Aetna 2013 Annual Report Download - page 128

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Annual Report- Page 122
vested three years after the grant is made, with one-third vesting each year. Vested SARs and stock options
may be exercised at any time during the ten years after grant, except in certain circumstances, generally
related to employment termination or retirement. At the end of the ten-year period, any unexercised SARs
and stock options expire.
We estimate the grant date fair value of SARs using a modified Black-Scholes option pricing model. We
did not grant a material number of SARs in 2013, 2012 or 2011.
We use historical data to estimate the period of time that stock options or SARs are expected to be
outstanding. Expected volatilities are based on a weighted average of the historical volatility of our stock
price and implied volatility from traded options on our stock. The risk-free interest rate for periods
within the expected life of the stock option or SAR is based on the benchmark five-year U.S. Treasury
rate in effect on the date of grant. The dividend yield assumption is based on our historical dividends
declared.
PSARs - PSARs represent the opportunity to vest in SARs. For the PSARs granted in 2013, the number of
vested PSARs (which may range in specified increments from zero to 700,000 SARs) is dependent on
Aetna's total shareholder return over a three year performance period relative to a defined peer group of
seven companies. The PSARs granted in 2013 are subject to a three-year vesting period.
The stock option, SAR and PSAR transactions during 2013, 2012 and 2011 were as follows:
(Millions, except exercise price and remaining life)
Number of Stock
Options, SARs and
PSARs
Weighted
Average
Exercise
Price
Weighted
Average Remaining
Contractual Life
Aggregate
Intrinsic
Value
2011
Outstanding, beginning of year 37.8 $ 31.01 4.1 $ 232.9
Granted .1 36.87 — —
Exercised (10.0) 17.35 — 228.8
Expired or forfeited (1.6) 47.95 — —
Outstanding, end of year 26.3 $ 35.18 4.0 $ 246.3
Exercisable, end of year 24.7 $ 35.38 3.8 $ 230.6
2012
Outstanding, beginning of year 26.3 $ 35.18 4.0 $ 246.3
Granted .1 44.79 — —
Exercised (6.7) 22.73 — 148.0
Expired or forfeited (.3) 43.02 — —
Outstanding, end of year 19.4 $ 39.34 3.5 $ 163.8
Exercisable, end of year 19.4 $ 39.34 3.5 $ 163.8
2013
Outstanding, beginning of year 19.4 $ 39.34 3.5 $ 163.8
Granted .7 (1) 63.32 — —
Exercised (9.3) 36.58 — 203.4
Expired or forfeited (.3) 47.11 — —
Outstanding, end of year 10.5 $ 43.27 3.5 $ 264.6
Exercisable, end of year 9.8 $ 41.77 3.0 $ 261.6
(1) PSARs are included in this table at the maximum amount that could potentially vest.