, and restricted stock, RSU and SPS awards include a clawback provision that applies to any Cigna employee, including any named executive officer,NEO, who: •
is terminated by Cigna due to misconduct; •
engages in behavior that would be considered grounds for termination due to misconduct; •
competes with Cigna within one year following any voluntary termination; •
solicits a Cigna employee or customer within one year following any termination; •
discloses Cigna confidential information improperly; or •
fails to assist Cigna in the handling of investigations, litigation or agency matters with respect to which the employee has relevant information. If an executive engages in any of the above “violation events,” any option gains realized over the two years before the event and the value of any restricted stock, RSU or SPS vesting over the year before the event are required to be paid back to Cigna. These provisions are designed to discourage executives from engaging in activities that can cause Cigna competitive harmharm. | | | 52 | | Cigna 2018 Notice of Annual Meeting of Shareholders and Proxy Statement |
Tax and Accounting Treatment Section 162(m)(6) of the Internal Revenue Code pertains to support retention.the deductibility of compensation paid by health insurers, including Cigna. Under Section 162(m)(6) of the Internal Revenue Code, any per person compensation in excess of $500,000 paid to any employee or, generally, any individual service provider, will not be deductible by Cigna. The tax deduction limitation applies whether or not compensation is performance-based or is provided pursuant to a shareholder-approved plan. The tax deduction limitation under Section 162(m)(6) results in the loss of some tax benefits related to employee compensation in excess of the $500,000 per person deduction limit. While the Committee considers the impact of Section 162(m)(6), it believes that shareholder interests are best served by not restricting the Committee’s discretion and flexibility in crafting the executive compensation program, even ifnon-deductible compensation expenses could result. Separately, the Committee also considers the accounting consequences of its compensation decisions. CIGNA – 2012 NoticeReport of Annual Meetingthe People Resources Committee
The People Resources Committee of Shareholdersthe Board of Directors reviewed and discussed with Cigna’s management the Compensation Discussion and Analysis. Based on this review and discussion, the People Resources Committee recommended to the Board of Directors that the Compensation Discussion and Analysis be included in this Proxy Statement – 50 and be incorporated by reference in the Annual Report onForm 10-K for the year ended December 31, 2017 filed with the Securities and Exchange Commission. The Board accepted the Committee’s recommendation. People Resources Committee: William D. Zollars, Chair Eric J. Foss John M. Partridge Eric C. Wiseman | | | | | | | | | Cigna 2018 Notice of Annual Meeting of Shareholders and Proxy Statement | | | 53 | |
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Executive Compensation Tables EXECUTIVE
2017 SUMMARY COMPENSATION TABLES 2011 Summary Compensation TableTABLE
This table includes information regarding 2009, 20102017, 2016 and 20112015 compensation for each of the named executive officers.NEOs. Other tables in this proxy statementProxy Statement provide more detail about specific types of compensation with respect to 2017. | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | NAME AND PRINCIPAL POSITION (a) | | YEAR (b) | | | SALARY ($) (c) | | | BONUS ($) (d) | | | STOCK AWARDS ($) (e) | | | OPTION AWARDS ($) (f) | | | NON-EQUITY INCENTIVE
PLAN COMPENSATION ($) (g) | | | CHANGE IN
PENSION VALUE AND
NONQUALIFIED
DEFERRED
COMPENSATION
EARNINGS ($) (h) | | | ALL OTHER
COMPENSATION ($) (i) | | | TOTAL ($) (j) | | David M. Cordani President and Chief Executive Officer | | | 2017 | | | | 1,284,615 | | | | — | | | | 6,513,698 | | | | 5,520,020 | | | | 4,000,000 | | | | 48,222 | | | | 229,237 | | | | 17,595,792 | | | | | 2016 | | | | 1,200,000 | | | | — | | | | 6,690,115 | | | | 6,000,012 | | | | 1,100,000 | | | | 62,000 | | | | 227,730 | | | | 15,279,857 | | | | | 2015 | | | | 1,189,615 | | | | — | | | | 7,105,072 | | | | 5,800,033 | | | | 2,860,000 | | | | † | | | | 352,952 | | | | 17,307,672 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Eric P. Palmer(1) Executive Vice President and Chief Financial Officer | | | 2017 | | | | 594,769 | | | | — | | | | 1,161,994 | | | | 281,581 | | | | 975,000 | | | | 12,950 | | | | 33,624 | | | | 3,059,918 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Christopher J. Hocevar(2) President, Strategy, Segments & Solutions | | | 2017 | | | | 534,458 | | | | — | | | | 737,529 | | | | 625,015 | | | | 775,000 | | | | 14,035 | | | | 22,506 | | | | 2,708,543 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Nicole S. Jones Executive Vice President, General Counsel | | | 2017 | | | | 601,810 | | | | — | | | | 966,654 | | | | 819,103 | | | | 1,054,000 | | | | 5,777 | | | | 23,595 | | | | 3,470,939 | | | | | 2016 | | | | 581,137 | | | | — | | | | 953,114 | | | | 854,702 | | | | 431,200 | | | | 7,207 | | | | 35,294 | | | | 2,862,654 | | | | | 2015 | | | | 577,867 | | | | — | | | | 1,003,501 | | | | 819,089 | | | | 756,000 | | | | 0 | | | | 31,390 | | | | 3,187,847 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Jason D. Sadler(3) President, International Markets | | | 2017 | | | | 611,832 | | | | — | | | | 678,576 | | | | 575,032 | | | | 908,371 | | | | — | | | | 222,623 | | | | 2,996,434 | | | | | 2016 | | | | 589,463 | | | | — | | | | 641,256 | | | | 575,039 | | | | 399,796 | | | | — | | | | 239,383 | | | | 2,444,937 | | | | | 2015 | | | | 586,330 | | | | — | | | | 704,494 | | | | 575,025 | | | | 575,297 | | | | — | | | | 235,637 | | | | 2,676,783 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Thomas A. McCarthy(4) Retired Executive Vice President and Chief Financial Officer | | | 2017 | | | | 369,779 | | | | — | | | | 1,416,105 | | | | 1,200,000 | | | | 400,000 | | | | 307,479 | | | | 205,520 | | | | 3,898,883 | | | | | 2016 | | | | 740,000 | | | | — | | | | 1,471,894 | | | | 1,320,035 | | | | 536,000 | | | | 65,616 | | | | 34,898 | | | | 4,168,443 | | | | | 2015 | | | | 719,231 | | | | — | | | | 1,470,005 | | | | 1,200,013 | | | | 1,000,000 | | | | 0 | | | | 29,036 | | | | 4,418,285 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Matthew G. Manders(5) Retired President, Gov’t & Indiv. Programs and Group Insurance | | | 2017 | | | | 634,615 | | | | — | | | | 1,534,012 | | | | 1,300,012 | | | | 900,000 | | | | 495,465 | | | | 27,744 | | | | 4,891,848 | | | | | 2016 | | | | 750,000 | | | | — | | | | 1,594,526 | | | | 1,430,035 | | | | 675,000 | | | | 289,130 | | | | 41,900 | | | | 4,780,591 | | | | | 2015 | | | | 732,692 | | | | — | | | | 1,347,529 | | | | 1,100,015 | | | | 1,080,000 | | | | 0 | | | | 37,253 | | | | 4,297,489 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| (1) | Mr. Palmer was appointed Executive Vice President and Chief Financial Officer effective June 16, 2017. |
| (2) | Mr. Hocevar was appointed President, Strategy, Segments and Solutions effective February 23, 2017. |
| (3) | Mr. Sadler’s base salary and annual award under the Management Incentive Plan are paid in Hong Kong dollars and, throughout these Executive Compensation Tables, have been converted to U.S. dollars using an exchange rate equal to the average of the dailymid-points between the bid and the ask prices for each trading day in the month of December for the relevant year. For 2017 base salary and the 2017 MIP award, $1 Hong Kong dollar = $0.12799676 U.S. dollars. |
| (4) | Mr. McCarthy retired effective June 16, 2017. On June 16, 2017, he and the Company entered into an Agreement and Release (the “McCarthy A&R Agreement”) in connection with his retirement. The McCarthy A&R Agreement is described in “Potential Payments Upon Termination or Change of Control — Terms of Mr. McCarthy’s Retirement Arrangement” of the Executive Compensation Tables. |
| (5) | Mr. Manders retired effective November 3, 2017. On October 16, 2017, he and the Company entered into an Agreement and Release (the “Manders A&R Agreement”) in connection with his retirement. The Manders A&R Agreement is described in “Potential Payments Upon Termination or Change of Control — Terms of Mr. Manders’ Retirement Arrangement” of the Executive Compensation Tables. |
Stock Awards (Column (e)) Amounts in 2011. As discussed in the CD&A on page 40, in 2011, the PRC approved a change in the Company’s Long-Term Incentive Program for executive officers to replace the portion of long-term incentive previously awarded in SPUs, which are paid in cash, Cigna common stock or a combination thereof, with SPSs, which are paid in shares of Cigna common stock.
Under the rules that govern presentation of executive compensation in Cigna’s Proxy Statement and as a result of the transition from the SPU to the SPS program, the Summary Compensation Table below includes both: (i) SPU payouts made for the performance period ending in 2011 (which are reported inthis column (g)) and (ii) SPSs awarded in 2011 for the 2011-2013 performance period (which are reported in column (e) as 2011 compensation, but are not payable until 2014).
Name and Principal Position (a) | Year (b) | Salary ($) (c) | Bonus ($) (d)(4) | Stock Awards ($) (e)(5) | Option Awards ($) (f)(6) | Non-Equity Incentive Plan Compensation ($) (g)(7) | Change in Pension Value and Nonqualified Deferred Compensation Earnings ($) (h)(8) | All Other Compensation ($) (i)(9) | Total ($) (j) | David M. Cordani President and CEO | 2011 | 1,000,000 | - | 5,825,025 | 2,647,883 | 9,323,125 | 159,040 | 130,494 | 19,085,567 | 2010 | 1,000,000 | - | 4,474,993 | 2,198,019 | 7,356,375 | 104,214 | 91,983 | 15,225,584 | 2009 | 750,961 | - | - | 811,275 | 4,948,750 | 189,483 | 27,427 | 6,727,896 | Ralph J. Nicoletti (1) Executive Vice President, CFO | 2011 | 285,577 | 50,000 | 1,888,395 | 132,408 | 837,489 | - | 113,145 | 3,307,014 | Nicole S. Jones (1) Executive Vice President, General Counsel | 2011 | 287,212 | 100,000 | 1,706,941 | 132,411 | 1,780,225 | 18,035 | 856,813 | 4,881,637 | John M. Murabito Executive Vice President, Human Resources and Services | 2011 | 592,250 | - | 703,405 | 319,740 | 1,804,225 | 65,374 | 28,163 | 3,513,157 | 2010 | 592,250 | - | 686,165 | 337,030 | 1,740,500 | 47,646 | 24,501 | 3,428,092 | 2009 | 592,250 | - | 1,150,005 | 204,757 | 1,341,750 | 114,384 | 7,759 | 3,410,905 | Matthew G. Manders (1) President, Regional and Operations | 2011 | 542,500 | - | 957,999 | 334,962 | 1,659,775 | 609,881 | 32,839 | 4,137,956 | Thomas A. McCarthy (1) Former Acting CFO | 2011 | 384,904 | 450,000 | 375,839 | 113,940 | 769,325 | 219,717 | 17,228 | 2,330,953 | 2010 | 333,654 | - | 641,502 | 94,056 | 591,361 | 126,191 | 15,172 | 1,801,936 | Bertram L. Scott (1) (2) Former President, U.S. Commercial Markets | 2011 | 585,231 | | 1,019,399 | 463,383 | | - | 3,887,720 | 5,955,733 | 2010 | 300,000 | 1,290,175 | 1,442,589 | 399,684 | 398,625 | - | 210,000 | 4,041,073 | Carol Ann Petren (3) Former Executive Vice President, General Counsel | 2011 | 305,615 | - | 873,764 | 397,189 | | 25,896 | 3,564,355 | 5,166,819 | 2010 | 575,962 | - | 895,014 | 439,604 | 2,229,000 | 21,571 | 40,182 | 4,201,333 | 2009 | 565,000 | - | 1,500,009 | 263,261 | 1,880,000 | 79,337 | 7,482 | 4,295,089 | (1) Messrs. Nicoletti and Manders and Ms. Jones did not become named executive officers until 2011, and therefore information regarding 2010 and 2009 is neither included nor required. Mr. Scott did not become a named executive officer until 2010, and therefore information regarding 2009 is neither included nor required. Mr. McCarthy did not become a named executive officer until he was named acting CFO in 2010, and therefore information regarding 2009 is neither included nor required. Mr. McCarthy’s 2011 compensation reported in this table is with respect to his time served as acting CFO and in his role as Vice President, Finance, which he assumed in June 2011. (2) Mr. Scott left the Company in December 2011. The terms of his separation agreement are included on page 63. Details about information reported in column (i) can be found in footnote (9) to this table. (3) Ms. Petren left the Company in July 2011. The terms of her separation agreement are included on page 63. Details about information reported in column (i) can be found in footnote (9) to this table. (4) Bonus awards for Mr. Nicoletti and Ms. Jones are cash payments that were part of their new hire compensation packages, as described under Transition Compensation Actions on page 42. For Mr. McCarthy, the bonus award represents his special incentive for service to the Company as the acting CFO, as described under Transition Compensation Actions on page 42. (5) Amounts in this column represent the grant date fair value of stock awards computed in accordance with ASC Topic 718 and for SPS, based upon the probable outcome of the performance conditions. Both restricted stock awards and SPS awards made under the Long-Term Incentive Plan are included. The SPSs are subject to performance conditions as described on page 38. The amount reported in column (e) is consistent with the estimate of aggregate compensation cost recognized over the service period determined as of the grant date under FASB ASC Topic 718, excluding the effect of estimated forfeitures, as follows: |
CIGNA – 2012 Notice of Annual Meeting of Shareholders and Proxy Statement – 51
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Name | 2011 Restricted Stock Grant Date Fair Value ($) | Strategic Performance Shares Granted in 2011 Grant Date Fair Value ($) | Value of Strategic Performance Shares Granted in 2011 at Highest Performance Achievement(i) ($) | David M. Cordani | – | 5,825,025 | 8,325,035 | Ralph J. Nicoletti | 250,015 | 1,638,380 | 2,360,623 | Nicole S. Jones | 250,009 | 1,456,932 | 2,104,457 | John M. Murabito | – | 703,405 | 1,005,296 | Matthew G. Manders | – | 957,999 | 1,371,495 | Thomas A. McCarthy | – | 375,839 | 538,582 | Bertram L. Scott | – | 1,019,399 | 1,456,909 | Carol Ann Petren | – | 873,764 | 1,248,769 | (i) The value at the ”Highest Performance Achievement” column reflects the TSR performance based on the accounting assumptions and the financial measures, Adjusted Income from Operations and Revenue, at 200% of target. (6) Represents the grant date fair value of option awards computed in accordance with ASC Topic 718 applying the same model and assumptions as Cigna applies for financial statement reporting purposes as described in Note 20 to Cigna’s consolidated financial statements in the Company’s Annual Report on Form 10-K for the year ended December 31, 2011 (disregarding any estimates for forfeitures). Consistent with market practice, Cigna stock option awards are calculated using a Black-Scholes value that assumes that all stock options are held full-term. Primarily for this reason, target long-term incentive values may differ from ASC Topic 718 values reported in this table, which assume a shorter term. The 2009 awards for the named executive officers have been restated in accordance with changes in the reporting requirements to include the grant date fair value of the option awards during the respective year. (7) This column reflects performance-based compensation described under Annual Incentives beginning on page 37 and Long-Term Incentives beginning on page 40. The compensation delivered differs from the targets based on individual contributions and organizational performance. Specifically, the following awards earned in 2011 are reflected: |
Name | Strategic Performance Unit (SPU) Payout for the Three-Year Period Ending December 31, 2011 ($) | 2011 Annual Incentive Payout Under the MIP ($) | David M. Cordani | 6,523,125 | 2,800,000 | Ralph J. Nicoletti | 415,100 | 422,389 | Nicole S. Jones | 1,209,600 | 570,625 | John M. Murabito | 1,166,725 | 637,500 | Matthew G. Manders | 947,275 | 712,500 | Thomas A. McCarthy | 356,825 | 412,500 | Bertram L. Scott | – | – | Carol Ann Petren | – | – | (i) Mr. Scott and Ms. Petren’s SPU and MIP payouts are included under column (i). (8) This column includes the aggregate change in actuarial present value of accumulated benefits under the pension plans, which value increases and decreases from period to period and is subject to the assumptions discussed in connection with the Pension Benefits Table on page 56. Information regarding the named executive officers’ accumulated benefits under the pension plans is also on page 56. The amounts in this column do not include deferred compensation because the Company does not provide above market earnings to executive officers. (9) This column includes: • Cigna’s matching contributions to the named executive officers under its 401(k) plans; • Dividend earnings on the restricted stock awards in 2011 of: $1,687 for Mr. Murabito; $1,359 for Mr. Manders; and $1,967 for Ms. Petren. • Tax reimbursement in 2011 of $163,978 for Ms. Jones and $42,132 for Mr. Nicoletti related to allowances associated with relocation, which is further described in footnote (ii) below; • Payments associated with Mr. Scott’s separation agreement, including $1,408,306 in severance, $650,000 in annual incentive payout, and $1,818,389 in long-term incentive arrangements; • Payments associated with Ms. Petren’s separation agreement, including $1,000,000 lump sum in lieu of forfeited restricted stock grants, $300,000 in annual incentive payout, and $2,234,560 in long-term incentive arrangements; and • 2011 perquisites valued at incremental cost (the cost incurred by Cigna due to the named executive officer’s personal use or benefit as shown in the following table) for named executive officers who received perquisites totaling $10,000 or more: |
Name | Executive Financial Services/Tax Preparation ($)(i) | Relocation ($)(ii) | Security Alarm Installation and Maintenance ($)(iii) | Company Aircraft ($)(iv) | Total ($) | David M. Cordani | 9,250 | - | 62,865 | 2,279 | 74,394 | Nicole S. Jones | 7,500 | 675,006 | 9,696 | - | 692,202 | Ralph J. Nicoletti | - | 64,905 | - | - | 64,905 | (i) Represents the fees paid by the Company for financial planning, tax preparation and legal services related to tax and estate planning. (ii) Represents the cost related to Ms. Jones’ and Mr. Nicoletti’s relocation packages. Ms. Jones’ relocation benefits included the sale of her departure home, shipment of household goods, temporary living, home finding trip, new home closing costs, supplemental allowance and the capital loss on the sale of her departure home. Mr. Nicoletti’s relocation benefits included temporary living, shipment of automobile and supplemental allowance. (iii) Represents cost to the Company of security alarm maintenance and installation. (iv) Calculated based on the direct variable operating costs to the Company of the personal use of the Company plane by the executive which takes into account: (1) fuel costs; (2) on-board catering costs; (3) landing and parking fees; and (4) crew travel expenses. |
CIGNA – 2012 Notice of Annual Meeting of Shareholders and Proxy Statement – 52
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Summary Compensation Table Narrative
The following table represents the PRC’s view of each named executive officer’s compensation in 2011, including the salary paid in 2011, the MIP award for the 2011 performance period, the grant date fair value of the SPSs awarded in 2011 (that will not be paid until 2014), andrepresent the grant date fair value of stock optionsawards computed in accordance with ASC Topic 718 as described in Note 16 to Cigna’s consolidated financial statements in the Company’s Annual Report on Form10-K for the year ended December 31, 2017 and, for SPSs, are based upon the probable outcome of the performance conditions. All awards were made under the Cigna Long-Term Incentive Plan. No stock awards, other than SPSs, were granted to the NEOs in 2017.
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The SPSs are subject to performance conditions. The grant date fair value of SPS awards granted in 2017 reflects the probable achievement level of the TSR performance condition as of the grant date for the assumed award value of SPS awards as shown in the CD&A. TSR performance comprises 50% of the weighting of the SPS performance measures. This forecasted performance condition creates an accounting grant date fair value that differs from the assumed award value granted to each NEO, as reflected in the CD&A. The amount reported in column (e) is consistent with the estimate of aggregate compensation cost recognized over the service period determined as of the grant date under ASC Topic 718, excluding the effect of estimated forfeitures, as follows: | | | | | | | | | NAME | | VALUE OF SPSs GRANTED IN 2017 | | | | GRANT DATE
FAIR VALUE | | | AT HIGHEST
PERFORMANCE ACHIEVEMENT* | | | | | ($) | | | ($) | | David M. Cordani | | | 6,513,698 | | | | 9,273,739 | | Eric P. Palmer | | | 1,161,994 | | | | 1,654,364 | | Christopher J. Hocevar | | | 737,529 | | | | 1,050,042 | | Nicole S. Jones | | | 966,654 | | | | 1,376,254 | | Jason D. Sadler | | | 678,576 | | | | 966,108 | | Thomas A. McCarthy ** | | | 1,416,105 | | | | 2,016,150 | | Matthew G. Manders ** | | | 1,534,012 | | | | 2,184,016 | | | | |
| * | The value at the highest performance achievement reflects adjusted income from operations at 200% of target and projected achievement of total shareholder return relative to Cigna’s SPS performance peer group based on accounting assumptions. |
| ** | Mr. McCarthy and Mr. Manders will receive a prorated portion of their award in accordance with their respective A&R Agreements. |
Option Awards (Column (f)) Represents the grant date fair value of option awards made under the Cigna Long-Term Incentive Plan computed in accordance with ASC Topic 718 applying the same model and assumptions as Cigna applies for financial statement reporting purposes, as described in Note 16 to Cigna’s consolidated financial statements in the Company’s Annual Report onForm 10-K for the year ended December 31, 2017 (disregarding any estimates for forfeitures). Non-Equity Incentive Plan Compensation (Column (g)) This column reflects performance-based compensation awarded under the MIP. Change in 2011 (including, forPension Value and Nonqualified Deferred Compensation Earnings (Column (h)) This column includes the aggregate change in the actuarial present value of accumulated benefits under the pension plans, which value increases and decreases from period to period and is subject to the assumptions discussed in connection with the Pension Benefits Table. Information regarding accumulated benefits under the pension plans is also discussed in the narrative to the Pension Benefits Table. In 2017, Mr. Nicoletti and Ms. Jones, those awardedMcCarthy received a full distribution of his Cigna Pension Plan (Part B) account, as part of their new hire compensation packages). This table doesreflected on the Pension Benefits Table. The amounts in this column do not include payouts of SPU awards, special incentive or new hire restricted stock grants, amounts relateddeferred compensation because we do not provide above market earnings to our executive officers. The “†” symbol in the table represents a negative change in pension values or perquisites or other benefits. Ms Petrenvalue. All Other Compensation (Column (i)) This column includes: Cigna’s matching contributions to the NEOs’ accounts under its 401(k) and supplemental 401(k) plans in the following amounts: Mr. Cordani — $43,869; Mr. Palmer — $20,712; Mr. Hocevar —$22,506; Ms. Jones — $23,595; Mr. McCarthy —$21,263; and Mr. Scott are notManders — $27,744. Cigna’s contributions of $91,168 to Mr. Sadler’s Third Country National Pension Plan account and $2,304 to Mr. Sadler’s Mandatory Provident Fund account. Dividends paid in 2017 on restricted stock units of $414 for Mr. Sadler. Payment of $180,000 to Mr. McCarthy pursuant to his Advisory Services Agreement. For more information on the Advisory Services Agreement, see “Potential Payments Upon Termination or Change of Control — Terms of Mr. McCarthy’s Retirement Arrangement.” | | | | | | | | | Cigna 2018 Notice of Annual Meeting of Shareholders and Proxy Statement | | | 55 | |
As permitted by SEC rules, we have included the perquisites and other personal benefits that we provided to certain named executive officers in 2017 where the aggregate amount of such compensation exceeds $10,000. 2017 perquisites valued at incremental cost (the cost incurred by Cigna due to the NEO’s personal use or benefit) as theyfollows: | ¡ | | For Mr. Cordani, perquisites included the use of the corporate aircraft for personal travel ($143,840), costs for security system monitoring and maintenance ($31,558) and fees for financial planning, tax preparation and legal services related to tax and estate planning. The incremental cost for the use of the corporate aircraft is determined by dividing the annual variable costs by the total number of flight hours and multiplying the result by the number of personal flight hours during the year. Variable costs include fuel, crew travel, trip-related maintenance, landing fees and hangar costs and other similar costs. Fixed costs that do not change based on usage are excluded from the incremental cost calculation. |
| ¡ | | For Mr. Palmer, perquisites included fees paid for financial planning, tax preparation and legal services related to tax and estate planning and costs for security system monitoring and maintenance. |
| ¡ | | For Mr. Sadler, perquisites are consistent with market practice for executives in Hong Kong, which included a housing allowance ($107,517), club memberships, a company car and a personal driver and fees paid for financial planning, tax preparation and legal services related to tax and estate planning. |
Pay Ratio The ratio of our CEO’s total annual compensation to our median employee’s total annual compensation (the “CEO Pay Ratio”) is a reasonable estimate calculated in a manner consistent with Item 402(u) of RegulationS-K. Cigna is a global health service company with employees in over 30 countries. We identified our median employee using our global employee population as of October 1, 2017, which consisted of 38,271 U.S. and 7,561non-U.S. employees as of that date. This population consisted of our full-time, part-time and temporary employees. In accordance with SEC rules, we excluded all employees in the 24 countries with our smallest employee populations, totaling in the aggregate 2,209 employees (approximately 4.8% of our total employee population at October 1, 2017). Employees from the following countries were notexcluded: United Arab Emirates (131), Australia (4), Bahrain (2), Canada (25), Chile (2), China (221), France (2), Germany (2), Hong Kong (315), Indonesia (327), India (30), Italy (1), Kenya (30), Kuwait (1), Lebanon (2), Malaysia (84), Netherlands (6), New Zealand (222), Norway (1), Oman (7), Saudi Arabia (5), Singapore (30), Switzerland (7) and Turkey (752). After excluding employees in these countries, our employee population as of October 1, 2017 consisted of 43,623 employees (including 38,271 employees in the U.S. and 5,352 employees outside of the U.S.). To identify our median employee, we used direct cash compensation as our consistently applied compensation measure, as permitted by SEC rules. This included cash elements such as base pay, overtime, sales commissions, variable pay, bonuses (discretionary andnon-discretionary) and beeper,on-call and night/weekend pay. This measure encompasses all of the principal methods of direct cash compensation we use for our employees around the globe and we believe reasonably reflects the annual compensation of our employees. We calculated the median employee’s total annual compensation in accordance with the Company at year end. The table below is intended to provide supplemental compensation disclosure. It differs substantially from the Summary Compensation Table on page 46 of this Proxy Statement and is not a substitute for that table.
Name | Salary ($) | MIP Award ($) | SPSs Awarded ($) | Stock Options Granted ($) | 2011 Total Direct Compensation ($) | David M. Cordani | 1,000,000 | 2,800,000 | 5,825,025 | 2,647,883 | 12,272,908 | Ralph J. Nicoletti | 285,577 | 422,389 | 1,638,380 | 132,408 | 2,478,754 | Nicole S. Jones | 287,212 | 570,625 | 1,456,932 | 132,411 | 2,447,180 | John M. Murabito | 592,250 | 637,500 | 703,405 | 319,740 | 2,252,895 | Matthew G. Manders | 542,500 | 712,500 | 957,999 | 334,962 | 2,547,961 | Thomas A. McCarthy | 384,904 | 412,500 | 375,839 | 113,940 | 1,287,183 |
Annual Incentives
Annual incentives are paid in cash in the first quarter of the calendar year following the close of the performance year. The Executive Incentive Plan (EIP) requires that any annual incentive award above $3 million is to be made in shares of Cigna common stock. There were no annual incentive awards for the 2011 performance year above $3 million.
Strategic Performance Units (SPUs)
SPUs are described beginning on page 41.
2009-2011 SPUs
The PRC awarded SPUs for the 2009-2011 performance period in February 2009. Those awards were valued in 2012 based on: (1) Cigna’s TSR, relative to that of its Secondary Peer Group (which was the Primary Peer Group at the awards in 2009); and (2) Cigna’s Adjusted Income from Operations for the three-year period. It is important to note the symmetry of the program; it measures absolute (three-year earnings growth) and relative (three-year TSR versus competitors) results and therefore generates a balanced view of performance. The Secondary Peer Group consists of the members of Cigna’s competitive peer group in effect at the time the SPUs were granted, including: Aetna, Coventry, Health Net, Humana, UnitedHealth Group and WellPoint. The PRC established specific goals with threshold, target and superior ranges of the Company’s performance and payouts for each level of performance versus the goals within each performance measure. The target unit value was $75. Below are the target performance goals for each measure.
TSR — 50% of Target Unit Value
| Adjusted Income from Operations for Three Ongoing Businesses — 50% of Target Unit Value
| Performance Goal: Middle Third (Ranked 3rd or 4th)
| Performance Goal: 2% to 5% compound annual growth in 2009, 2010 and 2011 over 2008 Actual (excluding prior year development)
|
Cigna’s three-year Adjusted Income from Operations result of $4,136 million, or 10% compound annual growth in 2009, 2010 and 2011 over 2008, is in the upper end of the above target range. Earnings over the three-year period reflect strong execution of Cigna’s strategy and fundamental financial results for each of Cigna’s ongoing businesses.
Cigna’s total shareholder return for 2011 was 14.7%. Over the three-year period from 2009 to 2011, the Company’s total shareholder return was 35.8%, which ranked second within the peer group companies. The three-year relative performance resulted in top-tier performance with respect to the total shareholder return component of the plan.
In totality, the SPU payout reflects strong results on both an absolute and a relative basis. The resulting calculated unit value of $175 was approved by the PRC.
SPU payouts for 2011 appear in column (g)requirements of the Summary Compensation TableTable. Based on our calculation for all named executive officers except Mr. Scott2017, our CEO’s annual total compensation for 2017 was $17,595,792 and Ms. Petren. Ms. Petren’s and Mr. Scott’s long-term incentive arrangements are describedour median employee’s annual total compensation for 2017 was $63,010. Accordingly, we estimated our CEO Pay Ratio for 2017 to be 279:1. Due to the flexibility afforded by Item 402(u) in footnotes 3 and 6 on page 64.calculating the CEO Pay Ratio, the ratio may or may not be comparable to CEO pay ratios presented by other companies.
| | | 56 | | Cigna 2018 Notice of Annual Meeting of Shareholders and Proxy Statement |
CIGNA – 2012 Notice of Annual Meeting of Shareholders and Proxy Statement – 53
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SPU awards are paid in the first quarter of the calendar year following the close of the performance period.
Cigna has structured the 2009-2011 SPU program for named executive officers to permit Cigna to deduct SPU payments to named executive officers as performance-based compensation under Internal Revenue Code Section 162(m). In order for named executive officers to receive any SPU payouts, objective performance goals, set by the PRC, must first be satisfied. The maximum payout per SPU is $200. The PRC may exercise its discretion to reduce the size of awards after applying the criteria described above under 2009-2011 SPUs to establish an appropriate unit value. However, the PRC does not have the authority to increase the size of any SPU awards.
CIGNA – 2012 Notice of Annual Meeting of Shareholders and Proxy Statement – 54
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Grants of Plan-Based Awards in Fiscal Year 2011GRANTS OF PLAN-BASED AWARDS IN 2017
This table provides information about annual incentive targets for 20112017 and grants of plan-based awards made in 20112017 to the named executive officers. Specifically, the table includes: (1) the 2011 annual incentive targetsNEOs. The disclosed dollar and maximum values approved by the PRC for the named executive officers; (2) the stock options granted to the named executive officers on March 1, 2011 by the PRC as part of the annual long-term incentive awards; (3) the 2011 – 2013 SPSs approved by the PRC for named executive officers; (4) for Messrs. Nicoletti, McCarthy and Manders and Ms. Jones, the transitional SPUs and SPSs approved by the PRC; and (5) restricted stock grants approved by the PRC for Mr. Nicoletti and Ms. Jones. The disclosedshare amounts do not necessarily reflect the actual amounts that will be paid or issued to the named executive officers.NEOs. Those amounts will be known only at the timeif and when the awards vest or become payable. Name (a) | Grant Date (b) | Committee Approval Date (c) | Award Type (d) | Estimated Possible Payouts Under Non-Equity Incentive Plan Awards | Units Awarded (#) (e) | Threshold ($) (f) | Target ($) (g) | Maximum ($) (h) | David M. Cordani | – | – | MIP Target | | – | 1,800,000(2) | 3,600,000 | 3/1/2011 | 2/22/2011 | SPS Award | | | | | 3/1/2011 | 2/22/2011 | Option Award | | | | | Ralph J. Nicoletti | – | – | MIP Target | | – | 293,836(2) | 587,672 | 8/8/2011 | 7/27/2011 | Transitional SPS | | | | | 8/8/2011 | 7/27/2011 | Transitional SPS | | | | | 8/8/2011 | 7/27/2011 | Transitional SPU | 2,372(1) | – | 177,990 | 474,400 | 8/8/2011 | 7/27/2011 | Option Award | | | | | 8/8/2011 | 7/27/2011 | Restricted Stock Grant | | | | | Nicole S. Jones | – | – | MIP Target | | – | 415,000(2) | 830,000 | 6/6/2011 | 5/20/2011 | Transitional SPS | | | | | 6/6/2011 | 5/20/2011 | Transitional SPS | | | | | 6/6/2011 | 5/20/2011 | Transitional SPU | 6,912(1) | – | 518,400 | 1,382,400 | 6/6/2011 | 5/20/2011 | Option Award | | | | | 6/6/2011 | 5/20/2011 | Restricted Stock Grant | | | | | John M. Murabito | – | – | MIP Target | | – | 425,000(2) | 850,000 | 3/1/2011 | 2/22/2011 | SPS Award | | | | | 3/1/2011 | 2/22/2011 | Option Award | | | | | Matthew G. Manders | – | – | MIP Target | | – | 475,000(2) | 1,200,000 | 3/1/2011 | 2/22/2011 | SPS Award | | | | | 12/1/2011 | 5/20/2011 | Transitional SPS | | | | | 12/1/2011 | 5/20/2011 | Transitional SPS | | | | | 3/1/2011 | 2/22/2011 | Option Award | | | | | Thomas A. McCarthy | – | – | MIP Target | | – | 275,000(2) | 550,000 | 3/1/2011 | 2/22/2011 | SPS Award | | | | | 8/8/2011 | 7/27/2011 | Transitional SPS | | | | | 8/8/2011 | 7/27/2011 | Transitional SPS | | | | | 3/1/2011 | 2/22/2011 | Option Award | | | | | Bertram L. Scott | – | – | MIP Target | | – | 650,000(2) | 1,300,000 | 3/1/2011 | 2/22/2011 | SPS Award | | | | | 3/1/2011 | 2/22/2011 | Option Award | | | | | Carol A. Petren | – | – | MIP Target | | – | 300,000(2) | 300,000 | 3/1/2011 | 2/22/2011 | SPS Award | | | | | 3/1/2011 | 2/22/2011 | Option Award | | | | | (1) In June 2011, Mr. Nicoletti and Ms. Jones were hired as the CFO and as the General Counsel, respectively. Mr. Nicoletti was awarded 2,372 transitional SPUs and Ms. Jones was awarded 6,912 transitional SPUs, both for the 2009-2011 performance period to be paid in 2012. See page 42 Transition Compensation Actions in the CD&A for additional information on the transitional SPUs. (2) Amounts in this column represent annual incentive targets for the 2011 performance period to be paid in 2012. Individual award values can range from 0% to 200% of target (shown in column (g)), subject to the EIP limits. The actual amounts earned are in the “non-equity incentive plan compensation” column of the Summary Compensation Table on page 55 of this proxy statement for all named executive officers except Ms. Petren and Mr. Scott. In the case of Ms. Petren and Mr. Scott, the award is shown in the “all other compensation” column of the Summary Compensation Table because the value was agreed upon at the time of separation. |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | NAME (a) | | GRANT DATE (b) | | | COMMITTEE APPROVAL DATE (c) | | | AWARD TYPE (d) | | | ESTIMATED POSSIBLE PAYOUTS UNDERNON-EQUITY INCENTIVE PLAN AWARDS | | | ESTIMATED FUTURE PAYOUTS UNDER EQUITY INCENTIVE PLAN AWARDS | | | | | | | | | | | | | | | | | | | | | | THRESHOLD ($) (e) | | | TARGET ($) (f) | | | MAXIMUM ($) (g) | | | THRESHOLD (#) (h) | | | TARGET (#) (i) | | | MAXIMUM (#) (j) | | | ALL
OTHER STOCK AWARDS: NUMBER
OF SHARES
OF STOCK
OR UNITS (#) (k) | | | ALL OTHER OPTION AWARDS: NUMBER OF SECURITIES UNDERLYING OPTIONS (#) (l) | | | EXERCISE OR BASE PRICE OF OPTION
AWARDS ($/Sh) (m) | | | CLOSING MARKET PRICE ON DATE OF GRANT ($/Sh) (n) | | | GRANT DATE FAIR MARKET VALUE OF STOCK AND OPTION AWARDS ($) (o) | | David M. Cordani | | | — | | | | — | | |
| MIP
Target |
| | | — | | | | 2,800,000 | | | | 5,600,000 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | 2/28/2017 | | | | 2/21/2017 | | | | SPS | | | | | | | | | | | | | | | | 6,477 | | | | 37,014 | | | | 74,028 | | | | | | | | | | | | | | | | | | | | 6,513,698 | | | | | 2/28/2017 | | | | 2/21/2017 | | | | Option | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | 119,053 | | | | 149.135 | | | | 148.90 | | | | 5,520,020 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Eric P. Palmer | | | — | | | | — | | |
| MIP
Target |
| | | — | | | | 750,000 | | | | 1,500,000 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | 2/28/2017 | | | | 2/21/2017 | | | | SPS | | | | | | | | | | | | | | | | 330 | | | | 1,888 | | | | 3,776 | | | | | | | | | | | | | | | | | | | | 332,249 | | | | | 5/8/2017 | | | | 4/25/2017 | | | | SPS | | | | | | | | | | | | | | | | 146 | | | | 834 | | | | 1,668 | | | | | | | | | | | | | | | | | | | | 158,559 | | | | | 6/16/2017 | | | | 4/25/2017 | | | | SPS | | | | | | | | | | | | | | | | 592 | | | | 3,382 | | | | 6,764 | | | | | | | | | | | | | | | | | | | | 671,186 | | | | | 2/28/2017 | | | | 2/21/2017 | | | | Option | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | 6,073 | | | | 149.135 | | | | 148.90 | | | | 281,581 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Christopher J. Hocevar | | | — | | | | — | | |
| MIP
Target |
| | | — | | | | 500,000 | | | | 1,000,000 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | 2/28/2017 | | | | 2/21/2017 | | | | SPS | | | | | | | | | | | | | | | | 733 | | | | 4,191 | | | | 8,382 | | | | | | | | | | | | | | | | | | | | 737,529 | | | | | 2/28/2017 | | | | 2/21/2017 | | | | Option | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | 13,480 | | | | 149.135 | | | | 148.90 | | | | 625,015 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Nicole S. Jones | | | — | | | | — | | |
| MIP
Target |
| | | — | | | | 680,000 | | | | 1,360,000 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | 2/28/2017 | | | | 2/21/2017 | | | | SPS | | | | | | | | | | | | | | | | 961 | | | | 5,493 | | | | 10,986 | | | | | | | | | | | | | | | | | | | | 966,654 | | | | | 2/28/2017 | | | | 2/21/2017 | | | | Option | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | 17,666 | | | | 149.135 | | | | 148.90 | | | | 819,103 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Jason D. Sadler | | | — | | | | — | | |
| MIP
Target |
| | | — | | | | 648,837 | | | | 1,297,674 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | 2/28/2017 | | | | 2/21/2017 | | | | SPS | | | | | | | | | | | | | | | | 675 | | | | 3,856 | | | | 7,712 | | | | | | | | | | | | | | | | | | | | 678,576 | | | | | 2/28/2017 | | | | 2/21/2017 | | | | Option | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | 12,402 | | | | 149.135 | | | | 148.90 | | | | 575,032 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Thomas A. McCarthy | | | — | | | | — | | |
| MIP
Target |
| | | — | | | | 400,000 | | | | 400,000 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | 2/28/2017 | | | | 2/21/2017 | | | | SPS | | | | | | | | | | | | | | | | 1,408 | | | | 8,047 | | | | 16,094 | | | | | | | | | | | | | | | | | | | | 1,416,105 | | | | | 2/28/2017 | | | | 2/21/2017 | | | | Option | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | 25,881 | | | | 149.135 | | | | 148.90 | | | | 1,200,000 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Matthew G. Manders | | | — | | | | — | | |
| MIP
Target |
| | | — | | | | 900,000 | | | | 900,000 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | 2/28/2017 | | | | 2/21/2017 | | | | SPS | | | | | | | | | | | | | | | | 1,525 | | | | 8,717 | | | | 17,434 | | | | | | | | | | | | | | | | | | | | 1,534,012 | | | | | 2/28/2017 | | | | 2/21/2017 | | | | Option | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | 28,038 | | | | 149.135 | | | | 148.90 | | | | 1,300,012 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
CIGNA – 2012 Notice of Annual Meeting of Shareholders and Proxy Statement – 55
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Estimated Future Payouts Under Equity Incentive Plan Awards (3) | All Other Stock Awards: Number of Shares of Stock or Units (#) (l)(4) | All Other Option Awards: Number of Securities Underlying Options (#) (m)(5) | Exercise or Base Price of Option Awards ($/Sh) (n)(6) | Closing Market Price on Date of Grant ($/Sh) (o) | Grant Date Fair Market Value of Stock and Option Awards ($) (p)(7) | Threshold (#) (i) | Target (#) (j) | Maximum (#) (k) | | | | | | | | | – | 118,512 | 237,024 | | | | | 5,825,025 | | | | | 189,610 | 42.190 | 41.850 | 2,647,883 | | | | | | | | | – | 13,200 | 26,400 | | | | | 602,813 | – | 21,119 | 42,238 | | | | | 1,035,567 | | | | | | | | | | | | | 9,504 | 42.090 | 40.250 | 132,408 | – | | | 5,940 | | | | 250,015 | | | | | | | | | – | 13,380 | 26,760 | | | | | 702,565 | | 13,380 | 26,760 | | | | | 754,367 | | | | | | | | | | | | | 8,266 | 48.395 | 47.980 | 132,411 | | | | 5,166 | | | | 250,009 | | | | | | | | | – | 14,311 | 28,622 | | | | | 703,405 | | | | | 22,896 | 42.190 | 41.850 | 319,740 | | | | | | | | | – | 14,992 | 29,984 | | | | | 736,877 | – | 1,548 | 3,096 | | | | | 73,868 | – | 2,874 | 5,748 | | | | | 147,254 | | | | | 23,986 | 42.190 | 41.850 | 334,962 | | | | | | | | | – | 5,100 | 10,200 | | | | | 250,672 | – | 996 | 1,992 | | | | | 45,485 | – | 1,625 | 3,250 | | | | | 79,682 | | | | | 8,159 | 42.190 | 41.850 | 113,940 | | | | | | | | | – | 20,740 | 41,480 | | | | | 1,019,399 | | | | | 33,182 | 42.190 | 41.850 | 463,383 | | | | | | | | | – | 17,777 | 35,554 | | | | | 873,764 | | | | | 28,442 | 42.190 | 41.850 | 397,189 | (3) Represents SPSs awarded for the 2011-2013 performance period and transitional SPSs for the 2010-2012 performance period awarded to Mr. Nicoletti and Ms. Jones as part of their new hire compensation packages and to Messrs. Manders and McCarthy as part of their compensation changes. The PRC will determine payout for the SPSs, if any, in 2014. The number of shares paid can range from 0% to 200% of the number of SPSs awarded. There is no minimum number of shares that will be earned under the SPS awards. Within the performance measures, the threshold earned shares percentages are as follows: for the TSR measure, 25% of shares are earned at threshold, and for both the Adjusted Income From Operations and Revenue measures, 35% of shares are earned at threshold. Because payment will be made in Cigna common stock, the actual value of the earned awards is based on Cigna’s common stock price at the time of payment. (4) Represents restricted stock grants approved by the PRC for Mr. Nicoletti and Ms. Jones as part of their new hire compensation packages. (5) Represents the stock option awards approved by the PRC at its February 2011 meeting as part of each named executive officers’ annual long-term incentive award, with the exception of Mr. Nicoletti and Ms. Jones, whose stock options were awarded as part of their new hire compensation package and Ms. Petren and Mr. Scott, whose stock options were forfeited upon their separation. (6) The exercise price of Cigna stock options, pursuant to the Long-Term Incentive Plan, is the average of the high and the low trading price of Cigna common stock on the grant date. (7) These amounts represent the grant date fair value of equity awards computed in accordance with ASC Topic 718, applying the same model and assumption Cigna applies for financial statement reporting purposes. Consistent with market practice Cigna stock option awards are calculated using a Black-Scholes value that assumes that all stock options are held full-term. Primarily for this reason, target long-term incentive values may differ from the grant date fair values reported in this table, which assumes a shorter term. |
CIGNA – 2012 Notice of Annual Meeting of Shareholders and Proxy Statement – 56
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Grants of Plan-Based Awards Table Narrative
In order to promote comparability across a broad range of companies, the compensation data used in the market assessment for Long-TermEstimated Possible Payouts UnderNon-Equity Incentive Plan Awards (Columns (f) and (g))
Amounts in column (f) represent annual incentive targets for the 2017 performance period paid in 2018. Individual award values can range from 0% to 200% of target (as reflected in column (g)). The actual amounts earned by each NEO are as follows: Mr. Cordani — $4,000,000; Mr. Palmer — $975,000; Mr. Hocevar — $775,000; Ms. Jones — $1,054,000; Mr. Sadler —$908,371; Mr. McCarthy — $400,000; and Mr. Manders — $900,000. Estimated Future Payouts Under Equity Incentive Plan Awards (Columns (h), (i) and (j)) Represents SPSs awarded for the 2017—2019 performance period. The People Resources Committee will determine payout amounts for the SPSs, if any, in 2019. The number of shares paid can range from 0% to 200% of the number of SPSs awarded. Threshold shares represent a threshold value for the SPS awards is evaluated using standard assumptions. For instance,at 17.5% of target, which represents the methodology used in the market assessment assumes that all stock options are heldlowest possible level of share payout under these awards assuming achievement at threshold for ten years. This assumption is calculated using the Securities and Exchange Commission’s safe harbor methodology and a three-year vesting period. When delivering actual Cigna commonadjusted income from operations. | | | | | | | | | Cigna 2018 Notice of Annual Meeting of Shareholders and Proxy Statement | | | 57 | |
All Other Option Awards (Column (l)) Represents stock option awards Cigna uses a Black-Scholes value that assumes that all options are held full-term (ten years). This assumption is used in grant calibration and for internal communication of long-term incentive values to all Long-Term Incentive Plan participants, including the named executive officers. When stock option awards are delivered, the stock option’s exercise price is made equal to the award date fair market value of Cigna common stock, that is, the average of the high and low stock price on the date of award. This measure of fair market value is a long-standing Cigna practice, and setting the stock option price no lower than the award date fair market value is required bygranted under the Cigna Long-Term Incentive Plan. Strategic Performance Units
The PRC awarded transitional SPUs forPlan and approved by the 2009-2011 performance periods to Messrs. Nicoletti, McCarthy and Manders and Ms. Jones in 2011. The performance measures and the structure of the awards are the same as those described for the 2009-2011 cycle on page 48.
Strategic Performance Shares
For the 2011 – 2013 performance period, the PRC awarded SPSs to the named executive officers (except Mr. Nicoletti and Ms. Jones) in March 2011 and transitional SPSs to Messrs. Nicoletti and McCarthy, Mr. Manders and Ms. Jones in August 2011, December 2011 and June 2011, respectively. The performance measures and structure of the awards are the same as those described on page 41.
Restricted Stock Awards
Restricted stock awards are not part of the annual long-term incentives for executive officers; however, awards may be grantedPeople Resources Committee at its February 2017 meeting as part of retention and/or transition compensation actions. In 2011, the PRC awarded restricted stock grants to Mr. Nicoletti and Ms. Jones as part of their new hire compensation packages, as described on page 42.
Stock Options
each NEO’s long-term incentive award. Stock options represented 50% of the long-term incentive awards for executive officers in 2011, as described on page 40. Mr. Nicoletti and Ms. Jones were hired after2017. Exercise or Base Price of Option Awards (Column (m)) Pursuant to the annual grant in 2011; however, they each received aCigna Long-Term Incentive Plan, the stock option exercise price is the average of the high and low trading price of Cigna common stock on the date of the award. Grant Date Fair Market Value of Stock and Options Awards (Column (o)) These amounts represent the grant date fair value of equity awards computed in accordance with ASC Topic 718, applying the same model and assumptions Cigna uses for financial statement reporting purposes. The award values represented in the table are theoretical, and may not correspond to the actual value that will be recognized by the NEO. The grant date fair value of SPS awards granted in 2017 reflects the probable achievement level of the TSR performance condition as part of their new hire compensation packages.the grant date for the assumed award value of SPS awards as shown in the CD&A. TSR performance comprises 50% of the weighting of the SPS performance measures. This forecasted performance condition creates an accounting grant date fair value that differs from the assumed award value granted to each NEO (as reflected in the CD&A). | | | 58 | | Cigna 2018 Notice of Annual Meeting of Shareholders and Proxy Statement |
CIGNA – 2012 Notice of Annual Meeting of Shareholders and Proxy Statement – 57
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Outstanding Equity Awards at Fiscal Year-End 2011OUTSTANDING EQUITY AWARDS ATYEAR-END 2017
This table provides information about unexercised stock options and unvested stock awards (restricted stock, restricted stock units (RSUs) and SPSs) held as of December 31, 2017 by the named executive officers at the end of 2011. Name (a) | Option Awards | | Stock Awards | Number of Securities Underlying Unexercised Options (#) Exercisable (b) | Number of Securities Underlying Unexercised Options (#)(1) Unexercisable (c) | Option Exercise Price ($) (d) | Option Expiration Date (e) | | Number of Shares or Units of Stock That Have Not Vested (#)(1) (f) | Market Value of Shares or Units of Stock That Have Not Vested ($) (g) | Equity Incentive Plan Awards: Number of Unearned Shares, Units or Other Rights That Have Not Vested (#)(1) (h) | Equity Incentive Plan Awards: Market or Payout Value of Unearned Shares, Units or Other Rights That Have Not Vested ($) (i) | David M. Cordani | 12,729 | | 29.8066 | 2/24/2015 | | - | - | 71,268 | 2,993,256 | 62,160 | | 40.5649 | 2/22/2016 | | | | | | 91,278 | | 46.8833 | 2/28/2017 | | | | | | 161,382 | | 47.6650 | 2/8/2018 | | | | | | | 53,795 | 47.6650 | 2/8/2018 | | | | | | 92,038 | | 47.9250 | 2/27/2018 | | | | | | | 59,359 | 14.0250 | 3/4/2019 | | | | | | 63,407 | | 34.6450 | 3/3/2020 | | | | | | | 126,773 | 34.6450 | 3/3/2020 | | | | | | | 189,610 | 42.1900 | 3/1/2021 | | | | | | Total: | 482,994 | 429,537 | | | | - | - | 71,268 | 2,993,256 | Ralph J. Nicoletti | | 9,504 | 42.0900 | 8/8/2021 | | 5,940 | 249,480 | 10,296 | 432,432 | Total: | - | 9,504 | | | | 5,940 | 249,480 | 10,296 | 432,432 | Nicole S. Jones | | 8,266 | 48.3950 | 6/6/2021 | | 5,166 | 216,972 | 8,028 | 337,176 | Total: | - | 8,266 | | | | 5,166 | 216,972 | 8,028 | 337,176 | John M. Murabito | 27,360 | | 40.5649 | 2/22/2016 | | 39,633 | 1,664,586 | 9,769 | 410,298 | 22,314 | | 46.8833 | 2/28/2017 | | | | | | 29,966 | | 47.9250 | 2/27/2018 | | | | | | | 14,982 | 14.0250 | 3/4/2019 | | | | | | 9,723 | | 34.6450 | 3/3/2020 | | | | | | | 19,438 | 34.6450 | 3/3/2020 | | | | | | | 22,896 | 42.1900 | 3/1/2021 | | | | | | Total: | 89,363 | 57,316 | | | | 39,633 | 1,664,586 | 9,769 | 410,298 | Matthew G. Manders | 15,855 | | 40.5649 | 2/22/2016 | | 32,115 | 1,348,830 | 9,916 | 416,472 | 12,933 | | 46.8833 | 2/28/2017 | | | | | | 13,646 | | 47.9250 | 2/27/2018 | | | | | | | 13,132 | 14.0250 | 3/4/2019 | | | | | | 7,264 | | 34.6450 | 3/3/2020 | | | | | | | 14,521 | 34.6450 | 3/3/2020 | | | | | | | 23,986 | 42.1900 | 3/1/2021 | | | | | | Total: | 49,698 | 51,639 | | | | 32,115 | 1,348,830 | 9,916 | 416,472 | Thomas A. McCarthy | 22,500 | | 16.2233 | 4/23/2013 | | 13,926 | 584,892 | 3,845 | 161,490 | 24,075 | | 18.4783 | 2/25/2014 | | | | | | 8,805 | | 29.8066 | 2/24/2015 | | | | | | 5,475 | | 40.5649 | 2/22/2016 | | | | | | 4,464 | | 46.8833 | 2/28/2017 | | | | | | 5,651 | | 47.9250 | 2/27/2018 | | | | | | 14,389 | | 14.0250 | 3/4/2019 | | | | | | | 7,193 | 14.0250 | 3/4/2019 | | | | | | 2,714 | | 34.6450 | 3/3/2020 | | | | | | | 5,424 | 34.6450 | 3/3/2020 | | | | | | | 8,159 | 42.1900 | 3/1/2021 | | | | | | Total: | 88,073 | 20,776 | | | | 13,926 | 584,892 | 3,845 | 161,490 | Bertram L. Scott | | | | | | | | 6,733 | 282,786 | Total: | | | | | | | | 6,733 | 282,786 | Carol Ann Petren | 30,426 | | 46.8833 | 2/28/2017 | | | | 4,461 | 187,362 | 38,528 | | 47.9250 | 2/27/2018 | | | | | | 19,262 | | 14.0250 | 3/4/2019 | | | | | | 25,354 | | 34.6450 | 3/3/2020 | | | | | | 28,442 | | 42.1900 | 3/1/2021 | | | | | | Total: | 142,012 | - | | | | - | - | 4,461 | 187,362 | (1) The following table shows the vesting date of the stock options, restricted stock, and SPSs that have not vested, held as of December 31, 2011 by the named executive officers. |
NEOs. CIGNA – 2012 Notice of Annual Meeting of Shareholders and Proxy Statement – 59
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | OPTION AWARDS | | | STOCK AWARDS | | NAME (a) | | NUMBER OF SECURITIES UNDERLYING UNEXERCISED OPTIONS (#) EXERCISABLE (b) | | | NUMBER OF SECURITIES UNDERLYING UNEXERCISED OPTIONS (#)(1) UNEXERCISABLE (c) | | | OPTION EXERCISE PRICE ($) (d) | | | OPTION EXPIRATION DATE (e) | | | NUMBER OF SHARES OR
UNITS OF
STOCK THAT
HAVE NOT VESTED (#)(1) (f) | | | MARKET
VALUE OF
SHARES OR UNITS OF
STOCK THAT
HAVE NOT
VESTED ($)(2) (g) | | | EQUITY INCENTIVE PLAN AWARDS: NUMBER OF UNEARNED SHARES, UNITS OR OTHER RIGHTS THAT HAVE NOT
VESTED (#)(1) (h) | | | EQUITY INCENTIVE PLAN AWARDS: MARKET OR PAYOUT VALUE OF UNEARNED SHARES, UNITS OR OTHER RIGHTS THAT
HAVE NOT VESTED ($)(2) (i) | | David M. Cordani | | | 189,610 | | | | | | | | 42.1900 | | | | 3/1/2021 | | | | 67,070 | | | | 13,621,246 | | | | 80,112 | | | | 16,269,946 | | | | | 200,229 | | | | | | | | 44.4250 | | | | 2/28/2022 | | | | | | | | | | | | | | | | | | | | | 206,843 | | | | | | | | 58.7300 | | | | 3/5/2023 | | | | | | | | | | | | | | | | | | | | | 229,443 | | | | | | | | 78.0350 | | | | 2/26/2024 | | | | | | | | | | | | | | | | | | | | | 106,258 | | | | 53,130 | | | | 120.8950 | | | | 2/25/2025 | | | | | | | | | | | | | | | | | | | | | 47,600 | | | | 95,201 | | | | 139.2200 | | | | 3/1/2026 | | | | | | | | | | | | | | | | | | | | | | | | | 119,053 | | | | 149.1350 | | | | 2/28/2027 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Total | | | 979,983 | | | | 267,384 | | | | | | | | | | | | 67,070 | | | | 13,621,246 | | | | 80,112 | | | | 16,269,946 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Eric P.
Palmer | | | 7,967 | | | | | | | | 78.0350 | | | | 2/26/2024 | | | | 2,701 | | | | 548,546 | | | | 8,127 | | | | 1,650,512 | | | | | 4,278 | | | | 2,139 | | | | 120.8950 | | | | 2/25/2025 | | | | | | | | | | | | | | | | | | | | | 2,233 | | | | 4,468 | | | | 139.2200 | | | | 3/1/2026 | | | | | | | | | | | | | | | | | | | | | | | | | 6,073 | | | | 149.1350 | | | | 2/28/2027 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Total | | | 14,478 | | | | 12,680 | | | | | | | | | | | | 2,701 | | | | 548,546 | | | | 8,127 | | | | 1,650,512 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Christopher J. Hocevar | | | | | | | 3,195 | | | | 120.8950 | | | | 2/25/2025 | | | | 4,033 | | | | 819,062 | | | | 6,697 | | | | 1,360,094 | | | | | 2,767 | | | | 5,534 | | | | 139.2200 | | | | 3/1/2026 | | | | | | | | | | | | | | | | | | | | | | | | | 13,480 | | | | 149.1350 | | | | 2/28/2027 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Total | | | 2,767 | | | | 22,209 | | | | | | | | | | | | 4,033 | | | | 819,062 | | | | 6,697 | | | | 1,360,094 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Nicole S.
Jones | | | 17,163 | | | | | | | | 58.7300 | | | | 3/5/2023 | | | | 9,473 | | | | 1,923,872 | | | | 11,633 | | | | 2,362,546 | | | | | 36,316 | | | | | | | | 78.0350 | | | | 2/26/2024 | | | | | | | | | | | | | | | | | | | | | 15,006 | | | | 7,503 | | | | 120.8950 | | | | 2/25/2025 | | | | | | | | | | | | | | | | | | | | | 6,780 | | | | 13,562 | | | | 139.2200 | | | | 3/1/2026 | | | | | | | | | | | | | | | | | | | | | | | | | 17,666 | | | | 149.1350 | | | | 2/28/2027 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Total | | | 75,265 | | | | 38,731 | | | | | | | | | | | | 9,473 | | | | 1,923,872 | | | | 11,633 | | | | 2,362,546 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Jason D.
Sadler | | | | | | | 5,268 | | | | 120.8950 | | | | 2/25/2025 | | | | 10,104 | | | | 2,052,021 | | | | 7,987 | | | | 1,622,080 | | | | | | | | | 9,124 | | | | 139.2200 | | | | 3/1/2026 | | | | | | | | | | | | | | | | | | | | | | | | | 12,402 | | | | 149.1350 | | | | 2/28/2027 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Total | | | 0 | | | | 26,794 | | | | | | | | | | | | 10,104 | | | | 2,052,021 | | | | 7,987 | | | | 1,622,080 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Thomas A. McCarthy | | | 8,138 | | | | | | | | 34.6450 | | | | 3/3/2020 | | | | 13,877 | | | | 2,818,280 | | | | 9,003 | | | | 1,828,419 | | | | | 8,159 | | | | | | | | 42.1900 | | | | 3/1/2021 | | | | | | | | | | | | | | | | | | | | | 10,960 | | | | | | | | 44.4250 | | | | 2/28/2022 | | | | | | | | | | | | | | | | | | | | | 11,332 | | | | | | | | 58.7300 | | | | 3/5/2023 | | | | | | | | | | | | | | | | | | | | | 44,614 | | | | | | | | 78.0350 | | | | 2/26/2024 | | | | | | | | | | | | | | | | | | | | | 32,977 | | | | | | | | 120.8950 | | | | 2/25/2025 | | | | | | | | | | | | | | | | | | | | | 31,417 | | | | | | | | 139.2200 | | | | 3/1/2026 | | | | | | | | | | | | | | | | | | | | | 25,881 | | | | | | | | 149.1350 | | | | 2/28/2027 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Total | | | 173,478 | | | | 0 | | | | | | | | | | | | 13,877 | | | | 2,818,280 | | | | 9,003 | | | | 1,828,419 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Matthew G. Manders | | | 38,471 | | | | | | | | 58.7300 | | | | 3/5/2023 | | | | 12,720 | | | | 2,583,305 | | | | 9,754 | | | | 1,980,940 | | | | | 39,038 | | | | | | | | 78.0350 | | | | 2/26/2024 | | | | | | | | | | | | | | | | | | | | | 30,229 | | | | | | | | 120.8950 | | | | 2/25/2025 | | | | | | | | | | | | | | | | | | | | | 34,035 | | | | | | | | 139.2200 | | | | 3/1/2026 | | | | | | | | | | | | | | | | | | | | | 28,038 | | | | | | | | 149.1350 | | | | 2/28/2027 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Total | | | 169,811 | | | | 0 | | | | | | | | | | | | 12,720 | | | | 2,583,305 | | | | 9,754 | | | | 1,980,940 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
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| Number of Stock Options That Have Not Vested | Vesting Date | Number of Shares or Units That Have Not Vested | Vesting Date | Number of Equity Incentive Plan Award Shares or Units That Have Not Vested (i) | Vesting Date (i) | David M. Cordani | 53,795 | 2/8/2012 | | | 35,714 | 2013 | 59,359 | 3/4/2012 | | | 35,554 | 2014 | 63,386 | 3/3/2012 | | | | | 63,387 | 3/3/2013 | | | | | 63,216 | 3/1/2012 | | | | | 63,197 | 3/1/2013 | | | | | 63,197 | 3/1/2014 | | | | | Ralph J. Nicoletti | 3,168 | 8/8/2012 | 2,970 | 8/8/2014 | 3,960 | 2013 | 3,168 | 8/8/2013 | 1,485 | 8/8/2015 | 6,336 | 2014 | 3,168 | 8/8/2014 | 1,485 | 8/8/2016 | | | Nicole S. Jones | 2,756 | 6/6/2012 | 2,583 | 6/6/2014 | 4,014 | 2013 | 2,755 | 6/6/2013 | 1,292 | 6/6/2015 | 4,014 | 2014 | 2,755 | 6/6/2014 | 1,291 | 6/6/2016 | | | John M. Murabito | 14,982 | 3/4/2012 | 2,554 | 9/14/2012 | 5,476 | 2013 | 9,719 | 3/3/2012 | 37,079 | 11/9/2013 | 4,293 | 2014 | 9,719 | 3/3/2013 | | | | | 7,634 | 3/1/2012 | | | | | 7,631 | 3/1/2013 | | | | | 7,631 | 3/1/2014 | | | | | Matthew G. Manders | 13,132 | 3/4/2012 | 32,115 | 8/3/2013 | 4,556 | 2013 | 7,260 | 3/3/2012 | | | 5,360 | 2014 | 7,261 | 3/3/2013 | | | | | 7,997 | 3/1/2012 | | | | | 7,994 | 3/1/2013 | | | | | 7,995 | 3/1/2014 | | | | | Thomas A. McCarthy | 7,193 | 3/4/2012 | 13,926 | 8/30/2013 | 1,827 | 2013 | 2,712 | 3/3/2012 | | | 2,018 | 2014 | 2,712 | 3/3/2013 | | | | | 2,721 | 3/1/2012 | | | | | 2,719 | 3/1/2013 | | | | | 2,719 | 3/1/2014 | | | | | Bertram L. Scott | | | | | 4,659 | 2013 | | | | | 2,074 | 2014 | Carol Ann Petren | | | | | 3,572 | 2013 | | | | | 889 | 2014 | (i) The shares are not vested until they are paid. Shares are paid in the year following the close of the performance period. The PRC will determine payout for the SPSs, if any, in the year that the shares vest, based on achievement of the established performance goals. The number of shares paid can range from 0% to 200% of the number of SPSs awarded. There is no minimum number of shares that will be earned under the SPS awards. In accordance with the Securities and Exchange Commission’s disclosure rules that govern presentation of executive compensation in this proxy statement, the number of SPSs reported above reflect the threshold percent of shares as described in footnote 2 to the Grants of Plan-Based Awards Table on page 50. |
| | | | | | | | | Cigna 2018 Notice of Annual Meeting of Shareholders and Proxy Statement | | | 59 | |
CIGNA – 2012 Notice of Annual Meeting of Shareholders and Proxy Statement – 60
| (1) | The following table shows the vesting dates of stock options, restricted stock, RSUs and SPSs that have not vested, held as of December 31, 2017 by the NEOs. |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | NUMBER OF STOCK
OPTIONS THAT
HAVE NOT VESTED (a) | | | VESTING DATE (b) | | | VESTING AMOUNT (c) | | | NUMBER OF SHARES OR UNITS THAT HAVE
NOT VESTED (i) (d) | | | VESTING DATE (i) (e) | | | VESTING AMOUNT (f) | | | NUMBER OF EQUITY INCENTIVE
PLAN AWARD
SHARES OR UNITS THAT HAVE
NOT VESTED (ii) (g) | | | VESTING DATE (ii) (h) | | | VESTING AMOUNT (i) | | David M. Cordani | | | 53,130 | | | | 2/25/2018 | | | | 53,130 | | | | 67,070 | | | | 3/2/2018 | | | | 67,070 | | | | 80,112 | | | | 2019 | | | | 43,098 | | | | | 95,201 | | | | 3/1/2018 | | | | 47,600 | | | | | | | | | | | | | | | | | | | | 2020 | | | | 37,014 | | | | | | | | | 3/1/2019 | | | | 47,601 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | 119,053 | | | | 2/28/2018 | | | | 39,684 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | 2/28/2019 | | | | 39,684 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | 2/28/2020 | | | | 39,685 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Total | | | | | | | | | | | 267,384 | | | | | | | | | | | | 67,070 | | | | | | | | | | | | 80,112 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Eric P. Palmer | | | 2,139 | | | | 2/25/2018 | | | | 2,139 | | | | 2,701 | | | | 3/2/2018 | | | | 2,701 | | | | 8,127 | | | | 2019 | | | | 2,023 | | | | | 4,468 | | | | 3/1/2018 | | | | 2,234 | | | | | | | | | | | | | | | | | | | | 2020 | | | | 6,104 | | | | | | | | | 3/1/2019 | | | | 2,234 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | 6,073 | | | | 2/28/2018 | | | | 2,024 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | 2/28/2019 | | | | 2,024 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | 2/28/2020 | | | | 2,025 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Total | | | | | | | | | | | 12,680 | | | | | | | | | | | | 2,701 | | | | | | | | | | | | 8,127 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Christopher J. Hocevar | | | 3,195 | | | | 2/25/2018 | | | | 3,195 | | | | 4,033 | | | | 3/2/2018 | | | | 4,033 | | | | 6,697 | | | | 2019 | | | | 2,506 | | | | | 5,534 | | | | 3/1/2018 | | | | 2,767 | | | | | | | | | | | | | | | | | | | | 2020 | | | | 4,191 | | | | | | | | | 3/1/2019 | | | | 2,767 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | 13,480 | | | | 2/28/2018 | | | | 4,493 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | 2/28/2019 | | | | 4,493 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | 2/28/2020 | | | | 4,494 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Total | | | | | | | | | | | 22,209 | | | | | | | | | | | | 4,033 | | | | | | | | | | | | 6,697 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Nicole S. Jones | | | 7,503 | | | | 2/25/2018 | | | | 7,503 | | | | 9,473 | | | | 3/2/2018 | | | | 9,473 | | | | 11,633 | | | | 2019 | | | | 6,140 | | | | | 13,562 | | | | 3/1/2018 | | | | 6,781 | | | | | | | | | | | | | | | | | | | | 2020 | | | | 5,493 | | | | | | | | | 3/1/2019 | | | | 6,781 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | 17,666 | | | | 2/28/2018 | | | | 5,888 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | 2/28/2019 | | | | 5,889 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | 2/28/2020 | | | | 5,889 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Total | | | | | | | | | | | 38,731 | | | | | | | | | | | | 9,473 | | | | | | | | | | | | 11,633 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Jason D. Sadler | | | 5,268 | | | | 2/25/2018 | | | | 5,268 | | | | 10,104 | | | | 3/2/2018 | | | | 6,650 | | | | 7,987 | | | | 2019 | | | | 4,131 | | | | | 9,124 | | | | 3/1/2018 | | | | 4,562 | | | | | | | | 6/4/2018 | | | | 3,454 | | | | | | | | 2020 | | | | 3,856 | | | | | | | | | 3/1/2019 | | | | 4,562 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | 12,402 | | | | 2/28/2018 | | | | 4,134 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | 2/28/2019 | | | | 4,134 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | 2/28/2020 | | | | 4,134 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Total | | | | | | | | | | | 26,794 | | | | | | | | | | | | 10,104 | | | | | | | | | | | | 7,987 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Thomas A. McCarthy | | | | | | | | | | | | | | | 13,877 | | | | 3/2/2018 | | | | 13,877 | | | | 9,003 | | | | 2019 | | | | 6,321 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | 2020 | | | | 2,682 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Total | | | | | | | | | | | — | | | | | | | | | | | | 13,877 | | | | | | | | | | | | 9,003 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Matthew G. Manders | | | | | | | | | | | | | | | 12,720 | | | | 3/2/2018 | | | | 12,720 | | | | 9,754 | | | | 2019 | | | | 6,848 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | 2020 | | | | 2,906 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Total | | | | | | | | | | | — | | | | | | | | | | | | 12,720 | | | | | | | | | | | | 9,754 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| (i) | These columns include unvested restricted stock, RSUs, and SPSs granted for the 2015—2017 performance period. The number of SPSs reported in these columns reflects the shares vested in March 2018 for the SPS 2015—2017 performance period at their actual payout percentage. As of December 31, 2017, the relevant performance conditions had been satisfied, but the awards were not fully vested until payout in March 2018. Pursuant to their respective A&R Agreements, Mr. McCarthy and Mr. Manders received payment for their 2015—2017 SPS awards as if their employment continued through December 31, 2017. |
| | | 60 | | Cigna 2018 Notice of Annual Meeting of Shareholders and Proxy Statement |
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| (ii) | These columns include unvested SPSs granted for the 2016—2018 and 2017—2019 performance periods. The SPS awards are not fully vested until paid in the year following the close of the three-year performance period. The People Resources Committee determines payout, if any, in the year of vesting based on achievement of three-year performance goals. It is not possible to determine whether SPS awards will vest until the end of the three-year performance period. Notwithstanding this, the SPS amounts reported in these columns assumes that each of the performance measures is achieved at target (100%). With respect to Mr. McCarthy and Mr. Manders, pursuant to their respective A&R Agreements, each is entitled to receive payment for a prorated portion of his 2016—2018 and 2017—2019 SPS awards based on the number of months he would have been employed during the applicable performance period, if his employment continued through December 31, 2017. Such prorated portion represents the number of shares for 2016—2018 and 2017—2019 SPS awards that would vest if each of the performance measures is achieved at target (100%). Because payment will be made in Cigna common stock, the actual value will be based on Cigna’s common stock price at the time of payment. |
| (2) | Based on the closing price of the Company’s common stock on December 29, 2017, the last business day of the year ($203.09). |
Option Exercises and Stock Vested in Fiscal Year 2011OPTION EXERCISES AND STOCK VESTED IN 2017
This table provides information about the number of shares of Cigna common stock acquired, and value realized by, the named executive officersNEOs upon exercise of stock options and the vesting of restricted stock during 2011. For stock options, the realized value represents the difference between the fair market value on the grant date of the stock option award and the stock price at2014—2016 SPS awards during 2017. No SPSs awarded for the time the option is exercised multiplied by the number of options exercised. For restricted stock, the realized value represents the fair market value on the vesting date multiplied by the number of shares of restricted stock.2015—2017, 2016—2018 or 2017—2019 performance periods vested in 2017. The amounts in this table reflect Cigna’s strong emphasis on performance-based and long-term compensation and appreciation of Cigna’s common stock price. As described in “CD&A—Executive Stock Ownership Requirements and Hedging Prohibition” on page 42, Cigna requires executive officers to retain, for at least one year, a minimum of 50% of the shares acquired upon exercise of any stock options and 50% of the shares acquired upon vesting of restricted stock grants (in each case, net of applicable taxes and fees).
Name (a) | Option Awards | Stock Awards | Number of Shares Acquired on Exercise (#) (b) | Value Realized upon Exercise ($) (c)(1) | Number of Shares Acquired on Vesting (#) (d) | Value Realized upon Vesting ($) (e)(1) | David M. Cordani | 82,698 | 2,002,926 | - | - | Ralph J. Nicoletti | - | - | - | - | Nicole S. Jones | - | - | - | - | John M. Murabito | 55,901 | 1,255,768 | 2,554 | 115,977 | Matthew G. Manders | 13,132 | 435,896 | 1,851 | 78,584 | Thomas A. McCarthy | - | - | - | - | Bertram L. Scott | 11,551 | 85,082 | - | - | Carol Ann Petren | 64,328 | 1,362,089 | 822 | 40,031 | (1) The dollar amount reported as value realized upon exercise of stock options and vesting of restricted stock grants was paid as wholly-owned shares and is subject to the stock holding requirement for executive officers. |
| | | | | | | | | | | | | | | | | | | | OPTION AWARDS | | | STOCK AWARDS | | Name (a) | | NUMBER OF SHARES ACQUIRED
ON EXERCISE (#) (b) | | | VALUE REALIZED UPON EXERCISE ($) (c)(1) | | | NUMBER OF SHARES ACQUIRED
ON VESTING (#) (d) | | | VALUE REALIZED UPON VESTING ($) (e)(1) | | David M. Cordani | | | 190,180 | | | | 25,772,432 | | | | 85,462 | (2) | | | 12,569,751 | | Eric P. Palmer | | | 6,595 | | | | 569,083 | | | | 2,968 | (2) | | | 436,533 | | Christopher J. Hocevar | | | 11,164 | | | | 1,091,898 | | | | 5,336 | (2) | | | 784,819 | | Nicole S. Jones | | | 17,000 | | | | 1,719,532 | | | | 13,527 | (2) | | | 1,989,551 | | Jason D. Sadler | | | 33,300 | | | | 2,630,653 | | | | 11,879 | (2)(3) | | | 1,807,228 | | Thomas A. McCarthy | | | 31,697 | | | | 5,159,220 | | | | 16,618 | (2) | | | 2,444,175 | | Matthew G. Manders | | | 29,953 | | | | 3,906,553 | | | | 16,599 | (2) | | | 2,441,381 | |
| (1) | Value realized upon exercise of option awards is calculated by multiplying the number of shares acquired upon exercise by the difference between the market price at the time of the transaction and the option’s exercise price. For stock awards, the value realized upon vesting is calculated by multiplying the number of shares acquired upon vesting by the fair market value (FMV) per share of Cigna common stock. The Cigna Long-Term Incentive Plan defines FMV per share as the average of the high and the low trading price per share of Cigna common stock on the applicable vesting date (see notes (2) and (3) below. |
| (2) | Includes the vesting on February 24, 2017 of 2014—2016 SPS awards as follows: Mr. Cordani — 85,462; Mr. Palmer — 2,968; Mr. Hocevar — 5,336; Ms. Jones — 13,527; Mr. Sadler — 8,425; Mr. McCarthy — 16,618; and Mr. Manders — 16,599. The FMV on February 24, 2017 was $147.08 per share. |
| (3) | Includes 3,454 shares acquired upon the vesting of restricted stock units for Mr. Sadler on June 4, 2017 (FMV of $164.47 per share). |
| | | | | | | | | Cigna 2018 Notice of Annual Meeting of Shareholders and Proxy Statement | | | 61 | |
CIGNA – 2012 Notice of Annual Meeting of Shareholders and Proxy Statement – 61
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Pension Benefits for Fiscal Year 2011PENSION BENEFITS FOR 2017
This table shows the present value as of December 31, 20112017 of the estimated pension benefits payable upon retirement benefit payableat age 65 to each of the named executive officers (exceptNEOs, except for Messrs. Nicoletti and Scott, as neither participatesMr. Sadler, who was not eligible to participate in the pension benefits plan) assuming that they retire at age 65.plans. The amounts shown are estimates only. They arepresent values and not necessarily the actual amounts that will be paid to the named executive officersNEOs, because the actualthose amounts will not be known until theythe pension benefits become payable. Name (a) | Plan Name (b) | Number of Years Credited Service (#)(c) | Normal Retirement Age (#)(d) | Present Value of Accumulated Benefit ($)(e) | David M. Cordani | Cigna Pension Plan | 18 | 65 | 255,771 | Cigna Supplemental Pension Plan | 18 | 65 | 158,855 | Cigna Supplemental Pension Plan of 2005 | 18 | 65 | 525,045 | Nicole S. Jones | Cigna Pension Plan | 3 | 65 | 43,601 | Cigna Supplemental Pension Plan | 3 | 65 | - | Cigna Supplemental Pension Plan of 2005 | 3 | 65 | 49,989 | John M. Murabito | Cigna Pension Plan | 6 | 65 | 107,538 | Cigna Supplemental Pension Plan | 6 | 65 | - | Cigna Supplemental Pension Plan of 2005 | 6 | 65 | 429,838 | Matthew G. Manders | Cigna Pension Plan | 23 | 65 | 664,682 | Cigna Supplemental Pension Plan | 23 | 65 | 340,858 | Cigna Supplemental Pension Plan of 2005 | 23 | 65 | 1,688,720 | Thomas A. McCarthy | Cigna Pension Plan | 26 | 65 | 675,239 | Cigna Supplemental Pension Plan | 26 | 65 | 230,463 | Cigna Supplemental Pension Plan of 2005 | 26 | 65 | 152,591 | Carol Ann Petren | Cigna Pension Plan | 4 | 65 | 69,257 | Cigna Supplemental Pension Plan | 4 | 65 | - | Cigna Supplemental Pension Plan of 2005 | 4 | 65 | 246,561 |
Parts A and B
| | | | | | | | | | | | | NAME (a) | | PLAN NAME (b) | | NUMBER OF
YEARS CREDITED
SERVICE # (c)(1) | | PRESENT VALUE
OF
ACCUMULATED BENEFIT ($) (d)(2) | | | PAYMENTS
DURING THE
LAST
FISCAL YEAR ($) (e) | | David M. Cordani | | Cigna Pension Plan (Part B) | | 18 | | | 326,764 | | | | — | | | | Cigna Supplemental Pension Plan | | 18 | | | 189,020 | | | | — | | | | Cigna Supplemental Pension Plan of 2005 | | 18 | | | 624,605 | | | | — | | | | | | | | | | | | | | | | Eric P. Palmer | | Cigna Pension Plan (Part B) | | 11 | | | 172,199 | | | | — | | | | Cigna Supplemental Pension Plan of 2005 | | 11 | | | 13,462 | | | | — | | | | | | | | | | | | | | | | Christopher J. Hocevar | | Cigna Pension Plan (Part B) | | 8 | | | 150,667 | | | | — | | | | Cigna Supplemental Pension Plan of 2005 | | 8 | | | 97,485 | | | | — | | | | | | | | | | | | | | | | Nicole S. Jones | | Cigna Pension Plan (Part B) | | 3 | | | 56,327 | | | | — | | | | Cigna Supplemental Pension Plan of 2005 | | 3 | | | 59,361 | | | | — | | | | | | | | | | | | | | | | Thomas A. McCarthy | | Cigna Pension Plan (Part A) | | 19.3 | | | 903,906 | | | | 28,132 | | | | Cigna Pension Plan (Part B) | | 26 | | | — | | | | 183,083 | | | | Cigna Supplemental Pension Plan | | 26 | | | 361,795 | | | | — | | | | Cigna Supplemental Pension Plan of 2005 | | 26 | | | 180,696 | | | | — | | | | | | | | | | | | | | | | Matthew G. Manders | | Cigna Pension Plan (Part B) | | 23 | | | 1,290,911 | | | | 6,098 | | | | Cigna Supplemental Pension Plan | | 23 | | | 387,216 | | | | — | | | | Cigna Supplemental Pension Plan of 2005 | | 23 | | | 2,356,909 | | | | — | | | | | | | | | | | | | | | |
| (1) | No employee has received additional credited years of service since 2009. |
| (2) | Assumptions used in the calculations of the amounts in this column are included in Note 16 to our audited financial statements for the year ended December 31, 2017 included in our Annual Report on Form10-K filed with the SEC on February 28, 2018. The actuarial present values of the prior period benefits were, in part, computed as a projected lump sum payout payable at normal retirement age (age 65) which was then discounted to the present value as of December 31, 2017 using the same assumptions as those used for financial reporting purposes. The assumptions are interest discount rates of 3.47% for the Cigna Pension Plan and 3.30% for the Cigna Supplemental Pension Plan and the Cigna Supplemental Pension Plan of 2005, and the RP 2014 mortality table (adjusted to 2006) with improvement scale MP 2017 on a generational basis for those plans. |
| | | 62 | | Cigna 2018 Notice of Annual Meeting of Shareholders and Proxy Statement |
Cigna Pension Plan The Cigna Pension Plan and the Cigna Supplemental Pension Plan of 2005 were frozen effective July 1, 2009. The Cigna Supplemental Pension Plan(CPP), atax-qualified plan, was frozen effective December 31, 2004. Messrs. Cordani and McCarthy participated in Part B of the Cigna Pension Plan, the Cigna Supplemental Pension Plan, and the Cigna Supplemental Pension Plan of 2005. Mr. Murabito and Ms. Petren participated in Part B of the Cigna Pension Plan and the Cigna Supplemental Pension Plan of 2005. Messrs. Scott and Nicoletti were hired after July 1, 2009 when the Company froze the Cigna Pension Plan (see page 43); therefore, they are not entitled to benefits under the Cigna Pension Plan or the Supplemental Pension Plans. Before re-joining Cigna in June 2011, Ms. Jones had previously been employed by the Company for a period of over three years, during which she participated in Part B of the Cigna Pension Plan and the Cigna Supplemental Pension Plan of 2005.
Mr. Manders participated in Part A of the Cigna Pension Plan, the Cigna Supplemental Pension Plan and the Cigna Supplemental Pension Plan of 2005, which were frozen effective July 1, 2009, December 31, 2004 and July 1, 2009, respectively. During a prior period of employment with the Company, Mr. McCarthy also earned benefits under Part A of the Cigna Pension Plan, the Cigna Supplemental Pension Plan, and the Cigna Supplemental Pension Plan of 2005. The actuarial present values of the prior period benefitsdoes not cover employees hired after that Messrs. Manders and McCarthy accumulated were computed as a single life annuity payable from normal retirement age (age 65) and then discounted to the present value as of December 31, 2011 using the same assumptions as those used for financial reporting purposes. The assumptions are interest discount rates of 4.0% for the Cigna Pension Plan and 3.5% for the Cigna Supplemental Pension Plan and the Cigna Supplemental Pension Plan of 2005, and the RP 2000 mortality table projected with scale AA to the year 2020 for those plans.
CIGNA – 2012 Notice of Annual Meeting of Shareholders and Proxy Statement – 62
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Cigna Pension Plan
date. From 2000 to July 2009, the Cigna Pension Plan generallyCPP covered all U.S. based full-time employees, including all named executive officersthe NEOs serving during that time. Cigna makes all the contributions necessary to fund PlanCPP benefits for deposit into a trust fund, and thefund. The annual contributions are at leastmeet or exceed the amount required to meet the applicable minimum funding requirements that apply to the Plan.requirements. Benefits are payable only after the termination of an employee’s service with Cigna. The Cigna Pension PlanCPP consists of Parts A and B, as described below. Part A covered certain employees hired before 1989, while Part B covered all other eligible U.S. employees. The Plan’sCPP’s benefit formulas applied equally to named executive officersNEOs and other employees. As explained on page 43, the Plan was frozen effective July 1, 2009, and employees hired after that date are not covered by the Plan. Pension PlanCPP benefits are based on an employee’s years of credited service and eligible earnings.
•
“Credited service” is generally the period of an employee’s service with a Cigna company while itthe individual participated in the Cigna Pension Plan.CPP. An employee received credit for one year of credited service for any calendar year in which the employee was credited with at least 1,000 hours of service. No employee has received credit for any service after 2009. •
“Eligible earnings” include base salary and annual incentive pay, but not payments under any long-term incentive compensation plans. Earnings after July 1, 2009 are not eligible earnings. Part A For credited service before April 1, 2008, Part A provides an annual retirement benefit stated in terms of a single life annuity payable at age 65. That annual benefit equals: •
the employee’s years of credited service (up to a maximum of 30 years); •
multiplied by 2% of the higher of the employee’s average annual eligible earnings over (a) the final 36 months of service, or (b) the three consecutive calendar years with the highest eligible earnings; and •
minus an offset equal to approximately half of the employee’s annual Social Security benefits. On March 31, 2008, this formula was frozen so that credited service after March 31, 2008 and eligible earnings after July 1, 2009 are not counted. Part A benefits under the frozen formula are generally payable only in annuity form as early as age 55. An actuarial reduction applies if benefit payments begin before age 65. All Part A participants are 100% vested. Effective April 1, 2008, Cigna adopted a new cash balance formula under Part A. For credited service on or after April 1, 2008, the plan provides a retirement benefit stated as a lump sum hypothetical account balance. That account balance equals the sum of (1) the employee’s accumulated annual benefit credits and (2) quarterly interest credits. For each year that an employee earnsearned a year of credited service, the employee’s account receivesreceived annual benefit credits equal to a percentage of eligible earnings: 8% for 2008 eligible earnings after March 31, 2008; 9% for 2009 eligible earnings through July 1, 2009; and 3% once an employee has 30 years of credited service. On the last day of each calendar quarter until an employee’s benefit is paid, the employee’s account also receivesreceived interest credits, which arewere based on an annual rate equal to the lesser of 9% or the yield on the five-year U.S. Treasury Constant Maturity Notes for the month of November of the preceding calendar year, plus 25 basis points. However, the annual rate willwould not be less than 4.5%. The hypothetical account balance is payable as early as an employee’s termination of employment. Payments may be made in annuity form or lump sum, at the employee’s election.election subject to the terms of the CPP. Part B Part B provides a retirement benefit stated as a lump sum hypothetical account balance similar to the Part A cash balance benefit described above. However: •
Annual Part B benefit credits range from 3% to 8.5% of eligible earnings, based on the employee’s age and accumulated years of credited service. •
As of January 1, 2008, an employee must have at least three years of vesting service to be 100% vested with a right to a Part B pension benefit. “Vesting service” is service with any Cigna company, even if it does not participate in the Cigna Pension Plan.
Effective July 1, 2009, when the Plan was frozen, any Part B participant employed by Cigna on April 1, 2009 became 100% vested. | | | | | | | | | Cigna 2018 Notice of Annual Meeting of Shareholders and Proxy Statement | | | 63 | |
CIGNA – 2012 Notice of Annual Meeting of Shareholders and Proxy Statement – 63
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Cigna Supplemental Pension Plan and Cigna Supplemental Pension Plan of 2005 The Cigna Supplemental Pension Plan (CSPP), an unfunded, nonqualified plan, was frozen effective December 31, 2004, and replaced with the Cigna Supplemental Pension Plan of 2005 (CSPP 2005), also an unfunded, nonqualified plan, which was frozen effective July 1, 2009. The CSPP provides an additional pension benefit to any employee whose Cigna Pension PlanCPP benefit is limited by one or more federal income tax laws.laws, including limitations on compensation recognition, limitations on retirement benefits amounts and an exclusion from eligible earnings of any compensation deferred under a nonqualified deferred compensation arrangement. The additional benefit equals the amount by which those limits reduce the pension benefit an employee would otherwise receive under the tax-qualified Cigna Pension Plan.CPP. The same plan provisions, including the definitions of service and earnings, apply equally to all employees with compensation above the qualified plan limits, including the named executive officers. The Cigna Supplemental Pension Plan was frozen effective December 31, 2004, and replaced with the Cigna Supplemental Pension Plan of 2005, which was frozen effective July 1, 2009.
The tax law limits in effect in 2009 were:
•
an annual limit of $195,000 on payments beginning at age 65 (the limit is actuarially reduced for payments beginning at an earlier age);
•
an annual limit of $245,000 on annual compensation that can be included in the Cigna Pension Plan’s benefit calculations; and
•
an exclusion from eligible earnings of any compensation deferred under a nonqualified deferred compensation arrangement.NEOs.
In calculating Supplemental Pension PlanCSPP benefits, the above limits are ignored; otherwise, the regular Cigna Pension PlanCSPP formulas and other terms and conditions apply. Supplemental Pension PlanCSPP benefits are paid in the year after an employee reaches age 55 or separates from service with Cigna, whichever is later.Pre-2005 benefits are ordinarily paid in a lump sum, based on the rules of the Supplemental Pension Plan,CSPP, but an employee who makes a timely election in compliance with applicable tax law may have all or part of the benefit that was earned and vested before 2005 paid in equivalent monthly installments. Any lump sum more than $100,000 is payable in two installments, with the second installment paid one year after the first. Supplemental Pension Planpension plan benefits earned after 2004 are covered under the Supplemental Pension Plan ofCSPP 2005, which provides only for payments in a lump sum in the year after an employee separates from service or reaches age 55, whichever is later. | | | 64 | | Cigna 2018 Notice of Annual Meeting of Shareholders and Proxy Statement |
Nonqualified Deferred Compensation for Fiscal Year 2011NONQUALIFIED DEFERRED COMPENSATION FOR 2017
This table provides information about the contributions, earnings and balances of the named executive officersfor Messrs. Cordani, Palmer, Hocevar, and Sadler under Cigna’s Deferred Compensation Plandeferred compensation plans as of and for the year ended December 31, 2011. Name (a) | Executive Contributions in Last FY ($) (b) | Registrant Contributions in Last FY ($) (c) | Aggregate Earnings in Last FY ($) (d) | Aggregate Withdrawal/ Distributions ($) (e) | Aggregate Balance at Last FYE ($) (f)(1) | David M. Cordani | - | - | 16,717 | - | 130,668 | Ralph J. Nicoletti | - | - | - | - | - | Nicole S. Jones | - | - | - | - | - | John M. Murabito (2) | - | - | 149,025 | - | 1,275,888 | Matthew G. Manders | - | - | - | - | - | Thomas A. McCarthy | - | - | - | - | - | Bertram L. Scott | - | - | - | - | - | Carol Ann Petren | - | - | (5,242) | - | 318,846 | (1) This column includes compensation earned in prior years and reported in the Summary Compensation Tables of Cigna’s previous proxy statements in the aggregate amounts of $95,200 for Mr. Cordani; $279,100 for Ms. Petren; and $437,000 for Mr. Murabito. (2) Mr. Murabito’s deferred compensation balance represents mandatory deferral of prior years’ compensation awards. |
2017. The other NEOs did not have deferred compensation. CIGNA – 2012 Notice of Annual Meeting of Shareholders and Proxy Statement – 64
| | | | | | | | | | | | | | | | | | | | | | | NAME (a) | | PLAN NAME (b) | | EXECUTIVE CONTRIBUTIONS IN LAST FY ($) (c) | | | REGISTRANT CONTRIBUTIONS IN LAST FY ($) (d) | | | AGGREGATE EARNINGS
IN LAST FY ($) (e) | | | AGGREGATE WITHDRAWAL/ DISTRIBUTIONS ($) (f) | | | AGGREGATE BALANCE AT LAST FYE ($) (g) | | David M. Cordani | | Cigna Deferred
Compensation Plan | | | — | | | | — | | | | 217,567 | | | | — | | | | 633,623 | (1) | | | | | | | | | | | | | | | | | | | | | | | | | Eric P. Palmer | | Cigna Deferred
Compensation Plan | | | — | | | | — | | | | 4,479 | | | | | | | | 154,136 | | | | | | | | | | | | | | | | | | | | | | | | | | Christopher J. Hocevar | | Cigna Deferred
Compensation Plan | | | | | | | | | | | 68,569 | | | | 100,634 | | | | 369,414 | | | | | | | | | | | | | | | | | | | | | | | | | | Jason D. Sadler | | Mandatory Provident
Fund(2) | | | 2,304 | | | | 2,304 | | | | 11,587 | | | | — | | | | 41,993 | | | | Third Country
National Pension
Plan(3) | | | — | | | | 91,168 | | | | 125,106 | | | | — | | | | 956,432 | | | | | | | | | | | | | | | | | | | | | | | | | |
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| (1) | Includes compensation earned in prior years and reported in the Summary Compensation Tables of Cigna’s previous proxy statements (beginning with the 2007 proxy statement) in the aggregate amount of $95,200 for Mr. Cordani. |
Nonqualified Deferred Compensation Narrative
| (2) | Cigna’s contributions are included in the Summary Compensation Table. |
| (3) | Cigna’s contributions are included in the Summary Compensation Table. |
Cigna Deferred Compensation Plan Cigna credits deferred compensation with hypothetical investment earnings during the deferral period as follows: •
Deferred cash compensation is credited with amounts that equal the gains (or losses) on the actual investment options available under the Cigna 401(k) Plan. The 401(k) investment options include a default fixed income fund with an annual interest rate applicable for 20112017 of 4.6%3.0%, which is not considered an “above market” interest rate as that term is defined by the Securities and Exchange Commission.SEC. The fixed income fund is the only hypothetical investment option available tonon-executive employees. •
Deferred shares of Cigna common stock are credited with amounts equal to any dividends that are paid on actual shares of Cigna common stock. These hypothetical dividends are treated as deferred cash compensation. Subject to limitations under Section 16 of the Securities Exchange Act of 1934 and under Cigna’s Securities Transactions and Insider Trading Policy, which prohibits trading by Cigna’s named executive officersNEOs during blackout periods, executive officers who participate in the Deferred Compensation Plan can defer up to 100% of their base salary and annual incentive award and change their hypothetical investment allocations on deferrals once per quarter. Before 2008, the PRC mandated deferral of certain compensation by Cigna’s named executive officers because immediate payment of that compensation would not be deductible by Cigna due to limits imposed by Section 162(m) of the Internal Revenue Code. After 2007, the PRC has not mandated deferral of compensation paid to any named executive officer.
Generally, payments of mandatory and voluntary deferrals after 2004 will be made or will begin during one of the following periods: seven months after the named executive officer’s separation from service; July of the year following the year of an executive’s separation from service; the ninety90 day period beginning January 1 of the year following the year of an executive’s death; or a date specified by the officer or by Cigna. Deferred compensation balances represent a general unsecured and unfunded obligation of the Company.Cigna. | | | | | | | | | Cigna 2018 Notice of Annual Meeting of Shareholders and Proxy Statement | | | 65 | |
POTENTIAL PAYMENTS UPON TERMINATION OR CHANGE OF CONTROL
The Contingent Payments Table on page 60 reflects the estimated amount of incremental compensation that would become payable to each of the named executive officersNEOs, except Mr. McCarthy and Mr. Manders, under existing plans and arrangements if the named executive officer’sNEO’s employment had terminated and/or a change of control had occurredin certain scenarios on December 31, 2011,2017, given the named executive officer’sNEO’s compensation and service levels as of such date and, if applicable, based on the Company’sour closing stock price on that date. Ms. PetrenDecember 29, 2017, the last business day of the year ($203.09 per share). Mr. McCarthy retired from the Company before December 31, 2011,on June 16, 2017 and Mr. Scott terminated employment before December 31, 2011; therefore, the actualManders retired on November 3, 2017. The terms of their retirement arrangements upon termination are described on page 63 under the heading Terms of Separation for Ms. Petren and Mr. Scott.below. All change of control benefits are double-trigger (that is,“double-trigger,” which means that they are payable only upon a change of control followed by termination of employment). The value attributable to benefits available prior to the occurrence of any termination of employment, including then-exercisable options, is included under the heading, Value of Long-Term Incentive; and benefits available generally to salaried employees, such as distributions under the Company’s 401(k), supplemental 401(k), deferred compensation and pension plans are reflected in the aggregate in the table under the heading, Retirement Plan(s).employment. Additionally, in connection with any actual termination of employment or change of control transaction, the Companywe may determinedecide to enter into an agreement or to establish an arrangement providing additional benefits or amounts, or altering the terms of the benefits described below, as the PRCPeople Resources Committee determines appropriate. The amounts reflected in the Contingent Payments Table are estimates. The actual incremental amounts that would be paid upon a named executive officer’sNEO’s termination of employment or in connection with a change of control can be determined only at the time of any such event. The calculation of the hypothetical amounts paid to each of the named executive officersNEOs in the circumstances described below relies heavily on assumptions used in making the calculations. Due to the number of factors that affect the nature and amount of any benefits provided upon the events discussed below, any actual amounts paid or distributed may be higher or lower than those reported below. Factors that could affect these amounts include the timing during the year of any such event, the company’sour stock price the named executive officer’s age, and specific plan terms that govern administration of payments. See also “Employment Arrangements and Post-terminationPost-Termination Payments” on page 44 in the CD&A section above for a description of Cigna’s policies on severance pay. CIGNA – 2012 Notice of Annual Meeting of Shareholders and Proxy Statement – 65
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In calculating the hypothetical payment amounts, we have assumed (except as noted below) that: (1) change of control and termination occur as of December 31, 2011;2017; (2) payments of benefits are made in a lump sum on December 31, 2011;2017; and (3) the value of options would be equal to the value realized upon exercise of those options that accelerate as a result of the applicable event and that werein-the-money as of December 31, 2011.2017. However, the actual exercise date of options is not known and payment dates would vary because of Internal Revenue Code rules relating to deferred compensation, and because of other considerations. Frozen accrued benefits under Cigna’s Pension Plan (Part A and Part B) and/or Cigna’s Supplemental Pension Plan are included in the table for those executives with these benefits. Mr. Cordani has a frozen accrued benefit under Part B of the Cigna Pension Plan and the Cigna Supplemental Pension Plans. Mr. Manders has a frozen accrued benefit under Part A of Cigna’s Pension Plan and the Cigna Supplemental Pension Plans. Mr. McCarthy has a frozen accrued benefit under Part A and Part B of the Cigna Pension Plan, and the Cigna Supplemental Pension Plans. Ms. Jones and Mr. Murabito each have a frozen accrued benefit under Part B of the Cigna Pension Plan and the Cigna Supplemental Pension Plan of 2005. Part B provides a retirement benefit stated as a lump sum hypothetical account balance. The account balance as of December 31, 2011 is the amount of payout reflected in the table.
Hypothetical payment amounts are rounded to the nearest thousand and represent an approximation of the potential payment.
Contingent Payments
compensation. The aggregate amounts in the Contingent Payments Table on page 74 appear under the following headings: •
Retirement Plan(s), for which the value may include:
–
Frozen accrued benefits under the Pension Plan and Supplemental Pension Plans (see narrative description following the Pension Benefits Table on pages 57 and 58 for information about payments;
–
Vested amounts under the 401(k) and Supplemental 401(k); and
–
Deferred Compensation Plan balances (see narrative description following the Nonqualified Deferred Compensation Table on page 71 for information about payments).
•
Severance, which refers to salary continuation upon involuntary termination or salary and annual incentive payments upon change of control.
•
Annual Incentive, which refers to annual cash incentive awards.
•
Value of Long-Term Incentive, which may represent some or all of the following: exercisable in-the-money options, payment in lieu of unvested restricted stock, accelerated vesting of options and/or restricted stock, SPUs, and/or SPSs.
•
Outplacement Services and Other Benefits, which maytable shown below does not include cost to the Company for outplacement services and or company paid life insurance.
•
Change of Control Cut-Back, which refers to the application of the reduction of the total payment upon change of control under the modified cap, of which either: (1) an executive will receive the full amount of change of control benefits and also pay any resulting excise tax, or (2) an executive’s change of control benefits will be reduced enough to avoid the excise tax entirely - whichever alternative provides the executive with the greater amount of after-tax benefits.
Contingent Payments | All Actions Assume a December 31, 2011 Termination Date | | | Termination for Cause or Voluntary Termination ($) | Involuntary Termination not for Cause ($) | Termination upon a Change of Control ($) | Retirement ($) | Death ($) | David M. Cordani | Retirement Plan(s) | 1,421,819 | 1,421,819 | 1,421,819 | 1,421,819 | 1,421,819 | Severance | - | 1,000,000 | 9,750,000 | - | - | Annual Incentive | - | 1,800,000 | - | 1,800,000 | - | Value of Long-Term Incentive | 710,774 | 8,498,961 | 17,940,653 | 11,091,944 | 11,091,944 | Outplacement Services and Other Benefits | - | 31,724 | $21,724 | 13,500 | - | Change of Control Cut-Back | - | - | - | - | - | TOTAL | 2,132,593 | 12,752,504 | 29,134,196 | 14,327,263 | 12,513,763 | Ralph J. Nicoletti | Retirement Plan(s) | 5,987 | 5,987 | 5,987 | 5,987 | 5,987 | Severance | - | 550,000 | 2,531,508 | - | - | Annual Incentive | - | 293,836 | - | 293,836 | - | Value of Long-Term Incentive | - | 1,095,521 | 1,987,378 | 1,092,654 | 1,092,654 | Outplacement Services and Other Benefits | - | 30,537 | 20,537 | - | - | Change of Control Cut-Back | - | - | - | - | - | TOTAL | 5,987 | 1,975,881 | 4,545,410 | 1,392,477 | 1,098,641 | Nicole S. Jones | Retirement Plan(s) | 220,419 | 220,419 | 220,419 | 220,419 | 220,419 | Severance | - | 515,000 | 2,790,000 | - | - | Annual Incentive | - | 415,000 | - | 415,000 | 0 | Value of Long-Term Incentive | - | 1,299,831 | 2,204,892 | 1,297,338 | 1,297,338 | Outplacement Services and Other Benefits | - | 30,539 | 20,539 | - | - | Change of Control Cut-Back | - | - | - | - | - | TOTAL | 220,419 | 2,480,789 | 5,235,850 | 1,932,757 | 1,517,757 | John M. Murabito | Retirement Plan(s) | 1,983,271 | 1,983,271 | 1,983,271 | 1,983,271 | 1,983,271 | Severance | - | 592,250 | 3,498,000 | - | - | Annual Incentive | - | 425,000 | - | 425,000 | - | Value of Long-Term Incentive | 110,777 | 3,005,991 | 4,538,556 | 3,548,949 | 3,548,949 | Outplacement Services and Other Benefits | - | 31,117 | 21,117 | - | - | Change of Control Cut-Back | - | - | - | - | - | TOTAL | 2,094,048 | 6,037,629 | 10,040,944 | 5,957,220 | 5,532,220 | Matthew G. Manders | Retirement Plan(s) | 2,379,937 | 2,379,937 | 2,379,937 | 2,379,937 | 1,659,830 | Severance | - | 575,000 | 3,623,439 | - | - | Annual Incentive | - | 475,000 | - | 475,000 | - | Value of Long-Term Incentive | 76,180 | 2,521,798 | 3,963,947 | 2,980,466 | 2,980,466 | Outplacement Services and Other Benefits | - | 30,899 | 20,899 | - | - | Change of Control Cut-Back | - | - | (1,060,952) | - | - | TOTAL | 2,456,117 | 5,982,634 | 8,927,270 | 5,835,403 | 4,640,296 | Thomas A. McCarthy | Retirement Plan(s) | 1,956,588 | 1,956,588 | 1,956,588 | 1,956,588 | 1,387,157 | Severance | - | 425,000 | 2,100,000 | - | - | Annual Incentive | - | 275,000 | - | 275,000 | - | Value of Long-Term Incentive | 1,683,974 | 2,693,186 | 3,303,089 | 2,927,582 | 2,927,582 | Outplacement Services and Other Benefits | - | 30,589 | 20,589 | - | - | Change of Control Cut-Back | - | - | - | - | - | TOTAL | 3,640,562 | 5,380,363 | 7,380,266 | 5,159,170 | 4,314,739 |
CIGNA – 2012 Notice of Annual Meeting of Shareholders and Proxy Statement – 66
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Termination for Cause or Voluntary Termination
Generally, a named executive officer would receivecertainnon-forfeitable payments or benefits, limited to those attributable to benefits available prior to termination, such as 401(k), supplemental 401(k), deferred compensation, pension plans and the value of exercisable previously vestedin-the-money options, assuming exercise; in each case, the case ofNEO would, subject to certain limitations, receive these payments or benefits upon termination, including voluntary termination or termination for cause, such as after convictioncause.
Terms of Mr. McCarthy’s Retirement Arrangement Mr. McCarthy retired effective June 16, 2017. In June 2017, he and the Company entered into the McCarthy A&R Agreement in connection with his retirement. The McCarthy A&R Agreement provided for benefits consisting of: (1) the payment of Mr. McCarthy’s annual cash incentive for his service in 2017 at 50% of his annual target, subject to the Company’s attainment ofpre-established performance goals; and (2) payout of previously awarded SPSs for the 2015–2017, 2016–2018 and 2017–2019 performance periods, prorated based on the number of months that Mr. McCarthy would have been employed during each36-month performance period if his employment continued through December 31, 2017. The agreement confirmed that, pursuant to the LTIP and the terms of the original grants, Mr. McCarthy’s stock options vested upon his retirement to the extent unvested. The aggregate value of these benefits was approximately $5.3 million, based on a felony involving fraud or dishonesty directed against Cigna. Restricted stock unvestedprice of $169.08 per share, the closing price of Cigna’s common stock on June 16, 2017. The percentage of actual shares earned and timing of the payment of the SPS awards will be determined by the People Resources Committee in accordance with the terms of the LTIP. Stock options awarded under the LTIP will expire at their original term. Mr. McCarthy and the Company also entered into an Advisory Services Agreement, pursuant to which Mr. McCarthy provided advice and counsel to senior management on business planning and strategy. Mr. McCarthy was paid $30,000 per month during the term of the agreement, plus $6,000 per day for each additional day Mr. McCarthy performed services in excess of five days in a given month. The Advisory Services Agreement expired on December 19, 2017. Terms of Mr. Manders’ Retirement Arrangement Mr. Manders retired effective November 3, 2017. In October 2017, he and the Company entered into the Manders A&R Agreement in connection with his retirement. The Manders A&R Agreement provided for benefits consisting of: (1) the | | | 66 | | Cigna 2018 Notice of Annual Meeting of Shareholders and Proxy Statement |
payment of Mr. Manders’ annual cash incentive for his service in 2017 at 100% of his annual target, subject to the Company’s attainment ofpre-established performance goals; and (2) payout of previously awarded SPSs for the 2015–2017, 2016–2018 and 2017–2019 performance periods, prorated based on the number of months that Mr. Manders would have been employed during each36-month performance period if his employment continued through December 31, 2017. The agreement confirmed that, pursuant to the LTIP and the terms of the original grants, Mr. Manders’ stock options vested unexercisedupon his retirement to the extent unvested. The aggregate value of these benefits was approximately $8.4 million, based on a stock price of $201.90 per share, the closing price of Cigna’s common stock on November 3, 2017. The percentage of actual shares earned and timing of the payment of the SPS awards will be determined by the People Resources Committee in accordance with the terms of the LTIP. Stock options SPUs and SPSs would be forfeited orawarded under the LTIP will expire upon termination and, generally, no annual incentive or additional base salary would be paid. Accordingly, Cigna estimates that it would not make any other paymentsat their original term. Contingent Payment Descriptions The aggregate amounts in the eventContingent Payments Table appear under the following headings: | • | | Severance, which refers to salary continuation upon involuntary termination, or salary continuation upon involuntary termination and change of control for the NEOs. |
| • | | Annual Incentive, which refers to annual cash incentive awards payable to the NEOs. |
| • | | Vesting of Previously Awarded Long-Term Incentives, which refers to accelerated vesting ofin-the-money options and/or restricted stock and SPSs. |
| • | | Outplacement Services and Other Benefits, which includes the cost to the Company for outplacement services and/or Company-paid basic life insurance. |
| • | | Change of ControlCut-Back,which refers to the application of the reduction of the total payment upon change of control, by which either: (1) an executive will receive the full amount of change of control benefits and also pay any resulting excise tax; or (2) an executive’s change of control benefits will be reduced enough to avoid the excise tax entirely – whichever alternative provides the executive with the greater amount ofafter-tax benefits. |
Hypothetical payment amounts represent an approximation of a termination for cause or voluntary termination.the potential payment. | | | | | | | | | Cigna 2018 Notice of Annual Meeting of Shareholders and Proxy Statement | | | 67 | |
CIGNA – 2012 Notice of Annual Meeting of Shareholders and Proxy Statement – 67
| | | | | | | | | | | | | | | | | CONTINGENT PAYMENTS All Actions Assume a December 31, 2017 Termination Date | | | | | INVOLUNTARY TERMINATION
NOT FOR CAUSE ($) (a) | | | TERMINATION UPON A CHANGE OF CONTROL ($) (b) | | | EARLY
RETIREMENT
OR
RETIREMENT ($) (c) | | | TERMINATION UPON DEATH OR DISABILITY ($) (d) | | David M. Cordani | | | | | | | | | | | | | | | | | Severance | | | 1,400,000 | | | | 12,600,000 | | | | — | | | | — | | Annual Incentive | | | 2,800,000 | | | | — | | | | — | | | | — | | Vesting of Previously Awarded Long-Term Incentives | | | 18,084,352 | | | | 53,159,946 | | | | — | | | | 42,884,405 | | Outplacement Services and Other Benefits | | | 29,306 | | | | 19,306 | | | | — | | | | — | | Change of ControlCut-Back | | | — | | | | — | | | | — | | | | — | | | | | | | | | | | | | | | | | | | | TOTAL | | | 22,313,658 | | | | 65,779,252 | | | | — | | | | 42,884,405 | | | | | | | | | | | | | | | | | | | | | | | Eric P. Palmer | | | | | | | | | | | | | | | | | Severance | | | 675,000 | | | | 4,275,000 | | | | — | | | | — | | Annual Incentive | | | 750,000 | | | | — | | | | — | | | | — | | Vesting of Previously Awarded Long-Term Incentives | | | 1,079,423 | | | | 3,638,614 | | | | — | | | | 2,831,737 | | Outplacement Services and Other Benefits | | | 25,812 | | | | 15,812 | | | | — | | | | — | | Change of ControlCut-Back | | | — | | | | — | | | | — | | | | — | | | | | | | | | | | | | | | | | | | | TOTAL | | | 2,530,235 | | | | 7,929,426 | | | | — | | | | 2,831,737 | | | | | | | | | | | | | | | | | | | | | | | Nicole S. Jones | | | | | | | | | | | | | | | | | Severance | | | 630,000 | | | | 3,930,000 | | | | — | | | | — | | Annual Incentive | | | 680,000 | | | | — | | | | — | | | | — | | Vesting of Previously Awarded Long-Term Incentives | | | 2,579,243 | | | | 7,651,637 | | | | — | | | | 6,174,767 | | Outplacement Services and Other Benefits | | | 26,426 | | | | 16,426 | | | | — | | | | — | | Change of ControlCut-Back | | | — | | | | — | | | | — | | | | — | | | | | | | | | | | | | | | | | | | | TOTAL | | | 3,915,669 | | | | 11,598,063 | | | | — | | | | 6,174,767 | | | | | | | | | | | | | | | | | | | | | | | Christopher J. Hocevar | | | | | | | | | | | | | | | | | Severance | | | 550,000 | | | | 3,150,000 | | | | — | | | | — | | Annual Incentive | | | 500,000 | | | | — | | | | — | | | | — | | Vesting of Previously Awarded Long-Term Incentives | | | 1,208,995 | | | | 4,058,087 | | | | — | | | | 3,289,391 | | Outplacement Services and Other Benefits | | | 26,009 | | | | 16,009 | | | | — | | | | — | | Change of ControlCut-Back | | | — | | | | (730 | ) | | | — | | | | — | | | | | | | | | | | | | | | | | | | | TOTAL | | | 2,285,004 | | | | 7,223,366 | | | | — | | | | 3,289,391 | | | | | | | | | | | | | | | | | | | | | | | Jason D. Sadler | | | | | | | | | | | | | | | | | Severance | | | 648,837 | | | | 3,893,020 | | | | — | | | | — | | Annual Incentive | | | 648,837 | | | | — | | | | — | | | | — | | Vesting of Previously Awarded Long-Term Incentives | | | 2,487,853 | | | | 5,996,910 | | | | — | | | | 4,974,555 | | Outplacement Services and Other Benefits | | | 25,000 | | | | 15,000 | | | | — | | | | — | | Change of ControlCut-Back | | | — | | | | — | | | | — | | | | — | | | | | | | | | | | | | | | | | | | | TOTAL | | | 3,810,527 | | | | 9,904,930 | | | | — | | | | 4,974,555 | | | | | | | | | | | | | | | | | | | |
| | | 68 | | Cigna 2018 Notice of Annual Meeting of Shareholders and Proxy Statement |
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Involuntary Termination not for Cause (Column (a)) Payments and benefits may be provided to named executive officersNEOs whose employment is terminated because of job elimination permanent disability or any othernon-cause reason. If a named executive officerNEO is terminated not for cause, there is no plan or formula that prescribes benefits that would be provided. Some of the benefits, such as severance payments or payments in the amount of the value of unvested restricted stock awards, would be subject to the discretion of the PRC. The following factors arePeople Resources Committee. In exercising such discretion, the Committee typically considered in the exercise of such discretion:considers length of service; the executive’sservice, target total compensation, target; and the executive’s career plans following termination of employment with Cigna.employment. From the range of possible decisions the PRCPeople Resources Committee may make about payments and benefits, we have assumed for purposes of this estimate it is assumedthat a named executive officerNEO would receive: •
An amount equal to one year of base salary. •
A prorated portion of that individual’s annual incentive target.target for the year in which termination occurs. The total amount of the annual incentive payout for 20112017 was included in the estimate because it assumes termination atyear-end. Payout of a prorated portion of previously awarded SPSs based on 100% of the 2015–2017 SPS award, 67% of the 2016–2018 SPS award and 33% of the 2017–2019 SPS award. The value shown for such NEO represents the number of SPSs multiplied by $203.09, the December 29, 2017 closing price of Cigna common stock. •
A lump sum payment equal to the value of unvested restricted stock, calculated by multiplying the number of shares of restricted stock forfeited upon termination, by the average closing price (assumed to be $42.48) over 30 trading days ending on the assumed termination date, at year-end.•
Payout of previously awarded SPUs at 100% of the 2009-2011 SPU award. The value shown for each named executive officer represents the target value ($75) however, the actual value would be determined at the end of each performance period.
•
Payout of a prorated portion of previously awarded SPSs based on 67% of the 2010 -2012 SPS award and 33% of the 2011- 2013 SPS award. The value shown for each named executive officer represents the number of SPSs multiplied by the closing price of Cigna common stockwhich was $203.09 on December 31, 2011 ($42.00).29, 2017.
Outplacement services and Company-paid basic life insurance, each for a period of one year. For purposes of this estimate, a cost of $25,000 for outplacement services was used. Previous separation agreements with executive officers required the terminated officer to make certain promises, covenants and waivers, including those relating to non-competition andnon-solicitation obligations and non-solicitation,a general release, in exchange for the benefits and payments provided by the Company.Cigna. In addition, each named executive officer would be entitled to receive the amounts vested under Cigna’s pension plans, 401(k) plan and supplemental 401(k) plan; amounts accrued under the deferred compensation plan; and the value of exercisable in-the-money options. The calculation of estimated payments also assumes payment of approximately $30,000 for one year of outplacement services based on the cost to Cigna and the cost to the Company for life insurance for one year.
Termination upon a Change of Control (Column (b)) The payments and benefits discussed are entirely hypothetical and contingent in nature. However, if a change of control were to occur, under our change of control policies discussed in CD&A, executive officers who are terminated (other than as the result of conviction of a felony involving fraud or dishonesty directed against Cigna) within two years after a change of control would receivebe entitled to the following payments equal to:and benefits: •
156 weeks of pay, at the base salary rate in effect at termination. •
Three times
Three-times the greater of the executive’s last annual incentive paymentpayout or the amount of the executive’s annual incentive target immediately before the change of control. •
The number of outstanding SPUs multiplied by the greatest of: the target value ($75); the value for a unit paid in the preceding twelve-month period ($125); or the average of the unit values for the last two unit payments ($125).
•
The number of outstanding SPSs multiplied by the greatest of: 100%; the vesting percentpercentage from the preceding performance period; or the average vesting percentpercentage for the last two performance periods. In addition, and only upon termination within two years after For purposes of this estimate, a changevesting percentage of control, restrictions139.5% of target was used. The value shown for each NEO represents the number of SPSs estimated to vest multiplied by $203.09, the closing price of Cigna common stock on December 29, 2017.
Unvested stock options and restricted stock awards would lapse and any unvested options would become exercisable andvest. Options would expire on the earlier of the original expiration date or three months after the termination date. The calculation of estimated payments assumes payment of approximately $20,000 for six
Six months of outplacement services and the cost to the Company for life insurance for one year. In addition, each named executive officer would be entitled to receiveyear paid by the amounts vested under Cigna’s pension plans, 401(k) plan and supplemental 401(k); amounts accrued under the deferred compensation plan; and the valueCompany. For purposes of exercisable in-the-money options. this estimate, a cost of $15,000 for outplacement services was used. If, within two years after a change of control, any of the following changes described in the next sentence affect an executive level employee,officer, and he or she then resigns following written notification to Cigna, the resignation will be treated as a termination upon a change of control. The covered changes arecontrol: any reduction in compensation, any material reduction in authority, duties or responsibilities, or a relocation of the executive’s office more than 35 miles from its location on the date of the change of control. | | | | | | | | | Cigna 2018 Notice of Annual Meeting of Shareholders and Proxy Statement | | | 69 | |
CIGNA – 2012 Notice of Annual Meeting of Shareholders and Proxy Statement – 68
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Retirement
Early Retirement or Retirement (Column (c)) Upon early retirement (on or after age 55 and at least five years of service) or retirement (on or after age 65 and at least five years of service), the amount of any benefits or payments to a named executive officerNEO is subject to the discretion of the PRCPeople Resources Committee and/or the terms of any agreement executed by the Company and the retiring named executive officerNEO that has been approved by the PRC.Committee. From the range of possible decisions the PRCPeople Resources Committee may make about payments and benefits, we have assumed for purposes of this estimate it is assumed a named executive officerNEO would receive: •
A prorated portion of that individual’s annual incentive target. The calculation includes the total annual incentive target for 20112017 because the estimate assumes termination atyear-end. •
Payout of previously awarded SPUs at 100% of the 2009-2011 SPU award. The value shown for each named executive officer represents the target value ($75); however, actual value would be determined at the end of each performance period.
•
Payout of a prorated portion of previously awarded SPSs based on 100% of the 2015–2017 SPS award, 67% of the 2010-20122016–2018 SPS award and 33% of the 2011-20132017–2019 SPS award. The value shown for each named executive officersuch NEO represents the number of SPSs held by the NEO multiplied by the closing price of Cigna common stock on December 31, 201129, 2017 ($42.00)203.09). •
Vesting of any unvested options would be accelerated and the options would become exercisable at retirement and expire on the original expiration date. The calculation includes the gain onin-the-money exercisable options.options, assuming option exercises on December 31, 2017. •
Vesting of any unvested Cigna restricted stock awards upon retirement, withsubject to the PRC’sPeople Resources Committee’s approval. ForAt December 31, 2017, none of the CEO, the calculation includes the incremental cost of providing office space and administrative assistanceNEOs serving as executive officers were eligible for one year, which is estimated to be approximately $13,500. In addition, each named executive officer would be entitled to receive the amounts vested under Cigna’s pension plans, 401(k) plan and supplemental 401(k) plan; and amounts accrued under the deferred compensation plan.early retirement.
Death or Disability (Column (d)) If a named executive officerNEO dies while still an active employee, certain benefits are available to that individual’s estate or surviving spouse. Payment of outstanding SPU and SPS awards are subject to the discretion of the PRC. In accordance with past practice, the estimates assume that the named executive officer’s estate or the surviving spouse would receive payment of a prorated portion of the SPUs and SPSs based upon the following formula: 100% of the 2009-2011 SPU award; 67% of the 2010-2012 SPS award; and 33% of the 2011 – 2013 SPS award. The SPU value shown for each named executive officer represents the target value ($75) and, for the SPS values, represents the Cigna common stock closing price on December 31, 2011 ($42.00); however, the actual value would be determined at the end of each performance period. Restrictions on restricted stock awards would lapse upon death.death or disability. In addition, vesting of any unvested options would be accelerated and the options would become exercisable at death and expire on the original expiration date. The calculation Upon death, the NEO’s estate or the surviving spouse would also receive an immediate payout of 100% of the pension plan payouts includesoutstanding SPS awards for the amount of an estimated survivor benefit which, along with other factors, is based upon2015–2017, 2016–2018 and 2017–2019 performance periods. Upon disability, the ageNEO’s 2015–2017, 2016–2018 and 2017–2019 SPS awards would fully vest, but would not be paid out until the end of the deceased officer’s spouse.performance period. In addition, each named executive officer’saccordance with past practice, the estimates assume that the NEO’s estate would be entitled to receiveor the amounts accrued under Cigna’s pension plans, 401(k) plan, supplemental 401(k) plan and the deferred compensation plan, as well as the value of exercisable in-the-money options. In the event of death before employment termination for a participant in Part A of Cigna’s pension plan, payments to a surviving spouse are different from those to a participant. In certain cases these benefits are payable at an earlier age than would otherwise be available under the plan and therefore the present valuereceive payment of those benefits may equal or exceed the present value of other payments upon termination. CIGNA – 2012 Notice of Annual Meeting of Shareholders and Proxy Statement – 69
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Terms of Separation for Ms. Petren and Mr. Scott
The Termination Payments Table below represents the payments made under the terms of separation for Ms. Petren and Mr. Scott, who left the Company during 2011. The following is a description100% of the categories of payments made under the terms of their respective arrangements.2015–2017 SPS award.
Mr. Scott’s agreement includes non-competition and non-solicitation covenants made by Mr. Scott as well as various other commitments, covenants and waivers. Mr. Scott is eligible for benefits available generally to salaried employees desriubed under the heading Retirement Plans. In addition, the agreement provides for benefits consisting of: (1) the payment of one year’s salary; (2) payouts under annual and long-term incentive arrangements; (3) cash payment for previously granted unvested restricted stock; and (4) miscellaneous insurance and outplacement benefits. The aggregate value of these benefits is approximately $3.9 million.
Ms. Petren’s agreement includes non-competition and non-solicitation covenants made by Ms. Petren, as well as various other commitments, covenants and waivers. Mr. Petren is eligible for benefits available generally to salaried employees descubed under the heading of Retirement Plans. In addition, the agreement provides for benefits consisting of: (1) payouts under annual and long-term incentive arrangements; and (2) cash payment for previously granted unvested restricted stock. The estimated aggregate value of these benefits is approximately $3.5 million.
Termination Payments ($)
| | | December 9, 2011 Termination Date
70 | | Cigna 2018 Notice of Annual Meeting of Shareholders and Proxy Statement |
| Bertram L. Scott
| Retirement Plan(s)(1)
| 53,483
| Severance
| 1,408,306
| Annual Incentive(2)
| 650,000
| Value of Long-Term Incentive(3)
| 1,818,389
| Outplacement Services and Other Benefits
| 30,000
| TOTAL
| 3,960,178
| July 1, 2011 Termination Date
| Carol Ann Petren
| Retirement Plan(s)(4)
| 796,261
| Payment in Lieu of RSG vesting
| 1,000,000
| Annual Incentive(5)
| 300,000
| Value of Long-Term Incentive(6)
| 2,234,560
| TOTAL
| 4,330,821
| (1) Present value of accumulated benefits at December 9, 2011.
(2) Annual incentive at target.AUDIT MATTERS
(3) Includes the following assumptions for SPU and SPS payments: (i) payment at actual unit value ($175) for 2009 units; and (ii) payment of 2010 and 2011 SPSs at December 9, 2011 closing price of $42.61.
(4) Present value of accumulated benefits at July 1, 2011.
(5) Prorated annual incentive at target.
(6) Includes the following assumptions for SPU and SPS payments: (i) payment at actual unit value ($175) for 2009 units; and (ii) payment of 2010 and 2011 SPSs at July 1, 2011 closing price of $52.20.
|
CIGNA – 2012 NoticeRatification of Annual MeetingAppointment of ShareholdersIndependent Registered Public Accounting Firm (Proposal 3)
The Board’s Audit Committee is directly responsible for the appointment, compensation, retention and Proxy Statement – 70
Backoversight of the independent registered public accounting firm retained to Contents
INFORMATION ABOUT ITEM 3.
RATIFICATION OF APPOINTMENT OF PRICEWATERHOUSECOOPERS, LLP AS CIGNA’S INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
audit the Company’s financial statements. The Audit Committee approved the appointment of PricewaterhouseCoopers LLP as Cigna’s independent registered public accounting firm for 2012.2018. PricewaterhouseCoopers LLP has served as Cigna’s independent registered public accounting firm since 1983. In order to ensure continued auditor independence, the Audit Committee periodically considers whether there should be a regular rotation of the independent registered public accounting firm. Further, in conjunction with the mandated rotation of the audit firm’s lead engagement partner, the Chair of the Audit Committee and the Chairman of the Board are involved in the selection of PricewaterhouseCoopers LLP’s lead engagement partner. The Audit Committee and the Board believe that the continued retention of PricewaterhouseCoopers LLP to serve as the Company’s independent registered public accounting firm is in the best interests of the Company and its shareholders. As a matter of good corporate governance, the Board is seeking shareholder ratification of the appointment even though ratification is not legally required. If shareholders do not ratify this appointment, the Audit Committee will reconsider PricewaterhouseCoopers’ appointment. Even if the selection is ratified, the Audit Committee in its discretion may select a different independent registered public accounting firm at any time of the year if it determines that such a change would be in the best interests of the Company and its shareholders. A representative from PricewaterhouseCoopers LLP is expected to attend the Annual Meeting, may make a statement, and will be available to respond to appropriate questions. The Board of Directors unanimously recommends that shareholders vote FOR the ratification of the appointment of PricewaterhouseCoopers, LLP as Cigna’s independent registered public accounting firm.
| | | | | | | | | | | | | | | | | | | | The Board of Directors unanimously recommends that shareholders vote FOR the ratification of the appointment of PricewaterhouseCoopers LLP as Cigna’s independent registered public
accounting firm. | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | Cigna 2018 Notice of Annual Meeting of Shareholders and Proxy Statement | | | 71 | |
Policy for thePre-Approval of Audit and PermissibleNon-Audit Services The Audit Committeepre-approves all audit services provided by Cigna’s accounting firms and all permissiblenon-audit services provided by the Company’s principal independent registered public accounting firm. Specifically: •
The full Audit Committeepre-approves all audit, review and attest services and their related fees. The Audit Committee has oversight of fee negotiations with the independent registered public accounting firm. •
The General Auditor and Chief Risk Officer (a role held by one individual and General Auditor (CRO)referred to as the CRO) for the Company presents to the full Audit Committee a schedule, accompanied by detailed documentation, listing all audit and permissiblenon-audit services expected to be performed by the Company’s independent registered public accounting firm during the calendar year. In the case of any additional permissiblenon-audit services concerning internal control over financial reporting and any tax service,services, the independent registered public accounting firm includes a written description of the scope of service and other information about the proposed service required by the Public Company Accounting Oversight Board rules.service. The Audit Committee reviews the schedule and documentation, andpre-approves the audit and permissiblenon-audit services it deems appropriate. •
For additional audit and permissiblenon-audit services that arise during the calendar year, the CRO presents an updated schedule reflecting the additional services for review and consideration for pre-approval by the Audit Committee. After the CRO’s presentation of the schedules as described above and, if applicable, a discussion with the Company’s independent registered public accounting firm regarding the potential effects of any permissible tax services on the independence of the Company’s independent registered public accounting firm, the Audit Committee will approve those permissible | additional services for review and consideration forpre-approval by the Audit Committee. After the CRO’s presentation of the schedules as described above and, if applicable, a discussion with the Company’s independent registered public accounting firm regarding the potential effects of any permissiblenon-audit services related to internal control over financial reporting or permissible tax services on the independence of the Company’s independent registered public accounting firm, the Audit Committee will approve those audit and permissiblenon-audit services it deems appropriate and necessary. |
•
The policy allows thepre-approval of additional audit and permissiblenon-audit services to be delegated to one or more Audit Committee members so long as the proposed services do not exceed $250,000 individually. Any services approved in this manner must be reported to the full Audit Committee at its next regularly scheduled meeting. •
The CRO reports to the Audit Committee at each meeting on anynon-audit services performed by the independent registered public accounting firm and on fees incurred for any services performed by the independent registered public accounting firm. Annually,At eachin-person meeting, the CRO reports to the Audit Committee the projected ratio between audit andnon-audit fees of the independent registered public accounting firm. | | | 72 | | Cigna 2018 Notice of Annual Meeting of Shareholders and Proxy Statement |
CIGNA – 2012 Notice of Annual Meeting of Shareholders and Proxy Statement – 71
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Fees to Independent Registered Public Accounting Firm The Audit Committee reviewed and approved the professional services rendered to Cigna by PricewaterhouseCoopers LLP consisting of the following: Aggregate
| | | | | | | | | | | | 2017 | | | 2016 | | Audit Fees | | $ | 12,388,000 | | | $ | 11,809,000 | | Audit-Related Fees | | | 2,036,000 | | | | 2,146,000 | | Tax Fees | | | 697,000 | | | | 379,000 | | All Other Fees | | | 605,000 | | | | 276,000 | | TOTAL | | $ | 15,726,000 | | | $ | 14,610,000 | | | | | | | | | | | |
Audit fees billed include the audit of annual financial statements; the review of quarterly financial statements; the performance of statutory audits; quarterly comfort letter work; and the evaluation of the effectiveness of internal control over financial reporting, as required by Section 404 of the Sarbanes-Oxley Act. Audit-related fees include assurance and related services that were reasonably related to the audit of annual financial statements and reviews of quarterly financial statements, but not reported under Audit Fees. Audit-related fees include: employee benefit plan audits; internal control reviews (e.g., Statement of Standards for Attestation Engagements No. 16 reports); consultation concerning financial accounting and reporting standards; agreed upon procedures; due diligence purchase accounting; and regulatory examinations. Tax fees include tax recovery services, tax consulting and tax compliance services. All other feesinclude professional services rendered by PricewaterhouseCoopers LLP for the audit of financial statements for the fiscal years ended December 31, 2011not reported in any other category and December 31, 2010,includepre-approved business process advisory and fees billed for other services rendered by PricewaterhouseCoopers, LLP during those periods were as follows:that, for 2017, relate primarily to a benchmarking exercise, a data analysis project and a quality assessment. | 2011 | 2010 | Audit Fees | $6,836,000 | $6,545,000 | Audit-Related Fees | 1,109,000 | 1,407,000 | Tax Fees | 71,000 | 56,000 | All Other Fees | 91,000 | 3,551,000 | TOTAL | $8,107,000 | $11,558,000 | • Audit fees include: the audit of annual financial statements; the review of quarterly financial statements; the performance of statutory audits; quarterly comfort letter work; and the evaluation of the effectiveness of internal control over financial reporting, as required by Section 404 of the Sarbanes-Oxley Act. • Audit-related fees include assurance and related services that were reasonably related to the audit of annual financial statements and reviews of quarterly financial statements, but not reported under “Audit Fees.” Audit-related fees include: employee benefit plan audits; internal control reviews (e.g., Statement of Standards for Attestation Engagements No.16 reports); consultation concerning financial accounting and reporting standards; agreed upon procedures; due diligence purchase accounting; and regulatory examinations. • Tax fees include tax recovery services, tax consulting and tax compliance services. • All other fees include professional services rendered by PricewaterhouseCoopers, LLP not reported in any other category and include pre-approved business process advisory and consulting services. On November 2, 2010 (the Closing Date), the Company’s auditor acquired Diamond Management & Technology Partners, Inc. (Diamond), a consulting firm that the Company had been using prior to the acquisition. The fee information for 2010 reflected in “All Other Fees” includes fees of $1,423,420 paid to PricewaterhouseCoopers, LLP for services performed by Diamond after the Closing Date, which will not recur because the Company no longer uses the services of what was formerly Diamond. In 2010, the Audit Committee discussed with PricewaterhouseCoopers, LLP its independence in relation to the provision of these services and PricewaterhouseCoopers, LLP confirmed its independence from Cigna. |
| | | | | | | | | Cigna 2018 Notice of Annual Meeting of Shareholders and Proxy Statement | | | 73 | |
Report of the Audit Committee Report
Cigna has maintainedmaintains an independent Audit Committee for many years. Itthat operates under a written charter adopted by the Board of Directors. All of the members of the Audit Committee are independent (as defined in the listing standards of the New York Stock Exchange, applicable federalSEC regulations and Cigna’s independence standards). Cigna’s management has primary responsibility for preparing Cigna’s financial statements and establishing and maintaining financial reporting systems and internal controls. Management also is also responsible for reporting on the effectiveness of Cigna’s internal controlscontrol over financial reporting. The independent registered public accounting firm is responsible for performing an independent audit of Cigna’s consolidated financial statements and issuing a report on these financial statements. The independent registered public accounting firm also is also responsible for, among other things, issuing an attestation report on the effectiveness of Cigna’s internal control over financial reporting based on its audit. As provided in itsthe Audit Committee’s charter, the Audit Committee’s responsibilities include oversight of these processes. As part of its oversight responsibilities, the Audit Committee meets periodically with Cigna’s CRO,Chief Financial Officer, General Auditor and Chief Risk Officer, Chief Accounting Officer, General Counsel, Global Chief FinancialCompliance Officer, Medicare/Medicaid Chief Compliance Officer, Global Chief Information Officer and independent registered public accounting firm, with and without management present, to discuss the adequacy and effectiveness of Cigna’s internal controls and the quality of the financial reporting process. In this context, before Cigna filed its Annual Report onForm 10-K for the year ended December 31, 20112017(Form 10-K) with the Securities and Exchange Commission, the Audit Committee: •
Reviewed and discussed with Cigna’s management the audited consolidated financial statements included in theForm 10-K and considered management’s view that the financial statements present fairly, in all material respects, the financial condition and results of operations of Cigna. •
Reviewed and discussed with Cigna’s management and with the independent registered public accounting firm, PricewaterhouseCoopers LLP, the effectiveness of Cigna’s internal controlscontrol over financial reporting as well as management’s report and PricewaterhouseCoopers LLP’s attestation on the subject. •
Discussed with PricewaterhouseCoopers LLP matters related to the conduct of its audit that are required to be communicated by auditors to audit committees and matters related to the fair presentation of Cigna’s financial condition and results of operations, including critical accounting estimates and judgments. •
Received the required written communications from PricewaterhouseCoopers LLP that disclose all relationships that may reasonably be thought to bear on its independence and to confirm its independence. Based on these communications, the Audit Committee discussed with PricewaterhouseCoopers LLP its independence from Cigna. •
Discussed with each of Cigna’s Chief Executive Officer and Chief Financial Officer their required certifications contained in Cigna’s Annual Report on Form 10-K for the year ended December 31, 2011.CIGNA – 2012 Notice of Annual Meeting of Shareholders and Proxy Statement – 72
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10-K.Based on the review and discussions referred to above, the Audit Committee recommended to the Board of Directors that such audited consolidated financial statements be included in Cigna’s Annual Report onForm 10-K for the year ended December 31, 20112017 for filing with the Securities and Exchange Commission. Audit Committee: Donna F. Zarcone, Chairman
Eric J. FossRoman Martinez IV, Chair
Jane E. Henney, M.D. John M. PartridgeJames E. Rogers
Eric C. WisemanDonna F. Zarcone
| | | 74 | | Cigna 2018 Notice of Annual Meeting of Shareholders and Proxy Statement |
CIGNA – 2012 Notice
| PROPOSAL TO AMEND RESTATED CERTIFICATE OF INCORPORATION |
Proposal to Amend Restated Certificate of Annual Meeting of Shareholders and Proxy Statement – 73
BackIncorporation to Contents
INFORMATION ABOUT ITEM 4.
APPROVAL OF AMENDED AND RESTATED CIGNA EXECUTIVE INCENTIVE PLANEliminate the Supermajority Voting Requirement (Proposal 4)
Cigna’s shareholders last approved the Cigna Executive Incentive Plan at the 2007 annual meeting. Cigna is seeking shareholder approval
Article Fifth of the Cigna Executive Incentive Plan (Amended andCompany’s Restated asCertificate of January 1, 2012) (EIP) soIncorporation provides that awards under the EIP may continue to qualify as performance-based compensation under Section 162(m)2 of Article III of the Internal Revenue Code (Section 162(m)). Subject to certain exceptions, Section 162(m) limits to $1 million the federal income tax deduction for annual compensation to each of the CEO and the next three highest paid executive officers other than the CFO. Performance-based compensation is exempt from this Section 162(m) limit. To continue to qualify as “performance-based compensation” under Section 162(m), Cigna’s shareholders must re-approve the Executive Incentive Plan at least every five years.
On February 22, 2012, the People Resources Committee (PRC) approved the EIP in the form included in Appendix B of this proxy statement, subject to its approval by shareholders at the Annual Meeting. No changes have been madeCompany’sBy-Laws, which relates to the maximum award limits or other material provisionsnumber, qualifications, election and term of the plan that were approved by shareholders in 2007. If Cigna’s shareholders re-approve the EIP, Cigna expects to continue to utilize the plan for annual incentive awards to executive officers as long as the performance-based compensation exception to Section 162(m) continues to apply.
The Boardoffice of Directors unanimously recommends that shareholders vote FOR the approval of the Amended and Restated Cigna Executive Incentive Plan.
The following is a summary of the EIP. A copy of the EIP is attached as Appendix B to this proxy statement.
Purpose
The purpose of the EIP is to provide for annual incentive bonuses to our executive officers that qualify as “performance-based compensation” under Sections 162(m) and 409A of the Internal Revenue Code.
Eligibility
Eligibility is limited to executive officers (as defined in Rule 3b-7 under the Securities Exchange Act of 1934, as amended), and therefore, approximately nine individuals are eligible to participate in the EIP. The PRC in its discretion may designate any executive officer as a participant in the EIP for a performance period, which is the calendar year unless the PRC specifies another period. Except for some leaves of absence and termination of employment on account of retirement, death or disability, a participant must be continuously employed by Cigna from the beginning of the performance period to the date of payment of the award to be eligible to receive an award.
Performance Objectives
Under the EIP, generally within 90 days of the beginning of a performance period, the PRC must establish performance objectives for the period, using one or more of the following performance measures:
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earnings (total or per share)
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growth in net income or income from selected businesses (total or per share)
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net income (total or per share)
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pre-tax income or growth in pre-tax income from selected businesses (total or per share)
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income
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profit margins
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revenues
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growth in premiums and fees
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revenue growth
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premiums and fees
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•
membership
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membership growth
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change in market share
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book value
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market share
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economic value added
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market value added
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cash flow
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expense ratios
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change in cash flow
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other expense management measures
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medical loss ratio
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ratio of claims or loss costs to revenues
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satisfaction — customer, provider, or employee
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accuracy of claim processing or other measures of operational effectiveness
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productivity ratios or other measures of operating efficiency
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service quality
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total shareholder return
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stock price
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change in stock price
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market capitalization
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change in market capitalization
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return on market value
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shareholder equity (total per share)
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return on equity
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assets
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return on assets
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capital
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return on capital
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growth in net income (total or per share)
The PRC may specify any reasonable definition of the performance measures it uses. The definitions may provide for reasonable adjustments and may include or exclude items, such as:
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realized investment gains and losses;
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special items identified in the Company’s reporting;
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extraordinary, unusual or nonrecurring items;
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effects of accounting changes, currency fluctuations, acquisitions, divestitures, reserve strengthening or financing activities;
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expenses for restructuring or productivity initiatives; or
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other non-operating items.
The performance objectives may be:
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for the Company as a whole or for one or more of its subsidiaries, business units or lines of business, or any combination thereof;
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absolute or comparative to that of a peer group or a specified index, or any combination thereof; and
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different for particular performance periods or participants.
For a description of how the PRC determined the performance objectives under the EIP for 2011, see Executive Incentive Plan and Section 162(m) Considerations on page 38.
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Limits on Awards
Participants will be eligible to receive an award under the EIP only if the PRC has certified in writing that the performance objectives have been met. The maximum award for each participant for a performance period will consist of:
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cash in the amount of $3 million; and
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in lieu of additional cash, 225,000 shares of common stock to be paid under Cigna’s Long-Term Incentive Plan.
These maximum award limits are the same as the EIP award limits approved by shareholders in April 2007. The share limit figure was updated from 75,000 shares to 225,000 shares to reflect Cigna’s three-for-one stock split effective June 4, 2007.
The PRC has sole and absolute discretion to reduce or eliminate entirely the award to one or more participants.
Deferrals of Awards
Cigna will pay the awards on or before March 15, but no earlier than January 1, of the calendar year following the close of the performance period. A participant may also voluntarily defer receipt of an award.
Amendments and Termination
The PRC or the Board of Directors, may amendbe amended by the Board or terminateby shareholders, upon the EIP at any time. However, an amendment will not be effective without the prior approval of shareholders if their approval is necessary to continue to qualify the awards as “performance-based compensation” under Section 162(m) or is otherwise required by any other applicable law, rule or regulation. The EIP provides for appropriate adjustments in the number of shares awardable under the EIP upon a stock dividend, stock split or other subdivision or combination of Cigna’s common stock, as well as in the number and/or kind of shares awardable under the EIP following a merger, reorganization or other similar event.
New Plan Benefits
The amounts awarded in 2013 under the EIP for the 2012 performance period will be based on actual performance during 2012, so amounts payable cannot yet be determined. The bonuses that were paid in March 2012 for the 2011 performance period to eachaffirmative vote of the named executive officers under the prior EIP are included in the “non-equity incentive plan compensation” and “stock awards’’ columns of the Summary Compensation Table on page 46 of this proxy statement. The total dollar value paid under the prior EIP for all executive officers in March 2012 for 2011 performance was approximately $7.1 million.
Equity Compensation Plans
The following table presents information regarding Cigna’s equity compensation plans as of December 31, 2011:
Plan Category | Securities To Be Issued Upon Exercise Of Outstanding Options, Warrants And Rights (a)(1) | Weighted Average Exercise Price Per Share Of Outstanding Options, Warrants And Rights (b)(2) | Securities Remaining Available For Future Issuance Under Equity Compensation Plans (Excluding Securities Reflected In Column (a)) (c)(3) | Equity Compensation Plans Approved by Security Holders | 11,480,832 | $33.92 | 12,184,049 | Equity Compensation Plans Not Approved by Security Holders | - | - | - | TOTAL | 11,480,832 | $33.92 | 12,184,049 | (1) In addition to outstanding options, includes 116,694 restricted stock units, 82,791 deferred shares, 32,315 director deferred share units that settle in shares, and 1,667,702 SPSs, which are reported at the maximum 200% payout rate. (2) The weighted-average exercise price is based only on outstanding options. (3) Includes 437,931 shares of common stock available as of the close of business December 31, 2011 for future issuance under the Cigna Directors Equity Plan; and 8,212,760 shares of common stock available as of the close of business on December 31, 2011 for future issuance under the Cigna Long-Term Incentive Plan as shares of restricted stock, strategic performance shares, shares in payment of dividend equivalent rights, shares in lieu of cash payable under a Qualifying Plan, or shares in payment of SPUs. |
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INFORMATION ABOUT ITEM 5.
PROPOSAL TO AMEND BY-LAWS TO PROVIDE FOR THE DECLASSIFICATION OF THE BOARD OF DIRECTORS
Proposed Amendment
The Board of Directors is submitting for consideration by shareholders an amendment to the Company’s By-Laws (By-Laws) to provide for the phased elimination of the Company’s classified board structure (Proposed Amendment).
The Company’s current By-Laws divide the Board of Directors into three classes that are elected by class for three-year terms. The text of the Proposed Amendment, which would replace Article III, Section 2 of the Company’s By-Laws, is attached as Appendix C to this proxy statement. If the Proposed Amendment is adopted, beginning in 2013, directors whose terms expire will stand for election for one-year terms, as further described under “Impact on Future Elections” below.
Background of Proposal
The Board and its Corporate Governance Committee (CGC) regularly review Cigna’s governance structure, including the classified board, considering both the general governance environment as well as the Company’s particular circumstances, to ensure that the Company maintains a structure that is in the best interest of its shareholders.
In evaluating the classified board structure, Cigna’s Board and its CGC have considered arguments on both sides of the issue, including the increasing number of companies that provide for annual election of directors and shareholder demand for director accountability through annual elections. After considering both environmental and company-specific factors, the Board continues to believe that the classified board structure has been and remains in the best interests of the Company and its shareholders, particularly in light of the current economic environment and stock market volatility. Additional factors that have influenced the Board’s decision include:
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the elimination of broker discretionary voting in director elections;
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increased influence of large investors focused on short-term objectives;
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increased reliance on proxy advisory firms’ voting recommendations; and
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the importance of assembling and maintaining a well-rounded, diverse, and collegial board.
In recognition that there are different perspectives on this issue, however, the Board has determined that it is advisable, and in the best interest of shareholders, to submit the Proposed Amendment for consideration at this year’s Annual Meeting.
Required Vote
For the Proposed Amendment to become effective, this proposal must receive the affirmative voteholders of at least 80% of the voting power of all of the capital stock of the Company outstanding sharesand entitled to vote. Article VIII of the Company’sBy-Laws contains a similar supermajority vote requirement to amend Section 2 of Article III of theBy-Laws.
The Board, as part of its ongoing review of the Company’s corporate governance practices and in light of the declassification of the Board, recognized that the elimination of this supermajority vote requirement would align with best practices in corporate governance. Therefore, on February 28, 2018, the Board approved an amendment to Article Fifth of the Company’s Restated Certificate of Incorporation, subject to approval of shareholders at the Annual Meeting, to eliminate the supermajority voting requirement necessary to amend Section 2 of Article III of the Company’sBy-Laws and replace it with a majority vote requirement. The complete text of the proposed amendment to Article Fifth, marked to show the proposed deletion, is set forth below: Fifth: TheBy-Laws of the Corporation may be adopted, amended or repealed by the affirmative vote of the holders of a majority of the voting power of the capital stock of the Corporation outstanding and entitled to vote atthereon; provided, however, that Section 2 of Article III of the meeting. IfBy-Laws may not be amended or repealed, nor may any provision be adopted that is inconsistent with such section, in any case by action of the proposalstockholders, unless such amendment, repeal or adoption is approved by the requiredaffirmative vote of the holders of at least 80% of the voting power of the capital stock of the Corporation outstanding and entitled to vote thereon. The Board of Directors shall also have the power to adopt, amend or repeal any provision of theBy-Laws of the Corporation without any vote of the stockholders of the Corporation. Following shareholder vote,approval of this amendment to Article Fifth of the Restated Certificate of Incorporation, the Board will amend theBy-Laws to eliminate the similar supermajority voting requirement contained in Article VIII of theBy-Laws. This action would be taken at the Board’s next meeting after the 2018 Annual Meeting of Shareholders. Thereafter, all supermajority voting provisions will have been removed and shareholders may amend all provisions of the Restated Certificate of Incorporation andBy-Laws by the affirmative vote of a majority of the Company’s By-Lawsoutstanding common stock. To be adopted, this Proposal 4 must be approved by the affirmative vote of a majority of the Company’s outstanding common stock. If this Proposal 4 is approved by shareholders, the Company’s Restated Certificate of Incorporation will be amended and restated as set forth in Appendix C. IfI and we will file the Proposed Amendment does not receive this levelRestated Certificate of shareholder approval,Incorporation with the Board will consider the voting results in its annual reviewSecretary of State of the Company’s governance structureState of Delaware as soon as practicable after the Annual Meeting. | | | | | | | | | | | | | | | | | | | | The Board of Directors unanimously recommends that shareholders vote FOR the amendment to the Company’s Restated Certificate of Incorporation to eliminate the supermajority voting requirement. | | | | | | | | | | | | | | | | | | | |
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Stock Held by Directors, Nominees and determine whether further action on this issue is appropriate in light of all factors. Impact on Future ElectionsExecutive Officers
If the Proposed Amendment is adopted, the directors standing for election at the 2013 annual meeting (currently expected to be Mr. Cordani, Mr. Harris, Dr. Henney and Ms. Zarcone) will stand for election for a one-year term expiring at the 2014 annual meeting, and they and their successors would stand for one-year terms thereafter.
The adoption of the Proposed Amendment would not shorten the terms to which our shareholders have previously elected directors. This means that the Board’s other directors (who would not stand for election at the 2013 annual meeting) will continue to hold office until the end of the terms for which they were elected, and they and their successors will stand for one-year terms thereafter.
Accordingly, directors elected at this year’s Annual Meeting will serve for a three-year term expiring at the annual meeting in 2015, and directors currently serving terms that end at the annual meeting in 2013 and 2014 will continue to serve for such terms. If the Proposed Amendment is approved, all directors will be elected on an annual basis beginning with the 2015 annual meeting. In all cases, each director will hold office until his or her successor has been elected and qualified or until the director’s earlier resignation or removal, and vacancies that occur during the year will be filled by the Board to serve until the next annual meeting.
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The Board of Directors makes no recommendation either FOR or AGAINST the proposal to adopt the Proposed Amendment and encourages all shareholders to vote as they believe appropriate.
STOCK HELD BY DIRECTORS, NOMINEES AND EXECUTIVE OFFICERS
The following table provides information as of January 31, 2012 regarding2018 about the amount of Cigna common stock beneficially owned by each director, nominee and executive officer named in the Summary Compensation Table (named executive officers) and the amount of Cigna common stock beneficially owned by the directors, nominees and named executive officers as a group. In general, “beneficial ownership” includes those shares a director, nominee or executive officer has the power to vote or transfer (even if another person is the record owner), and stock options that are exercisable as of January 31, 20122018 or that may become exercisable within 60 days. Name | Amount and Nature of Beneficial Ownership (1) | Percent of Class | Directors and Nominees (2) | | | Isaiah Harris, Jr. | - | * | Eric J. Foss | 1,302 | * | Jane E. Henney, M.D. | - | * | Roman Martinez, IV | 5,388 | * | John M. Partridge | 4,760 | * | James E. Rogers | - | * | Joseph P. Sullivan | - | * | Eric C. Wiseman | - | * | Donna F. Zarcone | 2,000 | * | William D. Zollars | - | * | Named Executive Officers (3) | | | David M. Cordani | 892,623 | * | Ralph J. Nicoletti | 5,940 | * | Thomas A. McCarthy | 133,408 | * | Nicole S. Jones | 6,479 | * | John M. Murabito | 243,533 | * | Matthew G. Manders | 128,837 | * | Bertram L. Scott | 4,714 | * | Carol Ann Petren | 161,918 | * | All Directors, Nominees and Executive Officers as a group including those named above (22 Persons) | 2,171,338 | 0.8% | * Indicates less than 1% of common stock outstanding. (1) Includes, in addition to wholly-owned shares: • shares of restricted common stock in the amount of 5,940 for Mr. Nicoletti; 13,926 for Mr. McCarthy; 5,166 for Ms. Jones; 39,633 for Mr. Murabito; and 32,115 for Mr. Manders; • shares acquirable within 60 days of January 31, 2012 by exercising vested stock options in the amount of 722,750 for Mr. Cordani; 100,699 for Mr. McCarthy; 121,698 for Mr. Murabito; 78,087 for Mr. Manders; 142,012 for Ms. Petren; and an aggregate of 307,251 for other executive officers; • holdings in Cigna Stock Funds of 401(k) Plans in the amount of 1,637 for Mr. Cordani; 1,167 for Mr. McCarthy; 1,313 for Ms. Jones; and 2,869 for Mr. Murabito; and • deferred stock units to be settled in common stock within 60 days of January 31, 2012 in the amount of 2,388 each for Messrs. Martinez and Partridge. (2) The amounts reflected in the table do not include restricted share equivalents, deferred stock units or hypothetical shares of Cigna stock; a more comprehensive representation of directors’ equity-based holdings is presented in the Director Stock Ownership Table on page 28. (3) Includes Mr. McCarthy, who served as acting CFO during 2011, and Mr. Scott and Ms. Petren, who were no longer with the Company at the end of 2011. |
| | | | | | | | | | NAME | | AMOUNT AND NATURE OF BENEFICIAL OWNERSHIP(1) | | | PERCENT
OF CLASS | | Directors and Nominees | | | | | | | | | Eric J. Foss | | | 13,413 | | | | * | | Isaiah Harris, Jr.(2) | | | 15,437 | | | | * | | Jane E. Henney, M.D.(2) | | | 14,936 | | | | * | | Roman Martinez IV(2) | | | 22,996 | | | | * | | John M. Partridge | | | 33,267 | | | | * | | James E. Rogers(2) | | | — | | | | * | | Eric C. Wiseman(2) | | | 4,200 | | | | * | | Donna F. Zarcone(2) | | | 13,500 | | | | * | | William D. Zollars(2) | | | 13,500 | | | | * | | Named Executive Officers | | | | | | | | | David M. Cordani | | | 1,494,113 | | | | * | | Eric P. Palmer | | | 28,847 | | | | * | | Christopher J. Hocevar | | | 26,937 | | | | * | | Nicole S. Jones | | | 133,408 | | | | * | | Jason D. Sadler | | | 47,208 | | | | * | | Thomas A. McCarthy | | | 221,238 | | | | * | | Matthew G. Manders | | | 221,926 | | | | * | | All Directors, Nominees and Executive Officers as a group including those named above (22 Persons) | | | 2,692,880 | | | | 1.1 | % |
| * | Less than 1% of the outstanding common stock. |
None of the shares reported are pledged as security. | (1) | Includes, in addition to wholly owned shares owned on January 31, 2018: |
| • | | 13,500 vested restricted stock units that settle in common stock upon separation of service held by each of Dr. Henney, Ms. Zarcone and Messrs. Harris, Martinez and Zollars; |
| • | | shares acquirable within 60 days of January 31, 2018 by exercising stock options in the amount of 1,120,397 for Mr. Cordani; 20,875 for Mr. Palmer; 13,222 for Mr. Hocevar; 95,437 for Ms. Jones; 13,964 for Mr. Sadler; 165,340 for Mr. McCarthy; 169,811 for Mr. Manders; and an aggregate of 216,938 for other executive officers; |
| • | | holdings in the Cigna stock fund of Cigna’s 401(k) Plan in the amount of 1,640 for Mr. Cordani; 271 for Mr. Palmer; 931 for Mr. Hocevar; 1,313 for Ms. Jones; 1,169 for Mr. McCarthy; and an aggregate of 13,223 for other executive officers; and |
| • | | shares paid upon the vesting of the 2015–2017 SPS program in the amount of 67,070 for Mr. Cordani; 2,701 for Mr. Palmer; 4,033 for Mr. Hocevar; 9,473 for Ms. Jones; 6,650 for Mr. Sadler; 13,877 for Mr. McCarthy; 12,720 for Mr. Manders; and an aggregate of 26,234 for other executive officers. |
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| OWNERSHIP OF CIGNA COMMON STOCK |
| (2) | The table below details as of January 31, 2018 certain other securities, the value of which is directly tied to the value of Cigna stock as described in“Non-Employee Director Compensation — Director Ownership.” Under SEC rules, deferred common stock and hypothetical shares of common stock are not considered beneficially owned and are therefore not included on the table. |
| | | | | | | | | | NAME | | DEFERRED COMMON STOCK | | | HYPOTHETICAL SHARES OF COMMON STOCK | | Isaiah Harris, Jr. | | | — | | | | 23,255 | | Jane E. Henney, M.D. | | | — | | | | 19,024 | | Roman Martinez IV | | | 22,780 | | | | 15,423 | | James E. Rogers | | | 37,520 | | | | 11,299 | | Eric C. Wiseman | | | 12,117 | | | | 3,652 | | Donna F. Zarcone | | | 8,230 | | | | 2,797 | | William D. Zollars | | | — | | | | 9,784 | | | | | | | | | | | |
Additional Information about Stock Held by Directors, Director Nominees and Executive Officers Directors, director nominees and named executive officers as a group beneficially own approximately 0.8%1.1% of the outstanding common stock. These beneficial ownership percentages do not include any common stock equivalents and are based on 286,517,042242,875,357 shares of common stock outstanding on January 31, 2012.2018. On January 31, 2012,2018, the Cigna Stock Fundsstock fund of Cigna’s two 401(k) plans for employeesplan held a total of 7,566,5144,883,664 shares, or approximately 2.6%2.0% of the outstanding common stock on that date. A Cigna management advisory committee determines how the shares held in the Cigna Stock Fundsstock fund will be voted only to the extent the plan’splans’ individual participants do not give voting instructions. The directors, director nominees and named executive officers control the voting and investment of all shares of common stock they own beneficially. The address for each individual in the table above is c/o Cigna Corporation, 900 Cottage Grove Road, Bloomfield, Connecticut 06002. CIGNA – 2012
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Stock Held by Certain Beneficial Owners The following table and Proxy Statement – 79
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Largest Security Holders
This table providesnotes provide information about a shareholder that filed a Schedule 13G indicating that it beneficially ownedbeneficial owners of more than five percent of Cigna’s common stock as of December 31, 2011. We prepared the table using information from the Schedule 13G filing made by the beneficial owner.stock. The percent of class reported in the table below is based on 286,517,042242,875,357 shares of Cigna common stock outstanding as of January 31, 2012.2018.
Name and Address of Beneficial Owner | Amount and Nature of Beneficial Ownership as of 12/31/2011 | Percent of Class | BlackRock, Inc. 40 East 52nd Street New York, NY 10022 | 19,368,396 | 6.8% |
BlackRock, Inc. reported on an amendment to a Schedule 13-G on February 13, 2012 with the Securities and Exchange Commission that it held these shares as a parent holding company or control person. BlackRock, Inc. reported that various persons have the right to receive or the power to direct the receipt of dividends from, or the proceeds from the sale of, the common stock of Cigna Corporation. BlackRock, Inc. has sole power to vote or direct the disposition of any of these shares. BlackRock, Inc. reported to the Securities and Exchange Commission that it acquired these shares in the ordinary course of business with no intention of influencing control of Cigna.
| | | | | | | | | NAME AND ADDRESS OF BENEFICIAL OWNER | | AMOUNT AND NATURE OF BENEFICIAL OWNERSHIP | | | PERCENT OF CLASS | | T. Rowe Price Associates, Inc. 100 E. Pratt Street Baltimore, MD 21202 | | | 17,756,569 | (1) | | | 7.3 | % | The Vanguard Group 100 Vanguard Blvd. Malvern, PA 19355 | | | 17,289,066 | (2) | | | 7.1 | % | BlackRock, Inc. 55 East 52nd Street New York, NY 10055 | | | 17,155,180 | (3) | | | 7.1 | % | | | | | | | | | |
| (1) | Based on information as of December 31, 2017 contained in an amended Schedule 13G filed with the SEC on February 14, 2018 by T. Rowe Price Associates, Inc. The amended Schedule 13G indicates that T. Rowe Price Associates, Inc. has sole voting power with respect to 6,047,631 shares and sole dispositive power with respect to 17,756,569 shares. |
| (2) | Based on information as of December 31, 2017 contained in an amended Schedule 13G filed with the SEC on February 8, 2018 by The Vanguard Group. The amended Schedule 13G indicates that The Vanguard Group has sole voting power with respect to 353,707 shares; shared voting power with respect to 62,005 shares; sole dispositive power with respect to 16,884,131 shares; and shared dispositive power with respect to 404,935 shares. According to the amended Schedule 13G, Vanguard Fiduciary Trust Company, a wholly owned subsidiary of The Vanguard Group, Inc., beneficially owns 273,111 of these shares and Vanguard Investments Australia, Ltd., a wholly owned subsidiary of The Vanguard Group, Inc., beneficially owns 210,687 of these shares. |
| (3) | Based on information as of December 31, 2017 contained in an amended Schedule 13G filed with the SEC on January 29, 2018 by BlackRock, Inc. The amended Schedule 13G indicates that BlackRock, Inc. has sole voting power with respect to 14,851,415 shares; and sole dispositive power with respect to 17,155,180 shares. |
Section 16(a) Beneficial Ownership Reporting Compliance SECTION 16(A) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Cigna directors, and executive officers and beneficial owners of more than 10% of our common stock are required to file reports of their holdings and transactions in Cigna securities with the Securities and Exchange Commission. Based on our recordsa review of the copies of reports furnished to the Company and written representations from our directors and executive officers, and directors, the Company believes that all reports due in 20112017 were timely filed. HOUSEHOLDING
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| ANNUAL MEETING INFORMATION |
Questions and Answers About the Proxy Materials Why did I receive proxy materials? What is included in the proxy materials? Cigna’s Board of Directors is soliciting your proxy to vote at the 2018 Annual Meeting of Shareholders. You received proxy materials because you owned shares of Cigna common stock at the close of business on February 26, 2018, the record date, and that entitles you to vote at the Annual Meeting. Proxy materials include the notice of annual meeting of shareholders, this Proxy Statement and our annual report onForm 10-K for the year ended December 31, 2017. If you received paper copies, the proxy materials also include a proxy card or voting instruction form. The Proxy Statement describes the matters on which the Board of Directors would like you to vote, and provides information about Cigna that we must disclose under Securities and Exchange Commission regulations when we solicit your proxy. Your proxy will authorize specified persons, each of whom also are referred to as a proxy, to vote on your behalf at the Annual Meeting. By use of a proxy, you can vote whether or not you attend the meeting in person. The written document by which you authorize a proxy to vote on your behalf is referred to as a proxy card. Why did I receive a “Notice of Internet Availability of Proxy Materials” instead of printed copies of the proxy statement and annual report? Cigna has elected to take advantage of the SEC’s rule that allows us to furnish proxy materials to you online. On March [ ], 2018, we mailed to shareholders a notice of the Internet availability of proxy materials containing instructions on how to access our proxy materials online. We believe electronic delivery will lower costs and reduce the environmental impact of our Annual Meeting because we will print and mail fewer full sets of materials. You may request to receive printed proxy materials by following the instructions contained in the notice of Internet availability. You also may contact Cigna Shareholder Services. Written requests should be directed to Shareholder Services, Cigna Corporation, Two Liberty Place, 5th Floor, 1601 Chestnut Street, Philadelphia, PA 19192-1550. You may also contact Shareholder Services at(215) 761-3516 or shareholderservices@cigna.com. How can I get electronic access to the proxy materials? The proxy materials are available for viewing at www.envisionreports.com/ci. The notice of Internet availability of proxy materials also provides instructions on how to: view our proxy materials on the Internet; vote your shares after you have viewed the proxy materials; and select a future delivery preference of paper or electronic copies of the proxy materials. For shareholders who received a printed copy of our materials, you still may choose to receive proxy materials electronically in the future. If you choose to do so, you will receive an email with instructions containing electronic links to the proxy materials for next year’s annual meeting and the proxy voting site. If you hold your shares through a bank, broker or other custodian, you also may have the opportunity to receive the proxy materials electronically. Please check the information contained in the documents provided to you by your bank, broker or other custodian. We encourage you to take advantage of the availability of the proxy materials electronically to help reduce the environmental impact of the Annual Meeting. | | | | | | | | | Cigna 2018 Notice of Annual Meeting of Shareholders and Proxy Statement | | | 79 | |
| ANNUAL MEETING INFORMATION |
Questions and Answers About Voting What am I voting on at the Annual Meeting? | | | | | | PROPOSALS | | ITEM | | BOARD
VOTE RECOMMENDATION | | 1 | | Election of the ten director nominees named in this Proxy Statement | | Vote FOR each of the nominees | | 2 | | Advisory approval of executive compensation | | VoteFOR | | 3 | | Ratification of the appointment of PricewaterhouseCoopers LLP as the Company’s independent registered public accounting firm for 2018 | | VoteFOR | | 4 | | Approval of an amendment to the Company’s Restated Certificate of Incorporation to eliminate the supermajority voting requirement | | VoteFOR |
Could other matters be decided at the Annual Meeting? We are not aware of any other matters that will be presented and voted upon at the Annual Meeting. The proxies will have discretionary authority, to the extent permitted by law, to decide how to vote on other matters that may come before the Annual Meeting. How many votes can be cast by all shareholders? Each share of Cigna common stock is entitled to one vote on each of the ten directors named in this Proxy Statement to be elected and one vote on each of the other matters properly presented at the Annual Meeting. We had 242,843,575 shares of common stock outstanding and entitled to vote on February 26, 2018. How many votes must be present to hold the Annual Meeting? At leasttwo-fifths of the issued and outstanding shares entitled to vote, or 97,137,430 shares, present in person or by proxy, are needed for a quorum to hold the Annual Meeting. Abstentions and brokernon-votes (discussed below) are included in determining whether a quorum is present. We urge you to vote by proxy even if you plan to attend the Annual Meeting. This will help us know that enough votes will be present to hold the meeting. How many votes are needed to approve each proposal? How do abstentions or brokernon-votes affect the voting results? The following table summarizes the vote threshold required for approval of each proposal and the effect on the outcome of the vote of abstentions and uninstructed shares held by brokers (referred to as brokernon-votes). When a beneficial owner does not provide voting instructions to the institution that holds the shares in street name, brokers may not vote those shares in matters deemednon-routine. Only Proposal 3 is a routine matter. | | | | | | | | | PROPOSAL | | ITEM | | VOTE REQUIRED
FOR APPROVAL | | EFFECT OF
ABSTENTIONS | | EFFECT OF BROKER
NON-VOTES | | 1 | | Election of the ten director nominees named in this Proxy Statement | | Majority of votes cast | | No effect | | Not voted/No effect | | 2 | | Advisory approval of executive compensation | | Majority of shares present and entitled to vote on the subject matter | | Counted “against” | | Not voted/No effect | | 3 | | Ratification of the appointment of independent auditor | | Majority of shares present and entitled to vote on the subject matter | | Counted “against” | | No brokernon-votes; shares are voted by brokers in their discretion | | 4 | | Approval of an amendment to the Company’s Restated Certificate of Incorporation to eliminate the supermajority voting requirement | | Majority of shares outstanding | | Counted “against” | | Counted “against” |
| | | 80 | | Cigna 2018 Notice of Annual Meeting of Shareholders and Proxy Statement |
| ANNUAL MEETING INFORMATION |
Signed but unmarked proxy cards will be voted “for” Proposals 1, 2, 3 and 4. Shares held by the Cigna stock fund of the Cigna 401(k) Plan that are not voted timely or properly will be voted by the plan trustees as instructed by Cigna’s Retirement Plan Committee. How do I vote if I own shares as a record holder? If your name is registered on Cigna’s shareholder records as the owner of shares, you are the “record holder.” This may include shares held at Computershare from restricted stock that has vested, shares acquired through an option exercise and shares issued in settlement of SPS awards. If you hold shares as a record holder, there are four ways that you can vote your shares. Over the Internet. Vote at www.envisionreports.com/ci. The Internet voting system is available 24 hours a day until 11:59 p.m. Eastern Time on Tuesday, April 24, 2018. Once you enter the Internet voting system, you can record and confirm (or change) your voting instructions. By telephone. Use the telephone number shown on your proxy card. The telephone voting system is available 24 hours a day in the United States until 11:59 p.m. Eastern Time on Tuesday, April 24, 2018. Once you enter the telephone voting system, a series of prompts will tell you how to record and confirm (or change) your voting instructions. By mail. If you received a proxy card, mark your voting instructions on the card and sign, date and return it in the postage-paid envelope provided. If you received only a notice of Internet availability but want to vote by mail, the notice includes instructions on how to request a paper proxy card. For your mailed proxy card to be counted, we must receive it before 8:00 a.m. Eastern Time on Wednesday, April 25, 2018. In person. Attend the Annual Meeting, or send a personal representative with a valid legal proxy. Please note that you cannot vote using the notice of Internet availability of proxy materials. The notice identifies the items of business and describes how to vote, but you cannot vote by marking the notice and returning it. How do I vote if my Cigna shares are held by a bank, broker or custodian (including a Fidelity brokerage account)? If your shares are held by a bank, broker or other custodian (commonly referred to as shares held “in street name”), the holder of your shares will provide you with a copy of this Proxy Statement, a voting instruction form and directions on how to provide voting instructions. These directions may allow you to vote over the Internet or by telephone. Unless you provide voting instructions, your shares will not be voted on any matter except for ratifying the appointment of our independent auditors. To ensure that your shares are counted in each of the other matters, we encourage you to provide instructions on how to vote your shares. If you hold shares in street name and want to vote in person at the Annual Meeting, you will need to ask your bank, broker or custodian to provide you with a valid legal proxy. You will need to bring the proxy with you to the Annual Meeting in order to vote. Please note that if you request a legal proxy from your bank, broker or custodian, any previously executed proxy will be revoked and your vote will not be counted unless you vote in person at the Annual Meeting or appoint another valid legal proxy to vote on your behalf. How do I vote if my Cigna shares are held by Fidelity in an employee stock account? Employee stock accounts maintained by Fidelity include unvested restricted stock that is votable if held on the record date. You should follow the rules above for voting shares held as a record holder. How do I vote shares held in the Cigna stock fund of the Cigna 401(k) Plan? If you have money invested in the Cigna stock fund of the Cigna 401(k) Plan, you may provide voting instructions as to the number of shares allocated to your account on the record date. However, you have an earlier deadline for submitting voting instructions. Your voting instructions must be received by 11:59 p.m. Eastern Time on Thursday, April 19, 2018. You may vote over the Internet, by telephone or by mail (as described above), but you maynot vote shares allocated to your 401(k) accounts in person at the Annual Meeting. The plan trustees will vote such shares in accordance with your voting instructions if they are received timely. If you do not send instructions by the April 19, 2018 deadline, you do not vote or you return your proxy card with unclear voting instructions or no voting instructions, the plan trustees will vote the number of shares allocated to your 401(k) account as instructed by Cigna’s Retirement Plan Committee. Your voting instructions will be kept confidential under the terms of the plan. Shares allocated to your 401(k) account, shares held in an employee stock account with Fidelity or shares held at Computershare may be aggregated on one proxy card. Please note that if voting instructions are submitted after 11:59 p.m. Eastern Time on Thursday, April 19, 2018, your vote will be counted for any shares held in your employee stock accounts at Fidelity or Computershare, but not with respect to shares allocated to your 401(k) account. | | | | | | | | | Cigna 2018 Notice of Annual Meeting of Shareholders and Proxy Statement | | | 81 | |
| ANNUAL MEETING INFORMATION |
What should I do if I receive more than one set of proxy materials? You may receive more than one set of proxy materials if your shares are registered differently or are in more than one account. Please provide voting instructions for all of the Notices and proxy and voting instruction cards you receive. Can I change my vote? Yes. If you are a record holder, you may: Enter new instructions by telephone or Internet voting before 11:59 p.m. Eastern Time on Tuesday, April 24, 2018; Send a new proxy card with a later date than the card submitted earlier. We must receive your new proxy card before 8:00 a.m. Eastern Time on Wednesday, April 25, 2018; Write to the Corporate Secretary at the address listed below. Your letter should contain the name in which your shares are registered, the date of the proxy you wish to revoke or change, your new voting instructions, if applicable, and your signature. Your letter must be received by the Corporate Secretary before 8:00 a.m. Eastern Time on Wednesday, April 25, 2018; or Vote in person (or send a personal representative with a valid proxy) at the Annual Meeting, which will automatically cancel any proxy previously given. If you hold your shares in street name, you may: Submit new voting instructions in the manner provided by your bank, broker or other custodian; or Contact your bank, broker or other custodian to request a proxy to vote in person at the Annual Meeting. Written notices of revocation and other communications about revoking Cigna proxies should be addressed to Corporate Secretary, Cigna Corporation, Two Liberty Place, 7th Floor, 1601 Chestnut Street, Philadelphia, Pennsylvania 19192-1550. Who will count the votes? Is my vote confidential? Computershare has been appointed Inspector of Election for the Annual Meeting. The Inspector of Election will determine the number of shares outstanding, the shares represented at the Annual Meeting, the existence of a quorum, and the validity of proxies and ballots, and will count all votes and ballots. All votes are confidential. Your voting records will not be disclosed to us, except as required by law, in contested Board elections or certain other limited circumstances. Who pays for the proxy solicitation and how will Cigna solicit votes? Cigna pays the cost of preparing our proxy materials and soliciting your vote. Proxies may be solicited on our behalf by our directors, officers, employees and agents by telephone, electronic or facsimile transmission or in person. We will enlist the help of banks and brokerage houses in soliciting proxies from their customers and reimburse them for their relatedout-of-pocket expenses. In addition, we have engaged Georgeson, Inc. to assist in soliciting proxies. Cigna will pay Georgeson a fee of approximately $15,000 plus reasonableout-of-pocket expenses. Where can I find the voting results of the Annual Meeting? We will publish the voting results of the Annual Meeting on a Current Report onForm 8-K filed with the SEC within four business days following the end of our Annual Meeting. How can I communicate with the Board of Directors? Shareholders and interested parties may contact the Board of Directors, the Chairman, the independent directors, or specific individual directors by submitting ane-mail to DirectorAccessMailbox@cigna.com. Shareholders and interested parties also may send written correspondence to Director Access, Attention: Office of the Corporate Secretary, Cigna Corporation, Two Liberty Place, 7th Floor, 1601 Chestnut Street, Philadelphia, PA 19192-1550. The Corporate Secretary will compile all communications other than routine commercial solicitations and opinion surveys sent to Board members and periodically submit them to the Board. Communications addressed to individual directors at the director address will be submitted to such individual directors. The Corporate Secretary also will promptly advise the appropriate member of management of concerns, and the Corporate Secretary will notify the Board of the resolution of those concerns. How does a shareholder submit a proposal or nomination of a director candidate for the 2019 annual meeting? Proposals If you intend to submit a proposal to be included in next year’s proxy statement pursuant to SECRule 14a-8, the Corporate Secretary must receive your proposal on or before November [ ], 2018. Submitting a shareholder proposal does not guarantee that Cigna will include the proposal in the proxy statement if the proposal does not satisfy the SEC’s rules. If you want to present your proposal at the 2019 annual meeting but are not proposing it pursuant to SECRule 14a-8, the Corporate Secretary must receive your proposal no earlier than December [ ], 2018 and no later | | | 82 | | Cigna 2018 Notice of Annual Meeting of Shareholders and Proxy Statement |
| ANNUAL MEETING INFORMATION |
than the close of business on January [ ], 2019, and it must satisfy the requirements set forth in Article II, Section 12 of Cigna’sBy-Laws. If, however, the 2019 annual meeting is not within 30 days before or 60 days after the anniversary of this Annual Meeting, we must receive such notice no earlier than the 120th day prior to such meeting and no later than the close of business on the later of the 90th day prior to such meeting or the 10th day following the public announcement of the meeting date. Director Nominations The Board has implemented a proxy access provision in ourBy-Laws, which allows a shareholder or group of up to 20 shareholders owning in aggregate three percent or more of our outstanding common stock continuously for at least three years to nominate and include in our proxy materials director nominees constituting up to 20% of the number of directors in office or two nominees, whichever is greater, provided the shareholder(s) and nominee(s) satisfy the requirements in ourBy-Laws. If a shareholder or group of shareholders wishes to nominate one or more director candidates to be included in the Company’s proxy statement for the 2019 annual meeting of shareholders pursuant to the proxy access provisions in Article II, Section 13 of ourBy-Laws, we must receive proper written notice of any such nomination no earlier than October [ ], 2018 and no later than the close of business on November [ ], 2018, and the nomination must otherwise comply with ourBy-Laws. If, however, the 2019 annual meeting is not within 30 days before or 60 days after the anniversary of this Annual Meeting, we must receive such notice no earlier than the close of business on the 120th day prior to such meeting and no later than the close of business on the later of the 90th day prior to such meeting or the 10th day following the public announcement of the meeting date. If you would like to otherwise nominate a candidate for director at the 2019 annual meeting, the Corporate Secretary must receive your notice no earlier than the close of business on December [ ], 2018 and no later than the close of business on January [ ], 2019, and it must satisfy the requirements set forth in Article II, Section 11 of Cigna’sBy-Laws. If, however, the 2019 annual meeting is not within 30 days before or 60 days after the anniversary of this Annual Meeting, we must receive such notice no earlier than the close of business on the 120th day prior to such meeting and no later than the close of business on the later of the 90th day prior to such meeting or the 10th day following the public announcement of the meeting date. Correspondence to the Corporate Secretary may be addressed to: Corporate Secretary, Cigna Corporation, Two Liberty Place, 7th Floor, 1601 Chestnut Street, Philadelphia, PA 19192-1550. How do I obtain copies of Cigna’s corporate governance and other company documents? The Guidelines, committee charters and Cigna’s Code of Ethics and the Director Code of Business Conduct and Ethics are posted atwww.cigna.com/about-us/corporate-governance/. In addition, these documents are available in print to any shareholder who submits a written request to the Corporate Secretary at the address listed above. The Company’s filings with the SEC, including its annual report onForm 10-K, are available throughwww.cigna.com/about-us/investors/. If you are a shareholder and did not receive an individual copy of this year’s Proxy Statement, annual report or notice of Internet availability of proxy materials, we will send a copy to you if you address a written request to Shareholder Services, Cigna Corporation, Two Liberty Place, 5th Floor, 1601 Chestnut Street, Philadelphia, PA 19192-1550. You may also contact Shareholder Services at(215) 761-3516 or shareholderservices@cigna.com. What is householding and how does it affect me? If you and other residents at your mailing address own shares of Cigna stock in “street name,” your broker or bank should have notified you that your household will receive only one proxy statement and annual report or one Noticenotice of Internet Availabilityavailability of Proxy Materials forproxy materials, but each company in which you hold stock through that brokershareholder who resides at your address will receive a separate proxy card or bank.voting instruction form. This practice is known as “householding.” Unless you responded that you did not want to participate in “householding,”householding, you were deemed to have consented to the process. Your broker or bank will send one copy of our proxy statement and annual report or one copy of our Notice of Internet Availability of Proxy Materials to your address. Each shareholder who receives a paper copy of the proxy statement and annual report will continue to receive a separate proxy card or voting instruction card. Householding benefits both you and Cigna because it reduces the volume of duplicate information received at your household and helps Cigna reduce expenses and conserve natural resources. If you would like to receive your own set of Cigna’s proxy statement and annual report and proxy statement or your own Noticenotice of Internet Availabilityavailability of Proxy Materialsproxy materials in the future, or if you share an address with another Cigna shareholder and together both of you would like to receive only a single set of Cigna annual disclosure documents or Notice of Internet Availability of Proxy Materials,Cigna’s proxy materials, please contact Broadridge, Householding Department, 51 Mercedes Way, Edgewood, NY 11717 or call them at (800) 542-1061. The request must be made by each person in the household. Be sure to indicate your name, the name of your brokerage firm or bank, and your account number. The revocation of your consent to householding will be effective 30 days following its receipt. | | | | | | | | | Cigna 2018 Notice of Annual Meeting of Shareholders and Proxy Statement | | | 83 | |
| ANNUAL MEETING INFORMATION |
IMPORTANT INFORMATION IF YOU PLAN TO ATTEND THE ANNUAL MEETING IN PERSON You must have an admission ticket, as well as a valid form of government-issued photo identification, in order to be admitted to the Annual Meeting. If you did not receive an individualare a Cigna shareholder of record and received a printed copy of this year’sCigna’s proxy statement, annual report or Noticematerials, you must bring the admission ticket portion of Internet Availability of Proxy Materials, we will promptly send a copy to you if you address a written request to Cigna Corporation, Shareholder Services, 1601 Chestnut Street, Philadelphia, PA 19192-1550 or call (215) 761-3516. CIGNA – 2012 Notice of Annual Meeting of Shareholders and Proxy Statement – 80
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2013 ANNUAL MEETING
The 2013 annual meeting will be held Wednesday, April 24, 2013, at a time and locationyour proxy card to be announced later. The Board may change this date in its discretion.
ABOUT SHAREHOLDER PROPOSALS AND NOMINATIONS FOR OUR 2013 ANNUAL MEETING
admitted to the Annual Meeting. If you intend to submitare a proposal to be included in next year’s proxy statement pursuant to Securitiesbeneficial owner and Exchange Commission Rule 14a-8, it must be received by the Corporate Secretary on November 16, 2012. Submitting a shareholder proposal does not guarantee that Cigna will include the proposal in its proxy statement if the proposal does not satisfy the standards set forthyour shares are held in the rulesname of the Securities and Exchange Commission. Ifa broker, bank or other nominee, you want to presentmust request an admission ticket in advance by mailing a request, along with proof of your proposal at the 2013 annual meeting, but are not proposing it pursuant to Securities and Exchange Commission Rule 14a-8, your proposal must be received by the Corporate Secretary byownership of Cigna common stock as of the close of business on January 25, 2013 and must satisfy the requirements set forth in Article II, Section 12Cigna record date of Cigna’s By-laws. Any shareholder who wishesFebruary 26, 2018, to introduce a proposal should consult Cigna’s By-laws.
If you would like to nominate a candidate for director at the 2013 annual meeting, you must notify the Corporate Secretary, Cigna Corporation, Two Liberty Place, 7th Floor, 1601 Chestnut Street, Philadelphia, Pennsylvania19192-1550. Proof of ownership would be a bank or brokerage account statement in your name showing the number of shares of Cigna common stock held by you on the Cigna record date or a letter from your broker, bank or other nominee certifying the amount of your beneficial ownership interest as of the close of business on January 25, 2013. The notice must include certain information, specified in Cigna’s By-laws, about you and your nominee(s). the Cigna record date.
If you would likewish to make suggestions for Board nomineesappoint a representative to attend the Annual Meeting in your place, you must provide to the CGC, those suggestionsCorporate Secretary, Cigna Corporation, Two Liberty Place, 7th Floor, 1601 Chestnut Street, Philadelphia, Pennsylvania 19192-1550, the name of your representative, the admission ticket portion of your proxy card if you are a Cigna shareholder of record, or your proof of ownership if you are a beneficial owner, and the address where the admission ticket should be submittedsent. A Cigna shareholder may only appoint one representative. Requests from Cigna shareholders that are legal entities must be signed by Monday, October 1, 2012an authorized officer or other person legally authorized to ensure consideration byact on behalf of the CGC forlegal entity. Requests received after April 9, 2018, may not be able to be processed in time to allow you to receive your admission ticket before the 2013 annual meeting. CIGNA – 2012 Noticedate of the Annual Meeting, so you should mail your request early.
For directions to the Annual Meeting, please contact Shareholder Services at 215-761-3516 or shareholderservices@cigna.com. Please note that cameras, recording equipment, electronic devices, large bags, briefcases or packages are not permitted in the meeting. Recording of Shareholders and Proxy Statementthe meeting is expressly prohibited. – 81
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APPENDIX A SURVEY DATA FOR EXECUTIVE VICE PRESIDENT, HUMAN RESOURCES AND SERVICES (USED AS PRIMARY MARKET REFERENCE FOR TARGET AND ACTUAL COMPENSATION)
Salary Survey
| Benchmarks
| Participants
| Aon Hewitt U.S. TCM
84 | | Cigna 2018 Notice of Annual Meeting of Shareholders and Proxy Statement |
| ANNEX A –NON-GAAP MEASURES |
| | | | | | | | | | | | | | | | | | | | | CONSOLIDATED ADJUSTED INCOME FROM OPERATIONS RECONCILIATION (dollars in millions) | | | Year Ended December 31, | | 2017 | | | 2016 | | | 2015 | | | 2014 | | | 2013 | | Shareholders’ net income (loss) | | $ | 2,237 | | | $ | 1,867 | | | $ | 2,094 | | | $ | 2,102 | | | $ | 1,476 | | After-tax adjustments to reconcile to adjusted income from operations: | | | | | | | | | | | | | | | | | | | | | Realized investment (gains) losses | | | (156 | ) | | | (109 | ) | | | (40 | ) | | | (106 | ) | | | (141 | ) | Amortization of other acquired intangible assets, net | | | 66 | | | | 94 | | | | 80 | | | | 119 | | | | 144 | | Results of guaranteed minimum income benefits business | | | — | | | | — | | | | — | | | | — | | | | (25 | ) | Special Items: | | | | | | | | | | | | | | | | | | | | | U.S. tax reform | | | 196 | | | | — | | | | — | | | | — | | | | — | | Debt extinguishment costs | | | 209 | | | | — | | | | 65 | | | | — | | | | — | | Long-term guaranty fund assessment | | | 83 | | | | — | | | | — | | | | — | | | | — | | Transaction-related costs | | | 33 | | | | 147 | | | | 57 | | | | — | | | | — | | Risk corridor allowance | | | — | | | | 80 | | | | — | | | | — | | | | — | | Charges associated with litigation matters | | | — | | | | 25 | | | | — | | | | — | | | | — | | Transaction costs associated with PBM services agreement | | | — | | | | — | | | | — | | | | — | | | | 24 | | Charge related to reinsurance transaction | | | — | | | | — | | | | — | | | | — | | | | 507 | | Charge for disability claims regulatory matter | | | — | | | | — | | | | — | | | | — | | | | 51 | | Charge for organizational efficiency plan | | | — | | | | — | | | | — | | | | — | | | | 40 | | | | | Adjusted income (loss) from operations | | $ | 2,668 | | | $ | 2,104 | | | $ | 2,256 | | | $ | 2,115 | | | $ | 2,076 | | | | | | | | | | | Special Items,pre-tax: | | | | | | | | | | | | | | | | | | | | | U.S. tax reform | | $ | (56 | ) | | $ | — | | | $ | — | | | $ | — | | | $ | — | | Debt extinguishment costs | | | 321 | | | | — | | | | 100 | | | | — | | | | — | | Long-term guaranty fund assessment | | | 129 | | | | — | | | | — | | | | — | | | | — | | Transaction-related costs | | | 126 | | | | 166 | | | | 66 | | | | — | | | | — | | Risk corridor allowance | | | — | | | | 124 | | | | — | | | | — | | | | — | | Charges associated with litigation matters | | | — | | | | 40 | | | | — | | | | — | | | | — | | Transaction costs associated with PBM services agreement | | | — | | | | — | | | | — | | | | — | | | | 37 | | Charge related to reinsurance transaction | | | — | | | | — | | | | — | | | | — | | | | 781 | | Charge for disability claims regulatory matter | | | — | | | | — | | | | — | | | | — | | | | 77 | | Charge for organizational efficiency plan | | | — | | | | — | | | | — | | | | — | | | | 60 | | | | | Total | | $ | 520 | | | $ | 330 | | | $ | 166 | | | $ | — | | | $ | 955 | | | | |
| | | | | | | | | Cigna 2018 Notice of Annual Meeting of Shareholders and Proxy Statement | | | Annex A-1 | |
| ANNEX A –NON-GAAP MEASURES |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | OPERATING BUSINESSES ADJUSTED INCOME FROM OPERATIONS RECONCILIATION (dollars in millions) | | | | | Global Health Care | | | Global Supplemental
Benefits | | | Group Disability and Life | | | Year Ended December 31, | | 2017 | | | 2016 | | | 2015 | | | 2017 | | | 2016 | | | 2015 | | | 2017 | | | 2016 | | | 2015 | | Shareholders’ net income (loss) | | $ | 2,282 | | | $ | 1,751 | | | $ | 1,794 | | | $ | 302 | | | $ | 268 | | | $ | 267 | | | $ | 358 | | | $ | 164 | | | $ | 328 | | After-tax adjustments to reconcile to adjusted income from operations: | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Realized investment (gains) losses | | | (88 | ) | | | (78 | ) | | | (30 | ) | | | (24 | ) | | | 6 | | | | (1 | ) | | | (49 | ) | | | (39 | ) | | | (4 | ) | Amortization of other acquired intangible assets, net | | | 48 | | | | 74 | | | | 84 | | | | 18 | | | | 20 | | | | (4 | ) | | | — | | | | — | | | | — | | Special Items: | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | U.S tax reform | | | (137 | ) | | | — | | | | — | | | | 73 | | | | — | | | | — | | | | (39 | ) | | | — | | | | — | | Long-term guaranty fund assessment | | | 68 | | | | — | | | | — | | | | — | | | | — | | | | — | | | | 15 | | | | — | | | | — | | Risk corridor allowance | | | — | | | | 80 | | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | | Charges associated with litigation matters | | | — | | | | 25 | | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | | | | | Adjusted income (loss) from operations | | $ | 2,173 | | | $ | 1,852 | | | $ | 1,848 | | | $ | 369 | | | $ | 294 | | | $ | 262 | | | $ | 285 | | | $ | 125 | | | $ | 324 | | | | | | | | | | | | | | | Special Items,pre-tax: | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Long-term guaranty fund assessment | | $ | 106 | | | $ | — | | | $ | — | | | $ | — | | | $ | — | | | $ | — | | | $ | 23 | | | $ | — | | | $ | — | | Risk corridor allowance | | | — | | | | 124 | | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | | Charges associated with litigation matters | | | — | | | | 40 | | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | | | | | Total | | $ | 106 | | | $ | 164 | | | $ | — | | | $ | — | | | $ | — | | | $ | — | | | $ | 23 | | | $ | — | | | $ | — | | | | |
| | | Annex A-2 | | Cigna 2018 Notice of Annual Meeting of Shareholders and Proxy Statement |
| ANNEX B – SURVEY DATA FOR PRESIDENT – INTERNATIONAL MARKETS |
| | | | | | Anthem, Inc. | | MetLife, Inc. | AFLAC Inc. | | Principal Financial Group, Inc. | Allianz SE | | Protective Life Corporation | Assurant, Inc. | | Prudential Financial, Inc. | AXA Group | | Sun Life Financial, Inc. | Centene Corp | | The Allstate Corporation | Chubb Limited | | The Hartford Financial Services Executive Total Compensation | Administration
| The survey includes Financial Services companies, representing primarily the insurance sector. Participants include, but are not limited to, Aetna, Allstate, Blue Cross & Blue Shield of Florida, Blue Cross & Blue Shield of Arizona, CareFirst, Humana, Hartford, Kaiser Permanente, MetLife, Nationwide, Protective Life, State Farm, Travelers, UnitedHealth Group, and WellPoint.
Inc. | Aon Hewitt U.S. TCM General Industry Executive Total CompensationGenworth Financial, Inc.
| Human Resources
| This survey provides total compensation data for General Industry and Retail executives in organizations with corporate revenues between $10 and $20 Billion including Baxter International, Bristol-Myers Squibb, Eastman Kodak, General Mills, ITT, Marriott, J.C. Penney, Navistar, Nintendo, Time Warner, Tyco Electronics, Viacom and Yum!Brands.
The Phoenix Companies, Inc. | Mercer US Global Premium Executive Remuneration Suite - Fortune 500 OrganizationsHumana, Inc.
| Top Human Resources Management Executive
| Fortune 500 Health and Medical insurance participants include Aetna, AFLAC, Amerigroup, Coventry Health Care, Health Net, Humana, Molena Healthcare, Nationwide, Principal Financial, UnitedHealth Group, Wellcare and WellPoint.
Transamerica Corp. | Mercer US Global Premium Executive Remuneration Suite - Fortune 500 OrganizationsLincoln Financial Corporation
| Top Administrative Executive
| Participants represent Fortune 500 Corporations and those publicly traded organizations. Participants include, but are not limited to, ADP, Colgate Palmolive, CVS/Caremark, Gap, International Paper, Kellogg, Kimberly Clark, Marriott, RR Donnelly, Sara Lee, Staples, Textron, Walt Disney, Waste Management and Whirlpool.
UnitedHealth Group, Incorporated | Pearl Meyer & Partners Executive and Senior Management Total Compensation SurveyManulife Financial Corporation
| Top Human Resources Executive
| Participants with Global Corporate Revenues greater than $10 Billon include, but are not limited to, Aetna, AT&T, Bristol-Myers Squibb, Comcast, CVS/Caremark, EMC Corporation, General Motors, Hewitt Packard, IBM, Liberty Mutual, Macy’s, Microsoft, Motorola, Northwestern Mutual, SunTrust Bank, TJX Companies, USAA, Viacom and Xerox.
Unum Group | Towers Watson CDB General Industry ExecutiveMarsh & McLennan Companies
| | Voya Financial | |
| | | | | | | | | Cigna 2018 Notice of Annual Meeting of Shareholders and Proxy Statement | | | Top Administration Executive (Major Functions)
Annex B-1 | The CDB Executive Database includes over 800 participants across all industries. Participants with Global Corporate Revenues between $10 and $20 Billon include, but are not limited to, Alcoa, ARAMARK, Bristol-Myers Squibb, CSX, General Mills, Kimberly-Clark Kellogg, Marriott, RR Donnelly, Time Warner, Whirlpool, Union Pacific, Viacom and Yum!Brands.
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| Towers Watson CDB General Industry Executive
| Top Human Resources ExecutiveANNEX C – GENERAL INDUSTRY PEER GROUP
| The CDB Executive Database includes over 800 participants across all industries. Participants with Global Corporate Revenues between $10 and $20 Billon include, but are not limited to, Alcoa, ARAMARK, Bristol-Myers Squibb, CSX, General Mills, Kellogg, Kimberly-Clark, Marriott, RR Donnelly, Time Warner, Union Pacific, Viacom, Whirlpool and Yum!Brands.
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| | | | | | Abbott Laboratories | | HCA Holdings, Inc. | AbbVie Inc. | | Humana Inc. | Accenture plc | | Kimberly-Clark Corporation | Aetna Inc. | | Medtronic, Inc. | AFLAC Inc. | | Merck & Co. Inc. | American Express Company | | MetLife, Inc. | American International Group, Inc. | | Progressive Corp. | Amgen Inc. | | Prudential Financial, Inc. | Anthem, Inc. | | Sprint Corporation | Bristol-Myers Squibb Company | | T-Mobile US, Inc. | Capital One Financial Corporation | | The Allstate Corporation | Centene Corp. | | The Bank of New York Mellon Corporation | CenturyLink, Inc. | | The Hartford Financial Services Group, Inc. | Chubb Limited | | The PNC Financial Services Group, Inc. | Citigroup Inc. | | The Travelers Companies, Inc. | Colgate-Palmolive Co. | | Thermo Fisher Scientific, Inc. | Eli Lilly and Company | | U.S. Bancorp | Gilead Sciences Inc. | | |
| | | | | | | | | Cigna 2018 Notice of Annual Meeting of Shareholders and Proxy Statement | | | Annex C-1 | |
| APPENDIX A – RESTATED CERTIFICATE OF INCORPORATION |
RESTATED CERTIFICATE OF INCORPORATION OF CIGNA – 2012 Notice of Annual Meeting of Shareholders and Proxy Statement – 82CORPORATION
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APPENDIX B EXECUTIVE INCENTIVE PLAN
Cigna Executive Incentive Plan
(Amended and Restated as of January 1, 2012)Originally incorporated on November 3, 1981 under the name North American General Corporation) Article 1 Statement of Purpose
First: The Cigna Executive Incentive Plan is intended to provide for annual incentive bonuses to executive officersname of the Company that qualify as performance-based compensation under Sections 162(m) and 409ACorporation is Cigna Corporation. Second: The address of the Internal Revenue Code.Corporation’s registered office in the State of Delaware is 1209 Orange Street in the City of Wilmington, County of New Castle, Delaware 19801. The name of its registered agent at such address is The Corporation Trust Company. Article 2 Definitions
Third: The terms used in this Plan include the feminine as well as the masculine gender and the plural as well as the singular, as the context in which they are used requires. The following terms, unless the context requires otherwise, are defined as follows: 2.1
“Award” means the incentive compensation determined by the Committee under Section 4.3nature of the Plan.
2.2
“Board” meansbusiness or purposes to be conducted or promoted is to engage in any lawful act or activity for which corporations may be organized under the Cigna board of directors.
2.3
“Cigna” means CignaGeneral Corporation a Delaware corporation, or any successor.
2.4
“Cigna LTIP” means the Cigna Long-Term Incentive Plan, or any successor plan under which grants of Common Stock are authorized.
2.5
“Code” means the Internal Revenue Code of 1986, as amended.
2.6
“Committee” means the People Resources CommitteeLaw of the Board or any successor committee with responsibility for employee compensation, or any subcommittee, as long as theState of Delaware.
Fourth: The total number of Committee members and their qualifications shall at all times be sufficient to meet the requirements for “outside directors” under Section 162(m), as in effect from time to time. 2.7
“Common Stock” means Cigna common stock other than Restricted Stock.
2.8
“Company” means Cigna and/or its Subsidiaries.
2.9
“Deferred Compensation Plan” means the Cigna Deferred Compensation Plan of 2005, a similar or successor plan, or other arrangement for the deferral of compensation specified by the Committee that satisfies the requirements of Section 409A.
2.10
“Disability” means permanent and total disability as defined in Code Section 22(e)(3).
2.11
“Employer” means the Company that employs a Participant during a Performance Period.
2.12
“Executive Officer” means any Company employee who is an “executive officer” as defined in Rule 3b-7 promulgated under the Securities Exchange Act of 1934.
2.13
“Participant” means an employee described in Article 3 of the Plan.
2.14
“Peer Group” means a group of companies, selected by the Committee, whose financial performance is compared to Cigna Corporation’s.
2.15
“Performance Measures” means the measures to be used to assess the Company’s performance with respect to Awards under the Plan. The measures shall be one or more of the following: earnings (total or per share); net income (total or per share); growth in net income (total or per share); income from selected businesses (total or per share); growth in net income or income from selected businesses (total or per share); pre-tax income or growth in pre-tax income; profit margins; revenues; revenue growth; premiums and fees; growth in premiums and fees; membership; membership growth; market share; change in market share; book value; total shareholder return; stock price; change in stock price; market capitalization; change in market capitalization; return on market value; shareholder equity (total or per share); return on equity; assets; return on assets; capital; return on capital; economic value added; market value added; cash flow; change in cash flow; expense ratios or other expense management measures; medical loss ratio; ratio of claims or loss costs to revenues; satisfaction – customer, provider, or employee; service quality; productivity ratios or other measures of operating efficiency; and accuracy of claim processing or other measures of operational effectiveness. The Committee may specify any reasonable definition of the measures it uses. Such definitions may provide for reasonable adjustments to the measures and may include or exclude items, including but not limited to: realized investment gains and losses; special items identified in the company’s reporting; extraordinary, unusual or non-recurring items; effects of accounting changes, currency fluctuations, acquisitions, divestitures, reserve strengthening, or financing activities; expenses for restructuring or productivity initiatives; and other non-operating items.
2.16
“Performance Objectives” means the written objective performance goals applicable to performance conditions for Awards under the Plan. To the extent required by Code Section 162(m), the Performance Objectives shall be stated in terms of one or more Performance Measures. Performance Objectives may be for the Company as a whole, for one or more of its subsidiaries, business units, lines of business or for any combination of the foregoing and may be absolute or may require comparing the Company’s financial performance to that of a Peer Group or of a specified index or indices, or be based on a combination of the foregoing.
CIGNA – 2012 Notice of Annual Meeting of Shareholders and Proxy Statement – 83
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2.17
“Performance Period” means a period for which an Award may be made as determined by the Committee in its discretion. Unless otherwise specified by the Committee, the Performance Period shall be a calendar year.
2.18
“Plan” means the Cigna Executive Incentive Plan (Amended and Restated as of January 1, 2012), as it may be amended from time to time. This Plan is deemed to be a Qualifying Plan under Section 9.1 of the Cigna LTIP.
2.19
“Restricted Stock” means Cigna common stock that is subject to restrictions on sale, transfer, or other alienation for a period specified by the Committee.
2.20
“Retirement” means a Termination of Employment, after appropriate notice to the Company, (a) on or after a Participant has reached age 55 and attained at least five years of service (as determined under the elapsed time service counting rules applied by the Company to determine an employee’s total period of Company service using an adjusted service date), or (b) upon such terms and conditions approved by the Committee, or officers of the Company designated by the Board or the Committee.
2.21
“SEC” means the Securities and Exchange Commission.
2.22
“Section 162(m)” means Code Section 162(m).
2.23
“Section 409A” means Code Section 409A.
2.24
“Subsidiary” means any corporation of which more than 50% of the total combined voting powershares of all classes of stock entitled to vote, or other equity interest, is directly or indirectly owned by Cigna; or a partnership, joint venture or other unincorporated entity of which more than a 50% interest in the capital equity or profits is directly or indirectly owned by CIGNA; provided that such corporation, partnership, joint venture or other unincorporated entity is included in the Company’s consolidated financial statements under generally accepted accounting principles.
2.25
“Termination of Employment” means (a) the termination of the Participant’s active employment relationship with the Company, unless otherwise expressly provided by the Committee, or (b) the occurrence of a transaction bystock which the Participant’s employing Company ceasesCorporation shall have the authority to be a Subsidiary.
Article 3 Participation
The Committee may, in its discretion, designate any Executive Officerissue is 625,000,000 shares divided into two classes as a Participant in the Plan for a Performance Period. An Executive Officer designated as a Participant shall continue to be a Participant until any Award he may receive has been paid or forfeited under the terms of the Plan.
Article 4 Incentive Awards
4.1
Objective Performance Goals. The Committee shall establish Performance Objectives for a Performance Period not later than 90 days after the beginning of the Performance Period or by some other date required or permitted under Section 162(m). The Performance Objectives need not be the same for different Performance Periods and for any Performance Period may be stated separately for one or more of the Participants, collectively for the entire group of Participants, or in any combination of the two.
4.2
Performance Evaluation. Within a reasonable time after the close of a Performance Period, the Committee shall determine whether the Performance Objectives established for that Performance Period have been met. If the Performance Objectives established by the Committee have been met, the Committee shall so certify in writing to the extent required by Code Section 162(m).
4.3
Award. If the Committee has made the written certification under Section 4.2 for a Performance Period, each Participant to whom the certification applies shall be eligible for an Award for that Performance Period. The maximum Award for each such Participant shall consist of (a) cash in the amount of $3 million and (b) in lieu of additional cash, 225,000follows: 600,000,000 shares of Common Stock to be paid under Article 9 of the Cigna LTIP. Forpar value of $.25 per share and 25,000,000 shares of Preferred Stock of the par value of $1.00 per share.
A. PREFERRED STOCK The Board of Directors is expressly authorized to provide for the issue of all or any Performance Period, however,shares of the Committee shall have the sole and absolute discretion to reduce the amount of, or eliminate entirely, the Award toPreferred Stock, in one or more series, and to fix for each such series such voting powers, full or limited, or no voting powers, and such designations, preferences and relative, participating, optional or other special rights and such qualifications, limitations or restrictions thereof, as shall be stated and expressed in the resolution or resolutions adopted by the Board of Directors providing for the issue of such series and as may be permitted by the General Corporation Law of the Participants. PaymentState of all or part of an Award in Common Stock shallDelaware, including, without limitation, the authority to provide that any such series may be made under and(i) subject to redemption at such time or times and at such price or prices; (ii) entitled to receive dividends (which may be cumulative ornon-cumulative) at such rates, on such conditions, and at such times, and payable in preference to, or in such relation to, the terms and conditionsdividends payable on any other class or classes or any other series; (iii) entitled to such rights upon the dissolution of, or upon any distribution of the Cigna LTIP and the applicable grant. In the event of a stock dividend, stock split, or other subdivision or combinationassets of, the Common Stock, the number of shares of Common Stock that a Participant may receive as an Award under the Plan will be adjusted accordingly. If the outstanding shares of Common Stock are changedCorporation; or converted(iv) convertible into, exchanged or exchangeable for, a different numbershares of any other class or kindclasses of shares or other securities of Cignastock, or of another corporation, by reason of a reorganization, merger, consolidation, reclassification or combination, the Committee shall make an appropriate adjustment in the number and/or kind of shares that may be awarded under this Plan. 4.4
Paymentany other series of the Award.
(a)
Payment of an Award in the form of cash or Common Stock shall be made on or before March 15, but no earlier than January 1, of the calendar year following the close of the Performance Period. Cigna Corporation shall issue and deposit any Award in the form of Common Stock into the stock account maintained for the Participant under the Cigna LTIP.
(b)
The Participant may, in accordance with Section 409A, voluntarily defer receipt of an Award in the form of cash or Common Stock under the terms of the Deferred Compensation Plan.
(c)
The Employer shall have the right to deduct from any cash Award any applicable Federal, state and local income and employment taxes and any other amounts that the Employer is required to deduct. Deductions from an Award in the form of Common Stock shall be governed by Section 15.6 of the Cigna LTIP and the terms of the Award.
CIGNA – 2012 Notice of Annual Meeting of Shareholders and Proxy Statement – 84
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4.5
Eligibility for Payments.
(a)
Except as otherwise provided in this Section 4.5, a Participant shall be eligible to receive an Award for a Performance Period only if the Participant is employed by the Company continuously from the beginning of the Performance Period to the date of payment of the Award.
(b)
Under paragraph 4.5(a), a leave of absence that lasts less than three months and that is approved in accordance with applicable Company policies is not a break in continuous employment. In the case of a leave of absence of three months or longer, the Committee shall determine whether the leave of absence constitutes a break in continuous employment.
(c)
If a Participant’s Termination of Employment occurs after the end of a Performance Period but before the Committee pays an Award under Section 4.3, and the Termination of Employment is on account of Retirement, death or Disability, the Committee shall determine whether to make an Award to or on behalf of the Participant under Section 4.3.
Article 5 Administration
5.1
General Administration. The Plan is to be administered by the Committee, subject to such requirements for review and approval by the Board as the Board may establish. Subject to the terms and conditions of the Plan, the Committee is authorized and empowered in its sole discretion to select Participants and to make Awards in such amounts and upon such terms and conditions as it shall determine.
5.2
Administrative Rules. The Committee shall have full power and authority to adopt, amend and rescind administrative guidelines, rules and regulations pertaining to this Plan and to interpret the Plan and rule on any questions respecting any of its provisions, terms and conditions.
5.3
Committee Members Not Eligible. No member of the Committee shall be eligible to participate in this Plan.
5.4
Decisions Binding. All decisions of the Committee concerning this Plan shall be binding on Cigna and its Subsidiaries and their respective boards of directors, and on all Participants and other persons claiming rights under the Plan.
5.5
Section 162(m); Shareholder Approval. Awards under this Plan are intended to satisfy the applicable requirements for the performance-based compensation exception under Section 162(m). It is intended that the Plan be administered, interpreted and construed so that Award payments remain tax deductible to the Company. Any Awards under this Plan shall be contingent upon shareholder approval of the Plan in accordance with Section 162(m) and applicable Treasury regulations.
Article 6 Amendments; Termination
The Plan may be amended or terminated by the Board or Committee. All amendments to this Plan, including an amendment to terminate the Plan, shall be in writing. An amendment shall not be effective without the prior approval of the shareholders of Cigna Corporation if such approval is necessary to continue to qualify Awards as performance-based compensation under Section 162(m), or otherwise under Internal Revenue Service or SEC regulations, the rules of the New York Stock Exchangesame or any other applicable lawclass or regulations. Unless otherwise expresslyclasses of stock, of the Corporation at such price or prices or at such rates of exchange and with such adjustments; all as may be stated in such resolution or resolutions.
B. COMMON STOCK | 1. | Voting Rights. Except as provided by law or this Certificate of Incorporation, each holder of Common Stock shall have one vote in respect of each share of stock held by him of record on the books of the Corporation for the election of directors and on all matters submitted to a vote of stockholders of the Corporation. |
| 2. | Dividends. Subject to the preferential rights of the Preferred Stock, the holders of shares of Common Stock shall be entitled to receive, when and if declared by the Board of Directors, out of the assets of the Corporation which are by law available therefor, dividends payable either in cash, in property, or in shares of capital stock. |
| 3. | Dissolution, Liquidation or Winding Up. In the event of any dissolution, liquidation or winding up of the affairs of the Corporation, after distribution in full of the preferential amounts, if any, to be distributed to the holders of shares of Preferred Stock, holders of Common Stock shall be entitled to receive all of the remaining assets of the Corporation of whatever kind available for distribution to stockholders ratably in proportion to the number of shares of Common Stock held by them respectively. The Board of Directors may distribute in kind to the holders of Common Stock such remaining assets of the Corporation or may sell, transfer or otherwise dispose of all or any part of such remaining assets to any other corporation, trust or other entity and receive payment therefor in cash, stock or obligations of such other corporation, trust or entity, or any combination thereof, and may sell all or any part of the consideration so received and distribute any balance thereof in kind to holders of Common Stock. Neither the merger or consolidation of the Corporation into or with any other corporation, nor the merger of any other corporation into it, nor any purchase or redemption of shares of stock of the Corporation of any class, shall be deemed to be a dissolution, liquidation or winding up of the Corporation for the purpose of this paragraph. |
Fifth: TheBy-Laws of the Corporation may be adopted, amended or repealed by the Board or Committee, no amendment to this Plan shall apply to Awards made before the effective dateaffirmative vote of the amendment. A Participant’s rights with respect to any Awards made to him may not be abridged by any amendment, modification or terminationholders of a majority of the Plan without his individual consent. Article 7 Other Provisions
7.1
Durationvoting power of the Plan. The Plan shall apply to Awards for Performance Periods beginning after December 31, 2011 and shall remain in effect until all Awards made under this Plan have been paid or forfeited under the terms of this Plan, and all Performance Periods related to Awards made under the Plan have expired.
7.2
Awards Not Assignable. No Award, or any right thereto, shall be assignable or transferable by a Participant except by will or by the laws of descent and distribution. Any other attempted assignment or alienation shall be void and of no force or effect.
7.3
Participant’s Rights. The right of any Participant to receive any Award payments under the provisionscapital stock of the Plan shall be an unsecured claim against the general assets of the Employer. The Plan shall not create, nor be construed in any manner as having created, any right by a ParticipantCorporation outstanding and entitled to any Award for a Performance Period because of a Participant’s participation in the Plan for any prior Performance Period, or because the Committee has made a written certification under Section 4.2 of the Plan for the Performance Period.
7.4
Termination of Employment. Cigna and each Subsidiary retain the right to terminate the employment of any employee at any time for any reason or no reason, and an Award is not, and shall not be construed in any manner to be, a waiver of such right.
7.5
Successors. Any successor (whether direct or indirect, by purchase, merger, consolidation or otherwise) to all or substantially all of Cigna’s business or assets, shall assume Cigna’s liabilities under this Plan and perform any duties and responsibilities in the same manner and to the same extent that Cigna would be required to perform if no such succession had taken place.
7.6
References. All statutory and regulatory references in this Plan include successor provisions.
7.7
Controlling Law. This Plan shall be construed and enforced according to the laws of the Commonwealth of Pennsylvania, without regard to Pennsylvania conflict of law rules, to the extent not preempted by federal law, which shall otherwise control.
CIGNA – 2012 Notice of Annual Meeting of Shareholders and Proxy Statement – 85
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APPENDIX C PROPOSED AMENDMENT OF ARTICLE III, SECTION 2 OF THE COMPANY’S BY-LAWS
SECTION 2. Number, Qualifications, Election and Term of Office. vote thereon. The Board of Directors shall consistalso have the power to adopt, amend or repeal any provision of not less than 8 nor more than 16 directors. The numbertheBy-Laws of the Corporation without any vote of the stockholders of the Corporation.
| | | | | | | | | Cigna 2018 Notice of Annual Meeting of Shareholders and Proxy Statement | | | Appendix-1 | |
| APPENDIX A – RESTATED CERTIFICATE OF INCORPORATION |
Sixth: Elections of directors need not be by written ballot unless theBy-Laws of the Corporation shall otherwise provide. Seventh: Notwithstanding any provision of the General Corporation Law of the State of Delaware, no action may be fixed, from time to time,taken by stockholders without a meeting, without prior notice and without a vote, unless a consent in writing setting forth the action so taken shall be signed by the holders of all the outstanding stock who would be entitled to vote thereon. Eighth: Whenever a compromise or arrangement is proposed between this Corporation and its creditors or any class of them and/or between this Corporation and its stockholders or any class of them, any court of equitable jurisdiction within the State of Delaware may, on the application in a summary way of this Corporation or of any creditor or stockholder thereof or on the application of any receiver or receivers appointed for this Corporation under the provisions of Section 291 of Title 8 of the Delaware Code or on the application of trustees in dissolution or of any receiver or receivers appointed for this Corporation under the provisions of Section 279 of Title 8 of the Delaware Code order a meeting of the creditors or class of creditors, and/or of the stockholders or class of stockholders of this Corporation, as the case may be, to be summoned in such manner as the said court directs. If a majority in number representing three-fourths in value of the creditors or class of creditors, and/or of the stockholders or class of stockholders of this Corporation, as the case may be, agree to any compromise or arrangement and to any reorganization of this Corporation as consequence of such compromise or arrangement, the said compromise or arrangement and the said reorganization shall, if sanctioned by the court to which the said application has been made, be binding on all the creditors or class of creditors, and/or on all of the stockholders or class of stockholders, of this Corporation, as the case may be, and also on this Corporation. Ninth: The Corporation reserves the right to amend, alter, change or repeal any provision contained in this Certificate of Incorporation, in the manner now or hereafter prescribed by statute, and all rights conferred upon stockholders herein are granted subject to this reservation. Tenth: | 1. | Vote for Certain Business Combinations. In addition to any affirmative vote of holders of a class or series of capital stock of the Corporation required by law or this Certificate, a Business Combination (as hereinafter defined) with or upon a proposal by a Related Person (as hereinafter defined) shall require the affirmative vote of the holders of at least a majorityof the voting power of all outstanding Voting Stock (as hereinafter defined) of the Corporation, voting together as a single class. Such affirmative votes shall be required notwithstanding the fact that no vote may be required, or that a lesser percentage may be specified, by law or the Board. |
| 2. | When Vote Is Not Required. The provisions of this Article shall not be applicable to a particular Business Combination, and such Business Combination shall require only such affirmative vote as is required by law and any other provision of this Certificate or theBy-Laws of the Corporation, if all of the conditions specified in any one of the following Paragraphs (A), (B) or (C) are met: |
| A. | Approval by Directors. The Business Combination has been approved by a vote of a majority of all the Continuing Directors (as hereinafter defined); or |
| B. | Combination with Subsidiary. The Business Combination is solely between the Corporation and a subsidiary of the Corporation and such Business Combination does not have the direct or indirect effect set forth in Paragraph 3(B)(v) of this Article Tenth; or |
| C. | Price and Procedural Conditions. The proposed Business Combination will be consummated within three years after the date the Related Person became a Related Person (the “Determination Date”) and all of the following conditions have been met: |
| (i) | The aggregate amount of (x) cash and (y) fair market value (as of the date of the consummation of the Business Combination) of consideration other than cash, to be received per share of Common or Preferred Stock of the Corporation in such Business Combination by holders thereof shall be at least equal to the highest per share price (including any brokerage commissions, transfer taxes and soliciting dealers’ fees) paid by the Related Person for any shares of such class or series of stock acquired by it; provided, that if either (a) the highest preferential amount per share of a series of Preferred Stock to which the holders thereof would be entitled in the event of any voluntary or involuntary liquidation, dissolution orwinding-up of the affairs of the Corporation (regardless of whether the Business Combination to be consummated constitutes such an event) or (b) the highest reported sales price per share for any shares of such series of Preferred Stock on any national securities exchange on which such series is traded and if not traded on any |
| | | Appendix-2 | | Cigna 2018 Notice of Annual Meeting of Shareholders and Proxy Statement |
| APPENDIX A – RESTATED CERTIFICATE OF INCORPORATION |
| such exchange, the highest reported closing bid quotation per share with respect to shares of such series on the National Association of Securities Dealers, Inc. Automated Quotation System or on any system then in use, at any time after the Related Person became a holder of any shares of Common Stock, is greater than such aggregate amount, holders of such series of Preferred Stock shall receive an amount for each such share at least equal to the greater of (a) or (b). |
| (ii) | The consideration to be received by holders of a particular class or series of outstanding Common or Preferred Stock shall be in cash or in the same form as the Related Person has previously paid for shares of such class or series of stock. If the Related Person has paid for shares of any class or series of stock with varying forms of consideration, the form of consideration given for such class or series of stock in the Business Combination shall be either cash or the form used to acquire the largest number of shares of such class or series of stock previously acquired by it. |
| (iii) | No Extraordinary Event (as hereinafter defined) occurs after the Determination Date and prior to the consummation of the Business Combination. |
| (iv) | A proxy or information statement describing the proposed Business Combination and complying with the requirements of the Securities Exchange Act of 1934, as amended, and the rules and regulations thereunder (or any subsequent provisions replacing such Act, rules or regulations) is mailed to public stockholders of the Corporation at least 30 days prior to the consummation of such Business Combination (whether or not such proxy or information statement is required pursuant to such Act or subsequent provisions). |
| 3. | Certain Definitions. For purposes of this Article Tenth: |
| A. | A “person” shall mean any individual, firm, corporation or other entity, or a group of “persons” acting or agreeing to act together in the manner set forth in Rule13d-5 under the Securities Exchange Act of 1934, as in effect on April 24, 1985. |
| B. | The term “Business Combination” shall mean any of the following transactions, when entered into by the Corporation or a subsidiary of the Corporation with, or upon a proposal by, a Related Person: |
| (i) | the merger or consolidation of the Corporation or any subsidiary of the Corporation; or |
| (ii) | the sale, lease, exchange, mortgage, pledge, transfer or other disposition (in one or a series of transactions) of any assets of the Corporation or any subsidiary of the Corporation having an aggregate fair market value of $100 million or more; or |
| (iii) | the issuance or transfer by the Corporation or any subsidiary of the Corporation (in one or a series of transactions) of securities of the Corporation or any subsidiary having an aggregate fair market value of $50 million or more; or |
| (iv) | the adoption of a plan or proposal for the liquidation or dissolution of the Corporation; or |
| (v) | the reclassification of securities (including a reverse stock split), recapitalization, consolidation or any other transaction (whether or not involving a Related Person) which has the direct or indirect effect of increasing the voting power, whether or not then exercisable, of a Related Person in any class or series of capital stock of the Corporation or any subsidiary of the Corporation; or |
| (vi) | any agreement, contract or other arrangement providing directly or indirectly for any of the foregoing. |
| C. | The term “Related Person” shall mean any person (other than the Corporation, a subsidiary of the Corporation or any profit sharing, employee stock ownership or other employee benefit plan of the Corporation or of a subsidiary of the Corporation or any trustee of or fiduciary with respect to any such plan acting in such capacity) that is the direct or indirect beneficial owner (as defined in Rule13d-3 and Rule13d-5 under the Securities Exchange Act of 1934) of more than ten percent (10%) of the outstanding Voting Stock of the Corporation, and any Affiliate or Associate of any such person. |
| D. | The term “Continuing Director” shall mean any member of the Board of Directors who is not affiliated with a Related Person and who was a member of the Board of Directors immediately prior to the time that the Related Person became a Related Person, and any successor to a Continuing Director who is not affiliated with the Related Person and is recommended to succeed a Continuing Director by a majority of Continuing Directors who are then members of the Board of Directors. |
| | | | | | | | | Cigna 2018 Notice of Annual Meeting of Shareholders and Proxy Statement | | | Appendix-3 | |
| APPENDIX A – RESTATED CERTIFICATE OF INCORPORATION |
| E. | “Affiliate” and “Associate” shall have the respective meanings ascribed to such terms in Rule12b-2 under the Securities Exchange Act of 1934. |
| F. | The term “Extraordinary Event” shall mean, as to any Business Combination and Related Person, any of the following events that is not approved by a majority of all Continuing Directors: |
| (i) | any failure to declare and pay at the regular date therefor any full quarterly dividend (whether or not cumulative) on outstanding Preferred Stock; or |
| (ii) | any reduction in the annual rate of dividends paid on the Common Stock (except as necessary to reflect any subdivision of the Common Stock); or |
| (iii) | any failure to increase the annual rate of dividends paid on the Common Stock as necessary to reflect any reclassification (including any reverse stock split), recapitalization, reorganization or any similar transaction that has the effect of reducing the number of outstanding shares of the Common Stock; or |
| (iv) | the receipt by the Related Person, after the Determination Date, of a direct or indirect benefit (except proportionately as a stockholder) from any loans, advances, guarantees, pledges or other financial assistance or any tax credits or other tax advantages provided by the Corporation or any subsidiary of the Corporation, whether in anticipation of or in connection with the Business Combination or otherwise. |
| G. | A majority of all Continuing Directors shall have the power to make all determinations with respect to this Article Tenth, including, without limitation, the transactions that are Business Combinations, the persons who are Related Persons, the time at which a Related Person became a Related Person, and the fair market value of any assets, securities or other property, and any such determinations of such directors shall be conclusive and binding. |
| H. | The term “Voting Stock” shall mean all outstanding shares of the Common or Preferred Stock of the Corporation entitled to vote generally and each reference to a proportion of Voting Stock shall refer to shares having such proportion of the number of shares entitled to be cast. |
| 4. | No Effect on Fiduciary Obligations of Related Persons. Nothing contained in this Article Tenth shall be construed to relieve any Related Person from any fiduciary obligation imposed by law. |
Eleventh: To the fullest extent permitted by the General Corporation Law of the State of Delaware as the same exists or may hereafter be amended, no director of the Corporation shall be liable to the Corporation or its stockholders for monetary damages for breach of fiduciary duty as a director. Any repeal or modification of the preceding sentence shall not adversely affect any right or protection of a majority of the entire Board of Directors. Any decrease in the number of directors shall be effectivedirector existing at the time of such repeal or modification. | | | Appendix-4 | | Cigna 2018 Notice of Annual Meeting of Shareholders and Proxy Statement |
Together, all the next succeedingway.913017_Proxy_Statement_cover_v7-Single pgs.indd 4 2/28/18 10:38 AM
| | | Using a black inkpen, mark your votes with an X as shown in
this example. Please do not write outside the designated areas. | | ☒ |
| | | | Admission Ticket Electronic Voting Instructions Available 24 hours a day, 7 days a week! Instead of mailing your proxy, you may choose one of the voting methods outlined below to vote your proxy. VALIDATION DETAILS ARE LOCATED BELOW IN THE TITLE BAR. Proxies submitted by the Internet or telephone must be received by 11:59 p.m., Eastern Time, on April 24, 2018. | | | Vote by Internet | | • Go towww.envisionreports.com/ci • Or scan the QR code with your smartphone • Follow the steps outlined on the secure website | Vote by telephone • Call toll free 1-800-652-VOTE (8683) within the USA, US territories & Canada on a touch tone telephone • Follow the instructions provided by the recorded message | |
| | | Annual Meeting Proxy Card | | |
| IF YOU HAVE NOT VOTED VIA THE INTERNETOR TELEPHONE, FOLD ALONG THE PERFORATION, DETACH AND RETURN THE BOTTOM PORTION IN THE ENCLOSED ENVELOPE. |
| | | | A | | Proposals — The Board recommends a voteFOR each of the nominees named in Proposal 1 andFOR Proposals 2, |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | 1. Election of Directors: | | | | | | | | | | | | | | | | | | | | | | | For | | Against | | Abstain | | | | | | For | | Against | | Abstain | | | | | | For | | Against | | Abstain | | | | | | | | | | | | | | | | 01 - David M. Cordani | | ☐ | | ☐ | | ☐ | | | | 02 - Eric J. Foss | | ☐ | | ☐ | | ☐ | | | | 03 - Isaiah Harris, Jr. | | ☐ | | ☐ | | ☐ | | | | | | | | | | | | | | | | 04 - Jane E. Henney, M.D. | | ☐ | | ☐ | | ☐ | | | | 05 - Roman Martinez IV | | ☐ | | ☐ | | ☐ | | | | 06 - John M. Partridge | | ☐ | | ☐ | | ☐ | | | | | | | | | | | | | | | | 07 - James E. Rogers | | ☐ | | ☐ | | ☐ | | | | 08 - Eric C. Wiseman | | ☐ | | ☐ | | ☐ | | | | 09 - Donna F. Zarcone | | ☐ | | ☐ | | ☐ | | | | | | | | | | | | | | | | 10 - William D. Zollars | | ☐ | | ☐ | | ☐ | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | For | | Against | | Abstain | | | | | | | | For | | Against | | Abstain | | | | | | | | | | | | | 2. | | Advisory approval of Cigna’s executive compensation. | | ☐ | | ☐ | | ☐ | | 3. | | Ratification of appointment of PricewaterhouseCoopers LLP as Cigna’s independent registered public accounting firm for 2018. | | | | ☐ | | ☐ | | ☐ | | | | | | | | | | | | | | | | | | | | | | | 4. | | Approval of an amendment to the Company’s Restated Certificate of Incorporation to eliminate the supermajority voting requirement. | | ☐ | | ☐ | | ☐ | | | | | | | | | | | Note: Such other business as may properly come before the meeting or any postponements or adjournments thereof. |
| | | | B | | Authorized Signatures — This section must be completed for your vote to be counted. — Date and Sign Below |
The shares represented by this proxy will be voted as directed by the undersigned. Where no direction is given when a duly executed proxy is returned, such shares will be voted “For” each of the nominees named in Proposal 1 and “For” Proposals 2, 3 and 4; and will grant authority to the proxy holder to vote upon such other business as may properly come before the meeting or any postponements or adjournments thereof. THE UNDERSIGNED HEREBY ACKNOWLEDGES RECEIPT OF THE NOTICE OF ANNUAL MEETING, PROXY STATEMENT AND ANNUAL REPORT OF CIGNA CORPORATION. Please sign exactly as name(s) appears hereon. Joint owners should each sign. When signing as attorney, executor, administrator, corporate officer, trustee, guardian, or custodian, please give full title. | | | | | | | | | Date (mm/dd/yyyy) — Please print date below. | | Signature 1 — Please keep signature within the box. | | Signature 2 — Please keep signature within the box. | | / / | | | | | | | | | | | | | | | | |
02RGWC
Admission Ticket Cigna Corporation 2018 Annual Meeting of Shareholders Wednesday, April 25, 2018 8:00 a.m. Delamar Hotel 1 Memorial Road West Hartford, Connecticut 06107 Please bring a valid government issued photo ID to be admitted to the meeting. In addition, if you own shares in street name, bring your most recent brokerage statement or a letter from your broker or other nominee with you to the meeting so that we can verify your ownership of common stock. Please note: no cameras, recording equipment, electronic devices, large bags, briefcases, signs or packages will be permitted. Mobile phones will be permitted in the meeting venue but may not be used for any purpose at any time while in the meeting venue. Violation of this rule can result in removal from the meeting venue. Please note that due to security reasons, all bags may be subject to search. Cigna will be unable to admit anyone who does not comply with these security procedures. No one will be admitted to the Cigna annual meeting once the meeting has commenced. IF YOU HAVE NOT VOTED VIA THE INTERNETOR TELEPHONE, FOLD ALONG THE PERFORATION, DETACH AND RETURN THE BOTTOM PORTION IN THE ENCLOSED ENVELOPE. Proxy/Voting Instruction Card Cigna Corporation Annual Meeting of shareholders unless there shall be vacancies inShareholders April 25, 2018, 8:00 a.m. This proxy/voting instruction card is solicited by the Board of Directors in which case such decrease may become effective The undersigned hereby constitutes and appoints Neil Boyden Tanner and Marguerite C. Geiger, or either of them, as proxies with full power of substitution. Each of them is hereby authorized to represent the undersigned and vote all shares of the Corporation held of record by the undersigned on February 26, 2018 at the Annual Meeting of Shareholders, to be held at the Delamar Hotel, 1 Memorial Road, West Hartford, Connecticut 06107, on Wednesday, April 25, 2018 at 8:00 a.m., or at any time prior topostponements or adjournments thereof, on all matters set forth on the next succeeding annual meeting toreverse side and in the extentdiscretion of the number ofproxies upon such vacancies. Directors need not be shareholders. The directors (other than membersother matters as may properly come before the Annual Meeting. If the undersigned has voting rights with respect to shares of the initial BoardCorporation’s common stock under the Cigna 401(k) Plan, the undersigned hereby directs the trustee of Directors) shall be divided into three classes which shall be divided as evenly as practicable with respectthe Cigna 401(k) Plan to vote shares equal to the number of members of each class;shares allocated to the term of office of those ofundersigned’s accounts under the first classplan in accordance with the instructions given herein. If the trustee does not receive instructions by 11:59 p.m. Eastern time on Thursday, April 19, 2018, the trustee will vote such shares in the manner instructed by the Corporation’s Retirement Plan Committee. You are encouraged to expire atspecify your choices by marking the annual meeting commencingappropriate selections (either on this card or electronically), but you need not specify any choices if you wish to vote in April, 1983; of the second class one year thereafter; of the third class two years thereafter; and at each annual election held after such classification and election, directors shall be chosen by class for a term of three years, or for such shorter term as the shareholders may specify to complete the unexpired term of a predecessor, or to preserve the division of the directors into classes as provided herein.The directors whose terms expire at the 2013 annual meeting of shareholders (or such directors’ successors) shall be elected to hold office for a one-year term expiring at the 2014 annual meeting of shareholders; the directors whose terms expire at the 2014 annual meeting of shareholders (or such directors’ successors) shall be elected to hold office for a one-year term expiring at the 2015 annual meeting of shareholders; and the directors whose terms expire at the 2015 annual meeting of shareholders shall be elected to hold office for a one-year term expiring at the next annual meeting of shareholders. Thereafter, the classification ofaccordance with the Board of Directors shall cease and all directors shallDirectors’ recommendations, so long as you submit your proxy. If you use this card to vote, you must sign it on the reverse side for your vote to be elected to hold office for one-year terms. Each director shall hold office until his or her successor shall have been elected and qualified, or until death, or until such director shall have resigned, or shall have been removed, as hereinafter provided in these By-Laws.counted. THE BOARD OF DIRECTORS RECOMMENDS THAT YOU VOTE “FOR” EACH OF THE NOMINEES NAMED IN PROPOSAL 1 AND “FOR” PROPOSALS 2, 3 AND 4. CIGNA – 2012 Notice of Annual Meeting of Shareholders and Proxy Statement – 86
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| | | | | | | | | | | Change of Address— Please print your new address below. | | | | Comments— Please print your comments below. | | | | Meeting Attendance | | | | | | | | | | | Mark the box to the right if you plan to attend the Annual Meeting. | | ☐ | | | | | | | | | | | | | | | | | | | | | |
DRIVING DIRECTIONS FOR THE ANNUAL MEETINGIF VOTING BY MAIL, YOUMUST COMPLETE SECTIONS A - C ON BOTH SIDES OF THIS CARD.
The Bushnell Performing Arts Center, Autorino Great Hall Theater
166 Capitol Avenue
Hartford, Connecticut 06106
Driving Directions
The Bushnell is located at 166 Capitol Avenue in Hartford, Connecticut.
FROM I-91 NORTH AND SOUTHBOUND:
Take Capitol Area Exit 29A. Go straight to the rotary. Go halfway around rotary, and bear right onto Elm Street. Take first left onto West Street. Take right onto Capitol Avenue. The Bushnell is one block on the right.
FROM I-84 EASTBOUND:
Take Capitol Avenue/Asylum Street Exit 48B. Bear right for Capitol Avenue. At light, turn left onto Capitol Avenue. The Bushnell is one block down on the left.
FROM I-84 WESTBOUND:
Take exit 50, Main Street. At 2nd traffic light, make left onto Main Street. At 10th traffic light, make right onto Capitol Avenue. The Bushnell is three blocks down on the right.
 CIGNA – 2012 Notice of Annual Meeting of Shareholders and Proxy Statement – 87
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