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

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 under each award type below.

Accounting policy. The Company awards options to purchase Cigna common stock at the market price of the stock on the grant date. Options vest over periods ranging from one to five 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 adjust the expense to reflect actual forfeitures over the vesting period. The fair value of options, net of forfeitures, is recognized in operating expenses on a straight line basis over the vesting period.

Compensation cost for stock options recorded in operating expenses was as follows for the years ended December 31:

Black-Scholes option-pricing model assumptions and the resulting fair value of options are presented in the following table.

		2016		2015		2014
Dividend yield		0.0%		0.0%		0.1%
Expected volatility		35.0%		35.0%		35.0%
Risk-free interest rate		1.2%		1.3%		1.3%
Expected option life		4.3 years		4.3 years		4.3 years
Weighted average fair value of options	$	42.01	$	36.40	$	23.56

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.

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

(Options in thousands)	2016				2015				2014
			Weighted				Weighted				Weighted
			Average				Average				Average
	Options		Exercise Price		Options		Exercise Price		Options		Exercise Price
Outstanding - January 1		6,433	$	68.86		7,331	$	51.84		7,350	$	42.24
Granted		1,336	$	139.20		1,410	$	120.94		2,012	$	78.11
Exercised		(577)	$	62.09		(2,146)	$	43.63		(1,869)	$	41.29
Expired or canceled		(95)	$	117.18		(162)	$	86.04		(162)	$	64.27
Outstanding - December 31		7,097	$	82.01		6,433	$	68.86		7,331	$	51.84
Options exercisable at year-end		4,409	$	58.36		3,414	$	46.55		3,919	$	38.11

Compensation expense of $37 million related to unvested stock options at December 31, 2016 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)	2016		2015		2014
Intrinsic value of options exercised	$	41	$	179	$	84
Cash received for options exercised	$	36	$	94	$	76

The following table summarizes information for outstanding common stock options at December 31, 2016:

		Options		Options
		Outstanding		Exercisable
Number (in thousands)		7,097		4,409
Total intrinsic value (in millions)	$	372	$	331
Weighted average exercise price	$	82.01	$	58.36
Weighted average remaining contractual life		6.5		5.3

The Company awards restricted stock to the Company's 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 and are used for substantially all U.S.-based employees receiving such awards. Recipients of restricted stock grants accumulate dividends and can vote during the vesting period, but forfeit their awards and accumulated dividends if their employment terminates before the vesting date. Awards of restricted stock units are generally limited to overseas 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 accumulate hypothetical dividends, but cannot vote during the vesting period. They forfeit their units 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 other operating expenses over the vesting period on a straight line basis.

Compensation cost for restricted stock grants and units was as follows for the years ended December 31:

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

(Awards in thousands)	2016			2015			2014
		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	1,642	$	72.58	2,121	$	53.59	2,844	$	41.56
Awarded	315	$	138.61	352	$	121.93	454	$	78.99
Vested	(591)	$	50.01	(736)	$	41.99	(1,065)	$	32.34
Forfeited	(57)	$	92.51	(95)	$	68.31	(112)	$	52.95
Outstanding - December 31	1,309	$	97.78	1,642	$	72.58	2,121	$	53.59

At the end of 2016, approximately 4,400 employees held 1.3 million restricted stock grants and units with $55 million of related compensation expense to be recognized over the next two years (weighted average period).

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 (2014 awards: revenue growth and cumulative adjusted net income; 2015 and 2016 awards, 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.

Accounting policy. Compensation expense for strategic performance shares is recorded over the performance period. For strategic performance shares with payment dependent on a market condition, fair value is determined at the grant date using a Monte Carlo simulation model and not subsequently adjusted regardless of the final outcome. For strategic performance shares with payment dependent on performance conditions, expense is initially accrued based on the most likely outcome, but evaluated for adjustment each period for updates in the expected outcome. At the end of the performance period, expense is adjusted to the actual outcome (number of shares awarded times the share price at the grant date). At the grant date, the Company estimates forfeitures based on experience and adjusts the expense to reflect actual forfeitures over the vesting period.

Compensation expense for strategic performance shares was as follows for the years ended December 31:

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

(Awards in thousands)	2016			2015			2014
		Weighted			Weighted			Weighted
		Average Fair Value			Average Fair Value			Average Fair Value
	Shares	at Award Date		Shares	at Award Date		Shares	at Award Date
Outstanding - January 1	1,188	$	81.68	1,547	$	59.20	1,572	$	49.67
Awarded	286	$	139.05	311	$	121.78	450	$	78.50
Vested	(494)	$	60.15	(608)	$	45.51	(397)	$	43.53
Forfeited	(38)	$	112.70	(62)	$	76.33	(78)	$	58.41
Outstanding - December 31	942	$	109.14	1,188	$	81.68	1,547	$	59.20

(Shares in thousands; $ in millions)	2016				2015				2014
	Shares		Fair Value		Shares		Fair Value		Shares		Fair Value
Shares of Cigna common stock distributed upon SPS vesting		768	$	109		972	$	119		719	$	57

At the end of 2016, approximately 1,400 employees held 942,000 strategic performance shares and $37 million of related compensation expense is 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 2017 and 2018.

During the vesting period, the Company records tax benefits in shareholders' net income based on the amount of expense being recognized. Beginning in 2016, in connection with the early adoption of ASU 2016-09 discussed in Note 2, when stock options are exercised, or when restricted stock and strategic performance share awards vest, the difference between tax benefits based on the expense and the actual tax benefit realized are also recorded in net income. Prior to 2016, such excess tax benefits were recorded as an adjustment to additional paid-in capital. The table below provides information about the cost and tax benefits related to all of our share-based compensation arrangements.

(In millions)	2016		2015		2014
Total compensation cost for shared-based awards	$	128	$	111	$	101
Tax benefits recognized in earnings based on expense	$	28	$	24	$	12
Excess tax benefits realized from options exercised and awards vested	$	29	$	60	$	35