Aetna 2012 Annual Report Download - page 123

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Annual Report- Page 117
The fair value of RSUs and PSUs are based on the market price of our common stock on the date of grant.
Beginning in 2010, we granted MSUs to certain employees. We estimate the fair value of MSUs using a Monte
Carlo simulation. MSUs granted in 2012 were valued using two separate performance periods, which resulted in
a weighted average per share fair value of $46.36 and $46.84, respectively, for the two-year and three-year
vesting period tranches, using the assumptions noted in the table below. In addition, the MSUs granted in 2011
and 2010 had a weighted average per share fair value of $38.79 and $33.85, respectively, using the assumptions
noted in the following table:
2012
Two-year Three-year 2011 2010
Dividend yield 1.6% 1.6% 1.6% .1%
Historical volatility 30.3% 39.7% 36.5% 58.7%
Risk-free interest rate .2% .3% .6% .9%
Initial price $ 44.79 $ 44.79 $ 36.87 $ 29.20
As the MSUs granted in 2012 have two separate performance periods (two years and three years), the annualized
volatility of the price of our common stock was calculated over the two-year and three-year periods preceding the
grant date. The annualized volatility of the price of our common stock was calculated over the 22 months and
two-year periods preceding the grant date, respectively, for the MSUs granted in 2011 and 2010, respectively.
The risk-free interest rates for periods within the expected life of the MSUs are based on a constant maturity yield
curve, a 22 month interpolated and two-year U.S. Treasury rate, each in effect on the date of grant for the the
MSUs granted during 2012, 2011 and 2010, respectively. The dividend yield assumptions for 2012 and 2011,
respectively, were based on our expected 2012 and 2011 annual dividend payout, respectively, and the 2010
dividend yield assumption was based on our historical dividends declared.
RSU, MSU and PSU transactions in 2012, 2011 and 2010 were as follows (number of units in millions):
2012 2011 2010
RSUs,
MSUs
and PSUs
Weighted
Average
Grant Date
Fair Value
RSUs,
MSUs
and PSUs
Weighted
Average
Grant Date
Fair Value
RSUs,
MSUs
and PSUs
Weighted
Average
Grant Date
Fair Value
RSUs, MSUs and PSUs at beginning of year 6.7 $ 33.62 5.0 $ 31.16 3.1 $ 34.6
Granted 4.6 43.71 3.9 37.43 3.8 29.22
Vested (7.7) 34.69 (1.3) 33.34 (1.3) 34.22
Forfeited (.2) 37.37 (.9) 33.65 (.6) 34.78
RSUs, MSUs and PSUs at end of year 3.4 $ 43.25 6.7 $ 33.62 5.0 $ 31.16
During 2012, 2011 and 2010, the following activity occurred under the Plans:
(Millions) 2012 2011 2010
Cash received from stock option exercises $ 89.8 $ 150.4 $ 52.6
Intrinsic value of options/SARs exercised and stock units vested 492.5 280.7 140.3
Tax benefits realized for the tax deductions from stock options and SARs exercised and stock units vested 172.4 98.2 49.1
Fair value of stock options, SARs and stock units vested (1) 273.4 98.5 105.7
(1) The fair value represents the total dollar value of the stock options, SARs and stock units as of the grant date.
We settle our stock options, SARs and stock units with newly-issued common stock and generally utilize the
proceeds from stock options to repurchase our common stock in the open market in the same period.