DEF 14A 1 d311702ddef14a.htm DEF 14A DEF 14A
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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

SCHEDULE 14A

Proxy Statement Pursuant to Section 14(a) of

the Securities Exchange Act of 1934 (Amendment No.         )

Filed by the Registrant

Filed by a Party other than the Registrant

Check the appropriate box:

 

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Cigna Corporation

(Name of Registrant as Specified In Its Charter)

(Name of Person(s) Filing Proxy Statement, if other than the Registrant)

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LOGO

 

NOTICE OF

2017

ANNUAL MEETING OF SHAREHOLDERS

AND PROXY STATEMENT

CIGNA®

April 26, 2017 at 8:00 a.m.

Sheraton Hartford Hotel (at Bradley Airport)

1 Bradley International Airport

Windsor Locks, Connecticut 06096


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LOGO

March 17, 2017

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 40,000 colleagues around the globe, we are pleased to cordially invite you to attend our 2017 Annual Meeting of Shareholders on April 26, 2017. The attached Notice of 2017 Annual Meeting of Shareholders and Proxy Statement contains important information about the business to be conducted at the Annual Meeting.

During the past year we continued to build on our numerous successes of the past seven years, including growing our number of customer relationships to more than 94 million, and delivering innovative tools and capabilities to drive quality, affordability, personalization and differentiated value. We continue to anticipate and meet our customers’ emerging needs with solutions and partnerships that better connect individuals and health care professionals to improve their health and well-being.

While we delivered strong revenue and customer growth in the face of considerable market disruptions this year, earnings were pressured by uncharacteristic challenges in the first half of the year for two of our historically well-performing businesses. Ultimately, Cigna concluded 2016 with strong momentum and remains in a solid position to drive attractive earnings and customer growth both in 2017 and over the long-term.

Our journey to create a more sustainable health care system originally motivated our proposed combination with Anthem as we sought to further expand choice, improve affordability and quality, and accelerate value-based care programs. In the second half of 2016, the Department of Justice sued to prevent our merger with Anthem; the federal district court has enjoined the proposed merger and litigation continues.

Throughout this process, we continued to invest in our businesses, and continued contingency planning for other potential paths if necessary — including a sovereign path. As we lead the healthcare industry in consumer engagement, continue supporting our customers through their diverse life and health stages, and contribute to building a sustainable health care system, we have a clear path ahead to create value in the marketplace, and eagerly and optimistically look to Cigna’s future.

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 2017 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 91 and 92 of the proxy statement.

We look forward to seeing you at the 2017 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

 


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NOTICE OF 2017 ANNUAL MEETING OF SHAREHOLDERS

 

 

 

LOGO

 

DATE AND TIME:   

Wednesday, April 26, 2017 at 8:00 a.m.

 

PLACE:   

Sheraton Hartford Hotel at Bradley Airport

1 Bradley International Airport

Windsor Locks, Connecticut 06096

 

ITEMS OF BUSINESS:   

Proposal 1: Election of seven director nominees for one-year terms expiring in April 2018.

 

Proposal 2: Advisory approval of executive compensation.

 

Proposal 3: Advisory approval of the frequency of future advisory votes on executive compensation.

 

Proposal 4: Approval of the Amended and Restated Cigna Long-Term Incentive Plan.

 

Proposal 5: Ratification of the appointment of PricewaterhouseCoopers LLP as the Company’s independent registered public accounting firm for 2017.

 

Proposal 6: Consideration of a shareholder proposal, if properly presented.

 

Consideration of any other business properly brought before the meeting.

 

RECORD DATE:   

You may vote on the matters presented at the Annual Meeting if you were a shareholder of record on February 27, 2017.

 

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 17, 2017    

By order of the Board of Directors,

 

   

/s/ Neil Boyden Tanner

    Neil Boyden Tanner
    Corporate Secretary

 

 

Important Notice Regarding the Availability of Proxy Materials for

the Annual Meeting of Shareholders To Be Held on April 26, 2017

 

The Notice of Annual Meeting, Proxy Statement and Annual Report for

the fiscal year ended December 31, 2016 are available at www.envisionreports.com/ci.

 

 

 

   


Table of Contents

 

 

TABLE OF CONTENTS

 

 

 

PROXY STATEMENT SUMMARY      1  
CORPORATE GOVERNANCE MATTERS      7  

ELECTION OF DIRECTORS (PROPOSAL 1)

     7  

PROCESS FOR DIRECTOR ELECTIONS

     7  

PROCESS FOR SELECTING AND NOMINATING DIRECTORS

     7  

BOARD OF DIRECTORS’ NOMINEES

     10  

DIRECTORS WHO WILL CONTINUE IN OFFICE

     15  

CORPORATE GOVERNANCE POLICIES AND PRACTICES

     16  

DIRECTOR INDEPENDENCE

     17  

BOARD LEADERSHIP STRUCTURE

     17  

BOARD EVALUATIONS AND BOARD EFFECTIVENESS

     18  

RESPONSIBILITIES OF THE BOARD

     19  

BOARD MEETINGS AND COMMITTEES

     20  

CODES OF ETHICS

     22  

ANNUAL POLITICAL CONTRIBUTIONS AND LOBBYING ACTIVITY REPORT

     22  

CORPORATE RESPONSIBILITY REPORT

     22  

CERTAIN TRANSACTIONS

     22  

NON-EMPLOYEE DIRECTOR COMPENSATION

     23  

OVERVIEW

     23  

DIRECTOR COMPENSATION PROGRAM

     23  

DIRECTOR COMPENSATION TABLE FOR 2016

     25  

DIRECTOR OWNERSHIP

     26  
COMPENSATION MATTERS      27  

ADVISORY APPROVAL OF EXECUTIVE COMPENSATION (PROPOSAL 2)

     27  

ADVISORY APPROVAL OF THE FREQUENCY OF FUTURE ADVISORY VOTES ON EXECUTIVE COMPENSATION (PROPOSAL 3)

     28  

COMPENSATION DISCUSSION AND ANALYSIS

     29  

EXECUTIVE SUMMARY

     29  

EXECUTIVE COMPENSATION POLICIES AND PRACTICES

     32  

ELEMENTS OF COMPENSATION

     36  

EMPLOYMENT ARRANGEMENTS AND POST-TERMINATION PAYMENTS

     47  

PROCESSES AND PROCEDURES FOR DETERMINING EXECUTIVE COMPENSATION

     48  

OTHER PRACTICES

     51  

EXECUTIVE COMPENSATION TABLES

     54  

2016 SUMMARY COMPENSATION TABLE

     54  

GRANTS OF PLAN-BASED AWARDS IN 2016

     56  

OUTSTANDING EQUITY AWARDS AT YEAR-END 2016

     58  

OPTION EXERCISES AND STOCK VESTED IN 2016

     60  

PENSION BENEFITS FOR 2016

     61  

NONQUALIFIED DEFERRED COMPENSATION FOR 2016

     64  

POTENTIAL PAYMENTS UPON TERMINATION OR CHANGE OF CONTROL

     65  

REPORT OF THE PEOPLE RESOURCES COMMITTEE

     69  

APPROVAL OF THE AMENDED AND RESTATED CIGNA LONG-TERM INCENTIVE PLAN (PROPOSAL 4)

     70  
AUDIT MATTERS      79  

RATIFICATION OF APPOINTMENT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM (PROPOSAL 5)

     79  

REPORT OF THE AUDIT COMMITTEE

     82  
SHAREHOLDER PROPOSAL – SHAREHOLDER PROXY ACCESS (PROPOSAL 6)      83  
OWNERSHIP OF CIGNA COMMON STOCK      86  

STOCK HELD BY DIRECTORS, NOMINEES AND EXECUTIVE OFFICERS

     86  

STOCK HELD BY CERTAIN BENEFICIAL OWNERS

     88  

SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE

     88  
ANNUAL MEETING INFORMATION      89  
ANNEX A – NON-GAAP MEASURES      A-1  
ANNEX B – SURVEY DATA FOR PRESIDENT – INTERNATIONAL MARKETS      B-1  
ANNEX C – GENERAL INDUSTRY PEER GROUP      C-1  
APPENDIX A – AMENDED AND RESTATED CIGNA LONG-TERM INCENTIVE PLAN      Appendix-1  


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PROXY STATEMENT SUMMARY

 

 

 

We provide below highlights of certain information in this Proxy Statement. As it is only a summary, please refer to the complete Proxy Statement and 2016 Annual Report before you vote.

Mission and Strategy

 

Cigna’s mission is to improve the health, well-being and sense of security of the people we serve in our more than 94 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, focus, execution, 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.

Our Mission

To improve the health, well-being and sense of security of the people we serve

 

 

Our Strategy

Go Deep within existing geographies and products, Go Global to offer solutions in

adjacent and new markets and Go Individual to serve the holistic needs of an individual

 

 

 

LOGO

 

 

Our proven Go Deep, Go Global, Go Individual strategy is delivering value as we help the people we serve maintain and improve their health as well as achieve high quality, affordable care when needed. First, our well-positioned, diverse and growing portfolio of businesses is delivering innovative solutions that meet the needs of customers and clients around the world. Second, we continue to have significant financial flexibility, with a strong return on capital in each of our business segments, which provides us with 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.

Proposed Merger with Anthem

Cigna entered into the merger in order to create a combined company that would expand choice, improve affordability and quality, and further accelerate value-based care. In February 2017, the U.S. District Court for the District of Columbia enjoined the proposed merger and an appeal of that decision is now pending before the Appeals Court. Also in February, we sent Anthem a notice terminating the merger agreement and the parties are now litigating whether the merger agreement remains in effect. Until this matter is resolved, we continue to abide by the terms of the merger agreement. Throughout this process, we have continued to invest in our businesses, and continued contingency planning for other potential paths if necessary – including a sovereign path.

 

LOGO  

 

Cigna 2017 Notice of Annual Meeting of Shareholders and Proxy Statement

    

 

 

 

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       PROXY STATEMENT SUMMARY

 

 

Business Performance

 

In 2016, consolidated revenue increased 5% to $39.7 billion, as we continue to focus on our mission to improve the health, well-being and sense of security of the people we serve. Consolidated adjusted income from operations* for 2016 was $2.1 billion, compared to $2.3 billion in 2015, reflecting strong performance in our Commercial Healthcare and Global Supplemental Benefits businesses and challenges during the year related to our Group Disability and Life and Seniors businesses. We made notable progress in the second half of 2016 addressing those challenges. Specifically, we gained traction in our Group Disability business as the claims process modifications made earlier in 2016 continued to mature, we experienced more stable claims in our Life business and, within Seniors, we made progress with our remediation efforts and are in the later stages of our audit response work. We concluded 2016 with strong momentum that positions Cigna for attractive earnings and customer growth in 2017.

 

CONSOLIDATED REVENUES

(IN BILLIONS)

 

LOGO

 

CONSOLIDATED ADJUSTED INCOME

FROM OPERATIONS*

(IN BILLIONS)

 

LOGO

* We encourage you to review our Annual Report on Form 10-K for the year ended December 31, 2016 for more complete financial information. Consolidated adjusted income from operations is a measure of profitability used by Cigna’s management because it presents the underlying results of operations of Cigna’s businesses and permits analysis of trends in underlying revenue, expenses and shareholders’ net income. This consolidated measure is not determined in accordance with accounting principles generally accepted in the United States (GAAP) and should not be viewed as a substitute for the most directly comparable GAAP measure, shareholders’ net income. Shareholders’ net income was $1.6 billion, $1.5 billion, $2.1 billion, $2.1 billion and $1.9 billion for the years ended December 31, 2012, 2013, 2014, 2015 and 2016, respectively. For a reconciliation of consolidated adjusted income from operations to shareholders’ net income, see Annex A.

Total Shareholder Return

 

 

The following chart shows our cumulative Total Shareholder Return (TSR) as of December 31, 2016, on a one-, three- and five-year basis. Cigna’s three-year annual compounded TSR was 15.1%, placing Cigna at the 67th percentile of its peers for the 2014–2016 Strategic Performance Share performance period.

CUMULATIVE TOTAL

SHAREHOLDER RETURN

 

LOGO

 

 

 

 

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Cigna 2017 Notice of Annual Meeting of Shareholders and Proxy Statement


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PROXY STATEMENT SUMMARY

 

 

Board of Directors

 

 

CURRENT

DIRECTORS

  AGE     OCCUPATION  

COMMITTEE

MEMBERSHIPS

     

David M. Cordani

    51    

President and Chief Executive Officer of Cigna

 

Executive

     

Eric J. Foss

    58    

Chairman, President and Chief Executive Officer of ARAMARK Corporation

 

Corporate Governance
People Resources

     

Isaiah Harris, Jr.

    64    

Former President and Chief Executive Officer of AT&T Advertising & Publishing – East

 

Chairman of the Board Executive (Chair)

     

Jane E. Henney, M.D.

    69    

Former Senior Vice President, Provost and Professor of Medicine, University of Cincinnati College of Medicine

 

Corporate Governance (Chair) Executive
People Resources

     

Roman Martinez IV

    69    

Private Investor

 

Audit (Chair)
Executive
Finance

     

John M. Partridge*

    67    

Former President of Visa, Inc.

 

Finance (Chair)
Executive
People Resources

     

James E. Rogers*

    69    

Former Chairman, President and Chief Executive Officer of Duke Energy Corporation

 

Audit
Finance

     

Eric C. Wiseman*

    61    

Executive Chairman of VF Corporation

 

Finance
People Resources

     

Donna F. Zarcone

    59    

President and Chief Executive Officer of The Economic Club of Chicago

 

Audit
Finance

     

William D. Zollars

    69    

Former Chairman, President and Chief Executive Officer of YRC Worldwide, Inc.

 

People Resources (Chair) Executive
Corporate Governance

 

  * Current term expires at the 2018 annual meeting of shareholders.

 

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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 2016 annual meeting of shareholders, the phased implementation of the Board’s declassified structure began 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.

 

KEY GOVERNANCE PRACTICES

 

      

   Independent board of directors with diversity in composition, skills and experience

 

   Independent Chairman of the Board

 

   Regular executive sessions of the Board and its committees

 

   Director elections by majority voting

 

   Annual election of all directors beginning in 2018

 

   Separate Code of Business Conduct and Ethics for the Board

      

 

   Independent Audit, Corporate Governance, Finance and People Resources Committees

 

   Annual self-evaluations of the Board, its committees and individual directors, including periodic independent third party assessments

 

   Majority of director compensation delivered in Cigna common stock

 

•   Meaningful stock ownership guidelines for directors

      

 

 

 

 

 

4

    

 

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PROXY STATEMENT SUMMARY

 

 

Executive Compensation

 

Cigna’s executive compensation program is based on the philosophy that executive pay should strongly align with the interests of our shareholders, directly link to Company and individual performance and attract and retain executive talent. We believe the achievement of our enterprise goals will result in the creation of meaningful and sustained long-term value for our shareholders. Each of the measures in our performance-based plans are designed to align with and support our business strategy – focusing on driving enterprise profitability, growth and operating expense efficiency to support investment in innovation, customer loyalty and stock performance.

As a result of our 2016 financial performance, payouts under the 2016 Management Incentive Plan were lower than in recent years and below target levels, reflecting strong pay-for-performance alignment.

In 2016, our shareholders overwhelmingly cast advisory votes in favor of our executive compensation program, with approximately 93% of votes cast in favor.

 

COMPENSATION GOVERNANCE AND CONTROLS

 

      

   “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

 

•   No excessive perquisites

 

•   Oversight by the People Resources Committee of people development policies and processes, including consideration of assessments of executive officers and key senior management

 

•   CEO and executive officer succession plans overseen by the Board of Directors, with assistance from the People Resources Committee

 

•   An annual assessment by the People Resources Committee of any potential risks and associated internal controls in our incentive compensation programs and policies

 

      

 

The target pay mix for the Chief Executive Officer and the other named executive officers during 2016 reflects our executive compensation philosophy that emphasizes performance-based compensation over fixed compensation. The percentages shown below are targets only and will not match the percentages calculable from the compensation reflected in the Summary Compensation Table on page 54.

 

CEO TARGET

PAY MIX

    

OTHER NEO AVERAGE

TARGET PAY MIX

 

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PROXY STATEMENT SUMMARY

 

 

Voting Matters and Board Recommendations

 

 

MANAGEMENT PROPOSALS

  BOARD
    RECOMMENDATION
    

Proposal 1. Election of Directors.

 

The Board and the Corporate Governance Committee believe that the seven director nominees, David M. Cordani, Eric J. Foss, Isaiah Harris, Jr., Jane E. Henney, M.D., Roman Martinez IV, Donna F. Zarcone and William D. Zollars, bring a combination of diverse qualifications, skills and experience that contributes to 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.

  FOR

each of the nominees

Proposal 2. Advisory Approval of Executive Compensation.

 

The Board believes that Cigna’s 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 Cigna’s performance and rewarding our executive officers for the creation of long-term value for Cigna’s shareholders. Because your vote is advisory, it will not be binding upon the Board. However, the Board and People Resources Committee value your opinion and will review and consider the voting results when making future executive compensation decisions.

  FOR

Proposal 3. Advisory Approval of the Frequency of Further Advisory Votes on Executive Compensation.

 

The Board believes that an advisory vote on executive compensation that occurs every year is the most appropriate alternative for Cigna. An annual advisory vote on executive compensation will enable shareholders to provide direct input to the Company regarding our compensation philosophy, policies and practices as disclosed in the proxy statement each year. 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 take into account the outcome of the vote when considering the frequency of future advisory votes on executive compensation.

  FOR

every “one-year”

Proposal 4. Approval of the Amended and Restated Cigna Long-Term Incentive Plan.

 

The Cigna Long-Term Incentive Plan awards are an essential part of the total compensation package for our employees. They reflect the importance the Company places on using long-term incentives to motivate employees, reward them for superior long-term results and align the interests of Cigna’s employees with the interests of its shareholders.

  FOR

Proposal 5. Ratification of the Appointment of PricewaterhouseCoopers LLP as our Independent Registered Public Accounting Firm for 2017.

 

The Audit Committee approved the appointment of PricewaterhouseCoopers LLP as Cigna’s independent registered public accounting firm for 2017. The Audit Committee and the Board believe that the continued retention of PricewaterhouseCoopers LLP to serve as the Company’s independent registered public accounting firm is in the best interests of the Company and its shareholders. As a matter of good corporate governance, the Board is seeking shareholder ratification of the appointment.

  FOR

SHAREHOLDER PROPOSAL

  BOARD
RECOMMENDATION

Proposal 6. Shareholder Proxy Access.

 

The Board believes that Cigna should have the opportunity to meaningfully consider appropriate and balanced terms of a proxy access bylaw that are more consistent with market practices and good corporate governance standards. The Board intends to complete its proxy access evaluation as soon as practicable, with a goal of implementing proxy access on terms it believes are in the shareholders’ best interests in advance of the 2018 annual meeting of shareholders.

  AGAINST

 

 

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CORPORATE GOVERNANCE MATTERS

 

 

Election of Directors (Proposal 1)

 

 

The Board of Directors is elected by Cigna’s shareholders. At the Annual Meeting, the Board is nominating seven directors for one-year terms expiring in 2018 for election by shareholders. The role of the Board, its leadership structure and governance practices are described below in the Corporate Governance Policies and Practices section beginning on page 16. This section describes the process for director elections and director nominations, identifies the director responsibilities and qualifications considered by the Board and the Corporate Governance Committee in selecting and nominating directors and presents the biographies, skills and qualifications of the director nominees and those directors continuing in office.

PROCESS FOR DIRECTOR ELECTIONS

At the 2016 annual meeting of shareholders, the phased implementation of the Board’s declassified structure began. Directors elected at this Annual Meeting will serve a one-year term, expiring at the 2018 annual meeting of shareholders. Three directors, Messrs. Partridge, Rogers and Wiseman, will complete their three-year term at the 2018 annual meeting of shareholders, at which time all directors will be elected to one-year terms and the classified structure will be fully eliminated.

Cigna has adopted a majority voting standard for the election of directors in uncontested elections. Under this standard, each director must receive a majority of the votes cast with respect to that director. This means that the number of votes cast “for” a director nominee must exceed the number of votes cast “against” that nominee for the director to be elected. Each director has agreed to tender, and not withdraw, his or her resignation if he or she does not receive a majority of the votes cast at the Annual Meeting. The Corporate Governance Committee will make a recommendation to the Board on whether to accept the resignation. The Board has discretion to accept or reject the resignation. A director whose resignation is under consideration will not participate in the decisions of the Corporate Governance Committee or the Board concerning his or her resignation. In contested elections, the voting standard is a plurality of votes cast.

PROCESS FOR SELECTING AND NOMINATING DIRECTORS

Director Selection and Nomination Process

The Corporate Governance Committee assesses the Board’s composition as part of the annual self-evaluation of the Board (described on page 18). When considering whether to nominate current directors for re-election, the Corporate Governance Committee and the Board review the Board’s annual self-evaluation and the individual director’s performance against the expectations for Board membership (identified below under Director Expectations and Qualifications). The Board considers its composition as part of its annual evaluation. The Board may nominate for election, and appoint to fill vacant or new Board positions, only those persons who agree to adhere to the Company’s majority voting standard (described above under Process for Director Elections).

From time to time, the Corporate Governance Committee retains a third-party search firm to assist in identifying and evaluating candidates for Board membership. The Corporate Governance Committee also considers suggestions for Board nominees submitted by shareholders, which are evaluated using the same criteria as new director candidates and current director nominees.

Once a potential candidate has been identified, the Corporate Governance Committee reviews the background of the new director candidate and presents him or her to the Board for consideration. When considering director candidates and the current composition of the Board, the Corporate Governance Committee and the Board consider how each candidate’s background, experiences, skills and/or prior board and committee service will contribute to the diversity of the Board. In addition, the Corporate Governance Committee and the Board consider the Company’s business strategy and how each director candidate’s background complements that strategy. Candidates interview with the Chair of the Corporate Governance Committee and the Chairman of the Board, as well as other members of the Board, as appropriate.

 

 

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CORPORATE GOVERNANCE MATTERS

 

 

Director Expectations and Qualifications

The Corporate Governance Committee, in consultation with the Board, has identified individual director expectations and qualifications, characteristics, skills and experience that it believes every member of the Board should have. In addition, the Corporate Governance Committee has identified areas of expertise that it believes support Cigna’s business strategy in the short- and long-term, enable the Board to exercise its oversight function and contribute to a well-rounded Board. In developing these areas of expertise, the Board considered the skills necessary to support business strategy and the skills and experiences reflected on the boards of companies within Cigna’s peer group, as well as best practices among other large companies. The Board regularly reviews the identified areas to ensure they support changes in the Company’s strategy and the Board’s needs. The Corporate Governance Committee and the Board take into consideration these criteria and the mix of experience as part of the director recruitment, selection, evaluation and nomination process.

 

 

Expectations of Every Director

 

      
 

•    Understand Cigna’s businesses and the importance of the creation of shareholder value

 

•    Participate in an active, constructive and objective way at Board and committee meetings

 

•    Review and understand advance briefing materials

 

•    Contribute effectively to the Board’s evaluation of executive talent, compensation and succession planning

    

•    Contribute effectively to the Board’s assessment of strategy and risk

 

•    Share expertise, experience, knowledge and insights on matters before the Board

 

•    Advance Cigna’s business objectives and reputation

 

•    Demonstrate an ongoing commitment to consult and engage with the CEO and senior management outside of Board and committee meetings on matters affecting Cigna

 
        

 

 

Qualifications, Characteristics, Skills and Experience of Every Director

 

 
 

•    Good judgment and strong commitment to ethics and integrity

 

•    Ability to analyze complex business and public policy issues and provide relevant input concerning the Company’s business strategy

 

•    Free of conflicts of interest

    

•    Ability to assess different risks and impact on shareholder value

 

•    Contribution to the Board’s overall diversity of thought

 

•    High degree of achievement in their respective fields

 
        

While the Board does not have a formal policy with regard to diversity, the Corporate Governance Committee works to ensure that the Board is comprised of individuals with expertise in fields relevant to Cigna’s business, experience from different professions and industries, a diversity of age, ethnicity, gender and global experience and a range of tenures. The Board believes that a range of tenure allows both new perspective and continuity. This continuity has proven beneficial given the complexities of the health care industry and the significant change and uncertainty the health care industry has faced over the past several years.

 

DIVERSITY   AGE   TENURE
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AREAS OF EXPERTISE REFLECTED ON CIGNA’S

BOARD OF DIRECTORS

 

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.

Finance

 

An understanding of finance, capital markets and financial reporting processes is necessary for a well-rounded Board because of the importance we place on accurate financial reporting and robust financial controls and compliance. In addition, Cigna’s business involves complex financial transactions.

Healthcare and Delivery Systems

 

As we work to create a sustainable health care ecosystem, the Board values directors with experience on issues related to reducing health costs to patients through provision of care management and the use of innovative delivery system solutions.

Information Technology

 

Effective information systems and the integrity and timeliness of data we use to serve our customers and health care professionals are integral to the operation of our business. For this reason, the Board benefits from directors with leadership experience related to the development, installation, implementation, security or maintenance of computer systems, applications and digital informatics.

International/Global

 

In furtherance of our Go Global strategy, the Board values directors with leadership experience overseeing non-U.S. operations and working in diverse cultures around the world.

Marketing and Consumer Insights

 

The Go Deep and Go Individual aspects of our customer-focused strategy support inclusion of 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.

Regulated Industry/Public Policy

 

Our business is highly regulated at the federal, state, local and international levels. For this reason, the Board benefits from 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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Other Practices and Policies Related to Director Service

In addition to working to ensure that the Board is comprised of diverse and qualified individuals, the Board has adopted the following governance policies and practices that contribute to a well-functioning Board.

 

Limits on Public Company

Directorships

 

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 Cigna’s 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.

Change in Director’s Principal Position

  If a director changes his or her principal employment position, that director is required to tender his or her resignation from the Board to the Corporate Governance Committee. The Committee will then recommend to the Board whether to accept or decline the resignation.

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.

Continuing Education for Directors

  The Board is regularly updated on Cigna’s 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 Cigna’s Board. The Corporate Governance Committee oversees the continuing education practices, and the Company is kept apprised of director participation.

BOARD OF DIRECTORS’ NOMINEES

Upon the recommendation of the Corporate Governance Committee, the Board is nominating the seven directors listed below for re-election for one-year terms to expire in April 2018. 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 Cigna’s business and strategy.

 

                       
      

 

The Board of Directors unanimously recommends that shareholders vote FOR the nominees

listed below.

 
   
     
                       

 

 

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  LOGO    

DAVID M. CORDANI

President, Chief Executive Officer and Director of Cigna

 

AGE: 51

 

DIRECTOR SINCE: 2009

 

COMMITTEES: Executive

 

Mr. Cordani has served as Cigna’s Chief Executive Officer since December 2009 and as President since June 2008. He served as Chief Operating Officer from June 2008 until December 2009; President, Cigna HealthCare from 2005 until 2008; and Senior Vice President, Customer Segments & Marketing, Cigna HealthCare from 2004 until 2005. He has been employed by Cigna since 1991. He is a member of the Business Roundtable and serves on the U.S.-India Business Council Board of Directors. In 2016, Mr. Cordani received the Leadership in the Nation’s Interest award from the Committee for Economic Development, a nonprofit, nonpartisan, business-led public policy organization. Mr. Cordani was named one of Fortune Magazine’s Top Business Persons of the Year in 2015. Mr. Cordani received his Bachelor of Business Administration from Texas A&M University and his MBA from the University of Hartford. His current term as a Director of Cigna expires in 2017.

Other Public Company Directorships:

General Mills, Inc. (2014-Present)

Business Leader. Mr. Cordani has extensive executive leadership and management experience, including through his current role as President and Chief Executive Officer of Cigna. Mr. Cordani has spearheaded Cigna’s transformation into a leading global health service company, more than doubling the size of the business since 2009. His prior role as Chief Operating Officer also encompassed broad responsibility for Cigna’s global business and corporate functions.

Finance. Mr. Cordani served as Business Financial Officer for Cigna’s healthcare division and in senior roles in corporate accounting and planning. He was formerly a CPA with public accounting experience at Coopers & Lybrand.

Healthcare and Delivery Systems. Mr. Cordani is President and Chief Executive Officer of Cigna Corporation, a global health service company and previously served as President of the Cigna HealthCare business segment. His long tenure with Cigna provides Mr. Cordani with unique perspective of the evolution of the healthcare service sector and the innovation of health delivery models.

Information Technology. Mr. Cordani manages Cigna’s information technology investments in support of business and strategic objectives.

Marketing and Consumer Insights. As Chief Executive Officer, he leads Cigna’s Go Deep, Go Global, Go Individual strategy, to deliver value in more than 94 million customer relationships around the world.

Regulated Industry/Public Policy. Mr. Cordani is actively engaged in public policy related to the highly regulated healthcare industry and other global business markets.

  LOGO    

ERIC J. FOSS

Chairman, President and Chief Executive Officer of ARAMARK Corporation

 

AGE: 58

 

DIRECTOR SINCE: 2011

 

COMMITTEES: Corporate Governance, People Resources

Mr. Foss has been Chairman of the Board of ARAMARK Corporation, a publicly traded provider of food services, facilities management and uniform services, since February 2015, and President and Chief Executive Officer since May 2012. He served as Chief Executive Officer of Pepsi Beverages Company, a beverage manufacturer, seller and distributor and a division of PepsiCo, Inc., from 2010 until December 2011. He was the Chairman and Chief Executive Officer of The Pepsi Bottling Group, Inc. from 2008 until 2010; President and Chief Executive Officer from 2006 until 2008; and Chief Operating Officer from 2005 until 2006. Mr. Foss received his Bachelor of Science degree from Ball State University. His current term as a Director of Cigna expires in 2017.

Other Public Company Directorships:

ARAMARK Corporation (2012-Present)

UDR, Inc. (2003-2015)

The Pepsi Bottling Company (2006-2010)

Business Leader. Mr. Foss has extensive leadership experience through his roles as Chairman, President and CEO of ARAMARK Corporation, combined with his 30-year career at Pepsi Beverages Company and The Pepsi Bottling Group, including his role as Chairman and CEO.

Finance. As Chairman, President and CEO of ARAMARK and as CEO of Pepsi Beverages Company and The Pepsi Bottling Group, his experience includes oversight of financial operations, financial reporting, merger and acquisition activities and corporate restructurings. He led ARAMARK’s initial public offering in 2013 and was instrumental in The Pepsi Bottling Group’s initial public offering and oversaw its acquisition by PepsiCo.

International/Global. Mr. Foss’ responsibilities at ARAMARK, Pepsi Beverages Company and The Pepsi Bottling Group included international business leadership, managing the challenges of operating a global business and strategic planning. At ARAMARK, he has oversight of operations in 20 countries, and throughout his tenure at Pepsi Beverage Company and The Pepsi Bottling Group, had responsibilities for global operations including international assignments.

Marketing and Consumer Insights. Mr. Foss’ service as CEO of Pepsi Beverages Company and The Pepsi Bottling Group provided him experience as an executive officer of a consumer oriented company.

 

 

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ISAIAH HARRIS, JR.

Former President and Chief Executive Officer of AT&T Advertising & Publishing — East

 

AGE: 64

 

DIRECTOR SINCE: 2005

 

COMMITTEES: Executive (Chair)

Mr. Harris has served as Cigna’s Chairman of the Board since December 2009 and served as Vice-Chairman of the Board from July 2009 through December 2009. Mr. Harris served as President and Chief Executive Officer of AT&T Advertising & Publishing — East (formerly BellSouth Advertising & Publishing Group), a communications services company, from 2005 until his retirement in 2007; as President, BellSouth Enterprises, Inc. from 2004 until 2005 and as President, Consumer Services, BellSouth Corporation from 2000 until 2004. Mr. Harris has served as an Independent Trustee of Wells Fargo Advantage Funds, a provider of mutual funds, since 2008. Mr. Harris was nominated as NYSE 2014 Chairman of the Year. Mr. Harris received his Bachelor of Science degree from Iowa State University and his MBA from the University of Minnesota. His current term as a Director of Cigna expires in 2017.

Other Public Company Directorships:

Deluxe Corporation (2004-2011)

Business Leader. In his executive business leadership roles, including as CEO of AT&T Advertising and Publishing, Mr. Harris managed large organizations, developed and executed business strategies and led transformational change initiatives in both domestic and international operations.

Finance. Mr. Harris’ extensive finance experience includes 19 years of corporate finance and operational experience in multi-national organizations, including as Vice President of Finance, BellSouth Corporation, preceded by 13 years as a CPA with KPMG LLP. Through service on the board of directors of Deluxe Corporation, a provider of customized products and services including financial services and direct checks, and as a trustee of Wells Fargo Advantage Funds, he has insight into financial services-related issues.

Marketing and Consumer Insights. Throughout his career with AT&T Advertising & Publishing, and particularly as President, Consumer Services, BellSouth Corporation (2000 to 2004), Mr. Harris focused on marketing communication services to end-user consumers.

Regulated Industry/Public Policy. Throughout his career at AT&T Advertising & Publishing, Mr. Harris navigated a heavily regulated and dynamic legal environment.

  LOGO    

JANE E. HENNEY, M.D.

Former Senior Vice President, Provost and Professor of Medicine, University of Cincinnati College of Medicine

 

AGE: 69

 

DIRECTOR SINCE: 2004

 

COMMITTEES: Corporate Governance (Chair), Executive, People Resources

Dr. Henney was appointed to the position of Home Secretary of the National Academy of Medicine, a division of The National Academies of Sciences designed to advise the nation on health issues, in April 2014. Dr. Henney served as a Professor of Medicine at the University of Cincinnati College of Medicine, an educational institution, from 2008 until 2012. She served as Senior Vice President and Provost, Health Affairs at the University of Cincinnati Academic Health Center from 2003 until 2008. Appointed by President Bill Clinton, Dr. Henney served as the first female U.S. Commissioner of Food and Drugs from 1998 to 2001. She has served as Lead Independent Director of AmerisourceBergen Corporation, a publicly traded bio-pharmaceutical company, since March 2016. Dr. Henney has also served on the China Medical Board since 2004. She received recognition from the National Association of Corporate Directors as an NACD Directorship 100 “Class of 2012” member. Dr. Henney is also an NACD Board Leadership Fellow. Dr. Henney received her Bachelor of Science degree from Manchester College and her Doctor of Medicine from Indiana University. Her current term as a Director of Cigna expires in 2017.

Other Public Company Directorships:

AmerisourceBergen Corporation (2002-Present)

Cubist Pharmaceuticals, Inc. (2012-2015)

AstraZeneca PLC (2001-2011)

Healthcare and Delivery Systems. Dr. Henney’s positions as Medical Doctor, Home Secretary of the National Academy of Medicine, Commissioner of Food and Drugs, and Executive of Academic Health Center provide her with direct experience regarding emerging health care issues and complex health delivery systems.

Regulated Industry/Public Policy. As former Commissioner of Food and Drugs and Home Secretary of the National Academy of Medicine, Dr. Henney has extensive insight into the highly regulated health industry in the U.S. and abroad.

 

 

 

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ROMAN MARTINEZ IV

Private Investor

 

AGE: 69

 

DIRECTOR SINCE: 2005

 

COMMITTEES: Audit (Chair), Executive, Finance

Mr. Martinez has been a private investor since 2003. In 2003, he retired as Managing Director of Lehman Brothers, an investment banking firm, following a 31-year career with the firm. He has served on the Board of Trustees of New York Presbyterian Hospital since 1996. Mr. Martinez received his Bachelor of Science degree from Boston College and his MBA from the Wharton School of the University of Pennsylvania. His current term as a Director of Cigna expires in 2017.

Other Public Company Directorships:

Orbital ATK, Inc. (2015-Present)

Alliant Techsystems, Inc. (2004-2015)

Finance. Mr. Martinez has over ten years of experience as a private investor and serves on the Investment Committees of several non-profit organizations. He previously served on the Investment Advisory Council of the State of Florida, which provides independent oversight of the Florida Retirement System funds and other state funds, which aggregated in excess of $150 billion. He has extensive experience in investment banking through his 31-year tenure with Lehman Brothers where he was involved in a broad spectrum of U.S. and international investment banking activities covering financing, mergers and acquisitions and restructuring advisory assignments as well as financing transactions for governments and corporations.

Healthcare and Delivery Systems. Through his over 15 years serving on the Board of Trustees of New York Presbyterian Hospital, Mr. Martinez developed insights into the issues facing health care systems in a rapidly changing environment, including the provision of care management and delivery systems.

  LOGO    

DONNA F. ZARCONE

President and Chief Executive Officer of The Economic Club of Chicago

 

AGE: 59

 

DIRECTOR SINCE: 2005

 

COMMITTEES: Audit, Finance

Ms. Zarcone has been the President and Chief Executive Officer of The Economic Club of Chicago, a civic and business leadership organization, since February 2012. She served as Interim President of The Economic Club of Chicago from October 2011 until February 2012 and as President and Chief Executive Officer of D. F. Zarcone & Associates LLC, a strategic advisory firm, from 2007 until February 2012. Ms. Zarcone served as the President and Chief Operating Officer of Harley-Davidson Financial Services, Inc., a provider of wholesale and retail financing, insurance and credit card programs and a wholly owned subsidiary of Harley-Davidson, Inc., from 1998 until 2006. She also served as Chairman of the Board of Eaglemark Savings Bank, a financial services provider, from 2002 to 2006. She received recognition from the National Association of Corporate Directors as an NACD Directorship 100 “Class of 2012” member. Ms. Zarcone is also an NACD Board Leadership Fellow. Ms. Zarcone received her Bachelor of Science degree from Illinois State University and her MBA from the University of Chicago Graduate School of Business. Her current term as a Director expires in 2017.

Other Public Company Directorships:

CDW Corporation (2011-Present)

The Jones Group (2007-2012)

Finance. As an executive at Harley-Davidson Financial Services and as the Chairman of the Board of Eaglemark Savings Bank, an FDIC-regulated entity, Ms. Zarcone oversaw end-user consumer financial services matters. She is also a certified public accountant. As President and CEO of The Economic Club of Chicago, she monitors social and economic issues facing the U.S. and global markets.

Marketing and Consumer Insights. As President of Harley-Davidson Financial Services, Ms. Zarcone oversaw direct marketing initiatives to end-user consumers for a portfolio of financial products. As head of Enthusiast Services at Harley-Davidson, she oversaw brand loyalty initiatives. As a director of The Jones Group, a designer, marketer and wholesaler of branded clothing, she focused on end-user consumer-related issues.

 

 

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WILLIAM D. ZOLLARS

Former Chairman, President and Chief Executive Officer of YRC Worldwide, Inc.

 

AGE: 69

 

DIRECTOR SINCE: 2005

 

COMMITTEES: People Resources (Chair), Executive, Corporate Governance

Mr. Zollars served from 1999 to 2011 as Chairman, President and Chief Executive Officer of YRC Worldwide, Inc., a holding company whose subsidiaries provide regional, national and international transportation and related services. Prior to that, Mr. Zollars was President of Yellow Transportation, Inc., from September 1996 through November 1999. From 1994 to 1996, he was Senior Vice President of Ryder Integrated Logistics. He also held various executive positions with Eastman Kodak. Mr. Zollars received his Bachelor of Arts degree from the University of Minnesota. His current term as a Director of Cigna expires in 2017.

Other Public Company Directorships:

Cerner Corporation (2005-Present)

ProLogis Trust (2001-2010; 2011-Present)

YRC Worldwide, Inc. (1999-2011)

Business Leader. Mr. Zollars’ role as Chairman, President and Chief Executive Officer of YRC Worldwide and various executive leadership positions with Yellow Transportation, Ryder Integrated Logistics and Eastman Kodak provided him extensive senior leadership experience.

Finance. As Chairman, President and CEO of YRC Worldwide, Mr. Zollars had oversight of financial operations, merger and acquisition activities and corporate restructurings and led YRC’s comprehensive recovery plan to reduce cost structure and improve operating results, cash flow from operations, liquidity and financial condition.

Healthcare and Delivery Systems. As a director of Cerner, a supplier of health care information technology, he focuses on issues facing the healthcare industry, particularly health information technology.

International/Global. As President and CEO of YRC, Mr. Zollars oversaw global operations and strategic planning and, throughout his YRC tenure, undertook international assignments.

 

 

 

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DIRECTORS WHO WILL CONTINUE IN OFFICE

 

  LOGO    

JOHN M. PARTRIDGE

Former President of Visa, Inc.

 

AGE: 67

 

DIRECTOR SINCE: 2009

 

COMMITTEES: Finance (Chair), Executive, People Resources

Mr. Partridge served as President of Visa, Inc., a publicly traded consumer credit company, from 2009 until 2013 and as Chief Operating Officer from 2007 to 2009. He joined Visa USA in October 1999 and served as President and Chief Executive Officer of Inovant (a Visa subsidiary) from 2000 to 2007 and as Interim President of Visa USA in 2007. From 1998 until joining Visa USA, Mr. Partridge served as Senior Vice President and Chief Information Officer of Unum Provident Corp., a publicly traded disability insurance company. From 1989 to 1998, Mr. Partridge was Executive Vice President for Credicorp Inc., a commercial banking, insurance and investment banking company, where he was responsible for consumer banking, technology and operations. Prior to joining Credicorp Inc., Mr. Partridge held various management positions with Wells Fargo Bank. Since October 2015, Mr. Partridge has served as an operating partner of Corsair Capital, a private equity firm focused on the financial services industry. Mr. Partridge received his Bachelor of Science degree from the University of California. His current term as a Director of Cigna expires in 2018.

Other Public Company Directorships:

Global Payments, Inc. (2013-Present)

Business Leader. Mr. Partridge has extensive senior leadership experience through his positions with Visa, Inc., Visa USA, Inovant, Unum and Credicorp.

Finance. As President and CEO of Inovant, he had direct oversight of financial operations, financial reporting, merger and acquisition activities and corporate restructurings. As President of Visa, he was involved with financial oversight and reporting and strategic transactions. His responsibilities at Credicorp provided significant financial services experience.

Information Technology. Mr. Partridge has experience managing and overseeing information technology investments in support of business objectives which he gained through each of his executive leadership positions, including as Chief Information Officer of Unum and as a director of Global Payments, a provider of electronic transaction processing services. As President of Inovant, he oversaw Visa’s electronic payment processing service.

International/Global. As President of Visa, Mr. Partridge’s responsibilities included international business leadership. He also serves as a director of a large public company with extensive international operations. His responsibilities with Credicorp included international assignments.

Marketing and Consumer Insights. Through his tenure with Visa, Mr. Partridge focused heavily on consumer credit and oversaw marketing, product, client service, support and processing services. As Executive Vice President of Credicorp, his responsibilities included consumer banking.

  LOGO    

JAMES E. ROGERS

Former Chairman, President and Chief Executive Officer of Duke Energy Corporation

 

AGE: 69

 

DIRECTOR SINCE: 2007

 

COMMITTEES: Audit, Finance

Mr. Rogers served as Chairman of Duke Energy Corporation, a publicly traded electric power company, from 2007 until 2013 and as the President and Chief Executive Officer from 2006 until 2013. Since October 2016, Mr. Rogers has served as a senior operating partner of Stonepeak Infrastructure Partners, a private equity firm focused on infrastructure investments. He co-founded and has served as Chairman of Brightlight Foundation, a non-profit provider of globally accessible and affordable energy solutions, since 2011. He was formerly the Chairman, President and Chief Executive Officer of CINERGY Corp. (which merged with Duke Energy Corporation in 2006) from 1994 until 2006. Mr. Rogers received his Bachelor of Business Administration from Emory University and his juris doctor from the University of Kentucky. His current term as a Director of Cigna expires in 2018.

Other Public Company Directorships:

Duke Energy Corporation (2007-2013)

Applied Materials, Inc. (2008-2015)

CINERGY Corp. (2000-2005)

Fifth Third Bancorp (1995-2009)

Business Leader. Mr. Rogers has extensive senior leadership experience through his positions with Duke Energy and in the utility industry for 25 years. Over the course of his career, he served on the boards of eight Fortune 500 companies.

Finance. As President and CEO of Duke Energy, he had oversight of financial operations, financial reporting, merger and acquisition activities and corporate restructurings. As a director of Fifth Third Bancorp, a regional banking corporation, Mr. Rogers developed expertise in several facets of commercial and consumer financial services.

Regulated Industry/Public Policy. Throughout his career at Duke Energy and CINERGY, Mr. Rogers operated in a heavily regulated environment and oversaw and implemented strategic policy initiatives. Before his corporate career, he served as the Deputy General Counsel for the Federal Energy Regulatory Commission and as a partner in the law firm of Akin Gump Strauss Hauer & Feld in Washington, D.C.

 

 

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ERIC C. WISEMAN

Executive Chairman of VF Corporation

 

AGE: 61

 

DIRECTOR SINCE: 2007

 

COMMITTEES: Finance, People Resources

Mr. Wiseman has served as Executive Chairman of VF Corporation, a publicly traded apparel and footwear company, since August 2008 and has served on its board since 2006. He served as Chief Executive Officer from January 2008 until December 2016 and President from 2006 until June 2015. He served as Chief Operating Officer of VF Corporation from 2006 to 2008; Executive Vice President, Global Brands from 2005 to 2006; Vice President and Chairman, Sportswear and Outdoor Coalitions from 2004 until 2005; and Vice President and Chairman, Global Intimates and Sportswear Coalition from 2003 until 2004. Mr. Wiseman received his Bachelor of Science degree and MBA from Wake Forest University. His current term as a Director of Cigna expires in 2018.

Other Public Company Directorships:

VF Corporation (2006-Present)

Lowe’s Companies, Inc. (2011-Present)

Business Leader. Mr. Wiseman has extensive senior leadership experience through his positions with VF Corporation.

Finance. As Chairman and CEO of VF Corporation, he has had oversight of financial operations, merger and acquisition activities and corporate restructurings.

International/Global. Through leadership positions at VF Corporation, Mr. Wiseman oversaw operations and product sales in over 150 countries. Prior to joining VF Corporation, he held executive leadership roles at Sara Lee Corporation that included international business leadership and international assignments.

Marketing and Consumer Insights. Through leadership roles at VF Corporation, Mr. Wiseman oversaw marketing of a variety of brands through all channels of distribution, both domestically and internationally. As a director of Lowe’s, a retail home improvement and appliances company, he focuses on end-user consumer-related issues.

 

 

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 annually reviews Cigna’s governance program based on, among other things, developments in corporate governance, shareholder engagement, legal or regulatory actions, proxy advisory firm positions, Securities and Exchange Commission (SEC) guidance and New York Stock Exchange (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. 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

 

 
 

    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

 

    Annual election of all directors beginning in 2018

 

    Separate Code of Business Conduct and Ethics for the Board

    

    Independent Audit, Corporate Governance, Finance and People Resources Committees

 

    Annual self-evaluations of the Board, its committees and individual directors, including periodic independent third party assessments

 

    Majority of director compensation delivered in Cigna common stock

 

    Meaningful stock ownership guidelines for directors

 
        

 

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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DIRECTOR INDEPENDENCE

Cigna believes in the importance of a board comprised largely of independent, non-employee directors. The current Board includes nine non-employee directors. On an annual basis, the Board, through its Corporate Governance Committee, reviews relevant relationships between directors, their immediate family members and the Company, consistent with Cigna’s independence standards. Cigna’s independence standards, which are detailed in the Guidelines, are consistent with the independence requirements set forth in the NYSE’s listing standards.

To be independent under Cigna and NYSE standards, the Board must affirmatively determine that a director has no material relationships with the Company directly or as an officer, shareholder or partner of an organization that has a relationship with the Company. In making its assessment, the Board considers all relevant facts and circumstances, including the nature of transactions with such organizations and/or the amount of such transactions (in aggregate or as a percentage of the organization’s revenues or assets). The Board also considers that, in the ordinary course of its business, the Company may sell products and services to, and/or purchase products and services from, organizations affiliated with our directors and may hold investments (generally, debt securities) in organizations affiliated with our directors.

Based on its review of director relationships, the Board has affirmatively determined that there are no material relationships between the non-employee directors and the Company and all non-employee directors (Dr. Henney, Ms. Zarcone and Messrs. Foss, Harris, Martinez, Partridge, Rogers, Wiseman and Zollars, as well as former director Ms. Gass) are independent as defined in both Cigna’s Guidelines and the NYSE listing standards. In addition, at the committee level, all committee members are independent and the members of the Audit Committee and the People Resources Committee meet the NYSE’s heightened independence requirements for service on those committees.

BOARD LEADERSHIP STRUCTURE

The Board is committed to the long-term growth of the business and the successful execution of our mission to improve the health, well-being and sense of security of the people Cigna serves around the globe. To fulfill its responsibilities to our shareholders, Cigna’s Board, both directly and through its committees, regularly engages with management, ensures management accountability and reviews the most critical issues that face Cigna. The Board is committed to meeting the dynamic needs of the Company and focusing on the interests of its shareholders and, as a result, regularly evaluates and adapts its composition, role and relationship with management.

Independent Chairman of the Board

We currently separate the roles of the Chairman of the Board and CEO. Our CEO sets the strategic direction for the Company, working with the Board, and provides day-to-day leadership, while our Chairman leads the Board in the performance of its duties and serves as the principal liaison between the independent directors and the CEO. We believe that having an independent Chairman assists in ensuring independent oversight of the Company and the management team. The Board regularly assesses the appropriateness of this leadership structure and has concluded that this structure best suits Cigna’s needs at this time.

In February 2015, the Board re-elected Isaiah Harris, Jr. to serve as our independent Chairman. The Board elects the Chairman to a three-year term, expiring at the annual meeting occurring at the end of the third year. Mr. Harris’ current term as Chairman will expire in April 2018. The full Board evaluates the Chairman’s performance on an annual basis as part of the annual Board evaluation.

 

 

 

Chairman Responsibilities

 

   
 

    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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Access to Management and Advisors

A member of senior management is assigned to each committee to act as a staff officer. The Chief Financial Officer supports the Audit and Finance Committees; the General Counsel supports the Corporate Governance Committee; and the Executive Vice President – Human Resources and Services supports the People Resources Committee. These executive officers attend committee and Board meetings and work with their respective committee chair to assist in setting and developing meeting agendas and materials. Committee chairs communicate frequently with executive officers and other members of management between scheduled Board meetings with respect to committee issues and management is expected to update the Board on any significant Company matters or competitive developments between Board meetings.

The Board and its committees are able to access and retain independent advisors as, and to the extent, they deem necessary or appropriate.

BOARD EVALUATIONS AND BOARD EFFECTIVENESS

Evaluation Process

A meaningfully designed director evaluation process allows the Board to gain insights into the effectiveness of the Board, its committees and its individual members, with the goal of enhancing Board performance and, as a result, increasing shareholder value. Cigna’s Board is committed to ongoing improvement and the evaluation process is an important vehicle that fosters and supports effectiveness. Our board evaluations are designed to solicit input and perspective on various matters, including:

 

    board leadership structure;

 

    board configuration, including size, diversity and skillset;

 

    board dynamics, including individual director preparation and participation;

 

    governance policies and practices;

 

    strategy and risk oversight;

 

    interaction with management; and

 

    progress achieved against prior year evaluation initiatives.

As set forth in its charter, the Corporate Governance Committee oversees the Board, committee and individual director evaluation process. Annually, the Corporate Governance Committee and the Chairman of the Board determine the appropriate form of evaluation and consider the design of the process to ensure it is both meaningful and effective. In 2016, each director was interviewed by either the Chair of the Corporate Governance Committee or the Chairman of the Board. In addition, the Board was able to submit anonymous written feedback to the Corporate Secretary.

The Chair of the Corporate Governance Committee summarizes the feedback from the individual director interviews in a report for the Chairman of the Board and each of the Committee Chairs. The Chair of the Corporate Governance Committee and the Chairman of the Board then present the report to the full Board for review, discussion and determination of action items. The chairs of each committee lead a similar self-assessment discussion for their particular committee.

From time to time, the Board has engaged an independent third party to conduct the Board evaluation, most recently in 2014. The Corporate Governance Committee and Board have agreed to use an independent third party to facilitate the Board evaluation process approximately every three to five years, or on an as needed basis.

The results of the evaluation process have confirmed the Board’s belief that the Board and committees are operating effectively.

Board Refreshment and Succession Planning

The Corporate Governance Committee is responsible for identifying new director candidates, reviewing the composition of the Board and its committees and for making recommendations to the full Board on these matters. On an ongoing basis, the Corporate Governance Committee engages in Board succession planning, taking into account input from Board discussions and from the Board and committee evaluation process regarding the specific backgrounds, skills and experiences that would contribute to overall Board and committee effectiveness. In addition, the Corporate Governance Committee identifies future needs of the Board and its committees in light of the Company’s strategic direction, the Board’s tenure and the diversity, skills and qualifications of directors who are expected to retire in the future.

 

 

 

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RESPONSIBILITIES OF THE BOARD

Board Oversight of Risk and Enterprise Risk Management

The Board of Directors has the ultimate responsibility for risk oversight under Cigna’s risk management framework. The Board executes its duty both directly and through its Audit, Corporate Governance, Finance and People Resources Committees. The Audit Committee oversees Cigna’s enterprise risk management (ERM) framework. ERM is a Company-wide initiative that involves the Board, Cigna’s management, Cigna’s Chief Risk Officer and General Auditor (CRO) and internal audit function in an integrated effort to (1) identify, assess, prioritize and monitor a broad range of risks and (2) formulate and execute plans to monitor and, to the extent possible, mitigate the effect of those risks. The CRO meets with the

Audit Committee regularly during its executive sessions and reports to the Board at least annually.

Cigna has implemented practices so that the Board and its committees are regularly briefed on issues related to the Company’s risk profile. These reports are designed to provide visibility to the Board about the identification, assessment and management of critical risks and management’s risk mitigation strategies. These reports address strategic, operational, financial reporting, succession and compensation, cyber-security, compliance, reputational, governance and other risks, as appropriate.

The Board, including its committees, oversees risks associated with their respective areas of responsibility, as summarized below. Each committee meets in executive session and with key management personnel and representatives of outside advisors as necessary.

 

 

BOARD/COMMITTEE   PRIMARY AREAS OF RISK OVERSIGHT

Full Board

  Strategic, financial and execution risks and exposures associated with Cigna’s business strategy, including impact of changes to laws and regulations, significant litigation and regulatory exposures and other current matters that may present material risk to financial performance, operations, infrastructure, plans, prospects, reputation, acquisitions and divestitures.

Audit

Committee

  In addition to overseeing Cigna’s ERM framework, oversees risks related to the Company’s financial statements, the financial reporting process, accounting, cyber-security and certain legal and compliance matters. The Audit Committee also oversees the internal audit function and the Company’s ethics and compliance program.

Corporate Governance Committee

  Oversees risks and exposures associated with director succession planning, corporate governance and overall Board effectiveness. Also oversees the Company’s risks related to political and charitable contributions. In exercising this oversight, the Corporate Governance Committee reviews and discusses financial contributions to such organizations.

Finance

Committee

  Oversees the Company’s deployment of capital, technology and investment-related initiatives. In exercising this oversight, the Finance Committee regularly reviews and discusses the technology, financial market and capital management risks that are monitored through the Company’s ERM process.

People Resources Committee

  Oversees compensation related-risks and management succession planning. For additional information regarding the People Resources Committee’s role in evaluating the impact of risk on executive compensation, see page 49 of the Compensation Discussion & Analysis.

 

Oversight of Business Strategy

Our directors provide unique insights into the strategic issues facing the Company, including changes in the regulatory environment, changing market dynamics and the competitive landscape. As part of its oversight of business strategy, the Board:

 

    Formally reviews Cigna’s annual and longer-term strategic plan, financial targets and strategies for achieving those targets;

 

    Regularly reviews and assesses Cigna’s results of operations, financial performance, prospects and competitive position;
    Regularly discusses external factors that affect the Company, such as regulatory developments and trends impacting the health care industry generally;

 

    Regularly reviews our performance compared to our competitors; and

 

    Regularly evaluates potential strategic alternatives relating to Cigna and our business, including possible acquisitions, divestitures and business combinations.

Management Succession Planning

At the direction of the Chairman, the Board oversees management succession planning, including for the CEO

 

 

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role. With the assistance of the People Resources Committee, the Board reviews and approves regular and emergency succession plans. The People Resources Committee is responsible for overseeing the Company’s policies and processes for people development in general. In fulfilling that responsibility, the People Resources Committee considers an annual review of executive officers and key senior management presented by the CEO, including a discussion of those employees who are considered to be potential successors to executive and senior level positions with regard to their readiness and development opportunities. This assessment is presented to and reviewed by the full Board.

Shareholder Interests

The Board oversees the Company’s shareholder engagement practice. Currently, senior management and

the Investor Relations team regularly meet with shareholders and respond to their questions and feedback throughout the year. The Office of the Corporate Secretary engages with shareholders on issues related to corporate governance, executive compensation and social responsibility.

In addition, the Board has adopted a number of practices that align the interests of the directors with those of the shareholders, including:

 

    A director compensation program whereby a majority of compensation is delivered in common stock;

 

    Robust stock ownership requirements for directors; and

 

    No shareholder rights plan and, at this time, the Board has no intention of adopting such a plan.
 

 

BOARD MEETINGS AND COMMITTEES

In 2016, the Board held eight meetings and the committees of the Board held a total of 26 meetings. At all meetings held in 2016, the independent members of the Board met in executive session. As part of all regularly scheduled Board meetings, the Chairman presides over all executive sessions of the Board. Each committee also met in executive session on a regular basis in connection with their respective meetings.

Each director attended more than 75% of the aggregate of all meetings of the Board and committees on which he or she served during 2016. During 2016, Board and committee attendance averaged 94% for the Board as a whole. In addition to formal Board meetings, the Board engages with management regularly throughout the year.

The Board encourages directors to attend the annual meeting of shareholders. Ten directors attended the 2016 annual meeting: Dr. Henney, Ms. Gass and Ms. Zarcone and Messrs. Cordani, Foss, Martinez, Partridge, Wiseman, Zollars and Harris, who chaired the meeting. All directors are expected to attend the Annual Meeting in 2017.

The Board has five committees: Executive, Audit, Corporate Governance, Finance and People Resources. Complete copies of the committee charters are available on Cigna’s website at www.cigna.com/about-us/company-profile/corporate-governance/.

The composition of the Audit, Corporate Governance, Finance and People Resources Committees is set forth below.

 

    Audit*   Corporate
Governance
  Finance   People
Resources

Eric J. Foss

       

Jane E. Henney, M.D.

    Chair    

Roman Martinez IV

  Chair #      

John M. Partridge

      Chair  

James E. Rogers

  #      

Eric C. Wiseman

       

Donna F. Zarcone

  #      

William D. Zollars

        Chair

Meetings in 2016

  9   5   5   7

 

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.

The Executive Committee may exercise the power and authority of the Board as specifically delegated by the Board when convening a meeting of the full Board of Directors is impracticable. Mr. Harris is Chairman of the Executive Committee and Dr. Henney and Messrs. Cordani, Martinez, Partridge and Zollars serve on the Executive Committee. In 2016, the Board of Directors did not delegate any actions to the Executive Committee and, therefore, the Executive Committee did not meet in 2016.

 

 

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    Committee    Responsibilities
  Audit Committee   

•  Assesses the qualification and independence of, appoints, compensates, oversees the work of and removes, if appropriate, Cigna’s independent registered public accounting firm.

 

•  Represents and assists the Board in fulfilling its oversight responsibilities regarding the adequacy and effectiveness of internal controls and the integrity of financial statements.

 

•  Reviews annual and quarterly financial statements, earnings releases, earnings guidance and significant accounting policies with management and, if appropriate, the independent registered public accounting firm.

 

•  Oversees compliance with material legal and regulatory requirements, including those that apply to federal and state health care programs.

 

•  Oversees the Company’s enterprise risk management program and internal audit function and advises the Board on financial and enterprise risks, including risks related to the security of information technology systems.

 

•  Maintains procedures for and reviews the receipt, retention and treatment of complaints and concerns regarding accounting, controls, auditing, reporting and disclosure matters.

 

  Corporate Governance Committee   

•  Reviews, advises and reports to the Board on the Board’s membership, structure, organization, governance practices and performance, as well as shareholder engagement activities.

 

•  Assists the Board in 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 Cigna’s capital.

 

•  Oversees Cigna’s long-term financial objectives and progress against those objectives.

 

•  Reviews Cigna’s strategic operating plan and budget.

 

•  Oversees Cigna’s investment strategy and sets investment policies and guidelines.

 

•  Oversees information technology strategy and execution.

 

  People Resources Committee   

•  Oversees the policies and processes for people development and 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 CEO’s compensation, evaluates the CEO’s performance in light of those established goals and objectives, and based on this evaluation, recommends the CEO’s compensation to the independent members of the Board for approval.

 

•  Reviews and approves compensation targets, base salaries, cash and equity-based incentive compensation payments and arrangements, severance, and other compensation and benefits arrangements for any current or prospective executive officers other than the CEO, subject to required Board or shareholder approvals.

 

•  Establishes performance measures and goals and assesses whether these goals are met for awards under short-term and long-term cash-based and equity-based compensation plans.

 

•  Reviews and monitors the Company’s diversity program.

 

 

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CODES OF ETHICS

Cigna is committed to conducting business in accordance with the highest standards of integrity, legal compliance and ethical conduct. In 2015, at the recommendation of the Corporate Governance Committee, the Board adopted a Director Code of Business Conduct and Ethics, available on Cigna’s website at www.cigna.com/about-us/corporate-governance/. The Board believes that having a separate code of conduct for the Board meaningfully enhances Cigna’s governance framework by making Board-specific policies clearer, while also addressing general shareholder concerns over transparency of company and board practices.

All directors and employees, including executive officers, must comply with the Company’s Code of Ethics, available on Cigna’s website at www.cigna.com/about-us/corporate-governance/. Both the Director Code of Business Conduct and Ethics and the Company Code of Ethics, together with Cigna’s related policies and procedures, address major areas of professional conduct, including, among others, conflicts of interest, protection of private, sensitive or confidential information, insider trading and adherence to laws and regulations affecting the conduct of Cigna’s business.

ANNUAL POLITICAL CONTRIBUTIONS AND LOBBYING ACTIVITY REPORT

Cigna is committed to transparency and strives to provide clarity about our goals and positions related to the Company’s federal and state lobbying and advocacy efforts as well as why we believe active engagement in the public policy arena is important to our mission, business and customers. Cigna has regularly engaged with shareholders to gain feedback regarding desired political contribution disclosure and published its first annual political contributions and lobbying activity report in 2011. The initial report provided information about Cigna’s political contributions, lobbying activities, trade association affiliations and related matters. Since then, we have significantly enhanced this report to incorporate subsequent input from shareholders and to provide greater clarity on our overall lobbying framework, including the areas in which we focus our advocacy efforts and why we believe active engagement in the public policy arena is necessary to support the achievement of our mission, the success of our business and the well-being of our customers. The report also provides information about: (1) direct political contributions that Cigna makes at a corporate level; (2) contributions that Cigna makes through the Cigna Political Action Committee; and (3) the total amount of dues paid to any industry trade association to which Cigna pays $50,000 or more in annual dues, as

well as the portion of any such dues that such trade associations inform us are allocable to any non-deductible lobbying expenses. The Corporate Governance Committee provides guidance and oversees Cigna’s political and lobbying activities. The Company updates the report annually and we encourage you to review our 2016 report which is available on Cigna’s website at www.cigna.com/about-us/corporate-governance/.

CORPORATE RESPONSIBILITY REPORT

As a global health service company with the mission of helping improve the health, well-being and sense of security of the people we serve, Cigna strongly believes that its success depends on earning trust through responsible business practices, corporate citizenship and providing superior services that meet our customers’ individual needs. Inspired by this mission, Cigna works to positively impact the health of people, communities and the environment. Cigna annually publishes a Corporate Responsibility Report highlighting our corporate responsibility goals and initiatives. The Corporate Responsibility Report is presented to the Corporate Governance Committee, which reviews the report with the Board. We encourage our shareholders to review our most current report which is available on Cigna’s website at www.cigna.com/about-us/corporate-responsibility/report/.

CERTAIN TRANSACTIONS

Transactions with Related Persons

Cigna has not adopted a written policy concerning review, approval or ratification of related person transactions. Cigna compiles information about transactions between Cigna and Cigna’s directors, director nominees and executive officers and any immediate family members and affiliated entities identified by directors, director nominees and executive officers as having any form of relationship with Cigna. Cigna’s Office of the Corporate Secretary analyzes the nature of any transaction to determine whether the transaction may require disclosure under SEC rules as a related person transaction. On an annual basis, the Corporate Governance Committee reviews the analysis prepared by the Company, and presents its assessment to the full Board of Directors.

Based on this review, there are no related person transactions requiring disclosure under SEC rules.

Compensation Committee Interlocks and Insider Participation

The People Resources Committee is comprised of the five independent directors listed on page 20. There are no compensation committee interlocks.

 

 

 

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Non-Employee Director Compensation

 

OVERVIEW

 

Cigna’s director compensation program is designed to attract and retain highly qualified independent directors, by addressing the time, effort, expertise and accountability required of active board membership. The Board believes that the current director compensation program:

 

    aligns with shareholder interests because it includes a significant equity-based compensation component, the value of which is tied to Cigna’s stock price; and

 

    is competitive based on the work required of directors serving on the board of an entity of the Company’s size, complexity and scope.

The Corporate Governance Committee’s charter provides that it will periodically review director compensation and assist the Board in the administration of director compensation plans. The Board approves the amount and form of director compensation. The Corporate Governance Committee may from time to time engage a compensation consultant to assist in its review of director compensation.

DIRECTOR COMPENSATION PROGRAM

The Corporate Governance Committee reviews Cigna’s non-employee director compensation program on an annual basis. In October 2011, the Corporate Governance Committee engaged an independent compensation consultant to assist in the Committee’s review of director compensation amount and pay mix. As a result of that review, the Board, upon recommendation from the Corporate Governance Committee, approved the current director compensation program, effective as of January 2012. The Board has not increased compensation since that time.

In 2016, the Board and the Corporate Governance Committee reviewed the director compensation program and did not make any changes. As part of this review, the Corporate Governance Committee reviewed benchmarking data from the Company’s compensation peer group (as described on page 33), as well as the top 200 companies of the S&P 500, to ensure that its pay practices were competitive and aligned with those companies against which we compete for talent.

The following chart summarizes the retainer compensation provided to directors for their service on Cigna’s Board and each committee on which they serve. A director who also is an employee of the Company does not receive payment for service as a director. The CEO is the only employee who currently serves as a director. There is no retainer for service on the Executive Committee. In addition to the Board retainer, the Chairman of the Board receives $225,000 in cash for his service as Chairman. Payments are made in equal, quarterly installments.

 

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

 

 

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Deferral of Payments

Under the Deferred Compensation Plan of 2005 for Directors of Cigna Corporation (Deferral Plan), directors may elect to defer the payment of the cash and/or common stock portion of their annual retainers. Deferred common stock compensation is credited to a director’s deferred compensation account as a number of shares of hypothetical common stock and ultimately paid in shares. Deferred cash compensation is ultimately paid in cash, and directors have a choice of hypothetical investment funds whose rates of return are credited to that account. These funds include a Cigna stock fund and several other funds selected from those offered to all Cigna employees under the Cigna 401(k) Plan. Directors may elect to receive payments under the Deferral Plan in a lump sum or installments. Lump sum payments are made, or payment installments begin, in January of the year following a director’s separation from service.

Stock Ownership Guidelines

Cigna requires directors to maintain a stock ownership level of at least $500,000 in value of Cigna common stock, which is more than five times the annual Board cash retainer. Under the guidelines, directors have five years from their election to the Board to satisfy this ownership obligation. Common stock, deferred common stock, restricted stock units and hypothetical shares of Cigna common stock held by a director count toward the stock ownership guidelines for directors whose service started before February 2014. Directors whose service started after February 2014 may only count common stock and deferred common stock for compliance. As of December 31, 2016, all of the directors are in compliance with the stock ownership guidelines.

Financial Planning and Matching Charitable Gift Programs

Directors may participate in the same financial planning and tax preparation program available to Cigna executive officers. Under this program, Cigna will make direct payments or reimburse directors for financial planning services that are provided by firms designated by Cigna

and for tax preparation services in the amount of up to $6,500 annually. Each director whose service started before 2006 and has at least nine years of board service upon separation from service also is eligible for direct payments or reimbursement in the amount of up to $5,000 for financial planning and tax preparation services during the one-year period following separation from service.

Directors also may participate in the matching charitable gift program available to Cigna employees, under which Cigna will make a matching charitable gift of up to $5,000 annually. In addition, upon a director’s retirement, in recognition of the retiring director’s service, the Board may make a donation in the amount of $10,000 to a charitable organization of the director’s choice.

Insurance Coverage

Cigna provides each director on the same basis as employees and at no cost to the director, group term life insurance coverage equal to the annual Board retainer ($275,000 during 2016), and business travel accident insurance coverage equal to three times the annual Board retainer ($825,000 during 2016).

Directors also may purchase or participate in, by paying premiums on an after-tax basis, additional life insurance, medical care, long-term care, property/casualty personal lines, and various other insurance programs available on a broad basis to Cigna employees. Directors also may elect to purchase worldwide emergency assistance coverage. This program, which provides international emergency medical, personal, travel and security assistance, also is available to Cigna executive officers and certain other Cigna employees who frequently travel abroad for business.

In addition, Cigna provides each retired director whose service started before 2006 and who has at least nine years of Board service upon separation from service with $10,000 of group term life insurance coverage, with premiums paid by Cigna. These directors may also participate for two years following separation from service in the medical care programs currently offered by Cigna to retired employees, with premiums paid by the director on an after-tax basis.

 

 

 

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DIRECTOR COMPENSATION TABLE FOR 2016

The table below includes information about the compensation paid to non-employee directors in 2016. Mr. Cordani, the only Company employee on the Board of Directors, does not receive any director compensation for his Board service.

 

    FEES EARNED
          OR PAID IN CASH           
           STOCK AWARDS            ALL OTHER
          COMPENSATION          
    TOTAL
          COMPENSATION          
 
NAME   ($)     ($)     ($)     ($)  
(a)   (b)     (c)     (d)     (e)  

Eric J. Foss

    115,000                                   180,000                     365                        295,365                   

Michelle D. Gass(1)

    115,000                                   180,000                     365                        295,365                   

Isaiah Harris, Jr.

    320,000                                   180,000                     918                        500,918                   

Jane E. Henney, M.D.

    120,000                                   180,000                     6,157                        306,157                   

Roman Martinez IV

    120,000                                   180,000                     1,320                        301,320                   

John M. Partridge

    120,000                                   180,000                     5,365                        305,365                   

James E. Rogers

    115,000                                   180,000                     766                        295,766                   

Eric C. Wiseman

    115,000                                   180,000                     766                        295,766                   

Donna F. Zarcone

    115,000                                   180,000                     6,263                        301,263                   

William D. Zollars

    120,000                                   180,000                     1,017                        301,017                   

 

  (1) Ms. Gass resigned from the Board of Directors on February 21, 2017.

Fees Earned or Paid in Cash (Column (b))

 

    In addition to the annual cash retainer for Board service received by each director:

 

    Dr. Henney and Messrs. Martinez, Partridge and Zollars each served as a committee chair and as a member of another committee.

 

    Ms. Gass, Ms. Zarcone and Messrs. Foss, Rogers and Wiseman each served as a member of two committees.

 

    Mr. Harris served as Chairman of the Board.

 

    Director fees listed in this column may be deferred by directors under the Deferral Plan (see Deferral of Payments as described on page 24).

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 16 to Cigna’s consolidated financial statements in the Company’s Annual Report on Form 10-K for the year ended December 31, 2016 (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, 2016.

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, Ms. Zarcone and Mr. Partridge; and

 

    the dollar value of Company-paid life insurance premiums for all directors.

 

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DIRECTOR OWNERSHIP

The table shows Cigna securities held by each non-employee director as of December 31, 2016. The value of these securities was calculated using $133.39, which was Cigna’s closing stock price on December 30, 2016.

 

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

    12,373          —           —            —              12,373          $ 1,650,434  

Michelle D. Gass

    4,109          —           —            —              4,109          $ 548,100  

Isaiah Harris, Jr.

    1,356          —           13,500            23,249              38,105          $ 5,082,826  

Jane E. Henney, M.D.

    2,596          —           13,500            19,024              35,120          $ 4,684,657  

Roman Martinez IV

    9,496          21,740           13,500            15,419              60,155          $ 8,024,075  

John M. Partridge

    32,227          —           —            —               32,227          $ 4,298,760  

James E. Rogers

    —           36,480           —            10,632              47,112          $ 6,284,270  

Eric C. Wiseman

    4,200          11,077           —            2,987              18,264          $ 2,436,235  

Donna F. Zarcone

    5,971          7,190           13,500            2,796              29,457          $ 3,929,269  

William D. Zollars

    2,327          —           13,500            9,782              25,609          $ 3,415,985  

Deferred Common Stock (Column (b))

Column (b) includes the equity portion of the 2016 and any previous year’s 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 Dr. Henney, Ms. Zarcone and Messrs. Harris, Martinez and Zollars. 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 common 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 director’s deferred compensation account is tied directly to the value of Cigna common stock.

 

 

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COMPENSATION MATTERS

 

 

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 of 1934, as amended (the Exchange Act) requires that we provide our shareholders with the opportunity to vote to approve, on an advisory basis, the compensation of our named executive officers (NEOs). In recognition of the preference of shareholders expressed at our 2011 annual meeting, the Board has held “say on pay” advisory votes on an annual basis. Consistent with this practice 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 Company’s named executive officers as disclosed in the Company’s Proxy Statement for the 2017 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 Cigna’s performance and rewarding our executive officers for the creation of long-term value for Cigna’s 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 29 and the Executive Compensation Tables beginning on page 54.

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 unanimously recommends that shareholders vote FOR the advisory approval of the Company’s executive compensation.

 
   
     
                     

 

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Advisory Approval of the Frequency of Future Advisory Votes on Executive Compensation (Proposal 3)

 

Section 14A of the Exchange Act provides that shareholders can indicate their preference, at least once every six years, as to how frequently we should seek a “say-on-pay” advisory vote on executive compensation. By voting on this proposal, you may indicate whether you would prefer that we seek future advisory votes on executive compensation once every one, two or three years.

The Board believes that an advisory vote on executive compensation that occurs every year is the most appropriate alternative for Cigna and therefore recommends that you vote for a one-year interval for the advisory vote on executive compensation. In formulating its recommendation, the Board considered that an annual advisory vote on executive compensation will enable shareholders to provide direct input to the Company regarding our compensation philosophy, policies and practices as disclosed in the proxy statement each year. Setting a one-year period for holding this shareholder vote enhances shareholder communication by providing a clear, simple means for our Board to ascertain general investor sentiment regarding our executive compensation program.

Shareholders may cast a vote on the preferred voting frequency by selecting the option of one-year, two-years or three-years when voting in response to the resolution set forth below:

RESOLVED, that the option of every one-year, two-years or three-years which receives the highest number of votes cast for this resolution will be the preferred frequency with which the Company is to provide shareholders with the opportunity to vote to approve the compensation of named executive officers, as disclosed pursuant to the compensation disclosure rules of the Securities and Exchange Commission.

The option of every one-year, two-years or three-years that receives the highest number of votes cast by shareholders will be the frequency for the advisory vote on executive compensation that has been selected by shareholders. Because the required vote is advisory, it will not be binding upon the Board. The Board and the People Resources Committee will, however, take into account the outcome of the vote when considering the frequency with which the Company will provide shareholders the opportunity to vote to approve the compensation of named executive officers.

 

                       
   

 

The Board of Directors
unanimously recommends
that shareholders vote

for the option of every
“one-year” as the
frequency with which
shareholders are provided
an opportunity to vote on
executive compensation.

 
   
     
                       

 

 

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Compensation Discussion and Analysis

 

This Compensation Discussion and Analysis (CD&A) describes the compensation policies, programs and decisions regarding our named executive officers (NEOs) for 2016, who include our Chief Executive Officer, Chief Financial Officer, the three most highly-compensated executive officers as of the end of 2016, as well as one executive officer who retired during 2016. The People Resources Committee (the Committee) is charged with oversight of the Company’s 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 2016, our NEOs are:

 

NAME

   TITLE

David M. Cordani

   President and Chief Executive Officer

Thomas A. McCarthy(1)

   Executive Vice President and Chief Financial Officer

Nicole S. Jones

   Executive Vice President and General Counsel

Matthew G. Manders(2)

   President, Government & Individual Programs and Group Insurance

Jason D. Sadler

   President, International Markets

Herbert A. Fritch(3)

   Retired President, Cigna–HealthSpring

 

  (1) On February 22, 2017, Mr. McCarthy notified the Company of his intention to retire from his position in the early summer of 2017.

 

  (2) On February 23, 2017, the Company appointed Matthew G. Manders, who was most recently the Company’s President of U.S. Markets, to the new role of President, Government & Individual Programs and Group Insurance.

 

  (3) Mr. Fritch retired from the Company effective November 11, 2016.

This CD&A is organized as follows:

 

Executive Summary provides an overview of our compensation philosophy and our pay-for-performance alignment.

   Pages 29 – 31  

Executive Compensation Policies and Practices describes our compensation objectives and practices, as well as how we set target total direct compensation and target pay mix.

   Pages 32 – 35  

Elements of Compensation describes each form of compensation we pay and how our executive compensation program is tied strongly to performance.

   Pages 36 – 47  

Employment Arrangements and Post-Termination Payments summarizes any employment agreements, our severance and other post-termination arrangements as well as our change of control arrangements.

   Pages 47 – 48  

Processes and Procedures for Determining Executive Compensation provides an overview of the Committee’s role in executive compensation, the process for determining executive officer compensation and the compensation consultant’s role.

   Pages 48 – 50  

Other Practices describes our stock ownership guidelines, our hedging and pledging restrictions, our clawback policy and the impact of tax and accounting treatment.

   Pages 51 – 53  

EXECUTIVE SUMMARY

Cigna’s executive compensation program is based on the philosophy that executive pay should strongly align with the interests of our shareholders, directly link to Company and individual performance and attract and retain executive talent. We believe the achievement of our enterprise goals will result in the creation of meaningful and sustained long-term value for our shareholders. Each of the measures in our performance-based plans are designed to align with and support our business strategy — focusing on driving enterprise profitability, growth and operating expense efficiency to support investment in innovation, customer loyalty and stock performance.

 

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The primary principles underlying our compensation philosophy are to:

 

Motivate superior enterprise results with appropriate consideration of risk while maintaining a commitment to the Company’s ethics and values.

 

Align the interests of the Company’s executives with

those of its shareholders and reward the creation of long-term value

for Cigna shareholders.

 

 

Emphasize

performance-based short-term and long-term compensation over

fixed

compensation.

 

Reward the achievement of favorable long-

term financial

results more

heavily than the achievement of short-term results.

 

Provide market-competitive compensation opportunities designed to attract and

retain highly

qualified executives.

Pay-for-Performance Alignment

Cigna’s compensation program is heavily weighted to emphasize performance-based pay over fixed compensation. Our Management Incentive Plan (MIP) is a cash-based program designed to reward the achievement of annual enterprise results. Long-term performance is awarded through annual long-term incentive (LTI) awards, including Strategic Performance Shares (SPSs), the payout of which is based upon performance over a three-year period. Financial measures within the MIP and SPS program, such as adjusted income from operations,1 revenues and operating expense ratio improvement, are tied to the performance of Cigna’s three ongoing business segments – Global Health Care, Global Supplemental Benefits and Group Disability and Life. Our MIP and SPS plans are designed to reward our NEOs for the Company’s performance relative to pre-established enterprise goals.

Short- and Long-Term Performance

For 2016, adjusted income from operations1 for Cigna’s ongoing business segments was $2.3 billion, compared to $2.4 billion in 2015, reflecting strong performance in Cigna’s Commercial Healthcare and Global Supplemental Benefits businesses and challenges during the year related to the Seniors and Disability and Life businesses. Revenue for the three ongoing business segments grew to $39.0 billion, reflecting continued growth in Cigna’s targeted customer segments. We made notable progress in the second half of 2016 addressing the challenges in our Group Disability and Life and Seniors business. Specifically, we gained traction in our Group Disability business as the claims process modifications made earlier in 2016 continued to mature, we experienced more stable claims in our Life business and, within Seniors, we made progress with our remediation efforts and are in the later stages of our audit response work. However, these challenges did impact full year adjusted income from operations.1

 

ADJUSTED INCOME FROM

OPERATIONS1, 2

(IN BILLIONS)

    

REVENUES2

(IN BILLIONS)

 

THREE-YEAR ANNUAL

COMPOUNDED TSR

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         LOGO

 

Cigna’s three-

year TSR was at

the 67th

percentile of its

peers for the

2014–2016

performance

period.3

 

 

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2016 Management Incentive Plan

As a result of our 2016 financial performance, payouts under the 2016 Management Incentive Plan were significantly lower than in prior years and below target levels, reflecting strong pay-for-performance alignment. Mr. Cordani’s MIP award was 50% of target for 2016, compared to 130% of target for 2015 and, on average, the MIP award paid to each of the other NEOs who received a MIP award was 75% of target for 2016, compared to 124% of target for 2015.

 

       Measure   Result   Award

Adjusted income from operations1, 2

  (6.7)% growth was below target range  

Individual payouts ranged from

50% to 80% of each NEO’s target.

Revenue2

  4.5% growth was within target range  

Operating expense ratio improvement2

  (0.5)% improvement was below target range  

Net promoter score (NPS)

  2016 NPS score decreased from 2015  

2014–2016 Strategic Performance Share Program

Long-term performance was rewarded through the payout of our 2014–2016 SPSs. Our TSR over this three-year period, which accounts for 50% of the SPS payout, was 15.1%, placing Cigna at the 67th percentile relative to the peer group. While 2016 performance impacted the payout percentage of the 2014–2016 SPSs, over the three-year performance period, each of adjusted income from operations1, 2 and revenue grew as described in the following table.

 

       Measure   Result ($ in millions)   Award

Relative TSR3

  67th percentile (151% of target)  

2014–2016 SPSs were paid out

at 123.5% of target.

Adjusted income from operations1, 2

  $6,724 (87.0% of target)  

Revenue2

  $110,641 (104.8% of target)  

 

  1. We encourage you to review our Annual Report on Form 10-K for the year ended December 31, 2016 for more complete financial information. 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 2014–2016 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 2014–2016 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.

 

  2. Reflects results for Cigna’s three ongoing business segments — Global Health Care, Global Supplemental Benefits and Group Disability and Life.

 

  3. The peer group used to measure relative TSR is the compensation peer group in place at the time of the 2014–2016 SPS award and includes: Aetna, Inc., Aflac Incorporated, Anthem, Inc., Chubb Limited, The Hartford Financial Services Group, Inc., Humana, Inc., Manulife Financial Corporation, MetLife, Inc. and Unum Group.

2016 Long-Term Incentive Award

In February 2016, the Committee (and, for Mr. Cordani, the Board, upon the recommendation of the Committee) approved the annual LTI award, 50% of which was awarded in stock options and 50% of which was awarded in an SPS award with a 2016–2018 performance period. The exercise price of the stock options awarded was $139.22, which means our stock must trade above that price for the NEOs to realize value from these awards. The payout of the 2016–2018 SPS award will be based on the Company’s performance over the three-year period. In determining the annual LTI award, the Committee primarily evaluates individual contributions, but also may consider the other factors described on page 42. The LTI awards granted in February 2016 ranged from 70% to 125% of each NEO’s target.

Shareholders Continue to Support our Executive Compensation Program

The Committee and the Board consider the results of the annual shareholder executive compensation “say-on-pay” vote, as well as other compensation-related shareholder votes, in determining the ongoing design and administration of the Company’s executive compensation programs. Shareholders have expressed their overwhelming support for our executive compensation program, with approximately 93% of votes cast at the 2016 annual meeting in favor of the advisory vote on executive compensation.

The Committee also considers feedback on our executive compensation program received as part of our ongoing communications with shareholders.

 

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EXECUTIVE COMPENSATION POLICIES AND PRACTICES

Compensation Objectives and Practices

Cigna’s executive compensation program is based on the philosophy that executive pay should strongly align with the interests of our shareholders, directly link to Company and individual performance and attract and retain executive talent. 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 based on companies of similar size and scope;

 

    Annual pay-for-performance assessment of the degree of achievement of the Company’s short-term and long-term goals and an evaluation of each executive officer’s contribution to the Company’s performance;

 

    A MIP designed to motivate executive officers to achieve the Company’s annual performance goals. No MIP awards are made unless the Company achieves a pre-defined minimum level of adjusted income from operations for the ongoing businesses;

 

    An equity-based incentive plan (the Cigna Long-Term Incentive Plan or LTIP) focused on long-term shareholder value creation. We grant SPS awards and stock options to executives under the LTIP. SPS awards reward executives for relative TSR performance as compared to our competitors and the achievement of financial goals over a three-year performance period. Through stock options, executives have the potential to realize value as a result of stock price appreciation;

 

    The retention of an independent compensation consultant to assist the Committee in its design and implementation of the Company’s executive compensation programs; and

 

    Ongoing monitoring of compensation best practices and investors’ views on compensation and the modification of our compensation programs as appropriate to align with good governance standards.

For information on the oversight of the executive compensation program, see Processes and Procedures for Determining Executive Compensation beginning on page 48.

Strong Compensation Governance and Controls

 

What We Do

 

•   Significant alignment between pay and performance.

 

•  “Double trigger” requirement for change of control benefits.

 

•   Regular review of executive compensation governance market practices, particularly when considering the adoption of new practices or changes to existing programs or policies.

 

•   Robust stock ownership guidelines and share holding requirements for equity awards to align executives’ interests with shareholders.

 

•   A disgorgement of awards (clawback) policy beyond the mandates of Sarbanes-Oxley.

 

•   Management of LTIP annual share usage (or burn rate) and total dilution by setting an annual share usage limit, which is below the maximum permitted under the plan.

 

•   Oversight of people development policies & processes, including consideration of assessments of executive officers and key senior management.

 

•   CEO and executive officer succession plans overseen by the Board of Directors, with assistance from the Committee.

 

•   An annual assessment by the Committee of any potential risks and associated internal controls in our incentive compensation programs and policies.

 

•   Require the achievement of a minimum acceptable level of financial performance in order for the MIP to be funded.

 

•   Over 90% of CEO’s target total direct compensation is performance based.

 

What We Don’t

Do

 

•   No tax gross-up of severance pay upon a change of control.

 

•   No excessive perquisites.

 

•   No hedging of Cigna stock by all directors and employees, including the executive officers, and we impose restrictions on pledging of Cigna stock by directors and Section 16 officers.

 

•   No discounting, reloading or repricing of stock options without shareholder approval.

 

•   No payment of dividends on unvested shares.

 

 

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Compensation Data

The Committee establishes target compensation levels based on a variety of factors, including published information regarding the pay practices of the Company’s compensation peer group and a general industry peer group.

2016 Peer Groups

Compensation Peer Group. The Committee periodically requests that its independent compensation consultant conduct a review of the Company’s compensation peer group and offer suggested modifications for benchmarking future executive pay decisions. The Committee’s consultant utilizes multiple sources to develop and recommend potential peer companies for the Committee to consider. Sources include companies screened by industry and business focus, peer groups developed by proxy advisory firms, peers identified in various analyst reports and peers of companies in Cigna’s compensation peer group.

The table below lists the companies included in the 2016 peer group, as in effect for the December 2015 determination of 2016 target total direct compensation and total target pay mix.

 

2016 Compensation Peer Group

Aetna, Inc.

Aflac Incorporated

Anthem, Inc.

Chubb Limited(1)

The Hartford Financial Services Group, Inc.

Health Net, Inc.(2)

Humana, Inc.
Manulife Financial Corporation
MetLife, Inc.
Prudential Financial, Inc.
Unum Group

 

  (1) In January 2016, ACE Limited acquired The Chubb Corporation and changed its name to Chubb Limited.

 

  (2) We subsequently removed Health Net, Inc., from our compensation peer group following its acquisition by Centene, Inc. in March 2016.

A broader cut of survey data, representing size-adjusted health and life insurance companies, was used to benchmark Mr. Sadler’s compensation because peer group data was insufficient or unavailable for his specific role. A list of the companies used to determine Mr. Sadler’s 2016 target total direct compensation and target total pay mix is included on Annex B.

General Industry Peer Group. The Committee also recognizes that Cigna often competes for talent from companies beyond that of its compensation peer group. As an additional reference to provide a broader perspective on market practices, particularly for those executive officers with job functions that could apply to a variety of industries, the Committee developed a general industry peer group, beginning in 2015. The general industry peer group was developed by screening publicly traded, U.S.-based companies within relevant industry classifications. The list was then narrowed to companies whose revenues were within the range of 0.4 to 2.5 times that of Cigna and whose market capitalization was within the range of 0.2 to 10 times that of Cigna. The screening process resulted in a group of 43 companies that the Committee approved as a general industry peer group. A list of the general industry peer companies is included on Annex C.

SPS Performance Peer Group. In consultation with its compensation consultant, the Committee also created a performance peer group to be used exclusively to track relative TSR within the SPS program, effective beginning with the 2015–2017 performance period. The Committee recognized that certain of our competitors were not included in the compensation peer group due to their relative size. While size is a relevant factor in determining a compensation peer group, it is less relevant when measuring performance. Other companies were included in the compensation peer group because Cigna competes with them for talent; however, because of significant differences in business focus, these companies do not make optimal comparators for performance purposes. For these reasons, the Committee created an SPS performance peer group comprising the same companies in its compensation peer group, but adding UnitedHealth Group Incorporated and removing Chubb Limited and Prudential Financial, Inc.

Updates to Peer Groups for 2017. In 2016, the Committee, with the assistance of its compensation consultant, conducted a review of each of the Company’s peer groups. As a result of this analysis, American International Group, Inc. and Centene, Inc. were added to the compensation peer group for benchmarking 2017 compensation decisions, and Centene, Inc. was added to the SPS Performance Peer Group for the 2017–2019 performance period. The Committee also reviewed the companies included in its general industry peer group by screening publicly traded, U.S.-based companies within relevant industry classifications. The list was then narrowed to companies whose revenues were within the range of 0.4 to 2.5 times that of Cigna and whose market capitalization was within the range of 0.25 to 4 times that of Cigna. The screening process resulted in a group of 35 companies, which are identified on Annex C.

 

 

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Tally Sheets

The Committee reviews tally sheets for all of its executive officers, first when total compensation targets are being reviewed in December and again before annual compensation award decisions are made in February. The tally sheets summarize historical actual compensation and current target compensation for each officer. The Committee believes that tally sheets are a useful reference tool when considering whether compensation decisions reflect Cigna’s compensation philosophy and performance, but are not a determining factor when making executive compensation decisions.

Target Total Direct Compensation and Target Pay Mix Emphasizes Performance-Based Compensation

The Committee’s decisions regarding target total direct compensation and target pay mix are consistent with its principles that (1) performance-based compensation should be emphasized over fixed compensation; and (2) long-term incentives should be more heavily weighted than annual incentives. Actual compensation, however, is driven by Company performance.

Target total direct compensation consists of base salary, the annual incentive target and the long-term incentive

target. On an annual basis, the Committee approves each of these amounts for each NEO and seeks to target an executive officer’s total direct compensation in a “competitive range” of within 15% of the 50th percentile of the relevant market data.

While the Committee targets total direct compensation in the competitive range, there may be variation in the target pay mix such that target amounts for individual compensation elements may be above or below the competitive range for the individual element. Target total direct compensation for a NEO also may vary outside of the competitive range of the 50th percentile of the survey data due to factors such as performance, tenure in role, range of data available and market and economic conditions. Internal pay comparisons among the NEOs are not generally considered for purposes of the Committee’s determination of target pay mix and target total direct compensation.

The table below presents each primary element of compensation for the NEOs subject to annual review by the Committee and the positioning of target total direct compensation relative to Cigna’s compensation and general industry peer groups. Target total direct compensation reflects the sum of annual base salary and the 2016 targets for the MIP and LTI programs.

 

 

NEO  

2016

ANNUAL

BASE

SALARY

($)

 

2016

MIP

TARGET

($)

 

2016

LTI

TARGET

($)

 

TARGET

TOTAL DIRECT

COMPENSATION

($)

 

TARGET

TOTAL DIRECT

COMPENSATION POSITION

TO COMPENSATION

PEER GROUP(1)

 

TARGET

TOTAL DIRECT

COMPENSATION POSITION

TO GENERAL INDUSTRY

PEER GROUP(2)

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   Below competitive range   Below 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   2,600,000   4,250,000   Within competitive range   Within competitive range

Jason D. Sadler(3)

  589,463   499,745   1,000,000   2,089,532   Within competitive range   Below competitive range

Herbert A. Fritch(4)

  1,000,000   1,000,000   2,000,000   4,000,000   Above competitive range   Above competitive range

 

  (1) Based on survey data available in December 2015 for the compensation peer group and, with respect to Mr. Sadler, the companies listed on Annex B.

 

  (2) Based on survey data available in December 2015 for the general industry peer group.

 

  (3) Mr. Sadler is based in Hong Kong. His base salary and annual incentive award are paid in Hong Kong dollars and, throughout this CD&A, have been converted to U.S. dollars using an exchange rate of $1 Hong Kong dollar = $0.12888508 U.S. dollar, the average of the daily mid-points between the bid and the ask prices for each trading day in the month of December 2016.

 

  (4) Mr. Fritch’s target total direct compensation was driven by his role as Chief Executive Officer of HealthSpring before Cigna acquired HealthSpring in January 2012.

 

 

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As illustrated in the charts below, performance-based compensation represents approximately 91% of Mr. Cordani’s target total direct compensation, including 74% in long-term incentives and 17% in annual incentives. On average, performance-based compensation represents 78% of target total direct compensation for the other NEOs, including an average of 56% in long-term incentives and 22% 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 54.

 

CEO TARGET

PAY MIX

 

OTHER NEO AVERAGE

TARGET PAY MIX

 

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ELEMENTS OF COMPENSATION

Cigna’s 2016 executive compensation program consists of the following elements:

 

ELEMENT   PURPOSE

Base salary

 

Fixed portion of total direct compensation, set with reference to competitive market data and designed to attract and retain key talent.

Management Incentive
Plan (MIP)

 

Performance-based cash compensation designed to reward the achievement of annual enterprise results relative to pre-established goals, as well as individual performance accomplishments and contributions.

Long-Term
Incentives (LTI)

 

Stock Options

 

Performance-based compensation, the potential realized value of which is determined by stock price appreciation from the date of grant through the date of exercise.

 

Strategic Performance Shares

 

Performance-based compensation, the payout of which is based upon the achievement of pre-determined enterprise goals and the Company’s relative TSR over a three-year performance period.

Retirement and Deferred Compensation

 

Compensation component 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.

Limited Perquisites and Other Benefits

 

Limited perquisites that are designed to attract and retain key talent or to provide for the safety and security of executive officers.

The Committee approved certain changes to compensation programs affecting 2017 compensation. The Committee approved a new performance measure for the 2017 MIP as described on page 42, approved changes to its various peer groups as described on page 33, and approved an alternative ranking methodology should the number of companies in the relevant SPS peer group fall below 10, as further described on page 45.

 

Base Salary

Base salary represents the only fixed portion of a NEO’s total target direct compensation and, consistent with the Committee’s philosophy that executive pay should strongly align with the interests of our shareholders, represents a small portion of total target direct compensation.

Base salary levels are set with reference to both competitive market data and individual performance. Base salaries are reviewed annually and may be adjusted as a result of updated market data and an assessment of an executive’s role and performance contributions, including the executive’s demonstration of Cigna’s core values and the achievement of the expectations associated with his or her role. The overall salary budget also is a factor in determining the extent of base salary adjustments.

 

The table below shows base salaries for each of the NEOs.

 

NEO   2016 ANNUAL BASE SALARY ($)

David M. Cordani

  1,200,000

Thomas A. McCarthy

    740,000

Nicole S. Jones

    581,138

Matthew G. Manders

    750,000

Jason D. Sadler

    589,463

Herbert A. Fritch(1)

  1,000,000

 

  (1) Mr. Fritch’s 2016 base salary was driven by his base salary in his role as Chief Executive Officer of HealthSpring before Cigna acquired HealthSpring in January 2012.
                       
   

 

Base salary
represents only 9%
of CEO target pay
and an average of 22% for
all other NEOs, with the
balance of target
compensation being
performance-based.

 
   
     
                       
 

 

 

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Annual Incentives

 

                       
   

 

Because profitability is critical to the long-term success of the business, no incentive award payments are made to executive officers unless the Company achieves a pre-defined minimum level of adjusted income from operations.

 
   
     
                       

Management Incentive Plan (MIP) Overview

Annual incentives are paid primarily under the MIP. The MIP is designed to reward executives for the achievement of short-term, or annual, performance goals. On an annual basis, the Committee approves:

 

    Enterprise performance measures and goals, which are designed to align with, and drive execution of, the Company’s business strategy;

 

    Aggregate funding levels for actual MIP awards;

 

    Individual targets for the NEOs, except for Mr. Cordani’s target, which is approved by the Board upon the recommendation of the Committee; and

 

    Actual MIP awards for the NEOs, except for Mr. Cordani’s award, which is approved by the Board upon the recommendation of the Committee.

Subject to certain limits described below, the actual annual incentive can range from 0% to 200% of the individual’s target, allowing the Committee to differentiate based on an individual’s contributions and how those contributions impacted the attainment of enterprise goals. This includes factors such as the extent to which an executive delivers results that provide improved financial performance, customer service or employee engagement

and an executive’s level of innovation and thoughtful risk-taking. At times, the Committee may also use this flexibility to aid in the retention of select key talent and to encourage management to make decisions that could yield lesser results in the short-term, but are in the best interests of the Company’s shareholders over the long-term. For 2016, MIP awards ranged from 50% to 80% of target based on Company results and individual contributions.

MIP Performance Measures and Goals

Each year, the Committee sets enterprise performance measures, weightings and goals for annual incentive awards based on Cigna’s business priorities and annual operating plan. The operating plan aligns with our strategy, long-term commitment to shareholders and expected performance in the industry. The Committee works with its independent compensation consultant to evaluate the appropriateness of these measures and weightings and the degree of challenge in the MIP performance goals. The measures are designed to align with and drive execution of the Company’s business strategy. For 2016, performance measures included adjusted income from operations, revenue, operating expense ratio improvement and net promoter score (NPS). More detailed information on these measures is included in the table on page 39.

For each MIP goal other than NPS, the Committee specifies certain below target, target and above target levels of performance. For NPS, the Committee considers whether our score remained the same, improved or decreased over the prior year’s score. To aid the Committee in setting the financial performance targets, and to assess the reasonableness and rigor of those targets, the Committee’s compensation consultant annually presents a comprehensive report to the Committee that evaluates Cigna’s historical relationship between pay and performance in comparison with Cigna’s compensation peer group. The compensation consultant also reviews performance goals determined by the Committee in the context of historical performance and analyst expectations of future performance for Cigna and Cigna’s SPS performance peer group.

 

 

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Executive Officer MIP Funding and Award Determination Process

The key considerations to funding the MIP and determining individual award amounts are discussed below.

 

STEP 1

Achieve Earnings Minimum

 

The Committee believes that achieving Cigna’s profitability goals is critically important to the long-term success of the business. In recognition of its importance, a minimum acceptable level of financial performance relative to Cigna’s corporate objectives for the year must be achieved. If the Company does not meet a pre-defined minimum level of adjusted income from operations, then no annual incentives will be paid to executive officers.

 

 

STEP 2

Company Performance Drives Funding Level

 

If the Company achieves the earnings minimum, the Committee may fund the executive officer MIP pool from 0% to 200% of target based upon the following performance ranges: below target, target and above target. The Company’s actual performance is the basis for establishing the range of funding available for awards. The following table sets forth the ranges between which the MIP pool may be funded for each performance measure, in each case, assuming the earnings minimum has been achieved:

 

    MEASURE   PERFORMANCE   FUNDING RANGE    
 

Adjusted Income from Operations

  Above target range   Above 120% to 200%  
 

Revenue

  Within target range   80% to 120%  
 

Operating Expense Ratio Improvement

  Below target range   Less than 80%  
 

NPS

  NPS score equal to or greater than

the prior year’s score

  100% to 200%  
    NPS score less than the prior year’s
score
  Less than 100%  

 

 

The Committee maintains the discretion to determine at which point within the limits of the pre-established range the actual funding will be set. In setting the actual funding, the Committee considers Cigna’s performance as a whole (both in absolute terms and relative to competitors), as well as Cigna’s achievement of the goals within each performance measure. The MIP funding mechanisms ensure that a minimum level of performance is achieved and that NEOs are only rewarded for satisfactory Company performance.

 

 

STEP 3

Award Amounts Based on Individual Contributions to Company Performance

 

Once MIP funding has been determined, the Committee (and for Mr. Cordani, the Board of Directors upon the recommendation of the Committee) assesses each named executive officer’s individual contributions and how such contributions impacted the achievement of the MIP goals to determine the actual award amounts for each NEO. Actual awards can range from 0% to 200% of a NEO’s MIP target, allowing the Committee to differentiate payouts based on each individual’s contributions.

 

 

 

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2016 Performance Goals, Measures and Actual Results

The Committee considers the appropriate measures for the MIP program for the upcoming year at its October and December meetings, and then considers and approves the actual targets at its meetings in January and February. For 2016, 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  

ALIGNMENT WITH

BUSINESS STRATEGY

  WEIGHTING     TARGET
PERFORMANCE GOALS
  ACTUAL RESULT

Adjusted income from operations*

 

Reinforces the importance of profitable growth across the enterprise.

    50   1% to 10% growth   (6.7)% growth was below target range

The target was set as a year-over-year growth goal for Cigna’s 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 collaboration across business units and drives customer focus.

    20   0.5% to 7% growth   4.5% growth was within target range

The target was set as a year-over-year growth goal for Cigna’s Global Health Care, Global Supplemental Benefits and Group Disability and Life segments.

Operating expense ratio improvement

 

Drives continued focus on delivering ongoing expense efficiency while furthering investment capacity for ongoing innovation.

    20  

(0.1)% to 3.8%

change

  (0.5)% improvement was below target range

The target was set as a composite objective, which measures operating expense improvement in Cigna’s Global Health Care, Global Supplemental Benefits and Group Disability and Life segments versus 2015. Operating expenses are expressed as a percent of revenue for each segment.

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 Cigna’s success.

    10   Improve or maintain 2015 NPS score   2016 NPS score decreased from 2015

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 2015 results. NPS results from each of Cigna’s segments are weighted based on the Company’s 2016 operating plan for the segment’s premiums and fees to establish both the NPS baseline and final result for 2016.

 

  * 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 2016, the Committee considered Cigna’s publicly disclosed earnings estimates, historical Company and SPS performance peer company results, analyst commentary and the Company’s then-current expectations for the industry and economic environment. The Committee considered various market forces impacting the Company and related uncertainties, including the expectation that the industry would continue to face significant market changes and disruption in 2016. Factors contributing to these uncertainties included continued rate pressure for the Medicare Advantage market, foreign exchange headwinds, continued uncertainty in enrollment and margins associated with the individual business on the public exchanges, as well as impacts from the proposed merger with Anthem. 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 2016.

 

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2016 Individual MIP Targets and Awards

MIP target levels for the 2016 performance year for the NEOs are set forth in the table below.

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 named executive officer’s individual contributions during 2016. For the 2016 performance year, the Committee and the Board made annual incentive awards to the NEOs ranging from 50% to 80% of the target award value, as reflected in the following table.

 

NEO     

2016

MIP

TARGET

($)

      

MIP

MAXIMUM

AWARD

($)

      

ACTUAL

MIP

PAYOUT

($)

      

PAYOUT
AS
 A PERCENT

OF TARGET

(%)

 

David M. Cordani

       2,200,000          4,400,000          1,100,000          50%  

Thomas A. McCarthy

       800,000          1,600,000          536,000          67%  

Nicole S. Jones

       560,000          1,120,000          431,200          77%  

Matthew G. Manders

       900,000          1,800,000          675,000          75%  

Jason D. Sadler

       499,745          999,490          399,796          80%  

Herbert A. Fritch(1)

       1,000,000          2,000,000          0          0%  

 

  (1) Mr. Fritch’s MIP target was driven by his annual incentive target in his role as Chief Executive Officer of HealthSpring before Cigna acquired HealthSpring in January 2012. Mr. Fritch retired in November 2016 and did not receive a MIP award for 2016.

Mr. Cordani

In early 2017, the Committee, together with the independent Chairman of the Board, assessed the performance of Mr. Cordani in the context of the overall Company performance. This assessment included a review of the Company’s financial performance in 2016 as well as Mr. Cordani’s individual contributions. Following this review, the Committee made certain recommendations to the Board relating to Mr. Cordani’s MIP award for 2016. The Board considered these recommendations as part of its own independent review of Mr. Cordani’s performance. More specifically, the Board considered the following factors:

Enterprise Performance. Consolidated revenue increased 5% to $39.7 billion. Consolidated adjusted income from operations for 2016 was $2.1 billion, compared to $2.3 billion in 2015. These results reflect strong performance in Cigna’s Commercial Healthcare and Global Supplemental Benefits businesses as well as challenges during the year related to the Group Disability and Life and Seniors businesses.

During the second half of the year, however, the Company made notable progress addressing the challenges in the Group Disability and Life and Seniors businesses. Specifically, we gained traction in the Group Disability business as the claims process modifications made earlier in 2016 continued to mature, we experienced more stable claims in the Life business and, within Seniors, we made progress with our remediation efforts and are in the latter stages of our audit response work. The Board recognized that, as a result of these efforts, the Company concluded 2016 with strong momentum that positions Cigna for attractive earnings and customer growth in 2017.

Strategy Execution. During 2016, Mr. Cordani oversaw development of our sovereign strategy to ensure that Cigna is well positioned for both a combination with Anthem or continuing as a sovereign company. Mr. Cordani also continued the advancement of the Company’s Go Deep, Go Global, Go Individual strategy, highlighted by:

 

  The successful implementation of a significant technology platform in support of our strategy to enhance affordability and personalization;

 

  The growth of Cigna Collaborative Accountable Care arrangements to over 160 relationships, in addition to over 70 specialty collaborative relationships; and

 

  The launch of Cigna SureFit, a next evolution of network capabilities that centers access around anchor care providers and allows greater personalization of care, and Cigna One Guide, a personalized multi-modal service experience that supports consumers consultatively at the point they choose a plan, find care and other “moments that matter,” with a roll out to more than one million Cigna customers in January 2017.

Enterprise Leadership. The Board recognized Mr. Cordani’s leadership during a year of significant change and uncertainty, focusing on talent retention, employee development and engagement initiatives. Cigna developed operating

 

 

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model changes, which were announced in early 2017 and are designed to ensure the executional focus necessary to deliver greater choice, quality, affordability and personalization to Cigna’s customers and clients. As evidence of Cigna’s strategic succession planning efforts, three leaders were appointed to the Enterprise Leadership Team. Cigna also delivered solid results on diversity and inclusion efforts.

Customer, Client and Partner Initiatives. Mr. Cordani continued Cigna’s customer-centric efforts to define and deliver value for targeted customer segments. While the Company did experience a decrease in its 2016 NPS score, NPS results within the Group Disability and Life and Seniors business were solid despite the challenges those businesses faced, indicating continued strong customer value and experience. In addition, Mr. Cordani represented Cigna and the health care industry in a number of forums in Washington, D.C. and across the country to ensure focus on the needs of the Company’s customers and clients.

Proposed Merger with Anthem. Cigna committed its full support – which included work by hundreds of associates and hundreds of millions of dollars in expenditures – to the regulatory approval process led by Anthem. Cigna deployed a significant number of key leaders and talent across the organization to address Department of Justice information requests in a timely and thorough manner, and to advance integration planning and “Day 1” readiness work in collaboration with Anthem.

Based on these factors, and in particular given the Company’s 2016 financial performance, the positive momentum going into 2017 and Mr. Cordani’s continued focus on executing the Company’s strategy and leading the organization during a challenging year, the Board awarded Mr. Cordani a MIP payout for 2016 of $1,100,000, or 50% of his 2016 MIP target.

Other NEOs

For all other NEOs, Mr. Cordani makes recommendations to the Committee regarding MIP awards based on his evaluation of each NEO’s performance and contributions to enterprise goals. The Committee considers Mr. Cordani’s recommendations when determining MIP awards. While not exhaustive, below are certain key factors the Committee considered when making award determinations.

Mr. McCarthy. As Cigna’s Chief Financial Officer, Mr. McCarthy has continued to lead productive engagement between business teams and their financial counterparts. While financial results varied across the Company’s businesses, Mr. McCarthy’s leadership in the management and development of reporting and financial processes and systems helped to deliver strong results in the U.S. Commercial and Global Supplemental Benefits businesses and to drive improvements in the Group Disability and Life and Seniors businesses in the second half of the year. Mr. McCarthy was critical in executing the Company’s investment strategy to deliver investment income and achieving Cigna’s capital management objectives. Under his leadership, Cigna has maintained its improved and favorable credit agency ratings, which will continue to provide Cigna with financial flexibility. In addition, Mr. McCarthy has actively supported the development of the Company’s strategic framework and the development and expansion of the Company’s delivery systems partnerships and a new supply chain management model throughout the enterprise. As a result of Mr. McCarthy’s contributions in 2016, Mr. Cordani recommended, and the Committee approved, a 2016 MIP payment of $536,000, or 67% of his target.

Ms. Jones. As Executive Vice President and General Counsel, Ms. Jones continued to lead Cigna’s legal, compliance and government affairs functions in 2016 and continued to strengthen the partnership across these functions and between them and the Company’s business leaders. During the past year, Ms. Jones led a centralization and reorganization of the Company’s compliance function and developed and staffed compliance initiatives to advance the HealthSpring remediation process and audit response efforts and to improve compliance communications throughout the enterprise. In addition, with respect to the proposed merger with Anthem, Ms. Jones provided key strategic legal counsel, directed critical regulatory support and participated in integration planning efforts. As a result of Ms. Jones’ contributions in 2016, Mr. Cordani recommended, and the Committee approved, a 2016 MIP payment of $431,200, or 77% of her target.

Mr. Manders. Mr. Manders continued to lead the U.S. Commercial and Group insurance operations in 2016. Under his leadership, the U.S. Commercial business delivered strong results, exceeding aggressive revenue and earnings targets in a challenging environment. While the Group business did not meet earnings targets for the full year, earnings improved markedly in the second half of the year. Mr. Manders continued to make meaningful progress advancing strategic initiatives, including the localization strategy and the development of critical technology and business process capabilities. Mr. Manders also led a restructuring of Cigna’s disability model, with a focus on enhancing the model’s short-term disability and long-term disability transition process. In addition to these contributions, Mr. Manders was key in the development of Cigna’s strategy and in the integration planning efforts related to the proposed merger with Anthem. As a result of his contributions, Mr. Cordani recommended, and the Committee approved, a 2016 MIP payment to Mr. Manders of $675,000, or 75% of his target.

 

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Mr. Sadler. Mr. Sadler continued to serve as President of Cigna’s International Markets business in 2016, delivering strong performance, particularly in the Global Supplemental Benefits business. Mr. Sadler was critical to the development and execution of our international strategy, leading acquisitions of innovative technologies, initiating product launches and significantly increasing brand equity and customer satisfaction throughout international markets. As a result of Mr. Sadler’s contributions in 2016, Mr. Cordani recommended, and the Committee approved, a 2016 MIP payment of $399,796, or 80% of his target.

2017 MIP Changes

For 2017, the Committee has added a new performance measure to the MIP plan — strategic priorities. This measure will evaluate Company performance in the following areas: (1) customer, client and reputation focus (which includes NPS), (2) employee engagement and (3) enterprise focus on compliance. NPS will be removed as a separate measure.

Adjusted income from operations and revenue will remain in the plan, with continued weightings of 50% and 20%, respectively, The operating expense improvement ratio measure will remain as well, with a new weighting of 10%. Strategic priorities will be weighted 20%.

Long-Term Incentives

 

                       
   

 

Long-term incentives are

designed to incent and reward superior results through long-term financial achievement and strategic accomplishments that benefit Cigna and its shareholders over

the long-term.

 
   
     
                       

LTI Overview

Long-term incentives are administered under the Cigna Long-Term Incentive Plan and are delivered annually through a mix of strategic performance shares (SPSs) and stock options. SPS awards have a three-year performance period and are denominated in shares of Cigna common stock. At the end of the three-year performance period, the actual number of shares earned is based on Cigna’s performance against pre-established enterprise goals. The SPSs earned will range from 0% to 200% of the SPS award opportunity. Cigna’s stock options, whose actual value realized depends upon stock price appreciation at the time that the options are exercised, generally vest (or first become exercisable) in equal installments over three years

beginning on the first anniversary of the grant and have a ten-year term.

2016 Individual LTI Targets and Awards

A named executive officer’s LTI target is expressed as a dollar value and is determined based on the market data for the officer’s role. The Committee sets the target as an absolute dollar value, not as a percentage of salary, with the primary consideration being the comparison to the 50th percentile LTI target level of the market data. An executive can receive a grant between 0% and 200% of his or her individual target value. 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, LTIP share utilization, succession planning needs and other factors as circumstances warrant.

In December 2015, to ensure that his target total direct compensation remained within a competitive range of the market median, the Committee increased Mr. Manders’ 2016 LTI target by $400,000.

2016 LTI awards ranged from 70% to 125% of each NEO’s target. These awards were delivered 50% in stock options and 50% in SPS awards having a 2016–2018 performance period. The Committee believes this mix provides an appropriate balance between emphasizing stock price appreciation and enterprise performance.

 

 

 

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The table below provides more detail about the 2016 LTI target values, grant values and percentages relative to LTI targets.

 

   

2016

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       12,000,000       125  

Thomas A. McCarthy

    2,400,000       4,800,000       2,640,000       110  

Nicole S. Jones

    1,424,500       2,849,000       1,709,400       120  

Matthew G. Manders

    2,600,000       5,200,000       2,860,000       110  

Jason D. Sadler

    1,000,000       2,000,000       1,150,000       115  

Herbert A. Fritch

    2,000,000       4,000,000       1,400,000       70  

 

  (1) Awarded in February 2016. 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 54. 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 50% (of the weighting) of the SPS performance measures, and is determined after the Committee arrives at each NEO’s LTI grant value. Thus, an SPS award’s grant date fair value may be higher or lower than the Committee’s 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 54.

Equity awards granted in 2016 are disclosed in terms of their grant date fair value in columns (e) and (f) of the Summary Compensation Table on page 54 and in the Grants of Plan-Based Awards Table on page 56.

 

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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.

 

Grants

At the time of grant, a total LTI dollar 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

Cigna’s 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%

 

Alignment with Business Strategy: Rewards NEOs for stock performance relative to Cigna’s applicable peer group at the time of the award

 

Comparator: Beginning with the 2015–2017 SPS program, the Committee adopted the SPS performance peer group to measure relative TSR. For the 2014–2016 SPS program, relative TSR is measured against Cigna’s compensation peer group at the time of the award

 

 

Measure: Adjusted income from operations

 

Weighting: 50%

 

Alignment with Business Strategy: Reinforces the importance of sustained profitable growth across the enterprise

 

Segments Included: Global Health Care, Global Supplemental Benefits and Group Disability and Life

 

Threshold Performance: Performance that would result in funding of less than 35% of target yields no payment for this measure

 

 

Final Payout 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

Cigna’s stock price at the time of payment.

 

 

The SPS programs are designed to pay at the competitive median for performance results against stretch targets. Each year, when the Committee approves the performance measures and goals for the SPS performance period, the Committee sets the goals with the expectation that performance resulting in a number of shares paid between 80% and 120% of target would be challenging and not certain, while performance resulting in a number of shares paid over 120% of target would be difficult, but not unattainable.

SPS awards with a performance period that began prior to 2015 included revenue as a performance measure. For the

2014–2016 program, TSR was weighted 50% and adjusted income from operations and revenue were each weighted 25%. In 2014, for SPS programs with performance periods beginning in 2015, the Committee adjusted the performance measures to focus on earnings-based and shareholder return-based metrics and to exclude revenue, which is consistent with current market practices and trends. The Committee believes that these two measures are more effective to evaluate the Company’s long-term success and value created for shareholders. In addition, the removal of revenue as a performance measure in the SPS program helps to mitigate the use of duplicate measures within Cigna’s short-term and long-term incentive plans.

 

 

 

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The following table shows the performance period for our SPS programs outstanding as of the end of 2016, the grant date, the potential payment date and the performance measures used for each cycle.

 

PERFORMANCE
PERIOD
  GRANT DATE   PAYMENT
DATE
(IF
 EARNED)
 

PERFORMANCE MEASURES

(WEIGHTINGS IN %)

2014–2016   February 2014   2017  

Relative TSR1, 3

(50%)

  Adjusted income from operations (25%)  

Revenue

(25%)

2015–2017   February 2015   2018  

Relative TSR2, 3

(50%)

  Adjusted income from operations (50%)
2016–2018   March 2016   2019  

Relative TSR2, 3

(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: Aetna, Inc., Aflac Incorporated, Anthem, Inc., Chubb Limited, The Hartford Financial Services Group, Inc., Humana, Inc., Manulife Financial Corporation, MetLife, Inc. and Unum Group.

 

  2. The SPS performance peer group, which includes Aetna, Inc., Aflac Incorporated, Anthem, Inc., The Hartford Financial Services Group, Inc., Humana, Inc., Manulife Financial Corporation, MetLife, Inc., UnitedHealth Group Incorporated and Unum Group, is used to measure relative TSR.

 

  3. In the event the number of companies in the peer group falls below ten during the three-year performance period, the Company’s TSR will be ranked against the remaining companies.

2014–2016 SPS Program

The performance goals for the 2014–2016 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

 

67th Percentile

(151% of target)

Adjusted income
from operations1, 2

    25  

Cumulative adjusted income from operations of $6,584 to $7,379, calculated assuming a compound annual growth rate of 5%–11%

 

$6,724

(87.0% of target)

Revenue2

    25  

Cumulative revenue of $102,881 to $115,384, calculated assuming a compound annual growth rate of 4%–10%

 

$110,641

(104.8% of target)

 

  1. 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 2014–2016 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 2014–2016 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.

 

  2. Reflects results for Cigna’s three ongoing business segments—Global Health Care, Global Supplemental Benefits and Group Disability and Life.

Over the three-year period from 2014 to 2016, three-year annual compounded TSR was 15.1%, which ranked at the 67th percentile relative to the applicable peer group companies and was 151% of target.

Based on the results in the table above, in February 2017, the Committee approved payout of the 2014–2016 SPSs at 123.5% of target. The calculations utilized to determine the payout were reviewed for accuracy by PricewaterhouseCoopers LLP. See the Outstanding Equity Awards table on page 58 for actual share amounts issued to each NEO and associated market values.

 

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COMPENSATION MATTERS

 

 

2013–2015 SPS Program

The shares earned under the 2013–2015 SPS Program were measured using performance through December 31, 2015 and were delivered to each executive officer in February 2016. The total share value realized by each NEO on the payment date is reflected in the Option Exercises and Stock Vested table on page 60. The performance measures, targets, results and payout for the 2013–2015 SPS program are discussed in greater detail in our definitive proxy statement for our 2016 annual meeting of shareholders, filed with the SEC on March 18, 2016.

 

Retirement and Deferred Compensation

401(k) Retirement Plan and Supplemental 401(k) Plan

All U.S. full-time employees are eligible for the tax qualified 401(k) Plan, which provides for employee contributions as well as Company matching contributions of up to 4.5% of eligible pay. Certain employees, including the U.S.-based NEOs, are eligible for the Cigna Supplemental 401(k) Plan.

The Supplemental 401(k) Plan is a non-qualified deferred compensation plan that provides an annual credit to employees equal to 1.5% of earnings that cannot be treated as eligible earnings under the regular 401(k) Plan due to Internal Revenue Code limits and cannot be the basis for employee or Company matching contributions under the regular 401(k) Plan. Earnings eligible for the credit are salary and bonus amounts that exceed the IRS annual limit on eligible earnings ($265,000 in 2016) or that an employee defers under the Cigna Deferred Compensation Plan. Credits accumulate with hypothetical interest equal to the rate of return under the 401(k) Plan’s Fixed Income Fund (3.35% as of January 1, 2016 and 3.0% as of January 1, 2017). The account will vest under the same rules that apply to the regular 401(k) Plan. The account balance will be paid after termination of employment in accordance with the plan.

Nonqualified Deferred Compensation Plan

Cigna provides the NEOs and certain other employees with the opportunity to defer base salary and annual incentive awards under the Cigna Deferred Compensation Plan. Cigna does not make any contributions to this plan on behalf of employees. This plan provides eligible employees an opportunity to postpone both the receipt of compensation and the income tax on that compensation — typically until after termination of employment with Cigna. Participants elect when to receive payment and can choose either a single lump sum or annual installments. For amounts deferred before 2005, participants can request an accelerated payment of all or part of their account balance subject to a 10% penalty. Otherwise, early

withdrawals are permitted only under financial hardship circumstances.

Additional information about deferred compensation can be found in the Nonqualified Deferred Compensation Table and narrative on page 64.

Defined Benefit Pension Plans

The Cigna Pension Plan and the Cigna Supplemental Pension Plan were frozen on July 1, 2009. Benefits earned under these plans have been determined based on eligible earnings through July 1, 2009. The freeze did not affect benefits earned before July 1, 2009. The Company’s NEOs hired before July 1, 2009 participated in the Pension Plan and the Supplemental Pension Plan.

Additional information about pension benefits can be found in the Pension Benefits Table on page 61.

Retirement Plans for Non-U.S.-based Employees

Mr. Sadler participates in the Mandatory Provident Fund program for Hong Kong employees. Local law requires employees to contribute 5% of their monthly salary up to a maximum amount ($1,500 KHD or approximately $200 USD per month). Employers also are required to contribute 5% of the employee’s monthly salary up to the same maximum amount. Employer contributions vest at a rate of 10% per year and are fully vested after 10 years of service. Participants may withdraw their lump sum benefit upon attaining the normal retirement age of 60.

As a citizen of the United Kingdom working in Hong Kong, Mr. Sadler also participates in Cigna’s Third Country National Pension Plan. At the end of each calendar quarter, Cigna allocates a hypothetical contribution equivalent to 9% of eligible base and bonus earnings for the period. The hypothetical balance earns interest based on investment elections. Employees are vested in plan benefits after five years of service. At the time of separation of service from Cigna, Mr. Sadler will receive a lump sum payment of his vested plan benefit.

 

 

 

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COMPENSATION MATTERS

 

 

Limited Perquisites and Other Benefits

Cigna’s executive compensation program provides limited perquisites to executive officers, offered primarily to attract and retain key talent or provide for an executive officer’s safety and security. Perquisites generally have included an annual allowance under our executive financial services program (as described below), payments for residential security system monitoring and maintenance and relocation benefits when a move is required. Executive officers working outside of the United States also may be provided with benefits that are customary in the country in which they are based. In addition, Mr. Cordani is encouraged to use the corporate aircraft for business and personal travel. This serves to increase his time available for business purposes and as a means to better ensure his safety and security. Mr. Cordani is fully responsible for personal income tax liability associated with his personal use of the corporate aircraft.

Cigna’s executive financial services program offers executive officers an annual allowance of up to $6,500 for the costs of financial or estate planning (including associated legal services) and tax return preparation, with the exception of Mr. Cordani who is reimbursed for all such expenses incurred for any year.

The perquisites provided to the NEOs in 2016 and the associated values and valuation methods are described in the notes to the Summary Compensation Table on page 54.

The NEOs also are eligible to receive all of the benefits offered to Cigna employees generally, including medical and other health and welfare benefits as well as voluntary benefits.

EMPLOYMENT ARRANGEMENTS AND POST-TERMINATION PAYMENTS

Employment Arrangements

We typically do not enter into individual employment contracts with our executive officers. Consistent with our approach of rewarding performance, employment is not guaranteed, and either Cigna or the executive officer may terminate the relationship at any time. An executive officer receives an offer letter upon his or her hire or promotion that describes initial compensation terms, such as base salary, any sign-on or other cash bonus or equity awards, any relocation assistance and target opportunities for annual cash incentive and long-term equity incentive compensation.

Jason Sadler

As an employee based in Hong Kong, Mr. Sadler is entitled to certain protections in the event of his termination that

are customary for local employees. Unless he is terminated for cause, to terminate his employment, either Cigna or Mr. Sadler must provide at least three months’ prior written notice of the termination, or payment in lieu thereof.

Herbert Fritch

In connection with the acquisition of HealthSpring, we entered into a retention agreement with Mr. Fritch, which included restrictions on his ability to sell certain shares of wholly owned stock and shares underlying certain stock options. This restriction terminated on January 31, 2017.

Severance Arrangements

Other than following a change of control of Cigna, the Committee generally has discretion to determine, on a case-by-case basis, whether to make any post-termination payments to an executive officer. In the past, the Committee has approved varying amounts of severance pay for departing executive officers in exchange for certain obligations, including, for example, a general release of all claims or an extended non-competition and non-solicitation period. In approving a severance arrangement, the Committee exercises its business judgment based on individual circumstances, including, but not limited to, the executive officer’s term of employment, past accomplishments, reasons for termination, opportunities for future employment and total unvested annual or long-term incentive compensation.

Other Post-Termination Arrangements

Under the Cigna Long-Term Incentive Plan, if, absent a change of control, an executive officer’s employment terminates prior to the vesting of a stock option, restricted stock, RSU or SPS award, the award is generally forfeited, subject to specific exceptions for disability, death or retirement (as defined in the plan). Upon an executive officer’s disability, death or retirement, stock options, restricted stock, RSUs and SPS awards may vest, depending on the nature of the award, the termination event, and the terms of the grant agreements. For a full explanation of how equity awards are treated in the event of an executive officer’s disability, death or retirement, please see Potential Payments Upon Termination or Change of Control beginning on page 65.

In 2016, in connection with his retirement, the Committee approved the terms of Mr. Fritch’s Agreement and Release as well as the terms of his Advisory Services Agreement. These agreements are described in Potential Payments Upon Termination or Change of Control — Terms of Mr. Fritch’s Retirement, beginning on page 65.

 

 

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COMPENSATION MATTERS

 

 

Change of Control Arrangements

 

                     
   

 

Cigna does not provide

executive officers with any
single-trigger payments or golden parachute excise tax gross-ups

or excise tax reimbursements
upon a change of control.

 
   
     
                     

The Cigna Executive Severance Benefits Plan applies to executive officers in the event of a qualified separation of service of the executive officer. A mere change of control itself (i.e., a “single trigger”) does not trigger benefits. The intent of the plan is to encourage executives to continue to act in shareholders’ best interests in evaluating potential transactions and ensure management talent will be available to assist with the transaction and business integration.

Under the Cigna Executive Severance Benefits Plan and Cigna Long-Term Incentive Plan, an executive officer will be eligible for benefits if his or her employment is terminated upon or during the two-year period following a change of control (i.e., a “double trigger”) if such termination is:

 

  initiated by the company other than “for cause” as defined in the applicable plan; or

 

  initiated by the executive officer after determining, in his or her reasonable judgment, that there has been a material reduction in authority, duties or responsibilities, any reduction in compensation or any changes in the executive’s principal office location of more than 35 miles from the location on the date of a change of control. Under the Executive Severance Benefits Plan, the executive must deliver notice to the company within 30 days after such reduction or change and at least 30 days before separation, after which the company has 30 days to remedy the circumstances before a separation upon a change of control is deemed to have occurred.

Benefits in a double-trigger situation include the following:

 

  A lump sum cash severance payment equal to 156 weeks (approximately three years) of base salary plus three times the higher of (i) the most recent annual incentive paid or (ii) the target annual incentive. The intent of the formula for the annual incentive amount is to reward the executive officer for his or her level of expected performance prior to the change of control.

 

  Full vesting of all unvested stock options, restricted stock and RSUs. As a result, if an executive is
   

involuntarily terminated without cause or resigns for good reason after a change of control, the executive is able to realize the shareholder value to which he or she contributed while employed at the company.

 

  Full vesting of all unvested SPS awards with the calculation of such vesting made at the highest of: (1) the target vesting percentage; (2) the vesting percentage for the most recent payout of SPS awards (i.e., the prior cycle); or (3) the average of the vesting percentage established by the Committee for the most recent two SPS payouts. The intent of this formula is to provide executive officers with a reasonable estimate of the potential payouts and to avoid placing executive officers at a disadvantage as a result of a change of control.

 

  At the company’s expense, twelve months of basic life insurance plan coverage and six months of reasonable outplacement services following a change of control.

If any portion of the change of control benefits paid to an executive officer would be subject to a change in control excise tax, then either (1) the executive will receive the full amount of the benefits and will pay any resulting excise tax or (2) the change of control benefits will be reduced enough to avoid the excise tax entirely, whichever alternative provides the executive with the greater amount of after-tax benefits. Upon closing, the proposed merger with Anthem would constitute a change of control under the Cigna Executive Severance Benefits Plan and Cigna Long-Term Incentive Plan.

For more information concerning the financial amount of these benefits, see Potential Payments upon Termination or Change of Control beginning on page 65.

PROCESSES AND PROCEDURES FOR DETERMINING EXECUTIVE COMPENSATION

The Role of the People Resources Committee in Executive Compensation

The Committee is composed entirely of independent directors. Pursuant to its charter, the Committee is charged with oversight of the Company’s compensation and benefit plans and policies that apply to executive officers. The Committee regularly reviews Cigna’s compensation programs against the Company’s strategic goals, industry practices, and emerging trends to ensure a strong linkage between executive pay and performance and alignment with shareholder interests. At each of its regularly scheduled meetings, the Committee conducts executive sessions, without Cigna management present. In addition, the Committee has engaged Pay Governance as its independent compensation consultant to assist the Committee in its responsibilities.

 

 

 

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Risk Oversight

As part of its responsibilities, the Committee considers whether Cigna’s compensation programs and policies encourage unnecessary or excessive risk-taking behavior. At the request of the Committee, on an annual basis, the Chief Risk Officer conducts a comprehensive review of executive and employee compensation programs to determine whether incentive compensation plans are likely to promote risk-taking behavior that could have a material adverse effect on the Company. The findings of this review are presented to, and discussed by, the Committee in February of each year. The review analyzes:

 

  compensation governance processes, including general design philosophy and risk considerations in structuring compensation and incentive plans;
  situations where compensation programs may have the potential to raise material risks to the Company;

 

  internal controls that mitigate the risk of incentive compensation having an unintended negative impact; and

 

  plan design features that further mitigate compensation risk, including clawback arrangements, holding periods, earnings thresholds, payment structures and plan caps.

After conducting the review and assessing potential risks, the Committee determined that the Company’s incentive programs do not create risks that are reasonably likely to have a material adverse effect on the Company.

 

 

Process for Executive Compensation Decisions

Chief Executive Officer Compensation

 

     

The Committee and

independent Chairman

of the Board evaluate

CEO performance and

enterprise goals.

 

The Committee makes recommendations to the independent members

of the Board about

CEO performance and compensation.

 

The Board considers

the Committee’s

recommendations as it

reviews and approves the

CEO’s compensation.

 

The Chairman of the

Board reviews the results

of the performance

evaluation with the CEO.

     

 

Mr. Cordani is not present when the Committee and the Board make decisions about his compensation. At the request of the Committee, the Executive Vice President, Human Resources and Services and the independent compensation consultant attend this Committee session.

Other NEO Compensation

Generally, the Executive Vice President, Human Resources and Services presents recommendations for all other NEOs’ compensation targets for the Committee’s consideration. For compensation decisions involving actual payouts for the NEOs, Mr. Cordani presents his recommendations to the Committee for its consideration. Mr. Cordani discusses Cigna’s performance and the individual officer’s performance. The Executive Vice President, Human Resources and Services is generally present for the discussion of compensation for all executive officers other than himself.

Compensation Consultant Role in Executive Compensation

While the Committee or Board ultimately makes all executive compensation decisions, the Committee engages the services of outside advisors for assistance. The Committee utilized Pay Governance as the Committee’s independent compensation consultant throughout 2016 to provide independent, objective analysis, advice and information and to generally assist the Committee in the performance of its duties. The Committee will typically request information and recommendations directly from the compensation consultant as it deems appropriate to structure and evaluate Cigna’s compensation programs, practices and plans. As part of its engagement, at the direction of the Committee, the compensation consultant will work with the Committee chair, the Executive Vice President, Human Resources and Services and Cigna’s compensation department in their work on the Committee’s behalf.

 

 

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COMPENSATION MATTERS

 

 

ADVICE RECEIVED BY THE COMMITTEE FROM ITS COMPENSATION CONSULTANT FOR 2016 COMPENSATION
DECISIONS

 

•  Analyzed compensation levels and pay practices as compared to Cigna’s compensation peer group to assess whether three-and five-year realizable pay were aligned with Cigna’s performance and compensation philosophy

 

•  Presented a comparison of competitive market data to the current compensation levels of each executive officer to assist in setting compensation targets

 

•  Provided market research on incentive plans to assist in the design of short-term and long-term incentive compensation plans

 

•  Reviewed incentive measures in the 2016 MIP and 2016–2018 SPS program to provide the Committee with objective reference points to consider when determining target goals

 

•  Evaluated the effect of Cigna’s equity programs on annual share use, burn rate and total overhang to provide the Committee with context for its determination of the maximum share limit for use in 2016

 

At the request of the Committee, a representative of Pay Governance regularly attended the Committee’s meetings in 2016. The Committee regularly reviews and evaluates its compensation consultant engagement, and annually reviews the compensation consultant’s performance.

Independence of the Compensation Consultant

The Committee’s policy requires that the compensation consultant be independent of the Company. A compensation consultant is deemed independent under the policy if the compensation consultant (1) is retained by and reports solely to the Committee for all executive compensation services; (2) does not provide any services or products to the Company or management except with approval of the Committee’s chair; and (3) is otherwise free from conflicts. The Committee has assessed Pay Governance’s independence pursuant to Cigna’s policy and NYSE rules and concluded that Pay Governance is free from conflicts and independent. In addition, each year the Committee receives a letter from its compensation consultant providing appropriate assurances and confirmation of independence.

 

 

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COMPENSATION MATTERS

 

 

OTHER PRACTICES

 

                     
   

 

Executive officers are

subject to robust stock

ownership requirements,

prohibited from hedging and

restricted in their ability to

pledge Cigna securities.

 
   
     
                     

Stock Ownership Guidelines

We believe that the ownership of meaningful levels of Cigna stock by our executive officers is a critical factor in aligning the long-term interests of management and our shareholders. To promote this goal, we have adopted stock ownership guidelines that apply to all of our executive officers, including our NEOs. As of December 31, 2016, all of our NEOs met or exceeded stock ownership guidelines. The chart below shows the stock ownership requirements and actual value of holdings as a multiple of base salary as of December 31, 2016 for the CEO and the average of the other NEOs.

 

LOGO

 

FEATURES OF OUR STOCK OWNERSHIP GUIDELINES

 

•     Wholly owned shares, restricted stock, stock equivalents, and shares owned through benefit plans (such as investments in the Cigna stock fund of the Cigna 401(k) Plan) are counted toward meeting the guidelines. SPSs granted on or after January 1, 2014 and stock options do not count toward meeting guidelines.

 

•     Executive officers have five years from date of hire, promotion or any other event that changes their multiple of base salary to meet their applicable ownership guideline. Prior to meeting their stock ownership guidelines, executives may only engage in transactions that increase their holdings. Once an executive attains his or her required holding level, the executive must maintain the requirement on a continuous basis, even if the requirement is met before the end of the five-year period.

 

 

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COMPENSATION MATTERS

 

 

SHARE RETENTION REQUIREMENTS ENCOURAGE A
LONG-TERM OWNERSHIP PHILOSOPHY
  OTHER PRACTICES REGARDING TRANSACTIONS IN
CIGNA STOCK

•  Once ownership guidelines are satisfied,

 

•  executive officers may not sell more than 50% of the shares held above their applicable guideline in any single open period; and

 

•  executive officers must retain, for at least one year, a minimum of 50% of the shares acquired upon exercise of any stock options and 50% of the shares acquired upon vesting of restricted stock grants.

 

 

•  Executive officers may only transact in Cigna securities during approved open trading periods after satisfying mandatory clearance requirements.

 

•  CEO approval is required for all transactions in Cigna stock by executive officers.

 

•  General Counsel approval is required for all transactions in Cigna stock by the CEO.

 

Hedging and Pledging Restrictions

Our insider trading policy prohibits our directors, executive officers and all employees from engaging in hedging, speculative or other transactions that hedge or offset any decrease in the market value of Cigna stock. Prohibited transactions include, but are not limited to, trading in put or call options, short sales, zero cost collars and forward sale contracts.

The Committee has adopted a policy that prohibits directors and Section 16 officers from pledging Cigna stock as loan collateral or holding Cigna stock in a margin account. Cigna’s Office of the Corporate Secretary, in consultation with the Chairman of the Board and the Chief Executive Officer, may grant exceptions to this prohibition only with respect to shares held above the stock ownership guidelines. Exceptions may be granted upon a determination that the pledge is reasonable in amount and scope and structured to minimize risks associated with pledging. This determination will be based on the following considerations, among others:

 

    the amount of the pledge as compared to Cigna’s total stock outstanding, market value or trading volume;

 

    the amount of the pledge as compared to the total value of Cigna stock held by the individual above the applicable stock ownership guideline;

 

    the individual’s ability to repay loans secured by Cigna stock or substitute other assets as collateral; and

 

    the terms of the pledging documentation.

To our knowledge, none of our directors, NEOs or other Section 16 officers have pledged Cigna stock, either now or at any time in the past.

Disgorgement of Awards (Clawback) Policy

The Board of Directors has the authority to recoup compensation paid to executive officers in the event of a restatement of financial results, beyond the mandates of

Sarbanes-Oxley. In addition, Cigna will review its policy and, if necessary, amend it to comply with any new clawback mandates under applicable law.

Currently, the Board will, in all appropriate cases and to the full extent permitted by law, require reimbursement of any bonus or other cash incentive compensation awarded to an executive officer or cancel unvested restricted or deferred stock awards previously granted to the executive officer if:

 

    the amount of the bonus or incentive compensation was calculated based upon the achievement of certain financial results that were later the subject of a restatement;

 

    the executive engaged in intentional misconduct that caused or partially caused the need for the restatement; and

 

    the amount of the bonus or incentive compensation that would have been awarded to the executive had the financial results been properly reported would have been lower than the amount actually awarded.

In addition, Cigna’s stock option, restricted stock, RSU and SPS awards include a clawback provision that applies to any Cigna employee, including any NEO, who:

 

    is terminated by Cigna due to misconduct;

 

    engages in behavior that would be considered grounds for termination due to misconduct;

 

    competes with Cigna within one year following any voluntary termination;

 

    solicits a Cigna employee or customer within one year following any termination;

 

    discloses Cigna confidential information improperly; or

 

    fails to assist Cigna in the handling of investigations, litigation or agency matters with respect to which the employee has relevant information.
 

 

 

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If an executive engages in any of the above “violation events,” any option gains realized over the two years before the event and the value of any restricted stock, RSU or SPS vesting over the year before the event are required to be paid back to Cigna. These provisions are designed to discourage executives from engaging in activities that can cause Cigna competitive harm.

Tax and Accounting Treatment

Prior to 2013, Section 162(m) of the Internal Revenue Code imposed limits on the amount of employee compensation that Cigna could deduct for federal income tax purposes, unless the compensation qualified as performance-based under Section 162(m). As part of health care reform legislation enacted in 2010, Section 162(m) was revised as it pertains to compensation paid by health insurers, including Cigna. Starting in 2013, under Section 162(m)(6), any per person compensation in excess of $500,000 paid

to any employee or, generally, any individual service provider, will not be deductible by Cigna. The tax deduction limitation applies whether or not compensation is performance-based or is provided pursuant to a shareholder-approved plan.

The tax deduction limitation under Section 162(m)(6) has impacted, and will continue to impact, Cigna through the loss of some tax benefits related to employee compensation in excess of the $500,000 per person deduction limit. While the Committee considers the impact of Section 162(m)(6), it believes that shareholder interests are best served by not restricting the Committee’s discretion and flexibility in crafting the executive compensation program, even if non-deductible compensation expenses could result.

Separately, the Committee also considers the accounting consequences of its compensation decisions.

 

 

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COMPENSATION MATTERS

 

 

Executive Compensation Tables

 

2016 SUMMARY COMPENSATION TABLE

This table includes information regarding 2016, 2015 and 2014 compensation for each of the NEOs. Other tables in this proxy statement provide more detail about specific types of compensation with respect to 2016.

 

NAME AND PRINCIPAL

POSITION

(a)

 

YEAR

(b)

   

SALARY

($)

(c)

   

BONUS

($)

(d)

   

STOCK

AWARDS

($)

(e)

   

OPTION

AWARDS

($)

(f)

   

NON-EQUITY

INCENTIVE
PLAN

COMPENSATION

($)

(g)

   

CHANGE IN
PENSION

VALUE AND
NONQUALIFIED
DEFERRED
COMPENSATION
EARNINGS

($)

(h)

   

ALL OTHER
COMPENSATION

($)

(i)

   

TOTAL

($)

(j)

 

David M. Cordani

President and

Chief Executive Officer

    2016       1,200,000             6,690,115       6,000,012       1,100,000       62,000       227,730       15,279,857  
    2015       1,189,615             7,105,072       5,800,033       2,860,000             352,952       17,307,672  
    2014       1,125,185             5,670,023       5,400,023       1,900,000       125,859       240,355       14,461,445  
                                                                         

Thomas A. McCarthy(1)

Executive Vice President and

Chief Financial Officer

    2016       740,000             1,471,894       1,320,035       536,000       65,616       34,898       4,168,443  
    2015       719,231             1,470,005       1,200,013       1,000,000             29,036       4,418,285  
    2014       637,037             1,102,541       1,050,006       630,000       205,455       38,063       3,663,102  
                                                                         

Nicole S. Jones

Executive Vice President,

General Counsel

    2016       581,137             953,114       854,702       431,200       7,207       35,294       2,862,654  
    2015       577,867             1,003,501       819,089       756,000             31,390       3,187,847  
    2014       562,682             897,453       854,710       501,113       15,623       32,013       2,863,594  
                                                                         

Matthew G. Manders(2)

President, Gov’t & Indiv. Programs

and Group Insurance

    2016       750,000             1,594,526       1,430,035       675,000       289,130       41,900       4,780,591  
    2015       732,692             1,347,529       1,100,015       1,080,000             37,253       4,297,489  
    2014       585,667             1,276,282       918,773       787,500       653,845       35,995       4,258,062  
                                                                         

Jason D. Sadler(3)

President,

International Markets

    2016       589,463             641,256       575,039       399,796             239,383       2,444,937  
    2015       586,330             704,494       575,025       575,297             235,637       2,676,783  
    2014       554,977             1,266,644       471,013       546,116             231,784       3,070,534  
                                                                         

Herbert A. Fritch(4)

Retired President,

Cigna-HealthSpring

    2016       883,428             913,987       700,039       0             138,634       2,636,088  
    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  
                                                                         

 

  (1) On February 22, 2017, Mr. McCarthy notified the Company of his intention to retire from his position in the early summer of 2017.

 

  (2) On February 23, 2017, the Company appointed Matthew G. Manders, who was most recently the Company’s President of U.S. Markets, to the new role of President, Government & Individual Programs and Group Insurance.

 

  (3) Mr. Sadler’s base salary and annual award under the Management Incentive Plan are paid in Hong Kong dollars and, throughout these Executive Compensation Tables, have been converted to U.S. dollars using an exchange rate equal to the average of the daily mid-points between the bid and the ask prices for each trading day in the month of December for the relevant year. For 2016 base salary and the 2016 MIP award, $1 Hong Kong dollar = $0.12888508 U.S. dollars.

 

  (4) Mr. Fritch retired effective November 11, 2016. On October 20, 2016, he and the Company entered into an Agreement and Release (the “A&R Agreement”) in connection with his retirement. The A&R Agreement is described in Potential Payments Upon Termination or Change of Control – Terms of Mr. Fritch’s Retirement, beginning on page 65.

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 16 to Cigna’s consolidated financial statements in the Company’s Annual Report on Form 10-K for the year ended December 31, 2016 and, for SPSs, are based upon the probable outcome of the performance conditions. All awards were made under the Cigna Long-Term Incentive Plan. For Mr. Fritch, also includes the incremental expense as determined in accordance with ASC Topic 718 related to the accelerated vesting of 45,020 shares of restricted stock pursuant to the A&R Agreement. No stock awards, other than SPSs, were granted to the NEOs in 2016.

 

 

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The SPSs are subject to performance conditions as described beginning on page 44. The grant date fair value of SPS awards granted in 2016 reflects the probable achievement level of the TSR performance condition as of the grant date for the assumed award value of SPS awards as shown in the CD&A. TSR performance comprises 50% (of the weighting) of the SPS performance measures. This forecasted performance condition creates an accounting grant date fair value that differs from the assumed award value granted to each NEO, as reflected in the CD&A. The amount reported in column (e) is consistent with the estimate of aggregate compensation cost recognized over the service period determined as of the grant date under ASC Topic 718, excluding the effect of estimated forfeitures, as follows:

 

       VALUE OF SPSs GRANTED IN 2016  

NAME

 

     GRANT DATE
FAIR VALUE
($)
       AT HIGHEST
PERFORMANCE ACHIEVEMENT*
($)
 

David M. Cordani

       6,690,115          9,690,167  

Thomas A. McCarthy

       1,471,894          2,131,936  

Nicole S. Jones

       953,114          1,380,519  

Matthew G. Manders

       1,594,526          2,309,560  

Jason D. Sadler

       641,256          928,815  

Herbert A. Fritch**

       780,653          1,130,722  

 

   * The value at the highest performance achievement reflects adjusted income from operations at 200% of target and projected achievement of total shareholder return relative to Cigna’s SPS performance peer group based on accounting assumptions.

 

  ** Mr. Fritch will only receive a prorated portion of this award in accordance with the A&R Agreement.

Option Awards (Column (f))

Represents the grant date fair value of option awards made under the Cigna Long-Term Incentive Plan computed in accordance with ASC Topic 718 applying the same model and assumptions as Cigna applies for financial statement reporting purposes, as described in Note 16 to Cigna’s consolidated financial statements in the Company’s Annual Report on Form 10-K for the year ended December 31, 2016 (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 37. Mr. Fritch did not receive a MIP award for 2016.

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 61. Information regarding accumulated benefits under the pension plans is also discussed in the narrative to the Pension Benefits Table beginning on page 62. The amounts in this column do not include deferred compensation because we do not provide above market earnings to our executive officers. The “†” symbol in the table represents a negative change in pension value.

All Other Compensation (Column (i))

This column includes:

 

    Cigna’s matching contributions to the NEOs’ accounts under its 401(k) and supplemental 401(k) plans in the following amounts: Mr. Cordani — $68,850; Mr. McCarthy — $34,050; Ms. Jones — $28,007; Mr. Manders — $35,400; and Mr. Fritch — $31,431.

 

    Cigna’s contributions of $104,742 to Mr. Sadler’s Third Country National Pension Plan account and $2,320 to Mr. Sadler’s Mandatory Provident Fund account.

 

    Dividends paid in 2016 on restricted stock awards of $258 for Ms. Jones and $7,203 for Mr. Fritch.

 

    Payment of $100,000 to Mr. Fritch pursuant to his Advisory Services Agreement. For more information on the Advisory Services Agreement, see the section titled “Potential Payments Upon Termination or Change of Control — Terms of Mr. Fritch’s Retirement” on page 65.

 

    2016 perquisites valued at incremental cost (the cost incurred by Cigna due to the NEO’s 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 — $23,608; Ms. Jones — $6,500; Mr. Manders — $6,500; and Mr. Sadler — $4,065.

 

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COMPENSATION MATTERS

 

 

  ¡    For the corporate aircraft, $129,040 of incremental cost related to Mr. Cordani’s use of the aircraft, at the Company’s 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.

 

  ¡    Costs for security system monitoring and maintenance in the following amounts: Mr. Cordani — $6,232; Mr. McCarthy — $848; and Ms. Jones — $529.

 

  ¡    Mr. Sadler is provided with local benefits consistent with market practice for executives in Hong Kong, which included his annual club memberships — $6,301; a housing allowance — $108,263; a company car — $7,405; and a personal driver — $6,287.

GRANTS OF PLAN-BASED AWARDS IN 2016

This table provides information about annual incentive targets for 2016 and grants of plan-based awards made in 2016 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.

 

NAME

(a)

 

 

GRANT

DATE

(b)

 

 

 

 

 

COMMITTEE

APPROVAL

DATE

(c)

 

 

 

 

 

 

AWARD

TYPE

(d)

 

 

 

 

 

 

 

ESTIMATED POSSIBLE PAYOUTS

UNDER NON-EQUITY INCENTIVE

PLAN AWARDS

 

 

 

 

 

 

 

 

ESTIMATED FUTURE PAYOUTS

UNDER EQUITY INCENTIVE

PLAN AWARDS

 

 

 

 

   




ALL
OTHER

STOCK

AWARDS:

NUMBER
OF

SHARES
OF

STOCK
OR UNITS

(#)

(k)

 
 

 

 

 
 

 
 

 
 

 

 

 

 

ALL OTHER

OPTION

AWARDS:

NUMBER OF

SECURITIES

UNDERLYING

OPTIONS

(#)

(l)

 

 

 

 

 

 

 

 

 

 

 


EXERCISE

OR BASE

PRICE OF

OPTION
AWARDS

($/Sh)

(m)

 

 

 

 
 

 

 

 

 


CLOSING

MARKET

PRICE
ON

DATE OF

GRANT

($/Sh)

(n)

 

 

 
 

 

 

 

 

   




GRANT

DATE
FAIR

MARKET

VALUE
OF

STOCK
AND

OPTION

AWARDS

($)

(o)

 

 
 

 

 
 

 
 

 

 

 

 

         

THRESHOLD

($)

(e)

 

 

 

   

TARGET

($)

(f)

 

 

 

   

MAXIMUM

($)

(g)

 

 

 

   

THRESHOLD

(#)

(h)

 

 

 

   

TARGET

(#)

(i)

 

 

 

   

MAXIMUM

(#)

(j)

 

 

 

         

David M.

Cordani

               

MIP

Target

 

 

          2,200,000       4,400,000                  
    3/1/2016       2/23/2016       SPS             7,542       43,098       86,196               6,690,115  
    3/1/2016       2/23/2016       Option                     142,801       139.22       138.53       6,000,012  
                                                                                                                 

Thomas A.

McCarthy

               

MIP

Target

 

 

          800,000       1,600,000                  
    3/1/2016       2/23/2016       SPS             1,659       9,482       18,964               1,471,894  
    3/1/2016       2/23/2016       Option                     31,417       139.22       138.53       1,320,035  
                                                                                                                 

Nicole S.

Jones

               

MIP

Target

 

 

          560,000       1,120,000                  
    3/1/2016       2/23/2016       SPS             1,075       6,140       12,280               953,114  
    3/1/2016       2/23/2016       Option                     20,342       139.22       138.53       854,702  
                                                                                                                 

Matthew G. 

Manders

               

MIP

Target

 

 

          900,000       1,800,000                  
    3/1/2016       2/23/2016       SPS             1,798       10,272       20,544               1,594,526  
    3/1/2016       2/23/2016       Option                     34,035       139.22       138.53       1,430,035  
                                                                                                                 

Jason D.

Sadler

               

MIP

Target

 

 

          499,745       999,490                  
    3/1/2016       2/23/2016       SPS             723       4,131       8,262               641,256  
    3/1/2016       2/23/2016       Option                     13,686       139.22       138.53       575,039  
                                                                                                                 

Herbert A.

Fritch

               

MIP

Target

 

 

          1,000,000       2,000,000                  
    3/1/2016       2/23/2016       SPS             880       5,029       10,058               780,653  
    3/1/2016       2/23/2016       Option                     16,661       139.22       138.53       700,039  
       

Restricted
Stock

Modification

 
 

 

                45,020             133,334  
                                                                                                                 

Estimated Possible Payouts Under Non-Equity Incentive Plan Awards (Columns (f) and (g))

Amounts in column (f) represent annual incentive targets for the 2016 performance period paid in 2017. 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 $1,100,000; Mr. McCarthy $536,000; Ms. Jones — $431,200; Mr. Manders $675,000; Mr. Sadler  $399,796; and Mr. Fritch — $0.

 

 

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COMPENSATION MATTERS

 

 

Estimated Future Payouts Under Equity Incentive Plan Awards (Columns (h), (i) and (j))

Represents SPSs awarded for the 2016–2018 performance period. Pursuant to the A&R Agreement, Mr. Fritch will receive a payout of a prorated portion of his 2016–2018 SPS award of 1,397 SPSs. Mr. Fritch forfeited the balance of his 2016–2018 SPS award (3,632 SPSs) granted in 2016. The People Resources Committee will determine payout amounts for the SPSs, if any, in 2019. The number of shares paid can range from 0% to 200% of the number of SPSs awarded. Threshold shares represent a threshold value for the SPS awards 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 Stock Awards: Number of Shares of Stock or Units (Column (k))

Pursuant to the A&R Agreement, on November 11, 2016, the vesting of 45,020 shares of Mr. Fritch’s restricted stock was accelerated. The amount shown with respect to these restricted stock awards in column (o) is the incremental expense of such acceleration.

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 2016 meeting as part of each NEO’s long-term incentive award. Stock options represented 50% of the long-term incentive awards for executive officers in 2016, as described on page 42.

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 2016 reflects the probable achievement level of the TSR performance condition as of the grant date for the assumed award value of SPS awards as shown in the CD&A. TSR performance comprises 50% (of the weighting) of the SPS performance measures. This forecasted performance condition creates an accounting grant date fair value that differs from the assumed award value granted to each NEO (as reflected in the CD&A). For Mr. Fritch, it also includes the incremental expense as determined in accordance with ASC Topic 718 related to the accelerated vesting of his restricted stock pursuant to the A&R Agreement.

 

LOGO  

 

Cigna 2017 Notice of Annual Meeting of Shareholders and Proxy Statement

    

 

 

 

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Table of Contents

 

 

COMPENSATION MATTERS

 

 

OUTSTANDING EQUITY AWARDS AT YEAR-END 2016

This table provides information about unexercised stock options and unvested stock awards (restricted stock, restricted stock units (RSUs) and SPSs) held as of December 31, 2016 by the NEOs.

 

    OPTION AWARDS     STOCK AWARDS  

NAME

(a)

 

NUMBER OF

SECURITIES

UNDERLYING

UNEXERCISED

OPTIONS

(#)

EXERCISABLE

(b)

   

NUMBER OF

SECURITIES

UNDERLYING

UNEXERCISED

OPTIONS

(#)(1)

UNEXERCISABLE

(c)

   

OPTION

EXERCISE

PRICE

($)

(d)

   

OPTION

EXPIRATION

DATE

(e)

   

NUMBER

OF

SHARES

OR
UNITS

OF
STOCK

THAT
HAVE

NOT

VESTED

(#)(1)

(f)

   

MARKET
VALUE

OF
SHARES

OR UNITS

OF STOCK

THAT
HAVE

NOT
VESTED

($)(2)

(g)

   

EQUITY

INCENTIVE

PLAN

AWARDS:

NUMBER
OF

UNEARNED

SHARES,

UNITS OR

OTHER

RIGHTS

THAT
HAVE

NOT
VESTED

(#)(1)

(h)

   

EQUITY

INCENTIVE

PLAN

AWARDS:

MARKET

OR PAYOUT

VALUE OF

UNEARNED

SHARES,

UNITS OR

OTHER

RIGHTS

THAT HAVE

NOT
VESTED

($)(2)

(i)

 

David M. Cordani

    190,180         34.6450       3/3/2020       85,462       11,399,776       91,074       12,148,361  
    189,610         42.1900       3/1/2021          
    200,229         44.4250       2/28/2022          
    206,843         58.7300       3/5/2023          
    152,970       76,473       78.0350       2/26/2024          
    53,129       106,259       120.8950       2/25/2025          
      142,801       139.2200       3/1/2026          

Total

    992,961       325,533                       85,462       11,399,776       91,074       12,148,361  
               

Thomas A. McCarthy

    4,464               46.8833       2/28/2017       16,618       2,216,675       19,408       2,588,833  
    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          
    11,332         58.7300       3/5/2023          
    29,744       14,870       78.0350       2/26/2024          
    10,992       21,985       120.8950       2/25/2025          
      31,417       139.2200       3/1/2026          

Total

    111,022       68,272                       16,618       2,216,675       19,408       2,588,833  
               

Nicole S. Jones

    34,163               58.7300       3/5/2023       13,527       1,804,367       12,916       1,722,865  
    24,212       12,104       78.0350       2/26/2024          
    7,503       15,006       120.8950       2/25/2025          
      20,342       139.2200       3/1/2026          

Total

    65,878       47,452                       13,527       1,804,367       12,916       1,722,865  
               

Matthew G. Manders

    29,953               44.4250       2/28/2022       16,599       2,214,141       19,371       2,583,898  
    38,471         58.7300       3/5/2023          
    26,027       13,011       78.0350       2/26/2024          
    10,076       20,153       120.8950       2/25/2025          
            34,035       139.2200       3/1/2026                                  

Total

    104,527       67,199                       16,599       2,214,141       19,371       2,583,898  
               

Jason D. Sadler

    4,864               58.7300       3/5/2023       15,333       2,045,269       8,888       1,185,570  
    6,670       6,670       78.0350       2/26/2024          
    5,267       10,535       120.8950       2/25/2025          
      13,686       139.2200       3/1/2026          

Total

    16,801       30,891                       15,333       2,045,269       8,888       1,185,570  
               

Herbert A. Fritch

    63,043 (3)              12.2500       2/13/2019       11,211       1,495,435       5,694       759,523  
    138,752 (3)        14.4000       11/11/2019          
    71,992 (3)        30.1300       11/11/2019          
    27,976         58.7300       3/5/2023