Aetna 2014 Annual Report Download - page 126

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Annual Report- Page 120
The grant date fair values 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 grant date fair value of
MSUs using a Monte Carlo simulation. MSUs granted in 2014 and 2013 had a weighted average per MSU grant
date fair value of $74.99 and $49.31, respectively. MSUs granted in 2012 were valued using two separate
performance periods, which resulted in a weighted average per MSU grant date fair value of $46.36 and $46.84,
respectively, for the two-year and three-year vesting period tranches. The weighted-average per MSU grant date
fair values listed above were calculated using the assumptions noted in the following table:
2012
2014 2013 Two-year Three-year
Dividend yield 1.3% 1.7% 1.6% 1.6%
Volatility 26.4% 28.1% 31.2% 37.5%
Risk-free interest rate .7% .4% .2% .3%
Initial price $ 72.26 $ 48.48 $ 44.79 $ 44.79
The annualized volatility of the price of our common stock was calculated over the three-year period preceding
the grant date for MSUs granted in 2014 and 2013. 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 risk-free interest rates for periods within
the expected life of the MSUs are based on a constant maturity yield curve in effect on the grant date for MSUs
granted in 2014, 2013 and 2012. The dividend yield assumptions for 2014, 2013 and 2012, respectively, were
based on our expected 2014, 2013 and 2012 annual dividend payout, respectively.
RSU, MSU and PSU transactions in 2014, 2013 and 2012 were as follows (number of units in millions):
2014 2013 2012
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 5.3 $ 48.82 3.4 $ 43.25 6.7 $ 33.62
Granted 2.7 71.88 3.6 51.22 4.6 43.71
Vested (2.5) 50.11 (1.3) 41.56 (7.7) 34.69
Forfeited (.4) 56.89 (.4) 46.65 (.2) 37.37
RSUs, MSUs and PSUs at end of year 5.1 $ 58.57 5.3 $ 48.82 3.4 $ 43.25
In 2013, we granted PSARs and estimated the fair value of those PSARs using a Monte Carlo simulation. The
PSARs granted in 2013 had a grant date per PSAR fair value of $18.64. That grant date fair value was calculated
using the assumptions noted in the following table:
Dividend yield 1.25%
Expected settlement period (in years) 6.12
Volatility 40.4%
Risk-free interest rate .6%
Initial price $ 64.25