Cigna 2014 Annual Report Download - page 139

PART II
ITEM 8. Financial Statements and Supplementary Data
The IRS began its examination of the Company’s 2011 and 2012 tax
D. Other Tax Matters
years in the third quarter of 2014 that is expected to continue through
In 2013, the IRS completed its examination of the Company’s 2009 2015.
and 2010 tax years, resulting in two issues that could not be resolved The Company conducts business in numerous state and foreign
at the examination level. The Company subsequently filed a formal jurisdictions, and may be engaged in multiple audit proceedings at
protest challenging the IRS positions on the two disputed matters. any given time. Generally, no further state audit activity is expected
The IRS previously withdrew its challenge relating to the first of these for tax years prior to 2010, and prior to 2008 for foreign audit activity.
matters, and the parties have since agreed on a resolution of the
second matter. The resolution of these matters did not materially
impact shareholders’ net income.
Employee Incentive Plans
The People Resources Committee (‘‘the Committee’’) of the Board of strategic performance shares, deferred stock units and restricted stock
Directors awards stock options, restricted stock, deferred stock and units.
strategic performance shares to certain employees. The Committee In connection with the HealthSpring acquisition on January 31,
has issued common stock instead of cash compensation and dividend 2012, HealthSpring employees’ awards of options and restricted
equivalent rights to a very limited extent, as part of restricted and shares of HealthSpring stock were rolled over to Cigna stock options
deferred stock units. The Company issues shares from Treasury stock and restricted stock. Unless otherwise indicated, information in this
for option exercises, awards of restricted stock grants and payment of footnote includes the effect of the HealthSpring rollover awards.
Compensation cost and related tax benefits for these awards were as follows:
(In millions) 2014 2013 2012
Compensation cost $ 101 $ 88 $ 98
Tax benefits $12 $25 $26
The Company had the following number of common stock shares available for award at December 31: 10.3 million in 2014, 13.2 million in
2013 and 8.4 million in 2012.
Stock options. The Company awards options to purchase the Company’s common stock at the market price of the stock on the grant date.
Options vest over periods ranging from one to five years and expire no later than 10 years from grant date.
The table below shows the status of, and changes in, common stock options during the last three years:
2014 2013 2012
Weighted Average Weighted Average Weighted Average
Exercise Exercise Exercise
(Options in thousands) Options Price Options Price Options Price
Outstanding – January 1 7,350 $ 42.24 8,951 $ 36.29 9,581 $ 33.92
Granted 2,012 $ 78.11 1,890 $ 58.84 3,446 $ 28.29
Exercised (1,869) $ 41.29 (3,107) $ 34.99 (3,740) $ 22.72
Expired or canceled (162) $ 64.27 (384) $ 43.86 (336) $ 37.85
OUTSTANDING – DECEMBER 31 7,331 $ 51.84 7,350 $ 42.24 8,951 $ 36.29
Options exercisable at year-end 3,919 $ 38.11 4,217 $ 35.84 5,731 $ 34.93
Compensation expense of $32 million related to unvested stock options at December 31, 2014 will be recognized over the next two years
(weighted average period).
The table below summarizes information for stock options exercised during the last three years:
(In millions) 2014 2013 2012
Intrinsic value of options exercised $84 $105 $95
Cash received for options exercised $76 $109 $85
Excess tax benefits realized from options exercised $ 19 $ 23 $ 15
CIGNA CORPORATION - 2014 Form 10-K 107
NOTE 20