UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
SCHEDULE 14A
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Cigna Corporation
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March 18, 2016
900 Cottage Grove Road
Bloomfield, Connecticut 06002
Dear Cigna Shareholder:
On behalf of the Cigna Corporation Board of Directors, our Enterprise Leadership Team and our more than 39,000 colleagues around the globe, we are pleased to cordially invite you to attend our 2016 Annual Meeting of Shareholders on April 27, 2016. The attached Notice of 2016 Annual Meeting of Shareholders and Proxy Statement contains important information about the business to be conducted at the Annual Meeting.
2015 marked the sixth consecutive year of strong financial and operating performance for Cigna, in which we again delivered outstanding results for our shareholders. We continue to be driven by our Companys clear mission and the effective execution of our focused global strategy, as rapidly evolving market forces present exciting opportunities to deliver value to a variety of stakeholders.
Paramount to our approach to value creation, and our ability to consistently achieve competitively attractive results and strong shareholder returns, is putting the customer at the center of everything we do. This commitment is underscored through continuing investments in our business, the expansion of our personalized offerings in targeted geographic markets, and our efforts to transform the health care delivery system through innovative, aligned incentive and engagement programs with providers and customers.
Further accelerating our strategy, in mid-2015 we entered into an historic agreement to combine with Anthem, representing a unique opportunity to improve health service access, quality and affordability for consumers. Your vote in support of this combination was an important one in bringing together two complementary businesses, with strong value propositions, committed to building a more sustainable, value-based health care system.
In this proxy statement, you will find a discussion of our pay-for-performance compensation program that ensures the performance goals of Cignas executives are well aligned with the objectives of our Company based on disciplined measures of performance. We also provide detail on two significant governance changes the beginning of the previously announced phased implementation of our declassified board structure, and the adoption of a separate Directors Code of Business Conduct and Ethics for our Board.
Our Board of Directors, comprised of individuals with diverse experiences and skills, is committed to strong corporate governance as a framework for financial integrity, shareholder transparency and competitively attractive performance.
Your vote is very important. Whether or not you plan to attend the 2016 Annual Meeting, we hope that you will cast your vote as soon as possible. Please review the instructions on each of your voting options described in the Important Notice Regarding the Availability of Proxy Materials. Additional instructions on how to vote can be found on pages 75 through 77 of the proxy statement.
We look forward to seeing you at the 2016 Annual Meeting. As always, thank you for your continued support of Cigna.
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 2016 ANNUAL MEETING OF SHAREHOLDERS
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DATE AND TIME: | Wednesday, April 27, 2016 at 8:00 a.m.
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PLACE: | Windsor Marriott Hotel, Ballroom 4 28 Day Hill Road Windsor, Connecticut 06095
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ITEMS OF BUSINESS: | Proposal 1: Election of four director nominees for one-year terms expiring in April 2017.
Proposal 2: Advisory approval of executive compensation.
Proposal 3: Ratification of the appointment of PricewaterhouseCoopers LLP as the Companys independent registered public accounting firm for 2016.
Consideration of any other business properly brought before the meeting.
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RECORD DATE: | You may vote on the matters presented at the Annual Meeting if you were a shareholder of record on Monday, February 29, 2016.
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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 18, 2016 | By order of the Board of Directors,
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/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 27, 2016
The Notice of Annual Meeting, Proxy Statement and Annual Report for the fiscal year ended December 31, 2015 are available at www.envisionreports.com/ci.
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Mission and Strategy
Cignas mission is to improve the health, well-being and sense of security of the people we serve in our more than 90 million customer relationships around the globe. Our strategic focus is centered on delivering high quality, affordable, and personalized solutions for our customers and clients by leveraging our insights, brand, talent and localized approach. Creating value for our customers, and in turn, our shareholders, is a direct result of the effective execution of our Go Deep, Go Global, Go Individual strategy that we implemented in 2010.
As we execute our Go Deep, Go Global, Go Individual strategy, we are guided by a clear framework that drives ongoing value creation. First, we continue to leverage our differentiated capabilities across our diversified portfolio of businesses to create value for our customers and clients, which drives strong revenue and earnings growth. Second, our businesses generate strong margins, and have done so consistently over time, as well as strong free cash flow, which gives us significant financial flexibility and the opportunity to effectively deploy capital for the benefit of shareholders. Finally, we continue to position ourselves to capitalize on opportunities to expand in new buying segments, new distribution marketplaces, and new geographies. We believe that our guiding framework will continue to drive differentiated value for our customers and shareholders.
Consistent with our mission, we believe in being a good corporate citizen. Every day, Cigna employees around the world make meaningful contributions to improve the health of the communities where we live and work. Our goal is to help ensure that everyone has the best opportunity to achieve their optimal health.
In July 2015, we entered into a merger agreement with Anthem, Inc. (Anthem). Our shareholders overwhelmingly approved this merger at our special meeting in December 2015, with approximately 99% of the votes cast voting in favor of the adoption of the merger agreement, representing approximately 82% of Cignas outstanding shares as of the record date for the special meeting. We continue to expect the merger to close in the second half of 2016.
Until the merger with Anthem closes, we remain a separate and independent company, focused on delivering competitively attractive earnings and revenue growth to Cigna shareholders, as we have over the past several years through the successful execution of our strategy.
Cigna 2016 Notice of Annual Meeting of Shareholders and Proxy Statement |
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PROXY STATEMENT SUMMARY |
Business Performance
In 2015, Cigna again delivered strong results with revenue and earnings contributions across the Companys diversified portfolio of businesses. Consolidated revenue increased 8% over 2014 to $37.9 billion. Consolidated adjusted income from operations* increased to $2.3 billion compared to $2.1 billion for 2014. This reflects strong revenue growth and continued favorable medical and operating costs in the Global Health Care segment. The following charts demonstrate our track record for consistent growth.
CONSOLIDATED REVENUES (IN BILLIONS)
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CONSOLIDATED ADJUSTED INCOME FROM OPERATIONS* (IN BILLIONS)
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* We encourage you to review our Annual Report on Form 10-K for the year ended December 31, 2015 for more complete financial information. Consolidated adjusted income from operations is a measure of profitability used by Cignas management because it presents the underlying results of operations of Cignas 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. 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, 2015, on a one-, three- and five-year basis. For Cignas TSR relative to its Strategic Performance Share performance peer group and the S&P 500 Index, see page 30. | CUMULATIVE TOTAL SHAREHOLDER RETURN
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Cigna 2016 Notice of Annual Meeting of Shareholders and Proxy Statement |
PROXY STATEMENT SUMMARY
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Board of Directors
CURRENT DIRECTORS
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AGE
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OCCUPATION
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CURRENT TERM
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COMMITTEE MEMBERSHIPS
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David M. Cordani
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50
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President and Chief Executive Officer of Cigna
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2016
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Executive
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Eric J. Foss
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57
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Chairman, President and Chief Executive Officer of ARAMARK Corporation
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2017
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Corporate Governance People Resources
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Michelle D. Gass
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48
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Chief Merchandising & Customer Officer of Kohls Corporation
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2017
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Audit Corporate Governance
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Isaiah Harris, Jr.
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63
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Former President and Chief Executive Officer of AT&T Advertising & Publishing East
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2016
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Chairman of the Board
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Jane E. Henney, M.D.
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68
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Former Senior Vice President, Provost and Professor of Medicine, University of Cincinnati College of Medicine
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2016
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Corporate Governance (Chair) People Resources
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Roman Martinez IV
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68
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Private Investor
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2017
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Audit (Chair) Executive Finance | ||||
John M. Partridge
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66
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Former President of Visa, Inc.
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2018
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Finance (Chair) Executive People Resources
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James E. Rogers
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68
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Former Chairman, President and Chief Executive Officer of Duke Energy Corporation
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2018
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Audit Finance
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Eric C. Wiseman
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60
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Chairman and Chief Executive Officer of VF Corporation
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2018
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Finance People Resources
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Donna F. Zarcone
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58
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President and Chief Executive Officer of The Economic Club of Chicago
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2016
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Audit Finance
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William D. Zollars
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68
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Former Chairman, President and Chief Executive Officer of YRC Worldwide, Inc.
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2017
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People Resources (Chair) Executive Corporate Governance
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Cigna 2016 Notice of Annual Meeting of Shareholders and Proxy Statement |
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PROXY STATEMENT SUMMARY |
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, shareholder confidence and attractive performance.
At the Annual Meeting, the phased implementation of the Boards declassified structure begins and, at the 2018 annual meeting of shareholders, all directors will be elected to one-year terms and the classified structure will be fully eliminated.
In 2015, the Board adopted a Director Code of Business Conduct and Ethics. The Board believes that having a separate code of conduct for the Board meaningfully enhances Cignas governance framework. Also in 2015, the Board and the Corporate Governance Committee conducted a thorough review of its governance practices and developed a set of Board Corporate Governance Guidelines (the Guidelines). The Guidelines set forth the key governance principles that guide the Board while also meeting the New York Stock Exchange (NYSE) listing standards.
KEY GOVERNANCE PRACTICES
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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 Director elections by majority voting Separate Code of Business Conduct and Ethics for the Board of Directors Independent Audit, Corporate Governance, Finance and People Resources Committees Annual self-evaluations of Board, 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 | ||
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Cigna 2016 Notice of Annual Meeting of Shareholders and Proxy Statement |
PROXY STATEMENT SUMMARY
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Executive Compensation
Cignas 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 corporate goals will result in the creation of meaningful and sustained long-term value for our shareholders. In 2015, our shareholders overwhelmingly cast advisory votes in favor of our executive compensation program, with 93.7% of votes cast in favor.
COMPENSATION GOVERNANCE AND CONTROLS
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Double trigger requirement for change of control benefits No tax gross-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 and employees, including the executive officers, 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 Limited executive officer perquisites Ongoing review by the People Resources Committee of people development, including 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 2015 reflects our executive compensation philosophy. The percentages shown below are targets only and will not match the percentages calculable from the compensation reflected in the Summary Compensation Table on page 51.
CEO TARGET PAY MIX |
OTHER NEO AVERAGE TARGET PAY MIX |
Cigna 2016 Notice of Annual Meeting of Shareholders and Proxy Statement |
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PROXY STATEMENT SUMMARY
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Voting Matters and Board Recommendations
PROPOSALS
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BOARD RECOMMENDATION
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Proposal 1. Election of Directors. The Board and the Corporate Governance Committee believe that the four director nominees, David M. Cordani, Isaiah Harris, Jr., Jane E. Henney, M.D., and Donna F. Zarcone, bring a combination of diverse qualifications, skills and experience that is required for a well-rounded Board. 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.
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FOR each of the nominees | |
Proposal 2. Advisory Approval of Executive Compensation. The Board believes that Cignas executive 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 Cignas performance and rewarding our executive officers for the creation of long-term value for Cignas 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.
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FOR | |
Proposal 3. Ratification of the Appointment of PricewaterhouseCoopers LLP as our Independent Registered Accounting Firm for 2016. The Audit Committee approved the appointment of PricewaterhouseCoopers LLP as Cignas independent registered public accounting firm for 2016. The Audit Committee and the Board believe that the continued retention of PricewaterhouseCoopers LLP to serve as the Companys 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.
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FOR |
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Election of Directors (Proposal 1)
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CORPORATE GOVERNANCE MATTERS
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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 developed a list of areas of expertise that it believes supports Cignas business strategy and contributes to a well-rounded Board. The Corporate Governance Committee and the Board take into consideration these criteria and the mix of experience as part of the director recruitment, selection, evaluation and nomination process. While the Board does not have a formal policy with regard to diversity, the Corporate Governance Committee works to ensure that the Board is comprised of individuals with expertise in fields relevant to Cignas business, experience from different professions and industries, a diversity of age, ethnicity, gender and global experience and a range of tenures to provide a balance of fresh perspective and continuity.
Expectations of Every Director
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Understand Cignas 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 Boards evaluation of executive talent, compensation and succession planning
Contribute effectively to the Boards assessment of strategy and risk |
Share expertise, experience, knowledge and insights as related to the matters before the Board
Advance Cignas 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 affecting Cigna |
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Qualifications, Characteristics, Skills and Experience of Every Director
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Good judgment and strong commitment to ethics and integrity
Ability to analyze complex business and public policy issues and provide relevant input concerning strategy
Free of conflicts of interest |
Ability to assess different risks and impact on shareholder value
Contribution to the Boards overall diversity of thought
High degree of achievement in their respective fields |
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CORPORATE GOVERNANCE MATTERS
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AREAS OF EXPERTISE THAT CONTRIBUTE TO A WELL-ROUNDED BOARD
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RELEVANCE TO BUSINESS STRATEGY
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Business Leader |
Directors who have served as a chief executive officer, a CEO-equivalent or a business unit leader of a large company bring a practical understanding of large organizations, processes, strategy and risk management.
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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, Cignas business involves complex financial transactions.
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Healthcare and Delivery Systems |
As we work to create a sustainable health care ecosystem, the Board requires directors with experience on issues related to reducing health costs to patients through provision of care management and the use of innovative delivery system solutions.
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Information Technology |
Our business is highly dependent on maintaining both effective information systems and the integrity and timeliness of the data we use to serve our customers and health care professionals and to operate our business. For this reason, the Board needs directors with leadership experience related to the development, installation, implementation, security or maintenance of computer systems, applications and digital informatics.
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International/Global |
In furtherance of our Go Global strategy, the Board requires directors with leadership experience overseeing non-U.S. operations and working in diverse cultures around the world.
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Marketing and Consumer Insights |
The Go Deep and Go Individual aspects of our strategy necessitate that the Board include directors with leadership experience over marketing, advertising and consumer insight functions. These directors also have experience with product development and brand building, particularly as it focuses on end-user consumers.
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Regulated Industry/Public Policy |
Our business is highly regulated at the federal, state, local and international levels. For this reason, the Board needs directors with experience in regulated industries and public policies to help us identify, assess and respond to new trends in the legislative and regulatory environment.
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Cigna 2016 Notice of Annual Meeting of Shareholders and Proxy Statement |
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CORPORATE GOVERNANCE MATTERS
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Other Practices and Policies Related to Director Service
In addition to requiring that the Board is comprised of diverse and qualified individuals, the Board has adopted the following governance policies and practices that contribute to a highly functioning Board.
Limits on Public Company Directorships |
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 a public company may not serve on more than one other public company board in addition to Cignas Board and the board of his or her employer (for a total of three public company directorships); and
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.
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Change in Directors Principal Position |
If a director changes his or her principal employment position, that director is required to tender his or her resignation to the Corporate Governance Committee. The committee will then recommend to the Board whether to accept or decline the resignation.
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Mandatory Retirement Age |
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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Continuing Education for Directors |
The Board is regularly updated on Cignas businesses, strategies, customers, operations and employee matters, as well as external trends and issues that affect the Company. Directors also are encouraged to attend continuing education courses relevant to their service on Cignas Board. The Corporate Governance Committee oversees the continuing education practices, and the Company is kept apprised of director participation.
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Upon the recommendation of the Corporate Governance Committee, the Board is nominating the four directors listed below for re-election for one-year terms to expire in April 2017. 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 may either reduce its size or designate another nominee. If the Board designates a nominee, your proxy will be voted for the substitute nominee.
Below are biographies, skills and qualifications for each of the nominees and for each of the directors continuing in office. Each of the director nominees currently serves on the Board. The Board believes that the combination of the various experiences, skills and qualifications represented contributes to an effective and well-functioning Board and that the nominees and directors continuing in office possess the qualifications, based on the criteria described above, to provide meaningful oversight of Cignas business and strategy.
The Board of Directors unanimously recommends that shareholders vote FOR the nominees listed below. |
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CORPORATE GOVERNANCE MATTERS
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CORPORATE GOVERNANCE MATTERS
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CORPORATE GOVERNANCE MATTERS
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DIRECTORS WHO WILL CONTINUE IN OFFICE
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CORPORATE GOVERNANCE MATTERS
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CORPORATE GOVERNANCE MATTERS
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Cigna 2016 Notice of Annual Meeting of Shareholders and Proxy Statement |
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CORPORATE GOVERNANCE MATTERS
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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, shareholder confidence and attractive performance. The Corporate Governance Committee regularly reviews Cignas governance program based on, among other things, developments in corporate governance, shareholder interactions, legal or regulatory actions, proxy advisory firm positions, Securities and Exchange Commission (SEC) guidance and NYSE requirements. In 2015, the Board and the Corporate Governance Committee conducted a thorough review of its governance practices and developed a set of Board Corporate Governance Guidelines (the Guidelines). The Guidelines set forth the key governance principles that guide the Board while also meeting the NYSE listing standards. 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 at www.cigna.com/about-us/corporate-governance/ and are available to any shareholder who requests a copy.1
Corporate Governance Highlights
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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
Director elections by majority voting
Separate Code of Business Conduct and Ethics for the Board of Directors |
Independent Audit, Corporate Governance, Finance and People Resources Committees
Annual self-evaluations of Board, 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 |
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1 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.
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Cigna 2016 Notice of Annual Meeting of Shareholders and Proxy Statement |
CORPORATE GOVERNANCE MATTERS
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Chairman Responsibilities
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Serve as principal representative of the Board
Facilitate discussion among independent directors on key issues
Preside over Board and shareholder meetings
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
Engage in the director recruitment process
Represent the Company in interactions with external stakeholders, at the direction of the Board |
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Cigna 2016 Notice of Annual Meeting of Shareholders and Proxy Statement |
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CORPORATE GOVERNANCE MATTERS
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BOARD/COMMITTEE
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PRIMARY AREAS OF RISK OVERSIGHT
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Full Board |
Strategic, financial and execution risks and exposures associated with Cignas 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.
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Audit Committee |
In addition to overseeing Cignas ERM framework, oversees risks related to the Companys 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 Companys ethics and compliance program.
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Corporate Governance Committee |
Oversees risks and exposures associated with director succession planning, corporate governance and overall Board effectiveness. Also oversees the Companys risks related to political and charitable contributions. In exercising this oversight, the Corporate Governance Committee reviews and discusses financial contributions to such organizations.
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Finance Committee |
Oversees the Companys 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 Companys ERM process.
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People Resources Committee |
Oversees compensation related-risks and management succession planning. For additional information regarding the People Resources Committees role in evaluating the impact of risk on executive compensation, see page 47 of the CD&A.
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CORPORATE GOVERNANCE MATTERS
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Cigna 2016 Notice of Annual Meeting of Shareholders and Proxy Statement |
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CORPORATE GOVERNANCE MATTERS
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As part of all regularly scheduled Board meetings, the Chairman presides over all executive sessions of the Board. At a significant number of meetings held in 2015, the independent members of the Board met in executive session. Each Board committee also met in executive session on a regular basis in connection with their respective meetings. In 2015, the Board held 25 meetings and the committees of the Board held a total of 29 meetings. Overall director attendance at Board and committee meetings was approximately 95%. Each director attended 75% or more of the aggregate of all meetings of the Board and committees on which he or she served during 2015. In addition to formal Board meetings, the Board engages with management throughout the year on critical matters and topics.
The Board encourages directors to attend the annual meeting of shareholders. In 2015, all directors attended the annual meeting and the special shareholder meeting held in December. All directors are expected to attend the Annual Meeting in 2016.
The Board has the five committees: Executive, Audit, Corporate Governance, Finance and People Resources. Complete copies of the committee charters are available on Cignas website at www.cigna.com/about-us/company-profile/corporate-governance/cigna-board-committee-members.
The directors serve on the following committees.
Executive
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Audit*
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Corporate
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Finance
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People Resources
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David M. Cordani
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ü | |||||||||
Eric J. Foss
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ü | ü | ||||||||
Michelle D. Gass
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ü | ü | ||||||||
Isaiah Harris, Jr.
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Chair | |||||||||
Jane E. Henney, M.D.
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ü | Chair | ü | |||||||
Roman Martinez IV
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ü | Chair # | ü | |||||||
John M. Partridge
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ü | Chair | ü | |||||||
James E. Rogers
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ü# | ü | ||||||||
Eric C. Wiseman
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ü | ü | ||||||||
Donna F. Zarcone
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ü# | ü | ||||||||
William D. Zollars
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ü | ü | Chair | |||||||
Meetings in 2015
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0 | 9 | 7 | 5 | 8 |
ü | Committee member |
# | 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. |
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Cigna 2016 Notice of Annual Meeting of Shareholders and Proxy Statement |
CORPORATE GOVERNANCE MATTERS
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Committee
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Responsibilities
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Executive Committee
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Exercises 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.
Serves as an advisory body to the Chairman of the Board as needed.
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Audit Committee
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Assesses the qualification and independence of, appoints, compensates, oversees the work of and removes, if appropriate, Cignas 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.
Oversees the Companys 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 Boards membership, structure, organization, governance practices and performance, as well as shareholder engagement activities.
Assists the Board in the oversight and governance of director succession plans.
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.
| |||
Finance Committee
|
Oversees the structure and use of Cignas capital.
Oversees Cignas long-term financial objectives and progress against those objectives.
Reviews Cignas strategic operating plan and budget.
Oversees Cignas investment strategy and sets investment policies and guidelines.
Oversees on information technology strategy and execution.
| |||
People Resources Committee
|
Oversees the policies and processes for people development and assessments of executive officers and key senior management and assists the Board in developing and evaluating executive officer succession plans.
Establishes company goals and objectives relevant to the CEOs compensation, evaluates the CEOs performance in light of those established goals and objectives, and based on this evaluation, recommends the CEOs 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 Companys diversity program.
|
Cigna 2016 Notice of Annual Meeting of Shareholders and Proxy Statement |
|
21 |
|
CORPORATE GOVERNANCE MATTERS
|
22 |
Cigna 2016 Notice of Annual Meeting of Shareholders and Proxy Statement |
CORPORATE GOVERNANCE MATTERS
|
NON-EMPLOYEE DIRECTOR COMPENSATION
RETAINER TYPE | ANNUAL AMOUNT | METHOD OF PAYMENT | ||
Board |
$275,000 | Cigna common stock ($180,000)
Cash ($95,000)
| ||
Committee chair
|
$ 15,000
|
Cash
| ||
Committee member
|
$ 10,000
|
Cash
|
There is no retainer for service on the Executive Committee. In addition to the Board retainer, the Chairman of the Board receives $225,000 in cash for his service as Chairman.
Cigna 2016 Notice of Annual Meeting of Shareholders and Proxy Statement |
|
23 |
|
CORPORATE GOVERNANCE MATTERS
|
24 |
Cigna 2016 Notice of Annual Meeting of Shareholders and Proxy Statement |
CORPORATE GOVERNANCE MATTERS
|
DIRECTOR COMPENSATION TABLE FOR 2015
The table below includes information about the compensation paid to non-employee directors in 2015. Mr. Cordani, the only Company employee on the Board of Directors, does not receive any director compensation for his Board service.
NAME |
FEES EARNED OR PAID IN CASH ($) |
STOCK AWARDS ($) |
ALL
OTHER ($) |
TOTAL ($) | ||||||||||||||||
(a) |
(b) |
(c) |
(d) |
(e) | ||||||||||||||||
Eric J. Foss
|
|
115,000
|
|
|
180,000
|
|
|
338
|
|
|
295,338
|
| ||||||||
Michelle D. Gass
|
|
115,000
|
|
|
180,000
|
|
|
338
|
|
|
295,338
|
| ||||||||
Isaiah Harris, Jr.
|
|
320,000
|
|
|
180,000
|
|
|
892
|
|
|
500,892
|
| ||||||||
Jane E. Henney, M.D.
|
|
120,000
|
|
|
180,000
|
|
|
6,131
|
|
|
306,131
|
| ||||||||
Roman Martinez IV
|
|
118,750
|
|
|
180,000
|
|
|
1,242
|
|
|
299,992
|
| ||||||||
John M. Partridge
|
|
120,000
|
|
|
180,000
|
|
|
338
|
|
|
300,338
|
| ||||||||
James E. Rogers
|
|
115,000
|
|
|
180,000
|
|
|
688
|
|
|
295,688
|
| ||||||||
Joseph P. Sullivan(1)
|
|
28,750
|
|
|
45,000
|
|
|
83,806
|
|
|
157,556
|
| ||||||||
Eric C. Wiseman
|
|
115,000
|
|
|
180,000
|
|
|
688
|
|
|
295,688
|
| ||||||||
Donna F. Zarcone
|
|
117,500
|
|
|
180,000
|
|
|
6,185
|
|
|
303,685
|
| ||||||||
William D. Zollars
|
|
120,000
|
|
|
180,000
|
|
|
990
|
|
|
300,990
|
|
(1) Mr. Sullivan retired from the Board in February 2015.
Fees Earned or Paid in Cash (Column (b))
| In addition to the annual cash retainer for Board service received by each director (prorated for Mr. Sullivan): |
| Messrs. Martinez, Partridge and Zollars, Dr. Henney and Ms. Zarcone each served as a committee chair and as a member of another committee for all or part of 2015. |
| Messrs. Foss, Rogers, Sullivan, Wiseman and Ms. Gass 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 as described on page 23). |
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 Cigna applies for financial statement reporting purposes as described in Note 20 to Cignas consolidated financial statements in the Companys Annual Report on Form 10-K for the year ended December 31, 2015 (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, 2015.
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 on 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 amount of $5,000 each for Dr. Henney and Ms. Zarcone; |
| for Mr. Sullivan, a payment of $73,750, equivalent to the total dollar value of his second quarter board and committee service retainer and a charitable donation in the amount of $10,000 to a non-profit organization in honor of his retirement from the Board; and |
| the dollar value of Company-paid life insurance premiums for all directors. |
Column (d) does not include the value of premiums, if any, paid by the directors for additional life insurance, medical care programs, long-term care, property/casualty personal lines, and various other insurance programs that also are available on a broad basis to Cigna employees.
Cigna 2016 Notice of Annual Meeting of Shareholders and Proxy Statement |
|
25 |
|
CORPORATE GOVERNANCE MATTERS
|
The table shows Cigna securities held by each non-employee director as of December 31, 2015. The value of these securities was calculated using $146.33, which was Cignas closing stock price on December 31, 2015.
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
|
|
11,017
|
|
|
|
|
|
|
|
|
|
|
|
11,017
|
|
$
|
1,612,118
|
| ||||||||||||
Michelle D. Gass
|
|
2,753
|
|
|
|
|
|
|
|
|
|
|
|
2,753
|
|
$
|
402,846
|
| ||||||||||||
Isaiah Harris, Jr.
|
|
|
|
|
|
|
|
13,500
|
|
|
23,242
|
|
|
36,742
|
|
$
|
5,376,457
|
| ||||||||||||
Jane E. Henney, M.D.
|
|
1,840
|
|
|
|
|
|
13,500
|
|
|
19,024
|
|
|
34,364
|
|
$
|
5,028,484
|
| ||||||||||||
Roman Martinez IV
|
|
9,496
|
|
|
20,384
|
|
|
13,500
|
|
|
15,414
|
|
|
58,794
|
|
$
|
8,603,326
|
| ||||||||||||
John M. Partridge
|
|
30,871
|
|
|
|
|
|
|
|
|
|
|
|
30,871
|
|
$
|
4,517,353
|
| ||||||||||||
James E. Rogers
|
|
|
|
|
35,124
|
|
|
|
|
|
9,913
|
|
|
45,037
|
|
$
|
6,590,264
|
| ||||||||||||
Eric C. Wiseman
|
|
4,200
|
|
|
9,721
|
|
|
|
|
|
2,121
|
|
|
16,042
|
|
$
|
2,347,426
|
| ||||||||||||
Donna F. Zarcone
|
|
5,971
|
|
|
5,834
|
|
|
13,500
|
|
|
2,795
|
|
|
28,100
|
|
$
|
4,111,873
|
| ||||||||||||
William D. Zollars
|
|
971
|
|
|
|
|
|
13,500
|
|
|
9,779
|
|
|
24,250
|
|
$
|
3,548,503
|
|
Deferred Common Stock (Column (b))
Column (b) includes the equity portion of the 2015 and any previous years Board retainer granted in Cigna common stock or deferred stock units 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 13,500 restricted share equivalents held by each of Messrs. Harris, Martinez and Zollars, Dr. Henney and Ms. Zarcone. The restricted share equivalents were originally granted pursuant to the terms of the compensation program in place at the times of the directors election to the 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 stock. The restricted stock units vest after nine years of service or upon reaching age 65. All of these restricted stock units are vested.
Hypothetical Shares of Common Stock (Column (d))
Column (d) includes (1) share equivalents resulting from voluntary deferrals of cash compensation hypothetically invested in the Cigna stock fund; (2) 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; and (3) 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. Although these securities are not common stock, the value of the hypothetical shares of Cigna common stock credited to a directors deferred compensation account is tied directly to the value of Cigna common stock.
26 |
Cigna 2016 Notice of Annual Meeting of Shareholders and Proxy Statement |
|
Advisory Approval of Executive Compensation (Proposal 2)
Our Board is committed to strong governance and recognizes that Cigna shareholders have an interest in our executive compensation policies and practices. Section 14A of the Securities 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, the Board has adopted a policy that provides for annual say on pay advisory votes. Consistent with this policy and SEC rules, we are asking you to approve the following advisory resolution:
Resolved, that the shareholders approve, on an advisory basis, the compensation of the Companys named executive officers as disclosed in the Companys Proxy Statement for the 2016 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.
We believe that our executive 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 Cignas performance and rewarding our executive officers for the creation of long-term value for Cignas shareholders. In considering your vote, we encourage you to review the Proxy Statement Summary beginning on page 1, the Compensation Discussion and Analysis beginning on page 28 and the Executive Compensation Tables beginning on page 51.
This advisory vote is intended to 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. However, the Board and People Resources Committee value your opinion and will review and consider the voting results when making future executive compensation decisions.
The Board of Directors |
||||||||
Cigna 2016 Notice of Annual Meeting of Shareholders and Proxy Statement |
|
27 |
|
|
Compensation Discussion and Analysis
Cignas 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 corporate goals will result in the creation of meaningful and sustained long-term value for our shareholders. The primary principles underlying our compensation philosophy are to:
This Compensation Discussion and Analysis (CD&A) describes the compensation policies, programs and decisions regarding our named executive officers (NEOs) for 2015, who include our Chief Executive Officer, Chief Financial Officer and the three most highly-compensated executive officers as of the end of 2015. The People Resources Committee (the Committee) is charged with oversight of the Companys executive compensation policy and plans and makes all compensation decisions for our executive officers with the exception of our CEO, for whom the Committee makes recommendations to the Board of Directors. This section also describes why the Committee has chosen each element of compensation and how it made compensation decisions. For 2015, our NEOs are:
NAME
|
TITLE
| |
David M. Cordani
|
President and Chief Executive Officer
| |
Thomas A. McCarthy
|
Executive Vice President and Chief Financial Officer
| |
Herbert A. Fritch
|
President, CignaHealthSpring
| |
Nicole S. Jones
|
Executive Vice President and General Counsel
| |
Matthew G. Manders
|
President, U.S. Commercial Markets and Global Health Care Operations
|
Company Performance
Cignas mission is to improve the health, well-being and sense of security of the people we serve in our more than 90 million customer relationships around the globe. Our strategic focus is centered on delivering high quality, affordable and personalized solutions to our customers and clients by leveraging our insights, brand, talent and localized approach. Creating value for our customers, and in turn, our shareholders, is a direct result of the effective execution of our Go Deep, Go Global, Go Individual strategy that we implemented in 2010.
28 |
Cigna 2016 Notice of Annual Meeting of Shareholders and Proxy Statement |
COMPENSATION MATTERS
|
In 2015, Cigna again delivered strong results with revenue and earnings contributions across the Companys diversified portfolio of businesses. Consolidated revenue increased 8% over 2014 to $37.9 billion. Consolidated adjusted income from operations* increased to $2.3 billion compared to $2.1 billion for 2014. This reflects strong revenue growth and continued favorable medical and operating costs in the Global Health Care segment. The following charts illustrate our revenue and adjusted income from operations growth, two key measures in determining the performance awards for our NEOs.
CONSOLIDATED REVENUES (IN BILLIONS)
|
CONSOLIDATED ADJUSTED INCOME FROM OPERATIONS* (IN BILLIONS)
|
* We encourage you to review our Annual Report on Form 10-K for the year ended December 31, 2015 for more complete financial information. Consolidated adjusted income from operations is a measure of profitability used by Cignas management because it presents the underlying results of operations of Cignas 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. For a reconciliation of consolidated adjusted income from operations to shareholders net income, see Annex A.
In July 2015, we entered into a merger agreement with Anthem, Inc. (Anthem). Our shareholders overwhelmingly approved this merger at our special meeting in December 2015, with approximately 99% of the votes cast voting in favor of the adoption of the merger agreement, representing approximately 82% of Cignas outstanding shares as of the record date for the special meeting. We continue to expect the merger to close in the second half of 2016.
Until the merger with Anthem closes, we remain a separate and independent company, focused on delivering competitively attractive earnings and revenue growth to Cigna shareholders, as we have over the past several years through the successful execution of our strategy.
Cigna 2016 Notice of Annual Meeting of Shareholders and Proxy Statement |
|
29 |
|
COMPENSATION MATTERS
|
Total Shareholder Return and Relative Peer Performance
The chart below shows the growth trend of a $100 investment in Cigna stock on December 31, 2012 over the past three years. For comparison purposes, we also have included the TSR of Cignas 2015 Strategic Performance Share performance peer group (see page 33) and the S&P 500 Index over the same time period.
* | Assumes that the value of the investment in Cigna common stock and each index was $100 on December 31, 2012 and that all dividends were reinvested. |
** | Includes Aetna, Inc., Aflac Incorporated, Anthem, Inc., The Hartford Financial Services Group, Inc., Health Net, Inc., Humana, Inc., Manulife Financial Corporation, MetLife, Inc., UnitedHealth Group Incorporated and Unum Group. Market returns are weighted by relative market capitalization. |
30 |
Cigna 2016 Notice of Annual Meeting of Shareholders and Proxy Statement |
COMPENSATION MATTERS
|
2015 Performance-Based Compensation Awards
For 2015, the Committee approved the following awards to the NEOs to reward the achievement of enterprise goals and to incent ongoing superior performance. The 2015 Management Incentive Plan performance measures and targets were determined in 2015 and awards were paid in 2016 based on 2015 performance. The 20132015 Strategic Performance Shares were paid out in 2016 based on 20132015 performance. The 2015 Long-Term Incentive was granted in 2015 based on the factors discussed on page 41.
Management Incentive Plan (MIP)
| ||||
Measure
|
Result
|
Award
| ||
Adjusted income from operations*
|
5.9% growth was within target range
|
Individual payouts ranged from 70% to 135% of each NEOs target. | ||
Revenue
|
9.0% growth was within target range
|
|||
Operating expense ratio improvement
|
0.1% growth was within target range
|
|||
Net promoter score
|
2015 NPS score decreased from 2014
|
|||
20132015 Strategic Performance Shares (SPS) ($ in millions)
| ||||
Measure
|
Result
|
Award
| ||
Relative TSR
|
90th percentile (200% of target)
|
20132015 SPSs were paid out at 155.5% of target. | ||
Adjusted income from operations*
|
$6,612 (113.3% of target)
|
|||
Revenue
|
$103,296 (108.6% of target)
|
|||
Long-Term Incentive (LTI)
| ||||
Description | Award | |||
In determining awards for the NEOs, the Committee (and, for Mr. Cordani, the Board, upon the recommendation of the Committee) primarily evaluates individual contributions, but also may take into consideration enterprise performance, Long-Term Incentive Plan (LTIP) share utilization, succession planning needs and other factors as circumstances warrant. In addition, the Committee takes into account market data and an individuals competitive position. | LTI awards ranged from 85% to 121% of each NEOs target. The LTI awards were delivered 50% in stock options and 50% in strategic performance shares with a 20152017 performance period. |
* Cigna uses adjusted income from operations as the principal financial measure for operating performance because management believes it best reflects the underlying results of our business operations and permits analysis of trends in underlying revenue, expenses and profitability. Effective January 1, 2015, adjusted income from operations is defined as shareholders net income (loss) excluding the following after-tax adjustments: net realized investment results, net amortization of other acquired intangible assets and special items. Prior to 2015, and at the time that the Committee approved the 20132015 SPS program, Cigna did not exclude net amortization of other acquired intangible assets in the calculation of adjusted income from operations. For this reason, net amortization of other acquired intangible assets is not excluded from the calculation of adjusted income from operations for the 20132015 SPS program. 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.
In addition to these awards, the Committee also made changes to the base salary and 2015 MIP and LTI targets for certain NEOs, as further described on pages 36, 39 and 41, to ensure that target total direct compensation remained competitive.
Annual Shareholder Vote on Executive Compensation and Other Shareholder Feedback
Cigna 2016 Notice of Annual Meeting of Shareholders and Proxy Statement |
|
31 |
|
COMPENSATION MATTERS
|
EXECUTIVE COMPENSATION POLICIES AND PRACTICES
Compensation Objectives and Practices
Cignas 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. 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.
To further our compensation philosophy, the Committee uses the following compensation practices, processes and instruments:
| A regular and rigorous analysis of relevant market compensation data for each executive officer. The analysis includes market data for competitors and the broad-based general industry using companies similar in size and scope; |
| Annual pay-for-performance assessment of the achievement of the Companys short-and long-term goals and an evaluation of each executive officers contribution to the Companys performance; |
| Our MIP is designed to motivate executive officers to achieve the Companys annual goals. No MIP awards are made unless the Company achieves a pre-defined minimum level of adjusted income from operations; |
| An equity-based incentive plan (the Cigna Long-Term Incentive Plan or LTIP) focused on long-term shareholder value creation. Our SPS plan rewards 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; and |
| The retention of an independent compensation consultant to assist the Committee in its design and implementation of the Companys executive compensation programs. |
For information on the oversight of the executive compensation program, see Processes and Procedures for Determining Executive Compensation beginning on page 47.
Compensation Governance and Controls
Our governance practices and controls include:
| Double trigger requirement for change of control benefits. |
| No tax gross-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 share holding requirements for equity awards to align executives interests with shareholders. |
| Prohibition of hedging of Cigna stock by all directors and employees, including the executive officers, 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 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. |
| Limited executive officer perquisites. |
| Ongoing review by the Committee of people development, including 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. |
32 |
Cigna 2016 Notice of Annual Meeting of Shareholders and Proxy Statement |
COMPENSATION MATTERS
|
Cigna 2016 Notice of Annual Meeting of Shareholders and Proxy Statement |
|
33 |
|
COMPENSATION MATTERS
|
NEO
|
2015
|
2015 MIP
|
2015 LTI ($)
|
TARGET TOTAL DIRECT
|
TARGET TOTAL DIRECT COMPENSATION POSITION TO COMPENSATION PEER GROUP(1)
|
TARGET TOTAL DIRECT COMPENSATION POSITION TO GENERAL INDUSTRY
| ||||||
David M. Cordani
|
1,200,000
|
2,200,000
|
9,600,000
|
13,000,000
|
Within competitive range
|
Within competitive range
| ||||||
Thomas A. McCarthy
|
740,000
|
800,000
|
2,400,000
|
3,940,000
|
Within competitive range
|
Below competitive range
| ||||||
Herbert A. Fritch(3)
|
1,000,000
|
1,000,000
|
2,000,000
|
4,000,000
|
Above competitive range
|
Above competitive range
| ||||||
Nicole S. Jones
|
581,138
|
560,000
|
1,424,500
|
2,565,638
|
Within competitive range
|
Within competitive range
| ||||||
Matthew G. Manders
|
750,000
|
900,000
|
2,200,000
|
3,850,000
|
Within competitive range
|
Within competitive range
|
(1) | Based on survey data available in December 2014 for the compensation peer group. |
(2) | Based on survey data available in December 2014 for the general industry peer group. |
(3) | Mr. Fritchs target total direct compensation is driven by his former role as Chief Executive Officer of HealthSpring before Cigna acquired HealthSpring in January 2012. |
As illustrated in the charts below, performance-based compensation represents approximately 91% of Mr. Cordanis target total direct compensation, including 74% in long-term incentives and 17% in annual incentives. On average, performance-based compensation represents 79% of target total direct compensation for the other NEOs, including an average of 56% in long-term incentives and 23% in annual incentives. These percentages are targets only and will not match the percentages calculable from the compensation amounts reflected in the Summary Compensation Table on page 51.
CEO TARGET PAY MIX |
OTHER NEO AVERAGE TARGET PAY MIX |
34 |
Cigna 2016 Notice of Annual Meeting of Shareholders and Proxy Statement |
COMPENSATION MATTERS
|
Cignas 2015 executive compensation program consists of the following elements:
ELEMENT
|
DESCRIPTION
|
COMMITTEE ACTIONS FOR 2015
| ||||
Base salary |
Fixed portion of total direct compensation, set with reference to competitive market data and designed to attract and retain key talent. |
Increased 2015 base salaries for certain NEOs to better align the base salaries with median market data, to reward individual performance and/or to reflect changes in role or responsibilities. See also page 36.
| ||||
Management Incentive Plan (MIP) |
Performance-based cash compensation designed to reward the achievement of annual enterprise results relative to pre-established goals, as well as individual performance accomplishments and contributions.
|
Increased MIP targets for certain NEOs to ensure that target total direct compensation remained within a competitive range of the market median. See also page 39. | ||||
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.
|
Increased LTI targets for certain NEOs to ensure that target total direct compensation remained within a competitive range of the market median. See also page 41. | |||
Strategic Performance Shares |
Performance-based compensation, the payout of which is based upon the achievement of pre-determined enterprise goals over a three-year performance period.
|
|||||
Retirement and Deferred Compensation |
Fixed component of compensation that is aligned to competitive market practice, including 401(k) plans and a voluntary non-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.
|
No changes in 2015. | ||||
Limited Perquisites and Other Benefits |
Limited perquisites that are designed to attract and retain key talent and provide for the safety and security of executive officers.
|
No changes in 2015. |
Cigna 2016 Notice of Annual Meeting of Shareholders and Proxy Statement |
|
35 |
|
COMPENSATION MATTERS
|
36 |
Cigna 2016 Notice of Annual Meeting of Shareholders and Proxy Statement |
COMPENSATION MATTERS
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Cigna 2016 Notice of Annual Meeting of Shareholders and Proxy Statement |
|
37 |
|
COMPENSATION MATTERS
|
2015 Performance Goals, Measures and Actual Results
Each year, the Committee considers the appropriate measures for the MIP program at its October and December meetings, and then considers and approves the actual targets at its meetings in January and February. For 2015, the Committee established the performance measures, weightings and target performance goals below, which were used to determine the range of potential aggregate funding for MIP awards.
MEASURE
|
RATIONALE
|
WEIGHTING
|
TARGET
|
ACTUAL RESULT
| ||||
Adjusted income from operations*
|
Reinforces the importance of profitable growth across the enterprise.
|
50%
|
(2.5)% to 7% growth |
5.9% growth was within
target range | ||||
The target was set as a year-over-year growth goal for Cignas Global Health Care, Global Supplemental Benefits and Group Disability and Life segments. | ||||||||
Revenue |
Focuses on enterprise growth, encourages business decisions that optimize results for the enterprise, promotes cross-selling efforts and collaboration across business units, and drives customer focus.
|
20% | 6% to 13% growth | 9.0% growth was within target range | ||||
The target was set as a year-over-year growth goal for Cignas 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.
|
20% | (1)% to 2.9% improvement |
0.1% improvement was within target range | ||||
The target was set as a composite objective, which measures operating expense improvement in Cignas Global Health Care, Global Supplemental Benefits and Group Disability and Life segments versus 2014. Operating expenses are expressed as a percent of revenue for each segment. As further described below, this target considers the impact of the health insurance industry tax. | ||||||||
Net promoter score (NPS) |
Reinforces our focus on customer retention and loyalty by measuring customer perception on matters such as our reputation, brand, product, service, pricing and providers, all of which we believe are critical to Cignas success.
|
10% | Improve or maintain 2014 NPS score |
2015 NPS score decreased from 2014 | ||||
This is a measure of customer loyalty based on the results of externally conducted customer surveys. The target was set as a composite objective, measuring the year-over-year change in the NPS against 2014 results. NPS results from each of Cignas segments are weighted based on the Companys 2015 operating plan for the segments premiums and fees to establish both the NPS baseline and final result for 2015. |
* | Cigna uses adjusted income from operations as the principal financial measure for operating performance because management believes it best reflects 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. |
In setting the target performance goals for each measure in February 2015, the Committee considered Cignas publicly disclosed earnings estimates, historical Company and compensation peer company performance, analyst commentary and the Companys then-current expectations for the industry and economic environment. The Committee considered various market forces impacting the Company and related uncertainty, including the expectation that the industry would continue to face significant market changes and disruption in 2015. Factors contributing to this uncertainty included continued rate pressure for the Medicare Advantage market, the incremental step up in the health insurance industry tax, and continued uncertainty in enrollment and margins associated with the individual business on the public exchanges. The Committee believed that the target performance goals represented competitively attractive goals that would be challenging to achieve in light of the circumstances facing the Company in 2015.
38 |
Cigna 2016 Notice of Annual Meeting of Shareholders and Proxy Statement |
COMPENSATION MATTERS
|
2015 Individual MIP Targets and Awards
MIP target levels for the 2015 performance year for the NEOs are set forth in the table below. In December 2014, after updating the compensation peer group and adopting the general industry peer group, the Committee increased 2015 MIP targets for certain NEOs. The Committee increased the 2015 MIP targets for Mr. Cordani, Mr. McCarthy, Ms. Jones and Mr. Manders by $400,000, $200,000, $124,250 and $150,000, respectively. The Committee believed these changes were necessary to ensure that target total direct compensation remained within a competitive range of the market median.
In determining actual MIP awards, the Committee (and for Mr. Cordani, the Board of Directors upon the recommendation of the Committee) takes an integrated approach, assessing enterprise results together with each executive officers individual contributions during 2015. For the 2015 performance year, the Committee and the Board made annual incentive awards to the NEOs ranging from 70% to 135% of the target award value, as reflected in the following table.
NEO
|
2015 MIP TARGET ($)
|
MIP MAXIMUM AWARD ($)
|
ACTUAL MIP PAYOUT ($)
|
PAYOUT AS A PERCENT OF TARGET (%)
|
||||||||||||
David M. Cordani
|
|
2,200,000
|
|
|
4,400,000
|
|
|
2,860,000
|
|
|
130
|
| ||||
Thomas A. McCarthy
|
|
800,000
|
|
|
1,600,000
|
|
|
1,000,000
|
|
|
125
|
| ||||
Herbert A. Fritch(1)
|
|
1,000,000
|
|
|
2,000,000
|
|
|
700,000
|
|
|
70
|
| ||||
Nicole S. Jones
|
|
560,000
|
|
|
1,120,000
|
|
|
756,000
|
|
|
135
|
| ||||
Matthew G. Manders
|
|
900,000
|
|
|
1,800,000
|
|
|
1,080,000
|
|
|
120
|
|
(1) | Mr. Fritchs MIP target is driven by his annual incentive target in his former role as Chief Executive Officer of HealthSpring before Cigna acquired HealthSpring in January 2012. |
Mr. Cordani
In early 2016, the Committee, together with the independent Chairman of the Board, assessed the performance of Mr. Cordani. This assessment included a review of the overall performance of the Company in 2015 against the established enterprise goals. They also considered Mr. Cordanis individual contributions. Following this review, the Committee made certain recommendations to the Board relating to Mr. Cordanis MIP award for 2015. The Board considered these recommendations as part of its own independent review of Mr. Cordanis performance. Under Mr. Cordanis leadership, Cigna achieved its sixth consecutive year of competitively attractive results. More specifically, the Board considered the following factors:
| strong leadership of the organization throughout a year marked by significant complexity and change for Cigna as well as disruption and volatility in the industry; |
| the continued advancement of the Companys Go Deep, Go Global, Go Individual strategy, highlighted by: |
¡ | significant progress in Cignas evaluation of potential strategic alternatives, with the ultimate determination to enter into a combination with Anthem; |
¡ | the launch of the Companys localization strategy, which brings together leaders from across the U.S.-businesses with the objective of leveraging Cignas assets to win at the local level; |
¡ | continued expansion of Cignas differentiated approach to partnerships with providers, including through the successful implementation and execution of two delivery system alliances and cultivation of additional opportunities for collaborative arrangements; and |
¡ | continued momentum in targeted geographies in international markets, including revenue growth in China and customer growth in Turkey and Thailand; |
| strong enterprise performance, including: |
¡ | consolidated adjusted income from operations of $2.3 billion, compared with $2.1 billion in 2014; |
¡ | consolidated revenue of $37.9 billion, representing 8% growth over 2014; |
¡ | one-year TSR of 42.2%; and |
Cigna 2016 Notice of Annual Meeting of Shareholders and Proxy Statement |
|
39 |
|
COMPENSATION MATTERS
|
¡ | medical customer base growth of 4% over year-end 2014 for a total of approximately 15 million customers; |
| the successful negotiation of and entry into the definitive merger agreement with Anthem in July 2015, which will bring together complementary strengths of the two companies and further accelerate Cignas strategy to improve quality, choice and affordability in the marketplace; |
| the audit by the Centers for Medicare and Medicaid Services in 2015 which resulted in sanctions being imposed in January 2016; and |
| effective representation of Cigna and the industry in a number of forums globally, including engagement in the legislative, administrative and policy arenas to ensure focus on the needs of the Companys customers and clients. |
Based on these factors, including the Boards overall evaluation of Mr. Cordanis performance, the Board awarded Mr. Cordani a MIP payout for 2015 of $2,860,000, or 130% of his 2015 MIP target.
Other NEOs
For all other NEOs, Mr. Cordani makes recommendations to the Committee regarding MIP awards based on his evaluation of each NEOs performance and contributions to enterprise goals. The Committee considers Mr. Cordanis recommendations when determining MIP awards. While not exhaustive, below are certain key factors the Committee considered when making award determinations.
Mr. McCarthy. Under Mr. McCarthys leadership as Chief Financial Officer, the enterprise delivered strong financial results. He continues to lead productive engagement between business teams and their financial counterparts, including the development of reporting and management processes to support Cignas localization strategy. Mr. McCarthy was critical in executing the Companys capital management objectives for financial leverage and capital deployment and the Companys investment strategy to deliver investment income. His efforts led to securing Cignas most favorable credit agency ratings in over a decade, further strengthening Cignas financial flexibility. In addition to his other contributions, Mr. McCarthy also played a key role in Cignas evaluation of potential strategic alternatives and the due diligence and negotiation of the merger agreement with Anthem, as well as the integration planning and regulatory work related to the potential combination. As a result of Mr. McCarthys contributions in 2015, Mr. Cordani recommended, and the Committee approved, a 2015 MIP payment of $1,000,000, or 125% of his target.
Mr. Fritch. Mr. Fritch continued to provide leadership to the Cigna-HealthSpring organization throughout 2015. The Cigna-HealthSpring business team partnered with Global Health Care on the successful implementation of the Companys localization strategy. Net promoter score showed improvement versus 2014 and disenrollment was at its lowest rate in several years. While core seniors businesses met or exceeded certain financial targets, Cigna-HealthSpring did not meet its overall earnings targets and results for the Cigna-HealthSpring business were below expectations. In addition, the audit by the Centers for Medicare and Medicaid Services in 2015 resulted in sanctions being imposed in January 2016. As a result of Mr. Fritchs contributions in 2015, Mr. Cordani recommended, and the Committee approved, a 2015 MIP payment of $700,000, or 70% of his target.
Ms. Jones. As Cignas Executive Vice President and General Counsel, Ms. Jones continued to lead the legal, compliance and government affairs functions in 2015, further strengthening these areas and the partnership with the Companys business leaders. Under Ms. Jones guidance, Cigna Legal successfully developed solutions aligned to the strategic goals and objectives of the Company. Ms. Jones demonstrated her leadership in strategic negotiations with third-party vendors and in the management of various litigation matters. In addition to her other contributions, Ms. Jones played a key role in Cignas evaluation of potential strategic alternatives and the due diligence and negotiation of the merger agreement with Anthem. In addition, she has been key to the integration planning and regulatory work related to the potential combination. As a result of Ms. Jones contributions in 2015, Mr. Cordani recommended, and the Committee approved, a 2015 MIP payment of $756,000, or 135% of her target.
Mr. Manders. Despite the breadth, scope and complexity of 2015, including the launch of Cignas localization strategy, intense marketplace competition and industry consolidation activity, under Mr. Manders stewardship, U.S. Commercial Markets and Global Heath Care Operations continued to produce attractive business results and make meaningful progress on strategic initiatives. U.S. Commercial Health Care, by far Cignas largest operating segment, exceeded its earnings and revenue targets for 2015. This business also continued its industry leading medical cost trend, as evidenced by its claim accuracy and overall cost containment. Mr. Manders championed Cignas localization efforts within the United States in 2015, developing the infrastructure and operational models to support Cignas achievement of this strategic objective. As a result of Mr. Manders contributions in 2015, Mr. Cordani recommended, and the Committee approved, a 2015 MIP payment of $1,080,000, or 120% of his target.
40 |
Cigna 2016 Notice of Annual Meeting of Shareholders and Proxy Statement |
COMPENSATION MATTERS
|
Long-Term Incentives
The table below provides more detail about the 2015 LTI target values, grant values and percentages relative to LTI targets.
2015 LTI TARGET ($)
|
LTI MAXIMUM AWARD ($)
|
ACTUAL LTI GRANT VALUE(1) ($)
|
LTI AWARD AS A PERCENT OF TARGET (%)
|
|||||||||||||
David M. Cordani
|
|
9,600,000
|
|
|
19,200,000
|
|
|
11,600,000
|
|
|
121
|
| ||||
Thomas A. McCarthy
|
|
2,400,000
|
|
|
4,800,000
|
|
|
2,400,000
|
|
|
100
|
| ||||
Herbert A. Fritch
|
|
2,000,000
|
|
|
4,000,000
|
|
|
1,700,000
|
|
|
85
|
| ||||
Nicole S. Jones
|
|
1,424,500
|
|
|
2,849,000
|
|
|
1,638,175
|
|
|
115
|
| ||||
Matthew G. Manders
|
|
2,200,000
|
|
|
4,400,000
|
|
|
2,200,000
|
|
|
100
|
|
(1) | Awarded in February 2015. 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 on page 51. This is largely due to the timing and determination of the grant date fair value of SPS awards under ASC Topic 718. SPS grant date fair values reflect a probable achievement level of the TSR performance condition as of grant date. The TSR performance condition comprises fifty percent (of the weighting) of the SPS performance measures, and is determined after the Committee arrives at each NEOs LTI grant value. Thus, an SPS awards grant date fair value may be higher or lower than the Committees LTI grant value 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 on page 51. |
Equity awards granted in 2015 are disclosed in terms of their grant date fair value in columns (e) and (f) of the Summary Compensation Table on page 51 and in the Grants of Plan-Based Awards Table on page 53.
Cigna 2016 Notice of Annual Meeting of Shareholders and Proxy Statement |
|
41 |
|
COMPENSATION MATTERS
|
Strategic Performance Shares Program
Our SPS program is designed to incent and reward superior results achieved through sustained long-term financial discipline and strategic accomplishments that benefit Cigna and its shareholders over the long-term, but that may not be reflected in annual or short-term results.
Grants
At the time of grant, a total LTI dollar award and value is approved for each executive officer. The SPS portion of
the award (50% of the total LTI value) is converted into a specific number of SPSs on the grant date based on
Cignas stock price on that date.
Vesting
SPSs vest in the first quarter of the year following the end of the three-year performance period.
Payout Determination
The Committee determines payouts based on Company performance of pre-established measures during the performance period. | ||
Measure: Relative TSR, compounded over the three-year performance period
Weighting: 50%
Rationale: Rewards NEOs for stock performance relative to Cignas applicable peer group at the time of the award
Comparator: Beginning with the 20152017 SPS program, the Committee adopted the SPS performance peer group to measure relative TSR. For the 20132015 and 20142016 SPS programs, relative TSR is measured against Cignas peer group at the time of the award |
Measure: Adjusted income from operations
Weighting: 50%
Rationale: Reinforces the importance of 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 is 0 200% of the SPSs Granted
SPS awards are ultimately settled in Cigna stock, so the actual value of the earned awards is based on
Cignas stock price at the time of payment.
42 |
Cigna 2016 Notice of Annual Meeting of Shareholders and Proxy Statement |
COMPENSATION MATTERS
|
The following table shows the performance period for our SPS programs outstanding as of the end of 2015, the potential payment date and the performance measures.
PERFORMANCE PERIOD
|
GRANT DATE
|
PAYMENT
|
PERFORMANCE MEASURES (WEIGHTINGS IN %)
| |||||||
20132015 | March 2013 | 2016 | Relative TSR(1) (50%) |
Adjusted income from operations (25%) |
Revenue (25%) | |||||
20142016 | February 2014 | 2017 | Relative TSR(1) (50%) |
Adjusted income from operations (25%) |
Revenue (25%) | |||||
20152017 | February 2015 | 2018 | Relative TSR(2) (50%) |
Adjusted income from operations (50%) |
(1) | The peer group used to measure relative TSR is the compensation peer group in place at the time of award and includes: ACE Limited, Aetna, Inc., Aflac Incorporated, Anthem, Inc., The Hartford Financial Services Group, Inc., Health Net Inc., Humana, Inc., Manulife Financial Corporation, MetLife, Inc. and Unum Group. Coventry Health Care, Inc. was removed from the peer group for the 2013-2015 performance period after it was acquired by Aetna, Inc. in 2013. |
(2) | The SPS performance peer group, which includes Aetna, Inc., Aflac Incorporated, Anthem, Inc., The Hartford Financial Services Group, Inc., Health Net, Inc., Humana, Inc., Manulife Financial Corporation, MetLife, Inc., UnitedHealth Group Incorporated and Unum Group, is used to measure relative TSR. |
20132015 SPS Program
The performance goals for the 20132015 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 |
90th Percentile (200% of target) | |||
Adjusted income from operations* |
25% | Cumulative adjusted income from operations of $6,104 to $6,714, calculated assuming a compound annual growth rate of 5%10%. |
$6,612 (113.3% of target) | |||
Revenue |
25% | Cumulative revenue of $96,452 to $106,030, calculated assuming a compound annual growth rate of 6%11%.
|
$103,296 (108.6% of target)
|
* | Cigna uses adjusted income from operations as the principal financial measure for operating performance because management believes it best reflects the underlying results of our business operations and permits analysis of trends in underlying revenue, expenses and profitability. Effective January 1, 2015, adjusted income from operations is defined as shareholders net income (loss) excluding the following after-tax adjustments: net realized investment results, net amortization of other acquired intangible assets and special items. Prior to 2015, and at the time that the Committee approved the 20132015 SPS program, Cigna did not exclude net amortization of other acquired intangible assets in the calculation of adjusted income from operations. For this reason, net amortization of other acquired intangible assets is not excluded from the calculation of adjusted income from operations for the 20132015 SPS program. 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 2013 to 2015, three-year annual compounded TSR was 40%, which ranked at the 90th percentile relative to the applicable peer group companies and was 200% of target.
Based on the results in the table above, on February 23, 2016, the Committee approved payout of the 20132015 SPSs at 155.5% of target. The calculations utilized to determine the payout were reviewed for accuracy by PricewaterhouseCoopers LLP. See the Outstanding Equity Awards table on page 55 for actual share amounts issued to each NEO and associated market values.
Cigna 2016 Notice of Annual Meeting of Shareholders and Proxy Statement |
|
43 |
|
COMPENSATION MATTERS
|
20122014 SPS Program
The shares earned under the 20122014 SPS Program were measured using performance through December 31, 2014 and were delivered to each executive officer in March 2015. The total share value realized by each NEO on the payment date is reflected in the Option Exercises and Stock Vested table on page 57. The performance measures, targets, results and payout for the 20122014 SPS program is discussed in greater detail in our definitive proxy statement for our 2014 annual meeting, filed with the SEC on March 13, 2015.
Other Equity Awards
From time to time, the Committee makes special equity grants to executive officers in the form of restricted stock or restricted stock units (RSUs) to encourage retention of the talent necessary to manage successfully the Companys businesses or to recognize superior performance. The Committee did not award any special equity grants to executive officers in 2015.
44 |
Cigna 2016 Notice of Annual Meeting of Shareholders and Proxy Statement |
COMPENSATION MATTERS
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Cigna 2016 Notice of Annual Meeting of Shareholders and Proxy Statement |
|
45 |
|
COMPENSATION MATTERS
|
46 |
Cigna 2016 Notice of Annual Meeting of Shareholders and Proxy Statement |
COMPENSATION MATTERS
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Cigna 2016 Notice of Annual Meeting of Shareholders and Proxy Statement |
|
47 |
|
COMPENSATION MATTERS
|
48 |
Cigna 2016 Notice of Annual Meeting of Shareholders and Proxy Statement |
COMPENSATION MATTERS
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Cigna 2016 Notice of Annual Meeting of Shareholders and Proxy Statement |
|
49 |
|
COMPENSATION MATTERS
|
50 |
Cigna 2016 Notice of Annual Meeting of Shareholders and Proxy Statement |
COMPENSATION MATTERS
|
2015 SUMMARY COMPENSATION TABLE
This table includes information regarding 2015, 2014 and 2013 compensation for each of the NEOs. Other tables in this proxy statement provide more detail about specific types of compensation with respect to 2015.
NAME AND PRINCIPAL POSITION (a)
|
YEAR (b)
|
SALARY ($) (c)
|
BONUS ($) (d)
|
STOCK AWARDS ($) (e)
|
OPTION AWARDS ($) (f)
|
NON-EQUITY INCENTIVE COMPENSATION ($) (g)
|
CHANGE IN VALUE AND ($) (h)
|
ALL OTHER ($) (i)
|
TOTAL ($) (j)
|
|||||||||||||||||||||||||||
David M. Cordani President and Chief Executive Officer |
|
2015
|
|
|
1,189,615
|
|
|
|
|
|
7,105,072
|
|
|
5,800,033
|
|
|
2,860,000
|
|
|
|
|
|
352,952
|
|
|
17,307,672
|
| |||||||||
|
2014
|
|
|
1,125,185
|
|
|
|
|
|
5,670,023
|
|
|
5,400,023
|
|
|
1,900,000
|
|
|
125,859
|
|
|
240,355
|
|
|
14,461,445
|
| ||||||||||
|
2013
|
|
|
1,034,615
|
|
|
|
|
|
6,080,687
|
|
|
4,096,268
|
|
|
2,160,000
|
|
|
|
|
|
152,509
|
|
|
13,524,079
|
| ||||||||||
Thomas A. McCarthy Executive Vice President and Chief Financial Officer |
|
2015
|
|
|
719,231
|
|
|
|
|
|
1,470,005
|
|
|
1,200,013
|
|
|
1,000,000
|
|
|
|
|
|
29,036
|
|
|
4,418,285
|
| |||||||||
|
2014
|
|
|
637,037
|
|
|
|
|
|
1,102,541
|
|
|
1,050,006
|
|
|
630,000
|
|
|
205,455
|
|
|
38,063
|
|
|
3,663,102
|
| ||||||||||
|
2013
|
|
|
504,500
|
|
|
|
|
|
1,838,734
|
|
|
224,416
|
|
|
690,000
|
|
|
|
|
|
23,819
|
|
|
3,281,469
|
| ||||||||||
Herbert A. Fritch President, Cigna-HealthSpring |
|
2015
|
|
|
1,000,000
|
|
|
|
|
|
1,041,266
|
|
|
850,020
|
|
|
700,000
|
|
|
|
|
|
36,450
|
|
|
3,627,736
|
| |||||||||
|
2014
|
|
|
1,000,000
|
|
|
|
|
|
787,576
|
|
|
750,001
|
|
|
900,000
|
|
|
|
|
|
30,563
|
|
|
3,468,140
|
| ||||||||||
|
2013
|
|
|
1,000,000
|
|
|
2,000,000
|
|
|
1,233,790
|
|
|
831,144
|
|
|
517,500
|
|
|
|
|
|
44,298
|
|
|
5,626,732
|
| ||||||||||
Nicole S. Jones Executive Vice President, General Counsel |
|
2015
|
|
|
577,867
|
|
|
|
|
|
1,003,501
|
|
|
819,089
|
|
|
756,000
|
|
|
|
|
|
31,390
|
|
|
3,187,847
|
| |||||||||
|
2014
|
|
|
562,682
|
|
|
|
|
|
897,453
|
|
|
854,710
|
|
|
501,113
|
|
|
15,623
|
|
|
32,013
|
|
|
2,863,594
|
| ||||||||||
|
2013
|
|
|
545,065
|
|
|
|
|
|
1,004,339
|
|
|
676,556
|
|
|
576,279
|
|
|
|
|
|
31,452
|
|
|
2,833,691
|
| ||||||||||
Matthew G. Manders President, U.S. Markets & Global Healthcare Operations |
|
2015
|
|
|
732,692
|
|
|
|
|
|
1,347,529
|
|
|
1,100,015
|
|
|
1,080,000
|
|
|
|
|
|
37,253
|
|
|
4,297,489
|
| |||||||||
|
2014
|
|
|
585,667
|
|
|
|
|
|
1,276,282
|
|
|
918,773
|
|
|
787,500
|
|
|
653,845
|
|
|
35,995
|
|
|
4,258,062
|
| ||||||||||
|
2013
|
|
|
583,404
|
|
|
|
|
|
1,130,968
|
|
|
761,870
|
|
|
859,625
|
|
|
|
|
|
34,873
|
|
|
3,370,740
|
| ||||||||||
Bonus (Column (d))
Amounts in this column represent non-incentive based bonus compensation.
Stock Awards (Column (e))
Amounts in this column represent the grant date fair value of stock awards computed in accordance with ASC Topic 718 as described in Note 20 to Cignas consolidated financial statements in the Companys Annual Report on Form 10-K for the year ended December 31, 2015 and, for SPSs, are based upon the probable outcome of the performance conditions. Includes SPS awards granted in 2015, 2014 and 2013. All awards were made under the Cigna Long-Term Incentive Plan. The SPSs are subject to performance conditions as described beginning on page 42. The grant date fair value of SPS awards granted in 2015 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 fifty percent (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 2015
| |||||||||
GRANT DATE FAIR VALUE |
AT HIGHEST PERFORMANCE ACHIEVEMENT* | |||||||||
($)
|
($)
| |||||||||
David M. Cordani
|
|
7,105,072
|
|
|
10,005,101
|
| ||||
Thomas A. McCarthy
|
|
1,470,005
|
|
|
2,070,007
|
| ||||
Herbert A. Fritch
|
|
1,041,266
|
|
|
1,466,272
|
| ||||
Nicole S. Jones
|
|
1,003,501
|
|
|
1,413,093
|
| ||||
Matthew G. Manders
|
|
1,347,529
|
|
|
1,897,541
|
|
* | 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 Cignas SPS performance peers based on accounting assumptions. |
Cigna 2016 Notice of Annual Meeting of Shareholders and Proxy Statement |
|
51 |
|
COMPENSATION MATTERS
|
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 20 to Cignas consolidated financial statements in the Companys Annual Report on Form 10-K for the year ended December 31, 2015 (disregarding any estimates for forfeitures).
Non-Equity Incentive Plan Compensation (Column (g))
This column reflects performance-based compensation awarded under the MIP as described beginning on page 36.
Change in Pension 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 on page 58. Information regarding accumulated benefits under the pension plans is also discussed in the narrative to the Pension Benefits Table beginning on page 59. The amounts in this column do not include deferred compensation because we do not provide above market earnings to our executive officers. As represented by the symbol in the table, the final change in pension present value in 2015 was negative for all participating NEOs. The table below details the net change in present value of as December 31, 2015:
NAME | NET CHANGE TO PRESENT VALUE ($) | |
David M. Cordani
|
(12,175)
| |
Thomas A. McCarthy
|
(4,898)
| |
Nicole S. Jones
|
(2,694)
| |
Matthew G. Manders
|
(5,582)
|
All Other Compensation (Column (i))
This column includes:
| Cignas matching contributions to the NEOs accounts under its 401(k) plans in the following amounts: Mr. Cordani $54,294; Mr. McCarthy $28,188; Ms. Jones $24,135; Mr. Fritch $36,450; and Mr. Manders $30,753. |
| Dividends paid in 2015 on restricted stock awards of $207 for Ms. Jones. |
| 2015 perquisites valued at incremental cost (the cost incurred by Cigna due to the NEOs personal use or benefit) as follows: |
¡ | Fees paid for financial planning, tax preparation and legal services related to tax and estate planning in the following amounts: Mr. Cordani $18,418; Ms. Jones $6,500; and Mr. Manders $6,500; |
¡ | Fees for legal expenses associated with Mr. Cordanis offer letter with Anthem in the amount of $98,378; |
¡ | For the corporate aircraft, $170,312 of incremental cost related to Mr. Cordanis use of the aircraft, at the Companys encouragement, for personal travel. Incremental cost 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; and |
¡ | Costs for security system monitoring and maintenance in the following amounts: Mr. Cordani $11,550; Mr. McCarthy $848; and Ms. Jones $548. |
52 |
Cigna 2016 Notice of Annual Meeting of Shareholders and Proxy Statement |
COMPENSATION MATTERS
|
GRANTS OF PLAN-BASED AWARDS IN 2015
This table provides information about annual incentive targets for 2015 and grants of plan-based awards made in 2015 to the NEOs. The disclosed dollar and share amounts do not necessarily reflect the actual amounts that will be paid or issued to the NEOs. Those amounts will be known only if and when the awards vest or become payable.
ESTIMATED POSSIBLE PAYOUTS UNDER NON-EQUITY INCENTIVE PLAN AWARDS |
ESTIMATED FUTURE PAYOUTS UNDER EQUITY INCENTIVE PLAN AWARDS |
|||||||||||||||||||||||||||||||||||||||||||||||||||
NAME (a)
|
GRANT DATE (b)
|
COMMITTEE APPROVAL DATE (c)
|
AWARD TYPE (d)
|
THRESHOLD ($) (e)
|
TARGET ($) (f)
|
MAXIMUM ($) (g)
|
THRESHOLD (#) (h)
|
TARGET (#) (i)
|
MAXIMUM (#) (j)
|
ALL STOCK AWARDS: NUMBER SHARES STOCK (#) (k)
|
ALL OTHER OPTION AWARDS: NUMBER OF SECURITIES UNDERLYING OPTIONS (#) (l)
|
EXERCISE OR BASE PRICE OF OPTION ($/Sh) (m)
|
CLOSING MARKET PRICE DATE OF GRANT ($/Sh) (n)
|
GRANT DATE MARKET VALUE STOCK OPTION AWARDS ($) (o)
|
||||||||||||||||||||||||||||||||||||||
David M. Cordani |
| | |
MIP Target |
|
| 2,200,000 | 4,400,000 | ||||||||||||||||||||||||||||||||||||||||||||
2/25/2015 | 2/25/2015 | SPS | 8,396 | 47,976 | 95,952 | 7,105,072 | ||||||||||||||||||||||||||||||||||||||||||||||
2/25/2015 | 2/25/2015 | Option | 159,388 | 120.895 | 121.18 | 5,800,033 | ||||||||||||||||||||||||||||||||||||||||||||||
Thomas A. McCarthy |
| | |
MIP Target |
|
| 800,000 | 1,600,000 | ||||||||||||||||||||||||||||||||||||||||||||
2/25/2015 | 2/25/2015 | SPS | 1,737 | 9,926 | 19,852 | 1,470,005 | ||||||||||||||||||||||||||||||||||||||||||||||
2/25/2015 | 2/25/2015 | Option | 32,977 | 120.895 | 121.18 | 1,200,013 | ||||||||||||||||||||||||||||||||||||||||||||||
Herbert A. Fritch |
| | |
MIP Target |
|
| 1,000,000 | 2,000,000 | ||||||||||||||||||||||||||||||||||||||||||||
2/25/2015 | 2/25/2015 | SPS | 1,230 | 7,031 | 14,062 | 1,041,266 | ||||||||||||||||||||||||||||||||||||||||||||||
2/25/2015 | 2/25/2015 | Option | 23,359 | 120.895 | 121.18 | 850,020 | ||||||||||||||||||||||||||||||||||||||||||||||
Nicole S. Jones |
| | |
MIP Target |
|
| 560,000 | 1,120,000 | ||||||||||||||||||||||||||||||||||||||||||||
2/25/2015 | 2/25/2015 | SPS | 1,186 | 6,776 | 13,552 | 1,003,501 | ||||||||||||||||||||||||||||||||||||||||||||||
2/25/2015 | 2/25/2015 | Option | 22,509 | 120.895 | 121.18 | 819,089 | ||||||||||||||||||||||||||||||||||||||||||||||
Matthew G. Manders |
| | |
MIP Target |
|
| 900,000 | 1,800,000 | ||||||||||||||||||||||||||||||||||||||||||||
2/25/2015 | 2/25/2015 | SPS | 1,592 | 9,099 | 18,198 | 1,347,529 | ||||||||||||||||||||||||||||||||||||||||||||||
2/25/2015 | 2/25/2015 | Option | 30,229 | 120.895 | 121.18 | 1,100,015 | ||||||||||||||||||||||||||||||||||||||||||||||
Estimated Possible Payouts Under Non-Equity Incentive Plan Awards (Column (f) and (g))
Amounts in column (f) represent annual incentive targets for the 2015 performance period paid in 2016. 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 $2,860,000; Mr. McCarthy $1,000,000; Mr. Fritch $700,000; Ms. Jones $756,000; and Mr. Manders $1,080,000.
Estimated Future Payouts Under Equity Incentive Plan Awards (Columns (h), (i) and (j))
Represents SPSs awarded for the 20152017 performance period. The People Resources Committee will determine payout for the SPSs, if any, in 2018. 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 at 17.5% of target, which represents the lowest possible level of share payout under these awards assuming achievement at threshold for adjusted income from operations.
All Other Option Awards (Column (l))
Represents stock option awards granted under the Cigna Long-Term Incentive Plan and approved by the People Resources Committee at its February 2015 meeting as part of each NEOs long-term incentive award. Stock options represented 50% of the long-term incentive awards for executive officers in 2015, as described on page 41.
Cigna 2016 Notice of Annual Meeting of Shareholders and Proxy Statement |
|
53 |
|
COMPENSATION MATTERS
|
Exercise or Base Price of Option Awards (Column (m))
Pursuant to the Cigna 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 2015 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 fifty percent (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).
54 |
Cigna 2016 Notice of Annual Meeting of Shareholders and Proxy Statement |
COMPENSATION MATTERS
|
OUTSTANDING EQUITY AWARDS AT YEAR-END 2015
This table provides information about unexercised stock options and unvested stock awards (restricted stock and SPSs) held as of December 31, 2015 by the NEOs.
OPTION AWARDS |
STOCK AWARDS |
|||||||||||||||||||||||||||||||
NAME (a)
|
NUMBER OF SECURITIES UNDERLYING UNEXERCISED OPTIONS (#) EXERCISABLE (b)
|
NUMBER OF SECURITIES UNDERLYING UNEXERCISED OPTIONS (#) UNEXERCISABLE (1) (c)
|
OPTION EXERCISE PRICE ($) (d)
|
OPTION EXPIRATION DATE (e)
|
NUMBER OF SHARES OR OF THAT NOT VESTED (#) (1) (f)
|
MARKET VALUE OF SHARES OR UNITS OF STOCK THAT HAVE NOT ($)(2) (g)
|
EQUITY INCENTIVE PLAN AWARDS: NUMBER UNEARNED SHARES, UNITS OR OTHER RIGHTS THAT NOT (#) (1) (h)
|
EQUITY INCENTIVE PLAN AWARDS: MARKET OR VALUE OF UNEARNED SHARES, UNITS OR OTHER RIGHTS THAT HAVE NOT ($)(2) (i)
|
||||||||||||||||||||||||
David M. Cordani |
190,180 | 34.6450 | 3/3/2020 | 137,020 | 20,050,137 | 117,176 | 17,146,364 | |||||||||||||||||||||||||
189,610 | 42.1900 | 3/1/2021 | ||||||||||||||||||||||||||||||
200,229 | 44.4250 | 2/28/2022 | ||||||||||||||||||||||||||||||
137,902 | 68,941 | 58.7300 | 3/5/2023 | |||||||||||||||||||||||||||||
76,497 | 152,946 | 78.0350 | 2/26/2024 | |||||||||||||||||||||||||||||
159,388 | 120.8950 | 2/25/2025 | ||||||||||||||||||||||||||||||
TOTAL |
794,418 | 381,275 | 137,020 | 20,050,137 | 117,176 | 17,146,364 | ||||||||||||||||||||||||||
Thomas A. McCarthy |
4,464 | 46.8833 | 2/28/2017 | 21,545 | 3,152,680 | 23,382 | 3,421,488 | |||||||||||||||||||||||||
5,651 | 47.9250 | 2/27/2018 | ||||||||||||||||||||||||||||||
21,582 | 14.0250 | 3/4/2019 | ||||||||||||||||||||||||||||||
8,138 | 34.6450 | 3/3/2020 | ||||||||||||||||||||||||||||||
8,159 | 42.1900 | 3/1/2021 | ||||||||||||||||||||||||||||||
10,960 | 44.4250 | 2/28/2022 | ||||||||||||||||||||||||||||||
7,555 | 3,777 | 58.7300 | 3/5/2023 | |||||||||||||||||||||||||||||
14,875 | 29,739 | 78.0350 | 2/26/2024 | |||||||||||||||||||||||||||||
32,977 | 120.8950 | 2/25/2025 | ||||||||||||||||||||||||||||||
TOTAL |
81,384 | 66,493 | 21,545 | 3,152,680 | 23,382 | 3,421,488 | ||||||||||||||||||||||||||
Herbert A. Fritch |
63,043 | (3) | 12.2500 | 2/13/2019 | 117,842 | (3) | 17,243,820 | 16,643 | 2,435,370 | |||||||||||||||||||||||
138,752 | (3) |