The People Resources Committee (the “Committee”) of the Board of Directors awards stock options, restricted stock grants, restricted stock units, deferred stock and strategic performance shares to certain employees.

Awards of Express Scripts options and restricted stock units were rolled over to Cigna stock options and restricted stock units in connection with the Express Scripts acquisition on December 20, 2018. Information in this footnote includes the effect of the Express Scripts rollover awards unless otherwise indicated.

The Company records compensation expense for stock and option awards over their vesting periods primarily based on the estimated fair value at the grant date. Fair value is determined differently for each type of award as discussed below.

Accounting policy. The Company awards options to purchase Cigna common stock at the market price of the stock on the grant date except for rollover option awards issued to Express Scripts employees in connection with the acquisition. Options vest over periods ranging from one year to three years and expire no later than 10 years from grant date. Fair value is estimated using the Black-Scholes option-pricing model by applying the assumptions presented below. That fair value is reduced by options expected to be forfeited during the vesting period. The Company estimates forfeitures at the grant date based on our experience and adjusts the expense to reflect actual forfeitures over the vesting period. The fair value of options, net of forfeitures, is recognized in Selling, general and administrative expenses on a straight-line basis over the vesting period.

Black-Scholes option-pricing model assumptions and the resulting fair value of options are presented in the following table. The average fair value of options and the expected option life exclude the rollover options granted to Express Scripts employees in connection with the acquisition.


	2020			2019			2018
Dividend yield	—		%	—		%	—		%
Expected volatility	30.0		%	30.0		%	35.0		%
Risk-free interest rate	1.4		%	2.5		%	2.5		%
Expected option life	4.5 years			4.4 years			4.4 years
Weighted average fair value of options	$	52.42		$	53.10		$	64.18

The expected volatility reflects the past daily stock price volatility of Cigna stock. The Company does not consider volatility implied in the market prices of traded options to be a good indicator of future volatility because remaining traded options will expire within one year. The risk-free interest rate is derived using the four-year U.S. Treasury bond yield rate as of the award date for the primary annual grant. Expected option life reflects the Company’s historical experience.


(Options in thousands)	2020			2019			2018
	Options	Weighted Average Exercise Price		Options	Weighted Average Exercise Price		Options	Weighted Average Exercise Price
Outstanding - January 1	11,438	$	136.19	12,370	$	125.46	6,156	$	100.79
Granted	1,851	$	191.86	1,569	$	183.41	7,080	$	143.62
Exercised	(3,289)	$	115.38	(2,297)	$	106.75	(771)	$	88.35
Expired or canceled	(258)	$	188.79	(204)	$	180.08	(95)	$	165.04
Outstanding - December 31	9,742	$	152.40	11,438	$	136.19	12,370	$	125.46
Options exercisable at year-end	6,837	$	137.08	8,874	$	123.87	9,446	$	114.22


(In millions)	2020		2019		2018
Intrinsic value of options exercised	$	304	$	180	$	86
Cash received for options exercised	$	376	$	224	$	68
Tax benefit from options exercised	$	57	$	34	$	8


	Options Outstanding		Options Exercisable
Number (in thousands)	9,742		6,837
Total intrinsic value (in millions)	$	543	$	486
Weighted average exercise price	$	152.40	$	137.08
Weighted average remaining contractual life	5.8 years		4.6 years

The Company awards restricted stock (grants and units) to the Company’s employees that vest over periods ranging from one to three years. Recipients of restricted stock awards accumulate dividends during the vesting period, but forfeit their awards and accumulated dividends if their employment terminates before the vesting date.

Accounting policy. Fair value of restricted stock awards is equal to the market price of Cigna’s common stock on the date of grant. This fair value is reduced by awards that are expected to forfeit. At the grant date, the Company estimates forfeitures based on experience and adjusts the expense to reflect actual forfeitures over the vesting period. This fair value, net of forfeitures, is recognized in Selling, general and administrative expenses over the vesting period on a straight-line basis.


(Awards in thousands)	2020			2019			2018
	Grants/Units	Weighted Average Fair Value at Award Date		Grants/Units	Weighted Average Fair Value at Award Date		Grants/Units	Weighted Average Fair Value at Award Date
Outstanding - January 1	1,945	$	178.78	2,138	$	168.12	1,295	$	126.44
Awarded	791	$	191.22	870	$	183.86	1,451	$	183.29
Vested	(1,026)	$	161.58	(964)	$	160.74	(560)	$	112.53
Forfeited	(110)	$	186.63	(99)	$	168.68	(48)	$	150.84
Outstanding - December 31	1,600	$	186.12	1,945	$	178.78	2,138	$	168.12

Approximately 10,300 employees held 1.6 million restricted stock awards at the end of 2020 with $152 million of related compensation expense to be recognized over the next two years (weighted average period).

The Company awards SPSs to executives and certain other key employees generally with a performance period of three years. Half of these shares are subject to a market condition (total shareholder return relative to industry peer companies) and half are subject to a performance condition (cumulative adjusted net income). These targets are set by the Committee at the beginning of the performance period. Holders of these awards receive shares of Cigna common stock at the end of the performance period ranging anywhere from 0 to 200% of the original awards.

Accounting policy. Compensation expense for SPSs is recorded over the performance period. Fair value is determined at the grant date for “market condition” SPSs using a Monte Carlo simulation model and not subsequently adjusted regardless of the final outcome. Expense is initially accrued for “performance condition” SPSs based on the most likely outcome, but evaluated for adjustment each period for updates in the expected outcome. Expense is adjusted to the actual outcome (number of shares awarded times the share price at the grant date) at the end of the performance period.


	2020			2019			2018
(Awards in thousands)	Shares	Weighted Average Fair Value at Award Date		Shares	Weighted Average Fair Value at Award Date		Shares	Weighted Average Fair Value at Award Date
Outstanding - January 1	818	$	177.94	707	$	160.74	778	$	136.57
Awarded	362	$	191.52	389	$	184.72	221	$	197.51
Vested	(309)	$	159.67	(244)	$	139.27	(269)	$	121.57
Forfeited	(63)	$	187.76	(34)	$	178.98	(23)	$	158.16
Outstanding - December 31	808	$	190.02	818	$	177.94	707	$	160.74


	2020			2019			2018
(Shares in thousands; $ in millions)	Shares	Fair Value		Shares	Fair Value		Shares	Fair Value
Shares of Cigna common stock distributed upon SPS vesting	306	$	55	254	$	45	380	$	73

Approximately 1,500 employees held 808,000 SPSs at the end of 2020 and $63 million of related compensation expense is expected to be recognized over the next two years. The amount of expense for “performance condition” SPSs will vary based on actual performance in 2021 and 2022.

The Company records tax benefits in shareholders’ net income during the vesting period based on the amount of expense being recognized. The difference between tax benefits based on the expense and the actual tax benefit realized are also recorded in net income when stock options are exercised, or when restricted stock and SPSs vest.