Employee Incentive Plans

12 Months Ended

Dec. 31, 2012

Employee Incentive Plans [Abstract]

Employee Incentive Plans

Note 21 — Employee Incentive Plans

The People Resources Committee (“the Committee”) of the Board of Directors awards stock options, restricted stock, deferred stock and, beginning in 2010, strategic performance shares to certain employees. To a very limited extent, the Committee has issued common stock instead of cash compensation and dividend equivalent rights as part of restricted and deferred stock units. The Company issues shares from Treasury stock for option exercises, awards of restricted stock and payment of deferred and restricted stock units.

As explained further in Note 3, in connection with the HealthSpring acquisition on January 31, 2012, HealthSpring employees' awards of options and restricted shares of HealthSpring stock were rolled over to Cigna stock options and restricted stock. Unless otherwise indicated, information in this footnote includes the effect of the HealthSpring rollover awards.

Compensation cost and related tax benefits for these awards were as follows:

(In millions)	2012		2011		2010
Compensation cost	$	98	$	61	$	49
Tax benefits	$	26	$	14	$	12

The Company had the following number of shares of common stock available for award at December 31: 8.4million in 2012, 11.7million in 2011 and 7.5million in 2010.

Stock options. The Company awards options to purchase the Company's common stock at the market price of the stock on the grant date. Options vest over periods ranging from one to five years and expireno later than 10 years from grant date.

The table below shows the status of, and changes in, common stock options during the last three years:

(Options in thousands)	2012				2011				2010
			Weighted				Weighted				Weighted
			Average				Average				Average
	Options		Exercise Price		Options		Exercise Price		Options		Exercise Price
Outstanding - January 1		9,581	$	33.92		12,093	$	31.10		13,751	$	29.34
Granted		3,446	$	28.29		1,546	$	42.36		1,846	$	34.64
Exercised		(3,740)	$	22.72		(3,480)	$	27.93		(2,565)	$	24.31
Expired or canceled		(336)	$	37.85		(578)	$	33.61		(939)	$	30.86
Outstanding - December 31		8,951	$	36.29		9,581	$	33.92		12,093	$	31.10
Options exercisable at year-end		5,731	$	34.93		6,147	$	34.94		7,656	$	34.42

Compensation expense of $20million related to unvested stock options at December 31, 2012 will be recognized over the next two years(weighted average period).

The table below summarizes information for stock options exercised during the last three years:

(In millions)	2012		2011		2010
Intrinsic value of options exercised	$	95	$	53	$	30
Cash received for options exercised	$	85	$	97	$	62
Excess tax benefits realized from options exercised	$	15	$	10	$	5

The following table summarizes information for outstanding common stock options at December 31, 2012:

(Dollars in millions, except per share		Options		Options
amounts)		Outstanding		Exercisable
Number (in thousands)		8,951		5,731
Total intrinsic value	$	154	$	106
Weighted average exercise price	$	36.29	$	34.93
Weighted average remaining
contractual life		6.3 yrs		5.1 yrs

Excluding the HealthSpring rollover options, the weighted average fair value of options granted under employee incentive plans was$14.99for 2012, $13.96for 2011 and $11.56for 2010, using the Black-Scholes option-pricing model and the assumptions presented in the following table. See Note 3 for additional information regarding the valuation of the HealthSpring rollover awards.

	2012	2011	2010
Dividend yield	0.1%	0.1%	0.1%
Expected volatility	40.0%	40.0%	40.0%
Risk-free interest rate	0.8%	1.7%	1.9%
Expected option life	4.5 years	4 years	4 years

The expected volatility reflects the Company's past daily stock price volatility. The Company does not consider volatility implied in the market prices of traded options to be a good indicator of future volatility because remaining maturities of traded options are less than 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 grant. Expected option life reflects the Company's historical experience.

Restricted stock. The Company awards restricted stock to its employees or directors with vesting periods ranging from two to five years. These awards are generally in one of two forms: restricted stock grants or restricted stock units. Restricted stock grants are the most widely used form of restricted stock awards and are used for substantially all U.S.-based employees receiving such awards. Recipients of restricted stock grants are entitled to earn dividends and to vote during the vesting period, but forfeit their awards if their employment terminates before the vesting date. Awards of restricted stock units are generally limited to international employees. A restricted stock unit represents a right to receive a common share of stock when the unit vests. Recipients of restricted stock units are entitled to receive hypothetical dividends, but cannot vote during the vesting period. They forfeit their units if their employment terminates before the vesting date.

The table below shows the status of, and changes in, restricted stock grants and units during the last three years:

(Awards in thousands)	2012			2011			2010
		Weighted			Weighted			Weighted
		Average Fair Value			Average Fair Value			Average Fair Value
	Grants/Units	at Award Date		Grants/Units	at Award Date		Grants/Units	at Award Date
Outstanding - January 1	4,246	$	28.88	4,306	$	27.70	4,113	$	27.65
Awarded	1,563	$	44.37	945	$	42.62	1,155	$	34.63
Vested	(1,485)	$	27.60	(564)	$	42.79	(541)	$	40.87
Forfeited	(260)	$	33.61	(441)	$	28.99	(421)	$	29.28
Outstanding - December 31	4,064	$	35.00	4,246	$	28.88	4,306	$	27.70

The fair value of vested restricted stock was: $66 million in 2012, $24million in 2011 and $18million in 2010.

At the end of 2012, approximately3,200employees held 4.1million restricted stock grants and units with $69million of related compensation expense to be recognized over the next three years(weighted average period).

Strategic Performance Shares.The Company awards strategic performance shares to executives and certain other key employees generally with a performance period of three years.Strategic performance shares are divided into two broad groups: 50% are subject to a market condition (total shareholder return relative to industry peer companies) and 50% are subject to performance conditions (revenue growth and cumulative adjusted net income). These targets are set by the Committee. At the end of the performance period, holders of strategic performance shares will be awarded anywhere from 0 to 200% of the original grant of strategic performance shares in Cigna common stock.

The table below shows the status of, and changes in, strategic performance shares during the last three years:

(Awards in thousands)	2012			2011			2010
		Weighted			Weighted			Weighted
	Grants/	Average Fair Value		Grants/	Average Fair Value		Grants/	Average Fair Value
	Units	at Award Date		Units	at Award Date		Units	at Award Date
Outstanding - January 1	834	$	39.45	430	$	34.73	-	$	-
Awarded	842	$	44.49	529	$	42.92	480	$	34.73
Forfeited	(76)	$	43.39	(125)	$	37.92	(50)	$	34.65
Outstanding - December 31	1,600	$	41.92	834	$	39.45	430	$	34.73

At the end of 2012, approximately 955 employees held 1.6million strategic performance shares and $26 million of related compensation expense was expected to be recognized over the next two years. For strategic performance shares subject to a performance condition, the amount of expense may vary based on actual performance in 2013 and 2014.