UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

SCHEDULE 14A

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the Securities Exchange Act of 1934 (Amendment No.        )

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March 16, 2018

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 colleagues around the globe, we are pleased to cordially invite you to attend our 2018 Annual Meeting of Shareholders to be held on April 25, 2018. The attached Notice of 2018 Annual Meeting of Shareholders and Proxy Statement contains important information about the business to be conducted at the Annual Meeting.

2017 marked another consecutive year of delivering strong, differentiated results, while generating considerable momentum for 2018 and the years ahead. This exceptional performance reflects the efforts of an exceptionally talented Cigna team – individuals who are proud to serve as champions on behalf of our customers and communities around the world.

In support of Cigna’s belief that our communities play an essential role in meeting the health and wellness needs of individuals, we continue to take leadership roles to confront a number of societal challenges. Cigna is addressing the needs of our friends, families and neighbors through efforts such as combatting the opioid crisis in partnership with providers, empowering veterans to address difficult health and life circumstances and establishing a multi-city health improvement tour to bring free health screenings nationwide.

We continue to be led by our Go strategy, which we adopted in 2009 and evolved in mid-2017 to Go Deeper, Go Local and Go Beyond to further accelerate our ability to drive significant value creation for our customers, clients, partners, communities and shareholders. By consistently and effectively executing on our Go strategy over this extended period of time, we have proven that we can actively align Cigna with the needs of our diverse stakeholders and succeed in an evolving, highly dynamic and disruptive global marketplace.

Enhancing this strategy is our continued commitment to innovation, a relentless focus on serving our customers, and a drive to be a convener for both organizations and individuals across an increasingly complex landscape. Taken together with our unwavering mission to improve the health, well-being and sense of security of those we are privileged to serve, we are solidifying Cigna’s role as a partner of choice, and are creating value for stakeholders across the markets where we compete.

Our ability to create and deliver this value is clearly reflected in our financial performance and in our ability to deliver competitively attractive top and bottom line growth, as well as earning the right to serve more than 95 million customer relationships around the world.

As we enter 2018, Cigna’s strong capital position and flexibility further enable our organization to drive attractive earnings and customer growth both in 2018 and over the long-term.

To position us for continued strong performance, this year we named five tenured and proven leaders to our enterprise leadership, allowing us to further emphasize our focus on customer engagement, local markets and value-based partnerships.

Our Board of Directors, comprised of individuals with diverse experiences and skills, remains committed to strong corporate governance as a framework for financial integrity, shareholder transparency and competitively attractive performance. In consideration of the vote on the shareholder proposal regarding proxy access at the last annual meeting and following outreach to shareholders, in December 2017 the Board adopted proxy access, representing a significant enhancement of shareholder rights.

Your vote is very important. Whether or not you plan to attend the 2018 Annual Meeting, we hope that you will cast your vote as soon as possible.

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

NOTICE OF 2018 ANNUAL MEETING OF SHAREHOLDERS

 

 

 

DATE AND TIME:		Wednesday, April 25, 2018 at 8:00 a.m.
PLACE:		Delamar Hotel, Ballroom 1 Memorial Road West Hartford, Connecticut 06107
ITEMS OF BUSINESS:		Proposal 1: Election of nine director nominees named in this Proxy Statement for one-year terms to expire at the next annual meeting of shareholders.   Proposal 2: Advisory approval of executive compensation.   Proposal 3: Ratification of the appointment of PricewaterhouseCoopers LLP as the Company’s independent registered public accounting firm for 2018.   Proposal 4: Approval of an amendment to the Company’s Restated Certificate of Incorporation to eliminate the supermajority voting requirement.   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 at the close of business on February 26, 2018.
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 16, 2018				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 25, 2018   The Notice of Annual Meeting, Proxy Statement and Annual Report for the fiscal year ended December 31, 2017 are available at www.envisionreports.com/ci.

 

 

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
CORPORATE GOVERNANCE POLICIES AND PRACTICES			16
PROXY ACCESS			16
DIRECTOR INDEPENDENCE			17
BOARD LEADERSHIP STRUCTURE			17
BOARD EVALUATIONS AND BOARD EFFECTIVENESS			18
RESPONSIBILITIES OF THE BOARD			19
BOARD MEETINGS AND COMMITTEES			21
CODES OF ETHICS			23
CORPORATE RESPONSIBILITY			23
ANNUAL POLITICAL CONTRIBUTIONS AND LOBBYING ACTIVITY REPORT			24
CERTAIN TRANSACTIONS			24
NON-EMPLOYEE DIRECTOR COMPENSATION			25
OVERVIEW			25
DIRECTOR COMPENSATION PROGRAM			25
DIRECTOR COMPENSATION TABLE FOR 2017			27
DIRECTOR OWNERSHIP			28
COMPENSATION MATTERS			29
ADVISORY APPROVAL OF EXECUTIVE COMPENSATION (PROPOSAL 2)			29
COMPENSATION DISCUSSION AND ANALYSIS			30
EXECUTIVE SUMMARY			31
EXECUTIVE COMPENSATION POLICIES AND PRACTICES			33
ELEMENTS OF COMPENSATION			37
EMPLOYMENT ARRANGEMENTS AND POST-TERMINATION PAYMENTS			48
PROCESSES AND PROCEDURES FOR DETERMINING EXECUTIVE COMPENSATION			49
OTHER PRACTICES			51
REPORT OF THE PEOPLE RESOURCES COMMITTEE			53
EXECUTIVE COMPENSATION TABLES			54
2017 SUMMARY COMPENSATION TABLE			54
GRANTS OF PLAN-BASED AWARDS IN 2017			57
OUTSTANDING EQUITY AWARDS AT YEAR-END 2017			59
OPTION EXERCISES AND STOCK VESTED IN 2017			61
PENSION BENEFITS FOR 2017			62
NONQUALIFIED DEFERRED COMPENSATION FOR 2017			65
POTENTIAL PAYMENTS UPON TERMINATION OR CHANGE OF CONTROL			66
AUDIT MATTERS			71
RATIFICATION OF APPOINTMENT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM (PROPOSAL 3)			71
REPORT OF THE AUDIT COMMITTEE			74
PROPOSAL TO AMEND RESTATED CERTIFICATE OF INCORPORATION TO ELIMINATE THE SUPERMAJORITY VOTING REQUIREMENT (PROPOSAL 4)			75
OWNERSHIP OF CIGNA COMMON STOCK			76
STOCK HELD BY DIRECTORS, NOMINEES AND EXECUTIVE OFFICERS			76
STOCK HELD BY CERTAIN BENEFICIAL OWNERS			78
SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE			78
ANNUAL MEETING INFORMATION			79
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 – RESTATED CERTIFICATE OF INCORPORATION			Appendix-A

PROXY STATEMENT SUMMARY

 

 

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PROXY STATEMENT SUMMARY

 

 

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PROXY STATEMENT SUMMARY

 

 

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PROXY STATEMENT SUMMARY

 

 

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PROXY STATEMENT SUMMARY

 

 

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PROXY STATEMENT SUMMARY

 

 

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CORPORATE GOVERNANCE MATTERS

 

Election of Directors (Proposal 1)

 

 

 

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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. These expectations and qualifications, as well as the identified areas of expertise, are considered and reviewed as part of the Board’s annual evaluation and as part of each individual Director’s evaluation. In developing these areas of expertise, the Board also considered the skills necessary to support the 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 skills and 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 impacting 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 from 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 Board remains committed to diversity and 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, and the significant change and uncertainty in, the health care industry over the past several years.

 

The above tables show the diversity of our nine independent board members.

 

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CORPORATE GOVERNANCE MATTERS

 

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 experience that would contribute to overall Board and committee effectiveness.

In 2017, the Corporate Governance Committee began a long-term board refreshment plan. The Corporate Governance Guidelines require that directors retire no later than the annual meeting of shareholders coinciding with or following his or her 72^nd birthday. As a result, within the next five years, four of the directors nominated for election are expected to retire from the Board. To assist with board refreshment planning, the Corporate Governance Committee engaged Russell Reynolds Associates, Inc. to provide advisory services related to board succession planning and to assist with the recruitment of director candidates. The plan includes a needs assessment and an interview with each director to understand his or her perspective on Cigna’s strategy, the culture of the Board and the Board’s relationship with management, and to seek the Board’s views on the skills that may be relevant in the coming years and in light of upcoming retirements. The Corporate Governance Committee is focused on identifying candidates that possess skills and qualifications that will support the Company’s short- and long-term strategy, while being mindful of the skills that the retiring directors bring to the Board and the ongoing significant complexity and uncertainty within the health care industry. The goal of the refreshment plan is to balance the knowledge that results from long-term service on the Board with the new skills and experience that results from adding new directors to the Board, at a pace that allows the Board to maintain its high-performing and diverse culture.

 

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CORPORATE GOVERNANCE MATTERS

 

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 at Cigna’s expense. Cigna regularly makes the Board aware of continuing education opportunities that may be of interest. 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 nine directors listed below for re-election to one-year terms to expire at the next annual meeting of shareholders. 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.

On March 12, 2018, Dr. Henney informed the Company of her intention to not seek re-election as a Director in light of her role as Lead Independent Director of AmerisourceBergen Corporation and Cigna’s announcement regarding the proposed acquisition of Express Scripts Holding Company. Dr. Henney will leave the Board at the expiration of her current term on April 25, 2018. The Board and Cigna’s management thank Dr. Henney for her many years of service.

Below are biographies, skills and qualifications for each of the nominees. 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 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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CORPORATE GOVERNANCE MATTERS

 

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 and shareholder confidence. The Corporate Governance Committee annually reviews Cigna’s governance program based on, among other things, developments in corporate governance, feedback received during shareholder engagement, legal or regulatory actions, proxy advisory firm positions, Securities and Exchange Commission (SEC) guidance and New York Stock Exchange (NYSE) requirements. The Board and the Corporate Governance Committee developed the Board Corporate Governance Guidelines (the Guidelines) which 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  without management present   •    Director elections by majority voting   •    Annual election of all directors   •    Proxy access right for shareholders				•    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⁾ Throughout this Proxy Statement, we reference information available on our website. 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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CORPORATE GOVERNANCE MATTERS

 

 

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CORPORATE GOVERNANCE MATTERS

 

In February 2018, 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 2021, subject to his annual election to the Board by shareholders. 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   •    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   •    Preside over Board and shareholder meetings   •    Engage in the director recruitment process   •    Represent the Company in interactions with external stakeholders,  as appropriate

 

 

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CORPORATE GOVERNANCE MATTERS

 

 

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 and refreshment 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 “Processes and Procedures for Determining Executive Compensation — Risk Oversight” in the Compensation Discussion & Analysis (CD&A).

 

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CORPORATE GOVERNANCE MATTERS

 

BOARD MEETINGS AND COMMITTEES

In 2017, the Board held 11 meetings and the committees of the Board held a total of 33 meetings. At all regular meetings held in 2017, the independent members of the Board met in executive session without management present. 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 without management 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 2017. During 2017, Board and committee attendance averaged 93% for the Board as a whole. In addition to formal Board meetings, the Board engages with management regularly throughout the year.

The Board expects directors to attend the annual meeting of shareholders. All directors attended the 2017 annual meeting and Mr. Harris chaired the meeting. All directors are expected to attend the Annual Meeting in 2018.

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 2017		9		8		8		8

 

✓	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 2017, the Board of Directors did not delegate any actions to the Executive Committee and, therefore, the Executive Committee did not meet in 2017.

 

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CORPORATE GOVERNANCE MATTERS

 

		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 board refreshment planning.   •   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 and the Company’s corporate responsibility and sustainability efforts.
		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 assists the Board in reviewing 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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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 an independent 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. The Corporate Governance Committee last engaged an independent compensation consultant in 2011 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 January 2012. The Board has not increased compensation since that time.

In 2017, 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 in “Executive Compensation Policies and Practices — 2017 Peer Groups” in the CD&A), as well as the top 200 companies of the S&P 500, to ensure that our pay practices were competitive and aligned with those companies.

The following chart summarizes the retainer compensation provided to directors for their service on Cigna’s Board and its committees. 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. All retainer 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)
Chairman of the Board		$225,000		Cash
Committee chair		$  15,000		Cash
Committee member		$  10,000		Cash

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.

 

		Cigna 2018 Notice of Annual Meeting of Shareholders and Proxy Statement			25

CORPORATE GOVERNANCE MATTERS

 

 

26		Cigna 2018 Notice of Annual Meeting of Shareholders and Proxy Statement

CORPORATE GOVERNANCE MATTERS

 

DIRECTOR COMPENSATION TABLE FOR 2017

The table below includes information about the compensation paid to non-employee directors in 2017. Mr. Cordani, the only Company employee on the Board of Directors, does not receive any director compensation for his Board service.

 

NAME		FEES EARNED             OR PAID IN CASH             ($)					STOCK AWARDS          ($)					ALL OTHER        COMPENSATION        ($)					TOTAL        COMPENSATION        ($)
(a)		(b)					(c)					(d)					(e)
Eric J. Foss				115,000					180,000					365					295,365
Michelle D. Gass(1)				28,750					45,000					61					73,811
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					1,373					301,373
John M. Partridge				120,000					180,000					5,365					305,365
James E. Rogers				115,000					180,000					820					295,820
Eric C. Wiseman				115,000					180,000					820					295,820
Donna F. Zarcone				115,000					180,000					6,316					301,316
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. 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” above).

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, 2017 (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, 2017.

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.

There were no perquisites or personal benefits provided to non-employee directors that exceeded $10,000, as permitted by SEC rules.

 

		Cigna 2018 Notice of Annual Meeting of Shareholders and Proxy Statement			27

CORPORATE GOVERNANCE MATTERS

 

DIRECTOR OWNERSHIP

The table shows Cigna securities held by each non-employee director as of December 31, 2017. The value of these securities was calculated using $203.09, which was Cigna’s closing stock price on December 29, 2017, the last business day of the year.

 

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				13,413					—					—					—					13,413				$	2,724,046
Isaiah Harris, Jr.				1,937					—					13,500					23,255					38,692				$	7,857,958
Jane E. Henney, M.D.				1,836					—					13,500					19,024					34,360				$	6,978,172
Roman Martinez IV				9,496					22,780					13,500					15,423					61,199				$	12,428,905
John M. Partridge				33,267					—					—					—					33,267				$	6,756,195
James E. Rogers				—					37,520					—					11,299					48,819				$	9,914,651
Eric C. Wiseman				4,200					12,117					—					3,652					19,969				$	4,055,504
Donna F. Zarcone				5,971					8,230					13,500					2,797					30,498				$	6,193,839
William D. Zollars				212					—					13,500					9,784					23,496				$	4,771,803

Deferred Common Stock (Column (b))

Column (b) includes the equity portion of the 2017 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 and reaffirmed at our 2017 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 2018 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 shareholder value. In considering your vote, we encourage you to review the Proxy Statement Summary, the Compensation Discussion and Analysis and the Executive Compensation Tables.

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.

 

		Cigna 2018 Notice of Annual Meeting of Shareholders and Proxy Statement			29

COMPENSATION MATTERS

 

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 2017, who include our Chief Executive Officer, Chief Financial Officer, the three most highly-compensated executive officers as of the end of 2017, as well as our former Chief Financial Officer and one other executive officer who retired during 2017. 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 2017, our NEOs are:

 

NAME		TITLE
David M. Cordani		President and Chief Executive Officer
Eric P. Palmer(1)		Executive Vice President and Chief Financial Officer
Christopher J. Hocevar(2)		President, Strategy, Segments and Solutions
Nicole S. Jones		Executive Vice President and General Counsel
Jason D. Sadler(3)		President, International Markets
Thomas A. McCarthy(4)		Retired Executive Vice President and Chief Financial Officer
Matthew G. Manders(5)		Retired President, Government & Individual Programs and Group Insurance

 

(1)

Mr. Palmer was appointed Executive Vice President and Chief Financial Officer effective June 16, 2017.

 

(2)

Mr. Hocevar was appointed President, Strategy, Segments and Solutions effective February 23, 2017.

 

(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 = $0.12799676 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 2017.

 

(4)

Mr. McCarthy retired from the Company effective June 16, 2017.

 

(5)

Mr. Manders retired from the Company effective November 3, 2017.

This CD&A is organized as follows:

 

Executive Summary provides an overview of our compensation philosophy and our pay-for-performance alignment.			Pages 31 — 33
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 33 — 36
Elements of Compensation describes each form of compensation we pay and how our executive compensation program is tied strongly to performance.			Pages 37 — 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 48 — 49
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 49 — 50
Other Practices describes our stock ownership guidelines, our hedging and pledging restrictions, our clawback policy and the impact of tax and accounting treatment on our executive compensation program.			Pages 51 — 53

 

30		Cigna 2018 Notice of Annual Meeting of Shareholders and Proxy Statement

COMPENSATION MATTERS

 

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. We focus on driving enterprise profitability, growth and operating expense efficiency to support investment in innovation, customer loyalty and stock performance.

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 rewarded 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⁾ revenue 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 2017, adjusted income from operations⁽¹⁾ for Cigna’s ongoing business segments was $2.8 billion, compared to $2.3 billion in 2016, reflecting significantly increased earnings contributions across each of Global Health Care, Global Supplemental Benefits and Group Disability and Life. Revenue for the three ongoing business segments grew to $40.9 billion, reflecting continued growth in Cigna’s targeted customer segments. Our results included strong performance across each of our priority growth platforms — Commercial Employer, U.S. Seniors, Global Supplemental Benefits, and Group Disability and Life. These results provide us with momentum for continued growth in 2018.

 

 

		Cigna 2018 Notice of Annual Meeting of Shareholders and Proxy Statement			31

COMPENSATION MATTERS

 

2017 Management Incentive Plan

Payouts under the 2017 Management Incentive Plan rewarded our NEOs for our strong performance in 2017, reflecting pay-for-performance alignment. MIP awards reward the achievement of annual enterprise results relative to pre-established goals, as well as individual performance, accomplishments and contributions.

 

Measure		Result		Award
Adjusted income from operations(1)(2)		24.5% growth was above target range		Individual payouts ranged from 130% to 155% of target for each of the NEOs serving as executive officers at the end of 2017.
Revenue(2)		4.9% growth was within target range
Operating expense ratio improvement(2)		2.3% improvement was within target range
Strategic Priorities		Above target performance reflects:   •   Strong progress in community health and client retention   •   A higher NPS score relative to 2016   •   Strong employee engagement results   •   Advancement of enterprise compliance initiatives

 

2015—2017 Strategic Performance Share Program

Long-term performance was rewarded through the payout of our 2015—2017 SPSs. Our TSR over this three-year period, which accounts for 50% of the SPS payout, was 25.5%, placing Cigna at the 78^th percentile relative to the SPS performance peer group for the period. Over the three-year performance period, adjusted income from operations,⁽¹⁾⁽²⁾ which accounts for 50% of the SPS payout, grew as described above.

 

Measure		Result ($ in million)		Award
Relative TSR(3)		78th percentile (183% of target)		2015—2017 SPSs were paid out at 139.8% of target.
Adjusted income from operations(1)( 2)		$7,532 (97.1% of target)

 

(1)

We encourage you to review our Annual Report on Form 10-K for the year ended December 31, 2017 for more complete financial information. Cigna uses adjusted income from operations as the principal financial measure for operating performance because management believes it presents 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.

 

(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 SPS performance peer group which, at the time of the 2015—2017 SPS payout, included: 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.

2017 Long-Term Incentive Award

In February 2017, the Committee (and, for Mr. Cordani, the Board, upon the recommendation of the Committee) approved the annual LTI award for each NEO, 50% of which was awarded in stock options and 50% of which was awarded in an SPS award with a 2017—2019 performance period. The exercise price of the stock options awarded was $149.135, which means our stock must trade above that price for the NEOs to realize value from these awards. The payout of the 2017—2019 SPS award will be based on the Company’s performance over the three-year period ending December 31, 2019. In determining the annual LTI award, the Committee primarily evaluates individual contributions, but also may consider the other factors described in “Elements of Compensation — Long-Term Incentives.”

 

32		Cigna 2018 Notice of Annual Meeting of Shareholders and Proxy Statement

COMPENSATION MATTERS

 

Shareholders Continue to Support our Executive Compensation Program

 

 

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 and exceptional service for our customers.

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 position. 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” in this CD&A.

 

		Cigna 2018 Notice of Annual Meeting of Shareholders and Proxy Statement			33